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Tuesday Morning Case Bites for September 3, 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

Reyes v Dyck, 2019 ABQB 667
Service | Application to Extend after Expiration | Liability not Contested

Kent v MacDonald, 2019 ABQB 669
Residential Real Estate Purchase Contract | Foundation Crack | Breach of Warranty

Owners: Condominium Plan No. 7721985 v Breakwell, 2019 ABQB 674
Deductible | Condominium Bylaws


Reyes v Dyck, 2019 ABQB 667

This was a successful application to extend the time for service of a Statement of Claim. the Plaintiff sought an extension of time to serve the Statement of Claim after the 1 year period for service had expired, or in the alternative, an order validating service.   Steps leading up to the application were as follows:

[5]               On January 3, 2018, the Plaintiff filed a Statement of Claim for the damages alleged to have resulted from the rollover. The next day a courtesy copy of the Statement of Claim was sent to the Insurer. The Insurer confirmed receipt of the courtesy copy, advising that confirmation of receipt was not an admission of liability. The Insurer asked if a Statement of Defence was required. Plaintiff Counsel granted an indulgence to the Insurer and advised that it was not required at that time.

[6]               Negotiations continued. Plaintiff Counsel asked when a decision would be forthcoming with respect to the submitted claims. Negotiations continued.

[7]               Plaintiff Counsel requested information on the liability limits and was subsequently advised of the limits by the Insurer.

[8]               The Insurer requested a copy of the police report and same was provided. This did not prompt liability discussions.

[9]                The Insurer made numerous requests for medical information and a settlement proposal. There were several discussions about whether the Insurer would pay for medical reports on an ongoing basis but each time the Insurer advised that those expenses would be considered in the context of costs.

[10]           An extensive settlement letter discussing quantum only was provided to the Insurer on December 8, 2018.

[11]           The Insurer responded to the settlement letter on January 23, 2019, advising Plaintiff Counsel that it was difficult to respond to an offer that was over the policy limits. For the first time, the Insurer asked if the Statement of Claim had been served on the Defendant.

[12]           The twelve-month service period expired on January 3, 2019. The Statement of Claim was not personally served on the Defendant within the twelve months following filing, and an application to extend the time for service pursuant to Rule 3.26(1) was not made before the twelve-month service period expired. The Plaintiff now applies for an Order to extend the time for service of the Statement of Claim under Rule 3.27, alternatively for an Order validating service under Rule 11.27.

The Plaintiff brought its application pursuant to Rule 3.27:

3.27(1) The Court may, at any time, grant an extension of time for service of a statement of claim in any of the following circumstances:

(a) if a defendant, anyone purporting to be a defendant, or a lawyer or other person purporting to negotiate on behalf of a defendant, has caused the plaintiff or the plaintiff’s lawyer to reasonably believe and to rely on the belief that

(i)   the defendant has been served,

(ii)   liability is not or will not be contested, or

(iii)  a time limit or any time period relating to the action will not be relied on or will be waived;

(b) if an order for substitutional service, an order dispensing with service or an order validating service is set aside;

(c) special or extraordinary circumstances exist resulting solely from the defendant’s conduct or from the conduct of a person who is not a party to the action.

The Court accepted that mere settlement discussions and requests for additional records do not create exceptional circumstances:

[16]           The Defendant cites a number of cases to rely on what is meant by “reasonably held belief” under these subsections. The belief must be subjectively as well as objectively held. The caselaw supports the position that “merely conducting negotiations and requesting medical information are not sufficient on their own to found a reasonable or objective basis for a belief that liability is not in issue” (Day v Swindells, 2018 ABQB 34 (CanLII) at para 11-12; See also Maassen v Horvath, 2010 ABCA 271 (CanLII) at paragraphs 14, 22 and 23).

The Court accepted that Plaintiff counsel’s subjective belief was that liability would not be contested.  Plaintiff counsel opened discussions by advising that he did not think liability was in dispute.  No further discussions on liability were had.  On this basis, the Court concluded that the insurer’s failure to contest liability lulled Plaintiff counsel into believing liability would not be disputed:

[20]           Given the course of conduct followed by the Insurer, it was also objectively reasonable for Plaintiff Counsel to hold this belief. The behaviour of the Insurer lulled Plaintiff Counsel into this belief. If the Insurer wants to contest liability, it should say so clearly and unambiguously, not just mention that a letter was not an admission of liability. If the Insurer wants to take advantage of the professional courtesies offered by Counsel, then the Insurer must be equally circumspect in its behaviour. It is not appropriate to allow the Insurer to insist on all the formalities while also asking that the formalities not be enforced against it. Again, I refer to the comments of Master Schlosser in Brousseau at paragraphs 26 to 28 inclusive. I find that Plaintiff Counsel had a reasonably held belief under Rule 3.27(1)(a) (ii).

As a result, an extension of time for service was granted.


