Kwan v. Superfly Inc., 2011 ABQB 343

Court of Queen ’ s Bench of Alberta Citation: Kwan v. Superfly Inc., 2011 ABQB 343 Date: 20110520 Docket: 0403 17022 Registry: Edmonton Between: Steve Kwan and Annie Kwan Respondents/Plaintiffs - and - Superfly Inc., Superior Hotel Inc. and Leo Superstein Applicants/Defendants _______________________________________________________ Memorandum of Decision of the Honourable Mr. Justice R.P. Marceau _______________________________________________________ I. Introduction [ 1 ] Superfly Inc., Superior Hotel Inc. and Leo Superstein [ “ the Defendants ” , or “ The Applicants ” ] apply for

summary dismissal of the Plaintiffs ’ Steve Kwan and Annie Kwan [ “ the Plaintiffs ” or “ the Respondents ” ] claim in this action. The Applicants identify four bases on which the court may dismiss some or all of this action: 1. all or some of this action was the subject of a prior and now concluded legal action;

2. a limitation period expired before the Respondents filed the Statement of Claim in August 31, 2004 and therefore the Respondents are statute barred from successfully pleading abuse of process, malicious conduct, bad faith conduct and wrongful filing of the Certificate of Lis Pendens ; 3. there is no merit to the whole of the Plaintiffs ’ claim against the Defendants; and 4. the Plaintiffs ’ damages are too remote and/or result from the Plaintiffs own impecuniosity. [ 2 ] As those items suggest, the present lawsuit [ “ Action No. 2 ” ] is related to an earlier legal dispute, Action No. 0103 20833 [ “ Action No. 1 ” ].

In Action No. 1 S Group Management Inc. and Superior Hotel Inc., two corporations directed by Leo Superstein, sued Steve Kwan and Annie Kwan for funds that Steve Kwan had allegedly misappropriated from S Group Management Inc. and Superior Hotel Inc. In Action No. 1 there was a further allegation that the misappropriated funds were given to Annie Kwan and invested in a home in Edmonton. After the action was started, a lis pendens was filed. [ 3 ] Several years after the Action No. 1 was commenced, the Defendants Steve and Annie Kwan made a formal offer to settle the action for a payment of $10.00 and no costs.

That offer was accepted, $10.00 was paid, Action No. 1 was formally discontinued, and the lis pendens was removed from the title to Annie Kwan ’ s house. [ 4 ] The present lawsuit, Action No. 0403 17022 was initiated shortly afterwards. [ 5 ] The Defendants in this action, Superfly Inc., Superior Hotel Inc. and Leo Superstein say that by paying $10.00 in damages the Plaintiffs in Action No. 1, have acknowledged as a matter of res judicata the bona fides of the cause of action in Action No .1 and can neither plead that Action No. 1 constituted an abuse of process, nor that the filing and continuing of the lis pendens was a breach Land Titles Act , R.S.A. 2000, c.

L-4, s. 149. [ 6 ] The Applicants argue that the entire Amended Statement of Claim in this action should be struck except for the independent alleged defamation contained in two letters in 1995 authored by the Defendant Leo Superstein.

In the alternative, the Applicants state that the doctrine of estoppel applies to all of the allegations in the Statement of Claim but for the defamation action. [ 7 ] On January 7, 2011 the Defendant Leo Superstein swore an affidavit in support of this application and was cross examined on the same on March 2, 2011. [ 8 ] No affidavit was sworn or filed by the Plaintiffs (Respondents) Steve Kwan and Annie Kwan. II. Facts and History of Proceedings A.

Action No. 0103 20833 - Action No. 1 [ 9 ] On October 9, 2001, S Group Management Inc. and Superior Hotel Inc. filed the Action No. 1 Statement of Claim against the Plaintiffs in Action No. 2, Steve Kwan and Annie Kwan. The Statement of Claim alleged that Steve Kwan and Annie Kwan wrongfully and fraudulently misappropriated funds from S Group Management Inc. and Superior Hotel Inc. and used those funds to purchase assets, including a residential house [the “ Home ” ]. [ 10 ] On or about October 1, 2000, S Group Management Inc. was amalgamated with Superfly Inc.

In October 2003, S Group Management Inc. and Superior Hotel Inc. successfully applied to amend their Statement of Claim. One change was to amend that style of

cause and replace S Group Management Inc. with Superfly Inc. as a plaintiff in Action No. 1. [ 11 ] On or about January 28, 2002, S Group Management Inc. and Superior Hotel Inc. registered a Certificate of Lis Pendens , Instrument No. 022032258, against the title to the Home. [ 12 ] In the summer of 2003, Steve Kwan and Annie Kwan applied to dismiss Action No. 1. Their application was adjourned by consent on five separate occasions. The

summary dismissal application was ultimately heard and rejected on March 26, 2004 by Master Smart: unreported Memorandum of Decision, Alberta Court of Queen ’ s Bench. [ 13 ] On the 14 th day of June, 2004, the Defendants Steve and Annie Kwan in the Action No. 1 made a formal offer to settle which was stated to be pursuant to Alberta Rules of Court , Alta.

