COURT FILE NO.: CV-17-CV-569369

MOTION HEARD: 2019-11-19

REASONS RELEASED: 2020-03-10

SUPERIOR COURT OF JUSTICE – ONTARIO

BETWEEN:

NUVISION HEALTH INC. Plaintiff/Defendant by Counterclaim

• and –

TEVA CANADA LIMITED Defendant/Plaintiff by Counterclaim

BEFORE: MASTER D. E. SHORT

COUNSEL: Colby Linthwaite, for the Defendant/Plaintiff by Counterclaim (Moving Party) Anna Tombs and Robert Sniderman (student at law), for the Plaintiff/Defendant by Counterclaim (Responding)

REASONS RELEASED: March 10, 2020

Reasons for Decision

I. Background

[1] This action arises from a somewhat novel system for making prescription drugs available in situations where normal retail “drugstore” was not readily accessible.

[2] Originally, NuVision Health Inc. (“NuVision”) acted as a pharmacy which managed remote, automated, drug dispensing kiosks through which it sold generic drugs manufactured by Teva Canada Limited (“Teva”).

[3] Teva carries on business as a manufacturer, distributor, and promoter of generic drugs.

[4] The relationship between NuVision and Teva was governed by a standard-form, fixed term, written agreement prepared by Teva (the "Contract"). The term of the Contract was three years, beginning on January 1, 2015. Pursuant to the Contract, NuVision was required to perform certain services for Teva aimed at promoting generic medication and, in exchange, Teva was required to pay NuVision a fixed fee per quarter, which NuVision and Teva specifically agreed, was the fair market value for such services (as expressly set out in the Contract).

[5] NuVision commenced this lawsuit against Teva in February 2017. It seeks damages from Teva for breach of the Contract. NuVision alleges that it provided all of the services required under the Contract in 2015 and 2016, but that on July 7, 2016, Teva purported to unilaterally terminate the fixed-term Contract, allegedly, without any proper basis for doing so.

[6] The present motion is brought by the defendant Teva with a view to amending its defence and counterclaim and to add a Third Party claim. This Motion raises significant issues in respect the application of any limitation periods applicable to Teva's proposed amendments, as well as the availability of the amendments, in light of its history to date of this action before this court.

II. Timeline of the Proceeding

[7] Following the 2016 termination, NuVision commenced this action against Teva on February 9, 2017. Teva served a Statement of Defence and Counterclaim on March 23, 2017. NuVision served a Reply and Defence to Counterclaim on May 30, 2017.

[8] Sometime in 2017, Terry Reid, Teva's in-house lawyer, goes onto the Ontario College of Pharmacists website and learns that NuVision is "Not entitled to operate - sold".

[9] On August 23, 2018, Teva brought a motion for security for costs, which was dismissed with costs awarded to NuVision. My previous Reasons for Decision with respect to that motion were released on December 18, 2018. In those reasons, NuVision was held to be impecunious, and its claim was described as having a "good chance of success".

[10] Subsequently, on March 22, 2019, NuVision brought a summary judgment motion which was originally scheduled to be returnable on August 1, 2019. On April 12, 2019, NuVision served materials for the summary judgment motion. On May 22, 2019, Teva served responding and cross motion materials for summary judgment. NuVision served reply materials on June 20, 2019.

[11] Significantly, in my view, it would appear that in October 2017, “Teva learns that NuVision on October 24, 2016 (after threatening to sue but before commencing the claim), NuVision had sold all or "substantially all" its assets to a "subsidiary of its principal creditor'', both unidentified.”

[12] More recently, on July 2, 2019, at Teva's request, NuVision's summary judgment motion was adjourned and made returnable November 29, 2019. In light of Teva's numerous delays, NuVision opposed the adjournment and (significantly in my view) Justice Dow ordered the November 29, 2019 summary judgment date would be peremptory to Teva.

[13] Also on July 2, 2019, Teva scheduled this Pleading Amendment Motion to be heard on August 1, 2019. NuVision's counsel did not receive any motion materials from Teva for the Pleading Amendment Motion and therefore confirmed with the Court, on multiple occasions, that Teva's Pleading Amendment Motion was still scheduled for August 1, 2019. However, (again significantly in my view) the motion date passed without receipt of any materials or any further communication from NuVision's counsel in respect of this motion.

