COURT OF APPEAL FOR ONTARIO
DATE: 20230811 DOCKET: C70835
Fairburn A.C.J.O., Simmons and Zarnett JJ.A.
BETWEEN
Emma Shwaluk Plaintiff (Appellant)
and
HSBC Bank of Canada and Sun Life Assurance Company of Canada Defendants (Respondent)
Counsel: Eric O. Gionet and Sabrina A. Lucenti, for the appellant Helen D.K. Friedman and Michael Prosia, for the respondent
Heard: January 26, 2023
On appeal from the order of Regional Senior Justice Bonnie R. Warkentin of the Superior Court of Justice, dated May 30, 2022, with reasons reported at 2022 ONSC 3192.
Zarnett J.A.:
A. Introduction
[1] The appellant, Emma Shwaluk, appeals the dismissal of her motion for leave to amend her statement of claim in her action against the respondent, Sun Life Assurance Company of Canada (“Sun Life”), for payment of Long-Term Disability (“LTD”) benefits and damages for the failure to pay them.
[2] The motion judge denied leave on two bases: (a) the proposed amendments sought to withdraw an admission that Ms. Shwaluk had made in her reply that she had not filed an application for LTD benefits within the time the policy required; and (b) the proposed amendments sought to add a request for relief from forfeiture that was statute-barred.
[3] For the reasons that follow, I would allow the appeal.
[4] An admission may relate to a fact or to a legal consequence − a position − alleged to flow from the fact. In determining whether a proposed amendment withdraws an admission in a pleading, the nature and extent of the admission is a key consideration. Ms. Shwaluk made a factual admission in her reply; she did not concede the position that Sun Life alleged flowed from the admitted fact. Her proposed amendments did not withdraw the factual admission. With this recognized, Ms. Shwaluk’s inclusion of additional assertions in the proposed amended pleadings are properly understood as particulars to further support and maintain her opposition to Sun Life’s position.
[5] In addition, the request for relief from forfeiture did not, in these circumstances, constitute the introduction of a new claim that was barred by the expiry of a limitation period.
B. The Action and the Original Pleadings
[6] In October 2016, Ms. Shwaluk commenced an action against her employer, HSBC Bank of Canada (“HSBC”) and the respondent Sun Life. She alleged that in March 2015 she became unable to perform her employment duties due to disabilities that stemmed from injuries sustained in a motor vehicle accident. The action claims payment of Short-Term Disability (“STD”) benefits and LTD benefits − the STD benefits under a plan provided by HSBC for its employees that was administered by Sun Life, and the LTD benefits under a group insurance policy that Sun Life had issued for HSBC employees.
[7] In her original statement of claim, Ms. Shwaluk alleged that both HSBC and Sun Life intentionally failed to pay the STD and LTD benefits, although obligated to do so, and that there was no legitimate reason for this “in light of the facts known to [HSBC and Sun Life]” and “information and documentary evidence available to them”.
[8] In June 2017, Sun Life filed a defence. It denied that it had any liability for STD benefits as those were solely the responsibility of HSBC, although they were “administered and adjudicated” by Sun Life. It admitted that it issued a group policy that provided for LTD benefits, but denied that Ms. Shwaluk was disabled to the extent required for payment of LTD benefits. And it relied, among other things, on the non-performance of a policy condition for LTD benefit claims. It alleged that under the group policy “Sun Life must receive a proof of a claim no later than 90 days after the end of the elimination period”, that a proof of claim was required by December 29, 2015, and that Ms. Shwaluk “has not submitted an application for LTD benefits to Sun Life, and the time for doing so has expired”.
[9] In September 2017, Ms. Shwaluk settled her claim against HSBC, leaving only the claims against Sun Life for LTD benefits outstanding. Later that month, she delivered a reply to Sun Life’s defence which began by stating that none of the allegations in the statement of defence were admitted. It went on to allege that Ms. Shwaluk did not receive a copy of the policy from Sun Life, despite requests, and was unaware of the timing requirements in it. It specifically alleged that Ms. Shwaluk “did not submit an application for LTD benefits to Sun Life, pending resolution of her STD benefits with her employer”.
