Court of Appeal for Ontario

CITATION: Ontario Securities Commission v. McLaughlin, 2009 ONCA 280

DATE: 20090402

DOCKET: M37383-C49832

BEFORE: O’Connor A.C.J.O.

BETWEEN

Ontario Securities Commission, Hugh Cleland, Daon Development Corporation, John Templeton and The Woodbridge Company Limited Plaintiffs (Respondents)

and

Stuart Bruce McLaughlin, Peel Financial Services Limited and S.B. McLaughlin & Company Limited Defendant (Appellant)

COUNSEL: Ronald G. Chapman, for the appellant Paul Michell, for the respondents

HEARD: March 24, 2009

Reasons for Decision

O’Connor A.C.J.O.:

[1] The issue on this motion for directions is whether an appeal from the dismissal of a motion to amend a statement of defence to plead defences to an oppression action lies to this court or to the Divisional Court.

[2] The moving party, McLaughlin, is a defendant in an action brought by the Ontario Securities Commission and the four other respondents to this appeal (collectively, the “plaintiffs”). The corporate plaintiffs are minority shareholders in a publicly traded company called Mascan Corporation which was incorporated under the Ontario Business Corporations Act, R.S.O. 1990, c. B.16 (“OBCA”). McLaughlin was a director and controlling shareholder of Mascan.

[3] The plaintiffs’ primary claim is based on the oppression remedy under s. 248 of the OBCA. They allege that the defendants conducted the affairs of Mascan in a manner that was oppressive and unfairly prejudicial to the security holders and seek a broad range of remedies aimed at rectifying the harm caused by the defendants’ allegedly oppressive actions.

[4] In July 2008, McLaughlin brought a motion seeking leave to amend his statement of defence to plead a number of matters that he said were necessary for “the court to fully determine the issues in the action”.

[5] By order dated December 22, 2008, the motion judge dismissed the motion. McLaughlin filed a notice of appeal to this court. He now seeks a direction as to whether the appeal lies to this court or to the Divisional Court. McLaughlin submits that the appeal is to this court. However, if I do not agree, he asks that I make an order transferring the appeal to the Divisional Court. The plaintiffs take no position on the motion.

[6] I have concluded that this appeal lies to the Divisional Court.

[7] Both parties submit that the order of the motion judge is a final order. I agree. An order that conclusively disposes of an issue raised by way of defence and thereby deprives a defendant of a substantive right is a final order: Ball v. Donais (1993), 1993 CanLII 8613 (ON CA), 13 O.R. (3d) 322 (C.A.). Thus, an order dismissing a motion to plead matters in defence has been held to be a final order: see 385925 Ontario Ltd. v. American Life Insurance (1985), 1985 CanLII 2204 (ON SC), 51 O.R. (2d) 382 (H.C.). In this case, by way of example, Cumming J.’s order refused McLaughlin’s request to plead that the plaintiffs’ claims should be dismissed because they do not have clean hands or because they were acting pursuant to an illegal conspiracy. The effect of the order is to finally determine that those defences are not available to McLaughlin.

[8] Section 6(1)(b) of the Courts of Justice Act, R.S.O. 1990, C.43 describes this court’s jurisdiction to hear appeals from a final order of a Superior Court judge:

6.(1) An appeal lies to the Court of Appeal from,

(b) a final order of a judge of the Superior Court of Justice, except an order referred to in clause 19(1)(a) or an order from which an appeal lies to the Divisional Court under another Act. [Emphasis added.]

[9] Section 255 of the OBCA invokes one of the exceptions in s. 6(1)(b) of the Courts of Justice Act. It reads:

An appeal lies to the Divisional Court from an order made by the court under this Act. [Emphasis added.]

The term “court” is defined in s. 1(1) of the OBCA to mean the Superior Court of Justice.

[10] Thus, the issue on this motion is whether the motion judge’s order is “an order made… under this Act” within the meaning of s. 255 of the OBCA. I conclude that it is.

[11] I start by observing that the OBCA does not contain provisions governing many of the procedures that apply generally to civil actions in Ontario. Like other civil actions, claims brought pursuant to the OBCA are subject to the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. Some of those rules deal with purely interlocutory matters. Others, such as Rule 20 (summary judgment), Rule 21 (inadequate pleading) and certain other motions related to pleadings may finally determine an action or issues within an action.

[12] In this case, McLaughlin’s motion to amend was brought pursuant to Rule 26.01. That being the case, McLaughlin argues that the order dismissing his motion was not made “under this Act” within the meaning of s. 255 of the OBCA. Rather, it was made under the Rules of Civil Procedure. On that narrow interpretation of s. 255, unless an order is expressly authorized by the language of the OBCA, then even if it finally resolves the action or an issue within the action, the order is not considered to have been made under the OBCA. In such a case, the argument goes, s. 255 does not apply, and the route of appeal is governed by the Courts of Justice Act. Appeals of final orders would go to the Court of Appeal and interlocutory orders to the Divisional Court with leave.

