Breen v Foremost Industries Ltd

Court of Queen’s Bench of Alberta

Citation: Breen v Foremost Industries Ltd, 2022 ABQB 478

Date: 20220712

Docket: 1501 03872

Registry: Calgary

Between:

Patrick Breen

Plaintiff

- and -

Foremost Industries Ltd., Roy H. Allen, Bruce J. MacLennan,

Bevan May, and Gordon M. Wiebe in Their Capacities As Trustees Of Foremost

Commercial Trust

Defendants

- and -

Foremost Industries Ltd.

- and -

Plaintiff by Counterclaim

Defendant by Counterclaim

Patrick Breen

_______________________________________________________

Memorandum of Decision

of the

Honourable Mr. Justice K.D. Yamauchi

_______________________________________________________

I.

Introduction

[1]

This case involves certain claims that the Plaintiff/Defendant by Counterclaim Patrick

Breen makes against Foremost Industries Ltd. ("FIL"), Roy H. Allen, Bruce J. MacLennan,

Bevan May, and Gordon M. Wiebe in their capacities as trustees of Foremost Commercial Trust

(collectively, the "Trustees"). FIL is one of a group of companies that operate under the same or

a similar umbrella. Those companies include, among others, Foremost Industries LP, Foremost

(Cyprus) Limited, Maloney Industries (Cyprus) Limited, Foremost Maloney Industries Limited,

Foremost Universal LP, and Universal Industries (Foremost) Corp. (collectively, the "Additional

Parties").

[2]

FIL filed a counterclaim against Mr. Breen. FIL and the Additional Parties seek this

Court's permission to amend the counterclaim (the "Amendments") to the form attached to these

reasons as Schedule "A" ("Amended Counterclaim"). Mr. Breen objects to the Amendments.

Page: 2

II.

Background

Mr. Breen filed a statement of claim on April 8, 2015. The Defendants FIL and the

[3]

Trustees (collectively, the "Defendants") filed their statement of defence to Mr. Breen's action on

May 26, 2015. On May 26, 2015, FIL filed a counterclaim against Mr. Breen. Mr. Breen filed a

Reply to Defence and Statement of Defence to Counterclaim on July 2, 2015.

[4]

This Court began hearing this trial on April 25, 2022. Mr. Breen had one other witness,

besides himself, who was his first witness. Mr. Breen's counsel examined Mr. Breen. Thereafter,

the Defendants' counsel began cross-examining Mr. Breen. While Mr. Breen was under cross-

examination and nearing the close of his case, the Defendants' counsel provided Mr. Breen's

counsel with the Amendments. Of course, each time this matter was adjourned during Mr.

Breen's cross-examination, this Court provided Mr. Breen with a warning against speaking to

anyone about the case or his evidence. Thus, he was unable to speak with his counsel concerning

the Amendments.

III.

General Principles

[5]

FIL and the Additional Parties seek this Court's permission to make the Amendments

pursuant to rule 3.65(1) of Alberta Rules of Court, Alta Reg 124/2010 [Rules], which provides:

3.65(1) Subject to subrule (5), before or after close of pleadings, the Court may

give permission to amend a pleading.

[6]

The parties agree that the general rule is that amendments to pleadings should be allowed,

no matter how late or careless, unless there is prejudice to the other side, and even then that is no

obstacle if such prejudice can be repaired: Balm v 3512061 Canada Ltd, 2003 ABCA 98, 14

Alta LR (4^th) 221, citing Milfive Investments Ltd v Sefel (1998), 216 AR 196; Delta Hotels No 2

Holdings Ltd v Calm Shore Ventures (1992) Inc, 2019 ABQB 434 at para 28; Andritz Ltd v

Quality Fabricating & Supply Ltd, 2010 ABQB 101 at para 43. The power to amend is

discretionary, and the court hearing the application should exercise that discretion generously

rather than restrictively: Marlborough Ford Sales Ltd v Ford Motor Co of Canada, 2003

ABQB 298 at para 10, 13 Alta LR (4th) 336. As well, an amendment should always be allowed

if it clarifies the issues or claims that a party is advancing: Andritz at para 46.

[7]

There are several exceptions to the general rule. The "four major exceptions" are:

1. the amendment would cause serious prejudice to the opposing party, not

compensable in costs;

2. the amendment requested is "hopeless," such that if it were in the original

pleadings it would have been struck as being vexatious or an abuse of process, or

it does not disclose a cause of action and is not relevant to a cause of action;

3. unless permitted by statute, the amendment seeks to add a new party or a new

cause of action after the expiry of a limitation period; and

4. there is an element of bad faith associated with the failure to plead the

amendment in the first instance.

Page: 3

Eon Energy Ltd v Ferrybank Resources Ltd, 2018 ABCA 243 at para 18; Attila

Dogan Construction & Installation Co v AMEC Americas Ltd, 2014 ABCA 74

at para 25, 569 AR 308, 6 Alta LR (6th) 358.

