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Monday Morning Case Bites for November 1, 2021

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

Edited by Steven Graham

Lafferty v Co-Operators General Insurance Co, 2021 ABCA 359
Limitation Period | Coverage Denial | Discoverability

Song v Her Majesty the Queen in Right of Alberta, 2021 ABCA 361
Delay | Rule 4.31


Lafferty v Co-Operators General Insurance Co, 2021 ABCA 359

The Master in Chambers initially dismissed the Plaintiffs’ claim on the basis that their insurance policy excluded coverage for loss or damage caused by illegal drug operations, and that the claim was filed more than four years out of time under the Limitations Act. That decision was upheld by the Justice in Chambers, and subsequently appealed.

The matter involved a house owned by the Plaintiffs which was rented to tenants. The tenants used the house to grow marijuana without the Plaintiffs’ knowledge. Co-Operators denied coverage on the basis of the exclusion for damage caused by illegal drug operations and vandalism. That determination was made on February 1, 2011. The Plaintiffs did not file their claim until February 7, 2017 and did not serve it until January 2, 2018.

One issue was that the Plaintiffs advised their broker that they were renting the house, and the broker did not advise them to obtain different coverage as a result of the rental. The Plaintiffs argued that Co-Operators were estopped from claiming a material change in risk because they knew about the rental and did not follow the necessary steps to void coverage.

The Master in Chambers, in dismissing the claim, affirmed that the insurer knew about the rental but it was irrelevant, as the denial of coverage was not based on a material change in risk. The Chambers Justice, on appeal, determined that the question regarding the insurer’s alleged breach of duty of good faith was moot, since the claim was filed well out of time.

The question before the Court of Appeal was whether the Courts below erred in finding the insurer met its burden of proof that more than two years before the claim was filed, [the Plaintiffs] knew or ought to have known that the injury occurred, was attributable to the conduct of the insurer, and (assuming liability), warranted bringing a proceeding, per s.3(1) of the Limitations Act.

The Court of Appeal cited from the Supreme Court of Canada’s decision in Grant Thornton LLP v New Brunswick (2021 SCC 31) that the common law rule of discoverability applies, unless ousted by clear legislative language. The Alberta Limitations Act codifies the common law rule of discoverability:

[25]           […] The common law discoverability rule provides that a cause of action arises for the purposes of a limitation period “when the material facts on which it is based have been discovered or ought to have been discovered by the plaintiff by the exercise of reasonable diligence”: Grant Thornton, para 29; Central Trust Co v Rafuse1986 CanLII 29 (SCC), [1986] 2 SCR 147, 224, 31 DLR (4th) 481, citing Kamloops (City of) v Nielsen1984 CanLII 21 (SCC)[1984] 2 SCR 2. [other citations omitted]

The Plaintiff, Justin Lafferty, attended law school subsequent to the loss and discovered provisions in the Insurance Act which, he argued, were the first he became aware that Co-Operators may have acted in bad faith. The Court of Appeal rejected this argument, since the material facts were known to the Plaintiff long before that time:

[26]           Mr Lafferty’s legal education in 2015 did not start, or restart, the limitation period clock on the breach of good faith claim as the Laffertys contend, because the material facts upon which their claim was asserted were known to them when they received the insurer’s denial of coverage letter. Contrary to Mr Lafferty’s assertions, there is nothing in the evidence to show he learned of any new material fact between the date of the denial letter and February 7, 2015, when he says he became suspicious the insurer had acted in bad faith.

[27]           The knowledge required for the purposes of determining the limitation period under s 3(1) of the Limitations Act does not have to be perfect knowledge: Stack v Hildebrand2010 ABCA 108, para 14, 477 AR 359; De Shazo, para 31Canadian Natural Resources Limited v Husky Oil2020 ABCA 386, para 31. Rather, plaintiffs will have sufficient knowledge when they have some support for a suspicion that their injury is attributable to the conduct of the defendant, and assuming the defendant’s liability, that an action is warranted: Grant Thornton, para 46; HOOPP Realty Inc v Emery Jamieson LLP2018 ABQB 276, para 213, 27 CPC (8th) 83 (M), citing Peixeiro v Haberman1997 CanLII 325 (SCC), [1997] 3 SCR 549, para 18, 151 DLR (4th) 429. Also see Stack, para 14De Shazo, para 36Hill, para 8.

[28]           Put another way, the requisite knowledge exists when a plaintiff “has knowledge, actual or constructive, of the material facts upon which a plausible inference of liability on the defendant’s part can be drawn”, Grant Thornton, paras 42, 45. A plaintiff will have constructive knowledge when the evidence shows the plaintiff ought to have discovered the material facts by exercising reasonable diligence, para 44. This plausible inference is one which gives rise to a “permissible fact inference”, para 45.

