Abarca et al. v. Vargas et al.; The Wawanesa Mutual Life Insurance Company, Third Party
[Indexed as: Abarca v. Vargas]
Ontario Reports
Ontario Superior Court of Justice,
Matheson J.
October 18, 2013
117 O.R. (3d) 383 | 2013 ONSC 6499
Case Summary
Actions — Abuse of process — Plaintiffs bringing ex parte motion under Rule 26 in Newmarket action to add insurer as defendant — Motion judge ruling that statutory limitation period had expired (subject to discoverability) and directing that motion be brought on notice to parties and insurer — Plaintiffs instead commencing action in Toronto against same defendants and insurer — Insurer moving successfully to strike paragraphs in Toronto statement of claim which asserted claims against it — Plaintiffs attempting to circumvent express procedural requirements of Rule 26 — Toronto action an abuse of process — Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Rule 26.
The plaintiffs in a Newmarket action brought an ex parte motion pursuant to Rule 26 of the Rules of Civil Procedure to add two insurers, Wawanesa and Economical, as defendants. The motion judge found that the statutory limitation period had expired, subject to discoverability, and directed the plaintiffs to bring the motion in open court on notice to the parties and the proposed defendants. Instead, the plaintiffs commenced an action in Toronto against the same defendants as well as Wawanesa and Economical. Economical brought a motion to dismiss the Toronto action or, alternatively, to strike out those paragraphs of the statement of claim that asserted a claim against it.
Held, the motion should be granted.
By commencing the new action, the plaintiffs introduced more inefficiency and complications. Counsel for the plaintiffs conceded that the two actions would have to be tried together and that at some point the plaintiffs would have to pick a region and take steps to transfer the other action to that region. In commencing the Toronto action instead of complying with the motion judge's direction, the plaintiffs effectively circumvented the express procedural requirements of Rule 26 and the court's jurisdiction under Rule 26. The action was an abuse of process. However, not all of the defendants were moving for relief against the Toronto action. Accordingly, it was appropriate to strike out [page384] the paragraphs of the statement of claim in the Toronto action that asserted claims against Economical.
Maynes v. Allen-Vanguard Technologies Inc., [2011] O.J. No. 644, 2011 ONCA 125, 274 O.A.C. 229, consd
Other cases referred to
Abarca v. Vargas, October 10, 2010, Doc. No. CV-09-094613-00, Quinlan J.
Rules and regulations referred to
Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 21.01(3), 26
MOTION to dismiss an action or strike part of a statement of claim.
William G. Scott, for plaintiffs.
George Kanellakos, for defendant Economical Mutual Insurance Company.
[1] MATHESON J.: — In this motion, the defendant Economical Mutual Insurance Company seeks an order dismissing this action as against it or, in the alternative, striking out those paragraphs of the statement of claim that assert a claim against it. It seeks this relief under rule 21.01(3) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the "Rules") on the grounds that this claim is an abuse of process.
[2] The abuse of process allegations arise because of the particular history of these proceedings. As of now, two separate but overlapping actions have been commenced. The first action was commenced in Newmarket, and the second is this action in Toronto. Key steps in the history are as follows:
(a) On May 15, 2009, an action was commenced in Newmarket (CV-09-094613-00) arising out of a motor vehicle accident that took place in the Town of Innsifil on August 26, 2007. It named four plaintiffs (all also named in this action) and named two defendants (Vargas, the owner/operator of the car who allegedly caused the accident and is also named in this action, and the Manufacturers Life Insurance Company, as insurer of the plaintiff Jorge Leiva).
(b) By order of August 12, 2010, The Wawanesa Mutual Insurance Company was added as a statutory third party to the Newmarket claim. Wawanesa took an off-coverage position, giving rise to an issue of underinsured coverage.
(c) On September 16, 2010, plaintiffs' counsel brought an ex parte motion in Newmarket, in writing, seeking to add two defendants to the Newmarket claim -- Economical and [page385] Wawanesa. The motion was considered by Justice Quinlan, who did not grant the requested relief. On October 10, 2010, he endorsed the record as follows:
Schedule A has not been appended to the Order. In addition the statutory limitation period, subject to discoverability, has expired. This motion is to be brought in open court on notice to the parties and proposed Ds [defendants].
(d) Plaintiffs' counsel did not proceed with a motion on notice. Plaintiffs' counsel instead commenced this action in Toronto, by statement of claim issued May 9, 2011, some seven months later.
