CITATION: SKY SOLAR (CANADA) LTD. v. ECONOMICAL MUTUAL INSURANCE COMPANY, 2016 ONSC 6468 COURT FILE NO.: CV-14-118469
HEARD: OCTOBER 3, 2016
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Sky Solar (Canada) Ltd.
v.
Economical Mutual Insurance Company and Firstbrook, Cassie & Anderson Limited
BEFORE: MASTER R.A. MUIR
COUNSEL: M. Snowden for Economical Mutual Insurance Company B. Forrest for Firstbrook, Cassie & Anderson Limited R. Huang for the plaintiff
ENDORSEMENT
[1] Both defendants bring motions pursuant to Rule 26.01 of the Rules of Civil Procedure, RRO 1990, Reg. 194 (the "Rules"). They seek orders granting them leave to amend their statements of defence. The plaintiff is opposed to leave being granted in respect of several of the proposed amendments.
[2] The plaintiff claims the defendant Economical Mutual Insurance Company ("Economical") owes it indemnity coverage in connection with losses arising from a fire and an overheating event at two solar power projects undertaken by the plaintiff in Caledon and Brampton, Ontario. The plaintiff had retained Marnoch Electrical Services Inc. ("Marnoch") to install rooftop solar systems at the two locations. In accordance with the requirements of the tender documents and at the request of Marnoch, Economical issued insurance certificates naming the plaintiff as an additional insured under a commercial general liability policy issued by Economical to Marnoch. Economical has denied the plaintiff's claim chiefly on the basis that the alleged losses occurred after Marnoch completed its operations on the projects and the losses did not arise from Marnoch's operations on the projects.
[3] The plaintiff has also claimed against Marnoch's insurance broker, the defendant Firstbrook, Cassie & Anderson Limited ("FCA"). The plaintiff takes the position that in the event there is no coverage under the Economical policy, FCA owes the plaintiff a duty of care and was negligent in issuing the certificates of insurance.
[4] The starting point on any motion to amend a pleading is Rule 26.01. It is important to note that the rule states that the court shall grant leave to amend on such terms as are just, at any stage of an action, unless prejudice would arise that cannot be compensated for by costs or an adjournment. A proposed pleading must also be legally tenable and otherwise comply with the applicable rules of pleading. The court should not allow an amendment to a pleading that would have been struck out if originally pleaded. See Marks v. Ottawa (City), 2011 ONCA 248 at paragraph 19. The moving party does not need to include evidence as to the merits of the proposed amendments. The court should not go beyond the pleading to determine whether a claim or defence is tenable or meritorious, as that word is used in Marks. See Schembri v. Way, 2012 ONCA 620 at paragraphs 33 and 41 to 43. A proposed pleading must be read generously in favour of the moving party with allowances for drafting deficiencies. See McCreight v. Canada (Attorney General), 2013 ONCA 483 at paragraph 39.
[5] The plaintiff objects to certain proposed amendments requested by Economical and FCA. The plaintiff's objections fall into three categories. It states that the proposed statements of defence by both defendants raise issues of res judicata and issue estoppel that have not been properly pleaded. The plaintiff also objects to certain paragraphs of Economical's proposed amended defence on the ground that they amount to a withdrawal of an admission and are otherwise irrelevant or amount to improperly pleading evidence.
[6] I do not accept the plaintiff's submissions. First, the main consideration on a motion of this nature is usually prejudice. Here, there is no suggestion of non-compensable prejudice to the plaintiff. Witnesses are available. Documents have been preserved. This action has been set down but is not scheduled for trial until the November 2017 sittings. The statement of claim has recently been amended. The parties will have sufficient time to exchange amended pleadings and conduct further discovery well before the trial date.
[7] The plaintiff takes some issue with FCA's proposed pleading in relation to arbitration proceedings between the plaintiff and Marnoch. The plaintiff objects to some, but not all, paragraphs dealing with the arbitrator's findings. I note that FCA has agreed to withdraw proposed paragraph 32 which purports to set out a defence of res judicata and issue estoppel. The impugned paragraphs dealing with the arbitrator's findings are objected to on the basis that they are evidence and not facts. I disagree. The statements in question are simply alleged to be findings made by the arbitrator. They are part of a paragraph that deals with several other findings allegedly made by the arbitrator. In my view, they do not stray into the area of evidence.
[8] The plaintiff also objects to statements in FCA's proposed pleading that describe the outcome of an appeal taken from the arbitrator's ruling. I see nothing improper about those paragraphs. They simply close the circle on the final outcome of the arbitration proceeding already pleaded.
