Court File and Parties
CITATION: A.J.D. Holdings v. VS Products/RNW Holdings, 2015 ONSC 4074
COURT FILE NO.: 25999/12
DATE: 2015-06-26
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
A.J.D. HOLDINGS CO.
Plaintiff
– and –
VS PRODUCTS INC. and RNW HOLDINGS LLC
Defendants
COUNSEL:
Steven G. Shoemaker, for the Plaintiff
Paul E. Trenker, for the proposed Defendant John Stach
HEARD: June 4, 2015
REASONS ON MOTION
JUSTICE E. GAREAU:
[1] Before the court is a notice of motion dated November 3, 2014 brought by the plaintiff, A.J.D. Holdings Co.
[2] In that motion, A.J.D. Holdings Co. seeks leave to amend the statement of claim issued on November 13, 2012 to add as a party, defendant John Stach and to amend the body of the statement of claim to make factual allegations against John Stach.
[3] Attached to these Reasons as Schedule “A” is the proposed amended amended statement of claim.
[4] The statement of claim was previously amended on December 20, 2013 pursuant to the order granted on December 19, 2013 by the Honourable I.S. McMillan to add RNW Holdings LLC as a party defendant and the body of the statement of claim was amended accordingly.
FACTUAL BACKGROUND:
[5] The defendants are suppliers of portable energy products. The proposed defendant, John Stach, is the principal of VS Products Inc.
[6] On April 13, 2012 the defendant, RNW Holdings LLC, a company related to VS Products Inc. sent an invoice to Electric Energy Store in the amount of $156,743.50 for the sale of portable energy products by RNW Holdings to Electric Energy.
[7] The plaintiff purchased the invoice sent to Electric Energy by agreement with the defendant VS Products Inc. by paying the sum of $125,394.80, being approximately 80% of the invoice amount. The agreement stipulated that if the plaintiff did not get full payment by Electric Energy by August 13, 2012, then the defendant VS Products Inc. would pay the plaintiff the full amount of the invoice.
[8] As of August 13, 2012, the plaintiff did not receive payment from Electric Energy and the plaintiff took the position that full payment under the Electric Energy invoice was due and payable by VS Products Inc. to the plaintiff.
[9] The plaintiff alleges that the defendant VS Products Inc. is in breach of the re-purchase agreement.
[10] When no payment was forthcoming, the plaintiff issued a statement of claim on November 13, 2012 against VS Products Inc.
[11] The statement of claim was amended on December 20, 2013 pursuant to a court order to add RNW Holdings LLC as a defendant in the action.
[12] The defendant RNW Holdings LLC did not defend the action and was noted in default. On February 27, 2014 the plaintiff obtained default judgment against RNW Holdings LLC in the amount of $159,255.69 plus costs in the amount of $920.62.
[13] On May 5, 2014, an examination for discovery was arranged for the defendant VS Products Inc. To be produced was the corporation’s representative, John Stach. Mr. Stach did not attend at the examination for discovery, nor was anyone produced on behalf of the defendant, VS Products Inc.
[14] The plaintiff then brought a motion to have the statement of the defendant VS Products Inc. struck for non-attendance at the examination for discovery. That motion was heard on July 10, 2014. The court ordered that the defendant VS Products Inc. shall comply with the order of March 6, 2014 and produce a representative of the Corporation for discovery by August 29, 2014, failing which the statement of defence of VS Products Inc. shall be struck.
[15] Pursuant to the order of July 10, 2014, an examination of John Stach to be examined on behalf of the defendant VS Products Inc. was arranged by the plaintiff for August 6, 2014 at 10:00 a.m. Mr. Stach failed to attend for the examination for discovery.
[16] On November 3, 2014, the plaintiff brought the motion now before the court to add John Stach as a party defendant in the proceeding.
THE MOTION TO AMEND THE STATEMENT OF CLAIM
(a) The Limitation Issue:
[17] The general authority to amend a pleading is found in Rules 5.04(2) and 26.01 of the Rules of Civil Procedure. Those rules read as follows:
“5.04(2) At any stage of a proceeding, the court may by order add, delete, or substitute the party or correct the name of a party incorrectly named on such terms as are just, unless prejudice would result that could not be compensated for my costs or an adjournment.”
