Blue Steel Investments LLC v Hegco Canada Inc, 2013 ABQB 275

Court of Queen ’ s Bench of Alberta Citation: Blue Steel Investments LLC v Hegco Canada Inc, 2013 ABQB 275 Date: 20130508 Docket: 0201 03170 Registry: Calgary Between: Blue Steel Investments LLC, BLX Inc., Walter Lipkin, and Myra Lipkin Applicants - and - Richter, Allan & Taylor Inc., RSM Richter Inc., and J Stephens Allan, all in their capacity as the Court appointed Receiver and Manager of Hegco Canada Inc., Red Leaf Energy Inc. and Hegco Inc. Respondents _______________________________________________________ Supplemental Reasons for Decision of the Honourable Mr. Justice P.R.

Jeffrey _______________________________________________________ Introduction [ 1 ] On March 12, 2013, I issued Reasons for Decision in Blue Steel Investments LLC v Hegco Inc , 2013 ABQB 156 (the “ Decision ”), denying the Applicants leave to sue the Receiver in Oklahoma nunc pro tunc and granting the Respondents’ (the “ Receiver ”) cross application for an order prohibiting the Applicants from suing the Receiver in any jurisdiction other than Alberta.

[ 2 ] On March 14, 2013, counsel for the Receiver brought to my attention a misapprehension of fact in the Decision: I incorrectly referred to the Receiver as having been discharged in Oklahoma. This misapprehension was referred to a number of times in the Decision. [ 3 ] I therefore prohibited the entry of an order embodying the Decision, to allow time for the parties to be heard as to the implications of the misapprehension.

On March 18, 2013 I invited written submissions regarding how my misapprehension of fact may have affected the outcome, if so in what way, and whether as a consequence a variation or correction of the Decision was warranted. Both parties responded to that invitation. These Supplemental Reasons for Decision address those submissions and the misapprehension. [ 4 ] The Applicants submitted that my misapprehension of fact significantly misdirected my focus, led to an overall error in the Decision and that the Decision should be reversed in favour of the Applicants.

The Receiver submitted that the misapprehension did not affect the Court’s ultimate analysis and conclusion because the Court made other findings unaffected by the misapprehension leading to the same result and therefore the Decision should be upheld. Applicants ’ Submissions that there were Additional Misapprehensions of Fact [ 5 ] The Applicants claimed the Decision contained two additional misapprehensions of fact, saying both were equally important and fundamental to the remaining reasons of the Decision regarding the limitations defence. (

i) Limitations Defence [ 6 ] The Applicants submitted that in the Decision the Court was under a misapprehension that the Receiver’s supporting Affidavits actually raised a limitations of actions defence, there in fact being no actual Statement of Defence filed or proposed by the Receiver and no mention of this defence in the Receiver’s Supporting Affidavit of December 22, 2011.

The Applicants submitted that in order for the Receiver to properly raise a limitations defence, it was required to submit a Statement of Defence, or to raise the defence in its Supporting Affidavit of December 22, 2011; it did neither. [ 7 ] The Receiver responded that it properly and appropriately raised the limitations concerns, that the Applicants had ample opportunity to formulate its response to the Receiver’s limitations defence and that the Applicants should not be allowed to reargue the limitations issues after receipt of the [Decision] under the guise of a “misapprehension”.

I agree. [ 8 ] The Receiver had no obligation to raise a limitations defence by submitting a Statement of Defence, since until the Applicants received leave to sue there was no valid Statement of Claim to answer. This application proceeded in Chambers, commenced by the Applicants’ Notice, to which no “defence” document needed to be filed. The Receiver filed affidavit evidence to rely upon in responding to the Application. No further evidence on the limitations issue was required by the Receiver in any Supporting Affidavit.

The limitations defence was properly raised by the Receiver in its Brief of July 13, 2012, responding to the Application. That brief contained its limitations arguments and was filed approximately two weeks prior to the Application hearing. This was sufficiently in advance of the hearing to enable the Applicants to consider the issue (if they failed to do so earlier), to determine all relevant dates including the original filing date of the Amended Petition in the Oklahoma Suit, to craft arguments on this issue and, if necessary, to attempt to adduce additional evidence or to request an adjournment to do so.

In these circumstances, it was proper for this Court to consider in its analysis the limitations issue asserted by the Receiver and to address it in the Decision. [ 9 ] In any event, this was not a “misapprehension of fact”; this is the second attempt by the Applicants, post-hearing, to rehabilitate their case on the limitations issue after the fact (the first occuring after the oral hearing of the Application, culminating in the recall of the parties for a further hearing September 4, 2012). (ii) The Start Date of the Oklahoma Suit [ 10 ] The Applicants also submitted that, at paragraph 13 of the Decision, the Court was under a misapprehension regarding the

commencement date of the Action in Oklahoma. Paragraph 13 of the Decision states “...on March 25, 2010 the Applicants filed their law suit against the Receiver in Oklahoma (the “ Oklahoma Suit ”)”. This also relates to the limitations issue. [ 11 ] The Applicants submitted the record is clear that this was an Amended Petition and the actual Oklahoma Suit commenced at an earlier date, such date not being before the Court. The Applicants directed the Court to the face of the Amended Petition, which they argued contained a 2009 filing date, for it states: “Case No. CJ-09-10780”.

