Primewest Energy Inc v Texacana Turbines Inc, 2016 ABQB 715

Court of Queen’s Bench of Alberta Citation: Primewest Energy Inc v Texacana Turbines Inc, 2016 ABQB 715 Date: 20161215 Docket: 0201 15009 Registry: Calgary Between: Primewest Energy Inc., Primewest Management Inc., Primewest Energy Trust, Exxonmobil Canada Energy, Exxonmobil Canada Ltd., Exxonmobil Resources Ltd., Calpine Canada Natural Gas Partnership, Calpine Canada Resources Ltd., Calpine Canada Natural Gas Company, Meota Resources Corp., Talisman Energy Canada, Talisman Energy Inc., Petromet Resources Limited, Bonavista Petroleum Ltd., Suncor Energy Inc., Star Oil & Gas Ltd., Renata Resources Inc., Coastal Resources Limited, Arthur Melville Wray, Devon AXL, Anderson Exploration Ltd., Devon ARL Corporation, Home Oil Company Limited, Numac Energy Inc. and Anderson Oil & Gas Inc.

Plaintiffs - and - Texacana Turbines Inc., Bryce Harold Beatty, Terralene Beatty, Bob Beatty, Intercontinental Materials Management Inc., Warren Gill, Jack Shearer, ABC Ltd. No. 1 to 10 and John Doe No. 1 to 10 Defendants - and - Primewest Energy Inc., Veco Canada Ltd., Turbocom Ltd., Texoma International Turbine Services Ltd. and Intercontinental Materials Management Ltd. Third Parties

_______________________________________________________ Reasons for Judgment of the Honourable Madam Justice K.D. Nixon _______________________________________________________ Introduction [ 1 ] This application concerns whether a third party claim should be struck as failing to disclose a reasonable claim, summarily dismissed as having no reasonable chance of success, or dismissed for delay. [ 2 ] The Plaintiffs are a group of interest holders in a gas plant represented by one of the Plaintiffs, Primewest Energy Inc., (“ Primewest ”).

The Applicant (Third Party), Veco Canada Ltd., (“ Veco ”), is an engineering firm that was hired by Primewest to assist in a project to increase natural gas production from the Plaintiffs’ gas plant by “debottlenecking” the plant. [ 3 ] The Respondents (Defendants), Texacana Turbines Inc., Bryce Harold Beatty, Terralene Beatty and Bob Beatty, (collectively, “ Texacana ”), were hired by Primewest to refurbish, install and start a new compressor (the Saturn Compressor) and to modify, install and start an existing compressor (the Centaur Compressor) in order to accomplish the debottlenecking process (the Saturn Compressor and the Centaur Compressor, are referred to as the “ Compressors ”). [ 4 ] Texacana installed the Compressors but problems arose with their function.

After failed attempts to rectify the difficulties with the Compressors, Primewest accomplished the debottlenecking process by installing another compressor at a different location in the plant. [ 5 ] The Plaintiffs sued Texacana alleging it was negligent in the design, manufacture, assembly and installation of the Compressors. They seek damages for the cost to repair and replace the Compressors and for the lost natural gas revenue arising from the delay in debottlenecking the plant. [ 6 ] Texacana denied that there was anything wrong with the Compressors or with their installation.

It asserted that it supplied, assembled and installed them in accordance with, and in reliance upon, plant conditions provided by Veco and Primewest.

It alleged that the difficulties with the function of the Compressors arose as a result, among other things, of the plant conditions being different from the conditions it was given and because of defects in the piping and valves that fed into the Compressors. [ 7 ] Texacana added Veco as a third party seeking contribution and indemnity on the basis that any losses suffered by the Plaintiffs were caused, or contributed to, by breach of duties of care and breach of contractual obligations owed by Veco to the Plaintiffs and by breach of duties of care owed by Veco to Texacana. [ 8 ] Texacana alleged that Veco was the engineer on the project responsible for management, engineering, piping design and installation, and supervision of the project.

In particular, Texacana asserted in its Third Party Notice that the difficulties with function of the Compressors arose as a result of conduct of Primewest and Veco, including:

a) inadequate and improper design of the piping and valves that fed into the Compressors;

b) refusal to make modifications to the plant or to the Compressors to accommodate the changed plant conditions at the time of start- up and commissioning of the Compressors;

c) negligent commissioning of the Compressors; and

d) failure to provide adequate and reliable supply of buffer gas. [ 9 ] Texacana also alleged that if the dry gas seals it used were faulty, which it denied, the seals were improperly approved by Veco. Further, Texacana alleged that any delays in the project were not its fault but arose as a result of delays caused by Veco and Primewest.

The alleged delays include delays required to change gas piping and valves and to replace a fuel gas regulator supplied by Veco, and delays that occurred as a result of the inability to control suction gas pressure. [ 10 ] In its Third Party Notice, Texacana pleaded that if the Plaintiffs suffered any loss, which is not admitted but is denied, the loss was caused or contributed to by the breach of contract, breach of duty, and negligence of Primewest and Veco, the particulars of which are:

a) causing delays in the completion of the project;

b) unreasonably refusing to make modifications to the turbines, Compressors or the plant as recommended by Texacana and others;

c) failing to reasonably hire and supervise agents, consultants, engineers and contractors including Veco;

d) failing to properly supervise the installation process of the Compressors;

e) failing to advise Texacana of an intention to increase the gas flow through the plant;

f) failing to provide Texacana with accurate information relating to plant operating conditions; and

g) such further and other particulars of negligence as may be proven at trial. Issues [ 11 ] Veco submits that it should be let out of the action for three reasons: 1) the third party pleadings do not disclose a reasonable claim; 2) the third party claim has no reasonable probability of success; and 3) it has been prejudiced by the delay in Texacana’s prosecution of the third party action. Analysis 1. Should the third party claim be struck? a. Test to strike claims [ 12 ] An action that has no reasonable prospect of success may be struck: Rule 3.68(2) (

b) of the Alberta Rules of Court , Alta Reg 124/2010 ; and Ernst v EnCana Corp , 2014 ABQB 672 at para 30 . [ 13 ] On an application to strike, the facts pleaded are presumed to be true. No evidence is considered on an application submitted on the basis of Rule 3.68(2) (b): Rule 3.68(3) of the Alberta Rules of Court . [ 14 ] The court’s goal when determining applications to strike is to weed out hopeless claims and ensure those with some chance of success go to trial: R v Imperial Tobacco Canada Ltd , 2011 SCC 42 at para 19 [“ Imperial Tobacco ”].

In making this assessment, the Supreme Court of Canada described the test to be applied as follows ( Imperial Tobacco at para 21 ): The court must [...] ask whether, assuming the facts pleaded are true, there is a reasonable prospect that the claim will succeed. The approach must be generous and err on the side of permitting a novel but arguable claim to proceed to trial. [ 15 ] Imperial Tobacco was recently applied by the Alberta Court of Appeal in O’Connor Associates Environmental Inc v MEC OP LLC , 2014 ABCA 140 [“ O’Connor ”].

At paragraph 14 of O’Connor , the Court of Appeal confirmed that striking pleadings with no reasonable prospect of success is consistent with the new culture articulated by the Supreme Court of Canada in Hryniak v Mauldin , 2014 SCC 7 [“ Hryniak ”].

This new culture requires the promotion of “timely and affordable access to the civil justice system [...] and moving the emphasis away from the conventional trial in favour of proportional procedures tailored to the needs of the particular case” ( Hryniak at para 2 ). [ 16 ] In O’Connor , the Court made the following observations about the application of the Imperial Tobacco test ( O’Connor at para 16): In determining whether a novel claim has a “reasonable prospect” of success, many factors must be examined. The clarity of the factual

pleadings is important. The existence of case law discussing the same or similar causes of action is relevant. As noted in ImperialTobacco, the courts must be careful not to inhibit the development of the common law by applying too strict a test to novel claims.However, the courts must resist the temptation to send every case to trial, even if some legal analysis is needed to determine if a claimhas any reasonable prospect of success: Kripps v. Touche Ross & Co. (1992), (BC CA), 94 D.L.R. (4th) 284 (B.C.C.A.) at p. 309, (1992), 69 B.C.L.R. (2d) 62 (B.C.