[14] The factum filed before me on behalf of the responding plaintiff asserts:

“17. Now, on the eve of summary judgment and after cross-examinations for the Summary Judgment Motion have taken place, Teva has brought the Pleading Amendment Motion, which it has scheduled a mere ten days in advance of the Summary Judgment Motion.”

[15] This Pleading Amendment Motion proceeded before me on November 19, 2019.

[16] On the following day, November 20th, Justice Kimmel dealt with the postponement of the parties’ Summary Judgment motions. Her endorsement reads in part:

“The issue that I must decide today is whether to allow the plaintiff to proceed with its summary judgment motion on November 29, 2019, as scheduled .

I am very concerned about the defendant’s conduct in that it does appear to be strategic and designed to prevent the impecunious plaintiff from reaching a quick and efficient determination of its claim for breach of contract. However, the Court of Appeal has been clear that partial summary judgment is not appropriate and with the withdrawal of day of the defendants cross-motion for j [on the counter claim] which raises issues and evidence that will overlap with the plaintiffs claim) I feel that the plaintiff summary judgment motion cannot proceed as presently constituted. Judgment on the counter… I feel that plaintiffs summary judgment motion cannot proceed as presently constituted.

I am ordering that the plaintiffs motion for S.J. be adjourned. Once Master Short’s decision of the November 19, 2019 hearing is released the parties are to attend in CPC to set a timetable that, in my view, should work towards a summary trial with an early trial date to be fixed within the parameters of the necessary intermediary steps.”

[17] Thus, with the guidance of Justices Dow and Kimmel, I turn to the motion before me.

III. The Defendant’s Proposed Amendments and Third Party Claim

[18] As outlined above, in 2015, the plaintiff NuVision and the defendant Teva executed a contract. On July 7, 2016, Teva terminated that contract.

[19] Teva asserts that in July and August 2016, “in letters written by its guiding mind, Isla Samaratunga ("Samaratunga"), NuVision thrice threatened to sue Teva for $675,000 which NuVision claimed that it was owed pursuant to the contract.”

[20] NuVision commenced this action in February 2017. The Statement of Claim alleged that Teva owed NuVision $675,000 in damages for breach of contract. Teva defended in part by asserting that NuVision had repudiated the contract through non-performance, and that Teva had accepted that repudiation. Teva counterclaimed for disgorgement of $300,000 already paid by Teva for services which Teva asserted had not actually been provided.

[21] The defendant asserts:

“ Teva brought a security for costs motion. In response to that motion, Samaratunga swore an affidavit dated October 16, 2017, in which she testified that in October 2016, NuVision had "sold its assets" or (elsewhere) "substantially all of its assets" to "a subsidiary of its principal creditor in exchange for settlement of all its debts to its principal creditor:" (The resulting impecuniosity of the company was its defence to the motion. ) ”

[22] Specifically, Teva’s counsel asserts:

When cross-examined on her affidavit in March 2018, Samaratunga said she didn't recall if any assets were excluded from the sale. When asked about the terms of the sale, she refused the question. She acknowledged the existence of a formal asset purchase agreement pursuant to which NuVision's assets had been transferred, but refused to produce that agreement. These refusals were maintained for more than a year.

[23] However, it would appear that no motion was brought at any time to compel answers to any of those refusals.

[24] To a large extent the position of Teva turns on the weight to be given to the point in time in which the actual asset purchase agreement was disclosed by the plaintiff. Teva’s factum asserts:

10. In a record in support of its motion for summary judgment, served on June 20, 2019, NuVision finally produced the asset purchase agreement (the "Agreement"), by which NuVision's assets were transferred.

11. The parties to the Agreement are MedAvail Technologies, Inc. ("MedAvail"), a creditor of NuVision, On The Spot RX Inc. ("On The Spot") a subsidiary of MedAvail, NuVision, and Samaratunga in her personal capacity. The terms of the Agreement make clear that NuVision conveyed all of its assets of value to On The Spot save for NuVision's contract with Teva (and thus the chose in action which it asserts in this proceeding.)

[25] Teva now wishes to amend its counterclaim to assert that by conveying all its assets of value, except its rights with respect to the Teva contract, NuVision violated the Fraudulent Conveyances Act and the Assignments and Preferences Act of Ontario.

