Manson Insulation Products Ltd. v. Crossroads C & I Distributors, 2011 ABQB 51

Court of Queen ’ s Bench of Alberta Citation: Manson Insulation Products Ltd. v. Crossroads C & I Distributors, 2011 ABQB 51 Date :20110127 Docket: 0903 17546 Registry: Edmonton Between: Manson Insulation Products Ltd. Plaintiff - and - Crossroads C & I Distributors, Yellow Cross Operating GP Inc. carrying on business under the firm name and style of Crossroads C & I Distributors, Johns Manville Canada Inc. and Johns Manville Corp.

Defendants And Between: Crossroads C & I Distributors, Yellow Cross Operating GP Inc. carrying on business under the firm name and style of Crossroads C & I Distributors Plaintiff by Counterclaim (Defendant) - and - Manson Insulation Products Ltd. Defendants by Counterclaim (Plaintiff) Corrected judgment: A corrigendum was issued on January 31, 2011; the corrections have been made to the text and the corrigendum is appended to this judgment.

_______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice G.H. Poelman _______________________________________________________ I. The Proceedings [ 1 ] The applications before the Court arise out of an action commenced by Manson Insulation Products Ltd. (which the parties style “New Manson”) on November 6, 2009 (an amended statement of claim filed on March 16, 2010).

The main defendant for present purposes is Crossroads C & I Distributors (which the parties style “New Crossroads”). [ 2 ] The action seeks to enforce and obtain damages for breach of a distribution agreement (the “Distribution Agreement”) made as of June 6, 2008 between Manson Insulation, Inc. (“Old Manson”) and Crossroads C & I Distributors Inc. (“Old Crossroads”).

Under the Distribution Agreement, Old Manson appointed Old Crossroads as exclusive distributor for insulation products and the parties undertook minimum supply and purchase obligations to each other. [ 3 ] By its previous solicitors, New Crossroads defended and counterclaimed on December 11, 2009.

It alleged, inter alia , that the Distribution Agreement was unenforceable as between the original parties, that its assignment from Old Manson to New Manson was not enforceable, and that New Manson had committed repudiatory breaches. [ 4 ] New Crossroads applied to amend its statement of defence and counterclaim or, alternatively, to consolidate this action with a new action it commenced but did not serve (containing the same allegations and claims, filed to avoid a limitation issue).

New Manson applied for declarations that the Distribution Agreement is valid and enforceable as between New Manson and New Crossroads. [ 5 ] Both parties’ applications were filed before November 1, 2010, when the new Alberta Rules of Court [1] became effective, but were argued on December 7, 2010. Thus, pursuant to new rules 15.2 and 15.12, the current version of the Alberta Rules of Court applies. [ 6 ] New Manson’s application was filed second, and argued second. However, the interplay of issues makes it best to determine the New Manson application first. II.

New Manson’s Application for Preliminary Determinations and

Summary Judgment A. Requested Relief [ 7 ] In its notice of motion, New Manson frames the relief it seeks as declarations; in its brief, it asks that two paragraphs of New Crossroads’ statement of defence be struck out. In substance, the forms of relief are the same, and no objection has been taken to this difference. [ 8 ] The notice of motion asks for an order: 1. Declaring that the Distribution Agreement ... is neither void nor unenforceable by reason of the failure of the respective assignor’s [sic] of that Distribution Agreement ... of certain Schedules to that agreement. [The wording is unclear. What seems to be meant is that

the Distribution Agreement does not fail merely because certain schedules were not completed in the executed agreement.] 2. Declaring that the ... Distribution Agreement constitutes a valid contract between [New Manson] and [New Crossroads], in their respective capacities as assignees of the obligations of the original parties to that agreement. [ 9 ] New Manson’s applications are based on the rules for preliminary determination of issues and

summary judgment based on admissions. B. Facts [ 10 ] Some background facts are necessary to understand the issues raised by the requested declarations. The facts are in evidence by David Chapman’s affidavit on behalf of New Crossroads, which adopts most of the proposed amendments to New Crossroads’ statement of defence and counterclaim, and the questioning conducted on his affidavit. [ 11 ] Old Manson and Old Crossroads had a business relationship for many years before the Distribution Agreement.

