) ) A1 PRESSURE SENSITIVE PRODUCTS INC. Plaintiff/Appellant – v. –, 2013 ONSC 4734

CITATION : A1 Pressure Sensitive Products Inc. v.Bostik Inc., 2013 ONSC 4734 DIVISIONAL COURT FILE NO.: 569/12 DATE: 20130716 ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT BETWEEN: ) ) A1 PRESSURE SENSITIVE PRODUCTS INC. Plaintiff/Appellant – and – BOSTIK, INC. Defendant/Respondent ) ) ) ) ) ) ) ) )) Kevin D. Sherkin and Robert A. Gold, for the Plaintiff/Appellant David Foulds, for the Defendant/ Respondent ) HEARD at Toronto: June 20, 2013 H. Sachs J.

Overview [ 1 ] The Appellant appeals an order of Master Glustein, dated November 7, 2012 (the “Order”), dismissing its motion for leave to amend its Statement of Claim (the “Claim.”) [ 2 ] The Appellant brought an action against the Respondent for breach of contract and breach of warranty and fitness related to an adhesive product that the Appellant had purchased from the Respondent.

On the motion before the Master the Appellant sought leave to amend the Claim to include claims of negligence and negligent representation. [ 3 ] The Master dismissed the motion, finding that the proposed amendments sought to plead new facts and new causes of action that were statute-barred. [ 4 ] In my respectful view, the Master erred in concluding that the Claim did not contain all the material facts necessary to support the proposed amendments. The amendments simply sought to claim alternative remedies based on the same facts and therefore should have been allowed.

Factual Background [ 5 ] In the Claim, the Appellant alleged the following facts: (

a) The Appellant is a manufacturer of pressure sensitive labels that are applied to bottled products and sold throughout North America. (

b) The Respondent is an adhesive manufacturer. (

c) In June 2006 the Appellant entered into a business relationship with the Respondent for the supply of adhesives for use in its pressure sensitive labels. (d) “[I]n that regard the [Respondent] advised [the Appellant] that it had an appropriate adhesive that would work with the [Appellant]’s line-manufacturing process and be compatible with the paper on which the labels are manufactured” (Claim, at para. 5). (e) “Prior to the [Appellant] agreeing to the use of the [Respondent]’s product the [Respondent] undertook to complete testing on the [Appellant]’s label and paper to ensure that the adhesive being recommended by the [Respondent] could act in accordance with the [Appellant]’s requirements, namely that the label could be repositioned within twenty-four hours after its application, after which it would become a ‘permanent label’” (Claim, at para. 6). (f) “[A]s a result of the testing performed by the [Respondent] as to the adequacy of the label’s compatibility with the glue and performance thereof, the [Appellant] commenced purchasing the [Respondent]’s adhesive” (Claim, at para.7).

(

g) In 2006 the Appellant “was considering changing paper suppliers and inquired with the [Respondent] whether such changein the paper would alter the effectiveness of the adhesive on the new proposed label stock.

The [Appellant] states that the [Respondent]asked if it could perform testing on the new paper product so it could ensure that the adhesive supplied would function properly with thenew paper the [Appellant] was going to purchase” (Claim, at para. 8). (h) “[T]he [Respondent] performed tests on the new paper stock and Beth Hammeder of the [Respondent] confirmed with the[Appellant] that it had completed the testing and the adhesive would function to the requirement of the [Appellant] as previouslyspecified” (Claim, at para. 9). (i) “As a result of the [Respondent]’s representations and testing, the [Appellant] continued to order the [Respondent]’sadhesive and apply it to the new paper stock on which the labels were being manufactured” (Claim, at para. 10). (j) “[S]oon after the said manufacture of the new labels and delivery of same the applied labels on its customers’ productcommenced failing.

Most of the labels had been applied to its customers’ Woolite bottles which labels were lifting off of the bottlescontrary to the specification and requirements of the said product” (Claim, at para. 11). [6] In the Claim, at para. 12, the Appellant pleaded that these facts supported a claim that the adhesive supplied by theRespondent was “not fit for the purpose intended and [was] not of merchantable quality.” [7] In the motion before the Master, the Appellant sought to amend the Claim to add two paragraphs: one asserting that it hadsuffered damages as a result of the Respondent’s negligence and negligent misrepresentation and the other stating that …the [Respondent] negligently performed the tests on the new label stock, which caused them to deliver the incorrect advice as set outin paragraph 9.

