Servus Credit Union Ltd v BRB Building Corp, 2016 ABQB 428

Court of Queen’s Bench of Alberta Citation: Servus Credit Union Ltd v BRB Building Corp, 2016 ABQB 428 Date: 20160804 Docket: 1001 11762 Registry: Calgary Between: Servus Credit Union Ltd. Plaintiff - and - BRB Building Corp., Got Goals Inc., Robert Molle, Karen Molle, Ostrander Lodging Group Ltd., Brian John Keith Ostrander, Michael David Babcock, and Maureen Elizabeth Babcock Defendants _______________________________________________________ Memorandum of Decision of J.B.

Hanebury , Master in Chambers _______________________________________________________ [ 1 ] This application raises the question of whether an open-ended request by a Defendant that a Plaintiff take no further steps in an action constitutes an express agreement to delay the running of the clock under rule 4.33, the drop dead rule. [ 2 ] A few days before this application was heard, rule 4.33 was amended. All counsel agreed that this application would be considered under the former rule. I note that all counsel appearing on this matter were not the original counsel on the file.

FACTS [ 3 ] Servus Credit Union Ltd. sued to enforce two commercial mortgages granted by BRB Building Corp. and for money owing under various related guarantees. I will refer to this as the BRB action. The Statement of Claim was filed on August 6, 2010. Statements of Defence were filed on behalf of all of the Defendants, other than Mr. and Ms. Molle and Got Goals Inc., in August, 2010. [ 4 ] The last step taken in the BRB action was the sale of the mortgaged property.

An order confirming the sale of the property was granted on April 4, 2012, and a final accounting from the sale was filed and apparently served on April 20, 2012. The BRB action then became dormant. [ 5 ] Servus was involved in other actions involving most of the Defendants. An action, which I refer to as the Squamish action, involved Mr. Ostrander, Mr. and Ms. Babcock, Got Goals Inc., and Mr. and Ms. Molle. In the Squamish action Mr. Vogeli of Burnet, Duckworth and Palmer was counsel to the Defendants, other than Ms. Molle.

The Squamish action went to a mediation in December, 2014, which ended in a settlement in principle, subject to the preparation of settlement documents. [ 6 ] Mr. Ostrander was of the view that the mediation in the Squamish action settled all claims by Servus against Mr. Ostrander and his companies, including those found in the BRB action. Servus disagreed.

An unsuccessful attempt was made to contact the mediator to confirm his or her recollection of the scope of the settlement. [ 7 ] On March 2, 2015, after a telephone discussion, counsel agreed to settle the Squamish action without the inclusion of the BRB action. [ 8 ] In a subsequent email Mr. Vogeli advised counsel for Servus, Mr. Bieganek, of a proposal by Mr. and Ms. Babcock to settle the BRB action. As no response was received he sent a follow-up email. [ 9 ] On March 9, 2015 Mr. Vogeli and Mr.

Bieganek had a telephone conversation and the latter advised that he thought the sum offered by the Babcocks would be unacceptable. Mr. Bieganek states in his affidavit that: During this timeframe, I had a few conversations with Mr. Vogeli wherein I indicated that it would be best to first finalize the settlement respecting the Other Actions and then address issues in the BRB Action. Mr.

Vogeli agreed with this approach and I had come to understand that the parties had agreed that the BRB Action [this action] would be on a standstill pending finalization of the settlement in the Other Actions”. [ 10 ] Mr.Vogeli says that during this call they did not discuss an agreement to standstill the BRB action “or even the possibility of entering into a standstill agreement.” He says that he agrees that: [Mr. Bieganek] indicated that his clients wanted to finalize the Squamish settlement before discussing settlement of the BRB action.

I agreed with that approach but I certainly did not agree to a standstill of this action. At no time did we ever discuss entering into a standstill agreement. There is no documentation even mentioning the potential of a standstill agreement...I do not believe that I entered into a standstill agreement with Mr. Bieganek or anyone else on behalf of Servus [and] I did not even discuss the possibility of a standstill agreement with Mr. Bieganek or anyone else on behalf of Servus. [ 11 ] Mr. Vogeli also notes that he was in contact with his client, Mr.

Babcock, during this time frame and discussed bringing an application for long delay. [ 12 ] The Molles had never filed a Statement of Defence in the BRB action. Their original counsel wrote Servus’ counsel in 2010 asking that he “not take any further steps without prior notice to our offices.” Ms. Molle subsequently hired new counsel who wrote to counsel for Servus on March 2, 2015, advising that she had become aware of this action and asking “that you take no steps in the action without prior reasonable written notice to our office…”

[ 13 ] On April 22, 2015 an application under the drop dead rule was filed on behalf of BRB Building Corp., Ostrander Lodging Group Ltd., Mr. Ostrander, Mr. Babcock and Ms. Babcock. Got Goals Inc., Mr. Molle and Ms. Molle filed a similar application on April 27, 2015.

