June 2012 Alberta Take Five

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June 2012

ALBERTA EDITION

Inside this Issue:

Commercial Law; Secured Transactions; Priorities; Quistclose Trust

Rules of Court; Standard of Review; “Drop Dead” Rule;

Administrative Law; Universities; Constitutional issues; Freedom of Speech;

Civil procedure; Actions; Amendment of Pleadings; Statement of Defence; Estoppel

Professional Responsibility; Self-Governing Professions; Investigation of Complaints

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A property developer, 1262459 Alberta Ltd. (the “Developer”) had plans to develop some land it owned in the County of Leduc. The Developer arranged financing with the Respondent, Carevest Capital Inc.. As security for the loans, the Developer granted a mortgage to the Respondent. On December 19, 2007, the Developer entered into a development agreement with the Appellant which required that the Developer pay certain off-site levies. The applicable Off-Site Levy Bylaw had not yet been enacted, but the Developer covenanted to pay the levies, once they had been set, prior to commencing certain construction.

Pursuant to the agreements, the Respondent’s solicitor forwarded the requisite amount to the Developer’s

solicitor who deposited the monies into his trust account. The Developer’s solicitor drew cheques, dated April 15, 2008, on his trust account marked “Balance of Levy Payment” and sent them to the Appellant. However, the Appellant did not deposit the cheques; the amount of the levy had not yet been determined. In accordance with Canadian banking practices, the cheques became “stale dated” on October 15, 2008.

On May 13, 2009, the developer’s solicitor received instructions countermanding his pay-out directions. The Appellant did not request replacement cheques until October 2009. The funds were ultimately paid into court by consent and without prejudice. The parties argued their respective entitlements before a Master who found that an effective trust had been created, but that the Respondent was the beneficiary, and directed that the funds be paid out to the Respondent.On appeal, a Queen’s Bench judge affirmed the conclusion of the Master in unreported reasons.

Carevest Capital Inc. v. Leduc (County), 2012 ABCA 161Areas of Law: Commercial Law; Secured Transactions; Priorities; Quistclose Trust

DESCRIPTION: This case deals with entitlement to funds after trust cheques were issued but not negotiated and subsequently became stale-dated. An express trust attached to the reception of funds by solicitor.

BACKGROUNDCLICK HERE TO ACCESS

THE JUDGMENT

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APPELLATE DECISION

Carevest Capital Inc. v. Leduc, (cont.)

The Court allowed the appeal. The core

issue was the existence and nature of any trusts created by the transactions. The Respondent argued the existence of a constructive trust as defined by Barclays Bank Ltd. v Quistclose Investments Ltd., [1970] AC 567 (HL (Eng), known as a “Quistclose” trust. A Quistclose trust arises when funds are advanced for a specific purpose, but cannot be or are not used for that purpose. Quistclose trusts have been recognized in subsequent cases.

The Court found that it was not necessary to consider the existence of a Quistclose trust since an express trust was created by the correspondence between the solicitor for the Respondent and the solicitor for the developer.

The Respondent also argued the fact that the cheques were not negotiated, became stale dated on October 15, 2008, and were countermanded on May 13, 2009, rendering them unenforceable and worthless.

The Court, however, held that, “The stale dating of a cheque does not render it invalid or unenforceable. Stale-dated items merely may not be cleared through the normal Canadian clearing system unless and until they are certified…” [para.26]. Further, the Court stated that countermanding the cheques does not relieve the drawer of liability for the underlying obligationsin this case, payment of the off-site levy pursuant to the trust letter from the solicitor for the Respondent). Therefore, the Appellant retains a right to enforce payment against the Developer’s solicitor.

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The Appellant, a former broker, was fired by the

Respondents in 2002. The Appellant issued a statement of claim in February 2004. No further action occurred on the law suit. The Master dismissed the suit using the five year “drop dead” Rule

(old R 244.1).Likewise, the chambers judge dismissed the appeal from the Master’s order under transitional R 15.4(1). The Appellant opposed the dismissal of his suit by arguing that the various tribunal proceedings to which he was a party in effect advanced his suit. The Respondentshave not been parties to any of those various tribunal proceedings, nor to the appeals and litigation flowing from them.

