1309489 Ontario Inc. v. BMO Bank of Montreal, 2015 ONSC 1063

COURT FILE NO.: CV-10-99670-00

DATE: 20150217

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 1309489 Ontario Inc. (formerly known as Xincon Technology (Canada) Inc.), Plaintiff

AND: BMO Bank of Montreal, Amex Bank of Canada, Paymentech Canada, Yan Ding, Zhao Yi and C&C International Inc., c.o.b. as Xincon Education Centre, Defendants

BEFORE: The Honourable Mr. Justice C. Boswell

COUNSEL: Mr. Alfred Schorr, Counsel for the Plaintiff

Ms. Allyson Fox, Counsel for the Defendant, Amex Bank of Canada

Ms. Laura Dougan, Counsel for the Defendant, Paymentech Canada

HEARD: February 17, 2015

ENDORSEMENT on Defendants’ motions for leave to amend

The Motions

[1] The defendants, Amex Bank of Canada (“Amex”) and Paymentech Canada (“PC”), move for leave to amend their respective Statements of Defence. The Plaintiff opposes.

[2] The amendments sought are straightforward. Apart from some minor clerical amendments sought by PC, what is in issue are requests to add defences based on the Limitations Act, 2002 S.O. 2002, c. 24 Sched. B.

The Action

[3] Only the briefest description of the underlying action is necessary for the purposes of this endorsement.

[4] The plaintiff operated a private school. It accepted school-related payments from its students by way of credit cards (including American Express) and debit. PC was retained by the plaintiff to provide merchant services for the processing and settling of debit and credit transactions.

[5] The plaintiff alleges that some $91,000 in American Express transactions were not properly credited to its bank account, due either to the fault of Amex or PC, or both.

[6] The plaintiff’s action was commenced on July 8, 2010. It was duly defended by each of BMO Bank of Montreal, Amex and PC. Only BMO advanced a limitations defence. The claim against BMO has been settled.

[7] Discoveries were conducted in September 2013.

[8] The action was set down for trial by the plaintiff in February 2014. A trial date was fixed for the fall 2014 civil sittings at Newmarket. A pre-trial conference was conducted in mid-October 2014. During the pre-trial, the issue of a limitations defence was discussed. It was agreed that the trial would be adjourned to the spring 2015 trial sittings and that the defendants would move, in the meantime, for leave to amend their pleadings.

Positions of the Parties

[9] The defendants assert that answers given by the plaintiff’s representative on discovery support the conclusion that the plaintiff knew or ought to have known of the facts giving rise to their claim as far back as 2004. They assert that the plaintiff’s claim is statute-barred pursuant to the provisions of the Limitations Act, 2002.

[10] The defendants rely on Rule 26.01 which provides that, at any stage of a proceeding, the court shall grant leave to amend a pleading unless to do so would result in non-compensable prejudice. They submit that there is no evidence of prejudice present, that their requested amendments constitute tenable, substantive defences and that they are entitled, in the circumstances, to the relief sought.

[11] The plaintiff opposes the relief sought on two grounds:

(i) It says that the defendants consented to the action being placed on the trial list and, as such, require leave to proceed with their motions under Rule 48.04. Leave should not be granted, in the circumstances, it says, because the defendants’ failure to plead the limitations defence is the result of inexcusable inadvertence; and,

(ii) It submits that a limitations defence is a substantive right and, as such, is itself caught by the provisions of the Limitations Act, 2002. The defendants failed to advance the defence within two years of discovering the facts supporting it and, as such, ought to be statute-barred from advancing the defence at this time.

Discussion

[12] I will address the issues raised by counsel in turn:

(i) First, whether the defendants require leave to proceed with the motions under Rule 48.04 and, if so, whether leave should be granted;

(ii) Second, whether the proposed limitations defences are subject to compliance with the provisions of the Limitations Act, 2002; and,

(iii) Third, whether the defendants have met the test for leave to amend, as set out in Rule 26.01.

Rule 48.04

[13] There is no dispute that the action was set down for trial by the plaintiff and that it was ultimately listed for trial in the fall 2014 civil trial sittings at Newmarket. There is a dispute about whether the defendants can be said to have “consented” to the action being placed on the trial list.

