OTTAWA COURT FILE NOS.: 12-56265

DATE: 2023/08/14

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Keith Murphy, in his capacity as Estate Trustee for the Estate of Mildred McMurtry

Plaintiff

– and –

John McMurtry, by his Litigation Guardian, Emily McMurtry and Mic Mac Realty (Ottawa) Ltd.

Defendants

Chris Trivisonno, for Keith Murphy in his representative capacity

Jeff Saikaley and Genevieve Therrien, for John McMurtry, by his Litigation Guardian, Emily McMurtry

Michael Hebert and Cheryl Gerhardt-McLuckie, observing for Jim McMurtry (the defendant and plaintiff by counterclaim in Court file no. 11-50312)

HEARD: July 27-28, 2023

RULING ON A MID-TRIAL MOTION

(The Estate Seeks Leave to Amend the Statement of Claim)

CORTHORN J.

Introduction

Introduction

1For more than a decade, three members of the McMurtry family have been embroiled in litigation over the ownership of ten common shares in and the historical operation of the McMurtry family business – Mic Mac Realty (Ottawa) Limited (“the Disputed Shares” and “MMR”, respectively).

2The first action was commenced by John McMurtry in 2011. John’s brother, Jim McMurtry, is the defendant and plaintiff by counterclaim in that action. The second action was commenced in 2012 by the family matriarch, Mildred McMurtry. The defendants in that action are John and MMR; only John is defending the action.

3Mrs. McMurtry passed away in 2021; her estate (“the Estate”) is continuing the 2012 action.[1] In the fall of 2015, John suffered a stroke. In 2016, he was declared incapable; his daughter, Emily McMurtry, became John’s litigation guardian for both the 2011 and 2012 actions.

4The two actions are being tried together, in two parts. Part 1 was heard in the latter half of 2015. A single issue was determined at that time – Mrs. McMurtry’s claim for a declaration that she is the owner of the Shares. The Reasons for Judgment in Part 1 were released in April 2016: McMurtry v. McMurtry, 2016 ONSC 2853, 17 E.T.R. (4th) 223 (“the First Trial Decision”), aff’d. 2017 ONCA 296, 31 E.T.R. (4th) 169 (“the Appeal Decision”).

5The outcome of Part 1 turned on principles in equity: First Trial Decision, at para. 21. It was determined Mrs. McMurtry inherited the Disputed Shares in her capacity as the residuary beneficiary of the Estate of Keith Murphy – the family patriarch, Ms. McMurtry’s late husband, and the founder of MMR: First Trial Decision, at paras. 88, 129. It was also determined that, by virtue of her conduct in the years subsequent to Keith Murphy’s death in 1998, Mrs. McMurtry was precluded by laches and estoppel from asserting a claim to ownership of the Disputed Shares: First Trial Decision, at paras. 163-185.

6Last, it was determined that, as a result of John’s reliance on Mrs. McMurtry’s conduct in the years subsequent to Keith Murphy’s death, a constructive trust is imposed with Mrs. McMurtry (and now the Estate) holding the Shares in trust for the benefit of John: First Trial Decision, at para. 25.

7In paras. 28-29 of the First Trial Decision, some of the issues to be determined when Part 2 is heard are summarized:

28The end result of the imposition of the constructive trust requires a determination of issues that were not before the Court at this stage of the proceeding. Whether John is entitled to a vesting order – with the ownership of some or all of the Shares ultimately being transferred to him – remains to be determined. The oppression remedy claims advanced by John as the plaintiff and by Jim as the plaintiff by counterclaim, both in the companion action, also remain to be determined.

29The equities with respect to these remaining matters do not begin and end with John and Mrs. McMurtry. The equities are much broader and require consideration of the position over time of each of the parties to the companion actions.

8An issue not mentioned in the paragraphs quoted above, and which remains to be determined, is Mrs. McMurtry’s (now, the Estate’s) claim for an oppression remedy.[2] On the motion before the court, the Estate seeks leave to amend the statement of claim as it relates to the oppression remedy claim. If the Estate is entirely successful on its motion, the original 14-paragraph pleading will be converted to a 111-paragraph pleading.

9The Estate asserts that the amendments are required to ensure the equities between the parties are fully addressed and the substantive dispute is fully adjudicated. The Estate portrays John as opposing the motion in an attempt to both restrict the court’s consideration of his oppressive conduct and preclude the court from granting a meaningful remedy regarding the Shares.

10The Estate brings the motion more than ten and a half years after the action was commenced and more than seven years after the First Trial Decision was released.

11In addition, it is now more than three and a half years since Mrs. McMurtry, through her former counsel, represented to the court and to John, on November 21, 2019, that she did not intend to seek leave to amend her pleading and she was ready to proceed with Part 2. At that time, Part 2 was scheduled to commence within a matter of weeks.

12A week later, and on the eve of trial, Mrs. McMurtry, through her former counsel, informed the court she intended to seek leave to amend her pleading. Mrs. McMurtry requested Part 2 be adjourned; the request for an adjournment was granted, with costs payable to John thrown away. The adjournment was granted specifically to permit Mrs. McMurtry to bring a motion for leave to amend her pleading. The motion was scheduled for March 2020; the motion did not proceed.

13Part 2 of the trial is scheduled to proceed in December 2023 and January 2024 for five weeks. At a trial management conference conducted in the first half of 2023, dates were set for this motion and examinations for discovery required based on the exchange of pleadings following this motion. Those examinations are scheduled to proceed in the latter half of September 2023. A pre-trial conference is now scheduled to proceed in late September, following those examinations.

14Despite the timing of the motion, John consents to the Estate being granted leave to make many of the proposed amendments. The amendments to which John consents are described by him as further particulars of the type of oppressive conduct alleged by Mrs. McMurtry from the outset – namely, misappropriation of funds from MMR.

15For five reasons, John opposes the Estate’s request for leave to include the balance of the proposed amendments in an amended pleading (“the contested amendments”):

1. The contested amendments raise new causes of action, all of which are statute-barred;

2. The contested amendments are significant and give rise to the requirement for additional documentary and oral discovery. John will suffer actual prejudice because he is no longer capable of participating in the litigation and because Mrs. McMurtry has passed away;

3. Some of the contested amendments amount to a collateral attack on the First Trial Decision, with the matters addressed in those amendments being res judicata;

4. The contested amendments specific to the property referred to as “Stoke Lacey”[3] do not meet the threshold required to establish a cause of action; and

5. The delay on Mrs. McMurtry’s part and, more recently, on the part of the Estate, in bringing the motion gives rise to a rebuttable presumption of non-compensable prejudice to John; in John’s submission, the Estate has not rebutted that presumption.

16I will next review the original pleading and the proposed amended pleading.

The Original and Proposed Amended Pleading

a) The Original Pleading

The Original and Proposed Amended Pleading

17The original pleading sets out the claims for ownership of the Disputed Shares and for an oppression remedy. The original pleading includes the prayer for relief (paras. 1(a)-(k)); a summary description of the parties (paras. 2-3); the bases for Mrs. McMurtry’s claim to ownership of the Disputed Shares (paras. 4-11), and an allegation of misconduct on John’s part (para. 12). Paragraph 13 of the original pleading simply repeats the request for the relief listed in the first paragraph. The original pleading concludes, in para. 14, with a request for the 2012 action and the 2011 action to be tried together.

18Although not described as such, the particulars of oppressive conduct are set out in paragraph 12 of the original pleading: “The Plaintiff further states that she has become aware of the many inappropriate actions of the Defendant, John McMurtry with respect to the operation of [MMR.] In this regard she adopts and relies on the allegations contained in [Jim’s pleading]”. The relief sought based on the oppression remedy claim is,

• a declaration that John engaged in oppressive conduct (para. 1(c));

• John’s removal “from any and all positions which he holds in any capacity in [MMR]” (para. 1(d));

• a valuation and the liquidation of MMR’s assets (para. 1(e));

• damages to be paid by John (para. 1(f));

• repayment by John to MMR of “all funds since 1998 that were misappropriated by him or for his benefit” (para. 1(g)); and

• “a full accounting of all personal expenses charged by John McMurtry to [MMR] and repayment of same” (para. 1(h)).

19The manner in which the claim for an oppression remedy is pleaded is central to John’s response to the motion for leave to amend. John describes the oppressive conduct originally alleged as restricted to misappropriation of funds for his personal benefit or as directed by him for the benefit of others. John consents to the Estate being granted leave to amend the original pleading to provide further or better particulars of conduct which falls within the scope of the alleged misappropriation of funds.

20For example, John consents to the proposed amendments alleging the declaration by John, or more recently by his wife Brenda McMurtry, of dividends payable only to John (paras. 44-50 and 51-56 of the proposed pleading). The dividends are alleged to have been declared in the years 2012 to 2022 and to total in excess of $1,380,000.

21As another example of further and better particulars of the oppressive conduct originally alleged, John consents to the amendments related to the use of MMR funds by John and his family members to pay personal expenses (paras. 65-73 of the proposed pleading).

22Last, John consents to the inclusion in the amended pleading of more fully particularized relief requested based on either of the two forms of misappropriation of funds described in paragraphs 20 and 21, above. The more fully particularized relief includes a request for Brenda’s removal from any position which she holds with MMR. The additional forms of relief to which John consents are set out in paras. 1(f), (g), (h), (i-i), (i-iii), (i-v), and (j) of the proposed pleading.

23There are, however, numerous proposed amendments to which John does not consent (“the contested amendments”).

b) The Proposed Amended Pleading

The Proposed Amended Pleading

24In the proposed pleading, the following headings are used to identify the topics covered in the document:

• Background, Parties and Relevant Persons (paras. 2-8);

• Background to Mildred’s Shares (paras. 9-21);

• John Takes Over Stoke Lacey (paras. 22-30);

• John Pressures His Mother to Sign Over the Tin House[4] and Then Evicts Her (paras. 31-39);

• The 2015 Trial and the Constructive Trust (paras. 40-43);

• John (or Brenda) Declares Significant Dividends (paras. 44-56);

• John Fails to Pay Property Taxes and Other Liabilities (paras. 57-64);

• John and his Family use Company Funds to pay Personal Expenses (paras. 65-73);

• Sandra Stapledon Loans (paras. 74-85);

• John Agrees to a Sale of Stoke Lacey that Benefits John and his Family (paras. 86-93);

• John has Never Completed Audited Financial Statements for the Company (paras. 94-97);

• The Estate Has Been Oppressed (para. 98);

• Mic Mac Should be Wound Up (paras. 99-102); and

• No Entitlement to a Constructive Trust or a Vesting Order (paras. 103-109).

25The final two paragraphs of the proposed pleading are not substantive; John consents to the proposed amendments to those paragraphs.

26The Estate’s primary position is the contested amendments do nothing more than provide further and better particulars of how John has, over the years, misappropriated funds from MMR (i.e., as alleged in the original pleading). The Estate’s alternative positions are discussed below, where relevant to one or more of the grounds upon which John relies in opposing the motion.

27John asserts the contested amendments address allege oppressive conduct, which is distinct from the type of oppressive conduct originally alleged (i.e., the payment of personal/family expenses and the declaration of dividends). For example, the proposed allegations related to the failure to pay property taxes and other corporate liabilities are said by John to be distinct from either the use of MMR funds to pay personal/family expenses or the declaration of dividends.

The Issues

The Issues

28The issues to be determined regarding the contested amendments are as follows:

1. Do the contested amendments raise new causes of action?

2. For any of the contested amendments that raise a new cause of action, is the claim statute-barred?

3. Do the allegations regarding the sale of Stoke Lacey meet the threshold required to establish a cause of action?

4. Regardless of whether any new causes of action are statute-barred, should leave to amend be refused because granting such leave will cause John actual prejudice in the litigation?

5. Regardless of whether any new causes of action are statute-barred, does Mrs. McMurtry’s, and now the Estate’s, delay in bringing the motion give rise to a rebuttable presumption of non-compensable prejudice and, if so, has the Estate rebutted that presumption?

6. Is the subject matter of any of the contested amendments res judicata?

7. Is the Estate entitled to leave to include the proposed amendments identified as made solely in support of the amended claims for declaratory relief?

29Before addressing the issues, I will review the law generally regarding pleadings, leave to amend a pleading, and pleading an oppression remedy claim.

The Law – Pleadings, Amending Pleadings, and Oppression Remedy Pleadings

a) The Requirements for a Pleading

The Law – Pleadings, Amending Pleadings, and Oppression Remedy Pleadings

30The requirements for a pleading are prescribed by r. 25.06(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194: “Every pleading shall contain a concise statement of the material facts on which the party relies for the claim or defence, but not the evidence by which those facts are proved.”

31The practical implications of those requirements are addressed by the Court of Appeal for Ontario in Burns v. RBC Life Insurance Company, 2020 ONCA 347, 151 O.R. (3d) 209. At para. 16, the Court explains, “Each defendant named in a statement of claim should be able to look at the pleading and find an answer to a simple question: What do you say I did that has caused you, the plaintiff, harm, and when did I do it?”

b) Amending a Pleading

32The general power of the court on a motion for leave to amend a pleading is set out in r. 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 an adjournment or costs.”

33In Farmers Oil and Gas Inc. v. Ontario (Natural Resources), 2016 ONSC 6359, 134 O.R. (3d) 390, Nordheimer J. (as he then was) reviewed the approach to be taken by the court on a motion for leave to amend:

• The starting point is to read the original pleading “generously and with due allowance for drafting deficiencies” (at para. 23);

• A “factually oriented approach to the meaning of a cause of action” is to be taken (at para. 14); and

• Assuming the defendant has notice of the factual matrix underlying the claim being advanced, then the proposed amendments “that arise out of, or do not depart from, that factual matrix do not constitute ‘new’ causes of action that would not be allowed by way of amendment” (at para. 14).

34At para. 31, Nordheimer J. summarizes the approach: “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.”

35At para. 19 of the decision in 1100997 Ontario Limited v. North Elgin Centre Inc., 2016 ONCA 848, 409 D.L.R. (4th) 382, quoting Letang v. Cooper, [1965] 1 Q.B. 232 (C.A.), at pp. 242-43, the Court of Appeal defines a cause of action as a “factual situation the existence of which entitles one person to obtain from the court a remedy against another person.”

36The following passage from Morden & Perrell, The Law of Civil Procedure in Ontario, 2nd ed. (Markham: LexisNexis Canada Inc., 2014), at p. 142, is frequently cited to explain when a proposed amendment does not constitute a new cause of action:

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 plead or additional facts upon which the original right of action is based. [Emphasis in original.]