ISSUES [ 14 ] These applications under the drop dead rule raise the following issues: • Does the granting of a redemption order preclude some or all of the Defendants from applying under the drop dead rule? • What occurred that significantly advanced the BRB action and has there been the necessary three year gap? • Did counsel enter into an express agreement with respect to the delay which precludes certain of the Defendants from bringing this drop dead application? • Does the request of the Molle Defendants that Servus take no further steps preclude them from bringing this drop dead application?

ANALYSIS [ 15 ] Rule 4.33 provides: (1) if three or more years has passed without a significant advance in an action, the court, on application, must dismiss the action as against the applicants, unless (

a) the parties to the application expressly agreed to the delay… [ 16 ] The case law has made it clear that the court is to look back from the date of the application to dismiss and if less than three years has elapsed since the date that something was done to significantly advance the action, the drop dead rule does not apply: Neitz v Jordan , 2015 ABQB 732 , para. 20 . [ 17 ] When determining whether something significantly advances an action, the court is required to undertake a functional approach.

It should examine the real issues in dispute, and take a macro view of what has gone on during the three-year period. The focus is to be on the actual substance of what was done and its effect, not on the form of what was done. The question is whether what was done moved the action closer to resolution: Nash v. Snow , 2014 ABQB 355 , para. 29 , 32-35; Weaver v. Cherniawsky , 2016 ABCA 152 , para. 18 . [ 18 ] With that approach in mind I turn to the issues raised by the parties.

Does the granting of a redemption order preclude some or all of the Defendants from applying under the drop dead rule? [ 19 ] Servus correctly states that the drop dead rule only applies to a process to be followed before a judgment is obtained: Alberta Treasury Branches v. Canadian Egg Processing Inc. , 2014 ABQB 548 . Servus argues that the redemption order ( order nisi ) it obtained in the BRB action is a judgment against the mortgagor, BRB Building Corp.

It says that the drop dead rule cannot be used to dismiss the action after that judgment, as the cause of action has "merged" into the judgment: 762126 Alberta Ltd. v. Sims , 2007 ABQB 550 , paras 20-24 . [ 20 ] In 762126 Alberta Ltd ., the mortgagors brought the mortgage into good standing after the granting of the order nisi . They then wanted the action against them discontinued as it was having a negative effect on their ability to obtain credit. The Court considered

whether an action could be discontinued once an order nisi had been granted and held that an order nisi is a form of judgment. It notedthat a dismissal of an action is itself a judgment and there cannot be “a judgment which dismisses a previous judgment in the same actionbetween the same parties”: para. 23. Similarly, the Court said, it is not possible to discontinue a judgment: para. 25. [21] However that case is distinguishable from the facts found in this case. As noted, the BRB action is more than a simpleforeclosure action.

It is an action against both the land (a claim in rem) and an action for a judgment against the owner and the guarantors(claims in personam).

Servus is asking this court to hold that an in rem order against one defendant results in an inability to discontinueor dismiss the action against the Defendants facing in personam claims. [22] If this premise were correct, and no further final orders were possible then, following Servus’ argument to its logicalconclusion, Servus would be unable to obtain judgment on its in personam claims against the Defendants. [23] The order nisi granted in this case is a declaratory order setting out the amount outstanding pursuant to the in rem claim madeunder the mortgage: Yorkshire Trust Company v.

Armwest Development Ltd. 1986 ABCA 247 paras 6 – 11. See as wellCanada Permanent Trust Company v. King Art Developments Ltd., 1984 ABCA 182 para. 44. There is no determination ofthe in personam claims, in fact the order nisi specifically adjourned a determination of the in personam claims against the guarantors. [24] It is clear that the Court cannot dismiss or discontinue the in rem claim against BRB after the order nisi is clear.

However, theother claims found in the BRB action remain outstanding and are capable of being granted, discontinued or dismissed. [25] This argument is insufficient to defeat the applications under the drop dead rule. What occurred that significantly advanced the BRB action and has there been the necessary three year gap? [26] Servus next argues that the mediation in the Squamish action in December, 2014, was something that significantly advancedthe BRB action with the result that there was no three year gap.

