Quadrangle Holdings Limited v. Coady, 2012 ABQB 22

Court of Queen ’ s Bench of Alberta Citation: Quadrangle Holdings Limited v. Coady, 2012 ABQB 22 Date: 20120112 Docket: 0901 16803 Registry: Calgary Between: Quadrangle Holdings Limited Plaintiff (Respondent) - and - Blair Coady, James Matheson, Max Wandinger, and Industrielle Alliance Valeurs Mobili è res Inc. Defendants (Applicants) _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice J.T.

McCarthy _______________________________________________________ Introduction [ 1 ] The Respondent Quadrangle Holdings Limited ( “ Quadrangle ” ) filed a Statement of Claim on November 6, 2009 in which it alleges that there was deliberate misappropriation of its shares. The shares pledged were Rally Energy Ltd. ( “ Rally ” ) shares owned by Quadrangle, which were provided as collateral to Shannon International Resources Inc. ( “ Shannon ” ) of which the Defendant Blair Coady

( “ Coady ” ) was principal and director. Quadrangle submits that Coady and the Defendant James Matheson ( “ Matheson ” ) misappropriated the majority of the Rally shares for their own benefit through a brokerage account with Lynch Investments Ltd. ( “ Lynch ” ). The allegation against Industrielle Alliance Valeurs Mobilières Inc. ( “ Industrielle ” ) is that, prior to the amalgamation of Industrielle with Lynch, Lynch held shares in a constructive trust for the benefit of Quadrangle.

Quadrangle submits that the shares were improperly transferred contrary to the constructive trust on instructions to Lynch from Coady. Quadrangle also alleges that Lynch breached the constructive trust by allowing trades without formal authorization which allegedly included instructions from Matheson. [ 2 ] The Applicant Matheson seeks an order permitting him to amend his pleadings to plead the provisions of the Limitations Act , R.S.A. 2000, c. L-12 ( “ Limitations Act ” ). All of the Applicants seek

summary dismissal of the Respondent Quadrangle ’ s claim arguing that it is plain and obvious that this action is statute barred under the Limitations Act . They argue that the action was commenced over four years after Quadrangle learned about the alleged improper transfer of the Rally shares. Initially, the Applicants also sought

summary judgment in any event, arguing that there was no merit to Quadrangle’s claim on other grounds. However, during the hearing this portion of the Applications was abandoned. [ 3 ] Quadrangle argues that the Applications for

summary judgment as well as Matheson ’ s Application to amend his Statement of Defence should be dismissed with costs. Facts [ 4 ] Dr. George Findlay is the beneficial owner of Quadrangle. Following meetings with Coady who was the president of Shannon at the time, Quadrangle wished to purchase Shannon shares. On July 24, 2003, Coady in his capacity as president of Shannon offered to sell Quadrangle 400,000 units consisting of one share of common stock and one common stock purchase warrant in Shannon. Quadrangle and Shannon entered a securities subscription agreement (“Subscription Agreement”).

The Subscription Agreement provided that it was governed by the laws of the province of Alberta. Quadrangle placed 500,000 Rally shares with Shannon as collateral for the execution of warrants for shares of Shannon. [ 5 ] A promissory note was executed by Quadrangle with respect to Quadrangle ’ s purchase of the Shannon shares ( “ Promissory Note ” ). The Promissory Note provides that the 500,000 Rally shares are to be held as security for the payment and performance of Quadrangle ’ s obligations. The collateral was delivered to BMO Nesbitt Burns in Calgary.

The Promissory Note provides that the governing law and jurisdiction regarding any dispute is the province of Alberta. It is clear from the questioning on affidavit of Dr. Findlay that Dr.

Findlay was aware and understood that the Rally shares were placed with Shannon in 2004. [ 6 ] On Coady ’ s instruction, and shortly after the Promissory Note was signed, the Rally shares pledged as collateral were transferred from BMO Nestbitt Burns in Calgary into Shannon ’ s brokerage account at Lynch in Halifax, Nova Scotia. [ 7 ] At some point between July 7 and November 16, 2004, 373,000 of the Rally shares pledged by Quadrangle were sold out of Shannon ’ s brokerage account at Lynch. [ 8 ] On October 10, 2005, at the request of Coady, Max Wandinger, special advisor and counsel to Shannon, contacted Dr.

