SUPERIOR COURT OF JUSTICE – ONTARIO

COMMERCIAL LIST

RE: Windsor Raceway Inc., Plaintiff

AND:

Ontario Lottery and Gaming Corporation, Defendant

BEFORE: D. M. Brown J.

COUNSEL:
W. Sasso and J. Horvat, for the Plaintiff

N. Finkelstein, A. Sinha, A. Kalamut and D. Sinnadurai, for the Defendant

HEARD: April 28, 2014

REASONS FOR DECISION

I. Motion to amend a statement of claim on what was to be the first day of the trial

[1] Monday, April 28, 2014, was to be the day I started hearing the trial of this action. Instead, I heard a motion by the plaintiff to amend its Statement of Claim. At a pre-trial conference a few weeks earlier the expedited trial of this action had been adjourned at the request of the parties, this pleadings motion scheduled, and time set aside for a two-day summary judgment motion on August 21 and 22, 2014.

[2] It is a shame that this pleadings motion ever came to pass. Let me explain why.

II. Background facts

[3] In April, 2012, Windsor Raceway Inc. (“WRI”) sued the Ontario Lottery and Gaming Corporation (“OLG”) for damages arising from OLG’s March, 2012 termination of the slots program at the racetrack. OLG defended the action in October, 2012.

[4] In the first quarter of 2013 both parties cranked up their summary judgment motion machines. At an April, 2013 case conference C. Campbell J. intervened, proposing, in a most reasonable fashion, that the parties consider, instead, an expedited trial date and the creation of a plan to get them there. As his April 23 endorsement stated: “Parties to consider proposal for the direction of an expedited trial of issue(s)”. The parties ultimately agreed to that proposal.

[5] There then began an exchange of communications between counsel to document that plan. On May 3, 2013, plaintiff’s counsel wrote to OLG’s counsel enclosing a “draft issues, positions and evidence list” for consideration. Plaintiff’s counsel explained that the approach he was proposing had been adopted by myself in an earlier trial – Beach v. Toronto Real Estate Board, 2010 ONSC 30001, aff’d 2010 ONCA 883 – and “was most successful in securing the just, most expeditious and least expensive determination of the civil proceeding on the merits”. I cannot claim any originality for that approach to the preparation for and the conduct of civil trials. I was simply following on, and trying to build upon, the earlier creative work of C. Campbell J.

[6] On July 16 counsel re-attended before C. Campbell J. who endorsed: “Counsel have agreed + confirmed an issues list attached. Counsel to prepare + confirm a timetable that would include a 2 week trial to be held in March or Apr. 14.” C. Campbell J. attached the Issues List to his endorsement. It should go without saying, but in the circumstances it obviously needs to be said, that by so doing C. Campbell J. made the Issues List part of a judicial order. The Issues List was not a “passing thought”, a “fancy” or a “musing”, it was a document approved by and incorporated into a judicial order and therefore enjoyed the stature and weight of a judicial order. His order established the issues for trial.

[7] By the end of July, 2013, the plaintiff was asking OLG to confirm that it approved certain changes to the Issues List:

When I receive your confirmation, I will write to Justice Campbell and ask that the final Issues List be made an official part of the pleadings in the court file.

Once the Issues List is filed and the trial dates are fixed, we can outline a more specific timetable which can be subsequently filed with the Court.

[8] On September 11 plaintiff’s counsel sent to OLG clean copies of the Issues List and Timetable and requested that once OLG counsel had instructions, “Please let me know and I will file both documents with the Court.” A follow-up email on September 24 asking whether OLG’s counsel had “instructions yet on the Issues List and Timetable” elicited the response: “Both approved.”

[9] On September 26 plaintiff’s counsel sent the Issues List and Timetable to C. Campbell J.:

You had asked that we forward the final documents to you so that the appropriate dates can be entered into the Court’s calendar and any appropriate endorsement made in the Court file.

We note that all parties have consented to the form and content of the enclosed documents.

