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Tuesday Morning Case Bites for November 12, 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

Domenic Construction Ltd v Primewest Capital Corp, 2019 ABQB 840 (CanLII)
Statement of Claim l Amendment

This was an unsuccessful appeal of an Order allowing the amendment of a Statement of Claim, which was issued in 2013. The amendments lifted the corporate veil to hold a director personally liable, added another corporate defendant, and added claims for punitive and aggravated damages. The Court accepted that the threshold for amendments is low:

[20]           The evidentiary threshold is low unless the proposed amendments alleges new, substantive fact. In that case, the application must be supported by evidence: Canadian Natural Resources Limited v Arcelormittal Tubular Products Roman S.A. (Mittal Steel Roman S.A.), 2012 ABQB 679 (CanLII).

The issue was discoverability of the new claims to be added, and the Court took into account the steps taken by Plaintiff counsel to obtain evidence:

[41]           Domenic exercised reasonable diligence in its unrelenting efforts to achieve production of basic documents and have Questioning of relevant witnesses. A review of the various applications, the competing affidavits and the orders granted demonstrate that Domenic was required to seek multiple court orders to compel the defendants’ compliance with the most basic procedural steps.

It was argued that reasonable counsel would obtain a corporate registry search before commencing litigation, and therefore should have known about the dissolution of some of the defendants.  However, throughout the litigation the individual was held out as the corporate officer of that entity, which perpetuated the myth that it continued to be an active corporate entity:

[42]           Finally, with respect to the dissolution of Clearview and Primewest, Noval and Ranch & Cattle argue that a diligent solicitor would have completed a corporate registry search prior to filing the Statement of Claim, and had that occurred Domenic would have discovered the dissolution in 2013. While that may be so, the dissolution documents demonstrate that Primewest represented to the Registrar that it had neither assets nor liabilities at the time of its dissolution. It was therefore dissolved without any notice to its creditors. Noval swore to the fact that he had failed to consider the liability to Domenic when he signed the articles of dissolution. Domenic asserts that either Novel wilfully misrepresented this fact to the Registrar, or that Ranch & Cattle (as the active 100% shareholder) assumed Primewest’s liabilities. Furthermore, notwithstanding the dissolution of Primewest in 2012, and Noval’s knowledge of such, during the course of this protracted litigation Noval continuously held himself out to be the President, corporate representative, or litigation representative of Primewest. He also relied on inadvertence as the explanation for his failure to correct the record as to the status of Primewest and his relationship to it. In the face of this evidence it cannot fairly be argued that the onus rested on Domenic to have conducted an earlier corporate registry search. Primewest, through Noval, perpetuated the myth that it continued to be an active corporate entity.

[43]           Based on all of the above I am satisfied that Domenic had reasonable awareness as to the use of the various corporate entities by Noval, relevant to the alleged fraudulent preference, at the earliest through the Questioning of Noval on October 30, 2015. This was supplemented by the information learned during the Questioning of Larry Owen on November 10, 2016, and, as pointed out by Master Robertson in his Memorandum of Decision, by the subsequent production of financial records in January 2017. As a result, the initial application to amend the pleadings filed January 19, 2017 was brought within the two-year limitation period provided for in section 3(1)(a) of the Limitations Act.

The Court found that the initial application to amend the pleadings was brought within the limitation period, and the amendments were allowed.