COURT FILE NO.: CV-19-00629544-0000 DATE: 20230803

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

SAMINE LLC Respondent – and – DIGITAL SHOVEL HOLDINGS INC. and SCOT JOHNSON Appellants

Counsel: Varoujan Arman, for Samine LLC Jordan Goldblatt and Sydney McIvor, for Digital Shovel Holdings Inc. and Scot Johnson

HEARD: February 3, 2023

A.P. Ramsay J.

A. Overview

[1] This is an appeal of a decision of an Associate Judge granting an amendment to the statement of claim to plead a new cause of action. The underlying action relates to a written services agreement between the parties for the hosting of Bitcoin mining equipment owned by the respondent and shipped to the appellants. The appellant company was to host the machines by providing a secure facility with power and Internet connectivity. The original claim is based on breach of contract, negligent misrepresentation, and conversion.

[2] The respondent sought to amend the statement of claim, to increase the prayer for relief, and plead fraudulent misrepresentation on the basis of discoverability. The appellants only opposed the amendment to add the new cause of action on the basis that the claim was statute barred.

[3] The Associate Justice allowed the amendment but permitted the appellants the right to plead that the action was statute barred.

B. The Parties

[4] The respondent is a company incorporated under the laws of California and carries on business as a Bitcoin miner. The statement of claim alleges that Bitcoin mining refers to the process by which computers confirm prior transactions on the Bitcoin network, adding it to the blockchain, in exchange for payment in the form of Bitcoin. Bitcoin miners therefore may earn Bitcoin, thereby generating revenue and profit. Profits of Bitcoin miners may increase as the trading price of Bitcoin increases.

[5] The appellant, Digital Shovel Holdings Inc., is incorporated under the laws of Ontario, and its primary business is in the crypto-currency sector.

[6] The appellant, Scot Johnson, is the President and Chief Executive Officer of Digital Shovel.

C. Nature of the Appeal

[7] This matter is an appeal of the decision of Associate Justice La Horey dated August 9, 2022, allowing the respondent to amend the statement of claim pursuant to Rule 26.01 R.R.O. 1990, Reg. 194, of the Rules of Civil Procedure to plead a new cause of action in fraudulent misrepresentation.

D. Background

[8] The original statement of claim was issued on October 21, 2019. The underlying claim arises out of a Colocation Master Services Agreement dated September 4, 2018 (“the Agreement”), between the respondent, Samine LLC, and the appellants, Digital Shovel Holdings Inc. (“Digital Shovel”) and its principal, Scot Johnson (“Mr. Johnson”). The original statement of claim seeks damages for breach of contract against both the appellant corporation and its principal, Mr. Johnson. The statement of claim pleads negligent conversion with respect to both the corporation and its principal, and negligent misrepresentation against its principal.

[9] The Agreement was for a one-year term. Under the Agreement, the appellant, Digital Shovel, agreed to install, connect, operate, warehouse, and otherwise provide services to the 100 S9 Bitcoin mining servers owned by the respondent for $7,600.00 USD per month. The appellant corporation was to host the machines by providing a secure facility with power and Internet connectivity. As a term of the Agreement, the respondent was required to provide an initial deposit of $22,800.00 USD. The respondent alleges that the appellant Digital Shovel failed to install, connect, or operate the respondent’s equipment by the agreed upon deadline, or at all.

[10] The parties agree that the respondent delivered equipment to Digital Shovel on October 10, 2018, and that Digital Shovel was to begin performing services on October 15, 2018 but was delayed. The parties dispute the cause and consequence of the delay.

[11] On or about September 11, 2019, the respondent sent a demand letter to the appellants. The letter contained a deadline of September 20, 2019, for a response.

[12] The respondent issued the statement of claim on October 21, 2019.

[13] On or about November 22, 2019, the appellants delivered a statement of defence and counterclaim. In the statement of defence, the appellants plead that the Agreement is performed and state, in the alternative, that if there was a breach, the respondent suffered no damages. The appellants deny the claim for conversion and further deny that there is any claim against Mr. Johnson.

