Smiling Spruce Farms Ltd. v. Canada

Smiling Spruce Farms Ltd. v. Canada Court (s) Database Federal Court of Appeal Decisions Date 2005-02-17 Neutral citation 2005 FCA 72 File numbers A-510-03 Decision Content Date: 20050217 Docket: A-510-03 Citation: 2005 FCA 72 CORAM: NADON J.A. SHARLOW J.A. MALONE J.A. BETWEEN: SMILING SPRUCE FARMS LTD. (otherwise known as SMILING SPRUCE FARMS), WALTER THEODORE BARTEL (otherwise known as WALTER T. BARTEL) (otherwise known as WALTER BARTEL) Appellants and HER MAJESTY THE QUEEN Respondent Heard at Winnipeg, Manitoba on February 15, 2005. Judgment delivered at Winnipeg, Manitoba on February 17, 2005. REASONS FOR JUDGMENT BY: SHARLOW J.A. CONCURRED IN BY: NADON J.A. MALONE J.A. Date: 20050217 Docket: A-510-03 Citation: 2005 FCA 72 CORAM: NADON J.A. SHARLOW J.A. MALONE J.A. BETWEEN: SMILING SPRUCE FARMS LTD. (otherwise known as SMILING SPRUCE FARMS), WALTER THEODORE BARTEL (otherwise known as WALTER T. BARTEL) (otherwise known as WALTER BARTEL) Appellants and HER MAJESTY THE QUEEN Respondent REASONS FOR JUDGMENT SHARLOW J.A. [1] This is an appeal of an order of the Federal Court dated October 24, 2003, reported as Canada v. Smiling Spruce Farms Ltd., [2003] F.C.J. No. 1568 (QL), 241 F.T.R. 230. That order dismissed an appeal from an order of a prothonotary dated September 29, 2003, which granted the motion of the Crown to strike Mr. Bartel's statement of defence. [2] The action that is the subject of the order under appeal was commenced in 1992 when the Crown sued Smiling Spruce Farms Ltd. for repayment of a debt, and also sued Mr. Bartel personally on the basis that he had guaranteed the debt. Mr. Bartel filed a statement of defence. The statement of defence is not in the record in this appeal, but apparently Mr. Bartel takes the position that he had not guaranteed the debt of Smiling Spruce Farms Ltd. No statement of defence has been filed for Smiling Spruce Farms Ltd. [3] Nothing happened in the action until 1999, when the Federal Court initiated a status review. The matter was permitted to continue as a specially managed proceeding, and the prothonotary was assigned as case manager. In 2001, Mr. Bartel was ordered to provide an affidavit of documents and failed to do so. His statement of defence was struck on the Crown's motion. The Crown then brought a motion for default judgment, which Mr. Bartel contested. Ultimately, the order striking Mr. Bartel's defence was set aside on consent and the matter continued. There was still no defence filed by the Smiling Spruce Farms Ltd.. After a case management meeting, arrangements were made for oral examinations for discovery. Mr. Bartel was examined by counsel for the Crown. However, Mr. Bartel declined to examine the Crown's deponent. After a pre-trial conference on January 13, 2003, Mr. Bartel was ordered to pay for costs thrown away by the Crown in having its deponent attend the examination. [4] The pre-trial conference was reconvened and resulted in a direction dated March 24, 2003 which reads as follows: The pre-trial of March 14, 2003, has been adjourned to a date to be set by the Court. On review of the file, the status of the corporate defendant [Smiling Spruce Farms Ltd.] and the plaintiff's intention to pursue its outstanding claim was canvassed by the Court and spoken to by the plaintiff, by letter dated October 4, 2001, from Mr. Hanna. The corporate defendant did not thereafter file a defence. Mr. Bartel must either bring a motion to represent the corporate defendant or appoint counsel of record to do so and thereafter file a defence. That said, at this juncture, given that the principal issue for trial is the validity of the personal guarantee of the corporate indebtedness executed by Mr. Bartel, subject to the comments of the parties, the Court is inclined, if Mr. Bartel so chooses, to resume the pre-trial conference, without a defence entered by the corporate defendant or its representation at trial. The plaintiff may thereafter move for judgment against the corporate defendant upon adjudication of the validity of the guarantee at trial. The comments of the parties are to be made in