BACKGROUND

Bahcheli v. Yorkton Securities Inc., 2012 ABCA 166Areas of Law: Rules of Court; Standard of Review; “Drop Dead” Rule

DESCRIPTION: This case settled the law in Alberta that the standard of review for an appeal from decisions of a Master is correctness.

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APPELLATE DECISION

The appeal was dismissed.

The big issue in this judgment was the standard of review on appeal from a Master to a judge. The Alberta Rules of Court were changed effective November 1, 2010, coincidently the date when

the chambers judge heard the appeal. It was clear that, although the chambers judge did not expressly state what the standard of review was on appeal from a Master to a judge, he plainly implied that the standard was deferential. Since then, a number of Court of Queen’s Bench judges have held that the standard of review on appeal from a Master to a judge is deferential, because of the new Rules.


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Bahcheli v. Yorkton Securities Inc., (cont.)

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The old Rules stated no standard, but case law laid down a standard of review which held for almost a century. It was a standard of correctness, with no deference: see United Utility Workers Association v TransAlta Corp, 2004 ABCA 200 (CanLII), (para 20); Willman v Administrator of Motor Vehicle Claims Act 1979 ABCA 332 (CanLII). The Court reviewed a number of problems should the standard of review be deference, [paras.24-28] and concluded, “In my view, the standard of review on appeal from a Master to a judge, on all issues, is still correctness.” [paras.30]

The Court held that notwithstanding a change in the wording of the relevant Rule, either R 244.1(1) or R 4.33(1), nothing done after the issuance of the statement of claim was of any benefit in advancing the action(one Rule was in force when the Master decided, and the other may have been in force when the judge decided, subject to transitional R 15.4(1)). They concluded, “... it does not matter here precisely how the judge-made tests under those Rules are or were framed. What the appellant did here does not satisfy any test in the Rules or in any case law which we were shown by either counsel. The result is inevitable. The Master and the judge were right to dismiss the suit. They had no choice.”

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Pridgen v. University of Calgary, 2012 ABCA 139Areas of Law: Administrative Law; Universities; Constitutional issues; Freedom of Speech

DESCRIPTION: A discussion of whether a university is subject to Charter scrutiny and the applicability of judicial review in a university’s disciplinary proceedings.

BACKGROUND

Two undergraduate students, Steven Pridgen and Keith Pridgen (the Respondents),were enrolled in a course in “Law and Society” taught by Professor Aruna Mitra (“Mitra”). Mitra was not a popular teacher. A Facebook site was created by another student. The theme of the site was titled “I no longer fear Hell, I took a course with Aruna Mitra”. The Respondents each posted a single comment to the site. Needless to say, Mitra took umbrage with the site and complained to the faculty dean. Dean Tettey (“Dean”) treated Mitra’s complaint as an allegation of non-academic misconduct. Non-academic misconduct is defined in s. 1 of the University’s Student Misconduct Policy (“SMP”) contained in the University calendar.

Section 2 (b) of the SMP states that where a case of alleged nonacademic misconduct is brought to the attention of a dean, the student is required to appear before the dean to

respond to the allegations.

In accordance with s. 2(b) of SMP, the Dean summoned the respondents and other members of the Facebook group to a meeting with the Dean and 4 other faculty members. The faculty members included the spouse of Mitra. After the group meeting, each student met individually with the Dean’s committee.

Ultimately, the Dean found all of the student members of the Facebook group guilty of nonacademic misconduct, regardless of the nature of their comments and, in some cases, even though they had made no comments at all. The Respondents received a letter outlining the Dean’s findings and requiring each of them to write a letter of apology, refrain from further comment about Mitra, and be subject to a period of academic probation.

