David M. Gottlieb Professional Corporation v. Nahal, 2011 ABQB 355

Court of Queen ’ s Bench of Alberta Citation: David M. Gottlieb Professional Corporation v. Nahal, 2011 ABQB 355 Date: 20110527 Docket: 1001 11623 Registry: Calgary Between: David M. Gottlieb Professional Corporation and Swiss Investments Inc. Respondents (Plaintiffs) - and - Satpal Singh Nahal Appellant (Defendant) _______________________________________________________ Reasons for Decision of the Honourable Mr. Justice P. R. Jeffrey _______________________________________________________ [ 1 ] Nahal was noted in default in this foreclosure action.

An Order Nisi and later an Order Confirming Sale were issued by Masters in respect of one of the parcels of land securing the subject loan. Just a few days before the scheduled closing of the judicial sale to a third party purchaser of that mortgaged property, Nahal applied to the Master to have the noting in default set aside. He applied because it had only recently come to his attention that the underlying mortgage might have been unenforceable as a consequence of the Limitations Act , R.S.A. 2000, c. L-12.

[ 2 ] The Master said in respect of that application: ... if an Order Nisi is not appealed, a defendant cannot later raise defences which should have been raised prior to the Order Nisi being granted. ... what is the utility of setting aside the noting in default in the circumstances of the unappealed Order Nisi? I see none at this juncture. So, this application to set aside the noting in default is premature, in my view. Practically speaking, it should be heard along with an appeal of the Order Nisi (and the Order Confirming Sale), if Mr.

Nahal can obtain an order extending the time to appeal the Order Nisi or the parties can otherwise agree in the bigger picture to have this appeal heard. It is possible that Mr. Nahal may be able to launch an appeal of the Order Nisi and ultimately be given leave to file a defence. [ 3 ] Nahal now appeals the Master’s decision, alleging the application to set aside the noting in default was not “premature” because, says Nahal, the Master was not without jurisdiction. He also appeals the Order Nisi and the Order Confirming Sale.

He then asks, regardless of the foregoing, that I set aside the noting in default and permit Nahal to file a Statement of Defence in this action. Background [ 4 ] On September 5, 2006, the Plaintiffs, David M.

Gottlieb Professional Corporation and Swiss Investments Ltd. (the “ Respondents ” or the “ Mortgagees ”), loaned the Defendant Satpal Singh Nahal (“ Nahal ”, the “ Appellant ” or the “ Mortgagor ”) $800,000 in consideration of a covenant to repay the principal and interest in the manner and by the dates then specified, in consideration of mortgage security (the “ Mortgage ”) on two parcels of land in the vicinity of Calgary, Alberta, a 40 acre parcel and a 70 acre parcel, and in consideration of other related covenants. [ 5 ] In July 2008 the Mortgagees loaned an additional sum of $1,9250,000 to Nahal, secured by at least four parcels of land, including the same 40 acre parcel already securing the $800,000 loan. [ 6 ] Nahal made no payments on the Mortgage after May 1, 2007.

It matured and the full amount was due to be repaid on October 1, 2007. The Mortgagees say they were satisfied that there was sufficient value available to them in the lands securing the $800,000 loan and so took no steps to demand payment or to enforce the security that is the subject of this action. They did not consider such efforts warranted in the circumstances.

Among other things, the Mortgagees say that they and Nahal had been in regular contact regarding this and the other debts Nahal owed them, Nahal exuding confidence that there was ample equity in the mortgaged lands to satisfy the Mortgagees. [ 7 ] In late 2009 the Mortgagees alleged default on the more recent $1.925 million mortgage and commenced legal action. They proceeded to foreclose on the 40 acre parcel (and the other three parcels) securing it. Pursuant to a March 2010 Order Nisi/Order for Sale a 90 day redemption period was set. It ran without Nahal redeeming.

The various parcels of land were listed for sale and, near the end of a second 90 day period, an offer of $1.9 million was received on the 40 acre parcel.

The Mortgagees preferred to commence a foreclosure action on the older (and higher priority) registration on the title to the 40 acre parcel in an effort to utilize the existing offer to sell the 40 acre parcel pursuant to the older $800,000 loan. [ 8 ] The Mortgagees filed a Statement of Claim August 5, 2010, to recover the amounts alleged to be then outstanding under the $800,000 Mortgage (allegedly $1,237,500 as at August 1, 2010) by, among other things, judicial sale (the “ Claim ”). [ 9 ] The Claim was served personally on Nahal August 9, 2010, by David Gottlieb, a lawyer and the principal of one of the plaintiffs, David M.

