) ) Keith Murphy, in his capacity as Estate Trustee for the Estate of Mildred McMurtry Plaintiff – v. –, 2023 ONSC 4774

CITATION : McMurtry v. McMurtry 2023 ONSC 4774 OTTAWA COURT FILE NOS.: 12-56265 DATE: 2023/08/14 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: ) ) Keith Murphy, in his capacity as Estate Trustee for the Estate of Mildred McMurtry Plaintiff – and – John McMurtry, by his Litigation Guardian, Emily McMurtry and Mic Mac Realty (Ottawa) Ltd.

Defendants ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Chris Trivisonno, for Keith Murphy in his representative capacity Jeff Saikaley and Genevieve Therrien, for John McMurtry, by his Litigation Guardian, Emily McMurtry Michael Hebert and Cheryl Gerhardt- McLuckie, observing for Jim McMurtry (the defendant and plaintiff by counterclaim in Court file no. 11-50312) HEARD: July 27-28, 2023 RULING ON A MID-TRIAL MOTION (The Estate Seeks Leave to Amend the Statement of Claim) CORTHORN J.

Introduction [ 1 ] For more than a decade, three members of the McMurtry family have been embroiled in litigation over the ownership of ten common shares in and the historical operation of the McMurtry family business – Mic Mac Realty (Ottawa) Limited (“the Disputed Shares” and “MMR”, respectively). [ 2 ] The first action was commenced by John McMurtry in 2011. John’s brother, Jim McMurtry, is the defendant and plaintiff by counterclaim in that action. The second action was commenced in 2012 by the family matriarch, Mildred McMurtry.

The defendants in that action are John and MMR; only John is defending the action. [ 3 ] Mrs. McMurtry passed away in 2021; her estate (“the Estate”) is continuing the 2012 action. [1] In the fall of 2015, John suffered a stroke. In 2016, he was declared incapable; his daughter, Emily McMurtry, became John’s litigation guardian for both the 2011 and 2012 actions. [ 4 ] The two actions are being tried together, in two parts.

Part 1 was heard in the latter half of 2015. A single issue was determined at that time – Mrs. McMurtry’s claim for a declaration that she is the owner of the Shares. The Reasons for Judgment in

Part 1 were released in April 2016: McMurtry v. McMurtry , 2016 ONSC 2853 , 17 E.T.R. (4th) 223 (“the First Trial Decision ”), aff’d. 2017 ONCA 296 , 31 E.T.R. (4th) 169 (“the Appeal Decision ”). [ 5 ] The outcome of

Part 1 turned on principles in equity: First Trial Decision , at para. 21. It was determined Mrs. McMurtry inherited the Disputed Shares in her capacity as the residuary beneficiary of the Estate of Keith Murphy – the family patriarch, Ms. McMurtry’s late husband, and the founder of MMR: First Trial Decision , at paras. 88, 129. It was also determined that, by virtue of her conduct in the years subsequent to Keith Murphy’s death in 1998, Mrs.

McMurtry was precluded by laches and estoppel from asserting a claim to ownership of the Disputed Shares: First Trial Decision , at paras. 163-185. [ 6 ] Last, it was determined that, as a result of John’s reliance on Mrs. McMurtry’s conduct in the years subsequent to Keith Murphy’s death, a constructive trust is imposed with Mrs. McMurtry (and now the Estate) holding the Shares in trust for the benefit of

John: First Trial Decision , at para. 25. [ 7 ] In paras. 28-29 of the First Trial Decision , some of the issues to be determined when

Part 2 is heard are summarized: [28] The end result of the imposition of the constructive trust requires a determination of issues that were not before the Court at this stage of the proceeding. Whether John is entitled to a vesting order – with the ownership of some or all of the Shares ultimately being transferred to him – remains to be determined. The oppression remedy claims advanced by John as the plaintiff and by Jim as the plaintiff by counterclaim, both in the companion action, also remain to be determined. [29] The equities with respect to these remaining matters do not begin and end with John and Mrs.

McMurtry. The equities are much broader and require consideration of the position over time of each of the parties to the companion actions. [ 8 ] An issue not mentioned in the paragraphs quoted above, and which remains to be determined, is Mrs. McMurtry’s (now, the Estate’

s) claim for an oppression remedy. [2] On the motion before the court, the Estate seeks leave to amend the statement of claim as it relates to the oppression remedy claim. If the Estate is entirely successful on its motion, the original 14-paragraph pleading will be converted to a 111-paragraph pleading. [ 9 ] The Estate asserts that the amendments are required to ensure the equities between the parties are fully addressed and the substantive dispute is fully adjudicated.

The Estate portrays John as opposing the motion in an attempt to both restrict the court’s consideration of his oppressive conduct and preclude the court from granting a meaningful remedy regarding the Shares. [ 10 ] The Estate brings the motion more than ten and a half years after the action was commenced and more than seven years after the First Trial Decision was released. [ 11 ] In addition, it is now more than three and a half years since Mrs.

McMurtry, through her former counsel, represented to the court and to John, on November 21, 2019, that she did not intend to seek leave to amend her pleading and she was ready to proceed with

Part 2. At that time,

Part 2 was scheduled to commence within a matter of weeks. [ 12 ] A week later, and on the eve of trial, Mrs. McMurtry, through her former counsel, informed the court she intended to seek leave to amend her pleading. Mrs. McMurtry requested

Part 2 be adjourned; the request for an adjournment was granted, with costs payable to John thrown away. The adjournment was granted specifically to permit Mrs. McMurtry to bring a motion for leave to amend her pleading. The motion was scheduled for March 2020; the motion did not proceed. [ 13 ]

Part 2 of the trial is scheduled to proceed in December 2023 and January 2024 for five weeks. At a trial management conference conducted in the first half of 2023, dates were set for this motion and examinations for discovery required based on the exchange of pleadings following this motion. Those examinations are scheduled to proceed in the latter half of September 2023. A pre- trial conference is now scheduled to proceed in late September, following those examinations. [ 14 ] Despite the timing of the motion, John consents to the Estate being granted leave to make many of the proposed amendments.

The amendments to which John consents are described by him as further particulars of the type of oppressive conduct alleged by Mrs. McMurtry from the outset – namely, misappropriation of funds from MMR. [ 15 ] For five reasons, John opposes the Estate’s request for leave to include the balance of the proposed amendments in an amended pleading (“the contested amendments”): 1. The contested amendments raise new causes of action, all of which are statute-barred; 2. The contested amendments are significant and give rise to the requirement for additional documentary and oral discovery.

John will suffer actual prejudice because he is no longer capable of participating in the litigation and because Mrs. McMurtry has passed away; 3. Some of the contested amendments amount to a collateral attack on the First Trial Decision , with the matters addressed in those amendments being res judicata ; 4. The contested amendments specific to the property referred to as “Stoke Lacey” [3] do not meet the threshold required to establish a cause of action; and 5. The delay on Mrs.

McMurtry’s part and, more recently, on the part of the Estate, in bringing the motion gives rise to a rebuttable presumption of non-compensable prejudice to John; in John’s submission, the Estate has not rebutted that presumption. [ 16 ] I will next review the original pleading and the proposed amended pleading. The Original and Proposed Amended Pleading

a) The Original Pleading [ 17 ] The original pleading sets out the claims for ownership of the Disputed Shares and for an oppression remedy. The original pleading includes the prayer for relief (paras. 1(a)-(k)); a

summary description of the parties (paras. 2-3); the bases for Mrs. McMurtry’s claim to ownership of the Disputed Shares (paras. 4-11), and an allegation of misconduct on John’s part (para. 12). Paragraph 13 of the original pleading simply repeats the request for the relief listed in the first paragraph.

The original pleading concludes, in para. 14, with a request for the 2012 action and the 2011 action to be tried together. [ 18 ] Although not described as such, the particulars of oppressive conduct are set out in paragraph 12 of the original pleading: “The Plaintiff further states that she has become aware of the many inappropriate actions of the Defendant, John McMurtry with respect to the operation of [MMR.] In this regard she adopts and relies on the allegations contained in [Jim’s pleading]”. The relief sought

based on the oppression remedy claim is, • a declaration that John engaged in oppressive conduct (para. 1(c)); • John’s removal “from any and all positions which he holds in any capacity in [MMR]” (para. 1(d)); • a valuation and the liquidation of MMR’s assets (para. 1(e)); • damages to be paid by John (para. 1(f)); • repayment by John to MMR of “all funds since 1998 that were misappropriated by him or for his benefit” (para. 1(g)); and • “a full accounting of all personal expenses charged by John McMurtry to [MMR] and repayment of same” (para. 1(h)). [ 19 ] The manner in which the claim for an oppression remedy is pleaded is central to John’s response to the motion for leave to amend.

