Computer Enhancement Corporation v. J.C. Options et al.

[Indexed as: Computer Enhancement Corp. v. J.C. Options]

Ontario Reports

Ontario Superior Court of Justice,

Edwards J.

July 4, 2013

116 O.R. (3d) 714 | 2013 ONSC 4548

Case Summary

Civil procedure — Parties — Adding parties — Expiry of limitation period — Plaintiff serving motion to add party within limitation period but motion heard after expiry of limitation period — Motion granted — Motion not required to be argued and determined prior to expiry of limitation period.

The plaintiff sought to add JR as a party defendant. The motion was served within the applicable limitation period, but was adjourned sine die and was not heard before the limitation period had expired.

Held, the motion should be granted.

A motion to add a party need only be served within the limitation period. It need not also be argued and determined prior to the expiry of the limitation period.

Marks v. Ottawa (City), [2013] O.J. No. 737, 2013 ONSC 1089 (S.C.J.); Joseph v. Paramount Canada's Wonderland (2008), 90 O.R. (3d) 401, [2008] O.J. No. 2339, 2008 ONCA 469, 294 D.L.R. (4th) 141, 56 C.P.C. (6th) 14, 241 O.A.C. 29, 166 A.C.W.S. (3d) 762; Philippine/Filipino Centre Toronto v. Portugal, [2010] O.J. No. 750, 2010 ONSC 956, 261 O.A.C. 290, 94 C.P.C. (6th) 92 (Div. Ct.), consd

Other cases referred to

Sweda Farms Ltd. v. Ontario Egg Producers, [2011] O.J. No. 4886, 2011 ONSC 6146 (S.C.J.)

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 26.01

MOTION to add a party defendant.

Antonio Conte, for plaintiff.

Robert W. Dowhan, for defendants.

EDWARDS J.: —

Overview

[1] The plaintiff seeks to add as a party to this litigation a former employee of the plaintiff, Jason Reia ("Jason"), who also is the brother of one of the named defendants. As well, the plaintiff seeks to add J.C. Options Inc. ("Inc."), a corporation that was formed and created on March 20, 2009. With respect to the addition of both of these parties, the defendants take the position that the two-year limitation period has expired. This motion raises the question of whether a motion to add a party must not only be served, but also argued and a decision rendered prior to the expiry of the limitation period.

The Facts

[2] The defendant Jeffrey Reia ("Jeffrey") is the brother of Jason. Both Jeffrey and Jason were employees of the plaintiff. Jeffrey had his position of employment with the plaintiff terminated on February 10, 2009, allegedly for having been caught moonlighting and converting corporate opportunities to himself.

[3] On March 25, 2009, the plaintiff commenced an action against Jeffrey, J.C. Options ("Options"), and Crystal Delight Reia ("Crystal") for, amongst other things, the alleged breach or breaches of a non-competition and non-solicitation agreements.

[4] Options is a sole proprietorship. Crystal is the wife of Jeffrey.

[5] On March 30, 2009, Jason resigned his position of employment with the plaintiff. Prior to his resignation, Jason had incorporated Inc. It is noted by counsel for the defendants that Options and Inc. are two different business ventures, although it is not unfair to comment that both of these entities have virtually the same name -- albeit a separate and distinct legal status.

[6] The plaintiff sought interlocutory relief, by way of a motion for an interim injunction, which ultimately was disposed of by way of a consent order of Mullins J. dated April 9, 2009. The order of Mullins J. ordered that the motion would be adjourned to May 6, 2009. In addition, the defendants were enjoined from, directly or indirectly, soliciting orders for computer memory and related products from any person with whom Jeffrey or Jason conducted business on behalf of the plaintiff since January 1, 2005.

[7] The motion heard on April 9, 2009 was followed-up by way of a supplementary notice of motion from counsel for the plaintiff, which is dated April 27, 2009. Amongst the relief sought in the supplementary notice of motion was an order adding Jason as a party defendant. This motion, ultimately by way of an agreement between the parties, was adjourned sine die.

[8] Since the adjournment of the May 6, 2009 motion to add Jason as a party defendant, there have been various other motions as well as examinations for discovery. It is alleged by the plaintiff that it was during the examination of Jeffrey on October 3, 2011 that the plaintiff learned, for the first time, that Inc. had been incorporated by Jason just prior to his leaving the plaintiff. It was as a result of this discovery of the existence of Inc. as distinct from the registered name style for Options that the plaintiff now moves to add Inc. as a party.

Position of the Defendants

[9] The defendants take the position that, as it relates to the addition of Jason as a party to this action, the plaintiff has known since April 27, 2009 of the basis for the accusations as against Jason, as evidenced by the material filed in support of the motion to add Jason as a party defendant. It is submitted that, as it relates to the addition of Inc., any search of a corporate profile would have shown and demonstrated the existence of this company and that all records produced in the litigation had shown the name of the business being operated by Jason as "J.C. Options Inc.".

