Court File and Parties

CITATION: Essar Algoma Steel Inc. v. Liebherr (Canada) Company, 2011 ONSC 1688 DIVISIONAL COURT FILE NO.: 467/10 DATE: 20110322

ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT

BETWEEN:

ESSAR ALGOMA STEEL INC. Applicant (Respondent in appeal)

– and –

LIEBHERR (CANADA) COMPANY and AMERICAN STATE EQUIPMENT CO., INC. Respondents (Appellants)

COUNSEL: Lisa La Horey & Laurie Murphy, for the Applicant (Respondent in appeal) Christopher J. Matthews, for the Respondent (Appellant), Liebherr-Canada Ltd. Randy Bennett, for the Appellant (proposed defendant), Liebherr-Werk Nenzing GmbH

HEARD: March 1, 2011

Reasons for Judgment

LEDERER J.:

Background

[1] Essar Algoma Steel Inc. (“Algoma”) is a producer of steel products. It purchased a crane from American State Equipment Co., Inc. (“American”). The crane had been manufactured by Liebherr-Werk Nenzing Gmbh (“LWN”), a company with its headquarters in Austria. The crane was destroyed in a fire which occurred on April 8, 2007. It was a complete loss. Liebherr-Canada Ltd. (“LC”) is an Ontario company which is a distributor of construction and mining equipment. It is one of the “Liebherr Group of Companies”. It does not design or manufacture cranes.

[2] On April 7, 2009, Algoma issued a Statement of Claim naming American and “Liebherr (Canada) Company” as defendants. Among other things, it was alleged that the defendants were liable for the faulty manufacture of the crane.

[3] LC delivered a Statement of Defence on July 23, 2009, which advised that it had been incorrectly named in the Statement of Claim and stating that it did not design or manufacture the crane. On August 18, 2009, and then again on September 8, 2009, counsel for Algoma wrote to counsel for LC requesting the name of the Liebherr company responsible for the design and manufacture of the crane. On September 8, 2009, counsel for LC responded. He advised that LWN was the manufacturer of the crane.

[4] Shortly thereafter, on November 30, 2009, Algoma filed a motion seeking to replace Liebherr (Canada) Company with the name of LWN. The motion was heard on August 23, 2010. Master Glustein allowed the change. This is the decision being appealed.

[5] By this appeal, LWN seeks to have the order of the Master set aside and the motion to name LWN as the defendant in the action dismissed. It is joined in this by LC, which acknowledges that it was improperly named in the Statement of Claim. It joins LWN in submitting that the order of the Master should be set aside and proposes that the party, as named, (Liebherr (Canada) Company) should be replaced with its name (Liebherr-Canada Ltd.).

Issue

[6] The issue is whether the naming of Liebherr (Canada) Company as a defendant should be treated as a misnomer and its replacement by LWN confirmed.

The Law

[7] The applicable rule in the Rules of Civil Procedure is 5.04(2):

At any stage of a proceeding the court may by order add, delete or substitute a party or correct the name of a party incorrectly named, on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.

[8] Despite the inclusion of the word in the rule, the correction of a misnomer does not involve the “substitution” of one party for another. It concerns a situation where a party seeks “to name the defendant correctly” after the applicable limitation period has expired (see: Spirito v. Trillium Health Centre, 2008 ONCA 762, [2008] O.J. No. 4524, 69 C.P.C. (6th) 36 at paras. 6 and 15, as quoted from Kitcher v. Queensway General Hospital (1977), 44 O.R. (3d) 589 (C.A.) at para. 2).

[9] In Davies v. Elsby Bros., [1961] 1 W.L.R. 170, an injured man sued what he thought was his employer (Elsby Brothers – a firm). In fact, the business had been taken over by a corporation (Elsby Brothers Ltd.). The court would not allow the amendment of the writ to change the name of the party. It was not a case of misnomer, but of the substitution of one party for another.

[10] The law has changed in that the application of the principle has been relaxed.

[11] In Ormerod v. Strathroy Middlesex General Hospital 2009 ONCA 697, the family of a dead man sued an emergency room physician. The doctor had not treated the deceased. The court allowed the claim to be amended to name the doctor who had looked after the man.

[12] The Court of Appeal noted that the law had evolved since Davies v. Elsby Bros., supra. It referred to the following as demonstrating the test for a misnomer:

The case law amply supports the proposition that where there is a coincidence between the plaintiff’s intention to name a party and the intended party’s knowledge that it was the intended defendant, an amendment may be made despite the passage of the limitation period to correct the misdescription or misnomer. See Ladouceur v. Howarth, [1973] S.C.J. No. 120 (S.C.C.); Kitcher v. Queensway General Hospital, [1997] O.J. No. 3305 (C.A.) and J.R. Sheet Metal & Manufacturing Ltd. v. Prairie Rosewood Products, 1986 ABCA 4, [1986] A.J. No. 7 (C.A.).