John describes the oppressive conduct originally alleged as restricted to misappropriation of funds for his personal benefit or as directed by him for the benefit of others. John consents to the Estate being granted leave to amend the original pleading to provide further or better particulars of conduct which falls within the scope of the alleged misappropriation of funds. [ 20 ] For example, John consents to the proposed amendments alleging the declaration by John, or more recently by his wife Brenda McMurtry, of dividends payable only to John (paras. 44-50 and 51-56 of the proposed pleading).

The dividends are alleged to have been declared in the years 2012 to 2022 and to total in excess of $1,380,000. [ 21 ] As another example of further and better particulars of the oppressive conduct originally alleged, John consents to the amendments related to the use of MMR funds by John and his family members to pay personal expenses (paras. 65-73 of the proposed pleading). [ 22 ] Last, John consents to the inclusion in the amended pleading of more fully particularized relief requested based on either of the two forms of misappropriation of funds described in paragraphs 20 and 21, above .

The more fully particularized relief includes a request for Brenda’s removal from any position which she holds with MMR. The additional forms of relief to which John consents are set out in paras. 1(f), (g), (h), (i-i), (i-iii), (i-v), and (

j) of the proposed pleading. [ 23 ] There are, however, numerous proposed amendments to which John does not consent (“the contested amendments”).

b) The Proposed Amended Pleading [ 24 ] In the proposed pleading, the following headings are used to identify the topics covered in the document: • Background, Parties and Relevant Persons (paras. 2-8); • Background to Mildred’s Shares (paras. 9-21); • John Takes Over Stoke Lacey (paras. 22-30); • John Pressures His Mother to Sign Over the Tin House [4] and Then Evicts Her (paras. 31-39); • The 2015 Trial and the Constructive Trust (paras. 40-43); • John (or Brenda) Declares Significant Dividends (paras. 44-56); • John Fails to Pay Property Taxes and Other Liabilities (paras. 57-64); • John and his Family use Company Funds to pay Personal Expenses (paras. 65-73); • Sandra Stapledon Loans (paras. 74-85); • John Agrees to a Sale of Stoke Lacey that Benefits John and his Family (paras. 86-93); • John has Never Completed Audited Financial Statements for the Company (paras. 94-97); • The Estate Has Been Oppressed (para. 98); • Mic Mac Should be Wound Up (paras. 99-102); and • No Entitlement to a Constructive Trust or a Vesting Order (paras. 103-109). [ 25 ] The final two paragraphs of the proposed pleading are not substantive; John consents to the proposed amendments to those paragraphs. [ 26 ] The Estate’s primary position is the contested amendments do nothing more than provide further and better particulars of how John has, over the years, misappropriated funds from MMR (i.e., as alleged in the original pleading).

The Estate’s alternative positions are discussed below, where relevant to one or more of the grounds upon which John relies in opposing the motion. [ 27 ] John asserts the contested amendments address allege oppressive conduct, which is distinct from the type of oppressive conduct originally alleged (i.e., the payment of personal/family expenses and the declaration of dividends). For example, the proposed allegations related to the failure to pay property taxes and other corporate liabilities are said by John to be distinct from either the use of

MMR funds to pay personal/family expenses or the declaration of dividends. The Issues [ 28 ] The issues to be determined regarding the contested amendments are as follows: 1. Do the contested amendments raise new causes of action? 2. For any of the contested amendments that raise a new cause of action, is the claim statute-barred? 3. Do the allegations regarding the sale of Stoke Lacey meet the threshold required to establish a cause of action? 4.

Regardless of whether any new causes of action are statute-barred, should leave to amend be refused because granting such leave will cause John actual prejudice in the litigation? 5. Regardless of whether any new causes of action are statute-barred, does Mrs. McMurtry’s, and now the Estate’s, delay in bringing the motion give rise to a rebuttable presumption of non-compensable prejudice and, if so, has the Estate rebutted that presumption? 6. Is the subject matter of any of the contested amendments res judicata ? 7.

Is the Estate entitled to leave to include the proposed amendments identified as made solely in support of the amended claims for declaratory relief? [ 29 ] Before addressing the issues, I will review the law generally regarding pleadings, leave to amend a pleading, and pleading an oppression remedy claim. The Law – Pleadings, Amending Pleadings, and Oppression Remedy Pleadings

a) The Requirements for a Pleading [ 30 ] The requirements for a pleading are prescribed by r. 25.06(1) of the Rules of Civil Procedure , R.R.O. 1990, Reg. 194 : “Every pleading shall contain a concise statement of the material facts on which the party relies for the claim or defence, but not the evidence by which those facts are proved.” [ 31 ] The practical implications of those requirements are addressed by the Court of Appeal for Ontario in Burns v. RBC Life Insurance Company , 2020 ONCA 347 , 151 O.R. (3d) 209.

At para. 16, the Court explains, “Each defendant named in a statement of claim should be able to look at the pleading and find an answer to a simple question: What do you say I did that has caused you, the plaintiff, harm, and when did I do it?”

b) Amending a Pleading [ 32 ] The general power of the court on a motion for leave to amend a pleading is set out in r. 26.01: “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 an adjournment or costs.” [ 33 ] In Farmers Oil and Gas Inc. v.

Ontario (Natural Resources) , 2016 ONSC 6359 , 134 O.R. (3d) 390, Nordheimer J. (as he then was) reviewed the approach to be taken by the court on a motion for leave to amend: • The starting point is to read the original pleading “generously and with due allowance for drafting deficiencies” (at para. 23); • A “factually oriented approach to the meaning of a cause of action” is to be taken (at para. 14); and • Assuming the defendant has notice of the factual matrix underlying the claim being advanced, then the proposed amendments “that arise out of, or do not depart from, that factual matrix do not constitute ‘new’ causes of action that would not be allowed by way of amendment” (at para. 14). [ 34 ] At para. 31, Nordheimer J. summarizes the approach: “In the end result, the requirement to read a pleading generously, and the concomitant requirement to allow amendments unless they will inflict non-compensable prejudice, means that the presumption is that any amendment, that can reasonably be seen as falling within the four corners of the existing claim, ought to be permitted.” [ 35 ] At para. 19 of the decision in 1100997 Ontario Limited v.

North Elgin Centre Inc. , 2016 ONCA 848 , 409 D.L.R. (4th) 382, quoting Letang v.

Cooper , [1965] 1 Q.B. 232 (C.A.), at pp. 242-43 , the Court of Appeal defines a cause of action as a “factual situation the existence of which entitles one person to obtain from the court a remedy against another person.” [ 36 ] The following passage from Morden & Perrell, The Law of Civil Procedure in Ontario , 2nd ed. (Markham: LexisNexis Canada Inc., 2014), at p. 142, is frequently cited to explain when a proposed amendment does not constitute a new cause of action: 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 plead or additional facts upon which the original right of action is based. [Emphasis in original.] [ 37 ] Leave to amend will be refused when the proposed amendment seeks to advance, after the expiry of a limitation period, a fundamentally different claim based on facts not originally pleaded: 1100997 Ontario Limited , at para. 23 .

c) Oppression Remedy Pleadings

[ 38 ] The oppression remedy

section of the Business Corporations Act , R.S.O. 1990, c. B.16 (“ OBCA ”), “is drafted in the broadest possible terms to respond to the broadest range of corporate malfeasance”: Maurice v. Alles , 2016 ONCA 287 , 130 O.R. (3d) 452, at para. 52 . This statutory cause of action is to be given a “broad purposive

interpretation”: Maurice , at para. 54 . [ 39 ] Interpreting the statutory provision in a broad purposive manner and applying the oppression remedy to the broadest range of corporate malfeasance does not, however, mean the requirements for a pleading in oppression remedy are somehow less stringent than those for any other cause of action. For example, bald allegations of oppression lacking in particulars of any wrong done to the interest of the plaintiff or otherwise are not sufficient: 790668 Ontario Inc. v.

D’Andrea Management , 2016 ONSC 4657 , at para. 191 . [ 40 ] I turn next to the issues, starting with Issue No. 1 – whether the proposed amendments raise new causes of action.

