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Civil Litigation Dicta - Amending Pleadings and Limitation Periods (2). McFadden v. Psutka
In McFadden v. Psutka (Ont CA, 2024) the Ontario Court of Appeal considered (and dismissed) an appeal from a denial of leave to amend a claim, here where the amended claim raised a new limitation-barred claim:[3] The motion judge dismissed the appellants’ motion to amend their claim after finding that the purported amendments constituted new claims, that these claims were statute barred by the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, and that this resulted in prejudice that could not be compensated by costs or an adjournment.
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[5] The motion judge relied on r. 26.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, which provides that a court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result which could not be compensated for by costs or an adjournment. The motion judge determined that the issues to be decided were (i) whether the proposed amendments merely particularized the claims already advanced against the respondent or whether they constituted a different cause of action, and (ii) if it was the latter, whether granting these amendments would cause prejudice to the respondent that could not be compensated for by an award of costs.
[6] The motion judge noted that a defendant is entitled to know the case it has to meet. The existing claim referred to surgeries alleged to have been negligently performed by Dr. Psutka in 2013 and onwards. The basis on which this claim had been advanced and defended assumed that Susan had already undergone jaw surgery many years earlier to remove her meniscus (a “meniscectomy”) in 1988, that a synthetic implant had been inserted into the joint by a different surgeon, Dr. Dobrovolsky, and that the implant had then been removed by Dr. Psutka in 1991. This history was confirmed at Susan’s examination for discovery.
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[8] The motion judge found that the appellants’ wish to amend the pleadings to reflect the new factual matrix laid out in their expert’s report put forth a very different allegation of negligence from the existing pleading that the surgery was done in a negligent fashion. She stated, at para. 38, “[i]n a nutshell, what the [appellants] seek to do with this motion to amend is to fundamentally change the nature of part of the case advanced against Dr. Psutka to conform with the opinion of their expert.”
[9] The proposed amendments to the claim also raised limitation period issues. The appellants argued that this new theory of liability was not known to them until they obtained the expert opinion in December 2021, so it was subject to discoverability. The motion judge rejected this submission, mainly because the expert’s report was rooted in his review of medical records which the appellants had had in their possession, power and control from the outset of the litigation.
[10] The motion judge accepted the respondent’s argument, relying on Frohlick v. Pinkerton Canada Ltd., 2008 ONCA 3, 88 O.R. (3d) 401, that an amendment sought by a plaintiff advancing a new claim which was statute-barred ought not to be permitted and constitutes prejudice. Since the limitation period to advance new claims in negligence had expired, and this constituted non-compensable prejudice, leave to amend to assert such a new claim should be refused. She also found that Dr. Psutka would be prejudiced because he had consented to the dismissal of crossclaims against other medical practitioners whose own actions could be implicated by the appellants’ new theory of liability.
ANALYSIS
[11] In Polla v. Croatian (Toronto) Credit Union Limited, 2020 ONCA 818, at para. 31, leave to appeal refused, [2021] S.C.C.A. No. 64, this court clarified the standard of review applicable in appeals of decisions which dismiss motions to amend pleadings. The motion judge’s finding that the amended pleadings constitute a new claim is a legal determination, which is subject to the correctness standard of review on appeal, while the motion judge’s finding that the new claim would be statute-barred due to the Limitations Act, and therefore constitutes actual prejudice against the defendant in the action, is a finding of mixed fact and law, and is entitled to deference. Appellate intervention is only warranted where a palpable and overriding error is established.
[12] Rule 26 of the Rules of Civil Procedure states that courts shall grant leave to amend a pleading on such terms as are just, unless prejudice would result which could not be compensated for by costs or an adjournment. However, “although the general rule is that amendments are presumptively approved, there is no absolute right to amend pleadings. The court has a residual right to deny amendments where appropriate”: Marks v. Ottawa (City), 2011 ONCA 248, 280 O.A.C. 251, at para. 19; see also Avedian v. Enbridge Gas Distribution Inc., 2023 ONCA 289, at para. 6.
[13] The appellant argues that Dr. Psutka adduced no evidence of actual prejudice, and that the appellants’ proposed amendments are factually intertwined with and provide particulars of existing allegations. According to the appellants, the amendments sought merely enable their claim to proceed to attempt to prove facts that are now apparent because of the expert report, while Dr. Psutka’s position is that the amendments fundamentally change the nature of the claim.
