Hnatiuk v. Assured Developments Ltd., (2012) 522 A.R. 3

• Judge: Côté, McFadyen and Martin, JJ.A.
• Court: Court of Appeal (Alberta)
• Case Date: March 05, 2012
• Citations: (2012), 522 A.R. 3;2012 ABCA 97

Hnatiuk v. Assured Dev. Ltd. (2012), 522 A.R. 3; 544 W.A.C. 3 (CA)

MLB headnote and full text

Temp. Cite: [2012] A.R. TBEd. AP.001

Kevin Hnatiuk and Monica Hnatiuk (appellants/plaintiffs) v. Assured Developments Ltd. (respondent/defendant)

(1101-0003-AC; 2012 ABCA 97)

Indexed As: Hnatiuk v. Assured Developments Ltd.

Alberta Court of Appeal

Côté, McFadyen and Martin, JJ.A.

March 29, 2012.

Summary:

New homeowners sued their building contractor alleging a fireplace problem. The contractor objected that the contract called for arbitration. The owners applied for arbitration of that defect and a few other specific defects. Mandatory conciliation did not succeed. At about the time that final argument before the arbitrator was heard, the owners discovered mould in their home. After about two months of inspections and tests, they were advised that there were serious gaps in the building "envelope". At about the same time, on May 15, 2006, the arbitrator concluded that the owners' complaints were justified and ordered the contractor to repair the defects and to pay costs to the owners. On May 29, 2006, the owners sued the contractor, claiming damages for the holes in the building envelope and the resulting mould and insects. On August 4, 2006, the owners issued a third statement of claim to convert the arbitrator's award to a judgment and to enforce it against the contractor. The third statement of claim was discontinued in late 2011. The contractor successfully moved to have the first action (which had been replaced by the arbitration proceedings) dismissed for want of prosecution. The second statement of claim went through discoveries and was set down for trial. At the opening of the trial, the judge queried the appropriateness of the trial and suggested three problems: res judicata (decision by the arbitrator), forum (trial v. arbitration) and limitation period. The trial was adjourned for the parties to prepare arguments and make written submissions.

The Alberta Court of Queen's Bench, in a decision reported at [2010] A.R. Uned. 287, struck out the action on the ground of res judicata and abuse of process. The owners appealed.

The Alberta Court of Appeal allowed the appeal and ordered a new trial.

Arbitration - Topic 2507

Stay of proceedings - When available - New homeowners sued their building contractor - The action was dismissed on the basis of res judicata and abuse of process - The Alberta Court of Appeal allowed the owners' appeal and ordered a new trial - The contractor complained in its statement of defence of not arbitrating, but it had not proceeded with a stay motion - The duty in s. 7(1) of the Arbitration Act to stay the suit in favour of arbitration only applied if that was sought "on the application of another party to the arbitration agreement" - Only the trial judge raised the duty to arbitrate - In any event, the owners actively pressed on with their lawsuit for years - The contractor fully participated and defended the suit on the merits - It even made an unsuccessful motion for summary judgment - It also counterclaimed - There were examinations for discovery, examinations on affidavit and a certificate of readiness - The case was set down for trial by consent - By participating in the suit on the merits, the contractor waived its right to arbitration and attorned to the court's jurisdiction - Section 7 provided that an exception to the court's duty to stay the suit was a stay motion "brought with undue delay" - Here no motion was brought - Even if there was a deemed or notional or informal motion at trial, the delay was gross - See paragraphs 38 to 44.

Arbitration - Topic 2513

Stay of proceedings - Bar to stay - Waiver - [See Arbitration - Topic 2507 ].

Arbitration - Topic 2516

Stay of proceedings - Bar to stay - Delay - [See Arbitration - Topic 2507 ].

