ALFRED H. BALM Respondent (Plaintiff) - v. -, 2003 ABCA 98

Balm v. 3512061 Canada Ltd., 2003 ABCA 98 Date: 2003 0402 Docket: 01-00432 IN THE COURT OF APPEAL OF ALBERTA ____________________________________________________ THE COURT: THE HONOURABLE MR. JUSTICE C ÔTÉ THE HONOURABLE MADAM JUSTICE HUNT THE HONOURABLE MR. JUSTICE WITTMANN ____________________________________________________ BETWEEN: ALFRED H. BALM Respondent (Plaintiff) - and - 3512061 CANADA LTD., KENNETH E. MACNEILL Appellants (Defendants) - and - JOHN DOE NO. 1, 3512070 CANADA LTD., JONATHON R. MACNEILL, JOHN DOE NO. 2 AND THOMSON KERNAGHAN & CO.

LIMITED Not Parties to Appeal [Note: A corrigendum was filed on April 4, 2003; the corrections have been made to the text and the corrigendum is appended to this judgment.]

[Note: A further corrigendum was filed on July 29, 2003; the corrections have been made to the text and the corrigendum is appended to this judgment.] APPEAL FROM THE ORDER OF THE HONOURABLE MR. JUSTICE P. M. CLARK DATED THE 13 TH DAY OF JUNE, 2001 ____________________________________________________ REASONS FOR JUDGMENT RESERVED ____________________________________________________ REASONS FOR JUDGMENT OF THE HONOURABLE MR. JUSTICE CÔTÉ CONCURRED IN BY THE HONOURABLE MADAM JUSTICE HUNT CONCURRED IN BY THE HONOURABLE MR. JUSTICE WITTMANN COUNSEL: J.A. Kotkas K.J. Wyke For the Respondent L.M. Sali, Q.C. D.V. Tupper For the Appellants ____________________________________________________

REASONS FOR JUDGMENT OF THE HONOURABLE MR. JUSTICE CÔTÉ ____________________________________________________ A. Introduction 1 The respondent sued 3512061 Canada, Kenneth MacNeill, and John Doe #1. I will refer to the first two defendants as 061 and Kenneth, respectively. After the statement of defence and some discovery and inspection of the defendants' records, the respondent sought leave to amend his statement of claim. A Master gave leave, with no recorded reasons, and a chambers judge affirmed that leave, with reasons: 2001 ABQB 805 , 2001 Carswell Alta. 1285. 2 Shares had been sold, but only half paid for.

Receipts for them were transferable, but contractually bound any holder registered on a certain date to pay the remaining half of the price, $9.75 per share. The underlying shares' market value dropped below $9.75, rendering the receipts a damnosa haereditas , a net liability. Certain receipt holders paid a fee to purchasers to get rid of their receipts. The plaintiff was the creditor, and sues, alleging that he was not paid on the due date.

Every defendant, including the registered holder of the receipts, is pointing the finger at someone else. 3 Appendix A to this Judgment summarizes the original statement of claim and the amendments to it. Besides another John Doe (#2), the amended statement of claim added three more defendants: 3512070 Canada, Jonathon MacNeill, and Thomson Kernaghan & Co. Ltd. I refer to them as 070, Jonathon, and Thomson & Co., respectively. 4 One of the newly-added defendants, Thomson & Co., appealed the order allowing the amendments, by appeal 01-00449. But no one showed up to argue that appeal on the day appointed.

Counsel for other parties told us that Thomson & Co. was bankrupt, and that the counsel filing the appeal had been told to cease to act. The respondent thought it unlikely that that appeal would proceed. The other new defendants neither appeared on any of the motions, nor appealed. 5 Counsel for the respondent asked us to hear the other appeal, 01-00432, which is by two of the original defendants. We did so, and reserved judgment. This contains my reasons for decision in it. B.

The Amendments 6 The formats of the original statement of claim and the amended statement of claim do not always make for easy reading or comparison. That is exacerbated by the fact that many words underlined in red in the amended statement of claim do not differ from the original statement of claim. Then again, there are many amendments to the statement of claim which are clerical or trivial. And the order and the style of pleading has been changed somewhat. 7 Since then, counsel for the respondent (with the consent of the court and opposing counsel) has provided us a guide.

It is a computer-generated true "redline draft", which shows which words or numbers have been inserted or deleted. Counsel for the appellants (original defendants) have had a chance to comment on it in writing. 8 My brief analysis of the old and new versions of the statement of claim is in Appendix A. 9 The first cause of action is pleaded in debt or contract, and found in paras. 21-25 of the original statement of claim, and paras. 31-35 of the amended one. The amended version does not seek to impose any liability on the new defendants, and indeed makes but trivial changes.

Such an amendment would require no evidence: Waquan (Mikisew Cree F.N.) v. R. 2002 ABCA 110 , 303 A.R. 43,

49 (para. 26); Firemaster Oilfield Services v. Safety Boss (Can.) (1993) (1996) (AB KB), 183 A.R. 155, 157, 37Alta. L.R. (3d) 317. 10 Whether paragraph 36 of the amended statement of claim (original para. 26) is part of that cause of action or is anindependent one is not easy to say, but it does not matter. The changes to that paragraph are also trivial and need no evidence. 11 Paragraph 37 in the amended statement of claim is new, and is clearly a new cause of action. However, though the legalconclusion pleaded is new, the acts alleged in it are not new.

It is trite law that a statement of claim need not name causes of action ordraw legal conclusions. It need only plead facts. So the plaintiff could merely have sent the original defendants' counsel a letter warningthat he would argue at trial that proof of such and such facts already alleged in the statement of claim would constitute the cause ofaction of mutuality of obligations under law merchant. See 30 Hals. Laws 7 (3d ed. 1959). 12 I express no opinion on whether such a cause of action under law merchant really exists, and no one argued that point.

