COURT FILE NO.: 16-68262
DATE: 2018/06/21
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Alfa Hoteliers Inc., Plaintiff
AND:
Active Energy Inc., Respondent
BEFORE: Mr. Justice Calum MacLeod
COUNSEL: Eytan B. Rip, for the Plaintiff
David J. McGhee, for the Respondent
HEARD: June 14, 2018
Reasons for decision
[1] This is an action concerning the validity of a contract for gas supply. On June 14th, 2018 there were two motions before the court. While there was other relief requested, the first motion was a motion by the plaintiff to amend the pleadings. The second was a motion by the defendant to transfer the action to Durham Region.
[2] Pursuant to paragraphs 47 – 51 of the Consolidated Provincial Practice Direction, any motion to transfer an action to Central East Region is required to be brought in writing to the Regional Senior Justice in that region. Consequently, I declined to deal with the question of transfer. I did give leave to amend the pleadings and I did impose a timetable.
[3] The motion raises some interesting issues. Specifically, under what circumstances is a pleading amendment a new cause of action and is it sufficient to avoid a limitation defence to have brought the necessary motion or must the amended claim be issued before the expiry of the limitation period?
[4] These reasons attempt to address those questions. I have allowed the pleading amendment.
Background
[5] The contract at the heart of this proceeding is a document dated March 12th, 2014 which purports to be a contract for Active Energy to become the supplier of natural gas and electricity for the plaintiff’s hotel located in Ajax, Ontario (the “Hilton Ajax”). The document was apparently signed by Shah Alam, the hotel accountant and by Douglas Bloomfield, a consultant for the defendant.
[6] According to the plaintiff, the document in question was the result of an unscheduled sales call and a resulting meeting between the hotel general manager, the accountant and Mr. Bloomfield. The plaintiff asserts that it was never the intention of its employees to enter into a contract. They believed the defendant intended to provide them with a quote.
[7] Apparently the gas and electricity suppliers for the hotel were changed in April of 2014. According to the plaintiff, this was done without its knowledge and resulted in significantly higher utility charges over the course of the ensuing year. It is alleged that the plaintiff only became aware of the existence of the contract with the defendant in March of 2015, although it had detected the charges in December of 2014 and demanded to know the basis for them.
[8] The plaintiff states that it tried unsuccessfully to cancel the contract over the following year but was able to have the utility company cancel the supply in March of 2016. In April of 2016 the plaintiff launched this action seeking a declaration that the contract is void and seeking damages of $83,175.25 for the overpayment. In May of 2016, the defendant counterclaimed for breach of contract.
[9] The original pleading alleged that Mr. Alam’s signature on the document was a forgery. The amendment seeks to withdraw that allegation and instead to plead that the document was presented as a quote sheet, was partially blank and was never intended by the representative of the plaintiff to be a binding contract. The declaration is now sought on the basis of misrepresentation and deceit. One of the amendments would also add the specific allegation that the plaintiff “first saw the alleged contract on or about March 19, 2015”.
[10] Notice of the plaintiff’s intention to amend was provided as early as December of 2016 and a draft amended claim was provided to the defendant in February of 2017. The motion was ultimately launched in March of 2017. Because the defendant was evidently taking the position that the amendment raised a new cause of action and because of uncertainty over whether or not bringing the motion was sufficient to foreclose a limitation defence, the plaintiff also started a second action on March 17, 2017. Needless to say, the claim in the second action is identical to the proposed amended statement of claim. It should also be stated that the statement of defence to the original claim delivered in May of 2016 does not assert a limitation defence although it does plead “laches”.
[11] The defendant opposes the amendments because it argues they are material and substantial, brought over four years after the events in question, over two years after the action was commenced and are in effect both a new cause of action and an improperly pleaded assertion of fraud and misrepresentation. Further, the defendant complains the added allegation that the alleged contract was first seen on March 19, 2015 appears to be a pure fabrication to avoid a limitation defence.
Analysis and Ruling
[12] Rule 26.01 is the governing rule. It provides that “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”. Essentially, this gives a party the right to amend its pleading at any time unless it will create irremediable prejudice to the other party but in doing so, the party amending its pleading may be liable for costs or other consequences.[^1]
[13] One such form of prejudice is requiring the defendant to plead to an untenable claim. If the proposed amendment does not conform to the rules of pleading under Rule 25 it may be rejected.[^2] Similarly, leave should not be granted if the plaintiff is trying to add a completely new cause of action that is clearly statute barred.[^3]
[14] Whether a proposed pleading raises a new cause of action has been the subject of considerable judicial comment. The leading case in Ontario is 1100997 Ontario Ltd. v. North Elgin Centre Inc.. The Court of Appeal endorsed academic commentary to the effect that “a new cause of action is not asserted if the amendment pleads an alternative claim for relief out of the same facts previously pleaded and no new facts are relied upon, or amount simply to different legal conclusions drawn from the same set of facts, or simply provide particulars of an allegation already pled or additional facts upon which the original right of action is based.” In effect it is a new cause of action if the amendment adds facts that would be independently actionable and are fundamentally different from the original claim.[^4] A fundamentally different claim based on facts not originally pleaded will not be allowed after the expiry of the limitation period.
