Written by Nick Noonan
In Maes et al. v. Western Warner Oil Ltd. et al., the case unfurled a mix of complex allegations and counterclaims involving an investment in Western Warner, a small oil and gas company based in Alberta. The central figures in this drama are the Maes brothers, described as seasoned investors, who alongside other parties, had put financial resources into the company. Dating back to the mid-’90s, the Maes brothers, buoyed by their extensive portfolio involving penny stocks, chose to invest in Western Warner. Having been swayed by the credentials of the defendants and their affiliations, the brothers thought they were embarking on yet another lucrative venture. Yet, all was not as it seemed; the investment quickly descended into a quagmire of financial losses and unfulfilled promises. Thus, compelled by a sense of betrayal and financial disillusionment, the plaintiffs launched a multi-pronged legal action alleging fraudulent and negligent misrepresentation, breach of contract, and oppressive conduct, against various defendants, including a Mr. Palka and a Mr. Benson, as well as the corporate bodies involved.
There were a number of questions to be answered. Did the plaintiffs rely on negligent or fraudulent misrepresentations to make their investments? If not, did the defendants breach any agreements or engage in oppressive conduct? Additionally, there was the overarching issue of whether the plaintiffs’ claims were time-barred under The Limitation of Actions Act.
Justice Bock determined that the plaintiffs were neither misled nor misinformed about various critical elements, such as (a) the existence of a cease trade order with respect to Western Warner securities in Alberta; (b) the compliance status of the defendants with the Manitoba Securities Commission; and (c) other matters referred to by the plaintiffs.
Furthermore, Justice Bock found that two of the key issues—the existence of litigation in South Dakota and Mr. Palka’s investment in Western Warner—were not adequately pleaded in the re-amended statement of claim. This oversight proved fatal for those allegations.
The judge also addressed the limitation period for bringing forward the brothers’ claims, noting that, under Manitoba law, these were subject to a six-year limitation period calculated from the date the cause of action arose. Instead, they were filed more than 14 years later, and had thus expired long before the filing of the statement of claim in 2016. The judgment dismissed the plaintiffs’ claims in their entirety.
For the discerning businessperson, this case serves as an instructive tale in several key areas. First, it underscores the importance of diligently investigating the facts before investing in small companies, particularly in sectors that are fraught with volatility. The Maes brothers, despite their investment acumen, stumbled in this venture, arguably due to a lack of comprehensive background checks on Western Warner. This case bolsters the notion that investors should, as the saying goes, do their homework. It places the onus on investors to not only be savvy but also proactive about the information that guides their financial decisions. Second, the decision reiterates the significance of timely legal action. The Statute of Limitations is not mere decorative elements in the legal landscape; they have teeth, and this case shows they bite. Ignoring the statute of limitations can imperil even otherwise meritorious claims. Finally, for lawyers advising corporate clients, the case serves as a stark reminder to carefully plead all pertinent facts and issues in the statement of claim.
The views and opinions expressed in the blogs and case reporter are the views of their authors, and do not represent the views of the Desautels Centre for Private Enterprise and the Law, the Faculty of Law, or the University of Manitoba. Academic Members of the University of Manitoba are entitled to academic freedom in the context of a respectful working and learning environment.