Court File and Parties

COURT FILE NO.: CV-20-647732 MOTION HEARD: 2021-11-25 REASONS RELEASED: 2022-03-03 SUPERIOR COURT OF JUSTICE – ONTARIO

BETWEEN:

5004514 ONTARIO INC. formerly known as AJAX SALES AND SERVICE INC. Plaintiff

- and-

HUSSEINI POONAWALLA aka KAIZER HUSSEINI POONAWALLA aka KAIZER POONAWALLA and 9495410 CANADA INC. Defendants

BEFORE: ASSOCIATE JUSTICE McGRAW

COUNSEL: C. Francis and S. Bogoroch E-mail: cfrancis@mindengross.com -for the Plaintiff

N. Reinkeluers E-mail: nicholas.reinkeluers@devrylaw.ca -for the Defendants and the Proposed Defendant Kaizer Poonawalla

REASONS RELEASED: March 3, 2022

Reasons For Endorsement

I. Introduction

[1] This is a motion by the Plaintiff for leave to correct a misnomer in its Statement of Claim which would add Kaizer Husseini Poonawalla as a Defendant to this action.

II. Background

[2] The Plaintiff 5004514 Ontario Inc. formerly known as Ajax Sales & Service Inc. (“AS”) owned a car dealership operating as Ajax Mazda. AS sold the dealership pursuant to an asset purchase agreement on or about August 29, 2018.

[3] The Defendant Husseini Poonawalla (“Husseini”) was employed by AS from 2012-2018 as a luxury car manager and salesman. The Proposed Defendant Kaizer Husseini Poonawalla (“Kaizer”) is Husseini’s son. The Defendant 9495410 Canada Inc. (“949”) is a corporation which AS alleges is controlled by Husseini and Kaizer.

[4] AS alleges that in or about 2017, Husseini advised Roger Jugdeo (“Roger”), the principal of AS, that BMW, Porsche and Mercedes-Benz were requesting that dealerships stop selling their vehicles. Husseini advised Roger that AS could still purchase vehicles from these manufacturers through 949, a company that he and Kaizer had incorporated. AS claims that Roger and Husseini agreed that AS would provide Husseini with a cheque payable to 949 for the cost of each vehicle; 949 would purchase the vehicle and transfer ownership to AS; and AS would sell the vehicle to a customer and pay Husseini and/or 949 an agreed upon commission. The Defendants allege that AS experienced difficulties in sourcing luxury vehicles as a result of being “blacklisted” by some manufacturers due to its failure to pay for vehicles and complete purchases and for shipping vehicles to China. The Defendants further claim that Husseini suggested that Roger contact 949 only after Roger refused his suggestion that AS purchase vehicles from another dealership. The Defendants deny that Husseini is an officer, director or shareholder of 949. However, they acknowledge that Husseini advised Roger that 949 is operated by his family members and have not denied that Kaizer is an officer or employee of 949 but claim that he has never spoken to Roger.

[5] AS alleges that it first became aware of suspicious transactions involving 949 and Husseini in or about November 2018 when completing the dealership sale transaction. AS commenced an investigation in November 2018 which revealed that on at least 2 occasions AS provided Husseini with a cheque payable to 949, the funds were deposited into 949’s bank account but AS never received the vehicles or return of the funds. The investigation further revealed that on at least 3 occasions, 949 failed to pay some or all of the amounts owing to AS for vehicle purchases. The Defendants assert that the transactions were legitimate and in some cases vehicles were not delivered because AS refused to complete the transactions.

[6] AS commenced this action by Statement of Claim issued on September 16, 2020 (the “Original Claim”) claiming damages of $318,541.13 for breach of contract, breach of trust, breach of fiduciary duty, fraud, theft, misrepresentation, conversion and/or misappropriation of funds or, alternatively, unjust enrichment. AS also claims amounts related to specific vehicles, punitive damages of $100,000 and a tracing of any misappropriated funds.

[7] Kaizer’s name is incorrectly stated in the style of cause of the Original Claim as an alias of Husseini: “Husseini Poonawalla aka Kaizer Husseini Poonawalla aka Kaizer Poonawalla and 949540 Canada Inc.” On this motion, AS seeks to correct this error by striking the first “aka” and replacing it with a comma so that Kaizer is also a Defendant and adding his name as required to the body of the pleading (the “Amended Claim”).

