Go to Top

Monday Morning Case Bites for December 17, 2018

Last Week’s Court Rulings from the Alberta Court of Queen’s Bench, Court of Appeal and SCC.

Edited by Amanda Kostek & Christie Dewar

Direct Horizontal Drilling Inc v North American Pipeline Inc, 2018 ABQB 1006
Dismissal for Long Delay l Inextricably linked actions

Aircraft Finance Services Inc v Miller, 2018 ABQB 1005
Dismissal for Inordinate Delay l Prejudice

Intact Insurance Company v Clauson Cold & Cooler Ltd., 2018 ABQB 997
Duty to Defend l True Nature of Policy

Direct Horizontal Drilling Inc v North American Pipeline Inc, 2018 ABQB 1006

This was an unsuccessful appeal from a successful application dismissing a claim for three years of delay under Rule 4.33. The parties agreed that there had been three years of delay, but the issue was whether one of the exceptions to the delay applied. Specifically, it was argued that there was a significant advance in a separate, inextricably linked action, which constituted a significant advance in this action.

On appeal, the Court confirmed the following test for determining if two related actions are “inextricably linked”:

[26] The following factors must be considered to determine if one action is inextricably linked to another action:

  1. Are the two actions inextricably linked in the sense that the result in the one action would be “legally or factually determinative” of the issues in the other action?
  2. Will the issue(s) determined in the one action be “relevant and binding” in the other action?
  3. Does the one action significantly advance the other action?
  4. Could the decision in one action be a “barrier in law” to the Court’s adjudicating the other action?

Angevine v Blue Range Resource Corporation, 2007 ABQB 443 (CanLII) at para 41

However, the Court noted that these factors raise additional questions:

[27] The application of Angevine raises several questions: Must the related action dispose of the main action in order for the actions to be inextricably linked? Is something less that a “condition precedent” situation sufficient for two actions to be inextricably linked? Do all four of the Angevine factors need to apply, or is it sufficient if only some apply?

[28] In the case of Danek v Levine, 2016 ABQB 422 (CanLII) at para 21, Jones J concluded that establishing any one of the above factors is not necessarily sufficient to establish an inextricable link; but that it is not necessary for all 4 factors to be present in order to establish such a link. Jones J goes on to state at para 22-24:

[22] Angevine tells us to consider the four factors set out. It does not state that any one is more important than any other. It does not tell us, for example, if the result in the related action must be legally and factually determinative of all of the issues in the primary action, or just some of them or just the more important issues.

[23] It does not tell us precisely how a determination of issues in the related action must be relevant and binding in the primary action and to what particular questions. It does not tell us how we are to measure the materiality of any advance it brings to the primary action.

[24] These comments are not a criticism of the discussion in Angevine. Rather, they are a recognition of the importance of viewing the four Angevine factors together to see if they collectively and cumulatively point to a consistent conclusion that the two actions are not only linked, but inextricably so.

The Court concluded that he two actions were inextricably linked on the following basis:

[62] The two actions in our case are not so interdependent as in Chisan, where one was a condition precedent to the other. However, similar to Field, the actions in our case involve the same parties, contracts, and incorporation of identical set-off claims. As in Dejanovic, the determination of liability for and quantification of an alleged $6.1M worth of damages in the Gordondale action case would play a large role in the global resolution of the Groundbirch action. The determination of these central issues has the effect of moving both actions forward. One might also argue that as was the case in TRG, the Gordondale action has grown to encompass the Groundbirch action to the point that a determination in one action would have a factual and legal impact on the other.

The only action that occurred in the collateral claim was the filing of an Affidavit, which arguably disclosed further evidence. However, the Court concluded that any new information was minimal at best, and the Affidavit was of limited value in the collateral claim:

[82] An examination of the Thomlinson Affidavit reveals that any additional information provided on top of that which was already available in the pleadings is minimal. It does not help the Appellant assess its own position in the Groundbirch or Gordondale action. While it does express an intention to amend the Respondent’s counterclaim, this is not in and of itself a significant advance. Only once the pleadings are actually amended are the issues narrowed and the position of the Respondent clarified. The affidavit does not significantly advance the Groundbirch action to any sort of resolution. Accordingly, it is of limited value.

