Smith v. Rotalec Canada Inc., 2026 ONSC 2310

Court File and Parties

CITATION: Smith v. Rotalec Canada Inc., 2026 ONSC 2310

COURT FILE NO.: CV-20-653262

MOTION HEARD: 20251030

SUPPLEMENTARY WRITTEN SUBMISSIONS: 20251114

REASONS RELEASED: 20260420

SUPERIOR COURT OF JUSTICE – ONTARIO

BETWEEN:

DAVID SMITH

Plaintiff

• and-

ROTALEC CANADA INC. and FARHAT BUCHH

Defendants

BEFORE: ASSOCIATE JUSTICE McGRAW

COUNSEL: N. MacDonald E-mail: nmacdonald@macdonaldassociates.ca -for the Plaintiff

J. Allingham E-mail: jallingham@maclawyers.ca -for the Defendant Farhat Buchh

REASONS RELEASED: April 20, 2026

Reasons For Endorsement

I. Background

1This is a motion by the Plaintiff for leave to amend his Statement of Claim to: i.) add a declaration that the Defendant Farhat Buchh (“Buchh”) conducted himself in a manner that justifies piercing the corporate veil to hold him personally liable for the wrongful conduct and liabilities of the Defendant Rotalec Canada Inc. (“RCI”)(the “Corporate Veil Amendments”); ii.) increase his damage claim against Buchh for the intentional infliction of mental suffering from $100,000 to $500,000; and iii.) add particulars regarding the receivership proceedings with respect to RCI (the “Receivership Proceedings”)(the “Receivership Amendments”, together with the Corporate Veil Amendments”, the “Amendments”).

2The Plaintiff commenced this action by Statement of Claim issued on December 16, 2020. An Amended Statement of Claim was issued on April 14, 2021 (the “Current Claim”). The Plaintiff is a Professional Engineer who was employed by RCI from January 1, 2000 until February 21, 2020. RCI is a company operating out of Brantford, Ontario which specializes in the design and distribution of industrial automation products including customized robotics. Buchh was RCI’s President and sole director. Buchh and his family owned all of RCI’s issued and outstanding shares through Buchh Holding Inc. (“BHI”).

3The Plaintiff commenced his employment pursuant to an employment contract with RCI’s predecessor, Le Groupe Rotalec. The Plaintiff pleads that in or about 2006 RCI began paying him 10% commissions on gross profits from his assigned account territories. He later earned additional commissions under other programs and arrangements. He alleges that from 2006 until 2020 he did not receive the commissions he earned or was paid haphazardly, continually complained to RCI and requested supporting documentation and an accounting which was never provided. In the Amended Claim, the Plaintiff claims unpaid commissions from 2015 through 2020 and an accounting.

4The Plaintiff states that he signed a new employment contract on August 11, 2016 after RCI merged with BHI. Under this agreement, the Plaintiff was entitled to a base salary of $59,510.88 plus commissions, benefits and home office and vehicle coverage. The Plaintiff was promoted to Regional Manager–Motion Control Specialist in January 2017 with a new compensation structure which included a base salary of $70,000 and commissions based on assigned territories and gross profit on Ontario sales with additional commissions to be considered plus other benefits.

5The Plaintiff claims that RCI removed his 10% commission on gross profits for his assigned territories in 2018. RCI proposed a new compensation plan which remained in place until the time of his alleged constructive dismissal. Under this plan, he was to receive a base salary of $75,000; commissions under six (6) different plans; car and office allowances of $6,000 and $5,750 respectively; mileage reimbursement; and a $15,000 bonus for meeting key performance indicators. He was also promoted to Technology Specialist.

6The Plaintiff alleges that material changes to the terms of his employment gave rise to his constructive dismissal amounting to a wrongful dismissal, including: RCI’s failure to pay bonuses and commissions; changes to his work location requiring that he work a minimum of 3 days per week at RCI’s offices; and changes to his compensation. The Plaintiff also relies on the removal of his car allowance and certain products from his portfolio.

7The Plaintiff further alleges that RCI denied his pre-planned vacation to Australia which was scheduled to start on February 22, 2020 and was advised that if he went on his vacation he would have resigned. The Plaintiff also alleges that RCI’s Vice-President of Sales admitted that his commissions and bonuses since 2015 were outstanding but would only be paid if he submitted a letter of resignation by February 21, 2020 with an effective date of March 16, 2020. The Plaintiff also states a Regional Sales Manager attended at his home on February 20, 2020 to collect his laptop and mobile phone. He was advised by a Vice-President on February 21, 2020 that he had resigned and was locked out of RCI’s information technology systems. A company-wide email was sent on February 24, 2020 announcing his departure as of February 21, 2020.

8The Plaintiff claims a declaration as against RCI that he was constructively dismissed on February 21, 2020, amounting to wrongful dismissal and that RCI breached the Employment Standards Act, 2000 (Ontario) by failing to pay his commissions properly or at all, which the Plaintiff earned and was owed. The Plaintiff also claims damages against RCI including $260,000 for wrongful dismissal representing 24 months of pay in lieu of notice including salary, commissions, bonuses and expenses. The Plaintiff further claims damages for commissions unpaid and owed to date, and a reconciliation of these amounts in an amount to be determined, the particulars of which are in the Defendants’ possession. He also claims unpaid commissions from RCI’s Motion Control Override program for 2017. In the alternative, the Plaintiff claims damages in the same amounts for RCI’s unjust enrichment on the basis that he was deprived of his commissions.

