SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-06-304071
DATE: 20120918

RE: Betty Florence Rutherford, Trustee of the B & G Fair Trust, Plaintiffs

AND:
Brent W. Swanick, 153967 Ontario Inc., and 9993838 Ontario Inc., Defendants

BEFORE: Carole J. Brown J.

COUNSEL:
Jeffrey W. Tighe , for the Plaintiff
Jason Squire , for the Defendants

HEARD: June 5, 2012

ENDORSEMENT

[ 1 ] The appellant/plaintiff, Betty Florence Rutherford, trustee of the B & G Fair Trust ("Rutherford"), appeals the order of Master M. J. Sproat dated February 22, 2012 which allowed the respondent/defendant Brent W. Swanick ("Swanick”) to commence a crossclaim against the defendant, 153967 Ontario Inc. ("153967"). The Master granted the respondent leave to amend his statement of defence in order to answer the fresh as amended statement of claim of the plaintiff, amended February 4, 2011 pursuant to the order of Trotter J. dated August 23, 2010 and to plead across claim as against the defendant 153967. While 153967 did not oppose the motion, the plaintiff did.

[ 2 ] The appellant further seeks leave to bring this appeal after the limitation period expired. The failure to bring the appeal within the limitation period was due to the inadvertence of the counsel in failing to file the Notice of Appeal on time. Factors to consider in a motion to request leave to extend time for an appeal include whether a reasonable explanation for the delay has been given, whether there is merit in the proposed appeal and whether the party had intended to appeal: Mauldin v. Cassels Brock & Blackwell LLP , (2011) ONCA 67, 2011 ONCA 67 , 274 O.A.C. 353 at para. 5 . In the circumstances as presented, and considering the relevant factors, I grant leave to bring the appeal.

The Facts

[ 3 ] The statement of claim in this matter was issued on January 13, 2006, by the plaintiff, as against Swanick, personally; Swanick in his capacity as trustee of two trusts; Gail Oikawa; Robert Shnier; 153967, Fernando Maio; 99938 and Anthony Gauci.

[ 4 ] The action as originally constituted made broad complaints about the management of the property in the two family trusts, including conflicts of interest, breach of fiduciary duty, conspiracy and negligence against Swanick in his personal and professional capacities, as well as in his capacity as trustee of the two trusts, as well as against the other named defendants. The plaintiff's claim was brought by her as beneficiary of the trusts. The action sought an order for certificates of pending litigation, termination of Swanick as trustee of the two trusts, orders appointing the plaintiff as trustee of those trusts, and orders requiring delivery of records to the plaintiff, and accounting regarding the two trusts and the passing of accounts by Swanick in his capacity as trustee, as well as an order requiring Swanick to disgorge various benefits and proceeds received by him and general and punitive damages in the amount of $700,000.00.

[ 5 ] 153967 defended the action on March 20, 2006 and Swanick defended the action on May 23, 2006. Rutherford signed a release in favor of 153967 on June 18, 2008, which was ultimately provided to Swanick in July of 2009 at examinations for discovery. The corporate status of 153967 was cancelled in June of 2009.

[ 6 ] In and after 2008, counsel for the parties cooperated to narrow the issues and the parties named as defendants. As a result, the conspiracy and related claims were dropped and the action was dismissed on consent as against a number of the defendants. The remaining claims included a claim against Swanick in the amount of $11,600.00 regarding legal fees which the plaintiff claims she did not agree to pay to Swanick, and legal fees in the amount of $23,615.83 and disbursements of $26,384.17 made to 153967, which the plaintiff claims were not disclosed to her and were improper.

[ 7 ] Following examinations for discovery, at which the release executed by Ms. Rutherford in favor of 153967 regarding one of the trust properties in issue was provided to Swanick, the plaintiff brought a motion to amend the statement of claim to reflect the narrowed claims. Prior to the motion being heard, counsel for Swanick wrote to plaintiff's counsel advising that they would be claiming over as against 153967 “if and when the pleading is amended”.

[ 8 ] The plaintiff's motion for leave to amend the statement of claim was granted by Trotter J. on August 23, 2010, and the statement of claim was amended on February 4, 2011. The new claim was brought by the plaintiff in her capacity as trustee of the B & G Fair Trust, rather than in her capacity as beneficiary of the trust. In addition, the statement of claim narrowed the claims made to those concerning the B & G Fair Trust. The claims as against Swanick are for breach of duties as trustee, misappropriation of various funds, conflict of interest, and conflict of his duties as trustee.

[ 9 ] The defendant’s motion for leave to amend his defence and to assert a cross claim against 153967 was granted by Master Sproat on February 22, 2012. It is from that decision that the plaintiff appeals.

The Law

Standard of Review

[ 10 ] The parties agree that the decision of the Master will only be interfered with if the Master made an error of law, exercised discretion on wrong principles or misapprehended the evidence such that there is a palpable and overriding error: Zeitoun v. Economical Insurance Group (2008), 91 O. R. (3d) 131 (Div. Ct.) at para. 40 .

