Executive Summary: Key Legal and Evidentiary Issues

• Dismissal for long delay under Court of King’s Bench Rule 24.02(1) where more than three years passed without a significant advance in the construction lien action.
• Contested application of the “disability” exclusion in Rule 24.02(3) based on the health and functional capacity of the corporate plaintiff’s directing mind.
• Interpretation of “disability” in Rule 1.03, and whether a corporate entity can rely on the mental or physical incapacity of an individual officer/director.
• Evidentiary sufficiency of medical and factual proof that the president’s injuries rendered the corporation incapable of managing its litigation affairs.
• Impact of ongoing corporate activity (annual returns, defending other litigation, CRA disability application) on the credibility of a claimed litigation-related incapacity.
• Entitlement to lien trust funds and costs following dismissal, including release of the remaining trust balance in favour of the general contractor and an order for tariff costs.

Background and project context

This case arises from the construction of a water treatment plant in the Rural Municipality of Deloraine Winchester, Manitoba, around 2015. The Province of Manitoba, acting through the Manitoba Water Services Board, owned and administered the project (collectively, the Owner). Gateway Construction & Engineering Ltd. (“Gateway”) was the general contractor, and R.B.S. Electrical Contractors (1992) Ltd. (“R.B.S.”) performed electrical work as a subcontractor. A dispute developed over payment. R.B.S. claimed it was owed $260,052.34 for its work and commenced an action in 2019 against Gateway and the municipality. In the background was a construction lien: funds otherwise payable by the Owner to Gateway were withheld because of a lien filed by R.B.S. Those lien funds (originally $266,686.37) were placed in trust with Thompson Dorfman Sweatman LLP (“TDS LLP”) under an October 22, 2020 agreement that the funds would be held pending resolution or final judgment in the action, without prejudice to Gateway’s right to dispute R.B.S.’s entitlement.

Procedural history and trust fund arrangements

The litigation then became protracted and disjointed. In March 2021, Master Goldenberg permitted R.B.S.’s then counsel to withdraw following a breakdown in the solicitor–client relationship. No one appeared for R.B.S. at that hearing, although its officer/director and shareholder, Michael Barnabe, had been served. Later, a pre-trial was set for January 19, 2022. By that time, Gateway had reviewed the project records and took the position that $215,070.41 was clearly owing to R.B.S.; it labelled this the “Undisputed Amount.” Gateway sought leave to move for summary judgment to pay this amount (less solicitor–client costs) and resolve the balance of issues more efficiently. At the pre-trial, the presiding judge explained the summary judgment process. On behalf of the corporate plaintiff, Mr. Barnabe agreed to proceed by way of a one-day summary judgment hearing, even though disputes remained over the balance of the claim and potential set-offs or counterclaims by Gateway. The judge also advised that, if summary judgment proved unsuitable due to factual conflicts, the matter would be set down for trial with viva voce evidence. A hearing date was tentatively targeted within about three months. R.B.S., through Mr. Barnabe, indicated that counsel would be retained and would liaise with Gateway’s counsel. New counsel (Marr Finlayson Pollock LLP) appeared for R.B.S. on March 1, 2022. A summary judgment date originally fixed for April 22, 2022 was pushed to June 9, 2022 and then adjourned sine die. On or about June 28, 2022, the parties agreed that the Undisputed Amount of $215,070.41 would be paid to R.B.S. from the lien funds. This partial resolution did not dispose of the action, and a balance remained in trust. As of November 10, 2025, the remaining trust balance, inclusive of accrued interest, stood at $56,108.19. Meanwhile, in September 2023, Marr Finlayson Pollock LLP moved to withdraw as counsel; their motion was heard October 11, 2023. The firm was allowed to cease acting after advising that they had not heard from Mr. Barnabe for approximately a year. During that hearing, Mr. Barnabe eventually joined by teleconference and reported that a serious accident had affected his ability to maintain contact. The judge suggested that one or the other side bring an appropriate motion—either to release the trust funds or to establish R.B.S.’s entitlement. Those steps did not immediately follow. Instead, Gateway eventually brought a motion, returnable December 8, 2025, to dismiss the action for delay and to have the remaining trust funds released to it. The court adjourned the matter to allow R.B.S. to respond in writing. The motion was re-scheduled to February 4, 2026, with both sides given filing deadlines. Although R.B.S. failed to meet those deadlines, both parties ultimately filed supplemental material in advance of the hearing.