Gottlieb Professional Corporation. Gottlieb asked Nahal to consent to a court order that would permit the 40 acre parcel to be sold for $1.9 million. Nahal responded that he wanted to obtain legal advice before consenting to anything. There is no evidence that this desire of Nahal’s was communicated to the Mortgagees’ counsel. In any event, Nahal did not consent and there is no evidence that he responded further in any way.

[ 10 ] Nahal was noted in default August 24, 2010, and the Praecipe to Note in Default was filed August 25, 2010. [ 11 ] Nahal says: “I first tried to retain Michael Bondar as my legal counsel. After a few weeks he informed me he was unable to represent me.” It is not clear whether this effort and the ensuing two weeks were before, overlapping the date, or after Nahal was noted in default. [ 12 ] Nahal also said that he pursued other counsel but could not secure counsel “due to potential conflicts.” [ 13 ] The Mortgagees applied to foreclose on the 40 acre parcel, returnable August 31, 2010.

On September 2, 2010, Nahal retained his current counsel, who now advances his three appeals. The Mortgagees acceded to a request to delay the application; the matter was set down into Masters’ Chambers on September 9, 2010. [ 14 ] On September 9, 2010, Nahal’s counsel asked that the requested order be approved but stayed for two weeks so that he could order and receive appraisals plus “sort out the various issues” on the file.

The Mortgagees opposed a stay but said it would in any event be about two weeks before they would be able to “bring forward” their existing offer for the 40 acre parcel and that Nahal could bring any evidence forward then that the parcel was worth more.

Nahal’s counsel said to the Master “And I’m fine with that.” [ 15 ] The Master approved that approach, set the next appearance for September 23, 2010, and advised Nahal’s counsel that if Nahal was “going to be making suggestions about the value of the property, there better be an appraisal in hand.” As the Master proceeded to determine the various deadlines for the associated steps, Nahal’s counsel said: I believe two weeks should provide us enough time to resolve the issues.

I do have an issue with deeming the amount owing on the mortgage now, because just on a quick review of the interest calculations, I’d like to first speak with my friend about that. Then if need be we can have examinations on that point. But I have no issues with the process. [ 16 ] The Master granted an Order Nisi/Order for Sale and Order for Judicial Listing of Property (the “ Order Nisi ”). Its first paragraph states: 1.

The issue of the amount owing under the Mortgage shall be adjourned to September 23, 2010 but in the interim, the mortgaged lands... shall be listed for sale as hereinafter provided. [ 17 ] The Order Nisi set a one-day redemption period and the redemption amount as: 2. ... the amount owing under the Mortgage and costs to the date of payment, together with any sums which the Plaintiff shall pay to protect its security, with interest on all such sums from the date of payment at the rate set out in the [M]ortgage... [ 18 ] The Order Nisi set the listing price at $1.9 million. [ 19 ] The parties returned September 23, 2010.

The Mortgagees brought four offers to the Court for consideration. Nahal opposed any sale and provided an affidavit of value setting out a fair market value of the 40 acre parcel of $3.9 million. One of the counsel apparently suggested to the Master that a closed bid process might increase the amounts bid for the property; Nahal’s counsel indicated that if that approach were followed he may not oppose the sale. The closed bid process was undertaken.

[ 20 ] The parties returned before another Master on September 27. Two bids were received, both for higher amounts. The Mortgagees asked the Master to approve a sale; Nahal wanted all bids rejected and the property listed for a higher amount. The Master invited them back for her decision on September 28, 2010. [ 21 ] The Master rejected Nahal’s request and approved one of the offers (the “ Order Confirming Sale ”). She then said: Counsel, that leaves outstanding the question of the amount owing under the mortgage. Could someone remind me where that stands?

Counsel for the Mortgagees responded: The question is really one of a simple versus a compound interest calculation which would have seemed to be an easy question from the reading of the mortgage, but it’s a little more complex than [Nahal’s counsel] and I both thought. But it’s a matter of a difference of $52,000. The deal doesn’t close for two months, we’ll work it out in the meantime. If necessary, we’ll hold back that money until it’s heard in a special or we can agree.

The Master asked counsel for Nahal: “That’s fine?” to which he responded: “That’s fine.” [ 22 ] The Order Confirming Sale approved the sale to one of the final two bidders of the 40 acre parcel for $2.3 million, payable on or before November 29, 2010.

It directed the allocation of the purchase price to, first, the listing agent’s costs, second, any outstanding taxes and condo fees, third, the mortgage holder registered ahead of the Mortgage on the title, fourth, the amount owing under the Mortgage “in full including interest at the mortgage rate” and costs, and fifth, any remainder “paid into court until further order.” [ 23 ] With respect to the dispute regarding the appropriate interest calculation, clause 5 of the Order Confirming Sale states: 5.