C.A.). [17] In an earlier articulation of the test in Arcelormittal Tubular Products Roman SA v Fluor Canada Ltd, 2013 ABCA 279,leave to appeal to SCC refused, [2013] SCCA No 403 [“Tubular”], the Court of Appeal had described the test to strike pleadings in anovel case as follows (at para 17): unless there is binding authority holding that either there is at law no such cause of action as alleged or if there be one, that it would notapply on the facts of the case at bar, then it cannot be said that the claim in question has no ‘reasonable prospect’ of success. [18] In retreating from its description of the test in Tubular, the Court of Appeal explained in O’Connor that its previousarticulation of the test had been too narrow because (O’Connor at para 15): [t]here are many reasons, other than the presence of “binding authority” that could deprive a claim of any “reasonable prospect” ofsuccess.

Binding authority would mean that there is essentially no prospect of success at all. Imperial Tobacco states that it is “notdeterminative” that a cause of action has not previously been recognized, but the opposite does not hold true; just because there is no“binding authority” does not mean that the claim has a reasonable prospect of success.

Indeed, in Imperial Tobacco itself the challengedclaims were all struck even though they were novel and there was no binding authority on the point. [19] The Court of Appeal in O’Connor also considered the scope of third party claims and held that (at para 26): [a]t a minimum, the third party notice must disclose a legally recognized claim by either the plaintiff or the defendant against the thirdparty. The complexity, expense, and time demands of an action will vary directly depending on the number of parties and causes ofaction.

At some point issues of proportionality and efficiency dictate that collateral claims be tried on their own. b. Relevant facts for the purpose of the application to strike [20] The relevant facts from the third party claim are those pleaded in the Third Party Notice.

These were conveniently set out inTexacana’s Brief of Argument as follows: • Veco was responsible for project management, engineering, piping design and installation and supervision of the debottleneckingwork at the plant; • Texacana presented the project engineer or consultant, Veco, two proposals, Option 1 and Option 2, for alternative arrangementsof Compressors and turbines; • Veco advised Texacana that Primewest would award a P.O. to Texacana to perform the work in accordance with Option 1; • Veco was responsible for and designed and supervised installation of piping and valves associated with the new system; • Veco provided Texacana specifications for operating conditions at the plant that were relied upon by Texacana and itssubcontractors and suppliers in performing the work under the contract.

Texacana supplied, assembled and installed Compressors thatcould be operated in a safe, proper and efficient manner according to the plant conditions and specifications provided by Veco; • Texacana later discovered that plant conditions at the time of start-up and commissioning of the Saturn compressor were differentfrom those provided by Veco; • Texacana provided recommendations to make adjustments to the plant or Compressors to accommodate the changed operatingconditions.

Veco unreasonably and negligently refused to make the modifications; • Any difficulty with control or vibrations experienced in the operation of the Saturn Compressor were the result of improper orinadequate piping and valves as well as plant conditions varying from those originally provided to Texacana by Veco.

These difficultiesdid not result from the condition of the Saturn Compressor on delivery and installation by Texacana, but rather from the negligence ofVeco in the performance of their work and in refusing to implement corrective changes recommended by Texacana; • Veco prevented Texacana from commissioning the Centaur Compressor. It was operated and modified by Veco without theproper commissioning by Texacana. If there were any defects in the Centaur Compressor, which is denied, they were minor and wereeasily repairable by Texacana if it had not been prevented from doing so by Veco.

Any failure of, problems with or damage to theCentaur Compressor were the result of the negligent commissioning, operation or alteration of it by Veco; • Texacana did not use faulty or defective seals. The seals used in the Compressors were approved by Veco. The seals operatedproperly.

Any failure or defects in the seals, which are denied, were the result of the negligence of Veco including improper approval ofthe use of the seals and failing to provide an adequate and reliable supply of buffer gas at all times as required; • Delays in the completion of Texacana’s part of the project were caused by Veco’s conduct, not Texacana’s; and • Losses sustained by the Plaintiffs, if any, were caused by Veco’s negligent performance of common law and contractual duties. c. Application of test to Texacana’s third party claim

[21] Texacana seeks contribution and indemnity from Veco on the following three legal grounds: 1) pursuant to the Tort-feasors Act, RSA 2000, c T-5, as amended, on the basis that Veco and Texacana each owed a duty of care toPrimewest; 2) at common law, on the basis that Veco and Texacana each had separate contractual obligations to Primewest; and 3) on the basis that Veco owed an independent duty of care to Texacana. [22] Veco argues that none of the three claims in the Third Party Notice is a proper third party claim.

It relies heavily on thereasoning in O’Connor where third party claims, based on the same three grounds asserted by Texacana, were not permit to proceed. Incontrast, Texacana relies on Tubular, where third party claims on the same three grounds were permitted to proceed. i. The Tort-feasors Act [23] Section 3(1)(

c) of the Tort-feasors Act provides that when damage is suffered by any person as a result of a tort, any tort-feasor liable in respect of that damage may recover contribution from any other tort-feasor who is or would have been liable, if sued, inrespect of the same damage. [24] The Third Party Notice alleged that both Texacana and Veco breached independent duties of care owed to Primewest resultingin the same damages.

The facts pled in the Third Party Notice clearly fit within the criteria of the Tort-feasors Act. [25] As discussed later in these Reasons, the Court of Appeal’s reasons for rejecting the joint tort-feasor claim in O’Connor do notapply here. ii. Contribution in contract at common law [26] It is not disputed that there was no contractual relationship between Veco and Texacana. Texacana, however, does not base itsclaim for contribution on breach of contract between it and Veco.

Rather, Texacana seeks contribution from Veco on the basis that eachof them had independent contractual duties to Primewest, breach of which gave rise to liability to Primewest for the same damages. [27] The Tort-feasors Act does not permit contribution between a tort-feasor and a party who is liable to a plaintiff for breach ofcontract. The common law, however, does permit contribution among parties who each owe independent contractual duties to theplaintiff, and who are responsible for the same damages.

This was recognized by the Alberta Court of Appeal in Petersen Pontiac BuickGMC (Alta) Ltd v Campbell, 2013 ABCA 251 [“Pontiac”] and confirmed in its decision in Tubular. As discussed later in these Reasons,O’Connor did not change the law in that regard. [28] In Pontiac, the plaintiff successfully sued two parties. One party was found liable for breach of contract. The other party wasfound liable for breach of contract and in negligence for the same damages.

In considering apportionment between the two defendants,the Court of Appeal reviewed the case law and academic commentary regarding contribution between parties found liable to a plaintifffor the same damage on the basis of separate contracts with the plaintiff. [29] Madam Justice Hunt, speaking for the Court, referred to La Forest, J.A.’s (as he then was) conclusion in Doiron v Caisse Populaire d’Inkerman Ltee (1985), (NB CA), 17 DLR (4th) 660 (NB CA) at 673 [“Doiron”] (cited in Pontiac at para49): [T]he doctrine of apportionment of loss where contributory negligence arises in contract cases is here to stay.

There are strong underlyingpolicy reasons favouring this approach and the Courts, using one technical device or another, will [...] continue to respond to these byapplying the doctrine. [30] She also noted Laskin, C.J.’s observation in Giffels v Eastern Construction (1978), (SCC), 2 SCR 1346, thatthe Supreme Court of Canada (Pontiac at para 48): was prepared to assume for the purposes of that case that when two contractors “each of which has a separate contract with a plaintiffwho suffers the same damage from concurrent breaches of those contracts, it would be inequitable that one of the contractors bear theentire brunt of the plaintiff’s loss”: at 1355, emphasis added. [31] While recognizing that the Court in Doiron was considering contribution in the context of a plaintiff’s contribution todamages, Justice Hunt quoted the following observations of La Forest, J.A. regarding when contribution in contracts is appropriate(Doiron at 680 cited in Pontiac at para 49): As in torts, the application of the principle of contributory negligence in contract will depend on all the circumstances.

In the case ofcontracts this will include the public expectations about the type of contract involved as well as the particular expectations one mustassume the parties had having regard to all the circumstances, including the relationship of the parties, their past dealings, the nature ofthe contract, and so on.

