Court File and Parties

COURT FILE NO.: CV-19-00627928-0000 MOTION HEARD: 20210913 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: NAVIGATOR LIMITED, Plaintiff/Defendant by Counterclaim AND: ERIC OWENS, Defendant/Plaintiff by Counterclaim

BEFORE: Associate Justice R. Frank

COUNSEL: Alexandra Teodorescu and Lou Brzezinski, Counsel for the Defendant/Plaintiff by Counterclaim/Moving Party, Eric Owens Jeffrey Feiner, Counsel for the Plaintiff/Defendant by Counterclaim/Responding Party

HEARD: September 13, 2021

Reasons for Decision

A. Introduction

[1] This is a motion by the Defendant/Plaintiff by Counterclaim, Dr. Eric Owens (“Dr. Owens”) seeking leave to amend his amended statement of defence and counterclaim (the “Current Defence and Counterclaim”).

[2] The proposed amendments relate to Dr. Owens’ counterclaim against the Plaintiff/Defendant by Counterclaim, Navigator Limited (“Navigator”). In the proposed amended fresh as amended statement of defence and counterclaim (the “Proposed Defence and Counterclaim”), Dr. Owens claims damages from Navigator in the amount of $8 million for breach of contract, negligence and negligent misrepresentation.

[3] Navigator does not consent to the Proposed Defence and Counterclaim. It takes the position that the proposed pleading contains new causes of action that Dr. Owens is seeking to add after the expiry of the applicable limitation period and that the proposed claim for $8,000,000 in damages is not tenable in law. It asserts that the new claims are statute-barred and prejudicial to Navigator, and that leave to amend should not be granted.

[4] For the reasons outlined below, Dr. Owens’ motion for leave to amend the Current Defence and Counterclaim is granted.

B. Background Facts

[5] Dr. Owens is the former CEO of Alexandria Minerals Corporation (“Alexandria”). Following his termination as CEO, Dr. Owens and certain other shareholders in Alexandria (the “Founders Group”) decided to launch a proxy campaign (the “Proxy Campaign”) to, among other things, requisition a shareholders meeting to vote on replacing three members of Alexandria’s Board of Directors and have Dr. Owens reinstated as CEO of Alexandria.

[6] Navigator was retained to provide communication and proxy solicitation services to Dr. Owens in connection with the Proxy Campaign pursuant to a services agreement dated April 11, 2018 between Navigator and Dr. Owens (the “Services Agreement”).

[7] The Proxy Campaign culminated with a vote of Alexandria’s shareholders held on July 24, 2018. Dr. Owens was ultimately unsuccessful in the Proxy Fight with 56% of the vote in favour of Alexandria’s incumbent Board of Directors.

[8] In September 2019, Navigator commenced this action against Dr. Owens claiming unpaid fees for services rendered under the Services Agreement.

[9] In October 2019, Dr. Owens filed a statement of defence asserting that he was not liable to Navigator because Navigator failed to fulfill its obligations under the Services Agreement. In December 2019, Dr. Owens amended his defence and added a counterclaim against Navigator by way of the Current Defence and Counterclaim, alleging that he suffered damages as a result of Navigator’s breaches of the Services Agreement and its duty of honest performance. Dr. Owens was self-represented at the time he served his initial statement of defence and the Current Defence and Counterclaim.

[10] Navigator served an amended reply and defence to counterclaim in December 2019, and the pleadings closed.

[11] Examinations for discovery were scheduled to proceed in April 2021. However, prior to the examinations, counsel for Dr. Owens requested an adjournment of the discoveries and indicated an intention to deliver an amended pleading.

[12] On April 26, 2021, counsel for Dr. Owens provided Navigator with the Proposed Defence and Counterclaim, which is in the form of a fresh as amended statement of defence and counterclaim. In the Proposed Defence and Counterclaim, Dr. Owens claims damages for breach of contract, negligence and negligent misrepresentation, and seeks damages in excess of $8,000,000.

[13] As noted above, Navigator has not consented to Dr. Owens filing the Proposed Defence and Counterclaim.