“26.01 On motion at any stage 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.”
[18] The aforementioned Rules would apply on the motion brought by the plaintiff if the motion was brought within the limitation period. Outside the limitation period, the court would be guided by Sections 21(1) and 21(2) of the Limitations Act.
[19] Counsel for John Stach argues that the amendment of the statement of claim is barred by s. 4 of the Limitations Act, 2002, S.O. 2002 c. 24 Sched. B, s.4, in that, the motion to amend was not brought within two years of the date on which the claim was discovered. Counsel for John Stach argues that the limitation of two years runs from August 13, 2012, which is the date in the re-purchase agreement whereby the plaintiff can collect against VS Products Inc. if they are unsuccessful in obtaining payment under the invoice from Electric Energy Store.
[20] The plaintiff takes the position that the amendment is within the limitation period, which, it suggests, runs from November 15, 2012. As is stated in paragraphs 20, 21, and 22 of the plaintiff’s factum on the motion to amend:
“20. Furthermore, the motion was brought within two (2) years of the cause of action arising, which continued to arise as late as November 15, 2012 when John Stach refused payment of the amount claims by the plaintiff.
There is no limitation issue to decide because, as of November 15, 2012, John Stach refused to pay the amount claimed by the plaintiff and the motion dated November 3, 2014 was served upon John Stach personally within two (2) years of this refusal. As such, there is no new Limitations Act issue to be determined.
If there is any limitation issue to decide, which is denied, the question for the court to decide is whether the statement of claim should be amended to include John Stach personally despite the alleged expiry of the imitation period.”
[21] Section 4 of the Limitations Act provides as follows:
Basic Limitation Period
- Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered. 2002, c. 24, Sched. B, s.4.
[22] Section 5 of the Limitations Act sets out when a claim is discovered as follows:
Discovery
- (1) A claim is discovered on the earlier of,
(a) the day on which the person with the claim first knew,
(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 claim is 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; and
(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a). 2002, c. 24, Sched. B, s. 5(1).
Presumption
(2) A person with a claim shall be presumed to have known of the matters referred to in clause (1)(a) on the day the act or omission on which the claim is based took place, unless the contrary is proved. 2002, c. 24, Sched. B, s. 5 (2).
Demand Obligations
(3) For the purpose of subclause (1) (a) (i), the day on which injury, loss or damage occurs in relation to a demand obligation is the first day on which there is a failure to perform the obligation, once a demand for the performance is made. 2008, c. 19, Sched. L, s. 1.
Same
(4) Subsection (3) applies in respect of every demand obligation created on or after January 1, 2004. 2008, c. 19, Sched. L, s. 1.
[23] With respect to the adding of a party, s. 21(1) of the Limitations Act reads as follows:
21(2) If a limitation period in respect of a claim against a person has expired, the claim shall not be pursued by adding the person as a party to any existing proceeding.
[24] Section 21(2) of the Limitations Act does give the court the power to correct a misnaming or misdescription of a party after a limitation period has expired. Specifically, s. 21(2) of the Limitations Act reads as follows:
21(2) subsection (1) does not prevent the correction of a misnaming or misdescription of a party.
[25] It is clear on the material filed on the motion that the invoiced purchased by the plaintiff would be due and owing by VS Products Inc. if not paid by Electric Energy Store by August 13, 2012. There is no dispute by the parties as to this fact. Normally, this is when the cause of action in contract would arise, August 13, 2012, and the two-year limitation period would flow from that date.
[26] The plaintiff argues that the e-mail exchanged between the plaintiff and John Stach, effectively extended the limitation period to have it not run as of August 13, 2012, but rather as of November 15, 2012. This position is set out in the affidavit of Matthew M. Shoemaker, sworn on November 3, 2014, at paragraph 20 and Exhibit “J”. Paragraph 20 of Mr. Shoemaker’s affidavit reads as follows:
“I further believe John Stach will not be prejudiced by the amendment in the proposed amended amended statement of claim as leave of the court is being requested within the two years of the statement of claim being issued on November 13, 2012 and further, within two years on November 15, 2012, which is the date John Stach refused payment of the outstanding amount as noted in the e-mail dated November 15, 2012 and attached hereto as Exhibit J”.
