Condominium Corporation No, 2016 ABQB 609

Court of Queen’s Bench of Alberta Citation: Condominium Corporation No 0610078 v Pointe of View Condominiums (Prestwick) Inc, 2016 ABQB 609 Date: 20161109 Docket: 1001 15771 Registry: Calgary Between: Condominium Corporation No. 0610078 and Syd Dombowsky as Representative Plaintiffs Plaintiffs - and - Pointe of View Condominiums (Prestwick) Inc., Royal & Sun Alliance Insurance Company of Canada and National Home Warranty Programs Ltd. Defendants - and - Pointe of View Condominiums (Prestwick) Inc., Robert Spaetgens Architect Ltd., David T. Symons Architect Ltd., Robert Spaetgens Architect Ltd. and David T.

Symons Architect Ltd., Carrying on Business as S2 Architecture Partnership, S2 Architecture, MWC Consulting Structural Engineering Ltd., Allen Wasnea Engineering Ltd., Idea Group Inc., Durwest Construction Systems (Alberta) Ltd., Prairie Pipe Sales Ltd., 789072 Alberta Ltd., R.K.G. Developments Ltd., Prairie Pipe Sales Ltd., 789072 Alberta Ltd. And R.K.G. Developments Ltd. Carrying on Business as Lenbeth Weeping Tile Calgary, Lenbeth Weeping Tile Calgary and Inland Concrete Limited Third Party _______________________________________________________ Memorandum of Decision

of the Honourable Madam Justice J. Strekaf _______________________________________________________ Introduction [ 1 ] The main issue in this application is the extent to which a party who is aware that it has suffered damage that merits bringing a proceeding should be expected to take steps to identify the parties responsible for that damage for the purpose of triggering the commencement of the limitation period.

The issue arises in the context of an application by the Plaintiff to amend its claim and add defendants in a certified class action brought by Condominium Corporation No. 0610078 and Syd Dombowsky as representative plaintiffs (the “Plaintiffs”) on behalf of the owners of units in a residential condominium project located at 10 Prestwick Bay SE in Calgary (the “Project”) to recover damages of $2.7 million to repair damage caused by water leakage due to faulty construction.

Relevant Facts [ 2 ] The evidence on the application was comprised of the affidavits of Syd Dombowsky, Renald Bedard, Trevor Hall, Kevin Nichol and Stephanie Lanz and transcripts from questioning of those affidavits, from which I find the following facts. [ 3 ] The Project, which was developed by the Defendant Pointe of View Condominiums (Prestwick) Inc. (“POV”) in 2004-2005, consists of four, four storey buildings above an underground parkade.

As a result of water leakage problems that were experienced in 2007 – 2008, the Project’s property manager retained Building Science + Architecture Ltd. (“Building Science”) to conduct a review of the problem. Building Science issued a report in October 2009 (the “Report”) that confirmed water penetration through the foundation walls and parkade ceiling resulting from defects with the building’s perimeter slope, concrete foundation walls, the parkade’s suspended slab and the drainage system.

It recommended a number of repairs including: • removal of the courtyard’s landscaping, asphalt parking lot and existing, waterproofing materials, adding extra drains and re- waterproofing the courtyard, • conducting inspection of the weeping tile, excavating the foundation walls, removing existing waterproofing materials and re- waterproofing and insulating the exterior walls, and • installing geotextile cloth and drainage gravel around the perimeter of the foundation walls and re-landscaping with positive slope away from buildings. [ 4 ] The Plaintiffs’ claim that the cost of the repairs and remediation due to construction deficiencies is $2.7 million. [ 5 ] The Report was reviewed by the board of the Condominium Corporation who retained legal counsel to assist them in late 2009 or early 2010.

On March 3, 2010, the Condominium Corporation’s legal counsel wrote to POV and advised them that a claim had been made against the National Home Warranty Program due to severe and ongoing structural deficiencies resulting from poor construction of the Project, and that “a claim will be made against your company and others involved in the construction of the complex.... Accordingly, it would assist this process for all concerned if you could identify for us your subcontractors and consultants involved in the construction of the (Project)”.

