COURT FILE NO.: CV-18-592887

MOTION HEARD: 20210705

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: John Kurgan, Plaintiff

AND:

RBC Dominion Securities Inc., Defendant

BEFORE: MASTER LA HOREY

COUNSEL: M. Sammon and D. Salter, Counsel for the Moving Party Defendant/ Plaintiff by Counterclaim

H. Nieuwland, Counsel for the Responding Party Plaintiff / Defendant by Counterclaim

HEARD: July 5, 2021

REASONS FOR DECISION

[1] The defendant RBC Dominion Securities Inc. ("RBC DS") brings this motion to amend its Amended Statement of Defence and Counterclaim in accordance with the proposed Amended Amended Statement of Defence and Counterclaim attached as Schedule A to its notice of motion. RBC DS sought consent for the proposed amendment in November 2020 and served its notice of motion in February 2021. The plaintiff, Mr. Kurgan, delivered a responding record on June 27, 2021.

[2] Mr. Kurgan opposes the proposed amendments on the basis that they are legally untenable. He takes the position that if an order is made permitting the amendments, there should be terms as proposed in his factum.

[3] This is a wrongful dismissal action. The plaintiff was an investment advisor at RBC DS whose employment was terminated in February 2018. Pleadings closed in April 2018. One of the issues raised in the pleadings is the plaintiff's prior involvement with a hedge fund called Lake Shore which is alleged to have defrauded investors by misrepresenting its results and which was apparently placed into receivership in the United States.

[4] The parties delivered affidavits of documents which include documents pertaining to Lake Shore. Discoveries took place in September and December 2018. Each party asked questions about Lake Shore. Following discoveries, the plaintiff brought motions in which he sought information relating to RBC DS's dealings with Lake Shore. The plaintiff has set the matter down for trial, but no trial date has been set.

[5] In his pleading, Mr. Kurgan pleads that he was dismissed after the publication of two news articles about Lake Shore and a convicted fraudster, Philip Baker, which referenced the plaintiff. At paragraph 6 of the Further Amended Statement of Claim dated April 4, 2018, Mr. Kurgan states that he had traded the Lake Shore account while working at another firm, but that he had no other involvement in the fund and had assisted several United States enforcement agencies in their investigation into the fraudulent activities of Lake Shore. He further pleads that following "an extensive investigation into the Lake Shore matter, including several interviews with Kurgan, neither the US or Canadian authorities brought any changes or sanctions against Kurgan."

[6] In its Amended Statement of Defence and Counterclaim dated April 17, 2018, RBC DS pleads that as a result of the media articles in November 2017 it decided to review the Lake Shore and Baker matter and the plaintiff's alleged involvement. RBC DS pleads that this involvement led to concerns that the plaintiff did not adequately address, and RBC DS decided to terminate the plaintiff's employment. The defendant pleads that it attempted to negotiate the plaintiff's exit, but an amicable exit agreement could not be arranged and accordingly, RBC DS opted to terminate Mr. Kurgan's employment in February 2018, without cause. In its pleading, RBC DS pleads after-acquired cause for termination, specifically that it learned in March 2018 that the plaintiff misappropriated confidential information.

[7] RBC DS is now seeking to amend its pleading to articulate an additional allegation of cause. RBC DS seeks to plead that Mr. Kurgan deliberately misled both it and the Ontario Securities Commission regarding his prior involvement with Lake Shore and Baker and that these misrepresentations justify termination for cause.

[8] Mr. Kurgan opposes the motion. He states the proposed amendments consist of allegations that were known to RBC DS before he was terminated. He takes the position that the law is clear that after-acquired cause cannot be asserted where the employee was terminated without cause and the alleged misconduct was known by the employer at the time of termination. Therefore, he says that the amendments are legally untenable.

[9] Rule 26.01 provides:

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. [my emphasis]

[10] The rule is mandatory. As stated by Justice Harvison Young in Klassen v Beausoleil, "the court must allow the amendment, unless the responding party would suffer non-compensable prejudice, the proposed pleading is scandalous, frivolous or vexatious, or the proposed pleading fails to disclose a reasonable cause of action."[^1]

[11] The plaintiff has not filed any evidence alleging any prejudice that cannot be compensated by costs or an adjournment. Rather, as noted, he takes the position that the amendments are not legally tenable.

