Syncrude Canada Ltd. v. Highland Consulting Group Inc., 2013 ABQB 594

Court of Queen ’ s Bench of Alberta Citation: Syncrude Canada Ltd. v. Highland Consulting Group Inc., 2013 ABQB 594 Date: 20131011 Docket: 1103 11934 Registry: Edmonton Between: Syncrude Canada Ltd. Plaintiff - and - The Highland Consulting Group Inc., the Highland Group International GmbH, and High Energy Consultants, Inc. Defendants Corrected judgment: A corrigendum was issued on October 15, 2013; the corrections have been made to the text and the corrigendum is appended to this judgment. _ ________________________________________ ______________ Reasons for Judgment of the Honourable Mr. Justice Don J. Manderscheid _________________________________________ ______________ Introduction

[ 1 ] Highland Consulting Group Inc. (“Highland Consulting”), The Highland Group International GmbH (“Highland International”), and High Energy Consultants, Inc. (“Highland Energy”) (collectively the “Applicants”) apply to set aside default judgment entered against them by Syncrude Canada Ltd. (“Syncrude”) and to be allowed to file a Statement of Defence. [ 2 ] On October 18, 2011 Syncrude entered default judgment against the Applicants in an action commenced by Statement of Claim on July 26, 2011.

The Applicants attempted to resist enforcement of that judgment in Maryland but failed and applied to set aside the default judgment in Alberta on February 15, 2013. The question before me is whether I should set aside the default judgment. Facts [ 3 ] Highland Consulting and Highland Energy are Delaware corporations with their principal place of business in Maryland, United States of America. Highland International is a Swiss company carrying on business in Switzerland. [ 4 ] Highland Consulting, through Mr.

Todd Bittner, Corporate Controller, executed a contract effective November 8, 2008 to provide consulting services to Syncrude (the “Contract”). That Contract provided that Highland Consulting would pay for all taxes arising or imposed by reason of the work contemplated under the Contract. Syncrude would deduct withholding taxes from payments where required.

Further, the Contract contained a broad indemnity and hold harmless clause for any damages to or costs incurred by Syncrude caused by Highland Consulting in connection with the Contract. [ 5 ] All three of the Applicants provided services and received payment under this Contract during the Contract period. When Syncrude made payments it did not withhold or deduct withholding taxes for these payments relying on withholding tax waivers provided to Syncrude by Highland Consulting. [ 6 ] On July 15, 2010, the Canada Revenue Agency (“CRA”) advised Syncrude that the Applicants did not have valid tax waivers.

On November 19, 2010, the CRA issued a Notice of Assessment to Syncrude for the unpaid withholding tax, interest, and penalties in the amount of $4,261,689.94. [ 7 ] Syncrude paid this amount to the CRA on November 30, 2010. CRA then amended the interest charge, reducing it by $155,131.02 and crediting Syncrude with that amount. Syncrude then withheld $2,783,461.35 from further payments to the Applicants under the Contract. [ 8 ] On July 26, 2011 Syncrude filed a Statement of Claim against the Applicants for the outstanding $1,323,097.57.

Syncrude served Highland Consulting and Highland Energy with the Statement of Claim by recorded mail to their principal place of business in Maryland on August 2, 2011. Mr. Bittner signed in receipt of service. Syncrude served Highland International with the Statement of Claim by recorded mail to its principal place of business in Switzerland on August 3, 2011. Mr. Raz Walter signed in receipt of service. [ 9 ] The Applicants failed to respond to the Statement of Claim and had default judgment entered against them on October 18, 2011 (“Alberta Judgment”).

A Certificate of Judgment was filed on November 30, 2011. [ 10 ] On February 1, 2012, Syncrude commenced proceedings in Maryland (the “Marlyand Action”) seeking to enforce the Alberta Judgment through Maryland’s Uniform Foreign Money Judgment Recognition Act , MD Code, Cts & Jud Proc, §§ 10-701. In the course of that litigation, Syncrude agreed to discontinue proceedings in Maryland against Highland International because Highland International has no operations in Maryland. [ 11 ] The Applicants brought a Motion to Dismiss.

