Court File and Parties

COURT FILE NO.: CV-16-00550104 DATE: 20181005 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

ONTARIO PROFESSIONAL FIRE FIGHTER’S ASSOCIATION Plaintiff – and – PAUL ATKINSON, COLIN GRIEVE, PROFESSIONAL FIREFIGHTERS ADVOCATES INC., SHERWIN H. SHAPIRO, SHAPIRO LAWYERS PROFESSIONAL CORPORATION, FRANCES FURMANOV and FRANCES FURMANOV PARALEGAL SERVICES Defendants

A N D B E T W E E N

PAUL ATKINSON, COLIN GRIEVE and PROFESSIONAL FIREFIGHTERS ADVOCATES INC. Plaintiffs by Counterclaim – and – ONTARIO PROFESSIONAL FIRE FIGHTER’S ASSOCIATION and CARMEN SANTORO Defendants to the Counterclaim

Counsel: Rahool Agarwal, Andrew McCoomb for the Plaintiff Sandra L. Secord for the Defendant, Sherwin H. Shapiro

HEARD: September 27, 2018

DIAMOND J. :

Endorsement

Overview

[1] In my Reasons for Decision released on March 5, 2018 (“Reasons”), I struck out all the causes of action in the plaintiff’s Statement of Claim (“Claim”) against the defendant Sherwin H. Shapiro (“Shapiro”). Two specific claims against Shapiro for false misrepresentation and breach of fiduciary duty were struck out without leave to amend. I granted the plaintiff leave to amend the balance of the causes of action.

[2] On May 31, 2008, the plaintiff filed a Fresh As Amended Statement of Claim (“Fresh Claim”) pursuant to Rule 26.02(a) of the Rules of Civil Procedure (as pleadings had yet to close). In its Fresh Claim, the plaintiff now advances two new causes of action against Shapiro for knowing assistance in breach of fiduciary duty and knowing assistance in breach of trust.

[3] Shapiro brings a motion to strike (relying on Rules 21.01(1)(a), 21.01(1)(b), 21.01(3)(d) and 25.11 of the Rules of Civil Procedure) on the basis that (a) the plaintiff’s new causes of action against him are statute-barred by operation of the provisions of the Limitations Act, 2002, S.O. 2002, c. 24 (“the Limitations Act”), and (b) the filing of the Fresh As Amended Statement of Claim amounts to an abuse of process on the part of the plaintiff.

Abuse of Process

[4] As held by the Court of Appeal for Ontario in Intact Insurance Company v. Federated Insurance Company of Canada, 2017 ONCA 73, abuse of process is a common law doctrine developed to protect the integrity of the adjudicative process. While abuse of process may take many forms, Shapiro argues that the filing of the Fresh Claim amounts to the plaintiff circumventing my previous Order. No doubt I have a broad discretion to prevent any misuse of the court process that would be manifestly unfair to Shapiro or otherwise bring the administration of justice into dispute.

[5] The plaintiff did not seek leave from me as the Case Management Judge to file a Fresh Claim. Nowhere in my Reasons did I authorize the plaintiff to amend its Claim by way of a Fresh Claim. Normally, the deficiencies in the plaintiff’s Claim would have been cured by the service and filing of a draft Amended Statement of Claim, with all changes underlined in accordance with Rule 26.03(1).

[6] Technically speaking, Rule 26.02(a) permits a party to amend its pleading without leave of the Court before the close of pleadings as long as the amendments do not necessitate the addition, deletion or substitution of a party to the proceeding. As discussed during the hearing of Shapiro’s motion, it was therefore open to the plaintiff to serve and file an Amended Statement of Claim in accordance with my Reasons, and then proceed immediately thereafter to further amend their pleading, without leave, to add the new causes of action.

[7] This proceeding is over two years old, and despite my efforts as the Case Management Judge to advance the proceeding on the merits, it remains in the pleadings stage. While it would have been procedurally preferable for the plaintiff to comply with my Order by serving and filing an Amended Statement of Claim, and thereafter further amending the pleading to add the two new causes of action, I do not view the plaintiff’s conduct as amounting to an abuse of the Court’s process. The plaintiff has the right to amend its pleading without leave of the Court while pleadings remain open. It is not as if the plaintiff filed a new or separate proceeding in the face of my Order; the plaintiff’s actions were technically consistent with my Order and the operation of Rule 26.02(a). Ironically, it appears that the plaintiff will thus benefit from the unfortunate slow pace of prosecution of its claim.

[8] Shapiro’s motion to strike on the basis of abuse of process is therefore dismissed.

Is Rule 21 available?

[9] Shapiro argues that as the Claim was issued on April 1, 2016, the two new causes of action were only raised for the first time in the Fresh Claim more than two years after the issuance of the Claim. Shapiro submits that the Fresh Claim, on its face, confirms that the new causes of action were commenced more than two years after they arose in fact and in law.

[10] Normally, a limitation period defence is determined by the Court on a motion for summary judgment, or perhaps in response to a formal motion seeking leave to amend a pleading.