In a word, the application of the rule of contribution to contracts may conceivably differ from its application in apurely tortious setting owing to the particular nature of the contract and its context, though similar considerations are not foreign to torts. [32] In concluding, Justice Hunt stated that she could “see no impediment in contract law to dividing liability between two partieswho have breached two different contracts, causing the same damages to a plaintiff.” (Pontiac at para 52).

[33] Although the issue at hand in Pontiac was contribution between two defendants, contribution between two parties each havingan independent contract with the plaintiff does not depend on the decision of the plaintiff to name both as defendants.

Referring toPontiac, the Court of Appeal in Tubular confirmed that a defendant may, by third party action, assert a claim in contract for contributionwhere both the defendant and the third party breached independent contractual duties to the plaintiff (at para 37). [34] The facts pleaded by Texacana in its Third Party Notice fit within the common law requirements for contribution amongparties each owing independent contractual duties to a plaintiff and liable for the same damages. [35] As discussed later in these Reasons, as with the joint tort-feasor claim, the Court of Appeal’s reasons for rejecting the thirdparty claim for contribution in contract in O’Connor do not apply here. iii.

Duty of care owed by Veco to Texacana [36] The two Anns criteria must be met in order to find that Veco owed a duty of care to Texacana (Cooper v Hobart, 2001 SCC 79at para 30 [“Cooper”]): 1) there must be sufficient foreseeability and proximity between them to establish a prima facie duty of care; and 2) there must be no policy considerations that negative or limit a duty of care. [37] The concept of proximity comes from the decision of Lord Wilberforce in Anns v Merton London Borough Council (1977),[1978] AC 728 (UK HL).

Proximity measures the legal relationship of the claimant and the defendant considering “expectations,representations, reliance, and the property or other interests involved.” (Cooper at para 34, cited in O’Connor at para 20).

It looks at thecloseness of the relationship between the parties and “whether it is just and fair having regard to that relationship to impose a duty of carein law upon the defendant” (Cooper at para 34, cited in O’Connor at para 20). [38] In Hercules Management Ltd v Ernst & Young, (SCC), [1997] 2 SCR 165 at para 24, La Forest J. held thatproximity means that (cited in Cooper at para 33): the circumstances of the relationship inhering between the plaintiff and the defendant are of such a nature that the defendant may be saidto be under an obligation to be mindful of the plaintiff’s legitimate interests in conducting his or her affairs. [39] In determining whether a prima facie duty of care exists, the first inquiry is to determine “whether the case falls within or isanalogous to a category of cases in which a duty of care has previously been recognized” (Cooper at para 41). [40] It is not necessary to undertake a full analysis of the Anns criteria here because the third party claim that Veco owed Texacanaa duty of care is not novel.

It falls within claims previously recognized. A similar third party claim was permitted to proceed againstengineers, who had no contract with the defendant, in Tubular. [41] Further, claims by parties who had no contractual relationship with engineers have either survived applications to strike orhave succeeded at trial based on three of the established categories of economic loss recognized in Martel Building Ltd v Canada, 2000SCC 60 at paras 36-38: (

i) negligent misrepresentation, (ii) negligent performance of a service, and (iii) negligent supply of shoddygoods or structures.

Texacana cites a number of precedents to support its claims: 1) Negligent misrepresentation on the basis that Veco supplied it with inaccurate specifications and plant conditions upon whichTexacana relied in performing its work: Edgeworth Construction Ltd v ND Lea & Associates Ltd, (SCC), [1993] 3 SCR206; Foundation Co of Canada Ltd v United Grain Growers Ltd (1997), (BC CA), 34 BCLR (3d) 92 (CA); Burnettv Took Engineering Inc, 2000 BCSC 1630 [“Took Engineering”]. [42] Texacana’s claim that Veco owed it an independent duty of care fits within the three established categories of claim foreconomic loss for which engineers have been held liable to non-clients.

It cannot be said that Texacana has no reasonable prospect ofsuccess in establishing this claim. d. Reasons in O’Connor do not apply to this case [43] The principles applied in O’Connor that led to the rejection of an independent duty of care by the third party to the defendantdo not apply to the present case. The Court now turns to a discussion of that case. i.

Summary of the O’Connor decision [44] In O’Connor, the Court of Appeal did not allow claims for contribution and indemnity against a third party to proceed. Thebasis for the Court of Appeal’s conclusion must be understood in the context of the particular facts in that case. This is important becausethe facts in O’Connor were quite unlike those in the present case. [45] The legal action in O’Connor arose out of the defendants’ sale of oil and gas assets, including pipelines, to the plaintiff. Theplaintiff alleged that the defendants inaccurately described the assets in a number of respects.

One of the allegations was that thedefendants had been deceitful because they knew that the pipelines were licensed only to carry sweet gas but were, in fact, carrying sourgas. The plaintiff claimed intentional misrepresentation. [46] The defendants asserted that the plaintiff relied on its own due diligence in purchasing the assets and not on anyrepresentations by them. They also issued third party proceedings seeking contribution and indemnity from consultants who had been

retained by the plaintiff to advise and assist the plaintiff in the due diligence process. [ 47 ] Relying on Tubular , the defendants in O’Connor founded their third party claims against the consultants on the same three grounds asserted by Texacana against Veco: breach of duties of care owed to the plaintiff, breach of contractual duties owed to the plaintiff, and breach of duties of care owed by the third party consultants to the defendants. [ 48 ] The defendants in O’Connor alleged that the consultants had breached their duty of care to the plaintiff in failing to property inspect and evaluate the assets.

They also alleged that the consultants were in breach of their contracts with the plaintiff by negligently performing their services and for failing to pass on to the plaintiff the knowledge they had about the assets.

Lastly, the defendants alleged that the third party consultants owed a duty of care to them which the consultants breached by failing to disclose or to communicate information to the plaintiff. [ 49 ] The third party consultants argued that the third party proceedings: 1) did not disclose any cause of action; 2) were not proper third party proceedings because they were in the nature of a defence and, thus, redundant; and 3) were not the type of claim that could be added to an action under the then newly-expanded Rule 3.44, which permitted third party claims beyond established claims for contribution and indemnity. [ 50 ] The chambers judge allowed all three claims to proceed.

This decision was overturned by the Court of Appeal. [ 51 ] With respect to the joint tort-feasor claim, the Court of Appeal acknowledged that there was a “conceptual possibility” that the consultants may be severally liable to the plaintiff in tort ( O’Connor at para 43).

However, it exercised its discretion, applying the principles of proportionality and efficiency, to strike the third party pleadings because the cause of action in tort was “merely collateral” to the main action in deceit and breach of contract ( O’Connor at para 43). [ 52 ] The Court of Appeal was of the view that the third party claim was, in reality, a defence to the plaintiff’s claim ( O’Connor at para 42). As a result, any failure of the consultants to pass on information from the defendants to the plaintiff was a failing for which the plaintiff was liable on the principles of agency.

The Court of Appeal held that a third party claim is inappropriate, indeed redundant, when the plaintiff is legally responsible for the conduct of the third party. [ 53 ] In O’Connor , the consultants were clearly agents of the plaintiff who had been retained to assist the plaintiff with the due diligence process. The third party proceedings, therefore, were prima facie inappropriate.

Having pled that the plaintiff did not rely on any representations by the defendants, which would be a complete defence because reasonable reliance is a necessary component of negligent misrepresentation, the Court of Appeal stated that it was not appropriate to raise it as an issue in the third party proceedings. [ 54 ] The Court of Appeal further stated that if the third party consultants were negligent in not discovering the defendants’ negligence, the plaintiff, as the third parties’ principal, would be “identified with that alleged negligence of the third parties, making third party proceedings redundant” ( O’Connor at para 42). [ 55 ] The defendants’ claim against the third party consultants for contribution and indemnity based on independent contractual duties that each owed to the plaintiff was also rejected.

The Court of Appeal gave the following reasons for its conclusion that the defendants could not litigate issues between the consultants and the plaintiff ( O’Connor at para 39): The [defendants] are not parties to those contracts, nor are they beneficiaries under those contracts, and they have no standing to litigate any issues with respect to them. If the [defendants] are liable to the plaintiff in deceit, or for breach of contract, these collateral contractual arrangements will be marginal relevance.

If the [defendants] are in breach of their contract, it is not a defence that some other party might also be in breach of another contract. A contracting party like the plaintiff purchaser is entitled to pursue whatever remedies are available to it.

