Leave to commence derivative action allowed where continuous breaches occurred under an agreement

In Sax v Rick Aurora, 2019 ONSC 3573, the Divisional Court considered the application of the Limitations Act, 2002 in the context of a derivative claim brought under section 246 of the Business Corporations Act for continuing breaches under an agreement. The plaintiff worked as a real estate agent for the defendants. He incorporated a numbered company to create a space for builders to sell pre-construction real estate to purchasers. His employer and the numbered company entered into an agreement whereby a portion of every commission earned by his employer operating in the numbered company’s space would be paid to the numbered company.

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Family Law Act claims commenced under s. 61 are a separate cause of action in the context of personal injury litigation

When it comes to claims brought by family members pursuant to s. 61 of the Family Law Act, RSO 1990, c. F.3. (“FLA”), the latest word from an Ontario court indicates that the two year limitation period applies to those claims as separate causes of action. In Malik v. Nikbakht, 2019 ONSC 3118, the defendant appealed a Master’s order that permitted the plaintiff to amend the statement of claim to add a claim pursuant to s. 61 of the FLA after the expiry of the limitation period. Section 61 allows family members of a party injured or killed by the fault or neglect of another to recover pecuniary losses that flow from a family member’s death or injury.

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Court of Appeal distinguishes between new causes of action and alternative forms of legal relief in determining whether a party can amend its pleadings after the expiry of the limitation period

In Klassen v Beausoleil, 2019 ONCA 407, the Court of Appeal reiterated the principle that a party cannot circumvent the operation of a limitation period by amending their pleadings to add additional claims after the expiry of the limitation period. The Court affirmed that where the amendment involves adding alternative relief on the same material facts, it is integrally related to the existing claim, and therefore, no prejudice arises.

Rule 26.01 provides that “[O]n 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.” The expiry of a limitation period is one form of non-compensable prejudice.

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Divisional Court cautions that seeking declaratory relief is not a means to circumvent applicable limitation periods

In Skylark Holdings Limited v. Minhas2018 ONSC 1568 (Div. Ct.)​, the issue on appeal was whether there is a genuine issue requiring trial that a limitation period had expired where there was a claim for declaratory relief in relation to share ownership. The Divisional Court held that in the context of a limitation period analysis, declaratory relief should be narrowly construed so as to ensure that s. 16(1)(a) is not used a means to circumvent applicable limitation periods. In order to do so, the motions judge is required to assess the essential nature of what the party is seeking.

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Distinction between Adding a Party and Adding an Individual to the Factual Narrative

In Eliot Shore v Capital Sports Properties Inc., 2018 ONSC 3064, the Court differentiated between “adding a party to an existing claim” as opposed to “adding a new individual to the factual narrative” after the limitation period passed.

The plaintiffs named an individual in respect of certain allegations made in an amended statement of claim. Section 21 of the Ontario Limitations Act prohibits adding a new party to an existing claim once the limitation period has passed. As a result, the defendants attempted to strike the amendment due to the limitation period being expired. However, the court held that the limitation period argument did not apply because the plaintiff added the name to the narrative rather than as an additional party. 

While the court ultimately concluded that the plaintiff could not name the new person in the narrative (because it contained new allegations that were not permitted pursuant to a previous Order of the Court), this decision illustrates that there is a distinction between adding a new party and adding a new individual to the narrative of the claim for the purpose of limitation periods.

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Beauchamp v. Gervais: Dunphy J. clarifies when an amendment is not a new cause of action for the purposes of the limitation period

It is trite that a pleading cannot be amended to assert a new cause of action if the cause of action is statute-barred.  In Beauchamp v. Gervais, 2015 ONSC 5848, Justice Dunphy set out types of permissible amendments that will not qualify as a new cause of action:

  1. an alternative claim for relief, or a statement of different legal conclusions based on no new facts or not going beyond the factual matrix from which the original claim arose;
  2. better particulars of the claims already made;
  3. a correction of errors in the original pleading; or
  4. the assertion of a new head of damage arising from the same facts.
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