Elbow River Marketing Limited Partnership v. Canada Clean Fuels Inc., 2012 ABQB 277

Court of Queen ’ s Bench of Alberta Citation: Elbow River Marketing Limited Partnership v. Canada Clean Fuels Inc., 2012 ABQB 277 Date: 20120426 Docket: 0801 04501 Registry: Calgary Between: Elbow River Marketing Limited Partnership Appellant Respondent by Counterclaim - and - Canada Clean Fuels Inc. and CCF International Corp. Respondents Appellants by Counterclaim _______________________________________________________ Memorandum of Decision of the Honourable Mr. Justice W. A. Tilleman _______________________________________________________ Introduction [ 1 ] This is an appeal from the decision of Master Prowse on October 26, 2010 granting

summary judgment to the Respondent, Canada Clean Fuels Inc. (“Canada Clean”), dismissing the action brought against it by the Appellant, Elbow River Marketing Limited Partnership (“ERM”). This appeal was first heard in this Court on March 30, 2011. Written reasons reversing the Master’s decision were issued on May 10, 2011, reported as 2011 ABQB 321 . Canada Clean and CCF International Corp. (“CCF”) then appealed to the Court of Appeal, which returned the matter to this Court pursuant to its reasons in 2011 ABCA 258 . I reheard the appeal on December 9, 2011. For clarity I will refer to the Appellant as “ERM” and to the Respondents Canada Clean and CCF collectively as the “Defendants”.

[ 2 ] ERM is in the business of brokering fuels, including biodiesel, in Canada and internationally. In February 2007, a marketer for the Defendants, Ron Wardrop, contacted ERM and, following some credit checks and a credit application being completed, ERM, apparently confused by the two entities, entered into an agreement in April 2007 with one of them (allegedly the wrong one) to purchase biodiesel fuel. The contract was executed with CCF, but the credit application was provided by Canada Clean, containing Canada Clean’s financial information.

Besides the similar names, the two corporations shared the same staff, address, telephone number, office and office manager, principal and president, shareholder, and website. The president and vice president of sales used business cards bearing the name Canada Clean Fuels for all of their dealings, regardless of which of the two corporations they were acting for.

As a result, ERM says that it either thought it was dealing with Canada Clean, or that CCF and Canada Clean were “one and the same”. [ 3 ] When the Defendants ran into trouble meeting their delivery obligations under the contract, the parties negotiated new contracts in August 2007, again between ERM and CCF. Payments under the contracts were invoiced by and made to Canada Clean.

By November 2007 the Defendants continued their inability to fulfill their supply commitments and ERM subsequently terminated the contracts and in April 2008 launched the underlying action for damages in the amount of $6,125,000 (USD) plus costs and interest. [ 4 ] As noted, on October 26, 2010, Master Prowse dismissed the action against Canada Clean, leaving CCF as the sole defendant.

CCF is no longer active in business. [ 5 ] After Master Prowse dismissed the action against Canada Clean, ERM applied to amend its Statement of Claim, appealed to this Court from the decision of the Master, and applied to introduce new evidence on the appeal, pursuant to Rule 6.14 of the new Rules of Court. Issues To Be Decided [ 6 ] The following issues arise in this appeal: A. Is ERM entitled to amend its Statement of Claim? B. Is ERM entitled to admit new evidence on appeal pursuant to Rule 6.14? C. Did the Master err in the granting of

summary judgment in his decision that Canada Clean and CCF are not partners? (And, related to this, is this Court permitted or required to reconsider the issue of partnership, having already ruled on this point in its decision of May 10, 2011?) D. Did the Master err in the granting of

summary judgment in his decision that Canada Clean did not use CCF as its agent? E. Did the Master err in the granting of

summary judgment in failing to consider the issue of piercing the corporate veil? F. Costs of this appeal and of the appearance in the Court of Appeal. Application To Amend The Pleadings [ 7 ] ERM seeks to amend its Statement of Claim to add several facts in support of its claims. In paras. 5(a)–5(

c) of the Statement of Claim as it is currently constituted, ERM pleads that it entered into an agreement with Canada Clean who used CCF as its agent; or

alternatively, with Canada Clean and its partner CCF; or in the further alternative, with CCF. ERM proposes to add clauses 5(d)–5(h), and paras. 6–13 and 20–21. [ 8 ] Proposed clauses 5(d)–5(

h) plead further alternative counterparties as follows (proposed amendments are underlined): 5. At all material times, ERM entered into an agreement with the following parties: (

a) Canada Clean who used CCF as its agent; (

b) alternatively, Canada Clean and it s partner, CCF; (

c) in the further alternative, CCF; (

d) in the further alternative, Canada Clean; (

e) in the further alternative, CCF who used Canada Clean as its agent; (

f) in the further alternative, Canada Clean as the controlling mind or alter ego of CCF; (

g) in the further alternative, CCF and Canada Clean operating as a whole corporate enterprise; and/or (

h) such further alternative as may be proven at trial. (hereinafter referred to as “ the Vendor ”) [ 9 ] Proposed paras. 6–13 add background facts related to the formation of the business relationship between the parties, information that was communicated between them, and the renegotiation of the terms of their relationship following difficulties in performance of the original contract, as follows: 6. In or around February 2007, the Vendor sought out ERM with a view to forging a business relationship. 7. On or about March 19, 2007, ERM requested a Credit Application from the Vendor. 8.

On or about March 19, 2007, Canada Clean completed a Credit Application for ERM of which the President of Canada Clean signed off on the Credit Application. 9. On or about March 19, 2007, Canada Clean ’s Financial Statements for 2005 and 2006 were sent to ERM. 10. On or about March 19, 2007 Canada Clean provided and / or facilitated a letter of financial reference to be sent to ERM.

11. Based on the strength of the credit and financial information provided to ERM, in April 2007 ERM agreed to purchase approximately 10,500,000 U.S. Gallons of biodiesel from the Vendor, with delivery to occur between April 2007 and January 2008 (the “April Deal ”). 12. For all biodiesel supplied pursuant to the April Deal, ERM made all payments to Canada Clean. 13. The Vendor was unable to meet its volume commitments according to the April Deal, which resulted in a meeting between ERM and the Vendor in August 2007, whereby business cards from the President of Canada Clean were given to the representatives of ERM. Resulting from this meeting, ERM agreed to revise its purchase

schedule from the Vendor according to the April Deal. [ 10 ] Proposed para. 20 claims that the Defendants represented that Canada Clean was the supplier and/or vendor of the biodiesel and that the Agreement was going to be with Canada Clean. It then sets out a number of representations that ERM says Canada Clean made to induce ERM to enter into the Agreement. Proposed para. 21 addresses ERM’s reliance on the alleged representations. Proposed paras. 20–21 follow: 20.

At all material times, the Defendants represented that Canada Clean was the supplier and/or vendor of the biodiesel and that the Agreement was going to be with Canada Clean. In doing so, Canada Clean made representations for the purpose of inducing ERM to enter into the Agreement, the particulars of which include the following: (

a) in response to credit inquiries by ERM, Canada Clean sent a completed Credit Application to ERM; (

b) in response to credit inquiries by ERM, Canada Clean sent ERM Financial Statements; (

c) Canada Clean submitted a financial reference from its bank to ERM; (

d) Canada Clean accepted payment on all prior dealings with ERM; (

e) Canada Clean confirmed that they had the financial wherewithal to purchase biodiesel to fulfil the obligations of the Agreement; and (

f) such further representations as may be proven at trial. (hereinafter referred to as “ the Representations ”) 21. ERM states that it was reasonable for them to rely on the Representations of the Defendants and state that they did in fact rely on the Representations in entering into the Agreement. [ 11 ] The Defendants take the position that, at this moment, Canada Clean Fuels Inc. is not a party to the action. On October 26, 2010, Master Prowse dismissed the Statement of Claim insofar as Canada Clean Fuels Inc. was concerned.

Given the judgment in the Court of Appeal, Master Prowse’s ruling stands unless it is overturned now. [ 12 ] If Canada Clean Fuels Inc. is not currently a party to the action, the amendments that ERM seeks would have the effect of adding them as a party, which the Defendants say should not be permitted given the expiry of the limitation period.

