PR Construction Ltd v Colony Management Inc, 2017 ABQB 600

Court of Queen’s Bench of Alberta Citation: PR Construction Ltd v Colony Management Inc, 2017 ABQB 600 Date: 20171006 Docket: 1403 15558 Registry: Edmonton Between: PR Construction Ltd Plaintiff/Defendant by Counterclaim - and - Colony Management Inc. Defendant/Plaintiff by Counterclaim/Third Party Defendant - and - The Guarantee Company of North America, Sinopec Canada Energy Ltd, Canadian Oil Sands Limited, Murphy Oil Company Ltd, Mocal Energy Limited, Nexen Energy ULC, Suncor Energy Inc, Imperial Oil Resources Limited and Canadian Oil Sands Limited Defendants - and - Kevin Lacroix, 0989842 BC Ltd, PR Construction and Paul Ronald Defendants by Counterclaim

_______________________________________________________ Reasons for Judgment of the Honourable Madam Justice D.A. Sulyma _______________________________________________________ I. Introduction [ 1 ] In 2012, Colony Management Inc. (Colony) subcontracted the steel erection portion of a construction project (Mildred Lake) to PR Construction Ltd. (PR). Colony employed Kevin Lacroix, a professional engineer, as project manager. Colony terminated Lacroix’s employment effective December 31, 2013. Lacroix was hired by PR in January 2014.

In the spring of 2014, the relationship between Colony and PR deteriorated and the work stopped. [ 2 ] Colony refused to pay amounts invoiced by PR on the project. PR sued and Colony counterclaimed against PR, its principal Paul Ronald, Lacroix and his company, 0989842. [ 3 ] This is an application by Lacroix and 0989842 to strike portions of Colony’s Counterclaim alleging misconduct on the part of Lacroix. II.

Background [ 4 ] In PR’s Statement of Claim filed on October 24, 2014, it alleges that PR and Colony amended their contract around June 17, 2013 to provide for additional payments for winter work and that Colony purported to unilaterally cancel that change order (Change Order 15) around October 4, 2013. PR rejected Colony’s purported cancellation of the Change Order 15. Colony refused to pay invoices delivered by PR to it including invoices under Change Order 15. PR eventually suspended work under the contract, and Colony allegedly unlawfully repudiated the contract a few days later.

PR accepted the repudiation shortly thereafter. PR claimed that it has a valid builder’s lien for services supplied under the contract against the lands at which the contract was performed. [ 5 ] In Colony’s Statement of Defence, filed on December 22, 2014, it alleges that Change Order 15 for work at higher unit prices never came into effect as the relevant work

schedule contemplating accelerated work was never implemented. Rather, a new

schedule took winter inefficiency factors into account by extending the duration of time allotted for each activity. In the alternative, the contract included an increased unit price that already accounted for any additional work. Colony notes in the Statement of Defence that Lacroix started working for PR shortly after leaving Colony’s employ. Colony further alleges that PR improperly threatened to suspend work, the parties agreed terms in relation to ensure PR would not suspend its work, PR did not abide by those terms and subsequently invoked the dispute resolution process under the contract.

Colony delivered its submission for dispute resolution. PR then advised it would either suspend work or terminate the contract. Colony alleges that PR unlawfully repudiated the contract. Colony also disputes PR’s entitlement to payments on various grounds. [ 6 ] In Colony’s Counterclaim against Lacroix, 0989842, PR and Ronald, also filed on December 22, 2014, it alleges that it relies on confidential information to carry on business and Lacroix had certain obligations as senior project manager and engineer.

Colony claims that Lacroix did various unauthorized acts while employed by Colony which accrued to the benefit of PR, including processing unauthorized change orders. Once employed by PR, Lacroix continued to do work for PR relating to the contract with Colony. Colony alleges that Lacroix accessed confidential information including privileged legal advice provided to Colony in relation to the contractual issues between the parties and deleted confidential information at the time of his departure from Colony.

