COURT FILE NO.: CV-19-00612409
MOTION HEARD: 20220621
WRITTEN SUBMISSIONS: 20220817
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: 1917916 Ontario Ltd. o/a Save On Contracting and Noorullah Kamil, Plaintiffs
AND:
Tarion Warranty Corporation, Defendant
BEFORE: Associate Justice L. La Horey
COUNSEL: Stephen R. Dyment, Counsel for the Moving Parties Plaintiffs
Montgomery Shillington, Counsel for the Responding Party Defendant
Dave Dhillon, Counsel for the Responding Party Home Construction Regulatory Authority
HEARD: June 21, 2022 by videoconference and written submissions delivered August 17, 2022
REASONS FOR DECISION
[1] The plaintiffs, 1917916 Ontario Ltd. o/a Save On Contracting (“Save On”) and Noorullah Kamil, bring this motion seeking leave to amend their amended statement of claim in the form of their draft Fresh as Amended Statement of Claim (the “FASC”) attached to their notice of motion and to add the Home Construction Regulatory Authority (“HCRA”) as a defendant.
[2] For the reasons that follow, I grant the plaintiffs’ motion in part.
BACKGROUND
[3] The statement of claim was issued on January 11, 2019 against the defendant Tarion Warranty Corporation (“Tarion”). This claim was amended on September 17, 2019 to correct a typographical error in name of the corporate plaintiff (the “Claim”). The plaintiffs seek $1,000,000 in damages on account of Tarion’s negligent misrepresentation and regulatory negligence, and bad faith decision making in refusing to register Save On as a builder/ vendor with Tarion. In the Claim the plaintiffs also seek an order requiring Tarion to approve Mr. Kamil as an officer and director of Save On and an accounting in respect of the property at 26 Saunders Road, Scarborough, Ontario.
[4] The Claim includes the following pleadings:
a. Save On is a construction contractor with respect to the construction and renovation of residential single family homes.
b. Mr. Kamil was the owner of property known as 26 Saunders Road, Scarborough, Ontario upon which a residence was built (“26 Saunders”) between February 2005 and October 2005. He was involved in the building of 26 Saunders between 2001 and 2005. He and his family occupied and resided at 26 Saunders between February 2005 and October 2005.
c. Mr. Kamil sold 26 Saunders in October 2005.
d. The purchasers of 26 Saunders made claims for compensation under the Ontario New Home Warranties Plan Act (“ONHWP Act).[^1]
e. Tarion caused two charges to be brought against Mr. Kamil pursuant to the Provincial Offences Act, (“POA”).[^2] Mr. Kamil was found guilty of having acted as a “vendor” of 26 Saunders without being registered under the ONHWP Act and having failed to provide particulars and pay fees under the ONHWP Act. Mr. Kamil was convicted on August 13, 2007 on both counts (the “2007 POA Conviction”) and paid the imposed fine.
f. Mr. Kamil was not a “vendor” at any relevant time and was not required to register 26 Saunders or himself with Tarion.
g. Tarion posted information about the 2007 POA Conviction on its website and stated that both Mr. Kamil and his companies were illegal builders. Mr. Kamil suffered losses as a result of this posting.
h. In 2007, Tarion issued a claim against Mr. Kamil and others for amounts that it paid to the homeowners of 26 Saunders (the “2007 Claim”).
i. Pursuant to a Notice of Proposal dated November 7, 2016 (the “2016 NOP”), Tarion refused to register Save On as a builder citing a number of reasons including that Mr. Kamil had: acted as a vendor and builder without being registered; been convicted of offences under the ONHWP Act; failed to indemnify Tarion for losses arising from 26 Saunders; declared bankruptcy; and, caused Save On to act as a vendor and builder of four homes on Markham Street, Toronto without registering with Tarion (the “Markham Properties”).
j. Save On appealed the 2016 NOP.
k. In the course of the appeal discovery process, Mr. Kamil learned in early 2017 that 26 Saunders had not been demolished, notwithstanding that Tarion had misrepresented to him that Tarion intended to demolish 26 Saunders as structurally unsound. Tarion misrepresented to Mr. Kamil that it had suffered losses from the resale 26 Saunders.
l. Mr. Kamil was released from the alleged debt he owed to Tarion as a result of his bankruptcy.
m. Mr. Kamil’s wife and Save On settled their dispute with Tarion and Save On was registered as a builder/vendor in May 2017.
n. Tarion has failed to account to Mr. Kamil with respect to its alleged losses in respect of 26 Saunders.
o. As a result of the wrongful delay of nine months by Tarion in registering Save On as a builder/vendor, the plaintiffs suffered damages estimated at $1,000,000 including loss of profit on construction contracts, losses arising from a dispute involving the Markham Properties, and injury to Mr. Kamil’s reputation in the house construction industry.
[5] In brief, the plaintiffs’ claim against Tarion relates to the alleged misrepresentation that 26 Saunders was to be demolished, wrongful postings about the plaintiffs by Tarion on the internet and a nine-month delay in failing to registrar Save On as a builder.
[6] The plaintiffs responded to Tarion’s demand for particulars on February 19, 2019. Tarion delivered a statement of defence dated March 19, 2019. The plaintiffs delivered a demand for particulars on April 22, 2019. Tarion’s response was delivered on May 23, 2019. The plaintiff delivered a reply on July 23, 2019.
[7] In its statement of defence, Tarion pleads, inter alia, that the plaintiffs’ claims against it are barred by the Limitations Act, 2002,[^3] and that they are frivolous, vexatious and an abuse of process. In particular, Tarion pleads that the attack on the 2007 POA Conviction and the 2007 Claim (which was dismissed) are collateral attacks on court orders. Further, Tarion pleads that the plaintiffs’ allegations in respect of the 2016 NOP are an attempt to relitigate an issue that the parties settled.
[8] In its reply of July 23, 2019, the plaintiffs, inter alia, respond to the limitations pleading and assert a discoverability argument. In particular, they plead that the first time that Mr. Kamil knew that the loss suffered by the plaintiffs was caused by Tarion was on February 26, 2017.
