513320 Alberta Inc., operating as The Interface Financial Group Plaintiff/Applicant - v. -, 2015 ABQB 826

Court of Queen ’ s Bench of Alberta Citation: 513320 Alberta Inc v St Jean, 2015 ABQB 826 Date: 20151223 Docket: 1103 15981 Registry: Edmonton Between: 513320 Alberta Inc., operating as The Interface Financial Group Plaintiff/Applicant - and - David St. Jean, Keri Malh, Lambert Custom Homes Ltd., Colwyn Kelly, and Wolf Hatheway Defendants/Respondents - and - Fred Lambert Respondent _______________________________________________________ Reasons for Judgment of the

Honourable Madam Justice J.H. Goss _______________________________________________________ Table of Contents I. Overview .. 3 II. Facts leading up to commencement of court action . 3 III. Master’s Decision . 4 IV. Standard of Review .. 5 V. Issue . 5 VI.

Summary of Parties’ Positions . 5 VII. Law .. 7 (

A) Rule 3.74 . 7 (

B) Amendments generally . 7 (

C) Added claims under the Limitations Act 8

(1) Relatedness of added claims to the conduct, transaction or events described in Amended Statement of Claim 9

(2) Adding parties . 11 VIII. Analysis . 11 (

A) Issue #1 – Did the limitation period expire before the Plaintiff filed its application to amend? 11

(1) Law of misrepresentation . 12

(2) Hopelessness . 15

(3) Decision on Issue #1 – Did the limitation period expire before the Plaintiff filed its application to amend? 15 (

B) Issue #2 – Does s 6 of the Limitations Act permit the amendments? . 16

(1) Relatedness . 16

(2) Adding Lambert as a Defendant 17

(3) Decision on Issue #2 – Does s 6 of the Limitations Act permit the amendments? . 18 IX. Other Considerations . 18 X. Conclusion . 19 I. Overview [ 1 ] This is an appeal from the April 22, 2015 decision of Master Breitkreuz dismissing the Plaintiff’s application to add new claims and a personal defendant to an existing action framed in debt. [ 2 ] The Plaintiff, 513320 Alberta Inc, operating as The Interface Financial Group (“Interface”), is a financing company that provides working capital to companies by purchasing accounts receivable from those companies. Mr.

Kewal Khakh (“Khakh”) is a director and officer of the Plaintiff and its majority shareholder. [ 3 ] The Respondents in the original application and in this appeal are David St. Jean (“St. Jean”), Lambert Custom Homes Ltd, and Colwyn Kelly (“Kelly”) (collectively, the “Defendants”). They were all unrelated customers of 360 Theatre Systems (Edmonton) Ltd. (“360”). Each of them entered into separate contracts with 360 for the provision of certain products and services.

[ 4 ] The Respondent, Fred Lambert (“Lambert”), is a director, officer and voting shareholder of Lambert Custom Homes Ltd. [ 5 ] In 2010, the Plaintiff purchased from 360 certain invoices (“Invoices”) involving the Defendants. After the Defendants failed to pay the Invoices, the Plaintiff brought an action in debt against each of them. On December 14, 2010, Interface filed a Statement of Claim against the Defendants and two other defendants, Keri Malh and Wolf Hatheway (not parties to this appeal). Interface filed an Amended Statement of Claim on January 12, 2011 to add the Plaintiff’s incorporated name.

No one takes issue with that historical amendment. [ 6 ] The original claim is framed solely in debt, on the basis of the assignment of the Invoices. Statements of Defense were filed by each Defendant between February and May 2011. Interface brought this application to amend its Statement of Claim on November 25, 2013 and seeks to further amend the Amended Statement of Claim to add Lambert, in his personal capacity, as a defendant in these proceedings, and to add claims of negligent misrepresentation and fraudulent misrepresentation against the Defendants and Lambert. II.

Facts leading up to commencement of court action [ 7 ] The Invoices that form the subject of this action are: (

i) Invoice number 804122685 dated March 23, 2010 to David St. Jean in the amount of $29,333.98; (ii) Invoice number 804122691 dated March 31, 2010 to Lambert Custom Homes Ltd in the amount of $29,624.18; and (iii) Invoice number 804122693 dated April 2, 2010 to Colwyn Kelly in the amount of $24,504.80. [ 8 ] Each of the Defendants was provided with written notice of the assignment of the Invoices (the “Notifications”, or “Notification” in the singular). Each Notification is dated April 8, 2010 and is a standard form, signed by the 360 President, Lonny Seguin (“Seguin”). Part of the Notification contains the following representations (the “Representations”): (

i) You have entered into a contract with us [360] either by way of a written contract, purchase order, verbal or other agreement which authorized us to provide to you the goods and/or services identified in the above invoice(s). (ii) You have received all goods and/or services specified in this invoice(

s) and your inspection confirms that these goods and/or services are satisfactory and meet the conditions called for in the contract for payment of the invoice amount. (iii) The invoice(

s) detailed above has been received and reviewed by you, are in accordance with the said contract and are scheduled for payment at the times identified above; and you agree to pay the invoice(

s) to INTERFACE without any right of set-off, counterclaim, dispute, deduction or withholdings whatsoever. [ 9 ] E ach of the Defendants executed a Notification and the Plaintiff was provided executed copies of the Notifications on April 8, 2010. [ 10 ] Prior to advancing funds, Khakh made random phone calls to two of the Defendants to ensure they understood the Notification signed. On April 9, 2010, Khakh and Lambert (on behalf of Lambert Custom Homes Ltd) spoke over the telephone but their evidence is conflicting regarding what was said.

Lambert deposes that he told Khakh that the work that was the subject of the allegedly assigned invoice had not been done and that 360 had already been paid for the work that was completed. He further deposes that he also told Khakh on that date that the work that had been completed to date was faulty and didn't work.

