O'Connor Associates Environmental Inc. et al. v. MEC OP LLC et al.,

• Judge: Kenny,Paperny,Slatter
• Neutral Citation: 2014 ABCA 140
• Subject Matter: TORTS,PRACTICE
• Citation: 2014 ABCA 140,(2014), 572 A.R. 354,572 AR 354,(2014), 572 AR 354,572 A.R. 354
• Date: 04 April 2014
• Court: Court of Appeal (Alberta)

O'Connor Assoc. Envir. Inc. v. MEC OP LLC (2014), 572 A.R. 354; 609 W.A.C. 354 (CA)

MLB headnote and full text

Temp. Cite: [2014] A.R. TBEd. AP.133

O'Connor Associates Environmental Inc. and Niven Fischer Energy Services Inc. (appellants/applicants) v. MEC OP LLC, MEC OP Transaction I ULC and Merit Energy Company LLC (respondents/respondents)

(1301-0375-AC; 1401-0002-AC; 2014 ABCA 140)

Indexed As: O'Connor Associates Environmental Inc. et al. v. MEC OP LLC et al.

Alberta Court of Appeal

Paperny and Slatter, JJ.A., and Kenny, J.(ad hoc)

April 29, 2014.

Summary:

The plaintiff purchased a number of oil and gas assets from the defendant vendors. The plaintiff sued the defendants, alleging deceit, negligent misrepresentation, breach of contract, and unjust enrichment. The defendants third partied three of the advisors and consultants who were hired by the plaintiff to assist with the due diligence process leading up to the purchase. The third party claim alleged that the third parties breached their contracts with the plaintiff and were negligent in performing their services. The third parties applied to strike the third party claims, arguing that the claims were not of the type that could properly be added under rule 3.44 and that the claims did not disclose a reasonable cause of action. The defendants also applied to amend the third party claim to include a claim of contribution, in the event that both the defendants and the third parties were found to have been negligent. The amended third party claim also alleged that the third parties had breached a duty owed to the defendants because they failed to adequately disclose or communicate information to the plaintiff. The latter amendment was applied for on the basis that in the decision Canadian Natural Resources Ltd. v. Arcelormittal Tubular Products Roman S.A., 2013 ABCA 279, the court had recognized "an arguable independent duty in negligence, despite the absence of a contractual relationship, between a defendant and a third party based on their relationship as actors in the same factual milieu".

The Alberta Court of Queen's Bench (case management judge), in brief oral reasons, allowed the amendments, holding that as a result of the decision in Arcelormittal Tubular it could not be said that there was no reasonable prospect that the new cause of action would succeed. The case management judge also concluded that it was reasonably possible that the court could hold the third parties partly responsible for the plaintiff's damage, and that therefore they should be bound by the decision. That was sufficient to fall under rule 3.44. The third parties appealed.

The Alberta Court of Appeal allowed the appeal. The third party notices and the amendments alleging an independent duty were struck. The court held that there was no realistic prospect of any findings being made in this litigation that would engage the third parties sufficiently to warrant the extra expense, complexity, and delay that would be caused by these third party notices. This was not a case where third party notices should be permitted so that the third parties would be bound by the findings and outcome of the main action.

Practice - Topic 1054

Parties - Third party or subsequent party procedure - Nature and scope - Nature of claims authorized - [See both Practice - Topic 1120 ].

Practice - Topic 1120

Parties - Third party or subsequent party procedure - When available - General - The Alberta Court of Appeal stated that "The present rule [respecting third party claims] is wider than its predecessor, because it is not limited to claims of indemnity or contribution. Rule 3.44 as presently drafted permits a wider range of third party claims. The rule is now another potential form of joinder. It does not mean, however, that any potential issue or claim between the parties and non-parties should be joined together using the third party process. At a minimum, the third party notice must disclose a legally recognized claim by either the plaintiff or the defendant against the third party. The complexity, expense, and time demands of an action will vary directly depending on the number of parties and causes of action. At some point issues of proportionality and efficiency dictate that collateral claims be tried on their own. Prevention of multiplicity of proceedings is desirable, but so too is allowing the economic and timely advancement of the original action" - See paragraphs 25 and 26.

