COURT FILE NO.: 14-60661
DATE: 2020/06/02
COURT OF ONTARIO,
SUPERIOR COURT OF JUSTICE
RE: ROBERT SIROTEK and 2341707 ONTARIO INC, Plaintiffs
AND:
FRANK O’DEA, NANCY O’DEA and AF GLOBAL ASSET MANAGEMENT INC., Defendants
BEFORE: Mr. Justice Calum MacLeod
COUNSEL: Katie Black, for the Plaintiff Sirotek, Moving Party
Robert E. Houston, Q.C., for the Defendants, Responding Parties
HEARD: March 4, 2020
DECISION AND REASONS
[1] The plaintiff retained new counsel towards the end of last year. This resulted in a request to adjourn the trial and to bring certain motions. Plaintiff’s new counsel was not prepared or available for the trial scheduled for the first week in March, believed it would take longer than had been scheduled and in any event wished to amend the pleadings, seek further production and discovery and to deliver an expert report.
[2] Over the objection of the defendants I adjourned the trial and scheduled the motions. It was agreed to use one of the days scheduled for trial to argue the latter. I have not yet dealt with the terms to be imposed or the cost consequences of adjourning the trial as to some degree those issues are intertwined with whether or not the motion is granted and on what terms.
[3] Unfortunately, following the argument of this motion but before the release of these reasons, Ontario was caught up in the COVID-19 pandemic which resulted in the suspension of court operations. This has had and will have a significant impact on dates and on scheduling. It will also affect the calculus as to when the trial of this action can be expected. As it happens the trial might have been interrupted in any event.
[4] For the reasons that follow, leave is granted to amend the statement of claim, the parties are to re-evaluate their documentary production and discuss the need for further discoveries. They are to review the outstanding refusals and undertakings in light of the pleading amendments. To the extent they cannot resolve the motions, the timetable or any other matter, there will be a case conference.
The Motion
[5] The motion was heard on March 4th, 2020. The specific relief included the following:
a. Leave to amend the statement of claim;
b. Leave to bring a motion for further discovery and production pursuant to Rule 48.04 notwithstanding the action has been set down for trial;
c. An order compelling further production from the defendants;
d. An order for further discovery of Frank O’Dea;
e. An order for discovery of the defendant AF Global Asset Management Inc.; and,
f. Leave to file an expert report.
[6] The question is whether justice is served by permitting the plaintiff to reorganize the proceeding and prepare for trial in the manner his new counsel believes to be necessary. Or, is justice better served by enforcing the time limits in the rules and requiring the plaintiff to live with the decisions made by his previous counsel at an earlier stage in the litigation. The answer depends to a large degree on whether further delay is justified and whether these steps result in prejudice to the defendants that cannot be addressed by a costs award.
Background
[7] By way of background the litigation involves an investment made by the plaintiff in 2011 and 2012. The purpose of the investment was the development of certain property in Brazil. The plaintiff alleges that there were material misrepresentations concerning the investment and that in any event, investment funds were diverted to the personal use of Frank O’Dea and his wife, Nancy. This litigation was commenced in 2014.
[8] The action was case managed. The case management orders contained deadlines for completion of production and discovery. Although there were a number of delays and many case conferences resulting in amended timetables, there had been no significant motions up until the time the action was set down for trial on April 18th, 2019. In fact, the only motion filed in the proceeding was a 2017 motion by the plaintiff to compel the defendants to make documentary production.
[9] It should be noted that the defendant Frank O’Dea was assigned into bankruptcy in December of 2014. The stay was lifted by order of Kershman J. on October 19th, 2016. In June of 2017, Mr. O’Dea was examined for discovery, but he indicated he was being examined only in his personal capacity and had not been produced as a representative of AF Global. This is despite the fact that he was a director and Chairman of the Board at the relevant times. On this basis, it appears there has never been a discovery of AF Global nor has there been formal documentary production. Despite this, the action was set down for trial to avoid the deemed dismissal which would otherwise have taken place in 2019.
[10] The matter was mediated in July of 2019 and pre-tried in October. The trial was scheduled in August of 2019 and fixed to proceed on February 18th of 2020 for 9 days. In November of 2019, the plaintiff appointed Ms. Black and Mr. Edelson as his new lawyers.
