I Take it Back – Praxy Cladding Corp. v. Stone Lamina Inc. and the Withdrawal of Admissions from Pleadings and Examinations for Discovery

In Praxy Cladding Corp. v. Stone Lamina Inc., 2023 ONSC 5288, the Ontario Superior Court reviewed the process for amending pleadings in proceedings under the Construction Act, and in doing so, provided important clarity as to what constitutes an admission, as well as the distinction between (and implications of) an admission from a pleading versus an admission arising out of an examination for discovery.

Below, we consider the key takeaways from this decision with respect to pleadings and conducting examinations for discovery.

Factual Background

Praxy Cladding Corp. (“Praxy“), contracted with Stone Lamina Inc. and GCAT Group Inc. (collectively, “Stone Lamina“) for Stone Lamina to supply and install– among other things panels, aluminum rails and clips for the project that was the subject matter of this case.

Praxy commenced an action against Stone Lamina under the Construction Act. Praxy’s Statement of Claim pleaded, in relevant part, that the parties “executed a Purchase Order”, referring to the fact that the parties had executed a purchase order for the supply and installation of the materials mentioned above.

After the close of pleadings, the parties conducted examinations for discovery (pursuant to the order for Trial Directions, as required under the process set out in the Construction Act). During the examination of the representative for  Praxy, counsel for Stone Lamina showed the purchase order and asked expressly if Praxy agreed that the purchase order formed the parties’ contract. The witness  agreed, although the question was then the subject of on-the-record disagreement between counsel as to whether it was proper for a legal question to be put to the deponent.

After examinations for discovery concluded, Praxy sought to amend its Statement of Claim by adding two paragraphs describing Praxy’s quote for its scope of work, and a third paragraph stating that the quote was expressly or implied incorporated into the purchase order and that the quote formed a contract document.

The original paragraph in the Praxy Statement of Claim read as follows:

“On or about February 1, 2019, Praxy and Stone Lamina executed a Purchase Order for the installation of Stone Lamina panels, aluminum rails and clips, Rockwool insulation and Blueskin membrane and the supply and installation of galvanized angles and brackets (the “PO”) in respect of the Project.”[1]

Stone Lamina consented to certain other amendments proposed by Praxy, but resisted the amendment to the foregoing paragraph on the basis that the existing Statement of Claim admitted that only the purchase order comprised the contract. Stone Lamina also took the position that a binding admission to that same effect was made during examinations for discovery.

Praxy brought a motion for leave of the Court to include the disputed amendments, which was granted.

The Court’s Decision

Before the Court, Praxy took the position that since the Construction Act is silent on the process for amending a pleading, leave to amend should be granted under Rule 26.01 . Conversely, Stone Lamina took the position that leave is required under Rule 51.05, since the proposed amendments would constitute a withdrawal of an admission.

The Court found that Praxy did not make a binding admission in its pleadings, nor during its examination for discovery, and that even if Praxy had made an admission in the Statement of Claim (which it did not), it would still met the test for withdrawal of an admission.

The Court began its analysis by noting as follows:

• The purpose of the examinations for discoveries includes the following: (1) allowing the examining party to know the case to be met, (2) obtaining admissions that may permit dispensing with formal proof of a fact in the proceeding; (3) obtaining admissions that will undermine the opponent’s case (4); facilitating settlement, pre-trial procedure, and trials (5); eliminating or narrowing issues; and (6) avoiding surprise at trial;[2] and
• Rule 51.05 does not apply to admissions made during an examination for discovery; rather, different rules apply to “the effect and use of admissions made during an examination”.[3]

With these points in mind, the Court turned to its consideration of whether Praxy should be permitted to withdraw the purported admission.

First, the Court reiterated that an admission in a pleading must be an unambiguous and deliberate, generally being admissions of fact that assist the opposing side in proving its claim or defence. In this case, the purported admission was ambiguous at best in that it was unclear whether the Statement of Claim stated unequivocally and deliberately that the purchase order was the only contract document.