From this numbering, they implied, it was obvious the action started in 2009. [ 12 ] The Receiver objected to the Applicants alleging additional misapprehension of fact on the basis that it was unrelated to the Court’s actual request. [ 13 ] In the Decision I found that the suit started March 25, 2010. That was the date of the Amended Petition which alleged the five causes of action against the Receiver that were the subject of the leave application. No earlier pleading was placed before me as the subject of the leave application.

Further, on the evidence before the Court it was not shown on balance how much earlier the initial commencing document was filed, whether it contained all or some or none of those five causes of action, how similar it was in other ways to the Amended Petition before the Court, or as to its validity. [ 14 ] In Alberta the date a pleading is filed is evident on its face by the Clerk’s date stamp. However, official documents issued in foreign countries are subject to formal proof, especially where, as here, no date was evident.

The proof of foreign public and private documents such as birth, marriage and death certificates, foreign judgments, notarial acts, wills, powers of attorney, affidavits, oaths, solemn affirmations or declarations, etc., is governed by the lex fori: Janet Walker, ed, Canadian Conflict of Laws , 6th ed. (Markham, Ontario: LexisNexus Canada Inc, 2005) at 7.10-11; Canada Evidence Act , RSC, 1985, c C-5 s 23. Evidence of the Oklahoma Court’s numbering system was required to show that “Case No. CJ-09-10780" meant a 2009 start date. It did not necessarily follow that that numbering meant a 2009 start.

Further, more evidence was required to show that the commencing pleading, whenever it was filed, pleaded facts that disclosed any of the same causes of action. Absent further evidence that was not determinable. [ 15 ] The front page of the Amended Petition was stamped with a date of March 25, 2010. During oral submissions this Court asked the Applicants when the original Petition was filed. The Applicants could only supply an estimate. Further, the fact that in response to the question the Applicants did not refer to “Case No.

CJ-09-10780” as evidence of the original filing date, suggests that at that time they did not consider it to be plain and obvious from the case number already before the Court that 2009 was the filing date. This Court did not misapprehend an additional fact. This was the third attempt by the Applicants to rehabilitate their case on the limitations issue after the fact. (iii) The Applicants ’ New Arguments [ 16 ] The Applicants also submitted new arguments regarding the

interpretation of certain parts of agreements between the parties and regarding whether the parties abided by these agreements. The Applicants also submitted notice arguments that were not raised before the Court at the time this Application was heard, quoting from the various contracts, affidavits and transcripts in their submissions. [ 17 ] The Receiver objected to these new submissions on the basis that they were not responsive to my request and overreached my directions. The Receiver also noted that this was the second time the Applicants committed such an overreach.

At the conclusion of the hearing, I had invited the parties to provide me with brief written submissions on the correct approach to foreign law in these proceedings. The Applicants submitted unrelated arguments (and further evidence) which were not copied to the Receiver (this is the event referred to at the end of para 9 above). [ 18 ] I agree with the Receiver and will not address further the parts of the Applicants’ submissions falling outside the scope of my direction to the parties. Without following the appropriate process the Applicants have (again) attempted to revisit the Application.

Effect of Misapprehension

[ 19 ] This brings me to the original matter precipitating the parties’ further submissions and these Supplemental Reasons, namely the effect that my misapprehension of fact (my erroneous belief that the Receiver had been discharged by the Oklahoma Courts) had on my Decision. (

i) Jurisdiction [ 20 ] First I will comment on my jurisdiction for this process. These Supplemental Reasons are issued pursuant to Rule 9.13 of the Rules of Court , Alta Reg 124/2010 : 9.13 At any time before a judgment or order is entered, the Court may (

a) vary the judgment or order, or (

b) on application, and if the Court is satisfied there is good reason to do so, hear more evidence and change or modify its judgment or order or reasons for it. [ 21 ] In Paniccia Estate v Toal , 2012 ABQB 11 , Justice Shelley found at paras 30-31 [emphasis added by Shelley, J.]: ...One conclusion that is clear from those cases is that the current Rules provide a broader authority to vary a judgment or order than existed under the former Rules . Justice Graesser, in Evans v. Sports Corp ., 2011 ABQB 478 (Alta. Q.B.) at para. 15 , (2011), 85 B.L.R. (4th) 313 (Alta.

Q.B.), observed that: Reading the plain language of Rule 9.13, I believe that I have extremely broad authority to do what I think is correct in these circumstances. [ 22 ] She continued, in para 34: ...It appears that this decision will be the first reported case where a judge has considered Rule 9.13(a).

I conclude that, while the Rule provides the judge a unilateral authority to make any change the judge considers appropriate, that authority should only be exercised after the judge has: 1. indicated to the parties that the judge is considering varying a judgment or order via Rule 9.13(a), 2. identified the nature of the proposed variation, and 3. provided an opportunity for the parties to make submissions that comment on that proposed variation. (ii) Fresh Evidence [ 23 ] Paragraph 51 of the Applicants’ March 28, 2013 submissions asked permission under Rule 9.13(

b) to adduce evidence that the

filing of a petition in Oklahoma, which was then amended March 25, 2010, was in 2009. I need not put the Applicants to the filing of aformal application, as the Rule requires, or the Receiver to providing a response.