C. Law and Analysis

(1) Submissions of the parties

[14] Dr. Owens submits that, notwithstanding the fact that more than two years have elapsed since the events giving rise to the counterclaims, leave should be granted to allow him to deliver the Proposed Defence and Counterclaim because he does not plead any new causes of action and the amendments would not result in prejudice that cannot be compensated by costs or an adjournment.

[15] Dr. Owens argues that when the original pleading is read as a whole, it is evident that Navigator had notice of the factual matrix underpinning the causes of action asserted in the proposed amendments. He submits that the Proposed Defence and Counterclaim simply provides further particularization of the facts and allegations set out in the Current Defence and Counterclaim, or pleads alternative remedies based on facts that were already relied upon in the original pleadings. Dr. Owens also submits that one of the purposes of the Proposed Defence and Counterclaim is to ensure that the pleading clearly sets out the legal elements for each cause of action and to cure deficiencies in the pleading drafted by a self-represented litigant.

[16] Navigators’ position is that Dr. Owens is attempting to circumvent the applicable limitation period by amending his pleading to include substantial new facts and two new causes of action (negligence and misrepresentation), and by improperly advancing a new head of damages. It also asserts that, in addition to being out of time, the proposed amendment with respect to the increased damages claim has no reasonable chance of success and should not be allowed. It asserts that the Proposed Defence and Counterclaim amounts to an entirely new pleading that includes claims that are statute-barred and prejudicial to Navigator and that, as a result, leave to amend should not be granted.

[17] For the most part, the parties are in agreement as to the applicable law with respect to a motion to amend pleadings. However, they have entirely different views on how the law applies in the circumstances of this case. As outlined below, the main issue between the parties is whether the proposed amendments plead alternative remedies and give greater clarity or particularity to the existing counterclaims, or whether they advance new claims.

(2) Legal background, discussion and analysis

[18] Rule 26.01 of the Rules of Civil Procedure provides as follows:

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.

[19] The applicable principles with respect to amendment of a pleading are summarized in the case law as follows:

1. Rule 26.01 is mandatory. 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]

2. On a motion to amend a claim, the court may not consider the factual or evidentiary merits of the proposed claims or whether the amending party is able to prove its amended claim. The court must assume the facts pleaded are true. The only question is whether the pleading is tenable at law and complies with the rules of pleadings. [2]

3. A proposed amendment cannot assert a “new cause of action” after the expiry of the applicable limitation period. [3] In French v. H&R Property Management Ltd., the Court of Appeal outlined the test for determining whether a pleading is a new cause of action as follows:

   … there is a distinction between pleading a new cause of action and pleading new or alternative relief based on the same facts as originally pleaded. An amendment is not the assertion of a new cause of action where the “original pleading… contains all the facts necessary to support the amendments… [such that] the amendments simply claim additional forms of relief, or clarify the relief sought, based on the same facts as originally pleaded”: Dee Ferraro Ltd v. Pellizzari, 2012 ONCA 55, 346 D.L.R. (4th) 624, at paras. 4, 13-14; see also 1100997 Ontario Ltd v. North Elgin Centre Inc., 2016 ONCA 848, 409 D.L.R. (4th) 382, at paras. 20-21; Davis v. East Side Mario’s Barrie, 2018 ONCA 410, at paras. 31-32; Quality Meat Packers, at para. 65.

   The relevant principle is summarized in Paul M. Perell & John W. Morden, The Law of Civil Procedure in Ontario, 3rd ed. (Toronto: LexisNexis, 2017), at p. 186:

   A new cause of action is not asserted if the amendment pleads an alternative claim for relief 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. [4]

4. An amendment will be refused when it seeks to advance, after the expiry of a limitation period, a “fundamentally different claim” based on facts that were not originally pleaded. [5]

5. When considering whether a proposed claim asserts a new cause of action, the original statement of claim must be read generously and with some allowance for drafting deficiencies. [6]

6. The expiry of a limitation period is one form of non-compensable prejudice. [7]

7. The onus of proving that a proposed amendment would cause prejudice that could not be remedied either by costs or an adjournment lies with the party opposing the amendment. [8] However, as explained by the Court of Appeal:

   Where a limitation period has passed, there will be a presumption of prejudice that cannot be compensated for by costs or an adjournment. The moving party must demonstrate why, on the facts of the case, the court should not apply the normal rule that the presumption of prejudice flowing from the loss of the limitation period is determinative. This involves a consideration of special circumstances that would lead the court to conclude that the presumption of prejudice should not apply.

