Rotzang v CIBC World Markets Inc, 2017 ABQB 354

Court of Queen’s Bench of Alberta Citation: Rotzang v CIBC World Markets Inc, 2017 ABQB 354 Date: 20170602 Docket: 1101 07053 Registry: Calgary Between: Alex Rotzang, Marina Ortman, Norex Well Services Inc. and Conna Investments S.A. Plaintiffs/Appellants - and - CIBC World Markets Inc. and Steven Bodon Defendants/Respondents _______________________________________________________ Memorandum of Decision of the Honourable Madam Justice S.L. Hunt McDonald _______________________________________________________ Appeal from the Memorandum of Decision of J. Farrington, Master in Chambers ( 2015 ABQB 354 Filed June 3, 2015)

Introduction [ 1 ] Alex Rotzang (“Mr. Rotzang”), Marina Ortman (“Ms. Ortman”), Norex Well Services Inc. (“Norex”) and Conna Investments S.A. (“Conna”) (collectively, the “Appellants”) claim in negligence, breach of contract and breach of fiduciary duty arising from the management of their investment accounts with the Respondent, CIBC World Markets Inc. (“CIBC”), and by the individual Respondent, Steven Bodon (“Mr.

Bodon”) (collectively, the “Respondents”). [ 2 ] On June 3, 2015, Master Farrington summarily dismissed the Appellants’ claim on the basis that the limitation period set out in the Limitations Act , RSA 2000, c-L12 [ Limitations Act ] had expired prior to the filing of the Statement of Claim: 2015 ABQB 354 (the “Master’s Decision”). The Appellants now appeal that decision, and seek to amend their Statement of Claim and file fresh evidence before me. The Respondents resist the amendments and the filing of fresh evidence on appeal. (

a) Background Facts [ 3 ] Each of the Appellants held separate investment accounts with investment brokerage CIBC, where Mr. Bodon was their investment advisor. These include: (

a) An account in Mr. Rotzang’s name that was opened in 2006 and closed on or about August 13, 2007 (the “Rotzang Account”); (

b) An account in Ms. Ortman’s name that was closed on August 31, 2007 (the “Ortman Account”); (

c) An account in Norex’s name that was opened on or about March 1, 2005 and closed in November 2010 (the “Norex Account”); and (

d) Two accounts in Conna’s name, one of which that was closed in January 2003 (the “First Conna Account”), and the other of which was closed on or about April 20, 2004 (the “Second Conna Account”). [ 4 ] At all relevant times, Mr. Rotzang had a connection to each of the Appellants. He was in an adult interdependent relationship with Ms. Ortman, and had a Power of Attorney that authorized him to provide instructions to CIBC regarding her account. Mr.

Rotzang is the president, director and sole beneficial owner of Norex, and was authorized to give instructions on behalf of both Norex and Conna. [ 5 ] The Respondents allege that the “Know Your Client” form for all of the above-listed accounts for the Appellants indicated a tolerance for 100% high risk with respect to investments selected by CIBC and Mr. Bodon as advisor. [ 6 ] The Appellants claim substantial damages from the Respondents on the basis of negligence, breach of contract, and a breach of fiduciary duty arising from the management of their individual accounts with CIBC by Mr. Bodon.

The Appellants submit that funds from the various accounts were invested by CIBC in high risk investments against their wishes. [ 7 ] The Appellants also claim damages on the basis that Mr. Bodon had been engaged in churning in respect of the Second Conna Account, the Ortman Account, the Rotzang Account and the Norex Account by executing the necessary trades for the purpose of increasing his commissions. The Appellants seek no damages in respect of the First Conna Account. [ 8 ] Mr. Rotzang claims an amount to be determined for investment losses for the Rotzang Account, while Ms.

Ortman seeks damages of $8,990 in investment losses for the Ortman Account. Norex claims $3,102,687 in investment losses for the Norex Account. Conna seeks damages of $180,000 for investment losses for the Second Conna Account. No damages are sought in respect of the First Conna Account. [ 9 ] The Respondents allege that Mr. Rotzang’s stated purpose for investing funds with the Respondents was to generate income to fund litigation.

This underlying purpose included his personal account, not just the Norex and Conna Accounts. [ 10 ] From June to August 2007, the Rotzang Account and the Ortman Account were transferred from CIBC to another brokerage, Wolverton Securities Ltd. (“Wolverton”). A significant portion of the assets in the Norex Account was also transferred from CIBC to Wolverton. Mr. Rotzang stated in the Transcript of the Questioning on July 26, 2012 that the reason for transferring his investments out of CIBC was because he was dissatisfied with the performance of the investments. Ms.

Ortman was also unhappy with the performance of her account and accordingly it was transferred in 2007 to Wolverton. [ 11 ] As of August 2007, the Norex Account had an approximate net value of $1,367,743.16, after some of the assets in its account were transferred to Wolverton. The Norex Account remained open at CIBC until November 2010, with Mr. Bodon as its investment advisor. From September 2007 to November 2010, when the Norex Account was closed, the main investment held in the Norex Account was shares in a company, Seair Inc. (“Seair”). [ 12 ] In his Questioning Transcript, Mr.

Rotzang indicated that after August 2007 he had ceased his dealings with Mr. Bodon and CIBC. Specifically, the questions asked of him were: Q. So you had no personal dealings with Mr. Bodon or anyone else at CIBC subsequent to August of 2007, correct? A. Probably not. ... Q. He was no longer acting as your investment advisor? A. No.

Q. And CIBC was no longer acting as your investment advisors? A. No. Q. You’re agreeing with what I’m saying? A. Yes. [ 13 ] Further, in Mr. Rotzang’s Questioning Transcript, he indicated that from August 2007 onwards the only account which remained opened was the Norex Account. The only asset that remained in the Norex Account were shares in Seair. He confirmed as well that no ongoing advice was provided in respect of this investment, and the shares were eventually transferred to TD Waterhouse in 2010. The relevant transcript excerpts state: Q.

And then nothing happened in the account, the Norex account between - - in 2008 and 2009. And then finally it was transferred in 2010? A. Yes. Q. You basically decided to stop dealing with Steve (Bodon) in 2007, and you just left the Seair there to see what would happen to it? A. Yeah, but what was I doing? I didn’t have any money in the account. There was nothing there to deal with. [ 14 ] In affidavit evidence the Appellants seek to rely on that was not before the Master, Mr.

