Tutt et al. v. Ishakis et al.

[Indexed as: Tutt v. Ishakis]

Ontario Reports

Ontario Superior Court of Justice

Divisional Court

Backhouse J.

September 25, 2020

153 O.R. (3d) 199 | 2020 ONSC 5711

Case Summary

Civil procedure — Pleadings — Statement of defence — Amendment — Plaintiffs granted leave to amend pleading to include claim for interest — Defendants believing that the amendment allowed them to plead Interest Act as of right but out of caution bringing motion to amend — Master did not err in finding prejudice and in dismissing defendants' motion — Affirmative defences had to be pleaded — Interest Act, R.S.C. 1985, c. I-15, s. 8.

The plaintiffs claimed against the defendants for repayment of a debt under three promissory notes and on a personal guarantee. They were granted leave to amend their claim to include a claim for interest under the Courts of Justice Act in the alternative to their claim for interest under the promissory notes. The defendants believed that they were entitled to amend their amended statement of defence and counterclaim to plead s. 8 of the federal Interest Act as of right because of the plaintiffs' amendment, but as a matter of prudence and caution brought a motion to amend. The master dismissed the defendants' motion on the ground that to permit the proposed amendment after an unexplained delay of four years would result in prejudice that could not be compensated for in costs or by an adjournment. The defendants appealed.

Held, the appeal should be dismissed.

The master did not err in finding that the defendants had no right to amend their pleading as a matter of law. Affirmative defences, including statutory defences, had to be pleaded. There was not to be trial by ambush. The parties to a lawsuit were entitled to have the matter adjudicated on the issues joined in the pleadings. With the defendants having brought the motion to amend, the master was entitled to determine whether to grant leave and did not exceed her jurisdiction.

The master did not err in finding that there was non-compensable prejudice which the defendants had not rebutted. During the four years that elapsed without the defendants raising the s. 8 defence, interest on the promissory notes accrued at $19,000 per month. Because of the defendants' failure to raise the defence in a timely fashion, the plaintiffs lost the opportunity to make informed decisions about the conduct of the litigation. Timely notice also would have informed the plaintiffs' settlement position at an early stage. The court's determination of whether the delay was sufficiently lengthy so as to give rise to presumed prejudice was a contextual exercise. It was open to the Master to find presumed prejudice in the loss of opportunity to strategize or settle or enforce their security and to find that the defendants failed to rebut the presumption.

Acquaviva v. P.A.R.C.E.L. Inc. (2015), 126 O.R. (3d) 108, [2015] O.J. No. 2388, 2015 ONCA 331, 385 D.L.R. (4th) 742, 334 O.A.C. 259, 41 B.L.R. (5th) 271, 54 R.P.R. (5th) 171, 252 A.C.W.S. (3d) 834; Schembri v. Way (2012), 112 O.R. (3d) 241, [2012] O.J. No. 4356, 2012 ONCA 620, 7 B.L.R. (5th) 1, 222 A.C.W.S. (3d) 64, consd