Through that relationship, Old Manson provided industrial insulation products to Old Crossroads. [ 12 ] The Distribution Agreement was made between Old Manson and Old Crossroads. Shortly thereafter, New Crossroads acquired the assets of Old Crossroads, including its position as “Buyer” under the Distribution Agreement.

Shortly after that transaction, New Manson acquired the assets of Old Manson, including the position of “Seller” under the Distribution Agreement. [ 13 ] There is no evidence that notice of the assignment of the Distribution Agreement from Old Manson to New Manson was given to Old Crossroads or New Crossroads or that notice of the assignment of the Distribution Agreement from Old Crossroads to New Crossroads was given to Old Manson or New Manson.

Likewise, there is no evidence of an express novation agreement between the parties to the Distribution Agreement and either or both of their purported assignees. [ 14 ] The material provisions of the Distribution Agreement for present purposes are the following: A. Seller [Old Manson] wishes to appoint Buyer [Old Crossroads] as exclusive distributor for the glass fibre mechanical and air handling insulation products with the specifications set forth in

Schedule “A” [Schedule “A” is attached, but contains only “Note to Draft: Insert description of insulation products including relevant specifications that are to be subject to this Agreement.”] ... manufactured and sold by Seller (“Products”) ... [“Territories”]. ... 1. Appointment and Territory a. Appointment of Distributor. Seller hereby appoints Buyer as its exclusive distributor for the sale of Products within the Territory throughout the term of this Agreement. ... b. Acceptance of Appointment. ... Buyer ... agrees to use all commercially reasonable efforts to market and sell the Products ... . 2.

Acceptance: ... No terms and conditions other than those set forth herein or incorporated herein by reference shall be binding upon Seller unless accepted by Seller in writing signed by an authorized representative of Seller.

3. Purchase and Sale: a. Requirements. During the term of this Agreement, Seller agrees to sell to Buyer, and Buyer agrees to purchase from Seller, not less than 90% of Buyer’s requirements for Products ... . As of the Effective Date, the prices (the “Price Terms”) for the Products are as set out in

Schedule “B” attached hereto. [Schedule “B” is blank] ... 4. Purchasing Procedures: a. Buyer shall from time to time during the term of this Agreement issue releases (“Release”) to Seller indicating the type, size, and quantity of Products to be supplied ... b. The total price to be paid by Buyer to Seller for Products pursuant to a Release (“Purchase Price”) shall be in accordance with the then current Price Terms. ... ... 5. Term/Termination: a.

The term of this Agreement will be five (5) years from the Effective Date with automatic renewal for successive two (2) year terms unless Seller or Buyer gives six (6) months prior written notice ... ... c. If either party commits a material breach of this agreement, the non-breaching party shall have the right to terminate this agreement effective on sixty (60) days’ prior written notice to the party in breach specifying the details of the breach, unless such breach is cured ... . ... 8. Claims: ...

All claims for defective Products arising from any other defect shall be deemed waived and released by Buyer, unless made in writing within six (6) months after arrival of the Products. ... ... 12. Seller’s Products Warranty: Disclaimer: Seller warrants and represents that at the time of delivery the Products will conform to Seller’s then current description and specification and be free from defects in material and workmanship under normal use and service. ... 13.

Remedy Limitations: Save and except where a third party claim is made against Buyer, Buyer’s exclusive remedy in the event that any of the Products do not conform to the description or specifications for such Products or the warranty set forth in

Section 12 shall be a replacement of the Products. ... ...

16. Assignments: a. Buyer may not directly or indirectly assign ... any of its respective rights or delegate any of its duties hereunder without the prior written consent of Seller. ... b.

In the event of a merger of Buyer with another entity, the sale of all capital stock of Buyer, or in the event of a sale of a substantial part of the assets of Buyer to another entity, Buyer and Buyer’s shareholders shall make a condition of any such merger, acquisition, or sale transaction, that the surviving entity or purchaser shall succeed to all Buyer’s right and shall accept and assume all of Buyer’s responsibilities and obligations under this Agreement. c.

