Hunt v Riehl, 2023 ABKB 440

Court of King’s Bench of Alberta Citation: Hunt v Riehl, 2023 ABKB 440 Date: 20230725 Docket: 1801 17241 Registry: Calgary Between: Leslie Marie Hunt and Rundlecreek Custom Homes Ltd Plaintiffs/Respondents - and - Brad Riehl Defendant/Appellant _______________________________________________________ Reasons for Decision of the Honourable Justice A. Loparco _______________________________________________________ I.

Introduction [ 1 ] The Appellant, Brad Riehl, appeals the Order of an Applications Judge dismissing his Application to set aside a Default Judgment entered against him by the Respondents, Leslie Marie Hunt and Rundlecreek Custom Homes Ltd. (the Respondents). [ 2 ] For the reasons that follow, the Appeal is dismissed. II. Background and Chronology • The parties were joint venture partners in the development of three jointly owned properties.

• The Respondents commenced the Action by Originating Application, filed December 4, 2018 (“First Action”). • The Originating Application sought certain relief, including: (

a) The partition and sale of title to the three parcels of land; and (

b) Damages as against the Appellant for loans. • The Originating Application was served on the Appellant by process server on December 6, 2018, and resulted in a December 13, 2018 Order by Master J.T. Prowse, QC, (as he then was) (the “Prowse Order”). • The Prowse Order included the following relief: (

a) co-ownership of the three parcels of land be terminated; (

b) properties be listed and sold; (

c) the award of damages against the Appellant for loans in the amounts of $24,000.00 and $28,517.35; and (

d) costs. • Additionally, the Respondents were granted leave to file and serve a Statement of Claim for all other damages. • The parties were present in Court on the date of the Prowse Order. Counsel for the Respondents served the Prowse Order on Mr.

Riehl on December 18, 2018, by email. • Pursuant to the leave granted in the Prowse Order, the Respondents filed a Statement of Claim, which was never served, and subsequently filed an Amended Statement of Claim on June 24, 2019 (“Second Action”). • On July 31, 2019, the Respondents filed an Affidavit of Service purporting to have effected service of the Amended Statement of Claim on the Appellant on June 26, 2019, by courier. • The Respondents obtained and filed a Noting in Default on July 31, 2019. On the same date, counsel for the Respondents, Torres Law, delivered, by email, to the Appellant: (

a) the Affidavit of Service; (

b) the Noting in Default obtained upon the Affidavit of Service; and (

c) the Amended Statement of Claim. • After the Prowse Order, the Respondents served a Garnishee Summons upon the Appellant’s employer, Imperial Oil. • From July 31, 2019, to February 17, 2022, no steps were taken in the Second Action. • On February 18, 2022, the Respondents filed an application for Default Judgment. • On May 18, 2022, the Appellant filed his Application to Set Aside the Noting in Default and Affidavit in support of the same. III.

Applications Judge Farrington’s Decision [ 3 ] Applications Judge Farrington agreed to first hear the Appellant’s Application to Set Aside the Noting in Default. [ 4 ] The Appellant argued that he did not receive notice of the Amended Statement of Claim purportedly served on June 26, 2019, and that consequently, the Affidavit of Service relied upon to note him in default was deficient in that: (

a) it contains hearsay by the Affiant, Ms. Lopez, as she did not personally observe nor effect service; and (

b) it did not bear a signature by the Appellant but instead had a horizontal line in the signature field. [ 5 ] He further argued that since the July 31, 2019 email was the earliest evidence of notice of the Amended Statement of Claim, he was noted in default without being given time to defend the Action. [ 6 ] The matter was primarily argued using the long-standing principles enunciated in Palin v Duxbury , 2010 ABQB 833 . However, Applications Judge Farrington correctly noted that that was the incorrect test, and that because of a procedural defect in service, the rule in Yehya v Thomas , 2019 ABCA 164 applied.

