Court File and Parties

COURT FILE NO.: CV-17-409-00 DATE: 2023-09-21

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

1401380 Ontario Limited O/A Wilderness North Air, Plaintiff Counsel: Mr. R. Johansen, for the Plaintiff

- and -

Wasaya Airways LP, Defendant Counsel: Mr. M. Holervich, for the responding parties, Wasaya Airways LP and the Proposed Defendant, Wasaya Petroleum LP

HEARD: via Zoom on September 14, 2023, at Thunder Bay

Madam Justice H. M Pierce

Reasons on Motion to Amend the Statement of Claim

Introduction

[1] These related cases are scheduled for trial on the list commencing October 10, 2023. I have dismissed the plaintiff’s motion to amend its statement of claim and compel the defendant to answer an undertaking with reasons to follow. These are the reasons.

Background

[2] Wilderness North Air (“the plaintiff”) seeks leave to amend its statement of claim to add a party defendant, Wasaya Petroleum LP. (“Petroleum”) to the action against Wasaya Airways LP (“Airways”). The plaintiff contends that it was first on notice that Petroleum was an involved party in June 2022 when it conducted examinations for discovery.

[3] Even if that were so, I wonder why the plaintiff would wait 15 months to argue a motion to amend its statement of claim, five weeks before trial.

[4] This motion was first served in January 2023. A pretrial was held in May 2023 and the case was set on the trial list.

[5] Justice Newton conducted a trial management conference on August 21, 2023. The trial involves two actions. The parties advised Newton J. that the trial will require two weeks.

[6] Justice Newton endorsed the file noting that this motion to amend was pending as of August 31st. In fact, it was heard two weeks later.

[7] The defendant, Airways, and proposed defendant, Petroleum, object to the amendment on the grounds that the limitation period to claim against Petroleum has expired, giving rise to a prohibition under section 21(1) of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B.

[8] As well, Airways objects to answer the question refused at Airways’ examination for discovery on the grounds of irrelevance.

Amending the Claim: The Law

[9] Rule 26 of the Rules of Civil Procedure [Rules] applies generally to amending pleadings, absent a limitation issue. It provides:

26.01 General Power of Court

On motion at any stage of an action the court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.

26.02 When Amendments may be Made

A party may amend the party’s pleading,

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

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

(c) with leave of the court.

Only subsection (c) of the rule applies in this case.

[10] The plaintiff submits that the wording of the rule is mandatory, requiring the court to grant it leave to amend its statement of claim. It contends that non-compensable prejudice does not arise from the requested amendment. It also submits that the limitation period has not expired, as the plaintiff first became aware of Petroleum as a potential defendant at the examinations for discovery conducted in June 2022. The plaintiff asserts that this is the date when the limitation clock for discoverability started running.

[11] The defendant, Airways, and the proposed defendant, Petroleum, submit that the plaintiff was on notice that Petroleum was a potential defendant no later than September 23, 2016, when the plaintiff received the statement of defence filed by Hydro One Remote Communities Inc. (“Hydro”) in the companion action commenced by the plaintiff. Airways also points to other evidence to suggest that the claim is now statute-barred. It does not contend that due diligence is in issue in this case.

Has the Limitation Period Expired?

[12] If the limitation period has expired under the Limitations Act, 2002, no amendment is possible. Thus, this issue should be considered first.

[13] Section 4 of the Limitations Act, 2002 prescribes the basic limitation period that applies to causes of action, section 5 deals with discoverability, and section 21 deals with the prohibition of adding a party, which are prescribed as follows:

4 Basic limitation period

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

5(1) Discovery

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).

5(2) Presumption

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.

21(1) Adding Party

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.

