SUPERIOR COURT OF JUSTICE - ONTARIO
OTTAWA COURT FILE NO.: 12-56265/11-50312
DATE: 2015/10/14
BETWEEN: Mildred McMurtry, Plaintiff (Court file no. 12-56265)
AND
John McMurtry and Mic Mac Realty (Ottawa) Ltd., Defendants
AND BETWEEN: John McMurtry, Plaintiff (Court file no. 11-50312)
AND
Jim McMurtry, Defendant
AND BETWEEN: Jim McMurtry, Plaintiff by Counterclaim (Court file no. 11-50312)
AND
John McMurtry, Brenda McMurtry, Barry Coons, Bouris Wilson LLP and Mic Mac Realty (Ottawa) Ltd., Defendants by Counterclaim
BEFORE: Madam Justice Sylvia Corthorn
COUNSEL: Mark W. Smith for Mildred McMurtry (12-56265)
Jeff Saikaley for John McMurtry (Both actions)
and for Brenda McMurtry (11-50312)
Daniel Mayo for Jim McMurtry (11-50312)
HEARD: September 21, 2015
PRELIMINARY MOTION AT TRIAL
Background Information
[1] At a case conference conducted in 2012, Master Roger (as he then was) made an order pursuant to which the 2011 action commenced by John McMurtry, the counterclaim advanced by Jim McMurtry in that action, and the 2012 action commenced by Mildred McMurtry are to be “tried together or one after the other at the discretion of the trial judge”.
[2] At the pre-trial conference conducted by Master MacLeod in June 2015, he referred to these matters as having been “ordered to an expedited consolidated trial”. He also recognized that the conduct of the trials of the two actions is subject to my discretion as trial judge. Master MacLeod ordered that, “[s]ubject to the discretion of the trial judge, these matters will be tried consecutively with action 12-56265 to be tried first. Between two and three days will be devoted to that matter.”
[3] Mic Mac Realty (Ottawa) Ltd. (“Mic Mac”) has not defended either the 2012 action commenced by Mildred McMurtry or the counterclaim advanced by Jim McMurtry in the 2011 action. That counterclaim has been dismissed as against Barry Coons and Bouris Wilson LLP. The parties participating in the trials of each of these actions are Mildred McMurtry, John McMurtry, Jim McMurtry, and Brenda McMurtry (“the Parties”).
[4] The Parties are in agreement that the first matter to be determined by the Court is an issue arising exclusively in the 2012 action. As framed in the prayer for relief in the statement of claim, the issue is whether Mildred McMurtry is “the lawful owner of ten (10) shares in the capital stock of Mic Mac realty (Ottawa) Limited [sic]”. The Parties are also in agreement that if that issue is decided in favour of Mildred McMurtry, then the issues of liability and damages in the 2011 and 2012 actions are to be tried together.
Preliminary Motions
[5] At the outset of the trial, John McMurtry (in both actions) and Brenda McMurtry (in the 2011 action) bring three motions:
In his capacity as a defendant in the 2012 action, John McMurtry seeks leave of the Court to amend his statement of defence;
In their capacity as defendants by counterclaim in the 2011 action, Brenda and John McMurtry seek leave of the Court to amend their statement of defence to the counterclaim of the plaintiff by counterclaim, Jim McMurtry; and
John McMurtry in the 2012 action and Brenda and John McMurtry in the 2011 action seek an adjournment of the trials with respect to the issues of liability and damages which are to follow upon the determination of the issue to be determined in the 2012 action (see paragraph [4] above).
Decision
[6] Each of the motions is dismissed with costs payable to the responding parties on a substantial indemnity basis.
Motion No. 1 – Leave to Amend Statement of Defence in 2012 Action
[7] The defendant’s motion record was served on September 8, 2015. The record consists of a notice of motion of the same date and the proposed amended statement of defence. Counsel for the defendant describes the proposed amendments as falling into one or more of four categories:
To clarify the defendant’s position based on facts as now known – that is to say, facts that became known following the discovery process and, in particular, the examinations for discovery.
