COURT OF APPEAL FOR BRITISH COLUMBIA

Citation:

Sun Wave Forest Products Ltd. v. Xu,

 

2018 BCCA 63

Date: 20180216

Docket: CA44572

Between:

Sun Wave Forest Products Ltd.
and CGR Investments Inc.

Appellants

(Plaintiffs)

And

Susanna Xu also known as Jie Xu, Paul Veltmeyer,
Biao Sun, Li Xu, Mike Sun, Sun Wave Management Ltd.,
Sun Wave Holdings Inc., TC Property Inc., SBS Management Ltd.,
API Enterprises Ltd., and JL Pacific Transportation Inc.

Respondents

(Defendants)

And

Sun Wave Forest Products Ltd.
and CGR Investments Inc.

Appellants

(Defendants by way of Counterclaim)

Before:

The Honourable Madam Justice Saunders

The Honourable Mr. Justice Goepel

The Honourable Madam Justice Fenlon

On appeal from: an order of the Supreme Court of British Columbia, dated
June 16, 2017 (Sun Wave Forest Products Ltd. v. Xu, 2017 BCSC 1265,
Vancouver Registry No. S083484)

Oral Reasons for Judgment

Counsel for the Appellants:

M.P. Katzalay

Counsel for the Respondents:

L.G. Harris, Q.C.

Place and Date of Hearing:

Vancouver, British Columbia

February 13, 2018

Place and Date of Judgment:

Vancouver, British Columbia

February 16, 2018

Summary:

The appeal is from an order dismissing the claim, started nine years previously, alleging fraud and defalcation, and cancelling certificates of pending litigation. Held: appeal allowed only on the order cancelling the certificates of pending litigation. It is not open to a judge to cancel CPLs when dismissing a claim for want of prosecution; s. 254 of the Land Title Act must be followed: see. Berthin v. Berthin, 2018 BCCA 57 and Bilin v. Sidhu, 2017 BCCA 429. The order dismissing the claim for want of prosecution, however, stands. The criteria for such a dismissal is discussed. Here the nature of the allegations, the length of time since commencement of the action and its impact on assessing credibility, and the fact the plaintiffs did not make good on their sworn statement of intention to proceed, support the order.

[1]          SAUNDERS J.A.: The appellants are the plaintiffs in this litigation. They appeal the order made June 16, 2017, pursuant to Rule 22-7(7) of the Supreme Court Civil Rules, dismissing their claims for want of prosecution (para. 1 of the Order) and cancelling certain certificates of pending litigation (para. 3 of the Order).

[2]          The appellants agree the judge referred to the correct test for dismissal of a claim for want of prosecution but say she erred in her consideration of the concepts of inordinate delay and reasonable excuse, and in her appreciation of the quality of prejudice that may attract an order ending the litigation. The appellants contend the delay was not inordinate, that their principal, Mr. Ni, established a reasonable excuse for their delay in pressing the case to trial, that no serious prejudice was established in the evidence before the judge, and that the judge erred in concluding the tests for the order were met.

[3]          In describing the events in the Supreme Court of British Columbia, I shall refer to the parties as the plaintiffs and the defendants.

[4]          The pleadings of both plaintiffs and defendants allege serious wrong-doing and business behaviours tainted by moral turpitude. The judge described the genesis of the action:

[2]        The plaintiffs sue the defendants for damages arising from conspiracy, fraud and misappropriation. The plaintiffs’ lawsuit is against Ms. Susanna Xu, her family, and companies controlled by her or her family.

[3]        Ms. Xu was hired by Mr. Ri Tao Ni, sole shareholder, director and officer of the plaintiffs, to manage and obtain permits for the purchase of the Skeena Cellulose pulp mill in Prince Rupert. For this work, she was paid management fees.

[4]        The defendants allege in response that the entire purchase of the pulp mill was made for the fraudulent purpose of inflating its value on a security document to obtain a loan. Ms. Xu asserts that, when she discovered the fraud, she refused to go along with it until Mr. Ni threatened her.

[5]        The plaintiffs then filed these proceedings on May 15, 2008. Ms. Xu filed a statement of defence and a counterclaim on July 9, 2008. Her counterclaim seeks damages and compensation for her wrongful dismissal.

[5]          In the course of commencing the action, the plaintiffs registered certificates of pending litigation against a number of the defendants’ properties.