Findlay and informed him that 373,000 of the 500,000 Rally shares held as collateral had been sold and that there were no monies available to replace them. In his cross-examination on Affidavit, Dr. Findlay agreed that Wandinger had contacted him and advised him of the sale of the Rally shares on October 10, 2005. In his cross-examination on affidavit, Dr. Findlay indicated that in mid-October 2005, counsel for Quadrangle were instructed to commence legal proceedings against Coady if a personal guarantee was not forthcoming and to look into criminal proceedings against Coady.

On October 13, 2005, Quadrangle wrote to Industrielle accepting a transfer of the remaining Rally shares. Clearly, as of mid-October 2005, Quadrangle was aware that the shares had been misappropriated. In fact, Quadrangle quickly engaged counsel to pursue the 500,000 share transaction. [ 9 ] In January 2008, Quadrangle commenced an action against Coady in Nova Scotia.

Industrielle and Matheson were not named as Defendants in the Nova Scotia action. [ 10 ] In May 2008, Coady filed an application seeking a declaration that the province of Alberta was the forum conveniens for the subject matter of the Nova Scotia action.

[ 11 ] The Supreme Court of Nova Scotia ordered that the forum conveniens for the claim against Coady was the province of Alberta. The Nova Scotia action was stayed on June 19, 2008. [ 12 ] On November 6, 2009, Quadrangle filed a Statement of Claim in the Court of Queen ’ s Bench of Alberta, Judicial District of Calgary. The Defendants named in the Statement of Claim are: Coady, Matheson, Wandinger and Industrielle. The action as against Wandinger has since been discontinued.

Issues [ 13 ] The first issue is whether this Court should allow an amendment to Matheson ’ s pleadings to plead the provisions of the Limitations Act and to assert that Quadrangle it is out of time. [ 14 ] The main issue in these Applications is whether Quadrangle ’ s claim against the Applicants Coady, Industrielle and Matheson should be summarily dismissed on the basis that it was not commenced in accordance with the requirements of the Limitations Act . Analysis A.

Matheson ’ s Application to Amend his Statement of Defence [ 15 ] The Applicant Matheson seeks to amend his Statement of Defence to plead provisions of the Limitations Act . If permission to amend is granted, then Matheson will argue that

summary judgment must be granted as against Quadrangle ’ s claim because Quadrangle is out of time. I must first deal with the Application to amend. [ 16 ] During the Application, counsel for Quadrangle argued that Rule 6.3(3)(

b) of the Rules of Court requires that the Application be supported by an affidavit. Rule 6.3 provides the following: 6.3

(1) Unless these rules or an enactment otherwise provides or the Court otherwise permits, an application may only be filed during an action or after judgment is entered. [...]

(3) Unless an enactment, the Court or these rules otherwise provide, the applicant must file and serve on all parties and every other person affected by the application, 5 days or more before the application is scheduled to be heard or considered, (

a) notice of the application, and (

b) any affidavit or other evidence in support of the application. [ 17 ] Counsel for Quadrangle added that although counsel for Matheson indicated that he was relying on the affidavits of Wandinger and Coady, neither of those affidavits address the issue of the amendment and neither are specifically about Matheson (although the affidavits refer to him). Quadrangle submits that the affidavits relate to the revelation in October of 2005 that the Rally shares which Shannon was to be holding as collateral had been sold on the direction of Coady.

Quadrangle argues that this evidence does not support the amendment Application. It must be noted that Quadrangle did not argue, in its brief or orally, that the amendment would cause prejudice to Quadrangle.

[ 18 ] Counsel for Matheson argued that Rules 3.62(1) and 3.65 do not require that affidavit evidence be presented, but simply require the Court ’ s prior permission. [ 19 ] Counsel for Matheson argued during the Application that the evidence relied upon to amend Matheson ’ s pleadings relates to when the facts giving rise to this matter arose as described in the affidavit of Coady.

Matheson argues in his brief that by mid-October 2005, Quadrangle knew of the facts which triggered the commencement of the limitation period. [ 20 ] Counsel for Matheson argued orally that his client cannot swear an affidavit stating when Dr. Findlay became aware of when Matheson was involved, because only Dr. Findlay can attest to this. Counsel for Matheson submitted that Dr. Findlay does not say exactly when he found out that Matheson had become involved. At this stage, there is no definitive statement from Dr.

