SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: 10-CV-404917
MOTION HEARD: April 26, 2012

RE: Treasure Mills Inc.

v.

Earle Lepofsky, Pinnacle
General Insurance Brokers Ltd., and
Intact Insurance Company

BEFORE: Master Thomas Hawkins

COUNSEL:
Nicole Godfrey, student-at-law,
for moving defendants
Earle Lepofsky and Pinnacle General
Insurance Brokers Ltd.
Fax No.: 416-596-7562

Richard Anka Q.C.
for responding plaintiff
Fax No.: 416-777-2655

No one for defendant Intact Insurance Company
or proposed third party H. & L. Alarm Systems Limited

REASONS FOR DECISION

[1] At the conclusion of argument I made an order granting the moving defendants leave to issue their proposed third party claim against H&L Alarm Systems Limited (“H&L”) and indicated that reasons for decision would follow. These are those reasons for decision.

[2] In their revised motion record the moving defendants sought several different kinds of relief. Part of the motion was settled. The only part of the motion argued before me was the motion under subrule 29.02(1.2) for an order granting the moving defendants leave to issue a third party claim against H&L in terms of the draft third party claim found at tab 4 of the moving defendants’ revised motion record.

[3] Subrule 29.02(1.2) provides as follows.

A third party claim may be issued at any time with the plaintiff’s consent or with leave, which the court shall grant unless the plaintiff would be prejudiced thereby.

[4] The following alleged facts underly this motion. For several years the plaintiff has operated as a manufacturer of bakery products in Newmarket, Ontario. The plaintiff retained H&L to supply, install and monitor an alarm system for its facility. One feature of the alarm system was a low temperature alarm for the freezer in the plaintiff’s facility. As I understand matters, this equipment was intended to send a signal to H&L if the temperature in the freezer rose towards the melting point for moisture in the food stored in the freezer.

[5] Over a weekend around September 21, 2009 the freezer malfunctioned. The low temperature alarm sent a signal to H&L but H&L failed to notify the plaintiff of the freezer malfunction. As a result, the food stored in the plaintiff’s freezer (worth about $180,000) spoiled and had to be thrown out. The plaintiff also suffered other related losses.

[6] The plaintiff made a claim under the insurance policy which the first two defendants, acting on behalf of the plaintiff, placed with the third defendant, Intact Insurance Company (“Intact”). The plaintiff then learned to its dismay that the Intact took the position that the subject insurance policy limited coverage for stock spoilage to $10,000. Intact paid $10,000 to the plaintiff. The plaintiff has discontinued this action as against Intact.

[7] The remaining two defendants are sued on the basis that they failed to ensure that the plaintiff had adequate insurance coverage for stock spoilage.

[8] The plaintiff resists this motion on the ground that it will be prejudiced by what it fears will be a significant delay in bringing this action to trial if H&L defends the third party claim, and more so if H&L delivers a defence to the main action.

[9] The status of the main action is as follows. Pleadings are complete. The examinations for discovery of the plaintiff and the remaining two defendants were held in April and June 2011. The examination of the plaintiff’s witness Robert Johnson is not complete. There are outstanding undertakings. Mediation has not taken place. The action has not been set down for trail.

[10] There is no evidence before me that during the period when the moving defendants delayed in bringing this motion, a witness helpful to the plaintiff died or disappeared, or that helpful documents have gone missing. That being so, while I accept that the plaintiff may suffer some prejudice through future delay, that prejudice is not so great that I should dismiss this motion.

[11] During argument plaintiff’s counsel submitted that if I granted the moving defendants leave to issue the proposed third party claim against H&L, I should impose terms that will minimize any future delay. This is a sensible suggestion. However, I do not feel that I should impose specific terms until we know if H&L has defended the third party claim and the main action. When that is known, I am prepared to hear submissions on terms.

[12] I also heard brief argument on whether a limitation period covering the moving defendants’ third party claim against H&L had expired when H&L was served with the moving defendants’ revised motion record on April 12, 2012. H&L did not appear on the argument of this motion on April 26, 2012. Someone from H&L apparently called counsel for the moving defendants and said that H&L would not be attending in court in response to this motion.

[13] In my view, for limitation of action purposes the rights of the moving defendants against H&L chrystallised on April 12, 2012 when H&L received the moving defendants’ revised motion record. I should not dismiss this motion on limitation of action grounds unless, on the evidence before me, it is clear that the limitation period covering the third party claim against H&L had expired before April 12, 2012. The evidence before me is not so clear. The statutory discoverability doctrine found in section 5 of the Limitations Act 2002, S.O. 2002, ch. 24 Schedule B comes into play. The evidence before me does not enable me to say with certainty to what extent that doctrine postponed the running of the limitation period for claims against H&L. If H&L defends the third party claim against it and raises a limitation of action defence, that issue will have to be resolved on a motion for summary judgment or at the trial of the third party claim.

[14] The moving defendants served their revised motion record on H&L by courier. Rule 16 does not permit service by courier of a document which is not an originating process (such as the moving defendants’ revised motion record) on a person which is not a party (such as H&L). On the evidence before me, namely the affidavit of service on H&L, I am satisfied that H&L did receive the moving defendants’ revised motion record on April 12, 2012. I am, pursuant to rule 16.08, therefore prepared to validate service on H&L by courier.

[15] I understand that there has been an offer to settle this motion which offer I have not seen. I will rule on the costs of this motion once I have seen that offer to settle and the costs outlines of the plaintiff and the moving defendants, unless counsel feel that I should first rule on terms for granting the moving defendants leave to commence their third party claim against H&L. Either side may write me requesting a telephone case conference at which time I will rule on how to proceed to deal with terms and costs.

Master Thomas Hawkins

DATE: June 5, 2012