Court File and Parties

COURT FILE NO.: 15-55035 MOTION HEARD: 2018-06-20 SUPPLEMENTARY WRITTEN SUBMISSIONS FILED: 2018-08-27 REASONS RELEASED: 2018-09-10

SUPERIOR COURT OF JUSTICE – ONTARIO

BETWEEN:

MOHAWK FORD SALES (1996) LIMITED Plaintiff

- and-

MARC R. JEWISS, TRACEY J. JEWISS and 1635146 ONTARIO INC. Defendants

BEFORE: MASTER M.P. McGRAW

COUNSEL: H. Nieuwland E-mail: hnieuwland@somelaw.ca -for the Plaintiff, Mohawk Ford Sales (1996) Limited

J. Wigle E-mail: wiglej@simpsonwigle.com -for the Defendants

REASONS RELEASED: September 10, 2018

Reasons For Endorsement

I. Background

Introduction

[1] This is a motion by the Plaintiff Mohawk Ford Sales (1996) Limited (“MF”) for leave to amend its Statement of Claim issued October 30, 2015 (the “Original Claim”). MF seeks leave to plead new causes of action and make related amendments with respect to alleged misconduct of the Defendant, Marc Jewiss (“Marc”).

[2] The main issue on this motion whether MF acted with reasonable diligence in discovering its additional claims, whether there is a triable issue of fact or credibility with respect to when MF discovered or should have discovered these additional claims and whether there is a reasonable explanation as to why MF could not have discovered its additional claims by exercising reasonable diligence. The Defendants argue that the proposed amendments are barred by the operation of the 2-year limitations period under the Limitations Act (Ontario) because MF had all of the facts to discover the new causes of action by August 2012, and no later than April 20, 2015 when MF received a forensic accounting report (the “Report”) from Grant Thornton Limited (“GTL”). MF submits that it was not until it completed a subsequent internal review of its financial records on or about September 12, 2016 that it discovered the new claims against Marc.

The Parties, the Investigations and the Action

[3] MF is a car dealership located in Hamilton, Ontario which was founded by Lloyd Ferguson (“Lloyd”). In 1989, Lloyd hired Marc, a Chartered Accountant, as MF’s Controller. Lloyd and Marc developed a relationship described by both as almost father-son. In 1995, Marc was promoted to General Manager and Dealer Principal. The Defendant Tracey Jewiss (“Tracey”) is Marc’s wife and 1635146 Ontario Inc. (“163”) is a corporation controlled solely by Marc. Prior to August 2012, Marc owned 70% of MF’s outstanding common shares through 163 with an unconditional contract with Lloyd’s holding company to purchase the other 30%.

[4] By the early 2000s, Lloyd was in his 70s, approaching retirement and no longer actively involved in the day to day management of MF. By then, Marc was effectively running MF, with all 50-60 employees effectively reporting to him. This included Lloyd’s daughters, Stacey Ferguson-Carter (“Stacey”), Controller and Secretary-Treasurer and Kendall Ferguson (“Kendall”), Officer Manager.

[5] Lloyd intended to have Marc succeed him as owner of MF. However, Lloyd and Marc’s relationship began to deteriorate in August 2012 when Lloyd and Stacey confronted Marc with their suspicions that he had stolen a car from the dealership. Like much of the evidence in this action, the parties disagree on all facts except that after being confronted, Marc paid the dealership for the value of the car.

[6] It is MF’s evidence that Marc admitted to taking the car, reimbursed MF and reassured Lloyd and Stacey that it was the only thing he had taken. Marc denies that he stole the car, denies that he admitted doing so and claims that he only paid for the car to resolve the issue. Marc further alleges that the timing of these allegations coincided with Stacey and Kendall first learning about Lloyd’s succession plan to exclude them, and shortly after the end of his extra-marital affair with Stacey in the Spring of 2012.

