Ontario Superior Court of Justice

Court File No.: CV-22-88932
Date: 2025/04/11

RE: 1995636 Ontario Inc. o/a 2B Developments and Lisa Bailey, Plaintiffs
AND
5010729 Ontario Inc. c.o.b. as Astute Capital Group, Astute Group of Companies, Astute Capital and Ashley Shewchuk, Defendants
AND BETWEEN
5010729 Ontario Inc. and Ashley Shewchuk, Plaintiffs by Counterclaim
AND
1995636 Ontario Inc. o/a 2B Developments, Lisa Bailey and Lindsay Michelle Blair, Defendants by Counterclaim

Before: Marc Labrosse

Counsel:
Jonathan Goode, Paul Jacoby, Torkin Manes LLP, for the Plaintiffs/Defendants by Counterclaim
Martin Black, BD Law Offices, for the Defendants/Plaintiffs by Counterclaim

Heard: 2024-12-23

Endorsement

Summary

[1] There are two motions before the court. The Defendants/Plaintiffs by Counterclaim (501 Parties) seek an order to file a Fresh as Amended Statement of Defence and Counterclaim (the Amended Pleading). The Plaintiffs/Defendants by Counterclaim (2B Parties) seek an order for the 501 Parties to deliver a further and better Affidavit of Documents in respect of specific additional productions.

[2] As part of the same Notice of Motion, the 501 Parties were seeking a Supplementary Affidavit of Documents, a ruling on refusals given at Examinations for Discovery and other relief. Those requests have been withdrawn or agreed on and the 501 Parties now only pursue the filing of the Amended Pleading which they claim will automatically bring about the need to file Supplementary Affidavits of Documents by all parties.

[3] For the reasons set out herein, the motion by the 501 Parties for the Amended Pleading is granted. The objections raised by the 2B Parties do not amount to grounds to refuse the proposed Amended Pleading at this stage of this complex litigation. The main argument against the Amended Pleading by the 2B Parties relates to an abuse of process and I have concluded that such is not the case. In terms of the limitation period issue, there is a live issue on discoverability and it can be pleaded in the 2B Parties Defence to Counterclaim. Otherwise, the Amended Pleading is authorized.

[4] As for the motion by the 2B Parties, the request for a Further and Better Affidavit of Documents is in large part granted in respect of a missing bank account and missing attachments and pages from communications already produced. This also generally applies to the production of unredacted bank records; however, specific objections may still form part of the discovery process following the close of pleadings. If there continue to be redacted documents, the positions of the parties shall be set out on the record through the discovery process. At that point, a motion can be brought back to me to deal with further disclosure and discovery issues.

Factual Background

[5] These motions form part of a series of disputes relating to certain development and financing agreements involving residential housing development projects. In particular, 2B Developments agreed to provide project management and site supervision services for the construction of a residential housing development on Philip Street in Smith Falls. 2B Developments claims damages against the Defendants in the amount of $469,716.90 and the Plaintiff Bailey claims damages as against the Defendants in the amount of $404,777.90.

[6] On or about February 25, 2022, 5010729 Ontario Inc. c.o.b. as Astute Capital sold its interest in the Philip St. property and the 2B Parties claim that the proceeds of sale are impressed with a trust in favour of the Plaintiffs pursuant to the Construction Lien Act. Accordingly, the Plaintiffs have sought an accounting and tracing of the proceeds of sale.

[7] The Plaintiffs commenced this action on April 4, 2022. On that same date, the Plaintiffs also started a construction lien action in relation to a property in Lanark County known as the Lanark Project (the Lanark Action). That claim was dismissed by McLean J. and that decision is now under appeal.

[8] The 501 Parties filed a Defence and Counterclaim against the 2B Parties on May 18, 2022. The Counterclaim seeks damages of $1,000,000 for breaches of trust, fraud and various other relief related to the Phillip Street Project.

[9] The parties entered into a Discovery Plan and both parties served Affidavits of Documents in June 2023. They proceeded to the examination for discovery of the Plaintiffs on October 12, 2023, and the examination was halted as a result of last-minute disclosure and a claim by the 501 Parties that counsel for the 2B Parties obstructed the discovery.

[10] The 501 Parties sought to bring a motion in November 2023 but its scheduling was cancelled by the Court. The parties then agreed to proceed to a case conference. In June 2024, a case conference was held which set out a timeline for further Affidavits of Documents, motions and discoveries.

