Halifax (Regional Municiplaity Pension Committee) v. State Street Global Advisors Ltd.

Halifax (Regional Municiplaity Pension Committee) v. State Street Global Advisors Ltd. Court Supreme Court Date 2012-01-26 Citation 2012 NSSC 64 Docket Hfx 309063 Judge/Registrar/Adjudicator Duncan, Patrick J. (Honourable Justice) (SC) Document Type Decision Decision Content SUPREME COURT OF NOVA SCOTIA Citation: Halifax (Regional Municipality Pension Committee) v. State Street Global Advisors Ltd., 2012 NSSC 64 Date: 20120210 Docket: Hfx 309063 Registry: Halifax Between: The Halifax Regional Municipality Pension Committee Plaintiff v. State Street Bank and Trust Company and State Street Global Advisors Ltd./ Conseillers En Gestion Global State Street, Ltée Defendant DECISION: Motion to amend Defence Judge: The Honourable Justice Patrick Duncan Heard: January 26, 2012 Counsel: George MacDonald, Q.C., Peter Rogers, Q,C., and Jane O’Neill, for the plaintiff Michael Ryan, Q.C. John Keith, Andrea Robinson, for the defendants By the Court: Introduction [1] The defendants move to amend their Statement of Defence. The plaintiff objects, arguing that the amendments are put forward in bad faith. For the reasons that follow the motion is granted. Background [2] The plaintiff Committee is the pension manager for employees of the Halifax Regional Municipality and certain other Halifax public sector employees. [3] The defendant State Street Global Advisors Ltd./ Conseillers En Gestion Globale State Street Ltee (SSGA Can) is a federally incorporated company with its registered office in Montreal, Quebec. It is registered to carry on business in Nova Scotia and was a party, with the Committee, to an Investment Management Agreement (IMA), dated January 16, 2007. SSGA Can is alleged by the plaintiff to have been acting as investment manager for the Committee at times relevant to this claim. [4] The defendant State Street Bank and Trust Company (SSBTC) is a Massachusetts trust company. It provides, among other things, financial services to institutional investors, including custody services, trust services, investment management, trading services, and investment servicing. [5] State Street Global Advisors (SSGA US) is an investment management firm with its offices in Massachusetts. It is alleged to be the investment arm of, and a division of SSBTC. [6] On July 30, 2007 the Committee entered into an Agreement of Trust (AoT) with SSBTC to settle funds (Halifax assets) on the latter for investment in the Global Alpha Edge Fund (Alpha Fund), a common trust fund controlled by the defendant SSBTC, and which was established pursuant to the Global Managed Common Trust Funds Declaration of Trust, dated February 1, 2004. (DoT). [7] The investment was managed from August 9, 2007 to September 15, 2008 by SSGA US. Custody of, and prime brokerage for, the Alpha Fund, which included all of the Halifax assets, was given by SSBTC to Lehman Brothers Inc. (LBI). In turn those assets were transferred to Lehman Brothers International (Europe), (LBIE). [8] In September of 2008, LBI and LBIE failed and in turn the Committee was advised that the Halifax assets were “frozen”. Repeated demands made to the defendants for return of the invested monies, have not been successful. [9] The Committee filed the present action on March 25, 2009, seeking a return of the Halifax assets. The Claim has been amended on two occasions, the Second Amended Statement of Claim having been filed July 16, 2009. The Committee claims against the defendants for negligence, breach of fiduciary duty, and breach of contract. [10] A Defence to the claim was filed on August 19, 2009. That Defence was amended, with plaintiff’s consent, on September 30, 2011. The present motion to amend the Defence was filed December 7, 2011. [11] Relevant to this motion is the fact that the plaintiff filed a motion for Summary Judgment on November 7, 2011 together with the supporting brief and affidavit evidence. The Summary Judgment motion is scheduled to be heard on March 29 and 30, 2012. (adjourned from February 16 and 17 to enable the parties to complete production). Applicable Law [12] The governing provision of the Nova Scotia Civil Procedure Rules states: Amendment of notice in an action 83.02 (1) A party to an action may amend the notice by which the action is started, a notice of defence, counterclaim, or crossclaim, or a third party notice. (2) The amendment must be made no later than ten days after the day pleadings close, unless the other parties agree or a judge permits otherwise. [13] The approach to the exercise of the discretion provided by Rule 83.02(2) was described in Garth v. Halifax (Regional Municipality) 2006 NSCA 89, per Cromwell J.A.: [30] The discretion to amend must, of course, be exercised judicially in order to do justice between the parties. Generally, amendments should be granted if they do not occasion prejudice which cannot be compensated in costs ... . [14] Further direction is found in Global Petroleum Corp. v. Point Tupper Terminals Co. (1998), 170 N.S.R.