Scott & Associates Engineering Ltd. Plaintiff - v. -, 2017 ABQB 626

Court of Queen’s Bench of Alberta Citation: Scott & Associates Engineering Ltd v Ghost Pine Windfarm, LP, 2017 ABQB 626 Date: 20171017 Docket: 1001 01977 Registry: Calgary Between: Scott & Associates Engineering Ltd. Plaintiff - and - Ghost Pine Windfarm, LP, Fortuna GP, Inc., Fortuna Limited Partner Holding, ULC, Nextera Energy Canada, ULC and Nextera Energy Resources, LLC Defendants _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice C.M.

Jones _______________________________________________________ Introduction [ 1 ] In early 2007, Scott & Associates Engineering Ltd. and Finavera Renewables Inc. worked together on a bid for a wind farm project. Ultimately, Finavera was the successful bidder and developed the project.

Finavera did not include Scott in the final bid, nor did it hire Scott as the engineer for the project. [ 2 ] Scott sued Finavera alleging that Finavera had misused confidential information Scott had provided as part of the joint bid process; misappropriated Scott’s business opportunity; and been unjustly enriched by Scott’s efforts in relation to the purchase of the project. Scott sought a constructive trust over the project and its associated lands. [ 3 ] In 2008, Finavera sold part of the project to Ghost Pine Windfarm LP. Scott then sued Ghost Pine in the current action.

Scott alleges that Ghost Pine made the purchase with full knowledge of Scott’s lawsuit against Finavera, including its allegations that Finavera held the project in trust for Scott. It argues that as a result of this knowledge when making the purchase, Ghost Pine now holds the project and the associated lands for Scott as constructive trustee. [ 4 ] Scott also alleges that Ghost Pine knowingly received confidential information from Finavera and benefitted from this information.

As remedy, it seeks a constructive trust in its favour over Ghost Pine’s interests in the project and associated lands, an accounting of profits or damages in the alternative. [ 5 ] Ghost Pine and the other defendants brought this application for

summary dismissal on the grounds that

section 203 of the Land Titles Act was a bar to Scott’s claims against the lands. Ghost Pine also argued that I should dismiss Scott’s claims for knowing receipt, breach of confidence and unjust enrichment.

[ 6 ] Scott brought a cross-application for costs for the late filing of four of the defendants’ Affidavits of Records and for “thrown away costs” for time spent reviewing materials that Ghost Pine inadvertently disclosed. [ 7 ] The now-completed Finavera litigation has resolved a number of issues in this application. In particular, Justice Martin concluded at trial that Scott had no interest in the lands. This conclusion permits me to dismiss all of Scott’s claims against the lands in this action.

Furthermore, since Martin J. refused to impose a constructive trust as remedy, I must dismiss Scott’s claim for knowing receipt of trust property, as there never was a trust interest. [ 8 ] The only remaining issues are: 1. Should I summarily dismiss Scott’s breach of confidence claim? 2. Should I summarily dismiss Scott’s claim for unjust enrichment? 3. Should I award Scott costs for the late filing of the Affidavits of Records? 4. Should I award “thrown away costs” for the time Mr. Scott spent reviewing the inadvertently disclosed records? [ 9 ] For the reasons that follow, I grant Ghost Pine’s

summary dismissal application and dismiss Scott’s claim in its entirety. I grant Scott’s cross-application in part and award costs of $1,000 for the late filing of one Affidavit of Records and $10,000 in “thrown away costs” to compensate for Mr. Scott’s time reviewing the inadvertently disclosed records. The Finavera Litigation [ 10 ] The Finavera litigation informs many of Scott’s claims in this action. At trial, Justice Martin denied Scott’s claim for breach of contract. She held that any confidential information received by Finavera from Scott in relation to the bid was used for proper purposes.

She also concluded there was no breach of confidence at common law. She further held that Finavera had not improperly taken Scott’s business opportunity. [ 11 ] She concluded, however, that Finavera had been unjustly enriched by Scott’s status and efforts associated with the bid.

She awarded Scott $600,000 for unjust enrichment: Scott & Associates Engineering Ltd. v Finavera Renewables Inc. , 2013 ABQB 273 . [ 12 ] The Court of Appeal affirmed Martin J.’s conclusions and rejected Scott’s claim for constructive trust as a remedy for the unjust enrichment: Scott & Associates Engineering Ltd. v Finavera Renewables Inc. , 2015 ABCA 51 . The Supreme Court of Canada denied Scott’s leave to appeal application on October 29, 2015. This final decision effectively ended any claim by Scott for a constructive trust over the project or its profits.

