CITATION: Lucky Star Developments Inc. v. ABSA Canada International, 2017 ONSC 4787
COURT FILE NO.: CV-12-18025
DATE: 20170908
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Lucky Star Developments Inc.
Plaintiff
– and –
ABSA Canada International
Defendant
Americo Fernandes, for the Plaintiff
Alex Van Kralingen and Mark Repath, for the Defendant
HEARD: August 1, 2017
REASONS ON MOTION
Thomas R.S.J.:
The Motion
[1] The plaintiff (Lucky Star) seeks leave to provide a Third Fresh as Amended Statement of Claim pursuant to r. 26.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The defendant (ABSA) resists some of the amendments proposed by Lucky Star
Background
[2] The action alleges that ABSA, a freight forwarder, did not meet its obligations to Lucky Star who desired to ship goods to Egypt and that as a result damages were incurred. It seems that Lucky Star was shipping containers of used clothing to India and that a total of seven containers were included in the transaction; the shipping taking place in 2011.
[3] The original statement of claim was issued on June 15, 2012. It claimed damages in the total amount of $4.5 million for loss of profits, demurrage and storage fees, bad faith and punitive, aggravated and exemplary damages.
[4] The statement of claim was served in July 2012. On October 11, 2012, ABSA served a motion to strike certain paragraphs of the statement of claim that it alleged amounted to unnecessary history in the dealings of the parties related to containers one through five. It was ABSA’s position that no claim was being made for a loss related to those containers and so it was irrelevant. It claimed that the claim for $4.5 million in damages was connected only to containers six and seven.
[5] On the returnable date of the motion, Lucky Star’s counsel, Mr. Paglione (not its present counsel) consented to the relief sought. By order dated December 3, 2012, Bondy J. struck out four paragraphs of the statement of claim that related to containers one through five without leave to amend. He also ordered that Lucky Star pay $4,453.75 in costs.
[6] E-mails confirm that on January 21, 2013, Mr. Van Kralingen, counsel for ABSA, requested of Mr. Paglione as to whether his clients knew of the order and when the costs might be paid. Mr. Paglione responded that “of course” they had been advised and that costs would be paid shortly.
[7] On April 19, 2013, Lucky Star delivered its Fresh as Amended Statement of Claim and while it deleted reference to containers one through five, it apparently did not comply with other portions of the Bondy J. order.
[8] A second motion to strike was served which led to a second consent order and a further $1,200 costs order.
[9] On August 28, 2014, ABSA delivered its Second Fresh as Amended Statement of Claim. That version of the claim sought $2.5 million in damages simply for breach of contract. The claim no longer specified damages related to containers six and seven but rather referred only to “the containers”, presumably since all references to containers one through five had been removed earlier.
[10] In August 2015, Lucky Star delivered its affidavit of documents which included information related to containers one through five.
[11] Guido Conflitti, as representative of Lucky Star, attended for an examination for discovery on September 17, 2015.
[12] There was the following exchange between counsel at the examination. It should be noted that by this time counsel on this motion, Mr. Fernandes, was now acting for Lucky Star:
MR. VAN KRALINGEN: And I want to understand whether the product costs and shipment costs for containers one to five are part of the damages claimed in this lawsuit?
MR. FERNANDES: I believe they are.
MR. VAN KRALINGEN: They are?
MR. FERNANDES: Yes.
MR. VAN KRALINGEN: Okay.
[13] It should be noted that Mr. Van Kralingen asked a number of questions that related to containers one through five notwithstanding the procedural history I have outlined.
[14] On September 23, 2015, Minkle Mittal was examined as representative of ABSA. Mr. Van Kralingen provided undertakings during the course of his client’s examination. However, when information was sought directly related to containers one through five, he took those requests “under advisement”. Ultimately, some of those questions were answered and some were not.
[15] On October 13, 2015, counsel for ABSA wrote to Mr. Fernandes seeking clarification on what damages were being sought. Portions of the letter are set out below:
In our review of the documents that have been served by Lucky Star to date, it appears that Lucky Star is alleging damages in connection with the first five containers (i.e. those before March 2012). In addition, during the course of Mr. Conflitti’s examination, the following exchange occurred between counsel at Q 764:
MR. VAN KRALINGEN: And I want to understand whether the product costs and shipment costs for containers one to five are part of the damages claims in this lawsuit.
MR. FERNANDES: I believe they are.
MR. VAN KRALINGEN: They are?
MR. FERNANDES: Yes.
From that exchange, I am under the impression that Lucky Star’s position is that the breach of contract it is claiming in the Action is in connection with all seven containers that were shipped, and not just containers 6 and 7 – those that were booked in March 2012.
