Alberta Courts Breathe Life Into New Rules - Arbitration & Dispute Resolution

Originally published in Blakes Bulletin on Litigation & Dispute Resolution, June 2011

The new Alberta Rules of Court (the New Rules) came into force on November 1, 2010, repealing the former rules (the Old Rules). Introduction of the New Rules brought many important changes affecting civil procedure in Alberta. In the past six months since inception, courts have had the opportunity to interpret several of the New Rules and in many cases compare the language to the comparable provisions in the Old Rules. This bulletin presents a summary of certain jurisprudence.

Foundational Rules

The Foundational Rules contained in Part 1 of the New Rules contain the basic tenets and purposes of the rules and are designed to inform interpretation. Courts have turned to these Foundational Rules on a number of occasions as grounds for a particular interpretation of a rule. Two examples of this are Envision Edmonton Opportunities Society v. Edmonton (City) (Envision) and Ponich Estate (Re), where Justices Moen and Veit respectively held that the analysis in New Rule 7.1(1) must be undertaken in light of the Foundational Rules.

In Koerner v. Capital Health Authority, Justice Shelley dismissed an application brought by the plaintiff to vary the terms of a prior order dealing with service when the plaintiff was out of the country. This order dealt with situations when the plaintiff chose to leave the country without establishing any entitlement to an adjournment. In dismissing the application, Justice Shelley noted that the defendants had a right to move the litigation along. This is reinforced by Foundational Rule 1.2(3)(a), which requires parties to "facilitate the quickest means of resolving the claim".

In L.C. v. Alberta (Metis Settlements Child & Family Services, Region 10), the plaintiff had contacted the defendant seeking clarification of a number of procedural issues. The plaintiff was not satisfied with the response, and brought an application under Rule 1.2 for direction from the court and to identify the issues in dispute. Justice Graesser held that a meaningful, open and forthright response is required when the opposing party makes an inquiry to help limit the issues in a dispute.

Justice Graesser noted that scheduling and moving litigation forward are no longer primarily the obligations of the plaintiff. Litigation is a joint problem that must be resolved fairly and in a cost-effective way. The defendant must not forego any processes to which they are entitled, but an application can be made under New Rule 1.2(3) to create an appropriate task list and move the litigation toward completion.

Two cases dealing with amending pleadings have noted the Foundational Rules in making their decision. Gendreau v. Alberta (Justice) (Gendreau) dealt with an application to amend a statement of claim. Master Prowse provided the plaintiff with more time to bring forward further particularized proposed amendments, noting that providing additional time was consistent with New Rule 1.4 which empowers the court to make procedural rulings which help identify the real issues in dispute and facilitate the quickest and least expensive means of resolving a dispute.

In Ignition Energy Ltd. v. Direct Energy Marketing Limited, Justice Macleod similarly recognized the court's broad discretion to allow amendments to pleadings, but noted that this discretion is subject to the court's duty under New Rule 1.5(4) not to cure non-compliance when to do so would result in irreparable harm to another party.

Transitional Provisions

Certain special considerations are required for cases that were in progress when the New Rules came into force. In Broers v. Real Estate Council of Alberta, Justice Horner held that the Old Rules applied to determination of a costs application where the submissions with respect to the costs were held in September before inception of the New Rules. The only step left when the New Rules came into force was her decision, and consequently the case was not an "existing proceeding" such that the New Rules would apply.

In Lindner v. Chittick (Lindner), Justice Lutz heard an application to discharge an ex parte order. The application was launched under Old Rule 387(3). Justice Lutz held that the case clearly fell within the definition of an "existing proceeding" in Rule 15.1 and, accordingly, New Rule 9.15(1) applied.

With respect to proceedings for which an order was granted under the Old Rules, in Ma v. Quinn, Justice Strekaf held that such orders are to be treated as if granted under the New Rules.

Amended Pleadings

In Gendreau, Master Prowse considered an application by the plaintiff to amend his statement of claim pursuant to New Rule 3.65. Relying on jurisprudence prior to the New Rules, Master Prowse considered whether the proposed amendments were hopeless, an abuse of process, lacked particularity and were supported by evidence. As noted above, the plaintiff was provided with more time to provide additional particularized amendments.

