Court File and Parties

COURT FILE NO.: FS-14-19854 DATE: 20190502 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Patricia Singal Applicant – and – Samuel Singal Respondent

Counsel: Elliot Birnboim, for the Applicant Eli Karp and E. Smolarek, for the Respondent

HEARD: April 16, 2019

SHORE, J.

REASONS FOR JUDGMENT

Motion:

[1] This was a motion by the Applicant wife for leave to amend her pleadings to include a claim for a constructive trust interest in the matrimonial home. The Respondent husband brought a cross-motion for disclosure. At the start of the motion I was advised that the parties would resolve the motion for disclosure between themselves and they were only proceeding on the motion for leave to amend the pleadings.

Background:

[2] The parties were married for 23 years, before they separated in June 2009. In October 2009, the parties signed a separation agreement which provided, amongst other things, that the husband would pay the wife a sum of money and the wife would then transfer her interest in the matrimonial home to the husband. This transfer occurred shortly thereafter. Until that point, title to the matrimonial home had been in the wife’s name. In 2012, for reasons that are not germane to the motion before me, the parties signed a second agreement, which purported to amend the 2009 agreement.

[3] In 2014, the Applicant started these proceedings, seeking to set aside the 2009 and 2012 agreements. The parties subsequently attended several conferences and several motions. On March 15, 2017, the Applicant was granted leave to amend her Application to seek an equalization of net family property. The parties attended at a trial management conference and the matter was set down for trial for June 2019.

[4] The Applicant has brought this motion to amend her pleadings for a second time to include a constructive trust claim on the matrimonial home. This issue was the subject of the Trial Management Conference held by Justice Gilmore on April 5, 2019. Specifically, Her Honour’s endorsement reads “Extensive discussions related to settlement and the upcoming Motion to Amend held.” This motion was scheduled then for April 16, 2019. Another Settlement Conference/Trial Management Conference is scheduled for May 6, 2019. The trial has been scheduled for 5 days, to start June 17, 2019.

Applicant’s position:

[5] The Applicant’s position is that the amendment must be allowed under Rule 11(3) as the Respondent will not suffer prejudice. She advises that leaving out the claim for a trust interest in the matrimonial home was inadvertent and she always intended to claim same. It was only when the Respondent agreed, for the purpose of trial, not to rely on the Separation Agreement that she realized she needed to make a trust claim in the house. Her position is that the house was transferred as a result of the Separation Agreement, and if the Agreement is being set aside, then she retains her interest in the property. She wants to be clear and certain that her pleadings reflect same. She initially suggested that she was only asking for declaratory relief, but later acknowledged that some additional facts need to be added to her pleadings.

Respondent’s position:

[6] The Respondent’s position is that if the Applicant is permitted to amend her pleadings it will create significant prejudice to the Respondent which cannot be compensated for with costs. Neither party is seeking an adjournment. It was only after the Respondent agreed not to rely on the disputed Separation Agreements that the Applicant requested leave to amend her pleadings. The Respondent made the concession based on the pleadings at that time. The Respondent also raised the issue as to whether or not the statute of limitations has expired. Further, the Applicant was already permitted to amend her pleadings once, when she added in a claim for an equalization payment. She could and should have made her claim for an equitable interest in the home at that time. Finally, the Respondent takes the position that if the Applicant is permitted to amend the claims in her pleadings, she has not plead the necessary facts.

Analysis and Law:

[7] Rule 11(3) of the Family Law Rules, O. Reg. 114/99 provides that the court shall grant leave to amend pleadings, “unless the amendment would disadvantage another party in a way for which costs or an adjournment could not compensate”.

[8] Granting leave to amend pleadings is mandatory, unless the Respondent, in the case before me, can prove that he would suffer a disadvantage that cannot be compensated for with costs or an adjournment, or both.

[9] Counsel for the Applicant brought the case of Moghimi v. Dashti, 2016 ONSC 2116, 80 R.F.L. (7th) 462 to my attention. In that case, Justice Myers did not allow the Respondent to amend his pleadings on the eve of trial to include a claim for an unequal share of the net family property, under s. 5(6) of the Family Law Act, R.S.O. 1990, c. F.3 as “it would indeed prejudice or disadvantage the applicant in a manner that cannot be compensated for by an award of costs or by an adjournment.” The essence of the Applicant’s claim was that the Respondent engaged in fraudulent transactions with members of his family to hide his assets and reduce his net family property. Following a settlement conference, the Applicant confirmed that she was only pursuing her claim against the matrimonial home, and not the condominium. The respondent then came back with a new claim, for an unequal division of net family property in his favour, having regard to the fact that the cohabitation only lasted 27 months.

[10] At paragraph 16, His Honour stated:

Pleadings have important purposes in the just determination of a dispute. They provide notice to the other party of the case that she has to meet. There is no principle more important to the fairness of a dispute resolution process than that each side is entitled to fair notice. Once parties know what the case is about, they made choices and takes actions. They produce relevant documents based on the issues raised and facts pleaded in support of those issues. They may question the other parties and possibly third parties as well on the facts that underlie the issues or which arise from the documents produced. At trial, the pleadings set the scope of the admissibility of evidence.

