Court File and Parties
COURT FILE NO.: CV-13-5764 DATE: 2016/09/30
ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
SHEILA BEIKO Plaintiff
- and -
TOM STONE and MORLAND REAL ESTATE APPRAISALS LTD. Defendants
COUNSEL: Joseph D. Kennedy, for the Plaintiff Christopher Afonso, for the Defendants Nicole A. McAuley, for the Third Parties, The Mortgage Group (Ontario) Inc. o/a TMG The Mortgage Group and Lynn Cowden
HEARD: September 1, 2016
NADEAU J.
RULING ON A MOTION
[1] The Plaintiff brings this Motion seeking an Order granting leave to amend her Amended Statement of Claim to add:
(a) her husband, George Beiko as a Plaintiff; and
(b) the Third Parties, The Mortgage Group (Ontario) Inc. o/a TMG The Mortgage Group and Lynn Cowden, as Defendants to the main action.
[2] Rule 26.01 of the Rules of Civil Procedure states:
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.
[3] This action arises out of a mortgage transaction in which the Plaintiff and George Beiko acted as lenders, with the borrowers being Mike and Carol Freyer. The Third Parties brokered the transaction. The Defendants completed a limited appraisal of the subject property for the transaction. This lawsuit was commenced against the Defendants alleging (among other things) negligent misrepresentation with respect to their appraisal for the mortgaging of the property.
[4] Sheila and George Beiko are private lenders. The Third Parties are a mortgage broker, Lynn Cowden, and the mortgage brokerage that employed her. In January of 2012, Lynn Cowden contacted George Beiko to solicit his interest in providing a private mortgage loan secured with a mortgage on the property.
[5] Lynn Cowden provided an appraisal of the property signed on January 7, 2012, which was prepared by the Defendants. That appraisal indicated (among other things) that the value of the property was between $425,000 to $430,000 as of the Street Inspection Date of January 5, 2012. Based upon the representations contained in that appraisal, plus the information and documentation provided by Lynn Cowden, the Plaintiff and George Beiko provided a mortgage for the property in the amount of $325,000.
[6] The borrowers defaulted on their payments. Consequently, the Plaintiff and George Beiko proceeded with a “Power of Sale” of the property. Following the sale of the property, there were insufficient funds to recover the amount provided to the borrowers. This lawsuit was commenced against the Defendants for (among other things) the damages/losses sustained as a result of their negligent appraisal and representations made by the Defendants (some of the details of which are in the Amended Statement of Claim).
[7] At the time this lawsuit began, the Plaintiff did not believe that the mortgage broker Lynn Cowden and TMG were responsible for the losses incurred with the mortgage for the property.
[8] When the Defendants added Lynn Cowden and TMG as Third Parties, the Plaintiff had no reason to believe that the mortgage broker was liable to George Beiko and the Plaintiff.
[9] This lawsuit has not been scheduled for a Pre-trial Conference. The Trial Record has not yet been served. Examinations for Discovery were held in April 2015 and undertakings have been answered.
[10] After this lawsuit was commenced, the Plaintiff telephoned Lynn Cowden and asked if she had a previous appraisal for the property. Apparently, Lynn Cowden said “no”. The parties exchanged sworn Affidavits of Documents and copies of the productions listed in them. On August 27, 2014, Lynn Cowden and TMG, through their solicitor, provided their Affidavit of Documents including productions.
[11] In reviewing these productions, the Plaintiff discovered that prior to George Beiko and the Plaintiff providing a mortgage on the property, Lynn Cowden had not provided all documentation in her possession regarding both the property and the borrowers. In particular, Lynn Cowden failed to provide a previous full appraisal dated January 24, 2010 also completed by the Defendants with respect to the property. That appraisal valued the property at $400,000. Also produced at that time was an e-mail between Lynn Cowden and Tom Stone on January 6, 2012, obviously prior to his signing of the appraisal, that indicated that she hoped the value of the property was at least $425,000.
[12] I am satisfied that the Plaintiff did not, and could not, discover her need to claim against Lynn Cowden and TMG until after the Plaintiff received and reviewed their Affidavit of Documents provided on August 27, 2014.
[13] I have not been satisfied on this evidence produced that, during this mortgage transaction, the Defendants informed any of the other parties of the previous Residential Appraisal Report signed January 24, 2010; which full appraisal indicated the property had a market value of $400,000 less than two years prior.
[14] The Notice of Motion for the relief sought was filed on March 17, 2016.
[15] The Defendants submit that a Statement of Claim cannot be amended to add time-barred claims except where the proposed amendments also include a viable defence to the application of the limitations law. The Limitations Act, 2002 only provides a single viable defence to the application of the limitations law: the doctrine of discoverability. The Rules only permit amendments in the absence of prejudice, but the expiry of a limitation period gives rise to a presumption of prejudice. Discoverability is the only permitted ground to avoid enforcement of a limitation period; and discoverability is not applicable vis-à-vis George Beiko’s proposed new claim against the Defendants.