He sought additional submissions in writing on this point before rendering his decision. [ 7 ] In his Endorsement, Applications Judge Farrington noted that where there is a procedural flaw, a defendant, proceeding promptly, is entitled to open the judgment as of right : Anstar Enterprises Ltd v Transamerica Life Canada , 2009 ABCA 196 at para 13 . [ 8 ] He dismissed the Appellant’s Application to Set Aside the Noting in Default, stating: While the process gives some degree of latitude to rectify errors in responding through inadvertence, a defendant cannot defer dealing with a matter indefinitely and then expect to return to the steps that they wish that they would have taken in the litigation earlier.

Permitting that would adversely affect the credibility of the process for litigants. The requirement to move promptly is an important balancing tool for the benefit of both sides. IV. Standard of Review [ 9 ] The standard of review of the Application Judge’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 30 .

V. Issue [ 10 ] Did the Applications Judge err in ruling that the Appellant did not proceed promptly in seeking to Set Aside the Noting in Default? VI. Law [ 11 ] Rule 11.5(1) outlines how a party must be served with a commencement document such as a Statement of Claim: Service on individuals 11.5(1) A commencement document may be served on an individual who is not required to be served by another method under this Division by (

a) being left with the individual, or (

b) being sent by recorded mail addressed to the individual.

(2) Service is effected under this rule, (

a) if the document is left with the individual, on the date it is left, or (

b) if the document is sent by recorded mail, on the date acknowledgment of receipt is signed by the individual to whom it is addressed. [ 12 ] When a defendant does not file a Statement of Defence or Demand of Notice, having been properly served with a Statement of Claim, the Defendant may be noted in default pursuant to Rule 3.36(1): Judgment in default of defence and noting in default 3.36(1) Subject to subrule (2) and

Part 11, Division 8, if a defendant does not file a statement of defence or demand for notice, or if the defendant’s statement of defence is struck out, the plaintiff may, on filing an affidavit of service of the statement of claim, (

a) enter judgment against the defendant under rule 3.38 or 3.39 , or (

b) require the court clerk to enter in the court file of the action, in Form 14, a note to the effect that the defendant has not filed a statement of defence or demand for notice and consequently is noted in default. [ 13 ] A Court may allow a defendant to file a defence even if they have been noted in default, essentially setting aside a noting in default, upon application to the Court pursuant to Rule 9.15(3)(a): The Court may, on any terms the Court considers just, (

a) permit a defence to be filed by a party who has been noted in default, [ 14 ] It is well-settled law in Alberta that setting aside a noting in default falls under one of two categories pursuant to Rule 9.15. In Kraushar v Kraushar , 2019 ABCA 186 at para 5 , the Court of Appeal noted there are, generally, two circumstances in which applications to set aside a noting in default are made: (

a) Where there is a non-trivial flaw in the process leading up to the default judgment, the defendant, acting promptly, has a right to have it set aside: Anstar Enterprises Ltd v Transamerica Life Canada , 2009 ABCA 196 at para 13 , 457 AR 68; Yehya v Thomas , 2019 ABCA 164 at para 11 ; and (

b) Where the procedure leading up to the noting in default is regular, the courts habitually refer to three criteria, which are summarized in Palin v Duxbury , 2010 ABQB 833 at para 21 , 15 CPC (7th) 191: i. an arguable defence; ii. that the defendant did not intend to allow the judgment to go by default and offers some reasonable excuse for the default such as illness or a solicitor’s inadvertence; and, iii. that once the noting in default came to the defendant’s attention, they promptly applied to set it aside. VII.

Analysis [ 15 ] The service of the Amended Statement of Claim in this matter arose in the context of leave being granted to file the Claim in this Action. [ 16 ] Even though the Appellant was aware that leave was granted to file a new claim, as he was present in court when the Prowse

Order was granted and was subsequently served by email with a copy of that Order, the Amended Statement of Claim started a new proceeding and was not a continuation of the prior filed Originating Application. Thus, contrary to the Respondents’ assertion, the Amended Statement of Claim was not merely a copy of the claims within the Originating Application. Master Prowse’s Order is clear on this point and grants leave to file a Statement of Claim for the other damages arising.

