Canadian Natural Resources Limited v. Arcelormittal Tubular Products Roman S.A. (Mittal Steel Roman S.A.), 2012 ABQB 679

Court of Queen ’ s Bench of Alberta Citation: Canadian Natural Resources Limited v. Arcelormittal Tubular Products Roman S.A. (Mittal Steel Roman S.A.), 2012 ABQB 679 Date: 20121102 Docket: 0701 03377; 0701 03553 Registry: Calgary Between: Canadian Natural Resources Limited Plaintiff - and - Arcelormittal Tubular Products Roman S.A., formerly known as Mittal Steel Roman S.A., Mittal Steel North America Inc., Emco Corporation carrying on business under the firm name and style Westlund, Vass Pipe and Steel Co. Inc. and Arcelormittal XYZ Corp.

Defendants - and - Arcelormittal Tubular Products Roman S.A., formerly known as Mittal Steel Roman S.A., Arcelormittal USA Inc., Mittal Steel North America Inc. formerly known as ISPAT North America Inc., Vass Pipe and Steel Co.

Inc., Emco Corporation carrying on business under the firm name and style Westlund, Fluor Canada Ltd., BNB Trading Inc., Trident Steel Corporation, TIC Canada ULC, PCL Industrial Constructors Inc., Willbros Canada Holdings ULC, Canadian Natural Resources Limited, John Doe, ABC Company and XYZ Company Third Parties And Between: Docket: 0701 03553 Canadian Natural Resources Limited Plaintiff

- and - Arcelormittal Tubular Products Roman S.A., formerly known as Mittal Steel Roman S.A., Mittal Steel North America Inc., Vass Pipe and Steel Co. Inc., BHD Tubular Limited and Arcelormittal XYZ Corp. Defendants - and - Arcelormittal Tubular Products Roman S.A., formerly known as Mittal Steel Roman S.A., Arcelormittal S.A. Inc. formerly Mittal Steel, N.V., Arcelormittal USA Inc., Mittal Steel North America Inc., formerly known as ISPAT North America Inc., Vass Pipe and Steel Co.

Inc., BHD Tubular Limited, Fluor Canada Ltd., BNB Trading Inc., Trident Steel Corporation, Pioneer Steel & Tube Corp., TIC Canada ULC, PCL Industrial Constructors Inc., Willbros Canada Holdings ULC, Canadian Natural Resources Limited, John Doe, ABC Company and XYZ Company Third Parties _______________________________________________________ Memorandum of Decision of the Honourable Madam Justice E.A. Hughes _______________________________________________________ I. Overview................................................................................................................... Para: 1 A.

Actions.......................................................................................................... Para: 5 B. Parties and Applications............................................................................... Para: 13 C.

Summary Conclusions................................................................................. Para: 25 II. Issues....................................................................................................................... Para: 29 III. Law and Analysis.................................................................................................... Para: 33 A. Tests governing the granting of leave to amend pleadings under Rule 3.65 Para: 34

B. Tests governing the striking of pleadings under Rule 3.68.......................... Para: 38 Issue 1 Should the Defendants ’ proposed amendments be denied, or be struck out, on the basis that they raise new substantive claims that are not supported by the evidence?..................................... Para: 47 A. Amendments that do not require evidence................................................... Para: 47 B. Burden of Proof and Nature of the evidence that can be considered............ Para: 49 C. Evidence from pleadings filed in another action.......................................... Para: 57 D.

Evidence relating to allegations of fraud and misrepresentation................... Para: 72 E. Safety Codes Act Amendments.................................................................... Para: 79 1. Legislation and Codes .................................................................... Para: 84 Safety Codes Act ........................................................................... Para: 86 Design, Construction and Installation of Boilers and Pressure Vessels Regulations Para: 91 Boilers and Pressure Vessels Regulation ..........................................

Para: 92 Canadian Standards Association Code B51-97 .............................. Para: 93 American Society of Mechanical Engineers Code B31.3-2004 ...... Para: 94 F. Contractual Evidence................................................................................... Para: 96 1. Fluor/CNRL Contractual Documents............................................... Para: 96 Fluor/CNRL Engineering Design Specifications.............................. Para: 98 Fluor/CNRL Change Order #1.......................................................

Para: 100 Fluor/CNRL Change Order #2....................................................... Para: 101 Fluor/CNRL Engineering Procurement ........................................ Para: 103 2. Fabricators ’ Contractual Documents.............................................. Para: 106 G. Emco ’ s Proposed Amendments................................................................. Para: 118 1. CNRL ’ s Amended Statement of Claim........................................... Para: 121 2. Emco ’ s Amended Statement of Defence........................................ Para: 123 3.

Emco ’ s Proposed ATPC - Emco ’ s BSM - Tab T.......................... Para: 126 H. BHD ’ s Proposed Amendments.................................................................. Para: 133 1. BHD ’ s proposed amendments regarding Fluor.............................. Para: 135 2. BHD ’ s proposed amendments regarding TIC................................ Para: 137 3. BHD ’ s proposed amendments regarding PCL................................ Para: 139 4. BHD ’ s Proposed Amendments regarding all of the Third Parties... Para: 141 I.

Mittal ’ s Proposed Amendments................................................................. Para: 143 1. Mittal ’ s Proposed Amended Statement of Defence........................ Para: 147 a. Amendments that are trivial or unopposed......................... Para: 147 b. Amendments regarding intermediate or end-user inspection Para: 148 c. Amendments regarding the CNRL/Fluor Engineering Error Para: 149 d. Safety Code Act Amendments ......................................... Para: 165 e. Amendments regarding CNRL ’ s and Fluor ’ s Failure to Disclose Para: 169

f. Amendments regarding Correction of CNRL/Fluor Engineering Error........... Para: 178 g. Amendments regarding PCL ’ s and TIC ’ s contractual duties to indemnify Mittal Para: 183 2. Mittal ’ s Proposed ATPC................................................................. Para: 184 a. Amendments incorporating allegations made in Mittal ’ s Proposed ASD Para: 184 b. Amendments relating to Fluor............................................ Para: 185 c. Amendments relating to the Fabricators............................. Para: 189 d. Amendments regarding effect of Safety Codes Act ............ Para: 191 e.

Amendments regarding Responsibilities of Fluor............... Para: 192 f. Amendments regarding Responsibilities of the Fabricators Para: 193 g. Amendments regarding Indemnification by TIC and PCL. Para: 194 Issue 2 Should the Defendants ’ proposed amendments be denied, or be struck out, on the basis that they make claims for contribution that cannot be asserted under the Tort-feasors Act , the common law, or the Rules? Para: 198 A. Claims for contribution under the common law and the Tort-feasors Act .. Para: 201 1. Claims for contribution under the common law............................. Para: 203 2.

Claims for contribution under the Tort-feasors Act ........................ Para: 206 a. Claims for contribution under the Tort-feasors Act must be for the “ same damage ” Para: 213 b. Claims arising from tortfeasors ’ breach of duty in tort or contract Para: 230 3. Independent claims that are not claims for contribution................. Para: 240 B. Third Party Claims that can be asserted under the Rules............................ Para: 241 C.

Summary................................................................................................... Para: 249 Third Party Claims for contribution under the common law....................... Para: 249 Third Party Claims for contribution under the Tort-feasors Act .................. Para: 252 Independent Third Party Claims................................................................. Para: 255 Claims for contribution under the Rules ................................................... Para: 256 D. Conclusion.................................................................................................

Para: 259 E. Application to Emco ’ s Proposed ATPC..................................................... Para: 260 F. Application to Mittal ’ s Proposed ATPC..................................................... Para: 274 G. Application to BHD ’ s Proposed Amended Third Party Claim.................... Para: 289 H. Application to Vass ’ s Third Party Claims...................................................

Para: 296 Issue 3 Should the Defendants ’ original third party claims or proposed amended third party claims be denied, or be struck out, on the basis that they are hopeless because they are barred under the Limitations Act (or seek to add a new party and/or a new claim after the expiry of a limitation period)?................ Para: 300 A. Were the Third Party Claims commenced within the applicable limitation period? Para: 309 1. Limitation period for commencing claims for contribution Para: 311 2. Limitation period for commencing claims for contribution Para: 328 B.

Can the Third Party Claims be added under s 6 of the Limitations Act even if they were not commenced within the applicable limitation period?..................................................... Para: 386

1. Do the proposed amendments “ add claims ” ?................................. Para: 397 2. What subsection of

section 6 of the Limitations Act governs the added claims? Para: 404 3. Are the added claims arguable at law?........................................... Para: 406 4. Are the added claims “ related to the conduct, transaction or events described in original pleading in the proceeding ” ?......................................................... Para: 408 5. Did the Third Parties acquire sufficient knowledge of the added claim Para: 415 a. What constitutes “ sufficient knowledge ” ?.......................... Para: 418 b. Meaning of “ limitation period applicable to the added claim ” Para: 424 6.