[9] I am therefore granting leave to FCA to deliver a fresh as amended statement of defence in the form of the draft fresh as amended statement of defence filed with the court on October 3, 2016, subject to paragraph 32 being omitted.
[10] In my view, Economical must also be granted leave to amend as requested. I am satisfied that the impugned paragraphs dealing with res judicata and issue estoppel have been properly pleaded. I view the plaintiff's objections as more in the nature of an attack on the merits of the proposed defence rather than a legitimate issue with the form of the pleading.
[11] A generous reading of the proposed amendments, and the proposed statement of defence as a whole, makes it clear that Economical has pleaded the necessary elements of the defence. These elements are set out in Great Atlantic & Pacific Co. of Canada Ltd. v. Economical Mutual Insurance Co., 2013 ONSC 7200 at paragraph 15. Economical states in its proposed amended pleading that arbitration findings related to the cause of the fires and the overheating incident and whether the losses claimed arose out of Marnoch's operations are some of the same issues presented in this proceeding (see proposed paragraphs 72 and 73). The decision of the arbitrator is now final (see proposed paragraphs 68 to 70 and 73). The same parties or their privies participated in the arbitration (see various paragraphs of the Economical statement of defence setting out the relationship between Economical and Marnoch as insurer and insured, especially original paragraph 23 and new paragraph 55 which allege that Economical retained counsel to defend Marnoch in the arbitration proceeding). The plaintiff is entitled to dispute the merits of this defence at trial, but in my view, a generous reading of the pleading reveals the facts necessary to assert the defence.
[12] The plaintiff also objects to the use of the phrase "abuse of process" in proposed paragraph 73 of the Economical statement of defence. I see nothing improper with the use of that phrase. Economical is not advancing a claim based on the tort of abuse of process. Economical is simply stating that the plaintiff's claim is an abuse of process based on its res judicata and issue estoppel defence. This statement simply engages the inherent power of the court to prevent the misuse of its procedures. There are many cases where claims or parts of claims have been struck out as an abuse of process based on res judicata and issue estoppel.
[13] The plaintiff also objects to several paragraphs of the proposed amended statement of defence as improper because they purport to withdraw an admission. The original pleading stated that Economical conducted a full investigation of the fires and the plant shutdown. In my view, the proposed amendments in relation to the "full investigation" do not withdraw an admission. Rather, they simply clarify what the expression "full investigation" meant within the context of the facts as set out in the original pleading. Economical seeks to make clear that its "full investigation" was within the context of a potential claim by the plaintiff against Marnoch. This does not contradict the original pleading. It simply seeks to provide clarity. Original paragraphs 17 to 22, read as a whole, make it clear that Economical's investigation arose as a result of an allegation by the plaintiff's insurer that Marnoch was responsible for one of the fires and the investigation was carried out within that context. I note that original paragraph 22 states that the investigation was carried out "to the extent necessary". In my view, these paragraphs of the proposed amended statement of defence do not amount to a withdrawal of any admissions in the original statement of defence. In my view, they appear to be consistent with the original statement of defence.
[14] I agree with the plaintiff that Economical's proposed amended statement of defence contains a significant degree of detail, especially in respect of the Giffin Koerth report. It may be that some of this detail crosses the line between evidence and fact. However, the standard is not perfection. Allowance must be made for drafting deficiencies. The distinction between fact and evidence is a fine one and some liberty must be allowed in order for a party to fully defend itself in the face of a very significant claim. The original defence was based in part on expert findings. So is the proposed amended defence. See paragraphs 17 to 22 of the original statement of defence. The proposed statement of defence is certainly longer and more detailed than the original but of course it must be noted that the newly issued amended amended statement of claim is similar in nature. It is 18 pages long and comprised of 81 paragraphs. I see nothing improper with the level of Economical's factual detail in defence of this claim.
[15] Finally, I do not accept the plaintiff's argument that Economical's proposed pleading with respect to FCA and its alleged duties to the plaintiff is improper as irrelevant. The plaintiff has pleaded that FCA was at all material times the agent of Economical and was acting on Economical's behalf when it issued the policy to Marnoch (see paragraph 11 of the amended amended statement of claim). Surely Economical has the right to defend itself against these allegations, which would include taking the position that FCA owed no duties to the plaintiff? There is nothing improper about these proposed paragraphs.
[16] For these reasons I am granting leave to Economical to amend its statement of defence in the form of the draft amended statement of defence found at tab 1A of its supplementary motion record dated September 16, 2016.
[17] The parties shall confer and attempt to agree on the issue of costs and any other terms that may need to be included as part of this order. If the parties are unable to agree they shall provide the court with brief submissions in writing by November 18, 2016.
October 18, 2016
Master R.A. Muir