Litigation and the ‘fresh step’ rule, The Lawyer’s Daily (April 11, 2022)

(this article originally appeared in the Lawyer’s Daily on April 11, 2022)

By Nikolay Y. Chsherbinin

The “fresh step” rule is based on the theory that if a party pleads over to a pleading, this implies a waiver of any irregularity that might otherwise have been attacked. For example, if a party, after obtaining knowledge of the irregularity, nonetheless delivers a statement of defence, it may disentitle it from bringing a Rule 21 motion under Ontario’s Rules of Civil Procedure to strike all or portions of a plaintiff’s statement of claim.

The fresh step rule has been part of the rules of practice and procedure in Canada for many years. In Ontario, it is codified in Rule 2.02 of the Rules, where it provides that a motion to attack a document for “irregularity shall not be made, except with leave of the court.” Conceptually, the legal effect of Rule 2.02, which uses the verb “shall,” is presumptively imperative in the sense that it creates a prohibition to attack a pleading except with leave. Leave is a condition precedent for the attack. In practice though, courts do not always regard “shall” as imperative and, more often than not, find a way to cure a party’s failure to comply with Rule 2.02.

A case in point is the Court of Appeal for Ontario’s decision in Potis Holdings Ltd. v. Law Society of Upper Canada, 2019 ONCA 618 (Potis). There, the appellants appealed the order of the motion judge striking out their statement of claim and amended statement of claim as against the Law Society for disclosing no reasonable cause of action.

After filing its statement of defence, the Law Society moved, pursuant to Rule 21.01(1)(b), to strike the appellants’ statement of claim as disclosing no reasonable cause of action. In response, relying on Rule 2.02, the appellants argued that a motion to strike a pleading is an attack on a document for irregularity, and because the Law Society had already taken a further step by delivering its defence, it was required to obtain leave before bringing its motion. The Court of Appeal disagreed, stating that: “[w]hile generally a defendant should move to strike a claim as disclosing no reasonable cause of action before filing a statement of defence, in some instances a defendant may bring such a motion without leave even after delivering a defence. One such instance is where it is obvious from the defendant’s pleading that the defendant takes issue with the sufficiency of the plaintiff’s claim.”

When used in its normal grammatical sense the verb “shall” indicates that the legislature intended for the prohibition in Rule 2.02 to be imperative. However, in Potis, the Court of Appeal appears to have regarded the statutory language of Rule 2.02 as being discretionary. In support of its conclusion, the court explained that the “Law Society’s statement of defence pleads the very deficiencies that were relied on in the motion to strike.” From a practical perspective, it follows that in order to overcome the leave requirement set out in Rule 2.02, it would be sufficient for a defendant to deliver a statement of defence alleging various deficiencies with causes of action that a plaintiff pleaded in a statement of claim and on that basis argue that no leave is required to bring a Rule 21 motion, provided that the motion is pursued in a timely manner and its scope is limited to the pleaded deficiencies.

Rule 21.01(1)(b) enables a defendant, before pleading over, to move to strike out a claim on the basis that it is plain and obvious that the plaintiff is not advancing a legally sufficient claim, even if all the facts one pleads can be proved at trial. In Brozmanova v. Tarshis, 2018 ONCA 523, the Court of Appeal explained that “the appropriate time for a defendant to move under the rule usually is before filing its statement of defence. That is because by filing a statement of defence, a defendant usually signals that the plaintiff has advanced a legally sufficient claim which the defendant intends to resist on the grounds set out in the statement of defence.”

In Bell v. Booth Centennial Healthcare Line Services, [2006] O.J. No. 4646, Justice David Brown stressed that the practice of delivering a statement of defence and then bringing a Rule 21 motion should be discouraged. He adroitly opined: “… the filing of a statement of defence signifies that the claim contains recognizable causes of action to which the defendant can respond and should prevent a defendant from complaining subsequently about an irregularity in the statement of claim. The defendants’ technique in this case of including in its Statement of Defence … assertions that portions of Mr. Bell’s Statement of Claim failed to plead reasonable causes of action is a practice that should be discouraged. Once pleadings closed … the parties should have been ready to proceed to the discovery phase of the proceeding; instead, they remain mired in a pleadings motion. Such an approach to managing a case does nothing to promote the overall policy objectives of the Rules of Civil Procedure ‘to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits’: Rule 1.04(1).”

The question of whether delivery of a statement of defence constitutes a fresh step in a proceeding is not as straightforward as it may seem. For example, in Lynch v. Westario Power Inc., 2009 O.J. No. 2927, Justice P.A. Daley concluded that the delivery of the statement of defence does constitute a fresh step in a proceeding, stating: “while the delivery of the statement of defence does constitute a ‘further step in the proceeding’ as contemplated by Rule 2.02, by its pleading, the defendant has clearly put in dispute the merits of the plaintiff’s claims.”

By contrast, in Abbasbayli v. Fiera Foods Company et al., 2022 ONSC 1968, Justice Jasmine Akbarali concluded that the delivery of the statement of defence in that case was not a fresh step, stating: “a defence that does nothing but challenge the validity of a claim is not a fresh step in a proceeding that prevents a defendant from challenging the statement of claim without leave.”

Despite differences in judges’ opinions, the review of jurisprudence suggests that in order to overcome the leave requirement in Rule 2.02, a statement of defence must expressly include a plea that the statement of claim discloses no cause of action. However, in my view, given the imperative statutory language of Rule 2.02, it is both obligatory and prudent to seek leave to file a Rule 21 motion once the defence is delivered, however pro forma it might be. In such instances a request for leave should be included within a Rule 21 notice of motion. Without a request for leave, a judge would, at least in theory, be deprived of the means to grant leave, if one is mandated by the Rules. If leave is granted without being sought, it could lead to an appeal, as occurred in Potis.

But as an old adage goes: “where there’s a will, there’s a way.” In Potis, the Court of Appeal found that the motion judge did not err when he “proceeded to hear the Law Society’s motion in the face of the appellant’s argument that the Law Society should have obtained leave. It was clear that the motion judge would have granted (or indeed effectively granted) leave. The motion judge’s determination to proceed was consistent with Rule. 1.04 of the Rules of Civil Procedure that the rules ‘be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.’” Take a note of the courts’ contrasting use of Rule 1.04 in Bell and Potis.

In determining whether leave should be granted to proceed with a Rule 21 motion, Rule 2.02(a) requires the court to consider the timeliness of the motion, which should be made promptly. In addition, the court would consider whether the moving party has impliedly or expressly forgiven the defect or irregularity by taking a further step in the proceeding. From a practical perspective, unless genuinely warranted, counsel should avoid the temptation to resist a request for leave, because it adds another layer of procedural arguments, increases costs and delays the determination of a case on its merits.

Counsel for defendants should also simply avoid filing a defence if their intention is to move to strike. Even if the defendants are forced to deliver the statement of defence under the pain of being noted in default, they should still not do it and instead bring a motion for an extension of time to file the defence and use their impending Rule 21 motion as a ground. In those circumstances the noting in default will backfire.