ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
ALTERNA SAVINGS AND CREDIT UNION LIMITED
Gary G. Boyd, on behalf of the Plaintiff
Plaintiff
- and -
SANDRA CHING, (also known as SANDRA SINGH, SANDRA ELITA SINGH,SANDRA ELITA CHING, or SANDRA PERTAB-SINGH), JAIMONIE HEERALALL, and THE ESTATE OF THE LATE BHORANA PURTAB (also known as BHORANA PERTAB SINGH)
Dennis G. Crawford, on behalf of the moving party, Jaimonie Heeralall
Defendants
HEARD: March 25, 2022
ENDORSEMENT
1This motion is brought by the defendant, Jaimonie Heeralall, (“Heeralall”) to amend her Statement of Defence, Crossclaim, and Defence to Crossclaim pursuant to r. 26.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the “Rules”).
2This motion was heard by videoconference.
3For the following reasons, the defendant’s motion is dismissed.
Procedural History:
4The underlying proceeding to this action is the consolidation of an application commenced by Heeralall on August 5, 2014, and an action commenced by Alterna Savings and Credit Union Limited (“Alterna”) on February 1, 2016. Both the application and action deal with the property located at 249 Pinewood Place in Waterloo, Ontario (the “Property”).
5Heeralall’s application sought a declaration that the transfer of the Property from her husband, Bhorana Purtab (“Purtab”) to his eldest daughter Sandra Ching (“Ching”) was fraudulent.
6Alterna brought the 2016 action due to a default in the mortgage registered against the Property by Ching.
7The action and application were consolidated on consent, by order of Gordon J. on May 20, 2016. Following consolidation, Heeralall delivered a Statement of Defence, Crossclaim, and Defence to Crossclaim dated June 10, 2016.
8Alterna served its affidavit of documents on Heeralall on or about August 2016. Heeralall submitted written questions for examination to Alterna’s representative Michael Doyle (“Doyle”) in April 2019. He responded in May 2019.
9Alterna filed a motion for summary judgment on its claim. Doyle, swore an affidavit in support of the motion. He was cross-examined on that affidavit in November 2020.
10Following cross-examination, Heeralall brought a motion to compel Doyle to answer refused questions. Many of the refusals related to questions about Paul Viveiros, (“Viveiros”) the personal banking manager, who met with Ching. His signature is found on certain mortgage documentation. He is also identified in paragraphs where Doyle explains Alterna’s due diligence efforts. The motion was heard in February 2021 by MacNeil J.
11MacNeil J. found some of the questions regarding Viveiros to be proper and relevant to Alterna’s due diligence efforts, namely those related to his competency and qualifications, as well as the circumstances of his hiring and termination. However, she also held that because Heeralall had not specifically pleaded that Alterna or Viveiros were participants in fraud, related questions were not relevant and properly refused.
12At the refusals motion, Heeralall also requested, in the alternative, to amend her pleadings so as to include pleas respecting alleged fraud of Viveiros. MacNeil J. held that should she wish to amend her defence, she should serve a motion to do so.
13Heeralall now seeks to amend her pleadings so as to allege that the alleged fraud of Ms. Ching was assisted, supervised, or directed by Viveiros, and that Alterna is vicariously liable as his employer; she also pleads for the first time that Alterna did not exercise due diligence in the hiring of Viveiros.
Background:
14Heeralall married to Purtab in 2003. She lived together with him at the Property. The only mortgage over the Property was discharged in 2010. She continues to reside at the Property. Purtab died in November 2015.
15Whether fraudulently or not, a transfer of the Property to Ching was affected on December 4, 2012. The stated consideration was $2.00, and the transferor’s spousal statement declared Purtab was not a spouse. Heeralall claims that this was her matrimonial home, and that her consent was not sought. Ching subsequently obtained a secured line of credit from Alterna in January 2013. The Property was mortgaged as security for the loan.
16In its Amended Statement of Claim, Alterna pleads that it conducted the proper due diligence respecting the mortgage. Alterna also pleads that it is a bona fide encumbrancer for good value. Based on the record before me, Ching defaulted on the mortgage in or around May 2015.