Pursuant to Federal procedural rules, Judge Bennett of the United States District Court for the District of Maryland converted the motion into a motion for

Summary Judgment. Synrcude filed a cross-motion for

Summary Judgment. [ 12 ] On January 10, 2013, Judge Bennett issued an Order and Judgment and a Memorandum of Opinion granting Syncrude

Summary Judgment and permitting the enforcement of the Alberta Judgment in Maryland (the “Maryland Judgment”): Syncrude Canada Ltd v Highland Consulting Group, Inc , D Md 2013 [ Syncrude (Maryland) ]. [ 13 ] On February 15, 2013 the Applicants made this application to set aside default judgment. To that end they also applied in Maryland to stay the Maryland Judgment.

On June 12, 2013 Judge Bennett entered a Letter Order (the “Letter Order”) staying “all matters in this case, including proceedings concerning the enforcement of the Maryland Judgment entered against the Applicants.” Issues [ 14 ] The main issue is: 1. Should this Court set aside the Alberta Judgment? [ 15 ] Syncrude has also raised the following issue: 1. Did Judge Bennett’s decision render any part of the current action res judicata ? The Law [ 16 ] In July of 2011, Rule 11.25 of the Alberta Rules of Court , Alta Reg 124/2010 [ ARC ] read as follows:

(2) A commencement document may be served outside Canada only if (

a) a real and substantial connection exists between Alberta and the facts on which a claim in an action is based and the commencement document is accompanied with a document that sets out the grounds for service of the document outside Canada, or (

b) the Court, on application supported by an affidavit satisfactory to the Court, permits service outside Canada.

(3) Without limiting the circumstances in which a real and substantial connection may exist between Alberta and the facts on which a claim in an action is based, in the following circumstances a real and substantial connection is presumed to exist: ... … (

b) the claim relates to a contract or alleged contract made, performed or breached in Alberta; (

c) the claim is governed by the law of Alberta; … [ 17 ] Currently Rule 11.25 of the new ARC states:

(2) A commencement document may be served outside Canada only if (

a) a real and substantial connection exists between Alberta and the facts on which a claim in an action is based and the commencement document is accompanied with a document or affidavit that sets out the grounds for service of the document outside Canada, (

b) the Court, on application supported by an affidavit satisfactory to the Court, permits service outside Canada, and (

c) the person served with the commencement document is also served with a copy of the order permitting service outside Canada. [ 18 ] Rule 11.31 of the ARC states:

(1) A defendant may apply to the Court to set aside (

a) service of a commencement document, (

b) an order for substitutional service of a commencement document, or (

c) an order dispensing with service of a commencement document, only before the defendant files a statement of defence or a demand for notice.

(2) An application under this rule is not an acknowledgment by the defendant that the Court has jurisdiction with respect to a claim, counterclaim or third party claim in respect of which the application is filed. [ 19 ] Rule 9.15 of the ARC states:

(3) The Court may, on any terms the Court considers just, (

a) permit a defence to be filed by a party who has been noted in default, (

b) set aside, vary or discharge a judgment granted upon application against a defendant who was noted in default, or whose statement of defence was struck out under rule 3.37, or (

c) Set aside, vary or discharge a judgment entered in default of defence by the plaintiff for the recovery of property under rule 3.38, or for a debt or liquidated demand under rule 3.39. Positions of the Parties The Applicants [ 20 ] The Applicants argue that the Court should set aside the default judgment. They claim that they have met the three part test to set aside default judgment.

The Applicants submit that they have four arguable defences: • First, Highland Energy and Highland International never contracted with Syncrude, only Highland Consulting. • Second, Syncrude’s liability to the CRA arose from its own lack of due diligence regarding withholding tax and did not arise from any contract with the Applicants. It arose from Syncrude’s failure to exercise its contractual obligation to withhold tax on payments to the Applicants.

Clause 4.1 of the Contract states in part: “When required, [Syncrude] shall deduct from payment due the amount of non- resident withholding taxes applicable to invoice.” In addition, Syncrude did not include the Applicants in its discussions with the CRA. • Third, the CRA has credited certain amounts, including approximately $350,000 in penalties, to Syncrude which would constitute a windfall if Syncrude could enforce the full Alberta Judgment.