The dispute with respect to the calculation of interest on the Plaintiffs’ mortgage shall be resolved either by agreement between the parties or failing agreement, by Court Order. and, of course, the Order Confirming Sale further states, at clause 8: 8. Any interest of [Nahal] in the mortgaged lands is extinguished. [ 24 ] On November 2 Nahal testified by affidavit that: After my lawyers have had a chance to finally review all of my financial records and sort through the binders of documents, they advised me that I have a defence to this action pursuant to the Limitations Act .

Had I been aware of this defence earlier or had my previous legal counsel informed me of this, I would have filed a Statement of Defence. [ 25 ] On November 2, 2010, Nahal applied to be heard by the Master on November 4, 2010, to set aside the noting in default and to abridge the minimum time that must ordinarily run from service of the application to its hearing.

[ 26 ] On November 22, 2010, the Master heard the parties but declined to consider the application; excerpts of her reasons are repeated in paragraph 2 above. In their written submissions to me the Mortgagees say that the Master “denied [Nahal’s] application to set aside the Praecipe to Note in Default.” I disagree with that characterization. The record is clear that the Master did not consider the application to set aside.

Rather, she indicated it was “premature” and left it open to Nahal to proceed properly and return. [ 27 ] On November 23, 2010, Nahal applied to appeal the Master’s decision that the application had been brought prematurely, along with an appeal of the Order Nisi and of the Order Confirming Sale, setting the three appeals returnable in morning chambers on November 25, 2010, again on an expedited basis. [ 28 ] The presiding Justice in Chambers that morning expressed dismay that an appeal from the Master was brought in morning chambers and further that it was brought without the filing of the record, even though appeals from Master’s decisions are appeals on the record.

He declined to hear the matter. [ 29 ] Nahal’s counsel then asked for a stay so the land would not transfer, pursuant to the Order Confirming Sale, on or before November 29, 2010. The Mortgagees opposed the request saying, in respect of any prejudice that may flow from the granting of a stay (and the loss of the sale of the 40 acre parcel), that the 40 acre parcel was the only property for which there were any offers, Nahal had no money and was not even making the interest payments. They also said to the Chamber’s Justice: “It’s only money, Sir.

There’s lots of room to set off against a final mortgage that won’t be paid off.” Perhaps that is why the Chamber’s Justice would not consider further a stay of the Order Nisi and Order confirming Sale. [ 30 ] The Chambers Justice declined to stay the foreclosure process, would not interfere in any way with the Order Nisi and clarified his decision on the appeal of the Master’s decision to not hear the application to set aside the noting in default: I’m refusing to hear you today because I don’t have any material. I’m not – I’m not dismissing your appeal, I’m not doing anything.

If you want to try to get an expedited date for the appeal, feel free. We’re not going to deal with it today ... Then there ensued the following exchange between Nahal’s counsel and the Chambers Justice: Counsel: So the application is adjourned, I gather? Court: Your application is refused. I’m not going to hear it today. Counsel: Well, okay, but there is – Court: But I’m not – Counsel: You’re just not going to hear it, that’s the – Court: That’s right. Counsel: – that’s the decision? Court: Okay.

Counsel: Okay. Thank you, Sir. [31] The formal Order endorsed by the Chambers Justice, filed two months later, however, states: 1. [Nahal’s] appeal of the Orders granted in Masters’ Chambers on September 9, 2010, September 28, 2010 and November 25, 2010shall be adjourned to a Special Chambers Application. I assume the reference to November 25 was intended to be November 22. [32] On December 6, 2010, a Master rendered a further order to distribute the sale proceeds.

The Master directed that the principalamount of the mortgage and costs be disbursed from those held by the Mortgagees’ counsel, a sum sufficient to cover the maximumamount of interest accruing thereon be retained by them “until such time as [the Master] orders the method of calculation to be used fordetermining the amount of interest owing under the mortgage” and the remainder paid in to Court. Application to Admit Fresh Evidence [33] Nahal swore a further affidavit March 29, 2011, which was then filed along with an application requesting that it also beconsidered as additional evidence on these appeals.

Representatives of each of the corporate Mortgagees filed responding affidavits inApril 2011, though without any application to the Court for their admission. At the oral hearing they said they opposed the admission ofNahal’s additional evidence but, if the Court granted Nahal’s application to adduce the new evidence, then they wanted their respondingnew evidence admitted as well. [34] The Court may receive further evidence in appeals on the record from a decision of a master; Rule 6.14 (3), Alberta Rules ofCourt, Alta. Reg. 124/2010, states: 6.14

(3) An appeal from a master’s judgment or order is an appeal on the record of proceedings before the master and, if the judgepermits, may also be based on new evidence that is significant enough that it could have affected the master’s decision. [35] This Court recently considered the test for admitting new evidence under this Rule: Heritage Station Inc. v. ProfessionalStucco Inc., 2011 ABQB 18. I agree with the conclusions of Wilson, J. therein that (

i) the test “is essentially the same as R. v. Palmer” (SCC), [1980] 1 S.C.R. 759 , at 775, and (ii) in respect of the fourth step in the Palmer test, the threshold is “could” not“would.” See also in this regard: Royal Bank of Canada v.

