SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: 4335/11
MOTION HEARD: 20130828

RE: Bank of Montreal, Plaintiff

AND:

Gary Usling and Lauterbrunnen Development Inc., Defendants

Gary Usling, Plaintiff by Counterclaim

AND:

Bank of Montreal, Defendant by Counterclaim

BEFORE: MILLER, J.

COUNSEL:
M. Collis, for the Plaintiff, Bank of Montreal & Defendant on Counterclaim

J. Zibarras, for the Defendants and Plaintiff, Gary Usling, on Counterclaim

M. Kestenberg, for the Proposed Defendant on Counterclaim, BMO Nesbitt Burns

HEARD: August 28, 2013

REASONS FOR DECISION

[1] The Plaintiff on the counterclaim, Gary Usling, brings a motion to amend his pleadings and to add BMO Nesbitt Burns as a Defendant on the counterclaim.

[2] The Defendant on the counterclaim Bank of Montreal has consented to the Amended Pleadings and takes no position on the motion.

[3] The proposed Defendant on counterclaim, BMO Nesbitt Burns, is opposed to being added as a party and further, and in the alternative, argues that the pleadings against it should be struck.

[4] The parties are agreed that if the limitation period as set out at section 4 of the Limitations Act expired before the motion was brought, s 21 of the Limitations Act applies to the motion.

[5] BMO Nesbitt Burns takes the position that as the limitation period has passed, it can only be added as a party to the litigation if Mr. Usling can show, pursuant to s.21(2) of the Limitations Act, that the proposed amendment would be a correction to a misnaming or misdescription of a party.

Application of the Limitations Act

[6] Section 4 of the Limitations Act 2002, S.O. 2002, CHAPTER 24 provides:

Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.

[7] In his Defence and Counterclaim Mr. Usling pleaded that he discovered that BMO Nesbitt Burns had transferred his shares without his knowledge or permission on January 12, 2011.

[8] The limitation period, based on this pleading, would have expired January 12, 2013.

[9] In the original pleadings, at paragraphs 26-28, Mr. Usling alleges that on December 7 and 8, 2010 he was advised by BMO Nesbitt Burns that they were unaware of the whereabouts of his shares. He was not advised until January 12, 2011 that BMO Nesbitt Burns had transferred his shares to the Securities Transfer Corp.

[10] As part of his proposed amendment Mr. Usling alleges at paragraph 58 that for a period of over four months after December 7, 2010 neither the Bank nor Nesbitt Burns “was unable [SIC]” to advise where the shares had been sent.

[11] This proposed amendment would extend the limitation period to April of 2013, subsequent to when this motion was brought.

[12] There is in evidence before me an e-mail dated November 7, 2012, from counsel for BMO to counsel for Mr. Usling, indicating BMO Nesbitt Burns is a different legal entity from the Bank of Montreal.

[13] This would indicate that counsel for Mr. Usling, if not Mr. Usling himself, knew that it was the Bank of Montreal’s position that BMO Nesbitt Burns was a separate legal entity within the limitation period, however defined.

[14] There is no issue that had Mr. Usling brought the motion to amend prior to January 12, 2013, the test to be applied would be as set out in Rules 5.04 (2)

At any stage of a proceeding the court may by order add, delete or substitute a party or correct the name of a party incorrectly named, on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.

and 26.01 of the Rules of Civil Procedure

On 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.

[15] The parties agree that if the limitation period had passed before the motion was brought, the more stringent test set out at s.21 (2) of the Limitations Act is the one to be applied.

Misnomer or Misdescription

[16] Section 21 of the Limitations Act 2002 provides:

(1) If a limitation period in respect of a claim against a person has expired, the claim shall not be pursued by adding the person as a party to any existing proceeding.

(2) Subsection (1) does not prevent the correction of a misnaming or misdescription of a party.

[17] The parties agree that the applicable law is as set out by Campbell, J, in Stekel v. Toyota Canada Inc. 2011 ONSC 6507 at paragraph 19:

While rule 5.04(2) of the Rules of Civil Procedure formulates the general procedural rule for the addition, deletion, or substitution of other parties somewhat differently, this general rule cannot properly be applied so as to effectively change the interpretation of s. 21 of the Limitation Act, 2002. In short, in circumstances where a limitation period has expired, rule 5.04(2) cannot be employed by the court to add a party to an ongoing proceeding unless it is only to "correct the name of a party incorrectly named" within the meaning of s. 21(2) of the Limitations Act, 2002.

[18] Campbell, J. at paragraph 18, cites Joseph v. Paramount Canada's Wonderland (2008), 2008 ONCA 469, 90 O.R. (3d) 401 (Ont. C.A.) as giving

…full effect to s. 21(1) of the Limitations Act, 2002, by precluding the "addition" of parties to an existing action after the expiry of a limitation period, unless the court is truly correcting "the name of a party that has been incorrectly named" within the meaning of s. 21(2) of the Limitations Act, 2002.

