SUPERIOR COURT OF JUSTICE – ONTARIO

COMMERCIAL LIST

RE: Robert L. Wilson, Plaintiff

AND:

Legacy Private Trust, Basel CanadaCorp Limited and James B. Love, Defendants

BEFORE: D. M. Brown J.

COUNSEL:
S. Beddoe, for the Plaintiff

J. Ormston, for the Defendants, Legacy Private Trust and James B. Love

HEARD: February 11, 2013.

REASONS FOR DECISION

I. Amendment of defence/refusals motion

[1] Robert Wilson’s employment as President of the defendant, Legacy Private Trust, ended in January, 2102. He has sued Legacy, its CEO, James Love, and Basel CanadaCorp Limited, a holding company related to Legacy in which Wilson owns shares, for damages for wrongful dismissal and oppressive conduct. Legacy has counterclaimed against Wilson for damages for breach of contract and breach of trust, as well as the return of certain expenses he was reimbursed by Legacy and other amounts. Basel has defended, but not counter-claimed.

[2] This action is subject to case management. Initial discoveries have been completed; follow-up discoveries must be completed by the end of April, 2013. The next case conference will be held on March 18, 2013, following which the parties will be required to schedule a trial date for this fall.

[3] Legacy and Love move for (i) an order requiring Wilson to answer certain questions refused and undertakings given on his October 1, 2012 examination for discovery and (ii) an order granting Legacy and Love leave to amend their Statement of Defence and Counterclaim.

II. Refusals motion

[4] The refusals made by Wilson (Notice of Motion, Schedule “B”, QQ. 38, 43, 47, 54, 58, 73 and 81) all relate to the issue of his efforts to mitigate his damages by finding new employment.

[5] The dispute concerning the questions refused really does not involve whether the questions asked were proper questions, in the sense of relevant questions, but the manner in which the questions should be answered. Wilson took the position that answering the mitigation questions would require him to disclose confidential and sensitive information, such as to whom he wrote during his search efforts, with whom he has had interviews, etc. Wilson was not prepared to answer those questions while Love was present in the examination room. Plaintiff’s counsel offered to provide answers to those questions to defendants’ counsel on a “counsel’s eyes only” basis. The defendants refused the offer.

[6] At Question 43 on Wilson’s discovery his counsel stated that the plaintiff had “a concern about disclosing this information in regard to communications that have occurred between representatives of your client and others.” That is an insufficient evidentiary basis to support the plaintiff’s refusal to provide an answer in the absence of some sort of confidentiality agreement or arrangement.

[7] I have reviewed the questions refused. The questions were all proper questions, relevant to the issue of mitigation. Answers given by the plaintiff enjoy the protection of the deemed undertaking rule. No evidence was adduced to support the fashioning of any further protection, nor did the plaintiff move for a confidentiality order. Accordingly, the plaintiff must provide written answers to the refusals and undertakings identified on Schedule “B” to the Notice of Motion no later than March 1, 2013, and Wilson must re-attend for further examination on any questions arising therefrom no later than the end of April, 2013.

III. Amendment of the Statement of Defence and Counterclaim

[8] As the Legacy/Love Statement of Defence and Counterclaim presently stands, Legacy has counterclaimed against Wilson for: (i) damages for breach of contract and breach of trust (para. 82(a)), and (ii) the return of certain monies paid to him, or on his behalf, by Legacy from the time Wilson started working with RecordXpress – gross salary, bonuses, employer contributions (EI and CPP), reimbursed employee expenses (paras. 82(c), (d) and (e)). Legacy seeks leave to amend its Counterclaim to add the following claims:

(i) damages for breach of confidence, misuse of confidential information and breach of fiduciary duty (para. 82(a));

(ii) an accounting for all monies, expenses and benefits Wilson received from RecordXpress while he was employed at Legacy (para. 82(b));

(iii) the return of Legacy’s portion of employee benefit plan payments made while Wilson worked for RecordXpress (para. 82(e));

(iv) the repayment of all expenses Wilson claimed as employment expenses in his income tax returns and for which he was also reimbursed by Legacy (para. 82(f));

(v) the repayment of all expenses for which he was reimbursed by Legacy and also by RecordXpress (para. 82(f));

(vi) alternatively remedies based on unjust enrichment and quantum meruit (paras. 82(g) and (h)).

[9] Whereas the material facts pleaded in support of the initial Counterclaim amounted to one paragraph which simply repeated and adopted the allegations of fact in the Statement of Defence, Legacy now seeks to amend its Counterclaim to plead just under 30 additional paragraphs of material fact. They can be broken down into the following basic groups of allegations:

(i) An allegation that Wilson had access to confidential client information (paras. 84-90) and was designated by Legacy as a “custodian” of Retirement Compensation Arrangements Trusts (paras. 91-94), Wilson stood in a fiduciary relationship with Legacy, and Wilson breached those duties by secretly approaching certain identified clients to secure their business to the detriment of Legacy (paras. 95-105);

(ii) An allegation that while employed by Legacy, Wilson used Legacy resources to conduct business on behalf of another company, RecordXpress, in breach of his duty of loyalty and his employment contract (para. 106);

(iii) An allegation that Wilson sought reimbursement from both Legacy and RecordXpress for the same expenses (para. 107) and sought income tax deductions for such reimbursed expenses (para. 108), for which Legacy seeks an accounting to determine how much Legacy lost as a result of this conduct (para. 109); and,

(iv) An allegation that Legacy seeks the return of all expenses Wilson claimed as employment expenses in his income tax returns for which he also was reimbursed by Legacy (para. 111).

