Stahl Properties Inc. v, 2013 ABQB 674

Court of Queen ’ s Bench of Alberta Citation: Stahl Properties Inc. v 937362 Alberta Inc., 2013 ABQB 674 Date: 20131115 Docket: 1003 08363 Registry: Edmonton Between: Stahl Properties Inc. and Stahl Peterbilt Inc. Plaintiffs - and - 937362 Alberta Inc., Shelby Engineering Ltd., James P. Doohan, Edmonton Trailer Sales & Leasing Ltd., Denis St. Andre, Brent Horn and Jordan Kabat Defendants _ ________________________________________ ______________ Memorandum of Decision of the Honourable Madam Justice M.T. Moreau _________________________________________ ______________ I.

Introduction [ 1 ] The Plaintiffs, Stahl Properties Inc. and Stahl Peterbilt Inc. (“Stahl”), seek leave to amend their Statement of Claim. The Defendant 937362 Alberta Inc. (“937”) and Jordan Kabat (“Kabat”) oppose the amendments while the remaining Defendants take no position on the application. Stahl entered into an agreement with 937 on December 20, 2006 to purchase lands located in Edmonton (“the Agreement”) for $5.1 million. Following the execution of the Agreement, contamination was found on the property from a previously- removed underground waste oil tank.

Stahl commenced this lawsuit claiming the costs associated with the remediation of the property along with loss of rental revenues. II. The Law relating to Amendment of Pleadings

[ 2 ] Rule 3.62 of the Alberta Rules of Court, Alta Reg 124/2010 [ ROC ], states: 1. A party may amend the party ’ s pleading, including an amendment to add, remove, substitute or correct the name of a party as follows: 2. … 3. (

b) after the pleadings close, 4. … 5. (ii) for any other amendment, with the Court ’ s prior permission in accordance with Rule 3.65. [ 3 ] Rule 3.65 of the ROC states: 1. Subject to sub rule (5), before or after the close of pleadings, the Court may give permission to amend a pleading. 2. If the Court gives permission for a pleading to be amended, the Court must specify the time period within which the amended pleading must be filed and served. 3.

An order giving permission to amend a pleading under this rule ceases to have effect unless the amended pleading is filed and served within the time specified by the Court. III. Background Facts [ 4 ] The Agreement contained the following terms with respect to inspections: 1. It is a condition precedent of this offer that the Purchaser, its Agent or nominee be allowed SIXTY DAYS following the date of the acceptance of this offer for the purpose of: ... 2.

The Purchaser in its sole discretion, being wholly satisfied with the results of all physical inspections of the property, including site grading, soils testing, architectural, engineering inspections and phase two environmental inspections. The Purchaser shall return the lands to an undamaged condition. 3.

If the Purchaser should, on or before the expiry of the conditional period outlined above fail to notify the Vendor in writing of its intention to proceed with the contract then this contract shall be null and void and of no further effect, and the deposit monies and accrued interest shall promptly be returned to the Purchaser. [ 5 ] 937 also warranted that to the best of its knowledge, no tenant or occupant had ever used, stored, or disposed of any hazardous materials on the property.

The Defendant Edmonton Trailer Sales & Leasing Ltd. was a tenant of 937 and occupying the property when Stahl and 937 entered into the Agreement. [ 6 ] In order to satisfy itself as to the satisfactory condition of the property, Stahl retained the Defendants Shelby Engineering Ltd (“Shelby”) through its representative, the Defendant James P. Doohan (“Doohan”), to conduct phase two environmental testing of the property. [ 7 ] Shelby provided a report dated April 10, 2007 confirming that test holes drilled outside of the building located on the property revealed hydrocarbon contamination.

The report recommended the disposal of soil material between a depth of 1.5 and 5.0 meters over an area of 20 meters by 8 meters. The report stated with respect to the cost of disposal: Disposal costs will be dependent on the proximity of a landfill that will accept the material. For estimation purposes excavation and disposal costs of $200.00 per cubic meter should be used. The area where the test holes were drilled had a concrete slab that will have to be removed and replaced.