9The Plaintiff also claims unpaid bonus payments related to key performance indicators for the years 2018-2020 and over the 24-month reasonable notice period, in an amount to be determined. The Plaintiff further claims the loss of benefits for the 24-month reasonable notice period, damages for accrued and unused vacation time and vacation pay accrued over the statutory notice period of 44.5 days and special damages for out-of-pocket expenses incurred as a result of attempts to secure alternative employment. The Plaintiff also seeks $250,000 for the bad faith manner of termination and $500,000 in punitive damages. The Plaintiff’s only claim against Buchh in the Current Claim is $100,000 for intentional infliction of mental suffering

10On July 19, 2024, Toronto-Dominion Bank obtained the Order of Black J. appointing Richter Inc. as interim receiver (the “Interim Receiver”) over all of the assets, undertakings and properties of RCI, BHI and other companies pursuant to s.47 (1) of the Bankruptcy and Insolvency Act (Canada)(the “BIA”). By Order of Kimmel J. dated July 31, 2024 (the “Receivership Order”), Richter Inc. was appointed receiver (the “Receiver”) pursuant to s. 243(1) of the BIA and s. 101 of the Courts of Justice Act (Ontario). Pursuant to paragraph 10 of the Receivership Order, this action is stayed as against RCI. By Orders of Osborne J. dated September 17, 2024, RCI’s assets and shares were sold to Continental Capital Investments Inc.

11The parties first attended before me at a telephone case conference on May 7, 2024 to speak to the Plaintiff’s request that the Defendants answer undertakings pursuant to the Order of Associate Justice Brown dated November 2, 2023 (the “Brown Order”). The Defendants had recently delivered 5,000 documents and a protocol was required for the Plaintiff’s review therefore another case conference was scheduled. At the next case conference on May 24, 2024, counsel advised that the parties were unable to agree on a protocol and the Plaintiff claimed that 31 of 37 undertakings remained unanswered. The parties agreed that the Defendants would produce all documents by June 28, 2024.

12Plaintiff’s counsel advised Defendants’ counsel on November 14, 2024 that the Plaintiff was bringing this motion. Another case conference proceeded on February 26, 2025 to speak to the scheduling of this motion and the ongoing productions issues. Counsel were unsure if this action was also stayed as against Buchh, therefore, the matter was adjourned to another case conference on March 21, 2025 so that counsel could make the appropriate inquiries. Counsel confirmed that the action was not stayed against Buchh and this motion was scheduled.

II. The Law and Analysis

13Buchh opposes the Amendments. He does not oppose the increase in damages for the intentional infliction of mental suffering. The Receiver takes no position on any of the relief. For the reasons that follow, I grant the Plaintiff’s motion.

14Rules 26.01 and 26.02 state:

“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.

26.02 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.”

15The Court of Appeal summarized the general principles on a leave to amend motion in 1588444 Ontario Ltd. v. State Farm Fire and Casualty Co., 2017 ONCA 42:

“[25] The law regarding leave to amend motions is well developed and the general principles may be summarized as follows:

The rule requires the court to grant leave to amend unless the responding party would suffer non-compensable prejudice; the amended pleadings are scandalous, frivolous, vexatious or an abuse of the court's process; or the pleading discloses no reasonable cause of action: Iroquois Falls Power Corp. v. Jacob Canada Inc., [2009] O.J. No. 2642, 2009 ONCA 517, 75 C.C.L.I. (4th) 1, at paras. 15-16, leave to appeal to S.C.C. refused [2009] S.C.C.A. No. 367, 2010 CarswellOnt 425; and Andersen Consulting Ltd. v. Canada (Attorney General), [2001] O.J. No. 3576, 150 O.A.C. 177 (C.A.), at para. 37. [page688]

The amendment may be permitted at any stage of the action: Whiten v. Pilot Insurance Co. (1996), 27 O.R. (3d) 479, [1996] O.J. No. 227 (Gen. Div.), revd (1999), 42 O.R. (3d) 641, [1999] O.J. No. 237 (C.A.), revd [2002] 1 S.C.R. 595, [2002] S.C.J. No. 19, 2002 SCC 18.

There must be a causal connection between the non-compensable prejudice and the amendment. In other words, the prejudice must flow from the amendments and not from some other source: Iroquois, at paras. 20-21; and Mazzuca v. Silvercreek Pharmacy Ltd. (2001), 56 O.R. (3d) 768, [2001] O.J. No. 4567 (C.A.), at para. 65.

The non-compensable prejudice may be actual prejudice, i.e., evidence that the responding party has lost an opportunity in the litigation that cannot be compensated as a consequence of the amendment. Where such prejudice is alleged, specific details must be provided: King's Gate Developments Inc. v. Drake (1994), 17 O.R. (3d) 841, [1994] O.J. No. 633 (C.A.), at paras. 5-7; and Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1995), 25 O.R. (3d) 106, [1995] O.J. No. 2220 (Gen. Div.), at para. 9.

Non-compensable prejudice does not include prejudice resulting from the potential success of the plea or the fact that the amended plea may increase the length or complexity of the trial: Hanlan v. Sernesky, [1996] O.J. No. 4049, 95 O.A.C. 297 (C.A.), at para. 2; and Andersen Consulting, at paras. 36-37.

At some point, the delay in seeking an amendment will be so lengthy, and the justification so inadequate, that prejudice to the responding party will be presumed: Family Delicatessen Ltd. v. London (City), [2006] O.J. No. 669, at para. 6.

