Court File and Parties

COURT FILE NO.: 272/14 (Guelph) DATE: 2021 01 29 SUPERIOR COURT OF JUSTICE – ONTARIO

RE: SEELSTER FARMS INC. WINBAK FARM OF CANADA, INC, STONEBRIDGE FARM, 774440 ONTARIO INC., NORTHFIELDS FARM INC., JOHN MCKNIGHT, TARA HILLS STUD LTD., TWINBROOK LTD., EMERALD RIDGE FARM, CENTURY SPRING FARMS, HARRY RUTHERFORD, D10041NE INGHAM, BURGESS FARMS INC., ROBERT BURGESS, 453997 ONTARIO LTD., TERRY DEVOS, SONIA DEVOS, GLENN BECHTEL, GARTH BECHTEL, 496268 NEW YORK INC., HAMSTAN FARM INC., ESTATE OF JAMES CARR, deceased, by its executor Darlene Carr, GUY POLILLO, DAVID GOODROW, TIMPANO GAMING INC., CRAIG TURNER, GLENGATE HOLDINGS INC., KENDAL HILLS STUD FARM LTD., ANY KLEMENCIC, TIM KLEMENCIC, STAN KLEMENCIC, JEFF RUCH, BRETT ANDERSON, DR. BRETT C. ANDERSON PROFESSIONAL VETERINARY CORPORATION, KILLEAN ACRES INC., DECISION THEORY INC., 296268 ONTARIO LTD., DOUGLAS MURRAY MCCONNELL, QUINTET FARMS INC., KARIN BURGESS, BLAIR BURGESS, ST. LAD’S LTD., WINDSUN FARM INC., SKYHAVEN FARMS, HIGH STAKES INC., 1806112 ONTARIO INC., GLASSFORD EQUI-CARE, JOHN GLASSFORD, GLORIA ROBINSON and KEITH ROBINSON

-AND-

HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO and ONTARIO LOTTERY AND GAMING CORPORATION

BEFORE: EMERY J.

COUNSEL: J. Lisus, I. Matthews, V. Milat and P. Underwood for the Plaintiffs R. Ratcliffe, L. La Horey and E. Machado for Her Majesty The Queen in Right of Ontario

HEARD: In writing

Endorsement (Motion in writing for leave to amend)

[1] Seelster Farms Inc. and the other plaintiffs seek leave to further amend the statement of claim to increase the damages pleaded from $60 million to $662 million. They seek leave to further amend the statement of claim by amending some paragraphs and adding others to update the factual circumstances, and to expand on the claim of breach of contract against Ontario. The plaintiffs also seek leave to further amend the statement of claim to elaborate on the theoretical basis for the damages they claim for breach of contract through the application of unjust enrichment.

[2] The plaintiffs bring this motion after this court delivered summary judgment on liability for reasons found at 2020 ONSC 4013. The motion was brought in writing. The notice of motion was directed only to Ontario as a defendant. It was not directed to the Ontario Lottery and Gaming Corporation (“OLG”), as the action has been dismissed on summary judgment as against OLG. The notice of motion also seeks to limit the amendment to the title of proceedings in the action to Ontario as the remaining defendant.

[3] No evidence was filed by the plaintiffs or by Ontario on the motion for leave. The plaintiffs simply filed their notice of motion with the draft Second Amended Statement of Claim (the “draft SOC”) showing the amendments they seek leave to make, a factum and a reply factum. Ontario likewise filed only primary materials consisting of the plaintiffs’ notice of cross-motion for summary judgment, excerpts from Ontario’s factum on the summary judgment motion, the supplementary notice of cross-appeal filed by the plaintiffs, and a factum on the leave motion.

The amendments at issue

[4] Ontario takes no issue with the amendments to paragraphs 12, 20 or 32 of the draft SOC as those paragraphs update the legal capacity of various plaintiffs. Ontario does not take a position on the amendments the plaintiffs seek to make by paragraphs 54.1 and 56, only stating that those amendments are unnecessary inclusions in light of the reasons for summary judgment.

