Amending pleadings last-minute can be fatal: Federal Court offers guidance

Authors: Adam Lakusta, Aziz Aboudheir

In Federal Court proceedings, parties often seek to amend their pleadings. The Court may allow or refuse such requests depending on a variety of factors. In a recent decision, the Federal Court detailed the requirements for parties seeking to amend their pleadings.

In RE/MAX, LLC v. Save Max Real Estate, Inc., 2022 CanLII 74908 (FC), RE/MAX, LLC (“REMAX”) commenced an action in Federal Court against Save Max Real Estate, Inc (“Save Max”) for trademark infringement and passing off in May 2018. Four years later, in July 2022, REMAX sought to amend its pleadings to, as the Court held, radically expand the scope of its claim and to implicate the franchisees of Save Max in the infringement allegations (the “proposed amendments”).

Save Max opposed, arguing that the proposed amendments were defective in law, that permitting amendments at this late stage was not in the interests of justice, and that the proposed amendments would prejudice Save Max in a manner not compensable by costs.

General principles governing amendments to pleadings

The Federal Courts Rules provide that the Court may allow amendments to the pleadings at any time on such terms that will protect the rights of the parties. Summarizing the law, the Court stated that amendments should be allowed provided that:

  1. the proposed amendments have a reasonable prospect of success;
  2. their allowance would not prejudice the opposing party to an extent that is not compensable by an award of costs; and
  3. permitting the proposed amendments is in the interests of justice.

The first step in the Court’s analysis is whether the proposed amendments have a reasonable prospect of success. This burden is on the party proposing the amendments. Amendments will not be permitted where it is plain and obvious, taking a realistic view of the law and the litigation process, that the amendments disclose no reasonable cause of action.

When faced with proposed amendments, Courts often ask whether the amendments would be capable of being struck out if they were already part of the pleadings. Pleadings must refine the issues in dispute and facilitate “manageable and fair” proceedings. For pleadings to be permissible, they must have an adequate factual foundation. Accordingly, amendments that make bald allegations that are unsupported by facts are not considered by the Court to be “manageable and fair” and are therefore impermissible.

The Federal Court Rules do not allow the Court to consider affidavit evidence when determining whether proposed amendments disclose a reasonable cause of action. Only once a party has demonstrated that the proposed amendments have a reasonable prospect of success will the Court consider further factors.

Other factors supporting amendments to pleadings include:

  1. the timing of the proposed amendments in the overall dispute;
  2. the extent of delay likely to be caused by the proposed amendments;
  3. the extent to which an original pleading has caused another party to follow a course of action that would be difficult or impossible to change; and
  4. whether the proposed amendments hit upon the true substance of the dispute on its merits.

Court denies REMAX’s motion

In this case, REMAX submitted that the proposed amendments were proper and alleged a valid claim for trademark infringement and passing off. Specifically, REMAX alleged that Save Max authorized and directed Save Max International and Save Max Franchisees to infringe and pass off REMAX’s trade indicia.

Considering the proposed amendments, the Court held that the allegations amounted to novel claims. However, despite REMAX’s submissions, the Court was unable to find that the novel claims had any factual foundation. In particular, there was nothing on the Court’s record supporting the existence of a direct relationship connecting the Defendant with Save Max International and the Save Max Franchisees.

Consequently, the Court concluded that the proposed amendments should not be allowed because REMAX, as the moving party, failed to discharge its burden to demonstrate that the proposed amendments had a reasonable prospect of success. Although the Court could have ended its reasons at this point, it continued its analysis.

The Court also noted that the substantial delay of REMAX was unjustified. REMAX claimed to have been aware of the need to amend 18 months prior, but could provide no satisfactory explanation for the delay, entitling the Court to assume that there was no explanation.

REMAX argued that the amendments should nonetheless be allowed if they can be made without injustice to the other side, regardless of the negligence or delay in proposing the amendments. The Court rejected this argument, saying it lacked merit and held that REMAX had to prove the absence of non-compensable prejudice and that the interests of justice would be served to allow the proposed amendments.

The Court also held that the proposed amendments represented a dramatic departure from REMAX’s current claim by adding parties and expanding the scope of allegations. Consequently, the Court found that the proposed amendments would significantly delay the impending trial by triggering a series of motions and amendments. The Court further found that allowing the proposed amendments would not necessarily facilitate its consideration of the “true substance of the dispute,” thus negating the ultimate purpose of the amendments.

In light of these reasons, the Court concluded that it was not satisfied that the interests of justice would be served by allowing the proposed amendments and dismissed REMAX’s application with costs.

Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.