Legal Principles:
17Rule 26.01 of the Rules require the court to grant leave to amend a pleading at any stage of a proceeding on such terms that are just, unless prejudice would result that could not be compensated for by costs or adjournment. The rule is mandatory. The Court of Appeal has explained that the rule is designed to “carry out the underlying principles reflected in the Courts of Justice Act, R.S.O. 1990, c. C.43, of encouraging public access to the courts (s. 71) and affirming the role of the Superior Court as a court of equity (s. 96) where actions are decided on their merits”: see Spar Roofing & Metal Supplies Limited v. Glynn, 2016 ONCA 296, at para. 36.
18Rule. 26.06(1) requires that every pleading contain a concise statement of the material facts on which the party relies for the claim or defence, but not the evidence by which those facts are to be proved.
19With regard to pleadings involving fraud, misrepresentation, breach of trust, malice, or intent, the Rules require that the pleading contain full particulars, but knowledge may be alleged as a fact without pleading the circumstances from which it is to be inferred: r. 25.06(8).
20Despite the presumptive approval of amendments, the jurisprudence of r. 26.01 establishes that there is “no absolute right to amend.” An amendment will not be permitted if it raises an issue that is prima facie unmeritorious or would have been struck under r. 25.11 if pleaded originally. It must also contain sufficient particulars to enable the other side to answer it: Marks v. Ottawa (City), 2011 ONCA 248, at para. 19.
21In 1588444 Ontario Ltd. v. State Farm Fire and Casualty Company, 2017 ONCA 42, 135 O.R. (3d) 681, the Court of Appeal summarized the general principles of the law regarding leave to amend at para. 25, as follows (citations omitted):
The rule requires the court to grant leave to amend unless the responding party would suffer non-compensable prejudice; the amended pleadings are scandalous, frivolous, vexatious or an abuse of the court's process; or the pleading discloses no reasonable cause of action
The amendment may be permitted at any stage of the action
There must be a causal connection between the non-compensable prejudice and the amendment. In other words, the prejudice must flow from the amendments and not from some other source
The non-compensable prejudice may be actual prejudice, i.e., evidence that the responding party has lost an opportunity in the litigation that cannot be compensated as a consequence of the amendment. Where such prejudice is alleged, specific details must be provided
Non-compensable prejudice does not include prejudice resulting from the potential success of the plea or the fact that the amended plea may increase the length or complexity of the trial
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
The onus to prove actual prejudice lies with the responding party
The onus to rebut presumed prejudice lies with the moving party
22Rule 21.01(1)(b) allows for a party to move that a pleading be struck out on the ground that it discloses no reasonable cause of action. Likewise, r. 25.11 permits the court to strike out or expunge all or part of a pleading on the ground that (a) it may prejudice or delay the fair trial of the action, (b) it is scandalous, frivolous or vexatious, or (c) it is an abuse of process of the court.
23The Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, s. 4 provides for a basic limitation period of two years from the day on which the claim was discovered.
24Under s. 5(1), a claim is discovered on the earlier of:
(a) the day on which the person with the claim first knew,
(i) that the injury, loss or damage had occurred,
(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,
(iii) that the act or omission was that of the person against whom the claim is made, and
(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and
(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a)
25Further, under s. 5(2) of the Limitations Act, 2002, a person with a claim shall be presumed to have known of the matters referred to in s. 5(1)(a) on the day on which the act or omission on which the claim is based took place, unless they can prove the contrary.
Positions of the Parties:
Position of Moving Party
26Heeralall submits that the transfer of the Property to Ching was fraudulent. The employee who assisted Ching in obtaining her mortgage, Viveiros, is a convicted white-collar criminal. Viveiros recommended to his supervisor that Alterna make the loan to Ching, despite her not meeting their usual lending requirements. Viveiros was only an employee at Alterna for 78 days before his employment was terminated. Ching traveled out of her way to attend the North York Alterna branch where Viveiros was employed, when there was at least one other branch much closer to her home in Mississauga. Heeralall argues that the circumstances of the transfer and the involvement of Viveiros raise suspicious circumstances. She says that she is not required to amend her pleadings in order to rely on the suspicious circumstances which she discovered after the close of pleadings. She submits that if she is required to do so, then she should be granted leave to amend her pleading pursuant to r. 26.01.
27Heeralall further submits that Alterna failed to conduct proper due diligence before employing Viveiros. Doyle’s answers on discovery demonstrate that Viveiros is the same Paul Viveiros who pleaded guilty to the criminal charge of false pretenses and was accused in National Bank of Canada v. Meneses, 2008 CanLII 25064, of having orchestrated a mortgage fraud scheme. Alterna began investigating the loan over a year before Ching had missed any payments; there is an email between the Assistant Manager of Collection and Doyle, which suggest that Alterna was considering revoking the loan as early as August 2013, before Heeralall even filed her application. This was shortly after Viveiros’ departure from Alterna.
