COURT FILE NO.: CV-07-330088

MOTION HEARD: January 18, 2012

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 1520658 Ontario Inc. v. Her Majesty the Queen in Right of the Province of Ontario represented by the Minister of Transportation for the Province of Ontario

BEFORE: MASTER R.A. MUIR

COUNSEL: Richard Butler for the plaintiff Ronald E. Carr for the defendant

REASONS FOR DECISION

[1] There are two motions before the court in connection with this action. The first is brought by the defendant (the "MTO") pursuant to Rule 26.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the "Rules") for an order granting it leave to amend its statement of defence and counterclaim to plead certain facts relating to the question of whether the plaintiff is a "tenant at will of the Crown" pursuant to section 50 of the Mining Act, R.S.O. 1990, c. M.14 (the "Mining Act") and to plead that no compensation is owed to the plaintiff as claimed, pursuant to section 65(1) of the Public Lands Act, R.S.O. 1990, c. P.43 (the "PLA").

[2] The second motion is brought by the plaintiff pursuant to Rule 25.11 for an order striking out certain allegations in the MTO's existing statement of defence and counterclaim as being scandalous, vexatious or an abuse of the process of this court. In particular, the plaintiff's notice of motion takes issue with various paragraphs alleging fraud or conduct akin to fraud.

[3] Many of the plaintiff's concerns with respect to the MTO's current statement of defence and counterclaim (especially those dealing with fraud) have now been addressed by the MTO in its revised version of its draft amended statement of defence and counterclaim. However, the plaintiff maintains its objections to paragraphs 59 and 61 of the current version of the draft amended statement of defence and counterclaim, along with objecting to the MTO's proposed new paragraphs 64-67. The plaintiff takes the position that the impugned paragraphs are improper based on the doctrines of res judicata and abuse of process.

BACKGROUND AND NATURE OF THE PROCEEDINGS

[4] The plaintiff is the holder of certain mining claims in the vicinity of Sudbury, Ontario (the "Mining Claims"). These claims were apparently staked and recorded by the plaintiff between April 9 and 14, 2003. On April 15, 2003, the mining claims were recorded with the Ministry of Northern Development and Mines.

[5] Around the same time, the MTO was considering a possible realignment of Highway 69, a portion of which ran through an area in the vicinity of the plaintiff's Mining Claims. On June 23, 2003, the Crown Lands bounded by the Mining Claims were withdrawn from staking by Withdrawal Order W-SO-25/03. Of course, this took place after the plaintiff had recorded the Mining Claims.

[6] The Highway 69 realignment work was commenced in late 2004 or early 2005. As a result of this work, Highway 69 was shifted eastward, which resulted in the road bisecting the Mining Claims, thereby making a portion of those claims unavailable to be developed and mined by the plaintiff.

[7] The plaintiff alleges that it became aware of the proposed realignment of Highway 69 in or about December, 2004. It appears that it then delivered correspondence to the MTO in January, 2005, asserting that the MTO had unlawfully interfered with its mining rights. In response to this assertion, the MTO commenced an application in this court on July 17, 2006 (the "Application"). The Application sought, among other things, a declaration that the Mining Claims were invalid and a declaration that the lands upon which the Mining Claims were staked were in the actual use and occupation of the Crown prior to April 15, 2003. In the alternative, in the event that the Mining Claims were found to be valid, the MTO sought a declaration that the plaintiff was a tenant at will of the Crown, pursuant to section 50 of the Mining Act, thereby allowing the Crown to terminate the tenancy upon notice.

[8] The plaintiff took the position that the matters raised by the MTO in the Application were properly matters that should be dealt with by the Mining and Lands Commissioner (the "Commissioner"), in accordance with section 105 of the Mining Act.

[9] Section 109 of the Mining Act allows a court to transfer such claims to the Commissioner upon the application of any party. It appears that the MTO was agreeable to such a transfer. On January 22, 2007, Justice Low made an order on consent transferring the Application to the Commissioner, in its entirety.

