Judgments

[1993] 2 F.C. 425

A-1191-91

Her Majesty the Queen (Appellant)

v.

Aqua-Gem Investments Ltd. (Respondent)

Indexed as: Canada v. Aqua-Gem Investments Ltd. (C.A.)

Court of Appeal, Isaac C.J., Mahoney, MacGuigan, Décary and Robertson JJ.A.—Toronto, November 9, 1992; Ottawa, February 4, 1993.

Judges and Courts — Per C.J. (dissenting): Whether all discretionary decisions of prothonotaries to be reviewed de novo (based on F.C.A. decision in Canada v. “Jala Godavari” (The)) or reviewed for error only in some cases — Issue of great importance as affecting efficient dispatch of Court business, utilization of judicial resources — Intention of Parliament in authorizing appointment of prothonotaries — General direction issued by A.C.J. as to powers of Senior Prothonotary, A.S.P. — Historical development of Master system in England — Canadian practice giving Masters larger discretion — Exhaustive review and exposition of law relating to Masters — Constitutional issues — Proper standard of review of discretionary orders of F.C. prothonotaries — Necessity for balancing judicial due process on questions vital to final issue of case with administrative expedition in routine matters — Authority of prothonotaries should not be limited as suggested in Canada v. “Jala Godavari” (The).

Practice — Dismissal of proceedings — Want of prosecution — Appeal from Order of Motions Judge setting aside A.S.P.’s denial of order staying or dismissing Crown’s action for want of prosecution — Action commenced in 1986, delayed more than three years — Delay inordinate, inexcusable, likely to cause prejudice to respondent.

This was an appeal from an order of the Motions Judge setting aside the dismissal by the Associate Senior Prothonotary of respondent’s motion for an order staying the proceeding under paragraph 50(1)(b) of the Federal Court Act or dismissing it for want of prosecution under R. 440. The respondent, a firm which specializes in buying and reviving failing businesses, sought to treat certain types of expenses as “active business income” for its 1979, 1980 and 1981 taxation years. The Minister of National Revenue treated the amounts in question as “Canadian investment income”, thus subjecting them to a higher tax liability. The respondent appealed the Minister’s assessment to the Tax Court of Canada which ruled in its favour. The Minister appealed that decision and filed a statement of claim in the Federal Court, Trial Division in July 1986. For various reasons, the case was delayed until March 1988 and again until September 1991, at which time the Associate Senior Prothonotary heard the respondent’s motion for an order dismissing the appellant’s action for want of prosecution, and dismissed it. The Motions Judge allowed the appeal from that decision, pointing out that “the delay on the plaintiff’s part has been of such substantial proportion as to likely cause prejudice to the defendant at trial”. The main issue was whether the Motions Judge applied the proper standard of review to the discretionary decision of the Prothonotary when he relied upon the standard enunciated by the Federal Court of Appeal in Canada v. “Jala Godavari” (The).

Held (Isaac C.J. and Robertson J.A. dissenting): the appeal should be dismissed.

Per MacGuigan J.A. (Mahoney and Décary JJ.A. concurring): Discretionary orders of prothonotaries ought not to be disturbed on appeal to a judge unless 1) they are clearly wrong in the sense that the exercise of discretion by the prothonotary was based upon a wrong principle or upon a misapprehension of the facts, or 2) they raise questions vital to the final issue of the case. In such cases, a judge ought to exercise his own discretion de novo. In the Jala Godavari case, the Court of Appeal, contrary to a view so far adopted in the Trial Division that the prothonotary’s discretion should be followed unless he had committed an error of law, ruled that a judge who hears an appeal from a prothonotary on a matter involving the exercise of discretion is called upon to exercise his own discretion and is not bound by the prothonotary’s opinion. This case should not be read as meaning that the prothonotary’s discretion should never be respected, but that it is subject to an overriding discretion by a judge where the question involved is vital to the final issue of the case. The question before the prothonotary herein can be considered interlocutory only because he decided it in favour of the appellant. If he had decided it for the respondent, it would have been a final decision in the case. A decision which can thus be either interlocutory or final depending on how it is decided, even if interlocutory because of the result, must nevertheless be considered vital to the final resolution of the case. The Motions Judge was right in following the Jala Godavari case and exercising his own discretion de novo. In concluding “solely on the grounds that the defendant had not complained of the plaintiff’s tardiness or taken some action at an earlier date”, the prothonotary made an error of law which prevented him from exercising his discretion properly. This would also justify the Motions Judge’s exercise of discretion de novo. The prothonotary’s fundamental error was in assuming that the respondent was under an obligation to take action in response to the draft statement of facts.

The Motions Judge properly exercised his discretion by taking into consideration all relevant factors, including the question of whether the subsequent delay by the respondent was sufficient to excuse the appellant’s failure to prosecute in a reasonable and timely manner. He did not find the respondent’s lack of response to amount to condonation, acquiescence or waiver. Nor did he err in law in considering how serious was the prejudice caused by the delay and he raised the question properly in saying: “the defendant must show … that it will likely be seriously prejudiced by the delay”. There was no manifest error of law on the Motions Judge’s part such as would permit the Court to interfere with his exercise of discretion.

Per Isaac C.J. (dissenting): The first issue was whether the Motions Judge applied the proper standard of review to the discretionary decision of the Associate Senior Prothonotary. Any standard adopted must recognize Parliament’s intention, embodied in section 12 of the Federal Court Act, that the office of prothonotary is designed to aid in “the efficient performance of the work of the Court”. A standard of review which subjects all impugned decisions of prothonotaries to hearings de novo regardless of the issues involved in the decision or whether they decide the substantive rights of the parties would be inconsistent with the statutory objective. The standard of review laid down in Jala Godavari is incomplete; therefore, the Motions Judge, who relied on it, did not apply the proper standard of review to the discretionary order of the Associate Senior Prothonotary.

The second issue was whether the Motions Judge erred in allowing the respondent’s appeal and setting aside the order of the Associate Senior Prothonotary. With respect to the first branch of the standard of review, whether the order of the Associate Senior Prothonotary was clearly wrong, there was no allegation that the latter misapprehended the facts. It was largely because he had taken into account the conduct of the respondent in the litigation that the Motions Judge found him to have been in error. In taking such conduct into account, the Associate Senior Prothonotary was acting in accordance with well-settled principles which have been accepted by the Federal Court. The level of litigious activity or inactivity on the part of the defendant is a relevant factor to be taken into account in determining whether a delay has been inordinate or inexcusable, and whether a party has been seriously prejudiced by it. In arriving at his conclusion, the Associate Senior Prothonotary did not act on a wrong principle and his order was not clearly wrong. As to the second branch of the standard, namely whether the order of the Prothonotary raised questions vital to the final issue of the case, the Motions Judge was not justified in refusing deference to the discretion of the Associate Senior Prothonotary and exercising his own. The order in question was interlocutory: it did not decide the substantive rights of the parties or any issue vital to the final issue of the litigation. Its sole effect was that the appellant was entitled to proceed to trial in accordance with the rules and practice of the Court. Delay in prosecution was not an issue in dispute in the action. The test to be applied in dismissing an action for want of prosecution is whether there has been an inordinate delay, whether that delay was inexcusable and whether the defendant is likely to be seriously prejudiced by the delay. The Associate Senior Prothonotary considered each element of this test in reaching his conclusion, albeit in different language. The Motions Judge erred in allowing the respondent’s appeal and setting aside the order of the Prothonotary.

Per Robertson J.A. (dissenting): The Motions Judge erred in applying the test on which decisions to dismiss actions for want of prosecution must be based. The two-year delay was “inexcusable” and “inordinate” but it remained to be determined whether the respondent was “likely to be seriously prejudiced by the delay”. One should not presume serious prejudice because the delay is deemed inordinate. Moreover, it is doubtful whether the “fading memory” rationale could be invoked as the sole basis on which to rest a decision to dismiss for want of prosecution. The burden of demonstrating sufficient prejudice is not easily met. Courts should not assess the likelihood of serious prejudice in a factual vacuum. The respondent offered no specific evidence which could reasonably be regarded as giving rise to a likelihood of serious prejudice. Its admission that “there was substantial evidence from the witness at the trial in the Tax Court” undermines the validity of the “fading memory” rationale and, if necessary, would rebut any presumption of prejudice. An order dismissing an action for want of prosecution is not intended to punish a plaintiff for its failure to proceed expeditiously. Its aim is to ensure that defendants are not exposed to “a substantial risk that a fair trial of the issues in the litigation will not be possible”. The respondent failed to adduce the evidence necessary to demonstrate that it would be unable to obtain a fair trial on the issues.

STATUTES AND REGULATIONS JUDICIALLY CONSIDERED

An Act for the division of the Province of Lower-Canada, for amending the Judicature thereof, and for repealing certain Laws therein mentioned [34 Geo. III, c. 6] 1793.

An Act to amend the Exchequer Court Act, S.C. 1920, c. 26, s. 3.

An Act to amend the Exchequer Court Act, S.C. 1957, c. 24, s. 1.

An Act to amend “The Supreme and Exchequer Courts Act”, and to make better provision for the Trial of Claims against the Crown, S.C. 1887, c. 16, s. 9.

Code of Civil Procedure, R.S.Q., c. C-25, art. 41, 42, 44.1, 511.

Constitution Act, 1867, 30 & 31 Vict., c. 3 (U.K.) (as am. by Canada Act 1982, 1982, c. 11 (U.K.), Schedule to the Constitution Act, 1982, Item 1) [R.S.C., 1985, Appendix II, No. 5], s. 101.

Courts of Justice Act, R.S.Q. 1977, c. T-16, s. 4.

Exchequer Court Act, R.S.C. 1927, c. 34, s. 87(2).

Exchequer Court Act, R.S.C. 1952, c. 98.

Exchequer Court General Rules and Orders, Rule 1A(4).

Federal Court Act, R.S.C., 1985, c. F-7, ss. 3, 12, 46(1), 50(1).

Federal Court Rules, C.R.C., c. 663, RR. 331A (as enacted by SOR/79-57, s. 6), 336, 440, 447(2), 460 (as am. by SOR/90-846, s. 15).

Income Tax Act, R.S.C. 1952, c. 148, s. 175(3) (as am. by S.C. 1988, c. 61, s. 21).

Judicature Act, S.N.S. 1972, c. 2.

The Supreme and Exchequer Court Act, S.C. 1875, c. 11, s. 70.

CASES JUDICIALLY CONSIDERED

APPLIED:

Evans v. Bartlam, [1937] A.C. 473 (H.L.); Stoicevski v. Casement (1983), 43 O.R. (2d) 436 (C.A.); revg (1983), 33 C.P.C. 145 (Div. Ct.); Canada v. “Jala Godavari” (The) (1991), 40 C.P.R. (3d) 127; 135 N.R. 316 (F.C.A.); Allen v. McAlpine (Sir Alfred) & Sons, Ltd., [1968] 1 All E.R. 543 (C.A.); The Queen v. Murphy and ABC Steel Building Ltd. (1988), 89 DTC 5028; 99 N.R. 75 (F.C.A.); Canadian National Railway Co. v. The Norango, [1976] 2 F.C. 264(F.C.A.).

