Hur v., 2013 ABQB 208

Court of Queen ’ s Bench of Alberta Citation: Hur v. 726913 Alberta Ltd., 2013 ABQB 208 Date: 20130405 Docket: 0903 16585 Registry: Edmonton Between: Tae Young Hur and Tae Young Hur Holdings Ltd. Plaintiffs - and - 726913 Alberta Ltd. and Sang Ok Jang Defendants Corrected judgment: A corrigendum was issued on April 12, 2013; the corrections have been made to the text and the corrigendum is appended to this judgment. _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice Russell Brown _______________________________________________________ I.

Introduction [ 1 ] The Plaintiffs, Tae Young Hur and Tae Young Hur Holdings Ltd., appeal the order of Master W. Breitkreuz made April 26, 2012 made in favour of the Defendants, 726913 Alberta Ltd. and Sang Ok Jang. Specifically, Master Breitkreuz:

1. denied the Plaintiffs' application to amend their Statement of Claim; 2. summarily dismissed the Plaintiffs' claim against the Defendants; 3. permitted the Defendants (who are also Plaintiffs by Counterclaim) to proceed with their Counterclaim against the Plaintiffs (who are also Defendants by Counterclaim), notwithstanding the dismissal of the Plaintiffs' claim; and 4. directed the Plaintiffs to pay to the Defendants, forthwith, costs in the sum of $12,500.00. II.

Background [ 2 ] On January 3, 2007, the Plaintiff Tae Young Hur "and/or [his] corporate nominee" offered to purchase from the Defendant 716913 Alberta Ltd. (the "Corporate Defendant") all its assets, comprising principally a motel and lands in Fort Saskatchewan. The parties agree that the Plaintiff Tae Young Hur Holdings Ltd. (the "Corporate Plaintiff") was Mr. Hur's nominee for the purposes of this agreement. [ 3 ] For the Corporate Defendant, the Defendant Sang Ok Jang accepted Mr.

Hur's offer on January 8, 2007. [ 4 ] The parties' agreement (the "Asset Purchase Agreement") contained a number of buyer's conditions to be satisfied or waived in writing by February 28, 2007 and March 31, 2007 respectively. It also contained a closing date of April 30, 2007, and further provided: 7. CONDITIONS FAVOURING THE BUYER ...

If the Buyer is not completely satisfied with any of the conditions and does not remove the Conditions Precedent in writing in the time specified above (the "Buyer's Conditions Date"), then this Offer becomes null and void and all deposits shall be refunded without deductions to the Buyer. ... 15. ADDITIONAL TERMS All time periods, deadlines and dates in this Contract shall be strictly followed and enforced. [ 5 ] The parties agree that they rescinded the Asset Purchase Agreement by mutual agreement. They had not, however, always been ad idem on this point. In his affidavit sworn April 15, 2011, Mr.

Hur deposed: 6. That all conditions precedent in favour of the Purchaser were satisfied by March 31, 2007 and the Purchaser went into possession of and began to operate the motel immediately following March 31, 2007. 7. That ... the closing date for the purchase of the motel was April 30, 2007. That Sang Ok Jang who is the principle [ sic ] of 726913

7. That ... the closing date for the purchase of the motel was April 30, 2007. That Sang Ok Jang who is the principle [ sic ] of 726913 Alberta Ltd. and I agreed that the payment of the purchase price would be extended beyond April 30, 2007 and paid by instalments. Between May 23, 2007 and December 7, 2007 the Purchaser paid a total $700,000.00 to 726913 Alberta Ltd. on account of the purchase of the motel. A further $480,000.00 was paid July 27, 2008. ... 8.

That in September 2008 Sang Ok Jang [...] told me that he was no longer prepared to proceed with the agreement for the purchase of the motel. [ 6 ] (Although Mr. Hur's affidavit does not explicitly treat Mr. Jang's statement alleged in paragraph 8 as repudiating the Asset Purchase Agreement, as will be seen his Statement of Claim does.) [ 7 ] Mr. Hur was questioned on his affidavit on April 28, 2011. At that time, he testified to a different state of affairs (page 22, line 25 to page 23, line 13): Q OK. I'll try and break that down.

So you were pointing to the first offer, you are pointing to the first offer, you are pointing to Exhibit A to your Affidavit on April 11 and you're calling that the first offer? A Yes, that's the first offer. Q This is an offer that is the first offer Exhibit A is an Offer to Purchase Assets, that was your understanding? A Yes, that's the asset purchase offer. Q Okay. And you understood that the first offer Exhibit A was an Offer to Purchase all of the assets of the hotel, motel Park Avenue? A Yes.

Q Now would you agree with me that you did not proceed with this offer because you agreed to buy some of the shares instead of the numbered company? A The answer is yes. [ 8 ] In short, Mr. Hur's own evidence did not support the allegation in his Statement of Claim that the Asset Purchase Agreement failed to close because Mr. Jang repudiated it. Rather, Mr. Hur's evidence was that he had decided not to proceed with an asset purchase, because he had instead resolved upon purchasing shares in the Corporate Defendant. [ 9 ] Neither party deposes to when this change of plans occurred.

The terms of the proposed Amended Statement of Claim which the Plaintiffs seek permission to file allege that "[s]hortly after January 8, 2007, the Defendant Jang on behalf of 726913 advised that 726913 would not proceed with the sale of the motel to the Plaintiffs." [ 10 ] Irrespective of how and when the parties terminated their bargain under the Asset Purchase Agreement, they agree that all further dealings between them were in respect of a share purchase. The proposed Amended Statement of Claim alleges that, in April 2007, Mr. Hur and Mr.

Jang entered into an agreement (the “ Share Purchase Agreement ” ) that Mr. Jang would sell to Mr. Hur 22% of the shares in the Corporate Defendant ’ s capital stock, presumably in return for payment of some amount (although that is not pleaded). It further alleges that the Share Purchase Agreement was amended twice: first, on an unspecified date, to require payment by Mr. Hur of

$800,000 in return for a 25% share in the Corporate Defendant; and second, in May 2008, to reflect the purchase by Mr. Hur of all of the shares. The proposed Amended Statement of Claim does not describe the purchase price agreed to in this second amendment, except to say that “ it was based upon [the motel] having a fair market value of $900,000.00. ” [ 11 ] Neither the Share Purchase Agreement, nor any of its alleged amendments, were reduced to writing. [ 12 ] The parties disagree on the amounts paid under, and the termination of, the Share Purchase Agreement. The Plaintiffs say that Mr.

Hur paid $1,280,000.00 and that, in September 2008, Mr. Jang repudiated the Share Purchase Agreement. The Defendants say the Plaintiffs paid only $1,210,000.00 and, while they agree that the Share Purchase Agreement was terminated in September 2008, they say it was triggered by Mr. Hur ’ s request to be released from the Share Purchase Agreement. They add, moreover, that they mistakenly repaid Mr. Hur too much ($1,350,000.00 instead of the $1,210,000.00 they say was owed).

The Plaintiffs acknowledge no overpayment. [ 13 ] In short, the relationship between the parties took the form of two distinct agreements: the written Asset Purchase Agreement for the purchase of a motel; and the unwritten Share Purchase Agreement for the purchase of stock in the motel ’ s corporate owner. The parties failed to close the Asset Purchase Agreement, pursuing instead (and also unsuccessfully) the Share Purchase Agreement. The Pleadings [ 14 ] On October 22, 2009, the Plaintiffs filed their Statement of Claim. Its contents relate exclusively to the Asset Purchase Agreement.

While some of the background matters I have already recounted in connection with the Share Purchase Agreement are also described in the Statement of Claim, they are alleged in the Statement of Claim to have occurred in connection with the Asset Purchase Agreement. In particular, the alleged $1,280,000.00 payment – which the Plaintiffs ’ submissions before this Court say was paid “ on account of the purchase from [Mr.

Jang] of shares in [the Corporate Defendant] ” – is said in the Statement of Claim to have been made “ on account of the acquisition of the motel and the Motel Lands. ” [ 15 ] The Statement of Claim further alleges that in September 2008 Mr. Jang on behalf of the Defendants purported to repudiate the Asset Purchase Agreement, and that the Plaintiffs do not accept the Defendants' repudiation.