[19] The parties further agree that Campbell, J. correctly summarized the law at paragraph 24 of Stekel:

The Court of Appeal for Ontario has made it clear that a plaintiff's pleading will be viewed as reflecting a correctible "misnomer" in respect of a defendant where it is apparent: (1) that the plaintiff intended to name the defendant; and (2) that the intended defendant knew it was the intended defendant in relation to the plaintiffs claim. Moreover, such a misnomer can be corrected notwithstanding that it requires that the defendant be added to the litigation after the expiry of the limitation period. See: Ormerod (Litigation Guardian) v. Strathroy Middlesex General Hospital, 2009 ONCA 697, [2009] O.J. No. 4071 (C.A.) at para. 20-25; Lloyd. v. Clark, 2008 ONCA 343, [2008] O.J. No. 1682 (C.A.) at para. 4; Spirito v. Trillium Health Centre, 2008 ONCA 762, [2008] O.J. No. 4524 (C.A.) at para. 15; Kitchener et al. v. Queensway General Hospital et al. (1997), 1997 1931 (ON CA), 44 O.R. (3d) 589 (C.A.). See also: Ladouceur v. Howarth, 1973 30 (SCC), [1974] S.C.R. 1111; Leesona Corp. v. Consolidated Textile Mills Ltd., 1977 199 (SCC), [1978] 2 S.C.R. 2; J.R. Sheet Metal & Manufacturing Ltd. v. Prairie Rose Wood Products, 1986 ABCA 4, [1986] A.J. No. 7 (C.A.).

[20] In evidence before me is a letter dated February 16, 2011from Gary Usling addressed to the Managing Director of BMO Nesbitt Burns Inc., indicating his intent to commence an action against Bank of Montreal, BMO Nesbitt Burns “and yourself”.

[21] Further, Mr. Usling’s affidavit of June 25, 2013 in which he asserts his intention from the commencement of his counterclaim to recover against “both the banking and investment arms of BMO” and references his testimony at his discovery January 30, 2013 that his perception was that the Bank of Montreal and BMO Nesbitt Burns were the same organization, has not been challenged by cross-examination.

[22] The original Statement of Defence and Counterclaim, dated October 3, 2011, alleges at paragraph 5 that BMO Nesbitt Burns Inc. “is a subsidiary and related company of” the Bank of Montreal. Throughout those pleadings Mr. Usling makes allegations against both the Bank of Montreal and BMO Nesbitt Burns and counterclaims against the Bank, citing actions taken by the Bank and BMO Nesbitt Burns in support of his claim.

[23] I am satisfied that it is apparent through Mr. Usling’s correspondence of February 16, 2011 as well as a plain reading of the Statement of Defence and Counterclaim that Gary Usling intended to name BMO Nesbitt Burns; and that BMO Nesbitt Burns knew, it was the intended defendant in relation to Mr. Usling’s claim. I am therefore satisfied that the proposed amendment to Mr. Usling’s pleadings adding BMO Nesbitt Burns amounts to a misnomer as contemplated under s. 21(2) of the Limitations Act.

[24] I have considered the position taken by BMO Nesbitt Burns that s.21(2) of the Limitations Act does not permit a party to be added but only permits a substitution. This same argument was rejected in Stekel at paragraphs 34 and 35 and I find that similar circumstances exist here: the original Defendant to the counterclaim, Bank of Montreal, remains as a defendant in the action as it was originally alleged to be liable in two different capacities. As the Court of Appeal held in Ormerod (Litigation guardian of) v. Strathroy Middlesex General Hospital 2009 ONCA 697, [2009] O.J. No. 4071 at paragraph 27: The correction of a misnomer does not involve the substitution of one defendant for another.

[25] Having found that Gary Usling has met the stringent test under the Limitations Act, it is not necessary that I make a finding with respect to the application of that Act. I am further satisfied, pursuant to Rules 5.04 and 26.01 of the Rules of Civil Procedure, that if BMO Nesbitt Burns is added as a party, no prejudice would result that could not be compensated for by costs or an adjournment.

[26] In coming to this conclusion I have considered the presumption of prejudice that would exist if the amendment of pleadings was made after the applicable limitations period. I have also considered that examinations as between Gary Usling and the Bank of Montreal were completed before the motion was brought. BMO Nesbitt Burns, as a newly added party, will now be permitted to conduct its own examinations.

[27] Gary Usling’s motion to add BMO Nesbitt Burns as a party to his Counterclaim is granted.

Improper Pleadings

[28] Having granted Mr. Usling’s motion to add BMO Nesbitt Burns as a party to his Counterclaim I turn to the argument, by BMO Nesbitt Burns “in the strict alternative”, that the pleadings are improper and should be struck.

