DATE OF RELEASE: June 4, 1996 No.

C917834
Vancouver Registry

IN THE SUPREME COURT OF BRITISH COLUMBIA

BETWEEN: )
)
KAMEI SUSHI JAPANESE RESTAURANT LTD., ) REASONS FOR JUDGMENT

1996 CanLII 1682 (BC SC)

TAKAHIRO HOLDINGS LTD. )
and )
YOKOHAMA ENTERPRISES INC. )
)
PLAINTIFFS )
)
AND: )
) OF THE HONOURABLE
IRVINE E. EPSTEIN, HENRY C. WOOD, )
STEVEN G. WONG and ROY A. LOGIE )
formerly doing business as )
EPSTEIN WOOD WONG & LOGIE, STEVEN G. WONG, )
GODDARD & SMITH REALTY LTD. a.k.a. )
GODDARD & SMITH INTERNATIONAL REALTY INC., )
HUGH FONG, PRIME REALTY LIMITED and )
THE LOWER MAINLAND PURPOSE SOCIETY FOR ) MR. JUSTICE CURTIS
YOUTH AND FAMILIES )
)
DEFENDANTS )
)
AND: )
)
IRVINE E. EPSTEIN, HENRY C. WOOD, )
STEVEN G. WONG and ROY A. LOGIE ) (IN CHAMBERS)
formerly doing business as )
EPSTEIN WOOD WONG & LOGIE and OTHERS )
)
THIRD PARTIES )

Counsel for the plaintiffs: Craig P. Dennis

Counsel for the defendants and third parties

Irvine E. Epstein, Henry C. Wood,
Steven G. Wong and Roy A. Logie
formerly doing business as
Epstein Wood Wong & Logie, Steven G. Wong: Dennis C. Quinlan

Counsel for the defendants and third parties

Goddard & Smith Realty Ltd. a.k.a
Goddard & Smith International Realty Inc.
and Hugh Fong: Gregory C. Blanchard

Counsel for the defendant

The Lower Mainland Purpose Society for
Youth and Families: Derek K. Miura

Place and dates of hearing: Vancouver, B.C.

April 3 and 4, 1996
 - 2 -

1 The issue in this application is whether the plaintiffs made

an admission in the statement of claim, and if so, whether the

statement of claim can now be amended to withdraw the admission.

1996 CanLII 1682 (BC SC)

The Lower Mainland Purpose Society has also applied for an order

dismissing the claim against it under Rules 18 and 19, however it

was agreed that motion would be argued after the present one was

decided.

2 The case arises out of the sale of property at 681 Columbia

Street, New Westminster, a building commonly known as the Kresge

Building from The Lower Mainland Purpose Society to the plaintiffs

under an agreement made in September 1989. The Kresge Building was

a well known landmark in New Westminster built in 1899. In

December 1988 the building was severely damaged by fire. The sale

completed October 18, 1989. On November 21, 1991 the plaintiffs

commenced this action claiming damages against the Society for

negligence and/or deceit. The writ was amended November 13, 1992

to allege negligence and/or misrepresentation for failing to

disclose an outstanding demolition order against the property and

alleging it had cost $225,000 rather than $25,000 to remove

asbestos from it. On February 12, 1993 the plaintiffs filed their

statement of claim containing the following paragraphs:

16. The plaintiffs were aware that a building situated

on the property (hereinafter referred to as the
"Building") contained asbestos and Fong undertook
to ascertain the cost of the removal of the
asbestos. In order to induce the plaintiffs to
purchase the property, Fong represented to the
plaintiffs that the cost of the removal of the
asbestos would be $25,000.
 - 3 -

19. Fong, Prime and the Society were aware at all

material times that the plaintiff intended to
immediately renovate the building and utilize same
for commercial office space.

1996 CanLII 1682 (BC SC)

3 On November 24, 1993, at a date scheduled for the examination

for discovery of Mr. Masuda a principle of the plaintiffs,

plaintiffs' counsel advised it was necessary to amend the statement

of claim because of a language/communication problem between Mr.

Masuda and Nathan Ganapathi the solicitor he instructed to commence

the action.

