Toronto Standard Condominium Corp. no 2051 v. Georgian Clairlea Inc. et al.

COURT FILE NO.: 11-CV-435360

Heard: March 23, 2016

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Toronto Standard Condominium Corp. no 2051 v. Georgian Clairlea Inc. et al.

BEFORE: Master Joan Haberman

COUNSEL: McKay, M, for the moving party

Fine, J.H. for the responding party

REASONS

Master Haberman:

[1] The plaintiff, TSCC 2051, moves to amend their statement of claim prior to the defendants’ scheduled motion for summary judgment. The defendants oppose the relief sought, having raised the following issues:

1. The parties arrived at a settlement agreement at mediation which bars further motions of this kind;

2. The proposed pleading raises new causes of action, barred by the expiry of the applicable limitation period;

3. The proposed pleading amounts to an abuse of process; and

4. Granting leave to the plaintiff to amend the pleading as proposed would cause prejudice to the defendant not compensable by costs or capable of being remedied by an adjournment.

GENERAL CONTEXT

[2] The action is a factually complex one. The plaintiff is a residential condominium corporation, comprised of 112 residential units. The defendants are the condominium developer and declarant of the corporation, Georgian Clairlea Inc. (“GCI”); GCI’s successor, the Residences of Clairlea Gardens Inc.; a transferee of the two mortgages in issue, Georgian Corporation, (“GC”); and the officers of directors of the corporate defendants, Anthony, Frank and Gene Maida.

[3] The claim was issued on September 20, 2011, at which time the plaintiff sought, among other things:

• A declaration that two mortgages, totaling approximately $3.25 million, and a promissory note in the amount of $90,034 made in favour of GCI are all null and void;

• Damages against GCI of approximately $138,000, for failing to pay common element expenses; failing to pay monies collected as interim occupancy fees into the reserve fund, and for the first year budget deficit; and

• Damages of $2 million for construction deficiencies.

[4] In response, the defendants counterclaimed for judgment on the outstanding amounts due under the mortgages and promissory note, along with ancillary relief.

THE AGREEMENT REACHED AT MEDIATION – IS IT A BAR TO THIS MOTION?

[5] A three week trial of the action was scheduled to begin on October 26, 2015 but both parties decided to mediate first, in an effort to resolve some of the many issues on the table. They did so and on July 15, 2015, they were somewhat successful in that regard, having arrived at terms for the approach they would take going forward.

[6] Although the parties have characterized this as a “settlement agreement”, in my view, that nomenclature is not a good fit as only procedural issues were resolved. No aspect of either the claim or counterclaim was, in fact, settled.

[7] In essence, the parties agreed to break the claim into two parts. All issues pertaining to alleged construction deficiencies were hived off, to be dealt with through the Tarion warranty process, and it was agreed that the remainder of the claim would be dealt with by way of summary judgment, to be heard on October 26, 2015, a date counsel were already holding for the trial.

[8] The responding parties assert that the agreement reached at mediation is a bar to this motion. It is therefore critical to examine what the parties did and did not agree to at that time.

[9] The agreement reads as follows:

Agreement to Settle All Construction Deficiency Claims [and certain other issues] and to Proceed Under Rule 20 with Respect to the Mortgage Claims [and remaining issues]

[10] Whereas Toronto Standard Condominium Corporation No. 2051 commenced this action on September 20, 2011, against Georgian Clairlea Inc., Residences of Clairlea Gardens Inc., Anthony Maida, Frank Maida, Gene Maida and Georgian Corporation and against the Equitable Trust Company and Firm Capital Mortgage Fund;

[11] And whereas the action was discontinued against Equitable and Firm;

[12] And whereas Georgian Clairlea Inc. changed its name to Residences of Clairlea Gardens Inc.;