Other cases referred to

1588444 Ontario Ltd (c.o.b. Alfredo's) v. State Farm Fire and Casualty Co. (2017), 135 O.R. (3d) 681, [2017] O.J. No. 241, 2017 ONCA 42, 274 A.C.W.S. (3d) 745, 64 C.C.L.I. (5th) 1, 409 D.L.R. (4th) 75; Deutsche Bank A.G. v. Mieszko Properties Inc., [2018] O.J. No. 3252, 2018 ONSC 3815, 294 A.C.W.S. (3d) 131, 95 R.P.R. (5th) 171; Family Delicatessen Ltd. v. London (City), [2006] O.J. No. 669, 2006 5135, 145 A.C.W.S. (3d) 1006 (C.A.); Gruen Watch Co. v. Canada (Attorney General), 1950 77 (ON SC), [1950] O.R. 429, [1950] O.J. No. 349, [1950] 4 D.L.R. 156, [1950] C.T.C. 440, 50 D.T.C. 784; Hav-A-Kar Leasing Ltd. v. Vekselshtein, [2012] O.J. No. 5592, 2012 ONCA 826; Knight v. Toronto (City), [2002] O.J. No. 4539, 33 M.P.L.R. (3d) 314, 118 A.C.W.S. (3d) 351, 2002 CarswellOnt 4017 (S.C.J.); McDiarmid Lumber Ltd. v. Shoal Lake Band #40, 2004 16326 (Ont. S.C.J.); Midland Resources Holding Ltd. v. Shtaif (2017), 135 O.R. (3d) 481, [2017] O.J. No. 1978, 2017 ONCA 320, 278 A.C.W.S. (3d) 736, 69 B.L.R. (5th) 1; Ontario Securities Commission v. McLaughlin, [2009] O.J. No. 1993, 177 A.C.W.S. (3d) 343, 2009 CarswellOnt 2694 (Div. Ct.); Severin v. Vroom (1977), 1977 1037 (ON CA), 15 O.R. (2d) 636, [1977] O.J. No. 2205, 76 D.L.R. (3d) 427, 3 C.P.C. 183, [1977] 1 A.C.W.S. 674 (C.A.); Shibish v. Scher, [2015] O.J. No. 1820, 2015 ONSC 1844; Strong v. P. (M.M.) (2000), 50 O.R. (3d) 70, [2000] O.J. No. 2792, 135 O.A.C. 161, 2 C.C.E.L. (3d) 8, 98 A.C.W.S. (3d) 833, 2000 16831 (C.A.)[MJ(1]

Statutes referred to

Courts of Justice Act, R.S.O. 1990, c. C.43

Interest Act, R.S.C. 1985, c. I-15, ss. 4 [as am.], 8 [as am.]

Statute of Frauds, R.S.O. 1990, c. S.19 [as am.]

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 25.07(4), 26.01, 26.05

APPEAL by defendants from a dismissal of a motion to amend an amended statement of defence.

Sean Dewart and Mathieu Belanger, for respondents/plaintiffs/ defendants by counterclaim.

Melvyn L. Solmon and Nancy Tourgis, for appellants/ defendants/plaintiffs by counterclaim.

BACKHOUSE J.

[1] The appellants appeal from the final order of Master Brott dated April 30, 2020. The Master dismissed the appellants' motion to amend its amended statement of defence and counterclaim to plead s. 8 of the Interest Act, R.S.C. 1985, c. I-15 on the grounds that to permit the proposed amendment at this stage in the proceeding would result in prejudice that could not be compensated for in costs or by an adjournment.

Factual Background

[2] The Master in her reasons set out the facts as follows:

[1] The plaintiffs claim against the defendants for repayment of a debt under three promissory notes and on a personal guarantee from the defendant Yochanan Ishakis ("Ishakis"). The plaintiffs are three sisters ("the sisters') and the estate trustee of the fourth sister. The sisters inherited a metal fabricating business from their father and having no business experience, sold it to companies ("the companies") controlled by Gustav Kastner ("Kastner"). $3.88 million of the purchase price was payable over time and the obligation was secured by, among other things, general security agreements on the assets of the business. In November 2010 the companies sold the business to the Fairfax companies ("Fairfax"). At the time of the sale, the companies still owed $2.28 million to the sisters. To facilitate the sale, the sisters agreed to exchange their general security interests for new security which included the assignment to the sisters of three promissory notes that Fairfax had granted to the companies. In 2012 Kastner sued Fairfax for breach of the agreement of purchase and sale. Fairfax counterclaimed against Kastner and added the sisters as defendants by counterclaim. When the companies' action was delayed, the sisters commenced this separate action against Fairfax in October 2014.

Chronology

March 20, 2012 -- Statement of Claim by Kastner against Fairfax wherein Kastner alleges Fairfax breached the agreement of purchase and sale and Fairfax's employment agreement with Kastner

July 2012 -- Statement of Defence and Counterclaim against Kastner

Fairfax noted Kastner in default. (set aside by Master Dash)

Third party claim against Kastner's accountants

April 16, 2014 -- Amended Statement of Claim

October 31, 2014 -- Sisters commence separate action against Fairfax (CV-14-515315)

May 4, 2015 -- Fairfax defends and counterclaims against the plaintiffs for an undisclosed amount. Fairfax alleges that Kastner misrepresented the attributes of the business. Fairfax alleges sisters were participants in Kastner's deception.

