Club Industrial Trailers, 2021 ABQB 480

Court of Queen’s Bench of Alberta Citation: Club Industrial Trailers

(2012) Ltd v Paramount Structures Inc 2021 ABQB 480 Date: 20210622 Docket: 1513 00120 Registry: Ft. McMurray Between: Club Industrial Trailers

(2012) Ltd Plaintiff - and - Paramount Structures Inc and Nova Chemicals Corporation Defendants _______________________________________________________ Memorandum of Decision of Brian W. Summers, Master in Chambers _______________________________________________________ Introduction [ 1 ] This Memorandum of Decision is with respect to the application of the Defendant Paramount Structures Inc (“Paramount”) to amend its Statement of Defense and to add a Counterclaim (“ASOD” and “CC”). [ 2 ] Paramount’s application was brought in Special Chambers. That application was to be immediately followed by the application of the Plaintiff Club Industrial Trailers

(2012) Ltd (“Club”) for

summary judgment. Unfortunately, time did not permit for

argument on Club’s application. Consequently, Club’s application for

summary judgment was adjourned, to be heard by me at a later date. [ 3 ] The Defendant Nova Chemicals Corporation (“Nova”) took no

part in the proceeding. Facts [ 4 ] Paramount had a contract with Nova to provide a six-unit blast resistant modular complex (the “Complex”). [ 5 ] Paramount retained Innovate Building Systems Inc (“Innovate”) to assemble and complete the interior and internal components of the Complex. Innovate completed one component of the Complex before becoming insolvent. [ 6 ] In early July of 2014, Paramount retained Club to complete assembly of the Complex (“Assembly Work”).

The Assembly Work was completed and Club’s invoice was paid by Paramount. [ 7 ] Meanwhile, Paramount issued a Request for Proposal (“RFP”) to Club for work on its blast resistant modular complexes, generally. Club submitted a proposal that was accepted by Paramount and Club was awarded the “Master Services Agreement Contract” (“MSA”).

Although the MSA was apparently not signed until November of 2014, there is no dispute between the parties that the MSA governed their contractual relationship (except with respect to the Assembly Work done under a separate RFP) and it was effective as of July 1, 2014. [ 8 ] The MSA set out the rates for labour and materials that Club was to charge to Paramount for the various projects that Club would work on for Paramount. [ 9 ] Three other provisions of the MSA relevant to this application are: that Paramount would not subcontract any work without Paramount’s prior written approval; changes or extra work needed to be approved by Paramount in writing; and Club was required to remit invoices at the beginning of each month for the work in the preceding month. [ 10 ] Importantly, the MSA also provided: This Agreement supersedes and terminates all other agreements as between the PARTIES and represents the entire agreement between the Parties and there are no covenants, representations, warranties, conditions or agreements, express or implied, collateral or otherwise forming part of or relating to this Agreement except as expressly set out in this Agreement. (hereinafter called the “Exclusionary Clause”) [ 11 ] Club performed work on the Complex (and other work for Paramount).

Club issued invoices to Paramount, but not within the time frames specified under the MSA. [ 12 ] Paramount paid some invoices, but not all of them. It is essentially the last three invoices with respect to work on the Complex that have not been paid. The Litigation [ 13 ] In March of 2015 Club commenced this action seeking to recover the sum of $428,907.39 from Paramount.

Club also sought validation of a builder’s lien in a slightly lesser amount. [ 14 ] Paramount filed a Statement of Defense on May 25, 2015. [ 15 ] Approximately one year after Paramount filed its Statement of Defense, Club filed an application for

summary judgment. That application was adjourned to allow for questioning on affidavits. [ 16 ] Many steps were taken over the course of a number of years. In pursuing this litigation, Club had to make applications to have Paramount: (

a) answer undertakings on questioning on affidavit;(

b) provide Paramount’s Affidavit of Records; (

c) set dates for questioning on discovery and to impose a litigation plan; (

d) compel answers to undertakings given on discovery; and (

e) obtain a procedural order for all steps leading to Club’s

summary judgment application (a second one which was filed October 15, 2020) including an order that if Paramount did not provide its Reply Affidavit by a specific date, its Statement of Defense would be struck. This Application [ 17 ] Paramount filed its application to amend its Statement of Defense and to add a Counterclaim on March 18, 2021, nearly six years after it filed its Statement of Defense.

