The Appellant, 994552 NWT Ltd.’s Action related to the misappropriation of approximately $2,000,000 by one of the Respondents. The Respondents applied to dismiss the Action pursuant to Rule 4.33 and alternatively, Rule 4.31. At first instance, the presiding Master held that three years had passed without the occurrence of a significant advance and dismissed the Action pursuant to Rule 4.33(2), without considering the Respondents’ alternative arguments relating to dismissal pursuant to Rule 4.31. The Appellant appealed that Decision.

On Appeal, Justice Labrenz reviewed the steps that had occurred in the Action. It had been commenced in 2008, and Questioning had occurred between October 2012 and June 2013. By the end of July 2013, two of the Respondents provided answers to Undertakings, and other Respondents provided answers to Written Interrogatories. Two of the Respondents, however, failed to provide answers to Undertakings, which failure continued even in spite of a Court Order to do so.

In March 2015, a Consent Order was filed to remove three parties’ Answers to Written Interrogatories from the Court record, as they had been mistakenly filed in 2013; the Order was consented to in 2013, but not filed until 2015. In July 2016, several Notices to Admit Facts were served on the Respondents, but many of them “did not seek any new admissions”. The Respondents provided their responses along with a letter advising that they were providing the responses without prejudice to their ability to apply to dismiss the Action for long delay. The Appellant then served a Request to Schedule Trial Date on the Respondents pursuant to Rule 8.4. Justice Labrenz noted that this was “somewhat significant” as the Appellant was prepared for Trial, and the only unfulfilled obligation prior to Trial was the Respondents’ responsibility to provide answers to Undertakings.

Justice Labrenz explained that under Rule 4.33(2), a Judge is obligated to conclude that the Action should be dismissed when three years have passed without a significant advance in the litigation – the Rule is not discretionary, but mandatory. The Court should use a “functional approach” to determine whether a litigation step has significantly advanced the Action, by considering the nature, value, and quality of the step, its genuineness, its timing, and sometimes its outcome.

Justice Labrenz explained that the Master had correctly noted that “an advance in an action against one, if it advances the action as a whole, is an advance against all”. However, His Lordship was concerned by the fact that two of the Respondents had failed to provide Undertaking responses, despite a Court Order that they do so. His Lordship therefore considered whether their failure to provide Undertaking answers removed their ability to bring an Application under Rules 4.33 and 4.31, even though – as their counsel emphasized – they had not been found in contempt of Court under Rule 10.52 for failing to provide the undertaking answers.

His Lordship explained that in his view, “a person in breach of a Court Order to do something that, if completed, would count as a significant advance, cannot rely on Rule 4.33”. Although Rule 4.33 does not provide the Court with discretion not to dismiss an Action when there has been delay beyond the exceptions set out in the Rule, it must also be read in accordance with Rule 1.2, which provides that one of the purposes of the Rules is to “provide a means by which claims can be fairly and justly resolved in or by a court process in a timely and cost efficient way”, and to “communicate honestly, openly and in a timely way”.

As such, Justice Labrenz held that the Respondents could not argue that their agreement to provide Undertaking responses did not significantly advance the Action, and held that the unfulfilled Undertaking responses would have constituted a significant advance. His Lordship found that the Undertaking responses would have helped to clarify or narrow the issues, and possibly would have moved the parties towards resolution. Justice Labrenz also noted that since the Respondent had agreed to provide the Undertakings, she must have been satisfied that the records sought were relevant and material to the Action. Because Rule 5.2 states that a record is relevant and material where it could “significantly help determine one or more of the issues raised in the pleadings”, this also supported the significance of the Undertakings.

Justice Labrenz next considered whether the Action should be dismissed for delay pursuant to Rule 4.31. The Respondents argued that in assessing overall delay, the Court should look back to 2004 when the funds began to be misappropriated, and not 2008 when the Statement of Claim was filed. The Respondents also argued that the Court must consider the six questions set out by the Court of Appeal in Humphreys v Trebilcock, 2017 ABCA 116, where an Application to dismiss for delay is advanced pursuant to Rule 4.31. They also emphasized that where fraud has been alleged the Action should be pursued faster.

Justice Labrenz held that the delay was not inordinate in the circumstances. Although the Action had been ongoing for 8.5 years, His Lordship noted the “theme in Alberta law that a useful starting point is ten years where an action is not yet on the eve of trial”. Justice Labrenz also held that the Respondents had contributed to the delay by failing to provide their Undertaking responses in a timely manner. Additionally, while the matter was ongoing, steps had been taken in criminal proceedings against the Respondents which were “inextricably linked factually such that they were significantly advancing the action”. The Appeal was therefore allowed.