Thatwas doubtless because the court must allow an amendment even though it raises a doubtful plea, if it is arguable: C.N.R. v. Pasco(Oregon Cr. I.B.) (#2) (SCC), [1990] 1 S.C.R. 117, 103 N.R. 235; Cadam v. Beaverbrook Newsp. [1959] 1 Q.B. 413,423-4, 425, [1959] 1 All E.R. 453 (C.A.); Morgan Crucible Co. v. Hill Samuel & Co. [1991] Ch. 295, 314, 325, [1991] 1 All E.R. 453(C.A.); Provincial Treasurer v. Andrejcsik [1991] A.U.D. 54, Calg. 12182 (C.A. Jan. 18); Meyer v. Leibel [1997] A.J. #91 (C.A. Jan.31), Calg. 97-16337. The test is very similar to that for striking out pleadings: Anxionnaz v.

Rolls-Royce [1965] R.P.C. 122, 132, 133-34(C.A.). 13 It is for that reason that the court will authorize a party to amend his pleadings, even if he has given some examination fordiscovery answers inconsistent with that proposed amendment: Neogleous v. Toffolon (1977) (ON SC), 17 O.R. (2d)453, 455. The appellants made just that objection here. They do argue that the claim against 070 and Jonathon is hopeless, but try to doso on the basis of evidence as to lack of damage, especially a cross-examination admission by the plaintiff. This is not a motion forsummary judgment by the plaintiff.

Doubt avails the appellants nothing. 14 When the impugned claim or cause of action overlaps with other claims or causes of action which are clearly arguable, orwhich no one moves to disallow or strike out summarily in chambers, there is an additional consideration. Striking out or disallowing theextra claim would not significantly alter the course of the trial, or save much time or money.

So disallowing an amendment whose legalvalidity is debatable but whose facts overlap parts not attacked, produces a real risk of injustice (if the new claim is actually open in law),but no real advantage (even if it is bad in law). See Derby & Co. v. Weldon (#5) [1989] 1 W.L.R. 1244. 15 Therefore, so far as the original defendants are concerned, new paragraph 37 required no evidence. Though it refers to "theDefendants", it does not seem to allege liability by all defendants, only by "the beneficial owner".

Coupled with the recital that the twotransfers were void, it seems to say that the party liable is Thomson & Co., not the present appellants. 16 Paragraphs 38-40 of the amended claim (paras. 27-30 of the original) allege conspiracy. There is a lot of rearrangement,maybe because one lawyer did not like his predecessor's drafting style, but I can see little substantive change in the allegations.

However,the pleas were and are against all "the Defendants", so to the extent that they now relate to the new defendants, they would needevidence. 17 Paragraphs 42-46 of the amended claim (31-35 in the original) claim oppression remedies under corporation legislation, andplead underlying acts. Though two new defendants are mentioned, they are not alleged there to have done any wrong. Otherwise, namesof defendants are clarified, and there are other small changes.

No evidence is needed to support this. 18 Paragraphs 47 and 48 correspond to old para. 36, and plead fraud. (There are two express references to the (first) transfer to061; but those simple references merely duplicate many such already in para. 36 and elsewhere, in the original statement of claim.) Thereare other changes of little moment, but two changes are more significant and require evidence: (

a) Since the allegation seems to be against all "the defendants", adding the new defendants to the suit extended this fraud claim tothem.

(

b) There is a new allegation of fraudulent representation, which is probably against Thomson & Co. It may also be against 061. (It isalso against Thomson & Co.’s “agents”, defined in para. 26, but they seem not to be parties.) 19 New paragraphs 49-52 (old 37-39) plead inducing breach of contract or very similar torts. Some clarifications of names reallychange nothing, but some (not all) of the allegations are against "the defendants".

Therefore those allegations are a claim which needsnew evidence so far as the new defendants are concerned. 20 New paragraph 41 (replacing old paragraph 40) alleges the tort of wrongful interference with economic relations. It has beenredrafted, but the changes in how the acts are described are of little moment. However, the plea is against "the defendants", so it needsevidence as against the new defendants. 21 New paragraphs 53-54 (replacing old 41-42) are ancillary, merely claiming that the mode of committing the wrongs earlieralleged merits various types of aggravated damages.

Paragraph 53 merely draws a conclusion from facts already pleaded, and likely para.54 does too. The essence of pleading in this area is facts, rather than conclusions: Whiten v. Pilot Ins. Co. 2002 SCC 18, 283 N.R. 1, 156O.A.C. 201, 261-3 (paras. 86-89). These paragraphs of the amended statement of claim form no part of the cause of action. 22 Even if aggravated damages must be pleaded to give notice, notice has been given, and helps the defendants and does nothurt them.

And so no evidence is needed for leave to make such amendments. (And see para. 14, supra.) 23 The other parts of the amended statement of claim are purely ancillary, contain no causes of action and (probably) noaverments which are necessary for them, and do not require evidence. Besides, it would be in no one's interest to strike out any part or allof them. 24 To recap, many of the amendments could have been made without evidence.

However, some needed evidence, if they are tostand against the parties mentioned below. (I will omit conclusions about evidence needed against Thomson & Co., since its appeal wasnot heard and its position was scarcely argued, if at all.) 1. new paras. 38-40 (conspiracy), against the new defendants only 2. maybe new para. 47(d) (fraudulent misrepresentation) against 061 3. rest of paras. 47 and 48 (fraud), against the new defendants only 4. parts only of new paras. 49-51 (inducing breach), but only as against the new defendants 5. para. 41 (interference), but only as against the new defendants C.

What Evidence Suffices 25 When evidence is needed to support a significant amendment to a pleading, before the limitation period has expired, whatevidence is needed? The Waquan (Mikisew) case, supra, does not address the point (except for some discussion about use of discoveryevidence).

I have not found much direct authority on the topic. (One reason is that England, British Columbia, and the Federal Court ofCanada require no evidence at all.) One case says that the test is whether in the evidence filed to support the proposed amendment “factswere alleged from which it could be inferred that” the facts to be pleaded occurred: Wil-Ton Constr. v. Amerada Minerals Corp. (1989)1989 ABCA 213 , 98 A.R. 296, 304 (para. 43), 69 Alta. L.R. (2d) 285 (C.A.). Chief Justice Moore held that the evidence neednot be enough to prove the new allegations on a balance of probabilities: Anderson Expl. v.