37Leave to amend will be refused when the proposed amendment seeks to advance, after the expiry of a limitation period, a fundamentally different claim based on facts not originally pleaded: 1100997 Ontario Limited, at para. 23.

c) Oppression Remedy Pleadings

38The oppression remedy section of the Business Corporations Act, R.S.O. 1990, c. B.16 (“OBCA”), “is drafted in the broadest possible terms to respond to the broadest range of corporate malfeasance”: Maurice v. Alles, 2016 ONCA 287, 130 O.R. (3d) 452, at para. 52. This statutory cause of action is to be given a “broad purposive interpretation”: Maurice, at para. 54.

39Interpreting the statutory provision in a broad purposive manner and applying the oppression remedy to the broadest range of corporate malfeasance does not, however, mean the requirements for a pleading in oppression remedy are somehow less stringent than those for any other cause of action. For example, bald allegations of oppression lacking in particulars of any wrong done to the interest of the plaintiff or otherwise are not sufficient: 790668 Ontario Inc. v. D’Andrea Management, 2016 ONSC 4657, at para. 191.

40I turn next to the issues, starting with Issue No. 1 – whether the proposed amendments raise new causes of action.

Issue No. 1 - Do the contested amendments raise new causes of action?

Issue No. 1 - Do the contested amendments raise new causes of action?

41For this issue, I focus on the following three categories of amendments:

• John Fails to Pay Property Taxes and Other Liabilities (paras. 57-64);

• Sandra Stapledon Loans (paras. 74-85); and

• John has Never Completed Audited Financial Statements for the Company (paras. 94-97).

42I will review the three categories of alleged oppressive conduct in the order in which they are listed above.

a) John Fails to Pay Property Taxes and Other Liabilities

43The amendments under this heading relate to property tax arrears alleged to have accumulated over time for two properties owned by MMR – 2678 Mic Mac Street and 2636 Mic Mac Street ( “the property tax allegations” and “the Mic Mac Properties”, respectively). I find the property tax amendments do not fall within the four corners or factual matrix of the original pleading.

44First, there is nothing in the original pleading, standing on its own, that would give John notice Mrs. McMurtry alleges he failed to direct that property taxes owed by MMR and other corporate liabilities be paid (i.e., whether for the Mic Mac Properties or otherwise).

45Second, if John were to consider the content of Jim’s pleading (as directed in para. 12 of the original pleading[5]), it does not mention a failure by John to direct that the property taxes for the Mic Mac Properties be paid. The only reference in Jim’s pleading to unpaid property taxes is to arrears of taxes as of June 2009 for Stoke Lacey. Jim alleges steps were taken to secure funds with which to pay the $280,000 of property taxes said by John to be owing for Stoke Lacey at the time.

46Third, there is nothing in the prayer for relief in the original pleading or in Jim’s pleading that would give John notice the alleged oppressive conduct and oppression remedies claimed in any way relate to the failure to pay property taxes for the Mic Mac Properties.

47The property tax allegations constitute a fundamentally different claim in oppression and amount to a new cause of action. For the same reasons, the relief claimed at para. 1(i-ii) regarding the failure to pay property taxes, does not constitute a claim for alternative relief arising out of facts originally pleaded.

48It remains to be determined whether this new cause of action is statute-barred (Issue No. 2) or leave to amend is, in any event, refused because of actual prejudice (Issue No. 4) or an unrebutted presumption of non-compensable prejudice (Issue No. 5).

b) The Loans to Sandra Stapledon

49The Estate alleges John engaged in oppressive conduct in the form of loans made to MMR by MMR’s accountant, Sandra Stapledon (“the Stapledon loan allegations”). The loans are described as “short-term” and alleged to total in excess of $1,100,000. The allegations include,

• the loans were made by Ms. Stapledon to MMR in each fiscal year from 2014 through 2021;

• many of the loans were repaid on the same day they were made or within a month of the date on which they were made; and

• at the same time the loans were being made by Ms. Stapledon, MMR was paying her for professional fees and other reasons.

50At para. 84 of the proposed pleading, the Estate alleges, “To the extent that John or his family benefitted or [MMR] was injured by [the Stapledon loans], John should be required to reimburse MMR.”

51The Stapledon loan allegations do not explicitly include an allegation of “misappropriation” of MMR funds on John’s part. The lack of the use of the term “misappropriation” is not, however, determinative of the issue of whether those allegations fall within the four corners or factual matrix of the original pleading.

52I find the Stapledon loan allegations address a potential diversion of MMR funds from the corporation for John’s benefit, and/or to the financial detriment of the corporation. The Stapledon loan allegations therefore fall within the four corners of the relief requested in para. 1(g) of the original pleading – namely, an order requiring John to repay “all funds since 1998 misappropriated by him or for his benefit.”

53Put another way, the Stapledon loan allegations are connected to the further and better particulars, to which John consents, of the alleged misappropriation of funds by way of payment of personal and/or family expenses and the declaration of dividends. The Stapledon loan allegations are additional facts upon which the original oppression claim is based.

54I reach this conclusion based exclusively on the wording of the original pleading; I do not rely in any way on the wording of Jim’s pleading.

55As the Stapledon loan allegations do not amount to a new cause of action, they are not statute-barred (Issue No. 2). It remains to be determined, however, whether leave to include those allegations in the amended pleading is refused because of either actual prejudice (Issue No. 4) or an unrebutted presumption of non-compensable prejudice (Issue No. 5).

c) The Alleged Failure to Complete Audited Financial Statements

56I refer to these allegations as “the financial statement allegations”. I find these allegations do not fall within the four corners or factual matrix of the original pleading. The financial statement allegations raise a new cause of action.

57First, there is nothing in the original pleading, standing on its own, that would give John notice Mrs. McMurtry alleges oppressive conduct based on the manner in which MMR’s financial records are maintained.

58The only corporate record mentioned in the original pleading is the MMR Minute Book. In para. 1(b) of the original pleading, Mrs. McMurtry requested the Minute Book be updated to reflect Ms. McMurtry’s ownership of the Disputed Shares. The Estate does not propose any amendments to para. 1(d) and includes that paragraph in the proposed pleading.

59In his pleading, Jim alleges that neither he nor his mother were ever provided with “a financial statement for the company” (para. 13 of Jim’s pleading). Jim also addresses efforts he made to have MMR’s books and records for 2009 reviewed and the irregularities found in the documents reviewed for that year (paras. 16-19 of Jim’s pleading). Jim does not, however, allege that John failed to have audited financial statements for MMR completed.

60Third, there is nothing in the prayer for relief in the original pleading (or Jim’s pleading) to give John notice that the oppressive conduct alleged includes failure to have audited financial statements completed for MMR.

61I mention Jim’s pleading but do not rely on its contents to determine Issue No. 1, as it relates to the financial statement allegations.

62It remains to be determined whether this new cause of action is statute-barred (Issue No. 2) or leave to amend is, in any event, refused because of actual prejudice (Issue No. 4) or an unrebutted presumption of non-compensable prejudice (Issue No. 5) arising from the financial statement allegations.

d) Conclusion – Issue No. 1

63The property tax allegations and the financial statement allegations constitute new causes of action. They are both addressed under Issue Nos. 2 (statute-barred), 4 (actual prejudice), and 5 (rebuttable presumption of non-compensable prejudice).

64The Stapledon loan allegations do not constitute a new cause of action; they are not statute-barred. These allegations are, however, addressed under Issue Nos. 4 (actual prejudice) and 5 (rebuttable presumption of non-compensable prejudice).

Issue No. 2 - If any of the contested amendments raise a new cause of action, are the claims statute-barred?

a) The Discoverability Principle is not Relevant

Issue No. 2 - If any of the contested amendments raise a new cause of action, are the claims statute-barred?

65In response to the Estate’s motion, John relies on Brenda’s June 2023 affidavit. At paras. 15-21 of her affidavit, Brenda addresses proposed amendments which she asserts and John submits constitute causes of action that were “discovered” more than two years ago.

66The Estate does not rely on the discoverability principle in s. 5 of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B. That position was confirmed by the Estate’s counsel on the return of the motion. The proposed pleading does not, in any event, include allegations which address the discoverability principle.

b) The Evidence

67The Estate did not deliver a reply affidavit. Brenda was not cross-examined on her affidavit. As a result, Brenda’s evidence as to when Mrs. McMurtry or the Estate had knowledge of various matters is uncontradicted and unchallenged.

68John was examined for discovery in October 2013 and August 2014. The exhibits to Brenda’s affidavit include excerpts from the transcript of that examination. The exhibits also include a chart of undertakings given during the latter portion of John’s examination and answers to the undertakings.

69Last, the exhibits include copies of three affidavits – two sworn by Jim (one in August 2016 and the other in November 2019) and one sworn by a legal assistant to Mrs. McMurtry’s former counsel (in November 2019).

70John relies on the contents of the exhibits to Brenda’s affidavit as evidence of when matters were known to Mrs. McMurtry.

71I will deal first with the property tax allegations and then with the financial statement allegations.

c) The Two New Causes of Action

i) John Fails to Pay Property Taxes and Other Liabilities

72Based on the exhibits to Brenda’s affidavit, I find that Mrs. McMurtry was aware by no later than November 2019 of the arrears of property taxes which had accumulated regarding both Stoke Lacey and the Mic Mac Properties.

73Item 23 of the undertakings chart (Exhibit ‘S’), is “To ask Brenda if she had a discussion with [MMR’s external accountant] about using rent payments from tenants to pay down tax arrears.” As recorded in the chart, the answer to the undertaking is that Brenda does not recall having such a conversation. I find that the potential for arrears of property taxes to have accumulated, including for the Mic Mac Properties, was known to the parties by August 2014 when the undertaking was given.

74I also consider the contents of Jim’s 2016 affidavit. It relates to a motion made pursuant to the court’s July 2016 trial management conference endorsement. The motion was intended to address gathering, and the presentation at trial of, evidence about MMR’s financial affairs.

75At para. 10 of his 2016 affidavit, Jim says the financial evidence required for Part 2 of the trial includes evidence to permit the court to “quantify any tax or other liabilities [MMR] may have.” At para. 30(iii) of his 2016 affidavit, Jim addresses the property tax arrears for the Mic Mac Properties:

The troublesome issue here is the majority of property taxes relate to the commercial rental premises on Mac Street, which have triple net leases, usually for 5 years. This means that [MMR] is collecting the taxes from the tenants, but not remitting the money to the city. What did John and Brenda do with the tenant’s tax money over all those years and what is the status this year? It’s a big number, easily over half a million dollars by now.

76In his November 2019 affidavit, Jim once again addresses property tax arrears. In paras. 18-19 of that affidavit, Jim says,

18. Also on the October 2019 motion I showed in my affidavit that $305,000 in property tax arrears had also accumulated on the Mac Street commercial rental properties. This despite the fact the tenants are on triple-net leases whereby the tenants pay the property tax as part of their monthly rent.

19. Thus John and Brenda are collecting the Mac Street taxes but failing to remit payments to the City. The unremitted funds are then avail able for John and Brenda’s continuing course of conduct to drain the company.

77Through their respective counsel, Jim and Mrs. McMurtry had the same information available to them about the state of MMR’s financial affairs and about how John and Brenda were collectively carrying out MMR’s business on a day-to-day basis.

78The two-year limitation period for the addition of a cause of action in oppression based on the failure to pay property taxes expired no later than November 2021 (i.e., two years after the date of Jim’s 2019 affidavit).

79There are several paragraphs in other sections of the proposed pleading which also refer to “tax liabilities” or “property taxes and other debts”, all of which are alleged to have accrued because of John’s failure to pay the taxes and/or debts. Leave to include those paragraphs in the amended pleading is also refused – because those paragraphs relate to a statute-barred cause of action. For clarity, the additional paragraphs are,

• paras. 1(i-ii);

• the first sentence of para. 7;

• the phrase “incurred significant liabilities and unjustifiable tax liabilities to the Corporation”, as it appears in para. 43;

• para. 51;

• para. 98(b); and

• para. 109(d).

80The subject heading for the property tax allegations includes the term “Other Liabilities”. I note, however, that the only topic covered in this section of the proposed pleading is the property tax arrears for Mic Mac Properties.

ii) John has Never Completed Audited Financial Statements for the Company

81Based on Brenda’s evidence, I find that Mrs. McMurtry was aware no later than August 2014 that John had not been arranging and did not intend to arrange for audited financial statements to be prepared for MMR.

82During the second portion of his examination for discovery, John answered questions related to the financial statements for MMR for the fiscal year ending in 2014. John’s evidence was the financial statements yet to be completed for that fiscal year would not be audited. He expressed a belief that it was not necessary for the financial statements to be audited – even in the face of questions arising during litigation related to MMR. That belief was based on John’s view that MMR is “a small company”.

83More than two years have passed since Mrs. McMurtry was aware of the circumstances giving rise to the cause of action in oppression set out in the financial statement allegations – the cause of action is statute-barred.

84Leave to amend is refused for the related allegations in paras. 97 and 98(d)-(e) of the proposed pleading:

• Proposed para. 97 is an allegation that “an audit is necessary and the failure to conduct one, as required, is oppressive”;

• Proposed para. 98(d) alleges that John failed “to produce information concerning the business”; and

• Proposed para. 98(e) is a reference to a failure to complete audited financial statements for MMR as part of the list of John’s conduct by which Mrs. McMurtry was and it has been oppressed.

d) Conclusion – Issue No. 2

85Both the property tax allegations and the financial statement allegations are statute-barred.

Issue No. 3 - Do the allegations regarding the sale of Stoke Lacey meet the threshold required to establish a cause of action?

a) Background

Issue No. 3 - Do the allegations regarding the sale of Stoke Lacey meet the threshold required to establish a cause of action?

86It is undisputed that, prior to the Estate changing counsel in 2021, Mrs. McMurtry’s former counsel was not involved in the efforts then being made to sell Stoke Lacey; only John and Jim, through their respective counsel, were involved in those efforts. It was not until the fall of 2021 that the Estate, through its current counsel, became involved in the potential sale of Stoke Lacey.

87It is also undisputed that, once the Estate Trustee became aware of the existence of the agreement of purchase and sale that was ultimately negotiated (“the APS”), the Estate, through its counsel, made John and Jim aware of the Estate’s position on the sale. By letter dated September 2021, the Estate’s counsel informed John’s and Jim’s respective counsel of that position: “Having now had the chance to review the APS, we are concerned that the transaction is not in the best interests of either [MMR] or the Estate [] as majority shareholder of Mic Mac.”

