Falkbuilt Ltd v DIRTT Environmental Solutions Inc, 2022 ABKB 787

Court of King’s Bench of Alberta Citation: Falkbuilt Ltd v DIRTT Environmental Solutions Inc, 2022 ABKB 787 Date: 20221128 Dockets: 1901 06550, 2101 12222 Registry: Calgary Between: Docket 1901 06550 Falkbuilt Ltd, Mogens Smed, and Barrie Loberg Plaintiffs by Counterclaim - and - DIRTT Environmental Solutions Inc and Kevin O’Meara Defendants by Counterclaim And between: Docket: 2101 12222 Falkbuilt Ltd, Mogens Smed, and Barrie Loberg Plaintiffs - and - DIRTT Environmental Solutions Inc, DIRTT Environmental Solutions Ltd, Kevin O’Meara, and Steven Parry Defendants

_______________________________________________________ Memorandum of Decision of the Associate Chief Justice J.D. Rooke _______________________________________________________ I. Introduction [ 1 ] On September 13, 2022, Counsel for DIRTT Environmental Solutions Inc, DIRTT Environmental Solutions Ltd, Kevin O’Meara and Steven Parry [2101 Defendants], by letter, referred to the Alberta Court of King’s Bench Docket No. 2101 12222 Statement of Claim as a candidate Apparently Vexatious Application or Proceeding [AVAP] pursuant to Civil Practice Note No. 7 [CPN7] paragraph 6.

The Docket No. 2101 12222 Statement of Claim was filed by Falkbuilt Ltd, Mogens Smed, and Barrie Loberg [Falkbuilt Parties]. [ 2 ] Succinctly, Counsel for the 2101 Defendants indicates that the Docket No. 2101 12222 Statement of Claim duplicates claims made in a Counterclaim filed on June 14, 2019 by the Falkbuilt Parties in a different Alberta Court of King’s Bench lawsuit: Docket No. 1901 06550.

Counsel for the 2101 Defendants included that Counterclaim with its referral letter. [ 3 ] After review of the Docket No. 2101 12222 Statement of Claim, and the Docket No. 1901 06550 Counterclaim, I concluded in a Decision reported as Falkbuilt Ltd v DIRTT Environmental Solutions Inc , 2022 ABKB 637 [ Falkbuilt #1 ] that the Docket No. 2101 12222 Statement of Claim exhibits a prima facie fatal defect, is an AVAP, and should be subject to a CPN7 “show cause” document-based review.

The Falkbuilt Parties were instructed to submit an up to ten-page Written Submission to “... answer how the Docket No. 1901 06650 Counterclaim and the Docket No. 2101 12222 Statement of Claim are not prohibited and abusive duplicate proceedings, and an abuse of the Court.”: Falkbuilt #1 at para 14 . [ 4 ] That Written Submission of the Falkbuilt Parties was received by the Court on October 6, 2022. The 2101 Defendants’ Written Reply was received on October 13, 2022. That completes the CPN7 process.

The Court now moves to determine whether the Docket No. 2101 12222 Statement of Claim should be struck out, in whole or in part. II. The Parties’ Submissions [ 5 ] A brief introduction is useful prior to review of the parties’ submissions. There are two reciprocal lawsuits in play in this analysis: • Docket No. 1901 06550 - One of the 2101 Defendants sued the Falkbuilt Parties and others.

The Falkbuilt Parties then countersued two of the 2101 Defendants. • Docket No. 2101 12222 - The Falkbuilt Parties sued the 2101 Defendants, who include two of the Docket 1901 06550 counterclaim Defendants, and two additional parties. [ 6 ] Thus, both relevant proceedings are initiated by the same Falkbuilt Parties: Plaintiffs: Falkbuilt Ltd, Mogens Smed, and Barrie Loberg.

The Defending parties overlap: • Docket No. 1901 06650 Counterclaim: DIRTT Environmental Solutions Ltd and Kevin O’Meara • Docket No. 2101 12222 Statement of Claim: DIRTT Environmental Solutions Inc, DIRTT Environmental Solutions Ltd, Kevin O’Meara, and Steven Parry. [ 7 ] As was observed in Falkbuilt #1 at paras 9-11 , the pleadings in the Docket No. 1901 06650 Counterclaim and Docket No. 2101 12222 Statement of Claim broadly overlap: [9] From my review, it appears that all claims in the Docket No. 1901 06650 Counterclaim are found in the Docket No. 2101 12222 Statement of Claim.