The onus to prove actual prejudice lies with the responding party: Haikola v. Arasenau (1996), 27 O.R. (3d) 576, [1996] O.J. No. 231 (C.A.), at paras. 3-4; and Plante v. Industrial Alliance Life Insurance Co. (2003), 66 O.R. (3d) 74, [2003] O.J. No. 3034 (Master), at para. 21.

The onus to rebut presumed prejudice lies with the moving party: Family Delicatessen, at para. 6.” (State Farm at para. 25).

16Sections 4 and 5 of the Limitations Act, 2002 (Ontario) state:

“4. 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) A claim is discovered on the earlier of,

(a) the day on which the person with the claim first knew,

(i) that the injury, loss or damage had occurred,

(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,

(iii) that the act or omission was that of the person against whom the claim is made, and

(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and

(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a).

(2) A person with a claim shall be presumed to have known of the matters referred to in clause (1) (a) on the day the act or omission on which the claim is based took place, unless the contrary is proved.”

17In Di Filippo v. Bank of Nova Scotia, 2024 ONCA 33, the Court of Appeal provided the follow guidance regarding pleadings amendments in the context of new causes of action and the Limitations Act:

38 In Grant Thornton LLP v. New Brunswick, 2021 SCC 31, 461 D.L.R. (4th) 613, the Supreme Court clarified when a plaintiff discovers that they have a claim. It is when they have knowledge, either actual or constructive"of the material facts upon which a plausible inference of liability on the defendant's part can be drawn": at para. 42. The plausible inference standard means that the plaintiff does not have to be certain that the known facts will give rise to legal liability, but the plaintiff must have knowledge of the material facts that form the basis for the plausible inference of legal liability.

39 This court summarized what type of amendments are allowable after the expiry of a limitation period in Polla, at para. 33:

... [A]n amendment to a statement of claim will be refused if it seeks to assert a "new cause of action" after the expiry of the applicable limitation period...[I]n this context, a "cause of action" is "a factual situation the existence of which entitles one person to obtain from the court a remedy against another person" (as opposed to the other sense in which the term "cause of action" is used - as the form of action or legal label attached to a claim). [Citations omitted.]

40 These cases make it clear that it is the pleading of the facts that is key. If a statement of claim pleads all the necessary facts to ground a claim on more than one legal basis, and the original statement of claim only asserts one of the legal bases - that is, one cause of action based on those facts - the statement of claim can be amended more than two years after the claim was discovered to assert another legal basis for a remedy arising out of the same facts - that is, another cause of action. This is because it is only the discovery of the claim, as defined in the Limitations Act and the case law, that is time barred under s. 4, not the discovery of any particular legal basis for the proceeding.

41 In the textbook The Law of Civil Procedure in Ontario, Paul M. Perell & John W. Morden 4th ed. (Toronto: LexisNexis Canada, 2020), at pp. 220-21, the authors explain when an amendment will be allowed in the following passage:

A new cause of action is not asserted if the amendment pleads an alternative claim for relief out of the same facts previously pleaded and no new facts are relied upon, or amount simply to different legal conclusions drawn from the same set of facts, or simply provide particulars of an allegation already pled or additional facts upon which the original right of action is based... Thus, where a limitation period has run its course, allowing or disallowing the amendment depends upon whether the allegations of the proposed amendment arise out of the already pleaded facts, in which case the amendment will be allowed, but if they do not the amendment will be refused. An amendment of a statement of claim to assert an alternative theory of liability or an additional remedy based on facts that have already been pleaded in the statement of claim does not assert a new claim for the purposes of s. 4 of the Limitations Act. [Citations omitted.]

42 In Klassen v. Beausoleil, 2019 ONCA 407 at para. 30, this court instructed that the application of this test should not be stringent or overly technical

In the course of this exercise, it is important to bear in mind the general principle that, on this type of pleadings motion, it is necessary to read the original Statement of Claim generously and with some allowance for drafting deficiencies.”

53 The framework for determining the commencement of a limitation period is found in the Grant Thornton decision. As stated above, the broad test for what has to be discovered is: "the material facts upon which a plausible inference of liability on the defendant's part can be drawn." To meet this standard, the plaintiff must have "actual or constructive knowledge that: (a) the injury loss or damage occurred; (b) the injury loss or damage was caused by or contributed to by an act or omission; and (c) the act or omission was that of the defendant.": at para. 43.

54 The court explained how to assess the plaintiff's knowledge at para. 44:

In assessing the plaintiff's state of knowledge, both direct and circumstantial evidence can be used. Moreover, a plaintiff will have constructive knowledge when the evidence shows that the plaintiff ought to have discovered the material facts by exercising reasonable diligence. Suspicion may trigger that exercise. (Crombie Property Holdings Ltd. v. McColl-Frontenac Inc., 2017 ONCA 16, 406 D.L.R. (4th) 252, at para. 42).

55 This court explained in Crombie that suspicion may trigger the due diligence obligation, but suspicion does not constitute actual knowledge. The full paragraph clearly explains the difference:

That the motion judge equated Crombie's knowledge of possible contamination with knowledge of actual contamination is apparent from her statement that "[a]ll the testing that followed simply confirmed [Crombie's] suspicions about what had already been reported on" (at para. 31). It was not sufficient that Crombie had suspicions or that there was possible contamination. The issue under s. 5(1)(a) of the Limitations Act, 2002 for when a claim is discovered, is the plaintiff's "actual" knowledge. The suspicion of certain facts or knowledge of a potential claim may be enough to put a plaintiff on inquiry and trigger a due diligence obligation, in which case the issue is whether a reasonable person with the abilities and in the circumstances of the plaintiff ought reasonably to have discovered the claim, under s. 5(1)(b). Here, while the suspicion of contamination was sufficient to give rise to a duty of inquiry, it was not sufficient to meet the requirement for actual knowledge. The subsurface testing, while confirmatory of the appellant's suspicions, was the mechanism by which the appellant acquired actual knowledge of the contamination.

