Executive Summary: Key Legal and Evidentiary Issues

• Scope of the insurer’s obligation to cover water and mould damage where the alleged cause (ice damming) is contested against alleged pre-existing humidity and maintenance problems.
• Adequacy and timeliness of the plaintiff’s compliance with discovery undertakings, affidavit of documents obligations, and a prior court order compelling production and answers.
• Impact of missing or delayed third-party records (from K² Property Management, Clear Claim Adjusters Inc. and Claim Restore) on proving causation, quantum of loss, and the insurer’s ability to defend the claim.
• Threshold for dismissal of an action, stay of proceedings, security for costs, and civil contempt in the face of significant but ultimately partial non-compliance with court orders.
• Extent of third-party discovery and production obligations for non-parties (property manager, restoration contractor and public adjuster) who are closely involved in the insured loss and have a financial interest in the outcome.
• Allocation of substantial cost sanctions among the plaintiff and non-party service providers, including use of costs as a remedy for contempt rather than terminating the action.

Factual background and the insurance dispute

The case arises out of an insurance dispute between 3309715 NS Ltd., the owner of an apartment building at 476 Robinson Street in Moncton, and its insurer, Southeastern Mutual Insurance Company. The property suffered water damage in January 2020, initially reported by K² Property Management, the building’s manager, to Claim Restore, a restoration firm. The plaintiff maintained that the water damage and subsequent mould found in units 3 and 5 were caused by ice damming, which it treated as an insured peril. The insurer initially evaluated the loss as arising from wind-driven rain and advised that the damage would be covered under the policy, following which significant demolition work commenced; the plaintiff later alleged that $42,000 of demolition was carried out in reliance on this initial position. A month later, near the end of February 2020, the plaintiff formally reported the claim to the insurer, after repairs had already started, which the insurer said hampered its ability to investigate and determine the true cause of loss. In May 2020, the insurer retained an expert who concluded that the damage stemmed from pre-existing internal humidity and maintenance issues rather than new water infiltration, meaning the harm did not arise from a covered peril. The plaintiff’s proof of loss claimed $184,581.96 in building costs and $28,000 in lost rental income, and it had bought the property in May 2019 then sold it in July 2021 for roughly $200,000 more than the purchase price, making tax and capital-gains information directly relevant to verifying the actual cost of repairs and improvements against what was claimed.

Parties, third-party players and their relationships

Several non-parties played central roles in the events and later procedural battles. K² Property Management managed the building, dealt with tenants, and coordinated early remediation efforts, including communications with restoration vendors. Claim Restore provided damage mitigation and reconstruction services, while Clear Claim Adjusters Inc., a public adjusting firm, acted for the insured in measuring and documenting the loss and negotiating with Southeastern Mutual. According to a service contract, Clear Claim Adjusters Inc. was to receive 25% (HST included) of any settlement above a defined “base offer,” and it reserved the right to retain a law firm to pursue judgment or settlement against the insurer on the insured’s behalf. The court noted the overlapping roles of key individuals—Jonathan Frenette and Rémi Doiron—as principals in both Claim Restore and Clear Claim Adjusters Inc., and highlighted the potential conflict of interest where one entity invoices for restoration work and another, with a contingent financial interest, advocates for a larger insurance recovery based on that same work. Although Clear Claim Adjusters Inc. and Claim Restore were not parties to the action, they were subject to third-party production orders due to their central involvement.

Prior court order on undertakings and production

On 4 November 2024, after earlier disputes about discovery, the court issued a detailed order compelling the plaintiff to answer numerous outstanding undertakings from examinations for discovery, to update its affidavit of documents, and to produce specific categories of information, including its Canada Revenue Agency records showing capital gains and related renovation expenses for the sale of 476 Robinson Street, any agreements with K² Property Management and/or Clear Claim Adjusters Inc., and copies of leases for the building. The order also required a formal rectification of a discovery answer by the plaintiff’s representative and directed the plaintiff to pay $2,000 in costs to the insurer. Separate provisions of the same order, made on a motion for third-party production, required K² Property Management to provide leases and documents responsive to several undertakings, and required Claim Restore and Clear Claim Adjusters Inc. to provide their own agreements and documents addressing a wide set of undertakings, including emails and other records relating to the loss. The court later found that the plaintiff eventually fulfilled most elements of the order, albeit very late, while omitting some items such as complete capital-gains documentation; K² Property Management did not respond at all, and Claim Restore and Clear Claim Adjusters Inc. answered in part but failed to supply the full range of documents contemplated.

Procedural history, adjournment and motion practice

The insurer brought a substantial motion to enforce compliance and seek procedural remedies after it had received no meaningful response to the November 2024 order within the required timeline. At that stage, there had been no undertakings answered, no affidavit of documents or third-party records produced, and no costs paid. As the insurer’s motion was first scheduled for hearing on 28 February 2025, the plaintiff filed problematic affidavits only days before the hearing; the clerk initially rejected one for lack of an original signature, and volumes of documents including the long-overdue affidavit of documents were served electronically on the insurer the afternoon before the scheduled hearing. The court eventually accepted the electronically commissioned affidavit but found that these last-minute steps, coupled with the similarly late affidavit from Rémi Doiron on behalf of Claim Restore and Clear Claim Adjusters Inc., justified an adjournment. The motion was rescheduled and later argued on 24 July 2025 on the basis of an extensive fifth amended record of nearly 2,000 pages. At the second hearing, there were further preliminary issues around technical non-compliance with the practice directive on remote commissioning, the form of exhibits, and the representation of both the plaintiff and non-party service providers by the same law firm, though different lawyers.

