Court File and Parties

Court of Appeal for Ontario Date: 2024-10-10 Docket: COA-23-CV-1234

Before: Miller, Zarnett and Thorburn JJ.A.

Between: Orllyn Loney and Yvonne Prouty Plaintiffs (Appellants)

And: John Doe, ABC Corporation, and Intact Insurance Company carrying on business as Intact Insurance Defendants (Respondents)

Counsel: Bronwyn Martin and Robin Moodie, for the appellants Grant D. Bodnaryk, C.S. and Jay A. Stolberg, for the respondents George Alexander Mills and 564242 Ontario Limited

Heard: June 6, 2024

On appeal from the order of Justice Susan E. Healey of the Superior Court of Justice, dated September 26, 2023, with reasons reported at 2023 ONSC 5123.

Thorburn J.A.:

A. Overview

[1] On August 9, 2013, Orllyn Loney was injured in a single vehicle motorcycle accident. Mr. Loney claims that on the day in question, he was driving his motorcycle behind a tractor-trailer that suddenly veered into the shoulder of the road causing debris and gravel to fly into his path. He claims that as a result, he lost control of his motorcycle and suffered serious personal injuries.

[2] In 2015, Mr. Loney and his wife Yvonne Prouty (together, “the appellants”) issued a statement of claim alleging the above facts. As they did not know the identity of the driver or owner of the tractor-trailer, they listed the defendants as John Doe, ABC Corporation, and Mr. Loney’s insurer, Intact Insurance Company (“Intact”).

[3] More than three years after the trial record was served setting the action down for trial and almost ten years after the accident, the appellants sought to change the names of John Doe and ABC Corporation to Michael George Alexander Mills (“Mr. Mills”) and 564242 Ontario Limited, also known as Liftlock Fuels and Liftlock Coach Lines Limited (“Liftlock”) (together, the “proposed defendants”).

[4] The appellants brought a motion for (i) an order granting leave to have the motion heard after setting down the action for trial pursuant to Rule 48.04(1) of the Rules of Civil Procedure, R.R.O. 1990 Reg. 194; and (ii) an order granting leave to amend the statement of claim on the basis of misnomer pursuant to Rule 5.04(2) of the Rules of Civil Procedure, R.R.O. 1990 Reg. 194.

[5] The motion judge dismissed the motion. She refused leave to have the motion heard after setting the action down for trial and refused leave to amend the statement of claim.

[6] The appellants claim that in so doing, the motion judge made three errors of fact and law: first, the motion judge incorrectly imposed an obligation on the appellants to exercise due diligence in order to discover the identity of the respondents. (They claim due diligence is not relevant to the misnomer analysis in Rule 48.04(1), as shaped by consideration of Rule 5.04); second, she erred in finding that the respondents would suffer actual prejudice if the motion was granted; and third, she failed to consider the appellants’ evidence that they had rebutted the presumption of non-compensable prejudice.

[7] For the reasons that follow, I would dismiss the appeal.

[8] I begin by setting out the legal test for deciding whether to grant leave to amend. I then recount the evidence of when and how the appellants discovered the names of the proposed defendants and the tractor-trailer driver’s recollection of the accident. Finally, I give a summary of the motion judge’s reasons, followed by my analysis and conclusion.

B. The Test for Granting Leave to Amend Pleadings After an Action Has Been Set Down for Trial

[9] Rule 48.04(1) provides that “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.” Under this rule, some courts have required the moving party to show a “substantial or unexpected change in circumstances” such that refusal to grant leave would be “manifestly unjust”, while others have granted leave even in the absence of such a change, if granting the order is “necessary in the interests of justice”. Under either analysis, the interpretation of Rule 48.04(1) and the decision as to whether to grant leave is shaped by the rule governing the proposed amendment: Horani v. Manulife Financial Corporation, 2023 ONCA 51 at paras. 17-19.

[10] In this case, the rule governing the proposed amendment is Rule 5.04(2) which addresses the doctrine of misnomer and permits the court to correct the name of an incorrectly named party: Mazzuca, at paras. 47-48.

[11] Rule 5.04(2) provides that “[a]t any stage of a proceeding the court may by order add, delete or substitute a party or correct the name of a party incorrectly named, on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment” (emphasis added). This is a permissive provision while the provision in Rule 26.01, by contrast, provides that “the court shall grant leave to amend […] unless prejudice would result that could not be compensated for by costs or an adjournment.” (emphasis added).

[12] There are two considerations under Rule 5.04(2) that must be met: (i) the moving party must satisfy the “litigating finger” test, and (ii) the amendment must not result in non-compensable prejudice.

