Court File and Parties

COURT FILE NO.: 18-CV-610614 MOTION HEARD: 20210119 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 9992987 Canada Inc., Plaintiff AND: Valguard Security Inc. et al., Defendants

BEFORE: Master Abrams

COUNSEL: J. Beitchman/S. Spitz, for the plaintiff B. Belmont, for the defendants IN PERSON: Messrs. Parray, Kovalov, Halatullah, Khanlarov and Kolesnik, proposed defendants

HEARD: November 4-5, 2020 and January 19, 2021

Reasons for Decision

The Nature of the Motion

[1] The plaintiff seeks leave to amend its statement of claim to correct what, it says, are misnomers and to permit related minor amendments.

[2] The motion in respect of Davaki Laud, Okishie Derrick, Lilia Harlenok, Andrew Page and Abby Joseph is granted, as not having been opposed by any of these five proposed defendants.

[3] The motion as it relates to each of Manas Parray, Oleksandr Kovalov, Jawid Halatullah, Javad Khanlarov and Dmitry Kolesnik was vigorously opposed and will be addressed by me, below. It was in respect of these five persons whom the plaintiff seeks to substitute for Doe defendants that evidence was filed and argument was made.

The Timing of the Motion

[4] The plaintiff explains the timing of its motion by pointing out that, when this action was commenced, it did not know the identity of the Valguard Security Inc. (“Valguard”) employees who had access to its (Canadian) digital ATMs and whom, it says, it identified variously as John, Jane and Dimitry Doe defendants. Though it requested this information from the defendants in December of 2018, when its claim was issued, the plaintiff submits that it was not until an Order was made by the court (in the Summer of 2019), compelling disclosure by the defendants, that it learned the given names of those whom, it says, it had sued using pseudonyms.

[5] The plaintiff points out that the court also ordered it to “amend its claim as soon as reasonably possible once it receive[d] the employee names to keep the matter moving forward”, and it did so. Indeed, in the Fall of 2019, the plaintiff moved for leave to amend its statement of claim. Because of counsel and court availability as well as Pandemic scheduling issues in 2020, it took some time before the motion was heard. I note that the defendants and opposing proposed defendants had asked for an in-person hearing but, because of COVID-concerns and restrictions on numbers in the courtroom, none could be accommodated.

Misnomer/Amend Pleading Analysis

[6] The plaintiff brings this motion pursuant to RR. 5.04 and 26.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

[7] R. 5.04(2) permits the court to add, delete or substitute a party or correct the name of a party incorrectly named, on such terms as are just, unless doing so will result in non-compensable prejudice. R. 26.01 requires of the court that it permit amendments to be made save, also, in the case of non-compensable prejudice. Under R. 5.04(2), the court maintains a residual discretion to deny the plaintiff its now requested substitution of parties.

[8] Prejudice, here a relevant consideration, may be presumed where a limitation period has elapsed or where there is a lengthy delay in seeking an amendment. The relevant period for the assessment of delay is the time between the commencement of the proceedings and the motion for leave to amend (Klassen v. Beausoleil, 2019 ONCA 407, at para. 49). The plaintiff posits that, in all of the circumstances (including those referenced above), the delay herein is not inordinate. I agree. Further, and notably, the plaintiff’s motion was brought within the relevant limitation period.

[9] With prejudice not being presumed and with no lapsed litigation period here in play, the onus to prove actual prejudice lies with those opposing the proposed amendments. Messrs. Parray, Kovalov, Halatullah, Khanlarov and Kolesnik say that, if added as parties, they will suffer “irreparable harm” and “non-compensable, extreme [and] undue prejudice”. The prejudice of which the proposed defendants complain, writ large, is that the nature and fact of such claims as the plaintiff seeks to assert against them, in their own names, could affect (or, they say, would affect) their employment. The affidavit evidence tendered by the proposed defendants references what the proposed defendants say will necessarily be “the loss of their employment and livelihood”.

[10] While it is true that the proposed defendants were not cross-examined on their affidavits (though plaintiff’s counsel did evince an intention to cross-examine), the plaintiff argues that the evidence adduced ought to be given little weight because it is self-serving in nature. For the most part, I agree. The affidavits filed are rife with absolutes. They speak to the proposed defendants’ views of the merits of the plaintiff’s claims (with, largely, blanket denials of any wrongdoing) and to what the proposed defendants say, without independent substantiation, will be the detrimental effects of naming them in this lawsuit.

[11] Further, the plaintiff points to the fact that that the proposed defendants do not speak to prejudice arising out of the amendments sought such as that of a lost opportunity in the litigation (1588444 Ontario Ltd. v. State Farm, 2017 ONCA 42). Instead, they speak to what they expect to be (but have not shown to be) the negative implications of being named in a lawsuit in which claims of fraud and misappropriation of monies are made. With this contention too, I agree.

[12] This is a civil lawsuit; the plaintiff’s claims may fail; the deemed undertaking rule applies; and, in any event, the plaintiff has said that it would be prepared to consider/discuss confidentiality terms.

[13] Further, and as the plaintiff submits, the case is still in the discovery phase such that the proposed defendants will not be “parachuted into an action that is quite advanced” (Lavelle v. McKenzie, 2019 ONSC 5855, at para. 18).

