Court File and Parties
COURT FILE NO.: 10-49174 DATE: 2016/05/31 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
MAXRELCO INC. Plaintiff – and – JIM PATTISON INDUSTRIED LTD. c.o.b. as PATTISON SIGN GROUP and LUMIPRO INC. carrying on business as LUMIPRO SIGNS AND LIGHTING SERVICES Defendant
Counsel: Brian C. Elkin and Stéphanie Drisdelle, for the Plaintiff Martin A. Smith and Nicole D. Tellier, for the Defendant
HEARD: March 22, 2016
REASONS FOR Decision
R. Smith j.
Overview
[1] The defendant, Lumipro Inc. (“Lumipro”), brought a summary motion to dismiss this action on the grounds that:
(a) The plaintiff Maxrelco Inc. (“Maxrelco”) is not the owner of the premises that were damaged by the fire, but rather is a shareholder of Maxrelco (Immeubles) Inc., (“Maxrelco Immeubles”) which owned the premises. The plaintiff submits that Maxrelco does not have a cause of action for a wrong done to Maxrelco Immeubles and argues that the action should be dismissed.
(b) Lumipro states that it was not retained to maintain the signs at the premises where the fire occurred, but was only hired to repair broken signs when requested to do so from time to time.
[2] In response Maxrelco has brought a cross motion to amend its Statement of Claim to change the name of the plaintiff to Maxrelco (Immeubles) Inc. to correct the misnomer.
[3] The following issues must be decided:
- Should the plaintiff be allowed to amend its name from Maxrelco Inc. to Maxrelco (Immeubles) Inc. after the limitation period has expired?
- Does Maxrelco have an insurable interest in the premises such that it can claim damages against Lumipro? And, can Maxrelco claim damages on the basis that it was the principal of Maxrelco Immeubles?
- Is there a genuine issue requiring a trial?
Background Facts
[4] On August 17, 2008, a fire occurred at a building housing restaurants and a hotel at a service centre beside Highway 417, located at 625 rue Principale, in Casselman, Ontario called “Restoparc”. The fire caused $1,070,290.83 in damages to the property.
[5] The lands and premises on which the Restoparc businesses were operated were owned by Maxrelco (Immeubles) Inc. The plaintiff Maxrelco Inc. owns 100% of the shares of a number of subsidiaries that own and operate service centers and restaurants including Maxrelco (Immeubles) Inc.
[6] The other wholly owned subsidiaries of Maxrelco Inc. that carry on business at Restoparc are as follows: (a) 9019-0430 Quebec Inc. operates the franchise restaurant, Burger King. (b) 9019-9895 Quebec Inc. operates the franchise restaurant, PizzaHut; and (c) 9019-8749 Quebec Inc. operates the franchise restaurant, Dunkin Donuts.
[7] The head office of both Maxrelco and Maxrelco (Immeubles) is located in Hudson, Quebec. Maxrelco (Immeubles) has a verbal agreement with 9103-0338 Quebec Inc. under which it leases the buildings, furniture and equipment at Restoparc.
[8] The fire started at the Restoparc behind the letter “I” on an outdoor Dunkin Donuts neon sign (the “sign”), which was mounted on an exterior wall of the building. Lumipro has been sued for breach of contract, negligence and failure to warn. Maxrelco claims that it paid Lumipro to maintain the signs and lighting and that Lumipro failed to do so properly or alternatively that it was negligent in the manner in which it repaired the Dunkin Donuts sign approximately 6 months before the fire occurred.
[9] Maxrelco manages and performs the accounting for all of the numbered companies as well as Maxrelco (Immeubles) and invoices them accordingly. All of the profits generated by the numbered companies and Maxrelco (Immeubles) are transferred to Maxrelco, which is the holding company of all the above companies. The manager of the Restoparc was at all material times an employee of Maxrelco.
