Armstrong v Gula, 2023 ABKB 270

Court of King’s Bench of Alberta Citation: Armstrong v Gula, 2023 ABKB 270 Date: 20230502 Docket: 2009 0065 Registry: Peace River Between: Jeffrey Armstrong Plaintiff - and - George Michael Gula, by His Litigation Representative, Lynette Gayle Gula Defendant _______________________________________________________ Reasons for Decision of the Honourable Justice M.A. Marion _______________________________________________________ I. Introduction and Background [ 1 ] This decision addresses the question of how courts, in light of the “shift in culture” with respect to

summary resolution of litigation as mandated by the Supreme Court of Canada (in Hryniak v Mauldin , 2014 SCC 7 ) as applied by the Alberta Court of Appeal (in, for example, Weir-Jones Technical Services Incorporated v Purolator Courier Ltd , 2019 ABCA 49 ), should handle a potentially material issue that the court identifies upon review of the evidence in a

summary dismissal application, but which may not be specifically identified in the pleadings or which may not have been expressly argued in the written briefs. [ 2 ] Should courts restrictively interpret the pleadings and the

summary resolution application, decline to consider the issue as not being before it, and effectively encourage the parties to engage in serial

summary resolution applications? Or should courts take a liberal view of the pleadings and application, and then implement a fair process to deal with the issue in the

summary resolution process?

For the reasons set out below, I believe that, in this case, the latter approach is appropriate, consistent with the culture-shift, and consistent with the foundational rules of the Alberta Rules of Court , Alta Reg 124/2010 ( Rules ). [ 3 ] The plaintiff Jeffrey Armstrong ( Armstrong ) seeks to enforce a November 2017 “Residential Real Estate Purchase Contract” ( Purchase Contract ) by which he argues George Gula ( Gula ) agreed to sell Armstrong five quarter sections of land in or near Cherry Point, Alberta ( Lands ) for $330,000. [ 4 ] In November 2017, Armstrong was interested in acquiring land in or near Cherry Point.

He had never met Gula. He approached Gula at his home on the Lands to see if Gula was interested in selling. Armstrong’s evidence is that in their first meeting the

parties reached an agreement at Gula’s kitchen table for the sale of the Lands and a tenancy arrangement that would allow Gula to remain on the Lands following the sale. Armstrong had his lawyers prepare the Purchase Contract and Armstrong personally prepared an Alberta Residential Tenancy Agreement. Armstrong asserts that he then re-attended at Gula’s residence where the parties reviewed the Purchase Contract and signed it. The entire process took a matter of a few days. [ 5 ] The Purchase Contract’s closing date was January 31, 2018, however, on January 30, 2018, Armstrong’s counsel was advised that

(1) Gula did not have a copy of the Purchase Contract;

(2) Gula did not intentionally sign any document to sell his Lands; (3) if he signed any document, he was tricked into signing it; (4) he never intended, nor does he intend to now, sell the Lands. The transaction did not close. [ 6 ] Nineteen months later, in October 2019, Armstrong filed and served this action seeking specific performance of the Purchase Contract and damages. At that time, Gula no longer had capacity to instruct counsel and, in March 2020, a Statement of Defence was filed on his behalf by his niece and litigation representative, Lynette Gula.

Gula passed away in October 2020 and the action is being defended on behalf of his estate ( Estate ) by his personal representatives. [ 7 ] In December 2022, the Estate filed a

summary dismissal application to dismiss Armstrong’s action, including on the basis that the Purchase Contract is void ab initio or unenforceable. The Estate asserts, among other things, that the Purchase Contract was forged, that Gula lacked capacity to contract, that Armstrong made misrepresentations to Gula, and that the Purchase Contract is unconscionable. The Statement of Defence also pleads mistake and non est factum . [ 8 ] The

summary dismissal record is voluminous. The Estate relies on 13 affidavits from various Gula family members, neighbours, tenants and friends, each of which were questioned on their affidavits. The Estate extensively questioned Armstrong on his response affidavit.

Undertakings were given and provided. [ 9 ] In preparing for the application, I noticed that the Purchase Contract included purchaser’s conditions to obtain financing and an appraisal on or before January 16, 2018, and included this provision: 8.5 Provided that the Purchaser or the Vendor, as the case may be, uses reasonable efforts to satisfy the Condition(s), if the written Notice has not been given on the stated Condition Day, then this Agreement is ended. [ 10 ] I wrote to the parties and noted that, in their briefs, the parties had not materially addressed this provision and whether written notice of the waiver of purchaser’s conditions had been provided.

