



COURT OF APPEAL FOR ONTARIO

CITATION: Polla v. Croatian (Toronto) Credit
    Union Limited, 2020 ONCA 818

DATE: 20201218

DOCKET: C66800

van Rensburg, Pardu and Thorburn
    JJ.A.

BETWEEN

Ferdinando Polla

Plaintiff (Appellant)

and

Croatian (Toronto)
    Credit Union Limited,

Zvonimir

Josipovic
,
Stephen P. Kovacevic
,
Stanko Bingula
,
Anton

Jurincic
,
Mato Menalo
,
Ante Mimica
,
Ignac Radencic
,
Joe

Sertic
,
Josip Vinski, Deposit Insurance Corporation
    of

Ontario,
Retford
    & Bates LLP
and Financial Services

Commission of Ontario

Defendants (
Respondents
)

Benjamin Salsberg, for the appellant

Frank E.P.
    Bowman, Douglas B.B. Stewart and Deepshikha Dutt, for the respondents Zvonimir
    Josipovic, Stephen P. Kovacevic, Stanko Bingula, Anton Jurincic, Mato Menalo,
    Ante Mimica, Ignac Radencic and Joe Sertic

Sandra E. Dawe and Jonathan Miller, for
    the respondent Retford Lane Bates LLP

Heard: July 15, 2020 by
    videoconference

On appeal from the judgment of Justice Jane
    Ferguson of the Superior Court of Justice, dated March 13, 2019, with reasons
    reported at 2018 ONSC 1641.

van Rensburg J.A.:

A.

Introduction

[1]

This is an appeal from a judgment dismissing the appellants action. The
    appellant sued various parties to recover his lost investment of $5 million in the
    Croatian (Toronto) Credit Union Limited (the CCU). He had discontinued or
    dismissed his claims against the two regulators of the CCU, the Deposit
    Insurance Corporation of Ontario (DICO) and the Financial Services Commission
    of Ontario (FSCO), and he had obtained default judgment against Josip Vinski,
    the CCUs former chief executive officer, who was bankrupt. The action proceeded
    to trial against the respondents, who were the members of the CCUs board of
    directors (the Board) and CCUs external auditors, Retford Lane Bates LLP
    (RLB), in respect of claims for misrepresentation in an offering statement,
    under the
Credit Unions and Caisses Populaires Act
,
1994
,
    S.O. 1994, c. 11 (the Act), and common law negligence.

[2]

After three weeks of trial, the appellant proposed to amend his Amended
    Statement of Claim to allege a misrepresentation in the offering statement that
    was not previously pleaded: essentially, that the offering statements
    description of the CCUs lending services as based on a propertys appraised
    value was a materially untrue statement because the CCU often based
    residential mortgage loan approvals on the value provided in the propertys
    purchase and sale agreement, instead of obtaining an independent appraisal
    opinion. The appellant argued that it was not until midway through the trial that
    he discovered that some mortgage loans were being made by the CCU based on the
    price in purchase and sale agreements, and without appraisals. The parties
    agreed to continue with the trial and to argue the motion at its conclusion as
    part of their closing submissions. By the end of the trial, it was evident that
    the appellants original allegations of common law and statutory misrepresentation
    and negligence against the Board and RLB were not going to succeed, and the
    appellants closing submissions made it clear that he was only pursuing the statutory
    misrepresentation claim set out in his proposed amended pleading.
[1]

[3]

The trial judge refused leave to the appellant to amend his pleading, on
    the basis that the 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. She
    went on to decide the issues that would have required determination had leave
    to amend been granted, finding against the appellant on all issues in respect
    of both liability and damages. The trial judge concluded that the impugned passage
    in the offering statement was neither a misrepresentation, nor was it material.
    Even if there had been a material misrepresentation, the respondents were
    entitled to the statutory defence under s. 82(5) of the Act (they did not
    believe and had no reasonable grounds to believe that there had been a
    misrepresentation). Finding that the appellant would have known about the
    alleged misrepresentation at the time of his investment, the trial judge
    concluded that his deemed reliance was rebutted under s. 82(2) of the Act. She
    also determined that the loss of the appellants investment, which was the
    basis for his claim for damages, was not caused by the alleged
    misrepresentation, and that there was contributory negligence.

[4]

The appellant raises a number of arguments on appeal, addressing the trial
    judges refusal to grant leave to amend, as well as her treatment of the
    various issues respecting liability and damages based on the misrepresentation
    claim set out in the proposed amendment.