[7] As a result of these allegations, Marc resigned as an officer and director of MF and executed an agreement selling 163’s 70% interest in MF to Lloyd’s holding company. Marc alleges that he only agreed to do so due to duress, continued harassment by Stacey and Kendall and personal and family issues. Marc remained employed by MF as General Manager, a tenure which was originally scheduled to terminate on December 31, 2012. However, Stacey and Lloyd requested that Marc continue in this capacity. He did so until January 17, 2015 when he sent a letter to MH advising that he had been constructively dismissed and did not return. Marc states that he did so as a result of ongoing verbal abuse from Stacey and Kendall which was causing him to suffer from serious medical conditions.

[8] Prior to his departure, Marc requested additional compensation. Therefore, Stacey sought advice from MF’s accountants, BDO Dunwoody Limited (“BDO”) with respect to the appropriate compensation for Marc’s position. In considering this request, BDO reviewed MF’s historical payments to Marc. BDO raised concerns about certain payments to Marc, therefore, on or about December 18, 2014, MF retained BDO to conduct a forensic accounting review of payments made to Marc between 2005 and 2012. MF had also retained Williams HR Law during this period, though it is not clear what actual involvement this Firm had in the issues which are material to this motion.

[9] MF terminated BDO’s engagement on February 3, 2015 due to a possible conflict of interest arising from BDO having provided accounting services to Marc and 163. On or about February 6, 2015, MF retained GTL to complete the review of payments to Marc.

[10] In or about February 2015, Stacey and Kendall made a complaint against Marc with the Hamilton Police Service (the “HPS”). To date, no charges have been laid. Marc has retained a criminal lawyer who has not been advised by the HPS if there is any ongoing investigation.

[11] GTL completed its review and delivered the Report to MF on April 20, 2015. As reflected in the Original Claim, the Report identifies alleged improper payments to Marc in the total amount of approximately $1,172,608.50 including: payments to a janitorial company which occasionally provided services to MF for the rental of a ski chalet by Marc and Tracey in Ellicottville, New York; loan re-payments from MF to Lloyd which were directed to a joint account held by Marc and Tracey or to 163 while accounting entries made it appear as if the amounts were repaid to Lloyd; the payment of unauthorized bonuses to Marc; and the direction of funds to 163 while steps were taken to make it appear as if the payments were made to Great Asia Enterprises, a former MF customer.

[12] On or about June 1, 2015, Lloyd filed a complaint against Marc with the Ontario Motor Vehicle Council (“OMVIC”). On or about June 4, 2015, MF filed a professional misconduct complaint against Marc with the Charter Professional Accountants of Ontario (the “CPAO”) which commenced an investigation. Both MF and Marc have provided additional documents and submissions and the investigation is ongoing.

[13] Based on the Report and the information and documentation filed with CPAO, MF had the Original Claim issued on October 30, 2015. In the Original Claim, MF claims $1,172,608 from the Defendants representing the total of the alleged improper payments to Marc, plus $500,000 in punitive damages. MF’s claims against Marc are for breach of contract, breach of fiduciary duty, conversion, conspiracy and unjust enrichment and against Tracey and 163 for conversion, conspiracy, unjust enrichment and knowing assistance.

[14] The Defendants delivered their Statement of Defence on December 24, 2015, denying the allegations and pleading limitations defences. MF delivered its Reply on February 8, 2016.

[15] GTL suggested that further reviews be conducted. Accordingly, in or about May or June 2015, Stacey and Kendall commenced an internal review of 25,000 cheques written by MF between 2003 and 2012 (the “Cheque Review”). Stacey and Kendall completed the Cheque Review in February 2016 and concluded that there was no evidence of impropriety.

[16] After completing the Cheque Review, Stacey and Kendall commenced an internal review of all transactions from 2003-2012 in 2 accounts for which Marc was solely responsible (the “Transaction Review”). Some of the thousands of transactions they reviewed required them to trace and review multiple entries. The Transaction Review was postponed from March 2016 until May 2016 after Lloyd underwent emergency surgery. From May 2016 until on or about September 12, 2016, Stacey and Kendall continued to care for Lloyd while conducting the Transaction Review after hours and on weekends. By its completion in September 2016, they concluded that the transactions demonstrated a pattern of “intentional misconduct” by Marc which forms the basis of MF’s additional claims and proposed amendments.