4 On January 6, 1994 the Society filed an application seeking

among other orders dismissal of the action against it. On January

13, 1994 the plaintiffs filed without leave an amended statement of

claim deleting the allegation in paragraphs 16 and 19 and alleging

in part:

15. The plaintiffs were not aware at any material time

hereto nor were they ever advised of the order nor
that the building contained asbestos.

5 Donald J. (as he then was) heard an application to dismiss the

action on the basis the suit was brought more than two years after

the cause of action arose. That application was dismissed along

with the following direction:

I am strongly of the view ... that this case must be

adjourned to give Mr. Lauk an opportunity to cross-
examine the deponent on your latest affidavits. It seems
to me you are introducing a whole new theory of the
plaintiffs' case and he should be given an opportunity to
test this new evidence against admissions already made in
pleadings. What do you say?
. . .
The applications are adjourned generally except the issue
on the Limitation Act.
 - 4 -

6 On March 16, 1994 the plaintiffs filed an application under

Rule 15(5) for leave to withdraw the admissions contained in

paragraphs 16 and 19 of the statement of claim. On March 15, 1994

1996 CanLII 1682 (BC SC)

Master Patterson ordered by consent the cross-examination Mr.

Masuda and Nathan Ganapathi on their affidavits concerning the

motion to amend the claim. Subsequently documents were produced

and many people from the plaintiffs' law firm as well as Mr. Masuda

were examined concerning how and why the pleadings were filed in

their original form and are now sought to be amended, all of which

is now before me in this application. The questions concerning

the proposed amendment to the pleadings have in fact resulted in a

trial within a trial in which unfortunately the plaintiffs' lawyers

have become embroiled as witnesses.

7 The first issue is whether paragraphs 16 and 19 of the

statement of claim filed February 12, 1993 are admissions requiring

leave to withdraw and whether in the circumstances of the

plaintiffs' conduct in the matter it is open to the plaintiffs to

argue those allegations are not admissions.

8 The significance of this issue arises out of the provision of

Rule 24 allowing amendments to pleadings. Rule 24(1) provides:

(1) A party may amend an originating process or

pleading issued or filed by that party at any time
with leave of the court and subject to Rules 15(5)
and 31(5)
(a) once without leave of the court at any time
before delivery of the notice of trial or
hearing, and
(b) at any time with the written consent of all
parties.
 - 5 -

9 Rule 31(5) provides:

(5) A party is not entitled to withdraw
(a) an admission made in response to a notice to
admit,
(b) a deemed admission made under subrule (2), or

1996 CanLII 1682 (BC SC)

(c) an admission made in a pleading
except by consent or with leave of the court.

10 Rule 1 in the definition portion includes:

(8) In these rules, unless the context otherwise
requires
"pleading" includes a statement of claim ...

11 The issue of what constitutes an admission arose in the case

of British Columbia Ferry Corp. v. T & N plc (1993) 31 C.P.C. (3d)

399. The circumstances of that case are set forth in the following

excerpt from the headnote:

The plaintiffs installed asbestos related products in

their fleet of ferries and then after concluding that
asbestos was dangerous, removed the products. They then
brought a products liability action against those
involved in the manufacture and installation of the
asbestos products. In para.30 of their statement of
claim, the plaintiffs alleged that the products were
supplied "to the plaintiffs and their predecessors as
owners and operators of the fleet and to their agents".
The defendants demanded and received by way of
particulars a copious list of who those agents were:
corporations that installed an asbestos-related product
in each of the many ferries. Two of the opposing
defendants denied this and pleaded that the plaintiffs
were fixed with the knowledge of the hazards of exposure
to asbestos of their agents, and that the plaintiffs'
agents employed or retained their own expert advisors to
inform them of the hazards of exposure to asbestos-
containing products and that the agents relied upon those
expert advisors and not the asbestos companies in
electing to incorporate asbestos-containing products into
the ferries. Two other defendants pleaded that to the
extent that sales were made to agents, there was no
privity of contract with either of those defendants.

