Kingsway General Insurance Company v Fekete Construction Co Ltd, 2016 ABQB 149

Court of Queen ’ s Bench of Alberta Citation: Kingsway General Insurance Company v Fekete Construction Co Ltd, 2016 ABQB 149 Date: 20160315 Docket: 0903 13177, 1003 09130 Registry: Edmonton Between: Docket: 0903 13177 Kingsway General Insurance Company Plaintiff - and - Fekete Construction Co. Ltd Defendant and CT & Associates Engineering Inc. Third Party And Between: Docket: 1003 09130 Greg Eitzen Plaintiff - and - Fekete Construction Co. Ltd., CT & Associates Engineering Inc., Chih-Tsung Hwang and David Nedohin Defendants _______________________________________________________ Reasons for Judgment

of W.S. Schlosser , Master in Chambers _______________________________________________________ [ 1 ] This is an application to strike two actions for delay. The lawsuits are about the consequences of building a house on sand or, at least, shifting fill. [ 2 ] The two issues canvassed at the application were the timing of service of an Affidavit of Records, and when time begins to run from an application. Authorities cited: 1. Huerto v Canniff , 2014 ABQB 534 2. Huerto v Canniff , 2015, ABCA 316 (at para 12 ) 3. Nash v Snow , 2014 ABQB 355 4. 155569 Canada Ltd v 57618 Manitoba Ltd, 2006 ABQB 919 5.

Barath v Schloss, 2015 ABQB 332 6. Ro-Dar Contracting Ltd v Verbeek Sand & Gravel Inc, 2015 ABQB 300 7. Terroco Drilling Ltd v Tusk Energy Corp, 2014 ABQB 419 (at paras 32-34 ) 8. Delorme v Canada (Attorney General), 2015 ABQB 240 9. Calgary (City) v Chisan, 200 ABCA 313 10. LC v Alberta (Metis Settlements Child & Family Services, Region 10), 2011 ABQB 12 11. TruehopeInc. V Stringman, 2014 ABQB 772 12. Supreme Court Act, RSC 1985, c S-26 13. Rules of the Supreme Court of Canada, SOR/2002-156 14. Filipchuk v Ladouceur, 2001 ABCA 26 15. Top Grade Solutions Inc v Flying Pizza 73 Inc, 2009 ABQB 492 16.

Huynh v Rosman, 2013 ABQB 218 17. Volk v 331323 Alta Ltd, 1998 ABCA 54 at para 21 18. Matco Investments Ltd v Dhow Properties Ltd, 2010 ABQB 104 (at para 30 ) 19. Condominium Corporation Number 0321365 v Cuthbert, 2016 ABCA 46 20. The Possibility of ‘Inference Causation’: Inferring Cause-in-Fact and the Nature of Legal Fact-Finding (2010) 55 McGill L J 1, Russell Brown (now Brown, J) 21. Murphy v Cahill, 2012 ABQB 793 22.

Alberta v Morasch, 2000 ABCA 24 Service of the Affidavit of Records [ 3 ] If Kingsway’s Affidavit of Records was served on CT shortly after it was sworn in March, 2010, it would not have advanced the action during the key period; which, here, is post-October 2012. However, if it was served for the first time in 2014, it would count as a significant advance, and at least one of the applications would fail. [ 4 ] A word about the evidence is in order because it is crucial to the first issue.

One Applicant, CT, brought this application based on an affidavit of a legal assistant; attaching the procedure card, the Memorandum of Judgment from the Court of Appeal (which bears on the second issue), and various letters written by others. The Court of Appeal Memorandum is dated November 15, 2012, and is tendered as evidence that the appeal was heard and dismissed from the Bench on October 5, 2012. Feketes’ Applicants’ affidavit is similar. Although it was sworn by an officer of the corporate party, it is sworn entirely on information and belief; attaching many letters written by others as exhibits.

Fekete’s affidavit is tendered to show that the Affidavit of Records of Kingsway, sworn March 2, 2010, was

served on Fekete’s counsel, first in March 2010 and, provided again, in April 2014, when another firm took over. [ 5 ] CT’s affidavit suggests that Kingsway’s Affidavit of Records may have been given to CT’s counsel in 2010 - but there is some doubt about that. They certainly got it in April 2014. [ 6 ] There are two actions.