Pan-Alberta Gas (1998) 1998 ABQB 456, 224 A.R. 109, 112 (para. 14). Possibly Kent J. was stating a standard when she called for “more than a scintilla of evidence”,in Firemaster Oilfield Services v. Safety Boss (Can.) (1993) (June 14 ’96) J.D.E. 9303-20358, unrep. She said that “everyone is inagreement that the threshold is low”: ibid. The chambers judge here adverted to that standard of proof (in his paras. 15, 16). Hearsay

clearly suffices: Marathon Constr. (Alta.) v. Bank of N.S. (1985) (SK CA), 47 Sask. R. 241 (C.A.). The appellants’factum does not cite any authority which contradicts those propositions. 26 Of course any admissible evidence will do. It need not be an affidavit by the party seeking to amend: Sheckter v. W. MotorHotels (Edm.) (1985) (AB KB), 61 A.R. 154, 158 (M.) (para. 19). 27 There is an analogy with service ex juris. Where a plaintiff wishes to get service ex juris., he or she needs some evidence ofhis or her cause of action, but not very much. He or she may not be capable of getting much. See Paterson v.

Hamilton (1991) 1991ABCA 51 , 115 A.R. 73, 77 (para. 23), 79 Alta. L.R. (2d) 111 (C.A.); Bechtel Can. v. Stearns Catalytic [1990] A.U.D. 212,218, Calg. #11672 (C.A. 24 May); C.A.P.A.C. v. Int. Good Music (SCC), [1963] S.C.R. 136, 142-4, 37 D.L.R. (2d) 1;Seaconsar Far E. v. Bank Markazi etc. Iran (HL(E)) [1994] 1 A.C. 438, 452-4, [1993] 4 All E.R. 456. An uncertain conclusion,hearsay, or evidence which does not exclude a possible defence, suffices: Bechtel Can. v.

Stearns Catalytic, supra. 28 One must recall that the original statement of claim here needed no evidence at all, and that any plaintiff can always issue anew statement of claim if the limitation period has not expired. Lack of a factual basis is ordinarily not a ground to strike out a pleading,so long as it alleges facts which (if true) would have given a cause of action (or defence). And a plaintiff with two statements of claimcould likely then have the two suits either consolidated or tried together.

The Judicature Act says to settle a dispute once in one action,and avoid circuity of action: see R.S.A. 2000, c. J-2, ss. 5(3)(

f) and 8. That permits, even mandates, joinder. Avoidance of suchmultiplicity is fundamental to our civil procedure: McLachlin J.A. (as she then was) in McNaughton v. Baker (BCCA), [1988] 4 W.W.R. 742, 746, 25 B.C.L.R. (2d) 17 (C.A.). And it is desirable that the amendments in parallel suits be similar; that is aground not to deny the amendments in one suit: Hatch v. Kelly Peters & Assoc. (1988) (BC CA), 30 B.C.L.R. (2d) 52(C.A.). 29 All of these analogies confirm the authorities above which say that a modest degree of evidence justifies an amendment topleadings within the limitation period.

And the analogies show that requiring a stiffer test to amend would be pointless, producing littleor no practical result. To require a stiffer standard for evidence to amend would produce a motion for

summary judgment in favour of thedefendant, without requiring that the defendant swear to anything. That is contrary to all principle. And attempts to argue or apply astiffer test have delayed this suit for a year and a half. 30 Furthermore, such authorities all presuppose that the amendment originates with the party wishing to amend.

For example,she thinks of a new cause of action, or learns new facts suggesting that she has sued the wrong person, or not enough people, or has herparticulars wrong. 31 Therefore, the court should relax the standard further where the triggering event is a pleading by the opposite side. That maybe an amendment by the opposing party of its pleading; the Rules then expressly allow the recipient of the amendment unilaterally toamend her own later pleading: R. 130(2), (3). Furthermore, often the initial filing of a pleading permits the opposing party to amend apleading which preceded the newly-filed one.

That is why a plaintiff can amend her statement of claim without leave until pleadingshave closed (R. 130(1)). Presumably it is always reasonable to let a plaintiff amend her statement of claim to take into account what thestatement of defence says. The courts used to interpret that power to amend without leave narrowly, as not permitting a change of parties,but that restriction has now been repealed: R. 130(1.1). 32 So, the plaintiff here need not have moved for leave to amend his statement of claim; he could have moved for extension ofthe time limit for unilateral amendment (close of pleadings) in R. 130(1).

Or to put it another way, the two topics are analogous, and arevery similar where the basis for the proposed amendment is the contents of the statement of defence. 33 There are other reasons why the need for evidence may differ somewhat where the statement of defence is the basis for theamendment to the statement of claim. The pleadings automatically define the issues. If the statement of defence goes beyond a meredenial of the facts (and law) in the claim, and asserts additional facts, that is automatically a new issue. As noted, the Rules then let theplaintiff file a Reply, or amend his statement of claim.

Indeed, the Rules require that this be done by amendment where the plaintiffraises a new claim or inconsistent fact: R. 110(1), (2). The Rules merely impose a deadline of 8 days (when pleadings are deemed toclose). To file evidence that the statement of defence creates a new issue would be pointless. The court can read the statement of defenceon its own files and see whether or not it raises a new issue.

34 Then again, the statement of defence is a formal statement by the defendants who filed it. In a narrow sense it is notevidence, but in a sense it is stronger than evidence. A pleading certainly can make admissions which the court will receive against theparty delivering it: Hardy Lbr. Co. v. Pickerel R. Impr. Co. (1898) (SCC), 29 S.C.R. 211, 214; 1 Daniell’s Chancery Practice 466 (8th ed. 1914); Seelye v. Lancaster Mill Co. (1841) (NB KB), 3 N.B.R. 377, 385; Bingham v. Stanley(1841) 2 Q.B. 117, 114 E.R. 47, 10 L.J.Q.B. 319, 321; Dubuc J., in Braun v. Braun (1902) (MB CA), 14 Man.