In addition, the [Respondent] negligently misrepresented to the [Appellant] that it had completed the appropriate testingon the new label stock, and that the adhesive would function to the requirement of the [Appellant] as previously specified.

The Master’s Decision [8] After reviewing the Claim and the proposed amendments to that Claim, the Master found that the Appellant in its Claim hadnot pleaded “all of the material facts necessary to establish a claim for negligence in testing the adhesive on the new paper stock”(Reasons of the Master, at para. 30). [9] In particular, according to the Master, “[t]here are no facts pleaded in the Existing Claim to support a duty of care in tort fornegligent testing, [and] not even a bare pleading … that Bostik was negligent in its testing” (para. 34). [10] With respect to the claim of negligent misrepresentation the Master found that the Claim did contain sufficient material factsto support four of the five essential elements of that tort, including a duty of care based on “special relationship” between the representorand the representee, that the representation was untrue, inaccurate or misleading, that the representee reasonably relied on therepresentation and that that reliance caused the representee damages.

However, he found that the Claim failed to plead “negligence withrespect to the alleged misrepresentation” (para. 42). Standard of Review [11] Both parties agree that the standard of review to be applied by me to the Master’s decision is that set out by the SupremeCourt of Canada in Housen v. Nikolaisen, 2002 SCC 33 , [2002] 2 S.C.R. 235. On questions of law the standard of review iscorrectness. On questions of fact the standard of review is one of palpable and overriding error.

On questions of mixed fact and law thestandard of review lies on a spectrum, depending on how extricable the legal principles are from the facts to which they were applied. Analysis [12] In Dee Ferraro Ltd. v. Pellizzari, 2012 ONCA 55, 346 D.L.R. (4th) 624 (“Dee Ferraro”), the Court of Appeal confirmed thatone of the seminal cases governing the distinction between pleading a new cause of action and pleading alternative remedies based onthe same set of facts is Canadian Industries Ltd. v. Canadian National Railway Co., (ON CA), [1940] 4 D.L.R. 629(C.A.), aff’d (SCC), [1941] S.C.R. 591 (“Canadian Industries”).

As summarized by the Court of Appeal in Dee Ferraro,at para. 5: The plaintiff sued for damages following the destruction of a cargo of sodium cyanide due to a derailment on the defendant’s railwayline. He pleaded that the defendant was a common carrier and that the goods had been damaged. The trial judge allowed an amendment,at trial, to plead negligence. Middleton J.

A., writing for the court, held at para. 18 that the amendment was properly allowed – it was notthe institution of a new cause of action, but simply an alternative claim with respect to the same cause of action: “The amendment relatesto the remedy sought upon facts already pleaded.” [13] In Dee Ferraro the Court of Appeal went on to contrast the situation in Canadian Industries with the one in Frohlick v.Pinkerton Canada Ltd., 2008 ONCA 3, 88 O.R. (3d) 401, where “[t]he plaintiff’s amendment to plead constructive dismissal set up anew cause of action relating to events more than a year before the events put at issue in the original pleading” (Dee Ferraro, at para. 6).

[14] On this appeal, the Appellant submits that as in Canadian Industries it is simply seeking to add two new alternative claimsagainst the Respondent based on the same facts already pleaded. Unlike the situation in Frohlick it is not seeking to add any new facts. Inessence, it argues that the Master erred in law in failing to apply the reasoning in Canadian Industries. [15] With respect to the claim of negligence the Master found that there were insufficient facts pleaded to support a “duty of care”in negligent testing.

Yet, in dealing with the claim for negligent misrepresentation, he acknowledged that there were sufficient factspleaded to support a duty of care. Therefore, the crux of the issue in respect of both new claims is whether the Claim contained sufficientfacts to support an allegation of negligence in respect to the testing of the product and the representation that the Appellant alleged aroseout of the testing. [16] The Master found that it did not because “negligence” was never asserted. However, in Canadian Industries the plaintiff didnot assert that the defendant was negligent in its original claim.