Findlay or Quadrangle to that effect. [ 21 ] Rules 3.62 and 3.65 give the Court the general right to give the applicant the permission to amend pleadings where no agreement between the parties exists and the pleadings have closed. When Rule 3.65 is read in conjunction with Rule 1.2 (2)(

a) the result is very similar to former Rule 132. In Manson Insulation Products Ltd. v. Crossroads C & I Distributors , 2011 ABQB 51 , Poelman J. reiterated the applicable principles as follows: 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. 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. (4th) 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.

[22] Therefore, it appears that under the new rules pleadings can be amended no matter how careless or late is the party seeking toamend. [23] Generally, the case law is clear that when evidence is actually required to support an amendment, only a modest amount ofevidence is needed: see for example Balm v. 3512061 Canada Ltd., 2003 ABCA 98, 327 A.R. 149. I am of the opinion that Matheson’sreliance on Coady’s affidavit, and the pleadings and proceedings suffices for the purpose of this Application. [24] In this case, I find that the amendment is necessary in order to identify the real issues in dispute.

As previously mentioned,Quadrangle has not raised any specific prejudice. In this case there is no prejudice that would not compensable in costs. I agree withMcInnes J. in Theberge v. Salmon River Logging Co.(1956), (BC SC), 2 D.L.R. (2d) 323 at 326 (B.C.S.C.), recentlyquoted in Smed v. Greens Golf & Country Club, 2011 ABQB 5 at para. 91, that if the proposed amendment “[..] had been pleaded at thefirst opportunity it would, if it is a valid plea, have had the effect of defeating the plaintiff’s claim just as effectually then as it wouldnow.

The plaintiff is therefore not prejudiced by the delay in applying for the amendment”. In addition, the amendment is not hopeless.As I will elaborate under the

section regarding the Applications for

summary judgment, the trial judge will need to determine whetherMatheson is liable and, if so, whether in light of the Limitations Act Matheson is entitled to immunity from liability in respect ofQuadrangle’s claim. Lastly, there is certainly no indication of bad faith of any sort with respect to the failure to plead the amendmentearlier on. [25] Therefore, I am prepared to allow Matheson to amend his Statement of Defence to plead the provisions of the Limitations Actas a defence with respect to Quadrangle’s claim. The Amended Statement of Defence must be filed and served within 30 days of the dateof this judgment. B. Applications for

Summary Judgment [26] Rule 7.3 of the Alberta Rules of Court, Alta Reg 124/2010 provides the following: 7.3

(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 followinggrounds: (

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) havebeen met or by other evidence to the effect that the grounds have been met.

(3) If the application is successful the Court may, with respect to all or part of a claim, and whether or not the claim is for a single andundivided debt, do one or more of the following: (

a) dismiss one or more claims in the action or give judgment for or in respect of all or part of the claim or for a lesser amount; (

b) if the only real issue to be tried is the amount of the award, determine the amount or refer the amount for determination by a referee;

(

c) if judgment is given for part of a claim, refer the balance of the claim to trial or for determination by a referee, as the circumstances [ 27 ] Sections 3 (1) and 12 of the Limitations Act, RSA 2000, c L-12 provide as follows: 3

(1) Subject to

section 11, if a claimant does not 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, or (b) 10 years after the claim arose, whichever period expires first, the defendant, on pleading this Act as a defence, is entitled to immunity from liability in respect of the claim. 12

(1) The limitations law of Alberta applies to any proceeding commenced or sought to be commenced in Alberta in which a claimant seeks a remedial order.

(2) Notwithstanding subsection (1), where a proceeding referred to in subsection (1) would be determined in accordance with the law of another jurisdiction if it were to proceed, and the limitations law of that jurisdiction provides a shorter limitation period than the limitation period provided by the law of Alberta, the shorter limitation period applies. [ 28 ] Under the new Rule 7.3 , the test for

summary judgment found under the old rules remains unchanged: 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 ; Mraiche Investment Corp. v. Paul , 2011 ABQB 164 at para. 11 . The Applicants Coady, Industrielle and Matheson have the onus of satisfying the Court that there is no genuine issue to be tried and the bar on such an application is high. If they succeed, Quadrangle must show that there is a genuine issue for trial: see for example Canada (A.G.) v.

