Docket: 1603 17846 1237789 Alberta Ltd. Plaintiff - v. -, 2021 ABQB 421

Court of Queen’s Bench of Alberta Citation: 1237789 Alberta Ltd v Ken's Furniture of Leduc Inc, 2021 ABQB 421 Date: 20210531 Docket: 1603 17846; 1603 17877 Registry: Edmonton Between: Docket: 1603 17846 1237789 Alberta Ltd. Plaintiff - and - Ken's Furniture of Leduc Inc, ABC Corporation, Defendant Corporation, XYZ Corporation, John Doe I and John Doe II Defendants And Between: Docket: 1603 17877 Waterworks Plumbing & Heating Ltd and Malories Cakes & Catering Inc Plaintiffs - and - Ken’s Furniture of Leduc Inc, ABC Corp 1, ABC Corp 2, and ABC Corp 3 Defendants _______________________________________________________ Reasons for Decision of

W.S. Schlosser , Master of the Court of Queen's Bench of Alberta _______________________________________________________ [ 1 ] The Plaintiffs seek to add Battle River Plumbing and Heating Ltd (Battle River) as a Defendant. Neither the law nor the facts are in dispute. [ 2 ] The Actions concern a fire that originated at Ken’s Furniture in Camrose in 2014.

The fire spread to the premises of Waterworks Plumbing and Heating Ltd (Waterworks) and Malories Cakes and Catering Ltd (Malories); both tenants in space leased from the numbered company Plaintiff, 1237789 Alberta Ltd (123 Alberta). [ 3 ] The Application engages three issues: 1. Did the Plaintiffs meet an objective standard of due diligence in discovering the identity (and potential involvement) of the proposed added Defendant for the purposes of s 3(1)(a)(ii) of the Limitations Act , RSA 2000, c L-12 ? 2.

Alternately, did the proposed added Defendant receive: ...within the limitation period applicable the added claim plus the time provided by law for service of process, sufficient knowledge of the added claim such that the defendant will not be prejudiced in maintaining a defence to it on the merits... for the purposes of s 6(4)(b); and 3. Is the proposed claim, in any event, hopeless such that the Court should refuse to exercise its discretion in favour of the amendment?

Section 3(1)(a)(ii) of the Limitations Act [ 4 ] A comprehensive and up-to-date review of the law can be found in Mitchell v Pytel , 2021 ABQB 403 at paras 277-279 . [ 5 ] The fire occurred on October 11, 2014. Statements of Claim were issued on October 7, 2016. One was amended on November 2, 2016. [ 6 ] A Cause and Origin Report from Rod Lewis of Precise Fire Investigations Limited was completed within the weeks following the fire.

The report concluded: Although the area of origin was determined to be within the furniture store’s warehouse located in and around the north side unit heater, this investigator could not conclusively determine if the heater was the source of ignition until such time as a detailed examination of the unit heater can be performed....At this time the exact cause for the fire remains undetermined as this investigator could not conclusively eliminate all accidental sources of ignition. [ 7 ] An employee reported that the overhead heater was making a weird “squealing screechy noise” when that employee left work at Ken’s Furniture the day before the fire.

It was particularly unusual that the heater should have been operating at all because it was 20 degrees outside. The timing of activation of the motion sensors and smoke detectors also pointed to the ceiling heater.

No recent work had been done to the electrical, heating or plumbing systems in the building. [ 8 ] There was also a report from the City of Camrose Fire Investigation team which concluded: “...the possible cause of this fire is an overheating condition occurring in the duct venting system of an overhead furnace igniting the 1x6 wood roof lathe material.” [ 9 ] The report went on to describe how this could have been initiated by the overhead furnace.

Nothing (or apparently nothing) was done to follow up these leads. [ 10 ] Statements of Claim were served in July 2017 in the 123 Action and in September 2017 in the Waterworks Action. Statements of Defence were filed in both Actions in November 2017. Ken’s Furniture’s Affidavit of Records was provided in January 2018 in the 123 Action and in April 2018 in the Waterworks Action. [ 11 ] Ron Lewis of Kent Forensic provided a report dated April 4, 2017. This report had privilege waived only very recently.

The examination of the heater was performed with destructive testing, though each step was carefully documented and photographed. The report observes that the heater was old and that is was unlikely that anyone was inside the heater since it was manufactured. Kent Forensic thought that this General Electric heater was at least 27 years old. Essentially, the expert concluded that the lubrication failed on the heater fan bearings. This caused the bearings to run hot. One or more of the two blower fans failed, the exhaust plenum overheated, melting the tar sealing the exhaust vent in the roof. The melted tar lit.

Flaming tar dropped onto boxes and other flammable materials stored directly beneath the heater. Kent Forensic was of the view the that fan motors appeared to be original equipment, that the fan motors had received no recent maintenance and were at or near the end of their working lives. [ 12 ] All three reports identified a prime suspect in terms of source and origin of the fire. [ 13 ] When Ken’s Furniture provided its Affidavit of Records, the Affidavit included six invoices from Battle River Plumbing and Heating indicating that work had been done on furnaces and boilers at their premises.

