Meaning of Rule 59.06

Rule 59.06 reads as follows:

 

Amending

 

59.06  (1)  An order that contains an error arising from an accidental slip or omission or requires amendment in any particular on which the court did not adjudicate may be amended on a motion in the proceeding. R.R.O. 1990, Reg. 194, r. 59.06 (1).

 

Setting Aside or Varying

 

(2)  A party who seeks to,

(a) have an order set aside or varied on the ground of fraud or of facts arising or discovered after it was made;

(b) suspend the operation of an order;

(c) carry an order into operation; or

(d) obtain other relief than that originally awarded,

may make a motion in the proceeding for the relief claimed. R.R.O. 1990, Reg. 194, r. 59.06 (2).

 

Does rule 59.06(2)(a) allows a party to apply, by motion, to set aside or vary a judgment when, after judgment is obtained, it is determined that the judgment was procured by fraud.  In an important decision released today (Royal Bank of Canada v. Korman, 2010 ONCA 63) the Court of Appeal says the rule cannot be used to obtain relief not pleaded after judgment.  So, even if fraud is discovered after trial the rule cannot be used to vary an existing judgment.

 

The Court writes:

 

[19]         The motion judge appears to have accepted the proposition that the normal course would be for the bank to amend its pleading in order to seek a judgment in fraud.  However, he ultimately rejected the appellant’s submission finding that “post-judgment, the notice of motion contents are allegations in this matter that effectively amount to new pleadings – they assert fraud clearly on their face. … I have no doubt that it was open to the bank to obtain the order that it did and it was open to Miller J. to grant that order, turning the default into a judgment in fraud under r. 59.06 based on the after-discovered facts.  That is exactly one of the reasons why the rule is there.”  Thus, in the view of the motion judge, a motion under r. 59.06 pertaining to a fresh cause of action obviates the need to have pleaded the cause of action.

 

[20]         In my view, the motion judge erred in rejecting the appellant’s submission in this regard.  Rule 59.06(2)(a) allows for the amendment, setting aside or varying of orders “on the ground of fraud or of facts arising or discovered after it was made.”  There are, therefore, two separate and distinct bases for applying r. 59.06(2)(a).  The first is fraud.  Read in the context of the rule as a whole, it is clear that the reference to fraud is a fraud perpetrated in the way the judgment or order was obtained.  There is no suggestion that this occurred in the present case.

[21]         The second basis is broader.  It provides that a judgment or order may be amended, set aside or varied because of facts that arose or were discovered after the order or judgment was obtained.

 

[22]         In the present case, the respondent argues that the facts it relies on to prove the alleged fraudulent misrepresentations were discovered by it after the judgment was obtained.  Assuming that the statements in the appellant’s personal statement of affairs were indeed fraudulent, the bank submits that this places it within the rule.

 

[23]         I disagree.  The difficulty with the respondent’s position is that it had never claimed fraud in the statement of claim.  The claim was simply for recovery of a debt based on the guarantee.  The claim contained no allegation of fraud nor was declaratory relief of the nature ordered by Miller J. sought.  In my view, this placed the relief requested by the bank beyond the scope of that available under r. 59.06.

 

[24]         The rule does not contemplate altering a judgment or order to provide for relief never sought in the moving party’s pleading.  In order to come within the rule, the motion must be one brought “in the proceeding”.  As a general rule, pleadings lay out the four corners of the dispute and parties are bound by their pleadings:  See Kalkinis (Litigation Guardian of) v. Allstate Insurance Co. of Canada (1998), 41 O.R. (3d) 528 (C.A.); leave to appeal refused, [1999] SCCA No. 253 (S.C.C.).  The proceeding continues to be defined by the pleadings even after judgment is obtained.  For the motion to be “in the proceeding”, therefore, it must be a motion that, even before judgment, was available to the moving party to bring.  In this case, even on a generous reading, a motion for judgment declaring the sums to be owing in fraud could not have been brought or succeeded before judgment based on the pleadings as they stand.  Rather, the respondent’s pleading would have to have been amended to request such relief.