Smith v. GCAT Group Inc., 2017 ONSC 7542

Smith v GCAT Group Inc., 2017 ONSC 7542

CITATION: Smith v GCAT Group Inc., 2017 ONSC 7542

COURT FILE NO.: CV-12-469769

DATE: 20171220

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

HENRY SMITH AND SUSYN SMITH

Plaintiffs/Respondents

– and –

GCAT GROUP INC., DANIAL HADIZADEH AND AKBAR HADIZADEH

Defendants/Appellants

Paul H. Starkman, for the Plaintiffs/Respondents

Pavic Masic, for the Defendants/Appellants

HEARD: December 15, 2017

ENDORSEMENT

DIAMOND J.:

1The defendants appeal the Order dated September 8, 2017 of Master Jolley wherein she, inter alia, granted the plaintiffs leave to amend their Statement of Claim to seek damages from the defendants for an alleged failure to comply with Minutes of Settlement entered into by the parties.

2A brief recitation of the salient facts is necessary for the disposition of this appeal:

• When this action was originally commenced in December 2012, the plaintiffs sought damages in the amount of $100,000.00 arising from the defendants’ alleged failure to honour a construction contract. Specifically, the original Statement of Claim alleged that the defendants failed to supply certain limestone materials, and failed to complete construction of certain walls, patios, and related items on the plaintiffs’ property. The claim also alleged that the limestone provided by the defendants was defective and not in accordance with the original samples provided.

• Pursuant to Minutes of Settlement dated October 24, 2014, the parties settled this action. The defendants agreed to replace certain limestone previously supplied to the plaintiffs with new Italian, white limestone (the “new stone”). Samples of the new stone were to be supplied to the plaintiffs for testing prior to full delivery and installation.

• The installation of the new stone was to take place on or before December 31, 2014.

• The defendants delivered the required samples prior to the Minutes of Settlement being executed. The samples were approved by the plaintiffs.

• The new stone was delivered to the plaintiffs’ property during the week of December 1, 2014. There is a dispute in the record as to whether “some but not all” of the new stone was delivered at that time.

• The defendants did not complete the installation work by the agreed upon deadline of December 31, 2014.

• By letter dated January 6, 2015, counsel for the plaintiffs advised counsel for the defendants of the defendants’ breach of the Minutes of Settlement, and requested that the defendants cure their default immediately.

• The defendants re-attended the plaintiffs’ property on several subsequent occasions. By letter dated November 25, 2015, counsel for the defendants (a) advised counsel for the plaintiffs that, in the defendants’ opinion, “all remedial work specified in the Minutes of Settlement had been completed”, and (b) requested that the plaintiffs execute a mutual release and consent to an Order dismissing this proceeding.

• By letter dated January 12, 2016, counsel for the plaintiffs disagreed with the positions taken by the defendants, and noted that the defendants had recently failed to appear anew at the plaintiffs’ property to “review further necessary affairs”.

• The plaintiffs arranged for pictures of alleged defects to be taken at the property in or around August 2016.

• In the fall of 2016, counsel for the plaintiffs advised counsel for the defendants of the plaintiffs’ intention to proceed with a motion for summary judgment, but that motion was never ultimately scheduled.

• In late December 2016, the plaintiffs retained RBS Consulting Engineers (“RBS”) for the purpose of collecting samples of the new stone and conducting a chemical analysis. As a result of that chemical analysis, the plaintiffs say that they discovered sometime in the spring of 2017 that the new stone was not the same as the sample stone they had previously approved.

• By Notice of Motion dated May 18, 2017, the plaintiffs sought leave to amend their Statement of Claim to seek, inter alia, damages arising from the defendants’ breach of the Minutes of Settlement and decision to substitute the new stone with inferior quality product.