The supporting evidence for this application was primarily found in an Affidavit of Paramount’s principal, Jason Burroughs filed on March 18, 2021 (“Burroughs’ March 2021 Affidavit”). [ 18 ] The original Statement of Defense was ten paragraphs and fairly simple. The draft ASOD, including the CC, is 66 paragraphs and adds many new defenses and claims not previously pled. [ 19 ] Counsel for Paramount stresses that he was just retained in February of this year and he advised counsel for Club immediately of his intention to make this application.

The Applicable Law [ 20 ] Paramount’s application is made pursuant to Rules 3.62 and 3.65. [ 21 ] Paramount asserts the following principles: (

a) an amendment should be allowed, no matter how careless or late, unless there is prejudice to the other side, and even that is no obstacle if it is repaired; (

b) a court should exercise its discretion and allow a party to amend unless there is a compelling reason not to allow the proposed amendment; (

c) that there is a presumption in favour of allowing amendments; (

d) there is no deadline for amending; (

e) while some evidence is needed to amend after the close of pleadings, the evidentiary threshold is low; and (

f) unless one of the following four exceptions apply, an amendment should be allowed: (

i) the amendment would cause serious prejudice to the opposing party, not compensable in costs; (ii) the amendment requested is hopeless (that is, if the amendment were in the original pleadings, would have been struck); (iii) unless permitted by statute, the amendment seeks to add a new party or a new cause of action after the expiry of a limitation period; and (iv) there is an element of bad faith associated with the failure to plead the amendment in the first instance. (

g) The legal tests to add a counterclaim are the same as to amend a statement of defense. [ 22 ] Authorities cited by counsel for Paramount for these propositions include the following: Balm v 3512061 Canada Ltd, 2003 ABCA 98 ; AARC Society v Canadian Broadcasting Corporation, 2019 ABCA 125 ; Dow Chemical Canada Inc v Nova Chemicals Corp, 2010 ABQB 524 ; Attila Dogan Construction & Installation Co v AMEC Americas Limited, 2014 ABCA 74 and Crystal Ridge Fuels Limited v McIntosh, 2013 ABQB 618 . [ 23 ] Paramount set out its proposed amendments in categories or topics.

Club responded with respect to those categories or topics. I will use the same categories or topics used by the parties. Amendment that Club represented that it would complete the work within a budget (“Budget Amendments”) [ 24 ] Paramount seeks to amend its Statement of Defense to assert that Club verbally agreed and represented that it would complete its work on the Complex within a budget of $200,000. Evidence in support of the Budget Amendments is found in Burroughs’ March 2021 Affidavit (and earlier evidence provided by Mr. Burroughs).

The Burroughs’ March 2021 Affidavit states (at paragraphs 13-15) that Club verbally agreed and represented that Club’s work would be completed within a budget of $200,000 and would provide written confirmation of that (but failed to do so). [ 25 ] This assertion must be contrasted with what was originally pled in Paramount’s Statement of Defense—that Club would provide a budget and failed to do so. [ 26 ] Counsel for Paramount says that Mr. Burroughs’ evidence on this point is not new and in fact was first given back in 2016.

He implies, if not expressly asserts that the failure to plead this defense was the fault of Paramount’s previous counsel and Paramount should not be penalized by the failing of its previous counsel. However, there is no evidence that Paramount’s previous counsel refused to follow Paramount’s instructions, or that he was not competent. [ 27 ] The authorities state that the evidentiary threshold for an amendment is low. However, there is an evidentiary threshold that must be met. [ 28 ] In my view, the evidentiary threshold is not the same in every case.

The evidentiary threshold must be considered in the context of the nature of the amendment and in the context of other evidence before the Court. [ 29 ] In this case, the amendment sought is a 180 degree change to Paramount’s position. The original pleading asserted that Club did not provide a budget. This new pleading asserts that Club did agree to a budget. [ 30 ] The only evidence in support of the new position is Mr. Burroughs’ statement or allegation. There is not so much as one document that supports Mr. Burroughs’ statement. [ 31 ] Paramount is also faced with the Exclusionary Clause in the MSA.

That clause is intended to prevent the exact thing that Paramount is trying to do in this case—alter a written contract by an alleged verbal statement. I note that the MSA is Paramount’s own contract.

[ 32 ] The Budget Amendment is completely contrary to what the MSA states: that Club will be paid on a labour and materials basis. [ 33 ] Furthermore, the evidence given by Paramount’s then CFO, Jim Pendergast, was that there was no budget. This was in accord with the evidence given by the Club witness Michael Crawford. [ 34 ] It seems to me that Mr. Burroughs’ sworn assertion that there was a budget is one of those “bald assertions” that stands on its own without support. [ 35 ] In my view, Paramount has not met the evidentiary threshold in this case to authorize the Budget Amendment.

