Court of Appeal for Ontario
Date: May 17, 2019
Docket: C65963
Judges: van Rensburg, Benotto and Harvison Young JJ.A.
Between
Henry Klassen Plaintiff (Appellant)
and
Robert Beausoleil and 1117726 Ontario Inc. o/a Robert's Boxed Meats Defendants (Respondents)
Counsel
Rohit Kumar, for the appellant
J. Sebastian Winny, for the respondents
Heard
March 14, 2019
On Appeal
On appeal from the order of Justice David A. Broad of the Superior Court of Justice, dated September 6, 2018, with reasons reported at 2018 ONSC 5237.
Judgment
Harvison Young J.A.:
[1] Introduction
[1] This is an appeal from an order denying the appellant leave to amend his Statement of Claim pursuant to r. 26.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The central issue is whether the appellant's proposed amendments to his Statement of Claim constitute a new cause of action that is statute-barred or whether the amendments seek alternate relief based on material facts that already form part of the claim. For the reasons that follow, I conclude that the proposed amendments do not constitute a new cause of action, and that the appeal should be allowed.
The Background Facts
[2] The appellant Henry Klassen was a 33% shareholder (holding 100 shares) of the respondent corporation. In 1996, he agreed to sell his shares pursuant to a Share Purchase Agreement (the "1996 SPA") in exchange for: a) the repayment of certain back wages owing in the amount of approximately $25,000; and b) amounts owed pursuant to a promissory note in the amount of approximately $20,000.
[3] The 1996 SPA provided that the appellant's shares would be held in escrow pursuant to an Escrow Agreement (the "1996 Escrow Agreement") pending repayment of the back wages and the amounts owing under the promissory note. Upon satisfaction of these escrow release conditions, the purchasers would be entitled to seek the release of the shares and would gain legal title to the shares.
[4] The respondent Robert Beausoleil is the ultimate purchaser of the shares sold by Mr. Klassen in 1996, having purchased all of the outstanding shares of the company in 1997. The Share Purchase Agreement entered into at that time (the "1997 SPA") provided that Mr. Beausoleil, in purchasing the shares, also assumed responsibility for payment of the back wages and amounts owing on the promissory note. The appellant's 100 shares would continue to be held in escrow pending satisfaction of the escrow release conditions. To this end the appellant, Mr. Beausoleil and the two other shareholders executed an Amended Escrow Agreement (the "1997 Escrow Agreement"), which, in effect, continued the terms of the 1996 Escrow Agreement.
[5] What happened over the next 18 years is very much in issue between the parties. The heart of the appellant's claim is that, shortly after Mr. Beausoleil purchased the shares in the corporation in 1997, they entered into an oral agreement under which he and Mr. Beausoleil would each become 50% co-equal shareholders in the corporation. The appellant also alleges that, for various reasons, Mr. Beausoleil and the corporation did not pay the back wages owing or the amounts owed under the promissory note.
[6] The dispute allegedly came to a head in late 2014, when Mr. Beausoleil denied that the appellant was a shareholder of the corporation. For his part, Mr. Beausoleil maintains that he has been the sole shareholder, director and officer of the corporation since purchasing all outstanding shares in 1997.
[7] In 2015, the appellant commenced this action against the corporation and Mr. Beausoleil, as the ultimate purchaser of his shares, for breach of contract, breach of trust, unjust enrichment and seeking relief under s. 248 of the Business Corporations Act, R.S.O., c. B.16 for the respondents' allegedly oppressive conduct.
[8] In August 2017, the respondents brought a motion for summary judgment, seeking the dismissal of the appellant's action in its entirety or, in the alternative, dismissing the appellant's claim to a 50% ownership interest, claim for amounts owing on the promissory note, and claim for back wages. One of the core arguments raised by the respondents was that the appellant's various claims were time-barred. The appellant responded, seeking the dismissal of the respondents' summary judgment motion or, in the alternative, judgment in his favor.
