2023 ONSC 6169

Court File and Parties

Court File No.: CV-16-70237 Date: 2023-10-30 Superior Court of Justice - Ontario

Re: W. James D. Helmer, Plaintiff And: Economical Mutual Insurance Company and Carr & Company Insurance Brokers Ltd., Defendants

Before: Associate Justice M. Fortier

Counsel: Michael Van Dusen, Counsel for the Plaintiff Martin Forget, Counsel for the Defendant Economical Mutual Insurance Company

Heard: June 22, 2023

Endorsement

Introduction

This is a motion by the Plaintiff, W. James D. Helmer seeking leave to amend the Statement of Claim. The Defendant, Economical Mutual Insurance Company (“Economical”) opposes the amendments.

Background

The Plaintiff was the owner of mixed-use premises located at the corner of Somerset and Percy Streets in the city of Ottawa (the “Premises”) The Premises were destroyed by fire on October 21, 2015.

Economical insured the premises pursuant to a commercial policy of insurance (the “Policy”). The Policy provides for the Premises to be rebuilt. The building limits described in the Policy were $1,721,000.00.

The Policy also contained an extension endorsement, referred to as “the 6558 Extension endorsement” (“6558 Extension”) that provided for an additional sum of $500,000.00 to be applied towards debris removal, building code and by-laws upgrades, inflation protection, and other miscellaneous items.

To protect the limitation period, the Statement of Claim (the “Claim”) was issued on October 13, 2016, when the Plaintiff was still at the design stage and construction had not yet started.

The Claim sought full replacement cost for the Premises including any additional costs that would be incurred with respect to building codes and by-law upgrades. The Plaintiff also sought damages for Economical’s breach of its obligations of good faith in adjusting the loss.

Following the fire, Economical paid out the replacement cost limits of the Policy of $1,721,000.00. In addition, by December 2016, Economical paid approximately $148,204.04 under the 6558 Extension leaving a balance remaining of $351,795.96.

According to the Plaintiff, Economical assured him that they would pay out any balance remaining of the additional amount of $500,000.00 under the 6558 Extension once construction had been completed and it could be shown that rebuild costs had exceeded $1,721,000.00. Economical denies that it gave this assurance.

On December 21, 2021, once construction was completed, the Plaintiff provided Economical with a Proof of Loss detailing total construction costs of $4,991,777.00 an amount considerably highly than the $1,720,000.00 previously paid.

Following a pre-trial held on December 14, 2022, the Plaintiff states that he advised Economical that he would be narrowing his claim to the balance remaining of $339,146.36 under the 6558 Extension. The Plaintiff filed a proof of loss seeking payment of $339,146.36 and informed Economical that he would be amending his claim.

Economical refuses to pay the remaining balance under the 6558 Extension stating that the Plaintiff did not meet the requirements of the Extension. In particular, the Plaintiff rebuilt a much larger commercial premises and did not replace the building with building of “like height, floor area and style, and for like occupancy” as required under the 6558 Extension.

The Plaintiff has settled his claim with the Defendant, Carr & Company Insurance Brokers Ltd. The trial of this matter will therefore proceed against Economical on the issue of the funds allegedly owing pursuant to the 6558 Extension, and bad faith.

The trial originally rescheduled to be heard over two weeks in December 2023 has been adjourned to September 2024.

The Draft Amended Statement of Claim is attached as Schedule “A” to this endorsement.

Issue

The issue is whether the Plaintiff should be granted leave to amend the Statement of Claim.

Preliminary Objection

The Plaintiff raised a preliminary objection at the outset of the motion. The Plaintiff asked the Court to disregard or strike the affidavits of Venice Watson, relied upon by Economical in response to the Plaintiff’s motion. Ms. Watson is a law clerk with the law firm Forget Smith, lawyers for Economical.

Ms. Watson’s affidavits are dated May 19, 2023, and June 13, 2023, respectively. The Plaintiff submits that both affidavits should be struck in their entirety as being improper and contrary to the rules regarding affidavit evidence.

With respect to Ms. Watson’s 40 paragraph affidavit of May 19, 2023, the Plaintiff argues that:

a) Ms. Watson does not identify the source of her information; b) Much of the substance of her affidavit bears directly on contentious issues; c) Many paragraphs contain argument and opinion on the issues that will form part of the evidence at trial.