[17] In its proposed Amended Statement of Claim (the “Amended Claim”), MF claims additional damages of $242,231.64 against Marc for breach of contract and breach of fiduciary duty for alleged transactions resulting in improper payments made with MF funds to or on behalf of over 20 friends, relatives and MF customers (the “Additional Claims”). The Amended Claim includes allegations that Marc used MF’s funds and manipulated MF’s accounting system and the Ford Motor Company VRetail System to pay off accounts, create false sales and write off deficiencies, losses and lease end charges for the benefit of his friends and relatives (together with the “Additional Claims”, the “Proposed Amendments”).

II. The Law and Analysis

[18] Rule 26.01 states:

“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.”

[19] Sections 4 and 5 of the Limitations Act provide as follows:

“4. Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.

5. (1) A claim is discovered on the earlier of,

(a) the day on which the person with the claim first knew,

(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 the person against whom the claim is 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; and

(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a).

(2) A person with a claim shall be presumed to have known of the matters referred to in clause (1) (a) on the day the act or omission on which the claim is based took place, unless the contrary is proved.”

[20] Amendments should be presumptively approved unless they would result in prejudice that cannot be compensated by costs or an adjournment; they are shown to be scandalous, frivolous, vexatious or an abuse of the court's process; or they disclose no reasonable cause of action (Andersen Consulting v. Canada (Attorney General), 2001 CarswellOnt 3139 (C.A.) at para. 37; Schembri v. Way, 2012 ONCA 620 at paras. 25 and 44).

[21] Master MacLeod summarized the test for leave to amend pleadings under Rule 26.01 at paragraphs 19-22 of Plante v. Industrial Alliance Life Insurance Co., 2003 CarswellOnt 296:

“(a) The amendments must not result in irremediable prejudice. The onus of proving prejudice is on the party alleging it unless a limitation period has expired. In the latter case, the onus shifts and the party seeking the amendment must lead evidence to explain the delay and to displace the presumption of prejudice: [citations omitted]

(b) The amended pleading must be legally tenable. It is not necessary to tender evidence to support the claims nor is it necessary for the court to consider whether the amending party is able to prove its amended claim. The court must assume that the facts pleaded in the proposed amendment (unless patently ridiculous or incapable of proof) are true, and the only question is whether they disclose a cause of action. Amendments are to be granted unless the claim is clearly impossible of success. For this purpose amendments are to be read generously with allowance for deficiencies in drafting: [citations omitted].

(c) The proposed amendments must otherwise comply with the rules of pleading. For example, the proposed amendments must contain a "concise statement of material facts" relied on "but not the evidence by which those facts are to be proved" (rule 25.06(1)), the proposed amendments are not "scandalous, frivolous or vexatious" (rule 25.11(b)), the proposed amendments are not "an abuse of the process of the court" (rule 25.11(c)), the proposed amendments contain sufficient particulars -- for example, of fraud and misrepresentation (rule 25.06(8)).”

[22] Although prejudice is presumed where a claim is brought beyond the expiry of a limitation period, where there is an issue of fact or credibility relating to the discoverability of the proposed claim, the matter will usually be left to the trial judge to determine (Skrobacky (Litigation Guardian of) v. Frymer, 2014 ONSC 4544 at paras. 9-26; Oppendisano v. Vitullo Bros. Plumbing Co. Ltd., 2015 ONSC 4021).

[23] Further guidance was provided by Master Dash at paragraphs 35-36 of 1194388 Ontario Inc. v. Toronto Dominion Bank, 2014 ONSC 215 (cited in Skrobacky at para. 26):

“35 If the motions court determines on the evidence before it that the plaintiff actually knew of the facts making up the cause of the action, in this case that Darlene was not an authorized signing officer, more than two years before the motion to amend was brought, such that there is no triable issue as to that knowledge, the motion to amend must be denied.