(Lloyd v. Clark, 2008 ONCA 343, [2008] O.J. No. 1682, at para. 4, as quoted in Ormerod v. Strathroy Middlesex General Hospital, supra, at para. 21)

[13] It follows that an analysis of whether an error in naming a party resulted from a misnomer requires a consideration of the circumstances from the perspective of the plaintiff and the prospective defendant.

[14] The intention of the plaintiff is identified “…not by what the writer of the document intended but what a reasonable man reading the document would understand it to mean…” (see: Davies v. Elsby Bros., supra, p. 4).

[15] The second part of the test has widely been identified as the “litigating finger test”:

… would a reasonable person, upon reading the document, know that she is the intended recipient (or that the ‘litigating finger’ was pointed at her)?

(Sorokataya v. Keith, [2010] O.J. No. 3429 at para. 9)

(see also, for example: Jackson v Bubela, [1972] B.C.J. No. 736, 28 D.L.R. (3d) 500 at para. 5; Dukoff et al. v. Toronto General Hospital, [1986] O.J. No. 188, (1986), 54 O.R. (2d) 58; Ormerod v. Strathroy Middlesex General Hospital, supra, at paras. 14, 22 and 24; and Spirito v. Trillium Health Centre, supra, at para. 5)

[16] This has been explained:

I think that the test must be: how would a reasonable person receiving the document take it? If, in all the circumstance of the case and looking at the document as a whole, he would say to himself: ‘Of course it must mean me, but they have got my name wrong,’ then there is a case of mere misnomer. If, on the other hand, he would say: 'I cannot tell from the document itself whether they mean me or not and I shall have to make inquiries,' then it seems to me that one is getting beyond the realm of misnomer.

(Davies v. Elsby Bros., supra, at p. 4)

[17] In Ormerod, supra, at para. 12, the motions judge broadened this part of the test. He observed that the “reasonable person receiving the document” is not restricted to the person to be named as a defendant: “Rather the cases have been expanded to include the ‘relevant person’ who reviews the document”.

[18] The broadening of the understanding of what is required to demonstrate misnomer has been accompanied by the recognition of the widening of a residual discretion, in the court, to refuse an amendment that may otherwise qualify as a misnomer:

As I see it, as the scope of what the courts treat as a misnomer broadens, it is appropriate to take a wider view of the court's discretion to refuse the correction of a misnomer. A 'classic' misnomer, one in which the claim contains a minor spelling error of the defendant's name and is personally served upon the intended but misnamed defendant, prompts the application of a standard historically developed to remedy mere irregularities. Now that the concept of 'misnomer' has been broadened to apply to a wider range of situations, the standard used to permit its correction should take into account the extent of its departure from mere irregularity in all circumstances of the case.

(Ormerod v. Strathroy Middlesex General Hospital, supra, at para. 31)

Standard of Review

[19] This is an appeal from an order of a Master. The decision of a Master is accorded the same deference as that of any other judicial officer:

There is, in my view no compelling reason for adopting differing standards of review on appeal depending solely on the place in the judicial hierarchy occupied by the decision maker whose decision is under appeal.

(Zeitoun v. Economical Insurance Group, [2008] O.J. No. 1771, 53 C.P.C. (6th) 308 at para. 41)

[20] The standard of review is that the decision shall be overturned only where the Master has made an error of law, exercised his or her discretion on wrong principles, or misapprehended the evidence such that there is a palpable overriding error (see: Zeitoun v. Economical Insurance Group, [2008] O.J. No. 1771, 53 C.P.C. (6th) 308 at para. 40).

Analysis

[21] The decision of the Master considers the two issues raised by the cases referred to above, namely:

(1) Whether the failure of Algoma to correctly name LWN as a defendant is a misnomer; and,

(2) Even if a misnomer occurred, should the Court exercise its discretion to refuse to permit the requested correction?

(1) Whether the failure of Algoma to correctly name LWN as a defendant is a misnomer?

[22] What was the intention of the plaintiff? The Master summarized the relevant evidence and found that Algoma intended to name, as a defendant, the manufacturer of the crane (see: Essar Algoma Steel Inc. v. Liebherr (Canada) Company, 2010 ONSC 4623 at para. 11).

[23] The only objection taken to this finding appears to be that there was information readily available to the plaintiff that would have identified LWN as the manufacturer. The Master pointed out that the fact that Algoma might have been able to make that identification did not affect its intention to sue the manufacturer. It is a consideration that might apply to a determination of whether the plaintiff exercised due diligence in determining who the defendants should be. It may be relevant to an application of the court’s residual discretion. It is not pertinent here.

