ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-11-9-00
DATE: 2012-08-24
BETWEEN:
DYNAMIC FUEL SYSTEMS INC., THOMAS FAIRFULL, GERALD FELDMAN, ALLEN KOFFMAN, DAVID ERIC WHITNALL, and DOUGLAS PATTISON
Plaintiffs, (Defendants by Counterclaim)
– and –
SYNERGIC DISTRIBUTION INC. and PAUL DOUGLAS BEARANCE (Plaintiff by Counterclaim)
Defendants
Christopher Bittle for the Plaintiff, Dynamic Fuel Systems (Plaintiff by Counterclaim). Daniel Z. Naymark, for the Plaintiffs (Defendants by Counterclaim), Thomas Fairfull, Gerald Feldman, Allen Koffman, David Eric Whitnall, And Douglas Pattison
Paul Douglas Bearance, (Plaintiff by Counterclaim) self represented, and representing Synergic Distribution Inc, Defendants.
HEARD: August 24, 2012 at Kingston
T.D. RAY. J
REASONS FOR JUDGMENT
[ 1 ] This is a motion for summary judgement dismissing the counterclaim on behalf of the defendants to counterclaim, Dynamic and Fairfall et al, on the ground that the defendant, Bearance’s counterclaim is barred by the Limitations Act [1] , and on the ground that that there is no cause of action as against the individual defendants by counterclaim. [2] This motion deals only with the Counterclaim. The action continues even if this motion is successful.
[ 2 ] A joint factum was filed by Dynamic and by Fairfall et al, although represented by different counsel.
[ 3 ] The motion record includes affidavits from each of the individual defendants by counterclaim. None were cross examined. Bearance’s several volumes of responding materials consist of submissions focussed on the merits of the counterclaim. During submissions, Bearance produced two affidavits which had been served on the plaintiffs some time ago but not filed. These two affidavits are not of assistance on this motion since they deal with the merits of the claim as opposed to the issues raised on this motion. No affidavit evidence by Bearance was filed.
[ 4 ] This action was launched by the plaintiffs July 23, 2008, seeking damages in the amount of 3.5 million dollars for defamation, wrongful interference with economic relations, injurious falsehood and punitive damages. Consequential injunctive and declaratory relief is also sought. No discoveries have taken place. The trial is to take place in January 2014.
[ 5 ] Dynamic is involved with the marketing and sale of a hydrogen generator retrofit device targeted for use in the heavy tractor-trailer industry called “Jetstar”, which it claims assists in the combustion of hydrogen and oxygen for a more complete burn of fuel. The individual plaintiffs were officers or directors of Dynamic. The plaintiffs claim that Bearance and Synergic published false and misleading information and comments about “Jetstar”, questioning the effectiveness of “Jetstar” which it knew to be false and misleading, and which caused the plaintiffs’ damage.
[ 6 ] The defendants pleaded by way of defence that Bearance invested heavily in Dynamic based entirely on representations made by the plaintiffs concerning “Jetstar”, and that a subsequent purchase of a unit from Dynamic proved “Jetstar” to be of questionable value: and that further testing showed that “Jetstar“ did not generate the claimed fuel savings. They plead that it was the plaintiffs that published false and misleading information concerning “Jetstar”. In response to the defamation claim, the defendants plead fair comment.
[ 7 ] The defendants added a counterclaim, July 30, 2008, to their defence seeking damages from the plaintiffs for fraudulent and negligent misrepresentation, breach of contract, breach of fiduciary duties, and aggravated/punitive damages – totalling approximately 2.5 million dollars. They also seek remedies under the Ontario Business Corporations Act restraining the plaintiffs from promoting “Jetstar”, for a receiver for Dynamic, and include an order that the plaintiffs repurchase the shares of Dynamic purchased by Bearance, and a disgorgement order against the individual plaintiffs. The amended statement of defence and counterclaim is a lengthy and detailed pleading. The defendants were represented at the time.
[ 8 ] A reply and defence by Dynamic essentially repeats its claim and disputes the allegations in the counterclaim. A reply and defence to counterclaim by the individual plaintiffs deny the allegations in the counterclaim and plead that the counterclaim is barred by the Limitations Act since it was not commenced within two years after discovery of the alleged events.
[ 9 ] The defendants commenced a small claims court action against the plaintiffs (Whitby court file #51753/07). The claim is not part of the evidence but the date of the claim suggests it was commenced in 2007. In minutes of settlement of the small claims action in July 2008 which do form part of the record, Superior Court proceedings are acknowledged, it was agreed that the small claims court claim would not be set aside, and that the plaintiffs (defendants in that action) agreed not to argue res judicata or issue estoppel in the Superior Court proceedings as against the defendants (plaintiffs in that action). Presumably the reference to Superior Court proceedings is to this action.
[ 10 ] Summary Judgement must be granted where “ the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence ”. [3] A judge’s powers on such a motion have now been expanded to permit the weighing of the evidence, evaluation of credibility, and the drawing of reasonable inferences from the evidence “ unless it is in the interest of justice for such powers to be exercised only at trial ”. This latter provision was recently expanded to include “ the full appreciation test ” [4] . This principle requires the motion judge to pose the following question: can the full appreciation of the evidence and issues that is required to make dispositive findings be achieved by way of summary judgment, or can this full appreciation only be achieved by way of a trial? The court notes that the purpose of the new rule is to eliminate unnecessary trials – not all trials. [5]
[ 11 ] The plaintiffs’ position is that on the record, Bearance knew of the “Jetstar” inadequacies in January 2005 when he first raised them with the plaintiffs; and that he failed to initiate his counterclaim until July 30, 2008 – more than two years later. Dynamic never raised the limitation period in its pleading, and apparently none of the plaintiffs raised the limitation period in the small claims court proceedings. Only the individual plaintiffs raised the Limitations Act in its pleading. The minutes of settlement of the Small Claims Court proceedings expressly agree that the plaintiffs will not plead res judicata or issue estoppel in these proceedings. The defendants pleading is that in January, 2005, they only sent a copy of an Environment Canada report (casting doubt on “Jetstar”) to the plaintiffs for comment. It is pleaded that the plaintiffs themselves sent out a circular to their shareholders in May 2005 questioning the Environment Canada report. According to the pleadings it was not until the fall of 2007 that a Surcel report was completed and that additional opinion was available as to the questionable value of “Jetstar”.