This cost should also be included in the allowance. [ 8 ] It was estimated that based on this formula, the cost of remediating the lands would be $112,000. [ 9 ] The condition precedent in the Agreement was extended until April 16, 2007. In the meantime, the parties executed a Memorandum and Escrow Agreement (the “Amended Agreement”) on April 11, 2007. It stated (in part): … AND WHEREAS the Purchaser has indicated that they are prepared to proceed with the purchase on the condition that the Vendor remediate the contamination identified in the consultant’s report which is attached as

Schedule “B”; NOW THEREFORE the parties agree as follows: … 2. The Vendor acknowledges that it has reviewed the environmental report provided by Shelby Engineering Ltd. as summarized in a letter of April 10, 2007, a copy of which is attached as

Schedule “B”. The Vendor accepts the responsibility to remediate the environmental contamination as identified in the report as soon as practicable and such remediation will be completed on or before the

27 th day of October, 2007. 3. The Vendor will be fully liable and responsible for the conduct of the remediation work, including the removal of any concrete slabs, the excavation and removal of any contaminated soil and the replacement of subsoil properly compacted. The Vendor will also be responsible to replace any concrete pads or paving which were taken out for the purposes of the excavation. Yard site will be returned to its original position as near as practicable. 4.

The Vendor acknowledges that it will do all of the remediation work to the satisfaction of the consultant who, acting reasonably and at the expense of the Vendor, will monitor the remediation in a professional manner and on behalf of both the Vendor and the Purchaser. Part of the consultant’s responsibilities will be to provide reports to the escrow agent for the purposes of authorizing the release of funds from time to time. [ 10 ] Pursuant to the Amended Agreement, 937 agreed to pay $150,000 into escrow and Stahl agreed to increase its deposit on the purchase by $300,000.

The Amended Agreement provided that “...other than with respect to the remediation of the environmental condition all other conditions precedent are satisfied and waived.” [ 11 ] In the course of remediating the property, more contamination was discovered, some of which was located under the building on the property as confirmed by Shelby in a further report dated November 26, 2007. The Plaintiff alleges that Shelby was paid throughout by 937, along with an engineer, Russ Renneberg, who provided advice on underpinning the building during excavation operations underneath.

Tundra Specialized Service Inc. (“Tundra”) conducted remediation operations. [ 12 ] Stahl alleges that in return for 937’s promise to complete the remediation work, Stahl agreed to extend the deadline for doing so. [ 13 ] The costs of remediation performed to date exceed $1 million and, according to Stahl, the remediation work is not completed.

Tundra has commenced a claim for its remediation services and filed a builders’ lien against title to the property. [ 14 ] Stahl alleges that 937 breached the Amended Agreement by failing to complete the remediation work as agreed and breached its statutory duties under the Environmental Protection and Enhancement Act , RSA 2000, c E-12. Stahl further alleges that 937 and the other named Defendants were negligent in causing or permitting the release of toxic substances on the property, and deliberately misrepresented the status of the property. IV.

Positions of the Parties [ 15 ] Stahl seeks to add a new para 16 to the Statement of Claim alleging an express agreement between the Plaintiffs and one or more of the Defendants that it was a condition precedent to the Agreement that in their sole discretion, the Plaintiffs be wholly satisfied with the condition of the property, including soils testing and phase two environmental inspections of the property. [ 16 ] Stahl seeks to add a new para 23 to plead in the alternative that notwithstanding limitations on the obligations of remediation specified in the Amended Agreement, the Defendants continued to remediate the property beyond the scope specified in the Amended Agreement.