Arguments of the parties on delay and disability

On the motion, Gateway relied on two complementary delay provisions in the Court of King’s Bench Rules. First, Rule 24.01, which allows dismissal where delay has caused significant prejudice (with a presumption of prejudice where delay is inordinate and inexcusable). Second, Rule 24.02(1), which requires the court to dismiss an action if three or more years have passed without a “significant advance” in the proceeding, unless one of several listed exceptions applies. At the February 2026 hearing, counsel for R.B.S. conceded that more than three years had elapsed without a significant advance, subject only to a contention that some of that time should be excluded from the calculation. R.B.S. did not rely on any of the specific exceptions in Rule 24.02(1). Instead, it invoked Rule 24.02(3), which excludes any “period under disability” from the three-year calculation. That led the court to Rule 1.03, which defines “disability” as applying where the person is a minor, or is mentally incompetent or incapable of managing his or her affairs, whether or not so declared by a court. The plaintiff’s argument was that, while the corporation itself is not a natural person, its president and directing mind, Mr. Barnabe, had been rendered incapable of managing his own affairs and, by extension, the corporate litigation affairs, because of serious injuries from an ATV accident and ongoing physical and cognitive difficulties. In his January 21, 2026 affidavit, Mr. Barnabe described his role as president and co-director (with his wife) of R.B.S., and stated that he alone bore practical responsibility for progressing the litigation. He said his wife’s involvement in the company was limited to occasional year-end financial reviews while working full-time elsewhere. He then outlined his accident, the emergency airlift to hospital, and his continuing health problems, claiming that he could not manage even minor responsibilities and that his focus remained impaired. R.B.S. urged the court to treat this as a “disability” period within the meaning of the Rules and to use Rule 24.04 to craft procedural relief—such as setting timelines to move the case forward—rather than dismissing the action. Gateway opposed that approach on several fronts. First, it argued that “disability” in the Rules is directed at natural persons—minors or individuals whose mental competence or capacity is compromised—not corporate entities. It relied on the decision in Broda v. Busby, where the court interpreted and distinguished concepts of “mental incompetence” and being “incapable of managing his or her affairs” in the litigation context. Gateway said those concepts did not, and logically could not, translate to a corporation. Second, Gateway pointed out that R.B.S. had two directors and that there was no evidence Mrs. Barnabe lacked capacity to instruct counsel or to cause the corporation to act. Third, Gateway stressed that the corporation had continued to function in other respects during the alleged disability period, such as filing annual returns and defending an unrelated action to the point of settlement, and that Mr. and Mrs. Barnabe had also completed a disability application to the Canada Revenue Agency. This, in Gateway’s view, undercut any claim that the corporation was unable to manage its affairs, particularly its litigation. Finally, Gateway drew support from the Court of Appeal’s decision in Al-Mamun v. Perkins, where a self-represented litigant with acknowledged mental health issues was still found to have offered no adequate solution or justification for persistent delay when he only took steps once his lawsuit or appeal was under threat of dismissal. Gateway argued a similar pattern existed here: R.B.S. did little or nothing for years, then reacted only when the dismissal motion was brought, and even then missed court-imposed filing deadlines.