[10] On March 26, 2007, counsel for the MTO wrote to the Registrar for the Commissioner and set out the basis upon which the hearing before the Commissioner would proceed, as agreed to by the parties. Of particular importance to this motion, is the agreement by the parties that the hearing would "proceed as a trial of the issues raised in the materials". At the time, the "materials" consisted of the MTO's Application and nothing else.

[11] On August 8, 2007, the plaintiff issued a notice of cross application (the "Cross-Application"). The Cross-Application sought, among other things, a dismissal of the Application and a declaration that the mining claims had been validly staked and recorded. The plaintiff also sought a declaration that the MTO failed to comply with the provisions of section 51(6) of the Mining Act prior to acquiring surface rights to the area encompassing the Mining Claims. It appears that the MTO did not file a response to the Cross-Application but rather chose to rely on the materials it had previously delivered in connection with the Application.

[12] The hearing took place before M. Orr, Deputy Mining and Lands Commissioner and L. Kamerman, Mining and Lands Commissioner (the "Commissioners"), between May 12 and 15, 2008, with argument being heard on June 26, 2008. Most of the hearing was devoted to the question of whether the lands upon which the Mining Claims were staked were in the actual use and occupation of the Crown prior to April 15, 2003. On October 14, 2008, the Commissioners released their decision which dismissed the MTO's application and declared the Mining Claims to be valid. Paragraph 1 of the Commissioners' formal order reads as follows:

1. IT IS ORDERED that the various applications of the Minister of Transportation be and are hereby dismissed.

[13] The formal order also provided that the various relief sought on the Cross-Application was to be addressed in the Commissioners' reasons for decision.

[14] At page 16 of their October 14, 2008 reasons for decision, the Commissioners noted as follows:

The tribunal notes the Respondent's [the plaintiff in this action] request to have it declared a "tenant at will of the Crown" pursuant to subsection 50(1) of the Act. The respondent anticipates that the Crown can terminate the tenancy upon notice. Given that the Respondent is reiterating a status already accorded by the Act in that subsection, it is pointless to make such a declaration. Since it would be up to the Crown to press an action for cancellation in the proper forum, the actions of the Crown in this regard are for the Crown to decide. The tribunal is not prepared to say what those actions should be in this case.

[15] This was obviously an error. At no time did the plaintiff in this action request the Commissioners to have it declared a "tenant at will of the Crown". In fact, it was the MTO that had requested, as part of the relief set out in the Application, a declaration that the plaintiff was a tenant at will of the Crown.

[16] As a result, the plaintiff's lawyer wrote to the Commissioners advising them of this error and seeking a correction. On October 21, 2008 the Commissioners released an amended order which acknowledged the error and rescinded page 16 of their reasons for decision and replaced it with a revised page 16. The paragraph I have quoted above was deleted from the reasons for decision and the following was substituted in its place:

The tribunal notes the Respondent's submissions regarding a "tenant at will of the Crown" and the Respondent's assumption that the issue was abandoned. While the issue may have been raised at some point in the hearing, the Applicant [MTO] has not pursued it and the tribunal is not prepared to deal with it.

[17] It should be noted that the MTO did not in any way object to this revised version of page 16.

[18] Page 16 of the Commissioners' reasons for decision also dealt with the relief requested by the plaintiff in its Cross-Application in connection with section 51(6) of the Mining Act. That portion of the reasons for decision reads as follows:

The tribunal has noted the Respondent Company's request for a declaration that the Applicant failed to comply with subsection 51(6). Section 51 deals with the right of the holder of an unpatented mining claim to use the surface rights (for prospecting and the like) and it sets out a process to deal with the possible frictions that might ensue where the surface rights are sold off or otherwise separated from the mining rights. In this case, the Respondent Company has indicated that it staked its Mining Claims solely for the purpose of protecting its aggregate interests and this in itself may raise issues for the parties at some point. As the process under section 51 has not been initiated (and the tribunal has made no ruling on whether it even applies), there is no need for such a declaration.