56 Similarly, in Kaynes v. BP p.l.c., this court held that knowledge of allegations in pleadings does not, without more, constitute actual knowledge of one's claim. In that case, a U.S. claim for misrepresentation in securities filing documents was required to allege fraud, referred to as "scienter", in order to make out a legally enforceable action. The allegation of scienter did not give Canadian class plaintiffs actual knowledge of any fraudulent intent by BP. It was only an allegation to be investigated.”

57 The motion judge below made the same error as was made in Crombie. He treated facts which might trigger a duty to investigate as material facts sufficient to trigger the limitation period - in his words"the who and the what". The class plaintiffs in this case had actual knowledge that there was a conspiracy among a number of financial institutions to fix and manipulate the price of gold and silver on the trading markets. That is the "what."

58 However, based on the allegations in the U.S. pleadings and in the press release of the WEKO investigation, they only had suspicion of the "who". Both a statement of claim and a government investigation, by their very nature, express allegations, not facts. In fact, the U.S. pleadings naming Bank of America and Merrill Lynch were ultimately struck with prejudice in July 2018, and the WEKO investigation into Morgan Stanley was terminated after Swiss authorities determined that suspicions of conspiracy were not substantiated.

59 These examples draw out an important distinction from Grant Thornton: actual knowledge does not materialize when a party can make a "plausible inference of liability." Rather, actual knowledge materializes when a party has "the material facts upon which a plausible inference of liability on the defendant's part can be drawn" [emphasis added]. While class counsel may have had reason to suspect that Bank of America, Merrill Lynch and Morgan Stanley were part of the conspiracy, that suspicion was not actual knowledge. The motion judge erred in law by finding actual knowledge.”

60 Because the U.S. pleadings and WEKO press release did not disclose the necessary material facts, it was an error of law to find that the proposed amendments were statute barred on the basis that class counsel had actual knowledge of the claims against Bank of America, Merrill Lynch and Morgan Stanley more than two years before the motion to amend was brought.

61 Section 5(1)(b) of the Limitations Act sets out an alternative, objective basis for finding that a limitation period has commenced, based on when the plaintiff ought to have known the facts that form the basis for the claim and therefore had constructive knowledge of it:

A claim is discovered on the earlier of,

(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).

62 The motion judge in this case did not decide when the plaintiffs had constructive knowledge that they had a claim under s. 5(1)(b) because he agreed with the submissions of the defendants that the plaintiffs had actual knowledge of it.

63 In Mancinelli v. Royal Bank of Canada, 2018 ONCA 544, this court held that where the facts regarding discoverability under s. 5(1)(b) are in dispute, the correct approach is for the motion judge to allow the addition of the new parties, but also allow the new parties to plead the limitations defence, with the issue to be determined at trial or on summary judgment.

64 The effect of s. 5(1)(b) is to impose an obligation of due diligence on those who have reason to suspect that they may have a claim, but who do not yet have actual knowledge of the material facts giving rise to that claim: Crombie, at para. 42. Where potential plaintiffs sit idle or fail to exercise due diligence, the limitation period will commence on the date that the claim would have been discoverable had reasonable investigatory steps been taken. In other words, it is the date when the potential plaintiffs have constructive, as opposed to actual knowledge of their claim: Grant Thornton, at para. 44.

65 A court determining this issue will require evidence of how the material facts could reasonably have been obtained more than two years before the motion to add was brought: Mancinelli, at paras. 28, 31; Morrison v. Barzo, 2018 ONCA 979, at paras. 61-62.”

18The Court of Appeal’s guidance regarding due diligence and discoverability in Mancinelli can be summarized as follows:

i.) the motion judge is entitled to assess the record to determine, as a question of fact, if there is a reasonable explanation on proper evidence as to why the plaintiff could not have discovered its claim through the exercise of reasonable diligence. If a plaintiff does not raise any credibility issue or issue of fact about when its claim was discovered that would merit consideration on a summary judgment motion or a trial and there is no reasonable explanation on the evidence as to why the plaintiff could not have discovered the claim by exercising reasonable diligence, the motion judge may deny the motion (para. 23);

ii.) the evidentiary threshold to be met by a plaintiff is low and whether the plaintiff and its counsel acted with reasonable diligence must be considered in context (para. 24);

iii.) in considering whether the plaintiff has provided a reasonable explanation as to why they could not have identified the party (or cause of action), the explanation is to be given a generous, contextual reading (para. 27);

iv.) a plaintiff’s failure to take reasonable steps to investigate a claim is not a stand-alone or independent ground to find a claim out of time, rather, the reasonable steps a plaintiff ought to take is a relevant consideration in deciding when a claim is discoverable under s. 5(1)(b)(para. 30);

v.) 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 that the plaintiff could have obtained the requisite information with due diligence, and by when the plaintiff could have obtained such information, such that there is no issue of credibility or fact warranting a trial or summary judgment motion (paras. 28 and 31).

