Saltsov et al. v. Rolnick

[Indexed as: Saltsov v. Rolnick]

101 O.R. (3d) 599

2010 ONSC 914

Ontario Superior Court of Justice, Divisional Court, J. Wilson, Dambrot, Murray JJ.

April 19, 2010

Civil procedure -- Summary judgment -- Appellants bringing simultaneous motions under Rules 21 and 20 -- Rule 21 motion unsuccessful -- Motion judge erring in dismissing Rule 20 motion on ground that it would be fundamentally unjust for party to obtain summary judgment dismissing claim under Rule 20 if party's primary position was that claim failed to disclose reasonable cause of action and should be struck under Rule 21 -- Rules of Civil Procedure, Reg. 194, Rules 20, 21.

Estoppel -- Conduct -- Payment into trust of sufficient funds to satisfy claim not giving rise to estoppel by conduct where claim against funds was specifically subject to final determination by court or arbitration.

Limitations -- Acknowledgment of liability -- Payment into trust of sufficient funds to satisfy claim not constituting admission of liability which could defer running of limitation period under s. 13 of Limitations Act -- Limitations Act, 2002, S.O. 2002, s. 13.

Limitations -- Discoverability -- Respondent alleging that employer made it impossible to perform duties of his employment starting in 2003 -- Respondent leaving his employment in 2004 and alleging that he was constructively dismissed -- Cause of action for constructive dismissal arising when employee elects to resign -- Motion judge erring in finding that employee's cause of action could have arisen in 2003 and could potentially be subject to six-year limitation period under transitional provisions of Limitations Act -- Limitations Act, 2002, S.O. 2002, c. 24, Sch. B.

R was hired as president of C Co. in September 2003 to help find a purchaser and to facilitate the sale of the business. He alleged in his pleadings that from the beginning, he was unable to discharge his duties and responsibilities as president of C Co. because of constant interference by S, a shareholder and director of C Co. In May 2004, S caused a Notice of Action to be issued in which he claimed damages against R for breach of fiduciary duty and trust, inducing breach of contract and interference with economic relations. R pleaded that issuance of the Notice of Action was the culminating event leading to his alleged constructive dismissal. He left his employment on May 20, 2004. On July 16, 2007, he brought a counterclaim against S for damages for inducing breach of contract, intentional interference with prospective economic relations and unjust enrichment. On July 25, 2007, more than three years after he left C Co., R filed a third party claim against C Co. seeking damages for breach of contract equal to the salary, bonus and benefits that he would have received up to and including January 2006, when the assets of the business were sold. C Co. and S brought a motion pursuant to Rule 21 of the Rules of Civil Procedure for an order dismissing R's claims on the basis that they were commenced more than two years after the cause of action arose and were statute-barred by the Limitations Act, 2002. They also brought a motion under Rule 20 for summary judgment on the basis that there was no genuine issue for trial with respect to the limitation issue. R did not file any affidavit material in response to the Rule 20 motion. The motion judge found that it was not plain and obvious that the claim was statute-barred as it was possible for R to have discovered his claims in 2003, when S interfered with his running of the business. In that case, under the transitional provisions of the Act, the former limitation period of six years applied. The motion judge also dismissed the Rule 20 motion on the basis that it would be fundamentally unjust for a party to obtain judgment dismissing a claim under Rule 20 if in reality the primary position of the party was that the claim failed to disclose a reasonable cause of action and should be struck under Rule 21. S and C. Co. appealed.

Held, the appeal should be allowed.

Per Murray J. (Dambrot J. concurring): A cause of action for constructive dismissal arises when the employee elects to resign from his employment. It does not arise when an employer acts unilaterally in a manner which gives rise to the right of an employee to resign but the employee does not resign. The transitional provisions of the Act apply to claims based on acts or omissions which took place before January 1, 2004, and in respect of which no proceeding has been commenced before that date. As pleaded, the claims by R against both C Co. and S did not arise until May 2004, when R left his employment. The operative limitation period in May 2004 was two years. The motion judge erred in law by deciding that R's causes of action could have arisen in 2003 and could potentially be subject to a six-year limitation period. It was plain and obvious that the pleadings did not disclose a reasonable cause of action, and the Rule 21 motion ought to have been successful on that basis.

