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From the Bench: True Strangers to a Claim cannot be added to an Action after the Expiry of the Limitation Period

This decision is notable as it provides clarity with respect to how the Courts determine whether applicants can be added to an action after expiry of the limitation period.

Richcrooks Enterprises (2000) Ltd v Arres Capital Inc, 2018 ABQB 84

Case Facts

This matter arises from an investment in a $9 million syndicated mortgage loan arranged and administered by the Defendant. Each investor entered into a trust agreement with the Defendant. The claim alleged the Defendant misappropriated trust funds by improperly deducting fees from sale proceeds of the units.

The application was to add an additional 11 investors as plaintiffs to the action after the limitation period expired. Master Mason had to determine whether the Applicants fell within the purview of s.6(1) and s.6(3) of the Limitations Act, RSA 2000 c. L-12.

True Strangers cannot be added as Claimants after the Expiry of the Limitation Period

Pursuant to the Alberta Law Reform Institute’s The Report of Discussion of the Law Reform Commission of Alberta on Limitations, Report No. 55, Dec. 1989, claimants seeking to be added after the expiry of the limitation period are characterized as either a “true stranger” or an “other claimant”. Only “other claimants” meet the criteria imposed by s.6(3)(c), as the claimant is necessary to effectively enforce the original claim:

18. Addition of true stranger as claimant. There are two types of cases in which a stranger may wish to add himself as a claimant in an action: “true stranger” and “other claimant”. Ss. [6(3)] permits the addition of a claimant who is necessary if the original claim asserted is to be enforced effectively. It does not deprive a defendant of a limitations defence to the untimely claim of an added claimant who is a “true stranger”.

a. True Strangers. In this type of case a non-diligent claimant will be attempting to slip his untimely claim into an action in which his defendant is already a party. For example, assume that the original claimant, Tom, brought a timely claim against the defendant, Alice, to recover for personal injuries suffered in an automobile accident, and that later a second claimant, Dave, a co-passenger in the car driven by Tom, sought to add an untimely claim against Alice to recover for Dave’s personal injuries. Dave’s claim would probably satisfy the relationship requirement and it might satisfy the knowledge to prevent prejudice requirement. However, Dave’s claim would be based on a different injury from that suffered by Tom and Dave’s added claim would not be necessary to ensure the effective enforcement of the original claim brought by Tom.

b. Other claimants. In this type of case the added claimant will be necessary if the original claim asserted is to be enforced effectively. The claimant is unlikely to be a “true” stranger. A common example is the case in which a married woman or a child requested damages in a personal injury action based on expenses for items for which a husband or parent was responsible for providing. If the married woman or child suffered no damage because of the expenses, only the husband or parent could suffer damage and recover damages.

Master Mason characterized the Applicants as non-diligent claimants and their claims were not necessary to effectively enforce the original Plaintiffs’ claim. The Applicants’ loss was personal to them and the additional investors were not required to proceed and prove the case at trial:

[9] It seems to me that the applicants are non-diligent claimants who are attempting to slip their untimely claims into this action. I cannot conclude that their claims are necessary to ensure effective enforcement of the original claim brought by the existing plaintiff investors. While their claims are the same in the sense that they were involved in the same investment opportunity and they are parties to the same form of trust agreements, their losses are personal to each of them. The existing action is a stand-alone claim that does not need the additional investors to proceed with and prove the case at trial. The addition of further investors will result in additional damages payable by the defendants if the claim ultimately succeeds.

Intention to participate in the Action prior to Expiry of the Limitation Period is Irrelevant

Master Mason rejected the notion the Applicants’ prior written authorization, indicating an intention to participate in the action, prior to the expiry of the limitation period should be considered. Referencing the decision in Wong v Voong, 2004 ABCA 216, the Court found an intention to bring an action irrelevant:

[13] In Wong v Voong, Ms. Voong was a passenger in a motor vehicle involved in an accident and wanted her claim to be added to the action commenced by the driver she was with. The Court confirmed that the sole fact that a claimant intended to bring an action before the limitation expired does not entitle that claimant to be added to the action.

Reference to Other Plaintiffs in the Pleadings is Insufficient

The Applicants argued the pleading asserted the Defendant intended to deprive all investors of the trust fund and the misappropriation affected all investors equally. They argued the Court should treat all investors equally by allowing them to be added and to receive the same remedy. This was rejected.

Although Master Mason acknowledged the pleadings referred to other investors not named as a plaintiff, the claim was not asserted on behalf of all investors. The claim was only asserted on behalf of the named Plaintiffs. This was insufficient to meet the requirements of s.6(3)(c) of the Limitations Act:

[15] It is true that the claim refers to the existence of other investors in the syndicated loan who are not named as plaintiffs. But the claim is not asserted on behalf of all the investors. It is asserted on behalf of the named plaintiffs and seeks judgment for their respective proportionate shares of the fees alleged to have been improperly charged by the trustee. Permitting further investors to be added on the basis suggested would require the Court to disregard the requirements of subsection 6(3)(c) of the Limitations Act.

Pursuant to Wong v Voong, s.6(3) of the Limitations Act does not apply to untimely claims such as the claims made by the Applicants:

[16] This is consistent with the Court’s statements in Wong v Voong at paragraph 18:

Ms. Voong is a true stranger to the proceedings not intended to benefit from the s.6(3) limitation exception. Her claim is not necessary or desirable to ensure the effective enforcement of the claims originally asserted or intended to be asserted by the named plaintiffs. The context of the Limitations Act makes it clear that mere untimely claims are not intended to be caught by s. 6(3). Nor does the provision permit the addition of all claims related to the event giving rise to the proceedings merely because they are related. Rather, the added claim must ensure the effective enforcement of the claims originally asserted or intended to be asserted in the proceeding…

The Applicants Could Not be added as Claimants

Despite the Applicants’ aforementioned arguments, Master Mason found s.6(3) of the Limitations Act was not met. There was no evidence to suggest the addition of the Applicants was necessary for the effective enforcement of the claims of the Plaintiffs. The application was dismissed.

In Conclusion

This decision is notable as it provides clarity with respect to how the Courts determine whether applicants can be added to an action after expiry of the limitation period. The Court must consider whether the applicants are “true strangers” or “other claimants”. The key distinction is whether the applicant can establish whether the added claimant is necessary to enforce the original claim. If this is proven, the applicants are considered “other claimants” and are likely to be added despite the limitation period expiring.

Consequently from this decision, insurers ought to be aware that in certain circumstances, particularly personal injury claims, parties may be added notwithstanding the expiry of the limitation period. This decision provides the example where a father/husband is responsible for out-of-pocket expenses for their child/wife. Although the child/wife claims damages from their personal injury, they have suffered no out-of-pocket expenses and thus no damages. This is a situation in which the father/husband could be added pursuant to s.6 as an “other claimant” as they are required to ensure the out-of-pocket expenses are claimable. This decision sets the important precedent of providing further clarity as to when s.6 of the Limitation Act applies and new claimants can be added after the expiry of the limitation period.