Contrary to the Applicants’ submission, I do not findthere to be a “good reason” to, in effect, revisit the application dismissed September 4, 2012, to adduce such new evidence. [24] The criteria for the admission of fresh evidence is set out in R v Palmer (1979), (SCC), [1980] 1 SCR 759 atpara 760, 106 DLR (3d) 212: (1) the evidence should generally not be admitted if by due diligence, it could have been adduced at trial provided that this generalprinciple will not be applied as strictly in a criminal case as in civil cases; (2) the evidence must be relevant in the sense that it bears upon a decisive or potentially decisive issue in the trial; (3) the evidence must be credible in the sense that it is reasonably capable of belief; and (4) it must be such that if believed it could reasonably, when taken with the other evidence adduced at trial, be expected to have affectedthe result. [25] Simply put, the first branch of the Palmer test is not satisfied by the Applicants in these circumstances with respect to thefiling date of the Amended Petition in the Oklahoma Suit being 2009, just as it was not when the Applicants earlier attempted to adducefresh evidence (dealt with at the application heard September 4, 2012). (iii) Test for leave nunc pro tunc [26] The Applicants submitted that since the Receiver was not discharged in Oklahoma, then the lower standard test for leave nuncpro tunc applies.

In their submissions, the Applicants quoted paragraph 34 of the Decision as follows: “The Receiver is correct; in these circumstances and provided that the Applicants had notice of the approval and discharge application,they must establish that they have a strong prima facie case for the Court to reopen prior decisions and permit an action to proceedagainst the Receiver.” (emphasis added) [27] However, the Applicants’ incorrectly quoted from the Decision.

Paragraph 34 of the Decision states “...that the Applicantshad notice of the approval or discharge application...” (emphasis added). [28] As discussed in the Decision, specifically at paragraphs 35-41, the higher standard of test for leave nunc pro tunc applieswhere allegations raised in the action could have been raised in earlier proceedings or where the conduct subject to the proposed attack isin substance the same as conduct approved earlier by the court.

The jurisprudence provides, as some examples of this, circumstanceswhere the impugned conduct was the subject of a discharge proceeding or circumstances where an earlier order approved the conductand activities of the Receiver. [29] My analysis of the test in the Decision flowed from two events, which I described at paragraph 42 as “...

i) the application fordischarge of the Receiver (resulting in the May 30, 2002 Order), or ii) the application for approval of the Little Bear Sale...”. While Imisapprehended that on May 30, 2002 the Receiver was discharged, what was important to my analysis and conclusion was that therewas notice to the Applicants of earlier Court proceedings at which the Applicants could have, and should have, raised their concerns. Theexistence of such earlier proceedings was established by both the May 30, 2002 Order (incorrectly) and the application for approval ofthe Little Bear Sale. Either of those two alone sufficed to trigger the higher standard test for leave.

[ 30 ] In addition, several other Court Orders involving the Receiver’s conduct availed similar opportunity to the Applicants or one of them, relating to at least one of the Applicant’s proposed causes of action: (

i) the Order approving the transaction between the Receiver and Freedom Oil and Gas (September 6, 2002); (ii) the Order approving, among other things, distributions previously made by the Receiver (March 26, 2003); and (iii) the Order approving the settlement agreement between the Receiver and Mr. Babb, BLX, and BLD (September 17, 2003), which are each found in undertaking #2. [ 31 ] The Receiver demonstrated on balance that the Applicants had notice of the application for approval of the Little Bear Sale.

Therefore the threshold for the higher test was established, regardless of whether the Receiver was discharged in Oklahoma. The Decision wording indicated that either court process alone would trigger the higher standard test. Conclusion [ 32 ] I referred to the misapprehended discharge of the Receiver in a number of paragraphs in the Decision. Each reference and the associated comment(

s) are obiter and should be disregarded. [ 33 ] The misapprehension of fact that the Receiver had been discharged in Oklahoma did not misdirect the remainder of my analysis or lead to an overall error in the Decision. I made other findings that were independent of and unaffected by the misapprehension that led to the same conclusion. [ 34 ] The denial of the leave and the granting of the prohibition Applications are confirmed. While the misapprehension of fact was regrettable, and after reconsidering the whole of the Decision, the correct finding of fact on that point did not warrant any change to my conclusions.

An order consistent with my Decision and these Supplemental Reasons may now be entered. The time that transpired between the date of the Decision and the date of these Supplemental Reasons is not to be counted in any times that run associated with these Applications and the entry of the resulting Order(s). Dated at the City of Calgary, Alberta this 7 th day of May, 2013. P.R. Jeffrey J.C.Q.B.A. Appearances:

Clive O. Llewellyn and Philip Watts (Oklahoma counsel) for the Applicants David LeGeyt and Heather Currie for the Respondents