[14] In response to the Covid-19 pandemic, the Ontario Government enacted Ontario Regulation 73/20 under s. 7.1 of the Emergency Management and Civil Protection Act, R.S.O. 1990, c. E.9, suspending all limitation periods temporarily in Ontario as of March 16, 2020. On September 14, 2020, O. Reg. 73/20 was revoked by O. Reg. 457/20. The parties do not dispute that there was a 182-day suspension of limitation periods as a result.

[15] On January 7, 2022, the appellants delivered a draft Notice of Motion for summary judgment.

[16] On March 10, 2022, counsel for the respondent sent a draft amended statement of claim by email to counsel for the appellants, asking for consent to the amendments to the claim.

[17] At the motion before the Associate Judge, the appellants took the position that the two-year limitation period expired on March 21, 2022. Counsel for the appellants did not respond to counsel for the respondent prior to the expiry of the two-year limitation period.

[18] On April 4, 2022, counsel for the appellants responded, and advised that the appellants would not consent as the limitation period had expired.

[19] On or about May 6, 2022, the respondent delivered a Notice of Motion to amend the pleadings. The respondent relied on new information recently discovered to add a new cause of action against the appellants for fraudulent misrepresentation.

[20] The respondent’s principal, Shan Yeh, swore an affidavit in support of the motion.

E. The Decision of the Associate Judge

[21] The Associate Judge granted the respondent leave to amend its statement of claim to include the claim for fraudulent misrepresentation on the basis that the respondent had raised an issue of discoverability. In oral reasons given, the Associate Judge stated, “…given my conclusion that the plaintiff has raised a discoverability issue that should be left to be determined by trial or a motion for summary judgment.”

[22] In arriving at her decision, the Associate Judge noted that: “The plaintiff says that only when the fact of the other claims against the defendant came to light that it became that the defendants had a plan to defraud foreign customers.”

F. Standard of Review

[23] An appeal of an Associate Judge’s order is not a hearing de novo: Zeitoun v. The Economical Insurance Group, 2009 ONCA 415, 96 O.R. (3d) 639.

[24] The standard of review of an Associate Judge’s decision on a question of law is correctness. On a matter of fact, or mixed fact and law, or a matter within the discretion of the Associate Judge, a reviewing court will only interfere if the Associate Judge exercised his or her discretion on wrong principles or under a misapprehension of the evidence such that there was a palpable or overriding error: Zeitoun v. Economical Insurance Group, , [2008] O.J. No. 1771, (2008) 91 O.R. (3d) 131, aff’d 2009 ONCA 415 (2009), 96 O.R. (3d) 639, at paras. 40 and 41; Wellwood v. Ontario (Provincial Police), 2010 ONCA 386, [2010] O.J. No. 2225, at para. 28.

G. Disposition

[25] For the reasons below, the appeal is dismissed.

H. Analysis

[26] In the respondent’s affidavit in support of the motion to amend the pleadings, Mr. Yeh stated: “Upon the discovery of the claims by Kessel and Abbies Inc. and noting the remarkable similarities to Samine's claim, it became apparent to me that Samine may have been a victim of a fraud perpetrated by Digital Shovel and Johnson. This was especially the case considering that Abbies Inc. is also alleging fraud.” The appellants argue that the Associate Judge was required to determine whether the respondent was seeking leave of the Court to plead a new, statute barred, cause of action.

[27] The appellants argue that the other claims that the respondent became aware of did not engage a discoverability issue under the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B. The appellants submit that the respondent did not discover any new facts in its case, rather, the respondent learned information that caused it to interpret known facts differently.

[28] I do not agree with the appellants that the Associate Judge’s reasons suggest that she disagreed with the appellants’ submissions that the fraudulent misrepresentation claim was a new cause of action. What is evident from her reasons is that she accepted the respondent’s unchallenged evidence as to when he learned of a material fact which grounded a cause of action in fraudulent misrepresentation. The case law establishes that the discoverability rule governs the commencement of a limitation period and stipulates that a limitation period begins to run only after the plaintiff has the knowledge, or the means of acquiring the knowledge, of the existence of the facts that would support a claim for relief: Kamloops v. Nielsen (1984), 10 DLR (4th) 641 (S.C.C.); Central Trust Co. v. Rafuse, , [1986] 2 S.C.R. 147; Peixeiro v. Haberman, , [1997] 3 S.C.R. 549.