[10] Maxrelco purchased an insurance policy covering any property damage at Restoparc which was underwritten by La Souveraine Compagnie d’assurances générale (“La Souveraine”). On the date of the fire, the named insured’s under the policy were as follows: Maxrelco Inc. et Gestion Claude Jacques Goupil Inc., Maxrelco (Immeubles) Inc. , 9019-0430 Québec Inc., 9018-8749 Québec Inc., 9018-9895 Québec Inc., 795074 Ontario Ltd., 160405 Canada Ltd., 3181634 Canada Inc., 318642 Canada Inc., 9103-0338 Québec Inc., 160404 Canada Inc., and 9093-5743 Canada Inc.
[11] Following the loss, Claude Jacques Goupil, a director of all of the companies, submitted an interim proof of loss form dated August 9, 2009 in the name of Maxrelco Inc. et al . The interim proof of loss authorized the insurer to pay the indemnity to Maxrelco Inc. On June 14, 2010, Mr. Goupil submitted a final proof of loss also in the name of Maxrelco Inc. et al , which authorized the insured to payout the remaining indemnity to Maxrelco Inc. La Souveraine paid a total amount of $1,050,000 to Maxrelco for damages caused by the fire.
[12] Mr. Goupil filed an affidavit in which he stated that both cheques were deposited in Maxrelco’s bank account and the required amounts were transferred to the subsidiaries based on their loss. Mr. Goupil also deposed that Maxrelco acted as a representative of Maxrelco (Immeubles) and the other subsidiaries, when it collected the insurance funds for the damages which occurred to the various business entities operating at the Restoparc as a result of the fire.
[13] Mr. Goupil states that Maxrelco Inc. dealt exclusively with the defendant Lumipro for the maintenance of all signs at Restoparc. When a sign was not working or needed repair, the manager of Restoparc would contact Lumipro by telephone or by fax with instructions. Between 2003 and 2008, Maxrelco paid all of Lumipro’s invoices for maintaining and repairing the signs at Restoparc.
[14] On or about December 13, 2009, La Souveraine retained the law firm of Lavery de Billy to bring a subrogated action to recover the indemnity paid out as a result of the fire. Counsel for La Souveraine was provided with the interim and final proof of loss forms and a copy of the insurance policy including the endorsement for coverage of the named insureds.
[15] The lawyer that prepared the Statement of Claim has signed an affidavit stating that she intended to and believed she had named the owner of the property as the plaintiff. Paragraphs 5 and 6 of the Statement of Claim make the following allegations:
At all material times, the plaintiff was the owner and operator of a building housing a Burger King, a Dunkin Donuts, a Pizza Hut and a Kentucky Fried Chicken, a convenience store as well as a 16 room motel (the premises).
the premises equipped with a neon signs, is located at 625 Principale, the town of Casselman, the province of Ontario.
[16] Lumipro filed its statement of defence on November 14, 2011 and did not take issue with the plaintiff’s standing to bring this action and pleaded to the merits of the claim.
[17] On April 20, 2012, Mr. Goupil was examined for discovery as a representative of the plaintiff and stated that the owner of the property was Maxrelco (Immeubles) Inc. On December 17, 2013, Mr. Guy Vallée was examined for discovery as a representative of the defendant Lumipro.
[18] On March 13, 2013, the plaintiff answered undertakings and included a detailed chart providing the corporate structure of Maxrelco Inc. and its subsidiaries.
[19] Mediation was scheduled for September 23, 2014 and no issue was raised as to the name of the plaintiff or its ability to bring action in this case.
[20] On September 23, 2014, Lumipro advised that they would bring a motion for Summary Judgment on the basis that the plaintiff had no legal standing to bring this action because it was not the owner of the premises that were damaged in the fire.
Analysis
Issue 1 – Should the plaintiff be allowed to amend its name from Maxrelco Inc. to Maxrelco (Immeubles) Inc. after the limitation period has expired?