As to Ms. Watson’s eight paragraph affidavit of June 13, 2023, the Plaintiff argues that, although Ms. Watson identifies the source of her information the affidavit is problematic for the same reasons outlined in subparagraphs 15 b) and c) above.

Rule 4.06(2) of the Rules of Civil Procedure (R.R.O. 1990, Reg. 194) provides:

“An affidavit should be confined to the statement of facts within the personal knowledge of the deponent or to other evidence that the deponent could give if testifying as a witness in court, except where these rules provide otherwise”.

Rule 39.01(2) states:

“An affidavit for use on a motion may contain statements of the deponent’s information and belief, if the source of the information and the fact of the belief are specified in the affidavit”.

Certain principles that the Court is to consider when dealing with the propriety of an affidavit in support of a motion can be summarized as follows:

a) The Rules permit hearsay evidence for motions under certain circumstances. An affidavit for use on a motion may contain statements of the deponent’s information and belief if the source of the information and the fact of the belief are specified in the affidavit. A statement in an affidavit that: (a) does not state the source of the affiant’s information; or (b) contains inadmissible hearsay, legal and factual argument belonging in the factum, inflammatory rhetoric, or offensive allegations made for the purposes of prejudicing another party may be struck out in whole or in part (. Gutierrez v. The Watchtower Bible and Tract Society of Canada et al., 2019 ONSC 3069 at para 27 ); b) Paragraphs in an affidavit for use on a motion that do not state the source of the deponent’s information and belief will be struck where the paragraphs deal with contentious matters. However, the paragraphs may be saved by rule 1.04 if they deal with a non-contentious matter and the exhibits to the affidavit reveal the source of the information and belief. Cameron v. Taylor (1992) 7575; c) An affidavit should be struck in its entirety and does not comply with r. 39.01(4) where the Court cannot distinguish the deponent’s personal knowledge from information received from others. Cowley v. Skyjack Inc, 2020 ONSC 1718 at para 65; d) An affidavit in support of a motion should be based on facts within the knowledge of the deponent. Opinion and argument are not facts but conclusions and unless the witness is tendered as an expert then the witnesses’ opinion is neither admissible nor probative of anything” Glasjam Investments Ltd. v Freedman para 35; e) It is improper for a lawyer or a member of the clerical staff to swear an affidavit on contentious issues. Rather, a lawyer or a member of the staff may swear an affidavit on non-contentious issues, such as identifying productions, answers to undertakings or answers given on a discovery. ( Mapletoft v. Christopher J. Service at para 15 ) As held by Master MacLeod (as he then was) in Glasjam Investmnts Ltd. v. Freedman, 2014 ONSC 3878 at para 37 : “A chronology of events and relevant correspondence sent or received are precisely the sort of non-contentious facts that could properly be put into evidence by a law clerk who has reviewed the file”.

May 19, 2023, Affidavit

For the reasons that follow:

a) Paragraphs 2-6, 10, 12-17, 20, 26, 27, 32, 33, 35- 39 are struck in their entirety; b) The first sentence of each of paragraphs 8, 9, 18, 19 are struck; c) Paragraphs 21, 22, 23, 24, 25, 28, 29, 30, 31, 34 are struck except for the last sentence in each paragraph attaching Exhibits “C” to “L”.

The first paragraph of Ms. Watson’s affidavit of May 19, 2023, states as follows:

“I am a law clerk at the law firm of Forget Smith, lawyers for the Defendant, Economical Mutual Insurance Company (“Economical”) and as such have knowledge of the matters hereinafter deposed. Where I do not have first-hand knowledge of the matters, I have specified the source of the information and I hereby state that I believe such information to be true”.

What follows are 39 paragraphs, wherein Ms. Watson fails to identify in any respect her involvement in the file. Moreover, not once does Ms. Watson specify the source of her information as required pursuant to rule 39.01(4). Ms. Watson does not state that she reviewed the file, or the Schedule “A” documents, or that she met with the defendants or Mr. Forget, counsel for Economical.

Paragraphs 2-6, 10, 12-17, 20, 26, 27, 32, 33, 35- 39 do not comply with ule 39.01(4) in that the Court cannot distinguish the deponent’s personal knowledge from information received from others or a review of the file. Moreover, these paragraphs either contain bald statements on contentious issues, or contain opinion and argument. Accordingly, the paragraphs are struck. ( Mapletoft at para 15; Gutierrez at para 27; Cowley at para 65 ).

