Ontario Superior Court of Justice
Court File No.: CV-18-866
Date: 2025-01-27
Parties
Between:
Profit Professionals Inc.
(Plaintiff/Responding Party)
Counsel: M. Gayed
And:
Tiger Drylac Canada Inc. / Tigre Drylac Canada Inc.
(Defendant/Moving Party)
Counsel: C. Crisman-Cox
Heard: January 6, 2025
Released: January 27, 2025
Before: Justice M.J. Valente
Endorsement on Motion for Summary Judgment
Overview
[1] This action is a commercial dispute in which the Plaintiff seeks damages for breach of contract and on a quantum meruit basis. The Defendant brings this motion for summary judgment to dismiss the Plaintiff’s claims by reason that the Plaintiff’s statement of claim was issued outside of the agreed two-year limitation period.
Summary of the Facts
a. The Parties
[2] The Plaintiff is a consulting business. It analyzes operating costs for its clients with a view of generating savings. If successful, the Plaintiff takes as its compensation a percentage of the savings.
[3] The Defendant is in the business of producing and selling high-quality surface coatings.
b. Non-Disclosure Agreement
[4] On October 17, 2013, the parties entered into a Non-Disclosure Agreement for a term of five years (the “Non-Disclosure Agreement”). Pursuant to the terms of the Non-Disclosure Agreement, any “confidential information” disclosed as between the parties would be used only for discussing, evaluating, or implementing a business opportunity, relationships, or arrangement between the parties. “Confidential information” is defined by the Non-Disclosure Agreement as including all business and financial information that is non-public or proprietary, including business strategies.
c. The Engagement Agreement
[5] On December 18, 2013, the parties signed an Engagement Agreement (the “Engagement Agreement”). The Engagement Agreement provides in part that:
- the Plaintiff will investigate the Defendant’s costs in the areas of courier, freight, packaging, and credit collecting fees, as well as duties and customs brokerage charges;
- the Plaintiff will prepare a baseline report (“Baseline Report”) with respect to its understanding of each of these fees and charges incurred by the Defendant;
- each Baseline Report requires the approval of the Defendant prior to the Plaintiff proceeding with additional work;
- if the Defendant approves one or more of the Baseline Reports, the Plaintiff will prepare a recommendation report regarding potential savings for each approved expense category;
- the Defendant will consider the recommendations, “and, where appropriate and possible, accept each recommendation”; and
- for the twenty-four months following the implementation of any accepted recommendation, the Defendant will pay the Plaintiff fifty percent of its cost savings.
[6] The courier, freight and packaging components of the Engagement Agreement are the key areas of dispute between the parties.
[7] The Engagement Agreement also includes a confidentiality provision (the “Confidentiality Provision”) whereby each of the Plaintiff and the Defendant agree to treat as confidential all information disclosed to the other party and neither party will use the information obtained from the other party without prior consent in writing. The Non-Disclosure Agreement and the Confidentiality Provision are hereinafter referred to as the “Confidentiality Agreement”.
d. The January, 2014 Baseline Reports
[8] In January, 2014 the Plaintiff delivered two Baseline Reports to the Defendant. The first report analyzed courier and less than load freight costs in the US market. The second Baseline Report analyzed courier costs in Canada.
[9] The Defendant agreed to neither of the Baseline Reports. As a result, the Plaintiff did not prepare a report respecting recommended cost savings in the areas of courier and freight fees. It is, however, the undisputed evidence of Jeffrey Bradshaw (‘Bradshaw’), president of the Plaintiff, that by April, 2014, the Plaintiff had shared with the Defendant its knowledge of the courier market in the US and Canada, including any available cost savings.
[10] Between January and March 2014, the Defendant attempted to negotiate a number of amendments to the Engagement Agreement. Several of the proposed changes were not accepted by the Plaintiff but the parties did agree on the following amendments:
- as of February 11, 2014, the parties agreed that the Plaintiff would defer any investigation of the Defendant’s freight costs; and
- as of March 28, 2014, the parties further agreed that the Plaintiff would focus its work solely on US courier savings and only with respect to its current courier supplier, UPS.
e. The Defendant Terminates the Engagement Agreement in Part
[11] By way of an email exchange on April 7, 2014, the president of the Defendant, Larry McNeely (‘McNeely’), advised Bradshaw that the Defendant would not be proceeding with the courier and freight components of the Engagement Agreement. Although McNeely’s emails are ambiguous regarding which aspects of the Engagement Agreement are to be terminated, Bradshaw confirmed on cross-examination that the Defendant terminated the Plaintiff’s work to reduce its courier and freight costs. The parties agree that the Engagement Agreement was breached in respect of these cost categories on April 7, 2014.