19The Plaintiff relies on his affidavit sworn June 5, 2025 (the “Smith Affidavit”). He was not cross-examined and his evidence is therefore uncontradicted. Buchh did not file any evidence on the motion. The Amendments are set out in the Plaintiff’s proposed Fresh As Amended Statement of Claim (the “Amended Claim”) including his claim for a declaration that Buchh conducted himself in a manner which justifies piercing the corporate veil such that he is personally liable for all of RCI’s wrongful conduct and is jointly and severally liable with RCI (the “New Claim”). In short, in the New Claim, the Plaintiff wishes to add a claim that the corporate veil be pierced to hold Buchh liable for the same damages he initially pleaded against RCI. The Plaintiff alleges that Buchh siphoned funds and stripped value from RCI for his personal benefit and the benefit of his family which caused RCI to not pay the Plaintiff’s commissions and other compensation.

20The Plaintiff concedes that the Corporate Veil Amendments and the New Claim constitute a new cause of action. However, the Plaintiff submits that he was unable to discover that he had a potential claim against Buchh personally for RCI’s liabilities until he received the Interim Receiver’s First Report dated July 29, 2024 (the “First Report”).

21The Plaintiff delivered his Affidavit of Documents on March 26, 2021. The Defendants served their first Affidavit of Documents on April 18, 2022. On March 7, 2023, the Defendants produced financial information including RCI’s financial statements for the years ended 2014 and 2015 and 2017 through 2020. The Plaintiff states that he did not notice anythng unusual in the financial statements and at that time he did not suspect that Buchh was siphoning funds from RCI. On May 1, 2024, in compliance with the Brown Order, the Defendants produced RCI’s financial statements for the years ending 2021 and 2022 which revealed that RCI had paid a dividend of $1,900,000. The Plaintiff claims that he found this “odd” because of the large amount and the fact that RCI had not historically paid dividends.

22The Plaintiff obtained the First Report in August 2024. As pleaded at paragraph 87 of the Amended Claim, the First Report disclosed the following:

i.) the Interim Receiver’s test count of RCI, BHI and the other related companies’ (the “Debtors”) inventory disclosed material overstatements and missing inventory of $755,000 that Buchh was unable to explain;

ii.) the Debtors’ eligible accounts receivable were overstated by approximately $809,000;

iii.) the Debtors’ eligible inventory was overstated by approximately $917,000;

iv.) the Debtors’ priority payables were understated by approximately $201,000;

v.) RCI’s reported margin deficit of approximately $60,000 as of April 30, 2024 was in fact adjusted to a margin deficit of $1,298,000 – findings that were not disputed by Buchh;

vi.) by July 24, 2024, RCI’s margin deficit had increased to $2,200,000.

23In the Amended Claim the Plaintiff alleges that Buchh was the controlling mind of RCI, that he used his control and domination to disguise his part in fraudulent or improper conduct or to shield himself from liability for those actions (paras. 83-85). The Plaintiff further pleads in the Amended Claim:

“86. More specifically, as the Plaintiff discovered only after the delivery of documents by the Defendants on June 28, 2024, Mr. Buchh has engaged in value-stripping of Rotalec of over $6,500,000, including, without limitation, by: a) arranging for Rotalec to pay for personal expenses of Mr. Buchh and his family members; b) arranging for Rotalec to make non-interest bearing loans to Mr. Buchh and/or his family members or entities under his control, with no terms of repayment, such that Rotalec was, essentially, the personal piggy bank for Mr. Buchh who co-mingled Rotalec’s funds with his own funds for personal use; c) charging unwarranted “management fees” to Rotalec by Buchh Holdings, an entity controlled by Mr. Buchh; d) paying exorbitant dividends to Mr. Buchh and his spouse, when Rotalec was not in a financial position to pay such dividends, leaving Rotalec deliberately underfunded and unable to meet its financial obligations.

88. The wrongful conduct that Mr. Buchh engaged in is directly related to the wrongful conduct carried on by Rotalec. More specifically, and without limitation: a) Mr. Buchh’s value-stripping of Rotalec rendered Rotalec unable to pay – or contributed to Rotalec’s inability to pay – Rotalec’s employees and, specifically, Rotalec’s ability to pay: i. commissions owed to the Plaintiff; ii. commissions under Rotalec’s MCO program, for 2017; iii. bonus payments relating to KPIs for the years 2018, 2019, and 2020; and b) Mr. Buchh deliberately underfunded Rotalec such that Rotalec would be unable to meet its financial obligations, including to the Plaintiff (both in respect of obligations while the Plaintiff was employed, and in respect of the damages award in this action).

89. As well, Mr. Buchh deliberately kept inaccurate books and records of Rotalec in order to conceal his value-stripping of Rotalec. In so doing, Mr. Buchh interfered with the proper determination of the commissions and bonus payments owed to the Plaintiff.

90. Furthermore, Mr. Buchh deliberately sought to conceal his wrongful conduct by withholding financial information from Rotalec’s creditor, TD Bank, and misreporting the financial information that Rotalec did provide to TD Bank. Mr. Buchh similarly provided misleading financial information to Rotalec’s employees. Such wrongful conduct continued in this action, with Mr. Buchh withholding and inordinately delaying the production of financial information to the Plaintiff – including by repeatedly breaching a Court order for the production of financial documentation to the Plaintiff.