[9] The motion judge, Sloan J., granted summary judgment to the respondents on the promissory note, based on the respondents' payment of the amount owing. He determined that the appellant did not have any further claim for interest owing on the promissory note. The motion judge also dismissed the appellant's claims in relation to certain other debts.
[10] However, the motion judge declined to grant summary judgment on the appellant's claims relating to the back wages and oral agreement for a 50% ownership interest in the corporation. It is clear from the motion judge's endorsement that he viewed the respondents' limitation defence to both claims as a live issue for trial. In particular, he found that since both claims and limitations defences turned on issues of credibility (and the alleged existence of numerous oral agreements), it was necessary to direct the claims to proceed to trial.
[11] In the course of the summary judgment motion, counsel for the appellant argued that the appellant remained a 33% shareholder by virtue of the respondents' failure to satisfy the escrow conditions. Counsel for the respondents objected on the basis that this theory was not pled in the appellant's Statement of Claim. The motion judge did not deal with this issue in his endorsement. Counsel for the appellant advised at the hearing of the appeal that this exchange between counsel at the summary judgment hearing was an important impetus for the subsequent r. 26.01 motion.
[12] Significantly, for the purpose of this appeal, the appellant's 100 shares remain in escrow. In October 2017, following the summary judgment motion, the appellant's counsel wrote to the escrow agent requesting the return of the appellant's shares, on the basis that the escrow release conditions under the 1996 Escrow Agreement and 1997 Escrow Agreement had not been satisfied. The respondents' counsel objected. The escrow agent refused to release the shares in light of the ongoing litigation between the parties.
[13] In January 2018, the appellant brought a motion (now the subject of this appeal) pursuant to r. 26.01 of the Rules for leave to amend his Statement of Claim. In particular, the appellant sought to amend his Statement of Claim to plead, in the alternative to his request for a declaration of a 50% ownership interest in the corporation, a request for a declaration that he had a 33% ownership interest in the corporation. This requested alternative relief is premised on the theory that the escrow release conditions in the 1996 Escrow Agreement and 1997 Escrow Agreement remain unsatisfied and the appellant's shares remain in escrow. If the appellant's shares remain in escrow, and he is entitled to seek their return, he remains a 33% shareholder in the corporation (assuming the corporation has not issued any additional shares). The appellant also sought to make certain other minor amendments to his Statement of Claim, which are not at issue in this appeal.
The Motion Judge's Decision
[14] The motion judge granted leave to the appellant to make most of the amendments sought, but refused to grant leave for the appellant to assert the alternative claim for a 33% ownership interest in the corporation. In this vein, he rejected the appellant's submission that the claim for a 33% legal ownership interest (based on the 1996 SPA, 1996 Escrow Agreement, 1997 SPA, and 1997 Escrow Agreement) was merely a claim for alternative relief, or the assertion of a different legal conclusion, based on no new facts and not going beyond the factual matrix of the original claims. The motion judge stated that the appellant had conceded that, if the alternative claim to a 33% ownership interest was the assertion of a new cause of action, it was statute-barred by the expiration of the relevant limitation period. As a result, he refused to allow the amendments relating to that claim.
[15] In the motion judge's view, the appellant's claim to a 50% ownership interest in the corporation rested squarely on the alleged oral agreement between the appellant and the respondents. The factual basis for this was a series of alleged representations made by the respondents: see paras. 16-19. Thus, as currently constituted, the appellant's claim to an ownership interest in the corporation was not premised on the 1997 SPA or any other written document: at para. 19.
[16] The motion judge was also of the view that the sole cause of action relating to the assertion of an ownership interest in the corporation was the claim for breach of the oral agreement: at para. 20. By contrast, the claim to a 33% ownership interest in the corporation was based upon an entirely different set of written agreements, such that the amendment did not consist of an alternative claim for relief, or a statement of a different legal conclusion based on no new facts, and went far beyond the factual matrix from which the original claim to ownership arose: at para. 21. While the 1996 SPA, 1996 Escrow Agreement and 1997 SPA were referred to in the Statement of Claim in order to provide "background" facts preceding the oral agreement, those written agreements did not provide any "necessary support" for the claim to a 50% ownership interest: at para. 22.