Other allegations include fraud, bribery, improper solicitation of entities, and conspiracy. [ 7 ] In the Statement of Defence to Counterclaim of PR and Ronald, filed on January 22, 2015, they allege that Ronald was advised in November 2013 that Lacroix’s employment with Colony had been terminated. Ronald contacted Lacroix and entered into negotiations which included discussions about Lacroix possibly receiving a minority ownership interest in PR. In early January 2014, PR hired Lacroix as VP Business Development.

PR and Ronald deny any improper relationship, fraudulent activity or other unlawful activities alleged by Colony. [ 8 ] In Lacroix’ and 0989842’s Statement of Defence to Counterclaim, also filed on January 22, 2015, they allege that the terms of Lacroix’ employment only prevented him from soliciting business from Colony’s current or past accounts until the end of his severance allowance. Either Colony or Lacroix could terminate the employment relationship on 30 days written notice.

They allege that Colony’s various allegations of improper conduct on the part of Lacroix are entirely unfounded. [ 9 ] In PR’s Amended Statement of Claim, filed February 5, 2015, it added a bond claim against Guarantee, and the registered owners of the lands on which the PR was to perform the steel erection for Colony. It also added allegations that Colony has slandered

PR. [ 10 ] In Guarantee’s Statement of Defence, filed March 13, 2015, it denied Colony’s liability to PR and alleged that PR did not give adequate notice of its bond claim. [ 11 ] In Lacroix’ and 0989842’s Statement of Defence to Counterclaim, filed on March 13, 2015, they reiterate the above allegations contained in their Statement of Defence to Counterclaim filed on January 22, 2015. [ 12 ] In Colony’s Amended Statement of Defence to Amended Statement of Claim, filed on March 13, 2015, it alleges that it owes nothing to PR which would trigger liability on the bond.

As well, it alleges that alleged defamatory statements are true, or were not made at all. [ 13 ] In Colony’s Third Party Statement of Defence to Third Party Claim of Lacroix, filed on March 13, 2015, Colony alleges that Lacroix received all payments from Colony to which he was entitled, and denies his allegations of defamation and abuse of process. III. Parties’ Positions A.

Applicants [ 14 ] The Applicants, Lacroix and 0989842 BC Ltd., submit that Colony is essentially trying to sidetrack PR’s claim for payment by advancing scandalous and improper allegations against Lacroix. [ 15 ] The Applicants apply to strike portions of Colony’s Counterclaim on the basis that they do not disclose a cause of action known to law. They argue that the allegations against Lacroix are not particularized; they are illogical and legally incomplete. They submit that the Counterclaim is abusive and vexatious on the central allegation of bribery and corruption.

The Applicants argue that further particulars provided by Colony do not assist it, as they are confusing, rambling and incoherent. [ 16 ] The Applicants also apply to strike the portion of the Counterclaim alleging breach of confidence and copyright on the basis that there is no pleading of a factual basis that would support a cause of action.

Rather the Counterclaim simply sets out the generic framework for those claims. [ 17 ] The Applicants also argue that the facts pled do not support the elements of the claim of interference with economic relations. [ 18 ] The Applicants allege that the examination on the affidavit of David Thompson (principal of Colony) establishes that Colony knowingly advanced false allegations of fraudulent conduct and other wrongdoing against Lacroix knowing that it would damage Lacroix and PR’s reputations in the industry.

The Applicant takes the position that it is apparent that Colony advanced these allegations vindictively to punish him for perceived mistakes during his employment with Colony and to create confusion, expense and delay in PR’s lawsuit for payments under its contract with Colony. [ 19 ] Further, the Applicants take the position that Colony’s Counterclaim is part of a pattern of personalizing litigation. They point to other commercial litigation between Colony and others, some of which has been struck or stayed. B.