[13] And Whereas the claim by 2051 includes claims for damages for construction deficiency arising from the construction by Residences of the condominium building of 2051, claims that the mortgage to secure the Service Units in the principal sum of $2,228,100 (“Service Unit Mortgage”), the mortgage to secure the Parking Units, Storage Units and Combined Parking-Storage Units in the principal sum of $1,026,375 (“Parking Mortgage”) and a promissory note dated April 12, 2010 to secure the principal sum of $90,034.26 (“Promissory Note”) are null, void and of no effect, as well as other claims, all more particularly set out in its Amended Statement of Claim;

[14] And Whereas Georgian has defended the action, including the construction deficiency claims, the Mortgage claims and the other claims and has asserted a counterclaim to enforce the Service Unit Mortgage, the Parking Mortgage and the Promissory Note, as more particularly set out in the Statement of Defence and Counterclaim;

[15] And whereas 2051 and Residences are currently engaged in a conciliation process concerning the construction deficiency claims through TARION pursuant to the Ontario New Home Warranties Plan Act, RSO 1990, c. O.31;

[16] And whereas the trial of this action is currently scheduled to commence on October 26, 2015 for an estimated 3 weeks and substantial time would be required at trial to deal with the construction deficiency claims;

[17] And whereas the parties hereto wish to adopt procedures to secure the just, most expeditious and least expensive determination of the issues;

[18] And whereas the parties hereto have authority to enter into this Agreement;

[19] The parties hereto hereby agree as follows:

1. The recitals set out above are true and are herein incorporated;

2. 2051 agrees to discontinue the construction deficiency claims made in the Amended Statement of Claim amended on October 31, 2011 as set out in paragraph 1a, 12-21, 38 and 39 of that pleading and will instruct its lawyers to deliver a Notice of Discontinuance in the Action with respect to those paragraphs. The discontinuance of the construction deficiency claims shall be a defence to any subsequent action that might be commenced by 2051 in respect of any or all such claims. This provision does not apply to the right of 2051 to pursue its construction deficiency claims through the procedures provided under the Ontario Home Warrantied Plan Act, including the right to commence appeal proceedings to the Licence Appeal tribunal pursuant to the Act.

3. Subject to the discretion of the Court, the remaining issues in this action will be determined on a summary judgment motion pursuant to Rule 20 of the Rules of Civil Procedure on a date to be scheduled by counsel and the Court. The parties agree, subject to the Court’s discretion, to commence this motion on or before October 26, 2015, a date scheduled to commence on October 26, 2015 will not be required.

4. The moving party in the summary judgment motion under Rule 20 will be one or more of the Georgian Parties. The solicitors for all parties will be instructed to provide all reasonable cooperation and to forthwith make arrangements as are required to put this agreement into effect, including attendance at Trial Scheduling Court and/or Civil Practice Court.

5. 2051 shall consent to an amendment to the Counterclaim of the Georgian Parties with respect to their allegation that 2051 is required to purchase two parking units at a price of $25,000 each, subject to the right of 2051 to amend its defence to counterclaim to raise any defence. It is agreed that this issue will also be determined by way of the Rule 20 motion.

July 15, 2015

[20] The responding parties have made three submissions to support their position that the agreement bars the amendments now proposed:

• The intention behind the agreement;

• The wording of it and what has been omitted from it; and

• The aftermath

[21] There are five important aspects of the agreement to note before embarking on an analysis of these issues raised by the responding parties:

1. Their recognition in the agreement that substantial time would be required to deal with the deficiency claims at trial;

2. The fact that the agreement is intended to reflect the parties’ intention to adopt procedures leading to the just, most expedition and least expensive determination of the issues;

3. The reference to the fact that the plaintiff will consent to the defendants’ proposal to amend their counterclaim regarding the purchase of two-parking units;

4. The absence of any discussion regarding other amendments that either of the two sides might wish to bring, on consent or otherwise, aside from the above one small item; and

5. The absence of any language to directly indicate that the parties expressly agreed to waive their rights under Rule 26.01 to make other amendments to any of their pleadings.

[22] Before I review the issues, it bears noting that the defendants took considerable liberties in their factum, making factual assertions without reference to a source in the evidence on several occasions. It was only as a result of my questioning that I was able to ascertain that, in some of these instances, what they assert actually represents inferences they hoped I would draw. Presenting an assertion as fact is not the proper way to go about asking the court to draw an inference.