The Current Applications [ 13 ] The parties appeared before me in 2012 to argue this

summary judgment application before the trial in the Finavera litigation. The parties agreed that the outcome of the Finavera litigation might resolve many of the issues in this application. In fact, Scott noted in its brief that it needed to succeed in the Finavera litigation to succeed in this action. We all agreed to wait for a final determination in the Finavera litigation. [ 14 ] We reconvened in 2015, after the trial and appeal, but before the Supreme Court of Canada had denied Scott’s leave to appeal application. At that time, the parties presented argument on the impact of the changed law of

summary judgment under Hryniak v Mauldin , 2014 SCC 7 . [ 15 ] The passage of time and the results of the Finavera litigation have overtaken the main issues in this application for

summary dismissal. The Supreme Court of Canada’s denial of leave to appeal has rendered it unnecessary to consider the application of

section 203 of the Land Titles Act and the included issue of fraud.

Section 203 operates to protect the priority of a registered interest owner’s title in the face of a challenge by the holder of an unregistered interest that existed at the time title was acquired. The effect of

section 203 can be overcome by evidence of fraud. [ 16 ] Martin J. concluded that Scott had no interest in the lands whatsoever. Without an interest in the lands, the priority of registered versus unregistered interests under

section 203 has no relevance. [ 17 ] I must also dismiss Scott’s claim for knowing receipt. A trust interest is necessary for a knowing receipt claim because the defendant must have knowingly received trust property. Martin J. held Scott had no trust interest in the property, so this claim cannot be made out. 1. Should I Summarily Dismiss Scott’s Breach of Confidence Claim? [ 18 ] This Court can grant

summary dismissal if there is no genuine issue requiring a trial. If the judge can make the necessary findings of fact and apply the law to the facts to come to a fair and just determination, then

summary dismissal is a proportionate, more expeditious and less expensive means to achieve a just result than a trial: Hryniak and Windsor v Canadian Pacific Railway Ltd. , 2014 ABCA 108 . A defendant is entitled to

summary dismissal if it presents uncontroverted facts and law that make it highly unlikely the plaintiff will succeed. [ 19 ] Scott argues that I should not grant

summary dismissal because the 2012 and 2015 hearings dealt only with claims based on

proprietary or trust interests in the lands and the effect of

section 203 of the Land Titles Act on those interests. Scott submits that itsclaims for knowing receipt, breach of confidence and unjust enrichment were not part of Ghost Pine’s application for

summary dismissaland should not be decided at this time. [20] I find that the parties thoroughly addressed these issues at both hearings, even if they did so largely within the framework oftheir

section 203 arguments. In particular, at the second hearing, both parties discussed the requirements for actions in knowing receipt,breach of confidence and unjust enrichment. Ghost Pine, in particular, argued that Scott had not made out the elements of these causes ofaction. I also note that Ghost Pine’s notice of motion seeks “any other relief this Court might deem fit”. In the unique circumstances ofthis case, I find I have the discretion to consider the dismissal of Scott’s entire claim. [21] In the Finavera litigation, Justice Martin dismissed Scott’s claim for breach of confidence.

She found that Finavera properlyused the limited amount of confidential information Scott supplied to acquire the project. Scott did not appeal this finding, nor was itaddressed in its leave application before the Supreme Court of Canada. [22] As explained by Justice Martin in her reasons at para 67, Canadian courts have rejected the view that confidential informationshould be treated as property.

Rather, an action for breach of confidence is rooted in the relationship of confidence rather than the legalcharacteristics of the information confided. [23] Martin J. set out the three elements needed to establish a breach of confidence claim at para 94 of her trial decision: theinformation conveyed must be confidential; the information must have been communicated in confidence; and, the party to whom it wascommunicated must have misused the information to the detriment of the party who confided it. [24] In this case, Ghost Pine acquired the project from Finavera in an arm’s length transaction in which Scott had no involvement.Ghost Pine had no relationship with Scott until Scott sued Ghost Pine in this litigation.

Scott did not convey any confidential informationto Ghost Pine; in fact, Scott did not communicate with Ghost Pine at all. [25] Furthermore, there is no evidence to suggest that Ghost Pine misused any information to Scott’s detriment. Justice Martinconcluded there was no misuse of Scott’s confidential information by Finavera. There is no basis for Scott to argue that Ghost Pine, aparty with whom it had no dealings, misused its confidential information. [26] I dismiss Scott’s breach of confidence claim against Ghost Pine. 2.

Should I Summarily Dismiss Scott’s Claim for Unjust Enrichment? [27] Unjust enrichment requires proof of the following three elements: that there has been an enrichment of the defendant, with acorresponding deprivation of the plaintiff, in the absence of a juristic reason for the enrichment and the deprivation: Pettkus v Becker, (SCC), [1980] 2 SCR 834. [28] Scott alleges that Ghost Pine was unjustly enriched by taking possession of its trust interest in the project and the relatedconfidential information.

Scott says there was no juristic reason for this enrichment and seeks a constructive trust over the project inGhost Pine’s hands. [29] Justice Martin found that Finavera was unjustly enriched, in that it had deprived Scott of the benefit of the project byexcluding Scott from its acquisition and from the engineering contract. Scott’s deprivation occurred as a result of Finavera’s acquisitionof the project.