28Heeralall contends that it has always been her theory of the case that the granting of the mortgage against the Property was invalid, because Ching was not the true owner of the property. She submits that the evidence against Viveiros “strongly” suggests that he was involved in the fraud committed by Ching against herself and Purtab.
29Counsel argues that the “suspicious circumstances” are admissible as evidence in the proceeding, and if proved, would disentitle the plaintiff from relief. Further, she argues that if she is not permitted to put the suspicious circumstances into evidence because they are outside of the scope of her pleading, then she should be permitted to bring the suspicious circumstances within the scope of her pleading. Amending her pleading would not cause the plaintiff any non-compensable prejudice and it has tendered no evidence of prejudice. Finally, she maintains that this matter is not appropriate for summary judgment and that a trial is required.
30Alterna responds that the proposed amendment constitutes a new cause of action. They argue that this is the first time that allegations of fraud have been raised against Alterna and Viveiros and that this is the first time that the underlying facts are alleged or pleaded. The amended pleadings are therefore statute-barred by the Limitations Act, 2002, because Heeralall knew about Viveiros’ involvement in 2016 when Alterna filed their action.
31Alterna also submits that the two affidavits on which the motion is based, were done by a clerk with very little knowledge of the file, and by Heeralall, which is clearly improper given her lack of personal knowledge of what she swore to. They also included an improper settlement offer. Her proposed pleadings are also a blatant attempt to place alleged similar fact evidence before the court under the guise of pleadings.
32Further, Heeralall has not added Viveiros as a party, despite the fact that his name was in the productions made by Alterna in 2016 where he was identified as the person who took the mortgage application from Ching. Heeralall attempts to get around this by pleading he “coached” Ching in her fraud, and that Alterna is vicariously liable for his alleged activities. This motion was only brought after the defendant’s failed motion, in part, before MacNeil. J., and ought to be dismissed.
Analysis:
Suspicious Circumstances
33The moving party argues that the Court of Appeal case of Demetriou v. AIG Insurance Company of Canada, 2019 ONCA 855, is binding precedent that requires this Court grant her leave to amend. Heeralall goes so far as to assert in her factum that MacNeil J. may have ruled differently regarding the refusals, had Demetriou been brought to her attention.
34Demetriou was an appeal of a summary judgment against an insurer. The plaintiff claimed he had had a valuable ring stolen from him while he was on vacation and brought an action for the insurer to pay the claim. In the investigation of the claim, the defendant discovered that the plaintiff had made a similar claim to another insurer a year earlier. The motion judge did not allow the defendant to amend its pleadings to rely on the provisions of its policy that exclude coverage for deliberate acts of fraud. The Court of Appeal held that the motions judge erred by denying an amendment under r. 26.01 so as to include allegations of fraud as there was no non-compensable prejudice arising from the amendment: para. 8.
35Heeralall says that in this case, as in Demetriou, there were suspicious circumstances surrounding the plaintiff’s claim which could not have been discovered until the commencement of discoveries. She submits that there are considerably more suspicious circumstances in this case, than in Demetriou, as there are suspicious circumstances regarding both the transfer of the Property and the granting of the mortgage.
36Alterna submits that Demetriou is not directly applicable in this case and that it does not compel this court to grant leave to amend because:
a) it was an appeal of both a refusal to permit an amendment and an order granting summary judgment to the insurer in which the Court of Appeal held that the motions judge did not take a “hard look at the entire record…in order to determine whether there was a genuine issue requiring a trial”: see para. 9; and
b) the Court of Appeal also found that the motions judge had reversed the onus of proof between the parties,
37I agree that Demetriou is not as definitive and binding as counsel for Heeralall submits. Further to the reasons submitted by Alterna, I further note that the “suspicious circumstances” in that case were also directly relevant to whether the respondent could prove his loss even outside of a plea of fraud: at para. 5. In this case, Heeralall does not need to prove that Viveiros was fraudulent in order to establish her loss, that Ching engaged in fraud, or that Alterna did not exercise proper due diligence
38Heeralall already pleaded fraud with respect to Ching’s actions regarding the transfer, I do not see how these suspicious circumstances, as they relate to Ching, are an issue, as they had nothing to do with Alterna’s refusals regarding Viveiros. She has further not added Viveiros as a party, and I fail to see how Alterna could be vicariously liable even if he were involved in the transfer. It is not within the authority of banking advisors to assist with real estate title transfers or give legal advice thereto. The allegations involving the transfer were therefore clearly not sufficiently related to the conduct authorized by Alterna as his employer to attract vicarious liability: see Bazley v. Curry, 1999 CanLII 692 (SCC), [1999] 2 S.C.R. 534, at para. 41.