[8]

In Delta Hotels, Justice Nielsen, as he then was, also says that an amendment will not be

allowed if it is not in proper form or is unsatisfactorily particularized. He goes on to say that the

court will not allow an amendment in the following circumstance:

... the amendment is made after a limitation has passed and

(i) does not relate to the same conduct, transaction or events

described in the original pleading in the proceedings;

(ii) the defendant did not receive, within the limitation period

applicable to the added claim plus the time provided by law for the

service of process (a total of three years) sufficient knowledge of

the added claim that the defendant will not be prejudiced in

maintaining a defence to it on the merits; and

(iii) the added claim is not necessary or desirable to ensure the

effective enforcement of the claims originally asserted or intended

to be asserted in the proceeding.

Delta Hotels at para 29.

[9]

The cases also speak to the evidence that the party seeking the amendment must present

to the court. In Bard v Canadian Natural Resources, 2016 ABQB 267 at para 12, 86 CPC (7th),

Justice KD Nixon said:

If an amendment is ancillary, no evidence is necessary. Otherwise, the amount of

evidence to support an amendment is generally low. This requirement for

"modest" evidence includes amendments that allege new substantive facts; yet,

even as the evidentiary threshold to amend is low, the evidence "must have some

foundation in fact": [Attila Dogan Construction & Installation Co v AMEC

Americas Ltd, 2013 ABQB 525 at paras 14-16, 565 A.R. 1]. Amendments that

particularize a pre-existing claim are granted more liberally than those which

effectively add new causes of action. The onus is on the applicants to adduce a

modest amount of evidence to support their proposed amendments.

[10] Finally, amendments that plead a new cause of action or claim arising from facts already

pleaded in existing pleadings require little if any evidence: Balm at para 11; Canadian Natural

Resources Ltd v Arcelormittal Tubular Products Roman SA, 2012 ABQB 679, 549 AR 72, 79

Alta LR (5th) 1, affirmed 2013 ABCA 87.

IV.

Discussion

[11] The Amendments include:

(a)

adding the Trustees as Plaintiffs by Counterclaim (the "Trustee

Amendment");

(b)

adding the Additional Parties as Plaintiffs by Counterclaim (the

"Additional Parties Amendment");

Page: 4

(c)

further particularizing the legal conclusions in respect of facts already

pleaded by adding references to civil fraud/deceit, unjust enrichment, and/or

knowing assistance (the "Legal Conclusions Amendment");

(d)

further particularizing the relief sought by adding references to

constructive trust, tracing, disgorgement of profits, compensation, and/or

accounting of profits (the "Remedies Amendment"); and

(e)

removing the claim for damages in respect of the Nokamic issue, which

was acknowledged at the start of trial (the "Nokamic Amendment").

[12] Mr. Breen objects to the Amendments on several grounds, some of which relate to the

delay in seeking the Amendments to a time when Mr. Breen was subject to cross-examination,

and thereby prejudicing him as he did not have a full opportunity to answer the Amendments

while providing his evidence in chief.

A. Trustee Amendment

[13] Mr. Breen is correct when he argues that Foremost Commercial Trust ("FCT") is the

express guarantor of amounts owed to him under his Executive Employment Agreement dated

October 31, 2011, which was made an exhibit in the trial ("Employment Agreement"). The

Trustees are named as Defendants in the Statement of Claim because FCT does not have a legal

status akin to a corporation, and the Trustees must be compelled to act on the FCT's behalf.

[14] Mr. Breen goes on to argue that no evidence at trial suggests that the Trustees or FCT

suffered any of the damages as alleged in the Amended Counterclaim, and none of those parties

has a cause of action against Mr. Breen. As a result, he argues, any such amendment is hopeless

as "it is plain and obvious that there is no triable issue": Remington Development Corporation v

Enmax Power Corporation, 2022 ABCA 71 at para 37.

[15] Mr. Breen was the President and Chief Executive Officer of FIL. The preamble to the

Employment Agreement provides as follows:

WHEREAS Foremost Industries Ltd (the "Employer") is an indirect wholly

owned subsidiary of Foremost Income Fund (the "Fund") and a direct wholly

owned subsidiary of Foremost Commercial Trust ("FCT");

AND WHEREAS the Employer is responsible for the day to day operations of the

Fund;

AND WHEREAS the Fund is the indirect owner of a group of entities which

collectively are the manufacturers of oilfield storage, processing, compression and

treatment equipment and drilling rigs and off road vehicles and related equipment

for the oil and gas, mining, construction and other industries;

AND WHEREAS the Employer wishes to employ Pat Breen (the "Executive") as

its President and Chief Executive Officer and the Executive wishes to fulfil such

role;

[16] Mr. Breen was aware of the organizational structure underneath the Foremost Income

Fund ("FIF"). He knew the operation in its entirety and how moneys flowed through the structure

from the lower entities up through FCT, and, ultimately, to the FIF. He acknowledges this in his

brief where he says, "The evidence at trial was that the revenue of the operating entities flows

Page: 5

upward to the Foremost Commercial Trust and ultimately to the Foremost Income Fund": Mr.

Breen's Brief dated June 10, 2022, at para 68. As a result, any loss to the entities below FIF was

a loss to FIF. Mr. Breen knew this. The facts supporting FCT's claim is pleaded in existing

pleadings and require little if any evidence or the Trustee Amendment is ancillary, which

requires no evidence. In any event, there is evidence to support the FCT's counterclaim, through

the Trustees, against Mr. Breen.