The intention behind the agreement

[23] One of the opening recitals to this agreement indicates that it has been reached in order to secure the just, most expeditious and least expensive determination of the issues. The responding parties rely on part of this recital (most expeditious and least expensive) to suggest that the proposed amendments would complicate the action, adding to the time needed to complete it and the ensuing costs. This, they say, would mark a departure from the parties’ stated objective of achieving an expeditious and the least expensive determination of these issues. On that basis, they assert the amendments must be prohibited.

[24] I disagree. This recital must be read as a whole and must be viewed in the context of the other opening recitals. The responding parties rely on the words “most expeditious and least expensive determination”, ignoring the fact that the word “just” precedes the other two.

[25] It is interesting that the parties chose wording similar to that used in the now defunct Rule 77, when case management was the regime that applied to all civil actions commenced, among other places, in Toronto. Though the purpose of case management was to reduce delay and costs, it was always clear this objective was never intended to supersede orders that were just. It seems to me that the parties to this agreement were of a similar mind, as they place “just” before their other objectives. I am therefore reluctant to interpret this recital in a manner that puts speed and cost ahead of justice. My focus is on achieving a just result on this motion.

[26] Further, it is important to view this recital in the context of what precedes it. The recital immediately before this one refers to the fact that a three week trial had been scheduled starting on October 26, 2015, and adds that substantial time will be required at trial to deal with the construction deficiency claim.

[27] As well, the title of the Agreement addresses the deficiency issues first, such that Rule 20 was intended to be used for what was left over. As I read it, finding a way to deal with the deficiency issues outside the action was the parties’ primary objective.

[28] On that basis, and reading this recital with the rest of the agreement, it seems to me that the real objective behind this agreement was to bifurcate the proceeding into two parts, so as to remove the deficiency issue from the trial. Instead, it will now be dealt with separately through the TARION warranty process, and the remainder of the issues are intended to be dealt with by way of a 2-day summary judgment motion.

[29] This is highlighted in the defendants’ factum, where, at paragraph 4, they state that the three-week trial the parties were facing was going to be long and costly due to the voluminous and detailed evidence that would be required as part of the construction deficiency claims. It appears that the parties were concerned that the deficiencies issues would drag the action down and extend the duration of the process. That seems to have been the impetus behind these discussions and, ultimately, behind this agreement.

[30] All in all, it was an excellent resolution as to how these issues should be approached. Regardless of whether or not these amendments are made, the construction deficiencies have been removed from and remain off the table, as the parties intended. This aspect of the claim, which appears to have motivated the parties to reach this procedural agreement, is not affected by whether the action is ultimately resolved by summary judgment motion or trial.

[31] Whether the remainder of the issues can still be resolved by a 2-day summary judgment motion remains to be seen, but the deficiency issues, slated to take up substantial time at trial, to use the parties’ own words, is no longer a consideration for trial.

[32] Contrary to what the defendants assert, the addition of the proposed amendments will not add a layer of multiplicity to the action that is not already there. As the deficiencies will now be dealt with through the Tarion process, there will either be a summary judgment motion or a trial, briefer than anticipated, to deal with the remaining issues.

[33] Though the possibility of a 2-day summary judgment motion may have been lost (this is not clear at this point), the defendants still have the benefit of having moved the construction deficiencies out of the action. This is in large part what they were bargaining for when they gave up their three-week trial in October.

[34] Accordingly, I do not believe the intention of the parties in coming to this agreement, as evidenced by what they said in it, bars this motion.

The wording: what was included and what has been omitted

[35] The responding parties submit that the issue of pleadings amendment was considered by the parties. Having turned their minds to it, it was agreed that a pleading amendment would be considered, but only insofar as a one discrete issue involving parking spots.

[36] They claim that, as the issue of amendments was considered and agreed to and the plaintiff failed to speak up at that time, the discussion is now closed. They rely on the maxim expressio unius est exclusio alterus to support their conjecture that the failure to also include reference to the amendments now before the court at that time acts to as a bar to raising the issue now.

