SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Bedros (Peter) Avedian, Claudio Petti and Mario D'orazio, Plaintiffs
AND:
Enbridge Gas Distribution Inc. operating as Enbridge Gas Distribution, Enbridge Solutions Inc. operating as Enbridge Energy Solutions, Enbridge Inc., Lakeside Performance Gas Services Ltd. operating as Lakeside Gas Services, Defendants
AND:
Alpha Delta Heating Contractor Inc. and Aubrey Leonard Dey, Third Parties
AND:
TQB Heating and Air Conditioning, Brentol Bishop a.k.a. Brent Bishop, Enbridge Solutions Inc. operating as Enbridge Energy Solutions and Enbridge Inc., Fourth Parties
BEFORE: D.A. Wilson J.
COUNSEL: Christine G. Carter, for the Plaintiffs
James G. Norton, for the Defendants, Enbridge Gas Distribution Inc. and Lakeside Performance Gas Services Ltd. operating as Lakeside Gas Services
C. Kirk Boggs, for the Third Parties, Alpha Dey Heating Contractor Inc. and Aubrey Leonard Dey
Chris Morrison, for the Fourth Party, TBQ Heating and Air Conditioning, and Brentol Bishop a.k.a. Brent Bishop
Cynthia R. C. Sefton, for the Fourth Party, Enbridge Solutions Inc. operating as Enbridge Energy Solutions and Enbridge Inc.
HEARD via Video Conference: March 4, 2022
ENDORSEMENT
1There was an explosion in the laundry room of an apartment building located at 399 Markham Road in Scarborough on September 14, 2010. The explosion caused a fire which led to damage to the building. That incident led to the commencement of this action on July 12, 2012, a claim for damages sustained as a result of the explosion and fire. Third- and Fourth-party actions have also been commenced. The Defendants, with the exception of Enbridge Solutions Inc. and Enbridge Inc., along with the Third and Fourth Parties have admitted liability for the explosion.
2I have been case managing this action since August 2021. The Plaintiffs have brought this motion to amend the Statement of Claim to increase the prayer for relief and to specifically plead damage claims on behalf of the individual Plaintiffs. I will refer to the Defendants and the Third and Fourth Parties as the "Defendants" for ease of reference, since their positions on this motion are aligned.
Background to the motion
3The case proceeded through the usual steps in a litigation file: production of documents; examinations for discovery and the securing of expert reports. It was set for trial to proceed in February 2020, but the Defendant Enbridge Inc. brought a motion for Summary Judgment, which was granted. The Plaintiffs appealed and on May 31, 2021, the Court of Appeal overturned the motion judge's decision and ordered the matter proceed to trial on an expedited basis.
4On June 15, 2021, Ms. Carter wrote to the Regional Senior Justice requesting an expedited trial date. In my capacity as co-team lead responsible for trials in Toronto, I was asked to address this request, and I convened the initial case conference on August 31, 2021. Counsel requested that I undertake trial management.
5Ms. Carter, the solicitor for the Plaintiffs, was anxious to secure an expedited trial date for 10 weeks of trial time. However, opposing counsel advised that the nature of the claims being advanced by the Plaintiffs was unclear and the evidence that would be called by the Plaintiffs at trial had not been disclosed. Counsel for the Plaintiffs indicated that she wished to amend the Statement of Claim to increase the prayer for relief from $7,500,000 to $57,500,000. She did not feel an amendment to the Statement of Claim to plead the personal claims was necessary. She was content with the existing Statement of Claim except for the quantum of damages sought.
6In my view, any amendments to a Statement of Claim should be done at the earliest date, and I determined this issue ought to be dealt with as part of the trial management process. At the next case conference on October 14, 2021, I directed that the solicitor for the Plaintiffs serve the proposed amended Statement of Claim by a certain date and the defence counsel would review it and advise whether the amendments sought would proceed on consent or whether there would be opposition.
7The draft proposed amended Statement of Claim was served and the Defendants advised that a motion would be necessary given the nature of the amendments sought. While Ms. Carter was content to bring the motion at trial and have it determined by the trial judge, I was not persuaded it was efficient to leave the issue of amendments to the pleadings to the trial judge.
8In my view, it is incumbent on a Plaintiff to describe the case that will be advanced at trial at the earliest date. It makes no sense to fix a trial date not knowing what the evidence at trial will be or how long the trial will take. Furthermore, a Defendant is entitled to know the case it has to meet at trial; there is no reason for any ambiguity or uncertainty about how the Plaintiff's case will unfold at trial or what theories are being advanced and what evidence will be called.
9In my endorsement of December 7, 2021, I set out a timetable for the various steps leading up to the hearing of the motion. Counsel submitted their materials, and the motion was argued before me.