While it is not contested that the Kingsway affidavit was served in the Kingsway action on Fekete in 2010, there is conflicting evidence about whether it was served on CT, the Third Party in the Kingsway action, and a Defendant in the other action, at that time. [ 7 ] The email chain (from attachments to Kingsway’s affidavit) is as follows; November 9, 2010 (Kingsway to CT) Attached please find a copy of the Affidavit of Records of Kingsway General Insurance Company.

November 10, 2010 (CT to Kingsway) Further to my voice mail of Tuesday afternoon, we would request that your provide us with a complete set of your producible documents, either on disk or hard copy format, at your early convenience. Friday, November 12, 2010 (Kingsway to CT) As requested. April, 1, 2014 (CT to Kingsway) We would reference our most recent telephone discussion and our e-mail of the same date, being March 18 th . Could we please hear from you at your earliest convenience with your document list on behalf of Kingsway.

As indicated, subject to the number and complexity of the documents, it would be helpful if you were to include the actual documents. Your early attention would be appreciated. (emphasis added) April 01, 2014 (Kingsway to CT) It turns out (the prior firm) prepared an Affidavit of Records for Kingsway and there aren’t that many documents. I checked and for some reason that was never sent to you. I’ve now dictated a letter and you’ll have both the Affidavit and the documents within the next week.

Have your assistant/associate contact my assistant Marg, should you wish to line up a date to question someone from Kingsway... recognizing that Kingsway no longer exists after being bought out by Jevco (2009) which in turn was bought out by Intact (2012). So I’m now reporting to someone from Intact and I don’t know if Shauna Voth (from Kingsway at the time; she sore out the Affidavit of Records) is still around, since I’m not reporting to her.

We’ll have to work all this out. (emphasis added) April 1, 2014 (CT to Kingsway) Thanks, we will be in touch once we have reviewed the documents. [ 8 ] It is not clear why CT’s counsel would be requesting an affidavit and the producible documents in 2014 if they had been provided with them in 2010. This, and the affidavit sworn on behalf of Kingsway (paras 16-19), certainly leave it open to the Court to infer that Kingsway’s Affidavit of Records was only served on CT in 2014 and that it never made it to them in 2010. [ 9 ] Service of the Affidavit of Records is required to complete that step (Rule 5.5).

Swearing the Affidavit and holding it on your file is not enough. Service of the sworn Affidavit of Records would count as something that will advance an action; It is a step mandated by the Rules : Alberta v Morasch . [ 10 ] No-one from CT swore positively that CT’s counsel got the Affidavit of Records in 2010. Correspondence, including the email chain mentioned above, raises doubts about this.

The absence of first-hand evidence of this kind, might, in itself, raise a negative inference about whether they actually got it in 2010. [ 11 ] This evidence is ‘information and belief’ because the deponent, who has no personal knowledge of the event, is being informed by a review of the file, and bases this belief on the review. It is hearsay because it simply attaches, as exhibits, documentary evidence about what somebody else said.

Some of the exhibits might be admissible under the Alberta Evidence Act , RSA 2000, c A-18 as public records (including filing dates) but the bulk of this evidence, if it is evidence of anything at all, it is that a statement was made. The attached correspondence is not evidence of the truth of the contents, and not really even evidence about dates, or the conveyance of any attachments.

I acknowledge that the other side might concede certain points on the face of evidence like this, but unless they do, and especially when doubts are raised about whether (and when) an event actually occurred, a higher standard is required. That is why we have Rule 13.18(3). [ 12 ] A Rule 4.33 application is a final application in that it may dispose of all or part of a claim. Rule 13.18(3) tells us that the evidence in support must be sworn on the basis of personal knowledge, not hearsay and not information and belief. [ 13 ] If we take this evidence as a whole, there are two ways that it can be approached.

On the one hand, the Court is presented

with two competing narratives and is faced with having to come to a conclusion about the probability of an event; that Kingsway’s Affidavit of Records was served on CT for the first time in 2014. The competing view is that it was served in 2010. The evidence on this point is inconsistent.