Reg. 390/1968, s. 170, and proposed that “ ... the Defendants shall pay to the Plaintiffs the sum of $10.00 and there shall be no costs between the parties. ” [ 14 ] On June 23, 2004, Superfly Inc. and Superior Hotel Inc. filed its Acceptance of Offer to Settle in Action No. 1 and then discontinued Action No.1. [ 15 ] The next day, on June 24, 2004, Superfly Inc. and Superior Hotel Inc. discharged the Certificate of Lis Pendens from the title to Annie Kwan ’ s Home. B.

Action No. 0403 17022 - Action No. 2 [ 16 ] On August 31, 2004, Steve Kwan and Annie Kwan began the present lawsuit against Superfly Inc., Superior Hotel Inc. and Leo Superstein. The claim was later amended on November 24, 2004. The Plaintiffs generally have alleged:

a) the wrongful registration of the Certificate of Lis Pendens in Action No. 1 as the Certificate of Lis Pendens was registered with intent in malice and in breach of Land Titles Act , R.S.A. 2000, c. L-4, s. 149;

b) bad faith activities;

c) malicious conduct;

d) abuse of process; and

e) defamation. [ 17 ] The Plaintiffs have each claimed damages $2.5 million dollars, punitive damages of $500,000.00, and costs on a solicitor- client basis. [ 18 ] Mr. Superstein was examined for discovery in both Action No. 1 and in Action No. 2, and specifically with respect to this application, has been examined on his affidavit sworn January 6, 2011. III. Law and Analysis

A.

Summary Judgment [ 19 ] The Defendant ’ s

summary judgment application is authorized by Alberta Rules Of Court , Alta. Reg. 124/2010, s. 7.3 [the “ Rules ” or individually, a “ Rule ” ]: 7.3(1) A party may apply to the Court for

summary judgment in respect of all or part of a claim on one or more of the following grounds: (

a) there is no defence to a claim or part of it; (

b) there is no merit to a claim or part of it; (

c) the only real issue is the amount to be awarded. [ 20 ] Rule 7.3 operates in the same manner and follows the same legal principles as its precursor, Alberta Rules of Court , Alta. Reg. 390/1968, s. 159: Manufacturers Life Insurance Company v. Executive Centre at Manulife Place Inc. , 2011 ABQB 189 at para. 11 ; Mraiche Investment Corporation v. Paul , 2011 ABQB 164 at para. 11 ; Janvier v. 834474 Alberta Ltd. , 2010 ABQB 800 at para. 21 . [ 21 ] Two critical principles that govern

summary dismissal can be gleaned from the decision of the Supreme Court of Canada in Papaschase Indian Band No. 136 v. Canada (Attorney General) , 2008 SCC 14 , [2008] 1 S.C.R. 372 . At para. 10 the court wrote: ...The

summary judgment rule serves an important purpose in the civil litigation system. It prevents claims or defences that have no chance of success from proceeding to trial . Trying unmeritorious claims imposes a heavy price in terms of time and cost on the parties to the litigation and on the justice system. It is essential to the proper operation of the justice system and beneficial to the parties that claims that have no chance of success be weeded out at an early stage . Conversely, it is essential to justice that claims disclosing real issues that may be successful proceed to trial. [Emphasis added.] [ 22 ] And further at para. 19: ... A

summary judgment motion cannot be defeated by vague references to what may be adduced in the future, if the matter is allowed to proceed. To accept that proposition would be to undermine the rationale of the rule. A motion for

summary judgment must be judged on the basis of the pleadings and the materials actually before the judge, not on suppositions about what might be pleaded or proved in the future . [Emphasis added.] [ 23 ] I agree with the proposition that in general the test for

summary dismissal is that it must be “ plain and obvious that the action cannot succeed ” , the action is “ bound to fail ” or the action has “ no prospect of success ” : Boudreault v. Barrett , 1998 ABCA 232 at para. 9 , 219 A.R. 67 ; De Shazo v. Nations Energy Co. , 2005 ABCA 241 at para. 17 , 367 A.R. 267 . The burden of proof required in

summary dismissal applications was set out by our Court of Appeal in Murphy Oil Co. v. Predator Corp. , 2004 ABQB 688 at para. 17 , 365 A.R. 326 , affirmed 2006 ABCA 69 at paras. 27-28 , 384 A.R. 251 . The Court of Appeal agreed with scheme provided at para. 17 of the chambers decision: 17 In

summary, the relevant principles are these: 1. A party bringing a motion for

summary judgment bears the legal onus of showing no genuine issue for trial.

