Court File and Parties

COURT FILE NO.: CV-15-519276 DATE: 20230223 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

SHOBROOK CORPORATION Plaintiff (Moving Party) – and – GEORGE GOULET, IVAN MA and ACCESS HEALTH BENEFITS LTD. Defendants (Responding Parties)

Counsel: Derek J. Bell, for the Plaintiff (Moving Party) John Friendly, for the Defendants (Responding Parties) Thomasina A. Dumonceau, for the Third Parties John Bowden and John A. Bowden Insurance Agency Limited

HEARD: January 17, 2023

BEFORE: Papageorgiou J.

A. Nature of the motion

[1] The plaintiff brings this motion to amend the Statement of Claim to increase the damages claimed and limit its claim to insurance coverage, and to obtain leave to bring this motion, after the matter has been set down for trial.

[2] The defendants object to the amendments for the reasons more fully explained in these reasons.

B. Decision

[3] For the reasons that follow I am granting the plaintiff leave to bring this motion, as well as leave to amend its Statement of Claim in accordance with the Amended Statement of Claim attached to the Notice of Motion.

[4] The defendants’ opposition to the amendments motion is largely based upon arguments which it seeks to make on the merits of the case with respect to matters which it has already set out in its Statement of Defence. A motion to amend is not the venue for significant arguments on the merits.

[5] The defendants have not led evidence which demonstrates that they will suffer non compensable prejudice. Further, I am satisfied that there is no causal link between the amendments sought and the actual prejudice alleged, or any presumed prejudice which may arise by virtue of the plaintiff’s delay in seeking the proposed amendments.

C. Background

[6] This action was commenced on January 7, 2015.

[7] The plaintiff, Shobrook Corporation (“Shobrook”), alleges that in or around 2003-2004 it was induced to purchase a universal life insurance policy (the “RBC Destiny Policy”) in reliance on representations made by the defendants. This insurance was in respect of Barbara Simmonds (“Simmonds”), the owner of Shobrook. In that regard, Shobrook pleads that George Goulet (“Goulet”) is the founder of the defendant, Access Health Benefits Ltd. (“Access Health”), that Ivan Ma (“Ma”) is an employee of Access Health and that these defendants are liable for breach of contract, negligent misrepresentation, negligence and breach of fiduciary duty. [1] These defendants are collectively referred to as the “Defendants”.

D. The Defendants’ position

[8] The Defendants oppose the amendments on the following bases: a) An Order dated January 9, 2020 made by Master Sugunasiri requires that any motion for leave to amend be made to the trial judge; b) This matter has been set down for trial. Rule 48.01(1) of the Rules of Civil Procedure, R.R.O 1990, Reg. 194 requires that leave be obtained and it should not be granted in the circumstances; c) The proposed amendments are untenable and/or would cause non compensable prejudice.

[9] I will address each of these positions.

E. Does the Order of Master Sugunasiri require that any motion for leave to amend be made to the trial judge?

[10] In or around August 23, 2019, Shobrook first raised its intention to amend its Statement of Claim seeking to increase damages claimed from $750,000 to $2 million.

[11] As the five year administrative dismissal date was approaching, on December 3, 2019, Shobrook advised the Defendants that either a timetable had to be filed or the matter had to be set down for trial. Shobrook requested the Defendants’ position on the Amended Claim, and also advised that it sought to amend the amount claimed to $2.5 million instead of $2 million, as originally advised.

[12] Shobrook then brought a motion before Master Sugunasiri returnable January 9, 2020 to extend the time within which the matter must be set down, and to amend its Statement of Claim. Twenty minutes were booked for the motion. The Defendants sought an adjournment to a half day motion with affidavits to be exchanged as well as cross-examinations.

[13] Master Sugunasiri was not prepared to consider the matter and the parties canvassed dates for the return of the motion. Counsel for the Defendants did not have any available dates until April 2020 and the Registrar advised that dates had not yet been set for any time after April 2020.

[14] Because the case was facing administrative dismissal, the parties agreed that Shobrook would abandon its motion to amend and that it could be raised at the outset of trial.

[15] Master Sugunasiri’s Order reads as follows:

1. THIS COURT FURTHER ORDERS that the local registrar of the Superior Court of Justice shall not dismiss this action for delay unless the action is not set down for trial by July 7, 2020. If the action has already been dismissed, I hereby set aside that order.

THIS COURT ORDERS that the balance of the relief sought on this motion is abandoned without costs and without prejudice to the plaintiff’s right to bring a motion to increase the damage claim before the Trial Judge.

[16] On January 27, 2020 Shobrook set the action down for trial.

[17] COVID-19 then occurred which resulted in delays within the courts.

[18] On December 21, 2020 Shobrook sent the Defendants a further Amended Statement of Claim seeking damages in the amount of $8,700,000.

[19] In January 2021 the Defendants raised for the first time the position that, if leave to amend was sought at the commencement of trial, they would object on the basis that further discovery was required and seek an adjournment of the trial.

[20] Shobrook offered the Defendants an additional day of discovery prior to trial so that if the amendments were granted, there would be no need for any further discovery. However, the Defendants would not agree.

[21] Then, in March 2021, the Defendants took the position that Master Sugunasiri’s Order prohibits Shobrook altogether from bringing its amendment motion until the commencement of trial.

[22] In my view, Master Sugunasiri’s Order does not require that the motion to amend be brought to the trial judge. The wording simply does not bear the interpretation which the Defendants advance. Rule 26.01 provides that a motion to amend can be made at any stage of a proceeding. Given the wording of r. 26.01, Master Sugunasiri would have used clear and precise language if her intention had been to prevent a motion to amend prior to trial altogether.

F. If Master Sugunasiri’s Order required the amendment motion to be brought to the trial judge, is the test for variation of an Order pursuant to r. 59.01(1) satisfied?

[23] If the Order must be amended or varied, then I would amend or vary the Order to the extent necessary to permit this motion to amend to be brought before me.

[24] In that regard, r. 59.06(1) permits the court to amend an order that requires amendment on any particular on which a previous court did not adjudicate. Further, r. 59.06(2) permits an order to be varied on the basis of new facts arising or discovered after it was made. The Defendants did not advise Master Sugunasiri or Shobrook that they would seek further discovery and an adjournment if the trial judge ordered the amendments. Therefore, the Defendants’ position is a new fact arising after Master Sugunasiri’s Order, in addition to being an issue upon which she did not adjudicate.

[25] In my view, the cases referred to by the Defendants with respect to the application of r. 59.06 (1) and (2) are distinguishable and/or unhelpful. These cases involved motions to set aside consent orders which ended the entire litigation. These are not the facts here. Master Sugunasiri’s Order did not engage the principles of finality or deference to trial judges. At most, it deferred the consideration of a procedural amendments motion to the commencement of trial. The Defendants provided no authority for the proposition that the stringent tests applied in cases where it is sought to re-open a concluded judicial proceeding should be, or are, applicable to the situation before me. [2]

[26] To the extent that the parties may have agreed that the motion to amend would be brought to the trial judge, any such agreement was made prior to the Defendants’ positions regarding the need for further discovery and an adjournment if the amendment was granted. As I will elaborate further below, the Defendants’ position in this regard would entail a potentially significant waste of the parties’ time and resources, as well as a waste of scarce judicial resources.