I requested they address in oral argument whether there was evidence in the record as to whether Armstrong had provided written notice of waiver of the purchaser’s conditions as contemplated by the Purchase Contract and, if not, what, if anything, is the impact of that on the Purchase Contract and the

summary dismissal application. I asked for their

interpretation of clause 8.5 of the Purchase Contract. For ease, I will refer to the issues arising out of my questions collectively as the “ Condition Waiver Issue ”. [ 11 ] In oral argument, counsel confirmed that there was no evidence before the court that Armstrong or his counsel provided written notice to Gula or his “legal representative” of a waiver of purchaser’s conditions on or before January 16, 2018. However, it is possible such evidence exists. [ 12 ] The Estate argued that the Condition Waiver Issue was amply included in the Statement of Defence, could and should be considered by the court as part of the

summary dismissal application. The Estate essentially argued that Armstrong failed to provide the written notice of waiver of purchaser’s conditions in accordance with the terms of the Purchase Contract and, therefore, it supported

summary dismissal of Armstrong’s claim. [ 13 ] Armstrong’s position is that the Condition Waiver Issue was not before me and should not be considered. He argued that the Statement of Defence did not plead the Condition Waiver Issue and, therefore, it would be an error in law for me to consider it on the

summary dismissal application. Armstrong’s position is that, if the Estate wishes to rely on the Condition Waiver Issue, it would have to amend the Statement of Defence. [ 14 ] Armstrong further argued it would be procedurally unfair for me to consider the Condition Waiver Issue because it has never been asserted by Gula or the Estate that the Purchase Contract came to an end on January 16, 2018 due to lack of written notice of the purchaser’s conditions.

Armstrong argues that, had he known this issue was being raised, he would have considered producing further records, made further inquiries of Armstrong’s former legal counsel about this issue to determine if other documents exist, questioned the Estate’s witnesses on this issue, and adduced further evidence on the

summary dismissal application including of conversations Armstrong’s former counsel had with KMSC Law LLP. In any event, Armstrong argues, among other things, that he provided effective notice of waiver through his legal counsel, or otherwise complied with the requirements of the Purchase Contract, and that Gula is estopped from arguing, or waived his right to argue, that effective notice was not provided. [ 15 ] The full-day

summary dismissal application proceeded, and the parties addressed all issues raised, including the Condition Waiver Issue, on the record that was before the Court. Neither party sought to adjourn the application.

I reserved my decision, asked the parties to consider whether further submissions were required in respect of the Condition Waiver Issue, and advised them that I may return to them with further directions. [ 16 ] I have decided that, as a matter of fairness, expediency and efficiency, for the reasons set out below, a further opportunity must be given to the parties to adduce and test evidence, and to make complete legal argument in respect of the Condition Waiver Issue, before I decide the Estate’s

summary dismissal application. Further legal submissions alone will not suffice. II. Issues [ 17 ] The question before me is whether I can or should address the Condition Waiver Issue on the Estate’s

summary dismissal

application and, if so, on what basis. This raises these issues: (

a) Is the Condition Waiver Issue properly pleaded and before the Court? (

b) Would it be procedurally unfair to consider the Condition Waiver Issue on the Estate’s

summary dismissal application? (

c) What is an appropriate path forward? III. Analysis A. Is the Condition Waiver Issue properly pleaded and before the Court? [18] Courts have emphasized that, as a fundamental principle of fairness, lawsuits are to be decided within the boundaries of thepleadings: Malton v Attia, 2016 ABCA 130 at para 39; Rodaro v Royal Bank (2002), (ONCA) at para 60;Motkowski Holdings Ltd v County of Yellowhead, 2010 ABCA 72 at para 20.

Accordingly, it is generally inappropriate for a judge todecide a case on a basis not pleaded by the parties: Sumner v PCL Constructors, 2011 ABCA 326 at para 26. [19] Basing a decision on an issue not raised in the pleadings deprives the other party of the opportunity to address that issue in theevidence at the trial; it is particularly problematic when a theory of liability is raised for the first time in the reasons for judgment:Malton at para 39; MNP (Next Friend of) v Bablitz, 2006 ABCA 245; Rodaro at paras 61-62.

Proceeding this way deprives a partyfrom knowing the case they have to meet: Rodaro at para 61. [20] However, pleadings are to be interpreted liberally and generously, not restrictively,: PricewaterhouseCoopers Inc v PerpetualEnergy Inc, 2021 ABCA 16 at para 74; Tottrup v Lund, 2000 ABCA 121 at para 9.

This interpretive approach applies in the context ofsummary resolution proceedings: Amyotte v Kawartha Haliburton Children’s Aid Society, 2021 ONSC 7378; Popescu v WittmanCanada Inc, 2017 ONSC 3252 at paras 30-32; Link v Venture Steel Inc, 2010 ONCA 144 at para 36. [21] Further, a judicial decision may be reached on a basis which does not “perfectly accord” with the pleadings if no party to theproceedings is surprised or prejudiced: Rules, rule 1.3; Tervita Corporation v Canada (Commissioner of Competition), 2013 FCA 28, [2014] 2 FCR 352 at para 72, reversed on other grounds, 2015 SCC 3; CSX Transportation, Inc. v.

ABB Inc., 2022 FCA 96 atpara 12; Canada (Commissioner of Competition) v Rogers Communications Inc, 2023 FCA 16 at para 12. This concept has beenapplied in

summary resolution proceedings: FFO Fiberglass v Distribution Composites, 2019 ONSC 4291 at para 40; Breen v FCTInsurance, 2018 ONSC 3644 at para 104. The question is whether all parties have been informed of the issue and given a fullopportunity to respond to it: Chahal v Chahal, 2020 BCCA 147 at para 117. [22] A similar approach has been applied by the Alberta Court of Appeal in granting

summary dismissal where it was not formallyapplied for but where the other party suffered no prejudice because it was aware of the relief sought: Pyrrha Design Inc v Plum andPosey Inc, 2016 ABCA 12 at paras 8-17. [23] In this case, the Amended Statement of Claim pleads the following: 4. On or about November 23, 2017, the Defendant entered into a Residential Real Estate Purchase Agreement to sell the Lands tothe Plaintiff for the total sum of $330,000 (the “Agreement”). [...] 6.

The Agreement was subject to [sic] financing condition which was removed by the Purchaser after his financing was approved bythe Bank of Montreal. [...] 10. On or about January 15, 2018, the Purchaser removed his financing condition in writing and the Agreement becameunconditional. [...] 12.

The Purchaser’s solicitor, Thorne & Thorne contacted the solicitor for the Vendor, KMSC Law in Fairview and sent them a copyof the Agreement and Waiver of Conditions. [24] In substance, Armstrong’s Statement of Claim asserts that the Purchase Agreement was conditional, but became unconditionalon January 15, 2018 when the Purchaser removed his financing condition. It also pleads that the “Waiver of Conditions” were sent toGula’s lawyers, KMSC Law, in Fairview. [25] In the Statement of Defence, the Defendant denied every allegation set forth in the Statement of Claim except where expresslyadmitted.

The Statement of Defence does not admit paragraphs 4, 6, 10 or 12, and expressly denies paragraphs 4 and 6. The Statement ofDefence further pleads, at paragraph 20, that if the Defendant did sign the Agreement, then Gula did not hear anything from Armstrongfor some time and that Gula “did not believe that any action was required by him or that he had entered into any agreement or contract inrelation to the Lands”.

At paragraph 47, the Statement of Claim pleads that “as a result of all of the foregoing defences pled by theDefendant, the Defendant states that the Alleged Agreement is void ab initio or unenforceable in its entirety”. The Statement of Defenceseeks a declaration that the “Alleged Agreement is void ab initio and/or unenforceable in its entirety”. [26] In my view, the pleadings join issue on (1) whether Armstrong removed his conditions and the Purchase Contract became

unconditional; and (2) whether the Purchase Contract, at the time of the Statement of Claim, was valid, void ab initio , or unenforceable. Armstrong’s entire claim depends on the continued existence and validity of the Purchase Contract, and the Statement of Defence amply denies both its existence and enforceability. Although it could have been made more express, I find that the pleadings sufficiently include the Condition Waiver Issue. [ 27 ] Further, pleadings are only pleadings of fact, not evidence: rule 13.6(2)(a).

Subject to certain matters which must be specifically pleaded to avoid surprise (rule 13.6(2) and (3)) or for which particulars are required (rule 13.7), pleading “a statement of a point of law” is discretionary: rule 13.8(1)(b). While it may sometimes be helpful to provide particulars, in a contract case a party does not need to plead every possible legal argument that leads to the contract not existing or being unenforceable, or that otherwise supports its

interpretation, unless those matters may take the other party by surprise or are enumerated as requiring express pleading: rule 13.6(3); Campbell v Paradise Petroleums , 2019 ABCA 410 at para 41 .

If an argument “necessarily went along” with arguments raised during the run up to an application, there can be no surprise: Campbell at para 41 . [ 28 ] In all the circumstances, it should not be a surprise to Armstrong or his counsel that, to be successful in his claim, Armstrong will have to prove, on a balance of probabilities that, if there were conditions, any conditions in the Purchase Contract were waived in accordance with the Purchase Contract or were otherwise legally resolved through conduct of the parties.

This is obvious from his pleading that the Purchase Contract became unconditional upon waiver of the financing condition. He did not need the Estate to expressly state this in the pleading. [ 29 ] I am not persuaded by Armstrong’s argument that the pleadings do not include the Condition Waiver Issue. B. Would it be Procedurally Unfair to consider the Condition Waiver Issue on the

Summary Dismissal Application? [ 30 ] Armstrong’s second objection to the Condition Waiver Issue being part of the Estate’s

summary dismissal application is that, even if the pleadings are sufficient to include the issue, it would be procedurally unfair because Armstrong has not been able to marshal or test evidence, or make full legal argument, on that issue. [ 31 ] The principles of fairness outlined above for pleadings apply equally to applications. Issues raised for the first time in oral submissions can lead to unfairness, including in

summary resolution proceedings: Holmes v Hatch Ltd , 2017 ONCA 880 at paras 1-9 ; Toronto-Dominion Bank, NA v Lloyd’s Underwriters , 2017 ONCA 1011 at para 16 ; Aeroflex Spa Ltd v Shemina Financial Corporation , 2002 ABQB 1079 at paras 10-20 . [ 32 ] In Holmes , the motion judge in a

summary judgment application made a finding about a type of breach of contract that had not been alleged, or advanced in the Notice of Motion or the written argument. The motions judge, once the issue arose, invited oral submissions on the issue during the hearing and in writing afterwards.

The Ontario Court of Appeal held that this was insufficient to ensure hearing fairness, at paras 8-9: [8] In fairness to the motion judge, the record confirms that, once the suggestion of this type of breach of the termination clause arose, the motion judge attempted to ensure fairness to the parties by inviting oral submissions on the issue during the hearing and in writing after the hearing.

Hatch was thus provided with some opportunity to address the new allegation against it in argument before the motion judge. [9] But, with respect, this did not meet the concern that the alleged breach had not been pleaded or raised by Holmes. And it did not remedy the denial of the opportunity for Hatch to lead evidence responsive to the precise breach allegation belatedly raised against it . Hearing fairness was therefore fatally compromised . [Emphasis added] [ 33 ] As noted earlier, Armstrong has not satisfied me that the Condition Waiver Issue was not pleaded by the Estate.

I am also satisfied that, technically, it is covered by a liberal

interpretation of the general provisions of the Estate’s Application for

Summary Dismissal. [ 34 ] But that does not end the matter. The Estate did not specifically raise the Condition Waiver Issue in its Application for

Summary Dismissal or its written argument. It only addressed the issue in oral argument after my query, which I was only able to raise with the parties the day before the special application. The parties have engaged in a significant evidentiary process that has been focussed on the events that led to the Purchase Contract being signed, Gula’s capacity and understanding at the time, and whether the Purchase Contract was unconscionable. They have spent little-to-no time on the Condition Waiver Issue. Further, they only had one day to prepare legal submissions on the issue. [ 35 ] Armstrong asserts that, had he known that the Condition Waiver Issue was to be relied on in support of

summary dismissal, he would have made further efforts to obtain records or evidence from Armstrong’s counsel at the time of the Purchase Contract, would have adduced further evidence (including evidence of industry practice regarding waiver of conditions), and made additional legal argument (including related to acceptance of breach, waiver of the requirement to provide written notice, failure of Gula to repudiate the Purchase Contract, estoppel, and a proper

interpretation of the Purchase Contract, among others). [ 36 ] In all the circumstances, I am persuaded that, as a matter of fairness, I should not consider the Condition Waiver Issue on the record before me. I am not satisfied that allowing further oral or written legal submissions alone will be sufficient to ensure a fair process. C. What is an Appropriate Path Forward? [ 37 ] Given that it would be unfair for me to consider the Condition Waiver Issue on the record before me, the question is whether I should proceed to decide the application without considering it at all (as argued by Armstrong), or if I should consider it in the context of

a further process to ensure fairness. [ 38 ] The foundational rules of court, in particular rules 1.2(1) and (2), 1.4 and 1.5, and the court’s inherent jurisdiction, are designed to give the court wide discretion to control its own process for the purposes of identifying the real issues in dispute and providing a means by which claims can be fairly and justly resolved in or by a court process in a timely and cost-effective way.

