Court File and Parties

Court File No.: CV-14-10812-00CL Date: 2018-10-12 Ontario Superior Court of Justice

Between: DAC Group (Holdings) Limited, Plaintiff/Responding Party – and – Fuego Digital Media Inc., ProtocollS Inc., Fuego Digital Media QSTP-LLC, Karl Gretton and Kevin Higgins, Defendants/Moving Parties

Counsel: Jeffrey Brown and Melissa Wright, for the Plaintiff Kevin Higgins and Karl Gretton, in Person, for themselves and the Corporate Defendants

Heard: July 27, 2018

L. A. Pattillo J.:

Introduction

[1] In October 2010 the plaintiff DAC Group (Holdings) Limited (“DAC”) commenced an arbitration against the defendant, Fuego Digital Media Inc. (“Fuego Canada”) and ProtocollS Inc. (“Protocol”) pursuant to an arbitration clause in an agreement claiming general damages of $10,000,000 for breach of confidence, breach of fiduciary duty, and breach of contract, and further an accounting of all profits they earned. DAC also sought various declarations and injunctions against both Fuego Canada and Protocol relating to its ownership of confidential information and software the defendants had developed for it and allegedly misappropriated (the “Arbitration”).

[2] By notice of action dated September 19, 2014 DAC commenced this action against Fuego Canada, Protocol, Fuego Digital Media QSTP-LLC (“Fuego Qatar”), Karl Gretton (“Gretton”), and Kevin Higgins (“Higgins”) claiming general damages of $10,000,000 for breach of confidence, oppression, breach of contract, and fraud, together with various declarations and injunctions similar to those sought in the Arbitration (the “Action”). DAC issued its statement of claim in the Action on October 7, 2014.

[3] The Action was effectively put on hold until the completion of the Arbitration which took place upon the issuance of the Final Award on July 31, 2017 and the Costs Award on September 29, 2017. DAC obtained the declarations and injunctions it sought. On May 9, 2018 this court dismissed Fuego Canada’s application to set aside the Final Award and stay the Costs Award, and recognized and granted enforcement of both the Final Award and the Costs Award as a judgment of the court.

[4] Fuego Canada, Fuego Qatar, Gretton, and Higgins (collectively the “Moving Parties”) now bring this motion pursuant to Rules 15 and 21 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, for the following relief:

a) An order permitting both Higgins and Gretton, rather than a lawyer, to represent Fuego Canada and Fuego Qatar respectively before the court in the Action;

b) An order dismissing the Action against them as statue barred;

c) An order dismissing DAC’s claims against them on the basis that they are res judicata; and

d) In the alternative, an order dismissing the Action in its entirety on the ground that it is otherwise frivolous, vexatious, and an abuse of process.

[5] In addition, DAC brings a cross-motion for an order to amend its claim in the Action to add Higgins’ wife, Patricia Ruth Higgins, as a party and assert a claim of fraudulent conveyance against Higgins and his wife relating to the transfer of his interest in the family home in Ottawa, Ontario on October 5, 2017. DAC also seeks a Certificate of Pending Litigation (“CPL”) to be filed against the Higgins’ residence. Higgins has consented to DAC’s cross-motion.

[6] At the outset of the hearing of the motion, and given that DAC did not oppose, I granted leave pursuant to r. 15.01(2) permitting Higgins to represent Fuego Canada in the Action and Gretton to represent Fuego Qatar in the Action.

Background

[7] In early 2005, DAC, which is in the business of providing “directional marketing” services to clients via both print and internet services, decided to develop a proprietary web application (the “DAC Web Application”) as part of its ongoing digital marketing strategies.

[8] As DAC was concerned that its own in-house resources did not have sufficient capacity to complete the project, it entered into discussions with Gretton concerning the provision of software development services. On May 2, 2005 DAC and Gretton, together with his company ProtocollS Inc. (“Protocol”), entered into a Confidentiality and Non-Competition Agreement (the “CNC Agreement”). Following further discussion, on July 22, 2005, DAC and Protocol entered into an agreement providing for the latter’s design, development, and implementation of the DAC Web Application (the “Master Agreement”).