[13] In support of this submission, McLaughlin relies on the Supreme Court of Canada’s decision in Kelvin Energy v. Lee, 1992 CanLII 38 (SCC), [1992] 3 S.C.R. 235, a case which is, in my view, distinguishable. In the Kelvin case, Kelvin Energy brought an application for an oppression remedy under the Canada Business Corporations Act, R.S.C. 1985, c. C-44 (“CBCA”). The parties negotiated a settlement which, pursuant to the CBCA, had to be approved by the court. The Director under the CBCA, who was added as a party to the proceedings, obtained a court order to examine two witnesses. That order was made under the Quebec Code of Civil Procedure, R.S.Q., c. C-25, whose rules expressly apply in oppression proceedings under the CBCA. The order for discovery was appealed and the Director moved to quash the appeal on the ground that the order was not appealable as of right under s. 249 of the CBCA.

[14] The wording of s. 249 of the CBCA is similar to s. 255 of the OBCA. It provides that an “appeal lies to the court of appeal of a province from any final order made by a court of that province under this Act.” Thus, the issue in Kelvin was whether the order for discovery under the Civil Code was an “order made by a court… under this Act”.

[15] The Supreme Court held that it was not. Writing for the majority, L’Heureux-Dubé J. held that the question as to whether an order is made under the Act must be approached by examining the “legislative origins of the power from which the judgment is derived”: Kelvin at p. 251. At p. 253-54, she stated:

Although the respondent was authorized to examine Atkinson and Sharpe in the general context of an application for the approval of a settlement, this interlocutory judgment does not thereby become an order made under the Canada Business Corporations Act. The relationship between the power which is in fact exercised and the legislative source must, in my opinion, be much closer for s. 249 C.B.C.A. to apply. For example, if the trial judge had approved or rejected the proposed settlement, this would have been an order which, under s. 242(2) C.B.C.A., derived its source from a power specifically conferred by the Canada Business Corporations Act. On the other hand, saying that an examination authorized to collect information on discovery is no different for the purposes of an appeal from an order provided for in the provision in question amounts to confusing means and ends.

[16] Unlike Kelvin, the order in this case was not an interlocutory order but a final order disposing of potential defences in an oppression action. In my view, the relationship between the power exercised by the motion judge was sufficiently “close” to a legislative source under the OBCA, namely, the power to adjudicate on oppression claims under s. 248. Implicit in that power is the authority to allow or deny certain claims and defences. When a court allows or dismisses an application under s. 248 after the completion of the proceedings, it is making an order under the OBCA which is appealable to the Divisional Court under s. 255. In my view, when a court exercises what is, in effect, the same power by allowing or dismissing a claim or a defence brought under s. 248 at an early stage of the proceeding, it is equally making an order “under this Act”. The relationship between the power in fact exercised – dismissing a defence to the claim – is sufficiently “close” to the source of the legislative power under s. 248.

[17] Furthermore, as Laskin J.A. noted in Amaranth L.L.C. v. Counsel Corporation (2004), 2004 CanLII 10897 (ON CA), 71 O.R. (3d) 258 (C.A.) at para. 10, the result in Kelvin “was driven by an important policy consideration”: to interpret the appeal provision in the C.B.C.A. in a way that was consistent with its purpose and with the purpose of the Act as a whole. Thus, in Kelvin, L’Heureux-Dubé J. held that allowing appeals as of right from an “almost unlimited number of interlocutory judgments that may be rendered in the course of a proceeding… would be contrary to the legislature’s primary objective of providing a fast and effective remedy to protect shareholders vulnerable to oppression”: Kelvin at p. 258.

[18] The interpretation of s. 255 of the OBCA that I adopt provides for a single appeal route for orders that finally resolve issues in an oppression action brought under the OBCA. Thus, interpreting s. 255 so as to include the order granted in this case is consistent with the purpose of s. 248 which, like its CBCA counterpart, provides a fast and effective remedy to protect vulnerable shareholders.

[19] This interpretation of s. 255 makes a good deal of common sense. In Amaranth, Laskin J.A. held at para. 12:

[I]t would be an anomalous result if the issue of standing were to be hived off and appealable only to this court, while the underlying merits of the s. 255 proceedings were appealable to the Divisional Court.

[20] Equally, it would be an anomalous result if orders finally determining issues, obtained prior to the completion of the full hearing of the merits of the case, were appealable to the Court of Appeal while, if determined after the hearing, decisions on same issues and the underlying merits of the case were appealable to the Divisional Court.

[21] There is one other aspect of this case that deserves comment. The plaintiffs’ claim is based primarily on s. 248 of the OBCA. However, the plaintiffs make an alternative claim for breach of fiduciary duty. On this motion, the parties did not suggest that s. 255 was inapplicable because the alternative claim was not made under the OBCA. Indeed, the main plaintiff, the Ontario Securities Commission, pleads its authority to make the oppression claim under s. 248 of the OBCA. It has not plead that it is making a claim in any other capacity. In these circumstances, I do not think that the presence of the alternative fiduciary duty claim alters the appeal route.

[22] As I said at the outset, the order under appeal in this case is a final order that resolves a proposed issue in the oppression action. The same reason that the order is considered to be a final order is the reason why, in my view, it ought to be considered as “an order made… under this Act” for the purposes of s. 255.

[23] In the result, I am satisfied that the proper route of appeal is to the Divisional Court and I make an order transferring this appeal to that court.

RELEASED: “DRO” “APR. 02 2009”

“Dennis O’Connor A.C.J.O.”