[17] As a result, the motion judge denied the appellant leave to amend his Statement of Claim to assert the alternative claim to a 33% ownership interest. However, the motion judge, with only limited analysis, allowed the appellant to make the balance of the amendments sought on the motion. This included an amendment to plead that the "conditions precedent for the transfer of the Klassen Escrow Shares have not been satisfied […and as] a result, Beausoleil has not acquired, and the Plaintiff is entitled to a return of, the Klassen Escrow Shares."
The Arguments on Appeal
[18] The appellant raises three core arguments on appeal. First, he argues that the trial judge erred in concluding that the alternative pleading of a 33% ownership interest was a new cause of action, rather than a claim for alternative relief or a different legal conclusion drawn from the same set of facts. He submits that the claim to a 33% ownership interest is a legal conclusion which flows from the respondents' failure to satisfy the applicable release escrow conditions. He argues that the Statement of Claim clearly pled that the escrow release conditions (payment of the back wages and amounts owed on the promissory note) had not been satisfied.
[19] Similarly, the appellant argues that the motion judge erred in requiring the alternative pleading of a 33% ownership interest to be grounded in the purported oral agreement, rather than in the broader factual matrix, in order to be a non-statute-barred amendment. Further, an amendment allowed by the motion judge – namely, permitting the appellant to seek the return of his shares in escrow – is inconsistent with his order denying leave to assert a claim to a 33% ownership interest.
[20] Second, the appellant argues that the motion judge erred in attributing to the appellant an admission that the applicable limitation periods had expired, such that the amendment would only be permissible if it was a claim for alternative relief based on an existing cause of action. The appellant argues that the applicable limitation period did not begin to run until October 2017, when the appellant's request that his shares be released from escrow was refused.
[21] Third, the appellant asserts that the respondents would not suffer any presumed or actual non-compensable prejudice – apart from the alleged expiry of a limitation period – as a consequence of the amendment. As a result, the amendment must be allowed pursuant to r. 26.01 of the Rules.
[22] In response, the respondents argue that to allow the appellant leave to plead the alternative claim to a 33% ownership interest would fundamentally change the nature of the litigation, some 22 years after the relevant events in question. They argue, in substance, that the underlying claim to a 33% ownership interest and request for the return of the appellant's shares currently held in escrow is incurably time-barred. In this vein, they argue that the appellant discovered his claim for breach of the 1996 SPA, 1996 Escrow Agreement and 1997 SPA when the corporation defaulted on payment in 1997. Thus, any claim in relation to the breach of those agreements is statute-barred by the expiration of the six-year limitation period provided by s. 45(1)(g) of the Limitations Act, R.S.O. 1990, c. L. 15 or alternatively by the transitional provisions under the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B.
[23] The respondents also argue that there has been extraordinary delay in seeking the amendments, such that a presumption of non-compensable prejudice arises. They point to the some 22 years that have elapsed since default in payment under the 1996 SPA, 1996 Escrow Agreement and 1997 SPA as evincing extraordinary delay. In any event, the respondents argue that they will suffer actual non-compensable prejudice as a consequence of the amendments because, among other things, they made a unilateral payment to the appellant on the promissory note in 2016 and because a material witness has died.
Analysis
(1) The Test to be Applied
[24] I begin with the text of r. 26.01 of the Rules. It provides:
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. [Emphasis added.]
[25] The rule is framed in mandatory terms: the court must allow the amendment, unless the responding party would suffer non-compensable prejudice, the proposed pleading is scandalous, frivolous or vexatious, or the proposed pleading fails to disclose a reasonable cause of action: 158844 Ontario Ltd v. State Farm Fire and Casualty Co., 2017 ONCA 42, 135 O.R. (3d) 681, at para. 25; Iroquois Falls Power Corp. v. Jacobs Canada Inc., 2009 ONCA 517, 264 O.A.C. 220, at paras. 15-16.
