CITATION: Cavana Corporation v. SMJC Holdings Incorporated, 2012 ONSC 413
COURT FILE NO.: CV-08-364122
DATE: 2012017
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Cavana Corporation et al. v. SMJC Holdings Incorporated et al.
BEFORE: Master Glustein
COUNSEL: Roberto R. Cucci for the plaintiffs
Paul Dollak for the defendant Susan Chiu and the proposed defendant SMJC Holdings Ltd.
No one appearing for the proposed defendant SMJC Company Ltd. or the defendants Michael Vong, Turbo Rocks Inc. and Raymond Lum
HEARD: January 16, 2012
REASONS FOR DECISION
[1] The plaintiffs Cavana Corporation, Quebex Development Corporation, and Joseph Schillaci bring this motion to amend the statement of claim to add the proposed defendants SMJC Holdings Ltd. ("Holdings Ltd.") and SMJC Company Ltd. ("Company"). The defendant Susan Chiu ("Chiu") and the proposed defendant Holdings Ltd. (collectively, the "responding parties") oppose the motion on the basis that the proposed claim against Holdings Ltd. is statute-barred as it arises more than two years after the alleged fraud.
[2] Company did not appear on the motion. However, since the plaintiffs seek leave of the court to amend their statement of claim, the plaintiffs must still satisfy the court that there is sufficient evidence to meet the applicable test set out below.
[3] In order to permit an amendment to add a party more than two years after the cause of action arose, the plaintiff must establish (i) a genuine issue of discoverability such that the issue of limitations period should be considered by a trial judge or (ii) a situation of misnomer.
[4] There is no genuine issue of discoverability raised by the evidence before the court. The plaintiffs led no evidence as to when they discovered that either Holdings Ltd. or Company was engaged in the alleged fraud. The only evidence on the issue was that the plaintiffs knew at the latest by December 12, 2008 that Holdings Ltd. was the alleged fraudster.
[5] The plaintiffs named the existing defendant SMJC Holdings Incorporated ("Holdings Inc.") as a fraudster in the initial statement of claim. The plaintiffs knew at least as of December 12, 2008 by letter from counsel for Chiu that "Holdings Ltd. also intends to defend this action with me as counsel if, in fact, that is the party your client intend to sue (there appears to have been a mistake in identifying [Holdings Ltd.] correctly in the title of proceedings – please confirm whether or not this is the case)".
[6] By letter dated December 24, 2008, plaintiffs' counsel did not accept that he had made a mistake in naming Holdings Inc. rather than Holdings Ltd. Instead, plaintiffs' counsel took the position, in his letter, that both Holdings Inc. and Holdings Ltd. should be defendants. In his letter, plaintiffs' counsel acknowledged that "there is more than one" SMJC entity (i.e. Holdings Inc. and Holdings Ltd.) and stated that:
Certainly there is [Holdings Ltd.] which ought to be a party. As well, [Holdings Inc.] as presently cited was apparently not a mere typographical error but rather taken from existing documents.
[7] By letter dated January 27, 2009, Chiu's counsel restated his position that Holdings Inc. was not the proper defendant. He stated:
Ms. Chiu has advised me that SMJC entity that you are suing is not the entity involved in the property; indeed my guess is that the entity you are suing does not exist.
As before, this is to confirm that I can get instructions to get on the record for [Holdings Ltd.] if, in fact, that is the party your client intends to sue. You will need to regularize the proceedings if that is what your client intends to do. Please advise me what you intend to do.
[8] There is no evidence of any steps taken in the matter for almost two years, until October 2010 when Mr. Schillaci's evidence is that he and his counsel "were determining how to reframe the action in view of the possible confusion about 'SMJC' raised by [Chiu's counsel] as complicated by what we had learned from the Ministry [i.e. that Holdings Ltd. was dissolved]."
[9] On January 5, 2011, plaintiffs' counsel wrote to Chiu's counsel and stated that he had learned subsequently that Holdings Ltd. had been dissolved.
[10] I agree with the responding parties that the above evidence does not raise a genuine issue of discoverability with respect to Holdings Ltd. The fact that a company is dissolved is not a bar to bringing an action against it.