In the event of a merger of Seller with another entity, the sale of all capital stock of Seller, or in the event of a sale of a substantial part of the assets of Seller to another entity, Seller and Seller’s shareholders shall make a condition of any such merger, acquisition, or sale transaction, that the surviving entity or purchaser shall succeed to all Seller’s right and shall accept and assume all of Seller’s responsibilities and obligations under this Agreement. 17.

Amendment; Waiver of Terms and Conditions: No modification, amendment, waiver or release of any provision of the Agreement or of any right, obligation, claim or cause of action arising hereunder shall be valid or binding for any purpose unless in writing and duly executed by the Party against whom the same is sought to be asserted. ... ... 23.

Integration: This Agreement sets forth the entire understanding of the Parties with respect to the subject matter hereof, there being no oral or other written agreements between then relating to the subject matter of this Agreement, and supersedes all prior agreements, undertakings, negotiations, commitments or any other writings or communications with respect to such subject matter between the Parties. [ 15 ] The product purchased from Old Manson (before and after the Distribution Agreement was made) was insulation made from glass fibres manufactured by a flame-attenuated process at a facility in Brossard, Quebec.

By the end of 2008, the Brossard facility was closed and New Manson provided a different glass fibre insulation product that proved unsatisfactory to New Crossroads’ customers. In October 2009, New Crossroads began to purchase its products from another distributor, the Defendants Johns Manville Canada Inc., Johns Manville and Johns Manville Corp. (collectively, “Manville”). C. Legal Principles : Preliminary Determination of Issues [ 16 ] New Manson now relies on new rule 7.1(3) (instead of former rule 221 [2] ) for preliminary determination of certain contractual issues.

Rule 7.1(3) must, however, be read in the context of the earlier parts of rule 7.1, as follows: 7.1(1) On application, the Court may (

a) order a question or an issue to be heard or tried before, at or after a trial for the purpose of (

i) disposing of all or part of a claim, (ii) substantially shortening a trial, or (iii) saving expense, (

b) in the order or in a subsequent order

(

i) define the question or issue, or (ii) in the case of a question of law, approve or modify the issue agreed by the parties, (

c) stay any other application or proceeding until the question or issue has been decided, or (

d) direct that different questions of fact in an action be tried by different modes.

(2) If the question is a question of law, the parties may agree (

a) on the question of law for the Court to decide, (

b) on the remedy resulting from the Court’s opinion on the question of law, or (

c) on the facts or that the facts are not in issue.

(3) If the Court is satisfied that its determination of a question or issue substantially disposes of a claim or makes the trial of the issue unnecessary, it may (

a) strike out a claim or order a commencement document or pleading to be amended, (

b) give judgment on all or part of a claim and make any order it considers necessary, (

c) make a determination on a question of law, or (

d) make a finding of fact. [ 17 ] There has not yet been an order that a question or issue be heard or tried, as contemplated by rule 7.1(1).

New Crossroads submits that the rule contemplates a two-stage process and thus New Manson’s application is, at best, premature. [ 18 ] Under the former rules, preliminary determination of issues was governed by rule 221, which provided as follows: 221(1) The court may order any question or issue arising in a proceeding whether of fact or law or partly fact and partly law to be tried before, at or after the trial and may give direction as to the manner in which the question or issue is to be stated, and may direct any pending application to be stayed until the question or issue has been determined.

(2) Where it appears to the court that the decision in that question or issue tried separately substantially disposes of the proceeding or renders the trial of further issues unnecessary, it may dismiss the proceeding or make such other order or give such other judgment as it considers proper. [ 19 ] This rule clearly provided for a two-stage procedure and was applied in that manner by the authorities. [ 20 ] In my view, the new rule also contemplates a two-stage procedure. That is clear, first, from the plain words.

Rule 7.1(1) authorizes the court to order a question or issue to be heard, to define the question or issue and to give procedural directions. Rule 7.1(3) is premised upon there having been an order under rule 7.1(1) and a determination made, and speaks only to the remedies available when “the Court is satisfied that its determination ... substantially disposes of a claim or makes the trial of the issue unnecessary.” Importantly, the conditions needed for the remedies in rule 7.1(3) are not necessarily required for the court to order determination of a question or issue under rule 7.1 generally.