36 If the issue is due diligence rather than actual knowledge, then the plaintiff has an evidentiary burden to explain what was done to ascertain the facts constituting the new cause of action and why those facts could not have been known earlier with due diligence. If the plaintiffs provide a reasonable explanation on proper evidence as to why the essential facts were not known or obtainable with due diligence within two years of moving to amend the statement of claim, such that the court determines there is a triable issue of fact or credibility on the discoverability allegations, the court will normally permit the amendments with leave to plead a limitations defence. It is only if the court is convinced on the evidence before it that the essential facts were actually known at the earlier date or that there is no issue of fact or credibility on discoverability then the amendments would be denied.”

[24] The Court of Appeal recently summarized the law with respect to discoverability and due diligence in Har Jo Management Services Canada Ltd. v. York (Regional Municipality), 2018 ONCA 469 at paragraph 42:

“A claim is discovered on the earlier of two dates: when the plaintiff actually knew of its claim, or when a reasonable person, with the plaintiff's abilities and in its circumstances, would have discovered the claim. If a plaintiff fails to exercise the diligence a reasonable person would, the claim is potentially discoverable earlier than the date the plaintiff had actual knowledge of the claim. Due diligence is therefore only relevant to the period of time preceding a plaintiff's actual knowledge of its claim, not the period after. Once a claim has been discovered, there is no ongoing duty on a plaintiff to further investigate the claim. Once the plaintiff has knowledge of its claim, then the limitation clock has begun running, and all the plaintiff is required to do is commence an action before the limitation period expires.”

[25] Section 5(2) of the Limitations Act creates a presumption that a person had actual knowledge of its claim on the day the acts or omissions took place under s. 5(1)(a), however this presumption does not apply to the inquiry under s.5(1)(b) which asks when the claim ought reasonably to have been discovered (Har Jo at para. 39; Fennell v. Deol, 2016 ONCA 249 at paras. 21 and 26). A plaintiff rebuts the presumption under s. 5(2) by demonstrating when it gained actual knowledge of its claim and does not need to show that it exercised due diligence in order to rebut this presumption because it is only relevant to the objective inquiry under s. 5(1)(b), not the inquiry into subjective knowledge under s. 5(1)(a) (Har Jo at para. 40; Fennell at paras. 23-24).

[26] The Court of Appeal has held although it is not sufficient that a plaintiff has a suspicion of a potential claim to conclude that the plaintiff has actual knowledge under s. 5(1)(a) of the Limitations Act, it may be sufficient to put a plaintiff on inquiry and trigger due diligence obligations in which the issue under s. 5(1)(b) where the test is whether a reasonable person with the abilities and in the circumstances ought reasonably to have discovered the claim (Crombie Property Holdings Ltd. v. McColl-Frontenac Inc., 2017 ONCA at para 42).

[27] In Colin v. Tan, 2016 ONSC 1187, cited by the Defendants, Perell J. held at paragraphs 58-59 and 65:

“58 ……. it is correct that at the pleadings amendment stage, the plaintiff will not require much evidence to establish that there is a triable issue that a proposed defendant could not have been identified with due diligence within the limitation period and that it is rare that the applicability of the discoverability principle based on due diligence will be determined on a motion to add a party. See: Fanshawe College of Applied Arts and Technology v. Sony Optiarc Inc., 2013 ONSC 1477; Wakelin v. Gourley (2005), 76 O.R. (3d) 272 (Master), aff'd [2006] O.J. No. 1442 (Div. Ct.); Tomescu v. Sarhan, 2013 ONSC 1358.

