Smale v Joozdani, 2019 ABQB 909

Court of Queen’s Bench of Alberta Citation: Smale v Joozdani, 2019 ABQB 909 Date: 20191128 Docket: 1101 10322 Registry: Calgary Between: David Smale Plaintiffs - and - Mehran Joozdani and Layla Joozdani Defendants (Plaintiffs by Counterclaim) - and - David Smale and Rocky Cross Construction (South) Limited (Defendants by Counterclaim) _______________________________________________________ Endorsement of J.T. Prowse , Master in Chambers

_______________________________________________________ [ 1 ] I am considering the defendants’ application to dismiss this action for prejudicial delay pursuant to rule 4.31. [ 2 ] For the reasons which follow I am dismissing the action for delay. Background [ 3 ] In January of 2010 the Joozdanis decide to renovate their house. They hired David Smale and/or his corporation Royal Cross Construction (Souoth) Limited (“RCC”) to assist. [ 4 ] The arrangement appears to be a hybrid. To some extent Smale/RCC were construction managers, providing construction management for a fee.

However, there were aspects of a fixed price contract involved. [ 5 ] Work was undertaken, but the parties had a falling out in December of 2010. By then Smale/RCC say that they had made payments to subcontractors on behalf of the Joozdanis, and earned fees payable by the Joozdanis, totalling $371,000. Smale alleges he was only paid $130,000. This left a shortfall of $241,000. [ 6 ] The Joozdanis, to the contrary, assert that they have suffered damages of $305,000, being the cost to repair the deficiencies in construction. [ 7 ] Smale filed a builder’s lien to enforce his claim on January 31, 2011.

He commenced these proceedings on July 26, 2011. The Joozdanis counterclaimed on August 12, 2011. [ 8 ] It is now almost 9 years since the lien was filed and the matter is not ready to set down for trial. The Joordanzis apply to dismiss the action for delay. The law concerning dismissal for delay [ 9 ] The Joozdanis apply to dismiss the action for prejudicial delay pursuant to rule 4.31, which states:

(1) If delay occurs in an action, on application the Court may: (

a) dismiss all or any part of a claim if the Court determines that the delay has resulted in significant prejudice to a party, or (

b) make a procedural order or any other order provided for by these rules.

(2) Where, in determining an application under this rule, the Court finds that the delay in an action is inordinate and inexcusable, that delay is presumed to have resulted in significant prejudice to the party that brought the application. [ 10 ] The leading cases from the Alberta Court of Appeal dealing with rule 4.31 are Humphreys v Trebilcock , 2017 ABCA 116 , 2017 CarswellAlta 647 and Transamerica Life Canada v Oakwood Associates Advisory Group Ltd , 2019 ABCA 276 , 2019 CarswellAlta 1388. [ 11 ] I will organize my analysis around the following topics: • Have the plaintiffs failed to advance the action to the point on the litigation spectrum that a litigant acting reasonably would have attained within the time frame under review?

Is the shortfall or differential of such a magnitude to qualify as inordinate? • If the delay is inordinate have the plaintiffs provided an explanation for the delay? If so, does it justify inordinate delay? • If the delay is inordinate and inexcusable, have the plaintiffs rebutted the presumption of significant prejudice created by rule 4.31(2)? • If the defendants have met the criteria for granting relief under rule 4.31(1), is there a compelling reason not to dismiss the plaintiffs’ action? [ 12 ] I will now discuss these factors.

Have the plaintiffs failed to advance the action to the point on the litigation spectrum that a litigant acting reasonably would have attained within the time frame under review? Is the shortfall or differential of such a magnitude to qualify as inordinate? [ 13 ] This remains a debt/damages action as the plaintiffs’ CLP has been discharged. It has not advanced to a stage one would expect if the plaintiff had been pursuing the action at a reasonable pace. [ 14 ] We are now almost 9 years since the filing of the lien and questioning has not occurred. [ 15 ] In my view the delay is inordinate.

If the delay is inordinate have the plaintiffs provided an explanation for the delay? If so, does it justify inordinate delay? [ 16 ] I set forth the chronology of litigation steps taken to date in order to consider any justification for periods of delay which have