June 26, 2015 -- Sisters' Reply and Defence to Counterclaim.

2015 and 2016 -- The sisters moved for summary judgment. There were days of cross-examinations. The parties refused to answer numerous questions and took many questions under advisement. Refusals motions followed. The sisters were substantially successful and Fairfax, on December 29, 2017, appealed. The Appeals were substantially dismissed on May 11, 2018.

April 25, 2017 -- Motion to amend Fairfax Defence in sisters' action is dismissed by the Master.

May 15, 2018 -- On Appeal of the Master's Amendment Order, Myers, J. granted leave to Fairfax to amend the Statement of Defence and Counterclaim to plead The Limitations Act.

June 19, 2018 -- Sisters deliver proposed draft Amended Amended Statement of Claim wherein they assert an alternative claim for interest in accordance with the Courts of Justice Act.

January 28, 2019 -- The sisters bring a motion to amend the Amended Statement of Claim. There was divided success. The parties are ordered to attend a mediation. The Amended Statement of Claim has not been served or filed.

April 2019 -- Fairfax relies on s. 8 of the Interest Act and takes the position for the first time, that the sisters are not entitled to interest already accrued.

[3] The appellants took the position before the Master that pursuant to rule 26.05 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, the appellants were entitled to deliver an amended amended statement of defence and counterclaim as of right because the respondents were granted leave to amend their claim to include a claim for interest under the Courts of Justice Act, R.S.O. 1990, c. C.43 ("CJA") in the alternative to their claim for interest under the promissory notes.

[4] At the hearing of this appeal, the respondents advised that they would not be delivering an amended amended pleading claiming interest under the CJA in regard to which leave had been granted. I do not agree with the appellants' submission that this is an abuse of the court's process. In my view, it is open to the respondents to choose not to amend their pleading pursuant to the leave granted. Accordingly, this matter must be considered under rule 26.01 of the Rules of Civil Procedure which states:

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.

[5] It is unnecessary under rule 26.01 for me to consider whether the appellants' amended amended defence is responsive to the respondents' alternate claim for interest under the CJA which was an issue before the Master.

[6] The remaining issues raised by this appeal are the following:

(1) Did the Master err in not finding that the appellants had the right to amend their pleading as a matter of law?

(2) Did the Master err in finding that there was non-compensable prejudice which the appellants had not rebutted?

Standard of Review

[7] There is no dispute about the appropriate standard of review. I agree with para. 57 of the appellants' factum which quotes from Shibish v. Scher, [2015] O.J. No. 1820, 2015 ONSC 1844 summarizing the standard of review on appeal from a Master's decision as follows [at paras. 15-20]:

Appellate interference will be warranted "only if the Master made an error of law or exercised his or her discretion on the wrong principles or misapprehended the evidence such that there is a palpable and overriding error": Zeitoun v. Economical Insurance Group (2008), 2008 20996 (ON SCDC), 91 O.R. (3d) 131.

The standard of review on a question of law is correctness: Zeitoun v. Economical Insurance Group, supra.

As regards findings of fact, the appellate court will not interfere with a Master's decision unless there has been a palpable and overriding error. This same standard applies to inferences of fact. Where there is some evidence upon which the Master could have relied to reach a conclusion, the appellate court will not interfere. It is not the role of the reviewing court to verify that inferences of fact can be reasonably supported by the findings of fact of the Master, but rather to determine whether the Master made a palpable and overriding error in coming to a factual conclusion based on accepted facts, which implies a stricter standard. Further, where evidence exists to support an inference, an appellate court will be hard-pressed to find a palpable and overriding error: Housen v Nikolaisen, [ 2002 SCC 33, [2002] 2 S.C.R. 235] at paras. 1, 6, 10, 19, and 21-23.

Moreover, an appeal from a Master's decision is not a re-hearing. On questions of fact and mixed fact and law, deference applies and the role of the reviewing court is limited. The appellate court cannot substitute its interpretation of the facts or re-weigh the evidence simply because it takes a different view of the evidence from that of the Master: Wellwood v Ontario Provincial Police et al, 2010 ONCA 386. Further, an appellate court is not free to interfere with a factual conclusion that it disagrees with where such disagreement stems from a difference of opinion over the weight to be assigned to the underlying facts: Housen v Nikolaisen, supra.