Issue No. 1 - Do the contested amendments raise new causes of action? [ 41 ] For this issue, I focus on the following three categories of amendments: • John Fails to Pay Property Taxes and Other Liabilities (paras. 57-64); • Sandra Stapledon Loans (paras. 74-85); and • John has Never Completed Audited Financial Statements for the Company (paras. 94-97). [ 42 ] I will review the three categories of alleged oppressive conduct in the order in which they are listed above.

a) John Fails to Pay Property Taxes and Other Liabilities [ 43 ] The amendments under this heading relate to property tax arrears alleged to have accumulated over time for two properties owned by MMR – 2678 Mic Mac Street and 2636 Mic Mac Street ( “the property tax allegations” and “the Mic Mac Properties”, respectively). I find the property tax amendments do not fall within the four corners or factual matrix of the original pleading. [ 44 ] First, there is nothing in the original pleading, standing on its own, that would give John notice Mrs.

McMurtry alleges he failed to direct that property taxes owed by MMR and other corporate liabilities be paid (i.e., whether for the Mic Mac Properties or otherwise). [ 45 ] Second, if John were to consider the content of Jim’s pleading (as directed in para. 12 of the original pleading [5] ), it does not mention a failure by John to direct that the property taxes for the Mic Mac Properties be paid. The only reference in Jim’s pleading to unpaid property taxes is to arrears of taxes as of June 2009 for Stoke Lacey.

Jim alleges steps were taken to secure funds with which to pay the $280,000 of property taxes said by John to be owing for Stoke Lacey at the time. [ 46 ] Third, there is nothing in the prayer for relief in the original pleading or in Jim’s pleading that would give John notice the alleged oppressive conduct and oppression remedies claimed in any way relate to the failure to pay property taxes for the Mic Mac Properties. [ 47 ] The property tax allegations constitute a fundamentally different claim in oppression and amount to a new cause of action.

For the same reasons, the relief claimed at para. 1(i-ii) regarding the failure to pay property taxes, does not constitute a claim for alternative relief arising out of facts originally pleaded. [ 48 ] It remains to be determined whether this new cause of action is statute-barred (Issue No. 2) or leave to amend is, in any event, refused because of actual prejudice (Issue No. 4) or an unrebutted presumption of non-compensable prejudice (Issue No. 5).

b) The Loans to Sandra Stapledon [ 49 ] The Estate alleges John engaged in oppressive conduct in the form of loans made to MMR by MMR’s accountant, Sandra Stapledon (“the Stapledon loan allegations”). The loans are described as “short-term” and alleged to total in excess of $1,100,000. The allegations include, • the loans were made by Ms. Stapledon to MMR in each fiscal year from 2014 through 2021; • many of the loans were repaid on the same day they were made or within a month of the date on which they were made; and • at the same time the loans were being made by Ms.

Stapledon, MMR was paying her for professional fees and other reasons. [ 50 ] At para. 84 of the proposed pleading, the Estate alleges, “To the extent that John or his family benefitted or [MMR] was injured by [the Stapledon loans], John should be required to reimburse MMR.” [ 51 ] The Stapledon loan allegations do not explicitly include an allegation of “misappropriation” of MMR funds on John’s part.

The lack of the use of the term “misappropriation” is not, however, determinative of the issue of whether those allegations fall within the four corners or factual matrix of the original pleading. [ 52 ] I find the Stapledon loan allegations address a potential diversion of MMR funds from the corporation for John’s benefit, and/or to the financial detriment of the corporation. The Stapledon loan allegations therefore fall within the four corners of the relief requested in para. 1(

g) of the original pleading – namely, an order requiring John to repay “all funds since 1998 misappropriated by him or for his benefit.” [ 53 ] Put another way, the Stapledon loan allegations are connected to the further and better particulars, to which John consents, of the alleged misappropriation of funds by way of payment of personal and/or family expenses and the declaration of dividends. The

Stapledon loan allegations are additional facts upon which the original oppression claim is based. [ 54 ] I reach this conclusion based exclusively on the wording of the original pleading; I do not rely in any way on the wording of Jim’s pleading. [ 55 ] As the Stapledon loan allegations do not amount to a new cause of action, they are not statute-barred (Issue No. 2). It remains to be determined, however, whether leave to include those allegations in the amended pleading is refused because of either actual prejudice (Issue No. 4) or an unrebutted presumption of non-compensable prejudice (Issue No. 5).

c) The Alleged Failure to Complete Audited Financial Statements [ 56 ] I refer to these allegations as “the financial statement allegations”. I find these allegations do not fall within the four corners or factual matrix of the original pleading. The financial statement allegations raise a new cause of action. [ 57 ] First, there is nothing in the original pleading, standing on its own, that would give John notice Mrs. McMurtry alleges oppressive conduct based on the manner in which MMR’s financial records are maintained. [ 58 ] The only corporate record mentioned in the original pleading is the MMR Minute Book. In para. 1(

b) of the original pleading, Mrs. McMurtry requested the Minute Book be updated to reflect Ms. McMurtry’s ownership of the Disputed Shares. The Estate does not propose any amendments to para. 1(

d) and includes that paragraph in the proposed pleading. [ 59 ] In his pleading, Jim alleges that neither he nor his mother were ever provided with “a financial statement for the company” (para. 13 of Jim’s pleading). Jim also addresses efforts he made to have MMR’s books and records for 2009 reviewed and the irregularities found in the documents reviewed for that year (paras. 16-19 of Jim’s pleading).

Jim does not, however, allege that John failed to have audited financial statements for MMR completed. [ 60 ] Third, there is nothing in the prayer for relief in the original pleading (or Jim’s pleading) to give John notice that the oppressive conduct alleged includes failure to have audited financial statements completed for MMR. [ 61 ] I mention Jim’s pleading but do not rely on its contents to determine Issue No. 1, as it relates to the financial statement allegations. [ 62 ] It remains to be determined whether this new cause of action is statute-barred (Issue No. 2) or leave to amend is, in any event, refused because of actual prejudice (Issue No. 4) or an unrebutted presumption of non-compensable prejudice (Issue No. 5) arising from the financial statement allegations.

d) Conclusion – Issue No. 1 [ 63 ] The property tax allegations and the financial statement allegations constitute new causes of action. They are both addressed under Issue Nos. 2 (statute-barred), 4 (actual prejudice), and 5 (rebuttable presumption of non-compensable prejudice). [ 64 ] The Stapledon loan allegations do not constitute a new cause of action; they are not statute-barred. These allegations are, however, addressed under Issue Nos. 4 (actual prejudice) and 5 (rebuttable presumption of non-compensable prejudice). Issue No. 2 - If any of the contested amendments raise a new cause of action, are the claims statute-barred?

a) The Discoverability Principle is not Relevant [ 65 ] In response to the Estate’s motion, John relies on Brenda’s June 2023 affidavit. At paras. 15-21 of her affidavit, Brenda addresses proposed amendments which she asserts and John submits constitute causes of action that were “discovered” more than two years ago. [ 66 ] The Estate does not rely on the discoverability principle in s. 5 of the Limitations Act , 2002 , S.O. 2002, c. 24, Sched. B . That position was confirmed by the Estate’s counsel on the return of the motion. The proposed pleading does not, in any event, include allegations which address the discoverability principle.

b) The Evidence [ 67 ] The Estate did not deliver a reply affidavit. Brenda was not cross-examined on her affidavit. As a result, Brenda’s evidence as to when Mrs. McMurtry or the Estate had knowledge of various matters is uncontradicted and unchallenged. [ 68 ] John was examined for discovery in October 2013 and August 2014. The exhibits to Brenda’s affidavit include excerpts from the transcript of that examination.

The exhibits also include a chart of undertakings given during the latter portion of John’s examination and answers to the undertakings. [ 69 ] Last, the exhibits include copies of three affidavits – two sworn by Jim (one in August 2016 and the other in November 2019) and one sworn by a legal assistant to Mrs. McMurtry’s former counsel (in November 2019). [ 70 ] John relies on the contents of the exhibits to Brenda’s affidavit as evidence of when matters were known to Mrs. McMurtry. [ 71 ] I will deal first with the property tax allegations and then with the financial statement allegations.

c) The Two New Causes of Action

i) John Fails to Pay Property Taxes and Other Liabilities

[ 72 ] Based on the exhibits to Brenda’s affidavit, I find that Mrs. McMurtry was aware by no later than November 2019 of the arrears of property taxes which had accumulated regarding both Stoke Lacey and the Mic Mac Properties. [ 73 ] Item 23 of the undertakings chart (Exhibit ‘S’), is “To ask Brenda if she had a discussion with [MMR’s external accountant] about using rent payments from tenants to pay down tax arrears.” As recorded in the chart, the answer to the undertaking is that Brenda does not recall having such a conversation.

