[2000] 3 F.C. 493
T-1168-96
Allison G. Abbott, Margaret Abbott and Margaret Elizabeth McIntosh (Plaintiffs)
v.
Her Majesty the Queen (Defendant)
and
Canadian Pacific Hotels Corporation (Intervener)
Indexed as: Abbott v. Canada (T.D.)
Trial Division, Hargrave P.—Vancouver, March 16 and April 3, 2000.
Practice — Variation of time — Reply overlooked and pleadings closed — Motion for extension of time to file reply — Reply alleging estoppel — Issue arising during discovery of Crown’s witness — Underlying consideration whether, in circumstances, grant of extension required to do justice between parties — Search for justice may require balancing of principle time limits in Rules requirements to be met against principle party committing procedural default should not be denied adjudication of claim unless prejudice to other side not compensable in costs — Except in exceptional circumstances, including where costs not proper compensation, time extension should ordinarily be allowed if in overall interests of justice — Must look at whether adequate explanation for failure to act in timely manner, whether arguable case — Even though some delay since completion of discoveries, any prejudice (e.g. further discoveries) compensable in costs — Reply not fundamental alteration of case, but evolution — Liberal approach necessary to do justice between parties.
This was a motion for an extension of time within which to file a reply. The action was commenced in 1996, with the plaintiffs filing an amended statement of claim in May 1998. The defence, filed in June 1998, alleged a lack of authority to grant leases containing perpetual renewal clauses. The essence of the reply is that the Crown, by its past actions, may now be estopped from denying the authority to consent to the assignment of leases of land in Riding Mountain National Park in Manitoba, without requiring the surrender of a right of perpetual renewal. The estoppel issue became apparent during discovery of a Crown witness in September 1998 which was completed in November 1999.
Held, the motion should be allowed.
The proper approach when a reply has been overlooked and the pleadings closed is to seek an extension of time.
The underlying consideration is whether, in the circumstances, to do justice between the parties calls for the grant of the extension. In the search for justice it may be necessary to balance the relevant factors, eg. a weak explanation for delay may be compensated for by a strong case. To deny a time extension over a small procedural matter, thus perhaps crippling the plaintiffs’ case and preventing a proper adjudication, is a result out of all proportion to the offence, unless there has been an inordinate breach of the Rules by the plaintiffs such as to cause prejudice to the defendant.
The time limits in the rules are not expressions of pious hope, but are requirements to be met. An intersecting principle is the impropriety of denying an adjudication of the merits of a claim unless there is prejudice going beyond what might be made up for by costs. Neither principle is absolute. To rigidly enforce the first would lead to penalizing a defaulting party without reference to whether the other side had been prejudiced. Yet to treat breaches of the Rules as merely sounding in costs would allow a well-to-do litigant to flout the rules with impunity unless or until the other side could demonstrate prejudice. Save for exceptional circumstances, including where costs are not proper compensation, a time extension ought ordinarily to be allowed if it is in the overall interests of justice. Whenever the grant of an extension of time is being considered the Court will generally look at whether there is an adequate explanation for the failure to act in a timely manner and whether the applicant has an arguable case.
Accepting that completion of discoveries in November 1999, when the plaintiffs had all of the Crown’s discovery evidence bearing on estoppel, as the underpinning of the estoppel argument, there was some delay, but such delay was justified until about the end of 1999. The intention to file a reply pleading estoppel was not abandoned between then and the March 2000 hearing date of this motion.
Any prejudice to defendant could be compensated in costs. Delay in and of itself does not necessarily cause prejudice. One must look not at delay per se, but at the result of the delay, to determine if prejudice exists. Further discovery of some 20 witnesses can be compensated for in costs. The estoppel argument was not a fundamental alteration of the case, but an evolution arising mainly from the discovery process.
To deny the plaintiffs an opportunity to reply would give too much weight to the principle that times set out in the Rules are to be met, and insufficient weight to the principle that a party committing a procedural default should not be denied adjudication of a claim unless there is prejudice to the other side which cannot be compensated by costs. Even though there has been delay and some prejudice to the defendant, a liberal approach is in order and indeed is necessary to do justice between the parties.
