Court File and Parties
COURT FILE NO.: 17-4205-00SR DATE: 2019-03-18 ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
Kathleen Jane Jolicoeur Plaintiff Matthew T. Kelly, for the Plaintiff
- and -
1154479 Ontario Inc., Bradley Smith, Mark Smith, and Dale Smith Defendants J. Sebastian Winny, for the Defendants
HEARD: at Kitchener March 12, 2019
REASONS FOR RULING
P. R. SWEENY J.
[1] The plaintiff moves to amend her statement of claim to include specific allegations relating to the liability of the personal defendants and in other respects. The proposed amendments which plead the Fraudulent Conveyances Act, R.S.O. 1990 c. F. 29, the Assignments and Preferences Act, R.S.O. 1990, A. 33 and assert the numbered company is insolvent are in issue on this motion. The defendants agree to the proposed amendments in paragraphs 1(a), 1(b), 19, 23, 27 and 28.
[2] Rule 26.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 provides:
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.
[3] The passing of a limitation period automatically gives rise to presumption of prejudice for the purposes of Rule 26.01 (see Frohlick v. Pinkerton Canada Limited, 2008 ONCA 3, 88 O.R. (3d) 401, at paras. 17-18).
[4] The defendants oppose the amendments. They submit the amendment with respect to the insolvency of the plaintiff is irrelevant and the amendments which raise the issue of Fraudulent Conveyances Act and the Assignments and Preferences Act are statute barred by virtue of the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B.
[5] If the proposed amendments assert a new cause of action, then the issue of the limitation period may arise. If however the amendments do not assert a new cause of action, then there is no limitation period issue.
[6] A helpful review of the authorities with respect to whether a proposed amendment does not assert a new cause of action is found in Klassen v. Beausoleil, 2018 ONSC 5237, at paras. 11-15. At para. 15, Broad J. writes:
Within the context of the foregoing principles, the question for determination is whether the amendments sought consist of alternative claims for relief, or statements of different legal conclusions based on no new facts or not going beyond the factual matrix from which the original claims arose. If not, the amendments should not be permitted, as to do so would deny the defendants the right to rely upon a limitations statute.
[7] This is a claim for wrongful dismissal arising out of the plaintiff’s employment with the defendant numbered company for more than 18 years. The numbered company carried on business as a mortgage brokerage. Robert Smith was the owner and principal broker of the corporation. The plaintiff was an executive assistant and compliance administrator. In May 2016 Robert died. His three sons, the personal defendants, became directors of the corporation.
[8] The plaintiff’s employment was terminated before the end of 2016. There is an issue as to whether she was provided verbal notice in October 2016 that her employment would be terminated effective December 31, 2016. In any event, on December 23, 2016, she received written notice that her employment will be terminated effective December 31, 2016. There is no allegation of cause.
[9] The plaintiff included the personal defendants in the action. The plaintiff asserts at paragraph 33 in the original pleading that:
To the extent that K-W Mortgage is insolvent and unable to meet any obligation it owes to the Plaintiff, the Plaintiff states that this is because the Directors emptied K-W Mortgage of its assets prematurely, when they ought to have been aware of K-W Mortgage’s obligation to the Plaintiff.
Accordingly, in view of the aforementioned wrongful conduct of K-W Mortgage at the direction of the Directors, the Plaintiff pleads that, if any debt is owed by K-W Mortgage to the Plaintiff, this is an appropriate case for this Court to pierce the corporate veil and visit any such liability on the Directors personally.
[10] The evidence is clear that an insurance policy paid a benefit of $250,000 to the corporation on the death of Robert. In August 2016, the personal defendants, as directors, declared a dividend of $75,000 payable to each of them. As I understand the evidence, the directors, or at least one of them, were aware that the corporation had difficulty paying its debts at that time.
[11] The plaintiff now seeks to amend the claim to plead the fact of the insurance proceeds being paid to themselves personally. The amendment asserts that the payments constitute a fraudulent conveyance pursuant to s. 2 of the Fraudulent Conveyances Act and, in the alternative, the withdrawal of the proceeds is void as against the plaintiff pursuant to s. 4 of the Assignments and Preferences Act.
[12] Do these amendments go beyond the factual matrix from which the original claims arose? In my view, they do not. At all times, the personal defendants were aware that the plaintiff asserted they acted improperly and identified their personal liability for their conduct. The issue of the insolvency of the numbered company was raised. The amendments are properly characterized as alternative claims for relief or statements of different legal conclusions not based on any new facts. Accordingly, they are not subject to any limitation period.
[13] On the issue of the amendment to plead that the numbered company is insolvent, I am satisfied that it should be permitted. It alleges a fact that the plaintiff wishes to prove. It is not irrelevant to the issues in the proceeding.
[14] With respect to the amendments, there is no prejudice to the defendants that cannot be compensated by costs or an adjournment. Therefore, the plaintiff’s motion to amend the statement of claim is allowed and the claim may be amended.
[15] The matter is under the simplified procedure. Examinations for discovery have already been conducted. The defendants are entitled to file a statement of defence to the amended statement of claim. With respect to the statement of defence to the amended statement of claim, the plaintiff shall pay the defendants’ associated costs in the amount of $250, forthwith.
[16] With respect to additional documentary disclosure, the defendants seek $500. While the amount is reasonable, in the circumstances, it need not be paid at this time. This is not a case where the plaintiff moved to amend the claim on the eve of trial and significant additional investigation is required. The defendants have not thrown away costs with respect to the documentary disclosure. If additional documents need to be disclosed, these are in addition to documents already provided.
[17] With respect to the discoveries, if the defendants conduct further discovery, they are entitled to recover up to $750 which shall be payable by the plaintiff to the defendants in any event of the cause (at the conclusion of the action regardless of whether the plaintiff is successful). This is because the discoveries are limited to two hours under the simplified procedure.
[18] If the parties are unable to agree on costs, I will accept written submissions limited to two pages plus a costs outline, bill of costs and any relevant offers to settle. The submissions are to be delivered to me at the John Sopinka Court House in Hamilton. The plaintiff shall have until March 25. The defendants shall have until April 1 to respond. If I receive no submissions by March 25, the issue of costs will be deemed settled.