The Respondents and some of the other students launched an appeal of the Dean’s decision, in accordance with the SMP, to the General Faculties Council (“GFC”), and an ad hoc Review Committee was convened (“Review Committee”). The Review Committee essentially confirmed the findings contained in the Dean’s letter to the Respondents.

The Respondents tried to appeal further to the University’s Board of Governors, but were told that such an appeal was not open to them under the provisions of section 31(1)(a) of the Post-Secondary-Learning Act, SA 2003, c. P-19.5 (“PLS Act”).



http://canlii.ca/en/ab/abca/doc/2012/2012abca139/2012abca139.html


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Pridgen v. University of Calgary, (cont.)

The Respondents then applied for judicial review in the Court of Queen’s Bench. The application raised a number of Charter and administrative law issues. The chambers judge found that the plain language of s. 31(1)(a) of the PSL Act provides a statutorily mandated right of appeal to the Board of Governors. Accordingly, the Board of Governors breached its statutory duty in refusing to hear the Pridgens’ appeals from the Review Committee decision. Further, the judge held that the reasons for decision provided by the Review Committee were not adequate. The chambers judge concluded that the

Review Committee’s finding of nonacademic misconduct was unreasonable and that it breached the provisions of the Charter. The chambers judge quashed the decision of the Review Committee on two grounds: (1) that the decision breached the Pridgens’ Charter rights and could not be saved by s.1 of the Charter, and (2) that the decision was unreasonable under administrative law principles.

The University appealed. It submitted that the chambers judge erred, firstly, by substituting

her own opinion for that of the Review Committee and applying a correctness standard to her review of the Committee’s decision rather than the appropriate standard of reasonableness, and secondly, that she erred by deciding that issue in a vacuum and by misapplying the law on whether the Charter applies to the actions of a university.

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The Court dismissed the appeal. The three judges

issued separate reasons, all concurring with the result. Two of the three judges determined that it was unnecessary to consider the Charter issues and dismissed the appeal on the basis of administrative law principles. Madam Justice Paperny gave reasons, not only concerning administrative law issues, but also concerning the issue of whether university proceedings are subject to Charter scrutiny. She embarked on a lengthy discussion of the applicability of s. 32 of the Charter [IP52-112]. Section 32 states that governmental actions are amenable to Charter scrutiny. The Supreme Court of Canada has expanded the concept of “government” to include an entity as “governmental”, either in and of itself or in some of its activities, for the purposes of s.32 of the Charter.

Following Eldridge v British Columbia (Attorney General), [1997] 3 SCR 624, and Multani v Commission scolaire MargueriteBourgeoys, 2006

SCC 6, [2006], (the majority reasons of Charron J.), Paperny JA concluded that in exercising its statutory authority to discipline students for nonacademic misconduct, it is incumbent on the Review Committee to interpret and apply the SMP in light of the students’ Charter rights, including their freedom of expression.

All three appellate judges dismissed the appeal using the principles of administrative law. They found that the decision of the Review Committee was unreasonable and that it contained a paucity of analysis and evidence. They further held that the Board of Governors was required by statute to hear the Respondents’ appeal and as a result of its refusal, the students were denied their statutory right to appeal the Review Committee’s decision to the Board of Governors of the University.

APPELLATE DECISION

Pridgen v. University of Calgary, (cont.)

June 2012


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Alberta Treasury Branches v. Opsteen, 2012 ABCA 153

Areas of Law: Civil Procedure; Actions; Amendment of Pleadings; Statement of Defence; Estoppel

DESCRIPTION: The granting of an Order Nisi for foreclosure, subject to appeal, is a final disposition between the parties, and evidence of a collateral contract prior to execution is res judicata.

BACKGROUND

The Appellants, the Opsteens, were hog

farmers. Commencing in 1996, they borrowed monies from the Respondent, Alberta Treasury Branches (ATB) to finance construction of barns and for operating expenses. The loans were secured by mortgages against the farm lands. Foreclosure proceedings were commenced on July 10, 2002. The Appellants filed a Statement of Defence and counterclaim. On March 21, 2003, ATB made application for summary judgment, including for sale of the mortgaged lands.

