Pleadings define the issue

Labatt Brewing Company Limited v. NHL Enterprises Canada, L.P., 2011 ONCA 511, released today, is a striking instance of the importance of courts limiting their ruling to the matters pleaded. The Court holds:

[5]              The problem is that this central conclusion was not anchored in the pleadings, evidence, positions or submissions of any of the parties. Indeed the application judge recognized this when he said in his reasons: "I realize that this result is not exactly what either side contended." As such, it was procedurally unfair, or contrary to natural justice, for the application judge to reach this conclusion on this record.

[6]              In Rodaro v. Royal Bank of Canada (2002), 59 O.R. (3d) 74 (C.A.), Doherty J.A. held that it was both fundamentally unfair and inherently unreliable for a trial judge to make findings against a defendant on the basis of a theory of legal liability not advanced by the claimant. He said, at paras. 61-63:

The injection of a novel theory of liability into the case via the reasons for judgment was fundamentally unfair to [the defendants].

In addition to fairness concerns which standing alone would warrant appellate intervention, the introduction of a new theory of liability in the reasons for judgment also raises concerns about the reliability of that theory.  We rely on the adversarial process to get at the truth.  That process assumes that the truth best emerges after a full and vigorous competition amongst the various opposing parties.  A theory of liability that emerges for the first time in the reasons for judgment is never tested in the crucible of the adversarial process.  We simply do not know how [the trial judge's] lost opportunity theory would have held up had it been subject to the rigours of the adversarial process.  We do know, however, that all arguments that were in fact advanced by [the plaintiff] and were therefore subject to the adversarial process were found wanting by [the trial judge].

[The trial judge] erred in finding liability on a theory never pleaded and with respect to which battle was never joined at trial.  This error alone requires reversal.