Court File and Parties
COURT FILE NO.: CV-09-375888
MOTION HEARD: 20200207
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Amelin Engineering Ltd. and Michael Elinson, Plaintiffs
AND:
Steam-Eng Inc. and Blower Engineering Inc., Defendants
BEFORE: Master Jolley
COUNSEL: Rachel Laurion, Counsel for the Moving Party Defendants
Thomas Dumigan and Matthew Diskin, Counsel for the Responding Party Plaintiffs
HEARD: 7 February 2020
REASONS FOR DECISION
BACKGROUND
[1] The defendants seek leave to amend their statement of defence and counterclaim. At present, the statement of defence and counterclaim is 52 paragraphs long. The defendants propose substantive changes to 31 of those paragraphs and minor changes to a number of others.
[2] The trial of this action is set to commence on 19 May 2020 and the evidence in chief, which is being tendered through affidavits, was finalized and exchanged some months ago.
[3] The plaintiffs argue that they will suffer prejudice that cannot be compensated for by way of costs or an adjournment if the amendments are permitted. Given the passage of time, they argue that there is a presumption of prejudice, which the defendants have not rebutted. Further, if the defendants were to have rebutted the presumed prejudice, the plaintiffs argue they will suffer actual prejudice.
[4] I agree, for the reasons set out below.
ANALYSIS
[5] The plaintiffs rely on Family Delicatessen Ltd. v. London (City) 2006 CanLII 5135 (ON CA), 2006 CarswellOnt 1021 (C.A.), followed in 1588444 Ontario Ltd. v. State Farm Fire and Casualty Co. 2017 ONCA 42 (“State Farm”) for the proposition that, at some point, the delay in seeking an amendment will be so lengthy and the justification so inadequate, that prejudice to the responding party will be presumed absent a demonstration by the moving party that there is in fact no prejudice despite the lengthy and unexplained delay. To quote the Court of Appeal in State Farm, supra at paragraphs, 36, 37:
The seminal case in Ontario considering the concept of presumed prejudice in the context of a r.26.01 motion is the Family Delicatessen decision. In that case, this court observed that at a certain point after an exceptional delay, non-compensable prejudice will be presumed absent evidence to the contrary. In other words, after inordinate delay, the presumption in favour of granting leave shifts to a presumption that non-compensable prejudice will result if leave is granted. This makes sense as a matter of fairness. It would be very difficult for a responding party to prove, for example, the generalized prejudice that witnesses’ memories will be diminished after a lengthy passage of time.
The presumption of prejudice is rebuttable. Where the moving party provides an adequate explanation for the delay or tenders evidence that there is no non-compensable prejudice, the presumption will be rebutted.
[6] To assess whether the presumption of prejudice has been rebutted, a short review of the proceeding is warranted.
[7] The action was commenced in April 2009 and concerns a representation that the plaintiffs allege the defendants made to them in 1995 about the capacity of steam generators they designed and manufactured. The plaintiffs allege that that representation induced them to enter into an exclusivity agreement with the defendants to sell their generators in the former Soviet Union. The plaintiffs allege that the capacity of the generators was not as represented and they seek $10,000,000 in damages. The defendants filed their statement of defence and counterclaim in July 2009 and pleadings closed with the delivery of the plaintiffs’ reply and defence to counterclaim in August 2009.
[8] Discoveries were completed in 2012 and the action was set down for trial almost six years ago, on 9 April 2014. The action has been pre-tried three times, on 24 May 2017, 11 February 2019 and 7 May 2019 and has also been subject to a case conference which was held on 9 December 2019.
[9] At the first pre-trial conference held in May 2017, the 15 day trial was set for 18 March 2019. In the second pre-trial held in February 2019, the March 2019 trial date was vacated, as the pre-trial judge determined that the action was not ready for trial. The trial was then set for September 2019 but for reasons outside the parties’ control, it did not proceed.
[10] The judge presiding over the February 2019 pre-trial ordered that evidence in chief for the September 2019 trial be tendered by way of affidavit. As particularized in paragraph 20, below, the parties exchanged unsworn affidavits in March and April 2019 and sworn affidavits in September 2019. In total the parties have delivered twelve affidavits, including those of their experts.
[11] The defendants argue that as a result of statements in those affidavits, they wish to amend their defence. The plaintiffs argue that the affidavits are consistent with the evidence given by the plaintiffs when they were examined in 2012 and contain no new material information. The defendants do not explain what evidence was contained in the 2019 affidavits that was not disclosed in the 2012 examinations for discovery or in answers to undertakings. Their affidavit states only that “after having reviewed the plaintiffs’ affidavits, including reply affidavits, and after having prepared for trial in September 2019, it was apparent that the defence and counterclaim ought to be amended to better particularize some of the matters at issue. It also needed to be amended to narrow other issues for trial.”
[12] Even if the plaintiffs’ affidavits did contain new, material evidence, the defendants had the bulk of those affidavits by May 2019. It is of note that the trial was to have commenced in September 2019 on the basis of those affidavits and there was no motion by the defendants then to amend their pleading. The defendants did not advise the plaintiffs of their intention to amend their pleading until 4 December 2019.
[13] This speaks both to the issue of delay and the lack of justification for the motion at this late stage.