Martin J’s judgment has remedied this loss by awarding $600,000 in damages for the unjust enrichment. [30] Ghost Pine subsequently entered into a purchase and sale transaction with Finavera that had nothing to do with Scott. GhostPine’s arm’s length transaction, in which it purchased the project from Finavera for value, did not lead to any enrichment of Ghost Pineor to any corresponding deprivation of Scott. There is no basis for Scott’s unjust enrichment claim against Ghost Pine and I dismiss it. 3.

Should I Award Scott Costs for The Late Filing of the Affidavits of Records? [31] Scott argues in an application filed under rule 190 of the old Rules of Court that it should receive double costs on column 5 forthe late filing of each of the defendants’ Affidavits of Records. [32] The defendants should have filed their Affidavits of Records on or before July 5, 2010, but three of the defendants filed onJuly 6, 2010 and Fortuna LP filed approximately ten days later. [33] Counsel for the defendants admits that she misapprehended the filing deadline: she believed it was July 6, as evidenced in herJune 25 letter to Scott’s counsel.

Scott’s counsel did not correct this misapprehension in his reply correspondence; rather, he simplyrequested the affidavits by no later than July 6, to prepare for a meeting on July 7. [34] By contrast, Scott’s counsel was clear and consistent in his refusal to extend the deadline to July 12 for Fortuna LP. On July8, he advised that he would seek costs for the late filing. Notably, he did not mention costs for the now-alleged late filing of the otherthree Affidavits of Records. [35] I find that Scott’s counsel acquiesced to the July 6 filing of the three Affidavits of Records.

Although the defendants’ counselerred in her calculation of the deadline, Scott’s counsel did not bring this error to her attention. Scott’s counsel did not acquiesce,however, to the late filing of Fortuna LP’s Affidavit of Records. [36] Rule 5.12, rather than rule 190, is now the applicable rule (see the transitional provisions in

Part 15). The new rule is lesspunitive than the former rule. It reflects a shift away from the mandatory language of double costs to a more permissive, discretionarydetermination with respect to costs. Failure to comply no longer triggers strict liability, although the new rule does require a party to

explain the circumstances to avoid sanction. [ 37 ] Fortuna LP has explained that its corporate officers were unavailable to swear the Affidavit of Records due to the Canadian and American public holidays in early July. I find this reason insufficient to excuse the late filing. Scott did not acquiesce to the July 12 late filing and Fortuna LP must bear the costs consequences of its lateness. [ 38 ] Scott argues for costs under column 5 because the capital cost of a windfarm is over $160 million, thus above the $1.5 million Column 5 threshold. I reject this argument.

The capital cost of a windfarm is not the proper basis upon which to value Scott’s claim. Scott’s claim is for constructive trust, accounting for profits, or damages, without specifying an amount. I award double costs for item 3(1) as set out in column 1 of

Schedule C for a total of $1,000. 4. Should I Award “Thrown Away Costs” for the Time Mr. Scott Spent Reviewing the Inadvertently Disclosed Records? [ 39 ] Scott also seeks what it describes as “thrown away costs” of more than $25,000. The defendants inadvertently disclosed to Scott materials in the form of discs and documents. When the defendants sought the return of those materials, Mr. Scott destroyed the notes he had made upon reviewing those materials. He claims he later undertook extra work when he received some of the documents back.

In particular, he states he had to redo an engineering analysis of whether Ghost Pine had used confidential information. He estimates he spent 110 hours on this work. Scott calculates the “thrown away costs” at a rate of $222 per hour, plus disbursements and GST. [ 40 ] The defendants submit that Scott should have made his request for these costs in the applications before Justices Nation and Strekaf, which dealt with the inadvertent disclosure. The defendants also argue that Mr. Scott has not provided any records to support his estimate of 110 hours to review the documents.

Similarly absent is any corroborative evidence regarding copying, courier costs and other disbursements. [ 41 ] I accept that Mr. Scott was required to perform additional work arising from the inadvertent disclosure. This additional work created a lost opportunity for Scott, which was the direct result of the defendants’ error. Nonetheless, I do not accept Scott’s assertion that Mr. Scott expended 110 hours of effort to address the recall of information or to recreate his destroyed notes. [ 42 ] I award costs of $10,000 to Scott. Conclusion [ 43 ] I grant Ghost Pine’s application for

summary dismissal and dismiss Scott’s claim in its entirety. [ 44 ] I award costs of $1,000 to Scott for the late filing of Fortuna LP’s Affidavit of Records and a further $10,000 for Scott’s thrown away costs in relation to the inadvertent disclosure. [ 45 ] If the parties cannot agree on the costs of these applications, they shall submit written argument outlining their respective positions within sixty days of the date of this judgment. Heard on the 11 th day of July, 2012 and the 2 nd day of September, 2015. Dated at the City of Calgary, Alberta this 17 th day of October, 2017. C.M. Jones J.C.Q.B.A. Appearances: John E. Fletcher Fletcher Professional Corporation for the Plaintiff

Renee Reichelt, Sarah Louw and Lyndsey Delamont McCarthy Tetrault LLP for the Defendants