Court File and Parties

COURT FILE NO.: CV-09-375202 DATE: 20170606

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Metro Ontario Real Estate Ltd., Plaintiff/Appellant – AND – Hillmond Investments Ltd. carrying on business as Central Parkway Mall, Defendant/Respondent

BEFORE: E.M. Morgan J.

COUNSEL: Linda Galessiere, for the Plaintiff/Appellant James McReynolds, for the Defendants/Respondents

HEARD: June 6, 2017

Reasons for Judgment

[1] This appeal puts into relief the line between objective fact and subjective advocacy.

[2] The appeal is from the decision of Master Hawkins granting leave to the Respondent to amend its Fresh Amended Amended Statement of Defence and Counterclaim. It is the Appellant’s position that the learned Master committed a palpable and overriding error in permitting amendments which constituted a withdrawal of admissions the Respondent had previously made in the action.

[3] Under Rule 51.05 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, an admission contained in a pleading may be withdrawn on consent or with leave of the court. At the hearing before the Master, some of the Respondents’ amendments were consented to by the Appellant while others were objected to by the Appellant. The Master granted the Respondent leave to amend its pleading and to withdraw the admissions at issue.

[4] In granting leave under Rule 51.05, the Master applied the correct test as set out in Antipas v. Coroneos (1988), 26 C.P.C. (2d) 63, at paras. 14, 20 (Ont. H.C.J.), and reiterated in BNP Paribas v. Bartlett, 2012 ONSC 5604, at paras. 8-10 (Div. Ct.) and 147619 Canada Inc. v. Chartrand, [2006] O.J. No. 1877 (C.A.):

A review of the cases indicates that a party requesting leave to withdraw an admission must pass three tests, by establishing (1) that the proposed amendment raises a triable issue; (2) that the admission was inadvertent or resulted from wrong instructions; and (3) that the withdrawal will not result in any prejudice that cannot be compensated for in cost.

…[I]f there is a triable issue, a party should be able to withdraw an admission upon furnishing a reasonable explanation for the change of position.

[5] Apparently, the Respondent has brought a summary judgment motion which, several years later, is still pending. In its response to that motion, the Appellant relied on a series of admissions in the Respondent’s pleading that the Respondent then sought to withdraw and amend. Given this context and the apparent centrality of the proposed amendments to the summary judgment motion and their relationship to core issues in the litigation, the amendments raise triable issues.

[6] Counsel for the Respondent submits that the initial admissions came as a result not of faulty instructions, but of a misunderstanding by the Respondent over the identity of its commercial tenant. The Master categorized the admissions which he granted leave to withdraw as follows:

(1) [The Appellant] is [the Respondent’s] tenant; (2) [The Respondent] was aware that the lease was assigned to [the Appellant], which assignment took place in 1987; (3) [The Respondent] received rent from or on behalf of [the Appellant]; (4) [The Respondent] received and sent communication[s] from/to [the Appellant] and on behalf of [the Appellant]; (5) [The Respondent] ‘offered’ [the Appellant] the fifth renewal period.

[7] It was the Master’s view that given a lengthy series of name changes and the relatively complex corporate structure of the Appellant, it was understandable that the Respondent was confused about the identity of the tenant. He reasoned that this confusion constituted a reasonable explanation for the late-in-the-day amendment.

[8] The lease at issue is an old one, dating from the 1970’s. The Appellant’s position is that it is the tenant, but over the years the rent has been paid by various corporate entities in its overall corporate family. The Master reviewed in detail the series of name changes and assignments of the tenancy between the Appellant’s parent and subsidiary companies. The Appellant has engaged in a dizzying set of reorganization and name change transactions within its corporate family, with different corporate entities taking on names that vary in minor ways from other companies in the group.

[9] Counsel for the Appellant does not deny that the Appellant has gone through the series of name changes and at least one assignment of the lease. What she says is that the Respondent knew of some of these matters all along, and certainly by July 12, 2011, the date of the previous amendment of its pleading, it was aware of everything it now says is new. The corporate name changes, etc. were outlined in detail in an affidavit filed by the Appellant in the summary judgment motion dated May 20, 2011. This affidavit and other material was served on the Respondents on May 24, 2011. Counsel for the Appellant points out that the last time the Respondent amended its pleading it did so after receiving those materials from the Appellant. In that amendment it even withdrew certain other admissions, but it did not withdraw the admissions in issue here.

[10] It is the Appellant’s position that having not amended its pleading to reflect this information at the last opportunity, it is now too late and the Respondent has no reasonable explanation for the withdrawal of the relevant admissions. Appellant’s counsel submits that the Respondent is not correcting factual errors in seeking the present amendments, but rather is burnishing up its strategic position now that it has seen the Appellant’s response to its summary judgment motion.

[11] The explicit explanation given by the Respondent’s affiant is that the Respondent did not discover the corporate structure and names until after the litigation began. However, it is clear from the history of proceedings that counsel for the Appellant is correct when she says that this information was not new for the Respondent in October 2012 when it served the current version of its pleading leading to this appeal.

[12] It would seem that the new amendments came with the Respondent’s change of counsel in June 2012. Not only did new counsel draft a Fresh Amended Amended Statement of Defense – the Respondent’s fourth amendment to its pleadings since the litigation began in 2009 – and not only does this new pleading withdraw certain relevant admissions, it withdraws admissions newly made in the previous amendment to its pleadings just 6 months previously. And that amendment, as indicated, had come after the Respondent already learned all of the corporate information about the Appellant on which the present amendment is premised.

