Go to Top

Monday Morning Case Bites for June 7, 2021

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

Edited by Steven Graham

1237789 Alberta Ltd v Ken’s Furniture of Leduc Inc, 2021 ABQB 421
Limitations Act | Adding a Defendant to the action

This action arose as a result of a fire at the premises of Ken’s Furniture in Camrose, Alberta in 2014. The fire spread to the premises of neighboring companies who were tenants of a commercial space owned by the Plaintiff. The Plaintiff commenced an action against the Defendants for damages incurred as a result of the fire, and during the course of that action discovered that another company may have been involved in the cause of the fire. As such, the Plaintiff sought to add that other company, Battle River Plumbing and Heating Ltd. (“Battle River”) to the action as an additional defendant and brought this application to do so.

Shortly after the fire, a Cause and Original report was completed, which could not provide a precise cause of the fire. A separate report prepared by the City of Camrose Fire Department pointed to the overhead furnace as a possible cause of the fire.

When the Defendant Ken’s Furniture provided its Affidavit of Records, there were invoices from Battle River for servicing of furnaces and boilers at the location of the fire. The Court pinpointed the provision of these records as the first notice the Plaintiff had of any potential involvement of Battle River. The Court went on to consider whether the Plaintiff should have known the fire may have been attributable to involvement of Battle River:

[16]           Actual subjective knowledge is not the end of the matter. The question is when the Plaintiffs ought to have known that the cause of the fire may have been attributable to the conduct of the proposed added Defendant, Battle River. The objective standard requires proof that an objectively reasonable person in the position of the Plaintiffs ought to have known about the involvement of this proposed Defendant using reasonable diligence.

[17]           In McDonnell v Csaki, 2014 ABQB 452, Poelman J said at para 28:

What a plaintiff “ought to have known” also incorporates an expectation of reasonable diligence by the plaintiff or his or her counsel. It will not suffice to wait idly for information to come to hand. Some research and inquiry may be expected of a reasonable plaintiff as part of determining what ought to have been known. The burden is not high to establish at least a triable issue on due diligence, but it is usually expected that the plaintiff to put forward some evidence of steps taken to ascertain the identity of tortfeasors and give a reasonable explanation for why information was not obtainable with due diligence earlier – and doing nothing for two years after an accident except possibly requesting a police report will not usually amount to due diligence.

The Court confirmed that a party must conduct due diligence to identify potential defendants, and found that the Plaintiff in this case had failed to do so. As such, the requirement to seek a remedial order within the timelines set out under s.3(1)(a)(ii) of the Limitations Act was not met:

[18]           The law requires that a litigant take objectively reasonable steps to discover the identity of a potential defendant. The obligation is engaged somewhere between suspicion and perfect knowledge. The Plaintiffs knew almost from the start that the prime suspect was the ceiling heater in Ken’s Furniture. No steps were taken to identify either the manufacturer or a service company until the Affidavits of Records were served about three and a half years later.

[19]           On the evidence presently before the Court, I am unable to say that the Plaintiffs’ conduct, being entirely reactive in the face of three expert reports identifying the roof heater as the potential cause, discharged any objective standard of diligence to discover the identity and involvement of the proposed added Defendant. The Plaintiffs apparently did nothing despite the fact that the entire focus of causation was the heater and despite a full battery of claims personnel investigating this fire loss.

[20]           The history of this file also exposes the dangers of a relaxed approach to the deadlines in the rules, especially where there is a limitation and the potential responsibility of another party.

[21]           The fact that the Contributory Negligence Act, RSA 2000, c C-27 (s 2(2)) and the Tort-Feasors Act, RSA 2000, c T-5 (s 3) meant that there was little incentive for additional parties is irrelevant.

[22]           In this case, the claimant/Applicant has not met the burden imposed on it by s 3(5) of the Limitations Act to show that the claim was made in time. The primary limitation under s 3(1)(a)(ii) has expired

The Court then considered when Battle River first had notice of a potential claim against it, for the purpose of section 6(4)(b) of the Limitations Act. The Court relied on the evidence provided by Battle River that despite being contacted by an insurance adjuster soon after the Fire, Battle River had no knowledge of any potential claim against it until it received a letter from the Plaintiff’s insurer on May 16, 2018. The Court determined that the time period under s.6(4)(b) of the Limitations Act expired in October 2017 – three years after the fire – and as such Battle River had not received notice of the claim in time that would permit it to be added as a Defendant:

[24]           When s 6(4)(b) of the Limitations Act first received judicial consideration, the emphasis was on notice, or knowledge, of the added claim (McLaughlin v Broddy, 2006 ABQB 914, paras 28, 29). Although the emphasis appears to have shifted somewhat towards prejudice, the test is in two parts: adequacy of notice, and prejudice. If there is no sufficient knowledge for the purposes of this subsection, the issue of prejudice is irrelevant. In other words, the prejudice part of the subsection is not engaged unless the notice requirement is met.