88In the September 2021 letter, the Estate’s counsel suggested that John and Brenda (as opposed to MMR) pay the expenses associated with Stoke Lacey for the two years John and Brenda will be continuing to live at the property, rent-free, following the closing of the sale. John and Brenda did not agree to do so.

89In the end, the Estate’s counsel informed John’s and Jim’s respective counsel that the Estate does not consent to the sale of Stoke Lacey on the terms in the APS. The Estate would not, however, “take any steps to stand in the way of the transaction, in view of the proceeds that will come to Mic Mac”.

90The sale of Stoke Lacey ultimately closed in September 2022, with a purchase price in excess of $5,000,000. It appears that the property tax arrears on Stoke Lacey were paid at the time of the sale. It also appears that John, Jim, and the Estate agree the proceeds from the sale will be held in trust, subject to an agreement or an order of the court providing for a portion of the proceeds to be applied towards MMR’s outstanding liabilities. No order has been made for any portion of the proceeds to be released from trust.

b) The Stoke Lacey Allegations

91The allegations regarding Stoke Lacey are made under the heading, “John Agrees to a Sale of Stoke Lacey that Benefits John and his Family”. The oppressive conduct alleged is that the terms of the APS include,

a) John and Brenda have the right to continue to occupy Stoke Lacey, rent-free, for two years following the closing of the sale;

b) MMR extended an interest-free, vendor take-back mortgage of $2,700,000 for two years;

c) the purchaser’s offer was accepted over other offers which provided for full payment of the purchase price on closing; and

d) the terms of the APS violate the reasonable expectations of the Estate regarding Stoke Lacey as one of MMR’s assets.

c) The Positions of the Parties

92John’s position is the Stoke Lacey allegations are not sufficient to raise a cause of action in oppression. John submits the allegations do not include either (a) the Estate’s reasonable expectations specific to the sale, or (b) how the Estate’s expectations were violated by the sale.

93In response, the Estate relies on para. 16 of the proposed pleading. The Estate alleges therein, “Mildred had a reasonable expectation that the Defendant, John McMurtry, would be honest and forthright and would act in the best interests of the company.” In addition, the Estate relies on s. 134 of the OBCA. That statutory provision is pleaded and relied on at para. 110 of the proposed pleading.

94The Estate’s position is the reasonable expectations particularized in para. 16 of the proposed pleading and s. 134 of the OBCA are the most basic of reasonable expectations that any shareholder would hold.

d) Analysis

95On the return of the motion, John consented to the inclusion of para. 16 of the proposed pleading in the amended pleading for the purpose of particularizing Mrs. McMurtry’s, and now the Estate’s, reasonable expectations in the context of the oppression remedy claims the Estate has pursued to date and, on this motion, is granted leave to pursue.

96When para. 16 is read together with the Stoke Lacey allegations (paras. 86-93), the Estate’s reasonable expectations regarding the sale and how those expectations were violated by the sale are sufficiently particularized to meet the requirements of an oppression remedy claim. In summary, the Estate alleges John put his and Brenda’s interests ahead of MMR’s interests and did so to the financial detriment of MMR.

97With the transaction having been negotiated in 2021 and closed in 2022, the claim for an oppression remedy arising from the sale of Stoke Lacey is not statute-barred. In any event, John does not rely on the expiration of the limitation period to oppose leave being granted to the Estate to include the Stoke Lacey allegations in the amended pleading.

98Granting leave to the Estate to pursue the Stoke Lacey allegations does not give rise to actual prejudice to John. His incapacity to participate in the discovery process or at trial is not relevant to this claim. By the time the terms of the APS were negotiated, John was incapable. John was not personally involved in the sale of Stoke Lacey.

99Given the absence of any delay in the pursuit of the Stoke Lacey allegations, they are not considered under Issue No. 5.

e) Conclusion – Issue No. 3

100The Estate is granted leave to include paras. 86-93 in the amended pleading. The Estate is also granted leave to include in the amended pleading the relief set out in para. 1(i-vi) of the proposed pleading; that relief relates to the Stoke Lacey allegations. These allegations are not statute-barred (Issue No. 2), do not give rise to actual prejudice (Issue No. 4), and do not give rise to a rebuttable presumption of non-compensable prejudice (Issue No. 5).

Issue No. 4 - Regardless of whether any new causes of action are statute-barred, should leave to amend be refused because granting such leave will cause John actual prejudice in the litigation?

a) The Positions of the Parties

Issue No. 4 - Regardless of whether any new causes of action are statute-barred, should leave to amend be refused because granting such leave will cause John actual prejudice in the litigation?

101John’s position is that – other than for the Stoke Lacey allegations – he will suffer actual prejudice if the Estate is granted leave to include the proposed oppression remedy claims in the amended pleading.

102John submits that actual prejudice arises because all of the examinations for discovery were conducted prior to the hearing of Part 1 of the trial. It has been nine years since John was examined for discovery. As a result of the passage of time and John’s incapacity (since 2016), John is no longer in a position to respond to the claims being made against him. In addition, John submits that actual prejudice arises because of the death of Mrs. McMurtry in 2021. She is no longer available to participate in either the discovery process or at trial.

103John’s position is that the loss, through incapacity or death, of evidence of key witnesses – including party witnesses – amounts to actual prejudice.

104In response, the Estate makes the following submissions. First, there is no actual prejudice because most of the proposed amendments relate to conduct that was ongoing or had not occurred prior to the commencement of Part 1 in the fall of 2015. The Estate points to the increase in the arrears of property taxes and the tripling of the dividends declared in John’s favour subsequent to the completion of Part 1.

105Second, the Estate submits that if, prior to the commencement of Part 1, John had concerns about the original pleading, there were several options available to him to address those concerns. For example, he could have served a demand for particulars and/or brought a motion to strike all or a part of the original pleading.

106Third, and more generally, the Estate submits that, to the extent any prejudice arises from two party witnesses no longer being available to participate in the litigation, then both parties are prejudiced. The Estate’s position is that the death of a party should not be a basis for refusing, the estate to which the deceased person’s interest in litigation is transmitted, leave to amend the deceased party’s pleading.

b) Analysis

i) Steps John Could Have Taken Prior to Part 1 of the Trial

107I start with the Estate’s submission that John’s concerns about the original pleading could have been addressed prior to the commencement of Part 1. John could have taken either of the procedural steps suggested by the Estate. He may, however, have had several reasons for doing nothing more than delivering a statement of defence.

108It may have been a strategic decision on John’s part not to serve a demand for particulars of the alleged oppressive conduct upon which Mrs. McMurtry was relying. He may have viewed taking that step as being of more assistance to Mrs. McMurtry than to him and decided, instead, to address at trial any substantive deficiencies in the original pleading.

109It was not incumbent upon John to take steps to assist Mrs. McMurtry in shoring up deficiencies in her pleading. The submission about steps that John could have taken prior to the commencement of Part 1 does not assist the Estate on the issue of actual prejudice.

ii) The Alleged Conduct is Ongoing

110The Estate’s position is the proposed amendments do not give rise to actual prejudice because they are based on conduct which is ongoing and the majority of which occurred subsequent to the commencement of Part 1.

111For this submission, I distinguish between the Stapledon loan allegations (not statute-barred) and the property tax allegations and financial statement allegations (statute-barred). I start with the Stapledon loan allegations.

• The Stapledon Loan Allegations

112The sole form of alleged oppressive conduct upon which Mrs. McMurtry originally based her claim for oppressive relief was misappropriation of funds. There is no mention in the original pleading of the method(s) by which Mrs. McMurtry alleges John misappropriated funds. Regardless, John does not dispute that he understood, prior to the commencement of Part 1, the alleged misappropriation included the use of MMR funds to pay personal/family expenses and the declaration of dividends to John only.

113As of the date on which Part 1 commenced, a detailed review of MMR’s financial records had not been completed and was ongoing. It would not have been possible, as of the commencement of Part 1, for Mrs. McMurtry to have a full appreciation of (a) the financial situation of MMR over time, (b) the alleged irregularities in MMR’s finances and/or financial records, and (c) potential causes of those alleged irregularities. Specifically, Mrs. McMurtry would not have known whether those potential causes included forms of misappropriation of funds other than the use of MMR funds to pay personal/family expenses and the declaration of dividends to John only.

114Mrs. McMurtry, the Estate, and Jim have historically taken the position that John and/or Brenda caused or contributed to the delays encountered in the completion of a detailed review of MMR’s financial records. It would be unfair to the Estate to preclude it from fully pursuing the only basis of alleged oppressive conduct because of a delay for which it may not be entirely responsible (if responsible at all).

115I next consider the period during which the Stapledon loans are alleged to have been made – MMR’s fiscal years 2014 through 2021. Depending on when fiscal year 2014 ended, it is possible John had little or nothing to do with the Stapledon loans. He may, at most, have been aware of the loans for one or two fiscal years prior to his stroke in the fall of 2015.

116Witnesses other than John are available to testify about the Stapledon loans. There is no evidence to suggest Ms. Stapledon is no longer available to testify. Brenda’s evidence is that she has “been involved in the management and day-to-day operation of Mic Mac with John since the 1980s.” She is in a position to testify about MMR’s management and operation from fiscal year 2014 and to the present – including for the period during which John was and remains incapacitated. I find the loss of John’s evidence on the subject of the Stapledon loans gives rise to little, if any, actual prejudice to John.

117I find the loss of Mrs. McMurtry’s evidence in support of this component of the oppression remedy claim does not give rise to actual prejudice. Evidence in support of this component of the claim is anticipated to be given by the individuals who reviewed MMR’s financial records. John continues to have the right to cross-examine those witnesses.

118Had she been alive at the time of Part 2, the court would have expected to hear from Mrs. McMurtry as to her reasonable expectations regarding the Stapledon loans. As noted in an earlier section of this ruling, the pleading sets out the most basic of reasonable expectations for any shareholder. John’s loss of the opportunity to cross-examine Mrs. McMurtry on those expectations gives rise to minimal, if any, actual prejudice.

119I find the prejudice to the Estate of refusing to grant leave to include the Stapledon loan allegations in the amended pleading far outweighs the actual prejudice, if any, to John of granting leave to add those allegations to the two existing categories of alleged misappropriation of funds.

• The Property Tax Allegations and Financial Statement Allegations

120Under Issue No. 2, I conclude that the allegations under these two categories of proposed amendments are statute-barred. I leave that conclusion aside for the moment to answer the following question: Would leave to include the property tax allegations and financial statement allegations be refused in any event because those allegations give rise to actual prejudice to John? I answer the question in the affirmative.

121The property tax allegations and financial statement allegations span a period commencing prior to 2012 (the year in which this action was commenced) and continuing to the current year. In total, the allegations span a period of more than eleven years.

122Approximately the first three years of that eleven-plus-year period were prior to John becoming incapacitated by reason of a stroke. During the first three years, and on the understanding the scope of the alleged oppressive conduct to which he is required to respond is restricted to the misappropriation of funds, John,

• delivered a 20-paragraph statement of defence in response to the 14-paragraph original pleading;

• addressed his documentary and oral discovery obligations;

• prepared for and participated in Part 1; and

• continued to manage MMR.

123I take judicial notice of the fact that a responsible litigant considers their settlement options while litigation is ongoing. I draw an inference and find that, in the same three-year period, John considered his settlement options on the understanding the alleged oppressive conduct to which he is required to respond in this action is restricted to misappropriation of funds.

124The Estate’s position is that such a general consideration of the history of the litigation is not sufficient to support a finding of actual prejudice. I disagree.

125I find that, eight years after John’s stroke and eleven years after the action was commenced, it would require significant effort and resources on John’s part, and on the part of his counsel, to review the pleadings; the transcripts from the examinations for discovery; the Schedule ‘A’ documents listed by the parties in their respective affidavits of documents; and any other documents that may be relevant to the property tax allegations and financial statement allegations and then assess, in hindsight, the impact those allegations would have had on John’s defence to the action. I find that being put in the position of having to do that work in response to the motion – approximately four and a half months prior to the date on which Part 2 is scheduled to commence – gives rise to actual prejudice in two ways.

126First, there is the actual prejudice of having to expend the effort and incur the cost of the work. That form of prejudice is compensable in costs or by an adjournment. Regardless, requiring John and his counsel to carry out that work would,

• effectively require them to reconsider the entirety of the litigation to date;

• be unreasonable and unfair to John;

• not be cost-effective; and

• run contrary to the general principle under r. 1.04(1) of the Rules of Civil Procedure. Pursuant to that rule, the parties are entitled to “secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.”

127Second, and in terms of an adjournment, there is no evidence as to how long it would take John and his counsel to carry out the review described above. How many weeks or months would they require to complete that work and be in a position to respond to the motion for leave to include the property tax allegations and financial statement allegations in the amended pleading? Regardless of how many weeks or months that work might take, it would be necessary to adjourn Part 2. I find it would be unreasonable and unfair to John, and unjust in the overall circumstances of the litigation, to adjourn Part 2 yet again.

c) Conclusion – Issue No. 4

128There is minimal, if any, actual prejudice to John if the Estate is granted leave to include the Stapledon loan allegations in the amended pleading. That prejudice, if it exists, is not a sufficient reason to refuse the Estate’s request for leave to include the Stapledon loan allegations in the amended pleading.

129Actual prejudice to John does, however, arise from the proposed property tax allegations and financial statement allegations. Actual prejudice is another reason why leave to include those allegations in the amended pleading is refused.

Issue No. 5 - Regardless of whether any new causes of action are statute-barred, does Mrs. McMurtry’s, and now the Estate’s, delay in bringing the motion give rise to a rebuttable presumption of non-compensable prejudice and, if so, has the Estate rebutted that presumption?

Issue No. 5 - Regardless of whether any new causes of action are statute-barred, does Mrs. McMurtry’s, and now the Estate’s, delay in bringing the motion give rise to a rebuttable presumption of non-compensable prejudice and, if so, has the Estate rebutted that presumption?

130Regardless of the conclusions reached under Issue Nos. 1, 2, and 4, and by virtue of the delay in bringing the motion, do the property tax, financial statement, and/or Stapledon loan allegations give rise to a rebuttable presumption of non-compensable prejudice? John answers that question in the affirmative; the Estate answers it in the negative.

a) The Law

131In Family Delicatessen Ltd. v. London (City), 2006 CanLII 5135 (Ont. C.A.), the Court of Appeal for Ontario considers the significance of inordinate delay prior to bringing a motion for leave to amend a statement of claim. At para. 6, the Court summarizes the rebuttable presumption of non-compensable prejudice to the defendants that can arise:

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.

