3.62: Amending pleading
3.65: Permission of Court to amendment before or after close of pleadings

Case Summary

The parties were equal participants in a joint venture agreement to design and build a magnesium oxide plant for Jordan Magnesia Company. The project did not proceed as planned and was subsequently terminated. The Appellant Plaintiff sued the Respondent Defendant. After a period of time and a lengthy legal history, the Appellants applied to amend their Statement of Claim and Defence to Counterclaim. First, the Appellant alleged that it entered into an agreement because of duress or undue influence. Second, it alleged that the Respondent was in breach of fiduciary duties by not disclosing a conflict of interest. The Case Management Judge dismissed the Application to amend the Plaintiff’s pleadings.

The Plaintiff appealed the Order of the Case Management Judge to dismiss the Application. The Appellant argued that the Case Management Judge erred in setting too high an evidentiary standard for amending pleadings, misstated the law on duress and fiduciary duties, and failed to consider relevant evidence.

The Court of Appeal noted that the standard of review for a question of law was correctness and there had to be a palpable and overriding error for a reversal of the Case Management Judge’s discretionary Decision. Decisions made by a Case Management Judge were discretionary and entitled to deference. They would only be overruled if they reflected an error of principle or were clearly unreasonable.

On the issue of amending pleadings, the Court noted that amending pleadings goes through three stages:

1.      The Plaintiff is allowed to include any allegations that disclose a cause of action without having to produce any evidence in support of the pleading when an action is commenced;

2.      An amendment can be made any number of times without the consent or permission of the other parties, and without having to produce any evidence in support before the pleadings close (Rule 3.62(1)(a)); and

3.       If any amendments are to be made after the pleadings close, they must be accompanied by either a Consent Order or the permission of the Court. Evidence in support of the allegation would be required (Rules 3.62(1)(c) and 3.65).

The Court of Appeal noted the importance of closing pleadings, as defined in Rule 3.67. The Court further noted that amendments could still be made. Although some evidence was required to amend after the close of pleadings, the evidentiary threshold was low. It was neither necessary for the amending party to show that the pleading could be proven at trial nor that it met the test for Summary Judgment.

In this case, the parties agreed that the Case Management Judge correctly set out the test for amending pleadings: no matter how careless or late the parties seeking the amendments are, amendments can be made subject to four exceptions:

(a)    It would cause serious prejudice to the opposing party not compensable in costs;

(b)   The amendment requested was hopeless;

(c)    Unless permitted by statute, the amendment sought to add a new party or cause of action after the expiry of the limitation period; and

(d)   There was an element of bad faith associated with the failure to plead the amendment in the first instance.

After stating the above, the Court analyzed the amendment for duress. The Appellants argued that the Case Management Judge engaged in a Summary Judgment analysis that set too high a standard for the amount of evidence required in support of the amendments. To determine the threshold necessary to justify an amendment, the Court held that a Judge was allowed some limited assessment of the evidence. This did not preclude weighing all of the tendered evidence by the Judge. In this case, the Court held that the allegation of duress, brought 13 years after the incident, could be taken into consideration to determine if an amendment was hopeless. On the issue of economic duress, the Court held that the Case Management Judge used the proper test and the Decision did not reflect a reviewable error. Overall, the Court held that the Appellant had not demonstrated any reviewable error with respect to the decision on the duress amendment.

The Appellant and the Respondent jointly hired counsel to settle their claim against Jordan Magnesia Company. The counsel hired had been previously retained by the Respondent, but acted jointly and for the benefit of both parties to settle the claim. The Court found no conflict of interest as a result of the Respondent’s counsel being previously retained and did not allow the conflict of interest amendment. The Court noted that even if there was a conflict of interest, no damage resulted and as such there would be no remedy. If there was a breach that would entitle the Appellant to a remedy, the Court noted that any such conflict of interest would not relieve the Appellant of all of its responsibilities to contribute to the legitimately incurred litigation costs.

Overall, the Court held that the assessment of the evidence by the Case Management Judge, and his discretionary decision to refuse the amendments, were entitled to deference. There was no palpable and overriding error. There was also no unreasonable exercise of discretion or an extricable error of law. The Appeal was dismissed.

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