Court File and Parties

2023 ONSC 5088

Court File No.: CV-20-00642405-0000 Date: 2023 0918 Superior Court of Justice – Ontario (Commercial List)

Re: NORAM BUILDING SYSTEMS INC., Plaintiff And: ZURICH INSURANCE COMPANY LTD. PROVIDENCE ST. JOSEPH’S AND ST. MICHAEL’S HEALTHCARE, and UNITY HEALTH TORONTO, formerly known as Providence St. Joseph’s and St. Michael’s Healthcare, Defendants

Before: Kimmel J.

Counsel: Julie Rosenthal & Brittni Tee, for the Plaintiffs (Responding Parties) Andrew Kalamut & Natalie Kolos, for the Defendants, Providence St. Joseph’s and St. Michael’s Healthcare and Unity Health Toronto, formerly Providence St. Joseph’s and St. Michael’s Healthcare (Moving Parties)

Heard: July 18, 2023

Endorsement (Defendants Rule 21 Motion to strike)

The Motion

[1] The defendants, Providence St. Joseph’s and St. Michael’s Healthcare and Unity Health Toronto, formerly Providence St. Joseph’s and St. Michael’s Healthcare (collectively, “Unity Health”), move under r. 21.01(1)(a) of the Rules of Civil Procedure to strike paragraphs 2(a), 2(b), 28, and 29 of the plaintiff’s Amended Statement of Claim. Noram Building Systems Inc. (“Noram”) made these amendments (the “Amendments”) on May 1, 2023 pursuant to r. 26.02(a). Unity Health submits that the Amendments are statute-barred by the Limitations Act, S.O. 2002, c. 24, Sched. B (the “Limitations Act”).

[2] In these Amendments, Noram claims the same damages it sought from Unity Health in the Original Statement of Claim dated June 12, 2020. The damages were originally claimed for unjust enrichment (the “Original Claim”). Noram has added, by the Amendments, the further alternative grounds for the same relief, based on claims of conspiracy and breach of fiduciary duty (the “New Claims”). The Original Claims and the New Claims are made in the alternative and applicable only if the surety bonds issued by Zurich Insurance Company Ltd. (“Zurich”) are rescinded and Zurich is found not to be obligated to make payments owing to Noram and other beneficiaries of those bonds. Zurich is seeking recission of the surety bonds because of conduct it alleges against Unity Health and others. This is the subject of an action commenced by Zurich on April 16, 2020 (the “Zurich Claim”).

[3] Noram asserts that the New Claims are predicated upon the same facts and underlying allegations contained in the Zurich Claim. The Zurich Claim was referred to and relied upon in Noram’s Original Claim. There is no dispute that the New Claims pleaded in the Amendments were discoverable by Noram by June 12, 2020, the date of the Original Claim. Accordingly, discoverability is not an issue for purposes of this motion.

[4] The Amendments were made almost three years later, on May 1, 2023. The COVID-19 emergency order temporarily tolled limitation periods until September 14, 2020: Limitation Periods, O. Reg. 73/20, s. 1, revoked on September 14, 2020 (See: O. Reg. 457/20, s. I). If the limitation period for the New Claims had begun to run by no later than when the Original Claim was issued, the two-year limitation period would have expired on September 14, 2022. This would mean that any limitation period in respect of the New Claims would have expired at least 7.5 months prior to when the Amendments were made.

[5] Unity Health was granted an indulgence by Noram. Noram has not yet required Unity Health to deliver a Statement of Defence. That is why the Amendments could be made by Noram without leave of the court under r. 26.02(a).

[6] The sole issue to be decided by this motion is whether it is plain and obvious that the Amendments containing the New Claims are statute-barred by ss. 4 and 5 of the Limitations Act. If so, they should be struck from the Amended Statement of Claim.

[7] There are no facts in dispute. For this motion, the pleaded facts are to be taken as true. There are no disputed facts on the discoverability question since it is not in issue for purposes of this motion. Both sides have asked the court to decide the limitations question under r. 21.01(1)(a), namely whether the New Claims are, or are not, statute barred. However, the court does not agree that it is appropriate to do so given the policy and other considerations that have been raised, as detailed in the reasons that follow.

[8] It is not plain and obvious that the Amendments should be struck. Accordingly, the r. 21 motion by Unity Health to strike the Amendments is dismissed, with costs and without prejudice to Unity Health’s right to raise a defence under the Limitations Act to the New Claims.

The Pleaded Facts

[9] The following is a summary of the pleaded facts (including facts incorporated by reference to other documents in the statement of claim) that have been extracted from both sides’ factums.

[10] Noram was a subcontractor to Bondfield Construction Company Limited (“Bondfield”). It provided services for the St. Michael’s Redevelopment Project (the “Project”). Noram and Bondfield entered into two subcontracts relating to interior and exterior glass, glazing, and curtain work that was performed on the Project between 2015 and December 2019.

[11] Zurich was Bondfield’s surety on the Project. In its capacity as surety, it issued two bonds: A performance bond and a Labour and Material Payment Bond bearing No. 6343517 (the “L&M bond” “payment bond”). Unity Health was named as an additional “obligee” under both bonds.

[12] The bonds were issued for the use and benefit of “claimants.” They provided that Zurich would honour Bondfield’s payment obligations to “claimants” for their work on the project in the event of a default by Bondfield. A “claimant” was defined as a party with a direct contract with Bondfield for labour, material, or both, used, or reasonably required for use, in the performance of the construction contract. Noram is a claimant under the L&M Bond.