[9] It is not contentious that after the plaintiffs amended their claim to correct the typographical error in the corporate plaintiff’s name, Tarion refused to renew Save On’s registration pursuant to a Notice of Proposal dated September 20, 2019 (the “2019 NOP”). The 2019 NOP was appealed.
[10] On February 1, 2021, the HRCA assumed the vendor and builder licensing responsibilities previously held by Tarion. The transition provision of the legislation mandated that the appeal would continue with the HRCA as respondent and Tarion would no longer be a party.
[11] It is not disputed that the HRCA and Save On settled the appeal of the 2019 NOP by Minutes of Settlement dated June 14, 2021.
[12] Meanwhile, Mr. Kamil was examined for discovery on September 4, 2020. Tarion’s representative, Girish Sharma, was examined for discovery on August 11, September 3 and November 11, 2020.
[13] In June 2021, plaintiffs’ counsel asked for consent to the issuance of the FASC, which included but was not limited to claims relating to the 2019 NOP. Consent was refused and this motion was brought. The parties attended Civil Practice Court on July 6, 2021 beginning the scheduling process for this motion. The plaintiffs have almost entirely rewritten the Claim and significantly added to it in the FASC. They have not provided a blacklined copy showing the changes. The FASC is 106 paragraphs compared to Claim’s 59 paragraphs.
PRELIMINARY ISSUE
[14] On May 18, 2022, the plaintiffs delivered, without leave, a document which is in essence a reply factum and I shall refer to it as such. Opposing counsel objected to me receiving the reply factum and its attachments. In particular, they objected to me considering the attached tolling agreement. It was not attached to any affidavit: it was simply a document appended as an attachment to the reply factum.
[15] In oral submissions, Mr. Dyment advised that it was an oversight of prior counsel not to include the tolling agreement in the affidavit in support of the motion, but said that he did not think it is “going to make a difference” whether I have regard to it or not. At the hearing, I ruled that I would not have regard to the tolling agreement as it is not properly in evidence. I also ruled that I would accept the reply factum as opposing counsel had approximately a month to review it.
POSITION OF THE PARTIES
[16] The plaintiffs say that the FASC includes allegations as to material facts arising from the discovery process as well as allegations concerning the 2019 NOP, i.e. events after the Claim was issued as well as the ongoing maintenance of the allegations against Save On on the regulator’s website. The plaintiffs submit that except for amendments in respect of the request for relief, the FASC does not contain fresh allegations of fact not included in the Claim. They say that for the most part, the FASC merely expands, explains the relevance of and clarifies the allegations of fact in the Claim.
[17] Tarion opposes the amendments on the following grounds:
a. Some amendments would result in prejudice that could not be compensated for in costs because the claims are being advanced after the expiry of a limitation period; and
b. Some amendments seek to advance untenable claims because:
i. The claims are barred by the doctrines of res judicata, issue estoppel and abuse of process;
ii. The claims are for something this Court lacks jurisdiction to grant; or
iii. The claims are obviously without merit and not worthy of trial.
[18] Tarion in its factum and in its chart of objections by paragraph number made a number of specific objections to the FASC but did not attack all of the paragraphs in the FASC. Tarion submitted that the failure of the plaintiffs to provide a blacklined claim or to more specifically delineate the new content, and the extensive re-wording make it impossible to isolate distinct parts of the pleading that are objectionable. Accordingly, Tarion says leave should be refused for the entirety of the proposed amendments.
[19] Tarion submits that it is prejudiced with respect to the expiry of the limitation period in respect of new claims in the FASC. It also submits that the plaintiffs have inordinately delayed in pursuing their claims. The FASC contains new claims and allegations from as long as 16 years ago. Tarion has filed the affidavit of Girish Sharma who deposes that everyone employed by Tarion that had a material role in the 2007 prosecution and warranty assessment regarding 26 Saunders has either retired or otherwise left the employ of Tarion and the passage of time has prejudiced Tarion’s ability to respond to new claims arising from events that took place so long ago.
[20] In the event that any amendments are allowed, Tarion asks for a term that leave is conditional on Tarion being compensated by the plaintiffs for costs arising as a result of the amendments.
[21] The plaintiffs also seek to add the HRCA as a defendant, as since February 1, 2021, the HRCA has been the regulator of Ontario home builders and vendors. The plaintiffs plead that the HRCA has maintained the harmful internet postings.
[22] The HRCA opposes the motion to add it as a party. It specifically objects to the inclusion of a request for a mandatory order against it. The HRCA also argues that it would be prejudiced by being added a party and asks me to use my discretion to dismiss the plaintiffs’ motion seeking to add it as a party.
LAW AND ANALYSIS
Issue 1: Whether the plaintiffs should be given leave to amend the pleadings
Test for the Amendment of Pleadings
[23] Rule 26.01 of the Rules of Civil Procedure provides:
26.01 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.
[24] In Klassen v Beausoleil[^4] the Court of Appeal set out the applicable principles on motions to amend a pleading as follows:
25 The rule is framed in mandatory terms: 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: 158844 Ontario Ltd v. State Farm Fire and Casualty Co., 2017 ONCA 42, 135 O.R. (3d) 681, at para. 25; Iroquois Falls Power Corp. v. Jacobs Canada Inc., 2009 ONCA 517, 264 O.A.C. 220, at paras. 15-16.
26 The expiry of a limitation period is one form of non-compensable prejudice. A party cannot circumvent the operation of a limitation period by amending their pleadings to add additional claims after the expiry of the relevant limitation period: Frohlick v. Pinkerton Canada Ltd, 2008 ONCA 3, 88 O.R. (3d) 401, at para. 24; 1100997 Ontario Ltd. v. North Elgin Centre Inc., 2016 ONCA 848, 409 D.L.R. (4th) 382, at paras. 21-23; United Food and Commercial Workers Canada, Local 175 Region 6 v. Quality Meat Packers Holdings Limited, 2018 ONCA 671, at paras. 64; Davis v. East Side Mario's Barrie, 2018 ONCA 410, at paras. 31-32. In this regard, the "addition of new statute-barred claims by way of an amendment is conceptually no different than issuing a new and separate Statement of Claim that advances a statute-barred claim" (emphasis added): Quality Meat Packers, at para. 64; citing Frohlick, at para. 24.