[26] Teva also seeks to commence a third party claim against Samaratunga, MedAvail and On The Spot, the other parties to the Agreement, “on the basis that the asset sale violated those statutes and the Bulk Sales Act of Ontario. In the case of Samaratunga, Teva also seeks a declaration that she breached her duty of good faith and honesty in contractual performance, that she caused NuVision to breach the duty of good faith and honesty in contractual performance, and that she should therefore be jointly and severally liable with NuVision for damages sought by Teva in its counterclaim.

[27] Significantly the moving defendant asserts:

“Teva did not become aware that the amendment sought to the counterclaim and the bringing of the third party claim were appropriate until late June 2019, when it reviewed the copy of the Agreement attached to Samaratunga's affidavit sworn June 19, 2019.”

IV. Applicable Law (1)

[28] Teva brings this motion pursuant to Rules 26.01 and 29.02(1.2) asserting that “as both Rules are mandatory”, the only issue is whether NuVision can establish non-compensable prejudice.

[29] Rule 29.02(1.2):addresses issuance of a Third Party Claim, With Leave :

29.02(1.2) A third party claim may be issued at any time with the plaintiff's consent or with leave, which the court shall grant unless the plaintiff would be prejudiced thereby. (my emphasis)

[30] However, that Rule further provides:

PREJUDICE OR DELAY TO PLAINTIFF

29.09 A plaintiff is not to be prejudiced or unnecessarily delayed by reason of a third party claim, and on motion by the plaintiff the court may make such order or impose such terms, including an order that the third party claim proceed as a separate action, as are necessary to prevent prejudice or delay where that may be done without injustice to the defendant or the third party. R.R.O. 1990, Reg. 194, r. 29.09.

[31] In Apotex Inc. v. Abbott Laboratories Limited, 2018 ONSC 7736 Mr. Justice Lederman of the Superior Court recently summarized the law on the amendment of pleadings at the outset of his reasons:

1. These are two motions, both brought by the defendants, to amend their pleadings. They are governed by rule 26. 01. The words of the rule and the case law that has developed in respect of it demonstrate that there is what amounts to, a predisposition that such a motion will be granted. The rule is mandatory. It states:

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. [Emphasis added, in original]

2. Absent non-compensable prejudice or that the claims being advanced are untenable at law, an amendment will be granted. "The motion judge has jurisdiction to refuse to allow amendments that are not tenable in the law." Any prejudice relied on to oppose an amendment must arise from the amendment. Any pre-existing prejudice unconnected to the amendment will not suffice. "Concern that proposed amendments to add new causes of action and parties would reconstitute and lengthen what is already a lengthy and complex commercial litigation cannot be allowed to emasculate the well-established rule that amendments should be presumptively approved..." “Delay without more is not prejudicial.” [footnotes omitted, my bolding]

[32] Counsel directed me to a decision of Justice R.A. Clark, whose analysis I found particularly helpful. In Pickering Harbour Co v Barton, [2006] OJ No 4394, 58 CLR (3d) 201, 39 CPC (6th) 293, 152 ACWS (3d) 818, 2006 CarswellOnt 6762, 2006 37135, it was held:

14 In summary, then, I am not convinced that, beyond delay, there will be any prejudice to the plaintiff that cannot be compensated for by costs. The mere fact that delay will be occasioned by adding a third party does not, without more, amount to prejudice such that leave to join a third party should not be granted: Pringle v. Snyder's Potatoes (Preston) Ltd., [1988] O.J. No. 2818 (Dist. Ct.); Ontario Mortgage Corp. v. Dubinsky, supra. In Medeiros,[2002 49431 (ON SC), 59 O.R.(3d) 136] Chapnik J., citing Dubinsky, as well as a number of other authorities, held that “the prejudice contemplated by rule 29.02(1.2) belies more than inconvenience and the additional work which flows inevitably when a third party is added. The court must evaluate all relevant circumstances and factors to determine whether any delay will unduly prejudice the plaintiff.”.[my emphasis]

[33] The Party seeking to add the additional counterclaims asserts, in part, that it did not have knowledge of :

