• Does Agreement Between Counsel Prohibit the Application of the ‘Drop-Dead’ Rule: Charik Custom Homes Ltd. v Sara Development Inc.
  • February 17, 2015
  • Law Firm: DLA Piper (Canada) LLP - Vancouver Office
  • In Charik Custom Homes Ltd. v Sara Development Inc., Master Robertson of the Alberta Court of Queen’s Bench added another layer of interpretation to the “drop-dead” rule. Specifically, the question posed to the Court was whether a request made for time to defend a claim, and agreed to by the plaintiff, can defeat an application to dismiss for long delay under the “drop-dead” rule. The “drop-dead” rule is found at 4.33(1):

    4.33(1) If 3 or more years has passed without a significant advance in an action, the Court, on application, must dismiss the action as against the applicant, unless

    (a) the parties to the application expressly agreed to the delay,

    (b) the action has been stayed or adjourned by order, an order has extended the time for advancing the action, or the delay is provided for in a litigation plan,

    (c) the applicant did not provide a substantive response within 2 months after receiving a written proposal by the respondent that the action not be advanced until more than 3 years after the last significant advance in the action, or

    (d) an application has been filed or proceedings have been taken since the delay and the applicant has participated in them for a purpose and to the extent that, in the opinion of the Court, warrants the action continuing.

    The Background

    At the time of the application, the plaintiff’s statement of claim had been filed for more than three years without another advance in the action. Shortly after service of the statement of claim, the defendant's counsel advised the plaintiff’s counsel that he was acting on their behalf, and requested the usual courtesy of not proceeding with default proceedings without reasonable prior notice. The plaintiff’s counsel agreed to this request, however the claim then sat dormant for over three years. Due to the delay, the defendants applied for dismissal of the claim against them under Rule 4.33 of the Alberta Rules of Court.

    The plaintiff’s counsel argued that the agreement between counsel, namely not to proceed with default proceedings, amounted to a “standstill” agreement, which would fulfill the requirement under Rule 4.33(1)(a) that the parties expressly agreed to the delay. This would serve to prohibit the dismissal of the action for a delay longer than three years.

    The Analysis

    Master Robertson concluded that “when a Defendant or Defendant’s counsel asks for reasonable prior notice before the Plaintiff takes default proceedings, and the Plaintiff agrees, then there is no agreement that would bring into play rule 4.33(1)(a)”(para 29). To reach this conclusion, Master Robertson analyzed previous case law, and determined that although there were some conflicting decisions, the status of the law was that the granting of the usual courtesy request for extra time, without an undertaking to defend the claim, did not amount to a standstill agreement. If there is no standstill agreement, there is no avoidance of the “drop-dead” rule under Rule 4.33(1)(a).

    There is however a difference when the defendant’s counsel has undertaken to defend. Master Robertson followed the Court of Appeal decision Bugg v Beau Canada Exploration Ltd., 2006 ABCA 201, which emphasized that there is a difference between the usual request for time, and an actual undertaking to defend, communicated to opposing counsel; “Where the Defendant or Defendant’s counsel has undertaken to defend, either Rule 4.33(1)(a) is brought into play, or the Defendant cannot bring the application to strike, having failed to do what he or she undertook to do, or both” (para 34).

    Therefore, if counsel has made an undertaking to defend, they will be correspondingly unsuccessful in applying for the action to be dismissed pursuant to Rule 4.33 if they never fulfilled their obligation of defending the claim. Furthermore, it is important to note that a notice of the intention to defend is not the same as an undertaking to defend.

    As more than three years had passed without the application of any of the exclusionary rules within Rule 4.33, Master Robertson allowed the defendant’s application to dismiss the plaintiff’s action pursuant to the “drop-dead” rule.

    How Does it Apply?

    Moving forward, do not rely upon the agreement between counsel to not proceed with default proceedings to stop the clock on the “drop-dead” rule. It is not sufficient to dismiss an application to strike. If you are a plaintiff granting the courtesy not to take default proceedings, consider requesting an undertaking to defend that will preclude the defendant from later seeking a dismissal of the action under Rule 4.33(1).