There is no evidence that any response was received to that letter. [ 6 ] A Statement of Claim was filed by new legal counsel on October 25, 2010 against POV, Royal & Sun Alliance Insurance Company of Canada and National Home Warranty Programs Ltd. pursuant to the Class Proceedings Act, SA 2003, c C-16.5. Third Party claims were filed on July 6 and 12, 2012 against various parties, including the following proposed defendants (collectively the “TP Proposed Defendants”) who participated in the lawsuit and filed defences to the Third Party Claims in July and September 2012: (

a) David T. Symons Architect Ltd., Robert Spaetgens Architect Ltd., David T. Symons Architect Ltd. carrying on business as S2 Architecture Partnership, and S2 Architecture (collectively “S2 Defendants”); (

b) Durwest Construction Systems (Alberta) Ltd. (“Durwest”); and (

c) Prairie Pipe Sales Ltd., 789072 Alberta Ltd., RKG Developments Ltd. carrying on business as Lenbeth Weeping Tile Calgary, and Lenbeth Weeping Tile Calgary (collectively “Lenbeth”). [ 7 ] On November 26, 2012, the action was certified as a class proceeding with the following common issues: (

a) The cause of the leakage and other defects and deficiencies discovered in the Project’s parkade and drainage system, as more particularly identified in the Statement of Claim; (

b) Damages attributable to investigation, repair, and replacement of the defects and deficiencies (the “Remediation Damages”); and (

c) Liability for the Remediation Damages, including whether Royal Sun Alliance Insurance Company of Canada or National Home Warranty Programs Ltd. have breached their obligations pursuant to insurance policies issued to the unit owners in the Corporation and are therefore liable to pay for some or all of the cost of the Remediation Damages.

[8] POV served its Affidavit of Records on August 9, 2013 which listed over 33,000 documents and included a list of thevarious contractors and trades involved in the Project.

POV’s officer was examined by the Plaintiffs on September 23 and 24, 2013.Through production of POV’s documents and questioning, the Plaintiffs became aware that Keystone Excavation Ltd. (“Keystone”),Artemis Landscapes & Design Ltd. (“Artemis”) and NW Construction AB Inc. (“NW”) had been involved in the excavation andsubgrade earthworks, landscaping and concrete installation, respectively, for the Project. [9] On June 26, 2015, the Plaintiffs filed an application to amend its Statement of Claim to add Keystone, Artemis and NW asdefendants in the action, none of whom had been third partied (collectively the “NonTP Proposed Defendants”).

The identity of theNonTP Proposed Defendants and their involvement in the Project was not known by the Plaintiffs prior to receipt of POV’s productionand questioning of its corporate representative in August and September 2013. Service of the Plaintiffs’ application to add the NonTPProposed Defendants as defendants in late June or early July 2015 was the first notice that they had of any litigation involving theProject. Relevant Law [10] Rule 3.74 of the Alberta Rules of Court, Alta Reg 390/1968 deals with adding parties after the close of pleadings. It states:

(1) After close of pleadings, no person may be added, removed or substituted as a party to an action started by statement of claim exceptin accordance with this rule.

(2) On application, the Court may order that a person be added, removed or substituted as a party to an action if (

a) in the case of a person to be added or substituted as plaintiff, plaintiff by-counterclaim or third party plaintiff, the application is madeby a person or party and the consent of the person proposed to be added or substituted as a party is filed with the application; (

b) in the case of an application to add or substitute any other party, or to remove or to correct the name of a party, the application ismade by a party and the Court is satisfied the order should be made.

(3) The Court may not make an order under this rule if prejudice would result for a party that could not be remedied by a costs award,an adjournment or the imposition of terms. [11]

Section 2.7 of the Rules provides that after a certification order is made under the Class Proceedings Act that a party may onlyamend a pleading with the Court’s permission. [12] The general rule is that pleadings can be amended at any time, however careless or late, subject to four exceptions, as outlinedby Wittmann, CJ in Dow Chemical Canada Inc v Nova Chemicals Corp, 2010 ABQB 524, at paras 20 – 21 [Dow]: 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 , 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.