Lameman , 2008 SCC 14 , [2008] 1 S.C.R. 372 at para. 11 . In the context of these applications, it means that Coady, Industrielle and Matheson have to establish that it is plain and obvious that Quadrangle ’ s claim is barred by operation of the Limitations Act . As stated in De Shazo v.

Nations Energy Co. , 2005 ABCA 241 , 367 A.R. 267 at para. 19 , the “ court must ascertain whether there are undisputed facts that necessarily lead to the conclusion that it is plain and obvious that the plaintiff ’ s claim is statute barred ” . [ 29 ] In support of their Applications, the Applicants rely on the Affidavits of Coady and Wandinger. Coady and Wandinger were both questioned on their affidavits. Quadrangle filed Dr. Findlay ’ s affidavit who was also subsequently questioned on it. Quadrangle argues that the Applicants are required to rely on their own affidavits and their own evidence.

However, I do not agree that this is the case. Rule 7.3(2) provides that the “ application must be supported by an affidavit swearing positively [...] ” . The Applicants relied specifically on Coady ’ s and Wandinger ’ s affidavits. I find that this is sufficient to meet the requirements of Rule 7.3 .

[ 30 ] Quadrangle argues that it was appropriate to first seek relief for the loss of the Rally shares in Nova Scotia. Quadrangle explains that its claims are based on misappropriation of the Rally shares and that the facts underpinning the transfer of those shares to Shannon, the eventual misappropriation of the Rally shares, and a number of the parties were all connected to or took place in Nova Scotia.

Quadrangle submits that at no time prior to the Nova Scotia order requiring Quadrangle to pursue its claim against Coady in Alberta could Quadrangle have known that the loss of the Rally shares warranted the commencement of proceedings in Alberta, rather than in Nova Scotia. It submits that it only first knew or ought to have known that the proceedings were warranted in Alberta in June of 2008 and, therefore, this action is not barred by operation of the Limitations Act . [ 31 ] Quadrangle concedes that the Alberta Limitations Act applies to these applications: Limitations Act , ss. 3 and 12 .

However, referring to the common law doctrine of privity of contract, Quadrangle disagrees that it applies because that is what was agreed to in the Subscription Agreement or the Promissory Note. In addition, Quadrangle argues that these proceedings are not with respect to recovery under the Promissory Note, but are founded in tort for breaches of duties owed by Coady, Industrielle and Matheson. [ 32 ] Under

section 3 of the Limitations Act , the Applicants must show that Quadrangle has not sought a remedial order within 2 years after the date on which the Quadrangle first knew or ought to have known that: 1) an injury has occurred; 2) the injury was attributable to the conduct of Coady, Industrial and Matheson; and 3) that the injury, assuming liability on the part of Coady, Industrial and Matheson, warranted bringing a proceeding. [ 33 ] Quadrangle argued during the Applications that the second element is not proven with respect to Industrielle and Matheson.

Quadrangle does not dispute that it was aware in October of 2005 that Coady had injured Quadrangle. As the evidence indicates, it was in fact disclosed in communication between Wandinger, Dr. Findlay and Quadrangle ’ s counsel. However, Quadrangle adds that on the face of the record, there is insufficient evidence to indicate that the injury was attributable to the conduct of either Lynch or Matheson.

Regarding Lynch, Quadrangle agrees that it was the brokerage that received the shares, but adds that, in and of itself, this is immaterial. [ 34 ] Quadrangle argues that once the Supreme Court of Nova Scotia directed Quadrangle to commence its proceeding against Coady in Alberta, it was then clearly appropriate to bring its claim against all of the parties connected to the sale of the Rally shares given the differences in the applicable limitations legislation. Quadrangle submits that at that juncture, it was appropriate out of an abundance of caution, to name all potential defendants.

It argues that it was only after the release of the Investment Industry Regulatory Organization of Canada ( “ IIROC ” ) decision Re Trenholm , [2009] IIROC No. 40 issued on September 6, 2009 that Quadrangle came to know the extensive role played by Matheson and Lynch in Quadrangle ’ s loss of the Rally shares. Daniel Trenholm was employed by Lynch and is the same Trenholm who dealt with Coady in this case.