[83] Application of the functional approach also involves an assessment of genuineness. The set-off claims which inextricably link the actions are not mentioned in the affidavit of Mr. Fisher in support of the Appellant’s summary judgment application. In fact, during the cross-examination of Mr. Fisher on the same, the Appellant refused to entertain questions regarding the Fraser or Groundbirch projects, taking the position that these were irrelevant to the Gordondale action. The Appellant now seeks to rely on the Respondent’s discussion of the same issues in their affidavit in opposition to the summary judgment application. Although the obligations of the foundational rule 1.2(3) apply to both parties, the plaintiff bears the ultimate responsibility of prosecuting its claim: XS Technologies Inc v Veritas DGC – Land Ltd, 2016 ABCA 165 (CanLII) at para 7. The Appellant’s conduct does not indicate a genuine willingness and effort to advance the action towards resolution.

[84] The timing of the Appellant’s reliance on the Thomlinson Affidavit also supports a conclusion that there was no significant advance in the Groundbirch action from a functional standpoint. The Thomlinson Affidavit was filed on November 26, 2014. The Appellants did not utilize the information contained therein to advance their claim, and only now, after the Groundbirch action faces dismissal for long delay, do they identify this as a significant step.

As a result, the appeal was dismissed.

Aircraft Finance Services Inc v Miller, 2018 ABQB 1005

This matter involved multiple applications. The Court concluded that the proper order to hear the applications was (1) Delay Application, (2) Amendment Application, and (3) Summary Judgment on the merits. The first application was unsuccessful, the second was successful, and the third was successful against one individual personally and unsuccessful against another party.

The Court noted that none of the delays in the action were extraordinary in and of themselves, and the fact that one witness living in Mexico refused to attend for Questioning could be overcome by videoconferencing. The evidence on prejudice was also thin.

[50] Mr. Miller’s complaint about prejudice is mostly based on the fact that he has had this claim hanging over his head for many years. However, he is now retired and aside from the stress of being sued for a significant amount of money he does not have the kind of adverse professional consequence that was discussed in Humphreys v Trebilcock, 2017 ABCA 116 (CanLII). That is, he is not losing the opportunity to work or to maintain a professional practice because of the allegations.

[51] More importantly, there is no real indication that he tried to have the case moved to trial promptly at an early stage, which is the fact situation in the hypothesis at paragraph 134 of Humphreys, and furthermore the claim until now has been based on a breach of contract. It is Mr. Miller who introduced the issue of fraud – that he was indirectly a victim, not a perpetrator. It is only now that the plaintiffs want to assert that he was directly involved in the wrongdoing.

The Court declined to dismiss the claim, but noted in the alternative that even if there had been inordinate delay, the late admission by one party of suppression of evidence should not be rewarded:

[54] Rule 4.31 includes some discretion. The rule says the Court “may” dismiss if the requirements are met. In my view, the requirements overall have not been met, but if I am wrong in that, if the plaintiffs’ theory is correct the rule would be used to miscarry justice. A defendant involved in the suppression of evidence – to the point of concealing a fraud – should not be rewarded if the defendants’ actions are successful in frustrating and delaying resolution of the claim.

Intact Insurance Company v Clauson Cold & Cooler Ltd., 2018 ABQB 997

This was an unsuccessful appeal of a lower Court ruling determining that the insurer had a duty to defend. The insurer’s position was summarized by the Court as follows:

[12] Intact argues that the Forms represent examples of two types of insurance coverage purchased by Clauson, each with its own purpose. It maintains that the Equipment Breakdown Comprehensive and Equipment Breakdown Consequential Forms are first party property insurance under which Clauson can claim its own loss, while the Warehouse Form and CGL are liability insurance under which Clauson can seek coverage for claims brought against it by third parties.