Meaning of the phrase “ plus the time provided by law for service of process ” Para: 429 C. Is there sufficient evidence to decide these limitation issues?.................... Para: 431 Issue 4 Should the Defendants ’ third party claims be denied, or struck out, on the basis that they assert claims for contribution under the common law or Tort-feasors Act , or independent duties of care to the Defendants, that do not arise under the law?.................................................................................... Para: 436 A. Allegations that the Third Parties breached duties owed to CNRL.............

Para: 438 B. Allegations that the Third Parties breached duties owed to the Defendants Para: 439 C. Allegations that the Third Parties had a duty warn the CNRL and the Defendants Para: 457 Issue 5 Should the Defendants ’ proposed amended third party claims be denied, or be struck out, on the basis that they are inconsistent with CNRL ’ s claims in the Amended Statement of Claim?........... Para: 469 Issue 6 Should the third party claims be denied, or be struck out, on the basis that they contravene the rule prohibiting third party claims that are a complete defence to plaintiff ’ s claim?........................

Para: 485 Issue 7 Should the Defendants be granted leave to extend the time for filing their Third Party Claims under Rule 3.45?.............................................................................................................................. Para: 494 A. BHD ’ s Application to Amend.................................................................... Para: 501 B. Emco ’ s Application to Amend................................................................... Para: 510 C. Mittal ’ s Application to Amend................................................................... Para: 515 I.

Overview [ 1 ] These actions, which are under case management, relate to two separate actions commenced by Canadian Natural Resources Limited (“CNRL”). [ 2 ] The actions concern carbon steel pipe (the “Subject Pipe”) that was supplied and installed in the upgrader facilities at CNRL’s Horizon Oil Sands Project (the “Horizon Project”). The Subject Pipe was to be manufactured to the American Society for Testing and Materials (“ASTM”) A106, Grade B Specification or Standard (the “A106B Standard”). CNRL alleges the Subject Pipe was defective and had to be removed and replaced.

CNRL commenced three actions as a result: the two actions to which the present applications relate and a third action in which it sued Fluor Canada Ltd. (“Fluor”) for breaches of duty in relation to its provision of engineering and procurement services on the Horizon Project. CNRL’s third action against Fluor was subsequently discontinued.

[ 3 ] Certain Defendants in the two remaining actions seek to amend their statements of defence and/or their third party claims filed in those actions, including third party claims against Fluor. CNRL and certain Third Parties oppose some of the proposed amendments on the basis that the Defendants have not satisfied the test for the amendment of pleadings under Rule 3.65. Fluor seeks to strike all of the third party claims filed against it under Rule 3.68. [ 4 ] The success of the various applications depends upon the determination of a number of issues including the

interpretation and application of the Alberta Rules of Court , Alta Reg 124/2010 [the “Rules”] governing the filing, amending and striking of third party claims; the nature of claims for contribution under the common law and under s 3 of the Tort-feasor’s Act , RSA 2000, c T-5 [the “ Tort- feasors Act” ]; and the limitation period applicable to claims for contribution and when new third party claims can be added to existing claims under s 6 of the Limitations Act , RSA 2000, c L-12 [the “Limitations Act” ]. A.

Actions [ 5 ] On March 30, 2007, CNRL commenced Action No. 0701-03377 against the Defendants it alleges either manufactured or supplied it with one portion of the defective Subject Pipe for the Horizon Project (the “CNRL/Emco Action”). Those Defendants are:

(1) Emco Corporation (“Emco”), a pipe supplier that allegedly contracted with CNRL to supply it with the Subject Pipe;

(2) Vass Pipe and Steel Co. Inc. (“Vass”), a pipe distributor that allegedly supplied Emco with the Subject Pipe;

(3) Arcelormittal Tubular Products Roman S.A, formerly known as Mittal Steel Roman S.A. (“Mittal Roman”), a pipe manufacturer that allegedly manufactured and supplied the Subject Pipe; and Mittal Steel North American Inc. (“Mittal NA”), a distributer of Mittal Roman pipe in North America that also allegedly supplied a portion of the Subject Pipe.

CNRL claims that the Defendants’ breaches of contract and/or breaches of duties of care caused it to suffer damages in the amount of $60,000,000. [ 6 ] Each of the Defendants filed third party claims against each other, against Fluor and against other parties alleged to have been parties in the supply chain for the Subject Pipe, namely, BNB Trading Inc. (“BNB”), Trident Steel Corporation (“Trident”) and Pioneer Steel & Tube Corp. (“Pioneer”) .

In addition, each of the Defendants also filed third party claims against the following parties that allegedly contracted with CNRL to fabricate the Subject Pipe into pipe modules (the “Pipe Modules”) that were then incorporated into the Upgrader Facilities at the Horizon Project (the “Upgrader Facilities”):

(1) PCL Industrial Construction Inc. (“PCL”),

(2) TIC Canada ULC (“TIC”), and

(3) Willbros Canada Holdings ULC (“Willbros”), (collectively “the Fabricators”). [ 7 ] On April 4, 2007, CNRL commenced Action No. 0701-03553 against other Defendants it alleges either manufactured or supplied it with a second portion of the Subject Pipe that was purchased for the Horizon Project (the “CNRL/BHD Action”). CNRL sued the following parties:

(1) BHD Tubular Limited (“BHD”), a pipe supplier that allegedly contracted with CNRL to supply it with the second portion of the Subject Pipe; (2) the pipe distributor, Vass; (3) the pipe manufacturer, Mittal Roman; and the pipe distributor, Mittal NA. CNRL claims that these Defendants’ breaches of contract and/or breaches of duties of care caused it to suffer damages in the amount of $27,000,000. [ 8 ] Each of these Defendants also filed third party claims against each other, against Fluor and against BNB, Trident and Pioneer. In addition, each of the Defendants filed third party claims against the Fabricators.

[ 9 ] The CNRL/Emco Action and the CNRL/BHD Action, when referred to jointly, will be referred to as the “Two Actions”. [ 10 ] In November 2007, CNRL commenced Action No. 0701-12375 against Fluor (the “CNRL/Fluor Action”). CNRL contracted with Fluor to perform engineering design services in relation to the Horizon Project and to act as its agent in procuring various goods and services required for the project, including the Subject Pipe. CNRL sued Fluor for breach of contract and negligent breach of duties in relation to its provision of engineering and procurement services.

CNRL claimed that Fluor’s breaches of contract and/or breaches of duties of care caused CNRL to suffer damages in the amount of $60,000,000. This action was discontinued on December 21, 2007. [ 11 ] The Defendants Mittal Roman and Mittal NA in the Two Actions seek to rely on the pleadings filed in the CNRL/Fluor Action as some evidence supporting their applications to amend their pleadings. [ 12 ] Mittal Roman and Mittal NA (collectively the “Mittal Defendants” or “Mittal”) also commenced Action No. 0701-12323 against CNRL for defamation (the “Mittal Defamation Action”).

Mittal’s application includes an application to amend the pleadings in that action however, that application was put over and this judgment does not deal with that application. B. Parties and Applications [ 13 ] CNRL is the sole plaintiff in each of the Two Actions. CNRL’s claims against Emco in the CNRL/Emco Action are very similar to the claims it makes against BHD in the CNRL/BHD Action.

CNRL’s claims against Vass and Mittal in the CNRL/Emco Action are also very similar to the claims it makes against those Defendants in the CNRL/BHD Action. [ 14 ] The Mittal Defendants are Defendants in each of the Two Actions and allegedly manufactured or supplied the Subject Pipe. CNRL and the other Defendants in the Two Actions made claims against the following Mittal Defendants: Mittal Roman; Mittal NA; ArcelorMittal S.A. formerly Mittal Steel Company, N.V. (“ArcelorMittal”); ArcelorMittal USA Inc. (“ArcelorMittal USA”); and Arcelormittal XYZ Corp.

It appears the claims against all of the Mittal Defendants, other than Mittal Roman and Mittal NA, have been discontinued. [ 15 ] Mittal seeks leave to amend its Statement of Defence and its Third Party Claim in each of the Two Actions.

Mittal’s proposed Amended Statement of Defence (“Mittal’s Proposed ASD”) and proposed Amended Third Party Claim (“Mittal’s Proposed ATPC”) and the grounds upon which it makes its applications are virtually identical in the Two Actions. [ 16 ] CNRL opposes Mittal’s application to amend its Amended Statement of Defence in the Two Actions. [ 17 ] Vass is a Defendant in each of the Two Actions and allegedly supplied the Subject Pipe to either Emco or BHD. Vass’s Statement of Defence (“Vass’s SD”) and Vass’s Third Party Claim (“Vass’s TPC”) are the same in each of the Two Actions and it does not seek to amend them.