Further, even if the statement in question was an admission in the Statement of Claim, the Court referred to the test for withdrawal of an admission[4] as set out in the case law (which is distinct from Rule 51.05):

• there is a triable issue on the proposed amendment to the facts previously admitted, meaning that the change in position is meritorious, rather than a tactical move that hinders, delays or frustrates the course of justice;
• there is a reasonable explanation for a change in position, such as the original admission being inadvertent or resulting from wrong instructions; and
• withdrawal of the admission will not result in any non-compensable prejudice:

As a preliminary point, the Court considered whether the impugned phrase from the original Statement of Claim – that the parties “executed a Purchase Order” – constituted an allegation of fact (which could be withdrawn), or whether it was a legal conclusion (which could not be withdrawn, insofar as it would have amounted to an admission). In that regard, the Court noted that under subrule 25.6(2) of the Rules, parties can raise a point of law in a pleading, provided that the conclusions of law may be pleaded, only if the material facts supporting them are pleaded. In the Court’s view, the impugned phrase was not a legal conclusion, but rather was a statement of material fact (1) that the purchase order was signed, and (2) the scope of work was contemplated by it. As such, it was a factual statement, and not a legal conclusion.

Therefore, it was appropriate to consider whether the impugned phrase could be withdrawn according to the common law test for withdrawal of an admission. The Court found as follows:

• There was triable issue on whether the quote constituted a contract document, given that it was signed by Stone Lamina’s deponent. Whether or not the terms of the quote were incorporated into the purchase order, or if the quote formed part of the contract documents, were triable issues to be addressed at trial;
• The response in the examination for discovery on whether the purchase order was a contract document was inadvertent, and not intentional. In that regard, Praxy advanced evidence that indicated that the deponent at the examination for discovery did not appreciate it to be a legal question; and
• Stone Lamina would not suffer any non-compensable prejudice from the proposed withdrawal. In that regard, the Court rejected Stone Lamina’s position that it would “fundamentally alter” Stone Lamina’s approach to the litigation if Praxy were permitted to argue that the quote was a contract document.

The Court also rejected a number of additional arguments raised by Stone Lamina including arguments to the effect that (1) the motion was an “ambush after the fact”, (2) there would further prejudice from “unjust delays” in the matter proceeding to trial, such delays arising from the need to revisit the pleadings stage, and (3) permitting the withdrawal would allow Praxy to change its litigation strategy.

Key Takeaways

Overall, and although Praxy is a relatively short decision, it nevertheless provides useful reminders with respect to pleadings and conducting examinations for discovery.

First, Praxy offers an important reminder to parties and their counsel to plead precisely with respect to the nature of a purchase order or a quote when drafting their pleadings, and to ensure that all contract documents are properly pleaded. This is of course particularly relevant in the construction context, where many (if not most) contractual relationships with subtrades and suppliers involve the delivery of a quote and the subsequent execution of a purchase order.  Careful pleading will avoid the risk – and just as importantly, the cost – of needing to bring a motion to amend a pleading down the road because key facts were initially omitted.

Second, Praxy also provides a number of helpful clarifications and reminders in respect of issues that can be overlooked by practitioners and which, although they may be small or subtle, can nevertheless be impactful. Most obviously, this includes the proposition that different rules apply to the withdrawal of admissions made during an examination for discovery than those rules that apply to admissions in respect of pleadings, requests to admit, and deemed admissions.

Finally, Praxy suggests that the difference between an allegation of fact in a pleading versus a legal conclusion is a fine line, and that a mere handful of words can make the difference between a successful motion to amend and a failure. In this particular case, Praxy only pleaded that the parties had executed a purchase order – such statement was insufficient to qualify as a legal conclusion by Praxy that the purchase order constituted the parties’ agreement. If, however, Praxy had pleaded to the effect that the parties executed a purchase order in order to enter into an agreement as to the supply and installation of materials, then one wonders whether such language may have been sufficient to tip the balance from allegation of fact into legal conclusion.

As always, careful pleading is a necessity and alleviates the need to “take back” what is alleged.

[1] Praxy Cladding Corp. v. Stone Lamina Inc., 2023 ONSC 5288 at para 7.

[2] Ontario v. Rothmans Inc., 2011 ONSC 2504 at para. 120.

[3] Praxy Cladding Corp. v. Stone Lamina Inc., 2023 ONSC 5288 at para. 17.

[4] PBW High Voltage Ltd. v. Metrolinx, 2021 ONSC 6715 at para. 27.

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