COURT FILE NO.: CV-12-330

DATE: 20210129

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Diane Giangrande cob as Dundalk Poultry Processing

Plaintiffs

• and -

Secure Insurance Solutions Group Inc. and North Waterloo Farmers Insurance Company

Defendants

D. Gordon Bent, for the Plaintiffs

M. Krygier-Baum, for the Defendant Secure Insurance

Jordan Dunlop, for the Defendant North Waterloo

HEARD: December 11, 2020

REASONS FOR DECISION

Chown J.

Introduction

1This is a motion brought by the defendant Secure Insurance Solutions Group Inc. to further amend its fresh as amended statement of defence and crossclaim. The plaintiff opposes the amendments on various grounds, but primarily on the basis that the proposed amendments are evidence and argument, and do not comply with rule 25.06.

2I am allowing the motion and granting leave for the amendments.

Legal Issue and Framework

Rule 26.01 Mandatory

3Under rule 26.01, leave to amend a pleading must be granted on such terms as are just as long as the amendments: (1) do not result in irremediable prejudice; (2) the amended pleading is legally tenable; and (3) the proposed amendments otherwise comply with the rules of pleading: Plante v. Industrial Alliance Life Insurance Co. (2003), 2003 CanLII 64295 (ON SC), 66 O.R. (3d) 74 at para. 19 to 22.

4The first element, prejudice, is not an issue here. In opposing the amendments, Mr. Bent on behalf of the plaintiff raises the long history of this action and notes that these amendments are coming very late. He notes that the statement of defence and crossclaim has already been amended more than once. However, Mr. Bent fairly acknowledged that no prejudice will arise from the amendments. There are no surprises in them. To a large extent, the proposed amendments will adjust the statement of defence and crossclaim to more closely align with the plaintiff’s discovery evidence.

5The second element, whether the pleading is legally tenable, is not engaged in this case.

6It is the third element that was the focus of argument on this motion – whether the proposed amendments offend the rules of pleading.

The Rules of Pleading

7A terrific catalogue of the rules of pleading is found in Justice Perell’s recent decision in Stedfasts Inc. v. Dynacare Laboratories, 2020 ONSC 8008 at para. 29 to 36. I refer in particular to paragraphs 29 to 32, as they summarize much of the law that was argued before me and which I have reviewed.

8Another decision of Justice Perell, Jacobson v. Skurka, 125 O.R. (3d) 279, 2015 ONSC 1699, is also instructive and was referred to by both Mr. Bent and Mr. Krygier-Baum. In particular, both counsel referred me to para. 43-44 where Justice Perell stated:

Rule 25.06(1) draws a distinction between the “material facts” and “the evidence by which those facts are to be proved.” A material fact may itself be relevant evidence and particulars of material facts may also be relevant evidence, so the distinction drawn in the rule is not a litmus test clear differentiation, but the essence of the directive of rule 25.06 is clear enough that a pleading is not the place for a party to lead relevant evidence and to present argument to prove his claim or defence.

… The difference between pleading material facts and pleading evidence is a difference in degree and not of kind. What the prohibition against pleading evidence is designed to do is to restrain the pleading of facts that are subordinate and that merely tend toward proving the truth of the material facts. [Citations omitted.]

9Another passage which I found instructive was written by Master MacLeod, as he then was, in Toronto (City) v. MFP Financial Services Ltd., [2005] O.J. No. 3214, 17 C.P.C. (6th) 338 at para. 15:

The distinction between material facts, particulars and evidence is not a bright line and there will be situations in which the level of detail required to provide adequate particulars sets out material facts that might also be regarded as evidence. Furthermore, pleadings motions should not be approached in an overly technical manner. Generally speaking a party should be at liberty to craft a pleading in the manner it chooses providing the rules of pleading are not violently offended and there is no prejudice to the other side.

10A further helpful passage is found in Linda S. Abrams and Kevin P. McGuinness, Canadian Civil Procedure Law, 2nd Ed. (Toronto: LexisNexis, 2010) at §10.19:

Every pleading is required to contain a concise statement of the material facts on which the party relies; the pleading should not, however, contain the evidence by which those facts are to be proved. As noted above, the distinction between fact and evidence is obviously difficult to draw in many cases and for this reason the courts tend to be as lenient as they can be without neglecting completely the prohibition on pleading evidence. [Citations omitted.]

Background

11The plaintiff and her late husband operated a poultry processing plant in Dundalk, Ontario. This action arises from a fire loss which occurred at the poultry processing plant on February 14/15, 2012. The plaintiff (Ms. Giangrande) claims against Secure (her insurance broker) and North Waterloo Farmers Insurance Company (her insurer).

