CITATION: KE v. 3270679, 2025 ONSC 1461 DIVISIONAL COURT FILE NO.: DC-24-00000701-0000 DATE: 20250306

ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT

BETWEEN:

KE RESIDENCES INC. and KING EDWARD REALTY INC. Appellants/Plaintiffs

-and-

3270679 NOVA SCOTIA COMPANY Appellant

– and –

BLANEY MCMURTRY LLP and TAMMY EVANS Respondents/Defendants

Counsel: Natalie Schernitzki, for the Appellants Rebecca Shoom, for the Respondents William E. Pepall, for the Respondents/ Defendants

HEARD: In Toronto, March 3, 2025, by videoconference

JUSTICE S. NAKATSURU

A. OVERVIEW

1This is an appeal of a motion decided by Associate Justice B. McAfee of the Superior Court of Justice by way of an endorsement issued on October 7, 2024.

2The decision subject to appeal arises in the context of an action commenced on May 20, 2016, by the appellants, KE Residences Inc. ("KE") and King Edward Realty Inc. ("KERI"). They allege professional legal negligence by the respondents, Blaney McMurtry LLP and Tammy Evans, relating to a hotel/condominium conversion project at the King Edward Hotel and the land it is located on at 22 Leader Lane, Toronto, Ontario (the "Property").

3The respondents deny liability based on their contention that one of the appellants, KERI, was not their client, and that the other appellant, KE, did not sustain damages, as it had no interest in the revenue loss at issue.

4The trial was scheduled to begin on September 11, 2023. However, at a pre-trial conference before Justice Vermette, on July 6, 2023, the trial date was vacated to allow the parties to bring motions to amend their pleadings.

5The respondents brought a motion seeking leave to amend their statement of defence to add a defence and the appellants brought a cross-motion seeking leave to amend their statement of claim to add a plaintiff, 3270679 Nova Scotia Co., in the event the respondents were successful on their motion. The Associate Justice granted the respondents' motion and dismissed the appellants' cross-motion.

6The appellants appeal the dismissal of their cross-motion, arguing that the Associate Justice erred in declining to add Nova Scotia Co. as a plaintiff to the claim when she concluded that this was not a case of misnomer under Rule 5.04(2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

7For the following reasons, the appeal is dismissed.

B. THE ASSOCIATE JUSTICE'S DECISION

1. The Respondents' Motion

8As noted above, the respondents sought leave to amend their statement of defence to assert a further defence, alleging that the appellant KERI was a bare nominee title holder to the Property and had no legal or beneficial interest in the revenue at issue in the action. The appellants plead in their statement of claim, and initially claimed in discovery, that KERI was the owner of the Property and the recipient of the payment at issue in the action.

9In the discovery process, the respondents received information suggesting that KERI was a bare nominee, holding no interest in the Property, and was therefore not the owner of the hotel and had suffered no damages. The information also suggested that Nova Scotia Co. was the beneficial owner of the property holding a 100% interest.

10The Associate Justice granted leave to amend the statement of defence based on the new information and productions that the respondents received in discovery. She held it disclosed a reasonable defence that would survive a motion to strike; that there was no non-compensable prejudice; and that neither the timing of the motion nor the public policy reason asserted by the appellants were sufficient reasons to decline leave to amend in the circumstances.

2. The Appellants' Cross-Motion

11The appellants then sought leave to amend their statement of claim to add Nova Scotia Co. as a plaintiff. The appellants did not seek to correct the name of an existing plaintiff or replace an existing plaintiff with Nova Scotia Co. They sought to add Nova Scotia Co. on the basis of misnomer, under Rule 5.04(2), if the respondents were successful on their motion.

12Rule 5.04(2) provides that "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."

13On the motion, the parties agreed that a claim by Nova Scotia Co. was statute barred.