Where the Master is exercising case management functions, as Master Brott was doing in this case, increased deference ought to be shown due to the unique role in the litigation process of case management masters: Zeitoun, supra; Housen v Nikolaisen, supra, Bruno Appliance and Furniture Inc. v Cassels Brock & Blackwell LLP, 2013 CarswellOnt 1630, 2013 ONSC 686.

There is no disagreement among the parties with respect to the standard of review applicable in this case. However, counsel for the appellant submits that, in the circumstances of this case, increased deference ought not to be shown to the Master, as her case management functions had not been ongoing for a long time prior to the motion. I do not have the evidence before me as regards how long she was involved, other than to note that she had heard at least one motion and convened a case conference prior to the motion for security for costs. Despite the appellant's submission, I am satisfied that the Master, as case management master, had exercised case management functions previously in this action and is owed increased deference.

Analysis

Issue 1 -- Did the Master err in not finding that the appellants had the right to amend their pleading as a matter of law?

[8] The appellants submit that the Court of Appeal specifically held in Acquaviva v. P.A.R.C.E.L. Inc. (2015), 2015 ONCA 331, 126 O.R. (3d) 108, [2015] O.J. No. 2388, 2015 CarswellOnt 6733 (C.A.) that s. 8 of the Interest Act did not need to be pleaded to be relied upon at trial and that the Master erred in ignoring this decision.

[9] The appellants submit that as a matter of prudence and caution, they moved to amend because the respondents took the position that if they did not, they were precluded from relying on s. 8 of the Interest Act at a summary judgment motion or trial. The appellants submit that this is an answer to para. 10 of the Master's reasons wherein she states:

[10] This is the defendants' [appellants'] motion to amend its Amended Statement of Defence and Counterclaim and Crossclaim. At the eleventh hour, [the appellants] argued that they are entitled to respond/amend as of right. If that is truly their position, then why did they proceed with the motion?. . .

[10] In P.A.R.C.E.L. Inc., the issue of s. 8 of the Interest Act was not pleaded or argued in the court below. There does not appear to have been an objection by the respondent to the Court of Appeal considering the issue and the court did not consider whether it needed to be pleaded or could be raised on appeal for the first time. Accordingly, I do not agree with the appellants' submission that it stands for the proposition that s. 8 of the Interest Act does not need to be pleaded to be relied upon at trial. No decision was cited by the appellants where the court considered the question of whether s. 8 needed to be pleaded and held that it did not.

[11] The appellants also rely on McDiarmid Lumber Ltd. v. Shoal Lake Band #40, 2004 16326 (Ont.S.C.J.). In that case, in dismissing a motion for summary judgment on the basis of s. 4 of the Interest Act which had not been pleaded in the defence, the judge held [at para. 19] that "[a] party need not plead a statute that is declaratory of the general law". For this proposition, the judge relied on Gruen Watch Co. v. Canada (Attorney General), 1950 77 (ON SC), [1950] O.R. 429, [1950] O.J. No. 349 (H.C.J.), at para. 53 which itself relied upon a decision of the Court of Appeal in 1909.

[12] Rule 25.07(4) of the Rules of Civil Procedure provides:

25.07(4) In a defence, a party shall plead any matter on which the party intends to rely to defeat the claim of the opposite party and which, if not specifically pleaded, might take the opposite party by surprise or raise an issue that has not been raised in the opposite party's pleading.

[13] According to the Court of Appeal, the reason for this pleading rule is "quite simple". The "just determination of a civil proceeding on its merits requires a fair adjudicative process. Trial by ambush is not fair. Accordingly, trial unfairness may result where a defendant is permitted to rely on an unpleaded defence which, if pleaded, might have prompted counsel to employ different tactics at trial." Where a defence to a civil action is not pleaded and no pleadings amendment is obtained, judges should generally resist the inclination to allow a defendant to raise and rely on the unpleaded defence if trial fairness and the avoidance of prejudice to the plaintiff are to be achieved. (Midland Resources Holding Ltd. v. Shtaif (2017), 135 O.R. (3d) 481, [2017] O.J. No. 1978, 2017 ONCA 320, at paras. 109-110; Hav-A-Kar Leasing Ltd. v. Vekselshtein, [2012] O.J. No. 5592, 2012 ONCA 826, at paras. 69-70 and Strong v. P. (M.M.) (2000), 50 O.R. (3d) 70, [2000] O.J. No. 2792, 2000 16831 (C.A.), at para. 37.