[ 13 ] However, if the appeal from the grant of

summary judgment is successful, and Canada Clean Fuels Inc. is therefore restored as a party, the Defendants do not take issue with the amendments in paras. 5–13, on the basis that those amendments relate to a claim (that there was an agency relationship) that ERM had been making from the start. [ 14 ] Furthermore, the Defendants do not object to the amendments in paras. 20–21 of the proposed Amended Statement of Claim to the extent that those amendments relate to ERM’s claim related to agency by estoppel.

The Defendants do, however, take issue with the amendments to the extent that they advance any new claim, relying again on the limitation period.

The Defendants argue that ERM seems to be making new claims based on the intertwining of the two companies such that they should be treated as one (justifying piercing the corporation veil), and based on misrepresentation, neither of which are related to the original claims that CCF was either an agent or a partner of Canada Clean. [ 15 ] In written argument ERM says that it is not bringing a new cause of action with these amendments, but that it is merely clarifying the facts that led to the action, and addressing the relationship between the Defendants.

In oral argument ERM allowed that it may be adding a claim based on piercing the corporate veil, but that this addition is allowed under the Limitation Act and the relevant cases. [ 16 ] With respect to the argument that I should only permit the amendments in paras. 5–13 if the appeal from the grant of

summary judgment is allowed, the Court of Appeal has given clear direction that I am to consider the issue of the amendment before any of the other issues, including the appeal from the grant of

summary judgment. The Law [ 17 ] Amendment of pleadings is provided for in Rules 3.62 and 3.65 of the Alberta Rules of Court . Rule 3.62 provides that a party may amend pleadings after they are closed with the Court’s prior permission. Rule 3.65 gives the Court discretion to allow an amendment, and provides that the Court must set a time limit for filing and serving the amendment. If the amendment is not filed and served within the time allotted, the order granting permission to amend the pleadings ceases to have effect. [ 18 ] The addition of a party to an action is addressed by Rule 3.74, which provides in relevant part as follows:

(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 ... (

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. [ 19 ] The parties agree that the bar for amending pleadings is a low one. The application of Rule 3.65 was recently considered by this Court in Ignition Energy Ltd. v. Direct Energy Marketing Ltd. , 2011 ABQB 90 at paras. 10–11, in which Macleod, J. recognized the importance of accurate pleadings and the resultant wide latitude that is afforded to litigants:

The Court’s discretion to amend pleadings recognizes the importance of accurate pleadings. Pleadings inform the other side as to thecase being put forth against them and the Court is bound to make a decision based on what is plead before it: see Mikisew Cree FirstNation v. Canada, 2002 ABCA 110, 303 A.R. 43 (Alta. C.A.) at para. 85; see also Newel Post Developments Ltd. v. 1402801 AlbertaLtd., 2010 ABQB 660 (Alta. Q.B.). As such, the threshold required to allow an amendment is very low. As stated in Balm v. 3512061 Canada Ltd., 2003 ABCA 98, 327A.R. 149 (Alta.

C.A.) at para. 43, an “amendment should be allowed, no matter how careless or late, unless there is prejudice to the otherside”. Absent prejudice, only a “clearly and obviously invalid” amendment should be rejected: Pasco v. Canadian National Railway, (SCC), [1990] 1 S.C.R. 117 (S.C.C.) at p. 118. Even a doubtful plea should be allowed, so long as it is at leastarguable: Balm at para. 12. [20] The principles to be applied for an amendment applicant under Rule 3.65 are the same as those that applied to the former Rule132: Manson Insulation Products Ltd. v.

Crossroads C & I Distributors, 2011 ABQB 51 at paras. 44–5. In Manson, Poelman, J. citesWittmann, C.J.Q.B.’s

summary of the applicable principles in Dow Chemical Canada Inc. v. Nova Chemicals Corp., 2010 ABQB 524,495 A.R. 338 at paras. 20–21: 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 (Alta. C.A.) at para. 43. This is referred to in Balm as the “classic rule”. The classic rule is subject to four major exceptions: Canada Deposit Insurance Corp. v. Canadian Commercial Bank, 2000 ABQB440, 269 A.R. 49 (Alta. Q.B.) at para. 11; Foda v. Capital Health Region, 2007 ABCA 207 (Alta.

C.A.) at para. 10; see also S. (C.H.) v.Alberta (Director of Child Welfare), 2006 ABQB 528, 403 A.R. 103 (Alta. Q.B.) at para. 11, aff’d 2006 ABCA 355, 401 A.R. 215(Alta. C.A.).

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. [21]

Section 6 of the Limitations Act, RSA 2000, c. L-12, provides in relevant part as follows: 6(1) Notwithstanding the expiration of the relevant limitation period, when a claim is added to a proceeding previously commenced,either through a new pleading or an amendment to pleadings, the defendant is not entitled to immunity from liability in respect of theadded claim if the requirements of subsection (2), (3) or (4) are satisfied.

(2) When the added claim ...

(

b) does not add or substitute a claimant or a defendant, or change the capacity in which a claimant sues or a defendant is sued, the added claim must be related to the conduct, transaction or events described in the original pleading in the proceeding. (3) [Applies to added claims that add or substitutes a claimant, or change the capacity in which a claimant sues] ...

(4) When the added claim adds or substitutes a defendant, or changes the capacity in which a defendant is sued, (

a) the added claim must be related to the conduct, transaction or events described in the original pleading in the proceeding, and (

b) the defendant must have received, within the limitation period applicable to the added claim plus the time provided by law for theservice of process, sufficient knowledge of the added claim that the defendant will not be prejudiced in maintaining a defence to it on themerits. [22] This Court recently considered the application of Rules 3.62 and 3.65 together with subsections 6(2) and 6(4) of theLimitations Act in Barker v. Budget Rent-A-Car of Edmonton Ltd., 2011 ABQB 127.

At para. 48, Lee, J. cites the classic rule in Balmand confirms that Pursuant to Rules 3.62 and 3.65 of the Alberta Rules of Court, the Court has a wide power to allow amendments to pleadings at virtuallyany time during the proceedings. The Court’s power to amend is discretionary and this discretion should be generally exercisedgenerously. [23] With respect to the application of

section 6 of the Limitations Act, Lee, J. cites authority to the effect that for an amendmentunder subsection 6(2) (i.e., where the claimant seeks to add a claim but not a claimant or defendant), it is sufficient to show that the claimis related to the conduct, transaction, or events described in the original pleading; the defendant cannot resist an amendment on the basisof prejudice, as it could under subsection 6(3)(b) (and presumably 6(4)(b)): Barker at para. 52. [24] If the amendment falls under subsection 6(4) (i.e., it adds or substitutes a defendant, or changes the capacity in which adefendant is sued), the defendant bears the burden of proving the requirement of subsection 6(4)(

b) is not satisfied: Limitations Act, s.6(5)(b); Barker at para. 57. The “relational” requirement in s. 6(4)(

a) is a low threshold: 235049 Alberta Ltd. v. 1102440 Alberta Ltd.,2011 ABQB 720 at para. 42. [25] Finally, counsel for ERM directs me to Zukiwski v. Yakmac Investments Ltd. (1999), 1999 ABCA 193 ,244 A.R. 136, 209 W.A.C. 136 (C.A.) at paras. 21 et seq. The plaintiffs in that case had a claim that was based in part on unjustenrichment, but the statement of claim contained insufficient facts to support such a claim. When this was pointed out to the plaintiffs incourt, counsel for the plaintiffs then said that he wished to amend the statement of claim to plead unjust enrichment properly. In itswritten decision, the Court noted the classic rule cited above and withheld

summary judgment on that part of the claim, giving theplaintiffs 60 days to apply to a Master to amend its statement of claim. The Court ruled that after the pleadings had again closed thedefendant was free to apply again for

summary judgment dismissing the unjust enrichment claim. The Court expressly did not exemptthe plaintiffs from the application of any limitation period. Analysis [26] ERM says that in the case at bar, Master Prowse ought to have followed the process the Court of Appeal used in Zukiwski,which is to say that he ought to have allowed ERM to amend its statement of claim to more properly plead the claim related to agency,and to plead the claim related to piercing the corporate veil. They say the Master erred by not allowing ERM to amend its statement ofclaim before granting

summary judgment.

