Court File and Parties
COURT FILE NO.: CV-18-00598716 MOTION HEARD: 20200807 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: 1346134 Ontario Limited and 2398094 Ontario Limited, Plaintiffs AND: Donald Wright, Defendant AND: Donald Wright, Plaintiff by Counterclaim AND: John Warren Laing, Open Access Limited, Hans Koehle, Ronald L. Feddersen, 1346134 Ontario Limited and 2398094 Ontario Limited, Defendants to the Counterclaim
BEFORE: Master B. McAfee
COUNSEL: M. Munoz, Counsel, for the Moving Party, the Defendant, Plaintiff by Counterclaim J. Zibarras and B. Peel, Counsel, for the Responding Parties, the Plaintiffs and Defendants to the Counterclaim
HEARD: August 7, 2020
Reasons for Decision
Nature of the Motion
[1] Pursuant to the order of Justice Glustein dated May 15, 2020, the motion of the defendant, plaintiff by counterclaim Donald Wright (Wright) to address an amendment to the statement of defence and any outstanding undertakings and refusals of the plaintiff upon which the defendant seeks relief, was to be heard by a Master on an urgent basis, in a single motion no later than August 21, 2020. Pursuant to the direction of Administrative Master Muir, the defendant’s motion was assigned to be heard by me. On May 19, 2020, I ordered a telephone case conference to take place on May 26, 2020. On May 26, 2020, the telephone case conference proceeded, and the motion was scheduled and timetabled. The motion proceeded before me on August 7, 2020.
[2] On this motion Wright seeks leave to amend his statement of defence and counterclaim in the form found at Schedule “A” to the notice of motion. Wright also seeks answers to written follow up questions asked further to the examination for discovery of Jennifer Lee, a representative of the defendant to the counterclaim Open Access Limited (OAL) and further to the examination for discovery of the defendant to the counterclaim Hans Koehle (Koehle).
[3] The plaintiffs, defendants to the counterclaim (collectively the responding parties) oppose the motion and ask that the motion be dismissed.
The Action
[4] This action was commenced against Wright for damages for breach of contract and unjust enrichment for failure to repay several advances. Wright defended the action on the grounds that the advances were to be satisfied by preferred shares held pursuant to trust agreements. Wright has counterclaimed alleging breach of duties owed to Wright as a beneficiary of the preferred shares.
Preliminary Issue
[5] As set out in their responding motion material, the responding parties ask that the affidavit of Christine Miroslavich, law clerk, affirmed July 8, 2020 (the Miroslavich affidavit) be struck in its entirety. The responding parties argue that the Miroslavich affidavit was not properly delivered in reply.
[6] After hearing argument on the preliminary issue, I advised the parties that I was not satisfied that the Miroslavich affidavit ought to be struck, with reasons to follow. What follows are my reasons on the preliminary issue.
[7] The Miroslavich affidavit was properly delivered in reply, specifically in reply to paragraph 31 of the responding affidavit of Juanita Logan sworn June 30, 2020 (the Logan affidavit).
[8] If I am wrong, and the Miroslavich affidavit goes beyond a proper reply to the Logan affidavit, I remain of the view that the Miroslavich affidavit should not be struck.
[9] In Johnson v. North American Palladium Ltd., 2018 ONSC 4496 (Ont. S.C.J.) the rule against case-splitting is discussed. Justice Perell states:
14 The standard for permissible reply evidence, however, is less strict for motion and application procedure than the standard applied at trial. When the reply evidence for a motion or application is introduced before the cross-examination and the hearing on the merits, a less rigorous standard applies. Once cross-examinations begin, the admission of reply evidence is governed by rule 39.02(2) of the Rules of Civil Procedure, discussed below, and the standard for admitting reply evidence is higher, but still not as strict as the standard at trial.
15 On motions and applications, in appropriate circumstances, the court has a discretion to admit the improper reply evidence and to allow the opponent to respond with a sur-reply affidavit. Ultimately, it is a balancing exercise, with the goal of ensuring that each party has a fair opportunity to present its case and respond to the case put forward by the other party.
[10] The Miroslavich affidavit was served in advance of Wright’s cross-examination. Wright’s counsel suggested that the cross-examination could be postponed allowing further time for the responding parties to review the Miroslavich affidavit. The responding parties chose not to postpone the cross-examination. There was no request to file a sur-reply affidavit. No adjournment of the motion was sought. Counsel for the responding parties confirmed that he was prepared to proceed with the motion if the Miroslavich affidavit was not struck. While not determinative, paragraph 6 of my endorsement dated May 26, 2020, states that the parties may contact me for a further telephone case conference should any issues arise, and I was not contacted further. This issue arose approximately one month prior to the return of the motion. Had I been contacted, the schedule could have been revised, if requested.
[11] For these reasons, I declined to strike the Miroslavich affidavit.