There is no sufficient reason to join the third parties to this action so that they can be “bound” by the outcome on this issue. [ 56 ] Relying on the then newly-expanded Rule 3.44, which permits third party claims beyond those for contribution and indemnity, the defendants argued that the third party consultants should be kept in the action in order for them to be bound by the result in the main action.

The Court of Appeal rejected this argument ( O’Connor at para 32). [ 57 ] The claim that the third party consultants owed the defendant a duty of care was characterized as follows by the Court of Appeal ( O’Connor at para 34): The claim, as pled, appears to be in part that the third parties owed a duty to the [defendants] to pass on to the plaintiffs the allegedly deceitful representations. Having the agent pass on deceitful representations to the principal is still deceit.

This is the opposite of pleading that the third parties should have discovered the deceit during the due diligence process, but in any event that duty would be owed to the plaintiff, not the [defendants]. Even if the third parties should or could have discovered the deceit that would not excuse the tortfeasor who deliberately made the deceitful misrepresentations.

There is no need to have the third parties “bound” by the finding of whether the respondents were or were not in fact “deceitful”. [ 58 ] In the Court of Appeal’s view, there was no reasonable prospect for the defendants to succeed in their claim that the third party consultants owed them a duty of care. The defendants had relied on a comment by the Court of Appeal in Tubular about parties being “actors in the same factual milieu” in support of its claim that the consultants owed them a duty of care. The Court of Appeal made

clear that this was not the test for an independent duty of care and, furthermore, the defendants had not correctly interpreted its comments in Tubular ( O’Connor at para 19) [ 59 ] In clarifying the test for whether a duty of care arises, the Court of Appeal cited paragraph 34 of Cooper , where the Supreme Court of Canada stated that the proximity component of the test requires that the “expectations, representations, reliance, and the property or other interest involved” be examined to determine if “it is just and fair having regard to that relationship to impose a duty of care in law upon the defendant” ( Cooper at para 34 , cited in O’Connor at para 20). [ 60 ] Noting that the consultants had been “selected, retained, instructed, and paid by the plaintiff”, the Court of Appeal found that their proximity was to the plaintiffs, not to the defendants ( O’Connor at para 20).

As a result, the defendants could not have had any reasonable expectation that the consultants were protecting their interests and it would have been unreasonable for the defendants, who were the vendors of the assets, to rely on the consultants. [ 61 ] After observing that imposing on the consultants a duty of care to the defendants would put them in a conflict of interest with respect to their duty to the plaintiff, the Court of Appeal concluded that “[w]here a professional advisor is retained to assist the purchaser of a business, it is unreasonable to think that the advisor owes any parallel or competing duties to the vendor of the business.” ( O’Connor at para 21).

Residual policy considerations also precluded recognition of a duty of care even if there were sufficient proximity because it would expose the consultants to indeterminate liability ( O’Connor at para 22). ii. Veco’s position [ 62 ] With respect to the joint tort-feasor claim, Veco submits that the reasoning in O’Connor applies here. It submits that, like the third parties in O’Connor , it was the agent of Primewest and, therefore, like the plaintiff in O’Connor , Primewest is responsible for any faults of Veco.

Thus, in Veco’s submission, Texacana’s third party claim is, in reality, a defence to the claims against it and not properly the subject of third party proceedings. [ 63 ] Relying further on O’Connor , Veco also submits Texacana has no standing to litigate the contract between Primewest and Veco and, therefore, no entitlement to seek contribution from Veco on the basis that Veco breached contractual duties it owed to Primewest. [ 64 ] Lastly, Veco submits that, like the consultants in O’Connor , its duty was exclusively to Primewest and that imposing upon it a duty of care to Texacana would give rise to a conflict between its duty to Primewest and its duty to Texacana. iii.

O’Connor reasoning does not apply [ 65 ] I do not agree with Veco that the reasoning in O’Connor applies to the present case. [ 66 ] Texacana’s claim against Veco as a joint tort-feasor is not a “conceptual possibility” nor is it a defence. Unlike O’Connor , applying the principles of proportionality and efficiency in the present case does not mandate that the third party claim proceed independently of the main action. In the circumstances of the present case, the third party action against Veco is not “merely collateral” to the action by Primewest against Texacana.

The principles of proportionality and efficiency support the opposite – that the third party proceedings proceed with the main action. [ 67 ] With respect to the claim for contribution in contract, the Court of Appeal in O’Conno r did not say, as Veco asserts, that there can be no contribution at common law between parties each owing contractual duties to the plaintiff and liable for the same damages.

The Court of Appeal made no mention of its earlier decision in Pontiac where it acknowledged Supreme Court of Canada authority confirming such claims. [ 68 ] The Court of Appeal’s conclusion in O’Connor that the defendants had no standing to litigate any issues with respect to the contracts between the third party consultants and the plaintiffs was based on its conclusion, at paragraph 39 cited earlier in these Reasons, that the contracts were collateral to the main issues - the main issues being the defendants’ liability for deceit or breach of contract. [ 69 ] The defendants in O’Connor were seeking to escape liability for their own alleged deceit by placing liability for their misrepresentation on the consultants who had been retained to provide advice to the opposing party in the sale.

The facts of the present case are quite different and do not give rise to the same concerns that lead to the rejection of the third party proceedings in O’Connor . [ 70 ] Unlike O’Connor , the allegations against Veco are not collateral to the issues between Texacana and Primewest. Veco, an engineering consultant, was retained by Primewest to assist with the debottlenecking project. There was direct interaction between Texacana and Veco that affected the ability of Texacana to perform its obligations to Primewest.

Further, unlike O’Connor , where the third party was retained to provide advice exclusively to the plaintiff, the third party pleadings allege that Veco had an over-riding management role with respect to the debottlenecking project. This is quite different from the circumstances in O’Connor where the third parties’ actions had nothing to do with what the defendants did or failed to do. [ 71 ] Finally, imposing an independent duty of care on Veco would not create a conflict of interest between Veco’s duties to Primewest and its duties to Texacana.

Unlike O’Connor , where the consultants’ role was to provide advice exclusively to the purchasers in a sale, Veco and Texacana were not on opposite sides of a transaction. Rather, Veco and Texacana were working together and had the same interest in making the debottlenecking project successful. iv. Similarities to Tubular [ 72 ] In contrast, the facts here are similar to those in Tubular where the Court of Appeal permitted a third party claim for contribution and indemnity to proceed. In Tubular , the plaintiff engaged a third party engineering firm to perform engineering,

procurement, and construction services for extraction processing facilities and upgrader facilities in connection with its oil sands project.The plaintiff sued the defendants for supplying defective pipes.

The defendants, in turn, brought a third party claim against theengineering firm seeking contribution on the same three legal bases asserted by Texacana in this action: 1) the third part engineers and the defendants were joint tort-feasors; 2) the engineers and the defendants breached independent contractual obligations to the plaintiffs; and 3) the engineers owed an independent duty of care to the defendants. [73] In Tubular, as in O’Connor, the Court of Appeal considered whether the third party claim was in substance a defence and,therefore, not a proper third party claim.

Referring to the decision of McLachlin J.A. (as she then was) in Adams v Thompson, Berwick,Pratt & Partners, (BC CA), [1987] BCJ No 1388 (CA), the Court of Appeal observed that a third party claim isunnecessary where the alleged fault of the third party is in fact the fault of the plaintiff.

Acts of the third party agent that fall within thescope of the agency relationship with the plaintiff are “in the category of acts for which the plaintiff is responsible” and are not properlythe subject of a third party claim (Tubular at para 21). [74] The third party’s submission that the allegations against it could be raised as a defence thereby making the third party noticeunnecessary was rejected in Tubular. The Court of Appeal held that third party proceedings were unnecessary only when allegations in athird party claim are a complete defence.

However, the Court of Appeal said (at para 23): [w]here there is the possibility of divided liability, especially where the claims are based on different causes of actions such asconcurrent contract and tort claims, it is not plain and obvious that a third party claim must be struck [citation omitted]. [75] Unlike O’Connor, where it was clear that the plaintiff was wholly liable for the actions of the third party as its agent, theCourt of Appeal in Tubular found that it was not clear that the defendant’s allegations against the third party were “wholly attributable”to the plaintiff and, therefore, a defence to the plaintiff’s claim (Tubular at para 25).