[29] She also rejected the appellants’ argument that the fact of the other claims is not a material fact, and that the respondent’s discoverability argument is not valid. She stated:

In my view, the plaintiff has raised a discoverability issue such that the amendment should be allowed. The plaintiff's learning of other similar claims that suggested that the defendant might be engaged in a course of conduct to defraud customers may extend the limitation period. I do not need to decide whether the plaintiff will be successful on its discoverability arguments. The plaintiff arguably learned something new in January 2022, which called into question the defendant's motive.

[30] On motion to amend the statement of claim, an amendment is mandatory unless the responding party can demonstrate non-compensable prejudice. Rule 26.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 provides that:

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.

[31] The Ontario Court of Appeal has indicated that amendments are presumptively approved unless there is abuse of the court process or non-compensable prejudice: Andersen Consulting Ltd. v. Canada (Attorney General), , [2001] O.J. No. 3576, 150 O.A.C. 177 (C.A.), at para. 37; Schembri v. Way, 2012 ONCA 620, [2012] O.J. No. 4356, at paras. 25 and 44; Klassen v. Beausoleil, 2019 ONCA 407, 34 C.P.C. (8th) 180, at para. 25.

[32] The onus is on the responding party to show non-compensable prejudice. The presumption is rebutted if there is a limitation period. However, I will say more on this point below.

[33] The facts must be taken as proven on an amendment motion. In Schembri, Feldman J.A, speaking for the court, referred to the comments of Moldaver J.A. (as he then was) in Andersen at para. 34, where he stated:

[T]he law is clear that unless the facts alleged are based on assumptive or speculative conclusions that are incapable of proof, they must be accepted as proven and the court should not look beyond the pleadings to determine whether the action can proceed.

[34] The Limitations Act defines “claim” as follows:

a claim to remedy an injury, loss or damage that occurred as a result of an act or omission[.]

[35] Section 4 of the Limitations Act contains the basic two-year limitation period, which is presumptive. The provision reads as follows:

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.

[36] Subsection 5(1) of the Limitations Act codifies the discoverability rule, and s. 5(2) sets out when a claim is presumed to be discovered. The relevant provisions read as follows:

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.

[37] Clause 5(1)(a) is a subjective test which requires that the court determine when the respondent had actual knowledge of the material facts constituting the cause of action. Clause 5(1)(b) is an objective test requiring a determination of when a reasonable person in the respondent’s position would have been alerted to the elements of the claim: Ferrara v. Lorenzetti, Wolfe Barristers and Solicitors, 2012 ONCA 851, [2012] O.J. No. 5683, at para. 33.

[38] In a single action where the plaintiff alleges different torts, it is possible for different limitation periods to apply to the different torts: West v. Ontario, 2015 ONCA 147, [2015] OJ No 1048, at paras. 2-3; Winmill v. Woodstock (Police Services Board), 2017 ONCA 962, 138 O.R. (3d) 641, at para. 17.

[39] The Associate Judge concluded that the respondent had raised a discoverability issue that should be left to be determined at trial or on a motion for summary judgment. She rejected the appellants’ argument that the respondent knew of its loss and the party that caused its loss in September 2019. In addition to allowing the claim relating to the fraudulent misrepresentation, the respondent was permitted to plead that “Digital Shovel is a corporate entity solely controlled by Johnson to conceal his fraudulent and deceitful conduct.”

[40] The determination of when the cause of action arose for the purpose of the commencement of the limitation period is a question of mixed fact and law: Aguonie v. Galion Solid Waste Material Inc. (1998), , 38 O.R. (3d) 161 (C.A.).