[17] This also addresses a concern that the Trustee Amendment is beyond the limitation

period set out in the Limitations Act, RSA 2000, c L-12 [Limitations Act]. Limitations Act s 6

provides:

6(1) Notwithstanding the expiration of the relevant limitation period, when a

claim is added to a proceeding previously commenced, either through a new

pleading or an amendment to pleadings, the defendant is not entitled to immunity

from liability in respect of the added claim if the requirements of subsection (2),

(3) or (4) are satisfied.

(2) When the added claim

(a) is made by a defendant in the proceeding against a claimant in

the proceeding, or

(b) does not add or substitute a claimant or a defendant, or change

the capacity in which a claimant sues or a defendant is sued,

the added claim must be related to the conduct, transaction or events described in

the original pleading in the proceeding.

...

(5) Under this section,

(a) the claimant has the burden of proving

(i) that the added claim is related to the conduct,

transaction or events described in the original

pleading in the proceeding, and

[18] The Trustees are already named Defendants in the action that Mr. Breen commenced. In

Marlborough Ford, Justice Hughes, as she then was, noted that Limitations Act s 6(2) governs.

She said, "[t]he only requirement of s. 6(2) of the Limitations Act, that the added claim 'be

related to the conduct, transaction or events described in the original pleading in the proceeding":

Marlborough Ford at para 33. She then provides the following purposes of the "relationship

requirement" as articulated by the Alberta Law Reform Institute, which are apposite to the case

at bar:

12. The relationship requirement is designed to serve at least three purposes. First,

it gives the courts ample latitude to adjudicate claims in a single proceeding

whenever this is [desirable] under objectives of procedural policy. ... Third, it

prevents any possible prejudice to a defendant because of surprise by the addition

of a claim after the expiration of the limitation period applicable to the added

claim. Because the defendant (unless the original claimant) must have been made

a party to the action under a timely claim, he will know of the conduct,

Page: 6

transaction or events described in the original pleading in the action, and he will

be able to gather and preserve evidence as to any possible claims against him

based on the described conduct, transaction or events.

Ibid, quoting Alberta Law Reform Institute, Limitations (Report No. 55)

(Edmonton: Alberta Law Reform Institute, December 1989) at 83.

[19] The existing counterclaim, and the Trustees' counterclaim, arise from the same conduct,

transaction and events underlying Mr. Breen's allegation of wrongful dismissal, viz, his alleged

misconduct. The counterclaim seeks the losses that FIL and FCT, through the Trustees, suffered

as result of Mr. Breen's alleged misconduct and the transactions and events surrounding and

arising from that alleged misconduct.

[20] Finally, Rules r 3.56(a) says that a defendant may, by counterclaim, file a claim against a

plaintiff. Mr. Breen's action is against FIL and the Trustees. As a result, the Trustees may file a

claim against Mr. Breen by way of counterclaim.

[21] This Court permits the Trustee Amendment, which will add the Trustees as Plaintiffs by

Counterclaim.

B. Additional Parties Amendment

[22] The Additional Parties argue that this Court may permit the Additional Parties

Amendment pursuant to Rules rr 3.62 and 3.74, which provide:

3.62(1) A party may amend the party’s pleading, including an amendment to add,

remove, substitute or correct the name of a party, as follows:

...

(b) after pleadings close,

(i) for the addition, removal, substitution or

correction of the name of a party, with the Court’s

prior permission in accordance with rule 3.74,

...

(c) despite clauses (a) and (b), whether or not pleadings have

closed, with the agreement of the parties filed with the Court.

3.74(1) After close of pleadings, no person may be added, removed or substituted

as a party to an action started by statement of claim except in accordance with this

rule.

(2) On application, the Court may order that a person be added, removed or

substituted as a party to an action if

(a) in the case of a person to be added or substituted as plaintiff,

plaintiff-by-counterclaim or third party plaintiff, the application is

made by a person or party and the consent of the person proposed

to be added or substituted as a party is filed with the application;

(b) in the case of an application to add or substitute any other

party, or to remove or to correct the name of a party, the

Page: 7

application is made by a person or party and the Court is satisfied

the order should be made.

(3) The Court may not make an order under this rule if prejudice would result for

a party that could not be remedied by a costs award, an adjournment or the

imposition of terms.

[23] The Additional Parties argue that the courts in Delta Hotels and Andritz permitted

amendments pursuant to those rules in "similar circumstances." Those cases are not similar to the

case at bar, as in both those cases, the plaintiffs were seeking to add additional plaintiffs. In the

case at bar, the Additional Parties are seeking to be added as plaintiffs by counterclaim.

[24] Rules r 3.56 provides:

3.56(1) A defendant may, by counterclaim, file a claim against

(a) a plaintiff, or

(b) the plaintiff and another person whether the other person is a

party to the action by the plaintiff or not.

[Emphasis added].

[25] Master Robertson dealt with the issue of whether a plaintiff by counterclaim could amend

the counterclaim to add a non-defendant as a plaintiff by counterclaim. He said that Rules r

3.56(1) could not "admit of the possibility of adding a stranger to the proceedings as a plaintiff-

by-counterclaim": Lil Dude Ranch Ltd v 1229122 Alberta Inc, 2014 ABQB 39, 585 AR 72, 5

Alta LR (6^th) 154 (Master). In so finding, Master Robertson followed Bhatt v Hoogstraat (1989),

102 AR 336, 38 CPC (2d) 55 (Master); Makarchuk v Pollard (1957), 23 WWR 617 (Alta SC,

App Div); Saskatchewan v Buskas, [1973] 3 WWR 4 (Alta SC).