[12] The plaintiff has filed a responding record which consists of the affidavit of a law clerk attaching answers to undertakings and questions taken under advisements by RBC DS at the examinations for discovery, as well as a number of documents produced by RBC DS. The plaintiff alleges that these documents show that RBC DS believed that Mr. Kurgan misled it and the OSC in late January 2018 but chose to terminate Mr. Kagan's employment without cause. In particular the plaintiff relies on a RBC DS internal investigation report into the issue of the plaintiff and his involvement in Lake Shore dated January 25, 2018. The plaintiff states that the proposed amendments are not new allegations, but rather the allegations are drawn from the 2018 RBC DS internal report.

[13] Because my role is to decide legal tenability based on the proposed pleading and not to conduct a factual review of the evidence arising from the examinations for discovery as if this were a motion for summary judgment or a trial, the 2018 RBC DS internal report is not germane to this exercise. However, even the RBC DS report were germane, it states that due to the limitations in the available of source documents, the true extent of Mr. Kurgan's involvement in the Lake Shore fraud cannot be confirmed or denied.

[14] The plaintiff is, in effect, asking me to consider the factual and legal basis for the proposed amendments at this stage. That is not the exercise under Rule 26.01. The words of Justice Weiler in Spar Roofing and Metal Supplies Ltd. v. Glynn[^2] are apposite. At paragraph 43 she stated:

43 The respondent's submission is in effect a submission that the court should consider the merits of the factual and legal basis for the proposed amendment at the pleading stage and not at a later stage of the proceedings. That is not the law under r. 26.01. As stated in Todd Archibald, Gordon Killeen & James C. Morton, Ontario Superior Court Practice, 2016 Edition (Markham, ON: LexisNexis Canada, 2015), at p. 1151:

The amended pleading must be legally tenable. It is not necessary to tender evidence to support the claims nor is it necessary for the court to consider whether the amending party is able to prove its amended claim. The court must assume that the facts pleaded in the proposed amendment (unless patently ridiculous or incapable of proof) are true, and the only question is whether they disclose a cause of action. Amendments are to be granted unless the claim is clearly impossible of success.

Put another way, an amendment is to be granted unless it would have been struck out under r. 21.01(1)(b) if it had been pleaded originally: 1317424 Ontario Inc., at para. 7. A motion to strike out a pleading on the ground it discloses no reasonable cause of action or defence must not, however, be conflated with a motion for summary judgment under r. 20.04: see Andersen Consulting v. Canada (Attorney General) (2001), 2001 CanLII 8587 (ON CA), 150 O.A.C. 177 (C.A.), at paras. 34-37; Griffiths v. Canaccord Capital Corp. (2005), 2005 CanLII 42485 (ON SCDC), 204 O.A.C. 224 (Div. Ct.), at para. 10.

[15] I am satisfied that RBC DS has met the test under Rule 26.01 and is therefore entitled to an order granting it leave to amend the Amended Statement of Defence and Counterclaim in accordance with the proposed Amended Amended Statement of Defence and Counterclaim attached as Schedule "A" to its notice of motion dated February 12, 2021.

[16] As noted above, the plaintiff asks for terms if leave to amend is granted. The plaintiff asks that he be given an additional day of oral examination for discovery in respect of the amendments. However, rather than a continued discovery of the RBC DS representative who has already testified, Michael Weber, he seeks to discover a second RBC DS representative.

[17] The request for additional discovery is opposed by RBC DS on the basis that the parties have engaged in oral discovery on the Lake Shore issues. Defence counsel says that if the plaintiff is permitted further discovery, the defendant should also be allowed additional oral discovery on the amendments. While there has been some discovery on the Lake Shore issues, the new pleadings may suggest additional questions. Given that some discovery has already taken place, I am prepared to order that the defendant's representative attend for up to two hours for continued oral discovery on the amendments. Counsel for the plaintiff fairly agreed that if the plaintiff is permitted further discovery, the defendant should be permitted further discovery. Therefore, Mr. Kurgan may be examined for up to two hours on the proposed amendments.