59 However, if the plaintiff does not show that there is an issue to be decided about whether he or she was unaware of the claim despite due diligence, and it is clear that the claim was discovered or ought to have been discovered, then the amendment will and should be refused. In other words, if there is no issue requiring a trial, and it is established that the limitation period defence is available to the defendant, the court will refuse the amendment. See: Wong v. Adler, supra; Pepper v. Zellers Inc., supra; Leighton v. Goodyear Canada Inc., [2008] O.J. No. 1870 (S.C.J.); Pooran v. 2029301 Ontario Ltd., [2008] O.J. No. 2812 (Master); Madden v. Holy Cross Catholic Secondary School, 2015 ONSC 1773; Wakelin v. Gourley, supra.

65 When a limitation period defence is raised, the onus is on the plaintiff to show that its claim is not statute-barred and that it behaved as a reasonable person in the same or similar circumstances using reasonable diligence in discovering the facts relating to the limitation issue: Durham (Regional Municipality) v. Oshawa (City), 2012 ONSC 5803 at paras. 35-41; Bolton Oak Inc. v. McColl-Frontenac Inc., 2011 ONSC 6657 at paras. 12-14; Bhaduria v. Persaud (1985), 40 O.R. (3d) 140 (Gen. Div.). That the onus is on the plaintiff accords with the presumption in s. 5(2) of the Act that a person with a claim shall be presumed to have discovered the claim on the day the act or omission on which the claim is based took place, unless the contrary is proved.”

[28] Where an amendment is sought after the expiration of a limitation period, prejudice is presumed and the party seeking the amendment must lead some evidence to explain the delay and rebut the presumption of prejudice (Skrobacky at parsa. 14; Robinnson Motorcycle Ltd. v. Fred Deeley Imports Ltd., [2009] O.J. No. 401 (S.C.J.) at para. 10; Deaville v. Boegeman, (1984) 48 O.R. 2(d) 725 (C.A.) at p. 5). The prejudice referred to under Rule 26.01 is prejudice to a party’s rights in prosecuting the action (Godoy v. 475920 Ontario Ltd. (2007), 52 C.P.C. (6th) 149).

[29] The Court of Appeal has provided the following guidance with respect to non-compensable prejudice:

i.) there must be a causal connection between the non-compensable prejudice and the amendment such that the prejudice must flow from the amendments and not somewhere else;

ii.) the non-compensable prejudice must be actual prejudice, ie. evidence that the responding party has lost an opportunity in the litigation that cannot be compensated as a consequence of the amendment and specific details must be provided;

iii.) non-compensable prejudice does not include prejudice resulting from the potential success of the plea or the fact that the amended plea may increase the length or complexity of the trial (1588444 Ontario Ltd. v. State Farm Fire and Casualty Co., 2017 ONCA 42, 2017 CarswellOnt 369 (C.A.) at para. 25; Andersen at paras. 34 and 37).

[30] On the return of this motion, the Defendants relied on Mancinelli v. Royal Bank of Canada, 2017 ONSC 7384 in which the court dismissed the plaintiffs’ motion to add 2 defendants to a class proceeding. Unbeknownst to counsel, one week prior to the return of the present motion, the Court of Appeal overturned the motion judge’s decision and provided guidance regarding discoverability in the context of pleadings amendment motions (Mancinelli v. Royal Bank of Canada, 2018 ONCA 544). By letter dated July 5, 2018, counsel advised me of the Court of Appeal’s decision and inquired into the filing of supplementary written submissions. Substantial submissions were filed by MF on August 8 and 27, 2018, and by the Defendants on August 20, 2018.

