COURT FILE NO.: CV-16-548869 DATE: 2023 11 02
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: MONSTER SNACKS INC., Plaintiff - and - SANDRA DAVID also known as SANDRA ALSAFFAWI-DAVID, Defendant
BEFORE: Associate Justice Todd Robinson
COUNSEL: G. Bowden, for the plaintiff by assignment, Royal Bank of Canada R. Karass, for the defendant J. Beesley, for the non-party, Murray Maltz (observing)
HEARD: June 29, 2023 (by videoconference)
REASONS FOR DECISION (Motion to Amend Statement of Claim)
[1] Royal Bank of Canada (“RBC”), in its capacity as assignee of the plaintiff’s claim in this action, moves for leave to amend the statement of claim. Although framed in the notice of motion as a motion by “the plaintiff”, no notice of change of lawyer appears to have been filed. It is undisputed that RBC is directing this litigation and has been since an assignment of the claim to RBC by the original plaintiff, Monster Snacks Inc. (“Monster”). RBC seeks leave to file a fresh as amended statement of claim naming itself as plaintiff and, as RBC characterizes it, particularizing allegations against the defendant, Sandra Alsaffawi.
[2] The motion is opposed by Ms. Alsaffawi, who takes the position that the proposed fresh as amended statement of claim seeks to plead new facts and new causes of actions that are now statute-barred by the Limitations Act, 2002, SO 2002, c 23, Sched B. Ms. Alsaffawi’s position is that there are actually no causes of action plead against her in the existing statement of claim.
[3] I am granting an order to continue, but am otherwise dismissing RBC’s motion. In my view, the proposed fresh as amended statement of claim does seek to plead a fundamentally different claim against Ms. Alsaffawi based on new facts that have not already been pleaded. I find that the new causes of action are statute-barred, but would have denied leave to amend in any event since the amended pleading, as drafted, does not comply with the rules of pleading.
Analysis
[4] An order to continue this action with RBC as plaintiff is unopposed. The parties’ core dispute is over whether RBC’s proposed amendments should be allowed.
[5] RBC’s position is that leave to amend should be granted, since the proposed fresh as amended statement of claim is only seeking to particularize causes of action and relevant facts that are already supported by the facts in the current statement of claim. Ms. Alsaffawi’s position is that the amendments should not be allowed for two reasons. First, RBC’s proposed amended pleading asserts new causes of action against Ms. Alsaffawi based on newly pleaded facts and those new claims are now statute-barred. Second, RBC’s proposed pleading does not comply with the rules of pleading.
Issue 1: Should an order to continue be granted?
[6] Monster’s prior default judgment (which has now been set aside) and its claims against Sandra Alsaffawi were assigned to RBC. Monster and RBC entered into an assignment agreement and minutes of settlement in May 2019. The assignment agreement, which is in evidence, supports an absolute assignment with a residual benefit retained by Monster.
[7] Rule 11.01 of the Rules of Civil Procedure, RRO 1990, Reg 194 (the “Rules”) provides that where the interest of a party is transferred or transmitted to another person by assignment, the proceeding shall be stayed with respect to the party whose interest has been transferred or transmitted until an order to continue the proceeding by or against the other person has been obtained. An order to continue has not been obtained, nor has one been sought. The proposed amendments seek to substituted Monster with RBC as plaintiff. In my view, an order to continue is the appropriate relief to change the plaintiff in these circumstances. Ms. Alsaffawi is unopposed to an order to continue, so I am granting one.
Issue 2: Is RBC asserting new cause of actions based on newly pleaded facts?
[8] Rule 26.01 of the Rules provides that on a motion at any stage of an action the court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment. The rule is framed in mandatory terms, namely that the court must allow the amendment unless the responding party would suffer non-compensable prejudice, the proposed pleading is scandalous, frivolous or vexatious, or the proposed pleading fails to disclose a reasonable cause of action: Klassen v. Beausoleil, 2019 ONCA 407 at para. 25.