132As recently as 2023, the Court of Appeal relied on the rebuttable presumption of non-compensable prejudice by reason of inordinate delay when the Court upheld a motions judge’s decision to refuse a plaintiff leave to make some of the plaintiff’s proposed amendments to their statement of claim: Horani v. Manulife Financial Corporation, 2023 ONCA 51. In Horani, the motion for leave to amend was brought seven and a half years after the incident in question, four years after the action was set down for trial, and six weeks before the trial was scheduled to proceed.

133For the rebuttable presumption of non-compensable prejudice to arise, the prejudice must be causally connected to the proposed amendments and not flow from some other source: Broome v. Western Assurance, 2023 ONSC 172, at para. 13; Horani, at para. 35.

134There is no fixed point in a proceeding at which the rebuttable presumption of non-compensable prejudice arises and the onus shifts to the moving party to rebut the presumption: see e.g., 1588444 Ontario Ltd. v. State Farm Fire and Casualty Company, 2017 ONCA 42, 135 O.R. (3d) 681, at para. 38. There is no rigid test to be met by the moving party in attempting to rebut the presumption: State Farm, at para. 41.

135What underlies the court’s recognition of the rebuttable presumption of non-compensable prejudice are “fairness considerations”: State Farm, at para. 42.

b) Analysis

136I find the delay in bringing the motion for leave to amend the original proceeding is inordinate. I rely in part on the fact that the parties have been before me, in my capacity as the trial judge, on numerous occasions since the release of the First Trial Decision. The transition from Part 1 to Part 2 and the commencement of the trial in John’s action and Jim’s counterclaim has been judicially managed.

137The management of that transition includes two appearances by the parties in November 2019 – a matter of weeks prior to the date on which Part 2 and the trial of the companion action (and counterclaim) were scheduled to commence. Within the span of that week, from one appearance to the next, Mrs. McMurtry confirmed to the court and to John that she did not intend to seek leave to amend her pleading, and then changed her mind. As a result, Part 2 and the commencement of the trial of the companion action (and counterclaim) were adjourned with costs to John thrown away.

138At the time of the adjournment, a return date of March 6, 2020, was set for Mrs. McMurtry’s motion for leave to amend the original pleading. The motion did not proceed on that date.

139It was not until the spring of 2023 that meaningful steps were taken by Mrs. McMurtry and/or the Estate, to bring the motion for leave to amend the original pleading. In May 2023, a request was made for a return date for the motion.

140In the circumstances of this case, that three-year delay, from March 2020 to the spring of 2023 might be described as inordinate. There is, in any event, more to the inordinate delay in bringing the motion. It is now more than ten and a half years since the action was commenced; almost nine years since John was last examined for discovery; more than seven years since the First Trial Decision was released; and more than three and a half years since the defendant’s supplementary and second supplementary affidavits of documents were served.

141I find the delay in bringing the motion so inordinate that prejudice to John is presumed to arise. That presumed prejudice is non-compensable if I find it is connected to the proposed amendments and does not flow from some other source. In determining that issue, I once again distinguish between the property tax allegations and financial statement allegations and the Stapledon loan allegations.

i) The Property Tax Allegations and Financial Statement Allegations

142For several reasons, some of which are discussed in earlier sections of this ruling, I find that the presumed prejudice to John which arises from the delay in bringing the motion for leave to include the property tax allegations and financial statement allegations in the amended pleading is causally connected to the proposed amendments. That prejudice does not flow from some other source. The presumed prejudice is therefore non-compensable.

143For example, the property tax allegations and financial statement allegations depend on new facts and arguments not originally pleaded: see paras. 43-48 and 56-62, above; Horani, at para. 35. The inclusion of these new causes of action would likely have affected John’s litigation strategy.

144At this late stage of the action, John simply cannot be put in the position he likely would have been in – in 2012 when the action was commenced or in any of the years thereafter to the commencement of Part 1: see Family Delicatessen, at para. 7.

145The onus therefore shifts to the Estate to rebut the presumption of non-compensable prejudice. I turn to the evidence upon which the Estate relies in support of the motion – Keith Murphy’s 53-paragraph affidavit, to which 47 exhibits are attached.

146The Murphy affidavit provides very little in the way of an explanation for the delay in bringing the motion. Mr. Murphy’s affidavit mentions the possibility of the parties attending mediation in 2022; the parties did not proceed to mediation in that year. That evidence may explain the delay from 2022 to 2023 in bringing the motion; it does nothing, however, to explain the delay in the years from 2012 to 2022.

147I find the evidence upon which the Estate relies is not sufficient to rebut the presumption of non-compensable prejudice. For example the preservation of documents, including MMR’s financial records, is not sufficient to rebut the presumption of non-compensable prejudice.

ii) The Stapledon Loan Allegations

148The Stapledon loan allegations do not constitute a new cause of action. They fall within the four corners or factual matrix of the original allegations of misappropriation by John of MMR funds for his benefit and to the financial detriment of the corporation: see paras. 49-55, above.

149To the extent there is any actual prejudice to John which arises from the Stapledon loan allegations it is minimal and, in any event, is outweighed by the prejudice the Estate would suffer if it were not permitted to include the allegations in the amended pleading: see paras. 112-119, above.

150For the reasons which follow, I find that a rebuttable presumption of non-compensable prejudice does not arise regarding the Stapledon loan allegations.

151In Schedule ‘A’ of her November 18, 2019 supplementary affidavit of documents, Brenda includes two documents under the heading “LOANS”. Document no. 12 is described as “Loan Agreement with Sandra Stapledon”; the document is dated from September 2014 to May 2019. Document no. 13 is described as “Supporting documents for John McMurtry’s Shareholder loan account”; it runs from June 1, 2018 to May 31, 2019 (i.e., a fiscal year).

152Based on the contents of the supplementary affidavit of documents, I draw an inference and find that, by at least September 2014, John was aware of (a) the existence of the loan agreement with Ms. Stapledon, (b) the record-keeping related to that loan agreement and any loans made by Ms. Stapledon to MMR, and (c) the potential for any misappropriation of funds related to the Stapledon loans to be relevant to Mrs. McMurtry’s claim for an oppression remedy.

153Given John’s state of knowledge as of September 2014, I find that any prejudice to John which arises from the Stapledon loan allegations is not causally connected to the proposed amendments; the prejudice, if any, flows from another source. Therefore, a presumption of non-compensable prejudice does not arise from the Stapledon loan allegations.

d) Conclusion – Issue No. 5

154A rebuttable presumption of non-compensable prejudice to John arises from the property tax allegations and financial statement allegations. The presumption has not been rebutted by the Estate. The rebuttable presumption of non-compensable prejudice is a third reason why leave to include those allegations in the amended pleading is refused.

155A rebuttable presumption of non-compensable prejudice to John does not arise from the Stapledon loan allegations.

Issue No. 6 - Is the subject matter of any of the contested amendments res judicata?

a) The Positions of the Parties

Issue No. 6 - Is the subject matter of any of the contested amendments res judicata?

156John describes several of the proposed amendments as a collateral attack on the findings made in the First Trial Decision. In addition, John submits that many of the proposed amendments (whether a collateral attack or not) are barred by the doctrine of res judicata.

157The paragraphs in the proposed pleading to which John objects on those bases are paras. 1(a), 1(c), 2 (other than the first two sentences), 4 (latter half of the paragraph), 7 (the second sentence only), 11 (the final sentence only), 13, 31-39 (“the Tin House allegations”), and 103-109 (“No Entitlement to a Constructive Trust or Vesting Order”).

158The Estate’s position is that none of the proposed amendments are in any way a collateral attack on the First Trial Decision. The Estate submits that, in their respective decisions for Part 1, both this court and the Court of Appeal make it clear the end result of the imposition of the constructive trust remains to be determined in Part 2.

159The Estate submits that it would be inconsistent to proceed to Part 2 and restrict the issues to whether or not John is entitled to a vesting order. The Estate describes such a trial as one John cannot lose and in which no meaningful issue would be determined.

b) The Law

160In Danyluk v. Ainsworth Technologies Inc., 2001 SCC 44, [2001] 2 S.C.R. 460, at para. 18, Binnie J. explains the importance of finality to litigation:

The law rightly seeks a finality to litigation. To advance that objective, it requires litigants to put their best foot forward to establish the truth of their allegations when first called upon to do so. A litigant, to use the vernacular, is only entitled to one bite at the cherry … An issue, once decided, should not generally be re-litigated to the benefit of the losing party and the harassment of the winner. A person should only be vexed once in the same cause. Duplicative litigation, potential inconsistent results, undue costs, and inconclusive proceedings are to be avoided.

161There are two branches to the doctrine of res judicata. The first branch is cause of action estoppel, which precludes the re-litigation of claims that have been determined in prior proceedings. The second branch is issue estoppel, which precludes the re-litigation of any right, question or fact put in issue and determined by a court of competent jurisdiction: Dosen v. Meloche Monnex Financial Services Inc (Security National Insurance Company), 2021 ONCA 141, 457 D.L.R. (4th) 530, at paras. 31-32; Danyluk, at para. 24.

162John relies on both cause of action estoppel and issue estoppel.

163For the doctrine of res judicata to apply on the basis of cause of action estoppel, “the subsequent action either must have been argued or could have been argued in the prior action if the party in question had exercised reasonable diligence”: The Catalyst Capital Group Inc. v. VimpelCom Ltd., 2019 ONCA 354, 145 O.R. (3d) 759, at para. 50. Cause of action estoppel does not arise simply because the cause of action could have been argued in the prior proceeding. “It is also necessary that the cause of action properly belonged to the subject of the prior action and should have been brought forward in that action”: Catalyst Capital Group, at para. 50.

164In Danyluk, Binnie J. explains when issue estoppel arises. At para. 25 of the decision, and relying on the Supreme Court’s earlier decision in Angle v. MNR, 1974 CanLII 168 (SCC), [1975] 2 S.C.R. 248, at p. 254, Binnie J. lists the three pre-conditions for the operation of issue estoppel:

(1) that the same question has been decided;

(2) that the judicial decision which is said to create the estoppel was final; and,

(3) that the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel is raised or their privies.

165If the three conditions are met, issue estoppel arises.

166If res judicata arises by reason of either cause of action estoppel or issue estoppel, the court must determine whether to exercise its discretion not to apply the doctrine: Danyluk, at paras. 33, 62. When deciding whether to exercise its discretion, the court must ask whether there is “something in the circumstances of this case such that the usual operation of the doctrine of estoppel would work an injustice?”: see Danyluk, at para. 63, quoting Schweneke v. Ontario (2000), 2000 CanLII 5655 (ON CA), 47 O.R. (3d) 97 (C.A.), at para. 38.

c) Analysis

167The Estate’s motion for leave to amend the original pleading is brought mid-proceeding. Only Part 1 of the Estate’s action is complete. Part 2 is scheduled to commence in December 2023.

168At para. 16 of the Appeal Decision, the Court of Appeal highlights that “what was necessary [for Part 1] was a factual determination as to whether the Disputed Shares had been gifted to John”. The finding that no such gift was made “is now res judicata and binding in any further proceedings”: Appeal Decision, at para. 17.

169It is important that the “parties to the actions agreed that [the] only aspect of the claims made on behalf of Mrs. McMurtry to be determined [in Part 1] is that for declaratory relief with respect to ownership of the [Disputed] Shares”: First Trial Decision, at para. 6. At paras. 16-17 of the Appeal Decision, the Court of Appeal concludes that Mrs. McMurtry did not even require declaratory relief; all she required was a factual determination as to whether the Disputed Shares had been gifted to John. At para. 7 of the Appeal Decision, the Court said, “In essence, the matter proceeded as a trial of the issue of share ownership.”

170John concedes that the issue of whether he is entitled to a vesting order, based on the imposition of the constructive trust, remains to be determined. I find that John’s position on both cause of action estoppel and issue estoppel does not account for the lack of a determination to date (i.e., in Part 1) of the following issues:

• If John is entitled to a vesting order for some or all of the Disputed Shares, on what date is the order effective?

• Is the Estate entitled to an oppression remedy based on John’s oppressive conduct, if found, prior to the date on which the vesting order is effective?

• If so, does the oppression remedy to which the Estate may be entitled include revision of the terms of the constructive trust?

• If John is entitled to a vesting order for only some of the Disputed Shares, how is ownership of the balance of the Disputed Shares to be addressed, including regardless of whether the Estate is entitled to an oppression remedy?

171In summary, John’s position on res judicata fails to account for the Estate’s, as yet undetermined, oppression remedy claim and the distinction between that claim and the share ownership claim.

172There may be some overlap between the evidence relevant to the share ownership issue determined in Part 1 and the issues to be determined in Part 2. That potential overlap does not, in and of itself, disentitle the Estate to leave to amend the original pleading to better address the material facts upon which it relies in regard to the oppression remedy claim and to better particularize the oppression remedies it seeks.

173Allowing for that overlap, I agree with John that, to the extent any of the allegations in the proposed pleading equate to revisiting findings made or conclusions reached in the First Trial Decision, leave to include those allegations in the amended pleading must be refused. I will deal with each of the proposed paragraphs for which John requests leave to amend be refused.

• Paragraph 1(a)

174In para. 1(a) of the original pleading, Mrs. McMurtry requested a “Declaration that the Plaintiff, Mildred McMurtry is the lawful owner of the [Disputed Shares].” The Estate requests leave to include in the amended pleading a request for the following relief: “A Declaration that the Estate of Mildred McMurtry (the “Estate”) is the lawful and beneficial owner of ten (10) shares in the capital stock of [MMR]”.

175As noted in para. 7 of the Appeal Decision, “the only aspect of claims made on behalf of [Mrs. McMurtry] to be decided [in Part 1] was the request for declaratory relief with respect to ownership of the Disputed Shares”: see also First Trial Decision, at para. 6. With that aspect of the claim having been determined, the Estate is not now entitled to amend para. 1(a) and revisit the declaratory relief requested.

176The three criteria for a finding of res judicata on the basis of issue estoppel are met. First, the question as to whether Mrs. McMurtry was entitled to declaratory relief related to the ownership of the Disputed Shares has been decided. Second, the decision in that regard is final, including because it was upheld on appeal. Third, the parties involved remain the same, including with the transmission of interest from Mrs. McMurtry to her estate.

177Leave to include proposed para. 1(a) in the amended pleading is refused. Leave is, however, granted to amend the original para. 1(a) to change “the Plaintiff, Mildred McMurtry” to “the Estate of Mildred McMurtry (“the Estate”)”. Leave in that regard is granted to reflect the transmission of interest which occurred on Mrs. McMurtry’s death in 2021.

