COURT FILE NO.: CV-12-18686 DATE: 20181022 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Strathan Corporation Plaintiff

– and –

Shahid Khan, Timothy Graham, Tony Pelle, Chromeshield Co., Chromecraft Corporation, FNG Corporation, Flex-N-Gate Canada Company, and Ventra Group Co. Defendants

Counsel: Raymond G. Colautti and Anita Landry, for the Plaintiff Sean M. Sullivan and Harry J. Dahme, for the Defendants

HEARD: Written submissions

REASONS FOR DECISION

HOWARD J.

Overview

[1] The plaintiff, Strathan Corporation (“Strathan”), has commenced two separate actions related to the lease of the same premises by the defendant Chromeshield Co. (“Chromeshield”).

[2] The first action was commenced on March 27, 2009 (the “First Strathan Action”). That action was commenced against Chromeshield, Chromecraft Corporation (“Chromecraft”), and FNG Corporation (“FNG”).

[3] The second action (the claim here) was commenced on November 21, 2012 (the “instant action” or the “Second Strathan Action”). The Second Strathan Action was commenced against Chromeshield, Chromecraft, FNG, Flex-N-Gate Canada Company (“Flex-N-Gate”), Ventra Group Co. (“Ventra”), and the personal defendants Mr. Shahid Khan (“Khan”), Mr. Timothy Graham (“Graham”), and Mr. Tony Pelle (“Pelle”).

[4] Strathan moves for an order pursuant to Rule 26 of the Rules of Civil Procedure [1] granting it leave to amend its statement of claim in the instant action to include, inter alia, a new claim for breach of statutory duty causing environmental contamination.

[5] The defendants oppose the proposed amendments on the basis that they are statute-barred by operation of the Limitations Act, 2002 [2]. The defendants further state that the proposed amendments are untenable at law, in that, the plaintiff seeks to reply upon sections of the Environmental Protection Act [3] that have no application here. Finally, the defendants maintain that the proposed new environmental claim is an abuse of process inasmuch as Strathan has already commenced a separate action against Chromeshield, Chromecraft, and FNG based on the same underlying factual allegations, i.e., the First Strathan Action, and that claim is still on-going.

[6] In my endorsement of May 18, 2018, I ruled that Strathan’s motion for leave to amend its claim must be dismissed. I indicated that full reasons for the court’s decision would follow presently. [4]

[7] These are the reasons.

Factual Background

The parties

[8] Strathan is the owner and landlord of a commercial property located at 804 McDougall Street in Windsor, Ontario (the “McDougall Property” or the “Premises”). Strathan is operated by Terry Davison and his daughter, Christine Davison. The Davisons are said to be Strathan’s directing minds.

[9] Chromeshield is a company incorporated pursuant to the laws of the Province of Nova Scotia. Between 1998 and 2010, Chromeshield operated as a metal component chrome and nickel plating supplier to the automotive industry.

[10] Chromecraft, FNG, Flex-N-Gate, and Ventra are companies within a commonly-controlled group of businesses affiliated with Chromeshield.

[11] Khan is the president of Chromeshield and one of its directors. Strathan alleges that Khan is a controlling mind of Chromeshield.

[12] Graham is a lawyer duly authorized to practise law in Ontario and, since January 2002, had been consulted on various legal matters relating to Chromeshield’s lease interest in the McDougall Property. From January 1, 2002, to November 28, 2003, Graham was employed by Flex-N-Gate as an in-house lawyer. After November 2003, Graham’s employment was transferred to Ventra. Graham was both the company secretary and a director of Chromeshield between October 31, 2003, and December 16, 2008. Graham resigned from both offices in 2008. Strathan alleges that Graham is a controlling mind of Chromeshield.

[13] Pelle was an employee of Chromeshield between 1998 and 2008, serving as its plant manager and later, general manager.

The dealings between the parties

[14] The factual background to this litigation was set out in some detail in my reasons for decision released on May 26, 2016, in respect of the defendants’ motion for summary judgment, as referenced below. [5] For present purposes, I need not repeat all of that detail here, but I would highlight the following.

[15] Between 1998 and November 1, 2010, Chromeshield operated its chrome plating business at the McDougall Property and was a tenant of the Premises pursuant to a commercial lease agreement, of which Strathan took assignment, as landlord, in or about 2002 (the “Lease”).

[16] The evidence indicates that for more than 20 years before the commencement of the Lease with Chromeshield, a company called Rustshield Plating Ltd. had operated a chrome plating business on the McDougall Property. [6]

[17] Chromecraft and FNG were parties to the Lease as guarantors of the obligations of Chromeshield. The Lease provided that on the expiration of the initial 10-year term, the guarantees would expire, such that, if Chromeshield exercised its right to renew the Lease for a further 10-year term and then defaulted during the renewal term, the landlord would have no recourse against Chromecraft and FNG as guarantors.