[9] Notwithstanding the “shall” language in rule 26.01, granting leave to amend remains a discretionary decision. The rule itself provides the court with express discretion in assessing what constitutes non-compensable prejudice in a particular case. In addition, the court retains a residual right to deny amendments where appropriate: Gayle v Cambridge Mercantile Corp., 2023 ONSC 3554 at para. 32 (citing Avedian v. Enbridge Gas Distribution Inc., 2023 ONCA 289 at para. 6).
[10] An amendment will be refused when it seeks to advance, after the expiry of a limitation period, a fundamentally different claim based on facts not originally pleaded: 100997 Ontario Limited v. North Elgin Centre Inc., 2016 ONCA 848 at para. 23. That is because expiry of a limitation period is one form of non-compensable prejudice. A party cannot circumvent the operation of a limitation period by amending their pleadings to add additional claims after the expiry of the relevant limitation period: Klassen v. Beausoleil, supra at para. 26.
[11] Because of the above case law, it matters whether RBC is seeking to plead new claims based on new facts, as Ms. Alsaffawi argues, or is only particularizing existing claims and facts, as RBC argues. Generally, if proposed amendments involve claims arising out of the same facts or the factual matrix pleaded in the original statement of claim, then the amendments will not be viewed as statute-barred: Farmers Oil and Gas Inc. v. Ontario Ministry of Natural Resources, 2016 ONSC 6359 at para. 14. That is because an amendment is not properly viewed as asserting a new cause of action where the original pleading contains all the facts necessary to support the claim. Instead, the amendments are only claiming additional forms of relief, or clarifying the relief sought, based on the same facts as originally pleaded: Klassen v. Beausoleil, supra at para. 28.
[12] A “cause of action” is a factual situation the existence of which entitles one person to obtain from the court a remedy against another person: Klassen v. Beausoleil, supra at para. 27; 100997 Ontario Limited v. North Elgin Centre Inc., supra at para. 19.
[13] RBC’s proposed fresh as amended statement of claim specifically identifies three causes of action: breach of contract, misrepresentation, and knowing assistance in a breach of trust or, alternatively, knowing receipt and misuse of trust funds. Only the first two are being pursued by RBC. The proposed amendment to add relief for knowing assistance or knowing receipt was withdrawn at the hearing.
[14] The original statement of claim seeks judgment for $290,000, but does not expressly state any cause of action. RBC’s position is that causes of action in both breach of contract and misrepresentation against Ms. Alsaffawi are supported by the facts as pleaded in the original statement of claim. The pleaded facts dealing with Ms. Alsaffawi are limited. The relevant facts in the original statement of claim are as follows (which I am paraphrasing for simplicity):
(a) Sandra Alsaffawi owns a vending machine business known as Suddenly Soda Refreshments, which is a trade name she owns (paras. 3-4);
(b) Tony David offered to sell Suddenly Soda to Monster’s principal and arranged for Ms. Alsaffawi to draft the terms of the agreement (para. 6);
(c) Monster and Ms. Alsaffawi signed an offer for Monster to purchase the assets of Suddenly Soda for $290,000, which listed 111 vending machines and their locations (para. 7);
(d) At the time of signing the offer to purchase, Monster’s principal did not know that Sandra Alsaffawi and Tony David were married, that Mr. David was “representing” Ms. Alsaffawi, or that Ms. Alsaffawi was the owner of the vending machines (para. 8);
(e) The transaction was completed on April 13, 2015, at which time Ms. Alsaffawi signed the closing documents, including a bill of sale listing the number and type of vending machines and their locations (para. 9);
(f) Ms. Alsaffawi refused to provide keys to the vending machines and continued to collect funds from the machines until July 13, 2015 (para. 10);
(g) Monster was finally given the keys and discovered that there were only 29 machines that “were in accordance with” the agreement and that the profit of Suddenly Soda as represented by Tony David was not true (para. 11);
(h) The business was not viable and did not have sufficient cash flow and was closed (para. 12); and
(i) “Various information” (which is not specified in the statement of claim) was provided to Monster’s principal by both Tony David and Sandra Alsaffawi to obtain a business loan, including the number of vending machines and their gross and net profits, which were false (para. 13).
