Luscombe v RE/MAX Real Estate (Edmonton) Ltd, 2023 ABKB 63

Court of King’s Bench of Alberta Citation: Luscombe v RE/MAX Real Estate (Edmonton) Ltd, 2023 ABKB 63 Date: 20230201 Docket: 1803 07655 Registry: Edmonton Between: David Luscombe and Shelley Luscombe Plaintiffs - and - RE/MAX Real Estate (Edmonton) Ltd, Larry Hahn, Procon Solutions Inc, ABC Corporation, Louis Csaba, Diana Wong, R & D Roofing Ltd, Ernie Elko, Cathie Elko, Pillar to Post Inc, 666708 Alberta Ltd operating as Pillar to Post Defendants _______________________________________________________ Memorandum of Decision of the Honourable Applications Judge B.W.

Summers _______________________________________________________ Introduction [ 1 ] In an application made in Special Chambers, the Defendants Ernie Elko and Cathie Elko (“Elkos”) applied to set aside my order granting judgment, which was made upon notice to them, but at which they did not appear. This application considers the test to set aside a judgment under r 9.15 of Alberta Rules of Court .

Facts [ 2 ] The Plaintiffs purchased a residence (“the Property”) from the Elkos for $4,090,000 on June 3, 2016. [ 3 ] Shortly after taking possession of the Property the Plaintiffs started noticing various forms of water damage to the Property. Investigations were done and improper design and workmanship were discovered. [ 4 ] The Plaintiffs undertook remediation, at considerable expense.

[ 5 ] The Plaintiffs commenced this action to recover the costs of remediation on April 16, 2018. Although the Plaintiffs named numerous Defendants, the only Defendant that I need to mention other than the Elkos, is the Defendant Larry Hahn (“Hahn”). Hahn was the realtor who acted as agent for both the Plaintiffs and the Elkos with respect to this transaction. [ 6 ] The Elkos were served with the Statement of Claim on November 4, 2018. [ 7 ] A Demand for Notice was filed on behalf of the Elkos on November 21, 2018 and served upon the lawyers for the Plaintiffs shortly after that.

The Elkos say that Hahn filed and served the Demand for Notice, without their knowledge or consent. Hahn testified in questioning that he had no recollection of doing this. [ 8 ] On June 30, 2020, the Plaintiffs applied for

summary judgment against the Elkos. The Elkos were served with this application on July 10, 2020. [ 9 ] The application for

summary judgment came before me on July 16, 2020. The Elkos did not attend, nor did anyone attend on their behalf. I granted judgment against the Elkos in the amount of $504,767.15 (“the Judgment”). [ 10 ] The Elkos were personally served with the Judgment on August 21, 2020. [ 11 ] On February 3, 2021 the Elkos were served again with the Judgment as well as a Bill of Costs and a Writ of Enforcement. [ 12 ] The Elkos’ application to set aside the Judgment was filed on April 19, 2021 (“Elkos’ Application”).

Since then, various steps were taken including filing of evidence (affidavits) and questioning on affidavits. I believe that the parties are in agreement that the significant passage of time between the filing of the Elkos’ Application and this hearing are not the fault of either party and that the passage of that time is not a factor to be considered on this application. The Elkos’ Application [ 13 ] The Elkos’ Application sought the following relief: (

a) An order extending the time under r 9.15(2) to bring an application to set aside the Judgment; (

b) An order setting aside the Judgment; (

c) An order discharging the Writ of Enforcement; (

d) An order setting aside the Demand for Notice and granting leave for the Elkos to file a Statement of Defense and other pleadings; and (

e) Costs. Issues [ 14 ] The Elkos’ Application raises three issues: (

a) Should I exercise my discretion under r 9.15(2) to extend the time for the Elkos to apply to set aside the Judgment? (

b) Has the test for the Court to set aside a judgment under r 9.15(1) been met? (

c) Should I exercise my discretion under r 3.34(5) to allow the Elkos to file a Statement of Defense in substitution for the Demand for Notice? Discussion [ 15 ] Although I have identified three issues, those issues overlap to such a significant extent that I think it is appropriate to consider them together. Rule 9.15 [ 16 ] Rule 9.15 states: 9.15(1) On application, the Court may set aside, vary or discharge a judgment or an order, whether final or interlocutory, that was made (

a) without notice to one or more affected persons, or (

b) following a trial or hearing at which an affected person did not appear because of an accident or mistake or because of insufficient notice of the trial or hearing.

(2) Unless the Court otherwise orders, the application must be made within 20 days after the earlier of (

a) the service of the judgment or order on the applicant, and

(

b) the date the judgment or order first came to the applicant’s attention.

(3) 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, (

b) set aside, vary or discharge a judgment granted upon application against a defendant who was noted in default, or whose statement of defence was struck out under rule 3.37, or (

c) set aside, vary or discharge a judgment entered in default of defence by the plaintiff for the recovery of property under rule 3.38, or for a debt or liquidated demand under rule 3.39.

(4) The Court may set aside, vary or discharge an interlocutory order (

a) because information arose or was discovered after the order was made, (

b) with the agreement of every party, or (

c) on other grounds that the Court considers just. [ 17 ] It is important to note what happened here, or more specifically, what did not happen here. That is, the Elkos were not noted in default, their Statement of Defense was not struck under r 3.37, nor was the Judgment for recovery of property under r 3.38, nor was the Judgment a default judgment under r 3.39. These are all judgments made without notice. Consequently, r 9.15(3) has no application to this application before me. [ 18 ] The Elkos’ Application to set aside the Judgment is made under r 9.15(1)(b).

That part of this rule allows the Court to set aside a judgment or order following a hearing where the applicants did not appear because of “accident or mistake”. Evidence of “Mistake” [ 19 ] Ernie Elko provided considerable evidence as to why this action was not defended and why the Elkos did not appear at the

summary judgment application. That evidence was in his affidavit and the transcript of his questioning on affidavit. I do not think that I do a disservice to all of the evidence given by Mr. Elko by summarizing it as follows: Mr. Elko is in his 80’s. His wife Cathie had been very sick, even to the extent that at one point she was given last rights. His total focus was on the life and health of his wife. When the Statement of Claim was served upon him, he thought that he and his wife had no liability as they had never resided in the Property. Hahn apparently agreed with this view. Hahn was aware of Mr.

Elko’s primary concern for the life and health of his wife and Hahn offered to take care of everything. Hahn had engaged lawyers who would act for Hahn and the Elkos. Hahn did not tell the Elkos he had filed a Demand for Notice and in any event they did not know that this filing constituted an admission of liability. Mr. Elko did review the Statement of Claim and the Application for

summary judgment and the Judgment, but generally, in a superficial fashion. He did so, as he placed complete trust and confidence in Hahn and what Hahn had undertaken to do. Between Hahn’s representations that he would take care of everything and Mr. Elko’s belief that he and his wife had a complete defense and no liability because they had never resided in the Property, that was as much as the Elkos needed to do.

The “Test” under Rule 9.15 [ 20 ] The parties disagree with the test to be applied by the Court under r 9.15 and refer to different cases. [ 21 ] The Elkos state that the test is found at para 11 of Fort McKay Métis Community Association v Morin, 2020 ABCA 311 , as follows: ...The three criteria reviewed by the court on an application to open up a noting in default in such circumstances were summarized in Kraushar v Kraushar , 2019 ABCA 186 at para. 5 , 88 Alta LR (6th) 69: (

a) an arguable defence; (

b) 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, (

c) that once the noting in default came to the defendant’s attention, they promptly applied to set it aside. [ 22 ] The Plaintiffs respond that this three part test is applicable to applications under r 9.15(3) but not to an application under r 9.15(1). [ 23 ] In response, the Elkos refer to the following cases: Pino Bros Commercial Inc v Silver Gold Bull Inc , 2014 ABQB 227 ; 1402445 Alberta Ltd v 1722353 Alberta Ltd, 2018 ABQB 546 ; Alliance Concrete Ltd v Robertson, 2014 ABQB 401 ; Kim v Choi , 2021 ABQB 645 ; and Thobani v Chahal, 2021 ABQB 919 . [ 24 ] These cases do indeed illustrate that our Court has employed this three part test with respect to applications made under r 9.15(1).

These cases also indicate that the over arching and most important consideration on these applications is “fairness”.

[ 25 ] The Elkos say that they have a very good defense to the claims against them and fairness dictates that they should be given their chance to defend. They say that they did not “thumb their nose at the Court” and never intended to ignore the legal process. They say that they just made the mistake of unreservedly placing their trust in Hahn. [ 26 ] The Plaintiffs do not argue that the Elkos do not have an arguable defense. Rather, they say that the Elkos’ Application should be denied because they have not met the correct test for mistake, under r 9.15(1).

They say that the correct test for mistake under r 9.15(1) is set out in other cases. [ 27 ] The case upon which the Plaintiffs place much reliance is Hammond v Hammond , 2019 ABQB 522 (“ Hammond ”). In that case Justice Lema had to consider a parent’s application to set aside a child-support order obtained at an application at which he had notice but did not attend. After considering cases on the predecessor to r 9.15, Justice Lema stated: [9] The evolution from those rules to Rule 9.15 is reflected in an Alberta Law Reform Institute report from July 2004 (key extract at Appendix A).

ALRI proposed: ... the adoption of a general provision allowing for an application to set aside or vary orders and judgments granted following inadvertent failure to appear at a trial or a chambers motion. [emphasis added] [10] As reflected in ALRI’s report and the cases below, the key is inadvertent, or unintentional, non-attendance.

Whether called an “accident” or a “mistake”, the reason must satisfy a “but for” test: “but for (or except for) [insert reason], I would have attended.” As the Rule states, the focus is non-attendance appear “ because of accident or mistake.” [11] In this context, the reason must be something other than failure to receive notice or insufficient notice. The premise of Rule 9.15(1)(

b) is that the party received notice and, despite that notice , did not attend. [12] The rule exists to remedy the injustice of an order being granted against a non-attending party where the party would have attended but for some “interfering” event or circumstance. [ 28 ] Justice Lema went on to review cases that provided acceptable reasons and those that did not. One of the cases found to have unacceptable reasons which has a significant parallel to the facts in this case is Tibbits v Canada (MNR) , [1995] TCJ No 2 (“ Tibbits ”) .

In that case the taxpayer had his accountant, Goguen, launch an appeal of tax assessments. Notices of proceedings were sent to Goguen, including a motion to dismiss for want of prosecution. Goguen failed to respond to any of the notices. The taxpayer’s appeal was consequently dismissed and judgment was granted against the taxpayer. The taxpayer applied to set aside the judgment. In dismissing the application, the Court stated: 25 In the matter before me judgment was obtained on proper notice, not ex parte.

Goguen, as the appellant’s agent, was clearly authorized to act for the appellant, was notified, had the opportunity to present the appellant’s case but did not do so. It is fair to say that the appellant turned over all of his accounting and taxation matters to Goguen and paid little or no attention to them himself. This is tantamount to giving the agent carte blanche to exercise his best judgment.

In such circumstances and in the absence of some reasonable explanation for the non-appearance an inference can just as readily be drawn that a conscious decision not to appear was taken by Goguen. 26 Last, I am not satisfied that the appellant would be entitled in any event to have the Court’s discretion exercised in his favour. He suggests that all blame for non-appearance at the hearing of the motion rests with his accountant, Goguen. The evidence before me, however, leads to the conclusion that throughout the relevant periods he himself did not act with due diligence.

Furthermore, I am not satisfied that he acted at the first opportunity and promptly upon learning of the judgment. [ 29 ] I find the Tibbits case to be completely on point. Mr. Elko provided Hahn with complete carte blanche in dealing with this lawsuit and paid little or no attention to the lawsuit himself. Even though Mr. Elko was properly served and received notice along the way, he chose to ignore what was happening—even after judgment had been granted. [ 30 ] Counsel for the Elkos argues that the “but for” test enunciated by Justice Lema in Hammond is met.

But for making the mistake of placing complete reliance on Hahn, the Elkos would have retained counsel and defended this case is the argument made. [ 31 ] This is not an inadvertent failure to appear. Mr. Elko made a conscious decision to not appear. [ 32 ] I acknowledge that fairness is an overarching and important consideration in this application. However, fairness must be considered in the context of what r 9.15(1) states. The Elkos’ failure to appear at the

summary judgment application was not due to inadvertence. The conscious decision was made to place their unreserved and complete trust in the agency of Hahn. It would not be fair to the Plaintiffs to undo the judgment they obtained because the Elkos made the mistake of placing complete trust in Hahn. In my view, this mistake by the Elkos is not the kind of mistake contemplated by r 9.15(1)(b). [ 33 ] I also note that the Elkos would need me to exercise my discretion to extend the time within which their application had to be made from 20 days to 8 months.

Given the lack of due diligence on the part of the Elkos for that very lengthy period of time, I am not inclined to exercise my discretion in favour of such an extension. [ 34 ] Finally, I wish to note that if the Elkos had been successful on the first two issues (to grant the extension and to set aside the judgment) I would still need to exercise my discretion under r 3.34(5) to allow the Elkos to substitute a Statement of Defense for the Demand for Notice filed on their behalf.

I would have exercised my discretion in their favour if this were not an academic question, since they had no knowledge of the Demand for Notice being filed, or what it meant. [ 35 ] If the parties are unable to agree on costs with respect to this application, costs may be addressed before me in morning chambers.

Heard on the 20 th day of January, 2023. Dated at Edmonton, Alberta this 1 st day of February, 2023. B.W. Summers A.J.C.K.B.A. Appearances: Robert P James, KC and Leela M Wright Parlee McLaws LLP for the Plaintiffs Kenneth B Haluschak and Karissa G Fald Bryan & Company LLP for the Defendants Ernie Elko and Cathie Elko