[18] Another term of the Lease provided that Chromeshield could remove the fixtures provided that all rents and other amounts due or which would become due under the lease were fully paid. As well, given the nature of Chromeshield’s business and the predecessor business, there were provisions in the Lease dealing with environmental conditions of the Premises and the obligations of Chromeshield to maintain it in a certain manner.

[19] On or about May 30, 2008, the Lease was renewed by Chromeshield for a further 10-year term, expiring July 31, 2018.

[20] Accordingly, pursuant to the terms of the Lease, the guarantors Chromecraft and FNG were released from their obligations under the lease as of July 31, 2008.

[21] At that point, from the perspective of Strathan, the equipment and fixtures at the Premises then became “the only remaining security for performance of the tenant’s obligations under the Lease, including payment of rent” (as Strathan pled in para. 25 of its statement of claim in the instant action).

[22] Although Strathan and Chromeshield agreed to extend the term of the Lease for another 10 years, they could not agree on the fixed minimum rental amount during the renewal term, which issue was referred to arbitration in June 2008.

[23] Strathan inspected the Premises in June 2008. Strathan’s position is that during its inspection of the Premises certain environmental concerns arose in their minds regarding the McDougall Property, which, Strathan says, gave rise to the First Strathan Action.

[24] It appears that the dealings between Strathan and Chromeshield became acrimonious at or about that point.

[25] It is common ground that the 2007-2008 financial crisis had a devastating impact on the North American automotive industry. Chromeshield’s evidence is that their customers dramatically reduced their chrome plated components orders.

[26] On October 3, 2008, Chromeshield gave notice to Strathan that the Chromeshield plant was going to “idle its business operations effective mid-December, 2008.” That was a matter of significant concern to Strathan. However, Chromeshield maintained that it was “presently in an extended operational shutdown. It is not closed for business operations.”

[27] In early 2009, there was correspondence between the parties over a number of concerns that Strathan apparently had concerning the tenancy, including, inter alia, the “on-going environmental remediation to the premises,” and the landlord’s access to the Premises.

[28] Over February and March 2009, the issue of the landlord’s access to the Premises became a source of increasing friction between the parties. At one point, on March 27, 2009, Chromeshield delivered notice pursuant to the Trespass to Property Act [7] purporting to bar Strathan, its principals, employees, and agents from entry onto the Premises without Chromeshield’s prior written consent.

[29] On that same day, Strathan commenced the First Strathan Action by notice of action issued March 27, 2009.

[30] From at least the summer of 2009 through to the spring of 2010, there was correspondence and dealings between the parties over Strathan’s concerns and observations that Chromeshield was apparently removing equipment and fixtures from the Premises. Generally speaking, the position of Chromeshield was that it was cleaning and preparing the Premises for new work, taking out old redundant equipment and replacing it with new equipment and/or refurbishing the old equipment.

[31] On June 15, 2010, the Davisons attended the Premises for inspection. They toured the plant, and spoke with Pelle, asking him, inter alia, about the apparent removal of certain equipment. The Davisons noted that it appeared that certain plumbing, heating, lighting, electrical and/or ventilating equipment had been removed.

[32] On or about October 1, 2010, Strathan delivered a notice of motion within the context of the First Strathan Action, seeking, inter alia, an interim order allowing Strathan to conduct an inspection of the Premises. The notice of motion was originally made returnable on October 19, 2010.

[33] Strathan’s motion, originally returnable October 19, 2010, was adjourned on consent to November 9, 2010, for argument on the inspection and production issues, with the balance of the motion being adjourned to February 28, 2011, for a full-day hearing.

[34] However, the motion did not proceed on November 9, 2010, because on November 1, 2010, Chromeshield abandoned the Premises without advance notice and surrendered the Lease.

[35] Some two years later, Strathan commenced the Second Strathan Action by statement of claim issued November 21, 2012.

The two Strathan actions and procedural history

[36] As indicated above, Strathan has commenced two separate actions arising out of Chromeshield’s tenancy at the McDougall Property.

[37] The First Strathan Action, bearing court file no. CV-09-12829CM, was commenced by way of notice of action issued March 27, 2009, with statement of claim delivered April 21, 2009, and amended statement of claim was delivered on November 10, 2011. The First Strathan Action advances claims for, inter alia, environmental contamination of the McDougall Property by the defendants, breach of the Lease by reason of the abandonment of the Premises, damages for arrears of rent, and damages for loss of rent over the balance of the term of the Lease. Neither Khan, Graham, Pelle, Flex-N-Gate, nor Ventra are parties to the First Strathan Action.

[38] The Second Strathan Action, bearing court file no. CV-12-18686, was commenced by statement of claim issued November 21, 2012. In the Second Strathan Action, the plaintiff claims for, inter alia, conversion, breach of the Lease, negligent misrepresentation, deceit, fraud, unjust enrichment, and oppression remedies arising from the alleged wrongful removal of equipment and fixtures from the McDougall Property. The parties to the Second Strathan Action include all of the defendants to the First Strathan Action, as well as Flex-N-Gate, Ventra, Khan, Graham, and Pelle.