Place, 2010 ABQB 733, at paragraph 52. [36] That test then is, when applied to appeals from a Master, that the evidence: (1) should not generally be admitted if, by due diligence, it could have been submitted to the Master; (2) must bear upon a decisive or potentially decisive issue to the application to the Master; (3) must be credible in the sense that it is reasonably capable of belief; (4) if believed, when taken with the other evidence adduced could reasonably be expected to have affected the Master’s result. [37] The Court may exercise some flexibility in its application of the first branch of the test.

This is consistent with its wording

(“should not generally be admitted if”). [38] The emphasis in Rule 6.14(3) appears to be more on the fourth branch of the test: “may also be based on new evidence that issignificant enough that it could have affected the master’s decision.” [39] Paragraphs 6 and 8 of the Nahal additional affidavit refer to events in October 2010. These references satisfy me that theevidence was available by due diligence before November 22 and could have been adduced prior thereto for the Master’s considerationat the November 22 hearing.

The remainder of the affidavit evidence is either explanatory context for paragraphs 6 and 8 or is otherwiseinformation that was readily available before November 22. Apart from any exercise of my discretion to overlook this, the first branch ofthe test is not met. [40] If I were to admit the additional evidence of Nahal, fairness would dictate that I also admit the additional evidence of theMortgagees.

They had no cause to present to the Court prior to the November 22 hearing the additional information contained in theiraffidavits, since it is entirely responsive to Nahal’s March 29, 2010, affidavit evidence. [41] Had I admitted all the additional evidence I would have given no weight to the Nahal assertion at paragraph 6 of his affidavit.I do not find it credible, or even reasonably capable of belief, in light of the uncontroverted affidavits of the Mortgagees (Germiquetaffidavit at paragraph 5 and Gottlieb affidavit at paragraphs 4 and 5 plus exhibits G and H), supported as they are further bycorroborative documents.

Therefore, the third branch of the test is not met. [42] Finally, the Master would not have varied her decision on November 22 if this additional evidence were before her. Shedeclined to consider the application on jurisdictional grounds; this would have remained her conclusion even if the additional evidencewas before her. [43] Therefore I do not admit any of the Nahal additional evidence. Fairness does not dictate otherwise in these circumstances:Hubert v. Outlaws Group Inc. (2007), 425 A.R. 327, 2007 ABCA 352, and Don Reid Upholstery Ltd. v. Patrie (1995), (AB KB), 173 A.R. 233 (Q.B.).

No request for the admission of the Mortgagees’ additional evidence is therefore triggered. Standard of Review [44] An appeal of the decision of a Master of this Court is an appeal on the record: Rule 6.14(3). The standard of review on suchappeals was recently summarized by Macklin, J. of this Court, in Janvier v. 834474 Alberta Ltd., 2010 ABQB 800, at paragraph 18, asfollows: In

summary, the standard of review on a decision from the Master on a question of law is correctness. The standard of review for factsaccepted by the Master or factual inferences drawn by the Master from the evidence is reasonableness. The finding must amount to apalpable and overriding error. The imputed error must be plainly identified and must be shown to have affected the result. On a questionof mixed fact and law, if the principle of law cannot be extricated from the question, then the standard of review is again one ofreasonableness only to be interfered with if a palpable and overriding error can be shown.

If the principle of law can be extricated fromthe question, then the standard of review on the principle of law is correctness. [45] Here there is no applicable standard of review for the appeals of the Order Nisi and of the Order Confirming Sale since nogrounds of appeal were actually advanced for those appeals. No error of any kind is alleged. There is nothing to review. That is discussedfurther below. [46] For the appeal of the Master’s treatment of the application to set aside the noting in default, the standard is correctness.

TheAppellant says the Master erred in concluding that she did not have jurisdiction to consider the application. The scope of the Master’sjurisdiction is a question of law and on such questions the Master must be correct.

Appeals of the Order Nisi and of the Order Confirming Sale [47] Nahal did not raise any specific ground of appeal in his Notice of Appeal of the Order Nisi – the Notice of Appeal was silenton just what were the grounds of appeal. Nahal did not allege any particular error on the part of the Master nor was any ever advanced inoral argument.

