|
Rule 4.31 Update
The Alberta Rules of Court provide a mechanism whereby the Court may dismiss all or part of a claim where a plaintiff’s delay in prosecuting an action has given rise to actual or presumptive prejudice (Rule 4.31). Since 2017, Alberta Lawyers Indemnity Association (“ALIA”) has noted a significant increase in the number of claims and the severity of claims resulting from Rule 4.31 applications. In the five years ending in 2021, dismissal for delay claims comprised of Rule 4.31 and Rule 4.33 claims were responsible for 9% of the claims reported and 24% of the incurred damages and defence costs.
As claim costs are one of the key drivers in establishing the levy and are the largest component, ALIA has been focused on loss prevention activities to reduce claims, including Rule 4.31 claims. In addition to educating Subscribers on claim prevention, ALIA, with the support of the Law Society of Alberta and the Alberta Civil Trial Lawyers Association, requested a change to Rule 4.31.
This ALIAdvisory briefly discusses recent Rule 4.31 developments and recommends steps to help avoid Rule 4.31 applications. ALIA urges Subscribers to remain vigilant in avoiding negligence claims by implementing proactive loss management strategies.
Case Law Developments
An earlier ALIAdvisory noted the decision of Humphreys v. Trebilcock (“Humphreys”) and its relevance to Rule 4.31 applications. The decision in Humphreys has been cited as setting out the considerations relevant to any Rule 4.31 applications. Please see the earlier ALIAdvisory for commentary on these considerations, as well as commentary with respect to Rule 4.33 (the three-year “drop dead rule”).
Since Humphreys, the Alberta Court of Appeal has issued several decisions clarifying certain points regarding the considerations relevant in Rule 4.31 applications.
In Arbeau v. Schulz, the Court clarified that where actual prejudice is alleged, the alleged delay must be the cause of the alleged prejudice.
In Transamerica Life Canada v. Oakwood Associates Advisory Group Ltd. (“Transamerica”), the current leading case on Rule 4.31, the Court clarified that the framework established in Humphreys is not a code that must be strictly followed by the Courts in all cases, and that each lawsuit is unique and should be examined on its own merits. The “core source” of the applicable considerations in Rule 4.31 applications remains the Alberta Rules of Court.
The post-Humphreys decisions from the Court of Appeal are also clear that part of the Rule 4.31 analysis must involve a Court taking a harder look at the defendants’ conduct in the lawsuit and whether they have participated in, or contributed to, the delay. Contribution or participation by defendants may excuse any delay, meaning that the presumption of prejudice contained in the Rule would not apply.
In summary, a Court hearing a Rule 4.31 applications will likely consider the inquiries set forth in Humphreys, but the Court is not bound by the six questions set out in that decision. Further, recent developments suggest the Court will not likely reward defendants who are the source of, or contributed to, delay.
The Rule 4.31 Amendment
In October 2021, ALIA, with the support of the Law Society of Alberta and the Alberta Civil Trial Lawyers Association, requested a change to Rule 4.31 as a loss prevention initiative.
ALIA’s submission to the Rules of Court Committee was designed to codify the principles outlined by the Court of Appeal in Transamerica, to require Courts to consider the role of defendants in contributing to the delay, while allowing Courts to retain discretion to determine whether an action should be dismissed. The Rules of Court Committee considered ALIA’s request at their March 2022 meeting, and in May 2022, the Alberta Rules of Court were amended through a regulation to the Judicature Act, including an amendment addressing ALIA’s submission.
The amended Rule is as follows:
Application to deal with delay
4.31(1) If delay occurs in an action, on application the Court may
(a) dismiss all or any part of a claim if the Court determines that the delay has resulted in
significant prejudice to a party, or
(b) make a procedural order or any other order provided for by these rules.
(2) Where, in determining an application under this rule, the Court finds that the delay in an action is
inordinate and inexcusable, that delay is presumed to have resulted in significant prejudice to the
party that brought the application.
(3) In determining whether to dismiss all or any part of a claim under this rule, or whether the delay is
inordinate or inexcusable, the Court must consider whether the party that brought the application
participated in or contributed to the delay.
The amended Rule provides that the Court must consider the contribution and participation of the defendant in the delay in assessing whether the delay is inordinate and excusable, and most importantly, in determining whether to dismiss all or part of an action.
Avoiding Delay and Avoiding Rule 4.31 Claims
None of the recent Rule 4.31 case law developments, or the recent amendment to the Rule, displaces the plaintiff’s (and their counsel’s) responsibility to prosecute their claim in a timely manner, and in particular, plaintiffs (and their counsel) cannot assume that the Court will excuse delays caused or contributed to by defendants.
ALIA cautions all lawyers to avoid delay. A Rule 4.31 application will most easily be avoided by prosecuting a client’s claim in a timely fashion and in a manner consistent with the Alberta Rules of Court. ALIA also notes the following options to avoid, or potentially ensure an adequate response to, Rule 4.31 applications:
1. Diarize all litigation steps appropriately and follow through with diarized dates. To read ALIA’s article on diary errors and missed limitations which includes links to software products and what to look for in software products, please scroll down to the following article “Diary Errors and Missed Limitations - Protect Your Reputation and Stop Missing Important Dates”.
2. Where the defendants are a source of a delay, paper the record appropriately in the event you later face a Rule 4.31 application. For example, caution defendants that your client does not consent to any such delays and clarify that the defendants’ delay shall not be used by the defendants in support of any application complaining of delay; and
3. Note the broader considerations that may affect the Court’s treatment of delay. For example, Humphreys noted that fraud claims are to be prosecuted with “reasonable expedition” given the potential prejudice to reputation(s) that may occur while the claim remains outstanding. In other words, be aware when your client’s claim requires increased expedition.