   The statute establishing the limitation period may itself provide for relief in certain circumstances. Absent a statutory basis for relieving against the harshness of a limitation period, the court, faced with a Rule 26.01 motion, will consider whether it would be unfair to allow the opposite party to rely on the limitation period given the relationship the proposed claim has to the existing and ongoing claim and the way that the action has progressed to date. The court will consider the true nature of all of the claims and the knowledge of the parties. [9]

[20] In this case, there is no dispute that the material facts relied on by Dr. Owens in support of his proposed amendments were known to him more than 2 years prior to the proposed amendments, and he does not argue that there are special circumstances that would rebut the presumption of non-compensable prejudice for any new causes of action. As a result, if the proposed amendments are the assertion of new causes of action, they will be statute-barred based on the Limitations Act, 2002. [10]

[21] For the reasons set out below, I find that the claims for negligence, negligent misrepresentation and increased damages in the Proposed Defence and Counterclaim arise out of the same circumstances and same actionable facts that were set out in the Current Defence and Counterclaim, namely the conduct that occurred during the period in which the parties entered into the Services Agreement and the performance of that agreement. [11]

Do the amendments with respect negligence assert a new cause of action?

[22] Dr. Owens argues that applying a factually oriented approach, his intention to claim in negligence is evident from the pleadings in the Current Defence and Counterclaim. He submits that the Current Defence and Counterclaim pleads a contractual relationship that created a proximate duty of care, that the pleadings detail Navigator’s alleged failures to satisfy its obligations under the Services Agreement and Navigators’ campaign plan (defined as the “Plan”) and set out the necessary factual matrix with respect to the breach of duty (at paragraphs 42-46, 48, 50, 52, 54, 55, 57-61, 63-68, 75, 77, 78 and 81) as well as the harm and damages resulting from the breach (at paragraphs 15, 77, 82, 79, 83 and 84). He also points to the express allegations of negligence in paragraph 69.

[23] Dr. Owens submits that the proposed amendments arise out of and do not depart from the factual matrix asserted in the current pleadings regarding the Services Agreement and the related Plan. He argues that the amendments regarding negligence provide further particulars of the action items that Navigator was supposed to and failed to perform. He submits that although some of the specific facts regarding the negligence claim were not pleaded in the Current Defence and Counterclaim, the particularization of them in the Proposed Defence and Counterclaim does not create a new cause of action.

[24] Navigator argues that the negligence claim in the Current Defence and Counterclaim describes a new cause of action in negligence. It submits that the amendments in the Proposed Defence and Counterclaim go beyond adding particulars such that the amended negligence claim does not solely arise out of the facts previously pled. It submits that the Current Defence and Counterclaim is a pleading in contract and not negligence because it does not plead the material facts necessary to establish the existence of a duty of care, the breach of that duty and that the breach caused the plaintiff damage. It complains that the amendments allege new conduct as well as extensive and new material facts on which a new cause of action is based. It argues that unlike the bare pleadings of negligence in the Current Defence and Counterclaim, the Proposed Defence and Counterclaim seeks to add new allegations that Navigator induced Dr. Owens to be its client and thus had a relationship of proximity with him, owed Dr. Owens a duty of care, and breached the applicable standard of care. Navigator also takes issue with many of the particulars pleaded in the Proposed Defence and Counterclaim with respect to its alleged failures to perform its obligations, including those under the Services Agreement.

