In 539091 Ontario Ltd. v. Allianz Insurance, Madam Justice Helen Pierce was dealing with various proposed amendments to the statement of claim in a fire insurance case. The motion raised several interesting issues but of particular note was the request of the plaintiff limited company to be able to claim damages for mental distress on behalf of its two shareholders (apparently without naming the individuals themselves as plaintiffs). Pierce J. granted leave to the plaintiff to amend the claim, to seek damages for mental distress on behalf of the two shareholders in question, but in their capacity as officers of the corporation.
Another part of the motion dealt with the withdrawal of an admission. The reasons of Pierce J. provide a useful discussion of the law on this subject.
Background
The plaintiff was a numbered company owned by Lenard and Margaret Ager. It operated an R.V. sales business whose premises were damaged by fire in August, 2001. In April, 2002, the corporation sued its insurer, Allianz, for payment on a policy of insurance. No proof of loss was delivered until August, 2002, after Allianz had entered a statement of defence. (Arguably, under the statutory conditions of Part IV of the Insurance Act, there was no cause of action when the action was commenced because under statutory condition 12, the loss only became payable “within sixty days after completion of the proof of loss”. Since no proof of loss had been filed, the insurer could not have been in breach of the policy.)
When it was delivered, the proof of loss indicated that the plaintiff intended to pursue a claim for business interruption, although no such claim had been pleaded. In correspondence, the plaintiff’s solicitor expressed an intention to amend the pleading, to advance such a claim. The solicitor said that it was through oversight that he had not done so.
The issue nevertheless received quite a bit of attention in the course of the examinations for discovery and ensuing answers to undertakings. In 2005, counsel for the plaintiff wrote to the defendant’s solicitor and said, “I can confirm that there will be no claim for business interruption loss.”
In April, 2005, the plaintiff filed its trial record. Pretrial conferences were held in 2005 and again in 2006. In November, 2005, to the surprise of counsel for the defence, the plaintiff’s solicitor advised that the business interruption claim was still being pursued.
At this motion, the plaintiff sought amendments to its claim, to advance the claim for business interruption and to claim damages for mental distress on behalf of its two shareholders.
Withdrawal of an admission
Allianz opposed the addition of the business interruption claim on several bases, but primarily because the insurer said that the amendment amounted to the withdrawal of an admission. Although Rule 26.01 mandates the making of amendments to pleadings “at any stage of an action”, Rule 51.05 imposes more rigorous requirements where the proposed amendment would have the effect of withdrawing an admission.
Counsel for the plaintiff argued that the statement, that no business interruption claim would be made, was not an admission as it had not been made by the principals of the plaintiff company.
Justice Pierce’s reasons say, “I do agree with the rationale for this submission”. However, the context of this language suggests that she actually intended to say, “I do not agree with the rationale for this submission.” She noted that the corporation had to be represented by counsel and that even if that counsel were dismissed, any admission made by him would remain in effect.
Her Honour then reviewed the authorities in order to determine whether the statement in this case constituted an admission. She noted the distinction drawn by the Court of Appeal in Marchand v. Public General Hospital Society of Chatham, between a “formal” admission (to which Rule 51.05 applies) and an “informal” admission. The latter is not governed by Rule 51.05. Answers given at a party’s examination for discovery have been held to be informal admissions and Pierce J. reasoned that the statement of the plaintiff’s solicitor in this case, having been the subject of a discovery undertaking, was the equivalent of an answer given on discovery. Hence, it was an informal admission, not binding on the plaintiff if overcome by other evidence. Despite a paucity of evidence, Her Honour was satisfied that this was the case here.
She also rejected the insurer’s submission, that by virtue of s. 111 of the Insurance Act, a business interruption claim should properly be dealt with by an appraiser rather than a judge. Her Honour acknowledged that issues of quantum had to be addressed through appraisal, but that whether a claim for business interruption could be made at all was within the court’s jurisdiction.
In the end, the plaintiff was given leave to amend its pleading to add a claim for business interruption. (No issue seems to have been taken with the fact that the plaintiff had set the case down for trial before this motion was brought. Under Rule 48.04, leave should have been sought before a motion could even be brought.)
Claim for mental distress
There is no indication in the reasons of Pierce J., that the plaintiff was asking for leave to add Lenard Ager or Margaret Ager as parties to the litigation. (Otherwise, the court probably would have referred to Rule 5 and to s. 21 of the Limitations Act, 2002.) Rather, it appears that the amendment sought was for the corporation to be able to claim damages for mental distress on behalf of the Agers. Presumably, there would have been problems with a limitation period if the Agers themselves were added as parties in 2007, in relation to a fire in 2001.
According to Justice Pierce, the material before her described the Agers as “shareholders” of the corporate plaintiff and the plaintiff’s solicitor did not distinguish between shareholders and officers. She also noted that there was “little evidence” that the Agers were directors of the corporation.
Allianz opposed this aspect of the plaintiff’s proposed amendment on the ground that the Agers personally were not named insureds under its policy.
Pierce J. reviewed the definition of “insured” in the Allianz policy and observed that it included “the Named Insured’s executive officers and directors” and also “the Named Insured’s stockholders”. Her Honour granted leave to the plaintiff to amend its statement of claim, “to seek damages for mental distress on behalf of Lenard Ager and Margaret Ager, as officers of the plaintiff corporation”.
If we have correctly understood the facts of the case from the reasons of Pierce J., we question whether it is possible for a corporate entity to claim damages for what is, in effect, a personal injury suffered by individuals. Obviously, a corporation cannot, itself, experience mental distress. We would have thought that only if the Agers themselves were named as plaintiffs could a claim for such damages be made.