[9] The Master Agreement provided, among other things, in paragraph 7.15, that “any dispute over any aspect of this Agreement … may be submitted by either Party to arbitration”. The clause further provided: “The determination arising out of the arbitration process shall be final and binding upon the Parties to the arbitration.”

[10] On November 1, 2007 Fuego Canada acquired Protocol’s technology. Protocol was subsequently dissolved on May 16, 2012.

[11] In early 2008 DAC approached Gretton about assisting it in the development of software for a new web application concept which became known as PAGEtorrent. The PAGEtorrent software was to be developed on top of an existing Content Management System owned by Fuego Canada (the “Fuego CMS”). The parties subsequently entered into two letter agreements, dated May 18, 2008 and January 12, 2009, dealing with the development of the PAGEtorrent software and which incorporated the terms of the Master Agreement (the “Letter Agreements”).

[12] In the spring of 2010 a dispute arose between DAC and Gretton over the ownership of the PAGEtorrent software and related proprietary information.

[13] On October 20, 2010 DAC commenced the Arbitration before a single arbitrator (the “Arbitrator”) in accordance with paragraph 7.15 of the Master Agreement.

[14] As noted at the outset, DAC’s statement of claim in the Arbitration claimed, among other things, damages in the amount of $10,000,000 for breach of confidence, breach of fiduciary duty, and breach of contract; various declarations confirming DAC’s ownership of Confidential Information, including the PAGEtorrent concept; interim and interlocutory injunctions restraining Fuego Canada and Protocol from using, disclosing or otherwise dealing with DAC’s confidential information and to remove the PAGEtorrent software from their systems except to solely provide support to DAC; and for an accounting by Fuego Canada and Protocol of all profits earned by them as a result of their breach of confidence and infringement of DAC’s intellectual property.

[15] DAC’s claim in the Arbitration was based on the allegations that Protocol (and its principal Gretton) and subsequently Fuego Canada utilized and sold DAC confidential information including the PAGEtorrent software which they were hired to develop solely for DAC and which belonged to DAC.

[16] Fuego Canada denied the allegations and filed a statement of defence. Subsequently it also commenced a counterclaim against DAC alleging that DAC had violated the license agreement with Fuego Canada by using Fuego Canada proprietary software in developing a replacement system for not just the software over which ownership was disputed, but for the broader Fuego Canada software platform licensed for use by DAC, of which the disputed software formed a small component (the “Counterclaim”).

[17] The Arbitration took place over a seven-year period, during which the Arbitrator made a number of rulings, both substantive and procedural, including granting an interlocutory injunction, holding that Fuego Canada and Protocol were proper parties to the Arbitration, and bifurcating the Arbitration into two phases: a contract issues phase and a technology issues phase. The contract issues phase determined the parties, and the scope and terms of the agreement between the parties. The technology issues phase determined the technical issues of the software ownership.

[18] The contract issues hearing took place from December 12, 2011 to December 16, 2011. The Arbitrator issued a final award on the contract issues on January 18, 2012 (the “Contract Issues Award”). The Contract Issues Award held, in part, that software “created by Fuego for DAC to integrate DAC data, third party software, Fuego CMS and hosting services required for the operation of PAGEtorrent, is DAC Software and is owned by DAC”. The Contract Issues Award required the parties to determine which portions of the PAGEtorrent system were part of the Fuego CMS and which portions were DAC software based on criteria set out in the Award.

[19] The parties subsequently hired software consultants who performed the analysis directed by the Arbitrator but they were unable to agree on the determination. Accordingly the technology issues hearing took place before the Arbitrator over five days in June 2017. A large part of the delay in proceeding arose because the parties engaged in settlement discussions which were ultimately unsuccessful.