91. In all the circumstances, Mr. Buchh’s wrongful conduct justifies a piercing of the corporate veil.”

24The Plaintiff claims that that he did not discover that Buchh had been siphoning funds from RCI until August 2024 when he reviewed the First Report and other documents and information from the Receivership Proceedings (the “Receivership Information”). He states that with the benefit of the Receivership Information transactions which he previously believed were innocuous now appeared suspicious. The Plaintiff claims that it was not until this time that he had any reason to infer that Buchh should be held personally liable for RCI’s failure to pay his unpaid commissions and other amounts. Therefore, the Plaintiff argues that the Amendments, including the New Claim, are not barred by operation of the Limitations Act because a reasonable person acting with due diligence could not have discovered them until August 2024 at the earliest.

25Buchh makes a preliminary request that approximately 24 paragraphs of the Smith Affidavit be struck as inadmissible double-hearsay or given no weight because they refer to the Receivership Proceedings, the Receivership Information and/or the First Report (which is attached as an exhibit) or, alternatively, are improper speculation. Bucch relies on Rules 25.11 and 4.06(2), Haventree Bank v. Lording, 2023 ONSC 1077 and, more specifically, Re Saskin, 2023 ONSC 4695. In Saskin, Associate Justice Ilchenko held as follows:

“244. Reports of Court Appointed Receivers are admissible evidence in their own Receivership Proceeding due to the deference given to the Court's Officer, but the Second Report is being attempted to be entered for the truth of its statements outside of the Receivership Proceeding, and therefore suffers from the same issues as the Affidavit from a third party in Mallard, and therefore Hanson's references to the findings of the Second Report of the Receiver are also impermissible hearsay from an inadmissible source, particularly given that A&M is a Court Officer subject to the strictures of other Orders issued by a different Court. Paragraph 24 is struck.”

26Buchh submits that since the Receiver’s Report and the Receivership Information are inadmissible, the Plaintiff has no evidence to support the Amendments or his submissions regarding when he discovered the New Claim and therefore, his motion must fail.

27I reject Buchh’s request to strike these paragraphs or give them no weight. In Saskin, a creditor filed a Receiver’s Report in support of its proof of claim in a bankruptcy claims process. In doing so, the creditor was relying on the Receiver’s Report for the truth of its contents in an attempt to prove its claim. This is akin to proving a claim on a summary judgment motion or at trial in regular civil litigation. By contrast, the present case is an interlocutory pleadings motion in which the Plaintiff is not relying on the First Report or the Receivership Information for the truth of its contents. Rather, the Plaintiff filed the First Report and other Receivership Information to support his discoverability submissions, namely that a reasonable person in similar circumstances could not have discovered the Amendments until August 2024. This does not require the court to determine or make findings regarding the truth of the First Report or any of the Receivership Information. An additional distinction from Saskin is that the Receiver in the present case is aware of this motion and takes no position. My conclusion below that there are issues of fact and credibility regarding discoverability which must be determined at trial or on a summary judgment motion further confirms that this Court is not making any findings of fact with respect to the First Report and the Receivership Information filed with the Smith Affidavit.

28In addition, determining whether the Amendments disclose a reasonable cause of action does not require the Plaintiff to rely on the Receivership Information for the truth of its contents as no evidence is required and the court is to assume that the Amendments as pleaded are true (FNF Enterpries Inc. v. Wag and Train Inc., 2023 ONCA 92 at para. 30; Plante at para. 21). I am also satisfied that the Receivership Amendments, which set out the undisputed particulars and history of the Receivership Proceedings, are appropriate amendments to reflect RCI’s updated corporate and litigation status. I have also not been referred to any authority which provides that there is a general prohibition against relying on reports and information from receivership proceedings or that there is any principled reason to prevent entry to the record on an interlocutory pleadings motion. Accordingly, I have given the Smith Affidavit the appropriate weight within the context that Buchh did not cross-examine the Plaintiff or file any evidence on this motion.

29Buchh submits that if the paragraphs are not struck then the Amendments are barred by operation of the Limitations Act, 2002 (Ontario) as a new cause of action being added after the expiry of a limitation period (Klassen at para. 27). Buchh submits that the limitation period for the Amendments began to run on February 21, 2020 when the Plaintiff alleges that he was constructively dismissed and/or when the Plaintiff resigned or accepted RCI’s repudiation and therefore had actual knowledge of his claim (Saltsov v. Rolnick, 2010 ONSC 914). Buchh also argues that the Plaintiff should have known whether he had a claim against Buchh as of February 21, 2020. Buchh therefore argues that the limitation period expired on February 21, 2022

30In sum, both parties are asking the court to make a finding as to when the limitation period started to run such that the Amendments are either barred or in time. Having given the Amendments a generous, contextual reading, I have concluded that I am unable to determine on the record before me when the limitation period started to run. Specifically, I cannot find that the Plaintiff had actual knowledge of the Amendments including the New Claim such that the limitation period started to run on February 21, 2020 and the 2-year limitation period expired on February 22, 2022. I also cannot conclude whether the Plaintiff acted with reasonable diligence or has provided a reasonable explanation as to why the Amendments could not have been discovered with the exercise of reasonable diligence before August 2024 or whether a reasonable person in the Plaintiff's circumstances ought to have discovered the New Claim or had constructive knowledge before the passage of the limitation period and, if so, the date of such reasonable discovery. All of this is in dispute and in my view, there are issues of fact and credibility with respect to the Plaintiff’s due diligence and discoverability which must be determined on a full record at trial or on a summary judgment motion. It would be inappropriate to do so at this stage of the proceedings and on the current record.

