Court File and Parties
COURT FILE NO.: CV-13-0304-00
DATE: 2021/10/05
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: John Van Huizen and Hastings Appraisal Services, Plaintiffs
AND
Trisura Guarantee Insurance Company, Defendant
BEFORE: Justice R. Ryan Bell
COUNSEL: R. Steven Baldwin, for the Plaintiffs
Heather Gray, for the Defendant
HEARD: September 28, 2021
ENDORSEMENT
Overview
[1] This action was scheduled for a three-day trial to begin on January 18, 2021. On January 18, Tranmer J. granted the defendant Trisura Guarantee Insurance Company leave to amend its statement of defence and denied the plaintiffs’ oral request for leave to maintain the action pursuant to ss. 7(1) and 7(2) of the Business Names Act, R.S.O. 1990, c. B-7. The trial dates were vacated to allow the plaintiffs the opportunity to seek leave to maintain their action.
[2] This is the plaintiffs’ motion for leave of the court to maintain the action. Trisura does not oppose the plaintiffs’ request for leave. On this motion, the plaintiffs also seek an order permitting the delivery of a reply in the form attached to their notice of motion. Trisura objects to the form of the proposed reply. Finally, the plaintiffs seek their costs of Trisura’s motion to amend its pleading and their costs of this motion. Trisura maintains that it is entitled to the costs of the pleadings motion and its costs thrown away as a result of the adjournment of the trial.
[3] For the following reasons, leave is granted to the plaintiffs to maintain the action. The plaintiffs may deliver a reply that is limited to those paragraphs that are responsive to the amended statement of defence. Trisura is entitled to costs of its motion to amend its pleading, costs thrown away because of the adjournment of the trial, and costs of this motion.
Factual Background and Procedural History
[4] Mr. Van Huizen is a certified residential appraiser and operated his business using the name Hastings Appraisal Services. The plaintiffs commenced their action in November 2013. They seek declaratory and other relief that Trisura had a duty to defend and indemnify them in respect of three underlying claims.
[5] Trisura delivered its statement of defence in August 2015. The plaintiffs did not deliver a reply.
[6] Mr. Van Huizen was examined for discovery in June 2016. He was asked whether Hastings Appraisal Services was a registered business name. Mr. Van Huizen testified that he did business using Hastings Appraisal Services, he “used to register every five years”, and he “[did not] know if we do that anymore.”
[7] In June 2017, Trisura moved for summary judgment. The materials filed by the parties on the motion for summary judgment referred to the fact that Hastings Appraisal Services was an unregistered business name. In February 2019, Hurley J. granted summary judgment to the plaintiffs on the basis that Trisura had a duty to defend the plaintiffs under Mr. Van Huizen’s insurance contract.
[8] Trisura appealed to the Court of Appeal for Ontario. In March 2020, the Court of Appeal determined that Trisura did not have a duty to defend the plaintiffs under Mr. Van Huizen’s insurance contract; however, the court held there was a live issue whether Trisura owed the plaintiffs a duty to defend under the certificate of insurance issued to another appraiser, Mr. Barkley.
[9] At the pre-trial conference in October 2020, a three-day trial was scheduled to commence January 18, 2021. No issue was raised at the pre-trial conference regarding the registration of the business name, Hastings Appraisal Services.
[10] On November 17, 2020, Doi J. released his decision in CWH Distribution Services Inc. v. Imperial Chilled Juice Inc., 2020 ONSC 7006. Doi J. confirmed that the effect of s. 7(1) of the Business Names Act was to automatically stay the plaintiff’s action due to the plaintiff’s failure to register its business name under the statute and that the defaulting party is required to seek leave under s. 7(2) so that the court may assess the leave criteria and determine whether leave should be granted: CWH Distribution, at paras. 40-46.
[11] Trisura’s corporate searches conducted after the release of CWH Distribution showed that Hastings Appraisal Services remained an unregistered business name. On January 5, 2021, counsel for Trisura wrote to plaintiffs’ counsel to advise that the action was automatically stayed by application of the Business Names Act.
[12] In response, counsel for the plaintiffs took the position, similar to that advanced on this motion, that a) Mr. Van Huizen had acknowledged that he did not maintain a filing for a registered business name, and b) there was no reason for the trial not to proceed on the issue whether Mr. Van Huizen carrying on business as Hastings Appraisal Services is entitled to coverage under the Barkley certificate of insurance.