[41] As the appellants rightly argue, a claim in fraudulent misrepresentation cannot be brought as an alternative theory of liability to a claim in negligent misrepresentation which has already been commenced: see Kaynes v. BP, P.L.C., 2021 ONCA 36, 456 D.L.R. (4th) 247, at para. 68; Midland Resources Holding Limited v. Shtaif, 2017 ONCA 320, 135 O.R. (3d) 481, at para. 198. To succeed in an action for fraudulent misrepresentation, the plaintiff must show that the defendant made a false representation, and that the defendant knew that the representation was false. The required elements of fraudulent misrepresentation must be pleaded and supported by adequate particulars. The five elements of fraudulent misrepresentation that a plaintiff must prove are as follows:

i. that the defendant made a false representation of fact; ii. that the defendant knew the statement was false or was reckless as to its truth; iii. that the defendant made the representation with the intention that it would be acted upon by the plaintiff; iv. that the plaintiff relied upon the statement; and v. that the plaintiff suffered damage as a result: see Mariani v. Lemstra (2004), 46 D.L.R. (4th) 489 (Ont. C.A.), at para. 12, leave to appeal refused, [2004] S.C.C.A. No. 355.

[42] In Washburn v. Wright (1914), , 31 O.L.R. 138 (C.A.), the Court of Appeal held at page 147:

Fraud is not a mistake, error in interpreting a contract; fraud is "something dishonest and morally wrong, and much mischief is ... done, as well as much unnecessary pain inflicted, by its use where 'illegality' and 'illegal' are the really appropriate expressions" (citation omitted).

[43] Rule 25.06(8) of the Rules of Civil Procedure requires that fraud be pleaded with particularity. Subrule 25.06(8) reads as follows:

Where fraud, misrepresentation, breach of trust, malice or intent is alleged, the pleading shall contain full particulars, but knowledge may be alleged as a fact without pleading the circumstances from which it is to be inferred.

[44] The discoverability of a claim for relief involves the identification of the wrongdoer, and the discovery of his or her acts or omissions that constitute liability: Aguonie at p. 167; Soper v. Southcott (1998), , 39 O.R. (3d) 737 (C.A.). The discoverability of a cause of action involves not only the identification of the tortfeasor but also the discovery of the act or omission that constitute liability: Aguonie at p. 167.

[45] As noted by the Ontario Court of Appeal in Aguonie, a cause of action arises for the purposes of a limitation period when the material facts on which it is based have been discovered, or ought to have been discovered by the plaintiff by the exercise of reasonable diligence. Although Aguonie involved the discovery of a tortfeasor, the case is still relevant to the circumstances of this case. The Court of Appeal noted that: “The discovery of a tortfeasor involves more than the identity of one who may be liable. It involves the discovery of his or her acts, or omissions, which constitute liability,” Aguonie, at p. 167. In the present case, the elements of the cause of action for fraudulent misrepresentation are consistent with the requirement under s. 5(1)(iv) of the Limitations Act, which incorporates into the statutory discoverability rule some awareness of the nature of the injury as a factor in determining when a cause of action is discoverable. The respondent has to plead the material facts required to maintain a cause of action for fraudulent misrepresentation as well as when the respondent acquired knowledge of the material facts giving rise to the new cause of action.

[46] In rejecting the notion that the amendment was sought as an abuse of process, the Associate Judge reiterated that: “The evidence is that the plaintiff's counsel was contacted by counsel in other actions in January 2022 and that this contact was unsolicited. The plaintiff's affiant said that he had no reason to consider the possibility of fraud until this contact. He was not cross-examined on his affidavit.” [Emphasis added.]

[47] The Associate Judge rejected the appellants’ argument that no new facts had been discovered subsequent to the issuance of the statement of claim and the argument that the presence of other actions against the appellants was not material to the transaction at issue. Relying on the Court of Appeal decision in 1588444 Ontario Ltd. v. State Farm Fire and Casualty Company, 2017 ONCA 42, 135 O.R. (3d) 681, at para. 25, the Associate Judge correctly articulated the general principle with respect to amending pleadings.

[48] It was open to the Associate Judge to conclude, on the evidence before her, that the respondent was not aware of a potential claim for fraudulent misrepresentation at the time that the statement of claim was issued. A party pleading fraud must comply with the Rules of Civil Procedure. The Associate Judge noted that Mr. Yeh indicated “that at the time the statement of claim in this matter was prepared, he felt that while the defendants were disorganized and careless as to their ability to receive and host the plaintiff’s miners, he was not aware of any facts that would suggest that fraud has been perpetrated.” The Associate Judge noted that he had not been cross examined on his affidavit. That is to say, his evidence was unchallenged.

