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Monday Morning Case Bites for July 22, 2019

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

Edited by Amanda Kostek & Christie Dewar

Bodnar Capital Corporation (301831 Alberta Ltd) v Synergy Projects, ABQB 528
Third Party Notice | Limitation Period

Pederson v Allstate Insurance, 2019 ABQB 531 (CanLII)
Privilege | Solicitor-client privilege | Litigation Privilege | Underlying Personal Injury Claim

Bodnar Capital Corporation (301831 Alberta Ltd) v Synergy Projects, ABQB 528

This was an Application to issue a late third party notice, which was successfully opposed by Damian Shepherd of CBM Lawyers. The underlying claim related to the construction and installation of a geothermal heating system. The claim was initiated against Synergy for the installation of the system. The proposed third party defendants were the designer and installer of the mechanical system.

The first lawsuit was filed on January 25, 2011 and served upon Synergy on January 23, 2012. Synergy defended on March 18, 2016, and filed (but not served) its third party notice on July 25, 2017. A second lawsuit was filed on July 8, 2014 which partially overlaps with the first lawsuit.

The Master noted that the deadline for the third party notice under Rule 3.45 expired six months from March 18, 2016 for both filing and service. As a result, the third party notice was out of time pursuant to the Rules of Court. An extension can be provided, after an assessment of the length of the delay, the explanation for the delay, the relative prejudice to the parties, and there must be an air of reality to the proposed third party notice.

[9] The time for a third party notice can be extended. There is a well-known three part test:

somewhat like the test for opening up a default that requires the Court to assess:

i) the length of the delay,
ii) the explanation for the delay,
iii) the relative prejudice to the parties.

There must also be some substance to the proposed third party notice in the form of (at least) ‘an air of reality·.

The Master noted that the above test need not be applied on the facts before him because the third party proceedings were doomed from their inception. The time for a third party proceeding or statutory claim for contribution is governed by section 3(1.1) of the Limitations Act. This provides two years after the later of the date on which the claimant was served with a pleading, or the date the claimant first knew or ought to have known that the defendant was liable. The Master found that it should have been obvious from the Statement of Claim that there was a potential claim against the proposed third parties, so the limitation would arguably have started to run then. The third party notice was filed five years, six months and two days after service of the Statement of Claim, and therefore was out of time.

The Master noted that a claim can be added to a proceeding after the expiry of the underlying limitation under Section 6(4) of the Limitations Act under the following test:

[15] An application under section 6(4) must satisfy the requirement of “relatedness’ of the proposed added claim; which this proposed claim undoubtedly is. However, if the “defendant’ is able to show that they did not receive, within the underlying limitation plus the time for service of process, sufficient knowledge of the claim that they will be prejudiced in maintaining a defense on the merits, the claim will not be added. The emphasis is on notice not on prejudice.

The Master found that neither Cox nor Vital had notice of the claim until August of 2017, although Cox’s counsel may have been aware of the 2011 action in early December of 2016. The Master noted that the cases tell us that the emphasis in section 6(4)(b) of the Limitations Act is on the adequacy of notice and not prejudice, and specific knowledge of the added claim is necessary rather than just of a claim generally.

The Master concluded that a limitations defence would almost certainly succeed, and as a result, the application was dismissed.

Pederson v Allstate Insurance, 2019 ABQB 531 (CanLII)

This was a partially successful application requiring an insurer to disclose documents identified as privileged in their Affidavit of Records, and to answer Undertakings which were refused or taken under advisement at Questioning. The insurer argued that all of the documents arose in personal injury litigation which concluded in January of 2017, and fell within either solicitor-client privilege or litigation privilege. The issue was whether the claims for privilege survive the conclusion of underlying personal injury litigation.

The personal injury claim related to a motor vehicle accident, in which the motor vehicle was allegedly stolen. Non-waivers were signed at various points in the litigation. The Administrator of the Motor Vehicle Accident Claims Act paid to the Plaintiff the $200,000 limits of coverage. Subsequently, another party was added as a defendant. The liability trial was ultimately heard in late 2012, where it was found that the vehicle was not stolen but was operated by an individual residing as a member of the household, and as a result, there was deemed consent by way of the Traffic Safety Act. Following the liability trial, the insurer reimbursed the Administrator for the limits paid out. The insurer then denied coverage on the basis that the insured had no insurable interest in the vehicle, and became a Third Party by Order. The litigation proceeded for an assessment of damages, and the Plaintiff was awarded $1.5 million.

