COURT FILE NO.: 449/04

DATE: 2005-04-01

SUPERIOR COURT OF JUSTICE – ONTARIO

DIVISIONAL COURT

RE: Chere McCormick, Trustee of the Estate of John McCormick, Applicant (Appellant) -and- Colleen Murphy, personally and as Trustee of the Estate of Thomas Murphy, Respondent (Respondent)

HEARD: March 18, 2005

BEFORE: Lane J.

COUNSEL: Michael Jordan, for the Respondent, moving party; Damian Rogers, for the Appellant, responding on the motion.

REASONS FOR JUDGMENT

LANE J.:

[1] The respondent, Colleen Murphy ("Ms. Murphy") moves to quash the appeal brought by the appellant, Chere McCormick, ("Ms. McCormick") from the order of Master Hawkins dated July 7, 2004 in which the Master stayed Ms. McCormick's application under the OBCA[^1] until the disposition of an action brought February 22, 2002, and still pending, in which Ms. McCormick is the plaintiff. In that action, Ms. McCormick asserts that Ms. Murphy and another party, Aberfoyle Steel Inc., of which Ms. Murphy is a shareholder, ought to pay certain sums said to be owing to the late John McCormick for services rendered. In the related application, Ms. Murphy is said to have received sums of money as shareholder, which it was oppressive to Ms. McCormick for her to take.

[2] John McCormick and Thomas Murphy were in business together. They are both now deceased. In her action, Ms. McCormick alleges that Thomas Murphy and the company Aberfoyle owed John McCormick certain sums for services rendered.

[3] In the present application, begun in April 2004, Ms. McCormick asserts that she is a creditor of Aberfoyle and that the shareholders of Aberfoyle caused it to pay the company assets to them rather than to the creditors, thus engaging in oppression of the creditors. She seeks to be granted leave to bring an oppression claim under the OBCA and obtain the same relief in that forum. Ms. Murphy argued before the Master that the action should be permitted to decide the issue of whether Ms. McCormick is a creditor and the Master agreed. He found that the action was the more convenient forum.

[4] Ms. McCormick filed a notice of appeal to the Divisional Court from the order of the Master on July 28, 2004, 21 days after the making of the order.

[5] Ms. Murphy submits that the appeal is out of time. Section 17(a) of the Courts of Justice Act provides that an appeal lies to the Superior Court from an interlocutory order of a Master. Rule 62.01 applies to appeals to a judge from an interlocutory order of a Master and requires that the Notice of Appeal be served within seven days after the making of the order. If that Rule applies, the appeal was launched late. The Rule also requires a date to be fixed for the appeal that is the earliest available after a seven day interval and that does not appear to have been done by Ms. McCormick.

[6] Ms. McCormick submits that the Master's order was not made under the Courts of Justice Act, but under the oppression sections of the OBCA, in particular, sections 245(c) and 248. Under the former section, the court has the discretion to find that any person is a proper person to be a complainant under the latter section. The Master determined, in effect, that Ms. McCormick was not such a person until her action was decided. Therefore, the appeal is governed by section 255 of the OBCA, which provides that an appeal from an order "made under this Act" lies to the Divisional Court.

[7] It is clear that the Master was engaged in a hearing relating to an application under the OBCA, although the jurisdiction which he stated was being invoked was that of the CJA section 106, which gives the Court the power to stay any proceeding. However, there is an equally broad, if not broader, jurisdiction under the OBCA wherein, by section 248(3) the court may make "any interim or final order it thinks fit". I agree that the impact of the decision was to declare that the appellant was not qualified to bring her oppression proceeding until her action was decided. I think that the order can be described as an order made under the OBCA. No matter which section applies, the order is an interlocutory order of a Master.