[14] In Morrison v. Barzo, 2018 ONCA 979 at paras. 29 – 32, the Court of Appeal discussed the approach to be taken on a motion to amend a pleading where there was a limitation issue:

[29] Where there is a question as to whether claims covered by the basic two-year limitation period are statute-barred, such that parties cannot be added pursuant to s. 21(1) of the Limitations Act, the court must make a finding as to when the plaintiff first knew the elements of the claim listed in s. 5(1)(a). If the date of actual discovery, as determined by the court, would bring the claim within the limitation period, and the proposed defendant relies on "reasonable discoverability" to contend the claim was brought outside the prescription period, the court must go on to determine under s. 5(1)(b) when "a reasonable person with the abilities and in the circumstances of [the plaintiff] first ought to have known of the matters referred to in clause (a)". While a plaintiff's due diligence is relevant to the finding under 5(1)(b), the absence of due diligence is not a separate basis for dismissing a claim as statute-barred. [Footnotes omitted.]

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

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

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

[15] In Mancinelli v. Royal Bank of Canada, 2018 ONCA 544, the Court of Appeal considered how reasonable diligence applies to a limitation issue on a motion to amend. The court set the following parameters:

1. The motion judge can determine, as a question of fact from the record, if there is a reasonable explanation on proper evidence why the plaintiff could not have discovered the claim by reasonable diligence (para. 23);

2. The evidentiary threshold is low; whether reasonable diligence was exercised must be considered in context (para. 24);

3. The plaintiff’s explanation as to why it could not have identified the party shall be given a “generous, contextual reading” (para. 27);

4. A plaintiff’s failure to take reasonable steps to investigate a claim is not a stand-alone or independent basis to find a claim is out of time, but rather, the reasonable steps a plaintiff ought to take is a relevant consideration in deciding when the claim is discoverable (para. 30); and finally,

5. Where the issue is due diligence, the motion judge will not be in a position to dismiss the plaintiff’s motion in the absence of evidence indicating that the plaintiff could have obtained the information with due diligence and the date by which such evidence could have been obtained (paras 28 and 31).

When Did the Elements of the Claim Become Known to the Plaintiff?

[16] When did the plaintiff discover that it had a cause of action against Wasaya Petroleum? Is there evidence that meets the threshold to show that limitation period for suing Petroleum has passed? Alternatively, when would a reasonable person with the abilities and in the circumstances of the plaintiff ought to have known that it had a claim, as provided in the Act?

[17] The plaintiff submits that it didn’t become aware of the elements of a potential claim against Petroleum until June 2022, when examinations for discovery were conducted. It submits that if there is a discoverability issue, it should be granted leave to amend its statement of claim and plead discoverability as an issue for the trial judge. It claims that the defendants will not be prejudiced.

[18] Airways and Petroleum contend that the elements of a potential claim for inducing breach of contract and unlawful interference in economic relationships became apparent, at the latest, when Hydro delivered its statement of defence to the plaintiff on September 23, 2016, when the plaintiff received the statement of defence filed by Hydro in the companion action commenced by the plaintiff.

[19] Based on the evidentiary record below, I conclude that there is no reasonable explanation on proper evidence as to why the plaintiff could not have discovered the claim by reasonable diligence.

[20] I find that the plaintiff was on notice that Petroleum was a potential defendant no later than September 2016 and possibly much earlier. It is therefore out of time to amend its statement of claim pursuant to s. 21(1) of the Limitations Act, 2002.

[21] The plaintiff operates aircraft in Northwestern Ontario that are designed to haul fuel to remote First Nations communities. Sometimes the defendant, Airways, has been a competitor in the fuel haulage business; sometimes it has been a customer. The record contains invoices from the plaintiff to Airways starting in 2012. The invoicing record also shows that the plaintiff delivered fuel for Petroleum on behalf of Hydro as early as 2014.

[22] The plaintiff contends that it was not aware of the relationship between Airways and Petroleum; however, it concedes that it did not do a corporate search.

[23] The plaintiff argues that it understood that Petroleum’s only involvement in fuel distribution was by road, which was a service on which the plaintiff didn’t bid. In my view, the evidence, including previous flights by the plaintiff delivering fuel for Petroleum, belies this submission.

[24] The ownership structure of Airways includes a significant number of First Nations communities in the area. The plaintiff, in its submissions, describes Airways and Petroleum as “sister companies.”

[25] Hydro issued a Request for Proposals to deliver fuel by air to these communities in November 2014.