[16] The Third Parties submit that the Plaintiff should not be permitted to further amend the Amended Statement of Claim to include the Third Parties as Defendants. The Plaintiff and her lawyer have failed to provide sufficient evidence to suggest that they were “reasonably diligent” in investigating the potential for a claim as against the Third Parties prior to the expiration of the limitation period. The Rules and the related common law underscore a simple, common sense proposition: that a party to litigation is not to be taken by surprise or prejudiced in non-compensable ways by late, material amendments after the expiry of a limitation period. If such surprise or prejudice is demonstrated, an amendment will be denied. The Third Parties alternatively submit that if the Plaintiff is permitted to amend the claim to include them as Defendants, certain paragraphs of the proposed Fresh as Amended Statement of Claim ought to be struck. As well, the Third Parties support that George Beiko ought not to be added as an additional Plaintiff.
[17] The Limitations Act provides in part in sections 4 and 5 as follows:
Unless this Act provides otherwise a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.
(1) A Claim is discovered on the earlier of,
(a) the day on which the person with the claim first knew,
(i) that the injury, loss or damage had occurred,
(ii) that the injury, loss or damage was caused by or contributed to by an or omission,
(iii) that the act or omission was that of the person against whom the claim is made, and
(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and
(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a).
(2) A person with a claim shall be presumed to have known of the matters referred to in clause (1)(a) on the day the act or omission on which the claim is based took place, unless the contrary is proved.
[18] The Limitations Act goes on to say in section 21:
- (1) If a limitation period in respect of a claim against a person has expired, the claim shall not be pursued by adding the person as a party to any existing proceeding.
[19] The Limitations Act must be read in conjunction to Rule 5.04(2) which states:
At any stage of a proceeding the court may by order add, delete or substitute a party or correct the name of a party incorrectly named, on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.
[20] In Brantford Engineering and Construction Ltd. v. Brantford (City) [2015] O.J. No. 4492, Justice Reilly of this Court outlined the following:
“11 I have carefully considered the jurisprudence cited by the parties. I note for instance the case of Kowal v. Shyiak, 2012 ONCA 512 cited by the respondent. This is an excellent decision from the Ontario Court of Appeal. At paragraph 18 of the decision, Justice Pepall stated:
Certainty of a defendant’s responsibility for the act or omission that caused or contributed to the loss is not a requirement. It is enough to have prima facie grounds to infer that the acts or omissions were caused by the party or parties identified (citing authority). Expert opinions are not required in all cases (citing new authority).
12 This same point was made by Master J. Haberman in the Superior Court of Justice in the case of Lima v. Moya, 2015 ONSC 324. Master Haberman stated at paragraphs 71-76:
[71] In summary, as long as the identity of a potential tortfeasor is known and there is some information on which a court could make a finding of liability, there is no room for discoverability to delay the starting point of the limitation period. Having enough information to form an allegation of negligence is quite different from having a winning case against a particular defendant -- it is only the former that is required for the limitation clock to start running.
[72] Further, while new information may emerge down the road that strengthens the case against the proposed defendant, this will not restart the clock. A plaintiff should not wait until he has a good case against a defendant before starting a claim against him -- as long as he has a case he can try to make, he must move within the limitation period.
[73] In terms of what does and does not constitute due diligence in assessing whether grounds to sue a particular individual exist, Master Dash noted in Wakelin v. Gourley et al, 76 OR (3d) 272, that if all the plaintiff does during the two years after an accident in order to identify tortfeasors is request a copy of the police report, that will not constitute reasonable diligence.
[74] The plaintiffs rely on the case law that dictates the approach the court should take when dealing with motions such as there, where the issue of discoverability is on the table and there is a credibility issue. They maintain that the case law suggests that leave should be granted to add the proposed party, while also allowing the defendant to plead the expiry of the applicable limitation period.
[75] However, it appears clear that such an approach is only advocated when there is an issue of credibility that has to be resolved regarding who knew what and when, such that a trial is a better mechanism for resolving the issue (citing precedence). The “let it go and flesh out the facts at trial” approach is only appropriate when the basis for the discoverability of the claim must be explored in more depth and the evidence about it needs to be tested.
[76] I should not have to point this out in 2015, the plaintiff’s only salvation in the face of an expired limitation period is the application of the discoverability doctrine. The doctrine of “special circumstances” was clearly laid to rest in Joseph v. Paramount Canada’s Wonderland, 2008 ONCA 469, a decision of the Ontario Court of Appeal released in February 2008. Cases that talk about lack of prejudice are generally dealing with special circumstances so the presence or absence of prejudice really is not a factor here. When dealing with discoverability, the issue is whether someone discovered, or ought to have, that they have a claim, along with the essential elements that go with it to enable them to start an action. This is a fact-based analysis.