[12] In cross-examination Bradshaw testified that he viewed the Defendant’s termination of these components of the Engagement Agreement as a “deferral” and looked forward in the future to pursuing cost savings for the Defendant in these expense categories.
[13] In the meantime, the Plaintiff continued to pursue cost savings for the Defendant in the areas of credit collection fees and customs and duty brokerage charges for which the Defendant paid the Plaintiff for its services as agreed.
f. Request for Information
[14] In anticipation of being retained by the Defendant to pursue courier cost savings, Bradshaw testified that in April, 2016, he contacted the Defendant to request data with respect to its March and April 2016 courier costs charged by the Canadian courier company, CTSG. The record is unclear as to the specific April date on which the request was made but by April 28, 2016, the requested data was delivered by the Defendant to the Plaintiff.
[15] Some six months later, between November 2 and 4, 2016, the Plaintiff, through Bradshaw, requested additional courier data respecting the Defendant’s UPS US courier costs at different times between 2014 to 2016 to which the Defendant responded without delay.
[16] Upon reviewing the UPS invoices, Bradshaw’s evidence is that he concluded that the Defendant had obtained significant cost savings from UPS as a result of the Defendant using confidential information the Plaintiff had shared with it. On November 16, 2016, Bradshaw met with a representative of the Defendant to discuss his conclusion and ultimately demanded payment of half of the UPS savings realized by the Defendant.
[17] When the Defendant failed to make the payment, the Plaintiff issued its statement of claim on July 10, 2015, claiming damages for breach of contract in the amount of $167,000 USD with respect to courier savings and $250,000 USD with respect to freight savings.
g. The June, 2014 Baseline Report
[18] In June, 2014, the Plaintiff prepared a Baseline Report with respect to the Defendant’s packaging costs. The record is unclear as to whether the June, 2014 Baseline Report was approved by the Defendant.
[19] The evidence is, however, that by email, dated October 9, 2014, the Plaintiff advised the Defendant that it would “stop all work on this packaging project” and by return email of the same date, the Defendant agreed “to consider [the parties’] signed agreement for ‘packaging’, null and void”.
[20] The Plaintiff’s statement of claim, issued on July 10, 2018, seeks damages in breach of contract and on a quantum meruit basis in the sum of $40,000 for what appears to be the alleged packaging savings realized by the Defendant.
Position of the Parties
[21] The Defendant submits that the agreed two-year limitation period was triggered for the Plaintiff’s breach of contract claim respecting the courier and freight savings on April 7, 2014 when it unilaterally terminated the Plaintiff’s work with respect to these cost categories. The Defendant relies on ss. 5(1) and 5(2) of the Limitations Act, 2002, SO 2002, c 24, Sch B (the “Act”). The Defendant submits that the Plaintiff cannot rely on its late discovery in November, 2016 that damages resulted for the Defendant’s breach of contract because any reasonable person in its position would have discovered the potential loss well in advance of November, 2016.
[22] The Defendant’s position is founded in the settled legal principle that discoverability is subject to a positive obligation on a claimant to make reasonable efforts to investigate a potential claim.
[23] The Defendant submits the same argument with respect to the Plaintiff’s packaging component breach of contract claim and otherwise submits that discoverability is irrelevant to any quantum meruit claim for work done by the Plaintiff to reduce its packaging costs. In order to advance a claim in quantum meruit, there can be no question that the Plaintiff knew or ought to have known the value of its work as of October 9, 2014 when its packaging cost consultation work came to an end.
[24] For its part, the Plaintiff advances a number of arguments in support of its position that the limitation period had not expired when it issued its claim on July 10, 2018. Its most compelling argument, however, is that it did not discover that it had suffered a loss as a result of the Defendant’s breach of contract until November, 2016 when it reviewed the Defendant’s US courier invoices. The Plaintiff further submits that given the nature of its relationship with the Defendant, until receipt of these invoices, it had no reason to investigate a potential claim against the Defendant.
[25] I discuss later in this Endorsement the circumstances upon which the Plaintiff and Defendant each rely to support these respective positions.