The Defendant contends that the purpose of Ms. Watson’s affidavit was to append certain documents and acknowledges that little or no weight should be given to anything else in the affidavit. Economical takes the position that to the extent that Ms. Watson’s summary of the correspondence is inconsistent with the document, the Court should rely on the correspondence.

The Defendant also concedes that paragraph 35 of the affidavit ought to be struck. Moreover, the Defendant is not challenging the submission that many of the paragraphs contain argument and opinion and should also be struck.

As stated previously, a member of staff may swear an affidavit on non-contentious issues, such as a chronology of events and relevant correspondence sent or received.

In my view, it is appropriate to allow Ms. Watson to attach relevant documents or correspondence sent or received. However, the part of each of those paragraphs in the affidavit where Ms. Watson either comments, interprets, or summarizes the documents are to be struck as outlined in subparagraphs 20 b) and c) above.

June 13, 2023, Affidavit

For the reasons that follow:

a) Paragraph 3 is struck; b) Paragraphs 4, 5, 6 and 7 are struck except for the last sentence in the paragraphs attaching Exhibits A, B, or C or tab 2 and 3.

Although, Ms. Watson identifies the source of her information and belief in the June 13, 2023, affidavit, paragraphs 3, 4, 5, 6 and 7 of the affidavit, contain opinion and argument on contentious issues.

Moreover, notwithstanding the Defendant’s argument that the purpose of the supplemental affidavit was to put documents before the Court, every paragraph of Ms. Watson’s affidavit attaching exhibits includes inappropriate argument or opinion related to those attachments. Accordingly, only the portions of the paragraphs in the affidavit attaching the exhibits will remain along with the exhibits.

The Amendments

The Plaintiff states that he is seeking leave to amend the Statement of Claim to particularize evidence of waiver, misrepresentation, and promissory estoppel on the part of Economical.

According to the Plaintiff, Economical, via Ryan Reis, the Economical adjuster appointed to manage the loss, specifically waived reliance on the restrictions and conditions set out in the 6558 Extension and made it clear that if a code compliant building was built on the same premises, the remaining monies would be paid once construction had been completed. The Plaintiff maintains that construction was completed in late 2021 and a Proof of Loss was filed in December 2021.

The Plaintiff argues that his right to claim payment based on the waiver only crystallized once construction had been completed and Economical refused to pay.

The amendments are now required because the Claim did not plead detrimental reliance, and promissory estoppel since the Plaintiff was not aware at the time that Economical would refuse to pay the balance of the 6558 Extension once construction was completed, as allegedly promised. The Plaintiff further argues that this change in position amounts to bad faith thereby exposing Economical to a claim for punitive damages.

Economical opposes the amendments arguing that:

a) There is non-compensable prejudice caused by the inornate delay in seeking the amendment; b) The amendments assert new claims outside of the limitation period; c) The proposed new claim of “promise to pay” is not legally tenable.

Law and Analysis

Rule 26.01 of the Rules provides:

“On motion at any stage of an action the Court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment”.

The principles that the Court is to consider on motions to amend pleadings pursuant to Rule 26.01 are set out in the decision of the Court of Appeal in 1588444 Ontario Ltd. v. State Farm Fire and Casualty Co. which reads as follows at paragraph 25 (citations omitted):

a) The Rule requires the Court to grant leave to amend unless the responding party would suffer non-compensable prejudice; the amended pleadings are scandalous, frivolous, vexatious or an abuse of the Court’s process; or the pleading discloses no reasonable cause of action; b) The amendment may be permitted at any stage of the action; c) There must be a causal connection between the non-compensable prejudice and the amendment. In other words, the prejudice must flow from the amendments and not from some other source; d) The non-compensable prejudice may be actual prejudice, i.e., evidence that the responding party has lost an opportunity in the litigation that cannot be compensated as a consequence of the amendment. Where such prejudice is alleged, specific details must be provided; e) Non-compensable prejudice does not include prejudice resulting from the potential success of the plea or the fact that the amended plea may increase the length or complexity of the trial; f) At some point, the delay in seeking an amendment will be so lengthy and the justification so inadequate, that prejudice to the responding party will be presumed; g) The onus to prove actual prejudice lies with the responding party.

Delay

Economical argues that it has suffered non-compensable prejudice due to the Plaintiff’s inordinate delay in bringing the motion. The defendant contends that almost 7-year delay since the commencement of these proceedings has caused not only presumed prejudice but actual prejudice. Economical asserts that the actual prejudice includes the availability and memory of various witnesses that have information related to the alleged promise of payment, waiver, detrimental reliance now alleged.

