Court File and Parties

COURT FILE NO.: CV-14-517481 MOTION HEARD: 31 July 2018

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Jack Ganz Consulting Ltd., Plaintiff AND: Cara Operations Ltd., Defendant

BEFORE: Master Jolley

COUNSEL: Patricia Virc, Counsel for the Moving Party Plaintiff Ken Prehogan and Hayley Peglar, Counsel for the Responding Party Defendant

HEARD: 31 July 2018

Reasons for Decision

[1] The plaintiff commenced this action seeking damages of $2,000,000 as a result of the defendant’s termination of its consulting agreement with the plaintiff. The action is presently framed in contract. The plaintiff wishes to amend the claim to plead, in the alternative, breach of the defendant’s obligation to give the plaintiff reasonable notice of the termination of the consulting agreement. The plaintiff does not allege any new facts in support of the alternative relief.

[2] The defendant takes the position that this proposed amendment raises a new cause of action which is statute barred. Alternatively, it argues that there are insufficient particulars provided to meet the pleading threshold and leave should be denied on that basis.

Does the proposed amendment raise a new cause of action?

[3] Rule 26.01 of the Rules of Civil Procedure 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. The expiry of a limitation period gives rise to a presumption of prejudice. (Frohlick v. Pinkerton Canada Ltd., 2008 ONCA 3 at paragraph 17).

[4] The plaintiff takes the position that the motion falls squarely within A1 Pressure Sensitive Products Inc. v. Bostik, Inc., 2013 ONSC 4734. In that case the plaintiff sued for breach of contract and breach of warranty and fitness related to a product it had purchased from the defendant. It sought leave to amend the claim to include claims of negligence and negligent misrepresentation. The motion was dismissed at first instance on the basis that the amendments pleaded new causes of action that were statute barred. The plaintiff succeeded on appeal. The Divisional Court permitted the amendment, finding that it was not a new material fact or case of action, but a new theory of liability. The amendment related to the remedy sought upon facts already pleaded (Canadian Industries Ltd. v. Canadian National Railway Co., [1941] S.C.R. 591).

[5] The use of a factually-oriented approach to determining whether a new cause of action has been pleaded was advanced by the court in Sweda Farms Ltd. v. Ontario Egg Producers, 2011 ONSC 6146 and endorsed by the Divisional Court in Farmers Oil and Gas Inc. v. Ontario (Ministry of Natural Resources), 2015 ONSC 6359. In Sweda, the court stated: “the defendants’ basic entitlement is to have notice of the factual matrix out of which the claim for relief arises.”

[6] As summarized by Nordheimer, J. in Farmers Oil at paragraph 22:

… the distinction between the authorities relied upon by the appellant, and those relied upon by the respondent, turns on whether the proposed amendments do, or do not, arise out of the same facts, or the factual matrix, that was pleaded in the original statement of claim. If they do, then the amendments should be permitted. If they do not, and the limitation period has expired, then the amendments should be refused.

[7] Here, the genesis of both damages theories is the defendant’s alleged wrongful termination of the plaintiff’s services. The amendment is not fundamentally different from the claims already pleaded. The plaintiff relies on the same facts for its claim (the defendant wrongly terminated the relationship with the plaintiff as a result of which the plaintiff suffered damages) but seeks to be able to argue an alternative theory of damages based on those facts. It is “part and parcel”, to further quote Nordheimer, J. in Farmers Oil at paragraph 23, of the dealings between the plaintiff and the defendant that gave rise to this action. I find that this proposed amendment is not a new cause of action but is simply an alternative form of relief based on the facts already pleaded.

Are there sufficient particulars pleaded?

[8] A proposed pleading should be read generously and should only be struck when it is plain and obvious and beyond doubt that the claim will not succeed (A1 Pressure Sensitive Products Inc., supra at paragraph 20). Read generously, it is not plain and obvious that the proposed amended claim would be struck for failing to disclose sufficient material facts to support a claim for damages on the basis of reasonable notice.

[9] While the plaintiff has not used the words “dependent contractor” in its statement of claim, it has pleaded the material facts in support of that legal conclusion, i.e. the plaintiff had a significant level of responsibility and a close working relationship with the defendant (speaking to the degree of reliance/closeness of the relationship), the project was of a long term nature (speaking to the duration/permanence of the relationship), the plaintiff provided at least 180 hours of service per month (speaking to the degree of exclusivity) and the consultant of the plaintiff was treated in a manner similar to other management level employees of the defendant in terms of holidays, stock options and hours of service (for identification of relevant factors, see McKee v. Reid’s Heritage Homes Ltd., 2009 ONCA 916). None of the factors are conclusive alone and not every factor need be present in order to classify a relationship as one that requires notice to terminate. The fact that the agreement between the parties describes the plaintiff as an independent contractor is a factor to be considered but may not be determinative of the relationship (Marbry Distributors Ltd. v. Avrecan International Inc., 1999 BCCA 172 at paragraphs 10 and 38).

Conclusion on the motion to amend

[10] The plaintiff is granted leave to amend its statement of claim as set out at Schedule “A” to its notice of motion on the following terms which I find are just in the circumstances.

[11] The defendant may file an amended statement of defence within 30 days of receipt of the amended statement of claim. This decision is not to be taken as a final determination on the limitation period issue and the defendant may plead the limitation period as part of any amended statement of defence.

[12] The defendant shall be entitled to examine the plaintiff for discovery on the amendment.

[13] The plaintiff was successful in obtaining the discretionary relief it requested. However, this will now cause the defendant to incur the expense of amending its statement of defence and conducting a further examination for discovery in relation to the amendment. I order the plaintiff to pay the defendant the sum of $5,000 as part compensation for these additional steps within 30 days of today’s decision.

Costs of the defendant’s cross motion

[14] The defendant brought a cross motion to dismiss the plaintiff’s action for failure to comply with a costs order and for an order to strike certain material relied on by the plaintiff on this motion.

[15] For oral reasons given, the motion to strike the evidence of Mr. Ganz given on his examination for discovery was granted.

[16] On the issue of the motion to dismiss the action, on 15 June 2018 the plaintiff was ordered to pay the defendant its costs of a late adjournment request in the amount of $20,000 within 30 days. On 17 July 2018, the day after the costs deadline had expired, counsel for the defendant wrote to counsel for the plaintiff advising that if he did not receive the funds by certified cheque or wire transfer that day, he would bring an urgent motion to dismiss the action. That same day plaintiff’s counsel advised that he would be making arrangements for payment and requested the defendant’s wire transfer details, which defendant’s counsel provided that day, along with a statement that he expected payment that day.

[17] On 19 July 2018 plaintiff’s counsel responded that he would be in funds for payment of the costs award later that day and that his law clerk would make arrangements for payment by wire transfer. In response, counsel for the defendant advised that she had already prepared the cross motion materials and later that same day this cross motion to strike the plaintiff’s action was served. The plaintiff paid the costs on 20 July 2018 and the defendant sought costs of its cross motion on a substantial indemnity scale.

[18] This was not a case of a party’s chronic disregard for court orders. Nor was there evidence of a real concern that the funds would not be wired. While the defendant was evidently frustrated because the plaintiff’s last minute adjournment of the defendant’s summary judgment motion was granted and may have felt justified in bringing the motion to strike, it would not be appropriate to order costs in these circumstances, other than $1,000 for that portion of the motion that resulted in certain of the plaintiff’s motion materials being struck.

Master Jolley Date: 14 August 2018