[15] RBC’s proposed fresh as amended statement of claim includes much more detailed allegations of fact. It pleads the following relevant facts (which I also paraphrase for simplicity):
(a) Tony David operated a vending machine business called “Suddenly Soda”, which was a sole proprietorship business belonging to Ms. Alsaffawi (para. 4);
(b) Monster’s principal and Ms. Alsaffawi agreed that Monster would purchase the assets of Suddenly Soda, in respect of which Ms. Alsaffawi prepared an agreement of purchase and sale that was signed by Monster’s principal and Ms. Alsaffawi (para. 5);
(c) Ms. Alsaffawi did not tell Monster’s principal (i) that she was estranged from her spouse (Tony David) and separating from him; (ii) that in her view the business belonged to Mr. David, not her; or (iii) that she did not accept responsibility for any contractual obligations of Suddenly Soda (para. 6);
(d) Ms. Alsaffawi signed the agreement of purchase and sale without expressing any reservations (para. 6);
(e) Ms. Alsaffawi received the full purchase funds, but most of the machines listed in the agreement of purchase and sale did not exist and companies that Ms. Alsaffawi claimed had contractual relations with Suddenly Soda had no dealings with the business at all (para. 7);
(f) Ms. Alsaffawi either knowing made or was wilfully blind to the misrepresentations contained in the agreement of purchase and sale (para. 10);
(g) Ms. Alsaffawi knew or ought to have known that the agreement contained misrepresentations, in that it purported to sell equipment and contracts that she knew or ought to have known did not exist (para. 10);
(h) Ms. Alsaffawi alleged that she was not privy to anything to do with Suddenly Soda and only signed the agreement of purchase and sale after receiving “abusive phone calls” from Mr. David (para. 11);
(i) Ms. Alsaffawi failed to warn Monster’s principal that she was signing the agreement of purchase and sale under protest, or that she was under duress when doing so, and failed to warn him that “he would not get what he bargained for” (para. 11); and
(j) Ms. Alsaffawi’s position is that Tony David was the seller, not her (para. 11).
[16] I am unconvinced by RBC’s arguments that the proposed amended pleading only particularizes causes of action and allegations already pleaded in the original statement of claim. It is not clear to me that sufficient material facts have been pleaded in the original statement of claim to support claims against Ms. Alsaffawi in either breach of contract or misrepresentation. Regardless, I am satisfied that the above facts are not further particulars of the factual matrix outlined in the prior pleading. They are new facts and a new version of events, which support a new theory of liability. In my view, the factual matrix has been substantively revised from that previously pleaded in a way that materially changes the allegations about Ms. Alsaffawi’s involvement and role in the underlying sale transaction.
[17] The original statement claim is a far cry from a well-drafted pleading. Nevertheless, on this type of pleadings motion, it must be read generously and with some allowance for drafting deficiencies: Klassen v. Beausoleil, supra at para. 30. However, even reading it generously, the pleaded facts in the fresh as amended statement of claim go well beyond those pleaded in the original statement of claim.
[18] In my view, the amended pleadings are not fairly viewed as being part of the same factual matrix as that pleaded in the original statement of claim. It thereby follows that RBC’s amended pleading cannot be particularizing an existing claim, nor is it advancing claims for additional forms of relief or clarifying the relief sought based on the already pleaded facts.
Issue 3: Are the new causes of action statute-barred?
[19] Since the proposed amendments plead new causes of actions based on new facts not already pleaded, I must consider whether the claims are statute-barred. I find that they are and, accordingly, that leave to amend should not be granted.
[20] Section 4 of the Limitations Act, 2002 sets out that a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered. Discovery is governed by s. 5 of the Limitations Act, 2002. It provides that a claim is discovered when a claimant knew or reasonably ought to have known that (i) the injury, loss or damage had occurred; (ii) the injury, loss or damage was caused by or contributed to by an act or omission, (iii) the act or omission was that of the person against whom the claim is made, and (iv) having regard to the nature of the injury, loss or damage, a proceeding is an appropriate means to seek to remedy it (s. 5(1)). The section also provides that a person with a claim is presumed to have discovered their claim on the day that the act or omission on which the claim is based took place, unless the contrary is proved (s. 5(2)).