[26] Lil Dude has been followed in Decore v Decore, 2016 ABQB 246 at para 69, 35 Alta LR

(6th) 189, 623455 Alberta Ltd v The Partnership of Jackie Handerek & Forester and Shawn D

Hagen, 2018 ABQB 86 at para 244, 68 Alta LR (6th) 125, and West Edmonton Mall Property

Inc v Proctor, 2020 ABQB 161 at para 48, 171 CPR (4th) 292, 47 CPC (8th) 294.

[27] In Decore, Justice Michalyshyn refers to Makarchuk, which held that a counterclaim

made by a non-party is a nullity and said that that case "remains good law in spite of numerous

changes to the wordings of rules since the late 1950s. It has been followed numerous times in the

years that have followed": Decore at para 70.

[28] In Lil Dude, Master Robertson says there is "strong appeal" to the concept of adding a

new plaintiff by counterclaim "to make sure that the correct parties are before the Court at trial":

Lil Dude at para 36. This Court agrees with that "strong appeal." However, it also agrees with

Master Robertson when he goes on to say:

... The submission is that rule 3.56(1) should be "interpreted" so as to allow the

addition of a non-party as plaintiff-by-counterclaim. The difficulty is that I would

not be "interpreting" it, but rather re-writing it, and I would be doing so in the face

of 57 years of consistent case law that read the same words, albeit in earlier Rules,

as saying that the words mean what they say in their plain and ordinary meaning:

a defendant can advance a counterclaim.

Ibid.

Page: 8

[29] The Additional Parties argue that any attempt to distinguish the cases that deal with the

addition of plaintiffs from the case at bar "would be technical and artificial." It points to Rules r

3.60 in support of its argument, which provides:

3.60(1) Except when the context or these rules otherwise provide, a rule that

applies to or in respect of

(a) a plaintiff applies equally to or in respect of a plaintiff-by-

counterclaim and a third party plaintiff-by-counterclaim,

...

(c) a pleading related to a claim made by statement of claim

applies equally to or in respect of a pleading related to a

counterclaim.

[30] In West Edmonton Mall, Justice Mah held that, "It is not a technical application of the

Rules to not permit something that is prohibited by the Rules": West Edmonton Mall at para 49.

Said differently, if something is prohibited by the Rules, it is not a technical application to apply

that prohibition. More clearly, the opening words to Rules r 3.60, say "Except when ... these rules

otherwise provide." In the case at bar, Rules r 3.56(1) "otherwise provides." It says that "A

defendant may, by counterclaim, file a claim against," among others, the plaintiff.

[31] As an alternative, FIL asks this Court to allow it to add a Third Party Claim as against the

Additional Parties. That way, the Additional Parties may file their claim against Mr. Breen. Rules

r 3.56(2) provides:

3.56 (2) A third party defendant may, by counterclaim, file a claim against the

plaintiff, defendant or third party plaintiff, or any combination of them, with or

without any other person, whether the other person is a party to the action or not.

[32] Rules r 3.45 provides:

A third party claim must

...

(c) be filed and served on the plaintiff and the third party

defendant, whether or not the third party defendant is already a

party to the action,

(i) within 6 months after the date on which the

defendant filed a statement of defence or demand

for notice, and

(ii) before judgment is entered against the defendant

or the defendant is noted in default,

...

[33] The suggested third party claim was not filed and served on Mr. Breen and the Additional

Parties "within 6 months after the date on which the defendant filed a statement of defence." As a

result, Rules r 13.5 might apply. It provides:

13.5(1) Unless the Court otherwise orders or a rule otherwise provides, the parties

may agree to extend any time period specified in these rules.

Page: 9

(2) The Court may, unless a rule otherwise provides, stay, extend or shorten a

time period that is

(a) specified in these rules,

...

(3) The order to extend or shorten a time period may be made whether or not the

period has expired.

[34] FIL and the Additional Parties are related, so they agree to extend the time within which

FIL must file and serve the third-party claim. Because any decision that this Court makes in

relation to this issue affects Mr. Breen, this Court finds that he too must agree to any such

extension. He does not. If this Court were to extend the time within which FIL could file a third-

party claim against the Additional Parties pursuant to Rules rr 13.5(2) and 13.5(3), it would do so

pursuant to Rules r 3.45. Then, the Additional Parties, qua third parties, would file a

counterclaim against Mr. Breen pursuant to Rules r 3.56(2). Mr. Breen argues that this procedure

is an attempt by the Additional Parties to do indirectly what they cannot do directly, as discussed

above in relation to Rules r 3.56, and is a clear procedural "sleight of hand."

[35] Is the third party claim that FIL seeks to make against the Additional Parties a "third

party claim"? The claim against which FIL seeks to name the Additional Parties as third party

defendants is the wrongful dismissal claim that Mr. Breen makes as against FIL. It is worthwhile

to consider Rules r 3.44 which provides:

3.44 A defendant or third party defendant may file a third party claim against

another person who

(a) is or might be liable to the party filing the third party claim for

all or part of the claim against that party,

(b) is or might be liable to the party filing the third party claim for

an independent claim arising out of

(i) a transaction or occurrence or series of

transactions or occurrences involved in the action

between the plaintiff and the defendant, or

(ii) a related transaction or occurrence or series of

related transactions or occurrences,

or

(c) should be bound by a decision about an issue between the

plaintiff and the defendant.

