SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-11-427137

DATE: 20140227

RE: U-PAK DISPOSALS (1989) LIMITED, Plaintiff

AND:

THE REGIONAL MUNICIPALITY OF DURHAM, Defendant

BEFORE: CHIAPPETTA J.

COUNSEL: Christopher Staples, for the Plaintiff

Andrew Heal, for the Defendant

HEARD: February 18, 2014

ENDORSEMENT

Overview

[1] The Plaintiff, U-Pak Disposals (1989) Limited, and the proposed plaintiffs, 1680925 Ontario Inc., McPherson Transfer Limited and 1063192 Ontario Limited, brought a motion before Master Abrams seeking an order for leave to amend the Statement of Claim to add the proposed plaintiffs and to, inter alia, add claims against the Defendant for negligent misrepresentation, breach of the by-laws and guidelines, and abuse of public office.

[2] The Defendant, The Regional Municipality of Durham, opposed the motion. It argued in part that the proposed plaintiffs did not sue in a timely fashion and are thus barred by the Limitations Act, 2002, S.O. 2002, c. 24, from asserting claims against the Defendant.

[3] The motion was originally returnable on March 4, 2013, but it was adjourned on consent to July 23, 2013. The parties have entered a tolling agreement with respect to any applicable limitation period, effective as of March 4, 2013.

[4] The Master’s reasons were released on October 21, 2013: see U-Pak Disposals (1989) Limited v. The Regional Municipality of Durham, 2013 ONSC 6535. She concluded as follows, at para. 18:

I cannot agree that the opposed proposed amendments are necessarily statute barred or that it is plain and obvious that the proposed parties plaintiff are seeking to insinuate themselves into this litigation after a limitation period has passed. At best, I can agree that the question of whether or not any of the moving parties’ claims (with which the defendant takes issue) are statute barred could be a question for another day. There are reasonable arguments as to why they are not statute barred – arguments that satisfy me that the proposed amendments are not clearly impossible of success.

[5] The Defendant appeals from the Master’s decision pursuant to s. 17 of the Courts of Justice Act, R.S.O. 1990, c. C.43. It argues that the learned Master erred in failing to find the new claims are statute barred under ss. 5(1) and 21(1) of the Limitations Act, 2002.

Background Facts

[6] The action arises out of a request for tender (“RFT”) issued by the Defendant for the contracting of waste disposal services for residents in the Durham Region. The first tender was issued in or around August 31, 2010 with a closing date of September 23, 2010 (“RFT1”). The Plaintiff and the proposed plaintiffs submitted a bid. In preparing for the bid, the Plaintiff alleges it incurred significant costs to upgrade its facilities, infrastructure, and equipment in order to comply with the RFT requirements.

[7] The Plaintiff received correspondence from the Defendant, dated October 13, 2010, which advised that the Defendant was cancelling RFT1. The letter stated that the Defendant would be “reviewing and revising the terms and conditions of the Tender” and anticipated that “the revised” tender would be issued in the next two to three weeks.

[8] By correspondence, dated October 14, 2010 and October 18, 2010, the Plaintiff through its lawyers objected to the cancellation of RFT1, sought clarification of the reasons for the cancellation, requested the tender process be completed, and “reserves the right in connection with this matter and will take such legal proceedings as it deems appropriate”.

[9] A senior solicitor of the Defendant responded by correspondence, dated October 20, 2010, advising in part that “any court proceedings will, of course, be considered in evaluating your client’s submission in subsequent procurements undertaken by the region”.

[10] RFT1 stated the following in Article 1.21:

Bidders and named subcontractors must each have and, if requested, be able to provide conclusive proof of acceptable qualifications and related business experience in performing the services required. The assessment of acceptable qualifications and related business experience will be based on a range of measures including . . . any outstanding litigation. [emphasis added].

[11] On or about November 4, 2010 a second RFT (“RFT2”) was issued by the Defendant for the similar provision of haulage and storage of solid waste. It was not materially different from RFT1; RFT2 had the same tender number as RFT1 with the exception of the letter “B”. RFT2 was extended for bidding until March 9, 2011 at which time, by resolution of municipal counsel, RFT2 was cancelled by the Defendant. The Defendant’s decision to cancel RFT2 was communicated to the Plaintiff on March 11, 2011.

[12] On May 24, 2011, U-Pak commenced the action against the Defendant for breach of contract and breach of the legal duty it owed to U-Pak to act fairly and in good faith.

[13] U-Pak is a group of family-owned companies that include the proposed plaintiffs. All of the U-Pak group of companies are commonly owned and operated.