It also seeks to add new paras 24, 25 and 26 alleging, respectively and in the alternative: the existence of a collateral contract between Stahl and the Defendants or some of them to remediate all of the contaminated property; an agreement by the Defendants or some of them to vary the Amended Agreement such as to waive the deadline for completion of the deadline; and the waiver by the Defendants or some of them of the limitation of the obligation as to the scope of remediation specified in the Amended Agreement. [ 17 ] Stahl seeks to plead additional facts in new paras 29 to 32 alleging that more extensive contamination discovered in November 2007 required the removal of the floor of the building; that all or some of the Defendants represented that all contamination would be remediated; that there was an additional agreement that Stahl was not prepared to complete the purchase unless all the contamination was remediated and the building put back into its original condition (including replacement of the concrete floor and concrete exterior pads); and that, finally, 937 and Trailer promised on numerous occasions to continue the remediation process to the satisfaction of the Plaintiffs, which Stahl alleges constituted a collateral agreement and inducement for the Plaintiffs to complete the purchase of the property. [ 18 ] Counsel for Stahl cited Dow Chemical Canada Inc v Nova Chemicals Corporation, 2010 ABQB 524 , 495 AR 338 [ Dow Chemical ], decided under R 132 of the former Rules of Court , Alta Reg 390/1968 .

Wittmann CJ referred to the “classic rule” in relation to the amendment of pleadings, at paras 20 and 21: Generally, any pleading can be amended no matter how careless or late is the party seeking to amend: Balm v. 3512061 Canada Ltd., 2003 ABCA 98 , 327 A.R. 149 at para. 43 . This is referred to in Balm as the “classic rule”. The classic rule is subject to four major exceptions: Canadian Deposit Insurance Corp. v. Canadian Commercial Bank , 2000 ABQB 440 , 269 A.R. 49 at para. 11 ; Foda v. Capital Health Region, 2007 ABCA 207 at para. 10 ; see also C.H.S. v.

Alberta (Director of Child Welfare) , 2006 ABQB 528 , 403 A.R. 103 at para. 11 , aff’d 2006 ABCA 355 , 401 A.R. 215. Those exceptions are as follows: 1. the amendment would cause serious prejudice to the opposing party, not compensable in costs; 2. the amendment requested is “hopeless” (an amendment that, if were in the original pleadings, would have been struck); 3. unless permitted by statute, the amendment seeks to add a new party or a new cause of action after the expiry of a limitation period; and 4. there is an element of bad faith associated with the failure to plead the amendment in the first instance.

Therefore, if no exception applies, the pleadings can generally be amended. [19] Counsel for Stahl also referred to Oregon Jack Creek Indian Band v CNR, (SCC), [1990] 1 SCR 117[Oregon Jack], in which a unanimous Court referred, at para 2, to the “settled principle” that pleadings should not be rejected unless theyare clearly and obviously invalid, adding that “[a] refusal to allow an amendment must meet the same standard.” [20] Counsel for Stahl maintains that the proposed amendments relate to the same sequence of events or transaction and do notgive rise to a “new claim” within the meaning of the Limitations Act, RSA 2000, c L-21 [Limitations Act], and referred to the commentsof Langston J in Stolk v 382779 Alberta Inc, 2005 ABQB 440 at para 24, 383 AR 203: In the case before me, the proposed amendments all relate to the same sequence of events and the same continuing relationship betweenthe parties.

For the most part, the proposed amendments either add further details about the parties and the factual backgroundunderlying the claim or further particulars about the allegations of negligence and breach of contract originally raised in the AmendedStatement of Claim. [21] Stahl noted that a statement of claim need only plead facts and not draw legal conclusions, citing Balm v 3512061 CanadaLtd, 2003 ABCA 98, 327 AR 149 [Balm]. Côté JA commented, at para. 11: Paragraph 37 in the amended statement of claim is new, and is clearly a new cause of action.

However, though the legal conclusionpleaded is new, the acts alleged in it are not new. It is trite law that a statement of claim need not name causes of action or draw legalconclusions. It need only plead facts. So the plaintiff could merely have sent the original defendants’ counsel a letter warning that hewould argue at trial that proof of such and such facts already alleged in the statement of claim would constitute the cause of action ofmutuality of obligations under law merchant. See 30 Hals.

Laws 7 (3d ed.1959). [22] It is Stahl’s position that none of the additional allegations constitute “new claims”; they flesh out facts already pleaded anddraw legal conclusions based on those facts. Stahl submits that para 16 is simply an additional reference to a term of the Agreementalready pled in para 11 of the statement of claim.