[ 27 ] In Zukiwski the plaintiffs specifically asked the Court for an opportunity to amend the Statement of Claim. On the other hand, it does not appear to me that counsel for ERM ever applied to the Master to amend its Statement of Claim. At several points during the hearing of the application for

summary judgment Master Prowse pointed out the difficulties he was having with ERM’s pleadings, voicing his concern that the Statement of Claim did not seem to match ERM’s theory of the case and the facts as presented. The learned Master suggested at least a couple of times that ERM might like to amend its pleadings to make them agree with what he saw as ERM’s theory of the case. In reply counsel for ERM indicated that, in their view, the partnership argument had merit, and that the pleadings as they stood did imply a claim based on piecing the corporate veil.

There were several opportunities for ERM to request that it be allowed to amend its Statement of Claim, as the plaintiffs in Zukiwski did, but ERM did not do so. [ 28 ] On the other hand, I would not want too much prejudice to accrue to ERM simply because counsel did not think in the moment to say specific words. ERM did subsequently apply to amend its pleadings (i.e., after the proceeding before the Master ended), and that application is before me now.

Adding Canada Clean Fuels Inc. [ 29 ] I turn first to the amendments in paras. 5–13 of the proposed Amended Statement of Claim. [ 30 ] As noted, the general rule is that pleadings can be amended no matter how careless or late is the party seeking to amend, subject to the four major exceptions listed above by Wittmann, C.J.Q.B.

In argument the Defendants, recognizing the low bar for amendments, did not object to the amendments in paras. 5–13 of the proposed Amended Statement of Claim, except on the ground that the amendment may have the effect of adding a party—Canada Clean—who had previously been struck from the action.

In other words, the Defendants object to the amendments on the basis that they fall under the third exception to the classic rule, which is that, unless permitted by statute, an amendment may not add a new party or a new cause of action after the expiry of a limitation period. [ 31 ] Note the words “unless permitted by statue”. The addition of a defendant even after the expiry of the limitation period is permitted by statute in some cases. Section 6(4) of the Limitations Act provides that “[w]hen the added claim adds ... a defendant, ... (

a) the added claim must be related to the conduct, transaction or events described in the original pleading in the proceeding, and (

b) the defendant must have received, within the limitation period applicable to the added claim plus the time provided by law for the service of process, sufficient knowledge of the added claim that the defendant will not be prejudiced in maintaining a defence to it on the merits.” As discussed in Barker , where the requirements of

section 6 are met, the amendments should be allowed. [ 32 ] It is clear that the added claim, which relates to the relationship between the two corporations, is related to the “conduct, transaction or events described in the original pleading”, and I so find. [ 33 ] I find also that the added defendant—if it is even correct to think of Canada Clean as an added defendant—had sufficient knowledge of the claim that it will not be prejudiced in maintaining a defence to it.

I make this finding on the basis that, prior to Master Prowse’s ruling, Canada Clean was a party to the action, and also on the basis of the overlapping management and ownership between Canada Clean Fuels Inc. and CCF International Corp.

Furthermore, or alternatively, the issue of the two defendants was in front of everyone when it was before Master Prowse. [ 34 ] I must also consider Rule 3.74 of the Rules of Court , which provides simply that “[o]n application, the Court may order that a person be added ... as a party to an action if ... (b) ... the application is made by a party and the Court is satisfied the order should be made.” The Rule provides further that “[t]he 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.” [ 35 ] I should say first that it’s not clear to me that ERM has made an application to add Canada Clean Fuels Inc. as a party.

However, if the Defendants are right in their argument that the effect of the amendments is to add Canada Clean as a party, then such an application is implied by the application to amend the Statement of Claim. [ 36 ] If an order adding Canada Clean Fuels Inc. is required as a consequence of the application to amend the Statement of Claim, I am satisfied that the order should be made. In my view this does not result in any prejudice to Canada Clean or CCF that cannot be

addressed by a costs award, an adjournment, and/or terms. As noted above, Canada Clean knew all along that ERM had advanced a claim against it, and the factual basis for that claim. Adding A New Cause Of Action [ 37 ] With respect to the amendments in paras. 20–21 of the proposed Amended Statement of Claim, as noted, the Defendants object on the basis that these amendments seek to introduce a new cause of action following expiry of the limitation period. In their written argument the Defendants say that the new claim is in misrepresentation.

In oral argument they focus on what appears to be ERM’s claim based on the intertwining of the two companies such that they should be treated as one (justifying piercing the corporation veil). In objecting to the addition of these claims the Defendants again appear to rely on the third exception to the classic rule. [ 38 ] As noted above, that exception says “unless permitted by statute”, and again, the Limitations Act governs.

Section 6 of the Act is structured such that only one of subsections (2), (3), or (4) applies in a given situation. Subsection (3) is relevant only in the context of adding a claimant, so subsections (2) and (4) remain. Subsection (4) applies when adding a defendant, and I have dealt with that situation above. Subsection (2) applies to the situation where a party is adding a claim but not adding a party.

It provides that the defendant is not entitled to immunity from the new claim if “the added claim [is] related to the conduct, transaction or events described in the original pleading in the proceeding.” If subsection (2) is the one that governs in this case then, as I have found above, this condition is satisfied. [ 39 ] In the result, pursuant to Rule 3.65, I order that ERM be permitted to file and serve the proposed Amended Statement of Claim in its entirety. To be effective, the pleading must be filed and served within 30 days of this decision.

Application To Admit New Evidence [ 40 ] In its brief, ERM discontinued its application to introduce new evidence on the appeal. That matter is closed.

Is This Court Permitted Or Required To Reconsider The Issue Of Partnership? [ 41 ] Counsel for ERM argues that the issue of whether or not Canada Clean Fuels Inc. and CCF International Corp. were partners should not be reheard or reconsidered by this Court, as I have already decided that issue in my May 10, 2011 decision ( 2011 ABQB 321 ), and the issue of partnership was not argued when that decision was appealed before the Court of Appeal. [ 42 ] Perhaps ERM is correct: Counsel for ERM points to the following words from the Judgment Roll, entered October 6, 2011: “It is hereby ordered and adjudged that the matter be returned to the Court of Queen’s Bench, before the Honourable Mr.

Justice W. A. Tilleman, to determine ... [a]ll remaining issues in respect of the Grant of

Summary Judgment” [emphasis added]. I note that the Judgment Roll was prepared by Mr. Vogel (counsel for ERM) and “[a]pproved as to form and content” by counsel for both parties. [ 43 ] First, even if I were to hold Mr. Ford (counsel for the Defendants) to this

interpretation of the Judgment Roll, his clients would not be prejudiced in any final way. The burden of proving the partnership relationship remains with the Plaintiff, ERM; the Defendants would still have an opportunity to prevail at trial. [ 44 ] On the other hand, it is instructive to look at the actual memorandum of judgment as delivered by the Court of Appeal when the appeal was heard, and filed September 23, 2011 ( 2011 ABCA 258 ).

Erring on the side of caution, it could be said that the Court of Appeal took issue with the entirety of the March 30, 2011 application (or the May 10 decision resulting therefrom). They say that this Court should have considered the amendment application and only then dealt with the three claims. My preferred view of the Court of Appeal’s decision is that no part of the application for

summary judgment ought to have been considered before the pleadings were settled: see also Condominium Corp. No. 0321365 v. 970365 Alberta Ltd. , 2012 ABCA 26 at para. 3 . [ 45 ] The Court of Appeal allowed the appeal. In the result, it is as if the May 10, 2011 decision of this Court never happened. That being the case, the issue of whether the partnership question is a genuine issue for trial—not having actually been decided—cannot be

res judicata. My preferred approach in the circumstances is to consider anew the entire appeal from the Master’s grant of

summaryjudgment. [46] Furthermore, I accept the Defendants’ argument that the doctrines of res judicata, issue estoppel, and abuse of process applyto the re-hearing of an issue or case in a subsequent action. This is not a subsequent action. This is the same action. [47] Even if it were correct to consider a rehearing of the partnership issue to be “relitigating” the matter, the Supreme Court ofCanada has said there are situations in which it is permissible—even preferable—to relitigate an issue. In Toronto (City) v.