[31] In Mancinelli, the Court of Appeal provided the following guidance and clarification with respect to opposed pleadings motions on the basis of the apparent expiry of a limitation period:

i.) if a plaintiff does not raise any credibility issue or issue of fact about when its claim was discovered that would merit consideration on a summary judgment motion or a trial and there is no reasonable explanation on the evidence as to why the plaintiff could not have discovered the claim by exercising reasonable diligence, the motion judge may deny the motion (para. 23)

ii.) the evidentiary threshold to be met by a plaintiff is low and whether the plaintiff and its counsel acted with reasonable diligence must be considered in context (para. 24);

iii.) in considering whether the plaintiff has provided a reasonable explanation as to why they could not have identified the party (or cause of action), the explanation is to be given a generous, contextual reading (para. 27);

iv.) a plaintiff’s failure to take reasonable steps to investigate a claim is not a stand-alone or independent ground to find a claim out of time, rather, the reasonable steps a plaintiff ought to take is a relevant consideration in deciding when a claim is discoverable under s. 5(1)(b)(para. 30);

v.) where the issue is due diligence, the motion judge will not be in a position to dismiss the plaintiff’s motion in the absence of evidence that the plaintiff could have obtained the requisite information with due diligence, and by when the plaintiff could have obtained such information, such that there is no issue of credibility or fact warranting a trial or summary judgment motion (para. 31);

vi.) the same approach and the same low threshold is warranted where the motion is opposed based on the apparent expiry of any statutory limitation period subject to the discoverability principle (para. 25).

[32] Turning to a consideration of the relevant tests and factors, the first issue is whether MF had actual knowledge of the Additional Claims more than 2 years prior to bringing this motion on February 13, 2018. Section 5(2) of the Limitations Act creates a presumption that MF had actual knowledge of the Additional Claims on the day they occurred. MF can rebut this presumption by demonstrating when it had actual knowledge of the Additional Claims. Due diligence is not relevant to this analysis.

[33] The Defendants submit that given Stacey’s and Kendall’s positions at MF, Stacey as Controller, and particularly Kendall as the person who entered transactions, they had knowledge of the now impugned transactions at the same time as or shortly after they were entered into MF’s computer systems during the period 2003-2008. The Defendants also submit that MF had actual knowledge as of August 2012 when Lloyd and Stacey confronted Marc about the alleged vehicle theft. The Defendants assert that the alleged vehicle theft demonstrates that MF had suspicions and reasonable grounds to believe in August 2012 that Marc may have misappropriated funds from MF. Alternatively, the Defendants argue that MF had actual knowledge as of April 20, 2015 when GTL delivered the Report.

[34] In my view, MF has rebutted the presumption of actual knowledge at the time the alleged conduct took place. I reject the Defendants’ submissions that MF had actual knowledge of the Additional Claims at the time they occurred as a result of Stacey and Kendall performing their duties at MH, in particular, entering sales transactions into MF’s computer system. The record before me indicates that the write-offs and lease-end charges giving rise to the Additional Claims were likely entered after the transactions themselves were posted. Further, knowledge of the many individual transactions which may have been entered into MF’s computer system or otherwise dealt with in the course of their day to day duties cannot be conflated with knowledge of multiple transactions which are the subject of the Additional Claims. This is particularly true where multiple employees, including Marc himself, entered transactions into the system.

[35] Although the alleged car theft may have raised MF’s suspicions about Marc’s conduct, this is not sufficient to establish actual knowledge of the Additional Claims. I am also unable to conclude that MF had actual knowledge of the Additional Claims when it received the Report on April 20, 2015. The Report raised concerns with respect to payments made to Marc, while the Additional Claims and the Proposed Amendments relate to alleged improper payments made to or on behalf of Marc’s friends, relatives and MF customers. It was not until Stacey and Kendall completed the Cheque Review, which uncovered nothing, and the Transaction Review, that MF obtained actual knowledge of the write-offs and other transactions which comprise the Additional Claims.

[36] Having considered the evidence before me and the relevant factors, I conclude that MF did not have actual knowledge of the Additional Claims until on or about September 12, 2016 when Stacey and Kendall completed the Transaction Review.