The motion judge also erred in dismissing the Rule 20 motions for summary judgment on the basis that the primary position of the moving parties was that R's claims should be struck under Rule 21. The motion judge effectively, and incorrectly, ruled out the ability of a party to seek dismissal of an action on alternative bases under Rules 20 and 21 by linking the success of a Rule 20 motion to that of a Rule 21 motion brought at the same time. R did not file any affidavit material in response to the Rule 20 motion. Rule 20.04 provides that the responding party "may not rest on the mere allegations or denials of the party's pleadings, but must set out, in affidavit material or other evidence, specific facts showing that there is a genuine issue for trial". It was not open to the motion judge to conclude that there were sufficient facts in dispute to raise a triable issue.

When C Co. was sold, the sum of $2.2 million was set aside and paid into trust in respect of any claims by R. That payment into trust did not give rise to an acknowledgment and estoppel by conduct. It was not an admission of liability or an acknowledgment that commissions were owed to R. R's claim against the funds was specifically subject to final determination by a court or by arbitration. Setting aside money sufficient to satisfy a claim does not amount to an admission of liability which could defer the running of the limitation period within s. 13 of the Limitations Act, 2002.

Per J. Wilson J. (dissenting in part): It was not plain and obvious that the acknowledgment and estoppel arguments would not succeed. To the contrary, cogent, compelling arguments were raised.

APPEAL from an order dismissing motions under Rules 20 and 21 of the Rules of Civil Procedure.

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(3d) 71, 106 A.C.W.S. (3d) 182; Odhavji Estate v. Woodhouse, [2003] 3 S.C.R. 263, [2003] S.C.J. No. 74, 2003 SCC 69, 233 D.L.R. (4th) 193, 312 N.R. 305, J.E. 2004-47, 180 O.A.C. 201, 11 Admin. L.R. (4th) 45, 19 C.C.L.T. (3d) 163, 127 A.C.W.S. (3d) 178; Oseen v. Chinook's Edge School Division No. 73, 2006 ABCA 286, [2006] A.J. No. 1291, 64 Alta. L.R. (4th) 8, 397 A.R. 278, 53 C.C.E.L. (3d) 222, 153 A.C.W.S. (3d) 368; R. v. Brown, [1993] 2 S.C.R. 918, [1993] S.C.J. No. 82, 105 D.L.R. (4th) 199, 155 N.R. 225, J.E. 93-1438, 141 A.R. 163, 83 C.C.C. (3d) 129, 22 C.R. (4th) 145, 16 C.R.R. (2d) 290, 20 W.C.B. (2d) 195; R. v. G. (L.), [2007] O.J. No. 3611, 2007 ONCA 654, 229 O.A.C. 89, 76 W.C.B. (2d) 178, 228 C.C.C. (3d) 194; R. v. Perka, [1984] 2 S.C.R. 232, [1984] S.C.J. No. 40, 13 D.L.R. (4th) 1, 55 N.R. 1, [1984] 6 W.W.R. 289, J.E. 84-1013, 28 B.C.L.R. (2d) 205, 14 C.C.C. (3d) 385, 42 C.R. (3d) 113, 13 W.C.B. 33; R. v. Rollocks (1994), 19 O.R. (3d) 448, [1994] O.J. No. 1458, 72 O.A.C. 269, 91 C.C.C. (3d) 193, 30 C.R. (4th) 293, 24 W.C.B. (2d) 281 (C.A.); Saltsov v. Rolnick, [2007] O.J. No. 5551 (S.C.J.); Saltsov v. Rolnick, [2008] O.J. No. 5248 (S.C.J.) [Leave to appeal granted [2009] O.J. No. 1864 (S.C.J.)]; Shaw v. Embury, [2009] O.J. No. 3335 (S.C.J.); Transamerica Life Canada Inc. v. ING Canada Inc. (2003), 68 O.R. (3d) 457, [2003] O.J. No. 4656, 234 D.L.R. (4th) 367, 41 B.L.R. (3d) 1, [2004] I.L.R. I-4258, 127 A.C.W.S. (3d) 235 (C.A.); Wasauksing First Nation v. Wasausink Lands Inc., [2004] O.J. No. 810, 184 O.A.C. 84, 43 B.L.R. (3d) 244, [2004] 2 C.N.L.R. 355, 129 A.C.W.S. (3d) 2 (C.A.); Xpress View Inc. v. Daco Manufacturing Ltd., [2002] O.J. No. 4078, 36 C.C.E.L. (3d) 78 (S.C.J.) Statutes referred to Limitations Act, 2002, S.O. 2002, c. 24, Sch. B, ss. 1, 4, 5(1), 13, (1), 24 [as am.], (1) [as am.], (2) [as am.], (5) Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 20, 20.04, (1) [rep. O. Reg. 438/08, s. 13(1)], 21, 39.03 Authorities referred to "Constructive Dismissal" in Brian D. Bruce, ed., Work, Unemployment and Justice (Montreal: Éditions Thémis, 1994)

