TRDMS Services Inc v Condo Corp, 2016 ABQB 527

Court of Queen ’ s Bench of Alberta Citation: TRDMS Services Inc v Condo Corp 0425913 (the New Cambridge Lofts), 2016 ABQB 527 Date: 20160927 Docket: 1303 13601 Registry: Edmonton Between: TRDMS Services Inc. Plaintiff - and - Condominium Corporation 0425913 Operating As "the New Cambridge Lofts" and John Doe Appellants/Defendants - and - John Woo Respondent/proposed Third Party _______________________________________________________ Reasons for Judgment of the Honourable Madam Justice D.L. Shelley In Relation to an Appeal of the Order of Master R.P. Wacowich

Pronounced July 31st, 2015 (the Decision) _______________________________________________________ Introduction [1] Condominium Corporation 0425913 (the Appellant) appeals the Decision dismissing its application to add the Plaintiff’slawyer, Mr. John Woo (the Respondent), as a Third Party to this Action.

Background [2] The Plaintiff bought a condominium unit (the Unit) in October 2011, pursuant to a judicially ordered sale resulting from anaction by the Appellant against a previous owner of the Unit. [3] The Respondent acted for the Plaintiff on the purchase and continued to act until recently. [4] The Plaintiff viewed the Unit prior to purchasing it. The condominium plan registered at the Land Titles Office in October2011 indicated that the Unit was 226 square meters.

In 2012, the Plaintiff discovered that the Unit was actually 147 square meters. [5] Because condominium fees and special levies are based upon unit factors, which are in turn determined by the area of theunits, the Plaintiff commenced an action against the Appellant to recover alleged overpayments resulting from the error, together withpunitive damages and costs. [6] A Statement of Claim was filed on September 24, 2013. The Statement of Defence was filed on December 2, 2013. ThePlaintiff filed an Affidavit of Records on December 23, 2013, and the Appellant did so on January 14, 2014.

The Appellant concluded itsquestioning of the Plaintiff on August 13, 2014 and the Plaintiff commenced, but did not conclude, questioning the Appellant on August13, 2014. [7] In March 2015, the Appellant sought an extension of time to permit it to file a Third Party Claim against the Respondent onthe basis that he had breached his duty of care to the Plaintiff, and was therefore liable for any amounts found owing by the Appellant.The Appellant alleges in the proposed Third Party Notice that the Respondent failed to inquire as to the monthly rate of condo fees leviedat the time of the vesting order, and failed to inform the Plaintiff of the particulars of the condo plan, by-laws and allocation of unitfactors prior to the vesting order. [8] The Master refused to extend the time to file the Third Party Claim, finding that no reasonable excuse was given for thedelay, the Plaintiff had expended considerable time and money advancing the action, adding a Third Party would considerably delay theaction, and the Plaintiff would suffer prejudice.

He also stated that nothing was put before him to suggest that a lawyer involved inconveyancing could not rely on the condo plan, and he concluded that the claim was dubious. Issues [9] The main issue before the Court is whether the Master erred in refusing to extend the time to allow the Appellant to file itsThird Party Claim.

Parties’ Positions Appellant’s Position [10] The Appellant submits that the Master erred by finding no reasonable explanation for delay, prejudice, and dubiousness of theThird Party Claim. [11] The Appellant acknowledges that the Third Party Claim ought to have been filed by June 2, 2014, and therefore there was adelay of approximately 11 months beyond the 6 month filing deadline. It argues that courts have in some cases found such a delay to bereasonably short.

In this case, at least three months of the delay are due to the fact that the Appellant had to retain new counsel whoextended the courtesy of waiting for the Respondent’s return from vacation prior to notifying him of the proposed Third Party Claim. [12] The Appellant submits that the Court should not consider the merits of the Third Party Claim unless inexcusable delay andserious prejudice are established on the evidence, citing Labell v R Jo Enterprises Ltd, 1990 ABCA 147 , [1990] AJ No 430,105 AR 319 (CA) and Rule 6.11.

If the Court can consider whether the claim has an air of reality, then the threshold to meet the air ofreality test is a low one and is met in this case. [13] The Appellant submits that the Plaintiff has not suffered prejudice; the expending of time and money in pursuing its action,and considerable delay resulting from addition of a Third Party Claim, are not matters that constitute prejudice. Furthermore, any allegedprejudice could be remedied by a costs award.

[ 14 ] The Appellant notes that it took almost 11 months for Plaintiff’s counsel to provide answers to undertakings.

The Plaintiff did not seek to resume its questioning until after this application was filed. [ 15 ] In oral argument, the Appellant submitted that the provisions of the Contributory Negligence Act , RSA 2000, c C-27 “trump” the provisions of Rule 3.45. [ 16 ] In response to the Respondent’s suggestion that the judicial sale context is relevant, the Appellant said it did not know the effect this context would have, but thought that a tenderer could probably come back to Court and back out of an accepted tender if it learned of such a mistake. [ 17 ] The Appellant further submits that, even if the Plaintiff had not relied on the Respondent or if the Respondent was not negligent vis-à-vis the Plaintiff, the Defendants could still claim against the Respondent.