[13] The “litigating finger” test will be satisfied if a person with knowledge of the facts would be aware of the true identity of a misnamed party by reading the statement of claim: Spirito Estate v. Trillium Health Centre, 2007 ON SC 41901 at para. 3, aff’d in 2008 ONCA 762, 302 DLR (4th) 654. See also: Essar Algoma Steel Inc. v. Liebherr (Canada) Co., 2011 ONSC 1688, 280 O.A.C. 243, at paras. 15-16.

[14] If the “litigating finger” test is met, a plaintiff seeking to correct a misnamed party need not establish due diligence in its efforts to identify the true defendant where the claim was brought within the limitation period: Stechyshyn v Domljanovic, 2015 ONCA 889, 129 O.R. (3d) 236 at para. 1, citing Kitcher v. Queensway General Hospital (1997), 1997 ONCA 1931, 44 O.R. (3d) 589 (C.A.), at paras. 1 and 4. The time taken to amend the pleading after discovering a defendant’s actual name however, remains a factor to be considered under Rule 5.04(2): See O’Sullivan v. Hamilton Health Sciences Corp., 2011 ONCA 507.

[15] Second, the defendant will be substituted unless there is evidence of non-compensable prejudice: Spirito trial decision at para. 3, citing Davies v. Elsby Brothers Ltd., [1960] 3 All E.R. 672; Moreau v. Northwestern General Hospital (1988), 1988 ON SC 4810, 65 O.R. (2d) 128 (S.C.); Rakowski et al. v. Mount Sinai Hospital et al. (1987), 1987 ON SC 4113, 59 O.R. (2d) 349 (S.C.); and McArthur v. Kaal (2006), 30 C.P.C. (6th) 150 (Ont. S.C.).

[16] Non-compensable prejudice may include the inability to conduct a timely investigation into the circumstances of the incident, the inability to take contemporaneous witness statements and preserve evidence, the inability to conduct early surveillance, the inability to obtain a timely defence medical assessment, and diminished witness recollection and memory: Lyman v. Chan, 2018 ONSC 4037, 88 C.C.L.I. (5th) 142.

[17] Where the delay between the initiation of proceedings and the filing of the motion to amend is “exceptional” or “inordinate”, courts will presume prejudice to the responding party: 1588444 Ontario Ltd. v. State Farm Fire and Casualty Co., 2017 ONCA 42, 135 O.R. (3d) 681. This presumption can be rebutted by either an adequate explanation for the delay or evidence that there is no non-compensable prejudice based on the facts of the case: State Farm Fire, at para. 37.

C. Chronology of Facts

(1) How and When the Appellants Discovered the Proposed Defendants’ Names

[18] The sequence of events leading to the discovery of the names of the proposed defendants is set out below.

[19] As stated above, the appellants did not know the names of the owner or driver of the tractor-trailer when they issued their statement of claim in August of 2015, so they identified the owner of the tractor trailer as John Doe, and the operator as ABC corporation. They also named their own insurer, Intact Insurance Ltd., as a defendant.

[20] On March 29, 2016, the appellants received a copy of the police motor vehicle accident report. In the report, the officer noted that it was a single vehicle accident with one witness to the accident. The witness was identified in the report as “Michael Wills”. Accompanying the report was a handwritten statement from “Michael Mills” and the statement included Mr. Mills’ telephone number (emphasis in bold).

[21] The correct name of the respondent is Michael Mills.

[22] On July 20, 2016, the appellants’ then counsel (who is not their current counsel) received a typed version of the witness statement with the correct name; that is, Michael Mills, and his telephone number. The appellants’ then counsel provided this typed version of the statement to a private investigator.

[23] On June 12, 2019, the appellants’ then counsel delivered the trial record setting the action down for trial. The driver was still listed as John Doe and the owner as ABC Corporation.

[24] In the meantime, counsel for Intact sought a copy of the police report and engaged an investigator. Counsel for Intact initially advised the appellants’ then counsel that they were investigating a “David Wills” but later advised that the correct name of the witness was Michael Mills.

[25] In a statement to Intact, Mr. Mills confirmed that he was the driver of the tractor-trailer and that the owner of the vehicle was Liftlock Fuels. (It was later discovered that the registered name was Liftlock Coach Lines Limited and that 564242 Ontario Limited o/a Liftlock Fuels was the operator of the tractor-trailer).

[26] On March 4, 2020, Counsel for Intact shared Mr. Mills’ contact information, as well as contact information for Liftlock Fuels with appellants’ then counsel.