[20] On July 31, 2017 the Arbitrator issued his Final Award – Technology and Remedies Issues (the “Final Award”). On September 29, 2017 the Arbitrator issued his Costs Award requiring Fuego Canada to pay DAC $1,532,978.54 forthwith.

[21] The Final Award granted, among other things, both declaratory and injunctive relief to DAC. It declared that DAC owned and had exclusive rights to the PAGEtorrent system; all Confidential Information and Materials (each defined), even if developed by the Respondents; as well as the DAC software and all intellectual property rights therein. It enjoined Fuego Canada and Protocol, “and all of their current, former and future directors, officers, agents, employees, contractors, subcontractors, servants, affiliates, joint ventures, successors, assigns, subsidiaries or Related Parties (including Higgins, Gretton and Fuego Qatar), and all those over whom they or any of them exercise control” from, among other things, disclosing, using, or developing the Confidential Information, the Materials, or the DAC software, or reproducing the DAC software, and requiring the Respondents to take all necessary steps within 60 days to permanently remove the Confidential Information, the Materials, and/or DAC software from their systems.

[22] On August 29, 2017 Fuego Canada commenced an application under the Arbitration Act, 1991, S.O. 1991, c. 17 (the “Act”) seeking to set aside the Final Award on the grounds of excess of jurisdiction, and breaches of procedural fairness and natural justice by the Arbitrator. The application also sought a stay of the Costs Award pending determination of the application. On May 9, 2018 Parfett J. dismissed the application and the court recognized and granted enforcement of both the Final Award and the Costs Award giving both awards “the full force and effect of law, as a judgment of this court.”

The Arbitrator’s August 22, 2014 Procedural Order

[23] In October 2013, more than a year and a half after the release of the Arbitrator’s Contract Issues Award, DAC asked the Arbitrator to hear a motion to add Gretton, Higgins, and Fuego Qatar as parties to the Arbitration. DAC sought to have them held jointly and severally liable for all findings and awards made against Fuego Canada and Protocol. The hearing did not proceed at the request of the parties due to settlement discussions.

[24] In July 2014 DAC initiated resumption of the Arbitration, including its request to add the parties. The Arbitrator subsequently received written submissions and convened conference calls during which the parties made oral submissions. On August 22, 2014 the Arbitrator issued a procedural order (the “Procedural Order”) denying DAC’s request to amend the pleadings to add Higgins, Gretton, and Fuego Qatar as parties.

[25] In the Procedural Order, the Arbitrator set out DAC’s basis for seeking to add the parties as follows:

In the materials submitted by DAC in support of its request to amend pleadings, DAC says Fuego Canada acted as agent for Mr. Higgins, Mr. Gretton, and Fuego Qatar in the development of the PAGEtorrent application. Alternatively, it says Fuego Canada acted as their alter ego and controlled the actions of Fuego Canada such that Fuego Canada had no independence of its own, and that they engaged in wrongful conduct, including the transfer of the PAGEtorrent software from Fuego Canada to Fuego Qatar. DAC also says they negotiated and performed the agreements with DAC in such a manner that, by their conduct, they agreed to be bound by the terms of the agreement with DAC, including the arbitration agreement.

[26] The Arbitrator went on to conclude that DAC’s claims against Higgins, Gretton, and Fuego Qatar, if proven, could fall within the scope of the arbitration agreement. In other words, the Arbitrator concluded that he had jurisdiction to add both the parties and the claims DAC wished to assert against them. However, based on the fact that since at least 2011, DAC had been aware of a relationship between Fuego Canada and Fuego Qatar and a direct or indirect relationship between Higgins and Gretton and both companies, the Arbitrator stated that if DAC wished to join the three parties, it should have done so at that time or immediately following the Contract Issues Award. In the result, the Arbitrator concluded that it would be prejudicial to Higgins, Gretton, and Fuego Qatar to be added as parties to the Arbitration at such a late date.

