SUPERIOR COURT OF JUSTICE - ONTARIO

2013 ONSC 7487

COURT FILE NOs.: 97-CU-122206 and 98-CV-149057

MOTIONS HEARD: DECEMBER 4, 2013

RE: CJSC “Sanokr-Moskva” v. Tradeoil Management Inc.

CJSC “Sanokr-Moskva” v. Tradeoil Management Inc. and Alexander Kotov

BEFORE: MASTER R.A. MUIR

COUNSEL:
Harvey S. Dorsey for the plaintiff in both actions

F. Scott Turton for the defendants in both actions

REASONS FOR DECISION

[1] The plaintiff in both of the above actions brings these motions pursuant to Rules 5.04 and 26.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the “Rules”) for orders granting it leave to amend its statements of claim and file fresh as amended statements of claim. The defendants do not oppose the relief requested in respect of the proposed breach of contract allegations in the 1997 action. They do oppose the relief related to the enforcement of the Russian arbitration award. The defendants argue that the applicable limitation period has expired with respect to any claim to enforce the arbitration award.

[2] The defendants oppose the requested amendments in the 1998 action on the basis that they amount to an attempt by the plaintiff to assert new causes of action after the expiry of the relevant limitation period. Those proposed amendments relate to a mortgage registered against title to the home of the defendant Alexander Kotov (“Kotov”) on August 14, 1997. The plaintiff now wishes to advance a claim that the mortgage was fraudulent and given for inadequate or no consideration. The plaintiff’s proposed amendments seek orders that the mortgage is null and void and that it be expunged from title.

[3] The proposed new defendant was properly served with notice of these motions but has not responded in any way and did not appear at the hearing of the motions.

[4] The background to the plaintiff’s claims is summarized by Justice Low in her 2010 decision on a motion brought by the defendant to set aside a default judgment in the 1997 action.[^1] Paragraphs 2 and 5 of Justice Low’s decision read, in part, as follows:

2 The action arises out of the purchase by the defendant of 40,000 metric tonnes of fuel oil under a contract dated May 31, 1994. The defendant took delivery of the oil at Sebastopol, Ukraine where it was loaded into seagoing tankers chartered by the defendant. The fuel oil was not paid for.

5 . . . The second action arose out of the inability of the plaintiff to realize on the judgment signed in this action. The second action seeks an oppression remedy and the plaintiff alleges that the defendant and its principal, Alexander Kotov, caused the defendant corporation to be stripped of its assets at a time when it was known to be indebted to the plaintiff. In the second action, the plaintiff obtained a certificate of pending litigation against Mr. Kotov's house which remains on title to date.

[5] Justice Low ultimately concluded that the default judgment in the 1997 action should be set aside. The judgment was irregular as the registrar lacked jurisdiction to sign the judgment in the circumstances of the plaintiff’s 1997 action, as pleaded. Justice Low made a finding that the claim relating to the enforcement of the arbitration award had not been sufficiently pleaded so as to allow the default judgment to be signed by the registrar.[^2]

[6] In my view, the proposed amendments to the 1997 action do not constitute a new cause of action being advanced after the expiry of the relevant limitation period. In my view, the proposed amendments simply provide particulars of allegations already pled or additional facts upon which the original right of action is based.

[7] The question of what constitutes a “new cause of action” in connection with a motion of this nature was summarized by Master Dash in Ascent Inc. v. Fox 40 International Inc., [2009] O.J. No. 2964 (S.C.J. – Master). At paragraph 3 of that decision, Master Dash states as follows:

A "cause of action" has been defined as a "factual situation the existence of which entitles one person to obtain from the court a remedy against another person." The key is whether substantially all of the material facts giving rise to the "new cause of action" have previously been pleaded or whether new facts are sought to be added that are relied upon to support a new cause of action. A new cause of action is not asserted if the amendments simply plead an alternative claim for relief arising out of the same facts previously pleaded and no new facts are relied upon, or amount simply to different legal conclusions drawn from the same set of facts, or simply provide particulars of an allegation already pled or additional facts upon which the original right of action is based.

[Footnotes omitted]

[8] The original statement of claim makes a number of references to the arbitration award, in particular at paragraphs 13-17. Full particulars of the arbitration proceeding are provided. Although the prayer for relief does not specifically seek enforcement of the arbitration award, it does seek payment from the defendant of the precise amounts awarded by the court of arbitration, including interest at the rates and from the dates specified in the award. In my view, a generous reading of the original statement of claim makes it clear that the plaintiff was seeking to enforce the arbitration award.

