David M Gottlieb Professional Corporation v Nahal, 2016 ABQB 141

Court of Queen ’ s Bench of Alberta Citation: David M Gottlieb Professional Corporation v Nahal, 2016 ABQB 141 Date: 20160311 Docket: 1001 11623 Registry: Calgary Between: David M. Gottlieb Professional Corporation and Swiss Investments Inc. Appellants - and - Saptal Singh Nahal Respondent _______________________________________________________ Memorandum of Decision of the Honourable Mr. Justice R.A. Neufeld _______________________________________________________ I. Introduction [ 1 ] In this proceeding, David M.

Gottlieb Professional Corp. and Swiss Investments Inc. (the “Appellants”) seek to strike the statement of defence and counterclaim of Mr. Saptal Singh Nahal (“Mr. Nahal” or the “Respondent”). [ 2 ] The matter before the Court has a long history. It relates to a mortgage granted by Mr. Nahal in 2006 as security for an $800,000 loan. [ 3 ] Aside from some initial prepaid mortgage payments, Mr. Nahal did not make any payments.

No payments were demanded, although interest at a rate of fourteen percent per annum accrued for a number of years. [ 4 ] In 2010, the Appellants filed a statement of claim that sought foreclosure of the mortgaged property. Initially, Mr. Nahal did not defend the action. This changed after he retained counsel who advised him that he could defend against the action using the Limitations Act, RSA 2000 c L-12. A series of applications to this Court in both Masters and Justice Chambers followed, in which Mr. Nahal opposed the foreclosure and judicial sale even though he was already noted in default.

While unsuccessful in stopping the judicial sale, Mr. Nahal was granted partial relief before this Court and subsequently on appeal to the Alberta Court of Appeal. At both levels, it was determined that Mr. Nahal was entitled to defend the claim, notwithstanding that the judicial sale had proceeded to its completion: David M. Gottlieb Professional Corporation and Swiss Investments Inc v. Nahal , 2011 ABQB 355 (Jeffrey, J); David M. Gottlieb Professional Corp v Nahal , 2012 ABCA 88 . [ 5 ] Following the Court of Appeal’s decision, the Appellants applied to strike Mr. Nahal’s statement of defense and

counterclaim. Master Prowse denied that application. He also denied Mr. Nahal’s application for

summary judgment in respect of hiscounterclaim: David M. Gottlieb Professional Corporation v Nahal, 2014 ABQB 271. [6] Master Prowse found that Mr. Nahal was entitled to defend the action on the basis of immunity from liability granted to himpursuant to

section 3 of the Limitations Act. In doing so, he relied on findings to that effect made by Justice Jeffrey of this Court and bythe Alberta Court of Appeal. He also found that the Court of Appeal had, in effect, determined that Mr. Nahal should be allowed to suefor conversion of his land under what he asserts is an invalid mortgage. [7] The Appellants contend that Master Prowse’s decision was incorrect. Mr. Nahal replies that it was correct, and characterizesthe motion to strike as an impermissible, collateral attack on Justice Jeffrey’s and the Court of Appeal’s decisions. II.

Standard of Review [8] The parties agree that a decision of a Master is reviewable by a Court of Queen`s Bench justice on the correctness standard:Bahcheli v Yorkton Securities Inc, 2012 ABCA 166. [9] I must determine whether Master Prowse was correct in dismissing the application to strike the statement of defence andcounterclaim. For the reasons to follow, I find that he was. III Findings [10] In arriving at his decision, Master Prowse had two questions before him. The first question was whether Mr. Nahal had apotentially meritorious defence to the action taken against him on the mortgage contract.

If he did, the second question was whether Mr.Nahal had the right to seek recovery of monies realized under the judicial sale or damages equivalent to the proceeds of the judicial saleas sought in his counterclaim. [11] Master Prowse concluded that the Court of Appeal’s decision of March 19, 2012, was determinative of both questions. I agree. [12] The Court of Appeal characterized the circumstances of this case as somewhat unusual. It held at para 19 that there was animplicit understanding that moving forward on the in rem portion of the foreclosure action did not prejudice Mr.