Background facts
10The Plaintiff 1815212 Ontario Inc. ("1815") was the owner of the building where the explosion occurred in 2010. It is a 15 floor, 250-unit apartment building. It was purchased in December 2009. Avedian, Petti and D'Orazio, (the "individual Plaintiffs") each had a holding company of which each of them was the sole shareholder and these holding companies owned the shares in 1815.
11In December 2014, 1815 entered into an agreement of purchase and sale of the apartment building to Golden Equity Properties. That transaction closed on or about July 15, 2015. The holding companies sold their shares in 1815 pursuant to a Share Purchase Agreement ("SPA"). The individual Plaintiffs agreed that the claims of 1815 from this lawsuit be assigned to them and they were signatories to the Assignment, which was only produced by the solicitor for the Plaintiffs in May 2019. As a result, an Order to Continue was secured on July 16, 2019, and the individual Plaintiffs were included as named Plaintiffs and 1815 no longer appears in the title of proceedings. The body of the Statement of Claim was not changed.
12The examinations for discovery of the Plaintiffs took place in 2017. Damage reports prepared by experts were served by the Plaintiffs in February 2019. Updated damage reports were served by the Plaintiffs in June 2019; these expert reports rely on the premise that the individual Plaintiffs would not have sold the apartment building in 2015 but for the explosion and subsequent damage sustained to the building.
13The Defendants have been requesting clarification of the claims being advanced in this action for a lengthy period of time. The solicitor for the Plaintiffs is of the view that the claims as pleaded are clear on their face and the dispute about whether or not the individual Plaintiffs can bring damage claims in their personal capacity is a question of law, which ought to be determined by the trial judge.
Positions of the Parties
The Plaintiffs
14The Plaintiffs assert that the amendments sought come as no surprise to the Defendants. The individual Plaintiffs were named in the Statement of Claim along with the company. It was clear from the testimony at the examinations for discovery in 2017 that the individual Plaintiffs took the position that they were forced to sell the apartment building much earlier than they had planned to as a result of problems caused by the negligence of the Defendants and, as a result, the sale price was much lower than it would have been. On a motion to amend a pleading the Court must accept the allegations as true, and it is not plain and obvious that the claims of the individual Plaintiffs cannot succeed at trial. Counsel disagrees that the amendments constitute a new cause of action.
15Ms. Carter submits that the Defendants brought a motion for production of financial documentation in October 2019, so they have known that the individual Plaintiffs are asserting personal losses arising out of the explosion and resulting forced sale of the building. The Defendants have served expert reports on damages. Counsel submits that no new theory of damages is being put forward; the amendments sought are simply for clarification, as requested by the defence counsel and directed by the Court. Ms. Carter states that if the motion to amend is not successful, there is no bar to the Plaintiffs advancing all of their claims at trial based on the existing pleading.
16Ms. Carter argues that the language of Rule 26 is mandatory and that an amendment shall be granted at any time in a proceeding unless it would result in prejudice; and there is no evidence of any prejudice to the Defendants by reason of the amendments sought.
The Defendants
17Counsel for the Defendants jointly submit that the proposed amendments ought not to be permitted for a number of reasons. First, the personal claims of the individual Plaintiffs are not contained in the original statement of claim. While the circumstances surrounding the sale of the apartment building have never been clear, the individual Plaintiffs were not the shareholders of 1815; rather, they each had a holding company which collectively owned the shares of 1815. The holding companies have never been parties to the action and any claim to add them would be statute barred at this point.
18Furthermore, at various points in the lawsuit, the solicitor for the Plaintiffs has advised that there will be no personal losses asserted by the Plaintiffs. At the time of the discoveries, the solicitor for the Plaintiffs confirmed that "...the individual plaintiffs will be withdrawing their personal claims. Only the numbered company will be advancing a claim."
19The proposed amendments on behalf of the individual Plaintiffs do not disclose a reasonable cause of action because they violate the rule in Foss v. Hardbottle and they ought not to be permitted.
The Role of Rule 48.04
20Before I address the motion on its merits, it is necessary to comment on the requirement to seek leave for the motion pursuant to Rule 48.04 of the Rules of Civil Procedure.
21In the instant case, the action was set down for trial in 2017 and a trial date fixed for February 2020. The notice of motion does not seek leave to bring this motion, as required by Rule 48.04 of the Rules of Civil Procedure. In response to inquiries from the Court, Ms. Carter submits that leave is not required because Rule 26.01 supersedes Rule 48.04. I do not agree. Rule 48.04 is clear that once a trial record is delivered, that party shall not initiate or continue any motion without leave of the court. [emphasis mine]. When counsel sets an action down for trial and requests a trial date from the court, they are confirming that all of the interlocutory steps have been completed and the action is ready for trial.