Rotzang states, on behalf of Norex, that subsequent to 2009 when the Norex funds remained invested in CIBC pursuant to the direction of Mr. Rotzang, he was still relying on Mr. Bodon to provide him with investment advice in respect of the Seair shares. He also states that the value of the Seair shares fluctuated significantly, and neither Norex nor Mr. Rotzang knew whether the Norex Account would rebound or not. [ 15 ] In his affidavit, Mr. Rotzang alleges that it was not until October or November 2010 that he became aware that Mr.

Bodon had a non-arms-length relationship with Seair and potentially with other companies whose shares Mr. Rotzang had authorized for purchase for the Second Conna Account, the Ortman Account, the Rotzang Account and the Norex Account. Accordingly, it is the Appellants’ position that the limitation period commenced in November 2010, shortly before the transfer of the Norex Account to another firm, when Mr. Rotzang discovered the non-arms-length link between Mr. Bodon and Seair. [ 16 ] The Statement of Claim was issued on May 19, 2011. (

b) The Master’s Decision [ 17 ] CIBC and Mr. Bodon applied before Master Farrington on June 3, 2015 for

summary judgment dismissing the action on the basis that the claim was brought outside the relevant limitation period. He noted that the application was not based on “the merits of the advice that was, or was not given, or on any of the substance of the relationship between the parties”: Master’s Decision at para 2. [ 18 ] Master Farrington found there was no evidence of an ongoing investment advisor relationship between Mr. Bodon and any of the Appellants after August 2007. He concluded that the Appellants knew everything they needed to know to start an action in August 2007.

In the Master’s Decision, Master Farrington concluded, at paragraph 23: There is no evidence of an ongoing investment advisor relationship between Mr. Bodon and Mr. Rotzang, or in fact any of the Plaintiffs, after August, 2007. Consequently, there is nothing to extend the limitation period and the limitation period expired two years from August 2007. The Plaintiffs clearly knew of their dissatisfaction with the investment advice that they had received at that time, and they knew that they had suffered significant losses.

While arguably they could not quantify them as the very nature of equities is that prices fluctuate, the losses were large, and there was no reason to refrain from bringing an action if they felt that the Defendants were responsible for their losses. Holding shares in one corporation, in one account, with no ongoing advice relationship, does not extend the limitation period indefinitely. [ 19 ] As a result, Master Farrington allowed the application and dismissed the Action in its entirety, as it was brought after the expiry of the limitation period. (

c) Parties’ Positions [ 20 ] The Appellants have brought an application to amend the Amended Amended Amended Amended Statement of Claim (the “Amending Application”), and have appealed the Master’s Decision dismissing their Application for

Summary Judgment (the “Appeal”). On the Appeal, they seek to rely on fresh evidence, two affidavits sworn by Mr. Rotzang. They also apply for an order directing that further excerpts from the transcript of Mr. Rotzang’s questioning may be used and relied on in the Appeal. [ 21 ] They argue that the Amending Application must be heard before the Appeal, and that the amendments should be permitted, as they are necessary for the determination of the real question between the parties, and it would not be prejudicial to allow them. [ 22 ] Further, the Appellants state that the Appeal should be allowed, firstly, because the

Summary Dismissal application giving rise to the Master’s Order should not have been decided on a

summary basis and can only be determined on viva voce evidence adduced at a trial. Further, they state that the available evidence presented at the

Summary Judgment Application hearing does not support the Master’s conclusion that there was no evidence of an ongoing investment advisor relationship between Mr. Bodon and the Appellants after August, 2007 or that the Appellants knew everything they needed to know to start the action in August 2007. They argue that the limitation period commenced to run in November 2010 when Mr. Rotzang says he became aware of Mr. Bodon’s actions in the accounts,

both regarding churning and that he was acting in non-arms-length transactions. At that time, the Norex Account was transferred to Wolverton, and the losses in the Norex Account were crystallized. [ 23 ] In support of this Appeal and Amending Application, Mr. Rotzang filed two Affidavits dated September 9, 2015 (the “September 2015 Affidavit”) and October 30, 2015 (the “October 2015 Affidavit”) (collectively, the “Affidavits”). The Appellants filed the Affidavits after the Master’s Decision granting

summary judgment to the Respondents and dismissing the Appellants’ claim in its entirety. [ 24 ] The Respondents submit that nothing in the Affidavits changes the underlying rationale for Master Farrington’s dismissal of the action, which was that the Appellants’ own evidence at Questioning established two key facts: (

a) The Appellants transferred the majority of their investments away from the Respondents in August 2007 due to the Appellants’ concerns over investment losses; and (

b) The Respondents ceased providing any investment advice to any of the Appellants at that time. [ 25 ] To the extent that the Appellants now suggest otherwise, the Respondents submit their evidence ought to be rejected on the basis that an applicant cannot resist

summary judgment by virtue of a conflict in their own sworn evidence. [ 26 ] The Respondents further submit that the Appellants knew, or ought to have reasonably known, of all the particulars of their injuries by August 2007 at the latest. Despite this, they did not commence their action until May 19, 2011, and are therefore outside the limitation period. As a result, the appeal should be dismissed. (

d) Hearing Procedure for the Amending Application and Appeal [ 27 ] The Amending Application and the Appeal were set down to be heard together in a full-day Justice Special Application by way of order of Justice M.R. Bast on December 8, 2015. She held that the first issue to be addressed is whether the Amending Application should be heard in priority to the Appeal. [ 28 ] Another application was filed by the Appellants on December 14, 2016 requesting that page 155 of the Transcript of the July 6, 2012 Questioning of Mr.

Rotzang, contained in the Affidavit of Amanda Whitford filed December 12, 2016, may be used and considered by this Court when considering the Appeal of the Master’s Decision (the “Transcript Application”). The Appellants argue that the portion of Mr. Rotzang’s Questioning held on July 6, 2012 which was relied upon by the Respondents at the hearing in front of Master Farrington on the basis that the Questions and Answers provided by the Respondents may have given a misleading impression of the Appellants’ evidence.