CONSIDERED:

Adamson v. Adamson et al (1888), 12 P.R. 469 (Ont. H.C.); Odell v. Mulholland (1891), 14 P.R. 180 (Ont. H.C.); Quality Steels (London) Ltd. v. Atlas Steels Limited, [1949] O.W.N. 110 (H.C.); Marleen Investments Ltd. v. McBride et al. (1979), 23 O.R. (2d) 125; 13 C.P.C. 221; 27 Chitty’s L.J. 69 (H.C.); King v. Drysdale et al. (1892), 24 N.S.R. 308 (S.C.); Starratt v. White (1913), 11 D.L.R. 488; 47 N.S.R. 163 (S.C.); Alta. Wheat Pool v. Nahajowicz (1930), 24 Alta. L.R. 400; [1930] 2 D.L.R. 759; [1930] 1 W.W.R. 483 (S.C.A.D.); Wright v. Disposal Services Ltd. and Marsh (1977), 8 A.R. 394; 80 D.L.R. (3d) 671; 4 Alta. L.R. (2d) 173 (S.C.); 274099 Alberta Ltd. v. West Edmonton Mall Shopping Centre Ltd. et al. (1990), 114 A.R. 57; 75 Alta. L.R. (2d) 389 (C.A.); Abermin Corp. v. Granges Explor. Ltd. (1990), 45 B.C.L.R. (2d) 188; 42 C.P.C. (2d) 25 (S.C.); Re Solloway Mills & Co., [1935] O.R. 37; [1935] 2 D.L.R. 549 (C.A.); Iscar Ltd. v. Karl Hertel GmbH, [1989] 3 F.C. 479 (1989), 25 C.P.R. (3d) 116; 27 F.T.R. 186 (T.D.); Reading & Bates Construction Co. v. Baker Energy Resources Corp. (1988), 22 C.I.P.R. 240; 24 C.P.R. (3d) 66; 25 F.T.R. 226 (F.C.T.D.); Do Carmo v. Ford Excavations Pty Ltd, [1981] 1 N.S.W.L.R. 409 (S.C.); overd in part [1981] 2 N.S.W.L.R. 253 (C.A.); vard (1984), 58 A.L.J.R. 287 (Aust.H.C.); Farrar v. McMullen, [1971] 1 O.R. 709 (C.A.); Nichols v. Canada et al. (1990), 36 F.T.R. 77 (F.C.T.D.); Birkett v. James, [1978] A.C. 297 (H.L.); Department of Transport v. Chris (Smaller) Transport Ltd., [1989] A.C. 1197 (H.L.).

REFERRED TO:

Ensite Ltd. v. R., [1986] 2 S.C.R. 509; (1986), 33 D.L.R. (4th) 491; [1986] 2 C.T.C. 459; 86 DTC 6521; 70 N.R. 189; Aqua-Gem Investments Ltd. v. M.N.R., [1986] 1 C.T.C. 2528; 86 D.T.C. 1392 (T.C.C.); Sculthorpe v. Burn (1866), 12 Gr. 427 (U.C.Ch); Branche v. MacArthur et al. (1986), 56 O.R. (2d) 71; 30 D.L.R. (4th) 301; 11 C.P.C. (2d) 8; 16 O.A.C. 306 (Div. Ct.); Wink (John) Ltd. v. Sico Inc. (1987), 57 O.R (2d) 705; 15 C.P.C. (2d) 187 (H.C.); Das v. Coles (1989), 71 O.R. (2d) 57; 64 D.L.R. (4th) 345 (H.C.); Hart v. Kowall (1990), 75 O.R. (2d) 306; 74 D.L.R. (4th) 126 (Gen. Div.); L.C.D.H. Audio Visual Ltd. v. I.S.T.S. Verbatim Ltd. et al. (1986), 54 O.R. (2d) 425; 40 B.L.R. 128; 8 C.P.C. 141 (H.C.); Fazzari et al. v. Pellizzari et al. (1988), 28 O.A.C. 38 (Div. Ct.); Lacaud c. Leblanc, [1983] C.S. 555 (Que. S.C.); Johnson Products Co. v. Truso Ltd. (1987), 12 C.I.P.R. 22; 15 C.P.R. (3d) 76 (F.C.T.D.); Reading & Bates Construction Co. v. Baker Energy Resources Corp. (1987), 12 C.I.P.R. 260 (F.C.T.D.); Westinghouse Electric Corp. et al. v. Babcock & Wilcox Industries Ltd. (trading under name and style Bailey Controls et al.) (1987), 15 C.P.R. (3d) 447; 15 F.T.R. 154 (F.C.T.D.); Standal Estate v. Swecan International Ltd. (1989), 24 C.I.P.R. 298; 25 C.P.R. (3d) 104; 27 F.T.R. 1 (F.C.T.D.); Syntex Inc. v. Novopharm Ltd. (1989), 24 C.I.P.R. 144; 24 C.P.R. (3d) 371; 28 F.T.R. 118 (F.C.T.D.); Unilever PLC v. Proctor& Gamble Inc. (1989), 23 C.I.P.R. 237; 24 C.P.R. (3d) 388 (F.C.T.D.); David et al. v. Kluger et al. (1991), 51 F.T.R. 234 (F.C.T.D.); Prouvost S.A. v. Munsingwear Inc., [1992] 2 F.C. 541(C.A.); Canastrand Industries Ltd. v. Lara S (The), [1992] 3 F.C. 398(T.D.); Ruhrkohle Handel Inter GMBH v. Federal Calumet (The), [1992] 3 F.C. 98(C.A.); Norton Co. v. Lionite Abrasives Ltd. (1975), 32 C.P.R. (2d) 270 (F.C.T.D.); Minnesota Mining and Manufacturing Company v. Lorcon Inc., [1984] 1 F.C. 380 (1984), 73 C.P.R. (2d) 176 (T.D.); McGregor and McGregor v. Canada (1988), 20 F.T.R. 122 (F.C.T.D.); Hendrickson v. Kallio, [1932] O.R. 675 (C.A.); Bozson v. Altrincham Urban Council, [1903] 1 K.B. 547 (C.A.); Walkley v. Precision Forgings Ltd., [1979] 2 All E.R. 548 (H.L.); Bremer Vulkan Schiffbau und Maschinenfabrik v. South India Shipping Corpn. Ltd., [1981] A.C. 909 (H.L.); Paal Wilson & Co. A/S v. Partenreederei Hannah Blumenthal, [1983] A.C. 854 (H.L.); A-G of Canada v. S.F. Enterprises Inc. et al. (1990), 90 DTC 6195; 107 N.R. 100 (F.C.A.); Ainsworth v. Bickersteth et al., [1947] O.R. 525; [1947] 3 D.L.R. 517 (C.A.).

AUTHORS CITED

Audet, Pierre E. Les officiers de justice: des origines de la colonie jusqu’à nos jours. Montréal: Wilson& Lafleur Ltée, 1986.

Jacob, Sir Jack I. H. The Fabric of English Civil Justice. (The Hamlyn Lectures; 38). London: Stevens & Sons Ltd., 1987.

APPEAL from the order of a Motions Judge ((1991), 91 DTC 5641; 50 F.T.R. 115 (F.C.T.D.)) setting aside an order of the Associate Senior Prothonotary ((1991), 91 DTC 5546 (F.C.T.D.)) dismissing the respondent’s motion for an order staying the proceeding under paragraph 50(1)(b) of the Federal Court Act or dismissing it for want of prosecution under Rule 440. Appeal dismissed.

COUNSEL:

Harry Erlichman and Laura C. Snowball for appellant.

Richard G. Fitzsimmons and Daniel F. Chitiz for respondent.

SOLICITORS:

Deputy Attorney General of Canada for appellant.

Fitzsimmons, MacFarlane, Slocum & Harpur, Toronto, for respondent.

The following are the reasons for judgment rendered in English by

Isaac C.J. (dissenting): This is an appeal from the order of a Motions Judge in the Trial Division dated November 8, 1991 [91 DTC 5641], allowing an appeal by the respondent made pursuant to Rule 336(5) of the Federal Court Rules [C.R.C., c. 663] from an order of the Associate Senior Prothonotary [(1991), 91 DTC 5546]. By his order, the Motions Judge set aside, with costs, the order of the Associate Senior Prothonotary which dismissed the respondent’s motion for, inter alia, an order staying the proceeding pursuant to paragraph 50(1)(b) of the Federal Court Act [R.S.C., 1985, c. F-7] or, alternatively, dismissing it for want of prosecution pursuant to Rule 440.

The order in appeal had the effect of dismissing the appellant’s action for want of prosecution.

The sole ground of objection to the order, alleged by the appellant in its memorandum of fact and law, was that the Motions Judge erred in dismissing the action for want of prosecution, but when the appeal came on for hearing, the Court, of its own motion, by order dated October 5, 1992, directed the parties to submit argument on the following question:

Whether the Motions Judge applied the proper standard of review to the discretionary decision of the Prothonotary when he relied upon the standard enunciated by Hugessen J.A. in The Ship “Jala Godavari” et al v. The Queen et al …

THE FACTS

The respondent, incorporated in 1975, is a firm which, inter alia, specializes in buying and reviving failing businesses. In computing its business income for the 1979, 1980 and 1981 taxation years, it sought to treat certain types of expenses as “active business income” in order to obtain the benefit of the small business deduction and refundable dividend provisions of the Income Tax Act.[1] The Minister of National Revenue (the “Minister”) disagreed. In 1983, in reassessing the respondent’s income tax returns for those years, the Minister treated all of the amounts in question as “Canadian investment income”, thus subjecting them to a higher tax liability.

The respondent appealed the Minister’s assessment to the Tax Court of Canada. The notice of appeal was filed on February 10, 1984. The Court heard the appeal on May 31, 1985 and rendered its decision on April 24, 1986.[2]

On the appeal to the Tax Court, the respondent conceded the Minister’s position concerning some of the expenses. However, the Court decided in its favour over the allocation of certain interest income. The Minister appealed that decision to the Trial Division of this Court in accordance with the provisions of the Income Tax Act.[3]

The Minister filed his statement of claim in the Trial Division on July 29, 1986. At the request of the respondent, the Minister agreed to a delay in the filing of the respondent’s defence until the Supreme Court of Canada had delivered its decision in Ensite Ltd. v. R., [1986] 2 S.C.R. 509, a case which involved roughly analogous facts and which the respondent thought could affect its position in this case. After the Supreme Court rendered its decision on November 6, 1986, the Minister indicated his intention to proceed with the appeal, and the respondent said that it would “endeavour” to file its defence by January, 1987. On March 9, 1987, the respondent’s solicitor wrote to the appellant’s solicitor enclosing the statement of defence for service.

