Kahlon v Khalon, 2021 ABQB 683

Court of Queen’s Bench of Alberta Citation: Kahlon v Khalon, 2021 ABQB 683 Date: 20210826 Docket: 1303 03244 Registry: Edmonton Between: Satwinder Singh Kahlon, Manpreet K. Kahlon, and Lovepreet Chahal Appellants - and - Amtul Shehnaz Khalon, Sukwinder Randhawa, Lampas Holdings Ltd. Operating As Re/max River City, and Rajiv Bhalla Respondents _______________________________________________________ Reasons for Decision of the Honourable Mr. Justice Peter Michalyshyn _______________________________________________________ Introduction [ 1 ] This is an appeal from a Master dismissing an action pursuant to Rule 4.33.

The sole issue on appeal is whether certain undertaking responses materially advanced the action. For reasons which follow the appeal is dismissed.

Background [ 2 ] The Statement of Claim filed March 4, 2013 seeks judgment of $650,000 for the defendants’ alleged failure to pay a deposit and/or remaining balance in relation to a $1.675 million real estate transaction. Part of the $650,000 claimed is $200,000 which was the initial deposit cheque that was returned NSF.

Certain specific remedies are also sought against the defendant Khalon in the nature of rescission and an order directing Land Titles in a certain fashion. [ 3 ] In a questioning on December 13, 2016 the appellant Satwinder Khalon gave three undertakings, each of which was agreed to without objection: 1) to produce records in his possession relating to the acquisition of the lands in question and to construction of the subject house; 2) to request bank copies of appraisals acquired for the property during its construction phase and to produce copies of any records received; and 3) to produce any documents in his possession relating to the deposit of the $200,000 cheque and return of that cheque owing to it going NSF. [ 4 ] On September 22, 2017 counsel for Bhalla served an application to compel answers to these undertakings.

No court application proceeded as the answers to undertakings were provided on October 9, 2017 [ 5 ] In relation to undertaking 1, the only record produced was a copy of a 2009 Real Estate Purchase Contract for the land; regarding undertaking 2, the bank advised that any records it may have had were long since destroyed; and regarding undertaking 3, the appellants produced a copy of a document entitled Returned Item advice received from the bank in question containing back and front images of the $200,000 cheque the appellant deposited to his account. [ 6 ] No one disagreed that these undertaking responses aside, nothing of significance occurred in the action between the December 13, 2016 questioning and the rule 4.33 application filed on January 10, 2020. [ 7 ] The rule 4.33 application was heard by the Master on February 19, 2020, and was dismissed.

Analysis [ 8 ] The standard of review of the Master’s decision on this appeal is well established.

The appeal is de novo and the standard of review is correctness ( Bahcheli v Yorkton Securities Inc , 2012 ABCA 166 at para 12 ). [ 9 ] The law applicable to r 4.33 is as most recently stated in Rahmani v 959630 Alberta Ltd , 2021 ABCA 110 , at para 14 , relying heavily on Patil v Cenovus Energy Inc ., 2020 ABCA 385 : [14] The legal principles governing r 4.33 applications were recently summarized in Patil v Cenovus Energy Inc , 2020 ABCA 385 at paras 7-8 : • The rule must be applied within the context of the foundational rule (r 1.2) to resolve claims fairly and justly in a timely and cost- effective way. • Plaintiffs bear the responsibility of prosecuting their claims in a timely way: XS Technologies Inc v Veritas DGC Land Ltd , 2016 ABCA 165 at para 7 . • Defendants are obliged (pursuant to r 1.2) to not obstruct, stall or delay an action that the plaintiff is advancing: Janstar Homes Ltd v Elbow Valley West Ltd , 2016 ABCA 417 at para 26 . • A functional, as opposed to a formalistic, approach is appropriate to determine if a step constitutes a significant advance: Ursa Ventures Ltd v Edmonton (City) , 2016 ABCA 135 at para 19 . • The functional approach to r 4.33 is context-sensitive: “[C]ases that have considered a particular advance in an action will be useful precedents, but they are not determinative”: Ursa Ventures at paras 19, 23. • A significant advance is one that moves the action forward in an essential way, having regard to the nature, quality, genuineness and timing of the advancing action: Ursa Ventures at para 19; Ro-Dar Contracting Ltd v Verbeek Sand & Gravel Inc. , 2016 ABCA 123 at para 21 . • Rule 4.33 functions like a limitations period.