[5] There is no prohibition in Rule 26.01 from updating material facts relating to a party or to material facts relating to a claim or defence, or about redundancy as a bar. There is no allegation of prejudice amending paragraphs 54.1 and 56 might cause to its position. Since Ontario has raised no legal basis to refuse the motion for leave to further amend the statement of claim to the extent of those paragraphs, an order shall go accordingly.

[6] This leaves the proposed amendments to paragraphs 1(b), 155, 156 and 157.1 opposed by Ontario (the “contested amendments”). I would add paragraph 155.1 not included in Ontario’s position one way or another as part of the contested amendments, as that paragraph appears in the midst of the contested amendments squarely in issue.

[7] The contested amendments can be dealt with conceptually as two questions. The first amendment involves an increase of the damages claimed and the further basis for those damages proposed in paragraph 1(b). The second set of contested amendments are found between paragraphs 155 and 157.1. These amendments relate to breach of contract and unjust enrichment as two of the causes of action pleaded before the motions for summary judgment were heard.

Paragraph 1(b)

[8] The proposed amendments to paragraph 1(b) in turn seek to accomplish two things. The first is the increase to the damages claimed in the action as against Ontario. The second is to develop the basis for the plaintiffs to claim those damages.

[9] The motions for summary judgment were brought to determine the liability issues on various causes of action against Ontario and OLG respectively. This is clear from paragraph 8 of the Reasons for Judgment. It is equally clear from paragraph 207 that very little evidence was given on damages. That paragraph reads as follows:

[207] A great deal of the evidence has been given on the liability issues of the case, and very little on damages. I have found that Ontario was required to give the plaintiffs reasonable notice as an implied term of the LOI or at law. To assess damages, the court requires the appropriate evidence, with submissions on what that reasonable notice would be after conducting their businesses under SARP for 14 years, and proof of the damages claimed by each plaintiff.

[10] The plaintiffs succeeded on the cross-motion and obtained summary judgment for breach of contract, with an order directing a trial on damages. Ontario’s motion was granted to the extent that the plaintiffs’ claims on all other causes of action are deemed dismissed as of July 1, 2019 under section 11(8) of the Crown Liability and Proceedings Act.

[11] It is noteworthy that the proposed amendments to paragraph 1(b) of the draft SOC do not include a further mention of any cause of action other than those already in the statement of claim prior to the motions for summary judgment.

[12] While the proposed amendment to paragraph 1(b) seeks to increase the amount claimed for compensatory damages, the surrounding language is consistent with the judgment obtained by the plaintiffs for breach of contract. This language neither adds to, or takes away from the causes of action that were already pleaded. The expanded language is, like any other part of the draft SOC, the stuff of claims and allegations unless and until proven by the plaintiffs. The increase in the amount of the damages claimed is therefore the issue.

[13] There is abundant authority for the court to grant a motion to amend the amount of damages claimed at any stage of an action. See: McHale v. Lewis, 2018 ONCA 1048, as well as Hales Contracting Inc. v. Towland-Hewitson Construction Ltd. (1996), 46 C.P.C. (3d) 299 (SCJ) and Haikola v. Arsenau (1996), 27 O.R. (3d) 576 (Ont.C.A.) for allowing amendments to the amounts claimed for damages shortly before trial. I also note the Supreme Court of British Columbia in Smithies Holdings Inc. v. RCV Holdings Ltd., 2018 BCSC 1831 allowed an amendment to add a claim for punitive damages after a bifurcated trial.

[14] There is no prejudice to Ontario of the kind discussed in the authorities if leave is granted to amend paragraph 1(b) that increases the amount of damages claimed, or the additional basis to claim those damages. An order shall therefore issue granting leave for the plaintiffs to make those amendments.