The text for these apparently duplicate claims is identical, or functionally, the same. For example, paragraph 30 of the Counterclaim is: In breach of the Smed Agreement and the Loberg Agreement, DIRTT did not comply with

section 24 and instead commenced this Action

on May 9, 2019. This was the first time that either Mr. Smed or Mr. Loberg learned of the allegations being made against either of them.As a result of DIRRT’s failure to comply with

section 24, in breach of contract, Mr. Smed and Mr. Loberg have suffered irreparabledamage to their reputations, not least with respect to a Calgary Herald

article which was subsequently written about this court action andwhich repeated the allegations in the Statement of Claim. [10] Paragraph 34 of the Docket No. 2101 12222 Statement of Claim reads: In breach of the Smed Agreement and the Loberg Agreement, DIRTT did not comply with

section 24 and instead filed a Statement ofClaim against Smed, Loberg and others, Court File No. 1901-06550. This was the first time that either Mr. Smed or Mr. Loberg learnedof the allegations being made against either of them. As a result of DIRRT’s failure to comply with

section 24, in breach of contract, Mr.Smed and Mr. Loberg have suffered irreparable damage to their reputations, not least with respect to a Calgary Herald

article which wassubsequently written about the Statement of Claim filed in Court File No. 1901-06550 and which repeated the allegations in theStatement of Claim. [Sic.] [11] Similarly, both pleadings seek duplicate remedies. This is the text of paragraph 61 of the Counterclaim, and the “Remedy” “(d)”paragraph of the Statement of Claim: [A] judgment in favour of Mr.

Loberg against DIRTT for general and specific damages relating to the Loberg Termination Entitlements,Loberg Options, Loberg PSUs and Loberg Promised Equity in the estimated amount of $1,500,000, or such other amounts as may beproven at trial of this action. A. Falkbuilt Parties [8] The Falkbuilt Parties take the position that the Docket No. 2101 12222 Statement of Claim is not an abuse of the Court andthe 2101 Defendants.

Succinctly, the Falkbuilt Parties say that there are additional parties and claims in the Docket No. 2101 12222Statement of Claim, and that makes the two proceedings non-duplicative, and non-abusive. These litigants say that the fact there are twoadditional parties in the Docket No. 2101 12222 Statement of Claim means that the two actions are legally different and distinct. [9] The Falkbuilt Parties argue that the Falkbuilt Parties attempted to avoid duplicative and overlapping litigation by seekingamendments to the Docket No. 1901 06550 Counterclaim, but that the 2101 Defendants did not agree with those steps.

That then led toChambers applications on August 16, 2021 and August 31, 2021 to amend the Counterclaim, that were rejected by the ApplicationsJudges. That is why the Falkbuilt Parties then initiated the Docket No. 2101 12222 lawsuit. The Falkbuilt Parties have subsequentlymade further attempts to amend the Counterclaim in May 2022, but say the opposing parties did not agree with those amendments. [10] Counsel for the Falkbuilt Parties also says that Ominayak v Penn West Petroleum Ltd, 2015 ABQB 342 [Ominayak]demonstrates that two lawsuits having the same claims does not represent abusive duplicative litigation.

They claim that the reasoningand facts in Ominayak also applies to the Docket No. 1901 06550 Counterclaim and Docket No. 2101 12222. [11] In addition, the Falkbuilt Parties argue that, allegedly, the opposing parties had consented to an amended Docket No. 190106550 Counterclaim, but then reneged on that. The Falkbuilt Parties say they would terminate the Docket No. 2101 12222 lawsuit if theamendments they want to the Docket No. 1901 06550 Counterclaim occur. B. 2101 Defendants [12] The 2101 Defendants say that the Court should reject the Falkbuilt Parties’ arguments.

As the Court observed in Falkbuilt #1,the text and content of the Docket No. 1901 06650 Counterclaim and Docket No. 2101 12222 Statement of Claim overlap, and are oftenidentical. The 2101 Defendants say that all the Falkbuilt Parties did was take the Docket No. 1901 06550 Counterclaim, add two parties,and some minor expansions to the first document. The subject matter of the two proceedings is the same. [13] The 2101 Defendants say Canadian case law is explicit that what the Falkbuilt Parties are doing is illegal and an abuse ofcourt processes.

Cahoon v Franks, (SCC), [1967] SCR 455 at 457 sets the rule that “... there is only one cause of actionfor a single wrongful or negligent act and damages resulting from the single tort must be assessed in the one proceeding ...”.