[13] The issue was raised at a trial management conference before Hurley J. on January 7. Justice Hurley provided a timeline for Trisura’s motion to amend its statement of defence to plead the Business Names Act.
[14] On January 8, the plaintiffs produced copies of Master Business Licenses for the business name, Hastings Appraisal Services, with registration effective January 8, 2021.
[15] On January 14, a pre-trial conference was held before Tranmer J. The automatic stay of the action by application of the Business Names Act was discussed.
[16] The plaintiffs did not file responding materials to Trisura’s motion to amend its statement of defence. Only a factum was delivered in response.
The Order of Tranmer J.
[17] On January 18, the date set for trial, Trisura moved to amend paras. 12 and 59 of its statement of defence to read:
John Van Huizen was at all relevant times a licensed appraiser and a member of the Appraisal Institute of Canada (“A.I.C.”) carrying on business in Quinte West and Trenton, Ontario to wit, through his corporation, In-Pho Limited carrying on business under the unregistered business name Hastings.
Trisura further pleads and relies upon the provisions of the Business Names Act. R.S.O. 1990, c. B.17, s. 7(1) as amended and all applicable regulations thereunder. Specifically, Trisura states that this action is presented stayed by application of s. 7(1) of the Business Names Act as leave has not been sought from this Honourable Court to maintain the proceeding.
[18] Justice Tranmer found that the plaintiffs had shown no prejudice and granted leave to Trisura to amend its statement of defence in the manner proposed.
[19] The plaintiffs then made an oral motion seeking leave of the court to maintain the proceeding in accordance with ss. 7(1) and 7(2) of the Business Names Act. Relying on Doi J.’s decision in CWH Distribution, Tranmer J. determined that s. 7(2) requires a full evidentiary record. Because there was no motion with supporting material before him, Tranmer J. found that a full consideration of the leave requirement could not be undertaken by the court at that time.
[20] The relevant terms of Tranmer J.’s January 18 order are:
(i) Leave is granted to the Defendant to amend;
(ii) Plaintiffs may move to maintain the proceedings as contemplated under section 7(1) and 7(2) by delivering materials within 30 days hereof;
(iii) If such leave is granted, the Plaintiffs are at liberty to deliver such pleadings as they consider appropriate in response to the Defence amendment;
(iv) Costs of today’s motion including any claims for costs thrown away, shall be determined by the judge adjudicating the motion for leave to be brought by the Plaintiffs; and
(v) Trial set for today through to Wednesday is vacated to permit the steps contemplated above to be taken by the parties.
Plaintiffs’ motion for leave to maintain the proceeding
[21] Section 2(1) of the Business Names Act provides that no corporation shall carry on business or identify itself to the public under a name other than its corporate name unless the name is registered by that corporation.
[22] Sections 7(1) and 7(2) of the Business Names Act provide:
(1) A person carrying on business in contravention of subsection 2(1), (2) or (3) or subsection 4(4) or (6) is not capable of maintaining a proceeding in a court in Ontario in connection with that business except with leave of the court.
(2) The court shall grant leave if the person seeking to maintain the proceeding satisfies the court that,
(a) the failure to register was inadvertent;
(b) there is no evidence that the public has been deceived or misled; and
(c) at the time of the application to the court, the person is not in contravention of this Act or the regulations.
[23] Despite this being the plaintiffs’ motion, they continue to assert that an order granting them leave to maintain the proceeding pursuant to s. 7(2) “was and is not required.” With respect, that issue was determined by Tranmer J. on January 18. The reasons of Tranmer J. make plain that in his view, the action was automatically stayed by operation of s. 7(1). It was for this reason that Tranmer J. ordered the trial dates be vacated to permit the plaintiffs to bring this motion on a full evidentiary record.
[24] Trisura does not oppose the plaintiffs’ request for leave to maintain the proceeding. Based on the evidentiary record, I am satisfied that the plaintiffs have met the test under s. 7(2) and that leave should be granted to maintain the action.
The Proposed Reply
[25] The terms of Tranmer J.’s order provide that if leave is granted to maintain the action, the plaintiffs are “at liberty to deliver such pleadings as they consider appropriate in response to the Defence amendment.”