Further, Khakh deposes that although he did speak with Lambert on April 9, 2010, Lambert did not advise him that he did not owe any money to 360, that the work described on the invoice issued to him by 360 was not complete or that 360 had been paid for the work already completed. [ 11 ] On that same day, April 9, 2010, Khakh deposes that Interface acted on the Notifications by funding the purchase of the accounts receivable to 360 (the “Funds”). The Invoices were all scheduled for payment in and around June and July of 2010. The Defendants each failed to pay the Invoices when they fell due. III.

Master’s Decision [ 12 ] Master Breitkreuz heard the Plaintiff’s application to amend the Amended Statement of Claim on January 19, 2015. On April 22, 2015 he dismissed the application by way of an oral decision. The Defendants had also cross-applied for

summary dismissal of the Plaintiff’s claim against them. This cross-application stands adjourned to a date yet to be determined. The only part of the Master’s decision under appeal is the dismissal of the application to amend the Amended Statement of Claim. IV. Standard of Review [ 13 ] The standard of review on an appeal from a Master, on all issues, is correctness: Bahcheli v Yorkton Securities Inc , 2012 ABCA 166 at para 30 .

The appeal is de novo and therefore the Court owes no deference and can make a fresh assessment of the facts: Poff v Great Northern Data Supplies (AB) Ltd , 2015 ABQB 173 at para 6 [ Poff ]. V. Issue [ 14 ] At issue in this appeal is whether the proposed amendments engage the Limitations Act , RSA 2000, c L-12. In other words,

are the proposed amendments to the Amended Statement of Claim statute-barred? [15] In Dow Chemical Canada Inc v Nova Chemicals Corp, 2010 ABQB 524, Wittmann CJ identified three possibilities that existwhere a party seeks to amend pleadings when there is an issue of limitations (at para 64): 1. Determine the limitation period has not expired and allow the amendment; 2. Rule the limitation period has expired and therefore consider s 6 of the Limitations Act which provides for when an amendment canbe made beyond the limitation period; 3.

Find that because of uncertainty in the evidence, the amendments should be allowed subject to the determination of the limitationissue at trial. [16] To determine the correctness of the Master’s decision, I must ascertain which of these three options presently applies. Unlessthe evidence is uncertain, I must determine whether the limitation period has expired. If so, I must subsequently consider whether theproposed amendments comply with the requirements of s 6 of the Limitations Act. VI.

Summary of Parties’ Positions [17] The Plaintiff argues that the Defendants each acknowledged in writing that a debt was owing to 360 and they confirmed theywould pay it to the Plaintiff. Then, after the Plaintiff relied on these representations to its detriment, the Defendants claimed the debt wasnot due or owing. The Plaintiff commenced an action in debt for the monies owed.

Though the Amended Statement of Claim does notspecifically plead that any of the Defendants represented that the work was completed, or that the invoices were not owing, the Plaintiffargues that the Court should allow the proposed amendments as the pleading refers to the Notifications and the Representations are inthe Notifications. [18] Interface submits that the limitation period had not expired when they brought their application to further amend theAmended Statement of Claim.

It argues that it did not know – and could not be expected to have known – that the Defendants and theRespondent had negligently or fraudulently misrepresented the Representations on the Notifications until after questioning was wellunderway. Interface further argues that the limitation period could not begin to run until it knew, or ought to have known, that an injuryhad occurred, that it was attributable to the conduct of the Defendants and the Respondent, and that the injury warranted bringing aproceeding.

It relies on Stack v Hildebrand, 2010 ABCA 108 at para 14 [Stack] in support of its argument that mere suspicion of aninjury is insufficient to trigger the running of a limitation period. The Plaintiff urges the Court to find that the limitation period did notbegin to run until September 2013. [19] Alternatively, Interface argues that even if the limitation period had expired, the proposed amendments are permitted as“added claims” under s 6 of the Limitations Act because they are related to the conduct, transaction or events described in the originalpleading.

It suggests that the phrase “related to” in s 6(2) and 6(4) has a broad meaning and the relational requirement is a low threshold.In support of its position, the Plaintiff relies on Calgary Mack Sales Ltd v Shah, 2005 ABCA 304 [Calgary Mack Sales], Poff, andMcDonnell v Csaki, 2014 ABQB 452 [McDonnell].

Once this low threshold is met, the onus shifts to Lambert to establish that he didnot have sufficient knowledge of the added claim within the time described in s 6(4). [20] Addressing the element of prejudice contemplated by r 3.74 and s 6(4) of the Limitations Act, Interface argues that theDefendants and/or Lambert bear the burden of establishing that such prejudice is present and suggests that they have failed to meet theburden. [21] The Defendants and Lambert argue that the Plaintiff’s application to amend the Amended Statement of Claim should bedenied for a number of reasons.

Foremost, they argue that the amendments are statute-barred because they notified the Plaintiff in 2010that 360 had not completed the contracted work and that they owed no further funds or alternatively that they had already paid 360.Because the Plaintiff was aware or ought to have been aware of these facts in the summer of 2010, they submit, the limitation period hadlapsed long before the Plaintiff brought its application to amend.

Alternatively, they suggest, the Plaintiff ought to have known therelevant facts at the latest by the summer of 2011 after the Statements of Defence were filed. [22] They further argue that in any event, the proposed amendments are hopeless and cannot succeed. Though they recognize thatthe provisions of s 6 of the Limitations Act could apply to protect claims that would otherwise be statute-barred, the Defendants andLambert argue that the proposed added claims should not be allowed because they do not satisfy the “relatedness” requirement of thatsection.

In support of this argument, they rely on Barker v Budget Rent-A-Car of Edmonton Ltd, 2012 ABCA 76 at para 12, leave toappeal to SCC refused (SCC), [2012] SCCA No 218, 553 AR 399 (note) [Barker]. [23] Finally, and notwithstanding any other determination, the Defendants and Lambert submit that it would not be appropriate forthe Court to allow the amendments because of the manner in which the Plaintiff chose to pursue this action.