In Trenholm , the IIROC found that by accepting trades without proper authorization (including from Matheson who was not authorized and included accounts that traded heavily in Rally shares) and without reasonable assurances there were legitimate reasons for the transactions, Trenholm failed to perform his role as gatekeeper for the securities industries.

The Panel concluded that Trenholm ’ s failure to properly monitor his client ’ s activities constituted gross negligence and found him in breach of his duties. [ 35 ] Quadrangle submits that it had no confirmation that Matheson had benefitted from the misappropriation of the Rally shares until it was raised by Coady on questioning nor was it known to Quadrangle that Industrielle was aware of the Promissory Note pursuant to the terms of which the Rally shares were provided to Shannon.

Quadrangle adds that it was only as a result of the document production in these proceedings that the extent of Lynch ’ s participation in the unauthorized and inappropriate trading activity fully came to light. [ 36 ] To summarize, Quadrangle submits that there is evidence that the injury sustained was known to be attributable to the actions of Coady in October 2005, but the same is not the case regarding the other two Applicants.

Furthermore, Quadrangle submits that the current claims are not barred as against any of the Applicants Coady, Industrielle or Matheson because this action was commenced within 2 years from the date that Quadrangle first knew, or ought to have known, that its injury warranted the commencement of proceedings in Alberta.

[37] Quadrangle submits that Alberta courts have applied a blended objective/subjective analysis with respect to determiningwhether a proceeding is warranted. Quadrangle refers to Condominium Plan 9421549 v. Main Street Developments Ltd., (AB KB), 2004 ABQB 962, 365 A.R. 162 at paras. 63 ff. rev’d in part on other grounds 2006 ABCA 194, 384 A.R. 375.Quadrangle argues that as part of this analysis, a plaintiff is permitted to engage in a cost benefit analysis which takes into account theplaintiff’s particular circumstances: Main Street Developments Ltd. at paras. 71-72.

In that regard, Quadrangle refers to Gayton v.Lacasse, 2010 ABCA 123, 482 A.R. 179 cited in Coady’s authorities in which the majority of the Court writes : [20] [...] Thus, while the test is objective, in that it employs the “ought to have known” standard, the test is applied having regard to aclaimant’s personal circumstances. In Alberta, given the decision in Kozens, this test applies to all three of the criteria set out in section3(1)(a). [38] In Gayton the Court summarized what need be shown under s. 3(1)(

a) as follows: 21 In

summary, therefore, in Alberta the legislative scheme must be applied to the facts of a given case when determining thecommencement date for a limitation period. A claimant is not required to bring a claim for a remedial order until two years afterdiscovery of the three criteria enumerated in section 3(1)(a) - namely, when the plaintiff first knew, or in the circumstances ought to haveknown, of the injury, that the injury could be attributed to the respondent, and that the injury warranted bringing the action.

Moreover,these three criteria must be examined taking into account the circumstances, including the personal circumstances of the claimant. [39] Quadrangle submits that when it was advised that Alberta was the more convenient forum, proceedings were commenced inAlberta within two years, and thus Quadrangle is not out of time. [40] In Sun Gro Horticulture Canada Ltd. v.

Alberta Metal Building Sales Inc., 2006 ABCA 243, 397 A.R. 282 at paras. 10-11,the Court of Appeal confirmed that the limitation period runs from discoverability of the injury, not discoverability of the cause ofaction: see also Gayton at paras. 18-19. Berger J.A. writing for the Court in Sun Gro Horticulture Canada Ltd. stated: [11] I agree with the Respondent that the Appellant confuses the concept of a cause of action with that of an injury. The LimitationsAct defines a “claim” as a matter giving rise to a civil proceeding in which a claimant seeks a remedial order (s. 1(a)).

A “remedial order”is defined as a judgment or an order made by a court in a civil proceeding requiring a defendant to comply with the duty or to paydamages for the violation of a right (s. 1(i)). The Act defines “injury” to mean personal injury, property damage, economic loss,non-performance of an obligation or, in the absence of any of the foregoing, the breach of a duty (s. 1(e)). It is true that a factual nexusgives rise to only one cause of action, and a judgment merges all claims for damages arising from that cause of action.