[5]

For the reasons that follow, I would dismiss the appeal. I see no error
    in the trial judges refusal to permit the appellant to amend the Amended Statement
    of Claim because the limitation period for his new statutory misrepresentation
    claim had expired. As the amendment was properly refused, it is unnecessary to
    address the appellants other grounds of appeal.

B.

Facts

[6]

The trial judges reasons for judgment set out a comprehensive account
    of the litigation, the appellants claims, the respondents defences, and the
    evidence at the trial. The facts relevant to this appeal can be briefly stated.

[7]

The CCU was a financially troubled credit union. As a result of a
    cheque-kiting scheme (referred to by the parties and in the court below as the
    Perfex fraud), and the subsequent withdrawal of a significant number of member
    deposits, the CCU fell below its liquidity and capital requirements as
    prescribed under the Act, and increased its overdraft with Credit Union Central
    of Ontario (CUCO) to over $18 million. In order to continue operations, the
    CCU needed to address the overdraft and to borrow additional funds from CUCO. Working
    with the regulators and CUCO, CCU prepared a recovery plan. As part of the
    recovery plan, the CCU issued an offering statement dated May 23, 2008 with the
    primary purpose of raising at least $3.5 million so that it could overcome the
    deficiencies created by the Perfex fraud and re-establish lending activity.

[8]

The appellant, a retired lawyer, was looking to get back into the
    mortgage business. The trial judge described the investment as a dream come
    true for the appellant, who wanted to arrange mortgage financing for his
    clients and earn referral fees. In June 2008, the appellant, through a family
    company, purchased 50,000 preferred shares of the CCU for $5 million.

[9]

By July 23, 2008, and after receiving monies from various subscribers, the
    CCU had met its required liquidity and capital ratios and was approved to
    resume lending. In August 2008, the appellant obtained a mortgage loan for $2.7
    million from the CCU. This was in addition to a $100,000 loan he had received,
    arranged by Mr. Vinski, before the CCU was approved to resume lending. Arnold
    Milan, who was a long-time member of the CCU and business partner of the
    appellant, and Mr. Milans wife also borrowed $2.6 million in August 2008.

[10]

These
    loans, which were discovered by the Board in November 2008, caused the CCU to
    again fall below its liquidity requirements. The regulators responded with an
    investigation, resulting in the CCU being placed into administration and DICO
    taking over its operations in July 2009.

[11]

Months
    after the CCU was placed into administration, and after Mr. Vinski had been
    suspended from his employment with the CCU, a fraudulent scheme referred to as
    the Oklahoma Mortgage Fraud (the OMF), was discovered. This was a complex
    fraud involving Mr. Vinski and various external parties, in which vacant
    properties were flipped from one fraudster to another at significantly
    inflated values. Mr. Vinski was convicted of fraud and sentenced to prison, but
    no one else at the CCU was suspected or charged for participation in the OMF.

[12]

The
    assets of the CCU were eventually liquidated, and the appellant lost his investment.

The Action

[13]

The
    appellant commenced an action in 2010, pleading common law negligence against
    the respondents. In March 2012, the statement of claim was amended (the
    Amended Statement of Claim) to plead that the appellants action against the respondents
    was also brought under s. 82 and related sections of the Act.

[14]

The
    Act requires, among other things, that an offering statement provide full,
    true and plain disclosure of all material facts relating to the securities that
    the credit union proposes to issue: s. 77(3). Section 82 provides for a
    statutory cause of action for misrepresentation in an offering statement as
    follows:

82 (1) If an offering statement  contains
    a misrepresentation, a purchaser of a security shall be deemed to have relied
    upon the misrepresentation if it was a misrepresentation when the purchase was
    made.

(2) Subsection (1) does not apply if
    the purchaser knew about the misrepresentation when purchasing the security.

(3) The purchaser has a right of
    action for damages against,

(a) the credit union;

(b) every person, other than an
    employee of a credit union, who sells the security on behalf of the credit
    union;

(c) every director of the credit
    union at the time the offering statement  was filed with the Superintendent
[2]
;

(d) every person whose consent
    has been filed pursuant to a requirement of the regulations but only with
    respect to reports, opinions or statements that have been made by them; and

(e) every person who signed the
    offering statement  other than the persons included in clauses (a) to (d).