In Manson Insulation Products Ltd. v. Crossroads C & I Distributors (Manson), Justice Poelman considered an application to amend pleadings pursuant to Rules 3.62(1), 3.65 and 3.74. He stated that generally pleadings may be amended without regard to carelessness or lateness on the part of the party seeking amendment. This general rule is subject to four main exceptions, which are laid out in Canadian Deposit Insurance Corp. v. Canadian Commercial Bank. Amendments will not be allowed where:

they would cause serious prejudice to the opposing party that cannot be remedied by costs;
they are "hopeless" in that if the amendment was in the original pleading it would have been struck;
unless permitted by statute, the amendment seeks to breach a limitation period by adding a new party or cause of action; and
there is bad faith in the failure to plead the amendment in the original pleading.

Security for Costs

In Attila Dogan Construction v. AMEC Americas Limited, a case in which Blakes acted for the successful applicant, the defendant sought an order for security for costs pursuant to New Rule 4.22. In considering the necessary factors enumerated in Rule 4.22, Chief Justice Wittmann engaged in a detailed discussion in assessing the merits of the action, as required by Rule 4.22(c). In granting the order, he rejected the plaintiff's argument that a more detailed inquiry into the relative strengths of each party's position was required under the New Rules and a higher standard should be applied. The standard for a security for costs application has not changed, and with respect to merits, applicants must only raise a reasonably arguable defence.

Striking Out Pleadings

In the context of striking out pleadings, New Rule 3.68 has been considered twice since inception. In Donaldson v. Farrell, Justice Graesser held that the New Rules have not modified or lessened the test for striking out pleadings. The test remains whether it is plain and obvious or beyond reasonable doubt that the claim cannot succeed.

In First Calgary Savings & Credit Union Ltd. v. Perera Shawnee Ltd., Justice Kent, dealing with an application to strike a counterclaim, similarly noted that the test has not changed under the New Rules. The court must find that it is plain and obvious that the claim discloses no reasonable cause of action in law. This is done without affidavit evidence, on the assumption that any allegations of fact are true.

Notice to Admit

In Andriuk v. Merrill Lynch Canada Inc., the plaintiffs had filed a statement of claim pursuant to the Class Proceedings Act. The defendant, who chose not to file a statement of defence until after the certification hearing, applied to strike a Notice to Admit Facts claiming that it was premature since certification had not yet occurred. Justice Martin held that unlike Old Rule 230, New Rule 6.37(8) does not outline when the court should set aside a Notice to Admit. This decision is entirely within the discretion of the court. In dismissing the defendant's application, Justice Martin noted that in order for a Notice to Admit to be set aside, there would have to be a very good reason, such as abuse of process or where it interfered with adjudicative fairness.

Summary Judgment

In BA Capital Inc. v. Stream Oil & Gas Ltd., Master Mason dealt with an application for summary judgment under New Rule 7.3. She relied on cases interpreting the predecessor summary judgment provisions, and held that the bar on a motion for summary judgment is high. The party bringing the application must show that there is no genuine issue for trial. Summary judgment should not be granted if opposing affidavits clash on relevant facts. Assessment of the quality and weight of evidence is inappropriate on a summary judgment application, as this assessment is a function to be performed by the trial judge.

Examination by Health Care Professional

In Nystrom v. Ranson, Master Schlosser considered New Rule 5.41 and the scope of a defendant's ability to compel medical examination of a plaintiff. Master Schlosser held that the New Rules have expanded the scope of Old Rule 217, but the court must still balance the plaintiff's right to be safe and secure against the defendant's right to challenge the plaintiff's assertions.

Confidentiality and Use of Information

In Hall v. Willcox, a judgment creditor of the respondent applied to use the transcript of the debtor's examination on his statutory declaration in other proceedings. Justice Graesser held that no such application was needed as the common law implied undertaking of confidentiality under New Rule 5.33 did not apply to a cross-examination on an affidavit or statutory declaration. These are treated as akin to testimony in court, and the New Rules have not changed this difference. The open court principle applies to allow use of these transcripts in other proceedings.

Trial of Particular Questions or Issues/Severance

In Envision and Nowicki v. Price, Justice Moen had the opportunity to consider operation of New Rule 7.1(1) (a), which allows a court to order a question or an issue to be heard or tried before, at or after a trial to meet the purposes of disposing of all or part of a claim, substantially shortening a trial, or saving expense.

Under its predecessor, Rule 221, the test that had developed was an "exceptional case" test where the court considered several factors, some of which include the decisiveness of the preliminary issue to other issues in the case, cost savings in both time and money and any injustice created by the severance into a piecemeal trial.