[8] The Defendants delivered a Demand For Particulars and Request to Inspect (the “Demand”) on October 16, 2020 which AS answered on December 24, 2020. Kaizer is not mentioned in the Demand or the Response. The Defendants delivered their Statement of Defence and Counterclaim on February 17, 2021 in which they pleaded that AS incorrectly listed Kaizer Husseini Poonawalla and Kaizer Poonawalla as aliases of Husseini, that Husseini and Kaizer are separate individuals and father and son.

[9] This motion first came before me on October 19, 2021 however AS did not file a Factum and it was adjourned until today.

III. The Law and Analysis

Pleadings Amendments Generally

[10] Rules 26.01 and 26.02 of the Rules of Civil Procedure state:

“26.01 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.

26.02 A party may amend the party’s pleading,

(a) without leave, before the close of pleadings, if the amendment does not include or necessitate the addition, deletion or substitution of a party to the action;

(b) on filing the consent of all parties and, where a person is to be added or substituted as a party, the person’s consent; or

(c) with leave of the court.

[11] Rule 5.04(2) of the Rules of Civil Procedure provides that at any stage of a proceeding the court may 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.

[12] Amendments should be presumptively approved unless they would result in prejudice that cannot be compensated by costs or an adjournment; they are shown to be scandalous, frivolous, vexatious or an abuse of the court's process; or they disclose no reasonable cause of action (Andersen Consulting v. Canada (Attorney General), 2001 CarswellOnt 3139 (C.A.) at para. 37; Schembri v. Way, 2012 ONCA 620 at paras. 25 and 44).

[13] The Court of Appeal summarized the law on leave to amend motions in 1588444 Ontario Ltd. v. State Farm Fire and Casualty Co., 2017 ONCA 42:

“[25] The law regarding leave to amend motions is well developed and the general principles may be summarized as follows:

The rule requires the court to grant leave to amend unless the responding party would suffer non-compensable prejudice; the amended pleadings are scandalous, frivolous, vexatious or an abuse of the court's process; or the pleading discloses no reasonable cause of action: Iroquois Falls Power Corp. v. Jacob Canada Inc., 2009 ONCA 517, [2009] O.J. No. 2642, 75 C.C.L.I. (4th) 1, at paras. 15-16, leave to appeal to S.C.C. refused [2009] S.C.C.A. No. 367, 2010 CarswellOnt 425; and Andersen Consulting Ltd. v. Canada (Attorney General), [2001] O.J. No. 3576, 150 O.A.C. 177 (C.A.), at para. 37. [page688]

The amendment may be permitted at any stage of the action: Whiten v. Pilot Insurance Co. (1996), 27 O.R. (3d) 479, [1996] O.J. No. 227 (Gen. Div.), revd (1999), , 42 O.R. (3d) 641, [1999] O.J. No. 237 (C.A.), revd [2002] 1 S.C.R. 595, [2002] S.C.J. No. 19, 2002 SCC 18.

There must be a causal connection between the non-compensable prejudice and the amendment. In other words, the prejudice must flow from the amendments and not from some other source: Iroquois, at paras. 20-21; and Mazzuca v. Silvercreek Pharmacy Ltd. (2001), 56 O.R. (3d) 768, [2001] O.J. No. 4567 (C.A.), at para. 65.

The non-compensable prejudice may be actual prejudice, i.e., evidence that the responding party has lost an opportunity in the litigation that cannot be compensated as a consequence of the amendment. Where such prejudice is alleged, specific details must be provided: King's Gate Developments Inc. v. Drake (1994), 17 O.R. (3d) 841, [1994] O.J. No. 633 (C.A.), at paras. 5-7; and Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1995), 25 O.R. (3d) 106, [1995] O.J. No. 2220 (Gen. Div.), at para. 9.

Non-compensable prejudice does not include prejudice resulting from the potential success of the plea or the fact that the amended plea may increase the length or complexity of the trial: Hanlan v. Sernesky, [1996] O.J. No. 4049, 95 O.A.C. 297 (C.A.), at para. 2; and Andersen Consulting, at paras. 36-37.

At some point, the delay in seeking an amendment will be so lengthy, and the justification so inadequate, that prejudice to the responding party will be presumed: Family Delicatessen Ltd. v. London (City), [2006] O.J. No. 669, at para. 6.