writing by the plaintiff no later than March 28, 2003, the defendant by no later than April 15, 2003. At the same time the parties are to provide their availability for the resumption of the pre-trial. [5] The Crown apparently moved for default judgment against the Smiling Spruce Farms Ltd., which was granted. That default judgment is not contested. [6] The record is not clear as to what comments the parties were expected to make in response to the direction in the second to last paragraph of the March 24, 2003 direction. The record contains no indication that the Crown made any comments. Counsel for the Crown submitted in this Court that the Crown had no comments to make. Mr. Bartel, who is self-represented, made no comments either. He submitted in this Court that he thought the direction left it up to him to decide whether to abandon any notion of defending the action on behalf of the Smiling Spruce Farms Ltd., and as he decided not to do so, he did not think he had any further obligations under the direction. He says that he did not understand that there was any doubt about his intention to continue to defend himself against the claim made against him personally on the alleged guarantee. [7] On August 25, 2003, the prothonotary made a further direction, as follows: As Mr. Bartel has chosen not to continue his defence of this action, the Crown may move to strike the defence by no later than September 4, 2003. [8] This direction was apparently made because of Mr. Bartel's failure to make any comments pursuant to the March 24, 2003 direction. It is not clear from the record how the failure of Mr. Bartel to comment led to the conclusion that he had chosen not to continue with his personal defence. Nor is it clear from the record why nothing was said about the Crown's failure to make any comments pursuant to the same direction. [9] On September 3, 2003, the Crown filed a notice of motion seeking: 1. An order that the Statement of Defence be struck out pursuant to Rule 221(1)(f) of the Federal Court Rules, 1998 and alternatively Rule 4 and by analogy Rule 221 or under the inherent jurisdiction of the Federal Court of Canada to control its own process; 2. The Plaintiff's costs of this Application; and 3. Such further or other order as this Honourable Court may deem just. [10] The factual foundation for the motion consisted of the August 25, 2003 finding of the prothonotary that Mr. Bartel "has chosen not to continue in his defence of the within action". The Crown's argument was that Mr. Bartel's failure to pursue his defence was an abuse of the process of the Court. [11] Mr. Bartel did not respond to the notice of motion. He did, however, send a letter to the Court on September 26, 2003, asking how to respond, and asserting that he wished to have a trial in relation to the validity of the alleged personal guarantee. It is not clear whether Mr. Bartel's letter had reached the prothonotary by September 29, 2003 when she made the following order, giving no written reasons: UPON THE APPLICATION of Chris Bernier, Counsel on behalf of the Plaintiff, her Majesty the Queen in right of Canada, and upon reading the material filed: THIS COURT ORDERS that 1. Pursuant to the inherent jurisdiction of the Court and Rule 221(1)(f) of the Federal Court Rules, 1998 the Statement of Defence of the Defendant Walter Bartel shall be struck out in its entirety; and 2. Costs of the within application be reserved to be dealt with at trial or at any application for judgment. [12] Mr. Bartel filed a notice of motion seeking an order setting aside the order of the prothonotary, and an order striking the Crown's statement of claim. Both motions were dismissed in the order now under appeal. [13] As the matter before the judge was an appeal of a discretionary decision of a prothonotary, the judge considered, as he was required to do, whether the decision of the prothonotary disclosed an error of principle or a misapprehension of the facts, or was an improper exercise of discretion on a question vital to the final issue of the case: Z.I. Pompey Industrie v. ECU-Line N.V., [2003] 1 S.C.R. 450, at paragraph 18. [14] The