[13] In or around the summer of 2018, Noram stopped receiving payment for its work on the Project. It made an initial claim to Zurich under the L&M Bond on July 25, 2018. In response, Zurich entered into two ratification agreements with Noram on or about January 9, 2019. In these agreements, Zurich agreed to continue to pay Noram in accordance with the subcontracts. This was to ensure that Noram would continue to work on the Project.

[14] On or about December 21, 2018, Bondfield’s Project Company went into receivership. Shortly thereafter, on or about April 3, 2019, a monitor was appointed over Bondfield. In December 2019, the monitor advised Noram that it should cease work, as there was no longer any source of funding to finance it carrying out work on the Project. At that time, Noram was owed $1,882,549.94 in respect of work it had completed on the Project.

[15] From December 2019 to April 2020, Noram engaged in discussions with Zurich in an effort to recover the money it was owed under the subcontracts. On April 16, 2020, Zurich commenced the Zurich Claim against Bondfield, Unity Health, and others, seeking, among other things, rescission of the bonds. In support of its claim for rescission, Zurich alleges that Unity Health and Bondfield participated in an unlawful bid-rigging scheme in favour of Bondfield’s proposal in violation of the fair and competitive process required by the procurement rules.

[16] More specifically, in the Zurich Action, Zurich alleges that Unity Health and Bondfield colluded to ensure that the Project contract was awarded to Bondfield. They did so through their principals, Vasos Georgiou and John Aquino. Zurich alleges that Unity Health’s participation in this collusive scheme “materially increased” the risk associated with the Project by enabling the selection of a fraudulent proposal that was neither “realistic” nor “achievable.” This contributed to the Project’s eventual financial collapse.

[17] Zurich further alleges that Unity Health, as the owner of the Project and an obligee under the bonds, violated its obligation to Zurich by failing to disclose its participation in unlawful collusion in which it participated prior to the issuance of the bonds. On this basis, Zurich seeks a declaration that the two bonds, including the bond under which Noram claims, are rescinded, of no force or effect, and/or void ab initio.

[18] In or around the same time that Zurich commenced the Zurich Claim, Zurich advised Noram that it no longer considered itself obliged to make any payment to Noram under the L&M Bond. The reasons that it gave for this refusal are the same as those pleaded in the Zurich Claim.

[19] On June 12, 2020, Noram commenced its Original Claim, seeking payment of $1,882,549.94 for outstanding amounts owed under the Noram Subcontracts. Zurich and Unity Health were named as defendants.

[20] In its Original Claim, Noram seeks damages of $1,882,549.94 from Zurich under the L&M Bond. Noram also seeks the same damages in the alternative from Unity Health for unjust enrichment. Noram alleges that Unity Health, as owner of the property, benefited from Noram’s supply of labour, services, and materials under the Noram Subcontracts prior to December 20, 2019. Specifically, Noram summarizes the relevant allegations in its Original Claim to be that:

a. Noram performed work on the St. Michael’s hospital tower; b. Noram is entitled to payment in respect of that work under the terms of the [the L&M] payment bond; c. The [L&M] payment bond was structured as a trust. Zurich, as surety, Bondfield, as principal, and Project Co. and Unity Health, as obligees and trustees, jointly and severally agreed that any claimant, as a beneficiary of the trust, could sue on the [L&M] payment bond if that claimant was not paid under the terms of its contract with the principal; d. Noram was a claimant under the [L&M] payment bond and accordingly was entitled to sue upon it as a beneficiary of the trust; e. Zurich’s only purported basis for refusing to pay Noram was the set of facts as pleaded in the Zurich’s Rescission Action; and f. If Zurich were held by the court to be excused from its obligations under the [L&M] payment bond (which would mean that its allegations made in the Zurich Claim had been substantiated by the court), then Unity Health was responsible to pay Noram for the work done pursuant to its subcontract. The legal basis for the claim against Unity Health is pleaded as unjust enrichment.

[21] Noram pleads that the basis for Zurich’s refusal to pay the amounts owing to Noram is that:

Noram was subsequently advised by BBCG [Bondfield] that, notwithstanding Zurich’s obligation and agreement to make payments to Noram for the work it performed under the Exterior Subcontract and Interior Subcontract, as a result of certain facts which are alleged in Court File #CV-20-639601-00CL [the Zurich Claim], Zurich was no longer obligated to, and would not, make such payments. Zurich claims in that action rescission of the Payment Bond [i.e. the L&M Bond].

The Amendments

[22] At para. 27 of the Original Claim (with one amendment made that is not objected to), Noram pleads:

Noram further states that it has and continues to supply labour, services and materials under the Noram Subcontracts to the Project and the Defendant, St. Michael’s Hospital, with the knowledge, consent and approval of St. Michael’s Hospital. However, St. Michael’s Hospital has not made any payment for any of the said labour, services and materials delivered prior to December 20, 2019 notwithstanding authorizing the work and taking the benefit thereof. In the alternative to the claim against Zurich, Noram therefore states that St. Michael’s Hospital has been unjustly enriched as a result of the supply of labour, services and materials by Noram without paying for any such labour, services and materials, which form the basis of the within claim, and there is no juristic basis for this enrichment of St. Michael’s Hospital at Noram’s expense.

[23] On May 1, 2023, as pleadings had not closed, Noram filed the Amended Statement of Claim pursuant to r. 26.02(a). That Rule permits a party to amend their 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.