• Paragraph 1(c)

178Paragraph 1(c) of the proposed pleading is entirely new. In that paragraph, the Estate sets out its request for a “Declaration that John McMurtry no longer has any legal, beneficial, or equitable right to the [Disputed] Shares and the [Disputed] Shares are no longer held in a constructive trust”.

179John’s position is that the issue of the existence of the constructive trust was determined in Part 1. I agree with John that, whether a constructive trust was imposed and, pending further order of the court, remains in effect was determined in Part 1 and gives rise to res judicata on the basis of issue estoppel.

180I disagree, however, with John’s position that the imposition and continued existence of the constructive trust – specifically in the circumstances of this action – gives rise to either cause of action estoppel or issue estoppel. In para. 7, above, I quoted paras. 28-29 of the First Trial Decision to identify some of the issues to be determined in Part 2 of the trial. Those issues include “the end result of the imposition of the constructive trust.” That end result will be determined in the context of the oppression remedy claim.

181The types of relief to which a plaintiff in an oppression remedy action may be entitled are non-exhaustively listed in s. 248(3) of the OBCA. The orders the court has the discretion to make under that section include “an order directing an issue or exchange of securities” (s. 248(3)(d)) and “an order compensating an aggrieved person” (s. 248(3)(j)).

182None of the remedies listed in s. 248(3) includes a form of declaratory relief. All the remedies listed therein are described as “an order” and include consequential relief (even in the form of an order requiring a trial of an issue (s. 248(3)(n)). The issue of whether declaratory relief may be granted as relief consequential to a finding of oppressive conduct is not before me on this motion.

183The Estate is granted leave to include proposed para. 1(c) in the amended pleading as an oppression remedy claimed and/or to address the end result of the imposition of the constructive trust.

• Paragraph 2

184In paragraph 2 of the original pleading, Mrs. McMurtry is described as a resident of the City of Ottawa, John’s mother, and Keith McMurtry’s widow. Nothing further is said in that paragraph about the relationship between Mrs. McMurtry and her late husband or about Keith McMurtry’s work to establish and build MMR as a business.

185The Estate seeks leave to expand those allegations as part of the background to the oppression remedy claim. Paragraph 2 of the proposed pleading reads as follows:

Mildred McMurtry was a resident of the City of Ottawa, in the Province of Ontario. She was married to the late Keith McMurtry for 52 years. While Keith worked to build his multiple business, including the significant real estate interests in [MMR], Mildred was responsible for maintaining the household and raising their six children, including Deborah Murphy, Jim McMurtry, and the Defendant John McMurtry. Mildred also did significant work to assist Keith with his businesses including [MMR]. The Estate is the largest shareholder of [MMR].

186The underlining identifies the portions of proposed para. 2 which the parties agree represent amendments to the original paragraph. Another element of the proposed amendments to para. 2 is the removal of an allegation that John is Mrs. McMurtry’s son. That allegation is now made in proposed para. 8; John consents to the inclusion of that paragraph in the amended pleading.

187John’s position is that the issue of the parties’ respective contributions to MMR were determined in Part 1. John relies on issue estoppel and submits that the proposed amendments to para. 2 amount to a collateral attack on the First Trial Decision. I reject that submission.

188The extent of John’s and Brenda’s contribution to MMR was addressed in a general way in the First Trial Decision. The relevant findings were made when addressing the defences of laches and estoppel: at paras. 169-170 and 181. That general determination does not preclude the Estate from raising Mrs. McMurtry’s and Keith McMurtry’s respective contributions to their family life and MMR during the trial of the oppression remedy claim.

189Neither issue estoppel nor cause of action estoppel applies. The proposed amendments to para. 2 of the original pleading do not constitute a collateral attack on the First Trial Decision.

190The Estate is granted leave to include proposed para. 2 in the amended pleading.

• Paragraph 4

191In para. 4 of the original pleading, Keith McMurtry is described as the founder of MMR in 1960 and as a successful businessman. The Estate seeks leave to amend para. 4 to include allegations that Keith “devoted his life to building the significant real estate portfolio held by [MMR] and his other business.” The Estate seeks leave to conclude para. 4 with the following sentence: “Keith, not John, was responsible for the acquisition of all of [MMR’s] real estate assets.”

192The proposed amendments to para. 4 address Keith’s work in building MMR’s real estate portfolio and are historical in nature. The proposed amendments to para. 4 do not relate to oppression arising from John’s failure to grow the real estate portfolio amassed by MMR under Keith’s leadership.

193Leave to include proposed para. 4 in the amended pleading is granted.

• Paragraph 7 (second sentence)

194Paragraph 7 of the proposed pleading is entirely new. In it, the Estate alleges that John and Brenda,

… have significantly mismanaged Mic Mac, including by failing to pay property tax arrears for many years with the result that more than three hundred thousand dollars in interest has unnecessarily accrued. And they have done nothing to build Mic Mac’s business, never acquiring new assets for the company. Instead, their livelihood relies on misusing the assets of the business that Keith McMurtry built.

195Leave to include the first sentence of proposed para. 7 in the amended pleading is refused because that sentence forms part of the property tax allegations. John’s position regarding the second sentence of proposed para. 7 is that the issue of John’s and Brenda’s contribution to MMR was determined in Part 1. For the reasons given regarding proposed para. 2, I disagree.

196Leave to include the second sentence of proposed para. 7 is also refused, however, for another reason. The alleged failure to build MMR’s business raises a new cause of action; it does not fall within the four corners of the misappropriation of funds alleged in the original pleading.

197Leave to include the first and second sentences of proposed para. 7 in the amended pleading is refused.

• Paragraph 11 (final sentence)

198Proposed para. 11 is an amended version of para. 5 from the original pleading. In the latter paragraph, Mrs. McMurtry made allegations regarding her late husband’s will, her status as the residuary beneficiary of her late husband’s estate, and her late husband’s interest in MMR.

199In proposed para. 11, Keith McMurtry’s will and Mrs. McMurtry’s status as the residuary beneficiary of her late husband’s estate are once again addressed. John consents to the inclusion in the amended pleading of the proposed versions of those allegations. John also consents to the inclusion in the amended pleading of the allegations in proposed para. 11 identifying each of John, Jim, and Mrs. McMurtry as the executors of Keith McMurtry’s estate.

200John opposes the inclusion of the final sentence of proposed para. 11: “Jim and Mildred did not have a copy of the will and did not know they were executors.” John’s position is that Mrs. McMurtry’s knowledge of her late husband’s will was addressed in the First Trial Decision.

201I agree with John that the First Trial Decision addresses both Mrs. McMurtry’s and Jim’s state of knowledge regarding Keith McMurtry’s will and their respective roles as an executor of Keith McMurtry’s estate: see the First Trial Decision, at paras. 88-92. Specifically, at para. 92 of the First Trial Decision, I found that Mrs. McMurtry and Jim “were both aware no later than November 1998 that they are executors of” Keith McMurtry’s estate. The three criteria of issue estoppel are met.

202Leave to include the final sentence of proposed para. 11 in the amended pleading is refused.

• Paragraph 13

203Paragraph 13 of the proposed pleading is entirely new. In it, the Estate addresses Keith McMurtry’s intentions regarding the Disputed Shares: “Keith’s clear intent under the will was that Mildred would inherit his assets, which include his most significant asset: the ten shares in Mic Mac.”

204John relies on para. 164 of the First Trial Decision in support of his position that the issue of Keith McMurtry’s intentions under his will is res judicata:

If Mrs. McMurtry truly believed that she was, by virtue of being the residuary beneficiary of the Estate, the beneficial owner of the Shares it was incumbent upon her personally to take action in the context of the administration of the Estate. Moreover, it was incumbent upon Mrs. McMurtry to fulfil her role as an executor and trustee and address that issue in the administration of the Estate. Mrs. McMurtry sat back and did nothing personally or in her capacity as an executor of the Estate to ensure that the Estate was administered on the basis of what she testified she believed, at the time, to be the intentions of her late husband (i.e. that the Shares would form part of the residue of the Estate).

205The final sentence of para. 164, quoted above, addresses Mrs. McMurtry’s belief as to her late husband’s intentions. That sentence does not address Keith McMurtry’s actual intentions and does not amount to a finding on that issue.

206A finding as to Keith McMurtry’s “clear intent” that Mrs. McMurtry was to inherit his assets generally was not required in Part 1. Keith McMurtry’s clear intent in that regard may have been relevant to the equities considered between the parties in Part 1. It is not the situation, however, where Keith McMurtry’s clear intent in that regard should have been considered in Part 1.

207Neither issue estoppel nor cause of action estoppel applies. The Estate is granted leave to include proposed para. 13 in the amended pleading.

• Paragraphs 31-39 (The Tin House Allegations)

208The Estate relies on the Tin House allegations solely in support of the amended claims for declaratory relief. The Estate alleges the Tin House is a residential property Mrs. McMurtry inherited from her late husband. Related to the Tin House allegations is the alleged misconduct described in paras. 109(b) and (c).

209The Tin House and related allegations, and John’s reasons for opposing their inclusion in the amended pleading, are discussed under Issue No. 7.

• Paragraphs 103-109

210This section of the proposed pleading is titled, “No Entitlement to a Constructive Trust or Vesting Order”. John’s position is that leave to include these paragraphs in the amended pleading should be refused based on the application of doctrine of res judicata. The Estate describes the allegations in these paragraphs as related to issues left open at the conclusion of Part 1 and to be determined at Part 2.

211With the exception of proposed para. 107, I find that paras. 103-108 fall within the scope of issues to be determined in Part 2. The allegations relate to whether John is entitled to a vesting order and, if not, or if for only some of the Dispute Shares, what will happen to the constructive trust. For the reasons already given, the doctrine of res judicata does not apply to those issues.

212Para. 107 focuses on John’s alleged failure to grow MMR. The allegations in that regard do not fall within the four corners or the factual matrix of the original pleading and are statute-barred. Those allegations give rise to both actual prejudice and a rebuttable presumption of non-compensable prejudice (which has not been rebutted). The reasons given under Issue Nos. 4 and 5 apply equally to the alleged failure to grow the business.

213In para. 109, the Estate lists some of the “wrongful conduct” in which it alleges John has engaged:

• Para. 109(a) addresses dividends declared; it falls within the scope of alleged misappropriation of funds. Leave is granted to include this paragraph in the amended pleading;

• As already identified, paras. 109(b) and (c) relate to the Tin House allegations; they are discussed under Issue No. 7;

• Para. 109(d) addresses the failure to pay property taxes; it falls outside the four corners of the original pleading. Leave to include this paragraph in the amended pleading is refused;

• Para. 1(e) addresses alleged misappropriation of MMR funds through the payment of personal expenses; it falls within the scope of the four corners of the original pleading. Leave is granted to include this paragraph in the amended pleading;

• Para. 1(f) addresses the sale of Stoke Lacey. For the reasons given under Issue No. 3, above, leave is granted to include this paragraph in the amended pleading.

d) Conclusion – Issue No. 6

214Leave is granted to include the following paragraphs in the amended pleading: proposed paras. 1(a) (limited, as set out above), 2, 4, 13, 103-106, 108, 109(e), and 109(f).

215Leave to include the following paragraphs in the amended pleading is refused: proposed paras. 1(a), 7 (first and second sentences), 11 (last sentence), 107, and 109(d).

Issue No. 7 - Is the Estate entitled to rely on the proposed amendments identified as made solely in support of the amended claims for declaratory relief?

a) The Proposed Amendments

Issue No. 7 - Is the Estate entitled to rely on the proposed amendments identified as made solely in support of the amended claims for declaratory relief?

216The Estate alleges the Tin House is a residential property which Mrs. McMurtry inherited from her late husband. At paras. 25-29 of its factum and on the return of the motion, the Estate highlighted the Tin House allegations, and paras. 103-109 of the proposed pleading, as the bases upon which it relies in support of the request for the amended declaratory relief.

217The Estate alleges John (a) pressured Mrs. McMurtry to transfer ownership of the Tin House to John, at no cost; (b) permitted Mrs. McMurtry to reside in the Tin House, with Deborah (who was providing care to Mrs. McMurtry after she became infirmed); and (c) in his capacity as landlord, sought to evict the tenant(s).

218The amended declaratory relief the Estate seeks is listed in paras. 1(a)-(c) of the proposed pleading. The Estate is granted leave to make a minor amendment to para. 1(a) of the proposed pleading to address the transmission of interest resulting from Mrs. McMurtry’s death: see paras. 174-177, above. The Estate is also granted leave to include paras. 1(b) and (c) in the amended pleading: see Issue No. 6, above.

219The amended declaratory relief, the entitlement which has not yet determined and which the Estate is entitled to pursue in Part 2, consists of the following declarations:

(b) A Declaration that John McMurtry is not entitled to a vesting order with respect to the Shares;

(c) A Declaration that John McMurtry no longer has any legal, beneficial, or equitable right to the [Disputed] Shares and the[Disputed] Shares are no longer held in a constructive trust[.]

220In para. 109, the Estate lists the wrongful conduct in which it alleges John has engaged. At para. 109(b), the Estate alleges that wrongful conduct includes, “Pressuring his mother into transferring ownership of the Tin House to him”. At para. 109(c), the wrongful conduct alleged is that John was, “Harassing and intimidating his mother by attempting to evict her at the same time that the first trial of this matter was heard”.

b) The Positions of the Parties

221The Estate asks the court to consider the allegations in support of the amended declaratory relief separately from the other allegations in the proposed pleading. The Estate submits the court may do so because no limitation period applies to bar a request for declaratory relief, as long as no consequential relief is sought.

222For several reasons, John opposes the inclusion of the Tin House allegations in the amended pleading. First, he submits that the Tin House allegations relate to events alleged to have occurred no later than 2016 (the failed attempt at eviction). Second, John submits that an oppression remedy claim based on the Tin House allegations is a new cause of action; the inclusion of that cause of action in the amended pleading would cause John actual prejudice.

223Third, John submits the Tin House allegations are res judicata. John ties his alleged conduct regarding the Tin House to the issue of clean hands and the consideration, in Part 1, of the equities between the parties.

c) Analysis

224The Estate does not dispute that a claim for consequential relief based on the Tin House allegations is statute-barred. The Landlord and Tenant Board (“LTB”) decision on the attempted eviction was released in early 2016: McMurtry v. Murphy (January 18, 2016), EAL-50685-15 (LTB) (“the LTB Decision”). The limitation period within which to advance a claim for consequential relief arising from the attempted eviction expired several years ago.

i) Res Judicata Does not Apply to the Tin House Allegations

225John submits the Tin House allegations fall within the scope of the issue of clean hands considered in Part 1, rendering the issue of those allegations res judicata. I disagree.

