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ALBERTA EDITION

Adjournment; Solicitor’s Lien; Withdrawal of Counsel; Spousal Support; Arbitration

Amendments; Limitation Period; Adding Parties; Prejudice; Fraudulent Concealment

Security for Costs Application; Merits of Appeal; Ability to Pay ~ With Counsel Comments

Family Law; Retroactive Spousal Support; Overpayment; Division of Matrimonial Property

Arbitration; Judicial Review; Differential Discipline; Personal Circumstances

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Pearson v. Pearson, 2020 ABCA 260Areas of Law: Adjournment; Solicitor’s Lien; Withdrawal of Counsel; Spousal Support; Arbitration

~Opposing parties ought not to be “held hostage” to the time the other party takes to resolve issues relating to replacement of counsel~

BACKGROUND

CLICK HERE TO ACCESS THE JUDGMENT

The parties arbitrated the issue of spousal support between them, resulting in an award issued on August 30, 2019. The appellant sought new counsel

thereafter. On October 2, 2019, new counsel requested the file from former counsel, which was provided the following week on the trust condition that the file not be used to represent the appellant “as we have a solicitor’s lien on the file”. The limitation period to appeal the Spousal Support Award expired the following week. No appeal was filed. In November 2019, former counsel served the appellant and opposing counsel with a Notice of Withdrawal of Lawyer of Record. On December 2, 2019, former counsel filed an Affidavit of Service related only to service of opposing counsel.

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Pearson v. Pearson, (cont.)

The respondent filed an application, returnable December 18, 2019, seeking to enforce the Spousal Support Award, among other things. The appellant forwarded the Application materials to new counsel on November 25, 2019. On December 16, 2019, new counsel advised former counsel and opposing counsel that he intended to represent the appellant on an appeal of the Spousal Support Award and requested a release of former counsel’s trust condition. The following day, new counsel sent a further email requesting an adjournment of the Application to allow former counsel time to respond. Opposing counsel agreed to a brief adjournment on the condition that the appellant continue to pay spousal support in the interim. New counsel advised that he was unable to accept instructions from the appellant on account of the trust condition. An hour later, former counsel sent an email confirming the appellant had already been served with her Notice of Withdrawal, advising that she would not be attending the Application, and giving new counsel limited use of her file for the Application. The Application went ahead. The appellant was not present but new counsel appeared,

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APPELLATE DECISION

The appellant argued that it was procedurally unfair for the chambers judge to deny the adjournment request as it meant the appellant had been unable

to advance his position. The Court of Appeal disagreed. It concluded that there was no procedural unfairness for five reasons.

First, new counsel was not prevented from consenting to the adjournment offered by opposing counsel, as taking these instructions from the appellant would not have required a breach of former counsel’s trust conditions. In any event, former counsel had given new counsel “limited use” of the file for purposes of the Application. Second, if there was any confusion as to what new counsel could agree to, there was nothing to prevent the appellant from appearing at the Application personally. Third, there was nothing to prevent new counsel from acting for the appellant and filing a notice of change in the appellant’s lawyer of record. Former counsel’s failure to file an Affidavit of Service related to the Notice of Withdrawal served on the appellant did not mean that new counsel could not act. Ongoing issues relating to a former lawyer’s unpaid fees do not preclude a new lawyer from acting and opposing parties ought not to be “held hostage” to the time frame the other party takes to resolve issues relating to replacement of counsel. Fourth, new counsel did make representations to the chambers judge on the appellant’s behalf, meaning that he had in fact acted as an advocate, not as a friend of the court. Fifth, nothing on the record suggested that the appellant

purportedly acting as amicus curiae. New counsel sought an adjournment on the basis that former counsel remained counsel of record and that he could not represent the appellant until the trust condition could be addressed. The chambers judge declined to grant an adjournment. He granted the respondent’s order, noting that none of the conditions necessary to decline to register the Spousal Support Award were present.



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suffered any prejudice from the adjournment being denied. The Court of Appeal concluded there was nothing to suggest an adjournment could have affected the outcome of the Application. Section 49 of the Arbitration Act requires the enforcement of an arbitration award unless certain enumerated conditions are present, which in this case they were not. The appeal was dismissed.