The sole issue with respect to Vass is whether Fluor’s application to strike Vass’s TPC should be granted. [ 18 ] Emco is a Defendant in the CNRL/Emco Action and allegedly supplied one of the two portions of the Subject Pipe. Emco seeks to amend its Third Party Claim in that Action. Emco filed an amended Statement of Defence by consent. [ 19 ] BHD is a Defendant in the CNRL/BHD Action and allegedly supplied the second of two quantities of the Subject Pipe.

BHD seeks to amend its Third Party Claim in that Action. [ 20 ] Fluor opposes Mittal’s application to amend its Statement of Defence and applies to strike all of the third party claims filed against it in each of the Two Actions.

[ 21 ] The Fabricators were not sued by CNRL. However, CNRL alleges in its Amended Statements of Claim filed in each of the Two Actions that the Fabricators were retained to: (

a) receive, cut, and prepare the pipe, (

b) weld the pipe together with other components such as valves in accordance with pre-prepared designs and specifications in order to manufacture prefabricated pipe modules and (

c) test completed assemblies. The Fabricators oppose the amendments sought by the Defendants as they relate to each of them and take substantially the same position in each of the Two Actions. [ 22 ] Pioneer is no longer a third party defendant in either of the Two Actions. [ 23 ] Trident continues to be a third party defendant in the CNRL/Emco Action but took no position in respect of the applications. [ 24 ] BNB only continues to be a third party defendant in the CNRL/Emco Action vis-à-vis Vass’s Third Party Claim; BNB, who is not represented by counsel, did not appear on these applications. C.

Summary Conclusions [ 25 ] Fluor’s Application to Strike all of the Third Party Claims filed against it is denied. [ 26 ] Emco’s Application for leave to amend its Third Party Claim in Action No. 0701-03377 is granted and is to be filed and served within 30 days of the date of this judgment. [ 27 ] BHD’s Application for leave to amend its Third Party Claim in Action No. 0701-03553 is granted and is to be filed and served within 30 days of the date of this judgment. [ 28 ] Mittal’s Application for leave to amend its Statement of Defence and Third Party Claim in Action No. 0701-03377 and Action No. 0701-03553 is allowed in part, as set out below.

The allowed amendments are to be filed and served within 30 days of the date of this judgment. II.

Issues [ 29 ] CNRL and the Third Parties, Fluor and the Fabricators, argue the Defendants have failed to satisfy the test for granting leave to amend pleadings under Rule 3.65 either because the proposed amendments are hopeless or seek to add a new party and/or new claim after the expiry of a limitation period. [ 30 ] In addition, Fluor applies to strike all of the third party claims filed against it under Rule 3.68 on the basis that they are hopeless because they do not give rise to a cause of action or to proper claims for contribution and indemnity. [ 31 ] In either case, the issues to be decided are whether the Defendants’ proposed amendments, or portions of their proposed amendments, should be denied, or are hopeless and should be struck out, on the basis that they: (1) allege new substantive facts and claims not supported by the evidence or not plead with sufficient particularity; (2) assert claims for contribution and indemnity that cannot be asserted under the Tort-feasors Act , the common law, or the Rules ; (3) are barred under the Limitations Act ; (4) allege that the Third Parties owe duties of care to the Defendants that do not arise under the law; (5) are inconsistent with the claims made against the Defendants by CNRL in its amended statements of claim in the Two Actions;

(6) are complete defences to CNRL’s claims in the Two Actions; or (7) in the case of PCL and TIC, seek to enforce an indemnity clause that does not apply or is irrelevant to CNRL’s claims against the Defendants in the Two Actions. [ 32 ] The Third Parties also oppose the Defendants’ proposed amendments, assuming leave to amend is granted, on the basis that the Defendants have failed to satisfy the test for granting leave to extend the time for filing the proposed amendments under Rule 3.45. III.

Law and Analysis [ 33 ] While the tests applied under Rule 3.65 and Rule 3.68 are similar, Balm v 3512061 Canada Ltd , 2003 ABCA 98 , 327 AR 149 [“ Balm” ] at para 12 , the evidence required and considered differs. A party seeking leave to amend its pleadings under Rule 3.65 must provide evidence to support those amendments, if the amendments are substantive. No evidence may be submitted on an application to strike under Rule 3.68. The motion to strike is decided solely on the allegations made in the pleadings, assuming them to be true and provable. A.

Tests governing the granting of leave to amend pleadings under Rule 3.65 [ 34 ] Rule 3.65 gives the court discretion to grant leave to amend pleadings: 3.65(1) Subject to subrule (5) [which is not applicable in this case], before or after close of pleadings, the Court may give permission to amend a pleading.

(2) If the Court gives permission for a pleading to be amended, the Court must specify the time period within which the amended pleading must be filed and served.

(3) An order giving permission to amend a pleading under this rule ceases to have effect unless the amended pleading is filed and served within the time specified by the Court. [ 35 ] When Rule 3.65 and Rule 1.2 are read in conjunction, they are similar to the former Rule 132 of the Alberta Rules of Court, Alta. Reg. 390/1968.

The case law developed under former Rule 132 is therefore applicable: Manson Insulation Products Ltd. v Crossroads C & I Distributors , 2011 ABQB 51 [“ Manson Insulation” ] at para 44 . [ 36 ] The Parties agree the “classic rule” is that “any pleading can be amended no matter how careless or late is the party seeking to amend” ( Balm at para 43 ), subject to four exceptions.

The rule and the four exceptions were set out by Wittmann, CJQB in Dow Chemical Canada Inc. v Nova Chemicals Corp , 2010 ABQB 524 [ “Dow Chemicals” ] 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 at para. 43 . This is referred to in Balm as the “classic rule”. 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 it 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 limitationperiod; and (4) there is an element of bad faith associated with the failure to plead the amendment in the first instance. [37] Mittal’s Proposed ASD and each of the Defendants’ proposed amended third party claims are opposed on the basis that theyare hopeless and/or seek to add a new party or a new cause of action after the expiry of a limitation period.

None of the third party claimswere opposed on the basis of prejudice or bad faith. B. Tests governing the striking of pleadings under Rule 3.68 [38] Fluor applies to strike all of the original third party claims filed against it on the grounds they disclose no reasonable cause ofaction and are therefore hopeless. Fluor also opposes the amendments which the Defendants seek to make against Fluor in their thirdparty claims on the basis that they are hopeless because they would not have succeeded if they had been included in the Defendants’original third party claims. [39] Rule 3.47(

b) states that a third party defendant may “apply to the Court for an order under Rule 3.68 with respect to the thirdparty claim.” Rule 3.68 governs motions to strike out pleadings. Rule 3.68(1) provides that if the circumstances warrant and a conditionunder Rule 3.68(2) applies, the Court may order that all or any part of a claim or defence be struck out. Rule 3.68(2)(

b) states that one ofthose conditions is that “a commencement document or pleading discloses no reasonable claim or defence to a claim”. Rule 3.68(3)provides that no evidence may be submitted on an application under Rule 3.68(2)(b). [40] Former Rule 129 provided that a pleading may be struck if it “discloses no cause of action”.

The test for striking out pleadingsunder Rule 3.68 is the same test as under former Rule 129: Donaldson v Farrell, 2011 ABQB 11 at paras 30-31. [41] In the recent Supreme Court of Canada case, R v Imperial Tobacco Canada Ltd., 2011 SCC 42 at para 17, [2011] 2 SCR 45[“Imperial Tobacco”] the Court affirmed that “[a] claim will only be struck if it is plain and obvious, assuming the facts pleaded to betrue, that the pleading discloses no reasonable cause of action”. [42] The power to strike out claims that fail to disclose a reasonable cause of action is granted to enhance the effectiveness andfairness of the litigation process.

It allows the litigants and the courts to focus their time and resources only on those claims that have areasonable chance of success: Imperial Tobacco at paras 19-20. [43] In Imperial Tobacco, at para 21, the Court cautioned that this power is to be exercised with caution, and courts must begenerous and err on the side of allowing claims if they are arguable, although novel: Valuable as it is, the motion to strike is a tool that must be used with care. The law is not static and unchanging. Actions that yesterdaywere deemed hopeless may tomorrow succeed [citing Donoghue v.