[36] The contours of Rules r 3.44 were discussed in Arcelormittal Tubular. In that case,

Justice Hughes, as she then was, describes Rules r 3.44(a), as the "classic type of third party

claims for contribution": Arcelormittal Tubular at para 202. In the Third Party Claim, FIL

claims:

6.

The Defendants state that if Breen was wrongfully dismissed and/or owed

damages (which is not admitted but expressly denied), the Third Party Defendants

caused, occasioned, or contributed to his wrongful dismissal and/or damages.

Page: 10

7.

If the Defendants are found liable to Breen (which is not admitted but

expressly denied), the Defendants claim indemnity and contribution from the

Third Party Defendants to the extent of any amount which Breen may recover

against the Defendants by way of judgment for damages, interest, and costs.

[37] This is artificial inasmuch as Mr. Breen's employer was FIL, and the obligations under

the Employment Agreement were guaranteed by FCT. The Additional Parties had nothing to do

with the Employment Agreement, or Mr. Breen's alleged wrongful dismissal. His "dismissal

letter" was signed on behalf of FIL. The only way in which the Additional Parties may be a part

of this lawsuit is that Mr. Breen might owe them money, which could have formed the subject-

matter of a separate lawsuit, which the Additional Parties did not commence.

[38] Justice Hughes describes the common law right of allowing the defendants to recover

contribution from the third parties "if the Third Parties breached duties they owed directly to the

Defendants under contract, tort, statute or otherwise": Arcelormittal Tubular at para 203. The

Additional Parties owed no such duties to FIL. In Metz v Breland (1990), 76 Alta LR (2d) 397,

110 AR 25 (CA), Justice Côté for the court said a third party notice serves to enforce duties

owed by the third party to the defendant, not to enforce duties owed by the third party to the

plaintiff. In Arcelormittal Tubular, Justice Hughes went on to say:

A third party claim for contribution under the common law must therefore allege

facts that could support a finding that the third party’s breach of duty to the

defendant caused the defendant to suffer damage that is related to the damage that

the plaintiff claims it suffered as a result of the defendant’s breach of duty to the

plaintiff.

Arcelormittal Tubular at para 251.

[39] It appears to this Court that the Additional Parties are attempting to "shoehorn" their third

party claims into this description. The Additional Parties did not breach a duty they owed to FIL.

In fact, they owed no duty to FIL that might have caused FIL to suffer damage as a result of its

alleged wrongful dismissal of Mr. Breen.

[40] In Arcelormittal Tubular, Justice Hughes goes on to describe the matters to which Rules

rr 3.44 (b) and 3.44(c) relate, when she says:

The new Rules also allow a third party claim to be filed against a party who is or

might be liable to the party filing the third party claim for an independent claim, if

the independent claims are related to the matters in the main action (Rule

3.44(b)), and against a party who should be bound by a decision about U(Rule

3.44 (c)).

Canadian Natural at para 242.

[41] Again, these relate to the claim that Mr. Breen makes as against FIL. The claims that FIL

allegedly makes as against the Additional Parties do not relate to Mr. Breen's claim against FIL.

As a result, the alleged third party claims that FIL is making as against the Additional Parties are

not true third party claims.

[42] If this Court is incorrect in its analysis, it will assess whether it should extend the time set

forth in Rules r 3.45 within which FIL must file and serve the third party claim, pursuant to Rules

Page: 11

r 13.5. In Lister v Calgary (City) (1997), 47 Alta LR (3d) 14, 193 AR 218, the Alberta Court of

Appeal said:

Where a party seeks a significant time extension, it is expected to give evidence to

explain the delay, i.e. why prompt compliance did not occur. Maybe it would be

different if the extension sought was slight, but here the delay was over four and

one-half years. Evidence must be proper admissible evidence such as an affidavit,

not mere allegations by counsel.

...

… the onus of proof is on the City, which is the one which moved for leave to

issue a pleading four and one-half years late. The third party is not obliged to lead

any evidence at all, let alone evidence which excludes doubt. The onus is on the

City to lead evidence which justifies the late pleading by explaining the delay.

Lister at 16-17.

[43] In Flight v Dillon, 2001 ABQB 211, 284 AR 117, Justice Moreau, as she then was, said:

… I am of the view that the proper test for an application to strike a third party

notice is ... that prejudice is still a factor to be weighed along with the nature of

the delay and whether it can be reasonably excused, unless the delay is

significant. In that event, the absence of a reasonable excuse for the delay

effectively overpowers any need on the part of the third party to demonstrate

actual prejudice.

... a short delay would result in a different weighing exercise, focusing primarily

on the existence of any prejudice. As one moves further away from the six-month

deadline, the weighing exercise will focus more on whether the delay is

excusable. In the case of a significant delay … failure to advance a reasonable

excuse for the delay will, without more, be fatal to an application to extend time.