The Transcript Application was determined during the hearing and the decision is set out in these Reasons. Issues [ 29 ] The issues to be determined are as follows: (

a) Should additional portions of the Transcript be included in the evidence on this Appeal? (

b) Should the Amending Application be heard before the Appeal? (

c) Should the requested amendments to the Amended, Amended, Amended, Amended Statement of Claim be permitted? (

d) What is the applicable standard of review? Can the Appellants rely on the September 2015 Affidavit on the appeal? (

e) What is the test for

summary judgment? Can the limitations issue be determined summarily? (

f) Did the Master err in summarily dismissing the claim on the basis that it was barred by the Limitations Act ? Discussion (

a) Application to Include Additional Portions of the Transcript [ 30 ] On this Appeal, the Appellants applied to include portions of the Questioning Transcript of Mr. Rotzang for consideration by this Court. Specifically, they seek to add page 154, line 27, all of page 155, and page 156, line 1. The Respondents have referenced page 154, lines 23 to 26 and page 156, lines 2 to 6. [ 31 ] The Appellants rely upon the Alberta Rules of Court , Alta Reg 124/2010 (the “ Rules ”) as authority for allowing the requested additional portions of the Questioning Transcript of Mr.

Rotzang to be considered as evidence on this Appeal. On application, the Court may direct that a further portion of the transcript may be used if it “is so connected with the portion used that it would or might be misleading not to use all or any other portion of the transcript”: Rules , r 5.31(3).

This is the exception to the general rule that “[o]ne cannot read in one’s own questioning transcript when that questioning was taken in the nature of “discovery” circumstances”: Master’s Decision at para 8; Rules , r 5.31(1) and (2). [ 32 ] Rule 5.31(3) was considered in 410675 Alberta Ltd v Trail South Developments Inc , 2011 ABQB 151 , where this Court held,

at paragraphs 6 and 7, that the applicable test had not changed, and remained as set out in Murphy Oil Co v Predator Corp , 2002 ABQB 403 at paras 14-15 : 14 ...The authorities are clear that R.214(4) [replaced by r 5.31(3)] cannot be used to put before the Court all that the witness has said on a particular topic.

It is limited to adding the rest of a specific answer or clarifying a passage which has been taken out of context or may be misleading. ... [citations omitted] 15 The issue here is whether the Predator Defendants’ proposed additional read-ins are so connected to the question or topic referred to by Apache in its read-ins that the proposed read-ins should be allowed. [ 33 ] This application was heard and determined at the hearing. The Appellants argued that the expanded read-ins are necessary to provide clarity and context to the read-ins relied upon by the Respondents.

The Respondents agreed with the test, but submitted that there is no connectivity and no misleading impression; rather, there are discrete questions and answers on a different topic. [ 34 ] After argument from the parties, I held that the following portions of the Questioning Transcript of Mr. Rotzang are admissible as evidence on the Appeal: I will admit ... page 154, lines 23 to 27, which is one line more than what was previously referred to by [the Respondents’ counsel] in his brief.

I will admit the entire page 155 and 156 down to the end of line 6: Transcript of Proceedings dated December 15, 2016, page 15, lines 4-10. (

b) Which should be determined first – the Amending Application or the Appeal? [ 35 ] The Master’s Decision was issued June 3, 2015 dismissing the action in its entirety. A notice of appeal was filed on July 16, 2015. On October 30, 2015, the Appellants filed the Amending Application. [ 36 ] Where there is an outstanding application to amend the pleadings, it should be determined before an application for

summary judgment: Elbow River Marketing v Canada Clean Fuels Inc , 2011 ABCA 258 [ Elbow River Marketing ] at para 3 . [ 37 ] The Appellants submit that in this situation there is no reason to depart from the proper procedure set out by the Court of Appeal in Elbow River Marketing with respect to the priority of the Amending Application to be determined before the Appeal. [ 38 ] At the appeal hearing, the Respondents made it clear that, while they take issue with the requested amendments to the Statement of Claim, they agreed that the Appellants’ Amending Application should be heard first.

This position differs from that taken in their Brief that if the Amending Application is heard first, “it would be tantamount to permitting the [Appellants] to rely on a statute- barred claim to try to save what would otherwise be statute-barred amendments”.

While the Respondents raised this argument on the merits of the Amending Application, they did not pursue it as a basis for determining that the Amending Application should be heard only after a successful appeal. [ 39 ] In light of the Court of Appeal’s direction in Elbow River Marketing and the parties’ agreement, the Amending Application will be determined before the Appeal on

summary judgment. (

c) Should the Amendments be permitted? [ 40 ] As has been noted, the Appellants’ initial Statement of Claim was filed on May 19, 2011. [ 41 ] There were subsequently four requests by the Appellants to amend the Statement of Claim which mostly dealt with the proper naming of parties, the proper spellings of names and the proper designation of corporate titles. The fourth requested amendment was filed on January 19, 2012. [ 42 ] The Appellants now apply to amend their Amended Amended Amended Amended Statement of Claim in the form attached to Mr. Rotzang’s October 2015 Affidavit.

They submit that the sought amendments to the Statement of Claim in this application are solely for the purpose of increased specificity, adding much-needed clarity to specific factual or time-line errors, all of which they say are reflected in the evidentiary record before the Court. The Appellants emphasize that the requested amendments add no new causes of action or any new parties. Specifically: (

a) The proposed amendments to paragraphs 7 to 7.7 set out the history of the investment advisor relationship between the parties, including the dates accounts were opened and closed, and other account details; (

b) The proposed amendments to paragraphs 10 to 11 plead when the Appellants say they became aware of alleged churning and conflicts of interest; and (

c) The proposed amendments to paragraphs 13 to 19.1 particularize the losses the Appellants allege and the remedies sought. [ 43 ] The Appellants argue that the amendments are necessary for the purpose of determining the real question in issue between the parties.

Further, they submit that the amendments will not cause any prejudice to the Respondents at all, or in the alternative, will not cause any prejudice to the Respondents that cannot be remedied by costs. [ 44 ] The test which governs the law on amendment to pleadings was discussed by the Court of Appeal in Attila Dogan Construction and Installation Co Inc v AMEC Americas Limited , 2014 ABCA 74 [ Attila Dogan ] at para 25 : Assuming some modest amount of evidence is provided in support, any pleading may be amended, no matter how careless or late the

party seeking the amendment, subject to four major exceptions: (

a) The amendment would cause serious prejudice to the opposing party, not compensable in costs; (

b) The amendment requested is hopeless; (

c) Unless permitted by statute, the amendment seeks to add a new party or new cause of action after the expiry of a limitation period; or (

d) There is an element of bad faith associated with the failure to plead the amendment in the first instance. [ 45 ] The amount of evidence required to justify amending a pleading is low. Even where there is contradictory evidence, the evidence presented in support of an amendment may be sufficient for the amendment to be granted: Attila Dogan at para 26 .