In reaching this conclusion, I am not weighing evidence or making any finding of credibility. All I am determining is that the evidentiary threshold required in these particular circumstances has not been met. [ 36 ] Although I do not have to consider the four exceptions to when an amendment should be allowed with respect to the Budget Amendment, I do want to make a comment regarding the bad faith exception.

Counsel for Club strongly asserts that Paramount has acted in bad faith in this eleventh hour pleading and in conduct of the litigation as a whole. [ 37 ] I agree with counsel for Club, that the issue as to whether a party is acting in bad faith need not be considered solely with respect to a singular act, but should be considered in the context of the party’s conduct throughout the entire action. [ 38 ] The history to this litigation shows that Club has had to make a number of applications to get Paramount to respond.

The litigation even reached the point where the presiding Master gave an order that if Paramount did not provide its evidence by a certain date, that Paramount’s defense would be struck. In considering whether there is an element of bad faith with respect to the amendments sought, I will be considering the conduct of Paramount throughout this litigation. [ 39 ] I find that Paramount seeking the Budget Amendments at this eleventh hour, as it has, is not done in good faith. This amendment is fundamentally different than the pleading as it stood for six years.

It is contrary to the evidence of Paramount’s CFO Jim Pendergast and contravenes the Exclusionary Clause in the MSA. There is no evidence to support the “bald assertion” of Jason Burroughs. I find that Paramount’s change of counsel at the eleventh hour does not create good faith where it is lacking on the part of Paramount. Amendment that Club would complete its work by a certain date (“Completion Date Amendment”) [ 40 ] The original Statement of Defense specifically alleges (in paragraph 2) that Club would complete its work by the end of August, 2014.

Although the Completion Date Amendment now alleges the date was the middle of August, 2014, it is otherwise the same allegation as previously made. [ 41 ] I am cognizant that the allegation regarding a completion date may have to be considered in the context of the Exclusionary Clause in the MSA.

However, in this case, I allow this amendment to be made as it was essentially pleaded previously, it does not specifically run contrary to a contractual term in the MSA and there is sufficient evidence to meet the low threshold for that amendment to be made. [ 42 ] I note that Club puts forward significant evidence as to delays attributable to Paramount and Nova, but that will have to be considered in the context of the

summary judgment application.

Amendment that Club’s outstanding invoices are improper or invalid (“Disputed Invoices Amendment”) [ 43 ] In the original Statement of Defense (at paragraph 7) Paramount “denies that the materials, labour and services were provided in the amounts alleged and further denies receiving any benefit in the amounts alleged over the $108,000 plus GST that it authorized...”. [ 44 ] Paragraphs 18 and 19 of the ASOD provides particulars of its dispute with respect to Club’s outstanding invoices including that: changes and extras were not authorized in accordance with the MSA; the invoices include amounts for subcontractors not authorized by Paramount in accordance with MSA; the amounts claimed are excessive and not supported by the required documents; charges not authorized under the MSA were included; duplication in the invoices; excessive material waste; charging full rates for training Club workers; failing to invoice on time in accordance with the MSA; and by exceeding the budget agreed to by Club. [ 45 ] All of the Disputed Invoices Amendments are allowed except for the allegation with respect to the Budget Price in subparagraph 19(f).

These amendments that I am allowing merely provide particulars of paragraph 7 of the original pleading and recite clauses found within the MSA which agreement was pled by both parties. Allegations that Paramount overpaid Club invoice 1312 (“Overpayment Amendment” or “Overpayment Claim”) [ 46 ] Club issued invoice 1312 in the amount of $43,103.59 plus GST for the Assembly Work. Paramount paid the invoice.

Paramount now asserts that the invoice was excessive, it was paid by Paramount’s accounting department without analyzing the validity of the invoice and the invoice should have been no more than $10,740 plus GST and it is entitled to setoff the sum of $32,366.59 against any liability to Club.