It seeks an order requiring specific performance or in the alternative damages of $5,434,165.00, interest, punitive damages of $250,000.00 and costs on a full indemnity basis. [ 16 ] Shortly after filing the Statement of Claim, the Plaintiffs also registered a Certificate of Lis Pendens against the subject lands. It remained on title until it was ordered discharged by Master Breitkreuz on October 18, 2011. [ 17 ] The Statement of Defence, filed March 18, 2010, alleges inter alia that the money paid by Mr.

Hur (again, $1,210,000.00, not $1,280,000.00) was paid "pursuant to a verbal, conditional, Share-purchase Agreement between the Shareholders of the Corporate Defendant and the Plaintiff Hur." The Defendants also plead the Limitations Act , RSA 2000, c. L-12 and the overpayment, and by Counterclaim seek relief for unjust enrichment in the amount of the overpayment. [ 18 ] In their Reply and Statement of Defence to Counterclaim filed June 1, 2010, the Plaintiffs repeat the allegations in the Statement of Claim and deny the overpayment.

The Reply also reiterates that the only agreement between the parties was the Asset Purchase Agreement: The only agreement between the Plaintiffs and the Defendants was for the purchase of the Park Avenue Motel. The Plaintiff claims and the facts are that the Defendants received payments pursuant to that agreement such that … payments made by the Plaintiff and accepted by the Defendants were in part performance of the Purchase Agreement referred to in the Statement of Claim … ." The Proposed Amendments [ 19 ] On March 20, 2011, the Defendants applied for

Summary Judgment. On October 7, 2011 - nearly seven months later, and

eleven days before the application was set to be heard - the Plaintiffs applied for permission to amend their Statement of Claim in the form set out in the proposed Amended Statement of Claim (the "Amended Claim"). [ 20 ] The Amended Claim retains only a few paragraphs of the Statement of Claim, describing the parties and recounting the Asset Purchase Agreement.

Whereas the Statement of Claim was concerned exclusively with the Asset Purchase Agreement (its conditions, the repudiation and the losses, all of which were said to entitle the Plaintiffs to specific performance), the Amended Claim ’ s brief reference to the Asset Purchase Agreement recasts that agreement as a preliminary event that preceded the real dispute between the parties. [ 21 ] As to that real dispute, the substance of the Amended Claim relates to the Share Purchase Agreement.

As I have already noted, it alleges an original agreement for 22% of the shares in the Corporate Defendant, then 25%, then all of them. It describes, somewhat unclearly, the purchase price agreed to in the Share Purchase Agreement. It alleges that money was advanced by Mr. Hur to Mr. Jang in part performance of the Share Purchase Agreement entitling Mr. Hur to 25% of shares in the Corporate Defendant. And, in addition to a declaration that Mr. Jang holds 25% of the shares in the Corporate Defendant in trust for Mr. Hur, it seeks damages of $1,000,000.00 and costs for breach of the Share Purchase Agreement.

The Learned Master's Decision [ 22 ] Master Breitkreuz heard the applications on October 18, 2011 (at which time he ordered the Certificate of Lis Pendens to be discharged, but reserved on the application to amend and the application for

Summary Judgment). On April 26, 2012, Master Breitkreuz issued brief reasons denying the application to amend and granting

summary judgment. In those reasons, he cited our Court of Appeal ’ s decision in DeSoto Resources Limited v. Encana Corporation , 2010 ABCA 110 at para. 10 , which states:

Section 6 allows the addition of new claims because the defendant will not be prejudiced or surprised since they arise out of the same conduct, transaction and events. Therefore, one test of whether a new claim is involved is to examine the extent to which a new set of conduct, transactions and events would have to be proven at the trial. The documents and other evidence that would be needed to prove the appellant's new allegations would differ significantly from those required to prove the originally pleaded facts. [ 23 ] The learned Master then made the order recounted above (under "Introduction"). III.

The Parties' Arguments [ 24 ] The Plaintiffs advance three arguments. 1. Permitting the amendments would meet the purpose of determining the real question in issue between the parties, for which purpose our Court of Appeal has stated that an amendment should be permitted, no matter how careless or late, unless there is irreparable prejudice to the other side. This generosity towards amendments is affirmed by the Limitations Act , R.S.A. 2000, c. L-12 which, in repealing the Limitations of Actions Act , R.S.A. 2000, c.

L-15 , codified a "functional" approach such that amendments should be allowed at any time unless a defendant can show that it would be prejudiced in a manner that cannot be addressed in costs. 2. The Statement of Defence itself raised the matter of the Share Purchase Agreement. This distinguishes this case from DeSoto Resources , upon which the learned Master relied, because the Defendants cannot be said to be prejudiced when the Plaintiff now seeks to raise it in the Statement of Claim. 3.

It would be unfair to permit the Defendants, as the learned Master did, to proceed with a Counterclaim relating to the Share Purchase Agreement, while denying the Plaintiff the opportunity of claiming on that same agreement.

[ 25 ] The Defendants also advance three arguments: 1. The Amended Claim is brought after the expiry of the two-year limitation period. (The Plaintiffs concede this). Further, it cannot be saved by Section 6(2) (

b) of the Limitations Act (which allows claims to be added to a proceeding after the expiration of the limitation period) because the Amended Claim is not, as Section 6(2)(

b) requires in these circumstances, "related to the conduct, transaction or events described in the original pleading in the proceeding". The Amended Claim substitutes a different agreement (the unwritten Share Purchase Agreement) for the written Asset Purchase Agreement, and seeks different relief.

In particular, the Statement of Claim's plea for specific performance or alternatively damages of $5,434,165.00 and punitive damages of $250,000, should be contrasted with the relief sought in the Amended Claim, comprising a declaration of ownership of shares, damages of $1,000,000 for breach of contract and no punitive damages. (I also observe that the Statement of Claim seeks costs on a full indemnity basis, while the Amended Claim seeks only "costs of this action"). (The Plaintiffs submit in reply that the Court should interpret Section 6(2) (b)'s reference to "the original pleading" (to which the allegations in the Amended Claim must relate) as meaning "all original pleadings, namely any Statement of Claim filed, or Statement of Defence or Counterclaim filed." The argument here is that, because the Share Purchase Agreement was described in the Statement of Defence, and because the Statement of Defence ought to qualify as "the original pleading", the Plaintiffs can point to conduct, a transaction or an event to which the Amended Claim is related.

The Plaintiffs also urge that a broad meaning be imputed to the Section 6(2) (b)'s term "related", such that different claims arising from an ongoing dispute between the parties can be sufficiently related to the conduct, transactions or events described in the original pleadings.) 2. In the alternative, the Statement of Claim which is sought to be amended was itself filed out of time, and that fact alone should determine the question of amendment in the Defendants' favour. In other words, amendments under

Section 6 of the Limitations Act should not be permitted where the Statement of Claim was filed after the expiry of the limitation period. (The Plaintiffs agree that amendments ought not to be allowed where the Statement of Claim was filed after the expiry of the limitation period, but they say that the Statement of Claim here was filed in time.) 3. Finally, the Plaintiffs should not be allowed to amend in these circumstances, which they say are characterized by bad faith in that the amendment was sought solely for the purpose of frustrating the Defendants' application for

summary judgment, and of causing expense and delay. (The Plaintiffs deny bad faith, explaining that the Amended Claim was prompted by Mr. Hur's recognition that he was "mistaken" in having "maintained the view of events" such that the parties' relationship after April 2007 was governed by the Asset Purchase Agreement, whereas it was actually governed by the Share Purchase Agreement. The Plaintiffs also submit that the mere fact that a

summary judgment application triggers an application to amend is, without more, not sufficient to establish bad faith.) IV. Analysis Standard of Review [ 26 ] An appeal from a Master is de novo . The standard of review which I am to apply on all issues is correctness. (Bahcheli v. Yorkton Securities Inc. , 2012 ABCA 166 at para. 20 ; Boyd v. Cook , 20113 ABCA 27 at para. 24). Procedure on Concurrently Heard Applications

[ 27 ] Where an application for

summary judgment is heard concurrently with a cross-application for permission to amend pleadings, the Court must determine the amendment application first before determining the application for

summary judgment. ( Elbow River Marketing Limited Partnership v. Canada Clean Fuels Inc. , 2011 ABCA 258 at para. 3 ) It appears, from the face of Master Breitkreuz's order, that he followed this procedure, deferring consideration of

summary judgment until the state of the pleadings had been determined: he first denied the Plaintiffs' application to amend the Statement of Claim, then summarily dismissed the Plaintiffs' claim against the Defendants. The Plaintiffs' Application to Amend the Statement of Claim

(1) Rule 3.65 and the General Rule [ 28 ] R. 3.62(1)(b)(ii) of the Alberta Rules of Court provides that a party may, after pleadings close (and where they are not seeking the addition, removal, substitution or correction of the name of a party), amend its pleading with the Court's prior permission in accordance with Rule 3.65. [ 29 ] Rule 3.65(1) simply provides that, "before or after close of pleadings, the Court may give permission to amend a pleading." While Rule 3.65(1) did not carry forward the predecessor Rule 132's purposive language of "determining the real question in issue between the parties", this Court has previously held that Rule 1.2(2)(a), which provides that the Rules are intended to be used "to identify the real issues in dispute", operates to confine permitted amendments to those which identify the real issues in dispute. ( Manson Insulation Products Ltd. v.