Requests for dismissal, stay and security for costs

On the renewed motion, Southeastern Mutual sought drastic procedural remedies. It asked first for dismissal of the plaintiff’s action for failure to obey the Rules of Court and the November 2024 order, arguing that the missing information went to the core of causation and quantum, and that the destruction or unavailability of records—particularly from K² Property Management—significantly prejudiced the defence. In the alternative, the insurer requested a stay of proceedings until earlier costs orders (totalling $3,000, plus interest) were fully paid and sought $20,000 in security for costs, noting that the plaintiff is an extra-provincial corporation with no assets in New Brunswick and that the insurer had already incurred expense pursuing several motions to secure production. The court acknowledged the seriousness of the plaintiff’s delay and non-compliance but stressed that dismissal is a last-resort remedy, more appropriate where willful defiance or destruction of evidence is clearly established. Here, the judge found that, aside from one outstanding capital-gains undertaking, the plaintiff had eventually answered or attempted to answer the undertakings, and that the worst failures of production were attributable to K² Property Management’s non-cooperation, which should not be visited on the plaintiff by striking its claim. The court therefore refused to dismiss the action and also denied the requests for a stay and for security for costs, finding that the plaintiff had finally paid the principal amount of earlier cost awards and that there was insufficient basis to conclude that the insurer faced a real risk of being deprived of costs at the end of the litigation. Instead, to prevent further drift, the judge imposed monthly case-management conference calls to monitor progress toward trial and enforce continuing obligations.

Contempt allegations and findings

The insurer also pursued civil contempt findings against the plaintiff, K² Property Management, Claim Restore and Clear Claim Adjusters Inc., coupled with a request for solicitor-client costs or fines as sanctions. Applying the Supreme Court of Canada’s test in Carey v. Laiken, the court emphasized that civil contempt requires proof beyond a reasonable doubt that a clear order existed, that the alleged contemnor had actual knowledge of it, and that the non-compliance was intentional. The judge accepted that the November 2024 order was clear and that it was eventually served on all of the respondents. However, she was not satisfied, on the criminal-law standard of proof, that the plaintiff knew of the order in time to comply within 30 days or intentionally breached it; counsel asserted that the order was overlooked in email for about a month and that undertakings began to be answered after the contempt motion was filed. On that basis, the request to hold the plaintiff in contempt was rejected. For Clear Claim Adjusters Inc. and Claim Restore, the court found that although their responses were slow and incomplete, they did eventually provide answers and some documentation, and the original order imposed no explicit deadline on them or obligation to report efforts made to obtain missing documents. Given that ambiguity and their eventual partial compliance, the court again declined to find contempt. By contrast, the judge held that K² Property Management, which had been served with the order and with the subsequent motions, produced nothing and did not participate in the proceedings at all. With no evidence of bankruptcy or dissolution, the court concluded that K² Property Management was in contempt and that a significant monetary sanction in the form of costs payable to the insurer was warranted to vindicate the authority of the court and deter similar disobedience.

Third-party production, additional discovery and overall outcome

Beyond sanctions, the motion addressed the insurer’s ongoing need for relevant records and testimony. Central to this was an early-February 2020 email discovered on the plaintiff’s phone at examination for discovery, sent by a K² Property Management employee to the plaintiff and others, reporting that another remediation firm, Puroclean, estimated $80,000–$100,000 in repairs and suggesting that coverage might be achieved “if we can persuade them the damage was caused by an ice dam,” despite acknowledging apparent installation problems with the metal siding. This and related emails raised serious questions about the true cause of the damage and whether it stemmed from construction defects or pre-existing issues rather than a covered peril, and underscored the need for broader email production from the public adjuster and restoration contractor. The court ordered Claim Restore and Clear Claim Adjusters Inc. to produce all emails in their possession and control that were exchanged with or copied to the plaintiff, his father, key principals in both firms, and K² Property Management regarding 476 Robinson Street, rejecting their narrow reading of the earlier order that had treated the obligation as merely to chase documents from K² Property Management. The judge also granted leave for the insurer to conduct further discovery of the plaintiff based on new materials and authorized oral examinations for discovery of Jonathan Frenette (Clear Claim Adjusters Inc.) and Rémi Doiron (Claim Restore) under Rule 32.10, holding that they possessed relevant information on causation, scope of remediation, and quantification of the claim that could not realistically be obtained otherwise and that it would be unfair to force the insurer to proceed to trial without access to their evidence. Finally, while the court refused the insurer’s most drastic requests (dismissal of the action, a stay, and security for costs) and declined contempt findings against the plaintiff, Claim Restore and Clear Claim Adjusters Inc., it nonetheless found K² Property Management in contempt and imposed a series of substantial cost awards to reflect the procedural burdens and delays caused. In total, the plaintiff was ordered to pay $7,500 in costs, Claim Restore and Clear Claim Adjusters Inc. were each ordered to pay $5,000, and K² Property Management was ordered to pay $10,000, meaning that Southeastern Mutual Insurance Company emerged from the motion as the net successful party with a combined $27,500 in costs awarded in its favour, while the underlying insurance coverage dispute and damages remain to be determined at trial.