In yesterday’s blog, I considered how to define the “closing of pleadings” in the context of applications. As an aside, I noted that the Rules of Civil Procedure allow a party to amend a pleading without leave of the Court until such time as pleadings have closed. The corollary that flows from yesterday’s blog is, of course, the question of what steps are to be taken by the parties and the Court when pleadings have closed and a party nonetheless moves to amend a pleading.
Rule 26.01 would seem to be the appropriate place to start, as it provides that the Court “shall grant leave to amend a pleading on such terms as are just”, unless such an amendment would result in prejudice that cannot be compensated by an award of costs or an adjournment. Although this Rule employs mandatory language suggesting that leave is to be granted except in discrete circumstances, the case law suggests the analysis is slightly more nuanced.
In Marks v Ottawa (City), the Court of Appeal considered an appeal of a lower court decision to deny the plaintiffs leave to effect certain amendments to a statement of claim while allowing others. The plaintiffs had brought a motion to amend a statement of claim with a view to amending existing claims and also introducing four new claims. The lower court granted only partial relief.
On appeal, the Court of Appeal noted that although Rule 26.01 provides that amendments are “presumptively approved” given the mandatory language of the Rule, the Court nonetheless retains a “residual right to deny amendments where appropriate.” The Court provided a list of factors that are to be considered on a motion for leave to amend.
Notably, and consistent with the language of Rule 26.01, the Court should allow pleadings to be amended unless such amendments “would cause an injustice not compensable in costs.” Moreover, the proposed amendment must be shown to be “an issue worth of trial and prima facie meritorious.” Conversely, an amendment should not be allowed if it would have been struck had it been included in the initial form of the pleading. Finally, the proposed amendment must contain “sufficient particulars.”
Although the first factor is intended to be broad in scope, the remaining three are interrelated and compel the Court to consider the merits and the particulars of additional claims being sought in deciding whether leave should be granted. Although the Court would effectively be performing a gatekeeping function in doing so, the Court is already empowered to perform a similar function with respect to claims raised in an original pleading. , for example, specifically empowers the Court to determine a discrete issue or question of law prior to a trial, or to strike a pleading entirely on the basis that it discloses no reasonable cause of action. Granting the Court the ability to perform a similar function with respect to claims to be raised in an amended pleading is merely an extension of its existing authority.
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Litigation is a fluid exercise. Often, proceedings are commenced by a party with only limited or rudimentary knowledge of the facts giving rise to a particular cause of action. As additional information is discovered, parties may wish to particularize the details of certain claims, or introduce new claims altogether.
The Rules of Civil Procedure permit a claimant to do so without leave of the Court, but only so long as “pleadings are not closed.” The close of pleadings is a term of art that, in the context of actions, is clearly defined by a plain reading of the Rules. However, in the context of applications, the Rules are not so clear, and guidance from the Court is required. The recent decision in Angeloni v Estate of Francesco Angeloni summarized the relevant authorities on this issue.
This case consisted of an application initially commenced by the alternate attorneys for property (eventually litigation guardians and, ultimately, estate trustees) for Concetta Angeloni, concerning the use of the proceeds of sale of a property by her deceased husband and prior attorney for property, Francesco. At a time when Concetta was incapable of managing her property, Francesco, as her prior attorney for property, severed the joint tenancy in a property previously owned by them, sold the property and, it was later discovered, retained all of the net proceeds of sale personally. In reviewing Concetta’s affairs following Francesco’s death, Concetta’s alternate attorneys for property soon realized that she did not appear to have received any share of the proceeds of sale, nor had Francesco made any provision for her in his Will.
Concetta’s attorneys for property commenced an application for dependant’s support against the Estate. However, only after this application was commenced did they confirm that Francesco had retained the sale proceeds entirely. The litigation guardians quickly amended the application seeking additional relief including an accounting as well as a declaration that Francesco had breached his fiduciary duty to Concetta.
The estate asserted that the relief sought in the amended application was not properly before the Court on the basis that the Notice of Application had not been “properly amended.” The Court disagreed. At the outset, the Court found that although a Notice of Application is not a pleading for the purposes of the Rules in the same vein as a Statement of Claim, the same rules with respect to the amendment of pleadings apply nonetheless.
The Court also noted that although Rule 25.05 defines the “close of pleadings” as being when the last Reply to a defence is served or the time to do so has expired, no equivalent definition in the context of applications is provided – a Reply is a pleading that may only be delivered in an action.
The Court considered the decision of the Court of Appeal in 1100997 Ontario Limited v North Elgin Centre Inc. In that case, the Court held that the affidavit materials filed by the parties, and not the Notice of Application, are to be considered the “pleadings” for the purposes of Rule 25.05, as it is the affidavits that contain the relevant facts in support of the relief sought in the Notice of Application. As such, a supporting affidavit would be considered part of an applicant’s pleadings, while a responding affidavit would be considered part of the respondent’s.