The Court of Appeal agreed with the defendantsthat (at para 25): [the third party’s] responsibility for the entire engineering, design and procurement process; its obligation to determine the suitability ofthe pipe; and its direct dealings with [the defendants] give rise to the arguable case that [the third party] owed independent duties to [thedefendants] and any failings by [the third party] may not be entirely matters of defence nor fully attributable to [the plaintiff]. [76] It is not plain and obvious here, as it was with respect to the third party claim in O’Connor, that Texacana’s claim is in thenature of a defence; that is, that any deficiencies in performance by Veco are the responsibility of Primewest.

The allegations in the thirdparty claim against Veco, if established, would not necessarily constitute a complete defence to the claims by Primewest againstTexacana, and are therefore more similar to the allegations made in Tubular. There is a possibility for liability of both Texacana andVeco to Primewest in both tort and in contract. [77] In support of its argument that Primewest is responsible for Veco’s actions and, thus, the claim against Veco is in the nature ofa defence, Veco relies on the fact that Texacana made the same allegations against Veco in its Third Party Notice that it did againstPrimewest.

This is not a basis to strike the third party claim. Parties are permitted to plead in the alternative. e. Conclusion regarding application to strike third party claim [78] In conclusion, Veco has not established that the third party claims by Texacana against it have no reasonable prospect ofsuccess. [79] Veco has not established that Texacana has no reasonable prospect of success in seeking contribution from Veco on the basisof the Tort-feasors Act or on the basis that both parties owed independent contractual duties to Primewest in respect of the samedamages.

Further, Veco has not established that Texacana has no reasonable prospect of success in its claim that Veco owed a duty ofcare to Texacana. [80] This is not a case where the principles of proportionality and efficiency mandate that Texacana’s claim against Veco bepursued separately from the main action. It would not serve efficiency or proportionality to require Texacana to pursue its action againstVeco after determination of Primewest’s claim against Texacana.

That would result in a multiplicity of litigation for no compellingreason. [81] Veco’s application to strike the third party proceedings, therefore, must be dismissed. 2. Should the third party proceedings be summarily dismissed? a. Test for

summary dismissal [82] An action may be summarily dismissed where “there is no merit to a claim or part of it”: Rule 7.3(1)(

b) of the Alberta Rulesof Court. Unlike in an application to strike pleadings, in a

summary dismissal application, evidence is considered: Rule 7.3(2) of theAlberta Rules of Court. The onus of establishing that there is no merit to the claim is on the party making the application, here Veco. If,however, the matter goes to trial, Texacana will have the onus to prove its claims against Veco on the balance of probabilities. [83] The Alberta Court of Appeal commented on the test for

summary judgment in light of Hryniak in two recent decisions:Windsor v Canadian Pacific Railway Ltd, 2014 ABCA 108 [“Windsor”] and Whitecourt Power Limited Partnership v Elliott

Turbomachinery Canada Inc , 2015 ABCA 252 [“ Whitecourt Power ”]. [ 84 ] In Windsor , the Court of Appeal articulated the test for

summary dismissal as follows (para 13, citing Hryniak at para 49 ):

Summary judgment is now an appropriate procedure where there is no genuine issue requiring a trial: 49 There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for

summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result. The modern test for

summary judgment is therefore to examine the record to see if a disposition that is fair and just to both parties can be made on the existing record. [ 85 ] In Whitecourt Power , the Court of Appeal gave a similar articulation of the test (at para 9): [T]he court asks whether there is any issue of merit that genuinely requires a trial or, conversely, whether the claim or defence is so compelling that the likelihood it will succeed is very high such that it should be determined summarily. A second consideration is whether examination of the existing record can lead to an adjudication and disposition that is fair and just to both parties. [ 86 ] When faced with a

summary judgment application, the non-moving party must ( Windsor at para 21 ): put its best foot forward, and present evidence to show sufficient “merit” to establish a genuine issue requiring a trial with respect to the outstanding issues [citation omitted]. Speculating that evidence might be available at a trial is not sufficient to create a genuine issue requiring a trial. [ 87 ] In 1214777 Alberta Ltd v 480955 Alberta Ltd , 2014 ABQB 301 Master Schlosser set out a roadmap for approaching

summary applications (at para 17). First, the court must determine whether a fair and just disposition can be made on the existing record. This determination is made by deciding if it is necessary for the court to see the witnesses. If so, the matter must go to trial. If not, the court engages in a six-step process. This process, in

summary, is as follows: 1. Presume that the best evidence from both sides is before the court. 2. Determine whether a negative inference can be drawn from the absence of evidence. 3. Consider whether all of the evidence is admissible, in particular, whether there is hearsay, which is inadmissible for a final application. 4. If there is a conflict in the evidence, consider whether the conflict has been resolved by cross-examination or whether the evidence giving rise to the conflict is purely self-serving and is otherwise unsupported. 5.

Examine the sufficiency, admissibility, and reliability of the evidence and whether the issues can be fairly decided on the factual record before the court. 6. Grant

summary judgment if the plaintiff can prove all elements of the cause of action and the defendant either has no defence or is missing critical elements of proof necessary to maintain that defence. Grant

summary dismissal if the plaintiff cannot prove an essential element of its cause or if the defendant has a complete defence. [ 88 ] As Master Schlosser noted at paragraph 19, in a

summary judgment application the legal or persuasive burden remains on the applicant throughout. A respondent is not obliged to furnish evidence. However, if the applicant meets its evidentiary burden on a balance of probabilities, the evidentiary burden then falls to the respondent to show there is arguable merit to the case. The legal burden does not shift to the respondent but the evidentiary burden does if the applicant meets its evidentiary burden. [ 89 ] Noting that the Supreme Court of Canada in Hryniak did not directly address whether the threshold for granting

summary judgment was the civil standard rather than the ‘plain and obvious’ test, Master Schlosser concluded that, absent guidance from the Supreme Court of Canada, the court is not free to conduct ‘paper trials’ on the civil standard (at para 22).

The ‘plain and obvious’ standard must be met when asking whether a fair and just determination can be made on the merits. [ 90 ] This Court must consider the evidence filed, apply the law to that evidence, and determine whether, applying Whitecourt , Veco has met its burden of proving that there is no issue of merit genuinely requiring a trial, or conversely, that Veco’s defence is so compelling that the likelihood it will succeed is very high such that it should be determined summarily. [ 91 ] The general approach taken by Veco in this application is that Texacana should be held to the standard that Texacana will be held to at trial and that this Court should find that Texacana has failed to prove its case against Veco on a balance of probabilities.

As noted, however, the onus is on Veco, as the party applying for

summary dismissal, to establish that there is no issue genuinely requiring a trial. [ 92 ] As stated in Windsor , the requirement for a party opposing a

summary dismissal application to put its “best foot forward” is to show there is sufficient merit to establish a genuine issue requiring a trial (at para 21). To successfully resist the

summary dismissal application, Texacana is not required to discharge the burden it would have at trial. Texacana is only required to provide evidence to effectively answer Veco’s evidence and show that a trial is needed to determine the issues. b. Application of test to Texacana’s third party claim [ 93 ] As noted earlier in these Reasons, Texacana’s claim for contribution and indemnity against Veco is three-pronged:

1) that each of Veco and Texacana breached duties of care owed to Primewest and are liable for the same damages (the joint tort- feasor claim); 2) that each of Veco and Texacana breached independent contractual duties each owed to Primewest and are liable for the same damages; and 3) that Veco owed Texacana a duty of care. [ 94 ] The Court now turns to a discussion of whether any of the above claims should be summarily dismissed. i. The joint tort-feasor claim [ 95 ] This claim is discussed below with the duty of care alleged to be owed by Veco to Texacana. ii.

Contribution in contract at common law [ 96 ] Veco was retained by Primewest in some capacity with respect to the project. The Veco employee primarily responsible for managing Veco’s role on the project, Mr. Gidley, stated that Primewest engaged Veco for the provision of services with respect to the debottlenecking project. He explained that despite several attempts by Veco to formalize its role in the project there was no written contract between it and Primewest. There are drafts of a Memorandum of Understanding and Design Base Memorandum and Scope of Work between the parties, but these are unsigned.