[19] The MTO appealed the Commissioners' decision to the Divisional Court and then to the Court of Appeal. Both appeals were dismissed. Neither the Divisional Court nor the Court of Appeal made any findings with respect to the "tenant at will of the Crown" issue or the issue regarding section 51 of the Mining Act.

[20] The statement of claim in this action was issued by the plaintiff on March 26, 2007. The plaintiff seeks damages in the amount of $50,000,000.00 for expropriation, injurious affection, conversion, negligence, trespass and nuisance. The parties agreed to hold this action in abeyance while the proceedings before the Commissioner were underway. On March 26, 2009, the court issued a status notice due to the fact that no defence had been filed. In response to this, the MTO delivered its statement of defence and counterclaim on April 22, 2009. The plaintiff's reply and defence to counterclaim was served on or about May 5, 2009, although it does not appear to have been filed with the court.

[21] Following the release of the decision of the Court of Appeal in May, 2011 dismissing the MTO's appeal from the Commissioners' decision, the parties once again turned their attention to this action. A timetable was agreed to and a consent order approving the timetable was made by Master Glustein on September 8, 2011. As part of those discussions, the MTO raised the issue of its proposed amendments to its statement of defence and counterclaim. Shortly thereafter, the plaintiff advised the MTO that it would not consent to the proposed amendments and also advised of its position with respect the paragraphs in the statement of defence and counterclaim that it believed should be struck out.

[22] The MTO then served its motion seeking leave to amend its statement of defence and counterclaim, originally returnable on November 7, 2011. The plaintiff responded with its cross-motion. Both motions were then adjourned by Master Abrams to be heard by me on January 18, 2012.

[23] The proposed amendments to the MTO's statement of defence and counterclaim read as follows:

64. In the alternative, the Ministry states that the plaintiff was a tenant at will of the Crown. The Ministry pleads and relies upon section 50(1) of the Act.

65. The Ministry further states that the tenancy of the plaintiff was terminable at the will of the Crown and that such tenancy was terminated either by the Crown taking possession of the land to construct the expansion of Highway 69 or by reason of written notice given by the Crown to the plaintiff.

66. The Ministry further states that no compensation is due to the plaintiff upon termination of its tenancy at will. In particular, the Ministry states that no right of compensation is due the plaintiff under any provision of the Act. In the further alternative, the Ministry states that no compensation is due the plaintiff under the common law.

67. Finally, the Ministry states that in accord with section 65(1) of the Public Lands Act no compensation is due to the plaintiff in respect to its Mining Claims as said provision reserves to the Crown the right to construct on the land any road "...without making compensation".

[24] The plaintiff does not object to the last sentence of the proposed new paragraph 66 but does object to the balance of that paragraph as well as to paragraphs 64, 65 and 67.

[25] The paragraphs in the statement of defence and counterclaim to which the plaintiff continues to object read as follows:

59. The Ministry states that the Act requires that the holder of a mining claim following the recording of the claim, perform or cause to be performed such annual audits of assessment work as are prescribed and submit reports of the assessment work done. The Ministry states that the plaintiff failed to carry out such work or report in accord with the requirements of the Act.

60. The Ministry states that __ said claims have expired or were abandoned by reason of the failure of the plaintiff to carry out such assessments or perform such ground work as required by the Act.

THE POSITIONS OF THE PARTIES

[26] The MTO takes the position that the Rule 26.01 is mandatory and requires that leave shall be granted to amend a pleading at any stage of a proceeding, unless it would result in prejudice to the opposing party. The plaintiff argues that the proposed amendments should not be allowed (and the remaining impugned paragraphs of the statement of defence and counterclaim should be struck out) because they are caught by the doctrine of res judicata and are an abuse of the process of this court.