Respondent [ 20 ] The Respondent, Colony, submits that the Court should be cautious and only strike claims and pleadings in a clear case. On an application under Rule 3.68(2)(b), the allegations in the pleadings are accepted as proven facts for the purpose of the application. [ 21 ] Among other things, the Respondent points to various communications between Lacroix and PR, Lacroix’ creation of invoices outside of Colony’s accounting system, Lacroix’ wiping of his phone before leaving Colony, and his 45% ownership interest in PR which he obtained for nominal consideration.

The Respondent points to facts in support of the allegations of fraud or bribery. [ 22 ] Colony did concede that it was prepared to amend its Counterclaim to withdraw the allegation of interference with economic relations, taking the position that it did not add to its claims which include fraud and breach of fiduciary duty. [ 23 ] The Respondent provides details of other litigation in which it is involved, including cited by the Applicants. IV.

Law [ 24 ] The Alberta Rules of Court , Alta Reg 124/2010 provide: 3.68(1) If the circumstances warrant and a condition under subrule (2) applies, the Court may order one or more of the following: (

a) that all or any part of a claim or defence be struck out; (

b) that a commencement document or pleading be amended or set aside...

(2) The conditions for the order are one or more of the following: ...(

b) a commencement document ... discloses no reasonable claim...;

(

c) a commencement document or pleading is frivolous, irrelevant or improper; (

d) a commencement document or pleading constitutes an abuse of process...

(3) No evidence may be submitted on an application made on the basis of the condition set out in subrule (2)(b). 1.2(1) The purpose of these rules is to provide a means by which claims can be fairly and justly resolved in or by a court process in atimely and cost-effective way.

(2) In particular, these rules are intended to be used (

a) to identify the real issues in dispute, (

b) to facilitate the quickest means of resolving a claim at the least expense, (

c) to encourage the parties to resolve the claim themselves, by agreement, with or without assistance, as early in the process aspracticable, (

d) to oblige the parties to communicate honestly, openly and in a timely way, and (

e) to provide an effective, efficient and credible system of remedies and sanctions to enforce these rules and orders and judgments. [25] Rule 3.68 is similar to old Rule 129, but must be viewed through the lens of the foundational Rule 1.2: Donaldson v Farrell,2011 ABQB 11, [2011] AJ No 18 at paras 8-10. [26] As well, the Supreme Court in Hryniak v Mauldin, 2014 SCC 7 at para 16, [2014] 1 SCR 87 held that courts must resist thetemptation to send every case to trial, even if some legal analysis is needed to determine if a claim has any reasonable prospect ofsuccess. [27] The onus on an applicant to demonstrate that a pleading should be struck is stringent: Hunt Oil Co of Canada, Inc v GalleonEnergy Inc, 2010 ABQB 212, [2010] AJ No 348 at para 9. [28] On such an application, no evidence is admitted, and the pleaded facts are presumed to be true: R. 3.68(3).

The test forstriking pleadings used to be framed as whether it is plain and obvious that the action is certain to fail because it contains a radical defect.The current test is whether, assuming the facts pleaded are true, there is any reasonable prospect that the claim will succeed, erring onthe side of generosity in permitting novel claims to proceed: Ernst v EnCana Corp, 2014 ABCA 285, [2014] AJ No 975 at paras 14-15,citing R v Imperial Tobacco Canada Limited, 2011 SCC 42 at paras 19-21, [2011] 3 SCR 45.

In determining whether a pleadingdiscloses a cause of action, courts must consider the entire pleading and may look to the underlying litigation context: HOOPP RealtyInc v The Guarantee Company of North America, 2015 ABCA 336 at paras 19-20, 607 AR 377. [29] Material facts in a statement of claim must be taken as true for the purpose of determining whether it discloses a reasonablecause of action. However, this does not require that allegations based on assumptions and speculations be taken as true: OperationDismantle, (SCC), [1985] 1 SCR 441, [1985] SCJ No 22 at para 27.