Courts - Topic 2015

Jurisdiction - General principles - Controlling abuse of its process (incl. abuse of process by relitigation) - New homeowners sued their building contractor, alleging a fireplace problem - The contractor objected that the contract called for arbitration - The owners applied for arbitration of that defect and a few other specific defects - At about the time that final argument before the arbitrator was heard, the owners discovered mould in their home - After about two months of inspections and tests, they were advised that there were serious gaps in the building "envelope" - At about the same time, on May 15, 2006, the arbitrator ordered the contractor to repair the defects - On May 29, 2006, the owners sued the contractor, claiming damages for the holes in the building envelope and the resulting mould and insects - At the opening of the second trial, the judge raised the issue of res judicata (the arbitrator's decision) and, after receiving submissions, struck the action based on res judicata and abuse of process - The Alberta Court of Appeal allowed an appeal - Abuse of process was a modern doctrine to be used where the precise grounds for res judicata were not quite made out - Res judicata was not almost made out here - Abuse of process required that the same questions were litigated in both proceedings - The questions in the two proceedings here were very different - In any event, courts invoked abuse of process to bar unjust delaying and harassing conduct by a litigant - There was nothing like that here - Abuse of process was not used to bar a proper arguable claim by someone guilty of misconduct or want of diligence - It was the opposite - If there was any want of diligence respecting the envelope problems, it was slight and short - There was no evidence of prejudice to the defendant - See paragraphs 35 and 36.

Estoppel - Topic 379

Estoppel by record (res judicata) - Res judicata as a bar to subsequent proceedings - Cause of action - New homeowners sued their building contractor, alleging a fireplace problem - The contractor objected that the contract called for arbitration - The owners applied for arbitration of that defect and a few other specific defects - At about the time that final argument before the arbitrator was heard, the owners discovered mould in their home - After about two months of inspections and tests, they were advised that there were serious gaps in the building "envelope" - At about the same time, on May 15, 2006, the arbitrator ordered the contractor to repair the defects - On May 29, 2006, the owners sued the contractor, claiming damages for the holes in the building envelope and the resulting mould and insects - At the opening of the second trial, the judge raised the issue of res judicata (the arbitrator's decision) and, after receiving submissions, struck the action based on res judicata and abuse of process - The Alberta Court of Appeal allowed an appeal - It appeared that the trial judge had no evidence before him - He referred generically to "affidavits", but the court doubted that the affidavits were properly before him - In any event, no affidavit or document linked the arbitration topics with the second statement of claim - Since the arbitration and the second suit were about different and unrelated deficiencies, the court could not see how res judicata applied - Causes of action were specific, not generic - If someone sued over a particular breach of contract and then later the same defendant committed a second but different breach of the same contract, nothing forbade a second suit over that new breach - Cause of action estoppel required that the same question now raised had been earlier decided, and had been fundamental to the earlier decision, not incidental - The test for different causes of action was substance (facts substantially the same), not technical - See paragraphs 1 to 23.

Estoppel - Topic 380

Estoppel by record (res judicata) - Res judicata as a bar to subsequent proceedings - Matters in issue - New homeowners sued their building contractor alleging a fireplace problem - The contractor objected that the contract called for arbitration - The owners applied for arbitration of that defect and a few other specific defects - At about the time that final argument before the arbitrator was heard, the owners discovered mould in their home - After about two months of inspections and tests, they were advised that there were serious gaps in the building "envelope" - At about the same time, on May 15, 2006, the arbitrator ordered the contractor to repair the defects - On May 29, 2006, the owners sued the contractor claiming damages for the holes in the building envelope and the resulting mould and insects - At the opening of the second trial, the judge raised the issue of res judicata (the arbitrator's decision) and, after receiving submissions, struck the action based on res judicata and abuse of process - The Alberta Court of Appeal allowed an appeal - With respect to issue estoppel, the issue raised in the two proceedings were different - Res judicata could cover things which should have been pleaded or argued in the arbitration proceedings (i.e., merger) - The doctrine related to what should have been raised about the same cause of action - The cause of action here was totally different - It was unclear that the mould and envelope problems were known or reasonably discoverable in time to have added them to the arbitration proceedings - Neither party had a real chance to lead such evidence - To have added the items would have required a second arbitration hearing or taking the first hearing back to "square one" - The arbitrator could have consented to stop the arbitration, but he was not obligated to do so - Adding a big new claim to the arbitration after the end of evidence would have been difficult and might not have been possible without the parties' consent - No authority was given for extending res judicata or the merger doctrine to facts first discovered after the close of evidence and shortly before judgment, during a trial - The time to raise issues was at the pleadings stage - The close of evidence marked the outer limit of amending the pleadings to add a distinct new claim - Ordinarily, that was far too late - A trial by instalments was usually inefficient and often prejudicial - An 11th hour request to have transformed the arbitration would have been "odd" - See paragraphs 24 to 34.