Guiding Legal Principles
[26] Rule 20.01 of the Rules of Civil Procedure, RRO 1990, Reg 194, permits a party to move for summary judgment. Rule 20.04 provides as follows:
20.04(2) The court shall grant summary judgment if,
a) the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence; or
b) the parties agree to have all or part of the claim determined by a summary judgment and the court is satisfied that it is appropriate to grant summary judgment.
(2.1) In determining under clause (2)(a) whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties and, if the determination is being made by a judge, the judge may exercise any of the following powers for the purpose, unless it is in the interest of justice for such powers to be exercised only at trial:
- weighing the evidence;
- evaluating the credibility of a deponent; and
- drawing any reasonable inference from the evidence.
[27] The relevant principles pertaining to summary judgment are now well known as a result of the Supreme Court’s decision in Hryniak v. Mauldin, 2014 SCC 7 (“Hryniak”).
[28] When is there no genuine issue requiring a trial? Karakatsanis J. addressed this question in some detail in Hryniak. Speaking on behalf of the Court, Karakatsanis J. held that on a motion for summary judgment, the court should first determine if there is a genuine issue requiring a trial based solely on the record before it without using the fact finding powers afforded to it in Rule 20. If after reviewing the factual record, the court is satisfied that there is sufficient evidence to fairly and justly adjudicate the dispute and that summary judgment would be timely, affordable and a proportionate procedure, then summary judgment should be granted.
[29] If, however, there is a genuine issue requiring a trial, the court should determine if the need for a trial can be avoided by using its powers stipulated in Rule 20.04(2.1) and (2.2). A court may, at its discretion, use those powers on the understanding that this use is not against the interest of justice. The court’s use of the stipulated powers will not be against the interest of justice should they lead to fair result, a just result and will promote the goals of timeliness, affordability, and proportionality in light of the litigation as a whole (see: Hryniak, at paras. 49-50, 66-67).
[30] The onus is on the moving party to show there is no genuine issue requiring a trial. However, the responding party must put its “best foot forward”. It is prohibited from saying more and better evidence will or may be available at trial. In short, the court is entitled to assume the record contains all of the evidence that the parties would present at trial (see: Simcoe Muskoka Child, Youth and Family Service v. L.V., 2019 ONSC 1208 (Div. Ct.)).
[31] Section 4 of the Act provides that a proceeding shall not be commenced in respect of a claim after the second anniversary of the day in which the claim was discovered unless the Act otherwise provides. Subsection 5(1) of the Act states 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). 2002, c. 24, Sched. B, s.5(1).
[32] Subsection 5(2) stipulates that a person is presumed to have known the matters referred to in clause 5(1)(a) on the day that the act or omission on which the claim is based took place unless the contrary is proved.
[33] In Apotex Inc. v. Nordion (Canada) Inc., 2019 ONCA 23 (‘Apotex’), Strathy C.J.O. (as he then was) made clear that pursuant to the Act, the limitation period for breach of contract does not necessarily run from the date of the breach. The breach of contract itself is only one factor to be considered in determining when a claim is discovered under the Act. “In addition to that factor, the person with the claim must also know that the ‘injury, loss or damage had occurred” (s.5(1)(a)(i)), that it was caused or contributed to by the act or omission (the breach of contract) (s.5(1)(a)(ii)), and that the act or omission was that of the defendant (s.5(1)(a)(iii)” (see: Apotex, at para 86).
[34] Strathy C.J.O. further observed that as a result of the presumption pursuant to s.5(2) of the Act, the limitation period begins to run on the date of the breach (being the date of the “act or omission”) unless it is established that the person advancing the claim did not know one or more of the matters set out in s.5(1)(a), and that a reasonable person would not have known of those matters (see: Apotex, at para 87).
[35] Furthermore, as the Court of Appeal also states in Arcani v. Dawson, 2016 ONCA 715 (‘Arcani’), it is incumbent upon any reasonable person with a potential claim to act with due diligence to acquire facts in order to be fully apprised of the material facts upon which a claim can be based (at para 15). As a corollary to this positive obligation, in the event that the potential claimant was unable to ascertain these essential facts prior to the expiry of the limitation period, they must provide a reason why this information was not obtainable with due diligence (see: Arcani, at para 15).
Analysis
[36] In support of its position that any reasonable person would have made inquiries respecting the potential of damages flowing from the breach of contract well before April, 2016 and would have known that damages had indeed resulted from the breach prior to November, 2016, the Defendant relies on its own conduct following the negotiation of the Engagement Agreement and the Plaintiff’s response.