[37] Again, I disagree. It is not clear to me that “amendments”, as a general category of what would be covered by the agreement was something the parties addressed their minds to. The agreement speaks only of one discrete amendment, to which the plaintiff consented. Presumably, if there were other issues, such as amendments, that they expected could proceed by way of consent, they may well have raised and considered them at that time, as well.

[38] The mediation was a day for coming together and reaching consensus. In the end, the parties achieved some level of success by removing a $2 million detail-oriented claim from the action. Raising potentially contentious issues in the context of these discussions might have interfered with the cooperative spirit that allowed the parties to reach this agreement. The main objective of splitting the action was achieved and that was critical.

[39] What is absent from the agreement are general statements to the effect that no other procedure issues at all are anticipated by either party or that they will be prohibited from raising any other procedural issues that Rules might otherwise permit. The absence of such language also detracts from the responding parties’ position. The defendants state that evidence to refute the application of the expressio unius rule is needed. I do not accept that is the case here, in the absence of anything in the agreement that suggests procedural rights are being waived. In any event, I find that the absence of such language in the context of the structure and language of this agreement constitutes whatever evidence may be required to refute the application of this maxim.

[40] Rule 26.01 is a rule of mandatory application. To suggest that the parties agreed to waive it because they mentioned one amendment, to be made on consent, in the agreement but no others, is reading too much into an agreement, the main thrust of which was to remove the deficiency issues from the action.

The aftermath

[41] On August 22, 1015, the parties attended Civil Practice Court and agreed on a timetable that resulted in a hearing of the defendants’ motion for summary judgment on October 26 and 27, 2015. The timetable agreed to at that time required the defendants to serve their materials by September 11, 2015 and TSCC 2051 to serve theirs by September 24, 2015.

[42] The defendants complied with the timetable but TSCC 2051 did not. Their now former counsel wrote on September 21, 2015 to indicate that they were unable to meet the September 24 deadline as they were having the defendants’ materials reviewed by an accounting/mortgages expert As a result, he noted that the hearing dates scheduled would likely have to be revised.

[43] In that no expert report has been served since that notification, the defendants take the position that the adjournment was obtained “under false pretences”. I have seen nothing in the evidence to support what I view as a dramatic conclusion, when there are other plausible explanations available. No report may have been obtained as yet or it may have been received but has not yet served. Alternatively, TSCC 2051 may have received a report but decided not to serve it as it did not provide what they had hoped to find. The fact that the report has not yet put in an appearance is not enough, in my view, to impute bad faith as I have been asked to do.

[44] Counsel re-attended CPC on October 13, 2015 and agreed on a new timetable and new hearing dates: February 29 and March 1, 2016. TSCC 2051 was to file their material by November 13, 2015, and Georgian’s further evidence would be filed by December 23, 2015. Arrangements were made for cross-examinations to take place on January 28 and 29, 2016, but again, TCSS 2051 failed to meet the agreed deadline for service of their material. Instead they served a Notice of Change of Solicitors on December 10, 2015.

[45] New counsel proposed a new timetable the following day, in hopes of keeping the February hearing date. However the new timetable included service of their Amended Amended statement of Claim by January 18, 2016. This was the defendants’ first notice of the plaintiff’s intention to amend its pleading, 6 months after the parties had agreed on a procedural approach for moving forward.

[46] The defendants have made much of the delays in getting this matter off the ground. No doubt, this has been a serious irritation in view of the amounts at stake and the age of the action. But one party’s frustration with the other is not a basis for refusing a pleading amendment. Neither Rule 26.01 nor the case law interpreting it provides an exception to its application based solely on delay. Plaintiffs have been permitted up to and even at trial to move to increase prayers for relief.

[47] It is less than a year since the procedural agreement discussed above was reached. While the trial date set for last fall has now been lost, it is to everyone’s advantage to have removed the $2 million deficiency claim from the action. That aspect of the agreement remains unchanged by this delay.