[24] The Amendments claim damages in the alternative against Unity Health on the basis of conspiracy and breach of fiduciary duty. These claims are applicable if Zurich is held not to be obligated to make payments owing to Noram as a consequence of the Zurich Claim. The New Claims are pleaded by the Amendments as follows:

2a. In the further alternative, the Plaintiff claims against St. Michael’s Hospital damages in the amount of $1,882,549.94 for conspiracy. 2b In the still further alternative, the Plaintiff claims against St. Michael’s Hospital damages in the amount of $1,882,549.94 for breach of fiduciary duty.

28. In the further alternative, in the event that Zurich is held to be not obligated to make the payments owing to Noram under the Exterior Contract and the Interior Contract due to the facts which are alleged by Zurich in Court File #CV-20-639601-00CL, then Noram pleads that those facts (if proven) constitute an agreement by St. Michael’s Hospital to commit an unlawful act, which act was directed towards Noram (along with other beneficiaries of the Payment Bond), and which act St. Michael’s Hospital knew or should have known would likely cause injury to Noram. Noram therefore claims damages from St. Michael’s Hospital for conspiracy to commit an unlawful act in the amount of $1,882,549.94. [emphasis added]

29. In the still further alternative, in the event that Zurich is held to be not obligated to make the payments owing to Noram under the Exterior Contract and the Interior Contract due to the facts which are alleged by Zurich in Court File #CV-20-639601-00CL, then Noram pleads that those facts (if proven) constitute a breach by St. Michael’s Hospital of its fiduciary obligations owed to Noram, which obligations are owed as a result of St. Michael’s Hospital's status as an Obligee and Trustee, as described in the Payment Bond. Noram therefore claims damages from St. Michael’s Hospital for breach of fiduciary duty in the amount of $1,882,549.94. [emphasis added]

The Positions of the Parties

[25] Unity Health contends that the New Claims were not tolled by Noram’s Original Claim. It submits that the New Claims are new causes of action for conspiracy and breach of fiduciary duty. These causes of action involve allegations of misconduct by Unity Health, directed towards Noram, that were not the subject of the Original Claim. These allegations of misconduct are new even if the damages are the same as originally pleaded for unjust enrichment, and even if they are alleged to arise from the facts pleaded in the Zurich Claim. Thus, the New Claims were not part of the factual matrix of the Original Claim. Rather, they advance new causes of action for fundamentally different claims based on facts, and having constituent elements, not pleaded in the Original Claim.

[26] Unity Health further contends that a limitation period cannot be avoided by commencing a proceeding and then amending the statement of claim, as of right, to add new causes of action. It argues that the words of s. 4 of the Limitations Act should be read purposefully and liberally to avoid this result.

[27] Noram argues that an amendment to a statement of claim is not barred by the Limitations Act. As a strict matter of statutory interpretation, s. 4 of the Limitations Act does not preclude an amendment to an originating process, but only the commencement of a proceeding (e.g. the initial issuance of an action or application). Further, Norman maintains that, unlike circumstances in which leave to amend is required, neither an amendment as of right nor a motion to strike under r. 21.01(1)(a) engages the court’s discretion or requires any consideration of potential prejudice to the defendant.

[28] Noram further contends that, in any event, the New Claims are simply an extension of the Original Claim. They were effectively tolled by the Original Claim. The “finger of litigation” was already pointed at Unity Health. The Amendments do not seek any additional damages against Unity Health. Rather, they advance two alternative, legal bases for recovering the same damages and relief originally claimed. They do not comprise new causes of action and do not evoke the Limitations Act.

Issues to be Decided

[29] As noted earlier, the issue to be decided on this motion is whether it is plain and obvious that the New Claims should be struck in their entirety from the Amended Statement of Claim on the basis that they are statute-barred pursuant to ss. 4 and 5 of the Limitations Act. The court will address the following sub-issues in answering this broader question:

a. The r. 21.01(1)(a) test and Unity Health’s onus b. Whether the defence that Unity Health seeks to asserts under the Limitations Act as grounds to strike out the Amendments is a question of law that could be decided under r. 21.01(1)(a), based upon the facts pleaded and documents incorporated by reference into the Amended Statement of Claim (e.g., the L&M Bond and the Zurich Claim). c. Whether it is plain and obvious that ss. 4 and 5 of the Limitations Act apply to amendments to a statement of claim that do not involve the addition of a party. d. Whether it is plain and obvious that the Amendments: i. advance new causes of action or fundamentally different claims based on facts not pleaded in the Original Claim; or ii. are alternative claims for relief founded upon the same facts, or flowing directly from the facts previously pleaded, such that the amendments do not comprise new causes of action and do not implicate the provisions of the Limitations Act.

Analysis

a) The Rule 21.10(1)(a) Test

[30] Rule 21.01(1)(a) confers jurisdiction on the Court to determine a question of law before trial where the determination of the question may dispose of all or part of the action.

[31] A motion brought under r. 21.01(1)(a) will only be granted in narrow circumstances where the determination of the issue is “plain and obvious”: MacDonald v. Ontario Hydro (1994), 26 O.R. (3d) 401 (Prov. Ct.), at para. 13, aff’d (1995), 26 O.R. (3d) 401 (Div. Ct.); Alafi v. Lindenbach, 2023 ONSC 831, 84 R.F.L. (8th) 456, at para. 35; Knight v. Imperial Tobacco Canada Ltd., 2011 SCC 42, [2011] 3 S.C.R. 45, at para. 17; Frank v. Legate, 2015 ONCA 631, 339 O.A.C. 359, at para. 36.