14The appellants therefore argued that Nova Scotia Co. should be added to the claim on the basis of misnomer after abandoning their argument to add Nova Scotia Co. as a plaintiff under the doctrine of "special circumstances" which at one time had provided an exception to the limitation period but is no longer the law in Ontario.

15The Associate Justice applied the test for when a moving party seeks to correct its own naming on the basis of misnomer from Urban Life Residential, in Trust v. 615858 Ontario Limited, 2024 ONSC 690, at para. 12, citing Dealer's Choice Preferred Collision Center Inc. v. Kircher, 2021 ONSC 8261 (Div. Ct.), at para. 2. The Associate Justice stated that test as:

When a plaintiff moves to correct its own naming, the focus is on whether the "new" plaintiff was an intended plaintiff when the action was commenced and whether the defendant reasonably ought to have been aware of which entity was pointing the litigation finger in its direction.

16The Associate Justice was not satisfied that this was a case of misnomer for the following reasons:

• She was not satisfied that Nova Scotia Co. was an intended plaintiff when the action was commenced. Nova Scotia's Co.'s identity and role had always been known to the appellants and they did not produce a document supporting that Nova Scotia Co. was the beneficial owner of the property, the Nominee Agreement relating to Nova Scotia Co., to the respondents because they did not believe it was relevant.
• The appellants only wanted to correct any purported misnaming if the respondents obtained leave to amend their statement of defence, otherwise they did not wish to make such a correction. The appellants' counsel confirmed that their position was that KERI had a legal and beneficial interest in the property and that they only sought to add Nova Scotia Co. as a plaintiff in case the trial court accepted the respondents' erroneous position about KERI's status, namely, that it was a bare nominee and not the owner of the hotel and had therefore suffered no damages.
• An Authorization and Direction from Nova Scotia Co. to KERI, authorizing KERI to be a nominal party to the action was drafted and signed in 2023 and backdated to the date the action was commenced. This was additional evidence of the lack of intention when the action was commenced.
• The Blaney defendant would not reasonably have known on reading the claim that Nova Scotia Co. was the intended plaintiff. There was no evidence that Nova Scotia Co. was ever Blaney's client nor was there evidence of Nova Scotia Co. being mentioned in any of the condominium documents Blaney prepared for the appellants.

17The Associate Justice denied the appellants' cross-motion for leave to add Nova Scotia Co. as a plaintiff to the claim as she was not satisfied that this was a case of misnomer that could be corrected under Rule 5.04(2).

C. THE COURT'S JURISDICTION

18The Divisional Court has jurisdiction to hear an appeal of an associate justice's final order pursuant to section 19(1)(c) of the Courts of Justice Act, R.S.O. 1990, c. C.43.

19An associate justice's decision regarding the substitution or addition of parties on the basis of misnomer has been considered a final decision and appealed to a single judge of the Divisional Court: Reimer v. City of Toronto, 2023 ONSC 484 (Div. Ct.) and Streamline Foods Ltd. v. Jantz Canada Corporation, 2011 ONSC 1630 (Div. Ct.), aff'd 2012 ONCA 174.

D. STANDARD OF REVIEW

20Appellate standards of review, as established in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, apply to appeals from an associate justice's order: Zeitoun v. Economical Insurance Group (2008), 91 O.R. (3d) 131 (Div. Ct.), at paras. 40-41, aff'd 2009 ONCA 415.

21The Housen appellate standards are as follows: (1) Questions of law are reviewed for correctness; (2) Questions of fact will not be overturned without palpable and overriding error; (3) Questions of mixed fact and law lie on a spectrum. If the factual and legal aspects cannot be separated, the palpable and overriding error standard applies. If a question of law can be extricated, or the question is closer to the legal end of the spectrum, correctness is used.

22An associate justice's discretionary decision will be interfered with on appeal if the discretion was exercised on the wrong principles: Ontario v. Rothmans Inc., 2011 ONSC 2504, at para. 97.