STATUTES AND REGULATIONS JUDICIALLY CONSIDERED
Federal Court Rules, 1998, SOR/98-106, rr. 184(1), 200.
Rules of the Supreme Court 1965 (U.K.), S.I. 1965/1776, Ord. 3, r. 5.
CASES JUDICIALLY CONSIDERED
APPLIED:
Canada v. Aqua-Gem Investments Ltd., [1993] 2 F.C. 425 [1993] 1 C.T.C. 186; (1993), 93 DTC 5080; 149 N.R. 273 (C.A.); affg The Queen v. Aqua-Gem Investments Ltd. (1991), 91 DTC 5641; 50 F.T.R. 115 (F.C.T.D.); Ferguson v. Arctic Transportation Ltd. et al. (1996), 118 F.T.R. 154 (F.C.T.D.); Eaton v. Storer (1882), 22 Ch. D. 91 (C.A.); Grewal v. Minister of Employment and Immigration, [1985] 2 F.C. 263 (1985), 63 N.R. 106 (C.A.); Costellow v. Somerset County Council, [1993] 1 W.L.R. 256 (C.A.); R. v. Walker, [1970] S.C.R. 649; (1970), 11 D.L.R. (3d) 173.
DISTINGUISHED:
Beilin v. Minister of Employment and Immigration (1994), 88 F.T.R. 132 (F.C.T.D.); Council of Canadians et al. v. Director of Investigation and Research, Competition Act et al. (1997), 212 N.R. 254 (F.C.A.); Council of Canadians et al. v. Director of Investigation and Research, Competition Act et al. (1996), 124 F.T.R. 269 (F.C.T.D.).
CONSIDERED:
Valyenegro v. Canada (Secretary of State) (1994), 88 F.T.R. 196 (F.C.T.D.); University of Saskatchewan v. Canadian Union of Public Employees Local Union 1975 et al., [1978] 2 S.C.R. 830.
MOTION for an extension of time within which to file a reply. Motion allowed.
APPEARANCES:
Arthur J. Stacey for plaintiffs.
Paul D. Edwards for defendant.
Judson E. Virtue for intervener.
SOLICITORS OF RECORD:
Thompson Dorfman Sweatman, Winnipeg, for plaintiffs.
Duboff, Edwards, Haight & Schachter, Winnipeg, for defendant.
Macleod Dixon, Calgary, for intervener.
The following are the reasons for order rendered in English by
[1] Hargrave P.: The plaintiffs’ motion is for an extension of time within which to file a reply and to be able to refer to that reply on a pending question of law. The essence of the reply is estoppel, arising out of a plea in the defence, filed 23 June 1998, the need for which estoppel became apparent during or on the completion of examinations for discovery which were held in September of 1998 and November of 1999.
[2] Specifically, the estoppel plea is to the effect that the Crown, by its past actions, may now be estopped from denying the authority to consent to the assignment of leases, of land in Riding Mountain National Park, in Manitoba, without requiring the surrender of a right of perpetual renewal.
CONSIDERATION
Failure to File a Reply
[3] I accept that the estoppel plea, while certainly far from the whole of the plaintiffs’ case, is relevant and necessary to determine an aspect of the controversy between the parties. Were the issue merely one of amending a pleading, here an amendment of a reply, I expect the order might well go without opposition, for such an amendment would be in the interests of justice. There would be no injustice to the defendant which might not be capable of compensation by award of costs. Herein lies the problem. Following the receipt of the defence counsel for the plaintiffs, perhaps quite correctly, given the then known facts, decided that no reply was necessary and here I would refer to what is now subsection 184(1) [of the Federal Court Rules, 1998, SOR/98-106], which provides an automatic denial to a pleading which is not admitted. A reply, merely joining issue, is thus unnecessary in many instances.
[4] As a result there exists no reply to amend. Moreover, the estoppel plea, arising as it does out the defence and discovery, ought, in the view of counsel for the plaintiffs, to be set out in a reply, not as an amendment to the statement of claim.