Practice - Topic 1120

Parties - Third party or subsequent party procedure - When available - General - The plaintiff purchased oil and gas assets from the defendant vendors - The plaintiff sued the defendants, alleging deceit, breach of contract, negligent misrepresentation, etc. - The defendants third partied the plaintiff's advisors and consultants, claiming, inter alia, that the third parties owed them a duty of care because they failed to adequately disclose or communicate information to the plaintiff - The third parties sought to have the third party claims struck - The Alberta Court of Appeal held that there was no independent duty of care owed by the third parties to the defendants, so the present third party notice could not be supported based on rule 3.44(b) - Further, this was not a case where third party notices should be permitted so that the third parties would be bound by the findings and outcome of the main action (rule 3.44(c)) - See paragraphs 25 to 44.

Practice - Topic 1127

Parties - Third party or subsequent party procedure - When available - Bars - [See second Practice - Topic 1120 ].

Practice - Topic 2200

Pleadings - Striking out pleadings - General principles - The Alberta Court of Appeal stated that the test for striking out pleadings was set out in British Columbia v. Imperial Tobacco Canada Ltd. (SCC 2011) - That case provided that "... on a motion to strike, it is not determinative that the law has not yet recognized the particular claim. The court must rather ask whether, assuming the facts pleaded are true, there is a reasonable prospect that the claim will succeed. The approach must be generous and err on the side of permitting a novel but arguable claim to proceed to trial" - See paragraph 14 and 16.

Practice - Topic 2200

Pleadings - Striking out pleadings - General principles - The Alberta Court of Appeal stated that "The test for striking pleadings is to be found in Imperial Tobacco [SCC 2011], which is binding authority in this province. In determining whether a novel claim has a 'reasonable prospect' of success, many factors must be examined. The clarity of the factual pleadings is important. The existence of case law discussing the same or similar causes of action is relevant. As noted in Imperial Tobacco, the courts must be careful not to inhibit the development of the common law by applying too strict a test to novel claims. However, the courts must resist the temptation to send every case to trial, even if some legal analysis is needed to determine if a claim has any reasonable prospect of success ..." - See paragraph 16.

Practice - Topic 2200

Pleadings - Striking out pleadings - General principles - In Canadian Natural Resources Ltd. v. Arcelormittal Tubular Products (2013 Alta. C.A.), the court interpreted the test for striking out pleadings as set out in British Columbia v. Imperial Tobacco (SCC 2011) as being: "... unless there is binding authority holding that either there is at law no such cause of action as alleged or if there be one, that it would not apply on the facts of the case at bar, then it cannot be said that the claim in question has no 'reasonable prospect' of success. Whether there is any merit to this admittedly novel duty of care can only be determined at trial" - The Alberta Court of Appeal stated that the court in Arcelormittal Tubular stated the test too strictly - See paragraph 15.

Practice - Topic 2202

Pleadings - Striking out pleadings - Standard of review of pleadings - The Alberta Court of Appeal stated that whether a pleading disclosed a cause of action was a question of law that was reviewed for correctness - If the law was correctly stated, the decision to strike the pleadings had to be reasonable - See paragraph 12.

Practice - Topic 2230

Pleadings - Striking out pleadings - Grounds - Failure to disclose a cause of action or defence - The plaintiff purchased oil and gas assets from the defendant vendors - The plaintiff sued the defendants, alleging deceit, breach of contract, etc. - The defendants third partied the advisors and consultants hired by the plaintiff to assist with the due diligence process - The defendants claimed that the third parties owed them a duty of care - The third parties argued that the claims respecting a duty of care should be struck - The Alberta Court of Appeal rejected the defendants' duty of care argument - There was not sufficient proximity between the defendants and third parties to give rise to a duty of care - Even if there was, residual policy considerations prevented recognition of a duty of care - The court struck the defendants' pleadings - See paragraphs 17 to 24.