[21] Rule 5.04(2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, states as follows:
At any stage of a proceeding the Court may by order add, delete, substitute a party or correct the name of a party incorrectly named, on such terms that are just, unless prejudice would result that could not be compensated for by costs or an adjournment.
[22] Rule 26.02 of the Rules of Civil Procedure deals with amendments to pleadings and reads as follows:
26.02 A party may amend the party’s pleading,
(a) without leave, before the close of pleadings, if the amendment does not include or necessitate the addition, deletion or substitution of a party to the action;
(b) on filing the consent of all parties and, where a person is to be added or substituted as a party, the person’s consent; or
(c) with leave of the court.
[23] Rule 1.04(1) of the Rules of Civil Procedure states as follows:
1.04(1) These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.
[24] Lumipro submits that Maxrelco is a shareholder of the corporation that owns the premises that were damaged by the fire and does not have a cause of action for the wrong done to the corporation Maxrelco (Immeubles) Inc. It relies on the Court of Appeal’s decision of Meditrust Health Care Inc. v. Shoppers Drug Mart, [2002] O.J. No. 3891 which applied the rule in Foss v. Harbottle , 1843 2 Hare 461, 67 E.R. 189 (ENG.V.-C. PRID) , which held that a shareholder does not have a cause of action for a wrong done to the corporation in which it owns shares.
[25] Meditrust owned a national mail order pharmacy business which it operated through a number of subsidiaries. Meditrust alleged that Shoppers Drug Mart Ltd. and other respondents conspired to destroy its mail order business. The motion judge held that Meditrust , did not suffer any damages directly but rather they were a derivative of the damages suffered by the subsidiary corporations. She applied the rule in Foss v. Harbottle and dismissed the claim .
[26] At paragraph 30 of the Meditrust decision the Court of Appeal stated as follows:
“…The economic reality of the mail-order business was a single economic enterprise. But the legal reality was separate corporate entities. And the rule in Foss v. Harbottle is a corporate law rule, not an economic rule. A parent company that owns all the shares of its subsidiaries may exercise complete and constant control over them. That control, however, does not clothe the parent with the right to sue for the subsidiaries.
[27] In Mazzuca v. Silver Creek Pharmacy Ltd., [2001] O.J. 4567 (“Mazzuca”), the Court of Appeal examined the interplay between Rules 1.04, 26.01 and 5.04(2) and at paragraph 41 stated as follows
…both the related jurisprudence and the rules themselves thus underscore a simple, common sense proposition: that a party to litigation is not to be taken by surprise or prejudiced in non-compensable ways by late, material amendments after the expiry of a limitation period. If such surprise or actual prejudice is demonstrated on the record, an amendment generally will be denied.
[28] Notwithstanding the above statement in Mazzuca , the Court of Appeal upheld the motion judge’s decision to permit the amendment of the title of the proceedings to reflect the accurate name of the corporate plaintiff (La Gondola Ltd.) instead of an individual plaintiff (Elsa Mazzuca) after the limitation period had expired. The claim was framed in negligence and the plaintiff sought damages arising from a business premises fire. At paragraph 48 of Mazzuca , Justice Cronk made the following statement with regards to the concept of correcting a misnomer:
“this language addresses misnomer situations and, in the absence of non-compensable prejudice, permits an amendment where it was intended to commence proceedings in one name but, in error, the proceedings were commenced in another name. Similarly, this aspect of the subrule may apply in situations where the plaintiff intended to sue one person but, in error, sued the wrong person. Such cases reflect an irregularity in the nature of the misnomer which may be relieved against in proper circumstances.