[37] I now turn to whether MF acted with reasonable diligence and if there is a triable issue with respect to the discoverability of the Additional Claims. In particular, the court must determine if MF has raised any credibility issues or issues of fact about when the Additional Claims were discovered that would merit consideration on a summary judgment motion or a trial and whether there is a reasonable explanation on the evidence as to why MF could not have discovered the Additional Claims by exercising reasonable diligence. This requires the court to consider whether a reasonable party with MF’s abilities and in its circumstances ought reasonably to have discovered or known about the Additional Claims at any time prior to February 13, 2016, 2 years before it brought this motion.

[38] MF submits that it could not reasonably have discovered the Additional Claims giving rise to the Proposed Amendments until Stacey and Kendall completed the Transaction Review in September 2016. MF argues that given Marc’s position as General Manager, supervisor to Stacey and Kendall, with oversight and control for the accounting operations and access to the accounting system, it was not possible for MF to do so until after Marc departed in January 2015. MF further submits that it was reasonable for Kendall and Stacey to conduct the Cheque Review and the Transaction Review after receiving the Report in April 2015 given MF’s limited resources at the time.

[39] The Defendants submit that MF’s due diligence obligation was triggered when Lloyd and Stacey confronted Marc regarding the stolen vehicle in or about August 2012, or alternatively, at the latest, upon the delivery of the Report on April 20, 2015. Among other things, the Defendants submit that Stacey and Kendall had access to and were custodians of the relevant records at all material times from 2003-2012. The Defendants further submit that MF’s decision not to retain GTL or another accounting firm to complete a forensic accounting review is “fatal” to MF’s motion.

[40] Giving MF’s explanation a generous, contextual reading, I conclude that MF has met the low threshold of demonstrating that it acted with reasonable diligence and raised triable issues of credibility and fact regarding the discoverability of the Additional Claims that would merit consideration by a Judge on a summary judgment motion or at trial. MF has also provided a reasonable explanation for why it did not or was unable to discover the facts giving rise to the Additional Claims until on or about September 12, 2016 and that a party of MF’s abilities in the same circumstances could not have reasonably discovered the Additional Claims earlier.

[41] With respect to the confrontation over the alleged stolen vehicle in August 2012, in my view, it was reasonable, given the context of Lloyd and Marc’s father-son relationship and the absence of any previous issues, for MF to accept Marc’s explanation and make no further inquiries at that time. Further, as set out above, the parties’ evidence diverges substantially such that to the extent to which there are discoverability issues with respect to the August 2012 incident, MF has established that there are triable issues of fact and credibility.

[42] I also conclude that MF has provided a reasonable explanation with respect to the steps which it took after receiving the Report in April 2015. In my view, in the context and circumstances and considering MF’s abilities and party in similar circumstances, it was reasonable, after receiving GTL’s suggestion to conduct further investigations, to have Stacey and Kendall conduct the Cheque Review and the Transaction Review.

[43] I reject the Defendants’ assertion that MF’s decision not to retain an accountant to conduct a forensic accounting review was fatal or even unreasonable in the circumstances. Faced with what it understood was a loss of approximately $1.1 million loss but unsure what, if anything additional it might find, rather than incur additional professional fees, MF elected to have Stacey and Kendall conduct the Cheque Review and the Transaction Review. After reviewing approximately 25,000 cheques, Stacey and Kendall found no evidence of impropriety. They then reviewed thousands of transactions comprising the Transaction Review, which was interrupted by Lloyd’s failing health, subsequently discovering the write-offs, buy-outs and other impugned transactions which comprise the Additional Claims.

[44] In my view, in the context of a business similar to MF facing a significant loss as a result of the alleged impropriety of a long-time General Manager, it was reasonable at that time for the founder’s daughters, both long-time employees with sufficient skills and experience, to conduct internal reviews as MF did with the Cheque Review and the Transaction Review rather than incur the related professional fees of a full forensic accounting review. I also find that the time it took for Stacey and Kendall to complete these reviews was reasonable in the circumstances. Discovering the Additional Claims was a labour intensive process of discovery and considering all of the circumstances, I conclude that MF acted with reasonable diligence.