Practice - Topic 8800.1

Appeals - Duty of appellate court regarding findings of mixed law and fact by a trial judge - [See Practice - Topic 8800.2 ].

Practice - Topic 8800.2

Appeals - General principles - Duty of appellate court regarding findings of law - The Alberta Court of Appeal stated that the interpretation of the Rules of Court was a question of law, and the standard of review was correctness - The application of the Rules to a particular set of facts was a mixed question of fact and law, and the standard of review was palpable and overriding error - To the extent that there was a discretion involved in amending pleadings, the decision would only be interfered with on appeal if it was based on an error in principle, or was wholly unreasonable - See paragraph 12.

Practice - Topic 8804

Appeals - Duty of appellate court regarding discretionary orders - [See Practice - Topic 8800.2 ].

Torts - Topic 76

Negligence - Duty of care - General principles - The plaintiff purchased a number of oil and gas assets from the defendant vendors - The plaintiff sued the defendants, alleging deceit, negligent misrepresentation, breach of contract, etc. - The defendants third partied three of the advisors and consultants who were hired by the plaintiff to assist with the due diligence process - The defendants claimed that the third parties owed them a duty of care, relying on a statement in Canadian Natural Resources Ltd. v. Arcelormittal Tubular Products (2013 Alta. C.A.), that "... it was arguable that the parties operating in the same milieu as other actors could have duties to legal neighbours despite no privity of contract ..." - The Alberta Court of Appeal held that the statement in Arcelormittal Tubular should be read as a comment on the facts in that case, and not as a general test for a duty of care - In light of test for identifying a duty of care in tort set out in Cooper v. Hobart (2001 SCC) and other cases, there was no longer any basis for a test that there could be an independent duty in negligence between two parties merely "based on their relationship as actors in the same factual milieu" - See paragraphs 17 to 20.

Cases Noticed:

Canadian Natural Resources Ltd. v. Arcelormittal Tubular Products Roman S.A., et al. (2013), 556 A.R. 188; 584 W.A.C. 188; 83 Alta. L.R.(5th) 417; 2013 ABCA 279, refd to. [para. 8].

Housen v. Nikolaisen et al., [2002] 2 S.C.R. 235; 286 N.R. 1; 219 Sask.R. 1; 272 W.A.C. 1; 2002 SCC 33, refd to. [para. 11].

Walton International Group Inc. v. Rocky View No. 44 (Municipal District) et al., [2007] A.R. Uned. 6; 32 M.P.L.R.(4th) 55; 2007 ABCA 21, refd to. [para. 11].

Mitten v. College of Alberta Psychologists et al. (2010), 487 A.R. 198; 495 W.A.C. 198; 2010 ABCA 159, refd to. [para. 11].

Heikkila v. Workers' Compensation Board Appeals Commission (Alta.) et al. (2007), 404 A.R. 33; 394 W.A.C. 33; 2007 ABCA 92, refd to. [para. 11].

Foda v. Capital Health Region et al., [2007] A.R. Uned. 345; 2007 ABCA 207, refd to. [para. 12].

Castledowns Law Office Management Ltd. et al. v. FastTrack Technologies Inc. (2012), 533 A.R. 287; 557 W.A.C. 287; 75 Alta. L.R.(5th) 125; 2012 ABCA 219, refd to. [para. 12].

Indian Residential Schools, Re (2001), 286 A.R. 307; 253 W.A.C. 307; 96 Alta. L.R.(3d) 16; 2001 ABCA 216, refd to. [para. 12].

British Columbia v. Imperial Tobacco Canada Ltd. et al., [2011] 3 S.C.R. 45; 419 N.R. 1; 308 B.C.A.C. 1; 521 W.A.C. 1; 2011 SCC 42, refd to. [para. 14].