The present action was commenced on July 9, 2017. The Plaintiff seeks to recover from the insurer the full limits of coverage in the Policy, by way of statutory cause of action arising from s.579(1) of the Insurance Act. The Plaintiff asserts that the insurer is precluded from denying liability under the policy because of the manner in which it conducted itself during the underlying personal injury litigation.

The Court noted that solicitor-client privilege survives the conclusion of litigation and is subject to very limited exceptions. The Court found that all communications between the insured and the insurer’s counsel were protected by solicitor-client privilege because they were created for the purpose of giving legal advice. Regarding documents between the insurer and the insurer’s counsel, the Court found that only the portions of the documents that related to legal advice fell under solicitor-client privilege. The Court ordered the production of some documents, after portions relating to legal advice were redacted.

The Court noted that litigation privilege does not have the same status and is less absolute than solicitor-client privilege. However, it is still central to the adversarial system and cannot be abrogated by inference, and clear, explicit and unequivocal language is required in order to lift it. One significant difference is that litigation privilege only extends for a limited duration. The general rule is that it comes to an end at the conclusion of the litigation. However, it may extend longer where there is other related litigation in progress.

The Court noted that there is some inconsistency in the case law in what constitutes “closely related proceedings,” some more broadly interprets the scope of the litigation privilege to subsequent proceedings, and some are more restrictive. However, it does come to an end absent closely related proceedings:

[73]           While there has been some inconsistency in the manner in which Blank has been applied, there is no lack of clarity in the direction given by the Supreme Court. Blank clearly establishes that litigation privilege comes to an end, absent closely related proceedings, upon the termination of the litigation that gave rise to the privilege. The proper test for determining whether the litigation privilege continues after the conclusion of the action in which the privilege first arose, is whether the two actions are closely related proceedings that involve the same or related parties that arise from the same or related cause of action (or juridical source) or which raise common issues and share the same essential purpose.

The Court considered the factors identified in Blank to determine if the actions were “closely related proceedings.” The Court found that the parties in the two actions are closely related, which is a factor in favor of continued litigation privilege. However, the two actions do not arise from the same cause of action as one arises from tort and the other from statute, which is a factor against continued litigation privilege.  There are no issues in common to the actions, which is a factor against the continuation of the litigation privilege:

[86]           There are no issues common to the two actions. In the underlying personal injury action, there were several fundamental issues:

  •       Who was operating the Dodge Shadow at the time of the collision?
  •       Was the operator of the Dodge Shadow negligent in the manner of operation?
  •       Did the negligence of the operator of the Dodge Shadow cause the Collision?
  •       Was the operator of the Dodge Shadow operating the vehicle with the express or implied consent of the registered owner, Ms. Danyluk?
  •       Did the Plaintiff suffer any damages as a result of the negligence of the operator of the Dodge Shadow?
  •       What was the quantum of damages?

[87]           The present action under s 579 of the Insurance Act shares none of those issues. Instead the issues in the present action are:

  •       Did Allstate issue a motor vehicle liability policy of insurance covering the Dodge Shadow which was in force at the time of the Collision?
  •       Would the equities as between Allstate and Ms. Danyluk and Mr. Norton have permitted Allstate to deny coverage pursuant to s. 579(12)of the Insurance Act as a result of the breach of the policy or a breach the statutory conditions?
  •       Has Allstate waived or acquiesced in any policy breaches?
  •       Has Allstate affirmed coverage despite any policy breaches?
  •       Is Allstate estopped from relying on any policy breaches?
  •       Is Allstate liable for punitive damages as a result of its conduct in the handing of the claim?

[88]           There are no similarities between the issues in the two actions. This argues against the continuation of the litigation privilege.

The Court noted that whether the Actions share the same essential purpose is neutral and is neither in favor or against the continuation of litigation privilege. The Court balanced the factors and concluded that the two actions are not closely related proceedings, and therefore the litigation privilege came to an end when the tort action concluded:

[92]           The purpose of the litigation privilege was to prepare a zone of privacy around the preparation for and the defence of the tort action. Some similarities exist between the two actions. The same parties were involved and the two actions generally arise from the Collision and relate to the Plaintiff’s ability to recover for the damages suffered in the Collision. However, the issues in the two actions are significantly different and, most significantly, the purpose of the two actions is not the same because the juridical sources differed.

[93]           As a result, I conclude that the two actions are not “closely related proceedings” as that term is used in Blank. Therefore, the litigation privilege that arose during the tort action came to an end when that action was concluded. The litigation privilege does not continue and does not provide an immunity from disclosure in the action commenced under s 579 of the Insurance Act.

The Court then considered Undertakings requested, noting that refusals related to litigation privilege cannot be sustained given the finding above that it has ended for the tort action.