Accordingly, the Court found that at the time the Notice of Application was amended, pleadings had not yet closed as the Estate had not delivered a responding affidavit. In any event, the Court noted that the responding affidavit eventually filed ultimately responded to the claims raised in the amended application and, as such, the Estate could not now take the position that those claims were not properly before the Court.
The Court concluded that the applicants did not require leave of the Court to amend the Notice of Application, that the Notice of Application had been properly amended, and that the additional claims could be (and were) determined by the Court.
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A recent decision of the Superior Court of Justice, Cormpilas v Ioannidis, reaffirmed the importance of clarity of language in asserting legal or equitable claims particularly when such claims are asserted outside of formal litigation proceedings.
The decision concerned the remedies available to co-owners of a property arising as a result of the laissez-faire conduct of the other co-owner. The property in question had been owned by two separated spouses as tenants in common, each of whom devised their respective interests in the property to different parties. The wife, who died in 2012, left her interest in the property to the Applicants, being four of her grandchildren. The husband, who died in November 2017, left his interest to one of his sons, being the Respondent. The Respondent was the uncle of each of the Applicants.
The Respondent had moved into the property with his spouse and family to care for his father several years prior to his father’s passing, although he continued to reside there, rent-free, for a number of years thereafter. The Applicants had made overtures shortly after their grandfather’s passing about wishing to sell the property and threatening to move for partition and sale, but the Respondent remained. The Applicants commenced an application in February 2019 in which they asserted a claim of unjust enrichment against the Respondent arising from his continued sole occupation of the property despite the Applicants’ interest in it. The Applicants sought orders for retroactive payment of occupation rent, or damages in the alternative.
The Court agreed that the Respondent had been unjustly enriched to the detriment of the Applicants and held that an award for payment of occupation rent was an appropriate remedy. However, the Court’s opinion of the period for which such rent would be payable differed from that of the Applicants, primarily owing to the Applicants’ failure to clearly particularize their claim.
The Applicants asserted that they were entitled to payment of occupation rent from November 2017 until the date the Respondent vacated the property, which eventually came in April 2020. The Applicants’ position was based in part on the fact that they had purportedly conveyed to the Respondent, shortly after their grandfather died, that the property should be vacated and sold, or otherwise that the Respondent should buy out the Applicants’ interest. The Respondent did neither. As such, the Applicants claimed they were entitled to occupation rent from date of death onward.
The Court disagreed with the Applicants’ position and awarded occupation rent payable only from the date the Application was issued to the date the property was vacated. The Court declined to go further on the basis that the Applicants had not clearly conveyed their intention to assert a claim for occupation rent against the Respondent as a result of his possession of the property. Although the Applicants referred to a demand letter in which they specifically characterized the Respondent as a tenant, that letter also authorized the Respondent to continue residing there without making reference to an intention to seek payment of occupation rent. In the absence of specific evidence to the contrary, the Court held the notice of application to be the earliest claim by Applicants for payment of occupation rent. The Court was clear that it was not prepared to infer that the Applicants had asserted claim for payment of occupation rent.
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Today’s blog is a continuation of yesterday’s discussion regarding the limitations analysis in Piekiut v. Romoli, 2019 ONSC 1190, 2020 ONCA 26. No limitation period was found to apply where an estate trustee was simply seeking a determination and declaration as to whether certain codicils were valid or not valid.
The testators in this case died in 2008. They had 3 children, Helen, Victor, and Krystyna. A meeting took place in 2008 between all 3 children and a lawyer to discuss the administration of the Estate. During this meeting, Krystyna revealed, for the first time, the existence of codicils and declarations of gift that provide her with an interest in certain properties. Helen refused to acknowledge the validity of these new documents.
In 2015, Helen brings a court application. Her application was later amended, on the consent of parties, in 2018 to reflect that Helen was only seeking a declaration in respect of the validity of the codicils. Thus in 2019, Justice Dietrich’s decision was made in the context of Krystyna’s motion for summary judgment to dismiss Helen’s application on the basis that it was statute barred and Helen’s cross-motion for summary judgment on her application. Justice Dietrich found that, since Helen did not ask the court to determine the ultimate beneficiaries of the properties that were subject to the Codicil or to vest such properties in any particular beneficiary or beneficiaries, her application was not barred by the Limitations Act, 2002.