Respondent’s Position [ 18 ] The Respondent acknowledges that there have been cases in which leave has been granted for longer delays than the one in this case. However, although the Appellant knew that he was the Plaintiff’s solicitor by at least August 2012, it took no steps to add him to the action until March 2015. Furthermore, the Appellant decided to retain new counsel at the end of October 2014, and the file was transferred less than a month later.

Therefore, the file transfer accounts for a small period of time and does not provide a reasonable excuse. [ 19 ] The Respondent submits that there will be significant prejudice to him and to the Plaintiff if the Appellant is allowed to file the Third Party Claim. The action has been proceeding at a good pace; questioning is completed on the Plaintiff and partially completed on the Appellant.

It would cause significant prejudice if a new party was brought in at this stage in the proceedings. [ 20 ] The Respondent disagrees that the Court should only consider the merits of the claim where there is inexcusable delay and serious prejudice. He points to cases which have considered the air of reality of a claim, even where there has been no excusable delay or serious prejudice, citing as an example Kwik-Kopy Printing Canada Corp v Skoreiko , 2002 ABQB 835 , 324 AR 126. [ 21 ] The Respondent argues that the Appellant does not have an independent claim against him.

Rather, the Appellant relies on an alleged breach of the Respondent’s duty to the Plaintiff. The Plaintiff has made no claim against the Respondent. [ 22 ] The Respondent submits that he cannot be responsible for any loss suffered by the Defendants. The Plaintiff did its own inspection, reviewed the condominium plan, and was satisfied with it, before attending at the Respondent’s office to sign the conveyancing documents required to complete the judicial sale to which it had already agreed. The judicial sale was on the basis that the tenderer would accept the Unit “as is”.

The Respondent was not responsible for the errors that resulted in the alleged damages suffered by the Plaintiff. Accordingly, there is no air of reality to the proposed Third Party Claim. Standard of Review [ 23 ] The standard of review of a Master’s decision is correctness: Bahcheli v Yorkton Securities Inc , 2012 ABCA 166 at para 19 , 524 AR 382.

Rules of Court [ 24 ] The Alberta Rules of Court , Alta Reg 124/2010 provide: 1.4(1) To implement and advance the purpose and intention of these rules described in rule 1.2 the Court may, subject to any specific provision of these rules, make any order with respect to practice or procedure, or both, in an action, application or proceeding before the Court.

(2) Without limiting sub rule (1), and in addition to any specific authority the Court has under these rules, the Court may, unless specifically limited by these rules, do one or more of the following: ... (h) ... extend the time for doing anything in the proceeding... 3.44 A defendant ... may file a third party claim against another person who (

a) is or might be liable to the party filing the third party claim for all or part of the claim against that party, (

b) is or might be liable to the party filing the third party claim for an independent claim arising out of (

i) a transaction or occurrence or series of transactions or occurrences involved in the action between the plaintiff and the defendant, or (ii) a related transaction or occurrence or series of related transactions or occurrences, 3.45 A third party claim must ...(

c) be filed and served on the plaintiff and the third party defendant, whether or not the third party defendant is already a party to the action,

(

i) within 6 months after the date on which the defendant filed a statement of defence or demand for notice... 13.5(1) Unless the Court otherwise orders or a rule otherwise provides, the parties may agree to extend any time period specified in theserules.

(2) The Court may, unless a rule otherwise provides, stay, extend or shorten a time period that is (

a) specified in these rules, (

b) specified in an order or judgment, or (

c) agreed on by the parties.

(3) The order to extend or shorten a time period may be made whether or not the period has expired. Law [25] In Tiesmaki v Wilson, 1971 ALTASCAD 79 , [1971] AJ No 145, 23 DLR (3d) 179, the Court of Appeal held that onan application to take a further step in an action, the defendant must show:

a) inordinate delay;

b) the inordinate delay is inexcusable; and

c) the defendants are likely to be seriously prejudiced by the delay. [26] In Labell, the Court of Appeal held that a court should not indulge a party by extending time to issue a third party noticeunless the party shows that there is an air of reality to the proposed claim.

The Court added that dismissal could be justified on thatground alone, although generally the Court is reluctant to deny an extension unless excusable delay and serious prejudice are also shown.The Court went on to find that there was insufficient evidence to establish an air of reality in that case, and it sent the matter back to theMaster, giving the appellant the opportunity to try to establish an air of reality.

In extending this “indulgence”, the appellant was orderedto pay solicitor-client costs on the original application as well as the appeal. [27] Since Labell, a number of decisions from this Court have considered whether there was an air of reality to a third party claim,in addition to the Tiesmaki factors. [28] In Condominium Plan 9812082 v Battistella Developments Inc, 2014 ABQB 644, [2014] AJ No 1167, Erb J. held that, inaddition to length of the delay, explanation for the delay and relative prejudice to the parties, the courts may consider whether theproposed claim has an air of reality.