[13] Intact argues that an insurer’s duty to defend can only arise in the context of liability coverage and that it is not possible for a duty to defend to arise in the context of first party insurance.

[14] Intact argues that the only potential liability insurance under which a duty to defend could arise for the BHJ and Bonduelle claims is the Warehouse Form. Intact urges that Clauson and this Court can only look at the Warehouse Form to determine whether a duty to defend has arisen. While Intact concedes that the BHJ and Bonduelle claims fall within the original grant of coverage under the Warehouse Form, it says the claims are clearly excluded by virtue of the exclusions in Article 4A(i) and (j) of the Warehouse Form.

[15] Article 4A(i) and (j) of the Warehouse Form provides:

A. Losses Excluded – This form does not insure any liability assumed by the Insured . . . for, or in respect of:

(i) Mechanical or electrical breakdown;

(j) Loss or damage cause by or resulting from . . . extremes or changes of temperature . . .

[16] Intact says the only logical conclusion that can be drawn from the claims in the BHJ and Bonduelle pleadings is that the frozen products of BHJ and Bonduelle thawed because of a change in temperature within the Clauson warehouse. It says the exclusion in Article 4A(j) of the Warehouse Form is clear and unambiguous and therefore that Intact’s duty to defend does not arise. Intact maintains that no extrinsic evidence is required to reach this conclusion and that it is the only logical conclusion based on the allegations contained in the pleadings.

The Court confirmed the following test in determining whether there is a duty to defend:

[23] The threshold giving rise to a duty to defend is low and the review to be conducted by the Court is to be based on the pleadings. Words chosen by litigants to characterize the claims are not determinative; the Court is to look at the pleadings to understand the true nature of the claims and to make a determination whether a defence is owed. The factual allegations in the pleadings are to be considered in their entirety. Only in very limited circumstances should extrinsic evidence be considered: Monenco at para 35-36.

[24] In determining whether a duty to defend has arisen, the Court is not to rely on the insurer’s view of the validity or nature of the claim. The question to be answered is whether the pleadings allege a state of facts which if proven would fall within the scope of coverage of the Policy.

[25] The principles of interpretation that govern the reading of an insurance contract are well settled and are also not in dispute. The Policy must be interpreted to give effect to the reasonable expectations of the parties. Coverage provisions will be interpreted broadly and ambiguities will be resolved in favour of the insured. The Policy and its components will be read as a whole and are to be given meaning in the context of the parties’ business realities. The law requires that the entire Policy be examined to understand the scope of coverage and, when so examined, that it be interpreted in a way that is commercially sensible.

The Court concluded that Intact had a duty to defend on the following basis:

[30] When the Equipment Comprehensive Form and the Equipment Consequential Form are reviewed, it is clear that neither limits the scope coverage to Clauson’s own losses. Under the Equipment Breakdown Consequential Form, the insurer agrees to pay the amount of loss on “Specified Property” of others which the Insured shall become obligated to pay, provided that the loss is due to spoilage from lack of refrigeration resulting solely from an accident. “Specified Property” is defined within the Equipment Breakdown Consequential Form as “property specifically described in the Declaration, or in any Schedules or Endorsements as may be attached to the Policy.” When one looks to the Declaration, “Specified Property” is expressly defined as “products under refrigeration.” When read as a whole, within what might be expected to be first party coverage the Insurer has agreed to pay for losses experienced by a third party (and for which Clauson shall become obligated to pay) for products under refrigeration at the Clauson warehouse when that loss is due to spoilage from lack of refrigeration resulting solely from an accident.

[31] To borrow words from the pleadings rule, the “true nature” of the Equipment Breakdown Consequential Form is not solely that of first party insurance. The liability contemplated within the Equipment Breakdown Consequential Form extends beyond the Insured’s own loss to the loss of product by third parties where the product is under refrigeration in the Clauson facility and spoilage occurs from lack of refrigeration resulting from an accident.