[39] In the First Strathan Action, Strathan claims for the cost of cleanup of the McDougall Property for environmental contamination. The prayer for relief in the amended statement of claim in the First Strathan Action contains, inter alia, the following claims:

a. a mandatory order that Chromeshield “perform the work under Article 6.03 of the Lease … or, alternatively, damages”; b. a declaration that “the cost of cleanup of the environmental contamination referred to in paragraphs 18, 19 and 20 of the Statement of Claim” be borne by Chromeshield; c. a declaration that “the cost of cleanup of the environmental contamination referred to in paragraphs 22 to 25 of the Statement of Claim” be borne by Chromeshield; d. a mandatory order “requiring Chromeshield to remedy the waste caused to the demised premises … or, in the alternative, damages”; e. damages for negligent misrepresentation “equal to the cost of cleanup of the contamination cause to the demised premises … and the cost of the installation of the two sumps and containment curbs described in paragraph 44 of the Statement of Claim”; and f. a declaration that Chromecraft and FNG “are liable under the Guarantee for any damages which occurred prior to July 31st, 2008[.]”

[40] The basis for Strathan’s claim against the defendants in the First Strathan Action may be summarized as follows:

a. Chromeshield failed to install at its own expense sumps in the four corners of the court yard at the McDougall Property, in violation of article 6.03 of the Lease. As a result, the run-off has caused additional contamination under the floor of the Premises; b. A plastic discharge pipe was installed by Chromeshield on lands adjacent to the McDougall Property and subsequently cracked, discharging contaminated effluent onto Strathan’s lands. Strathan further alleges that the pipe was capped by Chromeshield in October 2008 and, as a result, there was no adequate storm water management for rain water collected in the concrete sump and containment curbs resulting in further contamination flowing onto the McDougall Property, neighbouring premises, and the City of Windsor’s storm sewer system; and c. Chromeshield made representations in a tenant estoppel certificate that were untrue and inaccurate. Strathan alleges that it relied upon this negligent misrepresentation in taking the assignment of the Lease without an appropriate holdback to require the predecessor landlord to complete the installation of two sump pumps.

[41] The First Strathan Action has proceeded to examinations for discovery, which were completed in September 2014. The evidence indicates that representatives of Strathan and the defendants were extensively questioned on the issue of environmental contamination. [8]

[42] The Second Strathan Action has not proceeded to discoveries.

The defendants’ summary judgment motion and subsequent proceedings

[43] By way of notice of motion dated August 26, 2014, the defendants brought a motion for summary judgment for an order dismissing the Second Strathan Action against the defendants on the basis that the claim is statute-barred by operation of the Limitations Act, 2002 or, alternatively, striking the plaintiff’s claim for remedy under s. 248 of the Ontario Business Corporations Act [9], the Nova Scotia Companies Act [10], and/or the common law, without leave to amend.

[44] The summary judgment motion was originally returnable September 16, 2014, but was adjourned on consent to a one-day special appointment on April 13, 2015. It was subsequently adjourned to June 8, 2015 (as per the endorsement of Campbell J. on March 31, 2015). However, it was not reached on June 8th and was further adjourned to June 25, 2015, before me.

[45] In my Summary Judgment Decision [5], I concluded that there were genuine issues requiring a trial with respect to the application of the discoverability principle, having regard for, inter alia, Strathan’s position that the claim was not discoverable until Strathan became aware that the defendants had allegedly taken steps to strip Chromeshield of all of its assets such that it had no ability to pay rent and had also allegedly taken steps to cover up their alleged actions. I therefore concluded that the determination of whether Strathan’s action is statute-barred should be left to the trial judge and that, accordingly, the defendants’ motion for summary dismissal should be dismissed. [11]

[46] However, I granted the alternative relief sought by the defendants and struck out, without leave to amend, the oppression remedy component of the Second Strathan Action and, in particular, the claim for a remedy under s. 248 of the Ontario Business Corporations Act, on the basis that, inter alia, Chromeshield being a company incorporated pursuant to the laws of Nova Scotia, any oppressive conduct alleged in relation to Chromeshield would properly fall under the jurisdiction of the Nova Scotia Companies Act, and such claims must be brought before the Supreme Court of Nova Scotia. [12]

[47] There were actually five different motions before the court when the defendants’ summary judgment motion was argued, including the instant motion for leave to amend the claim in the Second Strathan Action. [13] Those four other motions were described in my Summary Judgment Decision [14]. However, as the main focus of the argument was on the summary judgment and Rule 21 motion, not all of the motions were fully argued, and the fifth motion was not argued at all.