[27] On September 19, 2014 DAC commenced an application under the Act seeking to set aside the Procedural Order on the ground that the Arbitrator denied it natural justice by dealing with the issue of delay constituting prejudice without conducting a full hearing on the issue. In the alternative, DAC sought to stay the Arbitration in favour of the Action which DAC commenced on the same day as the application.

[28] For reasons released December 30, 2015 Mesbur J. dismissed DAC’s application on the ground that the court had no jurisdiction given it was a procedural order. In her reasons, Mesbur J. reviewed both the Arbitrator’s reasons and the evidence, including the procedure leading up to the Procedural Order, and concluded, among other things, that the Arbitrator made no error in his conclusions regarding delay and prejudice, and that there was no denial of natural justice as contemplated by s. 46(1) of the Act, or otherwise. In addition, Mesbur J. dismissed DAC’s request for a stay of the Arbitration on the ground that it was contrary to the general principle in the Act which allows an action to be stayed in the face of an arbitration and not vice-versa.

[29] DAC’s application for leave to appeal Mesbur J.’s decision was dismissed by the Court of Appeal on September 15, 2016.

DAC’s Waiver of its Claim for Damages in the Arbitration

[30] On February 23, 2017 DAC requested that the Arbitrator schedule the technology issues hearing in June 2017. On May 15, 2017 Fuego Canada sought leave to preserve its Counterclaim by amending its statement of defence to plead the defence of set-off. Fuego Canada sought this leave in response to the Arbitrator’s warning that he would strike the Counterclaim if Fuego Canada did not make a monetary deposit to fund its share of the Arbitrator’s services, which it was unable to do. In response, DAC offered to formally waive any potential claim to monetary damages in the Arbitration if the Counterclaim was dismissed.

[31] On May 18, 2017 the Arbitrator issued the following ruling:

In a letter dated May 15, 2017, Fuego requested that, if I decide to dispose of Fuego’s counterclaim as a matter of procedure and not on the merits of the counterclaim, Fuego be allowed to amend its statement of defence to add the defence of set off and to add the particulars of that defence to the amended statement of defence.

In response to that request, counsel for DAC stated that DAC has not put forward any evidence of monetary damages and did not intend to pursue a claim for monetary damages at the hearing.

DAC agreed that for the purposes of this arbitration it will formally waive any potential claim to monetary damages, if Fuego’s counterclaim is dismissed by this Tribunal.

DAC argues that set-off can only be used to reduce monetary damages. It cannot apply to any other form of remedies. Therefore, Fuego cannot make a claim for legal or equitable set off if DAC is not claiming monetary damages. I accept this statement of the applicable law is correct.

Furthermore, as the Tribunal has previously determined with respect to DAC’s application to amend its Statement of Claim in this arbitration, the Tribunal has the discretion under Rule 28 to allow or refuse to allow amendments to the Statement of Defence.

I will exercise that discretion and will not permit Fuego to amend its statement of defence, provided that DAC waives any claim for monetary damages.

[32] Accordingly, as a result of DAC’s waiver of its claim for monetary damages, Fuego Canada was not allowed to amend its statement of defence in the Arbitration to claim set-off and the Final Award provided, among other things, that the Counterclaim was dismissed, with prejudice.

DAC’s Claim in the Action

[33] As noted, DAC’s statement of claim in the Action was issued on October 7, 2014. The pleading is virtually identical to DAC’s statement of claim in the Arbitration apart from the addition of the following claims: fraud, oppression, and punitive damages; the personal liability of Gretton and Higgins based on the relationship between the defendant corporations and Higgins and Gretton; and the allegations concerning oppression.

[34] The statement of claim claims damages of $10,000,000 for breach of confidence, oppression, fraud, and breach of contract. It further seeks various declarations regarding DAC’s ownership of Confidential Information (broadly defined) and any related intellectual property rights, duties of confidentiality and the essential elements of an oppression action together with various interlocutory and permanent injunctions similar to the Arbitration claim. Further, it seeks an accounting of all profits earned as a result of the defendants’ oppression, fraud, breach of confidence, and infringement of its intellectual property rights. Finally, it seeks punitive and exemplary damages.