[10] In Brookfield Financial Real Estate Group Limited v. Azorim Canada (Adelaide Street) Inc., 2012 ONSC 3818, I summarized the principles applicable to motions to amend pleadings as follows:

[23] I adopt, as succinctly summarizing the legal principles applicable to motions to amend pleadings, the following passages from Morden & Perell, The Law of Civil Procedure in Ontario, First Edition:

The rule is mandatory and amendments must be allowed unless the responding party can demonstrate prejudice that cannot be compensated by costs. The prejudice must arise as a result of the amendment and pre-existing prejudice unconnected to the amendment will not suffice…

With the exception of an amendment to plead a statute-barred claim, the onus of proving prejudice is on the party alleging it…

On a motion to amend a pleading, the court does not examine the factual merits of the proposed amendments or the moving party’s motives for seeking the amendment, but it does examine whether as a matter of law, the amendment raises a tenable claim or defence and whether the proposed amendment has been properly pleaded in the sense of complying with the rules that govern pleadings, including sufficient particularity. Put somewhat differently, it makes little sense to grant an amendment that will immediately be challenged as legally unsound, and the court may inquire into the merits to ensure that the amendment is tenable in law and compliant with the rules of pleading. The case law establishes that proposed amendments are to be read generously with allowance for deficiencies in drafting…

Where an amendment to a pleading includes the addition of a party, then the court must also consider whether the joinder would satisfy the requirements of the Rules on the joinder of parties and claims…

[24] Morden and Perell published their text in 2010. A year later the Court of Appeal, in its decision in Marks v. Ottawa (City), identified a list of factors to be considered on a motion to amend under Rule 26.01 which included not only that “no amendment should be allowed which, if originally pleaded, would have been struck”, but that “the proposed amendment must be shown to be an issue worthy of trial and prima facie meritorious”. The Court of Appeal’s analysis of the pleading in that case sheds some light on the precise meaning of that last factor. In upholding the motion judge’s refusal of that part of the motion which sought to amend a pleading to include a claim for negligent misrepresentation the Court stated:

I agree that there should be some scope for a plaintiff to bring a novel claim or argue for the creation of a new tort. In this case, however, the facts alleged fall so far outside of what has been established as negligent misrepresentation that I agree that there is no realistic prospect that the action will succeed.

Consequently, notwithstanding the language in the Marks case that a “proposed amendment must be shown to be an issue worthy of trial and prima facie meritorious”, the specific analysis of the proposed amended claim conducted by the Court of Appeal resembled that performed by a court on a motion to strike a claim (or defence) under Rule 21.01(1)(b). I therefore conclude that on a motion to amend a statement of claim a court will consider the “tenability” of a proposed claim by applying the principles developed under the Rule 21.01(1)(b) analysis.

[11] Turning to the present case, the plaintiff opposed granting leave to amend the Counterclaim on several grounds. First, Wilson submitted that Legacy had known the facts upon which the proposed amendments are based for some time, and in a case managed for efficiency it failed to put forward a reason for its delay in proposing the amendments. I see no merit in this submission. Given the stage of the proceeding, Wilson will suffer no prejudice in achieving a fall trial date since I can give directions concerning the conduct of any discoveries arising from an amendment.

[12] Second, Wilson argued that the proposed amendments do not disclose tenable causes of action. I reject this argument. On their face the proposed amendments plead tenable causes of action. In his factum Wilson argued that: “No facts exist – nor have the Defendants proposed pleading any new facts – that would give rise to a breach of confidence, misuse of confidential information and breach of fiduciary duty.” I do not understand that submission; proposed paragraphs 84 to 105 clearly set out material facts related to those claims. So, too, the paragraphs pleading, in essence, improper double-recovery for expenses paid to him by his employer, Legacy, contain a tenable claim for breach of employment contract and breach of duty as a senior fiduciary of Legacy. Whether Legacy can establish those allegations on evidence adduced at trial is neither here nor there on this motion to amend the pleading. Accordingly, I grant Legacy leave to amend its Counterclaim.

IV. Summary

[13] By way of summary, I make the following orders:

(i) Wilson must provide written answers to the refusals and undertakings identified on Schedule “B” to the Notice of Motion no later than March 1, 2013, and Wilson must re-attend for further examination on any questions arising therefrom no later than the end of April, 2013;

(ii) Legacy is granted leave to amend its Statement of Defence and Counterclaim in the form set out in Schedule “A” to its Notice of Motion;

(iii) Legacy shall deliver its Amended Statement of Defence and Counterclaim by Friday, February 22, 2013;

(iv) Wilson shall deliver his Amended Reply and Defence to Counterclaim by Friday, March 15, 2013; and,

(v) Any further discoveries of either party on the amendments must be completed by the end of April, 2013.

[14] As to costs, I do not understand why Wilson opposed this motion. Accordingly, I award Legacy and Love their costs of this motion, but in the cause of the action.

(original signed by)_______

D. M. Brown J.

Date: February 15, 2013