[48] In paras. 134-135 of my Summary Judgment Decision [5], I advised the parties that I had been appointed the designated judge under rule 37.15(1) of the Courts of Justice Act [15], as follows:

[134] I would note the history of the five motions here, which dates back to August 2014, the number of scheduled appearances where those motions were addressed, the voluminous record before me on those motions, and the fact that at least three judges of our court have been required to review some portions of the same material. In my view, given the history and complexity of the litigation, and given that there are here two separate proceedings arising out of the same factual matrix, this is an appropriate case in which to request that a single judge be designated pursuant to rule 37.15(1) of the Rules of Civil Procedure to hear all motions in the two proceedings.

[135] Accordingly, the parties are advised that I have made that request of the Local Administrative Judge in Windsor, and I confirm that the Local Administrative Judge has appointed me to serve as the designated judge under rule 37.15(1).

[49] Further to that designation, I directed counsel to contact the trial coordinator’s office to arrange for a case conference date before me for the purposes of scheduling a timetable for the determination of the remaining four motions, assuming that counsel were unable to resolve the outstanding issues.

[50] Subsequently, at a case conference held by teleconference with counsel for the parties on September 22, 2016, it was agreed and ordered that, given that counsel did not have a full opportunity to argue the plaintiff’s motion to amend at the hearing of the motion for summary judgment, the motion to amend would be determined on the basis of the record as it then existed but that counsel would be permitted to make further written submissions on the motion.

[51] To that end, further written submissions were received from counsel for Strathan and for the defendants, with the plaintiff filing submissions on November 29, 2016, [16] and the defendants filing submissions on January 31, 2017. [17]

[52] There was a further case conference held on November 2, 2017, following which counsel for Strathan wrote to the court by letter dated April 26, 2018, submitted with the consent of counsel for all parties, to inquire, quite appropriately, as to the status of the decision on Strathan’s motion to amend its pleading.

[53] I responded to counsel’s inquiry by my endorsement released May 18, 2018, and, as referenced, I ruled that Strathan’s motion for leave to amend its claim must be dismissed.

Analysis

The proposed new claim

[54] As referenced in para. 4 of Strathan’s Written Submissions [16], Strathan proposes to make the following amendments to its statement of claim in the Second Strathan Action:

a. it proposes to amend the prayer for relief to include “environmental contamination” as one of the grounds for its claim for general damages in para. 1(a), along with “conversion, breach of the Lease, negligent misrepresentation, deceit, fraud, unjust enrichment” etc.; b. it seeks to increase the amount of damages claimed in para. 1(a) from $2,500,000 to $10,000,000; c. it seeks to delete para. 45 of the existing pleading (in which it is alleged that Strathan “incurred damages of $2,621,734.44 for lost past and future rent …”); and d. it seeks to add an entire new section entitled “Liability for Environmental Contamination” in proposed paras. 49-63, which advances a new claim for breach of statutory duty causing environmental contamination. In that regard, the proposed para. 49 pleads as follows:

The Plaintiff pleads that under the Environmental Protection Act, section 99(1) and (2), any person (which includes corporations) has the right to compensation for loss or damage incurred as a direct result of the spill of a pollutant that causes or is likely to cause an adverse affect [sic], and for all reasonable cost and expense incurred in respect of carrying out her [sic] attempting to carry on an order or direction issued under the Act. The right to compensation for such loss or damages is from the “owner” of the pollutant and the person having control of the pollutant. “Pollutant” means a contaminant other than heat, sound, vibration or radiation, and includes any substance from which a pollutant is derived. “Spill” is defined in section 91 as meaning a discharge into the natural environment, from or out of a structure, vehicle or other container, and that is abnormal in quality or quantity in light of all the circumstances of the discharge. “Loss or damage” includes personal injury, loss of life, or loss of use or enjoyment of property and pecuniary loss, including loss of income.

The test for leave to amend the statement of claim

[55] Rule 26.01 of the Rules of Civil Procedure sets out the general power of the court to permit amendments to pleadings in the following mandatory language:

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.

[56] However, our court has said that the mandatory language of rule 26.01 does not create an absolute right to amend a pleading even if there is a lack of prejudice to the opposite party. In Jourdain v. Ontario, 2010 ONSC 6315 [18], the court held that:

The mandatory language of Rule 26.01 does not create an absolute right of amendment for the party seeking to amend a pleading even if there is a lack of prejudice to the opposite party. The court is required to examine the proposed amendment to ensure it is tenable in law. This includes a determination of whether the proposed amendment is statute-barred.

[57] In Frohlick v. Pinkerton Canada Ltd., 2008 ONCA 3 [19], our Court of Appeal considered the proper interpretation of rule 26.01 where a proposed amendment to a statement of claim seeks to advance a new claim after a limitation period has expired.

[58] In Frohlick, the Court of Appeal concluded that, for the purposes of rule 26.01, the expiry of a limitation period will give rise to a presumption of prejudice, and that this presumption of prejudice will be determinative unless the party seeking the amendment establishes the existence of special circumstances that rebut this presumption. In this regard, Rouleau J.A. held, on behalf of a unanimous court, that:

In my view, the proper interpretation of rule 26.01 is that the expiry of a limitation period gives rise to a presumption of prejudice. This presumption of prejudice will be determinative unless the party seeking the amendment can show the existence of special circumstances that rebut the presumption.