[29] At para. 56 of Mazzuca , Justice Cronk further stated:
…the action was mistakenly brought in the name of Ms. Mazzuca. This is not a situation in which a conscious decision was made to sue in her name rather than in the name of her company, La Gondola [Ltd.]. It was simply an error. Counsel always intended, and indeed was instructed, to bring the action to recover damages sustained to the business. The defendant always understood that it was the owner of the business who was suing for damages and defended on that basis. Correcting the misnomer has no impact on the defendant. There is no new cause of action being asserted and no new facts are alleged
[30] The facts in this case are very similar to Mazzuca as the solicitor for the plaintiff stated that she intended to sue in the name of the company that owned the Restoparc premises. Paragraph 5 of the Statement of Claim also makes the same statement. The defendant prepared its Statement of Defence and has also defended on this basis. No new cause of action is asserted and no new facts are alleged and as such the defendant would not suffer any prejudice if the name of the plaintiff was corrected.
[31] Lumipro submits that the decision of Mazzuca was made before the amendments of the Limitations Act, S.O. 2002, c. 24, Sched. B. The defendant refers to paragraph 34 of the Streamline Foods v. Jantz Canada Corporation, 2012 ONCA 174 decision which states that “the principles articulated prior to the passage of the Limitations Act , 2002, should be treated with caution. It is no longer possible to add parties after the expiry of a limitation period even in the face of special circumstances.”
[32] In the Streamline Foods decision the Court of Appeal stated “the primary issue is whether this is a situation of misnomer or is, instead, the addition of a new party. If it is the latter, it does not matter that the error was bonafide or the defendant would not suffer prejudice”.
[33] I am satisfied, based on the evidence before me, that this is a situation of a misnomer because the plaintiff’s counsel has sworn an affidavit stating that she intended to sue, and believed she had sued, in the name of the owner of the property as plaintiff. Her evidence was uncontradicted. I also find that the names in these circumstances were very confusing. The name of the holding company Maxrelco Inc. is very similar to Maxrelco (Immeubles) Inc., the company that was the owner of the premises that were damaged by the fire. In addition, the proof of loss claims were submitted in the name of Maxrelco Inc. the holding company which had purchased the insurance policy for all of the businesses operating at the Restoparc, including Maxrelco (Immeubles) Inc.
[34] Maxrelco Inc. was also actively involved in managing the business of all of the subsidiaries carrying on business as the Restoparc, namely it hired and paid the salary of the manager of all of the businesses at the Restoparc. It also provided accounting services to all of the businesses operating at the Restoparc, which included arranging insurance coverage for the property owned by Maxrelco (Immeubles) Inc and all of the other businesses operating at the Restoparc, and it submitted the proof of loss claims which were paid by the insurance company in the name of Maxrelco Inc. As a result, I find that naming Maxrelco Inc. as the plaintiff in this case was a misnomer of the actual owner of the premises damaged by the fire which was in fact Maxrelco (Immeubles) Inc.
[35] The defendant in this case was not misled or prejudiced by the misnomer and knew who was the intended to be the plaintiff, because the defendant filed a statement of defence, completed examinations for discovery and attended a mediation, all on the understanding that the plaintiff was the owner of the damaged premises. The defendant only raised the issue that another party owned the premises in September 2014. The defendant has not been misled or prejudiced in any way by the mistake in naming the correct plaintiff. The plaintiff does not need to amend any substantive portion of the Statement of Claim, as no new causes of action are being asserted, no new facts are alleged, and no new relief is requested. Also, no amendments will be required to the defendant’s statement of defence if the amendment to correct the plaintiff’s name is permitted.
[36] The Limitations Act allows for the correction of a misnomer. Section 21 of the Limitations Act, states as follows:
21(1) 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.
(2)Subsection 1 does not prevent the correction of a misnaming or a misdescription of a party.
[37] Subsection 21(2) of the Limitations Act, states that s. 21(1) does not prevent the correction of a misnaming or misdescription of a party. This is consistent with the decision of the Court of Appeal in Mazzuca and s. 5.04(2) which permits the amendment of a pleading to substitute a party or correct the name of a party incorrectly named on terms that are just, unless prejudice would result that could not be compensated by costs or an adjournment. In this case the defendant does not argue that it would suffer any prejudice. In fact, neither costs nor an adjournment are required as no prejudice has been alleged as the defendant was fully aware of the intended plaintiff and what damages were being claimed.