ANALYSIS

[27] Rule 26.01 provides as follows:

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.

[28] Rule 25.11 is also germane to these motions. That Rule reads as follows:

25.11 The court may strike out or expunge all or part of a pleading or other document, with or without leave to amend, on the ground that the pleading or other document,

(a) may prejudice or delay the fair trial of the action;

(b) is scandalous, frivolous or vexatious; or

(c) is an abuse of the process of the court.

[29] The MTO is correct when it argues that as a general proposition, proposed amendments under Rule 26.01 are presumptively approved, unless prejudice would result that could not be compensated for by costs or an adjournment. However, there is no absolute right to amend pleadings. The test to be applied is set out in Marks v. Ottawa (City), 2011 ONCA 248 at paragraph 19 where Court of Appeal stated as follows:

19 Although the general rule is that amendments are presumptively approved, there is no absolute right to amend pleadings. The court has a residual right to deny amendments where appropriate: Daniele v. Johnson (1999), 1999 CanLII 19921 (ON SCDC), 45 O.R. (3d) 498 (Div. Ct.) at paras. 11-15. Further, I would agree that the proper factors to be considered are those first set out in Simrod v. Cooper, [1952] O.W.N. 720 (H.C.J. Master) at p. 721, aff'd at p. 723 (H.C.J.), and quoted with approval in Vaiman v. Yates (1987), 1987 CanLII 4345 (ON SC), 60 O.R. (2d) 696 (H.C.J.) at p. 698, which can be summarized as follows:

• An amendment should be allowed unless it would cause an injustice not compensable in costs.

• The proposed amendment must be shown to be an issue worthy of trial and prima facie meritorious.

• No amendment should be allowed which, if originally pleaded, would have been struck.

• The proposed amendment must contain sufficient particulars.

[30] In addition, there is authority for the proposition that that Rule 25.11 can be used to strike out claims that amount to an improper attempt to relitigate issues that have been decided in earlier proceedings. In Wernikowski v. Kirkland, Murphy & Ain, 1999 CanLII 3822 (ON CA), [1999] O.J. No. 4812 (C.A.); leave to appeal refused, [2000] S.C.C.A. No. 98, the Court of Appeal stated as follows:

12 Like other rules (e.g. Rule 21.01), this provision [Rule 25.11] is designed to allow for an early and expeditious determination of claims that cannot succeed. As the exercise of the power set out in Rule 25.11 denies a litigant a full trial of the merits of the claim, it must be exercised only in the clearest of cases. Claims that are doubtful in law or factually weak should not be foreclosed. Allowance must also be made for inadequacies in the drafting of pleadings: Nash v. Ontario (1995), 1995 CanLII 2934 (ON CA), 27 O.R. (3d) 1 at 5-6 (C.A.); Temilini v. Ontario Provincial Police (Commissioner) (1990), 1990 CanLII 7000 (ON CA), 73 O.R. (2d) 664 at 668 (C.A.).

14 While acknowledging that the remedial power in Rule 25.11 must be used cautiously, there are cases in which pleadings are properly struck as an abuse of process where they amount to an improper attempt to relitigate issues that have been finally decided in earlier proceedings: Foy v. Foy (1978), 1978 CanLII 1394 (ON CA), 20 O.R. (2d) 747 at 748 (C.A.); Donmor Industries Ltd. v. Kremlin Canada Inc. (No. 1) (1991), 1991 CanLII 7360 (ON SC), 6 O.R. (3d) 501 at 506 (Gen. Div.).

[31] I also rely on the observations of Justice Strathy in Carney Timber Co. v. Pabedinskas, 2008 CanLII 63163 (ON SC), [2008] O.J. No. 4818 (S.C.J.). At paragraph 16 of that decision Justice Strathy summarized the law relating to the use of Rule 25.11 and noted, in part, as follows:

16 . . . pleadings that are clearly designed to use the judicial process for an improper purpose are an abuse of process – these include harassment and oppression of other parties, multifarious proceedings, the re-litigation of issues previously decided and the litigation of matters that have been concluded.