2. There is no onus on the responding party to prove a genuine issue for trial. 3. If the applicant for

summary judgment discharges his/her onus on the material filed, a respondent who does not resist theapplication through admissible evidence risks judgment against him/her. That is an evidentiary burden. 4. There is no obligation on the respondent to file material. He/she can accept the risk described above. If the applicant fails todischarge his/her legal onus, the application will fail. 5. More commonly a respondent will provide admissible evidence opposing the motion. In that event, the court will consider all theevidence to determine whether the applicant has shown that there is no genuine issue for trial. B.

Res Judicata or Issue Estoppel [24] I have already set out most of the facts relevant to the res judicata or cause of action estoppel argument. [25] In Bank of Montreal v. Cochrane, 2011 ABQB 259 at para. 7 Justice Kent wrote: Res judicata has two arms: issue estoppel and cause of action estoppel. Although they are rooted in the common law, they are likeequitable doctrines because the concepts of fairness, equity and justice are central to their application. [26] Justice Kent quoted with approval the following passage from Ontario v.

National Hard Chrome Plating Co., [1996] O.J.No. 93 (QL) at para. 12, 60 A.C.W.S. (3d) 289 (Ont. Ct. (Gen. Div.)) ... The test for res judicata is a flexible one and the court can use its discretion to determine whether, in the circumstances of the case,the relief sought is a process abusive of the court.

Even if the court determines that the factual circumstances are not a matter of resjudicata in the strict sense of the term, but the court finds that the second action is an attempt to reopen indirectly what the court hasalready dealt with in the disposition of the first action, the court should strike out the second action. ... [Emphasis added.] [27] The requirements of issue estoppel were set out in Angle v. M.N.R., (SCC), [1975] 2 S.C.R. 248 at 254, 47D.L.R. (3d) 544, where Dickson J. (as he then was) cited Carl Zeiss Stiftung v.

Rayner & Keeler Ltd. (No. 2), [1967] 1 A.C. 853. at p.935: (1) the same question has been decided; (2) the judicial decision which is said to create the estoppel was final; and (3) the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel israised on their privies. [28] In the case at bar there was no decision of the court but there was a clear settlement of the action.

In my view, by acceptingpayment of $10.00 in settlement which resulted in the plaintiff discontinuing its action and discharging the lis pendens, the defendants inAction No. 1 admitted that there was a valid cause of action pled in the first action.

But for the alleged defamation, all the wrongdoingidentified by the Plaintiffs in Action No. 2 could and should have been pled in Action No. 1 as either a defence, a counterclaim or both.The failure to plead as a defence or counterclaim in the first action prevents the plaintiff from now pleading those potential claims in asecond action, once the first action has been finally decided.

[29] There are four cases that illustrate the point that if a defence or counterclaim should but was not plead in a first action, thenthe person or persons who should have raised those issues in the first action are estopped from now claiming in the new action whatshould have been tried and decided in the first action. [30] In Henderson v.

Henderson (1843), 3 Hare 100 at 114, 67 E.R. 313 (Ch.), 1843 Privy Council case out of Newfoundland,the court explained the principle that res judicata applies to both issues raised in a first action and also issues that should have beenraised in that action: In trying this question I believe I state the rule of the Court correctly when I say that, where a given matter becomes the subject oflitigation in, and of adjudication by, a Court of competent jurisdiction, the Court requires the parties to that litigation to bring forwardtheir whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation inrespect of matter which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted partof their case.

The plea of res judicata applies, except in special cases, not only to points upon which the Court was actually required bythe parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, andwhich the parties, exercising reasonable diligence, might have brought forward at the time. [Emphasis added.] [31] Similarly, in Summer Village of Argentia Beach v. Warshawski, 1991 ABCA 322 at para. 5, 120 A.R. 27, Côté J.A.explained the same rule: ... Res judicata is not limited to what was argued and decided in the previous suit.

It extends to what reasonably should then have beenraised. Litigation by instalments is interminable. The Village argues that the second suit would have been made longer by raising thesematters then. But the total time of the two suits is even longer if that is permissible, so the practicality argument does not convince. [32] The application of the principle of res judicata is a matter of logic. In R. v. Duhamel (1982), 1981 ABCA 295 , 131D.L.R. (3d) 352, 33 A.R. 271 (Alta.