23Whether circumstances amount to misnomer involve findings of fact and assessments of reasonableness and are entitled to deference on appeal: Lithium Royalty Corporation v. Orion Resource Partners, 2023 ONCA 697, at para. 51.

E. ANALYSIS

24The appellants submit that the Associate Justice made two errors of law and palpable and overriding factual errors such that no deference should be afforded to her decision.

1. Error in the Legal Test

25The appellants submit that the Associate Justice did not apply the appropriate legal test for adding a party under Rule 5.04(2). They submit she should have considered the following questions in the exercise of her discretion: (1) Do the amendments add a completely new cause of action between the parties? (2) Is the amendment to correct a misnomer (i.e. a misnaming, misdescription or other mistake) as contemplated in Rule 5.04(2)? (3) Ought the defendant reasonably be aware that the new plaintiff was pointing the litigation finger in its direction? (4) Is there substantive prejudice to the defendant if a party is added as a plaintiff? (5) Should other matters be considered to ensure procedural fairness?¹

26The appellants submit the Associate Justice erred in law by relying solely on factors two and three of the test and therefore erroneously applied a truncated legal test.

27I am not persuaded that the Associate Justice made such an error. She stated in her reasons that the "focus" of the inquiry was on whether the new plaintiff was an intended plaintiff when the action was commenced and whether the defendant reasonably ought to have been aware of which entity was pointing the litigation finger in its direction. She cited the case of Dealer's Choice Preferred Collision Center Inc. v. Kircher, at para. 2, which affirmed this was the correct articulation of the test. The Associate Justice just did not refer to other factors the appellants complain she should have.

28In my opinion, the Associate Justice applied the legal test applicable to the question of whether misnomer was established given this was the only question she could consider on the appellants' motion, because it was agreed that the proposed claim by Nova Scotia Co. was statute barred. If a limitation period has lapsed, this is fatal to the ability to add a party to an existing action: Morrison v. Barzo, 2018 ONCA 979, 144 OR (3d) 600, at paras. 25-27; Arcari v. Dawson, 2016 ONCA 715, 134 O.R. (3d) 36, at para. 7. Therefore, the only basis on which Nova Scotia Co. could become a party to the action is through the correction of a misnomer. It is the only permissive exception provided for in s. 21(2) of the Limitations Act 2002, SO 2002, c 24, Sch B.²

29In the circumstances of this case, the Associate Justice committed no reversible error of law in the legal test that she applied. Having found no misnomer, it was unnecessary to deal with other considerations.

2. Error in the Application of the Doctrine of Stare Decisis

30The appellants submit that the Associate Justice made a legal error in her application of the doctrine of stare decisis by failing to follow binding precedent, specifically the case of Imperial Oil v. Landstake Investment Ltd., [2002] O.J. No. 1797 (Sup. Ct.), which they claim is similar to the circumstances of this case. In that case, the court allowed the plaintiff to correct the statement of claim to add an entity holding legal title when the action had been commenced by a partnership holding beneficial title to a property.

31The respondents submit that the Associate Justice was not required to follow Imperial Oil due to developments in the law of limitations. Additionally, they submit that the facts of that case were materially different from the facts in this one.

32I agree with the respondents.

33The appellants acknowledge that Imperial Oil must now be read carefully given the changes to the Limitations Act, which came into force after that decision. As it was said recently in Huether v. Sharpe, 2025 ONCA 140, at para. 32,

Ontario's comprehensive reform of the law of limitations, which came into force in 2004, sought to create "a clear and cohesive scheme for addressing limitation issues, one that balances the plaintiff's right to sue with the defendant's need for certainty and finality": Canaccord Capital Corp. v. Roscoe, 2013 ONCA 378, 115 O.R. (3d) 641, at para. 17.