Likewise, Mr. Estep, who was employed with Veco at the time as “an alliance manager responsible for the alliance formation and business development” with Primewest and responsible “to resolve project issues” confirmed that Primewest was one of Veco’s clients and that he was responsible to resolve project issues. [ 97 ] The present case is similar to Whitepower where the Court of Appeal found that

summary disposition was not appropriate where there was no written contract and the contractual situation was unclear. The terms of the contract between Veco and Primewest cannot be determined on the evidence in this application. I agree with Texacana that, until the scope of the contract and Veco’s obligations to Primewest under that contract are determined, there can be no determination whether Veco breached its contract and thereby caused or contributed to the damage claimed by Primewest. A trial is required to determine those issues. [ 98 ] Further, I agree with Texacana that the bare assertions of Mr. Estep and Mr. Gidley that Veco performed all its obligations are not sufficient for

summary dismissal. These assertions do not establish that Veco did not breach any contractual duties it owed to Primewest. iii. Duty of care owed by Veco to Texacana and the joint tort-feasor claim [ 99 ] These two claims can be usefully discussed together. [ 100 ] Although Veco’s exact role in the project is not clear, the evidence in this application shows that it was involved in various aspects including the planning of the project, designing piping that went into the Compressors, trouble-shooting the Compressors, and consideration of modifications.

The evidence shows that Veco provided engineering services and advice to Primewest, which could give rise to a duty of care owed by Veco to Primewest. There is also evidence of a relationship and interaction between Texacana and Veco, which could establish the proximity necessary to give rise to a duty of care owed by Veco to Texacana. Texacana’s Evidence [ 101 ] Mr.

Beatty, of Texacana, provides evidence in his affidavit that: 1) Veco was involved in the supervision and inspection of Texacana’s work; 2) there were communications between Texacana and Veco about deficiencies with valves and their locations; 3) Veco provided inaccurate data to Texacana; 4) there were communications with Veco regarding Texacana’s proposed revisions to components of the Compressors; and 5) Veco approved dry gas seals.

Veco’s Evidence [ 102 ] Although Veco acknowledges that it designed piping, it says that Primewest took responsibility for any deficiencies in the piping design because the design was, with Primewest’s agreement, completed before a hazard analysis was completed. It further submits that Texacana misunderstands the extent of Veco’s involvement in the project. It denies it was involved in the supervision and inspection of Texacana’s work and denies that it approved dry gas seals.

It submits that any misinformation about plant conditions provided to Texacana was by a Veco employee who was seconded to Primewest and, therefore, Primewest is the party responsible for the actions of that employee.

Veco also says that Primewest was satisfied with the work it performed. [ 103 ] Specifically, Veco submits that there is no merit to the case against it for the following reasons: 1) Its role in the project was limited and Primewest had the “overarching responsibility or authority” for the project. 2) It worked for and reported to Primewest and helped to coordinate but did not manage the project. 3) It provided limited support for and to the benefit of Primewest and only when it was requested to do so. 4) It was not acting in its own capacity in dealings with Texacana but for the purpose of assisting Texacana and coordinating its activities as they related to the compressor work by Texacana. 5) It played no role in reviewing and was not responsible for Texacana’s work. 6) If Veco was provided with inaccurate information about plant conditions, the information was provided by an employee of Veco who was seconded to Primewest and, therefore, Primewest is legally responsible for that employee’s conduct. 7) Primewest, not Veco, had control over plant operating conditions. 8) All final decisions were taken by Primewest and Primewest accepted any liability for any error of Veco. [ 104 ] One aspect of the claim by Texacana against Veco does appear to be clear from the evidence.

Mr. Beatty, of Texacana, asserted in his affidavit that Veco was involved in the decision to use dry gas seals. He based this conclusion on the presence of Veco’s employee, Mr. Gidley, at a meeting where a manufacturer of dry gas seals made a presentation. In his affidavit, however, Mr. Gidley stated that although he was present at that meeting, Veco did not have any role in the selection or recommendation of dry gas seals. Presuming that this is the best evidence on this matter, it is clear that Veco did not approve the dry gas seals.

Aside from this, the evidence in this application does not establish with clarity the scope of Veco’s role in the project. [ 105 ] The deponents of affidavits filed on Veco’s behalf consist largely of vague and conclusory statements. For example, Mr. Gidley, who attended weekly project meetings to update Primewest on the progress of the project, described Veco’s role in the project as a “facilitating role”.

He stated that the tasks Veco performed were “generally ancillary” to the project and that Veco “only dealt with Texacana for the purposes of assisting Primewest and to coordinate its own activities as they related to the work of Texacana”.

He acknowledged that Primewest asked Veco to play an increased role in troubleshooting after November 2000 but stated that “Veco did not play much, if any, of a direct role in the troubleshooting efforts regarding the Compressors” although Veco “would respond to any inquiries of Dale Kraus and/or George Briggs as Primewest and Texacana attempted to make the Compressors operational.” Mr. Gidley did not refute that Veco was involved in reviewing and approving recommendations from Texacana regarding modifications but asserted that the decisions about modifications were made by Primewest. [ 106 ] Mr.

Ridgway was the Veco employee seconded to Primewest during the debottlenecking project. He acted as the plant engineer responsible for daily operations and maintenance of the plant for Primewest. Mr. Ridgway deposed that he did not have any “direct role” in the project but would “sometimes provide information or assistance to individuals who were directly involved in the Project” at the direction of his supervisors at Primewest. He confirmed that he played a role in troubleshooting efforts but cannot recall what that role was.

He also acknowledged that the piping designed by Veco and the plant operating conditions may have impacted the running of the Compressors but neither he, nor anyone else to his knowledge, were able to keep the Compressors running long enough to make that determination. [ 107 ] Mr. Sarkar, who was employed by Veco as a project engineer, deposed in his affidavit that he had no direct involvement in the project. However, there are numerous documents that he either authored, received or that refer to him in connection with various aspects of the project.

On questioning, he testified that he was sought out by Primewest to provide advice and opinion because of his turbine knowledge and experience, and that he provided opinions about industry standard. Application

[ 108 ] Veco has not established with clarity the scope of the services it was required to provide on the project. The evidence on this application does not permit the Court to conclude that there is no issue of merit that genuinely requires a trial with respect to whether Veco owed a duty of care to Primewest or to Texacana.

Further, the evidence does not permit the Court to conclude that Texacana will not likely be able to establish that Veco breached any duty of care. [ 109 ] The Court will now turn to a discussion of Veco’s evidence and submissions. [ 110 ] First, in support of its submission that it did not breach any duty of care, Veco relies on the evidence of Mr. Estep, who deposed that Veco “performed all of obligations related to the Project to a reasonable standard and to the satisfaction of Primewest.” Veco also relies on the evidence of Mr.

Gidley, who likewise deposed that Veco “performed all of its obligations to Primewest regarding the Project to a reasonable standard and to the satisfaction of Primewest.” [ 111 ] This is self-serving evidence from lay witnesses about their own conduct. It does not meet Veco’s onus to show that there is no genuine issue for trial. Lay witnesses may give evidence about facts perceived but not about inferences or opinions drawn from them. Neither Mr. Estep nor Mr. Gidley is an independent expert qualified to give expert opinion evidence. Their opinion evidence is not admissible.

Neither meets the requirements of independent and impartiality required of an expert to be permitted to provide opinion evidence: White Burgess Langille Inman v Abbott and Haliburton Co , 2015 SCC 23 . [ 112 ] Even if their opinion evidence were admissible, their conclusory statements are too general to be helpful. They do not state what the standard of care is. They do not state the basis upon which they conclude that the standard was met. They say nothing about causation. Furthermore, it is beyond the personal knowledge of Mr. Estep and Mr.

Gidley whether Primewest was satisfied with all aspects of Veco’s performance. To the contrary, there is evidence that Primewest was not satisfied with Veco in all respects. [ 113 ] Veco submits that, even if it cannot rely on the evidence of its former employees with respect to the standard of care, the Court should draw an adverse inference against Texacana because it did not provide evidence that Veco was negligent.