Stevenson, (FOREP), [1932] A.C. 562 (U.K. H.L.)and Hedley Byrne & Co. v. Heller & Partners Ltd., [1963] 2 All E.R. 575 (U.K. H.L.)]. The history of our law reveals that often newdevelopments in the law first surface on motions to strike or similar preliminary motions, like the one at issue in McAlister (Donoghue)v. Stevenson. Therefore, on a motion to strike, it is not determinative that the law has not yet recognized the particular claim. The courtmust rather ask whether, assuming the facts pleaded are true, there is a reasonable prospect that the claim will succeed.

The approachmust be generous and err on the side of permitting a novel but arguable claim to proceed to trial. [44] In Odhavji Estate v Woodhouse, 2003 SCC 69, [2003] 3 SCR 263 at 277, the Supreme Court of Canada applied the test earlier

articulated by it in Hunt v Carey Canada Inc, (SCC), [1990] 2 SCR 959: An excellent statement of the test for striking out a claim under such provisions is that set out by Wilson J. in Hunt v. Carey Canada Inc., (SCC), [1990] 2 S.C.R. 959, at p. 980: . . . assuming that the facts as stated in the statement of claim can be proved, is it “plain and obvious” that the plaintiff’s statement ofclaim discloses no reasonable cause of action? As in England, if there is a chance that the plaintiff might succeed, then the plaintiffshould not be “driven from the judgment seat”.

Neither the length and complexity of the issues, the novelty of the cause of action, northe potential for the defendant to present a strong defence should prevent the plaintiff from proceeding with his or her case. Only if theaction is certain to fail because it contains a radical defect . . . should the relevant portions of a plaintiff’s statement of claim be struck out. . . . The test is a stringent one. The facts are to be taken as pleaded. When so taken, the question that must then be determined is whether ... itis “plain and obvious” that the action must fail.

It is only if the statement of claim is certain to fail because it contains a “radical defect”that the plaintiff should be driven from the judgment. See also Attorney General of Canada v. Inuit Tapirisat of Canada, (SCC), [1980] 2 S.C.R. 735. [45] To determine whether an action has a reasonable chance of succeeding, a court must examine the facts plead in the context ofthe law and the litigation process. In Imperial Tobacco, at para 25, the Court explained the process as follows: The judge on a motion to strike asks if the claim has any reasonable prospect of success.

In the world of abstract speculation, there is amathematical chance that any number of things might happen. That is not what the test on a motion to strike seeks to determine. Rather,it operates on the assumption that a claim will proceed through the Court system in the usual way - in an adversarial system where judgesare under a duty to apply the law as set out in (and as it may develop from) statutes and precedent.

The question is whether, considered inthe context of the law and the litigation process, the claim has no reasonable chance of succeeding. [emphasis in original] [46] The Alberta Court of Appeal has stated that if a court can “reasonably construe that some cause of action might be disclosedby a third party notice” the strike application cannot succeed: Leoppky v McWilliams, 2001 ABCA 197 at para 10, 281 AR 281[“Leoppky”]; see also Deboer v Raymaker (Darryl

J) Professional Corp (2000), 2000 ABCA 56 , 250 AR 312 [“Deboer”] atpara 3 where the Court observed that courts will strike claims at the early stages of proceedings “only in the clearest of cases”. Issue 1: Should the Defendants’ proposed amendments be denied, or be struck out, on the basis that they raise newsubstantive claims that are not supported by the evidence? A. Amendments that do not require evidence [47] Amendments which are trivial, such as those that do not seek to impose any liability on new defendants, or those that arepurely ancillary, do not require evidence: Balm at paras 9 and 23.

See also Mikisew Cree First Nation v Canada, 2002 ABCA 110 at para26, 303 AR 43 [“Mikisew”] [48] Amendments pleading a new cause of action or claim arising from facts already plead in existing pleadings filed in time, alsorequire little if any evidence. In Balm, Côté JA observed at para 11: Paragraph 37 in the amended statement of claim is new, and is clearly a new cause of action. However, though the legal conclusionpleaded is new, the acts alleged in it are not new. It is trite law that a statement of claim need not name causes of action or draw legalconclusions. It need only plead facts.

So the plaintiff could merely have sent the original defendants' counsel a letter warning that hewould argue at trial that proof of such and such facts already alleged in the statement of claim would constitute the cause of action ofmutuality of obligations under law merchant. See 30 Hals. Laws 7 (3rd Ed. 1959).

B. Evidentiary burden and nature of the evidence that can be considered [49] The leading Alberta case respecting the evidentiary burden and the nature of the evidence required for substantiveamendments to pleadings is Balm. Côté JA summarized the law at paras 25 and 26 as follows: When evidence is needed to support a significant amendment to a pleading, before the limitation period has expired, what evidence isneeded? The Waquan (Mikisew) case, supra, does not address the point (except for some discussion about use of discovery evidence).

Ihave not found much direct authority on the topic. (One reason is that England, British Columbia, and the Federal Court of Canadarequire no evidence at all.) One case says that the test is whether in the evidence filed to support the proposed amendment “facts werealleged from which it could be inferred that” the facts to be pleaded occurred: Wil-Ton Constr. v. Amerada Minerals Corp.(1989), 1989ABCA 213 , 98 A.R. 296, 304 (para. 43), 69 Alta. L.R. (2d) 285 (C.A.). Chief Justice Moore held that the evidence need not beenough to prove the new allegations on a balance of probabilities: Anderson Expl. v.

Pan-Alberta Gas (1998) 1998 ABQB 456 ,224 A.R. 109, 112 (para. 14). Possibly Kent J. was stating a standard when she called for “more than a scintilla of evidence”, inFiremaster Oilfield Services v. Safety Boss (Can.) (1993) (June 14 ’96) J.D.E. 9303-20358, unrep. She said that “everyone is inagreement that the threshold is low”: ibid. The chambers judge here adverted to that standard of proof (in his paras. 15, 16). Hearsayclearly suffices: Marathon Constr. (Alta.) v. Bank of N.S. (1985) (SK CA), 47 Sask. R. 241 (C.A.). The appellants’factum does not cite any authority which contradicts those propositions.

Of course any admissible evidence will do. It need not be an affidavit by the party seeking to amend: Sheckter v. W. Motor Hotels(Edm.), (1985) (AB KB), 61 A.R. 154, 158 (M.) (para. 19). [50] It is clear from the above passage in Balm that the evidentiary standard is very low and that the type of admissible evidence tosupport new amendments includes hearsay evidence. [51] In CHS v Alberta (Director of Child Welfare) 2006 ABQB 528 at para 11, 403 AR 103, aff’d 2006 ABCA 355, 401 A.R. 215,the Court considered the evidence required: Only a modest amount of evidence is needed to support an amendment.

An amendment will only be refused based on an argument that itis "bound to fail on the merits" if it is clear that there is no genuine issue for trial, and the amended claim would not survive a

summaryjudgment application. These principles are set out in a number of cases, including Mikisew Cree First Nation v. Canada, 2000 ABQB899, 86 Alta. L.R. (3d) 139, 278 A.R. 375 at para. 7; Rago Millwork & Supplies Co. Ltd. v. D. Woodhouse Construction Ltd. (1981), (AB KB), 28 A.R. 499; W.R. v. Alberta (Attorney General), 2004 ABQB 979 at para.11; Balm v. 3512061 CanadaLtd., 2003 ABCA 98, 14 Alta. L.R. (4th) 221, 327 A.R.149 at para. 25; Brar v.

Roy, 2005 ABCA 269, 371 A.R. 290 at paras. 17-18. [52] The Alberta Law Reform Institute (“ALRI”) states in Alberta Rules of CourtProject: Joining Claims and Parties, IncludingThird Party Claims, Counterclaims and Representative Actions Consultation Memorandum 12.9 (Edmonton: ALRI, 2004) at para 13[footnotes omitted] [the “ALRI 2004 Report on Joining Claims and Parties”] that the reason some evidence is required to supportproposed amendments alleging new substantive facts is to show that they raise a triable issue: Like the equivalent rules of most Canadian jurisdictions, Rule 132 is stated in permissive and discretionary terms.

For a court to grantdiscretionary leave to amend, “an amendment (1) must not cause injustice to the other side, (2) must raise a triable issue, (3) must not beembarrassing, and (4) must be pleaded with particularity.” To show that a triable issue is raised, the applicant must produce at least someevidence substantiating the facts that the applicant now wants to plead by amendment... [footnotes omitted] [emphasis added] [53] Although only modest evidence need be provided, it must have some foundation in fact. [54] Those opposing the Defendants’ proposed amendments assert that amendments must be supported by evidence of sufficient

cogency, relying on JAV International Ventures Ltd v Halliburton Group Canada Inc, 2008 ABCA 99. In that case, the respondentssought to admit affidavit evidence in support of their pleading amendments which detailed conversations that had taken place duringprivileged settlement negotiations. The issue before the Court was whether the evidentiary foundation supported the Respondents’sposition that privilege had been waived.