[14] But, all of these considerations notwithstanding, I note that R. 5.04 is permissive. It gives the court the discretion to relieve against the substitution of names that the plaintiff now seeks, if appropriate. In this regard, I am called upon to answer two questions: Would a person, having knowledge of the facts, be aware of the true identity of the misnamed party by reading the claim? If yes, are there circumstances which would make the substitution now sought unjust? (Loy-English v. The Ottawa Hospital et al., 2019 ONSC 6075, at para. 2).

[15] To be a misnomer, the plaintiff must clearly have intended to sue the proposed defendant. The pleading must be drafted with sufficient particularity such that an objective and generous reading of it would demonstrate that the ‘litigating finger’ is pointed at the proposed defendant. That is, the allegations made must be sufficiently articulated that a properly informed defendant, reading those allegations, would be able to recognize himself or herself as the target of the allegations. The allegations must be clear and definite on their face and not be held together through a series of assumptions about what the person reading the statement of claim might know.

[16] Those whom the plaintiff seeks to substitute for Doe defendants, save Dimitry Doe (about whom more will be said later), are those whom the defendants have identified as employees of Valguard who have had/who have access to the plaintiff’s digital ATM machines (in Canada).

[17] The allegations made against all of the proposed defendants (again, save for Dimitry Doe) are vague and generalized. The proposed defendants and their alleged wrongful acts are not separately described, specified or identified in the statement of claim. The plaintiff’s allegations are bundled and, with a few exceptions, apply equally to all whom the plaintiff seeks to substitute as parties defendant. In the words of the defendants and proposed defendants (i.e. those responding to this motion), the statement of claim fails to identify “dates, times or locations, such as could enable…[each of] the[se] proposed defendants to conclude that ‘of course it must mean me, but they have got my name wrong’…”. Rather than a pointing litigating finger, there is here “a wavering hand of purported inclusion” (Urie v. Peterborough Regional Health Centre et al., 2010 ONSC 4226, at para. 116), with generalized allegations of fraud, conspiracy and retention of missing funds made against those with access to the plaintiff’s digital ATM machines.

[18] “…[V]agueness and non-specificity weigh heavily, if not definitively, against a finding that misnomer is present. General assertions are ripe for the ‘moving target’ argument and are contra the ‘litigating finger’ test” (Urie v. Peterborough Regional Health Centre et al., supra, at para. 108). The defendants and proposed defendants say that the statement of claim “lumps the [proposed] defendants together, without providing the necessary separate, differentiating material facts that could support a claim against each individual” and without providing the level of detail mandated by R. 25.06(8) (Burns v. RBC Life Insurance, 2020 ONCA 347, at para. 17).

[19] In the plaintiff’s own factum, the plaintiff says that “[a]ny individual reading the statement of claim, with knowledge of the facts, would know they were being sued if they worked at Valguard and did Localcoin pickups during the time period at issue” and that direct notice of the plaintiff’s claims was given to the potential defendants in a timely fashion. But, as the court said in Loy-English v. Ottawa Hospital, supra, at para. 21(f), “[n]otice to the defendant within the limitation period cannot be a factor in deciding whether or not misnomer applies for the simple reason that… there is no requirement to serve a defendant within the limitation period…The question is not whether the defendant did know he or she was being sued but whether on a fair reading of the claim he or she would have known…”.

[20] There are issues with the manner in which the statement of claim describes who is alleged to have done what and when; but, it is clear that the discrepancies complained of in the statement of claim, giving rise to the litigation, relate to a limited number of persons with access to the plaintiff’s digital ATM network in Canada during the period January 1/2018-October 24/2018. That is the starting point, for me, when I consider in what direction(s) and at whom the litigating finger is pointed.

[21] Mr. Parray’s uncontradicted evidence is that he was not employed by or engaged in work on behalf of Valguard in 2018. He has provided the court with independent substantiation of his absence from Ontario during the relevant time period and of his engagement as an RCMP cadet and travel to/from Saskatchewan from November 2017-May 2018. And Mr. Khanlarov’s evidence is that he was a driver for Valguard over the course of a 3-month period in 2017 (and, parenthetically, had no direct access to the plaintiff’s digital ATM machines). Even with a generous reading of the statement of claim and recognizing, as I do, that there is much that the plaintiff doesn’t yet know/can’t yet know given the nature of the claims made, why would Messrs. Parray and Khanlarov have had reason to believe that the broadly cast claims, pertaining to a period in which they were not in Valguard’s employ, were meant to include them?

[22] The time period at issue does not apply to them at all and no evidence has been adduced by the plaintiff that is referable to 2017. Vagueness and non-specificity militate against the inclusion of Messrs. Parray and Khanlarov, as parties defendant. The claims, as they relate to them, are made with a wavering hand of purported inclusion. They ought not to be caught up in the litigation, litigation that relates to a time period outside of the periods of their employment, simply because they were once employed by Valguard and, for a time (a time in respect of which discrepancies are not now noted), had access to the plaintiff’s digital ATM machines.

