Beyond All Hope: Alberta Court of Appeal Clarifies Test for Hopeless Amendments

On February 28, 2022, the Alberta Court of Appeal (ABCA) issued its decision in Remington Development Corporation v ENMAX Power Corporation 2022 ABCA 71, denying the plaintiff’s attempt to amend its pleadings on the basis that the amendments were hopeless. In doing so, the ABCA overturned the lower court and clarified the test for disallowing hopeless amendments.
The threshold to allow amendments is low and it is unusual for amendments to be denied, particularly on the basis that they are hopeless. As a result, the ABCA's decision is now one of the leading decisions on refusing to permit hopeless amendments.

BACKGROUND

Remington and ENMAX have been engaged in protracted litigation relating to transmission lines which ENMAX operates over lands now owned by Remington. ENMAX has and continues to operate the transmission lines under a permit and license issued by the Alberta Utilities Commission (AUC). Since about 1948, ENMAX operated the transmission lines with the consent of the previous landowner through various right of way agreements. In 2002, Remington purchased the lands, then sought to terminate the historical right of way agreements and demanded that ENMAX remove the transmission lines, even though only the AUC has the ability remove or relocate transmission lines.

Remington commenced legal proceedings against ENMAX alleging, among other things, trespass and damages arising from the claimed inability to develop the land. The Court of Queen's Bench held that Remington could terminate the historical right of way agreements but only the AUC could authorize the relocation of the transmission lines. The parties subsequently entered into a letter agreement (Letter Agreement) relating to ENMAX's application to the AUC to remove the transmission lines.

ENMAX later applied to the AUC to relocate the transmission lines. The AUC denied the application primarily due Remington's failure to formally appear at the AUC hearing to provide any evidence of its claimed development plans. In 2016, the ABCA denied Remington leave to appeal the AUC decision. In doing so, the ABCA held that the "next step" in the proceedings would be for ENMAX to apply to the Alberta Surface Rights Board (SRB) for right-of-entry orders.

Before the SRB, Remington objected to any right of entry orders claiming that ENMAX had breached the Letter Agreement by applying for any right of entry. The SRB granted the orders and dismissed Remington's objection. The SRB held that Remington's interpretation of the Letter Agreement directly conflicted with the Surface Rights Act, which allowed the SRB to grant right of entry orders. The SRB concluded that that the legislation prevailed. Remington never appealed nor sought judicial review of that decision.

Despite that background, Remington sought to amend its statement of claim in the main action to allege that ENMAX breached the Letter Agreement by applying for right of entry orders (the “Amendments”). The Master dismissed the Amendments as hopeless, finding that they did not disclose a cause of action known in law. The Chambers Judge reversed the Master and permitted the amendments. ENMAX appealed to the ABCA.

THE DECISION

In its decision, the ABCA overturned the Chambers Judge and found that the Amendments were hopeless. In doing so, the ABCA found that the Chambers Judge had not only misstated the legal test for amending pleadings but had made palpable and overriding errors of fact in coming to her conclusions.

The ABCA acknowledged the low threshold for granting amendments, which are generally granted subject to four main exceptions, one of which is that the amendment is hopeless. The ABCA found that the Chambers Judge "did not articulate the correct test when she equated hopelessness with whether something was arguable." The ABCA described the difference between a pleading that is arguable and one that is hopeless. Arguable equates to a triable issue, whereas hopelessness means is “plain and obvious” that there is no triable issue.

The ABCA held that even if it were to accept Remington’s interpretation of the Letter Agreement, ENMAX was required under the Surface Rights Act to apply to the SRB for right of entry orders once the AUC denied the application to relocate the transmission lines.

Against that factual backdrop, the ABCA concluded that the proposed Amendments were "so inconsistent with the record that [they were] hopeless." Although allowing amendments is a discretionary decision, the ABCA relied upon 100-year authority from the Supreme Court of Canada that “[t]here can be no discretion to direct a futile amendment.”

CONCLUSION

The ABCA has clarified the test for dismissing proposed amendments to pleadings that are hopeless. In doing so, the ABCA emphasized that amendments must be considered against the existing factual record of the case. While many amendments are consented to, or otherwise allowed, they can have material consequences, including added costs of more document production, additional questioning, potentially increased damages, increased use of scarce court resources. In appropriate cases, amendments should be resisted and the ABCA has provided helpful guidance in this decision for doing so.

Blakes successfully represented ENMAX in these proceedings.

For further information, please contact:

Dalton W. McGrath, Q.C.                               403-260-9654
Michael O'Brien                                              403-260-9753
 
or any other member of our Litigation & Dispute Resolution group.