22In this action, the Plaintiffs have seemingly ignored the provisions of Rule 48.04. The Court retains the discretion in each case as to whether or not leave ought to be granted; in this case, defence counsel wished to have the issue of the pleadings determined prior to trial and I concurred with that approach.
23I raise the issue of non-compliance with Rule 48.04 because it was not addressed in the materials and the provisions of the rule are important and are often ignored. I agree with the view enunciated in Fulop v. Corrigan, 2020 ONSC 1648 where the Court stated, "...the setting down for trial is not a mere technicality, and there must be a justification for permitting further discovery or any other interlocutory step such as a substantial or unexpected change in circumstances or the necessity of the step in the interests of justice."
24Counsel need to consider whether motions will need to be initiated following the examinations for discovery, and that includes a motion to amend a pleading. In the instant case, I directed the motion to amend be brought at this juncture. I did so in the interests of justice, because I am of the view that it is unacceptable to bring a motion to amend to the trial judge on a case that is more than a decade old, and which has been fixed for a lengthy period of trial time, 10 weeks.
25This case was previously fixed for trial and following the decision of the Court of Appeal directing an expedited trial date, the case should have been ready to proceed to trial; there ought to have been no uncertainty about what evidence would be called at trial. Without knowing the nature of the claims of the Plaintiffs, how can counsel advise the Court with any certainty of how long the trial will take? The Court relies on the estimates of counsel for the amount of trial time required when the trial dates are scheduled.
The Timing of the Motion to Amend
26Ms. Carter is of the view that the existing Statement of Claim will allow her to advance personal claims on behalf of the individual Plaintiffs and that the trial judge can make the interpretation of the rule in Foss v. Harbottle, (1843) 2 Hare 461, 67 E.R. 189, in order to determine whether the individual Plaintiffs can claim personal financial losses as a result of the explosion. She was content to argue the motion to amend the Statement of Claim at trial.
27I do not favour that approach. In my view, there is no advantage to waiting for trial to bring a motion to amend pleadings when that motion is contested. There are significant disadvantages, including the very real possibility of an adjournment of the trial to enable the responding parties to be in a position to deal with any amendments granted.
28Pleadings frame the issues to be determined at trial and also frame the evidence that will be called at trial. It is unfair to the Defendants, in my view, to be in the position of not knowing what type of claims will be presented at trial; it makes it exceedingly difficult to properly defend such a case. There is no "upside" to leaving amendment motions to the trial judge and a great downside. It is the job of counsel to present cases at trial that are clearly defined, with the issues for adjudication set out without ambiguity for the trier of fact. Trials must be conducted efficiently, maximizing the use of Court time and keeping trial costs down.
29Leaving a proposed amendment for the decision of the trial judge when it is known in advance of the trial that the amendment will be opposed makes little practical sense. It requires parties to prepare for trial, incur significant expense while no-one knows whether the amendment will be allowed. Counsel do not know the evidence that will be necessary for trial and consequently, it is unclear how long the trial will last or what evidence will be necessary. In most cases, if an amendment is granted at trial, the trial will be adjourned to allow the responding party to take further steps to properly prepare for trial. This results in a waste of counsel's time and of court time and further delay is encountered when the new trial date is selected.
30In National Industries Inc. v. Kirkwood, 2022 ONSC 937, Justice Myers dealt with an appeal of a judge's order confirming the order of an Associate Judge who refused to allow a Statement of Claim to be amended. The issue of the interpretation of the claims contained in a Statement of Claim was commented upon, and Justice Myers stated, "A Defendant does not have to get to trial to discover the causes of action pleaded against him or her. One of the main purposes of pleadings is to give notice to the parties about what is and is not in issue in the case from the get-go. Pleadings set the issues from the very outset of the case. They define the scope of document production and oral examinations for discovery. They define the issues that have been joined and are to be proven at trial." I agree with the view expressed by Justice Myers.
31I do not accept Ms. Carter's submission that the motion to amend is unnecessary and even if she is unsuccessful, there is no barrier to the Plaintiffs asserting at trial all of the claims they wish to, including claims by both 1815 and by the individual Plaintiffs. Parties cannot show up at trial and call evidence about matters that are not pleaded in the action. Plaintiffs cannot assert claims that have no legal basis or no evidentiary basis. Simply put, pleadings matter. As I wrote in my endorsement dated October 20, 2021, "I concur that the Defendant must know the case they will meet at trial and that the Plaintiffs must articulate their case now. Pleadings delineate the issues in a lawsuit and form the basis for the evidence at trial. Until the pleadings are finalized, it is difficult to move forward with preparation for trial. The events giving rise to this lawsuit occurred more than 11 years ago; that is ample time for the Plaintiffs to determine the case against the various defendants. Barring some unforeseen circumstance, I see no reason why any further amendments to the pleadings would be required in the future."