Pleadings Amendments

The parties rely on Rule 26.01 which provides that the court shall grant leave to amend the pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment. The defendant further relies on Rule 28.03 and 28.04 (1) with respect to amending the statement of defence and asserting a crossclaim as against 153967.

[ 11 ] Master Sproat held that Rule 26.01 is mandatory. She found that there was no prejudice that could not be compensated for by costs or an adjournment. While the plaintiff pleaded that there was prejudice on the basis that she had executed a release in favor of 153967, the defendant argued that such did not constitute prejudice within the meaning of Rule 26.01. The Master found that any prejudice to the plaintiff arose not from the proposed amendment and crossclaim, but from her own conduct in providing the release to 153967, and that prejudice within the meaning of Rule 26.01 does not encompass or contemplate the potential success of a defence, or the legal consequence of the release executed by the plaintiff. The Master further held that it was not plain and obvious that the crossclaim against 153967 is statute-barred. Leave to amend the claim was granted in August of 2010 and the formal amendment made in February of 2011. The crossclaim was proposed in April of 2011 and written notice of the crossclaim given over one year earlier on January 15, 2010. The Master further held that the claim was a different claim than that originally issued and that, if the limitation period had expired as argued by the plaintiff, such was of consequence to 153967 and not to the plaintiff.

[ 12 ] The plaintiff argues that the Master erred in finding that there was no prejudice suffered by the appellant; that the amendments to the statement of claim resulted in it being different from the original claim; and that the limitation period argument regarding the addition of the cross claim was of consequence to 153967 but not to the plaintiff. The plaintiff argues that the only reason that the defendant wishes to bring a crossclaim against 153967 is to take advantage of the release executed by Rutherford in favor of 153967, which arguably contains a "no claims over" clause.

[ 13 ] The plaintiff argued that the amendments to the statement of claim served to simplify the proceedings but did not add any new causes of action and did not constitute a claim different from that originally issued. She argued that the limitation period has expired and no crossclaim should be permitted. The plaintiff argued that Rutherford suffered prejudice from the loss of the limitation defence. Further, the plaintiff argued that the Master erred in holding that there was no consequence to Rutherford regarding the addition of the crossclaim, but the only consequence was to 153967, which did not oppose the crossclaim.

[ 14 ] The defendant argues that the Master was correct in granting leave to amend the statement of defence and to assert a crossclaim. The defendant relies on Andersen Consulting v Canada , 2001 , [2001] O. J. No. 3576 at para. 37 (C.A.) to argue that pleadings amendments should be granted unless they would occasion prejudice that cannot be compensated by costs or an adjournment; they are shown to be frivolous, vexatious or an abuse of process; or they disclose no reasonable cause of action, assuming the facts as pleaded in the proposed amendment are true, unless patently ridiculous or incapable of proof.

[ 15 ] The defendant argues that the Master was correct in granting leave to amend the Statement of Defence and to plead a crossclaim. The defendant relies on Andersen Consulting v Canada , 2001 , [2001] O. J. No. 3576 at para. 37 (C.A.) to argue that the pleadings amendment should be granted unless they would occasion prejudice that cannot be compensated by costs or an adjournment; they are shown to be frivolous, vexatious or an abuse of process; or they disclose no reasonable cause of action, assuming the facts as pleaded in the proposed amendment are true, unless patently ridiculous or incapable of proof.

[ 16 ] The defendant argues that the Master was correct in finding that the prejudice referred to in Rule 26.01 does not include prejudice resulting from the success of the plea on its merits, and relies on Hanlan v. Serensky , 1996 (Ont. C. A.). This is consistent with the caselaw and I agree. The defendant argues that it would be unfair for the plaintiff to execute a release in favor of 153967 during the pendency of this litigation, but then seek to preclude Swanick from pleading that release an answer to the claim. I agree. The defendant further argues that the claim is different from that originally issued and that the Master’s factual conclusion is incontrovertible. Further, the defendant points to the Master’s finding that even had the limitation period expired, this would be an issue for 153967 to raise, which it did not. It is clear, from my reading of the original claim and the fresh as amended statement of claim that the claims advanced by the plaintiff, now as trustee and not as beneficiary of the trust, advanced different claims as against Swanick. Moreover, the crossclaim asserts no lis as between Swanick and the plaintiff but only contribution and indemnity as against 153967. The Master did not err in holding that there was no consequence to Rutherford regarding the crossclaim but only to 153967.

[ 17 ] I do not find that the Master made any palpable and overriding error in coming to her conclusions. I uphold the Master’s decision and dismiss the plaintiff’s appeal.

Costs

[ 18 ] The parties each submitted costs outlines at the close of submissions. The respondent/defendant, who was successful on his appeal, seeks costs, disbursements and HST of $2,388.25. I find this amount reasonable in light of the appellant/plaintiff’s cost outline, which sought costs on a partial indemnity scale, of $6,050.62. Taking into account the factors set forth at R. 57.01, I award the respondents costs in the amount of $2,388.25.

Carole J. Brown J.

DATE: September 18, 2012