[27] On July 28, 2020, Intact put Mr. Mills and Liftlock on notice of Intact’s third party claim. These letters were provided to the appellants’ then counsel on September 22, 2020.

[28] On February 3, 2022, appellants’ then counsel contacted counsel for the proposed defendants requesting information about the parties and advising that he would be adding them to the appellants’ claim.

[29] On March 3, 2022, the appellants’ then counsel sent the proposed amended statement of claim to the proposed defendants seeking their consent.

[30] On April 7, 2022, appellants’ then counsel advised counsel for the proposed defendants he would be bringing a motion for leave.

[31] On November 29, 2022, the motion was served.

(2) Mr. Mills’ Recollection of Events

[32] Mr. Mills’ recollection of the accident was recorded in his statements to the OPP, his interview with Intact’s investigator, and in his affidavit. In his February 28, 2020 interview with Intact’s investigator, Mr. Mills said that:

On the day of the accident I was operating tractor trailer with two empty fuel trailers west on Highway #7. I was somewhere between Havelock and Norwood but closer to Norwood. I say the motorcycle behind me followed me for several kilometres and I remember he tried passing me on at least two occasions. He pulled out into the eastbound lane and it looked like he was going to pass and then he just pulled in right behind me again, I couldn’t figure out what he was trying to do because he could have passed me very easily but he kept pulling in behind me. The last time he pulled out from behind me he pulled in the path of a pick-up truck. I was concerned that he was going to hit the pick-up truck so I pulled over slightly to the right and the pick-up did the same making room for the motorcycle to make it through. I’m not sure what he was thinking but he went from the westbound lane into oncoming eastbound lane and then right into the ditch.

[33] Mr. Mills also remembered that the tractor trailer was owned by Liftlock Fuels, and that he reported the accident to this company.

[34] In his affidavit dated January 19, 2023, Mr. Mills stated that,

The motorcyclist passed my truck, and was 7-8 car lengths ahead of me, when the motorcyclist lost control and drove into the ditch to my left (on the south side of the road). I stopped the truck at the side of the road and went back to where the motorcycle and operator were located. I then remained at the scene while police conducted their investigation, gave my witness statement to the police described above, and left once the police officer advised I was free to depart.

D. The Motion Judge’s Decision

[35] The motion judge held that the appellants did not meet the test for granting leave under Rule 48.04(1) as there was no sudden or unexpected change since the trial record was passed. She held that “[t]he only change that has occurred is that Intact decided to do [the appellants’ then counsel’s] work, and through their investigator contacted Michael Mills and confirmed that Liftlock is the owner of the defendant vehicle.”

[36] The motion judge held that the appellants offered no “reasonable explanation for the extraordinary delay” wherein the motion was served “over nine years after the accident and over two years from the time that [Mr. Mills] and Liftlock had any idea that this lawsuit had been started.”

[37] The motion judge held that the information as to the identity of the respondent Mills who worked for Liftlock was available to the appellants before the trial record was passed as:

From March 29, 2016, the date that he received the OPP file, [the appellants’ then counsel] had the name and phone number of the witness, his “John Doe”. From that point on, he disregarded information that was directly in front of him and left it to his private investigator to take whatever steps that he may have taken, none of which is properly in evidence on this motion. His own failure to pay attention to the information in his file allowed him to be led astray by Intact’s investigation, which led them down the path of a “David Michael Wills”. None of that changes the fact that the witness statement that was in [the appellants’ then counsel’s] hands in March 2016 was all that he needed to begin to take steps to confirm the driver of the vehicle, find the owner of the vehicle and correct the misnomer.

There is no good explanation given by [the appellants’ then counsel] as to why he made no efforts to act on the information prior to passing the trial record in June 2019, or explanation as to why, despite knowing the implications of r. 48.04(1), he did not try to resolve the issue before that date.

[38] As such, it was not in the interest of justice to grant leave.

[39] The motion judge also denied leave to amend the pleading. She held that:

The [appellants] are attempting to replace those placeholder names with the proposed [respondents] long after any limitation period has expired. However, as the [appellants] submit, there is no obligation on them to establish due diligence in identifying the true [respondents] within the limitation period on a misnomer motion, provided that the true [respondent] would know on reading the statement of claim that he was the intended [respondent].

[40] The motion judge acknowledged that on a fair reading of the claim, the “litigating finger” test was met as the respondents would know they were the intended targets of the lawsuit. She held however, that:

[T]he proposed defendants have led evidence of both actual non-compensable prejudice caused by the lengthy delay in bringing this motion, and have raised a presumption of prejudice due to the passage of time.