32I grant leave to the Plaintiffs to bring this motion despite having set the action down for trial, and I have determined the motion ought not to be left to the trial judge, for the reasons set out above.
Analysis
33A motion to amend a claim must be considered in the context of a variety of factors, including the stage at which the motion is brought, and what has transpired in the history of the action. The considerations for a judge presented with a motion to amend a statement of claim prior to examinations for discovery, for example, are different than the analysis undertaken by a trial judge when a motion to amend a pleading is brought at the opening of trial.
34In deciding this motion at this juncture, I am considering the history of the case, the steps that have been taken by counsel, and the nature of the amendments sought. Motions to amend are not done in a vacuum; the fact that the language in Rule 26 employs the word "shall" does not mean that every motion to amend must be granted. Obviously, a motion to amend to plead a frivolous or vexatious claim will not be permitted. It is no answer for a party seeking to amend to assert that amendments are granted at any stage, even at trial and even after a jury has returned a verdict.
35In my view, the proper approach on a motion to amend pleadings is for the Court to consider all of the relevant circumstances and make the order that is fair and just.
36In Horani v. Manulife Financial Corporation, 2022 ONSC 2350, Justice Vermette summarized the principles that apply to a motion to amend pleadings as enunciated by the Court of Appeal in 1588444 Ontario Ltd. v. State Farm Fire and Casualty Co., 2017 ONCA 42:
These principles are as follows: a. Rule 26.01 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. b. The amendment may be permitted at any stage of the action. c. 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. d. 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. e. 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. f. 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. g. The onus to prove actual prejudice lies with the responding party. h. The onus to rebut presumed prejudice lies with the moving party.
37Turning to the merits of the motion, for simplicity, I include the amendments proposed:
1(a) Damages in the amount of $57,500,000.
The Plaintiffs Bedros (Peter) Avedian, Claudio Petti and Mario D'Orazio are individuals whose individual holding companies were the 3 sole shareholders of the Plaintiff 1815212 Ontario Inc. whose sole asset was 399 Markham. In addition to their individual claims they are putting forward the claims of 1815212 Ontario Inc. in accordance with an order to continue dated July 16, 2019.
Those damages include but are not limited to the consequential losses sustained by the plaintiffs as individuals or, in the alternative, by the individual plaintiffs as assignees of 1815212 Ontario Inc., resulting from the forced sale of 399 Markham. Due to ongoing cumulative losses caused by the wrongful conduct of the defendants as set out in paragraphs 8 to 12 above, 1815212 Ontario Inc. entered into an agreement of purchase and sale dated December 30, 2014 for the forced sale of 399 Markham to Golden Equity Properties in trust for a company to be incorporated. Ultimately, on July 17, 2015, the individual plaintiffs, their respective holding companies (defined in the agreement as Peter Co. Mario Co. and Claudio Co.) and 1815212 Ontario Inc. were forced to enter into a share purchase agreement with 2473064 Ontario Inc. for the sale of the shares of 1815212 Ontario Inc., whose sole asset consisted of 399 Markham. Prior to the closing of that transaction, on July 14, 2015, the claims put forward in this action by 1815212 Ontario Inc. (which were defined as Excluded Assets in the share purchase agreement) were assigned to the individual plaintiffs Bedros (Peter) Avedian, Claudio Petti and Mario D'Orazio.
14(i) All other expenses and losses including the losses of the plaintiffs as individuals and/or in the alternative, the losses of the individual plaintiffs as assignees of 1815212 Ontario Inc. from the forced sale in 2015.
38Trials are for the adjudication of claims and issues that are pleaded and responded to and addressed in the evidence gathered by the parties. New claims cannot be advanced at trial nor can those that are statute barred. If there has been an interlocutory order of the Court dealing with pleadings, that must be adhered to at trial.
39I turn to the Statement of Claim as it was issued in 2012 and exists at the present time. Initially, the Plaintiffs were 1815 and the 3 individual Plaintiffs. Damages of $7,500,00 were claimed "as a result of the fire and explosion at 399 Markham Rd. on September 14, 2010." In the body of the claim, 1815 was identified as the owner of the apartment building; that was factually incorrect. The individual Plaintiffs were identified as the 3 sole shareholders of 1815; that was factually incorrect as well.
40The Order to Continue that was obtained in 2019 only changed the title of proceedings; there were no amendments to the body of the Statement of Claim. That is an important fact.
41In the section on damages, very few details are provided and the claims of the 4 Plaintiffs are not separated out; the damages were claimed by "the Plaintiffs." Certain specific losses are pleaded: losses stemming from the high vacancy rate in the building after the fire and marketing expenses to presumably rent the empty units; the loss of parking fees; the loss of rental fees for other units which could not be constructed as planned; the losses from the inability to increase the rent in the units while the renovation work was ongoing; the loss of time of the Plaintiffs because they had to deal with insurers and tenants; and "significant diminution in the fair market value" of the building.