It points out that some of the Defendants thought that the mediation andresulting settlement had settled the BRB action. Servus argues that to now claim that the mediation was not a step is inconsistent withthe Defendants’ own view of the matter. [27] I note that the same claim could be made in relation to Servus’ argument. It now seeks to imbue the mediation with a purposethat it earlier denied. In any event, the mediation must be viewed from a functional perspective, not a subjective perspective: Ro-DarContracting Ltd. v.

Verbeek Sand & Gravel Inc., 2016 ABCA 123 , 2016 CarswellAlta718, (ABCA), para’s 20, 21. [28] I cannot see that the mediation undertaken in the Squamish action did anything, let alone anything significant, to bring theBRB action closer to a resolution. [29] This argument is insufficient to defeat the application under the drop dead rule.

Did counsel enter into an express agreement with respect to the delay which precludes certain of the Defendants from bringing thisdrop dead application? [30] Servus next argues that it was clear that the parties agreed to conclude the settlement resulting from the mediation of theSquamish action first before discussing settlement of the BRB action. It argues that this agreement meets the requirements of rule 4.33(1)(

a) that the parties “expressly agreed to the delay”: Brian W Conway Professional Corporation v. River Rock Lodge Corporation,2015 ABQB 359, paras 40, 41, aff’d. 2016 ABCA 404; Bugg v. Beau Canada Exploration Ltd., 2006 ABCA 201, para. 15. [31] Servus says that the basic elements of the agreement were made out: the parties were identifiable; and, the commencementdate of the agreement and its essential terms were clear.

[ 32 ] Even if this agreement were not a complete standstill of the BRB action, Servus argues that it was an agreement to delay for specific period of time, being the time in between the agreement and the finalization of the settlement of the Squamish action, i.e. the period between April 23 and May 6, 2015. As the standstill period may be added to the end of the drop dead period, the effect of this argument is that the applications to dismiss were filed prematurely.

The three-year period had not yet expired: Neitz , para. 22 . [ 33 ] A number of cases have considered what constitutes “an express agreement” to delay under the drop dead rule. [ 34 ] In 525812 Alberta Ltd. v. Purewal , 2004 ABQB 938 , Slatter J., as he then was, said it means that “the parties must actually turn their minds to a standstill agreement before one will be found”: para. 10. In that case the Defendant had said it would not go to a mediation suggested by the Plaintiff until the lease in issue had expired. The Court held that it was clear that there was no express standstill agreement.

The correspondence did not refer to a standstill agreement, nor to a delay, nor to the passage of time, nor to the steps required to move the matter forward to trial. [ 35 ] In Bugg v. Beau Canada Exploration Ltd . , 2006 ABCA 201 , the Court noted the dictionary definition of “express”: Clear; definite; explicit; plain; direct; unmistakable; not dubious or ambiguous. Declared in terms; set forth in words. Directly and distinctly stated. Made known distinctly and explicitly, and not left to inference…Manifested by direct and appropriate language, as distinguished from that which is inferred from conduct.

The word is usually contrasted with implied. [ 36 ] Looking to this definition, the Court of Appeal noted that a standstill agreement cannot be implied by conduct and the evidence must establish the basic elements of an agreement, for example: the identity of the parties to the contract; when the standstill began; and, its essential terms. The evidence of the agreement can be written, oral or partly both.

It noted that when a standstill agreement is entered into “it would be preferable to describe it as such, and to state precisely what steps in the litigation process are waived or suspended pending the exploration of settlement…”: para. 18. [ 37 ] In Conway the parties had an email exchange in order to adjourn their trial and it included an agreement that they would "hold matters in abeyance" pending information on the solvency of a party.

At issue was whether there was an express agreement to the delay. [ 38 ] The Court held that there is no requirement for the parties to reference the "drop dead" date or how the agreement would impact the three-year time period, because the court can determine such facts by inference from the words used in the circumstances.

However, the court stated that “while an express or standstill agreement does not have to be completely in writing, such an agreement must clearly be demonstrated on the evidence provided, without recourse to conduct, intent or inference." The use of the word “abeyance” was key to the Court’s decision.

The Court noted that when used by a lawyer the word meant to refrain from taking procedural steps in a matter. [ 39 ] In this case a careful reading of the affidavits does not clearly demonstrate that there was an express agreement to hold the action in abeyance. [ 40 ] The conversations referenced in the affidavits came about as a result of a settlement offer made by some of the Defendants. Servus’ counsel says that it was agreed that the settlement would occur in the Squamish action before they would “address issues” in this action.

He then says that “I had come to understand that the parties had agreed that the BRB Action would be on a standstill pending finalization of this action.” Mr. Vogeli acknowledges that Mr.