[24] Would LWN acting reasonably, upon reading the Statement of Claim, know that it was the intended defendant? This is the “litigating finger” test. The Master listed the allegations he found in the Statement of Claim that would have made it plain to LWN that the manufacturer of the crane was an intended defendant (see: Essar Algoma Steel Inc. v. Liebherr (Canada) Company, 2010 ONSC 4623 at para. 13). Consistent with the broadening of the application of this part of the test, the Master accounted for the participation of LC. It was a “relevant person who review[ed] the document”. The Statement of Defence it filed made clear that it was a distributor and not the manufacturer of the crane. On April 11, 2007 (three days after the fire), employees of LC sent an e-mail to LWN indicating, among other things, that the cause of the fire was being investigated.

[25] Based on the pleadings, the Master found that LWN would have known that it was the intended defendant if it had received the Statement of Claim:

LWN was the manufacturer or the Crane and would have understood that it was the subject of the claim for negligent design and manufacture, even if LWN was not involved in the sale, marketing or distribution of the Crane. In the statement of claim, Algoma referred only to LC (not [American]) as the manufacturer of the Crane and LWN would have known that any claim for negligent manufacture or design could only have been based against LWN, and not LC.

(Essar Algoma Steel Inc. v. Liebherr (Canada) Company, 2010 ONSC 4623 at para. 19)

[26] This is a finding of fact and is entitled to deference in this Court. (see: Ormerod v. Strathroy Middlesex General Hospital, supra, at para. 24; and, Spirito v. Trillium Health Centre, supra, at para. 13). I am satisfied that it was reasonably open to the Master to come to the conclusion that he did.

[27] The principal objection to this determination is that the Master failed to properly account for the suggestion that the cause of the fire could have come, not from the design or manufacture of the crane, but from the installation of a generator on the crane, undertaken by American. Counsel for LWN relied on the proposition that the test is not whether the prospective defendant “could have” recognized that it was the intended party to the action, but whether it “would have”. It was submitted that this threshold had not been met.

[28] In her factum, counsel for the plaintiff observed that the Statement of Claim identified LC and not American (the entity which performed the aftermarket installation on the crane) as the party which designed and manufactured the crane, which is to say that the problem being asserted in the claim, arose from some other cause. The Statement of Claim pleads that the origin of the fire was in the engine compartment of the crane and was caused by electrical arcing in the wire running from the battery to the starter and not in the generator (see: Statement of Claim, paras. 10 and 11). It is not that the Master did not consider this. He noted:

The Liebherr Defendants submit that the issue relating to the Battery Wiring may not be LWN’s responsibility, and as such, LWN might not have known that it was an intended defendant of the claim. However, even if LWN had no involvement with the Battery Wiring (an issue on which I make no finding), LWN would have known that it was the manufacturer of the Crane, and that it was being sued in that capacity, even if there was no merit to the claim.

That test for a 'litigating finger' is whether a claim points at the intended defendant, not whether there is merit to the claim. On the basis of the above allegations, the only reasonable conclusion for LWN to have drawn if it had received the statement of claim was that it (and not LC) was the intended defendant.

(Essar Algoma Steel Inc. v. Liebherr (Canada) Company, 2010 ONSC 4623 at paras. 20 and 21)

[29] This does not take away from the conclusion that it was reasonably open to the Master to conclude as he did. There is a “coincidence” between the intention of the plaintiff to name the manufacturer of the crane and the manufacturer’s knowledge that it was the intended defendant. The failure of Algoma to correctly name LWN as a defendant was a misnomer.

(2) Should the Court exercise its discretion to refuse to permit the requested correction?

[30] There can be no doubt that the Master understood that there was a residual discretion in the court to refuse to permit the correction of a misnomer (see: Essar Algoma Steel Inc. v. Liebherr (Canada) Company, 2010 ONSC 4623, at paras. 23 to 28).

[31] Ormerod v. Strathroy Middlesex General Hospital, supra, at para. 32 provides some guidance as to the application of the residual discretion. It notes that the greatest weight should be given to a consideration of whether the defendant was misled or was unduly prejudiced. It goes so far as to say that these factors should be determinative, but cautions that a general principle is not an inflexible rule.

[32] The Master found that there was no prejudice to LWN as a result of the misnomer. In making this determination, he pointed out that LWN had filed no evidence on the motion. The only substantive affidavit filed was sworn by an associate with the law firm acting for the plaintiff, Algoma.

[33] The Master went further. He considered the question of due diligence. Should Algoma have been aware that LWN was the manufacturer before it issued the Statement of Claim?

[34] The Certificate of Origin for the crane names LWN as the consignor of the crane. It names the country of origin of the crane as being Austria. There was a metal identification plate on the crane that apparently identified LWN as the manufacturer.

