Court File and Parties

COURT FILE NO.: CV-15-1212-00 DATE: 2016 09 16

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: KOOLATRON CORPORATION - AND - SYNERGEX CORPORATION, SYNERGEX DE MEXICO S.A. de C.V. DAVID AIELLO, DAVID AELLO, TOM DAVIDSON, NEIL FLESHNER, JOHN SMITH and PHILIP WALTON

BEFORE: FAIRBURN J.

COUNSEL: Jayson W. Thomas, for the Plaintiff Arlindo Aragao, for the Defendants

HEARD: September 16, 2016

ENDORSEMENT

[1] The plaintiff brings a motion for a few forms of relief. The parties agreed to advance argument on only one issue today, that being the request to amend the Statement of Claim.

[2] The plaintiff was doing business with the corporate defendants Synergex and Synergex de Mexico. Wal-Mart Mexico will only purchase goods from a local vendor of record. Koolatran used Synergex de Mexico for this purpose.

[3] In the Statement of Claim issued March 11, 2015, the plaintiff alleges a breach of trust by the defendants and that they are owed a large sum of money. In the Statement of Defence, Synergex and Synergex de Mexico deny liability, alleging that no monies were received from Wal-Mart Mexico for the plaintiff’s product.

[4] The plaintiff now seeks to amend the Statement of Claim to add a claim in fraud. It is said that the fraud perpetrated by the defendants only became known at the discoveries. In brief, the plaintiff says that it only learned about the fraud during the discovery of Matthew Reinhart, a representative of the corporate defendants. Mr. Reinhart deposed that Wal-Mart Mexico applied a deduction against Synergex de Mexico’s vendor account because of an issue arising from the corporate defendants own supply of goods to the purchaser. The discovery evidence suggests monies that Wal-Mart would have provided for purposes of paying the plaintiff for its product, were actually used to satisfy debt obligations owed by Synergex de Mexico to Wal-Mart Mexico. I am satisfied that there is an evidentiary foundation for this allegation arising from the discovery evidence.

[5] The defendant filed two affidavits in response to the motion to amend the Statement of Claim. The second one was handed up to the court today. The affidavits suggest that the motion to amend should be denied because the limitation period for filing a claim has expired and non-specified prejudice has resulted to the defendants. Only the limitation issue was pressed in oral argument.

[6] Mr. Reinhart’s affidavit, as opposed to his discovery evidence, suggests that Wal-mart Mexico arbitrarily applied deductions to the plaintiff’s product line and has refused to reverse the deductions. It is said that this information was “immediately” communicated to Koolatran at the time it occurred. I note that there is no direct evidence supporting the sugestion that there was timely communication of what is alleged to have occurred.

[7] Rule 26.01 of the Rules of Civil Procedure governs the amendment of pleadings. 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”. This is mandatory language. The court shall grant leave “unless the responding party can demonstrate prejudice that cannot be compensated by costs”: P. Perell, J. Morden, The Law of Civil Procedure in Ontario, 2nd ed. (LexisNexis Canada, 2014), at p. 432.

[8] Here, the defendant argues that a limitation period has intervened and the plaintiff cannot now add to the claim. I disagree. In Frohlick v. Pinkerton Canada Ltd. (2008), 2008 ONCA 3, 88 O.R. (3d) 401 (C.A.), Rouleau J.A. held that the expiry of a limitation period gives rise to a presumption of prejudice, unless the party seeking the amendment shows “the existence of special circumstances that rebut the presumption”: at para. 17. Rouleau J.A. held that in cases where a factual dispute as to when a limitation period starts to run exist, and “the motion judge is not in a position to resolve it, the amendment will normally be allowed and the responding party will be given leave to plead the limitation period as a defence”, at para. 32.

[9] In this motion, I find that there is a real dispute as to when the limitation period starts to run. The applicant says that there was wilful concealment and, as such, the clock starts when the alleged fraud was uncovered for the first time at the discoveries. The respondent says that the clock should run from when Mr. Reinhart says in his affidavit, as opposed to his discovery evidence, that the matter was disclosed, which was more than two years ago.

[10] I am in no position to resolve this dispute on this motion. The parties have diametrically opposed accounts and views. It currently appears on the record before me that this matter will turn on assessments of credibility.

[11] As such, and in accordance with Frohlick, the motion is granted and the amendment is allowed. This is without prejudice to the defendants to plead the limitation issue in their Statement of Defence and raise the issue at trial.

[12] The applicant will submit no more than three pages of written submissions on costs no later than September 23, 2016. The respondent will provide submissions of the same maximum length, no later than September 30, 2016.

[13] The balance of motion is adjourned sine die to a date to be determined by the parties in consultation with the trial coordinator.

Fairburn J. DATE: September 16, 2016