Thoseexceptions 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. [13] The applicable limitation periods in this action are determined by section 3(1) of the Limitations Act, RSA 2000, c L-12,which states: Subject to subsections (1.1) and (1.2) and

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 the

claim. [14]

Section 6 of the Limitations Act deals with the addition of parties in circumstances where limitations issues have arisen. Itstates in part:

(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. ...

(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 theservice of process, sufficient knowledge of the added claim that the defendant will not be prejudiced in maintaining a defence to it on themerits.

(5) Under this section, (

a) the claimant has the burden of proving (

i) that the added claim is related to the conduct, transaction or events described in the original pleading in the proceeding, and (ii) that the requirement of subsection (3)(c), if in issue, has been satisfied, and (

b) the defendant has the burden of proving that the requirement of subsection (3)(

b) or (4)(b), if in issue, was not satisfied. [15] The Court in Dow outlined the options available to the court when an amendment is sought where there are limitations issues(para 64): Traditionally, when there is an issue of limitations and an amendment is sought, a court may: 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 can bemade 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: Hill v. Hill, [2007] A.J. No. 1515 (Q.B.) at para. 22, aff'd 2007 ABCA 293 at para. 10. A variation of the last option is to determine whether s. 6(2)(

b) of the Limitations Act saves a claim otherwise barred by the statute. Analysis TP Proposed Defendants [16] At the outset of the hearing of the application, the S2 Defendants consented to both an order to be added as defendants and tothe proposed related amendments of the Amended Statement of Claim, without prejudice to their ability to argue any limitations defencesat any subsequent application or at trial, and without costs. The remaining TP Proposed Defendants, Durwest and Lenbeth, do not opposesuch an order being granted as against them on the same basis. I am satisfied that would be appropriate.

NonTP Proposed Defendants [17] NW, Keystone and Artemis were not named as third parties in the action. Each first became aware of the litigation whenserved with notice of this application in late June or early July of 2015, approximately 10 years after the Project was constructed. Eachopposes being added as a defendant in the action on the basis that the action is statute barred as against them. Keystone and NW alsooppose being added on the basis that they would be prejudiced in defending the action at the present time. [18] Section 3(1)(

a) of the Limitations Act provides that a claim is statute barred if the claimant did not seek a remedial order“within 2 years after the date on which the claimant first knew, or in the circumstances ought to have known” that the injury hadoccurred, “that the injury was attributable to the conduct of the defendant” and that the injury warranted bringing a proceeding. [19] The Court of Appeal of Alberta in DeShazo v Nations Energy Company, 2005 ABCA 241 described section 3(1)(

a) of theLimitations Act as codifying the common law discoverability rule stating at paragraph 26: This provision codifies the common law discoverability rule and applies it to all actions for remedial orders. The common law rule wasdescribed by the Supreme Court of Canada in Central Trust Co. v. Rafuse, (SCC), [1986] 2 S.C.R. 147 at 224: "[A]cause of action arises for purposes of a limitation period when the material facts on which it [the cause of action] is based have been

discovered or ought to have been discovered by the plaintiff by the exercise of reasonable diligence." [20] The Court noted at paragraphs 31 - 32: The principle of discoverability does not require perfect knowledge. As this court noted in Hill v. Alberta (South Alberta Land Registration District) (1993), 1993 ABCA 75 , 100 D.L.R. (4th) 331 at 336 (Alta. C.A.) (leave to appeal to S.C.C. denied): Even if the discoverability rule of limitations applies to this case (which I need not decide), it does not call for perfect certainty. It doesnot require discovery at all: it says something else will do instead.

It suffices that "the material facts on which [the cause of action] isbased ... ought to have been discovered by the plaintiff by the exercise of reasonable diligence...": Central Trust v. Rafuse... . If theplaintiff is told a fact by someone who is likely to know, surely that makes the fact known or discoverable, even if someone else disputesthe fact. Very few people who sue have perfect certainty. The same point is made in Owners: Condominium Plan 9421549 v. Main Street Developments Ltd., supra, where Clackson J. summarilydismissed the plaintiff's claim on the basis of undisputed facts.

