John Deere Financial Inc. v. 1232291 Ontario Inc., 2022 ONSC 5244

COURT FILE NO.: CV-13-56908

DATE: 2022-09-15

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

John Deere Financial Inc.

Plaintiff

– and –

1232291 Ontario Inc. o/a Northern Haul Contracting, Ryan Bignucolo, Richard Bignucolo, Lucia Bignucolo, Bignucolo Incorporated, Chapleau Village Shops Inc., 1039442 Ontario Inc., and 1558738 Ontario Inc.

Defendants

AND BETWEEN:

1232291 Ontario Inc. o/a Northern Haul Contracting, Ryan Bignucolo, Richard Bignucolo, Lucia Bignucolo, Bignucolo Incorporated, Chapleau Village Shops Inc., 1039442 Ontario Inc. and 1558738 Ontario Inc.

Plaintiffs by Counterclaim

– and –

John Deere Financial Inc., Eacom Timber Corporation and Nortrax Canada Inc.

Defendants by Counterclaim

Counsel:

C. Cosgriffe, for the Plaintiffs by Counterclaim/Responding Parties

F. MacKinnon-Blair, for Eacom Timber Corporation, Defendant by Counterclaim/Moving Party

HEARD: August 30, 2022, via Zoom

DECISION ON MOTION

R.D. Gordon J.

Overview

[1] Eacom Timber Corporation (“Eacom”) seeks to strike the counterclaim that has been brought against it. In its view, the counterclaim discloses no reasonable cause of action, is the same as another proceeding pending between them and is frivolous, vexatious or an abuse of process.

Background Facts

[2] In February of 2011, 1232291 Ontario Inc. o/a Northern Haul Contracting (“NHC”) entered into a Harvest and Delivery Agreement with Eacom to harvest and deliver timber to Eacom’s mills for a period of five years.

[3] In order to fulfill its obligations under the Eacom contract, NHC required certain forestry equipment to cut, process, and deliver the timber. NHC entered into six commercial lease agreements with Nortrax Canada Inc. (“Nortrax”) for the equipment. Ryan Bignucolo, Richard Bignucolo, Lucia Bignucolo, Bignucolo Incorporated, Chapleau Village Shops Inc., 1039442 Ontario Inc. and 1558738 Ontario Inc. guaranteed the obligations of NHC under the contracts to a maximum of $500,000. The leases were subsequently assigned to JDFI.

[4] NHC says that in March of 2011 it began to experience problems with the equipment that it received from Nortrax, that Nortrax failed to make repairs in a timely fashion, and that as a result, NHC was unable to meet its obligations under the Eacom contract. It says that Eacom was aware of the equipment difficulties it was having but elected to terminate the Eacom contract on August 2, 2011, asserting that NHC had not delivered the required timber. NHC maintains that it performed its duties and obligations under the Eacom contract in accordance with its terms, conditions and industry standards and that Eacom’s termination of the contract was wrongful.

[5] As a result of the termination of the Eacom contract, NHC could not make the required lease payments.

[6] Consequently, on February 27, 2013 JDFI began the main action against NHC and its guarantors seeking $1,397,253.33 as monies due and owing under the equipment leases.

[7] The Defendants (the “NHC Parties”) counterclaimed against JDFI, Nortrax Canada Inc. (“Nortrax”) and Eacom.

[8] As against JDFI and Nortrax the NHC parties allege various problems with the equipment delivered pursuant to the leases and repair delays that prevented NHC from fulfilling its contract to harvest and deliver timber to Eacom.

[9] As against Eacom the NHC parties counterclaimed for “contribution and indemnity for any amount found to be owed to JDFI as a result of the wrongful termination of the Eacom contract”. The Eacom contract contains no provision according NHC a right of contribution and indemnity against Eacom.

[10] On August 1, 2013 NHC began a separate action against Eacom (the “second NHC action”) claiming damages of $100 million by reason of Eacom’s alleged wrongful termination of the Eacom contract. NHC’s claim for damages in the second NHC action includes a claim for any amounts that may be found owing by it to JDFI/Nortrax under the equipment leases.

Analysis

Does the Counterclaim Disclose a Cause of Action Against Eacom?

[11] Rule 21.01(1)(b) allows a party to move to strike a pleading on the ground that it discloses no reasonable cause of action. No evidence is admissible on a Rule 21.01(1)(b) motion, and the facts pleaded are assumed to be true.