• Finally, the contract obligated Syncrude to withhold tax on a per invoice basis and not on a lump sum basis at the end of theContract. Due to changes in the foreign currency exchange, the Applicants claim, Syncrude overpaid the CRA by $450,000 USD, andSyncrude should bear this difference. [21] The Applicants also argue that Syncrude did not comply with the requirements for service ex juris and this Court thereforelacks jurisdiction.

They claim Syncrude’s claim lacks a real and substantial connection to Alberta, as required by Rule 11.25(1),regarding Highland Energy and Highland International because no contract existed between Syncrude and those parties. Further, theApplicants argue that Syncrude has failed to establish a good arguable case: Scott & Associates Engineering Ltd v Ghost PineWindfarm LP, 2011 ABQB 630, 2011 CarswellAlta 1911 [Ghost Pine]; Lia Sophia Canada LP v Parklane Jewelry Ltd, 2013 ABQB53, 2013 CarswellAlta 119 [Lia Sophia].

Mere allegations or statements that Syncrude believes it has a good cause of action will notsuffice to establish a good arguable case: Murray v Canada (AG), 2003 ABQB 260, 2003 CarswellAlta 597 [Murray]. The Applicantssubmit that the evidence here does not support a good arguable case. [22] Explaining their failure to file a Statement of Defence, the Applicants claim that upper management did not learn of theStatement of Claim until Syncrude served them in the Maryland Action in February 2012. Mr. Bittner and Mr.

Walter, who receivedservice on their behalf, did not bring the Statement of Claim to upper management’s attention. Therefore, those with decision makingauthority did not know that the claim existed or that they needed to make a defence. [23] The Applicants explain the delay in seeking to set aside the default judgment by reference to the Maryland Action. They arguethat they chose to defend the Maryland Action.

As Hubert v Outlaws Group Inc, 2007 ABCA 352 at para 9, 425 AR 327 [Hubert] statesciting Wilson Arches Ltd v Sayers (1973), 1973 ALTASCAD 117 , [1974] 2 WWR 277 (ABCA): “[m]ere delay will not be abar to the application unless an irreparable injury will be done to the plaintiff or the delay has been wilful.” The Applicants submit thatSyncrude will suffer no irreparable harm. Although Syncrude submits they have suffered harm because Mr.

Bittner is no longeremployed by the Applicants, they submit that the only delay arose because the Applicants acted first to defend the Maryland Action,which if successful would have rendered an application to set aside the default judgment unnecessary. [24] Regarding res judicata, the Applicants argue that the Maryland Action only dealt with the sufficiency of service underMaryland law not the merits of the breach of contract action. Further, Judge Bennett has stayed execution of the Maryland Judgmentpending resolution of this application.

The Maryland Judgment is not a final judgment because a final judgment becomes final only oncethe court who made it has no further jurisdiction to rescind or vary it: Ernst & Young Inc v Central Guaranty Trust Co, 2006 ABCA337, 2006 CarswellAlta 1479. The Maryland Court retains jurisdiction to vacate or set aside its judgment if this Court sets aside theAlberta Judgment. The Respondent [25] Syncrude argues that the Court should not set aside the default judgment.

Syncrude submits that the Applicants haveestablished no arguable defence on the following basis: • First, Syncrude submits that all three of the Applicants provided work, received payment, and submitted tax waivers to Syncrudeand therefore fall under its claim; • Second, the obligation to withhold tax arose from the specific terms of the Contract, Syncrude relied on invalid tax waivers in notwithholding tax, and the Applicants intended that Syncrude rely on those waivers. Therefore, the loss resulted from the Applicants’misrepresentations not from Syncrude’s lack of diligence. Syncrude kept the Applicants and Mr.

Bittner informed about the CRA’sposition; • Third, Syncrude informed the Applicants of the CRA’s refund of $350,625.70 in penalties in March 2012, and reduced the balanceof the outstanding judgment debt accordingly; and • Finally, the Applicants cannot succeed on their foreign exchange argument because the claim is for money paid by Syncrude tothe CRA. That liability did not arise until November, 2010. The difference in amounts arises only because Syncrude relied on theApplicants’ invalid waivers.

