COURT FILE NO.: CV-15-524879

MOTION HEARD: 19 June 2018

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Michael Tuzyk, Peter Tuzyk and Ann Tuzyk, Plaintiffs

AND:

John Doe and TD Home and Auto Insurance Company, Defendants

BEFORE: Master Jolley

COUNSEL: Adam Little, Counsel for the Moving Party Plaintiffs

Rachel Pano, Counsel for the Responding Party Defendant TD Home and Auto Insurance Company

HEARD: 19 June 2018

REASONS FOR DECISION

[1] The plaintiffs seek leave to bring this motion and leave to amend their statement of claim to include a bad faith claim against the defendant TD Home and Auto Insurance Company (the “defendant”) as a result of its evaluation of the plaintiff’s claim.

[2] At the outset of the motion, plaintiffs’ counsel advised that they were content to withdraw the fiduciary duty allegation and, as such the last sentence of paragraph 16A is being deleted from the proposed draft.

Preliminary Issue

[3] This matter is set for a five week trial commencing 4 February 2019. Counsel confirm that if the motion succeeds, the new allegations will not increase the length of the trial. In terms of the commencement of trial, counsel for the defendant advised that, if the motion were successful, her client may bring a motion to strike some of the new pleading. She indicated that she would also require an examination of the plaintiff on the new allegations, something agreed to by plaintiffs’ counsel.

[4] Plaintiffs’ counsel confirmed to the court that he would not seek an examination of the defendant on these new issues. With this undertaking that there be no further documentary or oral examinations for discovery of the defendant, I am satisfied that there is sufficient time between now and the end of the year for the defendant to bring any pleadings motion it believes is required and to conduct an examination of the plaintiff Michael Tuzyk on this new issue. This motion proceeded to be argued on this basis.

[5] The proposed amended claim alleges that the defendant owed the plaintiff Michael Tuzyk a duty of good faith, that it breached that duty in various ways including that it did not consider the plaintiff’s evidence supportive of his claim, that it employed agents who were cynical about the plaintiff’s claim and treated the plaintiff as an adversary. The claim alleges that the defendant’s bad faith approach was harsh, vindictive and oppressive, is systemic and was done for profit and that the plaintiff suffered damages as a result.

[6] The defendant opposes the relief sought. It did not file an affidavit on the motion or put forward evidence of prejudice but instead cross-examined Kevin Henderson, a partner with Oatley Vigmond, the firm representing the plaintiffs, on the affidavit he swore in support of this motion. The defendant attempted to establish through this cross-examination that the plaintiffs’ proposed new claims were not tenable, i.e. were not capable of proof. For instance, the defendant went to some lengths to demonstrate that the plaintiff’s allegation that the defendant’s expert was biased was unsubstantiated and therefore the allegation was either vexatious or disclosed no reasonable cause of action.

[7] In my view, this is not the correct approach on a motion such as this. Unlike a motion for summary judgment, the court does not weigh the evidence put forward on a motion to amend a pleadings under Rule 26.

[8] Rule 26.01 of the Rule of Civil Procedure provides as follows:

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] The Court of Appeal set out the test on a motion under Rule 26.01 in 1588444 Ontario Ltd. v. State Farm Fire and Casualty Co. 2017 ONCA 42 at paragraph 25. It held that motions under Rule 26.01 are required to be granted unless:

(a) the responding party would suffer non-compensable prejudice;

(b) the amended pleading is scandalous, frivolous, vexatious or an abuse of the court’s process; or

(c) the pleading discloses no reasonable cause of action.

[10] The defendant takes the position that the amendments are not legally tenable and do not disclose a reasonable cause of action. Leave to amend should only be denied in the clearest of cases, when it is plain and obvious that no tenable cause of action is possible on the facts as alleged (South Holly Holdings Limited v. Toronto Dominion Bank 2007 ONCA 456 at paragraph 6). A cause of action is tenable unless it is clearly impossible for the claim to succeed. (Atlantic Steel Industries v. Cigna Insurance Co. of Canada [1977] O.J. No. 1278 at paragraph 9.)