In this regard, it submits that Texacana was required, but failed, to put its “best foot forward.” It submits that the Court must assume there will be no further evidence at trial and, therefore, Texacana will not be able to meet its trial onus to establish that Veco breached any duty of care. [ 114 ] Veco misconstrues the obligation of Texacana in an application for

summary dismissal. If the evidence provided by Veco in this application established that Texacana had no reasonable prospect of establishing that Veco breached any duty of care, Veco’s submission would have merit. However, Veco has not provided such evidence. The self-serving lay opinion evidence that Veco met its obligations to Primewest is not sufficient to meet Veco’s onus in this application. Further, as noted in Texacana’s Brief of Argument, Mr.

Beatty provided evidence in his affidavit that would support the conclusion that Veco breached its duty of care, including Veco’s role in supervision and inspection of Texacana’s work, providing inaccurate data and its role in the failure to change components of the Compressors in accordance with revised data. [ 115 ] Second, Veco asserts that it cannot be found liable because Primewest retained ultimate decision-making authority over all aspects of the project and made the final decisions about the project including decisions with respect to modifications.

It also submits that it cannot be held liable to Primewest because Primewest accepted liability for any errors of Veco. In this regard, it relies on the evidence of Mr. Gidley that he reported to and took instructions from Mr. Briggs, an employee of Primewest who, in turn, reported to Mr. Kraus, another Primewest employee. Mr.

Kraus was responsible for managing and overseeing the project and for making the major operational decisions as well as the day-to-day decisions on the project. [ 116 ] In a similar vein, Veco asserts that it can have no liability with respect to modifications of the project, because the decision to make modifications was Primewest’s decision. In this regard, Veco relies on the evidence of Mr.

Gidley who testified that, although Veco was involved in making recommendations with respect to changing the process valves and other piping that fed into the Compressors, and Veco “had indicated some support for [Texacana’s] concerns to the operations folks at the plant”, Primewest was reluctant to make any changes. [ 117 ] Not having final decision-making authority with respect to the project does not necessarily relieve Veco from liability. When a professional is retained to provide services and advice, it is the usual case that the client makes the final decision.

This, however, does not relieve the professional from any liability for negligent services or advice. [ 118 ] Third, Veco submits that it has a defence to the allegation that it was negligent in designing the piping on the basis that Primewest took the risk of any errors in the design because the work was done before a hazard analysis was completed. In this regard, Veco relies on an email wherein Primewest advised Veco that it would take the risk of piping rework that may come out of a hazard analysis.

With respect, the email is too general for the Court to conclude that Veco cannot be liable for any negligence in the design of the piping. [ 119 ] Fourth, in support of its submission that it had no independent duty of care to Texacana with respect to the plant operating conditions, Veco relies on the fact that the employee who gave this information to Texacana, Mr. Ridgway, was seconded to Primewest. In Veco’s submission, his secondment makes Primewest, not Veco, liable for any of Mr. Ridgway’s failings. [ 120 ] Mr.

Ridgway purported to make a legal assertion in his affidavit when he stated that he was “technically” an employee of Veco during the secondment. He deposed that because he worked at the Primewest plant and took direction from and reported to Dale Kraus and George Briggs, employees of Primewest, “I considered all steps taken in the course of my employment during my secondment to be done for and on behalf of Primewest.” [ 121 ] The fact that Mr. Ridgway was seconded to Primewest does not establish that Texacana has no reasonable prospect of success in its claim against Veco with respect to Mr. Ridgway’s conduct.

First, after Mr. Ridgway’s secondment ended, he resumed involvement in the project as a non-seconded Veco employee. Second, there are many factors a court considers in determining whether a seconded employee remains an employee of the defendant, such as who paid the employee’s wages, who paid for the employees benefits, who had the right to dismiss the employee and whether the employee could be retrieved from the project by his employer: Hardisty v 851791 NWT Ltd , 2005 NWTCA 4 . Mr. Ridgway’s assertions are insufficient to establish that Texacana has no reasonable prospect of

establishing that Veco is vicariously liability for his actions. [ 122 ] Fifth, as Texacana does not allege that the plant operating conditions were wrong at the time they were originally provided to Texacana by Veco, Veco submits that any liability to Texacana arising from the fact that the operating conditions subsequently changed rests with Primewest because Primewest controlled the plant conditions.

This is insufficient to conclude that Veco cannot be found to have any responsibility with respect to providing Texacana with information about operating conditions. [ 123 ] Sixth, Veco submits that it owed no duty of care to Texacana because it had an agency relationship with Primewest. To this extent, it relies on the affidavit of Mr.

Estep wherein he asserts that “[a]t all times while providing services to the Project, including any dealings with Texacana, VECO acted under the instruction of, as an agent of, and in the best interests of Primewest.” [ 124 ] Whether an agency relationship existed between Primewest and Veco is a legal conclusion requiring determination of the facts. Mr. Estep’s personal conclusion about the existence of an agency relationship is neither determinative nor helpful.

The existence and scope of any agency relationship between Primewest and Veco, and whether any allegations by Texacana against Veco are wholly attributable to Primewest as principal, is an issue for trial. [ 125 ] Seventh, Veco submits that it acted in the best interests of, and for the benefit of, Primewest and, therefore, it owed no duty of care to Texacana. In this regard, it relies on the affidavit evidence of Mr. Gidley that “[a]ny tasks performed by Veco on the project were done for and on behalf of Primewest” and on the evidence of Mr.

Estep that “[a]t all times when providing services to the project, including any dealings with Texacana, VECO acted under the instructions of, and as an agent of, and in the best interests of Primewest.” [ 126 ] In the circumstances of this case, where the parties were working together to complete the debottlenecking project, owing a duty of care to Primewest would not necessarily exclude a duty of care to Texacana. As stated previously in these Reasons, engineers have been held to have duties to non-clients when there is sufficient proximity between them.

There is evidence that Texacana and Veco worked closely together and that Veco provided information to Texacana. As stated, Veco’s role in the project is not clear.

Determining Veco’s role, and thus whether it owed a duty of care to Texacana, is an issue that must be determined at trial. [ 127 ] Lastly, Veco argues that any dealings it had with Texacana after November 2000, when it took on a troubleshooting role following the planned start-up of the Compressors, have no bearing on the claims in Primewest’s Amended Statement of Claim or Texacana’s Third Party Notice because there is no allegation by Texacana that Veco was negligent in assisting Primewest with the troubleshooting after that date.

Veco asserts that the cause of action arose prior to November 2000 when the Compressors did not function. [ 128 ] I agree with Texacana that what matters is not when Primewest’s cause of action against Texacana arose, but what loss Primewest seeks to recover from Texacana. In its Amended Statement of Claim, Primewest does not limit its damages to the period prior to November 2000.

It seeks to recover losses arising from the failure of the Compressors supplied by Texacana, including the cost to install a different compressor to accomplish the debottlenecking process and for loss of natural gas revenue as a result of the delay in debottlenecking the plant. Likewise, in its Third Party Claim, Texacana did not limit its claim against Veco to the period prior to November 2000. c. Conclusion regarding

summary dismissal [ 129 ] In conclusion, Veco has not met its burden of showing that there are no issues of merit that genuinely require a trial or that its defence is so compelling that the claim against it should be summarily dismissed. This Court is unable to give a fair and just adjudication on the issues between the parties on the basis of the evidence in this application. In the result, the application for

summary judgment must be dismissed. 3. Should the third party claim be dismissed for delay? a. Test to dismiss for delay [ 130 ] Veco seeks an order dismissing the third party claim on the basis of long delay pursuant to Rule 4.31 of the Alberta Rules of Court . [ 131 ] Rule 4.31(1) provides that a court may dismiss all or any part of a claim if the court determines that the delay has resulted in significant prejudice to a party.

If the court determines that there has been inordinate and inexcusable delay, significant prejudice to the party bringing the application is presumed: Rule 4.31(2) of the Alberta Rules of Court . [ 132 ] Rule 4.31 was discussed in Franchuk v Schick , 2013 ABQB 532 [“ Franchuk ”] where the Master in Chambers described the test as follows (at paras 19-20): Under the current version of Rule 4.31, the Defendant must prove delay and that the delay has caused significant prejudice. The Court will presume that there has been significant prejudice if the Defendant can show that the delay was inordinate and inexcusable.