[25]           Although Mr. Streich admits speaking with an unknown adjuster asking for a statement (above paras 3 & 4), this person did not impart any relevant knowledge for the purposes of this subsection. What it does do is to reinforce the idea that at least someone was following up in early days.

[26]           The time for notice for the purposes of s 6(4)(b) of the Limitations Act expired in October 2017. Accordingly, the notice by Intact’s Claim Representative on May 16, 2018 is beyond the time limit stipulated by that subsection.

[27]           Nothing in the evidence shows that Battle River Plumbing should have concluded that they might be involved within that three year window. In these circumstances, the question of prejudice is irrelevant as it is not engaged until the notice requirement is met. Unlike the circumstances in some of the other cases cited at this Application (Osunde v Saskatchewan Mutual Insurance Company, 2020 ABQB 177 per Robertson M, at paras 27 and following; Poff v Great Northern Data Supplies (AB) Limited, 2015 ABQB 173 per Schutz (then J)), this is not a situation where the proposed added defendant is already a party in some capacity or is closely related to an existing party.

[28]           It is the proposed added Defendant’s burden to show that the requirements of s 6(4)(b) have not been satisfied (s 6(5)(b)). I am satisfied that this burden has been met. On this basis, it would not be appropriate to add Battle River Plumbing and Heating pursuant to s 6(4) of the Limitations Act.

Lastly, the Court considered whether or not the Plaintiff’s claim against Battle River, if it were added, was hopeless. The Court noted that the expert reports pointed to the ceiling heater as the cause of the fire, but there was no evidence that Battle River was responsible for or had anything to do with the particular ceiling heater. The Court noted that the Plaintiff could have cross-examined Battle River in advance of the application to glean more evidence about its potential involvement, but did not do so. As such, the Court relied on the material before it which showed no apparent conection between Battle River and the cause of the fire:

[30]           Usually, amendment applications are made when the record is very incomplete. Here, we have the benefit of a more fulsome record. Not only do we have production, we have a series of expert reports, including the Kent report, produced by agreement just before this Application.

[31]           The Precise Fire Investigation report strongly implicates the ceiling heater. The Camrose fire report does, as well. At the very least, they invite follow-up with respect to this particular potential cause.

[32]           If I were to accept all these reports at face value, it is the ceiling heater that is to blame and, as I read the much more complete Kent report, it was a complete lack of maintenance of the ceiling heater that caused the fire. The Kent report concludes that the ceiling heater was probably never serviced and that lubrication failure, leading to a bearing failure and overheating, was responsible for this fire.

[33]           The invoices from Battle River Plumbing and Heating speak of work done on heaters and furnaces at Ken’s Furniture. However, there is no evidence from any source that Battle River Plumbing and Heating ever had anything to do with this heater. In fact, the entries on the invoices, as brief as they may be, are not consistent with anything the Kent report identifies as the cause of the fire.

[34]           I acknowledge that the evidentiary threshold is very low for this type of application. But at this stage, all the record really does is to very probably exonerate Battle River – or at least to demonstrate to the civil standard that there is no apparent connection between anything Battle River Plumbing and Heating did or did not do that caused this fire.

[35]           This Application is unusual in that there is a more complete evidentiary record. The Applicants argue that Battle River Plumbing and Heating should be added so that their records can be disclosed and they can be questioned. However, Battle River Plumbing’s Officer swore an Affidavit (before privilege was waived on the Kent report) and it would have been a simple matter to cross-examine him on this Affidavit. This would either have cast doubt on what the record shows thus far, or confirm that there is no case. All they had to do is ask (or even examine under r 6.8 is there had been no Affidavit). Instead the Applicants want to bring them in as a full party in the hope that they might fish something out contrary to the present evidentiary record.

As a result, the Plaintiff’s application was dismissed.