27 An amendment will be statute-barred if it seeks to assert a "new cause of action" after the expiry of the applicable limitation period: North Elgin, at paras. 19-23, 33; Quality Meat Packers, at para. 65. In this regard, the case law discloses a "factually oriented" approach to the concept of a "cause of action" -- namely, "a factual situation the existence of which entitles one person to obtain from the court a remedy against another person": North Elgin, at para. 19; Quality Meat Packers, at para. 65.
28 An amendment does not assert a new cause of action -- and therefore is not impermissibly statute-barred -- if 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, at paras. 4, 13-14; North Elgin Centre Inc., at paras. 20-21; East Side Mario's Barrie, at paras. 31-32; Quality Meat Packers, at para. 65. Put somewhat differently, an amendment will be refused when it seeks to advance, after the expiry of a limitation period, a "fundamentally different claim" based on facts not originally pleaded: North Elgin, at para. 23.
29 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.
30 In the course of this exercise, it is important to bear in mind the general principle that, on this type of pleadings motion, it is necessary to read the original Statement of Claim generously and with some allowance for drafting deficiencies: Farmers Oil and Gas Inc. v. Ontario (Ministry of Natural Resources), 2016 ONSC 6359, 134 O.R. (3d) 390 (Div. Ct.), at para. 23.
31 Finally, the court may refuse an amendment where it would cause non-compensable prejudice. The prejudice must flow from the amendment and not some other source: Iroquois Falls, at para. 20. At some point the delay in seeking an amendment will be so lengthy, and the justification so inadequate, that prejudice to the responding party is presumed. In this event, the onus to rebut the presumed prejudice lies with the moving party: State Farm, at para. 25.
32 Alternatively, the responding party may resist the amendment by proving actual prejudice -- i.e. by leading evidence that the responding party has lost an opportunity in the litigation that cannot be compensated by an adjournment or an award of costs as a consequence of the amendment. It is incumbent on the responding party to provide specific details of the alleged prejudice: State Farm, at para. 25.
33 Irrespective of the form of prejudice alleged, there must be a causal connection between the non-compensable prejudice and the amendment. The prejudice must flow from the amendment and not from some other source: State Farm, at para. 2.
[25] On a motion to amend, a court will consider whether the proposed amendment raises a claim that is tenable at law.[^5] It is not necessary to tender evidence to support the claims nor is it necessary for the court to consider whether the amending party is able to prove its amended claim.[^6] In undertaking this review, the court must assume that the facts pleaded in the proposed amendment (unless patently ridiculous or incapable of proof) are true. Further, the pleading must be read generously, with allowances for deficiencies in drafting.[^7] Amendments are to be granted unless the claim is clearly impossible of success.[^8] The proposed amendments must comply with the rules of pleading.[^9]
[26] Courts have often wrestled with the question of whether an amendment asserts a “new cause of action” after the expiry of the applicable limitation period. Justice Nordheimer (sitting in Divisional Court) considered the issue at length in Farmers Oil and Gas Inc. v Ontario (Ministry of Natural Resources).[^10] In that case, after a canvassing of the authorities he held as follows:[^11]
As may be obvious from the above, the distinction between the authorities relied upon by the appellant, and those relied upon by the respondent, turns on 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.
[27] And further:[^12]
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] O.J. No. 5430, 2010 ONSC 2892 (S.C.J.), 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.
[28] In National Industries v Kirkwood, Justice Koehnen held that an amendment to a pleading after the expiry of a limitation period is not statute barred if the amendment:[^13]
(a) provides particulars of an allegation already pleaded;
(b) provides additional facts upon which the original right of action is based;
(c) does not alter the nature of the claim, or
(d) arises from the core factual nexus as the facts and circumstances become clearer and more mature: Bank of Montreal v. Morris, 2013 ONSC 2884, at para 46; Martin v. St Thomas Elgin General Hospital et al., 2016 ONSC 294, at para 17.
Analysis
Tarion’s objections to specific paragraphs in the FASC
[29] I will evaluate the proposed amendments largely using the groupings and headings in the chart filed by Tarion.
Prayer for relief – paragraph 1
[30] In the FASC, the plaintiffs increase the amount of damages claimed against Tarion from $1,000,000 to $5,000,000. No specific objection was taken to the increase in the amount claimed against Tarion or to any of the other amendments in paragraph 1 except for the request for a mandatory order against the HRCA. I deal with the request for a mandatory order below when I consider whether the HRCA should be added as a party.
Allegations relating to the 2007 POA Conviction – paragraphs 9 (portion) and 10 – 42, 96(a)
[31] Tarion challenges these paragraphs relating to the 2007 POA Conviction on a number of grounds, including that they are statute barred by the two year limitation period in the Limitations Act, they are res judicata and an abuse of process and are not tenable. Tarion submits that the court should not allow any of the paragraphs of the FASC relating to the 2007 POA Conviction.
[32] Paragraphs 10 to 16 of the FASC are set out under the Heading “Construction of 26 Saunders Road”. These paragraphs are by way of background and elaborate on matters set out in the Claim and thus are not new pleadings. These paragraphs may stand.
[33] The next section in the pleading is entitled “Sale of Saunders Road” – paragraphs 17 to 25. This section sets out facts related to the sale of 26 Saunders by Mr. Kamil. It includes paragraphs in which the plaintiffs take issue with Tarion’s conclusion that Mr. Kamil was a vendor under the ONHWP Act. This was the conclusion reached by the POA Court when it convicted Mr. Kamil.