G. What is the test pursuant to r. 48.14(1) for leave to bring the motion as the case has been set down for trial?

[27] Rule 48.04(1) provides that once a matter has been set down for trial, leave is required prior to any further motions:

48.04(1) Subject to subrule (3), 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.

[28] In Horani v. Manulife Financial Corporation, 2023 ONCA 51, at para. 15, the Court considered an appeal of an amendments motion where the action had been set down. The Court noted, at paras. 16 and 22, that there is a divergence of opinion in the test applied by the courts as to when leave ought to be granted, in general, to bring a motion after it has been set down. The Court noted that the first line of authorities hold that the moving party must show “a substantial or unexpected change in circumstance such that a refusal to make an order under [rule] 48.14(1) would be manifestly unjust”: at para. 17. The second line of authorities hold that leave should be granted “if the moving party can demonstrate that ‘the interlocutory step is necessary in the interests of justice’ even in the absence of a substantial or unexpected change in circumstances”: at para. 18. And the third line of authorities sets out that, “courts have considered both tests and determined that they need not weigh in on the prevailing approach as the moving party could not meet the bar even under the broader ‘interests of justice’ test”: at para. 19.

[29] Although the Court in Horani did not determine which test was applicable, the Court noted the parties agreement that “the scope of the court’s discretion is shaped by Rule 26.01 of the Rules of Civil Procedure”.

[30] The Defendants have pointed to a different authority, Tanner v. Clark (1999), 93 O.T.C. 141 (Gen. Div.), which held at para. 25 that the authorities which hold that there is a single test for all motions is “overly rigid and simplistic”. Rather, “[t]he relevant principles to be considered and the weight to be given to leave motions will vary depending upon the nature of the leave requested, and the circumstances of the case.”

[31] Shobrook has pointed to yet another diverging viewpoint in 4197658 Holdings ULC v. The Atlas Corporation, 2021 ONSC 1659, at para. 33 where the Court reviewed applicable authorities and concluded that leave pursuant to r. 48.04(1) is not required when a motion to amend is sought. Rule 26.01 has its own leave requirement which is mandatory unless there is prejudice which cannot be compensated for by costs of an adjournment:

26.01 On a 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 by costs or an adjournment.

[32] The wording in r. 26.01 that a motion may be brought “at any stage of an action” arguably includes the stage when an action has already been set down. Imposing a further discretionary leave requirement on the mandatory language of r. 26.01 may defeat the underlying purpose of r. 26.01 which directs that leave “shall” be granted “at any stage” unless there is non-compensable prejudice, especially if the test for such leave is onerous.

[33] The wording “at any stage” of the action or proceeding is only used in respect of three other types of motions: r. 5.04(2): motions to add or delete parties, and rr. 24.1.16 & 75.1.13: motions which involve consent orders requiring parties to participate in additional mediation. [3]

[34] It would be odd to impose an onerous leave requirement in respect of rr. 24.1.16 and 75.1.13 consent motions. Similarly, as will be further discussed below, awaiting trial to either amend a pleading or add parties has the potential to derail scheduled trial dates, which makes little sense if it can be avoided.

[35] But for the wording of r. 48.04(1) which specifically indicates that leave is required for “any motion” without any exception, I would have agreed with the reasoning in 4197658 Holdings ULC that leave to bring the motion is not required for motions pursuant to r. 26.01.

[36] Therefore, in my view, the approach in the second line of cases which apply the less onerous “interests of justice” test is preferable in this case. I add that the authors of Ontario Superior Court Practice, Annotated Rules and Legislation, 2023 provide their view at p. 1787 that the “interests of justice test” is preferable “because the straightforward language of r. 48 does not mandate a stringent test such as a substantial and unexpected change of circumstances and there is no reason to fetter the court’s discretion unnecessarily by importing such a requirement.” This reasoning applies, in particular, for a motion of the nature before me. See also Kranjec v. Green, 2020 ONSC 6910 at para 39.

H. Should the court grant leave pursuant to r. 48.04(1)?

[37] The interests of justice would not be served by the approach advocated for by the Defendants. Awaiting the commencement of trial could undermine the policy objective of using the court’s scarce resources efficiently. It could also result in a significant waste of the parties’ time and resources (while prejudice to the Defendants is also relevant, there is no necessity to consider this as part of the r. 48.01 analysis as it is already a component of the r. 26.01 analysis).

[38] At Civil Practice Court on July 12, 2022 Myers J. noted as follows:

The action is now set down for trial. Long motion dates will potentially interfere with trial and therefore fall within judges’ purview. While tempted to send the parties to Trial Scheduling Court and leave the Defendants to refuse discovery at their own risk, that is not the efficient outcome. Instead the matter should be brought to a head….

Trial time is given a priority on the Civil Team. It cannot be assigned with a real risk of adjournment especially with the current strained judicial complement. A judge should consider how the motion should be heard, if necessary and consider scheduling and any consequent discovery before trial.

[39] Myers J. directed that the issues proceed to a case conference before Black J. who was to oversee the action up to trial, including all motions.

[40] At a subsequent case conference on August 16, 2022, Black J. agreed that this matter should not be sent to trial carrying the risk of an adjournment and directed that the parties proceed to a motion to address whether the amendments should be granted.

[41] Rule 1.04(1) is also relevant:

1.04(1) These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.

[42] The Defendants’ approach is to schedule a ten day trial with the motion to amend before the trial judge. They have taken two contradictory positions as to what this could mean. Initially, they advised Shobrook that they would request further discovery and an adjournment if the trial judge granted the motion; they have not resiled from this position. Before me they took the additional and contradictory position that the trial judge should hear the motion because the trial evidence would be relevant to the trial judge’s decision and that the trial judge could simply await the end of the trial to decide the amendment issue. This makes no sense as the merits of the case are not relevant to an amendment motion.

[43] The Defendants’ approach makes no practical sense as it has strong potential to waste time and expense, as well as judicial resources. Therefore, if leave is required, I am exercising my discretion to grant it.

I. Should the proposed amendments be granted pursuant to r. 26.01?

[44] Before considering whether the amendments should be granted, it is important to set out in greater detail the claim made by Shobrook, as well as the precise wording of the amendments it seeks.

J. Shobrook’s original claim

[45] Simmonds’s life had previously been insured by Shobrook by way of two, ten-year term life insurance policies with RBC Insurance. The intention of these life insurance policies was to ensure sufficient liquidity to pay taxes in the event Simmonds (who was one of the owners of Shobrook) died and there was a deemed disposition of Shobrook’s stock upon her death. By the year 2000, there were no longer any liquidity concerns and life insurance policies were not required for that purpose (Statement of Claim: paragraph 7).

[46] These term life insurance policies were expiring in or around 2003. Shobrook retained the Defendants to act as Shobrook’s insurance broker (Statement of Claim: paragraph 8).

[47] The Defendants recommended an RBC Destiny Policy, a type of life insurance policy “ that allows the policyholder to invest funds paid in excess of their premiums ” (emphasis added) (Statement of Claim: paragraph 11).