[6]          The trial judge described the prosecution of the action as follows:

[6]        The defendants argue that the plaintiffs have taken no steps to prosecute this action since their examination for discovery of the defendant Biao Sun on June 24, 2013. Their failure to take any steps to prosecute this action for over three years, the defendants say, is itself grounds to dismiss the action for want of prosecution. They argue that any other steps are only intended to appear as if the plaintiffs are prosecuting the claim, but, in fact, the claim has been languishing for some years. This, they argue, has caused serious prejudice to Ms. Xu.

[7]        The plaintiffs acknowledge some delay, but argue that the delay goes back to 2015, not 2013. In 2015 the plaintiffs filed an application response to the defendants Biao Sun and Li Xu’s application to cancel CPLs from their properties. The application was adjourned and never proceeded.

[8]        Other than responding to the 2015 CPL application, the only other action taken by the plaintiffs is to schedule a trial date, currently set for January 29, 2018. A trial was originally scheduled for 2013. The trial was adjourned. It is undisputed that the plaintiffs did not do any of the following for the 2013 trial:

(a)  attend the TMC;

(b)  file a trial brief; or

(c)   file a trial certificate.

The plaintiffs have also not taken any steps to examine the key defendant, Ms. Xu, for discovery.

[7]          I add to this summary that the defendants complained to the trial court in 2013 of the plaintiffs’ lack of progress in resolving the action.

[8]          The defendants’ application in September 2015 to cancel the certificates of pending litigation was brought pursuant to s. 252 of the Land Title Act, R.S.B.C. 1996, c. 250, which allows a certificate to be cancelled if no steps have been taken in the action for one year:

252      (1) If a certificate of pending litigation has been registered and no step has been taken in the proceeding for one year, any person who is the registered owner of or claims to be entitled to an estate or interest in land against which the certificate has been registered may apply for an order that the registration of the certificate be cancelled.

(2) An application under subsection (1) must be made to the court in which the proceeding was commenced and must be brought

(a) as an application in that proceeding, if the applicant is a party to the proceeding, or

(b) by petition, if the applicant is not a party.

(3) The registrar must, on application and on production of a certified copy of the order of the court directing cancellation under subsection (1), cancel the registration of the certificate of pending litigation.

[9]          The plaintiffs, in defending the application to cancel the certificates of pending litigation, filed an affidavit of its principal Mr. Ni sworn September 23, 2015, in which he explained that he had been detained in China from late 2012 but was no longer detained. He averred:

[7]        I now intend to do everything I can to move this litigation forward towards resolution in accordance with the laws of British Columbia. I have instructed my counsel to set down the trial of this action.

[10]       The plaintiffs however took no steps to advance their claim after the defendants’ application to cancel the certificates of pending litigation was adjourned in the fall of 2015, except reserving a trial date, a step they took after this application to dismiss for want of prosecution was filed. The absence of action on their part is contrary to the deposed intention of Mr. Ni.

[11]       Since September 23, 2015, Mr. Ni has been refused admission to Canada. It seems to be accepted he will not be able to attend in Canada for any trial procedures.

[12]       In her reasons for judgment dismissing the claim, the judge referred to the four factors commonly considered on applications to dismiss for want of prosecution set out in 0690860 Manitoba Ltd.v. Country West Construction Ltd., 2009 BCCA 535. They are:

(a)      the length of the delay and whether it was inordinate;

(b)      the reasons for the delay and whether the delay is excusable in the circumstances;

(c)       whether the delay has caused serious prejudice to the defendants, and if there is such prejudice, whether it creates a substantial risk that a fair trial is not possible at the earliest date after its reactivation by the plaintiff; and

(d)      whether justice requires dismissal of the action.

[13]       The judge held as to delay:

[14]      Whether the length of delay is two years, since 2015, or four years, since 2013, the delay has been long and inordinate. The plaintiffs are the dominus litis who should have a real interest in pursuing and prosecuting the claim, yet their actions coming up to the 2013 trial date show a dilatory approach to the prosecution. They did not file a trial certificate, a trial brief, or attend the TMC.

[14]       On the reasons for the delay, the judge said:

[15]      Mr. Ni’s detention from 2012 to 2015 is one of the reasons cited for the delay. Even if I were to accept that his detention is a bona fide reason for the delay, there is no explanation for why there has been no action by the plaintiffs to pursue the case since his release.

