Summaries Sunday: OnPoint Legal Research

One Sunday each month OnPoint Legal Research provides Slaw with an extended summary of, and counsel’s commentary on, an important case from the British Columbia, Alberta, or Ontario court of appeal.

JEKE Enterprises Ltd. v. Philip K. Matkin Professional Corp., 2014 BCCA 227

1. CASE SUMMARY

AREAS OF LAW: Procedural law; Chambers; Special cases

~It is not appropriate to proceed by special case where the underlying facts of the case are disputed~

BACKGROUND: The Appellants in this case held time shares in a resort owned by the Respondent. In order to fund substantial renovations at the resort, the Respondent gave time share holders the option of paying either a renovation project fee or a cancellation fee to terminate their ownership and leave the time share operation. Shortly before this option had been presented to the owners, the Respondent’s trustee had applied to the court for advice and direction, pursuant to the Trustee Act. The petition indicated that the Respondent wished to make certain unilateral amendments to the ownership agreements. Case planning conferences were held with respect to the petition, and it soon became apparent that the fees were the central issue. The Appellants disputed the Respondent’s ability to impose the fees. The chambers judge ordered that the issues relating to the renovation project fee and the cancellation fee be determined by way of a special case under Rule 9-3. The form of special case was settled by the court at a judicial management conference, but counsel for the Appellants refused to sign the statement of special case because of the extensive disputed affidavit evidence that, by then, had clearly demonstrated that the parties were not in agreement with respect to the facts. The Appellants took the position at the hearing of the special case that it was inappropriate as it was premised on the assumption that the ownership agreements were valid and enforceable, it did not include facts necessary to decide the case, and the court would be required to answer the questions for determination – whether the Respondent was entitled to charge or levy the cancellation fee and whether it was entitled under the agreements to levy the renovation project fee – on the basis of contested evidence. In determining that the special case should proceed, the chambers judge found that there were approximately 14,500 owners of whom roughly 755 opposed the fees or wanted out of their agreements. She found it in accordance with the Supreme Court Civil Rules‘ object of proportionality to proceed by special case instead of opening the door to hundreds of potential actions that would take an enormous amount of time and expense.

APPELLATE DECISION: The appeal was allowed. While the Respondent argued that the decision to proceed by special case was a discretionary one to which deference was owed, the Appellants argued that the special case was not appropriate because: the questions posed in the special case rested on a hypothetical assumption that the agreements were valid; necessary facts were not included and not all the facts were agreed upon by the parties; and the parties did not sign the statement of special case as required by Rule 9-3(3)(c). The Court of Appeal found that the question before the court was not appropriate for a special case. The underlying facts were in dispute and the question put to the court was based on hypothetical circumstances. There may be cases where determining a hypothetical point of law will be appropriate in a special case, but not in a case where the litigation is completely contingent on the undetermined validity of ownership agreements. Once the question of the validity and enforceability of the agreements came to light, the chambers judge should have directed a trial on that issue. She was well-intentioned in seeking to employ the most efficient and cost effective procedure, but this quest for efficiency overwhelmed the judge’s analysis. The chambers judge’s order was accordingly set aside.

2. COUNSEL COMMENTS:

Provided by L. John Alexander and Lindsay LeBlanc, Counsel for the Appellant

“This appeal raised an important emerging question in regard to “access to justice”, clearly a hot topic in civil litigation practice today in Canada. The chambers judge referred to a report released in October 2013, during the hearing of the Special Case by the Honourable Thomas A. Cromwell regarding access to justice and quoted from his finding that there is a serious access to justice problem in Canada. Between the hearing of the Petition and the hearing of the appeal, the Supreme Court of Canada made its recent pronouncement on “access to justice” in Canada’s civil litigation system in the case of Hryniak v. Mauldin, 2104 SCC 7, cited by the justices in this appeal decision. The chambers decision and the appeal decision read together show two sides of the question as to whether or not the serious problem of the civil justice system being too complex and too slow should override the requirements that the rules be respected and that the process nevertheless still be “just”. These proceedings concerned a timeshare resort in Fairmont, British Columbia, involving 18,950 timeshare owners of “Vacation Interval Agreements”. The potential for slow and cumbersome proceedings was obvious. In the face of that potential, the chambers judge determined that “access to justice” required that there be a speedy and summary determination. The appeal was brought because in the view of the Appellants, using the Statement of Special Case authorized by B.C. Supreme Court Rule 9-3 in the face of a large number of disputed facts, provided no access to justice at all.

There was a significant dispute as to the validity of the underlying Vacation Interval Agreements themselves, and whether or not the current resort operator, or its predecessor, had breached those Agreements. The chambers judge concluded that the Special Case process could proceed on the assumption that the Agreements were valid and enforceable. Unfortunately, the result of that hypothetical assumption was a finding by the chambers judge that the timeshare operator had acted reasonably within its contractual obligations and that all of the vacation interval owners were liable for payment of renovation fees exceeding $50 million. Not surprisingly, shortly after the chambers decision, the resort operator began collection proceedings against many owners, apparently ignoring the hypothetical assumption. The Appellants argued that the chambers judge simply chose the wrong pre-trial resolution procedure under which to seek a speedy and summary determination that could be made justly. In the Court of Appeal we argued that Supreme Court Rule 9 sets out a number of pre-trial resolution procedures and offers an effective tool box of summary processes available to the court depending on the circumstances. The access to civil justice problem identified by the Honourable Judge Cromwell cannot be solved without using the right tool. The Supreme Court’s recent pronouncements in Hryniak correctly observe that civil litigants should not expect all matters to be resolved only after a full traditional trial. However, choosing between Rule 9-3 “special case”, Rule 9-4 “proceedings on a point of law”, Rule 9-5 “striking pleadings” or the summary judgment or summary trial process under Rules 9-6 and 9-7 respectively must be approached with care. In this particular instance, a Rule 9-7 summary trial would have afforded the parties an opportunity to litigate on one issue in a just, speedy and inexpensive fashion, at the same time allowing the court to find facts based on disputed evidence. It is interesting to take the Supreme Court’s comments in Hryniak in regard to the “new summary judgment rule” in Ontario, and compare that to British Columbia’s summary trial tool, which has existed for more than 25 years (now Rule 9-7). Our Court of Appeal’s 1989 instructions on the use of the summary trial process from Inspiration Management are strikingly similar to the comments of Justice Karakatsanis, in Hryniak, in 2014.”