Makar v. Luedey, 2013 ABQB 189

Court of Queen ’ s Bench of Alberta Citation: Makar v. Luedey, 2013 ABQB 189 Date: 20130327 Docket: 1103 01548 Registry: Edmonton Between: Stacey Theresa Makar and Teagan Makar (An Infant) by Her Litigation Representative Stacey Makar Plaintiffs - and - Susan Marie Luedey Defendant Corrected judgment: A corrigendum was issued on April 4, 2013; the corrections have been made to the text and the corrigendum is appended to this judgment. _______________________________________________________ Memorandum of Decision of R. P. Wacowich, Master in Chambers _______________________________________________________

[ 1 ] This is an application by the Defendant seeking to set aside an Order for substitutional service granted on January 9, 2012, and also setting aside service of the Statement of Claim and Amended Statement of Claim (pleadings) on the Defendant.

There is a cross application by the Plaintiffs for an Order validating service of the pleadings on the Defendant Luedey, and alternatively an Order dispensing with service of those pleadings on the Defendant and further, in the alternative, an Order extending the time for service of the pleadings on the Defendant by allowing substitutional service on the Defendant ’ s counsel. [ 2 ] This matter arises from a claim by the Plaintiffs for personal injuries sustained in a motor vehicle accident on February 19, 2009, in Edmonton, Alberta.

On October 2, 2009, they retained counsel (not the counsel for the Plaintiffs in the within application) to bring a personal injury action. The Statement of Claim was filed on January 28, 2011, and amended on February 7, 2011. Within nine months of the accident date, Plaintiffs ’ counsel contacted the Defendant ’ s insurance company to advise them of the claim. [ 3 ] Counsel for the Plaintiffs took a number of steps to locate the Defendant in order to serve her with the pleadings: 1. On January12, 2011, he conducted a demographic search which indicated the Defendant ’ s Edmonton address with no return mail. 2.

On January 12, 2011 he conducted a vehicle registration search with no results. 3. On January 19, 2011, he contacted the insurer to confirm that the Defendant was the registered owner of the vehicle she was operating in the accident. The Insurer confirmed this and also stated that “ it appears that she had moved to Edmonton the previous year from Nova Scotia and has since moved back ” . 4. An investigator was retained to personally serve the Defendant and service was attempted unsuccessfully at the Edmonton address. 5.

The investigator took further steps to locate the Defendant and located the Defendant ’ s father at New Waterford, Nova Scotia. In their telephone conversation the father would not assist the investigator with locating the Defendant. He also contacted an uncle of the Defendant at Sydney, Nova Scotia who indicated that he had no contact information for the Defendant. 6. On September 16, 2011, after the attempted service at the Edmonton address counsel for the Plaintiffs asked the insurer to accept service on the Defendant ’ s behalf.

He indicated in his letter of September 16, 2011: I understand your insured has relocated to Nova Scotia and I do not have a present address for her. Are you in a position to accept service such that you would not at a later date need to deal with the excessive funding required for substitutional service and service ex juris? 7. The insurer advised on September 19, 2011, that they did not have a current address for the Defendant and that it was not their policy to accept service on behalf of an insured.

In any event, counsel for the Plaintiff provided the insurer with a copy of the Statement of Claim on February 23, 2011. 8. On January 9, 2012, counsel for the Plaintiffs obtained an Order extending the time for service of the pleadings until April 28, 2012, and allowing for substitutional service by publishing a notice of the action to the Defendant in the Edmonton Sun newspaper which was published on January 21, 2012. 9.

On February 13, 2012, at the insurer ’ s request counsel for the Plaintiffs provided the insurer with a copy of the Affidavit of Service filed in support of the application for substitutional service. On March 16, 2012, counsel for the insurer advised he had been retained and requested a copy of the substitutional service Order and supporting Affidavit which was provided by March 27, 2012, an entire month before the time for service expired.

10. On May 1 , 2012, counsel for the Defendant indicated that a defence would be filed once he contacted the Defendant and he“believed” she lived in Nova Scotia. It was not until after time for service had expired that counsel for the Defendant raised an issue withthe substitutional service on the Defendant. 11. Contact was made with the Defendant by counsel for the Defendant by e-mail on June 19, 2012. 12. The Defendant deposes that she became aware of the lawsuit when so advised by e-mail by counsel for the Defendant.