226The doctrine of clean hands may apply to any number of issues between the parties, including issues not yet determined. The application of the doctrine may not lead to identical results from one issue to the next. I find the doctrine of clean hands does not apply to the Tin House allegations when assessing the issue of equities between the parties for the purpose of the issues to be determined in Part 2.

227I also find that cause of action estoppel does not apply to the doctrine of clean hands and the Tin House allegations. To the extent the Tin House allegations constitute a cause of action, that cause of action did not crystallize until the release, in early 2016, of the LTB decision. The LTB concluded the attempt to evict Deborah and Mrs. McMurtry from the Tin House was done in bad faith: see the LTB Decision, at para. 8.

228The Tin House allegations are not barred by reason of res judicata.

ii) Actual Prejudice Arises

229John submits that if the Estate is granted leave to include the Tin House and related allegations in the amended pleading, he will suffer actual prejudice. He makes that submission on the basis the Tin House allegations constitute a new cause of action in the oppression remedy claim. Regardless of whether the Tin House allegations constitute a new cause of action, I consider whether the inclusion of the Tin House and related allegations in the amended pleading, even if only in support of the amended declaratory relief sought, would result in actual prejudice to John.

230I agree with the Estate’s submission there is no limitation period for a claim to declaratory relief if no consequential relief is sought: Limitations Act, 2002, s. 16(1)(a). The Estate does not, however, provide any authority to support the proposition that, on a motion for leave to add a claim for declaratory relief, the responding party is not entitled to rely on actual prejudice as a basis to oppose the motion.

231I find that the addition of the Tin House and related allegations gives rise to actual prejudice to John.

232The Tin House allegations include that John pressured Mrs. McMurtry into transferring ownership of the Tin House to him at no cost. The allegations do not specify when that pressure is alleged to have been applied to Mrs. McMurtry. The attempt to evict Mrs. McMurtry is alleged to have been ongoing at the time of Part 1. I draw an inference and find that the alleged pressure regarding the transfer of ownership and the attempted eviction commenced prior to Part 1 and prior to John’s incapacity.

233John and Mrs. McMurtry are not available to provide evidence on any of the events alleged to have occurred prior to Part 1 and prior to John’s incapacity. The preservation of documents, if any, relevant to the transfer of ownership of the Tin House do not make up for the lack of evidence as to discussions between the two individuals at the time of the transfer or as to the parties’ respective clean hands in regard to the transfer.

234To the extent the Tin House allegations apply to a period prior to John’s incapacity, I find there is actual prejudice to John.

235The LTB Decision identifies Brenda as the landlord’s representative at the hearing and John’s litigation guardian and daughter, Emily, as one of the witnesses at the hearing. The evidence on the motion suggests the tenant identified on the subject lease was Deborah Murphy (not Mrs. McMurtry). All three individuals remain available to testify as to the circumstances of the attempted eviction and the LTB proceeding. Their availability to address the period at the time of and shortly after Part 1 does not mitigate the actual prejudice to John regarding the period prior to Part 1 and prior to John’s incapacity.

iii) Non-compensable Prejudice Arises

236In opposing the Tin House and related allegations, John also relies on the rebuttable presumption of non-compensable prejudice by reason of delay. For the reasons given under Issue No. 5 regarding the property tax allegations and financial statement allegations, I find a rebuttable presumption of non-compensable prejudice arises and the Estate has not rebutted the presumption.

237Leave is therefore refused to include proposed paras. 31-39 and 109(b) and (c) in the amended pleading.

Disposition

Disposition

238Attached as Schedule ‘A’ is a list of the proposed amendments. The proposed paragraphs are divided into four categories:

• Blue represents paragraphs from the original pleading for which no amendment is proposed. The Estate does not require leave of the court to include those paragraphs in the amended pleading;

• Green represents the proposed amendments to which John consents. The Estate is granted leave to include those paragraphs in the amended pleading;

• Yellow represents the proposed amendments opposed by John and which the Estate is granted leave to include in the amended pleading; and

• Pink represents the proposed amendments opposed by John and which the Estate is refused leave to include in the amended pleading.

239In the First Trial Decision and the proposed pleading, the ten shares of MMR for which the constructive trust in favour of John is imposed are referred to as “the Shares”. In the Appeal Decision, the Court of Appeal for Ontario referred to those shares as “the Disputed Shares”. In this ruling I use the latter term when referring to the shares that are subject to the constructive trust. For the sake of consistency and ease of reference, the Estate shall, in the amended pleading, also refer to the subject shares as “the Disputed Shares”.

240The costs of this mid-trial motion shall be determined as part of the costs of the action following the conclusion of Part 2.

241I wish to thank counsel for the Estate and for John for their thorough and detailed written materials and oral submissions. Addressing a ten-fold increase in the size of a party’s pleading is a daunting task. Pleadings amendment motions do not typically result in a ruling in excess of 200 paragraphs. The well-organized approach taken by counsel for the moving and responding parties made the task more manageable than it might otherwise have been.

Timetable for the Exchange of Pleadings and Affidavits of Documents

Timetable for the Exchange of Pleadings and Affidavits of Documents

242When the dates for the pleadings amendment motion and the examinations for discovery were set, counsel and the parties understood that they would likely have to conduct this portion of the litigation on the basis of a compressed timetable – meaning that they would have less time than prescribed by the Rules for the completion of the exchange of pleadings etc. The timetable set out below is intended to assist the parties with the exchange of pleadings, exchange of affidavits of documents, and production, if requested, of copies of Schedule ‘A’ documents:

• The fresh as amended statement of claim shall be served no later than 4:00 p.m. on Monday, August 21, 2023;

• The statement of defence to the fresh as amended statement of claim shall be served no later than 4:00 p.m. on Thursday, August 31, 2023;

• The reply, if any, to the statement of defence shall be served no later than 4:00 p.m. on Thursday, September 7, 2023;

• Supplementary affidavits of documents shall be served no later than 4:00 p.m. on Wednesday, September 13, 2023; and

• Requests for production of copies of Schedule “A” documents shall be made no later than 4:00 p.m. on Friday, September 15, 2023; and

• Where requested, copies of Schedule “A” documents shall be produced no later than 4:00 p.m. on Monday, September 18, 2023.

Madam Justice Sylvia Corthorn

Date: August 14, 2023

SCHEDULE ‘A’

Schedule A

Table of Proposed Amendments, with Outcome, on the Estate’s Motion for Leave to Amend

Paragraphs

Determination by the Court

1. The Plaintiff claims as against the Defendants as follows:

a) A Declaration that Plaintiff Mildred McMurtry the Estate of Mildred McMurtry (the “Estate”) is the lawful and beneficial owner of ten (10) shares in the capital stock of Mic Mac Realty (Ottawa) Limited (the “Shares” and “Mic Mac” or the “Corporation”);

Leave is granted to change “Plaintiff Mildred McMurtry” to “the Estate of Mildred McMurtry (“the Estate”) and to define the terms “the Shares” and “Mic Mac” or the “Corporation”. Leave to make the amendment highlighted in yellow is refused.

b) A Declaration that John McMurtry is not entitled to a vesting order with respect to the Shares;

Leave to include this paragraph in the amended pleading is granted.

c) A Declaration that John McMurtry no longer has any legal, beneficial, or equitable right to the Shares and the Shares are no longer held in a constructive trust;

Leave to include this paragraph in the amended pleading is granted.

d) An Order directing that the Corporate Minute Book of the Corporation be updated to indicate the ownership of shares of the Plaintiff at ten (10) common shares of Mic Mac Realty (Ottawa) Limited;

e) A Declaration that the Defendant, John McMurtry has acted in a manner that is oppressive to and which unfairly disregards and is unfairly prejudicial to the interests of the Plaintiff;

Leave to include this paragraph in the amended pleading is granted.

f) An Order removing the Defendant, John McMurtry and Brenda McMurtry from any and all positions which he that they hold in any capacity in the Corporation the Corporation, including as Directors and Officers;

Leave to include this paragraph in the amended pleading is granted.

g) An order that the Corporation’s assets be valued and liquidated and the appointment of a receiver to carry out the said liquidation appointing a liquidator and requiring the wind-up of the Corporation;

Leave to include this paragraph in the amended pleading is granted.

h) An Order for damages as against the Defendant, John McMurtry for his oppressive conduct with respect to the Plaintiff and the Corporation;

Leave to include this paragraph in the amended pleading is granted.

i) An Order that requiring John McMurtry to repays to the Corporation all funds since 1998 that were misappropriated by him or used for his benefit or for the benefit of Brenda or Emily McMurtry, including the following:

Leave to include this paragraph in the amended pleading is granted.

i. Repayment to the Corporation of any dividends paid to him up to the date of trial;

Leave to include this paragraph in the amended pleading is granted.

ii. Repayment to the Corporation of all interest and penalties accrued on property taxes or other debts that John failed to pay;

Leave to include this paragraph in the amended pleading is refused.

iii. Repayment to the Corporation of all personal expenses paid for with corporate funds or corporate credit cards;

Leave to include this paragraph in the amended pleading is granted.

iv. Repayment to the Corporation for all legal and professional fees paid by the Corporation for services benefitting John, Brenda, and/or Emily personally;

Leave to include this paragraph in the amended pleading is granted. This paragraph falls within the scope of the allegations in proposed paras. 65-73, a series of proposed paragraphs to which John consents.

v. Repayment to the Corporation of all unpaid rent for the occupancy of Stoke Lacey; and

Leave to include this paragraph in the amended pleading is granted.

vi. Repayment to the Corporation of all expenses incurred in connection with Stoke Lacey during John and Brenda’s occupancy period following closing of the sale of Stoke Lacey.

Leave to include this paragraph in the amended pleading is granted.

j) An Order for a full accounting of all personal expenses charged by John McMurtry, Brenda McMurtry, or Emily McMurtry to the Corporation and repayment of same, including repayment of all personal credit card spending which continues to date and which is being charged to and paid by the company;

Leave to include this paragraph in the amended pleading is granted.

k) Pre-judgment interest and post-judgment interest pursuant to the Courts of Justice Act;

l) Costs on a full indemnity basis with H.S.T.; and

m) Such further and other relief as the Court may deem just.

Background, Parties, and Relevant Persons

2. The plaintiff, Mildred McMurtry is was a resident of the City of Ottawa, in the Province of Ontario. She is the mother of John McMurtry, one of the Defendants herein. She is also the widow of the late was married to the late Keith McMurtry for 52 years. While Keith worked to build his multiple businesses, including the significant real estate interests in Mic Mac, Mildred was responsible for maintaining the household and raising their six children, including Deborah Murphy Jim McMurtry, and the Defendant John McMurtry. Mildred also did significant work to assist Keith with his businesses, including Mic Mac. The Estate is the largest shareholder of Mic Mac.

Leave to include this paragraph in the amended pleading is granted.

3. Mildred passed away on May 9, 2021 and her interest as a Plaintiff in this action was transmitted to the Estate. To the best of the plaintiff’s knowledge, at the time of her death, Mildred had no meaningful assets other than her rights to the Shares. As a result, no distributions have been made from the Estate to its beneficiaries.

Leave to include this paragraph in the amended pleading is granted.

4. Keith McMurtry was the founder of the Corporation, Mic Mac Realty (The Corporation), which was created incorporated in May of 1960. Keith was a successful businessman and the company was prosperous who devoted his life to building the significant real estate portfolio held by Mic Mac and his other businesses. The Corporation continues on in business to the current date Keith, not John, was responsible for the acquisition of all of Mic Mac’s real estate assets.

Leave to include this paragraph in the amended pleading is granted.

5. Mic Mac is a corporation incorporated under the laws of Ontario. The Corporation’s sole business is the ownership and management of the real estate assets that Keith McMurtry worked to acquire in the business.

Leave to include this paragraph in the amended pleading is granted.

6. John McMurtry is Mildred’s son, a minority shareholder of Mic Mac, and a director. He and his wife Brenda McMurtry have controlled Mic Mac to the exclusion of the other shareholders, Jim and Mildred, for more than twenty years. They have used the corporation for their own benefit including by paying more than a million dollars to John in dividends with no dividends to the other shareholders and by using corporate funds and credit cards to pay their own personal expenses.

Leave to include this paragraph in the amended pleading is granted.

7. They have significantly mismanaged Mic Mac, including by failing to pay property tax arrears for many years with the result that more than three hundred thousand dollars in interest has unnecessarily accrued. And they have done nothing to build Mic Mac’s business, never acquiring new assets for the company. Instead, their livelihood relies entirely on misusing the assets of the business that Keith McMurtry built.

Leave to amend is refused.

8. Jim McMurtry is John’s brother and Mildred’s son. He is a minority shareholder in Mic Mac and a director.

Leave to include this paragraph in the amended pleading is granted.

Background to Mildred’s Shares

9. The Corporation has a total of twenty-two (22) shares.

Leave to include this paragraph in the amended pleading is granted.

10. The Plaintiff states that her husband had given shares to two (2) of his sons, John and Jim in the Corporation. Keith McMurtry died At the time of Keith McMurtry’s death on March 14, 1998, and at the time of his death the shareholders in the Corporation were Keith (ten (10) shares), John (six (6) shares) and Jim (six (6) shares). There were no other shareholders in the capital stock of the Corporation.

Leave to include this paragraph in the amended pleading is granted.

11. Keith McMurtry had prepared executed a Last Will and Testament dated November 27, 1992. ln the said will~~, the Plaintiff was~~ named Mildred as his residual beneficiary. As a result, the Plaintiff inherited her husband’s interest in the Corporation which included his common shares and the benefit of a shareholder’s loan of $103,051.00. which the company owed Keith, plus any other assets or properties owned by him at the date of bis death. and appointed John, Jim, and Mildred as executor. Jim and Mildred did not have a copy of the will and did not know they were executors.

Leave to include this paragraph in the amended pleading is granted for all but the final sentence of the paragraph (highlighted in yellow).

Leave to include the final sentence of the paragraph in the amended pleading is refused.

12. Upon her husband’s death, Mildred inherited her husband’s interest in the Corporation which included his common shares and the benefit of a shareholder’s loan of $103,051.00, which the company owed Keith, plus any other assets or properties owned by him at the date of his death.

Leave to include this paragraph in the amended pleading is granted.

13. Keith’s clear intent under the will was that Mildred would inherit his assets, which include his most significant asset: the ten Shares in Mic Mac.

Leave to include this paragraph in the amended pleading is granted.