The very real prejudice is that the proposed defendants have been denied the opportunity to conduct an examination for discovery of the plaintiff within a reasonable time frame. This is important in this case because the plaintiffs allege, and [the appellants’ then counsel] referenced during his cross-examination, that Mr. Loney sustained a head injury in this accident. If that is the case, the proposed defendants will be in the compromised position of having to elicit testimony from a plaintiff who may have cognitive impairments, over 10 years after the accident.

[41] The motion judge therefore concluded that the motion to amend should be denied as:

[I]t would be unjust to grant the relief … because of the unexplained, significant delay in moving to amend the pleading after learning of the correct name of Mills in March 2016, and taking into account the public policy reasons for adhering to limitation periods.

The facts in this case show that the failure to correct the name of the defendants for over seven years after [the appellants’ then counsel] knew or should have known their identity is more than a mere irregularity, and causes prejudice to the proposed defendants that is impossible to remedy after this passage of time.

Accordingly, it cannot be said that the relief sought on the motion would likely be granted.

E. Analysis of the Issues Raised by the Appellants

[42] The standard of review for a discretionary order such as this is deferential: the court can only intervene on the basis of an error in principle or palpable and overriding error: Horani at para. 23.

(1) The motion judge did not impose an obligation of due diligence on the appellants

[43] The first ground of appeal is that the motion judge erred by imposing a duty to exercise due diligence to discover the respondents’ identities.

[44] As set out above, under Rule 48.04(1) of the Rules of Civil Procedure, the onus is on the moving party to satisfy the court on a balance of probabilities that leave should be granted. The court may allow the correction of a misnomer at any stage provided there is no prejudice that cannot be compensated for by costs or an adjournment. While there is some disagreement as to the threshold to be met to grant leave, there must be (a) a “substantial or unexpected change in circumstances” between the passing of the trial record and service of the motion such that refusal would be manifestly unjust; or (b) a finding that “the interlocutory step is necessary in the interests of justice”: Horani at paras. 17-18.

[45] The appellants claim that although the motion judge conceded that on a fair reading of the claim, the respondents would know they were the intended target of the lawsuit (and thus the “litigating finger” was clearly pointed at them), she improperly focused on the appellants’ lack of due diligence in concluding that leave should be denied.

[46] I disagree that the motion judge’s decision rested on a finding that the appellants had simply failed to exercise “due diligence”.

[47] First, the motion judge held that the appellants’ counsel provided “no good explanation” for why the appellants “made no efforts to act on the information [as to Mills’ identity as set out in the witness statement] prior to passing the trial record in June 2019”, knowing that once an action is set down for trial, the parties cannot take any further steps without leave of the court.

[48] Second, she noted that the purpose of originally using placeholder names was to preserve the limitation period against those parties and this motion was an attempt to replace those placeholder names long after the limitation period had expired. She noted that “significant unexplained delay in bringing a misnomer motion long past the expiry of a limitation period” has, in other cases, resulted in denial of the motion for leave: See Mohabir v. Mohabir, 2014 ONSC 5484; Brown-Vidal v. Doe, 2015 ONSC 3362, 50 C.C.L.I. (5th) 301.

[49] Third, the motion judge held that “it would be unjust to grant the relief in this case because of the unexplained, significant delay in moving to amend the pleading after learning of the correct name of [Mr. Mills]” and considering “the public policy reasons for adhering to limitation periods” (emphasis added).

[50] I agree with the motion judge that the unexplained significant delay in moving to amend the pleading long after learning of Mr. Mills’ name, coupled with the public policy reasons for adhering to limitation periods, would render it unjust to grant the relief sought. This court has held that while granted in certain circumstances, “amendments to pleadings which [have] the effect of relieving against a limitation period” are generally not allowed: Mazzuca v. Silver Creek Pharmacy Ltd. (2001), 2001 ONCA 8620, 56 O.R. (3d) 768 (C.A.) at paras 30-32.

[51] I note, as did the motion judge, the policy reasons for these requirements as identified by the late Associate Judge Muir in Mohabir, at paras. 24 and 25:

There are important public policy considerations supporting limitation periods. At some point a proposed defendant should be free from having to account for past obligations when arranging his or her affairs. A proposed defendant should not be required to preserve relevant evidence for an unlimited period of time. Limitation periods promote the early resolution of civil disputes.

