OPPER v. 1706737 ONTARIO LIMITED, 2014 ONSC 2530

COURT FILE NO.: CV-10-412968
MOTION HEARD: MARCH 24, 2014

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Kenneth Opper v. 1706737 Ontario Limited, The Meakings Group (Canada) Inc., Barry Meakings and Jane Meakings

BEFORE: MASTER R.A. MUIR

COUNSEL: Chris Dockrill for the plaintiff

Marlon M. Roefe for the defendants Barry Meakings and Jane Meakings and the proposed defendant R and R Manufacturing

Asif Lasani for the proposed defendant Rubaroc International Inc.

Wolfgang J. Pazulla for the proposed defendant Thomas Christopher Welfare

REASONS FOR DECISION

[1] This motion is brought by the plaintiff pursuant to Rules 5.04 and 26.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the “Rules”) for an order granting him leave to amend his statement of claim. The plaintiff seeks to make various amendments involving further allegations of improper conduct on the part of the existing defendants. The plaintiff also seeks to add new defendants to this existing action.

[2] The plaintiff’s existing action largely relates to claims of oppression pursuant to the provisions of the Ontario Business Corporations Act, R.S.O. 1990, c. B.16. The plaintiff was and is a minority shareholder of the defendant 1706737 Ontario Limited (“170”). The plaintiff alleges that the affairs of 170 were conducted in a manner that was unfair and prejudicial to the plaintiff. The plaintiff also alleges that the existing defendants breached the terms of a compensation agreement. The plaintiff claims he has suffered damages, including the loss of his initial investment and the value of his shareholding in 170.

[3] This action was commenced on October 25, 2010. Examinations for discovery of the existing parties have been completed. The action has been set down for trial and a trial date has been fixed for February 9, 2015.

[4] The amendments the plaintiff now wishes to make can be summarized as follows:

(a) minor housekeeping amendments to clarify the precise nature of the relief being sought and more fully identify the parties;

(b) allegations relating to misconduct by the existing defendants in connection with the conduct of this action to date; and,

(c) allegations relating to the transfer of property belonging to 170 to other persons or entities related to the defendants and the proposed defendants subsequent to the commencement of this litigation.

[5] A copy of the proposed amended statement of claim is attached to these reasons as Schedule A.

[6] In my view, only those proposed amendments dealing with the alleged misconduct of the existing defendants in connection with the conduct of this action to date are improper and should not be allowed. The balance of the proposed amendments, including the addition of the new defendants, are proper and leave should be granted.

[7] As a preliminary issue, it is my view that leave should be granted to the plaintiff to bring this motion after having set this action down for trial. The plaintiff’s trial record was filed on November 30, 2011. I am satisfied that the facts supporting the substantive amendments the plaintiff now wishes to make regarding the transfer of property belonging to 170 were not known to the plaintiff before this action was set down. I accept the evidence of the plaintiff that it was only after certain relevant financial documents were delivered by the defendants in the fall of 2012 that he became aware of these potential new claims. The plaintiff also learned of certain other relevant facts following the bankruptcy of 170 in November 2012. This motion was then served in August 2013 with an initial return date of November 14, 2013. In my view, it was brought promptly in the circumstances.

[8] For these reasons, I am satisfied that there has been a substantial and unexpected change in circumstances. See Atlas Corp. v. Ingriselli, 2010 ONSC 1960 at paragraph 31. It is therefore just that the plaintiff be granted leave to bring this motion.

[9] The applicable test on a motion under the Rules 26.01 and 5.04 is summarized by Master MacLeod in Plante v. Industrial Alliance Life Insurance Co., 2003 64295 (ON SC), [2003] O.J. No. 3034 (S.C.J. – Master) at paragraphs 21 to 27. The principles can be set out as follows:

• the amendments must not result in prejudice;

• the amendments must be legally tenable;

• the amendments must comply with the rules of pleading;

• a motion to add a party must meet all of the requirements of a motion under Rule 26.01;

• the addition of the parties should relate to the same transaction or occurrence;

• the addition of the parties should not unduly delay or complicate the hearing;

• the addition of a party will not be permitted if it is shown to be an abuse of process.

[10] These are the factors and principles I have applied in determining the issues on this motion.

[11] The first series of proposed amendments are simply clarifications of facts and allegations already pleaded or relief already requested. They make it clear that one of the forms of relief the plaintiff is seeking is the return of his investment and an accounting by the defendants. The plaintiff seeks a reference as the appropriate means of obtaining that accounting. The original statement of claim made claims for the purchase by the defendants of the plaintiff’s equity interest in 170 (paragraph 1d) and sought an accounting (paragraph 40). The housekeeping amendments in proposed paragraphs 1(d), 1(e), 1(f), 1(g), 1(h), 37 and 44 simply particularize allegations and facts already pleaded. Those amendments are proper.

