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Carscallen LLP Win at the Alberta Court of Appeal Highlights the Risks of “Litigating in Slices”

Carscallen LLP Win at the Alberta Court of Appeal Highlights the Risks of “Litigating in Slices”

In Johansen v. Wallgren, 2021 ABCA 234, Carscallen LLP litigators Cathy Crang, Q.C. and Zubair Hussain successfully defended their client (the “Respondent”) at the Alberta Court of Appeal (“CA”). The Appellant was initially granted summary judgment by a Master in the Court of King’s Bench (“KB”) on the Respondent’s personal liability arising from a promissory note and a personal guarantee. In the Appellant’s original Statement of Claim, among other things, the Appellant raised allegations of fraudulent misrepresentation. However, in obtaining the summary judgment, the Appellant only based his case upon the promissory note and personal guarantee. The Respondent subsequently made an assignment into bankruptcy and remained an undischarged bankrupt.

Following the Respondent’s assignment into bankruptcy, the Appellant made an application to QB for summary trial and sought determination that his summary judgment would be exempted from the Respondent’s discharge from bankruptcy pursuant to s. 178(1)(e) of the Bankruptcy and Insolvency Act[1] (“BIA”). Among other things, this section provides that an order of discharge does not release a bankrupt from any debt or liability resulting from obtaining property or services by false pretences or fraudulent misrepresentation. In support of his application for summary trial, the Appellant filed a fresh affidavit which contained various allegations of fraudulent misrepresentation. The Court dismissed the application and held that the fresh affidavit was extraneous evidence. The Appellant appealed to the CA.

In dismissing the appeal, the CA highlighted that the Appellant chose to sever his claim and sought partial summary judgment for liquidated damages on only the basis of contract law, namely the promissory note and personal guarantee from the Respondent, and not on any basis of the alleged fraudulent conduct of the Respondent. Therefore, no evidence was before the Master on the issue of the alleged fraudulent misrepresentations of the Respondent. The CA found that on the face of the Master’s judgment, her reasons, and the evidence and submissions before her, the partial summary judgment was not granted on the basis of fraudulent misrepresentation. Instead, the Master had found liability for the debt based in contract, consistent with the grounds raised in the Appellant’s summary judgment application. The CA also confirmed that evidence that was not grounded in the process that produced the judgment debt was considered extraneous.

In pursuing a summary judgment application based on contractual claims, the CA reiterated that where a judgment has been produced by “litigation in slices”, it is important to look at the “slice” that was determined, not at every allegation that could have been determined but was not.

The CA noted that at the time of the partial summary judgment application before the Master, the Appellant could have pursued his fraudulent misrepresentation claims. Because the Respondent chose to pursue a summary disposition of the debt portion of his claim without relying on the allegations of fraudulent misrepresentation, he is now estopped from relitigating the debt claim with allegations of fraudulent conduct.

This case was chosen by OnPoint Law Corp’s “Take Five” publication, highlighting CA cases of importance for July 2021. The publication also features Counsel Comments on the case from Cathy Crang, Q.C. and Zubair Hussain, and can be found here.

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Carscallen’s team of experienced litigators has successfully represented clients at all levels of court and before tribunals in Alberta and Canada. Our extensive litigation experience allows us to focus on practical, common sense legal solutions to disputes. We represent public corporations, private enterprises and individuals and are adept at tailoring unique solutions to meet your needs and protect your interests. We have achieved regular and consistent success at trial and appellate levels of courts and before various tribunals, and we have a strong track record of effectively resolving disputes outside the formal legal process through mediations and arbitrations.

Please contact any member of our Commercial Litigation team with any questions you may have about any litigation-related issues.

*This update is intended for general information only on the subject matter and is not to be taken as legal advice.

Posted: August 13, 2021

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