R. 346,355-56 (C.A.); Shiels v. Adamson (1904) (MB KB), 14 Man. R. 703; Hogan v. Morrissy (1864) 14 U.C.C.P. 441, 443(C.A.); O’Kelly v. Downie (1914) (MB CA), 6 W.W.R. 911, 912, 17 D.L.R. 395 (Man. C.A.) (dicta); Re Bacon (SK CA), [1940] 1 W.W.R. 261, 266, [1940] 1 D.L.R. 617 (Sask. J.A.); Mongraw v. Paddock Tavern [1950] O.W.N. 463 (C.A.) (dicta); Llano v. Royal Shirt Co. (1997) 13 C.P.C. (4th) 182, 184 (Ont. M.); 352384 Alta. v. Nosh [1990] A.U.D. 14, J.D.E. 9003-10017 (M.

Dec. 20). (The evidentiary status of an old Chancery bill or answer before 1875 was complex, and is irrelevant today, so Iomit the divided authority on that topic.) 35 And the plaintiff has to act on the statement of defence, so the defendants filing it are probably estopped from denying itscontents. In any event, the defendants at least admit that their allegations in their statement of defence are arguable (unless they get leaveto withdraw admissions and amend or withdraw their defence). 36 A simple example will help.

What if a pedestrian sues alleging that the defendant drove his truck over him in a crosswalk,but the defendant files a statement of defence alleging that John Smith and not the defendant had then driven the truck? Could theoriginal defendant possibly object to leave (within the limitation period) to add John Smith as a defendant and plead in the alternative thathe was the driver? Or to adding a plea that John Smith had driven the truck with the consent of the original defendant?

What would begained by requiring the plaintiff to come up with evidence to support the amendment? 37 The Rules expressly allow pleas in the alternative (R. 111), and for good reason. Sometimes the plaintiff does not know, andcannot know, the identity of the wrongdoer, or the precise particulars. But he does know that it is one of three people, and occurredaround a certain time or place, and that it must have been done in one or two of three modes. He then sues all those people, and allegesall those things in the alternative. That is perfectly proper.

Sometimes who is the right defendant is a question of law, or mixed law andfact, e.g. turning on the validity of some transaction or document. But it is clearly one or the other of two people. Once again, suing bothpersons in the alternative is proper. To get service ex juris., it is enough to show that one defendant or the other is liable, in thealternative: C.C.B. v. McLaughlan (1989) 102 A.R. 276, 278 (paras. 5-6), (AB KB), 70 Alta.

L.R. (2d) 370. (I have anote that the Court of Appeal affirmed this decision, but cannot trace the appeal.) Paragraph 27 above notes the analogy betweenevidence for service ex juris. and evidence for amending a statement of claim. 38 It is important that all who are or may be parties to a contract be before the court, so that it can fully adjudicate upon theissues: Alta. Treasury Brs. v.

Ghermezian 2000 ABCA 228, 266 A.R. 170, 174, [2000] A.J. #263 (para. 15). (Note again para. 28 supraon avoiding multiplicity of suits, or circuity of actions.) Sometimes people are joined as defendants simply to bind them to the trialjudgment, not to get relief from them. It prevents the extra defendants from popping up after judgment claiming to be the personinterested, and relitigating the whole suit. Such a claim in the alternative also is proper, so long as the pleading is clear. 39 Therefore, often the plea of the opposite party will serve as, or in lieu of, evidence for leave to amend a pleading.

There isnothing contrary in Udovitch Est. v. Helm Est. (2001) 2001 ABCA 187 , 286 A.R. 185, 188, 92 Alta. L.R. (3d) 226 (para. 8)(C.A.). It speaks of whether an amendment is needed, or whether it adds a new cause of action, not what evidence is needed. Anamendment triggered by the statement of defence is a situation not found in the Waquan (Mikisew) case, supra. 40 The Waquan (Mikisew) case, supra, relied on by the appellants, also lacks some other features found here. They includedocuments which themselves are relevant transactions, and facts known only to the party objecting to the amendment.

And Waquan,supra, possesses some features not found here, such as an attempt to use one’s own examination for discovery answers. And there thefacts were known to the plaintiffs who wished to amend; some were known only to the plaintiffs. Here, the Balm affidavit says that thefacts in certain paragraphs of the statement of defence were not known to his solicitors before the defence was served.

And the Balmaffidavit says that the information in the documents from discovery of records exhibited was unknown to his solicitors until they viewedthe records. 41 If the amended pleading adds new parties previously unconnected with the suit, can they complain if the only "evidence"was a plea by one of the original opposing parties? That is an interesting question, but I may leave it for another day, since the presentappellants were both original defendants, and filed the statement of defence upon which the respondent plaintiff now relies. D. The Statement of Defence as Foundation for the Present Amendments

42 The notice of motion to amend the statement of claim was filed about 7-1/2 months after the statement of defence. But duringthose 7-1/2 months, the plaintiffs had requested consent to amend the statement of claim (in the words now impugned), and thedefendants had refused to consent: Balm affidavit, para. 13. Therefore, though the respondent is outside the time to amend unilaterallyunder R. 130, it is presumably only by a few months. 43 The appellants’ counsel stated in oral argument that the appellants did not allege prejudice to themselves.

Presumably he wasreferring to prejudice created by the amendment itself. And it is difficult to imagine that there could be prejudice to them from a fewmonths' delay in making the amendment, if none was created by the mere existence of the amendment itself. Had there been suchprejudice, the onus would have been on the appellants to raise it. The classic rule is that an amendment should be allowed, no matterhow careless or late, unless there is prejudice to the other side, and even that is no obstacle if it is repaired: Milfive Inv. v.

