Airdrie (City) v. Silvercreek Development Corporation, 2013 ABQB 357

Court of Queen ’ s Bench of Alberta Citation: Airdrie (City) v. Silvercreek Development Corporation, 2013 ABQB 357 Date: 20130624 Docket: 0901 15979 Registry: Calgary Between: The City of Airdrie Plaintiff - and - Silvercreek Development Corporation, Lee Maher Engineering Associates Ltd. and Blue-Con Excavating Ltd. Defendants - and - Silvercreek Developments Corporation, Lee Maher Engineering Associates Ltd. and Blue-Con Excavating Ltd. Third Party _____________________________________________________ Memorandum of Decision of J.B. Hanebury, Master in Chambers _______________________________________________________

[ 1 ] The defendant Silvercreek Development Corporation applies to strike the claim filed against it on the basis it was filed outside of the limitation period allowed under the Limitations Act , R.S.A. 2000, c. L- 12. FACTS [ 2 ] Most of the facts are found in the affidavit and cross examination of Lorne Stevens, the director of community infrastructure for the City of Airdrie and a civil engineering technologist. [ 3 ] Silvercreek was the developer of a subdivision in Airdrie known as Silvercreek Phase 3.

In 2000 it entered into a subdivision servicing agreement with Airdrie for the construction of all utilities to service 74 Phase 3 residences. The agreement required Silvercreek to construct copper water service lines to each lot. [ 4 ] Since copper pipes are subject to corrosion and pitting which can be reduced by cathodic protection, the plans and specifications for the water services allegedly provided for cathodic protection, which involved the installation of a “sacrificial anode”.

Apparently, this was a new requirement that had only recently been added to the City’s specifications. [ 5 ] Silvercreek retained Lee Maher Engineering Associates Ltd. who in turn retained Blue-Con Excavating Limited to construct the water services. [ 6 ] The water lines were constructed and in October, 2000, Lee Maher Engineering, on behalf of Silvercreek, submitted a Construction Completion Certificate for the lot service connections. Mr.

Maher certified “that the utilities and improvements within the area… have been constructed, installed, and inspected in conformance” with the specifications and “the utility noted herein meets with all the requirements for acceptance.” [ 7 ] Mr.

Maher subsequently submitted a Final Acceptance Certificate for the sewer and water connections in the subdivision and again certified that they had been properly constructed installed and inspected. [ 8 ] This document was accepted by the City in 2003, and as a result the water connections to the lots became Airdrie’s property and responsibility. [ 9 ] In the summer of 2006, Airdrie responded to water service line breaks at two residences in the subdivision.

Upon excavation, it appeared that the copper connections were corroded at the point of the breaks and there was no evidence of cathodic protection. [ 10 ] Mr. Stevens explained that there is typically one of three causes of a break: a construction default where the line separates; a rock rubbing against the line; or deterioration of the line with pitting and corrosion. The latter was the most likely scenario in this case and it was “suggestive of cathodic protection as being somewhere in the fray of an issue there”.

However, he said that he understood that the presence of cathodic protection did not mean pitting and corrosion would not occur. The goal of cathodic protection was to extend the life of the line and reduce the potential for that type of damage. [ 11 ] Mr. Stevens, on behalf of the City, sent a letter to Mr.

Maher on November 2, 2006, advising of the two water service breaks and stating that “as part of the excavation for these repairs, it was observed that the copper water services did not have cathodic protection installed.” He went on to say “[p]lease advise as to how LME issued the CCC [Construction Completion Certificate] for service connections, when cathodic protection had not been installed as per the 2000 specifications.”

[ 12 ] At that point, he said, the City was trying to ascertain from Mr. Maher if there was something else going on. Was the cathodic protection in a spot other than where the City expected to find it? A break, he said, “didn’t necessarily preclude that cathodic protection wasn’t installed” (sic) but no evidence of cathodic protection was found during repair activities. [ 13 ] The City’s normal protocol, he stated, is to ask a question, identify an issue, and see what the response is. [ 14 ] Mr.

Stevens said that at that time the City did not know whether all seventy-four water service lines had cathodic protection. He said in cross-examination that at that time they made some investigation to determine who could be a resource on the issue of cathodic protection. He does not know if the City was looking for someone to undertake an inspection or to be a resource, but no on e was retained. He said that to his knowledge, both then and now, there is no way to confirm if cathodic protection is missing on a line other than digging the seven to ten feet necessary to expose the line. [ 15 ] Mr.