[48] All in all, I am satisfied that neither the agreement nor anything that happened or failed to happen thereafter should stand in the way of this motion proceeding.

DO THE PROPOSED AMENDMENTS CONSTITUTE NEW CAUSES OF ACTION?

[49] The plaintiff maintains that this action has always been about the validity of two mortgages and a promissory note. In their submission, the proposed amendments, though embellishing the narrative somewhat, do not alter the essence of the action, which will turn on whether or not these three instruments are valid.

[50] The defendants, however, submit that the entire nature of the action will be modified if these amendments are permitted.

[51] A brief review of the law regarding pleadings, generally, and a more in-depth review of amendments to pleadings are a required first step for assessing the strength of the submissions on both sides. I note, in passing, that though the responding party delivered a detailed factum of 24 pages in length, in contained, for the most part, a factual recitation and their argument, with few references to the law. Their brief contained only one case, a family law case from 1975 and an excerpt from an encyclopedic digest, neither of which added to the debate in a material way.

LAW: pleadings

[52] It is trite law that the purposes of pleadings are:

1. To define with clarity and precision the issues or questions in dispute;

2. To give fair and proper notice to the other side as to the case they have to meet;

3. To inform the court as to the precise issues between the parties; and

4. To provide a permanent record of issues raised and decided, in order to prevent further litigation upon matters that have already been before the court (see D.E. & J.C. Hutchison Contracting Co. v. Windigo, 1998 CarswelIOnt 4538).

[53] A party is only required to plead material facts. They should refrain from pleading irrelevant facts, as well as the evidence by which material facts will be proven. However, the court gives parties some lee-way in terms of the style they adopt to tell their story. Thus, in D.E. Hutchison, (supra), Kozak J. held that facts may be pleaded if they are relevant to that cause of action, even if not necessary to make out that cause of action. On that basis, he allowed a party to employ a narrative style to give definition to and proper notice of his claims in the context of a complex case, although this resulted in what turned out to be a lengthy story.

[54] Kozak J. relied on Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1995), 25 (3d) 106, for the proposition that an unduly prolix claim that creates a prejudicial atmosphere is not a sufficient basis to deny amendments as long as what is proposed is relevant.

LAW: Amending pleadings

Rule 26.01

[55] Rule 26.01 deals with amendments to pleadings, generally:

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.

[56] There are five elements to the rule that are worth noting:

1. A pleading can be amended at any stage of an action. As a result, setting an action down for trial is not necessarily a bar to a motion of this kind (see Tate v. Bishop, 2015 ONSC 742). The court has gone so far as to grant leave to increase a prayer for relief at trial following the return of a jury verdict that exceeded the amount originally claimed (see Hill v. Church of Scientology of Toronto (1992 CarswellOnt 1076);

2. Granting leave to amend is, for the most part, mandatory. The Rule states that the court shall grant leave, unless what is proposed causes prejudice, as set out in the rule and as discussed below. This distinguishes a motion brought under this rule from one that involves adding a party, where the court has discretion. There is a further exception, aside from what the Rule sets out, created by case law: all proposed amendments must be tenable at law. Tenability is measured in the context of applicable legal principles, irrespective of the facts. The facts contained in the proposed amendments are deemed capable of being proven, so true, for the purpose of the motion. Thus, the issue for the court to consider is, whether the alleged facts, if proven, give rise to a viable cause of action. As noted by Lauwers J., as he then was, in Ivany v. Financiere Telco Inc. 2011 ONSC 2785, the rule is applied liberally to permit amendments;

3. Leave to amend must be granted on such terms as are just. By way of example, the court can require the moving party to pay costs thrown away; grant an adjournment or allow a defendant to plead a limitation period in response to the amendment where there is some doubt as to whether or not it has expired;

4. In the context of prejudice as an impediment to granting leave to amend, it must involve more than a vague suggestion about what a party may have done differently had the action been pleaded as the moving party now proposes from the outset (see Tate v. Bishop, 2015 ONSC 742). The onus is on the party asserting prejudice to specifically set out what it consists of (see Transamerica, supra). Added costs flowing from an amendment that results in further documentary and oral discoveries and increased trial preparation is not the kind of prejudice the rule speaks of and will not defeat a motion to amend (see Transamerica, supra)so is not a bar to a motion of this kind; and

5. If a proposed amendment has been forecast by evidence disclosed at discoveries, leave to amend should be granted as it can be dealt with by way of costs and/or an adjournment (see Transamerica, supra and Kings Gate Developments Inc. v. Colangelo 1994 CanLII 416 (ON CA), 17 OR (3d) 841).

