3.56: Right to counterclaim
3.72: Consolidation or separation of claims and actions

Case Summary

The Appellant mortgagor, 1177620 Alberta Ltd., developed a residential building. The Respondent, a mortgage administrator, managed three mortgages on the property which were each held by different mortgagees (the “Mortgagees”). After the Appellant defaulted on its mortgage payments, the Respondent and the Mortgagees commenced three foreclosure Actions. The Appellant counterclaimed on the third foreclosure Action for breach of contract, but was prevented from adding its principal and sole shareholder (“McCurdy”) as a Plaintiff in the Counterclaim by operation of Rule 3.56, because McCurdy was not a Defendant in the original Action. Therefore, the Appellant filed a separate Statement of Claim for breach of contract, advancing the same claim as the Counterclaim but including McCurdy as a Party.

The Appellant applied for consolidation of the four Actions under Rule 3.72, and the Respondent cross-applied to sever the Counterclaim to the third foreclosure Action. The Chambers Justice held that the four Actions should not be consolidated, but that the Counterclaim should be severed.

In assessing whether or not to consolidate the Actions, the Court of Appeal noted that the three foreclosure Actions and Counterclaim involved a common question of law and fact, and that all three Statements of Claim alleged a forbearance agreement with the Appellant. The Statements of Claim were also very similar, involved the same witnesses, and described the same events. Lastly, the Court noted that the “spectre of inconsistent verdicts” with regard to the forbearance agreement favoured hearing the Actions together. However, the Action involving McCurdy could cause undue delay to the foreclosure Actions, and included a distinct issue and would require the quantification of damages.

The Court of Appeal consolidated the three foreclosure Actions, including the Counterclaim to the third Action, but refused to consolidate the breach of contract claim.

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