[37] Not only did the Defendant seek the two amendments to the Engagement Agreement to which the Plaintiff agreed on February 11, 2014 and March 28, 2014, but it also attempted to negotiate other changes that were rejected by the Plaintiff. For example, after the Engagement Agreement was signed, the Defendant proposed that instead of the agreed pay structure, a fixed fee or a one-time fee be payable to the Plaintiff. Additionally, the Defendant sought to eliminate any payment to the Plaintiff for its services if it obtained savings of less than fifteen percent on its US courier costs.
[38] In the words of Bradshaw, the Plaintiff’s president, “[t]he repeated variations requested by the Defendant [were] contrary to the letter and spirit of the Engagement Agreement which commit[ed] the parties to costs savings and the parties ‘agree[ed] to work together’ to achieve this outcome…”.
[39] Furthermore, the Defendant points to the Plaintiff’s identical reaction to its decision not to approve the Baseline Reports which the Plaintiff viewed as contrary to both the “intention and spirit of the Engagement Agreement” given that at no time did the Defendant identify any error or omission in the Baseline Reports nor provide any valid business reason for refusing to approve the Baseline Reports.
[40] In these circumstances, of what may be described from the Plaintiff’s perspective as the Defendant’s bad faith conduct, coupled with the Plaintiff’s knowledge that it had shared some of its cost savings expertise with the Defendant prior to April, 2014, the Defendant argues that the Plaintiff ought to have been immediately put on notice of the potential for damages resulting from the Defendant’s breach and undertaken an investigation to determine its loss, if any.
[41] Finally, the Defendant submits that the Plaintiff ought to have known that it had suffered a loss in April, 2016 when it received the Defendant’s Canadian courier cost data. By that time the Plaintiff had the information it needed to advance a claim but has failed to offer any explanation for its failure to do so.
[42] According to the Plaintiff, the Defendant’s description of their relationship fails to account for its positive aspects. Whereas the Plaintiff was not working with the Defendant to reduce its courier, freight, and packaging costs, from April 2014 to at least November 2016, the Plaintiff and Defendant were co-operating to produce cost savings regarding the Defendant’s credit collection fees as well as its customs and brokerage costs. According to Bradshaw, the Plaintiff was delivering “wonderful savings” in these expense categories and the Defendant was “very happy about it”. The Defendant demonstrated its satisfaction with the Plaintiff’s work by paying its invoices without exception. From all accounts, the business relationship was mutually beneficial.
[43] Given the positive base upon which the parties’ relationship was founded, Bradshaw, on behalf of the Plaintiff, saw potential in growing the relationship. He viewed the Defendant’s decision not to pursue costs savings in the areas of courier and freight expenses as a deferral of this work to be addressed in the future. It is for this reason that in April 2016, Bradshaw requested certain data regarding the Defendant’s Canadian courier charges, and later in November 2016, he made the same request respecting the Defendant’s US courier expenses to which requests the Defendant responded without delay.
[44] In sum, the Plaintiff’s position is that in these circumstances, no reasonable person would have been put on notice of the potential of damages flowing from the Defendant’s breach until November 2016 when the Plaintiff received the Defendant’s US courier charges. Until this time, their business relationship had been one of trust and confidence with the prospect of a bright future.
[45] Furthermore, Bradshaw states in his affidavit that the Plaintiff had no reason to believe prior to November 2016 that the Defendant would profit from the confidential information it shared with the Defendant in light of the scope of the Confidentiality Agreement that governed their relationship.
[46] Apart from there being no evidence in the record that the Plaintiff ought to have known that it suffered a loss when it received the Canadian courier data in April 2016, I am satisfied that the Plaintiff has raised a genuine issue requiring a trial with respect to the discoverability of its loss for its breach of contract claims. Specifically, in the circumstances of this case, the genuine issue requiring a trial is whether a reasonable person, acting with the required due diligence to investigate a potential claim, would have known of the loss resulting from the breach of contract prior to the expiry of the two-year limitation period from the date of the breach (the “Genuine Issue”). The Genuine Issue requires scrutiny of Bradshaw’s evidence that in light of the party’s ongoing relationship and his reliance on the Confidentiality Agreement, the Plaintiff had no reason to investigate until November 2016 its loss in respect of the Defendant’s US courier and freight expense savings as well as its loss respecting the Defendant’s reduced packaging costs.