There isno indication as to how the insurer’s counsel located the Defendant so quickly. [4] A Land Titles search in Nova Scotia would not have disclosed the location of the Defendant nor would an Albertademographic search. There was no reasonable way that counsel for the Plaintiffs could have determined the exact location of theDefendant. [5] There are two issues before this Court: 1. Is there sufficient evidence to establish that the substitutional service by publication Order was sufficient and, if not,should it be set aside? 2.

If the Order for substitutional service is set aside should the Court grant an extension of time for service of the Statementof Claim? Issue 1: Is there sufficient evidence to establish that the substitutional service by publication Order was sufficient and, if not,should it be set aside? [6] It is, or should be, well known by litigation lawyers in Alberta that a substitutional Order by publication at a location whereit cannot be shown that the party to be served is resident, will be set aside on application. Hansraj v. Ao 2004 ABCA 223 ,[2005] 4 WWR 669.

Clearly, the substitutional service Order granted should “likely be effective”. It cannot likely be effective if there isno indication that the person might have the publication come to their attention. [7] The solicitor for the Plaintiffs had information that the Defendant’s vehicle had Nova Scotia licence plates and was advisedby the insurer of the Defendant and its counsel that it appeared likely that the Defendant was in Nova Scotia.

This was combined withthe fact that it could not be established that the Defendant was in Edmonton. [8] It is important to note that in her Affidavit the Defendant indicates she did not know of the claim until 52 days after thethree month renewal of the Statement of Claim expired. If she had been aware of the claim, the Statement of Claim could have beenrevived and an extension granted to the Plaintiffs within which time to serve the Defendant. MacNeil v. Hodgin (1998) 1998 ABQB 145, 58 Alta. L.R. (3d) 22. [9] Counsel for the Plaintiff hired an investigator to locate and serve the Defendant.

An Investigator went to considerable effortto locate the Defendant but was unsuccessful in doing so. In that situation, it may be that the Court would have granted an Orderdispensing with service. Instead, the Court granted an Order for publication with the hope that someone who knew the Defendant mightbring the matter to her attention. There was no indication whether the Defendant had moved to Nova Scotia even though there was someindication she may have. Based on that information should an Order for substitutional service by publication have been made for NovaScotia?

Where in Nova Scotia? [10] It is noteworthy that counsel for the Plaintiff indicated in his letter to the insurer that he understood the Plaintiff “hadrelocated to Nova Scotia”. Further, he referred to the need for an Order for service ex juris. It is clear he assumed the Defendant was in

Nova Scotia. In my view it would have been best if the Order for substitutional service by publication had been in a Halifax newspaper and also included substitutional service on the father. He was not co-operating but if he had received the pleadings and an Order indicating that service on him constituted service on his daughter it may well have moved the matter along.

Although, it cannot be said with any certainty that this would have taken place, that combined with publication in the Halifax Chronicle would have been a preferred method and in my view better than dispensing with service, the only other reasonable alternative. Also, the insurer would be aware of this service and in position to defend. [ 11 ] Although there is a reluctance to provide for service on an insurer, I am waiting for appropriate circumstances for when this will be granted.

Certainly making the insurer aware of the claim and providing it with a copy of the pleadings helps defeat any argument of prejudice on their part where service is not strictly complied within the lifetime of the pleadings. [ 12 ] The Plaintiffs ’ counsel ’ s best information was that the Defendant was from Nova Scotia and had gone back. Publication in the Edmonton Sun was not likely to be effective and the Order allowing for it is set aside.

Issue 2: If the Order for substitutional service is set aside should the Court grant an extension of time for service of the Statement of Claim? [ 13 ] Should there be an Order validating the service of the pleadings on the Defendant? The Defendant's insurer was aware of the action, was represented by Counsel and the Defendant was made aware of the pleadings 52 days after the period for service provided for by the Rules.