It only requires one significant advance within the three-year period, not “continuous significant advancement”. Rule 4.33 is not designed to determine what a “reasonably diligent litigant” would do over the course of the three-year period: Ursa Ventures at para 11. • Whether an agreement between counsel constitutes a significant advance is context-dependent.

Rule 4.33 was not designed to encourage an “ambush” by one side after the parties had agreed to take a particular step: Turek v Oliver , 2014 ABCA 327 at para 6 . • Courts assessing whether an action is a significant advance under r 4.33 should focus on substance, not form. As an example, agreement to participate in a judicial dispute resolution process may not constitute a significant advance if it was merely an agreement to

schedule a JDR, which was not carried out: Weaver v Cherniawsky , 2016 ABCA 152 at paras 20-21 . Importantly, r 4.33 is “not designed to regulate the efficient prosecution of actions, but rather to prune out actions that have truly died”: Ursa Ventures , at para 10. [ 10 ] The appellants also particularly rely on Alderson v Wawanesa Life Insurance Company , 2020 ABCA 243 at paras 12-16 . In its

summary of the r 4.33 law – and unlike the panels in Rahmani or Patil – the court in Alderson refers to its older decision in Ravvin

Holdings Ltd v Ghitter , 2008 ABCA 208 , for the proposition that “as a general rule, a response to an undertaking usually materially advances an action because it is an extension of the discovery process” (at para 23, citing Kuziw v. Kucheran Estate , 2000 ABCA 226 . The court in Ravvin Holdings also said this, at paras 24-25: [24] We would go further and suggest that providing a response to an undertaking is usually a thing that materially advances the action.

An undertaking given at an examination for discovery is really an extension of the discovery process – given at a time when relevant information requested during an examination is not immediately at hand. It is often as important to the advancement of the lawsuit as the examination for discovery itself, particularly where the existence of the information, or its importance, was not known prior to discovery. The significance of a response to an undertaking in trial preparation is confirmed by the requirement that all responses must be received before an action may be entered for trial.

No one would seriously deny that an examination for discovery is a thing that materially advances an action, and we find no reason to treat a response to an undertaking differently. Thus, even though it is in the power of the one party to respond to the undertaking, that does not change the nature of the response. It is, as a rule, a thing that materially advances the action. [25] Having said this, we note that there will always be exceptions to the general rule.

A response to an undertaking may not advance the action when it is merely perfunctory and nothing hinges on the response… [emphasis added] [ 11 ] There was some argument before the Master appealed from whether Ravvin was still good law. In my view there is little reason to doubt that it is. Of course it was cited favourably in Alderson ; the Court of Appeal version of that case was decided after the Master’s decision in the case on appeal before me. The Alderson decision aside, in my view the principles in Ravvin can be read alongside newer cases such as Rahmani and Patil .

Noting that an undertaking response will usually advance the action in a material way, it is also necessary to ask – as an exception to this general rule – whether functionally the undertaking response or responses significantly advance the action forward in an essential way, having regard for their nature, quality, genuineness and timing. What is also consistent with the newer authorities is the test articulated at para 25 in Ravin – whether an undertaking response is merely perfunctory and nothing hinges on its response. [ 12 ] Relevant too are the comments in Jacobs v.

McElhanney Land Surveys Ltd. , 2019 ABCA 220 at para 86 , relied on by the respondents: [86] To determine whether there is a significant advance – important or notable progress – a court must assess at the start and end points of the applicable period the degree to which the factual and legal issues dividing the parties have been identified and the progress made in ascertaining the relevant facts and law that will affect the ultimate resolution of the action.

Has anything that happened in the applicable period increased by a measurable degree the likelihood either the parties or a court would have sufficient information – usually a better idea of the facts that can be proven – and be in a better position to rationally assess the merits of the parties’ positions and either settle or adjudicate the action?