[47] I also find that the need for a trial to determine the Genuine Issue cannot be avoided by using the powers granted to this court by Rule 20.04(2.1). I further find that little benefit is to be gained by ordering the oral evidence of Bradshaw and the Defendant’s affiant, Amis Haider, because the Genuine Issue is tied to the substantive issue respecting a determination as to whether the Plaintiff’s loss resulted from the Defendant’s’ use of confidential information. I have concluded the use of the Rule 20.04(2.1) and (2.2) powers in the circumstances of this case will not promote the goals of timeliness, affordability, and proportionality in light of the litigation as a whole.
[48] I therefore decline to grant a summary dismissal of the Plaintiff’s breach of contract claim on the basis that the prescription period has lapsed.
[49] The Plaintiff’s claim in quantum meruit is, however, another matter. In its statement of claim, the Plaintiff alleges that it performed a number of services on behalf of the Defendant for which it seeks payment of $40,000 on the basis of a quantum meruit. Although it is not clear, the alleged services appear to relate to the Plaintiff’s efforts to reduce the Defendant’s packaging costs, and to that extent, the quantum meruit claim is alternative relief to the Plaintiff’s breach of contract claim for this component of the Engagement Agreement.
[50] The alleged services rendered include providing assistance and performing research in determining available savings for the Defendant; analyzing and preparing information specific to the Defendant using precise and general market information; and preparing reports reflecting available savings and revenue.
[51] I find that by no later than October 9, 2014, when the parties mutually agreed to terminate the packaging project, the Plaintiff knew or ought to have known that its packaging work had come to an end. Likewise, in the event that the quantum meruit claim also relates to the courier and freight projects, I find that the Plaintiff knew or ought to have known that its work with respect to these projects had come to an end by the April 7, 2014 breach of contract date. I also find that by these dates, the Plaintiff knew or ought to have known what work it had completed with respect to each expense category of packaging, courier, and freight fees. By these dates, the Plaintiff required no additional information to advance a claim in quantum meruit for its work.
[52] In these circumstances, I therefore conclude that if the Plaintiff wanted to bring a claim in quantum meruit, it should have done so within two years of October 9, 2014 for its packaging work and within two years of April 7, 2014 for its courier and freight work. Accordingly, I find that the Plaintiff’s claim in quantum meruit has proscribed.
[53] Finally, I acknowledge that the granting of partial summary judgment is not a common occurrence. The Court of Appeal in Service Mold + Aerospace Inc. v. Khalaf, 2019 ONCA 369 (‘Service-Mold’), recently emphasized this reality by referring to its earlier decision in Butler v. Chown, Cairns LLP, 2017 ONCA 783 (‘Butler’) where the Court found that if used imprudently, partial summary judgment can cause delay, and increase expense as well as the danger of inconsistent findings at trial made on a more complete record (see: Butler, at paras 29-33 and Service-Mold at para 14). For this reason, partial summary judgment “should be considered to be a rare procedure that is reserved for an issue or issues that may be readily bifurcated from those in the main action and that may be dealt with expeditiously and in a cost-effective manner” (see: Butler, at para 34).
[54] I am of the view that the matter before me is one of those uncommon cases where partial summary judgment is appropriate. The Plaintiff’s breach of contract claim can be easily bifurcated from its claim in quantum meruit; partial summary judgment will prove to be more efficient and less expensive for the parties; and partial summary judgment will not result in inconsistent findings by the court.
Disposition
[55] For the reasons stated above, the Defendant’s motion for summary judgment dismissal of the Plaintiff’s breach of contract claim is dismissed while its motion for summary judgment to dismiss the Plaintiff’s quantum meruit claim is granted.
Costs
[56] I encourage the parties to agree on the issue of costs. In the unfortunate event, however, that the parties are unable to agree, the party seeking costs may make written costs submissions within fifteen days of the release of this Endorsement and the responding party will have ten days after receipt of the submissions of the party seeking costs to respond. There shall be no reply. Each party’s cost submissions shall not exceed three double-spaced pages, exclusive of offers to settle, cost outlines and authorities. All cost submissions shall be forwarded to my attention by way of email to my judicial assistants at HamiltonSopinka.SCJJA@ontario.ca. If no submissions are received within this timeframe, the parties will be deemed to have settled the issue of costs.
Justice M.J. Valente
Released: January 27, 2025