Court’s analysis on long delay and corporate disability

The court framed the central issue as whether R.B.S. could rely on the Rule 24.02(3) “period under disability” exclusion, given the admitted lapse of more than three years without a significant advance in the action. If the exclusion applied, the three-year period might not be met, potentially saving the action from mandatory dismissal under Rule 24.02(1). If the exclusion did not apply, then—absent any of the enumerated exceptions in Rule 24.02(1)—the court was obliged to dismiss the case. The judge concluded that the plaintiff’s position on disability was “not sound.” Interpreting the Rules contextually, the court held that “disability” as defined in Rule 1.03, and used in Rule 24.02(3), is directed to individuals, not corporations. The reasoning in Broda v. Busby was considered instructive. The court observed that the terms “mentally incompetent” and “incapable of managing his or her affairs” naturally relate to human beings and are difficult to coherently apply to a corporate entity. On that basis, the judge accepted Gateway’s submission that the disability concept in these Rules is not intended for corporations and therefore cannot be invoked by a corporate plaintiff simply because one of its directing minds experiences health issues. In the alternative, even assuming for argument’s sake that some notion of disability might be imported into a corporate context, the court found that R.B.S. had not met the evidentiary threshold. There was no evidence that Mrs. Barnabe, the other director/officer/shareholder, lacked capacity to instruct counsel or advance the litigation. Nor was there evidence that the corporation as such was paralyzed. To the contrary, the record showed that corporate returns were filed, another lawsuit involving the company was defended and settled, and a disability application to the CRA was completed by Mr. and Mrs. Barnabe. The medical material, including a physiotherapist’s March 8, 2024 report, described Mr. Barnabe’s injuries and ongoing difficulties but did not specifically address an inability to attend to corporate or litigation affairs. The court also noted that Gateway had been deprived of a fair opportunity to test that evidence, as it could not cross-examine Mr. Barnabe or his health care providers due to the plaintiff’s late filings. Drawing on Al-Mamun, the judge acknowledged the seriousness of Mr. Barnabe’s health problems but emphasized that he offered no constructive solution or concrete explanation beyond a general assertion that his condition caused him “not to deal with matters.” In the judge’s view, the pattern resembled a litigant who takes no steps until the lawsuit is threatened, and then still fails to comply with procedural timelines. In the end, the court held that none of the exceptions in Rule 24.02(1) applied, and the three-year clock could not be reduced via the disability exclusion in Rule 24.02(3). Since more than three years had passed without a significant advance, Rule 24.02 required dismissal of the action, making it unnecessary to decide the alternative basis for relief under Rule 24.01 (significant prejudicial delay).

Disposition and monetary outcome

Having decided that dismissal for long delay was mandatory, the court ordered that the action brought by R.B.S. Electrical Contractors (1992) Ltd. be dismissed on account of delay, with prejudice to future actions. The judge then addressed the status of the lien funds held in trust at TDS LLP under the October 22, 2020 agreement. That agreement provided that the Owner would release all remaining project funds to TDS LLP; that TDS LLP would hold $266,686.37 in an interest-bearing trust account pending resolution or final judgment in the Queen’s Bench action; that no use of the funds would occur without written consent of both sides or a court order; and that the holding of the funds would not prejudice Gateway’s right to dispute the validity of R.B.S.’s claim or admit liability. Over time, the parties agreed that $215,070.41 (the Undisputed Amount) would be paid out of trust to R.B.S., leaving a balance. As of November 10, 2025, the remaining amount in trust, inclusive of interest, was $56,108.19. The court found that, save for R.B.S.’s objection, it was clear the remaining funds were payable to Gateway. With the plaintiff’s claim dismissed, there was no longer any impediment. Accordingly, the court ordered that all funds held in trust by TDS LLP in connection with this action, inclusive of accrued interest, be released to Gateway. It further ordered that R.B.S. pay tariff costs to Gateway, leaving the specific quantum of costs to be determined under the applicable tariff or assessment procedures. In practical terms, Gateway Construction & Engineering Ltd. emerged as the successful party. It obtained dismissal of R.B.S.’s action with prejudice, an order that the remaining trust balance of $56,108.19 (as at November 10, 2025, plus any further accrued interest to the date of release) be paid to it, and an award of tariff costs against R.B.S., although the exact costs amount cannot be determined from the decision.