The chambers judge decided that the Appellants’ counterclaim was a “separate action” and could proceed independently of the foreclosure action. The chambers judge granted ATB an Order Nisi/Order for Sale with respect to the mortgaged lands.

In 2011, the Appellants applied to the case management judge to amend their pleadings in the counterclaim to allege a breach of a collateral contract made prior to the contract of financing that led to the foreclosure and to increase the amount of damages claimed. The case management judge stated that the granting of the order nisi had concluded all contractual dealings between the parties. Respecting the amendment to increase damages, the case management judge dismissed the application, but allowed the Appellants to raise this issue at trial.

The Court dismissed the appeal dealing with the

amendment to the pleadings alleging a collateral contract prior to the mortgage. At para.21, the Court stated, “]t]he attempt to raise the alleged collateral agreement fails for two reasons. First, the claim could have been made by way

of equitable set-off and thereby runs afoul of the principles cited above in 420093 BC Ltd. Second, the Appellants did not explain on what basis the inconsistent oral collateral agreement could be given effect. As a general rule, a prior inconsistent oral agreement will not be allowed to stand: Hawrish v Bank of Montreal, [1969] SCR 515… Bauer v Bank of Montreal, [1980] 2 SCR 102 at para 18.”

The Court allowed the appeal regarding the application to increase damages.

APPELLATE DECISION






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Clark v. Complaints Inquiry Committee, 2012 ABCA 152 Areas of Law: Professional Responsibility; Self-Governing Professions; Investigation of Complaints

DESCRIPTION: The disclosure, or potential for disclosure, of confidential information contrary to a statutory provision will result in judicial relief.

BACKGROUND

The Appellant, Complaints Inquiry Committee (CIC),

is the disciplinary branch of the Institute of Chartered Accountants of Alberta (the Institute), which regulates the activities of Chartered Accountants in the province. The Institute received a complaint concerning the conduct of the Respondent, Clark, a C.A., in relation to his professional services. An investigation was ordered, and Rockwood, an employee of the Institute, was assigned to investigate. Rockwood instructed Clark to

The appeal was dismissed. Notwithstanding the

sparseness of the Appeal Tribunal’s reasons, the Court opined that, since adequacy of reasons is not a stand-alone basis for quashing a decision, it could look to the record to assess the reasonableness of the outcome. In reviewing the efficacy of the Appeal Tribunal’s decision, the Court examined the reasons “in the context of the evidence, the parties’ submissions and the process”: Newfoundland

send information relating to the investigation to him using Rockwood’s wife email account. Clark subsequently discovered that others, including the complainant, also used the wife’s email account to supply Rockwood with information. At the hearing of the complaint, Clark made an application to dismiss the proceedings on the basis that CIC had disclosed confidential information contrary to Regulated Accounting Profession Act, RSA 2000, c R-12 (RAPA), ss. 129(2). The Discipline Tribunal dismissed Clark’s application. Clark appealed the decision of the Discipline Tribunal to an Appeal Tribunal who directed a stay of the discipline proceedings. In brief reasons, the Appeal Tribunal stated that, “… disclosure of confidential information in the course of the investigation was not permissible or acceptable”. [para. 9]

and Labrador Nurses’ Union v Newfoundland and Labrador Treasury Board, 2011 SCC 62 (CanLII), para. 18.

The Court concluded the Appeal Tribunal had rejected the finding of the Discipline Tribunal that Clark had consented to the disclosure of the confidential information, and therefore, the CIC breached s. 129 of RAPA. While recognizing that every breach of a statutory provision does not result in an abuse of process, the Court concluded that the stay was the only way to hold the CIC to the standard of conduct expected of all members of the profession. The Court also held that Clark had a right of appeal to the Appeal Tribunal, (RAPA, s. 101), contrary to the submission of CIC.


APPELLATE DECISION




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June 2012 Alberta Take Five

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