CITATION: Farmers Oil and Gas Inc. v. Ontario (Natural Resources), 2016 ONSC 6359
DIVISIONAL COURT FILE NO.: 031/16
DATE: 20161012
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
BETWEEN:
FARMERS OIL AND GAS INC.
Appellant/Respondent by cross-appeal
(Plaintiff)
– and –
HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO represented by the MINISTRY OF NATURAL RESOURCES
and TALISMAN ENERGY INC.
Respondent/Appellant by cross-appeal
(Defendants)
J. Lisus & A. Winton, for the appellant/respondent by cross-appeal
W. MacLarkey & E. Wagner, for the respondent/appellant by cross-appeal, Her Majesty the Queen in right of Ontario
HEARD at Toronto: September 27, 2016
NORDHEIMER J.:
[1] This is an appeal and cross-appeal from the order of Master Graham dated December 22, 2015 in which the Master allowed certain amendments to be made to the statement of claim but disallowed others.
[2] This proceeding has a lengthy history. The action was commenced on October 30, 2001. Only some steps were taken in the action in the first few years before the matter went dormant. In January 2011, the court issued a status notice. At this point, the appellant retained new counsel, who are current counsel of record. A contested status hearing was held in May 2012 but, in the end result, the action was permitted to proceed. The respondent appealed the status hearing decision. That appeal was dismissed by Ducharme J. in November 2012. The respondent sought leave to appeal that decision. Its motion for leave to appeal was dismissed by Molloy J. in March 2013. The parties conducted examinations for discovery in June 2013. Undertakings were answered in November 2013. In February 2014, the respondent commenced a motion for summary judgment. In April 2014, the appellant brought its motion to amend the statement of claim. That motion was adjourned by the Master to await the outcome of the respondent’s summary judgment motion. The summary judgment motion was heard on October 8, 2014, and, by reasons delivered on January 14, 2015, the summary judgment motion was dismissed. At that point, the appellant’s motion to amend the statement of claim proceeded.
[3] I do not consider it necessary for the purpose of determining this appeal to go into great detail in terms of the amendments that were allowed and those that were refused. The critical issue that drives the result in this matter is whether, in seeking the amendments that it did, the appellant was attempting to advance “new” causes of action that were beyond the applicable limitations period.
[4] The parties appear to agree on one point and that is that the amendments either stand or fall as a group, that is, the Master ought to have allowed all of the proposed amendments to be made or none of them. There is no principled basis for the “split decision” that the Master arrived at. The parties do agree on one other point and that is that the standard of review is one of correctness. The issue turns on a question of law and on that issue the Master must be correct.
[5] The action itself, as drawn from the original statement of claim, arises out of a dispute over oil and gas rights. The appellant is involved in the development and production of oil in southwestern Ontario. The respondent, through the Ministry of Natural Resources, is responsible for regulating the exploration, development and production of oil and natural gas throughout Ontario.
[6] The appellant had rights over certain lands that straddled the Lake Erie shoreline. It was interested in acquiring the near-shore rights associated with these lands and made an approach to the Ministry, in that regard, in April 1991. It appears that the regulation of those rights was in a state of flux at that time. The appellant says that it asked the Ministry to keep it apprised of any changes that might be made to the regulations that would allow it to acquire the rights that it sought.
[7] In March, 1993, new regulations came into effect. Again, the appellant contacted the Ministry about acquiring the near-shore rights. The appellant says that the Ministry assured it that near-shore rights would only be granted to someone who first discovered an economically viable well in an area for which it held the rights that straddled the Lake Erie shoreline.
[8] In the Spring of 1995, the appellant began to drill on the property over which it had rights. In August, 1995, the Ministry first announced that it would be accepting applications for Crown rights. The appellant contacted the Ministry and inquired whether this announcement would permit it to acquire the near-shore rights relating to the properties, that it had, that straddled the Lake Erie shoreline. The Ministry responded that it would but for the fact that the Ministry had already given those near-shore rights to another company, that held rights over adjacent lands. It is this realization that led to the appellant commencing this proceeding.
[9] Of some importance to this motion is the pleading, in paragraph 23 of the original statement of claim, that reads:
In granting the Lot 10 near shore rights to Pembina in 1995 the Ministry erred in law, failed to act in accordance with principles of natural justice, denied Farmers Oil procedural fairness and exceeded his[sic] jurisdiction making what was then a patently unreasonable decision.