[23] Messrs. Halatullah, Kovalov and Kolesnik are differently situated, however.

[24] The claims made as against Dimitry Doe are those pled with the greatest level of detail. Looking at the claims made and the synchronicity between the first name of this Doe defendant and Mr. Kolesnik’s first name and the specificity in the statement of claim as it relates to Dimitry Doe, I do think that the litigating finger is pointing at Mr. Kolesnik. That doesn’t mean that the plaintiff will succeed in proving its claims, but the denial of liability on the part of Mr. Kolesnik is just that: a simple denial. Even with a failure to cross-examine Mr. Kolesnik on his affidavit, I cannot say that the merits, as deposed to by Mr. Kolesnik, are certain and uncontradicted. The merits have yet to be determined.

[25] As for Messrs. Kovalov and Halatullah, I say the following. Both were employed with Valguard and had access to the plaintiff’s digital ATMs during the period here at issue. Both had actual notice of the plaintiff’s claims as they relate to them within the limitation period. And, in Mr. Halatullah’s case, Mr. Halatullah knew there to be photographs that reveal him to be someone who performed services (for Valguard, on behalf of the plaintiff) at a relevant site (referenced in the claim), during the relevant time period. “Notice is relevant to the question of prejudice and the exercise of discretion. Actual notice to the proposed defendant will generally [emphasis added] obviate any injustice in subsequently correcting the misnomer” (Loy-English v. Ottawa Hospital, supra, at para. 21(g)).

[26] But, can it be said that, on a fair reading of the statement of claim, Mr. Kovalov “would have known” that he was being sued? I don’t think so. He would have had to have made a series of assumptions that, by virtue of his employment with Valguard and access to the plaintiff’s digital ATM machines, the plaintiffs intended to sue him (see: Loy-English v. Ottawa Hospital, supra, at para. 21(e)). Yet, his evidence is that he had no access to the digital ATM machines that are referenced in paragraph 24 of the statement of claim (and in respect of which the claims are most particularized). Further, there is nothing in the statement of claim (and there was no evidentiary foundation laid from the time that the statement of claim was issued until this motion was argued) that draws the appropriate nexus between Mr. Kovalov as intended defendant v. Mr. Kovalov as “placeholder” (Loy-English v. Ottawa Hospital, supra, at para. 20).

[27] Then too, and in any event, those claims that the plaintiff now says were intended to capture Mr. Kovalov (and his role) have been pled in a manner that runs counter to the rules of pleading referenced in paragraph 18, above.

[28] I note that Mr. Kovalov is currently enrolled in a 26-week RCMP training program. Mr. Kovalov says, albeit without independent substantiation, that if “[he] were to be included in this lawsuit it is more than likely [emphasis added] that the RCMP would terminate [his] training program—and any future possibility of…employment with the RCMP”. I recognize that the prejudice of which he speaks is speculative and can be mitigated by certain procedural safeguards. But, it is yet one more factor to consider when I look at the context within which this motion is brought, as it relates to Mr. Kovalov, and the question of what is just (or, here, unjust).

Disposition

[29] In all, therefore, I say that the plaintiff has not satisfied me that Messrs. Parray, Khanlarov and Kovalov ought to be substituted for three of the John Doe defendants. The litigating finger is not pointed at them; the pleas “lump them in” with other Valguard employees and are not sufficiently detailed and particularized; and, in my view, it would be unjust (on the pleadings now before me) to name them as defendants.

[30] The defendants posit that those whom the plaintiff now seeks to substitute for Doe defendants are not necessary parties, in any event, given that Valguard has already admitted that it is vicariously liable for its present and past employees. But, that is not so. Vicarious liability has been alleged by the plaintiff, but has been denied by the defendants. Defendants’ counsel says that the denial was an error, and that the defendants will take steps to amend paragraph 33 of their statement of defence and admit paragraph 35 of the statement of claim. This has yet to be done and had not been done, when this motion was argued.

[31] On the pleadings now before me, I am permitting the substitution of Messrs. Halatullah and Kolesnik for John Doe and Dimitry Doe (as well as the related amendments for which leave has been sought). The nature of the allegations made, as they relate to what the plaintiff says was a shortfall of funds (save in respect of Mr. Kolesnik), are necessarily general because the information as to who did/didn’t do what, and when, is largely within the knowledge of the defendants and proposed defendants. But there is sufficient precision in the claim and sufficient information was provided by the plaintiff to point the litigating finger (even if incorrectly pointed) at Messrs. Halatullah and Kolesnik—this within the limitation period. The potential prejudice of which Messrs. Halatullah and Kolesnik complain does not arise out of the amendments. If there is any prejudice, it is the same prejudice as would befall anyone who is named as a defendant in a lawsuit. It is the headache, heartache, cost and inconvenience of being called upon to defend disputed claims. And their respective denials of liability remain available to them. It is not for me, on this motion, “to consider whether the amending party is able to prove the amended claim[s]. The court must assume [that] the facts pleaded in the proposed amendment are true” (Essa v. Panontin, 2010 ONSC 691, at para. 8).

[32] Failing agreement as to the costs of the motion, I may be spoken to.

March 12, 2021 “Original Signed by Master Abrams”