[34] These allegations are contained in a less developed form in the Claim. The Claim refers to the 2007 POA Conviction in paragraphs 14 to 16. These paragraphs refer to the charges, state that the Mr. Kamil was convicted and paid the fine in full. Paragraph 17 pleads that Tarion referred to the conviction on its website. The conviction is referred to in paragraph 45(b) in the context of being one of the reasons that Tarion refused to register Save On as a builder in 2016. The plaintiffs take issue with the conviction in that they plead in paragraph 9 of the Claim that Mr. Kamil was not a vendor and therefore was not required to register with Tarion.
[35] Therefore, paragraphs to 17 to 25 are not new allegations and may stand. The claims based on a challenge to the 2007 POA Conviction may be out of time, may be res judicata and an abuse of process, but these issues are not for me to determine on a motion to amend. This is not motion for summary judgment.
[36] The FASC then contains a section entitled: “Provincial Offences Act Investigation” - paragraphs 26 to 34. In this section the plaintiffs challenge Tarion’s investigation and the decision to lay charges, not just the result. These allegations are new.
[37] This is followed by a section entitled: “Provincial Offences Act Trial”- paragraphs 35 to 42. In this section the plaintiffs challenge the process of Tarion’s prosecution, reference Mr. Kamil’s defence of the charges as an unrepresented litigant, and refer to evidence that was not brought to the court’s attention. These allegations are new.
[38] Paragraph 96 of the FASC sets out the particulars of Tarion’s “negligent breach of its regulatory duty to investigate diligently and thoroughly any and all circumstances relevant to the registrability of Save On including in 96(a) “failing to conduct a critical review of the quality of the investigation which resulted in the prosecution of Mr. Kamil.”
[39] The plaintiffs’ reply factum at paragraph 40 states:
- The Provincial Offences charges and conviction are separate from, irrelevant to and unrelated to the claims for damages against Tarion by the Plaintiffs set out in the Plaintiffs’ Fresh Amended Statement of Claim. These claims are based on the actions of, and wrongdoing by Tarion, long after the charges were dealt with. Accordingly, these claims are not, and cannot be, barred by the doctrines of res judicata or issue estoppel as a result of the determination of the Provincial Offences.
[40] With that concession, the sections entitled “Provincial Offences Investigation” and “Provincial Offences Act Trial” and paragraph 96(a) will not be permitted in an amended pleading, subject to the exceptions below.
[41] Further, Tarion alleges that the claims are statute barred. I agree with Tarion that any claim relating to the investigation or prosecution of the POA offences is new to the FASC and is statute barred as being well beyond the two year limitation period. It is almost 16 years since the conviction. As noted in Klassen, a party may not add statute-barred claims by amendment.[^14] The plaintiffs did not raise any issue of discoverability extending the limitation period in regards to the 2007 POA Conviction. Indeed, the notice of appeal of the 2016 NOP takes issue with the 2007 Conviction.
[42] That portion of paragraph 9 “before the laying of charges against Mr. Kamil” in relation to the breach of duty of care and good faith investigation cannot stand as it is a new cause of action; an alleged failure to properly investigate before laying of charges that is statute barred. It is also inconsistent with the position set out by the plaintiffs in paragraph 40 of the reply factum. Leave is granted to plead paragraph 9 except for the phrase “before the laying of the charges against Mr. Kamil”.
[43] Paragraph 26 of the FASC is permitted as background.
[44] The pleading in paragraph 41 of the FASC is allowed to stand in part insofar as it refers to matters pleaded in the Claim. The plaintiffs may plead the amount of the fines, $5,000 per conviction, excluding the reference to Tarion making submissions on the fines. The plaintiffs may also plead that Tarion published the 2007 POA Conviction in the absence of a mandate to do so. The publication of the 2007 POA Conviction and the website are raised in the Claim. The last part of the paragraph “in circumstances where the convictions were on their face inconsistent and resulted form a flawed investigation and a prosecution lacking in fairness” are not permitted as a new challenge to investigation and prosecutions after the expiry of the limitation period.
[45] Paragraph 42 is permitted as a rephrasing of paragraph 29 and 30 of the Claim.
[46] Because I have not allowed the majority of the paragraphs related to the 2007 POA Conviction, the plaintiffs are given leave to plead paragraphs 14 to 16 of the Claim in a revised pleading.
Allegations about the 26 Saunders warranty claim process – paragraphs 43-52 and 96
[47] Tarion submits that these paragraphs are statute barred and further, the plaintiffs have delayed inordinately in pursuing these claims.
[48] The Claim seeks an accounting with respect to Tarion’s alleged losses in respect of 26 Saunders and states that Tarion did not suffer any losses on the warranty claim. The claim for an accounting is maintained in the FASC.
[49] In paragraph 1(c) of the Claim, the plaintiffs claim against Tarion for its “wrongful refusal to register Plaintiff as builder/vendor with Tarion”. The basis for the plaintiffs’ claim in regulatory negligence is set out in paragraph 57 of the Claim. Paragraph 57 states in part, “The Plaintiffs plead that as a direct result of the inordinate delay of nine months by Tarion to register Save-On as builder/vendor with Tarion, they suffered damages and losses which they estimate to be $1,000,000.”
[50] Paragraphs 43 - 48, 50 – 51 and 96(c)-(k) make new allegations that Tarion’s warranty claims process with respect to 26 Saunders was flawed and assert that Tarion was negligent in its regulatory duties in that regard. This warranty process appears to have taken place in 2006 and 2007 and therefore would be statute barred subject to discoverability.
[51] Mr. Kamil, in his affidavit, says he learned of facts relating to Tarion’s warranty claims process as a result of the discovery evidence of Tarion and that he could not have previously discovered these facts as he was not privy to Tarion’s internal processes. Mr. Kamil was not cross-examined on his affidavit. Although I was not provided with the full transcripts of Mr. Sharma’s examination for discovery, it is apparent from the transcript excerpts and from the chart of answers to undertakings, that he was questioned on the warranty process in 2006 and 2007 and that Tarion provided information this regard. Where discoverability is in dispute, the determination of whether a cause of action is barred by a limitation period should not be made at the pleadings stage. In such case the amendment will normally be allowed, with leave to plead a limitation defence.[^15] I cannot determine this discoverability issue on the record before me.