Justice Moen held that the wording of New Rule 7.1(1) (a) constituted a substantial change, and did not simply codify the test noted above to interpret Old Rule 221. The "exceptional case" test is no longer the test in Alberta. A more lenient test prevails. The court must consider the three purposes enumerated in Rule 7.1(1) (a) (disposing of all or part of a claim, substantially shortening a trial, or saving expense). Since the purposes are connected with "or", if any one of those tests is answered positively, the court must then consider whether severance would be consistent and appropriate with the Foundational Rules advocating just, fair, timely and inexpensive resolution of claims (Rule 1.1(1)) and using the quickest means of resolving a claim at the least expense (Rule 1.2(2)(b)).

In Ponich Estate (Re), Justice Veit considered an application under the Dependants Relief Act. The respondents relied on Rule 7.1 as the basis on which the court could sever the issue of entitlement from the issue of quantification. Justice Veit held that the court had jurisdiction under this Rule to sever the issues of entitlement and quantification, and noted that New Rule 7.1 was significantly broader in scope than its predecessors. Similarly to Envision, Justice Veit held that Rule 7.1 must be considered in light of the Foundational Rules.

The interplay between Rules 7.1(1) and 7.1(3) was considered by Justice Poelman in Manson. It was held that, before a court may make a determination on an issue or a question of fact under Rule 7.1(3), it must first conclude that the issue or question of fact properly falls within one of the purposes in Rule 7.1(1). A party should not be required to prepare for the trial of an issue prior to being able to make submissions on whether there should be a separate determination in the first place.

For further details regarding New Rule 7.1(1)(a), see our February 2011 Blakes Bulletin: Alberta Court Provides New Test for Severance.

Affidavits

In Barker v. Budget Rent-A-Car of Edmonton Ltd., the defendant applied for an order pursuant to New Rule 3.68(4)(a), striking a paragraph of the plaintiff's affidavit on the basis that the evidence was hearsay and contained legal opinion. Justice Lee dismissed the application, noting that since this was an interlocutory application and not one that finally determined the rights of the parties, New Rule 13.18 allowed for affidavit evidence to be sworn on the basis of information and belief. Justice Lee relied on cases interpreting Old Rule 305(3), and suggested that these cases are still good law in interpreting the New Rules.

Application for Judgment/Noting in Default

With respect to an application for judgment under New Rule 7.2, in Manson, Justice Poelman also noted that there are no material differences between the New Rule and its predecessor, Rule 162.

In the context of noting in default, Justice Strekaf confirmed in Toerper v. Hoard that the purpose of an assessment of damages is to determine the quantum of damages rather than liability for damages. Further, it was confirmed that a defendant who is noted in default is deemed to have admitted the allegations of fact contained in the statement of claim.

Drop Dead Rule/Delay

In Brar v. Pawa, the defendant by counterclaim brought an application to strike the counterclaim under New Rule 4.33(1) (the two-year drop dead rule). An alternative argument was made under New Rule 4.31 to strike based on delay of the plaintiff by counterclaim.

Under Old Rule 244(4), a rebuttable presumption of serious prejudice to the applicant was established once inordinate and inexcusable delay on the part of the respondent was shown. In this case, the parties and Master Hanebury agreed that this same presumption applies to the New Rule.

With respect to the drop dead rule, Old Rule 244.1 required a step that "materially advances" an action. New Rule 4.33 and transitional rule 15.4 require a step that "significantly advances" an action. In Bahcheli v. Yorkton Securities Inc., Justice Wilkins held that there are no differences in interpreting the new wording. The jurisprudence relating to Old Rule 244.1 continues to apply.

Setting Aside, Varying or Discharging Judgments and Orders

In Palin v. Duxbury, Justice Poelman concluded that there is no material difference between New Rule 9.15 and its predecessor, Rule 158. Guidelines from jurisprudence interpreting the Old Rule remain in force. The 20-day deadline to bring an application stipulated by Rule 9.15(2) does not apply to an application to set aside default judgment.

With respect to evidence on an application to discharge an ex parte order under Rule 9.15, in Lindner, Justice Lutz noted that an application to discharge an ex parte order is not an appeal as defined in New Rule 6.14. If Rule 6.14 did apply, it would place constraints on the evidence that could be brought before the judge. Since the application to discharge could be brought before a master or a judge, it does not make sense to limit the evidence based only on a party's choice of bringing the evidence before a judge instead of a master.

In Montes v. Al-Shiraida, in the interests of expediency, Justice Macklin used the discretion of the court in New Rule 9.16 to allow an application to set aside two consent orders under Rule 9.15 to be heard by him instead of the judge who granted the judgments. Justice Macklin held that since the judgments were granted five years earlier, the original judge would not likely have any special recollection of the circumstances.