[ 47 ] This is a completely new allegation on the part of Paramount. It is pled in the ASOD and CC. The first evidence given with respect to the Overpayment Amendment is Mr. Burroughs’ evidence in cross examination on February 23, 2021. There is no mention of this claim by Mr. Burroughs in either of his two earlier affidavits, respectively filed September 13, 2016 and January 14, 2021. [ 48 ] It is Club’s position that the Overpayment Claim is limitation barred as the two year limitation period prescribed by

section 3 of the Limitations Act expired long ago. [ 49 ] Paramount first contends that to the extent that the Overpayment Claim is one of setoff in the ASOD, the limitation period in

section 3 of the Limitations Act has no application. I do not accept that submission. In order for Paramount to have the right of setoff, Club must have a liability to Paramount. Unless Paramount is able to establish its claim against Club, there is no right of setoff. [ 50 ] Alternatively, Paramount contends that the Overpayment Claim is saved by

section 6 of the Limitations Act. The relevant parts of that

section are as follows: Claims added to a proceeding 6(1) Notwithstanding the expiration of the relevant limitation period, when a claim is added to a proceeding previously commenced, either through a new pleading or an amendment to pleadings, the defendant is not entitled to immunity from liability in respect of the added claim if the requirements of subsection (2), (3) or (4) are satisfied.

(2) When the added claim (

a) is made by a defendant in the proceeding against a claimant in the proceeding, or (

b) does not add or substitute a claimant or a defendant, or change the capacity in which a claimant sues or a defendant is sued, the added claim must be related to the conduct, transaction or events described in the original pleading in the proceeding.

(3) When the added claim adds or substitutes a claimant, or changes the capacity in which a claimant sues, (

a) the added claim must be related to the conduct, transaction or events described in the original pleading in the proceeding, (

b) the defendant must have received, within the limitation period applicable to the added claim plus the time provided by law for the service of process, sufficient knowledge of the added claim that the defendant will not be prejudiced in maintaining a defence to it on the merits, and (

c) the court must be satisfied that the added claim is necessary or desirable to ensure the effective enforcement of the claims originally asserted or intended to be asserted in the proceeding.

(4) When the added claim adds or substitutes a defendant, or changes the capacity in which a defendant is sued, (

a) the added claim must be related to the conduct, transaction or events described in the original pleading in the proceeding, and (

b) the defendant must have received, within the limitation period applicable to the added claim plus the time provided by law for the service of process, sufficient knowledge of the added claim that the defendant will not be prejudiced in maintaining a defence to it on the merits.

(5) Under this section, (

a) the claimant has the burden of proving (

i) that the added claim is related to the conduct, transaction or events described in the original pleading in the proceeding, and (ii) that the requirement of subsection (3)(c), if in issue, has been satisfied, and (

b) the defendant has the burden of proving that the requirement of subsection (3)(

b) or (4)(b), if in issue, was not satisfied. [ 51 ] In respect of this argument by Paramount, I must consider whether Paramount has proven that its Overpayment Claim is related to the conduct, transaction or events described in Club’s Amended Statement of Claim. [ 52 ] At first blush, there is a connection in that it is all work done by Club with respect to the Complex. However, Club notes that there is a separate RFP for the Assembly Work. The Assembly Work was not done under or pursuant to the MSA. Club was retained to do the interior work on the Complex completely independent of its prior Assembly Work.

Simply, they are separate and distinct contracts with their own terms. [ 53 ] I also find it troubling that Paramount first raised this allegation in the Burroughs cross examination held in February of 2021. It took Paramount six years to discover this claim? [ 54 ] The evidence in support of the Overpayment Claim is made by way of a calculation, based upon assembly of another modular complex (which may not be a fair comparison at all). It also rests upon Mr.

Burroughs alleging that Paramount’s employee Kimmie Nguyen who reviewed the Club invoice, only did so for the purpose of ensuring there was no double counting and proper paperwork was provided. He also alleges that the CFO Jim Prendergast made the mistake in authorizing the payment of the invoice. However, there is

no evidence of Paramount ever raising a complaint with Club of overpayment on this invoice. [ 55 ] In my view the Overpayment Amendment is both limitation barred and was not brought forward in good faith. The request to make that amendment is denied. Allegations that Club delayed completion and Paramount suffered damages estimated to be $42,660 (“Delay Amendments” or “Delay Claim”) [ 56 ] The Delay Amendments are found in both the ASOD and the CC. [ 57 ] As noted above, the original Statement of Defense did allege that Club represented it would complete its work by the end of August 2014.

However, there was no prior pleading as to why that date was not met. Nor was there any suggestion that Paramount suffered damages as a result. [ 58 ] The evidence offered in the Burroughs’ March 2021 Affidavit to support the Delay Claim is as follows: 27. As set out in the January 2021 Affidavit, Club was to commence the Club Work in July 2014, and complete the Club Work in the middle of August 2014. Club did commence the Club Work in July, 2014, but did not complete the Club Work until September 23, 2014. As such, there was a delay in completion of the Club Work of approximately 39 days (the “Delay”). 28.