The Court of Appeal held that the Plaintiffs knew of the injuries and had all the facts they needed in February 2011 to draw an inference of liability on Co-Operators’ part. Their ignorance of the legal principles at play and how they may affect their rights was not a basis to postpone a limitation period.

The Court of Appeal upheld the decisions below, concluding there was no merit to the Plaintiffs’ claim and no genuine issue requiring a trial.


Song v Her Majesty the Queen in Right of Alberta, 2021 ABCA 361

The Plaintiff commenced an action against the Crown in right of Alberta for injuries he sustained while in the Remand Center in Edmonton. The Claim was commenced in 2006. On May 28, 2019 an application was brought before a Master in Chambers to strike for delay, pursuant to Rule 4.31. The Master dismissed the application; on appeal, the Justice in Chambers dismissed the action for delay.

The Justice in Chambers relied on the following facts to support her conclusion that Rule 4.31 had been satisfied:

  1. Three periods of unexplained activity amounting to 38 months;
  2. Four years of delay in finalizing pleadings;
  3. 15 months of delay in obtaining the EPS investigation file attributable to the Plaintiff;
  4. Delay in the Plaintiff answering undertakings and providing their standard of care report;

Before the Court of Appeal, the parties agreed that the delay was not inordinate. The Court of Appeal determined that the Chambers Justice erred in failing to assess the Crown’s role in the delay. In doing so, the Court of Appeal found it necessary to go through the minutiae of the action to locate periods of alleged delay and determine which parties were responsible for the same.

The Court of Appeal found that the Crown was entitled to rely on s.20 of the Proceedings Against the Crown Act to require the claimant to provide information the Crown may reasonably require. That said, the Crown waited 17 months after receiving an informal response to provide particulars from the Plaintiff before it filed its Statement of Defence:

[40]           Section 20 should not be taken as setting a standard of disclosure of a claim higher than that required by the Rules of Court pleadings provisions. It is not the intention of this provision that the claimant should provide full particulars of its intended proceedings, and how it intends to prove them. A properly drafted Statement of Claim will almost invariably meet the standard required by the Proceedings Against the Crown Act. Further information about the claim is more appropriately obtained through production of records and Questioning.

[41]           In this case, the additional Demand for Advance Information did not justify any delay in the filing of the Statement of Defence. The contents and filing of the Statement of Defence are governed by the Rules of Court, and once sufficient particulars were provided by the plaintiff, a defence was due. Section 8 of the Proceedings Against the Crown Act makes clear that claims against the Crown are to be processed under the ordinary procedural rules.

[42]           In this case, the Crown had all the information it could reasonably request under s 20. The Crown had the Board of Inquiry Report with its detailed review of the event that is the subject of the action. Nothing further was required to comply with s 20. It knew that the appellant had been an inmate of the ERC, and that he had been assaulted by another inmate. The “circumstances” were well-known, as were the “departments and officers of the Crown concerned”. Further, there is no particular formality required in the form of the response to a s 20 inquiry.

The Court of Appeal thus concluded both parties were responsible for the delay in finalizing the pleadings.

The appellants also argued the Chambers Justice failed to consider delay caused by events outside of the appellant’s control, such as obtaining the EPS file and standard of care expert report:

[47]           It took 15 months to obtain the EPS file. As the Crown acknowledges, it inadvertently misplaced the draft consent order for five months and the remainder of the 15 months appears to have been consumed by the appellant sending draft consent orders to the EPS and EPS advising that they did not meet their requirements, even ones that had been previously approved. While it is true that the appellant could have short circuited this delay by a Rule 5.13 application, nonetheless, this delay was largely beyond the plaintiff’s control and therefore excusable.

With respect to the expert report, the Chambers Justice held that the three years of delay was not reasonable, and it should not have taken 18 months after the first expert resigned for the Plaintiff to provide a report. As the Court of Appeal noted, the fact that the expert’s son had cancer and the expert himself was diagnosed with cancer and eventually became unable to complete the report was not attributable in any way to the Plaintiff, and therefore excusable.

With respect to prejudice, the Court of Appeal noted the evidence is largely contained within the proceedings of a recorded Board of Inquiry hearing, a report flowing from that hearing, and the documents within that process. The Court of Appeal saw no evidence of prejudice as a result of failing memories or lost witnesses, and in light of their finding shared delay and excusable delay, the presumption of prejudice could not be relied upon.

Ultimately the Court of Appeal agreed with the Master that this was a ‘borderline case’, the result of which was that it deserved to be heard. The appeal was allowed and the matter directed to proceed to trial.