Leave to Amend
[12] Wright seeks leave to amend his statement of defence and counterclaim by adding paragraphs 24 and 25:
In the further alternative, the OAL preferred shares held in trust for the pro rata benefit Wright and other certain partners (the “Beneficiaries”) of the BLP 2013 Partnership and the JDW 2013 Partnership, pursuant to Trust Agreements dated April 10, 2014, were to satisfy the loans of any Beneficiary from 239 in the event that Beneficiary did not receive the deductible tax expenses that underlay the formation and marking of and investment in the BLP 2013 Partnership and the JDW 2013 Partnership.
CRA disallowed the pro rata business expenses of the BLP 2013 Partnership and the JDW 2013 Partnership claimed by Wright in his 2013 and 2014 income tax returns in the approximate amount of $3.3 million, and hence that amount of Wright’s loan from 239 is satisfied by the OAL preferred shares held in trust.
[13] Rule 26.01 of the Rules of Civil Procedure states:
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.
[14] To the extent that the proposed amendments plead a further alternative defence, it is not the role of a master on a motion for leave to amend a pleading to determine whether the proposed further alternative defence will or will not succeed at trial. There is no evidence of prejudice.
[15] To the extent that the proposed amendments are relied upon in support of the counterclaim, I am satisfied that the proposed amendments do not constitute a new claim.
[16] The Ontario Court of Appeal in 1100997 Ontario Ltd. v. North Elgin Centre Inc., 2016 ONCA 848 (Ont. C.A.) at para. 20 cites Morden & Perell, The Law of Civil Procedure in Ontario, 2nd ed. (Markham: LexisNexis Canada Inc., 2014), wherein the authors state at p. 142:
A new cause of action is not asserted if the amendment pleads an alternative claim for relief out of the same facts previously pleaded and no new facts are relied upon, or amount simply to different legal conclusions drawn from the same set of facts, or simply provide particulars of an allegation already pled or additional facts upon which the original right of action is based.
[17] In Farmers Oil and Gas Inc. v. Ontario (Ministry of Natural Resources), 2016 ONSC 6359 (Ont. Div. Ct.) Justice Nordheimer states:
31 In the end result, the requirement to read a pleading generously, and the concomitant requirement to allow amendments unless they will inflict non-compensable prejudice, means that the presumption is that any amendment, that can reasonably be seen as falling within the four corners of the existing claim, ought to be permitted.
[18] To the extent that the proposed amendments are relied upon in support of the counterclaim, the proposed amendments are further particulars of the already pleaded alleged breach of duties owned in relation to the use of the preferred shares (paragraphs 27(b)(iii), (c), 29-33 of the counterclaim). The proposed amendments do not advance a new claim. There is no evidence of prejudice.
[19] Leave is accordingly granted to amend the statement of defence and counterclaim.
Answers to Follow-Up Questions
[20] The question references are taken from the Form 37C charts. What follows are my rulings on the written follow up questions remaining at issue.
[21] No. 1, F.U. Q. 2 to U/A 17, Q. 502: I am not satisfied that this question arises from the answer given to U/A 17. The question is broader than the initial question asked. The question is not a proper follow up question and need not be answered.
[22] No. 2, F.U. Q. 5 to U/A 16, Q. 497: I am not satisfied that this question arises from the answer given to U/A 16. The question is not a proper follow up question. To the extent that the question has not been answered, the follow up question need not be answered.
[23] No. 4, F.U. Q. to U/A 14, Q. 427: I am satisfied that this question arises from the answer given to U/A 14. On examination for discovery Koehle testified that he was contacted by the Canada Revenue Agency (CRA) in relation to “a couple of” the partnership loans and believed that the deduction for the 2013 investment was disallowed. Koehle’s counsel took under advisement a request for the correspondence to and from CRA that Koehle was referring to. On January 30, 2020, the following answer was provided: “Mr. Koehle does not have any correspondence or other documents from the CRA concerning the partnerships. As previously mentioned, Mr. Koehle does not maintain paper files and as such does not have copies of any documents or correspondences from the CRA or from Open Access Limited.” On March 17, 2020, moving counsel requested that Koehle obtain copies of correspondence from CRA directly. On May 14, 2020, in response, it is stated that Koehle advised that he has called the CRA and he understands that the tax deductions for fiscal 2013, 2014 and 2015 were not disallowed.
[24] Wright’s request for CRA documentation sought by way of follow up question is proper. Wright is entitled to obtain the documentation in support of Koehle’s understanding following Koehle’s telephone call with CRA. The requested documentation sought by way of follow up is also proper based on the subsequent answer given by Koehle that the 2013 deductions were not disallowed, which is differs from Koehle’s evidence on discovery. The follow up question is also relevant based on the pleadings, including the amendments for which leave has been granted.
[25] The follow up question shall be answered.
Costs
[26] The parties agreed that costs of the motion be reserved to the trial Judge. On consent, an order shall go accordingly.
Summary of Order
[27] Order to go as follows:
- Leave is granted to amend the statement of defence and counterclaim in the form set out at Schedule “A” to the notice of motion.
- Follow up questions no. 1 (F/U Q. 2 to U/A 17) and no. 2 (F/U Q. 5 to U/A 16) need not be answered.
- Follow up question no. 4 (F/U Q. to U/A 14) shall be answered.
- On consent, costs of the motion are reserved to the trial Judge.