[14] In Strong, supra, at para. 36 the court noted that Ontario courts have consistently held that rule 25.07(4) applies to pleadings relating to limitations that might bar an action.

[15] In respect of a failure to plead the Statute of Frauds, R.S.O. 1990, c. S.19, the Court of Appeal in Severin v. Vroom (1977), 1977 1037 (ON CA), 15 O.R. (2d) 636, [1977] O.J. No. 2205, held as follows [at para. 5]:

There is no question that the law today is that the Statute of Frauds must be pleaded. The rules so specify and in Steadman v. Steadman, [1974] 2 All E.R. 977, Lord Reid at p. 981 reiterates the requirement. It has also been stated in the Courts of this country that a failure to request to amend a statement of defence to plead the Statute of Frauds is a waiver of the right to do so and an admission that the statute is not applicable. That being so, the defendant places himself in the position that the Court, either in first instance or in appeal, will dispose of the action on the basis of the pleadings as constituted, and on the basis of the evidence submitted by the plaintiff. We find on examination of all the circumstances in this case, notwithstanding the very thorough and able argument of counsel for both parties, that there are no circumstances which in the interests of justice require or justify some other course than the disposition of the case on the record as its stands. Therefore, we are all of the view that the disposition of the motion for non-suit on the basis that the Statute of Frauds is not part of the pleadings, is correct.

This paragraph was cited and adopted in Deutsche Bank A.G. v. Mieszko Properties Inc., [2018] O.J. No. 3252, 2018 ONSC 3815, at para. 25.

[16] The authorities which support that statutory defences need not be pleaded derive from a line of cases that were decided long before rule 25.07(4) was promulgated. They cannot be reconciled with the recent pronouncements of the Court of Appeal concerning the need to plead affirmative defences, including statutory defences. The parties to a lawsuit are entitled to have the matter adjudicated on the issues joined in the pleadings. The modern approach requires that there is not to be trial by ambush. If a plaintiff is relying upon a statute, the defendant is entitled to know what it is. Similarly, if a defendant is relying upon a statutory defence, the plaintiff is entitled to know what it is. To not have to plead an affirmative defence undermines the whole concept of what a pleading is for.

[17] Having brought the motion to amend, the Master was entitled to determine whether the appellants should be granted leave granted pursuant to rule 26.01. There is no merit to the appellant's argument that the Master exceeded her jurisdiction by ruling on the motion.

Issue 2 -- Did the Master err in finding that there was non-compensable prejudice which the appellants had not rebutted?

[18] The Master considered 1588444 Ontario Ltd. (c.o.b. Alfredo's) v. State Farm Fire and Casualty Co. (2017), 135 O.R. (3d) 694, [2017] O.J. No. 241, 2017 ONCA 42 where the court set out the legal principles applicable to amending a pleading pursuant to rule 26.01 as follows [at para. 25]:

The law regarding leave to amend motions is well developed and the general principles may be summarized as follows:

-- The rule requires the court to grant leave to amend unless the responding party would suffer non-compensable prejudice; the amended pleadings are scandalous, frivolous, vexatious or an abuse of the court's process; or the pleading discloses no reasonable cause of action: Iroquois Falls Power Corp. v. Jacob Canada Inc., 2009 ONCA 517, 75 C.C.L.I. (4th) 1, at paras. 15-16, leave to appeal to SCC refused, 2010 CarswellOnt 425, and Andersen Consulting v. Canada (Attorney General) (2001), 2001 8587 (ON CA), 150 O.A.C. 177 (C.A.), at para. 37.

-- The amendment may be permitted at any stage of the action: Whiten v. Pilot Insurance Co. (1996), 1996 8109 (ON SC), 27 O.R. (3d) 479 (Gen. Div.), rev'd on other grounds (1999), 1999 3051 (ON CA), 42 O.R. (3d) 641 (C.A.), aff'd 2002 SCC 18, [2002] 1 S.C.R. 595.