The Rules of Service must be therefore strictly followed. [ 17 ] Applications Judge Farrington held that the first category of cases in which applications to Set Aside a Noting in Default are made applied here, since the Appellant relied on a non-trivial flaw in the procedural process. In situations where there is a non-trivial flaw in the process leading up to the Noting in Default or Default Judgment, the Defendant, acting promptly, has a right to have it set aside. A. Was there a non-trivial flaw in the process? [ 18 ]

Part 11 of the Rules of Court sets out the mandatory procedures for service. Division 2, Rules 11.3-11.19 deal with the Service of Commencement Documents. A Statement of Claim is a commencement document, as defined in the Appendix of the Rules . [ 19 ] Rule 11.5 provides for two methods of Service of a Commencement Document: personal service (i.e., the commencement document being left with the defendant) or service via recorded mail.

Here, the Respondents opted for service via recorded mail. [ 20 ] According to the Respondents, service of the Amended Statement of Claim was purported to have been effected by courier on June 26, 2019. Service by recorded mail is only effective under this Rule if the mail is signed for by the addressee: Al-Ghamdi v Alberta , 2017 ABQB 684 at para 308 .

Service of a Statement of Claim on a defendant who did not sign the receipt for recorded mail can be set aside: Al-Ghamdi at para 6 . [ 21 ] Here, the signature used for the recorded mail – a horizontal line- cannot be confirmed to be that of the Appellant, as required by Rule 11.5(2)(b).

Thus, service is deficient and there is no other evidence that the Appellant received the Amended Statement of Claim on June 26, 2019, and that his rights were engaged: Sandhu v MEG Place LP Investment Corp , 2012 ABCA 266 at para 18 . [ 22 ] Moreover, it is insufficient that the Appellant knew that the Respondents obtained leave to file a Statement of Claim; the Appellant had no knowledge that the Respondents carried through with the filing until he received the email on July 31, 2019. [ 23 ] Further, the clerk having allowed the proof of service and permitted the filing of the Noting in Default on July 31, 2019, is not confirmation of service.

Therefore, the Noting in Default is of no effect, having been issued by the Clerk of the Court upon the deficient Affidavit of Service: Bank of Nova Scotia v Short Estate , 2006 NBQB 139 at para 14 . [ 24 ] Applications Judge Farrington accepted, and I agree, that there was a procedural defect in service. As the purported service of the Amended Statement of Claim on June 26, 2019, fails, the earliest evidence of notice of the Amended Statement of Claim was July 31, 2019, which is insufficient to provide the Appellant with the requisite 20 days to defend. This amounts to a “non-trivial” flaw. B.

Did the Defendant act promptly? [ 25 ] Having concluded that there is no service of the Amended Statement of Claim, I will next address whether the Noting in Default ought to be set aside and the Appellant permitted to file a Statement of Defence. [ 26 ] There is no dispute that the Appellant received email copies of the relevant documentation, including the Noting in Default, on July 31, 2019. [ 27 ] However, the Application to Set Aside the Noting in Default was not filed until May 4, 2022, which is nearly three years after the Appellant received a copy of the Noting in Default. [ 28 ] Applications Judge Farrington stated: Putting the facts in the best light possible for the defendant, he appears to have not understood the ramifications of the noting in default and what it entailed.

The law is generally forgiving toward parties who were not aware of facts. One cannot respond to facts that they do not know. Being under a misapprehension as to what legal consequences and rights flow from those facts, however, is a different matter. The defendant had documents which would allow him to make decisions as to how to proceed either by researching them himself or by obtaining legal advice. The defendant was not missing any of the necessary facts .