Crossroads C & I Distributors , 2011 ABQB 51 at paras. 42-44 ; Quadrangle Holdings Ltd. v. Coady , 2012 ABQB 22 at paras. 21-23 .). [ 30 ] The general rule in Alberta provides that any pleading can be amended to achieve that purpose, now matter how late or careless is the party seeking to amend. ( Balm v. 3512061 Canada Ltd. , 2003 ABCA 98 at para. 43 ; Milfive Inv. v. Sefel , 1998 ABCA 161 at para. 3 ). The Court's discretionary power to allow amendments is therefore to be exercised generously. ( Andritz Ltd. v.

Quality Fabricating and Supply Ltd. , 2010 ABQB 101 at para. 43 ). [ 31 ] It follows that only a modest amount of evidence is needed to support an amendment ( C.H.S. v. Alberta (Director of Child Welfare) , 2006 ABQB 528 at para. 11 , aff'd 2006 ABCA 355 ). In this case, the Court has before it no affidavit of Mr. Hur or of anyone else on the Corporate Plaintiff's behalf in support of any of the amendments. (An earlier affidavit sworn by Mr. Hur on April 15, 2011 in opposition to the Defendants' application for

summary judgment speaks only to the pleadings in the Statement of Claim, not in the Amended Claim). The Plaintiffs point to Mr. Hur's evidence given during questioning (that he did not proceed with the Asset Purchase Agreement because he chose instead to pursue the Share Purchase Agreement) as explaining why the proposed amendments are sought, because it shows that only then was "the true nature of the relationship" revealed. The difficulty is that the "true nature of the relationship" had never been hidden from or otherwise unknown to the Plaintiffs. What happened during the questioning of Mr.

Hur was that he admitted its "true nature", which his something he would have known at the time of filing the Statement of Claim. Mr. Hur's evidence under questioning does not furnish an explanation for seeking the proposed amendments, and the Court must decide this application on the basis that there is no evidence to support them. ( C.H.S., supra at para. 13).

(2) Exceptions to the General Rule [ 32 ] There are recognized exceptions to the general rule that any pleading can be amended irrespective of lateness or carelessness. The Defendants rely on two of them: (1) the amendment seeks to add a new cause of action after the expiry of a limitation period; and (2) there is an element of bad faith associated with the failure to plead the amendment in the first instance. ( Foda v. Capital Health Region , 2007 ABCA 207 at para. 10 ; C.H.S. , supra , at para. 11; Dow Chemical Canada Inc. v. Nova Chemicals Corporation , 2010 ABQB 524 at paras. 20-21 ; Canadian Deposit Insurance Corp. v. Canadian Commercial Bank , 2000 ABQB 440 at para. 11 ). (

a) Amendment after Expiry of a Limitation Period [ 33 ] The parties are agreed that the Plaintiffs' application for permission to file the Amended Claim is brought after the expiry of the applicable limitation period under Section 3(1) of the Limitations Act .

[ 34 ] Their agreement is well-founded. On these facts, Section 3(1) would operate to require, generally, that the Plaintiffs seek a remedial order arising from the alleged breach of the Share Purchase Agreement within two years after the date of the breach. As to the date of the alleged breach of the Share Purchase Agreement, Mr. Hur agreed under questioning that he was refunded the money he had paid in part performance of the Share Purchase Agreement in September 2008, and the Plaintiffs' own submissions were that "[i]n September 2008, Jang purported to terminate the agreement between Jang and Hur".

This timing (but not the specific conduct) is affirmed by Mr. Jang's evidence that he agreed to rescission of the Share Purchase Agreement in September 2008). The time for suing upon the subject matter of the Amended Claim therefore began to run, at the latest, on September 30, 2008, and the limitation period under Section 3(1) would have expired, at the latest, on September 30, 2010. As the Plaintiffs did not apply for permission to file the Amended Claim until October 7, 2011, the Amended Claim is brought well outside the limitation period. [ 35 ]

Section 6 of the Limitations Act provides, in part: Claims added to a proceeding 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 the added 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. …

(5) Under this section, (

a) the claimant has the burden of proving (

I) that the added claim is related to the conduct, transaction or events described in the original pleading in the proceeding … . [ 36 ] In short, if the Plaintiffs can establish that the Amended Claim "is related to the conduct, transaction or events described in the original pleading in the proceeding", this Court (subject to the matter of bad faith, discussed below) may exercise its discretion to grant the Plaintiffs permission to make the proposed amendments, notwithstanding the expiry of the limitation period. [ 37 ] That the Defendants themselves raised in their Statement of Defence the matter of the Share Purchase Agreement goes to two of the Plaintiffs' submissions: (1) the Defendants cannot be said to be prejudiced by the Amended Claim, which ought to be determinative of this matter; and (2) Section 6(2) (b)'s reference to "the original pleading in the proceeding" should be read as if it said "original pleadings in the proceeding", in which case the Statement of Defence's reference to the Share Purchase Agreement might suffice to support the Amended Claim. [ 38 ] I note that the Defendants do not allege that their ability to defend against the Amended Claim is prejudiced by its lateness.

[39] In support of the Plaintiffs' submission that the absence of prejudice is determinative (such that the Court ought on that basisalone to permit them to file the Amended Claim), they rely upon the decision of our Court of Appeal in Neis v. Yancey, 1999 ABCA 272at para. 22, which anticipated the effect of what is now the Limitations Act.

For the Court, Russell J.A. wrote: That legislation would now permit a claim to be added after the limitation period to add a new defendant, if the added claim related tothe event in the original pleadings, unless the defendant can prove that he or she did not receive, within the limitation period, sufficientknowledge of the claim to avoid being prejudiced in maintaining a defence.

But as that provision was not in effect at the time the actionarose, it cannot be relied on in this case. [40] The Plaintiffs further submit that the determinative quality of the absence of prejudice is the effect of the "functional"approach referred to above as having been codified in the Limitations Act. This approach was recognized by our Court of Appeal in StoutEstate v.

Golinowski Estate, 2002 ABCA 49, where the "functional" approach and its contrasts with the competing "analytical" approachwere explained by Wittmann J.A. (as he then was, at paras. 97-100): Two approaches have developed in assessing whether pleadings can be amended outside the limitation period: the functional approach,which presumes that amendments will be allowed unless the party resisting amendment can show it will suffer actual prejudice; and theanalytical approach, which presumes that amendments will not be allowed, even in the absence of prejudice, unless the party seekingamendment can show special circumstances.

The two approaches proceed from opposite assumptions, and cannot be merged: Madill v.Alexander Consulting Group, 1999 ABCA 231, 237 A.R. 307 at para. 59. The analytical approach was prescribed in Weldon v. Neal (1887), 19 Q.B.D. 394 at 395 (C.A.), and modified by the Supreme Court ofCanada in Basarsky v. Quinlan, (SCC), [1972] S.C.R. 380, [1972] 1 W.W.R. 303. The functional approach was firstadvocated by Professor Watson in "The Amendment of Proceedings after the Expiry of Limitation Periods" (1975), 53 Can. Bar Rev.237.