I find that the potential for arrears of property taxes to have accumulated, including for the Mic Mac Properties, was known to the parties by August 2014 when the undertaking was given. [ 74 ] I also consider the contents of Jim’s 2016 affidavit. It relates to a motion made pursuant to the court’s July 2016 trial management conference endorsement. The motion was intended to address gathering, and the presentation at trial of, evidence about MMR’s financial affairs. [ 75 ] At para. 10 of his 2016 affidavit, Jim says the financial evidence required for

Part 2 of the trial includes evidence to permit the court to “quantify any tax or other liabilities [MMR] may have.” At para. 30(iii) of his 2016 affidavit, Jim addresses the property tax arrears for the Mic Mac Properties: The troublesome issue here is the majority of property taxes relate to the commercial rental premises on Mac Street, which have triple net leases, usually for 5 years. This means that [MMR] is collecting the taxes from the tenants, but not remitting the money to the city. What did John and Brenda do with the tenant’s tax money over all those years and what is the status this year?

It’s a big number, easily over half a million dollars by now. [ 76 ] In his November 2019 affidavit, Jim once again addresses property tax arrears. In paras. 18-19 of that affidavit, Jim says, 18. Also on the October 2019 motion I showed in my affidavit that $305,000 in property tax arrears had also accumulated on the Mac Street commercial rental properties. This despite the fact the tenants are on triple-net leases whereby the tenants pay the property tax as part of their monthly rent. 19. Thus John and Brenda are collecting the Mac Street taxes but failing to remit payments to the City.

The unremitted funds are then avail able for John and Brenda’s continuing course of conduct to drain the company. [ 77 ] Through their respective counsel, Jim and Mrs.

McMurtry had the same information available to them about the state of MMR’s financial affairs and about how John and Brenda were collectively carrying out MMR’s business on a day-to-day basis. [ 78 ] The two-year limitation period for the addition of a cause of action in oppression based on the failure to pay property taxes expired no later than November 2021 (i.e., two years after the date of Jim’s 2019 affidavit). [ 79 ] There are several paragraphs in other sections of the proposed pleading which also refer to “tax liabilities” or “property taxes and other debts”, all of which are alleged to have accrued because of John’s failure to pay the taxes and/or debts.

Leave to include those paragraphs in the amended pleading is also refused – because those paragraphs relate to a statute-barred cause of action. For clarity, the additional paragraphs are, • paras. 1(i-ii); • the first sentence of para. 7; • the phrase “incurred significant liabilities and unjustifiable tax liabilities to the Corporation”, as it appears in para. 43; • para. 51; • para. 98(b); and • para. 109(d). [ 80 ] The subject heading for the property tax allegations includes the term “Other Liabilities”. I note, however, that the only topic covered in this

section of the proposed pleading is the property tax arrears for Mic Mac Properties. ii) John has Never Completed Audited Financial Statements for the Company [ 81 ] Based on Brenda’s evidence, I find that Mrs. McMurtry was aware no later than August 2014 that John had not been arranging and did not intend to arrange for audited financial statements to be prepared for MMR. [ 82 ] During the second portion of his examination for discovery, John answered questions related to the financial statements for MMR for the fiscal year ending in 2014.

John’s evidence was the financial statements yet to be completed for that fiscal year would not be audited. He expressed a belief that it was not necessary for the financial statements to be audited – even in the face of questions arising during litigation related to MMR. That belief was based on John’s view that MMR is “a small company”. [ 83 ] More than two years have passed since Mrs.

McMurtry was aware of the circumstances giving rise to the cause of action in oppression set out in the financial statement allegations – the cause of action is statute-barred. [ 84 ] Leave to amend is refused for the related allegations in paras. 97 and 98(d)-(

e) of the proposed pleading: • Proposed para. 97 is an allegation that “an audit is necessary and the failure to conduct one, as required, is oppressive”; • Proposed para. 98(

d) alleges that John failed “to produce information concerning the business”; and

• Proposed para. 98(

e) is a reference to a failure to complete audited financial statements for MMR as part of the list of John’s conduct by which Mrs. McMurtry was and it has been oppressed.

d) Conclusion – Issue No. 2 [ 85 ] Both the property tax allegations and the financial statement allegations are statute-barred. Issue No. 3 - Do the allegations regarding the sale of Stoke Lacey meet the threshold required to establish a cause of action?

a) Background [ 86 ] It is undisputed that, prior to the Estate changing counsel in 2021, Mrs. McMurtry’s former counsel was not involved in the efforts then being made to sell Stoke Lacey; only John and Jim, through their respective counsel, were involved in those efforts.

It was not until the fall of 2021 that the Estate, through its current counsel, became involved in the potential sale of Stoke Lacey. [ 87 ] It is also undisputed that, once the Estate Trustee became aware of the existence of the agreement of purchase and sale that was ultimately negotiated (“the APS”), the Estate, through its counsel, made John and Jim aware of the Estate’s position on the sale.

By letter dated September 2021, the Estate’s counsel informed John’s and Jim’s respective counsel of that position: “Having now had the chance to review the APS, we are concerned that the transaction is not in the best interests of either [MMR] or the Estate [] as majority shareholder of Mic Mac.” [ 88 ] In the September 2021 letter, the Estate’s counsel suggested that John and Brenda (as opposed to MMR) pay the expenses associated with Stoke Lacey for the two years John and Brenda will be continuing to live at the property, rent-free, following the closing of the sale.

John and Brenda did not agree to do so. [ 89 ] In the end, the Estate’s counsel informed John’s and Jim’s respective counsel that the Estate does not consent to the sale of Stoke Lacey on the terms in the APS. The Estate would not, however, “take any steps to stand in the way of the transaction, in view of the proceeds that will come to Mic Mac”. [ 90 ] The sale of Stoke Lacey ultimately closed in September 2022, with a purchase price in excess of $5,000,000. It appears that the property tax arrears on Stoke Lacey were paid at the time of the sale.

It also appears that John, Jim, and the Estate agree the proceeds from the sale will be held in trust, subject to an agreement or an order of the court providing for a portion of the proceeds to be applied towards MMR’s outstanding liabilities. No order has been made for any portion of the proceeds to be released from trust.

b) The Stoke Lacey Allegations [ 91 ] The allegations regarding Stoke Lacey are made under the heading, “John Agrees to a Sale of Stoke Lacey that Benefits John and his Family”. The oppressive conduct alleged is that the terms of the APS include,

a) John and Brenda have the right to continue to occupy Stoke Lacey, rent-free, for two years following the closing of the sale;

b) MMR extended an interest-free, vendor take-back mortgage of $2,700,000 for two years;

c) the purchaser’s offer was accepted over other offers which provided for full payment of the purchase price on closing; and

d) the terms of the APS violate the reasonable expectations of the Estate regarding Stoke Lacey as one of MMR’s assets.

c) The Positions of the Parties [ 92 ] John’s position is the Stoke Lacey allegations are not sufficient to raise a cause of action in oppression. John submits the allegations do not include either (

a) the Estate’s reasonable expectations specific to the sale, or (

b) how the Estate’s expectations were violated by the sale. [ 93 ] In response, the Estate relies on para. 16 of the proposed pleading. The Estate alleges therein, “Mildred had a reasonable expectation that the Defendant, John McMurtry, would be honest and forthright and would act in the best interests of the company.” In addition, the Estate relies on s. 134 of the OBCA . That statutory provision is pleaded and relied on at para. 110 of the proposed pleading. [ 94 ] The Estate’s position is the reasonable expectations particularized in para. 16 of the proposed pleading and s. 134 of the OBCA are the most basic of reasonable expectations that any shareholder would hold.

d) Analysis [ 95 ] On the return of the motion, John consented to the inclusion of para. 16 of the proposed pleading in the amended pleading for the purpose of particularizing Mrs. McMurtry’s, and now the Estate’s, reasonable expectations in the context of the oppression remedy claims the Estate has pursued to date and, on this motion, is granted leave to pursue. [ 96 ] When para. 16 is read together with the Stoke Lacey allegations (paras. 86-93), the Estate’s reasonable expectations regarding the sale and how those expectations were violated by the sale are sufficiently particularized to meet the requirements of an oppression remedy claim. In

summary, the Estate alleges John put his and Brenda’s interests ahead of MMR’s interests and did so to the financial detriment of MMR. [ 97 ] With the transaction having been negotiated in 2021 and closed in 2022, the claim for an oppression remedy arising from the sale of Stoke Lacey is not statute-barred. In any event, John does not rely on the expiration of the limitation period to oppose leave being granted to the Estate to include the Stoke Lacey allegations in the amended pleading.