Preliminary determination of an issue might substantially shorten a trial or save expense, within the meaning of rule 7.1(1)(a), and thus merit an order that it be “heard or tried before it, at or after a trial,” while not substantially disposing of a claim or making trial unnecessary within the meaning of rule 7.1(3).

Thus, rule 7.1(3) is part of the overall system that rule 7.1 provides for determination of particular questions and issues; it does not operate independently as its own procedure. [ 21 ] Second, there are reasons of economy for both the parties and the judicial system that support a two-stage procedure. The court should not be required to determine separately every question or issue in an action that the parties put before them, without first considering whether it would dispose of all or part of a claim, substantially shorten a trial or save expense.

Similarly, a responding party should not be put to the expense of contesting on evidence and law the very question or issue proposed to be separately heard or tried, before having the opportunity to make submissions on whether there should be a separate determination. These considerations are consistent with the purpose and intention of the new rules as set out in rule 1.2, which emphasize resolution of claims in a timely and cost-effective way and discourage applications that do not achieve that purpose.

Preserving a two-stage procedure enables the court to ensure that separate determination of issues will occur only in proper cases.

[ 22 ] New Manson has not applied for an order under rule 7.1(1). Rather it has applied directly under rule 7.1(3), which assumes that the court has found that there should be a preliminary determination of the matters on which a declaration is sought. For this reason alone, New Manson’s application must fail. [ 23 ] If New Manson’s application were to be treated as though it were under rule 7.1(1), it would be necessary to consider whether the proposed determination of the requested declaration would dispose of all or part of a claim, substantially shorten a trial or save expense.

While there are changes from the former rule 221 to the new rule 7.1, some of the authorities considering the former rule remain instructive. In particular, I note the Court of Appeal’s warnings about “piecemeal” determination of preliminary issues in Esso Resources Canada Limited v. Stearns Catalytic Ltd. . [3] [ 24 ] There would be very little, if anything, to be gained by making findings on the declarations sought by New Manson. In essence, the two declarations (if granted) would hold the Distribution Agreement enforceable as between New Manson and New Crossroads. It would, however, remain to be determined: (

a) whether the Distribution Agreement was breached or repudiated by either New Crossroads or New Manson; (

b) whether New Manson breached implied warranties in the sale of products; (

c) whether there was tortious misconduct by any of the defendants (such as inducement or conspiracy to breach the supply arrangements); and (

d) if there was actionable misconduct by any party, what relief should be given. [ 25 ] Thus, if New Manson obtained the requested declarations, neither liability nor damages would have been determined. It has not been established that the declarations would avoid the need to call any witnesses. In fact, New Manson has put forward no evidence or arguments that an order to determine the issues it raises would dispose of all or part of a claim, substantially shorten a trial or save expense. [ 26 ] For these reasons, New Manson’s application for the preliminary determination of issues is dismissed. D. Legal Principles:

Summary Judgment [ 27 ] New Manson also applies for

summary judgment pursuant to rule 7.2, which provides as follows: 7.2 On application, the Court may at any time in an action give judgment or an order to which an applicant is entitled when (

a) admissions of fact are made in a pleading or otherwise, or (

b) the only evidence consists of records and an affidavit is sufficient to prove the authenticity of the records in which the evidence is contained. [ 28 ] The applicable

part is rule 7.2(a), as the evidence on this application extends beyond records. [ 29 ] An application for

summary judgment may also be made under rule 7.3, on the basis that there is no defence or merit to a claim or part of it or that the only real issue is amount. However, that rule is inapplicable here as it requires an affidavit from the applicant, which New Manson has not submitted.