Hryniak v. Mauldin (2014), 453 N.R. 51; 314 O.A.C. 1; 2014 SCC 7, refd to. [para. 14].

Kripps et al. v. Touche Ross & Co. et al. (1992), 15 B.C.A.C. 184; 27 W.A.C. 184; 69 B.C.L.R.(2d) 62; 94 D.L.R.(4th) 284 (C.A.), refd to. [para. 16].

BG Checo International Ltd. v. British Columbia Hydro and Power Authority, [1993] 1 S.C.R. 12; 147 N.R. 81; 20 B.C.A.C. 241; 35 W.A.C. 241, refd to. [para. 17].

Cooper v. Registrar of Mortgage Brokers (B.C.) et al., [2001] 3 S.C.R. 537; 277 N.R. 113; 160 B.C.A.C. 268; 261 W.A.C. 268; 2001 SCC 79, refd to. [para. 19].

Cooper v. Hobart - see Cooper v. Registrar of Mortgage Brokers.

Quintette Coal Ltd. v. Bow Valley Resource Services Ltd. (1986), 19 C.L.R. 153 (B.C.S.C.), affd. (1986), 19 C.L.R. 153n, refd to. [para. 19].

Hill et al. v. Hamilton-Wentworth Regional Police Services Board et al., [2007] 3 S.C.R. 129; 368 N.R. 1; 230 O.A.C. 260; 2007 SCC 41, refd to. [para. 21].

Spectra Architectural Group Ltd. v. Eldred Sollows Consulting Ltd. et al. (1991), 119 A.R. 13; 80 Alta. L.R.(2d) 361 (Q.B. Master), refd to. [para. 21].

B.D. et al. v. Children's Aid Society of Halton Region et al., [2007] 3 S.C.R. 83; 365 N.R. 302; 227 O.A.C. 161; 2007 SCC 38, refd to. [para. 21].

Syl Apps Secure Treatment Centre v. B.D. - see B.D. et al. v. Children's Aid Society of Halton Region et al.

Elliott v. Insurance Crime Prevention Bureau et al. (2005), 236 N.S.R.(2d) 104; 749 A.P.R. 104; 256 D.L.R.(4th) 674; 2005 NSCA 115, refd to. [para. 21].

Hedley Byrne & Co. v. Heller & Partners, [1964] A.C. 465 (H.L.), refd to. [para. 22].

Kamahap Enterprises Ltd. v. Chu's Central Market Ltd. (1989), 64 D.L.R.(4th) 167; 40 B.C.L.R.(2d) 288 (C.A.), refd to. [para. 23].

Laidar Holdings Ltd. v. Lindt & Sprungli (Canada) Inc. et al. (2012), 316 B.C.A.C. 42; 537 W.A.C. 42; 29 B.C.L.R.(5th) 1; 2012 BCCA 22, refd to. [para. 29].

Adams v. Thompson, Berwick, Pratt & Partners (1987), 15 B.C.L.R.(2d) 51 (C.A.), refd to. [para. 30].

Nunavut Tunngavik Inc. v. Canada (Attorney General) et al. (2009), 457 A.R. 320; 457 W.A.C. 320; 70 C.P.C.(6th) 93; 2009 NUCA 2, dist. [para. 31].

Statutes Noticed:

Rules of Court (Alta.), rule 3.44 [para. 25].

Counsel:

H.D. Lloyd, Q.C., and J. Shepherd, for the appellant, O'Connor Associates Environmental Inc.;

D. Tupper, for the appellant, Niven Fischer Energy Services Inc.;

R.F. Smith and K. Moffet-Burima, for the respondents.

This appeal was heard on April 4, 2014, before Paperny and Slatter, JJ.A., and Kenny, J. (ad hoc), of the Alberta Court of Appeal. The following memorandum of judgment was filed by the court in Calgary, Alberta, on April 29, 2014.