|
Civil Litigation Dicta - Amending Pleadings and Limitation Periods (2). SpaceBridge Inc. v. Baylin Technologies Inc.
In SpaceBridge Inc. v. Baylin Technologies Inc. (Ont CA, 2024) the Ontario Court of Appeal dismissed an appeal, this from a "finding that an amendment to the Notice of Application was not statute-barred".
Here the court considers the meaning of 'cause of action', here in an pleadings amendment-limitations context:[31] .... A cause of action, following Lord Diplock’s definition in Letang v. Cooper, [1965] 1 Q.B. 232 (C.A.), at pp. 242-43, is “a factual situation the existence of which entitles one person to obtain from the court a remedy against another person.” As explained in Morden & Perell, The Law of Civil Procedure in Ontario, 5th Ed. (Toronto: LexisNexis Canada, 2024), at para. 2.438: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. . SpaceBridge Inc. v. Baylin Technologies Inc.
In SpaceBridge Inc. v. Baylin Technologies Inc. (Ont CA, 2024) the Ontario Court of Appeal dismissed an appeal, this from a "finding that an amendment to the Notice of Application was not statute-barred":[28] .... An amendment to a pleading may be made past the applicable limitations period when the amendment does not plead a new cause of action or a new or alternative remedy: see 1100997 Ontario Inc. v. North Elgin Centre Inc., 2016 ONCA 848, 409 D.L.R. (4th) 382, at paras. 19-21. .... . Fehr v. Sun Life Assurance Company of Canada
In Fehr v. Sun Life Assurance Company of Canada (Ont CA, 2024) the Ontario Court of Appeal dismissed a class action appeal, here against an order dismissing the appellant's motion to add a common issue and amend the pleadings accordingly.
Here the court considered whether amendments were limitation-barred:[38] For these reasons, the motion judge concluded that the Investment Spread Claim was statute-barred. The motion judge accordingly denied the appellants leave to amend their FASOC, relying on this court’s decision in Polla v. Croatian (Toronto) Credit Union Limited, 2020 ONCA 818, at para. 32, leave to appeal refused, [2021] S.C.C.A. No. 64, as authority that the expiry of a limitation period in respect of a proposed new claim is a form of non-compensable prejudice that warrants refusing leave to amend under r. 26.01.
....
(1) Relevant Legal Principles
[45] The focus of the appeal is on whether the proposed amendments to the FASOC seek to add a new claim that is statute-barred. Sections 4 and 5 of the Limitations Act codify the two-year limitation period and the principle of discoverability.[14] They read as follows:4. Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the date 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). [46] The jurisprudence of the Supreme Court and this court make it clear that a plaintiff discovers a claim when they have knowledge, whether actual or constructive, “of the material facts upon which a plausible inference of liability on the defendant’s part can be drawn”: Grant Thornton LLP v. New Brunswick, 2021 SCC 31, [2021] 2 S.C.R. 704, at para. 42. As Feldman J.A. observed in Di Filippo v. Bank of Nova Scotia, 2024 ONCA 33, at para. 38, leave to appeal refused, [2024] S.C.C.A. No. 88, “[t]he 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.”
[47] With respect to amendments to pleadings, the point of departure is r. 26.01 of the Rules of Civil Procedure, which provides that a 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.” Typically, an amendment that proposes to add a new cause of action outside the applicable limitation period will be denied on the basis of non-compensable prejudice to the defendant. In 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)”: Polla, at para. 33, citing 1100997 Ontario Limited v. North Elgin Centre Inc., 2016 ONCA 848, 409 D.L.R. (4th) 382, at para. 19. An amendment will be refused when it seeks to advance, after the expiry of a limitation period, a “fundamentally different claim” based on facts not originally pleaded: North Elgin, at para. 23.
[48] A pleadings amendment that “simply provide[s] particulars of an allegation already pleaded” is not vulnerable to a limitations defence because it does not amount to asserting a new cause of action: Klassen v. Beausoleil, 2019 ONCA 407, 34 C.P.C. (8th) 180, at paras. 28-30. An amendment does not assert a new cause of action if the “original pleading … contains all the facts necessary to support the amendments … [such that] the amendments simply claim additional forms of relief, or clarify the relief sought, based on the same facts as originally pleaded”: Klassen, at para. 28. In conducting its analysis, the court should read the pleadings generously in favour of the proposed amendment, considering whether the existing pleading already contains the factual matrix to support any claim to which the proposed amendment relates: Polla, at para. 37. It is the pleading of facts that is key: Di Filippo, at para. 40.