[10] In its prayer for relief, the appellant claims damages against the respondent, along with declaratory relief, and an order requiring the respondent to enter into a production lease, with the appellant, for the near-shore rights.
[11] As Mew J. noted in his reasons dismissing the motion for summary judgment, the original statement of claim “does not represent the best example of the legal draftsman’s art”. As a consequence, the appellant sought, before the Master, to significantly amend the statement of claim. The appellant says that the proposed amendments “amplify” or provide particulars regarding the existing claims. The respondent says that the proposed amendments constitute an attempt to advance fresh causes of action that are barred by the expiration of the applicable limitation period.
[12] I begin my analysis of the issue be setting out the provision that governs the amendment of pleadings which is contained in r. 26.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The subrule reads:
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.
[13] As will be seen from the plain wording of the rule, the granting of an amendment is mandatory, unless non-compensable prejudice would result. At the same time, however, the proposed amendment must be a tenable one, that is, it cannot be an amendment that would be improper on its face, either because it is frivolous or because it does not disclose a reasonable cause of action. As Moldaver J. A. said in Andersen Consulting Ltd. v. Canada (Attorney General), 2001 8587 (ON CA), [2001] O.J. No. 3576 (C.A.) at para. 37:
Without diminishing the concerns raised by the motions judge, they cannot be used to emasculate the well-established rule that amendments like those sought in the present case should be presumptively approved unless they would occasion prejudice that cannot be compensated by costs or an adjournment; they are shown to be scandalous, frivolous, vexatious or an abuse of the court’s process; or they disclose no reasonable cause of action.
[14] As I have said, the central issue between the parties is whether the proposed amendments give greater clarity or particularity to the existing claim, or whether they advance new claims. On that point, the appellant relies heavily on the decision in 1309489 Ontario Inc. v. BMO Bank of Montreal (2011), 2011 ONSC 5505, 107 O.R. (3d) 384 (S.C.J.) where Lauwers J. addressed this same issue. In that decision, Lauwers J. referred to the two different approaches to determining whether a claim is a new cause of action. On the one hand, one can see a cause of action as a factual matrix. On the other hand, one can see a cause of action simply as the legal basis upon which the claim for relief is based. Lauwers J. concluded that the trend of the case law was to favour the broader factually oriented approach to the meaning of a cause of action. Under that broader approach, if the defendant has notice of the factual matrix underlying the claim being advanced, then amendments that arise out of, or do not depart from, that factual matrix do not constitute “new” causes of action that would not be allowed by way of amendment. On that point, Lauwers J. said, at para. 27:
A plaintiff is not required to name or specify the technical cause of action as an essential part of pleading; in saying this, I do not resile from the requirement noted in Morden and Perell, supra, that ordinarily the facts as originally pleaded, or as better particularized in the proposed new pleading, must be able to sustain the technical cause of action. [emphasis added]
[15] A very short time later, Lauwers J. had to deal with this same issue a second time. In Sweda Farms Ltd. (c.o.b. Best Choice Eggs) v. Ontario Egg Producers, 2011 ONSC 6146, [2011] O.J. No. 4886 (S.C.J.) the plaintiff sought to amend the statement of claim to advance a conspiracy claim, along with other amendments. The defendant objected on the basis that any such claim was barred by the expiration of the limitations period. In allowing the amendments to be made, Lauwers J. again addressed the meaning of a cause of action and said, at para. 25:
I find that the broader, factually-oriented approach to the meaning of “cause of action” in interpreting and applying rule 26.01 is the correct approach. It is consistent with the trend of the cases and is also consistent with a purposive approach to the interpretation of limitations legislation. This means that the defendant’s basic entitlement is to have notice of the factual matrix out of which the claim for relief arises. In my view the existing set of pleadings raises the factual matrix of concern to the plaintiffs and within which the defendants’ possible liability is to be located. The proposed Fresh Statement of Claim simply reframes those allegations of fact.
[16] The approach taken by Lauwers J. was tacitly approved by the Court of Appeal in Rausch v. Pickering (City), 2013 ONCA 740, [2013] O.J. No. 5584 (C.A.) where Epstein J.A. said, at para. 95:
As Lauwers J. (as he then was) emphasized in BMO Bank of Montreal, at para. 27, as long as the existing pleading “raises the factual matrix of concern to the plaintiff and within which [the defendant’s] possible liability is to be located[,] it successfully asserts a cause of action within the meaning of rule 21.01(1)(b).” Thus, even if the plaintiff does not explicitly set out the technical cause of action on which it relies, if the facts as pleaded implicitly advance such a claim, the court ought not to strike the pleadings: BMO Bank of Montreal, at paras. 26-27.