Allegations that are not assumed to be true includethose based purely on assumptions and speculation and those that are incapable of proof: McGregor v Holyrood Manor, 2014 BCSC679, [2014] BCJ No 698 at para 10, Honborg v Private Career Training Institutions Agency, 2015 BCSC 695, [2015] BCJ No 858,Young v Borzoni, 2007 BCCA 16, [2007] BCJ No 105 at para 34. [30] The claimant must clearly plead all material facts that are essential components of a cause of action.

If a material fact isomitted, a cause of action is not effectively pleaded: Willow v Chong, 2013 BCSC 1083, [2013] BCJ No 1310 at para 22, Young at para20.

A bald legal allegation that a wrong has been committed, without the pleading of a factual basis, does not disclose a cause of action,and should be struck under Rule 3.68(2)(b); simply pleading duties and breaches of duties without specifying the facts giving rise to theduties and breaches is not the same as pleading a cause of action: Wong v Leung, 2011 ABQB 687, [2013] BCJ No 1310 at para 20. [31] The phrase “abuse of process” is closely connected with the ideas of “vexatious” or “oppressive” litigation, whichcontemplates that in commencing or maintaining a legal proceeding, the process of the Court is being misused or is being used for animproper purpose, as opposed to an action being brought or maintained for the assertion of legitimate rights.

The past litigation conductof a litigant is material context for a determination of whether current litigation has been commenced for an improper purpose: DelBianco v 935074 Alberta Ltd, 2007 ABQB 150, [2013] BCJ No 1310 at paras 34, 39 and 40, Dixon v Canada (Attorney General), 2015ABQB 565, [2015] AJ No 990 at paras 16-24. V. Issue [32] The Court must consider the following issues: A. Assuming the facts pleaded are true, is there any reasonable prospect that Colony’s claims against Lacroix and 0989842 willsucceed? B.

Are the pleadings in question frivolous, irrelevant or improper or do they constitute an abuse of process? VI. Analysis

A. Assuming the facts pleaded are true, is there any reasonable prospect that Colony's claims against Lacroix and 0989842 will succeed? [ 33 ] The Applicants claim under Rule 3.68(1)(2)(

b) that certain pleadings in the Counterclaim do not amount to reasonable claims against them. As Colony has conceded that it is prepared to withdraw the allegation of interference with economic relations, I will not address that allegation. 1. Breach of confidence/copyright (paras 8-10, 37-41, 45(a)-(c), 49, 50, 51(b)-(d), (h)-(i)) [ 34 ] The Applicants assert that Colony does not allege any specific acts that could constitute a breach of confidence or breach of copyright, nor is any damage alleged to have been caused other than the boilerplate allegation of loss and damage at the end of the Counterclaim.

The Applicants submit that Colony has not pled material facts to show that: the information conveyed was confidential, it was conveyed in confidence, and it was misused by Lacroix to the detriment of Colony. [ 35 ] Colony alleges in the Counterclaim that Lacroix provided confidential information to PR, including privileged legal advice relating to the winter work, deleted confidential information in Colony’s records, and unlawfully converted certain confidential information for the use of Lacroix, PR and Ronald. [ 36 ] The Applicants refer to isolated paragraphs in the Counterclaim.

However, the pleadings in question must be viewed in context. The essence of Colony’s claim is that Lacroix occupied a key senior and trusted position in Colony, exercised considerable autonomy, was privy to confidential information, and had certain duties in relation to that confidential information which he breached.

Colony’s broader allegation is that Lacroix, while employed by Colony, acted for the benefit of PR and to the detriment of Colony, through the unauthorized sharing of information and commission of certain acts, and that he continued to act to Colony’s detriment after leaving Colony and taking employment with PR, for example through improper solicitation of Colony’s employees and business contacts in competition with Colony. [ 37 ] Again, the facts pleaded must be presumed to be true for the purposes of Rule 3.68(1)(2)(b).