[10] On May 9, 2019, the action was set down for trial. A pre-trial conference was conducted on November 19, 2020, at which potential amendments to pleadings were discussed. [^1]
(1) The Amendment Motion
[11] In February 2022, Ms. Shwaluk moved to amend her pleadings.
[12] The proposed amendments sought to add a request for relief from forfeiture in the following terms: “If the Plaintiff is found to have imperfectly complied with the terms of the Policies referred to below, the plaintiff seeks relief from forfeiture pursuant to the Insurance Act, R.S.O. 1990, c. I.8 and the Courts of Justice Act, R.S.O. 1990, c. C.43, s. 98”.
[13] Some of the key proposed amendments to Ms. Shwaluk’s statement of claim read as follows (underlining indicates what was already in her reply):
[Ms. Shwaluk] did not submit an application /formal proof of loss claim form for LTD benefits to Sun Life, pending resolution of her STD benefits with her employer . However, [Sun Life] was put on notice by June 22, 2015 that [Ms. Shwaluk] was seeking short-term and long-term disability benefits.
In the alternative, [Ms. Shwaluk] submits that [Sun Life] received notice and paperwork sufficient to satisfy its notice requirements, including by virtue of having adjudicated the short-term disability claim through three levels of appeal. [Ms. Shwaluk] therefore denies that she missed any notice deadlines.
Alternatively, [Ms. Shwaluk] states that any contractual preconditions or notices were imperfectly complied with, and she seeks relief from forfeiture from the policy or policies of insurance issued by [Sun Life] pursuant to the Insurance Act, R.S.O. 1990 c. I.8. and the Courts of Justice Act, R.S.O. 1990, c. C. 43, s. 98.
In the further alternative, [Ms. Shwaluk] states that [Sun Life] had an obligation to provide [Ms. Shwaluk] with any forms they required to be completed in support of her claims and failed to do so. [Sun Life] is therefore precluded from denying [Ms. Shwaluk’s] claims on this basis.
[Ms. Shwaluk] states [Sun Life] has all the information necessary, including all medical records and independent medical examinations, to adjudicate all claims for benefits for which [Ms. Shwaluk] claims entitlement. [Ms. Shwaluk] therefore states that [Sun Life] has not been prejudiced in this matter.
(2) The Motion Judge’s Decision
[14] The motion judge dismissed the motion. She essentially gave two reasons for doing so.
[15] First, she held the proposed amendments seek “to withdraw the admission by [Ms. Shwaluk] that she did not submit an application for LTD benefits to Sun Life”. She noted that withdrawal of an admission is governed by r. 51.05 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, and requires the moving party to demonstrate that the proposed amendment raises a triable issue, the admission was inadvertent or resulted from erroneous instructions, and the withdrawal will not result in non-compensable prejudice to the other party. The motion judge found that Ms. Shwaluk did not satisfy any of these criteria.
[16] Second, the motion judge held that the withdrawal of the admission and the proposed amendment to claim relief from forfeiture was the assertion of a new cause of action that was statute-barred. Ms. Shwaluk was aware at least by June 2017 when Sun Life’s statement of defence was delivered that it took the position that her claim for LTD benefits was barred by her failure to comply with the timing requirements in the policy for filing a proof of claim.
C. Analysis
(1) Did the motion judge err in concluding the amendments sought to withdraw an admission?
[17] In my view, the motion judge failed to use the correct legal test and erroneously determined that Ms. Shwaluk sought to withdraw an admission. That erroneous determination resulted in the motion judge applying the incorrect test to the question of whether the amendments should be allowed. Appellate interference is therefore justified, as a judge errs in law when they apply the wrong legal test: Canada (Director of Investigation and Research) v. Southam Inc., [1997] 1 S.C.R. 748, at para. 35.
(a) The Amendments Did Not Withdraw an Admission
[18] The motion judge’s reasons for concluding that the amendments involved the withdrawal of an admission were brief. She simply stated that the “amendments proposed by [Ms. Shwaluk] are an attempt … to withdraw her admission; that she never filed an application for LTD [benefits]”. The only paragraph of the amendments she specifically referred to was (underlining indicates the amended portion):
[Ms. Shwaluk] did not submit an application/ formal proof of loss claim form for LTD benefits to Sun Life, pending resolution of her STD benefits with her employer. However, [Sun Life] was put on notice by June 22, 2015 that [Ms. Shwaluk] was seeking short-term and long-term disability benefits.
[19] With respect, the motion judge erred in concluding that this amendment constituted a withdrawal of an admission.
[20] To determine whether an amendment withdraws an admission, two matters need to be considered: (i) the nature and extent of the admission in the original pleading; and (ii) the difference between the original pleading and the proposed amended pleading concerning what was admitted.
[21] In addressing these matters, it is important to recognize that admissions can pertain to alleged facts or to the legal conclusions or consequences (i.e., the party’s positions) alleged to follow from the alleged facts, or to both.
[22] Therefore, when considering the nature and extent of an admission, a court must consider whether the admission does one, or both, of the following: makes a “deliberate concession to a position taken by” the other party; or, accepts that “a set of facts posed by” the other party is correct: Yang v. The County of Simcoe, 2011 ONSC 6405, at para. 46 (emphasis added).
[23] That admissions may relate to facts or positions follows from the nature of the pleadings process. Pleadings are required to set out the material facts on which a party relies for their claim or defence. However, they may also contain conclusions of law if the material facts supporting them are pleaded: rr. 25.06(1) and (2). In other words, pleadings must allege facts, but they also, permissibly and routinely, allege the positions said to follow from those facts.
[24] For example, a plaintiff’s pleading may describe what the defendant did or failed to do, and it may also plead that such behaviour was negligent. The former are allegations of fact, the latter a position as it is a conclusion of mixed fact and law: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at paras. 26-29. Similarly, a pleading may allege that the defendant fired the plaintiff with a specific amount of notice − an allegation of fact − but may also allege that doing so was a wrongful dismissal, a position as it is a proposition of mixed fact and law: Dupuis v. Edmonton Cellular Sales Ltd., 2006 ABCA 283, 397 A.R. 376, at para. 6.
[25] Responsive pleadings (defences and replies) may address both the factual allegations and the conclusions or positions in the pleading being responded to, including by making admissions. Efficiency and fairness in the civil litigation process is advanced when this occurs. Although the Rules of Civil Procedure regarding statements of defence and reply pleadings refer to admissions of alleged facts found in the pleading to which they respond (see rr. 25.07(1) and 25.09(1)), nothing in the Rules prevents a party from also admitting, or denying, a legal conclusion or position that has been alleged. For instance, a defendant could admit that they behaved as the plaintiff contends and deny the position that the conduct constituted negligence or wrongful dismissal. Or they could, instead, admit that the conduct constituted negligence or wrongful dismissal, but then deny that the plaintiff suffered any damages. Doing so helps to frame the issues in the litigation.
[26] As is relevant to this appeal, Sun Life’s statement of defence alleged a fact, and a position or legal conclusion flowing from that alleged fact. The fact it alleged was that Ms. Shwaluk did not file an application for LTD benefits by a particular date. The position or legal conclusion it alleged was that the failure to file an application had a fatal consequence for her entitlement to LTD benefits.
[27] What was the nature and extent of the admission Ms. Shwaluk made in her reply? The reply specifically admitted Sun Life’s factual allegation that Ms. Shwaluk did not submit an application for LTD benefits to Sun Life. But it did not admit the position or legal conclusion asserted by Sun Life.
[28] The reply began with a general refusal to admit the allegations in the defence. This weighs heavily against extending any specific admission in the reply beyond its precise wording. The express language of the admission in the reply speaks only to the fact of non-submission of an LTD benefits application. Moreover, the reply alleged additional facts. On the point that is germane here, the question is not whether those additional facts were legally sufficient to defeat Sun Life’s position, but what they say about whether she was admitting it.
[29] The reply asserted that Ms. Shwaluk did not submit an application for LTD benefits to Sun Life “pending resolution of her STD benefits with her employer” and that Sun Life had not provided her with a copy of the policy keeping her in ignorance of its timing requirements. The only purpose for making these allegations was to advance a different position than the one Sun Life was asserting as flowing from the failure to file an LTD benefits application.
[30] The clear import of the reply was that, although she accepted the fact that an application was not submitted, Ms. Shwaluk did not concede the position, the legal consequence, that Sun Life alleged followed from it. That was the nature and extent of the admission for the purpose of considering whether the proposed amendment was a withdrawal.