To expand upon defenses already advanced with respect to the oppression remedy sought. In that regard counsel for the defendant highlighted the refinement of the defence of set-off by the addition of a reference to unjust enrichment.
To add paragraphs in support of the defendant’s position that much of the relief sought by Mildred McMurtry (“Mildred”), even if she is a shareholder, is:
a) Not in relation to damages that are personal to her; and
b) Therefore properly the subject of a derivative action pursuant to s. 246 of the Business Corporations Act, R.S.O. 1990, c. B.16 (“the Act”) and not an oppression remedy action pursuant to s. 248 of the Act.
- To amend paragraph 7, with respect to a letter alleged to have been written by Mildred in the period following her late husband’s death.
[8] Counsel for the defendant emphasized amongst other points:
• The proposed amendments are not based on “new facts”.
• The facts upon which the proposed amendments are based have been known since at least the examinations for discovery of the Parties.
• The proposed amendments are, and I quote, “just arguments.”
[9] With respect to the issue of derivative action versus oppression remedy, it is the position of John McMurtry (“John”) that the proposed amendments arise from a “new development” in the law. The new development upon which John relies is the decision of the Ontario Court of Appeal in Rea v. Wildeboer,[^1] a May 2015 decision of that Court.
[10] Counsel for the defendant acknowledges that his client has, on the motion for leave to amend¸ the onus to demonstrate that if leave to amend is granted the plaintiff will not suffer any prejudice that cannot be compensated for by costs or an adjournment.
[11] For the following reasons, the defendant’s motion for leave to amend the statement of defence in the 2012 action is dismissed.
[12] First, there is no evidence to support the motion. A notice of motion accompanied solely by a draft proposed amended statement of defence is not sufficient to satisfy the evidentiary requirements on a motion for leave to amend. The lack of evidence is particularly problematic for a motion of this kind brought at the start of trial. It is not sufficient for the party seeking leave to amend to reference solely by way of their counsel’s submissions, events in the litigation at which time facts became known and upon which the party relies in support of the motion for leave to amend. As noted above, the defendant relies upon facts that he says became known through the oral discovery process. Without supporting evidence in that regard, the Court is unable to assess: a) whether additional or ‘new’ facts became known as a result of the oral discovery process; and b) if so, whether the additional or ‘new’ facts support the proposed amendments.
[13] Second, and as counsel for the defendant noted during submissions, many of the proposed amendments are, and again I quote, “just arguments” This characterization applies to the proposed amendments that reference derivative action. I agree with the characterization of the proposed amendments as “just arguments” and find, as a result, that the amendments to the statement of defence are not required. If, by the commencement of trial, counsel for a plaintiff does not know what arguments their client will face at trial – whether in this action or any other – then plaintiff’s counsel falls short in carrying out their job. I make that comment generally. It is in no way directed to counsel for the plaintiff in this action; he has given every indication that he and his client are ready to proceed.
[14] Third, I do not agree with the characterization by counsel for the defendant of the decision in Rea as a “new development” in the law. The decision was released by the Court of Appeal in late May. “New” would be late August or early September. If by “new” counsel meant something other than temporally new, the decision still falls short of being a new development.
[15] In Rea the issue of oppression remedy versus derivative action was considered at the pleadings stage. As described by Blair J.A., at para. 12:
The general issue raised on this appeal is whether a complainant may assert, by way of an oppression remedy proceeding, a claim that is by nature a derivative action for a wrong done solely to the corporation, thereby circumventing the requirement to obtain leave to commence a derivative action.
[16] Blair J.A. continued by providing “[s]ome understanding of how and why these two forms of statutory redress evolved”.[^2] It is to that portion of the decision which counsel for the defendant pointed – paragraphs 17 to 20 – for the “new development”.