[ 98 ] Granting leave to the Estate to pursue the Stoke Lacey allegations does not give rise to actual prejudice to John. His incapacity to participate in the discovery process or at trial is not relevant to this claim. By the time the terms of the APS were negotiated, John was incapable. John was not personally involved in the sale of Stoke Lacey. [ 99 ] Given the absence of any delay in the pursuit of the Stoke Lacey allegations, they are not considered under Issue No. 5.

e) Conclusion – Issue No. 3 [ 100 ] The Estate is granted leave to include paras. 86-93 in the amended pleading. The Estate is also granted leave to include in the amended pleading the relief set out in para. 1(i-vi) of the proposed pleading; that relief relates to the Stoke Lacey allegations. These allegations are not statute-barred (Issue No. 2), do not give rise to actual prejudice (Issue No. 4), and do not give rise to a rebuttable presumption of non-compensable prejudice (Issue No. 5). Issue No. 4 - Regardless of whether any new causes of action are statute-barred, should leave to amend be refused because granting such leave will cause John actual prejudice in the litigation?

a) The Positions of the Parties [ 101 ] John’s position is that – other than for the Stoke Lacey allegations – he will suffer actual prejudice if the Estate is granted leave to include the proposed oppression remedy claims in the amended pleading. [ 102 ] John submits that actual prejudice arises because all of the examinations for discovery were conducted prior to the hearing of

Part 1 of the trial. It has been nine years since John was examined for discovery. As a result of the passage of time and John’s incapacity (since 2016), John is no longer in a position to respond to the claims being made against him. In addition, John submits that actual prejudice arises because of the death of Mrs. McMurtry in 2021.

She is no longer available to participate in either the discovery process or at trial. [ 103 ] John’s position is that the loss, through incapacity or death, of evidence of key witnesses – including party witnesses – amounts to actual prejudice. [ 104 ] In response, the Estate makes the following submissions. First, there is no actual prejudice because most of the proposed amendments relate to conduct that was ongoing or had not occurred prior to the commencement of

Part 1 in the fall of 2015. The Estate points to the increase in the arrears of property taxes and the tripling of the dividends declared in John’s favour subsequent to the completion of

Part 1. [ 105 ] Second, the Estate submits that if, prior to the commencement of

Part 1, John had concerns about the original pleading, there were several options available to him to address those concerns. For example, he could have served a demand for particulars and/or brought a motion to strike all or a part of the original pleading. [ 106 ] Third, and more generally, the Estate submits that, to the extent any prejudice arises from two party witnesses no longer being available to participate in the litigation, then both parties are prejudiced. The Estate’s position is that the death of a party should not be a basis for refusing, the estate to which the deceased person’s interest in litigation is transmitted, leave to amend the deceased party’s pleading.

b) Analysis

i) Steps John Could Have Taken Prior to

Part 1 of the Trial [ 107 ] I start with the Estate’s submission that John’s concerns about the original pleading could have been addressed prior to the commencement of

Part 1. John could have taken either of the procedural steps suggested by the Estate. He may, however, have had several reasons for doing nothing more than delivering a statement of defence. [ 108 ] It may have been a strategic decision on John’s part not to serve a demand for particulars of the alleged oppressive conduct upon which Mrs. McMurtry was relying. He may have viewed taking that step as being of more assistance to Mrs. McMurtry than to him and decided, instead, to address at trial any substantive deficiencies in the original pleading. [ 109 ] It was not incumbent upon John to take steps to assist Mrs.

McMurtry in shoring up deficiencies in her pleading. The submission about steps that John could have taken prior to the commencement of

Part 1 does not assist the Estate on the issue of actual prejudice. ii) The Alleged Conduct is Ongoing [ 110 ] The Estate’s position is the proposed amendments do not give rise to actual prejudice because they are based on conduct which is ongoing and the majority of which occurred subsequent to the commencement of

Part 1. [ 111 ] For this submission, I distinguish between the Stapledon loan allegations (not statute-barred) and the property tax allegations and financial statement allegations (statute-barred). I start with the Stapledon loan allegations. ▪ The Stapledon Loan Allegations [ 112 ] The sole form of alleged oppressive conduct upon which Mrs. McMurtry originally based her claim for oppressive relief was misappropriation of funds. There is no mention in the original pleading of the method(

s) by which Mrs. McMurtry alleges John misappropriated funds. Regardless, John does not dispute that he understood, prior to the commencement of

Part 1, the alleged misappropriation included the use of MMR funds to pay personal/family expenses and the declaration of dividends to John only.

[ 113 ] As of the date on which

Part 1 commenced, a detailed review of MMR’s financial records had not been completed and was ongoing. It would not have been possible, as of the commencement of

Part 1, for Mrs. McMurtry to have a full appreciation of (

a) the financial situation of MMR over time, (

b) the alleged irregularities in MMR’s finances and/or financial records, and (

c) potential causes of those alleged irregularities. Specifically, Mrs. McMurtry would not have known whether those potential causes included forms of misappropriation of funds other than the use of MMR funds to pay personal/family expenses and the declaration of dividends to John only. [ 114 ] Mrs. McMurtry, the Estate, and Jim have historically taken the position that John and/or Brenda caused or contributed to the delays encountered in the completion of a detailed review of MMR’s financial records.

It would be unfair to the Estate to preclude it from fully pursuing the only basis of alleged oppressive conduct because of a delay for which it may not be entirely responsible (if responsible at all). [ 115 ] I next consider the period during which the Stapledon loans are alleged to have been made – MMR’s fiscal years 2014 through 2021. Depending on when fiscal year 2014 ended, it is possible John had little or nothing to do with the Stapledon loans.

He may, at most, have been aware of the loans for one or two fiscal years prior to his stroke in the fall of 2015. [ 116 ] Witnesses other than John are available to testify about the Stapledon loans. There is no evidence to suggest Ms. Stapledon is no longer available to testify. Brenda’s evidence is that she has “been involved in the management and day-to-day operation of Mic Mac with John since the 1980s.” She is in a position to testify about MMR’s management and operation from fiscal year 2014 and to the present – including for the period during which John was and remains incapacitated.

I find the loss of John’s evidence on the subject of the Stapledon loans gives rise to little, if any, actual prejudice to John. [ 117 ] I find the loss of Mrs. McMurtry’s evidence in support of this component of the oppression remedy claim does not give rise to actual prejudice. Evidence in support of this component of the claim is anticipated to be given by the individuals who reviewed MMR’s financial records. John continues to have the right to cross-examine those witnesses. [ 118 ] Had she been alive at the time of

Part 2, the court would have expected to hear from Mrs. McMurtry as to her reasonable expectations regarding the Stapledon loans. As noted in an earlier

section of this ruling, the pleading sets out the most basic of reasonable expectations for any shareholder. John’s loss of the opportunity to cross-examine Mrs.

McMurtry on those expectations gives rise to minimal, if any, actual prejudice. [ 119 ] I find the prejudice to the Estate of refusing to grant leave to include the Stapledon loan allegations in the amended pleading far outweighs the actual prejudice, if any, to John of granting leave to add those allegations to the two existing categories of alleged misappropriation of funds. ▪ The Property Tax Allegations and Financial Statement Allegations [ 120 ] Under Issue No. 2, I conclude that the allegations under these two categories of proposed amendments are statute-barred.

I leave that conclusion aside for the moment to answer the following question: Would leave to include the property tax allegations and financial statement allegations be refused in any event because those allegations give rise to actual prejudice to John? I answer the question in the affirmative. [ 121 ] The property tax allegations and financial statement allegations span a period commencing prior to 2012 (the year in which this action was commenced) and continuing to the current year.

In total, the allegations span a period of more than eleven years. [ 122 ] Approximately the first three years of that eleven-plus-year period were prior to John becoming incapacitated by reason of a stroke. During the first three years, and on the understanding the scope of the alleged oppressive conduct to which he is required to respond is restricted to the misappropriation of funds, John, • delivered a 20-paragraph statement of defence in response to the 14-paragraph original pleading; • addressed his documentary and oral discovery obligations; • prepared for and participated in

Part 1; and • continued to manage MMR. [ 123 ] I take judicial notice of the fact that a responsible litigant considers their settlement options while litigation is ongoing. I draw an inference and find that, in the same three-year period, John considered his settlement options on the understanding the alleged oppressive conduct to which he is required to respond in this action is restricted to misappropriation of funds. [ 124 ] The Estate’s position is that such a general consideration of the history of the litigation is not sufficient to support a finding of actual prejudice.