[32] The test on a r. 21 motion was set out by the Supreme Court in Hunt v. Carey Canada Inc., [1990] 2 SCR 959, at p. 975:

[A]ssuming that the facts as stated in the statement of claim can be proved, is it “plain and obvious” that the plaintiff’s statement of claim discloses no reasonable cause of action? … Neither the length and complexity of the issues of law and fact that might have to be addressed nor the potential for the defendant to present a strong defence should prevent the plaintiff from proceeding with his or her case.

[33] In considering whether to grant the motion, the court should read the pleading generously, making allowances for drafting deficiencies: Frank v. Legate, at para. 36; Falloncrest Financial Corp. v. Ontario (1995), 27 O.R. (3d) 1 (C.A.), at p. 7.

[34] Evidence is only admissible on a r. 21.01(1)(a) motion with leave of the court or on consent of the parties. However, documents incorporated by reference in a statement of claim do not constitute “evidence” that would otherwise be excluded: Montreal Trust Co. of Canada v. Toronto Dominion Bank, [1992] O.J. No. 1274 (Ont. Prov. Ct.), at paras. 3-4. In this case, those documents incorporated by reference into the Original Claim include the Zurich Claim and the L&M Bond.

b) The Limitations Act Defence – Question of Law?

[35] Typically, where discoverability is in issue, a limitations defence is not a question of law because it requires factual determinations that cannot be made by simply taking the pleadings (including documents incorporated by reference) as true.

[36] Section 4 of the Limitations Act states the following: “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.”

[37] Section 5(1) of the Limitations Act provides that 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).

[38] Section 5(2) of the Limitations Act provides that: “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.”

[39] For purposes of this motion, the parties have proceeded on the basis that there is no s. 5 discoverability issue. It can be assumed that the New Claims were discoverable by at least June 12, 2020, the date on which the Original Claim was issued. It follows that, even accounting for the additional COVID tolling of limitations periods, the Amendments were made after the second anniversary of the day on which the New Claims were discovered. It is on this basis that Unity Health contends that it is plain and obvious that the Amendments should be struck.

c) Does the Limitations Act Apply to Amendments to an Originating Process?

[40] Noram raises a threshold question as to whether the Limitations Act applies at all to the Amendments. It contends that there is no legal basis for Unity Health’s assertion of a Limitations Act defence to the New Claims because s. 4 only prohibits the commencement of a proceeding after the second anniversary of the day on which the claim was discovered. The New Claims were simply added as Amendments to the Original Claim that had already been commenced.

[41] Noram points to the fundamental rule of statutory interpretation that requires words to be read in their entire context, in their grammatical and ordinary sense, in a manner that is harmonious with the overall statutory scheme and with Parliament’s intention: Bell ExpressVu Limited Partnership v. Rex, 2002 SCC 42, [2002] 2 S.C.R. 559, at para. 26.

[42] The issue here involves the interpretation of the words “proceeding” and “commencement.” A proceeding is defined in r. 1.03 to be an action or application. The Court of Appeal has applied this definition to s. 4 of the Limitations Act: Meady v. Greyhound Canada Transportation Corp., 2008 ONCA 468, 90 O.R. (3d) 774, at para. 11; Placzek v. Green, 2009 ONCA 83, 307 D.L.R. (4th) 441, at footnote 1.

[43] Giving the words “proceeding” and “commencement” their usual and ordinary meaning, a proceeding was commenced on June 12, 2020 when the Original Claims were advanced by this action. The New Claims have been added and are being advanced in this same existing action. No new proceeding was commenced.

[44] Parties may be added or joined to a proceeding under r. 5.03(2) with leave of the court, unless prejudice would result that is non-compensable. The lapse of a limitation period is an example of such prejudice. This is expressly addressed in s. 21(1) of the Limitations Act, which states that “if a limitation period in respect of a claim against a person has expired, the claim shall not be pursued by adding the person as a party to any existing proceeding.”

[45] Notably, the Limitations Act does not expressly prohibit an amendment that pursues new claims against persons already named as parties. Rule 5.01(1) specifically contemplates that “a plaintiff … may in the same proceeding join any claims the plaintiff … has against an opposite party.” A claim includes the relief sought and the cause of action (or causes of action) that support it. There may be multiple claims and multiple causes of action asserted in a single proceeding against the same party. This is trite.

[46] Noram argues that in determining whether the reference in s. 4 of the Limitations Act to a “proceeding” being “commenced” includes amendments, if those terms are found to be ambiguous the court should resolve any ambiguity in favour of the party whose right to pursue legal action is being curtailed: Berardinelli v. Ontario Housing Corp., [1979] 1 S.C.R. 275, at p. 280; Ordon Estate v. Grail, [1998] 3 S.C.R. 437, at p. 525; Tardif (Estate of) v. Wong, 2002 ABCA 121, 303 A.R. 103, at para. 21; Dundas v. Zurich Canada, 2012 ONCA 181, 109 O.R. (3d) 521, at para. 40.

[47] Unity Health argues against this interpretation. Despite its seemingly plain language, Unity Health relies upon the court’s interpretation of s. 4 of the Limitations Act in previous cases that have treated an amendment to an existing claim “no differently than the issuance of a new and separate statement of claim that advances a statute-barred claim.” The court in Frohlick v. Pinkerton Canada Ltd., 2008 ONCA 3, 88 O.R. (3d) 401, at para. 24, states the following:

In my view, rule 26.01 does not contemplate the addition of unrelated statute-barred claims by way of amendment to an existing statement of claim. Conceptually, this should be treated no differently than the issuance of a new and separate statement of claim that advances a statute-barred claim.