Standard of Review

[14] The standard of review of a Master’s decision is well settled. I am justified in interfering with the learned Master’s decision if the Master made an error of law, exercised his or her discretion based on the wrong principles, or made a palpable and overriding error in making factual findings or applying the facts to the law: see Zeitoun v. Economical Insurance Group (2008), 2008 20996 (ON SCDC), 91 O.R. (3d) 131 (Div. Ct.), at para. 40-41, aff’d 2009 ONCA 415, 96 O.R. (3d) 639.

The Master’s Decision

[15] The issue before the Master was whether the amendments sought were legally untenable and therefore clearly impossible of success. To resolve the issue, the Master had to consider when the claim of the proposed plaintiffs was “discovered” in accordance with s. 5(1)(a) of the Limitations Act, 2002, namely when the proposed plaintiffs knew all of the following:

(i) That the injury, loss or damage had occurred;

(ii) That the injury, loss or damage was caused by or contributed to by an act or omission;

(iii) That the act or omission was that of the person against whom the claims are made, and

(iv) That, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it.

[16] The learned Master determined that it could be reasonably accepted as a fact at trial that RFT1 and RFT2 were part of an ongoing tender process that ended March 9, 2011. The issue then became one of applying the correct legal principles to her factual finding. If one tender process is accepted as a fact at trial, she reasoned as follows, at para. 14:

[U]ntil March/11, it was not clear that the “turning point” referenced in Linett v. Linett, [2012] CarswellOnt 15634 (S.C.J.) was reached (thus starting the running of the limitation period). And, it could be argued too that it was not legally appropriate (the Court of Appeal having interpreted the phrase “appropriate means” in s. 5(1)(a)(iv) of the Limitations Act, 2002 to mean “legally appropriate”: Markel Insurance Company of Canada v. Federation Insurance Company of Canada, [2012] ONCA 218, at para. 34) for claims in respect of the whole of the tender process (RFT and second RFT) to be asserted until after March 11/11—having regard to the legal and practical implications of taking action, as articulated by the defendant.

[17] The Master concluded that there was a plausible argument the claim in question was not discoverable until March 11, 2011; and therefore, it was not certain that the amendments sought would clearly fall outside the two-year limitation period and must fail. As such, she granted the motion with leave to the Defendant to amend its defence to plead the Limitations Act, 2002.

Analysis

[18] For the reasons below, it is my view that the Master applied the correct legal principles to her factual findings to conclude the proposed pleading was not clearly impossible of success.

[19] The Master reasonably found that it could be accepted at trial that RFT1 and RFT2 were one ongoing tender process that ended March 9, 2011, given the following facts:

(a) The Defendant conceded the two tenders were connected;

(b) In reference to RFT1 the Defendant sent correspondence to the Plaintiff, dated October 13, 2010, stating that it would be “reviewing and revising the terms and conditions of the Tender” and expected that “the revised” tender would be issued within the next few weeks;

(c) RFT2 was a revised tender bearing the same number as RFT1 save for the suffix “B”; and

(d) The potential bidding parties were the same and the bid conditions did not change.

[20] The Defendant accepts the Master’s finding that RFT1 and RFT2 could be found as a fact at trial to be one tender process. It submits, that even if this were found at trial, it would not negate the finding that as of October 2010, the Defendant cancelled RFT1. The Master, it is submitted, misinterpreted the law by ignoring that all of the elements of discoverability were evident following the cancellation of RFT1.

[21] The Defendant references the Amended Statement of Claim, at para. 33, where the Plaintiff and the proposed plaintiffs pled that they were “willing to submit a bid under the [RFT2] in order to mitigate any damages they might suffer as a result of the unlawful cancellation of [RFT1]”. It is submitted, therefore, that the Master erred in applying the law as stated in Linett v. Linett, 2012 ONSC 6894 and Markel Insurance Co. of Canada v. ING Insurance Co. of Canada, 2012 ONCA 218, 109 O.R. (3d) 652, because she held that when a claim could be discovered later, meant that it was irrelevant that in fact it was discovered earlier.

[22] The issue before the Master was assuming that RFT1 and RFT2 was one tender process, when could it be said that the proposed plaintiffs discovered their claim. The contentious issue identified was the application of s. 5(1)(a)(iv) of the Limitations Act, 2002. In an ongoing tender process, when would it be “appropriate” to bring a proceeding to remedy the loss? On this point the Master applied the legal principles cited in Markel and concluded that it could be successfully argued that bringing claims regarding the whole tender process would not be “legally appropriate” until after March 11, 2011 having regard to the legal and practical implications of taking action, as articulated by the Defendant.

[23] In my view, the Master correctly applied the legal principles articulated in Markel, at para. 34:

This brings me to the question of when it would be “appropriate” to bring a proceeding within the meaning of s. 5(1)(a)(iv) of the Limitations Act. Here as well, I fully accept that parties should be discouraged from rushing to litigation or arbitration and encouraged to discuss and negotiate claims. In my view, when s. 5(1)(a)(iv) states that a claim is “discovered” only when “having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it”, the word “appropriate” must mean legally appropriate. To give “appropriate” an evaluative gloss, allowing a party to delay the commencement of proceedings for some tactical or other reason beyond two years from the date the claim is fully ripened and requiring the court to assess [the] tone and tenor of communications in search of a clear denial would, in my opinion, inject an unacceptable element of uncertainty into the law of limitation of actions.

[24] The Master concluded that “legally appropriate” could be interpreted to include circumstances where the commencement of a proceeding would affect a legal relationship between the parties. The legal implications for taking action during the course of an active tender process were known to the Plaintiff; under the terms of the tender, Durham Region would have been within its legal right to disqualify the Plaintiff and the proposed plaintiffs’ bid.

[25] In my view, the Master correctly concluded there is a potentially successful argument to be made by the prospective plaintiffs that their claims were not legally appropriate until the whole tender process expired because a claim during the process would legally disqualify them from continuing to participate in the very process that may upon its completion form the foundation of the claim. If this argument were accepted, the proposed plaintiffs could not have had a viable claim as of October 2010 because the “appropriate means” element of discoverability had not yet crystallized.

[26] Similarly, the Master did not err in applying the principles from Linett. She held that the “turning point” referenced in Linett was arguably not reached until March 2011 in this case. Although factually different, I agree it is arguable that the principle applicable in Linett may apply here in that the cancellation on March 9, 2011 was a “turning point” in what was otherwise an ongoing good faith holistic process.

[27] The Defendant argues that the Master ignored the leading cases of Hamilton (City) v. Metcalfe & Mansfield Capital Corporation, 2012 ONCA 156, 347 D.L.R. (4th) 657, and York Condominium Corporation v. Superior Energy Management, 2013 ONSC 2615, 362 D.L.R. (4th) 127, aff’d 2013 ONCA 789, to deny the addition of proposed plaintiffs in this kind of circumstance. The Court of Appeal in Metcalfe & Mansfield, at para. 61, directed that knowing the full nature and extent of the damages is not required to crystallize discovery. The court in Superior Energy, at paras. 15-17, reiterated that some damage is sufficient to start the running of the limitation period.

[28] The uncontested evidence before the Master, however, was that before completing the bid process it was not known if the Plaintiff would suffer any damage at all. The Master did not ignore the direction in Metcalfe & Mansfield. Rather, she held that if RFT1 and RFT2 were found to be one process, it was the cancellation of RFT2 that completed the tender process and gave rise to damage to the Plaintiff and the proposed plaintiffs. This is consistent with Metcalfe & Mansfield and Superior Energy.

Conclusion

[29] The Master did not determine the exact date the claim was discovered, but that was not the issue before her. Rather, in the context of a motion to amend a pleading, she determined that it was plausible that RFT1 and RFT2 could be found at trial to be one tender process. If this were found as a fact at trial, she concluded it was not plain and obvious that the proposed plaintiffs would fail in their submission that their claims fell within the two-year statutory limitation period because all the elements of discoverability crystallized only following the cancellation of RFT2. It could not be said therefore that the proposed plaintiffs’ claim was clearly without a chance of success.

[30] The Defendant argues that the event triggering discovery of the claim was the Defendant’s cancellation of RFT1. The Defendant’s argument is persuasive if it is found as a fact that RFT1 and RFT2 were separate tender processes. The Defendant’s right to put forward this argument at trial was preserved in the Master’s order.

[31] Since the Master’s decision was correct and without palpable and overriding error, discoverability as of March 11, 2011 is therefore not legally untenable, specifically as it relates to the interpretation of “appropriate” in s. 5(1)(a)(iv) of the Limitations Act, 2002.

[32] For the reasons outlined above, I see no reason to interfere with the learned Master’s decision. The appeal therefore is denied.

Costs

[33] The parties agreed that costs fixed at $7,500.00 is an appropriate award of costs to the successful party on this appeal. Costs are thus awarded to the Plaintiff fixed at $7,500.00.

CHIAPPETTA J.

Date: February 27, 2014