The Applicants’ caused that loss and it properly rests with them. [26] Syncrude argues that it complied with Rule 11.25(2)(

a) in serving the Applicants with a Statement of Claim setting out thegrounds for service ex juris. Syncrude submits it has a good arguable case relying on Jocelyne George’s affidavit filed October 18, 2011(the “George Affidavit”) deposing that the Applicants breached the Contract with Syncrude and the Jocelyne George’s Declaration (the“George Declaration”) filed in the Maryland Action detailing the contractual relationship between the parties.

It argues the evidencediscloses a real and substantial connection and a good arguable case. [27] Syncrude seeks to distinguish Ghost Pine on the grounds that it considered whether the Court should apply the good arguablecase test to service ex juris effected under the old ARC despite the transitional provisions in the ARC. Syncrude submits it does notconsider if the good arguable case test applies to applications to set aside service ex juris under the ARC. [28] Second, Syncrude argues that the Applicants had actual knowledge of the claim since August, 2011 and took no action inAlberta until February, 2013.

Judge Bennett found that service on Mr. Bittner and Mr. Walter provided the Applicants with actualknowledge of the claim. Syncrude states that if Mr. Bittner and Mr. Walter did not inform upper management the Applicants’ complaintlies with Mr. Bittner and Mr. Walter: Black Gold Leasing v S & W Holdings Ltd, 42 AR 219, 1982 CarswellAlta 475 (QB) [BlackGold].

Syncrude submits that the Applicants deliberately delayed bringing this application, because they believed service was invalid.The Court should not condone decisions not to pursue a defence in the face of actual knowledge, because of technical deficiencies inservice: Kelland v Hardestine Holdings Ltd, 2007 CarswellOnt 9383 [Kelland]. Further, defending the Maryland Action did notpreclude bringing this application at the same time. [29] Syncrude also alleges the delay caused irreparable harm on two grounds. Mr. Bittner will be difficult to locate because he no

longer works for the Applicants. Further, the Applicants do not keep email records unless employees store them on their own hard drives.It is likely that Syncrude cannot produce Mr. Bittner’s emails at any eventual trial. [30] Syncrude argues that the doctrine of res judicata, in the form of cause of action estoppel, bars the Applicants’ application toopen up the default judgment. Syncrude argues that Judge Bennett granted

summary judgment to Syncrude on the merits considering thecontractual relationship between the parties and the work provided to Syncrude by the Applicants. A final decision on a cause of actionestops a party privy to the litigation from arguing the existence of that cause of action again in subsequent litigation: 420093 BC Ltd vBank of Montreal, (AB CA), 174 AR 214, 1995 CarswellAlta 439 (CA).

This principle applies to every pointactually decided and any point which “properly belonged to the subject of the litigation and which, the parties, exercising reasonablediligence, might have brought forward at the time:” Henderson v Henderson, 3 Hare 100, [1843-60] All ER Rep 378 at 381-82[Henderson]. In the alternative, Syncrude argues that res judicata, in the form of issue estoppel, bars the Applicants from arguinginsufficient service under Rule 11.25. Analysis A: Should this Court set aside the Alberta Judgment? [31] To have the default judgment set aside the Applicants must show that: 1.

They have an arguable defence; 2. They did not deliberately let judgment go by default and have some excuse for the default, such as illness or a solicitor’sinadvertence; and 3. After learning of the default judgment, they moved promptly to open it up: Palin v. Duxbury, 2010 ABQB 833 at para 21, 2010 CarswellAlta 2517 [Palin]; Fjeld v Alberta, 2008 ABQB 558 at para 16, 2008Carswell Alta 1262 [Fjeld]; Hubert at para 9. [32] Granting default judgment is discretionary. As Veit J stated in Don Reid Upholstery Ltd. v. Patrie, 32 Alta LR (3d) 281, (QB) at para 24: … discretion, by definition, rejects rigid rules.

When judges say that an applicant must prove the three things set out above, they aremerely using a form of shorthand: they are saying that fairness must always be done and that usually fairness requires that these threethings be proved. Under R. 158, the court has discretion to do what is just; the most that case law can do is to provide "generalindications to help the Court in exercising the discretion". Thus, for example, it is unlikely that a court will set aside a default judgmentunless the party applying can show that it has a defence on the merits.