Specifically, they point tothe Plaintiff’s choice to pursue the various debts in one court action in the Court of Queen’s Bench (as opposed to several smaller actionsin Provincial Court) and not pursuing any actions against 360 and/or its principal Seguin. In addition, because of the very serious natureof fraud allegations, they ask the Court to not allow such amendments lightly. VII. Law (

A) Rule 3.74 [24] Rule 3.62(1)(

b) of the Alberta Rules of Court, Alta Reg 2010/124 (“Rules”), allows a party to amend the party’s pleading after

the pleadings have closed in accordance with r 3.74 (adding, removing, substituting or correcting the name of a party) and r 3.65 (allother amendments). Rule 3.74 requires the Court to be satisfied that an order should be made to add, substitute, remove or correct thename of any party other than a plaintiff (r 3.74(2)). The Court cannot make an order under r 3.74 if prejudice would result that could notbe remedied by a costs award, an adjournment or the imposition of terms (r 3.74(3)).

The burden is on the party resisting the amendmentto show that it would suffer non-compensable prejudice if the amendment is allowed: Castledowns Law Office Management Ltd vFastTrack Technologies Inc, 2012 ABCA 219, at paras 17-18 [Castledowns]. The most common prejudice is the respondent’s lostchance to lead more evidence: Balm v 3512061 Canada Ltd, 2003 ABCA 98 at para 73 [Balm].

Other prejudice may exist, including thesignificant passage of time or the death or incapacitation of a key witness. [25] Exceptions to the general rule allowing for amendments include where the amendment requested is “hopeless”, theamendment seeks to add a new party or a new cause of action after the expiry of a limitation period (unless permitted by statute), andwhere there is an element of bad faith associated with the failure to plead the amendment in the first instance: Canadian DepositInsurance Corp v Canadian Commercial Bank, 2000 ABQB 440 at para 11; Foda v Capital Health Region, 2007 ABCA 207 at para10; CHS v Alberta (Director of Child Welfare), 2006 ABQB 528 at para 11, aff'd 2006 ABCA 355. (

B) Amendments generally [26] The Court has broad discretion to allow amendments, however late or careless, after pleadings have closed: Castledowns atpara 16; Brar v Roy, 2005 ABCA 269 at para 17 [Brar]; Balm at para 43; Milfive Investments Ltd v Sefel (1998), 1998 ABCA 161, 216 AR 196 (Alta CA) at para 3.

This generous discretion enables the determination of the real issues between parties, evenwhere the proposed amendment raises a doubtful plea – as long as it is arguable: Balm at para 12; Brar at para 17; Hur v 726913Alberta Ltd, 2013 ABQB 208 at para 30 [Hur]; Manson Insulation Products Ltd v Crossroads C & I Distributors, 2011 ABQB 51 atparas 43-44. [27] The evidentiary threshold to amend pleadings is low.

Only a modest degree of admissible evidence is needed to support anynew facts or substance alleged entailing a significant amendment to a pleading before the limitation period has expired; the evidenceneed not be enough to prove the new allegations on a balance of probabilities: Balm at paras 25-26, 29; Barker at para 12.

Even hearsaywill suffice: Balm at para 25; Canadian Natural Resources Limited v Arcelormittal Tubular Products Roman SA (Mittal Steel RomanSA), 2012 ABQB 679 at para 50. [28] However, the evidentiary threshold is “significantly elevated” when the proposed amendment alleges fraud, and likelyrequires evidence which will pass a stiffer test: Balm at para 63; Mikisew Cree First Nation v Canada, 2002 ABCA 110 at para 61[Mikisew]. In Mikisew, the Court of Appeal explained that there must be good ground, and significant evidence and particulars, to relaxthe general rule against amending pleadings to allege fraud.

Some cases suggest that “exceptional circumstances” are needed. (

C) Added claims under the Limitations Act [29] In addition to the Rules, ss 3 and 6 of the Limitations Act also apply to the present appeal.

Section 3 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, or (b) 10 years after the claim arose, whichever period expires first, the defendant, on pleading this Act as a defence, is entitled to immunity from liability in respect of theclaim. [30] Those portions of s 6 that apply are: 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 theadded claim if the requirements of subsection (2), (3) or (4) are satisfied.

(2) When the added claim: (

a) is made by a defendant in the proceedings against a claimant in the proceedings, or (

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. ...

(4) When the added claim adds or substitutes a defendant, or changes the capacity in which a defendant is sued, (

a) the added claim must be related to the conduct, transaction or events described in the original pleading in the proceeding, and (

b) the defendant must have received, within the limitation period applicable to the added claim plus the time provided by law for the service of process, sufficient knowledge of the added claim that the defendant will not be prejudiced in maintaining a defence to it on the merits. [ 31 ] As Schutz J (as she then was) noted in Poff , s 6 “extinguishes [an] added defendant’s substantive right to raise a limitation defence to which it otherwise would have been entitled” (at para 28). [ 32 ] Where a party wishes to amend pleadings to add parties or to add claims after the expiration of a limitation period, the Court must evaluate whether each of the requirements of s 6 are made out in the circumstances of that particular case: Stout Estate v Golinowski Estate , 2002 ABCA 49 at para 100 ; R v Canadian National Railway , 2003 ABCA 69 at para 3 .