[48] There are other examples of this approach in the context of motions for leave to amend a statement of claim, under r. 26.01 or 26.02(c):

a. Derenzis v. Johnson, 2021 ONSC 5136, aff’d 2022 ONCA 323: This is a complicated case that involved consideration of r. 21.01 and r. 26.01. The Limitations Act arguments appear to have been decided under r. 26, leave to amend, to add claims for civil conspiracy and declaratory relief to an existing defamation and battery claim. Leave was denied. The court stated the following, at paras. 74 and 76:

Although the general rule is that amendments are presumptively approved, the court has a residual right to deny amendments where appropriate and the court will consider whether: (a) the opposing party will suffer an injustice not compensable in costs; (b) the proposed amendment is an issue worthy of trial and prima facie meritorious; (c) the amendment would have been struck if originally pleaded; and (d) the amendment contains sufficient particulars …

With the exception of an amendment to plead a statute-barred claim, the onus of proving prejudice is on the party alleging it. Where a limitation period has intervened, the party seeking the amendment must lead evidence to explain the delay and to displace the presumption of prejudice.

b. Lucky Star Developments Inc. v. ABSA Canada International, 2018 ONCA 346: The court upheld the motion judge’s decision not to grant leave to allow amendments to a statement of claim that were statute-barred. The court concluded the following, at para 7:

In oral submissions, the appellant argued that s. 4 of the Limitations Act, 2002 does not apply to proceedings that have already been commenced, and so does not bar amendments under r. 26.01. We disagree. As the court noted in Joseph, the rules must be read in light of the Act and its purpose in establishing a basic limitation period in s. 4.

c. The Honourable Justice Graeme Mew, in his text The Law of Limitations, summarizes the courts’ approach to amendments of existing proceedings:

While section 21(1) [of the Limitations Act] deals only with adding parties, as opposed to adding new claims against parties already sued, conceptually, adding a new, statute-barred claim against a defendant sued in a timely fashion is treated no differently than the issuance of a new and separate statement of claim against that defendant that advances a statute-barred claim: The Honourable Justice Graeme Mew, “Part I: General Principles,” in The Law of Limitations, 3rd ed (LexisNexis Canada, 2016), at s. 4.176.

The authorities cited for this are Frohlick and Dee Ferraro Ltd. v. Pellizzari, 2012 ONCA 55, 346 D.L.R. (4th) 624, another r. 26 leave to amend case.

[49] The Court of Appeal in United Food and Commercial Workers Canada, Local 175. Region 6 v. Quality Meat Packers Holdings Ltd., 2018 ONCA 671, at paras. 63-64, applied Frohlick in a different but related context. [1] The court stated the following:

[The plaintiffs] assert that, since s. 4 of the Limitations Act bars commencing a proceeding, and under Rule 10.01 the proceeding has already begun before a representation order is sought, the limitation period is of no moment ....

This court, however, has repeatedly held that parties cannot circumvent the Limitations Act by amending their pleadings to add additional claims: see Frohlick [other citations omitted].

[50] In Joseph v. Paramount Canada’s Wonderland, 2008 ONCA 469, 90 O.R. (3d) 401, at paras. 22-28, the Court of Appeal granted a r. 21 motion to strike an original statement of claim that was issued after the expiry of the applicable limitation period. This case provides some useful history of pleading amendments and consideration of prejudice:

[10] The special circumstances doctrine originated in Canadian jurisprudence in Basarsky v. Quinlan, [1972] S.C.R. 380, [1971] S.C.J. No. 118. [page 405]. In that case, the plaintiff brought a claim within the applicable limitation period, but later sought to add a new claim after the period had expired. The Supreme Court adopted the rule in Weldon v. Neal (1887), 19 Q.B.D. 394 (C.A.), that an amendment cannot be made that would prejudice the other party by taking away the existing right of the time bar, except in peculiar or special circumstances that warrant the amendment. The Supreme Court concluded that the defendant was not prejudiced and exercised its power to allow the amendment on the basis of special circumstances.

[11] This common law doctrine gradually came to be applied to motions brought under Rule 26 and Rule 5 of the Rules of Civil Procedure to amend pleadings or add parties after the expiry of a limitation period. The relevant subsections of these rules read as follows:

5.04(2) At any stage of a proceeding the court may by order 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.

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.

[12] Neither of these rules refers specifically to the expiry of a limitation period or to the doctrine of special circumstances. However, following the line of cases that began with Basarsky v. Quinlan, these rules have been interpreted to allow a court to add or substitute a party or to add a cause of action after the expiry of a limitation period where special circumstances exist, unless the change would cause prejudice that could not be compensated for with either costs or an adjournment: see, e.g., Mazzuca v. Silvercreek Pharmacy Ltd. (2001), 56 O.R. (3d) 768, [2001] O.J. No. 4567 (C.A.).

Application of special circumstances under the new Act

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

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

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

[51] It is this history and the requirement for leave under r. 26 that distinguishes the above authorities from the issue that the court is faced with in this case. In this case, there is no leave requirement, and the court is not being asked to exercise its discretion in favour of one party to the potential prejudice of the other. There is no discretion being exercised that raises the question of prejudice.

[52] Unity Health submits that the court can “gap fill” s. 4 of the Limitations Act to prevent parties from circumventing the Limitations Act by amending their pleadings to add additional claims that would otherwise be out of time. Unity Health argues that there is one case in which the Court of Appeal did just that, in a similar situation to this one: Kaynes v. BP, PLC, 2019 ONSC 6464, aff’d 2021 ONCA 36, 456 D.L.R. (4th) 247, at paras. 50 and 60-62. [2]

[53] Noram submits that Kaynes is not an authority for this point because the parties and the court in that case proceeded on the assumption that s. 4 did apply to amendments made as of right: at para. 57. The court did not consider the issue or engage in the statutory interpretation point raised here. That is, the Court of Appeal did not consider the language of s. 4 of the Limitations Act, which speaks only to a “proceeding” being “commenced.” Nor did the court consider its own jurisprudence, which states that a “proceeding” in the context of the Limitations Act is either an action or an application (e.g., an originating process): see Meady and Placzek.

