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Monday Morning Case Bites for July 9, 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

Broadway v Robson, 2018 ABQB 463
Security for Costs l Exemption l Beneficial Owner of Corporation

Royal Well Servicing Ltd v Murphy Oil Company Ltd, 2018 ABQB 514
Limitation Period l Invoice

Judgment Highlights

Broadway v Robson, 2018 ABQB 463

This was an unsuccessful application for security for costs. Although the Plaintiff had been bankrupt twice, resided out of province, had no assets in Alberta, and had two unpaid judgments in British Columbia, the Plaintiff was exempt from paying security for costs. Under sections 243(3) and 239(b) of the Alberta Business Corporations Act, a beneficial owner of a corporation is exempt from security for costs. The Master found that the Plaintiff was entitled to a 5% finders fee of the shares of the corporate defendant, which made him a beneficial owner.

[4] However, Broadway relies on section 243(3) of the Alberta Business Corporations Act (“ABCA”) which states:

(3) A complainant is not required to give security for costs in any application made or action brought or intervened in under this Part.

[5] “Complainant” is defined in section 239(b) of the ABCA as follows:

(b) “complainant” means

(i) a registered holder or beneficial owner, or a former registered holder or beneficial owner, of a security of a corporation or any of its affiliates, … (emphasis added)

[6] While Broadway has never been a registered owner of a security of Petro Motion Inc. he advances the argument that he is a beneficial owner, being someone who is legally entitled to shares in Petro Motion Inc.

[17] While Proctor and Robson deny that Broadway is entitled to any of the shares of Petro Motion, on January 26, 2014, Proctor sent an email to Broadway which contained the following wording:

As I said earlier, you are entitled to a 5% finder’s fee. This has been done and earned …

You think your role is done by bringing the group together. This is worth 5% and you will get it regardless. (emphasis added)

[18] It is clear from the context that the reference to a 5% finder’s fee was a reference to 5% of the shares of Petro Motion.

[19] Broadway clearly has an arguable case that he is entitled to at least 5% of the shares of Petro Motion, and that accordingly he is a beneficial owner of a security (shares) of Petro Motion, and therefore a ‘complainant’ for the purposes of section 243(3) of the ABCA.

[20] Pursuant to Section 243(3) security for costs cannot be required from the plaintiff Broadway, and the defendants’ application for security for costs is accordingly dismissed.

Royal Well Servicing Ltd v Murphy Oil Company Ltd, 2018 ABQB 514

This was a successful summary dismissal application based on a limitation period argument. Work was performed, invoices had been issued for the work, and had been paid. Subsequently, it was discovered that not all charges were included on the original invoices, and new invoices were issued to address this. The Plaintiff argued that the limitation period ran from the date the new invoices were issued. The Court disagreed and found that claims for debts from jobs completed more than two years and 45 days before the filing of the Statement of Claim were statute barred by the Limitations Act. The Court found that the limitation period ran from a reasonable length of time after work was completed, in which invoices would have been issued and paid. The Court also concluded that section 6 of the Limitations Act (claims added to a proceeding) did not save the action.

[23] In those cases where services have been performed and an invoice has been issued and not paid, the injury is said to be the unpaid invoice.

[24] Things become more complicated when services have been provided and no invoice is issued, or as is the case here, the original invoice did not include some of the services that were provided.

[25] Royal argues that the injury does not occur until after the invoice is issued and the defendant fails to pay it. Royal argues that both of these things are required in order to start the clock running on the limitation period.

[26] Murphy argues that the injury occurs when the work is complete and the recipient of those services does not pay for them – regardless of whether an invoice was issued. Murphy argues that the injury is the economic loss that the claimant suffers when this happens, not the non-payment of the invoice by the defendant.

[27] Both of these arguments ignore the need to consider the elements of discoverability in relation to what the claimant knew or in the circumstances ought to have known. The test is whether the claimant ‘in the circumstances ought to have known’ of the claim – whether the claimant was reasonably diligent in determining whether it had a claim, in the claimant’s circumstances; Condo Plan 0125764 at para 95. Put another way, when did Royal know, or in the circumstances when ought Royal to have known, the material facts giving rise to the cause of action in this case?

[28] It is not the nature of the injury that should be the focus of the analysis in this case, but rather when Royal knew or should have known the facts that permit the analysis and application of s 3(1)(a) of the Limitations Act.

[29] Royal was the party who, with due diligence, would have known at the time of sending its original invoices, that some of its services had not been billed and that Murphy had not paid for those services. Royal is relying on its own lack of diligence in failing to issue the correct invoices and in failing to issue further invoices within a reasonable period of time, to extend the limitation period. Issuing a correcting invoice in these circumstances should not delay or re-start the running of the limitation period; Twinn v Sawridge Band, 2017 ABQB 366 (CanLII) at para 88 (Twinn); Strohschein v Alford, 2015 ABPC 243 (CanLII) at para 24 (Strohschein).

2. When does the limitation period start to run in relation to those services for which no invoice was issued?

[30] Applying the discoverability principles set out above, the limitation period in this case would run from the time the services were completed and a reasonable period of time is allowed for issuing the invoice and its payment by the defendant.

[36] In this case, the Master concluded that Royal’s action should have been commenced within 2 years and 45 days from the date the work was completed. That is how he reached his conclusion that any claims arising from work done before December 5, 2013 are statute barred by the Limitations Act. I agree with the Master’s conclusion.