On March 13, 1987, the solicitor for the Minister wrote to the solicitor for the respondent suggesting that they exchange lists of documents and make arrangements for examinations for discovery. No further communication appears to have passed between the parties until March 23, 1988, when the Minister’s solicitor forwarded his list of documents to the respondent’s solicitor and asked for the respondent’s list in return. The Minister’s solicitor also suggested that the parties should attempt to agree on the facts and thereby obviate the need for discoveries, since the facts were “hardly in dispute.” On March 29, 1988, the solicitors agreed by telephone that the solicitor for the Minister would prepare a draft statement of facts. There is no evidence that this agreement was ever terminated or that the respondent did deliver its list of documents.

On May 14, 1990 (over two years after the previous exchange of correspondence), the solicitor for the Minister sent the solicitor for the respondent a copy of its draft statement of agreed facts and asked for comments. The solicitor for the respondent did not respond. On October 24, 1990, the solicitor for the Minister wrote again, requesting a response. He received none. On January 15, 1991, the solicitor for the Minister wrote a third time as follows:

A draft of the Statement of Agreed Facts was sent on May 14, 1990 for your perusal. I have not had any response from you despite a reminder dated October 24, 1990.

May I please hear from you whether or not you intend to proceed with this appeal. In reviewing your position you might take into account the views of the Tax Court expressed in McCutcheon Farms Ltd. v. M.N.R., 88 DTC 1208 at pages 1214-25 on the reasons behind the Tax Court’s decision in Aqua-Gem.

To this the respondent’s solicitor replied by serving on the appellant’s solicitor, a notice of motion returnable on June 10, 1991 in the Trial Division for the relief mentioned earlier.

The motion was adjourned by the parties sine die and was heard by the Associate Senior Prothonotary in Toronto on September 30, 1991.

THE JUDGMENTS BELOW

a)         Reasons of the Associate Senior Prothonotary

On September 30, 1991, the Associate Senior Prothonotary heard the motion and dismissed it. On October 8, 1991, he delivered written reasons for his decision. In his reasons, the Associate Senior Prothonotary reviewed the procedural history of the action and the correspondence passing between the solicitors for the parties. He then stated [at pages 5546-5547]:

The time that has passed since the occurrence of the facts giving rise to this action (which is a tax appeal) is sufficient for any witness to have forgotten many of the circumstances. Defendant’s counsel, however, admitted that there was substantive evidence from the witness at the trial in the Tax Court and no doubt transcripts of that testimony will go far to refresh the witness’s memory. The delay prior to March, 1987 [i.e. the period prior to Aqua-Gem’s filing its defence] was either by agreement awaiting the Supreme Court decision or by delay of the defendant. The delay immediately after March 1987 was in not filing document lists. Both sides were required to file such lists, neither did so. Over a year later, in March 1988, the plaintiff [i.e. Crown] supplied a list. The defendant might at that time have moved or complained of a fresh step being taken after a year’s delay. The defendant did not do so. The parties communicated and on the 28th of March 1988, the plaintiff agreed to draft a Statement of Facts in the hope that an Agreed Statement of Facts might be used to shorten proceedings. The plaintiff did not supply the draft Agreed Statement of Facts for over two years. When the plaintiff finally supplied the draft in May of 1990, the defendant could again have moved or complained. Over the next year, the plaintiff twice sought replies and received none. The delay of two years up until May, 1990 as I say, might well have supported a successful motion to dismiss brought about at that time. The defendant, however, did nothing. Twice the defendant was reminded. The next step in the proceedings which were apparently agreed to by the parties in March of 1988 was for the defendant to react to the draft Agreed Statement of Facts which it did not do. Having apparently excused a one year delay prior to March 1988, and a further two year delay prior to May 1990, or if it did not excuse those delays to have done nothing about either of them until June of 1991. [sic] The defendant cannot be heard to complain at this late date of the plaintiff’s failure to proceed expeditiously at earlier times nor of the plaintiff’s failure to react to the defendant’s delays in commenting on the Agreed Statement of Facts. For these reasons I dismissed the defendant’s motion. [Emphasis added.]

b)         Reasons of the Motions Judge

The respondent appealed from the order of the Associate Senior Prothonotary by motion brought pursuant to Rule 336(5) of the Federal Court Rules, according to the practice of the Court.

In its notice of motion the respondent sought, inter alia, an order reversing the order of the Associate Senior Prothonotary on several grounds, but in essence it claimed that the Associate Senior Prothonotary had erred in not staying or dismissing the appellant’s action.

I digress here to observe that in argument before us counsel for the appellant stated that he took the position before the Associate Senior Prothonotary that despite the alternative claim for relief the respondent’s motion was properly one for dismissal for want of prosecution pursuant to Rule 440 of the Federal Court Rules and not for a stay pursuant to subsection 50(1) of the Federal Court Act, (“the Act”).[4] It would appear that the Associate Senior Prothonotary accepted that position because he decided the motion on that basis.

After he had reviewed the facts, the Motions Judge outlined his approach to the appeal in the following terms [at page 5642]:

The first point I wish to make concerns the function of a trial judge of this court when hearing an appeal from a decision of a prothonotary. It is now established that in cases of this nature, a judge is not only permitted to exercise his or her own discretion, but is required to do so. Furthermore, there is no obligation on the court to accept the views of the prothonotary. This principle was set out by the Federal Court of Appeal in The Ship “Jala Godavari” et al. v. The Queen et al. (A-112-91, October 18, 1991), wherein Hugessen, J.A. writing for the court made the following statement:

In this latter connection we would add that, contrary to a view that has sometimes been expressed in the Trial Division, a judge who hears an appeal from a prothonotary on a matter involving the exercise of discretion is called upon to exercise his own discretion and is not bound by the prothonotary’s opinion. He may, of course, choose to give great weight to the views expressed by the prothonotary, but the parties are, in the final analysis, entitled to the discretion of a judge and not that of a subordinate officer.

It was this passage in the reasons of the Motions Judge which caused the Court to require argument on the issue of whether the proper standard of review had been applied to the order of the Associate Senior Prothonotary.

Following his description of the scope of review, the Motions Judge stated that he would allow the appeal. In justifying his conclusion he said [at pages 5642-5643]:

In order to succeed on an application to dismiss an action for want of prosecution, the defendant must show that there has been inordinate delay which is inexcusable and that it will likely be seriously prejudiced by the delay. The general rule is that the longer the delay, the greater the likelihood of serious prejudice at the trial as the passage of time weakens witnesses’ recollection of events.

I am satisfied that the defendant has successfully shown these elements in the present case. Indeed, it is not seriously contested here that there has been inordinate delay on the part of the plaintiff. Giles, A.S.P. noted in his Reasons that “the time that has passed since the occurrence of the facts giving rise to this action (which is a tax appeal) is sufficient for any witness to have forgotten many of the circumstances.” Accordingly, it is appropriate that the plaintiff’s action be dismissed for want of prosecution.

The fact that plaintiff’s delay in prosecuting this case is sufficient to warrant an order dismissing the action is not, under the circumstances, altered by any subsequent delay on the part of the defendant. The implication that the defendant’s lack of action excused the plaintiff’s failure to prosecute in a reasonable and timely manner is simply not correct.

…

I am of the view that the Associate Senior Prothonotary was in error when he refused to grant the motion for want of prosecution solely on the grounds that the defendants had not complained of the plaintiff’s tardiness or taken some action at an earlier date. It is clear on the facts that the delay on the plaintiff’s part has been of such substantial proportion as to likely cause prejudice to the defendant at trial. [Emphasis added.]

THE ISSUES

As reconstituted, the following two issues arose for determination in this appeal and were fully canvassed by counsel for the parties:

1. Whether the Motions Judge applied the proper standard of review to the discretionary decision of the Associate Senior Prothonotary.

2. Whether the Motions Judge erred in allowing the Respondent’s appeal and setting aside the order of the Associate Senior Prothonotary.

I will deal with each issue in turn.

1.         Whether the Motions Judge applied the proper standard of review to the discretionary decision of the Associate Senior Prothonotary.

I observe at the outset that this issue is of great importance, since it touches directly upon the efficient dispatch of the business of the Court and the proper utilization of judicial resources. Simply stated, the competing considerations are whether all discretionary decisions of prothonotaries are to be reviewed by hearings de novo, as the Motions Judge has concluded, based on the decision in Canada v. “Jala Godavari” (The) (1991), 40 C.P.R. (3d) 127 (F.C.A.), or whether they should be reviewed for error only in some or all cases. If only in some, how should such cases be defined?

Resolution of this issue requires an appreciation of the role of prothonotaries and the nature of the functions they perform in this Court. It is necessary to an understanding of that role and those functions to review their legislative underpinnings.

By section 3 of the Federal Court Act, Parliament continued in this Court, as a superior court of civil and criminal jurisdiction, the authority formerly exercised by the Exchequer Court of Canada. As is well known, the Exchequer Court employed a Registrar or Master to assist in its work.[5]

The Act provides, in section 12, for the continuation of the function performed by these officers, by authorizing the appointment of prothonotaries. Section 12 defines the powers, duties, functions and status attaching to the office of prothonotary in the following terms:

12. (1) The Governor in Council may appoint as prothonotaries of the Court such fit and proper persons who are barristers or advocates in a province as are, in his opinion, necessary for the efficient performance of the work of the Court that, under the Rules, is to be performed by them.

(2) The Governor in Council shall designate one of the prothonotaries to be Senior Prothonotary and one of the prothonotaries to be Associate Senior Prothonotary.

(3) The powers, duties and functions of the prothonotaries shall be determined by the Rules.

(4) Each prothonotary shall be paid a salary to be fixed by the Governor in Council.

(5) For the purposes of the Public Service Superannuation Act, a prothonotary shall be deemed to be employed in the Public Service.

In the exercise of the rule-making authority given in paragraph 46(1)(h) of the Act to make rules “empowering a prothonotary to exercise any authority or jurisdiction, subject to supervision by the Court even though the authority or jurisdiction may be of a judicial nature”, the Court has promulgated Rule 336 which enumerates the duties which a prothonotary may perform. For convenience, I reproduce relevant portions of that Rule:

Rule 336. (1) Notwithstanding Rule 326(1), a prothonotary shall have power

(a) to do anything that he is by these Rules authorized to do,

(b) if he is satisfied that all parties affected have consented thereto, to make any order that the Trial Division may make other than

(i) an order that is inconsistent with an order previously made by the Court or a judge, or

(ii) an order fixing a date or place of trial,

(c) if he is satisfied that all parties affected have consented thereto, to give a judgment disposing of an action,

(d) to deliver any judgment and make any order that the Court may deliver or make under Rules 432 to 437,

(e) to make any order that the Court might make granting leave to issue a writ of execution or extending the validity of a writ of execution,

(f) to hear and dispose of any action in which the amount involved does not exceed $5,000 that has been assigned to him by a special direction of the Associate Chief Justice, or

(g) to dispose of any interlocutory application assigned to him specially or to any prothonotary, by special or general direction of the Chief Justice or of the Associate Chief Justice,

and, in exercising his powers, a prothonotary shall, ordinarily, sit in a hearing room open to the public, but, except in a matter under paragraph (f), failure to do so shall not invalidate anything done by him.