[54] As a result, Noram contends that the decision in Kaynes was made per incuriam and is not binding on this court. If the Court of Appeal had considered the point of statutory interpretation directly, it would not have found the amendment to be statute-barred.

[55] The Court of Appeal recently affirmed that per incuriam is a “well-recognized exception” to stare decisis, which applies where the panel deciding the earlier case did not advert to judicial or statutory authority binding on it. Had the panel considered this authority, it would have decided the case differently: McNaughton Automotive Ltd. v. Co-operators General Insurance Co. (2005), 76 O.R. (3d) 161 (C.A.), at para. 111; R. v. Henry, 2019 ONSC 4978, at paras. 35-41.

[56] On this basis, Noram first argues that it is open to the court to decide on this motion that the Limitations Act simply does not apply to the Amendments. At a minimum, it argues that it is not plain and obvious, or well-settled law, that a pleadings amendment made as of right engages s. 4 of the Limitations Act.

[57] I agree with the second position. The Court of Appeal has cautioned that matters of law which have not been fully settled should not be disposed of on a r. 21.01(1)(a) motion: Law Society of Upper Canada v. Ernst & Young (2003), 65 O.R. (3d) 577 (C.A.), at para. 50, leave to appeal refused, [2003] S.C.C.A. No. 358; Portuguese Canadian Credit Union Ltd. v. CUMIS General Insurance Co., 2010 ONSC 6107, 104 O.R. (3d) 16, at para. 46.

[58] This was stated by the Court of Appeal in Transamerica Life Canada Inc. v. ING Canada Inc. (2003), 68 O.R. (3d) 457 (Ont. C.A.), at para. 39:

On a pleadings motion, a court should not dispose of matters of law that are not settled in the jurisprudence. Where the law in a particular area can be described as “muddy”, the court will not strike that part of the pleading, nor hold that the claim or defence must fail.

[59] Considering Kaynes and the uncertainty that it introduces because the issue before the court now was not squarely addressed and only arose by implication, and because the Limitations Act itself does not contain a prohibition against amendments to add new claims against a party to an existing proceeding (but does prohibit amendments to add new parties), it is not plain and obvious that the Limitations Act applies. Just because the court has declined to exercise its discretion to permit a party to amend to add otherwise statute barred claims when leave is required does not necessarily mean that an amendment made as of right to include such a claim is prohibited by the Limitations Act. I am not prepared to decide this issue on a r. 21 motion in favour of either side, Noram or Unity Health.

[60] This question of whether s. 4 of the Limitations Act precludes a plaintiff from amending a statement of claim to assert new claims in an existing proceeding against an already named defendant has not been directly considered in any authority that was presented. For Unity Health to succeed, it would have to satisfy the court that it is plain and obvious that this what the words of this section of the statute mean. It has not done so. This question of statutory interpretation was not squarely addressed by either the motions judge or the Court of Appeal in Kaynes. If the Legislature had intended to preclude such claims, it could have said so directly by including a prohibition like the one in s. 21 of the Limitations Act regarding amendments to add parties. It did not do so.

[61] Courts may have treated an amendment to an existing claim as “the issuance of a new and separate statement of claim that advances a statute-barred claim” in the context of the exercise of the court’s discretion under r. 26: see Frohlick (and other cases cited above). However, on the record before the court on this motion, Unity Health has not established a policy reason or principal of statutory interpretation that renders it plain and obvious that that the line of authority under r. 26, and other provisions that engage the court’s discretion, should and would be extended to a r. 21 motion, which does not engage the exercise of the court’s discretion.

[62] Unity Health submits that failing to extend this line of authority will lead to perverse results and an anomaly of (albeit, limited) circumstances in which the applicability of the Limitations Act could be avoided; however, Noram contends that doing so could lead to a perverse interpretation of the words of the statute, if it requires the court to read into the Limitations Act a prohibition against amendments to add new claims against existing parties to a proceeding and to conclude that, by making the Amendments, Noram “commenced” a “proceeding” in respect of the New Claims or should be treated as having done so.

[63] Where, as I have found here, this reading is not plain and obvious, these and other policy considerations should be explored on a record that is not constrained by the strictures of a r. 21.01(1)(a) motion to strike. Given the court’s general reluctance to grant dispositive motions at the pleadings stage of an action, this issue is best left to be considered in the full context of the proceeding, with a more fulsome record.

[64] Unity Health’s motion is, thus, dismissed. Unity Health may still raise defences under the Limitations Act, the availability of which shall be determined in the fullness of this and the other related proceedings.

[65] In coming to this conclusion, the court is mindful that this outcome is not going to have a material substantive or procedural impact on the litigation going forward. Irrespective of the outcome of this motion, Unity Health will remain a defendant in this proceeding and the many related proceedings. It will have to defend to allegations of conspiracy and breach of fiduciary duty in any event. For the time being, it will be required to defend these same claims by Noram as well, while at the same time, its limitation defence will be preserved.

d) Does the Amended Statement of Claim Advance New Causes of Action or Fundamentally Different Claims Based on New Facts?