(5) A person who signed the
    disclosure certificate  or a director is not liable under this section if [the
    person] proves one of the following:



3. The person had no reasonable
    grounds to believe, and did not believe, that there had been a
    misrepresentation.

(6) In this section,

misrepresentation means,

(a) an untrue statement of
    material fact, or

(b) an omission to state a
    material fact that is required to be stated or that is necessary to make a statement
    not misleading in light of the circumstances in which it was made.

[15]

The
    Amended Statement of Claim, at para. 12, asserts the following claims against
    the Board members:

12. The Plaintiff pleads that the Defendants,
    Zvonimir Josipovic, Stephen P. Kovacevic, Stanko Bingula, Anton Jurincic, Mato
    Menalo, Ante Mimica, lgnac Radencic and Joe Sertic negligently induced the
    Plaintiff to purchase shares in [CCU] in the following manner:

(a) They permitted an Offering Statement to go
    out to the public when they knew or ought to have known that it was misleading;
    in particular, they knew that the true financial difficulty of the Credit Union
    was not simply a consequence of a members account deficiency, but rather the
    result of a fraud or frauds perpetrated upon the Credit Union by its own
    officers in conspiracy with third parties;

(b) They permitted Josip Vinski to remain in a
    position of authority, speaking for [CCU] until April 30, 2009 when they were
    or ought to have been aware that he was unfit for the position and had already
    acted fraudulently in the "Oklahoma" mortgages described below and
    the Perfex matters. They knew or ought to have known that he was likely to
    mislead members of the public in the future, including those in the position of
    the Plaintiff herein;

(c) They permitted the mass redemption of term
    deposits in excess of $100,000.00 by the Credit Union in favour of their
    friends and acquaintances.

[16]

Paragraph
    15 of the Amended Statement of Claim asserts the following claims against RLB:

15. The Plaintiff pleads that the Defendant, [RLB]
    negligently induced the Plaintiff to invest in shares in [CCU] in the following
    manner:

(a) [RLB] failed to abide by the terms of its
    own engagement letter with [CCU] in failing to recognize the fraud perpetrated
    upon the Credit Union by the "Oklahoma" mortgage fraudsters as
    described in Superior Court action #CV-09-8471-00CL;

(b) [RLB] failed to recognize and indicate
    that loans in excess of [CCUs] permissible limit of $300,000.00 had frequently
    been made;

(c) [RLB] negligently failed to recognize the
    absence of appraisals in the "Oklahoma" loan files of the Credit Union
    as described in Superior Court action #CV-09 8471-00CL;

(d) [RLB] prepared and delivered financial statements
    which they knew or ought to have known did not fairly represent, in all material
    respects, the financial position of the Credit Union.

[17]

Although
    the Amended Statement of Claim pleads that the claim for damages is at common
    law and pursuant to the provisions of the [Act], the only claim against the
    respondents in respect of a misrepresentation in an offering statement is as
    stated in para. 12(a)  that the offering statement was misleading 
in
    particular, [the Board] knew that the true financial difficulty of the Credit
    Union was not simply a consequence of a members account deficiency, but
    rather the result of a fraud or frauds perpetrated upon the Credit Union by its
    own officers in conspiracy with third parties
 (emphasis added).

[18]

At
    the appellants examination for discovery in December 2011, an undertaking was
    given to set out the misleading and/or misleading by omission statements in
    the [offering statement]. The undertaking answers provided in March 2012 did
    not mention, expressly or by implication, any misstatement or omission relating
    to appraisals.
[3]

The Motion to Amend

[19]

Approximately
    three weeks into the trial, the appellant sought to further amend the Amended Statement
    of Claim. He proposed to add the following paragraph:

11 A. The aforementioned Offering Statement provided,
inter alia
, at page 17, as follows:

Lending Services

CCU [Croatian (Toronto) Credit Union Limited] is
    licensed by the FSCO as a Class 2 Credit Union under the Act. As part of its
    license, CCU is subject to certain limits on its lending. The Board has
    approved, and management follows, lending policies in all areas to minimize the
    risk of loan losses. These lending policies are in compliance with the Act and
    are applied by the Corporations Credit Committee. For Residential Mortgages,
    the Corporation will lend up to 95% of the appraised value of the property
    where an insurance company insures the mortgage. Otherwise, the loan will be
    limited to a maximum of 75% of the appraised value. The Corporation also has a
    recommended debt service level of 40% of the borrowers available income.

