Court File and Parties

COURT FILE NO.: CV-17-578649

RELEASED: 2020/12/07

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Dealer’s Choice Preferred Collision Centre Inc. v. Peter Kircher, 918402 Ontario Inc., and Downtown Fine Cars Inc.

BEFORE: Master Graham

HEARD: December 4, 2020

COUNSEL: Clifford I. Cole and Matthew Karabus for the plaintiff (moving party) David Levangie for the defendants

REASONS FOR DECISION

(Motion to correct a misnomer in the name of the plaintiff)

[1] John Keen and the defendant Peter Kircher have had a business relationship since 1999. Kircher is the principal of the corporate defendants 918402 Ontario Inc. and Downtown Fine Cars Inc. (“DFC”) which operate a Porsche dealership in Toronto and an Audi dealership in Markham. On January 28, 1999, Keen incorporated Downtown Auto Collision Centre Inc. (“Downtown Auto”) to carry on business as an auto body repair shop. Prior to 2012, DFC referred customers to Downtown Auto which was also known as “Downtown Collision”.

[2] In February 2012, Keen was charged with 52 counts of fraud under $5,000.00 and 52 counts of uttering forged documents in relation to allegedly fraudulent vehicle repairs. Although these charges were all withdrawn after approximately a year, DFC informed Keen that Porsche Canada had expressed a concern about DFC’s relationship with Downtown Auto, such that DFC could no longer refer customers to it.

[3] Meanwhile, Kircher owed Keen $500,000.00 on an outstanding unsecured loan. In order to resolve this outstanding indebtedness and to rehabilitate their business relationship, Keen and Kircher entered into an Agreement dated May 6, 2013. The parties to the agreement are described as:

“JOHN KEEN, businessman, of Toronto, Ontario (“Keen”), and DEALER’S CHOICE PREFERRED COLLISION CENTRE INC., an Ontario corporation (“Dealer’s Choice”), (Keen and Dealer’s Choice collectively herein sometimes referred to as the “Keen Group”), OF THE FIRST PART, and DR. PETER KIRCHER, 918402 ONTARIO INC. and DOWNTOWN FINE CARS INC. (herein sometimes referred to as “918”) OF THE SECOND PART”

[4] The May 6, 2013 Agreement provided for repayment of Keen’s loan to Kircher, and a release between Keen on one hand and Kircher, his wife, his business partner and his lawyer on the other. Most significantly for the purpose of this action, the Agreement also contained a term whereby 918402 Ontario Inc. would refer all customers requiring body and collision services for damaged Porsche and Audi vehicles to Dealer’s Choice Preferred Collision Centre Inc. (“Dealer’s Choice”) for ten years.

[5] On July 11, 2017, Dealer’s Choice commenced this action, alleging that the defendants breached the May 6, 2013 Agreement by ceasing to refer customers with damaged Porsche vehicles to Dealer’s Choice. The defendants have counterclaimed against Dealer’s Choice and Keen, alleging that in May, 2016, they learned that Dealer’s Choice and Keen breached the Agreement by submitting fabricated or otherwise false invoices and other documentation to Aviva Canada Inc. for work that was not performed or parts that were not ordered, and by offering DFC’s customers referred to them a “kickback” for participating in the scheme. The counterclaim is for damages for breach of contract, damage to reputation, loss of goodwill, and interference with their economic, business and contractual relations.

[6] It subsequently came to light that the party named in the May 6, 2013 Agreement and as the plaintiff in this action as Dealer’s Choice Preferred Collision Centre Inc. is not an incorporated entity, nor does it have any other legal status. The business names registered by Downtown Auto Collision Centre Inc. for the period March 6, 2012 to March 5, 2017 are Dealers Choice Preferred Luxury Collision, Dealers Choice, and Dealers Choice Preferred Collision. Dealer’s Choice Preferred Collision Centre was not a registered business name and s. 11(2) of the Business Corporations Act, R.S.O. 1990, c. B. 16 prohibits the use of the words “Limited”, “Incorporated”, or “Corporation” or any abbreviations of those words in a business name or style.