[52] Even if the claims are not statute-barred, Tarion submits that I should exercise my discretion to refuse these amendments (and others) because of the plaintiffs’ inordinate delay. Given that the examinations for discovery took place as late as November 2020 with answers to undertakings being provided thereafter, I cannot say that the plaintiffs inordinately delayed in seeking leave to amend the Claim.
[53] Tarion submits that it is prejudiced by these proposed amendments relying on Mr. Sharma’s affidavit tendered in support of this motion. In his affidavit, Mr. Sharma deposes that everyone employed by Tarion that had a material role in the 2007 illegal vendor prosecution and the warranty assessment process regarding 26 Saunders has either retired or otherwise left the employ of Tarion. Mr. Sharma specifically refers to four individuals, three of whom are said to have had functions related to the warranty process. Mr. Sharma does not say whether or not these employees are co-operating with Tarion regarding this litigation, and whether or not their evidence and records have been preserved. Mr. Sharma states that the passage of time has prejudiced Tarion’s ability to respond to new claims arising from events that took so long ago.
[54] Mr. Sharma was not cross-examined. However, it appears from the answers to the undertakings chart appended to Mr. Kamil’s affidavit, that the evidence of at least one of these individuals has been preserved. Ms. Metcalfe, the manager of claims, provided information to Tarion to enable it to respond to a number of undertakings. The evidence goes some way to rebut any prejudice. Tarion did not file a reply affidavit. It is incumbent on Tarion to provide specific details of the alleged prejudice.[^16] Further, given the 2007 Claim, and the NOP applications, it is logical that some of the evidence related to the 26 Saunders warranty claims would have been collected and preserved. It is not clear that the alleged prejudice relates to the amendments as Mr. Sharma does not specify when the named individuals left the employ of Tarion. As noted above, the plaintiff has an explanation for the delay from the issuance of the Claim to the request for amendments. I am therefore prepared to allow the amendments in paragraphs 43 - 48, 50 – 51 and 96(c)-(k) with Tarion being given leave to plead a limitation defence. Further, my reasons do not prevent Tarion from arguing at trial that the alleged prejudice has adversely affected its ability to defend the claims against it.[^17]
[55] Tarion also submits that some of these allegations are an attack on the 2007 POA Conviction and are res judicata and an abuse of process. As set out above, this was an issue raised by the Claim and is not a new issue. I am not deciding a summary judgment motion.
[56] Tarion separately takes issue with paragraph 49 which says that “Tarion added insult to injury” by naming Mr. Kamil as a defendant in the 2007 Claim, notwithstanding that it was aware that the action stayed by virtue of Mr. Kamil’s bankruptcy. As I read it, it is not a new claim, but is rather added in support of the already pleaded request for punitive damages. Paragraph 49 is allowed.
[57] Paragraph 52 is not a new allegation, it is a pleading with respect to the accounting for 26 Saunders which was pleaded in the Claim. It is permitted.
[58] Paragraphs 96(b),(l)-(o) allege failures on the part of Tarion to critically review the issues around 26 Saunders. Reading the pleading generously as I must, it is possible that the plaintiffs are here attempting to allege that the 2016 review process was flawed because Tarion failed to re-examine the issue of 26 Saunders in 2016. To the extent these claims are intended to relate to the 2016 NOP, they may stand as allegations with respect to an existing claim, but this should be clarified in a revised claim. If these paragraphs are intended to refer to the 2007 – 2008 process, the claims are new and are statute barred subject to a discoverability and a limitation defence, in which case the amendments are permitted with leave given to plead a limitation defence.
Allegations about representations made by Tarion during the registration application process – paragraphs 57 – 61
[59] These paragraphs relate to the things said or represented by Tarion during the registration process that culminated in the 2016 NOP. Tarion submits that this is a new cause of action with respect to misrepresentation. The plaintiffs delivered a response to demand for particulars with respect to the allegations of negligent misrepresentation in the Claim. In their response the plaintiffs do not refer to any misrepresentations made during the application process. However, these allegations arise out of the same factual matrix as the pleadings in the Claim, namely that Tarion’s refusal to register Save ON for a period of nine months was wrongful. The plaintiffs’ version of the 2016 application process is set out in some detail at paragraphs 33 to 44 of the Claim and includes allegations as to what Mr. Kamil was told by representatives of Tarion. Tarion has already pleaded a limitation defence in response to the Claim in respect to the 2016 NOP and it shall have leave to plead a limitation defence with respect to these allegations.
Allegations about the reasons Tarion gave when proposing to refuse to register Save On in 2016 – paragraphs 67-75 and 97(a),(c) – (g); allegations that challenge the decision of the Registrar with regard to a NOP to refuse registration – paragraphs 67 - 81
[60] Paragraphs 67 to 75 of the FASC are found under the heading, “Refusal of Registration”. The alleged wrongful refusal to register Save On pursuant to the 2016 NOP is raised in the Claim. These allegations are not new. They expand on existing allegations. Similarly, paragraphs 97 (a), (c) – (g) which particularize Tarion’s negligence and /or bad faith in respect of the of the registration process are not new, but rather particularize the allegation in the Claim that Tarion wrongfully refused registration to Save On in 2016. Tarion’s defence includes a long section setting out its version of facts regarding the registration (paragraphs 24 – 38). The existing defence pleads a limitation period. I am not satisfied that there is any prejudice arising out of these amendments or that the delay has been inordinate.
[61] Tarion also submits that the claims in paragraphs 67 to 81 are untenable because these allegations challenge administrative decisions made by the Registrar and that the LAT was the appropriate forum to pursue such challenges. This jurisdictional issue does not arise because of the amendments. Tarion raised jurisdiction as an issue in its defence. This motion is not the occasion to resolve this issue.