(e) On this motion to dismiss, plaintiffs' counsel swore an affidavit and was cross-examined on it. He attested that the above endorsement of Justice Quinlan did not immediately come to his attention. His office would have received at the time, but he cannot recall when he personally received it. Whenever he did review it, he concluded that commencing a second action would be the least expensive and most expeditious process to follow. On cross-examination, he attested that he believed that the judge was wrong about the expiry of the limitation period. Further, he was of the view that under the Rules he could either move to amend or start a new claim. It was his choice. He attested that he was entitled, if he wanted to, to take the least efficient way to the end result, and spend more money. Here, he concluded that it made more sense to start a new action. He conceded that the two actions would have to be tried together but said that would not be an issue since most cases do not get to trial. Significantly, no explanation was provided for the choice to commence the second action in Toronto, rather than Newmarket, a choice that would likely lead to more burden on the parties and was certainly inefficient from the standpoint of the court system.
(f) The Toronto action named the same four plaintiffs as the Newmarket action. A new plaintiff was also named. As defendants, the Toronto action again named Vargas, and added the defendants Economical and Wawanesa. It asserted essentially the same allegations against the defendant Vargas as the Newmarket claim, supplemented by allegations against the new defendants.
(g) With respect to Economical, the Toronto action asserted a claim by the plaintiffs Jorge and Maria Levia for statutory accident benefits and for underinsured coverage, including [page386] declaratory relief. This relief had been initially sought in the ex parte motion dealt with by Justice Quinlan in Newmarket.
(h) The claims against Economical were made by the plaintiffs Jorge and Maria Leiva only. Those plaintiffs were both named in the original Newmarket action.
(i) The Toronto action was served on Economical, which retained counsel. Its counsel then began requesting information and clarification about the Toronto and Newmarket proceedings. There was a long course of correspondence that was characterized by counsel to Economical asking for clarifications, and generally receiving either no timely response or no response at all. Chief among the requests for clarification were questions about why the Toronto action was commenced in the face of Justice Quinlan's endorsement and why the Toronto action should proceed given the Ontario Court of Appeal decision in Maynes v. Allen-Vanguard Technologies Inc., [2011] O.J. No. 644, 2011 ONCA 125. As well, Economical's counsel repeatedly advised that he had heard that the claim for statutory accident benefits had been settled and asked for confirmation of that information.
(j) The above course of correspondence culminated in this motion, brought on March 6, 2012.
[3] Under rule 21.01(3), if I find that the Toronto action against Economical is an abuse of process, I may make an order or grant judgment accordingly.
[4] With respect to the question of whether the claim for statutory accident benefits has been settled, and, if so, whether it should be dismissed as an abuse of process for that reason alone, I find the evidence on this motion insufficient. Although Economical's counsel has repeatedly tried to confirm the settlement, he has been unable to do so through no fault of his own. There may have been a settlement but it is not proved here. With respect to the second claim, for underinsured coverage, Economical notes that it may not ultimately be needed. It arises only if the Leivas' combined claims exceed $200,000. That may be so, ultimately, but that issue is not being determined on this motion.
[5] The starting point for the disposition of this motion is the Ontario Court of Appeal decision in Maynes, which is factually very similar to this case on the relevant issues. In Maynes, certain senior executives of Med-Eng Systems Inc. and related numbered companies sued Med-Eng asserting a number of [page387] claims relating to the company's repurchase of their shares. The employees had originally acquired the shares under the Med-Eng employee share purchase plan. After the first action was commenced, the company was the subject of a takeover. The plaintiffs then wanted to sue additional defendants and assert new claims. They sought consent, which was denied. Then, rather than proceeding under Rule 26 for leave to add the new defendants, they started a new action including the new defendants and moved for joinder and consolidation of the two actions. The defendants then moved to strike out the new action as an abuse of process.
[6] In upholding the decision to strike out the claim, the Court of Appeal made it clear that Rule 26 ought not be circumvented by the commencement of a second action. Justice Weiler, for the court, held as follows [at paras. 36, 38-41, 45-46]:
The doctrine of abuse of process seeks to promote judicial economy and to prevent a multiplicity of proceedings: Toronto (City) v. C.U.P.E., Local 79, 2003 SCC 63, [2003] 3 S.C.R. 77, at para. 37.