[27] I have reviewed carefully the e-mails exchanged between Bear DeFino on behalf of A.J.D. Holdings and John Stach. These series of e-mails are all dated November 15, 2012 and run from 10:02 a.m. to 11:30 a.m. on that date. In my readings of those e-mails, it is clear and obvious that John Stach is taking a position on behalf of VS Products Inc. and not on behalf of himself personally. The e-mails are from A.J.D. Holdings to VS Products and are sent by VSproducts@gmail.com In the e-mail of November 15, 2012, at 10:27 a.m., to Bear DeFino, John Stach writes in the last paragraph, “If your group is prepared to drop the statement of claim and work with VSP we will send you out a payment immediately. Let me know how you would like to proceed.”
[28] Given the nature of the e-mails attached as Exhibit “J” to the affidavit of Matthew M. Shoemaker, sworn on November 3, 2014, I do not agree with the position of the plaintiff that the e-mails extend the limitation period to November 15, 2014 as it pertains to a claim against John Stach. In the e-mails, John Stach was not making a promise to pay on his own behalf, which may have extended a limitation period for claims against him. In the e-mails, John Stach was always negotiating a payment on behalf of VS Products Inc. in exchange for discontinued legal action against that company. John Stach was not promising to personally pay the debt owing to the plaintiff. In my view, the e-mails exchanged between John Stach, on behalf of VS Products Inc., and Bear DeFino, on behalf of A.J.D. Holdings Co., does not extend the limitation period from August 13, 2012 to November 15, 2012 as it relates to a claim personally against John Stach. The cause of action against all relevant parties runs from the date set out in the re-purchase agreement, namely, August 13, 2012.
[29] Section 4 of the Limitations Act refers to a proceeding not being commenced after the second anniversary of the day “on which the claim was discovered”. In the material filed on the motion before the court, there is nothing to indicate that the plaintiff “discovered” something after August 13, 2014 that it did not know within the two-year limitation period concerning the liability of John Stach or the nature of his involvement with the corporation VS Products Inc. Much has been made by the plaintiff about the failure of John Stach to attend at an examination for discovery, but that failure does not extend the limitation period. John Stach was being examined for discovery on behalf of VS Products Inc. and his examination would have been restricted to that company’s relationship with A.J.D. Holdings Co., the details of the re-purchasing of the invoice, the contract between the companies and the efforts to secure payment from Electric Energy Store. It is highly doubtful that any information gained from John Stach on his discovery would have assisted in a personal claim against him, since any questions put to him in that regard would have not been relevant and would have been beyond the scope of proper questions in an action between the plaintiff and the defendants as framed by the pleadings.
[30] In my view, the limitation period applicable with respect to the proposed amendment to the statement of claim, to add John Stach as a party, arises on August 13, 2012 and the motion to amend, brought on November 3, 2014 is beyond the two-year limitation period as set out in paragraph 4 of the Limitations Act. Section 21(1) of the Limitations Act clearly provides that if a limitation period in respect of a claim against a person has expired, the claim shall not be pursued by adding the person as a party to any proceeding. This prohibition is tempered by s. 21(2), which allows the adding of a party to correct the misnaming or misdescription of a party.
[31] Is the adding of John Stach, as a party defendant in this proceeding, beyond the limitation period, “the correction of a misnaming or misdescription of a party? The jurisprudence indicates that the words “misnomer and misdescription” should be liberally and broadly interpreted by the courts. At paragraph 10 in the case of Hastings v. Halton Condo Corp., 2012 ONSC 175, Murray, J. notes:
“Before the passage of the Act (referring to the Limitations Act), the law permitted the correction of a misnomer or misdescription of a party in the style of cause notwithstanding the expiration of a limitation period. Ladouceur v. Howard, 1973 CanLII 30 (SCC), [1973] S.C.J. No. 120 is an example of such a case. Section 21(2) of the Act perpetuates this exception. The broad and liberal interpretation given by the courts to misnomer and misdescription is a recognition by the judiciary of the desirability of claims proceeding against individual defendants in circumstances of misnomer or misdescription where justice requires such a result.”