The difference between a new cause of action and concurrent liability and adding facts to particularize an existing cause of action

[57] Another exception emanating from case law that militates against the mandatory nature of the Rule involves a proposal to amend a claim beyond the expiry of the presumptive limitation period for the purpose of pleading a new cause of action.

[58] Again, case law has established general principles that are helpful here.

[59] “Cause of action”, has been defined to mean a factual situation the existence of which entitles one person to obtain from the court a remedy against another person (see July v. Neal (1986), 1986 CanLII 149 (ON CA), 57 OR (2d) 129; Letang v. Cooper, [1965] 1 QB 232, Goorbarry v. Bank of Nova Scotia 2011 ONCA 793, 2011ONCA 793). The focus is therefore on the factual situation.

[60] As stated in Ivany, (supra) the preferred analysis for determining if a proposed amendment constitutes a new cause of action is to apply a purposive, functional and factually oriented approach. Thus, a new legal conclusion drawn from facts already pleaded will not constitute a new cause of action. This is referred to as concurrent liability and provides, by way of example, that a party can add a claim for negligence to an existing claim for breach of contract where he relies on the same facts to support both basis for liability.

[61] Further, where a set of facts giving rise to a cause of action has already been pleaded, and proposed amendments merely serve to particularize what is already there, the proposed amendments do not constitute new causes of action see (Ivany, supra).

[62] In their factum, the defendants state that an amendment to a Statement of Claim that seeks relief for new factual reasons is a new and distinct cause of action. They provide no support for that conclusion, and, in view of Ivany, supra., it is not an accurate statement of law as it unduly narrows the test. Further, adding clarity, precision and definition to an existing claim should not be prohibited, as these are attributes of a good pleading.

[63] If a cause of action has already been pleaded, amendments that seek to add further support for it do not constitute a new cause of action. A clear example of this arises from time to time in personal injury cases. Where negligence has been pleaded based on certain particulars, amendments adding further particulars will generally be permitted as the cause of action – negligence- has already been pleaded.

Examination of the proposed amendments in light of what has already been pleaded

[64] While the plaintiff could have used clearer and less inflammatory language at times, for the most part, they have remained within the confines of causes of action that are already part of this litigation. To the extent that I indicated during the hearing that what they proposed to plead appeared to be out of bounds, they agreed to amend. Leave to do so has therefore been granted in those instances.

[65] I propose to examine each set of proposed amendments in the context of the parties’ submissions. Before doing so, however, I note that there is no opposition to the proposed amendments at paragraphs: 1(a)(f)(i)(j); 2(a)(f), 3, 5, 7,47-46, 49, 57, 59, 61 and 64.

[66] Paragraph 1(e): The plaintiff seeks to clarify that their claim for interest on arrears is 12%, as provided by article 11.6(A) of By-law No. 1, in place of pre-judgment interest as provided by the Courts of Justice Act. The defendants maintain that a new fact – that interest is owed in accordance with the by-law- is pleaded, so that this constitutes a new cause of action. However, in Accent Metals Inc. v. Stelfab Niagara Ltd., 2011 ONCA 691, the Court of Appeal held that amending an interest rate, which is the end result of this proposed amendment, does not represent an entirely new claim, but rather a change to a component of an existing claim for monies owing. I characterize what is proposed here to fit within the Court’s comments, and therefore find that this amendment does not constitute a new cause of action.

