Fram Elgin Mills 90 Inc. (Formerly Frambordeaux Developments Inc.) v. Romandale Farms Limited et al., 2016 ONCA 404

Fram Elgin Mills 90 Inc. (Formerly Frambordeaux Developments Inc.) v. Romandale Farms Limited et al.

[Indexed as: Fram Elgin Mills 90 Inc. v. Romandale Farms Ltd.]

Ontario Reports

Court of Appeal for Ontario,

Weiler, Hourigan and Huscroft JJ.A.

May 26, 2016

131 O.R. (3d) 455 | 2016 ONCA 404

Case Summary

Judgments and orders — Final or interlocutory order — Motion judge granting defendant leave to amend statement of defence and to add party as defendant — Plaintiff's appeal to Court of Appeal quashed for [page456] lack of jurisdiction — Orders interlocutory — Motion judge not making final determination that res judicata and Limitations Act, 2002 did not apply to proposed defence — Limitations Act, 2002, S.O. 2002, c. 24, Sch. B.

The motion judge granted the defendant leave to amend its statement of defence and to add a party as a defendant. The plaintiff appealed. The defendant brought a motion to quash the appeal on the basis that the court lacked jurisdiction because the orders under appeal were interlocutory.

Held, the motion should be granted.

The orders in question were interlocutory. The fact that the motion judge responded to submissions by the plaintiff that the defendant could not amend its statement of defence on account of res judicata and that the proposed amendment was barred by the Limitations Act, 2002 did not make the orders final. The motion judge was merely rejecting the arguments put forward for not allowing the proposed amendment, and was not making a final determination that res judicata and the Limitations Act, 2002 did not apply.

Cases referred to

Abbott v. Collins (2002), 2002 CanLII 41457 (ON CA), 62 O.R. (3d) 99, [2002] O.J. No. 4058,165 O.A.C. 272, 26 C.P.C. (5th) 273, 117 A.C.W.S. (3d) 521 (C.A.); Ashak v. Ontario (Director, Family Responsibility Office) (2013), 115 O.R. (3d) 401, [2013] O.J. No. 2573, 2013 ONCA 375, 363 D.L.R. (4th) 322, 48 R.F.L. (7th) 130, 307 O.A.C. 103, 4 C.C.L.T. (4th) 1, 228 A.C.W.S. (3d) 7; Ball v. Donais (1993), 1993 CanLII 8613 (ON CA), 13 O.R. (3d) 322, [1993] O.J. No. 972, 64 O.A.C. 85, 45 M.V.R. (2d) 319, 40 A.C.W.S. (3d) 1031 (C.A.); Dynasty Furniture Manufacturing Ltd. v. Toronto-Dominion Bank, [2015] O.J. No. 945, 2015 ONCA 137; Fram Elgin Mills 90 Inc. v. Romandale Farms Ltd., [2014] O.J. No. 2988, 2014 ONSC 3785 (Div. Ct.); Fram Elgin Mills 90 Inc. v. Romandale Farms Ltd., [2015] O.J. No. 6109, 2015 ONSC 7308 (S.C.J.); Grand River Enterprises v. Burnham, 2005 CanLII 6368 (ON CA), [2005] O.J. No. 952, 197 O.A.C. 168, 10 C.P.C. (6th) 136, 137 A.C.W.S. (3d) 940 (C.A.); Hunter v. Richardson, [2013] O.J. No. 5896, 2013 ONCA 731; Natario v. Rodrigues, [2015] O.J. No. 1640, 2015 ONCA 227, 71 C.P.C. (7th) 285, 251 A.C.W.S. (3d) 423; S. (R.) v. H. (R.) (2000), 2000 CanLII 17038 (ON CA), 52 O.R. (3d) 152, [2000] O.J. No. 4843, 195 D.L.R. (4th) 345, 139 O.A.C. 378, 7 C.P.C. (5th) 32, 19 R.F.L. (5th) 383, 101 A.C.W.S. (3d) 1093 (C.A.); Spar Roofing and Metal Supplies Ltd. v. Glynn, [2016] O.J. No. 2152, 2016 ONCA 296, 348 O.A.C. 330, 265 A.C.W.S. (3d) 250; Stoiantsis v. Spirou (2008), 91 O.R. (3d) 184, [2008] O.J. No. 2736, 2008 ONCA 553, 57 C.P.C. (6th) 30, 168 A.C.W.S. (3d) 235

Statutes referred to

Courts of Justice Act, R.S.O. 1990, c. C.43, ss. 6(1) (b) [as am.], 19(1)(b) [as am.]