[49] A motion judge’s finding that proposed amendments will add a new claim to the proceedings is a legal determination subject to review for correctness on appeal, while the determination that the new claim would be statute-barred due to the Limitations Act, and therefore gives rise to actual prejudice to the defendant in the action, is a finding of mixed fact and law, and subject to reversal based on a palpable and overriding error, except if there is an extricable error in principle, which will be reviewed for correctness: Di Filippo, at paras. 21-22. . Loney v. John Doe
In Loney v. John Doe (Ont CA, 2024) the Ontario Court of Appeal considered the granting of leave to amend pleadings, here after the action is set down for trial and in a case of misnomer:B. THE TEST FOR GRANTING LEAVE TO AMEND PLEADINGS AFTER AN ACTION HAS BEEN SET DOWN FOR TRIAL
[9] Rule 48.04(1) provides that “a party who has set an action down for trial shall not initiate or continue any motion or form of discovery without leave of the court.” Under this rule, some courts have required the moving party to show a “substantial or unexpected change in circumstances” such that refusal to grant leave would be “manifestly unjust”, while others have granted leave even in the absence of such a change, if granting the order is “necessary in the interests of justice”. Under either analysis, the interpretation of Rule 48.04(1) and the decision as to whether to grant leave is shaped by the rule governing the proposed amendment: Horani v. Manulife Financial Corporation, 2023 ONCA 51 at paras. 17-19.
[10] In this case, the rule governing the proposed amendment is Rule 5.04(2) which addresses the doctrine of misnomer and permits the court to correct the name of an incorrectly named party: Mazzuca, at paras. 47-48.
[11] Rule 5.04(2) provides that “[a]t any stage of a proceeding the court may by order add, delete or substitute a party or correct the name of a party incorrectly named, on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment” (emphasis added). This is a permissive provision while the provision in Rule 26.01, by contrast, provides that “the court shall grant leave to amend […] unless prejudice would result that could not be compensated for by costs or an adjournment.” (emphasis added).
[12] There are two considerations under Rule 5.04(2) that must be met: (i) the moving party must satisfy the “litigating finger” test, and (ii) the amendment must not result in non-compensable prejudice.
[13] The “litigating finger” test will be satisfied if a person with knowledge of the facts would be aware of the true identity of a misnamed party by reading the statement of claim: Spirito Estate v. Trillium Health Centre, 2007 CanLII 41901 (ON SC) at para. 3, aff’d in 2008 ONCA 762, 302 DLR (4th) 654. See also: Essar Algoma Steel Inc. v. Liebherr (Canada) Co., 2011 ONSC 1688, 280 O.A.C. 243, at paras. 15-16.
[14] If the “litigating finger” test is met, a plaintiff seeking to correct a misnamed party need not establish due diligence in its efforts to identify the true defendant where the claim was brought within the limitation period: Stechyshyn v Domljanovic, 2015 ONCA 889, 129 O.R. (3d) 236 at para. 1, citing Kitcher v. Queensway General Hospital (1997), 1997 CanLII 1931 (ON CA), 44 O.R. (3d) 589 (C.A.), at paras. 1 and 4. The time taken to amend the pleading after discovering a defendant’s actual name however, remains a factor to be considered under Rule 5.04(2): See O’Sullivan v. Hamilton Health Sciences Corp., 2011 ONCA 507.
[15] Second, the defendant will be substituted unless there is evidence of non-compensable prejudice: Spirito trial decision at para. 3, citing Davies v. Elsby Brothers Ltd., [1960] 3 All E.R. 672; Moreau v. Northwestern General Hospital (1988), 1988 CanLII 4810 (ON SC), 65 O.R. (2d) 128 (S.C.); Rakowski et al. v. Mount Sinai Hospital et al. (1987), 1987 CanLII 4113 (ON SC), 59 O.R. (2d) 349 (S.C.); and McArthur v. Kaal (2006), 30 C.P.C. (6th) 150 (Ont. S.C.).
