CITATION: Scarf et al. and Ottawa Athletic Club 2016 ONSC 7968
COURT FILE NO.: 13-58138
DATE: 2016/10/14
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Julie Michelle Scharf, Michelle Hancock and Keith Hancock,
Plaintiffs
and –
Ottawa Athletic Club Inc., LEGENDS MARTIAL ARTS INC., carrying on business as GRECO LEAN AND FIT, TONY GRECO carrying on business as GRECO LEAN AND FIT, WILLIAM ANDERSON and MATT JOSE and CODY WAITE, 2155199 ONTARIO INC., 2089880 ONTARIO INC. and 2317495 ONTARIO INC., carrying on business as GRECO LEAN AND FIT, GRECO LEAN + FIT, and SHENKMAN CORPORATION
Defendants
David Cutler, lawyer for the plaintiffs
Pasquale Santini, lawyer for the defendants
HEARD: September 13, 2016
REASONS FOR JUDGMENT ON A RULE 26 MOTION TO DELIVER A FRESH STATEMENT OF CLAIM
PELLETIER, J.
Introduction
[1] The Plaintiff brings this motion seeking leave to deliver a fresh statement of claim in relation to an action in negligence. She claims that the Defendant athletic club and certain entities and individuals associated with the club were negligent in the delivery of fitness exercises. The event giving rise to the action occurred on July 6, 2011. A Statement of Claim was issued on July 3, 2013 and amended on consent on September 19, 2013. An amended statement of defence and cross-claim was filed January 22, 2014.
[2] The Plaintiff’s current counsel was retained in April 2015. Discoveries were held in June 2015 and March 2016. By the spring of 2016, the Defendants were contemplating a motion for summary judgment. The results of the Discoveries caused the Plaintiff to consider a reformulation of her claim.
THE ISSUE
[3] At issue presently is whether the filing of a fresh statement of claim is in any way prevented from receiving the Court’s approbation under Rule 26. For the reasons that follow, I have concluded that the plaintiffs should be permitted to reformulate her pleadings.
THE PARTIES’ POSITIONS
[4] The Plaintiff is of the view that the proposed new pleadings are for the most part a matter of housekeeping in order to simplify the pleadings and to eliminate the distractions associated with pleadings amended several times. The plaintiff also relies on information gathered during the Discoveries in raising two new issues: firstly, a new cause of action, negligent misrepresentation and secondly an assertion that by his actions the Defendant Tony Greco has caused the corporate veil over his business entities to be lifted.
[5] The Defendants’ counsel opposes the motion on five specific grounds. Firstly, he submits that the proposed pleadings refer to evidence rather that the assertion of material facts. Secondly, it is argued that vacating the amended statement of claim would result in the withdrawal of admissions to the unfair detriment of the Defendants. Thirdly, it is suggested that any new claims advanced are not tenable. Fourthly, the Defendants plead that the new claims are advanced beyond the statutory time limits, and finally it is submitted that the filing of the proposed new claim represents an abuse of process, particularly as it relates to timing.
ANALYSIS
[6] Before examining each of the Defendants’ objections to a reformulation of the claim, certain base principles must be identified. The pleadings identify the subject of the debate. They must be specific and detailed though not to the extent of citing sources of information or advocating for the position held. They must reveal facts and not cite evidence. Pleadings can be modified on consent or with leave of the Court. This practice is presumptively permitted and encouraged in order to narrow the issues and ensure procedural and trial fairness. Rule 26 of the Rules of Civil Procedure renders amendments to the pleadings a matter of course unless the changes create an irreparable disadvantage. Access to civil justice must be balanced against each parties’ entitlement to fairness in both the procedural and final adjudicative process.
[7] The application of these general principles will be determined in each case on its particular circumstances. The Court is not however to go beyond the pleadings in its assessment of the merits of a Rule 26 motion. The facts pleaded are to be taken as given provided they comply with the rules of process drafting and are not otherwise statute barred or void for reasons developed jurisprudentially. In that connection, the Court must occupy a gatekeeper role to ensure that unfair or prejudicial practices are not resorted to. Prejudice to a party is not the result of unfortunate circumstances but rather the result of unfair circumstances.