[48] The Defendants represented that the RBC Destiny Policy had three key features: a) It had a 4 percent minimum guaranteed interest rate; b) It would require only 10 annual payments of $300,000 commencing 2003, and no further payments would be required after 2013. Further, if those 10 annual payments were made it would not ever lapse; c) When Simmonds reached the age of 100, the policy would have a cash surrender value of $7.9 million (Statement of Claim: paragraphs 20-21, 29, 31).

[49] These representations were made on three separate occasions. The first two were contained in spreadsheets which set out the details of the payments required and the guaranteed rate of return in the amount of 4 percent per annum. The final representation was contained in a report which compared seven different universal life insurance policies (the “Oakwood Report”) (Statement of Claim: paragraphs 26-32).

[50] In or around October 2012, Shobrook became concerned that the policy values in the RBC annual statements were diverging from policy values shown in the Oakwood Report. It contacted the Defendants and requested a reconciliation (Statement of Claim: paragraph 36).

[51] Shobrook maintained ongoing communications regarding this issue; the RBC Insurance ultimately advised Shobrook that the information in its annual statements was correct. RBC Insurance also confirmed that the Oakwood Report was not developed by or endorsed by RBC Insurance (Statement of Claim: paragraphs 37-47).

[52] In paragraph 48 of the Statement of Claim, Shobrook pleads:

48. As such, the Defendants’ Representations and the Oakwood Report, showing “a rate of return of 4 % plus the Preferred Client Bonus” and a policy that would “never” lapse, were completely false and misleading.

[53] Shobrook alleges that it suffered loss and damage due to its reliance on the misleading and inaccurate advice of the Defendants.

[54] In paragraph 57 of the Statement of Claim it pleads:

To its detriment, [Shobrook] relied upon the Defendants in making the decision to purchase the RBC Destiny Policy. But for the Defendants’ Representation and the Oakwood report, [Shobrook] would not have purchased the RBC Destiny Policy.

[55] Shobrook claims damages for breach of contract, breach of fiduciary duty, negligence, and negligent misrepresentation, the basis for which are more particularly set out in the Statement of Claim (Statement of Claim: paragraphs 51-64).

[56] Paragraph 65 of the Statement of Claim provides as follows:

By virtue of the wrongful acts described above, the plaintiff has suffered damages in the amount of $750,000. Among other things, not only was [Shobrook] deprived the opportunity to invest the premiums in alternative investments that would have yielded returns greater than or equal to what was projected by the Defendants’ Representations and the Oakwood Report, it lost the financial protection of the non-taxable insurance policy of $5,000,000 on the life of [Simmonds] for the unknown remainder of her life.

[Emphasis added.]

K. The amendments sought

[57] As set out above, the Proposed Amended Claim increases the damages claimed from $750,000 to $8,700,000. Shobrook’s amendment to claim $8.7 million in damages is based upon its position that, but for the alleged misrepresentations, it would have invested further in the only other investment it made at the time: a hedge fund, North Polar Capital Investments Limited (“Polar Capital”).

[58] It also seeks amendments related to insurance limits.

[59] In that regard, in the summer of 2021, Shobrook discovered that the defendant Goulet had filed for bankruptcy. It brought a motion in the bankruptcy proceeding to lift the stay to permit it to proceed with this action. The trustee agreed that the stay could be lifted as long as Shobrook did not seek recovery beyond the $2,000,000 limits of Goulet’s errors and omissions insurance.

[60] Shobrook also learned that Access Health had been dissolved. Access Health has no assets. However, Access Health had brought a third party claim against John Bowden and John A. Bowden Insurance Agency Limited (the “Third Parties”), who hold a $5,000,000 insurance policy. Therefore, in order to preserve Access Health’s entitlement to claim against the third party, Shobrook brought a motion to revive Access Health, which was successful.

[61] Shobrook seeks amendments in paragraphs 66 and 67 which clarify that it has limited its claim against Goulet to $2,000,000 but still claims the full amount against Access Health on a several basis even if it exceeds $2,000,000.

[62] Shobrook seeks a further amendment in paragraph 68, such that to the extent that the court apportioned any liability as between Access Health and the Third Parties, Shobrook would disclaim any entitlement to damages in excess of $5,000,000, the policy limit of the insurance held by the Third Parties.

[63] The following are the full texts of the Amendments sought.

1. The plaintiff, Shobrook Corporation (“Shobrook”), claims from the defendants, George Goulet (“Goulet”), Ivan Ma (“Ma”) and Access Health Benefits Ltd. (“Access Health”), jointly and severally: (a) Damages for breach of contract, breach of fiduciary duty, negligence, and negligent misrepresentation in the amount of $ 750,000.00 $2,000,000, jointly and severally against all defendants, and $8,700,000.00 severally and not jointly against Access Health, subject to the disclaimer set out at paragraph 68;

2. There is a clear causal link between the defendants’ actions and the plaintiff’s loss. By virtue of the wrongful acts described above, the plaintiff has suffered damages in the amount of $750,000.00 $8.700,000.00. Among other things, not only was the plaintiff was [sic] deprived the opportunity to invest the premiums in alternative investments that would have yielded returns greater than or equal to what was projected by the Defendants’ Representations and the Oakwood Report, it lost the financial protection of the non-taxable insurance policy of $5,000,000 on the life of [Simmonds] for the unknown remainder of her life.

3. Unbeknownst to the plaintiff, on May 25, 2018, Goulet made a Division 1 proposal (the “Proposal”) under the Bankruptcy and Insolvency Act, RSC 1985, c. B-3 (the “BIA”) with certain of his creditors. Creditors voted in favour of the Proposal and Goulet’s trustee in bankruptcy. Grant Thornton LLP, takes the position that the plaintiff’s claim was compromised in the Proposal. In order to have the statutory stay of proceedings imposed by the BIA be lifted, the plaintiff is seeking only $2,000,000 against Goulet, which is the amount of Goulet’s Errors & Omissions insurance coverage, and this claim accordingly does not seek recovery from Goulet's personal assets.

4. Access Health is not a part of the Proposal and the full amount of damages is sought on a several, and not joint, basis, so that no claim will be made against Goulet’s personal assets through the claim against Access Health. To the extent that an apportionment of damages as between Goulet and Access Health results in damages being payable by Goulet directly in excess of $2,000,000, the plaintiff disclaims any entitlement to any such damages in excess of $2,000,000 (plus costs awarded by the Court, if any).

5. Further, to the extent that the Court apportions any liability as between Access Health and the defendants to the Third Party Claim, John Bowden and John A. Bowden Insurance Agency Limited (the “Third Party Defendants”), such that the Third Party Defendants are liable for damages in excess of $5,000,000, being the amount of insurance held by the Third Party Defendants, the Plaintiffs disclaims any entitlement to any such damages in excess of $5,000,000.

L. The applicable legal principles pursuant to r. 26.01

[64] On a motion to amend a pleading pursuant to r. 26.01, leave is “presumptively approved”. A court is “required” to grant leave, unless the defendants have satisfied their onus to prove “non-compensable prejudice, abuse [or] where the proposed pleading is untenable at law”: Marks v. Ottawa, 2011 ONCA 248, 280 O.A.C. 251, at para. 19; York Region Standard Condominium Corporation No. 1206 v. 520 Steeles Developments Inc., 2018 ONSC 632, at para. 13; 1588444 Ontario Ltd. v. State Farm Fire and Casualty Co., 2017 ONCA 42, 135 O.R. (3d) 694, at para. 25.