C.U.P.E.,Local 79, 2003 SCC 63, [2003] 3 S.C.R. 77, cited by counsel for ERM, the Court said at para. 52: There may be instances where relitigation will enhance, rather than impeach, the integrity of the judicial system, for example: (1) whenthe first proceeding is tainted by fraud or dishonesty, (2) when fresh, new evidence, previously unavailable, conclusively impeaches theoriginal results, or (3) when fairness dictates that the original result should not be binding in the new context. This was statedunequivocally by this Court in [Danyluk v.

Ainsworth Technologies Inc., 2001 SCC 44, [2001] 2 S.C.R. 460], at para. 80. [48] It is the third situation that is relevant here. With respect to fairness, ERM argues that it would not be just for it to have toargue an issue on which it has already been successful. This rings somewhat hollow, as counsel for ERM was perfectly willing, prepared,and able to reargue the partnership issue before me, and did so, even though I offered to adjourn the matter for counsel to prepare. Itseems to me that the real concern is that, having already won once on this issue, ERM risks losing if it is considered again.

This concernis understandable, but it does not override my desire to be thorough. [49] In conclusion, I will err on the side of caution and in considering the appeal from the Master’s grant of

summary judgment, Iwill be considering all of the grounds of the appeal, including the partnership issue. Appeal From Grant Of

Summary Judgment Standard Of Review [50] Until the new Rules of Court came into effect in Alberta in 2010 it was long-settled law in Alberta that a superior court judgehad unrestricted ability to substitute his/her discretion for that of a Master: Wright v. Disposal Services Ltd. (1977), (AB KB), 8 A.R. 394, 80 D.L.R. (3d) 671 at para. 13; see also the cases cited by Ross J. in her recent decision, Alberta TreasuryBranches v. Valerio, 2011 ABQB 580 at paras. 37–8. As Ross J. explains, this was based in part on the fact that appeals from a masterwere hearings de novo.

Under the new rules, appeals from Masters’ decisions are on the record, though the judge still retains discretionto admit new evidence if it is relevant and material: Rule 6.14(3). This change in the rules has led several Justices of this Court toconsider the appropriate level of deference that is now owed to a Master. [51] In Royal Bank v.

Place, 2010 ABQB 733, 504 A.R. 230, Manderscheid, J. suggested that “[a]n appeal on the record suggeststhat the standard of review should then be that of general appellate review as set out by the Supreme Court of Canada in Housen v.Nikolaisen, 2002 SCC 33 , [2002] 2 S.C.R. 235”. This well-known standard is correctness for questions of law, and deferenceabsent “palpable and overriding error” for findings of fact. This latter standard is also sometimes called the “reasonableness” standard,from the administrative law context; the finding of fact much be unreasonable to be overturned.

True questions of mixed fact and law areaccorded a similarly deferential standard, but if there is an extricable question of law, then such a question is dealt with on the non-deferential correctness standard: Housen at para. 36. [52] In Lee v.

Lepage, 2010 ABQB 829, the Court adopted the suggestion in Royal Bank and summarized it as follows: “In arecord review, our role then is to dismiss unless there is overriding and palpable error as it relates to the facts determined below,meaning, the Master made a clear and obvious mistake.” [53] Macklin J. referred to the findings of fact that a Master might make in Janvier v. 834474 Alberta Ltd., 2010 ABQB 800, 48

Alta. L.R. (5th) 156 at para. 15: The Master generally does not have jurisdiction to determine disputed or contentious questions of fact: Court of Queen’s Bench Act,R.S.A. 2000, c. C-31, s. 9(3)(b). If there remains a dispute on material facts at the time of the application, there must be a trial. However,if one party’s evidence on material facts is either destroyed by cross-examination on Affidavit or the introduction of other evidencerendering that party’s evidence completely non-credible, then the Master may accept certain facts or may draw inferences of fact.

Suchfindings or inferences of fact are not to be interfered with unless the Master made a “palpable and overriding error”. That is, the Master isentitled to a high degree of deference on findings or inferences of facts drawn from the evidence. [54] The reasoning of Manderscheid, J. may not be as applicable in appeals in which the court allows new evidence under Rule6.14(3). However, the appeal before me is not complicated by that consideration. In

summary, the standard of review that I apply in thisappeal is that of correctness for questions of law, and deference absent “palpable and overriding error” for findings of fact. Test For

Summary Judgment [55] Rule 7.3(1) of the Rules of Court provides as follows: 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 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. [56] The test for

summary judgment under new Rule 7.3 is the same as under the old rules: Manufacturers Life Insurance Co. v.Executive Centre at Manulife Place Inc., 2011 ABQB 189, 48 Alta. L.R. (5th) 178 at para. 11; Encana Corp. v. ARC Resources Ltd.,2011 ABQB 431 at para. 7. [57] The parties agree with the analysis of this Court at paras. 29–31 of my previous decision in this matter (2011 ABQB 321). Forconvenience, I repeat that analysis here: [58] The test for

summary judgment is well-known. The Supreme Court of Canada made these comments in this regard in Canada(Attorney General) v. Lameman, 2008 SCC 14, [2008] 1 S.C.R. 372 at paras. 10–11: This appeal is from an application for

summary judgment. The

summary judgment rule serves an important purpose in the civil litigationsystem. It prevents claims or defences that have no chance of success from proceeding to trial. Trying unmeritorious claims imposes aheavy 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 thejustice system and beneficial to the parties that claims that have no chance of success be weeded out at an early stage. Conversely, it isessential to justice that claims disclosing real issues that may be successful proceed to trial. For this reason, the bar on a motion for

summary judgment is high. The defendant who seeks

summary dismissal bears the evidentiaryburden of showing that there is “no genuine issue of material fact requiring trial”: Guarantee Co. of North America v. Gordon CapitalCorp., (SCC), [1999] 3 S.C.R. 423, at para. 27. The defendant must prove this; it cannot rely on mere allegations or thepleadings: 1061590 Ontario Ltd. v. Ontario Jockey Club (1995), (ON CA), 21 O.R. (3d) 547 (C.A.); TucsonProperties Ltd. v. Sentry Resources Ltd. (1982), (AB KB), 22 Alta. L.R. (2d) 44 (Q.B. (Master)), at pp. 46-47. If thedefendant does prove this, the plaintiff must either refute or counter the defendant’s evidence, or risk

summary dismissal: Murphy Oil

Co. v. Predator Corp. (2004), 365 A.R. 326, 2004 ABQB 688, at p. 331, aff’d (2006), 55 Alta. L.R. (4th) 1, 2006 ABCA 69. Each sidemust “put its best foot forward” with respect to the existence or non-existence of material issues to be tried: Transamerica LifeInsurance Co. of Canada v. Canada Life Assurance Co. (1996), (ON SC), 28 O.R. (3d) 423 (Gen. Div.), at p. 434;Goudie v. Ottawa (City), [2003] 1 S.C.R. 141, 2003 SCC 14, at para. 32. The chambers judge may make inferences of fact based on theundisputed facts before the court, as long as the inferences are strongly supported by the facts: Guarantee Co. of North America, atpara. 30. [59] In other words,

summary judgment will be granted only where there is no genuine issue for trial and it must be plain andobvious that the action cannot succeed. [60] I will add that the Alberta Court of Appeal has said that “[i]t must be beyond doubt that no genuine issue for trial exists.”:Tottrup v. Clearwater (Municipal District) No. 99, 2006 ABCA 380, 401 A.R. 88 at para. 13, citing Pioneer Exploration Inc. (Trusteeof) v. Euro-Am Pacific Enterprises Ltd., 2003 ABCA 298, 339 A.R. 165 at para. 19. The Alberta Court of Appeal’s

summary of the testfor

summary judgment in Tottrup was recently confirmed by the Court in Dow Chemical Canada Inc. v. Shell Chemicals Canada Ltd.,2010 ABCA 126, 477 A.R. 112 at para. 13; leave to appeal to SCC refused, (SCC), 510 A.R. 399 (note), [2010]S.C.C.A. No. 234. [61] Purely legal issues need not be beyond doubt in order to grant

summary judgment. Trials are primarily to determine questionsof fact: Tottrup at para. 12. However, there are some legal questions that are sufficiently “unsettled or complex or intertwined with thefacts, [that] it is sometimes necessary to have a full trial to provide a proper foundation for the decision.”: Tottrup at para. 11. I discussthis in more detail below under the topic of piercing the corporate veil. [62] As set out by the Supreme Court of Canada in Lameman,

summary judgment is analysed in two steps. First, the moving partyadduces evidence to show there is no genuine issue for trial. Second, if that burden is met, the responding party may adduce evidence topersuade the Court that there is a genuine issue to be tried. (See also Murphy Oil at para. 25.) [63] The Alberta Court of Appeal recently discussed the two-step analysis in Condominium Corp. No. 0321365. After confirmingthat the new Rules of Court, like the old Rules, provide that

summary judgment may be granted where there is “no merit” to a claim orpart of it, Fraser, C.J.A. explains the two steps at para. 43: In the first instance, a

summary judgment application involves two steps. First, the moving party must adduce evidence to show there isno genuine issue for trial. This is a high threshold. If there is no genuine issue for trial, then there will be no merit to a claim.Accordingly, if the evidentiary record establishes either that there are missing links in the essential elements of a cause of action or thatthere is no cause of action in law, then there will be no genuine issue for trial.