The plaintiffs sought to amend para.30 to delete the

words "and to their agents". The opposing defendants
took the position that in reality the proposed amendment
was an attempt to withdraw an admission, and that
pursuant to R.31(5)(c), leave was required.
 - 6 -

12 Braidwood J. in reaching his decision on the issue held at

p.384 of his reasons:

The type of admission contemplated in the rule is an

1996 CanLII 1682 (BC SC)

admission which would benefit the defendant in its
defence of the case remaining after the amendment.
Further, the admission contemplated by the rule must be
a deliberate concession made by the plaintiff for the
benefit of the defendant.

In that pleadings should contain statements of fact, in

one sense every pleading is an admission where it
contains a statement of fact. But that is not the type of
admission contemplated by R.31(5). The rule contemplates
an admission deliberately made by the party pleading it
as a concession to its opponent. No particular form of
words need be given but the concession must be clear.

In the case of Milosevic (Litigation Guardian of) v.

Etheridge (1991), 3 C.P.C. (3d) 69 (Ont. Gen. Div.),
Scott J. in considering whether or not the amendment was
in reality a withdrawal of an admission found that an
admission must be unambiguous.

I am of the opinion that the various particulars granted

would have been available and would have been granted
whether or not agency had been pled. These defendants
were entitled to know who in fact installed the alleged
hazardous asbestos materials into their ferries and to be
told all relevant questions surrounding that issue.

I am further of the opinion that the pleading of agency

in para.30 and other related paragraphs was not intended
to be pled as an admission to the defendants.

Accordingly, the proposed amendment to be made by the

plaintiffs is a genuine attempt to limit their claim and
to narrow the issues. I am of the opinion that it is in
the best interest of justice to allow this amendment.

13 When the statement of claim was drafted and then filed

February 12, 1993 it was intended to allege the facts giving rise

to the cause of action. There were no facts in issue between the

parties when the statement of claim was filed. It was not in

response to any other pleading at the time it was filed and was not

intended to be a deliberate concession for the benefit of the

defendant. A plaintiff seeking to amend allegations of facts in

 - 7 -

its original statement of claim is in essence amending the factual

foundation of its claim and thereby the nature of the claim in

issue. If the new allegation of fact gives rise to a new claim

1996 CanLII 1682 (BC SC)

which is statute barred or otherwise inappropriate the defendant

can apply to strike such pleadings. However the amendment proposed

is not an admission as that term is intended in Rule 31(5) and as

interpreted by Braidwood J. in the B.C. Ferry case referred to. In

my opinion the definition of "pleading" in Rule 1 including a

statement of claim does not determine this issue because the

context of Rule 31(5) requires otherwise.

14 Black's Law Dictionary (5th ed.) p.45, defines admission as

follows:

The acknowledgment or recognition by one party of the

truth of some matter alleged by the opposite party, made
in a pleading, the effect of which is to narrow the area
of facts or allegations required to be proved by
evidence. Averments in a pleading to which a responsive
pleading is required are admitted when not denied in the
responsive pleading.

15 The plaintiffs in this action allege the original pleading was

in error in any event and therefore it could not be a deliberate

concession. Whether the February 12, 1993 statement of claim was

filed in error is a question of fact very much in issue on this

application. I would comment at this stage however that a factual

pleading genuinely made in error could not fairly be characterized

as a "deliberate admission". The rule appears to contemplate a

party giving careful thought to the matters in issue and making an

informed decision to concede some matter of fact in order to narrow

those issues.
 - 8 -

16 I find the factual allegations made in paragraphs 16 and 19 of

the plaintiffs' statement of claim filed February 12, 1993 were not

admissions within the meaning of s.31(5) of the Rules. Accordingly

1996 CanLII 1682 (BC SC)

as no notice of trial had been served it was open to the plaintiffs

to withdraw those factual allegations and amend their pleadings in

that respect without leave unless as the defendants allege the

plaintiffs' conduct should estop them now taking this position.

17 In support of the argument that the plaintiffs are estopped

from alleging the pleadings in issue is not an admission it is

submitted that the order of Donald J. decided the issue. I do not

interpret the reasons of Donald J. as deciding the issue. He says:

It seems to me you are introducing a whole new theory of

the plaintiff's case and he should be given an
opportunity to test this new evidence against admissions
already made in the pleadings. What do you say.

18 Following further submissions the ruling is:

The applications are adjourned generally except the issue

on the Limitation Act.