M. Are the claims untenable at law?

[65] Both parties filed affidavit evidence because of the issues surrounding the chronology of events, alleged prejudice, as well as the applicability of rr. 48.01 and 59.06. The Defendants then used this opportunity to file evidence to argue the merits of the case, and Shobrook also filed its evidence on these issues in response.

[66] I foreshadow that it is my view that the Defendants’ arguments regarding why the proposed amendments are not tenable require a weighing of the evidence which is not appropriate on an amendment motion. I will explain.

[67] First, the Defendants argued that the claims against Access Health are untenable altogether because Access Health was not in existence when the representations were made; rather, the Defendants Goulet and Ma worked for another broker at the time, Oakwood Associates Advisory Group Ltd. In paragraph 6, Shobrook pleaded that Access Health was known at some of the relevant times as Oakwood Associates Advisory Group Ltd., and that Goulet was the primary representative of Access/Oakwood. Clients of Oakwood became clients of Access Health after Oakwood was dissolved. Issues related to whether or not there is a valid claim against Access Health related to its incorporation are not related in any way to the amendment sought, let alone should they be decided on this motion.

[68] Second, the Defendants argued that Shobrook’s claims are beyond the limitation period because the misrepresentations upon which Shobrook relies were provided in 2003 and 2004. For that reason, they argue that the cause of action is statue barred since it “accrued” at that time, in reliance on Hamilton (City) v. Metcalfe & Mansfield Capital Corporation, 2012 ONCA 156, 347 D.L.R. (4th) 657. In Hamilton, the motions judge dismissed the plaintiff’s claim as statute barred on summary judgment, not accepting the plaintiff’s argument that the cause of action had not yet accrued because the plaintiff did not appreciate the full extent of the loss. Hamilton does not assist the Defendants. Nor is it clear how this amendment motion is the venue to make this argument.

[69] Third, the Defendants also argue that Shobrook’s claim is statute barred because it received annual reports from RBC showing the status and value of the RBC Destiny Policy all along, including in October 2012, but did not commence its action until 2015. Shobrook provided evidence of its position that the claim was not discoverable until RBC Insurance advised it on February 24, 2014 that the information received by Shobrook regarding the RBC Destiny Policy was incorrect. Again, it is unclear how the proposed amendments relate to the limitation period issues; in any event, they cannot and should not be decided on this motion.

[70] Fourth, the Defendants argued that the only duty of care owed by insurance brokers to their clients is to provide information about available insurance products. They relied upon Fletcher v. Manitoba Public Insurance Co., 1990 SCC 59, [1990] 3 S.C.R. 191, at p. 214 where the Supreme Court of Canada cited the holding in Fine Flowers Ltd. v. General Accident Assurance Co. of Canada (1977), 17 O.R. (2d) 529 (C.A). They argue that this is incontrovertible authority for the proposition that the only duty owed by them was to provide advice with respect to life insurance policies available, and that Shobrook’s claim for any damages related to alternate investments they would have made but for this advice, is therefore untenable.

[71] The main difficulty with this argument is that Fletcher and Fine Flowers did not involve the duty of care owed by insurance agents who provide advice with respect to insurance products which have an investment component. [4] Shobrook pleads, and the Defendants concede, that the RBC Destiny policy is a form of life insurance policy which is also an investment. As I will elaborate below, the words “invest”, or “investment” are used 16 times in the Statement of Claim.

[72] The Defendants did not provide any case law in respect of duties of care owed by insurance agents who provide advice on these kinds of hybrid policies. Even if there is no established duty of care of the nature asserted by Shobrook, a court may find a new duty of care based upon proximity: see 1688782 Ontario Inc. v. Maple Leaf Foods, 2020 SCC 35, 155 O.R. (3d) 544; Deloitte & Touche v. Livent Inc., 2017 SCC 63, [2017] 2 S.C.R. 855, at paras. 25-29. Therefore, Fletcher and Fine Flowers would not preclude the finding of a duty of care of the nature asserted which would be determined and/or assessed based upon the evidence presented at trial.

[73] The Defendants may very well succeed at trial with some or all of the above arguments. However, they all involve significant contested factual issues which should be decided by the trier of fact and not on an amendment motion.

[74] As stated in York Region, at para 16 and Andersen Consulting v. Canada (Attorney General) (2001), 150 O.A.C. 177 (C.A.), at paras. 34-35, when considering a r. 26 amendment motion, “the court should not examine whether there is sufficient evidence to sustain the pleading, weigh evidence or make findings of fact.” The court “should not look beyond the pleadings to determine whether the action can succeed”. The Defendants’ arguments above do exactly that.

N. Is there non compensable prejudice?

[75] The applicable law is set out in State Farm, at para. 25 as follows:

There must be a causal connection between the non-compensable prejudice and the amendment. In other words, the prejudice must flow from the amendments and not from some other source: Iroquois at paras. 20-21; and Mazzuca v. Silvercreek Pharmacy Ltd. (2001), 56 O.R. (3d) 768, at para. 65.

The non-compensable prejudice may be actual prejudice, i.e. evidence that the responding party has lost an opportunity in the litigation that cannot be compensated as a consequence of the amendment. Where such prejudice is alleged, specific details must be provided: King’s Gate Developments Inc. v. Drake (1994), 17 O.R. (3d) 841 (Ont. C.A.), at paras. 5-7, and Trans America Life Insurance Co. of Canada v. Canada Life Assurance Co. (1995), 25 O.R. (3d) 106 (Ont. Gen. Div.), at para. 9.

Non-compensable prejudice does not include prejudice resulting from the potential success of the plea or the fact that the amended plea may increase the length or complexity of the trial: Hanlan v. Sernesky (1996), 95 O.A.C. 297 (Ont. C.A.) at para. 2 and Andersen Consulting, at paras 36-37.

At some point, the delay in seeking an amendment will be so lengthy, and the justification so inadequate, that prejudice to the responding party will be presumed: Family Delicatessen Ltd. v. London (City), 2006 ONCA 5135, [2006 O.J. No. 669 (Ont. C.A.)], at para. 6.

The onus to prove actual prejudice lies with the responding party: Haikola v. Arasen au (1996), 27 O.R. (3d) 576 (Ont. C.A.), at paras. 3-4; and Plante v. Industrial Alliance Life Insurance Co. (2003), 66 O.R. (3d) 74, at para. 21.

The onus to rebut presumed prejudice lies with the moving party: Family Delicatessen, at para. 6.

O. Do the proposed amendments assert a new cause of action/new claim of pure economic loss?

[76] First, the Defendants argue that the proposed amendments seek to introduce through the back door a new cause of action which takes them by surprise. They say that the amendments seek, for the first time, to claim damages for pure economic loss.

[77] However, Shobrook’s original Claim pleads the torts of negligent misrepresentation and negligent performance of a duty. These torts are already an established category where private parties may claim pure economic loss: Maple Leaf Foods at paras. 20-21.