Should service be deemed good and sufficient? [ 14 ] It is submitted by the Applicant Plaintiffs that the Court has inherent jurisdiction to waive irregularities as well as specific authority under Rule 11.27 and 1.5 to cure a contravention, non compliance or irregularity concerning the Rules: 1.5(1) If a person contravenes or does not comply with these rules, or if there is an irregularity in a commencement document, pleading, documents, affidavit or prescribed form, a party may apply to the Court (

a) to cure the contravention, non-compliance or irregularity,

(4) The Court must not cure any contravention, non-compliance or irregularity unless (

a) to do so will cause no irreparable harm to any party, (

b) in doing so the Court imposes terms or conditions that will (

i) eliminate or ameliorate any reparable harm, or (ii) prevent the recurrence of the contravention, non-compliance or irregularity, (

c) in doing so the Court imposes a suitable sanction, if any, for the contravention, non-compliance or irregularity, and (

d) it is in the overall interests of justice to cure the contravention, non-compliance or irregularity.

11.27(1) On application, the Court may make an order validating the service of a document served inside or outside Alberta in a mannerthat is not specified by these rules if the Court is satisfied that the method of service used brought or was likely to have brought thedocument to the attention of the person to be served. [15] According to the Alberta Court of Appeal, courts will generally take steps to cure a procedural defect as long as it does notcause substantial prejudice to the other party.

Further, “no defect should vitiate a proceeding unless, as a result of it, some real possibilityof prejudice to the attacking party is shown, or unless the procedure was so dramatically devoid of the appearance of fairness that theadministration of justice is brought into disrepute”. The test, now codified in Rule 1.4(4)(

a) and made even broader, now requires thatthe steps taken to cure the irregularity “will cause no irreparable harm to any party”. Musgrove v. Nielsen, 2000 ABPC 12 quoting Stachuk v. Nielson (1958), (SK KB), 26 W.W.R. 567 (Sask. Q.B.) atpara. 57 Shah v. Christiansen and Hi Road Construction Ltd., (1992) 1992 ABCA 297 , 135 A.R. 74 (Alta. C.A.) at paras. 27. [16] With regard to Rule 1.5, I do not believe these general provision rules can be invoked where there is a specific rule thataddresses the issue in question. The curing rules do not apply to this substantive issue.

To do that, one must look at Rule 3.27. [17] Rule 11.27(1) does not apply unless the “... method of service ... was likely to have brought the document to the attention ofthe person to be served”. Publication in the Edmonton Journal in this case was not likely to be effective and therefore Rule 11.27 doesnot assist the Applicant. [18] Under the old Rules, the Court did not have the authority to order an extension for service once the time for service hadexpired. Hansraj v. Ao, 2004 ABCA 223 at para. 57.

Rule 3.27(1) is a new rule designed to remedy issues such as that in Hansraj and toallow the court to extend time for service at any time if there are special circumstances. One special circumstance is where an order forsubstitutional service is set aside. Rule 3.27(1) The Court may, at any time, grant an extension of time for service of a statement of claim in any of the followingcircumstances: (

a) if a defendant, anyone purporting to be a defendant, or a lawyer or other person purporting to negotiate on behalf of a defendant,has caused the plaintiff or the plaintiff’s lawyer to reasonably believe and to rely on the belief that (

i) the defendant has been served, (ii) liability is not or will not be contested, or (iii) a time limit or any time period relating to the action will not be relied on or will be waived; [substance of old Rule 11(9)] (

b) if an order for substitutional service, an order dispensing with service or an order validating service is set aside; (

c) special or extraordinary circumstances exist resulting solely from the defendant’s conduct or from the conduct of a person whois not a party to the action.

(2) If an extension of time is granted under subrule (1), no further extension of time may be granted under this rule and rule 13.5 does not apply unless different or new circumstances described in subrule (1) are established to the Court ’ s satisfaction. [(

b) and (

c) and (2) new] [ 19 ] Although the Rules themselves do not set out the grounds for granting an extension under Rule 3.27, Justice Read in Sanderson Estate v. Potter, 2012 ABQB 593 outlined which factors the Court should consider:

a) The Court should only extend the time for service where there is no prejudice to the defendant;

b) The plaintiff bears the onus of proving that the defendant would not be prejudiced by the extension;

c) The defendant has at least an evidentiary obligation to provide some details of prejudice which would flow from an extension of the time for service;

d) The defendant cannot create prejudice by failing to do something that it reasonably could have or ought to have done.

e) The prejudice must have been caused by the delay. [ 20 ] Counsel for the Defendant is of the view that substitutional service by publication in an Edmonton newspaper was not appropriate and would not have been granted if the Court knew all of the facts that were available. His view is that Rule 3.27 is a slip rule and should only be used where the Defendant knew of the claim or for some other reason the deficiencies are not significant.