42Nowhere in the Statement of Claim is it asserted that the individual Plaintiffs are making personal claims. There is no reference to any "forced sale" of the apartment building because that had not occurred at the time the Statement of Claim was issued. The Plaintiffs included broad statements in the Statement of Claim such as "The full extent of the Plaintiffs' damages are not yet quantified, but particulars of same will be provided prior to the trial of this action" and "all other expenses and losses..." These pleadings do not assist the Plaintiffs on this motion because they do not set out that the individual Plaintiffs are advancing claims for personal financial losses which they attribute to the explosion.
43The claims set out in paragraph 14 of the Statement of Claim are claims that are properly made in this lawsuit by the owner of the building, 1815. When the individual Plaintiffs transferred their interests in the building in July 2015 and ceased to have an interest, that transaction was accomplished through the SPA by which the 3 holding companies each sold its share to the purchaser, Golden Equity. It is incorrect to submit, as the solicitor for the Plaintiffs has on numerous occasions, that the individual Plaintiffs were the shareholders of 1815.
44The individual Plaintiffs were never the shareholders of 1815; rather, they each had their own holding company of which they were the only shareholder and those holding companies owned 1815. After the share transfers in 2015, 1815 remained the owner of the building. While counsel for the Plaintiffs makes reference in the materials to "shareholder losses" that is not an accurate description of how 1815 was organized at the time of the explosion.
45Having reviewed the existing Statement of Claim and the desired amendments, it is clear that proposed paragraph 14(i) for the first time articulates that the individual Plaintiffs are asserting their own losses which they attribute to the "forced sale". Those claims are very different than the damages claimed by the building as a result of the effects of the explosion. The fact that in the SPA excluded the claims arising from the explosion from the transfer also does not assist the Plaintiffs on this motion to amend because clearly, the claims as set out in the Statement of Claim are excluded, but there is nothing in the SPA that addresses what types of claims are being referenced.
46The solicitor for the Plaintiffs says the amendments are no surprise to the Defendants; but the defence counsel submit that the Plaintiffs have not advanced personal financial claims in this lawsuit and that the case has not been defended on that basis. The affidavit evidence before me on this motion makes it clear that counsel have different recollections of what has transpired over the course of this lawsuit. In his affidavit filed in support of the motion solicitor Krygier-Baum states at paragraph 24, "Having reviewed the transcripts, there is no doubt in my mind that counsel for the Defendants and third and fourth parties understood that a claim was being put forward for the loss related to the 2015 sale." Mr. Krygier-Baum appears to have had very little, if any, involvement in this action; it is difficult to understand how he can state what the understanding of defence counsel was as to the nature of the claims being put forward. I attach little weight to what Mr. Krygier-Baum thought from reviewing the transcripts as to how defence counsel understood the nature of the damages being advanced in the lawsuit.
47Mr. Krygier-Baum deposes that the expert reports that were served in 2020 make it clear that the defence understood that personal losses were being advanced by the individual Plaintiffs arising from the forced sale of the property and they obtained an order from the court for documentation related to these claims. There is a statement in the affidavit that "all documents related to this claim have been produced." What that means in Mr. Krygier-Baum's view, or how he arrived at that conclusion is not clear.
48In stark contrast, the Defendants have filed the affidavit of Mr. Christopher Morrison, counsel who has been involved in the action since 2017. Mr. Morrison was not cross-examined on his affidavit. He deposes that there has been a "lack of clarity" from the outset concerning the nature of the claims sought to be advanced by the Plaintiffs. Initially, no claims by the individual Plaintiffs were asserted. Mr. Morrison deposes that during the course of the litigation, there was no advice to defence counsel that personal losses of the individual Plaintiffs were being advanced as a result of the sale of the apartment building.
49At the discovery in 2017, according to Mr. Morrison's affidavit, there was no production of documentation by the individual Plaintiffs nor any mention of personal losses stemming from a "forced sale" of the building. Although the share transfer took place in 2015 and the action was stayed at that time as a result, and an order to continue was necessary to carry on with the lawsuit, defence counsel were not apprised of this in a timely fashion. Neither the SPA nor the Assignment was produced in the Affidavit of Documents prior to the discoveries; rather the complete SPA and the Assignment were produced after the discoveries, in 2019 . It was at that time that defence counsel realized that 4 years earlier, the cause of action had been transferred and the action stayed.
