Background
Maria Natario was catastrophically injured when she fell through a floorboard in a home owned by Kevin David Sherkin and others. She obtained a judgment against the homeowners and then applied under section 132(1) of the Insurance Act to claim indemnity from their insurers, RBC Insurance Company of Canada and Aviva Insurance Company of Canada.
In defending the indemnity claim, the insurers alleged that the homeowners had misrepresented how the accident occurred—claiming Natario fell down the stairs rather than through the floorboard. On the eve of trial, the insurers moved to amend their defence to explicitly characterize this misrepresentation as civil fraud. The motion judge dismissed the amendment motion, finding it irrelevant and that allowing it would cause non-compensable prejudice to Natario.
The Court’s Holding
The Court of Appeal unanimously dismissed the insurers’ appeal. The court held that the defence as already pleaded—containing the allegation that the homeowners lied about the accident—was sufficient for the insurers to adequately defend against the indemnity claim and to resist Natario’s request for relief from forfeiture. Expressly characterizing the conduct as civil fraud was therefore irrelevant to the outcome.
The court found no reversible error in the motion judge’s discretionary decision to deny the amendment based on non-compensable prejudice to the plaintiff. Allowing an amendment on the eve of trial that recharacterizes the opposing party’s conduct would constitute an injustice given the case’s history and procedural posture. The court declined to resolve the broader question of whether civil fraud is available as a defence to a section 132(1) application, as it was unnecessary in light of the prejudice analysis.
Natario was awarded costs of $15,000 from the appellants.
Key Takeaways
- Amendments to pleadings are denied when they would cause non-compensable prejudice to the opposing party, particularly when sought on the eve of trial, even if the substantive facts are already pleaded.
- The legal characterization of conduct (e.g., as “civil fraud”) need not be expressed in pleadings if the underlying facts support the defence as currently stated.
- Courts balance the right to amend against procedural fairness and the injustice that late amendments can cause to parties who have prepared their case on existing pleadings.
Why It Matters
This decision reinforces the principle that Rule 26.01’s permission to amend pleadings is not absolute. Even when an amendment might be technically permissible or relevant, courts will deny it if the timing and prejudice weigh against the amending party. For insurance disputes under section 132(1) of the Insurance Act, this means insurers cannot rely on late amendments to add inflammatory characterizations of the insured’s conduct once trial preparation is complete.
The decision also clarifies that substance prevails over form in pleading. When facts supporting a legal theory are already alleged, disputes over terminology or classification should not require amendment or derail proceedings. This promotes finality and protects parties from tactical last-minute reframings of claims and defences.