An amendment will be permitted even if a party has given some answers on questioning that are inconsistent with the proposed amendment: Balm v 3512061 Canada Ltd , 2003 ABCA 98 [ Balm ] at para 13 . [ 46 ] Even a doubtful plea should be allowed if it is arguable: Balm at para 12 . It is not necessary that the amended pleading meet the test for

summary judgment: Attila Dogan at para 26 . [ 47 ] The Appellants submit that the only potential criteria from Attila Dogan that may be satisfied in this case relate to (

a) prejudice and (

b) hopelessness, as the amendments do not add new parties or causes of action, and there is no question of bad faith.

As a result, the court need only decide whether, if the Amending Application is allowed, it would cause serious prejudice to the Respondents not compensable in costs, or that the amendments requested are hopeless. [ 48 ] With respect to prejudice not compensable in costs, the burden is on the party resisting the amendment to show that it would suffer non-compensable prejudice if the amendment is permitted: Castledowns Law Office Management Ltd v FastTrack Technologies Inc , 2012 ABCA 219 at para 17 . [ 49 ] According to the Appellants, the Respondents have not argued they will suffer any prejudice that cannot be compensated by costs if the proposed amendments are allowed.

They argue that, to the extent that the court determines that the Respondents would suffer prejudice as a result of the amendments, that prejudice is compensable in costs. [ 50 ] Further, the Appellants argue that the proposed amendments are not hopeless. A proposed amendment that is so inconsistent with the record may be hopeless: Attila Dogan at para 27 . That is not the case here. [ 51 ] On the Amending Application, the Appellants rely on both their September 2015 Affidavit and their October 2015 Affidavit.

They also argue that the parties’ documentary discovery and questioning covered the time period, accounts and transactions detailed in the proposed amendments, and the proposed amendments provide further details concerning the losses suffered by each of the Appellants. They further point out that the Respondents have not cross-examined Mr. Rotzang on his September 2015 Affidavit.

Accordingly, the Appellants argue there can be no basis for any claim that the timeline in the September 9, 2015 Affidavit of Rotzang, as supported by the Exhibits, is hopeless. [ 52 ] In response, the Respondents argue that the Appellants are seeking to fundamentally revise the action, when the underlying action sought to be amended was brought outside the relevant limitation period, as determined by Master Farrington.

As a result, they say that any amendments that add new claims would also be statute barred as they are now well outside the relevant limitation period. [ 53 ] The Respondents submit that adding a claim outside of the limitation period would require the Appellants to fall within the ambit of

section 6 of the Limitations Act , which addresses amendments that seek to add claims to a proceeding. However, the Respondents submit that

section 6 only applies where there is an extant “proceeding”. In this case, at the time the application to amend the pleadings was filed, no such proceeding existed because the action itself had been dismissed by the Master. [ 54 ] The question of whether a statute-barred Statement of Claim can be amended under

section 6 of the Limitations Act has not yet been resolved by the Alberta courts. Although this situation has not received direct judicial consideration in Alberta, this Court has commented in Hur v 726913 Alberta Ltd , 2013 ABQB 208 on the potential mischief that could result, at paragraphs 61-62, as follows: In W.A.R. v. Alberta (Attorney General) , 2006 ABCA 219 Côté, J.A. for our Court of Appeal raised it as “an interesting question”, but found it unnecessary to address on the facts of that case.

He said at para 50: The logic that one time-barred claim cannot be added to save a claim that is itself time-barred is appealing, if only to avoid the absurdity of an otherwise statute-barred claim being saved by an amendment under

Section 6... [ 55 ] In 926 Capital Corp v Petro River Oil Corp , 2016 ABQB 194 , aff’d 2016 ABCA 393 , this Court identified a potential issue that could arise by allowing amendments to a statute-barred claim, at paragraph 43: I need not decide if an action had been dismissed in its entirety (on limitations grounds or otherwise), whether months or years later a party could seek to amend its pleadings and add a statute-barred claim to that proceeding pursuant to

Section 6. [ 56 ] The Respondents submit that at the time the application to Amend being considered in this proceeding was actually filed, there was no “proceeding” to amend and so

section 6 of the Limitations Act cannot be used to save what would otherwise be a time- barred amendment. [ 57 ] The Respondents also argue that the principle that a party is obligated to put its “best foot forward” on an application for

summary judgment should apply both to the evidence filed and to pleadings. Otherwise, they assert there is great potential for mischief and prejudice to the Respondents. Pleadings are not evidence, and the Respondents provided no authority where this principle was extended to pleadings. Something more than this assertion is required for the Respondents to establish prejudice.

[58] In essence, the Respondents’ argument in opposition to the amendments turns on whether the Appellants are seeking to add aclaim to the Statement of Claim by amending it after the limitation period has expired. A “claim” is defined in the Limitations Act as “amatter giving rise to a civil proceeding in which a claimant seeks a remedial order”: s 1(a). [59] I agree with the Appellants that the proposed amendments do not add new parties or causes of action. The proposedamendments sought would not add a claim to the proceedings. They add allegations of facts and particulars of amounts claimed in theaction.

The dates and amounts set out in the Statement of Claim are not facts; they remain to be proven when the

summary judgmentAppeal is considered. The affidavit and other evidence the Appellants rely on satisfy the low threshold required for evidence in supportof the proposed amendments. The amendments are not hopeless, and no prejudice has been established to the Respondents that could notbe compensated for in costs. There is no evidence of bad faith in the failure to plead the amendments in the first place. [60] The Appellants’ Amending Application is allowed, and leave is granted to amend the Statement of Claim in the form attachedas

Schedule “A” to the October 2015 Affidavit sworn by Mr. Rotzang. That version of the Statement of Claim will be used in myconsideration of the Appeal. (

d) Standard of Review and Fresh Evidence [61] An appeal from a Master is an appeal de novo, and the standard of review is correctness: Bahcheli v Yorkton Securities Inc,2012 ABCA 166 at paras 3, 30. [62] The Appellants filed no affidavit evidence before Master Farrington.