[17] I say that the approach was tacitly approved only because the issue that was before the Court of Appeal in Rausch had less to do with the expired limitation period and more to do with whether the proposed amendment disclosed a cause of action.
[18] The respondent, on the other hand, relies on a different line of cases beginning with Fuda v. Jim McIntosh Petroleum Engineering Ltd., 2013 ONSC 2122, [2013] O.J. No. 5208 (S.C.J.); aff’d. 2014 ONCA 378, [2014] O.J. No. 2255 (C.A.) where Wilton-Siegel J. granted summary judgment dismissing certain claims, that had been added to the statement of claim by amendment, on the basis that the limitations period had expired. In addressing the issue whether the subsequent claims could be seen to have been part of the original claim, Wilton-Siegel J. said, at para. 310:
Given the principles set out above, I conclude that each of these causes of action were asserted for the first time in the 2013 Amendment dated February 8, 2013, other than the original cause of action based on the 2003 Reserve Report Representation, which was asserted in the Statement of Claim. The fact that both the cause of action asserted in the Statement of Claim and the four additional causes of action asserted in the 2013 Amendment lie in negligent misrepresentation is not sufficient to conclude that these remaining causes of action are contained in the Statement of Claim.
[19] It is of some importance to this conclusion to be aware of how the Court of Appeal approached this conclusion. In dismissing the appeal, the court said, at para. 9:
The misrepresentation claims that were asserted after the expiry of the limitation period advanced new causes of action that were unconnected to the factual matrix pleaded in the original statement of claim. [emphasis added]
[20] The respondent relies on two other authorities. One is Winnipeg (City) v. Entegra Credit Union Ltd., 2013 MBCA 2, [2013] M.J. No. 10 (C.A.). In that case, the motion judge had permitted the plaintiff to amend its statement of claim. The motion judge found that the proposed amendments did not constitute new causes of action. The Court of Appeal reversed that finding. The Court of Appeal found that the motion judge had misunderstood the nature of the claim being advanced by the proposed amendments, that is, a separate and distinct claim for breach of contract that was “independent” of the existing claim.
[21] The other authority is American Axle & Manufacturing, Inc. v. Durable Release Coaters Ltd., 2010 ONSC 3368, [2010] O.J. No. 2515 (S.C.J.) where the issue was whether certain claims at trial were barred by the expiration of a limitations period. The claims had been added to the statement of claim by way of amendment with the limitation period issue being expressly reserved for determination at trial. The trial judge, Newbould J. , found that those claims were barred by the limitation period, and were not saved by any suggestion that they were not “new” causes of action, but rather were encompassed within the same factual situation previously pleaded. In so concluding, Newbould J. said, at para. 50:
In my view the amendments do not plead alternative claims for relief arising out of the same facts previously pleaded. The new facts pleaded are relied upon to support new causes of action and new heads of damages arising from those new causes of action. While it is the same contract as previously pleaded that is claimed in the amendments to have been breached, the contractual provisions and breaches relied on in the amendment are different from the previous pleading and the breaches and resulting damages are different from those previously pleaded. They constitute new causes of action.
[22] As may be obvious from the above, the distinction between the authorities relied upon by the appellant, and those relied upon by the respondent, turns on whether the proposed amendments do, or do not, arise out of the same facts, or the factual matrix, that was pleaded in the original statement of claim. If they do, then the amendments should be permitted. If they do not, and the limitations period has expired, then the amendments should be refused.
[23] In determining this issue in this case, I must begin by reading the original statement of claim generously and with due allowance for drafting deficiencies – see Operation Dismantle Inc. v. Canada, 1985 74 (SCC), [1985] 1 S.C.R. 441. In my view, it is clear from a generous reading of the statement of claim that the appellant’s original claim arises out of an alleged course of conduct between it and the Ministry that began in 1991, and continued through to 1995, when the new policy was adopted, and the alleged unfair dealing by the Ministry with the appellant came to light. It is clear that the appellant was, at all relevant times, interested in obtaining the near shore rights. The appellant claims that it did not take steps to acquire those rights only because the Ministry told it that it did not need to because, up until 1995, the Ministry was not in a position to grant those rights. What the appellant alleges, however, is that the Ministry did not tell it that companies could file applications for those rights and, specifically, that one company had filed for the very rights that the appellant was seeking.