[15] For purposes of this motion, it is not necessary to enter into an extensive review of the law of pleading. Suffice to say that Ontario retains a system of “fact based pleading” developed in the great legal reforms of the late 19th century. Under our rules, a pleading is to contain a concise statement of the material facts upon which the party relies for the claim or defence but not the evidence by which those facts are to be proven. In addition, conclusions of law may be pleaded if the facts to support those conclusions have also been pleaded but the pleading of a conclusion of law is not required.[^5] Accordingly, while it may be good practice to do so, it is not technically necessary to name the cause of action or legal theory on which a plaintiff relies. Specific types of claim, such as fraud or negligence, require a higher degree of particularity. The primary objective of these requirements is to define the issues for adjudication clearly and concisely and to ensure the other party knows the case it has to meet.[^6]
[16] I am not persuaded that the proposed pleading seeks to introduce a new cause of action. The fundamental question at the heart of this litigation is and has always been whether or not there is a valid contract between the parties. It is reasonable to withdraw the allegation of forgery of Mr. Alam’s signature if it is now conceded that it is his signature on the document. The detailed allegation that the representatives of the plaintiff were misled as to the nature of the document and that portions of the document were filled in after it was signed are not a new cause of action. The fact that the contract document was described by the defendant as a “quote form” and the representatives of the plaintiff did not intend to sign a contract is already pleaded in paragraph 7 of the original claim.
[17] This is sufficient to dispose of the objection that the amendments are statute barred. In addition, in argument, counsel for the defendant conceded that the limitation period did not begin to run until the date on which the contract was repudiated in March of 2016. There is no limitation defence currently pleaded and of course there is a counterclaim arising from the termination of the contract in 2016. The validity of the contract would be a defence to the counterclaim in any event and the plaintiff’s claim for damages relates to so called overcharging from the date when the defendant became the supplier of its utilities until it was successful in ending that relationship.
[18] While the question of whether launching the motion would have brought the proposed amendments within the limitation period may therefore be moot, it is an important practice point. I am in agreement with the approach articulated by Corbett J. in Moss v. Joseph Brant Memorial Hospital[^7]. A new claim is “commenced” within the meaning of the Limitations Act, 2002 when a motion is commenced to amend the existing pleading to add the new claim or to add a new party. To hold otherwise would promote a multiplicity of proceedings because (as was done here) counsel would be forced to commence a second proceeding. That can be done instantly whereas the timing of a decision on whether or not to give leave to amend the pleading is not within the control of the plaintiff.
[19] In this case, the motion was launched on March 16th, 2017 and the plaintiff had always pleaded that it only became aware of the alleged contract in March of 2015. The amendment adds the specific allegation that the alleged contract document was seen for the first time “on or about March 19, 2015”. While this allegation remains to be proven, it is at least arguable that even if the amendments do include a new cause of action, the limitation period did not start to run until the date that the contract document was discovered.
[20] The other objection to the proposed pleading is an objection as to form. I am not in agreement with the assertion that insufficient particulars of the allegations of misrepresentation or fraud are provided. The pleading is quite specific in describing how Mr. Bloomfield allegedly misled the representatives of the plaintiff. This ruling does not limit the right of the defendants to make a demand for particulars if appropriate.
[21] The form of the proposed pleading is in technical compliance with Rule 26.03 (2) insofar as additions to the claim are clearly identified by underlining. The pleading does not comply with the standard practice of crossing out deletions. That is the preferred practice because the default rule requires that the amendments be made on the face of the original pleading. It is only if the amendments are so “extensive as to make the amended pleading difficult or inconvenient to read” that a new document entitled “amended statement of claim” is required.
[22] The intention of the rule is that, while amendments are generally to be granted, the record should clearly show what was originally pleaded and what was added or deleted by amendment. I will not require the plaintiff to prepare a new document. This objective will be satisfied if the trial record contains both the original pleading and the amended pleading and I so direct.