Resolving the conflict would normally require weighing the evidence and, at least to some degree, applying the Courts experience and perspective. [ 14 ] This approach may be something that is acceptable or even necessary at trial, but it is not acceptable on the present state of the law in this jurisdiction in a chambers application. There are a number of cases that tell us that Judges and Masters are not to weigh evidence in a chambers application, the most recent of which is Condominium Corporation Number 0321365 v Cuthbert , 2016 ABCA 46 at para 28 (in the

summary judgment context). I acknowledge that every determination in court might involve some element of weighing ( Orr v Fort McKay First Nation , 2014 ABQB 111 at para 18 , and the authorities cited), but weighing evidence to determine the central issue in this chambers application though tempting, is not acceptable.

In this instance the inconsistency goes to the onuses and burdens, not a finding of a fact. [ 15 ] Counsel for CT expressed some exasperation when this portion of the evidence was examined in detail at the chambers application because she had reviewed the file prior to the application and was aware of evidence that would resolve the issue. The application was adjourned for this affidavit. [ 16 ] But the Supplemental Affidavit was in the same form as the others. It was sworn by a legal assistant who attached correspondence from the file.

The legal assistant does not swear to any personal knowledge of the events described in the affidavit. Attaching the correspondence is really only a form of hearsay. [ 17 ] No one will swear that CT’s counsel got Kingsway’s Affidavit of Records in 2010 and there is no explanation about why they would have made repeated requests for it in 2014 if they had already had it for four years. [ 18 ] Like a

Summary Judgment application the standard to strike for delay is high. Like a

Summary Judgment application, the Respondent can tender hearsay evidence to raise an issue, or meet an onus, once the evidentiary burden passes to them: Murphy v Cahill , but this course of action is not open to an Applicant. [ 19 ] If there is an inconsistency on the evidence that ought to be clarified or explored on cross-examination, affidavits on information and belief, containing hearsay, are virtually immune from being tested.

And, there is no point in having the Court engage in an esoteric exercise to try to discern what must have happened if somebody can clear it up by giving evidence about it directly. [ 20 ] The normal course would be to ignore all of the Applicant’s evidence that violates Rule 13.18(3). This part of the application should fail on the evidence and the onus. Fortunately the application does not have to be decided on this point. When does time begin to run from an application? [ 21 ] An application that has been heard by the Court will usually advance an action.

The hearing of the application usually counts as the advance, not a reserved decision, because a reserve is out of the parties’ control: 155569 Canada Ltd v 57618 Manitoba Ltd, per Marceau, J. The question here is whether the subsequent Reasons, a Formal Order, or the passing of an appeal period can also have that effect. [ 22 ] After the actions had been commenced, CT & Associates Engineering Inc. had the indelicacy to sue the Plaintiff’s expert: issuing Third and Fourth Party Notices, respectively.

I acknowledge that litigation is not yet a ticket to the love train, but this went too far. [ 23 ] The Plaintiff’s expert retained counsel and applied to strike out the Third and Fourth Party Notices. Justice Browne and the Court of Appeal agreed. One of the reasons was that the Plaintiff’s expert did not owe CT any duty. [ 24 ] This is where the timing becomes important. [ 25 ] Justice Browne struck the Third and Fourth Party Notices. The application was heard September 27, 2011. Her Memorandum of Decision was published December 22, 2011. The Formal Order was filed January 23, 2012.

An appeal was taken to the Court of Appeal. The appeal was heard on October 5, 2012, and dismissed from the Bench, with Reasons to follow. There is no doubt that this Decision was important and represented a significant step in the action.

Subject to an appeal the Supreme Court of Canada, it settled the parties to the lawsuit once and for all. [ 26 ] The file was not dormant after the Court of Appeal Decision but, except for the issue of service of the Affidavit of Records discussed above, none of the events can be taken to have significantly advanced the action until October 21, 2015, when the Plaintiff filed and served their Expert Report in one action, and on October 30, 2015, when the same Expert Report and Form 25 was served in the other action. [ 27 ] If the hearing of the appeal and its dismissal from the Bench was the last thing that significantly advanced the action, the Plaintiff’s expert report was 16 days too late to save the action.