50Mr. Morrison states at paragraph 36 of his affidavit, "...the active defendants have been trying to figure out the significance of the transaction which occurred in July of 2015. However, what was being claimed, by whom and who had the rights to make such a claim remained elusive. Significantly, however, we did not understand that any claim was being maintained by the Plaintiffs in respect of any personal causes of action by the individual Plaintiffs."
51Compounding this lack of clarity about the nature of the damages was the advice from counsel for the Plaintiffs on several occasions that any claims of the individual Plaintiffs were being withdrawn. This was done in writing and on the record at the discovery, excerpts of which are included in the Morrison affidavit.
52When the SPA was entered into in 2015, it was agreed that the purchaser was not acquiring the proceeds of this lawsuit; this was defined as an excluded asset in the SPA. However, that does not change the nature of the structure of 1815 nor the relationship of the individual Plaintiffs to it. It meant simply that the proceeds of this litigation would not go to the new owner but rather would remain with the sellers.
53The instant case has been ongoing for a decade; Ms. Carter has acted on behalf of the Plaintiffs from the outset, so she is well acquainted with the facts of the case and with the evidence. The explosion giving rise to this action occurred in 2010, almost a dozen years ago. The building was sold in 2015; the examinations for discovery took place in 2017 and the action was set down for trial thereafter. A trial date was fixed in February of 2020. Had the Summary Judgment motion not been brought by Enbridge, the action would have proceeded to trial more than 2 years ago, without any amendments to the Statement of Claim.
54The SPA was not produced prior to the examinations for discovery; the Assignment, of which all 3 of the individual Plaintiffs were signatories, was dated more than 2 years prior to the discoveries, yet it was not included in the productions of the Plaintiffs. The affidavit of Mr. Morrison states that the individual Plaintiffs did not testify at the discovery that they were making personal claims for losses attributable to the explosion at the building or that they had personal losses arising from the "forced sale" of the apartment building.
55In paragraph 48 of his affidavit, Mr. Morrison deposes that "...no questions were directed to the individual claims of the plaintiffs. No detailed questions were asked regarding the individual financial circumstances of the individual plaintiffs. No questions were asked relating to what the individual plaintiffs did with the profits from the sale of their shares in the holding companies, or about any issues regarding their personal ability to avoid or mitigate an alleged loss that was neither being pursued nor pleaded."
56While counsel for the Plaintiffs asserts that the personal claims have been advanced subsequent to the sale of the building in 2015, I do not find the evidence supports this contention. The examinations for discovery took place in 2017, more than 2 years after the sale of the building which the individual Plaintiffs wish to claim was a direct result of the explosion. If this was the case, the affidavits of documents produced by the Plaintiffs ought to have included the SPA, documentation from the individual Plaintiffs concerning their financial losses alleged to have arisen as a result of the sale of the building and other financial records on which they rely to support their damage claims. Those documents were clearly in the possession of the Plaintiffs and clearly relevant if they were advancing damages arising from the sale of the building in 2015. For reasons which are not addressed in the materials of the Plaintiffs, the relevant documentation was not produced until years after the discoveries, in 2019. The fact that they were not produced, and the Plaintiffs were not questioned about the sale of the building at the discoveries supports the view of defence counsel that the Plaintiffs have not been advancing personal financial claims arising from the explosion from the outset. The explosion and resultant damage to the building occurred in 2010. The sale was in 2015 and if it was the Plaintiffs' position that the explosion was the cause of the sale, then that should have been articulated well in advance of the discoveries so there was no confusion about the nature and ambit of the claims being advanced in this lawsuit.
57Contrary to the submissions of counsel for the Plaintiffs, motions to amend pleadings are not "slam dunks" simply because the language in Rule 26 includes the word "shall". In Family Delicatessen Ltd. et al v. The City of London et al, the issue of the timing of the motion to amend was addressed by the Court of Appeal. In that case, the Plaintiffs sought to amend a statement of claim to include new causes of action against the Defendant. In upholding the motion judge's dismissal of the Plaintiffs' motion to amend, the Court of Appeal stated, "The appellants could have brought the motion to amend their claim at any time after the outset of these proceedings. They chose not to do so despite repeated requests from the City...There is no justification for the inordinate delay in bringing the motion to amend the statement of claim. While delay is not in and of itself a basis for refusing an amendment, there must come a point where the delay is so long and the justification so inadequate that some prejudice to the defendants will be presumed absent a demonstration by the party seeking the amendment that there is in fact no prejudice despite the lengthy and unexplained delay."
58In upholding the dismissal of the Plaintiffs' motion to amend, the Court went on to note that the Defendant had defended the existing case for 6 years. Had the amendments been allowed, "its litigation strategy may well have been entirely different. It, of course, cannot undo what has already been done in this proceeding. While it is true that the prejudice to the City flowing from the proposed dramatic change in the course of this litigation could be addressed in part by appropriate orders concerning added discoveries and related matters, we are satisfied that the City could not be put in the position it would have been to meet these allegations had they been made in a timely fashion." In my view, the comments of the Court in Family Delicatessen, supra, are applicable to the instant case.