C.A.), affirmed (SCC), [1984] 2 S.C.R. 555, 14 D.L.R. (4th) 92 the Moir J.A.observed: The issue sought to be estopped in a subsequent proceeding must have been clearly and unequivocably decided by the first court.Essentially one must apply reasoning or logic. It is not necessary to show that the issue was specifically decided so long as it can beshown that it was a necessary logical consequence of the point actually decided. It is pure logic, not probability, likelihood orspeculation. [Emphasis added.] [33] Similarly, Justice Hirschfield relied on Henderson v. Henderson, supra and in Horsfall v.

Horsfall (1988), (MB KB), 14 R.F.L. (3d) 393 at paras. 13-15, 10 A.C.W.S. (3d) 390 (Man. Q.B.) wrote: It is mandatory in law that a party asserting a cause of action must claim all his relief in respect to it and is not entitled to a secondattempt to invoke the aid of the courts in the same cause. This rule applies equally to a defendant who must put forth all defences whichwill defeat the plaintiff's action, and if he does not, he will be barred from raising them subsequently ...

By reason of the operation of this principle, estoppel by res judicata "also extends to any point whether of assumption or admissionwhich was in substance the ratio of and fundamental to the decision." [34] In order for the doctrine of issue estoppel to apply, the facts in this case must fall within the doctrine. I have concluded thatthey do. Firstly, the settlement and doctrine of res judicata was clearly plead in paragraph 3 of the Action No. 2 Statement of Defence: 3.

In June 2004 the plaintiffs in this action made an offer to settle the Action No. 0103 20833 pursuant to Rule 170 of the Rules of Courtof the Queen’s Bench on the following terms:

The Defendants shall pay to the Plaintiffs the sum of $10.00 and there shall be no costs between the parties. 4. The Defendants accepted the said offer which constituted a settlement and termination the Action No. 0103 20833 finally and with a consequential discontinuance of the action and a discharge of the Lis Pendens. The settlement constituted a satisfaction and accord of the disputes between the parties in Action No. 0103 20833. 5. As a result of the said settlement and termination of that Action, the Action 0103 20833 is now res judicata and no rights can accrue to the Plaintiffs thereunder. 6.

As a result of the said settlement the parties also settled their claims in respect of this action.

This action is barred as being res judicata or alternatively the said settlement constituted a satisfaction and accord of this action alternatively the Plaintiffs in this action are stopped fro bringing this action as the issues in this action have been concluded and the doctrine of issue estoppel applies. [ 35 ] Secondly, it is true that there was no actual judicial decision but by paying the sum of $10.00 in full settlement instead of pleading the injuries now claimed (wrongful registration of the certificate of lis pendens , bad faith, malicious conduct and abuse of civil process), I find the defendants in the Action No. 1 have acknowledged: 1. the statement of claim and filing of the lis pendens constituted a valid action, 2. the statement of claim and the lis pendens were not filed in bad faith, with malicious intent, or in a manner that was an abuse of process, and 3. registration of the lis pendens was wrongful or unlawful.

The cases above cited are authority for the proposition that litigants are precluded from commencing multiple actions alleging causes of action and defences which should have been plead in the first action. [ 36 ] Even if I am wrong on that point, I conclude the Respondents do not have a legal right to sue on these alleged wrongs. Res judicata is a functional doctrine, its objective is to prohibit persons from attempting to assert legal claims which have been exhausted. At its heart, the res judicata principle says that a legal action cannot exist where a plaintiff has no legal right to enforce.

Sometimes a right is extinguished by a court dismissing a claim. A legal right can be also be extinguished by a person binding themselves, in contract, to abandon a legal right. At its core the offer and acceptance of a lawsuit settlement is the formation of a contract by which parties agree to end or limit their legal rights to take a matter to court. When the Respondents made their offer in relation to Action No. 1, they offered to surrender their legal right to seek pursue legal action against the Applicants in the dispute.

That surrender took effect with acceptance of the offer by the Plaintiffs in Action No. 1. [ 37 ] Thirdly, although the parties to the first and second action are not exactly the same, the issues between the parties (but for the defamation) are the same and have been settled: 1) were funds wrongfully taken from S. Group Management, 2) then given to Annie Kwan, and 3) invested in the subject of the lis pendens , the Home? Fundamentally, the basis on which the Respondents advance Action No. 2 is simply that Action No. 1 was an abuse of process.

In that sense the end of Action No. 1 ended any possible claim against Superfly and Superior Hotel. Leo Superstein was the guiding mind of those corporations. [ 38 ] The common-law recognizes that persons other than those named in an action may be shielded from subsequent lawsuits by the results of that action. That principle was recently reviewed by the Nova Scotia Court of Appeal in Lienaux v. 2301072 Nova Scotia Ltd. , 2005 NSCA 97 at paras. 37-44 , 234 N.S.R. (2d) 185 , leave denied [2005] S.C.C.A. No. 399.

