This was an Appeal from an Order of a Justice in Chambers directing the severance of the Trial of related Actions into two parts. The Order under Appeal contemplated that the first Trial would determine if the Appellants were responsible for a breach of the Respondent Flying Club’s sublease, and whether the Respondent was entitled to an injunction to prevent the Appellants from closing the Edmonton City Centre Airport. If it was determined that the Respondent was entitled to a remedy, but not an injunction, the second phase of the Trial would determine the Respondent’s entitlement to damages, and the Appellants’ liability for certain economic torts. After the Chambers Judge issued reasons for ordering the severance, but before the formal Order was entered, the City commenced expropriation proceedings. The Respondent argued that the expropriation was itself a breach of the covenant of quiet enjoyment; however, the Chambers Judge declined to revisit the Order.

The Majority of the Court of Appeal noted that interpretation of the Rules of Court was a question of law reviewed for correctness, but absent an error of law or principle, the Decision to order severance was a discretionary Decision that would only be varied on Appeal if it was unreasonable.

The Majority stated that, under section 8 of the Judicature Act, RSA 2000, c J-2, every Action will result in only one Trial, where all issues will be decided. Rule 7.1 permitted the severance of issues, but on an exceptional basis. An Applicant who proposed to sever issues was required to demonstrate that it was clearly desirable to do so, and the legal test for severance acknowledged by the Majority was that there must be a “real likelihood” or “good probability” of savings. Further, a split Trial must be likely to achieve the aims listed in Rule 7.1 and must be likely to result in disposing of all or part of the Claim, substantially shortening the Trial, or saving expense, or some combination thereof.

The Majority then considered whether there was likely to be an overlap in the evidence. As part of that analysis, the theories of both Parties were considered. The Majority expressed concern that the Order under Appeal restricted the scope of discovery on damages, as severance should not be ordered in a way that prevents the Defendant from putting forward all its defences. The Majority also noted that section 19 of the Judicature Act provided that, where equitable relief was available, the Court could award damages in substitution; however, the severance Order restricted the ability of the adjudicator at Trial to exercise their jurisdiction under section 19.

After considering several of the issues that were likely to be disputed, the Majority stated that it was unrealistic to think that either Party would enter into an Agreed Statement of Facts conceding the fundamental premise of the other and extensive evidence would be required. Based on all of the above, the Majority concluded that the Chambers Judge’s holding that the initial Trial on the availability of an injunction would be “much shorter than any Trial for damages” was unreasonable and reflected a reviewable error. The Appeal was allowed and the Order was set aside.

Justice O’Ferrall agreed with the Majority that an Applicant proposing to sever issues must demonstrate that it was likely to be advantageous, but disagreed with the Majority’s conclusion that the Chambers Justice’s Decision reflected an error of law. Justice O’Ferrall noted that Rule 7.1(1)(a) provided that a discrete question or issue may be tried or heard before, at or after Trial for any one of three purposes, only one of which was saving expense. Justice O’Ferrall stated that it could not be seriously argued that the Order would not substantially shorten any Trial which might follow the determination of the question of the Plaintiff’s entitlement to a permanent injunction. Regardless, whether two Trials would take up substantially less time than one, was a matter the Trial Court was required to assess and deference ought to be accorded to that assessment. Further, the likelihood of saving time and expense, while sufficient reason to order issues to be heard before Trial, was not a necessary reason according to the plain wording of Rule 7.1(1)(a). Finally, Justice O’Ferrall noted that when property rights are appropriated or expropriated in the province of Alberta, a bifurcated process was often the rule, not the exception; therefore, severance was logical and accorded with legislatively-mandated severance schemes found in Alberta statutes. Justice O’Ferrall concluded by stating that severing the Trial of the question of the Flying Club’s entitlement to an injunction would provide sooner certainty for the Airport Authority. Justice O’Ferrall would have dismissed the Appeal.