[35] The Master accounted for these factors when he noted:

The Liebherr Defendants rely on the Certificate of Origin and the website, as set out in paragraph 13 above. A probe of websites or a review of the Certificate of Origin may have led to further inquiries that might have led to a conclusion that LWN was the manufacturer, but the evidence was not direct. The Liebherr Defendants also rely on a metal identification plate on the Crane that allegedly would have identified LWN as the manufacturer, but as noted at footnote 2 above there is no evidence as to the condition of the plate after the fire and the Crane was salvaged along with all operational and maintenance manuals prior to being referred to counsel.

(Essar Algoma Steel Inc. v. Liebherr (Canada) Company, 2010 ONSC 4623 at footnote 5, see also footnote 2 and para. 13)

[36] The Master found that there was no evidence that Algoma knew that LWN was the manufacturer when it issued its Statement of Claim.

[37] The Master pointed out that one needs to be careful in applying due diligence to this situation. The cases on which counsel for LWN relied reflect circumstances where the question was when a cause of action was discoverable. This begins the running of time against which to calculate the expiry of a limitation period (see: Leighton v. Goodyear Inc., [2008] O.J. No. 1870 and Guay v. BHD Financial Group, [2007] O.J. No. 3405). As the Master noted, to too-strictly apply due diligence would limit the application of misnomer which, by its nature, is only effective after a limitation period has expired. To my mind, this is one reason why the understanding of the prospective defendant, and the presence of prejudice to that party, are the more important considerations.

[38] Nonetheless, the Master understood that there may be circumstances when a plaintiff knows or ought to have known of the existence of the defendant and still chooses to ignore that information and continues the action against another. He recognized that, in those circumstances, the court may be entitled to infer that the plaintiff chose to proceed against the wrong defendant, and it would be inappropriate to permit correction of the defendant's name.

[39] In this case, the Master found no evidence of any attempt by Algoma to bring litigation against a known, wrongly-named defendant and then to seek an advantage through a late request for a misnomer. He found that Algoma and its counsel appeared to have made a mistake in naming the defendant which did not result in prejudice to LWN.

[40] Moreover, the Master was aware that, as soon as counsel for Algoma reviewed the Statement of Defence in which LC denied any involvement with the crane, he wrote to the counsel for LC to inquire as to who the manufacturer of the crane was and then took immediate steps to make the change.

[41] Finally, the Master concluded: "Far from the evidence that the court should exercise its discretion to refuse the correction, the circumstances in the present case reflect a typical case when the doctrine of misnomer should be applied" (see: Essar Algoma Steel Inc. v. Liebherr (Canada) Company, 2010 ONSC 4623 at paras. 25, 27(a), 27(c) and 28).

[42] The Master did not fail to address any exceptional circumstances in his consideration of the residual discretion that remains. He considered all the circumstance of the case and exercised his discretion to permit the correction. Far from finding exceptional circumstances in this case, the Master found the circumstances to be unexceptional and reflective of a typical case where misnomer should apply. In the words of the Court of Appeal in: Ormerod v. Strathroy Middlesex General Hospital, supra, at para. 33: “…That discretion was his, not this court’s, to exercise. I see no basis to interfere.”

Appeal as to Costs

[43] Finally, quite apart from the merits of the motion, LC appeals the award of costs made by the Master. It is the view of counsel for LC that the motion resulted from an error made by Algoma and that, in being permitted to amend the Statement of Claim, it is being granted an indulgence. It should pay the costs.

[44] Costs are a matter of discretion. There is no wrong principle of law involved in these submissions, just a sense that the equities have been wrongly applied. There is no reason for me to overturn the ruling of the Master. In saying this, I observe that the Master did not award costs against LC alone. Rather, the “Leibherr Defendants” were ordered to pay. Consequently, LC and LWN share the liability. The Master has left it to them to agree as to the division of the responsibility he had imposed. It is not clear that Algoma made a mistake in the sense that it was careless or knowingly proceeded in error. It would be open to the Master to conclude that Algoma did what was reasonable and was led down a path it had every reason to believe was the correct one. It was open to LWN to have conceded that it was the manufacturer, its knowledge of the events and that the litigation finger was pointing its way. Viewed from this perspective, the motion could have been avoided by the “Liebherr Defendants”.

Disposition

[45] The appeal is dismissed.

Costs

[46] No submissions were made as to costs. If the parties are unable to agree, I will consider submissions, made in writing, on the following terms:

1. On behalf of Algoma, no later than fifteen days after the release of these reasons. Such submissions are to be no longer than three pages, double-spaced, excluding any Costs Outline or Bill of Costs and case law that may be included.

2. On behalf of the LWN and LC, no later than ten days thereafter. Such submissions are to be no longer than three pages, double-spaced, excluding any Costs Outline or Bill of Costs and case law that may be included.

3. If necessary, submissions, on behalf of Algoma, in reply to those of the plaintiff, no later than five days thereafter. Such submissions are to be no longer than one page, double-spaced.

LEDERER J.

Released: 20110322