The recentrestatement of the characteristics of collateral attacks in Unrau v National Dental Examining Board, 2019 ABQB 283 at para 613[Unrau #2] is clear: “... conducting multiple proceedings with the same litigation objective ...” is prohibited. [14] According to the 2101 Defendants, Ominayak is actually irrelevant in the current situation, since in that matter two lawsuitshad common underlying facts, but were fundamentally different claims - public vs private law - against entirely different defendants.Here, the Counterclaim and Statement of Claim involve: 1) the same parties, 2) the same facts, 3) the same alleged illegalities, and 4)exactly the same relief. [15] As for the arguments relating to possible amendments to the Docket No. 1901 06550 Counterclaim, the 2101 Defendants saythat is irrelevant, and, additionally, that the narrative provided by the Falkbuilt Parties is false.

The 2101 Defendants deny they havechanged their position in relation to amendments to the Counterclaim. The 2101 Defendants emphasize several points. First, the Docket1901 06550 Plaintiffs were uninvolved in court appearances where amendments to the Docket No. 1901 06550 Counterclaim wererejected. Second, the sequence of events is telling. The Docket No. 2101 12222 Statement of Claim was filed in 2021. Then, eightmonths later, on May 16, 2022, the Falkbuilt Parties made their latest attempt to amend the Docket 1901 06550 Counterclaim.

While theFalkbuilt Parties say that makes the 2101 Defendants responsible for the duplicative litigation, in fact, the chronology indicates theopposite. [16] The 2101 Defendants also observe that, operationally, what the Falkbuilt Parties have done, by filing the Docket No. 210112222 Statement of Claim, is to conduct a collateral attack on their repeated unsuccessful ex parte attempts to amend the Docket No.1901 06550 Counterclaim, after those amendments were rejected by the Applications Judges. The 2101 Defendants note that the

Falkbuilt Parties admit as much in their Written Submission; the Docket No. 2101 12222 Statement of Claim is admittedly identified aresponse to the negative Chambers outcomes, rather than potentially legitimate steps in the Docket No. 1901 06550 lawsuit. III. CPN7 Analysis A. Preliminary Issues [17] As a first preliminary issue, there appears to be some misapprehension by the Falkbuilt Parties as to who “owns” a CPN7process. That answer is, that is the Court. CPN7 is a process that is initiated by the Court.

Parties and court personnel refer candidateAVAPs to the Administrative (Chief and Associate Chief) Justices for potential review by CPN7 as exhibiting prima facie fatal defects.The Court sets the scope of that review, and identifies what issues require response from the party that filed the document under review.In Falkbuilt #1, I stayed on an interim basis both the Docket No. 1901 06550 Counterclaim and the Docket No. 2101 12222 Statement ofClaim.

That was a decision of the Court, on its own motion, in response to the identified apparently abusive litigation activity by theFalkbuilt Parties. [18] The second preliminary issue is the status of materials and information that both parties submitted relating to the Docket Nos.1901 06550 and 2101 12222, outside the potentially duplicate Counterclaim and Statement of Claim. The scope of documentation andinformation that may be considered in CPN7 is very limited.

Rule 3.68(3) explicitly prohibits parties from introducing evidence relevantto whether a filing “... discloses no reasonable claim or defence to a claim ...”: Rule 3.68(2)(b). Instead, CPN7 has a document-centredfocus, and that usually means the Court only examines one document - the AVAP - and its content: Ubah v Canadian NaturalResources Limited, 2019 ABQB 347 at paras 24-48 [Ubah #2]. One of the very narrow range of exceptions to that procedure is wherethe suspect filing is a collateral attack or duplicative proceeding: Ubah #2 at para 35.

If so, then documents to establish a collateral attackand/or duplicative proceedings exists is admissible. Here, that would be the Docket No. 1901 06550 Counterclaim and the Docket No.2101 12222 Statement of Claim. [19] For the purposes of this analysis, my conclusion is that the only relevant and admissible materials are the Docket 1901 06550Counterclaim and the Docket 2101 12222 Statement of Claim. Either these are duplicative proceedings - based on their text - or they arenot.

The outside circumstances of how these two lawsuits were initiated, and interlocutory litigation, are simply irrelevant to that specificquestion. [20] In coming to that conclusion, I acknowledge that the 2101 Defendants say there is also a collateral attack of a kind going onhere. In a broad sense that may be correct, but for the purposes of a narrow, focussed CPN7 review, the 2101 Defendants have notidentified re-litigation of the kind that would be addressed by this Court in this context. B.

Duplicative Proceedings [21] In Falkbuilt #1 at paras 8-11, the Court identified parallel and identical litigation in the Docket No. 1901 06550 Counterclaimand the Docket No. 2101 12222 Statement of Claim. I agree with the 2101 Defendants that these two actions overlap and duplicate oneanother. As the 2101 Defendants indicate, the filing parties are the same, the alleged facts are the same, the alleged illegalities are thesame, and the remedies in both proceedings are the same.