He said at paras. 55-56: I am satisfied that these facts establish, beyond a reasonable doubt, that the Plaintiff knew that the buildings suffered from moistureproblems and knew of the potential sequella if the problems were not rectified. This knowledge existed well before May 25, 1999. WhileI accept that it is possible the Plaintiff did not have perfect knowledge of the injury, that level of knowledge is not required:Peixeiro v. Haberman, (SCC), [1997] 3 S.C.R. 549; Hill v.

Alberta (South Alberta Land Registration District), (1993)1993 ABCA 75 , 135 A.R. 266(C.A.), leave to appeal to S.C.C. refused [1944] 1 S.C.R. viii; Ward v. Taubner, 2004 ABQB565, 9 E.T.R. (3d) 275 (QB). What was obvious was that there was a problem and that there was damage or at least the real potential for damage if the problem wasnot addressed. In my view, that is enough. (Emphasis added) [21] The Plaintiffs knew when they received the Report from Building Science in October 2009 outlining the constructionproblems at the Project that an injury had occurred that warranted bringing a proceeding.

The Plaintiffs retained legal counsel and wereaware that it had a claim that they might wish to pursue against some of POV’s consultants or contractors by March 2010 when itscounsel wrote to POV seeking their names.

While the Plaintiffs did not know the identity of Artemis, Keystone and NW until August orSeptember 2013 when it received POV’s Affidavit of Records and examined its officer, the question is whether their identity ought tohave been known or ought to have been discovered by the Plaintiffs at an earlier date through the exercise of reasonable diligence. [22] A similar issue arose in Condominium Plan 9421549 v Main Street Developments Ltd, (AB KB), 2004ABQB 962, which involved an application for

summary judgment to dismiss an action on the basis that it was statute barred in somewhatsimilar circumstances. The Plaintiffs in that action were the owners of two residential condominium buildings constructed in 1994 and1996. After a resident had concerns that the floor was heaving, an inspection was done on September 9, 1998 that led to the discovery ofstanding water in the crawl space and that the crawl space was not vented. Further inspections were undertaken and a claim was broughtagainst the National New Home Warranty Program on November 17, 1998.

The investigations continued and in November 1999 thebuilder’s workmen uncovered rotting and mouldy floor trusses, which is when the Plaintiff submitted that it became aware of the extentof the problem and learned that it may have resulted from improperly located weeping tile. The action was commenced on May 25, 2001.The issue was whether the limitation period had begun prior to May 25, 1999. Clackson, J noted that perfect knowledge of an injury isnot required to trigger a limitation period.

He went on to state at paragraph 74: I am of the view that the Applicants are correct in their suggestion that, with the exercise of reasonable diligence, the present parties tothis action were readily discoverable well before May 25, 1999. Multi-party litigation is complicated, but is becoming more and morecommon.

The Plaintiff here was represented and certainly counsel could have assisted in the timely discovery of prospective defendants.Knowing that there was water in the crawl space of the two buildings, it would have been reasonable to name any party that might beresponsible, including the architect, the engineer, the contractor, the party that excavated the crawl space and the party that wasresponsible for the construction.

The names of these parties would have been readily available to the Plaintiff. [23] Once a party becomes aware that it has suffered damage that merits bringing proceedings, then it is incumbent on that party totake reasonable steps to identify the parties responsible for that damage. The only evidence that the Plaintiff took any steps to attempt toidentify the identity of POV’s consultants and contractors prior to obtaining POV’s documents and questioning its corporaterepresentative in the period of almost four years between October 2009 and August 2014 was the single letter written by its counsel inMarch 2010.