[20]

The
    appellant also proposed to amend para. 12(a) of the Amended Statement of Claim to
    add to the pleading against the Board that they knew that the Credit Union had
    made, and was continuing to make, mortgage loans without appraisals, and to
    add a pleading against RLB, as para. 15(e):

(e) [RLB] consented to the attachment of the
    Audited Financial Statement of the [CCU] for the years 2015, 2016 and 2017 when
    they knew that the contents of the Offering Statement at page 17 thereof
    respecting appraised values were untrue and that the said financial
    statements were prepared on the basis that appraisals were not always required
    and taken by the credit union in respect of mortgage loans made and advanced by
    it. The Plaintiff pleads that such conduct is contrary to the provisions of s.
    82 of the [Act] and the standard of care applicable to professional accountants
    in like circumstances.

[21]

Essentially
    the representation that the appellant proposed to assert in his proposed amendment
    was that the CCU was making loans on the security of residential properties
    only in accordance with the terms of its credit policies, that is, where there
    had been an appraisal, and that this was a misrepresentation because the CCUs practice
    was to proceed without appraisals in some circumstances. The appellants theory
    was that if the CCU had required appraisals to lend on residential properties,
    as represented in the offering statement, rather than using agreements of
    purchase and sale, the OMF would have been detected and the CCU would not have
    failed.

[22]

The
    motion to amend was supported by the affidavit of one of the appellants lawyers
    (not his counsel on appeal). The lawyer deposed that it was determined only
    during the trial that the CCU was routinely and extensively lending on the
    security of residential mortgages without first obtaining appraisals of the
    subject properties, and that this was contrary to the representation concerning
    lending services as expressed at p. 17 of the offering statement. The lawyer
    deposed that the motion to amend was brought out of an abundance of caution,
    and that the proposed amendment consisted of facts that were known to the
    Board, that were never previously disclosed to the appellant and that already
    formed part of the existing factual matrix as pleaded in the Amended Statement
    of Claim. The lawyer confirmed under cross-examination out of court that in 2012,
    during the course of the proceedings, he and the appellant had received a copy
    of the CCUs Board-approved 2002 credit policy, which disclosed that when
    making loans, purchase and sale agreements could substitute for an appraisal.

[23]

On
    the suggestion and with the agreement of all counsel, the trial judge directed
    that the motion to amend would not be determined at the time it was brought,
    but that it would be argued by counsel as part of their closing submissions. Counsel
    for all parties confirm that this procedure was adopted in order to minimize
    further disruption to the trial schedule, and that the trial continued under
    the assumption that the amendment had been allowed for evidentiary purposes and
    the understanding that the motion was opposed.

[24]

The
    trial judge noted that, by the end of the trial, the appellant was advancing
    only claims for statutory misrepresentation in relation to the
    misrepresentation that he sought to add in his motion to amend, and that he had
    abandoned his other claims in the action.
[4]

The Trial Judges Reasons for Refusing the
    Amendment

[25]

The
    trial judge noted that the appellant proposed to amend the Amended Statement of
    Claim to allege a new misrepresentation  essentially, that the offering
    statement represented that the CCU always based its mortgages on the opinion of
    a professional appraiser, even though the Board knew that the CCU frequently
    approved mortgages based on an agreement of purchase and sale.

[26]

The
    respondents opposed the amendment on the basis that this was a new and separate
    misrepresentation claim that was discoverable since 2012 when the appellant
    received a copy of the CCUs 2002 credit policy, and that the two-year
    limitation period for asserting a claim in respect of this misrepresentation
    had accordingly expired. The respondents also opposed the amendment on the
    basis that it would cause them prejudice which could not be compensated for by
    costs.

[27]

The
    trial judge agreed with the respondents that the proposed amendment sought to
    advance a new and separate misrepresentation claim. Referring to para. 12(a)
    of the Amended Statement of Claim, she observed that the appellant was pleading
    that the defendants were at fault for their failure to disclose a fraud or
    frauds from which the CCU was suffering. Although the factual matrix as
    pleaded set out the broad context in which this misrepresentation occurred, the
    act complained of was fundamentally different. While the existing pleading
    pleaded a misrepresentation in the offering statement, the proposed amendment
    was based on a different act of the defendants, a separate alleged failure to
    disclose: at para. 158. The trial judge observed that the proposed
    amendment [alleged] an entirely separate misrepresentation or failure to
    disclose on the part of the defendants, and that it [was] not part and
    parcel of the dealings already described in the existing amended statement of
    claim: at para. 159.