[12] In my view, Eacom is correct in asserting there is no reasonable cause of action disclosed against it in the counterclaim.

[13] The NHC Defendants seek indemnification. An obligation to indemnify typically arises in one of two ways: (1) Among two or more wrongdoers when each is alleged to be liable in whole or in part for the damages suffered by the party who was wronged (typical to tort claims); or (2) In the contractual context by seeking contribution and indemnity pursuant to a contractual term that grants an entitlement to same.

[14] In this case there is no tort alleged against Eacom by either JDFI or NHC and no allegation that Eacom could be in any way liable to JDFI directly for any of its damages. Vis-à-vis JDFI, there is no allegation by anyone that Eacom is a wrongdoer or could have any direct liability.

[15] The NHC Defendants argue that a right of action exists for a claim for contribution and indemnity relating to a contractual breach. They point to s. 18 of the Limitations Act as contemplating such a claim:

18(1) For the purposes of subsection 5(2) and section 15, in the case of a claim by one alleged wrongdoer against another for contribution and indemnity, the day on which the first alleged wrongdoer was served with the claim in respect of which contribution and indemnity is sought shall be deemed to be the day the act or omission on which that alleged wrongdoer’s claim is based took place.

(2) Subsection (1) applies whether the right to contribution and indemnity arises in respect of a tort or otherwise.

[16] It is the words “or otherwise” in subsection (2) upon which NHC makes its argument. This very provision was considered by the Court of Appeal for Ontario in Cannacord Capital Corp v. Roscoe, 2013 ONCA 378 when the court held that the limitation period for claims of contribution and indemnity arising in the contractual context are governed by s. 18. However, in that case there was a specific contractual provision requiring the Defendant to indemnify the Plaintiff. The Court of Appeal did not say that a right to indemnification arises from a breach of contract that does not otherwise specifically provide for it. Indeed, counsel for NHC was unable to direct me to any authority for such a proposition.

[17] In this case there is no contractual provision between NHC and Eacom requiring Eacom to indemnify NHC in whole or in part.

[18] As NHC has no legal basis to claim indemnification, it has no cause of action capable of succeeding.

[19] NHC argued in the alternative that its claim should be permitted to continue as a novel cause of action. In my view there is nothing novel about this claim. I understand NHC’s position that its inability to meet the terms of its contract with JDFI was a result of Eacom’s breaching its contract. However, even if they are correct, their entitlement is to damages not indemnification.

Should Leave to Amend Be Granted?

[20] Given my finding that there is no reasonable cause of action, NHC would seek leave to amend the Counterclaim to claim damages from Eacom resulting from its breach of contract, including amounts found to be owing to JDFI.

[21] It is my view that leave to amend should not be given in this instance because NHC already has an action outstanding in which this very relief is claimed. There is no prejudice to NHC as it will continue to have the ability to have its claims against Eacom fully adjudicated in the second NHC action. Although NHC alleges prejudice because funds may become owing by it to JDFI prior to the determination of the breach of contract claim against Eacom, it will have an opportunity to address this concern in its motion to consolidate the actions or have them tried together, which I am advised is pending.

Other

[22] Given my decision on Eacom’s motion to strike, it is not necessary that I determine the alternate relief claimed.

[23] If the parties are unable to agree on costs they may each make written submissions to me, not to exceed four pages in length plus attachments, within 45 days.

The Honourable Mr. Justice R.D. Gordon

Released: September 15, 2022

COURT FILE NO.: CV-13-56908

DATE: 2022-09-15

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

John Deere Financial Inc.

Plaintiff

– and –

1232291 Ontario Inc. o/a Northern Haul Contracting, Ryan Bignucolo, Richard Bignucolo, Lucia Bignucolo, Bignucolo Incorporated, Chapleau Village Shops Inc., 1039442 Ontario Inc. and 1558738 Ontario Inc.

Defendants

AND BETWEEN:

1232291 Ontario Inc. o/a Northern Haul Contracting, Ryan Bignucolo, Richard Bignucolo, Lucia Bignucolo, Bignucolo Incorporated, Chapleau Village Shops Inc., 1039442 Ontario Inc. and 1558738 Ontario Inc.

Plaintiffs by Counterclaim

– and –

John Deere Financial Inc., Eacom Timber Corporation and Nortrax Canada Inc.

Defendants by Counterclaim

DECISION ON MOTION

R.D. Gordon J.

Released: September 15, 2022