The Proposed Pleading Amendment
[11] A pleading amendment motion is not complicated. The first question is whether the proposed pleading is acceptable insofar as it complies with Rule 25.06 of the Rules of Civil Procedure[^1]. Assuming it is a proper pleading and is not self-evidently frivolous, vexatious or an abuse of process, the next question is whether the amendment will cause prejudice that cannot be remedied by costs or an adjournment. Rule 26.01 provides that any amendment that meets this test must be granted on such terms as are just at “any stage of an action.” This means what it says. A late amendment on the eve of trial may result in substantial costs consequences but it is permissible if it does not result in irremediable prejudice. [^2]
[12] The jurisprudence under this rule is well developed and has been set out in a number of decisions of this court and of the Court of Appeal. In particular, the governing principles were set out in 1588444 Ontario Ltd. v. State Farm Fire and Casualty Co.[^3] I will not repeat them here. Suffice to say that the prejudice is not the prejudice which would have existed from facing the amended pleading in the first place. It is prejudice that results from the timing of the amendment and cannot be cured.
[13] Leave is needed for the plaintiff to bring any motion other than a motion referred to in Rule 48.04 (3) after the plaintiff has set the matter down for trial and leave is also required to amend a pleading but this is not a two step process. Leave will be granted pursuant to Rule 26.01 if the pleading amendment is appropriate and in that case Rule 48.04 is also satisfied. It is not necessary to argue a leave motion and then a pleading amendment motion.[^4] The fact that the plaintiff has set the matter down for trial and certified that it is trial ready is a consideration in assessing prejudice. So too is the ostensible passing of a limitation period. A pleading amendment will not be allowed if the amendment adds a cause of action and the limitation period has clearly expired.[^5]
[14] In this case I have reviewed the proposed pleading. The new pleading is longer and more detailed but it is not improper. I disagree with the defendant that the proposed pleading includes new causes of action. Adding claims for additional relief is not the addition of a new cause of action providing the new heads of relief would have been supported by the facts as pleaded or are simply different legal conclusions drawn from the same set of facts. Adding particulars to the claim is permissible providing the original claim contained the assertions against the defendants and they are not taken by surprize.[^6]
[15] Reading the original pleading, there is no doubt that the plaintiff asserted he invested in AF Global based on misrepresentations made by Frank O’Dea. And there is no doubt that he pleaded both Frank and Nancy were beneficiaries of investment funds diverted from AF to their personal benefit. Now that the plaintiff has new counsel and there has been a partial settlement with one of the original plaintiffs, considerable latitude should be allowed to the plaintiff and his new counsel to reorganize and repackage the statement of claim in order to accommodate their revised litigation strategy.
[16] The pleading is acceptable and the defendant has not demonstrated actual prejudice other than the loss of the trial date, further delay and increased costs.
Delay, Abuse of Process and Leave
[17] The defendants did not bring a motion to dismiss the action for delay under Rule 24.01 nor did any party bring a motion for a status hearing under Rule 48.14 (5). Nevertheless, the defendants argued the motion as if the reverse onus under Rule 24.01 (2) or Rule 48.14 (1) 1 applied. That onus simply means that in cases that have not been made ready for trial within 5 years of commencement, prejudice to the defendants may be presumed. At a status hearing, the plaintiff must explain the delay and demonstrate that there is no prejudice to the defendant in permitting the action to continue.[^7]
[18] The reason there was no status hearing or alternatively no dismissal order by the Registrar is that the plaintiff and his former counsel did not bring a motion to extend the time for setting the matter down for trial. Instead the matter was set down and certified as ready for trial.
[19] To set a matter down for trial when it is not ready and then to seek leave to continue discovery or to bring motions for additional expert reports could in some instances be an abuse of process. Rather than bringing the motion, explaining the delay and demonstrating the absence of prejudice, a plaintiff in that situation seeks to avoid the problem by setting the matter down for trial and then seeks to avoid the consequence of doing so imposed by Rule 48.04.
[20] That is not the case here. The plaintiff’s former counsel was prepared to go to trial but the plaintiff has retained new counsel. There is no evidence that the new retainer was merely tactical. In any event, there is an explanation for the delay and for the change in pleading and trial strategy and that explanation is the relatively recent production of audited financial statements. Despite the attempt by the defendants to discount this explanation, I find it sufficient.