[23] There should also be a cost consequence of the amendment. The original pleading asserted that the signature was a forgery. This allegation has been withdrawn although there are new allegations that initialing of certain paragraphs and insertions are not genuine. Nevertheless, the defendant retained a handwriting expert because of the now withdrawn allegation and it should be reimbursed for the reasonable cost of the handwriting analysis.
[24] When the statement of claim is amended, the defendant has the option of delivering an amended statement of defence in accordance with Rule 26.05. The defendant is at liberty to plead a limitations defence if it views that as appropriate.
[25] Part of the relief sought by the defendant was dismissal for delay. The defendant concedes that it cannot meet the test under Rule 24 and the plaintiff is not in breach of a timetable pursuant to Rule 3. Dismissal is not appropriate. What is appropriate is the imposition of a timetable. At this point, some two years into the litigation, the parties have not completed pleadings, production or discovery. Counsel should be collaborating to devise a streamlined and cost effective plan to complete these steps and bring the matter to resolution. The amounts in issue are modest and the issues are not complex.
Conclusion & Order
[26] In conclusion, the plaintiff has leave to amend the statement of claim in the form contained at Schedule A to the notice of motion.
[27] The plaintiff is to discontinue the second action and may do so without costs.
[28] The plaintiff shall reimburse the defendant for the reasonable fees charged by any handwriting expert that had been retained by the defendant to respond to the forgery allegation.
[29] The amended pleading is to be issued and served by July 6th, 2018. The defendant shall have until July 20th to serve an amended defence and counterclaim or to advise that it is relying on its existing pleading. An amended defence may, if appropriate, plead a limitations defence. In any event, the plaintiff shall deliver a defence to counterclaim (which may include a reply) no later than August 3rd, 2018.
[30] Within 90 days of the close of pleadings, the parties shall exchange affidavits of documents. Although Rule 76 does not apply to this proceeding because of the claims for a declaration, injunction and punitive damages, the parties shall nevertheless prepare the affidavit of documents in compliance with Rule 76.03. That is they shall produce all of the Schedule A documents automatically and they shall include a Schedule D identifying all potential witnesses.
[31] Also within 90 days of the close of pleadings, the parties shall select a mediator and a date for the mediation. Mediation shall be completed no later than the end of December, 2018.
[32] The parties may proceed with discoveries either before or after the mediation but if the discoveries take place after the mediation they are to be completed no later than the end of March, 2019. Any undertakings given at the discoveries are to be answered within 60 days of the undertaking being given.
[33] The action is to be set down for trial by the end of November, 2019.
[34] A motion to transfer the file to Durham Region and to change the place of trial may be brought to the Regional Senior Justice of the Central East Region in compliance with the applicable Practice Direction but whether or not the file is transferred, subject to any contrary direction by the RSJ, the action shall remain subject to Rule 24.1 and the parties shall comply with the timetable established for the proceeding as set out herein.
Costs
[35] The plaintiff is entitled to costs of the motion. If counsel wish to make submissions on costs they may request an opportunity to make submissions by July 6th, 2018. If neither party asks to make such submissions then the costs are fixed at $1,500.00 on a partial indemnity scale.
[36] The amount to be reimbursed for the defendant’s handwriting expert may be offset against the costs award.
Mr. Justice Calum MacLeod
Released: June 21, 2018
COURT FILE NO.: 16-68262
DATE: 2018/06/21
ONTARIO
SUPERIOR COURT OF JUSTICE
RE: Alfa Hoteliers Inc., Plaintiff
AND:
Active Energy Inc., Respondent
BEFORE: Mr. Justice Calum MacLeod
COUNSEL: Eytan B. Rip, for the Plaintiff
David John McGhee, for the Respondent
HEARD: June 14, 2018
Reasons for decision
Mr. Justice Calum MacLeod
Released: June 21, 2018
[^1]: See King’s Gate Developments v. Colangelo, (1994) 1994 416 (ON CA), 17 O.R. (3d) 841 (C.A.) as an extreme example
[^2]: Plante v. Industrial Alliance Life Insurance Co., (2003) 274, 2003 64295 (ON SC), 66 O.R. (3d) 74 (Master)
[^3]: See Frohlick v. Pinkerton Canada Ltd., 2008 ONCA 3, (2008) 88 O.R. (3d) 401 (C.A.), Davis v. East Side Mario's Barrie, 2018 ONCA 410 (C.A.) and Moss v. Joseph Brant Memorial Hospital, (2004) 10 CPC (6th) 1 (Ont. SCJ)
[^4]: 2016 ONCA 848 (C.A.) See paras. 19 – 23.
[^5]: Rule 25.06
[^6]: These are not the only purposes of pleadings but they are the most critical
[^7]: Note 3 above