[14] We reject the appellants’ submission. We see no error in the motion judge’s conclusion that the amendments sought created a new claim. Furthermore, the motion judge’s finding of actual prejudice was tied to her conclusion that the amendments raised a new negligence claim that would otherwise be statute barred as outside the limitation period in this case. This finding is entitled to deference. Moreover, the limitation period for the respondent to claim contribution and indemnity had passed. . Di Filippo v. Bank of Nova Scotia
In Di Filippo v. Bank of Nova Scotia (Ont CA, 2023) the Court of Appeal considered the challenging tension when seeking to amend pleadings which may offend limitation periods:[39] This court summarized what type of amendments are allowable after the expiry of a limitation period in Polla, at para. 33:... [A]n amendment to a statement of claim will be refused if it seeks to assert a “new cause of action” after the expiry of the applicable limitation period…[I]n this context, 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” (as opposed to the other sense in which the term “cause of action” is used – as the form of action or legal label attached to a claim). [Citations omitted.] [40] These cases make it clear that it is the pleading of the facts that is key. If a statement of claim pleads all the necessary facts to ground a claim on more than one legal basis, and the original statement of claim only asserts one of the legal bases – that is, one cause of action based on those facts – the statement of claim can be amended more than two years after the claim was discovered to assert another legal basis for a remedy arising out of the same facts – that is, another cause of action. This is because it is only the discovery of the claim, as defined in the Limitations Act and the case law, that is time barred under s. 4, not the discovery of any particular legal basis for the proceeding.
[41] In the textbook The Law of Civil Procedure in Ontario, Paul M. Perell & John W. Morden 4th ed. (Toronto: LexisNexis Canada, 2020), at pp. 220-21, the authors explain when an amendment will be allowed in the following passage: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 pled or additional facts upon which the original right of action is based… Thus, where a limitation period has run its course, allowing or disallowing the amendment depends upon whether the allegations of the proposed amendment arise out of the already pleaded facts, in which case the amendment will be allowed, but if they do not the amendment will be refused. An amendment of a statement of claim to assert an alternative theory of liability or an additional remedy based on facts that have already been pleaded in the statement of claim does not assert a new claim for the purposes of s. 4 of the Limitations Act. [Citations omitted.] [42] In Klassen v. Beausoleil, 2019 ONCA 407 at para. 30, this court instructed that the application of this test should not be stringent or overly technical:In the course of this exercise, it is important to bear in mind the general principle that, on this type of pleadings motion, it is necessary to read the original Statement of Claim generously and with some allowance for drafting deficiencies. ....
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[45] The main additions to the amended statements of claim are the recitation of the content of the orders made by the CFTC against some existing defendants and against the proposed defendants. The orders recite the findings by the tribunal that in each case, multiple spoofing transactions were carried out during the claim period causing loss to the people who made the trades. UBS was found to have carried out these transactions from 2008 to 2013, HSBC from 2011 to 2014, Bank of America and Merrill Lynch from 2008 to 2014, Morgan Stanley from 2013 to 2014, and JP Morgan from 2008 to 2016. Huge fines and restitutionary orders were included.
[46] Because the statements of claim already pled that spoofing (or painting the screen in the gold pleading) transactions were carried out by the defendants, the CFTC orders merely provide confirmatory evidence or further details of what was already pled. The claim for damages for the losses caused by the spoofing transactions is an additional remedy to the claim for damages for conspiracy to spoof, arising from the same facts, the same losses.
[47] According to the CFTC findings, there were hundreds of thousands of spoofing transactions by the defendants during the claim period. The plaintiffs do not know which, if any, were done pursuant to an agreement between two or more institutions, nor do the CFTC orders address that issue.
[48] To summarize, the motion judge erred in law by finding that the proposed amendments were statute barred because they allege new facts and a new cause of action. The additional facts in the proposed amendments constitute evidence of the facts already pleaded or further details of those facts. Further, the proposed amendments, which include claims for damages for non-conspiratorial spoofing, constitute “an alternative theory of liability or an additional remedy based on facts that have already been pleaded”. They do not plead a new claim under the Limitations Act.
[49] As a result, the proposed amendments are not statute barred.
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