The same was true of the appeal of the Order Confirming Sale. [48] Of course Nahal filed the appeals of the Order Nisi and of the Order Confirming Sale after the Master explained that it waspremature to ask the Court to set aside the default when neither the Order Nisi and Order Confirming Sale were appealed. The very nextday Nahal set down the appeals of all three decisions for hearing on short notice in morning Justice chambers.

Nahal was refusedaudience and then was denied a stay pending the hearing of the appeal of the Order Confirming Sale. [49] Nahal did suggest before me that the Order Nisi was not actually a true order nisi in that it was not a final judgment. Nahalsays it was merely an interlocutory order because it failed to declare what was owing under the mortgage. But that assertion was raised inthe context of the appeal of the Master deciding to not set aside the noting in default because the Order Nisi was not under appeal.

Nahaldoes not suggest that, because the Order Nisi was interlocutory that the Master erred when actually granting it, or raise that argument as aground of appeal of the Order Nisi. This was appropriate given that Nahal consented to the process by which the interest determinationwas deferred (and by which more time was accorded him to return with evidence of value).

Nahal was an active part of the consensualdeferral of any declaration of value, which he says resulted in the Order Nisi being interlocutory rather than final. [50] Thus the Order Nisi and the Order Confirming Sale were not directly impugned in any way by the Appellant. Nahal does notraise any ground of reviewable error of either order. [51] In any event, the transfer of the 40 acre parcel to the successful bidder has since concluded and will not now be reversed,since the equity of redemption has irrevocably terminated. Furthermore, subsequent rights have since intervened. See: Drisdelle v.

AbleHoldings Ltd. (1981), 1981 ABCA 4 , 31 A.R. 1 (C.A.), and Morguard Mortgage Investments Ltd. v. Faro DevelopmentCorp., (AB CA), [1975] 1 W.W.R. 737 (Alta. S. C. A. D.). [52] Therefore the appeals of the Order Nisi and of the Order Confirming Sale necessarily fail. Appeal of the Decision to Not Set Aside the Noting in Default [53] Nahal says the Master erred in concluding she did not have jurisdiction to consider the application to set aside the noting indefault if the Order Nisi was not appealed.

He says the order that was granted, though called an order nisi, was in fact not a true ordernisi and that therefore she actually did have jurisdiction. He asks that I so find and remit the matter back to the Master to now considerthe application to set aside the noting in default or, if I am so inclined, just decide that application now without sending it back. In thealternative, if the Master did not have jurisdiction, Nahal asks me to exercise my discretion under Rule 9.15(3) and set aside the noting indefault.

To that end Nahal addressed the three-part test of setting aside a noting in default and argues all three parts of the test aresatisfied. [54] The Mortgagees say the Order Nisi was final, the Master was correct and the appeal should be denied. Regarding Nahal’sargument in the alternative, the Mortgagees maintain that Nahal has not satisfied the test for the noting in default to be set aside. [55] Certainly if the Order Nisi was final then the Master was correct in her conclusion.

Price and Trussler state, in MortgageActions in Alberta (Calgary: Carswell, 1985), at p. 132: If it is not appealed, a defendant cannot later raise defences which should have been raised prior to the order nisi being granted.

Nahal does not appear to challenge that proposition of law. He says instead that it did not apply in this case. The argument that the OrderNisi was merely interlocutory and not final was not presented to the Master. [56] At the November 22 and 25 Court appearances (and prior) Nahal’s objective was halting the judicial sale process and eitherholding on to the 40 acre parcel or seeing it sold for closer to what he believed to be its true value. He believed it was worth far morethan would be realized via the judicial sale underway. [57] That judicial sale to a third party has since concluded.

In oral argument Nahal’s counsel acknowledged that the 40 acre parcelwould no longer be able to be redeemed by Nahal. He acknowledged that there was no prospect of him recovering the land now that thejudicial sale concluded, since his Limitations Act defence was not raised in defence of the Claim or at any of the attendances before theMasters that dealt with that sale. [58] This acknowledgement was appropriate. Nahal, with or without representation of counsel at the time, acquiesced to the Claimgoing undefended.

Then, with counsel, he agreed to the process before the Master at the Order Nisi stage (see, for example, paragraphs14 and 15 above) and to the process before the Master at the Order Confirming Sale stage (see, for example, paragraphs 19 to 21 above). [59] Nahal recognized that therefore he will not be able to get the land back, but he maintains that this should not preclude himfrom getting his money back – of recovering the monies lost from judgment entered on an unenforceable mortgage.

At least, it wasargued, he should have the opportunity to advance that argument in Court by the opening up of the noting in default for the filing of adefence.