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The dispute underlying this appeal relates to the sale of a parcel of

land by the respondent Domenic Construction Ltd to Clearview Capital Corp. The adjoining piece of land was owned by the appellant Primewest Capital Corp. Primewest, which was a subsidiary of the appellant Bar-N Ranch & Cattle Ltd., provided a guarantee on the sale. The purchaser Clearwater was a subsidiary of the appellant Bar-N Ghost Pine Ranch Ltd. All of the appellant corporations and Clearwater were controlled by the personal appellant, the late Gregory Noval. No guarantees for the sale were obtained from Ghost Pine Ranch, Ranch & Cattle or Mr. Noval. Clearview defaulted under the agreement for sale. Domenic obtained a consent “Rice order” judgment of approximately $2.99 million against Clearview and Primewest. When Domenic tried to collect on the judgement, it discovered the judgement debtors

BACKGROUND

Domenic Construction Ltd. v. Primewest Capital Corp., 2020 ABCA 265Areas of Law: Amendments; Limitation Period; Adding Parties; Prejudice; Fraudulent Concealment

~Plaintiff could make significant amendments to pleadings, including adding parties, where there was no prejudice~


were trustees for the other corporate appellants but that they had no assets of their own. In 2013, Domenic commenced the underlying fraudulent conveyance action alleging that the adjoining Primewest lands had been fraudulently conveyed from Primewest to Ghost Pine Ranch. In early 2017, Domenic applied to amend the statement of claim to add new allegations against Primewest and Ghost Pine Ranch. Before that application was heard, Domenic applied in March and April 2018 to make more extensive amendments, including to add Mr. Noval and Ranch & Cattle as defendants. The proposed amendments were significant. In addition to following the allegedly fraudulent conveyance of the adjoining Primewest lands, the amendments would impose liability on new parties under the agreement for sale, the guarantee, or the judgment.




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Domenic Construction Ltd. v. Primewest Capital Corp., (cont.)

APPELLATE DECISION

The Court of Appeal noted that amendments are generally easily obtained where they seek to add new claims or parties within the applicable limitation

period. It found that one of the contentious amendments clearly fell in that category and would be allowed. While the preferred procedure is to resolve any limitations issue at the time of the application to amend, the record did not allow the Court of Appeal to make a fair and just determination of the limitations issue with respect to the allegation of assignment. It therefore allowed the amendment but noted the appellants would be entitled to raise the limitations defence at trial. The Court of Appeal rejected Domenic’s alternate argument that the limitation period might be extended under s. 4 of the Limitations Act, as it concluded there was no evidence of the necessary “fraudulent concealment”.

The Court determined that an amendment relating to “Judicial Obstruction”, which was not a known cause of action, constituted an “impermissible pleading” and should not be allowed. It did, however, allow the addition of certain claims with “novel” aspects. In considering prejudice caused by the proposed amendments, the Court of Appeal concluded that the appellants had not shown sufficient prejudice to preclude the added claims against the corporate defendants. The claims against Mr. Novel raised different concerns, and the Court of Appeal concluded they should not be permitted. Mr. Novel had died

The master hearing the amendment application and the chambers judge hearing the subsequent appeal each considered whether the contentious amendments would cause any prejudice not compensable in costs, would be barred by the Limitations Act or were hopeless, and whether the application to amend had been brought in bad faith. Both the master and the chambers judge allowed certain amendments, only one of which was carried forward from the original fraudulent conveyance statement of claim.


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Domenic Construction Ltd. v. Primewest Capital Corp., (cont.)

prior to the appeal and his Estate would be prejudiced in its ability to respond to any claim where Mr. Novel’s evidence was no longer available. The Court of Appeal did not find that the amendments had been brought in bad faith and it declined to reject them as an abuse of process. In the end, the appeal was allowed in part with certain amendments permitted. In concurring reasons, Chief Justice Fraser and Madam Justice Khullar made several caveats. In particular, they stressed that the Court of Appeal’s reasons should not be interpreted as prejudging any issues that would be subject to trial.

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2008570 Alberta Ltd. v. Cedar Peaks Mortgage Investments Inc., 2020 ABCA 275Areas of Law: Security for Costs Application; Merits of Appeal; Ability to Pay

~The merits of an appeal go to the question of whether a security for costs order should be granted, not to the question of the amount of the order~

BACKGROUND

This was an application for security for costs by Cedar

Peaks Mortgage Investments Inc., in connection with two appeals filed by the application respondent, 2008570 Alberta Ltd. The underlying dispute relates to housing modules supplied by 2008570 to Rik54 Consulting Ltd., the owner of lands on which a duplex was to be built. Cedar advanced the funds for the purchase and a mortgage was registered against Rik54’s lands. 2008570 subsequently registered a lien against the lands. Rik54 defaulted on the mortgage. Cedar commenced foreclosure proceedings, resulting in the removal of 2008570’s lien and confirming the sale of the lands. 2008570 did not appeal the Sale Order, but it did apply to stay the Sale Order. A master dismissed the stay application on the basis that there was no serious issue to be tried. On appeal, a chambers’ judge dismissed 2008570’s appeal as an abuse of process. 2008570 appealed to the Court of Appeal, which is the first


appeal connected to the security for costs application. The second appeal relates to a separate builders’ lien action commenced by 2008570 against Rik54, in which it applied to have the duplex declared “materials” rather than an improvement to the lands. A master concluded that the duplex was an improvement and dismissed the application. On appeal, the chambers judge agreed and also concluded that the issue was moot given 2008570’s rights under the builders lien were extinguished.