[8] The Court’s evaluation of the merits in any proceeding evolves from the outset to the final disposition. The examination of the sufficiency of pleadings is conducted less stringently than the consideration of summary judgment, itself less exhaustive than a final adjudication on the merits.
[9] Turning to the grounds of opposition to the present motion, I am firstly unable to agree that the proposed reformulation of the Plaintiff’s claim violates the rule of pleadings that facts alone and not evidence must be pleaded. I agree with the Plaintiff’s counsel that the determination of whether the proposed pleadings contain evidence rather than factual allegations is to be conducted by examining only the proposed new pleadings.
[10] The existing Amended Statement of Claim is of no moment in the determination of whether its proposed replacement respects the rule that facts and not evidence be pleaded. The proposed pleadings are not extraordinarily lengthy. They cover in fairly succinct detail the circumstances relied upon to justify the claims in relation to both liability and damages. The pleadings do not identify the sources of information or the proposed evidence. They are restricted to allegations based on certain circumstances. In sum, they serve the purpose of clearly identifying the facts relied upon and the basis upon which the claim is made.
[11] Secondly, the Defendants argue that leave should not be granted in the present motion if to do so would extinguish previous admissions. I am similarly unpersuaded by this submission. As argued by the Plaintiff, seldom are admissions made in the originating process.
[12] Specific to the present pleadings, the Defendants argue that the Amended Statement of Claim concedes that the Defendant, Tony Greco, was an employee of the Ottawa Athletic Club, and not, as proposed in the fresh statement of claim, a director and officer and operating mind of the Defendant corporations, a fact, according to the Defendants, previously known or readily discoverable. The Defendants further argue that in her original pleadings, the Plaintiff conceded that her mishap was the result of having “accidentally landed” on a bar bell, and had “tripped” on it. On the issue of the character of Tony Greco’s relationship to the Defendant corporations, I accept the argument that the initial qualification left open the characterisation proposed in the fresh pleadings, in as much as it has been specified that “the particulars of the relationship among the defendant corporations and other defendant is not within the knowledge of the plaintiffs as of the date of this statement of claim”.
[13] Initial pleadings are frequently framed in alternative terms. The responding pleadings, resulting inquiries and the outcome of Discoveries are routinely instructive on the precise nature of the relationship between various Defendants and the responsibilities and duties attributed to them. If amendments to pleadings are to be permitted and encouraged in order to properly focus the litigation, the filing of reconstituted pleadings must be viewed in a permissive and reasonably inclusive light, unless the Defendants are irreparably disadvantaged. The Defendants remain at liberty to defend the revised allegations as they relate to corporate structure and personal liability.
[14] As to the submission that the Plaintiff has conceded that the injury was the result of an accident, in the sense that it was unforeseeable and not reasonably avoidable, the entire pleading, as it stands, must be read in order to appreciate the full context of the use of the expression “accidental”. The present claim makes clear the concept that the incident was, from the Plaintiff’s perspective, avoidable with the proper care and precaution to which the Plaintiff was entitled. To give effect to the Defendant’s submission on this issue would be to conclude that the Plaintiff served the Defendants in relation to something over which they had no control – a suggestion clearly not expressed in the exiting pleadings. In sum, therefore, the modified pleadings presently proposed expand upon the existing pleadings in a manner which cannot be said to place the Defendants in a position of not being able to rebut the Plaintiff’s claim.
[15] Thirdly, the Defendants are of the view that the proposed fresh statement of claim raises a new basis of liability which is untenable in law or the facts as pleaded. The only new cause of actions proposed is in negligence, specifically negligent misrepresentation, more specifically failure to obtain proper insurance coverable for the corporate defendant and failure to advise prospective clients of this fact. It is quite correct to state that the Plaintiff could not be a party to a contract of insurance as between the athletic club and its service providers. There is however room to argue that the non-disclosure of the absence of insurance coverage may have mislead or induced individual prospective clients to engage in a contract of services with the providers of those services. This particular dimension of the case became known to the Plaintiff as a result of the Discoveries process. It was previously unknown and not readily foreseeable. This theme is re-examined in the assessment of the Defendants fourth objection below. It is however relevant on the present assessment of the third objection in relation to the tenability of the newly pleaded claim.