[21] I agree with Ms. Alsaffawi that the fact that she pleaded a limitations defence in her statement of defence filed in response to the existing statement of claim is immaterial to whether the amendments should or should not be allowed. RBC has the onus of rebutting the presumption of discovery in s. 5(2) about when Monster knew (or ought to have known) about its claim.
[22] RBC has tendered no direct evidence on when Monster discovered its claims against Ms. Alsaffawi. The original statement of claim sets out that the agreement of purchase and sale was signed in January 2015, with the sale transaction closing on April 13, 2015, but that Ms. Alsaffawi refused to provide keys to the vending machines or permit Monster to attend at the machines. The statement of claim also states that Ms. Alsaffawi continued to collect funds from vending machines until July 13, 2015. These dates are admitted for material events.
[23] In my view, the statement of claim supports presumptive discovery of the claim against Ms. Alsaffawi under s. 5(2) of the Limitations Act, 2002 by no later than July 13, 2015. That is well over two years before this motion was brought.
[24] I am unconvinced by RBC’s arguments that it was unaware of material facts until Ms. Alsaffawi’s cross-examination on the prior motion to set aside the default judgment. Regardless, even I accept that RBC lacked subjective knowledge of material facts until that cross-examination, it does not assist RBC. It is Monster’s claim, so it is Monster’s reasonable knowledge that matters. RBC cannot rebut the presumption in s. 5(2) of the Limitations Act, 2002 without evidence. The brief two-page affidavit of a legal assistant tendered by RBC in support of this motion does not provide it. RBC has not met its evidentiary burden. I find that the newly pleaded claims are statute-barred.
Issue 4: Does the proposed amended pleading comply with pleading rules?
[25] Even if I am wrong in the foregoing, I would not allow the proposed amendments as drafted. I agree with Ms. Alsaffawi that they do not comply with the rules of pleading. In such a circumstance, the court should not give leave to amend a pleading. Confronting a responding party with a proposed amended pleading that does not comply with the rules of pleading is also a form of prejudice under rule 26.01 that is sufficient to deny leave to amend to the moving party: Gayle v. Cambridge Mercantile Corp., supra at para. 33.
[26] Subrule 25.06(1) of the Rules provides that every pleading shall contain a concise statement of the material facts on which the party relies for the claim or defence, but not the evidence by which those facts are to be proved. “Material” facts are those facts necessary to establish the constituent elements of the claim or defence. Pleadings should be brief, clear, focused and plead the material facts to support the claim: Gayle v Cambridge Mercantile Corp., supra at paras. 68-69.
[27] In my view, RBC’s proposed amended pleading offends the rules of pleading in several respects. Notably, it includes statements of evidence (para. 11), irrelevant statements amounting to submissions on the procedural history in this action (paras. 8-9), and rambling or confusing compound paragraphs (paras. 10-11).
[28] Also relevant for this motion is subrule 25.06(8). It provides that where misrepresentation is alleged the pleading shall contain full particulars, but knowledge may be alleged as a fact without pleading the circumstances from which it is to be inferred. RBC’s fresh as amended statement of claim clearly states, at para. 1(b), that damages are sought for misrepresentation. However, full particulars of Ms. Alsaffawi’s alleged misrepresentations have not been pleaded. It is unclear what specific representations were allegedly made to Monster or its principal, by whom they were made, when and how they were made, which of them were false, and which of the representations Monster relied upon.
[29] The only representation reasonably inferred from the pleading, by combination of paras. 7, 9, and 11, is that some of the vending machines listed in the purchase agreement “were not in accordance with the Bill of Sale”. These allegations are, in my view, too general and do not meet the requirement for full particulars.