3The defendants resisted the plaintiffs’ motion on the grounds that the amendments constituted new causes of action which ran contrary to the provisions of the Limitations Act 2002 S.O. 2002 C..24 (“the Act”). In granting the plaintiff’ leave to amend their Statement of Claim, Master Jolley found that the amendments were not barred by the reason of the Act. She rejected the defendants’ argument that the limitation period began to run (a) by December 5, 2014 for the failure to deliver the new stone, and (b) by December 31, 2014 for the failure to complete the installation in accordance with the Minutes of Settlement. As held by Master Jolley, “while it is possible that the plaintiffs should have been suspicious of the defendants and should have been on guard against being cheated, it is equally possible that the plaintiffs entered in the Settlement Agreement in good faith and expected that the defendants were doing so as well.”

4The defendants appeal Master Jolley’s decision on the basis that the limitation periods for the plaintiffs’ causes of action expired at the latest by December 31, 2016, being two years after the deadline by which the installation work for the new stone was to be completed. The defendants argue that, under the Act, the plaintiffs are “presumed to have known of the matters at issue on the day the act or omission on which the claim is based unless the contrary is approved.”

5A Master’s decision is entitled to a high degree of deference. As held in Zeitoun v. Economical Insurance Group 2008 CanLII 20996 (ON SCDC), [2008] O.J. No. 1771 (Div. Ct.), for issues of fact or mixed fact and law, the standard of review is whether there is a palpable and overriding error.

6Pursuant to section 5(1)(a) of the Act, a claim is discovered on the earlier of the day upon which a person with the claim first knew, or a reasonable person with the abilities and in the circumstances of that person first ought to have known,

(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 a person against whom the claim was 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.

7Section 5(2) of the Act and the jurisprudence developed thereunder is clear that a person with a claim shall be presumed to have known of the matters referred to above on the day the act or omission upon which the claim is based took place unless the contrary is proved. This is a presumption that can be rebutted by a plaintiff with necessary evidence.

8As the Court of Appeal for Ontario held in Miaskowski v. Persaud 2015 ONCA 758, a plaintiff is presumed to have discovered the material facts upon which his/her claim against a defendant is based on the day the accident took place. There is an obligation upon a plaintiff to act with due diligence in determining if he/she has a claim. No limitation period will be tolled while a plaintiff sits idle and takes no steps to investigate any of the matters referred to in section 5(1)(a) of the Act.

9A plaintiff is not required to possess a comprehensive understanding of his/her potential claim in order for the limitation period to commence. As held by the Court of Appeal for Ontario in Lawless v. Anderson 2011 ONCA 102, “the question to be posed is whether the prospective plaintiff knows enough facts on which to base an allegation of negligence against the defendant”.

10Discoverability is thus a fact-based analysis. The discovery of a claim does not depend upon a plaintiff’s knowledge that his/her claim is likely to succeed, or awareness of the totality of a defendant’s wrongdoing. Knowledge of the material facts, and not the elements of a cause of action, will inform the Court’s assessment of the commencement of a limitation period. A plaintiff must show that he/she was both not subjectively aware of the factors set out in section 5(1)(a) of the Act, and that a reasonable person “with the abilities and in the circumstances of the person with the claim” would also not have been aware of these factors. In other words, the plaintiff bears the onus of leading evidence to displace both the objective and subjective components of the tests set out in section 5(1)(a) of the Act.

11In assessing the presence of any prejudice in the face of a motion to amend, the Court must consider whether proposed amendments advance a new cause of action which may be barred by the Act. The amendments in the plaintiffs’ Amended Statement of Claim clearly amount to new causes of action. The issue is whether, on the record before Master Jolley, those new causes of action were issued more than two years after they arose in law.

12The defendants summarize the new causes of action as follows: (a) a claim for damages arising out of the defendants’ wrongfully substituting the approved new stone with an inferior product, and (b) a claim for damages based upon the defendants’ breach of the Minutes of Settlement by failing to complete the installation work by December 31, 2014.

13Dealing with the first cause of action, the gist of the defendants’ position is that the plaintiffs were aware of all material facts to support that cause of action by early January 2015, and even though they allowed the defendants the opportunity to cure their breach of the Minutes of Settlement, they did so “at their peril” as the limitation period continued to run. In my view, the defendants’ argument ignores the principles set out by the Court of Appeal for Ontario in 407 ETR Concession Co. v. Day 2016 ONCA 709.