[62] The amendments in paragraphs 67 – 81 and 97(a),(c) – (g) are allowed, with leave to plead a limitation defence.
Allegations concerning the 2019 NOP – paragraphs 82 to 95
[63] Tarion submits that paragraphs 82 to 95 relate to allegations that the 2019 NOP was improper or actionable and are untenable. They say that the allegations are obviously without merit as the plaintiffs refused to participate in the renewal process by providing the requisite financial information. Thus, according to Tarion, any claim that the Registrar wrongfully refused to renew the registration of Save On is untenable. Tarion relies on an email from Mr. Kamil in response to a request to furnish information in support of its submission that Tarion refused to participate in the renewal process. On a pleadings motion, I have to assume the pleadings are true. This is not a motion for summary judgment.
[64] Tarion also submits that these allegations in paragraphs 88 to 95 are untenable as they seek to challenge the administrative decision of the Registrar and the LAT is the proper forum to pursue such challenges.
[65] However, reading the pleadings generously, these allegations are directed at Tarion’s actions in connection with the investigation and renewal process, and in respect of their postings on the internet, as opposed to a challenge to the decision of the Registrar.
[66] The plaintiffs submit that the FASC does not raise as an issue the correctness or validity of the 2019 NOP. Rather they seek damages, an accounting and a mandatory order (which I deal with below).
[67] The plaintiffs rely on a letter from counsel for Tarion dated October 11, 2019, to plaintiffs’ counsel in support of their contention that allegations in respect of the 2019 NOP should be permitted. In this letter Tarion’s lawyer acknowledges receipt of the notice of appeal in respect of the 2019 NOP. She suggests that Save On drop the appeal and allow the refusal of the renewal registration to proceed. She says that as Save On does not intend to build new homes, registration with Tarion is not required. Further, she states:
Your clients are also seeking recourse not available to them through the Tribunal. Therefore, it seems that the most appropriate course of action is that your clients withdraw their appeal and deal with all of their claims for damages through the civil litigation.
[68] The 2019 NOP was ultimately settled by way of Minutes of Settlement whereby the Save On withdrew its appeal. The Minutes of Settlement between Save On and the Registrar, Home Construction Regulatory Authority, contain a term that the withdrawal of the notice of appeal does not constitute an admission by Save On or its past and present directors, including Mr. Kamil, of the allegations in the 2019 NOP save in respect of a future application for a licence.
[69] Tarion executed an acknowledgement on June 14, 2021 that states: “The minutes of settlement will not be construed as an admission by the Applicant or its current or past directors as to any issues of liability or damages raised in the aforementioned Save On v Tarion proceeding.”
[70] There is thus an issue as to whether the parties specifically contemplated and agreed that claims for damages in respect of the 2019 NOP would be addressed in a civil action. The plaintiffs argue that Tarion is estopped from challenging the jurisdiction of the Ontario Superior Court of Justice as a result of the Minutes of Settlement and Acknowledgement.
[71] Based on the foregoing, I cannot say that these pleadings regarding the 2019 NOP are clearly impossible of success. Paragraphs 82 to 95 are permitted.
Bankruptcy issue – paragraph 97(b)
[72] In paragraph 97 of the FASC, the plaintiffs list particulars of Tarion’s breaches of care. In paragraph 97(b) they plead that Tarion arrogated to itself “the authority to exercise its regulatory discretion at cross-purposes to the legislative intent of the Bankruptcy and Insolvency Act (“BIA”).[^18] This allegation relates to the issue of whether the debt owing by Mr. Kamil to Tarion in respect of warranty claims for 26 Saunders had been extinguished by virtue of Mr. Kamil’s bankruptcy. The unpaid debt was one of the reasons given by Tarion in denying registration to Save On in 2016. It is also relevant to the posting on the website.
[73] Mr. Shillington argued that as a matter of law the unpaid debt was not extinguished when Save On applied for registration as a builder. This is because there was no stay in place at the relevant time under the BIA. Therefore, he submits that the pleading in paragraph 97(b) is untenable.
[74] Whether or not this is correct, paragraph 50 of the Claim makes the allegation there was no debt owing by Mr. Kamil to Tarion by virtue of his bankruptcy.
[75] Accordingly, this is not a new pleading, but a reworking of matters already plead. My task on an amendment motion is not to decide the tenability of matters that were already plead. Accordingly, leave is granted with respect to paragraph 97(b) of the FASC.
Allegations regarding Tarion’s alleged misrepresentations - paragraphs 98 - 101
[76] Tarion submits that these allegations are statute barred and that Mr. Kamil was aware of these causes of action prior to the expiry of the limitation period.
[77] In paragraph 98 of the FASC, the plaintiffs plead that in 2007 Tarion misrepresented the seriousness of the deficiencies of 26 Saunders, and that the costs would be extensive. At paragraph 99, the plaintiffs plead that as a result of the misrepresentation, Mr. Kamil declared bankruptcy, left Canada and sustained losses for which Tarion is liable.
[78] In paragraph 100 of the FASC, the plaintiffs plead Tarion made a misrepresentation in 2016 to Save On that 26 Saunders had to be demolished and that Mr. Kamil’s warranty breaches caused Tarion to suffer losses amounting to $239,614.29. The plaintiffs say that they relied on this misrepresentation in organizing their affairs.
[79] Paragraph 101 of the FASC pleads that because Save On relied on Tarion’s misrepresentation, it removed Mr. Kamil from his corporate governance position and withdrew its appeal, causing Save On losses for which Tarion is liable.
[80] The allegation that Tarion misrepresented that 26 Saunders would have to be demolished is contained in the Claim (paragraphs 19, 47 and 48). Although the date of the misrepresentation is not given in paragraph 19, it is clear from the context the misrepresentation is alleged to have occurred in 2007 given that paragraphs above and below deal with 2007 events. Therefore, this is not a new misrepresentation that is being alleged and arises out of the factual matrix pleaded in the Claim. As noted above, Tarion has a limitation defence to the Claim. Leave is given to plead paragraphs 98 to 101with Tarion being given leave to plead a limitation defence.