The fact there is no genuine issue for trial must be proven;relying on mere allegations or the pleadings will not suffice: Papaschase Indian Band No. 136 v. Canada (Attorney General), 2008SCC 14 (S.C.C.) at para 11, [2008] 1 S.C.R. 372 (S.C.C.) [Lameman]. Second, once the burden on the moving party has been met, theparty resisting

summary judgment may adduce evidence to persuade the court that a genuine issue remains to be tried: Murphy, supra atpara. 25. That effectively means showing that the claim has what is often referred to as “a real chance of success”. This may beaccomplished by establishing the existence of disputes on material questions of fact, including inferences to be drawn therefrom, or onpoints of law that cannot be readily resolved given the factual disputes. [64] It is important to keep in mind in this case that I am not trying issues, but that I need to determine whether there are triableissues.

With this in mind, does the record disclose any genuine issues for trial? Partnership [65] One of the alleged grounds of liability of Canada Clean for CCF’s contractual obligations is that Canada Clean and CCF werepartners. [66] In its application for

summary judgment with respect to the action against Canada Clean, the defendants adduced evidencemeant to show that the partnership issue was not a genuine issue for trial. This evidence took the form of an Affidavit of Lucio

Angelucci, who was the president of both companies. [ 67 ] In relation to partnership, Mr. Angelucci says in his Affidavit that “Canada Clean and CCF are not partners”, “[n]o representations were made at [the August 20, 2007] meeting suggesting that CCF was the partner ... of Canada Clean”, and “I am not aware of any facts to substantiate a claim that CCF is ... a partner of Canada Clean”. [ 68 ] ERM has adduced evidence that the two companies shared, inter alia , office space, a website, telephone numbers, staff, bank accounts, management, and ownership.

Both companies were in the business of dealing in biodiesel fuel, and both companies had dealings with ERM in relation to the same contracts. Besides the fact that it was Canada Clean that supplied all of the financial information that ERM requested from CCF, the invoices for deliveries under the contract came from Canada Clean, payments were directed to be made to Canada Clean, and payments were in fact made to Canada Clean’s bank account. In the cross examination of Mr. Angelucci on his Affidavit, he was asked about the payments to Canada Clean.

He responded that the payments under the contract were made to Canada Clean “[o]n behalf of CCF”. The Law [ 69 ] “Partnership is a legal term derived from common law and equity as codified in various provincial and territorial partnership statutes”: Backman v. R. , 2001 SCC 10 , [2001] 1 S.C.R. 367. The relevant provisions of the Alberta Partnership Act , R.S.A. 2000, c.

P- 3, are included below: 1 In this Act , ... (g) “partnership” means the relationship that subsists between persons carrying on a business in common with a view to profit; ... 4 In determining whether a partnership does or does not exist, regard shall be had to the following rules: ... (

c) the receipt by a person of a share of the profits of a business is proof, in the absence of evidence to the contrary, that that person is a partner in the business, ... ... 7 The acts of each partner in carrying on in the usual way business of the kind carried on by the firm of which the partner is a member, bind the firm and the partner's partners, unless (

a) the partner so acting has in fact no authority to act for the firm in the particular matter, and (

b) the person with whom the partner is dealing knows that the partner has no authority, or does not know or believe the partner to be a partner.

... 17(1) Each person who by spoken or written words or by conduct represents that person, or who knowingly permits that person to be represented, as a partner in a particular firm is liable as a partner to any one who has on the faith of that representation given credit to the firm. ... 105 The rules of equity and of common law applicable to partnership continue in force except where they are inconsistent with the express provisions of this Act . [ 70 ] Partnership has a deceptively brief if not simple definition in the Partnership Act : “the relationship that subsists between persons carrying on a business in common with a view to profit”. [ 71 ] Counsel for the Defendants has referred me to Alison R.

Manzer, A Practical Guide to Canadian Partnership Law , looseleaf (Aurora, Ont.: Canada Law Book, 1994– ) (October 2011 release consulted). In that work Manzer considers the statutory definition at ¶1.370: In the common law jurisdictions, the definition contained [in the Partnership Acts] is as good a guide as any as to what is a partnership. It appears that a partnership is merely a convenient way of referencing the common business undertaking of the separate individuals who are partners.

Provided that these individuals have chosen to present to the world a common business enterprise, for profit purposes, then they have likely formed a partnership.

The partnership is therefore merely a legal shorthand reference to a group of individuals who are otherwise undertaking a common business enterprise based on agency principles. [ 72 ] And at ¶2.650: The broad wording of the statutes and case law applicable to the creation of partnership results in it being more likely than not that a partnership has been created, where persons are undertaking business together, if there is a sharing of profits and a combination of assets. [ 73 ] Along with the definition of a partnership given above, the Partnership Act includes several factors that must be considered when determining the existence of a partnership, most notably that of profit sharing (which “ is proof, in the absence of evidence to the contrary ” of partnership, and which I address below).

Application of the Act [ 74 ] The Defendants say that the Partnership Act does not prevail, that the Act provides indicia of a partnership but that the existence of a partnership is ultimately a matter of contract. In Backman at paras. 17–18, the Supreme Court held that for the purpose of interpreting the Income Tax Act , the definition of partnership in the provincial Partnership Acts prevailed, notwithstanding the concept’s long common law history before the enactment of any Partnership Acts .

In the case at bar, which directly engages the Defendants’ potential liability as partners—a topic squarely within the domain of the Partnership Act — the Act governs all the more. [ 75 ] The Defendants’ assertion that partnership is created by agreement, not statute, is true only in the sense that, unlike a corporation—which is an entirely statutory construction that exists solely at the whim of its governing statute—a partnership is created by the will and acts of its partners, rather than by the granting of registration by a governing authority in compliance with corporate legislation.

In that sense, I agree that partnerships exist independently of statute.

[76] However, since the enactment of the Partnership Act, it is the Act that determines how to recognize if a partnership exists.Section 105 of the Act provides that “[t]he rules of equity and of common law applicable to partnership continue in force except wherethey are inconsistent with the express provisions of this Act.” Therefore the Act is not a complete code, but it does prevail. The Actprovides a set of default rules, many of which the parties to a partnership agreement may indeed alter or contract out of. One thing thatparties cannot contract out of, however, is the definition of partnership itself.

As noted below, it is actually the very wording of thestatutory definition (“in common”) that creates the need for some kind of agreement (contract). But the agreement that exists need onlybe enough to satisfy the statutory definition, and it may be inferred from the conduct of the parties. I discuss the role of contract underthe heading In common, below.

Essential Ingredients Of A Partnership [77] The Supreme Court has deconstructed the definition of partnership common to the various Partnership Acts, noting that apartnership has “three essential ingredients: (1) a business, (2) carried on in common, (3) with a view to profit.”: Continental Bank ofCanada v. R., (SCC), [1998] 2 S.C.R. 298, 163 D.L.R. (4th) 385 at para. 22. In Continental and Backman, the Courtused the three essential ingredients as a framework to decide whether a partnership existed.