Before me, they filed the October 2015 Affidavit insupport of their Amending Application, and seek to rely on the September 2015 Affidavit on the Appeal. [63] Rule 6.14(3) of the Rules addresses the evidentiary record on an appeal from a Master’s order: An appeal from a master’s judgment or order is an appeal on the record of proceedings before the master and may also be based onadditional evidence that is, in the opinion of the judge hearing the appeal, relevant and material. [64] The Respondents challenge the September 2015 Affidavit sworn by Mr.

Rotzang not on its admissibility, but rather, on thebasis that it is a self-serving affidavit that alleges facts contrary to his prior evidence on questioning. This argument does not make theaffidavit inadmissible. The September 2015 Affidavit sets out facts that are relevant and material to the issues raised by the pleadings,and as a result, will be permitted on the Appeal. It remains to be determined whether the facts are relevant and material to thedetermination of the commencement date of the limitation period, which is the subject of this appeal. (

e) Test for

Summary Judgment – Can the Limitations Issue be determinedsummarily? Test for

Summary Judgment [65] The parties agree on the applicable law on an application for

summary judgment. The test for

summary judgment is set out inHryniak v Mauldin, 2014 SCC 7 [Hryniak], and has been applied by the Alberta Court of Appeal in Windsor v Canadian PacificRailway Ltd, 2014 ABCA 108 [Windsor], where the Court referred to paragraph 49 of Hryniak at paragraph 13 of Windsor as follows: 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 forsummary judgment.

This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows thejudge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result. [66] The Court of Appeal has explained there are two considerations on a

summary judgment application: (1) “whetherexamination of the existing record can lead to an adjudication and disposition that is fair and just to both parties”; and (2) “whether thereis any issue of merit that genuinely requires a trial or, conversely, whether the claim or defence is so compelling that the likelihood itwill succeed is very high such that it should be determined summarily”: Condominium Corporation No 0321365 v Cuthbert, 2016ABCA 46 [Condo Corp 032] at para 27. [67] An issue of merit is established when the non-moving party’s case discloses a “genuine issue of a potentially decisive materialfact in the case which cannot be summarily found against the non-moving party on the record revealed by the ‘fair and just [summary]process’”: Condo Corp 032 at para 27.

A dispute over non-material facts is irrelevant on a

summary judgment application: AccessMortgage Corporation

(2004) Limited v Arres Capital Inc, 2014 ABCA 280 [Access Mortgage] at para 60, citing Beier v Proper CatConstruction Ltd, 2013 ABQB 351 at para 68. In addition, “a self-serving affidavit is not sufficient in itself to create a triable issue in theabsence of detailed facts and supporting evidence”: Access Mortgage at para 59, citing Guarantee Co of North America v GordonCapital Corp, (SCC), [1999] 3 SCR 423 at 436-437. [68] At the same time,

summary judgment will not be granted where opposing parties’ affidavits or evidence conflict on materialfacts, as the Court cannot assess credibility or weigh evidence on a

summary judgment application: Condo Corp 032 at para 28. Evidence on the Appeal [69] The Appellants have been permitted to amend their Statement of Claim for a fifth time to include the following allegation inparagraph 10: “The Plaintiffs were not aware of the conflict of interest any earlier than October or November, 2010, when the non-arms-length nature of the transactions and the conflict were disclosed by Bodon to Rotzang.” They also allege, in paragraph 11: “The Plaintiffswere not aware of the churning of the Accounts any earlier than December, 2010.” Pleadings are not evidence. It remains to bedetermined whether these allegations can be established based on the evidence.

[ 70 ] The issues in dispute between the parties are defined by the pleadings as amended. However, it is the evidence that must be examined when determining whether

summary judgment should be granted. The Appellants have filed affidavit evidence that contradicts some of the evidence from questioning relied on by the Respondents. If the conflicting evidence relates to non-material facts, this Court would not be required to assess credibility or weigh evidence, and could grant

summary judgment if the material facts establish no genuine issue requiring a trial. [ 71 ] There is no conflict in the evidence on the following facts: (

a) The Appellants held investment accounts at CIBC, where Mr. Bodon was their investment advisor. (

b) The First Conna Account was closed in January 2003, and the Second Conna Account closed in April 2004. (

c) The assets in the Ortman Account were transferred from CIBC to Wolverton, and it was closed in August 2007. (

d) The assets in the Rotzang Account were transferred from CIBC to Wolverton, and it was closed in August 2007. (

e) A significant portion of the assets in the Norex Account were transferred from CIBC to Wolverton, leaving shares in Seair as the only investment remaining in the account from August 2007 onward. The Norex Account was closed in November 2010. (

f) The Statement of Claim was issued on May 19, 2011. [ 72 ] The Respondents rely on the following evidence given by Mr. Rotzang and Ms. Ortman on their questioning, which is now disputed by the Appellants: (

a) Mr. Rotzang and Ms. Ortman gave evidence that the investments in the Ortman Account, the Rotzang Account and the Norex Account were transferred from CIBC to Wolverton because they were dissatisfied with the accounts’ performance. (

b) Mr. Rotzang indicated that after August 2007, he had no personal dealings with Mr. Bodon and CIBC, and that Mr. Bodon and CIBC were no longer acting as his investment advisors. (

c) Mr. Rotzang confirmed that no ongoing advice was provided in respect of the Seair shares, which were eventually transferred to TD Waterhouse in 2010. His evidence was that nothing happened in the Norex Account in 2008 and 2009. [ 73 ] On appeal, the Appellants rely on the following additional evidence by way of the September 2015 Affidavit sworn by Mr. Rotzang: (

a) The Rotzang Account was updated in January 2007 to be a “margin” account. Mr. Bodon was aware it was a personal account, and there was no need or desire for that account to generate large returns or to tolerate high risk. (

b) The “Know Your Client” forms for the Accounts that indicated a tolerance for 100% high risk were not accepted by the Appellants, and they did not agree to this level of risk. Mr. Rotzang first learned of the contents of the KYC forms after beginning this litigation. (

c) From August 2007 to November 2010, when the only investment in the Norex Account was the Seair shares, Mr. Bodon remained as the advisor for the Norex Account. (