[78] Therefore, the fact that the proposed amendment seeks to increase the quantum of Shobrook’s loss does not mean that it is now a new claim of pure economic loss. It always was.

P. Do the amendments raise a new theory of damages/expanded duty of care?

[79] Then the Defendants argue that Shobrook’s amended claim for $8.7 million can only be sustained based upon a new and more expansive theory of damages and duty of care never pleaded before.

[80] They rely upon Maple Leaf Foods and Livent.

[81] Livent and Maple Leaf Foods concerned the applicable test to determine whether a duty of care is owed in cases of negligent misrepresentation and negligent performance of a service. The Court indicated that where an established proximate relationship cannot be found, courts must undertake a full proximity analysis. The two most important factors in determining proximity are the defendant’s undertaking and the plaintiff’s reliance. The proximate relationship is formed when the defendant undertakes responsibility which invites a reasonable and detrimental reliance for that purpose. Any reliance which falls outside the scope of the undertaking falls outside the scope of the proximate relationship: see Livent, at paras. 28-30. The Defendants rely in particular on the following statement made in Livent, at para. 31:

Rights, like duties, are, however, not limitless. Any reliance on the part of the plaintiff which falls outside the scope of the defendant’s undertaking of responsibility—that is, of the purpose for which the representation was made or the service was undertaken—necessarily falls outside the scope of the proximate relationship, and therefore the defendant’s duty of care.

[82] The Defendants point to a variety of paragraphs in the Statement of Claim which they say demonstrate that Shobrook’s original Claim was based upon a duty of care which was limited to the provision of advice on available insurance products.

[83] They reference paragraph 62 of the Statement of Claim:

62. The defendants failed to meet the standard of care expected of insurance brokers through the negligent performance of the only service they were retained to provide. The primary purpose of the relationship was to supply the plaintiff with accurate information about its policy options and to provide accurate comparison of different insurance policies. This was the only value the defendants could have provided and the sole basis for the relationship.

[84] The Defendants also reference the following additional paragraphs: paragraph 56, where Shobrook pleads as to the importance of insurance product comparisons, and paragraph 58, where it pleads as to the Defendants’ fiduciary duty to provide impartial and accurate advice regarding insurance coverage.

[85] The Defendants say that they have reasonably based their defence upon this more limited duty of care to provide advice with respect to insurance products only, as well as damages being based upon other insurance products Shobrook would have purchased but for the alleged negligent misrepresentation or negligence. In that regard, paragraph 29 of Mr. Choi’s affidavit, filed on behalf of the Defendants states:

29. Based on [the original Statement of Claim] (and considering the amount sought was $750,000) the defendants reasonably based their defence on damages being, at the highest, calculated as, the difference between the value of the RBC Destiny Policy and 1) other universal life policies that would been purchased instead, or 2) the difference between a policy delivering 5.5% returns, instead of 4% returns. In both cases, the damages would be less than what was originally claimed.

[86] The first problem with this argument is that the Defendants do not particularize how they would have conducted their defence differently had Shobrook initially claimed damages in the increased amount. If all that were required were that a defendant state they would have conducted their defence differently, then every amendment motion could be defeated with this sort of bald statement in an affidavit. In State Farm, at para. 32, the Court cautioned “the specific allegation of prejudice should be detailed in sufficient particularity in evidence to allow the opposing party to respond to the allegation and to allow the court to take a hard look at the merits of the allegation.” On this basis alone, the Defendants’ argument must fail.

[87] In any event, the Defendants are reading the pleadings too restrictively.

[88] The Court’s comments in Polla v. Croatian (Toronto) Credit Union Limited, 2020 ONCA 818 about the purpose of pleadings are relevant. The Court directed that pleadings should be read broadly, keeping in mind that the purpose of a claim is to alert the other side to the claim that the other party is pursuing. “As such, the question in this case is whether the respondents would reasonably have understood from [the Statement of Claim] and the particulars provided on discovery, that the appellant was pursuing a claim in respect of the matter addressed by the proposed amendment”: Polla, at paras 37-39.

[89] There are no pleadings by any party using the words “proximity” or “undertaking”, which is now the focus of the Defendants’ position. These are only labels in any event; what matters is whether the facts pleaded could support the conclusion that a duty of care was owed and was breached. The Court’s comments in Livent, at para. 28, are relevant in this regard. The Court directed that when considering whether a new proximate relationship, previously not established, exists, the court must examine “all relevant ‘factors arising from the relationship between the plaintiff and the defendant’”: Livent, at para. 29. The relevant factors are diverse and will depend on the circumstances of each case including things like expectations, representations, reliance and the property or other interests involved.

[90] In my view, reading the pleading as a whole, and taking into account all relevant facts pleaded, the original Statement of Claim put the Defendants on notice that Shobrook’s claim encompassed negligence in the performance of a service, or negligent misrepresentation arising out of investment advice, not merely the provision of advice with respect to insurance policies which were available, for the following reasons.

[91] First, as stated above, both sides agree that a universal life insurance policy is not merely an insurance policy, but is also a form of investment.

[92] The word “invest” or “investment” is used 16 times in the Statement of Claim. For example:

Para 11: the RBC Destiny Policy “allows the policyholder to invest funds paid in excess of their premiums”.

Para 12: Shobrook’s “ investment under the policy would continue to increase in value even after payments stopped”.

Para 28: “With the RBC Destiny Policy, [Shobrook] would have a guaranteed return on investment at 4 %”.

Para 49: “RBC Insurance communicated that its yearly policy statements reflecting the policy’s cash value and the investment rates of return had been sent to Goulet’s office, along with ‘detailed policy statements reflecting these investment rates of return and the cost of insurance deductions.’”

Para 52: “[T]he defendants represented that the RBC Destiny Policy would have ‘an investment value of approximately $7.9 million when [Simmonds] reached 100’”.

Para 60: “[Shobrook’s payment level and schedule were planned based on a $3 million total investment over ten years. It was an important consideration for [Shobrook] that the insurance policy and its promised investment value and growth would continue after ten years without the requirement for further premiums or further investment beyond the $3 million.”

[Emphasis added.]

[93] Paragraph 15 is particularly clear that the Defendants provided investment advice: “Goulet represented that this type of policy would be a good investment for the plaintiff given that the policy would earn a guaranteed minimum interest rate of return on a tax deferred basis on any account value within the policy” (emphasis added).

[94] Paragraph 65 of the Statement of Claim then references the damages being claimed based upon alternate investments Shobrook could have made which would have yielded greater returns.

65. There is a clear causal link between the defendants’ actions and the plaintiff’s loss. By virtue of the wrongful acts described above, the plaintiff has suffered damages in the amount of $750,000. Among other things, not only was the plaintiff was [sic] deprived the opportunity to invest the premiums in alternative investments that would have yielded returns greater than or equal to what was projected by the Defendants’ Representations and the Oakwood Report, it lost the financial protection of the non-taxable insurance policy of $5,000,000 on the life of [Simmonds] for the unknown remainder of her life.

[Emphasis added.]