He suggested that the effect of a limitation statute must be reconciled with the competing principle found in the broad power ofamendment, and that a restrictive approach might impair the just determination of the real matters in dispute. This Court, in cases governed by the former Limitations of Actions Act, concluded that the analytical approach is the proper one:Madill; Neis v. Yancey, 1999 ABCA 272, (1999), 250 A.R. 19, 180 D.L.R. (4th) 463 (C.A.); Cunningham v. Irving-Adams, 2001 ABCA38, 277 A.R. 115.

However, in Neis the Court foreshadowed the possible adoption of a different approach, noting that the newLimitations Act would "permit a claim to be added after the limitation period [...] unless the defendant can prove that he or she did notreceive, within the limitation period, sufficient knowledge of the claim to avoid being prejudiced in maintaining a defence": at para. 22.Other provinces have also enacted legislation adopting the functional approach. See The Queen's Bench Act, 1998, S.S. c. Q-1.01, s. 30;Limitation Act, R.S.B.C. 1996, c. 266, s. 4(4).

The approach advocated by Watson more than 25 years ago has now made its way into s. 6 of the Limitations Act. As the analyticalapproach has been replaced by a legislated functional approach, special circumstances are no longer required to amend pleadings.Instead, a court must evaluate whether each of the requirements of s. 6 are made out in the circumstances of the particular case. [41] The Defendants rely on the passage of DeSoto Resources Limited v. Encana Corporation, supra at para. 10 cited by thelearned Master in his decision.

They submit that prejudice is an independent basis for refusing to exercise discretion to permit anamendment after the expiry of the applicable limitation period. While, therefore, the existence of prejudice provides a basis for the Courtto decline permission to amend even where the proposed amended allegations are related to the conduct, transaction or events describedin the original pleading, they also argue that the absence of prejudice does not relieve the Plaintiffs of proving that relationship.

In otherwords, prejudice and the lack of relationship between a proposed amendment and the conduct, transaction or events alleged in theoriginal pleading each stand as independent bases upon which the Court must decline to exercise its discretion under Rule 3.65 to permitan amendment after the expiry of the applicable limitation period. [42] The Defendants' submissions accord with the careful direction of our Court of Appeal in the authorities the Plaintiffs cite.

Thestatement in Yancey (at para. 22) that the Limitations Act would permit a claim to be added after the limitation period "if the added claimrelated to the event in the original pleadings, unless [the defendant could prove insufficient knowledge to avoid prejudice]" did notsignify that the absence of prejudice would support an amendment in all circumstances, even where the added claim did not relate to theoriginal claim. It merely stated that, absent prejudice, the added claim would be permitted where it did relate. The Court of Appeal'sstatement in Stout Estate is more directly on-point.

There, Wittmann J.A. (at para. 100) explained that, as an incident of the replacementof the analytical approach with the function approach under the Limitations Act, "a court must evaluate whether each of the requirements

of s. 6 are made out in the circumstances of the particular case." [ 43 ] In other words, legislative adoption of the functional approach did not make the absence of prejudice determinative that an amendment would be permitted.

Section 6 - and, in the circumstances of this case, Section 6(2) (

b) and its requirement that the added claim be related to the conduct, transaction or events described in the original pleading in the proceeding - must still be satisfied. [ 44 ] Both this Court and the Court of Appeal have, moreover, reiterated that prejudice is only one of several possible bases upon which this Court should refuse permission to amend.

In Foda , supra at para. 10 , the Court of Appeal wrote: Generally, pleadings can be amended at any time, subject to the following exceptions: it causes the opposing party serious prejudice not compensable by an award of costs; the amendment is hopeless; unless permitted by statute, it adds a new cause of action or adds a new party outside the statutory limitations period; the failure to amend earlier is indicative of bad faith, see The Honourable William A. Stevenson and The Honourable Jean E.

C ô t é , Alberta Civil Procedure Handbook 2007 (Edmonton: Juriliber, 2007) at pp. 142 - 146 which summarizes the authorities in its annotations to Rule 132. [ 45 ] Similarly, in C.H.S. , supra at para. 11, Slatter J. (as he then was) wrote: Rules 132 and 133 give the Court a wide power to allow amendments at almost any stage of the proceedings. As a general rule, amendments should always be allowed if they clarify the issues or claims that are being advanced. Amendments are generally only refused when: (

a) They will create prejudice that cannot be ameliorated by costs, consequent amendments, an adjournment, or other measures. (

b) The amendments do not disclose a cause of action and are not relevant to a cause of action. (

c) The amendment would have been improper as an original pleading. That is, no amendment will be allowed if it could have been struck as being vexatious, embarrassing, an abuse of process, etc. (

d) The amendment is not in proper form, or is insufficiently particularized. (

e) The amendment is made after a limitation has passed, and does not relate to the same conduct, transaction or events as the original pleading: Limitations Act , R.S.A. 2000, c. L-12, s. 6. [ 46 ] Even where (as here) the Defendants have not shown that the Amended Claim would create prejudice, the absence of prejudice is not, on its own, determinative. The Plaintiffs must still satisfy the Court that the Amended Claim relates to the same conduct, transaction or events as the original pleading. [ 47 ] On a review of the statutory language, this makes sense. The Legislature has, by Section 6(2) (

b) of the Limitations Act , confined the Court's jurisdiction to allow an amendment under Rule 3.6 to circumstances where "the added claim must be related to the conduct, transaction or events described in the original pleading in the proceeding." While the Court retains discretion to decline permission to amend where an added claim is related but causes irreparable prejudice to a defendant, the Act leaves the Court no discretion - even in the absence of prejudice - to permit an amendment after the expiry of the limitation period where the required relationship is not demonstrated. [ 48 ] This conclusion finds support in the 1989 report of the Alberta Law Reform Institute on "Limitations".

This Report

eventually led to the enactment of the Limitations Act and included a model Limitations Act, Section 7(2) of which contained identicallanguage to the current Section 6(2). The Report explained (at pages 41-42): When a proceeding has been started by a timely claim, the parties will often wish to add further claims which are subject to a limitationsdefence. If the added claims are related to the conduct, transaction or events described in the original pleading in the proceeding, it willoften be desirable, for reasons of justice and efficiency, to have them tried in a single proceeding with the original claims.

The newAlberta Act will deprive a defendant of a limitations defence he would normally have to an added claim in the situation we havedescribed, but only if the requirements designed to give the defendant alternative limitations protection have been satisfied. (Emphasis added.) [49] I now turn to the second of the Plaintiffs' submissions pertaining to the Statement of Defence and its reference to the SharePurchase Agreement. The submission here is that Section 6(2)(b)'s reference to "the original pleading in the proceeding" should be readas if it said "original pleadings in the proceeding".

This would have the effect, they say, of permitting an amendment so long as the addedclaim is related to the conduct, transaction or events described in any of the "original pleadings" which would include the Statement ofDefence. [50] I reject this submission. The statutory language of "the original pleading" is both definitive and singular in expression. Theuse of the definite

article ("the") plainly signifies that there is only one "original pleading". This is affirmed by the Legislature's use ofthe singular term "pleading". The use of the term "original" signifies that the pleading must originate the claim that is being sought to beamended. As to the meaning of "the proceeding", I note that it has previously been determined to refer to the action (Fiebich v. Ortlieb,2004 ABCA 256 at para. 22; Austec Electronic Systems Ltd. v. Mark IV Industries Ltd., 2001 ABQB 349 at para. 43). [51] Taken all together, the reference in Section 6(2)(

b) to "the original pleading in the proceeding" requires that an added claimrelate to the conduct, transaction or events described in either the Statement of Claim or, where relevant, the Originating Application. ThePlaintiffs cannot rely, for the purposes of satisfying Section 6(2)(b), upon the Defendants' reference in the Statement of Defence to theShare Purchase Agreement.

The Amended Claim must relate to the conduct, transaction or events described in the Statement of Claim. [52] As to whether on these facts the Amended Claim is "related" to the conduct, transaction or events described in the Statementof Claim, the Plaintiffs submit that whether something or someone is "related to" something or someone else should be determinedliberally, taking "a wide rather a narrow view" of the degree of connection denoted. (Slattery v Slattery, (SCC), [1993] 3SCR 430 at para. 22; and Calgary Mack Sales Ltd. v. Shah, 2005 ABCA 304 at para. 14).