The onus to prove actual prejudice lies with the responding party: Haikola v. Arasenau (1996), 27 O.R. (3d) 576, [1996] O.J. No. 231 (C.A.), at paras. 3-4; and Plante v. Industrial Alliance Life Insurance Co. (2003), 66 O.R. (3d) 74, [2003] O.J. No. 3034 (Master), at para. 21.

The onus to rebut presumed prejudice lies with the moving party: Family Delicatessen, at para. 6.” (State Farm at para. 25).

[14] In determining whether an amended pleading is legally tenable, the only question is whether the amendments disclose a cause of action and they are to be granted unless the claim is clearly impossible of success (Plante at paras. 19-22). It is unnecessary to consider whether the amending party is able to prove its amended claim and the court must read the amendments generously with allowances for drafting deficiencies assuming that the facts pleaded in the proposed amendment (unless patently ridiculous or incapable of proof) are true (Plante at paras. 19-22). Where an amendment is sought after the expiration of a limitation period, prejudice is presumed and the party seeking the amendment must lead some evidence to explain the delay and rebut the presumption of prejudice (Skrobacky (Litigation Guardian of) v. Frymer, 2014 ONSC 4544 at para. 14).

Law of Misnomer

[15] Glustein J. explained the distinction between Rule 26.02 and Rule 5.04(2) in Loblaw Properties Limited v. Turner Fleischer Architects Inc., 2018 ONSC 1376:

“11 Unlike a motion to amend, a party is not seeking to amend a pleading under Rule 26.02 when it asks the court to apply the doctrine of misnomer. Instead, under Rule 5.04(2), the title of a proceeding is corrected. No changes to the pleadings need to be made.

12 To conflate Rule 26.02 and Rule 5.04(2) is contrary to the principles in Mazzuca v. Silvercreek Pharmacy Ltd, 2001 CarswellOnt 4133 (Ont. CA). Cronk J.A. referred to "the difference in language between the two rules [which] suggest that the drafters of the rules intended to preserve for the courts under subrule 5.04(2) a discretion to permit or deny amendments relating to a change of parties" (at para. 26).”

[16] The test for misnomer was set out by K.M. van Rensburg J. (as she then was) in Spirito v. Trillium Health Centre, [2007] O.J. No. 3832 (S.C.J.); aff’d 2008 ONCA 579:

“3 The test for determining whether an amendment is for misnomer or for the addition of a new defendant is whether the "litigating finger" is pointed at the proposed defendant in the Statement of Claim; that is, would a person having knowledge of the facts be aware of the true identity of a misnamed party by reading the Statement of Claim? If so, the defendant will be substituted unless there is prejudice that cannot be compensated for in costs or by an adjournment (Davies v. Elsby Brothers Ltd., [1960] 3 All E.R. 672; Moreau v. Northwestern General Hospital (1988), 65 O.R. (2d) 128; Rakowski et al. v. Mount Sinai Hospital et al. (1987), 59 O.R. (2d) 349; McArthur v. Kaal, [2006] O.J. No. 1525). The alleged expiry of a limitation period cannot be set up as "prejudice" where the initial claim against the misnamed defendants was made within the limitation period (Kitcher et al. v. Queensway General Hospital et al., [1997] O.J. No. 3305).”

[17] More recently in Loy-English v. The Ottawa Hospital, 2019 ONSC 6075, relied on by the Defendants and Kaizer, MacLeod J. provided an updated summary of the law of misnomer, including the applicable test:

“19… e. To be a misnomer, the plaintiff must clearly have intended to sue the proposed defendant. The pleading must be drafted with sufficient particularity that an objective and generous reading of the pleading would demonstrate that the "litigation finger" is pointing at the proposed defendant. To put this another way, the pleading must be sufficiently clear that a properly informed defendant reading the allegation would be able to recognize that he or she was the target of the allegation. The allegation must be clear and definite on its face and not held together through a series of assumptions about what the person reading the statement of claim might know.”

[18] As Glustein J. held in Loblaws, limitation period defences do not apply:

13 The distinction between Rule 5.04(2) and Rule 26.02 is further demonstrated by the settled law that limitation period defences do not apply to a motion to correct a misnomer. Due diligence of the plaintiff (or a defendant) would be irrelevant. Even if a party knew of the existence of the proper name of the defendant, an incorrect name or a John Doe pleading based on no pleaded knowledge of the defendant can still be cured at any time provided the "litigating finger" test is met and there is no non-compensable prejudice arising from the misnomer (Stechyshyn v. Domljanovic, 2015 ONCA 889 at paras. 1, 17, 19; Skribans v. Nowek, 2012 ONSC 532 at paras 30, 34, 41).