Richard B. Swan and Jason W. Woycheshyn, for appellant Leon Saltsov. Rocco Di Pucchio and Andrew Winton, for appellant 968831 Ontario Inc., formerly known as CashCode Co. Inc. Brian A. Grosman and John R. Martin, for respondent.

MURRAY J. (DAMBROT J. concurring):

Overview

[1] This is an appeal from an order of the Hon. Justice Morawetz dated December 19, 2008 [[2008] O.J. No. 5248 (S.C.J.)] in which he dismissed motions brought by 968831 Ontario Inc. (formerly known as CashCode Co. Inc.) and Leon Saltsov pursuant to Rules 20 and 21 [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194]. In their Rule 21 motions, the appellants CashCode and Saltsov asserted that Rolnick's claims were commenced more than two years after the cause of action arose and were barred by the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B. In the alternative, Saltsov and CashCode filed evidence in support of a Rule 20 summary judgment motion arguing that there was no genuine issue for trial with respect to the limitation issue. Rolnick did not file any affidavit material in response to the Rule 20 motion.

[2] Justice Morawetz took the view that it was not plain and obvious that the claim is statute-barred given the transitional provisions of the Limitations Act, 2002. Justice Morawetz also dismissed the Rule 20 motions indicating that it would be fundamentally unjust for a party to obtain judgment dismissing a claim under Rule 20 if "in reality the primary position of the party" is that the claim fails to disclose a reasonable cause of action and should be struck under Rule 21.

[3] Leave to appeal the decision of Justice Morawetz was granted by the Hon. Justice Swinton in a lengthy written endorsement dated May 1, 2009 [[2009] O.J. No. 1864 (S.C.J.)].

[4] This appeal raises two principal issues. The first issue relates to when a cause of action is discovered within the meaning of the Limitations Act, 2002. The second issue relates to Rules 20 and 21 and the relationship, if any, between them.

[5] As a result of an argument made for the first time on appeal, there is also an issue whether Saltsov and CashCode are estopped from raising a limitations defence in this case.

The Facts

[6] CashCode carried on business as a manufacturer and retailer of currency validation and cash storage devices used by transportation, gaming, vending and amusement industries. The plaintiff, Leon Saltsov, is a shareholder and director of CashCode.

[7] By August 2003, the directors and shareholders of CashCode had decided that they would pursue a mandate to sell the business. In September 2003, the shareholders agreed to hire a third party to act as interim president of CashCode during the divestiture process. In September 2003, Abe Rolnick was hired as president to help find a purchaser and to facilitate the sale of the business as soon as possible. Rolnick was the president of CashCode from October 1, 2003 until May 20, 2004. The assets of the business were sold on January 17, 2006.