[28]

The
    trial judge concluded that the misrepresentation referred to in the proposed
    amendment was discoverable since 2012 when the appellant received the 2002
    credit policy, which clearly noted that agreements of purchase and sale could
    be used to determine property values, and that this was not, as the appellant
    had argued, a bombshell that was dropped during the trial.
[5]
A reasonable person would have assumed that the 2002 credit policy was in place
    at the time that the CCU distributed the offering statement, and [i]f this had
    struck [the appellant] as giving rise to material misrepresentation in the [offering
    statement], he could have amended his statement of claim to add that allegation
    at that time: at para. 160. The two-year limitation period under s. 4 of the
Limitations
    Act, 2002
, S.O. 2002, c. 24, Sched. B had expired.

[29]

The
    trial judge concluded that, in any event, the respondents, who had defended the
    action for eight years and into the trial based on the original pleaded
    misrepresentations, would suffer irreparable prejudice if she allowed an
    amendment that was raised only after the appellant and several other material
    witnesses had testified: at para. 162. She characterized the appellants
    attempt to amend his pleadings as a wild goose chase, and she stated that [h]e
    [could not] evolve his claim mid-way during trial to address different acts by
    the defendants based on an entirely new theory of the case: at para. 163.

C.

Analysis

[30]

The
    appellant asserts that the trial judge erred (1) in concluding that the
    proposed amendment was the pleading of a new claim which was statute-barred;
    and (2) in refusing the amendment in any event on the basis of prejudice to the
    respondents.

[31]

The
    trial judges conclusion that the proposed amendment made a new claim is a
    legal determination, which is subject to the correctness standard of review
    on appeal: see
Blueberry River First Nation v. Laird
, 2020 BCCA 76, 32
    B.C.L.R. (6th) 287, at paras. 20-21;
Strathan Corporation v. Khan
,
    2019 ONCA 418, at paras. 7-8. Her conclusion that the limitation period had expired
    is a determination of mixed fact and law, that was based in this case on a
    finding of fact as to when the appellant ought to have known about the new
    misrepresentation, and reviewable on a standard of palpable and overriding
    error: see
Longo v. MacLaren Art Centre
, 2014 ONCA 526, 323 O.A.C.
    246, at para. 38. The same deferential standard of review applies to the
    refusal of an amendment based on an assessment of prejudice:
Tuffnail v.
    Meekes
, 2020 ONCA 340, 449 D.L.R. (4th) 478, at para. 120, leave to appeal
    refused, [2020] S.C.C.A. No. 269.

[32]

The
    general rule respecting the amendment of pleadings is that an amendment
shall
be granted at any stage of a proceeding on such terms as are just, unless
    prejudice would result that could not be compensated for by costs or an
    adjournment:
Rules of Civil Procedure
, R.R.O. 1990, Reg. 194, r. 26.01.
    The expiry of a limitation period in respect of a proposed new claim is a form
    of non-compensable prejudice, where leave to amend to assert the new claim will
    be refused:
Klassen v. Beausoleil
, 2019 ONCA 407, 34 C.P.C. (8th) 180,
    at para. 26.

[33]

There
    is no real dispute between the parties about the applicable test. In
1100997
    Ontario Limited v. North Elgin Centre Inc.
, 2016 ONCA 848, 409 D.L.R.
    (4th) 382, this court observed that an amendment to a statement of claim will
    be refused if it seeks to assert a new cause of action after the expiry of
    the applicable limitation period. As this court explained, at para. 19, in this
    context, a cause of action is a factual situation the existence of which
    entitles one person to obtain from the court a remedy against another person
    (as opposed to the other sense in which the term cause of action is used  as
    the form of action or legal label attached to a claim: see the discussion in
Ivany
    v. Financiere Telco Inc.
, 2011 ONSC 2785, at paras. 28-33).

[34]

The
    relevant principles are summarized in Paul M. Perell & John W. Morden,
The
    Law of Civil Procedure in Ontario
, 4th ed. (Toronto: LexisNexis Canada, 2020),
    at pp. 220-21, as follows:

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 pled or additional facts upon [which] the
    original right of action is based.