[12] In my view, the allegations relating to the transfer of property belonging to 170 to other persons or entities related to the defendants and the proposed defendants subsequent to the commencement of this litigation are also proper. As I have found above, the facts supporting these allegations did not come to the attention of the plaintiff until well after this action was set down for trial. They also became known to the plaintiff within the last two years and would not appear to raise any limitation issues.

[13] I am also satisfied that these proposed amendments are tenable at law and otherwise comply with the rules of pleading. They may not be perfectly drafted but when read as a whole, and in a generous manner, I am satisfied that the facts pleaded, if true, support the plaintiff’s claims based on alleged fraudulent preferences and conveyances and conspiracy.

[14] The vast majority of the submissions of the defendants and the proposed defendants related to the merits of the plaintiff’s proposed claims. The responding parties argued that the plaintiff was required to adduce evidence on this motion in support of the merits of his proposed claims. The responding parties took the position that the plaintiff had provided insufficient evidence to support those claims and the amendments should therefore not be allowed.

[15] I do not agree with those submissions. The Court of Appeal has recently held as follows in Schembri v. Way, 2012 ONCA 620 at paragraphs 41-43:

41. The motion judge relied on the decision of C. Campbell J. in Hilltop Group Ltd. v. Katana, [2001] O.J. No. 1564, 104 A.C.W.S. (3d) 845 (S.C.J.) for the proposition that it is appropriate when considering a motion to add parties for the court to consider evidence advanced in support of the claim in order to assess its tenability. However, the facts in that case make it inapplicable to this situation. In Hilltop, the plaintiffs by counterclaim sought to name a new defendant by counterclaim two weeks before the trial. The basis of the claim was that they had only recently learned that the proposed new defendant was a 50 per cent shareholder in one of the companies operated by her husband, who was also a defendant, and that she may have played a role in his impugned activities.

42. The rule being relied on was rule 5.04(2), which allows a party to be added or deleted at any stage subject to non- compensable prejudice. The focus of the judge's analysis in that case was the lateness of the request, the effect on the upcoming trial and the issue of prejudice, and in that context, the tenability of the proposed new claim. For that purpose, because the proposed pleading was so bald, the court looked at the transcripts that were available to see if there was any suggestion of the involvement of the proposed new party and there was not. The court therefore found, among other things, that the pleading did not disclose a tenable claim. However, that was true without looking for evidence. Nonetheless, the judge was willing to apply any evidence he could find to support the claim and fill in the pleading if there was any basis for doing so, but there was none.

43. In my view, Moldaver J.A.'s statement in Andersen, quoted above, is again applicable. Where a party wishes to amend a claim or add a new party within the limitation period, the facts pleaded are taken to be true and provable (subject to unprovable assumptive or speculative conclusions) and the court is to assess the tenability of the claim on that basis.

[16] In my view, the decision of the Court of Appeal is clear. The facts pleaded are to be taken as true and provable. Tenability is to be assessed on that basis and a motion for leave to amend should not evolve into a summary judgment motion. Of course, it is equally important to emphasize that the plaintiff has yet to prove any of these allegations and my conclusions on this motion are not findings of wrongdoing on the part of any of the responding parties.

[17] It is also my view that any prejudice to the defendants and the proposed defendants will be minor in nature. It is true that the trial of this action is set for February 2015. However, I note that this motion was originally served by the plaintiff in August 2013 with an initial return date of November 14, 2013. It was adjourned from that date at the request of the responding parties. It is also my view that the extensive cross-examinations on the merits that have already taken place will reduce the extent of any further pre-trial preparation. Ultimately, the defendants and the proposed defendants may seek an adjournment of the trial date if necessary.

[18] Finally, there is simply no compelling evidence before the court that the plaintiff’s motivation in amending his claim is improper or an abuse of the process of this court. The plaintiff simply wishes to advance claims that property of 170 was improperly transferred after this action was started. The fact that these allegations involve family members and other parties related to the principals of 170 is hardly surprising when it comes to allegations of this nature.

[19] I do agree with the responding parties, however, that the proposed amendments relating to the plaintiff’s complaints about the defendants’ conduct of this litigation to date do not comply with the rules of pleading. In my view, they have been inserted purely for the purpose of colour. They are not relevant to the matters in issue in the existing claim or the proposed claim. At best, they relate to the issue of costs. The amendments at proposed paragraphs 5a and 43 shall not be permitted.

[20] I therefore order as follows:

(a) the plaintiff is hereby granted leave to amend his statement of claim in the form of the draft amended statement of claim attached to these reasons as Schedule A subject to the deletion of the proposed amendments at paragraphs 5a and 43;

(b) the parties shall confer and attempt to agree upon a timetable for the remaining steps in this action;

(c) if the parties are unable to agree on a timetable, they shall make submission to the court in writing by no later than May 23, 2014; and,

(d) if the parties are unable to agree on the issue of the costs of this motion, they shall make brief submissions in writing by no later than May 23, 2014.

Master R.A. Muir

DATE: April 23, 2014