Nahal therefore was now just wanting the default opened up so that a defence could be filed; he indicated that the consequencesof any successful defence, if it got that far, would not involve the land but some reversal of the economic loss. [60] The Mortgagees appear to have already expressed a preference for this outcome over the then alternative, disrupting thepending judicial sale, when on November 25, 2010, they represented to the Chambers Justice in resisting a stay of that judicial sale: “It’sonly money, Sir.

There’s lots of room to set off against a final mortgage that won’t be paid off.” [61] But the Mortgagees say that “the Praecipe to Note in Default, the Order Nisi and the Order Confirming Sale are inextricablylinked together, each forming part of a series of related and dependent transactions.” They then argue that “failure to take action to setaside a default judgment and acquiescing in the sale of the property amounted to an election to accept the default judgment as binding”and rely on Royal Trust Co. v. Spillers Canada Milling Co., (AB CA), [1931] 4 D.L.R. 430 (Alta.

S.C.A.D.), at p. 434,which states: In my opinion the conduct of the respondents in not taking steps promptly to set aside the judgment, but on the contrary in effectadopting it, certainly acquiescing in it, by allowing the property to be offered for sale in pursuance of it amounted to an election to treat itas a binding judgment and after the plaintiff has gone to the expense of extensive advertising they are estopped from now maintainingthat it is not a binding judgment and the learned Judge should have so held. [62] However, the facts in that case are quite different.

Most notably it was not a case in which the mortgagor after entry of thedefault came to the realization that a defence to the original claim existed and upon that realization immediately instructed counsel toapply to have the noting in default set aside. In Royal Trust Co. there was nothing so immediate. A long series of steps transpired (seepp. 433-4 thereof) in pursuit of a sale of the subject property and no explanation appears to have been offered for not having earlierapplied for leave to defend.

There a sale had not yet been reached, or even an offer, though 9 months had transpired since the filing of theclaim. Here the Mortgagees were proceeding on a fast track with the listing, two rounds of offers and a sale approved just over a monthfrom the noting in default. The actual sale concluded in just over 3 months from the noting in default.

Further, here it cannot be said thatNahal “acquiesced in the sale of the property.” He resisted any sale at the price tendered, at the prices offered, and, very late in the day,also on the basis that the noting in default should be opened up. [63] In any event, that case does not stand as authority that all failures to act to set aside a default plus acquiescence through a saleprocess preclude a setting aside of a noting in default.

Rather, it is authority that failure to take steps promptly may be fatal to anyapplication to set aside a default, now understood to be part of the three-part test for any setting aside of a noting in default (seeparagraph 68 below). [64] I need not decide whether the unappealed Order Nisi was interlocutory or final. If the Mortgagees are correct that it was final,

and therefore the Master correctly declined to hear the application to set aside the noting in default for want of jurisdiction, then theentire process would end without Nahal ever having the Court consider the merits of his argument on the setting aside. At least, that isthe result the Mortgagees urge upon me. At each step of the way errors on the part of Nahal or those representing him have underminedany limitations defence he may have and have undermined his desire to have this Court turn its mind to whether or not the Claim shouldbe re-opened for the filing of a defence.

Fairness militates in favour of Nahal’s actual application being heard at some stage. [65] As a consequence, if I concluded that the Order Nisi was final, I would nevertheless exercise any discretion to turn my mindto the request to set aside the noting in default as if it was a fresh application under Rule 9.15(3).

Nahal is entitled to have this Courtconsider whether or not the test has been satisfied for the noting in default to be set aside and, if so, the Claim opened up for the filing ofa defence, despite all Nahal’s procedural errors in bringing that request to the Court. [66] If, on the other hand, I concluded the Order Nisi was not final and that the Master did have jurisdiction to hear the applicationto set aside the noting in default, rather than then remit it back for the Master to now do so, putting the parties to the associatedadditional expense and delay after having already fully presented and argued the merits of their respective positions on that questionbefore me, I would exercise my discretion to consider and rule on the setting aside application now and not remit it to the Master. [67] Thus, whatever my conclusion on the question of whether the Order Nisi was final or interlocutory, the practical effect willbe the same.

Therefore I will now consider the application to set aside the noting in default on its merits. Whether to Set Aside the Noting in Default [68] For the Court to set aside a noting in default an applicant must show: 1. an adequate explanation as to why a statement of defence was not delivered; 2. whether there was any delay in applying to set aside the default and, if so, whether there was a satisfactory explanationaccounting for that delay; and 3. whether the material discloses a meritorious defence, that is, a triable issue of fact or law. See: Hubert v. Outlaws Group Inc., at paras. 9ff, Wilson Arches Ltd. v.