[66] Unity Health’s position on this issue is that it is plain and obvious that the Amendments advancing the New Claims for conspiracy and breach of fiduciary duty constitute new causes of action or fundamentally new claims based on new facts that are barred by ss. 4 and 5 of the Limitations Act. The applicability of the Limitations Act to the Amendments is a threshold or gating issue that must be decided before this issue arises. In light of the court’s findings in the previous section of this endorsement, this next issue need not be decided at this time.

[67] Given the extensive oral and written submissions on this issue, the parties’ positions will be summarized in the interest of completeness. The law is not particularly controversial in this area, but its application is not entirely straightforward. There is much room for interpretation.

a. The Court of Appeal has repeatedly held that pleading amendments will not comprise a new cause of action if the original pleading contains the facts that are necessary to support the additional relief claimed: Klassen v. Beausoleil, 2019 ONCA 407, at para. 28; [3] Dee Ferraro Limited, at para. 4; Canadian National Railway v. Canadian Industries Ltd., [1940] 4 D.L.R. 629 (Ont. C.A.), at pp. 634-35. b. In Klassen, at para. 28, the Court of Appeal stated: “An amendment does not assert a new cause of action - and therefore is not impermissibly statute-barred - if the original pleading contains all the facts necessary to support the amendments, such that the amendments simply claim additional forms of relief, or clarify the relief sought, based on the same facts as originally pleaded.” Put another way, an amendment does not assert a new cause of action - and therefore is not subject to scrutiny under limitations statutes - so long as the new legal basis for the claim is based upon facts that “can reasonably be seen as falling within the four corners of the existing claim”: Boyer v. Callidus Capital Corporation, 2023 ONCA 233, at para. 66, citing Farmers Oil and Gas Inc. v. Ontario (Natural Resources), 2016 ONSC 6359, 134 O.R. (3d) 390, at para. 31. c. The pleading must be read generously in this context: Klassen, at para. 30; Operation Dismantle Inc. v. R., [1985] 1 S.C.R. 441, at p. 451. This includes consideration of facts outlined in documents incorporated into the pleadings by reference: Hitchlock v. AG Ontario, 2020 ONSC 5348, at paras. 11-12; Advance Beauty Supply Limited v 233930 Ontario Inc., 2015 ONSC 422 at para. 11, citing Trillium Power Wind Corp. v. Ontario, 2013 ONCA 683, 117 O.R. (3d) 721, at paras. 30-31. d. This approach to determining whether an amendment to a pleading adds a new cause of action has been held to be consistent with a purposive approach to the interpretation of limitations provisions. The purposive approach considers the “defendant’s basic entitlement to have notice of the factual matrix from which a claim arises”: Prollenium International Corporation v. Vital Esthetique Sarl, 2020 ONSC 1704, at paras. 21, 38. e. This court has held that where a defendant has been put on notice of the factual matrix underpinning new claims by the original pleading, a strict application of the Limitations Act runs contrary to the principles of equity. The court in Farmers Oil, at para. 31, quoting Brand Name Marketing Inc. v. Rogers Communications Inc., 2010 ONSC 2892, at para. 84, stated:

I believe that equity dictates that if a defendant knows that the “finger of litigation” is pointing in its direction, and an action is commenced on a timely basis based on specific actions, this court ought to take appropriate steps to ensure that the true lis between the parties is addressed, rather than permitting one party to perhaps escape its possible liability by relying upon a technical Limitations Act defence.

f. According to the Court of Appeal in United Food, at paras. 64-65, citing North Elgin Centre Inc., 2016 ONCA 848, 409 D.L.R. (4th) 382, at paras. 19-23 and 33, this comes down to the court’s assessment of the amendment. The court must consider whether the amendment: i. seeks to advance “a fundamentally different claim based on facts not originally pleaded”; or ii. seeks to assert a new cause of action; but iii. a new cause of action is not asserted if an amendment pleads an alternative claim for relief from the same facts, or, in other words, if the amendment flows directly from the facts already pleaded. g. However, in Kaynes, this court held, at para. 94, that “material facts may sound in negligence, breach of contract, and breach of fiduciary duty. But by pleading the material facts of one theory of liability it does not automatically follow that alternative theories of liability are pleaded.” h. In Derenzis, the court did not allow amendments to add a claim for civil conspiracy as a new cause of action. After summarizing the general approach, the court stated, at para. 87:

The key is whether substantially all of the material facts of the tendered cause of action have already been pleaded, in which case, the amendment will be allowed, or whether new material facts are sought to be added to support the cause of action, in which case, the amendment will not be allowed or if already pleaded, it will be struck [footnotes omitted]

[68] In the alternative to its primary response (that the Limitations Act does not apply to the New Claims contained in the Amendment made as of right to a statement of claim in a pending proceeding), Noram asserts that, even if the Limitations Act does apply, the New Claims were sheltered by the Original Claim because they are merely advancing two additional, alternative, legal bases for recovering the same damages and relief sought by the Original Claim relying upon, or flowing from, the same facts as previously pleaded.

[69] Noram contends that its pleadings of conspiracy and breach of fiduciary duty are based on the same factual matrix pleaded in the original statement of claim. The New Claims (like the Original Claim of unjust enrichment) are advanced only in the alternative, in the event that the court finds that the facts alleged by Zurich in the Zurich Claim are made out. These facts are said to have been incorporated by reference into the Original Claim, together with the terms of the L&M Bond. Therefore, the following facts are also relied upon to support the Amendments:

a. With respect to the pleading of conspiracy, the Zurich Claim pleads that Unity Health and Bondfield formed an agreement to pursue an unlawful bid-rigging scheme. This scheme resulted in the selection of a proposal containing falsified and inaccurate information that Unity Health knew or ought to have known would compromise the financial viability of the Project. b. With respect to the pleading of breach of fiduciary duty, the fiduciary relationship between the parties is stated plainly on the face of the L&M Bond. The statement of claim pleads that the named “obligee” was a trustee of the payment bond, and that Noram was a beneficiary of that trust. Should the allegations in the Zurich Claim prove to be true, Unity Health’s collusive and unlawful behaviour would constitute a breach of the fiduciary obligations that it owes as a trustee under the bond to Noram, one of the bond’s beneficiaries.