They also point to past statements of this Courtas effectively stating that, where the added claims relate to an ongoing dispute between the parties, they are sufficiently "related" to theconduct, transactions or events described in the original pleadings to satisfy Section 6(2)(b). (Wrzesien v. Arnett & Burgess PipelinersLtd., 2013 ABQB 59 at para. 34; and Divestco Inc. v. Devon Energy Corp., 2011 ABQB 750 at para. 19, per Master Mason inChambers).

They emphasize that both agreements "dealt with a hotel in Fort Saskatchewan", involved "the same players" and that"everything had to do with the acquisition of an interest, one way or another, in the hotel." [53] The Defendants would have me distinguish Wrzesien and Divestco and, in my judgment, they are distinguishable from thiscase.

The Court in Wrzesien explicitly observed that the new claims "rely in part on conduct referred to in the original Statement ofClaim" - which cannot be said of the Amended Claim here; and the learned Master in Divestco noted that "the very term that Divestcoalleges was breached" was identical in both new and original claims - which, again, would not apply here where the Plaintiffs areabandoning all claims arising from the Defendants' alleged repudiation of the Asset Purchase Agreement.

The Defendants emphasizethat the Plaintiffs have abandoned a claim for specific performance of a written agreement for the transfer of land, and have elected topursue a claim under a different, unwritten agreement for the purchase of shares in a corporation.

The details that the Defendants point to- the striking difference in remedies, damages and costs - are obviously not determinative, but they serve to illustrate the distinction thatthe Plaintiffs themselves appeared to see between the two agreements and in the circumstances surrounding (at least) their termination. [54] I accept the Defendants' submissions on this point. The difficulty in the Plaintiffs' position is that they are not seeking merelyto add to a claim, which is what Section 6(2)(

b) permits. Rather, they are seeking to substitute one claim for another, by advancing a newset of facts as the basis for their claim, and by abandoning the set of facts alleged as the basis for the original claim in the Statement ofClaim. The Asset Purchase Agreement need not have been mentioned at all in the Amended Claim. It is superfluous to the allegations inthe Amended Claim, contributing nothing more than collateral, background narrative. [55] While, as part of the background narrative, the Asset Purchase Agreement might be viewed as part of an overall chronology

[ 55 ] While, as part of the background narrative, the Asset Purchase Agreement might be viewed as part of an overall chronology of events that included the Share Purchase Agreement, that is not enough to support a conclusion that a claim arising from one is "related to" a claim arising from the other, thereby satisfying Section 6(2)(b).

It is not enough to say, as the Plaintiffs did in their submissions before the Court, that "everything had to do with the acquisition of an interest, one way or another, in the hotel." As Slatter J. cautioned in C.H.S. , supra (at para. 32), a certain amount of specificity is required. In this case, “ the conduct, transaction or events ” in the original pleading is the is the is the alleged formation, part performance and repudiation in September 2008 of the Asset Purchase Agreement made on January 8, 2007.

The Plaintiffs, by reiterating in their Reply to the Statement of Defence that the Asset Purchase Agreement was the only agreement the parties entered into, effectively affirmed this. Any permissible amendment to the Statement of Claim must be sufficiently specific to its alleged formation, part performance or repudiation in order to be "related to" it. Had the Plaintiffs sought permission to make an amendment that was related to the allegations regarding the Asset Purchase Agreement, they would have satisfied Section 6(2)(b).

Instead, "the conduct, transaction or events" in the Amended Claim relates to the alleged formation, part performance and breach, probably in September 2008, of a Share Purchase Agreement made in April 2007. This is not an "added claim" to the original pleading in the proceeding. The Amended Claim would abandon the claim advanced in the original pleading on one agreement, and replace it with a claim on a different agreement. [ 56 ] In short, the Amended Claim does not (as the Plaintiffs submit) "define the real questions in issue between the parties". Rather, it purports to re-define them.

It is not related to the conduct, transaction or events described in the Statement of Claim. On that basis, I dismiss the Plaintiffs' application for permission to amend the Statement of Claim as proposed. [ 57 ] I also direct that the Defendants, who are Plaintiffs by Counterclaim, may prosecute their Counterclaim against the Plaintiffs, who are Defendants by Counterclaim, notwithstanding that I have dismissed the Plaintiffs' claim.

I acknowledge the Plaintiffs' submission that, to permit the Defendants to proceed with a counterclaim relating to the Share Purchase Agreement while denying the Plaintiff the opportunity of claiming on that same agreement, works an unfairness against the Plaintiffs. Admittedly, the circumstances here have worked an unusual result, although it is not unprecedented, ( JED Executive Services Ltd. v. UT Quality Inc. , 2009 ABQB 606 at para. 46 ). It is also a natural effect of Rule 3.58 which provides that a counterclaim is an independent action. [ 58 ] Moreover, this result is of the Plaintiffs' own making. Mr.

Hur always knew the "true nature of the relationship" between the Plaintiffs and the Defendants. If that true nature lay in their relationship as parties to a share purchase and not to an asset purchase, he should have pleaded that specific relationship, and not a different one, in the Statement of Claim.

At the very least, he should have moved to do so once that very point was raised in the Statement of Defence, instead of adamantly rejecting it in his Reply. [ 59 ] There is no unfairness in holding the Plaintiffs to the consequences of the most basic elements of their own allegations, pleaded in full knowledge of all the circumstances.

Unfairness would lie, however, in precluding the Defendants from pursuing a counterclaim on the basis that the Plaintiffs originally and knowingly advanced what they later acknowledge was a baseless claim, and where they persisted in doing so even after the Defendants formally drew that error to their attention. (

b) Amending where the Original Pleading is Statute-Barred [ 60 ] As I have already described, the parties are agreed that amendments under

Section 6 of the Limitations Act should not be allowed where the original claim was filed out of time. They are, however, disagreed about whether the Statement of Claim in this case was so statute-barred. [ 61 ] This question of whether a statute-barred Statement of Claim can be amended under

Section 6 has not yet been resolved by the Courts of this Province. In W.A.R. v. Alberta (Attorney General) , 2006 ABCA 219 at para. 50 , C ô t é J.A. for our Court of Appeal raised it as "an interesting question", but found it unnecessary to address on the facts of that case. [ 62 ] The logic that one time-barred claim cannot be added to save a claim that is itself time-barred is appealing, if only to avoid the absurdity of an otherwise statute-barred claim being saved by an amendment under

Section 6. Perhaps for that reason, the except cited above from the 1989 report of the Alberta Law Reform Institute on "Limitations" expressly conditioned its proposals on the proceeding having "been started by a timely claim … ." [ 63 ] The state of the evidence before me is not, however, sufficiently clear to allow me to determine that the Statement of Claim was statute-barred. [ 64 ] The Defendants submit that, because the Asset Purchase Agreement prescribed a closing date of April 30, 2007, the

Plaintiffs had two years from that date to sue for its repudiation. Since the Statement of Claim was filed October 22, 2009, they say the original pleading is itself statute-barred. While they acknowledge that Mr. Hur has deposed (in paragraph 7 of his Affidavit, sworn April 15, 2011) to having agreed with Mr. Jang that "the payment of the purchase price would be extended beyond April 30, 2007 and paid by installments" and that such installments were paid up to July 27, 2008, they submit that this is answered by the transcript of his evidence given under questioning on his affidavit.

Specifically, they say the transcript shows his counsel having made an admission that the parties never agreed to an extension of the closing date. [ 65 ] While undoubtedly attributable in substantial part to evident difficulties with translation, the transcript is not at all clear as to whether that specific concession was made (page 30, line 21 to page 33, line 5): Q There's a statement. I read it. It's the first line of paragraph 6. It says that all continue [sic] precedent in favour of the purchaser were satisfied by March 31st, 2007. My question or my statement that I'm asking Mr.

Hur to agree with is that that is not correct. The conditions precedent were not satisfied because the agreement was cancelled? A He cannot understand the point of the question because the seller changed the mind so he just followed it so it's all irrelevant and then you are going back and is it true or not true so he's completely confused. Q I don't understand the confusion, Mr. Hur. There's a statement saying the conditions precedent were satisfied and I'm simply asking you were they satisfied or were they just not pursued because the agreement was cancelled?

A What he and I cannot understand is the purpose of the question. Mr. Engelking: It's not up to you to understand the purpose of the question. A Because I don't know the meaning so I cannot translate. Mr. Engelking: So fine. And Mr. Hendrickson, you have his evidence on this point. It's obvious from his evidence today that that statement in his Affidavit is an error based upon the evidence that he's given today. We're prepared to make that admission. Mr. Hendrickson: Thank you. Q Again looking at paragraph 6 Mr.