39Alterna responds that the order of MacNeil J. was not appealed and that these arguments are an impermissible collateral attack on her decision. I agree.
40MacNeil J. held that the moving party was required to amend her pleadings in order to bring the refused questions at issue within the scope of the pleadings. Heeralall’s submissions with regards to not being required to amend her pleadings at all would require an appeal of the endorsement of MacNeil J. It is not my role as judge on this motion to overturn the ruling of a judge on another motion.
41Alterna contends that the moving party’s allegations of suspicious circumstances are nothing more than “pure supposition.” This is not a legal argument, as r. 26.06(1) requires that every pleading contain a concise statement of the material facts on which the party relies for a defence, but not the evidence by which those facts are to be proved. Unless the facts alleged are based on assumptive or speculative conclusions that are incapable of proof and the court “should not look beyond the pleadings to determine whether the action can proceed”: Andersen Consulting Ltd. v. Canada (Attorney General), 2001 CanLII 8587 (ON CA), [2001] O.J. No. 3576 at para. 34.
42I find the question of whether evidence of suspicious circumstances might be adduced without the specific pleadings of fraud to be collateral to this motion.
Prejudice
43Prejudice is the only legislated reason as to why pleadings may not be subject to the mandatory amendment language of r. 26.01. Despite this, Heeralall made limited submissions with regard to prejudice, and Alterna ignored the issue altogether, appearing to rely entirely on their other arguments.
44The jurisprudence establishes that up to a certain point, the responding party will be required to establish that the amended pleadings will result in actual non-compensable prejudice. However, once past that point, the courts have accepted that the passing of time will inevitably result in prejudice as memories fade, and the opportunities to gather evidence become more difficult: see State Farm at paras 27-51.
45The responding party has made no attempt to establish actual prejudice in this case. Likewise, without submissions from Alterna as to whether this case has reached a case of presumed prejudice, I am loath to find that it applies in this case. Clearly, Doyle was at Alterna during all the important periods, and there appears to be no argument from Alterna that his memories have faded, or that their documentary evidence is no longer available. Therefore, I cannot find allowing the change of pleadings would result in non-compensable prejudice to Alterna.
New Cause of Action
46The moving party argue that it was not until the close of pleadings, and the parties were engaged in the discovery process that Heeralall became aware that her that Ching’s loan was processed by Viveiros. She says in her affidavit that this caused her and her counsel to further develop their theory of the case. In her affidavit she says that this information could only have been discovered after the close of pleadings, when she learned of Viveiros’ involvement “during discovery”. She does not specify when exactly she became aware of Viveiros’ involvement.
47Alterna argues that the new pleadings raise new causes of action which are statute barred under the Limitations Act, 2002. The proposed amendments are the first time Heeralall alleges fraud against Alterna and Viveiros, and the first time the related underlying facts are alleged or pleaded. They note that the involvement of Viveiros was known to Ms. Heeralall in 2016 and therefore the two-year limitation period has passed. They submit that the new pleadings should be struck out under r. 21.01(1)(b) as they therefore disclose no reasonable cause of action.
48They further argue that the allegations contained in the proposed new pleadings are vexatious and an abuse of process of the court, and that they should therefore be struck under s. 25.11.
49In Spar Roofing & Metal Supplies Limited v. Glynn, 2016 ONCA 296, at para. 43, Weiler J.A. explains that an amendment is to be granted unless it would have been struck under r. 21.01(1)(b) if it had been pleaded originally as having no reasonable chance of success. However, she cautions against conflating a motion to strike out a pleading on the ground that it discloses no reasonable cause of action or defence, and a motion for summary judgment under r. 20.04: see also 1317424 Ontario Inc. v. Chrysler Canada Inc., 2015 ONCA 104 at para. 7.