[38] In the case of Greater Toronto Airport’s Authority Assn. Inc. v. Foster Wheeler Ltd., 2010 ONSC 5891, the plaintiff sought damages against the defendant for a boiler explosion at the airport. The plaintiff brought a motion to amend the title of the proceeding to the Greater Toronto Airport Authority (GTAA) in order to remove the words “Assn. Inc.” from the plaintiff’s name after concerns were raised by defendant’s counsel and after the limitation period had expired. In the GTA decision the Court concluded it was a situation of misnomer and given the absence of prejudice the motion to correct the name should be granted. The facts in this case are very similar to the Greater Toronto Airport Authority Assn. Inc . decision.
Disposition
[39] For the above reasons, I grant the plaintiff’s motion to correct the misnomer of its name to the owner of the Restoparc properties, namely to correct the name of the plaintiff from Maxrelco Inc. to Maxrelco (Immeubles) Inc.
Issue #2
[40] It is not necessary to deal with whether Maxrelco Inc. has an insurable interest or had an interest as the principal of Maxrelco (Immeubles) Inc., given my findings on Issue #1, where I permitted the correction of the misnomer of the plaintiff’s name.
Issue #3 – Is there a genuine issue requiring a trial?
[41] The plaintiff has pleaded that the fire at Restoparc was caused by faulty installation of a neon sign combined with improper maintenance. It also pleaded that some months prior to the fire, Lumipro negligently performed maintenance on the Dunkin Donuts neon sign, which it alleges caused the fire.
[42] Rule 20.04(2) of the Rules of Civil Procedure state as follows:
The Court shall grant summary judgment if, (a) the Court is satisfied there was no genuine issue requiring a trial with respect to a claim or defence; or (b) the parties have all of part of the claim determined by a summary judgment and the Court is satisfied that it is appropriate to grant a summary judgment.
[43] Both parties agree that the test in Hryniak v. Mauldin, 2014 SCC 4, should be applied. In Hryniak , the Supreme Court stated that the test is to be applied in two steps. Firstly, to determine whether the evidence before the Court allows it to fairly and justly adjudicate the dispute in a timely affordable and proportionate procedure. If not the Court must go to the second step to decide on a discretionary basis whether to use the powers set out in Rules 20.04(2.1) and (2.2)
[44] On a summary motion the responding party must put his “best foot forward or risk losing”.
[45] Lumipro submits that Maxrelco has simply made a bald assertion that Lumipro has breached its contract and that it was negligent in its repair of the Dunkin Donuts neon sign. The evidence of Lumipro’s work on outdoor Dunkin Donuts sign are a number of service reports for neon signs, the most recent are:
(a) A service report dated January 9, 2008; and
(b) A service report dated January 30, 2008, contained in the plaintiff’s affidavit of documents.
[46] Maxrelco submits that, in discovery, Lumipro’s president stated that in January of 2008, his company probably worked on the Dunkin Donuts sign where the fire started. Mr. Guy Vallée contradicted this evidence in his affidavit. Mr. Louis Lavallée, Lumipro’s technician of 25 years who attended at the Restoparc on several occasions stated that he may have worked on the same sign in 2007.
[47] Maxrelco has filed an expert report giving an opinion on the origin and cause of the fire. The report was prepared by the engineering firm, Technorm Inc. and is dated June 2, 2011. The experts concluded that the fire originated inside the roof structure, over the food court, near the front wall behind the letter “I” of the Dunkin Donuts’ neon sign. The experts gave their opinion that the fire was caused by a failure of the high voltage portion of the sign. Their inspection revealed 1) evidence of water penetration inside the channel letters; 2) deterioration of the vast majority of electrode enclosures namely cracking and thermal damage; and 3) inadequate spacing between high voltage cables and the grounded metal parts.
