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Premature Pleadings Amendment Motions May Get Adjourned

Ontario

,

Canada

In Kastner v. Chitiz Pathak LLP, 2022 ONSC 1967 (CanLII), McGraw A.J. adjourned a pleadings amendment motion to a later date where the motion in question concerned pleadings regarding defendant’s counsel’s conduct during the ongoing litigation (including at the early pre-discovery stage) where the substance of the proposed amendments was also the subject of other motions and judicial case management. This was consistent with the Court’s requirement under r.1.04(1) to liberally construe the Rules to secure the just, most expeditious and least expensive determination of the issues.

Background

The defendants were lawyers who acted for the plaintiffs in two actions commenced in 2010 and 2012.  The plaintiff sought damages of $2,000,000 for the defendants’ negligence, breach of loyalty, breach of fiduciary duties, and other things. The plaintiff also sought $650,000 in fees and disbursements paid to the defendants and other damages. The plaintiff sought punitive damages of $500,000.

After the plaintiff commenced the action, the defendants exercised a solicitor’s lien over the files that had been sent to the defendant’s LawPRO appointed lawyers. Defendant’s counsel advised plaintiff’s counsel that the files in question would be delivered to him once the plaintiffs had settled their outstanding account and notices of change of lawyers removing the defendants as the plaintiffs’ counsel in the 2010 and 2012 actions.

Eventually, the defendants attended before Master Pope on motion for removal as lawyers of record in the actions. Master Pope held it was not reasonable for them to assert a solicitor’s lien, and ordered the defendants to deliver the files to the plaintiff. The defendants provided scanned versions on USBs. The plaintiffs claimed they were incomplete and sought the original paper files. These were provided, but certain labels were intentionally removed in advance of this. Further disputes arose with respect to how the files were provided, in particular relating to their organization (paras. 2-11)

McGraw A.J. was faced with a motion by the plaintiff for leave to amend her statement of claim to allege litigation misconduct by defendant’s counsel. The motion arose in the context of an adjourned motion by the plaintiff to remove defendant’s counsel (para. 1).

When will a plaintiff be allowed to amend their claim to plead litigation misconduct?

McGraw A.H. held that amendments should be presumptively approved unless they would result in prejudice that cannot be compensated by costs or an adjournment; they are shown to be scandalous, frivolous, vexatious or an abuse of the court's process; or they disclose no reasonable cause of action (para. 15).

McGraw A.J. held that the Court of Appeal summarized the law on pleadings amendment motions in 1588444 Ontario Ltd as: 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. 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. 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.

Per the Divisional Court, proposed amendments should be permitted where they arise out of the same facts or factual matrix that was pleaded in the original statement of claim (para. 17).

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. An amendment will be statute-barred if it seeks to assert a "new cause of action" after the expiry of the applicable limitation period.  The courts have adopted a broader, factually-oriented and less technical approach to determining if a new cause of action has been pleaded, consistent with the purposive approach to the interpretation of limitations provisions, in particular, a defendant’s basic entitlement to have notice of the factual matrix from which a claim arises (paras. 18-19).

If a plaintiff provides a reasonable explanation on proper evidence as to why the essential facts were not known or obtainable with due diligence such that it is determined that there is a triable issue of fact or credibility on the discoverability allegations, the court will normally permit the amendments with leave to plead limitations defences (para. 21).

Can you get punitive damages before discovery?

The proposed amendments argued that the defendant’s counsel’s conduct gave rise to punitive damages. McGraw A.J. held that the pleadings motion was possibly premature in light of the ongoing disputed regarding the organization of the files (para. 26).

McGraw A.J. held that while there is case law in support of granting punitive damages as a result of litigation conduct, it largely addresses damages awarded at the conclusion of the litigation. There appears to be little or no guidance with respect to pleading counsel’s conduct during ongoing litigation, including at the early pre-discovery stage, where the substance of the Proposed Amendments are also the subject of other motions and judicial case management.  (para. 29).

Ultimately, McGraw A.J. adjourned the pleadings motion to a telephone case conference or 30 minute attendance to allow the parties to resolve some of the issues mentioned, including the ongoing and unresolved judicial case management aspects. McGraw A.J. made no determinations or dispositions with respect to the pleadings motion.

May 20, 2022
Kastner v. Chitiz Pathak LLP, 2022 ONSC 1967 (CanLII)