[31] Turning to the second matter, the proposed amended pleadings did not withdraw the admission. The proposed amendment focussed on by the motion judge did not alter the paradigm in the original pleadings. The amended allegation continued to accept the fact that no application was submitted, and likewise continued to contest Sun Life’s position that a fatal consequence flowed from it.
[32] As did the original reply, the amendment continued to say: “[Ms. Shwaluk] did not submit an application … for LTD benefits to Sun Life, pending resolution of her STD benefits with her employer”. The addition of “[Sun Life] was put on notice by June 22, 2015 that [Ms. Shwaluk] was seeking short-term and long-term disability benefits” was simply the plea of an additional fact to contest something she had never admitted, namely, the position or legal consequence Sun Life alleged flowed from the failure. In terms of admissions by Ms. Shwaluk, Sun Life was in the same position on the proposed amended pleading as it was with the original reply. It continued to have the benefit of an admission of the fact that no application for LTD benefits was filed by the deadline in December 2015. And, as was the case in the original pleadings, Sun Life had no admission of the position or legal consequence it said flowed from the admitted fact.
[33] Sun Life argues that the concluding words of the paragraph of the amendment relied on by the motion judge, coupled with a sentence from another paragraph of the proposed amendments alleging that Sun Life received sufficient information about Ms. Shwaluk’s disability when adjudicating STD benefits and denying that “she missed any notice deadlines”, effectively assert that she filed an application for LTD benefits. In its view, this changes the factual admission.
[34] I disagree. The amended pleadings continue the factual admission that Ms. Shwaluk made no application for LTD benefits. Ms. Shwaluk expressly conceded in this court − and she is bound by this concession − that she is not seeking to “withdraw the factual assertion (admission) that an application for LTD benefits was not submitted” nor arguing that she made an LTD benefits application. Instead, she is pleading that she provided information to Sun Life as one of the particulars of the facts to support her request for relief from forfeiture; a request which itself assumes that there was a contractual breach by Ms. Shwaluk − the admitted failure to file the application/proof of loss − that needs to be relieved against. [^2]
[35] I therefore conclude that the motion judge erred in treating the proposed amendments as involving a withdrawal of an admission.
(b) The Motion Judge’s Error Led Her to Apply the Wrong Test for Whether to Grant Leave to Amend
[36] Amendments to pleadings are generally governed by r. 26.01: “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”. Under this rule, the court must permit an amendment, regardless of the stage of the action at which it is sought, unless the party opposing the amendment can demonstrate actual prejudice that is non-compensable, or unless the delay in seeking it was so long, and the justification so inadequate, that prejudice is presumed: 1588444 Ontario Ltd. v. State Farm Fire and Casualty Co., 2017 ONCA 42, 135 O.R. (3d) 681, at para. 25.
[37] This is a different test than the one applicable for when the proposed amendment would withdraw an admission made in the original pleading. Rule 51.05 provides that: “an admission in a pleading may be withdrawn on consent or with leave of the court”. Absent consent, the party seeking an amendment to withdraw an admission must satisfy a three-part test to be granted leave. They must show that: (a) the proposed amendment raises a triable issue; (b) the admission sought to be withdrawn was inadvertent or the result of wrong instructions; and (c) the withdrawal will not result in non-compensable prejudice: Szelazek Investments Ltd. v. Orzech (1996), 44 C.P.C. (3d) 102 (Ont. C.A.).
[38] The test for withdrawal of an admission varies in two significant ways from the test applicable to other types of amendments. First, where no withdrawal of an admission is involved, the moving party is not required to show that the prior version of the pleading is the result of inadvertence or incorrect instructions. Second, the onus regarding prejudice is different. Where an admission is withdrawn “the onus is on the moving party to show that the opposite party will not be prejudiced, rather than the reverse as is the case under rule 26.01”: Kostruba and Sons v. Pervez, 2011 ONSC 4894, 38 C.P.C. (7th) 100, at para. 42.
[39] The motion judge applied the test for withdrawal of an admission and did so erroneously since no withdrawal was being made. The use of the incorrect test made a difference. I do not read the motion judge’s findings that Ms. Shwaluk had failed to satisfy the three-part test for withdrawal of an admission to be the equivalent of finding that Ms. Shwaluk should be denied leave to amend under r. 26.01. As I will explain, when the correct test is applied, leave to amend should be granted.
[40] The first consideration is the legal tenability of the amendment. An amendment will not be permitted if it is legally untenable, a point determined on the basis of the pleading taken as true, rather than by weighing evidence: Andersen Consulting Ltd. v. Canada (Attorney General) (2001), 13 C.P.C. (5th) 251 (Ont. C.A.), at paras. 34-35. Although the motion judge said the amendments did not raise a triable issue, her treatment of this point focussed on whether there was a reasonable explanation for Ms. Shwaluk’s supposed withdrawal of an admission, and was melded together with a consideration of whether the admission in the reply was inadvertent. She did not consider whether on the facts alleged in the amendments, taken as true, relief from forfeiture had a reasonable chance of success.
[41] Failing to file a proof of loss with an insurer within a policy-prescribed time limit is a type of imperfect compliance which might be amenable to relief from forfeiture: Falk Bros. Industries Ltd. v. Elance Steel Fabricating Co., [1989] 2 S.C.R. 778, at pp. 784-85; Kozel v. Personal Insurance Co., 2014 ONCA 130, 119 O.R. (3d) 55, at paras. 40-43. Although Sun Life argues that relief from forfeiture pursuant to s. 129 of the Insurance Act is not applicable to this type of policy, it is unnecessary that I determine whether that section, or any other section of the Insurance Act providing for relief from forfeiture, may apply. I see no reason why s. 98 of the CJA would not be applicable, as it has been held to be “available as an avenue of relief for contracts governed by the Insurance Act”: Kozel, at para. 58.
[42] In my view, the amended pleading raises a request for relief from forfeiture that is legally tenable. For example, in Smith v. Sun Life Assurance Company of Canada, 2021 ONSC 7109, the court granted relief from forfeiture after first determining that an insured’s failure to file a formal application for LTD benefits constituted imperfect compliance. The case involved circumstances where the insurer had previously dealt with and adjudicated the plaintiff’s request for STD benefits based on the same alleged disability and had some notice of an intention to claim LTD benefits: at paras. 25-28.
[43] The second consideration is prejudice. The motion judge made a finding that Ms. Shwaluk failed to show that Sun Life would not suffer non-compensable prejudice from the amendments. But given the different onus, this finding cannot be directly transposed into a finding that Sun Life proved it would suffer non-compensable prejudice, which is the test under r. 26.01. Other than noting the stage of the action, the only finding about prejudice the motion judge made was that “Sun Life has conducted its litigation strategy on the basis of the admission” and permitting the withdrawal of the admission would therefore prejudice it. However, since there is no withdrawal of an admission, this ground of prejudice cannot stand.
[44] Subject, therefore, to the argument that relief from forfeiture cannot be sought by Ms. Shwaluk because the statutory limitation period for doing so under the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, expired, the amendments should have been permitted.
(2) Did the motion judge err in concluding the request for relief from forfeiture was statute-barred?
[45] An amendment that adds a new claim may be refused on the basis that it creates non-compensable prejudice to the responding party if the limitation period for advancing the claim has expired: Klassen v. Beausoleil, 2019 ONCA 407, 34 C.P.C. (8th) 180, at paras. 26-27.
[46] However, an amendment is not an assertion of a new claim if it merely pleads an alternative claim for relief arising from the same facts already alleged, different legal conclusions drawn from the same facts, particulars of an allegation already pleaded, or additional facts upon which the original right of action is based. In making the assessment of whether a new claim is advanced, the original pleading is to be read generously, with some allowance for drafting deficiencies: Klassen, at paras. 29-30.
[47] The motion judge tied her finding that Ms. Shwaluk’s request for relief from forfeiture was a new statute-barred claim directly to her view that an admission had been withdrawn. She stated:
I find that the amendments sought by [Ms. Shwaluk] are an attempt to include new claims and allegations. By withdrawing her admission that she had not filed an LTD claim in her reply, [Ms. Shwaluk] is statute-barred from now asserting relief from forfeiture on new facts that had not been previously pled and were not previously disclosed or alleged. They do not arise from the same facts already admitted and pled, and to permit the amendments proposed would result in fundamentally different claims than those originally pleaded.