[17] In his discussion of oppression remedy and derivative actions, Blair J.A. noted that the two types of actions “frequently intersect, as might be expected.” He pointed out that a single wrongful act may result in harm to both the corporation and to the personal interests of an individual complainant. He made reference to the number of cases, in particular involving small, closely-held companies, in which an oppression claim was permitted to proceed even though the wrongs asserted were wrongs to the corporation.[^3]
[18] The portion of the decision on which the defendant relies ends with a quote from the Koehnen text on oppression remedies – “[t]he distinction between derivative actions and oppression remedy claims remains murky.”[^4] There is therefore nothing new in Rea which marks an evolution in the law with respect to the remedies available pursuant to sections 246 and 248 of the Act.
[19] With respect to the ‘murkiness’, if any which remains, during the course of the liability and damages portion of the trial of an oppression remedy action it is incumbent upon the plaintiff to satisfy the requirements of section 248(2) of the Act. The plaintiff must establish that the conduct complained of is oppressive, et cetera within the meaning of that section. Any conduct which is not oppressive within the meaning of that section will not entitle the plaintiff to an oppression remedy.
[20] Counsel for the defendant drew a distinction between conduct complained of that does not “personally affect” a shareholder (or a director) and that which does. It is the position of the defendant that conduct that does not personally affect a shareholder or a director does not entitle the individual to an oppression remedy. It may be that some of the conduct complained of by Mildred is not proven to have a personal effect. If so, then Mildred is not entitled to an oppression remedy based on that conduct. Whether or not the same conduct would otherwise give rise to entitlement to a remedy in the context of a derivative action is irrelevant to the claim Mildred is advancing for an oppression remedy (amongst other relief sought).
[21] Fourth, and finally: In a word, “timing” and, in particular, timing in a case-managed action that is now three years old and has been the subject of numerous procedural orders. I have reviewed the case management orders, as they are included in the trial record filed in the 2011 action. I note that the deadline for completion of examinations for discovery was extended from March 31 to October 31, 2014. If, as counsel for the defendant submitted, the bases for at least some of the proposed amendments are facts arising from the discovery process, then the supporting facts – whatever they are – were known by October 31, 2014.
[22] By that date an order was in place setting the pre-trial conference for June 15, 2015. The defendant had ample, reasonable opportunity at a much earlier date – including at the pre-trial conference – to seek leave to amend his pleading. No explanation has been given as to why the defendant did not at an earlier date seek leave to amend his pleading in this action.
[23] Given that I am not granting leave to amend, it may not be necessary for me to address the issue of prejudice. However, for the sake of completeness and because of what has been a procedurally demanding course of events in these actions I shall do so.
[24] Mildred is 85 years old. She is involved in litigation with members of her family. It is reasonable to infer that whether Mildred is the picture of good health or, as might be expected of someone who is 85, somewhat infirmed, this litigation has taken and will, until it is resolved, take a toll on her.
[25] Even if I were inclined to grant leave to amend, which clearly I am not, I would be very concerned about any delays that might arise because of the proposed amendments.
Motion No. 2 – Leave to Amend Defence to Counterclaim in 2011 Action
[26] John and Brenda McMurtry (“Brenda”) are defendants by counterclaim in the 2011 action. In support of their motion for leave to amend their statement of defence to the counterclaim, they rely on the same motion record as did John in his capacity as a defendant in the 2012 action. The nature of the proposed amendments is the same as those proposed in the 2012 action.
[27] For the reasons given with respect to the 2012 action, the motion by John and Brenda in the 2011 action for leave to amend their statement of defence to the counterclaim advanced by Jim McMurtry (“Jim”) is dismissed. For the following additional reason I would also dismiss the motion with respect to the pleading in the 2011 action. The counterclaim that Jim is advancing in the 2011 action is on the basis of his capacity as a shareholder and as a director of Mic Mac. The issue of derivative action versus oppression remedy is therefore less relevant, if possible, to Jim’s counterclaim than it is to Mildred’s claim in the 2012 action.
Motion No. 3 – Request for Adjournment of the Trials
[28] The motion for an adjournment of the 2011 action and of the balance of the 2012 action (i.e. after the ‘threshold’ issue is determined) is dismissed.