[5] The proper approach, when a reply has been overlooked and the pleadings closed, is to seek an extension of time. The basic case, still referred to, as an illustration of this procedure, is Eaton v. Storer (1882), 22 Ch. D. 91 (C.A.), in which the plaintiff, having overlooked a necessary reply, successfully fended off the defendant’s motion for dismissal by seeking an extension of time within which to file a reply. Jessel M.R., pointed out at page 92 that the usual procedure, in such an instance, was to give the plaintiff time to take the next procedural step, with payment of costs being sufficient punishment to prevent the rules from becoming meaningless. But Jessel M.R., did add a caution to the effect that while this was the standard course not to be departed from ordinarily, a special circumstance, such as excessive delay, might result in refusal of an extension and, in a particular instance, dismissal of an action.
Time Extension
[6] The approach in Eaton is liberal and less strict than that applied, for example, in Grewal v. Minister of Employment and Immigration, [1985] 2 F.C. 263 (C.A.) and in some subsequent cases following Grewal. Counsel for the plaintiffs, while not referring to Eaton, suggest a liberal approach, submitting that the stringent Grewal-type test was applied to, and is more suitable for, immigration appeals and the like, but not for a fairly basic procedural matter such as an extension of time within which to file a reply.
[7] Grewal may be summarized by saying that there was some justification for the delay throughout and that there was an arguable case, but that overall on a balancing of the factors, including the nature of the interest at stake, an extension was necessary to do justice between the parties (Chief Justice Thurlow, at page 272):
The underlying consideration, however, which, as it seems to me, must be borne in mind in dealing with any application of this kind, is whether, in the circumstances presented, to do justice between the parties calls for the grant of the extension.
Mr. Justice Marceau, who also gave reasons in Grewal, wrote of the need to bring litigation to an end by observing time limits, but then went on to point to the need, in the search for justice, to balance the relevant factors (at page 282):
It seems to me that, in order to properly evaluate the situation and draw a valid conclusion, a balancing of the various factors involved is essential. For example, a compelling explanation for the delay may lead to a positive response even if the case against the judgment appears weak, and equally a strong case may counterbalance a less satisfactory justification for the delay.
Clearly a weak explanation for delay may be compensated for by a strong case.
[8] One of the many cases following Grewal is Beilin v. Minister of Employment and Immigration (1994), 88 F.T.R. 132 (F.C.T.D.), a decision of Mr. Justice Strayer. There, the unsuccessful applicants had been less than diligent in applying for reconsideration and were unable to show “some justification for the delay throughout the whole period of the delay” (page 134).
[9] There are many cases which have followed Grewal: most add little to the basic Grewal principles. However, I will touch upon Council of Canadians et al. v. Director of Investigation and Research, Competition Act et al. (1997), 212 N.R. 254 (F.C.A.). Mr. Justice Hugessen commented that the Motions Judge did not consider an irrelevant factor “when he asked himself if the Council had formed an intention to apply for judicial review within the time fixed by law” (page 255). The Court of Appeal noted there was no immutable check list by which to measure an application for a time extension, but that a court “will generally look at whether there is an adequate explanation for the failure to act timely and whether the applicant has an arguable case” (loc. cit.). The Court of Appeal went on to consider Chief Justice Thurlow’s view in Grewal at pages 277-278 where, after setting out various considerations, he wrote that discretion to grant a time extension ought not to be fettered by hard and fast rules. Mr. Justice Hugessen summed up this passage by saying that he felt it was for the applicant for a time extension to display due diligence. In Council of Canadians there was a delay of some four months, which was not satisfactorily explained, in bringing on a motion for a time extension within which to bring judicial review. The Trial decision in Council of Canadians (1996), 124 F.T.R. 269, chronicled a number of weeks of vacillation on the part of the Council. The applicants were not successful in obtaining an extension. One might say that the need to bring litigation to an end overrode the harm of denying an adjudication on the merits when the applicants really could not within a reasonable time decide whether they wished to bring judicial review proceedings or not. This points to the conflict between two valid and basic principles. This was referred to as an “intersection of two salutary principles” by the Court of Appeal in Costellow v. Somerset County Council, [1993] 1 W.L.R. 256, at page 263.