The only comment respecting the evidentiary burden in an amendment to pleadings applicationis in the first sentence in para 5 which states: In the context of an application to amend the pleadings, the evidentiary burden is “modest”.

At this stage of the proceedings, for purposesof the Respondents’ motion to amend the pleadings, the threshold for admissibility is, in our view, prima facie evidence of sufficientcogency that the allegations have some foundation in fact. [emphasis added] [55] I find the phrase “evidence of specific cogency” in the JAV case applies to the evidentiary foundation to support theRespondent’s position the privilege had been waived, and not to the evidentiary burden on an application to amend. [56] The parties opposing the Defendants’ proposed amendments introduced evidence that could be found to be contrary to theevidence proffered by the Defendants.

It must be remembered that the purpose of these applications is not to make findings of fact or tofinally decide the issues raised in the pleadings. The evidence submitted in support of the amendments may be contradictory to otherevidence submitted. I need only determine if there is “some” evidence supporting the proposed amendments. As Côté JA stated in Balmat para 13: It is for that reason that the court will authorize a party to amend his pleadings, even if he has given some examination for discoveryanswers inconsistent with that proposed amendment: Neogleous v.

Toffolon (No. 2) (1977) (ON SC), 17 O.R. (2d) 453(H.C.) at p. 455. The appellants made just that objection here. They do argue that the claim against 070 and Jonathon is hopeless, but tryto do so on the basis of evidence as to lack of damage, especially a cross-examination admission by the plaintiff. This is not a motion forsummary judgment by the plaintiff. Doubt avails the appellants nothing. [emphasis in original] C.

Evidence from pleadings filed in another action [57] The Mittal Defendants seek to rely on statements made in CNRL’s Statement of Claim filed against Fluor in the CNRL/FluorAction as some evidence supporting the amendments they seek to make in the present Two Actions. In that Statement of Claim, CNRLsued Fluor for breaches of duty in contract and tort in relation to Fluor’s provision of engineering, design and procurement servicesrelated to the installation and replacement of the Subject Pipe in the main interconnecting pipe racks (the “MIP’s”) at the HorizonProject.

Other Defendants have made similar claims against Fluor in the Two Actions.

As noted above, the CNRL/Fluor Action wasdiscontinued; there is no evidence this claim was settled. [58] CNRL and Fluor argue that a court may find admissible evidence from pleadings filed in another action in two circumstances:(1) if a party makes an unequivocal admission of fact in the prior proceedings and then seeks to assert facts that contradict that in thesecond proceedings; or (2) if a party makes an admission of liability in one action and then asserts that it is not liable on that basis in thesecond action. [59] The Mittal Defendants argue that while courts have admitted evidence from pleadings filed in another action for the abovepurposes, the following cases do not state that these are the only bases in which a court may find admissible evidence from pleadingsfiled in another action. [60] The text, The Law of Evidence in Canada, 3d ed., Alan W.

Bryant, Sidney N. Lederman and Michelle K. Fuerst, (Markam,Ont: LexisNexis, 2009) at para 2.1, suggests there are three classifications of admissible evidence: “...(1) oral or testimonial evidence; (2)real evidence; and (3) documents...[and] ...a practical way of classifying admissible evidence is to divide the three main categories intothe following five: (

a) sworn statements; (

b) unsworn statements; (

c) things; (

d) experiments; and (

e) documents. [61] The pleadings in the Statement of Claim from the CNRL/Fluor Action can be characterized as an unsworn statement of CNRL

or a document created by CNRL. [62] While a document may be introduced into evidence to prove its existence, that is not the purpose the Mittal defendants seek;rather, they seek to use the document as some evidence of the truth of its contents so as to establish an evidentiary basis for theiramendment applications. [63] An oral or written unsworn statement of a party is admissible if it falls with an exception to the hearsay rule or is specificallyallowed by statute.

Out of court assertions or admissions “...made by a party to the proceeding have been regarded as admissible at theinstance of the opposite party as an exception to the hearsay rule.” The Law of Evidence in Canada at para 6.396. [64] In Caviglia v Tenorio (1992), (BC SC), 71 BCLR (2d) 255 (SC), the defendant driver in a motor vehicleaccident was sued in two separate actions, and denied liability in the one action but admitted liability in the second action. The plaintiff inthe first action sought

summary judgment. The Court ruled the admission of liability in a pleading in one action was admissible againstthat defendant in the other action. Specifically the court said at 261: This question does not appear to have been considered in British Columbia or by other Canadian courts... ... I consider it useful to analyze the problem in the context of our present system of pleadings. In British Columbia, an admissionmade in a pleading is a judicial admission which is solemn and conclusive against the party making it in that proceeding.

Such anadmission can only be withdrawn by consent or with leave of the Court: Rule 31(5). The test applied by the Court in considering anapplication for leave is whether the proposed withdrawal of an admission is in the interests of justice: Abacus Cities Ltd. v. Port Moody(1981), (BC CA), 26 B.C.L.R. 381 (C.A.) and Norlympia Seafoods et al v. Dale and Co. Ltd. (1982) (BC CA), 41 B.C.L.R. 145 (C.A.). Where the opposite party has relied on the admission, and its withdrawal would prejudice that party,the Court may not permit its withdrawal.

Rule 31(5) reflects the modern view of pleadings which was expressed by Hope, J.A. in Can. Perm. Mtge. Corp. v. Toronto, (ON CA), [1951] O.R. 726: Admissions made in pleadings or otherwise for the purpose of trial are judicial admissions.

The vital feature of a judicial admission isuniversally conceded to be its conclusiveness upon the party making it, i.e., the prohibition of any further dispute of the effect by himand by any use of evidence to dispute or contradict it. [65] In Gerling Global General Insurance Co v Canadian Occidental Petroleum Ltd (1998), 1998 ABQB 714 , 230 AR39, admissions were made in a United States action in a statement of uncontested material facts. The admissions were sought to beintroduced as evidence in an application for

summary judgment in Alberta in support of arguments as to the proper forum. The Courtruled that the admissions made in the uncontested material facts in the United States action were admissible evidence in the Albertaaction. [66] In Rigco North America LLC v ExxonMobil Canada Ltd, 2007 ABQB 311 at para 14, 416 AR 396 [Rigco] Macleod J referredto the fact that Rigco had filed pleadings in a Texas lawsuit that were at issue. Macleod J stated that he saw “no reason not to rely onRigco’s own pleadings and arguments [. . .]” in that action.

It was noted that “[t]he pleadings and arguments were prepared by Rigco’scounsel [. . .]” and that the Court was “entitled to assume that the prepared documents were carefully drawn with the expectation thatRigco would be bound by their words.” [67] In Duckman v Jelian Distributors Inc (2002), 112 ACWS (3d) 269, [2002] OJ No 871 (QL), 2002 CarswellOnt 713 (WL Can)[Duckman cited to Carswell Ont], the issue was whether Jelian had received exclusive distribution rights from the company calledRombouts, which Jelain was entitled to as a condition of purchasing a business.

In another trial in a separate case between Jelian andRombouts, Jelian had pleaded that it owned the exclusive distribution rights. The Court, at para 20, quoted from the pleadings in theother action where Jelian had admitted this. Jelian objected to the pleadings in the other action being admitted as evidence in the Rigcoaction. The Court stated at para 23:

I ruled that the statement of defence and counterclaim filed by Jelian in the Rombouts Action was admissible. I agreed with the approachtaken by Allan J. of the British Columbia Supreme Court in Caviglia v. Tenorio (1992), (BC SC), 71 B.C.L.R. (2d)255 and specifically with the conclusion (at p. 262) that "...an admission of liability in a proceeding is admissible in separate proceedings,but not conclusive.

The weight to be given to such an admission must be determined in the particular circumstances in which it wasmade." The question I must now address is: what weight should be given to the admission before me? [68] In Mystar Holdings Ltd v 247037 Alberta Ltd, 2009 ABQB 480, 483 AR 12 [“Mystar”] a party brought an application tostrike pleadings, arguing that the allegations made in the pleadings were inconsistent with allegations made by the same party in priorproceedings.

Brooker J ruled at para 49, that “a party is not free to deliberately argue diametrically inconsistent facts in various actions,thus knowingly advancing irreconcilable positions which are not articulated as alternative claims” [emphasis in original]. At para 60Justice Brooker said: Although both Caviglia and Gerling Global confirm that prior pleadings may be evidence to be weighed at trial, neither deals with theconsequences of inconsistent pleadings in an application to strike the same as an abuse of process.

