Court File and Parties
COURT FILE NO.: CV-15-531071 MOTION HEARD: 2017-05-02 REASONS RELEASED: 2017-05-02 SUPERIOR COURT OF JUSTICE – ONTARIO
BETWEEN:
AJKMIK LIMITED Plaintiff
- and-
SHARIDA KHAN BABULAL AND HAYDEN BABULAL Defendants
BEFORE: MASTER D. E. SHORT
COUNSEL: Patrick Morrissey, for the Plaintiff Monty Dhaliwal, for the Defendants
RELEASED: May 2, 2017
Reasons for Endorsement
I Nature of Main Action
[1] The Plaintiff has brought an action for possession and sale of the first named Defendants property located on Bow Valley Drive in Toronto ("the Property") under a second mortgage dated the 29th day of July 2010 ("the Original Mortgage"). The original mortgage was assigned to the Plaintiff via transfer of charge on the 12th day of December 2011 ("the Assignment of Mortgage") The original and assigned mortgages expired on the 1st day of August 2012.
[2] Nevertheless it was not until June 24, 2015 that the Plaintiff brought an action for payment of principal and interest under the assigned mortgage against first named defendant as the mortgagee and the second named Defendant as a personal guarantor under the mortgage.
[3] The action was defended by way of a statement of defence dated August 6, 2015.
[4] No discoveries or other activity appears to have taken place until the Plaintiff brought a Motion for Summary Judgment which was initially returnable on June 28, 2016. Significantly the original Counsel for the Defendants recused himself due to a prior conflict on June 28th, 2016.
[5] That conflict related to the “independent legal advice” he had provided with respect to the assignment transaction. The motion was adjourned on consent, to allow the Defendants time to appoint new Counsel.
[6] The Defendants served the Plaintiff with a Notice of Intention to Act in Person on February 14th, 2017. The motion was rescheduled for March 29th, 2017. The Plaintiffs Motion Record included an affidavit in support sworn by Terence Austin Kelly, the agent for the Plaintiff. The Defendants retained Counsel, to act on their behalf on March 24th, 2017. On March 29th, 2017 Mr. Dhalliwal sought an adjournment of the Motion which was contested. The matter was adjourned to less than a week from now, to May 8, 2017 on a peremptory basis against the Defendants, by Patillo, J. who imposed a term of a $7500 payment on account to the plaintiff.
[7] That payment was made. The defendants now seek to assert the basis of the opposition to the Summary Judgment motion, partially at least, by way of additions to the original pleading filed by their former, and now admittedly conflicted, counsel.
II. Motion to Amend
[8] The Defendants seek leave of the Court to amend their Statement of Defence in accordance with Rule 26 of the Rules of Civil Procedure. The rule states that:
26.01 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.
[9] In my view applying this rule, the amendments would ordinarily be permitted.
[10] The pleadings on both sides are relatively sparse. Notwithstanding the claim is based upon Form 14 B “Statement of Claim (Mortgage Action-Foreclosure)”, foreclosure is not sought with respect to the mortgage. Rather the pleading reads:
CLAIM
- The plaintiff claims: (a) that the property secured by the mortgage mentioned below be sold and the proceeds of the sale applied towards the amount due under the mortgage, and payment to the plaintiff by the defendants, SHARIDA KHAN BABULAL and HAYDEN BABULAL personally of any deficiency if the sale proceeds are not sufficient to pay the amount found due to the plaintiff; (b) possession of the mortgaged property; (c) payment by the defendants, SHARIDA KHAN BABULAL and HAYDEN BABULAL of the sum of $ 94,434.39 (from paragraph 6 below) now due under the mortgage together with interest at the rate of 6.0 per cent per year until judgment; (d) post-judgment interest at the rate of 6.0 per cent per year in accordance with the mortgage; and (e) the costs of this action on a substantial indemnity basis if the mortgage so provides.
[11] The factual assertion on behalf of the corporate plaintiff is that:
- The mortgage provides that on default of payment of any sum required to be paid under the mortgage, the principal becomes due and payable and the plaintiff is entitled to possession of the mortgaged property and to sale of the mortgaged property.
[12] The entirety of the Statement of defence reads:
The Defendants herein admit the allegations contained in paragraphs 2, 3 and 7 of the Statement of Claim.
The Defendants deny the allegations contained in paragraphs 4, 5 and 6 of the Statement of Claim and that the Plaintiff is entitled to the relief claimed in paragraph 1 of the Statement of Claim.
The Defendants state that while this Statement of Claim as issued states that it seeks foreclosure of the mortgaged property that the Statement of Claim itself contains no actual claim for foreclosure.
In the event that this Honourable Court should find that such a claim has been made, the Defendants seek leave, if necessary, to file a Request for Sale, or alternatively, a Request to Redeem pursuant to the Rules of Practice.
The Defendants deny specifically that the Plaintiff is owed the sum of $94,434.39 and puts the Plaintiff to the strict proof thereof.
The Defendants further deny that either of the Plaintiff or the original mortgagee ever advanced the sum of $64,702.26 to the Defendants and put the Plaintiff to the strict proof of that allegation.
The Defendants further deny that the Plaintiff is contractually entitled to the additional costs as claimed in paragraphs 6 (b) through 6(h) of the Statement of Claim and puts the Plaintiff to the strict proof thereof of that allegation. [sic]
The Defendants therefore ask that this action be dismissed with costs on a substantial indemnity basis.
[13] They deny owing the sum claimed and if an amount is found to be owing, they request a sale of the Property in accord with their statutory rights.
[14] Their new counsel asserts that the defendants are the victims of a complicated ownership scheme where a Mr. Natale held the property in trust for them and that, in the end, there was no real mortgage debt owing.