[8] There is no authority in the CJA for an appeal of an interlocutory order of a Master to the Divisional Court. The jurisdiction of the Court is set out in section 19 and, while section 19(1)(b) provides for appeals from the interlocutory order of a judge, and 19(1)(c) for appeals from a final order of a Master, no section provides for the appeal at bar. Section 17(a) of the CJA provides for an appeal of a Master's order to a Judge, as noted above. The only authority for a direct appeal to the Divisional Court is, therefore, section 255 of the OBCA, which applies to "any order". Rule 62.01 states that it applies to an appeal that is made "to a judge" from (a) an interlocutory order of a Master or (b) a certificate of assessment of costs, or (c) under any other statute, unless that statute provides another procedure. However, section 255 of the OBCA provides for an appeal to the Divisional Court, not to a judge, and provides no procedural guidance.

[9] If section 255 is to be taken literally, every interlocutory matter heard by a Master in an oppression application could be appealed as of right to the full panel of the Divisional Court. When one considers that an interlocutory order of a judge in the same application could only be appealed with leave, it is clear that this cannot have been the intention of the Legislature.

[10] In [Lee v Lee][^2], the members of a corporation appealed under section 329 of the OBCA, (now section 255), against an order requiring a bank to pay certain disputed funds to the corporation. The appeal was quashed by Steele J sitting as a single judge of the Divisional Court, as an interlocutory appeal brought without leave. Rosenberg J. then heard an application regarding an appeal from that order to the full panel, and stated that Steele J. had been in error as section 329 made no distinction between final and interlocutory orders. At paragraph 13, he said:

13. Counsel acknowledged that Justice Steele was not referred to the fact that the appeal was by virtue of s. 329 of the Corporations Act, which provides as follows:

14. An appeal lies to the Divisional Court from any order made by a court under this Act.

15. It is clear from the case-law that the appeal lies by virtue of the statute and that the question of whether the order appealed is final or interlocutory is irrelevant: Ferguson v. Imax Systems Corp. (1982), 38 O.R. (2d) 59, 134 D.L.R. (3d) 519 (Div. Ct.). In that case the court was dealing with the Canada Business Corporations Act, S.C. 1978-79, c. 9, which had a similar provision and Justice Galligan on behalf of the Divisional Court stated in part:

However s. 242 of the Canada Business Corporations Act does not restrict the right of appeal in any such way, it grants an absolute right of appeal from any order. It is therefore my opinion that this court does have jurisdiction to hear this appeal. I do not think that an Act of the Legislature of Ontario can derogate from rights of appeal specifically created by federal statute.

15. While the statute in this case is not a federal statute, the same principle applies as the rules cannot derogate from the clear authority to appeal granted by the provisions of the Act. Accordingly Justice Steele's decision may have been different had counsel argued that the appeal before him was by virtue of the provisions of s. 329 of the Corporations Act and that the question of whether the order appealed from was interlocutory or final had no relevance.

[11] In [Watkin v. Open Window Bakery][^3] the plaintiff, a shareholder, was dismissed from his position as manager and director of the defendant. The defendant refused to pay dividends and to pay off the shareholder's loan made by the plaintiff. The plaintiff started two proceedings: one under the oppression provisions of the OBCA for an order for the purchase at fair market value of the plaintiff's shares; the other for damages for wrongful dismissal. Lederman J. ordered the defendant to make an interim payment of $250,000 to the plaintiff. The defendant appealed to the Divisional Court. The plaintiff moved to quash the appeal, arguing that the order was interlocutory and therefore leave was required, which was not obtained. The defendant relied on s. 255 of the OBCA, which provides that an appeal lies to the Divisional Court "from any order" made by a court under the OBCA.

[12] Rosenberg J. heard the motion and quashed the appeal. In so doing, he resiled from the position he had taken in Lee, that the final or interlocutory nature of the order in appeal made no difference. He had overlooked the significance of an obiter dictum of Galligan J. in Ferguson v. Imax, supra, at page 60:

It is, of course, common ground, that if this were an appeal from an interlocutory order made in proceedings authorized by an Ontario statute, this Court would have jurisdiction only if leave were granted.