[11] In denying leave to amend, Justice Myers held that it would be unfair to add a new issue for trial that “has not been the subject of disclosure, questioning, or cases conferences up to this point. Pre-trial disclosure of relevant documents is a cornerstone of the Family Law Rules. A process that requires a party to go to trial without disclosure and discovery of relevant documents and evidence is allowing trial by ambush and surprise.”

[12] Justice Myers highlighted two other reasons why an amendment would potentially not be allowed: if the amendment proposed is untenable (ie. not prima facie meritorious in law) or the amendment is made in bad faith. I do not find that either of these reasons are present in this case. On a prima facie basis, there appears to be merit to the Applicant’s claim and I do not find that the amendment is being requested in bad faith. Therefore, the real issue before me is the timing and scope of the request, and any prejudice this may cause to the Respondent.

[13] Ultimately, Justice Myers did not grant leave to amend the pleadings as he found that it would be unjust, the claim had no merit to it and the Respondent acted in bad faith. Specifically, he found that the last-second request for an amendment to plead an unparticularized claim for an unequal division of net family property for the first time, on the eve of trial, without a plan to alleviate the prejudice of an inevitable adjournment would disadvantage the Applicant in a way for which costs or an adjournment could not compensate. The fact that the request to amend was being made on the eve of trial was the primary reason for finding that the amendment would cause disadvantage. Neither party wanted to adjourn the trial. A key issue was also that the parties would have to file additional materials setting out the factual basis for the claim.

[14] There was no request by either party to adjourn the trial in the case before me. I have to proceed assuming the trial will be going ahead in June 2019 as scheduled.

[15] Justice Pazaratz in Mio v. Mio, 2014 ONSC 2186, 45 R.F.L. (7th) 374 at paras. 32-33, stated:

Rule 11(3) is an important rule, but it’s not the only rule:

a. The primary objective of the rules is to enable to court to deal with cases justly (Rule 2(2)). b. The court must ensure procedural fairness to all parties; time and expense should be reduced (Rule 2(3)). c. The parties and their lawyers are required to help the court promote the primary objective (Rule 2(4)).

Courts generally take a flexible and even forgiving approach to amending pleadings. But in an era of heightened concern about the cost, duration and emotional drain of family litigation, we cannot allow Rule 11(3) to relieve litigants of their fundamental obligation to pursue their claims in a diligent ad efficient manner.

[16] The Respondent’s counsel referred me to the case of 1588444 Ontario Ltd. v. State Farm Fire and Casualty Company, 2017 ONCA 42, 135 O.R. (3d) 681, where the motion judge dismissed a motion to amend the statement of defence. The appellant insurer had wanted to withdraw allegations of non-cooperation and plead instead that insurance coverage was being denied on the basis that the respondent had committed arson. The motion judge found that the respondent would suffer actual and presumed non-compensable prejudice if leave to amend were granted. Specifically, the proposed amendment would have the effect of restarting the litigation process. In determining whether the amendment would cause “actual prejudice”, the Court of Appeal held that there should be detailed evidence of the “actual prejudice” alleged to allow the opposing party to respond and allow the court to take a hard look at the merits of the allegation. The Court of Appeal held that the motion judge erred in finding actual prejudice. However, given that the fire had taken place nine years earlier and the pleadings were started eight years earlier, the eight year delay would presumptively cause prejudice.

[17] In Mio, the father commenced a Motion to Change ongoing child support (amongst other relief) in October 2012. Shortly thereafter, the mother filed her Response to Motion to Change. The file continued through the court system, with the parties participating in conferences. In December 2013, the matter was set down for trial during the sittings starting March 13, 2014. Deadlines were set for filing of material. The parties filed their materials and attended at Purge Court in March 24, 2014. At no time from the commencement of the proceedings until March 28, 2014, when the mother brought a motion to amend her pleadings, did the mother raise the issue of retroactive child support. The mother’s lawyer was candid and acknowledged that failing to include this claim was an oversight. Justice Pazaratz held that the cause of the amendment did not matter – even an oversight could be corrected if the other elements of Rule 11(3) are met. However, Justice Pazaratz found that the amendment would disadvantage the Applicant father in a way which could not be compensated for by costs or an adjournment. The following are some of the considerations taken into account by Justice Pazaratz in denying the motion:

a. Additional factual considerations would arise; b. If there was no adjournment and the motion was argued on the basis of the materials filed, the father would be disadvantaged; c. The issue had not been previously raised and therefore the father’s lawyer was not able to address the issue of testing or responding to the significant retroactive support claim; d. Disclosure requests and perhaps questioning might have been required as well as additional affidavits; e. An adjournment would create a number of additional steps, including additional materials by both parties, questioning (as the mother is asking that income be attributed to the father) and a delay of at least 4-6 months; f. The motion before the court related to child related issues (including an OCL report); g. The new claim would have to be addressed through the case conference process; and h. The mother was not actually offering to pay any of the costs and she had no ability to pay the costs at this stage. The costs would be quite significant.