Sayers, 1973 ALTASCAD 117 , [1974] 2 W.W.R. 277(Alta. C. A.), at p. 279, and Goulet v. da Silva (2002), 313 A.R. 32, 2002 ABQB 369. [69] Nahal need not satisfy me that he will ultimately succeed on his limitations defence, just that it is meritorious – that it raises atriable issue of fact or law. In Oxford Properties Group Inc. v. Lymer, 2004 ABQB 196, this Court expanded the scope of this branch ofthe test to “a possibly reasonably meritorious defence.” In my view, based on the evidence before the Court, Nahal’s evidence easilydiscloses a possibly reasonably meritorious defence.

Further, I am satisfied it raises triable issues, such as the

interpretation andapplication to these circumstances of sections 3, 8 and 9 of the Limitations Act. [70] I am further satisfied that the delay here was relatively nominal or “mere” as it has been described in some cases. “Meredelay will not be a bar to the application unless an irreparable injury will be done to the plaintiff or the delay has been wilful”: WilsonArches, at p. 279; Hubert, at para. 9. The delay here certainly was not wilful and the Mortgagees have not proven any irreparable injuryto setting aside the noting in default for the filing of a defence simpliciter, as is now proposed by Nahal.

The Mortgagees justifiablyasserted injury and prejudice if the judicial sale were somehow reversed. They also say that third parties, such as subsequent registrantson the old title to the 40 acre parcel, will be prejudiced if the default is set aside. In my view the Mortgagees have not shown any“irreparable injury” to any party by Nahal’s latest formulation of his application or any “wilful delay” by Nahal.

[71] Even if not “mere”, the delay prior to the possible defence coming to Nahal’s attention also was attributable to his counsel,not Nahal. In Noble Moving Services Inc. v. Kohn, 2008 BCSC 434, Ross J. remitted a matter to Provincial Court on an application toset aside default judgment.

The judge found that the delay was due to the neglect of counsel retained by the petitioner and stated, at para.25: There are a number of decisions in which courts have concluded that it is appropriate to set aside a default judgment when it appears thatthe failure to act may be that of counsel rather than the party: see Johnston, Ross & Cheng Ltd. v. Taipan Holdings Ltd., [1996] B.C.J.No. 286. In Gill v. Radio India, et al., 2005 BCSC 1298, Madam Justice Russell notes at para. 14 that “[t]he key time to assess thetimeliness of the defendants’ action was once they learned their counsel had failed them”.

In this case, once Nahal learned of the potential failure of counsel he acted without delay. [72] Finally, regarding why a statement of defence was not delivered, Nahal’s explanation is that his counsel never informed himof the possible defence; as soon as he was apprised of this defence he requested the setting aside. But is Nahal not bound by any failureof his counsel? [73] In Winkler Credit Union Ltd. v. Muz and Groening (1982), (MB CA), 47 Man. R. (2d) 254 (C.A.),default judgment had been entered against the defendant. Hall, J.

A. for the majority said, at para. 5: The circumstances under which the default arose are set out at length in Groening’s affidavit and need not here be repeated. It issufficient to say that his then solicitor was not paying attention to his client’s affairs and the solicitors for the Credit Union were notabout to change that situation. Final judgment by default was entered without notice....In any event, the neglect of Groening’s thensolicitor should not be visited upon him. Similar statements have also been made by other courts, for example: Shedler v. Jackson, [1954] O.W.N. 245 (Ont.

H.C.J.), at p. 246;cited with approval in Bank of Montreal v. Dockendorff, 2003 PESCTD 19 , 2003 PEISCTD 19, 224 Nfld. & P.E.I.R. 4; andNational Trust Co. v. Medd, 1998 CarswellOnt 2536. [74] The overriding principle is that there should where possible be a just determination on the real matters in dispute. In thecontext of an appeal of a judge’s decision to not adjourn trial when asked at its very outset, Karakatsanis J. said, in Sprostranov v. StateFarm, (Ont. Div.

Ct.), at para. 12: The Deputy Judge’s decision is understandable given the nature of the submissions made by [the requesting counsel] in the morning.The Deputy Judge was patient and made every effort to be fair and reasonable. I am persuaded however that the interests of justicerequired that the plaintiff be granted the adjournment. Notwithstanding the other considerations, it was necessary to consider theimportant principle that, as far as possible, cases should be resolved on their merits.

The plaintiff should not bear theconsequences of his counsel’s failure to adequately assist the Deputy Judge with respect to why it would be prejudicial to the plaintiff toproceed when this was a first appearance and prejudice to the defendant could have been easily remedied by a costs award. The paralegalMr. Denis ultimately gave sufficient explanation about the nature of the documents and why they were necessary to a just determinationon the merits. [emphasis added] [75] Further, the threshold for this part of the three-fold test is an “adequate” explanation only.