This has been called the “functional approach” and presumes that amendments will be allowed unless the party resisting amendment can show it will suffer actual prejudice: Stout Estate at para 97 . Where each of the requirements is satisfied, the cumulative effect of s 6 is to eliminate the immunity granted by s 3 of the Act, in favour of having the added claim heard with the original claim(

s) in a single proceeding: Poff at para 37 ; R v Canadian National Railway , 2003 ABCA 69. [ 33 ] Ultimately, the Court’s discretion as to whether a late amendment will be allowed prevails over merely satisfying s 6(2) of the Limitations Act : 422252 Alberta Ltd v Messenger , 2013 ABQB 399 at para 49 . An inability to answer a claim due to the passage of time, particularly where the ultimate limitation period has passed, is a serious prejudice that may lead the court to exercise its discretion to deny the amendment even if the requirements of s 6 are met: 422252 Alberta Ltd at paras 59, 61. That is the essence of the limitations system.

(1) Relatedness of added claims to the conduct, transaction or events described in Amended Statement of Claim [ 34 ] The “relatedness test” is described in both ss 6(2) and 6(4). An added claim “must be related to the conduct, transaction or events described in the original pleading in the proceedings”. In this case, because the initial amendment to the Statement of Claim was authorized by the Rules and did not trigger any limitations concerns, for present purposes, the “original pleading” is the Amended Statement of Claim.

The “added claims” refer to the proposed further amendments. [ 35 ] Relatedness has a very broad meaning, and a low threshold – but, it is not unlimited: Desoto Resources Ltd v EnCana Corp , 2010 ABCA 110 at paras 8 , 10 [ Desoto ]; Calgary Mack Sales at para 14 ; McDonnell at paras 39, 41 ; Poff at paras 53-54 ; 422252 Alberta Ltd at para 47; Greentree v Martin , 2004 ABQB 365 at para 13 ; Stolk v 382779 Alberta Inc , 2005 ABQB 440 at para 36 . [ 36 ] In Desoto our Court of Appeal stated that the determination of whether a new claim arises from the same conduct, transaction or events, requires an assessment of “the whole factual and legal context” (at para 8).

No firm line can be drawn between an unrelated new claim, and what has previously been pleaded. Too general a definition would give the plaintiff an unlimited ability to add statute- barred claims. [ 37 ] 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: Desoto at para 10. The applicable question is: would the documents and other evidence that would be needed to prove the appellant’s new allegations differ significantly from those required to prove the originally pleaded facts?

Claims having only a brief or fleeting relation or for which facts will have to be proven by new documents and new witnesses are only weakly connected to the original claims and should be closely scrutinized. [ 38 ] The key is whether the proposed amendments simply elaborate on existing allegations or whether they broaden the scope of the Plaintiff’s claims beyond the parameters of the original pleadings: Stolk at para 26 . Where only a cursory, superficial connection to the original pleadings exists, the amendments should not be allowed: Champagne v Sidorsky , 2015 ABQB 305 at para 171 .

Additionally, where a plaintiff is seeking to substitute one claim for another, essentially re-defining the questions in issue between the parties, by advancing a new set 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 of Claim, the amendment should not be allowed: Hur at paras 54, 56 . [ 39 ] It is also possible that an added claim is not related where the facts and circumstances supporting the added claim were never expressly alleged in the original pleading and could not be inferred: Barker at para 17 .

In that case, the Court was tasked with interpreting s 6(4). The proposed amendments would have added the driver of a vehicle and a claim that he was negligent.

In the circumstances of that case, the Court stated “we reiterate negligence of the driver was never expressly alleged in the original pleading; nor could it be inferred.” However, the Court also determined that there was no evidence to support the proposed amendments and therefore the application to amend should have been dismissed (at para 15). [ 40 ] There are two divergent lines of cases that address the relatedness requirement of s 6: the Calgary Mack Sales line and the Barker line.

The Plaintiff urges that I follow Calgary Mack Sales , and the Defendants and Lambert advocate Barker as the more appropriate approach. [ 41 ] To the extent that the conclusions of the Court of Appeal in Barker conflict with the conclusions of the same court in Calgary Mack Sales , my colleague Poelman J concluded in McDonnell that courts should use the approach taken in Calgary Mack Sales . Notably, he stated (at para 39): 39 In Barker , the court did not refer to [ Calgary Mack Sales ], nor did it purport to establish a principle for the

interpretation and application of

section 6 of the Limitations Act . Calgary Mack Sales , however, expressly set out the proper approach to be taken to

section 6 ...

41 Further, the Calgary Mack Sales approach reflects the plain wording of section 6(4)(a). The requirement that “the added claim... berelated to the conduct, transaction or events described in the original pleading” is very broad... [I]t is circumscribed by the followingsubsection to avoid prejudice to a defendant. But the only requirement of subsection 4(

a) is that the claim be related to the originallypleaded conduct, transaction or events. [42] Justice Poelman’s conclusions are on point in the present case. Like him, I prefer the Calgary Mack Sales approach overBarker – and I apply it below.

(2) Adding parties [43] When the added claim adds a defendant under s 6(4), the Court must be satisfied that the added claim is related to the conduct,transaction or events described in the original pleading. An additional requirement is imposed. Section 6(4)(

b) requires that the Court besatisfied that the proposed defendant received, within the limitation period applicable to the added claim plus the time provided by lawfor the service of process (i.e. three years), sufficient knowledge of the added claim such that the defendant will not be prejudiced inmaintaining a defence to it on the merits. The proposed defendant bears the burden of proving – with evidence – that such knowledgewas not received and that it will be prejudiced in maintaining a defence on the merits: McDonnell at paras 45, 47, 92; R v CanadianNational Railway, 2001 ABQB 984 at para 27, aff’d 2003 ABCA 69. [44] Concerns about the broad applicability of s 6(4)(

a) are tempered by the requirement in s 6(4)(

b) that the Court avoid prejudiceto a defendant that cannot be remedied. VIII. Analysis [45] To properly analyze the present issues, the Court must first make findings as to when the limitation periods began to run, and,consequently when they expired. (

A) Issue #1 – Did the limitation period expire before the Plaintiff filed its applicationto amend? [46] The Defendants and Lambert argue that the proposed amendments are limitation-barred as the Plaintiff had, or ought to havehad, knowledge of the proposed added claims in negligent and fraudulent misrepresentation and Lambert’s potential personal liability bythe summer of 2010, or alternatively by no later than the summer of 2011. [47] The Plaintiff argues that it was only at Lambert’s questioning on affidavit in September 2013 that the Plaintiff finally acquiredknowledge of all of the elements of fraudulent misrepresentation, and specifically, knowledge of the Defendants’ intention to deceive thePlaintiff. [48] Khakh deposes that he was very confused and did not understand why the Defendants and Lambert would say the workreflected in the Invoices was not completed after they had signed the Notifications with the Representations.