A director, officer, owner, or directing mind of a corporation is “ a privy of a party ” , and not subject to further legal action as a consequence of res judicata . Thus, it would be an abuse of process to allow an action to proceed on this issue based on the argument that Leo Superstein was not a party to the first action.

[ 39 ] Last, it is arguable that the offer to settle cited the wrong Rule ( Rule 170 rather than Rule 169) and the acceptance of the offer does not allow the plaintiff to then obtain a judgment under the Rule . In my view that is a technical argument with no real merit. Clearly there was a settlement of the action by payment to the plaintiff. As I have previously observed, the June 14 offer and June 23 acceptance formed a contract. It is trite law that the effect of a contract is what the parties intended, and here their intention is clear.

A minor slip in the text of a contract would not defeat the mutual obligation established by that agreement. [ 40 ] For these reasons I dismiss all allegations in the Statement of Claim against Superfly Inc., and Superior Hotel Inc. I dismiss all allegations against Leo Superstein except the allegations of defamation arising from publication of the two letters as that is a separate and new cause of action. Of course, there is no cause of action in defamation pled by Annie Kwan and her action should be struck in its entirety. C.

Expiry of the Limitation Period [ 41 ] The Defendant has plead the Limitations Act , R.S.A. 2000, c. L-12, and say this action is statue barred for having been commenced beyond the two year limit set by s. 3(1) (a). The Limitations Act specifically states a defendant is immune from liability if a claimant does not seek a remedial order within: 3(1)(a) ... 2 years after the date on which the claimant first knew, or in the circumstances ought to have known, (

i) that the injury for which the claimant seeks a remedial order had occurred, (ii) that the injury was attributable to conduct of the defendant, and (iii) that the injury, assuming liability on the part of the defendant, warrants bringing a proceeding, ... [ 42 ] The Defendants filed their Statement of Claim in Action No. 1 in October of 2001. The Certificate of Lis Pendens was filed on January 28, 2002 - so that is the date upon which the Defendants in that action knew that a lis pendens had been filed against the Defendant Annie Kwan ’ s Home. Their Amended Statement of Claim in Action No. 2 states: 6.

On October 9 th , 2001 , the Defendants , Superfly and Superior filed a Statement of Claim in the Court of Queen ’ s Bench of Alberta No.: 0103 20833 (the “ Action ” ) , against the Plaintiffs claiming that the Plaintiffs wrongly and fraudulently misappropriated funds from the Defendants, Superfly and Superior and used the said fund for the purpose of purchasing, among other assets, a home with the following legal description: PLAN 842 0255 BLOCK 9 LOT 42 EXCEPTING THEREOUT ALL MINES AND MINERALS (the “ P roperty ” ) 7 . At all material times, the owner of the P roperty was the Plaintiff , Annie. 8 .

On January 28 th , 2002 , the Defendants, Superfly and Superior registered a Certificate of Lis Pendens as Instrument No. 022 032 258 at the Northern Alberta Land Titles Office against Title to the Property .

9 . In or about June of 2004, the aforesaid A ction was discontinued against the Plaintiffs in consideration of the Plaintiffs paying the Defendants the sum of $10.00. 10 . On June 24 th , 2004 , the said Lis Pendens was discharged. 11 . _____________The Defendants, and each of them, knew that there was no merit to the aforesaid lawsuit and the Lis Pendens registered against the P roperty.

The Defendant, Superstein initiated the lawsuit and subsequently filed the Lis Pendens solely because when he saw the Property that the Plaintiff, Annie owned, he determined that the Property must have been obtained fraudulently. 12 . The Lis Pendens was registered with intent and malice. The Defendants, and each of them, committed an abuse of civil process, ___________________ in commencing the aforesaid action and wrongfully registering the Lis Pendens against the title to the P roperty based on frivolous and unsubstantiated allegations . 13 .

By virtue of the actions of the Defendants, the Defendants have breached

Section 149 of the Land Titles Act , R.S.A. 2000, c. L-4 and amendments thereto and have caused damage to the Plaintiffs. [ 43 ] Land Titles Act , R.S.A. 2000, c.

L-4, s 149 provides the penalty for a person who files a lis pendens for which there is no reasonable basis: 149 A person filing or continuing a certificate of lis pendens without reasonable cause is liable to make compensation to any person who may have sustained damage by that filing or continuation. [ 44 ] The Applicants pointed out that nowhere in paragraph 6-12 of the Action No. 2 Amended Statement of Claim do the Plaintiffs in the second action allege that the Defendants wrongfully continued the action as opposed to all the allegations that initiated the lawsuit and subsequent to file lis pendens with intent and malice. [ 45 ] The Respondents, however, argues that in paragraph 13 they allege that the Defendants breached Land Titles Act , s. 149.