The onus will then shift to the Plaintiff to rebut the presumption. The old three part test of inordinate, inexcusable delay and serious prejudice still applies but the emphasis is now on prejudice. (See Raven v. Airdrie (City) , 2012 ABQB 74 (Alta. Master); Mintage Financial Corp. v. Altenhofen , 2013 ABQB 486 (Alta. Q.B.)). [ 133 ] The onus is on Veco to establish that there is delay and that the delay has caused significant prejudice to it. If inordinate and inexcusable delay is established, prejudice is presumed, and the onus will shift to Texacana to rebut the presumption of prejudice.

b. Facts relevant to delay [ 134 ] The main action was commenced on September 6, 2002, when the Plaintiffs issued their Statement of Claim. Texacana filed its Statement Defence and Counterclaim on February 28, 2003 (with the individual Beatty defendants filing their Statement of Defence on October 11, 2002). The Plaintiffs filed their Statement of Defence to the Counterclaim on June 3, 2003.

Another defendant, Intercontinental Materials Management (“ IMM ”), filed its Statement of Defence to Primewest’s action on November 6, 2003. [ 135 ] Texacana filed its Third Party Notice on August 27, 2003, but Veco did not file its Statement of Defence to the third party proceedings until two years later on September 30, 2005. [ 136 ] Initially, the main action appears to have moved along at a reasonable pace. In 2003, the Plaintiffs and Texacana provided their initial document production. Both provided additional production and filed their affidavits of records in 2006.

IMM also provided its document production in 2006. Veco produced its documents in 2007. [ 137 ] The Plaintiffs questioned Texacana and the individual Beatty defendants in May 2006 and December 2007. [ 138 ] The action was put into case management in September 2007, but case management was concluded in August 2008. [ 139 ] There appears to have been no formal steps from the conclusion of case management in 2008 until the Plaintiffs questioned IMM in September 2010.

Then, the action appears to have moved more expeditiously with Texacana providing its answers to undertakings in January 2011 and IMM providing its answers in October 2011.

Thereafter, no formal steps were taken by the Plaintiffs for two years until they filed their supplemental affidavit of records in October 2013. [ 140 ] Despite the lack of formal steps between September 2010 and October 2013, during this period Texacana’s legal counsel made requests of counsel for the Plaintiffs and counsel for Veco that they produce additional records and make former employees and corporate representatives available for questioning. Counsel for Veco advised counsel for Texacana that it did not expect any difficulties in locating former employees.

No objections about the litigation continuing or concerns about prejudice were raised. In October 2013, after repeated demands by Texacana’s counsel, the Plaintiff provided their supplemental document production. [ 141 ] Following the additional production by the Plaintiffs, the parties agreed to a Litigation Plan. The Litigation Plan was consented to by all parties, including Veco, and was approved by the Court on April 16, 2014.

The Litigation Plan was subsequently varied by consent of all parties a few months later, on July 31, 2014. [ 142 ] Between July 2014 and February 2015 there was further questioning by Texacana of Primewest employees and the Primewest corporate representative, some of which questioning was attended by counsel for Veco.

Numerous undertakings were given by Primewest’s corporate representative during this questioning. [ 143 ] Texacana took steps in compliance with the steps in the Litigation Plan, but Veco filed its application to dismiss the Third Party action in November 2014, three months after it consented to the revised Litigation Plan. [ 144 ] Veco’s application to dismiss the Third Party action for delay was initially set to be heard at a Special Application, along with its application to strike the claim and for

summary dismissal, in May 2015. The applications, however, were adjourned following the late filing of an affidavit by Mr. Beatty and a successful application by Texacana to exclude excerpts of Veco’s Rebuttal Brief. [ 145 ] Veco filed additional affidavit evidence in support of its applications in September 2015. Following cross-examination on those affidavits, the application was re-scheduled. [ 146 ] To date, there has been no questioning by Veco or Texacana of each other nor has Veco yet questioned the Plaintiffs. c. Application of test to the facts i.

Has there been inordinate and inexcusable delay? [ 147 ] Inordinate delay is “delay that is in excess of what is reasonable having regard to the nature of the issues in the action and the circumstances of the case”: Franchuk at para 22 citing Kuziw v Kucheran Estate , 2000 ABCA 226 at para 31 [“ Kuziw ”] and Deis v Koch Oil Ltd , 2001 ABQB 997 at para 11 . [ 148 ] The entire progress of an action from its commencement to the date the application to dismiss was filed must be considered: Steparyk v Alberta , 2014 ABQB 367 at para 30 , aff’d on other grounds, 2015 ABCA 125 . [ 149 ] The onus is on a delaying party to make out a credible excuse for the delay: Kuziw at para 37 . [ 150 ] The period to be considered in assessing whether there is delay is the time from commencement of the Third Party Notice in August 2003 to the filing of this application in November 2014.

The total delay is 11 years and 2 months. [ 151 ] Texacana and Veco each present different views about how the delay should be assessed in the context of a third party claim. Veco’s Position [ 152 ] Veco asserts that it is Texacana’s responsibility to move the third party proceedings forward on a timely basis. As a result, Veco focuses on the delay specific to the third party proceedings and the formal steps as shown in the court Procedure Card.

[ 153 ] Veco submits that a defendant who pursues a third party action has the same obligation to move an action forward as does a plaintiff. Veco relies on Rule 3.55(

a) that provides that “[e]xcept when the context or these rules otherwise provide, a rule that applies to or in respect of a plaintiff applies equally to or in respect of a third party plaintiff”. Veco submits that Texacana was required, at a minimum, to ensure that any delay in the action did not prejudice its own rights to pursue Veco or prejudice Veco.

As an example, Veco submits that Texacana could have sought a stand-still agreement with Veco. [ 154 ] In support of its position, Veco relies on two cases: Carter v Sears Canada Inc , 2011 ABQB 732 [“ Carter ”] and Bentley v Stone , [2006] OJ No 5473 , aff’d 2007 ONCA 623 [“ Bentley ”]. [ 155 ] Focusing on the delay specific to the third party proceedings, Veco relies on two periods of delay: first, the two years between the filing of the Third Party Notice in August 2003 and the Defence to the Third Party Notice in September 2005; and, second, the five years between the conclusion of case management in August 2008 and an application by the Plaintiffs for a Litigation Plan in October 2013.

Veco submits that these delays are not only inordinate but also inexcusable and, therefore, give rise to prima facie prejudice. Texacana’s Position [ 156 ] In contrast, Texacana asserts that the third party proceedings are not separate from the main action and that the primary responsibility for moving the action along rests with the Plaintiffs. It submits that an assessment of delay in third party proceedings must be considered in the context and circumstances of the entire action.

In this regard, Texacana relies on Rules 3.46(1) and 3.46(2), that provide that a third party claim becomes part of the main action with the pleadings between the defendant and third party forming part of the file between the plaintiff and the defendant.

Unless the court orders otherwise, Rule 3.46(3) provides that a third party claim is tried with the main action. [ 157 ] In support of its position, Texacana relies on two decisions of the Alberta Court of Appeal where the Court held that delay must be assessed in the context of the entire action: Apex Land Corp v Heikkila , 2011 ABCA 87 [“ Heikkila ”] and Calgary (City) v Chisan , 2000 ABCA 313 [“ Chisan ”]. [ 158 ] Noting that the potential liability of Veco first requires that the Plaintiffs succeed in their action against Texacana, Texacana submits that the primary responsibility for moving the action forward rests on the Plaintiffs.

It says that it should not be expected to push forward either the main action or the third party claim if the Plaintiffs are not advancing the main action because Veco, as much as Texacana, would benefit if the Plaintiffs’ failure to advance their action resulted in dismissal for delay of the main action.

Texacana submits that delay as a result of the Plaintiffs’ failure to advance their action is neither inordinate nor inexcusable delay by the Defendants. [ 159 ] In the context of technical, document-intensive, multi-partied litigation such as the present action, Texacana notes that the action must proceed in an orderly fashion. In this regard, it submits that it took reasonable steps to keep the action moving forward. It says the inevitable delays arose from the reality that the action involves four counsel representing four parties or groups of parties.

Analysis [ 160 ] The Court now turns to a discussion of the cases relied upon by the parti

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