Alfred H. Balm Respondent/Plaintiff - v. -, 2011 ABQB 650

Court of Queen ’ s Bench of Alberta Citation: Balm v. Aikins, MacAulay & Thorvaldson LLP, 2011 ABQB 650 Date: 20111026 Docket: 0801 10693 Registry: Calgary Between: Alfred H. Balm Respondent/Plaintiff - and - Aikins, MacAulay & Thorvaldson LLP, James Alexander Ferguson, Brian D. Lerner, Richard Roe and XYZ Corp. Applicants/Defendants _______________________________________________________ Reasons for Decision of the Honourable Mr. Justice A.D.

Macleod _______________________________________________________ [ 1 ] The Defendants, Aikins, MacAulay & Thorvaldson LLP (“AMT”), a prominent law firm, and some of its members are defendants (“Applicants”) in an action brought by the Respondent Mr. Balm, the principal behind a well known oil service company Canadian Fracmaster Ltd., now Fracmaster Ltd. (“Fracmaster”). The Applicants bring this application for

summary judgment over the entirety of Mr. Balm’s claim, except with respect to paragraphs 40 and 41 which relate to some of the Applicants’ files which were allegedly concealed. The Applicants argue that

summary judgment should be granted by virtue of the Limitations Act , RSA 2000, c L-12, because the action was commenced on September 8, 2008 well over two years after Mr. Balm ought to have known that an action against the Applicants was warranted. Accordingly, they argue that the bulk of Mr. Balm’s claim is without merit justifying an application for

summary judgment under Rule 7.3. [ 2 ] Mr. Balm, on the other hand, argues that while he was fully aware that AMT was acting as a law firm on behalf of the

[ 2 ] Mr. Balm, on the other hand, argues that while he was fully aware that AMT was acting as a law firm on behalf of the Sudermann defendants (defendants in another action), it was not until much later and within the two-year time limit that he became aware of facts upon which he was able to discern that AMT was not only acting as lawyers to the Sudermann defendants, it was acting as a co-conspirator. Background [ 3 ] Mr.

Balm’s tale of woe is set out in the statement of claim against the Sudermann defendants issued April 6, 1999 and again in a Statement of Claim issued September 8, 2008 against these Applicants. In the summer of 1997, he owned 67.5% of the issued and outstanding common shares of Fracmaster. On August 21 of that year, he entered into an agreement with a number of underwriters under which he agreed to sell to the underwriters his shares in Fracmaster for $19.50 per share payable on an instalment basis.

An Instalment Receipt Agreement was entered into which provided that the first instalment of $9.75 per share was due and payable to Mr. Balm by the underwriters when the deal closed as they were the initial registered holder of the Instalment Receipts. The second instalment of $9.75 was due and payable to Mr. Balm by the registered holders of the Instalment Receipts on September 9, 1998 at 1:00 p.m.

The rights to acquire the shares being offered for sale by the underwriters were represented by the Instalment Receipts and title to the Instalment Receipts would be transferrable in accordance with the Instalment Receipt Agreement. Registration of the transfer was necessary to become a registered holder. Thus, the registered holder agreed to be bound by the conditions of the Instalment Receipt Agreement and assumed the obligations to pay Mr. Balm the final instalment. The Instalment Receipts were listed and traded on the Toronto Stock Exchange and other stock exchanges.

As the receipts were traded, the purchasers were duly registered as holders. [ 4 ] In the summer of 1998, the common shares of Fracmaster began to trade on the exchanges for a price less than $9.75 per share with the prospect that on the final instalment date the receipts would have a negative value. [ 5 ] One’s loss is another’s opportunity. The action against the Sudermann defendants alleges that they orchestrated the creation of a number of shell companies to purchase these Instalment Receipts by having the sellers pay them to take them off their hands and insulate them from any exposure to an action by Mr.