…

(3) Every order or decision made or given by a prothonotary under this Rule is as valid and binding on all parties concerned as if it had been made or given by the Court.

The supervision required by Parliament in paragraph 46(1)(h) is found in Rule 336(5), which provides for a right of appeal from all orders of prothonotaries, and which reads:

Rule 336. …

(5) Any person affected by an order or decision of a prothonotary, other than a judgment under Rule 432 to 437 [which deal with default judgments], may appeal therefrom to the Court and such appeal shall be made by an application of which a notice shall be given to all interested parties setting forth the grounds of objection and served within 14 days after the order or decision complained of, and 4 clear days before the day fixed for hearing the same, or served within such other time as may be allowed by the Court or a prothonotary on ex parte application. The appeal shall be filed not later than 2 days before the date named for hearing (In this paragraph, “Court” means “Trial Division”, if the matter is in the Trial Division and “Court of Appeal”, if the matter is in the Court of Appeal).

On October 31, 1985, the Associate Chief Justice, acting under the authority of Rule 336(1)(g), issued a general direction respecting the powers of prothonotaries in relation to the hearing and disposition of interlocutory applications in the Trial Division. In that direction, the Associate Chief Justice stated that the Senior Prothonotary and the Associate Senior Prothonotary were empowered to hear and dispose of any interlocutory application in the Trial Division except one falling within five classes of matters specifically enumerated therein.

Doubtless, in providing for the office of the Registrar or Master in the Exchequer Court and of the prothonotary in this Court, Parliament was mindful of the pre-trial and post-judgment support which the master system provided for superior court judges in the judicial systems of England and Ontario, both of which made extensive use of these judicial officers.

In his Hamlyn Lectures (published under the title The Fabric of English Civil Justice, London: Stevens& Sons, 1987), Sir Jack Jacob, Q.C., himself a former senior master of the High Court of Justice in England, sketched the historical development of the master system in England and the manner of its operation. The following passage at pages 110-111 is instructive of the historical evolution of that system:

The most striking feature of the English pre-trial process is that, save for a few exceptions, the proceedings are conducted not before a judge but before a junior judicial officer, called the Master or Registrar. Before 1837, the judges of the three superior common law courts themselves dealt with pre-trial applications, which were then comparatively few in number and in variety. In 1837, Parliament abolished a great number of administrative and a few quasi-judicial offices and in their place created the Masters of the three Common Law Courts to assist the judges in their pre-trial work. In 1867, Parliament took the bold leap forward to transform the position of the Master from being an assistant to the judge into becoming a separate, distinct and independent judicial officer. This was achieved by enabling the judges to make rules of court empowering the Masters to transact all such business and exercise all such authority and jurisdiction as may be transacted and exercised by the judge in Chambers, except in specified matters and proceedings. Needless to say, the requisite rules of court were immediately made and they have continued with considerable expansion to this day. They operate to confer on the Masters original jurisdiction in respect of the matters and proceedings that come before them. For these purposes in the High Court, the Master is the equivalent of the judge in Chambers and his decision, order or judgment is made or given in his capacity as “the court” itself.

The jurisdiction of the Masters, which has from time to time since their creation been greatly expanded, is very extensive indeed and covers almost the entire range of pre-trial proceedings, with the important exception of applications for an injunction, other than in agreed terms, and it also extends to almost all post-judgment proceedings. They have power to make final as well as interlocutory orders and to give final judgments which are as operative and enforceable and which must be complied with as if made or given by a judge.

There is no doubt that the office and functions of a master in superior courts of civil jurisdiction in the common law provinces in Canada is an inheritance of the colonial past, but from an early date Canadian practice seems to have diverged from that of England. So it was that as long ago as 1866, in Sculthorpe v. Burn (1866), 12 Gr. 427 (U.C. Ch), Mowat V.C. could say that, in pre-confederation Ontario, masters had been invested with a “larger discretion” than their counterparts in England.

In the early years of Confederation, the question of the proper standard of review of the discretionary decisions of masters by motions judges in provincial superior courts arose for consideration. Two distinct lines of authority emerged and they persist to the present time.

In Ontario, in Adamson v. Adamson et al (1888), 12 P.R. 469 (Ont. H.C.) at page 471, Chancellor Boyd accepted as settled that, “the rule is not to interfere unless the order appealed from is clearly wrong”. To the same effect is Odell v. Mulholland (1891), 14 P.R. 180 (Ont. H.C.), a case where the Master had ordered a change of venue. Chancellor Boyd refused to interfere on appeal because he had not been persuaded that the Master was clearly wrong, even though he said that he himself might have decided the case differently if it had come before him in the first instance.

This was the Ontario standard until the decision of Barlow J. in Quality Steels (London) Ltd. v. Atlas Steels Limited, [1949] O.W.N. 110 (H.C.) where he purported to adopt the English standard, quoting the following passage [at pages 111-112] from the speech of Lord Atkin in Evans v. Bartlam, [1937] A.C. 473 (H.L.) at page 478:

As to the limits of the discretion, if any, it may be necessary to say a word or two later. I only stay to mention a contention of the respondent that the Master having exercised his discretion the judge in Chambers should not reverse him unless it was made evident that the Master has exercised his discretion on wrong principles. I wish to state my conviction that where there is a discretionary jurisdiction given to the Court or a judge the judge in Chambers is in no way fettered by the previous exercise of the Master’s discretion. His own discretion is intended by the rules to determine the parties’ rights; and he is entitled to exercise it as though the matter came before him for the first time. He will, of course, give the weight it deserves to the previous decision of the Master; but he is in no way bound by it.

In Marleen Investments Ltd. v. McBride et al. (1979), 23 O.R. (2d) 125 (H.C.), however, Southey J. reinstated the rule as formulated by Chancellor Boyd in Adamson and Odell, remarking that Barlow J. had overlooked these cases when he decided Quality Steels. Southey J. added that different considerations would apply in circumstances where the orders of a master raised questions vital to the final issue of a case. In those instances he concluded that a reviewing judge would be required to exercise an independent discretion, if the Master’s decision was questioned on appeal. For this addition to the rule he relied upon the following passage [at pages 127-128] from the speech of Lord Wright in Evans v. Bartlam, supra, at page 484:

The Masters admirably exercise their discretion in routine matters of pleading, discovery, interrogatories, venue, mode of trial, and other interlocutory directions, without any appeal being necessary. But such matters may on occasion raise questions most vital to the final issue of the case. The decision of such questions is properly for the judge who will no doubt consider carefully the order of the Master. If a further appeal is taken to the Court of Appeal it is the judge’s discretion which that Court has either to support or vary or reverse.

Like the present case, Marleen Investments was an appeal from an interlocutory order of a master dismissing an application by the defendants to dismiss an action for want of prosecution (under the appropriate Ontario Rule). Southey J. applied the rule laid down in Adamson and Odell and having found no error in the Master’s decision, dismissed the appeal.

The Ontario rule as restated in Marleen Investments was approved and refined by the Ontario Court of Appeal in Stoicevski v. Casement (1983), 43 O.R. (2d) 436.

In Stoicevski, a Local Judge of the Supreme Court, acting as Master, had refused to allow an amendment to a statement of defence in an action arising out of a motor vehicle accident on the ground that the proposed amendment raised matters which would have required the plaintiff to plead a fresh cause of action against third parties. Since the limitation period had expired by the time the amendment was sought, the Local Judge concluded that the plaintiff would be unanswerably prejudiced by the amendment in a manner not compensable in costs. The Divisional Court reversed [(1983), 33 C.P.C. 145]. In allowing the appeal and restoring the order of the Local Judge, Lacourcière J.A., writing for the Court, stated at pages 438 and 439:

One of the arguments presented … and adopted by White J. in his dissenting judgment in the Divisional Court, was that the learned local judge arrived at his decision in the exercise of his judicial discretion and consequently his order ought not to have been disturbed by the Divisional Court unless it was clearly wrong. I agree that this test (adopted by Southey J. in Marleen Investments Ltd v. McBride et al. …, following the language of Chancellor Boyd in Adamson v. Adamson et al. …) is the appropriate one where an appeal is taken from an interlocutory order involving matters such as a change of venue, a jury notice or a routine amendment to a pleading. However, it was recognized by Southey J., in Marleen Investments, supra, that some interlocutory rulings which raise questions vital to the final issue of the case require a rehearing in which the judge’s discretion may be properly substituted for that of the master or local judge. The present appeal clearly falls within the latter category. An amendment which may have the effect of reducing the plaintiff’s quantum of recovery of damages is clearly vital to the final issue. [Emphasis added.]

The following are some examples of decisions of masters in Ontario which have been held to raise questions vital to the final issue of a case: a decision that a limitation period barred the adding of defendants (Branche v. MacArthur et al. (1986), 56 O.R. (2d) 71 (Div. Ct.)); an order requiring the plaintiff to post security for costs which would have effectively precluded the action from being heard (Wink (John) Ltd. v. Sico Inc. (1987), 57 O.R. (2d) 705 (H.C.)); a decision to consider a group of plaintiffs collectively rather than individually in determining whether they should post security for costs (Das v. Coles (1989), 71 O.R. (2d) 57 (H.C.)); and, a refusal to set aside the noting of pleadings closed, the effect of which was that a defendant was deemed to admit the truth of a plaintiff’s pleadings (Hart v. Kowall (1990), 75 O.R. (2d) 306 (Gen. Div.)). In each of these cases, the Motions Judge heard the matter de novo and exercised his or her own discretion.

In contrast, motions judges in Ontario have refused to engage in de novo review of an order to divide examinations for discovery (L.C.D.H. Audio Visual Ltd. v. I.S.T.S. Verbatim Ltd. et al. (1986), 54 O.R. (2d) 425 (H.C.)); and an order dismissing a motion to strike out a portion of a claim for punitive damages (Fazzari et al. v. Pellizzari et al. (1988), 28 O.A.C. 38 (Div. Ct.)).

A reading of these cases suggests that the critical question is whether the decision of the master will preclude a hearing of the case on its merits. If so, it will be considered to raise a question vital to the final issue of the case and de novo review is appropriate. But if not, a motions judge will defer to the master’s discretion unless, to borrow the language of Chancellor Boyd, he or she is “clearly wrong”.