New para 23 refers to the increased scope of remediation which arises from para 22 ofthe Statement of Claim in its reference to the considerably greater contamination than Stahl was originally led to believe and the fargreater remediation costs incurred for yet to be completed remediation work. New para 29 effects a similar purpose - that there was moreextensive contamination was previously referred to in para 22 of the Statement of Claim.

The reference to the removal of the buildingfloor adds particulars to the allegations in para 32 of the Statement of Claim that the Plaintiffs have incurred significantly greaterexpenses in renovating the building than had the extent of the contamination been limited to what they had been led to believe. [23] Counsel for Stahl submits that new paras 24, 25 and 26 can be characterized as legal conclusions and are not new claims.Their legal conclusions are drawn from the promise by 937 to complete the remediation and the agreement by Stahl to extend thedeadline for completing the remediation referred to in para 21 of the statement of claim.

As the remediation work performed was beyondthe scope of work referred to in the Amended Agreement, these new paragraphs provide a legal explanation for the performance of theadditional work. Paragraph 22 of the statement of claim had already pled that the remediation costs exceeded the amount set out in theAmended Agreement.

The representation referred to in new para 30 similarly arises from para 21, as does the promise referred to in newpara 32. [24] Counsel for Stahl submits that the reference in new para 31 to an additional agreement that included concrete floor andconcrete pad replacement is not new but is contemplated in para 3 of the Amended Agreement that was originally pled at para 20 of theStatement of Claim: The Vendor will also be responsible to replace any concrete pads or paving which were taken out for the purposes of the excavation. [25] Counsel for Stahl submits that the additional agreements referred to in new paras 24 through 26, 31 and 32 can co-exist withthe Agreement and Amended Agreement as neither the Agreement nor Amended Agreement contain the term that any amendment mustbe in writing or an “entire agreement” clause.

The additional agreements referred to in the proposed amendments are not inconsistentwith the Amended Agreement as at the time it was made the only contamination known to the parties was as described in the first Shelbyreport.

The additional agreements place a legal characterization on the promise to complete the remediation and the correspondingextension of deadline referred to in para 21 of the Statement of Claim. [26] Addressing the other exceptions to the “classic rule” referred to in Dow Chemical at para 21, counsel for Stahl submits thatthe proposed amendments are not hopeless and speak to the different ways the actions of the Defendants could be characterized in law.Nor will 937 suffer prejudice not compensable in costs as questioning has not yet been completed.

Finally, no element of bad faith can beinferred from the actions of Stahl in seeking the amendments. [27] Counsel for 937 and Kabat took no issue with the legal principles cited by Stahl in addressing applications to amendpleadings. He maintains that the proposed amendments fit within two of the exceptions referred to in Dow Chemical. First, the proposedamendments raise a new and previously unpled set of promises and previously unpled collateral contract made in 2007 to which theLimitations Act offers a complete defence. Second, the proposed amendments raise allegations that are hopeless.

Counsel for 937 electedat hearing not to argue the bad faith exception raised in his written brief, there being no evidence at this point in the proceeding regardingthe timing of St. Andre’s withdrawal as officer of 937 nor are the terms of an alleged Perringer agreement between St.

Andre and Stahlknown. [28] Counsel for 937 and Kabat characterizes the application as Stahl’s desperate attempt to shore up its defence of a pendingsummary dismissal application filed on behalf of 937 and Kabat. [29] Counsel for 937 and Kabat maintains that the only obligation binding them was to remediate the contamination identified inthe first Shelby report of April 10, 2007. Stahl now proposes to allege that there was a promise by the Defendant Denis St.

Andre (“St.Andre”), an officer of 937 at the material time, to remediate all contamination and that this promise constituted a collateral contract inNovember, 2007. An action should have been commenced by November 2011 to comply with the Limitations Act.