The Respondents have also plead that a lis pendens was filed, and they have plead the date when the lis pendens was discharged was June 24, 2004.

The Respondents therefore argue that the only conclusion a court could come to is that they alleged the lis pendens was continued from the date it was filed until June 24, 2004, so that for a substantial period of time the lis pendens had a legal effect that extended into the two years limitations period for filing the Statement of Claim in this action - so that “ the action for wrongful filing maybe caught by the Limitation of Actions Act but not its continuance. ” [ 46 ] I am satisfied mainly on the authority of Hennessy Cup Developments Ltd. v.

Western Concord Manufacturing Ltd. , 2002 ABCA 56 , 299 A.R. 169 that all the Plaintiffs have to prove is that the lis pendens was continued without reasonable cause and intent and malice need not be proved. If the Plaintiffs/Respondents meant to sue for continuing the lis pendens , they certainly could have made that more clear, but I cannot say that this argument will not meet with success at trial and I would not grant

summary dismissal of that part of the Statement of Claim which deals with the allegation of the filing of the lis pendens and its continuation until it was discharged. And I suppose it is arguable that if the lis pendens was continued with intent and malice and was based on frivolous and unsubstantiated allegations as alleged, then it was probably continued without reasonable cause. [ 47 ] Was the Statement of Claim filed without merit other than the claim for continuing the lis pendens and compensation under the Land Titles Act and the claim for defamation?

Paragraph 12 of the Amended Statement of Claim speaks of registering the lis pendens with intent and malice. It says that the Defendants committed an abuse of civil process in commencing the action and wrongfully registering the lis pendens against the title to the Property, that act was based only on frivolous and unsubstantiated allegations.

Again, it is arguable that although the Action No. 2 Statement of Claim itself was filed outside the limitation period, Action No. 1 was continued until June of 2004 and therefore, most of the time that the Action No. 1 Statement of Claim was extant was within the limitation period. It is arguable that the tort continued until Action No. 1 was discontinued.

D. Allegations without a Factual Basis 1. Abuse of Process [48] Furman J., as she then was, in Rocky Mountain Rail Society v. H & D Hobby Distributing Ltd. (1995), (AB KB), 167 A.R. 16, 27 Alta. L.R. (3d) 424 (Alta. Q.B.): The tort of abuse of process clearly exists in our law, but as I read the case law, most of which derives from Ontario, it is narrow in scope.The process of the court must be used for an improper purpose and there must be a definite act or threat in furtherance of such purpose. ... This is also cited with approval in Teledata Communications Inc. v.

Westburn Industrial Enterprises Ltd. (1990), (ONSC), 71 O.R. (2d) 466 (H.C.J.). At 469, Eberle J. states: "What lies at the heart of the cause of action is

an act, or threat of

an act, outside the ambit of the action. The essence of the actiontherefore is the use of legal process to gain an end which the legal process does not entitle the plaintiff to obtain." [Emphasis added.] Furman J. goes on to conclude: Based on my analysis of the case law, 2 elements must be pleaded: first, there must be an improper purpose which is outside the ambit ofthe litigation; secondly, there must be a definite act or threat in furtherance of that purpose.

If one or both of these elements is absent, it isthen beyond doubt that the Counterclaim is doomed to failure. [Emphasis added.] [49] The Respondents in this action state that the definite act or threat in furtherance of the purpose is the filing of the Statementof Claim and its continuance. I agree that is arguable.

However, the onus is on the Applicants to show there was no “improper purposewhich was outside the ambit of the litigation”. [50] Leo Superstein in his affidavit and in the portion of the examinations for discovery that have been placed in evidence beforeme has asserted that the Statement of Claim and lis pendens were filed because he believed that monies advanced by him to a jointventure between Superfly Inc., Superior Hotel Inc. and Steve Kwan. Those funds were documented as having been withdrawn by Mr.Kwan and not accounted for. Mr.

Superstein then asserts at the examinations for discovery that Annie Kwan’s money was received fromSteve Kwan and she used those funds to buy the Home which was the target for the lis pendens. [51] Counsel for the Respondents argued that these statements were near suspicions or simply assumptions on the part of Mr.Superstein. Several passages from the examinations for discovery indeed had Mr. Superstein confirm that he assumed the money wastaken by Steve Kwan, given to Annie Kwan, and then used to buy the Home.

However, counsel for the Applicants put in several otherpages of the same examinations for discovery which put those comments into context. I rely particularly on the explanations given onpage 35 of the examination of Mr. Superstein. I quote from line 7 to 27: Mr. Engelking - Q Sure. And those are all assumptions made by you, aren’t they, Mr. Superstein? Mr. Superstein - A They’re documents.