[13] Rosenberg J. reasoned that section 19(1) of the Courts of Justice Act provides that an appeal lies to the Divisional Court from: "(b) an interlocutory order of a judge of the General Division, with leave as provided in the rules of the court". The words "unless otherwise provided" are not used. Section 19(1) prevails over s. 255 of the OBCA. In an appeal from an interlocutory order made in proceedings authorized by an Ontario statute, the Divisional Court has jurisdiction only if leave is granted.

[14] Rosenberg J. also referred to [Kelvin Energy Ltd. v. Lee][^4], where the Supreme Court of Canada dealt with an order of the court for authorization to summons two witnesses for an examination for discovery in an application for an oppression remedy based on s. 241 of the C.B.C.A. Section 249 of the C.B.C.A. provided that "an appeal lies to the Court of Appeal from any order made by a court under this Act". The majority decision found that a judgment, whether interlocutory or final, will be appealable as of right under this section only if it was made pursuant to a power expressly conferred by that Act. Madam Justice L'Heureux-Dubé, in speaking for the majority, stated at p. 252 S.C.R., p. 628 D.L.R.:

The scope of s. 249 C.B.C.A. is thus clearly circumscribed. Any judgment, whether interlocutory or final, will be appealable as of right provided it was made pursuant to a power expressly conferred by the Canada Business Corporations Act. That being so, it becomes essential to determine the legislative origin of the power exercised by the trial judge.

[15] Further, at p. 258 S.C.R., p. 633 D.L.R., L'Heureux-Dubé J. foresaw the difficulties arising from a right to appeal an interlocutory order without leave and stated:

First, in view of the almost unlimited number of interlocutory judgments that may be rendered in the course of a proceeding, such an interpretation would be contrary to the legislature's primary objective of providing a fast and effective remedy to protect shareholders vulnerable to oppression by the majority. Second, when the function of the court under s. 242(2) C.B.C.A. is considered together with the correlative necessity of collecting information in advance, it is clear that this interpretation could only lead to an impeding if not a paralysation of the function vested in the judiciary.

[16] While the Kelvin decision was dealing with the same situation as Ferguson, that is, the question of whether or not a provincial statute can limit a right of appeal in a federal statute, the reasons of the majority quoted above are strong support for the proposition stated by Galligan J. in Ferguson [p. 60], namely:

It is, of course, common ground, that if this were an appeal from an interlocutory order made in proceedings authorized by an Ontario statute, this Court would have jurisdiction only if leave were granted.

[17] In Watkin, Rosenberg J. continued:

As argued by Watkin, this proposition of law has a very practical and desirable effect. It avoids clogging the Divisional Court with innumerable appeals as of right of any interlocutory order made under the O.B.C.A. The list of possible orders that can be made under the O.B.C.A. is endless. The difficulty of determining whether an order could only be made under the O.B.C.A. or could also be made under the court's inherent jurisdiction or under some other statutory or common law authority would be avoided. All interlocutory orders made under an Ontario statute and all other interlocutory orders (except those made under a federal statute which provides a clear right of appeal of all orders) would require leave to appeal. I am of the view that that is the law and that the obiter of Justice Galligan referred to was correct and applies in this case. Accordingly, leave to appeal was required and accordingly the motion to quash succeeds.

[18] Mr. Justice Rosenberg's decision in Watkin has been followed in Kabutey[^5] by Southey J. and by the Divisional Court in Goft[^6] where Then J. stated:

3. In Watkin, … Mr. Justice Rosenberg has recognized the principle that while section 255 of the OBCA purports to grant a right of appeal from any order made under the OBCA, that right of appeal does not pertain to interlocutory orders in view of the provisions of s. 19(1)(b) of the Courts of Justice Act. Accordingly, if the order at issue is interlocutory, leave is required before this appeal can proceed.