[32] In the Hastings v. Halton Condo Corp. case, the plaintiffs were requesting an amendment to their statement of claim to add the name of Gordon Germann to the style of cause and to amend the statement of claim accordingly. In the end, the amendment was allowed by the court, but not on the basis of misnomer or misdescription. As stated by the court in paragraph 11 of its decision:
“Notwithstanding the arguments of counsel for the plaintiff, I am unable to conclude that this is a case of misnomer or misdescription. There is no person misnamed or misdescribed in the style of cause who could stand as a “placeholder” for Mr. Germann. By inadvertence, Mr. Germann was not shown as a party defendant in the style of cause, although named as a party defendant in the statement of claim.”
[33] The case of Lloyd v. Clark, 2008 ONCA 343, is a useful case in directing the court as to what is intended by the phrase “misnaming or misdescribing of a party” as set out in s. 21(2) of the Limitations Act. In that case, the plaintiff had named the Town of Ajax and the Corporation of the Town of Whitby as defendants in a statement of claim. The plaintiff sought to name the Regional Municipality of Durham as a defendant in place of the named defendant. The motion brought by the plaintiff for the amendment was initially dismissed by the court. The Ontario Court of Appeal allowed the appeal and granted the amendment sought by the plaintiffs. In doing so, the Ontario Court of Appeal noted in paragraphs 3 and 4 of its decision:
“We agree with the submission that on a fair reading of the statement of claim, it was clear that the plaintiff intended to name the municipality having jurisdiction over and responsibility for the maintenance of the road on which the accident occurred. Moreover, there was clear evidence that Durham immediately knew that it was the intended defendant given the letter sent by Durham’s insurance adjuster to the plaintiff’s solicitor upon receipt of the statement of claim.
The case law amply supports the proposition that where there is a coincidence between the plaintiff’s intentions to name a party and the intended party’s knowledge that it was the intended defendant, an amendment may be made despite the passage of the limitation period to correct the misdirection or misnomer.”
[34] On the material filed before me, I cannot conclude that it was clear that the plaintiff intended to name John Stach personally as a party or that John Stach knew that he was an intended party within the limitation period. The material before this court does not indicate that the plaintiff has met the test for an amendment set out in s. 21(2) of the Limitations Act as set out in the Ontario Court of Appeal in Lloyd v. Clark.
[35] In my view, the amendment sought by the plaintiff does not merely correct a name misdescribed or misnamed. Rather, the amendment sought is bringing into the litigation an entirely new party, John Stach. There is a new legal entity entering the litigation. This is not a case of merely correcting the name of a party already named in the litigation or misdescribed in the title of proceedings. The plaintiff is not simply trying to correct a misnaming or misdescription of a party in its motion to the court. It is bringing into the litigation an entirely new party that it did not intend to bring into the litigation within the two-year limitation period (August 13, 2012 to August 13, 2014).
[36] It is my view that the amendment sought by the plaintiff to add John Stach as a party defendant and to amend the body of the statement of claim accordingly is beyond the limitation period prescribed by Sections 4 and 5 of the Limitations Act. Section 21(1) bars the adding of a party beyond the limitation period. In the case at bar, this is not cured by the provisions of s. 21 (2) of the Limitations Act since the amendment requested is not for the purpose of misnaming or misdescription of a party.
[37] Accordingly, the motion brought by the plaintiff dated November 3, 2014 is dismissed.
COSTS:
[38] As to costs, it was agreed by counsel at the conclusion of argument on the motion that the successful party on the motion is entitled to its costs. The plaintiff suggested costs in the range of $2,500.00, whereas counsel for the party responding to the motion suggested costs in the range of $3,600.00. Considering the applicable principles on costs, including Rule 57.011 of the Rules of Civil Procedure, and the factors set out therein, an appropriate award of costs in this matter is the sum of $3,000.00, inclusive of HST and disbursements.
[39] Accordingly, the plaintiff shall pay forthwith, costs to John Stach, in the amount of $3,000.00, inclusive of HST and disbursements.
Justice E. Gareau
Released: June 26,2015
CITATION: A.J.D. Holdings v. VS Products/RNW Holdings, 2015 ONSC 4074
COURT FILE NO.: 25999/12
DATE: 2015-06-26
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
A.J.D. HOLDINGS CO.
Plaintiff
– and –
VS PRODUCTS INC. and RNW HOLDINGS LLC
Defendants
REASONS ON MOTION
Justice E. Gareau
Released: June 26, 2015