Balm to enforce payment of the final instalment. As the price of the shares fell and the price of taking the Instalment Receipts off the registered owners increased, offshore companies were created and the Instalment Receipts ended up in two offshore shell companies, Victoria Sunset Investments Corp., a Bahamas company and Coral Bay Holdings Limited incorporated under the laws of the Territory of the British Virgin Islands. It is alleged that the Applicants and the Sudermann defendants conspired to effect the transfers of the Instalment Receipts to these offshore companies.

Those companies would not have the means to satisfy the final instalment and thus the Applicants profited from a scheme to deprive Mr. Balm of his ability to pursue holders of the Instalment Receipts who may well have had the assets to satisfy the obligation. [ 6 ] The Applicants do not seek

summary judgment with respect to paragraphs 40 and 41 of the Statement of Claim in which it is alleged that the Applicants actively concealed records and actively counselled the Sudermann defendants not to produce documents to their Alberta counsel and without telling Alberta counsel. Those documents were not produced until 2008 and 2009 and while the Applicants vehemently deny that they did actively conceal production, they do not seek

summary judgment with respect to that portion of Mr. Balm’s claim. Issue [ 7 ] The issue in this case is whether it is plain and obvious that the Mr. Balm’s action is statute barred. Analysis [ 8 ] The Limitations Act , RSA 2000, c L-12, s 3(1) provides that a claimant is required to seek a remedial order within: (a) 2 years after the date on which the claimant first knew, or in the circumstances ought to have known, (

i) that the injury for which the claimant seeks a remedial order had occurred,

(ii) that the injury was attributable to conduct of the defendant, and (iii) that the injury, assuming liability on the part of the defendant, warrants bringing a proceeding [...] [ 9 ] Rule 7.3 of the Alberta Rules of Court , Alta Reg 124/2010 provides as follows:

(1) A party may apply to the Court for

summary judgment in respect of all or part of a claim on one or more of the following grounds: (

a) there is no defence to a claim or part of it; (

b) there is no merit to a claim or part of it; (

c) the only real issue is the amount to be awarded.

(2) The application must be supported by an affidavit swearing positively that one or more of the grounds described in subrule (1) have been met or by other evidence to the effect that the grounds have been met. [...] [ 10 ] The new Rule 7.3 does not change the test for

summary judgment found under the old rules: see Manufacturers Life Insurance Co. v Executive Centre at Manulife Place Inc. , 2011 ABQB 189 at para 11 ; Encana Corp. v ARC Resources Ltd., 2011 ABQB 431 at para 7 . The Applicants have the onus of satisfying the Court that there is no genuine issue to be tried. If they succeed, then Mr. Balm must show that there is a genuine issue for trial: see for example Canada (Attorney General) v Lameman , 2008 SCC 14 , [2008] 1 SCR. 372 at para 11 . In the context of this application, it means that the Applicants have to establish that Mr.

Balm knew or ought to have known by the first week of September of 2006 that an action against AMT was warranted. [ 11 ] In . Lameman , in the context of an application for

summary judgment based upon the operation of a limitations statute, the Supreme Court wrote the following: [10] This appeal is from an application for

summary judgment. The

summary judgment rule serves an important purpose in the civil litigation system. It prevents claims or defences that have no chance of success from proceeding to trial. Trying unmeritorious claims imposes a heavy price in terms of time and cost on the parties to the litigation and on the justice system. It is essential to the proper operation of the justice system and beneficial to the parties that claims that have no chance of success be weeded out at an early stage. Conversely, it is essential to justice that claims disclosing real issues that may be successful proceed to trial. [11] For this reason, the bar on a motion for

summary judgment is high. The defendant who seeks

summary dismissal bears the evidentiary burden of showing that there is “no genuine issue of material fact requiring trial” [...] The defendant must prove this; it cannot rely on mere allegations or the pleadings [...] If the defendant does prove this, the plaintiff must either refute or counter the defendant’s evidence, or risk

summary dismissal [...] Each side must “put its best foot forward” with respect to the existence or non-existence of material issues to be tried [...]The chambers judge may make inferences of fact based on the undisputed facts before the court, as long as the inferences are strongly supported by the facts [...] [Citations omitted] [ 12 ] The Court in Lameman concluded that there was no genuine issue for trial because the claims were barred by operation of the Limitations of Actions Act .

