Caskey v Hillenbrand, 2023 ABKB 477

Court of King’s Bench of Alberta Citation: Caskey v Hillenbrand, 2023 ABKB 477 Date: 20230817 Docket: 1903 23595 Registry: Edmonton Between: Robin Caskey, Jody Caskey and Indiava Financial and Wealth Management Ltd Plaintiffs - and - Mark E Hillenbrand, Hillenbrand Kozicki LLP and Randy Ettinger Defendants Docket: 1903 23831 And between: Robin Caskey and Jody Caskey Plaintiffs - and - Robert Joseph and Prowse Chowne LLP Defendants _______________________________________________________

Reasons for Decision of the Honourable Applications Judge L.A. Smart _______________________________________________________ Introduction [1] The Defendants Mark E Hillenbrand and Hillenbrand Kozicki LLP (Hillenbrand) have applied for

Summary Dismissal ofthis action as against them pursuant to r 7.2 of the Alberta Rules of Court. [2] Rule 7.2 provides that: The Court may grant judgement when:

a) admissions of fact are made in a pleading or otherwise;

b) the only evidence consists of records and an affidavit is sufficient to prove authenticity of the records in which the evidence iscontained. [3] Robin Caskey (Caskey) has filed an affidavit in opposition to the application. Jody Caskey has been questioned for discoveryas has Mark Hillenbrand. Both parties include extracts from those questionings. Hillenbrand also served a Notice to Admit facts whichCaskey responded to by admitting most of those facts.

Neither party takes issue with the evidence adduced and both largely agree on thefacts. [4] In November, 2017 Caskey entered into an Agreement for the Sale of Land and Construction of a Home (the Agreement)with Celebration Homes. The Co-defendant Randy Ettinger was a director and controlling mind of Celebration. There is no dispute aboutthe authenticity of the Agreement.

Under the Agreement, Caskey paid $385,570.68 – $315,000 on December 14, 2017, $30,000 on July7, 2018, and $30,570.68 on September 28, 2018. [5] A copy of title showed Celebration as the Registered Owner of the subject lot – Lot 29, Block 3, Plan 1123063. The title wassubject to a Vendor’s Lien Caveat by 830480 Alberta Ltd related to Celebration’s acquisition of the lot. Relevant to these proceedingssubsequent to that is the Purchaser’s Caveat by Caskey registered on January 10, 2018.

This Caveat was registered by Hillenbrand oninstruction from Celebration after a discussion between Ettinger and Jody Caskey (Robin’s husband). The essence of that discussion wasthat Celebration would instruct the registration as it was easier for Celebration to get it done. There is no evidence to establish whatreason was given by Celebration to Hillenbrand as to why they would be doing this registration on the Purchaser’s behalf.

Hillenbrandcompleted the registration of the Purchaser’s Caveat, signing it as Solicitor and Agent for Caskey. [6] On April 25, 2018 a mortgage to The Builders Capital Mortgage Corp for $2 million was registered on title. On June 29,2018 Caskey’s Purchaser’s Caveat was postponed to that mortgage by a Postponement signed by Hillenbrand as the “authorized Solicitorand Agent” of Caskey.

Caskey was not informed of the registration of that mortgage nor that their Purchasers Caveat was postponed to it.Celebration subsequently was found to be Bankrupt, had failed to pay the mortgage, and its interest, along with that of Caskey, wasforeclosed from title. Discussion [7] There is no dispute that Caskey didn’t sign a retainer agreement with Hillenbrand nor was there any communication betweenCaskey and Hillenbrand at any relevant time. Hillenbrand disavows any claim that it acted as Caskey’s solicitor and agent.