While my purpose in this application is not todecide finally whether a partnership existed, I will use the same framework only to decide whether the partnership question presents atriable issue. A Business? [78] While “carrying on a business” has been defined in several ways in different contexts, the definition at

section 1(

c) of the Actis very broad: “‘business’ includes every trade, occupation and profession”. In some cases this definition may be sufficient on its own,where it is obvious that the activity in question is a trade, occupation, or profession. As the Backman Court noted at para. 19, however,there are other legal

definitions that can assist in the determination of whether there is a business: One simple definition of “carrying on trade or business” is given in Black’s Law Dictionary (6th ed. 1990), at p. 214: “To hold one’s selfout to others as engaged in the selling of goods or services.” Another definition requires at least three elements to be present: (1) theoccupation of time, attention and labour; (2) the incurring of liabilities to other persons; and (3) the purpose of a livelihood or profit: seeR. v. Gordon, (SCC), [1961] S.C.R. 592 (S.C.C.) per Cartwright J., dissenting but not on this point, at p. 603.

In Common? [79] The words “in common” in the definition of partnership create the need for some kind of agreement, specifically anagreement to carry on the business together: J. Anthony VanDuzer, The Law of Partnerships & Corporations (Toronto: Irwin Law,2009) at 36; see also Backman at para. 21. The Defendants place a great deal of reliance on statements in Manzer and elsewhere to theeffect that partnership is entirely or primarily a matter of contract.

They cite the decision of the Supreme Court in Continental atpara. 23: The existence of a partnership is dependent on the facts and circumstances of each particular case. It is also determined by what theparties actually intended. As stated in Lindley & Banks on Partnership (17th ed. 1995), at p. 73: “in determining the existence of apartnership ... regard must be paid to the true contract and intention of the parties as appearing from the whole facts of the case”. [80] This does not mean that a formal partnership agreement is required.

I take the cited para. to mean, more than anything else,that substance trumps form. Where there is an express contract (or where one may be inferred; see below) the existence of a partnershipmay be determined upon a true construction of the overall agreement in its factual context; it is not automatically dispositive that acontract may say that the parties are or are not “partners”.

What matters as much as the existence of a partnership agreement (whetherwritten, oral, or implied), is whether the terms of that agreement—along with the parties’ actual conduct—evince the sort of relationshipdescribed in the definition of partnership. The Defendants did not refer to the following para. (para. 24) of Continental, wherein theSupreme Court referred to some common indicia of such a relationship: [S]ince most of the case law dealing with partnerships results from disputes where one of the parties claims that a partnership does not

exist, a number of criteria that indicate the existence of a partnership have been judicially recognized. The indicia of a partnership includethe contribution by the parties of money, property, effort, knowledge, skill or other assets to a common undertaking, a joint propertyinterest in the subject-matter of the adventure, the sharing of profits and losses, a mutual right of control or management of the enterprise,the filing of income tax returns as a partnership and joint bank accounts. (See A. R.

Manzer, A Practical Guide to Canadian PartnershipLaw (1994 (loose-leaf)), at pp. 2-4 et seq. and the cases cited therein.) [emphasis added] [81] In Backman, the Court added that correspondence with third parties may also provide evidence consistent with an intention tocarry on business in common: Backman at para. 21. [82] Some factors are more important than others. One of the strongest indicia of partnership has always been the sharing ofprofits, though since the 1860 case of Cox and Wheatcroft it is no longer completely determinative: Cox and Wheatcroft v. Hickman(1860), 11 E.R. 431, 8 H.L.

Cas. 268 at 305), cited by Sproule v. McConnell, (SK CA), [1925] 1 D.L.R. 982, [1925] 1W.W.R. 609 (Sask. C.A.). Sharing of profits is still, however, “proof [of partnership], in the absence of evidence to the contrary”:Partnership Act, s. 4(c). Para. (

c) goes on to list exceptions to the presumptive rule that sharing profits proves partnership; the exceptionsrelate to debtor-creditor relationships, employment/agency relationships, and other situations that equally do not apply here. [83] I am quick to point out that the best evidence of an agreement to carry on business together is a written partnership agreement.A written agreement is not compulsory, however, nor is it required that the parties have even expressed their intention to form thepartnership.

The Newfoundland and Labrador Court of Appeal considered the quotation from Bastarache J. at para. 23 of Continental,along with an excerpt from Manzer at ¶1.340, and observed that “neither indicates that it is necessary to find a specifically expressedintention, or a written agreement, to form a partnership in order to find that one has been established. That intention, and agreement, canbe inferred from the conduct of the parties, on consideration of all of the evidence.”: Green v. Harnum, 2006 NLCA 46, 19 B.L.R. (4th)236 at para. 12.

When a court is looking to the conduct of the parties to determine if a partnership agreement may be inferred, “[t]hecourse of dealings as between the parties, and their dealings with others, will be reasonably determinative as to whether there is apartnership.”: Manzer at ¶2.640. [84] Furthermore, even a stated intention in a written agreement that the parties are or are not partners may not be conclusive: seeManzer at ¶2.340–¶2.342. This can be so in at least two situations.

The first is the situation where the terms of the agreement—apartfrom a declaration that the parties are not partners—are such that the true nature of the relationship created by the agreement is apartnership: VanDuzer at 36; Manzer at ¶2.242. [85] The second situation in which even a stated intention on the part of the parties that they are not partners may not be conclusiveis where the relationship that is apparent to third parties is one with the indicia of partnership.

Manzer notes at ¶2.770 that while astatement setting out the nature of a relationship between two parties (stating, for example, that they are not partners) would be bindingas between the parties as a matter of contract law, it may not protect the parties, as apparent partners, from liability to third parties: The consequences of partnership, however, have an effect on third parties dealing with the partnership and accordingly, if dealings withthird parties would seem to indicate that the relationship was other than that declared in the agreement, the courts are free to find therelationship was that which was apparent to third parties.

This would particularly be the case in circumstances where a party claims notto have been a partner, when the facts clearly indicate that the criteria of partnership are present. [86] This may be contrasted with holding out, which I deal with below. Under the doctrine described above, a court may find theexistence of a partnership, notwithstanding express statements between the partners to the contrary, on the basis of the partnership’sdealings with third parties. This it would do only if other partnership indicia are present: Manzer at ¶2.340.

On the other hand liabilityfor holding out, described later, may arise even in the absence of a finding of partnership. [87] Intention is clearly important in the authorities that discuss whether or not there is a partnership agreement. Those authoritiesrefer to the “true contract and intention of the parties”, and “what the parties actually intended.”: Continental, citing Lindley & Banks onPartnership; Sproule at para. 25, citing Cox v. Hickman. [88] However, when we speak of intention, what matters is the objective intention of the parties.

It is not a question of thesubjective intention to be in a partnership but rather the intention to act in a way that the law objectively regards as partnership. AsVanDuzer puts it at 36:

Whether an agreement exists is determined objectively, in the sense that persons may be characterized as partners without their knowledge and even contrary to their express intention so long as the court decides that the circumstances show the existence of an agreement.

The agreement must demonstrate an intention to participate in a relationship that fits within the definition of partnership . [emphasis added, references omitted] [ 89 ] This means that the agreement between the parties—including any contract a court infers from the circumstances and conduct of the parties—need not provide that the parties are “partners” or that the relationship is that known to the law as “partnership”; it need merely state such things as “we will share profits” and “we will be in this business together” (along with, perhaps, some detail about how that relationship is to work). [ 90 ] For examples of situations in which partnerships have been found despite the lack of an overt intention to form a partnership, see Manzer at ¶2.240–¶2.310 and the cases cited therein.

With A View To Profit? [ 91 ] To qualify as a partnership, the enterprise must be undertaken with the intention of producing a profit. This is contrasted with carrying out the activity for charitable, social, or cultural purposes: VanDuzer at 35. As noted above, intention can be inferred from circumstances and conduct. The income tax cases are a source of guidance in how to determine a profit intention. The following principles emerge: [ 92 ] First, there is a difference between what motivates the formation of the alleged partnership and what its intentions are.

The motivation might be tax avoidance (or administrative convenience, or anything else), but if the business has as one of its intentions the generation of profit, the requirement is still satisfied: Backman at para. 22 . [ 93 ] Second, the overriding intention need not be profit; an “ancillary profit-making purpose” is sufficient: Backman at para. 23 . [ 94 ] Third, the amount of the profit, and in particular whether anticipated future profits are sufficient to overcome initial losses, should not decide the matter, as long as the enterprise is carried on with a view to profit in the future: Spire Freezers Ltd. v.