Limitations Act, 2002, S.O. 2002, c. 24, Sch. B [as am.], s. 4

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 21.01(1) (a), (b), 26.01

Authorities referred to

Archibald, Todd, Gordon Killeen and James C. Morton, Ontario Superior Court Practice, 2016 Edition (Markham, Ont.: LexisNexis Canada, 2015)

MOTION to quash an appeal. [page457]

Sarit E. Batner and Adam Goldenberg, for moving party Romandale Farms Limited.

Robert Rueter and Janet Lunau, for responding party Fram Elgin Mills 90 Inc.

John J. Longo, for responding parties Jeffrey Kerbel, 2001251 Ontario Inc. and First Elgin Developments Inc.

The judgment of the court was delivered by

1WEILER J.A.: — Romandale Farms Limited ("Romandale") brings this motion to quash appeals by Fram Elgin Mills 90 Inc. ("Fram") and Jeffrey Kerbel et al. ("Kerbel") on the basis that this court lacks jurisdiction because the orders under appeal are interlocutory, not final, orders: see Courts of Justice Act, R.S.O. 1990, c. C.43, ss. 19(1)(b) and 6(1)(b).

2For the reasons that follow, I would agree that the orders are interlocutory and quash the appeals.

A. Factual Background to the Litigation as Set Out in Pleadings

3In order to appreciate the context of the appeals, I will set out a simplified version of the facts based on the pleadings, proposed amendments and the motion judge's reasons.

4Fram and Romandale were co-owners of two parcels of land, known as the Elgin Mills lands in Markham, with ownership apportioned at five per cent to Fram and 95 per cent to Romandale. Their ownership of the lands was governed by two separate but identical co-owners agreements ("COA"). The COA gave Fram the right to require Romandale to sell its 95 per cent share to it.

5On August 29, 2005, Romandale entered into a contract to sell its interest in the lands to 2001251 Ontario Inc. (hereinafter "Kerbel", except as specifically noted).

6Fram issued a claim alleging that Romandale breached the co-ownership agreement and sought a declaration that the August 29, 2005 agreement was void and should be set aside. It claimed specific performance of the COA requiring Romandale to sell its interests in the lands to Fram and also damages against Kerbel.

7Fram settled its action against Kerbel in 2010. Romandale did not participate in the settlement.

8The settlement agreement provided, among other things, that Fram would not seek a declaration that the August 29, 2005 agreement was void, that Fram would seek no relief against Kerbel, and that Kerbel would grant Fram an option to purchase [page458] a 50 per cent interest in the lands Kerbel could acquire through the August 29, 2005 agreement.

9On November 29, 2011, Spence J.'s order granted leave to Fram to amend its statement of claim against Romandale to conform to the settlement agreement. He held that if Romandale had a proper basis for keeping Kerbel in the litigation, it could endeavour to do so by bringing a cross-claim or a third party claim.

10When Romandale received Fram's proposed amended statement of claim, it brought a motion before Master Graham to amend its statement of defence and to commence a cross-claim or third party claim against Fram and the Kerbel defendants.

11In its proposed draft "amended amended statement of defence, crossclaim and counterclaim", Romandale asserted, at para. 62, that in order to trigger the buy-sell provision of the COA it was first necessary to develop the lands so that they could obtain secondary plan approval. The August 29, 2005 agreement between it and Kerbel provided for them to co-operate in developing the Elgin Mills lands to that point with Kerbel responsible for the development costs. At para. 68, Romandale asserted that the August 29, 2005 agreement was now terminated as a result of the September 2010 settlement agreement between Fram and Kerbel.

12Fram and Kerbel submitted that the September settlement agreement contemplated performance of the August 29, 2005 agreement in accordance with its terms.

13Master Graham observed that although the language of rule 26.01 [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194] with respect to amendment of pleadings is mandatory, the court still retains the discretion to scrutinize the proposed amendments and to refuse them if they are not tenable in law. He held, at paras. 13-14:

I accept that the settlement between [Fram] and the Kerbel defendants does not amount to a breach of the August 29, 2005 agreement because whatever the Kerbel defendants do with the lands once Romandale's interest in them is conveyed to them pursuant to that agreement is none of Romandale's concern. [Fram] is free to abandon its claim for specific performance under its co-owners agreements with Romandale, mitigate its damages to the extent of the 50% interest to be conveyed to it by the Kerbel defendants and claim damages from Romandale in respect of the remaining 50%.