“(c) The intent behind, financial context for, and effect of, the sale. These is centrally relevant to the claims sought to be made in the amendment pursuant to:

i. the Assignments and Preferences Act: "every gift, conveyance, assignment or transfer, delivery over or payment of goods, chattels or effects, or of bills, bonds, notes or securities, or of shares, dividends, premiums or bonus in any bank, company or corporation, or of any other property, real or personal, made by a person when insolvent or unable to pay the person's debts in full or when the person knows that he, she or it is on the eve of insolvency, with intent to defeat, hinder, delay or prejudice creditors, or any one or more of them, is void as against the creditor or creditors injured, delayed or prejudiced. " and

ii. the Fraudulent Conveyances Act: "Every conveyance of real property or personal property and every bond, suit, judgment and execution heretofore or hereafter made with intent to defeat, hinder, delay or defraud creditors or others of their just and lawful actions, suits, debts, accounts, damages, penalties or forfeitures are void as against such persons and their assigns. ,,

28. The reality is that NuVision refused to produce the Agreement, or describe its terms, for as long as it felt it could, and is now seeking to employ the passage of time during its suppression of relevant information in order to argue that the Agreement is now beyond challenge. Rather than being prejudiced, NuVision is simply being forced to deal with the consequences of its own conduct.

[34] However, I am not convinced that the situation described meant that the Defendant could delay moving for the various information now sought in this 2017 action, in which it filed its initial Defence and Counterclaim in March of 2017.

V. Responding Plaintiff’s Position

[35] The Plaintiff’s factum (with footnotes omitted) asserts:

“18. The relief Teva seeks in the Pleading Amendment Motion is outside of the limitation period. Teva seeks to amend its counterclaim to plead that NuVision breached its duties of good faith and honesty in contractual performance, the Fraudulent Conveyance Act (the "FCA"), and the Assignments and Preferences Act ("APA") ( collectively, the "Proposed Causes of Action") when it entered into an asset purchase agreement (the "Asset Purchase Agreement") with On the Spot RX Inc. ("On the Spot") on October 24, 2016.

19. In its motion materials, Teva suggests that it did not learn of the material facts necessary to assert the Proposed Causes of Action until June 2019, when a copy of the Asset Purchase Agreement was produced in NuVision's reply materials (a copy of this agreement was not previously produced as it was not relevant to Teva's security for costs motion). This suggestion is simply not credible. Teva itself tendered evidence dated February 2017 which demonstrates its knowledge of the Asset Purchase Agreement between NuVision and On the Spot as of that time. In addition, by its own admission, Teva was aware that NuVision sold its assets to On the Spot by, at the absolute latest, September 1, 2017. Notwithstanding this knowledge, Teva elected not to include the Proposed Causes of Action in its counterclaim, served March 23, 2017, nor did Teva bring this Pleading Amendment Motion until after the expiry of the applicable limitation period. ”

20. Similarly, Teva's proposed third party claim is statute barred. The proposed defendants are Ms. Kate Samaratunga - NuVision's principal and sole shareholder - On the Spot, and MedAvail, and the allegations relate to a purported breach of the FCA, APA, and Bulk Sales Act. As stated above, by its own evidence, Teva was aware that NuVision entered into the Asset Purchase Agreement by February 2017 and, based on Teva's own admissions, knew the parties to this agreement by September 1, 2017. Accordingly, at the very latest, Teva's limitation period to issue a third party claim expired September 1, 2019, a month after Teva abandoned its originally scheduled Pleading Amendment Motion. (my emphasis throughout)

[36] I note in passing that Ontario’s Bulk Sales Act was repealed by virtue of the the Burden Reduction Act, 2017 effective as of March 22, 2017. (See: 2017, c. 2, Sched. 3, s. 1) That would seem to terminate any possible continuing potential liability under that statute in the present case.

VI. Applicable Law (2)

[37] The issues to be decided on this motion are whether Teva should be granted leave to amend its counterclaim and/or leave to issue its proposed Third Party claim.

[38] With respect to the Proposed Amendments to Teva's Counterclaim Rule 26 of the Rules governs the amendment of pleadings. There is no absolute right to amend pleadings, and the court has a residual right to deny amendments, where appropriate.

[39] While amendments are generally permitted, they should not be allowed if it would result in an injustice non-compensable in costs. Rule 1.04 sets out the overriding guidance as to the application of the Rules of Civil Procedure:

1.04 (1) These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits

Proportionality

(1.1) In applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding.