Similarly, a court will be unlikely to grant a motion to set aside adefault judgment unless the party applying can demonstrate that they acted promptly to set the judgment aside once they became awareof the judgment. i: Do the Applicants have an arguable defence? [33] The first part of the test asks whether the Applicants have established a good arguable defence. [34] Watson J as he then was, addressed the test for a good arguable defence in Goulet v da Silva, 2002 ABQB 369 at para 74, 313AR 32 stating: [T]he simple assertion of a claim of a defence is insufficient, and does not relieve the Court from evaluating whether there is a triableDefence.

In [GFK Capital Base Corporation v Fernando (1993), (MB CA), 88 Man R (2d) 125], it was put thus: The judge should be satisfied that the proposed defence is arguable, in the sense that if the facts are proved it might well succeed, andthat the wish to defend the action is genuine, in the sense that the defendant is not merely trying to further delay or to defeat a validclaim. [35] I address each raised defence in turn then deal with the question of res judicata. 1: The contract between Highland Energy and Highland International and Syncrude [36] The Applicants depose that Highland Energy and Highland International were not parties to the Contract.

On its face theContract lists only Highland Consulting and Syncrude as parties. Further, if Highland Energy and Highland International were not partiesto the Contract, then the fact that they did work for Syncrude only acts as evidence that they had a contract with Syncrude. The Courtneeds a full hearing to decide on the alleged existence and terms of any contract between Highland Energy or Highland International andSyncrude. 2: Syncrude’s lack of due diligence [37] The Applicants raise a serious issue regarding the construction of the Contract and its application to the facts of this case.

TheApplicants raise an arguable defence regarding whether Syncrude’s reliance on the allegedly invalid tax waivers is due to Syncrude’sown lack of due diligence or if the Applicants wrongfully mislead Syncrude in some way. More generally, the question arises whetherthe Applicants remain liable for payment of the withholding tax under the Contract when Syncrude failed to withhold the tax. TheContract does not deal with those questions clearly and definitively. I cannot decide them in this application. The Applicants have

established a good arguable defence which requires evidence and submissions from the parties. 3: The amount credited to Syncrude by the CRA [38] The Applicants argue that the CRA has credited back to Syncrude the amount of the penalties that Syncrude paid. Syncrudeaccepts, through counsel’s written submissions, that it received this credit in the amount of $350,625.70 but that it informed theApplicants of this credit in March 2012 and credited it against the Applicants.

I agree with the Applicants that to permit Syncrude toretain the full judgment in light of this undisputed fact would result in a windfall to Syncrude. This defence does not go to liability but toquantum. It clearly constitutes good reason to set aside the default judgment in order to reduce the Alberta Judgment by the amount ofthe credit.

If I had not found the other defences constituted good arguable defences, I would set aside the default judgment in part toreduce the quantum: Atchison v Boyd, (AB KB), 61 AR 189, 1985 CarswellAlta 486 (QB). 4: The foreign exchange argument [39] Fourth, I decline to rule substantively on the final defence raised because I have decided based on the first and seconddefences above that the Applicants have a good arguable defence. I do not think this defence has a serious chance of success on themerits.

It goes mainly to quantum and Syncrude’s argument that if it properly relied on the tax waivers, its liability to the CRA did notcrystalize until November, 2011 when CRA issued its assessment.

If the Applicants are liable for breach of contract in inducingSyncrude’s reliance on invalid tax waivers then the entirety of Syncrude’s liability to the CRA at the date of that assessment, less thecredits received, lies at the Applicants’ feet. 5: Service ex juris [40] The Applicants have also argued that this Court lacks jurisdiction because Syncrude did not properly serve the Applicants exjuris under Rule 11.25, as it read at the time. Although they raise it as a separate issue, it properly constitutes a defence to Syncrude’sclaim.

For the reasons discussed below this defence lacks merit. [41] Rule 11.25(2)(a), as it read when Syncrude effected service, provided that a plaintiff may serve a commencement documenton a defendant outside Canada if there is a real and substantial connection between the plaintiffs claim and this jurisdiction.

The case lawstates that a plaintiff must demonstrate a good arguable case on an application to set aside service ex juris: Ghost Pine; Lia Sophia. [42] In addition to Syncrude’s Statement of Claim, I have before me the George Affidavit, the George Declaration, the affidavit ofJonathan Walls, sworn February 14, 2013 (the “Walls Affidavit”) and the transcript of the June 25 cross examination of Jonathan Wallson the Walls Affidavit (the “Walls Examination”). These documents evidence an executed contract between Syncrude and HighlandConsulting.