Are the parties at the end of the applicable period much closer to resolution than they were at the start date? [ 13 ] These comments in Jacobs were referred to approvingly in LDS v SCA , 2021 ABCA 59 , at para 12 . [ 14 ] In addition to Alderson itself, and other cases already mentioned, the appellants referred to 994552 NWT Ltd v Bowers , 2019 ABQB 195 , Le v 1055168 Alberta Ltd , 2013 ABQB 431 . [ 15 ] In addition to Patil and again other cases already mentioned, the respondents referred to Altex International Heat Exchanger Ltd v Foster Wheeler Limited , 2018 ABQB 620 ; Davenport Homes Ltd v Cassin , 2015 ABQB 138 ; Flock v Flock Estate , 2-17 ABCA 67; Berlinic v Peace Hills General Insurance Co , 2016 ABQB 104 ; Huerto v Canniff , 2015 ABCA 316 . [ 16 ] With these authorities in mind, the question remains – viewed as part of what transpired in the three-year period subject to r 4.33 scrutiny, did one or any combination of the three undertakings in question advance the action in a significant way, having regard for their nature, quality, genuineness, and timing?

Or are they an example of the exception the courts recognize to the general rule, including the question: were they perfunctory, with nothing hinging on their response? [ 17 ] The appellants argue that the three undertaking responses are “fulsome answers to the questions asked, and are not perfunctory”.

As noted above, however, it is also necessary to ask if ‘anything hinged on their response’. [ 18 ] I agree with the following characterization of the undertaking responses: the first undertaking response produced a 2009 Real Estate Purchase Contract but given the pleadings, it had nothing to do with the action in question. The second undertaking response provided nothing more than confirmation that certain documents once in the banks possession no longer exist.

Even if that arguably narrowed the action, I agree with the respondents that again given the pleadings the requested documents are not relevant to the action in question. The third undertaking response provided no more than a copy of the $200,000 cheque as noted above. While this response is relevant, it cannot be said to have advanced the action in a significant way as it provided no information not already known to the parties.

As argued by the respondents, it did not move the parties closer to resolution; nothing hinged on it; it could not advance the action in a significant way, having regard for its nature and quality, if not its genuineness and timing. [ 19 ] The appellants argue that searching for or asking third parties for records and responding that there are no further records, or that records no longer exist, “is a necessary step”. Granted, it was a necessary step if only because counsel agreed to answer the undertakings.

But none of that necessary activity persuasively answers the real question, which is: did the responses themselves, applying the functional approach, significantly advance the action? [ 20 ] I am not persuaded by the appellants’ submissions that the responses are significant because the questioning party asked for them in the first place, and took the trouble to prepare an application to compel responses, and said in support of the application that the provision of the answers was a necessary step to advance the action. [ 21 ] Again, on a functional approach it is not the asking or applying for undertakings, but rather the actual responses to the undertakings, that matters.

[ 22 ] The appellants refer to questioning leading to the requested undertakings, for example questions relating to the original value of the house in question and the possibly inflated value of the house some years after its construction. Further, the request for records relating to the $200,000 NSF cheque may have helped “clarify the convoluted history of the transaction between the parties” (Appellant’s Reply Brief, at para 18) [ 23 ] However, the appellants also acknowledge there is nothing in the pleadings that relates specifically to the original or subsequent value of the house.

A review of the Statement of Claim and various Statements of Defence confirms this. Nevertheless, the appellants argue the respondents cannot now deny the relevance of the questions or answers given – not when at questioning the respondents evidently believed themselves, regardless of the state of the pleadings, that the questions and answers [ 24 ] I am unable to agree that on a functional approach, questions asked and undertakings given at discovery that clearly did not arise from the pleadings now become relevant for the r 4.33 application before me.

The determination of relevance and materiality of the impugned response must start with reference to the pleadings: Berlinic v Peace Hills General Insurance Co , 2016 ABQB 104 , at para 17 , and cases mentioned therein. To a similar effect, Huerto , at para 8 . Conclusion [ 25 ] For the reasons given, the appeal is dismissed. If the parties are unable to agree, costs may be spoken to. Heard on the 30 th day of April, 2021. Dated at the City of Edmonton, Alberta this 26 th day of August, 2021. Peter Michalyshyn J.C.Q.B.A. Appearances: Greg Lintz Purdon Lintz for the Appellants Stuart J.

Weatherill Emery Jamieson LLP for the Respondent Rajiv Bhalla Jarin K.P. Myskew Duncan Craig LLP for the Respondent Lampas Holdings Ltd. operating as RE/MAX River City Murray Engelking Engelking Law for the Respondent Sukwinder Randhawa