[26] The expiry of a limitation period is one form of non-compensable prejudice. A party cannot circumvent the operation of a limitation period by amending their pleadings to add additional claims after the expiry of the relevant limitation period: Frohlick v. Pinkerton Canada Ltd, 2008 ONCA 3, 88 O.R. (3d) 401, at para. 24; 1100997 Ontario Ltd. v. North Elgin Centre Inc., 2016 ONCA 848, 409 D.L.R. (4th) 382, at paras. 21-23; United Food and Commercial Workers Canada, Local 175 Region 6 v. Quality Meat Packers Holdings Limited, 2018 ONCA 671, at paras. 64; Davis v. East Side Mario's Barrie, 2018 ONCA 410, at paras. 31-32. In this regard, the "addition of new statute-barred claims by way of an amendment is conceptually no different than issuing a new and separate Statement of Claim that advances a statute-barred claim" (emphasis added): Quality Meat Packers, at para. 64; citing Frohlick, at para. 24.
[27] An amendment will be statute-barred if it seeks to assert a "new cause of action" after the expiry of the applicable limitation period: North Elgin, at paras. 19-23, 33; Quality Meat Packers, at para. 65. In this regard, the case law discloses a "factually oriented" approach to the concept of a "cause of action" – namely, "a factual situation the existence of which entitles one person to obtain from the court a remedy against another person": North Elgin, at para. 19; Quality Meat Packers, at para. 65.
[28] An amendment does not assert a new cause of action – and therefore is not impermissibly statute-barred – if the "original pleading … contains all the facts necessary to support the amendments … [such that] the amendments simply claim additional forms of relief, or clarify the relief sought, based on the same facts as originally pleaded": Dee Ferraro, at paras. 4, 13-14; North Elgin Centre Inc., at paras. 20-21; East Side Mario's Barrie, at paras. 31-32; Quality Meat Packers, at para. 65. Put somewhat differently, an amendment will be refused when it seeks to advance, after the expiry of a limitation period, a "fundamentally different claim" based on facts not originally pleaded: North Elgin, at para. 23.
[29] The relevant principle is summarized in Paul M. Perell & John W. Morden, The Law of Civil Procedure in Ontario, 3rd ed. (Toronto: LexisNexis, 2017), at p. 186:
A new cause of action is not asserted if the amendment pleads an alternative claim for relief out of the same facts previously pleaded and no new facts are relied upon, or amount simply to different legal conclusions drawn from the same set of facts, or simply provide particulars of an allegation already pled or additional facts upon [which] the original right of action is based.
[30] In the course of this exercise, it is important to bear in mind the general principle that, on this type of pleadings motion, it is necessary to read the original Statement of Claim generously and with some allowance for drafting deficiencies: Farmers Oil and Gas Inc. v. Ontario (Ministry of Natural Resources), 2016 ONSC 6359, 134 O.R. (3d) 390 (Div. Ct.), at para. 23.
[31] Finally, the court may refuse an amendment where it would cause non-compensable prejudice. The prejudice must flow from the amendment and not some other source: Iroquois Falls, at para. 20. At some point the delay in seeking an amendment will be so lengthy, and the justification so inadequate, that prejudice to the responding party is presumed. In this event, the onus to rebut the presumed prejudice lies with the moving party: State Farm, at para. 25.
[32] Alternatively, the responding party may resist the amendment by proving actual prejudice – i.e. by leading evidence that the responding party has lost an opportunity in the litigation that cannot be compensated by an adjournment or an award of costs as a consequence of the amendment. It is incumbent on the responding party to provide specific details of the alleged prejudice: State Farm, at para. 25.
[33] Irrespective of the form of prejudice alleged, there must be a causal connection between the non-compensable prejudice and the amendment. The prejudice must flow from the amendment and not from some other source: State Farm, at para. 25.
[34] Bearing in mind these principles, the framework to determine the issues raised by this appeal is as follows:
Are the proposed amendments to assert a claim to a 33% ownership interest the assertion of a "new cause of action"? If the proposed amendments are the assertion of a new cause of action, are the amendments statute-barred?