[67] Group 2 – paragraphs 10, 23 and 65: These paragraphs refer to the impact of these events on, among others, “its members”, though no notice has been served to indicate that the action is brought on their behalf. Moving counsel has agreed to remove the phrase “and its members” from the paragraphs in which it appears. In doing so, they have removed any basis for objection to these proposed amendments on the basis that they constitute the addition of a new cause of action.

[68] Group 3 – paragraphs 11, 13, 14, 24, 26, 27, 31-33, 35 and 51(d): The responding party has characterized these proposed amendments as an attempt to add a new cause of action based on allegations of a duty to and failure to disclose.

[69] For the most part, the proposed amendments deal with what has already been pleaded, albeit with further particularization, to support a claim that the mortgages are null and void and therefore unenforceable. Current paragraph 12 already asserts that the defendant….had a duty of care to ensure that the condominium complex…was constructed in accordance with…[among other things] the Disclosure Statement… In my view, that paragraph already sets up a duty to ensure that disclosure is made in accordance with the disclosure statement. Much of what follows therefore involves particulars of what the defendants were allegedly required but failed to disclose.

[70] While the responding party may not like words such as “scheme” and “concoct”, it will be up to the plaintiff to establish that what they say and how they say it is an accurate characterization of the situation. Though my preferred style of pleading is to omit adverbs and adjectives and to leave it to the court to draw their own conclusions, not all counsel plead that way, nor are they bound by my stylistic preferences.

[71] There are, however, some places where the moving party has crossed a line. In paragraph 32, for example, the reference to the transaction having been structured so as to deceive purchasers regarding carrying costs is problematic. While the plaintiff may not be using “deceive” in the context of the tort of deceit, it is open to be read that way. After some discussion, it was agreed that “deceived” would be changed to “misled” wherever it appeared in the proposed amendments.

[72] Further, as the purchasers are not parties to the action, they should not be referred to. Whether they were misled is not relevant to the action as structured.

[73] As a result, the defendants needn’t be concerned that this amendment opens the door to evidence from dozens of potential witnesses about what they knew and when they knew, as they say they fear. This suggestion in their factum no longer applies in view of this clarification.

[74] In paragraph 33, the assertion begins with the general, “purchasers are deemed”, which is not problematic, but then goes off to state that they did rely on the disclosure statement. Again, ass the members are not parties to the action what they did or didn’t do is of no import. Plaintiff’s counsel accordingly agreed to remove the words “and did” in the first sentence.

[75] Also in paragraph 33, the third sentence crosses the line as it speaks of the defendants having “induced the purchasers into buying…based on misleading…disclosure.” I have difficulty both with reference to inducement and, again, to the assertion of rights on behalf of purchasers who are not parties to the action. Moving counsel sees the difficulties and has agreed to go back to rework this passage, absent the offending words.

[76] Still in paragraph 33, the last sentence begins by referring to “purchasers and members” having suffered damages. As the purchasers are not parties, they have no place in the action so that sentence shall be reworked to delete them and to state that TSCC 2015 has therefore suffered damages.

[77] Insofar as the rest of the proposed amendments in this category, none raise a new cause of action in the context of the legal principles discussed above.

[78] Group 4 – Alleged sale of the same land twice: paragraphs 15-23

[79] Paragraphs 15-18 set out what purchasers paid for various pieces of heating, cooling and HVAC equipment. They do not raise a cause of action but are there, it seems, to support what comes next.

[80] What comes next – paragraph 19-23 – is what concerns the defendants. As an alternate theory supporting the plaintiff’s claim that the mortgages are null and void, they assert that certain equipment, the purchase price of which was guaranteed by that mortgage, was sold by the defendants twice.

[81] It has already been agreed and ordered that the words “and its members” will be eliminated from paragraph 23 so this issue is off the table. What we are left with is a set of facts, pleaded to establish an alleged alternate basis for relief already claimed.

[82] Looking back at the current incarnation of the pleading, however, it seems that this claim of a “double-purchase” has, in fact, already been made. Paragraph 26(d) states that the encumbrances were unlawful. Accordingly, relief under s. 35 of the Condominium Act has been claimed, on the basis that it is oppressive to require it [the plaintiff] to purchase its own Service Units, Parking Units Storage Units and Combined Parking-Storage Units at an exorbitant price with a rate of interest at 10% for a 25-year period.