19 The only issue between the parties decided by Donald J. was

that concerning the Limitation Act. He did not decide the

pleadings in issue were admissions although he may well have been

of the opinion they were. The records do not indicate that aspect

was argued before Donald J. Issue estoppel does not arise from

that decision.

20 Next it is argued that the plaintiffs are estopped from

arguing the pleadings are not admissions because they filed a

 - 9 -

motion for leave to withdraw admissions contained in paragraphs 16

and 19 of the statement of claim. A great deal of time and expense

has been expended on getting at the reason for the state of the

1996 CanLII 1682 (BC SC)

pleadings including production of many documents and cross-

examination of many of the participants in the preparation of the

pleadings. This has occupied much of the time from March 16, 1994

to the present. Is it wrong to allow the plaintiffs having changed

counsel to now argue that all this was in fact unnecessary because

the pleading did not contain admissions requiring leave to

withdraw? I hold it would be. The defendants have gone to a great

deal of time and expense to defend the plaintiffs' application for

leave to amend its pleadings. In essence the plaintiffs

represented by their conduct that they would seek leave of the

court to amend the pleadings and it is too late considering the

extent of the defendants' reliance upon that representation for the

plaintiffs to take the position that leave is not necessary. Any

civil case is in essence an agreement between the parties within

legal parameters to resolve the dispute upon the decision of the

matters they chose to put in issue between them and there comes a

point at which it is unfair to alter the matters upon which the

case is to be resolved. So far as whether leave is necessary for

the plaintiffs to amend its pleadings that point has been passed.

21 An admission may be withdrawn if in the circumstances the

court is satisfied that it is in the interests of justice to

withdraw it. (Norlympia Seafoods Limited et al v. Dale and Company

Ltd. (1982) 41 B.C.L.R. 145 (B.C.C.A.), Abacus Cities Ltd. v. Port

Moody (1981) 26 B.C.L.R. 381 (B.C.C.A.)).

 - 10 -

22 In the Norlympia case, McFarlane J.A. held at p.148:

Now, it is pointed out to us by counsel for the

appellants that in the Gardiner case there was an absence
of proof of inadvertence or undue haste, but I cannot

1996 CanLII 1682 (BC SC)

read the judgment of Mr. Justice Cartwright as deciding
that that matter which I regard as secondary is essential
before admission could be withdrawn if in fact in all the
circumstances of the case it is found that there is a
triable issue which ought to be tried in the interests of
justice, and not left to an admission of fact.

I think that view is supported by a judgment of this

court to which I will now refer. Before doing so it will
be apparent that in this case which I am about to mention
there was evidence that the defence was filed
precipitously. As I read the decision, however, our court
has not decided that that is the essential factor in
concluding whether or not there is a triable issue
involving the admission which ought, in the interests of
justice, to be tried by a judge at trial. I think the
essential base part of the decision of our court in
Abacus Cities Ltd. v. Port Moody (1981), 26 B.C.L.R. 381,
is found at this paragraph at p.383. The judgment was
delivered by the Chief Justice of our court, the Chief
Justice of British Columbia, and he was referring to what
was said by Chief Justice Hunter, for the full court, in
an earlier case in this province [Robertson v. Batchelor,
49 B.C.R. 559, [1935] 2 W.W.R. 29]. Chief Justice Nemetz
summed it up in this way:
It seems to me that what the learned Chief Justice
was saying was that a judicial admission should be
allowed to be withdrawn if, in the circumstances,
the court is satisfied that it is in the interest
of justice to withdraw same.

That sentence to me expresses the ratio of the decision.

For present purposes I would emphasize the words "in the
circumstances" and "that it is in the interest of justice
to withdraw same" meaning to withdraw the admission.

It seems to me that the question whether an admission has

been made inadvertently, hastily, without knowledge of
the facts or whether facts come to the attention of the
court after the admission has been made are all matters
to be taken into consideration in deciding whether or not
the circumstances show that there is a triable issue
which ought to be tried in the interests of justice.

23 The abundance of conflicting evidence demonstrates there is

certainly a factual issue between the parties. Were it not for the

manner of pleading the matter the issue as presently stated by Mr.