With respect to allegations of actual prejudice, the Court of Appeal in 1588444 Ontario Ltd. V. State Farm Fire and Casualty Co. held that generalized descriptions of presumed prejudice lack the required degree of specificity to qualify as evidence of actual prejudice. Such allegations of prejudice must be detailed in sufficient particularity to allow the opposing party to respond to the allegation and the allow the Court to determine the merits of the allegation. (paras 31 and 32).

The burden is on Economical to adduce specific evidence of actual prejudice should the amendments be granted. In the matter before me, there is no evidence whatsoever of actual prejudice. Rather Economical has made general allegations of actual prejudice in argument. Accordingly, I do not find that the Defendant has met its onus of proving actual prejudice.

As outlined above, the Courts have found that at some point, the delay in seeking an amendment will be so lengthy and the justification so inadequate, that prejudice to the responding party will be presumed.

Based on the evidence before me, I do not agree that there has been an exceptional delay in seeking the amendments such that prejudice to the Defendant will be presumed. The fact the that claim was commenced seven years ago does not, in and of itself, amount to an exceptional delay in bringing the motion. It depends on the circumstances of each case.

I do not accept Economical’s argument that the promise of payment, waiver and detrimental reliance now alleged by the Plaintiff should have made in their statement of claim or that the Plaintiff should have sought to amend their statement of claim much earlier.

It is Plaintiff’s evidence that when the claim was drafted there was no basis upon which to plead promissory estoppel or detrimental reliance since the Plaintiff was not aware at the time that Economical would refuse to pay the balance of the 6558 Extension once construction was completed.

It is the Plaintiff’s uncontradicted evidence that he sought to amend the Claim to specifically plead and rely on the equitable doctrines of promissory estoppel and waiver immediately after the Defendant refused to pay the balance allegedly owing under the 6558 Extension, following the pre-trial in December 2022. This, in my view, does not amount to an inordinate delay.

Limitation Period – New Cause of Action

The Defendant argues that the Plaintiff’s claim of a promise of payment and damages for “breach of duty to act in good faith” are new causes of action based on facts not pled in the original statement of claim and are asserted outside the limitation period.

In their submissions related to the alleged promise of payment, the parties referred to a series of emails between Ryan Reis of Economical and the Plaintiff. Not surprisingly, the Plaintiff and the Defendant interpret the emails differently.

The Defendant argues that, to the extent that the Plaintiff believed there was a promise of payment created in the emails, he knew by the latest June 6, 2018, that he would not be paid in accordance with that alleged promise. As those communications were five years ago, any claim arising out of the alleged promise of payment is statute barred.

The Plaintiff on the other hand, points to other emails in support of his position that he was promised payment of the balance under the 6558 Extension once he had completed construction of the building on the same location and shown that he had spent over $1,721,000.00. The Plaintiff’s uncontradicted evidence on the motion is that construction was completed in the fall of 2021. The Plaintiff argues that the claim for “promise of payment” is not statute barred because the claim did not crystalize until the completion of construction and Economical’s refusal to pay.

On motions to amend pleadings that deal with the expiry of a limitation period, the Court of Appeal in Frohlick v. Pinkerton Canada Ltd, and 1100997 Ontario Ltd. v. North Elgin Centre Inc., 2016 ONCA 848 provided the following guidance:

a) An amendment will be statute-barred if it seeks to assert a “new cause of action” after the expiry of the applicable limitation period: ( North Elgin, at paras. 19-23, 33); b) The expiry of a limitation period is one form of non-compensable prejudice. A party cannot circumvent the operation of a limitation period by amending their pleadings to add additional claims after the expiry of the relevant limitation period. ( Frohlick v. Pinkerton Canada Ltd, 2008 ONCA 3, 88 O.R. (3d) 401, at para. 24; 1100997 Ontario Ltd. v. North Elgin Centre Inc., 2016 ONCA 848, 409 D.L.R. (4th) 382, at paras. 21-23 ); c) An amendment does not assert a new cause of action – and therefore is not impermissibly statute-barred – if the “original pleading … contains all the facts necessary to support the amendments … [such that] the amendments simply claim additional forms of relief, or clarify the relief sought, based on the same facts as originally pleaded” ( North Elgin Centre Inc., at paras. 20-21 ); d) Where there is a factual dispute as to when the limitation period began to run or where there are facts that might operate so as to extend the limitation period and the motion judge is not in a position to resolve the dispute, the amendment will normally be allowed, and the responding party will be given leave to plead the limitation period as a defence. ( Frohlick at para 32 ).