1.05 When making an order under these rules the court may impose such terms and give such directions as are just.

[40] The plaintiff submits that contrary to Teva's suggestion, Rule 26 is only "mandatory" after the Court has confirmed that there is no prejudice that cannot be compensated for by costs. In that regard I considered the Ontario Court of Appeal’s decision in Frohlick v Pinkerton Canada Ltd., [2008] OJ No 17, 2008 ONCA 3, 232 OAC 146, 88 OR (3d) 401, 62 CCEL (3d) 161, 49 CPC (6th) 209, 2008 CarswellOnt 66, 163 ACWS (3d) 371, 289 DLR (4th) 639. In his reasons P.S. Rouleau, J.A., writing on behalf of court, observed:

22 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.

23 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.

24 In my view, 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.

[41] Justice Rouleau specifically notes:

29 It is only after the court has determined that there is no prejudice that cannot be compensated for by costs or an adjournment that the mandatory nature of rule 26.01 comes into play. The rule then provides that the motion judge "shall" grant the amendment sought. This can be contrasted with the permissive wording of rule 5.04(2), which grants the motion judge a residual discretion to deny the relief sought, even in the absence of the kind of prejudice contemplated by the rules. In exercising this residual discretion under rule 5.04 the court may once again consider special circumstances.

[42] However, the common law is continually developing. Justice Rouleau’s decision was released on January 8, 2008. The Court of Appeal , later that year, on June 12, 2008, specifically addressed the unavailability of “special circumstances ” to circumvent the clear terms of the Limitations Act, 2002. In Joseph v Paramount Canada's Wonderland, [2008] OJ No 2339, 2008 ONCA 469, 90 OR (3d) 401, 294 DLR (4th) 141, 241 OAC 29, 56 CPC (6th) 14, [2008] ILR para G-2216, 166 ACWS (3d) 762, 2008 CarswellOnt 3495, a panel made up of Justices Feldman, MacFarland and Watt specifically held:

[13] The question to be answered now is whether the legislature intended to preserve the court's common law discretion to extend limitation periods under the new Act by applying the doctrine of special circumstances. As a matter of statutory interpretation, I have concluded that the answer must be no.

[15] Because s. 4 of the new Act mandates a two-year limitation period "[u]nless this Act provides otherwise", the court must look in the Act for the authority to derogate from the application of the two-year limitation period. These opening words compel the conclusion that the new Act is intended to be comprehensive.

[16] No specific provision in the new Act refers to the doctrine of special circumstances, or specifically allows a court to extend or suspend the running of the limitation period based on special circumstances. To the contrary, s. 21 of the Act precludes the addition of parties to an existing action after the expiry of a limitation period. The late addition of parties to an existing action was one of the main situations where the doctrine of special circumstances was traditionally applied at common law and under rule 5.04(2).

[17] Section 20, however, preserves the extension, suspension or other variation of a limitation period "by or under another Act". The question that therefore arises is whether the special circumstances doctrine that courts have applied at common law and in conjunction with the Rules of Civil Procedure constitutes “the extension, suspension or other variation of a limitation period or other time limit by or under another Act” (emphasis added).

[24] Because the Rules themselves are authorized to be made by the Courts of Justice Act, they are arguably made "under another Act". However, it is only the interpretation of the Rules by application of the common law that has incorporated the doctrine of special circumstances to extend limitation periods by adding parties or claims after the expiry of a limitation period. The Rules themselves do not do this. In my view, it would be extending the meaning of “under another Act” too far to interpret it as including the application of common law principles used to apply the Rules, even though the Rules themselves are made by regulation “under another Act”.

[25] I am reinforced in my view by s. 21 of the new Act, which specifically prohibits the addition of parties to an existing action after the expiry of the limitation period. Section 20 would conflict with s. 21 if it were interpreted to extend to the incorporation of the common law special circumstances doctrine, thereby allowing the possible addition of parties after the expiry of the limitation period where special circumstances exist, in conflict with s. 21.

[43] More recently, Justice H.A. Rady considered the application of these rules and in particular “discoverability” in Ismail v Nitty’ s Food Services Ltd., 2014 ONSC 4140, [2014] OJ No. 3499; 2014 ONSC 4140; 2014 CarswellOnt 10148; 242 ACWS (3d) 542; 69 CPC (7th) 215. The Court observed:

6 Rule 26 is mandatory and provides that an amendment shall be granted absent non-compensable prejudice. An intervening limitation period may be cause to refuse an amendment. Rule 5.04 is discretionary but the test remains the same - is there non-compensable prejudice?