[11] Further, the plaintiffs led no evidence at all relating to Company, let alone evidence as to when the plaintiffs discovered a cause of action against Company. Consequently, even though Company did not appear on the motion, I cannot find on the evidence that there is a genuine issue on discoverability with respect to Company that ought to be heard by a trial judge.
[12] With respect to the issue of misnomer, the doctrine requires a coincidence between a plaintiff's intention to name a party and the intended party's knowledge that it was the intended defendant (Lloyd v. Clark, 2008 ONCA 343, [2008] O.J. No. 1682 (C.A.) at para. 4). Misnomer can apply when a defendant is sued "wearing two hats", and the pleading is later corrected to name the two defendants who in fact wear the two hats (Stekel v. Toyota Canada Inc. 2011 ONSC 2211, [2011] O.J. No. 1591 (Mast.) at paras. 18-19; affirmed (2011) 2011 ONSC 6507, 107 O.R. (3d) 431 (S.C.J.)).
[13] However, the doctrine of misnomer does not apply when one party is sued in one capacity and then other defendants are proposed to be added in the same capacity.
[14] In the present case, Holdings Inc. was sued in its capacity as the alleged fraudster who caused the loss to the plaintiffs. If the plaintiffs were seeking to change the name of the defendant from Holdings Inc. to Holdings Ltd. (as they were advised to do from the outset), then the doctrine of misnomer would apply since (i) the plaintiffs had the intention to name the alleged fraudster as defendant and (ii) Holdings Ltd. stated from the outset that Holdings Inc. "is not the entity involved in the property" and "there appears to have been a mistake in identifying [Holdings Ltd.] correctly in the title of proceedings".
[15] However, in the proposed amended statement of claim, the plaintiffs seek to name both Holdings Inc. and Holdings Ltd., as well as Company, as alleged fraudsters. This is not a correction of an incorrect defendant, but is rather a motion to add new parties which is statute-barred, unless there is a genuine issue as to the discoverability of a cause of action against the proposed new defendant. For the reasons discussed above, the evidence does not establish such a genuine issue.
[16] The plaintiffs' position would transform the doctrine of misnomer into a doctrine that enables counsel to add parties when a plaintiff leads no evidence as to why that plaintiff could not have reasonably discovered the cause of action within two years from the date it arose, simply because the other proposed defendants also participated in the alleged cause of action. I find that the scope of the doctrine of misnomer, as a limited exception to the finality under limitation periods, ought not to extend to the addition of parties as co-defendants after the expiry of a limitation period unless the plaintiff can establish a genuine issue of discoverability. To allow Holdings Ltd. and Company to be added in addition to Holdings Inc. is not an application of the doctrine of misnomer.
[17] Consequently, I dismiss the motion to add Holdings Ltd. and Company on the basis of the proposed amended statement of claim. It is not a misnomer if a plaintiff fails to name all alleged fraudsters, it is only a misnomer if a plaintiff intends to name the proper alleged fraudster but fails to do so by mistake and the proper alleged fraudster is aware that it is intended to be a defendant.
[18] I make this order without prejudice to the plaintiffs amending the statement of claim to replace Holdings Inc. with Holdings Ltd., and I make no finding as to what, if any, enforcement proceedings may be available against any of the existing or proposed defendants if the plaintiffs obtain judgment against one or more defendants.
[19] The costs sought by the responding parties of $4,500 (inclusive of taxes and disbursements) are reasonable given the importance of the motion, the complexity of the legal issues, and the research required for the motion. Further, included in these costs are $500 in costs for an appearance related to whether Company had to be served, which I decided in favour of the position taken by the responding parties, and $500 for an appearance in which the hearing did not proceed because the time confirmed for the opposed motion was twice that booked and could not be heard. Those costs ought reasonably to be awarded to the responding parties.
[20] Consequently, I fix costs at $4,500, payable by the plaintiffs to the responding parties within 30 days of this order.
[21] I thank counsel for their thorough written and oral submissions which were of great assistance to the court.
___________________________
Master Benjamin Glustein
DATE: January 17, 2012