Tarion’s Overall Objection to the FASC
[81] As noted above, Tarion submits that leave should be refused for the entirety of the proposed amendments because the plaintiffs failed to delineate the new content and the extensive re-wording makes it impossible to isolate distinct parts of the pleading that are objectionable. I agree with Tarion that the extensive re-working of the FASC has made it challenging to analyze the propriety of the amendments. While I am not prepared to refuse leave to amend for this reason, it is a factor that I will take into account on the issue of costs.
Conclusion on Issue 1
[82] The plaintiffs are granted leave to deliver an amended statement of claim in accordance with these reasons. Tarion shall be entitled to deliver an amended statement of defence and may plead a limitation defence.
[83] Tarion submits that if any amendments are allowed, they will be required to prepare an amended defence and conduct further discovery. It seeks the sum of $7,356 for these costs (inclusive of anticipated disbursements and tax). Plaintiffs’ counsel did not contest that some amount ought to be payable, but took issue with the number of hours estimated by counsel. In my view the hours estimated are fair and thus the sum of $7,356 is reasonable. Tarion is entitled to its costs in the sum of $7,356 (all inclusive) in respect of delivering an amended pleading and further discovery as a term of the amendment.
Issue 2: Whether the HRCA should be added as a party defendant
Test for Adding Parties
[84] Rule 5.04(2) provides:
(2) At any stage of a proceeding the court may by order add, delete or substitute a party or correct the name of a party incorrectly named, on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.
[85] The test for adding a party is summarized in Steel Tree Structures Ltd. v Gemco Solar Inc.[^19] where Justice Horkins quotes from Plante v. Industrial Alliance Life Insurance Co.[^20] To succeed under Rule 5.04(2):
a) The proposed amendment must meet all of the tests under Rule 26.01.
b) Joinder should be appropriate under Rule 5.02(2) or required under Rule 5.03. The addition of the parties should arise out of the same transaction or occurrence … should have a question of law or fact in common … or the addition of the party should promote the convenient administration of justice … Adding a party will be particularly appropriate if it is unclear which of the original defendant or the proposed defendant may be liable …, or if it is necessary that the proposed defendant be bound by the outcome of the proceeding or his or her participation is otherwise necessary to allow the court to adjudicate effectively …;
c) Joinder should not be inappropriate under Rule 5.03(6) or 5.05. The addition of a party should not unduly delay or complicate a hearing or cause undue prejudice to the other party…;
d) Addition of a party will not be permitted if it is shown to be an abuse of process. Abuse of process will exist where the addition of a party is for an improper purpose such as solely to obtain discovery from them, to put unfair pressure on the other side to settle, to harass the other party or for purely tactical reasons. [citations omitted].
[86] Because the rule is permissive and not mandatory (by contrast with Rule 26.01), the court has the discretion to refuse to add the party even in the absence of non-compensable prejudice. However, this discretion should not often be invoked.[^21]
Claim for a mandatory order against the HRCA
[87] The FASC adds a new request for relief in paragraph 1(c). It seeks a mandatory order requiring the HRCA to assess any existing or future applications under the New Home Construction Licensing Act, 2017,[^22] (“NHCLA”) without regard to any matter related to 26 Saunders or the Markham Properties.
[88] The HRCA objects on the basis that this requested relief is outside the jurisdiction of the Superior Court as it is a request for mandamus which can only be brought in Divisional Court by way of a notice of application.
[89] Section 7 of the Judicial Review Procedure Act,[^23] (“JRPA”) provides that:
[a]n application for an order in the nature of mandamus, prohibition or certiorari shall be deemed to be an application for judicial review and shall be made, treated and disposed of as if it were an application for judicial review.
[90] Section 6(1) of the JRPA provides that applications for judicial review shall be made to the Divisional Court, subject to s. 6(2) of the JRPA which provides that an application for judicial review may be made to the Superior Court of Justice with leave where the case is one of urgency. The Consolidated Practice Direction for Divisional Court Proceedings provides that in the Toronto Region, applications under s. 6(2) of the JRPA are directed to be brought in Divisional Court for a hearing before a single judge of that court sitting as a judge of the Superior Court of Justice. The Practice Direction also makes it clear that the proceeding should be commenced by way of notice of application.
[91] In Sanscon Construction Ltd. v City of Toronto, Justice Vella declined to rule on an application in which the applicant was seeking an order for certiorari, or in the alternative an order of mandamus or in the further alternative, an order for prohibition, stating that the matter should have been started as an application for judicial review and brought before the Divisional Court.
[92] The plaintiffs in their reply factum rely on s. 101 of the Courts of Justice Act and Rule 40 of the Rules of Civil Procedure for the proposition that a judge of the Superior Court can adjudicate a claim for a mandatory order. However, the ability of a Superior Court judge to make a mandatory order is not the issue. Mr. Dyment could point me to no case in which a mandatory order was made against a regulator, such as the HRCA, in an action, as opposed to in an application for judicial review. I agree with the HRCA that the request for a mandatory order against the HRCA is untenable as it is brought in the wrong forum. Accordingly, the request to amend the claim to seek a mandatory order against the HRCA is refused.
[93] The request for the mandatory order may be vulnerable on other grounds. Mr. Dyment confirmed that the plaintiffs do not have any existing applications pending so the request for relief may be said to be premature or hypothetical. The plaintiffs’ reply factum makes it clear that the plaintiffs are focussed on “any future application by the Plaintiffs for registration under the HCLA”. In oral argument, counsel for the HRCA referred me to Amherst Island v Director of Environmental Approvals[^24] where Justice Sachs quashed an application for judicial review on the basis that the parties can only proceed to judicial review after the administrative process has run its course. However, I need not make any finding in this regard given my conclusion that the pleading is not tenable on jurisdictional grounds.