This passage has been cited with approval by this
    court. See
1100997 Ontario Limited
, at para. 20,
Davis v. East
    Side Marios Barrie
, 2018 ONCA 410, at para. 32, and
Klassen
,
    at para. 29.

[35]

The
    appellant asserts that the trial judge erred when she characterized the
    proposed amendment as pleading a new cause of action. He argues that the facts
    that were pleaded in the Amended Statement of Claim  before the motion to
    amend was brought during the trial  were broad enough to encompass the statutory
    misrepresentation claim that was advanced during the trial. He submits that he
    was not asserting a new cause of action but simply a specific particular of his
    case that arose out of the factual matrix already pleaded: that there was an
    offering statement that contained misrepresentations. Specifically, he asserts
    that there was a single instance of tortious conduct contravening the Act,
    namely the distribution of the [offering statement] to [the appellant].

[36]

I
    disagree.

[37]

The
    necessary starting point is to consider the substance of the appellants claim
    before he sought the pleadings amendment. What acts or omissions that would
    give rise to the respondents liability were already at issue in the action? The
    court must determine whether the existing pleading already contains the factual
    matrix to support any claim to which the proposed amendment relates, or whether
    the amendment seeks to put forward additional facts that are necessary and
    material to a new and different claim.

[38]

In
    conducting this assessment, the court must read the pleadings generously in
    favour of the proposed amendment:
Klassen
,

at para. 30;
Rabb
    Construction Ltd. v. MacEwen Petroleum Inc.
, 2018 ONCA 170, 29 C.P.C.
    (8th) 146, at para. 8. The existing pleadings, together with the proposed
    amendment, must be considered in a functional way  that is, keeping in mind
    that the role of pleadings is to give notice of the
lis
between the
    parties. As such, the question in this case is whether the respondents would reasonably
    have understood, from the Amended Statement of Claim and the particulars
    provided on discovery, that the appellant was pursuing a claim in respect of
    the matter addressed by the proposed amendment.

[39]

The
    trial judge accepted that there was a connection between the facts pleaded in
    the Amended Statement of Claim and the proposed amendment, since the appellant was
    always pleading that there was a misrepresentation in the offering statement. As
    such the factual circumstances or matrix that were already pleaded provided
    the broad
context
in which the statutory misrepresentation referred to
    in the proposed amendment arose. The original pleading however alleged that the
    misrepresentation (by omission) was a failure to disclose frauds, while the
    proposed amendment was based on a different act of the respondents and a
    separate failure to disclose.

[40]

There
    is no error here. The trial judges understanding of the appellants claims was
    based not only on her comparison of the proposed amendment to the Amended
    Statement of Claim. She knew that the appellant had further particularized his
    claims for misrepresentation (in 2012), at which time the misrepresentation referred
    to in the proposed amendment had not been raised. She also had the benefit of
    presiding over the trial, including the period leading up to the proposed
    amendment, when the claims that the appellant was pursuing had been set out and
    addressed in the evidence of the witnesses. All of this informed her conclusion
    that the appellant was seeking to evolve his claim mid-way during trial to
    address different acts by the defendants based on an entirely new theory of the
    case: at para. 163.

[41]

The
    appellants existing claim was not, as he asserts before this court, a statutory
    claim in respect of a misleading offering statement. The distribution of the
    offering statement was not the act or omission that he was pursuing in his
    claim. Rather, he was pursuing a claim for statutory misrepresentation under
    the Act. The wording of s. 82 of the Act makes it clear that the claim is in
    respect of a misrepresentation (as defined by the Act) in an offering
    statement, and not in respect of the distribution of the offering statement
    itself. Section 82(1) provides for deemed reliance upon
the misrepresentation

    (emphasis added) where the offering statement contains
a misrepresentation
if it was
a misrepresentation
when the purchase of securities was made. The
    statutory defences also relate to specific misrepresentations. Under s. 82(2),
    deemed reliance does not apply if the purchaser knew about
the
    misrepresentation
when purchasing the security (emphasis added). Section
    82(5) provides that a person who signed the disclosure certificate or a
    director is not liable if the person proves [t]he person had no reasonable
    grounds to believe, and did not believe, that there had been
a misrepresentation

    (emphasis added).