[35] The claim for Gretton and Higgins’ personal liability is based on allegations that they operated the defendant companies as a single common enterprise and were merely the companies’ alter egos. In the alternative, DAC pleads that Fuego Qatar, Gretton, and Higgins were the undisclosed principals to the agreements with DAC to develop DAC Technology and the PAGEtorrent Concept (statement of claim, paragraphs 95 to 99).

[36] DAC pleads its oppression claim in paragraphs 100 to 103 of the statement of claim. DAC relies on the actions of the defendant companies as set out in the claim, and pleads that they have effected a result and been carried on and conducted in a manner which is oppressive, unfairly prejudicial to, and unfairly disregards the interests of creditors, including the plaintiff (paragraphs 100 and 101). DAC further pleads that the defendant corporations’ directors exercised their powers in a manner that is oppressive, unfairly prejudicial to, and unfairly disregards the creditors’ interests including the plaintiff (paragraph 102). Finally, in paragraph 102, DAC pleads that Higgins and Gretton have personally benefited from the oppressive and unfair conduct.

[37] DAC amended its statement of claim in the Action by order dated October 4, 2017. In particular, it amended its claim for damages to split the $10,000,000 into a claim for $5,000,000 for breach of confidence and fraud against the defendants except Fuego Canada, and a claim for $5,000,000 for oppression against Fuego Canada, Gretton, and Higgins. Further, the claim excluded Fuego Canada from the injunctions claimed based on the Final Award. DAC also added pleadings concerning the various positions that Gretton and Higgins held in the defendant corporations and their affiliates.

[38] The principal amendments added paragraphs 70 and 71 in the section of the claim entitled “Unfair Competition and Attempted Misappropriation”. Paragraph 70 sets out further allegations that Gretton and Higgins carried out a “deliberate course of conduct to fraudulently misappropriate DAC’s intellectual property and confidential information”. In support, DAC pleads various actions by Gretton and Higgins in March and April 2010 which DAC pleads they undertook with the deliberate intent to misappropriate DAC’s Technology. DAC further pleads that Higgins and Gretton licensed, transferred, or sold DAC Technology. Paragraph 71 alleges that Higgins and Gretton in their personal capacity and as officers and directors of Fuego Canada and Fuego Qatar knowingly made false statements about DAC Technology and PAGEtorrent’s ownership to DAC with the intention that DAC would rely on the statements, and further, that DAC did rely on them and suffered damages including legal costs to defend and assert DAC’s ownership rights.

[39] The statement of claim amendments also pleaded events in the Arbitration following the final dismissal of DAC’s application to set aside the order of Mesbur J. These events included the waiver of its damage claims and the dismissal of Fuego Canada’s counterclaim; the technology issues hearing; the Final Award; and Fuego Canada’s application to set it aside.

[40] Finally, DAC amended its claim for damages to include all legal costs incurred in the Arbitration and in the Action “as a result of the Defendants’ fraudulent acts, false statements, and the misappropriation of the DAC Technology.”

The Legal Framework

[41] As noted at the outset, the Moving Parties rely on r. 21.01(1)(a) and (3)(d) to support their motion to strike DAC’s amended statement of claim. The relevant portions of r. 21.01 are as follows:

21.01 (1) A party may move before a judge,

a) for the determination, before trial, of a question of law raised by a pleading in an action where the determination of the question may dispose of all or part of the action, substantially shorten the trial or result in a substantial saving of costs; or

b) to strike out a pleading on the ground that it discloses no reasonable cause of action or defence,

and the judge may make an order or grant judgment accordingly.

(2) No evidence is admissible on a motion,

a) under clause 1(a), except with leave of a judge or on consent of the parties;

b) under clause 1(b).