-- 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), 2001 8620 (ON CA), 56 O.R. (3d) 768 (C.A.), 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), 1994 416 (ON CA), 17 O.R. (3d) 841 (C.A.), at paras. 5-7 and Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1995), 1995 7105 (ON SC), 25 O.R. (3d) 106 (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), 1996 1762 (ON CA), 95 O.A.C. 297 (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 5135 (Ont. C.A.), at para. 6.

-- The onus to prove actual prejudice lies with the responding party: Haikola v. Arasenau (1996), 1996 36 (ON CA), 27 O.R. (3d) 576 (C.A.), at paras. 3-4 and Plante v. Industrial Alliance Life Insurance Co. (2003), 2003 64295 (ON SC), 66 O.R. (3d) 74 (Master), at para. 21.

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

[19] Allan Herman, counsel for the respondents, in an affidavit before the Master sworn July 5, 2019, deposed that over this time period, the respondents have lost the opportunity to make informed decisions, to move for an accelerated timetable and more definitive sanctions with respect to the appellants' failure to comply with their obligations including court orders and that this is prejudice not compensable by costs or an adjournment.

[20] The appellants submit that Mr. Herman's affidavit amounts to hearsay, vague suggestions, speculation, self-created prejudice and inadmissible evidence and that courts have been critical of affidavits which were not from the parties. (Knight v. Toronto (City), [2002] O.J. No. 4539, 2002 CarswellOnt 4017 (S.C.J.), paras. 17-19, 22.)

[21] In this case, the respondents are retired (or in the case of one of the sisters, deceased), were found by the Master to have no business experience and took no part in negotiating the security they received on the resale of the business. It is hard to see what they could have added to the evidence of Mr. Herman about the conduct of the litigation and what prejudice they suffered over the four-year period because the s. 8 defence was not raised. Mr. Herman was cross-examined on his evidence and, as counsel for the respondents with carriage of the action, was well-situated to advance the evidence of loss of litigation opportunities which the Master found met the test for actual prejudice.

[22] The Master went on to hold that in the absence of any evidence that the proposed amendment pertained to evidence that was discovered recently, a delay of four years before the amendment was raised was unexplained delay and gave rise to presumed prejudice which was not rebutted by the appellants.

[23] In 1588444 Ontario Ltd., supra, the court, while finding the affidavit of counsel regarding prejudice insufficient to support a finding of actual prejudice, nevertheless made a finding of presumed prejudice.

[24] Four years have gone by without the appellants raising the s. 8 defence. During that time, interest owing under the promissory notes accrued at the rate of $19,000/month. Interest owed pursuant to the promissory notes as of April 15, 2019 when the appellants first raised the s. 8 defence amounted to approximately $1.3 million on the principal debt of $1.6 million. Because of the failure to raise the defence in a timely fashion, the respondents lost the opportunity to make informed decisions about the conduct of the litigation. Timely notice would also have informed the respondent's settlement position at an early stage. The proceedings for the summary judgment motion in this case have been going on since 2015. Fifteen days of cross-examination, motions for undertakings and refusals and appeals therefrom have all taken place. If the s. 8 defence had been pleaded at the outset, the decision to bring a motion for summary judgment may well have been different.

[25] The Master relied upon Family Delicatessen Ltd. v. London (City), [2006] O.J. No. 669, 2006 5135 (C.A.) and Ontario Securities Commission v. McLaughlin, [2009] O.J. No. 1993, 2009 CarswellOnt 2694 (Div. Ct.) to find that the delay in moving to amend resulted in presumptive prejudice to the respondents. At para. 20 of her reasons the Master stated:

[20] In Family Delicatessen Ltd. v. The Corporation of the City of London, 2006 5135 (ONCA), the Court of Appeal states:

While delay is not in and of itself a basis for refusing an amendment, there must come a point where delay is so long and the justification so inadequate that some prejudice to the defendants will be presumed absent a demonstration by the party seeking the amendment that there is in fact no prejudice despite the lengthy and unexplained delay.