[8] Rolnick alleges in his pleadings that immediately after he began his employment he was unable to discharge his duties and responsibilities as president of CashCode and that Saltsov constantly interfered with every aspect of his authority. On November 7, 2003, Rolnick complained to CashCode's external corporate counsel that Soltov's actions were "contrary to my contract" and were "bordering on breach of my agreement". Rolnick remained on the job for approximately six more months. Rolnick alleges that, during this period, he did a "stellar" job. In 2004, the relationship between Rolnick and Saltsov further deteriorated.

[9] On May 14, 2004, Saltsov caused a Notice of Action to be issued in which he claimed, inter alia, damages against Rolnick for breach of fiduciary duty and trust, inducing breach of contract and interference with economic relations. Rolnick has pleaded that issuance of the Notice of Action was "the culminating event" leading to his alleged constructive dismissal. On May 18, 2004, Rolnick demanded that certain conditions had to be satisfied by the end of the business day on May 19, 2004, failing which he would quit as president of CashCode and "commence an action for constructive dismissal". The conditions were not satisfied and, on May 20, 2004, Rolnick left his employment at CashCode. Rolnick's salary was continued by CashCode until June 26, 2004.

[10] On July 16, 2007, Rolnick commenced a counterclaim against Saltsov, claiming damages for inducing breach of contract; in the alternative, damages for intentional interference with prospective economic relations; and, in the further alternative, damages for unjust enrichment. Rolnick's counterclaim is based on damages allegedly flowing from Saltsov's alleged involvement in the employer's breach of the employment contract which led to Rolnick's departure on May 20, 2004.

[11] Rolnick commenced his action against CashCode on July 25, 2007 -- more than three years later, after he left CashCode -- when he filed a third party claim against CashCode. In the third party claim, Rolnick seeks, inter alia, damages for breach of contract equal to the salary, bonus and benefits that he would have received up to and including January 17, 2006, the date when the assets of the company were sold.

The Companion Motions before Justice Morawetz brought by CashCode and Saltsov pursuant to Rules 20 and 21

[12] CashCode brought a motion to strike Rolnick's third party claim on the ground that the claim was not commenced within the limitation period set out in the Limitations Act, 2002. The motion was brought pursuant to Rule 21 and, in the alternative, a motion was brought pursuant to Rule 20.

[13] At the same time, Saltsov brought a "companion" motion for the same relief in respect of the claim asserted by Rolnick against Saltsov for inducing breach of contract, intentional interference with economic relations and unjust enrichment. Justice Morawetz heard both motions on July 16, 2008, and his endorsement related to both the motion brought by CashCode and the companion motion brought by Saltsov.

The Rule 21 Motions

[14] CashCode's Rule 21 motion to dismiss Rolnick's claim was based on Rolnick's pleading in which he alleged that the repudiation of his employment contract occurred in May 2004 and was accepted by Rolnick on May 20, 2004, thereby giving rise to his claim. CashCode took the position that pursuant to the Limitations Act, 2002, the applicable limitation period was two years; that the time limit began to run on May 20, 2004; that the claim was commenced in July 25, 2007, outside the two-year limitation period; and that the claim is statute-barred.

[15] In his Rule 21 motion, Saltsov took a similar position, that is, that the counterclaim was based on Rolnick's losses flowing from the alleged constructive dismissal and Saltsov's conduct related thereto. As a result, Saltsov argued that Rolnick's claims against him were also statute-barred.

[16] Relying on the transition provisions of the Limitations Act, 2002, Rolnick asserted that the applicable limitation period is six years, being the limitation period under the former Limitations Act and not two years under the Limitations Act, 2002.

[17] Section 24 of the Limitations Act, 2002 provides as follows:

24(1) In this section,

"former limitation period" means the limitation period that applied in respect of the claim before January 1, 2004.