[70] Noram points to the explicit assertions it makes in paras. 28 and 29 of the Amendments, that the constituent elements of the causes of action in conspiracy and breach of fiduciary duty can be found in the Zurich Claim and the L&M Bond, by its plea that: “due to the facts which are alleged by Zurich in Court File #CV-20-639601-00CL, then Noram pleads that those facts (if proven) constitute…[the constituent elements of the New Claims].” However, it also concedes that the Zurich Claim does not make direct assertions about the alleged misconduct of Unity Health in relation to the beneficiaries of the bonds (such as Noram); they are one step removed from the alleged misconduct in the Zurich Claim that is directed at the placement of the bonds.

[71] Unity Health counters that not only are these clearly distinct causes of action from a claim for unjust enrichment, but these New Claims required assertions of new facts to make out their entirely different constituent elements. These new facts include the following:

a. In paragraph 28 of the Amended Statement of Claim with respect to the claim for conspiracy [emphasis added]: i. If the facts pleaded against Unity in the Zurich Claim are proven, then those facts constitute an agreement by Unity to commit an unlawful act; ii. The unlawful act was directed towards Noram; and iii. Unity knew or ought to have known the unlawful act would likely cause injury to Noram. b. In paragraph 29 of the Amended Statement of Claim with respect to the claim for breach of fiduciary duty [emphasis added]: i. Unity owes a fiduciary duty to Noram as an Obligee and Trustee as described in the L&M Bond; ii. If the facts pleaded against Unity in the Zurich Claim are proven, then those facts amount to a breach by Unity of its fiduciary duty owed to Noram; and iii. The breach of that duty caused Noram damages.

[72] Unity Health submits that the constituent elements of the causes of action in conspiracy and breach of fiduciary duty were added in the Amendments precisely because they were not present in the Original Claim. A claim for unjust enrichment is predicated upon benefits conferred on a defendant at the expense of the plaintiff, without a juristic reason. It does not involve any allegation of wrongful or intentional misconduct, intention to harm or failure to protect, or the existence of any duty, hence the need for the Amendments.

[73] Unity Health points to other cases in which this court has found amendments pleading alternative claims of breach of fiduciary duty and conspiracy to be statute-barred. For example, in:

a. 1921628 Inc. v. Liu, 2021 ONSC 3399, at para. 20, the court did not permit the plaintiff to amend its pleading to plead a statute-barred alternative claim for breach of fiduciary duty because a fiduciary relationship was not pleaded in the original statement of claim. b. Derenzis, the court did not permit amendments that pleaded an alternative, statute-barred claim of civil conspiracy because the constituent elements of a civil conspiracy were not originally pleaded: at paras. 95-96; also see the Court of Appeal decision in Derenzis, at para. 14).

[74] The question of whether the Limitations Act applies is being deferred. I consider it unnecessary and imprudent at this early stage of the proceeding to make an interim ruling on this question about whether the Amendments assert fundamentally different claims based on new facts while that threshold or gating issue remains to be determined. The practical effect of this is that the different and alternative causes of action now asserted by Noram in its Amended Statement of Claim may be further particularized through other available sources. That may, in turn, put a finer point on the analysis, if and when any limitations defence that Unity Health pleads is adjudicated.

Costs and Final Disposition

[75] The parties agreed that the losing party shall pay the successful party their all-inclusive costs of this motion, fixed in the amount of $15,000.

[76] Accordingly, since Unity Health’s r. 21 motion is being dismissed and the Amendments are not being struck, Unity Health shall forthwith pay $15,000 in all-inclusive costs to Noram.

[77] This endorsement and the orders and directions contained in it shall have the immediate effect of a court order without the necessity of a formal order being taken out.

KIMMEL J. Date: September 18, 2023

[1] This case involved two representative plaintiffs who purported to bring a representative action on behalf of 125 non-union employees for unpaid severance. They did not obtain a representation order under r.10.01 within the two-year limitation period. The proposed class of employees had been terminated en mass by a meat processing business. The lower court specifically addressed and considered r. 26.02(a): Abreu v. Quality Meat Packers Holdings Limited, 2016 ONSC 7594, at para. 19. However, this case was decided on the basis of the distinction between a class action under the Class Proceedings Act and a representative action. A class action expressly tolls limitation periods for putative class members pending class certification; whereas, in a representative action, there is tolling of claims for non-plaintiffs was held pending a representation order being made: at paras. 51 and 72.

[2] I note as well that there appeared to be some confusion about whether the Derenzis case was a r. 26 or r. 21 case; although, ultimately, the limitations issues appear to have been decided under r. 26. There is a passing reference, at para. 87 of the court’s decision, to either denying leave or striking an amendment if the new claims are found to be new causes of action. Yet, the issue in Derenzis, like in Kaynes, does not appear to have been addressed squarely. It was a passing comment in obiter.

[3] Recently, the Court of Appeal released its decision in Shwaluk v. HSBC Bank of Canada, 2023 ONCA 538. This decision was not available at the time this motion was argued. It largely reiterates the principles in Klassen.