d) The value of the Seair shares fluctuated significantly during this time, and neither Mr. Rotzang nor Mr. Bodon knew whether they would rebound or not. (

e) Mr. Rotzang received advice on Seair from a CIBC employee on December 16, 2009. He attaches as an exhibit to the September 2015 Affidavit a note from CIBC’s internal system confirming a meeting between Mr. Rotzang and the employee. Based on the employee’s advice at that meeting and based on Mr. Bodon’s previous assurances, Mr. Rotzang agreed to a wait-and-see approach to the Seair shares to give them time to increase in value. (

f) In 2008 and 2009, Mr. Rotzang introduced Mr. Bodon to various people Mr. Rotzang felt could help grow Seair’s business. He also provided technical advice to Seair in an effort to assist the company’s growth and progress. (

g) At no time was Mr. Rotzang made aware that Seair was in any financial trouble, or would not be as profitable as Mr. Bodon told him it would be. (

h) In October or November 2010, Mr. Rotzang says he became aware that Mr. Bodon had a non-arms-length relationship with Seair, and potentially with other companies whose shares he had authorized for purchase for the Second Conna Account, the Ortman Account, the Rotzang Account and the Norex Account. (

i) From December 2010 to February 2011, Mr. Rotzang began taking educational courses in investing. At that time, he became concerned that Mr. Bodon had been engaged in churning in relation to the Second Conna Account, the Ortman Account, the Rotzang Account and the Norex Account. [ 74 ] The evidence conflicts on the following facts: (

a) Mr. Rotzang’s evidence at questioning was that the purpose of the Rotzang, Ortman and Norex Accounts was

to fund litigation so a continuous income stream was required. In contrast, in the September 2015 Affidavit, Mr. Rotzang swears that the Rotzang and Ortman Accounts were personal, and only the Norex Account was for the purpose of funding litigation. (

b) Mr. Rotzang disputes Mr. Bodon’s evidence that he had disclosed to Mr. Rotzang his personal interest and involvement in any of the Appellants’ investments before they were made. (

c) In the September 2015 Affidavit, Mr. Rotzang deposes that the Rotzang and Ortman Accounts were moved in June 2007 because they were “quite small”. This is in contrast to his evidence at questioning that he moved the Accounts because he was unhappy with their performance. The September 2015 Affidavit does not address why the Norex Account was moved (

d) The parties disagree as to the timing of when Mr. Rotzang had actual knowledge of: (

i) the alleged non-arms-length dealing between Mr. Bodon and Seair; (ii) the alleged churning in the Accounts; and (iii) that the KYC forms indicated a tolerance for 100% high risk investments. (

e) Mr. Rotzang’s evidence in the September 2015 Affidavit was that Mr. Bodon and CIBC provided ongoing investment advice after the Ortman and Rotzang Accounts were closed. In contrast, in questioning, he confirmed twice that there was no ongoing relationship with Mr. Bodon after the Ortman and Rotzang Accounts were closed. [ 75 ] Much of the conflicting evidence relates to the merits of the claim against the Respondents. On this Appeal, I do not consider whether there has been negligence, a breach of contract or a breach of fiduciary duty arising from the management of the Appellants’ investment accounts. The sole basis on which

summary judgment was sought, and is considered on this Appeal, is whether the action was commenced outside the limitation period, and therefore should be dismissed. To the extent the evidence conflicts on issues relating to the limitation period, I discuss it below. Limitations Issue [ 76 ] This appeal turns on whether the limitation period had expired by the time the action was commenced, and whether that determination can be made on a

summary basis. [ 77 ] The Respondents are entitled to immunity from liability in respect of the Appellants’ claim if the action was not commenced within two years after the date on which they knew, or in the circumstances ought to have known, that (

i) the injury for which the Appellants seek a remedial order had occurred; (ii) the injury was attributable to the Respondents’ conduct; and (iii) the injury warrants bringing a proceeding: Limitations Act , s 3(1)(a). [ 78 ] The two-year limitation period is subject to the discoverability principle. The limitation period begins to run “when the identification of the wrongdoer, injury and damages are known to the person desiring to start the action”: 42662871 Investments Ltd v Jomha , 2016 ABCA 120 at para 4 .

Discoverability is not based upon perfect knowledge; the material facts on which the action is based ought to have been discovered by the plaintiff acting with reasonable diligence: De Shazo v Nations Energy Company Ltd. , 2005 ABCA 241 at para 31 .

This is an objective test, where knowledge of the elements that trigger the commencement of a limitation period can be imputed based on what the plaintiff ought to have known, or can be based on actual knowledge: Yugraneft Corp v Rexx Management Corp , 2010 SCC 19 at para 60 . [ 79 ] In determining whether the action was commenced outside the limitation period, it is necessary to decide what material facts the Appellants knew, or ought to have known, by May 19, 2009, two years before the Statement of Claim was issued on May 19, 2011.

If the Respondents establish that the Appellants knew or ought to have known that they had suffered an injury attributable to the Respondents’ conduct that warrants bringing a proceeding on or before May 18, 2009, then the limitation period had expired by the time the action was commenced. Occurrence of the injury (s 3(1)(a)(i)) [ 80 ] The Appellants claim against the Respondents in negligence, breach of contract and breach of fiduciary duty.

They say their specific claims are that the Respondents improperly invested their money in improvident and risky investments, were in a conflict of interest with respect to investments made with the Appellants’ money, and made trades for the purpose of increasing commissions. They argue that the loss of money in an investment account does not, on its own, start the running of the limitation period. The Appellants argue that it was necessary for them to discover the following facts before the limitation period would start to run: (

a) Mr. Bodon’s alleged non-arms-length relationship with Seair; (

b) the alleged “churning” in their accounts; and (

c) that the KYC forms for the various Accounts indicated a tolerance for 100% high risk. [ 81 ] The parties disagree as to when Mr. Rotzang had actual knowledge of these facts. [ 82 ] The Respondents say that none of these facts are material to the determination of when the relevant limitation period starts to run. Their position is two-fold: first, these facts particularizing the Appellants’ claims are not relevant to the identification of when the alleged injury – namely investment losses – occurred; and in any event, Mr.

Rotzang’s actual knowledge is not determinative, as the Court must also consider when the Appellants “ought to have known” of the circumstances surrounding the alleged injury. [ 83 ] It is the Respondents’ position that the limitation period started to run in August 2007, when there was a concern about poor

performance sufficient that the Appellants moved accounts to another professional advisor, Wolverton. Mr.