[21] The purpose of Rule 48.14 is not to set a trap for unwary plaintiffs but to weed out inactive files and to keep the court information current.[^8] The justice of this case requires not only that the pleading amendment be granted but as a consequence of that amendment and the review of the production and discovery needs of the case, new counsel be entitled to argue for further discovery and production.
Refusals
[22] Counsel for the defendants stated that he did not come to the motion ready to argue the merits of the refusals but only to argue the question of leave to bring the motion. I do not condone this approach. There is little merit in turning such motions into a two step process and indeed, the significance and importance of the refusals to the plaintiff’s case would be an important consideration in granting leave to bring the motion. The principle of proportionality informs not only the interpretation of the rules but also the exercise of discretion.
[23] Under the circumstances, however, I adjourned the refusals motion to consider the pleading amendment motion. It took far longer to argue that motion than should have been necessary in part due to the inordinate amount of motion material filed by the plaintiff and in part because of the defendants’ insistence on a “two-step” process.
[24] Now that the pleading amendments have been granted, the parties will be obliged to reconsider the production and discovery needs of this action. It would be wise to review the refusals in this light and also in light of any issues raised in the amended defence which the defendants will now be entitled to serve.
Conclusion
[25] In summary, leave is granted to amend the statement of claim in the form proposed.
[26] Leave is also granted to conduct discoveries of the corporate defendant and to seek further discovery of the named defendants once the pleadings are closed.
[27] The motion for refusals which was adjourned shall be returnable before the master.
[28] Before arguing the refusals motion, counsel are to review their positions on production and discovery and confer with a view to revising or creating a discovery plan. If they are unable to agree they are to seek a case conference with the master before returning to argue the motion.
[29] Rule 77 will apply to this proceeding if it has not already been assigned to formal case management.
Additional Terms
[30] The defendants are entitled to costs thrown away, if any, in connection with preparing for a trial that was scheduled and then adjourned. They will also be entitled to costs thrown away, if any, if any portion of the previous discoveries must be a “do over” because of the amendments to the statement of claim.
[31] I invite the parties to seek agreement over those costs and of the costs of the motion. In the absence of agreement, I may be spoken to within the next 30 days.
[32] The plaintiffs shall amend the claim within 10 days from receipt of this decision. The defendants shall then have 21 days to serve an amended defence.
[33] These times shall run despite the COVID-19 suspension of court proceedings. All documents may be served and filed electronically.
Mr. Justice C. MacLeod
Date: June 2, 2020
COURT FILE NO.: 14-60661
DATE: 2020/06/02
ONTARIO
SUPERIOR COURT OF JUSTICE
RE: ROBERT SIROTEK and 2341707 ONTARIO INC, Plaintiffs
AND:
FRANK O’DEA, NANCY O’DEA and AF GLOBAL ASSET MANAGEMENT INC., Defendants
BEFORE: Mr. Justice Calum MacLeod
COUNSEL: Katie Black, for the Plaintiff Sirotek, Moving Party
Robert E. Houston, Q.C., for the Defendants, Responding Parties
decision and reasons
Mr. Justice C. MacLeod
Released: June 2, 2020
[^1]: Rules of Civil Procedure, R.R.O. 1990, Reg. 194
[^2]: See King’s Gate Developments Inc. v. Drake, (1994) 1994 416 (ON CA), 17 OR (3d) 841 (CA)
[^3]: 2017 ONCA 42, (2017) OR (3d) 681 (CA) @ para. 25
[^4]: See Plante v. Industrial Alliance Life Insurance Co., (2003) 2003 64295 (ON SC), 66 OR (3d) 74 (Master) @ para. 24
[^5]: See Family Delicatessen Ltd. v. London (City), 2006 5135 (ON CA), 2006 CarswellOnt 1021; [2006] OJ no. 669 (Ont. CA) @ para 8
[^6]: See 1100997 Ontario Ltd. v. North Elgin Centre Inc., 2016 ONCA 848 and Dee Ferraro Ltd. v. Pellizzari, 2012 ONCA 55
[^7]: See Brook Restoration Ltd. v. Metropolitan Toronto Condominium Corporation No. 677, 2020 ONSC 3100 (Master)
[^8]: See Daniels v. Grizzell, 2016 ONSC 7531