[11] On August 21, 2024, the Trial Judge in the Lanark Action released his decision dismissing the action by 2B Developments, awarding damages in the amount of $325,375 to 5010729 Ontario Inc. and making credibility findings against the Defendant by Counterclaim Blair and unfavourable findings against the Plaintiff Bailey.

[12] Following a case conference, there was an order allowing each party to serve a further Affidavit of Documents. There are ongoing disputes relating to the completeness of the productions to date.

[13] On August 24, 2024, the 501 Parties served their motion seeking rulings on refusals, a further and better Affidavit of Documents, various relief in two other actions involving some of the same parties and leave to amend their Defence and Counterclaim. That same day, the 2B Parties served their motion seeking a further and better Affidavit of Documents.

[14] After a further case conference, the 501 Parties withdrew the requests for rulings on refusals and the further and better Affidavit of Documents. The relief relating to other proceedings was resolved. This leaves the motion for the Amended Pleading and the motion by the 2B Parties for a further and better Affidavit of Documents.

Applicable Law

Amendments to Pleadings

[15] Rule 26.01 deals with amendments to pleadings and reads as follows:

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

[16] The law regarding leave to amend motions is well developed and the general principles were summarized in 1588444 Ontario Ltd. v. State Farm Fire and Casualty Co., 2017 ONCA 42, para 25:

• 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;
• The amendment may be permitted at any stage of the action;
• 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;
• 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;
• 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;
• The onus to prove actual prejudice lies with the responding party.
• The onus to rebut presumed prejudice lies with the moving party.

(internal citations omitted)

[17] The issues often considered on a motion to amend pleadings were set out as follows in Automated Logic, Canada Ltd. v. Urban Mechanical Contracting Ltd., 2024 ONSC 4870, paras 7-8:

Should the plaintiff be granted leave to amend its statement of claim to add the proposed amendments? More specifically:

(a) Do the proposed amendments plead a new cause of action?

(b) If the proposed amendments plead a new cause of action, are they statute-barred under the Limitation Act, 2002?

[18] In respect of the addition of new causes of action, the distinction between additional relief and a new cause of action was set out as follows in Sirotek v. O’Dea, 2020 ONSC 3427, para 14:

Adding claims for additional relief is not the addition of a new cause of action providing the new heads of relief would have been supported by the facts as pleaded or are simply different legal conclusions drawn from the same set of facts. Adding particulars to the claim is permissible providing the original claim contained the assertions against the defendants and they are not taken by surprise.

Further and Better Affidavit

[19] Rule 30 of the Rules of Civil Procedure guides the court in considering the sufficiency of documentary productions.

[20] Rule 30.02(1) of the Rules requires that:

"[E]very document relevant to any matter in issue in an action that is or has been in the possession, control or power of a party to the action shall be disclosed as provided in rules 30.03 to 30.10, whether or not privilege is claimed in respect of the document."

[21] Where the court is satisfied by any evidence that a relevant document in a party’s possession, control or power may have been omitted from the party’s affidavit of documents, Rule 30.06 allows a court to order the service of a further and better Affidavit of Documents.

[22] In the case of redacted productions, Strathy J. made the following comment in McGee v. London Life Insurance Co., 2010 ONSC 1408, para 8:

“It is impermissible for a party to redact portions of a relevant document simply on the basis of its assertion that those portions are not relevant.”

[23] Strathy J. then cited Master MacLeod (as he then was) in Bouchard Paradis Inc. v. Markel Insurance Co. of Canada, [2000] O.J. No. 5210 and affirmed that:

“[T]he right to redact information from documents which are otherwise relevant should only be given in circumstances…where the parties are business competitors and the information which is not relevant may be sensitive in nature.”

[24] Part of the rationale for this approach lies with the Deemed Undertaking Rule and the limits imposed on the use of documents received in the litigation process.

Analysis

Amendment to the Pleading – Abuse of Process

[25] The Plaintiffs’ primary argument in opposing the motion lies with their contention that the Amended Pleading is an abuse of process. In reliance on this position, the Plaintiffs highlight three different ongoing litigation matters where the factual circumstances surrounding the pleading of fraudulent misrepresentation are already being litigated and the result is that the proposed amendments in para 16 to 18 of the draft Amended Pleading amount to an abuse of process.

[26] In this regard, I have reviewed the statements of claim in the Stratton Action (also known as the Chambers’ Action), the Lanark Action and the Garland Action (commenced by a third party – 2 Garland Holdings Inc.).