In addition to avoiding a multiplicity of actions, the doctrine of abuse of process seeks to uphold the integrity of the administration of justice: see Toronto (City) v. C.U.P.E. at paras. 35-37. In the present case, the plaintiffs' assertions in Claim Six are intricately linked to Claims One through Five, which are already being pursued in the Ongoing Actions. The plaintiffs should have sought leave of the court to name the Added Defendants in the Ongoing Actions and to amend their pleadings to plead any relief they had not already claimed, either pursuant to rule 26.02(c) or rule 26.01. As mentioned, rule 26.01 obliges the court 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."
Instead, the plaintiffs commenced the New Action for the purpose of naming the Added Defendants as parties to the related litigation and sought declaratory relief against them in Claim Six. By doing so, the plaintiffs effectively circumvented the express procedural requirement in rule 26.02(c) that leave of the court be obtained to add a non-consenting party to the proceeding after pleadings have closed. This was an abuse of process. By starting the New Action instead of moving to amend their pleadings in their existing actions to claim "enhanced relief" against the Added Defendants, the plaintiffs circumvented the court's jurisdiction to: (1) assess whether the defendants would be prejudiced by an amendment and to determine whether that prejudice can be compensated for by costs; (2) to impose costs in favour of the defendants for granting the amendment; and (3) to impose other terms that are just.
The filing of the statement of claim in the New Action also placed an inappropriate burden on the defendants who had to bring a motion to strike the New Action, when the onus should have properly been on the plaintiffs to convince the court that leave should be granted to amend their pleadings in the Ongoing Actions. [page388]
My conclusion that there has been an abuse of process is buttressed by the principle of law that the court should refuse to grant a declaration when an alternate appropriate process is available.
Disputes about whether parties may be added and whether a claim may be amended must be resolved through the process established by the Rules, not by circumventing them by the commencement of a new action seeking declaratory relief. Where, as here, the Rules provide an effective means to obtain a remedy, it is reasonable to assume that the legislature intended that litigants and their counsel would rely on the prescribed provisions. Otherwise, the integrity of the administration of justice is undermined, as is the goal of efficiency.
The present statement of claim is an abuse of process because it duplicates claims in the two Ongoing Actions with respect to the Original Defendants and undermines the integrity of the administration of justice by circumventing rule 26.02(c) with respect to the Added Defendants.
(Emphasis added)
[7] In Maynes, the plaintiffs attempted to justify their approach on the basis that the expiry of a limitation period was approaching (in about two months). That argument was unsuccessful. As well, the two actions were in the same region, which would have allowed for joinder and consolidation, or some sort of coordinated management to avoid some of the inefficiencies of multiple proceedings. And the plaintiffs moved proactively for that relief. Yet that was not enough to defeat the abuse of process motion.
[8] When considering the facts on the motion before me, the plaintiffs did not even take steps to facilitate coordinated management of the litigation. On the contrary, by commencing the new action in another region, they introduced more inefficiency and complications. Plaintiffs' counsel, in his affidavit, did not even attempt to justify or explain that choice.
[9] Mr. Scott, who appeared as counsel for the plaintiffs on this motion, fairly indicated that at some point the plaintiffs will have to pick a region and take steps to transfer the other action to that region. There should be a common mediation, a common pre-trial and a plan for trial together giving the common factual foundation.
[10] Counsel to Economical suggests that the commencement of the second action in a new region was an attempt by the plaintiffs' counsel to distance the matter from the Newmarket court and the endorsement of Justice Quinlan. In the absence of any explanation from that counsel, I conclude that it is a fair conclusion to draw from the evidence.
[11] The endorsement of Justice Quinlan is an exacerbating fact that was not before the Court of Appeal in Maynes. Here, [page389] the plaintiffs started on the right course, seeking leave to amend under Rule 26, and when faced with the need to move on notice, changed course. In doing so, the plaintiffs effectively circumvented the express procedural requirements of Rule 26 and the court's jurisdiction under Rule 26, as adverted to by the Court of Appeal, at para. 39 of Maynes.