[7] The plaintiff now moves for an order to amend the title of proceedings to correct what it submits is the misnomer of the plaintiff by substituting “Downtown Auto Collision Centre Inc. o/a Dealer’s Choice Preferred Collision Centre Inc.” for the current plaintiff “Dealer’s Choice Preferred Collision Centre Inc.”.

Applicable Rule and Case Law

[8] The motion is brought under rule 5.04(2):

5.04(2) At any stage of a proceeding the court may by order add, delete or substitute a party or correct the name of a party incorrectly named, on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.

[9] Most of the authorities on the issue of when the name of a party may be amended to correct a misnomer address circumstances in which a plaintiff seeks to amend the name of a defendant. The law in this regard is well summarized in Sorokataya v. Keith, 2010 ONSC 4453 (at paras. 7-9):

7. Rule 5.04(2) gives the court discretion to correct the name of a party incorrectly named unless prejudice would result that could not be compensated for by costs or an adjournment. Although a party may not be added after the expiry of the applicable limitation period, per s. 21(1) of the Limitations Act, the discretion to correct a “misnomer” does not require a consideration of the applicable limitation period. (Limitations Act, 2002, s. 21(2); Spirito Estate v. Trillium Health Centre, 2008 ONCA 762; Kitcher v. Queensway General Hospital (1997), 1997 CanLII 1931 (ON CA), 44 O.R. (3d) 589 (C.A.)) This is because the test for misnomer is such that the party who has been misnamed will still have been put on notice of the claim and will therefore not be at any disadvantage by being deprived of the benefit of the limitation period. (Ormerod v. Strathroy Middlesex General Hospital, 2009 ONCA 697)

8. It appears to be settled that the test for misnomer comes from the English Court of Appeal decision Davies v. Elsby Brothers, Ltd., [1960] 3 All E.R. 672 (Eng. C.A.), where it was held:

The test must be: How would a reasonable person receiving the document take it? If, in all the circumstances of the case and looking at the document as a whole, he would say to himself: “Of course it must mean me, but they have got my name wrong”, then there is a case of mere misnomer. If, on the other hand, he would say: “I cannot tell from the document itself whether they mean me or not and I shall have to make inquiries”, then it seems to me that one is getting beyond the realm of misnomer. One of the factors which must operate on the mind of the recipient of a document . . . is whether there is or is not another entity to whom the description on the writ might refer. [emphasis added]

9. This test is known as the “litigating finger” test. In other words, would a reasonable person, upon reading the document, know that she is the intended recipient (or that the “litigating finger” was pointed at her)? The Ontario Court of Appeal has suggested that there are two main elements at play with regard to the litigating finger test.

10. First, the plaintiff must intend from the beginning to name the correct party.

11. Second, the intended defendant must have had notice of the claim. As noted in Ormerod and Spirito, the finding of what the intended defendant would have known is primarily a finding of fact. This decision is to be made by the motion judge on the basis of the evidence presented by the parties and is entitled to deference by the appellate court.

[10] The issue of when a claim may be amended to substitute a plaintiff on the basis of misnomer was addressed in Corp. of Township of North Shore v. Grant, 2018 ONSC 503 (at paras. 21-23):

21 [T]he jurisprudence is clear that an amendment will be permitted where there is a “coincidence” between a plaintiff’s intention to sue and the intended defendant’s knowledge of the plaintiff’s intention. In Lloyd v. Clark, 2008 ONCA 343, the plaintiff was denied leave by the motion judge to name the Regional Municipality of Durham as a defendant in place of the Town of Ajax and the Corporation of the Town of Whitby. In a brief endorsement allowing the appeal, the Court of Appeal held:

The case law amply supports the proposition that where there is a coincidence between the plaintiff’s intention to name a party and the intended party’s knowledge that it was the intended defendant, an amendment may be made despite the passage of the limitation period to correct the misdescription or misnomer.