[24] When one then looks at the proposed amendments, they allege facts that are clearly part and parcel of these dealings. They arise out of the same factual matrix. In that respect, they fall into the Sweda and related line of cases and are thus distinguishable from the Fuda line of cases. They provide precisely the type of particulars regarding what was said, and between whom, that ought to have been part of the original statement of claim. What they do not do, however, is allege some new and distinct claim unrelated to that original claim.
[25] The Master permitted the majority of the amendments that the appellant sought. However, he denied some others. Given that the respondent agrees that the amendments ought to have been either allowed in total or refused in total, it is arguably not necessary to review the particular proposed amendments that the Master did not allow, given my conclusion on the central issue. However, for the sake of completeness, I will deal briefly with each of them.
[26] In terms of the amendments at paragraphs 20 and 21, the Master found that the appellant could not amend the statement of claim to plead certain misrepresentations based on the decision in Fuda. With respect, I believe that the Master misunderstood that decision. The claims in Fuda that were disallowed were completely separate misrepresentations that were unconnected to the factual matrix that had been pleaded. Indeed, the misrepresentations in that case were contained in different reports issued at different times.
[27] In this case, the misrepresentations that the appellant seeks to add to the statement of claim in paragraphs 20 and 21 are integral to the dealings that the appellant has already pleaded that it had with representatives of the Ministry. They are very much factually intertwined with the existing allegations. They are part of the same factual matrix and the Master ought to have allowed them.
[28] The Master also disallowed the amendments proposed in paragraphs 37-44 relating to a new policy that the Ministry had adopted in March 1995. He did so on the basis that this new policy had not previously been pleaded and therefore these allegations amounted to a new cause of action. Again, I find that the Master erred in that conclusion. This new policy was, in fact, pleaded in the original statement of claim at para. 16, although again not as artfully as it might have been. It is not, therefore, a new pleading, but rather a clarification and expansion of the existing claim and ought to have been allowed.
[29] With respect to the proposed amendment in paragraph 47, the Master similarly found that this was a new cause of action not previously advanced in the statement of claim. However, the facts surrounding this claim were in the original statement of claim (e.g. paragraphs 34 & 35). Once again, this was not a new pleading, but rather a clarification and expansion of the existing claim and ought to have been allowed.
[30] Finally, with respect to the amendment in paragraph 50, the Master held that this was a new cause of action and was not permitted. In reaching this conclusion, the Master did not, in my view, read the existing statement of claim generously and with due allowance for drafting deficiencies. The original statement of claim pleaded reliance and it pleaded harm from the Ministry’s actions. Read generously, the original statement of claim was founded in negligence in terms of the Ministry’s conduct. The proposed amendment simply clarifies the foundation for the appellant’s claim.
[31] In the end result, the requirement to read a pleading generously, and the concomitant requirement to allow amendments unless they will inflict non-compensable prejudice, means that the presumption is that any amendment, that can reasonably be seen as falling within the four corners of the existing claim, ought to be permitted. In that regard, I agree with the sentiment expressed by Master Short in Brand Name Marketing Inc. v. Rogers Communications Inc., 2010 ONSC 2892, [2010] O.J. No. 5430 at para. 84:
I believe that equity dictates that if a defendant knows that the “finger of litigation” is pointing in its direction, and an action is commenced on a timely basis based on specific actions, this court ought to take appropriate steps to ensure that the true lis between the parties is addressed, rather than permitting one party to perhaps escape its possible liability by relying upon a technical Limitations Act defence.
[32] I would allow the appeal, set aside the order of the Master, insofar as it denied the appellant the right to add paragraphs 20, 21, 37-44, 47 and 50 of the proposed amended statement of claim, and grant leave to the appellant to make those amendments. The cross-appeal is dismissed.
[33] If the parties cannot agree on the appropriate disposition of the costs of the appeal, they may file written submissions. The appellant shall file its submissions within fifteen days of the date of the release of these reasons and the respondent shall file its submissions within ten days thereafter. The submissions of each party shall not exceed ten pages in length. No reply submissions shall be filed without leave of the court.
NORDHEIMER J.
Date of Release: October 12, 2016
CITATION: Farmers Oil and Gas Inc. v. Ontario (Natural Resources), 2016 ONSC 6359
DIVISIONAL COURT FILE NO.: 031/16
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
BETWEEN:
FARMERS OIL AND GAS INC.
Appellant
– and –
HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO represented by the MINISTRY OF NATURAL RESOURCES
and another
Respondent
REASONS FOR JUDGMENT
NORDHEIMER J.
Date of Release: