Ontario: Court of Appeal on amending to add a new cause of action

In Polla v. Croatian (Toronto) Credit Union Limited, the Court of Appeal summarised the principles of amending to add a cause of action after the presumptive expiry of the limitation period:

[31]      The trial judge’s conclusion that the proposed amendment made a new claim is a legal determination, which is subject to the “correctness” standard of review on appeal: see Blueberry River First Nation v. Laird2020 BCCA 76, 32 B.C.L.R. (6th) 287, at paras. 20-21Strathan Corporation v. Khan2019 ONCA 418, at paras. 7-8. Her conclusion that the limitation period had expired is a determination of mixed fact and law, that was based in this case on a finding of fact as to when the appellant ought to have known about the new misrepresentation, and reviewable on a standard of “palpable and overriding error”: see Longo v. MacLaren Art Centre2014 ONCA 526, 323 O.A.C. 246, at para. 38. The same deferential standard of review applies to the refusal of an amendment based on an assessment of prejudice: Tuffnail v. Meekes2020 ONCA 340, 449 D.L.R. (4th) 478, at para. 120, leave to appeal refused, [2020] S.C.C.A. No. 269.

[32]      The general rule respecting the amendment of pleadings is that an amendment shall be granted at any stage of a proceeding on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment: Rules of Civil Procedure, R.R.O. 1990, Reg. 194, r. 26.01. The expiry of a limitation period in respect of a proposed new claim is a form of non-compensable prejudice, where leave to amend to assert the new claim will be refused: Klassen v. Beausoleil2019 ONCA 407, 34 C.P.C. (8th) 180, at para. 26.

[33]      There is no real dispute between the parties about the applicable test. In 1100997 Ontario Limited v. North Elgin Centre Inc.2016 ONCA 848, 409 D.L.R. (4th) 382, this court observed that an 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. As this court explained, at para. 19, in 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: see the discussion in Ivany v. Financiere Telco Inc.2011 ONSC 2785, at paras. 28-33).

[34]      The relevant principles are summarized in Paul M. Perell & John W. Morden, The Law of Civil Procedure in Ontario, 4th ed. (Toronto: LexisNexis Canada, 2020), at pp. 220-21, as follows:

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.

This passage has been cited with approval by this court. See 1100997 Ontario Limited, at para. 20Davis v. East Side Mario’s Barrie2018 ONCA 410, at para. 32, and Klassen, at para. 29.

[38]      In conducting this assessment, the court must read the pleadings generously in favour of the proposed amendment: Klassen, at para. 30Rabb Construction Ltd. v. MacEwen Petroleum Inc.2018 ONCA 170, 29 C.P.C. (8th) 146, at para. 8. The existing pleadings, together with the proposed amendment, must be considered in a functional way – that is, keeping in mind that the role of pleadings is to give notice of the lis between the parties. As such, the question in this case is whether the respondents would reasonably have understood, from the Amended Statement of Claim and the particulars provided on discovery, that the appellant was pursuing a claim in respect of the matter addressed by the proposed amendment.