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LIMITATION OF ACTIONS - When time begins to run - Discoverability

Friday, March 06, 2020 @ 9:19 AM  

Lexis Advance® Quicklaw®
Appeal by the defendants from the dismissal of their application for dismissal of the plaintiff’s claims. Application by the defendants to dismiss the claims as against the defendant Daniel Jenkins. In 2008, the plaintiff 1332721 Alberta Inc. (133) leased commercial office space to the defendant Jenkins & Associates, Architecture and Town Planning Ltd. (Associates), which was wholly owned by Jenkins. Associates sought a reduction in rent due to an economic downturn. 133 refused the request. In February 2010, Jenkins incorporated Jenkins Architecture Ltd. (Architecture). Jenkins transferred all of Associates assets to Architecture. In March 2010, Associates stopped paying rent and abandoned the rental premises in a midnight move to a new location. Architecture continued to operate the same business at the new location. 133 commenced an action in May 2010 to recover its losses from the breach of the lease. The action concluded in February 2016, by way of a consent judgment against Associates for just under $418,500 and a consent dismissal of the action against Jenkins. Associates had only one asset and was unable to pay judgment. 133 discovered the transfer of assets from Associates to Architecture. It commenced a new action against Associates, Architecture and Jenkins in June 2016 alleging that the transfer of assets was a fraudulent conveyance. The defendants applied to summarily dismiss the claims against them as being out of time. The master dismissed the application. The defendants appealed and brought an application to dismiss the claims against Jenkins personally. 133 said it could not be expected to have known of the conveyance earlier than March 2016. The defendants said that 133 ought to have known of the conveyance soon after being given cause to make reasonable further inquiries in the spring of 2010 or, failing that, at the latest in the spring of 2013.

HELD: Appeal dismissed. Application allowed in part. The test for when 133 ought to have known was that of reasonable diligence. The inquiries made by 133 in March 2016 were focused on what happened to Associate’s assets, whereas any such inquiry undertaken in 2010 would not have had the benefit of that focus. The creation of Architecture, with a very similar legal name, was insufficient to cause 133 to suspect a conveyance. There was insufficient knowledge to throw upon 133 a positive obligation to make reasonable inquiries. The business’ website address had not changed, the change to its legal name was very subtle, and Jenkins continued to let 133 believe nothing had changed. In 2013, the information obtained in the responses to undertakings was insufficient to throw upon 133 an obligation of further inquiry. 133 would have seen Architecture’s name a few more times, but nothing would generate any suspicions of a conveyance by Associates to Architecture. 133 became aware of the conveyance in March 2016, when it received Associate’s financial statement. It commenced the action within the two-year limitation period. 133’s allegation that Jenkins induced Associates to breach the lease by causing a midnight move could have been part of the first action. Any such claim was out of time. Jenkins was not liable to 133 directly for any proven breaches of the lease, but the claims for allegedly inducing the alleged breaches, as currently pleaded, were not so without merit that they ought to be dismissed summarily.

1332721 Alberta Inc. v. Jenkins & Associates, [2020] A.J. No. 10, Alberta Court of Queen's Bench, P.R. Jeffrey J., January 6, 2020. Digest No. TLD-March22020010