I recognize that the above exchange between counsel occurred in the middle of an examination for discovery, and that Lucky Star’s position on the issue might change upon more deliberate consideration.
As such, given the state of the pleadings, I am writing to you to kindly clarify Lucky Star’s position in connection with the first five containers. Is Lucky Star claiming damages in connection with the first five containers? If so, can you kindly clarify what damages are being claimed with respect to hose five containers?
I would appreciate your written response to my query…
[16] Mr. Fernandes advised in argument that he did not respond to this correspondence as he felt his position at the examination had been clear.
[17] In November 2016, Mr. Fernandes gave notice of his intention to amend the claim further, in part to include damages for the first five containers.
[18] ABSA’s counsel advised that they would resist any claim related to containers one through five and reminded counsel that Lucky Star had already consented to an order striking that portion of the claim as irrelevant.
[19] On June 16, 2017, the Third Fresh as Amended Statement of Claim was delivered. The latest pleading contained a number of amendments including an increase in the claimed damages to almost $15 million. All amendments proceeded on consent but for the paragraphs related to damages claimed for the first five containers. Lucky Star was claiming that it lost the benefit of a lucrative contract with a charity in India as a result of the actions of the freight forwarder, ABSA.
[20] At least a portion of the defence pled by ABSA related to privity of the contract. ABSA maintains its contract was with a third party intermediary and not with this plaintiff.
[21] Finally, in this proceeding Mr. Conflitti has provided affidavit evidence that Mr. Paglione never advised him of the consent order to strike a portion of the claim and he never provided those instructions on behalf of Lucky Star. He maintains that it was “sometime” after the order that he was apprised of that development in the litigation and it was never his intention to abandon that portion of the claim.
[22] The matter came on before me for argument on August 1, 2017. I then requested written submissions of the impact on the limitation period of Mr. Conflitti’s claim that he never provided instructions to his former counsel to consent to the order of December 3, 2012. I have now received those submissions.
Position of the Parties
[23] Mr. Fernandes on behalf of Lucky Star believes this to be a simple matter. He points me to the compulsory direction contained in r. 26.01. He argues that despite the consent order of December 3, 2012, the defendant should have been aware that the plaintiff would pursue damages for containers one through five. Those damages were part of the material disclosed by the affidavit of documents. The position of Lucky Star was clear at the examination for discovery and questions were asked and answered regarding that portion of the claim.
[24] Counsel for the plaintiff suggests there has been no evidence of prejudice provided. He maintains that Mr. Conflitti’s evidence that he was never aware of the consent order on December 3, 2012 and never gave those instructions until sometime after the order was granted makes the running of the limitation period less than clear. He suggests if it is unclear to me when Conflitti discovered that his claim was abandoned, then the amendment should move forward to allow for the issue to be determined appropriately as the litigation progresses.
[25] Mr. Fernandes provides authority for the proposition that solicitor’s negligence in discovering a claim should not work against a client whose claim might otherwise be extinguished by the running of a limitation period (Davenport v. Stakew, 2007 CanLII 6911 (ON SC); Barnes v. Sunlife Financial Services of Canada, 2007 CanLII 57086 (ON SC), [2007] O.J. No. 5056 (S.C.J.)).
[26] He suggests as well that the Court of Appeal wrongly decided Joseph v. Paramount Canada’s Wonderland, 2008 ONCA 469 (Joseph), a decision that abolished the doctrine of special circumstances when amendments were sought to add a new cause of action after the expiration of the limitation period. Counsel proposes though that if faced with these particular facts, the Court of Appeal would have allowed the amendment recognizing that s. 4 of the Limitations Act and r. 26.01 are compatible with a finding of special circumstances if, in fact, special circumstances are needed at all here. He maintains that s. 4 concerns itself only with the commencement of proceedings. Lucky Star, he argues, is not commencing new proceedings, nor is it adding a new cause of action.
[27] Mr. Van Kralingen on behalf of ABSA argues that the actions of the plaintiff in consenting to the abandonment of this portion of the claim, and then attempting to resurrect it in the fashion proposed, amounts to abuse of process. He suggests that as an abuse of the court’s process, he need not prove prejudice and the amendment should be denied.
[28] He points to the expired limitation period as presumptively prejudicial without the need to prove more. He maintains that the questioning at the examination for discovery is determinative of nothing and that only evidence related to the claims as particularized in the pleading in play at the time (the Fresh Second as Amended) would be admissible in the proceeding. He maintains that he only asked questions about containers one through five to fully explore his privity of contract defence.
