Executive Summary: Key Legal and Evidentiary Issues

• KMBR Architects sought leave to file a late counterclaim for additional fees arising from the same school construction project that is the subject of the District's claims.

• The court applied the Naudi Investments factors to determine whether extending time to file a counterclaim was just and convenient.

• Evidence explaining KMBR's delay in bringing forward its counterclaim was deemed lacking and insufficient to meet the "clearest and best evidence" standard.

• Limitation period concerns arose because the counterclaim was drafted in a vague manner that obscured when the various claims may have accrued.

• Section 22(1) of the Limitation Act permits counterclaims connected to the original action even if a limitation period has expired, subject to the court's discretion.

• The District successfully argued that its limitation defenses should be preserved for trial rather than extinguished by the court's order granting leave.

Background of the school construction project

The Board of Education, School District No. 41 (Burnaby) engaged KMBR Architects Planners Inc. to provide architectural and consulting services for the replacement of Burnaby North Secondary School. The parties entered into a contract on or about December 10, 2018, under which KMBR was to receive a fixed fee of $6,092,563. The initial construction budget was $67,809,668, and the "ready for takeover" date was originally supposed to be August 20, 2021. Yellowridge Construction Ltd. became general contractor of the Project pursuant to a CCDC 2 stipulated price contract dated April 2, 2020, with a construction cost of $91,817,858 that eventually increased to $107,150,708 due to approved change orders.

The District's claims against KMBR

On May 25, 2022, the District started this action against KMBR and its subconsultant, Fast & Epp, claiming negligence, negligent misrepresentation, and breach of contract. The District alleged it suffered damages due to deficient architectural services, including incomplete coordination of the Project, incorrect design details, inadequate consideration of constructability, and slow or incomplete responses to requests for information, shop drawing approvals, design alterations, and contract administration notices. The essence of the District's claim is a flow-through of various claims made by Yellowridge for delays and extra costs.

KMBR's application to file a counterclaim

KMBR filed an application on September 22, 2025, seeking leave to file a counterclaim against the District. KMBR said that on at least three occasions it raised with the District that it was incurring additional fees and facing claims from subconsultants due to increased Project scope and delays, and that it would be seeking additional compensation. Mr. Tawfik, principal of KMBR, later approached Mr. Horswill, secretary treasurer of the District, who discouraged KMBR from making such a request and suggested it would impair its ability to secure future work on District projects. On October 16, 2024, KMBR sent the District a written request for additional fees based on construction costs exceeding the original construction budget, significant expansion of KMBR's scope of services, and a minimum 37 months of Project delay. On November 5, 2024, the District rejected the request for additional fees, saying the basis for the request was unclear.

The applicable legal test

The court applied the factors from Naudi Investments Ltd. v 0899809 B.C. Ltd., 2021 BCSC 1121, which require consideration of whether the proposed counterclaim is related to the plaintiff's claim and whether it would be just and convenient to extend time for filing. Relevant sub-factors include the length of time between receiving the statement of claim and proposing the draft counterclaim, the reasons for delay, whether the counterclaim would be time-barred but for Section 22 of the Limitation Act, the connection between the claims, and the degree of prejudice to both parties.

The court's analysis of the delay

The court agreed that KMBR's evidence regarding the reasons for its delay is lacking. There was no evidence suggesting the parties ever discussed or agreed that KMBR could or should delay filing its response to civil claim, and there was no evidence indicating the District ever pressed KMBR to do so, or otherwise took any steps to move the litigation forward. The court noted that when KMBR filed its response to civil claim on March 28, 2025, it did not offer any explanation for why it did not file a counterclaim at the same time. However, the court observed that this concern is perhaps balanced somewhat by the District's decision to put the action on what appears to be an informal hold while the Project was in progress.

Connection between the claims and prejudice considerations

The court found the proposed counterclaim clearly related to or connected with the subject matter of the District's claim, as both arise from the same Project, the same Contract, and the same alleged changes in budget, Project scope and delay. KMBR argued there would be no prejudice to the District if leave is granted because it has taken no steps to prosecute its claims since serving the notice of civil claim on KMBR. The District did not suggest it would be prejudiced in terms of its ability to defend against the issues raised in the proposed counterclaim, there has been no trial date scheduled, and the District has not yet taken significant steps to move the action forward. The court agreed that if KMBR is forced to start a separate action, that would involve duplication given the overlap in the issues and evidence, characterizing the claims as really different sides of the same Project coin.

Ruling and outcome

Associate Judge Bilawich concluded that it is just and convenient to exercise discretion to extend time for KMBR to file its proposed counterclaim. However, the court ordered that the District's limitation defences to the claims raised in the counterclaim are preserved and to be determined at trial. The limitation defences that would have accrued as of June 30, 2025—the date the draft counterclaim was circulated—were specifically preserved. With respect to costs, the court noted there has been mixed success, as it was necessary for KMBR to make this application but it was also reasonable for the District to oppose it in an effort to preserve its limitation defences; costs of the application were ordered to be in the cause. No specific monetary award was determined at this procedural stage; the substantive claims remain to be adjudicated at trial.