[18] I turn now to the question of who should be produced on behalf of RBC DS. Mr. Kurgan seeks to examine David Agnew. Mr. Agnew is apparently the CEO of RBC Wealth Management and is alleged to be the individual who made the decision to terminate Mr. Kurgan. As noted above examinations for discovery have already taken place and Michael Weber was examined on behalf of the defendant pursuant to the parties' discovery plan. The request that RBC DS ought to produce Mr. Agnew to be examined (should the court grant leave to amend) was made in the plaintiff's factum dated June 27, 2021.

[19] A party who wishes to examine a second representative of a corporation may move for leave of the court under Rule 31.03(b) and must satisfy the court that the requirements in Rule 31.03(4) have been met. Rule 31.03(4) provides:

31.03(4) Before making an order under clause (2) (b) or (3) (b), the court shall satisfy itself that,

(a) satisfactory answers respecting all of the issues raised cannot be obtained from only one person without undue expense and inconvenience; and

(b) examination of more than one person would likely expedite the conduct of the action.

[20] The plaintiff has not brought a motion to examine a second representative of the defendant and has not filed any materials in support of this request which was made in his factum filed shortly before this motion. As Justice Perrell noted in Fischer v IG Investment Ltd.[^3] the test for a further examination for discovery is strict and orders to examine a second representative are rarely granted.

[21] The plaintiff has not met the stringent requirements of the rule on the record before me. In making this finding, I should not be taken as precluding Mr. Kurgan from bringing a motion under Rule 31.03(4), if so advised. Therefore, the defendant shall produce Mr. Weber to be discovered on the amendments.

[22] The plaintiff has also asked that the defendant be required to produce a further and better affidavit of documents. The plaintiff has established no basis for a request for a further and better affidavit of documents. Documents have already been produced on the Lake Shore issue and the plaintiff will have an opportunity to seek production of further relevant documents (if there are any) during the continued discovery of Mr. Weber.

[23] The plaintiff submits that he should not be forced to bear the costs of the continued discoveries as they are necessitated by the amendments. He suggests that I make an order that the costs be assessed and that they be ordered paid to Mr. Kurgan in any event of the cause. However, the further discoveries are a term requested by Mr. Kurgan over the objection of the defendant who says that they are not necessary. I am not in a position on this record to determine whether or not the additional discoveries are truly necessary and accordingly, make no order with respect to the costs of the additional discoveries and instead leave such costs to be determined by the trial judge.

[24] The parties exchanged costs outlines in respect of this motion. I am advised that RBC DS's costs outline is in the amount of $10,500 and Mr. Kurgan's costs outline is in the amount of $8,500. RBC DS asks for costs in that range submitting that it was successful on the motion. It also notes that it asked for consent to the amendments in November 2020 but did not receive any timely response. Moreover, the plaintiff filed no evidence of prejudice. Mr. Kurgan takes the position if the amendment is granted on terms, that there is mixed success and each party should bear its own costs. I am satisfied that RBC DS is entitled to its costs, given its substantial success. In my view the all-inclusive sum of $9,000 is a fair and reasonable amount that the plaintiff could expect to pay for costs in the circumstances.

[25] In summary an order shall go:

1. Granting the defendant leave to amend the Amended Statement of Defence and Counterclaim in accordance with the proposed Amended Amended Statement of Defence and Counterclaim attached as Schedule "A" to its notice of motion dated February 12, 2021.

2. Permitting the plaintiff to examine Michael Weber, as the representative of the defendant, on the amendments for up to two hours.

3. Permitting the defendant to examine the plaintiff on the amendments for up to two hours.

4. Directing that the plaintiff pay the defendant the costs of this motion in the sum of $9,000 all-inclusive within 30 days.

Master L. La Horey

Date: July 8, 2021

[^1]: 2019 ONCA 407 at para 25 (citations omitted)

[^2]: 2016 ONCA 296 at para 43

[^3]: 2016 ONSC 4405 at para 40