Rotzang chose to simplyleave the holdings in the Norex account to see if the share price would increase. [84] Section 3(1)(a) “links immunity with the discoverability of the injury, not the discoverability of a cause of action for anyinjury”: Sun Gro Horticulture Canada Ltd v Alberta Metal Building Sales Inc, 2006 ABCA 243 at para 11 [emphasis in original].“Injury” is defined to mean personal injury, property damage, economic loss, non-performance of an obligation, or in the absence of anyof these, the breach of a duty: Limitations Act, s 1(e). [85] The timing as to when Mr.

Rotzang learned of the non-arms-length relationship between Mr. Bodon and Seair, and when Mr.Rotzang says he first saw the KYC forms indicating 100% high risk tolerance are not material to when the Appellants suffered injury.Whether these facts are relevant to the third branch of the test, whether proceedings are warranted, is considered below. When Mr.Rotzang learned about churning is relevant to when the Appellants knew they suffered an injury, or economic loss, due to churning. [86] The Respondents rely on Mr. Rotzang’s questioning transcript in support of their submission that Mr.

Rotzang knew he hadsuffered losses. He testified that he was unhappy with the way the stock was going. Subsequently, in the September 2015 Affidavit, hedeposed that the Ortman Account and the Rotzang Account were closed at the request of Mr. Bodon because they were such smallaccounts. He does not contradict his evidence as to his stated reason on questioning for transferring assets from the Norex Account,reducing its value from approximately $10,000,000 to $1,367,743.16 by August 2007. He also testified about promises Mr.

Bodon madeat that time that the Seair shares would increase in value to $30, and would recover everything that had been lost. They also filed excerptsfrom the transcript of the questioning of Phillip Brendan Murray, who was Vice President of Norex. His evidence was that he wouldprepare monthly spreadsheets setting out the gains and losses in the Norex Account, as well as the commissions paid each month. Mr.Murray would send the spreadsheet every month or two to Mr.

Rotzang. [87] In this case, the “injury” is the economic loss suffered due to a loss of investment principal and due to commissions paid thatresulted from churning in the Accounts. The Appellants knew as of August 2007, when the Ortman Account, Rotzang Account andNorex Account were closed or had significant assets transferred out, that they had suffered a loss of investment principal.

Based on Mr.Rotzang’s evidence about loss of investment principal in the Accounts, and his uncontradicted evidence that he moved significant assetsout of the Norex Account because he was unhappy about the stock performance, I find he knew or ought to have known that an injuryhad occurred as of August 2007. [88] Mr. Rotzang’s evidence is that he did not become concerned about churning until December 2010 to February 2011, when hetook educational courses on investing.

Although he suggests he did not know about the loss of commissions due to churning until thattime, the Appellants should have known about these losses when they moved the Ortman and Rotzang Accounts, and a large portion ofthe Norex Account, to Wolverton. They had information about the account activity, including spreadsheets for each account showingmonthly commissions, among other information. They also had the benefit of the advice of a new advisor, Wolverton, when theAccounts were transferred.

Acting with reasonable diligence, the Appellants ought to have known of their claim for loss of commissionsdue to churning. [89] The Appellants suffered an “injury” as required under section 3(1)(a)(ii) of the Limitations Act in August 2007. The firstbranch of the test as to when the limitation period starts to run is satisfied. This alone is not sufficient to start the running of the limitationperiod at that time; the other two branches of the test set out in section 3(1)(

a) must also be satisfied. Whether the injury is attributable to the conduct of Mr. Bodon and CIBC (s 3(1)(a)(ii)) [90] Given that the Accounts were held at CIBC with Mr. Bodon as the advisor, and as the claim is in negligence, breach ofcontract and breach of fiduciary duty arising out of their management of the Accounts, it is clear that the Appellants knew as of August2007 that the injury was attributable to the conduct of the Respondents. The second branch of the test is also satisfied.

Whether proceedings are warranted (s 3(1)(a)(iii)) [91] The third branch of the test for determining when the limitation period starts to run is when the Appellants knew or ought tohave known that the injury was serious enough to warrant proceedings. [92] In evaluating whether the injury suffered warrants proceeding, a blended objective/subjective analysis is required to determinewhether the extent of the injury in comparison to the economics of prospective action warrants a proceeding: Condominium Plan9421549 v Main Street Developments Ltd, (AB KB), 2004 ABQB 962 [Condo Plan 942] at para 63, rev’d on othergrounds 2006 ABCA 194.

The injury must be sufficiently serious to merit bringing an action; there must be relatively serious harm:Condo Plan 942 at para 65, citing the Law Reform Institute of Alberta Report No 55 at 33. Further, there must be a “concrete sense ofreality to a claim”: Northey-Taylor v Casey, 2007 ABQB 113 at para 80, aff’d 2008 ABCA 149. [93] The Appellants argue although they knew the Accounts were not performing, they did not know they should start aproceeding until 2010. They say the limitation period did not start to run until October or November 2010, as: (

a) the Appellants did not know of Mr. Bodon’s non-arms-length relationship with Seair until October orNovember 2010; (

b) Mr. Rotzang only discovered the possibility of churning from December 2010 to February 2011, and prior tothat, was unaware of the practice of churning; and (

c) Mr. Rotzang only discovered that all the KYC forms for the Accounts indicated a tolerance for 100% riskafter this action was commenced. [94] The Appellants’ actual knowledge is only one aspect of the test for when the limitation period starts to run. As the Court of

Appeal explained in Boyd v Cook , 2013 ABCA 27 at para 28 : The legal test is not whether this plaintiff actually knew the situation warranted suing. It has two branches. The test is whether he knew or whether in the circumstances he ought to have known. The test is largely objective, that of the reasonable person in the same circumstances. We do not see what room that leaves for assessing the credibility of the plaintiff Mr. Boyd, in this case. His actual state of mind in mid-June at best is one alternative arm of the test.