He argues that to invoke Rule 3.27 in this case would benefit the Plaintiff's lawyer by rescuing the lawyer for his mistake in obtaining a substitutional Order for publication in Edmonton without sufficient evidence in support. The Plaintiffs ’ remedy should be against their counsel for his negligently obtaining the Order for service by publication without the necessary evidence to support it. As indicated, the Order could have been published in Nova Scotia and/or substitutionally on the father who gave no indication of providing any assistance to the Plaintiffs ’ investigator.

For the reasons to follow, I choose to rely on Rule 3.27(1)(

b) and consider the factors set out by Justice Reid in the Sanderson Estate case. [ 21 ] In my view there is no prejudice to the Defendant. The Plaintiff has proved that the insurer had notice early on and that the Plaintiff made every reasonable effort available to locate the Defendant. The Defendant has provided no details of prejudice and none are present. The Defendant has not shown any evidence of prejudice to flow from an extension of time for service. Each case has to be judged on its own facts.

In this case there is nothing which causes any reluctance on my part to grant relief under Rule 3.27(1)(b). [ 22 ] I am supported in my decision by the recent decision of the Court of Appeal (March 1, 2013) in Nixon v. Timms , 2013 ABCA 84 . The case is not directly on point but it does consider the issue of Rule 3.27. In that case, the process server fraudulently swore an affidavit indicating he had served the Defendant Timms when he had not. Timms only became aware of the claim on service on him of a default judgment.

The trial judge concluded there had been no service of the statement of claim and set aside the default judgment. She declined to strike the claim and declared that service had now been properly effected and ordered the defendant to file a defence within 20 days. [ 23 ] That case fell under the old Rules and the Court had no difficulty in indicating that under the circumstances of the case the former Rule 11(9) would not allow renewal.

The Court stated at paragraphs 9 and 10: [9] Our view is reinforced when considered in the context of the respondent ’ s submission that the claim had not “ expired ” but was suspended or capable of being renewed under R. 3.27 “ at any time ” . Counsel fairly conceded that although the rule involved a strict test, the trial judge ’ s

interpretation of the rule would involve endless or timeless discretion to restore a claim. In effect, the rule could be

applied in these same circumstances in the year 2040 or beyond. [10] We do not accept that the drafters of R. 3.27 intended this broad a discretion or the perpetual ability to renew expired claims.

We note, however, that in considering whether extraordinary circumstances exist in a given case or whether to exercise a discretion under the rule, regard must be had to the policy considerations in the Limitations Act , RSA 2000, c.-12 and any prejudice arising as a result of the expiration of a particular limitation period. [ 24 ] The case simply indicates that before Rule 3.27 an extension could not be granted in a case such as this.

It further indicates that where a lengthy period of time has passed since the time for service has expired the Court may not exercise its discretion under Rule 3.27 in favour of the party seeking to invoke an extension. Counsel for the Defendant suggests that it should not be used where it would involve a breach of the Limitations Act . This would be correct if the pleading itself was statute barred. In this case, the pleading is not statute barred and the only possible impediment is created by the rules for service of the Statement of Claim and extension of time for service.

Rule 3.27 is specifically designed to grant relief in this type of case. [ 25 ] When reviewing the Alberta Rules of Court project the Alberta Law Reform Institute did a series of Consultation Memorandums. Consultation Memorandum No. 12.14, October 2004, dealt with miscellaneous issues which included “ the problem of the untraceable Defendant ” . [ 26 ] To provide a better picture of the issues effecting litigants and the Court when dealing with Defendants who are difficult, if not impossible to serve, I will refer at length to the Institutes Memorandum.

The Memorandum states: [88] Rule 11's short time period for serving a statement of claim can be a problem when dealing with an untraceable defendant. If a plaintiff truly has no idea where to find a defendant who has disappeared and cannot be traced, the plaintiff will have to get a court order dispensing with service (very rare) or an order for substitutional service (more common). Default Judgment would then follow. But if the defendant reappears later, the defendant may be able to set aside both the default judgment and the order for substitutional service or the order dispensing with service.