(2d) 367 (C.A.) where Bateman J.A. wrote, at para. 15: The law regarding amendment of pleadings is not complicated: leave to amend will be granted unless the opponent to the application demonstrates that the applicant is acting in bad faith or that, should the amendment be allowed, the other party will suffer prejudice which cannot be compensated in costs. [15] The burden to demonstrate either serious prejudice that cannot be compensated with costs, or bad faith, rests upon the plaintiff, subject to rebuttal. The evidentiary burden is high. e.g., M5Marketing Communications Inv. v. Ross 2011 NSSC 32, at para. 31. Analysis [16] The defendants submit that the amendments should be permitted as it is early in litigation and there is no prejudice to the plaintiff that cannot be compensated in costs. [17] As to the merits of the proposed amendments the defendants say that the pleadings, in particular the plaintiff’s claim, have contained significant ambiguity as to the choice of law being relied upon by the parties. They offer that the proposed amendments add clarity and will assist the court when it turns to the ultimate argument on the merits. They deny the plaintiff’s assertion that the amendments are made in bad faith. [18] A live issue on the trial of this matter will be the extent to which either or both of the laws of Massachusetts or Nova Scotia will apply. Nova Scotia Civil Procedure Rule 54.04 states: (2) The law of a foreign state is presumed to be the same as the law of Nova Scotia, unless a party gives notice by a pleading that the law of a foreign state is in issue and proves that that law is not the same as the law of Nova Scotia. [19] The plaintiff’s Statement of Claim alleges that the defendants’ conduct must be measured against the standard of care derived from section 29 of the Pension Benefits Act R.S.N.S. 1989, c. 340, as amended. ( the PBA) (see, paras. 14 and 32; Claim). It specifically claims that the conduct of the defendants breached their “statutory duty under the PBA (including the PBA standard of care) ...” (see para. 50, Claim). [20] In paragraph 20 of the Claim, the plaintiff pleads that it intends to rely on the Global Trust Fund Declaration “... for its full force and effect ...”. That Declaration was continued through an Amendment and Fund Declaration (the Alpha Declaration) effective October 31, 2006. The Plaintiff says it too “... will be referred to for its full force and effect ...” . (see para. 21, Claim). [21] At paragraph 53 of the Claim, the plaintiff alleges, in the alternative, that the defendants are subject to Massachusetts law and that the defendants are liable to the plaintiff for “remedies” under the laws of that jurisdiction. [22] The plaintiff’s Claim is silent on whether the Massachusetts law differs from Nova Scotia law. [23] The defendants’ position in their September 30 Defence: - denies the applicability of the Pension Benefits Act ( para. 4, Defence); - asserts that the AoT governs the relationship between the parties in this proceeding (para. 5(j), Defence); - relies upon the provision of the Trustee Act R.S.N.S 1989, c. 479, as amended (para. 8, Defence ); - relies on an “exculpatory clause” in the AoT to deny liability under either or both of Nova Scotia and Massachusetts laws ( para. 9, Defence ); - denies the applicability of the provisions of the Massachusetts Consumer Protection and Unfair Trade Practices Act, Mass. Gen. Laws, Chapter 93A, for enumerated reasons (para. 12, Defence). [24] The Defendants’ proposed amendments focus their position on the law they say must be applied in assessing the claim. They rely upon Massachusetts law, and only conditionally defer to Nova Scotia laws “to the extent that they may apply”. In the proposed amendments to the Defence the defendants specify what, in their submission, the laws of that jurisdiction provide. It may be supposed that evidence will be led at trial to prove Massachusetts law, where it is alleged to be different than the law of Nova Scotia. The plaintiff is put on notice by the amendments that the defendants are putting “the law of a foreign state in issue”. [25] The parties devoted some time in argument to the dispute over the choice of law as reflected by the respective pleadings. At this point, the disagreement is as to the appropriateness of permitting the proposed amendments. It is not necessary for the purposes of this motion that I delve into that complex and contentious question. It is sufficient to note that the question is engaged. Bad Faith [26] The onus of establishing bad faith rests on the party alleging it. see, National Bank Financial Ltd. v. Potter, 2008 NSSC 135, at para. 128. [27] The plaintiff submits that the proposed amendments are put forward in bad faith. Specifically the plaintiff says that the proposed amendments are intended to create issues of fact that have the potential to render the Summary Judgment motion untenable. In support of this position they note that the motion to amend contains variations that could have been made at the time of the September amendments, but were not. Instead these amendments were only brought forward after the defendants had an opportunity to read the plaintiff’s brief in support of the Summary Judgment motion. The plaintiff submits that this is evidence of bad faith because it is being done only for strategic purposes and not for any legitimate purpose. [28] It is also suggested that the motion is a transparent attempt