Maher did not respond to Mr. Stevens’ letter nor to his subsequent follow up by telephone. [ 16 ] Mr. Stevens also contacted Silvercreek by email on four occasions to advise that no response had been received from Mr. Maher. Silvercreek then wrote to Mr. Maher on September, 25, 2007, and copied Mr. Stevens. The letter said: Over the past eight months Silvercreek along with City of Airdrie have anticipated a response from Lee Maher Engineering Associates Ltd. in regard to the issue of cathodic protection within Phase 3 of our Silvercreek Sub-division in Airdrie Alberta.

The issue of cathodic protection has been brought to your attention on several occasions; however neither the City of Airdrie nor Silvercreek Development Corporation has received any formal response to this issue. .... We feel that we have given your firm more than enough time to respond to the issues mentioned and as such we request that you respond in writing to both the City of Airdrie as well as ourselves to the issue of cathodic protection within the Silvercreek Sub-division immediately.

Failure to respond will result in legal action by Silvercreek against your firm. [ 17 ] In September, 2007, another water service failure in the subdivision occurred due to corrosion and again, cathodic protection was not observed during repairs. [ 18 ] On October 9, 2007, Mr. Mayer admitted in a letter to Silvercreek that cathodic protection was required and had not been installed. The City of Airdrie was apparently not copied with that letter. [ 19 ] On October 25, 2007, a meeting was held between the City, Silvercreek and Mr. Maher and Mr.

Maher disclosed to the City that no cathodic protection was installed on any of the 74 water service lines. [ 20 ] On November 20, 2007, Maher Engineering responded to the City’s letter of a year prior. Mr. Maher confirmed the lack of cathodic protection in the water service lines. He alleged that there was some confusion at the time of the installation and believed that the installation without the cathodic protection had met the City’s requirements at the time. [ 21 ] The City denies that allegation.

This Statement of Claim was issued on October 23, 2009, almost 2 years after their meeting on October 25, 2009 and over three years from the first water service line failure.

[22] Silvercreek applies to summarily dismiss the claim against it on the basis that it is time-barred. ANALYSIS [23] Rule 7.3 allows the court to dismiss a claim if there is no merit to it in whole or in part. As the Supreme Court of Canadaacknowledged, the rule prevents claims or defences that have no chance of success from proceeding to trial. At the same time “it isessential to justice that claims disclosing real issues that may be successful proceed to trial”. As a result, the bar on a motion forsummary judgment is high: Canada (Attorney General) v.

Lameman, 2008 SCC 14 , 2008 SCC14. para. 10 and 11. [24] Silvercreek has the “evidentiary burden of showing that there is ‘no genuine issue of material fact requiring trial’”: Lameman,para. 11. As the Alberta Court of Appeal said: “[i]t must be beyond doubt or plain and obvious that there is no genuine issue requiringtrial”: Tottrup v. Clearwater (Municipal District No. 99) 2006 ABCA 380, para. 10. [25] Each side is under an obligation to put its best foot forward on the material issues to be determined by the Court. It isinsufficient to rely on allegations found in the pleadings: Lameman, supra, para. 11.

The Justice or Master hearing the application is notto assess the quality and weight of the evidence. That is to happen at trial: Liu v. Tangirala, 2004 ABCA 171, para. 2. [26] However, as noted in Tottrup, para. 11, in some cases the test for

summary judgment is not whether the issue of law is"beyond doubt", but whether the issue of law can fairly be decided on the record before the court. See as well: Dow Chemical CanadaInc. v. Shell Chemicals Canada Ltd., 2010 ABCA 126. As the Court of Appeal put it in De Shazo v. Nations Energy Co., 2005 ABCA241, at para. 18, “the court has an obligation to conduct a careful review with an eye to determining whether there are undisputed factssufficient to resolve the matter, even when the action is complex.” [27] At issue in this case is

section 3 of the Limitations Act which provides: 3(1) Subject to

section 11, if a claimant does not seek a remedial order within (a) 2 years after the date on which the claimant first knew, or in the circumstances ought to have known, (

i) that the injury for which the claimant seeks a remedial order had occurred, (ii) that the injury was attributable to conduct of the defendant, and (iii) that the injury, assuming liability on the part of the defendant, warrants bringing a proceeding, ... the defendant, on pleading this Act as a defence, is entitled to immunity from liability in respect of the claim. [28] The court must be satisfied that it is beyond doubt that the claim cannot succeed as it is time-barred by the criteria found in s.3(1). [29] Silvercreek says that the City knew or ought to have known of its injury, the fact that it was attributable to Silvercreek andthat the injury warranted bringing an action at the latest by September, 2007.