22 Although Lloyd was a case in which a plaintiff sought to substitute a defendant it has frequently been applied in cases in which a plaintiff seeks to substitute or add a plaintiff: see, for e.g., Streamline Foods v. Jantz Canada Corp., 2010 ONSC 6393 (Ont. S.C.J.), aff’d 2011 ONSC 1630 (Ont. Div. Ct.), 2012 ONCA 174 (Ont. C.A.); Tetreault v. Nussbaum, 2015 ONSC 6226 (Ont. S.C.J.); Asset Strategy Corp. v. Rodinia Lithium Inc., 2016 ONSC 5337 (Ont. S.C.J.).

23 Thus, an amendment to add the name of one or more plaintiffs to a statement of claim should be permitted notwithstanding the expiry of a limitation period where the court is satisfied that the plaintiffs sought to be added to an action were intended plaintiffs prior to the expiration of the limitation periods, that the defendant knew that they were intended plaintiffs, and where no prejudice arises that cannot be compensated for in costs. [emphasis added]

[11] To summarize, where a plaintiff seeks to amend or substitute the name of a defendant on the basis that the defendant has been misnamed, the issue is whether the intended defendant was given notice of the claim and ought reasonably to have known that the plaintiff’s “litigating finger” was pointed at them (Sorokataya, para. 9). Where, as in this case, a plaintiff seeks to amend or substitute another entity for itself, the issue is whether the “new” plaintiff was an intended plaintiff when the action was commenced and the defendant reasonably ought to have been aware of which entity was pointing its litigating finger in its direction (North Shore v. Grant, para. 23).

Issue on the motion

[12] The issue on the motion is whether the defendants, on receiving the statement of claim naming Dealer’s Choice Preferred Collision Centre Inc. as plaintiff, should reasonably have known that the actual party suing them (i.e. pointing its “litigating finger” in their direction) was Downtown Auto Collision Centre Inc. operating as Dealer’s Choice Preferred Collision Centre Inc..

Analysis

[13] The plaintiff’s action is based entirely on the defendants’ alleged breach of the May 6, 2013 Agreement. Specifically, the claims in paragraph 1 of the statement of claim are for:

(a) an order directing Downtown Fine Cars to specifically perform the May 6, 2013 Agreement (as defined in paragraph 4 below);

(b) an accounting of all Porsche and Audi repair business carried on by Downtown Fine Cars and referrals made by it to entities other than Dealer’s Choice from the commencement of the May 6, 2013 Agreement to and including the date of trial of this action (the “Accounting”);

(c) damages in the amount of $10,000,000.00 for breach of contract. [emphasis added throughout]

[14] The May 6, 2013 Agreement was reached following a period of negotiation between Mr. Sheppard, counsel for John Keen, and Ms. Perfetto, counsel for Kircher, 918402 Ontario Inc. and DFC. Although the parties’ materials include various emails and letters exchanged between their counsel during that negotiation, the crucial correspondence for the purpose of resolving the issue on the motion is Ms. Perfetto’s letter to Mr. Sheppard of May 1, 2013, which includes the following:

“There remain certain terms and provisions in your draft Agreement that are unacceptable to us as follows:

1. Your client cannot insist that Downtown Auto Collision Centre Inc. be a party to this Agreement for reasons already expressed, but which I will repeat, namely that as far as our clients are concerned Downtown Auto Collision Centre Inc. is not a party to whom they refer autobody work. The inclusion of Downtown Auto Collision Centre Inc. is adverse to your client’s interests given that the manufacturers and insurers have on-going concerns about your client. We do not understand the reason for your client’s insistence. In any event, Dealer’s Choice is the entity to which our client will refer its clients.” [emphasis added]