Hur, you say in your Affidavit and I quote, "The purchaser went into possession of and began to operate the motel immediately following March 31st, 2007". Is it correct that you operated it as a partner with Mr. Jang, is that correct? A He did all the work but not as an owner but as a partner, is that what you're getting?

Q That's what I'm getting at. Paragraph 7 of the same Affidavit you state in the second sentence that Sang Ok Jang who is the principal of 726913 and I agreed that the payment of the purchase price would be extended beyond April 30th, 2007 and paid by installments. That's not correct, is it? A The question is this is not true or? Q Well. A False or what? Q I said it's not correct which is the same I suppose as saying it's not true.

A He feels you are trying to induce some answer of which he doesn't know why and the deal was off and it's not no longer the purchase agreement, it's partnership agreement and a statement based on that purchase agreement is not relevant. Q Okay. You know that's basically the answer I want … . So but let me put it another way. Mr. Hur, when you say that the purchase price would be paid in installments, you mean the purchase price under the new deal to purchase the shares, is that right? A He didn't pay to that time frame because Mr. Jang wanted to be paid when requested. Mr. Engelking: But that's not the question.

The question simply is the statement here in error, that's the question. Can you ask him that. The Interpreter: In your opinion. Mr. Engelking: Not in my opinion. Is it in error or not? Does he acknowledge it's in error? A He doesn't know he says. And so confusing he cannot answer. Mr. Engelking: Okay that's his answer.

A It doesn't make it clear. He cannot understand it. [ 66 ] From the foregoing, I find that the Plaintiffs' counsel conceded on the Plaintiffs' behalf that the conditions were not satisfied by March 31, 2007. His concession did not, however, extend to the closing date. (Indeed, he assisted the Defendants' counsel in questioning Mr. Hur on that very point.) Perhaps it can be argued that, by necessary implication of Mr.

Hur's earlier admission under questioning (that he did not proceed with the asset purchase because he had resolved upon a share purchase), the Court should infer that the parties agreed to no extensions of the closing date. That submission might well prevail with further and better evidence. On the unclear evidence before me, however - and particularly where the transcript on its face suggests both a lack of comprehension by Mr. Hur on this particular point, combined with an unusual mediative role being assumed by the translator - I cannot make that finding.

Consequently, I am unable to determine on this application that the original Statement of Claim was statute-barred, and it is therefore unnecessary for me to determine whether that would constitute an independent ground for refusing permission to amend. (

c) Bad Faith [ 67 ] The Defendants point to the following circumstances which they say amounts to "outrageous misconduct" by the Defendants: 1. Having maintained since October 22, 2009 that he and the Corporate Plaintiff were entitled to specific performance of the Asset Purchase Agreement, and having registered a Certificate of Lis Pendens against title to the subject lands, Mr. Hur conceded at his questioning on April 28, 2011 that he did not close the Asset Purchase Agreement because he instead chose to purchase shares of the Corporate Defendant.

In effect, the Asset Purchase Agreement was rescinded by agreement. 2. Despite Mr. Hur's concession, the Plaintiffs opposed the Defendants' application for an order discharging the Certificate of Lis Pendens , causing difficulties for the Defendants in securing financing for an addition to the motel. 3. The Plaintiffs took nearly a month consenting to the Defendants' form of Master Breitkreuz's order discharging the Certification of Lis Pendens . 4. No explanation is provided in the materials for the decision to file a Certificate of Lis Pendens or to oppose its discharge. 5.

The Plaintiff's application to amend was brought only days before the hearing of the Defendants' application for

Summary Judgment. [ 68 ] The Plaintiffs submit that Mr. Hur's actions were explained by his original "view of events" and by his attempt to "maintain that view" until "it became apparent that he was mistaken" - a reference to his admission under questioning that he switched from pursuing an asset purchase to pursuing a share purchase. [ 69 ] The Plaintiffs also point out that an application to amend is not an uncommon response to a

summary judgment application, as it demonstrated by the very existence of cases such as Elbow River, supra, which provide for the order in which a Court should determine matters when an application for

summary judgment is heard concurrently with a cross-application for permission to amend pleadings. They submit that, because an application to amend is a risk-averse and rational response to an application for

summary judgment, such an application to amend cannot, without something more, be taken as demonstrating bad faith. [ 70 ] The term "bad faith" has different meanings which depend upon the specific context of its use. The authorities do not provide specific guidance to its meaning when used as a basis for refusing permission to amend pleadings. As to general guidance, Phipson on Evidence , 17th ed. (Sweet & Maxwell, 2010) at § 16-13 says of good faith: Whatever its meaning in the context, however, a party's good faith in performing

an act may generally be inferred from any facts which

would justify performing it. In such cases the state of his knowledge … may often be relevant. So to show the bona fides of a party'sbelief as to any matter, it is admissible to show the state of his knowledge … while the absence of reasonable grounds of belief in theexistence of a fact (e.g. means of knowing the opposite) is evidence of want of honest belief. [71] In C.S. v. M.S. (2007), (ON SC), 38 RFL (6th) 315 (Ont.

SCJ) at para. 17, Perkins J. stated, inconsidering whether a party had committed "bad faith" for the purposes of satisfying the cost provisions in Ontario's Rules of Court: In order to come within the meaning of bad faith in sub-rule 24(8), behaviour must be shown to be carried out with intent to inflictfinancial or emotional harm on the other party or other persons affected by the behaviour, to conceal information relevant to the issues orto deceive the other party or the court.

A misguided but genuine intent to achieve the ostensible goal of the activity, without proof ofintent to inflict harm, to conceal relevant information or to deceive, saves the activity from being found to be in bad faith. The requisiteintent to harm, conceal or deceive does not have to be the person's sole or primary intent, but rather only a significant part of the person'sintent.

At some point, a party could be found to be acting in bad faith when their litigation conduct has run the costs up so high that theymust be taken to know their behaviour is causing the other party major financial harm without justification. [72] I also apply the general principle that the onus is on the party alleging bad faith to show it, not on the other party to disproveit. [73] As to the specific context of this case - that is, in determining whether the failure to plead amendments earlier involves badfaith or whether the amendment itself involves bad faith - I am guided by the principle that, absent something more, the mere bringing ofan application to amend in the face of an application for

summary judgment does not demonstrate bad faith. [74] The Defendants submit that both the Plaintiffs' conduct with respect to the Certificate of Lis Pendens, and the timing andsubstance of the application to amend, furnish the requisite "something more" to discharge their onus. [75] As to the Certificate of Lis Pendens, the Defendants urge that I draw an inference that the Plaintiffs elected to sue on theAsset Purchase Agreement for the reason that a claim arising from the Share Purchase Agreement would not confer an interest in landcapable of sustaining a Certificate of Lis Pendens, while a claim arising from the Asset Purchase Agreement would.

In the absence ofany evidence supporting that inference other than the mere fact that the Asset Purchase Agreement would sustain a Certificate of LisPendens, I decline to draw that inference. I also decline to infer that the Defendants' consent to the discharge of the Certificate of LisPendens was refused in bad faith. I note that Master Breitkreuz initially dismissed the Defendants' application to discharge the AssetPurchase Agreement on July 28, 2011 (three months after Mr. Hur was questioned on his affidavit).

And, although the Plaintiffs oughtreaonably to have moved more quickly to consent to the form of Master Breitkreuz’s order discharging the Certificate of Lis Pendens, Ido not find that it was so egregious as to constitute bad faith. [76] While Mr.

Hur's admission given during that questioning (that the Asset Purchase Agreement was abandoned in order topursue a share purchase) makes the Defendants' theory about the Plaintiffs' motivations a prima facie reasonable account, it does notdemonstrate it to a balance of probabilities. [77] As to the Defendants' submission regarding the timing and substance of the Plaintiffs' application to amend, I note as apreliminary point that, in assessing this submission, Court may draw reasonable inferences from all of the circumstances surrounding thePlaintiffs' application. [78] While, therefore, the burden rests with the Defendants to prove bad faith and not with the Plaintiffs to disprove it, evidentiarysilence on the matter of the proposed amendments can itself be relevant to the question of bad faith, and can be considered in determiningwhether the Defendants have discharged their burden.