(2) This section applies to claims based on acts or omissions that took place before January 1, 2004 and in respect of which no proceeding has been commenced before that date. . . . . .

(5) If the former limitation period did not expire before January 1, 2004 and if a limitation period under this Act would apply were the claim based on an act or omission that took place on or after that date, the following Rules apply:

1. If the claim was not discovered before January 1, 2004, this Act applies as if the act or omission had taken place on that date.
2. If the claim was discovered before January 1, 2004, the former limitation period applies.

[18] Mr. Rolnick's pleading asserted that from the time he began to discharge his duties and responsibilities as president in 2003, Mr. Saltsov interfered with his running of the business and, furthermore, that the allegations of interference were formally raised in his November 7, 2003 letter to counsel for CashCode. Based on these factual assertions in the pleadings, Rolnick asserted that he "discovered" his claim by no later than November 7, 2003. Rolnick made the same argument in response to the Saltsov Rule 21 motion.

[19] Morawetz J. agreed with Rolnick's submissions and dismissed the Rule 21 motions brought by CashCode and Saltsov on the basis that it was possible for Rolnick to have discovered his several claims in 2003. Justice Morawetz dismissed the motions brought by CashCode and Saltsov without prejudice to their raising the limitation defence at trial.

[20] In support of the alternative relief sought pursuant to Rule 20, CashCode relied on affidavit and other evidence, including the evidence obtained on an examination of Rolnick pursuant to rule 39.03. That evidence established, inter alia, that (a) CashCode hired Rolnick on or about September 26, 2003; (b) Rolnick did not take the position that he had been constructively dismissed until after Saltsov caused a Notice of Action to be filed against him in May 2004; (c) Rolnick's claim that he was constructively dismissed was "in response to" the Notice of Action issued May 14, 2004; (d) Rolnick left the employment of CashCode on May 20, 2004.

[21] Rolnick did not adduce any evidence in response to CashCode's or Saltsov's Rule 20 motions. Rather than respond to the motions on their merits, Rolnick relied solely on an argument that CashCode's and Saltsov's reliance on Rule 20 was an improper attempt to "water down" the "more onerous" test for relief under Rule 21. Justice Morawetz agreed with this submission. The motion judge also concluded that the moving parties had failed to demonstrate that no genuine issue for trial exists. Furthermore, he held there were [a] number of facts in dispute and, as a result, Mr. Rolnick should not be deprived of his right to trial.

Leave to Appeal Granted by Justice Swinton

[22] On May 1, 2009, the Honourable Madam Justice Swinton granted CashCode and Saltsov leave to appeal the order of Justice Morawetz on the grounds that there was good reason to doubt the correctness of his decision and that the appeal raised important issues.

[23] In her written endorsement, granting leave, Justice Swinton came to the following conclusions: (a) for there to be a claim under the Limitations Act, 2002, there must be an injury, loss or damage; (b) an alleged repudiation of a contract does not give rise to a claim for breach of contract until the repudiation is accepted; (c) Rolnick's claim arose at the earliest in May 2004, when he left his employment; (d) Justice Morawetz's conclusion that Rolnick could have discovered his claim in 2003 ignores the definition of "claim" in the Act (which requires "injury, loss or damage") and ignores Rolnick's pleading itself, which alleges that the "culminating event" that led to his constructive dismissal was the Notice of Action issued on May 14, 2004; and (e) the uncontested facts before the court on the Rule 20 motion demonstrate that Rolnick's claim arose at the earliest in May 2004.

Analysis

[24] At the outset, it is useful to consider constructive dismissal as a cause of action. In Farber v. Royal Trust Co., [1997] 1 S.C.R. 846, the Supreme Court of Canada summarized the jurisprudence relating to constructive dismissal, at pp. 864-65 S.C.R., as follows:

Thus, it has been established in a number of Canadian common law decisions that where an employer unilaterally makes a fundamental or substantial change to an employee's contract of employment -- a change that violates the contract's terms -- the employer is committing a fundamental breach of the contract that results in its termination and entitles the employee to consider himself or herself constructively dismissed. The employee can then claim damages from the employer in lieu of reasonable notice.