2008570 also commenced a new action against Cedar, in which it alleges that Cedar wrongfully advanced the mortgage proceeds to Rik54 contrary to an assignment of those funds to 2008570. 2008570 intends to file for summary judgment in the New Action. 2008570 applied for an adjournment of Cedar’s security for costs application pending the outcome of the summary judgment application in the New Action.




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2008570 Alberta Ltd. v. Cedar Peaks Mortgage Investments Inc., (cont.)

APPELLATE DECISION

The Court of Appeal dismissed 2008570’s adjournment application but granted Cedar’s application for security for costs. The application for

security for costs was brought pursuant to the Rules of Court and s. 254 of the Business Corporations Act. The Court of Appeal declined to determine whether section 254 supersedes or supplements Rule 4.22 in the case of an application for security for costs against a corporate plaintiff, as it was satisfied that the application should be granted, whichever test applies.

The Court of Appeal found that 2008570 would be unable to pay its costs if the appeals are not successful. 2008570 argued that its claim in the New Action was an asset to be considered in the assessment of its financial position. The Court of Appeal disagreed. While it accepted that there may be cases where a contingent asset (such as a claim in another action) could be sufficiently certain to be considered, it concluded that this was not such a case. The Court of Appeal found that 2008570 had no assets or income and already had three outstanding costs awards in favour of Cedar, totaling $14,338.25. The Court of Appeal determined that the appeals were not frivolous but also concluded that an order for security for costs would not unduly prejudice 2008570’s ability to prosecute the appeals. While 2008570 argued that it did not have the funds to pay a security for costs award, the Court of Appeal found there was no evidence that it would be unable to obtain funds from interested “third parties”. The Court of Appeal determined that it was appropriate for 2008570 to be required to post security for costs. It ordered 2008570 to pay $14,900, which was an estimate of Cedar’s taxable costs of the appeal. The Court of Appeal rejected 2008570’s position that it should only be required to pay half that amount, as there is merit on both sides of the appeal. The Court of Appeal concluded that the merits assessment goes to whether the order should be granted, not how much should be paid.

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COUNSEL COMMENTS

Counsel Comments provided by

Francis N. J. Taman and Ksena J. Court, Counsel for the Respondent

“For our client, Cedar Peaks Mortgage Investments Inc. (“Cedar Peaks”), being

involved in a lawsuit was unexpected on two levels. First, they are a mortgage lender, so the vast majority of their litigation is pursued at the Masters level and is summary nature. Appeals to a Justice are infrequent. A full appeal to the Court of Appeal is unusual to say the least. Second, 2008570 Alberta Ltd. (“200”) was not a borrower or another lender. They were a modular home builder who had no interest in the mortgaged lands at the time the mortgage was registered and the loan advanced. Indeed, around our office, this file is referred to as “RIK 54” after the borrower under the loan, RIK 54 Consulting Ltd. (“RIK 54”).

The Appeal itself arises from two separate lawsuits. The first was Cedar Peaks’ foreclosure on a parcel of land in Lac La Biche which contained a largely completed modular duplex. The loan was guaranteed by the principal of

2008570 Alberta Ltd. v. Cedar Peaks Mortgage Investments Inc., 2020 ABCA 275

RIK 54, who had granted a collateral mortgage against his personal residence. The second was a builder’s lien action by 200 against RIK 54. In the foreclosure action, there have been four separate decisions – two at the Masters level, which were both separately appealed by 200 to a Justice. Both Justice level decisions are now being appealed by 200 to the Court of Appeal.

During the course of those applications, Cedar Peaks was awarded a number of costs judgments against 200. Despite demand, 200 failed to pay those judgments. Cedar Peaks decided to take steps to enforce its costs judgments. The first step was to obtain a statutory declaration under the Civil Enforcement Act disclosing 200’s assets and income. When this was provided, it disclosed that 200 has no income or assets of any kind. This became the foundation for our application for Security for Costs.