I disagree. [ 125 ] I find that, eight years after John’s stroke and eleven years after the action was commenced, it would require significant effort and resources on John’s part, and on the part of his counsel, to review the pleadings; the transcripts from the examinations for discovery; the

Schedule ‘A’ documents listed by the parties in their respective affidavits of documents; and any other documents that may be relevant to the property tax allegations and financial statement allegations and then assess, in hindsight, the impact those allegations would have had on John’s defence to the action. I find that being put in the position of having to do that work in response to the motion – approximately four and a half months prior to the date on which

Part 2 is scheduled to commence – gives rise to actual prejudice in two ways. [ 126 ] First, there is the actual prejudice of having to expend the effort and incur the cost of the work. That form of prejudice is compensable in costs or by an adjournment. Regardless, requiring John and his counsel to carry out that work would,

• effectively require them to reconsider the entirety of the litigation to date; • be unreasonable and unfair to John; • not be cost-effective; and • run contrary to the general principle under r. 1.04(1) of the Rules of Civil Procedure. Pursuant to that rule, the parties are entitledto “secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.” [127] Second, and in terms of an adjournment, there is no evidence as to how long it would take John and his counsel to carry out thereview described above.

How many weeks or months would they require to complete that work and be in a position to respond to themotion for leave to include the property tax allegations and financial statement allegations in the amended pleading? Regardless of howmany weeks or months that work might take, it would be necessary to adjourn

Part 2. I find it would be unreasonable and unfair to John,and unjust in the overall circumstances of the litigation, to adjourn

Part 2 yet again.

c) Conclusion – Issue No. 4 [128] There is minimal, if any, actual prejudice to John if the Estate is granted leave to include the Stapledon loan allegations in theamended pleading. That prejudice, if it exists, is not a sufficient reason to refuse the Estate’s request for leave to include the Stapledonloan allegations in the amended pleading. [129] Actual prejudice to John does, however, arise from the proposed property tax allegations and financial statement allegations. Actual prejudice is another reason why leave to include those allegations in the amended pleading is refused.

Issue No. 5 - Regardless of whether any new causes of action are statute-barred, does Mrs. McMurtry’s, and now the Estate’s,delay in bringing the motion give rise to a rebuttable presumption of non-compensable prejudice and, if so, has the Estate rebuttedthat presumption? [130] Regardless of the conclusions reached under Issue Nos. 1, 2, and 4, and by virtue of the delay in bringing the motion, do theproperty tax, financial statement, and/or Stapledon loan allegations give rise to a rebuttable presumption of non-compensable prejudice?

John answers that question in the affirmative; the Estate answers it in the negative.

a) The Law [131] In Family Delicatessen Ltd. v. London (City), (Ont. C.A.), the Court of Appeal for Ontario considers thesignificance of inordinate delay prior to bringing a motion for leave to amend a statement of claim.

At para. 6, the Court summarizes therebuttable presumption of non-compensable prejudice to the defendants that can arise: While delay is not in and of itself a basis for refusing an amendment, there must come a point where the delay is so long and thejustification so inadequate that some prejudice to the defendants will be presumed absent a demonstration by the party seeking theamendment that there is in fact no prejudice despite the lengthy and unexplained delay. [132] As recently as 2023, the Court of Appeal relied on the rebuttable presumption of non-compensable prejudice by reason ofinordinate delay when the Court upheld a motions judge’s decision to refuse a plaintiff leave to make some of the plaintiff’s proposedamendments to their statement of claim: Horani v.

Manulife Financial Corporation, 2023 ONCA 51. In Horani, the motion for leave toamend was brought seven and a half years after the incident in question, four years after the action was set down for trial, and six weeksbefore the trial was scheduled to proceed. [133] For the rebuttable presumption of non-compensable prejudice to arise, the prejudice must be causally connected to the proposedamendments and not flow from some other source: Broome v.

Western Assurance, 2023 ONSC 172, at para. 13; Horani, at para. 35. [134] There is no fixed point in a proceeding at which the rebuttable presumption of non-compensable prejudice arises and the onusshifts to the moving party to rebut the presumption: see e.g., 1588444 Ontario Ltd. v. State Farm Fire and Casualty Company, 2017ONCA 42, 135 O.R. (3d) 681, at para. 38.

There is no rigid test to be met by the moving party in attempting to rebut the presumption:State Farm, at para. 41. [135] What underlies the court’s recognition of the rebuttable presumption of non-compensable prejudice are “fairnessconsiderations”: State Farm, at para. 42.

b) Analysis [136] I find the delay in bringing the motion for leave to amend the original proceeding is inordinate. I rely in part on the fact that theparties have been before me, in my capacity as the trial judge, on numerous occasions since the release of the First Trial Decision. Thetransition from

Part 1 to

Part 2 and the commencement of the trial in John’s action and Jim’s counterclaim has been judicially managed. [137] The management of that transition includes two appearances by the parties in November 2019 – a matter of weeks prior to thedate on which

Part 2 and the trial of the companion action (and counterclaim) were scheduled to commence. Within the span of thatweek, from one appearance to the next, Mrs. McMurtry confirmed to the court and to John that she did not intend to seek leave to amendher pleading, and then changed her mind. As a result,

Part 2 and the commencement of the trial of the companion action (andcounterclaim) were adjourned with costs to John thrown away. [138] At the time of the adjournment, a return date of March 6, 2020, was set for Mrs. McMurtry’s motion for leave to amend theoriginal pleading. The motion did not proceed on that date. [139] It was not until the spring of 2023 that meaningful steps were taken by Mrs. McMurtry and/or the Estate, to bring the motion

for leave to amend the original pleading. In May 2023, a request was made for a return date for the motion. [ 140 ] In the circumstances of this case, that three-year delay, from March 2020 to the spring of 2023 might be described as inordinate. There is, in any event, more to the inordinate delay in bringing the motion.

It is now more than ten and a half years since the action was commenced; almost nine years since John was last examined for discovery; more than seven years since the First Trial Decision was released; and more than three and a half years since the defendant’s supplementary and second supplementary affidavits of documents were served. [ 141 ] I find the delay in bringing the motion so inordinate that prejudice to John is presumed to arise. That presumed prejudice is non- compensable if I find it is connected to the proposed amendments and does not flow from some other source.

In determining that issue, I once again distinguish between the property tax allegations and financial statement allegations and the Stapledon loan allegations.

i) The Property Tax Allegations and Financial Statement Allegations [ 142 ] For several reasons, some of which are discussed in earlier sections of this ruling, I find that the presumed prejudice to John which arises from the delay in bringing the motion for leave to include the property tax allegations and financial statement allegations in the amended pleading is causally connected to the proposed amendments. That prejudice does not flow from some other source.

The presumed prejudice is therefore non-compensable. [ 143 ] For example, the property tax allegations and financial statement allegations depend on new facts and arguments not originally pleaded: see paras. 43-48 and 56-62, above ; Horani , at para. 35 . The inclusion of these new causes of action would likely have affected John’s litigation strategy. [ 144 ] At this late stage of the action, John simply cannot be put in the position he likely would have been in – in 2012 when the action was commenced or in any of the years thereafter to the commencement of

Part 1: see Family Delicatessen , at para. 7. [ 145 ] The onus therefore shifts to the Estate to rebut the presumption of non-compensable prejudice. I turn to the evidence upon which the Estate relies in support of the motion – Keith Murphy’s 53-paragraph affidavit, to which 47 exhibits are attached. [ 146 ] The Murphy affidavit provides very little in the way of an explanation for the delay in bringing the motion. Mr. Murphy’s affidavit mentions the possibility of the parties attending mediation in 2022; the parties did not proceed to mediation in that year.

That evidence may explain the delay from 2022 to 2023 in bringing the motion; it does nothing, however, to explain the delay in the years from 2012 to 2022. [ 147 ] I find the evidence upon which the Estate relies is not sufficient to rebut the presumption of non-compensable prejudice. For example the preservation of documents, including MMR’s financial records, is not sufficient to rebut the presumption of non- compensable prejudice. ii) The Stapledon Loan Allegations [ 148 ] The Stapledon loan allegations do not constitute a new cause of action.