59The Statement of Claim as it currently exists makes no reference to individual claims of the 3 Plaintiffs nor to any forced sale of the apartment building. The numbered company owns the building at present and it owned it in 2010 when the explosion occurred. The damage claims contained in paragraph 14 are losses sustained by the owner of the building, 1815, as a result of the blast.
60The Defendants have defended the claim as set forth in the pleadings. While the individual Plaintiffs were named in the Statement of Claim, there were no claims advanced on their behalf; rather, the claims were advanced on behalf of 1815. When the shares were purchased in 2015 by Golden Equity and if the Plaintiffs felt they were "forced" to sell the apartment building due to the explosion and its aftermath, and felt they sustained personal financial losses, a motion to amend could have been brought at that point, some 2 years prior to the examinations for discovery. That was not undertaken, and documentation related to the sale of the building was not produced in a timely fashion.
61In the instant case, there is no explanation for the delay in seeking the amendments. While the solicitor for the Plaintiffs may be content with the current Statement of Claim, it is clear that it does not contain personal financial claims for the individual Plaintiffs arising from a "forced sale" of the apartment building which the Plaintiffs wish to allege arose as a result of the negligence of the Defendants.
62The Statement of Claim was issued in 2012; the losses the Plaintiffs are now attempting to assert could not be captured in the existing Claim because the sale of the building had not taken place when the Claim was issued so the personal losses did not exist. The SPA did nothing more than assign the cause of action of 1815 to the 3 individuals; the personal Plaintiffs can assert the damage claims of 1815 stemming from the explosion, but they cannot assert personal losses stemming from the sale of the building. The Plaintiffs did not own the shares of 1815 so they cannot claim a loss of share value attributable to the damage sustained to the building. Any such claim would have to be asserted by the holding companies, which have never been parties to this litigation and the limitation period for adding them has long since expired.
63The issue of the nature of the claims being advanced has been an ongoing one raised by defence counsel on numerous occasions going back to 2019 at least. According to the affidavit evidence, in February 2019 for the first time, the solicitor for the Plaintiffs served expert reports on the damages issue and these reports did not contain personal financial losses allegedly suffered by the individual Plaintiffs. In June 2019, the solicitor for the Plaintiffs served further damage reports based on a theory that but for the explosion in 2010, the individual Plaintiffs would not have sold the building in 2015 and as a result, incurred losses of more than $30 million. Those claims are not contained in the existing pleadings and defence counsel wrote to the solicitor for the Plaintiffs on several occasions in an attempt to clarify the nature of the damages being sought. In response, defence counsel were advised on several occasions that no personal losses by the individual Plaintiffs were being pursued. It is not difficult to see why the Defendants were uncertain about the types of losses the Plaintiffs were making as a result of the explosion.
64The action has been defended on the basis of the claims contained in the Statement of Claim; liability has been admitted for the explosion. Had the Defendants known prior to the examinations for discovery that they were facing a claim of $50 million based on a forced sale of the building, the defence may well have defended the claim quite differently, including the manner in which the issue of liability was handled between the Defendants and the Third and Fourth Parties. To now amend the claim to permit the individual Plaintiffs to claim personal losses they relate to the explosion in 2010 would result in prejudice to the Defendants at this point in time.
65In 1588444 Ontario Ltd., supra, the Court of Appeal commented, "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." In my view, this is such a case. The delay in seeking the amendment, in clarifying the type of damages being claimed at this point in the litigation is such that prejudice to the Defendants will be presumed. On the evidence before me, I am not satisfied that the Plaintiffs have rebutted the presumption of prejudice.
66In my view, the prejudice to the Defendants at this juncture cannot be answered by simply saying that further productions can be made, further examinations for discovery on the personal claims can be held, and the Defendants can secure additional expert reports. That is not fair and it is certainly not in the interests of justice to delay this case for several more years. This is not a case where there has been an unanticipated change in circumstances that mandates an amendment to the pleadings. Rather, this is a claim based in negligence arising from an event that occurred a dozen years ago. The Plaintiffs have had years to determine what is involved in their case; they were the ones who decided to sell the apartment building 7 years ago. If they were of the view that it was the negligence of the Defendants that resulted in the "forced" sale of the building and that but for the negligence they would not have sold and would not have suffered the financial losses that they allege they did, there has been ample time for the Plaintiffs to articulate that through an unequivocal amendment to the Statement of Claim to claim such losses. Whether they are recoverable at law on the facts of this case is a separate issue but until the claims were advanced, the Defendants did not have to respond to them or deal with the issue of whether such personal claims could be successfully advanced in light of the rule in Foss v. Harbottle.