R. , 2001 SCC 11 , [2001] 1 S.C.R. 391; Backman at para. 24 . [ 95 ] In

summary, the requirement that the business be undertaken with a view to profit will be fairly easily met. Profit need not be the only purpose, it need not be a specific amount, and it need not be the motivation for undertaking the enterprise. Holding Out And Partnership By Estoppel [ 96 ] Finally, even if there is no express partnership agreement and none can be inferred (i.e., even if there is no partnership), a person can be liable as an apparent partner.

Combining concepts of holding out and partnership by estoppel, subsection 17(1) of the Partnership Act provides as follows: Each person who by spoken or written words or by conduct represents that person, or who knowingly permits that person to be represented, as a partner in a particular firm is liable as a partner to any one who has on the faith of that representation given credit to the firm. [ 97 ] Note that to be liable under this

section an apparent partner must either make a representation or knowingly permit the representation, but the representation can be by conduct. The words “on the faith of” mean that the third party advancing a claim against

the apparent partner must have relied upon the representation, though the plaintiff need not show that it acted solely because of the representation: Brown Economic Assessments Inc. v. Stevenson , 2004 SKCA 89 , 249 Sask. R. 214; Manzer at ¶2.956. Furthermore, the third party creditor may not advance a claim on the basis of this

section if the creditor was aware of the true state of affairs; i.e., if the plaintiff knew that the apparent partner was not a partner, its claim cannot succeed: Manzer at ¶3.600. This flows logically from the reliance requirement. Application To The Facts Of The Case At Bar [ 98 ] The Defendants place great emphasis on Mr. Angelucci’s subjective statements, as did the Master. That emphasis makes some sense. Angelucci’s evidence was on-point and he was in a position to know the nature of the relationship between the corporations. However the learned Master may have placed too much emphasis on Mr.

Angelucci’s statements to the exclusion of, for example, the conduct of the parties. [ 99 ] The problem with Mr. Angelucci’s evidence, apart from the fact that it is subjective, is that the existence of a partnership is a legal conclusion that flows from a set of facts. When Mr. Angelucci says the two corporations were not and are not partners, that is his opinion, and it may indicate a lack of subjective intention to be partners, which may in turn be one of the indicia , but even if it is, a single indicium of partnership is not dispositive of the entire question. [ 100 ] Mr.

Angelucci’s assertion that CCF and Canada Clean did not represent that they were partners may be helpful to counter ERM’s partnership by estoppel/holding out argument, but this is but one way partnership liability might be found. [ 101 ] Finally, Angelucci’s statement that he is not aware of any facts to substantiate a partnership claim is more on point for sure but it is also more in the nature of a legal conclusion than a statement of fact addressing the partnership indicia . [ 102 ] It would, of course, have been more helpful for the Defendants if someone could have sworn that there was no sharing of profits, no business carried out in common, no pooling of resources, and so forth.

But this was not done. [ 103 ] I question whether the Defendants have met their burden under the

summary judgment test of showing that there is no clearly no issue for trial, and so perhaps their application should have failed at the first stage of the analysis.

However, assuming (without deciding) that they have met their burden, I proceed to the second stage of the analysis, which is to determine whether ERM have adduced sufficient evidence to persuade the Court that there is a genuine issue to be tried. [ 104 ] For the purposes of my decision and on the basis of the evidence from both parties, I am satisfied that there was a “business” (the purchase and sale of biodiesel fuel) and that it was conducted “with a view to profit”. These points are not contentious.

The question is whether Canada Clean and CCF were carrying on that business “in common”, or in the alternative if Canada Clean is otherwise liable under

section 17 (holding out). [ 105 ] ERM adduced evidence that Canada Clean and CCF each contributed property (including the shared premises), and effort, knowledge and skill (the same people worked in both corporations, and/or each of the corporations provided services to the business). There was at least one shared bank account, and there was at least the appearance of a mutual control or management of the business, as evinced by the common management.

The correspondence with ERM seemed to indicate that whether one was communicating with (or being billed by or remitting payment to) Canada Clean or CCF, it did not seem to matter, as they both appeared to have authority to deal with ERM in respect of the same contracts. [ 106 ] As noted, the sharing of profits and losses is one of the key indicia of a partnership. While there is no direct evidence on the record that profits and losses were apportioned between the putative partner corporations in an organized way, the pooling of their funds might be sufficient evidence of profit sharing.

Of course, while the sharing of profits is weighty evidence of partnership, it is not the only thing. In any event, the Defendants do not appear to deny this allegation. In the portion of their brief that deals with

section 4 (

c) of the Partnership Act , rather than argue that profits were not shared, they focus on the words “in the absence of evidence to the contrary”, saying in essence that shared revenues does not prove the existence of a partnership in the face of Mr. Angelucci’s Affidavit evidence to the contrary.

[ 107 ] In

summary, as it relates to the decision I am faced with, ERM adduced significant evidence of an arrangement between Canada Clean and CCF that looked like a partnership, and the two corporations dealt with ERM in a way that indicated that they were each part of the same business. [ 108 ] With respect to evidence of holding out under

section 17, Mr. Angelucci says that there were no representations with respect to partnership. However, Canada Clean, by replying to the requests for financial information about CCF, might be seen as representing that it was a partner in the business. Later, by invoicing ERM and accepting payment under the contract between ERM and CCF, Canada Clean might be seen as representing by conduct that it was a partner in the business. It seems improbable that ERM would have contracted with CCF either the first time or the second without the first representations (those regarding the financial and credit information).

This might be reliance enough. The later representations by Canada Clean (the representation by the conduct of billing and accepting payment that it was part of a common business with CCF) likewise must have continued to bolster ERM’s view of the creditworthiness of the party with whom it was dealing. ERM appears to have relied on this understanding of the nature of the common business when entering into the new contracts in August 2007. [ 109 ] I note that it is far from clear on the record as its stands that there was actually a holding out with reliance within the meaning of

section 17. However, there does appear to be some evidence of it. [ 110 ] The Master was of the view that Mr. Malcolm’s stated belief (at para. 14 of his Affidavit) that ERM thought “that Canada Clean Fuels and CCF were one and the same” is incompatible with a theory that they were partners. This might be taking Mr. Malcolm’s words a bit too literally. Those words may have meant that ERM considered the two to be the same corporation.

However, with respect, those words may also have meant that ERM considered the two corporations to be parts of the same enterprise; one for all and all for one. [ 111 ] In any event, I do not think that an understanding (especially a false one) by ERM that there was only one legal entity between Canada Clean and CCF—if indeed that is what it understood—would be fatal to a claim based on partnership. It may foreclose a claim for partnership by estoppel, but in my view it would not, in itself, prevent a finding that the basic definition of partnership was satisfied.

Liability to a third party by a partner for the actions of another partner is not predicated on the third party perfectly understanding the exact relationship between the partners. [ 112 ] I note that para. 7(

b) of the Act provides that the firm and the partners are not liable for the acts of an unauthorized partner if “the person with whom the partner is dealing ... does not know or believe the partner to be a partner.” Perhaps this is the source of the Master’s concern about ERM’s belief (if indeed it did believe) that Canada Clean and CCF were the same legal entity. The learned Master’s argument, as I understand it, is that a third party cannot believe that A and B are partners if it also believes that A and B are really just different names for a single entity, as one cannot be a partner with oneself. [ 113 ] However, the words of para. 7(

b) must be read in the context of the whole

section and of the whole Act , including the definition of partnership. First, for the purpose of

section 7, if there is actually a partnership, objectively determined, such that the party acting has actual authority to bind the partnership, then it is not sufficient that the third party dealing with the acting partner may not believe the partner to be a partner. Both 7(a) (the party really is unauthorized) and 7(b) (a certain knowledge or belief on the part of the third party) must be satisfied to avoid partnership liability.