[10] The enclosed Issues List identified three main issues – Termination, Benchmarking and Expropriation of Goodwill – covering both liability and damages, together with the positions of the parties on each issue and agreed upon facts in respect of each issue. The Timetable listed all steps to be completed prior to the trial date of April 28, 2014.

[11] C. Campbell J. retired from this Court shortly thereafter.

[12] In accordance with the Timetable discoveries were held in January, 2014. On the January 22, 2014 examination of the plaintiff’s representative a question was posed, and plaintiff’s counsel queried the relevance of the question given the agreed facts set out on the Issues List. That elicited the following from OLG’s counsel:

The common Issues List does not define all the issues between the parties. That is defined by the pleadings.

It was never intended that the Issues List narrowed the scope of discovery or narrowed the scope of a trial. Those issues are dealt with at trial, but they are not the only issues. The issues are still, and always were, dealt with by the pleadings.

[13] With all due respect to OLG’s counsel, that position was wrong. Of course the Issues List was intended to narrow the issues in dispute, both for discovery and for trial. The case management judge had made it clear that in exchange for an expedited trial date – which the Court gave the parties – the parties had to work to narrow the issues to their core and proceed on that basis. The parties worked for five months to agree upon an Issues List. That was not a court-directed make-work project to enhance lawyers’ billings. It had a purpose tied to the fundamental principle found in Rule 1.04(1) of the Rules of Civil Procedure. It was a tool the Court directed the parties to use – if they wanted an expedited trial date – in order to focus the trial on the essence of the parties’ dispute.

[14] The plaintiff then moved on certain refusals made by the defendant on its examination for discovery. Master Jean rendered her decision on April 1, 2014. No appeal was taken from her decision. Accordingly, the comments which follow do not derogate from the parties’ obligation to comply with her reasons.

[15] During the course of her reasons Master Jean made the following observations about the Issues List:

The parties did not agree as to whether the “issues list” prepared by the parties in connection with two summary judgment motions could guide the court in the determination of relevance. The plaintiff sought to rely upon the position it took in respect of various issues contained in the issues list. On the other hand, the defendant submitted a more restrictive approach be taken, that regard should be had only to the pleadings in deciding relevance.

The position taken by a party in relation to the issue in the action, as stated in the “issues list” does not, in my view, operate to expand the scope of the pleadings and, thereby, does not broaden the scope of discovery. There is, in my view, a real potential for mischief if this submission was given effect and I decline to do so.

As well, I am not prepared to accept the “issues list” as definitive of the issues in the action. It would appear that the issues list was prepared as an aid for the court in dealing with the scheduling of two motions for summary judgment. In my view, the issues list was prepared for particular purposes and was not intended by the parties, and certainly not the defendant, to be definitive as to the issues in the action to be tried. It was clear that there was no concession that the issues list was somehow applicable to determine the relevance of questions on examination for discovery.

I do not know what record was before Master Jean on the refusals motion. However, with all due respect to the Master, she was incorrect in stating that the Issues List was prepared as an aid for the court in dealing with the scheduling of two motions for summary judgment. Quite the contrary; it was the work-product of a proposal made by the case management judge to scope the issues for trial in order to secure an expedited trial date. From the record placed before me, it was crystal clear that the Issues List was intended by the court to define the issues, in a definitive way, for adjudication at the trial – that was its raison d’être.

[16] On April 1, 2014, plaintiff’s counsel wrote to OLG’s stating:

[A]ccepting that there was a genuine misunderstanding on whether the Issues List is part of the pleadings, the problem can and should be rectified by an amendment to the pleadings to incorporate the Issues List.

We have taken the liberty of redrafting and attach WRI’s amended statement of claim to (a) incorporate all aspects of the Issues List, and (b) the additional facts that support WRI’s causes of action arising from the documentary and oral discovery of OLG that followed the preparation of the Issues List. We also attach a fresh statement of claim accepting the underlines and strikethroughs in the amended claim.

