nielsen j

3.68: Court options to deal with significant deficiencies
3.71: Separating claims
3.72: Consolidation or separation of claims and actions
4.22: Considerations for security for costs order
13.7: Pleadings: other requirements

Case Summary

Through its Statement of Claim, the Plaintiff alleged that the Defendant initiated receivership proceedings hastily, and in breach of a forbearance agreement, causing the Plaintiff to go out of business. The Defendant, Servus, applied for an Order Striking out the Statement of Claim for failure to disclose a cause of action, collateral attack on receivership proceedings, and abuse of process. Alternatively, the Defendant applied for Security for Costs.

The Defendant proposed to strike out the Plaintiff’s claims relating to the Defendant’s conduct leading up to the Receivership Order (the “Conduct Claims”), and claims relating to the Receiver’s shortcomings (the “Receiver Claims”). Nielsen J. noted that the test for striking out pleadings is outlined in Rule 3.68, and has been interpreted by the leading authorities to mean that a claim may be struck where it is “beyond doubt” and “plain and obvious” that the claim will fail.

Nielsen J. held that the Conduct Claims did not conflict with the receivership and sale proceedings. The Defendants’ allegations revolved around a concern that the Statement of Claim revealed similar allegations to those made in its defence to the receivership proceedings. Justice Nielsen noted that Rules 3.71 and 3.72 provided that a claim may be asserted in a separate Action, and as a Counterclaim in another Action if the claim arose from the same occurrence or series of occurrences. Nielsen J. observed that since the receivership Action was nearing completion, and because the pleadings disclosed a reasonable cause of action, allegations regarding Servus’ conduct should be tried apart from the receivership Action. However, Nielsen J. held that the Conduct Claims were not sufficiently particularized, since they did not provide particulars with respect to alleged misrepresentation, in accordance with Rule 13.7(c). The Plaintiff was granted 30 days from the date of the Reasons for Judgment to provide particulars. Nielsen J. noted that the Plaintiff had the opportunity to challenge the Receiver Claims in the context of the receivership. Accordingly, Nielsen J. held, among other things, that the Receiver Claims were a collateral attack on the receivership proceedings, and several paragraphs in the Statement of Claim should be struck.

Nielsen J. considered Rule 4.22, and granted the Defendant’s request for Security for Costs. Justice Nielsen noted that Rule 4.22 applies to all cases which are not subject to statutory regulations. In this case, security would be granted under section 254 of the Business Corporations Act, RSA 2000, c B-9 rather than Rule 4.22, because the Plaintiff was a body corporate.

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