24 Consequently, even if the plaintiff knew the identity of the defendant (e.g. the name of the emergency room as in Ormerod or the proper municipality as in Lloyd v. Clark, 2008 ONCA 343, 2008 O.J. No. 1682 (CA)), the plaintiff (or the defendant, as I discussed above) could still substitute the proper name of the defendant despite the passage of the limitation period. Knowledge of the defendant or discoverability does not impact the analysis on misnomer, subject to the courts' discretion (Skribans v. Nowek, 2012 ONSC 532 (Mast.), at para. 37).”

[19] MacLeod J. provided the following guidance regarding the effect of notice in Loy-English:

“19… f. Notice to the defendant within the limitation period cannot be a factor in deciding whether or not misnomer applies for the simple reason that, as discussed earlier, 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.

g. Notice is relevant to the question of prejudice and the exercise of discretion. Actual notice to the proposed defendant will generally obviate any injustice in subsequently correcting the misnomer. Delay is also relevant to the issue of prejudice and to the exercise of discretion.

h. Notice may be sufficient if the claim against an unknown party has been brought to the attention of the named defendant and to an employer, organization or insurer with the means to determine who was involved in the alleged acts or omissions. In that case it may not be unfair to correct the misnomer once the identity of the other defendant is known even in the absence of actual notice.”

[20] In my view, this is a case of misnomer and it is just and reasonable in the circumstances to grant AS leave to correct its Original Claim so that Kaizer is a Defendant to this action.

[21] The present case differs from cases of misnomer where pseudonyms such as John Doe or Jane Doe are used then subsequently corrected. In those case, the primary issue is the identity of misnamed party. Kaizer’s name appears in the style of cause and the removal of “aka” after his father’s name and addition to the body of the Original Claim is required. The main issue is whether the allegations against Kaizer are pleaded with sufficient particularity.

[22] Based upon an objective, fair and generous reading of the Original Claim, I conclude that the properly informed defendant having knowledge of the facts would know that the “litigating finger” was pointed at Kaizer. Kaizer’s name appears in the style of cause as an alias of his father. Reading the Original Claim, Kaizer would or should have known that this was incorrect and that it was referring to him. As an officer, employee and/or individual materially involved with the Defendant 949 which was served with and defended the Original Claim and represented by the same counsel as the Defendants, I also conclude that although Kaizer was not served with the Original Claim, he was aware and had notice of it.

[23] Kaizer submits that since the Original Claim treats Husseini and Kaizer as the same person, many of the allegations do not apply to him particularly AS’ allegations against Husseini as an AS salesman and manager. Therefore, he argues that AS did not intend to name him separately from Husseini and he did not know the claim was directed at him. I accept that the Original Claim could have been pleaded with more particularity with respect to Kaizer though this is largely due to the incorrect and inadvertent use of his name as his father’s alias partly attributable to the fact that “Husseini” appears in both of their names. On a generous reading, I am satisfied that the claims against Kaizer are sufficiently clear on the face of the Original Claim read as a whole and that AS intended to name him separately. At paragraphs 34-40 of the Original Claim, AS pleads that Husseini and 949 are liable for breach of trust and fiduciary duty, fraud, theft, conversion, fraudulent misrepresentation and misappropriation, that the schemes described in the Original Claim were arranged and orchestrated principally for the personal benefit of the Defendants and that Husseini and 949 were unjustly enriched. These allegations are not limited to Husseini’s employment at AS and specifically plead against all Defendants which, given the incorrect use of his name and the factual context, in my view was intended to include Kaizer. I also reject Kaizer’s assertion that the Amended Claim does not disclose a tenable cause of action against him as he has not demonstrated that the proposed claims against him are clearly impossible of success.

[24] I also accept Roger’s uncontroverted evidence that the failure to correctly plead Kaizer’s name was inadvertent and that he knew that Kaizer was involved with 949 because Husseini told him so. I also conclude that Kaizer’s name was not mentioned in the responses to the Demand because the Defendants did not specifically ask any questions about him nor did they point out the mistake in the style of cause until they delivered their Defence and Counterclaim.