[27] I am in agreement with the Defendants that the relief claimed in the subject Phillip Street Action is distinct from the relief claimed in the Stratton and Lanark actions. If there is a risk of overlap, that can specifically be dealt with later by consolidating some of the actions or clarifying the pleadings to confirm that the same relief is not sought in two different actions, but it does not warrant a refusal to authorize the Amended Pleading. I highlight the following:

a. The proposed amendments to the Phillip Street Action claim damages for fraudulent misrepresentation as a result of falsified documents and a representation that Lindsay Blair had paid a deposit of $65,000.00 towards the purchase of the Garland Project when other documents suggest that the deposit was only $1.00. Ms. Blair identified the $65,000 as a cost to be reimbursed by the Defendants.

b. In the Stratton Action, the Counterclaim is directed towards the 2B Parties and the pleading related to fraudulent misrepresentation forms part of the Defence. The Counterclaim is for $45,000 and seeks damages on the Stratton Project and it is not the same as the Garland Project allegations in the Amended Pleading. I agree with the Defendants that the pleading surrounding the fraudulent misrepresentation concerning the $65,000 deposit on the Garland Project is contextual and not a relief claimed in the Stratton Action.

c. In the Lanark Action, this action relates to the Lanark project and seeks damages against Ms. Blair and Ms. Bailey personally as such claims could not be made in the construction claim. The references to the Garland and Phillips projects form part of the background and are not the subject of separate claims in that statement of claim. However, it should be noted that the Lanark Action claims damages of $625,000 for fraudulent misrepresentation while the judgment in the Lanark construction action is for $325,375. The focus of this claim is on the personal liability of the defendants Blair and Bailey and does not appear to claim damages for those matters pleaded in para. 16-18 of the Amended Pleading. If there is overlap between the Duplicate Lanark Action and the Amended Pleading, that can be dealt with at a later date to ensure that there is no duplicate claim for fraudulent misrepresentation.

d. Finally, the Plaintiffs appear to rely on the pleadings in the Garland Action as somehow being relevant to the issue of abuse of process because some other parties have claimed fraudulent misrepresentation as against some or all the Defendants. I fail to see any relevance to this argument as different parties can sue for the same relief.

[28] I conclude that there are no obvious issues of duplicative proceedings when considering the proposed amendments in the Amended Pleading. The pleadings made in paragraphs 16-18 of the Amended Pleading relate to the Garland and Phillip projects in relation to the 501 Parties. It may at some point be worthwhile to confirm that no damages are sought in the Lanark Action in respect of the fraudulent misrepresentation claimed in paras. 16-18 of the Amended Pleading.

[29] I conclude that the Amended Pleading is not an abuse of process.

Limitations Act

[30] Turning to the other issues raised by the Plaintiffs in opposing the Amended Pleading, I start with the limitation issue. The perspective put forward by the Plaintiffs relies on a finding that a new cause of action should not be permitted when it is statute-barred: see Ascent Incorporated v. Fox 40 International Inc..

[31] In the present case, there is a significant live issue as to the discoverability of the Defendants’ claim for fraudulent misrepresentation. I specifically reject the notion that the limitation period on that claim would have begun to run when 2 Garland Holdings Inc. identified its claim for fraudulent misrepresentation against 2B Developments in relation to the Garland Project.

[32] The discoverability issue is fact specific and specific to these Defendants. The Defendants have put reasonable evidence before this court on the issue of discoverability and this merits to be litigated. The distinguishing feature is that the claim for fraudulent misrepresentation is not clearly statute barred: see Alfa Hoteliers Inc. v. Active Energy Inc., 2018 ONSC 3904. There is no dispute that the Plaintiffs maintain their right to plead a limitation defence in its responding amended pleading.

Breach of the Duty of Good Faith and Piercing the Corporate Veil

[33] The Plaintiffs claim that the amendments to paras. 78a, 83 and 84 of the Amended Pleading represent new causes of action which are statute barred. Those claims relate to a claim for damages for a breach of the duty of good faith and a claim to pierce the corporate veil.

[34] My review of the further facts pleaded in para. 82 of the Amended Pleading is that they fall part of the same factual matrix already pleaded.