For these reasons I am satisfiedthat Nahal has provided an adequate explanation for not having filed a defence within the required time. [76] Justice Veit, in Don Reid Upholstery, commented that the three-fold test for setting aside a noting in default is a shorthandversion of saying that fairness must always be done and that usually fairness requires proof of the three branches of the test. Theobjective of the rules, she observed, is fairness, not blind adherence to mere formalism.

I put that to Nahal’s counsel in oral argument,asking how the outcome requested could be fair when Nahal admitted (or at least did not contest) the original loan, his default thereof orthe resulting amount of arrears. None of those are disputed.

[ 77 ] I find I must agree with his counsel’s response, that the Limitations Act embodies policy decisions made by Alberta legislators and Nahal should be entitled to assert any benefit that it may accord him. Any considerations of fairness, he implied, do not extend to acting contrary to the legislation. I would note further that the Mortgagees had the same opportunity to be aware of and operate in light of the Limitations Act. And they may have. At this stage a meritorious case has been raised that they may not have.

That issue is for another day, after Nahal files a defence and the parties deal with the merits of the issue. [ 78 ] I will say, however, that it is not without some distaste that I accede to a party asking me to forgive a missed deadline, so that he can try to vanquish another for missing theirs. One is procedural and the other substantive. That is little comfort here; both have the future of the Claim hanging in the balance. [ 79 ] I grant the application of Nahal to set aside the noting in default, but of course without any recourse to the 40 acre parcel.

Nahal has three business days to file his defence and pay the costs I am awarding the Mortgagees below. The three days will run from noon on the day that Nahal’s counsel receives the Mortgagees’ Bill of Costs, for the costs awarded below,a to noon three business days hence.

Any dispute over that Bill of Costs shall not extend the aforementioned deadline; any disputed amount must be paid but shall be held in trust by the Mortgagees’ counsel pending resolution of the dispute. [ 80 ] The Mortgagees are awarded from Nahal their costs on a full indemnity basis from November 2, 2010, to the date of this decision, plus their costs on the same basis for preparation of their Bill of Costs for this award, all times 1½, plus all disbursements.

A costs award on a full indemnity basis is not uncommon when applications of this sort are granted, recognizing that all of a plaintiff’s costs resulted from the omission of the defendant to file a defence within the time permitted in the rules. It would be inequitable after placing the plaintiffs back at risk in the litigation to also burden them with any of the costs flowing from the defendant’s procedural failures, unless the plaintiffs took unreasonable positions or approaches in response. That did not occur here.

The Mortgagees were fully justified and reasoned in resisting Nahal’s attempts to avert the judicial sale by asking that the noting in default be set aside. [ 81 ] The 50% cost increment is awarded because of the materially deficient manner in which these appeals were filed and proceeded, both in November and before me in April. For example it appears that the rules were either not consulted or intentionally ignored. For appeals on the record the criticality of assembling and filing the record should be obvious.

The Court had to expend considerable additional effort to assemble and sort through filed materials to try to discern what was before each Master on each of the three decisions under appeal and then try to piece together the background and context in advance of hearing from counsel. No doubt the Respondents were put to similar needless effort. After doing so in light of the written arguments supplied by the Appellant in the brief, and preparing for the hearing of those arguments, the Appellant then jettisoned many of those written arguments during oral submissions.

In their place other arguments surfaced afresh, necessitating a revisiting by the Court of extensive parts of the Court file after the hearing. This would have been alleviated had the Applicant’s counsel complied with the rules of this Court. [ 82 ] The Notices of Appeal filed actually purport to be accompanied by the component parts of the respective records. That of course left the Court believing they must be somewhere in the file or misplaced elsewhere at the Courthouse, triggering further searches. Those statements, it now appears, misrepresented that the records had been so filed.

The records of the three matters before the Masters were not supplied until after the oral hearing, and then only after the Court made a formal request for what should have been supplied at the outset, at the time of filing the Notices of Appeal. [ 83 ] I should add, in fairness to the counsel advocating Nahal’s positions orally, that he does not appear to have been the one responsible for many or perhaps any of these various deficiencies.

Rather, the focus he brought during oral argument likely salvaged the matter for his firm’s client. [ 84 ] Nahal has five business days from the date of this decision to draw anything to the Court’s attention that might demonstrate he was not so deficient procedurally as described above, in respect of the 50% increment on the cost award, failing which the full cost award described above is final. This five day period runs concurrent with the deadlines earlier mentioned; it does not extend them. Heard on the 29 th day of April, 2011. Dated at the City of Calgary, Alberta this 27 th day of May, 2011.

P.R. Jeffrey J.C.Q.B.A. Appearances: Derek R. Nash and Judy D. Burke Demiantschuk Lequier Burke & Hoffinger LLP for the Plaintiff Arthur H. Wenngatz Caron & Partners LLP for the Defendant