Beiganaek “indicated that his clients wanted to finalized the Squamish settlement before discussing settlement of the BRB action.” However he says there was no intent to enter into a standstill, i.e. a cessation of the procedural steps in this action. [ 41 ] In my view the facts in this case are most similar to those found in Purewal where the parties agreed that a proposed mediation would not occur until the lease in issue had expired. Similar to that situation, there was no discussion about stopping or suspending the procedural steps or requirements of the action.

As a result, the discussions of counsel do not meet the requirements for an express agreement. [ 42 ] This argument is insufficient to defeat the application under the drop dead rule. [ 43 ] Therefore, the application of all of the Defendants except the Molles and their company, Got Goals Inc., is granted. Servus’

claims against them are dismissed. The Molles’ situation is slightly different and is considered further below. Does the request of the Molle Defendants that Servus take no further steps preclude them from bringing this drop dead application? [ 44 ] Servus next argues that an express agreement to delay the action was entered into with counsel for the Molles and their company. [ 45 ] As noted, the Molles’ original counsel sent a letter to counsel for Servus in 2010 asking that he “not take any further steps without prior notice to our offices’. Five years later, in March, 2015, newly-retained counsel for Ms.

Molle wrote to counsel for Servus asking “that you take no steps in the action without prior reasonable written notice to our office”. In neither letter was an undertaking given to defend the action, nor was a time set for a defence to be filed. [ 46 ] A number of cases have considered the effect of a request to take no further steps on the drop dead rule. [ 47 ] In Bugg new counsel for the Defendant advised counsel for the Plaintiff that he needed a few weeks to further understand the matter; undertook to defend on Mr. Bugg’s behalf and asked that no steps be taken to note Mr.

Bugg in default without reasonable notice. [ 48 ] A few weeks were granted and subsequent extensions were given. Several months later new counsel for Mr. Bugg filed a drop dead application. [ 49 ] The Court of Appeal found the agreed-to request to extend time coupled with the undertaking to file a Statement of Defence constituted a standstill agreement. With an undertaking to take a step that would significantly advance the action, the filing of a Statement of Defence, Mr. Bugg was contractually bound not to do something different.

The Court said that the agreement could have been terminated upon reasonable notice. [ 50 ] In Craig v. Blue Cross Life Insurance Company of Canada , 2010 ABQB 659 a standstill agreement was found where the Defendant requested that no further steps be taken while the parties undertook certain resolution efforts. There was a similar finding in Danek v. Calgary (City) , 2006 ABQB 807 (Master), where counsel for the Defendant City made repeated specific requests for extensions due to workload and family issues. See as well Sinnott v. Canadian Pacific Railway Company , 2010 ABQB 85 . [ 51 ] In Barcellona v.

Einarson , 2012 ABQB 56 (Master) counsel requested a few weeks in order to allow him to meet with the Defendant. He asked that no further steps be taken, including noting in default, without reasonable prior notice. There was no undertaking to defend. The Court held that if there were a standstill agreement, it was only for a week or two, which was insufficient to defeat the drop dead application. [ 52 ] In Charik Custom Homes Ltd. v.

Sara Development Inc . 2014 ABQB 63 (Master), the Court reviewed the case law that “can appear conflicting” and found that a request for courtesy, i.e. time to file a defence, agreed to by the Plaintiff’s counsel, does not defeat an application to dismiss for long delay. In that case the Defendant’s counsel had asked for the “usual courtesy of taking no default proceedings without reasonable prior notice”. There was no time frame set, nor undertaking to defend, nor any discussion of when further steps would be taken. [ 53 ] In Neitz v.

Jordan , 2015 ABQB 732 , Nixon J. examined several different requests by the Defendants that the Plaintiff not take further steps to determine if a standstill agreement had resulted. [ 54 ] In each case she found that the agreement identified the parties, clearly encompassed the entire action and either stipulated a time frame or imposed a temporal boundary. She held that each agreement constituted an express agreement to delay taking further steps in the action.

[ 55 ] In Conway counsel agreed to hold the action in abeyance pending a determination of the solvency of the Defendant. The Court held that this agreement constituted an express agreement to delay the clock. [ 56 ] It is difficult to reconcile this, and other case law not cited here, in a way that makes practical sense. In part, this results from the need, when situations such as this arise, to balance fairness with the practicalities and courtesies inherent in the practice of law. [ 57 ] For example, in Sucker Creek First Nation v.

Canada (Attorney General) , 2013 ABQB 199 , the Court pointed out the practical importance of allowing counsel time to prepare a defence but the unfair bargain that results if, by doing so, a Plaintiff reduces its drop dead time. As noted by Master Robertson in Charik , Defendant’s counsel often make a request that no further steps be taken and sometimes the Plaintiff loses interest in pursuing the action and it goes nowhere.