We seek your comments and consent to the proposed amendments and the delivery of the fresh statement of claim.

On April 1, OLG’s counsel, Mr. Sinha, replied:

We do not consent to the amendment of WRI’s Statement of Claim. There is no basis for an amendment at this stage of the proceeding.

[T]here was never any agreement that the Issues List amended the pleadings…

[17] So, in the circle of life that is the Toronto motions culture, an Issues List developed at the suggestion of an experienced case management judge to avoid summary judgment motions and to secure an expedited trial of a dispute on its merits, now finds itself confined to the dustbin of “judicial nice tries”, with the parties turning their backs on the proffered expedited trial date and hunkering down for summary judgment motions.

III. Analysis

[18] In Brookfield Financial Real Estate Group Limited v. Azorim Canada (Adelaide Street) Inc., I attempted to summarize the principles governing the amendment of pleadings:

The analysis must start with a consideration of Brookfield’s request to amend its Statement of Claim. The relevant portions of Rule 26 of the Rules of Civil Procedure read 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.

26.02 A party may amend the party’s pleading,

(a) without leave, before the close of pleadings, if the amendment does not include or necessitate the addition, deletion or substitution of a party to the action…

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…

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.[^1]

[19] By the end of last September the parties had developed a “package of issues” for trial and had been given an expedited trial date. They did not take advantage of the service given to them by this Court; they spurned their trial date and have moved back into summary judgment mode. Having foregone the opportunity provided by this Court for an expedited trial of their dispute, I see nothing about the timing of the proposed amendments to the Statement of Claim to raise concern or cause prejudice – the parties are back into pre-trial mode.

[20] In its factum OLG advanced four main arguments opposing the proposed amendment:

(i) some proposed amendments were statute-barred;

(ii) some proposed amendments “completely change the character of the action, to the extent of withdrawing a central admission of good faith in the performance of the Site Holder Agreement”;

(iii) some proposed amendments are not covered by the Issues List; and,

(iv) some proposed amendments are pleas of evidence and argument or a combination of both.

Amendments statute-barred?

[21] First, if the defendant takes the view that some of the amendments raise statute-barred matters, the defendant can plead over and assert a prescription defence. On its part, the plaintiff contended that the amendments simply incorporated all aspects of the Issues List and included additional facts gained from discovery.

[22] The reality lies somewhere in between.

[23] Many of the proposed amendments objected to by OLG on the basis that they were statute-barred – the “yellow” colour-coded paragraphs in Schedule 1 to its Factum – consisted of nothing more than a pleading of historical facts which could be described as “context”. I see nothing objectionable or prejudicial about those proposed amendments.

[24] The issue is less clear when one considers paragraph 53 of the proposed Amended Statement of Claim which talks about OLG breaching “its obligations to act in good faith under the terms of the LOI and the benchmarking obligations under Article 6 of the Site Holder Agreement”. The later claim was previously asserted by the plaintiff; the former is new. When read with proposed paragraph 58, one could form the view that the plaintiff appears to be asserting a claim for damages arising prior to the termination of the Revised Agreement based on bad faith performance of that agreement by OLG: see the damages claimed in paragraph 56(b) of the proposed Amended Statement of Claim.

[25] If so, in that respect the plaintiff would appear to be proposing amendments going beyond the matters identified on the Issues List. However, in oral argument plaintiff’s counsel stated that the damages claimed in paragraph 56(b) were forward-looking from the date of the notice of termination. Given that binding clarification, I conclude that the proposed amendments do not expand the claim from the existing one of post-termination damages.[^2]

[26] Accordingly, on the record before me, I cannot clearly conclude that some of the amendments assert a new claim which would be statute-barred. As a result, I think the best way to balance the interests of both parties and to ensure a fair trial – assuming the parties ever want to get to trial – would be to impose, as a condition of granting the amendment, an order that the plaintiff cannot conduct any examination for discovery of OLG or motion-related cross-examination of OLG affiants on the amendments. That condition should not prejudice the plaintiff since its counsel, in his April 1, 2014 letter, contended that the amendments simply incorporated all aspects of the Issues List and included “the additional facts that support WRI’s causes of action arising from the documentary and oral discovery of OLG that followed the preparation of the Issues List”. On the other hand, the condition will operate to reduce the pre-trial cost consequences to OLG of the amendments.