The Defendants agree that the Report was a significant advance but say it was too late. They did not participate or acquiesce in reviving the action after it was served. Instead, they brought these applications. [ 28 ] For their part, the Respondents argue that the Rule 4.33 clock should begin to run with the Court of Appeal Reasons dated November 15, 2012, or the Formal Order, rendering the Court of Appeal functus officio, or the expiry of the time for seeking leave to appeal to the Supreme Court of Canada which, arguably, was up December 5, 2012.

Any of these events would put the Expert report in time to save the action. [ 29 ] This is a novel point. But there are a number of principles from the decided cases that bear on it. First, the events we are looking at are not steps mandated by the Rules so we are obliged to apply the functional approach in our determination about whether an

event advances an action. [ 30 ] Second, Rules 4.33 and 4.31 affect the ‘right to litigate’. Doubts about

interpretation should be resolved in favour of letting an action proceed, Filipchuk v Ladouceur (CA). [ 31 ] Third, an event that would otherwise significantly advance an action does nothing if the other side does not know about it. This comes up most frequently in the context of expert reports. It is in line with those authorities that hold that a ‘step’, or an event, must be completed, not just started, if it is to constitute an advance. [ 32 ] Finally, a motion to strike for delay asks for what has been described as the ‘capital punishment’ of a lawsuit. As I see it, the standard should be correspondingly high: approaching the criminal standard, or the standard that applied to old

Summary Judgment applications; which would require a level of certainty that was ‘plain and obvious’, or ‘beyond doubt’ that no significant advance had occurred. [ 33 ] The Respondents argue that the step represented by the Court of Appeal hearing and the decision from the Bench at the conclusion of the hearing cannot be counted as a completed step against them because they were not present when the appeal was dismissed. I agree.

Their first indication that the appeal had been dismissed (and the parties settled) would have come with the publication of the Reasons issued November 15, 2012, or the formal Judgment that followed on November 21, 2012. If we count either of these things as the last significant advance in the lawsuit, the October 2015 Expert Report was just within the three year period. [ 34 ] The Plaintiffs said that CT had approached this lawsuit very aggressively and, that given CT’s track record, the parties could reasonably have expected an application for Leave to Appeal to the Supreme Court of Canada.

The deadline for this would not have expired until December 5, 2012, at the earliest. [ 35 ] The effect of bringing the Plaintiff’s expert into the action as a party was to sterilize and insulate the expert from contact with the Plaintiffs. The expert had separate counsel and contact with the expert (other than as a party) would not have been possible until they were out of the action once and for all.

Although this effectively occurred when the Court of Appeal gave its decision off the Bench it did not formally occur until the Judgment, or the passing of the appeal period. [ 36 ] If I apply these principles, I am not prepared to hold that an event that the Plaintiffs did not attend and did not know about counts as the event that stopped the Rule 4.33 clock.

I am prepared to find that the events following the Court of Appeal hearing can count; such as the Reasons for Decision, the Formal Order and, were it necessary, possibly even the passing of the appeal period. [ 37 ] Accordingly, I am not willing to dismiss this action for delay under Rule 4.33. [ 38 ] CT has also brought an application under Rule 4.31, in the alternative, which, in the circumstance is without merit. [ 39 ] The application is dismissed, though given the novelty of the point, without costs to the Respondent.

The Plaintiffs are to prepare a litigation plan within 30 days of the date of this Decision to bring this matter to a conclusion. Heard on the 25 th day of February, 2016. Dated at the City of Edmonton, Alberta this 15 th day of March, 2016. W.S. Schlosser M.C.C.Q.B.A. Appearances: Kember Handzic Emery Jamieson LLP for Kingsway General Insurance Company and Greg Eitzen Galan Lund

Chomicki Baril Mah LLP for Fekete Construction Co. Ltd. Valerie Quintal Burnet, Duckworth & Palmer LLP for CT & Associates Engineering Inc., Chih-Tsung Hwang and David Nedohin