12In the action, the issue against the broker can be stated simply: The amount of insurance was inadequate. Is the broker to blame?

13The action has a long history. The claim was issued in December 2012. Discoveries were held in 2017. A summary judgment motion in 2019 was not successful. A pretrial has been held. The action was on a trial list in Owen Sound for 2020 but was put off because of the pandemic. It is now on a trial list for 2021.

14North Waterloo consents to the requested amendments and did not make submissions on the motion.

Reason for the Amendments

15The broker says the amendments are necessary primarily because they spell out the causation defence more clearly. Inspired by the Court of Appeal’s decision in 2049390 Ontario Inc v. Leung, 2020 ONCA 164 at para. 15, the broker will argue that the plaintiff was in a good position to assess the adequacy of the insurance coverage, and the broker is not responsible for the plaintiff’s decision. In 2049390 Ontario Inc., the trial judge accepted that the insured/plaintiff was a sophisticated client who was “in a good position to assess whether his insurance coverage was sufficient.” This was based on facts that were specific to that case. This in part justified the dismissal of the action against the broker in that case. The Court of Appeal dismissed an appeal.

16Here, the broker seeks to plead facts to support a similar argument.

17Plaintiff’s counsel argues that the broker is attempting to plead evidence. Counsel argues that the “only effect of the detailed evidence cited is to create a negative impression of the Plaintiff on the court before the trial begins.” Further, counsel argues that the proposed amendments are unnecessary because the causation defence is sufficiently pleaded and will not take any party by surprise.

Specifics of the Requested Amendments

18The disputed amendments fall into four categories (although this categorization is loose, and the objections overlap):

• Construction costs of the insured buildings;

• Statements made in two meetings;

• The plaintiff’s business’s gross receipts; and

• Affirmative defences (or argument, in plaintiff’s counsel’s submission).

Construction Costs

19The structures on the insured premises included a residence, the original poultry processing plant, and several additions to the processing plant. These were all insured under the policy. In proposed paragraphs 3(a) to 3(h), the broker too information from Ms. Giangrande’s discovery testimony to:

• set out the dates of construction;

• assert that the Giangrandes were general contractors for the construction;

• state the cost of each construction project.

20By way of example, this is proposed paragraph 3(f):

Starting in the 1980s, the Giangrandes acted as general contractor in building three additions to the original poultry plant. As with the construction of the home, and the original poultry processing plant, the Giangrandes were actively involved and managed the construction of the three additions. As with the construction of the original poultry plant, Mr. Giangrande was actively involved in physically constructing the additions. The Giangrandes spent approximately $75,000 to build each of the three additions (unadjusted for inflation), for a construction cost of $225,000 for the additions. Taken together with the construction costs of the original building, the total construction costs of the poultry plant building was approximately $375,000, unadjusted for inflation.

21These allegations are tied into the causation argument in proposed paragraph 7(d):

Secure pleads that the Giangrandes were in the best position to properly assess the cost to rebuild the poultry plant and replace the equipment, due to their direct and extensive involvement in the construction and financing of the poultry plant, including its additions, and their purchase of the equipment.

22Later in the pleading (the current pleading) it is alleged that, “To the extent the $344,000 limit for the poultry plant is inadequate, which is not admitted but expressly denied, the Plaintiff is, again, the author of its own misfortune.” Based on this and other passages in the current pleading, plaintiff’s counsel argues that the causation defence is already adequately pleaded, and the added passages are solely intended to cast the plaintiff in a bad light.

23The plaintiff objects to proposed paragraphs 3(a) to (h) on the basis that they are evidence. The details of the construction and construction costs are subordinate alleged facts, proffered to bolster the material alleged facts that the plaintiffs were aware of the construction costs and that these costs were more than the amount of insurance. A simple statement to this effect would suffice, according to plaintiff’s counsel.

24Justice Perell, in Stedfasts, at para. 32, concisely described the rule behind this point: “The prohibition against pleading evidence is designed to restrain the pleading of facts that are subordinate and that merely tend toward proving the truth of the material facts.”

25Is it wrong, for example, for the pleading to set out the specific amounts each structure cost to build? Is it wrong to repeat that the Giangrandes were general contractors on each project? Are these subordinate facts?

26The broker considers these amounts important, not just the fact that they exceed the policy limit, even before adjusting for inflation. The broker says the amounts help by showing by how much the construction costs exceed the amount of insurance. The broker alleges that the building limit was specifically requested by the plaintiff. I note that, in response to this argument, the plaintiff has already obtained a report from an expert saying there is a duty on a broker to ask the insured, “where did that number come from?”