Section 3(1)(a),however, links immunity with the discoverability of the injury, not the discoverability of a cause of action for any injury. [...] [Emphasisin original] [41] Recently, in Salna v. Awad, 2011 ABCA 20, 499 A.R. 264, an action was commenced in Ontario to settle a dispute regardingoppression remedies. A further action was commenced in Alberta.

The Court of Appeal was of the opinion that the limitation period in aclaim for restitution begins to run when all elements of the cause of action have occurred and that the limitation period was not affectedby the timing of the Ontario court decision: “In short, the Ontario proceedings did not serve to make an action by Dover unwarranted.” The Court added that generally in Alberta, discoverability refers to facts not law, and that error or ignorance of law does not postpone anylimitation period: at para. 28.

The Court of Appeal acknowledged that the Alberta Limitations Act refers to injury and claimants, notcause of action, but commented as follows in the context of an action for unjust enrichment: 30 While the Alberta statute focuses on “injury” and “claimants” seeking “remedial orders”, and does not tie limitations periods toany particular cause or causes of action, it is difficult to conceive how an injury could warrant bringing a proceeding until all of thevarious elements of the cause of action had occurred.

Unjust enrichment has three elements: (1) an enrichment of the defendant; (2) acorresponding deprivation of the part of the plaintiff; and (3) an absence of juristic reason for the defendant's enrichment: Garland v.Consumers’ Gas Co., 2004 SCC 25, [2004] 1 S.C.R. 629 (S.C.C.). Thus, to discover when the limitations clock began to tick, it isnecessary to examine these components to determine when they arose. [42] In Yugraneft Corp. v.

Rexx Management Corp., 2010 SCC 19, [2010] 1 S.C.R. 649, the Supreme Court of Canada discussedthe issue of limitation period applicable to the recognition and enforcement awards in the province of Alberta. The injury in that case was

the non-performance of an obligation i.e. the respondent ’ s failure to comply with an arbitral award. Justice Rothstein, writing for the Court, agreed that s. 3 of the Limitations Act allows the courts to consider aspects of an arbitral creditor ’ s circumstances that would lead a reasonable person to conclude that there was no reason for the arbitral creditor to know whether proceedings were warranted in Alberta: 60 Section 3(1)(a)(iii) provides that the limitation period will commence only once the plaintiff knew or ought to have known that the injury it received warrants bringing a proceeding. Thus s. 3(1)(

a) ensures that the scheme created by the Limitations Act balances the interests of both plaintiffs and defendants. However, much like its counterpart in the B.C. Limitation Act at issue in Novak v. Bond , s. 3(1) measures the conduct of the plaintiff against an “ objective ” standard. Section 6(4) of the B.C. Act provides that the limitation period will not commence until the facts available to the plaintiff are such that a “ reasonable person ... would regard those facts as showing ” that the plaintiff was (

a) able to bring a claim, and (

b) that the claim had a reasonable prospect of success. Section 3(1) of the Alberta Act does not refer to a “ reasonable person ” and its discoverability criteria are not identical with those in s. 6(4) of the B.C. Act. However, it does subject the knowledge elements of its discoverability rule to an objective test: the plaintiff must know or “ ought to have known ” the elements that trigger the running of the limitation period.

Thus, constructive or imputed knowledge, in addition to actual knowledge, will trigger the limitation period. 61 Section 3(1)(a)(iii) therefore allows the courts to consider aspects of an arbitral creditor ’ s circumstances that would lead a reasonable person to conclude that there was no reason for the arbitral creditor to know whether proceedings were warranted in Alberta. For example, it is not infrequent for the parties to an international arbitration to have assets in a number of different states or jurisdictions within a federal state.

An arbitral creditor cannot be presumed to know the location of all of the arbitral debtor ’ s assets. If the arbitral creditor does not know, and would have no reason to know, that the arbitral debtor has assets in a particular jurisdiction, it cannot be expected to know that recognition and enforcement proceedings are warranted in that jurisdiction.

Thus, in my view, recognition and enforcement proceedings would only be warranted in Alberta once an arbitral creditor had learned, exercising reasonable diligence, that the arbitral debtor possessed assets in that jurisdiction. [ 43 ] Justice Rothstein concluded that the facts before the Court did not lead to the conclusion that it was that kind of case, considering the fact that there was a contract which identified the corporation as an Alberta corporation: 62 Nevertheless, a delay on this account would not be open to Yugraneft in this case.