Sefel (1998)1998 ABCA 161 , 216 A.R. 196 (C.A.). 44 Counsel for the appellants (original defendants) tried to argue that the suit is all about the original transfer of the receipts to061, not about the second transfer to 070, so the plaintiff would need evidence that the new defendants were involved in that firsttransfer. According to the appellants, the amendments should be denied because there is no such evidence. 45 However, the statement of claim alleges a scheme with sham companies, and a need to pierce the sham to see who is reallyliable.

It is the appellants who try to separate and isolate parties and transactions, not the respondent. The statement of claim also allegesancillary causes of action, such as conspiracy, inducing breach of contract, and interference with economic relations. 46 In any event, I analyze the amendments above (in Part B of the body of these reasons, and in Appendix A), and the evidencebelow (in the paras. next following), and find many more links than does counsel for the appellants. 47 The statement of defence is long and somewhat repetitious. So here is a

summary of the allegations in it which are material tothe impugned later amendments to the statement of claim: (

a) The original defendant Kenneth acquired the shares of 061 and became its president, secretary, and director, thereby acquiringfiduciary and other duties, a few days before the due date of the receipts (paras. 7, 33(c), and 34(c)). (

b) Shortly before the due date, 061 acquired the receipts in question from Thomson & Co., these being "house shares" of that firm,acquired for consideration (para. 11). (

c) The original defendants do not know who originally sold the receipts to Thomson & Co. (para. 12). (

d) Just before the due date, 061 sold the receipts for consideration to 070 (paras. 14 and 39), thereby ending any obligations of 061(para. 39). (

e) Just before the due date the original defendant Kenneth told Thomson & Co. to register the receipts in 070's name (para. 15). (

f) Thomson & Co. by their own error inadvertently registered the receipts in the name of 061, and later stated that that was an error,and tried to correct the error, but without success (paras. 15, 27, and 41). (

g) On the due date neither original defendant, 061 nor Kenneth, had beneficial or legal title to the receipts. (h) 061 decided to, and did, trade in these receipts for investment purposes (paras. 30, 35, and 37).

(

i) The respondent (plaintiff) is not a creditor of 061 (paras. 33(

a) and 34(a)). (

j) The original defendant Kenneth did not know the nature or terms of the receipts (paras. 38(

b) and 44(a)). (I interpret “terms” to refer to liability to pay the $9.75 balance of the price.) (

k) The original defendant Kenneth allowed 061 to buy and sell the receipts (para. 45(c)). (

l) All the original defendants at all times understood that 061 had sold the receipts before the due date, and that therefore 061 had no further obligations to the respondent and any economic relationship between them had ended (paras. 45(

d) and 46(a)). 48 Does that statement of defence found any of those amendments which I concluded above (in Part B of these reasons) needed evidence? 49 The appeal by Thomson & Co. did not proceed, and this appeal by the original defendants said little about Thomson & Co. So I will try to avoid conclusions about that firm. 50 The statement of defence patently permits the addition of 070 as a defendant, on a number of grounds. It says that 070 was the beneficial owner and should have been the registered owner and thus liable, on the due date.

And it says that error was the cause of its not being so registered. 51 (It also supplies one of the building blocks for various claims against the original defendants and so indirectly reinforces the amendments.) 52 The statement of defence supplies one of the building blocks for the liability of John Doe #2, the owner of 070, and Jonathon, the sole director and officer of 070, because (as noted) it says that 070 should have been registered and liable on the due date. Whether it is quite enough alone to justify adding John Doe #2 and Jonathon as defendants is a difficult question.

But a corporation cannot act without human beings, and its directors must be elected by its shareholders. Therefore, there is just enough evidence to join the corporation’s shareholders and directors to the torts claims and uphold the addition of John Doe #2 and Jonathon. 53 Finally, the statement of defence confirms that the owner of the receipts who should have been liable on the due date was clearly at least one of a group of three: Thomson & Co., 061, and 070, though it was not clear which.

That would be a good foundation for suing those three in the alternative, and so for adding the two who were not already defendants. E. Other Evidence to Support the Amendments 54 The Balm affidavit deposes that a bundle of documents (his Exhibit

D) were obtained from the original defendants through discovery of records under their affidavit of records (his Exhibit C). A later Prefontaine affidavit adds two more records (its Exhibits B and

C) obtained the same way. That affidavit of records is sworn by the original defendant Kenneth, but states that the records listed are in the possession of the original defendant 061. The affidavit of records itself is filed in the same action, and is in the appeal book, and is plainly evidence open to support the impugned amendments. It also triggered deemed admissions by 061 and by any other party upon whom it was served.

Those admissions are authenticity of the records, and that any record seeming to have been sent was in fact sent and received: R. 192. 55 No one deposes that any fact statements in those records are true. However, if any record was written by one of the original defendants (appellants here), then it is probably an admission by that defendant. That is sufficient evidence to found an amendment to pleadings, given the fact that the evidence need be far from conclusive, as noted above in

Part C. 56 Therefore, some of the records are plainly admissions by the original defendants 061 and Kenneth: their letters of September

56 Therefore, some of the records are plainly admissions by the original defendants 061 and Kenneth: their letters of September 1 (A.B. p. 108), September 8 (A.B. p. 142), September 15 (A.B. p. 115), and their resolution of August 31 (A.B. p. 106). They establish that (

a) Well before the due date and the transaction, Kenneth and 061 knew that the registered holder would become liable for the balance owing; (

b) Thomson & Co. acted, and acquired the receipts, as agents for 061; (c) 061 got and spent the fee which it was paid to acquire the receipts, and shared that fee with 070; (

d) Well after the due date, 061 wanted the receipts registered in the name of 070; and (

e) Kenneth was the president and secretary of 061, and had power, acting alone, to cause 061 to buy, sell, deal in, securities of every nature and kind, and sign any documents associated therewith. 57 And two records contain a plain admission by Thomson & Co. that the receipts were registered in the wrong name, and that others wanted them changed: letters of September 28 and October 22 (A.B. pp. 117, 119). Another contains admissions by Thomson & Co. about the flow of funds in the transactions in question, in the form of account and advice slips (A.B. pp. 121-41).