Q You looked at the documents and assumed in the review of those documents that Mr. Kwan got money? A I have no evidence that he didn ’ t. Q Right. But you just assumed that he did? A Yes. Q And on the basis of those assumptions you claim that he took money from you and gave it to Annie and she used it to buy a house? A I know and it ’ s since been confirmed that all of Annie ’ s money was received from Steven. Q Again this doesn ’ t answer my question. Mr. Veale He answered it. Mr. Engelking - Q At the time that you issued the Statement of Claim though, Mr.

Superstein, you just assumed, didn ’ t you, that Steven stole money from you and he gave it to Annie and she used it to buy the house; that ’ s what you claimed, wasn ’ t it? Mr. Superstein - A In my mind that was a logical progression. [ 52 ] It becomes clear that Mr. Superstein is claiming that his assumptions are based on documentation and that his conclusion that the funds were taken by Mr. Kwan and given to Mrs. Kwan, who then invested them in the Home, are the result of not a frivolous assumption but rather “ a logical progression. ” [ 53 ] It is also clear that Mr.

Superstein has said, at Line 18 and 19 - “ I know and it ’ s since been confirmed that all of Annie ’ s money was received from Steven. ” No matter how I read the portion of Mr. Superstein ’ s examinations for discovery produced to me whether from the first action or the second action, Mr.

Superstein is saying that his belief that Steve Kwan took money from the joint venture, failed to account for the money, gave the missing money to Annie Kwan, who then bought a house with those funds, is based on what he claims to be documentation and logical reasoning. [ 54 ] In my view, that evidence and the affidavit evidence of Leo Superstein meet the threshold to show that there was no improper purpose of any kind: 1. in filing the Action No. 1 Statement of Claim, 2. pursuing Action No. 1, 3. continuing Action No. 1, and

3. filing and continuing the lis pendens against the Home. [ 55 ] In most of these applications for

summary judgment the person in the position of the Respondents will tender an affidavit which gives evidence of the improper purpose. However, the Respondents in this application have not filed any affidavit that would lead me to conclude either that the Statement of Claim was filed for an improper purpose or that Mr. Superstein had no basis for his belief. Certainly, no affidavit has been filed saying that the documentation will show that the sums advanced by Mr. Superstein to the joint venture were either not appropriated by Steve Kwan, or if appropriated by Mr.

Steve Kwan were accounted for as an expense associated with the venture. [ 56 ] In my view that failure results in there being no merit to the allegations of abuse of process, improper filing of the Statement of Claim or improper filing of the lis pendens . It also means that the Plaintiffs have failed utterly in showing any evidence whatsoever that there was not reasonable cause to file the lis pendens . The result is that paragraph 6 through 13 of the Action No. 2 Amended Statement of Claim are struck as pleading an action which is doomed to failure. 2.

Defamation [ 57 ] The Action No. 2 Amended Statement of Claim at paras. 14-16 set out a cause of action for untrue statements published by: 1. a August 30, 1995 letter to Norinco, and 2. a May 15, 1996 to Hang Seng Bank Limited. [ 58 ] The specific text is: 14. Further, the Defendant, Superstein published, or caused to be published, false statements in correspondence to other business associates of the Plaintiff, Steve, as follows: (

a) On August 30, 1995, the Defendant, Superstein stated in correspondence to Norinco that: “ We have a similar unfortunate situation with Steve Kwan. He is responsible for losses in our company of over $350,000.00 CAD. The company is in serious financial difficulty. You and I have a common purpose and I will assist in any way I can on the understanding that Mr. Kwan misrepresented his position with our company to you and many others, and we will not be held financially responsible for his actions. ... I have not spoken with Steve Kwan for many months. ” (

b) On May 15, 1996, the Defendant, Superstein stated in correspondence to Hang Seng Bank Limited that: “ I was involved with Steve Kwan Shu Chi in this company. Mr. Kwan committed fraud against me and I am in the process of an audit by Revenue Canada audit department in connection with this company. ” 15. The statements and innuendos were discovered by Steve and Annie on or about September 22 nd 2003. Further, the statements and innuendoes were fictitious, all of which the Defendant, Superstein, upon reasonable inquiry could have discovered. 16.

The untrue statements published by the Defendant, Superstein, were calculated to, or had the effect of lessening the regard members of public and the Plaintiff, Steve ’ s peers had or were likely to have of the Plaintiff. The allegations made by the Defendant, Superstein impugned the honesty and the integrity of the Plaintiff s in ___ his business and personal affairs.