They fall within the four corners or factual matrix of the original allegations of misappropriation by John of MMR funds for his benefit and to the financial detriment of the corporation: see paras. 49-55, above . [ 149 ] To the extent there is any actual prejudice to John which arises from the Stapledon loan allegations it is minimal and, in any event, is outweighed by the prejudice the Estate would suffer if it were not permitted to include the allegations in the amended pleading: see paras. 112-119, above . [ 150 ] For the reasons which follow, I find that a rebuttable presumption of non-compensable prejudice does not arise regarding the Stapledon loan allegations. [ 151 ] In

Schedule ‘A’ of her November 18, 2019 supplementary affidavit of documents, Brenda includes two documents under the heading “LOANS”. Document no. 12 is described as “Loan Agreement with Sandra Stapledon”; the document is dated from September 2014 to May 2019. Document no. 13 is described as “Supporting documents for John McMurtry’s Shareholder loan account”; it runs from June 1, 2018 to May 31, 2019 (i.e., a fiscal year). [ 152 ] Based on the contents of the supplementary affidavit of documents, I draw an inference and find that, by at least September 2014, John was aware of (

a) the existence of the loan agreement with Ms. Stapledon, (

b) the record-keeping related to that loan agreement and any loans made by Ms. Stapledon to MMR, and (

c) the potential for any misappropriation of funds related to the Stapledon loans to be relevant to Mrs. McMurtry’s claim for an oppression remedy. [ 153 ] Given John’s state of knowledge as of September 2014, I find that any prejudice to John which arises from the Stapledon loan allegations is not causally connected to the proposed amendments; the prejudice, if any, flows from another source. Therefore, a presumption of non-compensable prejudice does not arise from the Stapledon loan allegations.

d) Conclusion – Issue No. 5 [ 154 ] A rebuttable presumption of non-compensable prejudice to John arises from the property tax allegations and financial statement allegations. The presumption has not been rebutted by the Estate. The rebuttable presumption of non-compensable prejudice is a third reason why leave to include those allegations in the amended pleading is refused. [ 155 ] A rebuttable presumption of non-compensable prejudice to John does not arise from the Stapledon loan allegations. Issue No. 6 - Is the subject matter of any of the contested amendments res judicata?

a) The Positions of the Parties [156] John describes several of the proposed amendments as a collateral attack on the findings made in the First Trial Decision.

Inaddition, John submits that many of the proposed amendments (whether a collateral attack or not) are barred by the doctrine of resjudicata. [157] The paragraphs in the proposed pleading to which John objects on those bases are paras. 1(a), 1(c), 2 (other than the first twosentences), 4 (latter half of the paragraph), 7 (the second sentence only), 11 (the final sentence only), 13, 31-39 (“the Tin Houseallegations”), and 103-109 (“No Entitlement to a Constructive Trust or Vesting Order”). [158] The Estate’s position is that none of the proposed amendments are in any way a collateral attack on the First Trial Decision.

The Estate submits that, in their respective decisions for

Part 1, both this court and the Court of Appeal make it clear the end result of theimposition of the constructive trust remains to be determined in

Part 2. [159] The Estate submits that it would be inconsistent to proceed to

Part 2 and restrict the issues to whether or not John is entitled to avesting order. The Estate describes such a trial as one John cannot lose and in which no meaningful issue would be determined.

b) The Law [160] In Danyluk v. Ainsworth Technologies Inc., 2001 SCC 44, [2001] 2 S.C.R. 460, at para. 18, Binnie J. explains the importance offinality to litigation: The law rightly seeks a finality to litigation. To advance that objective, it requires litigants to put their best foot forward to establish thetruth of their allegations when first called upon to do so. A litigant, to use the vernacular, is only entitled to one bite at the cherry … Anissue, once decided, should not generally be re-litigated to the benefit of the losing party and the harassment of the winner.

A personshould only be vexed once in the same cause. Duplicative litigation, potential inconsistent results, undue costs, and inconclusiveproceedings are to be avoided. [161] There are two branches to the doctrine of res judicata. The first branch is cause of action estoppel, which precludes the re-litigation of claims that have been determined in prior proceedings. The second branch is issue estoppel, which precludes the re-litigation of any right, question or fact put in issue and determined by a court of competent jurisdiction: Dosen v.

Meloche MonnexFinancial Services Inc (Security National Insurance Company), 2021 ONCA 141, 457 D.L.R. (4th) 530, at paras. 31-32; Danyluk, atpara. 24. [162] John relies on both cause of action estoppel and issue estoppel. [163] For the doctrine of res judicata to apply on the basis of cause of action estoppel, “the subsequent action either must have beenargued or could have been argued in the prior action if the party in question had exercised reasonable diligence”: The Catalyst CapitalGroup Inc. v. VimpelCom Ltd., 2019 ONCA 354, 145 O.R. (3d) 759, at para. 50.

Cause of action estoppel does not arise simply becausethe cause of action could have been argued in the prior proceeding. “It is also necessary that the cause of action properly belonged to thesubject of the prior action and should have been brought forward in that action”: Catalyst Capital Group, at para. 50. [164] In Danyluk, Binnie J. explains when issue estoppel arises. At para. 25 of the decision, and relying on the Supreme Court’searlier decision in Angle v.

MNR, (SCC), [1975] 2 S.C.R. 248, at p. 254, Binnie J. lists the three pre-conditions for theoperation of issue estoppel: (1) that the same question has been decided; (2) that the judicial decision which is said to create the estoppel was final; and, (3) that the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppelis raised or their privies. [165] If the three conditions are met, issue estoppel arises. [166] If res judicata arises by reason of either cause of action estoppel or issue estoppel, the court must determine whether to exerciseits discretion not to apply the doctrine: Danyluk, at paras. 33, 62.

When deciding whether to exercise its discretion, the court must askwhether there is “something in the circumstances of this case such that the usual operation of the doctrine of estoppel would work aninjustice?”: see Danyluk, at para. 63, quoting Schweneke v. Ontario (2000), (ON CA), 47 O.R. (3d) 97 (C.A.), at para.38.

c) Analysis [167] The Estate’s motion for leave to amend the original pleading is brought mid-proceeding. Only

Part 1 of the Estate’s action iscomplete.

Part 2 is scheduled to commence in December 2023. [168] At para. 16 of the Appeal Decision, the Court of Appeal highlights that “what was necessary [for

Part 1] was a factualdetermination as to whether the Disputed Shares had been gifted to John”. The finding that no such gift was made “is now res judicataand binding in any further proceedings”: Appeal Decision, at para. 17. [169] It is important that the “parties to the actions agreed that [the] only aspect of the claims made on behalf of Mrs. McMurtry to bedetermined [in

Part 1] is that for declaratory relief with respect to ownership of the [Disputed] Shares”: First Trial Decision, at para. 6. At paras. 16-17 of the Appeal Decision, the Court of Appeal concludes that Mrs. McMurtry did not even require declaratory relief; all sherequired was a factual determination as to whether the Disputed Shares had been gifted to John. At para. 7 of the Appeal Decision, the

Court said, “In essence, the matter proceeded as a trial of the issue of share ownership.” [ 170 ] John concedes that the issue of whether he is entitled to a vesting order, based on the imposition of the constructive trust, remains to be determined. I find that John’s position on both cause of action estoppel and issue estoppel does not account for the lack of a determination to date (i.e., in

Part 1) of the following issues: • If John is entitled to a vesting order for some or all of the Disputed Shares, on what date is the order effective? • Is the Estate entitled to an oppression remedy based on John’s oppressive conduct, if found, prior to the date on which the vesting order is effective? • If so, does the oppression remedy to which the Estate may be entitled include revision of the terms of the constructive trust? • If John is entitled to a vesting order for only some of the Disputed Shares, how is ownership of the balance of the Disputed Shares to be addressed, including regardless of whether the Estate is entitled to an oppression remedy? [ 171 ] In

summary, John’s position on res judicata fails to account for the Estate’s, as yet undetermined, oppression remedy claim and the distinction between that claim and the share ownership claim. [ 172 ] There may be some overlap between the evidence relevant to the share ownership issue determined in

Part 1 and the issues to be determined in

Part 2. That potential overlap does not, in and of itself, disentitle the Estate to leave to amend the original pleading to better address the material facts upon which it relies in regard to the oppression remedy claim and to better particularize the oppression remedies it seeks. [ 173 ] Allowing for that overlap, I agree with John that, to the extent any of the allegations in the proposed pleading equate to revisiting findings made or conclusions reached in the First Trial Decision , leave to include those allegations in the amended pleading must be refused.