Erb J. found that the parties had provided no evidence to support the merits of the third party claimbeyond general allegations.

The extension request was denied on the basis of inexcusable delay, no reasonable explanation, and inferredprejudice. [29] In Pagnucco v Sears Canada Inc, 2011 ABQB 810, [2011] AJ No 1505, the Master found four or five third party claims hadonly a questionable air of reality, but ultimately denied the extension request because of significant prejudice. [30] In Kydd v Abolarin, 2008 ABQB 310, [2011] AJ No 1245, the appeal of a Master’s decision to grant an extension of the timeto file a third party claim was dismissed because there was an air of reality to the third party claim in addition to some excuse and onlyinsignificant prejudice. [31] In Condominium Corp No 9813678 v Statesman Corp, 2008 ABQB 495, [2008] AJ No 904, two of four third party claimswere denied an extension of time to file because they had no air of reality.

Two others were denied because of significant delay and noreasonable excuse. [32] In Lam v Bockman, 2006 ABQB 101, [2006] AJ No 162, an extension was granted because there was an air of reality to thethird party claim in addition to only a short delay, a reasonable excuse, and insignificant prejudice. [33] In Primrose Drilling Ventures Ltd v Hitchner, 2005 ABQB 84, [2005] AJ No 127, an application to extend the filingdeadline was denied because there was no air of reality to the third party claim, in addition to no credible excuse and a finding ofprejudice. [34] In Kwik-Kopy, the Master’s decision to deny an extension request was upheld because the third party claim had no air ofreality.

Watson J. (as he then was) held that the Master was entitled to consider the air of reality, and there was insufficient evidence tosupport the claim. Analysis [35] It is implicit in the Master’s conclusion that he considered the delay to be inordinate. I agree. The Respondent’s role wasalways known by the Defendants. The error regarding the Unit’s dimensions was discovered in 2012. The Third Party Claim did nothave to be filed until June 2, 2014.

This was not a situation in which the Defendants were unaware of the facts underlying their claimuntil well into the action. [36] I am also satisfied that there was no reasonable excuse for the inordinate delay. The Appellant took the position in its oral

argument that one of the reasons for not raising the Respondent’s negligence earlier was that it would have been “awkward” to have asked questions regarding his negligence while he was in the room representing the Plaintiff, and this awkwardness resulted in a lack of particulars regarding his alleged negligence.

Such awkwardness is not a reasonable excuse for delay. [ 37 ] I also find that adding the Respondent at this stage in the proceedings would be prejudicial to the Plaintiff, although prejudice is not a significant factor in this case. [ 38 ] I reject the Appellant’s argument that the air of reality analysis has no application. Clearly, courts have considered the merits and the air of reality of a claim even where all three Tiesmaki factors are not present. The Court of Appeal held in Labell that dismissal could be justified on that ground alone.

While courts may be reluctant to determine an application solely on the basis of the air of reality test, it is a factor that can be considered in all cases, and it may be determinative in an appropriate case. [ 39 ] I share the Master’s skepticism that the Defendants will find case authority to support its alleged claim against the Respondent in the particulars of this case. In that regard, I consider Orr v Metropolitan Toronto Condominium Corp No 1056 , 2011 ONSC 4876, [2011] OJ No 3898 , var’d 2014 ONCA 855 , [2014] OJ No 5752, to be distinguishable on its facts.

In that case, the client received two storeys rather than the three she had seen. The previous owner had unlawfully created the third storey. Further, the sale in that case was not a judicial sale and the person alleging negligence was the lawyer’s client. [ 40 ] I share the Master’s conclusion that the merit of the Appellant’s claim against the Respondent is questionable. I also agree with the Respondent’s submission that the Appellant has failed to provide sufficient evidence to meet the air of reality test. [ 41 ]

Section 6 of the Contributory Negligence Act , allows adding, as a party defendant, a person who may be wholly or partly responsible for damages claimed. I do not interpret this

section as extending the normal timelines or limitations established to add third parties to an action. Conclusion [ 42 ] For the above reasons, the appeal is dismissed. Costs [ 43 ] If the parties are unable to agree on costs, they are to contact my assistant within 30 days of receipt of these Reasons for Judgment to arrange a time at which the matter may be addressed. Heard on the 23 rd day of March, 2016. Dated at the City of Edmonton, Alberta this 27 th day of September, 2016. D.L. Shelley J.C.Q.B.A. Appearances:

Hugh Willis Willis Law for the Plaintiff Craig R. Madill Blakey & Dushenski for the Defendant/Appellant, Condominium Corporation 0425913 Kelly W. Wong Kelly Wong Law Office for John Woo, Respondent/proposed Third Party