[14] The defendants also take the position that certain of the amendments are needed to address the plaintiffs’ failure to properly plead their claim of intentional misconduct. This is something that would have been known to the defendants more than ten years ago when they filed their statement of defence.
[15] I find that the defendants have not met their onus of rebutting the presumption of prejudice. There is no adequate explanation for the delay in seeking these extensive amendments and no evidence, beyond a statement in an affidavit of defendants’ counsel, that the plaintiffs would not suffer non-compensable prejudice.
[16] Had I found that the presumption of prejudice had been rebutted, I am satisfied that, in the circumstances of this case, the plaintiffs would suffer actual non-compensable prejudice were the amendments granted.
[17] First, it is apparent from the nature and extent of the amendments that it would be unfair for the plaintiffs to have to proceed to trial without being able to conduct discoveries on the amendments. For instance, the defendants now wish to plead that no representation about the generators’ performance was ever raised in the series of meetings that took place between the parties from January 23 to 25, 1995. In respect of those same meetings, the defendants’ original statement of defence pleaded that “as a result of those meetings, Amelin entered into an agreement with Blower to purchase 10 steam generators in 1995.” The defendants now seek to remove that sentence from their pleading. By way of a further example, the defendants propose to plead that there were subcategories of the type of generator they sold to the plaintiffs, and those subcategories had varying capacities. They also wish to plead that any issues experienced by the ultimate purchasers of the generators sold by the plaintiffs were due to the plaintiffs’ failure to install a proper drip leg and to translate the installation manuals into Russian. In addition, the defendants’ proposed amendments plead estoppel and a limitation period defence.
[18] It is exceedingly likely that the plaintiffs would lose the long-awaited trial date were these amendments granted. First, they would be required to prepare an amended reply and defence to the counterclaim. There may be additional productions required to address these new factual issues such as the translation of an installation manual and the allegation that there were subsets of generators under the general ST502H model with different capacities. Thereafter, the plaintiffs would be entitled to examine the defendants for discovery on these amendments.
[19] Second, the amendments put in issue discussions that took place 25 years ago. Mr. Tom Byrnes, Sr., the president of the defendants and their key witness, was examined on those meetings in 2012 but a further eight years has passed since that examination. He would now be required to testify about his specific recollection of those meetings in addition to being questioned on all the other new allegations. This is particularly problematic as Mr. Byrnes is presently 89 years old and in June 2019 he reported to a physician practising in dementia care that he has had a progressive decline in his short term memory since 2017.
[20] As set out more particularly in the decision on the plaintiff’s companion motion to examination Mr. Byrnes in advance of the trial, reported as 2020 ONSC 961, the parties had agreed that they would exchange unsworn affidavits with placeholders for the exhibits. A joint document book would be prepared containing all the exhibits and then the affidavits amended simply to reflect the updated references to the documents in the joint exhibit book. The defendants delivered an unaffirmed affidavit of Mr. Byrnes with exhibit placeholders in April 2019 and then an affirmed version in May 2019. The joint document brief was finalized in August 2019 and the affidavits were then ready to be completed and sworn. The plaintiffs finalized and swore their affidavits on 12 September 2019. However, because of their own concerns about Mr. Byrnes’ memory issues, defendants’ counsel did not have Mr. Byrnes affirm an updated affidavit, but have chosen to rely on his affirmed May 2019 affidavit.
[21] Lastly, this is akin to a motion to amend pleadings mid-trial as both parties have committed to their evidence in chief almost a year ago and tendered it by way of sworn affidavits. The defendants argue that amendments to pleadings may be made at trial, and their motion should not be denied because of lateness. I note that in Robinson v. Robinson (1989) 70 O.R. (3d) 249 (H.C.), the court refused the defendant’s motion to amend his statement of defence at trial after the evidence had been adduced, holding that the proposed amendment would fundamentally alter the issues and would result in palpable prejudice to the plaintiff that was not compensable in costs. Those conclusions are equally applicable here.
[22] Leave is granted to amend the counterclaim to reduce the damages claim as that calculation does not appear to be in dispute. Otherwise, the defendants’ motion is dismissed with costs. The parties have agreed that the unsuccessful party on the motion will pay the successful party $2,500 in costs. The defendants shall pay the plaintiffs $2,500 within 30 days of the date of this decision.
Master Jolley
Date: 12 February 2020
Correction to paragraph 22 of REASONS FOR DECISION
COURT FILE NO.: CV-09-375888
MOTION HEARD: 20200207
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Amelin Engineering Ltd. and Michael Elinson, Plaintiffs
AND:
Steam-Eng Inc. and Blower Engineering Inc., Defendants
BEFORE: Master Jolley
COUNSEL: Rachel Laurion, Counsel for the Moving Party Defendants
Thomas Dumigan and Matthew Diskin, Counsel for the Responding Party Plaintiffs
HEARD: 7 February 2020
[23] The following paragraph replaces the corresponding paragraph in the original decision released on 12 February 2020:
[22] Leave is granted to amend the counterclaim to reduce the damages claim as that calculation does not appear to be in dispute. Otherwise, the defendants’ motion is dismissed. The parties have agreed that the costs of the motion will be in the cause.
Master Jolley
Date: 13 February 2020