The parties disagree on the evidence regarding whether Highland Energy and Highland International ever contracted withSyncrude; however, both clearly provided services in Alberta and Syncrude paid them for those services. The loss Syncrude incurredfrom tax liability due to its failure to withhold funds occurred in Alberta. The Contract allegedly applying to the contractual arrangementexisting between Syncrude and all three Applicants clearly states that Alberta law shall apply. Finally, given that the injury and the workoccurred in Alberta, Alberta law applies to the other claims.

Considering this evidence, the test for a real and substantial connection laidout in Club Resorts Ltd v Van Breda, 2012 SCC 17, [2012] 1 SCR 572 at para 90-91 [Club Resorts], and the ARC Rule 11.25(3)(

b) and(c), I conclude that Syncrude has clearly established a real and substantial connection between the facts underlying Syncrude’s claim andAlberta. [43] Further, Syncrude has established a good arguable case as required to properly effect service ex juris. The good arguable casetest requires the plaintiff to bring some evidence that the case it proposes to bring has a foundation in fact. The court must not try thecase or prejudice the parties on the merits: Murray, at para 33. The court looks to ensure the case is not “fanciful or speculative:” GhostPine at para 34.

The consideration of a good arguable case occurs early in the litigation, often before disclosure and questioning. Thecourt cannot expect the plaintiff to have full knowledge of the claim at that point: Murray, at para 34. The Alberta Court of Appealnoted in Esso Resources Canada Ltd v Stearns Catalytic Ltd, 1990 ABCA 138 , 216 AR 122, 1990 CarswellAlta 730 at para11 [Esso Resources]: [Rule 11.25] and the binding cases under it set a fairly lax standard of proof, and for good reason.

In particular, they do not call for first-hand information, a positive factual conclusion, or evidence excluding possible defences. [44] Syncrude has alleged and provided affidavits that depose that a contractual relationship existed between itself and theApplicants in the form of the Contract, and that the Contract, arguably, made the Applicants liable for any Canadian tax owing arisingout of the Contract. Although the Contract only lists Highland Consulting as the Contractor, all the Applicants performed work under theContract in Alberta and received payment for that work.

In my view, Syncrude can reasonably argue that a contract, be it the Ccontract orotherwise, with Highland Energy and Highland International or that Highland Consulting or Mr. Bittner endorsed a contract on theirbehalf as their agent. Syncrude’s uncontested evidence is that it relied on invalid withholding tax waivers provided by the Applicants innot withholding tax and thereby incurred a loss.

Syncrude therefore has an arguable case for breach of contract. [45] Syncrude also argued that Judge Bennett decided the issue of adequate service and therefore argument on this issue isrendered res judicata by issue estoppel.

Because I have found Syncrude properly effected service under Rule 11.25 I decline to addressthis argument. [46] Therefore, Syncrude’s service on the Applicants complied with the requirements of ARC Rule 11.25(2) and I find thatSyncrude effected good and proper service on the Applicants. 6: Cause of action estoppel [47] Syncrude argues that Judge Bennett’s decision rendered this action res judicata. In this respect, Syncrude argues that I should

not open up the default judgment because the doctrine of res judicata, in the form of cause of action estoppel, estops the Applicants’from making any argument to the merits. Put simply, Syncrude argues that the Applicants have no good arguable defences because thisaction is res judicata. [48] The court recognizes two forms of res judicata: issue and cause of action estoppel. “In their simplest

definitions, issueestoppel means that a litigant is estopped because the issue has clearly been decided in the previous proceeding, and cause of actionestoppel means that a litigant is estopped because the cause has passed into a matter adjudged in the previous proceeding:” Donald JLange, The Doctrine of Res Judicata in Canada, 3d ed. (Ontario: LexisNexis Canada Inc., 2010) [Res Judicata] at 1; see also Ernst &Young Inc v Central Guaranty Trust Company, 2006 ABCA 337 at para 29, 397 AR 225. [49] Cause of action estoppel does not apply here.