[16] Non-compensable prejudice may include the inability to conduct a timely investigation into the circumstances of the incident, the inability to take contemporaneous witness statements and preserve evidence, the inability to conduct early surveillance, the inability to obtain a timely defence medical assessment, and diminished witness recollection and memory: Lyman v. Chan, 2018 ONSC 4037, 88 C.C.L.I. (5th) 142.
[17] Where the delay between the initiation of proceedings and the filing of the motion to amend is “exceptional” or “inordinate”, courts will presume prejudice to the responding party: 1588444 Ontario Ltd. v. State Farm Fire and Casualty Co., 2017 ONCA 42, 135 O.R. (3d) 681. This presumption can be rebutted by either an adequate explanation for the delay or evidence that there is no non-compensable prejudice based on the facts of the case: State Farm Fire, at para. 37.
....
[44] As set out above, under Rule 48.04(1) of the Rules of Civil Procedure, the onus is on the moving party to satisfy the court on a balance of probabilities that leave should be granted. The court may allow the correction of a misnomer at any stage provided there is no prejudice that cannot be compensated for by costs or an adjournment. While there is some disagreement as to the threshold to be met to grant leave, there must be (a) a “substantial or unexpected change in circumstances” between the passing of the trial record and service of the motion such that refusal would be manifestly unjust; or (b) a finding that “the interlocutory step is necessary in the interests of justice”: Horani at paras. 17-18.
....
[48] Second, she noted that the purpose of originally using placeholder names was to preserve the limitation period against those parties and this motion was an attempt to replace those placeholder names long after the limitation period had expired. She noted that “significant unexplained delay in bringing a misnomer motion long past the expiry of a limitation period” has, in other cases, resulted in denial of the motion for leave: See Mohabir v. Mohabir, 2014 ONSC 5484; Brown-Vidal v. Doe, 2015 ONSC 3362, 50 C.C.L.I. (5th) 301.
[49] Third, the motion judge held that “it would be unjust to grant the relief in this case because of the unexplained, significant delay in moving to amend the pleading after learning of the correct name of [Mr. Mills]” and considering “the public policy reasons for adhering to limitation periods” (emphasis added).
[50] I agree with the motion judge that the unexplained significant delay in moving to amend the pleading long after learning of Mr. Mills’ name, coupled with the public policy reasons for adhering to limitation periods, would render it unjust to grant the relief sought. This court has held that while granted in certain circumstances, “amendments to pleadings which [have] the effect of relieving against a limitation period” are generally not allowed: Mazzuca v. Silver Creek Pharmacy Ltd. (2001), 2001 CanLII 8620 (ON CA), 56 O.R. (3d) 768 (C.A.) at paras 30-32.
[51] I note, as did the motion judge, the policy reasons for these requirements as identified by the late Associate Judge Muir in Mohabir, at paras. 24 and 25:There are important public policy considerations supporting limitation periods. At some point a proposed defendant should be free from having to account for past obligations when arranging his or her affairs. A proposed defendant should not be required to preserve relevant evidence for an unlimited period of time. Limitation periods promote the early resolution of civil disputes.
[T]he very purpose of limitation periods would be seriously undermined by allowing a plaintiff to simply name John Doe defendants as part of a claim issued on the eve of the expiry of the limitation period and then do nothing to identify those defendants for several years thereafter. [52] Finally, I note that these facts are similar to those in O'Sullivan v. Hamilton Health Sciences Corporation (Hamilton General Hospital Division), 2011 ONCA 507 where this court held that the motion judge:did not err [in denying the motion to amend] by taking into account the appellants’ essentially unexplained significant delay in moving to amend their pleading after learning of the correct name of the defendant and the public policy reasons supporting adherence to established limitation periods” (emphasis added). [53] Further, it was proper for the motion judge to consider other circumstances, such as the fact that “the respondent had no knowledge of the potential claim against it until five years after the incident”: O’Sullivan, at paras. 3-5.
....
[55] The appellants’ second and third grounds of appeal are interrelated. They essentially assert that the motion judge erred in finding the appellants did not rebut the presumption of non-compensable prejudice caused by the delay and erred in finding that the respondents would suffer actual prejudice if the motion were granted such that leave to amend should be denied.
[56] The onus to rebut presumed prejudice lies with the moving party; the onus to provide evidence of actual prejudice lies with the responding party: State Farm Fire, at para. 25.
....
[60] There is no dispute that the appellants did not satisfy the first prong of the test as they have not provided an explanation for the delay in bringing the motion to seek leave after learning of the identity of the truck driver.
[61] The appellants submit however, that they have satisfied the second prong of the test by demonstrating that there is no non-compensable prejudice. They submit that Mr. Loney’s medical records, police records, and damage documents have been preserved, and Intact conducted an examination for discovery of Mr. Loney in 2016 for which there is a transcript, such that there would be no non-compensable prejudice from granting the motion.
[62] Despite the preservation of some evidence, I agree with the motion judge that the lengthy delay in this case would create non-compensable prejudice as the lawsuit has proceeded for more than nine years and numerous steps have already been taken in the litigation. Nor was the motion judge required to simply assume that the examination for discovery conducted by Intact as a defendant was sufficient from the standpoint of the respondents.
[63] As a result of the delay, the respondents have been denied the opportunity to undertake important discovery tools in a timely fashion, including the opportunity to conduct early surveillance of the appellant Loney, examine the appellants in respect of these claims at any early stage of the proceeding in the fashion they might choose to conduct, and obtain their own timely defence medical assessment.
[64] The loss of these opportunities related to proper discovery constitutes actual prejudice that cannot be compensated by costs or an adjournment.
[65] Given the circumstances of this case, that is, the unexplained and significant delay in bringing the motion for leave both before and after the trial record was served including for a considerable period after discovering the names of the proposed defendants, as well as the fact that ten years have passed since the accident occurred and actual prejudice would result, I see no palpable and overriding error in the motion judge’s exercise of her discretion not to grant leave to amend the statement of claim. . McFadden v. Psutka
In McFadden v. Psutka (Ont CA, 2024) the Ontario Court of Appeal considered (and dismissed) an appeal from a denial of leave to amend a claim, here where the amended claim raised a new limitation-barred claim:[3] The motion judge dismissed the appellants’ motion to amend their claim after finding that the purported amendments constituted new claims, that these claims were statute barred by the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, and that this resulted in prejudice that could not be compensated by costs or an adjournment.
....
[5] The motion judge relied on r. 26.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, which provides that a court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result which could not be compensated for by costs or an adjournment. The motion judge determined that the issues to be decided were (i) whether the proposed amendments merely particularized the claims already advanced against the respondent or whether they constituted a different cause of action, and (ii) if it was the latter, whether granting these amendments would cause prejudice to the respondent that could not be compensated for by an award of costs.
[6] The motion judge noted that a defendant is entitled to know the case it has to meet. The existing claim referred to surgeries alleged to have been negligently performed by Dr. Psutka in 2013 and onwards. The basis on which this claim had been advanced and defended assumed that Susan had already undergone jaw surgery many years earlier to remove her meniscus (a “meniscectomy”) in 1988, that a synthetic implant had been inserted into the joint by a different surgeon, Dr. Dobrovolsky, and that the implant had then been removed by Dr. Psutka in 1991. This history was confirmed at Susan’s examination for discovery.
....
[8] The motion judge found that the appellants’ wish to amend the pleadings to reflect the new factual matrix laid out in their expert’s report put forth a very different allegation of negligence from the existing pleading that the surgery was done in a negligent fashion. She stated, at para. 38, “[i]n a nutshell, what the [appellants] seek to do with this motion to amend is to fundamentally change the nature of part of the case advanced against Dr. Psutka to conform with the opinion of their expert.”
[9] The proposed amendments to the claim also raised limitation period issues. The appellants argued that this new theory of liability was not known to them until they obtained the expert opinion in December 2021, so it was subject to discoverability. The motion judge rejected this submission, mainly because the expert’s report was rooted in his review of medical records which the appellants had had in their possession, power and control from the outset of the litigation.
[10] The motion judge accepted the respondent’s argument, relying on Frohlick v. Pinkerton Canada Ltd., 2008 ONCA 3, 88 O.R. (3d) 401, that an amendment sought by a plaintiff advancing a new claim which was statute-barred ought not to be permitted and constitutes prejudice. Since the limitation period to advance new claims in negligence had expired, and this constituted non-compensable prejudice, leave to amend to assert such a new claim should be refused. She also found that Dr. Psutka would be prejudiced because he had consented to the dismissal of crossclaims against other medical practitioners whose own actions could be implicated by the appellants’ new theory of liability.
ANALYSIS
[11] In Polla v. Croatian (Toronto) Credit Union Limited, 2020 ONCA 818, at para. 31, leave to appeal refused, [2021] S.C.C.A. No. 64, this court clarified the standard of review applicable in appeals of decisions which dismiss motions to amend pleadings. The motion judge’s finding that the amended pleadings constitute a new claim is a legal determination, which is subject to the correctness standard of review on appeal, while the motion judge’s finding that the new claim would be statute-barred due to the Limitations Act, and therefore constitutes actual prejudice against the defendant in the action, is a finding of mixed fact and law, and is entitled to deference. Appellate intervention is only warranted where a palpable and overriding error is established.
[12] Rule 26 of the Rules of Civil Procedure states that courts shall grant leave to amend a pleading on such terms as are just, unless prejudice would result which could not be compensated for by costs or an adjournment. However, “although the general rule is that amendments are presumptively approved, there is no absolute right to amend pleadings. The court has a residual right to deny amendments where appropriate”: Marks v. Ottawa (City), 2011 ONCA 248, 280 O.A.C. 251, at para. 19; see also Avedian v. Enbridge Gas Distribution Inc., 2023 ONCA 289, at para. 6.
[13] The appellant argues that Dr. Psutka adduced no evidence of actual prejudice, and that the appellants’ proposed amendments are factually intertwined with and provide particulars of existing allegations. According to the appellants, the amendments sought merely enable their claim to proceed to attempt to prove facts that are now apparent because of the expert report, while Dr. Psutka’s position is that the amendments fundamentally change the nature of the claim.
[14] We reject the appellants’ submission. We see no error in the motion judge’s conclusion that the amendments sought created a new claim. Furthermore, the motion judge’s finding of actual prejudice was tied to her conclusion that the amendments raised a new negligence claim that would otherwise be statute barred as outside the limitation period in this case. This finding is entitled to deference. Moreover, the limitation period for the respondent to claim contribution and indemnity had passed. . Di Filippo v. Bank of Nova Scotia
In Di Filippo v. Bank of Nova Scotia (Ont CA, 2023) the Court of Appeal considered the challenging tension when seeking to amend pleadings which may offend limitation periods:[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. ....
....
[45] The main additions to the amended statements of claim are the recitation of the content of the orders made by the CFTC against some existing defendants and against the proposed defendants. The orders recite the findings by the tribunal that in each case, multiple spoofing transactions were carried out during the claim period causing loss to the people who made the trades. UBS was found to have carried out these transactions from 2008 to 2013, HSBC from 2011 to 2014, Bank of America and Merrill Lynch from 2008 to 2014, Morgan Stanley from 2013 to 2014, and JP Morgan from 2008 to 2016. Huge fines and restitutionary orders were included.
[46] Because the statements of claim already pled that spoofing (or painting the screen in the gold pleading) transactions were carried out by the defendants, the CFTC orders merely provide confirmatory evidence or further details of what was already pled. The claim for damages for the losses caused by the spoofing transactions is an additional remedy to the claim for damages for conspiracy to spoof, arising from the same facts, the same losses.
[47] According to the CFTC findings, there were hundreds of thousands of spoofing transactions by the defendants during the claim period. The plaintiffs do not know which, if any, were done pursuant to an agreement between two or more institutions, nor do the CFTC orders address that issue.
[48] To summarize, the motion judge erred in law by finding that the proposed amendments were statute barred because they allege new facts and a new cause of action. The additional facts in the proposed amendments constitute evidence of the facts already pleaded or further details of those facts. Further, the proposed amendments, which include claims for damages for non-conspiratorial spoofing, constitute “an alternative theory of liability or an additional remedy based on facts that have already been pleaded”. They do not plead a new claim under the Limitations Act.
[49] As a result, the proposed amendments are not statute barred.
|