I find that the Applicants have not established that there is no reasonable prospect that this claim will succeed. 2. Improper solicitation and unfair competition (paras 42-43, 45(f), 50 and 51(

f) and (i)) [ 38 ] The Applicants submit that certain pleadings do not amount to an allegation of wrongful conduct of any kind. Again, the pleadings in question must be viewed in context. These pleadings are arguably part of the broader allegation that Lacroix breached his fiduciary duties by dealing improperly with confidential information and soliciting Colony’s employees and business contacts in competition with Colony. I have found that the Applicants have not established that there is no reasonable prospect that the breach of confidence claim will succeed. 3. Theft of bolts ( paras 44, 45(

g) and 51(g)) [ 39 ] The Applicants submit that nowhere does Colony allege that Lacroix had any specific involvement with taking structural bolts or engaging, cooperating or assisting in the theft of materials. [ 40 ] Colony alleges in the Counterclaim that it discovered a crate of its bolts on March 13, 2014 on a PR vehicle marked for delivery to PR offices or Ronald’s house. Further, Colony paid approximately $40,000 to replace structural bolts allegedly misplaced by PR during the course of the project.

Colony alleges that Lacroix engaged, cooperated or assisted in the materials theft. [ 41 ] A bald allegation that a wrong has been committed, without the pleading of a factual basis, does not disclose a cause of action. Even assuming the facts pled to be true, the Applicants have established that there is no reasonable prospect that this claim will succeed as the facts alleged in the pleadings are bald allegations which do not link Lacroix or 0989842 to the theft of any bolts.

In particular, the allegations do not speak to various elements of theft: identity, taking, taking fraudulently and without colour of right, and intention to deprive the owner. 4. Collaborating and conspiring in advancing claims against Colony (para 51(l) [ 42 ] In my view, this is simply another aspect of Colony’s claim that Lacroix acted for the benefit of PR and to the detriment of Colony in breach of his duties to Colony. 5.

Alleged overpayments by Colony (paras 52, 53) [ 43 ] In paragraphs 52 and 53, Colony alleges that it made payments to PR prior to knowledge of the unlawful acts, in amounts higher than contemplated or permitted by the contract.

As a result, Colony was required to perform the remaining work to complete the project or retain others to do so on its behalf. [ 44 ] The Applicants submit that Colony would have incurred the expense of completing the work whether PR completed it or otherwise and therefore the expense is not a loss. [ 45 ] Elsewhere in the Counterclaim, Colony alleges that Lacroix made unauthorized changes affecting the contract price. Further, all of the pleadings as a whole describe a situation in which some time elapsed as Colony and PR’s relationship unravelled.

The Applicants essentially ask the Court to infer that Colony could not have suffered a loss in the circumstances beyond the anticipated expense of completing the contract. The Court declines to do so.

[46] The Applicants argue that no foreseeability is pleaded between Lacroix’ alleged misconduct and PR’s cessation of work.However, Colony alleges in paragraphs 54 and 55 that the defendants by Counterclaim conspired, or knew, or ought to have known thatthe injuries to Colony were likely to result from the commission of the unlawful acts. 6.

Unjust enrichment and constructive trust (paras 56-59) [47] The Applicants submit that the allegations in paragraphs 56-57 amount to an assertion that where a company has received anunjust enrichment, its shareholders are liable as a result in the increase in value of their shareholdings in PR. There is no allegation thatthe Applicants are controlling minds of PR.

Consequently, paragraph 57 should be struck and paragraph 56 amended so as to exclude theApplicants. [48] The Applicants also argue that a constructive trust cannot arise in relation to a purely monetary claim without identifyingreferential property, citing Pro-Sys Consultants Ltd v Microsoft Corporation, 2013 SCC 57 at paras 90-92, [2013] 3 SCR 477. I agreethat paragraph 59 is not viable and should be struck. B. Are the pleadings in question frivolous, irrelevant or improper or do theyconstitute an abuse of process? [49] The Applicants claim under Rule 3.68(2)(

c) and (

d) that certain pleadings are frivolous, irrelevant and improper, and that theyconstitute an abuse of process. 1. Pattern of abusive or vexatious litigation [50] The Applicants cite other litigation in which Colony is involved. Colony is actively engaged in an area of business whichnecessarily involves many entities playing various roles in relation to significant contracts. Therefore, it is not surprising to learn that it isinvolved in commercial litigation from time to time. Counsel for the Respondent provided some context for the litigation referred to bythe Applicants, as well as other cases.