He was further confusedbecause at the same time Seguin had advised him that the Defendants had directly paid 360 the amount shown on the Invoices. Khakhdid not understand why the Defendants would have paid 360 the amounts shown on the Invoices if the work was not completed. Hisevidence is that he assumed that the Defendants were simply looking for excuses not to pay the Invoices, although he understood therewas a possibility the Representations were false.

He deposes however that he did not assume the Representations were fraudulent. [49] In January of 2012, Kelly and Lambert swore affidavits wherein they each indicated that the work invoiced was not complete.Khakh deposes that at this point he understood the Representations were false but still had no reason to believe the false Representationswere knowingly made with the intention to deceive Interface. It was not until September 25, 2013 (the day that Lambert was questionedon his Affidavits) that Khakh deposes that he discovered that the Representations were made for the purposes of deceiving Interface.

Inhis questioning, Lambert explained that the reason he and some of the other Defendants made the false Representations was so thatInterface would advance the funds to 360. Then 360 would have sufficient capital to complete the work invoiced. [50] The Plaintiff argues that prior to Lambert’s questioning, it had no knowledge of the Defendants’ intentions to deceive it withthe false representations, which is a key element of fraudulent misrepresentation.

Therefore, the Plaintiff did not have – and could nothave – sufficient knowledge of the “injury” to “warrant bringing a proceeding” within the meaning of the Limitations Act. This isbecause it did not have knowledge of all the facts constituting the elements of the tort. [51] On this basis, Interface argues that the limitation period did not begin to run until September 2013 and the claim is not statute-barred.

Similarly the Plaintiff argues that, prior to examining the Defendants, there was no basis for him to have known from theconfusing statements of the Defendants and Seguin that the Respondents’ untrue representations were negligently made, or that theresultant losses warranted bringing proceedings against them. [52] The common law discoverability principle provides that “a cause of action arises for purposes of a limitation period when thematerial facts on which it is based have been discovered or ought to have been discovered by the plaintiff by the exercise of reasonablediligence”: Central Trust Co v Rafuse, (SCC), [1986] 2 SCR 147 at p 224, 31 DLR (4th) 481 (SCC).

This principle willinform the application of s 3(1)(a), but courts must also be mindful of the three criteria in s 3 of the Limitations Act: Gayton v Lacasse,2010 ABCA 123 at para 17 [Gayton].

The fundamental operative principle is “knowledge” and immunity is linked with thediscoverability of material facts – the injury – not the discoverability of a cause of action for any injury: Laasch v Turenne, 2012 ABCA32 at para 24; Sun Gro Horticulture Canada Inc v Abe’s Door Service Ltd 2006 ABCA 243 at paras 8, 11. [53] Liability is to be assumed; it is not something which the Limitations Act says has to be known to start the limitation period

running: Boyd v Cook 2013 ABCA 27 at para 23 [Boyd]. The legislated principle does not require perfect knowledge or perfect certainty: De Shazo v Nations Energy Co, 2005 ABCA 241 at para 31; Hill v Southern Alberta Land Registration District, (1993), 100 DLR (4th)331 (Alta CA), 1993 ABCA 75 at para 8. While the test is objective in that it employs the “ought to have known” standard, thethree criteria must be examined taking into account the circumstances, including the personal circumstances, knowledge and interests ofthe particular plaintiff: Boyd at para 20; Gayton at para 21.

What a plaintiff “ought to have known” also incorporates an expectation ofreasonable diligence by the plaintiff or his or her counsel to do some research and make some inquiry as part of determining what oughtto have been known: McDonnell at para 28.

(1) Law of misrepresentation [54] Though findings of fact related to the alleged misrepresentations are to be left to the trial judge, a review of the law ofmisrepresentation is nonetheless essential to determine when the limitation clock began to run. A limitation period does not begin untilthe last of the criteria described in s 3(1)(

a) of the Limitations Act has been met: Tran v Kerr, 2014 ABCA 350 at para 39. [55] The limitation period commences for a claim in negligent misrepresentation when a plaintiff knew or ought to have knownthat their economic loss was arguably due to the respondents’ negligent misrepresentations and that those losses warranted bringingproceedings against them.

With fraudulent misrepresentation, the limitation period commences when the plaintiff learned that therepresentation was untrue: Stack at para 17. [56] A representation is a statement made by, or on behalf of, one person to, or with the intention that it shall come to the notice of,another person which relates, by way of affirmation, denial, description, or otherwise, to a matter of fact.