14. The Last Will and Testament of Keith McMurtry was in the possession of the Defendant, John McMurtry. He kept the Will secret from the plaintiff Mildred. The Defendant, John McMurtry did not apply for probate, did not attend to the deceased’s estate and did not administer the last wishes of the deceased.

Leave to include this paragraph in the amended pleading is granted.

15. Further, John McMurtry did not advise his mother of her interest in the estate and to the contrary went about a course of action which was intended to misrepresent to her the state of affairs and further to deprive her of her rightful inheritance. The Plaintiff trusted the Defendant, John McMurtry, her son to be truthful and honest with her. Had the Plaintiff been advised that her husband had not named her his beneficiary, she would have been entitled to make a claim under the Familv Law Act for an equalization of net family property upon the death of her husband.

Leave to include this paragraph in the amended pleading is granted.

16. Mildred had a reasonable expectation that the Defendant, John McMurtry, would be honest and forthright and would act in the best interests of the family and the Company.

Leave to include this paragraph in the amended pleading is granted.

17. To the contrary, the said Defendant John McMurtry has carried out a course of conduct since the death of Keith McMurtry to deprive his mother of her rightful inheritance, . Incidences of his inappropriate conduct included including as follows:

Leave to include this paragraph in the amended pleading is granted.

a) He hired a solicitor in December, 1999 to prepare a false Declaration of Transmission stating that Keith’s shares had passed to him by inheritance.

b) He convinced his mother into to signing over to him Plaintiff’s Mildred’s home which she had inherited from her husband. John paid nothing for this transfer of property.

Leave to include this paragraph in the amended pleading is granted.

c) He has, since a dispute arose in 2009 between him and his brother Jim, engaged in a course of conduct to apply duress and pressure on the Plaintiff Mildred to disclaim her interest in the Corporation and to sign over her shares to him without consideration.

Leave to include this paragraph in the amended pleading is granted.

d) He has misrepresented to the Plaintiff Mildred that he required the shares to be in his name to more effectively operate the Corporation.

Leave to include this paragraph in the amended pleading is granted.

e) He has claimed in Court documents that the subject shares were given to him by his father before his father’s death.

f) He has filed tax returns for the Corporation from 1999 onwards certifying that the share ownership of the Corporation was shared on an equal basis with his brother Jim.

18. The Defendant John, in the face of his assertions that he owns his father’s shares, in 2009 repaid to his mother, a shareholder’s loan of $103,051.00 which was with respect to the shareholdings of her late husband. It is a contradiction to the Defendant’s in John’s position that he owns the said shares but then paid his mother the shareholder’s loan connected with them.

Leave to include this paragraph in the amended pleading is granted.

19. The Defendant John McMurtry has been deceitful and overbearing to the Plaintiff Mildred and has caused her financial harm and personal stress as a result of his actions.

Leave to include this paragraph in the amended pleading is granted.

20. The Plaintiff therefore claims that she is the lawful owner by succession of ten (10) shares in the capital stock of Mic Mac Realty (Ottawa) Limited and requests an Order of the Court accordingly.

21. The Plaintiff further states that she has become aware of the many inappropriate actions of the Defendant John McMurtry with respect to the operation of the Corporation. In this regard the Plaintiff relies upon the allegations contained in the Statement of Defence and Counterclaim of her son James Jim in Court Action No. 11-50312.

Leave to include this paragraph in the amended pleading is granted.

John Takes Over Stoke Lacey

22. In 1990, Keith purchased the single-family residential property located at 2560 Sixth Line Road in Ottawa, Ontario (“Stoke Lacey”).

Leave to include this paragraph in the amended pleading is granted.

23. Stoke Lacey is owned by Mic Mac and is its most significant asset, having been appraised at a value of $4,825,000, and having been sold for $5,400,000.

Leave to include this paragraph in the amended pleading is granted.

24. Keith and Mildred lived at the property until the mid to late 1990s when Keith’s health began deteriorating. At that time, Keith and Mildred moved to an apartment closer to Mic Mac’s offices to facilitate Keith going to work.

Leave to include this paragraph in the amended pleading is granted.

25. In or around the same time, John and Brenda moved into Stoke Lacey and have resided there ever since. For many years, John and Brenda never paid rent to Mic Mac for their use of the Corporation’s property.

Leave to include this paragraph in the amended pleading is granted.

26. Before Keith’s death, Keith and Mildred moved into a house owned by Keith personally in Kinburn Ontario (the “Tin House”).

Leave to include this paragraph in the amended pleading is granted.

27. In or around 2013, John signed a lease with the Corporation pursuant to which he had an obligation to pay the Corporation $3,000 per month to live at Stoke Lacey with Brenda and Emily. This rent was based on a 2012 valuation of the property.

Leave to include this paragraph in the amended pleading is granted.

28. John failed to pay the monthly rent in 2013 and again from 2020 to date. While the rent appears to be accounted for in the Corporation’s financial documents from 2014 to 2019, the rent was far below market value, and, during that time, the expenses at Stoke Lacey exceeded the rent paid by John.

Leave to include this paragraph in the amended pleading is granted.

29. The Corporation also pays the utilities and other operating expenses of the Stoke Lacey residence, to the sole benefit of John and his family.

Leave to include this paragraph in the amended pleading is granted.

30. Notably, for many years, John failed to pay the property taxes for Stoke Lacey. Upon the closing of the sale of the property in 2022, there was $254,097.77 owing in unpaid taxes to the City of Ottawa.

Leave to include this paragraph in the amended pleading is granted.

John Pressures His Mother to Sign Over the Tin House and Then Evicts Her

31. Following Keith’s death, Mildred inherited the Tin House and Deborah moved into the home to help care for her mother in her advanced age.

Leave to include these paragraphs in the amended pleading is refused.

32. John pressured his mother to sign over ownership of the Tin House to John at no cost. For many years, John had bullied his mother and other family members. By this time, Mildred was advanced in age, vulnerable, and wanted to avoid conflict with her son, so she acceded under duress.

33. In 2006, John asked Deborah to sign a lease and to begin paying rent of $875 per month. Before that time, Mildred and Deborah had lived at the Tin House without paying rent. Deborah did not sign a lease but began paying rent of $875 per month, because Mildred wanted to continue living at the Tin House. Deborah continued to pay the rent throughout the time that she and Mildred lived at the Tin House.

34. In 2015, as the within litigation was proceeding to trial, John and Brenda began to take steps to pressure Mildred and Deborah to leave the Tin House, including by planting a for sale sign on the lawn of the house and by removing the kitchen sink. In May 2015, John escalated his efforts to evict Mildred and Deborah. John’s daughter Emily delivered a formal eviction notice, purporting to terminate the tenancy and to provide sixty days to leave the premises. At that time, Mildred and Deborah had been living at the Tin House for more than 15 years.

35. The May 2015 eviction notice claimed that the Tin House had been sold and that the purchaser planned to move in. John served a subsequent notice in July, 2015, changing his purported justification, and claiming that his daughter Emily was moving into the property.

36. John then brought an eviction proceeding before the Landlord and Tenant Board (the “Board”), which was originally heard on September 9, 2015, only days before the first trial in the within action commenced. The hearing resumed and was completed on November 5, 2015.

37. Brenda and Emily provided evidence in support of John as the landlord. John did not testify.

38. The Board found that John had acted in bad faith in trying to evict his mother and sister and that these actions were taken as retaliation for Mildred’s filing of this lawsuit. The Board found that John had harassed his mother and sister by erecting a for sale sign in front of the property, removing the sink from the property’s kitchen, removing the water pump, and failing to repair a leak that caused damage, among other things.

39. John’s actions, particularly the eviction proceeding, were aimed at and had the result of causing significant stress and intimidation to Mildred, in particular during the trial of this proceeding. This significantly affected Mildred’s ability to testify at the first trial, especially given that she was nearly eighty-six years old at the time. As a result, she was found not to be a credible witness, which was a significant factor in the court imposing a constructive trust on Mildred’s shares.

The 2015 Trial and the Constructive Trust

40. A trial of the within matter was held before the Honourable Justice Corthorn on September 14-18, 21, 22, and 25, 2015.

Leave to include this paragraph in the amended pleading is granted.

41. In the decision dated April 29, 2016, Justice Corthorn imposed a constructive trust over the Shares in favour of John.

Leave to include this paragraph in the amended pleading is granted.

42. At paragraph 28 of the decision, Justice Corthorn stated as follows:

The end result of the imposition of the constructive trust requires a determination of issues that were not before the Court at this stage of the proceeding. Whether John is entitled to a vesting order – with the ownership of some or all of the Shares ultimately being transferred to him – remains to be determined.

Leave to include this paragraph in the amended pleading is granted.

43. In the many years since the trial, John has failed to seek a vesting order. Instead, he and his family have taken advantage of the constructive trust in order to use the shares in Mic Mac for their personal benefit to the detriment of the Corporation and the Estate. They have paid themselves dividends to the exclusion of other shareholders, incurred significant and unjustifiable tax liabilities to the Corporation, incurred significant personal expenses, and sold the Corporation’s most significant asset in a manner that benefits them while delaying the receipt of the purchase price by the Corporation.

Leave to include the portion of the proposed paragraph highlighted in pink in the amended pleading is refused.

Leave to include the portion of the paragraph highlighted in yellow in the amended pleading is granted.

John (or Brenda) Declares Significant Dividends

44. In the fiscal years ending May 31, 2013 to May 31, 2016, John (or Brenda) declared a dividend to John each year in the amount of $60,000. No dividends were paid to the other shareholders.

Leave to include this paragraph in the amended pleading is granted.

45. In fiscal year 2017, following Justice Corthorn’s trial decision, John (or Brenda), seemingly emboldened by the constructive trust, declared a dividend to John in the amount of $190,570. No dividend was paid to the other shareholders.

Leave to include this paragraph in the amended pleading is granted.

46. In fiscal year 2018, John (or Brenda) declared a dividend to John in the amount of $240,165. No dividend was paid to the other shareholders.

Leave to include this paragraph in the amended pleading is granted.

47. In fiscal year 2019, John (or Brenda) declared a dividend to John in the amount of $178,644. No dividend was paid to the other shareholders.

Leave to include this paragraph in the amended pleading is granted.

48. In fiscal year 2020, John (or Brenda) declared a dividend to John in the amount of $149,796 (and an additional $42,143). No dividend was paid to the other shareholders.

Leave to include this paragraph in the amended pleading is granted.

49. In fiscal year 2021, John (or Brenda) declared a dividend to John in the amount of $155,121. No dividend was paid to the other shareholders.

Leave to include this paragraph in the amended pleading is granted.

50. In fiscal year 2022, John (or Brenda) declared a dividend to John in the amount of $187,654. No dividend was paid to the other shareholders

Leave to include this paragraph in the amended pleading is granted.

51. At the same time that these dividends were being paid to John, he was failing to pay Mic Mac’s property taxes, such that the taxes accrued with significant and unnecessary interest and penalties, as set forth in more detail below.

Leave to include this paragraph in the amended pleading is refused.

52. As shareholders of the same class of shares, the Estate and Jim have the same rights to dividends as John and dividends must be paid out equally in proportion to each shareholders’ shareholdings.

Leave to include this paragraph in the amended pleading is granted.

53. The dividends were not properly authorized and are therefore void and must be repaid. Dividends may only be declared by the board of directors and require the authorization of a majority of the directors. No board meetings were held to declare the dividends. No board resolutions were passed. The dividends were not authorized by a majority of the board of directors.

Leave to include this paragraph in the amended pleading is granted.

54. For nearly all the dividends, John and/or Brenda did not even take steps to generate documents purporting to authorize them. It is impossible to determine which of John or Brenda purported to authorize each dividend, given the total lack of documents. Notably, John has lacked mental capacity for many years.

Leave to include this paragraph in the amended pleading is granted.

55. The dividends violated the reasonable expectations of the Estate and are oppressive.

Leave to include this paragraph in the amended pleading is granted.

56. The Plaintiff has not received disclosure of further dividends. Any other undisclosed dividends to John should be repaid to the Corporation.

Leave to include this paragraph in the amended pleading is granted.

John Fails to Pay Property Taxes and Other Liabilities

57. For many years, John (and/or Brenda) has failed to pay property taxes on rental properties owned by the Corporation located at 2678 Mac Street and 2636 Mac Street in Ottawa (collectively the “Mac Street Properties”). Instead, it appears that Mic Mac’s rental revenue was used to pay John’s dividends.

Leave to include these paragraphs in the amended pleading is refused.

58. The rents received from these properties are the primary source of income for the Corporation. All of the leases related to the properties require the tenants to pay the full amount of the property taxes to Mic Mac so that Mic Mac can pay them to the city. As such, there is no reasonable explanation for not paying the property taxes.

59. As of January 18, 2023, the total arrears owed on 2636 Mac Street are $541,685.97 (including $189,174.80 in outstanding interest and penalties). The total arrears owing on 2678 Mac Street are $335,227.42 (including $129,246.15 in outstanding interest and penalties).

60. The Mac Street properties generate more than sufficient rent revenue to pay taxes as they come due. For example, in the financial year ending May 31, 2022, Mic Mac received $392,260 in rental income, according to its financial statements.

61. There is no business justification for failing to pay the income tax on these properties, especially for so many years. John’s failure to pay the taxes has resulted in the unnecessary accumulation of $318,420.95 in interest and penalty liabilities to the detriment of the Corporation. Interest and penalties continue to accrue as the taxes remain unpaid.

62. All the while, John (or Brenda) has been paying dividends to John with funds that should have been used to pay the Corporation’s taxes.

63. John (or Brenda) have also compelled the Corporation to take on significant unnecessary debt for which it has been required to pay unnecessary interest. These debts were not authorized by the board of directors or other shareholders of Mic Mac. There is no business reason for these debts.

64. John and his family’s mismanagement of the Corporation violates the Estate’s reasonable expectations and is oppressive. John should be required to pay the entire amount of the accrued interest and penalties.

John and his Family use Company Funds to pay Personal Expenses

65. Throughout the time that they have controlled Mic Mac, John and his family have used the Company’s funds and credit cards to pay their personal expenses.

Leave to include this paragraph in the amended pleading is granted.

66. A forensic accounting completed by Welch LLP in 2012 revealed that during the fiscal years 2007 to 2011, Mic Mac paid at least $91,606 in personal expenses including paying professional fees associated with the ongoing dispute. Mic Mac also paid $175,254 in expenses related to Stoke Lacey, which benefitted John and his family who lived there throughout this time. Welch also uncovered significant travel, vehicle, and telephone expenses for which John had failed to maintain supporting documentations.