[49] There is nothing in the record before the Associate Judge to indicate that Mr. Yeh’s evidence was contradicted. Mr. Yeh’s evidence is that his lawyer received a call on January 4, 2022, from counsel for another plaintiff in another action. The respondent’s counsel then received three statements of claim involving the appellants which the respondent had not been aware of. Thereafter, counsel for the respondent caused a court file search to be carried out against the appellants which revealed claims commenced by other companies against the appellants, and “noting the remarkable similarities to the plaintiff’s own claim, it became apparent to him that the plaintiff may have been the victim of a fraud perpetrated by the defendant. This was especially the case considering the claim of Abbies Inc. is also alleging fraud.” The statements of claim were before the Associate Judge, and it is evident from her oral reasons that she reviewed them.

[50] The Associate Judge accepted, on the record before her, which was reasonable in the circumstances, that it was not until the respondent’s lawyer received three statements of claim against the appellants, carried out a court search, and found other claims commenced against them “that it became apparent that the plaintiff may have been a victim of a fraud perpetrated by the defendant.” Mr. Yeh’s evidence was unchallenged on this point. His evidence—that “therefore, the receipt of these claims alarmed me that the defendants appear to have a modus operandi of defrauding foreign customers by absconding with their deposit money and their valuable mining equipment”—was unchallenged and uncontradicted. The appellants do not suggest that the respondent could have discovered these facts any sooner, with the exercise of reasonable diligence.

[51] The Associate Judge noted that: “The defendants have raised no issue of prejudice other than the loss of the limitation period.” She went on to state: “As I have already found, I am satisfied that there is an issue of discoverability which cannot be resolved on this motion.” The Associate Judge granted the respondent the right to amend to add a new cause of action based on the respondent’s evidence as to when he learned of the other claims against the appellants. The Associate Judge rightly recognized the date of the discovery of this fact as a potential material fact and as potentially invoking the application of the discoverability principle. The case law makes it clear that the discoverability rule is a general rule of interpretation for the construing of limitations statutes and will be applied to avoid the injustice of precluding an action before the person is able to raise it: Peixeiro at para. 36. As Major J. explained at para. 39:

In balancing the defendant's legitimate interest in respecting limitations periods and the interest of the plaintiffs, the fundamental unfairness of requiring a plaintiff to bring a cause of action before he could reasonably have discovered that he had a cause of action is a compelling consideration. The diligence rationale would not be undermined by the application of the discoverability principle as it still requires reasonable diligence by the plaintiff.

[52] Bearing in mind that the appellants initially had the onus of discharging the onus that they had suffered non-compensable prejudice, I see no error by the Associate Judge to allow the amendment. She was very much alive that to the fact that the discoverability principle could extend the commencement of the limitation period, and rightly left that issue to be determined at trial or on a summary judgment motion.

[53] The discoverability principle postpones the running of the statutory limitation period until a plaintiff knows, or by reasonable diligence could have known, the material facts upon which to bring an action: Findlay v. Holmes, , [1998] O.J. No. 2796 (C.A.), at para. 28; Peixeiro at para. 39. On the unchallenged and uncontradicted evidence before the Associate Judge, it was open to her to accept that the respondent was not aware of the existence of a cause of action against the appellants for fraudulent misrepresentation, and that that cause of action was not reasonably discoverable until the respondent learned of the existence of the other claims. The discoverability rule is now statutorily embodied in s. 5(2) of the Limitations Act.

[54] The discoverability principle mandates that a limitation period starts to run when the plaintiff discovers the underlying material facts or, alternatively, when the plaintiff ought to have discovered those facts by the exercise of reasonable diligence: Central & Eastern Trust Co. v. Rafuse, at p. 224; Nielsen v. Kamloops (City) (1984), , 10 D.L.R. (4th) 641 (S.C.C.).