Should the result be that the Defendant is unable to bring a drop dead application three years later? [ 58 ] At the same time, should the Defendant be able to lull the Plaintiff into a false sense of security by requesting an open-ended agreement to take no further steps and then, shortly thereafter, launch a drop dead application? I hasten to add that there is absolutely no suggestion that there was such an intent in this case. That was made clear to me by counsel in oral argument. The new counsel for Ms. Molle was unfamiliar with the file at the time she made the request for time.

It is obvious that her review then disclosed what appeared to her to be a lengthy period of inactivity in the BRB action. [ 59 ] The way to resolve these issues is to return to basic principles. Rule 4.33 “is designed to bring an end to actions that have become inactive and should be deemed to have been abandoned”: Turek v. Oliver , 2014 ABCA 327 , para. 5 . The Rule requires that any agreement to stop the clock running must be “express”. In my view, for that to occur, a time line or temporal boundary of some kind must be established when the agreement is made. This was the approach taken by Nixon J. in Neitz .

When the agreement to take no further steps is, for example, to permit a meeting with the client or to permit evidence to be examined or because of counsel’s schedule, that requirement is met. However, an open-ended request that no steps be taken or the Defendant not be noted in default is insufficient to meet the criteria found in the Rule and as articulated in Bugg . [ 60 ] As a result, the original letter of 2010 was not a standstill agreement as it had no temporal boundary and the application of Mr.

Molle and Got Goals Inc. under the drop dead rule to dismiss the claim against them is granted. [ 61 ] The letter of new counsel for Ms. Molle of March 2, 2015, being open-ended, was also not a standstill agreement.

However that does not end the matter, as it leaves open the question of whether in fairness, a defendant can make an open-ended request for an accommodation and then promptly bring a drop dead application. [ 62 ] In my view, when a defendant makes an open-ended request for time near the end of the drop dead period, fairness requires that he or she cannot bring an application under the drop dead rule for a reasonable period of time: Co-operators Life Insurance Co. v. Rollheiser , 1998 ABQB 874 ; Danek ( supra ). As it was succinctly put by Slatter J.A. in Turek v.

Oliver , 2014 ABCA 327 , where, unlike this case, the situation was egregious, “[t]he drop dead rule was never designed to encourage the sort of ambush that was unleashed here, after months of courtesies by one side and obfuscation and unresponsiveness by the other”. [ 63 ] A similar comment was made recently in Kerr v. McDonald & Bychkowski Ltd ., 2016 ABQB 40 .

Noting that it is not clear that estoppel applies to applications under Rule 4.33, the Court nonetheless said: Where a plaintiff is trying hard to get the defendant to take a vital step and the defendant stalls and makes promises, and gets time extensions then the plaintiff should be able to rely upon the promises and the defendant cannot be permitted to ambush the plaintiff in the face of those promises and accommodations. That may be termed estoppel by conduct or it may be termed a standstill agreement, depending on the situation. [ 64 ] Fairness does not permit Ms.

Molle to bring an application under the drop dead rule for a reasonable period of time after seeking an accommodation of time. What that reasonable period is will depend on the facts in each case. In this case the action is on the personal guarantees of a mortgage debt. The facts in such a case are usually straightforward and it is rare that the defences, if any, are complex. The time needed for counsel to review the relevant facts would not be lengthy.

[ 65 ] Ms. Mosse’s counsel requested that no further steps be taken without notice on March 2, 2015. The three-year period in this case expired on April 20, 2015 and Ms. Molle’s application was filed almost two months after her request, on April 27, 2015. By that point, as I see it, it was not unreasonable or unfair for her to file her application under the drop dead rule. CONCLUSION [ 66 ] The applications are granted and the claims are dismissed against the Defendants. If the parties cannot agree as to costs they may contact the Clerk within 45 days to arrange to make further submissions.

Heard on the 23 rd day of June, 2016. Dated at the City of Calgary, Alberta this 4 th day of August, 2016. J.B. Hanebury M.C.C.Q.B.A. Appearances: Nicole T. Taylor-Smith Miller Thomson LLP for the Plaintiff Perry R. Mack, Q.C. Peacock Linder Halt & Mack LLP for the Defendants Brian Ostrander, Michael Babcock, Maureen Babcock, Ostrander Lodging Group Ltd., and BRB Building Corp. Victor C. Dick Olson Olson & Company for the Defendants Robert Molle, Karen Molle, & Got Goals Inc.