(3) A defendant may move before a judge to have an action stayed or dismissed on the ground that,

d) the action is frivolous or vexatious or is otherwise an abuse of the process of the court,

and the judge may make an order or grant judgment accordingly.

[42] Res judicata encompasses the common law doctrines of cause of action estoppel, issue estoppel, and abuse of process: Toronto (City) v. C.U.P.E., Local 79, 2003 SCC 63, [2003] 3 S.C.R. 77. They seek to balance the finality of litigation against fairness to a particular litigant.

[43] Issue estoppel precludes relitigation of issues previously decided in court in another proceeding. To be invoked, three pre-conditions must be met: (1) the issue must be the same as the one decided in the prior decision; (2) the prior judicial decision must have been final; and (3) the parties to both proceedings must be the same, or their privies: CUPE, at para. 23.

[44] The doctrine of abuse of process, on the other hand, is based on the court’s inherent and residual discretion to prevent an abuse of its process. As noted by Arbour J. in CUPE at para. 35:

Judges have an inherent and residual discretion to prevent an abuse of the court's process. This concept of abuse of process was described at common law as proceedings "unfair to the point that they are contrary to the interest of justice" (R. v. Power, [1994] 1 S.C.R. 601, at p. 616), and as "oppressive treatment" (R. v. Conway, [1989] 1 S.C.R. 1659, at p. 1667). McLachlin J. (as she then was) expressed it this way in R. v. Scott, [1990] 3 S.C.R. 979, at p. 1007:

... abuse of process may be established where: (1) the proceedings are oppressive or vexatious; and, (2) violate the fundamental principles of justice underlying the community's sense of fair play and decency. The concepts of oppressiveness and vexatiousness underline the interest of the accused in a fair trial. But the doctrine evokes as well the public interest in a fair and just trial process and the proper administration of justice.

[45] Abuse of process has been applied by Canadian courts to preclude relitigation in circumstances where the strict requirements of issue estoppel are not met, but where allowing the litigation to proceed would nonetheless violate such principals as judicial economy, consistency, finality, and the integrity of the administration of justice: per Arbour J., CUPE, at para. 37. Although Arbour J. noted that the typical application of the doctrine of abuse of process in such circumstances was to avoid the requirement of privity or mutuality, it can also apply in respect of new issues which ought reasonably to have been raised in the prior proceeding. See: Erschbamer v. Walster, 2013 BCCA 76, 41 B.C.L.R. (5th) 160, at paras. 30-31.

[46] In CUPE, at para. 43, the Court noted that the primary application of the doctrine of abuse of process is the adjudicative functions of the courts. The focus is less on the interest of the parties and more on the integrity of judicial decision making as a branch of the administration of justice.

Position of the Parties

a. The Moving Parties

[47] The Moving Parties submit that the Action should be dismissed on the ground that it discloses no reasonable cause of action (r. 21.01(1)(b)). In that regard, they submit that the Action is statute barred based on expiry of the limitation period given the Arbitrator’s Procedural Award and Mesbur J.’s subsequent decision to uphold it. Further, in the event that evidence is required to support their position, the Moving Parties request leave to permit evidence pursuant to r. 21.01(2)(a). Finally, and in the alternative, the Moving Parties submit that their motion should be converted into a motion for summary judgment pursuant to r. 37.13(2)(a).

[48] The Moving Parties further submit, based on the doctrines of res judicata, and more particularly issue estoppel, that DAC’s claims for declaratory relief and injunctions in the Action have been decided in the Arbitration, and further that its claim for damages should not be permitted as DAC waived those claims in the Arbitration.

[49] In the alternative, the Moving Parties submit that having regard to the issues in the Arbitration and Procedural Order, the Action is an abuse of process in that it seeks to relitigate issues which could have and should have been decided in Arbitration.

b. DAC

[50] DAC submits that r. 21.01(1)(b) does not apply as it is not “plain and obvious” on the face of its amended statement of claim that the claims in the Action are statute barred.