[35] I disagree with the Plaintiffs that the relief claimed in those paragraphs relate to new causes of action. The claims relating to the duty of good faith and for the piercing of the corporate veil fall squarely under the authority of Sirotek described above. This is additional relief claimed and not the addition of a new cause of action. It is a different theory of liability and a different legal conclusion on liability being sought but supported by the same set of facts. None of the 2B Parties have changed. Neither Ms. Bailey nor Ms. Blair would have been taken by surprise by the claim for deceit in para 83 of the Amended Pleading. Their personal liability is already in issue as a result of the original Counterclaim and the new relief sought is simply a further claim for relief arising out of their personal liability.

Arbitration Clause Issue

[36] The Plaintiffs have raised the existence of a dispute resolution clause as a ground to refuse the Amended Pleading. The problem is that the Plaintiffs have never pleaded it and during cross-examinations, Ms. Blair stated that she was not invoking it. It is not material to the pleadings in this case and cannot form part of a ground to refuse the Amended Pleading.

Plaintiff’s Motion for a Further and Better Affidavit of Documents

[37] As already addressed, the Amended Pleading is authorized. This, according to the Defendants, will generate the obligation to provide Supplementary Affidavits of Documents. Accordingly, there is no need for an order for a further and better Affidavit of Documents. However, the current Affidavit of Documents is deficient and regardless of the Amended Pleading, there warrants an order requiring a further and better Affidavit of Documents.

[38] The Plaintiffs have requested the following additional productions:

a. TD bank account 5010729 Ontario Inc: Account No: 5215166 – from March 31, 2022 to present;

b. Redacted or missing bank records (see CaseCentre page references):

i. A205: 3rd page of document – don’t have third page – Feb 28, 2022 – complete copy of that statement;

ii. A207 and A208 – statements – redacted;

iii. A208 – missing page;

iv. A209: only have 20 of the 29 pages – want the entire document.

c. Separate bank account: see Ex L – Ms. Blair A336: bank account was closed, don’t have the records. See Q56: Account No. 5257614 from Dec 2019 to the present.

d. E-mail attachments – Detailed list is part of A158: List of missing e-mail attachments.

[39] During the motion, the Defendants offered a reciprocal order that both parties would produce unredacted bank statements. That offer was not accepted by the Plaintiffs as counsel for the Plaintiffs had not obtained instructions on this issue. However, there is no basis for consent to be withdrawn simply because the Plaintiffs are not doing the same. If the Plaintiffs submit redacted productions, the Defendants can bring the matter back to me once they have completed the discovery process in order for the parties to properly state their respective positions on the record with respect to specific redactions. Otherwise, the Defendants have consented to producing unredacted copies of bank records and that order shall issue as offered. Reciprocity is not required but there may still be a legal issue by any party to warrant a redaction that has not been put before the court. That possibility is not foreclosed.

[40] I also agree that the Plaintiffs are allowed to obtain what is available on the additional bank account and explore that issue at discoveries.

[41] As for the specific documents where there are pages missing as set out above, the production of those missing pages is ordered. There was no principled reason to refuse those pages.

[42] Also at the motion, the parties consented to an order that both parties are to ensure that all attachments from all previously disclosed emails must be provided. This should be done in the form of fresh new productions in order to ensure that it is not done in a piecemeal fashion.

[43] Finally, the court agrees with the Defendants’ position that the issue of disclosure needs to proceed through the discovery process in order to ensure that each party can set out their objections to requested disclosure or explain why certain documents may not be available. It is only once the parties have set out their respective positions that the parties will be able to return before me and then I will adjudicate on areas where disclosure is disputed.

Conclusion

[44] For the reasons set out herein, the court considers the Defendants’ draft order and makes the following rulings:

a. Para. 1 is ordered as it is on consent as per the Plaintiffs’ Factum;

b. Para. 2 is ordered for the reasons set out herein;

c. Para. 3 is ordered on the basis that all parties must reconsider their productions in light of the Amended Pleading;

d. Paras. 4, 5 and 6 are ordered as they are on consent per the Plaintiffs’ Factum.

[45] As for the relief sought by the Plaintiffs, the missing attachments are ordered on a reciprocal basis. The missing pages are ordered as per the list included herein. The obligation for the Defendants to provide unredacted bank records is ordered as per its consent unless there is a specific objection to a particular record which is maintained during the discovery process. I will rule on such specific objections as part of any motions which arise from the discovery process.

Costs

[46] The parties are encouraged to resolve the issue of costs or at least to wait until the end of the discovery process. If they do not agree, they may submit written cost submissions within thirty (30) days of this decision, with a right of reply within fifteen (15) days. Costs submissions to be a maximum of four pages plus attachments.

Marc Labrosse
Date: April 11, 2025