Here, I consider the absence of a reasonable explanation from Mr. Hur forsubstituting a claim arising from the Asset Purchase Agreement with a claim arising from the Share Purchase Agreement to be animportant factor. The proposed amendments evidence a striking change of heart - not merely a new theory of the case, but an entirelynew case - coupled with a total lack of explanation. (National Bank Financial Ltd. v.

Potter, 2008 NSCA 92 at para. 29, per CromwellJ.A., as he then was, aff'g 2008 NSSC 135.) The change of heart is all the more dramatic in view of the Reply, by which the Plaintiffsexplicitly rejected the Defendants' pleading (that any payments were made on account of the Share Purchase Agreement) which theAmended Claim now appears to adopt. Indeed, the Reply was categorical, stating that "the only agreement between the Plaintiffs and the

Defendants was [the Asset Purchase Agreement]". [ 79 ] I acknowledge the Plaintiffs' submission that the Amended Claim was prompted by Mr. Hur's recognition that he was "mistaken" in having "maintained the view of events" that the parties' relationship after April 2007 was governed by the Asset Purchase Agreement, and that it was only during his questioning in April 2011 that "the true nature of the relationship" was revealed. [ 80 ] It is not difficult, in the circumstances of this case, to conceive of evidence that Mr.

Hur might have advanced to support this submission, and to raise sufficient doubt to allow the Court to avoid drawing the inference that the Amended Claim is sought in bad faith. He might, for example, have attested that his "mistake" was prompted by language difficulties. Alternatively, he might have given evidence that it was caused by a lack of sophistication, such that he did not appreciate the difference between an asset purchase and a share purchase. Such evidence might have rebutted any inference of bad faith by showing, in the language of C.S. v. M.S., supra , that Mr.

Hur's conduct of the litigation reflected merely "a misguided but genuine intent … without proof of intent to inflict harm, to conceal relevant information or to deceive." There is, however, no such evidence before the Court - which Mr.

Hur alone could have provided - to support the Plaintiffs' submission that he was "mistaken". [ 81 ] The comments of the trial judge in National Bank, supra (at para. 142) are therefore apposite: It is reasonable to infer, and the respondents have satisfied me on the basis of the material before the Court, that NBFL has no bona fide reason to alter the material fact allegations against Bruce Clarke at this time.

Its discontinuance of claims against Bruce Clarke (which is not irrevocable) does not justify "the sea change" in its material fact allegations respecting the participation of Bruce Clarke in an alleged conspiracy or other wrongdoing. To the extent that NBFL convinced Justice Scanlon in November 2004 that their state of knowledge of the actions of Bruce Clarke was a bona fide basis for alleging his involvement in a conspiracy, if one existed, it has not even attempted to proffer some factual basis, in the face of the respondents' submission that no basis exists, for the withdrawal of the allegations.

This rings of bad faith. [ 82 ] Another important consideration here is that specific allegations in the Amended Claim are inconsistent with the evidence to which Mr. Hur swore in his affidavit on April 15, 2011. For example, the allegation in the Amended Claim that Mr.

Jang advised "shortly after January 2007" that he would not proceed with the purchase of the motel" is inconsistent with his sworn evidence "that in September of 2008, Sang Ok Jang told me that he was no longer prepared to proceed with the agreement for the purchase of the motel." Another example smacks more of contradiction than inconsistency: the Amended Claim alleges payments made by the Plaintiffs to the Defendants on account of the purchase of shares, whereas Mr.

Hur's sworn evidence is that they were made on account of the purchase of the motel. [ 83 ] These troubling factors loom large when considering the timing of the Plaintiffs' application to amend. It was filed nearly two years after the original Statement of Claim was filed (at which point the Plaintiffs already knew the matters which they now seek to plead the Statement of Claim), seven months after learning of the application for

Summary Judgment, more than five months after Mr. Hur's admission that the Asset Purchase Agreement was abandoned by agreement, and only eleven days before the application was to be heard. It coincides almost precisely with the hearing of the application. I am entitled to consider, and do consider, that the Plaintiffs had a long period of time in which to amend the Statement of Claim, particularly after the Defendants raised the Share Purchase Agreement in the Statement of Defence, and they failed to do so until eleven days before the date set for hearing of the Defendants' application for

summary judgment. ( Matthison v. Bradburn (Trustee of) , 2007 ABCA 173 at paras. 3-5 ). [ 84 ] Taking into consideration (1) the absence of any explanation for the Amended Claim, (2) the inconsistency and contradiction between the Amended Claim and Mr. Hur's own sworn evidence, (3) the Plaintiffs' categorical insistence in their Reply that the Asset Purchase Agreement was the only agreement between the Plaintiffs and the Defendants, and (4) the eleventh-hour timing of the Plaintiffs' application to amend, I infer the proposed amendment is motivated by the sole purpose of frustrating the Defendants' entitlement to

summary judgment, thereby causing unnecessary expense and delay, and not by some sudden realization (of which there is no evidence in any event) by Mr. Hur of "the true nature of the relationship". [ 85 ] If, therefore, I am incorrect in my earlier conclusion that the Amended Claim is not related to the conduct, transaction or events described in the Statement of Claim, I also find that the Plaintiffs' application to amend was brought in bad faith.

On these facts, this is effectively the same thing as to say that their failure to plead the amendment in the first instance was in bad faith and, as such, it is a further ground to dismiss the Plaintiffs' application for permission to amend the Statement of Claim as proposed.

Summary Judgment [ 86 ] Having disposed of the application for permission to amend the Statement of Claim, I turn now to the Defendants' application for

summary judgment. [ 87 ] The test for granting

summary judgment to a defendant is that it must be "plain and obvious that the action cannot succeed". (Boudreault v. Barrett , 1998 ABCA 232 at para. 9 ; Kwan v. Superfly Inc. , 2011 ABQB 343 at para. 23 . The initial evidentiary burden rests upon the Defendants. If it is met, the Plaintiffs must show that the action has a real chance of success. ( Tate v.

Canada Mortgage and Housing Corporation , 2002 ABQB 465 at para. 13 .) Upon reviewing the pleadings in this action and the affidavits described below, I find that the Defendants have discharged their burden, and that the Plaintiffs have not shown that the action as presently framed has any chance of success, let alone a "real" one. [ 88 ] The Statement of Claim, as already noted, alleges that the parties entered into the Asset Purchase Agreement, whereby the Defendants agreed to sell, and the Plaintiffs agreed to purchase a motel and motel lands.

It further alleges that all conditions precedent were satisfied in time, that the closing date was extended indefinitely, and that by July 27, 2008, the Plaintiffs had paid to Mr. Jang the amount of $1,280,000.00. Finally, it alleges that the Defendants purported to repudiate the Asset Purchase Agreement, that the Plaintiffs refused to accept the Plaintiffs' repudiation, and that the Plaintiffs seek the relief that I have already recounted. [ 89 ] The Court has before it three affidavits: 1. The Affidavit of Mr. Jang, sworn March 6, 2011; 2. The Affidavit of Mr. Jang, sworn July 21, 2011; and 3.

The Affidavit of Mr. Hur, sworn April 15, 2011. [ 90 ] In addition, the Court has been provided with the transcript of the questioning of Mr. Hur conducted April 28, 2011. [ 91 ] On March 6, 2011, Mr. Jang deposed that the conditions to the Asset Purchase Agreement were neither met nor waived by the agreed upon condition date of February 28, 2007, that the Asset Purchase Agreement did not close by the agreed upon closing date of April 30, 2007, and that the closing date was never extended.

He alleges that the money paid by the Plaintiffs to the Corporate Defendant (which he says was $1,210,000.00) were paid pursuant to the Share Purchase Agreement. He deposes that the amounts were refunded, but that by mistake of fact the Defendants overpaid the plaintiffs by $140,000.00. Mr. Jang deposes to his belief that there is no merit to the Plaintiffs' claim. (Mr. Jang's later affidavit addresses the transcript of Mr. Hur's questioning.) [ 92 ] Mr.

Hur deposed on April 15, 2011 that the closing date of April 30, 2007 was extended as part of an agreement with the Defendants that he would pay the purchase price in installments. He deposes to having made $1,280,000 over two installments by July 27, 2008 but that, in September 2008, Mr.