basis of the judge's decision dismissing the appeal is that the decision to strike the statement of defence is the decision of a case manager, who must be taken to be in the best position to determine whether or not the interests of justice would be served by permitting an action or a defence to continue. The judge noted that Mr. Bartel's defence had been struck once before and then reinstated, and that the action had made little progress toward trial. He appears to have inferred that this was mostly the fault of Mr. Bartel, that the case manager would have been aware of that, and that the delays and other problems caused by Mr. Bartel must have formed the basis upon which the prothonotary granted the motion to strike Mr. Bartel's defence, even though she did not say that was the case. [15] The difficulty with this reasoning is that the notice of motion in support of the Crown's motion to strike Mr. Bartel's defence did not actually rely upon the long history of the case, or on any delays caused by Mr. Bartel, or on any failure by Mr. Bartel to comply with the rules or court directions, except his failure to provide comments pursuant to the March 24, 2003 direction referred to above. On the contrary, the language of the prothonotary's order suggests that she took into account only the material in the Crown's motion record. In my view, there is no evidentiary foundation for the inferences drawn by the judge as to the reasons for the prothonotary's order striking Mr. Bartel's defence. For that reason, the order of the judge must be set aside. [16] Having reached that conclusion, it is necessary to consider how the judge should have disposed of Mr. Bartel's motion to set aside the order of the prothonotary. I have no doubt that a case manager must be allowed a wide latitude in dealing with pre-trial matters, especially in a case such as the present where there have been numerous lengthy delays and procedural problems in moving a matter forward. However, the very sparse record placed before the prothonotary in support of the Crown's motion to strike Mr. Bartel's defence contains no evidence that is capable of establishing that Mr. Bartel could be faulted for anything, except perhaps his failure to provide comments as directed on March 24, 2003. Nor does the record disclose any reason for the prothonotary's conclusion that Mr. Bartel's failure to respond meant that he had chosen not to continue with his personal defence. I am unable to conclude that the order striking Mr. Bartel's defence was justified by the material filed in the Crown's motion record. Therefore, I would set aside the order of the prothonotary and replace it with an order dismissing the Crown's motion to strike Mr. Bartel's defence. [17] I find no error in the decision of the judge to dismiss the motion for an order striking the Crown's statement of claim, and that part of Mr. Bartel's appeal must be dismissed. [18] I note that both parties advised this Court that they are ready for trial and that there are no procedural hurdles to setting a trial date. [19] As success in this appeal is divided, no costs should be awarded on the appeal. The costs of the motions before the judge and the prothonotary are deferred to the judge or prothonotary who deals with the disposition of the action. "K. Sharlow" J.A. "I agree, M. Nadon, J.A." "I agree, B. Malone, J.A." FEDERAL COURT OF APPEAL NAMES OF COUNSEL AND SOLICITORS OF RECORD DOCKET: A-510-03 (APPEAL FROM AN ORDER OF THE FEDERAL COURT DATED OCTOBER 24, 2003, DOCKET T-340-92) STYLE OF CAUSE: Smiling Spruce Farms Ltd. & Walter Theodore Bartel v. Her Majesty the Queen PLACE OF HEARING: Winnipeg, Manitoba DATE OF HEARING: February 15, 2005 REASONS FOR JUDGMENT: SHARLOW J.A. CONCURRED IN BY: NADON J.A. MALONE J.A. DATED: February 17, 2005 APPEARANCES: Mr. Walter Bartel Winnipeg, Manitoba ON HIS OWN BEHALF - FOR THE APPELLANTS Mr. Chris Bernier Department of Justice Saskatoon, Saskatchewan FOR THE RESPONDENT SOLICITORS OF RECORD: Mr. Walter Bartel on his own behalf ON HIS OWN BEHALF - FOR THE APPELLANTS John H. Simms, Q.C. Deputy Attorney General of Canada FOR THE RESPONDENT