[19] It appears to me that these cases have settled the law in Ontario so far as appeals from interlocutory orders of judges made in OBCA proceedings are concerned. If the order is interlocutory, leave must be obtained. But the order before me is a Master's interlocutory order. Under section 19(1)(c) of the CJA, the Divisional Court has jurisdiction to hear appeals from a final order of a Master. Such appeals may be and are regularly heard by a single judge of the Divisional Court pursuant to section 21(2)(a) of the CJA. An interlocutory order of a Master may be appealed under section 17(a) of the CJA to a judge of the Superior Court. Since all judges of the Divisional Court are Superior Court judges, this is a formal distinction only. As well, the Master is expressly exercising the power of a judge in hearing "any motion in a proceeding": Rule 37.02(2). "Proceeding" includes an application: Rule 1.03. Section 255 is explicit in authorizing an appeal to the Divisional Court. What then are the options?

[20] The idea that an interlocutory order of a Master would be appealed as of right to the panel when the same order made by a judge requires leave is incongruous to say the least, and as noted earlier, surely cannot have been the intention of the Legislature. It would be equally odd that a final order of a Master could be appealed to a single judge of the Divisional Court, but an interlocutory order would require leave and then go to the full panel. By failing to stipulate any procedures, section 255 is best read as intending to conform to the existing procedures in place for appeals to the Divisional Court which call for leave to appeal on interlocutory orders.

[21] While no appeal to the Divisional Court is mandated by the CJA from an order of a Master, that gap is supplied by the clear words of the OBCA. There is, therefore, an appeal from the interlocutory order of a Master made in an OBCA proceeding, but there is no procedure. In such a case, Rule 1.04(2) calls for the practice to be determined by analogy to the Rules. The appeal must be to the Divisional Court and so cannot be to a judge of the Superior Court. The choices would seem to be to analogize to Rule 62.01 and have the appeal to a single judge of the Divisional Court, or to analogize to the appeal from a Judge and call for leave to go to the panel.

[22] In my view, the better analogy is to Rule 62.01, particularly because Rule 62.01(1)(c) contemplates that it will apply to appeals under other statutes. True, it speaks of appeals to "a judge", but we must operate by analogy as the exact language does not cover the case. I think a direct appeal to a single judge of the Divisional Court is the preferable course because it allows the first appeal as of right, a normal state of affairs in our jurisprudence. It is a quicker and less expensive way of having a review, as it is one procedure and not two. It also avoids the necessity, discussed in Kelvin, supra, of determining whether the Master was exercising a power expressly given by the OBCA or one given by the CJA, which can be problematic. Since all Judges of the Divisional Court are also Judges of the Superior Court, and do not lose either jurisdiction wherever they sit[^7], the origin of the power is academic, at least for this narrow purpose.

[23] Since the better analogy is to Rule 62.01, it follows that the procedure of that Rule should be adopted as far as possible. That would make the time limits and scheduling requirements applicable.

[24] That brings me at last to the merits of the motion to quash. The appeal was brought out of time, as the moving party asserts. However, as the procedure has had to be invented, it is an appropriate case to refuse to quash the appeal, extend the time for appealing to July 28, 2004 and direct that the appeal is to be heard by a single judge of the Divisional Court.

[25] The motion to quash is dismissed, but in the circumstances without costs.

Lane, J.

DATE: April 1, 2005

[^1]: Ontario Business Corporations Act, R.S.O. 1990, c. B.16 [^2]: Lee v. Lee (1995), 23 O.R. (3rd) 130 (O.C.G.D.) [^3]: Watkin v. Open Window Bakery Ltd. (1996), 28 O.R. (3rd) 441 (Div. Ct.) [^4]: [1992] 3 S.C.R. 235, 97 D.L.R. (4th) 616. [^5]: Kabutey v. New-Form Manufacturing Co. [1997] O.J. No. 5305. [^6]: Goft v. 1206468 Ontario Ltd. [2002] O.J. No. 3659 [^7]: Anthes Equipment Ltd. v. Wilhelm Layher GmbH (1986), 53 O.R. (2d) 435 (HCJ)