[30] Counsel for 937 and Kabat submits in any event that the oral collateral contract was a promise given in exchange for theextension of a deadline that had already expired. He also maintains that the alleged collateral contract clearly contradicts the originalAgreement as it purports to create an entirely new deal between the parties.

He referred to Hawrish v Bank of Montreal, (SCC), [1969] SCR 515, in which Judson J, for the Court, referred in the penultimate paragraph to Hoyt’s Proprietary Ltd v Spencer,[1919] 27 CLR 133 (H Ct Aus), for the following principle: A distinct collateral agreement, whether oral or in writing, and whether prior to or contemporaneous with the main agreement, is validand enforceable even though the main agreement be in writing, provided the two may consistently stand together so that the provisionsof the main agreement remain in full force and effect notwithstanding the collateral agreement. [31] According to counsel for 937 and Kabat, Stahl purports to argue that an alleged oral contract to remediate the property, atmany times the cost originally agreed upon, merely amended the Amended Agreement that expressly limited 937’s liability for the costof remediation to that specifically noted in the Shelby report of April 10, 2007 appended to the Amended Agreement.

The notion of acollateral contract, he argues, is at complete odds with the Amended Agreement, para 2 making specific reference to the Shelby reportand stating: 2. ...

The Vendor accepts the responsibility to remediate the environmental contamination as identified in the report as soon as practicable and such remediation will be completed on or before the 27th day of October, 2007. [underlining added] [32] Counsel for 937 and Kabat states that any time extensions were not given by Stahl as a result of alleged agreed-upon changesin the scope of the remedial work, but rather, to accommodate the occupation of the property by Edmonton Trailer as it had nowhere elseto go. He relied on the Affidavit sworn by Edward Stahl on March 7, 2013.

Stahl stated, at para 6, that Edmonton Trailer did not have abuilding to move to and continued to operate its business from the building on the property until a new building was completed in 2008.However, counsel for Stahl responded that nowhere in his Affidavit did he state that the occupation of the property by Edmonton Trailerwas the reason for the remediation work delays. [33] Counsel for 937 and Kabat argues that the proposed amendments are as hopeless as the original allegations contained in theStatement of Claim.

The Amended Agreement clearly provides that the remediation is to be performed to the satisfaction of Shelby, theconsulting firm the parties agreed would take on that role. Shelby certified that all remediation was performed as required by the April10, 2007 report appended to the Amended Agreement.

According to counsel for 937 and Kabat, that ends the lawsuit, coupled with thefact that a condition precedent to a contract cannot be relied upon after the contract has been completely performed. [34] Finally, counsel for 937 and Kabat points out that Stahl filed the application to amend the Statement of Claim very late in theproceeding, following applications resulting in 937 posting a letter of credit of more than $2 million and after some Questioning.

Theproposed amendments raise new allegations that should have been sued on years ago and are in any event contradictory to the parties’written Amended Agreement. He questions why Stahl now seeks the amendments if indeed they all truly arise from the Statement ofClaim. V. Discussion [35] New para 16 refers to the condition precedent that was a term of the Agreement pled in the Statement of Claim.

While issuesof merger may prevent Stahl from reviving the condition precedent, the reference to the condition precedent may also be intended toemphasize the importance given by the parties to soil testing and phase two environmental inspections and to shed some light on theirintentions when attempts to remediate the property were made beyond the scope of the Amended Agreement. [36] I agree with counsel for Stahl that para 23 refers to the increased scope of remediation which arises from the reference in para22 of the Statement of Claim to the far greater contamination than Stahl was originally led to believe and the far greater remediationcosts associated with the remediation work.

New para 29 provides some particulars of the extent of the contamination referred to in para22 of the Statement of Claim. [37] I am of the view that similarly, reference to the removal of the building floor adds particulars to the allegation at para 32 thatthe Plaintiffs have incurred significantly greater expenses in renovating the building than they originally were led to believe would berequired. [38] I agree with counsel for Stahl that new paras 24, 25, 26, 30, 31 and 32 can be characterized as legal conclusions drawn fromthe alleged promise by 937 to complete the remediation work and the alleged agreement by Stahl to extend the deadline for completingthe remediation referred to in para 21 of the Statement of Claim.