[26] Trisura objects to the form of reply proposed by the plaintiffs on the basis that it is overly broad and goes beyond answering the actual amendments made by Trisura to its pleading. Trisura maintains that much of the proposed reply is a comprehensive response to the unamended portions of the statement of defence. Trisura says that other paragraphs in the proposed reply raise new issues and allegations which, if permitted, would necessitate, at the minimum, further oral and documentary discovery.
[27] I agree.
[28] An allegation that raises a new ground of claim must be made by way of an amendment to a party’s previous pleading, and not raised in a subsequent pleading: Rule 25.06(5) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.
[29] Rule 25.08, which governs where a reply is necessary, provides:
(1) A party who intends to prove a version of the facts different from that pleaded in the opposite party’s defence shall deliver a reply setting out the different version, unless it has already been pleaded in the claim.
(2) A party who intends to reply in response to a defence on any matter that might, if not specifically pleaded, take the opposite party by surprise or raise an issue that has not been raised by a previous pleading shall deliver a reply setting out that matter, subject to subrule 25.06(5) (inconsistent claims or new claims).
(3) A party shall not deliver a reply except where required to do so by subrule (1) or (2).
(4) A party who does not deliver a reply within the prescribed time shall be deemed to deny the allegations of fact made in the defence of the opposite party.
[30] The ability to respond to an amended pleading is set out in Rule 26.05:
(1) A party shall respond to an amended pleading within the time remaining for responding to the original pleading, or within ten days after service of the amended pleading, whichever is the longer period, unless the court orders otherwise.
(2) A party who has responded to a pleading that is subsequently amended and does not respond to the amended pleading within the prescribed time shall be deemed to rely on the party’s original pleading in answer to the amended pleading.
[31] The purpose of Rule 26.05 is to permit a party to amend its pleading to respond to an amendment made in the pleading of an opposite party. Importantly, Rule 26.05 does not permit a party, in purporting to answer an amended pleading, to raise new issues without first obtaining leave of the court to amend its pleading: Walker Estate v. York-Finch General Hospital, 1996 Carswell 3757 (Ont. Gen. Div.), at para. 8.
[32] The plaintiffs’ position is that Trisura’s amendments to its pleading constitute further evidence of Trisura’s bad faith conduct. They assert that the order of Tranmer J. granting them leave to respond to the amended statement of defence “as they consider appropriate”, permits “consequential and non-consequential allegations” and to “fulsomely respond” to Trisura’s bad faith conduct to delay the hearing.
[33] I do not interpret Tranmer J.’s order in the manner proposed by the plaintiffs. The order permits the plaintiffs to deliver such pleadings as they consider appropriate “in response to the Defence amendment.” In advancing their position, the plaintiffs seemingly choose to ignore this important qualification, one that is entirely consistent with Rule 26.05.
[34] It is also important to note that a plaintiff is only permitted to deliver a reply where the plaintiff is required to do so under Rule 25.08(1) or (2). The plaintiffs in this case elected not to file a reply and, by operation of Rule 25.08(4), are deemed to deny all allegations of fact in the unamended statement of defence. Justice Tranmer’s order expressly recognizes that the plaintiffs are, at this juncture, entitled to respond to the amendments made to the statement of defence.
[35] The plaintiffs also advance an alternative argument. They maintain that the proposed reply responds with a different version of events than that pleaded by Trisura and provides particulars as to Trisura’s bad faith conduct, including the allegation that Trisura has delayed the trial of the action, in support of their claims for aggravated and punitive damages. The plaintiffs say that the proposed reply is intended to respond fully to the amended statement of defence so as not to take the defendant by surprise at trial. In the event I determine the proposed reply falls outside the scope of Tranmer J.’s order, the plaintiffs seek leave for an extension of time for filing the reply on the basis that Trisura will not suffer any prejudice.
[36] I turn to consider the proposed reply. There is no dispute that paragraph 2 insofar as it refers to paragraphs 12 and 59 of the amended statement of defence, and paragraphs 4, 5, 43(m), and 44(a)-(e) of the proposed reply are responsive to the amended statement of defence.
[37] In my view, paragraph 1 and the balance of paragraph 2 (admissions and denials) are unnecessary given the operation of Rule 25.08(4).
[38] Paragraph 3 of the proposed reply (the “no knowledge” paragraphs) is not responsive to the amended statement of defence as it refers to unamended paragraphs of the pleading.