[44] As mentioned earlier, there is some artificiality to this Court's analysis, as the Additional

Parties, as proposed third parties, in the case at bar, are related to the Defendant FIL. As a result,

the Additional Parties are not objecting to be added as third parties, and will suffer no prejudice,

as a result. However, if this Court were to add them as third parties, they will make a claim as

against Mr. Breen, so any ruling that this Court makes affects indirectly, Mr. Breen's rights. As a

result, he has standing to make the arguments he is making in this application.

[45] FIL did not provide this Court with any proper admissible evidence as to why "prompt

compliance did not occur." Rather, it refers to the "technical argument raised by Plaintiff's

counsel for the first time at trial, namely: that the Counterclaim is flawed because the proper

parties are not named as Plaintiffs by Counterclaim to permit recovery for the claimed losses":

FIL's Brief dated June 3, 2022, at para 3. As well, it is FIL's onus to explain the delay.

[46] The delay spans over seven years. This goes far beyond a "slight" extension. It strikes

this Court as odd that this application was not made the moment it became clear to the

Additional Parties that Mr. Breen was allegedly receiving funds from Mr. Chernyk. There have

been days of questioning, and a separate lawsuit commenced against Mr. Chernyk. Surely,

something amiss would have appeared to the Additional Parties early in these proceedings. In

fact, it did not take long into this trial for this Court to realize from which of the entities Mr.

Page: 12

Chernyk, then Mr. Breen, received some of the funds. As a result, this Court fails to see the

"reasonable excuse for the delay." As the court said in Pikani Nation v McMullen, 2020 ABCA

366 at para 65, 455 DLR (4^th) 376, "The timing of the application alone, coming seven years

after [the defendant] filed his defence, invites its dismissal."

[47] As mentioned, the prejudice that the Rules invite this Court to consider is that to which

the Additional Parties would be exposed. Obviously, the Additional Parties would suffer no

prejudice, as they are related to FIL, and know the reason why they want to be made third

parties. The reason for the amendment is to allow the Additional Parties to make their claims

against Mr. Breen. Mr. Breen argues that he will suffer prejudice if this Court were to allow the

Additional Parties to be named as third parties. We must remember that in Flight, Justice

Moreau said, "the absence of a reasonable excuse for the delay effectively overpowers any need

on the part of the third party to demonstrate actual prejudice." This Court has found that the

Additional Parties have provided it with little in terms of a reasonable excuse.

[48] As a result of the foregoing, this Court will not permit the addition of the Additional

Parties as Plaintiffs by Counterclaim.

[49] This Court received no argument from the parties on the applicability of Rules r 3.73. It

expects to receive argument from the parties concerning the applicability of that rule when it

receives the parties' substantive final arguments on this matter.

C. The Legal Conclusions Amendment

[50] Mr. Breen argues that the Legal Conclusions Amendment adds new causes of action, and

that they do not result from facts already pleaded. The Plaintiffs by Counterclaim, as amended,

argue that the Legal Conclusions Amendment seeks to particularize legal consequences that flow

from facts already pleaded.

[51] Rules r 13.6(2) provides:

13.6(2) A pleading must state any of the following matters that are relevant:

(a) the facts on which a party relies, but not the evidence by which

the facts are to be proved;

[52] In Balm, Justice Côté said:

... though the legal conclusion pleaded is new, the acts alleged in it are not new. It

is trite law that a statement of claim need not name causes of action or draw legal

conclusions. It need only plead facts. So the plaintiff could merely have sent the

original defendants' counsel a letter warning that he would argue at trial that proof

of such and such facts already alleged in the statement of claim would constitute

the cause of action of mutuality of obligations under law merchant.

Balm at para 11.

[53] To be clear, the Legal Conclusions Amendment adds the following to the Counterclaim:

Foremost states that Breen’s conduct gave rise/amounted to civil fraud/deceit,

unjust enrichment, and/or knowing assistance.

[54] It is important to note that the facts that may create liability under the Legal Conclusions

Amendment are already in the Counterclaim. The Plaintiffs by Counterclaim need not provide

Page: 13

evidence to prove liability. That is not the purpose of pleadings. Whether this Court reaches

those conclusions will depend on the applicability of the facts already presented to it, and how

the law in relation to those conclusions relate to those facts. Much like the situation in Korte v

Cormie, 1996 ABCA 15 at para 34, 178 AR 199, 36 Alta LR (3d) 431, "the [Legal Conclusions

Amendment] does not raise an absolutely distinct and different cause of action, but rather one

that is related to the facts originally pled." The facts prove the cause of action, not the other way

around.

[55] Because the facts that may support the cause of action have already been pleaded, the

Legal Conclusions Amendment should "have effect for limitations purposes from the date of that

earlier pleading": Stoney Tribal Council v Encana, 2019 ABCA 90 at para 29.

[56] Mr. Breen argues that the Legal Conclusions Amendment would fundamentally change

the issues that this Court heard during the trial, citing Eon Energy Ltd v Ferrybank Resources

Ltd, 2018 ABCA 243 at para 21. This Court does not agree. The issues in the case at bar are

distinct and the facts supporting or challenging those issues are already in the pleadings. Whether

additional information would have been required at trial is up to the parties to argue in their final

arguments. Mr. Breen has provided this Court with no argument concerning additional

information he might have required to defend against the so-called new causes of action. He has

already presented his case in response to the facts that the Defendants/Plaintiffs by Counterclaim

had already pleaded.