Furthermore, the law does not require, in my view, that the third party turn its mind specifically to whether the partner has a separate legal existence from the other partner or partners. It should be sufficient for the purpose of this subsection if the third party believes the person with whom it is dealing is part of a business that objectively satisfies the definition in 1(g), whether or not the third party understands there to be a partnership at the time. If ERM had notice that Canada Clean was not a partner of CCF, or was otherwise not authorized to bind the partnership, then para. 7(

b) would operate such that the acts of CCF would not bind Canada Clean, but there was no such notice. Substantially similar statutory language was summarized by an Ontario Court in this way: “Each partner in a partnership is an agent of all the other partners and is capable of binding all the other partners, unless the person with whom that partner is dealing knows that the partner has no authority or is not really a partner”: Kamen v. Rose , [2001] O.T.C. 567 (Ont. S.C.J.) at para. 8 . [ 114 ] The Saskatchewan Court of Appeal recently dealt with its version of

section 7 (also

section 7 in the Saskatchewan Act ), which is materially identical to the Alberta provision, in Prince Albert Co-operative Assn. Ltd. v. Rybka , 2010 SKCA 144 , [2011] 4 W.W.R. 266. The question was whether a creditor who was unaware of the existence of a partner, and who thought it was dealing with a sole proprietor, could nevertheless recover from the unknown partner after becoming aware of the partner’s existence. The Court applied the criteria from Backman and held that objectively a partnership existed, notwithstanding the lack of an express partnership agreement. Having so found, the Court then turned to

section 7 and held that even though the creditor did not believe the person with whom it was dealing to be a partner, there was nothing to suggest he did not have the requisite authority to bind the partnership, and it held the previously unknown partner liable for the debt.

[115] For the purpose of this appeal, it does not matter whether I think—nor whether the Master thought—that the Defendants werepartners. What matters is whether the question is a genuine issue for trial. Is it plain and obvious that the Defendants were not partners?Of course, if the Master reached a conclusion that it is plain and obvious that the Defendants were not partners by employing the wrongtest for partnership, then the Master erred in law, and the finding that flows from that error cannot stand. See Partners in Psychiatry Inc.v.

Canadian Psychiatric Assn., 2011 ONCA 109, 81 B.L.R. (4th) 136 at para. 6. [116] The Master did not say much about the partnership question, though he did say that he did not see “any evidence adduced onbehalf of the plaintiff to show that there was either an agency or partnership agreement.” [117] To the extent that the Master was implying that there can be no partnership without a formal partnership agreement, he erred inlaw, since the misapplication of a legal test amounts to an error of law: Canada (Director of Investigation & Research) v. Southam Inc., (SCC), [1997] 1 SCR 748, 144 DLR (4th) 1 at para. 39.

To the extent that the Master was saying simply that therewere no indicia of a partnership, then, in the face of the evidence that was before him this was palpable and overriding error.Furthermore, if the Master concluded that there were no indicia of a partnership, he reached a conclusion not grounded in the evidence,which also amounts to an error of law: see Patrus v.

Alberta (Workers’ Compensation Board, Appeals Commission), 2011 ABQB 523at paras. 40–1. [118] It may not be the case that the Master found no indicia of partnership, or that he implied that there can be no partnership withouta formal partnership agreement.

Rather, the Master may have been considering the evidence in total and determining that, on balance, itwas plain and obvious that there was no partnership. (Indeed, a careful, pragmatic balancing of the relevant factors in context is the onlyway to determine if there is a partnership: Backman at para. 26.) On the one hand, there appears to have been no formal partnershipagreement, and there were separate corporations, the Affidavit of Mr. Angelucci, and so forth. On the other hand, there was thecommingling of the money, what appears to be a common business, and all of those other things mentioned above.

Manzer at ¶2.330notes that “[d]etermining when a partnership has been entered into is often difficult because the case law, in this area, is somewhatinconsistent and is frequently based upon the specific facts before the courts.” This suggests, along with Backman, that a detailedconsideration and balancing of the facts is required in these cases. [119] If this is the route that the learned Master took to reach his conclusion, then he was making a determination by choosing fromamong competing inferences.

That is to say, given the facts on the record, and in view of the principles I have discussed above, it wouldbe open to a trier of fact to conclude either that CCF and Canada Clean were partners or that they were not. Neither conclusion isimpossible, nor in my view is either conclusion predictable. [120] In such circumstances it is questionable whether a master or a chambers judge, on an application for

summary judgment, shouldprefer one inference over the other. The Ontario Court of Appeal discussed this in Iroquois Falls Community Credit Union Ltd. v.Co-operators General Insurance Co., 2009 ONCA 364, 249 O.A.C. 210 at para. 62: On a

summary judgment motion, where significant evidence, albeit uncontested, is reasonably capable of supporting more than oneinference, the motion judge should refrain from deciding the issue of fact. The competing inferences should be resolved at trial: seeTransamerica Occidental Life Insurance Co. v. Toronto Dominion Bank (1999), (ON CA), 44 O.R. (3d) 97 (Ont.C.A.), at p. 110. See also Walters v. Clark (2006), (ON CA), 211 O.A.C. 278 (Ont. C.A.) at para. 6. A similar statement of principle was cited by this court in Sullivan v.

Golden Intercapital (GIC) Investments Corp., 2010 ABQB 338 atpara. 15: A further helpful statement of the law on this subject and in respect to the need for evidence on such applications is found in a judgmentof Slatter, J. (as he then was) in Papaschase Indian Band No. 136 v. Canada (Attorney General), 2004 ABQB 655 (Alta. Q.B.): [52] ... Once the defendant establishes that there is a real doubt about the claim, the onus shifts to the plaintiff to show there is a genuineissue for trial: Hercules Management Ltd. v. Ernst & Young, (SCC), [1997] 2 S.C.R. 165 at para. 15. The test is a

strict one, and if the record raises any genuine issue for trial, then

summary judgment cannot be granted.... [53] Trials are usually held to resolve issues of fact. ... Where there is a dispute about inferences that might be drawn from a paper record, a trial is sometimes helpful, and caution should be exercised in granting

summary judgment. If a plaintiff can show that a competing inference on a material point might be drawn from a document, that might well raise a genuine issue for trial ... (Emphasis added) It is true that the Supreme Court in Lameman clarified, at para. 11 , that a “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”.

However, the case at bar, in which the inference that the parties were partners seems at least as plausible as the inference that they were not, does not seem to me to be the right case in which to pick a winner from between the competing inferences. If forced to choose one of the two inferences at this stage of the litigation, I would not be inclined to choose the inference that the applicant has requested in this application for

summary dismissal (i.e., that the corporations were not partners). Neither is it clear that the learned Master chose this inference. As noted, he may not have even reached this stage of the analysis, having decided instead that there could be no partnership without a partnership agreement, or that ERM’s understanding of the facts was incompatible with partnership. [ 121 ] The Ontario Court of Appeal has recently had to deal with a new formulation of its

summary judgment rule. As explained in Combined Air Mechanical Services Inc. v. Flesch , 2011 ONCA 764 , 108 O.R. (3d) 1 at paras. 9–58, an Ontario motions judge (but not a master) can now weigh evidence, evaluate the credibility of a deponent, and draw any reasonable inference from the evidence. These amendments were intended to expand the use of the

summary judgment rule so that matters that did not require the full machinery of a trial could be determined without one. The result of this has been to render inapplicable some of the earlier cases that restrict the scope of

summary judgment in Ontario. Whether or not the case at bar is one that might qualify as one requiring a trial under the new Ontario rule, it must be noted that there have been no such changes to the Alberta rule. As noted above, the test for

summary judgment remains unchanged under the new rules that came into force in 2010 in Alberta. The wording of Rule 7.3(1)(

b) is that

summary dismissal may be granted if “there is no merit to a claim or part of it”. Properly considering the principles discussed in this

section together with the indicia of partnership evident on the record, I do not think the learned Master could reasonably have reached a conclusion that there is no merit to ERM’s claim with respect to partnership. [ 122 ] In the end, and without greater reasons, it is not entirely clear how the learned Master reached his conclusion that the question of partnership was not a genuine issue for trial. For the reasons given above, I find that the Master erred on this point, and the question of whether CCF and Canada Clean were partners must proceed to trial.

Agency [ 123 ] Another ground on which ERM alleges that Canada Clean is liable under the contract that ERM entered into with CCF is that CCF was an agent of Canada Clean. Law [ 124 ] The usual test for agency is the existenc

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