[55] As stated, the determination of when the cause of action arose for the purpose of the commencement of the limitation period depends on mixed fact and law. In Aguonie, Borins J. (ad hoc) states at p. 167:

. . . the application of the discoverability rule to the facts of a particular case necessarily requires a finding of fact about when the plaintiff discovered the facts in respect to the remedy sought, or, through reasonable diligence, ought to have discovered the facts.

[56] The case law has noted that motions to amend pleadings should not be treated as summary judgment motions or trials, and the weighing of evidence and the making of findings of fact ought to be avoided at this stage: Andersen Consulting v. Canada (Attorney General), at para. 35.

[57] A claim for fraudulent misrepresentation is a new cause of action. The plaintiff’s knowledge that the defendant made a false statement is one of the elements of cause of action; so too is the plaintiff’s knowledge that the defendant knew the statement was false or was reckless as to its truth. When a reasonable person with the abilities and in the circumstances of the person with the claim ought to have known of the matters giving rise to the claim is a question of fact: Arcari v. Dawson, 2016 ONCA 715, 134 O.R. (3d) 36, at para. 9, citing Lima v. Moya, 2015 ONSC 324, [2015] O.J. No. 171, at para. 76, aff’d on appeal, 2015 ONSC 3605 (Div. Ct.), at para. 19. The limitation period only starts to run when a party acquires the material facts upon which a claim can be based, or ought to have discovered those facts by the exercise of reasonable diligence: Soper v. Southcott, at p. 744. A review of the record before the Associate Judge and of the statement of claimant of claim does not disclose that all of the essential facts to ground a cause of action for fraudulent misrepresentation were known to the respondent at the time the statement of claim was issued.

[58] As Major J. stated in Peixeiro, at para. 34, “Whatever interest a defendant may have in the universal application of a limitation period must be balanced against the concerns of fairness to the plaintiff who was unaware that his injuries met the conditions precedent to commencing an action.” Major J. went on to state, at para. 39:

In balancing the defendant’s legitimate interest in respecting limitations periods and the interest of the plaintiffs, the fundamental unfairness of requiring a plaintiff to bring a cause of action before he could reasonably have discovered that he had a cause of action is a compelling consideration. The diligence rationale would not be undermined by the application of the discoverability principle as it still requires reasonable diligence by the plaintiff.

[59] In Grant Thornton LLP. v. New Brunswick, 2021 SCC 31, [2021] S.C.J. No. 31, at para. 42, the Supreme Court of Canada stated: “[A] claim is discovered when a plaintiff has knowledge, actual or constructive, of the material facts upon which a plausible inference of liability on the defendant’s part can be drawn.”

[60] As the Court of Appeal has repeatedly made clear, the determination of whether a person has discovered a claim is a fact-based analysis. The question is whether the prospective plaintiff knows enough facts on which to base a claim against the defendant. If the plaintiff does, then the claim has been “discovered”, and the limitation begins to run: Lawless v. Anderson, 2011 ONCA 102, [2011] O.J. No. 519, at para. 23; Soper v. Southcott; McSween v. Louis (2000), , 132 O.A.C. 304 (C.A.).

[61] The Associate Judge’s finding that the respondent learned of other similar claims, which, by inference, supported a cause of action in fraudulent misrepresentation, is a finding of fact entitled to deference. Her findings of fact were well supported by the evidence. The Associate Judge did not make a palpable and overriding error related to her findings of fact which would warrant this court’s intervention.

[62] 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, [2014] O.J. No. 3658, at para. 14.

[63] Generally, a proposed amendment to add a new cause of action after the expiry of the applicable limitation period is not permitted: Klassen, at para. 27. In this case, by the time the respondent delivered its Notice of Motion in May 2022, the two-year limitation period had expired. The Associate Judge noted that for the purpose of the motion, the appellants agreed that the limitation period expired on March 21, 2022. However, the respondent raised the issue of discoverability with respect to the claim for fraudulent misrepresentation. The respondent has provided some explanation, which was unchallenged, and accepted by the Associate Judge, as to when the respondent became aware of the material facts to ground a cause of action in fraudulent misrepresentation.