I believe that the Delay was caused solely by the actions of Club, as Club had: (

a) Insufficient manpower to complete the Club Work in accordance with the

schedule and in a timely manner; (

b) A lack of requisite knowledge, skill, and experience to complete the Club Work in accordance with the

schedule and in a timely manner; (

c) A lack of urgency in completing the Club Work in accordance with the

schedule and in a timely manner; and (

d) Failed to implement the appropriate and required planning, organization, and sequencing in respect of the Club Work. 29.

As a result of the Delay in completion of the Club Work caused by Club, Paramount suffered losses or damages estimated to be in the amount of $42,660.00. [ 59 ] To say the least, this evidence seems to be self serving statements of opinion and conclusion. [ 60 ] Both the ASOD (at paragraphs 25-27) and CC (at paragraphs 8-10) repeat these statements almost completely verbatim. [ 61 ] Club provides a significant amount of evidence as to why it was not responsible for the delay that did occur with respect to its work on the Complex.

It also notes that paragraph 34 of the MSA provides for the steps to be taken by Paramount if Club was not executing the contract at the rate required. No such steps were taken by Paramount. [ 62 ] Club also asserts that there is no evidence provided by Paramount as to its damage claim with respect to the Delay Claim. [ 63 ] Although I view Paramount’s evidence on the Delay Amendment to be low, I am prepared to allow part of the Delay Amendment, in the ASOD, to be made. That part allowed is paragraphs 25 and 26.

I see those paragraphs as particulars of the delay, first referenced in the original Statement of Defense. However, I will not authorize that part of the Delay Amendment that claims damages of $42,660.00 (paragraphs 27 and 28 of the ASOD). Nor will I allow the Delay Amendment in so far as it appears in the CC. I will not authorize these amendments for three reasons: (1) there is a lack of evidence to support the damage claim; (2) raising this claim for the first time in March of 2021 as Paramount has, exhibits to me a lack of good faith; and (3) this late claim, just before the

summary judgment application is prejudicial to Club as it is put into the position of responding to something new, without being able to cross examine or put forward its own evidence on the alleged damages. Allegation that Club’s work was deficient (“Deficiency Amendments” or “Deficiency Claim”) [ 64 ] Paramount’s original Statement of Defense did not make any allegation that Club’s work was deficient. [ 65 ] The ASOD and CC allege poor workmanship with respect to roof caps, roofing and joints, resulting in water leaks.

These pleadings assert that Paramount has incurred costs of approximately $40,000.00 to cure these deficiencies. [ 66 ] Paramount has put into evidence emails sent by Paramount to Club regarding deficiencies noted in 2015 and 2016. These emails were sent a number of months after the original Statement of Defense was filed. This would of course explain the absence of a Deficiency Claim in the original pleading. [ 67 ] There is some evidence to support Paramount’s claim. There is a reason why it was not pled in the first instance.

The Deficiency Claim (in both the ASOD and CC) relates to the claim that Club brought under its Amended Statement of Claim and therefore is not limitation barred. [ 68 ] The Deficiency Amendment, in both the ASOD and CC is allowed.

Allegations of Misrepresentation on the part of Club (“Misrepresentation Amendments” or “Misrepresentation Claim”) [ 69 ] The ASOD asserts that Club made misrepresentations that: (

a) its work would be completed by the middle of August, 2014; (

b) The Budget Price of $200,000.00 is fair, appropriate and sufficient for the Club Work, and the cost of the Club Work will not exceed $200,000.00; and (

c) Club would provide written confirmation to Paramount of the Budget Price. The ASOD goes on to state that Paramount would not have awarded the contract to Club, but for these misrepresentations. [ 70 ] The Misrepresentation Amendments are repetitive of the Budget Amendments and the Completion Date Amendments. My prior rulings on these amendments should apply to the Misrepresentation Amendments. That is, the Misrepresentation Amendments are allowed in so far as they repeat the Completion Date Amendments, but are not allowed in so far as they repeat the Budget Amendments.

If further clarification is required [ 71 ] I hope that my rulings on these categories of amendments allow the parties to determine which paragraphs and subparagraphs are allowed in the proposed ASOD and CC, and which are not. However, if there is further clarification required, I will entertain brief written submissions on any points of contention. Heard on the 18 th day of May, 2021. Dated at the City of Ft. McMurray, Alberta this 21 st day of June, 2021 . Brian W. Summers M.C.Q.B.A.

Appearances: Akhil Vohra Carscallen LLP for the Applicant Paramount Structures Inc Waverly Muessle Muessle Flett Law LLP for the Respondent Club Industrial Trailers

(2012) Ltd