In order to fully understand why the passing of a limitation period automatically gives rise to a presumption of prejudice, it is useful to examine the purposes behind limitation periods. In M. (K.) v. M. (H.), [1992] 3 S.C.R. 6 at paras. 21-24, the Supreme Court of Canada set out the underlying rationale for the limitations statutes as follows:

There are three [purposes], and they may be described as the certainty, evidentiary, and diligence rationales....

Statutes of limitations have long been said to be statutes of repose... The reasoning is straightforward enough. There comes a time, it is said, when a potential defendant should be secure in his reasonable expectation that he will not be held to account for ancient obligations....

The second rationale is evidentiary and concerns the desire to foreclose claims based on stale evidence. Once the limitation period has lapsed, the potential defendant should no longer be concerned about the preservation of evidence relevant to the claim....

Finally, plaintiffs are expected to act diligently and not “sleep on their rights”; statutes of limitation are an incentive for plaintiffs to bring suit in a timely fashion.

In addition to these three purposes, the court must also consider the legislation establishing the limitation period as well as any statutory provision that might provide for extension of the limitation period. As appears from cases such as Novak v. Bond, [1999] 1 S.C.R. 808, the way that the statutory limitation has been framed will often seek to balance the arbitrariness of a limitation period with the interests of the party seeking to overcome the limitation defence. As set out by the majority in Novak at para. 66:

Contemporary limitations statutes thus seek to balance conventional rationales oriented towards the protection of the defendant – certainty, evidentiary, and diligence – with the need to treat plaintiffs fairly, having regard to their specific circumstances. As Major J. put it in Murphy, supra, “[a] limitations scheme must attempt to balance the interest of both sides”.

Rule 26.01 is an enactment that allows a court to relieve against the harshness of an expired limitation period in certain circumstances. It would be wrong, however, to view rule 26.01 as allowing a party to use the existence of an outstanding claim, and nothing more, to defeat the protection of relevant limitation periods.

The following excerpt from the decision of Deaville v. Boegeman (1984), 48 O.R. (2d) 725, at 730, conveys the correct perspective:

In my view, the expiry of the limitation period creates a presumption, however slight in some cases, of prejudice to the defendant.... If matters are left in balance, the usual rules apply and the applicant upon whom the burden lies has not discharged that burden.

Where a limitation period has passed, there will be a presumption of prejudice that cannot be compensated for by costs or an adjournment. The moving party must demonstrate why, on the facts of the case, the court should not apply the normal rule that the presumption of prejudice flowing from the loss of the limitation period is determinative. This involves a consideration of special circumstances that would lead the court to conclude that the presumption of prejudice should not apply.

The statute establishing the limitation period may itself provide for relief in certain circumstances. Absent a statutory basis for relieving against the harshness of a limitation period, the court, faced with a rule 26.01 motion, will consider whether it would be unfair to allow the opposite party to rely on the limitation period given the relationship the proposed claim has to the existing and ongoing claim and the way that the action has progressed to date. The court will consider the true nature of all of the claims and the knowledge of the parties. [20]

[59] Ultimately, the Court of Appeal concluded in Frohlick that “rule 26.01 does not contemplate the addition of unrelated statute-barred claims by way of amendment to an existing statement of claim. Conceptually, this should be treated no differently than the issuance of a new and separate statement of claim that advances a statute-barred claim.” [21]

[60] In this regard, I note the concession of Strathan in its Written Submissions [16], where Strathan concedes that:

Where a limitation period has passed, there will be a presumption of prejudice that cannot be compensated for by costs or an adjournment. The moving party must demonstrate why, on the facts of the case, the court should not apply the normal rule that the presumption of prejudice flowing from the loss of the limitation period is determinative. This involves a consideration of special circumstances that would lead the court to conclude that the presumption of prejudice should not apply. [22]

[61] In my view, it is very clear that the proposed amendments to the statement of claim in the Second Strathan Action seek to add a new cause of action based on breach of statutory duties under the Environmental Protection Action causing environmental contamination.

[62] The new claim for environmental contamination is very different from the causes of action previously asserted in the existing statement of claim in the Second Strathan Action, which, essentially, allege breach of the Lease and other alleged wrongful and oppressive conduct by the defendants as a result of their alleged removal of the equipment and fixtures (i.e., the landlord’s security) from the Premises. (The allegations of oppressive conduct were struck out by my Summary Judgment Decision [5].)

[63] As such, the new claim for environmental contamination is unrelated to the original claim for remedies arising out of the defendants’ alleged removal of fixtures and equipment from the Premises, which were alleged to be security for the Lease, and which constitutes a separate and distinct cause of action.