At that time there had been three failures in thesubdivision’s lines and no response by Mr. Maher to the City’s letter. Therefore, the claim is out of time as it was filed on October 23,2009.

[30] The City makes several arguments in response. [31] It argues that, prior to the meeting with Mr. Maher, Mr. Stevens neither knew nor ought to have known that the City had beeninjured.

It was not feasible to investigate all of the lines and it was not obvious that cathodic protection was not in place and was thecause of the injury to the City. [32] The Courts have made it clear that the clock starts to run the earlier of when the plaintiff actually knew or ought to haveknown the facts in relation to all of the three criteria found in s. 3(1)(a), i.e. that it had been injured, the injury was caused by thedefendant and the injury warranted bringing a proceeding. [33] Under the Act a “claim” is a matter that gives rise to a civil proceeding where a “remedial order” is sought.

An “injury” isdefined as a personal injury, property damage, economic loss, non-performance of an obligation, or if none of the foregoing, the breachof a duty: s. 1(e). [34] Section 3 (1)(

a) links the issue of discoverability to the injury, not the cause of action: Sun Gro Horticulture Canada Inc. v.Alberta Metal Building Sales Inc., 2006 ABCA 243, para. 11, Gayton v. Lacasse, 2010 ABCA 123, para. 18. There can be separateclaims with different limitations grounded on different injuries that resulted from the same event: Sun Gro, (supra), para, 10, quoted inGayton, (supra), para. 19. [35] The test for discoverability found in s. 3 is a subjective and an objective test and they are alternative; time starts to run as soonas one of them is satisfied.

Once the plaintiff has actual knowledge of the criteria in s. 3 and therefore has a claim, it is irrelevant whethera “reasonable person ought to have known” he or she had a claim: Gratton v. Shaw, 2011 ABCA 175; Mills v. Royal Bank of Canada,2012 ABCA 75. [36] On the other hand, if there is no actual knowledge, the court is required to determine what the reasonable person would haveknown or could have discovered with some diligence. When the plaintiff does not know the facts, he or she is expected to have exercisedreasonable diligence to acquire those facts: Central Trust v.

Rafuse, (SCC), [1986] 2 S.C.R. 147, Borchers v. Kulak,[2009] A.J. No. 801 (Q.B.). [37] There can be a subjective element to the court’s consideration of whether the plaintiff “ought to have known” of the criteria ins. 3(1)(

a) as the court can consider the knowledge and interests of the particular plaintiff in making its determination: Boyd v. Cook,2013 ABCA 27, paragraphs 28, 20; Gayton (supra), para. 21. [38] In starting the clock, discoverability of the injury is the first criteria to be considered.

To determine when the clock starts, thecourt must determine when the City had or ought to have had the requisite degree of knowledge of the injury or injuries for which theremedial order is being sought. [39] The claim makes a number of allegations against Silvercreek: a breach of contract; a breach of both a duty of care and of afiduciary duty to warn the City that the water lines had not been installed according to the specifications; and, a negligentmisrepresentation to the same effect.

The relief sought is for past and future costs of repairs and reconstruction and unspecified furtherand other damages. [40] The injury therefore can be described as damage to property, economic loss, non-performance of an obligation and, a breachof a duty. All lead back to same question, is it plain and obvious that the City knew or ought to have known prior to October 23, 2007,that it had been injured due to a failure to install cathodic protection on the water lines in the subdivision? [41] It is the facts that are relevant: Sztuczka v. Knebel, 2012 ABQB 72, (Master) at para. 11.

A plaintiff does not need to have perfect certainty about the facts to start the clock running under the Act: De Shazo v. Nations EnergyCo., 2005 ABCA 241, para. 38. At the same time, more than mere suspicion is required. There must be support for the suspicion: DeShazo, para. 29, citing Photinopoulos v. Photinopoulos, (ABCA). [42] The evidence of the City on the question of what it knew at that time is in issue. The letter from Mr. Stevens to Mr. Mahercan be interpreted as indicating some certainty as to the absence of cathodic protection. However, the evidence of Mr.