A “matter of fact” means eitheran existing fact or thing, or a past event: Opron Construction Co v Alberta (1994), (AB KB), 151 AR 241 (AltaQB) at para 498, citing Spencer, Bower & Turner, in The Law of Actionable Misrepresentation, 3rd ed (London: Butterworths, 1974) atp 3. [57] The Supreme Court of Canada in Queen v Cognos Inc, [1993] 1 SCR 87, , laid out the five general elementsrequired for a successful claim of negligent misrepresentation (at 110): (1) there must be a duty of care based on a “special relationship” between the representor and the representee; (2) the representation in question must be untrue, inaccurate, or misleading; (3) the representor must have acted negligently in making said misrepresentation; (4) the representee must have relied, in a reasonable manner, on said negligent misrepresentation; and (5) the reliance must have been detrimental to the representee in the sense that damages resulted. [58] To establish liability for fraudulent misrepresentation, our Court of Appeal identified the following elements that must beproven in Stack; Keleman v El-Homeira, 1999 ABCA 315 at para 7 [Keleman]: (1) a false representation or statement made by the representor; (2) which was knowingly false; (3) which was made with the intention to deceive the representee; and (4) which materially induced the representee to act, causing damage [59] For an action in deceit or fraud to lie, the person making the statement must either know the statement to be false, or bereckless as to its truth or falsehood.

A true statement may also be considered in law as a false representation if it omits reference torelevant qualifying conditions, or facts that the representor has a duty to disclose: Opron at para 500, citing Spencer, Bower & Turner atp 6. [60] A successful action for deceit also can be based on an incomplete disclosure – the so-called half-truth.

Active concealment byconduct may also constitute a fraudulent misrepresentation: Village on the Park, Re, 2009 ABQB 497 at para 58 [Village on the Park],citing Lewis N Klar, Tort Law, 4th ed (Scarborough, Ont: Carswell, 2008) at pp 669-70. [61] The motive of the representator is irrelevant: Peek v Derry (1889), 14 AC 337 (UK HL). There need be no intention to cheator injure the representee: Village on the Park at para 90. It is not necessary that the representator actually know that his representationswere false.

They are fraudulent if they are false and made without belief in their truth, recklessly, or carelessly, whether they were true orfalse: Nesbitt v Redican (1923), (SCC), [1924] SCR 135 at 157 (SCC). Being oblivious to the truth equates with fraud:Bank of Montreal v Profab Welding Ltd, 2014 ABQB 466 at para 15. [62] It is not a defence that with reasonable diligence a plaintiff could have discovered the truth for himself: Sylvan Lake Golf &Tennis Club Ltd v Performance Industries Ltd, 2002 SCC 19 , [2002] 1 SCR 678 (SCC); Hasham v Kingston (1991), (ON SC), 4 OR (3d) 514 (Ont Div Ct).

If the statement is actually relied on, it is no defence that a plaintiff was negligent orfoolish in doing so, or that he had a full opportunity of discovering the truth for himself. Consent is no defence. Every man has in law aright to believe and act on all lies told him by others with intent to deceive him. Nor is it any defence to say that the representation is not“material”, or would not have induced a reasonable man. The true question is whether the statement was a real inducement to theplaintiff and whether he relied on it: Keleman at paras 8-9.

The test is a subjective, not objective, one in a tort action for deceit: Villageon the Park at para 93. [63] Beyond the conflicting affidavit evidence which must be resolved at trial, Khakh deposes that he was first advised that the

Representations might be inaccurate or not completely true in June 2010. At that time, he was making calls to the debtors to remind them the Invoices would be falling due soon, and to make their payment to Interface, not 360. [ 64 ] On June 8, 2010, Khakh spoke with Lambert who told him that he had paid Seguin, and that he would speak with Seguin and get back to him. Khakh made a notation of this call on the back of the Notification signed by Lambert. On the same date Khakh spoke with Kelly who asked him for a reminder the following week, which Khakh did on June 24, 2010.

He did not speak with Kelly on that date, but left him a message. Khakh made notations of these calls on the back of the Notification signed by Kelly. He deposes that Kelly must have advised him that the amount showing on the invoice issued to him did not match the actual amount owing as there is a notation to that effect on the invoice.

Khakh is certain that the call occurred after the Funds were released. [ 65 ] On June 21, 2010, Khakh was advised by Seguin and made a notation that all of the Defendants had paid Seguin directly for the amounts showing on the Invoices and that Seguin would make arrangements with Interface to repay the Funds. [ 66 ] On June 24, 2010, Khakh spoke with St. Jean who advised him that the work invoiced was not completed of which Khakh made a notation to this effect. St.

Jean deposes that all services provided to him by 360 were fully paid, by way of cash, cheque, or business referrals, well in advance of March of 2010 and that he has not ever owed money pursuant to the assigned invoice. [ 67 ] Khakh acknowledged at Questioning on Affidavit that Lambert could have told him that the work was not completed at the end of June or before the end of July.

Furthermore the various Statements of Defense filed by the Defendants in February and May 2011 address the accuracy and truthfulness of the Representations set forth in the Notifications as they state that the work detailed in the invoices was not completed, 360 did not perform or complete the work specified in the allegedly owing invoices, 360 failed to perform any of its obligations under the contract, and that no money was owing to 360.

(2) Hopelessness [ 68 ] The Defendants argue that the proposed amendments in this case are hopeless and doomed to fail as the Plaintiff will not be able to establish that the alleged reliance it placed on the Representations contained within the Notifications was objectively reasonable or that the Plaintiff actually (i.e. subjectively) relied on the Representations. [ 69 ] The Defendants point to the fact that the Plaintiff is a sophisticated party.

Prior to purchasing the Invoices from 360, Interface, Seguin and 360 were complete strangers but nonetheless the Plaintiff relied entirely on Seguin to provide financial information about 360 and did not conduct any independent searches or due diligence to verify the information. It was the Plaintiff’s practice to make “dead sure” that invoices are owing, and it was a policy not to advance funds if the work invoiced for had not been completed. Khakh “spot- checked” only two out of five of the alleged debtors.

Khakh has deposed that the Plaintiff relied on the Representations in advancing the Funds and that had it known the Representations were false, the Plaintiff would not have done so. Khakh further deposed that the Funds were not to be paid to 360 until the Plaintiff received confirmation from the Debtors that the Invoices were valid.