[42]

Having
    pursued an action in respect of a statutory misrepresentation in an offering
    statement, it was not open to the appellant to change course in the middle of
    the trial  to advance a claim in respect of a new and different
    misrepresentation regarding the failure to obtain appraisals  that had not
    been pursued up to that point in the action. The existing pleading did not
    contain the factual matrix that would support the claim asserted in the proposed
    amendment. The proposed amendment, although related to the same offering
    statement, alleged an entirely different misrepresentation from what had been pleaded
    in the Amended Statement of Claim and particularized during the discovery
    process. As such, the trial judge was correct in concluding that the
    misrepresentation relating to the basis on which the CCU made loans was based
    on a different act of the respondents, a separate alleged failure to disclose,
    and as such was not part and parcel of the claims the appellant was advancing
    in his Amended Statement of Claim.

[43]

Finally,
    the appellant challenges the trial judges conclusion that the misrepresentation
    claim that he proposed to advance in the amendment to his Amended Statement of
    Claim was discoverable in 2012. The appellant asserts that he only discovered this
    misrepresentation during the trial, after hearing the evidence of two Board
    witnesses and seeing the 2005 credit policy, and that, as such, his pleading is
    not statute-barred.

[44]

This
    argument cannot succeed. While the appellant may only have adverted to the
    claim giving rise to the amendment in the course of the trial, the trial judge
    concluded that the alleged misrepresentation was discoverable in 2012 when the
    appellant received the Board-approved 2002 credit policy, which clearly noted
    that agreements of purchase and sale were being used to determine property
    values, and that after that point, a reasonable person would have assumed that
    the 2002 credit policy was in place when the offering statement was
    distributed. There is no reason to interfere with the trial judges conclusion
    that the new misrepresentation claim was discoverable in 2012. Her conclusion was
    fully supported by the evidence. As such the amendment of the Amended Statement
    of Claim to assert a new statutory misrepresentation claim was properly refused
    because that claim was statute-barred.

[45]

The
    conclusion that the new misrepresentation claim, which was ultimately the only
    claim relied on by the appellant at trial, was properly dismissed because it
    was statute-barred is sufficient to dispose of this appeal.

D.

Disposition

[46]

For
    these reasons I would dismiss the appeal. I would award costs to the
    respondents in the amounts agreed between the parties: $45,000 to the Board
    respondents and $30,000 to RLB, both amounts inclusive of disbursements and
    applicable taxes.

Released: December 18, 2020 (K.M.v.R.)

K.
    van Rensburg J.A.

I
    agree. G. Pardu J.A.

I
    agree. Thorburn J.A.





[1]

The
    reasons for judgment deal almost entirely with the statutory misrepresentation
    claim raised by the proposed amendment. The trial judge did however address and
    dismiss the appellants common law negligence claim against the Board
    notwithstanding that the appellants closing submissions focused only on the
    statutory misrepresentation claim raised by the proposed amendment: see paras.
    176-186.



[2]

The
    Act has since been amended to reflect the fact that the Financial Services
    Regulatory Authority of Ontario (FSRA) replaced FSCO and DICO, including
    replacement in this passage of the reference to the Superintendent (of FSCO) by
    the Chief Executive Officer (of FSRA): S.O. 2018, c. 8, Sched. 7, s. 5.



[3]
This
    is from the trial judges reasons at para. 155(vi).
The answers to
    undertakings were not part of the appeal record. According to the written
    submissions at trial by RLB, which were filed on the appeal, the appellants answers
    to undertakings pointed to the following instances of alleged misstatement or
    omission: (1) the 'Perfex fraud' is misdescribed in the Offering Statement; (2)
    the assets of the Credit Union are overstated by $8.2 million; (3) the Offering
    Statement does not disclose that there were mass redemptions of deposits in
    June and July, 2007; (4) the Offering Statement does not disclose that most of the
    commercial loan portfolio was a loan on one property in which Mr. Vinski had an
    interest; and (5) the Offering Statement does not disclose that Mr. Vinski
    operated without supervision by the Board of the Credit Union.



[4]
Reasons for Judgment, at paras. 8 and 139.
Notwithstanding that she
    regarded the other claims as having been abandoned, the trial judges reasons
    briefly addressed and dismissed the appellants common law negligence claim
    against the Board. See note 1 above.



[5]

As the trial judge noted, the Board-approved credit policy
    that was in place when the offering statement was distributed was the 2005 credit
    policy, however, its relevant terms were essentially the same as the 2002
    credit policy.


