3.68: Court options to deal with significant deficiencies
3.69: Joining claims
3.70: Parties joining to bring action
3.71: Separating claims
13.6: Pleadings: general requirements

Case Summary

The Defendants appealed a Decision which had allowed the Plaintiff, Domenic Construction Ltd.’s (“Domenic”) to amend its pleadings. The pleading amendments arose from a complex chain of events involving a default on the impugned land sale agreement. The Respondent, Domenic had sold a parcel of land to Clearview Development Corporation (“Clearview”), the financing of which was guaranteed by the Appellant, Primewest Capital Corp (“Primewest”).

During its unsuccessful collection efforts following a foreclosure Action against Clearview, Domenic discovered that it had been holding the lands in question in trust for the benefit of a parent corporation, which was owned by another Defendant in the Action, Mr. Noval. Moreover, Domenic discovered that shortly after the land sale was executed, the lands were transferred at undervalue in settlement of the trust agreement to this same parent company: one of several corporations which were owned by Mr. Noval.

Accordingly, Domenic applied to amend its pleadings to assert, in essence, that Clearview had clandestinely acted as agent for its parent company during the land purchase in order to insulate the former from liability. These amendments were not adjudicated, as shortly thereafter, Domenic successfully applied to the Court for more substantial amendments which, among other things, alleged that Clearview had been intentionally dissolved and the lands transferred to another of Mr. Noval’s companies in an attempt to preclude liability, which would add new Defendant corporations to the Action, and would potentially allow Domenic to pierce the corporate veil, if successful.

The Court of Appeal assessed the Appellants’ objections to the proposed amendments. Domenic’s discovery of the relevant information prompting the sought-after amendments was also in issue due to the time constraints imposed by the Limitations Act, RSA 2000, c L-12 (the “Limitations Act”) and thus the Court of Appeal was tasked with examining the amendments in light of the Rules as well as the limitations issues.

With respect to the joining of the parent corporation due to the fraudulent transfer of the lands allegation, the Court stated that in assessing Rules 3.69 and 3.70, the amendment was permissible as the corporation’s ostensible liability arose from the same transaction, and further, including the parent company as a party would not cause the litigation to become so complex as to become unmanageable, as per Rule 3.71.

However, the Court of Appeal agreed with the Appellants’ argument that one of Domenic’s amendments, which alleged that Clearview, Mr. Noval, and his corporations intentionally failed to disclose the agency relationship that Clearview held amongst that corporate group, constituted, in the Court’s words, “judicial obstruction”. The Court noted that while this issue could be litigated under both the Limitations Act and the Rules, pleadings must contain facts not evidence, as required by Rule 13.6.

Notwithstanding this assertion, the Court did not grant the Appellant’s Application to strike pursuant to Rule 3.68, as the overlapping limitations issues created factual uncertainties which necessitated a Trial to be thoroughly examined.

The Court of Appeal allowed the Appeal in part, and permitted some of Domenic’s amendments to the Statement of Claim, and disallowed others.

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