[26] Hydro awarded the bid to the plaintiff on June 23, 2015. The agreement set out the First Nations communities for which the plaintiff would be the primary supplier of diesel fuel. It also specified the communities for which the plaintiff would be the secondary supplier. The formal agreement was signed by Hydro and Petroleum on September 10, 2015.

[27] Before awarding the bid to the plaintiff, a number of the First Nations communities passed band council resolutions advocating their support for Airways and/or Petroleum and directing Hydro to award the fuel delivery contracts to them. The band council resolutions represent the start of a cascade of discoverability opportunities.

[28] The wording of the band council resolutions are similar. Each resolution identifies Wasaya Airways and Wasaya Petroleum separately. The band council resolution from Kingfisher Lake, below, is an example:

Subject: Hydro One Remote Communities Inc.

Whereas Kingfisher Lake First Nation… is a partner in the Wasaya Group (“Wasaya”) which includes Wasaya Airways Limited Partnership (“Wasaya Airways”) and Wasaya Petroleum LP (“Wasaya Petro”) and supports the Wasaya companies,

And whereas, Hydro One Remote Communities Inc. (“Hydro One”) purchases fuel to operate its generating equipment located on the First Nation,

And whereas, electrical power generated by Hydro One’s on-site equipment is sold to the First Nation and its members,

Therefore be it further resolved that, Hydro One is directed to support the First Nation and Wasaya by utilizing the services of Wasaya Airways and Wasaya Petro exclusively when purchasing fuel for the First Nation.

Be it further resolved that, the First Nation supports the tender application submitted by Wasaya Petroleum LP and/or Wasaya Airways LP for the supply of fuel to our First Nation for three years commencing April 1, 2015.

[29] Although the date of the resolution is obscured, it is understood to have been passed in 2015.

[30] While some First Nations passed resolutions supporting other favoured competitors, none of which have been sued, many band council resolutions supported the award of contracts to Wasaya Petroleum and Wasaya Airways. For example, Kitchenuhmaykoosib Inninuwug passed its resolution on January 23, 2015; Wunnumin Lake on January 27, 2015; Nibinamik on January 28, 2015; Keewaywin on January 28, 2015; Wapekeka on January 29, 2015; Sandy Lake on January 30, 2015; Fort Severn on April 30, 2015; and Kingfisher Lake on June 23, 2015.

[31] After the bid was awarded to the plaintiff, the following additional band council resolutions to the same effect were passed: Kasabonika Lake on July 14, 2015; North Caribou Lake on November 3, 2015; Neskataga on November 6, 2015; Webequie on December 7, 2015; and Pikangikum on May 26, 2016.

[32] Some of the resolutions, of which Fort Severn’s is an example, state that…

the First Nation will not transport nor allow a third party to transport fuel from the airport location to Hydro One fuel storage if fuel is delivered to our ownership communities by any other carrier other than Wasaya Airways LP or supplied by Wasaya Petroleum.

[33] The record shows that these band council resolutions came to the attention of the plaintiff. For example: on July 21, 2015, Hydro wrote to the plaintiff with respect to Kasabonika Lake, referencing the band council resolution. Hydro asked the plaintiff to show that the resolution had been rescinded, so that it could fulfill its contractual obligations.

[34] The plaintiff replied by letter dated August 7, 2015, indicating that it had already made fuel deliveries pursuant to the contract during the past four weeks and that any issue arising out of the band council resolution was Hydro’s problem.

[35] A news article was posted by Net News Ledger on-line on September 25, 2015, detailing the conflict arising out of the Hydro’s tender process and naming Wasaya Airways and Wasaya Petroleum as involved parties. This article came to the plaintiff’s attention because it prepared an undated power point presentation arguing its position regarding a flawed tendering process. A copy of the power point, containing the news item, is contained in the record.

[36] Hydro and the plaintiff continued their correspondence. On November 13, 2015, Hydro wrote to the plaintiff asking it to supply proof that Neskantaga had rescinded its band council resolution, failing which they would conclude the plaintiff had breached its contract to supply fuel.

[37] On November 25, 2015, the plaintiff wrote to Hydro concerning North Caribou Lake, Neskantaga, and Kasabonika Lake, reiterating its position that the band council resolutions promoting contracts for Airways and Petroleum were Hydro’s problem.