Nonetheless,Hillenbrand signed the postponement of Caskey’s Purchasers Caveat in favour of the subsequent mortgagee as their “authorized Solicitorand Agent”. [8] Hillenbrand, relies on the reasoning in Toronto-Dominion Bank v Currie, 2017 ABCA 45 particularly at para 6 and 7 whichread as follows: [6] When an agent acts within his or her actual authority, the principal is bound by the acts of the agent, even if fraudulent: Martin vNational Union Fire Insurance Co., (AB CA), [1923] 3 WWR 897 at p. 904 (Alta SC App Div), affirmed NationalUnion Fire Insurance Co v Martin, (SCC), [1924] SCR 348.

However, where the principal alleges that the actor either(

i) was never an agent or (ii) was an agent but acted outside his or her actual authority, the question becomes whether the agent hadostensible authority. The answer depends on whether the principal has, by words or deeds, held out the agent as having the authority todo the challenged act: Doiron v Manufacturers Life Insurance Co., 2003 ABCA 336 at paras. 15-6, 20 Alta LR (4th) 11, 339 AR 371. [7] The law has established a number of principles about ostensible authority of an agent: (

a) Representations about the authority of the agent must come from the principal; an agent cannot clothehimself or herself with authority: Jensen v South Trail Mobile Ltd., 1972 AltaSCAD 29 at para. 21, [1972] 5 WWR 7, 28 DLR (3d)233;

(

b) The onus is on the person who is relying on the act of the agent to prove ostensible authority; (

c) However, when the agent has actual authority, but that authority is subject to limitations, the onus is on the principal to prove that the limitations were conveyed to the third party who relied on the agent: Kohn v Devon Mortgage Ltd., 1985 ABCA 10 at para. 3 , 37 Alta LR (2d) 20, 65 AR 73 (CA); (

d) These general principles apply to the specific situation where a debtor pays money to the agent, rather than directly to the principal, as happened in this appeal: Kohn v Devon Mortgage. Whether the test has been met in this appeal is largely a question of the proper inferences to draw from the undisputed facts. Some of the earlier cases use dramatic language to describe the evidence that is required to meet these various tests: “pays at his peril”, “clear evidence of authority”, “prove to the hilt”, “clear and unequivocal proof”, etc.

There is, however, only one standard of proof in civil cases, and that is proof on a balance of probabilities : F.H. v McDougall, 2008 SCC 53 at para. 40 , [2008] 3 SCR 41. [ 9 ] In Currie, the agent was clothed with considerable actual authority with respect to a mortgage. He had negotiated the original transaction and the principal had had no communications with the mortgagor. The mortgagee named the agent in the mortgage as the appropriate line of communication by directing that it would take place “care of” that agent.

Furthermore, the agent had prepared a payout statement with the knowledge of the principal as approval from Currie had been sought. At that point the principal did not communicate to the agent that he was not to prepare statements.

Additional statements were prepared by the agent without the knowledge of the principal for amounts less than the actual amount payable, sent to the mortgagors’ lawyer who relied upon it, and which contained instructions to pay the amount to the agent who on receipt of the funds absconded. [ 10 ] The question here is whether from the facts in evidence in this case can one properly infer on a balance of probabilities that Celebration had actual authority. It is known from the facts that no authority was directly communicated from Caskey to Hillenbrand.

We do not know what was communicated by Celebration when giving instructions to Hillenbrand to register the caveat. Nonetheless, Hillenbrand was instructed to register a caveat by Celebration. They were aware that Caskey was purchasing the lot.

With that information it would be a reasonable assumption by Hillenbrand that it was appropriate to effect the registration with the knowledge that it would protect Caskey’s interest under the Agreement and to represent themselves to the Land Titles Office as being their Solicitor and Agent for that purpose. [ 11 ] The question then arises in the context of the postponement. Hillenbrand argues that having given actual authority to Celebration to register the caveat that it is a reasonable inference that such authority would be extended to the postponement.

Again, no evidence on what instructions, if any, were given by Celebration to Hillenbrand. It is clear that the postponement would negatively alter the rights of Caskey. A very different consequence than the registering a caveat. [ 12 ] Hillenbrand argues that the third paragraph of Clause 6 of the Agreement gives authority to Celebration to postpone the caveat.