Nahal’s ability topursue his limitations defence. Therefore, Mr. Nahal was entitled to defend the action on that basis. This reasoning answers the firstquestion. [13] With respect to the second question, the Appellants emphasize that Mr. Nahal’s right to pursue an in personam remedy waslimited since the foreclosure action did not advance a personal claim.

They also argued that a limitations defence in and of itself cannotform the basis of an action, and that the counterclaim did not articulate a cause of action for return of judicial sale proceeds under anorder that was unsuccessfully appealed. [14] The Court of Appeal observed that if Mr. Nahal successfully defends the action, he may be entitled to repayment of proceedsof the judicial sale. Specifically, at para 21 the Court of Appeal wrote that: It is apparent that significant portions of the sale proceeds have been distributed by various court orders.

The recipients of those fundsmay have arguments to advance, and the Masters or judges who ultimately hear this matter will have to decide whether to require therecipients to account for those funds. The validity of the limitations defence will have to be determined, the priorities of the variousclaimants to the funds will have to be settled, and any issues of prejudice will have to be resolved. Some or all parties might requestinterim relief or advice and direction.

These reasons are not intended to foreclose any of those issues, which are remitted back to theCourt of Queen’s Bench. [15] Additionally, the Court of Appeal made it clear that in the extraordinary circumstances of this case, the judicial sale of thelands in question was allowed to proceed on a without prejudice basis to Mr. Nahal’s ability to pursue his limitations defence. The Courtof Appeal reached this conclusion by drawing an analogy between this case and Royal Bank v. W. Got & Associates Electric Ltd,(1997), 1997 ABCA 136 , 196 AR 241 (CA) (“Got Electric”).

In Got Electric, the Alberta Court of Appeal held that the in remportion of a proceeding (a receivership action) was distinct from the in personam one (a conversion action). I agree with Master Prowsethat just as the borrower in Got Electric was allowed to sue for conversion of its assets following their sale in invalid receivershipproceedings, Mr. Nahal should be allowed to sue for conversion of his land under what he asserts is an invalid foreclosure. This answersquestion number two. [16] Based on the materials before me, it appears that Mr.

Nahal has a difficult road ahead in pursuing his counterclaim forconversion. Particularly problematic for him is the wording of the mortgage, as interpreted by our Court of Appeal on at least twooccasions, and which in my view supports the proposition that the foreclosure action was well within time under the Limitations Act:Daniels v Mitchell, 2005 ABCA 271; Toronto Dominion Bank v Letendre, 2014 ABCA 232. [17] Nonetheless, the problems faced by Mr. Nahal in pursuing this counterclaim do not rise to the level of compelling this Courtto find that it should be struck. The Court of Appeal found that Mr.

Nahal has a meritorious defence (for the purpose of opening up thenoting in default) and also has the right to pursue repayment of the proceeds of the judicial sale. Like Master Prowse, I am not preparedon appeal to strike a statement of defence and counterclaim that seeks to accomplish this. [18] Having said that, I note that one of the arguments advanced by the Appellants was that the statement of defence andcounterclaim duplicate a separate action that was commenced by Mr. Nahal that relates to the same mortgage, the same land, and thesame foreclosure, and that is at an advanced state of litigation.

If that is correct, it may well be that this separate action is dispositive ofthe issues advanced in the statement of defence and counterclaim, rendering it unnecessary for the counterclaim to proceed.

[ 19 ] During oral argument, I invited counsel to address whether the relief sought herein might be effectively obtained through consolidation of the two actions. Neither were prepared to agree to that suggestion, but it remains open for one or both of the parties to pursue that (or a similar) remedy. No one benefits from having the same matters litigated in different proceedings, and counsel are encouraged to work together to avoid such a result. [ 20 ] The appeal is dismissed. [ 21 ] Counsel may speak to costs if agreement is not reached. Heard on the 19-20th days of January, 2016.

Dated at Calgary, Alberta this 11 th day of March, 2016. R.A. Neufeld J.C.Q.B.A. Appearances : Judy Burke / Derek Nash Demiantschuk Lequier Burke & Hoffinger LLP for the Appellants C. Richard Jones McMillan LLP for the Respondent