They are therefore not new claims. They provide a proposed legalframework within which to evaluate liability for the additional remedial work whose cost was noted at para 22 of the Statement ofClaim.

The reference in para 31 to an additional agreement to replace the concrete floor and concrete arises from para 3 of the AmendedAgreement. [39] While the amount of the costs of remediation are considerably greater than what, on 937’s version of the events, it agreed topay, and on Stahl’s version, the Plaintiffs were led to believe by the Defendants, additional oral agreements are not expressly barred bythe Agreement and Amending Agreement, nor does either document contain an “entire agreement” clause.

It is also noted that thestatement of claim sought damages of over four million dollars, many times greater than the escrow amount. [40] As noted in Oregon Jack, pleadings should not be rejected unless they are clearly and obviously invalid. I am of the view thatthe legal conclusions raised do not add new claims. As was the case in Dow Chemical, the proposed amendments all relate to the samesequence of events and the continuing relationship between the parties. Wittmann CJ noted at para 69 in relation to s 6 of the LimitationsAct:

[69] It is noteworthy that the language of the provision does not require that the cause of action in the amendment be related to theoriginal cause of action, but rather that the added claim be related to the conduct, transaction or events described in the original pleadingin the proceeding. This is indicative of a broader perspective: Greentree v. Martin, 2004 ABQB 365 , 2004 ABQB 365, 369A.R. 263 at para. 13. Indeed, it has been confirmed by the Court of Appeal of Alberta and the Supreme Court of Canada that the phrase“related to” has a very broad meaning: Calgary Mack Sales Ltd. v.

Shah, 2005 ABCA 304 , 2005 ABCA 304, 380 A.R. 195 atpara. 14, Slattery v. Slattery, (SCC), [1993] 3 S.C.R. 430, at 445-46. Moreover, it has been stated that this standard“does not appear to be a particularly high threshold”: Stolk v. 382779 Alberta Inc., 2005 ABQB 440 , 2005 ABQB 440, 383A.R. 203 at para. 36. [70] Whether an amendment arises out of the same events as the original pleading is a matter of degree and judgment with which acertain amount of specificity is required: C.H.S. at para 32.

An over broad definition would bestow on the plaintiff an unlimited abilityto add on statute-barred claims: C.H.S. at para. 32, DeSoto Resources Ltd. v.

EnCana Corp., 2010 ABCA 110 , 2010 ABCA 110at para. 8.As noted in Balm, though the legal conclusions pleaded are new, the facts alleged in the proposed amendments are not new butflesh out the promises alleged in para 21 of the statement of claim. [41] While one of the exceptions referred to in Dow Chemical is whether the proposed amendments are hopeless, I agree withcounsel for Stahl that they speak to the different ways the actions of the parties could be characterized in law. It will remain for thepending application for

summary dismissal to determine whether the action has no real chance of success. [42] There was no evidence led as to prejudice beyond the fact that a $2 million letter of credit was posted by 937 in order topermit the sale of the property to proceed. Counsel are directed to set a case management meeting date to set deadlines for ensuing stepsin this and the companion lawsuits to avoid undue delays. VI. Conclusion [43] For the reasons given, Stahl’s application to amend the Statement of Claim in the manner set out at Tab 2 of its Brief isgranted.

The Amended Statement of Claim must be filed and served by November 22, 2013. Any Amended Statements of Defence mustbe filed and served by December 5th, 2013. [45] Costs may be spoken to at the next scheduled case management meeting if an agreement cannot be reached regarding same within21 days. Heard on the 23rd day of October, 2013. Dated at the City of Edmonton, Alberta this 15th day of November, 2013. M.T. Moreau J.C.Q.B.A. Appearances: Patrick J. McAllister & Darcy McAllister Cleall for the Plaintiffs Robert M. Curtis, Q.C. McCuaig Desrochers LLP for the Defendants, 937362 Alberta Ltd. and Jordan Kabat