[16] It is neither necessary nor possible for the Court presently to decide whether the Defendants are liable for negligent misrepresentation. There are however sufficient grounds on the basis of the proposed pleadings for this issue to be tried. The Plaintiff does not purport to have been disadvantaged by the lack of insurance coverage as it relates to either negligence in the delivery of services or the ability to recover. The plaintiff raises the issue as it relates to her conscious decision to avail herself of the corporate Defendants services in the face of the non-disclosure of the Defendants status as an insured entity. Whether that claim, on its face viable, will succeed can only be determined on the merits after trial.
[17] The additional feature of the proposed pleadings, that the defendant Tony Greco has caused, by his actions or inaction vis-à-vis insurance coverage, the corporate veil of his company to be pierced is, in my view, not a cause of action per se but rather notice that the Court will be invited, upon a review of the entire evidentiary record to consider whether Tony Greco has acted in a manner inconsistent with his duties as the director and operating mind of the corporation. This feature of the case similarly crystalized following the process of Discoveries. The argument is valid. Its success can only be determined on the fulsome review of the merits at trial.
[18] I would accordingly conclude that the new cause of action, liability through negligent misrepresentation, and the proposed submission that the corporate veil has been pierced by the conduct of the corporation’s principal, are previously undiscoverable features of the litigation which have sufficient merit to allow the case to proceed on this basis as well as those already contained in the pleadings.
[19] Fourthly, implicit in the previous conclusion is the determination that it is open to the Plaintiff to argue that the 2-year limitation period associated with the new claims were discovered upon the completion of the Discoveries, within the past 2 years and therefore not statute barred. In order to convince the court otherwise, the Defendants would need to demonstrate that, on balance, the Plaintiff was remiss in the exercise of reasonable diligence is identifying these features of the case at a point in time greater than 2 years before the motion to amend the pleadings. There being no concerted effort to do so, I am unable to subscribe to the view that delay in instituting the new claims are fatal in a temporal basis.
[20] Finally, I am not persuaded that the conduct of the Plaintiff represents an abuse of the Court’s purpose in seeking redress. Clearly the Court cannot countenance practices which offend basis tenets of fairness and conscionability. That onus upon the party advancing a claim of abuse of process is understandably difficult to meet. A finding of abuse of process can only be made in circumstances where the Courts are enlisted to participate in a process that is high handled and reprehensible.
[21] The present reformulation of the pleadings resulted from the Discoveries. I am not persuaded that the proposed amendments were deliberately designed to thwart the summary judgment motion which the Defendants had previously contemplated. If indeed, as the Court has concluded, the Discoveries lead to a revised approach to the overall issue of liability, the pursuance of the claim on the revised basis cannot be determined to be some form of manoeuvering deliberately designed to sabotage the summary judgment motion contemplated by the Defendants.
[22] This determination is consistent with the jurisprudence which addresses abuse of process and based upon findings in the present circumstances which distinguish the present case from those where the Courts have intervened to prevent the flagrant misuse of the judicial process.
CONCLUSION
[23] Having determined that the Defendants’ objections neither individually nor cumulatively compel a finding that the filing of a fresh statement of claim violates Rule 26, the motion is granted and the proposed new pleadings will be permitted. The Defendants remain at liberty to pursue their motion for summary judgment as currently scheduled.
[24] Amendments to the style of cause and the deletion of certain parties, as agreed upon by counsel may be effected.
[25] Cost submissions may be exchanged and filed within 30 days of the release of the Reasons for Judgment herein. Submissions are not to exceed 3 pages in addition to supporting documents.
The Honourable Justice R. Pelletier
Released: October 14, 2016
CITATION: Scarf et al. and Ottawa Athletic Club 2016 ONSC 7968
COURT FILE NO.: 13-58138
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Julie Michelle Scharf, Michelle Hancock and Keith Hancock,
Plaintiffs
and –
Ottawa Athletic Club Inc., et al.
Defendants
REASONS FOR JUDGMENT ON A RULE 26 MOTION TO DELIVER A FRESH STATEMENT OF CLAIM
Pelletier, J.
Released: October 14, 2016