[10] In Costellow at issue were cross motions: one to strike out for delay and the other to obtain an extension of time within which to serve medical reports. The plaintiff’s argument, which the Court of Appeal termed a powerful argument, was that to strike out for delay was too severe and against the weight of the jurisprudence, unless the delay was not only inexcusable, but also inordinate and as such caused prejudice. Now this may seem a little remote from the present issue, however it is an applicable concept: to deny a time extension over a small procedural matter, thus perhaps crippling the plaintiffs’ case and preventing a proper adjudication, is a result out of all proportion to the offence, unless there has been an inordinate breach of the rules by the plaintiffs such as to cause prejudice to the defendant.
[11] In Costellow, Sir Thomas Bingham M.R., grappled with this problem by observing that the limits in the rules are not expressions of pious hope, but are requirements to be met (at page 263):
The first principle is that the rules of court and the associated rules of practice, devised in the public interest to promote the expeditious dispatch of litigation, must be observed. The prescribed time limits are not targets to be aimed at or expressions of pious hope but requirements to be met.
The intersecting principle is the impropriety of denial of an adjudication, or indeed an effective adjudication, of the merits of a claim, unless there is prejudice going beyond what might be made up for by costs. As put in Costellow [at pages 263-264]:
The second principle is that a plaintiff should not in the ordinary way be denied an adjudication of his claim on its merits because of procedural default, unless the default causes prejudice to his opponent for which an award of costs cannot compensate. This principle is reflected in the general discretion to extend time conferred by Ord. 3, r. 5, a discretion to be exercised in accordance with the requirements of justice in the particular case. It is a principle also reflected in the liberal approach generally adopted in relation to the amendment of pleadings.
[12] The Court of Appeal pointed out, in Costellow, that neither principle was absolute. To rigidly enforce the first principle would lead to penalizing a defaulting party without reference to whether the other side had been prejudiced. Yet to treat breaches of the rules as merely sounding in costs would allow a well-to-do litigant to flout the rules with impunity unless or until the other side could demonstrate prejudice (at page 264):
Neither of these principles is absolute. If the first were rigidly enforced, procedural default would lead to dismissal of actions without any consideration of whether the plaintiff’s default had caused prejudice to the defendant. But the court’s practice has been to treat the existence of such prejudice as a crucial, and often decisive, matter. If the second principle were followed without exception, a well-to-do plaintiff willing and able to meet orders for costs made against him could flout the rules with impunity, confident he would suffer no penalty unless or until the defendant could demonstrate prejudice. This would circumscribe the very general discretion conferred by Ord. 3, r. 5 and would indeed involve a substantial rewriting of the rule.
The Court of Appeal rejected any single universal rule of thumb solution, or any rigid mechanistic approach, as inappropriate. It felt that such conflict ought to be viewed in the round, so as to do justice to both parties. The Court went on to say that (at page 264):
Cases involving procedural abuse … may call for special treatment. So, of course, will cases of contumelious and intentional default and cases where a default was repeated or persisted in after a peremptory order. But in the ordinary way, and in the absence of special circumstances, a court will not exercise its inherent jurisdiction to dismiss a plaintiff’s action for want of prosecution unless the delay complained of after the issue of proceedings has caused at least a real risk of prejudice to the defendant. A similar approach should govern applications under Orders 19, 24, 25, 28 and 34. The approach to applications under Ord. 3, r. 5 should not in most cases be very different. Save in special cases or exceptional circumstances, it can rarely be appropriate, on an overall assessment of what justice requires, to deny the plaintiff an extension (where the denial will stifle his action) because of a procedural default which, even if unjustifiable, had caused the defendant no prejudice for which he cannot be compensated by an award of costs. In short, an application under Ord. 3, r. 5 should ordinarily be granted where the overall justice of the case requires that the action be allowed to proceed. [Emphasis added.]
Here the Court of Appeal, by referring to [Rules of the Supreme Court 1965 (U.K.), S.I. 1965/1776] Order 3, rule 5, the English time extension rule, clearly brings the conflicting principles to an appropriate focus: save for exceptional circumstances, including where costs are not proper compensation, a time extension ought ordinarily to be allowed if it is in the overall interests of justice. This concept of doing justice between the parties is the same concept that both Chief Justice Thurlow and Mr. Justice Marceau used as an underpinning in Grewal (supra). Nor is it inconsistent with Mr. Justice Hugessen’s view in Council of Canadians (supra), for there he pointed out that there “is no immutable check list of matters that must be reviewed whenever the grant of an extension of time is being considered; the most that can be said is that the Court will generally look at whether there is an adequate explanation for the failure to act timely and whether the applicant has an arguable case” (page 255).