[ 30 ] Formerly,

summary judgment applications based on admissions were governed by rule 162, which provided as follows: 162 At any stage of the proceedings the court may, upon application, give any judgment or order which the applicant may be entitled when (

a) admissions of fact have been made on the pleadings or otherwise, or (

b) the only evidence consists of documents and such affidavits as are sufficient to prove their execution or identity. [ 31 ] There is no material difference between new rule 7.2(

a) and former rule 162. Thus, the authorities under the former rule remain applicable for

summary judgment applications based on admissions. [ 32 ] In Zebroski v. Jehovah’s Witnesses, [4] McBain J., after considering the authorities, held that the correct approach to a

summary judgment application based on admissions was as follows: 18 Obviously, matters must be clear before a party will be denied the right to try an issue. At trial evidence can be adduced, viva voce and findings of fact, as a result made, and then questions of law can be adequately argued, considered and decided. 19 I will therefore proceed on the basis that before I grant any request of the Defendants:

(1) The admissions must be clear; and, (2) there is no serious question of law left to be tried. 20 When there are serious questions of law or fact to be tried then the Plaintiff, in all fairness, must be allowed to proceed to trial to attempt to there obtain a favorable resolution of the issue. [ 33 ] That is, in my view, the approach to be taken to an application under rule 7.2 for

summary judgment based on admissions. [ 34 ] In support of its application, New Manson relies solely on its questioning of Chapman, a director of the general partner of New Crossroads. Its submissions on the most important elements of Chapman’s testimony may be summarized as follows:

a) New Crossroads purchased Old Crossroads’ assets, including the Distribution Agreement, and by doing so meant to accept an assignment of the Distribution Agreement.

b) New Crossroads accepted the Distribution Agreement as being in full force and effect.

c) Old Manson and Old Crossroads intended the Distribution Agreement to be effective as signed. [ 35 ] These are not controversial points and little is added by having a witness (whose personal involvement was limited to the New Crossroads era) repeat them. They do not address the most significant defences raised by New Crossroads, namely: (1) whether the Distribution Agreement is legally enforceable, and (2) whether there is a binding contractual relationship between New Manson and New Crossroads by virtue of a legal or equitable assignment.

[ 36 ] Whether the Distribution Agreement was legally enforceable despite the absence of Schedules “A” and “B,” which were to contain product specifications and prices, is not answered by a witness’ subjective understanding and his statement of the parties’ subjective intentions.

That is even more so when the witness was not involved in making the Distribution Agreement. [ 37 ] It is quite arguable that the Distribution Agreement is enforceable despite the missing schedules, either on its express terms, amendments made expressly or by implication through later course of conduct or words, or other mechanisms supported by evidence the parties may adduce. But one witness’ thoughts and understandings do not constitute the clear, legally effective admissions required for

summary judgment. [ 38 ] Whether there subsequently arose a binding contractual relationship between New Manson and New Crossroads depends first, of course, on whether the Distribution Agreement was itself enforceable. As noted, that hurdle has not been crossed. Furthermore, Chapman’s evidence that New Crossroads intended to “purchase” the Distribution Agreement and accept an assignment of it from Old Crossroads to New Crossroads does not address the issue of enforceability as between New Manson and Old Crossroads.

There is no admission or other evidence that express notice of Old Manson’s assignment of the Distribution Agreement to New Manson was given to either Old Crossroads or New Crossroads, as would be required to establish a legal assignment under section 20(1) of the Judicature Act . [5] If there is no legal assignment, there might still be an equitable assignment, but that would require Old Manson, as assignor, to be added as a party: Telus Services Inc. v. Tele-Direct (Publications) Inc. [6] [ 39 ] For these reasons, New Manson’s application for

summary judgment under rule 7.2 is dismissed. III. New Crossroads’ Application to Amend Pleadings A. The Applicable Rules [ 40 ] Rule 3.62(1) is the new general provision governing amendments to pleadings in the Alberta Rules of Court . It provides as follows: 3.62(1) A party may amend the party’s pleading, including an amendment to add, remove, substitute or correct the name of a party, as follows: (

a) before pleadings close, any number of times without the Court’s permission; (

b) after pleadings close, (

i) for the addition, removal, substitution or correction of the name of a party, with the Court’s prior permission in accordance with rule 3.74, or (ii) for any other amendment, with the Court’s prior permission in accordance with rule 3.65; (

c) despite clauses (

a) and (b), whether or not pleadings have closed, with the agreement of the parties filed with the Court. [ 41 ] In this case, pleadings have closed and there is no agreement. Thus, reference must be made to rule 3.65 for those amendments not adding parties, and rule 3.74 for those adding parties. B. Legal Principles: Amendments Not Adding Parties [ 42 ] Rule 3.65 gives no substantive guidelines on when amendments not adding parties should be granted. Apart from formal requirements, it simply states that “the Court may give permission to amend a pleading.”