(3) Decision on Issue #1 – Did the limitation period expire before the Plaintiff filed its application to amend? [ 70 ] Khakh’s affidavit evidence addresses the reliance the Plaintiff placed on the Representations. As to whether reliance was objectively reasonable I note that if the statement or representation is actually relied on, it is no defence that a plaintiff was negligent or foolish in doing so, or that he had a full opportunity to discover the truth for himself. The extent to which reliance induced advancing the monies to 360 will be a matter for trial.

I am not satisfied that the proposed amendments are hopeless and doomed to fail on this basis. [ 71 ] On the evidence before me, I am satisfied that the Plaintiff ought to have known by the end of June 2010 that at least some of the Representations in the Notifications were inaccurate or untrue, as Khakh was advised of this by Seguin and by each of the Defendants. Indeed, in his May 8, 2014 Affidavit, Khakh deposes to this knowledge as of June of 2010.

At that point, the Plaintiff ought to have known that its economic loss was arguably due to the Defendants’ misrepresentations and that those losses warranted bringing proceedings against them. [ 72 ] Accordingly, I find that the limitation period for the claim in negligent misrepresentation began to run by the end of June 2010, approximately three years and five months before the filing of the application to further amend the Amended Statement of Claim. [ 73 ] With respect to the claim in fraudulent misrepresentation, the Plaintiff argues it did not have knowledge of the Defendants’ intention to deceive it until September 2013.

However, the case law tells us that representations are fraudulent if they are false. Our Court of Appeal stated in Stack that the limitation period for fraudulent misrepresentation commences when a plaintiff learns that a representation was untrue. The discoverability principle does not require perfect knowledge or perfect certainty. Liability is to be assumed; it is not something which has to be known to start the limitation period running.

On that basis, I find that the limitation period for the claim in fraudulent misrepresentation had also begun by the end of June 2010. [ 74 ] I further find that the limitation period for the added claims of negligent misrepresentation and fraudulent misrepresentation expired by the end of June 2012. [ 75 ] In addition, I am satisfied that the Plaintiff also ought to have known by the end of June 2010 that at least some of the Representations that Lambert gave on behalf of Lambert Custom Homes Ltd were inaccurate, untrue, or false.

I find that the limitation period for adding Lambert as a defendant in his personal capacity also expired by the end of June 2012. (

B) Issue #2 – Does s 6 of the Limitations Act permit the amendments? [ 76 ] My findings on the expiry of the limitation periods do not end the matter.

Section 6 of the Limitations Act may nonetheless permit the amendments if the added claims are related to the conduct, transaction or events (i.e. facts and circumstances) described in the Amended Statement of Claim. Because of the identical language in s 6(2) and 6(4)(a), in my view, the same relatedness test applies to

both sections. Relatedness is the only requirement necessary to satisfy s 6(2). Section 6(4) requires the Court to be satisfied that the relatedness test is met (s 6(4)(a)) together with the additional considerations described in s 6(4)(b).

(1) Relatedness [ 77 ] The Plaintiff argues that the proposed added claims in fraudulent and negligent misrepresentation meet the test under s 6(2) of the Limitations Act . The Amended Statement of Claim pleads the agreement between 360 and the Plaintiff to assign the Invoices, the Notifications to the Defendants of the assignment of the Invoices, that the Notifications were signed by the Defendants and returned to the Plaintiff, and that the Defendants have failed to pay the Invoices when they became due or upon demand.

It is argued that the claims for negligent and/or fraudulent misrepresentation arise directly from these transactions and events as the alleged misrepresentations were contained in the Notifications signed by the Defendants. [ 78 ] The Defendants argue that the Plaintiff has not established that the added claims are related to the events described in the original pleadings. The original pleading is a simple debt action and does not plead the conduct or misconduct of the Defendants, that any of the Defendants made any representations to the Plaintiff, or that the Plaintiff relied on those representations.

Relying on Barker , they argue that one cannot infer negligence, much less fraud, on the part of any of the Defendants from the facts pled in the Amended Statement of Claim. They submit that the proposed amendments are not a mere clarification or expansion of what is already contained within the pleadings, but rather they seek to wholesale redefine the issues within the litigation. [ 79 ] I am not persuaded by the Defendants’ arguments. With the amended pleadings, a new set of conduct, transactions and events would not have to be proven at the trial.

The alleged actions, representations and intentions of parties within those transactions and events already pleaded would simply take on a new focus and need to be proven. Those actions, representations and intentions have more than a fleeting, cursory or superficial relation to the transactions and events pled; they are integrally involved.

Certainly the issues related to the conduct, events and occurrences between the parties are broadened or focussed by the proposed amendments and additional facts pleaded, but not beyond the parameters of the original pleading. [ 80 ] Further, I am not convinced that, to be related, the facts and circumstances supporting added claims must be expressly alleged or be capable of being inferred in the original pleading.

Such a conclusion runs contrary to the low threshold required to meet the relatedness test, particularly when considered within the context of the functional approach to be taken to s 6 identified by the Court of Appeal in Stout and the presumption that amendments will be allowed unless the party resisting amendment can show it will suffer actual prejudice. [ 81 ] As previously noted, relatedness in s 6 has a very broad meaning and only a low threshold is required to establish it.

In light of the whole factual and legal context, I find that the Plaintiff has satisfied its onus that the added claim of negligent misrepresentation is related to the conduct, transaction or events described in the Amended Statement of Claim. [ 82 ] The evidentiary threshold for proposed amendments alleging fraud is “significantly elevated”.

In this case, the Plaintiff relies upon Lambert’s own evidence at questioning on his affidavit that when he signed the Notification, Lambert Custom Homes Ltd owed no money to 360, and that the purpose of signing the Notification was so that the Plaintiff would advance funds to 360.