[25] As set out in Farmers, a cause of action is “a factual situation the existence of which entitles one person to obtain from the court a remedy against another person.” [12] The test for determining if amendments are permissible is to assess “whether the proposed amendments do, or do not, arise out of the same facts, or the factual matrix, that was pleaded in the original statement of claim. If they do, then the amendments should be permitted. If they do not, and the limitations period has expired, then the amendments should be refused.” [13]

[26] Based on the factually oriented approach to determining what constitutes a new cause of action, “if the defendant has notice of the factual matrix underlying the claim being advanced, then amendments that arise out of, or do not depart from, that factual matrix do not constitute ‘new’ causes of action that would not be allowed by way of amendment.” [14]

[27] I do not consider the negligence claim in the Proposed Defence and Counterclaim to be a “fundamentally different claim” based on facts that were not pleaded in the Current Defence and Counterclaim. Rather, I see it as a clarification and expansion of the existing claim that amounts to a different legal conclusion drawn from the same set of facts, or that provides particulars of an allegation already pled or additional facts upon which the original right of action is based. I accept Dr. Owens’ argument that the breach of contract claim in the current pleading and the negligence claim as particularized in the Proposed Defence and Counterclaim arise from a very similar factual matrix. Unlike the situation in Frohlick where the proposed amendments related to events that occurred prior to the events described in the original statement of claim that were unrelated to that claim, the proposed amendments in this case are very much factually intertwined with the existing allegations and are part of the same factual matrix. [15] In this case, although the negligence claim was inelegantly pleaded, there are numerous allegations in the Current Defence and Counterclaim, including specific allegations of negligence in paragraph 69, that provided Navigator with notice of the factual matrix out of which the negligence claim arose.

[28] Reading the Current Defence and Counterclaim generously and with due allowance for drafting deficiencies, [16] I find that the proposed amendments regarding negligence are not an assertion of a new cause of action. Rather, they clarify the foundation for Dr. Owens’ claim and therefore are permissible amendments. [17]

Do the amendments with respect to negligent misrepresentation assert a new cause of action?

[29] Dr. Owens argues that the negligent misrepresentation claim set forth in the Proposed Defence and Counterclaim is not a new cause of action. He submits that it is a new legal characterization of the wrong that was alleged in the Current Defence and Counterclaim and that it arises out of the same factual matrix. Navigator argues that the pleadings of negligent misrepresentation, including those at paragraphs 56-62 of the Proposed Defence and Counterclaim, are new because they include allegations of untrue, inaccurate or misleading statements, carelessness, inducement and reliance not found in the Current Defence and Counterclaim.

[30] In my view, the negligent misrepresentation claims in the Proposed Defence and Counterclaim arise from the same factual matrix and provide further particulars of the pleadings at paragraphs 40-46, 62-67, and 77 of the Current Defence and Counterclaim. Reading the Current Defence and Counterclaim as a whole and generously, and with some allowance for drafting deficiencies, the existing pleadings provide the necessary factual matrix for proximity, inducement, reliance, inaccuracy of the representations, and harm. They include pleadings with respect to services that Navigator “held out” it could and would preform and that Navigator “assured” Dr. Owens it could do, and it pleads that Navigator was hired for those purposes.

[31] I find that the pleading of negligent misrepresentation in the Proposed Defence and Counterclaim is not a new cause of action. Rather, it is a new legal characterization of the wrong that was alleged in the Current Defence and Counterclaim and arises out of the same factual nexus. [18] As noted by Nordheimer J. (as he then was) in Farmers, a “plaintiff is not required to name or specify the technical cause of action as an essential part of pleading”. [19] In my view, based on a generous reading, the Current Defence and Counterclaim provided Navigator with notice of the factual matrix out of which the negligent misrepresentation claim arose. Even if the Current Defence and Counterclaim does not explicitly set out the technical cause of action, it provided Navigator with notice of the actionable facts. In this regard, I adopt the following reasoning from Farmers:

In terms of the amendments at paragraphs 20 and 21, the Master found that the appellant could not amend the statement of claim to plead certain misrepresentations based on the decision in Fuda. With respect, I believe that the Master misunderstood that decision. The claims in Fuda that were disallowed were completely separate misrepresentations that were unconnected to the factual matrix that had been pleaded. Indeed, the misrepresentations in that case were contained in different reports issued at different times.

In this case, the misrepresentations that the appellant seeks to add to the statement of claim in paragraphs 20 and 21 are integral to the dealings that the appellant has already pleaded that it had with representatives of the Ministry. They are very much factually intertwined with the existing allegations. They are part of the same factual matrix and the Master ought to have allowed them. [20]

[32] As in Farmers, the pleadings of misrepresentation that Dr. Owens seeks to add to the Proposed Defence and Counterclaim are integral to the dealings with Navigator that he has already pled, namely the entering into and performance of the Services Agreement. They reframe the allegations of fact and provide further particulars. [21] They are very much factually intertwined with the existing allegations and are part and parcel of the same factual matrix. “They provide precisely the type of particulars … that ought to have been part of the original statement of claim. What they do not do, however, is allege some new and distinct claim unrelated to that original claim.” [22]

[33] At the hearing of the motion, Navigator referred to and relied on Ascent Incorporated v. Fox 40 International in support of its argument that the pleading of negligent misrepresentation is a new cause of action. [23] In that case, the plaintiff was originally seeking damages and disgorgement of profits for breach of fiduciary duty, damages for breach of contract or unjust enrichment and an accounting of revenues wrongfully appropriated in breach of a joint venture agreement. Through the proposed amendments, the plaintiff sought to add a claim for fraudulent misrepresentation. Master Dash did not allow the proposed amendments. He found that there was nothing in the original statement of claim that alleged that the promises or representations by the defendants were knowingly false or fraudulent at the time they were made or made with an intention to deceive. As a result, he held that the amendments were a markedly different and new set of facts seeking to establish liability based on a new, statute-barred claim. [24]

[34] In my view, Ascent Incorporated is distinguishable because the proposed amendments in that case were based on a markedly different and new set of facts that only in a very general sense arose out of the same factual matrix. [25] As noted above, I find that is not the case here. Further, I do not accept Navigator’s submission that the current situation is analogous to the one in Ascent Incorporated even though the proposed amendments here are framed as negligent rather than fraudulent misrepresentation. Had Dr. Owens sought to plead fraudulent misrepresentation, he too would have faced the burden of demonstrating that the existing pleading includes allegations that Navigator’s statements were knowingly false or fraudulent at the time they were made. But that is not his allegation. Unlike the situation in Ascent Incorporated, I find that the proposed amendments are sufficiently connected to the existing factual matrix and are not so markedly different from the current pleadings as to constitute the pleading of a new cause of action.

[35] Navigator also argues that the new facts Dr. Owens seeks to include in the Proposed Defence and Counterclaim demonstrate that he is seeking to add a new cause of action. However, it does not necessarily follow that pleading new facts equates to pleading of a new cause of action. The pleading of new and additional facts is permissible, provided the facts are not essential to the cause of action being pled, such as where they support an alternative remedy or provide further particulars based on the same factual nexus as originally pleaded. [26]

[36] Finally, Navigator argues that Dr. Owens seeks to plead new facts by deleting factual assertions that are tantamount to admissions, including the pleadings in the Current Defence and Counterclaim at paragraphs 12, 33, and 37-41 that outline the circumstances under which Dr. Owens alleges he entered into the Services Agreement. Navigator does not go so far as to formally take the position that the amendments are an improper withdrawal of admissions, but it argues that the pleadings in the Current Defence and Counterclaim and the Proposed Defence and Counterclaim are fundamentally contradictory with respect to whether Dr. Owens relied on Navigator’s representations when he entered into the Services Agreement. In my view, the pleadings are not as contradictory as Navigator suggests, and any alleged contradictions can be explored and dealt with on discovery and at trial.

[37] For the above reasons, I find that the facts as originally pleaded and as better particularized in the Proposed Defence and Counterclaim are sufficient to sustain the technical cause of action of negligent misrepresentation. [27] The proposed amendments with respect to negligent misrepresentation are permitted because they flow directly from facts previously pled. [28]

Do the amendments increasing the damages claim assert a new cause of action?

[38] The Proposed Defence and Counterclaim seeks damages in the amount of $8,000,000 for breach of contract, negligence, and negligent misrepresentation. Navigator argues that the Proposed Pleading is impermissible because it alleges for the first time that:

• Dr. Owens held legal or beneficial title to 8 million shares in the Alexandria;
• that he sold his shares at a discounted price after the relevant events;
• that Navigator’s conduct caused him this loss; and
• if the Founders Group had been successful in the proxy fight and implemented Dr. Owens’ plan to continue drilling efforts, this would have increased shareholder value.

