Ontario’s top court affirms denial of leave to amend claim in secondary market misrepresentation class action
December 2nd, 2015
Most recently, in a class action brought by investors against SNC-Lavalin Group and its officers and directors, the Court of Appeal for Ontario had occasion to consider the not infrequent situation in which plaintiffs in a misrepresentation action seek to amend their statement of claim to plead additional misrepresentations and other supporting facts after the action is commenced. In this case, the plaintiffs had already made two sets of amendments before obtaining leave to proceed under s.138.8(1) and they sought to leave to amend their Third Fresh as Amended Statement of Claim to make additional allegations of bribery, embezzlement, and other illegal conduct on the part of the defendants. The question in this case was whether, having already obtained leave to proceed with an earlier version of their claim, the plaintiffs were required to bring a further motion for leave under s.138.8(1) to plead these additional allegations.
In the Superior Court below, Justice Perell rejected the plaintiffs’ argument that the spirit and intent of Part XXIII.1 requires that amendments be granted after the leave test has been met unless the proposed pleading fundamentally alters the action for which leave was granted. Rather, Justice Perell observed that “obtaining leave cannot be used as a procedural bait-and-switch tactic or a procedural bait-and-pile-on tactic” in which leave to proceed with one type of misrepresentation claim is then used to advance others that have not themselves been subjected to the leave test under s.138.8(1). Fresh leave is required for any new misrepresentation allegations which must themselves be supported by evidence sufficient to meet the test for leave.
The Court of Appeal agreed, finding that it would “frustrate the objective of the leave requirement” to permit a plaintiff that has met the leave test “to significantly expand the scope of the action to include discrete, untested allegations of misrepresentation that are without merit.” While not all amendments will necessarily require a fresh leave application, the Court of Appeal accepted Justice Perell’s characterization of the amendments as discrete misrepresentation claims that “go too far to be allowed without being tested by a fresh leave application.”
In upholding the majority of the conclusions reached by Justice Perell on the amendments sought, the Court of Appeal showed deference to Justice Perell, given his role in deciding the initial leave motion and in case managing every aspect of the action.
Unfortunately for the plaintiffs, both levels of court found that the amendments sought were, in any event, statute-barred under the three-year limitation period prescribed by Part XXIII.1, s.138.14(1) and that the plaintiffs were therefore too late in trying to advance them. The only exception to all of this, was that the Court of Appeal did overturn Justice Perell and permit the plaintiffs to make a single amendment to plead a misrepresentation by omission based upon the failure of SNC Lavalin to disclose alleged payments and other criminal activity connected to one of its projects in Bangladesh – but only to the extent that this amendment could be tied directly to a claim for which leave had already been granted.
 Drywall Acoustic Lathing and Insulation Local 675 v. SNC-Lavalin Group Inc., 2015 ONCA 718 – http://www.ontariocourts.ca/decisions/2015/2015ONCA0718.htm