[15]       On the issue of prejudice, the judge said:

[16]      I accept the defendants’ evidence of prejudice. Their properties have been affected by the CPLs, which have been in place for years, preventing them from selling or refinancing.

[17]      In the nine years since the claim was filed, there has been no attempt to conduct examinations for discovery of the main defendant, Ms. Xu. This is a case where credibility will be a significant issue. Conversely, the defendants have tried to conduct an examination for discovery of Mr. Ni but could not do so. Any specifics about his detention, which is referred to in his affidavits, are vague. The affidavits are carefully constructed to say little about the substance or details of his detention or the specific dates of when that occurred. Further, I find there are significant risks that a fair trial on the merits is not possible, given that Mr. Ni’s evidence cannot be given in person in a courtroom where credibility is a significant issue in the case.

[16]       Before us, the appellants contend that the judge failed to properly apply the tests of 0690860 Manitoba Ltd. In particular, they say that the delay was not inordinate, whether measured from 2013 or 2015 and, quoting from Osolin v. Aquila Holdings Ltd., [1982] B.C.J. No. 1225, say that the measure for an inordinate delay is one that is so long “it strikes at the root of justice, and makes a fair trial a virtual impossibility”. They point to the modest steps taken by the plaintiffs to advance their claim: their discovery in 2013 of the defendant Biao Xu; their reservation of a 2013 trial date, later adjourned at their behest; and their more recent reservation of a trial date. They observe as well that the defendants proposed an examination for discovery in October 2015, by video conference, but have not pursued that avenue. They say that the judge failed to balance the interests of justice in considering the extent of the delay.

[17]       On the reasons for delay and excuseability, the appellants say that Ms. Xu made allegations to the Chinese government about Mr. Ni’s involvement in a scheme in China and so caused his detention by Chinese authorities, which in turn caused him to be refused admission to Canada. They say Mr. Ni’s inability to come to Canada is an excusable reason for the delay.

[18]       The appellants also challenge the judge’s conclusion on the issue of prejudice. They refer to the judge’s statement that she accepted the evidence of prejudice, and they say that the evidence adduced ‒ the registration of the certificates of pending litigation, Ms. Xu’s physical health, her expenditures on the litigation, and her sometimes position as a self-represented litigant ‒ are not the sort of prejudice as support such a drastic order as was made by the judge.

[19]       Last, they challenge the judge’s conclusion that the circumstances present a risk to the fairness of any trial that may be held.

[20]       In my view, the tests for dismissal for want of prosecution are not as categorical as the appellants contend. The four issues are the ones the judge considered, but their content is case dependent. It seems to me that the statement of Justice Tyrwhitt-Drake in Osolin I have quoted is not entirely apt to the context of this appeal and I would return to the passage he first quoted in Osolin from the reasons for judgment of Justice Seaton in Irving v. Irving (1982), 38 B.C.L.R. 318 (C.A.). There Justice Seaton adopted the formulation of Lord Salmon in Allen v. Sir Alfred McAlpine & Sons Ltd. (1968), 20 Q.B. 229, and said at 328:

The demonstration of inordinate delay, inexcusable delay and serious prejudice does not lead necessarily to dismissal. Those three factors are only the primary considerations; all of the circumstances must be considered. It is still for the courts to decide “whether or not on balance justice demands that the action should be dismissed.” …  All of the statements of law are subject to the overriding principle that essential justice must be done. (See Freeman J.A., as he then was, in Ross and Ross v. Crown Fuel Co. Ltd. et al (1962), 41 W.W.R. 65 at 88, 37 D.L.R. (2d) 30 (Man.C.A.)

[21]       While Justice Tyrwhitt-Drake referred to the speech of Lord Salmon, it appears to me he drew the requirement of near impossibility of a fair trial as a condition of an order dismissing a claim for want of prosecution, from the speech of Lord Diplock, also in Allen. In a passage referred to both by Justice Smith in Irving and Justice Esson in Tundra Helicopters et al. v. Allison Gas Turbine et. al., 2002 BCCA 145, 98 B.C.L.R. (3d) 238, Lord Diplock said at 259:

The application is not usually made until the period of limitation for the plaintiff’s cause of action has expired. It is then a Draconian order and will not be lightly made. It should not in any event be exercised without giving the plaintiff an opportunity to remedy his default, unless the court is satisfied either that the default has been intentional and contumelious, or that the inexcusable delay for which the plaintiff or his lawyers have been responsible has been such as to give rise to a substantial risk that a fair trial of the issues in the litigation will not be possible at the earliest date at which, as a result of the delay, the action would come to trial if it were allowed to continue.