50In the recent case of McConnell v. Fraser, 2020 ONSC 6649 at para. 25, Boswell J. turns to Black’s Law Dictionary, which provides that a cause of action is “a group of operative facts giving rise to one or more bases for suing; a factual situation that entitles one person to obtain a remedy in court from another person.” He then goes on to endorse the following test from Master Dash in Ascent Incorporated v. Fox 40 International Inc., 2009 CanLII 36994 (Ont. S.C.) at para. 3, for whether a proposed amendment constitutes a new cause of action:
The key is whether substantially all of the material facts giving rise to the “new cause of action” have previously been pleaded or whether new facts are sought to be added that are relied upon to support a new cause of action. A new cause of action is not asserted if the amendments simply plead an alternative claim for relief arising out of the same facts previously pleaded and no new facts are relied upon, or amount simply to different legal conclusions drawn from the same set of facts, or simply provide particulars of an allegation already pled or additional facts upon which the original right of action is based. (citations omitted).
51In this case, the new pleadings rely on the alleged material facts that Viveiros assisted Ching in her fraudulent transfer, and that he further engaged in fraud in his role at Alterna by securing the mortgage over the Property. In her original Statement of Defence and Crossclaim and Defence to the Crossclaim, of June 10, 2016, Heeralall alleged that Ching engaged in title fraud. The issue of due diligence is contained within Alterna’s Amended Statement of Claim, wherein it pleads that it conducted proper due diligence respecting the mortgage. The previously pleaded material facts cannot be drawn upon to reach the alternative claims of the new pleadings.
52I adopt the principles in McConnell. In McConnell, Boswell J. refused a r. 26.01 motion to amend for similar reasons. The plaintiff was a handyman doing some work at the defendant’s home and was seriously injured when he fell from some scaffolding rented from Home Depot. The plaintiff sued the homeowners and Home Depot for negligence, the claim against the homeowners was “generally grounded in the duties that occupiers of premises owe to those entering onto such premises”: at para. 12. During examinations for discovery the plaintiff learned for the first time that Mr. Fraser may have bumped the scaffolding, resulting in his fall. He sought to amend his statement of claim to allege negligence of Ms. Fraser for either distracting him while he worked or bumping the scaffolding. Boswell J. noted that while the original pleadings alleged liability of omission the proposed amendments alleged acts of commission: at para. 34. He further noted that the presumption created by s. 5(2) of the Limitations Act, 2002 is that the plaintiff knew of the alleged new cause of action at the date of the loss, he held that the facts and circumstances were not capable of rebutting the presumption.
53So too, in this case Heeralall knew that Viveiros was the person who processed the mortgage as early as August 2016 when Alterna served its affidavit of documents on her. In my view, it is apparent from her cross-examination on her affidavit that Heeralall knew of Viveiros’ involvement as early as 2016, and it is also clear from her 2019 written examination for discovery questions that she had already developed the theory that his behaviour may have been fraudulent.
54I also note that, in oral argument, counsel for the moving party claimed that an amendment to the pleadings was not considered necessary at the outset of the litigation. It was only after the results of the motion before MacNeil J., - where success was divided and a number of refusals sought by the moving party were deemed irrelevant based on the pleadings - that this step was contemplated.
55In any event, I find that the proposed amended pleadings constitute a new cause of action that was presumed known to Heeralall in August 2016 under s. 5(2) of the Limitations Act, 2002. The proposed amended pleadings as they relate to the alleged fraud of Viveiros are statute-barred and discloses no reasonable cause of action. The new pleadings would be struck under r. 21.01(1)(b) if originally pleaded.
Conclusion:
56Heeralall’s motion to amend her pleadings, in particular, paras. 22-31 of the Amended Statement of Defence, Crossclaim, and Defence to Crossclaim in relation to Viveiros or Alterna is dismissed.
57Paragraphs 32-34 of the Amended Statement of Defence, Crossclaim, and Defence to Crossclaim are just an elaboration of the fraud pleadings against Ching, (also known as Sandra Singh) and leave to amend is granted.
Costs:
58If the parties cannot agree on the issue of costs, I will consider brief written submissions. As the successful party, Alterna is entitled to costs. The materials shall not exceed five pages in length, (not including any Bill of Costs). The plaintiff shall file its costs submissions within 15 days of today’s date. The defendant shall file her costs submissions within 15 days of the receipt of the plaintiff’s materials. The plaintiffs may file a brief reply within five days thereafter. If submissions are not received by May 31, 2022, the file will be closed and the issue of costs considered settled.
A.J. Goodman J.
Released: April 19, 2022