14In 407 ETR, Justice Laskin held that the purpose of section 5(1)(a)(iv) of the Act includes a determination of whether the added element of “appropriate means” can have the effect of postponing the start date of the limitation period beyond the date when the plaintiff knows he/she has incurred a loss due to a defendant’s actions. On the record before Master Jolley, in the face of being advised of their breach of Minutes of Settlement, the defendants chose to try and cure that breach by asking the plaintiffs for the opportunity to re-attend the property and carry out the necessary remedial work. It was not until late November 2015 that the defendants took the position that they had completed all that was necessary to cure their breach of the Minutes of Settlement.

15As held by the Court of Appeal for Ontario in Presidential MSH Corporation v. Marr Foster & Co. LLP 2017 ONCA 325:

”Resort to legal action may be ‘inappropriate’ in cases where the plaintiff is relying on the superior knowledge and expertise of the defendant, which often, although not exclusively, occurs in a professional relationship. Conversely, the mere existence of such a relationship may not be enough to render legal proceedings inappropriate, particularly where the defendant, to the knowledge of the plaintiff, is not engaged in good faith efforts to right the wrong it caused. The defendant’s ameliorative efforts and the plaintiff’s reasonable reliance on such efforts to remedy its loss are what may render the proceeding premature.”

16This is arguably what happened in this case, and at the pleadings stage I am not prepared to conclude that the first cause of action is barred by the provisions of the Act.

17Dealing with the second cause of action, the defendants argue that the plaintiffs led no evidence before Master Jolley as to any observations of alleged defects in the new stone which ultimately (and the defendants say “too late”) led them to retain RBS to conduct a chemical analysis. The defendants further argue that such a lack of evidence, together with the plaintiffs’ threats of litigation from January 2015 onward, leads to an “inescapable inference” that the defects were observed well before the plaintiffs’ expert was retained.

18In my view, the defendants’ argument goes too far. The plaintiffs’ main concern in early 2015 was to ensure that the work was completed with the new stone which they had approved. On the record before Master Jolley, I do not find the plaintiffs to have possessed knowledge of the material facts to support this cause of action as of the date of the delivery of the new stone. The defendants argue that the plaintiffs had an opportunity to test the product once they received the samples, and the plaintiffs ought to have done so given the nature of their allegations in the original Statement of Claim. To give effect to this argument would be tantamount to allowing the defendants to rely on their own alleged breaches and place an onus upon the plaintiffs to suspect that the defendants were not being honest or acting in good faith. While there could have been grounds for the plaintiffs to be suspicious of the defendants, in my view that does not necessarily trigger the limitation period on the record before Master Jolley.

19In Rausch v. Pickering (City) 2013 ONCA 740, the Court of Appeal held that “a disposition that allows amendments that raise a cause of action the tenability of which is in dispute and leaves the door open to a subsequent Rule 21 challenge of the amendments is a disposition that is internally contradictory and legally not available.” In my view, the defendants’ reliance upon this proposition goes too far. I am to presume all of the facts in the Amended Statement of Claim are true, and since the defendants insisted upon pointing me to the evidence, or lack thereof, in the record before Master Jolley (something which is impermissible on a Rule 21 motion), what the defendants were really arguing was that the amendments would not survive a Rule 20 motion for summary judgment. That may very well prove to be true, and the plaintiffs are free to pursue such a motion should they see fit, but such a consideration is not relevant at the pleadings stage.

20I therefore do not find Master Jolley to have made any palpable or overriding error in granting the plaintiffs leave to amend their Statement of Claim, and for these reasons the defendants’ appeal is dismissed.

21As agreed by the parties at the conclusion of the hearing, the successful parties were to be awarded costs of this appeal in the all-inclusive amount of $5,000.00. I therefore order the defendants to pay the plaintiffs their costs of the appeal in the amount of $5,000.00 forthwith.

Diamond J.