Unfortunately, with the relevant facts in hand, he did not either make an application to set aside the noting in default, or consult with counsel, until significantly later. The “as of right” setting aside of a noting in default for procedural irregularities discussed in Yehya v Thomas has its limits. The test still requires proceeding promptly. Moving promptly would be a question of fact, but in this case, it is difficult to argue on any view of the facts that the defendant moved promptly. That is the case even if some allowance is made for the COVID 19 pandemic effects.

In the circumstances, regardless of whether one uses the Palin v Duxbury test or the Yehya v Thomas test, and I think the latter is more forgiving, the test is not met. As a result, I must dismiss the application to set aside the noting in default. While the process gives some degree of latitude to rectify errors in responding through inadvertence, a defendant cannot defer dealing with a matter indefinitely and then expect to return to the steps that they wish that they would have taken in the litigation earlier. Permitting that would adversely affect the credibility of the process for litigants.

The requirement to move promptly is an important balancing tool for the benefit of both sides. (Emphasis added) [ 29 ] The Applications Judge applied the correct test given the existence of a procedural flaw. Therefore, the Appellant was entitled to open up judgment as of right but only if he proceeded promptly . [ 30 ] Judge Farrington relied on the case of Yehya in reaching his conclusion that the Appellant did not act promptly. However, Anstar also remains good law and requires a holistic assessment of the case rather than a one-sided assessment of the Defendant’s delay.

It holds that given the serious implications for the party noted in default, both parties’ actions are under scrutiny to determine whether prejudice was caused by either side’s delay. At first glance, the Appellant’s delay of nearly three years appears unquestionably excessive.

However, the Respondents’ delay, if any, in advancing the Action, must also be considered. [ 31 ] Applications Judge Farrington sought additional written submissions on the test in Yehya ; however, I note that Yehya merely restates a part of Anstar . [ 32 ] In Yehya , the Court of Appeal noted that the Chambers Judge applied the wrong test ( Palin ) and ought to have simply applied the Anstar test because there was a procedural flaw. At para 12, the Court stated: …Therefore, the appellant was entitled to open up judgment as of right if he proceeded promptly.

The appellant could not be expected to proceed to open up the judgment while the stay was in place. The stay was lifted upon his discharge on September 13, 2017: s 69.3(1.1) BIA . He applied to set aside the judgment on October 27, 2017. Therefore, the appellant proceeded promptly and was entitled to have the default judgment set aside as against him as of right. [ 33 ] Given Anstar , I need to consider whether either party was responsible for the delay in this matter before concluding if the Appellant’s delay to seek to Set Aside the Noting in Default was excessive.

I asked counsel to provide additional written submissions on this point. [ 34 ] In Anstar the following facts are relevant: • The Plaintiffs filed their Statement of Claim on February 28, 2001. • On October 16, 2001, the Plaintiffs delivered a copy of the Statement of Claim to Mr. Macleod, who was listed on a corporate search as an agent for service. • The following day, October 17, 2001, Mr. Macleod: (

i) advised the Plaintiffs that he was no longer the agent for service and referred the Plaintiffs to the service list published by the Superintendent of Insurance; and (ii) contacted counsel for the extant insurance company Defendant and subsequently, forwarded a fax copy of the Statement of Claim on October 30, 2001. • On November 7, 2001, the Plaintiffs filed Affidavits of Service (but omitted the fact Mr.

Macleod had advised that service was ineffective) and, on November 14, 2001, noted the Defendant in default. • The Action remained dormant until March 2006 when the Plaintiffs discovered that Stewart & Stewart was the Attorney for Service for the Defendant and corresponded with them, inviting them to file a Statement of Defence within 30 days (not mentioning that they had already been noted in default), which resulted in: (

i) the Defendant filing a Statement of Defence on May 4, 2006, and serving it June 1, 2006; and (ii) the Plaintiffs filing and serving their Affidavit of Records on July 25, 2006. [ 35 ] Despite its subsequent efforts to elicit a response from the defendant, the plaintiffs in Anstar backtracked and, relying on the prior filed noting in default, applied to strike the Statement of Defence and to seek Default Judgment on December 4, 2006.