67Ms. Carter answers the objections of defence counsel by submitting that at trial, the judge can be asked to determine if the rule in Foss v. Harbottle is applicable and prevents the individual Plaintiffs from recovering their personal losses. Ms. Carter submits that the rule in Foss v. Harbottle does not prevent the Plaintiffs from asserting their personal losses from the 2015 sale of the building. I do not agree that this approach is appropriate. There is an obligation on counsel to frame a lawsuit so that it accords with the facts and evidence in the case and with the governing law.
68In ruling on this motion, I am not determining whether the rule in Foss v. Harbottle applies in this case. However, as part of the factors I consider in determining whether the motion to amend the Statement of Claim should be granted, one of the considerations is whether the pleading sought fails to disclose a reasonable cause of action.
69The individual Plaintiffs chose to have 1815 purchase the apartment building and be the owner of it. This was done through 3 holding companies which in turn had one share which was owned by the individual Plaintiffs.
70In Meditrust Healthcare Inc. v. Shoppers Drug Mart et al., Justice Laskin noted, "The rule in Foss v. Harbottle provides simply that a shareholder of a corporation—even a controlling shareholder or the sole shareholder—does not have a personal cause of action for a wrong done to the corporation...A shareholder cannot be sued for the liabilities of the corporation and, equally, a shareholder cannot sue for the losses suffered by the corporation."
71In Hercules Management Ltd. v. Ernst & Young, 1997 CanLii 345 (SCC), the Court summarized the rule as providing that individual shareholders have no cause of action in law for any wrongs done to the corporation and that if an action is to be brought in respect of such losses, it must be brought by the corporation...The company acquires causes of action for breaches of contract and for torts which damage the company...
72In the instant case, 1815 was always the owner of the building. Losses resulting from the explosion such as loss of rental revenue, physical damage to the premises, loss of parking revenues and other such similar losses can be claimed by 1815 as the owner of the building. That is very different than the individual Plaintiffs who were not even shareholders in 1815 asserting their own personal losses based on a decision to sell the building some 5 years after the explosion. The Plaintiffs cannot argue that the Assignment granted them the right to pursue such damages; it granted them the right as assignees of 1815's cause of action against the negligent Defendants for the tort claims arising from the explosion. However, it does not convey on the individual Plaintiffs the right to pursue damages in their individual capacity arising from losses on the 2015 sale.
73In my view, Tran v Bloorston Farm Ltd., 2020 ONCA 440 relied on by the Plaintiffs, is of marginal relevance. Factually, that was a very different case than the one before me as it involved a Plaintiff who owned shares in a company and in her personal capacity signed a contract to lease the premises. In that case, the Court of Appeal confirmed that a shareholder does not have a personal cause of action for a tort done to a corporation. In the Tran case, the individual was the party who entered into the contract for the lease of the premises in which to operate her restaurant. She was entitled to recover her reasonably foreseeable damages which arose as a result of the wrongful termination of the lease and the inability of the restaurant to operate. Here, the negligent Defendants did not commit a separate tort against the individual Plaintiffs. For example, the individuals were not injured by the explosion. The damages were suffered by the owner of the building: 1815. In my view, the amendments sought arising from personal financial losses suffered by the individual Plaintiffs who were not shareholders in 1815 as a result of the share transfer of the building are not recoverable in law.
74In addition, quite apart from the issue of the applicability of the rule in Foss v. Harbottle, I am of the view that personal financial losses arising from the transfer in ownership of the building cannot be asserted at this point in time for another reason. The individual Plaintiffs never were shareholders in 1815; they each owned a share in a holding company that owned the shares in 1815. If a claim were to be put forth for diminution in share value as a result of the SPA, then such a claim would have to be made by the holding companies, which have never been parties to this action. The limitation period for adding these holding companies would have expired years ago, no later than 2 years after the sale, and there is no basis upon which to extend the limitation period. Such a claim would be statute-barred.
75It is a fundamental principle of tort law that negligent tortfeasors are responsible for the reasonably foreseeable consequences of their negligence. In the instant case, looking at the manner in which it has been advanced, including the pleadings, the productions, the examinations for discovery and the statements by counsel in response to inquiries from defence counsel, I do not find that the amendments sought reflect the claims that have been put forward from the outset. Rather, to allow such amendments at this juncture in my view would result in non-compensable prejudice to the Defendants and unfairness in the litigation process which cannot be countenanced by the Court.
Conclusion
76The motion by the Plaintiffs to amend the Statement of Claim in accordance with the draft Statement of Claim set out as Schedule A in the motion record is dismissed. If costs cannot be agreed upon between counsel, I may be contacted.
Date: June 3, 2022