occurred: • January 31, 2011 – Smale filed a builder’s lien. • May 16, 2011 – the Joozdanis obtained a site inspection report from Neoteric Architecture. • July 26, 2011 – Smale filed the statement of claim. • May 24, 2012 – Smale filed an affidavit of records. • June 11, 2012 – Joozdanis filed an affidavit of records. • June 29, 2012 – RCC (as defendant by counterclaim) filed an affidavit of records. • April 22, 2015 – RCC was placed in receivership by HSBC. • June 4, 2015 – Smale applied to set a litigation plan. • June 9, 2015 – Joozdanis applied to discharge the builders’ lien. • June 10, 2015 – an expert report was filed by Smale. • June 16, 2015 - both applications were heard, and order was pronounced discharging Smale’s certificate of lis pendens and approving a form of litigation plan. • June 25, 2015 – a Notice to Admit was filed and served by Smale. • July 10, 2015 – a Response to Notice to Admit was filed by the Joozdanis. • March 9, 2016 – HSBC’s counsel received the file materials from the lawyer acting for Smale and RCC as defendant by counterclaim. • July 5, 2016 – HSBC decided to proceed with the action, and wrote to the Joozdanis’ lawyer, noting that questioning was the next step but observing that, as four years had elapsed since each party provided an affidavit of records, the production of any new documents should be elicited first. • July 20, 2016 – Joozdanis’ counsel responded, indicating that she was generally available for questioning in November of 2016 and further advising “our client is gathering additional documents to substantiate his defence and counterclaim and will provide those to you in due course”. • November 21, 2016 – HSBC’s counsel responded as follows: ...

I was hoping to get the supplemental documents from you prior to scheduling the questioning. This would allow me to complete my preparation at one time. Please let me know when I should expect to receive the documents. If it is necessary to

schedule the questioning as a backstop to your clients providing the documents, please advise and we can discuss some mutually convenient dates. • May 12, 2017 – HSBC’s counsel emailed to Joozdanis’ counsel, referencing his email of November 21 and stating: ... I need to push this matter ahead. Please get back to me with the additional documents shortly. We can then

schedule examinations. If I hear nothing from you within the next two weeks I will assume your instructions are not to cooperate and will proceed as required. • May 26, 2017 – Joozdanis filed a supplemental affidavit of records. • December 8, 2018 – HSBC proposed adding RCC as a plaintiff and forwarded a proposed consent order in that regard. • February 25, 2019 – HSBC filed an application to add RCC as a plaintiff. • March 26, 2019 – Joozdanis applied to strike the claim for delay. [ 17 ] A review of this chronology leads to the following observations: • The affidavits of records were provided by June 9, 2012.

Nothing happened for the next 2 years and 11 months until Smale applied for a litigation plan. There has been no justification for this delay. • RCC was placed in receivership on April 22, 2015.

While a delay of perhaps 3 or 4 months might have been justified for the receiver to consider whether to carry on with the litigation, in fact it took almost 15 months for that decision to be made. • While the receiver’s counsel was reasonable in wanting to receive a supplemental affidavit of records from the Joozdanis before holding questioning, the supplemental affidavit of records was received on May 26, 2017 and then another 1 ½ years went by without the scheduling of questioning.

Instead counsel for HSBC next engaged (in December of 2018) the topic of adding RCC as a plaintiff. [ 18 ] My conclusion, having regard to the observations set out above, is that the delay is inexcusable. If the delay is inordinate and inexcusable, have the plaintiffs rebutted the presumption of significant prejudice created by rule 4.31(2)?

[ 19 ] Given my conclusion that the delay in this case was both inordinate and inexcusable, the onus lies on Smale/RCC to rebut the presumption of significant prejudice.

See Transamerica at paragraph 43. [ 20 ] My conclusion is that Smale/RCC have not rebutted the presumption of significant prejudice, for the reasons set out below. [ 21 ] While there are hundreds of pages of documents listed in the parties’ affidavits of records, that does not make this a ‘documents’ case so far as evaluating prejudice from delay. [ 22 ] Perhaps the most important issue in this case is the nature of the arrangement between Smale/RCC and the Joozdanis.

Unfortunately there was no written agreement. [ 23 ] In order to demonstrate how important undocumented discussions would play in any trial, counsel for the Joozdanis sets out, in his written argument, the competing versions of the unwritten arrangement between the parties. He does so by referring to the competing versions as set out in the pleadings exchanged.

I will now quote from his argument in that regard (I will substitute the defined terms already used in these reasons to avoid confusion): • The statement of claim was filed on July 26, 2011, and alleges: Smale and the Joozdanis entered into the Agreement, the terms of which were as follows: Smale would provide the Joozdani’s with advisory services regarding the Renovation Project in return for payment of $15,000; Smale would provide credit facilities to the Joozdanis in order to secure labour and materials from various contractors, including RCC and sub-trades who normally worked with RCC, to complete the Renovation Project; and Smale was entitled to a 10% administrative charge applied to all labour and materials obtained through the credit facilities; Smale provided all services in accordance with the Agreement; and Smale has not been paid for all amounts owing under the Agreement. • The statement of defence disputes the [statement of] claim’s allegations as follows: The terms of the Agreement were as follows: Smale, and/or RCC would arrange for reputable and qualified sub-trades to complete the Renovation Project; The sub-trades would submit invoices to RCC, and Smale would determine whether the invoice would be paid by either Smale, RCC, or the Joozdanis; The Renovation Project would be completed for the all-inclusive sum of $360,000; Smale was to supervise the Renovation Project; The Renovation Project would be complete within four months, with all work completed to a good and workmanlike standard; The Joozsdanis have made payments of $143,000 to RCC and $287,000 to various sub-trades.