I do not read either case as stating thatwhen faced with an inconsistent pleading, a party does not have the option of bringing an application to strike the pleading, but is insteadlimited to entering the pleading as evidence to be used in the subsequent hearing. [69] In paras 62-63 of Mystar, Justice Brooker concluded: The doctrine of abuse of process assists in promoting the "integrity of the administration of justice". On the facts before me, 247, withfull knowledge of the facts, should not be able to advance a claim that is diametrically opposed to its earlier position.

In thesecircumstances, the integrity of the justice system would be no less compromised simply because the initial claim was not followedthough [sic] to judgment. This does not mean, as the Respondent suggests, that a factual pleading will forever and irrevocably bind a party in all subsequentpleadings.

Rather, it means that, if a party, with full knowledge of the facts (thus distinguishing itself from a Potter scenario) chooses toargue irreconcilable facts in its pleadings, and where such pleadings are clearly not made in the alternative, allowing such a party tocontinue pursuing an incompatible claim may constitute an abuse of process. [70] I read the Mystar decision as an abuse of process ruling in the context of examining pleadings from a prior proceeding,specifically where a party argues diametrically inconsistent facts that advance irreconcilable positions in two separate actions.

I do notread it as meaning that prior pleadings are admissible as evidence in a separate action. See also First Majestic Silver Corp. v Davila Santos, 2012 BCCA 5, 29 BCLR (5th) 211; Pepper’s Produce Ltd v Medallion Realty Ltd, 2012 BCCA 247. [71] I find admissions by CNRL in the CNRL/Fluor Statement of Claim are admissible as evidence in the present proceedingsagainst CNRL but are not admissible against any other Party. Any other statements made by CNRL in the CNRL/Fluor Statement ofClaim are not evidence and cannot support Mittal’s amendment applications. D.

Evidence relating to allegations of fraud and misrepresentation [72] Mittal’s first Proposed ASD (see

Schedule

I) and Proposed ATPC made new allegations that CNRL and Fluor, among otherthings, intentionally concealed from Mittal and the other Defendants and/or Third Parties that they had ordered and installed the wrongpipe in the Horizon Project. See paras 41-58 of the Proposed ASD. [73] CNRL and Fluor argued these allegations amount to allegations of fraud or high-handed or malicious conduct, which imposea higher evidentiary burden on Mittal. I agree the allegations do amount to allegations of fraud or high-handed or malicious conduct. [74] During oral argument, Mittal filed a revised Proposed ASD (see

Schedule II). The contentious allegations were changed, forexample, from “intentionally concealed” to “did not disclose”. CNRL and Fluor argue these revised allegations continue to amount toallegations of fraud or high-handed or malicious conduct. I agree with these submissions when the new allegations in paras 41-58 of therevised Proposed ASD are read as a whole. All further references to the Proposed ASD are to the revised Proposed ASD.

[ 75 ] I find, as more specifically concluded in

Part I under this heading, that there is no evidence to support these claims by the Mittal Defendants. [ 76 ] A pleading must “include a statement of any matter on which a party intends to rely that may take another party by surprise”, including breach of trust, fraud, malice or ill will, and misrepresentation: Rule 13.6(3).

A pleading must also give the particulars of the alleged breach of trust, fraud, misrepresentation, or wilful default: Rule 13.7. [ 77 ] In Mikisew at para 61, the Court set out the following evidentiary foundation required for amendments alleging fraud: This proposed amendment makes a very strong sweeping allegation of fraud in 1986. The plaintiffs tendered no evidence whatever to support this amendment. Courts are reluctant to allow an amendment to raise a new plea of fraud.

There must be good ground in a particular case to relax the general rule against amending to allege fraud: 2 Holmested & Gale, Ontario Judicature Act , R. 132 s. 10 (1997 rev.). Some cases say that “exceptional circumstances” are needed. And it is impossible to show "good ground" without significant evidence, let alone particulars. [ 78 ] In Balm at para 63 , Côté JA stated that an amendment adding an allegation of fraud “likely requires evidence which will pass a stiffer test than that set out in

Part C of the body of these reasons.”. See also Condominium Corporation No 0321365 v 970365 Alberta Ltd , 2011 ABQB 325 , 518 AR 1; Gendreau v Alberta (Justice) , 2010 ABQB 781 at para 25 , 507 AR 159, where the Master states that the same higher standard of evidence for fraud ought to be met where the amendments assert high-handed and malicious conduct; and Milne v Columbia Health Centre Inc , 2005 ABQB 594 at paras 11-13 , 383 AR 252 wherein Rowbotham J, as she then was, held that particulars of fraud include dates, names and descriptions of the alleged misrepresentation or fraud. E.

Safety Codes Act Amendments [ 79 ] A pleading may include, among other things, a point of law, and if so, the facts that make the point of law: Rule 13.8(1). A pleading must include a statement of any matter on which a party intends to rely that may take another party by surprise: Rule 13.6(3). [ 80 ] The Mittal Defendants apply to amend their pleadings to rely on the Safety Codes Act , RSA 2000, c S-l [ Safety Codes Act ] and related regulations and codes.

The Mittal Defendants say that the proposed amendments are sought to prevent surprise. [ 81 ] The Mittal Defendants proffer the contracts between CNRL and Fluor, CNRL and PCL, and CNRL and TIC as evidence that each respectively owed duties under the Safety Codes Act and related regulations and codes, in conducting their work at the Horizon Project. [ 82 ] The Mittal Defendants argue that the evidence supporting their amendments alleging that CNRL and/or the Third Parties breached their duties under the following legislation , regulations and codes, can be inferred from other evidence in these proceedings.

They argue that CNRL and/or the Third Parties had duties under the legislation, regulations and codes and it can be inferred, from the facts alleged in the statements of claim filed by CNRL in the Two Actions, that they did not satisfy those duties otherwise, the Subject Pipe that was installed in the Upgrader at the Horizon Project would not have been defective. [ 83 ] I find for the following reasons that there is some evidence supporting the Defendants’ proposed Safety Code Act amendments. 1.

Legislation and Codes [ 84 ] I note, as a preliminary matter, that the Safety Code Act amendments are plead for the purpose of preventing surprise. There was some question of whether the regulations or codes were in force at the material times. That need not be decided but must only be

arguable at this preliminary stage of the proceedings. [ 85 ] I find that the following legislation, regulations and codes arguably applied to CNRL as the owner, Fluor as the engineering designer, and the Fabricators as fabricators, manufacturers and/or inspectors of the pipe, pipe modules or MIPs used in the Horizon Project. - Safety Codes Act [ 86 ] The Subject Pipe was used to construct the Pipe Modules and MIPs through which pressurized fluids and gases run at the Horizon Project Upgrader .

The Safety Codes Act applies to fire protection and the design, manufacture, construction, installation, operation and maintenance of, among other things, pressure equipment: s 2(1). “Pressure equipment” is defined under s 1(

y) of the Safety Codes Act as meaning “a thermal liquid heating system and any containment for an expansible fluid under pressure, including, but not limited to, fittings, boilers, pressure vessels and pressure piping systems, as defined in the regulations”. [ 87 ]

Section 5 of the Safety Codes Act refers to owners and those with care and control and states that the “owner of any thing, process or activity to which this Act applies shall ensure that it meets the requirements of this Act, that the thing is maintained as required by the regulations and that when the process or activity is undertaken it is done in a safe manner.”An “owner” is defined under s 1(

v) of the Safety Codes Act as a “...person in charge, a person who has care and control and a person who holds out that the person has the powers and authority of ownership who or for the time being exercises the powers and authority of ownership”. This arguably applied to CNRL as the person who owned or had care and control of the pressure equipment on the Horizon Project. [ 88 ]

Section 6 of the Safety Codes Act refers to those with design duties and states that a “person who creates, alters, has care and control of or owns a design or offers a design for use by others shall ensure that the design complies with this Act and that it is submitted for review [...]”. Fluor was arguably a person with design duties for pressure equipment under the Safety Codes Act in relation to its work on the Horizon Project. [ 89 ]

Section 7 of the Safety Codes Act refers to manufacturers’ duties and states that a “person who manufactures any thing or undertakes a process or activity to which this Act applies shall ensure that the thing, the process or the activity complies with this Act.” The Fabricators were arguably manufacturers under the Safety Codes Act when they undertook the fabrication of the Pipe Modules and MIPs on the Horizon Project. [ 90 ]

Section 8 of the Safety Codes Act refers to a contractor’s duties and states that a “contractor who undertakes construction, operation or maintenance of or builds or installs any thing to which this Act applies shall ensure that this Act is complied with.” Fluor and the Fabricators were arguably contractors referred to in s 8 of the Safety Codes Act in relation to their work on the Horizon Project. - Design, Construction and Installation of Boilers and Pressure Vessels Regulations [ 91 ] The Mittal Defendants assert that the Design, Construction and Installation of Boilers and Pressure Vessels Regulations , Alta Reg 227/1975 (the “DCIBPV Regulation ”) was in force during the material times when the piping modules and MIPs for the Horizon Upgrader were being designed, manufactured and installed.