[39] Paragraphs 6 to 23 respond to unamended paragraphs of the amended statement of defence. For example, paragraphs 21, 22 and 23 of the proposed reply specifically state they are in response to paragraphs 18, 19 and 20 of the amended statement of defence. These paragraphs have not been amended. These paragraphs of the proposed reply do not fall within the scope of Tranmer J.’s order. By operation of Rule 25.08(4), the plaintiffs are deemed to deny these paragraphs. I would also not grant leave to extend the time for filing a reply that includes these paragraphs. To the extent that these paragraphs are intended to provide particulars in support of the plaintiffs’ claims for aggravated and punitive damages, they are not “in response to a defence” on a matter that would take Trisura by surprise. They do not fall within the scope of 25.08(3).
[40] The balance of the paragraphs in the proposed reply also respond, in whole or in part, to unamended paragraphs of the amended statement of defence. To the extent that they do so, they do not fall within the scope of Tranmer J.’s order. Where the plaintiffs have made a conscious and informed choice not to deliver a reply to the initial statement of defence, the right to deliver a reply is limited to the pleadings necessary to respond to the amendments and issues arising as a consequence of those amendments: Talisman Energy Inc. v. Petro-Canada, 2000 ABQB 602, at para. 25.
[41] Certain of the remaining paragraphs in the proposed reply plead the following:
- that Centra Claims was the claims handler and agent of Trisura and for this reason the claim was provided to Trisura (paragraphs 25 and 27);
- an absence of good faith on the part of the claims handler and agent of Trisura (paragraph 36);
- that Trisura acted in bad faith by the fact that Centra Claims directed or acquiesced in Centra Claims acting in a conflict of interest and “played off” the plaintiffs between two insurers (paragraph 37);
- that Mr. Van Huizen advised Trisura through its claims handler and agent of the particulars of the engagement with Mr. Barkley and that it was bad faith on the part of Trisura to ignore its obligation to defend (paragraph 38);
- that Trisura took advantage of Mr. Barkley, to deny or not extend coverage to him, expecting that he would not pursue a coverage action “as is the apparent modus operandi of Trisura” (paragraph 40); and
- that Trisura directed Centra Claims to prefer the interests of Trisura over those of the plaintiffs and to ignore blatant conflicts of interest (paragraphs 43c and 43d).
[42] These allegations go far beyond the scope of Tranmer J.’s order. I would not grant leave to permit an extension of time for the delivery of a reply that includes these paragraphs. These allegations are, on the plaintiffs’ own admission, intended to provide Trisura with particulars of the plaintiffs’ allegations of bad faith and in support of its claim for aggravated and punitive damages. They are intended to buttress the allegations in the statement of claim and are not in response to a defence raised by Trisura. They do not constitute a proper reply pleading.
[43] In addition, given the allegations made in these paragraphs and, in particular, the pleading of an agency relationship, I agree with Trisura that at the minimum, further documentary and oral discovery would be warranted. The trial, originally scheduled for January 2021, would be further delayed.
[44] The plaintiffs shall be permitted to deliver a reply that includes paragraphs 2 (to refer to paragraphs 12 and 59 of the amended statement of defence), 4, 5, 43(m), and 44(a)-(e).
Costs
[45] The remaining issue is that of costs. The costs at issue are: (i) costs of Trisura’s motion to amend its statement of defence; (ii) costs thrown away as a result of the adjournment of the trial; and (iii) costs of this motion.
(i) Costs of Trisura’s Motion to Amend
[46] In my view, Trisura is entitled to costs of its motion to amend its statement of defence. Although the plaintiffs opposed Trisura’s motion, Tranmer J. found that the plaintiffs failed to show prejudice and granted leave to Trisura to amend its pleading in the manner proposed.
[47] Trisura’s partial indemnity costs of the motion to amend are approximately $6,000, including attendance on the motion. The costs outline shows that two counsel were involved in communications and preparation of motion material, for a total of 18 hours. In my view, given the straightforward nature of the motion to amend, the total time claimed for this work is excessive. I infer (as no details were provided) that there was overlap in the work done by counsel.
[48] I would fix Trisura’s costs of its pleadings motion at $4,000, all inclusive. These costs are to be paid by the plaintiffs within 30 days.
(ii) Costs Thrown Away
[49] Trisura seeks its costs thrown away as a result of the adjournment of the trial. The plaintiffs no longer seek their costs thrown away.