[ 43 ] The most analogous former provision is rule 132, which stated as follows: The court may at any stage of the proceedings allow any party to alter or amend his pleadings or other proceedings in such manner and on such terms as may be necessary for the purpose of determining the real question in issue between the parties. [ 44 ] The reference to “purpose of determining the real question in issue between the parties” does not appear in rule 3.65. However, rule 1.2(2)(

a) includes that purpose in the overall purpose and intention of the new Alberta Rules of Court . Thus, rule 3.65 cannot be seen as a change from the approach taken by the courts under the former rule 132. [ 45 ] The principles to be applied on amendment applications, established by the authorities under the formal rules, were recently summarized by Wittmann C.J.Q.B. as follows: [20] Generally, any pleading can be amended no matter how careless or late is the party seeking to amend: Balm v. 3512061 Canada Ltd. ., 2003 ABCA 98 , 327 A.R. 149 at para. 43 .

This is referred to in Balm as the “classic rule”. [21] The classic rule is subject to four major exceptions: Canadian Deposit Insurance Corp. v. Canadian Commercial Bank , 2000 ABQB 440 , 269 A.R. 49 at para. 11 ; Foda v. Capital Health Region , 2007 ABCA 207 at para. 10 ; see also C.H.S. v. Alberta (Director of Child Welfare) , 2006 ABQB 528 , 403 A.R. 103 at para. 11 , aff’d 2006 ABCA 355 , 401 A.R. 215 .

Those exceptions are as follows: 1. the amendment would cause serious prejudice to the opposing party, not compensable in costs; 2. the amendment requested is “hopeless” (an amendment that, if were in the original pleadings, would have been struck); 3. unless permitted by statute, the amendment seeks to add a new party or a new cause of action after the expiry of a limitation period; and 4. there is an element of bad faith associated with the failure to plead the amendment in the first instance.

Therefore, if no exception applies, the pleadings can generally be amended. [7] [ 46 ] The principles summarized by Wittmann C.J.Q.B. were not premised on particular words in the old rules. Rather, they arose from the function of pleadings before our contemporary common law courts. As stated by Bensler J.: [18] This discretion [to amend pleadings] exists because “pleadings are not a meaningless ritual incantation or medieval superstition; they fulfil the first rule of natural justice, knowledge of the case against one”: Waquan v. Canada , 2002 ABCA 110 , 303 A.R. 43 , 2 Alta. L.R. (4 th ) 1 at para. 85 .

Furthermore, with the Court bound to decide a matter upon the issues pled before it, accurate pleadings are necessary for just decisions. [8] C. Legal Principles: Amendments Adding Parties: [ 47 ] Rule 3.74 governs amendments that add parties. It provides as follows: 3.74(1) After close of pleadings, no person may be added, removed or substituted as a party to an action started by statement of claim except in accordance with this rule.

(2) On application, the Court may order that a person be added, removed or substituted as a party to an action if (

a) in the case of a person to be added or substituted as plaintiff, plaintiff-by-counterclaim or third party plaintiff, the application is made by a person or party and the consent of the person proposed to be added or substituted as a party is filed with the application; (

b) in the case of an application to add or substitute any other party, or to remove or to correct the name of a party, the application is

made by a party and the Court is satisfied the order should be made.

(3) The Court may not make an order under this rule if prejudice would result for a party that could not be remedied by a costs award, an adjournment or the imposition of terms. [ 48 ] The material parts for this application, where there is no consent, are rules 3.74(2)(

b) and 3.74(3). These establish three requirements:

a) the application must be made by a party;

b) the court must be satisfied that an order should be made; and

c) there must be no prejudice that could not be remedied. [ 49 ] The amendment application is made by New Manson, a party to both the claim and counterclaim. Thus, the first requirement is satisfied. [ 50 ] The rule gives no express guidance on what is meant by the second requirement, that the court be satisfied. It clearly intends to confer discretion on the court.