[32] In my view, it is clear from these authorities that proposed amendments must be scrutinized to determine whether they meet the requirements of Rule 25.11. If they do not, the proposed amendments should not be allowed.

[33] As stated above, the plaintiff argues that the proposed amendments are barred by the doctrine of res judicata and constitute an abuse of process. The law regarding this issue is summarized by the Court of Appeal in McQuillan v. Native Inter-Tribal Housing Co-Operative Inc., 1998 CanLII 6408 (ON CA), [1998] O.J. No. 4361 (C.A.). Beginning at paragraph 8 of that decision, the court stated as follows:

8 The respondent does not contend that the cause of action is the same in both applications. Indeed, it is not. The respondent relies rather on a wider principle, often treated as covered by the plea of res judicata. The doctrine of res judicata, in its wider application, prevents a person from relying on a claim or defence which he or she had the opportunity of putting before the court in the earlier proceedings but failed to do so. This principle was adopted by the Supreme Court of Canada in Maynard v. Maynard, 1950 CanLII 3 (SCC), [1951] S.C.R. 346 (at 358-59 citing the often-quoted words of Wigram V.C. in Henderson v. Henderson, (1843) 67 E.R. 313 (Eng. V.C.)

• ... where a given matter becomes the subject of litigation in and of adjudication by a court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward only because they have from negligence, inadvertence or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation and which the parties, exercising reasonable diligence, might have brought forward at the time.

9 The court in Maynard also adopted the following excerpt in the judgment of the Judicial Committee in Hoystead v. Commissioner of Taxation 1925 CanLII 607 (UK JCPC), [1926] A.C. 155 at 165] (at 359):

Parties are not permitted to begin fresh litigations because of new views they may entertain of the law of the case, or new versions which they present as to what should be a proper apprehension by the Court of the legal result either of the construction of the documents or the weight of certain circumstances.

If this were permitted litigation would have no end, except when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted, and there is abundant authority reiterating that principle.

[34] Having reviewed the proposed amendments to the statement of defence and counterclaim and the material filed in connection with these motions, I have come to the conclusion that the proposed amendments in paragraphs 64, 65 and 66 should not be allowed (subject to the portion of paragraph 66 to which the plaintiff does not object). All of those proposed amendments flow from the issue of whether the plaintiff is or was a tenant at will of the Crown. The MTO's Application specifically sought a declaration to that effect and a declaration that any such tenancy could be terminated upon notice. On the consent of both parties, the MTO's Application, in its entirety, was transferred to the Commissioner. The MTO itself advised the Commissioner that the hearing was to "proceed as a trial of the issues raised in the materials". This was not a situation where a certain issue was transferred in order to have a hearing to determine a particular point (for example, the validity of the Mining Claims). Justice Low's order stated quite simply that "the within proceeding shall be transferred to the Mining and Lands Commissioner".

[35] The recitals found at the beginning of the formal order of the Commissioners clearly reference the MTO's request for a declaration that the plaintiff was a tenant at will as being part of the matter before them. Paragraph 1 of their order unequivocally stated that the "various applications of the Minister of Transportation be and are hereby dismissed".

[36] The MTO argues that this order must be read in conjunction with page 16 of the Commissioners' reasons for decision. The MTO submits that the original version of page 16 makes it clear that the Commissioners concluded that it was premature for them to deal with the issue of tenancy at will. However, the original page 16 of the Commissioners' reasons for decision was rescinded by their order of October 21, 2008 and replaced by a different version. The revised version of page 16 states that the MTO did not pursue the tenancy at will issue and that the Commissioners were not prepared to deal with it for that reason. The MTO took no objection to the Commissioners' revisions to page 16. The original version of page 16 has been rescinded and replaced. In my view, it is not appropriate to attempt to interpret the Commissioners' order with reference to a rescinded portion of their reasons for decision.