The latest invoice was about a year before the fire. [ 14 ] I accept that these invoices provide the Plaintiffs with the first actual notice of the potential involvement of Battle River

Plumbing. [ 15 ] The Plaintiff knew from the Affidavits of Records in January and April of 2018, respectively, that the injury might have been attributable to the conduct of Battle River Plumbing. The other two requirements of s 3 of the Limitations Act : that an injury had been suffered and that it warranted bringing a proceeding, were satisfied when the fire occurred. [ 16 ] Actual subjective knowledge is not the end of the matter. The question is when the Plaintiffs ought to have known that the cause of the fire may have been attributable to the conduct of the proposed added Defendant, Battle River.

The objective standard requires proof that an objectively reasonable person in the position of the Plaintiffs ought to have known about the involvement of this proposed Defendant using reasonable diligence. [ 17 ] In McDonnell v Csaki , 2014 ABQB 452 , Poelman J said at para 28: What a plaintiff “ought to have known” also incorporates an expectation of reasonable diligence by the plaintiff or his or her counsel. It will not suffice to wait idly for information to come to hand. Some research and inquiry may be expected of a reasonable plaintiff as part of determining what ought to have been known.

The burden is not high to establish at least a triable issue on due diligence, but it is usually expected that the plaintiff to put forward some evidence of steps taken to ascertain the identity of tortfeasors and give a reasonable explanation for why information was not obtainable with due diligence earlier – and doing nothing for two years after an accident except possibly requesting a police report will not usually amount to due diligence. [ 18 ] The law requires that a litigant take objectively reasonable steps to discover the identity of a potential defendant.

The obligation is engaged somewhere between suspicion and perfect knowledge. The Plaintiffs knew almost from the start that the prime suspect was the ceiling heater in Ken’s Furniture.

No steps were taken to identify either the manufacturer or a service company until the Affidavits of Records were served about three and a half years later. [ 19 ] On the evidence presently before the Court, I am unable to say that the Plaintiffs’ conduct, being entirely reactive in the face of three expert reports identifying the roof heater as the potential cause, discharged any objective standard of diligence to discover the identity and involvement of the proposed added Defendant.

The Plaintiffs apparently did nothing despite the fact that the entire focus of causation was the heater and despite a full battery of claims personnel investigating this fire loss. [ 20 ] The history of this file also exposes the dangers of a relaxed approach to the deadlines in the rules, especially where there is a limitation and the potential responsibility of another party. [ 21 ] The fact that the Contributory Negligence Act , RSA 2000, c C-27 (s 2(2)) and the Tort-Feasors Act , RSA 2000, c T-5 (s 3) meant that there was little incentive for additional parties is irrelevant. [ 22 ] In this case, the claimant/Applicant has not met the burden imposed on it by s 3(5) of the Limitations Act to show that the claim was made in time.

The primary limitation under s 3(1)(a)(ii) has expired. Notice and Prejudice [ 23 ] Ron Streich, Battle River Plumbing’s Officer and Director, swears: 2. I am aware that a fire occurred at premises occupied by Ken’s Furniture of Leduc Inc. (“Ken’s”) on October 11, 2016 [sic] (the “Fire”). 3. At some point shortly after the Fire I was contacted by an insurance adjuster who asked me to provide a statement about services Battle River had provided to Ken’s prior to the Fire. I do not now recall who the adjuster represented.

I was not sure why the adjuster wanted to talk to me about the fire, but I answered her questions. She did not give me a business card and I never heard from her again. 4. The adjuster did not suggest to me that she was assessing whether Battle River might have caused or contributed to the Fire. 5. On May 16, 2018, Battle River received a letter from lntact Insurance Company putting Battle River on notice of its intention to pursue recovery for damages paid to 1237789 Alberta Ltd. arising from the Fire and advising that we should forward this information to our insurer.

A copy of the letter is attached as Exhibit “A” to my Affidavit. … 7. Prior to May 16, 2018, nobody advised me or any of the other Directors or Shareholders of Battle River that anyone, including the ·Plaintiffs, was considering pursuing an action against Battle River in relation to the Fire. [ 24 ] When s 6(4)(

b) of the Limitations Act first received judicial consideration, the emphasis was on notice, or knowledge, of the added claim ( McLaughlin v Broddy , 2006 ABQB 914 , paras 28 , 29). Although the emphasis appears to have shifted somewhat towards prejudice, the test is in two parts: adequacy of notice, and prejudice. If there is no sufficient knowledge for the purposes of this subsection, the issue of prejudice is irrelevant. In other words, the prejudice part of the subsection is not engaged unless the notice requirement is met. [ 25 ] Although Mr.