[29] ABSA relies upon a long line of cases that impute the solicitor’s knowledge to his/her client as agent for the client (Espin v. Pemberton (1859), 44 E.R. 1380 (Ch. D.); Scherer v. Paletta (1966), 1966 CanLII 286 (ON CA), 2 O.R. 524 (C.A.); North Waterloo Farmers Mutual Insurance Co. v. Wylie, 1989 CanLII 10416 (ON SC), [1989] O.J. No. 1493 (S.C.J.); Soper v. Southcott, 1998 CanLII 5359 (ON CA), [1998] O.J. No. 2799 (C.A.); Conde v. Ripley, 2015 ONSC 3342).
[30] He reminds me as well of the content of s. 12(2) of the Limitations Act which stands for the proposition that agent’s knowledge of the underlying facts leading to discoverability is to be imputed to the principal.
[31] Finally, he contends that even if Mr. Conflitti only learned of the Bondy J. order in early 2015, the limitation period has still expired thereby establishing prejudice.
Analysis
[32] Rule 26.01 of the Rules of Civil Procedure states the following:
GENERAL POWER OF COURT
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.
WHEN AMENDMENTS MAY BE MADE
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.
[33] Rule 26.01 is mandatory; an amendment shall be permitted even in the face of unfairness and prejudice unless the prejudice cannot be compensated by an adjournment or costs (Kings Gate Developments Inc. v. Drake, 1994 CanLII 416 (ON CA), [1994] O.J. No. 633 (O.C.A.).
[34] The rule is clearly meant to encourage access to justice and to allow the court to determine the outstanding issues on their merits, bringing all the relevant parties to the dispute before the court at once (s. 71, Courts of Justice Act, R.S.O. 1990, c. C.43).
[35] In my view, if ABSA is to be successful in blocking this amendment it must establish one or more of the following on a balance of probabilities:
Non-compensable prejudice;
Abuse of process;
Issue estoppel.
1. Non-compensable Prejudice
[36] The expiration of a limitation period gives rise to a presumption of prejudice: Frohlick v. Pinkerton Canada Ltd., 2008 ONCA 3, [2008] O.J. No. 17 (C.A.). Conceptually it should be treated no differently than a new claim that attempts to advance a statute-barred claim.
[37] Lucky Star’s counsel has argued that the defendant ABSA was on notice from the issuing of the first statement of claim throughout the progress of the litigation that Lucky Star was claiming damage for these specific containers. There is no evidence of an agreement between the parties to waive the tolling of the limitation period. There is no explanation for the consent order striking the claim and then the delay of four and a half years until the attempt to resurrect it. This position of Lucky Star suggests that special circumstances exist. Section 21(1) of the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B, effectively abolishes the doctrine of special circumstances. In my view, that issue was decided by the Court of Appeal’s decision in Joseph.
[38] I do not accept Lucky Star’s argument that since there is a general claim for breach of contract, it should be permitted to amend to seek an order of damages not presently plead and previously struck without leave to amend.
[39] Further, I am unable to find an application of the discoverability rule to these circumstances. The concept here would relate to when Lucky Star found it had a claim for breach of the defendant’s obligations related to containers one through five. Clearly, the plaintiff was aware of those concerns in 2012 when it issued the original statement of claim. When Mr. Conflitti, as a directing mind of Lucky Star, found out about the order of Justice Bondy is simply irrelevant to the expiration of the limitation period. His knowledge of the order, however, may have importance concerning when he learned of the potential negligence of his solicitor; if that claim can be substantiated. This is not a case where a claim was missed from a lack of due diligence. This is a case where the claim was originally plead five years ago.
[40] I am content that the limitation period has expired as it relates to the alleged damages from the shipment of containers one through five. I find that the expiration of the limitation period amounts to prejudice that cannot be compensated and that the amendment is therefore barred.
[41] I am aware that plaintiff’s counsel has suggested that a decision denying this amendment will mean a loss of any recourse to recover what is potentially hundreds of thousands of dollars in damages. I mention in passing the line of cases which, when previously considering special circumstances and limitation periods, found it important to consider the potential of a claim over against the client’s solicitor (Swiderski v. Broy Engineering Ltd., 1992 CanLII 7559 (ON SC), [1992] O.J. No. 2406 (Div. Ct.); Robertson v. O’Rourke, [1997] O.J. No. 3724 (Gen. Div.)).
[42] Despite my findings on this first issue, I will move forward to consider the other two I have identified.
2. Abuse of Process
[43] ABSA claims that Lucky Star’s attempt to resurrect claims struck by a consent order constitutes an abuse of process. If I agree then, of course, the amendment could not proceed.