[45] I do not accept the Defendants’ contention that MF’s decision not to retain an accounting firm to conduct a forensic accounting review is, on its own, is “fatal” to MF’s motion. In my view, this is contrary to the Court of Appeal’s direction in Mancinelli that failure to take reasonable steps to investigate a claim is not a stand-alone or independent ground to find a claim out of time. Rather, what steps a plaintiff ought to have taken is one relevant consideration in determining when a claim is discoverable. As set out above, taking MF’s decision to proceed internally into consideration, I have concluded that MF acted reasonably in all of the circumstances.

[46] I also do not accept the Defendants’ submission that MF’s motion should fail because it has not established that Marc prevented MF from discovering the impugned transactions giving rise to the Additional Claims by destroying documents, hiding records or otherwise. As set out above, I conclude that MF has satisfied the low threshold set out in Mancinelli and other case law, and to the extent to which there are any discoverability issues regarding the facts related to the access which Marc, Stacey and Kendall had to relevant records and MF’s computer systems, their respective job descriptions and the credibility of each of them regarding these and many other facts, these are proper considerations for a Judge at trial or on a summary judgment motion.

[47] I further reject the Defendants’ submission that this court should reject Stacey’s and Kendall’s evidence generally on all issues on the basis that they are not credible witnesses given their conduct, including their “relentless harassment” of Marc. This submission reinforces my conclusion that there are numerous issues of credibility and fact which are not appropriate for a Master to determine on a pleadings motion, but rather are more properly within the role of a Judge on a summary judgment motion or at trial. These issues of fact and credibility are many, however, they include the materially different versions of the 2012 stolen vehicle confrontation; Marc’s allegations regarding the motivations and conduct of Stacey and Kendall; MF’s alleged financial limitations which influenced its decision not to retain accountants; and the respective roles, responsibilities and access to relevant records of each of Stacey, Kendall and Marc.

[48] Based on the evidence before me, applying a contextual analysis and providing a generous reading, I conclude that MF has met the low threshold of establishing that it acted with reasonable diligence and has raised triable issues of fact and credibility with respect to the discoverability of the Additional Claims which should be considered by a Judge on a summary judgment motion or at trial. I also conclude that MF has provided a reasonable explanation for why it was unable to discover the Additional Claims earlier which is consistent with a party in similar circumstances acting reasonably.

[49] Turning to a consideration of prejudice, the Proposed Amendments engage the passage of a limitations period and therefore, raise a presumption of actual prejudice. However, the Defendants have provided no evidence of actual prejudice, and there is otherwise no basis for me to conclude that the Defendants would suffer any actual prejudice such as the loss of documents, the unavailability of witnesses or the fading of witnesses’ memories. In fact, given the Report, the Cheque Review, the Transaction Review and other steps taken by MF, many of the relevant documents and records have been preserved. The Defendants submit that it “may” be difficult to locate witnesses who were the alleged beneficiaries of the Additional Claims, however, they have provided no evidence to support this contention including any efforts to locate these witnesses. Accordingly, I conclude that MF has rebutted the presumption or any actual or non-compensable prejudice.

[50] I further conclude that the Proposed Amendments are tenable, and there is no evidence before me that allowing the amendments would constitute an abuse of process or disrupt these proceedings or that the proposed amendments are vexatious, scandalous or frivolous.

[51] In my view, having considered all of the relevant factors and circumstances, I conclude that it is appropriate that MF be granted leave to amend its Statement of Claim with the Defendants granted leave to amend their Defence to plead additional and/or amended limitations defences.

III. Disposition

[52] Order to go granting MF leave to amend its Statement of Claim in the form of the Amended Claim filed with the Defendants granted leave to, if necessary, plead additional or amended limitations defences.

[53] If the parties are unable to agree on the costs of this motion, they may file written costs submissions not to exceed 3 pages (excluding costs outlines) with me through the Hamilton Trial Coordinator on or before October 31, 2018.

Released: September 10, 2018

Master M.P. McGraw