[29] The first ground relied on is the failure, primarily of Jim and, to a much lesser extent, of Mildred, to answer undertakings given at their respective examinations for discovery. As I have already noted: a) the examinations for discovery were to be completed by October 31, 2014; and b) both actions are subject to case-management.
[30] The July 4, 2014 case conference order of Master Roger (as he then was) includes a number of terms dealing with undertakings:
Outstanding examinations for discovery required of any party shall be conducted by October 31, 2014. (Note: A detailed schedule followed.)
Undertakings outstanding to date to be answered by July 31, 2014.
Additional undertakings to be answered within 45 days of discovery.
Any motion on undertakings and advisements shall be served by no later than January 31, 2015.
[31] If John in the 2012 action and John/Brenda in the 2011 action were concerned about answers to undertakings outstanding from the examinations for discovery of Mildred and Jim, there was a process by which they were to deal with their concerns. They were to do so by way of a motion or motions with the record or records served by January 31, 2015. They chose not to deal with their concerns as required by the case conference order of Master Roger (as he then was). John and Brenda are simply out of time to pursue a motion to address unanswered undertakings – in particular a motion for relief in the form of an adjournment of the actions. For unanswered undertakings given by Jim or Mildred to result in an adjournment of the action(s), John/Brenda would have had to: a) bring a motion or motions within the time specified by Master Roger (as he then was); b) satisfy the Court much earlier than at the outset of the trial as to the importance of the answers outstanding; and c) establish prejudice that could only be addressed by way of an adjournment.
[32] As it stands now John/Brenda will have to meet the cases as presented and, if appropriate, seek relief in the context of the trial process itself. The Rules of Civil Procedure, R.R.O. 1990, Reg. 194, set out specific consequences to a party who fails to answer an undertaking. For example, subrule 31.07(2) of the Rules provides, “If a party … fails to answer a question as described in subrule 37.07(1), the party may not introduce at the trial the information that was not provided, except with leave of the trial judge.”
[33] The importance of that subrule is reflected in the decision of the Ontario Court of Appeal in Snelgrove v. Steinberg Inc.[^5] In that case the Court held that where a question on discovery was a proper question and an answer was not forthcoming, in order to invoke rule 31.07 no request for an undertaking is necessary nor is it necessary to bring a motion to compel an answer to the question.
[34] Based on subrule 31.07(4) (“Obligatory Status of Undertakings”), I interpret subrule 31.07(2) as applying to undertakings given that remain unanswered as of the date of trial. Concerns raised during the trial on the basis of undertakings that remain unanswered as of the date of trial shall be addressed in the context of rule 31.07.
[35] The second and third grounds relied on are related – both deal with estimated trial time and the potential for the trial to run beyond the two weeks allotted. In July 2014, Master Roger (as he then was) ordered the matter set down for trial for 10 days. Presumably, he did so on the input of all counsel during the course of the pre-trial conference.
[36] It is unusual for: a) counsel to underestimate the length of trial; and b) a trial to be adjourned and continued at a later date because the trial is not completed in the time allotted. The second and third issues relied on are neither unusual nor special. If after 10 days of trial time, the trials are not complete, then they will be adjourned and scheduled to continue at a later date.
[37] Finally, I note that the first party out of the gate in all of this litigation was John. As the plaintiff in the earliest of all actions, he has an obligation to move his action forward. I heard nothing in the way of submissions and there is no evidence before me as to why the main 2011 action (John’s action) should not proceed. I am not aware of any order dealing with the substance of that action.
[38] In summary, there is no reason to adjourn either of the main actions (2011 or 2012) or the counterclaim in the 2011 action.
[39] Having determined that the trial of these two actions is proceeding on the basis of the existing pleadings and without adjournment as requested by Mr. Saikaley’s clients, there remains the matter of how to proceed once the ‘threshold issue’ is determined. As I see it, if I determine that Mildred is a shareholder in Mic Mac, then the trial of the 2012 action moves immediately to liability and damages and is heard at the same time as the main action and counterclaim in the 2011 action. If I determine that Mildred is not a shareholder then she will have to determine whether she wishes to participate in the balance of the proceedings.