27As to the alleged fact the plaintiff and her late husband were general contractors for the construction, broker considers this to be important because it suggests the Giangrandes would have insight into the cost of building these structures and therefore the cost of rebuilding them. Such insight may bear on whether or to what extent they relied on the broker to assist in determining the policy limits for the structures, and on whether they made any misrepresentations regarding the replacement cost. The quantum also bears on the sophistication of the Giangrandes.

28The broker also says that the impugned proposed paragraphs are responsive to the allegation in paragraph 37 of the statement of claim which states that the defendant was “negligent in failing to investigate, source out and recommend insurance coverages in appropriate amounts in all the circumstances.” The broker says the particulars in the allegations in the proposed amendments relate directly to its theory of the case and on this basis, they are compliant with rule 25.06 (Jane Doe v. Weinstein, 2018 ONSC 1126 at para. 7).

29Justice Perrell said in Stedfasts at para. 30, “Material facts include facts that the party pleading is entitled to prove at trial, and at trial, anything that affects the determination of the party’s rights can be proved; accordingly, material facts includes facts that can have an effect on the determination of a party’s rights.”

30As noted at the outset of these reasons, “the distinction between fact and evidence is obviously difficult to draw in many cases” (Toronto (City) v. MFP Financial Services Ltd, supra, at para. 15). “The difference between pleading material facts and pleading evidence is a difference in degree and not of kind” (Jacobson, supra, at para. 44).

31While I agree that the defence pleading, including the proposed paragraphs, could be drafted more concisely, the same could be said of the statement of claim, and the reply. Indeed, the same could probably be said of most pleadings, and many judgments (including this one!). However, the court should not require changes to a pleading that amount to refinement.

32Where it is a close call, it is unproductive to spend time arguing over whether a party is pleading evidence, or determining the issue.

33In my view, the broker has reasonable justification for setting out the details it has chosen to include in its proposed paragraphs 3(a) to (h).

34I am reassured by considering cases in which pleadings have been struck out on the basis that they plead evidence. Instructive cases which contain specific examples include: Canada (Royal Canadian Mounted Police) v. Canada (Attorney General), [2007] O.J. No. 4762; Jacobson v. Skurka, supra; Kang v. Sun Life Assurance Co. of Canada, 2011 ONSC 6335. The proposed additions to the statement of defence and crossclaim here are far different from the examples in these cases. The proposed additions are not rambling, incoherent, scandalous, salacious, inflammatory or excessively verbose. They do not refer to non-parties. They are not ad hominem argument intended to discredit the adverse party (Jacobson, para. 51). They do not amount to a witness statement (Jacobson, para. 55). They do not clutter the pleading with useless information (Jacobson, para. 63). They do not contain conclusory character assassination (Jacobson, para. 64). They are not “emotive grandstanding polemic” (Jacobson, para. 27) or “a responsive polemic that will provoke a further polemic” (Jacobson, para. 70). They are not prolix, overly vague or repetitive. They cannot be criticized as “dialectic,” “personal reflection,” “a diary” or “a blog for commentary” (Canada (Royal Canadian Mounted Police), para. 16 to 19). They are not “irrelevant evidence … included solely for colour and argument and to scandalize” (Kang, para. 84).

35In conclusion, I do not find that proposed paragraphs 3(a) to (h) clearly offend the rules of pleading, and the amendments should be permitted.

Statements Made in Meetings

36The second category of proposed amendments relate to what was said between the broker and the plaintiff’s now deceased husband in two meetings. These include proposed paragraphs 7(b) and 24(a). For example, in proposed paragraph 7(b):

At the January 1999 meeting, Mr. Giangrande specifically requested that the building limit of the poultry plant be $210,000. Ms. Wilson advised that the Giangrandes should consult with a building contractor to assess the adequacy of the building limit. In response, Mr. Giangrande confirmed his satisfaction and request for a $210,000 building limit, and instructed Secure to bind on that basis.

37Plaintiff’s counsel argues that what was said at the meeting is inadmissible hearsay. The allegations are said to be self-serving and “inadmissible since there is no corroborative evidence to establish threshold reliability.” This argument appears to invite me to make an evidentiary ruling that should be left to the trial judge.

38It is further said that this is an effort to plead inadmissible evidence with the sole purpose of casting the plaintiff in a bad light. However, this proposed paragraph does not offend that rule.

39I note also that the January 1999 meeting is not otherwise mentioned in the defence pleading. In the circumstance, it is appropriate to describe the meeting and the instructions the broker alleges it was given.