The standard of review in Nova Scotia, when masters were employed there,[6] was similar to the early Ontario Rule. In King v. Drysdale et al. (1892), 24 N.S.R. 308 (S.C.), Townshend J. (as he then was) stated at page 317 that the Court’s duty on review of a master’s discretionary order was “only to see if the master had acted on a wrong principle or had committed some manifest error”. Similarly, in Starratt v. White (1913), 11 D.L.R. 488 (S.C.), Townshend C.J. stated at page 489 in an appeal from the decision of a master allowing certain interrogatories:

This appeal is of a class which should be discouraged, involving, as it does, only a question whether the County Court Judge, acting as a Master of this Court, properly exercised his decision in a point of practice. All authorities agree that, unless he has erred in principle, the Court will not interfere on appeal.

Twenty-five years after Alberta joined Confederation, the Supreme Court of Alberta developed a different standard of review of discretionary orders made by masters. In Alta. Wheat Pool v. Nahajowicz (1930), 24 Alta. L.R. 400 (S.C.A.D.), a case involving an order by a master that the plaintiff deliver particulars of his claim to the defendant, Harvey C.J.A., speaking for the Appellate Division, stated at page 401:

As to the last ground it has been pointed out more than once that the Master is not a Judge but an officer of the Court exercising certain delegated functions and that the rule about discretionary orders by a Judge does not apply to his orders.

This standard of review was applied in Wright v. Disposal Services Ltd. and Marsh (1977), 8 A.R. 394 (S.C.) where Laycraft J. (as he then was) stated at page 398:

It was urged upon me during argument that as the Master had exercised his discretion [the case involved an application to extend the time for serving a statement of claim], I should follow the practice of Appellate Courts and not interfere with that discretion even if I disagreed with the result, unless it was plainly based on wrong principle. In my opinion, however, the rule followed by the Appellate Division in an appeal from a Trial Judge involving an exercise of discretion does not apply to an appeal from the decision of a Master-in-Chambers. While that decision is entitled to the greatest respect, the discretionary jurisdiction possessed by a Superior Court Trial Judge cannot be fettered in any way by the previous decision of the Master. [Emphasis added.]

In reaching that conclusion, Laycraft J. adopted the English standard, as expressed in the speech of Lord Atkin in Evans v. Bartlam, supra.

In 274099 Alberta Ltd. v. West Edmonton Mall Shopping Centre Ltd. et al. (1990), 114 A.R. 57 (C.A.), Côté J.A., writing for the Court, may even have suggested an enlarged standard when he stated at page 57:

The disposition of any appeal [from the decision of a Master] depends upon the correctness of the formal judgment appealed from, not the correctness of the reasons for judgment. Furthermore, in Alberta an appeal from a Master to a judge is de novo. The judge exercises any discretion anew. New evidence may be put before him for that reason, and because he has original jurisdiction as well. He is not just an appellate tribunal.

After considering both positions, MacDonald J. of the Supreme Court of British Columbia adopted the Ontario standard as laid down in Stoicevski, in Abermin Corp. v. Granges Explor. Ltd. (1990), 45 B.C.L.R. (2d) 188. Abermin was an appeal from the order of a master granting a motion to adjourn applications to fix security for costs. The Master had granted the order on condition that examinations for discovery then scheduled should not proceed until the disposition of the applications.

Confronted by seemingly conflicting decisions in the Supreme Court of British Columbia as to the appropriate standard, MacDonald J. looked for guidance in “other provincial jurisdictions which have been operating under the same constitutional limitations for some years” (page 192). He considered the Alberta standard as expressed in Wright v. Disposal Services Ltd., supra, and the Ontario standard as expressed both in Marleen Investments Ltd., and Stoicevski, supra, and concluded at page 193:

The decision in Stoicevski v. Casement represents a realistic compromise between the various policy considerations which bear upon the scope of review which should be permitted. … An appeal from a master’s order in a purely interlocutory matter should not be entertained unless the order was clearly wrong. However, where the ruling of the master raises questions which are vital to the final issue in the case, or results in one of those final orders which a master is permitted to make, a rehearing is the appropriate form of appeal. Unless an order for the production of fresh evidence is made, that rehearing will proceed on the basis of the material which was before the master. In those latter situations, even where the exercise of discretion is involved, the judge appealed to may quite properly substitute his own view for that of the master.

Since both Alberta and Ontario now seem to have adopted the positions taken by different Law Lords in Evans v. Bartlam, it might be useful to review the facts in that case briefly.

Evans v. Bartlam was a case where a Master refused to set aside a judgment which had been noted in default for failure to file an appearance. It was apparent that the defendant had a defence to the claim (see the speech of Lord Wright at page 489), but by refusing him leave to reopen, the Master was effectively precluding him from ever raising it. The Motions Judge, exercising his own discretion, reversed the Master’s decision. A majority of the Court of Appeal reversed the decision of the Motions Judge. Before the House of Lords, the issue was the correctness of the decision of the Court of Appeal, but in delivering their speeches, Lords Atkin and Wright made the observations concerning the review of discretionary orders of masters already quoted. The House of Lords held that the Motions Judge was not in error in substituting his discretion for that of the Master, thus affording the defendant an opportunity to file a defence and allowing the substantive rights of both parties to be determined at a trial in the ordinary way.

In the province of Quebec, the Code of Civil Procedure of Quebec [R.S.Q. c. C-25] provides several avenues of review of orders made by prothonotaries. See Audet, Les officiers de justice: des origines de la colonie jusqu’à nos jours (Montréal: Wilson & Lafleur, 1986), at pages 199-204. Some orders are reviewable by a hearing de novo in a proceeding before a Superior Court Judge known as revision. See, for example, Code of Civil Procedure of Quebec, Articles 42 and 44.1, and Lacaud c. Leblanc, [1983] C.S. 555 (Que. S.C.). Others are reviewable in appeals to the Court of Appeal, in which case they are treated like final judgments of the Superior Court. See Code of Civil Procedure of Quebec, Articles 41 and 511, and Audet, at page 202. Others, still, are reviewable in special proceedings for retraction and annulment. See Audet, at pages 201-204.[7]

Although in Abermin, MacDonald J. considered the seemingly conflicting lines of authority as reflecting different policy considerations, it is my view that a more plausible explanation of the difference between the Ontario and Alberta standards may be that they are based upon different constitutional approaches to the office of Master. In Ontario, the approach was expressed by Middleton J.A. in Re Solloway Mills & Co., [1935] O.R. 37 (C.A.) at page 43 as follows:

The contention that the Province has no power to appoint Masters or to authorize an enquiry before any of the Court’s officers, because they are executing a judicial and not a ministerial power, is plausible but ill founded. Section 96 of The British North America Act, 1867, 30-31 Vict., ch. 3, requires the appointment of Judges of the Superior and County Courts by the Governor General of Canada, but this does not prohibit the Province from appointing an officer of the Court who may exercise some judicial functions.

In contrast, in Wright v. Disposal Services Ltd. and Marsh, supra, at page 398, Laycraft J. justified de novo review on the basis that:

The Superior Court Judge possesses that jurisdiction by virtue of his Federal appointment under the powers given the Federal Crown by the British North American Act [sic]. His status resulting from that appointment cannot be diminished by the decision of the Master appointed by the Provincial Crown.

Even if I am correct in my assessment of the reasons for the differing approaches, it is not necessary in this appeal to decide which of these constitutional positions is correct, since the constitutional infirmity to which the Alberta master’s appointment is said to be subject does not extend to the appointment of a prothonotary to this Court. That Parliament has constitutional authority by virtue of section 101 of the Constitution Act, 1867 [30 & 31 Vict., c. 3 (U.K.) (as am. by Canada Act 1982, 1982, c. 11 (U.K.), Schedule to the Constitution Act, 1982, Item 1) [R.S.C., 1985, Appendix II, No. 5]] to appoint both prothonotaries and judges of this Court cannot be doubted. That was the conclusion of Jerome A.C.J. in Iscar Ltd. v. Karl Hertel GmbH, [1989] 3 F.C. 479(T.D.) It is a conclusion with which I am, respectfully, in complete agreement. I am also in agreement with the Associate Chief Justice where he said at page 484:

It is clear from paragraph 46(1)(h) of the [Federal Court] Act that Parliament did not intend prothonotaries to act simply as procedural officers of the Court. On the contrary, it is clear from that section that Parliament intended prothonotaries to have jurisdiction of a judicial nature.

What, then, should the standard of review of discretionary orders of prothonotaries of this Court be? It is of paramount importance that any standard adopted must recognize Parliament’s intention, embodied in section 12 of the Act, that the office of prothonotary is designed to aid in “the efficient performance of the work of the Court”. Sir Jack Jacob captured the essence of this intent in the following passage of his Hamlyn Lectures:[8]

They fulfil many important and even crucial functions in the English judicial system. They provide a more speedy, economical and convenient machinery for pre-trial and post-judgment applications; they perform the greater volume and variety of the judicial work at the stages of pre-trial and post-judgment proceedings which would otherwise require to be performed by a Judge, so conserving “judge-power” for more important work and making more efficient use of “judge-time”; …

I reiterate at the outset that Rule 336(5), by providing for a right of appeal from all orders made by prothonotaries, was intended to satisfy the requirement for supervision of those orders as required by paragraph 46(1)(h) of the Act.

A question was raised in argument as to whether the order of the Associate Senior Prothonotary was interlocutory or final. In my view, this question does not assist us in determining the standard of review. Rule 336(1)(g) vests in the prothonotary authority to “dispose of any interlocutory application assigned to him specially … by special or general direction of the Chief Justice or of the Associate Chief Justice” [Emphasis added.] Once it is determined that the prothonotary was acting within jurisdiction, then, the question then becomes by what standard his decision is to be reviewed.

In this case, there is no question that the application as a result of which the order was made was interlocutory. It was accordingly an application which the Associate Senior Prothonotary had jurisdiction to hear by virtue of Rule 336(1)(g) and the general direction of the Associate Chief Justice to which I have already referred. The question remaining to be answered, then, is what is the appropriate standard of review of the discretionary order which the Associate Senior Prothonotary made in disposing of that application.

Until the decision of this Court in Jala Godavari, it had been held consistently and accepted as settled law in the Trial Division of this Court that an appeal from a discretionary order of a prothonotary should be treated in the same manner as an appeal from a discretionary order of a motions judge, reviewable for error rather than as a re-hearing on the merits.

In Reading & Bates Construction Co. v. Baker Energy Resources Corp. (1988), 22 C.I.P.R. 240 (F.C.T.D.) at page 244, McNair J. described the approach as follows:

Rule 336(5) of the Federal Court Rules provides for appeals from an order or decision of a prothonotary, and it is unnecessary to set it out verbatim. Suffice it to say, the Rule has been the subject of some judicial consideration.