In my view, the litigation referred to by the parties does not give rise to an inference that theRespondent is in the habit of engaging in litigation for an improper purpose. 2.

Allegations against Lacroix (paras 22-26, 28, 45(a), (e), 47-48, 49(a)(ii), (iii), (iv), (v), (vi), (b), (d), (f),(g), (j), (k), (l), (p), (o), , 51(a)-(b), (e), (j)-(k)) [51] The Applicants submit that Colony’s allegations of fraud were advanced without particulars required by Rules 13.6 and 13.7,and subsequent particulars simply highlight the frivolous and vexatious nature of the allegations. [52] David Thompson, the principal of Colony, and Lacroix swore affidavits in relation to these applications. They were bothexamined on those affidavits. [53] This is not a

summary judgment application. Pleadings may be struck under s. 3.68(

c) or (

d) when, for example, they arestatute-barred, res judicata, outside of a court’s jurisdiction or brought for a collateral purpose. A factually unfounded claim can bestruck out under Rule 3.68, although the Court of Appeal has held that a litigant should probably simply apply for

summary judgment insuch cases: German v Major, 1985 ABCA 176 at paras 7-8, 62 AR 2.

The Court in German referred to cases in which pleadings werestruck as the allegations constituted mere conjecture or were virtually impossible to prove. [54] There is some evidence before the Court on this application that: Thompson expressed concerns to Lacroix about unapprovedchange orders that unduly favoured PR, Lacroix processed some change orders outside Colony’s accounting system including ChangeOrder 15, Lacroix wanted those change orders to look like change orders produced in the accounting system, Lacroix contacted PRregarding legal advice received by Colony, Lacroix wiped his Colony iPhone clean within a week before leaving Colony, and Lacroixtook his electronic devices with him when he left Colony including all information regarding winter work, Colony spreadsheets andcalculations and Colony presentations to Kiewit. [55] The Applicants point to evidence from which the Court might draw inferences and conclusions.

In my view, it would beinappropriate for the Court to weigh any of the evidence on this application, whether conflicting or not. Weak evidence is not a ground tostrike pleadings: McTaggart v R (1991) (ON SC), 6 OR (3d) 456, [1991] OJ No 2242 at para 9.

Indeed, the fact thatthere is conflicting evidence on numerous points raised by the Applicants supports the conclusion that they have not established that thepleadings are abusive. [56] The Applicants theorize that Colony is tossing out a red herring as a diversion from the claim by PR against it for payment.However, far from raising a side issue, Lacroix’ conduct as alleged in the Counterclaim is clearly central to Colony’s primary defence toPR’s claim. I find that the impugned pleadings in the Counterclaim are not abusive. VII Conclusion [57] Paragraphs 45(g), 51(g), 57 and 59 are struck.

Paragraph 56 shall be amended to exclude reference to the Applicants. [58] The application to strike pleadings is otherwise dismissed. VIII Costs

[ 59 ] If the parties are unable to agree on costs, they may speak to them within 30 days of the date of this decision. Heard on the 26 th day of May, 2016 . Dated at the City of Edmonton, Alberta this 6 th day of October, 2017. D.A. Sulyma J.C.Q.B.A. Appearances: Daniel Cowper Robert Fleming for the Applicant Kevin Lacroix and 0989842 BC Ltd G. James Thorlakson and Aiyaz A Alibhai Miller Thomson LLP for the Defendant, Colony Management Inc.