7 Rules 5.04 and 26.01 must be interpreted in light of the Limitations Act, 2002, which does not permit the extension of a limitation period by virtue of special circumstances: Joseph v. Paramount Canada's Wonderland (2008), 2008 ONCA 469, 90 O.R. (3d) 401 (C.A.). However, the concept of discoverability is preserved in the Act.

8 In Pepper v. Zellers Inc. (2006), 2006 42355 (ON CA), 83 O.R. (3d) 648 (C.A.), Justice Lang commented on the discretionary nature of an order under Rule 5.04(2) as follows:

[A] rule 5.04(2) motion to add parties and, in this case, to add parties after the apparent expiration of a limitation period, is discretionary. While the threshold on such a motion is low, the motion judge is entitled to consider the evidentiary record to determine whether there is a live issue of fact or credibility about the commencement date of the limitation period.

Are Teva's Proposed Amendments Statute Barred ?

[44] Section 4 of the Limitations Act, 2002 provides that a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered. Section 5(b) defines "discovery" as 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 injury, loss, or damage alleged to have been caused by the defendant's act or omission.

[45] The law of discoverability does not require knowledge of the exact extent or type of harm suffered, or the precise cause of injury, in order for a limitation period to run. The question is whether the party advancing the claim knows enough facts to base a cause of action against the other party. If so, the claim has been “discovered” and the limitation period begins to run.

[46] NuVision’s counsel submits:

“Teva's assertion that it needed to review a copy of the Asset Purchase Agreement to plead the Proposed Causes of Action is unfounded and not correct in law. For example, in order to "discover" a claim under the FCA for the purposes of the Limitations Act, a party must have knowledge of the conveyance and the parties to the conveyance. In Stravino v Butinelli, { [2015] OJ No 1358, 2015 ONSC 1768, 252 ACWS (3d) 41, 53 RPR (5th) 275, 7 ETR (4th) 327, 2015 CarswellOnt 38092015 ONSC 1768, (paras. 67-69) } the Court dismissed a motion to amend a claim to add an FCA claim on the basis that it was statute barred because the applicant had discovered its FCA claim when it had knowledge of the conveyance and the parties to this conveyance. In this case, no document underlying the sale was required in order for the claim to be “discovered” for the purposes of the Limitations Act.

[47] Similarly, in order to "discover" a claim under the Assignment and Preferences Act for the purposes of the Limitations Act, a party need only know about the act which the party alleges unfairly preferred one creditor over another. For example, in PNA Holdings Ltd v Rydon Homes Ltd, {,[2011] OJ No 3539, 2011 ONSC 3858, 2011 CarswellOnt 7431, 206 ACWS (3d) 197} C.W. Hourigan J. (as he then was ) dismissed an action as statute barred when, over two years before the claim was brought, the plaintiff was aware of the sale of the property, the fact that a mortgage had been registered in the defendant's favour, and the fact that the mortgage had been discharged upon the sale. In this case, the Court dismissed the claim as statute barred despite the fact that the plaintiff was not even aware of the party to whom the property was sold.

[48] Section 5 of the Act states that a claim is discovered on the earlier of the following:

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).

[49] In that case the judge held that the plaintiffs were in possession of all of the necessary facts to assert their claim. At that point they knew that the Property had been sold, they knew that a mortgage had been registered and they knew that the mortgage had been discharged upon the sale of Property. As of that date, they knew that all of the facts listed in subparagraphs 5(a)(i) to (iv) of the Act, or, in the alternative, if they did not know them, a reasonable person with the abilities and in the circumstances of the plaintiffs would have known such facts. (my emphasis)

Failure to Serve Proposed Parties,

[50] Understandably, the Rules require that all persons potentially affected by an order be notified of the related motion:

37.07 (1) The notice of motion shall be served on any party or other person who will be affected by the order sought, unless these rules provide otherwise.

[51] In 1317621 Ontario Inc v Krauss, 2008 CarswellOnt 4621, Master Dash discussed the reference to “other person” in Rule 37.07(1) and stated that it “clearly means a person who is not a party to the action but who would be affected by an order made in the action". Similarly, in lvandaeva Total Image Salon Inc. v Hlembizky, 2003 CarswellOnt 868, the Ontario Court of Appeal interpreted the reference to “person who will be affected”. There, Justice Borins observed:

... the requirement of rule 37.07(1) that "any person or party who will be affected by the order" be given notice of the motion seeking the order, introduces an essential ingredient of due process. (my emphasis)

[52] I accept that On the Spot and MedAvail undoubtedly fall into the definition of "or other person who will be affected" under Rule 37.07(1 ). However, on cross-examination, Teva's legal counsel, admitted these entities were not notified of this motion. Teva did not tender any evidence which indicates that it even attempted to serve MedAvail and On the Spot.