They assert that this Regulation imposed duties on the Fabricators. In particular, they assert that the Fabricators owed duties under s 57 of the Regulation which provided that before any pressure piping system was tested, the contractor was required to inspect the system to ensure that the materials, construction, identification and installation complied with the Regulation.

It is arguable that this Regulation applied at the material times and that the Fabricators owed duties under this Regulation in relation to the work they performed on the Horizon Project. - Boilers and Pressure Vessels Regulation [ 92 ] The Mittal Defendants assert that the Boilers and Pressure Vessels Regulation , Alta Reg 293/1994 (Alta Reg. 293/1994) [the “BPV Regulation” ] was also in force during the material times and that it imposed duties on CNRL, Fluor and the Fabricators.

Section 5(3) of that Regulation provided that “[n]o person may operate or place under pressure a pressure piping system unless it is inspected and tested in accordance with the standards and codes adopted under the Act.” It is arguable that this Regulation applied at the material times and that it imposed duties on CNRL, Fluor and the Fabricators in regard to the work they performed on the Horizon Project.

- Canadian Standards Association Code B51-97 [ 93 ] The Defendants assert that the Canadian Standards Association Code B51-97 - Boiler Pressure Vessel and Pressure Piping Code [the “ CSA Code B51-97 "] applied during the material times.

Section 4.19.2 of that Code states that where required by the regulatory authority in the province of installation, the piping fabricator or installer shall furnish an acceptable piping data report to the regulatory authority.

Section 8.3 states that “all welded joints in a pressure piping system shall not be painted or covered until inspection by an authorized inspection agency has been completed.” This Code arguably applied to the Fabricators in relation to their work on the Horizon Project. - American Society of Mechanical Engineers Code B31.3-2004 [ 94 ] The Defendants assert that the American Society of Mechanical Engineers, Code B31.3-2004 [the “ ASME Code B31.3 "] applied during the material times. This Code contains rules for piping including those in petroleum refineries.

It prescribes requirements for materials and components and imposes duties on those who design, fabricate, assemble, erect, examine, inspect, and test piping. The Defendants rely on the following sections of this Code: 300 General Statements (

b) Responsibilities

(1) Owner. The owner of a piping installation shall have overall responsibility for compliance with the Code, and for establishing the requirements for design, construction, examination, inspection, and testing which will govern the entire fluid handling or process installation of which the piping is a part. The owner is also responsible for designating piping in certain fluid services and for determining if a specific Quality system is to employed.

(2) Designer. The designer is responsible to the owner for assurance that the engineering design of piping complies with the requirements of this Code and with any additional requirements established by the owner.

(3) Manufacturer, Fabricator and Erector. The manufacturer, fabricator, and erector of piping are responsible for providing materials, components, and workmanship in compliance with the requirements of this Code and of the engineering design.

(4) Owner’s inspector. The owner’s inspector (see para. 340) is responsible to the owner for ensuring that the requirements of this Code for inspection, examination, and testing are met.... ... 340 Inspection 340.1 General This Code distinguishes between examination (see para. 341) and inspection.

Inspection applies to functions performed for the owner by the owner’s inspector or the Inspector’s delegate... 340.2 Responsibility for Inspection It is the owner’s responsibility, exercised through the owners Inspector, to verify that all required examinations and testing have been completed and to inspect the piping to the extent necessary to be satisfied that it conforms to all applicable examination requirements of the Code and of the engineering design.

... 341 Examination 341.1 General Examination applies to quality control functions performed by the manufacturer (for components only), fabricator, or erector. Reference in this Code to an examiner is to a person who performs quality control examinations. 341.2 Responsibility for Examination Inspection does not relieve the manufacturer, the fabricator, or the erector of the responsibility for: (

a) providing materials, components, and workmanship in accordance with the requirements of the Code and of the engineering design ... (

b) performing all requirement examinations; (

c) preparing suitable records of examinations and tests for the Inspector’s use. [ 95 ] The ASME Code B31.3 arguably applied to CNRL as the owner, Fluor as the engineering designer, and the Fabricators as fabricators, manufacturers and/or inspectors in respect of their work on the Horizon Project. F. Contractual Evidence 1.

Fluor/CNRL Contractual Documents [ 96 ] The Defendants rely on a series of contracts between Fluor and CNRL (the “Fluor/CNRL Contractual Documents”) as some evidence supporting their proposed amendments alleging that Fluor owed duties to comply with the above legislation, regulations and codes, as well as duties to CNRL and the Defendants.

I will refer to these contracts as referenced in Emco’s Book of Supporting Materials filed November 25, 2011 (“Emco’s BSM”). [ 97 ] I find that the following Fluor/CNRL Contractual Documents are some evidence of the following: that Fluor was retained by CNRL as an independent contractor to develop detailed design specifications for utilities and offsite facilities at the Horizon Project; that Fluor’s responsibilities included designing the main interconnecting piperacks, or MIPs, for the Horizon Project which included design and procurement of material and equipment including all pipe; that the actual scope of Fluor’s duties, as CNRL’s agent on the Project, was limited in nature; and that Fluor owed duties under the above provisions of the Safety Codes Act , and the provisions of the above Regulations and Codes relating to its work on the Horizon Project. - Fluor/CNRL Engineering Design Specifications [ 98 ] Fluor and CNRL entered into the Engineering Design Specifications (EDS), Utilities and OffSites Contract, covering the period from February 2, 2004 to November 1, 2004 (the “Fluor/CNRL EDS”): see Emco’s BSM, Tab J. [ 99 ] The Fluor/CNRL EDS states that Fluor shall be an independent contractor and shall have responsibility for and control over the details and means of performing the work.

The "Scope of Work," under s. 3, is entitled "Engineering Design Specifications for the Utilities and Off-Sites Units." The work in this Contract is oriented around engineering and design. The only exception is if there was an agency pursuant to a specific change order: para. 3.7. - Fluor/CNRL Change Order #1

[ 100 ] The term of the Fluor/CNRL EDS was extended from November 1, 2004 to December 31, 2004 by Change Order #1(“Change Order #1"): see Emco’s BSM, Tab K. The contract states that Fluor is to provide engineering and design work for the period February 2 to November 1, 2004.

Paragraph 4 refers to the limited agency appointment stating that in order to facilitate Fluor’s provision of procurement services as part of the work, “owner appoints contractor as owner’s agent to procure such services, machinery, equipment or materials [...] and the contractor agrees to accept such appointment”, which is defined as the limited agency appointment. The clause goes on to limit the agency to the preparation, execution and delivery of purchase orders and other instruments required in connection with the purchase, transportation and importation of goods.

The contract also includes a positive indemnification obligation by Fluor in favour of CNRL. - Fluor/CNRL Change Order #2 [ 101 ] The term of the Fluor/CNRL EDS was further extended from January 1, 2005 to January 31, 2005 by Change Order #2 (“Change Order #2"): see Emco’s BSM , Tab L. Paragraph 4.1 similarly identifies Fluor as an "independent contractor" in all respects, other than as may be identified in a Change Order.

It focuses on Fluor’s engineering and design duties and limits Fluor’s limited agency appointment to the execution of new contracts for procured items. [ 102 ] This Contract states that Fluor shall exercise the skill, care, diligence, efficiency and judgment in the performance thereof of a prudent, diligent, skilled and experienced engineering and procurement firm possessing specialized expertise: s. 8(a) - Fluor/CNRL Engineering Procurement and Construction Management Resources Contract [ 103 ] The Fluor/CNRL EDS, as well as the associated Change Order #1 and Change Order #2, were replaced by the Engineering Procurement and Construction Management Resources Contract (the “Fluor/CNRL EPCMR”) effective January 3, 2005: Emco’s BSM, Tab M.

The Contract states that Fluor is an independent contractor and performs its obligations and duties under the Contract at its own risk and responsibility. It states that Fluor does not represent CNRL or act on behalf of CNRL or in its name, except as specifically allowed pursuant to the limited agency appointment contained in s.