[T]he very purpose of limitation periods would be seriously undermined by allowing a plaintiff to simply name John Doe defendants as part of a claim issued on the eve of the expiry of the limitation period and then do nothing to identify those defendants for several years thereafter.

[52] Finally, I note that these facts are similar to those in O'Sullivan v. Hamilton Health Sciences Corporation (Hamilton General Hospital Division), 2011 ONCA 507 where this court held that the motion judge:

did not err [in denying the motion to amend] by taking into account the appellants’ essentially unexplained significant delay in moving to amend their pleading after learning of the correct name of the defendant and the public policy reasons supporting adherence to established limitation periods” (emphasis added).

[53] Further, it was proper for the motion judge to consider other circumstances, such as the fact that “the respondent had no knowledge of the potential claim against it until five years after the incident”: O’Sullivan, at paras. 3-5.

[54] For these reasons, I would dismiss the first ground of appeal.

(2) The Motion judge did not fail to consider the Appellants’ Rebuttal of the Presumption of Non-compensable Prejudice OR err in finding there was Real Prejudice that would be occasioned should the motion be allowed

[55] The appellants’ second and third grounds of appeal are interrelated. They essentially assert that the motion judge erred in finding the appellants did not rebut the presumption of non-compensable prejudice caused by the delay and erred in finding that the respondents would suffer actual prejudice if the motion were granted such that leave to amend should be denied.

[56] The onus to rebut presumed prejudice lies with the moving party; the onus to provide evidence of actual prejudice lies with the responding party: State Farm Fire, at para. 25.

[57] The motion judge held that the respondents, “have led evidence of both actual non-compensable prejudice caused by the lengthy delay in bringing this motion, and have raised a presumption of prejudice due to the passage of time.”

[58] The appellants concede that “at a certain point, after an exceptional delay, non-compensable prejudice will be presumed absent evidence to the contrary”: State Farm Fire, at para. 36 and that, given the passage of time, there was presumed prejudice because the respondents were not advised of the intention to add them as parties to the appellants’ proceeding until almost nine years after the accident and two years after knowing Mr. Mills’ identity.

[59] The appellants correctly note that the motion judge mischaracterized the test to determine if the presumption of prejudice has been rebutted. The motion judge held that the test requires a moving party to provide both an explanation for the delay and evidence that there is no non-compensable prejudice. The correct test is disjunctive: the moving party must provide an adequate explanation of the delay or an absence of prejudice. It is not necessary to provide evidence of both: State Farm Fire, at para. 42.

[60] There is no dispute that the appellants did not satisfy the first prong of the test as they have not provided an explanation for the delay in bringing the motion to seek leave after learning of the identity of the truck driver.

[61] The appellants submit however, that they have satisfied the second prong of the test by demonstrating that there is no non-compensable prejudice. They submit that Mr. Loney’s medical records, police records, and damage documents have been preserved, and Intact conducted an examination for discovery of Mr. Loney in 2016 for which there is a transcript, such that there would be no non-compensable prejudice from granting the motion.

[62] Despite the preservation of some evidence, I agree with the motion judge that the lengthy delay in this case would create non-compensable prejudice as the lawsuit has proceeded for more than nine years and numerous steps have already been taken in the litigation. Nor was the motion judge required to simply assume that the examination for discovery conducted by Intact as a defendant was sufficient from the standpoint of the respondents.

[63] As a result of the delay, the respondents have been denied the opportunity to undertake important discovery tools in a timely fashion, including the opportunity to conduct early surveillance of the appellant Loney, examine the appellants in respect of these claims at any early stage of the proceeding in the fashion they might choose to conduct, and obtain their own timely defence medical assessment.

[64] The loss of these opportunities related to proper discovery constitutes actual prejudice that cannot be compensated by costs or an adjournment.

[65] Given the circumstances of this case, that is, the unexplained and significant delay in bringing the motion for leave both before and after the trial record was served including for a considerable period after discovering the names of the proposed defendants, as well as the fact that ten years have passed since the accident occurred and actual prejudice would result, I see no palpable and overriding error in the motion judge’s exercise of her discretion not to grant leave to amend the statement of claim.

F. Conclusion

[66] I would therefore dismiss the appeal.

[67] If the parties are unable to agree on costs, the respondents may file a written submission no more than three pages in length within fourteen days of the date of the release of these reasons and the appellants may file a written submission no more than three pages in length within ten days of the date the respondents’ submission is due.

Released: October 10, 2024 “B.W.M.” “Thorburn J.A.” “I agree. B.W. Miller J.A.” “I agree. B. Zarnett J.A.”