Henderson v Henderson, 3 Hare 100, [1843-60] All ER Rep 378 [Henderson]first formulated the test for res judicata stating: … where a given matter becomes the subject of litigation in, and of adjudication by, a Court of competent jurisdiction, the Court requiresthe parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same partiesto open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, butwhich was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case.

Theplea of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to forman opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties,exercising reasonable diligence, might have brought forward at the time. The Supreme Court of Canada has adopted this test under cause of action estoppel: Church v Abell (1877), 1877 CanLII 33 (SCC), 1SCR 442; Grandview v Doering, [1976] 2 SCR 621, (SCC). [50] The facts of Henderson are illuminating.

In that case, a Newfoundland court granted the plaintiffs default judgment in anaction for an accounting of an estate and of partnership property. The plaintiffs sought to enforce that judgment in England and thedefendants attempted to argue set-off based on a debt owed to them. Wigram VC barred that argument because the defendants shouldhave raised it in the Newfoundland action as a defence to the plaintiffs’ claim. [51] Syncrude claims that Judge Bennett decided the case before him on the merits of Syncrude’s claim: I disagree.

The matterbefore Judge Bennett only concerned recognition of the Alberta Judgment under Maryland’s Uniform Foreign Money JudgmentRecognition Act. True, the proceedings in Maryland took the form of

summary judgment applications, but Judge Bennett’s reasons makeclear that they related to

summary judgment on the issue of whether Maryland should recognize the Alberta Judgment. [52] Judge Bennett did not address, nor did he need to address, the substance of Syncrude’s claim. He may have had materialsbefore him regarding the underlying contractual relationship between the parties, the work done, and the basis of Syncrude’s claim, butthat does not transform an action for recognition of a foreign judgment into an action on the merits. Exactly as in Henderson, the casebefore Judge Bennett dealt with enforcement of a foreign default judgment.

Had the parties attempted to litigate the merits of Syncrude’sclaim the doctrine of cause of action estoppel would have barred their arguments exactly as it did in Henderson. [53] Cause of action estoppel does not act to bar any part of this action. [54] Based on the first and second defences raised by the Applicants, I find they have established a good arguable defence asrequired under the test to set aside default judgment.

However, I must still consider whether the Applicants deliberately let the judgmentgo by default and whether they applied promptly to have the Alberta Judgment set aside. ii: Did the Applicants deliberately let judgment go by default and do they have some excuse for the default? [55] In this case the Applicants did not deliberately let judgment go by default. They failed to make a response because neither Mr.Bittner nor Mr.

Walter informed anyone in authority that Syncrude had served them with a Statement of Claim. [56] Syncrude emphasizes that it effected service and therefore the Applicants had actual knowledge of the claims, making theirfailure to defend deliberate. Further, the Walls Affidavit and Walls Examination both state that the Applicants decided not to take anyaction in Alberta because they thought service was invalid.

This does not constitute an adequate reason for the Applicants to decide not torespond: Kelland at para 1. [57] The evidence before me does not disclose that the Applicants deliberately let the Alberta Judgment go by default. Theevidence only discloses that Mr. Walls and the other officers of the Applicants do not know what Mr. Bittner or Mr. Walter did with theStatement of Claim upon receiving it. However, Mr. Bittner’s and Mr. Walter’s failure to act does not demonstrate that the Applicantsdeliberately let the judgment go by default: at most it demonstrates negligence. Mr. Bittner’s and Mr.

Walter’s conduct remainsunexplained but mere failure to file a statement of defence will not bar an application to set aside default judgment unless the plaintiff hassuffered irreparable harm or the Applicants willfully failed to file: Hubert, at para 9; see also Klein v Schile, (SK CA),[1921] 2 WWR 78, 14 Sask LR 220.

In this case, the failure to file does not demonstrate a deliberate intention on the part of theApplicants. [58] I do not accept Syncrude’s contention that the Applicants willfully let the judgment go by default. iii: After learning of the default judgment, did the Applicants move promptly to open it up? [59] The evidence discloses a different situation regarding the promptness of an application to set aside default judgment.