[37] Moreover, I do not interpret the Commissioners' reasons for decision as suggesting that the tenancy at will issue was premature but rather that the MTO chose not to pursue the issue when it had the opportunity to do so.

[38] In my view, having included the tenancy at will issue in its Application which was then referred to the Commissioner, it was incumbent upon the MTO to deal with it at the hearing of the Application before the Commissioners. It chose not to do so and it also appears that it chose not to pursue the issue on appeal. In my view, it is improper for it to seek to do so now as part of this proceeding, given the unambiguous dismissal order of the Commissioners.

[39] I have therefore concluded that the doctrine of res judicata is applicable to the proposed amendments dealing with the tenancy at will issue. In my view, had the opposed portions of those proposed amendments been part of the original pleading they would have been struck out as an abuse of process. I have therefore concluded that those proposed amendments should not be allowed.

[40] I do not, however, view the proposed amended paragraph 67 in the same manner. This proposed paragraph seeks to plead that no compensation is owed to the plaintiff, pursuant to section 65(1) of the PLA. The plaintiff argues that the issue of the disposition of surface rights for a public purpose in connection with section 51 of the Mining Act was raised before the Commissioner, as set out in the plaintiff's Cross-Application. The plaintiff argues that this is the same issue raised by section 65 of the PLA. While I agree that this issue was certainly raised in the Cross-Application, in my view the manner in which the Commissioners dealt with this issue was very different from the way in which they dealt with the tenancy at will issue. The Commissioners' formal order clearly states that the issues raised by the Cross-Application were to be addressed in accordance with their reasons for decision. There is no express order with respect to the section 51 issue. The Commissioners' reasons for decision at page 16 state that the process for dealing with surface rights provided for by section 51 of the Mining Act "may raise issues for the parties at some point". They go on to state that "[a]s the process under section 51 has not been initiated (and the tribunal has made no ruling on whether it even applies), there is no need for such a declaration". In my view, the Commissioners clearly took the position that the section 51 issue was premature and for that reason they were not prepared to make the declaration requested by the plaintiff. Given this finding, it was simply not an issue that the Commissioners could or should have ruled upon at the time of the proceedings before them. It is my view, therefore, that the doctrine of res judicata does not apply to the proposed amended paragraph 67. That proposed amendment should be allowed.

[41] The plaintiff argues that paragraphs 59 and 61 of the current version of the statement of defence and counterclaim should be struck out, also on the basis of the doctrine of res judicata. The plaintiff submits that those paragraphs are inconsistent with the finding of the Commissioners that the plaintiff's Mining Claims are valid.

[42] I do not read those paragraphs in that fashion. In my view, those paragraphs simply take the position that the plaintiff, as a holder of valid Mining Claims, may have lost those claims as a result of its failure to comply with its ongoing obligations under the Mining Act. They do not suggest that the Mining Claims were invalid from the outset but rather that they may have been abandoned or may have expired subsequent to the date they were recorded with the Ministry of Northern Development and Mines. I see nothing inconsistent between those portions of the MTO's statement of defence and counterclaim and the decision of the Commissioners. Consequently, I am not prepared to make an order striking out those paragraphs.

ORDER

[43] I therefore order as follows:

(a) the MTO is hereby granted leave to amend its statement of defence and counterclaim in accordance with the draft amended statement of defence and counterclaim attached as Schedule "A" to the MTO's notice of motion dated November 10, 2011, except for those proposed amendments set out at paragraphs 64, 65 and the first two sentences of paragraph 66;

(b) the relief sought by the plaintiff in paragraphs (a) and (b) of its cross-motion is dismissed, subject to the order in paragraph (a), above; and,

(c) if the parties are unable to agree on the issue of costs, they may make brief written submissions by no later than February 3, 2012.

Master R.A. Muir

DATE: January 23, 2012