These payments exceed the original quote of $360,000; The work was not completed in a good and workmanlike manner and the defendants have incurred costs to remedy these deficiencies; and The Joozdanis deny that Smale was entitled to a 10% administrative charge. • Smale has filed an application to amend the statement of claim and add RCC as a plaintiff. This application will be heard concurrently with the within application to dismiss the claim.

The [proposed] amended statement of claim alleges: The Agreement was originally between Smale and the Joozdani’s provided as follows: Smale would provide a budget for the Renovation Project; Smale would provide contact information for construction trades so they could be interviewed and potentially engaged for the Renovation Project; Smale would provide construction advice and guidance on an “as needed” basis; and Smale would be paid $15,000 for the services described above. [the proposed amended statement of claim alleges that] The sub-trades desired by the Joozdani’s refused to be invoiced and paid by anyone other than RCC, and as such RCC became a party to this Agreement and it was revised as follows: RCC would retain sub-trades on behalf of the Joozdani’s, and RCC would pay invoices submitted by these sub-trades; RCC would pay for some materials required to complete the Renovation Project; The Joozdanis would reimburse RCC for all invoices paid by RCC on behalf of the Joozdanis;

RCC would provide its own construction personnel for general labour purposes and the defendants would be billed at the normal rates charged by RCC; and RCC was entitled to add a 10% overhead and administrative charge to the invoices paid on behalf of the defendants; RCC/Smale have not been paid for all amounts owing under the Agreement. [ 24 ] If this matter was to come to trial in (perhaps) 2022, the Court would have to determine which of the competing versions represents the actual arrangement between the parties.

This determination would depend on the testimony of the participants regarding events and discussions held in 2009 and 2010. It is obvious that the lengthy passage of time will dull the litigants’ memories of those events and discussions. [ 25 ] The adequacy of the renovation work done will be another important and contentious topic if this matter proceeds to trial. [ 26 ] I pick at random some of the particulars contained in the expert report of John Spender of BTY, who provided a report to the Joozdanis regarding construction deficiencies.

A few of these alleged deficiencies are: - return air grille chipped - skewed window - door not plumb - painting incomplete - mismatched guard rails [ 27 ] It is hard to imagine how difficult it would be for a trial judge could evaluate whether a return air grille was chipped and, if so, who chipped it, more than12 years after it was (or was not?) chipped. This difficulty would apply to all of the many alleged construction deficiencies. [ 28 ] As stated in 330626 Alberta Ltd v Ho & Laviolette Engineering Ltd, 2018 ABQB 398 , 2018 CarswellAlta 954 (Alta.

Q.B.) at para 95 : In Middleton Energy Management Ltd v TransCanada Pipelines Limited, 2017 ABQB 669 , 2017 CarswellAlta 2329 (Alta. Q.B.), the Master observed that stale memories are prejudicial; memories are important to the witnesses' recollection of the facts and to allow proper challenges to the witnesses' evidence (paras 30-31 & 38-41; and The Owners: Condominium Plan No 982 6403 v CPI Crown Properties International Corporation, 2017 ABQB 562 , 2017 CarswellAlta 1680 at para's 63-69 (Alta. Q.B.). The Court of Appeal said in Costigan v Ruzicka, 1984 ABCA 234 , 13 D.L.R. (4th) 368 (Alta.

C.A.): " Every trial judge is aware that stale claims with stale testimony produce bad trials and poor decisions " (para 30). (emphasis added) [ 29 ] In my view, Smale/RCC have not rebutted the presumption of significant prejudice found in rule 4.31(2). If the defendants have met the criteria for granting relief under rule 4.31(1), is there a compelling reason not to dismiss the plaintiffs’ action? [ 30 ] I am not aware of any reason to cause me to exercise my discretion not to dismiss the action for delay.

Conclusion [ 31 ] The action is dismissed for delay, conditional on the Joozdanis agreeing to a concurrent dismissal of their counterclaim. [ 32 ] If the parties cannot agree on costs they may make written submissions in that regard within 60 days from the release of these reasons. Heard on the 22 nd day of October, 2019. Dated at the City of Calgary, Alberta this 28 th day of November, 2019. J.T. Prowse M.C.C.Q.B.A. Appearances:

Russell N. Avery Bishop & McKenzie LLP for the plaintiffs Michael Cashion DBH Law for the defendants