[13] More than that, at least one of the current amendments, and arguably all of them, are premised on information that the Respondent obviously knew all along because it has to with the Respondent’s own negotiation of a fifth renewal to the lease in issue. The previous version of the Respondent’s pleading had said that the Respondent offered the fifth renewal to the Appellant, while the new version says that the Respondent acquiesced to the Appellant’s insistence on a fifth renewal. This type of amendment cannot be a fact newly discovered by the Respondent following on some disclosure by the Appellant during the course of the litigation. A party cannot propose an amendment that exposes it as “trying to resile from its own description of its business”: Canada Post Corp. v. Key Mail Canada Inc., at para. 40 (SCJ).

[14] Counsel for the Appellant states that what really happened is that the Appellant, in responding to the Respondent’s summary judgment motion in February 2012, relied on all of the previous iterations of the Respondent’s pleading. It is, of course, perfectly understandable that one party would rely on the statements made by the other in its pleading; the pleading sets out in a fundamental way a party’s understanding of its own case. The Appellant’s position in the motion must have alerted the Respondent to the fact that their admissions were not helpful to their own position and that, whatever the factual accuracy, it should withdraw these admissions and try some new ones.

[15] Counsel for both parties are in agreement that the standard of review in an appeal of this nature from the ruling of a Master is that of “palpable and overriding error”. This is not a hearing de novo: Zeitoun v. Economical Insurance Group (2009), 2009 ONCA 415, 96 O.R. (3d) 639 (C.A.). “A ‘palpable error’ is one that is obvious, plain to see or clear”: Allcock v. Larsen, 2013 ONSC 2591, at para. 18.

[16] What the Master appears to have overlooked is the requirement that a moving party’s explanation for withdrawal of an admission must take into account “the circumstances that led to the withdrawal”: Antipas, supra, at para. 21. The circumstances that led to the withdrawal of the admissions here is that the Respondent needed to improve its litigation position.

[17] It is the Appellant counsel’s contention that the matters at issue are not a matter of fact but of advocacy. As another illustration, she points to the fact that the Respondent goes to much effort in its newly proposed amended pleading to deny the Appellant’s tenancy by saying that other companies, and not the Appellant, have been paying the rent. Appellant’s counsel correctly observes that this, too, cannot have been newly discovered by the Respondent during the course of the litigation. The Respondent has been receiving the rent cheques month after month for decades. Every month it knew precisely which company was giving it the rent.

[18] In other words, it seems apparent that the Respondent sought to make this amendment to its pleading, and to deny its previous admission that the Appellant was the actual tenant, only now that it has been pointed out that it would improve its advocacy position to do so. For an aging action like this one, commenced in 2009, which has gone through 4 pleadings amendments by the Respondent and has had a summary judgment motion pending since 2012, there comes a time when matters must solidify and the case be moved forward. If the pleadings have to be amended and admissions withdrawn every time the Respondent and its counsel think of a new advocacy position, the matter will continue to lack forward momentum.

[19] I agree with Appellant’s counsel that the amendments are more a matter of position and, for want of a better word, ‘spin’, than they are fact. In proposing the new amendments and withdrawing its previous admissions, the Respondent is not reflecting its newfound understanding of the facts, but rather is taking a new position that greatly expands the issues in the action. Without making any substantive finding in the action, it is starting to look like instead of amending the pleading to state the objective facts, the Respondent is amending the pleading to make it more difficult for the objective facts to be found.

[20] In my view, the amendments are an application of subjective advocacy, not objective fact. They come in the midst of a summary judgment motion, and while in general that is not too late for an amendment, it is incumbent on the Respondent to put forward some reasonable explanation for it.

[21] The Master’s granting leave to amend in the absence of a reasonable explanation for the late and, given the context of the summary judgment motion, strategic withdrawals of admissions, reflects a misapprehension of the evidence before him. “Examples of [palpable] errors include findings made in the complete absence of evidence, findings made in conflict with accepted evidence, findings based on a misapprehension of evidence and findings of fact drawn from primary facts that are the result of speculation rather than inference”: Allcock, at paras. 18-21.

[22] There was no evidence that the Respondent’s withdrawal of admissions was based on newly acquired information. The Master evidently confused factual matters with advocacy positions, and thereby misapprehended the evidence before him regarding the nature of the Respondent’s amendments. This effectively discredited the result of the motion below: Cruz v. Robins, at para. 17 (C.A.).

[23] The appeal is allowed. The Master’s order is set aside and the Respondent’s motion to amend its pleading is dismissed.

[24] The Respondent shall pay the Appellant costs of this appeal in the amount of $7,500, inclusive of fees, disbursements, and HST. This amount has been agreed upon by the parties.

[25] Counsel for the Appellant has also indicated that she would like to revisit the costs awarded by the Master below. The parties are at liberty to make written submissions in this regard, which shall be no longer than 3 pages. I would ask that counsel for the Appellant provide me with her submissions within one week of the date of this judgment, and that counsel for the Respondent provide me with his submissions within one week of the date of the Appellant’s submissions.

Morgan J. Date: June 6, 2017