[53] Pursuant to Rule 37.07(5)(a), the Court may dismiss a motion where it appears to the court that the notice of motion ought to have been served on a person who was not notified. This clause supports what I believe is the correct determination of this motion.

VII. Analysis

[54] Having considered the though and helpful submissions of counsel on both sides, I ultimately have been persuaded by the law and facts put forward by Plaintiff’s counsel that Teva "discovered" or “ought to have discovered” all of the material facts it now attempts to rely on to assert the Proposed Causes of Action by, at the very latest, September 1, 2017.

[55] On balance I am satisfied that Teva was aware that NuVision entered into the Asset Purchase Agreement by, at the very latest, March 23, 2017, when it served its Statement and Defence and Counterclaim. Teva's own pleading states “NuVision sold its assets in bulk and ceased all pharmacy dispensing operations on or about October 24, 2016”

[56] In addition, in support of Teva's motion for security for costs and cross motion for summary judgment, Teva produced two affidavits from its former legal counsel, Mr. Terry Reid, in which he swears to knowledge of the Asset Purchase Agreement. For example, in Mr. Reid's affidavit dated September 8, 2017, he swears that on May 9, 2017, he accessed and downloaded information from the Ontario College of Pharmacists which indicated NuVision was sold. He appended a printout from this website to both his affidavit sworn September 8, 2017, and his affidavit sworn May 22, 2019. When questioned about this printout on cross-examination, Mr. Reid confirmed his knowledge of NuVision's asset sale and gave these answers:

A: So you are asking me if -- when was this prepared? So March 23, 2017, was I aware that NuVision had sold its assets in bulk and ceased operating all pharmacy dispensing operations on or about October 24, 2016? I knew what the College website, I think, had said.

Q: And that was that it sold it to On The Spot RX?

A: Yes.

Q. How did you know that NuVision had sold its assets to On The Spot Rx?

A. If you look up the College of Pharmacists' website, it states it.

Q. Did you look up the College of Pharmacists' website on or around September 1, 2017?

A. I looked it up. I don't remember when exactly.

Q. Is it fair to say it would have been in or around the time that you made this phone call? [according to Mr. Reid's affidavit, the phone call was made September 1, 2017]

A. Probably.

[57] If these asserted entitlements mattered, it seems odd they were not sought to be enforced promptly.

[58] I also give credence to the Plaintiff’s submission regarding the ownership of the claim asserted in regard to the main action:

“In addition, Teva knew or ought to have known that NuVision did not sell rights to this action as part of the Asset Purchase Agreement. It is a basic principle of corporate law that, in contrast to a share purchase agreement, liabilities are often retained by the vendor in an asset sale. For example, Ontario Corporate Law and Practice [Carswell] describes an asset sale as follows:

... the vendor usually has superior knowledge and always has an existing responsibility for liabilities, the invariable principle is that the purchaser is not to become liable for any undisclosed or surprise liabilities. Also, while the purchaser may be willing to assume specified liabilities as part of the purchase price, the vendor may prefer to discharge the liabilities himself. [emphasis added]

… In contrast, Ontario Corporate Law and Practice describes a share purchase agreement as follows:

When buying shares, the purchaser (economically, but not legally) assumes the liabilities because she is buying the entire target company, which includes its liabilities.” [emphasis added]

[59] As well, in my view, 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.

[60] Further, I am convinced that the proposed Third Party Claim is statute barred. Section 5 of the Limitations Act 2002 is clear and unequivocal - an action is required to be commenced within two years of the date the claim was discovered. This section applies equally to the issuance of third party claims. Moreover, section 21 of the Act specifically prohibits the addition of parties to an existing action after the expiry of the limitation period. In fact, the Ontario Court of Appeal has stated that this section of the Limitations Act acts as “an absolute bar to the addition of a party to an already existing action” upon the expiry of the limitation period.