[40] I make those remarks on a preliminary basis and without prejudice to the Parties to make further submissions as to ‘process’ upon my determination of the threshold issue with respect to ownership of the shares in Mic Mac. The goal of this Court is to bring these matters to a conclusion – but not without regard for procedural fairness to the parties.
Costs
Costs of the motions for leave to amend and for an adjournment are awarded to each of Mildred and Jim on a substantial indemnity basis in any event of the cause. The bases for both the award of costs in favour of each of Mildred and Jim and the scale on which costs are awarded include:
• The motion for leave to amend a pleading in each of the 2012 action and the 2011 counterclaim had no chance of success given that no evidence was filed, on either motion, in support of the relief requested. (See the discussion above in paragraph 12.)
• The motion records with respect to leave to amend the pleadings were served in early September, approximately one week prior to the date on which the trials were scheduled to commence. There was no explanation provided by the moving parties for their delay in bringing the motion for leave to amend their respective pleadings – in particular in the context of case-managed actions. (See the discussion in paragraphs 21 and 22 above.)
• As a result of John/Brenda bringing the motions at the outset of trial, the trial was unnecessarily lengthened by a day.
In the event the Parties are unable to agree on the quantum of costs payable by John in the 2012 action and John/Brenda in the 2011 action, costs payable on a substantial indemnity basis shall be fixed by me. In that event, the Parties shall deliver submissions with respect to costs as follows:
The submissions shall be limited to a maximum of four-pages, inclusive of a bill of costs;
All costs submissions shall comply with Rule 4 of the Rules of Civil Procedure;
Hard copies of any caselaw or other authorities relied on shall be provided with the submissions;
Mildred and Jim shall deliver their respective submissions by 5:00 p.m. on the tenth business day following the date on which this decision is released;
John/Brenda shall deliver their submissions by 5:00 p.m. on the fifteenth business day following the date on which this decision is released; and
Mildred and Jim shall deliver submissions in reply, if any, by 5:00 p.m. on the twentieth business day following the date on which this decision is released.
Note: The date of release of this decision is not included in the 10, 15, and 20-day periods referred to in paragraphs 4, 5, and 6 above. ‘Day One’ starts on the first business day following the date on which this decision is released.
Date: October 14, 2015
Justice S. Corthorn
OTTAWA COURT FILE NO.: 12-56265/11-50312
DATE: 2015/10/14
SUPERIOR COURT OF JUSTICE – ONTARIO
Court File No. 12-56265
BETWEEN: Mildred McMurtry, Plaintiff
AND
John McMurtry and Mic Mac Realty (Ottawa) Ltd., Defendants
Court File No. 11-50312
AND BETWEEN: John McMurtry, Plaintiff
AND
Jim McMurtry, Defendant
AND BETWEEN: Jim McMurtry, Plaintiff by Counterclaim
AND
John McMurtry, Brenda McMurtry, Barry Coons, Bouris Wilson LLP and Mic Mac Realty (Ottawa) Ltd., Defendants by Counterclaim
BEFORE: Madam Justice Sylvia Corthorn
COUNSEL: Mark W. Smith for Mildred McMurtry
Jeff Saikaley for John McMurtry and Brenda McMurtry
Daniel Mayo for Jim McMurtry
ENDORSEMENT
Justice S. Corthorn
Released: October 15, 2015
[^1]: 2015 ONCA 373, at para. 12 (“Rea”).
[^2]: Ibid, at para. 13.
[^3]: Ibid, at paras. 20 and 29.
[^4]: Markus Koehnen, Oppression and Related Remedies (Toronto: Thomson Canada Limited, 2004), at p. 443.
[^5]: (1995), 1995 1526 (ON CA), 85 O.A.C. 365.