The Court of Appeal agreed with Justice Dietrich. The panel was also of the view that this case is distinguishable from Leibel v. Leibel, 2014 ONSC 4516 and Birtzu v. McCron, 2017 ONSC 1420 because of the consequential relief that was pleaded in those cases. Since the Court of Appeal decision did not go into the details of the relief sought in Birtzu (unlike its description of Leibel), it is helpful to understand the breadth of the Statement of Claim in Birtzu, which sought the following:
- an Order setting aside the Will;
- an Order setting aside the Deceased’s Powers of Attorney;
- an accounting of the entire Estate, as well as all financial transactions undertaken by the Deceased, or on his behalf, or on behalf of his Estate, from the date that the Deceased’s matrimonial home was sold in 2003 to the date of trial;
- Orders for the production and release of financial and medical information;
- an Order reversing all transactions undertaken by the Defendant, either directly or indirectly, without authority or in breach of her authority, or in breach of her fiduciary duties to the Deceased and to his beneficiaries, including the Plaintiffs;
- an Order tracing the property of the Deceased into the property owned by the Defendant, including her home;
- Orders for injunctive relief, including the issuance of a certificate of pending litigation;
- a Declaration that all property held in the name of the Defendant, or part thereof, is held by her for the benefit of the Plaintiffs;
- damages against the Defendant in the amount of at least $400,000.00, for conversion of property, breach of statutory duty, and/or breach of fiduciary duty;
- pre- and post- judgment interest; and
- costs fixed on a substantial indemnity basis, plus H.S.T.
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Billionaire and recently deceased American shopping mall developer Melvin Simon’s heirs are fighting over his last will. Mr. Simon’s children from his first marriage are challenging a will that changed the distribution of his estate in favour of his second wife. Aside from the glamour factor, the case is interesting in that an allegation of fraud was recently dismissed on the grounds that "[t]he complaints fail to allege affirmative misrepresentations that can support a claim of actual fraud".
This illustrates an important point in estate and trust litigation. Ontario’s Rules of Civil Procedure similarly requires pleadings that contain allegations of fraud or breach of trust to contain full particulars:
"Rule 25.06(8) Where fraud, misrepresentation, breach of trust, malice or intent is alleged, the pleading shall contain full particulars, but knowledge may be alleged as a fact without pleading the circumstances from which it is to be inferred."
This could theoretically present beneficiaries challenging the actions of a trustee, since the trustee frequently has the particulars and the beneficiaries do not. In practice, this problem rarely arises because most litigation occurs in the context of a passing of accounts, where it is unnecessary to make allegations against the estate trustee. Instead, under the procedure in Rule 74, the beneficiaries can simply file and serve a Notice of Objection to Accounts challenging transactions or omissions in the trustee’s accounts.
After filing their Notice of Objection to Accounts, the beneficiaries can then bring a motion for an order giving directions (or an order for assistance) that will provide for the disclosure of the particulars they think exist. After receiving full disclosure, the beneficiaries should in a position to make a better-informed decision on whether to add such allegations to their pleadings.
Where this process is anticipated, the order should specifically authorize the parties to return to court for further directions. Of course, it would rarely even be necessary to allege fraud at all, since the facts that support the allegation of fraud can form the basis of an objection to the accounts without using the words "fraud" or "breach of trust", and this can achieve the same practical result without the risks associated with alleging fraud. Beneficiaries can also avoid the risk of having their pleadings struck at an early stage.
Have a great day,
Christopher M.B. Graham – Click here to learn more about Chris Graham.
Rule 45 of Ontario’s Rules of Civil Procedure contains mechanisms by which a party can freeze assets that are in issue or relevant to the proceeding. However, this should be done prior to the close of pleadings because once the matter is set down for trial, Rule 48.04(1) applies. Rule 48.04(1) requires that any motion brought after the close of pleadings have leave of the court. Leave will only be available where there has been a substantial or unexpected change in circumstances.
A recent example of Rule 48.04(1) barring a motion for interim preservation occured in Trapukowitcz Estate v. Royal Bank of Canada. In this case, an estate trustee was seeking an order that the proceeds of a GIC and a bank account be paid into court pending determination of ownership. Justice Harris refused to grant leave to bring the motion because, on the basis of the admissible evidence, the estate trustee had not shown a substantial or unexpected change in circumstances.
Justice Harris followed Machado v. Pratt & Whitney Canada Inc. (1993), 16 O.R. (3d) 250, which requires strong affidavit evidence to demonstrate a "substantial and unexpected change in circumstances to the extent that to refuse the order would be manifestly unjust". The grounds in the moving estate trustee’s affidavit were unconvincing.
As importantly, viva voce evidence given in submissions was not considered. To do so would be unfair to the respondent, particularly since the evidence had been available since June 4, 2009 and the hearing took place in August 6, 2009. Therefore, Justice Harris cited Rule 37.06(b), which stipulates that every notice of motion must state the grounds to be argued, and refused to consider the viva voce evidence.
There is no requirement under Rule 45 to prove the assets are actually at risk, so a R. 45 freezing order is easier to get before the close of pleadings.
Enjoy your day,
Christopher M.B. Graham – Click here for more information on Chris Graham.