[15] In this letter, the defendants, through their counsel, rejected the inclusion of the proposed substituted plaintiff Downtown Auto Collision Centre Inc. as a party to the May 6, 2013 Agreement that is the sole basis for the plaintiff’s claim. As stated in Davies v. Elsby Brothers Ltd., supra, “one of the factors which must operate on the mind of the recipient of a document . . . is whether there is or is not another entity to whom the description on the writ might refer.” The defendants were being sued on the May 6, 2013 Agreement and would have had no reason to think that the intended plaintiff was different than the other contracting party, i.e. Dealer’s Choice Preferred Collision Centre Inc.. It defies logic for the plaintiff to suggest that the defendants might reasonably have thought that they were really being sued on the Agreement by Downtown Auto Collision Centre Inc., an entity that their counsel had, on May 1, 2013, specifically said could not be a party to the Agreement and which was ultimately excluded from it.

[16] The context in which the May 6, 2013 Agreement was made is important. One of the main purposes of the Agreement was to enable Keen to continue to do business with Kircher and his companies in the face of the recent fraud charges against him. As stated in the passage from the defendants’ counsel’s letter quoted above, the defendants and Keen needed Downtown Auto Collision Centre Inc. excluded from the Agreement “given that the manufacturers [i.e. Porsche and Audi] and insurers have on-going concerns about your client [i.e. Keen]”. Accordingly, the Agreement stipulated that the referrals from 918402 Ontario Inc. for Porsche and Audi body work were to be to Dealer’s Choice and not to Downtown Auto, which had been stigmatized by those charges. This supports the defendants’ position that they would have had no reason to think that Downtown Auto was the actual intended plaintiff.

[17] The fact that the named plaintiff Dealer’s Choice Preferred Collision Centre Inc. has no legal status also does not justify an order correcting a misnomer. Plaintiff’s counsel acknowledged during argument that the defendants had no reason to think that the named plaintiff Dealer’s Choice was not an incorporated legal entity. This makes sense; if Keen himself was unaware that Dealer’s Choice had no legal status when he entered into the May 6, 2013 Agreement, the defendants certainly could not have been expected to know.

[18] On February 28, 2012, while his fraud charges were pending, Keen incorporated Dealers Choice Preferred Luxury Collision Inc. (“Luxury Collision”) of which an associate Edward Cafferty was the sole officer and director. Luxury Collision sought but never obtained certification as a certified Porsche body shop. The plaintiff argued, and the defendants disputed, that Downtown Auto rather than Luxury Collision was the corporation behind the unincorporated Dealer’s Choice Preferred Collision Centre Inc.. There is little to be gained by weighing these arguments and making a determination as to the role of Luxury Collision. The point is that the proposed substituted plaintiff Downtown Auto was specifically excluded from being a party to the May 6, 2013 Agreement and was therefore not plausibly the actual plaintiff pointing the “litigating finger” at the defendants in the action for breach of the Agreement.

Summary and decision

[19] For these reasons, I conclude that the defendants, on receiving and reviewing the statement of claim, would have had no reason to think that the plaintiff pointing the “litigating finger” at them was other than the named plaintiff Dealer’s Choice Preferred Collision Centre Inc.. The plaintiff’s entire action is based on the May 6, 2013 Agreement with the defendants and the negotiated exclusion of Downtown Auto Collision Centre Limited from the Agreement eliminated any possible reason for the defendants to consider that Downtown Auto was the intended plaintiff. The fact that all parties to the May 6, 2013 Agreement were mistaken as to the status of Dealer’s Choice would not have given the defendants any reason to think that they were really being sued by Downtown Auto. The plaintiff is therefore not entitled to the amendment sought, and the motion is hereby dismissed.

Costs

[20] Counsel have agreed that the successful party on the motion should recover costs of $39,000.00 inclusive of fees, HST and disbursements. The defendants being the successful party, the plaintiff shall pay their costs fixed at $39,000.00. If counsel cannot agree as to when these costs shall be paid, they may arrange to speak to the matter before me by telephone conference.

MASTER GRAHAM

December 7, 2020