[9] Moreover, I do not view this finding as being inconsistent with Justice Low’s finding on the motion to set aside the default judgment signed by the registrar. At paragraphs 23 and 24 of her decision, Justice Low stated as follows:

23 In my view there has not been a properly pleaded claim for enforcement of the foreign arbitration award and I am not satisfied that the registrar had jurisdiction to sign judgment to enforce an arbitration award by a foreign tribunal on the strength only of its existence having been alleged in the body of the pleading.

24 There is no claim in the prayer for relief for either recognition or enforcement of the foreign arbitration award. While there is some generosity given to drafters of pleadings in the context of motions to strike for failure to disclose a cause of action, there is no objective that would militate in favour of such generosity where a plaintiff seeks to obtain judgment by the administrative act of a registrar's pen. I would note here that counsel at the hearing was not the drafter of the plaintiff's pleading.

[10] First, Justice Low acknowledges that the arbitration award was referenced in the body of the pleading. Second, it is clear that her decision is limited to there being no claim for enforcement of the arbitration award in the prayer for relief itself. Justice Low simply declines to engage in the exercise of giving a generous reading to the pleading in order to support a default judgment signed by the registrar. In my view, that conclusion does not preclude such an exercise on the motion before me for the purposes of determining whether leave should be granted to the plaintiff to amend its statement of claim.

[11] For these reasons, I have concluded that leave should be granted to the plaintiff to amend its pleading in the 1997 action, as requested.

[12] However, I am not prepared to grant the relief requested by the plaintiff in connection with the 1998 action. The proposed amendments allege that Kotov and the mortgagee engaged in fraud and conspired to defeat the claims of the plaintiff, and perhaps other creditors, by registering a phony mortgage on title. The existing statement of claim contains no hint of any such allegations. In fact, the mortgage is not mentioned despite the fact that the mortgage was on title when the statement of claim was issued in 1998 and the statement of claim makes allegations about Kotov’s property being purchased or constructed with money allegedly owing to the plaintiff. In addition, it is clear that the plaintiff had suspicions about the mortgage as far back as December 2003 when its lawyer at the time expressly stated during the course of an examination that “I’m trying to find whether or not this mortgage is legitimate”. I note that there is no evidence before me on this motion that any new information about the legitimacy of the mortgage has come to light since 2003 or even since 1998 for that matter. In my view, the limitation period for the claims the plaintiff now seeks to advance in the 1998 action has long since expired.[^3]

[13] The fact that the proposed new party did not oppose the amendments does not help the plaintiff. The proposed amendments make direct claims against Kotov. The proposed claims being advanced against the new defendant cannot be separated from the claims being made against Kotov.

[14] Finally, the plaintiff suggested that the fact that the mortgage remains registered on title means that a new claim is discovered every day. Therefore, the limitation period starts to run all over again each day the mortgage remains registered on title. No authority was provided for this proposition. It would also appear to be inconsistent with the decision of the Divisional Court in Toronto Standard Condominium Corp. No. 1703 v. 1 King West Inc., 2010 ONSC 2129 (Div. Ct.). That case involved a motion for leave to amend a statement of claim to add claims seeking declarations that certain mortgages were void as fraudulent conveyances. The Divisional Court affirmed the decision of Master Glustein[^4] in which he found that the claim was discovered, for the purposes of the running of the limitation period, on the date the mortgages in question were registered. See the decision of the Divisional Court in Toronto Standard Condominium Corp. No. 1703 at paragraph 49.

[15] For these reasons, I am not prepared to grant leave to the plaintiff to amend its statement of claim in the 1998 action.

[16] At the conclusion of the argument of these motions, the parties agreed that in the event of divided success, there should be no order as to costs.

[17] I therefore order as follows:

(a) the plaintiff is hereby granted leave to issue a fresh as amended statement of claim in the 1997 action in accordance with the draft pleading at tab 5 of its motion record;

(b) the plaintiff’s motion in the 1998 action is dismissed; and,

(c) there shall be no order with respect to the costs of either motion.

Master R.A. Muir

DATE: December 4, 2013

[^1]: Reported at 2010 ONSC 3073.

[^2]: It should be noted that Mr. Dorsey was not acting for the plaintiff at the time these actions were commenced.

[^3]: See Limitations Act, 2002, S.O. 2002, c. 24, Schedule B, section 24 and Maftoun v. Banitaba, 2012 ONSC 2988 (S.C.J.) at paragraphs 96-99.

[^4]: 2009 55330 (ON SC), [2009] O.J. No. 4216 (S.C.J. – Master).