Paragraphs 155 to 157.1

[15] The plaintiffs seek leave to make further amendments to plead additional facts and particulars to their claim for damages for breach of contract on which they have been granted summary judgment. They submit that the amendments are based on the same facts they have already pleaded. The plaintiffs also argue that the claim for unjust enrichment pleaded in the amended statement of claim was not foreclosed by the summary judgment, and that the amendments relate as much to that claim as to their judgment for breach of contract.

[16] Ontario opposes the proposed amendments set out paragraphs 155 to 157.1 on the basis that they seek to revive or otherwise rely upon unjust enrichment as a cause of action. Ontario argues that, among other things, unjust enrichment is not longer available to the plaintiffs as a matter of estoppel because the motions for summary judgment have already been heard and determined.

[17] Ontario disclosed in its responding material that the plaintiffs have filed a Supplementary Notice of Appeal dated November 27, 2020. This Supplementary Notice of Appeal added further relief and grounds of appeal to the initial Notice of Appeal dated August 18, 2020. The plaintiffs’ Supplementary Notice of Appeal includes the appeal of this court’s disposition of the unjust enrichment claim, and asks for judgment on unjust enrichment as a cause of action. Ontario relies on that fact to argue that the amendments the plaintiffs are now seeking leave to make are an abuse of process, or constitute a collateral attack on issues under appeal.

[18] In order to determine the objections to the requested amendments, I propose to first review the general principles that apply to amendments, and then to address each of the objections raised by Ontario to those amendments.

General principles

[19] The power given to the court to grant leave under Rule 26.01 is well known and applied daily on motions across the province. The power to grant leave to amend is discretionary, even though the exercise of that discretion is extremely limited. In Marks v. Ottawa, 2011 ONCA 248, the Court of Appeal explained the narrow grounds for refusing an amendment in the following terms:

[19] Although the general rule is that amendments are presumptively approved, there is no absolute right to amend pleadings. The court has a residual right to deny amendments where appropriate: Daniele v. Johnson (1999), 45 O.R. (3d) 498 (Ont. Div. Ct.) at paras. 11 - 15. Further, I would agree that the proper factors to be considered […] can be summarized as follows:

• An amendment should be allowed unless it would cause an injustice not compensable in costs.
• The proposed amendment must be shown to be an issue worthy of trial and prima facie meritorious.
• No amendment should be allowed which, if originally pleaded, would have been struck.
• The proposed amendment must contain sufficient particulars.

[20] Boiled down to its essence, Rule 26.01 requires the court to permit a party to make an amendment to its pleading unless the other party can show that the amendment will cause prejudice to that other party that cannot be compensated by costs or an adjournment for the loss of time or expense. The amendment must also be tenable and worthy of trial.

[21] Ontario submits that prejudice of the sort required to successfully resist a motion for leave must relate to an inability of the other party to respond or deal with the amendment, or how the amendment changes the overall pleading. Ontario argues that prejudice of this sort would be caused if the amendments were permitted to fortify the allegations of unjust enrichment already in the statement of claim because the issue of liability has now been determined on summary judgment. Ontario is concerned that the contested amendments, when read together with the existing pleading, will amount to an impermissible resurrection of the claim for unjust enrichment after the liability in this action has been determined.

Non-compensable prejudice

[22] Ontario sets out four reasons in its factum why the contested amendments would result in prejudice that is not compensable in costs:

a. The claim of unjust enrichment, and therefore amendments made to support that claim, are res judicata by virtue of issue estoppel; b. In the alternative, the claims for unjust enrichment are res judicata by virtue of cause of action estoppel; c. In the further alternative, the contested amendments are an abuse of this court’s process; and d. The Contested Amendments are a collateral attack on another proceeding pending before the Court of Appeal.

A. Res Judicata by Way of Issue Estoppel

[23] Ontario describes issue estoppel as a branch of res judicata that precludes the re-litigation of issues previously decided in another proceeding. Ontario submits that three preconditions must be met to find issue estoppel: (1) the issue must be the same, (2) the prior judicial decision must have been final, and (3) the parties to both proceedings must be the same.