[25] The Supreme Court in Farber cited with approval an article entitled "Constructive Dismissal", in B.D. Bruce, ed., Work, Unemployment and Justice (1994), 127, in which Justice N.W. Sherstobitoff of the Saskatchewan Court of Appeal defined the concept of constructive dismissal as follows:

A constructive dismissal occurs when an employer makes a unilateral and fundamental change to a term or condition of an employment contract without providing reasonable notice of that change to the employee. Such action amounts to a repudiation of the contract of employment by the employer whether or not he intended to continue the employment relationship. Therefore, the employee can treat the contract as wrongfully terminated and resign which, in turn, gives rise to an obligation on the employer's part to provide damages in lieu of reasonable notice. (Emphasis added)

In the last sentence of this passage approved by the Supreme Court of Canada, it is clear that what gives rise to an obligation to pay damages in lieu of notice is the act of resignation by the employee.

[26] In Dick v. Canadian Pacific Ltd., 2000 NBCA 10, the New Brunswick Court of Appeal in commenting on constructive dismissal observed that it is commonplace that whether an employee has been constructively dismissed is a question of fact. In Dick, the New Brunswick Court of Appeal commented on the wide array of unilateral modifications to the employment relationship brought about by the employer which, if sufficiently significant, may be treated by an employee as wrongfully terminating the employment contract (see paras. 35-37 and the cases referred to therein). At para. 38, the court states as follows:

It is axiomatic that each constructive dismissal case must be decided by applying the relevant principles of law to its own particular facts. Whether a given change to an employment contract is a fundamental alteration will depend on all the circumstances of the particular case, including the specific features of the employment contract in issue. See Farber v. Royal Trust Co., at p. 865.

[27] In Dick, the New Brunswick Court of Appeal also decided when the cause of action of constructive dismissal arises for purposes of a limitation period. Under the applicable legislation, Mr. Dick's action was statute-barred if it was not commenced within six years after the cause of action arose. Therefore, the issue before the New Brunswick Court of Appeal was: when did the cause of action for constructive dismissal arise? In answering this question, the court relied on the Supreme Court of Canada decision in Farber and concluded as follows, at paras. 49-50:

Mr. Dick's action was commenced on December 30, 1988. Section 9 of the Limitation of Actions Act bars Mr. Dick's action if, and only if, it was not commenced "within six years after the cause of action arose". As Stratton, C.J.N.B., underscored in Saint John Shipbuilding Ltd. v. Snyders, at para. 14, an employer's breach of a fundamental term "gives rise to liability should the employee choose to treat that breach as a repudiation of the contract of employment". The common law rule as articulated by Justice Sherstobitoff in the passage reproduced in Farber v. Royal Trust Co., at p. 865 views the employee's resignation as the event giving "rise to an obligation on the employer's part to provide damages in lieu of reasonable notice". England and Christie, in Employment Law in Canada, emphasize in para. 13.24 that the constructive dismissal is deemed to occur upon the employee's resignation:

The acts of the employer may entitle the employee to quit, with or without notice, and to recover damages, with the resignation being treated in all respects as if it were a wrongful dismissal by the employer. This is known as "constructive dismissal". . . .

It follows that Mr. Dick's cause of action only arose once he resigned in early January 1989. Accordingly, his action is not barred by s. 9 of the Limitation of Actions Act.

See, also, the Alberta Court of Appeal decision in Oseen v. Chinook's Edge School Division No. 73, 2006 ABCA 286, in which that court stated as follows [at para. 14]:

It is settled law that repudiation of a contract does not terminate the contract unless the repudiation is accepted. Until the repudiation is accepted, the contract continues. In the employment context, acceptance is often communicated by resignation but it can take other forms: S.M. Waddams, The Law of Contracts, 5th ed. (Toronto: Canada Law Books Inc., 2005) at 448 and Randall S. Echlin & Jennifer M. Fantini, Quitting for Good Reason: The Law of Constructive Dismissal in Canada (Ontario: Canada Law Book Inc., 2001) at 48. Therefore, the Board erred in law in concluding the contract was terminated on the date of the alleged repudiation and not on the date the appellant communicated her acceptance of the alleged repudiation.