Section 13 of the Fluor/CNRL EPCMR states that Fluor has a limited agency appointment related only to execution of new contracts for procured items under the terms of that Contract. Fluor’s scope of work otherwise remains focussed on engineering and design for various systems of the Horizon Project Upgrader, including determining the precise specifications for the pipe for the Project. [ 104 ]

Section 13.6 of the Fluor/CNRL EPCMR states that the Work shall be performed in accordance with any applicable edition or revisions of Standards and Codes in effect. [ 105 ] There is evidence that on April 7, 2005, CNRL revoked the limited agency appointment that existed pursuant to the Fluor/CNRL EPCMR: see the Fluor/CNRL Monthly Progress Report, dated April 7, 2005, Emco’s BSM, Tab P. 2.

Fabricators’ Contractual Documents [ 106 ] The Defendants also rely on the contract between CNRL and PCL, the contract between CNRL and TIC, and the contract between CNRL and Willbros as some evidence supporting the Safety Code Act amendments and other proposed amendments they seek to make with respect to these Third Parties. [ 107 ] I find that these contracts are some evidence that the Fabricators owed duties under the above provisions of the Safety Codes Act , DCIBPV Regulation , BPV Regulation , CSA Code B51-97 , and ASME Code B31.3 relating to their work on the Horizon Project.

There is also some evidence based on the provisions of the above legislation, these contracts, and the allegations made in CNRL’s

Amended Statements of Claim in the Two Actions that the Fabricators breached their duties under the Act and the above Regulations and Codes. [ 108 ] PCL and CNRL entered into the a Major Equipment Purchase Agreement Purchase Order (the “PCL/CNRL Contract”): see Exhibit A to the Affidavit of James Whiting sworn July 15, 2011. [ 109 ] TIC and CNRL entered into a Major Equipment Purchase Agreement Purchase Order (the “TIC/CNRL Contract”): see Exhibit B to the Affidavit of James Whiting sworn July 15, 2011. [ 110 ] Willbros and CNRL entered into a Major Equipment Purchase Agreement Purchase Order (the “Willbros/CNRL Contract”): see Exhibit F to the Affidavit of Ken Hesse sworn July 14, 2011. [ 111 ] The PCL/CNRL Contract, the TIC/CNRL Contract, and the Willbros/CNRL Contract are substantially the same.

Each is some evidence that those Fabricators had responsibilities, in conducting their work for the Horizon Project, to comply with the Safety Codes Act and the above Regulations and Codes. Under each of those Contracts, PCL, TIC, and, Willbros undertook extensive responsibilities in respect of the fabrication of the piping for the Horizon Project. Exhibit One to each of the Contracts is the Interconnecting Piperack Modules Fabrication and Assembly Scope of Work. The Fabricators scope of work included, among other things, responsibilities: (

a) for pipe fabricating, piping system installation into modules, and hydrotesting (s 6.5); (

b) to perform specific mechanical work including all work required to complete the piping modules, which included obligations to receive, inspect, handle and store all “free-issued” material supplied by the [CNRL] (“free-issued material” is defined in s. 9.1 to include “pipe, fittings, flanges and valves”) (s 7.2.1); (

c) to perform all inspections and tests as indicated in standards, exhibits and in accordance with the responsible regulatory bodies and all applicable codes (s 7.2.1.7); (

d) to ensure quality assurance, for example, to have prime responsibility for performing quality Work [as defined in the Contract] and to conduct the quality control measures necessary to ensure Work [as defined in the Contract] conforms to established codes, industry practices, drawings and specifications (s 12.1.1). [ 112 ] There is also some evidence that PCL and TIC certified, among other things, that the materials, construction and workmanship of the piping fabrication conformed to the applicable piping Codes: see Alberta Boilers Safety Association (“ABSA”) Construction Data Report for Piping Systems signed by PCL, (CNR-015163/1 - CNR-015163/4), Mittal’s Book of Exhibits, Tab H-1 (the “PCL ABSA Construction Data Report”); and ABSA Construction Data Report for Piping Systems signed by TIC, (TIC001729 - TIC 001730) (the “TIC ABSA Report”). [ 113 ] The Defendants also claim a right to contribution and indemnity under the indemnity clause in the PCL/CNRL Contract and the TIC/CNRL Contract.

The indemnity clause is found in

Schedule A,

Article 15.1of all the Contracts and reads as follows: 15.1 Injury or Damage Supplier waives all rights of recourse against Owner Group and Other Contractor Groups, and, from the Effective Date to the completion of the Work, shall be liable for and, as a separate and independent covenant, shall indemnify, defend and hold harmless Owner Group and Other Contractor Groups for any damage or loss to the Project Assets from any cause whatsoever contributed to, directly or indirectly, by Supplier Group and arising out of or in relation to any Work performed by any member of the Supplier Group on the Project site in relation to performance of the Agreement. [ 114 ] The

Schedule A,

Definitions and

Interpretation Section, in each of the three Contracts defines the following:

“Other Contractor Groups” as “... all Persons (other than Supplier Group) who enter into a contract with Owner [CNRL] to provide any goods or services required for the construction of the Project, their respective Affiliates, subcontractors of any tier, suppliers and vendors of any tier and Personnel thereof and, where applicable, may mean anyone of them. “Project” “means the oil sands mine, bitumen production extraction plant and bitumen upgrading plant in the Fort McMurray area described in EUB Decision 2004-005 (Report of the Joint Panel established by Alberta Energy and Utilities Board and the Government of Canada).” “Project Site” “means the location on which the Project is to be constructed.” [ 115 ] The Defendants argue that they are included in the definition of “Other Contractor Groups” under each of the respective Contracts and are thereby entitled to be indemnified by the PCL and TIC.

They argue that this contractual indemnity entitles them to contribution and indemnity for any damages awarded against them for any injury suffered by CNRL in the Two Actions. [ 116 ] PCL and TIC argue that these indemnity clauses cannot be interpreted as extending to the Defendants for a number of reasons, including for the reason that the damage CNRL claims it suffered relates to work performed at the “Project Site”, while the Fabricators did not perform their work at the “Project Site”. [ 117 ] The Third Parties need only provide some evidence in support of their amendments and the above evidence suffices.

It is arguable that the Defendants are indemnified under the above indemnity clauses in each of the PCL/CNRL Contract and the TIC/CNRL Contract. G. Emco’s Proposed Amendments [ 118 ] The substantive amendments in Emco’s Proposed Amended Third Party Claim (“Emco’s ATPC”) are supported by the evidence. [ 119 ] Emco’s BSM contains the evidence upon which Emco relies in support of its proposed amendments. [ 120 ] The majority of Emco’s proposed amendments do not require evidence as they are trivial, draw conclusions from facts already pleaded, or are otherwise ancillary.

To the extent that Emco is required to produce some evidence substantiating its proposed amendments, the evidence provided meets or exceeds the applicable evidentiary threshold. 1.

CNRL’s Amended Statement of Claim [ 121 ] The viability of Emco’s proposed amendments depend, in part on the allegations made by CNRL against Emco, which are contained in paras 2 and 16- 40 of CNRL’s Statement of Claim (“CNRL’s ASC”). [ 122 ] CNRL claims that the damage it suffered (see paras 30 and 31) was caused by Emco’s breach of contractual and common law duties of care owed to CNRL, including duties: (1) to ensure the Subject Pipe met the A106B Standard (para 18); (2) to ensure the Subject Pipe was safe and otherwise fit for its intended purpose (see, for example, paras 20, 26, 28, 30, 32, 34 to 37); (3) to inspect, test and supervise during manufacturing, transportation and handling, and delivery of the Subject Pipe (para 36); and (4) to warn (para 38).

CNRL also alleges that Emco and Mittal made negligent misrepresentations to CNRL including that the Subject Pipe satisfied Emco’s contractual warranties and was suitable for its intended purpose and that CNRL reasonably relied upon those representations, to its detriment, which also caused or contributed to the damage that CNRL suffered (paras 26-27).

2. Emco’s Amended Statement of Defence [ 123 ] Emco’s ATPC incorporates the allegations made in Emco’s Amended Statement of Defence (“Emco’s ASD”). [ 124 ] Emco’s ASD denies all of the allegations made against it and pleads that if the pipe was defective, it was proximately caused by the negligence and wrongful conduct of others, including the negligence or contributory negligence of

(1) CNRL;

(2) Fluor, both in its own right and as an agent of CNRL to the limited extent that it was an agent; and (3) the Fabricators with whom CNRL and Fluor contracted to construct the Pipe Modules, including TIC and PCL: para 4(b)(iv). Emco also pleads that any damage suffered by CNRL was caused by the manufacturing negligence of Mittal Roman, and breaches of duties of care and duties to warn owed to CNRL and Emco by the parties from whom Emco obtained the pipe for CNRL including Mittal Roman, Mittal NA, Vass, BNB, Trident, and Pioneer. Emco’s ASD also pleads that if the pipe was defective and CNRL suffered damage as a result, such damage was, among other things, subject to significant discount

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