The defendant argued it was the first time they heard about the noting in default; they applied to set aside the praecipe to note in default and sought a declaration that the Statement of Defence was validly filed. [ 36 ] The Chambers Judge in Anstar found that the defendant had effective knowledge of the claim and dismissed its application to set aside the noting in default, striking its defence for being filed by the clerk after the defendant was noted in default. [ 37 ] The Court of Appeal of Alberta reversed the Chambers Judge’s decision and set aside the noting in default. [ 38 ] Paragraphs 13-21 of Anstar , set out below, are relevant and must be considered in context when determining whether the Respondents in this case failed to follow any procedural rules or act diligently: Because a default judgment does not involve an adjudication on the merits of a claim, the plaintiff must act in “the utmost good faith and in strict compliance with the Rules”: William Stevenson and J.E.

Côté, Civil Procedure Encyclopedia (Edmonton: Juriliber Limited, 2003) at 17-2. In other words, a party seeking to hold an opposing party in default must strictly comply with the procedural rules. Accordingly, where there is a flaw in the procedure leading up to default judgment, a defendant, proceeding promptly, is entitled to open up the default judgment as of right.

In the absence of a procedural flaw, the defendant can only rely on the court's indulgence and must then demonstrate that there is an arguable defence, that they did not they (sic) deliberately let judgment go by default and have a valid excuse for the default, and that they promptly attempted to open up default judgment: see Stevenson & Côté, Alberta Civil Procedure Handbook , (Edmonton: Juriliber Limited, 2009) at 177 - 78, Graylake Holsteins Ltd v Kzam Farms Ltd , 2004 ABQB 828 at paras 1 & 19 , 49 Alta LR (4th) 103.

In the decision below, the chambers judge proceeded on the basis that there was no procedural flaw in the process, and made his determination on the basis that TLC's excuse was not valid or justified. TLC submits that the chambers judge erred by overlooking the procedural flaws that led up to it being noted in default, such as the respondents' failure to properly serve TLC. We agree with TLC that the chambers judge overlooked the procedural irregularities in this case, and therefore applied the wrong test in determining whether to set aside the praecipe to note in default.

Not only did the respondents fail to properly serve TLC with the claim, but they also prematurely entered the praecipe to note in default before TLC was provided the minimum 15 days to enter a defence, and then delayed in taking any further steps to obtain default judgment (several years, in fact) until after they invited TLC to file its defence. TLC submits that the respondents’ conduct, notably the failure to properly serve TLC and to notify TLC of its intention to note it in default, were flaws in the proceedings leading up to the default.

To those purported defaults, we might add that the praecipe to note in default was entered on November 14, 2001, the 15 th day after TLC obtained knowledge of claim against it, and that the respondents exhibited considerable delay (several years) in seeking default judgment, particularly after inviting TLC to file its

defence to the claims. The respondents do not appear to rely on their attempted service on Mr. Macleod or Mr. Zechel, but on the fact that notice ofthe Statement of Claim was ultimately received by TLC. The chambers judge relied on the principle that defective service can bedeemed to be good and sufficient in circumstances where the document came to the attention of the party being served and thatparty acquired knowledge of “the general nature of the claim being pressed against him”: LaPierre v Andrew (1993), (AB KB), 45 AR 220, 25 Alta LR (2d) 308 (QB), Hansraj v Ao, 2004 ABCA 223 at para 32, 354 AR 91.

While we agree with this proposition, it may on occasion, present a significant and practical difficulty, as illustrated by the facts inthis case. That is, a plaintiff, such as the respondents here, cannot know whether (or when) the defendant acquires actualknowledge of the claim. As it turns out, TLC obtained actual knowledge of the respondents' claim when it received a fax copy ofthe Statement of Claim on October 30, 2001.