31Buchh also argues that the Amendments do not disclose a reasonable cause of action. To demonstrate that the Amendments disclose a reasonable cause of action, the Plaintiff must show that the Amendments are legally tenable (Plante at paras. 21). It is not necessary for the Plaintiff to tender evidence to support the Amendments nor is it necessary for the court to consider whether the Plaintiff can prove the Amended Claim (Plante at paras. 21). The court must assume that the facts as pleaded in the Amendments (unless patently ridiculous or incapable of proof) are true, and the Amendments are to be granted unless the claim is clearly impossible of success read generously with allowances for drafting deficiencies (FNF at para. 30; Plante at para. 21).

32Buchh initially argued that the Amendments did not disclose a reasonable cause of action because RCI was no longer a party to this action due to the Receivership Proceedings therefore the Plaintiff could not pierce the corporate veil. Buchh withdrew this argument at the outset of the motion and concedes that RCI remains a party. Both parties rely on FNF with respect to whether the Amendments disclose a reasonable cause of action. In that case, the Court of Appeal dismissed the Plaintiff’s motion for leave to amend its Statement of Claim to add a claim to pierce the corporate veil based on an allegation of value stripping:

“26 The second category of alleged conduct is value stripping. However, it is important to identify what this allegation is and what it is not. As the appellants describe it, the gist of this allegation is that Ms. Ross stripped value from Wag and Train knowing of its lease liabilities, that is, the amounts it owed by reason of its breach of the lease. It is not alleged that removing value from Wag and Train knowing of the lease liabilities is what gave rise to those liabilities in the first place - they arose because of Wag and Train's breach of the lease. This is important because it is the lease liabilities that the piercing the corporate veil claim seeks to impose on Ms. Ross. It is not alleged that Wag and Train's entering into the lease was an abuse of the corporate form or a shield for fraudulent or improper conduct. On the appellants' own allegations, Wag and Train performed the lease from the time it was made in 2015 until March 2020.

27 This situation is unlike cases in which courts have pierced the corporate veil given the nexus between the liability the plaintiff sought to recover by piercing the corporate veil and the wrongful conduct directed by the individual in control of the corporation that gave rise to that very liability. For instance, in Shoppers Drug Mart, the defendant corporation's sole officer, director, and shareholder directed that funds - which were supposed to be used to satisfy the plaintiff's utility bills pursuant to an agreement - be misappropriated into an account in his name and that of his corporation. The court applied the holding from Fleischer and concluded that the corporate veil should be pierced to impose liability for the misappropriated funds on the corporation's directing mind, as he expressly directed and caused the wrongful act of misappropriation: at paras. 43, 45. There was a clear link between the liability for the misappropriated funds and the wrongdoing - the decision by the corporation's directing mind to misappropriate gave rise to the liability for the misappropriated funds. A similar link was present in 6071376 Canada Inc. v. 3966305 Canada Inc., 2020 ONCA 428, 5 B.L.R. (6th) 193. In that case, the court considered that the individual appellant used the corporation "to direct and cause the misappropriation of the respondent's funds for his own purposes": at para. 14.

28 That kind of link between the alleged wrongful conduct and the liabilities sought to be imposed by piercing the corporate veil is missing here. The allegations in this case are materially different than those in Shoppers Drug Mart or 6071376. It is not alleged that stripping value from Wag and Train, knowing it had incurred liabilities as a result of the lease and its breach, constitutes misappropriation of the appellants' funds. More importantly, the piercing the corporate veil claim is not aimed at whatever value was "stripped" with knowledge of the lease liabilities - it is aimed at the lease liabilities themselves (regardless of the amount of value that was stripped). But the lease liabilities have a source other than, and independent of, any alleged value stripping.

29 To be sure, the alleged value stripping may be conduct that prejudices the appellants, as creditors of the corporation, in their ability to collect the liabilities of Wag and Train that arose from its breach of the lease. But the remedy for conduct that defeats reasonable expectations of a creditor of a corporation is, as discussed below, under the oppression remedy, rather than piercing the corporate veil.

30 In my view, the piercing the corporate veil claim has no reasonable chance of success, even accepting the facts pleaded as true and giving them the generous characterization urged by the appellants' counsel. As the Supreme Court stated in Atlantic Lottery, at para. 19, striking a claim, even a novel one, that is doomed to fail is "beneficial, and indeed critical to the viability of civil justice and public access thereto" since it avoids protracted and expensive proceedings. And although that observation was made in the context of striking an entire claim, it applies with equal force to striking part of a claim so that the parties may focus on aspects of the claim that have a viable legal justification.

33Assuming the facts as pleaded in the Amendments are true and giving them the required generous reading for drafting deficiencies, I am satisfied that the Amendments, including the New Claim, disclose a reasonable cause of action and are not clearly impossible of success.

34In my view, the present case is distinguishable from FNF. In FNF, the Court of Appeal held that the link was missing between the alleged wrongful conduct of the individual in control of the corporation and the lease liabilities the plaintiff sought to impose by piercing the corporate veil. The Court of Appeal found that the plaintiff did not allege that the stripping of value from the corporation knowing it had incurred liabilities as a result of the lease and its breach constituted misappropriation of the plaintiff’s funds. More specifically, the plaintiff in FNF did not allege that removing value from the corporation knowing of the lease liabilities is what gave rise to the liabilities in the first place which arose due to the breach of the lease.