In my view, the law was correctly stated by Mr. Justice Collier in Reading& Bates Construction Co. v. Baker Energy Resources Corp. (1987), 12 C.I.P.R. 260, at pp. 261-262 as follows:

[a]n appeal from the decision of a Prothonotary is not a trial de novo.

It is not the function of the Trial Division, sitting on appeal from Prothonotaries, to substitute its discretion for that of the Prothonotary. It must be shown the Prothonotary was wrong, in that he exercised his powers on a wrong principle, or on a complete misapprehension of the facts, or for some other compelling reason requiring interference by a Judge sitting in an appellate position.

Ample support for this principle may be found in the case of Algonquin Mercantile Corp. v. Dart Industries Can. Ltd. (1984), 5 C.I.P.R. 40 (Fed.C.A.), wherein the Court held that the order under appeal, being discretionary, should be overruled only if the motions Judge was clearly wrong on the facts, or proceeded on an erroneous principle of law, or his decision resulted in some injustice to the appellant. None of these circumstances were existent in the case on appeal. It seems to me that it is now authoritatively settled as a rule of practice that an appeal from a discretionary order, whether it be that of a prothonotary or a motions Judge, should be treated as an appeal rather than a rehearing on the merits, and the order appealed from should be interfered with only when it can be demonstrated that such order was clearly wrong in law or on the facts.[9] [Emphasis added.]

In Jala Godavari, however, Hugessen J.A., writing for the Court, laid down a different standard at page 128:

… contrary to a view that has sometimes been expressed in the Trial Division, a judge who hears an appeal from a prothonotary on a matter involving the exercise of discretion is called upon to exercise his own discretion and is not bound by the prothonotary’s opinion. He may, of course, choose to give weight to the views expressed by the prothonotary, but the parties are, in the final analysis, entitled to the discretion of a judge and not that of a subordinate officer.

The standard of review laid down in Jala Godavari was followed in Prouvost S.A. v. Munsingwear Inc., [1992] 2 F.C. 541(C.A.); Canastrand Industries Ltd. v. Lara S (The), [1992] 3 F.C. 398(T.D.) and Ruhrkohle Handel Inter GMBH v. Federal Calumet (The), [1992] 3 F.C. 98(C.A.).

Before us, counsel for the appellant contended, both in written and oral submissions, that the Motions Judge had applied a standard of review that was inappropriate to the circumstances of this case. He argued this way: the order which the Associate Senior Prothonotary made in this case was an interlocutory order made upon an interlocutory application; that order did not decide any question vital to the final issue in the case, and, as such it was reviewable only for error; the Motions Judge was therefore wrong in applying the standard enunciated in Jala Godavari and exercising his own discretion. In this connection, counsel for the appellant urged upon us that the proper standard of review of discretionary orders of prothonotaries was that which was laid down in Stoicevski, supra, and adopted in Abermin Corp. v. Granges Explor. Ltd., supra.

Counsel for the respondent submitted in paragraph 15 of his supplementary memorandum of fact and law that such a standard may well be desirable “as a means of balancing the competing interests of judicial due process in vital matters and administrative expedition in routine matters.” He contended, however, that in this case, the Motions Judge had applied the proper standard. First, he said, “The Motions Judge explicitly invoked the hearing de novo standard enunciated by Hugessen J.A. (in Jala Godavari) and applied it.” [Respondent’s supplementary memorandum of fact and law, paragraph 11.] Secondly, he said, that “the Motions Judge also implicitly applied the appellate review standard when he concluded that the Associate Senior Prothonotary erred in principle in finding that the Respondent’s tardiness in moving for dismissal of the action had excused the Appellant’s failure to prosecute the action.” [Respondent’s supplementary memorandum of fact and law, paragraph 12.] Counsel also contended that the de novo standard “is the proper standard to apply in cases such as the present, where the motion is vital to the ultimate outcome of the claim.” [Respondent’s supplementary memorandum of fact and law, paragraph 13.]

I am in agreement with counsel for the appellant that the proper standard of review of discretionary orders of prothonotaries in this Court should be the same as that which was laid down in Stoicevski for masters in Ontario. I am of the opinion that such orders ought to be disturbed on appeal only where it has been made to appear that

(a) they are clearly wrong, in the sense that the exercise of discretion by the prothonotary was based upon a wrong principle or upon a misapprehension of the facts, or

(b) in making them, the prothonotary improperly exercised his discretion on a question vital to the final issue of the case.

In each of these classes of cases, the Motions Judge will not be bound by the opinion of the prothonotary; but will hear the matter de novo and exercise his or her own discretion.

As counsel for the respondent himself has submitted, in paragraph 15 of his supplementary memorandum of fact and law, this standard balances judicial due process on questions vital to the final issue of a case with administrative expedition in routine matters. Moreover, such a standard is consistent with the parliamentary intention embodied in section 12 of the Act, that the office of prothonotary is intended to promote “the efficient performance of the work of the Court”.

In my respectful view it cannot reasonably be said that a standard of review which subjects all impugned decisions of prothonotaries to hearings de novo regardless of the issues involved in the decision or whether they decide the substantive rights of the parties is consistent with the statutory objective. Such a standard conserves neither “judge power” nor “judge time”. In every case, it would oblige the motions judge to re-hear the matter. Furthermore, it would reduce the office of a prothonotary to that of a preliminary “rest stop” along the procedural route to a motions judge. I do not think that Parliament could have intended this result.

On this analysis, it is my view that the standard of review laid down in Jala Godavari is incomplete. It follows from this that the Motions Judge did not apply the proper standard of review to the discretionary order of the Associate Senior Prothonotary in this case.

Although on the basis of the Canadian and English authorities set out above, it is in my view clear that the authority of the prothonotaries of this Court should not be limited in any way suggested in Jala Godavari, there is a decision on point from the Supreme Court of New South Wales which I feel to also be of some interest. Do Carmo v. Ford Excavations Pty Ltd, [1981] 1 N.S.W.L.R. 409 (S.C.),[10] involved the very same question at issue here, viz. the way in which the decision of a master ought to be regarded on appeal. After a very thorough review of the law, Cross J. concluded that in New South Wales, unlike in England or certain other Australian states, a master was the Court, rather than merely an officer of the Court, and his decisions were therefore to be treated as judicial decisions of first instance. While this is not as clearly the case with this Court,[11] I think that Cross J.’s observations at page 420 about the value of masters in the efficient operation of the judicial process bear repeating in the present situation:

[P]art of the scheme of the [Supreme Court] Act and rules was to set up a body of judicial officers who were, or who would quickly become, expert in the practice and procedure of the court and who, could readily and expertly decide practice and procedural problems. Providing they exercised their discretion judicially—as normally they would—that was to be the end of the matter.

2.         Whether the Motions Judge erred in allowing the respondent’s appeal and setting aside the order of the Associate Senior Prothonotary.

If the Motions Judge had applied the appropriate standard of review, he would have inquired whether the order of the Associate Senior Prothonotary was clearly wrong in the sense that I have indicated, or whether it involved the improper exercise of discretion on a question vital to the final issue of the case. As I have already explained, the Motions Judge did neither. He relied instead on the incomplete standard laid down in Jala Godavari and exercised his own discretion without first determining whether he could properly do so.

In these circumstances, it becomes necessary to review the reasons of the Associate Senior Prothonotary in light of the standard I have proposed as appropriate to determine whether the Motions Judge was justified in reversing the order on appeal before him.

I begin with the first branch of the standard, i.e. whether the order of the Associate Senior Prothonotary was clearly wrong. I note that there was no allegation here that the Associate Senior Prothonotary misapprehended the facts. I will therefore say no more about it.

The error alleged by the respondent and accepted by the Motions Judge was that the Associate Senior Prothonotary based his decision on a wrong principle when he took into account the conduct of the respondent in the litigation. It is useful to recall here the dispositive reasons of the Associate Senior Prothonotary. After he had detailed the conduct of both solicitors throughout the litigation, he noted [at page 5547]:

Having apparently excused a one year delay prior to March 1988, and a further two year delay prior to May 1990, or if it did not excuse those delays to have done nothing about either of them until June of 1991. [sic] The defendant cannot be heard to complain at this late date of the plaintiff’s failure to proceed expeditiously at earlier times nor of the plaintiff’s failure to react to the defendant’s delays in commenting on the Agreed Statement of Facts.

Indeed, it was largely because he had taken this conduct into account that the Motions Judge found him to have been in error. In my view, in taking such conduct into account, the Associate Senior Prothonotary was acting in accordance with well-settled principles which have been accepted by this Court. See Norton Co. v. Lionite Abrasives Ltd. (1975), 32 C.P.R. (2d) 270 (F.C.T.D.); Minnesota Mining and Manufacturing Company v. Lorcon Inc., [1984] 1 F.C. 380(T.D.); and McGregor and McGregor v. Canada (1988), 20 F.T.R. 122 (F.C.T.D.).

It is true, as the Ontario Court of Appeal held in Farrar v. McMullen, [1971] 1 O.R. 709 (and as was referred to by the Motions Judge), that a demand for action by the defendant is not a condition precedent to an application for dismissal on the basis of want of prosecution in every case, but in my view, there can be no doubt that the level of litigious activity or inactivity on the part of the defendant is a relevant factor to be taken into account in determining whether a delay has been inordinate or inexcusable, and whether a party has been seriously prejudiced by it. It is, as Farrar suggests, one of the circumstances to be considered.[12] In arriving at his conclusion, the Associate Senior Prothonotary did no more.

The English courts, too, have considered the conduct of the parties to be relevant in similar circumstances. In Allen v. McAlpine (Sir Alfred) & Sons, Ltd., [1968] 1 All E.R. 543 (C.A.), for example (upon which counsel for the respondent placed much reliance), each member of the Court of Appeal considered the defendant’s conduct to be of importance. Diplock L.J. (as he then was) made this point quite clearly when he said at page 556:

Since the power to dismiss an action for want of prosecution is only exercisable on the application of the defendant his previous conduct in the action is always relevant. So far as he himself has been responsible for any unnecessary delay, he obviously cannot rely on it. Moreover, if after the plaintiff has been guilty of unreasonable delay the defendant so conducts himself as to induce the plaintiff to incur further costs in the reasonable belief that the defendant intends to exercise his right to proceed to trial notwithstanding the plaintiff’s delay, he cannot obtain dismissal of the action unless the plaintiff has thereafter been guilty of further unreasonable delay.[13]

In light of the principles laid down in these cases, I am of the view that the Associate Senior Prothonotary did not act on a wrong principle and that his order was not clearly wrong.

I turn now to the second branch of the standard, namely, whether the order of the Associate Senior Prothonotary raised questions vital to the final issue of the case.