[95] It is telling that paragraph 23 of the Statement of Defence already responds to Shobrook’s claim that it was considering other kinds of investments at the time:

Shobrook was not considering investment options other than life insurance. Life insurance provided substantial advantages compared to other investment options for reasons that included tax sheltering and the beneficial tax treatment of death benefits. A death benefit would be non-taxable not only to Shobrook but also to the shareholders of Shobrook through a Capital Dividend Account. Based on the purposes, circumstances and goals of Shobrook, the circumstances and goals of its shareholders, and the time constraints imposed by the expiry of the conversion option, the Defendants deny there were alternative investments to the RBC Destiny policy that would have yielded greater returns, benefits or advantages to Shobrook and its shareholders.

[96] There would be no reason for the Defendants to plead paragraph 23 if they understood Shobrook’s claim to be limited in the way they now argue.

[97] Paragraph 26 and paragraph 27 of Shobrook’s Reply further put the Defendants on notice:

26. In response to the allegations contained in paragraph 21 of the Statement of Defence, the plaintiff denies that if the illustrations had depicted the 4 % guaranteed interest rate—inclusive of the Preferred Client Bonus—Shobrook nonetheless would have proceeded with the RBC Destiny Policy. The plaintiff also denies that the “RBC Destiny [P]olicy would still have been the best and preferred option to Shobrook.” To the contrary, the plaintiff would not have proceeded with the RBC Destiny Policy and would have invested its premiums into an alternate investment that could have yielded greater or equal to those projected by the defendants.

27. In fact, the plaintiff did make other investments at or around the same time that it purchased the RBC Destiny Policy, and those investments did earn greater returns than those promised by the defendants in respect of the RBC Destiny Policy. As such, the defendants’ allegation at paragraph 23 of the Statement of Defence, that ‘Shobrook was not considering investment options other than life insurance’, is patently false.

[98] The questions the Defendants asked when they conducted their discovery of Shobrook’s representative in 2016 also supports the conclusion that the Defendants understood that the damages being claimed were not limited to alternate insurance products, which Shobrook would have purchased but for the alleged misrepresentations.

[99] Shobrook’s representative was asked to identify all of the investments Shobrook made from 2003 to 2012 and to produce documents from which the Defendants would be able to determine the returns on those different investments. When asked whether he would have looked to invest in other life insurance products he said Shobrook would not. When he was asked what other products he would have looked at which would have yielded a higher return, he specifically referred to the hedge fund Polar Capital as a fund that Shobrook invested in at the time, and which yielded a much higher rate of return. Indeed, as part of its productions, Shobrook produced a document entitled “Return of Investment Analysis for Shobrook Investment and [Polar Capital]” and was asked questions about it. This is the alternate investment upon which Shobrook says it is basing its amendment to seek damages in the amount of $8.7 million and which the Defendant says takes them by surprise.

[100] Finally, in 2018 Shobrook provided an answer to undertaking which included particulars on damages sought and the basis for same. The answer provided was based upon the difference between the value of the RBC Destiny Policy on redemption, compared to the expected TSX returns of investment accounts. This calculation clearly bases damages on Shobrook investing its premiums in other non-life insurance products, even if the quantum is much lower than the sought amendment.

[101] In my view, the Defendants understood throughout that Shobrook’s claim included alleged negligence or negligent misrepresentation with respect to investment advice provided which resulted in the purchase of the RBC Destiny Policy, as well as damages based upon alternate investments that Shobrook would have made but for the misrepresentation – not merely based upon comparable insurance products it might have purchased.

[102] Notably, the parties in this case pleaded their cases before Livent and Maple Leaf Foods provided a nuance to the way in which proximity should be analyzed. What has happened is that these cases have given the Defendants a legal argument which they may not have had or appreciated before; but that does not mean they did not understand the nature of Shobrook’s case against them.

[103] Additionally, Shobrook takes issue with the Defendants’ interpretation and application of the principles set out in Livent and Maple Leaf. I agree that the facts of these cases are quite different from the facts before me; the damages claimed in Livent and Maple Leaf were quite unrelated to the nature of the work that the defendants in those cases undertook to perform and/or the representations which they made.

[104] It may be that the Defendants are correct in their interpretation and application of Livent and Maple Leaf with respect to Shobrook’s claims of negligence and negligent misrepresentation and that they will succeed at trial in establishing that the Defendants only made a more limited undertaking to provide advice and information with respect to insurance policies only, such that any losses caused by reliance which exceeded that undertaking cannot be recovered. But that issue is for another day.

[105] I add that in any event, the Defendants failed to provide any evidence, argument or caselaw as to why Shobrook’s claim for breach of fiduciary duty could not sustain a damage claim in the amount of $8.7 million.

[106] The Defendants made a general argument that the increase in damages claimed results in the need to obtain records from other financial institutions and advisors, to consider obtaining separate representation for the Defendants or to potentially issue new third party claims, which is now not possible because of the passage of time. These claims were not particularized in any way. In my view, these kinds of bald statements without any explanation cannot be sufficient to establish prejudice. See again the Court’s comments in State Farm, at para. 32. I add that there was no evidence or argument that Polar Capital’s records of earnings are not available anymore and no argument or evidence as to why any fact witnesses would even be required to address Polar Capital’s past earnings, which logic suggests would be based upon records, not witness memory.

[107] The Defendants also argue that they are prejudiced because one of the Third Parties, John Bowden, now has moderately severe cognitive impairment and will not be able to participate any further in court proceedings.

[108] They have produced an email from Mr. Bowden’s counsel dated January 3, 2023 in response to the Defendants counsel’s request for a rule 36 examination of Mr. Bowden. Counsel advised “[u]nfortunately, Mr. Bowden’s health has declined such that he is no longer in a position to provide evidence under oath” and attached a medical note from his physician to that effect, which also indicates that Mr. Bowden is 92 years old and living at a retirement facility.

[109] In my view, the bald statement that Mr. Bowden’s current health now prejudices them with respect to the amended damages quantum is not sufficient to establish actual prejudice.

[110] The Third Party Claim asserts that Mr. Bowden was involved as an additional advisor when Shobrook purchased the RBC Destiny Policy. The Defendants seek contribution and indemnity from him.

[111] The Third Party Claim already pleads broadly as to all the things that Mr. Bowden allegedly did wrong and why he is liable to indemnify the Defendants if Shobrook is successful. These include his alleged provision of advice to Shobrook in 2003 and 2004 with respect to the RBC Destiny Policy, his receipt of commissions, his receipt of information regarding the RBC Destiny Policy, his review of the RBC Destiny Policy, his review of the Oakwood Report, his ongoing receipt of annual projections from RBC Insurance, his advice in 2008 to a representative of Shobrook that there were discrepancies that needed to be cleared up, his failure to adequately and properly review all information available to him, his providing inadequate advice and his failure to follow up with RBC Insurance.

[112] The Defendants provided no evidence or even argument as to what additional issues arise with respect to their Third Party Claim or Mr. Bowden by virtue of the increased damage amount, why any discovery evidence or previous investigations they have made with respect to the Third Parties is now inadequate, or what additional information or evidence they would now require from Mr. Bowden because of the increase in damages claimed.