[18] Ultimately, leave was not granted. The consequences of the delay were detrimental and the determining factor in Mio.

[19] As I mentioned to counsel during argument, I am having difficulty with the fact that the Respondent has already agreed that he would not rely on the Separation Agreements for the purpose of trial. The constructive trust claim had not been raised until after the concession had been made. I find the facts before me similar to those before Justice Myers in Moghimi. Ensuring a fair process is part of the primary objective in the Family Law Rules (r. 2(2) and (3)(a)). This includes fair notice of the case that needs to be met, as this will influence choices and actions by the parties (such as the Respondent’s concession not to rely on the Agreements at trial).

[20] One option is to allow the Respondent to re-consider his position with respect to the Agreements, to avoid the prejudicial effect of the amended pleadings. However, this would cause considerable delay. These proceedings have been going on for approximately five years.

[21] In considering the factors set out in Mio, I am also not satisfied that the factual basis exists in the current pleadings to determine the trust claim. Additional facts will need to be pled and additional disclosure exchanged, which will inevitably cause delay of the trial. No mention was made by either party of questioning, so it is unclear whether further questioning will be required. Further, the Applicant did not put forward her position on how she would compensate the Respondent for wasted costs.

[22] Finally, if the Agreements are set aside, the Applicant can still move under s. 10(1) of the Family Law Act, leaving her in a similar situation as if she had made a trust claim in the home. She can still argue that title should be restored in to her name.

[23] The Applicant has relied on a number of cases which can be distinguished from the case before me. In Landry v. Landry, 2012 ONSC 7187, 31 R.F.L. (7th) 422, the wife brought a motion for spousal support and leave to amend her pleadings to include a claim for constructive trust. Although the wife was granted leave to amend her pleadings, no reasons are given in the decision. However, at the same time, an order was granted extending the time to set the matter down for trial.

[24] In Machanda v. Thethi, 2016 ONCA 909, 84 R.F.L. (7th) 374 involves another decision by Justice Myers. In this case, the Court of Appeal upheld the Justice Myers’ decision to grant leave to the Respondent to amend her pleadings. The Appellant’s pleadings had been struck because he had breached numerous court orders, and the Respondent was permitted to amend her pleadings. In upholding the decision to grant leave to amend pleadings, the Court of Appeal specifically found that the “motion judge had no evidence of prejudice to the appellant. There is no basis to interfere with the motion judge’s exercise of discretion”: para. 14. In the case before me, I have already made a finding that the Respondent will suffer prejudice if the Applicant is permitted to amend her pleadings at this stage.

[25] In Johnston v. Adam, 2011 ONSC 3808, 5 R.F.L. (7th) 176, the wife’s mother brought a motion for summary judgement on a legal issue, specifically, requesting that she be removed as a party. Her argument was that she should not be a party in the family law proceedings. The husband had originally included in his pleadings a claim for an interest in a Quebec cottage, solely owned by the mother, as he previously understood that he and his wife owned 50% of the cottage, with the mother owning the other 50% (so his claim was only with respect to his wife, not her mother). It was clarified during the motion that the husband was actually seeking an unequal share of his and his wife’s 50% interest in the cottage and had failed to claim same in his pleadings. He therefore sought leave to amend his pleadings. The husband was granted leave to amend his pleadings. There was no discussion about prejudice to the parties, only a finding that there was merit to his claim and the mother therefore needed to remain as a party to the proceedings, so that the Court could determine whether the husband and wife had an interest in the cottage and what the values of their respective interests were for the purposes of equalization. As part of her reasons, Justice Annis found that without the amendment, the mother would not be a necessary party, but by allowing the amendment, the two proceedings could now proceed as one. The reasons therefore do not apply in the case before me. Finally, the litigation in that case was started in 2011, and the motion took place in June of that year. The parties were only at the start of litigation.

[26] For the reasons set out above, I am not granting leave for the Applicant to amend her pleadings.

Limitation period:

[27] The parties agree that the issue of the limitation period should be left to trial, given that I do not have an evidentiary basis on which to make the decision.

Costs:

[28] The parties agreed that the appropriate quantum for costs of the motion is $6,000, without limiting the Court’s ability to order a different (albeit lower) amount if deemed appropriate. The parties have a motion scheduled May 7, 2019. The parties agreed that their submissions for costs would be adjourned to May 7, 2019, subject to the parties reaching an agreement on same.

Order:

[29] Order to go as follows:

1. The Applicant’s motion for leave to amend her pleadings is dismissed.
2. On consent, if the parties are unable to resolve the issue in advance, submissions for costs of this motion adjourned to May 7, 2019, before the Judge hearing the motion to strike already scheduled for that day. However, on consent, cost of the motion are set at $6,000, payable by the unsuccessful party, subject to the Court’s discretion to order a lesser amount on hearing submissions from the parties.

Shore, J. Released: May 2, 2019