It reads as follows: In the event the Purchaser does not obtain title prior to the date of possession, but files a caveat against the Land or the Builder or anyone holding the Land under an Agreement with the Builder, then the Purchaser undertakes and agrees that an unconditional postponement of any such Purchaser’s caveat will be granted on the request of the Builder in favour of any vendor’s lien caveat to be filed by the Builder subsequently or, if required by a mortgage lender for the purpose of making mortgage advances. [ 13 ] It is doubtful in my mind that this paragraph has any application to the facts of this case.

Caskey did not obtain possession nor was Caskey entitled to possession before the caveat was postponed. Regardless, the language falls well short of giving Celebration authority to instruct registration of a postponement. Furthermore, although an undertaking was given to postpone to an unpaid vender’s lien caveat (there was none) on the request of Celebration, “or, if required by a mortgage lender for the purpose of making mortgage advances”. No request was made by Celebration nor is there any evidence that it was required by the mortgage lender to advance.

This is quite apart from the valid question of whether a postponement to a blanket mortgage over the subject and two other properties for mortgage advance(

s) well in excess of their collective value would have been reasonably contemplated by the parties at the time the Agreement was executed. [ 14 ] Hillenbrand also argues that Caskey should have communicated to them that the authority given to Celebration was limited to registration of the caveat. Even if the terms of the Agreement applied, no request was made by Celebration to postpone.

Caskey simply had no knowledge or reason to expect that a postponement would be prepared and registered so it would be inexplicable for them to find it would be necessary to convey the absence of Celebration’s authority to give those instructions. [ 15 ] Finally, Hillenbrand argues it can rely on the indoor management rule or the ostensible authority of the individual director of Celebration. Whether Celebration satisfied its internal corporate requirements is of no relevance and would not and could not give Celebration authority over someone else’s rights where none existed.

Caskey conveyed no authority to Celebration to postpone the Caveat. Liability and Damages [ 16 ] In this case, Caskey engaged her own Counsel to review the Agreement, understood Hillenbrand was Counsel for Celebration and, as noted above, Caskey never communicated with Hillenbrand. It is true that a solicitor for a vendor of land typically owes no duty of care to a purchaser unless the solicitor is retained by both parties. I am inclined to agree that no solicitor client relationship was created in the conventional sense.

However, if we accept that Celebration was an agent for Caskey, when Hillenbrand received instructions from the agent, there arose a relationship with Caskey as the principal for who they were ultimately responsible. The signing of the postponement as Caskey’s “authorized solicitor and agent” belies the argument that no relationship was created, and no duty of care arose to Caskey.

[ 17 ] Indeed, if they were not acting on Caskey’s behalf then they mis-characterized their position to the Land Titles Office. Without that characterization Land Titles would not have registered the postponement. Whether a duty arose under a solicitor client relationship or under the common law, by altering the priority of Caskey’s registration, the possibility of an economic loss is arguably both proximate and foreseeable. [ 18 ] As for damages, liability for funds advanced by Caskey after the registration of the postponement appear to logically flow.

And, although perhaps more difficult to establish, damages for the initial $315,000 payment to Celebration is in issue. Decision [ 19 ] Considering the above facts and analysis, I am unable to conclude that the claim lacks merit. Accordingly, the application for

summary dismissal is dismissed. No cross application has been made nor argument given for

summary judgment. Regardless, I would not be prepared to grant it based on the factual record before me. [ 20 ] Unless there are other considerations which have not been brought to my attention, Caskey will have her costs of this application on the appropriate Column of

Schedule C. Heard on the 26 th day of July, 2023. Dated at the City of Edmonton, Alberta this 17 th day of August, 2023. L.A. Smart A.J.C.K.B.A. Appearances: Edward R Feehan, KC Duncan Craig LLP for the Plaintiffs Stuart J Weatherill Emery Jamieson LLP for the Defendants, Mark E Hillenbrand and Hillenbrand Kozicki LLP