These two legal actions overlap. [22] The Supreme Court of Canada was very clear in Cahoon v Franks that inter-related tort activities must be conducted in oneaction. Subsequently, the Alberta Court of Appeal has framed that conclusion in this way in Zukowski v Royal Insurance Company ofCanada, 2000 ABCA 165 at para 15: ... The Supreme Court of Canada made it clear in Cahoon v.

Franks (1967), (SCC), 63 D.L.R. (2d) 274, that there is onlyone cause of action for a single negligent act and damages resulting from such a single tort must be assessed in one proceeding. ... [23] Here, there are two proceeding that emerge from the same alleged misconduct. I agree with and adopt the reasoning of the2101 Defendants on why Ominayak v Penn West Petroleum Ltd has no application here.

Instead, this Court has uniformly concludedthat conducting duplicate proceedings is an abuse of court: Unrau v National Dental Examining Board, 2019 ABQB 283 at para 613;Piers v Proudman, 2021 ABQB 253 at paras 21-24, litigation struck out by CPN7, 2021 ABQB 349; Ellis v Szawlowski, 2021 ABQB103 at para 13, litigation struck out by CPN7, 2021 ABQB 164; Joshi v Saskatchewan, 2021 ABQB 240 at paras 19, 22, litigation struckout by CPN7, 2021 ABQB 317; Ashraf v Munn, 2021 ABQB 407 at para 13, litigation struck out by CPN7, 2021 ABQB 472 at paras23-30; Selim v Greystone Residential Management Corp, 2021 ABQB 1000 at paras 21-22, litigation struck out by CPN7, 2022 ABQB59; John v Alberta, 2022 ABQB 193 at paras 33-34, litigation struck out by CPN7, 2022 ABQB 272; Simonovic v Shandro, 2022ABQB 433 at para 26, litigation struck out by CPN7, 2022 ABQB 481; Harrison v McClelland, 2022 ABQB 547, litigation struck outby CPN7, 2022 ABQB 589. [24] What matters is that there are two co-existent, overlapping legal processes in the Alberta Court of King’s Bench.

That hasbeen the situation since the Docket No. 2101 12222 Statement of Claim was filed. Throughout that period, and to the present, the DocketNo. 2101 12222 Statement of Claim is a duplicative proceeding, and, because of that, an abuse of the Court. [25] In the alternative, if I where to be incorrect that the various interlocutory steps that have gone on in relation to the Docket No.1901 06550 Counterclaim are, in some sense, admissible in a CPN7 process, I would have come to the same result.

The broaderlitigation backdrop of these two lawsuits does not impact the fact that the content of the Docket No. 1901 06550 Counterclaim and theDocket No. 2101 12222 Statement of Claim overlap. They are both “live” proceedings in this Court. That is the only determinative issuefor the Court. The result is the Docket No. 2101 12222 Statement of Claim is an illegal abuse of the Court.

IV. Conclusion [ 26 ] I have concluded that the Falkbuilt Parties has not rebutted the Court’s identification of abusive duplicate proceedings in Falkbuilt #1 . I, therefore, pursuant to Rule 3.68 and CPN7, para 3(c), order that the Docket No. 2101 12222 Statement of Claim is struck out as an abuse of the Court and the 2101 Defendants. [ 27 ] When an Action, Application, or claim is terminated via the CPN7 process, the usual practice of this Court is to award costs in favour of the litigant(

s) who initiated or participated in the CPN7 process: e.g. Ahad v Calgary Housing Company , 2020 ABQB 450 at para 9 ; Phillips v Kenney , 2020 ABQB 452 at para 9 ; Skrypichayko v Law Society of Alberta , 2020 ABQB 604 at para 43 ; Feeney v Alberta , 2020 ABQB 633 at para 6 . I see no reason to depart from that approach in this instance. Taking into account the quantum of damages sought in the Docket No. 2101 12222 Statement of Claim, and

Schedule C of the Alberta Rules of Court, I, therefore, order the Falkbuilt Parties pay the 2101 Defendants, each, $3,000 in costs, for a total of $12,000, forthwith. [ 28 ] Counsel for the 2101 Defendants will prepare the Order giving effect to this Decision. Dated at the City of Calgary, Alberta this 28 th day of November, 2022. J.D. Rooke A.C.J.C.K.B.A. Appearances: Andrew M. Pozzobon Borden Ladner Gervais LLP for the Plaintiffs by Counterclaim / Plaintiffs Falkbuilt Ltd, Mogens Smed David M. Price Stikeman Elliott LLP for the Plaintiff by Counterclaim / Plaintiff Barrie Loberg James Murphy Burnet, Duckworth & Palmer LLP for the Defendants by Counterclaim / Defendants