Is It Prejudicial to Be Added to a Claim that Might be Doomed to Fail?
On March 18, 2025, Justice John Krawchenko of the Ontario Superior Court of Justice released his decision in Mazgaj v. Reyes, 2025 ONSC 1721.
This decision concerned a motion brought by the plaintiff, Tadeusz Mazgaj to amend their statement of claim to add two additional parties (Mrs. Melissa Corzo Reyes and Mr. Mark Ziegert) as named Defendants to the action. The existing defendant and the proposed new defendants opposed the motion.
Background:
The underlying claim involves a series of loans that were allegedly made by the Plaintiff to the originally named Defendant (Fabio Reyes) between 2006 and 2014.[1]
The statement of claim was issued in September 2018 as against Mr. Reyes only. At the time of the issuance of the claim, Mr. Reyes owned a residential property as a joint tenant with his spouse, Mrs. Reyes.
In October 2019, Mr. Reyes was examined for discovery. During the discovery, Mr. Reyes gave evidence that he lived at a residential property with his wife, children and grandmother in law. Mr. Reyes was asked whether both he and his wife were on the mortgage. While Mr. Reyes counsel attempted to interject, Mr. Reyes answered “No”. Counsel for Reyes then refused to any further questions about Mr. Reyes’ property.
In March 2020, Mr. Reyes made a Consumer Proposal, which resulted in a stay of the action. In the course of that Consumer Proposal, Mr. Reyes swore a statement of affairs in which there was no reference to real property and answered in the negative as to whether he had sold or disposed of any property in the five years prior to the initial bankruptcy event.
In February 2023, Mr. Reyes made an assignment in bankruptcy. In this instance, he swore a new statement of affairs, in which his answer to whether he had sold or disposed of property in the previous five years, changed into the affirmative.
The plaintiff submitted that it was only after the receipt of the second statement of affairs from 2023 that it undertook title searches to investigate the disposition of property by the named and proposed defendants.
The plaintiff then learned that between May 2018 and November 2022, Mr. Reyes, Mrs. Reyes and her step-father in law Mr. Ziegert engaged in a number of property transactions.
In November 2022, the defendant Mr. Reyes brought a summary judgment on the basis the claim was statute barred by the expiration of the limitation period. The defendant sought leave to amend his statement of defence, in the alternative. The Summary Judgement was dismissed and leave to amend the defence was granted.
At paragraph 20, of the Summary Judgment motion decision, the motion judge wrote:
“Quite apart from the merits of the case generally, it may very well be that the Plaintiff’s claim will be found to be statute barred, based on the evidence in general and on the content of the February 26, 2015 letters in particular. However, it is not possible for this court to proceed with confidence to draw that conclusion and proceed to summary judgment, given the conflicting evidence and the communication barriers that exist. This is a case where a genuine issue does exist requiring a trial for a fair and just determination on the merits”.[2]
Critically, the summary judgement motion judge made no determination on the limitations issue but that a trial was required.
Issues on the Motion:
- Should the plaintiff be allowed to amend his Statement of Claim pursuant to Rule 26.01?
- Should the Proposed Defendants be added as parties to the action pursuant to Rule 5.04(2)?
Reasoning:
Issue 1: Leave to Amend under Rule 26.01
Justice Krawchenko began his analysis by examining the text of Rule 26.01 which outlines when the court can grant leave to amend a pleading. The Rule states that 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 costs or an adjournment. In the present case, where pleadings are closed, leave of the court is required (Rule 26.02).[3]
The proposed defendants argued that the motion should be dismissed because they would suffer prejudice from being drawn into litigation which may ultimately be found to be statute-barred, and would therefore be required to expend funds to defend a doomed action.
However, the motion judge promptly dismissed this argument finding that if such a circumstance were to amount to “prejudice,” it would be prejudice “faced by all defendants involved in litigation”.[4] He further found that the Rules address the issue of being forced to defend an unsuccessful claim with potential costs consequences if a plaintiff is not successful in their action.
The proposed defendants also advanced a more creative argument that the expiry of a limitation period in respect of a proposed new claim is a form of non-compensable prejudice, and so leave to amend to assert the new claim should be refused. In support of this position, they cited the Ontario Court of Appeal’s decision in Polla v. Croatian (Toronto) Credit Union Limited, 2020 ONCA 818.[5]
In Polla, the plaintiff sought to further amend his amended statement of claim after three weeks of trial, alleging misrepresentation that was not previously pleaded. The trial judge refused leave to the plaintiff to amend his pleading, on the basis that the proposed amendment asserted a new claim for statutory misrepresentation that was statute-barred, and that, in any event, the respondents would be irreparably prejudiced if the amendment were permitted.