[11] On this motion, the defendant has put evidence before the court in an attempt to establish that the plaintiff does not have the evidence to prove bad faith. If the plaintiff makes allegation of bias or allegations of bad faith that he cannot substantiate at trial, there may be costs consequences there but the plaintiff need not prove those allegations at this pleadings stage.

[12] Proposed new paragraph 16A pleads that the defendant owed the plaintiff a duty of utmost good faith. Paragraph 16B pleads that the defendant breached that duty of good faith and sets out twelve subparagraphs of particulars of that alleged breach. Paragraph 16C pleads that the defendant’s conduct violated its obligation of good faith.

[13] In addition to taking the position that proposed paragraph 16D does not disclose a reasonable cause of action, the defendant argues that that particular paragraph is a bald allegation and should be struck. Paragraph 16D reads as follows:

16D. TD’s bad faith has been systemic. Their adjusting practices are motivated by profit to ensure the financial success and viability of the company at the expense of its insureds.

[14] In discussing punitive damages, the Supreme Court of Canada in Whiten v. Pilot Insurance Co. 2002 SCC 18 held at paragraph 20 that “deterrence is an important justification for punitive damages. It would play an even greater role in this case if there had been evidence that what happened on this file were typical of Pilot’s conduct towards policyholders.” Clearly, evidence of systemic policy could impact the quantum of a punitive damages claim, if proven.

[15] This pleading issue was dealt with squarely by the court in Craig-Smith v. John Doe 2009 51513 (ON SC). Hourigan, J. was faced with a pleading where the plaintiff sued her insurer for bad faith. In her claim she pleaded that the defendant’s bad faith was systemic and there existed a policy of failing to fulfil its duty of good faith. Like the defendant here, the defendant in Craig-Smith argued that this was a bald allegation of systemic misbehaviour and that it should be struck because the allegation lacked particulars. In disposing of this argument, the court stated at paragraph 16(i):

… I reject the submission that an allegation of systemic wrong doing is not relevant to an analysis of bad faith or punitive damages. There are many examples of cases where such allegations are considered in the context of a punitive damages or bad faith analysis (see, for example, Whiten v. Pilot Insurance Co., supra, at para. 120). I also disagree that more particulars are required. The plaintiff has alleged that this policy exists and in the circumstances it is hard to imagine what particulars the plaintiff can furnish at this stage. I decline to strike the paragraph or order particulars.

[16] Paragraph 16E pleads that the plaintiff suffered damages as a result of the defendant’s bad faith conduct and paragraph 16F pleads that the conduct was harsh, vindictive, etc. and showed a reckless disregard for the plaintiff entitling him to aggravated, punitive and exemplary damages.

[17] At this stage, it is not necessary or appropriate for the court to consider the merits of the allegation or whether the plaintiff will be able to prove his claim at trial. The test is, assuming the allegations in the proposed amendment are proven, do they disclose a cause of action. (Spar Roofing & Metal Supplies Ltd. v. Glynn 2016 ONCA 296 at paragraph 43). I find they do. The plaintiffs’ motion for leave to amend their statement of claim is granted.

Costs

[18] The plaintiffs seeks their partial indemnity fees of $7,700. With counsel fee, HST and disbursements, their total partial indemnity costs claimed are $9,709.53. The defendant did not provide a costs outline but advised their costs were in the range of $5,000. The plaintiffs urged the court not to discount the partial indemnity total, given that a significant amount of the time was spent cross-examining Mr. Henderson in an attempt to obtain evidence that the proposed claims would not succeed at trial. As this was not properly before the court, the costs of that exercise should be included in the costs award. I agree. While the defendant was entitled to cross-examine Mr. Henderson on his affidavit, the evidence garnered was not relevant for this pleadings motion and the plaintiff’s costs of preparing for and attending that cross-examination should be reflected. I order the defendant to pay the plaintiffs their costs of this motion in the amount of $9,500 within 30 days of the date of this decision.

Master Jolley

Date: 21 June 2018