[57] Mr. Breen analogizes the case at bar to the situation in Sorrell v eQube Technology and

Software Inc, 2019 ABQB 31. Sorrell is distinguishable as in that case, the plaintiff sought to

add a factual narrative to her pleadings that would support a breach of contract claim to her

existing quantum meruit claim. She sought this amendment on the last day of the trial. Justice

Hollins dismissed the plaintiff's application because of the likelihood that the amendments would

require further document production and oral discovery, which would extend the trial. Those

issues do not arise in the case at bar, as the factual narrative supporting the Legal Conclusions

Amendment already appear in the pleadings. Whether this Court finds that the evidence the

parties presented during the four-week trial support those conclusions will be determined when

this Court provides its further analysis of that evidence.

[58] As a result of the foregoing, this Court will allow the Plaintiffs by Counterclaim, as

amended, to add the Legal Conclusions Amendment.

D. Remedies Amendment

[59] The Remedies Amendment adds the following underlined wording to the Relief Sought

portion of the Counterclaim:

(f)

such further and other relief as this Honourable Court deems appropriate,

which may include (without limitation) imposition of a constructive trust, tracing,

disgorgement of profits, compensation, and/or accounting of profits.

[60] Similar to the Legal Conclusions Amendment, these remedies could arise from the

already-pleaded facts. The difference, however, is that the Remedies Amendment appears in the

Relief Sought portion of the Counterclaim. As Justice KD Nixon noted in Bard:

This Court has the authority to grant any remedy it deems fit, regardless of

whether or not a particular remedy has been pleaded: Alberta Rules of Court, Alta

Page: 14

Reg 124/2010, s 1.3(2). It is with this knowledge that the Court exercises its

discretion in allowing new remedies to be pleaded, or not.

Bard at para 48.

[61] Justice Nixon allowed the plaintiff to add the disgorgement of profits to the pleadings

before her.

[62] Mr. Breen argues that he was "not aware" of the Remedies Amendment until the middle

of the trial and, as a result, it is prejudicial to him. Mr. Breen was aware that this Court could

grant "such further and other relief" as this Court considered appropriate. All relief against him

was open for this Court to consider, based on how the evidence unfolded. The Remedies

Amendment simply adds relief that this Court may consider. The Remedies Amendment neither

narrows nor broadens the scope of remedies open for this Court to consider. Other remedies were

open for this Court to consider given the original wording of item (f), including those that are

added by way of the Remedies Amendment.

[63] This Court allows the Remedies Amendment to be added to the Counterclaim.

E. Nokamic Amendment

[64] This Court allows the Plaintiffs by Counterclaim to make the Nokamic Amendment. Mr.

Breen does not object to this, although he does raise issues concerning the costs associated with

this amendment. This Court has no intention of dealing with costs at this stage of the

proceedings.

V.

Conclusion

[65] In conclusion, this Court allows the Plaintiffs by Counterclaim to make the Trustee

Amendment, the Legal Conclusions Amendment, the Remedies Amendment, and the Nokamic

Amendment. It will not permit them to make the Additional Parties Amendment or add the Third

Party Claim.

[66] Because of the number of issues the parties raised in this application and the relatively

extensive materials they provided to this Court in support of their respective arguments, this

Court was not able to deal with these matters as promptly as it had expected. As a result, it

extends the deadline for each of them, respectively, to provide this Court with their briefs on the

substantive issues by two-weeks.

Heard on the 25^thday of April, 2022 to the 20^thday of May, 2022.

Dated at the City of Calgary, Alberta this 12^thday of July, 2022.

K.D. Yamauchi

J.C.Q.B.A.

Page: 15

Appearances:

Richard F Steele, Craig O Alcock & Alanna Wiercinski

Burnet, Duckworth & Palmer LLP

for the Plaintiff/Defendant by Counterclaim

Thomas WR Ross, QC & Alex MacDonald

McLennan Ross LLP

for the Defendants/Plaintiff by Counterclaim

Page: 16

Clerk’s Stamp

COURT FILE NO.

1501-03872

Schedule “A”

COURT

COURT OF QUEEN’S BENCH OF ALBERTA

JUDICIAL CENTRE

CALGARY

PLAINTIFF/DEFENDANT PATRICK BREEN

BY COUNTERCLAIM

DEFENDANTS

FOREMOST INDUSTRIES LTD. and ROY H. ALLEN, BRUCE J. MACLENNAN,

BEVAN MAY, AND GORDON M. WIEBE IN THEIR CAPACITIES AS TRUSTEES

OF FOREMOST COMMERCIAL TRUST

PLAINTIFFS BY

COUNTERCLAIM

FOREMOST INDUSTRIES LTD. and ROY H. ALLEN, BRUCE J. MACLENNAN,

BEVAN MAY, AND GORDON M. WIEBE IN THEIR CAPACITIES AS TRUSTEES

OF FOREMOST COMMERCIAL TRUST and FOREMOST INDUSTRIES LP,

FOREMOST CYPRUS LIMITED, MALONEY INDUSTRIES (CYPRUS) LIMITED,

FOREMOST MALONEY INDUSTRIES LIMITED, FOREMOST UNIVERSAL LP,

AND UNIVERSAL INDUSTRIES (FOREMOST) CORP.