Stevens indicatesthat their information at that time was more nuanced as it was possible that the protection had been installed elsewhere than the expectedlocation and there could have been another reason for the failures. [43] The only information the City had subsequent to its letter was the lack of response from Mr. Maher and one further line breakwhere the line appeared corroded and there was no cathodic protection in the expected location. [44] Mr.

Stevens is alleging that by October 23, 2007, the City was suspicious that a lack of cathodic protection was the cause ofthe breaks but did not have the requisite degree of knowledge that it had been injured to trigger the clock. [45] On its own, the letter to Mr. Maher arguably indicates that the City had knowledge of the injury. However, this

interpretationis tempered by Mr. Stevens’ evidence as to the exact nature of the City’s concerns. In De Shazo (supra) the limitations dispute betweenthe parties centered on the inferences to be drawn from correspondence from the plaintiff to the defendant. However, thatcorrespondence threatened a lawsuit for essentially the same claim as was ultimately filed. [46] This case is not as blatant. While the evidence of Mr. Stevens does appear to benefit from hindsight, and is possiblydisingenuous, an assessment of its weight and credibility cannot be made at this stage of the proceeding.

It must be made at trial: Liu,(supra), para. 2. I cannot say that it is beyond doubt that the City had the requisite degree of knowledge that it had been injured as aresult of the failure to install cathodic protection. [47] However, that does not end the matter. The Act does not countenance what may be wilful blindness. The question thenbecomes, is it plain and obvious that the City ought to have known that it had been injured as a result of a failure to install cathodicprotection?

The requirement of a claimant to exercise reasonable diligence does not appear applicable in this case as the only evidencebefore the Court as to how to ascertain if cathodic protection was in place is Mr. Stevens’ statement that to his knowledge the onlymethod was to dig the lines up and they were buried to a depth of seven to ten feet. [48] Mr. Stevens’ evidence establishes that more than two years prior to issuing its claim the City knew that 3 of 74 waterlineshad broken. It knew that there was no cathodic protection on those three lines at the place where the City normally expected it to be.

Itknew that a lack of cathodic protection may be the cause of the breaks as they resulted from corrosion and pitting. [49] However, there is no context provided to allow the court to give some perspective to this evidence. For example, there is noevidence as to the likelihood of breaks resulting from corrosion or pitting occurring on lines of the same material and the same age bothwith and without cathodic protection. What was the likelihood of such a break if the line had been cathodically protected?

What is thelikelihood of such a break without protection, which was apparently the situation prior to the change in specifications that occurred withthis project? Furthermore, the Court does not know the options allowed or available for the installation of cathodic protection. Theevidence is that on those three lines cathodic protection was not found where it was expected to be found. Was that where it wascontractually required to be found? I could not find a location for the cathodic protection specified in the materials filed. Did standardconstruction practices dictate it must be in a specific place?

Did the contractor have leeway as to where it was installed? When the threelines were repaired were the entire lines dug up or only the immediate area of the repair? [50] For the Court to undertake the objective assessment necessary to determine what the City ought to have known, furtherinformation is necessary. [51] This is a

summary judgment application. The Court must find it plain and obvious or beyond doubt, that the action will notsucceed due to the limitations defence. In my view, the evidence before this Court is not sufficient to summarily determine that the Cityought to have known that the injury was attributable to a lack of cathodic protection.

[ 52 ] With the amendment to the Rules of Court, the applicant is now able to file further evidence upon appeal. As a result the omission of the contextual evidence necessary to determine whether the City “ought to have known” of its injury is capable of being remedied. [ 53 ] The application is dismissed. If the parties cannot agree to costs they may be spoken to within 30 days of this decision. Heard on the 09 th day of April, 2013. Dated at the City of Calgary, Alberta this 24 th day of June, 2013. J.B. Hanebury M.C.C.Q.B.A.

Appearances: Ronald Robertson Barrister & Solicitor for the Applicant, Silvercreek Development Corporation Sean E.D. Fairhurst Henry Chan MacPherson Leslie & Tyerman LLP for the Defendants, the City of Airdrie