Even if TLC had taken reasonable steps to ascertain what was happening in thesuit, which it was obligated to do once it acquired knowledge of an outstanding claim against it (see Hansraj at para 17), it haduntil November 15, 2001, to file its Statement of Defence. But, by that time, the respondents had already noted TLC in default. When TLC was properly served in March 2006, the respondents still did not know whether TLC had ever acquired actual knowledge ofthe claim. Moreover, the respondents had not yet taken any steps to obtain default judgment.

As noted by this courtin Yaremchuk v Haight, 2001 ABCA 7 at para 6, 277 AR 160, a plaintiff that has noted a defendant in default is expected “topursue his claim for damages in a diligent manner in the same way a defendant who has filed a statement of defence has thisentitlement.” Rather than taking steps to obtain default judgment, or even notify TLC that it had been noted in default, the respondentsinvited TLC to file its defence and took fresh steps to continue with the litigation process.

In all of these circumstances, we consider there to be a number of procedural irregularities that warranted setting aside the praecipe tonote in default and permitting TLC to file its Statement of Defence. This is not to suggest that TLC is entirely blameless for these irregularities. As previously indicated, it did not meet its obligation todetermine what was happening in the suit once it acquired actual knowledge of the claim.

It also appears that TLC may have had somewarning that it was in default when it filed the Statement of Defence in May 2006, although the evidence on this point was not clear.Nonetheless, where neither party strictly abides by the Rules, it would be unjust to ignore one party’s noncompliance at theexpense of the other: Hansraj at para 22. Here, TLC faces liability for a significant amount, possibly exceeding $500,000, basedon a technical breach of the procedural rules.

The respondents may, at the end of the day, be successful in holding TLC liable,but it cannot do so in default proceedings and rely on TLC’s failure to meet its procedural obligations where the respondentsthemselves have not governed themselves in accordance with those same procedural rules. (Emphasis added) [39] The Appellant submits that the facts in this case are sufficiently similar to the facts in Anstar because he did not receive noticeof the Claim until July 31, 2019, at a time when he was already noted in default and could not have filed a Statement of Defence.

Hefurther argues that, although a successful Garnishee Summons was granted for damages awarded in the Prowse Order pursuant to theOriginating Application, no steps were taken in the Action initiated by the Amended Statement of Claim until February 18, 2022, whenthe Respondents filed their Application for Default Judgment and served the same on the Appellant on March 11, 2022 (almost threeyears after the Noting in Default was entered). [40] The Appellant takes the position that the Respondents, after obtaining the Noting in Default, did not pursue their claim fordamages in a diligent manner (as prescribed in Yaremchuk) and instead opted to not file an Application for Default Judgment until nearlythree years later.

The Appellant says he is in a similar position as the Defendant in Anstar, facing significant liability in the amount of$345,161.75 based on a technical breach of the procedural rules if the Noting in Default is not set aside. [41] The Appellant further submits that the Court should evaluate the promptness of the Appellant’s Application to Set Asiderelative to the Application for Default Judgment, as the event that threatens prejudice, rather than evaluating it relative to the Noting inDefault.

The Appellant bases this argument on his view that a noting in default is an “administrative notation”, while an application forDefault Judgment indicates that prejudice is imminent and prompts a defendant into action. The Appellant notes that the Rules do notrequire a noting in default to be served. [42] In contrast, the Respondents submit that the test in Anstar does not require them to proceed promptly; only the Appellant’spromptness is at issue.

However, the Respondents note that, in any event, they actively pursued their Action. [43] I agree that this case and Anstar have some similarities; for example, both include procedural flaws leading up to the noting indefault. However, Anstar differs when we consider whether the party seeking to set aside the noting in default acted promptly. [44] In Anstar, prior to December 4, 2006, the defendant had awareness of the unserved claim, but not the noting in default.