[64] In support of this conclusion, I note the evidence of Ms. Christine Davison, principal of Strathan, who described the essential differences between Strathan’s two actions in the following terms:

Both actions pertain to property owned by the Strathan [sic], located at 804 McDougall Avenue in Windsor. The first action includes, but is not limited to, claims for environmental damages and [by reason of the amendments of November 10, 2011] damages incurred as a result of a breached lease agreement. The second action includes, but is not limited to, claims for oppression remedies arising from the Officers and Directors[‘] removal of the equipment and fixtures from the subject premises which was supposed to be the security for the lease and their continuing refusal to disclose the whereabouts of same.

[65] As described by Ms. Davison, the proposed claim for environmental contamination is conceptually quite distinct from the existing claims in the Second Strathan Action.

[66] Further, one must note the difference in the proposed parties to the new claim sought to be advanced in the Second Strathan Action. That is, by way of its proposed amendments, Strathan now purports to claim, for the first time in the context of the Second Strathan Action, environmental contamination claims and breach of the EPA against the personal defendant Khan, Graham, and Pelle, and the corporate defendants Flex-N-Gate and Ventra. Strathan now alleged, for the first time, that these defendants were the tenant Chromeshield’s “employee or agent … having the charge, management or control of the pollutant immediately before the first discharge of the pollutant.” Strathan had not previously made such allegations against these defendants or, for that matter, against Chromecraft or FNG.

[67] Moreover, I note the overwhelming amount of new factual circumstances now pled in the proposed amended statement of claim, taking what had previously been a 16-page statement of claim originally to now a proposed 27-page pleading, in which the proposed new claim for “Liability for Environmental Contamination” now requires essentially an additional ten pages to plead the new cause of action and new factual circumstances in support of the amended pleading.

[68] As such, while the proposed new claim for environmental contamination may not be “new” or “unrelated” to the causes of action advanced in the First Strathan Action, it certainly advances a new and unrelated cause of action for the purposes of the Second Strathan Action. Indeed, the proposed claim for environmental contamination in the Second Strathan Action is based on the same factual allegations already claimed in the First Strathan Action.

The proposed new claim is barred by reason of the limitation period

[69] Sections 4 and 5 of the Limitations Act, 2002 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).

[70] The import of ss. 4 and 5 of the Limitations Act, 2002 in the context of the instant claim is that no proceeding shall be commenced in respect of the separate claim for environmental contamination after the second-year anniversary of the day on which the said claim was discovered. Further, Strathan is presumed to have known of its (new) claim for environmental contamination on the day on which the act or omission occurred, unless the contrary is proven.

[71] As I indicated in para. 83 of my Summary Judgment Decision [5], Perell J. described the proper approach in Huang v. Mai, 2014 ONSC 1156 [23], as follows:

… the case law that established the discovery principle and the Limitation Act, 2002, which codifies the principle, starts a limitation period running from the date the plaintiff knew or ought to have known that a cause of action existed through the exercise of reasonable diligence: Peixeiro v. Haberman, [1997] 3 S.C.R. 549.

[72] In my view, Strathan clearly knew that it had a claim for environmental contamination as against the defendants in respect of the McDougall Property at least as far back as April 21, 2009, if not earlier. In fact, it commenced the First Strathan Action against Chromeshield, Chromecraft, and FNG in 2009 claiming such relief.

[73] Strathan commenced the First Strathan Action against the defendant tenant Chromeshield and the guarantors Chromecraft and FNG by way of its notice of action issued March 27, 2009. Admittedly, the notice of action, not unsurprisingly, was not entirely descriptive of the cause of action alleged by the plaintiff. However, the statement of claim delivered April 21, 2009, expressly claimed for environmental contamination against those defendants. The subsequent amendments to the claim in the First Strathan Action on November 10, 2011, did not alter the focus of the First Strathan Action from the claims against the defendant-tenant Chromeshield, and the guarantors Chromecraft and FNG, for liability for environmental contamination.

[74] In my view, one cannot maintain that Strathan did not know or ought not to have known that it had a claim for environmental contamination in respect of the McDougall Property as of 2009 when Strathan in fact commenced an action in 2009 specifically claiming environmental contamination in respect of the McDougall Property. The two positions cannot be reconciled.

[75] Thus, in my view, the relevant considerations on the instant motion are not like those in the Summary Judgment Decision [5] where, in short, I held that the question of when Strathan discovered it had a cause of action arising from the defendants’ alleged removal of equipment and fixtures from the McDougall Property was a genuine issue requiring a trial. In coming to that conclusion, I noted Strathan’s position that “the defendants took steps to cover up the fact that they had stripped Chromeshield of all of its assets and converted those assets.” [24]

[76] That is not the case here. On the instant motion, Strathan must be taken to have acknowledged that it knew it had a cause of action for environmental contamination at the time it commenced the First Strathan Action in the spring of 2009.