The disclosure that 200 was in essence a shell corporation at this point in



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COUNSEL COMMENTS

2008570 Alberta Ltd. v. Cedar Peaks Mortgage Investments Inc., (cont.)

time created a serious concern for our client. 200 had vigorously pursued both lawsuits with limited success. One of the applications under appeal was essentially an application for a stay pending appeal. Both a Master and a Justice held that 200 had failed to meet the first stage of the test for a stay, the existence of a strong prima facie case. Indeed, the Master stated that he felt the appeal was not likely to succeed. With the matter before the Court of Appeal, Cedar Peaks was likely to incur more costs with little likelihood of recovering any of the costs it would be awarded. 200 was, in the words of Justice Cote, a “one way valve”1 that allowed any funds received by 200 to be funnelled to 200’s shareholders or its creditor while thwarting any attempts by Cedar Peaks to recover any of the costs awarded to it.

Upon receiving the application, 200 provided a revised statutory declaration claiming the lawsuit under appeal and a second lawsuit that it had as assets. The Court of Appeal had significant issues accepting these contingent assets as constituting sufficient reason to deny the application. They were simply too uncertain.

The Court of Appeal was very alive to Cedar Peaks’ concerns regarding 200’s lack of assets or income. We argued that while 200 claimed to have no income and no assets, they continued to pursue the appeal and a second lawsuit and were represented by counsel. The lack of evidence regarding the ability of the shareholders of 200 to post or otherwise assist 200 in posting security for costs was also noted by the Court.

The most significant takeaway for lenders is the value of obtaining a statutory declaration regarding assets and income from a subsequent encumbrancer once costs are awarded. While most subsequent encumbrancers are lenders with some substance, many small corporations may in fact be shells or have limited assets available to them. Indeed, some may have been specifically been set up that way to limit their owner’s liability. If it becomes apparent that the subsequent encumbrancer will not be able to pay the costs amount awarded against it, it would be beneficial for lenders to pursue a security for costs application at an early stage in order to avoid unnecessary litigation.”

1 Calmont Leasing Ltd. v. 32262 B.C. Ltd., 2002 ABCA 290 at para. 8.



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Harbaugh v. Harbaugh, 2020 ABCA 280Areas of Law: Family Law; Retroactive Spousal Support; Overpayment; Division of Matrimonial Property

~Unequal division of matrimonial property was justified in part on the basis that there had been an overpayment of spousal support, even where the amount of overpayment was not established~

The parties were married for 22 years and had three children.

The husband worked as a medical technician throughout the marriage. The wife did not return to work outside of the home after the birth of their youngest child in 1988. The parties separated in 2004 when the children were 21, 20 and 16 years old. When the parties separated, the husband left the matrimonial home and went to live with his mother. The parties continued to maintain their joint bank account, into which the

BACKGROUND CLICK HERE TO ACCESS THE JUDGMENT

husband deposited the whole of his pay cheque until 2013. From 2013 to the end of 2016, he deposited about half of his pay cheque to the joint account. In January 2017 he limited the deposits to $500 per month, and he stopped the payments altogether in September 2017. Sometime during the marriage, the wife cashed out her pension and RRSP account. At the time of trial, she had neither.

The husband commenced divorce proceedings in 2014 when he was




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Harbaugh v. Harbaugh, (cont.)

APPELLATE DECISION

The wife advanced three main grounds of appeal, namely, that the trial judge erred 1) in denying her claim for retroactive spousal support, 2) in

distributing the parties’ equity in the matrimonial home unequally in favour of the husband, and 3) in distributing the husband’s pension and RRSP based on its value on the date of separation, rather than the date of trial. The main

65 and the appellant wife was 62. The wife continued to live in the matrimonial home throughout. The youngest child, who at the time of the trial was 30 and employed, also continued to live at the matrimonial home. The issues at trial were spousal support, the distribution of the matrimonial home and the distribution of the husband’s pension and RRSP. On the issue of spousal support, the wife argued that she was required to stay home past the ordinary date of self-sufficiency because of the children’s disabilities. All three children qualified for Alberta Income Assistance for the Severely Handicapped (AISH) at some point, with two of the children receiving AISH at the time of trial. The trial judge held that all three children were economically self-sufficient by 2007. The trial judge concluded that the wife had been entitled to compensatory spousal support, but that claim had been met. She concluded that although the husband had likely “overpaid” spousal support, the husband had not established the amount of the overpayment and in any event it would be unfair to review the payments back to 2004 and impose a “significant debt” on the wife. She rejected the wife’s position that the husband had underpaid spousal support. On the division of the matrimonial home, the trial judge held that it was just and equitable to deviate from the presumption of equal sharing and granted the husband 75 percent of the value at the date of trial. On the distribution of the husband’s pension and RRSP, the trial judge distributed the funds equally based on the value at the date of separation, and allowed the husband to retain the benefit of the accruals after separation. The wife appealed.