TheRespondents here argue that the legal consequences of these two documents are vastly different, i.e., an unserved claim does not engagea defendants’ legal rights: 1226911 Alberta Ltd v Redecopp, 2012 ABQB 776. In contrast, they argue that a noting in default presumes adefendant has admitted the allegations, resulting in legal rights by judgment. I agree. [45] The distinguishing factor in Anstar is that once the defendant had actual notice that it was noted in default, it acted promptly.Here, the Appellant had actual notice on July 31, 2019, and did nothing until the Application for Default Judgment was filed.

As a notingin default means the defendant is presumed to admit the allegations in the Statement of Claim, it follows that I do not accept theAppellant’s distinction in prejudicial consequences between Noting in Default (prejudice not imminent) and Default Judgment (prejudiceimminent). The Appellant did not proceed promptly. [46] I also disagree with the Appellant’s attempt to impugn the Respondents’ lack of promptness. In my view, the Respondents

acted in good faith and took steps in compliance with the time limitations pursuant to the Rules. [47] The Respondents may have had many reasons for waiting to take additional steps to secure Default Judgment. Theysuccessfully garnished the Appellant’s wages, and we know from the Prowse Order that one property was uninhabitable; theRespondents would have had to complete the renovations on their own and sell all three of the properties before they could assess thequantum of damages.

In addition, I note that the Appellant did not sign the proposed Consent Order to sell the raw land at the proposedprice, and with respect to the rental property, the Respondents had to wait until the lease expired. [48] As in Yahya, acting promptly requires consideration in the context of the case. The defendant in Yahya could not have doneanything during the bankruptcy stay. Here, the Respondents could not have proceeded to seek Default Judgment before their damageswere fully known.

In any case, the filing of the Application for Default Judgment was within the three-year drop-dead rule (Rule 4.33)unlike in Anstar, where the plaintiffs waited over five years to seek default judgment. [49] In conclusion, although the Respondents relied on a deficient affidavit in obtaining the Noting in Default, they did not breachany time limits in the Rules after the Noting in Default was brought to the Appellant’s attention on July 31, 2019.

The Respondents actedin good faith, and their delay in seeking Default Judgment was reasonable. [50] This is distinguishable from the situation in Anstar where the plaintiff, rather than taking steps to obtain Default Judgment, oreven notify the defendant that it had been noted in default, invited the defendant to file its defence and took fresh steps to continue withthe litigation process, only to then backtrack and try to rely on the earlier filed praecipe to note in default. [51] In this case, it is the Appellant who is to blame for lying in the weeds until nearly three years later.

A praecipe to note indefault does not have to be brought to the attention of the Defendant. In this case, it was. This analysis does not engage any assessment ofthe Palin factors; as such, the Appellant’s failure to act promptly after notice that he was noted in default is fatal here. [52] Finally, I note that in SFM v MRM, 2020 ABQB 302, Justice Lema decided an application to Set Aside a Default Judgmentusing the Palin factors.

While he held that the Applicant had satisfied the three-factor test, he also commented on an “overall fairness”review, a “last look review for overall fairness between the parties”: at para 31. [53] Justice Lema noted that, at the end of the day, a decision must be fair in all of the circumstances, which requires a “prejudicecomparison”.

Under a prejudice comparison the Court will: review the potential prejudice to the party applying to set aside defaultjudgment if the application is dismissed, review the potential prejudice to the respondent if the application is allowed, and review theeffect any resulting order will make on the overall integrity of the administration of justice (SFM at para 32, citing from Geldart vGeldart, 2016 ONSC 7150 at para 96). [54] A “prejudice comparison” is, in my view, equally applicable in this case since a judge hearing the application to set asideretains discretion to do so where fairness requires it to be granted: Don Reid Upholstery Ltd v Patrie, , 173 AR 233(QB) at para 24, as applied in Poloma Investments Ltd v Yuen, 2016 ABCA 93 at para 4; Kraushar at para 6. [55] The evidence demonstrates that the Appellant has repeatedly ignored correspondence to participate in the proceedings for aslong as possible (e.g., he did not respond to a request to sign a consent order for the sale of one of the properties after the Prowse Order),and only reacted when necessary to prevent judgment from being entered against him.