[77] Accordingly, the applicable two-year limitation period under s. 4 of the Limitations Act, 2002 expired in or about April 2011, well before the statement of claim in the Second Strathan Action was issued on November 21, 2012, and the instant motion for leave to amend the claim was first brought in February 2015.

[78] Throughout paras. 11-21 of the Defendants’ Written Submissions [17], the defendants argue that Strathan had extensive prior knowledge of the alleged environmental contamination by reason of various expert reports and inspections that date back prior to Chromeshield’s departure on November 1, 2010, including some reports that Strathan acknowledge it reviewed and relied upon in deciding to purchase the McDougall Property in February 2002. In my view, it is unnecessary to make specific findings as to Strathan’s knowledge based on those reports and inspections given my conclusion that, at the very latest, Strathan knew it had a cause of action for environmental contamination when it commenced the First Strathan Action in 2009.

[79] However, Strathan argues, in para. 9 of its Written Submissions [16], that “[n]ew evidence has been obtained by the Plaintiff about the extent of the environmental contamination at the subject premises.” [Emphasis added.]

[80] While that may be true, it is not particularly relevant for determining when a limitation period starts to run. In Peixeiro v. Haberman, [1997] 3 S.C.R. 549 [25], the Supreme Court of Canada set out the basic test for when a limitation period begins to run, where Major J. held that:

The authorities are clear that the exact extent of the loss of the plaintiff need not be known for the cause of action to accrue. Once the plaintiff knows that some damage has occurred and has identified the tortfeasor, [citations omitted], the cause of action has accrued. Neither the extent of damage nor the type of damage need be known. [Emphasis added.]

[81] The plaintiff also argues that the environmental contamination pled in the proposed amendments constitutes a continuing breach that continued throughout the period of time at issue and thus, it is said, the cause of action continued to accrue “on a rolling basis” from the continuing breach. [26]

[82] The plaintiff relies on the Court of Appeal’s decision in Pickering Square Inc. v. Trillium College Inc., 2016 ONCA 179, where it was held that a landlord was entitled to claim damages for breach of the tenant’s covenant to operate a business continuously throughout the term of the lease for a period going back two years from when the action was commenced until the lease expired.

[83] In my view, this argument does not assist Strathan. In Pickering Square [27], the court held that the landlord was entitled to claim damages “for breach of the covenant for the period going back two years from the commencement of its action on February 16, 2012 – the period that ran from February 16, 2010 until the lease expired on May 31, 2011.” [Emphasis added.]

[84] In this case, Chromeshield surrendered the Lease on November 1, 2010. All of the alleged wrongful acts of defendants are alleged to have occurred before Chromeshield surrendered the Premises on November 1, 2010. The defendants could not have engaged in further acts of environmental contamination after November 1, 2010, because all chrome-plating operations had ceased and the defendants had vacated the premises. The Second Strathan Action was commenced on November 21, 2012.

Summary

[85] It is well settled that rule 26.01 does not contemplate the addition of unrelated statute-barred claims by way of amendment to an existing statement of claim. The proposed amendments to the statement of claim seek to add a new cause of action to the Second Strathan Action. Strathan knew that it had a cause of action for environmental contamination no later than when it commenced the First Strathan Action in 2009. The two-year limitation period has since expired, which gives rise to a presumption of prejudice, and Strathan has not established the existence of any “special circumstances” that would rebut the presumption.

The Real Property Limitations Act

[86] Strathan submits at para. 30(ii) of its Written Submissions [16] that, in any event, claims related to action for recovery of damages to land are not governed by the Limitations Act, 2002 but, rather, are subject to s. 4 of the Real Property Limitations Act [28], which, Strathan maintains, creates a ten-year limitation period “for an action for damages respecting an interest for land.”

[87] In my view, there is no merit in that submission.

[88] Section 4 of the Real Property Limitations Act provides as follows:

No person shall make an entry or distress, or bring an action to recover any land or rent, but within ten years next after the time at which the right to make such entry or distress, or to bring such action, first accrued to some person through whom the person making or bringing it claims, or if the right did not accrue to any person through whom that person claims, then within ten years next after the time at which the right to make such entry or distress, or to bring such action, first accrued to the person making or bringing it.

[89] The proposed new claim of Strathan for breach of statutory duty causing environmental contamination, etc., does not fall within the language of the prohibition in s. 4 of the Real Property Limitations Act that “[n]o person shall make an entry or distress, or bring an action to recover any land or rent” ten years after the right first accrued. Strathan’s proposed claim is of a different nature than that proscribed by s. 4 of the Real Property Limitations Act.

[90] I agree with the submissions of the defendants that a discovered environmental claim clearly falls within the ambit of the Limitations Act, 2002. That is the plain inference from s. 17 of that Act, which provides: “[t]here is no limitation period in respect of an environmental claim that has not been discovered.” The clear inference to be drawn from s. 17 is that an “environmental claim” that has been discovered is subject to that Act.