Jang told him that he "was no longer prepared to proceed with the agreement for the purchase of the motel." [ 93 ] While there are differences between the parties on relevant facts such as extension of the closing date and amount of the payments that the Plaintiff made to the Corporate Defendant, those evidentiary discrepencies, in light of Mr. Hur's evidence on questioning, are insignificant.

His evidence was that he did not proceed with the Asset Purchase Agreement (which he referred to as "the asset purchase offer") because he agreed "to buy some of the shares instead of the numbered company." This completely pulls the foundation out from under the action since, if the purpose of those payments was to perform the Share Purchase Agreement and not the Asset Purchase Agreement, other issues such as the extension or non-extension of the Asset Purchase Agreement, or the amount of the payments made, become immaterial. The Asset Purchase Agreement did not end because of any of those issues.

It ended because Mr. Hur, by his own admission, decided to pursue the Share Purchase Agreement instead.

[94] In light of Mr. Hur's admission, the Defendants have demonstrated that it is plain and obvious that an action against theDefendants for repudiation of the Asset Purchase Agreement cannot succeed. Conversely, the Plaintiffs demonstrate no chance ofsuccess. I therefore grant the Defendants' application for

summary judgment, and dismiss the Plaintiffs' claim, subject as I have alreadyprovided that Defendants, as Plaintiffs by Counterclaim, may prosecute their Counterclaim. Costs [95] The Defendants say that the Plaintiff's conduct should attract an award of costs against them on a solicitor-client basis, whichI take to mean costs indemnifying the Plaintiffs for their lawyer's charges under Rule 10.31(b)(ii). Alternatively, the Defendants seekcosts on a multiple of Column 5.

Their arguments parallel the submissions which they advanced to support a finding of bad faith, and goto the Plaintiffs' conduct with respect to the Certificate of Lis Pendens, and the timing and substance of the application to amend, furnishthe requisite "something more". [96] The Plaintiffs argue that their post-pleading conduct in this case does not meet the high threshold for awarding solicitor-clientcosts. More specifically, they submit that their conduct in respect of the Certificate of Lis Pendens does not entitle the Defendants tosolicitor-client costs.

They also stress that, before the learned Master, the Defendants sought costs on the scale of double Column 5. (Thelearned Master ultimately awarded increased party-party costs of $12,500.00). They submit that "taking what the Appellants consider tobe a legitimate Appeal from the decision of the Master to deny leave to amend surely cannot constitute misconduct of the litigation suchthat enhanced costs would be justified." [97] The authorities are clear that this Court may award solicitor-client costs only in rare and exceptional circumstances. (Sidorskyv.

CFCN Communications Ltd., 1997 ABCA 280 at para. 31; Professional Sign Crafter

(1988) Ltd. v. Seitanidis, 1998 ABCA 303 atpara. 5; and Evaskow v. International Brotherhood of Boilermakers (1969), (MB CA), 9 DLR (3d) 715 at para. 22(MBCA).) Serious misconduct - that is, “reprehensible, scandalous or outrageous conduct” must be demonstrated to have occurred. (Young v. Young, (SCC), [1993] 4 SCR 3 at para. 261).

The Court may not take into account conduct that gave rise tothe litigation, and must confine itself to considering the party's conduct in initiating the proceedings and its conduct thereafter.(Professional Sign Crafter, supra at para. 5). [98] Taking into account the Court’s justified wariness of awarding solicitor-client costs, and also taking into account that party-party costs on the appropriate column of

Schedule “C” are the presumptive measure of costs, the question to be asked is whether justicecan be done only if the Defendants are completely indemnified for their costs. [99] As to what constitutes the rare and exceptional circumstance constituting serious misconduct sufficient to justify an award ofcosts on a solicitor-client basis, Hutchinson J. of this Court in Jackson v.

Trimac Industries Ltd. (1993), (AB KB), 138A.R. 161 at para. 28 classified them in these general terms: 1. circumstances constituting blameworthiness in the conduct of the litigation by that party …; 2. cases in which justice can only be done by a complete indemnification for costs; 3. where there is evidence that the plaintiff did something to hinder, delay or confuse the litigation, where there was no serious issue offact or law which required these lengthy, expensive proceedings, where the positively misconducting party was "contemptuous" of theaggrieved party in forcing that aggrieved party to exhaust legal proceedings to obtain that which was obviously his …; 4. an attempt to deceive the court and defeat justice, an attempt to delay, deceive and defeat justice, a requirement imposed on theplaintiff to prove facts that should have been admitted, thus prolonging the trial, unnecessary adjournments, concealing materialdocuments from the plaintiffs and failing to produce material documents in a timely fashion …; 5. where the defendants were guilty of positive misconduct, where others should be deterred from like conduct and the defendants should

be penalized beyond the ordinary order of costs … ; 6. defendants found to be acting fraudulently and in breach of trust … ; 7. the defendants' fraudulent conduct in inducing a breach of contract and in presenting a deceptive statement of accounts to the court at trial … ; 8. fraudulent conduct … ; [and] 9. an attempt to delay or hinder proceedings, an attempt to deceive or defeat justice, fraud or untrue or scandalous charges … . [ 100 ] For the same reason that I am unable to find that the evidence before me regarding the Certificate of Lis Pendens reveals bad faith, I also find that it fails to support an award of solicitor-client costs. [ 101 ] I have, however, found that the Plaintiffs' application to amend was brought in bad faith, motivated by the sole purpose of frustrating the Defendants' entitlement to

summary judgment, thereby causing unnecessary expense and delay. In making that finding, I took into consideration the absence of any explanation for the amendments, the variance between the Amended Claim and Mr. Hur's sworn evidence, the Plaintiffs' Reply which insisted that the Asset Purchase Agreement was the only agreement they entered into with the Defendants, and the last-minute timing of the application to amend.

Taken together, those factors also constitute rare and exceptional circumstances amounting to blameworthy and reprehensible conduct by a party which arose in the course of the litigation itself, which had the effect of delaying and defeating justice thereby prolonging the action.

It amounts to positive misconduct, from which the Court should deter others. [ 102 ] As the Plaintiffs noted, the learned Master imposed a (significantly) increased costs award of $12,500.00, which ought to have conveyed to the Plaintiffs the Court's concern when confronted with an application to amend in these unusual and improper circumstances. To persist even further in advancing these amendments without, inter alia , explaining why the earlier claim regarding the Asset Purchase Agreement were made, or why it was being abandoned, or why they now seek to advance allegations of fact that contradict Mr.

Hur ’ s sworn evidence, heightens that concern. It also satisfies me that justice can be done only by imposing upon the Plaintiffs an even more severe costs sanction amounting to an indemnity for at least some of the Defendants ’ costs. Accordingly, while I choose not to disturb that award as it pertains to the application before the learned Master, I supplement it by ordering solicitor-client costs for the costs of this appeal. [ 103 ] I therefore order that: 1. The Plaintiffs' (Defendants by Counterclaim) application to amend the Statement of Claim is dismissed; 2.

The Defendants' (Plaintiffs by Counterclaim) application for

summary judgment is granted, and the Plaintiffs' claims are and shall be summarily dismissed; 3. The Defendants (Plaintiffs by Counterclaim) are permitted to proceed, subject to such further directions as may be necessary, with their Counterclaim filed March 18, 2010, notwithstanding the dismissal of the Plaintiffs' claim. 4. The Plaintiffs shall pay to the Defendants costs in the sum of $12,500.00 in respect of the application before Master Breitkreuz; and

5. The Plaintiffs shall pay to the Defendant solicitor-client costs incurred in respect of this application. Heard on the 14 th day of March, 2013. Dated at the City of Edmonton, Alberta this 5 th day of April, 2013. Russell Brown J.C.Q.B.A. Appearances: Murray L. Engelking Engelking Wood for the Plaintiffs/Applicants Len W. Hendrickson MacPherson, Leslie & Tyerman LLP for the Defendants/Respondents _______________________________________________________ Corrigendum of the Reasons for Judgment of The Honourable Mr.

Justice Russell Brown _______________________________________________________ The citation line has been changed from Hur et al. v. 726913 Alberta Ltd. Et al., 2013 ABQB 208 to read Hur v. 726913 Alberta Ltd., 2013 ABQB 208.