[ 13 ] In support of their application, the Applicants filed an extensive affidavit of Keith Ferbers, a partner with AMT, who was not involved in the transactions at issue. Mr. Ferbers has done a forensic analysis of the information available to Mr. Balm and sets it out in some detail in his affidavit and the three volumes of exhibits to that affidavit for the purpose of establishing that Mr. Balm knew all he needed to know prior to September 2006. But of course AMT argues equally forcefully that the evidence does not disclose an actionable wrong. [ 14 ] In support of his position, Mr.

Balm filed the affidavit of Thomas Ferguson, Q.C., the principal lawyer on the file until he left McCarthy Tetrault LLP, and he remains a part of the legal team in his new capacity as counsel at Fasken Martineau DuMoulin LLP. [ 15 ] Certainly, it appears clear that Mr. Balm was aware or ought to have been aware that AMT was acting on behalf of the Sudermann defendants in all aspects of the series of transactions giving rise to Mr. Balm’s claim. What Mr.

Balm disputes, however, is that he was aware or ought to have been aware that AMT was not only acting on its clients’ instructions, but it was acting as a co- conspirator with respect to the allegations. Mr. Ferguson deposes that during the fall of 2006 he became suspicious because Robert and Leonard Sudermann could not recall certain matters they ought to have recalled if they were instructing AMT to carry out transactions which had occurred. They could not recall agreements. They did not retain files. They did not recognize changes made to documents and did not receive copies of certain documents.

They could not recall transactions or particulars of transactions which one would have thought they would had they been instructing principals throughout the piece. [ 16 ] According to Ferguson, it was not until AMT produced its trust records and activity reports in August 2007 that it was discoverable that AMT perhaps received profits as a result of participation in the transactions as opposed to receipt of legal fees. Mr.

Balm further states that the allegations surrounding the concealing or refusing to produce documents is crucial evidence in support of its assertion that AMT is a co-conspirator. [ 17 ] The Applicants vehemently deny their role as co-conspirators or that they concealed anything. [ 18 ] Mr. Balm states that it was only as a result of documents produced pursuant to the Order of this Court dated August 7, 2007, the cross-examination of the Sudermanns in the fall of 2006, the discovery of AMT’s participation through the production of time records and billing information and July 2008 cross-examination of another Mr.

Ferguson (a partner of AMT) that Mr. Balm had reason to believe that the Applicants were acting not just as lawyers but as co-conspirators. [ 19 ] While it is not clear that Mr. Balm will succeed against AMT, it is not plain and obvious that he ought to have been aware of facts supporting an action against AMT as co-conspirators and not as lawyers. [ 20 ] It must be recalled that mere suspicion is not enough: see for example De Shazo v Nations Energy Co. , 2005 ABCA 241 , 367 AR 267 at paras 28-30 . [ 21 ] Prior to September 2006, Mr.

Balm had every expectation that AMT was acting as diligent counsel to the Sudermann defendants, but it is not plain and obvious whether there was a real basis to allege that AMT was acting as a co-conspirator. I do not conclude that AMT acted in any capacity other than as lawyers; indeed I have not been asked to draw that conclusion. I have, however, concluded that the Applicants have not demonstrated that it is plain and obvious that Mr. Balm’s claim in that regard is statute barred. Accordingly, the application is dismissed with costs. Heard on the 26 th day of May, 2011.

Dated at the City of Calgary, Alberta this 26th day of October, 2011.

A.D. Macleod J.C.Q.B.A. Appearances: Kara L. Smyth McCarthy Tetrault LLP for the Respondent/Plaintiff J. Patrick Peacock, Q.C./ Pat Robinson Peacock Linder & Halt LLP for the Applicants/Defendants