I will deal with each of the proposed paragraphs for which John requests leave to amend be refused. ▪ Paragraph 1(a) [ 174 ] In para. 1(

a) of the original pleading, Mrs. McMurtry requested a “Declaration that the Plaintiff, Mildred McMurtry is the lawful owner of the [Disputed Shares].” The Estate requests leave to include in the amended pleading a request for the following relief: “A Declaration that the Estate of Mildred McMurtry (the “Estate”) is the lawful and beneficial owner of ten (10) shares in the capital stock of [MMR]”. [ 175 ] As noted in para. 7 of the Appeal Decision , “the only aspect of claims made on behalf of [Mrs. McMurtry] to be decided [in

Part 1] was the request for declaratory relief with respect to ownership of the Disputed Shares”: see also First Trial Decision , at para. 6. With that aspect of the claim having been determined, the Estate is not now entitled to amend para. 1(

a) and revisit the declaratory relief requested. [ 176 ] The three criteria for a finding of res judicata on the basis of issue estoppel are met. First, the question as to whether Mrs. McMurtry was entitled to declaratory relief related to the ownership of the Disputed Shares has been decided. Second, the decision in that regard is final, including because it was upheld on appeal. Third, the parties involved remain the same, including with the transmission of interest from Mrs. McMurtry to her estate. [ 177 ] Leave to include proposed para. 1(

a) in the amended pleading is refused. Leave is, however, granted to amend the original para. 1(

a) to change “the Plaintiff, Mildred McMurtry” to “the Estate of Mildred McMurtry (“the Estate”)”. Leave in that regard is granted to reflect the transmission of interest which occurred on Mrs. McMurtry’s death in 2021. ▪ Paragraph 1(c) [ 178 ] Paragraph 1(

c) of the proposed pleading is entirely new. In that paragraph, the Estate sets out its request for a “Declaration that John McMurtry no longer has any legal, beneficial, or equitable right to the [Disputed] Shares and the [Disputed] Shares are no longer held in a constructive trust”. [ 179 ] John’s position is that the issue of the existence of the constructive trust was determined in

Part 1. I agree with John that, whether a constructive trust was imposed and, pending further order of the court, remains in effect was determined in

Part 1 and gives rise to res judicata on the basis of issue estoppel. [ 180 ] I disagree, however, with John’s position that the imposition and continued existence of the constructive trust – specifically in the circumstances of this action – gives rise to either cause of action estoppel or issue estoppel. In para. 7, above , I quoted paras. 28-29 of the First Trial Decision to identify some of the issues to be determined in

Part 2 of the trial. Those issues include “the end result of the imposition of the constructive trust.” That end result will be determined in the context of the oppression remedy claim. [ 181 ] The types of relief to which a plaintiff in an oppression remedy action may be entitled are non-exhaustively listed in s. 248(3) of the OBCA . The orders the court has the discretion to make under that

section include “an order directing an issue or exchange of securities” ( s. 248(3) (d)) and “an order compensating an aggrieved person” ( s. 248(3) (j)). [ 182 ] None of the remedies listed in s. 248(3) includes a form of declaratory relief. All the remedies listed therein are described as “an order” and include consequential relief (even in the form of an order requiring a trial of an issue (s. 248(3)(n)). The issue of whether declaratory relief may be granted as relief consequential to a finding of oppressive conduct is not before me on this motion. [ 183 ] The Estate is granted leave to include proposed para. 1(

c) in the amended pleading as an oppression remedy claimed and/or to address the end result of the imposition of the constructive trust.

▪ Paragraph 2 [ 184 ] In paragraph 2 of the original pleading, Mrs. McMurtry is described as a resident of the City of Ottawa, John’s mother, and Keith McMurtry’s widow. Nothing further is said in that paragraph about the relationship between Mrs. McMurtry and her late husband or about Keith McMurtry’s work to establish and build MMR as a business. [ 185 ] The Estate seeks leave to expand those allegations as part of the background to the oppression remedy claim. Paragraph 2 of the proposed pleading reads as follows: Mildred McMurtry was a resident of the City of Ottawa, in the Province of Ontario.

She was married to the late Keith McMurtry for 52 years. While Keith worked to build his multiple business, including the significant real estate interests in [MMR], Mildred was responsible for maintaining the household and raising their six children, including Deborah Murphy, Jim McMurtry, and the Defendant John McMurtry. Mildred also did significant work to assist Keith with his businesses including [MMR]. The Estate is the largest shareholder of [MMR]. [ 186 ] The underlining identifies the portions of proposed para. 2 which the parties agree represent amendments to the original paragraph.

Another element of the proposed amendments to para. 2 is the removal of an allegation that John is Mrs. McMurtry’s son. That allegation is now made in proposed para. 8; John consents to the inclusion of that paragraph in the amended pleading. [ 187 ] John’s position is that the issue of the parties’ respective contributions to MMR were determined in

Part 1. John relies on issue estoppel and submits that the proposed amendments to para. 2 amount to a collateral attack on the First Trial Decision . I reject that submission. [ 188 ] The extent of John’s and Brenda’s contribution to MMR was addressed in a general way in the First Trial Decision . The relevant findings were made when addressing the defences of laches and estoppel: at paras. 169-170 and 181. That general determination does not preclude the Estate from raising Mrs.

McMurtry’s and Keith McMurtry’s respective contributions to their family life and MMR during the trial of the oppression remedy claim. [ 189 ] Neither issue estoppel nor cause of action estoppel applies. The proposed amendments to para. 2 of the original pleading do not constitute a collateral attack on the First Trial Decision . [ 190 ] The Estate is granted leave to include proposed para. 2 in the amended pleading. ▪ Paragraph 4 [ 191 ] In para. 4 of the original pleading, Keith McMurtry is described as the founder of MMR in 1960 and as a successful businessman.

The Estate seeks leave to amend para. 4 to include allegations that Keith “devoted his life to building the significant real estate portfolio held by [MMR] and his other business.” The Estate seeks leave to conclude para. 4 with the following sentence: “Keith, not John, was responsible for the acquisition of all of [MMR’s] real estate assets.” [ 192 ] The proposed amendments to para. 4 address Keith’s work in building MMR’s real estate portfolio and are historical in nature.

The proposed amendments to para. 4 do not relate to oppression arising from John’s failure to grow the real estate portfolio amassed by MMR under Keith’s leadership. [ 193 ] Leave to include proposed para. 4 in the amended pleading is granted. ▪ Paragraph 7 (second sentence) [ 194 ] Paragraph 7 of the proposed pleading is entirely new. In it, the Estate alleges that John and Brenda, … have significantly mismanaged Mic Mac, including by failing to pay property tax arrears for many years with the result that more than three hundred thousand dollars in interest has unnecessarily accrued.

And they have done nothing to build Mic Mac’s business, never acquiring new assets for the company. Instead, their livelihood relies on misusing the assets of the business that Keith McMurtry built. [ 195 ] Leave to include the first sentence of proposed para. 7 in the amended pleading is refused because that sentence forms part of the property tax allegations. John’s position regarding the second sentence of proposed para. 7 is that the issue of John’s and Brenda’s contribution to MMR was determined in

Part 1. For the reasons given regarding proposed para. 2, I disagree. [ 196 ] Leave to include the second sentence of proposed para. 7 is also refused, however, for another reason. The alleged failure to build MMR’s business raises a new cause of action; it does not fall within the four corners of the misappropriation of funds alleged in the original pleading. [ 197 ] Leave to include the first and second sentences of proposed para. 7 in the amended pleading is refused. ▪ Paragraph 11 (final sentence) [ 198 ] Proposed para. 11 is an amended version of para. 5 from the original pleading.

In the latter paragraph, Mrs. McMurtry made allegations regarding her late husband’s will, her status as the residuary beneficiary of her late husband’s estate, and her late husband’s interest in MMR. [ 199 ] In proposed para. 11, Keith McMurtry’s will and Mrs. McMurtry’s status as the residuary beneficiary of her late husband’s estate are once again addressed. John consents to the inclusion in the amended pleading of the proposed versions of those allegations. John also consents to the inclusion in the amended pleading of the allegations in proposed para. 11 identifying each of John, Jim, and Mrs.

McMurtry as the executors of Keith McMurtry’s estate.

[ 200 ] John opposes the inclusion of the final sentence of proposed para. 11: “Jim and Mildred did not have a copy of the will and did not know they were executors.” John’s position is that Mrs. McMurtry’s knowledge of her late husband’s will was addressed in the First Trial Decision . [ 201 ] I agree with John that the First Trial Decision addresses both Mrs. McMurtry’s and Jim’s state of knowledge regarding Keith McMurtry’s will and their respective roles as an executor of Keith McMurtr

[…]