[22]       Justice Esson observed at para. 37:

It is no light matter to dismiss an action for want of prosecution.

[23]       The circumstances in which an application to dismiss an action for want of prosecution are further elucidated in Busse v. Robinson Morelli Chertkow (1999), 63 B.C.L.R. (3d) 174 (C.A.) and 0690860 Manitoba Ltd.

[24]       No doubt the words of Lord Diplock are a caution against undue haste in dismissing a claim for want of prosecution, and emphasize the interests of justice. They are most usefully considered, however, in circumstances of an initial challenge to the timeliness of the plaintiffs’ prosecution of an action, and they lose some force when considered in the context of a second or third complaint of lack of diligent pursuit of the plaintiffs’ claim, as is the case here. It seems to me the more general standard discussed by Lord Salmon, adopted by Justice Seaton in Irving and re-stated in 0690860 Manitoba Ltd. is the better measure for this case.

[25]       Considering that standard, I turn to the factors usually considered. Whether delay is inordinate is, in my view, not just a question of temporal arithmetic. It also requires consideration of the circumstances of the case. One aspect of that assessment lies with the nature of the litigation – some cases by their nature are susceptible of faster carriage or by the nature of the allegations call for more expeditious prosecution than others. In my view, the latter is the case here. The case was outstanding for nine years when this application was heard. Nearly four years had elapsed from the only examination for discovery conducted by the plaintiffs (not, I would note, of the central defendant). More than a year and a half had elapsed since Mr. Ni deposed his intent was to “do everything” to pursue the action and said he had given instructions to set the matter for trial. Yet no steps were taken by the plaintiffs to advance the trial until this motion was filed. The action engages allegations most serious to personal reputation ‒ business defalcation and fraud. The damage that may be caused by a plaintiff advancing such claims is well known, see for example, the opinion of Justice Newbury in H.Y. Louie Co. v. Bowick, 2015 BCCA 256 dissenting, but not on this point. In H.Y. Louie, Justice Newbury referred with approval to this statement of Justice McKinnon in Ip v. Insurance Corp of British Columbia (1994), 89 B.C.L.R. (2d) 251 (B.C.S.C.), equally applicable to the actions of plaintiffs:

I appreciate that the defendant is faced with many fraudulent claims and that it has a duty to refuse payment where reasonable grounds exist for so doing. An allegation of fraud, wilful misstatement, or such other claims made against a person casts a serious pall over his or her reputation in the community. Very careful consideration must be given by the defendant before making such serious allegations. …

[26]       The care spoken of in actions pleading fraud, in my view, includes doing more than allowing the allegations to float for years over the defendants, free from the rigours of prosecution and free from resolution.

[27]       The judge characterized the delay in this case as inordinate. In my view, that characterization is reasonable in context.

[28]       On the issue of the reason for delay, the appellants refer to Mr. Ni’s detention in China. The judge noted that Mr. Ni did not offer a satisfactory explanation for the delay after he was released and after he gave the commitment to the court and the parties (in September 2015) to advance the claim. Absent a satisfactory explanation for this last delay, one must say that the second factor favours the application. I would not interfere with the judge’s conclusion on lack of reasonable excuse for the delay.

[29]       As to the issue of prejudice, it appears to me that the judge based her conclusion of prejudice primarily on her view that the case engaged credibility issues, determination of which will be negatively affected by the dimming effect on memory of the passage of years, coupled with the limitations inherent in determining credibility without the presence of the defendants’ main detractor in the courtroom. While the judge referred to Ms. Xu’s evidence of personal prejudice, it appears to me the judge decided this issue on the broader view of the case as it pertained to all parties, reserving her greatest concern for the limitations inevitably produced on the trier of fact’s ability to fully see the credibility landscape. I would not interfere with that assessment of prejudice.

[30]       Last is the umbrella issue, the interests of justice. Here I have had in mind the words of Lord Diplock referred to by Justice Esson in Tundra Helicopters, but consider they are tempered by the need to consider the context in which the issue is raised. The defendants have twice before brought the matter of delay to the plaintiffs’ and trial court’s attention, first in 2013 and again in 2015. On the latter occasion, Mr. Ni filed an affidavit with commitments he did not make good, expressing his intention to advance the litigation which the plaintiffs have not done. Bearing in mind the injurious nature of the allegations of fraud and corrupt practices lying dormant so long, the lapse of time since the action was commenced, the lack of explanation from the plaintiffs for the most recent delays, and the empty promise of Mr. Ni in his affidavit, I am persuaded that I should defer to the judge’s view of the interests of justice.