 - 11 -

Masuda in his evidence is whether or not the plaintiffs were aware

that there was asbestos in the building and an outstanding

demolition order against the building at the time they purchased

1996 CanLII 1682 (BC SC)

it. Because of the pleadings issue this primary matter between the

parties has become subsumed in the argument as to how the matter

came to be pleaded into which the plaintiffs' counsel have become

entangled as witnesses; the position really being in effect that

the original pleadings were drafted according to Mr. Masuda's

instructions and that his current evidence the plaintiffs did not

know of the existence of the asbestos is demonstrably untrue from

the manner in which he must have instructed counsel and counsel

drew the pleadings. Thus what actually happened between the

parties would come to be tried in a secondary sort of way by

deciding on affidavit material how and why plaintiffs' counsel were

instructed. Litigation is being pursued concerning the litigation

itself and the case has strayed a long way from "the just, speedy

and inexpensive determination of every proceeding on its merits".

24 The reason a factual pleading is later sought to be changed is

a part of "all matters to be taken into consideration in deciding

whether or not the circumstances show there is a triable issue

which ought to be tried in the interests of justice".

25 Cases turning upon issues of credibility, where possible,

should be decided at trial after the witnesses have testified and

been cross-examined before the judge who is to rule on the issue of

credibility. The factual allegations made by Mr. Masuda certainly

raise an issue that in the normal course is best tried upon oral
 - 12 -

evidence. It is the sort of factual issue trials are meant to

resolve. In the interests of justice that issue ought to be

resolved in the forum but best suited to get at the truth of the

1996 CanLII 1682 (BC SC)

matter unless because of the circumstances of this case the

defendants are now prejudged in presenting their case on the issue

to the extent that it would be unfair.

26 The prejudice alleged by the defendants is that it lost the

opportunity to assemble all the evidence through documents and

witnesses that would have been available on the questions of the

plaintiffs' knowledge of the existence of asbestos and intentions

concerning the building had the nature of the plaintiffs' present

allegations been made known originally.

27 What Mr. Fong represented to the plaintiffs concerning

demolition of the building has always been in issue. The parties

would clearly have investigated the matter concerning what Mr. Fong

said on the issue which would include anything he said about

asbestos, and what knowledge the plaintiff had about the asbestos

and the cost of removal.

28 Counsel for the Lower Mainland Purpose Society submits the

Society has suffered prejudice beyond remedy because a Mr. Hughes

who could give evidence that Mr. Fong knew about the asbestos

cannot be located. Mr. Fong however in his affidavit of September

28, 1995 stated not only that he knew about the asbestos but also

that he discussed it with Mr. Masuda and that he and Mr. Masuda

discussed the presence of the asbestos with Mr. Buckland in the

 - 13 -

City Engineering Department. In light of Mr. Fong's evidence it

does not appear that Mr. Hughes is a necessary witness.

1996 CanLII 1682 (BC SC)

29 It is also suggested that the Society is prejudice by the

delay because Mr. Buckland cannot remember what occurred, however

it is not clear whether he would have at the time the original

statement of claim was filed.

30 The Society also submits that its ability to call evidence

that the plaintiff intended to demolish the building has been

prejudiced. The defendant Stephen Wong in an affidavit dated

January 11, 1994 deposes that he was the solicitor acting for the

plaintiff in the land transfer in question. He deposes that Mr.

Masuda advised him the building was going to be demolished and was

not concerned about orders against the building. In addition Mr.

Wong had a note stating in part "He intends to demolish". In light

of the availability of this evidence I am not convinced that the

Society has been prejudiced in its ability to deal with the issue

of the plaintiffs' intention to demolish the building.

31 On the basis of the materials filed I do not find the Society

has been prejudiced to the extent that the amendment should be

denied. It appears that the evidence is available to the parties

so that the factual issue raised by the proposed amendment can be

fairly and properly litigated and determined at trial.

 - 14 -

32 The amendment proposed raises a triable issue that ought to be

tried in the interest of justice and I grant leave to the

plaintiffs to amend its pleadings accordingly.

1996 CanLII 1682 (BC SC)

"V.R. Curtis, J."

Vancouver, B.C.
June 4, 1996