[64] It is settled law that on a motion to amend pleadings where there is an issue of fact or credibility relating to discoverability, the customary practice is to grant leave to amend with leave to the defendant to include a limitation period: Austin v. Overs Estate, 2010 ONSC 7194, [2010] O.J. No. 5703, at para. 33. See also: Skrobacky at para.14; Kilitzoglou v. Cure Estate, 2011 ONSC 679, [2011] O.J. No. 387; Re/Max Omega Realty (1988) Ltd. v. Draper, 2012 ONSC 4477, 2012 CarswellOnt 12724.

[65] The caselaw in Ontario is settled that where a party relies on a limitation defence and discoverability is in dispute, the determination of whether a cause of action is barred by a limitation period should not be made at the pleadings stage. As noted by the Ontario Court of Appeal in Smyth v. Waterfall (2000), , 50 O.R. (3d) 481, at para. 10: “Central to the application of the discoverability rule is when the plaintiff acquired, or ought reasonably to have acquired, knowledge of the facts on which her claim is based.” Although Smyth involved a summary judgment motion, and was based on the common law discoverability principle, the principle applies to the statutory enacted discoverability provision under the Limitations Act.

[66] In Skrobacky, Then J., speaking on behalf of the panel at the Divisional Court, commented at para. 23 that: “[t]he starting point for a motion to amend pursuant to rule 26.01 therefore, is that factual disputes relating to discoverability are matters to be left for the trial judge.” And after commenting on the differences between the discretionary language in r. 5.04 and the mandatory language in r. 26.01, Then J. observed: “Although prejudice is presumed under both rules for claims brought beyond the limitation period, disputed issues relating to discoverability are to be left to the trial judge.”

[67] In my view, the Associate Judge followed the body of jurisprudence which establishes that where a factual dispute exists as to the discoverability of sufficient information to enable a cause of action to be asserted, and thus as to when a limitation period begins to run, it is a question of fact that should be left for determination to the trial judge on a full evidentiary record, and in those circumstances the amendment sought to a statement of claim will normally be allowed and the responding party will be given leave to plead the limitation period as a defence: Frohlick v. Pinkerton Canada Limited, 2008 ONCA 3, 88 O.R. (3d) 401, at para. 32; Zapfe v. Barnes (2003), , 66 O.R. (3d) 397 (C.A.), at paras. 26 and 29; Austin, at para. 33.

[68] Having regard to the unchallenged and uncontradicted evidence of the respondent as to when the respondent became aware of the alleged false statements, I find that the Associate Judge made no error in permitting the statement of claim to be amended to add the new cause of action based on discoverability, with the right of the appellants to plead a limitation defence.

[69] There was some argument before the Associate Judge as to whether the delivery of a draft statement of claim by the respondent’s counsel suspended the running of the limitation period. Like the Associate Judge, I need not decide the issue, but there is an open question as to whether it would be unfair or unjust to permit the appellants to rely on limitation period where the appellants were on notice, before the expiry of the limitation period, of the respondent’s intention to add the new cause of action but waited until after the limitation period had expired to state their position. The Ontario Court of Appeal has applied the doctrine of fraudulent concealment where a defendant's conduct was alleged to have been responsible for a plaintiff's delay in filing a claim: Halloran v. Sargeant, , [2002] O.J. No. 3248, 63 O.A.C. 138 (C.A.); Beaudoin Estate v. Campbellford Memorial Hospital, 2021 ONCA 57, 154 O.R. (3d) 587, at para. 48. For the sake of completeness, I note that the amended statement of claim in the present case also pleads fraudulent concealment.

[70] I note that the appellants waited until two weeks after the expiry of the limitation period to advise counsel for the respondent that they would not be consenting to the proposed amendments.

I. Conclusion

[71] I am not persuaded that the Associate Judge erred. The appeal must therefore be dismissed with costs.

J. Costs

[72] I would urge the parties to agree on costs. If they are unable to do so, the respondent may submit its costs submissions within fifteen days of the date of this endorsement, and the appellants fifteen days thereafter.

A.P. Ramsay J.

Released: August 3, 2023

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

SAMINE LLC Respondent – and – DIGITAL SHOVEL HOLDINGS INC. and SCOTT JOHNSON Appellants

REASONS FOR JUDGMENT A.P. Ramsay J.

Released: August 3, 2023