[83] By referring to the fact that the plaintiff has been “required to purchase its own” space, the plaintiff is already speaking of a double-sale in the current version of the pleading, as these areas could only have become “their own” if they had already bought them. In my view, this is simply a different way of describing a double-sale.

[84] The new particulars, though extensive, remain particulars of a claim already made. I therefore find that they do not constitute a separate and distinct factual underpinning for saying these mortgages are null and void. According to Ivany, supra, this form of amendment does not constitute a new cause of action.

DO THE PROPOSED AMENDMENTS AMOUNT TO AN ABUSE OF PROCESS?

[85] In Ivany, the responding party objected to a proposed amendment that alleged an investment scheme was not appropriate for a certain class of investors and that it was actually a scam designed to steal money from them. The basis of the objection was that no claim had been advanced for fraud or theft, as the action had been brought in negligence only, so this amendment could lead nowhere.

[86] In that instance, the court agreed. Though the pleading was designed to add colour, the plaintiff had gone too far, as what was proposed cast Dundee and CWT in a negative light though no relief had been claimed against either of the basis of having perpetrated a scam to steal money. In that context, the court concluded that the allegations were scandalous and not properly pleaded as against these two entities. The court then went on to affirm that amendments should only be refused as scandalous, embarrassing or abusive only in the clearest of cases.

[87] Here, the basis for asserting abuse of process is unrelated to what the plaintiff proposes to plead. Instead, it is supported by reference to the procedural agreement which I have already discussed above, and the timing of this motion, as I have also already described under “The aftermath”.

[88] In the context of dealing with these issues, I have found that the procedural agreement did not amount to a waiver of Rule 26.01. Further, I saw no basis to impute bad faith (or acting under “false pretences” as asserted). I was taken to no case law to support the application of either theory to these facts. These circumstances would not, in any event, constitute the clearest of circumstances, as discussed in Ivany, supra.

[89] I am therefore find there has been no abuse of process here.

PREJUDICE

[90] The Defendants suggest that they will be prejudiced if these amendments are granted as they would have gone about dealing with the action differently had they appreciated that this is the case they would have to meet. In that regard they say that summary judgment motion may no longer be a viable option for resolving the non-construction deficiency claims. They have not, however, abandoned that possibly entirely, as yet. They do not say they would never have entered this procedural agreement had they appreciated that further amendments were coming.

[91] As discussed earlier, for prejudice to be an impediment to granting an amendment, there must be more than a vague assertion about what a party may have done differently had they known where a pleading was going to go. The onus is the party asserting prejudice to prove it (see Tate, supra. And Transamerica, supra.).

[92] Rule 26.01 makes it clear that amendments must be permitted unless allowing them would result in prejudice that cannot be compensated for by costs or an adjournment. To the extent that further time is needed to deal with these amendments, the court can deal with that. To the extent that costs are involved in addressing the amendment or are thrown away as a result of an abandoned motion for summary urgent, these too, can be dealt with by the court. Delay is dealt with by the accumulation of interest on the three instruments for which the counterclaim has been asserted.

[93] There is no evidence before this court that suggests any form of prejudice not anticipated by the Rule. There is no evidence to indicate, for example, that the ongoing default on these mortgages is causing any of the defendants to experience hardship of such an extreme that their financial status is in serious jeopardy.

[94] I therefore find that prejudice is not an impediment to this motion going forward.

CONCLUSION and ORDER

[95] On the basis of all of the foregoing, I find that, except for those proposed amendments discussed above where leave has been granted to further amend by removing or substituting words, leave is granted to amend this amended statement of claim as per what has been proposed.

[96] If the parties are unable to agree as to costs, either can write to me within thirty days, copying the other, seeking a timetable for the exchange of brief written submissions addressing that issue.

Master Joan M. Haberman

Released: May 3, 2016