[51] DAC further submits that issue estoppel does not apply to its claims for declaratory relief and injunctions against Higgins, Gretton, and Fuego Qatar as they were not parties to the Arbitration and therefore the Final Award does not bind them. Further, the amended claim excludes Fuego Canada from such relief. DAC further submits that its waiver of damages was limited to the Arbitration and applied to Fuego Canada and not Higgins, Gretton, and Fuego Qatar who were not parties to the Arbitration.

[52] DAC submits that its claims against Gretton and Higgins for fraud and deceitful acts are separate causes of action which were not before the Arbitrator or within his jurisdiction and which DAC submits it did not discover until the eve of the technology issues hearing in June 2017. Further, DAC submits its oppression claim versus Fuego Canada, Higgins, and Gretton is a distinct statutory cause of action which was not within the Arbitrator’s jurisdiction and was not raised in the Arbitration.

Analysis

i. No Reasonable Cause of Action

[53] As noted by DAC, in order to succeed on a r. 21.01(1) motion on the ground that the pleading discloses no reasonable cause of action, the moving party must establish that it is “plain and obvious” on the face of the pleading alone that the responding party has failed to plead a cause of action or defence. Rule 21.01(2)(b) provides that no evidence is permitted on such a motion.

[54] I agree with DAC that when its amended statement of claim is considered in its entirety, it is not plain and obvious on its face that its claims are statute barred. In advancing their argument that the Action was statute barred, the Moving Parties relied primarily on the Procedural Order and Mesbur J.’s subsequent decision upholding it.

[55] Although the pleading refers to DAC’s motion to join Higgins, Gretton, and Fuego Qatar as parties to the Arbitration; that it was dismissed; and that the subsequent application to set the Procedural Order aside was dismissed (paras. 94 to 96), I do not consider that either the Procedural Order or Mesbur J.’s decision establish that the limitation period expired for the claims. The Procedural Order dismissed DAC’s motion on the grounds that DAC’s delay in amending its claim to add the parties to the Arbitration was prejudicial to them. The Arbitrator did not address the limitation issue.

[56] Further, Mesbur J.’s decision was based on her finding that the Arbitrator’s decision was a procedural order which the court had no jurisdiction to set aside. Although she went on to address DAC’s other arguments “for the sake of completeness”, those findings, including her comments on the limitation issue, are obiter and accordingly not binding.

[57] Further, the issue of limitation period expiry is complicated by DAC’s pleading as to when it learned of the Moving Parties’ actions it complains of.

[58] It is clear that evidence is necessary to enable the court to decide the limitation issue. That said, I am not prepared to grant the Moving Parties leave to adduce evidence on the motion. The Moving Parties’ factums rely on both r. 21.01(1)(a) and r. 21.01(1)(b). While r. 21.01(2)(a) gives the court discretion to permit evidence, given the issue raised I do not consider it would be appropriate in this case. Since the limitation issue is not “plain and obvious” on the pleading, I believe that the issue is best dealt with on a summary judgment motion. Based on the Moving Parties’ submissions, I consider that their motion is based on r. 21.01(1)(b) – no reasonable cause of action. Rule 21.01(2)(b) expressly provides that no evidence is permitted on such a motion (and the court has no authority to grant leave).

[59] Finally, I do not consider that it is proper or appropriate to convert the Moving Parties’ pleading motion into a motion for judgment pursuant to r. 37.13(2)(a). The motion has proceeded as a pleadings motion. It would be unfair and prejudicial to DAC to convert it at this stage to a summary judgment motion. As I have already stated, if it is necessary to decide the limitation issue, it should be brought in a proper summary judgment motion when all of the evidence is before the court and the parties are able to make full argument.