ALIA also notes the Alberta Rules of Court provide options to prevent or deal with delay:
1. [Rule 4.32] Where delay is necessary, enter into a written standstill agreement in order to demonstrate that the delay is agreed to. If the delay is not agreed to, consider applying under Rule 4.33(9) for a suspension period (note, however, that a suspension period relates to delay as considered by Rule 4.33 – the “drop dead rule”). A form of standstill agreement is available here. It is provided for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind. Legal advice should always be obtained before adopting any template, including this one.
2. [Rule 4.4(2)] Serve the other parties with a litigation plan in a timely fashion. If parties are unable to agree to a litigation plan, any party may then apply to the Court to set forth the same. The litigation plan can include as many steps as it makes sense. If parties cannot agree to subsequent amendments to the litigation plan, use Rule 4.7(2) to return to the Court and amend steps and dates if necessary.
3 [Rules 4.9] Apply to the Court if parties are failing to meet their obligations to manage the dispute and facilitate its resolution, generally. Use other Rules to hold other parties to their obligations, specifically. For example, a party may be penalized for their failure to file their Affidavit of Records in a timely manner under Rule 5.12(1).
4. [Rule 4.10(3)] Alternatively, apply to the Court to manage the litigation and obtain any necessary procedural orders.
5. [Rule 4.12] Finally, if the matter is sufficiently complex or otherwise warrants it, apply to the Court for a case management order.
Where your client is or may be the source of the delay, or has contributed to it, ensure you adequately caution your client of the risks of engaging in or permitting delay, and ensure such cautions are set out in writing.
Conclusion
Rule 4.31 presents a significant risk of claims, and Subscribers can take proactive steps to help avoid being offside of the Rule. Subscribers should be aware of the factors the Court will consider in examining any Rule 4.31 application and what steps may be taken to help avoid, or potentially defend against such applications. Rule 4.31 is, by its nature, highly discretionary. Subscribers should therefore ensure they and their clients are proactive to avoid these applications.
If you have any questions with respect to the foregoing, please do not hesitate to contact ALIA.
_______________________________________________________________________
ALIA acknowledges, with appreciation, Michael Gaber for his significant contributions to Avoiding Rule 4.31 Claims and Darren LaRose for his instrumental work in writing Case Law Developments and Rule 4.31 Amendment. Michael Gaber is ALIA’s defence counsel and a Senior Associate at BLG. Darren LaRose is ALIA’s Senior Claims Counsel.
Diary Errors and Missed Limitations - Protect Your Reputation and Stop Missing Important Dates
In Alberta, claims resulting from missed limitation dates represented 12% of the losses incurred by ALIA over the five years ending in 2021. Many of these claims were caused by a diary error resulting in either failing to serve or not filing a statement of claim on time. Diary errors also cause claims resulting from dismissing actions for delay, which generated 24% of ALIA’s incurred losses over the same period.
Claim costs are the largest component of the levy which means these mistakes impact the levy; they also lead to dissatisfied clients and damage your professional reputation.
The good news is that these errors can generally be avoided with the help of a well-constructed limitations system. The key is using limitations software to organize and monitor your deadlines.
While Microsoft Outlook offers a calendar system that can be useful, several software products are customized for lawyers to track limitations and deadlines. These products include an interface that minimizes data entry mistakes and redundant data, a simplified routine process, and a reminder system that spans multiple years. While there is a cost to these systems, having a claim also comes with costs, including a $5,000 deductible and a potential surcharge on your levy.
To assist lawyers with understanding what to look for in limitations software, along with an overview of the available products, including key features and current pricing, please click on the links below.
Limitations Software Options – Law Society of Alberta
What to Look for in Limitations Software – Law Society of Alberta
The Lawyers Indemnity Fund in B.C. also has an excellent guide on avoiding missed limitations and deadlines. This award-winning publication offers more than 70 tips to prevent missed deadlines, and real-life stories behind the mistakes.
High Alert on Scams
Through the summer, ALIA has continued to receive a steady stream of cyber scams. Lawyers need to stay vigilant against cybercrime during all times.
ALIA Subscribers have reported several scams, including where firms have been asked to act for purchasers of industrial equipment and a business with a building. These were discovered to be fraudulent and were likely attempted bad cheque scams. In one case, the lawyer noticed the client’s identification passport photo looked suspicious and discovered the fraud with further online sleuthing. In the other case, the lawyer reached out to the proposed counterparty, who had no knowledge of the transaction.
Another scam involved an email from a fake law firm that appeared to be a phishing attack. The lawyer did not open the link, as such links often contain malware which could then infect the recipient’s computer system.
In another case, a fraudster appeared to be impersonating the Law Society of Alberta. When the lawyer contacted the number back, it was no longer in service. Previously, another lawyer was contacted by a person with a caller ID, “Calgary – Law Society of Alberta” requesting bank information. When the lawyer contacted the number back, it was no longer in service.
In all these cases, lawyers recognized red flags and ceased contact with the criminals. For tips to avoid being , read our list of Red Flags.
______________________________________
ALIA does not provide legal advice. ALIAdvisory notices, ALIAlerts and the content on ALIA’s website, notices, blogs, correspondence and any other communications are provided for general information purposes only and do not constitute legal or other professional advice or an opinion of any kind. This information is not a replacement for specific legal advice and does not create a solicitor-client relationship.
ALIA may provide links to third-party websites. Links are provided for convenience only; ALIA does not vet or endorse the information contained in linked websites or guarantee its accuracy, timeliness or fitness for a particular purpose.
If you believe you have been targeted by potentially fraudulent activity, please contact ALIAlert.
| 