[10] The defendants therefore take the position that, given the plaintiff has known since April 27, 2009 of the underlying facts that existed with respect to a potential claim as against Jason, the two-year limitation period has expired.

Position of the Plaintiff

[11] The plaintiff takes the position that where a motion is served prior to the expiry of the limitation period, the purpose of which is to add a new defendant, an order should issue nunc pro tunc to make the amendment effective prior to the expiry of the limitation period. As it relates to the addition of Inc., the plaintiff argues that the commencement of the limitation period is subject to the rule of discoverability as a question of fact and that in this circumstance where there is an issue as to when the cause of action was discovered, the issue of discoverability should not be decided on a pleadings motion.

The Law

[12] As it relates, first of all, to the addition of Inc., counsel for the defendants acknowledged during the course of argument that as the issue of discoverability is a question of fact, the appropriate disposition of this aspect of the motion would be to allow the plaintiff to add Inc. as a party, with leave to the defendants to plead the Limitations Act. Under the circumstances, on the basis of the material filed, it is not possible for this court to come to a conclusion as to when the plaintiff first discovered, or ought to have discovered, the existence of Inc. and, as such, the plaintiff shall have leave to add Inc. as a party with leave to the defendants to plead the Limitations Act.

[13] As it relates to the proposed addition of Jason, counsel for the defendants referred me to a very recent decision of Marks v. Ottawa (City), [2013] O.J. No. 737, 2013 ONSC 1089 (S.C.J.). Marks involved a motion to add a party, which had originally been served in February 2010 and had remained outstanding and unresolved until the issue was brought before the court in November 2012. In coming to the conclusion that the limitation period had expired, M.S. James J. held [at para. 25]:

The decision in Joseph v. Paramount Canada's Wonderland 2008 ONCA 469, [2008] O.J. No. 2339 (C.A.) makes it clear that the broad language of Rules 5 and 26 of the Rules of Civil Procedure must yield to the operation of a limitation period. In this case, on the plaintiff's own evidence, the limitation period expired two years after the plaintiff became aware of Huxley's role through his review of the City's records. The fact that the motion to add Huxley was delivered but not argued before the expiration of the limitation period does not improve the plaintiff's position. There was neither evidence of either an agreement that the limitation period would not run during the period of the adjournment nor circumstances in which an estoppel could be invoked. The delivery of the motion, standing alone, does not stop the clock. Motions must be successfully argued in order to claim the benefit of the relief sought.

[14] In the end result, M.S. James J. came to the conclusion that, given the motion to add the proposed defendant had not been argued prior to the expiry of the limitation period, the amendment should not be granted.

[15] In coming to the conclusion that he did, M.S. James J. did not have the benefit of counsel referring him to a decision of the Divisional Court that may have led him to a different conclusion. In Philippine,^1 Ferrier J. was dealing with an appeal from the order of the master, which dismissed a motion by the plaintiffs which sought to amend the statement of claim to allege a new claim against the defendants. One of the issues that Ferrier J. had to deal with, as it relates to the issues before this court, is whether the rights of the parties should be determined as of the date of the service of the motion, which would have been within the limitation period, or as of the date of the hearing of the motion, which would have been after the expiry of the limitation period. After a review of the jurisprudence in this area, Ferrier J. came to the conclusion that the law was clear that a party's rights should be determined as of the date of the service of the motion, not the hearing of the motion. While there had been considerable delay between the time that the motion was actually served and the hearing of the motion, Ferrier J. commented that the delay in bringing the motion goes to the issue of prejudice under rule 26.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 and not whether the potential limitation defence barred the granting of the amendment. I am confident that if this decision of the Divisional Court had been brought to the attention of M.S. James J. in Marks, the outcome may not have been as set forth in para. 13, above.

[16] It is worth pointing out that the decision of Ferrier J. in Philippine was only brought to the court's attention by plaintiff's counsel after full argument on this motion had been heard in open court. Subsequent to the existence of Philippine being brought to the court's attention, Mr. Dowhan, quite properly, provided the court with supplementary submissions dealing specifically with the Philippine decision and its application to the facts of this case.

[17] Mr. Dowhan argues that Philippine is an anomaly and has never been appealed nor considered by any court since its release. It is submitted that Marks is binding on this court and is the correct interpretation of the law. In light of the decision of the Court of Appeal in Joseph v. Paramount Canada's Wonderland (2008), 2008 ONCA 469, 90 O.R. (3d) 401, [2008] O.J. No. 2339 (C.A.), Mr. Dowhan argues a party can only be added by agreement or by order of the court, which it is submitted must be obtained prior to the expiry of the limitation period.

