2013 ONSC 4081, 2013 ONSC 4081

CITATION : Dynamic Fuel Systems Inc. v.

Paul Douglas Bearance, 2013 ONSC 4081 COURT FILE NO.: 12-1875 DATE: 20130612 SUPERIOR COURT OF JUSTICE – ONTARIO DIVISIONAL COURT RE: DYNAMIC FUEL SYSTEMS INC., THOMAS FAIRFULL, GERALD FELDMAN, ALLEN KOFFMAN, DAVID ERIC WHITNALL and DOUGLAS PATTISON, Plaintiffs/Appellants and SYNERGIC DISTRIBUTION INC. and PAUL BEARANCE, Defendants/Respondents AND PAUL DOUGLAS BEARANCE; Plaintiff by Counterclaim and DYNAMIC FUEL SYSTEMS INC., THOMAS FAIRFULL, GERALD FELDMAN, ALLEN KOFFMAN, DAVID ERIC WHITNALL and DOUGLAS PATTISON, Defendants to the Counterclaim BEFORE: Valin, MacDougall and Rady JJ. COUNSEL: P.

Fruitman, for THOMAS FAIRFULL, GERALD FELDMAN, ALLEN KOFFMAN, DAVID ERIC WHITNALL and DOUGLAS PATTISON; Plaintiffs/Defendants to the Counterclaim C. Bittle, for DYNAMIC FUEL SYSTEMS INC; Plaintiff PAUL BEARANCE, self-represented HEARD: June 12, 2012 ENDORSEMENT [ 1 ] The Appellant, (Plaintiff/Defendant by Counterclaim), Dynamic Fuel Systems Inc. (Dynamic), is the manufacturer of a product called “Jetstar” which purportedly is a device that is installed in trucks to reduce emissions and decrease fuel consumption.

Between August 2002 and September 2003 the Respondent (Plaintiff by Counterclaim), Paul Bearance (Bearance) purchased shares in the Appellant company, Dynamic. [ 2 ] In March 2004, Bearance purchased a Jetstar unit from Dynamic and had it installed in a truck in his possession.

Bearance wanted verification of the emissions and fuel consumption that the Jetstar product was supposed to achieve and arranged to have the device tested by Peter Barton, an engineer with Environment Canada. [ 3 ] In mid April 2004, Bearance received a telephone call from Peter Barton where he reported that the testing by Environment Canada was of the Jetstar device only showed that results that were “statistically insignificant”. [ 4 ] In Bearance’s affidavit sworn May 15, 2013, filed on this appeal with consent of the Appellants, Bearance deposes that: 13.

At that moment in time, [referring to the telephone call from Peter Barton] there was no question in my mind that I was in harm’s way for the following reasons. (

a) My investment as a shareholder would produce a loss. This has proven to be true for anyone who purchased shares pre-IPO didn’t engage in short selling. (

b) Having been displayed as a distributor on Dynamic Fuel Systems website, in the event of a legal action, I could be included as a party to the action. This is one of the reasons that I approached the multitude of regulators, law enforcement agencies, politicians, bureaucrats, shareholders and former “would-be” distributors. 14. This fear was confirmed when I was interviewed by the Competition Bureau in early July, 2004. I informed the regulators in order to bring to their attention that I was not a part of what in my mind amounted to fraudulent misrepresentation. [ 5 ] Mr.

Barton sent his final report dated June 1, 2005 (the Barton report) to Bearance. The report concluded that the Jetstar product which Mr. Bearance had purchased from Dynamic: “…failed in its effectiveness in reducing emissions and giving better fuel consumption for vehicles and did not affect combustion

efficiency of the test vehicle engine nor did it improve exhaust emission rates or fuel consumption of the vehicle”. [ 6 ] Bearance acknowledged in his pleadings that he had received that report from Environment Canada, and that he had forwarded it on to Dynamic, to the Ontario Securities Commission, as well as to a number of government and other agencies. [ 7 ] On September 19, 2007, Bearance commenced a Small Claims Court action against Dynamic seeking damages alleging that Dynamic was fraudulent and had been deceitful in its promotion of the Jetstar product. [ 8 ] On July 3, 2008, Dynamic and the officers and directors of Dynamic (being the personal plaintiffs, Defendants by Counterclaim) commenced this action against Bearance for damages in the amount of $3.5 million for, among other things, defamation, wrongful interference with economic relations, and injurious falsehood. [ 9 ] On July 30, 2008, Bearance filed his Statement of Defence and Counterclaim against Dynamic and the personal plaintiffs for general damages among other things, alleging deceit and fraudulent misrepresentation regarding the ability of the Jetstar product to significantly reduce emissions and fuel consumption in combustion engines. [ 10 ] In Bearance’s Counterclaim, he quoted the Barton report that the Jetstar did not work. [ 11 ] As a result of this Superior Court action being commenced, the parties agreed to have the Small Claims Court dismissed on a “without prejudice” basis. [ 12 ] Dynamic and the personal defendants brought a motion for

Summary Judgment seeking to have the counterclaim dismissed, firstly in the grounds that the counterclaim was barred by the Limitations Act and secondly under Rule 21, on the ground that there was no cause of action against the individual defendants by Counterclaim. [ 13 ] The motions judge dismissed the motions for

Summary Judgment with reasons. Dynamic sought and obtained leave to appeal only the dismissal of the motion regarding the Limitations Act issue. [ 14 ] The Appellants have raised several grounds for appeal. However, in our view, it will not be necessary for us to deal with all of the grounds as we as we find that the motion judge has made errors that are reversible errors of law. Accordingly, the appeal is allowed and the