It sought to make that assertion at trial, and the courts found that theassertion was not an attempt to plead new material facts. In essence, negligence was a new theory of liability, not a new material fact. [17] In the case at bar, the Respondent states that the material facts that it did not know when it read the Claim were that theAppellant was asserting that there was something wrong with its testing or the representation it made as a result of that testing.

Yet theRespondent’s Statement of Defence and Counterclaim deals with the allegations that the Appellant made about its testing and recites itsversion of the material facts concerning that testing and the representations that were made or not made about that testing. Thus it is clearfrom the Appellant’s Claim that the material facts it had pleaded put the Respondent’s testing and its representations about that testing atissue.

All the proposed amendments do is clarify the legal theory of liability arising from those facts. [18] In considering the Respondent’s position, it is important to remember certain principles that should govern the analysis whenit comes to assessing whether an amendment should be allowed when a limitation period issue exists. Limitation periods exist to preventcitizens from having to defend claims that they may have no knowledge or evidence about and regarding which they may be unable,because of the time that has elapsed, to obtain that knowledge or evidence.

However, in interpreting and applying shorter statutorylimitation periods, the court must be careful not to “ignore the legitimate interests of potential plaintiffs”: Bannon v. Thunder Bay (City)(2000), (ON CA), 48 O.R. (3d) 1 (C.A), at para. 24, rev’d on other grounds 2002 SCC 20, [2002] 1 S.C.R. 716. [19] In 1309489 Ontario Inc. v.

BMO Bank of Montreal, 2011 ONSC 5505, 107 O.R. (3d) 384 (“1309489 Ontario”), Lauwers J.(as he then was) acknowledged the above and applied what he described as a functional and purposive approach to the motion beforehim, which also involved the consideration under Rule 26.01 of whether amendments should be allowed to a Statement of Claim whenthe defendant raised a limitation period issue. Lauwers J. allowed the amendments finding that, while the pleading could have beenconsiderably clearer, the defendant “BMO knew without doubt that the ‘litigation finger’ was pointing at it” (para. 28).

Lauwers J. foundthat the defendant had received what it was entitled to before the limitation period expired, namely notice of the factual matrix out ofwhich the new claims for relief arose. The same is true in the case at bar. [20] As 13094890 Ontario makes clear, the Rule 26.01 and 21.01(1)(

b) analyses are closely intertwined. As part of his analysisunder Rule 26.01 the Master in this case appropriately considered whether the Claim contained sufficient particulars to support theamended causes of action being asserted.

However, in my view, in doing so he failed to give adequate consideration to the principle thatthe pleading should be read generously and that a pleading will only be struck for failing to disclose a cause of action where it is plainand obvious and beyond doubt that the claim will not succeed: 1309489 Ontario, at paras. 11-12. [21] Read generously, it is not plain and obvious that the Claim would be struck for failing to disclose sufficient material facts tosupport causes of action in negligence and negligent misrepresentation.

Conclusion [22] In view of my finding on the issue of whether the Claim contained sufficient material facts to support the causes of actionsought to be added, it is not necessary for me to deal in detail with the other issue raised on the appeal (the “applicability of Americanlaw” issue) except to say that I would adopt the Master’s reasons on this issue. [23] For these reasons, the appeal is allowed, the Order below is set aside and an order will go allowing the Appellant leave toamend its Claim as proposed.

The parties agreed that the successful party on this appeal was entitled to its costs fixed in the amount of$15,000. On this basis the Respondent will pay the Appellant its costs of $15,000. The Appellant is also entitled to its costs of theproceedings below, which the parties agree should be $3,500. H. SACHS J. Released: CITATION: A1 Pressure Sensitive Products Inc. v.Bostik Inc., 2013 ONSC 4734 DIVISIONAL COURT FILE NO.: 569/12

DATE: 20130716 ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT H. SACHS J. BETWEEN: A1 PRESSURE SENSITIVE PRODUCTS INC. Plaintiff/Appellant and BOSTIK, INC. Defendant/Respondent REASONS FOR JUDGMENT Released: July 16, 2013