[18] Contrary to Mr. Dowhan's submission, Philippine has been judicially considered -- in Sweda Farms Ltd. v. Ontario Egg Producers, [2011] O.J. No. 4886, 2011 ONSC 6146 (S.C.J.), Lauwers J., at para. 22, stated:

The notice of motion to amend and consolidate is dated April 26, 2010, and was filed in the old Whitby court office on April 30, 2010. It was set to be heard on March 10, 2011, along with other matters, but was put off until October 13, 2011, as a matter of convenience to the court and the parties; no special blame attaches to the plaintiffs. The limitation issue crystallizes as of the date of service of the notice of motion, which had to be on or before April 30, 2010, when it was filed with the court: Filipino Centre Toronto v. Portugal, [2010] O.J. No. 750, 2010 ONSC 956 (Div. Ct.) per Ferrier J. at para. 34. On these facts the amendment motion seems timely.

[19] Having considered the supplementary submissions of the defendants, particularly the submissions that this court is bound by Joseph, I am of the view that Joseph has no application to the facts of the case presently before this court. This is not a situation where the special circumstances doctrine, which has now been laid to rest by Joseph, is in any way applicable to the facts that this court is called upon to deal with.

[20] The suggestion that a motion to add a party must be served, argued and a court order obtained prior to the expiry of the limitation period is lacking in common sense. The following example demonstrates the absurdity of this proposition. Suppose for the moment that a motion to add a party is served prior to the expiry of the limitation period. Interlocutory motions that are expected to take less than one hour are presently being scheduled in Newmarket approximately six months after the motion is booked. Lengthier delays are experienced in other jurisdictions in the Province of Ontario. The moving party is therefore very much in the hands of the court in a motion like this as to whether or not the motion, properly brought within the limitation period, can be argued and disposed of within the limitation period. It is argued that, in this situation, the moving party should seek a tolling agreement from the defendant so that such a delay does not prejudice the plaintiff. The obvious question then becomes what happens if the defendant refuses to enter into a tolling agreement? The plaintiff is still faced with the inherent delay in the hearing of the motion; a delay which is not, in any way, shape or form, the fault of the plaintiff. As well, to suggest that the motion not only has to be served and argued, but an order of the court obtained within the limitation period, makes little sense in a situation where the motion may very well have been argued prior to the expiry of the limitation period but no decision rendered by the court. To suggest that the limitation period has expired in such a circumstance where the decision of the court has not been rendered makes no sense at all.

[21] There is no doubt that the doctrine of special circumstances no longer applies. The facts of this case do not require the application of the now defunct special circumstance doctrine. Rather, the facts of this case require the application of common sense. Where a motion is brought prior to the expiry of limitation period to add a party defendant, and where, through no fault of the moving party, there is an inherent delay in the hearing of that motion caused as a result of a backlog in the hearing of interlocutory motions, the moving party should not be prejudiced. Undoubtedly, the facts of this case point to a situation where the plaintiff was less than expeditious in terms of having the motion brought back for hearing. Nonetheless, a motion was served within the limitation period, albeit never heard until brought back before this court.

[22] There has been undoubted delay between the service of the motion, which sought to add Jason back in late April 2009. I have not, however, been directed to any prejudice that could not be cured by an adjournment or costs. In fact, to the contrary, the litigation as it has progressed would appear to have been such that it would have been difficult for Jason not to have been aware of the fact that at some point in time he would be formally brought into the litigation as a result of the motion that had been adjourned in May and June 2009. This action, however, has languished for far too long and has moved along at a desultory pace. In the circumstances, I am going to allow the amendment adding Jason as a party but on the following terms and conditions:

(a) the amended statement of claim is to be served forthwith and no later than July 10, 2013;

(b) defendants shall file their responding amended statement of defence by no later than July 31, 2013;

(c) any reply by the plaintiff shall be filed by August 10, 2013;

(d) the parties shall exchange amended affidavits of documents by August 30, 2013;

(e) the plaintiff shall be entitled to a further discovery of Jason and Inc. to be completed no later than October 15, 2013, in which the discovery of both parties shall be limited to seven hours;

(f) the defendants shall be entitled to further discovery of the plaintiff with respect to the issues raised by the addition of Inc. and Jason, which discovery of the plaintiff shall be limited to seven hours;

(g) any motion to deal with undertakings and refusals shall be heard prior by the end of 2013; and

(h) this matter shall be ready to be listed for trial at the May 2014 sittings with a pre-trial to be conducted prior to the commencement of trial. The date and time of the pre-trial shall be fixed by the trial coordinator.

[23] As to the question of costs, the plaintiff has sought an indulgence from this court. In recognizing the lengthy delay between the service of the notice of motion in April 2009 and the ultimate disposition by this court, the plaintiff may wish to consider its position in terms of seeking costs. If the parties cannot agree upon an appropriate costs disposition, the parties are to exchange costs submissions within 15 days from the date of release of these reasons, which submissions are to be limited to three pages in length and filed with the court no later than July 15, 2013. If such submissions are not received within that time frame, the court will consider that the question of costs has been resolved.

Motion granted.

Notes

1 Philippine/Filipino Centre Toronto v. Portugal, [2010] O.J. No. 750, 2010 ONSC 956 (Div. Ct.).

End of Document