COURT FILE NO.: C-919-12
DATE: 2019/11/14
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Strassburger Holdings Limited and Strassburger
Windows and Doors Limited, Plaintiffs
AND:
XCG Consultants Ltd., Defendant
XCG Consulting Limited, Tom Williams, D. Grant Walsom, Kevin Shipley, Philip John Gray and Christine L. Hill, Proposed Defendants
BEFORE: Justice G.E. Taylor
COUNSEL: Natalie Mullins and Jessica Boily, Counsel for the Plaintiffs/Moving Parties
Christopher Reain and Matthew Shiota, Counsel for the Defendant/Responding Party
Alex Flesias, Counsel for the Proposed Defendants, XCG Consulting Limited, Tom Williams, D. Grant Walsom and Kevin Shipley
Peter Hertz, Counsel for the Proposed Defendants, Philip John Gray and Christine L. Hill
HEARD: September 13, 2019
ENDORSEMENT – motion to add parties
and to Amend Statement of Claim
Introduction
[1] The plaintiffs seek to add a number of defendants to the action and to amend their Statement of Claim to assert new claims against the new defendants.
[2] The proposed new corporate defendant is XCG Consulting Limited (“New XCG”) and the proposed individual defendants are the officers and directors of XCG Consultants Ltd. (“Old XCG”) at the time New XCG was incorporated.
[3] The plaintiffs also seek to increase the amount claimed as damages from $5,000,000 to $8,000,000.
[4] The thrust of the plaintiffs’ position on this motion is that during the currency of this proceeding, New XCG was incorporated and the business and assets of Old XCG were transferred to it for the purpose of defeating the plaintiffs’ claims.
Background
[5] The plaintiffs, or one of them, own property located at 646 Colby Drive, Waterloo, Ontario. In or about 1996, the plaintiffs became aware that the Colby property was contaminated with hydrocarbons. The plaintiffs retained Old XCG, an engineering firm with expertise in environmental contamination, for the purpose of providing advice with respect to the hydrocarbon contamination of the Colby property. Old XCG supervised the removal of a quantity of hydrocarbon contaminated soil but advised the plaintiffs that it was not necessary to remove all of the contaminated soil. In or about 2010, the plaintiffs learned that some of the hydrocarbon contamination on the Colby property had migrated onto the property of an adjoining owner. This action was commenced in 2012.
[6] On March 27, 2015, New XCG was incorporated. The plaintiffs were not advised of the incorporation of New XCG. Counsel for the plaintiffs learned by happenstance of the incorporation of New XCG in or about November or December 2018 while preparing for a mediation in the present action. According to the Corporation Profiles of Old XCG and New XCG they share the identical mailing addresses and officers and directors. The officers and directors are the proposed individual defendants.
[7] A review of the website of Old XCG from 2013 and the website of New XCG from February 2019 discloses significant similarities. Both refer to XCG (without disclosing that it was Old XCG) being founded in 1990. At the top of both websites, in bold letters, are the letters “XCG” with smaller script below stating “Environmental Engineers & Scientists”. In small script at the bottom of the webpage of Old XCG are the words “Copyright 2011 XCG Consultants Ltd.”. In small script at the bottom of the webpage of New XCG are the words “Copyright 2019 XCG Consulting Limited”.
[8] The proposed amended Statement of Claim alleges that New XCG was incorporated for the purpose of acquiring and continuing the business of Old XCG. It is further alleged that New XCG acquired the assets of Old XCG for the purpose of avoiding, defeating, hindering, or delaying the payment of damages to which the plaintiffs are entitled.
Discussion and Analysis
[9] Rule 26.01 of the Rules of Civil Procedure provides that in any stage of an action leave to amend a pleading shall be granted unless prejudice would result that could not be compensated for by costs or an adjournment.
[10] Although this matter is on a trial list, the trial is not imminent. Therefore it is not necessary to consider an adjournment.
[11] Although the defendant and the proposed defendants put forward in their responding material innocent explanations for the incorporation of New XCG, the timing of the incorporation of New XCG raises certain questions. It would be open to a trier of fact to conclude, based on a review of the websites, that some effort was taken to not draw attention to the existence of New XCG, apparently carrying on the same business as Old XCG.
[12] Although I am not moved by the argument that the plaintiffs should have regularly updated corporate searches for XCG to discover the incorporation of New XCG, the expiry of the limitation period can be pleaded in a Statement of Defence. It is my view that, although not legally necessary, the XCG entities could have notified the plaintiffs of the incorporation of New XCG which in my view would be of assistance in determining the commencement of the limitation period.
[13] In my view, the plaintiffs moved with sufficient dispatch to seek amendments to the Statement of Claim after becoming aware of the incorporation of New XCG.
[14] The defendants object that insufficient particulars of the claim for fraud have been provided. The plaintiffs are presumed to be aware that there could be significant adverse cost consequences if the allegations of fraud cannot be proven. I do not find this to be a reason to disallow the proposed amendments.
[15] In my opinion, the allegations raised by the plaintiffs arising out of the incorporation of New XCG are more conveniently dealt with in the present action rather than awaiting attempts by the plaintiffs to enforce their judgment only to find that Old XCG does not have sufficient assets to satisfy the amount owing. The proposed individual defendants were all officers and directors of the XCG entities when New XCG was incorporated. No business reason has been put forward to justify the incorporation of New XCG. I presume all officers and directors were aware of and consented to the incorporation of New XCG. I am also mindful that the plaintiffs may very well be exposing themselves to significant liability with respect to costs if the new claims are ultimately not proven.
Conclusion
[16] An order will issue granting leave to the plaintiffs to issue an Amended Statement of Claim in the form attached to the Notice of Motion.
[17] If the parties are unable to agree on the costs of this motion, they may make submissions in writing. The parties are reminded that this was a practice motion to amend a pleading. Cost submissions are not to exceed three pages exclusive of a Costs Outline and Bill of Costs. Cost submissions of the plaintiffs are to be submitted within 14 days of the release of this Endorsement. Cost submissions of the Old XCG and the added parties are to be submitted within 28 days of the release of this Endorsement. Counsel are directed to file electronic copies of their cost submissions at Kitchener.Superior.Court@ontario.ca to my attention.
G.E. Taylor J
Date: November 14, 2019