Some Relevant Background
[13] Applying some of this to the present situation requires an examination of the nature of the estoppel plea, of the time line leading to the present motion and the prejudice to the defendant.
[14] The action was commenced in 1996, with the plaintiffs filing an amended statement of claim in May of 1998. The defence, which followed in June of 1998, set out, among other things, a complete lack of legal authority to grant leases containing perpetual renewal clauses, from which it follows, according to the defence, that the clauses were null and void.
[15] The plaintiffs examined the Crown on this point in September 1998 and November 1999. Counsel for the plaintiffs submits that the estoppel issue became apparent during the discovery of the Crown’s Mr. Low, the issue then being put on the table. Now it can be too easy, in hindsight, to read given elements into a discovery transcript and for that reason I have again read through not only portions of the transcript referred to me by counsel, but also some portions of the transcript surrounding those references. Certainly the Crown agreed, beginning in the 1930s, that a lease of park land containing a perpetual renewal clause was consistent with the Crown’s policy at that time, but that the perpetual lease policy ceased in about 1958 by reason of doubts on the part of the Crown that it could grant lease renewal in perpetuity. Moreover, up to about 1958, Crown approval of assignment of leases was a mere formality. However, after 1958, the Crown not only stopped issuing perpetually renewable leases, but also refused to allow assignments of leases unless the lease holder surrendered the existing lease, together with its right of perpetual renewal. This policy changed in about 1970 when the Supreme Court of Canada, in R. v. Walker, [1970] S.C.R. 649, held that once a lease holder had a perpetual renewal right it could not be taken away on a renewal. The Crown also, at some point, decided that on an assignment of lease, rather than on a renewal, it might take away the renewal right by insisting on a surrender of the existing lease and to date will not reinstate the perpetual lease clauses in any fresh lease issued to an assignee.
[16] Moreover, the Crown’s position remains that assignments are no longer automatic, without condition, even when the lease holder has been behaving properly. At this point, following the completion of the Low discovery in November of 1999, there could be no doubt that the plaintiffs, by then, had estoppel firmly in mind and that the discovery answers confirmed that an arguable case might be made utilizing estoppel, even though estoppel may, in some instances, be of limited value as against the Crown. Here I accept that estoppel represents at least an arguable approach by which to obtain relief.
[17] It is against this background of the June 1998 defence and the discovery of the Crown’s Mr. Low, completed in November 1999, that counsel for the plaintiffs recognized the need for a reply to specifically raise the estoppel issue, essentially setting out that the defendant may not resile from the exercise of an authority and procedure which gave a right to renew leases in perpetuity.
Intention to Reply
[18] I am satisfied that the plaintiffs had an intention to rely on the estoppel argument as early as the September 1998 discovery of the Crown’s Mr. Low, a discovery completed in November 1999. To have considered a reply, at an earlier date, would have required much speculation and perhaps the hope of turning up assistance on examination for discovery. It is therefore unrealistic to require the intention to file a reply to go back to July 1998, 10 days following the receipt of the defence.
[19] Partial completion of discovery, some 20 months ago, when an estoppel argument had some underpinning, might be argued to have been an appropriate time at which to seek to file a reply, however the better base line is completion of discoveries in November 1999, when the plaintiffs had all of the Crown’s discovery evidence bearing on estoppel. By this measure there has been delay, but justification for the delay, at least until about the end of 1999. I do not see an abandonment of that intention between then and the March 2000 hearing date of this motion, for while both sides were preoccupied with negotiating rule 200 questions of law to be heard in the spring and with some form of document production from, and possibly discovery of, predecessor lease holders, there was discussion of the estoppel issue at the 13 January 2000 case management conference.
[20] This leaves the question of the existence of prejudice which cannot be compensated in costs.