Estoppel - Topic 383

Estoppel by record (res judicata) - Res judicata as a bar to subsequent proceedings - In arbitration proceedings - [See Estoppel - Topic 380 ].

Estoppel - Topic 386

Estoppel by record (res judicata) - Res judicata as a bar to subsequent proceedings - Issues decided in prior proceedings - [See Estoppel - Topic 380 ].

Estoppel - Topic 388

Estoppel by record (res judicata) - Res judicata as a bar to subsequent proceedings - Decisions of administrative tribunals - The Alberta Court of Appeal stated that "The defendant also assumes that a tribunal decision creates res judicata (or one of its relatives) as readily as does a court judgment. That is far from clear in Canadian law, and there are not very many cases about that. ... In any event, one thing is clear: the court has a discretion not to find or enforce res judicata flowing from a tribunal's decision. That topic must be considered, and the judge cannot bypass it: ... The chambers judge did not consider that issue here. Given an unusual circumstance here (late discovery), the discretion should be exercised against res judicata. There is also another unusual circumstance pointing the same way: delay and acquiescence. ..." - See paragraph 37.

Cases Noticed:

Hoque v. Montreal Trust Co. of Canada et al. (1997), 162 N.S.R.(2d) 321; 485 A.P.R. 321 (C.A.), refd to. [para. 25].

420093 B.C. Ltd. v. Bank of Montreal (1995), 174 A.R. 214; 102 W.A.C. 214; 34 Alta. L.R.(3d) 269 (C.A.), refd to. [para. 25].

Huxley Investments Ltd. v. Wesley Mews Enterprises Ltd. (1999), 17 B.C.T.C. 179 (S.C.), refd to. [para. 29].

Gordyukova v. Certas Direct Insurance Co. et al., [2011] O.A.C. Uned. 707; 108 O.R.(3d) 315; 2011 ONSC 6535 (Div. Ct.), refd to. [para. 32].

Babcock & Wilcox Canada Ltd. v. Agrium Inc. (2003), 347 A.R. 107; 2003 ABQB 1004, refd to. [para. 42].

Eiffel Developments Ltd. v. Paskuski (2010), 511 A.R. 11; 2010 ABQB 619 (Master), refd to. [para. 44].

Millennial Construction Ltd. v. 1021120 Alberta Ltd., [2005] A.R. Uned. 544; 2005 CarswellAlta 975; 2005 ABQB 533, refd to. [para. 44].

Authors and Works Noticed:

Lange, Donald J., The Doctrine of Res Judicata in Canada (3rd Ed. 2010), c. 4 [para. 35]; pp. 42 to 55, 147 to 151 [para. 23]; 176, 177 [para. 37]; 206, 207 [para. 35]; 227 to 237 [para. 37].

Counsel:

D.R. McKinnon and B. West, for the appellants/plaintiffs;

R.N. Billington, Q.C., and K. Setrakov, for the respondent/defendant.

This appeal was heard on March 5, 2012, by Côté, McFadyen and Martin, JJ.A., of the Alberta Court of Appeal. The court filed the following memorandum of judgment at Calgary, Alberta, on March 29, 2012.