Claim for Damages against the HRCA
[94] The FASC contains a claim for damages against the HRCA in addition to the claim for the mandatory order. At the hearing, I asked Mr. Dyment if the plaintiffs would still be seeking to add the HRCA as a party if I decided not to permit an amendment claiming a mandatory order. He advised that the plaintiffs still wished to add the HRCA as a party defendant because of the “ongoing defamation claim”.
[95] In paragraphs 91 and 92 of the FASC, the plaintiffs make claims against Tarion with respect to items it posted online including through the Ontario Builder Directory (“OBD”) between June 2019 and January 2021 that they say caused reputational damage to the plaintiffs. The plaintiffs plead in paragraph 93 that the HRCA continued to maintain the posts on the OBD from February 2021 to June 13, 2021. The claims against the HRCA post-date the issuance of the Claim.
[96] The HRCA submits that it was acting in accordance with its statutory obligations to provide information to the public pursuant to section 82(1) of the New Home Construction Licensing Act, 2017.[^25] It argues that the plaintiffs are seeking damages from the HRCA for fulfilling its consumer protection mandate.
[97] The HRCA contends that this claim is frivolous and vexatious because the HRCA was acting within its statutory mandate. I cannot make that determination on the record before me.
[98] In its factum, the HRCA alleges that if it is added as a party, then it will have lost the opportunity to litigate the issue of whether Save On should be registered before the Licensing Appeal Tribunal (“LAT”) as it settled the issue with Save On and the appeal was abandoned. However, it was not suggested that the LAT could have adjudicated the issue of whether the posts on the OBD were compliant with the legislation or defamatory.
[99] The HRCA takes the position that this is a case where the court should use its residual discretion to deny leave to add the HRCA as a party. It submitted that if the court uses it discretion to add the HRCA as a party, this may result in future claims against the regulatory authority which has limited resources. Not surprisingly, Mr. Dhillon could point me to no case where a court refused to add a party defendant because it is a public body with scarce resources. Nor did Mr. Dhillon point me to any statutory immunity or legislative provision prohibiting or prescribing suit against the HRCA. I therefore decline to exercise my discretion to refuse to add the HRCA as a party.
[100] The plaintiffs are given leave to add the HRCA as a party defendant, but only with respect to the claim for damages.
COSTS
[101] The parties filed costs outlines and made submissions on costs following the hearing. I was advised that no formal offers to settle the motion were made.
[102] Success on the motion was divided with respect to the amendment of pleadings concerning Tarion. Tarion was successful with respect to a number of paragraphs. The plaintiffs were successful with respect to more paragraphs. As set out in my endorsement of April 20, 2022, the motion was adjourned from April 21, 2022 at the request of plaintiffs’ counsel. I granted the adjournment but reserved costs of the adjournment. Both Tarion and the HRCA sought their costs thrown away. Further the way in which the FASC was drafted and presented made it extremely difficult to separate out what was new, increasing Tarion’s costs of responding.
[103] Having regard to the issue of costs holistically, and having regard to the factors set out in Rule 57.01(1), I find that it is fair and reasonable that the plaintiffs and Tarion each bear their own costs of the motion, save and except that the plaintiffs are required to pay Tarion’s costs of $7,356 (all inclusive) in respect of delivering an amended pleading and further discovery as a term of the amendment. These costs are payable within 30 days of the release of these reasons by the plaintiffs to Tarion.
[104] Although the plaintiffs were successful in obtaining leave for the HRCA to be added as a party, they were unsuccessful in their request for an amendment seeking a mandatory order. Moreover, the plaintiffs caused additional costs to be incurred by the HRCA as a consequence of the adjournment request.
[105] Having regard to the issue of costs holistically, and having regard to the factors set out in Rule 57.01(1), I find that it is fair and reasonable that the plaintiffs and the HRCA each bear their own costs of the motion.
DISPOSITION
[106] Order to go in accordance with these reasons.
L. La Horey, A.J.
Date: September 1, 2022
[^1]: R.S.O. 1990, c. O.31 [^2]: R.S.O. 1990, c. P.33 [^3]: S.O. 2002, c 24, Sch B [^4]: 2019 ONCA 407 at para 25 – 33; See also 1588444 Ontario Ltd. v. State Farm Fire and Casualty Co. 2017 ONCA 42 at para 25 [^5]: Brookfield Financial Real Estate Group Ltd. v Azorim Canada (Adelaide Street) Inc., 2012 ONSC 3818 at para 24 [^6]: Plante v Industrial Alliance Life Insurance Co., 2003 CanLII 64295 at para 21 [^7]: Klassen at para 30; Plante at para 21 [^8]: Plante at para 21 [^9]: Plante at para 21 [^10]: 2016 ONSC 6359 (Div Ct), leave to appeal to ONCA refused, February 24, 2017 (M47111). The case law on this point was recently summarized in 2250898 Ontario Inc. v Mukelova, 2022 ONSC 3075 [^11]: Farmers at para 22 [^12]: Farmers at para 31 [^13]: 2018 ONSC 1490 (Div Ct) at para 11, affirming 2017 ONSC 4196 (Master), leave to appeal to Court of Appeal denied, July 6, 2018 [^14]: Klassen v Beausoleil at para 26 [^15]: 2550898 Ontario Inc. (c.o.b. Ferrari & Associates Insurance) v. Mukelova, 2022 ONSC 3075 at para 33; Frohlick v Pinkerton Canada Ltd. 2008 ONCA 3 at para 32 [^16]: Klassen at para 32 [^17]: See Iroquois Falls Power Corp v Jacobs, 2009 ONCA 517 at para 30 [^18]: R.S.C. 1985, C. B-3 [^19]: 2016 ONSC 955 at para 23 [^20]: Plante v Industrial Alliance Life Insurance Co., 2003 CanLII 64295 (ON SC), [2003] OJ No 3034 [^21]: Steel Tree at para 24 [^22]: S.O. 2017, c. 33 [^23]: R.S.O. 1990, c.J.1 [^24]: 2016 ONSC 2416 [^25]: SO 2017, C 33, Sched. 1