Accordingly, as [Fram's] settlement with the Kerbel defendants does not constitute a breach of any agreement or agreements between any of the parties, it does not give rise to any cause of action or defence in favour of Romandale. Romandale's proposed amendments are therefore not tenable at law and its motion to amend its pleading is also dismissed. [page459]

14Romandale appealed the decision of Master Graham to a single judge of the Divisional Court and the appeal was heard by Kitely J.

15In dismissing Romandale's appeal on June 20, 2014 [[2014] O.J. No. 2988, 2014 ONSC 3785 (Div. Ct.)], Kitely J. held that the master did not make findings of fact but assumed the facts as pleaded including the settlement agreement and stated, at paras. 14-15 of her reasons:

A review of the settlement agreement demonstrated that it was plain and obvious that the proposed pleading would not survive rule 21 [entitling a party to strike out a pleading on the ground that it discloses no reasonable defence][.]

The Master focused on the settlement agreement because it was the foundation of the motion. However, that did not mean that he erred by failing to consider the other causes of action proposed. His conclusion with respect to the settlement agreement meant that it was unnecessary to deal with the other proposed causes of action. The Master could readily conclude that the proposed amendments were not tenable, nor was the proposed cross-claim and counterclaim since both depended on the asserted interpretation of the settlement agreement.

16Romandale did not appeal the decision of Kitely J.

17While Kitely J.'s decision was under reserve, Romandale commenced a separate action against Kerbel party 2001251 Ontario Inc. seeking a declaration that the August 29, 2005 agreement had been terminated by reason of breaches of fiduciary duty on account of conflict of interest. Romandale alleged 2001251 delayed pursuing approval for development of the Elgin Mills lands by reason of its interests in neighboring tracts of land.

B. The Order Below

18Romandale once again brought a motion seeking leave to amend its statement of defence (and other ancillary relief not relevant to this motion). It submitted that neither Master Graham nor Kitely J. prohibited Romandale from making further amendments to their pleadings to make them tenable or otherwise compliant with the rules regarding pleadings. At para. 43 of its notice of motion, Romandale asserted:

Romandale's Further Amended Statement of Defence raises no claims, seeks no remedy, and is not statute barred by any legislation including, without limitation, the Limitations Act 2002.

(Emphasis in original)

19Romandale also submitted that the Kerbel parties were necessary parties to the litigation and their presence before the court was necessary as they were likely to be affected by the court order determining the rights between Fram and Romandale and the legal status of the settlement agreement. [page460]

20The motion judge's order [[2015] O.J. No. 6109, 2015 ONSC 7308 (S.C.J.)] granted Romandale leave to amend its statement of defence and joined Kerbel party 2001251 as a defendant for certain limited purposes.

21In making the order he did, the motion judge first held there was no prejudice to Fram. Although Romandale again proposed to plead that the settlement agreement between Fram and Kerbel resulted in the repudiation of both the COA and the August 29, 2005 agreement, it pleaded facts and theories that the motion judge, who was also the case management judge, held were tenable defences to Fram's pleading of the settlement agreement and request for its approval.

22He observed, at paras. 68-69:

[T]he Settlement Agreement lifted from [Fram's] shoulder the prospect of having to finance an immediate acquisition of approximately $40 million of land [if it exercised the buy-sell clause in the COA] and the full assumption of the risks of ownership thereof thereafter (including development and approval risk) and replaced it with a fixed-price option without up-front cost that it may or may not choose to exercise years in the future.

By entering into the Settlement Agreement, [Fram] knowingly assumed the risk that it could obtain that benefit without Romandale's consent. Romandale seeks only to plead that this is not so and why.

23In response to Fram and Kerbel's submissions that Romandale could not amend its statement of defence on account of res judicata and that to allow an amendment would constitute an abuse of process, he held, at paras. 3 and 4:

Failure to advance theories of defence at a prior pleadings motion does not operate to deprive a party of the ability to make a full answer and defence when the claim against it is ultimately heard. No party will be compelled to attend trial with its hands tied behind its back by reason of prior errors that can yet be corrected without injustice. The abuse of process would consist in failing to hear such defences and risking a miscarriage of justice.

There is no question here of abandoning the principles of res judicata. There has been no examination of any of these issues on the merits. . . . This was a case of a failed pleadings amendment dismissed due to its evident deficiencies without examination of the merits.