[11] I agree with the plaintiff that limitation period questions are typically not appropriate for determination under Rule 21.01. Unless there are no material facts in dispute, a limitation period question should normally be determined after the close of pleadings (as a limitation period is a defence which should be pleaded) and by way of motion for summary judgment or trial. As recently held by the Court of Appeal for Ontario in Golden Oaks Enterprises Inc. (Trustee) v. Lalonde, 2017 ONCA 515:

“However, the basic limitation period established by the Limitations Act, 2002 is now premised on the discoverability rule. The discoverability rule raises issues of mixed fact and law: Longo v. MacLaren Art Centre, 2014 ONCA 526, 323 O.A.C. 246, at para. 38. We therefore question whether there is now any circumstance in which a limitation issue under the Act can properly be determined under rule 21.01(1)(a) unless pleadings are closed and it is clear the facts are undisputed. Absent such circumstances, we are skeptical that any proposed limitation defence under the Act will involve “a question of law raised by a pleading” as required under rule 21.01(1)(a).”

[12] Shapiro has not delivered a Statement of Defence. Shapiro takes the position that discoverability is not an issue in this case, as it is plain and obvious from the contents of both the Claim and the Fresh Claim that the plaintiff knew or ought to have known, by the date of the issuance of the Claim, all of the material facts upon which the two new causes of actions are based. I disagree. It is trite to state that when a cause of action is discovered is always a factual determination, and as such I do not believe there to be a true “question of law” raised on the plaintiff’s Rule 21.01 motion.

[13] Under Rule 21.01, I am to review the contents of the pleading and not consider any other external evidence other than documents specifically referenced in the pleading. It is not plain and obvious to me that there are no undisputed facts. As held by Justice Brown (as he then was) in Greatrek Inc. v. Aurelian Resources Inc., 2009 ONSC 6095:

“Although the Beardsley decision leaves open the theoretical possibility of a limitations-based Rule 21.01(1)(a) motion prior to the filing of a statement of defence, in my view courts should do nothing to encourage such a practice. A court cannot gain a complete picture of the issues in a case without reading all the pleadings. To permit defendants to move to strike using yet-to-be-pleaded limitation defences would distort the pleadings process. Rule 25.06 does not require plaintiffs to plead their claims anticipating defences which might be raised. Replies function to respond to pleaded defences: Rule 25.08(2). As the Court of Appeal observed in Beardsley, these rules ensure procedural fairness.”

[14] I do not find Shapiro’s Rule 21 motion to be one of the “rarest of cases” that warrants the Court entertaining a limitation period analysis under Rule 21.01(1)(a). In the event that I am incorrect and Rule 21.01 applies, I would not grant the relief sought with respect to the two new causes of action. The plaintiff has pleaded concealment against Shapiro and the remaining defendants, who are alleged to have participated in an elaborate scheme to defraud the plaintiff over several years (the alleged scheme is set out in greater detail in my previous Reasons). As held by Justice Lauwers (as he then was) in 1309489 Ontario Inc. v. BMO Bank of Montreal, 2011 ONSC 5505, I must consider the constituent elements of the two new causes of action to see “if the facts as originally pleaded, or as better particularized in the proposed new pleading, could technically sustain” the two new causes of action.

[15] A claim for knowing assistance has four essential elements:

a) the existence of a fiduciary duty or trust relationship;

b) the fiduciary or trustee breached his/her duty fraudulently and dishonestly;

c) the third party to the relationship must have had actual knowledge of the nature of the fiduciary or trust relationship, and the fraudulent or dishonest conduct of the fiduciary or trustee; and,

d) the third party participated in or assisted the fraudulent and dishonest conduct.

[16] Reading the Claim liberally and generously as I am mandated to do on a Rule 21 motion, I agree with the plaintiff that by “lumping in” Shapiro with the remaining defendants, all of the four constituent elements of the claim of knowing assistance were raised in the Claim. The plaintiff alleged a fiduciary and trust relationship between the Atkinson defendants and the plaintiff. The plaintiff alleged that the Atkinson defendants committed acts of fraud or dishonesty amounting to breach of trust and breach of fiduciary duty. The plaintiff alleged that Shapiro had knowledge of the relationship between the Atkinson defendants and the plaintiff which gave rise to fiduciary and trust obligations. Finally, the plaintiff alleged that Shapiro had knowledge of the Atkinson defendants’ dishonest conduct.

[17] While the material facts necessary to support the two new causes of action were not drafted with particularity or precision, given the threshold on a Rule 21 motion, I find those material facts to be nevertheless present. It may be that through a motion for summary judgment, or the discovery process, additional material facts are learned or discovered which would support Shapiro’s limitation period position. At this pleadings stage, and relying solely on the Claim and Fresh Claim, I cannot conclude that it is plain and obvious that the two new causes of action ought to be struck out.

[18] Accordingly, Shapiro’s motion is dismissed, without prejudice to Shapiro delivering a Statement of Defence to the Fresh Claim and thereafter seeking summary judgment to dismiss the two new causes of action on the basis of them having been commenced beyond the limitation period.

Costs

[19] At the conclusion of the hearing of Shapiro’s motion, counsel for the parties exchanged and filed their respective Costs Outlines and Bills of Costs.

[20] However, it became apparent that offers to settle the motion may have been exchanged between the parties leading up to the hearing.

[21] As such, in the event the parties are unable to resolve the costs of Shapiro’s motion, they may make brief costs submissions totaling no more than three pages in accordance with the following schedule:

a) the plaintiff shall serve and file its costs submissions within 10 business days after the release of this Endorsement.

b) Shapiro shall thereafter have an additional 10 business days from the receipt of the plaintiff’s costs submissions to deliver its responding costs submissions.

Diamond J. Released: October 5, 2018