[48] The service reports and invoices of the defendant Lumipro indicate that its employees attended at the Restoparc at least 26 times between November 2003 and February 2008. Lumipro’s evidence was that fluorescent lights are used inside and neon lights are used outside. The sign in issue was located outside and used neon tubes. In his cross examination Mr. Vallée confirmed the above evidence on the use of neon and fluorescent signs, namely that fluorescent tubes are used on interior signs and neon signs are used on outdoor signs. Mr. Vallée agreed that if a Lumipro employee noticed a dangerous situation they were to inform the customer and make a note on a service report.
[49] Lumipro in fact shut down a light tower at the Restoparc and advised Maxrelco to replace the dangerous components with respect to a red band around the tower.
[50] Lumipro’s service reports and invoices do not refer to the exact sign that it worked on. However, with regards to a May 23, 2007 invoice, the technician who attended, Louis Lavallée, provided a statement “regarding the 2007 service call, started on May 30 and completed on June 12, I cannot tell by looking at the service report if I worked on an exterior Dunkin Donuts’ sign. It is not written on which sign I would have worked but based on the material indicated, I did work on an exterior sign.” With regards to the service report dated January 9, 2008, Mr. Vallée referred to a Dunkin Donuts’ sign; however, he stated that it referred to a different Dunkin Donuts’ sign. Mr. Vallée stated that “fixed the lights outside, includes the installation of 50 feet of GTO cable, bringing it through a wall and fishing it through the building’s ceiling.”
[51] The evidence appears to be uncontested that the fire commenced behind the letter “I” on the Dunkin Donuts’ sign which was an outdoor sign affixed to one of the buildings on the premises. The Lumipro employee stated that he probably worked on that sign but was not sure that it was on the letter “I”. He agreed that Lumipro installed the high voltage wires to the neon signs on the Restoparc premises in early January or February of 2008 and that he fished wire through the ceiling of the premises to a sign and that it was probably the same sign.
[52] The plaintiff has filed an expert report indicating that there was deficient installation and improper maintenance of the sign and the failure to warn the plaintiff of this situation. The defendant agrees that it had a duty to warn if it observed a dangerous situation with the neon signs.
[53] At question 140 of the cross examination, a Lumipro employee agreed that the sign could pose a risk of fire because it was an old neon sign where arcing could occur and a cut-off was not installed. The evidence is that three neons had to be repaired and to do so, the cable had to be passed through a wall. The invoice indicates that Lumipro was to “fix neons” and the neon lights were located outside. Mr. Vallée stated that the neons “probably weren’t on this side.”
[54] I agree with the submission by the plaintiffs that a genuine issue exists that requires a trial based on the expert evidence of defective installation of part of the high voltage wires to the Dunkin Donuts neon sign and with the admission by the Lumipro employee that they probably worked on that the sign shortly before the fire. The issue of the cause of the fire needs to be determined at a trial and cannot be decided fairly and justly on a summary motion even if I decided to use the powers under Rule 20.04(2.1). This case also involves issues of credibility of witnesses, as well as assessing the expert opinions on the causes of the fire where physical evidence is destroyed and inferences must be made.
Disposition of Motion for a Summary Judgment
[55] The defendant’s motion for a summary judgment is dismissed for the above reasons, and I find that a trial is required to determine the issues of causation of the of the fire and the inferences that must be drawn from the evidence after a fire and the admission by the defendant that it probably worked on the neon sign in question shortly before the fire.
Costs
[56] The parties shall have 15 days to make brief submissions on costs.
Justice Robert J. Smith
Released: May 31, 2016
COURT FILE NO.: 10-49174 DATE: 2016/05/31 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: MAXRELCO INC. Plaintiff – and – JIM PATTISON INDUSTRIED LTD. c.o.b. as PATTISON SIGN GROUP and LUMIPRO INC. carrying on business as LUMIPRO SIGNS AND LIGHTING SERVICES Defendant REASONS FOR JUDGMENT R. Smith J.
Released: May 31, 2016