[24] Ontario takes the position that the contested amendments are a “thinly veiled attempt” to restore the plaintiffs’ claim for unjust enrichment.

[25] Ontario refers to the decision of the Court of Appeal in McIntosh v. Parent, [1924] O.J. No. 59 (Ont. C.A.), where the plaintiffs in that case were prohibited from resurrecting a claim, with related damages, by virtue of issue estoppel. In McIntosh, the court stated:

…..When a question is litigated, the judgment of the Court is a final determination as between the parties and their privies. Any right, question, or fact distinctly put in issue and directly determined by a Court of competent jurisdiction as a ground of recovery, or as an answer to a claim set up, cannot be re-tried in a subsequent suit between the same parties or their privies, though for a different cause of action. The right, question, or fact, once determined, must, as between them, be taken to be conclusively established so long as the judgment remains.

[26] The application of issue estoppel depends upon the finding that the issue decided in the prior proceeding must have been fundamental to arriving at the decision that decided an issue once and for all. Binnie J. explained it this way for the Supreme Court of Canada in Danyluk Technologies v. Ainsworth Technologies Inc., 2001 SCC 44:

[…] the estoppel extends to the material facts and the conclusions of law or of mixed fact and law (‘the questions') that were necessarily (even if not explicitly) determined in the earlier proceedings.

[27] Ontario argues that the fact that the claim for unjust enrichment was not argued at the summary judgment motion is of no matter. All of the issues relating to liability were considered by the court on the motions for summary judgment, and the issue of liability is now foreclosed.

[28] This would be a significant impediment for the plaintiffs to overcome except for the fact that the plaintiffs’ reply factum refutes Ontario’s position that the contested amendments plead unjust enrichment as a cause of action. The plaintiffs unequivocally state that this is not the case. They state that these amendments relate directly to theories of damages on the plaintiffs’ contract claim.

[29] The plaintiffs submit that the contested amendments are required to plead particulars of the plaintiffs’ claim for contractual damages. They submit that Ontario will not suffer any prejudice as a result of these amendment because the allegations of material fact to make the claims for breach of contract and unjust enrichment have already been pleaded: see paragraph 12 of the reply factum.

[30] The plaintiffs further submit that the issue of unjust enrichment was not decided on the motions for summary judgment. The Reasons for Judgment stated at paragraph 208 as follows:

[208] In view of my conclusion on the plaintiffs claim for breach of contract, I have not considered the claim made in the amended statement of claim for unjust enrichment. Counsel for the parties made little mention of that claim in their submissions in any event, or tendered evidence to show a whether a benefit was received by either defendant, a corresponding deprivation to any plaintiff, and no juristic reason for the enrichment on these facts.

[31] The parties attended to settle the Judgment after the summary judgment motions had been decided, and the Settlement of Judgment and Scheduling Endorsement was released at 2020 ONSC 5235. That Endorsement provided that any language proposed by Ontario to include in the judgment for the dismissal of the plaintiffs’ claims for unjust enrichment against either defendant was denied for the following reasons:

[5] I have not included paragraphs 4 and 5 from Ontario’s draft or any reference to a dismissal of the Plaintiffs’ claims against Ontario or OLG for unjust enrichment or waiver of tort from paragraph 6 in the Judgment. Unjust enrichment was not considered in the Reasons for Judgment (see paragraph 208), and waiver of tort was not argued by any party on the motions.

[32] In view of these pronouncements on the motions for summary judgment, unjust enrichment as a cause of action or as a theoretical device for the plaintiffs to prove their damages for breach of contract was not decided on summary judgment.

[33] Recently, Myers J. of this court stated in Li v. Li, 2017 ONSC 1611 that “absent a decision on the merits, in which a matter was put in issue and decided expressly, res judicata does not apply.” The contested amendments that seek to embellish the unjust enrichment claim originally pleaded has never been decided. Therefore, the principle of issue estoppel does not apply here.