[44] The court has inherent jurisdiction to intervene if its process is being used improperly, dishonestly or with an absence of good faith (Jaman Estate v. Hussein, [2005] M.J. No. 48 (Q.B.), at para. 28).
[45] It is apparent that there are many ways in which pleadings may amount to an abuse of process: National Trust Co. v. Furbacher, [1994] O.J. No. 2385 (Gen. Div.) (Furbacher). The pleadings may be vexatious, harassing or oppressive: Carnegie v. Rasmussen Starr Ruddy (1994), 1994 CanLII 7283 (ON SC), 19 O.R. (3d) 272 (Gen. Div.), at pp. 277-278.
[46] They may demonstrate a mere tactical move to put pressure on the other party to settle: C. Evans & Sons Ltd. v. Spritebrand Ltd., [1985] 2 All E.R. 415 (C.A.), at p. 424 or may grossly exaggerate damages: Shaw v. The Queen, 1980 CanLII 4173 (FC), [1980] 2 F.C. 608 (T.D.), at p. 620.
[47] In Furbacher, Farley J. found that claims against two former Premiers and the Lieutenant Governor of Ontario amounted to tactical harassment, a fishing expedition and, as a result, an abuse of process.
[48] There is an arguable claim for abuse of process here. The plaintiff seeks to re-introduce paragraphs that were struck on consent. The plaintiff did not appeal that order or attempt to set it aside under r. 59.06 or otherwise. The affidavit of the plaintiff’s representative is vague as to when he learned of the order striking.
[49] I find that while the process here was improper and exceedingly unwise, it does not extend to being an abuse of process.
3. Issue Estoppel
[50] In its motion before Justice Bondy in 2012, ABSA claimed that the allegations related to containers one through five were irrelevant and it sought an order striking the related paragraphs. It seems Lucky Star initially contested the motion but close to the date of the argument capitulated.
[51] Justice Bondy’s order struck out the paragraphs “without leave to amend” on consent.
[52] Is Lucky Star now estopped from arguing to reinsert those claims into the pleading? Has the issue already been determined by the court?
[53] For the doctrine of issue estoppel to apply, there must be a decision on the question rendered in a contentious matter: Van Deventer v. Van Deventer, [2001] B.C.J. No. 2262 (C.A.), at paras. 18-19. The decision must be final which means it must conclusively determine the issue between the parties: Heynen v. Frito-Lay Canada Ltd. (1997), 1997 CanLII 12338 (ON SC), 32 C.C.E.L. (2d) 183 (Gen. Div.), at p. 322. However, the decision need not determine the entire litigation. It need not be a decision after a full hearing as long as it was a “judicial” decision which may suggest a consent order could create issue estoppel: Danyluk v. Ainsworth Technologies Inc., 2001 SCC 44, [2001] S.C.J. No. 46, at paras. 44-51.
[54] I conclude that issue estoppel does not apply here. Justice Bondy struck the paragraphs without leave to amend. I conclude that this term simply meant he did not grant leave. It is arguable that it would not hinder another judge granting leave on appropriate grounds.
[55] Lucky Star has created a significantly different claim from the Second Fresh as Amended to the Third. It now sues for a particularized loss of profits as a result of the actions of ABSA. It alleges the loss of a lucrative contract. It pleads that ABSA’s treatment of containers one through five figure directly into those losses.
[56] If Lucky Star had simply tried to amend to reinstitute the original statement of claim, then issue estoppel might have application. In the argument before me, the doctrine does not apply.
Conclusion
[57] For the reasons set out above, Lucky Star’s motion for leave to amend its statement of claim to add claims for the shipment of containers one through five is dismissed. The relevant paragraphs of the proposed Third as Amended Statement of Claim must be deleted. If the parties are unable to agree on those paragraphs, I may be spoken to.
[58] I will receive written submissions as to costs delivered to the trial coordinator in Windsor within 30 days of the release of these reasons. The submissions are limited to five (5) typed pages excluding the bill of costs. If I do not receive any submissions in the timeframe set out above, there will be no order as to costs.
Original signed by Regional Senior Justice Bruce Thomas
Bruce Thomas
Regional Senior Justice
Released: September 8, 2017
CITATION: Lucky Star Developments Inc. v. ABSA Canada International, 2017 ONSC 4787
COURT FILE NO.: CV-12-18025
DATE: 20170908
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Lucky Star Developments Inc.
Plaintiff
– and –
ABSA Canada International
Defendant
REASONS on motion
Thomas R.S.J.
Released: September 8, 2017