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Monday Morning Case Bites for November 25, 2019

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

Edited by Amanda Kostek & Christie Dewar

Booth v Christensen, 2019 ABQB 878
Res Judicata | Property Damage Default Judgment | Personal Injury Action

HOOPP Realty Inc v Guarantee Company of North America, 2019 ABCA 443
Limitation Period between Owner and Contractor | Application to Surety

Booth v Christensen, 2019 ABQB 878

This was an application by the Plaintiff for a determination of an issue in advance of trial, and specifically whether res judicata or the doctrine of merger barred her personal injury action. The Court determined that her personal injury action was not barred. The Plaintiff’s insurer issued a separate subrogated action for property damage to her vehicle. At all material times, the Plaintiff’s insurer was aware of her personal injury action. It proceeded to obtain Judgment in Provincial Court for the subrogated claim without the Plaintiff’s knowledge. The Plaintiff became aware of the Judgment while in the midst of settlement discussions in her personal injury action. The Defendant in that action refused to participate in further settlement discussions on the basis that her claim arising out of the accident were already decided, and no further damages were payable.

The Court outlined the doctrine of res judicata and merger at length, but commented that while those principles stress the importance of finality, fair access to the courts are also considerations;

[55]           While these authorities stress the importance of finality, it must be remembered that res judicata, estoppel and merger are inter-related doctrines of public policy designed to advance the interests of justice. Fair access to the courts and the ability to have one’s issues adjudicated are part of the balance.

In this case, the application for Default Judgment specifically referenced the Plaintiff’s personal injury action.  The Court noted that Default Judgments involve special circumstances:

[68]           Default judgments, being judgments ex parte, should support a plea of merger or cause of action estoppel: see for example Edwards. However, the full vigour of these doctrines might not apply: Res Judicata in Canada at 345. The equivocation arises, in part, from a concern that the judgment is not actually determined or pronounced by the court after an adjudication of the merits. The suggestion in Hennig that a default judgment is a special circumstance should be considered in this context rather than as a general rule.

After a thorough review of the case law, the Court noted the following factors to consider in determining whether to exercise its discretion on the issue of res judicata:

[84]           In deciding whether to apply the doctrines of cause of action estoppel and merger to extinguish a proceeding, the exercise of discretion appears to involve consideration of at least the following factors:

  1.    The nature of the outstanding claim;
  2.    The nature and gravity of the prejudice to each affected party;
  3.    The circumstances giving rise to multiple proceedings;
  4.    The nature and gravity of any denial of natural justice or deliberate abuse of process;
  5.    The potential of causing unfairness to a party;
  6.    The impact of multiple proceedings on the complexity, inefficiency and cost of litigation for the parties;
  7.    The impact of multiple proceedings on judicial resources;
  8.    The length and consequences of delay occasioned by the fragmentation;
  9.      The risk of inconsistent results;
  10.      The availability of remedies against others to right any wrong; and
  11.    The systemic impact of uncertain outcomes.

Key in the Court’s decision was the issue of prejudice to the respective parties:

[112]      Ms. Booth’s Statement of Claim pleads numerous physical and psychological injuries, loss of income and housekeeping capacity, and seeks damages exceeding $250,000. Her ability to pursue any part of that claim is lost if the doctrines of cause of action estoppel and merger are applied. The potential prejudice to her is substantial.

[113]      In comparison, the possibility that Ms. Christensen has suffered prejudice is essentially speculative. She paid nothing towards the Default Judgment. The Administrator argues that enforcement proceedings are still outstanding, but Ms. Christensen entered into bankruptcy in December 2015 and no evidence suggests she will ever make a payment.

[114]      The Administrator asserts that a possible block on licence reinstatement arising from enforcement proceedings should be treated as prejudice. However, the evidence is that Ms. Christensen was driving without an operator’s licence at the time of the collision. No evidence was introduced of any efforts by her to regain her operator’s licence. She might have left the jurisdiction and obtained a licence in another place. The Administrator presumably could have sought evidence from her of actual prejudice. I am reluctant to treat speculation as a demonstration of prejudice.