Gross Receipts

40The third category of proposed amendments relate to the gross receipts of the plaintiff’s business. This category includes proposed paragraphs 10(b), 12(b), 14(b) and 17(b). For example, 12(b) states:

In actuality, and unknown to Secure prior to commencement of this action, the Plaintiffs 2004 gross receipts were approximately $410,000, rather than the $170,000 disclosed by the Plaintiff.

41The plaintiff objects to these amendments on the basis that they are relevant only to an issue that is no longer in play. It is argued that these amendments are really aimed at the plaintiff’s credibility. The gross receipts would be relevant to a business interruption claim but that claim has been abandoned as part of an agreement which settled the quantification of damages. What remains in issue for trial is liability for the property damage claim, and the gross receipts are not relevant to that issue.

42The agreement on damages was included in the evidence on this motion. The parties agree that the replacement cost for the loss as a result of the fire is $1,650,000. The agreement also states that the plaintiff will not pursue damages for business interruption. But the agreement then states:

However, the Plaintiff reserves the right to tender evidence concerning business interruption insurance discussions and the availability of such coverage as it relates to the broker's conduct generally. It is not agreed that the said evidence is admissible and the broker reserves the right to object to the evidence when tendered and to tender rebuttal evidence.

43The policy did not contain business interruption coverage. It was originally pleaded by the plaintiff that the broker did not make the plaintiff aware that such coverage was available, and she would have purchased it had she known it was available.

44The broker acknowledges that gross receipts do not impact the premium for property coverage, only for business interruption coverage. Thus, understating the gross receipts would not have saved the plaintiff any money on its premium. Since there was no business interruption coverage and there is no longer any claim for business interruption losses, the gross receipts are not directly relevant. However, the broker argues that the understated gross receipts is that they reflect a pattern. The broker asserts that the Giangrandes consistently understated the value of their buildings and the amount of their gross receipts believing that higher values and higher receipts would increase their premiums. The point the broker wants to make is that the Giangrandes tried to minimize their insurance premiums by understating the gross receipts. To support this argument the broker wants to plead the details of the alleged underreported gross receipts.

45This theory is tied together in proposed paragraph 33(b), discussed below.

46In my view, the proposed paragraphs do not clearly plead irrelevant facts or clearly offend rule 25.06.

Affirmative Defences or Argument?

47The fourth and final category of proposed amendments are conclusory or summing up statements, including proposed paragraphs 7(c), 7(d), and 33(b). 33(b) states:

Secure pleads that the Plaintiffs misrepresentations and non-disclosures regarding: (i) the historical construction and equipment costs of the poultry plant: (ii) the total area of the poultry plant: and (iii) the annual gross receipts, were all indicative of the Plaintiffs history, pattern, and propensity of underinsurance. The Plaintiff failed to disclose accurate figures and amounts, and failed to correct same. Based on the aforesaid facts pleaded, Secure states that there is no causal connection between any breach of duty alleged by the Plaintiff and the Plaintiffs loss.

48It is argued on behalf of the plaintiff that these proposed paragraphs are argument, not a short statement of material facts, and they are therefore improper. For example, in his factum, plaintiff’s counsel argues that paragraph 33(b) amounts to an argument that “the nondisclosure of historical construction costs is non-disclosure of material risk.” He says, “that issue can be argued at trial but the unnecessary inclusion of the extensive evidence in support in the pleading is improper and prejudicial.”

49As with the distinction between “facts” and “evidence,” the distinction between “argument” and “affirmative defence” is not bright and clear. Under rule 25.07(4), in a defence, a party is required to plead “any matter on which the party intends to rely to defeat the claim of the opposite party and which, if not specifically pleaded, might take the opposite party by surprise or raise an issue that has not been raised in the opposite party’s pleading.”

50In my view, proposed paragraphs 7(c), 7(d) and 33(b) are better characterized as “affirmative defence” rather than “argument.” These paragraphs state the broker’s theory of the case. Further, these paragraphs raise issues that were not raised in the opposite party’s pleading. The broker has reasonable justification for seeking to include these in its pleading.

Disposition

51I grant leave for all the requested amendments. The plaintiff shall have the right to file an amended reply. The plaintiff shall also have the right to further discovery of the broker on issues raised in the amendments.

52If either party requests it, I will hear submissions on the issue of costs in a 20-minute Zoom conference at 9:00AM on a convenient date. Counsel should email me through my judicial assistant by February 5, 2021 if that is required, providing their mutual availability for a hearing during the weeks of February 8 and 15, 2021. If counsel do not email me by February 5, 2021 to request a hearing, there shall be no order for costs in this motion.

Signed: Justice R. Chown