The contract entered into by Yugraneft and Rexx on October 1, 1998, indicates that Rexx was identified as an Alberta corporation (Contract No. 157, A.R., vol. 2, at p. 41). An arbitral creditor might well not be expected to know every location in the world in which an arbitral debtor might have assets, but this cannot be said of the jurisdiction where the debtor is registered and where its head office is located.

In such circumstances, Yugraneft has not claimed and could not claim that it did not know or ought not to have known that a proceeding was warranted in Alberta at the time of (or indeed earlier than) the expiry of the three-month appeal period following receipt of notice of the award. [ 44 ] In light of these principles of law, I now turn to each of the Applicants. i. Coady [ 45 ] Quadrangle concedes that it was aware in October of 2005 that Coady had injured Quadrangle.

The only issue that is disputed with respect to Coady is whether Quadrangle knew or ought to have known that the injury warranted bringing a proceeding. [ 46 ] In June of 2008, the Supreme Court of Nova Scotia ruled that Alberta, rather than Nova Scotia, was the more convenient forum. Quadrangle argues that the Nova Scotia decision is the trigger point as to when Quadrangle became aware that proceedings were warranted in the province of Alberta.

It submits that the proceedings were commenced within two years of that date. [ 47 ] Counsel for Quadrangle argued that the fact that a proceeding was commenced in Nova Scotia is relevant. He argued that there is ample evidence linking Quadrangle to Nova Scotia. Quadrangle argues that while Shannon was a Nevada incorporated company, it was registered in Nova Scotia. Lynch (now Industrielle) was based out of Halifax. The trades by which the misappropriation occurred took place in Nova Scotia as a result of the trades being processed by Lynch. Quadrangle had links with New Brunswick and Nova Scotia.

In addition, Dr. Findlay explained the process that was undertaken immediately following the revelation of the misappropriation in the fall of 2005 and in 2006. Quadrangle argues that it only made sense for Quadrangle to first determine whether compensation could be provided through Shannon (referring to an attempt to settle the matter with Shannon). When it became apparent that it could not, Quadrangle then proceeded to commence an action in Nova Scotia against Coady.

[ 48 ] As stated in Salna , discoverability refers to facts, not law. In this case the province of Alberta was certainly not an unknown or undisclosed location considering that Coady is a resident of Calgary, Shannon had a head office in Calgary, Shannon leased office space on a month-to-month basis from Rally, an Ontario company which carried on an oil and gas business in the province of Alberta.

In addition, both the Promissory Note and the Subscription Agreement provide that the parties to the agreements were governed by the laws of the province of Alberta or that the governing law and jurisdiction regarding any dispute was the province of Alberta. This is not a case where considering Quadrangle’s circumstances, one would conclude there was no reason for knowing that proceedings were warranted in Alberta. [ 49 ] I therefore conclude that Coady has demonstrated beyond doubt that Quadrangle ’ s claim against him is statute barred. ii.

Industrielle [ 50 ] During the hearing, counsel for Industrielle referred to Sun Gro Horticulture Canada Ltd. and emphasized that in Alberta, discoverability runs from the time of the injury, not from the discoverability of the cause of action. He added that Quadrangle knew of the injury from October 2005. In addition, Quadrangle knew that the shares were impressed with a trust, and knew in 2005 that those shares were held by Lynch. Thus Quadrangle knew that its injury could be attributed to Lynch and that the injury warranted bringing the action.

Industrielle adds that Quadrangle did not do anything before filing the Alberta Statement of Claim with respect to Industrielle and that a reasonable person would have done so. Industrielle argues that the three criteria enumerated in s. 3(1) (

a) of the Limitations Act were met in October of 2005, and therefore the limitation began to run at that time. [ 51 ] Quadrangle submits that until it became aware of the Trenholm decision and had the benefit of the subsequent June 28, 2011 questioning of Coady, Quadrangle was not informed of the full extent of the role played by Matheson and Lynch regarding the sale of the Rally shares. During the Applications, counsel for Quadrangle submitted that the only evidence as to when Quadrangle learned of the complicity of Lynch in the misappropriation by Coady relates to the Trenholm decision in 2009.

