Executive Summary: Key Legal and Evidentiary Issues

• Melcor sought to amend its Third Party Claim to add WSP as a Third Party Defendant after learning the City was releasing WSP from the action, apparently in recognition that the City's claim against WSP was limitation-barred.

• Section 6 of Alberta's Limitations Act was invoked by Melcor to argue the proposed Third Party Claim should survive despite the expired limitation period.

• WSP could not have had "sufficient knowledge" of the added claim by October 2016, as the main action was not even commenced until June 6, 2017 — approximately nine months later.

• The contractual extension of the limitation period between the City and Melcor by an additional four years did not bind WSP, which was not a party to that contract.

• Reasoning from HSB Securities (Canada) Inc v Davies, Ward & Beck supported the conclusion that Melcor, not WSP, should bear the risk of the statutory limitation period expiring.

• The application was dismissed with costs awarded to WSP.

Background and the Oakmont subdivision dispute

On February 22, 2005, WSP Canada Inc, formerly doing business as Focus Corporation Ltd, entered into a contract with Melcor Developments Ltd to provide project management and specific engineering services — including infrastructure design and construction drawings — with respect to the Oakmont subdivision in St. Albert. Melcor was developing the subdivision under a contract with the City of St. Albert. Notably, the contract between the City and Melcor extended the normal limitation period for claims by the City against Melcor by an additional four years.

Discovery of the drainage problems

The City became aware of problems with respect to drainage in the Oakmont subdivision in 2011. The City ultimately commissioned a report from an independent engineer, which was received in October of 2013. Melcor and WSP were made aware of the report when it was issued.

Commencement of the litigation

On June 6, 2017, the City filed a Statement of Claim against Melcor and WSP, alleging it had suffered damages as the result of a deficiently designed and constructed drainage swale in the Oakmont subdivision. The Statement of Claim was amended twice, with the second amendment being made on June 21, 2018. The action alleged causes of action against Melcor and WSP in both contract and tort. In the summer of 2018, Melcor and WSP each defended and filed a Notice of Claim against Co-Defendant against each other, seeking contribution or indemnity under the Tortfeasors Act or the Contributory Negligence Act. They each also issued a Third Party Claim against Sureway Construction Group Ltd, Sureway Construction Ltd, and Standard General Inc. WSP's Third Party Claim was also made against Thurber Engineering Ltd.

WSP's release and Melcor's amendment application

On November 3, 2022, WSP notified Melcor that the City was releasing WSP from the action, apparently in recognition that the City's claim against WSP was limitation-barred. On November 7, 2022, Melcor filed an application to amend its Third Party Claim to add WSP as a Third Party Defendant, claiming contribution or indemnity as a result of breach of contract and negligence on the part of WSP. In 2023, a number of partial discontinuances were filed: on April 26, Melcor discontinued its Third Party Claim as against Sureway; on May 12, the City discontinued the action against WSP; and on June 1, WSP discontinued as against Thurber.

Melcor's reliance on section 6 of the Limitations Act

Melcor did not argue that the limitation periods under section 3 of the Limitations Act had not expired. Rather, Melcor argued that section 6 of the Limitations Act allowed its Third Party Claim against WSP to proceed. Section 6(1) provides that, notwithstanding the expiration of the relevant limitation period, when a claim is added to a proceeding previously commenced, the defendant is not entitled to immunity from liability if the requirements of subsection (4) are satisfied. Section 6(4) requires that the added claim be related to the conduct, transaction or events described in the original pleading in the proceeding, and that the defendant must have received, within the limitation period applicable to the added claim plus the time provided by law for the service of process, sufficient knowledge of the added claim that the defendant will not be prejudiced in maintaining a defence to it on the merits. WSP did not contest that the first requirement — relatedness — was met.

The court's analysis of the limitation timeline

WSP asserted that the two-year limitation period with respect to Melcor's claim for contribution or indemnity from WSP, for negligence or breach of contract, expired in October 2015, which is two years after the City and Melcor knew that there were problems with the swale following receipt of the report from the independent engineer in October of 2013. Melcor did not put forward an alternate date for the commencement of the limitation period. The time provided by law for service of process is one year, as specified in Rule 3.26. The Court therefore considered the state of WSP's knowledge at October 2016 — one year after expiry of the limitation period. However, the City did not commence its action against Melcor and WSP until June 6, 2017, approximately nine months after the time at which the Court was to assess WSP's knowledge. The Court found that WSP could not have had any knowledge of the added claim nine months before the main claim was commenced, characterizing such a result as "nonsensical." The Court further observed that it would be "passing strange indeed" if a claim against a defendant could withstand a limitation defence as an "added claim" but not as an original claim.

The role of the contractual limitation extension

The Court noted that this very unique situation was brought about by the fact that the City's claim against Melcor was not limitation-barred because of the agreement between them that the limitation period for claims by the City against Melcor was extended by four years. WSP was not a party to that contract and its limitation period was not extended beyond the statutory limits. The Court drew on the Ontario Court of Appeal's reasoning in HSB Securities (Canada) Inc v Davies, Ward & Beck, 2005 CarswellOnt 267, where the court held that if one of the joint tortfeasors has to bear the risk of a statutory limitation period expiring during the passage of time permitted by a tolling agreement, it should be the party who entered into that agreement. In this case, the Court concluded that WSP had nothing to do with, and was not a party to, the agreement extending the limitation period, and as between Melcor and WSP, Melcor should bear the risk of the statutory limitation period expiring.

Ruling and outcome

Applications Judge B.W. Summers dismissed Melcor's application, including its alternative application for an order under Rule 13(5) to extend the time for filing and service of its Third Party Notice, which was dismissed as being academic. Costs were awarded to the respondent WSP. If the parties cannot agree on the scale or quantum of costs, an application may be made before the Court in morning chambers in the next 30 days. No specific monetary amount in damages was at issue in this decision, as the ruling pertained solely to the procedural question of whether the proposed Third Party Claim amendment could proceed. The successful party in this application was WSP, which preserved its limitation defence and avoided being added as a Third Party Defendant.