Both theWills Affidavit and the Wills Examination state that the Applicants chose not to apply to set aside the default judgment after Syncrudeserved the Applicants with documents in the Maryland Action because they believed service was invalid. On the advice of theirMaryland solicitors, the Applicants chose to defend the Maryland Action instead of making an application in Alberta. The Applicants

also chose at that time not to retain Alberta counsel to advise them on Alberta law. I agree with the sentiment put forward in Kelland atpara 1, if the Applicants chose to take a calculated risk, relying on technical deficiencies, the court should not condone such conduct. [60] I find that the Applicants intentionally did not commence proceedings in Alberta. The Applicants chose to defend theMaryland Action first based on a technical deficiency in service.

They chose to rely upon that technical deficiency in an attempt to delayor frustrate Syncrude’s claim against them, instead of coming to Alberta to deal with the substance of that claim. [61] Syncrude rightly notes that proceedings in Alberta would have rendered the Maryland Action unnecessary. The Applicantschose to avoid a direct challenge to Syncrude’s claim and took a more circuitous route. Had the Applicants succeeded in Maryland, theAlberta Judgment would remain outstanding.

They may have acted on the advice of counsel but this Court cannot condone such practice,particularly where Syncrude fully complied with the rules for service. [62] Syncrude has argued that the delay caused it to suffer irreparable harm because Mr. Bittner no longer works for theApplicants and the Applicants do not retain personal emails. This complaint is spurious. I have no evidence that Mr. Bittner is ill, dead,or otherwise cannot be produced at an eventual trial. [63] The complaint regarding the emails presents a more serious problem but it does not amount to irreparable harm.

Given theApplicants do not keep emails, the Applicants very likely could not have produced the emails in any event. That is, I can find noevidence that the delay caused the loss of the emails. [64] Syncrude can still examine all the parties and call them to provide testimony in Court.

Perhaps this will require more extensiveexaminations during Questioning but a costs order can remedy that harm. [65] Finally I note that, considering the fairness in the circumstances, a delay of a year and a half pales in comparison to thesignificant delays seen in other cases: Nipissing Helicopters Inc v Eagle Copters Maintenance Ltd, 1996 ABCA 229 , 187 AR29, 1996 CarswellAlta 653 the defendant opposed enforcement of an Alberta judgment in Ontario causing a delay of more than six years;Fieldhouse v Buxton, (AB CA), 13 Alta LR 269, 1918 CarswellAlta 26 involving a seven year delay from the date thestatement of claim issued and a four and a half year delay from the judgment date. [66] A delay of this length should not, by itself, act to bar setting aside default judgment.

Conclusion [67] In conclusion, I find that Syncrude has established a real and substantial connection between the facts underlying its claim andthis jurisdiction. Therefore, Syncrude validly served the Applicants under Rule 11.25 as it read when Syncrude effected service. I findSyncrude has established good arguable case under the test for service ex juris. [68] I exercise my discretion to set aside the default judgment and permit the Applicants to file a Statement of Defence. Althoughthe Applicants let judgment go by default, they did not do so intentionally.

I find the Applicants made a decision to delay in applying toset aside the Alberta Judgment once it came to their attention but they did so in the interest of time and expense not with the deliberateaim of delay. Further, the delay was short and Syncrude did not suffer any irreparable harm that the Applicants cannot remedy through apayment of costs. Finally, the Applicants have raised good arguable defences to Syncrude’s claim.

Those defences relate directly to theexistence and terms of the Contract between Syncrude and all the Applicants and the application of those terms to the facts in this case.These issues must be decided by argument and evidence from the parties. [69] Therefore, I set aside the Alberta Judgment and grant the Applicants’ application to file a Statement of Defence. Costs [70] If the parties cannot agree on costs, they may apply to me within 60 days of the issuance of this Decision for a ruling on thatmatter. Heard on the 7th day of August, 2013. Dated at the City of Edmonton, Alberta this 10th day of October, 2013.

Don J. Manderscheid J.C.Q.B.A. Appearances: Jonathan W. McCully Sharek Logan & van Leenen LLP for the Plaintiff Peter T. Linder, Q.C. Peacock Linder & Halt LLP for the Defendants _______________________________________________________ Corrigendum of the Reasons for Judgment of The Honourable Mr. Justice Don J. Manderscheid _______________________________________________________ The citation is amended by removing “The”. It should read as follows: Syncrude Canada Ltd. v. Highland Consulting Group Inc., 2013 ABQB 594