[29] There is no issue that, as set out in Plante v. Industrial Alliance Life Insurance Co. 2003 64295 (ON SC), [2003] O.J. No. 3034 at paragraph 21, amendments must not result in irremediable prejudice, they must be legally tenable and must otherwise comply with the rules of pleading.

[30] The (now) Defendant to the Counterclaim, BMO Nesbitt Burns points out that while at paragraph 40 of the proposed amended pleadings BMO Nesbitt Burns is included in all claims, it is clear that at paragraph 44 the claim of breach of contract is directed only at the Bank of Montreal.

[31] Gary Usling agrees that the claim at paragraphs 44-46 is only directed at the Bank of Montreal.

[32] The (now) Defendant to the Counterclaim, BMO Nesbitt Burns points out that paragraphs 47-49 of the proposed amended pleadings alleges intentional interference with economic relations which requires proof of intent to cause loss. This position is supported by the Ontario Court of Appeal decisions in Alleslev-Krofchak v. Valcom Ltd.2010 ONCA 557, [2010] O.J. No. 3548 at paragraph 39 and Barber v. Vrozos 2010 ONCA 570, [2010] O.J. No. 3697 at paragraph 47.

[33] The position of BMO Nesbitt Burns is that the allegation at paragraph 48 of “knowledge of the harm and effect” of the Defendants’ actions is not the same as intention.

[34] Gary Usling takes the position that full knowledge of harm and effect – as alleged – is the same as intent. This position is supported by the finding in Alleslev-Krofchak at paragraph 42 that the defendants intended the natural consequences that they knew would arise from their deliberate actions. In Barber v. Vrozos, the Court of Appeal found that it was sufficient that the defendant’s action was directed against the plaintiff and “with complete disregard for any impact”. In order to accomplish its objective the defendant was willing to impose hardship on the plaintiff.

[35] I find that the allegations in paragraphs 47-49 of the proposed amended pleadings are sufficient to show the requisite intent.

[36] The (now) Defendant to the Counterclaim, BMO Nesbitt Burns points out that the proposed amended pleadings at paragraphs 50-54 allege defamation for which the pleadings must be precise. While the pleadings are particular as to who received the alleged communications, they are not particular as to who made the alleged communications, when they were made or in what circumstances. In particular, the pleadings do not identify whether the alleged communicator of the defamatory communications was an employees of the Bank of Montreal or BMO Nesbitt Burns.

[37] The Ontario Court of Appeal in Lysko v. Braley et al. 2006 11846 (ON CA), [2006] O.J. No. 1137 at paragraph 91 asserted that:

Both courts and leading authors on the law of defamation repeatedly state that pleadings in defamation cases are more important than in any other class of actions. The statement of claim must contain a concise statement of the material facts. A summary of the necessary material facts to allege a complete cause of action for defamation is found in Patrick Milmo and W.V.H. Rogers, ed., Gatley on Libel and Slander 10th ed. (London: Sweet & Maxwell Limited, 2003) at 806:

These facts are the publication by the defendant, the words published, that they were published of the claimant, (where necessary) the facts relied on as causing them to be understood as defamatory or as referring to the claimant and knowledge of these facts by those to whom the words were published, and, where the words are slander not actionable per se, any additional facts making them actionable, such as that they were calculated to disparage the plaintiff in an office held by him or that they have caused special damage.

[38] And at paragraph 92, the Plaintiff must “plead a prima facie case of defamation against the defendant.” BMO Nesbitt Burns asserts that the pleading of defamation as they exist are impossible to defend and must therefore be struck out.

[39] I find that Mr. Usling has here pleaded a prima facie case of defamation but must, in order for the claim to be defensible, provide further particulars as to the circumstances in which the alleged communications were made. Particulars as to when the communications were made, whether in person or by some other form of communication, and whether the communications were initiated by the Bank or BMO Nesbitt Burns or the result of some enquiry by the recipient of the communication, and, if possible, the identity of the communicator of the alleged defamatory communications must be provided within 90 days of the release of this decision, or the Defendants to the Counterclaim may bring a further motion to strike.

[40] In respect of the proposed amended pleadings alleging negligence at paragraphs 55-60, BMO Nesbitt Burns argues that as this is an entirely new pleadings and it may not be advanced after the expiration of the limitation period.

[41] I find that in accordance with the Ontario Court of Appeal decision in Gladstone v. Canadian National Transportation Ltd. 2009 38789 (ON SCDC), [2009] O.J. No. 3118 Gary Usling is not advancing a new and discrete cause of action, but one that arose from the core factual basis set out in the original claim. Therefore there is no bar to an amended pleading for the new legal basis of liability, in this case the claim of negligence.

[42] The parties may exchange and file written submissions as to costs, not to exceed five pages exclusive of the bill of costs, no later than October 31, 2013.

MILLER J

Date: September 23, 2013