Streich admits speaking with an unknown adjuster asking for a statement (above paras 3 & 4), this person did not impart any relevant knowledge for the purposes of this subsection. What it does do is to reinforce the idea that at least someone was following up in early days. [ 26 ] The time for notice for the purposes of s 6(4)(

b) of the Limitations Act expired in October 2017. Accordingly, the notice by Intact’s Claim Representative on May 16, 2018 is beyond the time limit stipulated by that subsection.

[ 27 ] Nothing in the evidence shows that Battle River Plumbing should have concluded that they might be involved within that three year window. In these circumstances, the question of prejudice is irrelevant as it is not engaged until the notice requirement is met.

Unlike the circumstances in some of the other cases cited at this Application ( Osunde v Saskatchewan Mutual Insurance Company , 2020 ABQB 177 per Robertson M, at paras 27 and following; Poff v Great Northern Data Supplies (AB) Limited , 2015 ABQB 173 per Schutz (then J)), this is not a situation where the proposed added defendant is already a party in some capacity or is closely related to an existing party. [ 28 ] It is the proposed added Defendant’s burden to show that the requirements of s 6(4)(

b) have not been satisfied (s 6(5)(b)). I am satisfied that this burden has been met. On this basis, it would not be appropriate to add Battle River Plumbing and Heating pursuant to s 6(4) of the Limitations Act . Hopelessness [ 29 ] The well known rule that amendments are generally permitted no matter how late or careless is subject to four exceptions. In Attila Dogan Construction and Installation Co. Inc. v AMEC Americas Limited , 2014 ABCA 74 , the Court of Appeal held: [25] The parties agree that the case management judge correctly set out the test for amending pleadings.

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. Foda at para. 10; Dow Chemical Canada Inc. v Nova Chemicals Corp. , 2010 ABQB 524 at paras. 20-21 , 35 Alta LR (5th) 51, 495 AR 338. ... [27] Several things might make a proposed amendment “hopeless”. That category would include amendments that do not disclose a cause of action. There may be other circumstances where the proposed amendment is so inconsistent with the record that it could fairly be described as “hopeless”.

Here the case management judge used the expression to indicate that the appellant had not even brought forward enough evidence to meet the low evidentiary threshold required to support an amendment. The use of the term “hopeless” in that context is not an error of law. [ 30 ] Usually, amendment applications are made when the record is very incomplete. Here, we have the benefit of a more fulsome record.

Not only do we have production, we have a series of expert reports, including the Kent report, produced by agreement just before this Application. [ 31 ] The Precise Fire Investigation report strongly implicates the ceiling heater. The Camrose fire report does, as well. At the very least, they invite follow-up with respect to this particular potential cause. [ 32 ] If I were to accept all these reports at face value, it is the ceiling heater that is to blame and, as I read the much more complete Kent report, it was a complete lack of maintenance of the ceiling heater that caused the fire.

The Kent report concludes that the ceiling heater was probably never serviced and that lubrication failure, leading to a bearing failure and overheating, was responsible for this fire. [ 33 ] The invoices from Battle River Plumbing and Heating speak of work done on heaters and furnaces at Ken’s Furniture. However, there is no evidence from any source that Battle River Plumbing and Heating ever had anything to do with this heater.

In fact, the entries on the invoices, as brief as they may be, are not consistent with anything the Kent report identifies as the cause of the fire. [ 34 ] I acknowledge that the evidentiary threshold is very low for this type of application. But at this stage, all the record really does is to very probably exonerate Battle River – or at least to demonstrate to the civil standard that there is no apparent connection between anything Battle River Plumbing and Heating did or did not do that caused this fire. [ 35 ] This Application is unusual in that there is a more complete evidentiary record.

The Applicants argue that Battle River Plumbing and Heating should be added so that their records can be disclosed and they can be questioned. However, Battle River Plumbing’s Officer swore an Affidavit (before privilege was waived on the Kent report) and it would have been a simple matter to cross- examine him on this Affidavit. This would either have cast doubt on what the record shows thus far, or confirm that there is no case. All they had to do is ask (or even examine under r 6.8 is there had been no Affidavit).

Instead the Applicants want to bring them in as a full party in the hope that they might fish something out contrary to the present evidentiary record. Disposition [ 36 ] The Applications are dismissed. Costs may be spoken to if they are not agreed.

Heard on the 11 th day of May, 2021. Dated at the City of Edmonton, Alberta this 31st day of May, 2021. W.S. Schlosser M.C.Q.B.A. Appearances: Nicholas A. Clarke Intact Insurance for 1237789 Alberta Ltd. Vaughn Cox Chatwin LLP for Ken’s Furniture of Leduc Inc. (no appearance) Paul W. Kolida Field LLP for Waterworks Plumbing & Heating Ltd. and Malories Cakes & Catering Inc. Vivian R. Stevenson, Q.C. Duncan Craig LLP for Battle River Plumbing and Heating Ltd.