It was the contention of counsel for the respondent in paragraph 13 of his supplementary memorandum of fact and law that the motion before the Associate Senior Prothonotary was “vital to the outcome of the claim.” For that reason, he submitted that the Motions Judge was justified in refusing deference of the discretion of the Associate Senior Prothonotary and exercising his own. This contention is not well-founded, in my opinion. The order which the Associate Senior Prothonotary made was interlocutory:[14] it did not decide the substantive rights of the parties or any issue vital to the final issue of the litigation. Its sole effect was that the appellant was entitled to proceed to trial in accordance with the rules and practice of this Court. As such, it decided a matter that was wholly collateral to the issues in dispute between the parties in the litigation. As the pleadings clearly show, delay in prosecution was not an issue in dispute in the action. In my view, therefore, it cannot reasonably be said that the order made by the Associate Senior Prothonotary raised questions vital to the final issue of the case.

The test to be applied in deciding whether to dismiss an action for want of prosecution was set out in the decision of Dubé J. in Nichols v. Canada et al. (1990), 36 F.T.R. 77 (F.C.T.D.). Relying upon the judgment of Salmon L.J. (as he then was) in Allen v. McAlpine (Sir Alfred) & Sons, Ltd., supra, at page 561, Dubé J. stated at page 78:

The classic test to be applied in these matters is threefold: first, whether there has been an inordinate delay; secondly, is the delay inexcusable; and thirdly, whether the defendants are likely to be seriously prejudiced by the delay.

In Birkett v. James, [1978] A.C. 297 (H.L.), the House of Lords affirmed the principles set out in Allen and expounded upon the grounds for dismissal for want of prosecution. Lord Diplock (who, as I have noted, delivered one of the judgments in Allen) said that Allen had set out the following principles. The power to strike out a claim for want of prosecution, he said (at page 318),

… should be exercised only where the Court is satisfied either (1) that the default had been intentional and contumelious, e.g., disobedience to a peremptory order of the court or conduct amounting to an abuse of the process of the court; or (2) (a) that there has been inordinate and inexcusable delay on the part of the plaintiff and or lawyers, and (b) that such a delay will give rise to a substantial risk that it is not possible to have a fair trial of the issues in the action or is such as is likely to cause or have caused serious prejudice to the defendants either as between themselves and the plaintiff or between each other or between them and a third party.

More recently, in Department of Transport v. Chris (Smaller) Transport Ltd., [1989] A.C. 1197 (H.L.), Lord Griffiths, in a speech in which all other members of the House concurred, reaffirmed the same point. At pages 1207-1208, he said:

The principles in Allen v. McAlpine and Birkett v. James are now well understood and I have not been persuaded that a case has been made out to abandon the need to show that the post writ delay will either make a fair trial impossible or prejudice the defendant.

See also: Walkley v. Precision Forgings Ltd., [1979] 2 All E.R. 548 (H.L.); Bremer Vulkan Schiffbau und Maschinenfabrik v. South India Shipping Corpn. Ltd., [1981] A.C. 909 (H.L.) and, Paal Wilson & Co. A/S v. Partenreederei Hannah Blumenthal, [1983] A.C. 854 (H.L.).

A review of the decision of the Associate Senior Prothonotary makes it abundantly clear that he considered each element of this test in reaching his conclusion, albeit in different language. Accordingly, for all of these reasons, it is my view that the Motions Judge erred in allowing the respondent’s appeal and setting aside the order of the Associate Senior Prothonotary.

In Birkett v. James, their Lordships also made an important observation on the consequences of an order to dismiss for want of prosecution, which I think is critical to a proper understanding of the nature of an order to dismiss a proceeding for want of prosecution. In most circumstances, the House noted, such an order is not a bar to further action. “[E]xceptional cases apart” (chief of which would include the expiry of a limitation period), Lord Diplock said at page 321

… where all that the plaintiff has done has been to let the previous action go to sleep, the court in my opinion would have no power to prevent him starting a fresh action within the limitation period and proceeding with it with all proper diligence notwithstanding that his previous action had been dismissed for want of prosecution.

Similarly, Lord Salmon, who had also delivered one of the judgments in Allen, said that “[t]he fact that the plaintiff or his solicitor has behaved badly in the first action does not make him into a vexatious litigant barred from bringing any further proceedings without permission of the courts” (page 328). See also the speech of Lord Edmund-Davies at page 334.

These things being the case, Lord Diplock made an important observation which I think should be borne in mind whenever a motion to dismiss is being contemplated [at page 320]:

Crucial to the question whether an action ought to be dismissed for want of prosecution before the expiry of the limitation period is the answer to a question that lies beyond it, viz., whether a plaintiff whose action has been dismissed may issue a fresh writ for the same cause of action. If he does so within the limitation period, the effect of dismissing the previous action can only be to prolong the time which must elapse before the trial can take place beyond the date when it could have been held if the previous action had remained on foot. Upon issuing the new writ the plaintiff would have the benefit of additional time for repeating such procedural steps as he had already completed before the action was dismissed. This can only aggravate; it can never mitigate the prejudice to the defendant from delay. [Emphasis added.]

In Department of Transport v. Chris (Smaller) Transport Ltd., supra, Lord Griffiths, speaking for the House, made a similar observation on the appropriateness of an order to dismiss after the expiry of a limitation period. At page 1207, he said:

However, [counsel for the Appellants] submits that once the limitation period has expired so that the plaintiff cannot commence a fresh action, inordinate and inexcusable delay in the conduct of the litigation should be a ground for striking out even though there can be a fair trial of the issues and the defendant has suffered no prejudice from the delay. What would be the purpose of striking out in such circumstances? If there can be a fair trial and the defendant has suffered no prejudice, it clearly cannot be to do justice between the parties before the court; as between the plaintiff and defendant such an order is manifestly an injustice to the plaintiff. The only possible purpose of such an order would be as a disciplinary measure which by punishing the plaintiff will have a beneficent effect upon the administration of justice by deterring others from similar delays. I have no faith that the exercise of the power in these circumstances would produce any greater impact on delay in litigation than the present principles.

Given the absence of a showing of prejudice by the respondent here, I find the sentiments there expressed appropriate in the circumstances of this case.

Before parting with the matter, there is one other important aspect of this case which I should like to mention. It is clear to me from a review of the record in this appeal that counsel had agreed to by-pass the Federal Court Rules, by proceeding by agreed statement of facts and waiving certain procedural steps, such as delivery of lists of documents and examinations for discovery. In my view this agreement was a relevant circumstance to consider in assessing the conduct of the solicitors for both parties. There is no evidence that the respondent had repudiated the agreement. The reasons of the Motions Judge are devoid of any hint that he was alive to this contextual fact; and it may well be that, absent repudiation or some other warning, the appellants’ solicitor was induced to act on the assumption that respondent intended to continue the litigation.

There is no doubt, as the Associate Senior Prothonotary found and as the record discloses, that the appellant’s solicitor was dilatory in delivering the agreed statement of facts. However, when it was delivered, respondent’s counsel deliberately refused to react for well over one year. When he did react, it was by notice of motion under Rule 440(1), but without even complying with the provisions of Rule 440(2) which require that prior warning be given before a motion under Rule 440(1) is launched. Fortunately for the respondent, in argument before us appellant’s counsel informed us that he was not invoking non-compliance with Rule 440(2) as a ground of error since it was his position throughout that counsel for the parties had agreed to by-pass the Rules.

I would, therefore, allow the appeal with costs, both here and below, set aside the order of the Motions Judge dated November 8, 1991 and restore the order of the Associate Senior Prothonotary dated September 30, 1991.

* * *

The following are the reasons for judgment rendered in English by

MacGuigan J.A.: I have had the opportunity of reading the reasons for judgment of the Chief Justice and accept his statement of the facts except for his assumption that there was an agreement between the parties in 1988 as to the preparation of a draft statement of facts by the appellant. As I read the materials, the only agreement on the part of the respondent was that it would “review” such a draft, if prepared (Appeal Book at page 33).

I also agree with the Chief Justice in part as to the standard of review to be applied by a motions judge to a discretionary decision of a prothonotary. Following in particular Lord Wright in Evans v. Bartlam, [1937] A.C. 473 (H.L.) at page 484, and Lacourcière J.A. in Stoicevski v. Casement (1983), 43 O.R. (2d) 436 (Div. Ct.), discretionary orders of prothonotaries ought not to be disturbed on appeal to a judge unless:

(a) they are clearly wrong, in the sense that the exercise of discretion by the prothonotary was based upon a wrong principle or upon a misapprehension of the facts, or

(b) they raise questions vital to the final issue of the case.[15]

Where such discretionary orders are clearly wrong in that the prothonotary has fallen into error of law (a concept in which I include a discretion based upon a wrong principle or upon a misapprehension of the facts), or where they raise questions vital to the final issue of the case, a judge ought to exercise his own discretion de novo.

In Canada v. “Jala Godavari” (The) (1991), 40 C.P.R. (3d) 127 (F.C.A.), this Court in an obiter dictum stated the rule the other way around, seeking to emphasize the necessity for the exercise of the Judge’s discretion de novo, in contradistinction to the view that was at that time gaining acceptance in the Trial Division that the prothonotary’s discretion should be followed unless he had committed error of law. Jala Godavari should not, I think, be read as meaning that the prothonotary’s discretion should never be respected, but rather that it is subject to an overriding discretion by a judge where the question involved is vital to the final issue of the case. (Error of law is, of course, always a reason for intervention by a judge, and is not in any way in controversy).

Now, in the case at bar, what kind of interlocutory order was in question? The appellant urged this Court to follow Stoicevski, but was unable to explain in argument why the prothonotary’s decision here was not on a question vital to the final issue of the case. The formulations both of Lord Wright and Lacourcière J.A. underline the contrast between “routine matters of pleading” (Lord Wright) and “a routine amendment to a pleading” (Lacourcière J.A.) [italics added] and questions vital to the final issue of the case, i.e., to its final resolution.

The question before the prothonotary in the case at bar can be considered interlocutory only because the prothonotary decided it in favour of the appellant. If he had decided it for the respondent, it would itself have been a final decision of the case: A-G of Canada v. S.F. Enterprises Inc. et al. (1990), 90 DTC 6195 (F.C.A.) at pages 6197-6198; Ainsworth v. Bickersteth et al., [1947] O.R. 525 (C.A.). It seems to me that a decision which can thus be either interlocutory or final depending on how it is decided, even if interlocutory because of the result, must nevertheless be considered vital to the final resolution of the case. Another way of putting the matter would be to say that for the test as to relevance to the final issue of the case, the issue to be decided should be looked to before the question is answered by the prothonotary, whereas that as to whether it is interlocutory or final (which is purely a pro forma matter) should be put after the prothonotary’s decision. Any other approach, it seems to me, would reduce the more substantial question of “vital to the issue of the case” to the merely procedural issue of interlocutory or final, and preserve all interlocutory rulings from attack (except in relation to errors of law).