Kent v MacDonald, 2019 ABQB 669

This was a trial decision in which the Plaintiff purchasers of a residential property were successful against the sellers and a structural engineer. The sellers retained a structural engineer as a result of a crack in the foundation of their home to offer assurances of the structural integrity of the home in order for the sale to go through. All parties understood that the buyers would rely on this representation. The structural engineer ultimately signed off on the structural integrity of the home without removing drywall to carry out the inspection.  He advised that this was not necessary.

[7]               Mr. White inspected the Home on May 15, 2010 and advised that it was structurally sound. He produced a short report to this effect. The Buyers were unsatisfied with this first report as it made no mention of the horizontal crack; they directed further specific questions to him to be answered. Since the Buyers were advised by the foundation repair companies they contacted that the drywall would need to come down in order to do a proper inspection, Mr. Kent asked Mr. White if this had been done. Mr. White advised the Buyers that it was unnecessary to remove the drywall and reiterated that the foundation was structurally sound. His only recommendation was that the slope of the Home around the foundation be regraded in the next few years. The Buyers removed the condition on the Home and took possession on June 30, 2010.

In addition, it came to light during the litigation process that the sellers had in their possession a prior inspection report, which noted “concrete spalling present in the basement”.

At Trial the Plaintiff’s expert was challenged on the basis that he had become the director of the company that ultimately carried out the repairs.  The Court rejected this challenge on the following basis:

[41]           Dr. Konstantin Ashkinadze is a structural foundation engineer and served two terms on the Association of Professional Engineers and Geoscientists of Alberta’s (APEGA) Practice Standards Committee. He obtained a diploma in Civil Engineering (with Honours) from the Moscow State construction university, and a Candidate of Engineering (post-graduate PhD equivalent) from the Central Research and Design Institute for Residential Construction. He was tendered as an expert witness for the Plaintiffs and qualified as an expert engineer in the areas of foundations and remediation in relation to foundations as well as on the standard and duty of care of engineers.

[42]           Mr. White’s counsel raised a question of bias on account of the fact that Dr. Ashkinadze is currently a director of engineering at Abarent. I note that he became a director in January 2018, after his initial report was completed. I also note that he recommended two foundation repair companies to the Plaintiffs in 2011 and did not pressure them to use Abarent. Although he stated he had no connection with Abarent prior to this time, I was advised that he did contract design work for Abarent dating back to the time he was first retained by the Buyers. However, as this was not an exclusive contract and he worked for several other companies at the same time, I do not find this fact would render Dr. Ashkinadze biased.

                …

[46]           There was no evidence placed before me that Dr. Ashkinadze had a “clear unwillingness or inability” to give “fair, objective and non-partisan evidence” (White Burgess at para 49). While it was asserted during Dr. Ashkinadze’s cross examination for qualification that his previous contract work for Abarent – who ultimately performed the repair work on the Home – eroded his independence, I cannot agree. Admission of expert opinion evidence “is a matter of fact and degree” (White Burgess at para 50).

[47]           Consequently, I find that Dr. Ashkinadze is independent, impartial and qualified to give expert evidence in this trial. This conclusion is based on the evidence that: a) his September 2011 report was completed long before January 2018 when Dr. Ashkinadze became a director of Abarent; b) the contract work he did for Abarent prior to that development was non-exclusive (i.e. he contracted with other companies other than Abarent); and c) he also recommended two foundation repair companies to the Buyers in 2011 – i.e. not just Abarent – for consideration in the process of recruiting the firm that would potentially do the repair work on the Plaintiffs’ Home. Nevertheless, as required by existing jurisprudence, I will weigh the overall costs and benefits of receiving his evidence and disregard or exclude, as necessary, in the within proceeding: White Burgess at paras 48-49.

The Court found the structural engineer was negligent on the following basis:

[104]      What is clear from both experts is that even though there was a difference in opinion with respect to the structural integrity of the Home, Mr. White ought not to have provided the categorical statements he did with respect to the state of the Home without qualification and caution.

[105]      The Buyers did everything in their power to clarify their concerns and lay out in clear terms what their expectations were. Mr. White was cavalier with their instructions. In light of the detailed email and telephone conversation that occurred after Mr. White’s first report, it should have been abundantly clear to him that greater diligence was expected and that careful consideration of their concerns needed to be addressed as their decision to purchase the Home hinged on his opinion. Mr. White did not express that either time or money were limiting issues or factors preventing him from completing his work. Nevertheless, he testified that he did not respond to the second and third elements of Mr. MacDonald’s email; this underscores his careless attitude and the minimal effort put into his conclusions.

[106]      Mr. White argued that there is a distinction between providing an opinion whether the crack compromised the structural integrity of the Home and whether there was water ingress. I disagree. It is clear that water ingress is deleterious to the structural integrity of a home and the issues are therefore not mutually exclusive. According to Dr. Ashkinadze’s testimony, the first step would have been to note the slope of the landscaping toward the west wall and the existence of debris, indicating potential water ingress. The suspicion of water entering the foundation should always be forefront when examining a horizontal crack even though some foundation issues are caused by lateral or hydraulic pressure from the expansion of soil. In any event, Mr. White addressed the issue and recommended regrading in order to divert water away from the foundation.