The Plaintiff has thereby been defamed and has suffered damage, all of which is claimed from the Defendant, Superstein. [ 59 ] The Applicants have not evinced any evidence in response to these allegations to indicate that the letters were not published. They have not shown that these were privileged communications. The Applicants only plead truth as a defence. It is clear from the letters that if the allegations are untrue, they are defamatory, and if they are defamatory, damages are presumed.

Also, the Applicants have not been able to show that by the exercise of reasonable care or making reasonable inquiries, the Kwans could have found out about the

statements in the letters prior to September 22 nd 2003 when they were disclosed in the affidavit of the documents filed by the Plaintiffs in the first action. [ 60 ] Paragraphs 14 through 16 of the Action No. 2. Amended Statement of Claim are not struck as they do not set out a cause of action which the Plaintiffs cannot prove. 3. Bad Faith [ 61 ] Paragraph 18 of the Amended Statement of Claim is struck because the Plaintiffs allege bad faith or lack of good faith. Again, there is no evidence of that.

I realize that in Paragraph 18(a), the statement is made that the Defendants made “ reckless and improper allegations against the Plaintiff, Steve ” . If that is a reference to the defamation action founded on the two letters, it has already been plead. If that allegation is a general reference to Action No. 1, I have already found there is no evidence adduced of bad faith. 4. Mental Distress [ 62 ] Paragraph 19 of the Amended Statement of Claim reads as follows: 19.

As a result of the Defendants ’ malicious conduct, abuse of civil process, defamation, failure to act in good faith and breach of statute ______________, the Plaintiffs have suffered financially ____________ and have suffered great mental distress due to the Defendants ’ actions. [ 63 ] I think it is permissible for the Plaintiffs to allege mental distress due to the defamation, and accordingly I would allow the Plaintiffs to amend the paragraph 19 to state that as a result of the Defendants ’ defamation, the Plaintiff Steve (who is the only one impugned) has suffered great mental distress. E.

Remoteness of Damages [ 64 ] Paragraph 20 of the Amended Statement of Claim reads as follows: 20. As the result of the actions of the Defendants as described aforesaid, the Plaintiffs, and each of them have incurred damages , including but not limited to the following: (

a) An increase in the interest rate on the Property; (b) _____________________________________ (

b) Business losses, including shutting down businesses operated as “ Ming ” in China, in the amount of $1,500,000.00 dollars; (

c) Other business losses in the amount of $1,000,000.00 dollars; and (

d) Such further and other losses as the Plaintiffs are able to prove at trial.

[ 65 ] The Applicants dispute (a), (

b) and (c). The Applicants requested particulars of the damages alleged. The Respondents provided the following additional and more detailed allegations: a. The Plaintiffs “ were denied a home equity loan for $400,000 ” which “ completely shut down the cash flow that was relied upon for Mr. Kwan ’ s business ventures in China, Hong Kong and the United States of America ” ; b. The Plaintiffs “ were unable to sell their house to pay existing debts or to obtain the needed cash flow ” ; c. Financial losses due to the closure of four companies; d. Loss of personal income due to the closures of all four companies; e.

Loss of cash investments; f. Loss of project income of the four companies; and g. Increase in the interest rate on the Home in the amount of $9,625.00. [ 66 ] In my view, the claims are too remote to be attributed to the Defendants. The Plaintiffs ’ ambiguity and their cash flow difficulties and the estimated losses of various companies cannot be blamed on the filing of a lis pendens . However, with respect to the action for defamation, no evidence has been placed before me that at least some of these alleged injuries do not flow from the alleged defamation.

I will not strike the claim for damages as it relates to the remaining defamation action. IV. Conclusion [ 67 ] The defamation action by Steve Kwan against Leo Superstein remains. All other claims against the Defendants are struck on the basis of issue estoppel and for the absence of and factual foundation. [ 68 ] Superfly Inc. and Superior Hotel Inc. are not the subject of any remaining claims and are no longer parties to this action. [ 69 ] Annie Kwan has no claim against the remaining Defendant, Leo Superstein.

She too is no longer a party. [ 70 ] The Defendants have argued that Leo Superstein was not a party to the initial action and the claims against him should be struck and he too should be removed as a party. I believe the short answer to that is that Mr. Superstein is alleged to have authored the two letters which allegedly defamed Steve Kwan and therefore he is correctly named and remains as the sole Defendant in the defamation action. [ 71 ] The parties may speak to costs by appointment. Heard on the 5 th and 6 th days of May, 2011.

Dated at the City of Edmonton, Alberta this 20 th day of May, 2011. R.P. Marceau J.C.Q.B.A. Appearances: Murray L. Engelking, Engelking Wood for the Respondents Lara M. Levesque, Ogilvie LLP for the Applicants