This includes, if possible, avoiding multiplicity of proceedings, abuse of process, and litigation by instalment: Phyrra Design at paras 8-9; PricewaterhouseCoopers Inc v Perpetual Energy Inc , 2022 ABCA 111 at paras 77-82 [ PricewaterhouseCoopers 2022 ]. Further, while serial or successive

summary resolution applications are possible in certain circumstances, they are “obviously to be discouraged”: PricewaterhouseCoopers 2022 at paras 87-90 ; Milne v Barnes , 2013 ABCA 379 at para 6 . [ 39 ] Further, in light of the culture-shift on

summary resolution, courts are obliged to resolve legal disputes in the most cost- effective and timely method available, provided the process selected ensures fairness between the parties: Phyrra Design at para 10. [ 40 ] If I simply ignore the Condition Waiver Issue and decide the

summary dismissal application, and then conclude

summary dismissal is not appropriate on the record and issues argued before me, I find it is highly likely the Estate would bring another application for

summary dismissal to raise the Condition Waiver Issue. If I ignore the Condition Waiver Issue and grant

summary dismissal on other grounds, it is possible that this may be appealed and then, if that appeal is successful, then the Estate might bring another application for

summary dismissal to raise the Condition Waiver Issue. Further, if I ignore the Condition Waiver issue, it is conceivable the Estate might seek to commence a second

summary judgment application without waiting for this one to run its course. All of this would lead to significant delay, duplication and waste of resources, and potential multiplicity of proceedings. None of this is consistent with the foundational rules or the culture-shift on

summary proceedings. [ 41 ] I am not functus , as I have not rendered my decision on the merits. Given the inefficiency and delay concerns, the potential value of the lands at issue, the interests at stake, the significant effort of the parties to date, the relatively narrow scope of the Condition Waiver Issue, the interrelationship in the evidence between the Condition Waiver Issue and the other issues in the

summary dismissal application, in my view it behooves the court to exercise its discretion to craft a fair process that allows the Condition Waiver Issue to be fully explored by the parties in the Estate’s application, rather than ignoring it and, effectively, “kicking it down the road”. I am aware of no prejudice in doing so, and it will allow the parties to have all issues fairly considered in the court’s determination of whether

summary dismissal is appropriate in this action. IV. Conclusion [ 42 ] Based on the foregoing, I order the following: (

a) the Estate’s

summary dismissal application shall proceed, with the Condition Waiver Issue to be considered, however, that application is adjourned for a further evidentiary process and legal argument prior to my decision being rendered, as set out below; (

b) although not, in my view, strictly necessary, for efficiency and to avoid further disputes, if the Estate intends to formally advance an argument that the Condition Waiver Issue supports

summary dismissal, the Estate shall propose an amendment to the Statement of Defence to specifically plead and particularize its allegations in respect of the Condition Waiver Issue; (

c) if Armstrong consents to the proposed amendment to the Statement of Defence, the parties shall arrange to have it filed and provided to my office. Armstrong shall have the right to file a Reply to the amended Statement of Defence, as contemplated by rule 3.33, to address the Condition Waiver Issue, within 10 days after service of the filed amended Statement of Defence; (

d) if Armstrong does not consent to the proposed amendment to the Statement of Defence, the Estate is granted leave to amend its Application for

Summary Dismissal to include an application to amend the Statement of Defence (with its proposed amendment), and this will be heard by me as part of the

summary dismissal application; (

e) the parties shall be entitled to produce additional records, file supplemental affidavits, and to conduct further questioning on existing or new affidavits, to address the Condition Waiver Issue and (if necessary) the proposed amendment to the Statement of Defence; (

f) each party may file a supplemental brief of argument to address the amendment application (if necessary) and the Condition Waiver Issue, to maximum of 12 pages (excluding authorities); and (

g) the parties are encouraged to agree to a

schedule to accommodate the steps contemplated by this order, and have leave to approach my to

schedule a further ½ day of oral argument once they are ready to

schedule it. [ 43 ] If the parties cannot agree on a procedural

schedule to implement this decision they may seek my further direction. Heard on the 26 th day of April, 2023. Dated at the Town of Peace River, Alberta this 2 nd day of May, 2023. M.A. Marion J.C.K.B.A.

Appearances: Robert A. Martz and Jennie S. Han for the Plaintiff/Respondent Leah Paslawski for the Defendant/Applicant