The Respondents had to take legal steps at everyturn to advance their Action. [56] In SMF, Lema J permitted the default judgment to be set aside on account of the Appellant’s serious drug and alcoholproblems, which impaired his ability to appreciate the legal consequences of the court proceedings. Here, the Appellant relies on a lackof legal advice or knowledge that his rights were in peril. However, he had the ability to seek legal advice.

He was a high income-earner,had previously attended court, and had advance notice that the Respondents would be seeking damages via a new claim (he was in courtwhen the Prowse Order was granted and was subsequently served with it). A failure to seek legal advice in these circumstances is not anacceptable excuse for a lack of promptness. [57] In my view, the Respondents would suffer greater prejudice if I allowed a defence to be filed since they had to single-handedly clean up the financial mess in the joint venture, bring the properties up to a sellable standard, and mitigate their losses.

Theyacted with reasonable dispatch given the many steps required, and in any case, they advanced their Action within the time limitsprescribed by law. [58] The procedural flaw in service is acknowledged, but under the Anstar test, the Appellant’s promptness is measured from thetime he knew about the Default Notice and not relative to the time that the Respondent sought Default Judgment. Nothing in the Rulesor my reading of the relevant jurisprudence, permits a party to wait until they are notified of an application of to seek default judgment orof the default judgment.

Permitting such further delay would violate the foundational principles of the Rules, which requires parties inlegal proceedings to act with reasonable dispatch. In the present case, Rule 1.2 is worth restating: 1.2(1) The purpose of these rules is to provide a means by which claims can be fairly and justly resolved in or by a court process in atimely and cost-effective way.

(2) In particular, these rules are intended to be used (

a) to identify the real issues in dispute, (

b) to facilitate the quickest means of resolving a claim at the least expense, (

c) to encourage the parties to resolve the claim themselves, by agreement, with or without assistance, as early in the process aspracticable,

(

d) to oblige the parties to communicate honestly, openly and in a timely way, and (

e) to provide an effective, efficient and credible system of remedies and sanctions to enforce these rules and orders and judgments.

(3) To achieve the purpose and intention of these rules the parties must, jointly and individually during an action, (

a) identify or make an application to identify the real issues in dispute and facilitate the quickest means of resolving the claim at the least expense, (

b) periodically evaluate dispute resolution process alternatives to a full trial, with or without assistance from the Court, (

c) refrain from filing applications or taking proceedings that do not further the purpose and intention of these rules, and (

d) when using publicly funded Court resources, use them effectively.

(4) The intention of these rules is that the Court, when exercising a discretion to grant a remedy or impose a sanction, will grant or impose a remedy or sanction proportional to the reason for granting or imposing it. [ 59 ] In

summary, where there is a non-trivial flaw in the process leading up to the Default Judgment, the defendant, acting promptly, has a right to have a praecipe to note in default set aside but only if they acted promptly from the earliest of receiving notice of: the noting in default; an application for Default Judgment (where a demand for notice was filed per Rule 3.34); or, the Default Judgment. VIII. Conclusion [ 60 ] As there was a procedural flaw with service of the Amended Statement of Claim, the Default Notice was a nullity.

The Appellant was entitled to Set Aside the Noting in Default as of right, so long as he proceeded promptly. The Appellant failed to act promptly. [ 61 ] In short, I find that the Respondents acted in good faith and in compliance with the Alberta Rules of Court and that they pursued their claims in a diligent manner. [ 62 ] The Appeal is dismissed with costs to the Respondents. [ 63 ] The Respondents are at liberty to

schedule the Default Judgment hearing. Heard on the 8 th day of June, 2023. Dated at the City of Calgary, Alberta this 25 th day of July, 2023. A. Loparco J.C.K.B.A. Appearances: Francisco Torres Torres Arteaga Lawyers for the Plaintiffs/Respondents Nicholas Lo McLeod Law LLP for the Defendant/Appellant