(Emphasis in original)

24He further held in relation to res judicata, at para. 98 of his reasons:

The rejection of the proposed pleading by Kitely J. establishes no more than that the particular proposed pleading as pleaded disclosed no reasonable cause of action. It cannot be taken to foreclose the prospect of a revised pleading passing muster. Even pleadings dismissed pursuant to Rule 21 of the Rules of Civil Procedure are normally done with leave to amend unless it is plain and obvious that the claim cannot be pleaded back into life: [page461] AGF Canadian Equity Fund et al. v. Transamerica Commercial Finance Corporation Canada et al., (1993) 1993 CanLII 8682 (ON CTGD), 14 O.R. (3d) 161 at para. 21. To hold otherwise would be "contrary to the policy that cases should be finally decided on their merits, not on technicalities arising from mispleading, and contrary to the liberal approach to pleading found in Rule 26.01": AGF, (supra) per Borins J. (as he then was) at para. 35.

(Emphasis in original)

25The motion judge also rejected the submission that the proposed amendment was barred by the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B. In this regard, he dealt with the argument that Romandale's proposed amended statement of defence coupled with the request for joinder of the Kerbel parties amounted to making claims against them that were statute-barred. He commented, at para. 111: "Were Romandale to bring a claim against 2001251 seeking damages or other relief as against 2001251, this assertion may well have merit. That is not the case here." He dismissed the argument [at para. 112] because, "Section 4 of the Limitations Act, 2002 prohibits the commencement of a proceeding in respect of a claim. The raising of a proper defence to a claim asserted is by its very nature not subject to that prohibition."

26Romandale also sought to have the Kerbel parties added generally as a party defendant to the litigation. In adding only Kerbel party 2001251, the motion judge stated, at para. 118: "only 2001251 is a party to the August Agreement and it is the intersection of the August Agreement with the Settlement Agreement that is the basis of Romandale's motion". Accordingly, only 2001251 was added as a party defendant [at para. 119] "for the limited purpose of being bound by any determination made by the court . . . regarding: a. Whether the Settlement Agreement ought to be approved and on what conditions; b. . . . whether the August Agreement remains enforceable as against Romandale. . .; and c. Whether, in the alternative, Romandale can repudiate the August agreement unilaterally as it claims."

27Both Fram and Kerbel appealed the decision of the motion judge to this court¹ and also sought leave to appeal the motion judge's costs order. Romandale brought this motion to quash the appeals.

C. Discussion

28An order granting leave to amend a pleading is an interlocutory order: see [page462] Dynasty Furniture Manufacturing Ltd. v. Toronto-Dominion Bank, [2015] O.J. No. 945, 2015 ONCA 137, at paras. 5-7; Natario v. Rodrigues, [2015] O.J. No. 1640, 2015 ONCA 227, 71 C.P.C. (7th), at para. 7. An order adding a party defendant is also an interlocutory order: see Hunter v. Richardson, [2013] O.J. No. 5896, 2013 ONCA 731, at para. 2. The rationale in both instances is that the litigation continues and the order made does not affect a party's substantive rights.

29By contrast, an order under rule 21.01(1)(a) to determine a question of law before trial where the determination disposes of all or part of a claim or defence is final because it precludes the party from raising the issue going forward: see Ball v. Donais (1993), 1993 CanLII 8613 (ON CA), 13 O.R. (3d) 322, [2013] O.J. No. 972 (C.A.), at para. 3; Abbott v. Collins (2002), 2002 CanLII 41457 (ON CA), 62 O.R. (3d) 99, [2002] O.J. No. 4058 (C.A.), at paras. 5-7. Where an order deprives a party of a substantive right that could be determinative of the action, that order is final: Stoiantsis v. Spirou (2008), 91 O.R. (3d) 184, [2008] O.J. No. 2736, 2008 ONCA 553, at paras. 19-22.

30The nature of the underlying motion is an important consideration in deciding whether the order is final or interlocutory. For instance, regardless of the reasons given by the judge for dismissing a motion under rule 21.01(1)(b) to strike a pleading on the ground it discloses no reasonable cause of action or defence, "it is reasonable to think that . . . the judge does not have the power to make a final order under that provision": S. (R.) v. H. (R.) (2000), 2000 CanLII 17038 (ON CA), 52 O.R. (3d) 152, [2000] O.J. No. 4843 (C.A.), at para. 15, per Morden J.A.

31There is an intersection between a motion under rule 26.01 where, in the absence of non-compensable prejudice, an amendment to pleadings must be allowed where a tenable cause of action or defence is disclosed and rule 21.01(1)(b) dealing with a motion to strike a pleading as disclosing no cause of action or defence. In Spar Roofing and Metal Supplies Ltd. v. Glynn, [2016] O.J. No. 2152, 2016 ONCA 296, at para. 43, this court recently held: "Put another way, an amendment [to a pleading] is to be granted unless it would have been struck out under r. 21.01(1)(b) if it had been pleaded originally" (citation removed).