[113] They have not even indicated whether they ever conducted an examination for discovery of Mr. Bowden before or whether he had ever been capable of providing such evidence when this matter was commenced in 2015. If they have conducted discovery of him, they may seek leave to introduce the transcript of his discovery at trial pursuant to r. 31.11(6). If they have not conducted any discovery of him, they can hardly complain that Shobrook is responsible for the fact that his evidence is no longer available merely because it is seeking to amend its claim to increase the damages, particularly when they do not explain how the increased claim changes the nature of their Third Party Claim.

[114] It is telling that the Third Parties attended and took no position on this motion.

[115] Whether the Claim is amended or not, Mr. Bowden will not likely be able to participate any further in this proceeding. Any prejudice here arises from Mr. Bowden’s illness, not from the amendment sought.

[116] The Defendants have not established the requisite link between the argued prejudice and the sought after amendment as required by Iroquois Falls Power Corp v. Jacobs, 2009 ONCA 517.

Q. Is there presumed prejudice which cannot be compensated for by virtue of delay?

[117] First, the Defendants argued that prejudice is presumed whenever proposed amendments assert new causes of action after expiry of a limitation period: Polla, at paras. 33-35.

[118] In this case, no new cause of action arises from the proposed amendment; the Defendants provided no authority for the proposition that an increased claim for damages in respect of a cause of action and facts already pleaded could be statute barred.

[119] The Defendants also argued that prejudice must be presumed because of the “inordinate delay”: see State Farm.

[120] It relies upon the following facts: the RBC Destiny Policy was purchased in or around 2003. Shobrook says that it discovered the misrepresentation in or around 2014, and the action was not commenced until 2015, and it is now 8 years after the Claim was commenced.

[121] In my view, the delay herein is not inordinate when considering the nature of the amendment sought, which only involves an increase to the damages claimed. The amendment sought does not change any of the causes of action, the investigations which would or should have been made based upon the case pleaded in the Statement of Claim, or the complexity of the case. I add that Shobrook began its attempt to amend its claim to plead greater damages four years after it commenced the claim, in 2019 (although admittedly not as high as the amendment now sought). This motion was derailed in part by the parties’ attempt at mediation, then by the Defendants’ request for an adjournment when it was brought on in early 2020, then by COVID-19 which caused some delays within the courts, and by the discovery Shobrook made with respect to Mr. Goulet and Access Health which required further steps. I add that there is not yet any trial date scheduled.

[122] If I am wrong and the delay has been inordinate, such that prejudice is presumed, then I am satisfied that Shobrook has rebutted that presumption.

[123] To explain, it is important to consider the underlying facts in some of the cases brought to my attention on this issue.

[124] In State Farm the defendant insurer sought to amend its defence to plead that the plaintiff insured had started a fire upon which she sought coverage, and that amendment was sought nine years after the Claim had been commenced. The Court in this case referenced the seminal decision in Re Family Delicatessen v. London, 2006 ONCA 5135 which established the concept of presumed prejudice based upon “inordinate delay”. It indicated that after an “inordinate delay”, the presumption in favour of granting leave shifts to a presumption that non-compensable prejudice will result if leave is given. It gave the following rationale: At some point it would be very difficult for a responding party to prove, for example, the generalized prejudice that witness’ memories will be diminished after a lengthy passage of time. It also confirmed that there is no hard and fast rule as to what length of time will constitute an inordinate delay or the type of evidence which will rebut the presumption.

[125] On the facts before it, the Court in State Farm indicated that the insurer had failed to rebut the presumption of prejudice. While the Court did not specifically say so, the presumed prejudice caused by the delay was clearly causally related to the amendment which sought to raise significant substantive issues never pleaded before. The passage of time would clearly affect the insured’s ability to obtain the necessary evidence and the Court specifically noted that the insurer lead no evidence that through its own investigation it had retained key pieces of evidence or taken the relevant witness statements “before the passage of time is presumed to have caused evidence to disappear and memories to fade”. The Court, at para. 46, suggested that such evidence would have been one way to rebut the presumption.

[126] It is also important to understand the facts of Family Delicatessen. The Claim was commenced in 1988 and the City of Toronto was named as a nominal defendant so it would be bound by any judgment made against the true defendant. The motion to amend did not occur until sometime in 2004, some 16 year later. By that time the City had participated on the basis that it was a nominal defendant, and it took a cooperative stance with other parties. Had there been allegations of serious misrepresentation against it at the outset, it might have taken an entirely different litigation stance and what it had done in the litigation could not be undone. The Court agreed that presumed prejudice flowed “from the dramatic change in the course of this litigation” and was “satisfied that the City could not be put in the position it would have been to meet these allegations had they been made in a timely manner.” Therefore, the Court was satisfied that the presumed prejudice caused by the delay was clearly linked to the amendment sought.

[127] Shobrook has rebutted any presumed prejudice. It has demonstrated that the original Statement of Claim alerted the Defendants to all the same substantive issues and that the amendment seeking an increase in damages is an increase in quantum only, not an increase in kind.

[128] As set out above, in addition to Shobrook’s pleadings which alerted the Defendants to its claim for damages based upon “investment” advice it received and “alternate investments” it would have purchased but for the misrepresentation, Shobrook also provided evidence that during the 2016 discovery the Defendants asked questions about alternate investments that Shobrook would have made but for the alleged misrepresentations, that Shobrook’s witness specifically discussed the investments it had made in the Polar Capital hedge fund and that it had provided an analysis of the Polar Capital hedge fund’s returns as part of its productions. There is no reason to suppose that an increase in the quantum of damages claimed would have changed the Defendants’ investigations or inquiries, or that it would have resulted in different discovery questions being asked had the damages claimed been greater. Shobrook already produced an analysis of its Polar Capital returns. It is unclear how witness testimony would impact evidence with respect to Polar Capital earnings over the years.

[129] The recent case, Horani, cited above, does not assist the Defendants. In that case, the motions judge refused the appellant’s request for leave to bring a motion to add the claim for punitive damages, but granted leave to increase the quantum of compensatory damages. The Court of Appeal upheld the motion judge’s decision to refuse the amendment to add a claim for punitive damages agreeing that the presumed prejudice was causally connected to the proposed amendment and not compensable in cost because “the proposed amendment depended on new facts and arguments not pleaded, would affect how the respondent conducted its litigation, and would likely jeopardize the 32 day jury trial scheduled to begin on February 13, 2023 which has already been significantly delayed”: Horani, at para. 35. These are not the facts that I have found. There is no trial scheduled, there has not even been a pre-trial yet nor any pretrial conference materials where the parties have certified that the pleadings are ready.

[130] Lauwers J.’s (as he then was) decision in Davies v. Clarington, 2010 ONSC 418 is the most relevant authority presented to me in respect of the proposed amendment to increase the quantum of damages.

[131] Lauwers J. canvassed the extensive caselaw where motions to amend claims to increase damages were granted at all stages of an action, even after trial. That case involved a request by a class member to increase the damage claim from $10 million to $50 million after the case had been settled in respect of all other class members after 11 weeks of trial. The defendants had entered into an agreement apportioning liability as well as costs and argued they would never have entered into such agreement had they understood the extent of their individual exposure pursuant to the amendment now sought.