[39] Navigator argues that this amendment is not simply an additional head of damages based on facts previously pleaded. Rather, it is a new cause of action regarding the devaluation of Alexandria of which Navigator did not have notice.

[40] Dr. Owens’ position is that the claim for increased damages is an alternative remedy based on the same actionable facts and factual nexus in the Current Defence and Counterclaim, including that Navigator failed to perform the required services and breached its duties to Dr. Owens which resulted in the lost Proxy Campaign. Dr. Owens points to the pleadings in the Current Defence and Counterclaim (including paragraphs 6‑10, 19, 20, 26, 27, 29, 31 and 79) that describe the factual nexus to which the amended damages claim is linked, including:

• his shareholdings in Alexandria;
• the background facts regarding the financing he had helped secure for Alexandria;
• that the Proxy Campaign was initiated as a result of a dispute over how to maximize the value of Alexandria;
• why the share price of Alexandria plummeted following the Proxy Campaign; and
• the loss he suffered.

[41] In considering the amendment regarding increased damages, I am mindful of the following principle outlined by Nordheimer J. (as he then was) in Farmers:

In the end result, the requirement to read a pleading generously, and the concomitant requirement to allow amendments unless they will inflict non-compensable prejudice, means that the presumption is that any amendment, that can reasonably be seen as falling within the four corners of the existing claim, ought to be permitted. In that regard, I agree with the sentiment expressed by Master Short in Brand Name Marketing Inc. v. Rogers Communications Inc., 2010 ONSC 2892, [2010] O.J. No. 5430 at para. 84:

I believe that equity dictates that if a defendant knows that the “finger of litigation” is pointing in its direction, and an action is commenced on a timely basis based on specific actions, this court ought to take appropriate steps to ensure that the true lis between the parties is addressed, rather than permitting one party to perhaps escape its possible liability by relying upon a technical Limitations Act defence. [29]

[42] In the result, I find that the amended damages claim is not a new cause of action and can be viewed as an alternative remedy being sought by Dr. Owens based on the actionable facts and factual nexus outlined in the Current Defence and Counterclaim. [30]

Are the amendments increasing the damages claim untenable in law?

[43] Although this is not a Rule 21 motion (which is within the jurisdiction of a Judge only), Navigator argues that on a Rule 26.01 motion, the court must determine whether the proposed pleading is legally tenable. It asserts that in doing so, the court must determine whether, accepting the facts pleaded as true, it is plain and obvious that the amendment discloses no reasonable cause of action or defence. Navigator argues that, in this case, the proposed claim for damages in the amount of $8,000,000 in lost share value should not be allowed because it is barred by the terms of the contract between the parties and, therefore, it is not tenable at law.

[44] Navigator relies on Richards v. Media Experts M.H.S. Inc., 2012 ONSC 3518, [31] a case in which the moving party brought a Rule 21 motion to strike based on the exclusion/limitation of liability clauses in the applicable contract. In that case, the court held that documents referred to and relied upon in a statement of claim are incorporated into the pleading and are not evidence precluded by Rule 21, and that the clauses could be used to determine whether a claim was legally tenable. [32]

[45] Navigator argues that, on this motion, although evidence is not permitted to assess the viability of the proposed pleadings, the court is entitled to consider documents referred to and relied upon in the pleading itself – in this case, the Services Agreement. Specifically, it relies on Sections 4.02 and 4.03, which it says create a monetary limit on liability that is capped at a maximum of $110,000 (the total fees Navigator charged under the Services Agreement) and preclude certain types of claims against Navigator, including claims for indirect and consequential damages. Navigator argues that these clauses of the Services Agreement are limitation of liability provisions that are clearly applicable in the circumstances. The sections read as follows:

4.02 Navigator shall indemnify and save harmless the Client, to a maximum of the total price of the Agreement, from and against any and all claims, losses, damages, penalties, fines, costs (including legal fees), actions and causes of action arising out of or resulting from Navigator’s own negligence or breach of any provision of this Agreement, whether or not such claims, losses, damages, penalties, fines, costs (including legal fees), actions, or causes of action arise during the term of this Agreement.