[91] That conclusion is buttressed by the definitions of the terms “contaminant,” “discharges” and “environmental claim” found in s. 1 of the Limitations Act, 2002, as follows:

“contaminant” has the same meaning as in the Environmental Protection Act;

“discharge” has the same meaning as in the Environmental Protection Act;

“environmental claim” means a claim based on an act or omission that caused, contributed to, or permitted the discharge of a contaminant into the natural environment that has caused or is likely to cause an adverse effect[.]

The proposed new claim is an abuse of process

[92] Section 138 of the Courts of Justice Act provides that, as far as possible, “multiplicity of legal proceedings shall be avoided.”

[93] There is no doubt that the court has inherent jurisdiction to dismiss or stay any proceeding that it determines to be an abuse of process. In Reddy v. Oshawa Flying Club, [1992] O.J. No. 1337 [29], Ground J. observed that:

The court has an inherent jurisdiction to dismiss or stay any proceedings which it determines to be an abuse of process. The doctrine of abuse of process is somewhat similar to the doctrine of res judicata in that it also seeks to prevent a multiplicity of proceedings or the re-litigation of an issue determined in earlier proceedings or which might have been raised in earlier proceedings but the party now raising the issue before the court chose not to do so.

[94] In Donmor Industries Ltd. v. Kremlin Canada Inc. (1991), 6 O.R. (3d) 501 [30], the court concluded that:

... these plaintiffs are abusing the court process in attempting to put forward again issues which were either raised in the first action or which were known to them and left unraised at the time of the first action. To allow them to do so is to permit a duplication of proceedings with the inherent danger of conflicting findings of fact on identical issues.

[95] I have already concluded that the proposed claim for environmental contamination in the Second Strathan Action is based on the same factual allegations already claimed in the First Strathan Action.

[96] As I have said, the First Strathan Action was commenced against the tenant Chromeshield and the guarantors, Chromecraft and FNG. Strathan now proposes to amend its statement of claim in the Second Strathan Action so that it can advance a duplicative claim for environmental contamination against the same three parties as well as two other companies and four individuals.

[97] I agree with the defendants that Strathan is attempting to graft the same claim onto another action against the same parties as well as additional parties.

[98] That attempt should not be countenanced by the court. If permitted, it would amount to an abuse of process.

The proposed new claim under s. 99(1) and (2) of the Environmental Protection Act is untenable at law

[99] While I agree with the submissions of the defendants as set out in paras. 26-30 of the Defendants’ Written Submissions [17], I would not rest my decision to refuse leave to amend on that basis alone.

[100] In my view, the plaintiff should not be permitted to amend its statement of claim in the Second Strathan Action because the proposed amendments are statute-barred by the Limitations Act, 2002 and, if permitted, would give rise to an abuse of process.

[101] It bears emphasizing that this decision does not leave Strathan without any remedy at all. If Strathan wishes to assert a cause of action based on breach of statutory duty under the EPA, it is open to Strathan to seek leave to amend its statement of claim in the First Strathan Action. The defendants themselves have acknowledged this option. [31]

Conclusion

[102] For all of these reasons, Strathan’s motion for leave to amend its statement of claim in the Second Strathan Action is dismissed.

[103] The defendants were successful on the motion and are presumptively entitled to their costs. If counsel are unable to agree on the question of costs, they may file brief written submissions with the court, of no more than five (5) double-spaced pages (exclusive of any costs outline, bill of costs, dockets, offers to settle, or authorities), in accordance with the following schedule:

a. the defendants shall deliver their submissions within twenty (20) days following the release of these reasons; b. the plaintiff shall deliver its submissions within twenty (20) days following service of the defendants’ submissions; c. the defendants shall deliver their reply submissions, if any, within five (5) days following service of the plaintiff’s submissions; d. if any party fails to deliver their submissions in accordance with this schedule, they shall be deemed to have waived their rights with respect to the issue.

[104] As referenced in paras. 9-11 of my endorsement of May 18, 2018 [4], I note that the parties had earlier agreed to have the First Strathan Action and the Second Strathan Action tried and heard together. However, apparently the parties were unable to agree upon the terms of a consent order withdrawing the declarations claimed in the instant action. Counsel had previously agreed that the issue of the language of the draft order ought not to be determined before the court releases its decision on the instant motion for leave to amend. With the present release of the reasons, and the dismissal of the motion for leave to amend, if counsel remain unable to agree upon the language of their consent order, they may contact the trial coordinator’s office to arrange for a case conference date before me to address the issue.

Original signed by Justice J. Paul R. Howard

J. Paul R. Howard Justice

Date: October 22, 2018

COURT FILE NO.: CV-12-18686 DATE: 20181022 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: Strathan Corporation Plaintiff – and – Shahid Khan, Timothy Graham, Tony Pelle, Chromeshield Co., Chromecraft Corporation, FNG Corporation, Flex-N-Gate Canada Company, and Ventra Group Co. Defendants REASONS FOR DECISION Howard J.

Released: October 22, 2018