Irrespective of the above, is this a case where non-compensable prejudice will arise as a consequence of the amendments?
(2) The Proposed Amendments Do Not Assert a New Cause of Action
[35] The first issue is whether the proposed amendments to assert an alternative claim to a 33% ownership interest is the assertion of a "new cause of action" and statute-barred by the expiration of a limitation period. In my view, the proposed amendments do not assert a new cause of action.
[36] With respect, the motion judge erred in principle in his approach to the motion for leave to amend under r. 26.01 of the Rules. In suggesting that the 1996 SPA, 1996 Escrow Agreement and 1997 SPA were pled solely as "background" to the 50% ownership interest claim, the motion judge failed to appreciate that the appellant had explicitly asserted claims for breach of contract and breach of trust in relation to those agreements. Reading the appellant's Statement of Claim generously, the proposed amendments do not amount to the assertion of a new cause of action; rather, the alternative claim to a 33% ownership interest is an alternative claim for relief, or an alternative legal conclusion, flowing from the material facts as originally pled.
[37] I turn now to the content of the appellant's Statement of Claim and the material facts pled therein. Reading the Statement of Claim generously and as a whole, the essential factual matrix giving rise to the appellant's action is his decision to sell his shares in 1996, the respondents' failure to pay him for his shares, and the oral agreements allegedly made between the parties, including the oral agreement that he would become a 50% shareholder. As pled, these issues are all interwoven.
[38] While the allegation that the appellant is a 50% shareholder of the corporation has, for obvious reasons, been the predominant focus of the litigation to date, it is not the exclusive claim set out in the original Statement of Claim. The appellant has also expressly pled claims for breach of contract relating to the 1996 SPA, the 1996 Escrow Agreement and 1997 SPA, in addition to the purported breach of the oral agreement. Thus, the various written agreements referred to in the Statement of Claim not only provide the necessary material facts and background relating to the alleged breach of the oral agreement, but also the material facts necessary to ground a claim for breach of the written agreements themselves.
[39] In this vein, the appellant's original Statement of Claim expressly "pleads and relies" on the 1996 SPA and 1996 Escrow Agreement, and sets out the material terms in respect of both agreements (see Statement of Claim, at paras. 9-11). The Statement of Claim similarly expressly pleads and relies on the terms of the 1997 SPA, under which Mr. Beausoleil is said to have assumed the rights and obligations relating to the 1996 SPA and 1996 Escrow Agreement (see Statement of Claim, at paras. 15-16).
[40] The appellant then expressly pleads that the respondents have breached their obligations under the 1996 SPA, 1996 Escrow Agreement, 1997 SPA, and oral agreement, in that, among other things:
The respondents failed, neglected and/or refused to pay the back wages (Statement of Claim, at para. 29(b));
The respondents have failed, neglected and/or refused to pay back the promissory note (Statement of Claim, at para. 29(c));
The respondents have "sold, assigned, hypothecated, alienated, released from escrow or dealt with the Klassen Escrow Shares" (i.e. the appellant's 100 shares) in a manner contrary to the 1996 Escrow Agreement (Statement of Claim, at para. 29(d));
The respondents have failed, neglected and/or refused to pay the appellant for the "Klassen Escrow Shares" when it was due and payable, or at all (Statement of Claim, at para. 29(g));
The respondents have failed, neglected and/or refused to make good faith efforts to satisfy their obligations under the 1996 SPA, 1996 Escrow Agreement, 1997 SPA and/or the alleged oral agreement (Statement of Claim, at para. 29(j)); and
In the alternative, the appellant pleads that the foregoing breaches amounted to the frustration of the 1996 SPA, 1996 Escrow Agreement, 1997 SPA or alleged oral agreement (Statement of Claim, at para. 30).
[41] The appellant further pleads that the respondents are liable for breach of trust because the respondents "appropriated or converted all or part of the Klassen Escrow Shares to their own use or to a use inconsistent" with the 1996 Escrow Agreement and 1997 SPA: Statement of Claim, at para. 31.