[25] The finding of misnomer is supported by Kaizer’s failure to demonstrate that he would suffer any actual prejudice if the motion is granted. He submits that he would suffer non-compensable prejudice because he is not currently a party, the Amended Claim does not disclose a reasonable cause of action and the claim against him is statute barred. The fact that Kaizer is not currently a party does not constitute actual prejudice, I have concluded that there is a reasonable cause of action and limitations defences do not apply to misnomer. More importantly, there is no evidence that Kaizer has lost any opportunities in the litigation, which is still in the pleadings stage, he has been aware of the proceedings and Husseini and 949 have defended the action with the assistance of counsel now retained by Kaizer. There has also been no inordinate delay in bringing this motion which would give rise to a presumption of non-compensable prejudice (State Farm at para. 22).

[26] I also conclude that to deny the correction sought by the Plaintiff in these circumstances, particularly given the factual matrix and where Kaizer’s name appears in the style of cause and 949 and Husseini are already Defendants would be to favour an overly technical approach to misnomer and pleadings rejected by MacLeod J. in Loy-English:

“19.. i. It is not useful for misnomer motions to be decided based on technicalities or vagaries of pleading. The object of pleading analysis should not be one of looking for traps, tricks or loopholes. We should not be engaged in the legal equivalent of "whack a mole" or "gotcha". Rather, the question in every case should be whether it is reasonable and just to allow the pleading amendment and whether it is permitted by the governing legislation.”

[27] I am also satisfied that this conclusion is consistent with Rule 1.04(1) of the Rules of Civil Procedure which provides that the Rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits. In this respect, the Court of Appeal held in Mazzuca v. Silvercreek Pharmacy Ltd., 2001 CarswellOnt (C.A) at paragraph 23:

“The combined effect of Rules 26.01, 5.04 and 1.04(1) generally is to focus the issue of non-compensable prejudice in the wider context of the requirement that a liberal construction is placed on the Rules to advance the interests of timely and cost-effective justice in civil disputes.”

[28] Although the parties did not make submissions on this point, I also decline to exercise the court’s residual discretion to refuse to permit the correction of the misnomer (Ormerod v. Strathroy Middlesex General Hospital, 2009 ONCA 697 at paras. 26-33). In determining whether to exercise this residual discretion the most important factors are whether the proposed defendant was misled or would be unduly prejudiced though the absence of prejudice does not guarantee an amendment (Mazzuca at para. 42; Ormerod at paras. 26-30 and 32; Skribans at para. 47). The court may also consider any unexplained inordinate delay in seeking leave to correct the misnomer; lack of notice including how long notice of the claim was given to the proposed substituted defendant after the cause of action and the passage of the presumptive limitation period; the stage of the proceedings and the lack of participation by the proposed substituted defendant; the lack of specificity of negligence; and public policy supporting adherence to limitation periods (Ormerod at paras. 28-32; Skribans at paras. 47-52; Mohabir v. Mohabir, 2014 ONSC 5484 at para. 15; Urie v. Peterborough Regional Health Centre, 2010 ONSC 4226 at paras. 108 and 144; Patrick at paras. 28-31).

[29] Further, as the scope of what the courts consider a misnomer broadens beyond a “classic” misnomer in which the claim contains a minor spelling error of the defendant’s name and is personally served upon the intended but misnamed defendant, it is appropriate to take a correspondingly wider view of the court’s discretion to refuse to correct the misnomer, in particular, the extent of its departure from a mere irregularity in all circumstances of the case (Ormerod at para. 31). In my view, the misnomer in the present case is closer to a “classic” misnomer which does not depart significantly from an irregularity. Kaizer’s name appears in the style of cause but requires correction and I cannot conclude that he was misled. While the Original Claim was not personally served on Kaizer, 949 and Husseini have both defended the action and he was aware of it. The absence of inordinate delay and actual prejudice and the fact that these proceedings are in the early stages also militates against exercising this discretion.

Pleadings Amendments and the Limitations Act

[30] If the doctrine of misnomer does not apply, then the Limitations Act, 2002 may apply, including: the basic limitation period of 2 years (s. 4); the discoverability provisions (s. 5); and section 21 (Patrick v. Southwest Middlesex (Municipality), 2017 ONSC 17 at paras. 10 and 49). If I had concluded that misnomer does not apply, then I would have granted leave to add Kaizer as a Defendant on the basis that there is a triable issue of fact or credibility with respect to discoverability.