[115]      Even if enforcement proceedings created an obstacle for Ms. Christensen in regaining an operator’s licence, no evidence is before me about the impact that deprivation had on her. The record does not explain the extent to which she drove vehicles in the past or would have been operating vehicles after the Default Judgment was obtained.

[116]      In short, the evidence does not establish any prejudice to Ms. Christensen, and even if the speculation invited an inference of inconvenience for Ms. Christensen, that inconvenience would be very minor.

The Court accepted that there was no deliberate abuse of process, and although the two actions resulted in a multiplicity of actions, there was almost no duplication:

[120]      No one asserts any deliberate abuse of process by the Insurer. To the contrary, the Affidavit in support of the desk application was reasonably transparent about the nature of the claim and the limited relief to which it applied. The Affidavit contained language expressly mentioning the Injury Action and contemplating that other relief would be sought in that lawsuit arising from the same cause of action.

[121]      While the continuation of the Injury Action would permit a multiplicity of proceedings, almost no duplication of effort or cost arises for Ms. Christensen since she did not defend the Provincial Court action. The Injury Action, having been filed and served first, is made no more complex by the Default Judgment. No one suggests Ms. Booth intends to rely on the Default Judgment to assert liability for the collision has been determined in the Provincial Court and that estoppel is engaged in her favour.

[122]      In comparison, the continuation of the Injury Action would likely conclude or simplify Ms. Booth’s litigation against the Insurer, reducing cost and frustration.

Further, there was little risk of inconsistent court findings, because the Provincial Court matter proceeded by way of Default Judgment:

[126]      The risk of inconsistent findings is low. The liability finding in the Provincial Court was based on default rather than a judicial assessment of the merits, so the risk of undermining public confidence in the administration of justice is very low. Further, while the Administrator has entered a defence on behalf of Ms. Christensen contesting liability, the facts as pleaded describe a rear-end collision. Liability in those circumstances is usually not complicated.

As a result, the Court exercised its discretion and directed that the doctrines of res judicata and merger would not apply to this case.

HOOPP Realty Inc v Guarantee Company of North America, 2019 ABCA 443

This was an unsuccessful appeal of a summary trial. The issue on appeal was “whether a surety is relieved from liability under a performance bond if the primary claim by the owner against the contractor has been barred by the expiration of the limitation period.” At Trial, the Court concluded that the surety was still liable under the performance bond notwithstanding the expiry of the limitation period.

On appeal, the Court of Appeal confirmed that the expiration of a limitation period does not extinguish the underlying obligation:

[17]           In summary, the trial judge correctly determined that under Alberta law the expiration of a limitation period does not result in the complete extinguishment of the underlying obligation. Accordingly, the expiry of the limitation period against Clark Builders does not provide an answer to the essential question raised in this appeal.

The Court accepted that a surety could raise any defence available to the principal debtor but clarified that this does not mean that a surety has no independent obligations under the performance bond:

[28]           In summary, it can be accepted that in most respects the obligation of a surety is coextensive with the obligations of the principal debtor. That means that the surety is not exposed to a wider liability than that of the principal debtor under the principal contract, and that any substantive defences open to the principal debtor will be open to the surety. It does not, however, mean that the surety can have no independent obligations under the performance bond. Whether there are such independent obligations depends on the wording of the bond. In this case, it is clear that HOOPP Realty had several claims against Clark Builders and The Guarantee Company, and it was entitled to pursue one or both of them. Having failed in its claim against Clark Builders, it nevertheless retains a potential claim against The Guarantee Company.

The Court explained the principal debtor does not have the protection of the limitation period vis a vis the surety until the limitation between it and the surety has expired:

[31]           The principal debtor, Clark Builders, did not “lose the protection” of the limitation period as a result of the trial decision, because it never effectively had such protection. In a situation, such as in this appeal, where the principal is obliged to indemnify the surety for any funds paid under the performance bond, the principal does not effectively have the protection of the Limitations Act until the limitation has run against both the principal and the surety. The principal exposed itself to that form of liability when it signed the performance bond, knowing that it was obliged to indemnify the surety for any claims. Likewise, the surety is not “losing the benefit” of any defence, because it never had that defence in the first place. Again, the surety does not obtain the protection of the limitation period until the applicable limitation has run against both it and the principal debtor.

The appeal was dismissed.