This would enable 360 to complete the home automation system installation that 360 was doing for Lambert Custom Homes Ltd. [ 83 ] Again, considering the whole factual and legal context, I am satisfied that the evidence presented in this appeal meets the significantly elevated evidentiary threshold required to relax the general rule against allowing amendments to pleadings to allege fraud. The Plaintiff has satisfied its onus that the added claim of fraudulent misrepresentation is related to the conduct, transaction or events described in the Amended Statement of Claim.

(2) Adding Lambert as a Defendant [ 84 ] To add a defendant to an existing action, s 6(4) requires the Court to consider not only relatedness but also the impact of prejudice against the proposed new defendant. Interface bears the burden of satisfying the relatedness component (see s 6(5)(a)). The onus then shifts to Lambert to prove that the requirements in s 6(4)(

b) were not satisfied (see s 6(5)(b)). [ 85 ] I first address whether Interface has met its burden. [ 86 ] The evidence of “relatedness” identified in the preceding

section also applies here. In addition, I find compelling the evidence of Lambert’s role as director, officer and voting shareholder in the Defendant Lambert Custom Homes Ltd and his interactions with Interface on behalf of Lambert Custom Homes Ltd.

This involvement in these proceedings to date and Lambert’s relationship with Lambert Custom Homes Ltd, in my view, satisfies the relatedness element. [ 87 ] Turning now to Lambert’s burden, I must now go a step further and ascertain whether Lambert received sufficient knowledge of the added claims and most particularly the facts and circumstances giving rise to the added claims within the requisite period, such that he will not be prejudiced in maintaining a defence to the claims on the merits. [ 88 ] Lambert Custom Homes Ltd has been involved in this action with legal representation since at least May 2011, when its Statement of Defence was filed.

Lambert has filed three affidavits in this action since January 2012 on behalf of Lambert Custom Homes Ltd, deposing to matters of which he had personal knowledge as it relates to this action, including particulars of the invoice and execution of the Notification containing the Representations, which he signed on behalf of Lambert Custom Homes Ltd. He has been questioned on Affidavit once. [ 89 ] Essentially, Lambert has been integrally involved in and with this action throughout. Incorporated business entities require a live person to sign documents and talk on the telephone – and in this case, that was Lambert.

Interface’s interactions with Lambert Custom Homes Ltd necessarily involved Lambert as it was he who signed documents and spoke on the telephone on behalf of the corporate entity.

[ 90 ] Lambert’s involvement in Lambert Custom Homes Ltd as a director, officer and voting shareholder speaks volumes as to his personal knowledge. The only way that Lambert Custom Homes Ltd can “know” something is if Lambert knows it. That a corporation is a distinct person from the directors, officers, and shareholders is a legal fiction meant to provide certain rights, privileges and protections.

However, when it comes to corporate knowledge, the mind of a representative of a corporation can be attributed to the corporation as a whole: Motkoski Holdings Ltd v Yellowhead (County) , 2010 ABCA 72 at para 88 ; see also Poff at paras 78-80 . It strikes me that in certain cases, the present case being one, the converse is also true – the knowledge of the corporation is the knowledge of the representative. [ 91 ] Lambert has not satisfied me that he did not receive sufficient knowledge of the added claim within the relevant time.

Indeed, as was argued by the Defendants, the accuracy and truthfulness of the Representations set forth in the Notifications was specifically pleaded in the Statements of Defense in this action, including the one filed by Lambert Custom Homes Ltd. As the Statements of Defense were filed before the summer of 2011, I find that Lambert had sufficient knowledge of the added claims by then.

That is well within the three-year period contemplated in s 6(4)(b), which commenced in the June 2010. [ 92 ] Additionally, Lambert has not filed any evidence regarding prejudice in maintaining a defence on the merits and I find none. Section 6(4) has been satisfied.

(3) Decision on Issue #2 – Does s 6 of the Limitations Act permit the amendments? [ 93 ] I am satisfied that the requirements of ss 6(2) and 6(4) have been met. The amendments are permitted through operation of the provisions of the Limitations Act . Permitting the amendments does not, of course, pass judgment on the merits of the Plaintiff’s claims. To be successful, the Plaintiff will still need to prove its claims at trial. IX. Other Considerations [ 94 ] The Defendants and Lambert urge the Court to deny the amendment application even if the requirements of s 6 have been satisfied – which they have been.

They point to the manner in which the Plaintiff chose to pursue the action and they are critical of the Plaintiff’s decision not to seek any remedial relief from 360 or Seguin. [ 95 ] The Rules encourage parties to resolve claims quickly and at the least expense, after identifying the real issues in dispute (see r 1.2(2)). Provided a party complies with the Rules , I see no reason why a party should be faulted for its choices in the carriage of a matter. [ 96 ] Moreover, Lambert’s failure to file any evidence regarding prejudice means that the concerns identified in r 3.74 are alleviated.

This also means that I need not address possible remedies to prejudice. [ 97 ] I see no reason not to permit the amendments. X. Conclusion [ 98 ] The Master’s decision to deny the Plaintiff’s application was incorrect. I allow the appeal and grant the Plaintiff’s application for an Order allowing it to amend the Amended Statement of Claim as set forth in its draft Amended Amended Statement of Claim. [ 99 ] Owing to its success on this appeal, I award costs to the Plaintiff in the sum of $1,000. Heard on the 10 th day of November, 2015. Dated at the City of Edmonton, Alberta, this 23 rd day of December, 2015. J.H.

Goss J.C.Q.B.A.

Appearances: Justine Mageau, Witten LLP for the Appellant/Plaintiff Michele A. Wolowidnyk, Weir Bowen, LLP for the Respondents/Defendants David St Jean and Lambert Custom Homes and for the Respondent Fred Lambert Eugene J. Erler, Durocher Simpson Koehli & Erler for the Respondent/Defendant Colwyn Kelly