Similarly in Ontario (Securities Commission) v. McLaughlin 2009 CarswellOnt 2694 (Div. Ct.), the court stated:

6. He (the motions judge) was not indicating that a party must introduce evidence in support of the merits of the substantive elements of the proposed new matters pleaded, but rather referring to the need for some explanation of the delay in seeking the amendments and the presence or absence of prejudice to the opposite party and the need to show a nexus between the proposed amendments and the facts or evidence said to be recently discovered.

7. An absence of any reasonable explanation for the delay and the irremediable prejudice to the plaintiffs justified the motion judge's refusal to allow the amendments.

[26] The Master found:

[19] In the defendants' oral submissions on this motion, counsel stated that the provision of the Interest Act only came to their attention in preparation for mediation. The defendants failed to provide any evidence of the reason for the delay in seeking this amendment. Clearly, had the defendants led evidence on this, the plaintiffs likely would or could have delivered evidence in response.

[23] The sisters submit that they will suffer prejudice. Courts have held that the moving party must provide some explanation of delay and the need to show a nexus between the proposed amendment and the facts or evidence recently discovered. Here any explanation of delay and/or nexus from Fairfax [the appellants] is completely absent. Fairfax has not rebutted the prejudice alleged by the sisters, and, on the facts, I find presumed prejudice.

[27] The appellants submitted that contrary to the Master's reasons, an explanation for the delay was provided which was not cross-examined upon, in the August 21, 2019 affidavit of Matthew Valitutti, a lawyer with the appellants' law firm. Mr. Valitutti deposed:

[2] Without any waiver of solicitor/client privilege, while preparing for the mediation, our firm included a portion in the statement of issues entitled "Fairfax's Proposal for Settlement". When researching our argument on this topic and our position, we came across a decision of the Ontario Court of Appeal called P.A.R.C.E.L. Inc. v. Acquaviva, 2015 ONCA 331, which interprets s. 8 of the Interest Act. We included this case in our mediation brief to support our position on the proper quantum of any interest claim advanced by the Sisters. We believe that this case is relevant and should be brought to the attention of the court.

[28] Mr. Valitutti's evidence does not state that they were unaware of s. 8 of the Interest Act or the 2015 Ontario Court of Appeal P.A.R.C.E.L. decision prior to preparing their mediation brief served on April 9, 2019. It does not provide evidence of the reason for delay in seeking the amendment during the years that this lawsuit has been pending.

[29] The Master found that in the circumstances where there was no explanation for the delay and/or nexus between the proposed amendment and facts or evidence recently discovered, the prejudice alleged by the respondents was not rebutted and found presumed prejudice.

[30] The appellants rely upon Schembri v. Way (2012), 112 O.R. (3d) 241, [2012] O.J. No. 4356, 2012 ONCA 620, at para. 42 as support for the proposition that amendments should be granted if it is prior to examination for discovery. However, in this case, 15 days of cross-examination have taken place. The proposed amendment is a legal question. Discoveries will not inform this issue. In the circumstances of this case, the fact that discoveries have not yet occurred is not relevant.

[31] I do not agree that the Master's finding of inordinate delay is inconsistent with prior findings in this action where the respondents were unsuccessful in obtaining costs or in striking the appellants' pleading for delay. Whether one has taken steps in the proceeding within the prescribed time is a different matter than a four-year unexplained delay in raising a new defence.

[32] There is no clear direction as to when the delay will be so lengthy that prejudice will be presumed and there is no hard and fast rule as to what qualifies as inordinate delay (1588444 Ontario Ltd., supra, para. 44). The court's determination of whether the delay in this case was sufficiently lengthy so as to give rise to presumed prejudice was a contextual exercise. Given the unexplained delay in moving to amend and the evidence of Mr. Herman, it was open to the Master to find that there was presumed prejudice in the loss of opportunity to strategize/settle/enforce their security which was unrebutted by the appellants. The appellant specifically requested that Master Brott hear the motion "given the history that [she had] with this file over the years". As the case manager, the Master is owed increased deference due to the unique role in the litigation process of case management masters. An appeal from a master's decision is not a rehearing. I find no error of law and no palpable and overriding error.

Conclusion

[33] The appeal is dismissed. In accordance with the agreement of the parties, the respondents shall be entitled to their costs, fixed in the amount of $12,500.

Appeal dismissed.

End of Document