35I conclude that this link exists in the present case. The Plaintiff has pleaded the elements for piercing the corporate veil: that RCI was completely dominated and controlled by Buchh who used RCI as a shield for fraudulent or improper conduct, namely to strip value and siphon funds for his benefit and the benefit of his family (FNF at para. 18). The Plaintiff’s claim is focussed predominantly on his allegations of unpaid commissions from 2015 through 2020. The Plaintiff alleges that Buchh’s value stripping, siphoning funds and deliberate underfunding of RCI was the direct cause of RCI’s failure and inability to pay his commissions. The Plaintiff further pleads that the failure to pay his commissions and bonuses, changes to his compensation and other factors gave rise to his constructive dismissaal. Therefore, the Plaintiff alleges in the Amendments that Buchh misdirected his commissions for his own use causing the commissions to be unpaid and giving rise to his underlying claim for constructive dismissal. Accordingly, I am satisfied that the Amendments plead a sufficient link between Buchh’s alleged wrongful conduct and the liabilities which the Plaintiff seeks to impose on Buchh by piercing the corporate veil.

36This conclusion is supported by the material differences between the nature of the Plaintiff’s commissions and the lease amounts in FNF. Unlike the lease liabilities, the commissions are tied to specific sales programs, regions and/or customer sales. When sales were made and RCI collected the accounts, a percentage of those funds were allegedly owed to the Plaintiff pursuant to the applicable commission program. The Plaintiff alleges that the funds collected from customers, which included his commissions, were not used by RCI to pay him but were siphoned by Buchh for his personal use, This is further supported by the Plaintiff’s alternative claim for unjust enrichment based on the fact that he was deprived of his commissions and RCI and Buchh had the benefit of these funds. I am satisfied that the present case resembles the cases and circumstances cited in FNF in which the courts have pierced the corporate veil for the misappropration of funds given that Buchh is alleged to have diverted the Plaintiff’s commissions for his own personal use (FNF at paras 27-28). This is further supported by the Plaintiff’s claim for an accounting of his commissions and allegations that Buchh deliberately did not keep accurate books and records, intentionally did not disclose or altered records in order to conceal his conduct and denied requests for an accounting of the Plaintiff’s commissions.

37The present motion is further distinguishable from FNF because the Plaintiff’s claim is for commissions on an ongoing basis over an extended period of time in the context of an employer-employee relationship. In FNF, the lease amounts were paid for approximately 5 years from the signing of the lease until March 2020 with one year remaining. The Plaintiff is claiming unpaid commissions from 2015-2020, pleading that he complained about not receiving all of his commissions dating back to 2006. As such, the Plaintiff alleges that the non-payment of his commissions and failure to provide an accounting was an ongoing, long-standing issue which the Plaintiff raised over an extended period of time.

38For the same reasons I also conclude that there is a sufficient link between Buchh’s alleged wrongful conduct and the bonuses, wages and other compensation which the Plaintiff claims were not paid, including because it is alleged that non-payment and compensation changes gave rise to his constructive dismissal claim. Similarly, I am satisfied that a sufficient nexus has been pleaded between Buchh’s alleged conduct and the Plaintiff’s damage claims for bad faith termination and punitive damages. Overall, while the Amendments could have been pleaded more succinctly, I am satisfied that giving the Amended Claim the required generous reading, they are not clearly impossible of success.

39During reply submissions, Plaintiff’s counsel cited Downtown Eatery (1993) Ltd. v. Ontario, [2001] O.J. No. 1879 (C.A.) as a case where directors had been held liable for an employee’s claims. As this case had not been filed or provided to Defendants’ counsel, the parties accepted my invitation to file supplementary written submissions. The parties also made submissions with respect to numerous other cases cited by the Plaintiff in his supplementary written submissions. The parties’ written submissions do not alter my conclusions above, however, I provide the following comments.

40In Downtown Eatery, the plaintiff obtained judgment for a wrongful dismissal claim against his corporate employer then attempted to enforce it against related companies and their directors on the basis of the common employer doctrine and oppression remedies. That case did not involve a claim for piercing the corporate veil, therefore it is distinguishable from the present case and not helpful to the Plaintiff’s submissions.

41Most of the other cases cited by the Plaintiff are also distinguishable or otherwise unhelpful. However, in Habash v. St. Clair College of Applied Arts and Technology, 2025 ONSC 1441, J.A. Horvat J., refused to strike a former employee’s claims for injurious falsehood and inducing breach of contract against the college’s President on the basis that they disclosed no reasonable cause of action. In that case, the court found that the plaintiff sufficiently pleaded that the director had acted outside of their scope of authority (Habash at paras. 41-42).

42I also conclude that Buchh would not suffer any prejudice if leave is granted. Buchh has not provided any evidence of prejudice and there is none on the record before me. Buchh’s only submission is that the addition of a new cause of action after the passage of a limitation period gives rise to non-compensable prejudice (Klassen at para. 26). As I have not made any findings with respect to when the limitiation period expired, I cannot conclude that permitting the Amendments would give rise to non-compensable prejudice on this basis.

43I conclude that the appropriate remedy in the circumstances is to grant the Plaintiff leave to amend the Current Claim substantially in the form of the Amended Claim with leave granted to Buchh to filed a further Amended Statement of Defence including limitations defences.

III. Disposition and Costs

44Order to go granting the Plaintiff leave to amend his Current Claim substantially in the form of the Amended Claim within 45 days with Buchh granted leave to file a further Amended Statement of Defence including limitations defences within 45 days after service of the Amended Claim.

45If the parties are unable to agree on the costs of this motion, they may file written costs submissions not to exceed 4 pages (excluding Costs Outlines) with me on a timetable to be agreed upon by counsel. If the parties cannot agree on a timetable or there are any other issues they may schedule a telephone case conference with me.