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Monday Morning Case Bites for May 13, 201

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

Edited by Amanda Kostek & Christie Dewar

Steer v Chicago Title Insurance Company, 2019 ABQB 318
Summary Judgment | Title Insurance | Unmarketable Title | Water Ingress

Yehya v Thomas, 2019 ABCA 164
Noting in Default | Procedural Flaw

Xpress Lube & Car Wash Ltd v Gill, 2019 ABQB 326
Dismissal for Long Delay | Application filed before 3 years

Steer v Chicago Title Insurance Company, 2019 ABQB 318

This was an unsuccessful application for summary judgment. The Plaintiffs purchased a new duplex, but shortly after taking possession, experienced severe water ingress issues. The Plaintiffs recovered some money under the New Home Warranty Program, but were still out of pocket $378,000.  As a result, they sued their title insurer and applied for summary judgment on the basis that they suffered damages as a result of unmarketable title.  At the initial hearing their application was dismissed on the basis that title was not unmarketable under the terms of the Policy.  This decision was affirmed on appeal.   In rendering its decision, the Court noted that undesirable land can still have a marketable title:

[44]           Land which is physically undesirable and economically unsalable may still have marketable title. Even now, it is arguable that the Steers have marketable title. They have said that they could sell the Property as condemned property. If so, that illustrates that, even at present, the construction problems with the Property go to its value, not the marketability of title. I agree with Master Prowse’s conclusion that ““unmarketability of title” does not relate to physical defects in land”; Steer, para.22.

The Court directed that the title insurance policy was intended to insure against defects in ownership, and not as a secondary insurance for building deficiencies:

[48]           I find no ambiguity in the Policy language on that issue. However, in the event that Clause 11 could be characterized as ambiguous, I would have found support for this interpretation in the nature and objectives of the subject industry. Because this is a standard form contract, we can look at the purpose behind title insurance policies. Just as Wagner, J described the purpose of builders’ risk policies as covering losses associated from faults and defects in the building of a premises; Ledcor, para.79, so title insurance is meant to insure against defects in the ownership interest conveyed via the transfer of title from purchaser to vendor, not as secondary insurance for construction defects where resort cannot be had to the responsible party, be that vendor, builder or construction insurer.

[49]           Confining title insurance to its stated objective rather than expanding it to cover losses for which specific, alternative insurance is available is consistent with appropriately spreading risk between various service providers; Ledcor, para.80.

[50]           I realize that the MacDonald and Breen cases characterized latent defects arising from past renovations as risks which existed at the time of conveyance and I am also mindful of the importance of consistent interpretation of similar policies. However, with the greatest of respect to the Ontario courts, I cannot agree that unknown construction defects not affecting title at the date of conveyance should be covered by title insurance. Considering the purpose of the contract at issue, the nature of the relationship it creates and the market or industry in which it operates, there should be a distinction between the coverage afforded under general liability or construction insurance and the coverage provided by title insurers.

Nothing precluded the Plaintiffs from selling their property on the Policy date:

[51]           The Steers contracted to pay for insurance for covered risks, but only those that would render their title unmarketable on the Policy Date. There was absolutely nothing that would have interfered with their ability to alienate title on the Policy Date. Latent construction defects, even if those could be brought under the umbrella of title insurance because of the later-issued SCA Order, did not affect title on the Policy Date.

Yehya v Thomas, 2019 ABCA 164

This was a successful application to set aside a Noting in Default. The Defendant was Noted in Default after he had made an assignment into bankruptcy.  Upon discharge from bankruptcy he applied to set aside the Noting in Default.   The Court of Appeal confirmed that where there is a procedural flaw, a Defendant who moves promptly to open up the Noting in Default is entitled to do so as of right:

[11]           The tests for setting aside a default judgment are different depending on whether or not there is a flaw in the procedure leading up to the default judgment. Where there is a procedural flaw, a defendant, proceeding promptly, is entitled to open up the judgment as of right. In the absence of a procedural flaw, a defendant must demonstrate that there is an arguable defence, he did not deliberately let judgment go by default and has a valid excuse for the default, and he promptly attempted to open up the default judgment: Anstar Enterprises Ltd v Transamerica Life Canada, 2009 ABCA 196 (CanLII) at para13, 457 AR 68.

[12]           The chambers judge applied the wrong test because he applied the test for a judgment entered in the absence of a procedural flaw. However, there was a flaw in the procedure leading to the default judgment because the judgment was entered while the stay of proceedings was in effect: Braun Nursery Ltd v Edmonds Bros Landscape Service Ltd (1978), 29 CBR (NS) 55 (Ont SC) at p 58. Therefore, the appellant was entitled to open up judgment as of right if he proceeded promptly. The appellant could not be expected to proceed to open up the judgment while the stay was in place. The stay was lifted upon his discharge on September 13, 2017: s 69.3(1.1) BIA. He applied to set aside the judgment on October 27, 2017. Therefore, the appellant proceeded promptly and was entitled to have the default judgment set aside as against him as of right.

Xpress Lube & Car Wash Ltd v Gill, 2019 ABQB 326

This was an Application for dismissal due to delay that was unsuccessful under the three year drop dead rule, but successful under the inordinate delay rule. The issue in this case was whether filing an application for long delay a couple of days before the 3 year period elapsed, precluded the application. The Court concluded that it did:

[68] Accordingly, the case law is clear that when the applications under rule 4.33 were filed the three-year clock was frozen, and accordingly the applications under that rule must fail. That is, by bringing the applications when they did out of professional courtesy, the defendants actually saved the plaintiff’s claim for purposes of rule 4.33. No good deed goes unpunished.

However, the Court also considered Rule 4.31, the inordinate delay provision. Under Rule 4.31 an claim can be dismissed for taking too long from to move the matter forward to Trial. The matter had been commenced in 2009 and 2010, but there were large periods of inactivity. Questioning in the first action was completed in 2011, but Questioning in the second action never occurred. There were two periods of almost 3 years of no activity at all. The Court dismissed the claim for inordinate delay.