I believe this approach is supported by the Ontario Court of Appeal in Stoicevski, where Lacourcière J.A. held (at page 439) that “[a]n amendment [to a statement of defence] which may have the effect of reducing the plaintiff’s quantum of recovery of damages is clearly vital to the final issue.” More important, the decision by the English Court of Appeal on the third appeal in Allen v. McAlpine (Sir Alfred) & Sons, Ltd., [1968] 1 All E.R. 543, where the Court refused to intervene against a motions judge’s substitution of his discretion for that of a master on a motion to dismiss an action for want of prosecution, is on all fours with the case at bar. It is true that on the facts in the third appeal in Allen, the delay had been one for 14 years, but that fact can have nothing to do with the issue of whose discretion is to govern.

I am therefore drawn to the conclusion that the learned Motions Judge was entirely right in following Jala Godavari and exercising his own discretion de novo.

In my view, as the respondent contended, the Motions Judge’s reasons for decision could also be construed as being implicitly based on the prothonotary’s error in coming to his conclusion [at page 5643] “solely on the grounds that the defendants had not complained of the plaintiff’s tardiness or taken some action at an earlier date,” in the words of the Motions Judge himself. In other words, the prothonotary had fallen into an error of law which prevented him from exercising his discretion properly. This would also justify the Motions Judge’s exercise of discretion de novo. The prothonotary’s fundamental error was in assuming that the respondent was under an obligation to take action in response to the draft statement of facts. As Diplock L.J. (as he then was) put it in Allen (at page 555):

It is thus inherent in an adversary system which relies exclusively upon the parties to an action to take whatever procedural steps appear to them to be expedient to advance their own case, that the defendant, instead of spurring the plaintiff to proceed to trial, can with propriety wait until he can successfully apply to the court to dismiss the plaintiff’s action for want of prosecution on the ground that so long a time has elapsed since the events alleged to constitute the cause of action that there is a substantial risk that a fair trial of the issues will not be possible.

The second issue is whether the Motions Judge has properly exercised his discretion. In so exercising his discretion, he took account of the prothonotary’s finding [at page 5547] that the appellant’s action “might well have supported a successful motion to dismiss,” and also of the question whether the subsequent delay by the respondent was sufficient to excuse the appellant’s failure to prosecute in a reasonable and timely manner. Weighing both factors he arrived at the finding [at page 5643] that “the delay on the plaintiff’s part has been of such substantial proportion as to likely cause prejudice to the defendant at trial.”

Of course, as Diplock L.J. also said in Allen (at page 556):

Since the power to dismiss an action for want of prosecution is only exercisable upon the application of the defendant his previous conduct in the action is always relevant.

However, that the Motions Judge did not fail to take this factor into account is established to my mind by the following passage from his reasons [at pages 5642-5643]:

The fact that plaintiff’s delay in prosecuting this case is sufficient to warrant an order dismissing the action is not, under the circumstances, altered by any subsequent delay on the part of the defendant. The implication that the defendant’s lack of action excused the plaintiff’s failure to prosecute in a reasonable and timely manner is simply not correct. [Emphasis added.]

It was also said that the Motions Judge should have explicitly taken into consideration an admission made by the respondent, but that “admission” is only as to the fact that “there was substantial evidence from the witness at the trial in the Tax Court,” [at page 5546] a fact presumably already in the record. While relevant, that does not get the appellant even to first base in refuting the overall effect of the prejudice to the respondent’s case caused by the cumulative delays.

The Motions Judge having exercised his discretion, this Court cannot intervene in the absence of an error of law. As it was put by Mahoney J.A. for this Court in The Queen v. Murphy and ABC Steel Building Ltd. (1988), 89 DTC 5028 (F.C.A.), at page 5029:[16]

The order of the Trial Division is discretionary. The principles to be applied by this Court have been accepted as those stated by Lord Diplock in Birkett v. Jones [sic] [1978] A.C. 297] at page 317:

… an appellate court ought not to substitute its own “discretion” for that of the judge merely because its members would themselves have regarded the balance as tipped against the way in which he had decided the matter. They should regard their function as primarily a reviewing function and should reverse his decision only in cases either … where they are satisfied that the judge has erred in principle by giving weight to something which he ought not to have taken into account or by failing to give weight to something which he ought to take into account;

The appellant contended that the respondent had condoned, acquiesced in or waived its right to object to any unreasonable delay on her part. But this argument was rested on her view that the draft statement of facts was prepared on the basis of an agreement between the parties. As I have said, the only agreement seems to have been to the effect that the respondent would “review” such a draft, if prepared. In any event, this is a factual determination which was open to the Motions Judge, who clearly did not find the respondent’s lack of response to amount to condonation, acquiescence or waiver.

A motions judge must not fall into error of law in considering how serious is the prejudice caused by the delay. But the Motions Judge in the case at bar raised the question properly [at page 5642]: “the defendant must show … that it will likely be seriously prejudiced by the delay.” He also answered it squarely [at page 5643]: “It is clear on the facts that the delay on the plaintiff’s part has been of such substantial proportion as to likely cause prejudice to the defendant at trial.” [Emphasis added.] Given the Motions Judge’s reliance on his assessment of the facts, I find myself unable to conclude that he relied solely on an intuitive notion that inordinate delay necessarily entails serious prejudice, and I therefore find no manifest error of law such as would permit me to interfere with his exercise of discretion.

The appellant also argued that the respondent was in violation of former Rule 447(2), which required it “within 20 days after the pleadings in the action are deemed to be closed as between him and any other party, or such longer period as that other party may agree to, file and serve on that other party a list of the documents of which he has knowledge at that time that might be used in evidence ….” However, the only sanction for any such pro forma requirement is a Court order to produce under Rule 460, [as am. by SOR/90-846, s. 15] a procedure which has not been invoked by the appellant. Similarly, the respondent relied on the provisions of Rule 331A [enacted by SOR/79-57, s. 6], that “[w]here a year, or more, has elapsed since the last proceeding in a matter, a party who desires to proceed must give to every other party not less than one month’s notice of his intention to proceed.” But there seems to be no consequence clearly provided in the rules for such default, and in any event the rule was not previously invoked.

The appellant not having succeeded in establishing any error of law, the appeal must therefore be dismissed with costs.

Mahoney J.A.: I agree.

Décary J.A.: I agree.

* * *

The following are the reasons for judgment rendered in English by

Robertson J.A. (dissenting): I share the view of the Chief Justice that this appeal should be allowed. Even if I were to accede to the argument of my colleague MacGuigan J.A. that under the proposed review standard the Trial Judge was entitled to exercise his discretion de novo, I am not persuaded that the result should be any different. In my respectful opinion, the Motions Judge erred when applying the test on which decisions to dismiss actions for want of prosecution must be based. That test is set out in the decision of Dubé J. in Nichols v. Canada et al. (1990), 36 F.T.R. 77 (F.C.T.D.), at page 78:

The classic test to be applied in these matters is threefold: first, whether there has been an inordinate delay; secondly, is the delay inexcusable; and thirdly, whether the defendants are likely to be seriously prejudiced by the delay. [Emphasis is mine].

It is common ground that the appellant’s delay was “inexcusable”. As well, I am willing to concede that the two-year delay was “inordinate”. Thus it remains to be determined whether the respondent was “likely to be seriously prejudiced by the delay”. In this regard the Motions Judge held [at page 5642]:

In order to succeed on an application to dismiss an action for want of prosecution, the defendant must show that there has been inordinate delay which is inexcusable and that it will likely be seriously prejudiced by the delay. The general rule is that the longer the delay, the greater the likelihood of serious prejudice at the trial as the passage of time weakens witnesses’ recollection of events.

In my respectful opinion, one should not presume serious prejudice because the delay is deemed inordinate. Nor I am persuaded that the “fading memory” rationale is applicable in the instant case. Unless a defendant leads evidence to that effect, one should refrain from speculating on the possible deleterious effects of inordinate delay.

I must confess that I am sceptical of the “fading memory” rationale being invoked as the sole basis on which to rest a decision to dismiss for want of prosecution. One need only take cognizance of the lengthy delays generally experienced throughout this country in bringing cases to trial to appreciate that the passage of time simpliciter is not regarded as an impediment to a fair trial, at least so far as civil actions are concerned. Moreover, cases such as Farrar v. McMullen, [1971] 1 O.R. 709 (C.A.) reveal that the burden of demonstrating sufficient prejudice is not easily met. In that case, the Ontario Court of Appeal declined to dismiss the action on the basis of delay despite the intervening death of the only witness who could testify on behalf of the defendant.

In my view, the Court should not assess the likelihood of serious prejudice in a factual vacuum. The complexity and nature of the case, the conduct of the respective solicitors, the kinds of issues under consideration, the physical and mental well-being of witnesses and the existence of documentary evidence are examples of matters which require careful consideration.

From the appeal record, it is apparent that the respondent offered no specific evidence which could reasonably be regarded as giving rise to a likelihood of serious prejudice.[17] Moreover, on appeal, it simply maintained that such prejudice may properly be presumed and went on to speculate that serious prejudice “might have been found in the difficulty of operating a business while ensnared in a tax dispute for an inordinate time” (see respondent’s memorandum of fact and law, paragraph 20, page 9). This argument might have been relevant had the respondent offered some supporting evidence. Alternatively, the respondent might have argued (which it did not) that the facts raised a rebuttable presumption of prejudice. But even if that argument were available, there is, in my opinion, sufficient evidence to rebut such a presumption.

Before the prothonotary, counsel for the respondent [at page 5546] “admitted that there was substantial evidence from the witness at the trial in the Tax Court” and hence the prothonotary observed “no doubt transcripts of that testimony will go far to refresh the witness’s memory.” The respondent’s admission, in and of itself, undermines the validity of the “fading memory” rationale and, if necessary, would rebut any presumption of prejudice. Consequently, the onus would shift to the respondent (defendant) to prove actual prejudice. This is not to suggest that in law a rebuttable presumption arises where motions for dismissal for want of prosecution are involved. In my opinion, it is as much an error of law to place on the appellant (plaintiff) the onus of disproving the likelihood of serious prejudice which arises as a result of a presumption, as it is to presume prejudice because of a lengthy delay. On this point, I find myself in respectful disagreement with the Motions Judge and my colleague MacGuigan J.A. Prejudice is being presumed and consequently the appellant bears the onus of refuting the possible adverse effects which the delay might have had on the respondent’s case.

Finally, I think it important to emphasize that an order dismissing an action for want of prosecution is not intended to punish a plaintiff for its failure to proceed expeditiously. Its aim is to ensure that defendants are not exposed to “a substantial risk that a fair trial of the issues in the litigation will not be possible” (per Diplock L.J., Allen v. McAlpine (Sir Alfred) & Sons, Ltd., supra, at page 556). In my opinion, the respondent failed to adduce the evidence necessary to demonstrate that it would be unable to obtain a fair trial on the issues.

I would allow the appeal in the manner proposed by the Chief Justice.

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