Summary Judgment motion will be granted. [ 15 ] The Respondent Bearance was self-represented before the motion judge and was self-represented on this appeal. [ 16 ] We find that the motion judge was mistaken in finding that the corporate plaintiff had not pleasded the two year limitation provisions of the Limitations Act . Both the personal appellants and corporate appellants in their separate pleadings did plead the provisions of the Limitations Act . [ 17 ] We also find that, in dismissing the

Summary Judgment motion, the motion judge based his determination on allegations in the Respondent’s pleading unsupported by any evidence in the motion record as required by rule 20 of the Rules of Civil Procedure . [ 18 ] We have reviewed the transcript of the discussion between the motions judge and Bearance. The motion judge repeatedly asking Bearance for an explanation as to why he had not filed any material on the

Summary Judgment motion. [ 19 ] The only explanation Bearance provided was that he understood (mistakenly) that the limitation period did not start to run until he was served with the Plaintiffs’ Statement of Claim. [ 20 ] Rule 29.02(2) provides: In response to affidavit material or other evidence supporting a motion for

summary judgment, the responding party may not rest solely on the allegations or denials in the party’s pleadings, but must set out, in affidavit material or other evidence, specific facts showing that there is a genuine issue requiring a trial. [ 21 ] As noted, the central feature of Bearance’s cause of action in the Counterclaim was that the plaintiffs were promoting their Jetstar product as a device that would reduce combustion efficiency and exhaust emissions and their rates of fuel consumption when they knew the product did not work and that they were engaging in fraudulent misrepresentation, among other things. [ 22 ] In addition to having acknowledged in his pleadings that the Barton report of June 2005 confirmed that the Jetstar product did not work, in para.72 of his Counterclaim, Bearance pled: The defendants state that the plaintiffs made fraudulent misrepresentations regarding the ability of the Jetstar to significantly reduce emissions and fuel consumption in combustion engines.

As set out above, and misrepresentations were made fraudulently, or in the alternative, negligently to induce the defendants rely upon the representations and purchased stock in the sham Corporation. The defence did rely on the representations, did purchase stock, and have suffered damages as set out in this counterclaim . [ 23 ] Further, Bearance did not take the position before the motion judge that he “discovered” his cause of action at some point after the Barton report. [ 24 ] The motion judge, however, in paragraphs 11 and 12 of his reasons stated:

… The defendant’s pleading is that in January 2005, he only sent a copy of the Environment Canada report [casting doubt on “Jetstar”]to the plaintiff for comment. It is pleaded that the plaintiff himself sent out a circular to their shareholders in May 2005 questioning theEnvironment Canada report. According to the pleadings it was not until the fall of 2007 that a Surcell report was completed and thatadditional opinion was available as to the questionable value of “Jetstar”. It is not clear from the defendants pleading that he knew in January, 2005 that “JetStar” was not what it claimed to be.

Suspicion is notenough to trigger the limitation. There is insufficient evidence on this motion to allow for a finding that January 2005 was thecommencement of the limitation. A full appreciation of the evidence on this point must await the trial. [25] In Kowal v. Shyiak 2012 ONCA 512 , [2012] O.J. No. 3420 (C.A.), on the issue as to when time begins to run underthe Limitations Act, S. E. Pepall J.A. writing for the court, stated that certainty of a defendant’s responsibility for the act or omission thatcaused or contributed to the loss is not a requirement.

It is enough to have prima facie grounds to infer that the acts or omissions werecaused by the party or parties identified. [26] Bearance is now raising another provision of the Limitations Act being

section 15 (

c) which provides that the two-yearlimitation period does not run during any time in which the person against whom the claim is made, (

i) wilfully conceals from the personwith the claim the fact that injury, loss, or damage has occurred, that it was caused by or contributed to by

an act or omission or that theact or omission was that of the person against whom the claim is made, or (ii) wilfully misleads the person with the claim as to theappropriateness of a proceeding as a means of remedying the injury, loss or damage. [27] Neither in the material before us nor in the Bearance’s pleadings is there any facts supporting Bearance’s contention that thelimitation period should not have run from at least the date he received the final report from Environment Canada. [28] We find that the discoverable date was at least the date of the Barton report on June 1, 2005, even though Bearance was awareat an earlier date of Paul Barton’s findings and conclusions on his testing of the Jetstar product.

Bearance commenced his Small ClaimsCourt action September 19, 2007 and therefore, was outside the two year limitation period under the Limitations Act. [29] For these reasons, we find that the errors and misapprehension of the facts as referred to constitute, in these circumstances,palpable and overriding errors by: (

i) finding that the corporate Plaintiff had not pled the Limitations Act; (ii) findings based on pleadings in Bearance’s Counterclaim without any affidavit evidence that there was a triable issue on theLimitations Act; and (iii) finding that the Barton report filed by Environment Canada in 2005, only raised suspicions when in fact the report clearly gave theopinion that the Jetstar product did not work. [30] The appeal is allowed. The motion is granted for

Summary Judgment dismissing Bearance’s Counterclaim. [31] We fix the Appellants’ costs as follows: For the Corporate Appellant Dynamic, including costs below, $10,000 all inclusive For the personal Appellants, including costs below, $7500 all inclusive. Mr. Justice G. Valin Mr. Justice B. MacDougall Madam Justice H. Rady Date: June 12, 2013

CITATION : Dynamic Fuel Systems Inc. v. Paul Douglas Bearance, 2013 ONSC 4081 COURT FILE NO.: 12-1875 DATE: 20130612 ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT RE: Party, Plaintiff(s)/Applicant(

s) AND Party, Defendant(s)/ Respondent(

s) BEFORE: Judge COUNSEL: Counsel, for the Plaintiff(s)/Applicant(

s) Counsel, for the Defendant(s)/ Respondent(

s) ENDORSEMENT By the Court Released: June 12, 2013