[30] In Seguin v. Van Dyke, 2011 ONSC 2566, at para. 25, Master MacLeod (as he was then) discussed the mischief in permitting pleadings that do not comply with the rules of pleading. In striking the defendants statement of defence, he stated as follows:
There is also real mischief in a pleading such as this if it is allowed to stand. As Mr. Sammon argues, if left alone these pleadings will be the first documents read by the trial judge before the trial begins. Pleading of evidence before the evidence has actually been given or admitted may be prejudicial. Equally as important, long rambling pleadings lead to unnecessary disagreements about the scope of documentary production and discovery. No purpose is served by adding colourful denunciations of the plaintiff’s claim. It is sufficient if the facts and conclusions of law set out in the statement of claim are denied and the defendant states succinctly the material facts it intends to prove and rely upon at trial.
[31] The same logic applies here. RBC’s proposed pleading is deficient. Even if I had not found that the proposed amendments are statute-barred, I would still have exercised my discretion to deny leave to amend the statement of claim.
Costs
[32] Ms. Alsaffawi has been successful in opposing this motion and is entitled to her costs. She seeks her partial indemnity costs of $21,716.34, incl HST.
[33] RBC submits that Ms. Alsaffawi’s costs claim is excessive, and that costs of the motion should be more commensurate with RBC’s own costs claim. Had RBC been successful, it would have sought partial indemnity costs of $3,973.67, including HST and disbursements. RBC argues that the motion was not complex, was not fact driven, and was mainly about comparing the original statement of claim to the proposed fresh as amended statement of claim. With respect to Ms. Alsaffawi’s costs claim, RBC submits that the hours claimed are large lumps sums unsupported by dockets. It points to Anderson v. St Jude Medical, Inc. (2006), 264 DLR (4th) 557 at paras. 24-25 as supporting that it is difficult to mount a meaningful challenge to Ms. Alsaffawi’s costs claim without supporting dockets, which RBC has provided with its costs outline, but Ms. Alsaffawi has not.
[34] Although I do not have the dockets from Ms. Alsaffawi’s counsel, I do have a bill of costs outlining hours spent, rates charged, and amounts claimed. They have been certified by Ms. Alsaffawi’s lawyer, who is an officer of the court. I am able to fairly assess costs.
[35] Ms. Alsaffawi submits that the motion had significant ramifications for her and was treated as such. She submits that RBC’s costs are not a fair measure of costs, since they are based on discounted hourly rates available to RBC as an institutional client of its external counsel that were not available to Ms. Alsaffawi. I agree. Although on the higher side, I do not find the rates claimed for Ms. Alsaffawi’s two lawyers to be excessive or unreasonable given their experience. Work on this motion appears to have been appropriately allocated between the two lawyers. In addition to material preparation, there were also multiple motion appearances and a case conference. That said, I do find the total time spent to be on the high side, particularly the aggregate time spent on the original factum and fresh as amended factum.
[36] This was a significant motion for Ms. Alsaffawi, particularly in context of the litigation history of the prior motion where RBC strenuously opposed Ms. Alsaffawi’s request to set aside the default judgment. RBC was aware that Ms. Alsaffawi would be opposing this motion and ought to have expected her opposition to be meaningful given the history of the parties’ dealings on the last one. Ms. Alsaffawi’s materials were also much more involved than those of RBC.
[37] Having considered the factors in subrule 57.01(1) of the Rules, I find that the fair and reasonable amount of costs that RBC should pay in the circumstances of this motion is $18,000, including HST.
Disposition
[38] For the above reasons, RBC’s motion is dismissed, other than granting an order to continue. In that regard, this proceeding shall continue and the title of the proceeding in all documents issued, served or filed after the date of this order shall list RBC as plaintiff in place of Monster. RBC shall pay to Ms. Alsaffawi her costs of the motion, fixed on a partial indemnity basis in the amount of $18,000.00, including HST, payable within thirty (30) days. Order accordingly.
[39] The form of draft order submitted is in pdf format and not readily editable to reflect the order made. If a formal order is required by the parties, or either of them, then a draft order approved as to form and content may be submitted to my Assistant Trial Coordinator for my signature.
ASSOCIATE JUSTICE TODD ROBINSON DATE: November 2, 2023