[42] The claim for relief in the original Statement of Claim expressly requests damages in respect of the non-payment of the promissory note and back wages, as well as $2 million in general damages for breach of contract and/or breach of trust. This relief can only be claimed in respect of the alleged breaches of the 1996 SPA, 1996 Escrow Agreement and 1997 SPA.
[43] In light of these material facts expressly set out in the Statement of Claim, the appellant's requested amendments do not assert a new cause of action, but rather request alternative relief flowing from the respondents' alleged breach of the 1996 SPA, 1996 Escrow Agreement and 1997 SPA. In the appellant's original Statement of Claim, he expressly alleges that the respondents breached their contractual obligations by failing to satisfy the escrow release conditions – i.e. by paying the back wages and amounts owing under the promissory note – and sought damages in that regard. The proposed amendments do not seek to introduce any new material facts. Rather, the amendments seek to introduce, wherever a pleading of a 50% ownership interest is particularized, language to the effect of "or in the alternative a 33% ownership interest". In effect, the appellant seeks the return of his shares held in escrow and a declaration that he remains a 33% shareholder as a consequence of the respondents' breach of the 1996 SPA, 1996 Escrow Agreement and 1997 SPA, rather than an award of damages. This is a quintessential example of a request for "additional forms of relief, or [a clarification of] the relief sought, based on the same facts as originally pleaded": Dee Ferraro, at para. 4.
[44] I also agree with the appellant's submission that it is inconsistent for the motion judge to have granted leave to allow the appellant to plead an entitlement to the return of the shares in escrow, while denying the amendment to plead that he remains a 33% shareholder. These pleadings are fundamentally interrelated.
[45] During oral argument on the appeal, counsel for the respondent forcefully argued that the underlying claim to the return of the shares in escrow or claim to a 33% ownership interest, however framed, is incurably time-barred. In this vein, the respondents argue that the failure to make payment on the promissory note and back wages in 1997 triggered the start of the applicable limitation period, such that any claim for breach of the 1996 SPA, 1996 Escrow Agreement and 1997 SPA, and corresponding request for the return of the shares, is now statute-barred.
[46] Whatever the merits of the respondents' limitations arguments, it is only necessary to determine whether a limitation period has expired in respect of the proposed amendments if the amendments assert a new cause of action. I have concluded that the proposed amendments do not do so. For this reason, it is unnecessary to address the parties' various limitation arguments arising from the original pleadings at this stage. It is clear that whether any or all of the appellant's claims are time-barred will be a central issue at the eventual trial of this matter.
(3) The Amendments Would Not Cause Prejudice to the Respondents
[47] The next issue is whether the appellant's delay in seeking the amendment raises a presumption of non-compensable prejudice or whether the respondents have demonstrated actual, non-compensable prejudice. For the reasons that follow, I conclude that the delay in seeking leave to amend, in these circumstances, does not raise a presumption of prejudice and that the respondents have not established they would otherwise suffer actual, non-compensable prejudice as a result of the amendments.
(4) Presumed Prejudice
[48] The respondents argue that the appellant's delay in seeking the amendment raises a presumption of non-compensable prejudice. They focus on the fact that 22 years have elapsed between the events giving rise to the 33% ownership claim and the appellant seeking leave to amend his Statement of Claim.
[49] I disagree. The focus is properly on the period of delay between commencing the proceedings and seeking leave to amend, not the period between the underlying events in question and seeking leave to amend: State Farm, at para. 44. Here, the delay of approximately 2 years and 7 months between commencing the action (April 2015) and formally seeking leave to amend was short. Moreover, the appellant moved fairly promptly to amend his Statement of Claim following the summary judgment motion, when the respondents' counsel object to the appellant's position that the 33% ownership claim was sufficiently pled in the original Statement of Claim.
[50] Most significantly, as discussed earlier in these reasons, the amendment claims alternative relief based on the same material facts as were originally pleaded. It is integrally related to the existing claim. These circumstances cannot give rise to any presumed prejudice.