[12] The parties to this motion disagree about whether the endorsement of Justice Quinlan amounted to an order that was breached, or just a direction to the plaintiffs of how to proceed if continuing with that motion. Plaintiffs' counsel was of the view that he could withdraw his motion if he wished to do so. That may be so. The plaintiffs could certainly decide not to proceed against the proposed new defendants at all and there would have been no need for a motion. As well, they could pursue one of their two claims, for statutory accident benefits, before the Financial Services Commission of Ontario rather than in court. However, where the plaintiffs wished to continue pursuit of the new defendants in court, Justice Quinlan's endorsement set out the steps that needed to be taken. Even if the Justice Quinlan endorsement was just a direction to the plaintiffs about how to proceed in the court process, it was the correct path and ought to have been followed here. In the circumstances of this case, the choice to disregard it supports the abuse of process claim.
[13] It was also argued before me that parties should be free to start a new action if they wish to do so, especially when the claim is within the limitation period. As a general proposition, this is contrary to Maynes. In that case, the second claim was within the limitation period.
[14] It was further argued that the claim against Economical was not even ripe when the first action was commenced. It was not a proper defendant at that time. This too was the case in Maynes.
[15] It was further argued that because the plaintiffs Jorge and Moira Leiva had a contract with Economical, they should be free to separately pursue their claims against it. I do not read Maynes as dependent upon the nature of the claims. Indeed, since the Leiva claims all arise from the same accident, they are more closely connected than the additional claims in Maynes.
[16] It was further argued that motor vehicle claims are fundamentally different from share disputes, and sometimes multiple actions are required. To begin with, the general principles set forth by the Court of Appeal in Maynes are not limited to the subject matter of that dispute. Further, there may well be cases where other rules or legal requirements are also engaged, and require separate actions. It may be necessary to have more than [page390] one action, for example, to address conflicts of interest and different plaintiffs with different counsel. But these situations ought to arise only where there is a sound reason for the multiplicity of proceedings. That was not the case in Maynes, and it is not the case here.
[17] There was also some argument before me about whether or not the pertinent limitation periods had passed at different points in time. Economical's counsel rightly objects to this motion being transformed into a determination of limitation periods and discoverability. That issue could properly addressed under Rule 26 (if a proposed defendant chooses to raise it) or as a defence to the claim, but I do not see it as necessary to decide it on this motion. Nonetheless, plaintiffs' counsel submits that at this point the plaintiffs will be out of time on at least the underinsured claim, which should be considered as a factor against granting the motion. Plaintiffs' counsel also submits that Economical has suffered no prejudice (presumably apart from the costs being incurred to address this issue), which should be considered even though there was also no prejudice in Maynes.
[18] My main concern about this case, as compared to Maynes, is the fact that not all the defendants here are moving for relief against this second action. It may be that since the other defendants are already in the first action, they are not inclined to incur the cost of objecting. There was no evidence on this point before me. As a result, even if I am persuaded that there has been an abuse of process that deserves some relief (which I am, as summarized below), both actions will remain in some form after my order. Thus, the multiplicity of proceedings will remain even if the moving party is successful. While this means the remedy here will not be as effective as it was in Maynes, it is a problem that arises from the choice to commence this second action in the first place, a choice that I find is an abuse of process. It ought not therefore become a reason to deny some relief.
[19] I have considered all the circumstances and conclude that this claim is an abuse of process. As set out above, the plaintiffs circumvented the express procedural requirements in Rule 26 and the court's jurisdiction to assess whether the requirements of that rule had been met. In doing so, the plaintiffs disregarded the direction of Justice Quinlan, which indicated what needed to be done to bring Economical into the litigation. They further chose to commence the new action in a different region, exacerbating the already problematic choice of commencing a new action to add Economical to their other claims. The two actions make essentially the same allegations as regards the original [page391] parties, arise out of the same factual foundation and will ultimately need to be brought together to be dealt with in the court system. It is just the sort of conduct that fails to promote judicial economy, fails to prevent the multiplicity of proceedings and fails to uphold the integrity of the administration of justice.
[20] I therefore order that the following paragraphs of the Toronto claim, which comprise all the allegations against Economical, be struck out without leave to amend: paras. 3, 12, 17, 18, 19, 20 and 21.
[21] If the plaintiffs still wish to proceed against Economical in court, they must proceed under Rule 26 in Newmarket. They may attempt to resurrect their old motion or commence a new one. There may be additional hurdles at this stage, but that is a matter for consideration by the leave judge in Newmarket if a motion is pursued.
[22] Economical shall deliver its costs submissions by brief written submissions together with a bill of costs, to be delivered by November 8, 2013. The plaintiffs' brief written response, if any, shall be delivered by November 27, 2013.
Motion granted.
End of Document