[14] I have insufficient evidence in the record to make a determination about whether the defendants consented to the listing for trial. That said, even if they did consent, such that leave is required, I would grant leave for two reasons. First, the Limitations Act, 2002 defences are substantive and may represent a complete defence. The interests of justice require, in my view, that leave be granted, if required. Second, I agree with the observations of Master MacLeod in Plante v. Industrial Alliance Life Insurance Co., 2003 64295 (ON SC), [2003] O.J. No. 3034 where he said, at para. 24, that leave to amend after an action has been set down for trial “is generally to be granted or Rule 26.01 would be meaningless.”

The [Limitations Act, 2002](https://www.canlii.org/en/on/laws/stat/so-2002-c-24-sch-b/latest/so-2002-c-24-sch-b.html)

[15] Mr. Schorr submits that a limitations defence is a substantive right, relying for that proposition on the Supreme Court’s decision in Tolofson v. Jensen; Lucas (Litigation Guardian of) v. Gagnon, 1994 44 (SCC), [1994] 3 S.C.R. 1022. There, in the context of a conflict of laws dispute, the court held that the Saskatchewan Limitations of Actions Act, R.S.S. 1978, c. L-15 created a right that vests in a defendant to plead a time bar. The reasoning extends, of course, beyond the Saskatchewan act, to any limitations defence created by statute.

[16] Mr. Schorr’s submission is that a right to plead a time bar is a “claim” within the meaning of the Limitations Act, 2002. That Act defines a claim as “a claim to remedy an injury, loss or damage that occurred as a result of an act or omission”. The Act bars the commencement of any proceeding in respect of a claim after the second anniversary of the day on which the claim was discovered.

[17] In my view, although I appreciate the novelty of the argument, it cannot succeed. A right to advance a defence based on the passage of time is not a claim to remedy an injury, loss or damage. It is a defence against such a claim. Moreover, the Act only bars the commencement of a proceeding. While “proceeding” is not defined in the Act, it is defined in the Rules of Civil Procedure as an application or an action. The Act does not bar the advancement of a defence.

The Test Under Rule 26.01

[18] Rule 26.01 is couched in mandatory language: “at any state 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.”

[19] There is an absence of evidence of actual prejudice in the record before me. Mr. Schorr suggested that there may be a general prejudice to the administration of justice, but in my view something substantially more is needed. In this instance, the discoveries have already covered the limitations issue and will not need to be continued. The trial is set for the May 2015 sittings and will not be delayed as a result of the proposed amendments.

[20] I agree that the landscape of the trial will change, but that is not the type of prejudice that Rule 26.01 is concerned with. While the revised defences may be prejudicial to the plaintiff, in the sense that they raise a problematic issue, they are not prejudicial in the sense of procedural or substantive fairness.

Conclusion

[21] In the result, I am satisfied that the defendants, Amex and PC, have met the test under Rule 26.01 and each has leave to amend their Statement of Defence as requested. The plaintiff shall have leave to serve and file a Reply to the Amended Statements of Defence within 20 days of receipt and shall have leave to amend the Trial Record to reflect the amended pleadings.

Costs

[22] Each party seeks costs. The plaintiff, even though not successful, seeks costs on the basis that the response to the motion was reasonable and it was put to time, trouble and expense as a result of the inadvertence of defence counsel. Mr. Schorr seeks $3,500 on a partial indemnity basis.

[23] The defendants essentially argue that they were successful and that costs should follow the event. Amex seeks $5,000 and PC seeks $2,500, both on a partial indemnity basis.

[24] The general rule is that costs follow the event and will be awarded on a partial indemnity basis: Bell Canada v. Olympia & York Developments Limited et. al. (1994), 1994 239 (ON CA), 17 O.R. (3d) 135 (C.A.). Ultimately, in fixing an amount for costs, the overriding principles are fairness and reasonableness: Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.); and Moon v. Sher (2004), 2004 39005 (ON CA), 246 D.L.R. (4th) 440 (C.A.).

[25] In my view, there is no reason to depart from the general rule in this case. In other words, the defendants are entitled to an assessment of their costs, given that they were successful on the motions. That said, the amounts sought ought to be attenuated somewhat by virtue of the fact that the motions had to be brought at all. Mr. Schorr correctly pointed out that BMO Bank of Montreal raised a limitations defence as far back as December 16, 2011. The issue could have been addressed substantially sooner. Having said that, regardless of the timing, the plaintiff could have consented to the relief sought.

[26] All things considered, I fix the costs of Amex at $3,000 and the costs of PC at $2,000, all of which are payable by the plaintiff within 30 days.

Boswell J.

Date: February 17, 2015