(5) Actual Prejudice
[51] The respondents also argue that they will suffer actual, non-compensable prejudice as a consequence of the amendments. They point to four sources of actual prejudice:
In January 2016, the corporation made what was described by the respondents as a "unilateral" payment of approximately $46,000 on the promissory note. The payment was also stated to be "without prejudice" to the appellant's other claims, and the respondents' defence of those other claims. The respondents argue that if the amendments are allowed, the appellant may take the position that this payment is an acknowledgment and has restarted the limitation period to reclaim his escrowed shares.
A material witness – Robert Detzler – has passed away. Mr. Detzler was briefly employed by the corporation. He was also involved in some negotiations over the course 1997-1998, along with Mr. Beausoleil and the appellant, with a view to combining the corporation with another meat supplier. The appellant argues that Mr. Detzler is a witness to anything that the appellant said about his ownership interest in the corporation during the period of 1997-1998. Mr. Detzler was examined by both parties in May 2017 before the summary judgment motion.
Relevant evidence from the corporation's business records and corporate files have been lost, as the corporation's practice is only to retain records for seven years.
The respondents have already examined the appellant for discovery and, as a consequence, did not have the opportunity to examine the appellant on the alternative claim to a 33% ownership interest.
[52] I do not agree that the respondents have established that the amendments will cause them actual, non-compensable prejudice.
[53] First, the payment on the promissory note in January 2016 was tendered on an unconditional basis and without prejudice to the appellant's other claims. On the strength of that payment, the respondents were able to obtain summary judgment on the appellant's claim for payment on the promissory note. The respondents made a strategic choice to make a payment on the promissory note, and cannot now point to that payment as establishing actual prejudice.
[54] Second, I do not agree that allowing the amendments will cause the respondents to suffer prejudice as a consequence of Mr. Detzler's death. Mr. Detzler was not a party to the 1996 SPA, 1996 Escrow Agreement or 1997 SPA, nor privy to the negotiations leading up to the execution of those agreements. It is upon these agreements that the appellant's alternative claim to a 33% ownership interest is premised. While the respondents argue that Mr. Detzler might be able to give evidence about anything the appellant said regarding his ownership interest in the corporation during 1997-1998, presumably this would have been fully canvassed when the parties examined Mr. Detzler prior to respondents' summary judgment motion because the appellant's ownership in the corporation was squarely in issue at that time.
[55] Third, the alleged prejudice resulting from the destruction or loss of the business records does not arise as a consequence of the amendments. The evidence is that certain corporate records were destroyed by the corporation's solicitor in the ordinary course prior to the commencement of the action in 2015. Mr. Beausoleil similarly deposes that he suspended his practice of destroying business records after 7 years when the action was commenced. The respondents do not suggest that any further records have been lost or destroyed since the action was commenced. Thus, the alleged prejudice does not flow from the amendments; it flows from the historic nature of the allegations as originally particularized in the Statement of Claim.
[56] Fourth, any prejudice resulting from the fact that the appellant has already been examined for discovery can be cured by allowing for additional examinations.
[57] As a result, I conclude that the respondents have not discharged their onus of proving actual, non-compensable prejudice.
Disposition
[58] For the foregoing reasons, the appeal is allowed. The appellant is granted leave to amend his Statement of Claim in accordance with the draft amended Statement of Claim filed on the motion below. The appellant is entitled to his costs of the appeal in the agreed upon amount of $10,000, inclusive of HST and disbursements, and the costs of the motion below in the agreed upon amount of $6,000, inclusive of HST and disbursements.
[59] In these circumstances, the respondents shall be entitled to deliver an amended statement of defence to address the amendments made by the appellant. The parties shall be entitled to conduct further examinations for discovery on matters arising out of the amendments. The costs of any such further examinations shall be determined by the ultimate trier, in the ordinary course.
Released: May 17, 2019
"MLB"
"A. Harvison Young J.A."
"I agree K. van Rensburg J.A."
"I agree M.L. Benotto J.A."