[48] Ms. Shwaluk makes two arguments in opposition to this conclusion. First, she argues that a request for relief from forfeiture is not a “claim” within the meaning of the Limitations Act and is never subject to the two-year limitation period that the motion judge apparently applied. [^3]
[49] Second, Ms. Shwaluk argues that, even if a request for relief from forfeiture is a “claim” under the Limitations Act, the request is not a new claim that is statute-barred. In her submission, the amendments are “factually intertwined with the existing allegations and can reasonably be viewed as falling within the four corners of the existing claim and reply. Similarly, the pleading of relief from forfeiture is an alternative claim for relief arising out of the same facts previously pleaded”.
[50] It is not necessary to decide whether relief from forfeiture can ever be considered a “claim” within the meaning of the Limitations Act. Even if a request for relief from forfeiture is a “claim”, here it is not a new claim within the meaning of Klassen. The motion judge’s view to the contrary was tainted by her incorrect finding that an admission was being withdrawn in favour of new facts and positions not previously advanced. Viewed from the correct perspective, the facts asserted in the amendments are particulars of alleged facts in the original pleadings, read generously; relief from forfeiture is the legal conclusion alleged to flow from those facts, including the factual admission which continues.
[51] The original statement of claim referred to Ms. Shwaluk’s request for STD and LTD benefits and asserted the failure to pay both was unreasonable and unjustified in light of facts, documents, and information provided or available to Sun Life. The proposed amendments assert that the information provided or available to Sun Life by June 2015 in connection with STD benefits was sufficient information regarding LTD benefits and included notice that both STD and LTD benefits were being sought, so Sun Life was not prejudiced by the failure to file an LTD benefits application/proof of claim by December 2015. This is a particularized version of the facts already alleged.
[52] Considered more generally, Ms. Shwaluk’s original statement of claim and reply alleged that her claim to payment under the policy should be allowed, given the facts, even though she had not timely filed an application/proof of loss for LTD benefits. Sun Life was always facing a lawsuit that was premised on that position. Relief from forfeiture may in some cases be granted even if not expressly raised at trial, where the facts warrant it: MacIvor v. Pitney Bowes Inc., 2018 ONCA 381, 143 O.R. (3d) 633, at paras. 28-29, leave to appeal refused, [2018] S.C.C.A. No. 223. Relief from forfeiture, which is expressly requested in Ms. Shwaluk’s proposed amendments, is a legal conclusion that she seeks in order to give effect to her originally advanced position.
[53] In light of my conclusion that the request for relief from forfeiture in the amended pleadings is not a new claim, such a request is not statute-barred. Sun Life will not suffer non-compensable prejudice from the amendments. Accordingly, leave to amend should have been granted.
D. Conclusion
[54] I would allow the appeal, set aside the order of the motion judge, and grant leave to Ms. Shwaluk to amend her pleadings as requested, with the exception set out in footnote 2 above. The amended statement of claim shall be delivered within 7 days from the date of the release of these reasons.
[55] Pursuant to the agreement of the parties, costs of the appeal are awarded to Ms. Shwaluk in the amount of $15,000, inclusive of disbursements and applicable taxes. If the parties are unable to agree on costs of the motion below, they may make written submissions not exceeding three pages each. The submissions of Ms. Shwaluk shall be delivered within ten days of the release of these reasons and Sun Life’s submissions shall be delivered within ten days after receipt of those of Ms. Shwaluk.
Released: August 11, 2023 “J.M.F.” “B. Zarnett J.A.” “I agree. Fairburn A.C.J.O.” “I agree. Janet Simmons J.A.”
[^1]: Ms. Shwaluk’s original counsel passed away in February 2019. There were two subsequent changes of counsel before the motion to amend was finally brought. [^2]: For certainty on this point, I would not permit the sentence “Emma therefore denies that she missed any notice deadlines” to be included in the amended claim. [^3]: The motion judge did not specify what limitation period she was relying on, but earlier in her reasons noted that Ms. Shwaluk would have been aware that Sun Life was relying on her non-submission of an application for LTD benefits by September 2017, a date more than two years before the amendments were sought.