[132] At paras. 98-99 Lauwers J. referenced the Court of Appeal decision in Beals v. Saldanha (2001), 54 O.R. (3d) 641 (C.A):

Specific pleading rules cannot be confused with the rules of natural justice, and a particular pleading rule cannot be viewed in isolation. While rule 25.06(9) requires that damage claims specify “the amount claimed for each claimant in respect of each claim”, the wide powers of amendment found in rule 26.01 demonstrate that the failure to comply with rule 25.06(9) does not mean that a defendant has been denied the opportunity to know the extent of its jeopardy or the case it has to meet. Under rule 26.01, a court can refuse to make amendments, including amendments increasing the amount of the damages claimed, only where the defendant can demonstrate on the balance of probabilities that the amendment would cause prejudice that could not be compensated for by costs or adjournment. The mere fact that an amendment substantially increases the quantum of the plaintiff’s damages claim and therefore the defendant’s potential liability is not a basis upon which to deny the amendment. The amending power in rule 26.01 has been invoked to substantially increase the quantum of damages claimed after judgment is granted, and even on appeal: see Hill v. Church of Scientology of Toronto (1992), 7 O.R. (3d) 489 at 496 (Ont. Gen. Div.), aff’d. without reference to this point (1994), 114 D.L.R. (4th) 1 (Ont. C.A.), aff’d. without reference to this point (1995), 126 D.L.R. (4th) 129 (S.C.C.).

The approach dictated by rule 26.01 to motions that seek to amend pleadings to substantially increase the damages claimed no matter when in the proceeding that motion is brought, is inconsistent with the argument that knowledge of the amount claimed by the plaintiff at the time the defendant is called upon to reply to the statement of claim is essential to the defendant’s ability to know the extent of its jeopardy and to make an informed decision as to how to respond to the claim. If knowledge of the amount claimed was essential to the defendant’s ability to effectively respond to the claim, motions to significantly increase the amount of the claim as late as the appellate stage would be rejected out of hand. Rule 26.01 takes the opposite approach. It requires the court to make those amendments unless the defendant can show prejudice that cannot be cured by costs or an adjournment.

[133] In my view, there is no causal link between the amendment and any prejudice presumed by the delay; as such, Shobrook has rebutted any presumed prejudice which is not compensable in costs or an adjournment.

[134] With respect to the amendments in paragraphs 66 to 68, the Defendants argued that the amendments sought now claim damages above the insurance limits; had they known this was the case, they would have made different decisions about how the claim would have been defended, including potentially raising third party claims against others. Again, without any particulars, this argument must fail.

[135] In any event, these amendments have the opposite effect to that claimed: they limit the claim to insurance limits with respect to Goulet or the Third Party. There is no evidence as to any insurance policy held by Ma or Access Health, and so the Defendant’s position on this basis must fail with respect to Ma and Access Health. I note that Access Health is now defunct and has only been revived for the purposes of this proceeding. Therefore, it has no assets in any event.

[136] To the extent that the claim of disgorgement is not caught by the amendments limiting the claim to policy limits, Shobrook is prepared to amend the Claim further to clarify this and has provided a further Amended Claim in this regard. However, in my view the proposed amendments are clear, and no further amendment is necessary.

R. Conclusion

[137] Overall, despite the extremely complex arguments advanced by the Defendants, the amendment motion is simply a motion to limit the claim to insurance limits while increasing the damages sought; it does not change the substance of Shobrook’s claim in any material way. Master Sugunasiri’s Order does not require this motion to be brought to the trial judge; nor would it be in the interests of justice to await trial for this motion to be brought and determined.

[138] The Defendants have not established that the amendments sought are not tenable, nor have they established that actual prejudice would be caused by the proposed amendments. Furthermore, there is no requisite link between the amendment sought and the claimed or presumed prejudice because the proposed amendments do not change the nature of the case to which the Defendants have responded, only the quantum of damages to which they are exposed: State Farm, at para. 25; Iroquois Falls, at para. 20; Clarington, at para. 50.

[139] I am satisfied that Shobrook should be given leave to amend its pleading in accordance with the amendments set out in the proposed Amended Statement of Claim attached to the Notice of Motion. I am satisfied that there is no prejudice which cannot be compensated for by costs or an adjournment. Indeed, no adjournment is even required because no trial date has been scheduled.

[140] As part of this Order, I am granting the Defendants leave to conduct further discovery of Shobrook with respect to its increased damage claim, which is something that Shobrook has already proposed and consented to. I will accept submissions on how long this discovery should be together with the cost submissions which I request in accordance with the following timetable: Shobrook within seven days with the Defendant’s response within seven days thereafter.

Papageorgiou J. Released: February 23, 2023

Footnotes

[1] Note that Shobrook also pleads that the business of Access Health was carried on by and was known as Oakwood Associates Advisory Group Ltd. (“Oakwood”).

[2] Holterman v. Fish, 2017 ONCA 769, [2018] 3 C.T.C. 55 involved a consent discontinuance of an action by the plaintiff after four days of evidence at trial after the trial judge alerted the plaintiff to potentially insurmountable obstacles in connection with their claim for misfeasance in public office. The plaintiff sought to set aside the consent discontinuance on the basis of new evidence. The judge refused to set it aside because of his view that the new evidence would not assist the plaintiff. The Court of Appeal noted that an important aspect of a discontinuance on consent is that the parties, after considering their positions, made a joint decision to end the litigation. The Court applied the test in 761122 Ontario Ltd. v. Sagaz Industries Canada Inc, 2001 SCC 59, [2001] 2 S.C.R. 98, which involved a moving party’s motion to reopen a trial where the Supreme Court cautioned that decisions to reopen trials should be exercised “sparingly and with the greatest care”. Such cases also involved consideration of finality and the Court held that the moving party must demonstrate exceptional circumstances in this case. 2479240 Ontario Inc. v. CS Capital Ltd., 2021 ONSC 8421, was a motion to vary an order on consent whereby the motions judge dismissed the plaintiff’s motion to set aside the Registrar’s dismissal Order. The plaintiff sought to vary the order to permit it to continue its claim against certain defendants. The Court referenced caselaw on the high standard to be applied to set aside a consent judgment. Holterman and 2479249 Ontario Ltd involved situations where a party sought to set aside a consent order which ended the entire litigation. These are not the facts here as the only issue is the timing of the amendment motion. Logan v. Harper (2004), 72 O.R. (3d) 706, involved a motion to vary a consent confidentiality order which was intended to allow productions to be shared amongst parties in 37 actions with limits placed on retention and dissemination of these documents. The Order in question permitted variance and the Court indeed ordered it to be varied in part. No reference to r. 59 was even made in the decision.

[3] The words “at any stage of an action [or proceeding]” are also used in r. 11.01: mandatory stays of proceeding where a parties interest is transferred by assignment, bankruptcy, death or other means, and r. 57.01(4) which specifically permits the Court to award a percentage of costs from a particular stage of a proceeding.

[4] In Fletcher, the insured was injured in a car accident and the insurance proceeds were insufficient to cover the insured’s injuries. In Fine Flowers, a horticultural business was damaged because of the breakdown of the heating system and the insurance purchased did not cover this kind of loss.