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Harbaugh v. Harbaugh, (cont.)

error alleged by the wife, which underlay all three grounds of appeal, was that the trial judge made contradictory findings about whether the husband overpaid retroactive spousal support. The Court of Appeal disagreed. It found that the trial judge applied the correct standard of proof and concluded that the husband had met the burden of showing that he had overpaid but not the amount that he had overpaid. In any event, the reasons reflect that before the trial judge considered the husband’s claim for overpayment, she found it would be “unfair and unjust” to allow the husband to make a retroactive claim for spousal support overpayment or to allow the wife to make her claim. The Court of Appeal found no reviewable error in the trial judge’s decision to make an unequal distribution of the pension, RRSP, or matrimonial home in the husband’s favour. The trial judge had considered the appropriate factors, of which the husband’s unquantified overpayment of spousal support was but one. The Court of Appeal dismissed the appeal.



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Alberta Union of Provincial Employees v. Alberta, 2020 ABCA 284Areas of Law: Arbitration; Judicial Review; Differential Discipline; Personal Circumstances

~Differential treatment in discipline was reasonable where the Board had reached one of two permissible outcomes and discipline was proportional to differences in conduct~

BACKGROUND CLICK HERE TO ACCESS THE JUDGMENT

The appellant union brought a grievance on behalf of the

grievor, a correctional peace officer whose employment had been terminated by the respondent employer. The termination related to an incident in April 2015, in which the grievor recorded CCTV security footage of a correctional officer being assaulted by an inmate in the Edmonton Remand Centre. She then sent the video to two coworkers, BP and Todd Ross. The video footage was also released to the media, although the grievor was not directly responsible for its release. The grievor

was not honest or forthcoming about the incident during two interviews prior to her termination. Ultimately, she admitted her actions in two subsequent interviews. The grievor also encouraged MC, a coworker who had watched the video with the grievor, to lie to investigators about their involvement in the incident. MC first denied any involvement in the incident, but then requested a second interview in which he recanted his original statements. MC, BP, Mr. Ross and the grievor were all disciplined as a result of the incident. MC received a one-day suspension and



APPELLATE DECISION


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Alberta Union of Provincial Employees v. Alberta, (cont.)

BP received a letter of reprimand. Mr. Ross and the grievor’s employment were both terminated. Mr. Ross grieved his termination. The arbitrator found that Mr. Ross had deliberately misled the employer’s interviewers but imposed a lesser discipline: one-year salary in lieu of reinstatement. The grievor also grieved her termination.

The majority of an arbitration panel (the Board) dismissed the appellant’s grievance. The Board concluded that the trust relationship between the employer and the grievor had been irrevocably broken. The Board considered a number of the grievor’s mitigating personal circumstances, but ultimately concluded that they were not sufficient to save the employment relationship. The appellant applied for judicial review of the Board’s decision. The reviewing judge applied the reasonableness standard and concluded that given the factual matrix, the Board reached one of two permissible outcomes open to it. He dismissed the application.

In dismissing the appeal, the Court of Appeal rejected the appellant’s arguments that the reviewing judge erred 1) in concluding that the Board’s decision was

reasonable in light of the differences in the discipline given to MC, BP, and Mr. Ross; 2) in finding that the Board had given meaningful consideration to the grievor’s emotional distress; 3) in upholding the Board’s unreasonable finding that the trust relationship was irrevocably broken; and 4) in being improperly deferential to the Board’s conclusions.

The Court of Appeal noted two distinct concepts: first that different discipline for the same conduct may be discriminatory; and second that different conduct can be treated differently in proportion to the differences. In this case, the individual participation and level of responsibility of each correctional officer was disparate. The reviewing judge did not err in determining that it was reasonable



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Alberta Union of Provincial Employees v. Alberta, (cont.)

for the Board to consider each of BP and MC’s conduct to be less serious than the grievor’s, and therefore warranting a different sanction. The Court of Appeal rejected the allegation that the Board did not adequately assess the arbitration decision in which Mr. Ross was awarded one-year salary in lieu of reinstatement. The Board properly considered Mr. Ross’ decision, but was nonetheless entitled to decide that the grievor’s dismissal was justified. The Court of Appeal also found no reviewable error in the reviewing judge’s conclusions that the Board gave meaningful consideration to the grievor’s personal circumstances, or that the Board provided an intelligible, justifiable and transparent explanation for its conclusion that the trust relationship was irrevocably broken. The Court of Appeal was satisfied that the reviewing judge carefully considered the Board’s reasons and concluded that the reasons met the standard of review.


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