ii. Issue Estoppel

[60] I also agree with DAC that because they were not parties to the Arbitration, issue estoppel does not apply to dismiss DAC’s claims against Higgins, Gretton, and Fuego Qatar in the Action. While I agree that the parties to DAC’s motion to add Higgins, Gretton, and Fuego Qatar are the same, the Procedural Order decided that those parties would not be added as parties to the Arbitration. As a result, Higgins, Gretton, and Fuego Qatar were never parties to the Arbitration. Accordingly, the precondition of mutuality cannot be met.

iii. Abuse of Process

[61] The test to strike out a claim pursuant to r. 21.01(3)(d) as an abuse of process is whether it is plain and obvious that the claim cannot succeed. Further, the ability to file evidence on the motion does not change its character, which is not to determine the merits but to decide whether the pleading should be struck as having no chance of success because it is an abuse of process. See: Baradaran v. Alexanian, 2016 ONCA 533, 3 C.P.C. (8th) 131, at paras. 15-16.

[62] While I am of the view, based on the material filed, that the Moving Parties have put forward a strong argument to support their position that the Action is in essence an attempt by DAC to litigate issues that could have or should have been raised in the Arbitration against them, based on the material filed the matter is not free from doubt at this stage.

[63] The facts pleaded to support DAC’s claims in the Action are virtually identical to those pleaded in the Arbitration notwithstanding that DAC has added claims for fraud and oppression together with an allegation of fraudulent misrepresentation. The question of whether those additional claims and particularly the claim for oppression, could have (and should have) been brought in the Arbitration requires a determination on the merits which is outside the scope of a r. 21.01(3)(d) motion.

[64] I am also of the view that the issue of whether the claims in the Action are statute barred as having been commenced outside the limitation period is a factor that should be considered when determining whether the Action constitutes an abuse of process.

Conclusion

[65] Accordingly, for the above reasons, the Moving Parties’ motions are dismissed, without prejudice to their future ability to raise the defences of expiry of the limitation period and abuse of process in the Action.

[66] DAC has been successful on the substantive portions of the motion and is accordingly entitled to its costs on a partial indemnity basis. DAC has provided a Costs Outline claiming partial indemnity costs of $21,415.32 including HST. Given the issues, the material filed, and the court time involved, I consider that amount to be excessive. In my view, a fair and reasonable partial indemnity fee in respect of both motions is $15,000.00 in total including disbursements and taxes, payable by the Moving Parties jointly and severally.

DAC’s Cross-motion

[67] As noted at the outset, DAC has brought a cross-motion to further amend its amended statement of claim in the Action to add Higgins’ wife, Patricia Ruth Higgins, as a party and assert a claim of fraudulent conveyance against Higgins and his wife relating to the transfer of his interest in the family home in Ottawa, Ontario on October 5, 2017. DAC also seeks an order permitting it to file a Certificate of Pending Litigation (“CPL”) against the Higgins’ residence. Both Higgins and his wife have consented to the motion.

[68] During the hearing of the motion, I raised concerns over whether a CPL could be granted in a fraudulent conveyance action before a plaintiff obtained judgment. As the motion was on consent, neither party had filed factums and authorities. Accordingly I ordered that each party should provide me with brief submissions on the issue and set time limits. I subsequently received and considered submissions from both parties.

[69] Although divided as to the proper test to be applied, the authorities are clear that a CPL can be granted in circumstances where a fraudulent conveyance is alleged before the plaintiff has obtained judgment. See: Vettese v. Fleming (1992), 8 C.P.C. (3d) 327 (Ont. C.J. Gen. Div.); Grefford v. Fielding (2004), 70 O.R. (3d) 371 (S.C.J.).

[70] Accordingly, based on the consent, I am satisfied that an order should issue in the form attached to the signed consent adding Mrs. Higgins as a party to the Action, amending the amended statement of claim in the Action to plead a fraudulent conveyance claim, and permitting the issuance of a CPL.

[71] As agreed, there are no costs on the cross-motion.

L. A. Pattillo J.

Released: October 12, 2018