[ 12 ] It is not clear from the defendants pleading that they knew in January, 2005 that “Jetstar“ was not what it claimed to be. Suspicion is not enough to trigger the limitation period. There is insufficient evidence on this motion to allow for a finding that January 2005 was the commencement of the limitation period. A full appreciation of the evidence on this point must await the trial. [6] Since the limitation period issue was not raised in the Small Claims Court or the Minutes of settlement in July, 2007, one may conclude that it was not a live issue. The minutes of settlement expressly provide that the action was not disposed of and that res judicata and issue estoppel would not be pleaded in these proceedings. It smacks of overreaching to plead that the date of the defendants counterclaim in July 2008 is the governing date when clearly on the record the defendants had commenced proceedings at a much earlier date. In any event the limitation period was not pleaded in these proceedings by Dynamic and its failure prevents it from relying upon that defence. On the material before me I cannot conclude that the defendants’ counterclaim is barred by the Limitations Act , 2002 .
[ 13 ] The individual plaintiffs claim that the counterclaim against them must be dismissed because the counterclaim does not plead specifically that any of them personally made any representation to Bearance in regards to the affairs or outlook of Dynamic, or efficacy of the “Jetstar”. This portion of the motion is grounded on rule 20 and rule 21 of the rules of civil procedure. On a rule 21 motion the pleadings are taken to be true for the purpose of determining a cause of action. The complaint is a lack of particularity in the pleading. That argument fails since their defence was filed and further discovery on that point was presumably available. Lack of particularity in a pleading must be taken to be waived if the complaining party delivers its pleading, unless the pleading is so flawed as to fail allege a cause of action. Particularity of the opposite parties pleading is one of the purposes of discovery. It is not a ground for summary judgement at this stage of the proceeding unless the pleading fails on its face to sustain a cause of action.
[ 14 ] The evidence of the individual plaintiffs on this issue is contained in affidavits filed on this motion. Subject to my earlier remarks, the defendants have filed no evidence. None of the parties have been examined for discovery. All the individual plaintiffs were or are officers or directors of Dynamic, and are maintaining their claim against the defendants.
[ 15 ] The affidavit of Gerald Feldman asserts that while he met with Bearance and sold him a “Jetstar” unit, he made no representations to Bearance concerning the efficacy of the unit or the value of investing. David Eric Whitnall asserts that he had no communication with Bearance. Douglas Pattison asserts that he had no communication with Bearance. Allen Koffman asserts that he had no communications with Bearance. Bearance has not filed any evidence on this motion. Save and except for the Plaintiff Feldman, the evidence is that the other individual plaintiffs had no communication with Bearance.
[ 16 ] However, Bearance’s counterclaim is not limited to allegations of misrepresentations in personal communications. His pleading alleges these misrepresentations were made in internet postings, shareholder meetings, and corporate filings. Bearance’s allegations against the individual plaintiffs, including extensive particulars, are grounded in a number of causes of action.
[ 17 ] Bearance in his counterclaim seeks an order against the plaintiffs, including the individual plaintiffs, of disgorgement. That remedy does not require that there be evidence that they met or had communications with Bearance, but only that they individually wrongfully profited by Dynamic’s wrongdoing.
[ 18 ] The plaintiffs claim and Bearance’s counterclaim are very closely entwined factually. I am not satisfied that the particulars in Bearance’s counterclaim are so devoid as to fail to sustain a cause of action, or that there is no cause of action pleaded. I am similarly not satisfied that there are no issues requiring a trial or that the issues should be disposed of without a full appreciation of the evidence at a trial. The motion is dismissed.
[ 19 ] Only one of the parties filed a costs outline as required by rule 57. If the parties cannot agree on costs, they may make written submissions addressed to my Ottawa chambers within 10 days with a further 5 days for reply. Otherwise I will assume the parties have settled the costs issue.
Honourable Justice Timothy Ray
Released: August 24, 2012
COURT FILE NO.: CV-11-9-00
DATE: 2012-08-24
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN: DYNAMIC FUEL SYSTEMS INC., THOMAS FAIRFULL, GERALD FELDMAN, ALLEN KOFFMAN, DAVID ERIC WHITNALL, and DOUGLAS PATTISON Plaintiffs, (Defendants by Counterclaim) – and – SYNERGIC DISTRIBUTION INC. and PAUL DOUGLAS BEARANCE (Plaintiff by Counterclaim) Defendants
REASONS FOR JUDGMENT
The Honourable Justice Timothy Ray
Released: August 24, 2012
[^1]: Limitations Act. 2002 . S.O. 2002, c. 24 . s. 24(5) 1.
[^2]: Rule 20 and Rule 21, Rules of Civil Procedure.
[^3]: Rule 20.04(2) Rules of Civil Procedure .
[^4]: Combined Air Mechanical Services Inc. v. Flesch , 2011 ONCA 764 @ paragraph 53 ff
[^5]: Combined Air @paragraph 38
[^6]: Combined Air @ paragraph 15