There is clearly a factual dispute as to when the limitation began to run with respect to the promise to pay. This is matter that should be left to the trial judge to determine, based on a full evidentiary record as I am not able to resolve this dispute on the motion.

Regardless of the limitation period issue, in my view, neither the claim of a “promise of payment” nor the claim for damages for breach of duty to act in good faith are new causes of action.

In Navigator Limited v. Owen 2022 ONSC 251 Associate Justice Frank set out what constitutes a new cause of action as follows:

a) As set out in Farmers, a cause of action is “a factual situation the existence of which entitles one person to obtain from the Court a remedy against another person.” The test for determining if amendments are permissible is to assess “whether the proposed amendments do, or do not, arise out of the same facts, or the factual matrix, that was pleaded in the original statement of claim. If they do, then the amendments should be permitted. If they do not, and the limitations period has expired, then the amendments should be refused. b) Based on the factually oriented approach to determining what constitutes a new cause of action, “if the defendant has notice of the factual matrix underlying the claim being advanced, then amendments that arise out of, or do not depart from, that factual matrix do not constitute ‘new’ causes of action that would not be allowed by way of amendment.

Promise to Pay

In my view, the proposed amendments related to the “promise to pay” arise out of the same factual matrix that was pled in the statement of claim but add the required particulars. The statement of claim specifically pleads at paragraph 1(e) that the Plaintiff is entitled to any additional costs occasioned by building code or by-law upgrades to the Premises. These are provided for in the 6558 Extension.

As stated in paragraph 13 of the Statement of Claim, at the time of drafting, the Premises were an empty lot. I accept the Plaintiff’s submissions that when the statement of claim was drafted, there was no basis upon which the Plaintiff could make the claim because the Defendant allegedly promised to pay when the building was completed. In my opinion, the Plaintiff is particularizing the evidentiary basis for claiming the balance allegedly available under the 6558 Extension.

In addition, based on the evidence before me, the Defendant had notice of the factual matrix underlying the claim being advanced. The evidence relied on by the Plaintiff is in the record.

Breach of Duty to Act in Good Faith

In my view, the claim for damages for breach of duty to act in good faith is not a new claim. In particular, the allegation that Economical failed to act in good faith is found in paragraph 16 of the Statement of Claim. Moreover, Economical specifically enjoined the issue of bad faith in their Amended Statement of Defence and Crossclaim at paragraph 13 which states: ”Economical denies that it has wrongly refused or neglected to reimburse and/or indemnify the Plaintiff for his loss and damages and further says that no act or omission by Economical, as alleged or at all, constituted negligence, breach of duty, breach of contract or breach of good faith, and Economical denies liability to the Plaintiff.”

I find that the proposed amendments with respect to the claim for damages for breach of duty to act in good faith serve to particularize the specific allegations of a breach of duty of good faith that are already made in the statement of claim and are part of the same factual matrix.

The parties have both provided their positions on the issues of waiver, promissory estoppel, and detrimental reliance in the context of this action and the facts pleaded. Not surprisingly, they don’t agree.

In my view, it is not for me to decide these issues but rather for the trial judge to decide on a full evidentiary record. This is not a situation where the amended pleadings are scandalous, frivolous, vexatious or an abuse of the Court’s process or discloses no reasonable cause of action.

Conclusion

For the reasons outlined above, I conclude that the Economical has not discharged its onus of proving actual, non-compensable prejudice.

Disposition

For the foregoing reasons, the Plaintiff’s motion is granted. The Plaintiff is granted leave to amend his statement of claim in accordance with the draft amended Statement of Claim filed on the motion.

The Defendant is entitled to deliver an amended statement of defence to address the amendments made by the Plaintiff. The parties may conduct further examinations for discovery on matters arising out of the amendments.

If the parties cannot agree on costs, they may file written submissions not exceeding three pages, exclusive of their respective bills of costs. The plaintiff shall file its costs submissions within 20 days of the release of this decision. The cost submissions of the defendants shall be filed within 10 days thereafter.

Marie T. Fortier Associate Justice M. Fortier

DATE: October 30, 2023