[31] Sections 4 and 5 of the Limitations Act state:

“4. Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.

5. (1) A claim is discovered on the earlier of,

(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).

(2) A person with a claim shall be presumed to have known of the matters referred to in clause (1) (a) on the day the act or omission on which the claim is based took place, unless the contrary is proved.”

[32] Section 21(1) of the Limitations Act provides that where a limitation period with respect to a claim against a person has expired, the claim shall not be pursued by adding the person as a party to an existing proceeding.

[33] In Morrison v. Barzo, 2018 ONCA 979, the Court of Appeal summarized the approach on a motion for leave to add a party which involves the possible passage of a presumptive limitation period:

[29] Where there is a question as to whether claims covered by the basic two-year limitation period are statute-barred, such that parties cannot be added pursuant to s. 21(1) of the Limitations Act, the court must make a finding as to when the plaintiff first knew the elements of the claim listed in s. 5(1)(a). If the date of actual discovery, as determined by the court, would bring the claim within the limitation period, and the proposed defendant relies on "reasonable discoverability" to contend the claim was brought outside the prescription period, the court must go on to determine under s. 5(1)(b) when "a reasonable person with the abilities and in the circumstances of [the plaintiff] first ought to have known of the matters referred to in clause (a)". While a plaintiff's due diligence is relevant to the finding under 5(1)(b), the absence of due diligence is not a separate basis for dismissing a claim as statute-barred: see Fennell v. Deol, [2016] O.J. No. 1745, 2016 ONCA 249, 97 M.V.R. (6th) 1, at paras. 18 and 24; Galota v. Festival Hall Developments Ltd. (2016), 133 O.R. (3d) 35, [2016] O.J. No. 3906, 2016 ONCA 585, at para. 23. This is the case whether expiry of the limitation period is at issue in a motion for summary judgment or in a motion to add a defendant: Mancinelli v. Royal Bank of Canada, [2018] O.J. No. 3129, 2018 ONCA 544, 24 C.P.C. (8th) 1, at para. 30.

[30] Reasonable discoverability of a claim under s. 5(1)(b) that precludes adding a party contrary to s. 21(1) requires [page609] an evidentiary foundation. The court must be satisfied that a reasonable person in the plaintiff's circumstances ought to have discovered the claim, and the date of such reasonable discovery must be determined. It is not sufficient for the court to say that the claim was discoverable "before the expiry of the limitation period", without explaining why. It may be that the date of reasonable discoverability can only be determined at a later stage in the proceedings, at trial or on a summary judgment motion. In such a case, the motion to add the defendant should be granted, with leave for the defendant to plead a limitation defence: Mancinelli, at paras. 31 and 34.

[31] The evidentiary burden on a plaintiff seeking to add a defendant to an action after the apparent expiry of a limitation period is two-fold. First, the plaintiff must overcome the presumption in s. 5(2) that he or she knew of the matters referred to in s. 5(1)(a) on the day the act or omission on which the claim is based took place, by leading evidence as to the date the claim was actually discovered (which evidence can be tested and contradicted by the proposed defendant). The presumption is displaced by the court's finding as to when the plaintiff subjectively knew he had a claim against the defendants: Mancinelli, at para. 18. To overcome the presumption, the plaintiff needs to prove only that the actual discovery of the claim was not on the date the events giving rise to the claim took place. It is therefore wrong to say that a plaintiff has an onus to show due diligence to rebut the presumption under s. 5(2): Fennell, at para. 26.

[32] Second, the plaintiff must offer a "reasonable explanation on proper evidence" as to why the claim could not have been discovered through the exercise of reasonable diligence. The evidentiary threshold here is low, and the plaintiff's explanation should be given a "generous reading", and considered in the context of the claim: Mancinelli, at paras. 20 and 24.

[34] If the plaintiff provides a reasonable explanation on proper evidence as to why the essential facts were not known or obtainable with due diligence such that it is determined that there is a triable issue of fact or credibility on the discoverability allegations, the court will normally permit the amendments with leave to plead limitations defences (Skrobacky at para. 6).

