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Monday Morning Case Bites for April 6, 2020

Last Week’s Court Rulings from the Alberta Court of Queen’s Bench, Court of Appeal and SCC.

Edited by Amanda Kostek & Steven Graham

McKay v Prowse, 2020 ABCA 131
Rule 4.33 | Drop Dead Application | Onus to advance on Plaintiff

Zoltan Gergely Farm Inc v Wawanesa Mutual Insurance Company, 2020 ABPC 47
Contents Claim | Actual Cash Value Settlement | No Bad Faith

McKay v Prowse, 2020 ABCA 131

In the context of an appeal of an order dismissing a claim for long delay under Rule 4.33, which is commonly referred to as the “drop dead” rule, the Court directed that a Defendant’s failure to respond to settlement overtures does not stop the clock in terms of a drop dead application: 

[27]           The nature of the responsibilities on a defendant, in the context of a rule 4.33 dismissal application having regard to the foundational rules, was addressed in Janstar Homes Ltd v Elbow Valley West Ltd, 2016 ABCA 417 at para 26: 

With respect to the foundational rule 1.2, two comments are in order. First, it does not override the clear mandatory language of rule 4.33. Second, it does not have the effect of requiring a defendant, in any manner, to assume carriage of an action where the plaintiff is not actively advancing its own claim. The initiative at all times remains with the plaintiff to pursue its lawsuit in a timely fashion: XS Technologies Inc v Veritas DGC Land Ltd, 2016 ABCA 165 at para 7. On the other hand, a defendant is obliged, pursuant to the foundational rule 1.2, not to engage in tactics that obstruct, stall or delay an action that the plaintiff is advancing. 

[28]           The record before us does not suggest that the respondents were engaging in tactics to obstruct, stall or delay the action. However, it does not appear from the record that the respondents replied to the appellant’s overtures to pursue arbitration or mediation between November 2014 and November 2016, despite several written requests for their position. Having initially suggested arbitration on October 8, 2014, if the respondents subsequently determined that they were not interested in pursuing arbitration, that position should have been communicated to the appellant in a timely fashion. That is the expectation in the foundational rules. 

[29]           However, the responsibility to pursue the lawsuit remains on the plaintiff. The reasons of this court in Flock v Flock Estate, 2017 ABCA 67 at paras 20-22 are applicable to the case before us: 

First, there is nothing in the evidence that would lead to an inference that the appellant had expressly waived her legal entitlement to rely upon rule 4.33 at the appropriate time. 

Second, while the appellant’s counsel wrote to the respondent’s counsel on November 15, 2012 suggesting mediation and that the litigation be put on hold, this is not the same as a standstill agreement. Regardless, the respondent never advised if this offer was accepted and the appellant did not consent to delay beyond those perimeters; mediation discussions ultimately failed by February 2013, with no significant advance in the action. 

After February 2013, there is no evidence or indication, whether by communication or action or participation in these proceedings, that would lead to a reasonable inference that the appellant acquiesced in further delay. Silence is not acquiescence, and acquiescence does not amount to an “express” standstill agreement. Plaintiffs cannot be “lulled” into inactivity by vagueness about the reach of this mandatory rule. 

[30]           If a defendant is not responding to an invitation to resolve the dispute through an alternate dispute resolution mechanism, the onus remains on the plaintiff to take steps to advance the action or risk having it struck. In the absence of a standstill agreement, parties may need to operate on two tracks – settlement and litigation – at the same time.

Zoltan Gergely Farm Inc v Wawanesa Mutual Insurance Company, 2020 ABPC 47

The Plaintiff insured sued its insurer following fire in respect of a contents claim.  The dispute was summarized as follows: 

[4]               The Plaintiff company (“Gergely”) maintains that it is entitled to receive the replacement cost of all contents destroyed or damaged in the subject fire; Wawanesa asserts that the Plaintiff agreed to settle the issue of content damage pursuant to the terms of a written memorandum dated July 27th, 2018 (Exhibit #6) wherein the Plaintiff agreed to submit no further replacement value claims in return for the insurance company agreeing to an actual cash value on all contents destroyed by the fire as set out in Schedule of Loss (Schedule) Exhibit #3, of 75% of replacement value provided that the replacement value from which the actual cash value would finally be determined was left for further consideration. 

The Court concluded that the Plaintiff was bound by the agreement entered into: 

[25]           I am satisfied that the Plaintiff is bound by the agreement represented by the memorandum in writing executed by Mr. Gergely on behalf of the Plaintiff (Exhibit #11) on the 27th day of July 2018. In return for the Plaintiff submitting no further replacement cost receipted claims, and thereby giving up his right to receive compensation on a replacement cost basis, the insurers agreed to pay forthwith 75% of the replacement cost value advanced by the insurer. The question as to what the final replacement costs values would be was left for further discussion and later resolution. Essentially, if the final replacement costs evaluation exceeded the $106,652.15 established by the insurer’s appraisal, 75% of anything in excess of that figure would also be paid to the insured. In accordance with this agreement the Plaintiff was paid the sum of $31,824.72, the sum believed to be the unpaid portion of 75% of the $106,652.15 which was the replacement cost value asserted by the insurer at that point not including the hot tub cost. 

The Court concluded that the settlement was fair and there was no bad faith on the part of the Insurer: 

[26]           I can find no “bad faith” basis upon which to override the settlement agreement entered into between the Plaintiff and the Defendant as represented by the memorandum in writing of July 27th, 2018 (Exhibit #11). Although the Plaintiff was anxious to be paid, the Plaintiff company had already received at least $49,364.84 towards the contents loss, and the insurer had encouraged Mr. Gergely throughout to file receipts for replacement purchases. He had made some purchases from The Brick prior to that July date and had been reimbursed on a replacement basis as mentioned previously. 

[27]           The Plaintiff had received money based upon the actual cash value which could have been used to purchased replacements and upon providing receipts for those replacements assuming the replacement was comparable to the items lost further funds would have been paid on that basis. He apparently did not do that save to the extent described aforesaid. The Defendant insurance company had not rushed him into anything in that regard, having waived the 180 contractual time limit for claiming replacement costs, but that did not appear to result in the Plaintiff taking the opportunity to actually replace contents to any significant degree. Mr. Gergely was made aware, and acknowledges in his testimony, that to get replacement costs compensation he had to actually replace the item and provide a receipt of purchase. 

[28]           The 75% replacement cost value, which represented only a 25% depreciation reduction from the replacement value, was not unfair, but likely significantly higher than would have been the case has each item in the Schedule been depreciated individually. Without accepting Kohn Enterprises’ individual depreciation of the Scheduled items set out in the appraisal of July 18th, 2019 (Exhibit #3), his estimate of the depreciation in that regard which would have set the depreciated value of the Schedule items at around $43,000.00, which would represent an amount a far cry from the 25% depreciation rate which would see the same property valued at $79,500.00 more or less.