[38] By November 30, 2015, the plaintiff advised Hydro that it had arranged to meet with the Chiefs of North Caribou Lake and Neskantaga in order to “mitigate the BCR issue.” The plaintiff also requested a copy of the North Caribou resolution from Hydro.

[39] The trouble continued.

[40] On January 31, 2016, the plaintiff wrote to Hydro indicating that on January 29th, a competitor “leaked” that they had met with Hydro about the transfer of two more communities under contract with the plaintiff, based on the band council resolutions.

[41] On February 1, 2016, Hydro wrote to the plaintiff requesting confirmation, such as by way of recission of the band council resolution, that it could honour its contractual obligations to deliver fuel to Webequie.

[42] On May 17, 2016, the plaintiff sued Hydro for breach of contract and unlawful interference with economic relations. Hydro delivered its statement of defence on September 23, 2016. Paragraph 15 of the statement of defence identifies the plaintiff, Cargo North and Wasaya Petroleum Limited Partnership as having been successful bidders.

[43] Both Airways and Petroleum submit that the two-year limitation date commenced as of the date of Hydro’s statement of defence. The case would therefore become statute-barred two years later, after September 23, 2018.

[44] Furthermore, a Hydro representative was examined for discovery on March 21, 2017. Hydro delivered its affidavit of documents containing all the band council resolutions in April 2017. All of this information provided the plaintiff with discoverability opportunities.

[45] In fact, the plaintiff sued Airways on September 1, 2017, for inducing breach of contract and unlawful interference in its economic relations. The plaintiff granted Airways an extension to file its statement of defence, which was not delivered until April 9, 2021.

[46] Examinations for discovery in the Airlines case did not take place until June 2022. By that point, the plaintiff was out of time to add Petroleum as a defendant.

[47] As I have indicated, there were many opportunities for a sophisticated party such as the plaintiff with experience in local industry conditions, to have come to the conclusion that it had a claim against Petroleum. Airways was not obliged to identify Petroleum to the plaintiff as a possible co-defendant. The delivery of Hydro’s statement of defence, and the ensuing Hydro litigation, also identified Petroleum as a possible defendant.

Will Petroleum be Prejudiced if an Amendment is Granted?

[48] The plaintiff submits that there is no prejudice to Petroleum by granting it leave to amend its statement of claim at this late stage. It submits that the relevant documents have already been produced and discovery could be limited to two hours.

[49] In view of my finding that the plaintiff is out of time to commence a claim against Petroleum, the issue of non-compensable prejudice that cannot be dealt with by costs or an adjournment does not arise.

[50] However, if I am in error with respect to the limitation period, I would find that an amendment would create prejudice to Petroleum, who is entitled to a reasonable time to retain and instruct counsel, to order production and disclosure, to conduct examinations for discovery, and to engage in resolution discussions, as per the procedures set out in the Rules of Civil Procedure.

[51] The records of the parties are dated and may be destroyed. The availability of witnesses is uncertain, the reliability of their memories may be in question. Prejudice to Petroleum is a problem of the plaintiff’s own making that costs or an adjournment will not rectify, and which could only get worse.

Answer to Refusal at Examination for Discovery

[52] The plaintiff seeks to compel Airways to answer the following question it refused to answer at the examinations for discovery:

To provide for the year 2015, LP agreements, identifications of the general partners for each of the two LPs (Wasaya Airways LP and Wasaya Petroleum LP) shareholder agreements within the general partner corporation and any management agreement between LPs and the general partner.

[53] Airways objects to answer the question refused at its examination for discovery on the grounds of irrelevance. I agree. In view of this order dismissing the motion to amend the statement of claim, this question is irrelevant.

Conclusion

[54] For reasons given, the plaintiff’s motion to amend its statement of claim and to compel the defendant to answer the question refused are dismissed.

[55] If counsel are unable to agree on costs, either may seek an appointment from the trial coordinator within 30 days of the release of these reasons to argue costs, failing which costs will be deemed to be settled.

“original signed by”

The Hon. Madam Justice H.M. Pierce

Released: September 21, 2023