[35] The Court of Appeal also provided the following guidance in Mancinelli v. Royal Bank of Canada, 2018 ONCA 544:

i.) the motion judge is entitled to assess the record to determine, as a question of fact, if there is a reasonable explanation on proper evidence as to why the plaintiff could not have discovered its claim through the exercise of reasonable diligence. If a plaintiff does not raise any credibility issue or issue of fact about when its claim was discovered that would merit consideration on a summary judgment motion or a trial and there is no reasonable explanation on the evidence as to why the plaintiff could not have discovered the claim by exercising reasonable diligence, the motion judge may deny the motion (para. 23);

ii.) the evidentiary threshold to be met by a plaintiff is low and whether the plaintiff and its counsel acted with reasonable diligence must be considered in context (para. 24);

iii.) in considering whether the plaintiff has provided a reasonable explanation as to why they could not have identified the party (or cause of action), the explanation is to be given a generous, contextual reading (para. 27);

iv.) a plaintiff’s failure to take reasonable steps to investigate a claim is not a stand-alone or independent ground to find a claim out of time, rather, the reasonable steps a plaintiff ought to take is a relevant consideration in deciding when a claim is discoverable under s. 5(1)(b)(para. 30);

v.) where the issue is due diligence, the motion judge will not be in a position to dismiss the plaintiff’s motion in the absence of evidence that the plaintiff could have obtained the requisite information with due diligence, and by when the plaintiff could have obtained such information, such that there is no issue of credibility or fact warranting a trial or summary judgment motion (paras. 28 and 31).

[36] I conclude on the record before me that AS has met the low evidentiary threshold that there is an issue of fact or credibility with respect to discoverability which must be determined at trial or on a summary judgment motion.

[37] It is Roger’s uncontroverted evidence that AS did not discover its claims against the Defendants and Kaizer until November 2018 when it was completing the dealership asset sale, noticed suspicious transactions and began its investigation. Given the six-month suspension of all limitation periods between March 16, 2020 and September 14, 2020 due to the COVID-19 pandemic under section 7.1 of the Emergency Management and Civil Protection Act (Ontario), AS submits that it had until May 2021 to name Kaizer as a Defendant. Since AS served its Motion Record on March 25, 2021, it asserts that this motion was brought within the applicable 2-year limitation period or alternatively that there is a triable issue of discoverability.

[38] Kaizer submits that this Court should find that AS’ claims against him are clearly out of time and absolutely barred. He argues that Roger and other senior AS management were aware of and approved the vehicle sales transactions between AS and 949 at the time they were entered into. Since the transactions occurred between June 2017 and September 2018, Kaizer argues that, taking into account the six-month suspension, two years prior to the date this motion was brought is September 24, 2018. As all transactions were entered into more than two years prior to September 24, 2018, AS’ claims against Kaizer are clearly out of time. Kaizer further argues, and the Defendants have already pleaded, that to the extent to which AS was not aware of the details of any transactions at the time they occurred it was because AS did not keep accurate bookkeeping and accounting records, which was not Husseini’s responsibility.

[39] I am unable to determine on the record before me whether AS’ claims against Kaizer are timely or clearly out of time. The parties have raised genuine issues of fact and credibility with respect to discoverability which are more properly considered on a full record at trial or on a summary judgment motion. These issues include whether a reasonable party in AS’ circumstances ought to have discovered the claim sooner, and the date of reasonable discovery, including whether this should have been at the time of the transactions as Kaizer submits, when AS commenced its investigation or some other time. The Defendants’ allegation in their Defence that any inability to discover the claims was due to AS’ own deficient accounting is another issue of fact and credibility which requires determination at trial.

[40] As set out above, I have concluded that Kaizer would not suffer any actual prejudice and there has been no extraordinary or inordinate delay giving rise to a presumption of actual prejudice. Granting leave is also consistent with the law on pleadings amendments generally and in the context of limitations periods including the presumption that leave should be granted where adding Kaizer will not result in non-compensable prejudice.

[41] Finally, these conclusions are also consistent with Master Short’s (as he then was) direction that the court should ensure that the true lis of a matter is decided without the possibility that proposed defendants such as Kaizer might escape potential liability on a technical limitations defence (Khoury v. Scottish and York Insurance, 2018 ONSC 3881 at para. 20).

III. Disposition

[42] Order to go granting the Plaintiff leave to correct the misnomer in its Original Claim in the form of the Amended Claim.

[43] If the parties are unable to agree on the costs of this motion, they may file written costs submissions not to exceed 3 pages (excluding Costs Outlines) with me on a timetable to be agreed upon by counsel.

Released: March 3, 2022

Associate Justice McGraw