Ontario: the Court of Appeal on adding a new claim

In Klassen v. Beausoleil, the Court of Appeal provides a helpful summary of the analysis for determining whether proposed amendments assert a fundamentally new claim:

(1)         The test to be applied

[24]      I begin with the text of r. 26.01 of the Rules. It 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. [Emphasis added.]

[25]      The rule is framed in mandatory terms: the court must allow the amendment, unless the responding party would suffer non-compensable prejudice, the proposed pleading is scandalous, frivolous or vexatious, or the proposed pleading fails to disclose a reasonable cause of action: 158844 Ontario Ltd v. State Farm Fire and Casualty Co.2017 ONCA 42 (CanLII), 135 O.R. (3d) 681, at para. 25; Iroquois Falls Power Corp. v. Jacobs Canada Inc., 2009 ONCA 517 (CanLII), 264 O.A.C. 220, at paras. 15-16.

[26]      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 Ltd2008 ONCA 3 (CanLII), 88 O.R. (3d) 401, at para. 241100997 Ontario Ltd. v. North Elgin Centre Inc.2016 ONCA 848 (CanLII), 409 D.L.R. (4th) 382, at paras. 21-23United Food and Commercial Workers Canada, Local 175 Region 6 v. Quality Meat Packers Holdings Limited, 2018 ONCA 671 (CanLII), at paras. 64Davis v. East Side Mario’s Barrie2018 ONCA 410 (CanLII), at paras. 31-32. In this regard, the “addition of new statute-barred claims by way of an amendment is conceptually no different than issuing a new and separate Statement of Claim that advances a statute-barred claim” (emphasis added): Quality Meat Packers, at para. 64; citing Frohlick, at para. 24.

[27]      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; Quality Meat Packers, at para. 65. In this regard, the case law discloses a “factually oriented” approach to the concept of a “cause of action” – namely, “a factual situation the existence of which entitles one person to obtain from the court a remedy against another person”: North Elgin, at para. 19; Quality Meat Packers, at para. 65.

[28]      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”: Dee Ferraro, at paras. 4, 13-14; North Elgin Centre Inc., at paras. 20-21; East Side Mario’s Barrie, at paras. 31-32; Quality Meat Packers, at para. 65. Put somewhat differently, an amendment will be refused when it seeks to advance, after the expiry of a limitation period, a “fundamentally different claim” based on facts not originally pleaded: North Elgin, at para. 23.

[29]      The relevant principle is summarized in Paul M. Perell & John W. Morden, The Law of Civil Procedure in Ontario, 3rd ed. (Toronto: LexisNexis, 2017), at p. 186:

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.[2]

[30]      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: Farmers Oil and Gas Inc. v. Ontario (Ministry of Natural Resources)2016 ONSC 6359 (CanLII), 134 O.R. (3d) 390 (Div. Ct.), at para. 23.

[31]      Finally, the court may refuse an amendment where it would cause non-compensable prejudice. The prejudice must flow from the amendment and not some other source: Iroquois Falls, at para. 20. At some point the delay in seeking an amendment will be so lengthy, and the justification so inadequate, that prejudice to the responding party is presumed. In this event, the onus to rebut the presumed prejudice lies with the moving party: State Farm, at para. 25.

[32]      Alternatively, the responding party may resist the amendment by proving actual prejudice – i.e. by leading evidence that the responding party has lost an opportunity in the litigation that cannot be compensated by an adjournment or an award of costs as a consequence of the amendment. It is incumbent on the responding party to provide specific details of the alleged prejudice: State Farm, at para. 25.

[33]      Irrespective of the form of prejudice alleged, there must be a causal connection between the non-compensable prejudice and the amendment. The prejudice must flow from the amendment and not from some other source: State Farm, at para. 25.

[34]      Bearing in mind these principles, the framework to determine the issues raised by this appeal is as follows:

  •     Are the proposed amendments to assert a claim to a 33% ownership interest the assertion of a “new cause of action”? If the proposed amendments are the assertion of a new cause of action, are the amendments statute-barred?

  •     Irrespective of the above, is this a case where non-compensable prejudice will arise as a consequence of the amendments?