[61] Yet another ground of concern flows from Rule 37.07

[62] In, Parvin v Richardson, 2015 ONSC 1778, para. 31 in dismissing a motion to issue a third party claim on the basis that it was statute barred, the Ontario Superior Court of stated:

It is well-settled law that the court has no authority to allow an action to be commenced after the expiry of a limitation period, subject to discoverability .... To permit such a claim would force the parties to a two-step process of issuance of a third party claim and then a subsequent motion for summary judgment to strike out the third party claim on the grounds that it is statute barred. [emphasis added]

[63] Rule 29.09 prohibits the issuance of a third party claim if the plaintiff will suffer prejudice. Rule 29.09 states:

29.09 A plaintiff is not to be prejudiced or unnecessarily delayed by reason of a third party claim, and on motion by the plaintiff the court may make such order or impose such terms, including an order that the third party claim proceed as a separate action, as are necessary to prevent prejudice or delay where that may be done without injustice to the defendant or the third party. [emphasis added]

[64] In Wilson v Servier Canada Inc., 2001 CarswellOnt 4267, para. 23, Justice Cumming denied leave to issue a third party claim and commented as follows:

Our society's concept of justice dictates that fairness is inherently fundamental to our court processes. Timeliness in the determination of claims on their merits is critical to achieving fairness to the parties. Justice must be done and it must be seen to be done in a timely way and manner. It is prejudicial to plaintiffs to deny them fairness through further substantial delays by granting Servier's motion. To grant Servier's motion would inevitably have the result of delaying and frustrating a determination of the common issues on their merits. A basic objective of the judicial system is access to justice. [emphasis added]

[65] Here, it is clear to me that NuVision will suffer significant prejudice by virtue of the added complexity and additional delays if Teva's statute barred third party claim is issued now. NuVision, an impecunious plaintiff, already defeated Teva's motion for security for costs, obtained a summary judgment motion date that is peremptory on Teva, completed cross-examinations for the Summary Judgment Motion, and has prepared for the imminent Summary Judgment Motion.

[66] As noted at the outset of these reasons, the Plaintiff’s Summary Judgment motion had to be adjourned, to permit this already delayed motion to proceed. To further delay this matter will only stretch the impecunious NuVision thinner by way of the additional legal and other costs and unproductive time.

[67] The Defendant withdrew its motion for summary judgment. Proportionality and fairness dictate to me that it is now time for the key issue of this action to be addressed on the merits with each side having an opportunity to put their best foot forward.

[68] In the Annual Review of Civil Litigation, 2014, Rachel Gold and I contributed an article entitled: “Proportionality. In Theory and Practice” ( pp 373-408.). The preface to the article was a quotation from the decision of the Supreme Court of Canada in Hryniuk v. Mauldin, 2014 SCC 7, para.59:

What is fair and just turns on the nature of the issues, the nature and strength of the evidence and what is the proportional procedure.

[69] We concluded that article with this observation:

Going forward, judges and members of the bar are required to take on a proactive role in ensuring that proportionality in the summary judgment motions is observed. In the face of the current public system of justice in which disputes take years to resolve and costs are increasingly rising such that the system is becoming largely inaccessible to the average Canadian, the increased use in recognition of the proportionality principle in summary judgment motions and other rules of the court will lead us in the right direction: toward justice system in the public interest that can be accommodating and flexible, fair and just, and within reach of almost all, if not all, Canadians.

[70] Taking all the foregoing into account, I am satisfied that Teva should not be granted leave to amend its counterclaim as the Proposed Causes of Action consist entirely of new causes of action and are therefore statute barred. By Teva's own admissions, it was aware of the material facts it now uses to assert these causes of action by, at the latest, September 1, 2017. Similarly, the limitation period for Teva to issue a third party claim had also expired.

VIII. Disposition

[71] In the result the motion of the Defendant Teva Canada Limited is dismissed in its entirety.

[72] Unless there were offers to settle this motion were exchanged, I see no reason why costs on a partial indemnity basis, payable within 30 days, should not be awarded.

[73] If the parties are unable to agree upon a form of order or an appropriate costs award, I may be contacted in order that an appropriate protocol can be established for submissions by the parties.

[74] The previous endorsement of Kimmel J. directs that, now that these reasons have been released, the parties are to reattend in Civil Practice Court to set a timetable that should work towards “a Summary Trial with an early trial date”. I commend the wisdom of that direction.

Master D. Short

Released: March 10, 2020

DS/ R311