B. Res Judicata by Way of Cause of Action Estoppel

[34] As an alternative argument based on the principle of res judicata, Ontario argues that the contested amendments should not be permitted because they would offend the doctrine of action estoppel. Ontario argues that cause of action estoppel is broader than issue estoppel. In McIntosh v. Parent, the Court explained that action estoppel:

[… ] makes it obligatory upon a plaintiff asserting a cause of action to claim all his relief in respect thereto, and prevents any second attempt to invoke the aid of the Courts for the same cause, for on his first recovery his entire cause of action has become merged in his judgment and is gone forever.

[35] The plaintiffs respond to this argument by submitting that the authorities relied upon by Ontario do not apply. In Doering v. Grandview (Town), [1976] 2 S.C.R. 621, the Supreme Court of Canada spoke of cause of action estoppel as applicable only after “an issue has been raised and distinctly determined between the parties.” In the words of the plaintiffs, in this case, the plaintiffs’ unjust enrichment claim was not “distinctly determined.”

[36] The Supreme Court of Canada case in Grandview v Doering cited Lord Denning in Fidelitas Shipping Co Ltd v. V/O Exportchleb, [1965] 2 All E.R. 4 as follows:

The law, as I understand it, is this: if one party brings an action against another for a particular cause and judgment is given on it, there is a strict rule of law that he cannot bring another action against the same party for the same cause. Transit in rem judicatam . . . But within one cause of action, there may be several issues raised, which are necessary for the determination of the whole case. The rule then is that, once an issue has been raised and distinctly determined between the parties, then, as a general rule, neither party can be allowed to fight that issue all over again. The same issue cannot be raised by either of them again in the same or subsequent proceedings except in special circumstances . . . And within one issue, there may be several points available which go to aid one party or the other in his efforts to secure a determination of the issue in his favour. The rule then is that each party must use reasonable diligence to bring forward every point, which he thinks would help him. If he omits to raise any particular point, from negligence, inadvertence, or even accident (which would or might have decided the issue in his favour), he may find himself shut out from raising that point again, at any rate in any case where the self- same issue arises in the same or subsequent proceedings. 18

[37] The rule against fighting about the same point again was subsequently expanded by the Supreme Court in Royal Bank v. W. Got & Associates Electric Ltd., [1999] 3 S.C.R. 408. In Royal Bank v. W. Got & Associates, the Court held that compensatory damages will generally be similar where a claim is made for the same wrongful act but framed under different causes of action, as adjusted for a particular cause of action.

[38] In my view, the same reasoning applies here. There is no basis to deny the plaintiffs leave to amend the draft SOC by the contested amendments because of action estoppel.

C. Abuse of Process

[39] In the further alternative, Ontario takes the position that the contested amendments are an abuse of the court’s process. Ontario submits that the abuse of process, in this context, can be characterized as a re-litigation of the same issues litigated in the summary judgment motions.

[40] Ontario submits that the doctrine of abuse of process in this respect is “similar to the doctrine of res judicata in that it also seeks to prevent a multiplicity of proceedings or the re-litigation of an issue determined in earlier proceedings or which might have been raised in earlier proceedings, but the party now raising the issue before the court chose not to do so.” See Reddy v. Oshawa, [1992] O.J. No. 1337.

[41] The plaintiffs respond to Ontario’s objection on this ground by submitting that Ontario will have the opportunity to respond to any of the contested amendments at trial. This response is made in addition to the plaintiffs’ main argument that the contested amendments seek to plead unjust enrichment as an alternate theory of damages, and not as a cause of action on which to make a finding of liability.

[42] In my view, the answer to Ontario’s objection that the contested amendments are an abuse of process is the same as the answer to the objection that they should not be permitted by reason of issue estoppel. I did not hear from the parties on whether a claim for unjust enrichment is inconsistent with a finding of breach of contract on the same set of facts. I did not receive submissions or authorities from either party that unjust enrichment is known only as a cause of action at law, from which its own restitutionary remedies flow, and not as a theoretical platform for assessing damages. Nor did I hear submissions that the elements of unjust enrichment cannot be used to prove damages for liability found under any other legal or equitable claim.