The trial judge found that granting the amendment so late into trial would cause irreparable prejudice, because by that point in the trial the new allegations could not be raised with the plaintiff during his trial evidence as well as several other material witnesses in the proceedings. The trial judge’s decision to deny leave to amend the pleadings mid-trial was upheld by the Court of Appeal.[6]
In the present decision, the motion judge distinguished Polla on the basis that the motion in Polla was a motion to amend, not a motion for summary judgment or a motion at trial, and that he could not make a determination on the limitation period or discoverability on the motion record before him.[7]
Instead, Krawchenko J, cited with approval the principle from Atlantic Steel Industries Inc. v. Cigna Insurance Co. of Canada, 1997 CanLII 12125 (ON SC) , that amendments should generally be granted unless it is abundantly clear that upon giving the Claim a generous reading, the amendments seek to advance an action that is not capable of succeeding.[8]
His Honour concluded that the amendments to the pleadings, including allegations relating to the nature of the conveyances as between the family members of the Reyes family, were appropriate at this stage, and leave to amend ought to be granted.
Issue 2:
Justice Krawchenko also found that the addition of the proposed defendants satisfied the requirements of Rule 5.04(2) which provides that a court may at its own discretion add a party on such terms that are just, unless prejudice would result that could not be compensated by costs or an adjournment.
His Honour noted the four-part test set out in Rebello v. Ontario, 2022 ONSC 4094, for whether the Court ought to exercise its discretion to add parties:
a) The proposed amendment must meet all of the tests under Rule 26.01.
b) Joinder should be appropriate under Rule 5.02(2) or required under Rule 5.03. The addition of the parties should arise out of the same transaction or occurrence (Rule 5.02(2)(a)), should have a question of law or fact in common (Rule 5.02(2)(b)), or the addition of the party should promote the convenient administration of justice (Rule 5.02(2)(e)). Adding a party will be particularly appropriate if it is unclear which of the original defendant or the proposed defendant may be liable (Rules 5.02(2)(c) or (d)), or if it is necessary that the proposed defendant be bound by the outcome of the proceeding or his or her participation is otherwise necessary to allow the court to adjudicate effectively (Rule 5.03(1)).
c) Joinder should not be inappropriate under Rule 5.03(6) or 5.05. The addition of a party should not unduly delay or complicate a hearing or cause undue prejudice to the other party. In a case-managed proceeding, it may also be appropriate to withhold consent if it will cause significant disruption to the court-ordered schedule.
d) Addition of a party will not be permitted if it is shown to be an abuse of process. Abuse of process will exist where the addition of a party is for an improper purpose such as solely to obtain discovery from them, to put unfair pressure on the other side to settle, to harass the other party or for purely tactical reasons.[9]
Justice Krawchenko was satisfied that the four-part test was satisfied in the present matter. He had already established that the requirements of Rule 26.01 had been met earlier his decision, and given that the claims alleged in the new amendments related to the same series of transactions, it appeared that joining the added parties would promote the convenient administration of justice.[10]
Disposition:
In summary, His Honour granted the plaintiff’s motion to amend the statement of claim to add the new proposed defendants.
Conclusion and Takeaways:
This decision provided further clarity and guidance on the court’s generous approach to amending pleadings to add additional parties, where doing so will promote the convenient administration of justice.
The Court affirmed that simply being named in a legal action that may be ultimately doomed to fail due to a limitation period issue, by itself, does not amount to “prejudice,” especially when potential defendants have available remedies in the Rules relating to costs.
This decision also left open the possibility that the expiry of a limitation period in respect of a new claim may be a form of non-compensable prejudice. However, in order to determine this, the Court must be able to make a determination on issues of applicable limitation periods and discoverability on a sufficient evidentiary record found more typically in a summary judgment motion or at trial.
[1] Mazgaj v. Reyes, 2025 ONSC 1721, at para 4.
[2] Ibid, at para 11.
[3] Ibid, at para 14.
[4] Ibid, at para 15.
[5] Polla v. Croatian (Toronto) Credit Union Limited, 2020 ONCA 818 and Polla v. Croatian (Toronto) Credit Union, 2019 ONSC 1641
[6] Polla v. Croatian (Toronto) Credit Union, 2019 ONSC 1641 at paras 156-163.
[7] Mazgaj, at para 16.
[8] Ibid, at para 17.
[9] Rebello v. Ontario 2022, ONSC 4094, at para 16.
[10] Mazgaj, at paras 19-20.