DOCUMENT

AMENDED COUNTERCLAIM OF FOREMOST INDUSTRIES LTD. and

ROY H. ALLEN, BRUCE J. MACLENNAN, BEVAN MAY, AND GORDON

M. WIEBE IN THEIR CAPACITIES AS TRUSTEES OF FOREMOST

COMMERCIAL TRUST and FOREMOST INDUSTRIES LP, FOREMOST

(CYPRUS) LIMITED, MALONEY INDUSTRIES (CYPRUS) LIMITED,

FOREMOST MALONEY INDUSTRIES LIMITED, FOREMOST

UNIVERSAL LP, AND UNIVERSAL INDUSTRIES (FOREMOST) CORP.

McLENNAN ROSS LLP

Lawyer: Thomas W.R. Ross, Q.C.

Telephone: 403.303.9124

Fax: 403.303.1671

Email: [email protected]

File No.: 151528

ADDRESS FOR SERVICE AND

CONTACT INFORMATION OF

PARTY FILING THIS

1900 Eau Claire Tower,

600 – 3^rdAvenue SW ^

Calgary, Alberta T2P 0G5^

DOCUMENT

NOTICE TO DEFENDANT BY COUNTERCLAIM

You are being sued. You are a Defendant by Counterclaim.

Go to the end of this document to see what you can do and when you must do it.

NOTE: State below only facts and not evidence [Rule 13.6]

Page: 17

1.

The Plaintiffs by Counterclaim Foremost Industries LP, Foremost (Cyprus)

Limited, Maloney Industries (Cyprus) Limited, Foremost Maloney Industries

Limited, Foremost Universal LP, And Universal Industries (Foremost) Corp. are

companies and limited partnerships registered pursuant to the laws of Alberta,

Cyprus, and Russia (as the case may be), which together with the Plaintiffs by

Counterclaim Foremost and the Trustees (as defined and described in the Statement

of Defence), collectively advance the singular, unified business of the Foremost

Income Fund. The Plaintiffs by Counterclaim^ repeat^ and rely on all of the

allegations set out in the Statement of Defence.

2.

The Plaintiffs by Counterclaim^ say^ that the Plaintiff / Defendant by

Counterclaim, Patrick Breen (“Breen”), failed in his contractual duties, fiduciary

duties, and duty of care to the Plaintiffs by Counterclaim^. He acted willfully and

contrary to authority and failed to act in the best interests of the Plaintiffs by

Counterclaim^. Further, or in the alternative, he was incompetent. In the further

alternative, he acted negligently and breached the standard of care expected of him

as a leader, officer, and director of the Foremost businesses. The particulars of

these allegations are contained in the Statement of Defence.

3.

4.

As a result of Breen’s failure to obtain approval for the Transneft Contract and

address the need for and implement a currency hedge, as required by ^ the

applicable practices and policies, the Plaintiffs by Counterclaim^incurred a foreign

exchange loss on the Transneft Contract of $710,605 (or such other amount to be

proven at trial).

As a result of Breen’s unauthorized transfers of funds to ^ secret private accounts,

the Plaintiffs by Counterclaim^ lost approximately $550,000 (or such other amount

to be proven at trial). Without limiting the allegations already set out, Foremost

states that Breen’s conduct gave rise/amounted to civil fraud/deceit, unjust

enrichment, and/or knowing assistance.

5.

6.

^ ^

As a result of Breen’s unauthorized bonus to another ^ employee, the Plaintiffs by

Counterclaim^ lost approximately $30,000.

7.

8.

Further particulars of the damages suffered by the Plaintiffs by Counterclaim^ will

be provided at trial.

Breen is responsible to the Plaintiffs by Counterclaim^ for all of the losses he

caused.

Remedy Sought

9.

the Plaintiffs by Counterclaim^ claim^ the following against Breen:

Page: 18

(a)

damages in the amount of $1,290,605^ or such other amount as may be

proven at trial;

(b)

(c)

(d)

punitive or aggravated damages in the amount of $50,000;

such further and other damages as may be proven at trial;

prejudgment interest to the date of judgment pursuant to the Judgment

Interest Act, R.S.A. 2000, c. J-1;

(e)

(f)

costs; and

such further and other relief as this Honourable Court deems appropriate,

which may include (without limitation) imposition of a constructive trust,

tracing, disgorgement of profits, compensation, and/or accounting of profits.

NOTICE TO THE DEFENDANT BY COUNTERCLAIM

You only have a short time to do something to respond to this counterclaim:

20 days if you are served in Alberta;

1 month if you are served outside Alberta but in Canada; or

2 months if you are served outside Canada.

You can respond by filing a Statement of Defence or a Demand for Notice to Counterclaim in the office of

the clerk of the Court of Queen’s Bench at Calgary, Alberta, AND serving your Statement of Defence or a

Demand for Notice to Counterclaim on the Plaintiff by Counterclaim’s address for service.

WARNING

If you do not file and serve a Statement of Defence or a Demand for Notice to Counterclaim within your

time period, you risk losing the law suit automatically. If you do not file, or do not serve, or are late in

doing either of these things, a court may give a judgment to the Plaintiff by Counterclaim against you

after notice of the application has been served on you.