LJ RESOURCES CO LTD v INDEPTH ENERGY INC, 2026 ABKB 574

The underlying Action relates to a fraud claim started in 2016. The claim alleged that the Defendants used a scheme to cause Goldenkey Oil Inc. (formerly LJ Resources Co. Ltd.) to transfer about $9.2 million to shell companies. The Defendants included several individuals and corporate entities. There was also a related shareholder loan action brought by some of the Defendants, as well as a separate but related lawsuit commenced by Baytech Energy Investment Inc.

Between 2016 and 2018, the parties exchanged Affidavits of Records and conducted Questioning. Those questionings resulted in hundreds of undertakings, including 216 from a single witness. Progress then slowed for a number of reasons, including the need to answer Undertakings, procedural issues in the related actions, the COVID-19 pandemic, disputes over litigation plans, insolvency proceedings arising from the Plaintiff's bankruptcy, and various procedural Applications, including a Security for Costs Application. The fraud Action and the shareholder loan Action were ultimately consolidated.

In 2024, after nearly eight years of litigation, the Defendants applied to dismiss the fraud Action under Rule 4.31 for inordinate and inexcusable delay.

The Court found that there had been delay, including inordinate delay. It identified significant periods during which the Plaintiff failed to meaningfully advance the litigation, including lengthy delays in providing Undertaking responses and extended periods of limited activity. The Action remained not trial-ready after more than eight years, with Questioning outstanding and expert evidence yet to be exchanged.

The Court nevertheless held that the delay was excusable. The major periods of delay were explained by the volume and complexity of the undertaking requests, the need to obtain information from former directors, accountants, financial institutions, and other third parties, the complex procedural history of the litigation, the Plaintiff’s insolvency, proposal and bankruptcy proceedings, COVID-19 disruptions, and the Defendants’ own conduct.

The Court emphasized that delay must be assessed in the context of the litigation as a whole and not by focusing solely on isolated periods of inactivity. While the Court did not condone the lengthy time taken to answer Undertakings, it accepted the Plaintiff’s explanations in the circumstances.

The Court further found that, because the delay was excusable, the presumption of significant prejudice did not arise. In any event, the Defendants failed to establish actual significant prejudice caused by the Plaintiff’s conduct. The Court noted that the Defendants themselves had materially contributed to the pace of the litigation.

The 4.31 Application was dismissed.