13 The same point was made by Justice Perell in the Superior Court of Justice in the case of Tenderchoice Foods Inc. v. Versacold Logistics Canada Inc. 2013 ONSC 80 (Sup. Ct.). At paragraph 55, Justice Perell noted that:
A plaintiff is required to act with due diligence in acquiring facts in order to be fully apprised of the material facts upon which a claim can be based (citing precedence).
He went on to state at paragraph 60:
Discovery does not depend upon awareness of the totality of the defendant’s wrongdoing. Section 5(1)(a) of the Limitations Act 2002 prescribes that discovery occurs when the plaintiff knows or ought to know of an injury caused by an act or omission of the defendant and having regard to the nature of the injury legal proceedings would be an appropriate way to seek a remedy. For the limitation period to begin to run, it is enough for the plaintiff to have prima facie grounds to infer that the defendant caused him or her harm, and certainty of a defendant’s responsibility for the act or omission that caused or contributed to the loss is not a requirement (citing Kowal v. Shyiak).
14 The same point was made by a unanimous Court of Appeal in the case of Sloan v. Sauve Heating Limited, 2011 ONCA 91. There are certain similarities between the Sloan case and the case at bar as far as the facts are concerned. In Sloan, the Court of Appeal prevented the plaintiff from adding a defendant when plaintiff’s counsel failed to act on information related to the proposed defendant for several months and thereby missed the expiry of the limitation period.”
[21] Since this is a fact-based analysis, I note from the Affidavit of Lynn Cowden that, at the time of the mortgage transaction in 2012, she had “a full appraisal that was completed of the property in 2010 for a previous transaction”. That full appraisal was also completed by the Defendants less than two years prior, indicating the property had a market value of $400,000. However, her e-mail to Tom Stone on January 6, 2012 requests the following:
“Hi T,
Here is the favour request for the year LOL
I need a formal letter of opinion on Mike and Carol Freyers home.
369B Bear Creek Road, Callander, Ontario
I would hope to have a value of at least 425K.”
[22] The limited appraisal from an apparent street inspection by the Defendants then indicates the Final Estimated Value Range of the property as of January 5, 2012 is from $425,000 to $430,000. How does that happen? And why was the previous full appraisal not provided by anyone to the Plaintiff or her husband, especially when it was asked for?
[23] The response from Lynn Cowden to the Defendants, upon receiving the limited appraisal with “a value of at least 425K”, is as follows:
“Got it.
Thanks very much T
L”
[24] The Affidavit evidence of the Plaintiff and her husband is that they had not seen the previous full appraisal from 2010 until they received Lynn Cowden’s Affidavit of Documents in 2014. The Defendants, on this evidence for this motion, remain silent on this issue of a previous full appraisal of the property with a lower market value than the range indicated in the limited appraisal provided by the Defendants.
[25] In my view, this motion is one of those cases “where the issue of discoverability is on the table and there is a credibility issue”. There is clearly an issue of credibility here that must be resolved regarding who knew what and when, such that the trial is the better mechanism for resolving the issue. The basis for the discoverability of this claim by the Plaintiff and her husband as against the Defendants and the Third Parties must be explored in more depth, and the evidence about it needs to be tested at the trial.
[26] I have considered and applied these principles to the evidence presented to me by all of the parties on this motion. Although I have some concern regarding the due diligence exercised by the Plaintiff and her husband, I have concluded that they have met the onus placed upon them to provide a reasonable explanation on proper evidence as to why the information about the Defendants and the Third Parties potential responsibility was not obtainable prior to the expiry of the presumed limitation period with the exercise of due diligence.
[27] Notwithstanding the initial decision by George Beiko not to make a claim as one of the mortgagees here, the evidence that was produced for this Motion satisfies me that he discovered he must claim once he and his wife were informed of the 2010 full appraisal and the e-mail exchange between the Third Parties and the Defendants. Their potential responsibility to George Beiko and his wife appears to only become discoverable once they received Lynn Cowden’s Affidavit of Documents on August 27, 2014. There is no evidence produced of a “triggering event” for them to make such inquiries until that date, and this Motion was brought within two years of that date.
[28] For these reasons, I am granting the relief sought by the Plaintiff. There shall be an Order that George Beiko be added as a Plaintiff, and that leave is granted to have the Fresh as Amended Statement of Claim issued. The obvious effect is that three parties are added to the main action; making these Third Parties now Defendants. Each of the Defendants shall have leave to plead a limitation defence.
[29] Having regard to my expressed concern of the due diligence exercised by the Plaintiff and her husband, as well as their decision to proceed initially in her name only, my preliminary view is that the appropriate award of costs for this Motion is costs to the Plaintiff in the cause unless otherwise ordered by the trial judge. In that event, only if the Plaintiffs are later awarded the costs of this action after trial will they be entitled to the costs of this Motion from the Defendants, now including the Third Parties. However, if these litigants are unable to agree on such an appropriate costs disposition, any party seeking costs shall within 15 days provide submissions (up to three pages) supported by a Bill of Costs. Any responding submissions (up to three pages) may be made within a further 15 days.
Nadeau J. Released: September 30, 2016