If the defendant can set aside an order for substitutional service or the order dispensing with service, the plaintiff will by then usually be unable to get an extension under Rule 11 to serve the expired statement of claim on the newly-surfaced defendant. If the limitation period has also expired, the plaintiff ’ s claim will be defeated. In these circumstances, the strictness of Rule 11 merely serves to reward defendants who disappear in order to avoid service. [89] This scenario occurred in the Alberta Queen ’ s Bench case of Hansraj v. Ao .

The plaintiff obtained an ex parte substitutional service order based on speculative and inadequate evidence about the defendant ’ s whereabouts. There was no evidence that the statement of claim ever came to the defendant ’ s attention. Sufficiency of service was later successfully challenged by the defendant ’ s insurer and the substutional service order and default judgment were set aside.

The statement of claim had long since expired under Rule 11 and therefore the claim was effectively ended against the missing defendant. [92] The General Rewite Committee considered whether to propose an exception to Rule 11 that would allow an extension of time for service following expiry of the original period specifically where an order for substitutional service or the order dispensing with service is later overturned.

But such an exception would have to be subject to considerations of due diligence by the plaintiff in searching for the defendant and preparing the affidavit in support of the now-challenged order, because sometimes it is perfectly justifiable to overturn those orders.

The exception must not relieve a plaintiff from the consequences of using sloppy or inadequate evidence in obtaining such orders. [94] Instead of trying to list in the Rule all the specific scenarios justifying an exception to Rule 11, the Committee wonders if there should be a general exception to Rule 11 that would give a court the discretion, at any time, to extend the time for service for a specified period if there are special or exceptional circumstances to justify the extension.

Such an exception would allow a court to remedy the problem when dealing with a truly untraceable defendant in any type of litigation, but not when dealing with other situations where service has been legitimately set aside.

It would also cover other circumstances where it would be unfair not to let a plaintiff serve a statement of claim despite the passage of time. ... [95] The potential problem with having such a general exception is that judges may use it too loosely and grant extensions in less then exceptional circumstances, thereby undermining the legislative intent of Rule 11 to eliminate procrastination and delay. Any provision

will have to be carefully worded to discourage that outcome. [ 27 ] The Plaintiff truly had no idea where to find the Defendant - it could only be guessed. Although I have determined that the Order for Service by publication here should be set aside, it is arguable that it was supportable as the best guess. It was better than dispensing with service. In my view, there was due diligence by the Plaintiff in searching for the Defendant and it is appropriate to invoke Rule 3.27.. [ 28 ] I agree with the comments cited above from Consultation Memorandum No. 12.14.

It indicates that it is rare to dispense with service and I have chosen not to dispense as the service provided for herein is more appropriate. This Court can and does dispense with service but that is designed for narrow circumstances which justify dispensing. A good example would be a foreclosure action where the Defendant Mortgagor has abandoned the property, left the country, cannot be located and there is no equity in the property. [ 29 ] There is no prejudice to the Defendant to grant an extension of the time for service of the pleadings.

It would be unfair not to allow the Plaintiffs to serve the pleadings after the short passage of time (52 days) after the renewal period had expired when the action came to the Defendant's attention. I believe this case squarely fits within the purpose of Rule 3.27(1)(

c) and accordingly the Order for time for service is extended. Given that the Defendant is now aware of this action and the pleadings therein and counsel for the Defendant and her insurer has the pleadings, service of the pleadings on the Defendant ’ s counsel and insurer ’ s counsel is deemed good and sufficient. Heard on the 20 st day of March, 2013. Dated at the City of Edmonton, Alberta this 27 th day of March, 2013. R. P. Wacowich M.C.C.Q.B.A. Appearances: Corinne Petersen Chomicki Baril Mah LLP for the Plaintiffs Connor Glynn Parlee McLaws LLP for the Defendant

_______________________________________________________ Corrigendum of the Memorandum of Decision of R. P. Wacowich, Master in Chambers _______________________________________________________ Paragraph 6 has been amended as follow: [6] It is, or should be, well known by litigation lawyers in Alberta that a substitutional Order by publication at a location where itcannot be shown that the party to be served is resident, will be set aside on application. Hansraj v. Ao 2004 ABCA 223 , [2005]4 WWR 669. Clearly, the substitutional service Order granted should “likely be effective”.

It cannot likely be effective if there is noindication that the person might have the publication come to their attention.