to delay the defendants’ meeting with a day of reckoning. [29] I find little evidence to support the plaintiff’s argument. The pleadings, to this point, set up a conflict between the parties as to the role that the laws of Massachusetts and Nova Scotia will play in analyzing the plaintiff’s claim. In paragraph 5(o) of the proposed amended Defence the issue is put succinctly: (o) The Plaintiff alleges that Nova Scotia laws apply and relies upon Massachusetts law in the alternative. The Defendants deny the allegation. The Defendants state that the applicable trust documents are clearly governed in all material respects by Massachusetts law and include provisions that read, inter alia: AoT: Eighth: The trust hereby created shall be in all respects governed by the laws of Massachusetts, provided however that Trustee shall not invest the trust property in any of Trustee’s affiliated mutual funds without the prior written consent of Settlor. DoT: Section 6 - Effect of Law and Regulation These Funds shall be administered at all times in conformity with the laws of the Commonwealth of Massachusetts, as declared by the decisions of the Supreme Judicial Court thereof and by the statutes of said Commonwealth from time to time prevailing, with the laws of the United States of America as the same may from time to time be amended, and with the rules and regulations from time to time promulgated by the Comptroller of the Currency and/or other appropriate regulatory authority pertaining to the collective investment of trust funds by national or state banks ( as such may be amended or modified by interpretations or pronouncements of such regulatory authorities), all of which shall be deemed to be part of this Plan. [30] These provisions provide some factual underpinning for the defendants’ position on this issue. This is so even though the plaintiff holds a different view as to applicability of Nova Scotia laws to this dispute. [31] I have been asked to look at the impact of the amendments on the Summary Judgment motion. If the amendments have the effect of forestalling the motion or creating overall delay in the progress of the litigation, it is only objectionable if it is done for those reasons and no other good reason. To put it another way, a motion to amend pleadings, where there is a demonstrable legitimate purpose for the amendments, should not be denied simply because it also has the effect of undermining the opposing party’s litigation strategy. There must be some further or other motive at play. In my view there is no evidence to suggest that other motive. It cannot be said that the motion to amend is frivolous or vexatious. [32] I cannot say at this point how the defendants’ motion may create a prejudicial consequence to the plaintiff. It is not clear on the information adduced in this motion if the plaintiff will, or will not, be able to continue with the Motion for Summary Judgment in the face of an amended Defence. If the Summary Judgment motion is derailed by the timing and substance of these amendments, then the plaintiff may, in due course, seek costs for that consequence. To that extent the consequence of permitting the amendments is compensable in costs. [33] There is a real issue in this dispute with respect to the applicability of the laws of the two jurisdictions in question. The amendments address that dispute directly. If this is a ploy on the part of the defendants to subvert the Summary Judgment motion and/or to create delay for the sake of delay then it is one that is fraught with risk. The amended pleadings will form the basis on which the defence will go forward. An attempt to further amend the Defence after the Summary Judgment motion is resolved, and in a way that reverses or otherwise waters down the effect of these amendments would, I think, be viewed with a critical eye. [34] Unlike some cases where amendments have been denied, this matter is still in its relatively early stages. Production is not complete. Discoveries have not begun. The timing of the Summary Judgment motion has been contentious from when it was first raised by the plaintiff, because it was proposed to be heard before disclosure is complete, a position that the defendant objected to. It is perhaps not surprising that filing the motion has crystallized some of the points in dispute between the parties and generated variations in the litigation positions. Even if the defendants adjusted their position in response to the Summary Judgment motion that is not a reason, in and of itself, for finding the existence of bad faith, or otherwise concluding that there is a basis to refuse the motion to amend. Conclusion [35] The evidence and submissions do not satisfy me that the motion to amend the defence has been made in bad faith. While the plaintiff has not advanced the alternate basis to refuse the amendments, I add that I am also not satisfied that any prejudice created by permitting the amendments cannot be compensated in costs. Costs [36] The mutual submission of the parties is that costs of this motion to amend should be determined following the disposition of the plaintiff’s Summary Judgment motion, or at some other time as determined by the court after consideration of the parties’ positions. I agree. J.