Alleged withdrawal of an admission

[27] As to the defendant’s argument that by withdrawing paragraph 12 of its original Statement of Claim[^3] and advancing, instead, a claim of bad faith contract performance, the plaintiff was withdrawing a critical admission, I see no prejudice at trial to the defendant as long as the plaintiff is not permitted to deliver a “fresh Statement of Claim titled ‘Fresh Statement of Claim’ without underlining” and, instead, files a black-lined copy of the Amended Statement of Claim. The black-lined copy will make apparent the deletion of paragraph 12, and the defendant will be able at trial to cross-examine the plaintiff’s representatives about their apparent volte-face, perhaps to good effect, or perhaps not. Indeed, one might question why the defendant would oppose such an amendment - provided it was transparent through black-lining - given the potential forensic benefit at trial.

Absence of proposed amendments from the Issues List

[28] Third, the defendant opposed the amendment, in part, because some of the proposed changes were not on the Issues List. I find that argument most curious given the defendant’s earlier disavowal of the pleadings value of the Issues List. In any event, on this point OLG does not say that these amendments fail to assert a tenable claim at law, so I see no prejudice.

Argumentative amendments

[29] Finally, OLG opposed several amendments[^4] on the basis that they were argumentative – “overview akin to a factum” – or, in one case, evidence. Frankly, life “in the litigation fast lane” is too short to get too fussed about this stuff. This is a multi-million dollar claim. The parties are sophisticated commercial players. They are well-represented by sophisticated litigation counsel. This case will be tried by a judge of the Commercial List. And a bit of argument in a Statement of Claim is going to mislead or prejudice the opposing party or befuddle the trial judge? I think not. I see no prejudice.

IV. Summary

[30] For these Reasons I grant the plaintiff’s motion, but only in part:

(i) I grant the relief sought in paragraph (a) of the Notice of Motion permitting the plaintiff to amend its Statement of Claim as set out in the Amended Statement of Claim found at Tab 2D of its motion record, but on the conditions that (a) the plaintiff is not entitled to conduct any further pre-trial examination for discovery or cross-examination (in the context of any motion) on the subject-matter of the amendments and (b) the amendments operate from the date of the plaintiff’s Notice of Motion, April 3, 2014;

(ii) I do not permit the plaintiff to file a fresh claim without underlining – all amendments must be disclosed and properly underlined or black-lined;

(iii) I do not grant the plaintiff the right to make further amendments to its claim as sought in paragraph (c) of its Notice of Motion. Enough is enough. The plaintiff was prepared to go to trial on the Issues List; the present amendments are sufficient. It is free to rely at trial on further evidence obtained from the defendant provided that such evidence is otherwise admissible;

(iv) OLG shall deliver its Amended Statement of Defence by August 8, 2014; and,

(v) The plaintiff may deliver a further Reply by August 18, 2014.

[31] As to costs, on reflection they shall be in the cause and shall follow the determination of the real merits of this dispute.

D. M. Brown J.

Date: July 7, 2014

[^1]: 2012 ONSC 3818, paras. 22 to 24.

[^2]: The proposed amendments set out in paragraphs 60 through to 69 of the Amended Statement of Claim strike me as going more to the motive for OLG’s termination of the Revised Agreement than issues of past performance.

[^3]: Paragraph 12 read: “For the nearly 15 years following the implementation of the Program, the OLGC and Windsor Raceway had a productive and prosperous working relationship.”

[^4]: Thirteen to be precise, as listed on OLG’s Schedule 2 to its Factum.