Discretionary powers of the court must, of course, be exercised judicially -- that is, in accordance with accepted principles. [ 51 ] In my view, for the reasons given above, the guidelines established by the authorities under the former rules should again inform the court’s discretion under rule 3.74(2)(b). There is, therefore, no reason to take a different approach in principle to amendments that add parties, subject of course to the express inclusion of prejudice considerations in rule 3.74(3). [ 52 ] The third element, prejudice, is a consideration in any amendment application, according to the authorities.

It is given more prominence where new parties are added, presumably because they are more likely to expand the scope and expense of an action, and may be particularly be affected where the action is well advanced or limitation periods have passed. D. Nature of Proposed Amendments (

i) Introduction [ 53 ] New Manson does not object to amendments that it has described as “inconsequential.” Accordingly, those will be allowed. [ 54 ] The contested amendments fall generally into two groups: those that do not add parties, and those that add parties. They will be considered in turn. (ii) Amendments Not Adding Parties [ 55 ] The proposed amendments that do not add parties relate to the contractual issues considered in connection with New Manson’s applications for declarations and

summary judgment. They concern whether the Distribution Agreement is legally enforceable having regard to the absence of schedules, and whether there was a binding contractual relationship between the assignees, New Manson and New Crossroads. Those matters can be addressed briefly here, as they were treated at more length in relation to New Manson’s application. [ 56 ] The proposed amendments relating to the “missing schedules” plead (1) that the written document set forth the entire understanding of the parties, and (2) that the failure of the original parties to reach consensus on what should have been included in the

schedules made the contract “void or unenforceable for incompleteness, or alternatively, uncertainty.” The first simply refers to the “entire agreement” clause in the Distribution Agreement, and the second pleads a legal conclusion.

These amendments are allowed, as they are adequately supported by evidence (primarily, a copy of the Distribution Agreement itself), do not cause prejudice and do not fall into the category of “hopeless.” [ 57 ] The proposed amendments regarding whether a contractual relationship exists between New Manson and New Crossroads allege that “there was never a tripartite agreement” between the respective groups of assignors and assignees and their counterparty, that there was therefore no novation of the Distribution Agreement, and that New Manson has no right to bring this action.

Again, these amendments are allowed, as they are based on adequate evidence and undisputed facts, cause no prejudice and cannot be considered as “hopeless.” (iii) Amendments Adding Parties [ 58 ] The remaining amendments involve the addition of Old Manson, Old Crossroads, Shawn Tilson and Keith Eaman as defendants by counterclaim. Additional background facts are needed to understand their effect. [ 59 ] When the Distribution Agreement was executed, Tilson and Eaman owned 100 percent of Old Manson and 50 percent of Old Crossroads and were directors of both Old Manson and Old Crossroads.

In the proposed amendments it is alleged, in brief, that:

a) Both Old Manson and Old Crossroads were considering sales of all or significants parts of their assets. The directors of Old Crossroads, other than Tilson and Eaman, were unaware of Old Manson’s plans.

b) Tilson and Eaman, by controlling 50 percent of Old Crossroads’ shares, could block the Old Crossroads sale.

c) To increase the sale price of Old Manson’s assets, Tilson and Eaman needed Old Crossroads to enter into a longterm distribution agreement with Old Manson. They “intimated” to Old Crossroads that they would vote for a sale of Old Crossroads’ assets only if the longterm agreement was made.

d) Tilson and Eaman knew that after the sale of Old Manson’s assets, New Manson would be unable to sell the Brossard products that were used by Old Manson’s customers. [ 60 ] The evidence in support of adding the new parties and allegations relating to them is weak. With respect to the merits of the new allegations, Chapman’s affidavit states only the following: Exhibit “A” to my affidavit is a draft of the Amended Statement of Defence and Counterclaim that the Defendants CCI and Yellow Cross propose to file, with the proposed additions indicated by underlining.

I have read the underlined passages and, so far as they state facts, those facts are true to the best of my knowledge, information and belief, with the exceptions of paragraphs 17, 18, 31, 35, 37 and 94(c), the first 15 words of paragraph 19 and the first 6 words of paragraph 27. The facts that I have excepted are within the exclusive knowledge of the Plaintiff or the proposed Defendants by Counterclaim, Tilson and Eaman. [ 61 ] When questioned on his affidavit, Chapman stated that in many cases he had no personal knowledge of the subject matter of the amendments.