The Alberta Statement of Claim was issued a matter of months later. [ 52 ] Quadrangle adds that there was no need for it to commence its claims against Matheson or Lynch in the first instance, as Quadrangle still had years to do so under the limitation period applicable in Nova Scotia where both are situated. [ 53 ] Quadrangle argues that it is now aware that, in a number of instances, Matheson traded directly with representatives of Lynch despite the fact that he lacked any formal authorization to make such trades.

It adds that the evidence of Coady also establishes that Matheson and Industrielle knew of the existence of the Promissory Note and, as such, they breached duties which were owed to Quadrangle. [ 54 ] The test applicable in this case is whether Quadrangle knew or ought to have known that the injury had occurred, that the injury was attributable to the conduct of Lynch (Industrielle) and that the injury, assuming liability on the part of Lynch (Industrielle), warranted bringing a proceeding. Quadrangle knew that the injury had occurred.

However, at this stage, it is not clear as to whether Quadrangle knew or ought to have known that the injury was attributable to Lynch. I agree with Quadrangle that the fact that Lynch was the brokerage that received the shares is not necessarily conclusive. This issue will be more appropriately determined at trial. [ 55 ] Therefore, I find that the Applicant Industrielle has not met the test for

summary judgment. Industrielle has not shown that Quadrangle knew or ought to have known by mid October 2005 that the injury may have been attributable to Lynch and that the injury warranted bringing a proceeding. It is not plain and obvious that Quadrangle ’ s claim against Industrielle is statute barred. I dismiss Industrielle ’ s Application for

summary judgment. iii. Matheson [ 56 ] Matheson and Lynch (Industrielle) were not named as parties in the original Nova Scotia action. It was only upon the commencement of this action in Alberta that Quadrangle advanced its claims against them in relation to the misappropriation of the Rally shares.

[ 57 ] During the hearing, counsel for Matheson argued that his client could not swear an affidavit stating when Dr. Findlay became aware of when Matheson was involved, because only Dr. Findlay can attest to this fact. Counsel for Matheson submitted that Dr. Findlay does not specify when he found out that Matheson had been involved. At this stage, there is no definitive statement from Dr.

Findlay or Quadrangle to that effect. [ 58 ] Quadrangle submits that it was not until it learned of the Trenholm decision and had the benefit of the subsequent questioning of Coady, that Quadrangle was informed of the nature or full extent of the role played by Matheson or Lynch in the sale of Rally shares. [ 59 ] Counsel for Quadrangle added that, in fairness, Quadrangle was aware that Matheson was a major shareholder of Shannon and was involved behind the scenes, but this does not meet the onus that is on the Applicant to establish that Quadrangle knew or ought to have known that the wrongful conduct was attributable to Matheson. [ 60 ] In light of Quadrangle ’ s Statement of Claim, Dr.

Findlay ’ s, Coady ’ s and Wandinger ’ s affidavits, I cannot determine whether the action is statute barred as against Matheson. This issue will be more appropriately determined by the trial judge as the facts are not clear, particularly with respect to Quadrangle ’ s knowledge of Matheson ’ s alleged role in the misappropriation of the Rally shares. I dismiss Matheson ’ s Application for

summary judgment iv. Conclusion [ 61 ] Accordingly, assuming that the claims disclosed triable issues, I find that the claim against Coady is barred by operation of the Limitations Act and dismiss Quadrangle ’ s claim as against him. Industrielle ’ s and Matheson ’ s Applications for

summary judgment are dismissed. Conclusion [ 62 ] For all these reasons, I conclude that: 1. Matheson ’ s Application to amend his Statement of Defence to plead the provisions of the Limitations Act is allowed. His Application for

summary judgment is dismissed. 2. Quadrangle ’ s claim against Coady is statute barred. Coady ’ s Application for

summary judgment is granted. 3. Industrielle ’ s Application for

summary judgment is dismissed. [ 63 ] If necessary, the parties may make an appointment to speak to costs. Heard on the 17 th and 18 th day of October, 2011. Dated at Calgary, Alberta this 10 th day of January, 2012.

J.T. McCarthy J.C.Q.B.A. Appearances: Steven Robertson for the Plaintiff William L. Ryan, Q.C. for the Defendant Coady Donald J. McGarvey for the Defendant Industrielle Alliance Valeurs Mobiliers Inc. Clive O. Llewellyn for the Defendant Matheson