[15] The proposed pleading refers to their previous lawyer Mr Terry Kelly as “T.K.” and reads in part:
T.K. -who the Defendants respectfully plead has been the controlling mind and beneficial actor behind all material events taking place in this action - acted for and against the Defendants at various times from prior to the Defendants taking residency in the property up to and including July 29, 2014.
The Defendants respectfully plead that they had no knowledge that T.K. was acting for any parties adverse to their interests until they learned he was acting on behalf of the Plaintiff, AJKMIK Limited, who they deny any knowledge of prior to the demands in or around July 29, 2014.
[16] The affidavit in opposition filed on behalf of the plaintiff is sworn by Rita Ruth Hartmann and indicates she now resides in Oregon. She deposes that she is the president of the plaintiff company.
[17] She deposes as well that:
“I say and believe that an order granting leave to amend the Defendants pleadings would cause prejudice to the plaintiff, which could not be compensated for by costs or an adjournment.
[18] Her affidavit also indicates that Terence Austin Kelly is her brother and that he passed away after “after a lengthy battle with cancer, on April 24, 2017.
[19] She therefore asserts states:
“17. The defendants, in the amended statement of defence make accusations of an oral trust agreement between the Terence Austin Kelly and the defendants. Due to the death of Terence Austin Kelly, it is impossible for the plaintiff provide viva voce or affidavit evidence refuting this allegation.
[20] Conversely the defendants were unable to challenge the deponent by way of cross-examination.
[21] What was not disclosed in the affidavit, but which came out in argument was that Ms. Hartman also practiced law in Ontario in the same firm as her brother. More importantly, I note that the 2010 document found in exhibit “A’ of her affidavit is the 2010 charge in favor of Robert Natale. The document is submitted for registration by Mr. Kelly’s firm and is signed by Rita Ruth Hartman with the indication that she had “the authority to sign in register the document on behalf of the chargors.” The interrelationship of those involved needs to be clarified.
[22] The factum filed on behalf of the plaintiff asserts:
- The allegation of an oral trust agreement between Terence Austin Kelly and the Defendants cannot be refuted by the Plaintiff. Terence Austin Kelly passed away on April 24, 2017. There would be irreparable prejudice to the Plaintiff, if the amendments to plead the existence of a trust, or that Terence Austin Kelly was the controlling mind of the Plaintiff were made. Mr. Kelly is not available to give evidence by way of affidavit or otherwise, nor can he be examined on the allegations contained in the Defendants amended pleadings. Where there would be irreparable prejudice to the Plaintiff as a result of the amendment to the pleadings the application for leave to amend ought to be dismissed.
[23] In light of all the circumstances, I am not satisfied that it would an insurmountable task for the moving parties to prove their claim and if appropriate to refute the oral trust allegations now made by the defendants.
[24] In my proportionality dictates that the best way to have all relevant information before the court in order to permit a search for the most just resolution is to permit the amendment sought.
[25] I am not convinced that the prejudice to the Plaintiff that would arise from the amendments to the pleadings could not be remedied by an order for costs or an adjournment.
III. Delay and the presumption of Prejudice
[26] While delay is not in and of itself a basis for refusing amendment, there is a point where the delay is so long and the justification so inadequate that some prejudice will be presumed absent a demonstration by the party seeking the amendment that there is in fact no prejudice. The plaintiff points to Family Delicatessen Ltd. v. London (City), [2006] O.J. No. 669 at paragraph 6. I feel that is a very different case and that here delay may well be beneficial to both sides in a rapidly rising real estate market.
IV. Caselaw
[27] In Marks v. Ottawa (City), 2011 ONCA 248; 280 O.A.C. 251; 81 M.P.L.R. (4th) 161; 2011 CarswellOnt 2165; 200 A.C.W.S. (3d) 329; the Court of Appeal addressed such issues. There, they were dealing with a statement of claim, but I regard to principles, as applying to a statement of defence as well. Justice LaForme observed:
19 Although the general rule is that amendments are presumptively approved, there is no absolute right to amend pleadings. The court has a residual right to deny amendments where appropriate: Daniele v. Johnson (1999), 45 O.R. (3d) 498 (Div. Ct.) at paras. 11-15. 2 Further, I would agree that the proper factors to be considered are those first set out in Simrod v. Cooper, [1952] O.W.N. 720 (H.C.J. Master) at p. 721, aff'd at p. 723 (H.C.J.), and quoted with approval in Vaiman v. Yates (1987), 60 O.R. (2d) 696 (H.C.J.) at p. 698, which can be summarized as follows:
- An amendment should be allowed unless it would cause an injustice not compensable in costs.
- The proposed amendment must be shown to be an issue worthy of trial and prima facie meritorious.
- No amendment should be allowed which, if originally pleaded, would have been struck.
- The proposed amendment must contain sufficient particulars.
[28] I have considered those tests and am satisfied that to not permit the amendment sought would be more likely to cause an injustice.
V. Disposition
[29] Because of the urgency involved these reasons have been somewhat abbreviated. Nevertheless I am convinced that is appropriate in this case to grant the Defendants leave to amend their statement of defence, but on limited terms.
[30] Case Management Masters recognize it when the matter is scheduled for trial, they ought not to do anything that would jeopardize the trial date, as late adjournments result in wasted available court time.
[31] It seems to me that the amendments to the statement of defence can just as easily be incorporated into an affidavit that may otherwise have been filed in response to the notice of motion of the plaintiff. A fulsome statement of defence will assist in organizing and setting out the true case to be met. I am therefore granting leave subject to any direction from the judge scheduled to hear the motion next week.
[32] Following argument, I determined with counsel that winner of today’s motion ought to be entitled to their costs, which I fix at $1500, payable within 60 days by the plaintiff.
DS/ R.181 Master D. E. Short