With respect to the application under Rule 9.15, Justice Macklin allowed one application and set aside the consent judgment since a valid statement of defence was filed. Accordingly, the defendant was entitled to notice of the application for consent judgment, and it was unfair to allow the plaintiff to proceed by consent judgment without at least obtaining an order for substituted service or to have service dispensed with.

The other application was dismissed. Justice Macklin held that since the defendant never attempted to obtain an order to set aside the noting in default and took no further steps until the present application, he was not entitled to notice of subsequent proceedings and therefore the plaintiff followed the proper procedure and the consent judgment was allowed to stand.

Staying a Judgment or Order

In Rap Designs Inc. v. Dean, Master Hanebury dealt with an application to stay the execution of a summary judgment order that had been granted. He noted that while New Rule 1.4(2)(h) provides that a court may stay the effect of a judgment or order, the Rule does not provide criteria or a test for the grant of a stay. The long-established test still applies. The court must consider whether there is an arguable issue on appeal, any irreparable harm flowing from the stay, and the balance of convenience.

Standard of Review on Appeal from a Master

In Royal Bank of Canada v. Place (Royal Bank), Justice Manderscheid considered the standard of review for an appeal of a master's decision under New Rule 6.14. Under its predecessor, Rule 500, an appeal from a master in chambers was a hearing de novo, and all findings of fact were reviewed on a standard of correctness.

Under New Rule 6.14(3), an appeal from a master's judgment or order is an appeal on the record. Justice Manderscheid held that an appeal on the record suggests that the standard of review should be that of general appellate review. Questions of law are reviewed on a standard of correctness, and findings of fact are reviewed on a standard of palpable and overriding error. Questions of mixed law and fact are also reviewed on a standard of palpable and overriding error, unless it is clear that the trial judge made some extricable error in principle, in which case the error may be an error of law subject to the correctness standard.

The treatment of New Rule 6.14 in Royal Bank was subsequently discussed in Lee v. Lepage. Justice Tilleman agreed with the standard of review in Royal Bank, and noted that the role of the court is to dismiss the appeal unless there is an overriding and palpable error as it relates to facts. For the court to intervene, the master must have made a clear and obvious mistake.

In Janvier v. 834474 Alberta Ltd. (Janvier), Justice Macklin similarly held that New Rule 6.14 changed the approach. For an appeal on the record, the standard of review must be determined before the appeal can be considered on its merits. Justice Macklin was dealing with an appeal from a master's decision dismissing a summary judgment application. It was held that the standard of review of the definition of the legal test for a summary judgment application is correctness as it is a question of law. The decision itself is reviewed on a standard of reasonableness. Janvier was subsequently cited with approval by Justice Strekaf in Ma v. Quinn.

New Evidence on Appeal from a Master

Two cases have dealt with the introduction of new evidence on appeal from a master's decision. In Shengli Oilfield Freet Petroleum Equipment Co. Ltd. v. Ascension Virtual Group Ltd., Justice Kenny held that new evidence should be filed and served along with the rest of the material. It is then up to the appeal judge to determine if, as required by New Rule 6.14, the evidence is significant enough that it could have affected the master's decision.

In Heritage Station Inc. v. Professional Stucco Inc., Justice Wilson clarified what is meant by the quality requirement that the new evidence must be significant enough to have affected the master's decision. He stated that "only relevant and credible evidence that is decisive enough that it could [as opposed to would] have likely affected the result will qualify for admission". He went on to note that the adjective "new" means that only evidence that is truly new in the sense that it could not, through due diligence, have been adduced at the chambers application will be admitted. In other words, the evidence must have been recently discovered. Justice Wilson concluded that the test for admissibility of new evidence under Rule 6.14(3) is effectively the same as the test in Palmer v. The Queen, a 1979 decision of the Supreme Court of Canada, which governs the admissibility of evidence before the Court of Appeal.

Conclusion

The Alberta courts continue to work to give meaning to the New Rules.

Certain themes have emerged, as indicated above. First, the Foundational Rules are being articulated as a framework for the interpretation of the New Rules. Second, the courts are carefully examining the differences, if any, between the Old Rules and the New Rules to assess whether they reflect any intention to change the Rules or to have them remain fundamentally the same.

Clearly, though, the New Rules are having an effect and the changes are not being interpreted as merely cosmetic.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Canada: Alberta Courts Breathe Life Into New Rules