In Club Industrial Trailers v Paramount Structures, 2022 ABQB 34, Carscallen LLP litigator Akhil Vohra successfully represented his client (the “Appellant”) in a recent decision at the Court of King’s Bench of Alberta. This decision was in relation to an appeal from a Master’s Decision disallowing certain amendments by the Appellant to its Statement of Defence and parts of a proposed Counterclaim (the “Master’s Decision”). 

Master’s Decision

The Master’s Decision was in relation to an Application by the Appellant to amend its Statement of Defence and file a Counterclaim in its lawsuit with the Respondent. The underlying dispute between the parties relates to amounts claimed by the Respondent for labour and materials provided on a construction project. The Appellant disputes that any further amounts are due and owing to the Respondent. 

In response to an application for summary judgment by the Respondent for payment of the amounts claimed, the Appellant applied to amend its Statement of Defence and to file a Counterclaim. Although the Master allowed many of the proposed amendments and permitted the Appellant to file a Counterclaim, he denied the Appellant’s proposed amendments in relation to three important issues. Notably, one of the reasons why the Master refused these amendments was his finding that the amendments were advanced in bad faith. The “bad faith exception” is the most infrequently used of the four main exceptions to the classic rule that amendments to pleadings are allowed, no matter how careless or late, unless there is prejudice to the opposing party which cannot be repaired.

Justice Feth’s Decision

There is very little legal authority and judicial interpretation of the “bad faith exception” to amending pleadings in Alberta. Justice Feth’s decision is useful for its review of the existing judicial interpretation of the exception, and helps to clarify when the exception may be used to oppose amendments to pleadings. At paragraph 35 of his decision, Justice Feth summarizes that the “bad faith exception” applies to proposed amendments that seek to:

• inflict financial or emotional harm on the adverse party or another person affected by the behaviour; 
• conceal information relevant and material to the litigation issues; or
• deceive the adverse party or the Court.

Other useful findings by Justice Feth on the “bad faith exception” include that:

• the exception is not to be used to punish negligent or careless delay that can be remedied through costs;
• the bad faith purpose need not be the applicant’s sole or primary intent, so long as a significant feature of the intent was for an abuse of process to occur;
• a vague and sweeping approach to defining “bad faith” invites an overly expansive, complicated, and expensive application process that can obscure rather than reveal the motivations for specific amendments; the exercise should not digress into sanctioning prior misconduct by denying amendments; and 
• an allegation of bad faith does not convert the pleading amendment process into a broad inquiry about the parties’ past litigation conduct and the merits of proposed claims and defences, except where the exercise is truly necessary and compelling in showing that specific proposed amendments are motivated by an improper purpose.

Ultimately, Justice Feth rejected the Master’s findings that, on a balance of probabilities, three of the Appellant’s amendments were advanced in bad faith, and allowed the amendments. 

This decision was featured in Bottom Line Legal Research’s Clipping Email Service. 

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