We must recall that that has significance for the liability of 061, the supposed principal of Thomson & Co. 58 Indeed, a document (record) can be more than evidence of a fact or

an act; it can itself be the fact or act. That would certainly make it evidence against everyone. If it is only a copy and not the original, it might technically be trial evidence only against a party filing or served with the affidavit of records (R. 192). But because evidence for an amendment may be far from conclusive, a purported photocopy of a document which is itself

an act, is good enough evidence for an amendment. If it were a forgery, draft, or escrow, that proof could await the trial. No one suggested any such flaws here, in any event. 59 A number of the records thus obtained from 061 fit into that category of acts or facts in themselves: (

a) the resolution of August 31 (A.B. p. 106) described above; (b) 061's new client application form with Thomson & Co. (A.B. p. 107), which shows no information whatever about the new client, an ominous circumstance; (

c) the September 1 letter of 061 instructing Thomson & Co. to acquire the receipts for 061 (A.B. p. 108); (

d) the formal September 2 contracts by which 061 resold the receipts to 070 (A.B. pp. 109-14), signed on behalf of 061 by Kenneth, and on behalf of 070 by "J. R. MacNeill"; (

e) the September 15 letter instructing Thomson & Co. to register the receipts in the name of 070 (A.B. p. 115); (

f) the October 16 refusal of the official registrar to take the receipts out of the registered name of 061 (A.B. p. 118) (though the facts recited in this letter are probably not admissible evidence); and (

g) The September 8 letter instructing transfer of funds, some to 070 (A.B. p. 142).

60 I listed above what new evidence was needed (end of Part B of the body of these reasons). Almost all the need was to justifyadding claims against the new defendants. The only possible need for evidence in respect of a claim against any original defendant wasfraudulent misrepresentation against 061. 61 Is there evidence to support extending existing pleas of certain causes of action to the new defendants? They are conspiracy,fraud, inducing breach, interference, and (maybe) aggravation of damages. 62 There is probably enough evidence to plead that the J.R. MacNeill who signed for 070 was the Jonathon R.

MacNeill joinedas a new defendant, but not to show conspiracy or fraud against him. There is no evidence of his intent. But the act of becomingtransferee of the receipts is plainly one which he assisted by signing, so there is enough evidence to let the amendments stand which addhim to pleas of inducing breach of contract and interference with economic relations.

And a fortiori extending those allegations to thenew defendant 070 was proper. 63 Though an observer might be sceptical, even suspicious, I cannot say that the evidence suffices to add an allegation of fraud.Such an amendment likely requires evidence which will pass a stiffer test than that set out in

Part C of the body of these reasons. See theWaquan (Mikisew) case, supra, at its para. 61; cf. dicta in Balaz v. Petro-Infor (1983) 1983 ABCA 90 , 43 A.R. 229, 233(C.A.) (para. 24). That is doubly apt here, where the new allegation of fraudulent misrepresentation is unclear, but is probably not againstthe appellants (existing defendants) anyway. Therefore, I would strike out the entirely new particulars of fraud, and re-amend thestatement of claim to confine the existing fraud pleas to the original defendants and Thomas Kernaghan. 64 For clarity, these are the precise changes which I would make in respect to allegations of fraud: (

a) In the introduction to para. 47, first lines, change “defendants” to “the 3512061 defendants and Thomas Kernaghan”. (

b) In para. 47(c), line 2, change “defendants” to “the 3512061 defendants and Thomas Kernaghan”. (

c) In para. 47(c), third last line, change “defendants” to “the 3512061 defendants and Thomas Kernaghan”. (

d) In para. 47(e), first line, change “defendants” to “the 3512061 defendants and Thomas Kernaghan”. (

e) Delete para. 47(d). (

f) Delete para. 48. Given the newly-issued statement of claim, however, this may become of little importance. 65 That leaves conspiracy and aggravated damages. Evidence is not needed so far as they relate to the original defendants. In myrespectful view, the records obtained show just enough evidence against 070 to add it to the conspiracy claim, but not enough to addJonathon, nor Doe #2. In any event, my view is not the issue. One reason that I would leave this amendment in place against 070, is thatthe chambers judge did so.

The standard of review on appeal from amendments directed by a chambers judge is particularly deferential:see Eastern Counties Farmers v. J. & J. Cunningham [1964] 1 Ll. R. 81, 83 (C.A.). 66 No evidence is needed to add any of the new defendants to the pleas for aggravated etc. damages in new paras. 53 and 54.Therefore, I would not strike out any part of new paras. 53 and 54.

67 The chambers judge applied the correct legal tests here. The appellants’ factum does not suggest that he made any error oflaw or principle. It erroneously contends that there should be a review on the standard of correctness. Then it goes right to the merits ofthe amended claims. There is no reason to upset the chambers judge’s assessment. F. Implied Undertaking 68 New co-counsel for the appellants suggests that the records got here through discovery are inadmissible evidence becausethey were used contrary to an implied undertaking to the court.

That is the usual implied undertaking not to use information got throughdiscovery for collateral purposes. (Many authorities cited below discuss it.) New co-counsel pleads violation of the appellants’ rights ofconfidentiality. 69 The present argument relates only to records got through discovery. It does not and cannot relate to the use of the statement ofdefence to support the amendments. 70 The appellants made no objection to the admissibility of these records in Queen’s Bench chambers, nor in their factum. Thatsilence persisted for 2-1/2 years.

The first intimation of this possible argument surfaced in a faxed letter late on the afternoon before oralargument of the appeal was scheduled (and did occur). Even during oral argument, new co-counsel for the appellants had not completedhis research on this topic. 71 The complaint of violation of confidentiality here is odd and technical. Many of the records got through discovery whose usethe appellants attack merely confirm what the appellants’ own statement of defence had already voluntarily revealed. 72 The artificiality is worse than that.