What the reasonable person would have known or discovered with some diligence, could equally start the limitation period running. [emphasis in original] [ 95 ] Assuming that the Appellants required the above information in order to advance its claims in negligence, breach of contract and breach of fiduciary duty, and accepting that they did not have actual knowledge of the information until October or November 2010 at the earliest, the issue is at what point they ought to have known that information. In that regard: (

a) Mr. Rotzang ought to have known that Mr. Bodon had a non-arms-length relationship with Seair. In the September 2015 Affidavit, he stated that in 2008 and 2009, he introduced Mr. Bodon to various people to assist in growing Seair’s business, including in Switzerland. (

b) Mr. Rotzang ought to have known that the Appellants had a claim for churning in 2007 when the Ortman and Rotzang Accounts were closed and a large portion of the Norex Account was transferred to Wolverton. He had account statements listing all the transactions and commissions, as well as spreadsheets from Mr. Murray summarizing the commission amounts. A reasonably diligent person with that information would have inquired of the new advisor about the fees that had been paid. (

c) Mr. Rotzang ought to have reviewed the contents of the KYC forms when they were signed, and maintained a copy for his file. Further, a reasonably diligent person would have inquired about the risk level of the investments when the losses were realized in 2007. [ 96 ] In Johnson v Studley , 2014 ONSC 1732 [ Johnson ], the Ontario Superior Court of Justice considered a limitations argument in an advisor negligence case. The court determined that the limitation period started to run when the plaintiffs suffered a loss as a result of mistaken advice received from an advisor.

In so deciding, Justice Perell reasoned, at paras 74-75: The [plaintiffs] argue that if [the defendant’s] argument about the running of the limitation period was correct, it would lead to the absurd result that any time an individual makes an investment based on an adviser’s recommendation and advice, and the investment fails, the limitation period begins to run when the investor learns that the investment has failed. I, however, see no absurdity.

While it would be absurd for a limitation period to begin to run from the time that mistaken advice was given to the plaintiff, when it is not yet known whether the advice has caused harm, it is not absurd that the limitation period begins to run when the plaintiff discovers that the advice was mistaken and he or she is suffering for having relied on the bad advice. [ 97 ] In Johnson , the primary allegation against the defendant advisor was essentially negligent misrepresentation.

The court held that the plaintiffs knew or ought to have known each of the constituent elements of the cause of action between 2005 and 2007, at the time they suffered the loss, but waited until 2013 to bring an action: at para 77. [ 98 ] Similarly in this case, the Appellants had all the information they needed in August 2007 to evaluate whether their losses warranted bringing an action. The only asset remaining in any of the Accounts after that time was the Seair shares in the Norex Account. As admitted by Mr. Rotzang on his questioning, there was “nothing there to deal with” from August 2007 onwards.

They were taking a “wait and see” approach in the hope that the shares would increase in value. Whether or not that was on advice from Mr. Bodon is not relevant to the determination of the limitation period. A plaintiff cannot wait indefinitely to see if an investment might recover prior to bringing a claim. In essence, that would make an investment advisor into an insurer for his clients’ losses. As the Court of Appeal has noted, an advisor “is not an insurer for all the risks and losses of the client”: S Maclise Enterprises Inc v Union Securities Ltd , 2009 ABCA 424 at para 18 .

I conclude that the third branch of the test is satisfied that the Appellants ought to have known that proceedings were warranted in August 2007. (

f) Did the Master err in dismissing the action summarily? [ 99 ] In the Master’s Decision, Master Farrington concluded that the limitation period expired two years from August 2007, and found there was no evidence of an ongoing advisor relationship between Mr. Bodon and any of the Appellants after August 2007. There was nothing to extend the limitation period. He reasoned that “[h]olding shares in one corporation, in one account, with no ongoing advice relationship, does not extend the limitation period indefinitely”: at para 23. [ 100 ] There is now affidavit evidence before me from Mr.

Rotzang that there was an ongoing advisor relationship until November 2010, which seems to conflict with his evidence on questioning that after August 2007, Mr. Bodon and CIBC were no longer acting as his investment advisors. I also have the additional transcript excerpts from Mr. Rotzang’s questioning that I permitted as evidence.

The Appellants explain this inconsistency with reference to the transcript, and argue there is no conflict in the evidence when the full excerpt is examined. [ 101 ] I have reviewed the evidence relied on by the parties, including where it conflicts, and reached my decision on a different basis than did the Master. In applying the test under section 3(1) (

a) of the Limitations Act , it is irrelevant in my analysis whether there was an ongoing advisor relationship; the relationship is relevant to the merits of the action, which I do not consider on this Appeal. There is no issue that requires viva voce evidence or an assessment of credibility in order to determine when the Appellants were aware of their potential action against the Respondents. [ 102 ] I am satisfied that by August 31, 2007: i. The Appellants knew they had suffered investment losses in their Accounts and ought to have known they had

suffered losses in commissions as a result of churning. The investment losses were quantifiable and the commissions and transactions were known on the dates the Accounts were closed, as follows: • The Second Conna Account – on transferring assets and closing the account on or about April 20, 2004 • The Rotzang Account – on transferring assets and closing the account on or about August 13, 2007 • The Ortman Account – on transferring assets and closing the account on or about August 31, 2007 • The Norex Account – on transferring all assets but shares in Seair in August 2007; ii.

The Appellants knew who the parties were (the Respondents) that may have been responsible for their losses; and iii. The Appellants knew or ought to have known that the injury was serious enough to warrant proceedings. [ 103 ] The limitation period had expired before the Statement of Claim was issued on May 19, 2011. Master Farrington’s decision was correct, although he had a different record and made his decision on a different basis. The claim is statute-barred by the Limitations Act , and, as a result, there is no genuine issue of merit for trial.

Conclusion [ 104 ] The portions of the Rotzang Transcript at Questioning are permitted on the Appeal, as set out in these Reasons. The Amending Application is determined before the Appeal, and the amendments to the Statement of Claim are allowed. The September 2015 Affidavit is permitted as evidence on the Appeal. The Appeal from the Master’s Decision granting

summary judgment is dismissed. [ 105 ] If the parties are unable to agree on costs, they may contact my office within 45 days of the date of this decision to arrange for costs to be spoken to. Heard on the 15 th day of December, 2016. Dated at the City of Calgary, Alberta this 2 nd day of June, 2017. S.L. Hunt McDonald J.C.Q.B.A. Appearances: David W. Johnson and Adam Zelmer, Poole Lawyers for the Plaintiffs/Appellants James J. Heelan, Q.C., Bennett Jones LLP for the Defendants/Respondents