[50] Costs thrown away are intended to indemnify a party for steps reasonably necessary to proceed with the action, but which have been rendered useless by the conduct of the other party: Legacy Leather International Inc. v. Ward, 2007 CarswellOnt 527 (Ont. S.C.J. [Commercial List]); Pittiglio v. Pittiglio, 2015 ONSC 3603, at para. 5. When a trial must be postponed, the task for the court is to determine what costs are actually rendered useless or “a complete waste”; not all preparation is considered to be costs thrown away because some of it will inevitably be of use when the case ultimately comes to trial: Martin v. Glaze Block Products Inc., [2003] O.J. No. 1952 (Ont. S.C.J.), at para. 7; Pittiglio, at paras. 5-6.
[51] Costs thrown away are generally payable on a substantial recovery basis: Pittiglio, at paras. 5-6; Smith v. Harrington, [1994] O.J. No. 2985 (Gen. Div.), at para. 9.
[52] The adjournment of the trial was the direct result of the plaintiffs’ failure to place an evidentiary record before Tranmer J. to permit the adjudication of the leave requirement. Trisura is entitled to its costs thrown away as a result of the adjournment.
[53] However, because of the lack of detail in Trisura’s Bill of Costs, I am severely hampered in my ability to determine what costs incurred by Trisura were rendered a “complete waste.” In relation to the time spent by the lawyers in preparation for trial (31.70 hours by senior counsel and 51.70 hours by junior counsel), the Bill of Costs lists only broad categories: correspondence with plaintiffs’ counsel and with client regarding trial and trial preparation; trial management checklist and meeting with team for trial preparation; preparing briefs and notices; meeting with witnesses and doing trial preparation; reviewing case law; review of materials and preparation for trial attendance; and attending pre-trial conference/trial management conference.
[54] No breakdown of the work done by each lawyer under each of these categories is provided, nor is there an indication of how many hours each lawyer spent in tasks associated with each category of work. There are no dates provided in the bill of costs. Trisura claims total fees and disbursements as costs thrown away in the amount of $27,318.38, on a substantial indemnity basis.
[55] It is difficult to know how much of the total time spent by counsel – 83.4 hours– will be wasted due to the passage of time. It is certainly not apparent from the Bill of Costs what work will need to be redone. It may be necessary to redo notices; it should not, however, be necessary to “reprepare” briefs. Witness preparation meetings will have to be conducted afresh. Legal research and review of case law is not work that has been rendered useless or a complete waste. The Bill of Costs also includes 15.10 hours for research conducted by a student. I would not include any of this time as costs thrown away. The disbursements claimed in the total amount of $642.50 are for “outside printing” and “transcripts.” These do not seem to me to be items that were rendered a complete waste by the adjournment of the trial.
[56] The onus rests on the party seeking costs thrown away to identify which costs were thrown away: Legacy Leather, at para. 19. Taking into account these observations, including that there is likely to have been overlap in the time spent by senior and junior counsel on various tasks, I am prepared to award only $6,000 as costs thrown away, calculated on a substantial indemnity basis. These costs are to be paid by the plaintiffs within 30 days.
(iii) Costs of This Motion
[57] Trisura is the successful party on this motion. The plaintiffs’ motion for leave to maintain the action was occasioned by the automatic stay pursuant to s. 7(1) of the Business Names Act and the plaintiffs’ failure to place an evidentiary record before Tranmer J. The fact that I have granted leave to maintain the action does not render them “successful” for purposes of determining entitlement to costs. Trisura succeeded in opposing the plaintiffs’ motion for leave to deliver a reply in the form proposed by the plaintiffs. Finally, I have awarded Trisura costs of its motion to amend, and costs thrown away, albeit not in the amount requested.
[58] Trisura is, therefore, entitled to its costs of this motion. The parties are urged to agree on the amount of costs. Should they be unable to do so, they may schedule a brief attendance before me to address the issue.
Ryan Bell J.
Justice R. Ryan Bell
Date: October 5, 2021
COURT FILE NO.: CV-13-0304-00
DATE: 2021/10/05
ONTARIO
SUPERIOR COURT OF JUSTICE
RE: John Van Huizen and Hastings Appraisal Services, Plaintiffs
AND
Trisura Guarantee Insurance Company, Defendant
BEFORE: Justice R. Ryan Bell
COUNSEL: R. Steven Baldwin, for the Plaintiffs
Heather Gray, for the Defendant
ENDORSEMENT
Justice Ryan Bell
Released: October 5, 2021