Leave to include this paragraph in the amended pleading is granted.

67. In 2019, Welch completed a similar report for the period June 1, 2012 to May 31, 2016 and found that John had continued to fund his legal fees in the ongoing corporate dispute in the amount of $32,658. Welch found another $161,345 worth of uncategorized expenses that appeared to be personal in nature and had no supporting documentation. Additionally, Welch found $623,606 in telephone, insurance, utilities, maintenance, and vehicle expenses, and interest and bank charges that Welch could not determine was or was not personal in nature because John had failed to maintain adequate documentation.

Leave to include this paragraph in the amended pleading is granted.

68. John and his family have continued to use Mic Mac’s funds and credit cards to pay for personal expenses. No forensic accounting has been completed for the years since 2016. The full extent of the misuse of Mic Mac’s funds is not known to the Estate.

Leave to include this paragraph in the amended pleading is granted.

69. What is known to the Estate, is that Mic Mac pays for the personal expenses charged to Brenda’s American Express credit card (and other credit cards). Between February 2019 and January 2023, Mic Mac has paid more than $90,000 towards Brenda’s personal American Express credit card. These payments have not been authorized by the board of directors or the shareholders of Mic Mac.

Leave to include this paragraph in the amended pleading is granted.

70. John and Brenda’s purported explanation for these expenses is that they are added to a so- called loan from Mic Mac to John. No such loans to John are reflected in the general ledger or on the financial statements. Moreover, this arrangement was never authorized by the board of directors or the other shareholders of Mic Mac.

Leave to include this paragraph in the amended pleading is granted.

71. Mic Mac has continued to pay for significant telephone and communication expenses and vehicle expenses that benefit John and his family.

Leave to include this paragraph in the amended pleading is granted.

72. Mic Mac has (and has had over the years) numerous credit cards and bank accounts, making it very difficult to monitor and assess the full scope of John and his family’s misuse of corporate assets.

Leave to include this paragraph in the amended pleading is granted.

73. John also receives significant monthly cash withdrawals (represented as “management/shareholder” draws on the general ledger) from the corporation without any authorization, justification, or explanation. Significantly, John currently lacks mental capacity and cannot manage the business, so he should not receive any purported management fees. These fees have not been authorized by the board of directors or the shareholders.

Leave to include this paragraph in the amended pleading is granted.

Sandra Stapledon Loans

74. Since at least 2014, Mic Mac’s general ledger has reflected payments by Mic Mac to its accountant Ms. Stapledon of more than $1.1 million, purportedly for short-term loans.

Leave to include these paragraphs in the amended pleading is granted.

75. In fiscal year 2014, Mic Mac’s general ledger reflects $102,548.84 in loans from Ms. Stapledon and $92,548.84 in corresponding payments to Ms. Stapledon. Many of the payments to Stapledon were made the same day or a month after the purported loan.

76. In fiscal year 2015, Mic Mac’s general ledger reflects $70,000 in loans from Ms. Stapledon and $72,500 in corresponding payments to Ms. Stapledon. Many of the payments to Stapledon were made the same day or a month after the purported loan.

77. In fiscal year 2016, Mic Mac’s general ledger reflects $176,999.20 added to the short-term loan account. But a significant portion of this amount is recorded as “Rent etc.” not as loans from Ms. Stapledon. And yet, Ms. Stapledon was paid $171,999.20 as purported loan repayments. Again, many of the payments to Ms. Stapledon were made the same day or a month after amounts were added to the loan account.

78. In fiscal year 2017, Mic Mac’s general ledger reflects $358,400.20 added to the short-term loan account. But again, a significant portion of these amounts is recorded as rent. And yet, Ms. Stapledon was paid $353,075 in purported loan repayments. Again, many of the payments to Ms. Stapledon were made the same day or a month after amounts were added to the loan account.

79. In fiscal year 2018, Mic Mac’s general ledger reflects $439,465.10 added to the short-term loan account. Again, a significant portion of these amounts is recorded as rent. Ms. Stapledon was paid $413,500 in purported loan repayments. Many of the payments to Ms. Stapledon were made the same day or a month after the purported loan.

80. In fiscal year 2019, Mic Mac’s general ledger reflects $23,000 added to the short-term loan account, including rent. Ms. Stapledon was paid $47,000 in purported loan repayments. Again, payments to Ms. Stapledon were made on the same day as purported loans.

81. In fiscal year 2020, Mic Mac’s general ledger reflects $22,118.93 in purported loan repayments to Ms. Stapledon and no amounts added to the shareholder loan account.

82. In fiscal year 2021, Ms. Stapledon was paid $2,533 in in purported loan repayments.

83. None of these purported loans were authorized by the board of directors or other shareholders. There is no reasonable business purpose or explanation for these purported loans.

84. To the extent that John or his family benefitted or the Corporation was injured by the above transactions, John should be required to reimburse Mic Mac.

85. Throughout the time that Ms. Stapledon has been receiving purported loan repayments, she has also received significant payments for professional fees and other reasons.

John Agrees to a Sale of Stoke Lacey that Benefits John and his Family

86. On or around August 31, 2021, John (or Brenda) caused the Corporation to enter an agreement of purchase and sale for Stoke Lacey (the “APS”) at a purchase price of $5,400,000.

Leave to include these paragraphs in the amended pleading is granted.

87. The APS provides John and Brenda with the right to continue occupying Stoke Lacey rent- free for two years following the closing of the transaction. During this two-year period, the Corporation is required to continue paying the expenses, taxes, and insurance for Stoke Lacey, with no corresponding benefit to the Corporation. This arrangement is to the sole benefit of John and Brenda.

88. The Corporation received other offers for the purchase of Stoke Lacey for a comparable purchase price to what was ultimately agreed. But none of these offers provided a two-year rent- free occupancy period for John and Brenda. The Defendants entered the APS because it provided John and Brenda with a significant benefit and it burdened the Corporation with further unnecessary expenses.

89. Pursuant to the APS, the Corporation was also required to extend a vendor take-back mortgage of $2,700,000 with a term of two years. The Corporation has no right to any interest under the mortgage and receives no benefit from it. By contrast, at least one of the other offers made on Stoke Lacey provided the certainty of the full purchase price paid on closing with no two- year vendor take back mortgage.

90. The transaction was initially scheduled to close by November 30, 2021. Due to a number of issues with the closing conditions, the transaction did not close until on or around August 31, 2022.

91. Throughout that time, John and Brenda have continued to occupy Stoke Lacey without paying rent and will be able to do so for another two years pursuant to the APS.

92. Making the sale of Stoke Lacey subject to a two-year rent-free occupancy period and a two-year interest-free vendor take back mortgage was oppressive and was not in the best interests of the Corporation. It violated the reasonable expectations of the Estate. There was no justifiable business reason for the two-year occupancy period. It only benefits John and Brenda.

93. Upon the closing of the sale of Stoke Lacey, the Corporation owed $254,097.77 in unpaid property taxes to the City of Ottawa because of John’s failure to pay these taxes. Like the taxes for the Mac Street Properties, these unpaid taxes should have been paid as they came due with rental revenue received by the Corporation. Instead, the full amount was paid using funds received on the closing of the sale of Stoke Lacey.

John has Never Completed Audited Financial Statements for the Company

94. Contrary to the requirements of ss. 149 and 154 of the OBCA, John has never completed audited financial statements for the corporation.

Leave to include these paragraphs in the amended pleading is refused.

95. He has never sought or obtained the authorization of the other shareholders to exempt the Corporation from the required audit.

96. The financial records of the company are disorganized, confusing, and, in many respects, unreliable. The state of the financial records benefits John and his family by obscuring their usurpation of corporate assets.

97. In the circumstances, an audit is necessary and the failure to conduct one, as required, is oppressive.

The Estate Has Been Oppressed

98. As set out above, John has breached the Estate/Mildred’s reasonable expectations as a shareholder and acted in a manner that is oppressive, unfairly prejudicial and unfairly disregards Mildred’s interests, including by:

Leave to include this paragraph in the amended pleading is granted.

a. Paying himself $1,384,093 in unauthorized dividends with no corresponding payments to the other shareholders;

Leave to include this paragraph in the amended pleading is granted.

b. Failing to pay taxes owing on the Mac Street Properties and other debts for years with the result that significant interest and penalties have accrued, unjustifiably and unnecessarily increasing the Corporation’s liabilities;

Leave to include this paragraph in the amended pleading is refused.

c. Using corporate funds to pay personal expenses;

Leave to include this paragraph in the amended pleading is granted.

d. Failing to produce information concerning the business;

Leave to include this paragraph in the amended pleading is refused.

e. Failing to complete audited financial statements; and

Leave to include this paragraph in the amended pleading is refused.

f. Compelling the Corporation to enter an oppressive sale of Stoke Lacey that creates personal benefits for John and Brenda, liabilities for the Company, and fails to provide a corresponding benefit to the company.

Leave to include this paragraph in the amended pleading is granted.

Mic Mac Should be Wound Up

99. John and Brenda’s self-interested actions and dominance of the company have resulted in a complete breakdown in the relationship among the shareholders. The shareholders have been engaged in litigation for more than a decade and have been unable to work together for years. The parties’ interests must be separated.

Leave to include this paragraph in the amended pleading is granted.

100. A winding-up will provide the most expeditious separation of the parties’ interests. The company’s only major assets are real estate, which can be sold quickly and at fair value.

Leave to include this paragraph in the amended pleading is granted.

101. A buy-out is unworkable, including because John does not have the funds to purchase the other shareholders’ shares.

Leave to include this paragraph in the amended pleading is granted.

102. In the circumstances, a winding-up is the most just and equitable resolution.

Leave to include this paragraph in the amended pleading is granted.

No Entitlement to a Constructive Trust or a Vesting Order

103. John is not entitled to the equitable remedy of a vesting order and the Shares should no longer be impressed with a constructive trust.

Leave to include paragraphs 103-106 and 108 in the amended pleading is granted.

Leave to include paragraph 107 in the amended pleading is refused.

104. Allowing John to own or to continue to benefit from the Shares would deprive the Estate (and its beneficiaries) of any benefit from Mic Mac and Keith McMurtry’s life’s work in building the family real estate portfolio. Mildred contributed significantly to Mic Mac, both through her direct work in the business and by raising their six children and maintaining the household.

105. In recognition of their relationship and Mildred’s years of support for Keith and the family, Keith bequeathed his estate to Mildred, which includes his Shares in Mic Mac, so that she could benefit from his work after his death. Notably, John has already usurped another major asset received by Mildred from her husband’s estate by pressuring Mildred to sign over the Tin House for no consideration.

106. Mildred’s Estate has no other significant assets. Allowing John to own or to continue to benefit from the Shares would deprive her beneficiaries (other than Jim) from any benefits from the family real estate portfolio built by Keith and held by Mic Mac.

107. John has not taken any steps to grow Mic Mac or its real estate portfolio. He has simply profited from Keith’s work (and Mildred’s), taking over Stoke Lacey for himself and his family, and making his living by misappropriating significant funds from the Corporation, as set out above. Throughout that time, he has mismanaged the company, paying himself dividends rather than paying property taxes, with the result that the company has accumulated significant liabilities as set out above.

108. John comes to this court with unclean hands and he has acted in a manner oppressive to the Estate. Therefore, he should not benefit from any equitable remedy (whether it be a constructive trust, a vesting order, or otherwise). John’s wrongful conduct is directly related to any alleged entitlement by him to the Shares.

109. As set out in more detail above, John’s wrongful conduct has included:

Leave to include this paragraph in the amended pleading is granted.

a) Paying himself $1,384,093 in unauthorized dividends with no corresponding payments to the other shareholders;

Leave to include this paragraph in the amended pleading is granted.

b) Pressuring his mother into transferring ownership of the Tin House to him;

Leave to include this paragraph in the amended pleading is refused.

c) Harassing and intimidating his mother by attempting to evict her at the same time that the first trial of this matter was heard;

Leave to include this paragraph in the amended pleading is refused.

d) Failing to pay taxes owing on the Mac Street Properties and other debts for years with the result that significant interest and penalties have accrued, unjustifiably and unnecessarily increasing the Corporation’s liabilities;

Leave to include this paragraph in the amended pleading is refused.

e) Using corporate funds to pay personal expenses; and

Leave to include this paragraph in the amended pleading is granted.

f) Compelling the Corporation to enter an oppressive sale of Stoke Lacey that creates personal benefits for John and Brenda, liabilities for the Company, and fails to provide any corresponding benefit to the company.

Leave to include this paragraph in the amended pleading is granted.

110. Wherefore The Plaintiff claims the relief as set out in paragraph 1 herein pleads and relies upon the provisions of the Ontario Business Corporations Act, including ss. 22, 22(3), 38, 134, 148-160, 207 and 248.

Leave to include this paragraph in the amended pleading is granted.

111. The Plaintiff further requests that this action and the aforesaid Court Action No. 11-50312 be tried together in Ottawa, Ontario.

Leave to include this paragraph in the amended pleading is granted.

OTTAWA COURT FILE NOS.: 12-56265

DATE: 2023/08/14

SUPERIOR COURT OF JUSTICE – ONTARIO

BETWEEN: Keith Murphy, in his capacity as the Estate Trustee of the Estate of Mildred McMurtry, Plaintiff

– and –

John McMurtry, by his Litigation Guardian, Emily McMurtry and Mic Mac Realty (Ottawa) Ltd., Defendants

RULING ON MID-TRIAL MOTION

Madam Justice Sylvia Corthorn

Released: August 14, 2023

¹ The Estate of Mildred McMurtry, Deceased (“the Estate”) is represented by Keith Murphy. He is Mrs. McMurtry’s grandson and the son of Deborah Murphy (John’s and Jim’s sister and Mrs. McMurtry’s daughter).

² In the First Trial Decision, at para. 31, I ordered that the Disputed Shares remain an asset of the Estate of Keith McMurtry, and that the Estate Trustees are prohibited from transferring the Disputed Shares to Mrs. McMurtry or to anyone else.

³ Keith Murphy’s evidence on the motion is that Stoke Lacey is a residential property located on Sixth Line Road and the most significant property owned by MMR. It is undisputed that the property was sold in 2022 for a purchase price in excess of $5,000,000.

⁴ In the proposed pleading, the Estate alleges that the Tin House is a residential property inherited by Mrs. McMurtry from Keith McMurtry. The origin of the name “Tin House” is not before the court on the motion.

⁵ The reliance by Mrs. McMurtry on Jim’s pleading in the 2011 action and by John, in his statement of defence to the contents of his pleadings in the 2011 action are discussed in another section of this ruling.