34The court in Imperial Oil permitted a plaintiff to be added to the claim following the expiry of the limitation period. It applied the doctrine of "special circumstances", which previously granted courts the discretion to allow a plaintiff to add parties to a claim following the expiry of a limitation period, where there was no resulting prejudice to the opposing party and where special circumstances justified the exercise of such discretion. Justice Cameron found the facts in Imperial Oil amounted to special circumstances. The Limitations Act has eliminated the special circumstances doctrine. Courts no longer can extend or suspend a limitation period based on special circumstances: Joseph v. Paramount Canada's Wonderland, 2008 ONCA 469, 90 OR (3d) 401, at paras. 13, 16, 23-25; Streamline Foods Ltd. v. Jantz Canada Corporation, 2012 ONCA 174, at para. 8. Imperial Oil can be distinguished on this basis.

35Thus, the Associate Justice committed no error of law by not following that authority as a binding precedent.

3. Misapprehension of Evidence and Palpable and Overriding Errors of Fact

36The appellants submit that the Associate Justice misapprehended the evidence and made palpable and overriding errors of fact in finding that Nova Scotia Co. was not an intended plaintiff when the action was commenced and when she was not satisfied that the Blaney defendant would reasonably have known on reading the claim that Nova Scotia Co. was an intended plaintiff.

37While the appellants argue several factual errors were made and evidence ignored, I find that the factual findings were reasonably open to the Associate Justice. First, given my conclusion that the Associate Justice did not err in law as contended above, she did not ignore evidence relevant to those issues. Second, the Associate Justice does not have to address every aspect of the argument or every piece of evidence to explain her decision adequately: Dealer's Choice Preferred Collision Centre Inc. v. Kircher, at para. 8. Third, she did not misapprehend any evidence or make an erroneous factual conclusion. For example, she made findings of credibility and reliability regarding the affidavit evidence presented by the appellants to support their contention that Nova Scotia Co. was always an intended plaintiff. She did not accept that evidence for the reasons that she outlined in her endorsement. Deference should be afforded to that finding.

38The appellants have not identified any reversible error in the analysis of the Associate Justice on the facts but merely asks me to come to a different conclusion as to the sufficiency of the evidence in support of their position that this was a misnomer.

39I decline to do so. The Associate Justice's findings are entitled to deference and are only reversible in the event of a palpable and overriding error. I see no error in her findings, much less a palpable and overriding one.

F. DISPOSITION

40The appeal is dismissed.

41The respondents are awarded $6,000 all-inclusive in costs payable forthwith.

Nakatsuru J.

Released: March 6, 2025

CITATION: KE v. 3270679, 2025 ONSC 1461 DIVISIONAL COURT FILE NO.: DC-24-00000701-0000 DATE: 20250306

ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT

KE RESIDENCES INC. and KING EDWARD REALTY INC. Appellants/Plaintiffs

-and-

3270679 NOVA SCOTIA COMPANY Appellant

– and –

BLANEY MCMURTRY LLP and TAMMY EVANS Respondents/Defendants

REASONS FOR JUDGMENT NAKATSURU J.

Released: March 6, 2025

Footnotes

1. 1The appellants rely on the following authorities: 1100997 Ontario Limited v. North Elgin Centre Inc., 2016 ONCA 848, [2016] O.J. No. 5851 (C.A.), at paras. 21-22; Urban Life Residential, In Trust v. 615858 Ontario Limited, 2023 ONSC 690, at paras. 11-14, 29 and 31; Farmers Oil and Gas Inc. v. Ontario (Ministry of Natural Resources), 2016 ONSC 6359 (Div. Ct.), at para. 22; Mazzuca v. Silvercreek Pharmacy Ltd. (ONCA), at paras. 25 and 49; Imperial Oil v. Landstake Investments Ltd., [2002] O.J. No. 1797 (Sup. Ct.), at para. 24. It should be noted that these cases deal with broader issues than just misnomer.
2. 2Section 21 of the Limitations Act, states: 21(1) If a limitation period in respect of a claim against a person has expired, the claim shall not be pursued by adding the person as a party to any existing proceeding. (2) Subsection (1) does not prevent the correction of a misnaming or misdescription of a party.