One of the appellants swore and filed an affidavit (A.B. p. 53) which incorporates therespondent’s affidavit which the appellant’s new co-counsel now attacks, including all its exhibits! See R. 313, which makes otheraffidavits admissible in motions. 73 An appeal court will not hear a new ground of appeal which was not raised in the first court, unless it is satisfied that therewill be no prejudice resulting. The most common prejudice is the respondent’s lost chance to lead more evidence. For example, seeSyncrude Can. v. Cdn. Bechtel (1994) 1994 ABCA 35 , 149 A.R. 54, 58-59, 16 Alta.

L.R. (3d) 153 (C.A.), and Ricketts v.Woods (1989) (ON CA), 69 O.R. (2d) 128 (C.A.). That is especially applicable to a belated objection to admissibilityof evidence which the respondent led in the first court. Had there been an objection at the time, the respondent would have a chance tolead more evidence on two topics: (

a) the substantive one on which the impugned evidence was adduced; and (

b) the factors relevant to the admissibility or inadmissibility of the impugned evidence. See Ricketts v. Woods, supra. 74 That is even more apposite here, because the cloud alleged to lie over this evidence is not absolute; discovery evidence isadmissible even for a collateral purpose, if leave of the court is sought and obtained. 75 I am surprised by the new suggestion that use of discovery information in the same suit to amend the pleadings is a forbiddencollateral use. That obviously had not occurred to anyone else on the appellants’ side either. In my experience, that objection is notencountered in Alberta practice.

76 The amendments in question here do not radically transform this suit. The amended statement of claim here displays nomisjoinder of parties or causes of action, no colorable attempt to graft a truly different suit onto an existing one by amendment. In broadoutline, the amendments here simply say that more people were mixed up in the already-pleaded scheme to evade payment, than wasfirst realized. 77 There are cases barring use of records got through discovery to begin a new claim for defamation based on the contents ofthose records, such as Riddick v. Thames Bd.

Mills [1977] 3 All E.R. 677 (C.A.), and Carbone v. De La Rocha (1993) (ON SC), 13 O.R. (3d) 355. But I do not find that situation analogous. 78 Neither side has cited to the Court any case which supports the appellants’ new argument that the implied undertaking wasviolated here. 79 The appellants’ industry has uncovered an unreported decision of the English Court of Appeal, Savings & Inv. Bank v. Gray(#1) (10 Aug. 1990). It has to do with disclosure ancillary to a Mareva injunction, and the limited purpose for which such an injunction isgiven.

It is not a case on ordinary discovery between parties in an action, and I do not find it analogous to the present problem. 80 Many cases cited show that the implied undertaking was not violated here by use of discovered documents, because theyhold that amending the pleadings is not a collateral use. See Allstate Life Ins. Co. v. Aust. & N.Z. Banking Grp. (1995) 57 F.C.R. 360(paras. 92ff.) (Aust. F.C.); W.J. Morray Eng. v. Cesare (Eng. Ch.D. 25 Apr. ’97) unreported (pp. 24-5 of transcript); Laufer v. MeritInv. Corp. [1999] O.J. #5175 (M.) (para. 10); B.E. Chandler Co. v.

Mor-Flo Ind. (1996) (ON SC), 30 O.R. (3d) 139,at p. 141, affg. and adopting M.; Alta. Treasury Brs. v. Leahy 2000 ABQB 575, 270 A.R. 1, 80-81 (para. 280) (affd. other grounds 2002ABCA 101, 303 A.R. 63, leave den. S.C.C. Dec. 5 ’02); cf. N.W.U.L. v. Std. Safety & Consulting Services (1981) 35 A.R. 616, 623-4 (para. 8); cf. Peterson v. Highwood Distillers (Atlas Concrete) (1998) 1998 ABCA 105 , 216 A.R. 83, 158 D.L.R. (4th) 569,574 (C.A.) (para. 16). (I cannot find a copy of the Master’s decision in the B.E.

Chandler case.) 81 Nor did the respondent plaintiff use the discovery information unilaterally: he moved on notice and got leave to amend. Thecourt saw what evidence he relied upon, before it approved the amendments. 82 Further sub-issues to the implied undertaking issue were raised by counsel in written replies. But on the view which I take,those sub-issues do not arise here. 83 No one violated the implied undertaking. The amendment was outside its scope. G. Conclusion 84 I attach an Appendix B summarizing my conclusions about whether there is enough evidence for amendments.

And in Part Eof the body of these reasons, I gave the precise wording of the amendments respecting fraud which I would order. Therefore, most of theappeal is dismissed. It is allowed only to the extent shown in those two places. 85 Though success was somewhat divided, the great bulk of the amendments have withstood challenge. It is true that I wouldstrike out a few corners of the respondent’s amendments. But had the respondent not tried to add those corners, the time anddisbursements would have been almost as large.

Accordingly, I would not disturb the costs in Queen's Bench. 86 On appeal, the respondent plaintiff should recover costs. No debt has yet been assessed (or awarded) for the claim, but it is abig suit. I would adopt column 4 of

Schedule C. Offsetting the respondent's partial failure on appeal is the fact that the appellants(original defendants) raised the entirely new issue of the implied undertaking at the last moment, in the result forcing the respondent toread further written argument and authorities, and prepare a further written reply (in effect a second factum). Netting out those twofactors, I would increase item 14 of

Schedule C by 30% in favor of the respondent, who will also recover full reasonable disbursementson appeal. (I would not add still more for the respondent's other written reply enclosing the very useful redline draft, because it merelyclarified what the respondent had not made entirely clear before.) The appellants should be jointly and severally liable to pay the costs ofthe respondent, as soon as they are taxed. No costs should be payable to any of the appellants.

87 I remind counsel that authorities over 30 pages in length should be bound separately, not with the factum: Consolidated Practice Directions, Part D.3. The Practice Directions (and some of our Court’s decisions) also say that where counsel cite a reported case, they should give its citation in a law report ( id. at C.4 and D.1(b)); sometimes that was not done here. APPEAL HEARD on January 16 , 2003 REASONS FILED at CALGARY , Alberta, this 2 nd day of April , 2003 ______________________________ C ÔTÉ J.A. I concur: ______________________________ HUNT J.A.