[31]       I would dismiss the appeal from the order dismissing the plaintiffs’ action.

[32]       As part of the appeal, the plaintiffs also challenged the order cancelling the certificates of pending litigation. The application to dismiss the action for want of prosecution was heard on May 29, 2017. The judge reserved and then gave oral reasons on June 16, 2017. After she had given her reasons dismissing the action for want of prosecution, defence counsel asked for an order cancelling the certificates of pending litigation. That relief had not been sought in the notice of application. The trial judge agreed to make the order. Counsel did not bring to the judge’s attention s. 254 of the Land Title Act:

254  If an action in respect of which a certificate of pending litigation is registered has been dismissed, the registrar must cancel the registration as provided in the regulations, or, on

(a) application, and

(b) production of a certificate of the registrar of the court that issued the certificate of pending litigation, endorsed by the registrar of the Court of Appeal, certifying that

(i) the action has been dismissed and that the time limited for appeal has expired and no notice of an appeal has been filed with the registrar of the Court of Appeal, or

(ii) a notice of appeal has been filed and has been finally disposed of, and the dismissal of the action has not been set aside by the Court of Appeal or the Supreme Court of Canada.

[33]       I consider the appellants are correct in saying the certificates of pending litigation ought not to have been cancelled. In the recent decision Bilin v. Sidhu, 2017 BCCA 429, this court addressed the jurisdiction of the trial court to cancel certificates of pending litigation as part of an order ending proceedings in the Supreme Court of British Columbia. Yesterday this Court released Berthin v. Berthin, 2018 BCCA 57, discussing Bilin. It is clear from these two cases that the Supreme Court of British Columbia’s jurisdiction to cancel a certificate of pending litigation, outside of an application under ss. 256 and 257 of the Land Title Act is narrow. When a claim that supported the filing of a certificate of pending litigation is dismissed, the certificate of pending litigation must remain on title until the requirements of s. 254 are satisfied or a subsequent application under s. 256 establishes hardship or inconvenience. In Berthin, Justice Fenlon for the Court explained:

[32]      A CPL is an extraordinary pre-judgment mechanism intended to protect a valid claim to an interest in land until the issues in dispute can be resolved. It prevents a plaintiff’s claim from being defeated by the defendant transferring the property in dispute to a third party. Section 254 of the Land Title Act continues that protection throughout the appeal process, thereby ensuring the property remains available in the event an appeal is successful. Section 256 protects the interests of the defendant property owner by providing for removal of a CPL if it is causing hardship or inconvenience. Section 252 provides a further avenue for removal where the plaintiff fails to pursue a claim diligently.

And:

[44]      I conclude that a judge has jurisdiction to make an order immediately cancelling a CPL when the claim does not meet the threshold requirements of s. 215, or when the property owner affected by the CPL establishes hardship or inconvenience under s. 256. A judge does not have jurisdiction to make an order cancelling a CPL when a claim is dismissed under Rules 9-5, 9-6, 9-7, or following a full trial. In those circumstances, s. 254 of the Land Title Act governs and an order purporting to immediately cancel a CPL cannot be given effect and should not be made. In short, when a claim underpinning registration of a CPL is dismissed, the CPL must remain on title until the requirements of s. 254 are satisfied or a subsequent application under s. 256 establishes hardship or inconvenience.

[Emphasis added.]

[34]       In the circumstances of a dismissal for want of prosecution, it was not open to the judge to cancel the certificates of pending litigation. Accordingly, that portion of the order must be set aside and the certificates of pending litigation revived, to be removed only in accordance with the provisions of the Land Title Act.

[35]       I would allow the appeal only to the extent of setting aside paragraph 3 of the Order of June 16, 2017.

[36]       GOEPEL J.A.: I agree.

[37]       FENLON J.A.: I agree.

[38]       SAUNDERS J.A.: The appeal is allowed only to that extent as I have described.

[39]       There will be the usual order for costs which is as Mr. Harris states.

“The Honourable Madam Justice Saunders”