The affidavit does not disclose the source of Chapman’s information, contrary to rule 13.18(2). When questioned, however, Chapman was generally able to identify the sources of his information and New Manson has not opposed the application on this basis (or indeed, on lack of an evidentiary foundation generally). [ 62 ] The evidentiary basis for this application is adequate, having regard to the very low threshold the authorities have established, [9] particularly in the circumstances of this early application.

Of particular relevance in this case is Côté J.A.’s reminder that “one must recall that the original statement of claim here needed no evidence at all, and that any plaintiff can always issue a new statement of claim if the limitation period has not expired.” [10]

[ 63 ] There has been no evidence or even assertion of prejudice by either New Manson or the proposed new parties (whose counsel attended the hearing of this application). In summarizing the authorities on amendments, Hughes J. noted as follows: The power to amend is discretionary. The discretion is to be exercised generously rather than restrictively, especially when the amendment is sought early in the proceedings. [11] [ 64 ] In this case “questioning” (as the new rules refer to examinations for discovery) has not begun and production of records has not been completed.

Further, this application is not opposed on the basis of expiry of limitation periods. [ 65 ] Finally, it cannot be said that the proposed amendments involving new parties are “hopeless.” If the allegations of fact are proved, the causes of action are at least arguable. [ 66 ] For these reasons, the applications to amend the statement of defence and counterclaim are granted and it is unnecessary to consider the consolidation application. IV. Conclusions [ 67 ] Based on the foregoing reasons, New Manson’s application for preliminary determination of issues or

summary judgment on certain issues is dismissed, and New Crossroads’ application to amend its pleadings is allowed. [ 68 ] The parties are given leave to speak to costs, if necessary. Heard on the 7 th day of December, 2010. Dated at the City of Calgary, Alberta this 25 th day of January, 2011. G.H. Poelman J.C.Q.B.A. Appearances: Michael J. McCabe, Q.C. Reynolds, Mirth, Richards & Farmer LLP for the Plaintiff

Hein Poulus, Q.C./Matthew Synnott Stikeman, Elliott for the Defendants Crossroads C & I Distributors, Yellow Cross Operating GP Inc. carrying on business under the firm name and style ofCrossroads C & I Distributors Erin J. Baker Jensen Shawa Solomon Duguid Hawkes LLP for the Defendants Johns Manville Canada Inc. and Johns Manville Corp. Michael S. Sestito Bennett Jones LLP for Shawn Tilson and Keith Eaman _______________________________________________________ Corrigendum of the Reasons for Judgment of The Honourable Mr. Justice G.H.

Poelman _______________________________________________________ Citation should read: Manson Insulation Products Ltd. v. Crossroads C & I Distributors, 2011 ABQB 51 [1]Alta. Reg. 124/2010. [2]Former Alberta Rules of Court, Alta. Reg. 390/1968. [3](1991), 1991 ABCA 48 , 114 A.R. 27, 77 D.L.R. (4th)557 (C.A.), at paras. 9 to 11. [4](1986), (AB KB), 71 A.R. 259 (Q.B.). [5]R.S.A. 2000 c. J-2. [6]2001 ABQB 777, 301 A.R. 297 (QB), at paras. 22 - 25. [7]Dow Chemical Canada Inc. v.

Nova Chemicals Corporation, 2010 ABQB 524,at paras. 20-21. [8]Newel Post Developments Ltd. v. 1402801 Alberta Ltd., 2010 ABQB 660, at para. 18. [9]Balm v. 3512061 Canada Ltd., 2003 ABCA 98, 327 A.R. 149; and Hunter Financial Group Ltd. v. Maritime Life Assurance Company,2007 ABQB 263, 428 AR 150.

[10] Balm v. 3512061 Canada Ltd. , 2003 ABCA 98 , 327 A.R. 149, at para. 28 . [11] Marlborough Ford Sales Limited v. Ford Motor Co. of Canada, Ltd. , 2003 ABQB 298 , at para. 10 (citations omitted).