I concur: ______________________________ WITTMANN J.A. ______________________________________________________________ CORRIGENDUM OF THE REASONS FOR JUDGMENT RESERVED ______________________________________________________________ 1. Under the heading of counsel, K.J. Wyke has been added as co-counsel for the respondent. 2. In paragraph 64, subsection (b), “line 3” has been corrected to read “line 2”. In paragraph 64, subsection (f), “47(e)” has been corrected to read “48”. APPENDIX A BALM v. 3512061 CANADA ET AL

Statement of Claim Originally Issued (April 6, 1999) Amended Statement of Claim (January 31, 2001) Adds 070, Jonathon MacNeill, Thomson & Co., John Doe #2.

Parties, residence, etc. including owner of 061. (paras. 1-6) Describes new parties too. (paras. 1-11) Governing statute, business, listing. (paras. 7-9) No significant change. (paras. 12-14) Instalment sale and pledge contract, with its terms. (paras. 10-13) No significant change. (paras. 15-18) Part payment, issue of receipts and trading of them and the receipts. (paras. 14-16) No significant change. (paras. 19-21) Incorporation and purchase of receipts by 061, intent of defendants being that 061 be broke, and to hold only and as mere agent of defendants. (paras. 17-20) Old para. 17 largely gone; fragments left in new para. 25.

Old paras. 18-20 amended to show Thomson & Co. and its agents were transferor (similar to old para. 17 re others) and paid for transfer. Agency. Both numbered companies were sham companies. (paras. 22-30) Main cause of action in contract debt: purchase under para. 17, agency, controllers, demand, failure to pay, and debt of all defendants. (paras. 21-25) Adds or clarifies some names of defendants. Names added are existing defendants, not new ones.

No other significant change. (paras. 31-35) Facts in paras. 21-25 are breach of contract by 061 and defendants as undisclosed principals and controllers. (para. 26) Clarifies names of defendants. Names are of existing defendants, not new ones. No other significant change. (para. 36) New: Recites some facts, many of which (not all) are above.

Conclusion re liability of beneficial owner under law merchant. (para. 37) Alternatively, defendants conspired with each other and persons unknown to do facts in paras. 17-20 with main intent to injure the plaintiff and pay 061 to do it and to carry out unlawful acts in paras. 27-29 knowing harm to plaintiff was likely. Particulars. (paras. 27-30) Particulars of conspiracy omitted, still against all “defendants”, so in effect names of new defendants added as wrongdoers. Wording rearranged.

No new elements added. (paras. 38- 40) In further alternative, oppression remedies for plaintiff under C.B.C.A. and leave for derivative action under C.B.C.A., based on above particulars, and unfairly prejudicial conduct and breach by Ken MacNeill of fiduciary duties to 061 by unlawful acts. (paras. 31-35) Names of defendants clarified, and small changes of cross references. New name is not alleged to have done wrong. Para. 46 has other small changes. No other change. (paras. 42-46)

In further alternative, paras. 17-30 are fraud, with particulars. (para. 36) Names of defendants inserted, as is reference to registration. Refers to “defendants”, so in effect new defendants added as wrongdoers. 47(

d) and 48 are new allegation of fraudulent representation (probably by Thomson & Co. and its alleged agents, maybe by 061) that 061 would pay. No other change. (paras. 47-48) In further alternative, facts in paras. 17-36 were intentional and wrongful interference with contractual relations and inducement to it, by principals and controlling minds. (paras. 37-39) Names of defendants clarified and a few words dropped. Some allegations are against the “defendants”, so likely those in effect add new defendants as wrongdoers.

Para. 51 is new allegation that Thomson & Co. interfered with contractual relationship between plaintiff and agents. No other change. (paras. 49-52) Ditto re economic interests and business interests. (para. 40) Worded differently, but little substantive difference. Except drops allegation of intent to cause harm. But allegation is against “the defendants”, so in effect adds new defendants as wrongdoers. (para. 41) Plaintiff’s loss and defendants’ maliciousness etc.

Aggravated etc. damages. (paras. 41-42) No change, except reference is to all defendants. (paras. 53-54) Length and place of trial. (paras. 43-44) No change, except reference is to all defendants. (paras. 55-56) Prayer: Damages and judgment (paras. a-

e) Declaration (para.

f) Leave to sue (para.

g) Compensation, interest, account, and profits (paras. h-

k) Injunctions to preserve funds and records (paras. l-

n) Receiver etc. (para.

o) Costs (paras. p,

q) Other relief (para.

r) Minor change in heading of prayer (contents moved to some paras. below.) Adds “jointly and severally” (paras. a-

g) No change (para.

h) Clarifies name of defendant (para.

i) Clarifies name of defendants (paras. j-

m) No change (paras. n-

p) Clarifies name of defendant (para.

q) No change (paras. r,

s) No change (para.

t) Statement of Claim Originally Issued (April 6, 1999) Amended Statement of Claim (January 31, 2001) APPENDIX B IS THERE ENOUGH EVIDENCE FOR AMENDMENTS?

(X: not applicable; evidence not needed) Who Claim in Amended Statement of Claim is Against: New Amendments re Original Defendants Doe #2 070 Jonathon Law merchant (new para. 37) X X X X Conspiracy (new paras. 38-40) X No Yes: Records No Oppression (new paras. 42-46) X X X X Fraud (new paras. 47-48) (Only needed re 061, and maybe not even against it.) Re new parts, no. (See para. 64) No No No Inducing Breach of Contract (new paras. 49-52) X (Needed re some allegations only) Yes: Statement of Defence (Needed re some allegations only) Yes: Statement of Defence and records (Needed re some allegations only) Yes: records Interference with Econ.

Rels. (new para. 41) X Yes Yes: Statement of Defence and records Yes: records Aggravated etc. Damages (new paras. 53-54) X X X X