Prejudice
[21] The defendant points to Valyenegro v. Canada (Secretary of State) (1994), 88 F.T.R. 196 (F.C.T.D.) for the proposition that delay, for all practical purposes, may be equated with prejudice. The Court in Valyenegro relied, for this proposition, on University of Saskatchewan v. Canadian Union of Public Employees Local Union 1975 et al., [1978] 2 S.C.R. 830. There the Supreme Court of Canada granted an extension of time within which to appeal on the basis that an extension was justified by reason of the principle that relief ought to be granted if it can be done without serious prejudice to the other party, where it prevents serious prejudice to the litigant applying for the extension (at page 831):
Nevertheless, I feel that an extension is justified under the circumstances by reason of the principle that, if it can be done without serious prejudice to the other party, relief should be granted in order to prevent serious prejudice to a litigant. This is, as it appears to me, the principle on which this Court, overruling the Quebec Court of Appeal, granted an extension of time for bringing an appeal to that Court in Cité de Pont Viau v. Gauthier Mfg., Ltd. (February 7, 1978, not yet reported). In the present case, the appeal, even if brought in time, would not have been ready for inscription for this term. Any appreciable prejudice can therefore be avoided by granting an extension subject to the condition that the case be made ready for inscription for the April term.
The line of reasoning, the delay per se is prejudicial, is apparently based on the proposition that there was no prejudice because the appeal could not have been ready, in any event, for inscription in the current term. The Supreme Court of Canada does not go so far as to automatically equate delay with prejudice.
[22] I believe the better view is that touched upon by Mr. Justice MacGuigan, in the majority decision in Canada v. Aqua-Gem Investments Ltd., [1993] 2 F.C. 425 at page 468, where he rejects the “intuitive notion that inordinate delay necessarily entails serious prejudice”. There the Court of Appeal approved the approach of the Trial Judge [(1991), 91 DTC 5641] in looking at the facts before equating delay with prejudice.
[23] In Ferguson v. Arctic Transportation Ltd. et al. (1996), 118 F.T.R. 154 (F.C.T.D.), at pages 159-160, Mr. Justice Teitelbaum referred to this passage from Aqua-Gem:
Clearly I take this case to mean, on the facts of the case before me, the plaintiff must, at least, show some prejudice caused to him by defendants’ delay in bringing on the motion for security in a dilatory manner, if in fact there was “delay”.
I am satisfied that the delay in bringing the application for security was not “completely out of the ordinary” and, moreover, I have absolutely no evidence that the plaintiff has suffered or will suffer any prejudice as a result of the “delay” of the defendants to bring the motion for security for costs.
…
It cannot be assumed that the plaintiff has been prejudiced by the delay. Prejudice may sometimes be caused by a delay of some months or not be caused by a delay of almost three years. If plaintiff alleges, as he does, that he should not be required to provide security for costs because of the issue of delay, he must show that as a result of the delay he suffered some prejudice. The plaintiff has failed to do so.
[24] It is clear, both from Aqua-Gem and from Arctic Transportation, that delay in and of itself does not necessarily cause prejudice.
[25] By Aqua-Gem and Arctic Transportation I am instructed to look not at delay per se, but at the result of the delay, to determine if prejudice exists.
[26] In the present instance, the defendant points out that some 20 witnesses, produced by the plaintiffs, have been examined for discovery. If there must be further discovery of those individuals, or interrogatories, or some further particulars, that will be inconvenient and might be time consuming, but it can be compensated for in costs.
[27] The defendant also submits that the estoppel argument is a fundamental change to the case. Looking at the pleadings, extant and proposed, I would not term the alteration in the case, and there is some alteration, a fundamental alteration. Rather it is an evolution arising principally from the discovery process, giving rise to an estoppel argument and the need for a reply. Moreover, none of this comes as any surprise.
CONCLUSION
[28] To deny the plaintiffs an opportunity to reply would be to give too much weight to the principle that times set in the Rules are to be met and insufficient weight to the principle that a party committing a procedural default ought not to be denied adjudication of a claim unless there is prejudice to the other side which cannot be compensated by an award of costs. Here, even though there has been delay and, in all fairness, some prejudice to the defendant, a liberal approach is in order and indeed is necessary to do justice between the parties. Any prejudice may be compensated in costs.