In my view, that does not constitute reasonable diligence. There is no evidence that the Plaintiff or its counsel took anyother steps to identify the contractors involved in the Project, which might have involved performing searches, reviewing the plans andpermits or making inquiries of the City of Calgary or of POV’s counsel after the lawsuit was commenced or of counsel for the otherentities named as third parties. [24] I need not decide precisely when the limitation period began to run to decide this amendment application in view of theprovisions in

section 6 of the Limitations Act.

Section 6 permits an amendment to pleadings after the expiry of a limitation period wherethe added claim is “related to the conduct, transaction or events described in the original pleading” (section 6(4)(a)) and where thedefendant received sufficient notice “within the limitation period applicable to the added claim plus the time provided by law for theservice of process that the defendant will not be prejudiced in maintaining a defence to it on the merits” (section 6(4)(b)). [25] The NonTP Proposed Defendants do not dispute that the claims sought to be added against them are related to the conduct,transaction or events described in the original proceeding for the purposes of section 6(4)(a).

However, they deny that they receivednotice of the claim within three years of the commencement of the limitation period as contemplated in section 6(4)(b), being the twoyear limitation period in section 3(1)(

a) plus one year allowed for service. In other words, the action is statute barred so long as thelimitation period began prior to June 26, 2012, which is three years prior to the earliest date that the NonTP Proposed Defendantsbecame aware of the dispute. As I have already indicated, the Plaintiffs knew it had a claim that merited bringing a proceeding byOctober 2009 and there is no evidence that it took any steps to identify the contractors involved in the construction of the Project (other

than the March 2010 letter of counsel) between then and June 26, 2012, a period of almost three years. I am satisfied that the Plaintiff did not exercise reasonable diligence and that the action is statute barred as the limitation period began running sometime prior to June 26, 2012. [ 26 ] Both Keystone and NW also submit that even apart from the action being statute barred, they should not be added as defendants because they would be prejudiced due to the passage of approximately 10 years since construction of the Project.

This prejudice includes the potential difficulties in locating former employees who were involved in the Project, and the lack of any documentation other than the original bids due to the disposition of records in the ordinary course of business: Condominium Corporation No 0213028 v Pasera Corporation , 2016 ABQB 477 . In view of my decision on the limitations issue, I need not decide this aspect of the application.

Conclusion [ 27 ] The Plaintiffs’ application to add Durwest and Lenbeth as defendants and the related amendments to the Statement of Claim is granted, without prejudice to their ability to argue any limitations defences at any subsequent application or at trial, and without costs. [ 28 ] The Plaintiffs’ application to add Keystone, NW and Artemis as defendants is dismissed. If the parties are unable to agree on costs, they are at liberty to make written submissions within 45 days. Heard on the 6 th day of October, 2016. Dated at the City of Calgary, Alberta this 9 th day of November, 2016. J. Strekaf J.C.Q.B.A.

Appearances: Mylene D. Tiessen and Jane Butcher, Peacock Linder Halt & Mack LLP for the Plaintiffs Celeste Small, Scott Venturo LLP for the Defendant Pointe of View Condominiums (Prestwick) Inc. Brian Wallace, Duncan Craig LLP for the Defendant Royal & Sun Alliance Insurance Company of Canada Todd Kathol, Field Law for Keystone Excavation Ltd. Jennifer Biernaskie, McLennan Ross LLP for Prairie Pipe Sales Ltd., 789072 Alberta Ltd., RKG Developments Ltd., carrying on business as Lenbeth Weeping Tile Calgary and Lenbeth Weeping Tile Calgary Kelly Moffet-Burima, Norton Rose Fulbright

for David T. Symons Architect Ltd., Robert Spaetgens Architect Ltd., David T. Symons Architect Ltd., carrying on business as S2 Architecture Partnership and S2 Architecture Jennifer Blanchard, Hendrix Law for NW Construction AB Inc. Jonathan Selnes, Burnet, Duckworth & Palmer LLP for Durwest Construction Systems Alberta Ltd. Nabeel Peermohamed, Brownlee LLP for Artemis Landscapes & Design Ltd. Anthony (Tom) Schmit, CBM Lawyers for Allen Wasnea Engineering Ltd.