4.03 Notwithstanding the above, in no event shall either Party be responsible to the other Party for any special, exemplary, indirect, incidental, consequential or punitive damages of any kind or nature whatsoever.

[46] With respect to section 4.02, Navigator argues that the Services Agreement explicitly limits the quantum of damages that can be claimed as a result of Navigator’s conduct, including as a result of a breach of contract or negligence. Navigator submits that, based on the limitation of liability clause in Section 4.02, Dr. Owens’ counterclaim is barred to the extent that he claims beyond $110,000, and that because this threshold has already been exceeded in the Current Defence and Counterclaim, the proposed amendment to increase the quantum of damages claim is not legally tenable. Dr. Owens argues that Section 4.02 is an indemnity clause and not a general limitation of liability clause, and that it is not sufficiently clear that it bars the increased damages claim such that the court can conclude that it is plain and obvious that the claim is not legally tenable.

[47] In my view, the applicability and effect of Section 4.02 of the Services Agreement should not be assessed at the pleadings stage. Rather, it should be addressed at a hearing on the merits based on the available evidence. As Diamond J. held in Rinc Consulting Inc. v. Grant Thornton LLP, 2019 ONSC 7725, [33] the court will have to make an assessment of whether the clause applies to the circumstances based on the evidence ultimately before the court and applying the factors for analyzing such clauses as laid out by the Supreme Court of Canada in Tercon Contractors Ltd. v. British Columbia (Minister of Transportation & Highways), 2010 SCC 4. [34]

[48] Navigator also argues that Dr. Owens’ claim for increased damages includes a claim for indirect or consequential damages. It submits that Dr. Owens’ claim is that he lost the Proxy Campaign as a result of Navigator’s conduct and that, as a further or indirect result, his financing plan for Alexandria was not implemented, which in turn caused a loss of share value. Navigator argues that it is plain and obvious that this claim for indirect or consequential damages will fail because it is barred by Section 4.03. Dr. Owens disputes that the claims are for indirect or consequential damages and argues that the assessment of the damages that he may ultimately be able to recover will turn on issues of remoteness.

[49] In my view, this is also an issue that should be addressed at a hearing on the merits rather than at the pleadings stage. It will ultimately be up to the trier of fact, based on the record before the court, to determine whether Navigator succeeds in arguing that either or both of Sections 4.02 and 4.03 of the Services Agreement are applicable and, if so, to what extent they bar Dr. Owens’ damages claims.

Is the form of the Proposed Defence and Counterclaim a bar to permitting the amendments?

[50] Navigator argues that it is prejudiced by the fresh as amended form of the Proposed Defence and Counterclaim. It submits that in the fresh as amended form, it is not possible to readily identify the full extent of the amendments and deletions arising from the proposed amendments.

[51] As noted in Belsat Video Marketing Inc. v. Zellers, [35] the purpose of Rule 26.03, which requires the underlining of amendments in pleadings, is to clearly identify the amendments and deletions. As in that case, the amendments here are so extensive that underlining or striking out will result in an unreadable document. Therefore, as a term of the order allowing the amendments, Dr. Owens’ original statement of defence and the Current Defence and Counterclaim shall be included in the trial record in addition to the fresh as amended statement of defence and counterclaim.

D. Conclusion

[52] For the reasons outlined above, the motion is granted. I order as follows:

1. Dr. Owens is granted leave to deliver a fresh as amended statement of defence and counterclaim in accordance with the draft attached and marked as Schedule “A” to his notice of motion dated August 10, 2021.
2. When filed, the trial record for this action shall include Dr. Owens’ statement of defence dated October 17, 2019, Dr. Owens’s amended statement of defence and counterclaim dated December 4, 2019, as well as Dr. Owens’ fresh as amended statement of defence and counterclaim.

[53] If the parties cannot agree on costs, they may make written submissions, limited to three pages, exclusive of attachments, as follows:

1. from Dr. Owens by January 24, 2022; and
2. from Navigator within 14 days of receipt of Dr. Owens’ submissions.

R. Frank Associate J. Date: January 10, 2022