[43] The mandatory language of Rule 26.01 is clear. 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. Ontario has not provided me with a sufficient reason to find that granting leave to make the contested amendments would amount to non-compensable prejudice. Ontario would have the right to serve an amended statement of defence under Rule 25.06. Ontario has the time to take what steps it considers necessary to discover the plaintiffs on the contested amendments, and to ready itself for trial. Any costs that it incurs needlessly in the end result could potentially be compensated by costs.

[44] I conclude that the contested amendments are not precluded because of any effort by the plaintiffs to re-litigate an issue that has already been determined as an abuse of process.

D. The Contested Amendments are a Collateral Attack

[45] Fourth and finally, Ontario argues that the contested amendments are a collateral attack on an issue that is currently under appeal.

[46] The Supplementary Notice of Appeal requests that the Court of Appeal grant judgment on the plaintiffs’ claim based on unjust enrichment. Ontario submits that this contradicts the plaintiffs’ claims made in this motion for leave that the contested amendments are required merely to set out an alternate approach to damages flowing from their judgment for breach of contract. Ontario points to the plaintiffs’ position on the motion that they do not intend to reintroduce the claim for unjust enrichment as a basis for liability under it.

[47] The plaintiffs did not provide any submission of substance to this objection.

[48] The Supreme Court of Canada held in R. v. Wilson, [1983] 2 SCR 594 that a collateral attack is “an attack made in proceedings other than those whose specific object is the reversal, variation, or nullification of the order or judgment."

[49] Now armed with the knowledge of the plaintiffs’ appeal to seek judgment on their claim for unjust enrichment on the motions for summary judgment, the question on the leave motion is whether the contested amendments, if leave is granted while the plaintiffs have an appeal pending on a related issue, would cause prejudice to Ontario that cannot be compensated by an adjournment or by costs.

[50] In my view, it would be inappropriate to bolster or augment the plaintiffs’ claim for unjust enrichment by permitting any amendment to the claim for unjust enrichment as a cause of action pending that appeal. Where the plaintiffs have put the issue of unjust enrichment as pleaded at the summary judgment stage before the Court of Appeal, that claim is now in the domain of that Court.

[51] Ontario cannot be expected to fight the plaintiffs’ claim for unjust enrichment at two levels of our court system at the same time. This strategy would cause prejudice to Ontario’s substantive rights in the underlying litigation that cannot be compensated by costs.

[52] I have reviewed the language in the contested amendments that is underscored by double lines to discern what paragraphs in whole or in part relate to unjust enrichment. The contested amendments themselves do not contain any mention of unjust enrichment as a concept. They do not add particulars to the three elements of unjust enrichment through those paragraphs to implicitly expand on that claim.

[53] In paragraph 155 of the draft SOC, the plaintiffs plead that Ontario (and OLG) have been “unfairly” enriched, but the rest of the proposed amendment to that paragraph, when read in context, is framed in contractual terms. The proposed amendments to paragraphs 155.1 and 156 relate to the type of loss the plaintiffs have allegedly suffered, and the reasons for that loss. And in paragraph 157.1, the contested amendments provide a summary of the plaintiffs’ theory on damages they hope to prove.

[54] I conclude from a plain reading of the language that the contested amendments do not tread upon the matters at issue for the Court of Appeal to decide on the cross-appeal. As a result, the contested amendments do not amount to a collateral attack.

Conclusion

[55] The plaintiff’s motion for leave to further amend the statement of claim is granted as follows:

1. To amend the title of proceeding as proposed;
2. By adding paragraphs 12, 20 and 32, on consent;
3. By adding paragraphs 54.1 and 56 on an unopposed basis;
4. By amending paragraph 1(b) to increase the damages claimed to $662 million, and to add the proposed basis for that claim; and
5. By adding paragraphs 155, 155.1, 156 and 157.1

[56] Costs may be spoken to at the next Case Management Conference.

Emery J. Released: January 29, 2021