32The logic of Morden J.A.'s reasoning in S. (R.) applies equally to an order granting a rule 26.01 motion. Applying that logic here is sufficient to grant the motion to quash.

33The difficulty in this case arises in part from the motion judge's reasons. However, it is important to observe as a starting point that "the law is clear that an appeal lies from an order, not from the reasons given by the judge making the order": Grand River Enterprises v. Burnham, 2005 CanLII 6368 (ON CA), [2005] O.J. No. 952, 197 O.A.C. 168 (C.A.), at para. 10. Further, "in most instances, the content [page463] of the formal order is integral to determining what has been decided against a party in a fashion that is binding": Ashak v. Ontario (Director, Family Responsibility Office) (2013), 115 O.R. (3d) 401, [2013] O.J. No. 2573, 2013 ONCA 375, at para. 13. In any event, the motion judge's reasons, read as a whole, confirm the conclusion that his order was interlocutory.

34At para. 71 of his reasons, the motion judge observed:

While leave to amend is mandatory under R. 26.01, our courts have long considered that there is a discretion to reject amendments where it is clear that they simply do not make a tenable claim or raise a tenable defence. The approach on such matters is not unlike a Rule 21(1)(a) motion -- the proposed pleading is to be given a broad and generous reading and the facts pleaded are assumed to be true unless it is plain and obvious that they cannot be proved. A close examination of the merits is not called for -- that will be the trial judge's job. At this stage, my task is to assess whether the defences pleaded in the proposed amendment rise to the level of tenable. In my view they do.

35Reading this paragraph in context, I take the motion judge's reference to rule 21.01(1)(a) to be a slip and that his intended reference was to rule 21.01(1)(b). There is a big difference between making a prima facie assessment of whether a defence is tenable under rule 26.01, which is what the motion judge said he was doing, and making a determination under rule 21.01(1)(a) on a question of law which determines or disposes of all or part of the action. The former is what the motion judge is entitled to do; the latter he is not entitled to do on a pleading motion.

36Fram and Kerbel's submission that the motion judge's order is a final order is in effect a submission that in granting Romandale leave to amend its pleadings the motion judge considered the factual and legal basis for the proposed amendment at the pleading stage and made a final determination that res judicata and the Limitations Act, 2002 did not apply to Romandale's defence. That is not what the motion judge indicated he was doing when he said that "a close examination of the merits is not called for". Indeed, had the motion judge made a final determination on the merits of Romandale's defence, he would have erred in law. As stated in Todd Archibald, Gordon Killeen and James C. Morton, Ontario Superior Court Practice, 2016 Edition (Markham, Ont.: LexisNexis Canada, 2015), at p. 1118: "A court is restricted to looking only at whether there is a prima facie meritorious case set out in the pleading, and cannot consider the merits of the factual basis for the proposed amendment."

37In my opinion, the motion judge did not go beyond what he was entitled to do on the motion. [page464]

38In observing that the Limitations Act, 2002 was not a bar to Romandale's proposed amendment to its statement of defence, the motion judge was only stating the obvious, which is that s. 4 of the Limitations Act, 2002 bars claims, not defences, and therefore the low bar of a tenable defence had been met. In rejecting the submission that res judicata and the Limitations Act, 2002 applied, the motion judge was merely rejecting arguments put forward for not allowing the proposed amendment. The rejection of those arguments does not convert the overall nature of the motion from a rule 26.01 motion into a rule 21.01(1)(a) motion or the order made from an interlocutory one into a final order.

39Because the motion judge was only making a preliminary assessment, I see nothing in the order here that prevents Fram and Kerbel from bringing a motion under rule 21.01(1)(a) if so advised.

D. Disposition

40For the reasons given, I would allow the motion to quash on the basis of lack of jurisdiction and quash the appeals. Accordingly, I would not grant leave to appeal the costs award made by the motion judge.

41Costs of this motion are to Romandale. If the parties are unable to agree on the amount of costs or how they should be apportioned, they may make submissions in writing limited to three pages, served and filed in triplicate. Romandale shall have five days from the date of these reasons to make its submissions and Fram and Kerbel shall have a further five days in which to reply.

Motion granted.

Notes

1 Fram and Kerbel also brought motions for leave to appeal the order of the motion judge to the Divisional Court.

End of Document