[107]      While it is agreed that the drywall does not have to be removed in all cases in order to meet the standard of care, it was required in this case as: a) there were signs of water ingress on the north wall, b) the exterior slope towards the west wall was significant, c) it was unknown if the floor was level as it was not properly measured, d) there was no impediment to removing the drywall to inspect further and it was specifically suggested by the Buyers and the Sellers, and e) there were other patent signs of possible water damage as noted in the Squair report (e.g. water problems and cracks visible on the inside foundation). Even if Mr. White concluded that there was no risk to the structural integrity of the Home, he ought not to have provided a recommendation that the only work required was re-grading in the next few years as this estimate of time was not based on any statistics or evidence-based predictions regarding the remaining life of the west wall. He also ought to have qualified in his report that the damage arising from the crack beyond the drywalls is unknown. The report, as written, was misleading to the Buyers.

[111]      The subsequent revelation of the extent of the foundation problems, and the fact that Mr. White had full authority to remove the drywall for a complete inspection, or to use a camera to inspect the concrete walls behind the drywall but chose not to, leads to the conclusion that he did not meet the standard of care. It is also not clear what instruments, if any, Mr. White used to measure the walls. Mr. MacDonald did not believe any were used. Mr. Ozum testified that the plumbness of the wall should be tested with a 4-foot level and a plumb bob and that he would not have used a 9-inch torpedo. While the failure to use specific instruments in the inspection is not conclusive on whether Mr. White met the standard of care, the totality of the facts, including the conclusions drawn, the lack of supporting evidence or analysis to ground those conclusions, and the failure to set out the limitations of the inspection and any qualifications cumulatively fell below the standard of care. In particular, Mr. White was negligent in stating that the slope would require re-grading in the “next few years,” without relying on any evidence on which to base this conclusion. He conceded at trial that he should not have provided such a long estimate of time within which this work could be performed.

The Sellers were also liable for breach of warranty on the following basis:

[117]      The key elements in Mr. MacDonald’s evidence are that he: a) knew there was an inspection report done in 2005 that identified issues; b) was unsure whether any repairs were effected in relation to those issues raised; and c) recalled the existence of the report when it came time to sell the Home. He did not forget that the report existed; thus, having turned his mind to the existence of the report and knowing that there were issues identified, he chose to do nothing further. However, with reasonable effort, he likely could have obtained a copy of the report by either searching for it, or by asking Pillar to Post or the previous owners whether they had a copy. In this day and age, it is likely an electronic copy existed. If his searches turned up empty, he should have at least advised the Buyers that there were issues identified in the report but that he could not recall the nature of them or whether they were addressed by the previous owners. It is not an answer to say that the Sellers did not appreciate the seriousness of the issue that was identified in the report or that it had been rectified (Connie v Sampson, 2009 ABPC 61 (CanLII) at para 35, [2009] AJ No 383 [Connie]). Instead, the Sellers turned a blind eye and were reckless to the fact it may have contained pertinent information about possible latent defects in the Home.

[118]      Mr. MacDonald knew a report outlining various problems existed, but believed it was no longer in his possession and that it did not matter in any event as any subsequent Buyer inspection would override any findings in the prior report. This assumption was incorrect and I find the Sellers had a duty to understand the problems raised in the Pillar to Post report and that they cannot merely say that they did not understand the term “spalling.”

Although betterment was argued, the Court concluded that the evidence fell short of establishing it:

[129]      There was insufficient evidence to establish the defence of betterment. Mr. Ozum testified that he would have recommended a step-wise cost-effective strategy to repairing the damage, starting with the re-grading work first. He stated that the landscaping cost would have been a few thousand dollars, and that weeping tile and a sump pump would have cost approximately $30,000-$40,000. He did not provide an estimate for foundation replacement or repair work nor did he dispute the appropriateness of the cost incurred by the Buyers. In my view, betterment was not established and I find the repairs carried out were entirely reasonable in the circumstances.

However, the level of blameworthiness was not equal.  The structural engineer was held 75% liable and the Sellers 25%.


Owners: Condominium Plan No. 7721985 v Breakwell, 2019 ABQB 674

This was a successful appeal of a Master’s decision dismissing the Condominium Corporation’s claim against the individual unit holder. The issue was whether a Condominium Corporation could collect an insurance deductible back from an individual unit owner. The cause of the flood was from a burst pipe within the unit as a result of low temperatures.  The Court noted that when a deductible is charged back to a unit owner, the bylaws must be consulted:

[32]           The $10,000 deductible was charged to Breakwell’s unit as an “Insurance Ded. Assessment”. It was not assessed to all the owners of the units in the condominium building, it was assessed to a particular unit, and it is not with respect to what one would characterize as a  typical common condominium expense. Therefore, the By-laws must also be reviewed to determine if the money spent by the Corporation can be recovered from Breakwell by means of an assessment: Condominium Plan No 8210034 v King, 2012 ABQB 127 (CanLII) at para 49; Bala at para 20; and Reilly at para 29.

Upon review of the bylaws the Court concluded that the Condominium Corporation was entitled to recover the deductible from the unit owner.