[28] The established jurisprudence makes it clear that a cause of action for constructive dismissal arises when the employee elects to resign from his employment. A cause of action for constructive dismissal does not arise when an employer acts unilaterally in a manner which gives rise to the right of an employee to resign but where the employee does not resign.

[29] There would be some very significant practical problems if the courts accepted that a cause of action of constructive dismissal can be discovered before acceptance by the employee of the repudiation of the contract by the employer, that is, before the employee resigns. When an employee suffers interference in the performance of his/her job duties and a concomitant diminution of responsibilities, there may be multiple opportunities for such an employee to resign on the basis that he or she has been constructively dismissed. However, in many circumstances the employee, for perfectly valid reasons, may elect to carry on and see if he/she can work it out. If the respondent is correct about when the limitation period is triggered, it is possible that a plaintiff/employee could resign after being interfered with for two years, having finally had enough (the straw that broke the plaintiff's back), only to be told that the limitation period has expired because she/he could have "accepted the repudiation" of the contract more than two years ago, i.e., the claim was discoverable. This is neither workable nor fair. Neither is such an approach consistent with the jurisprudence.

[30] In considering Justice Morawetz's disposition of the Rule 21 motions, it is necessary to consider the applicable provisions of the Limitations Act, 2002 to determine the appropriate limitation period. Section 1 of the Act defines a claim to mean a "claim to remedy an injury, loss or damage that occurred as a result of an act or omission". Section 4 of the Act states that unless provided otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim is discovered. When is a claim discovered? To answer this question, a consideration of section 5(1) of the Act is necessary. This section provides as follows:

5(1) A claim is discovered on the earlier of, (a) the day on which the person with the claim first knew, (i) that the injury, loss or damage had occurred, (ii) that the injury, loss or damage was caused by or contributed to by an act or omission, (iii) that the act or omission was that of the person against whom the claim is made, and (iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it;

[31] As Swinton J. noted in her endorsement granting leave to appeal, the limitation period begins to run from the time when a claim is discovered within the meaning of the Act. For there to be a "claim" and for the claim to be discovered, there must, by definition and by the words of s. 5(1), be an injury, loss or damage. In the case at bar, there was no injury, loss or damage arising from any of Rolnick's claims before May 20, 2004.

[32] The transitional provisions of the Act, to which I have referred above, apply to claims based on acts or omissions which took place before January 1, 2004 and in respect of which no proceeding has been commenced before that date. As pleaded, the claims by Rolnick against both CashCode and Saltsov did not arise until May 2004, at the time of the resignation from employment by Rolnick. The operative limitation period in May of 2004 was two years.

[33] Justice Morawetz erred in law by deciding that Rolnick's cause of actions could have arisen in 2003 and potentially be subject to a six-year limitation period. In my opinion, it is plain and obvious that the pleadings do not disclose a reasonable cause of action based on the established jurisprudence and on the provisions of the Limitations Act, 2002 which make the claims statute-barred. The Rule 21 motions ought to have been successful on this basis.

[34] In his reply to the statement of defence in the third party claim against CashCode, Rolnick raised an estoppel defence. I am of view that the facts, if assumed proven for purposes of the Rule 21 motion, do not raise an estoppel permitting a successful defence against the argument advanced by CashCode that the third party claim was made outside the limitation period and was statute-barred. I reach this conclusion for several reasons. Firstly, because the respondent did not make this argument before the motion judge, and secondly, because the payment into trust of $2.2 million, on the face of the pleadings, was made available to satisfy the claim of Rolnick subject to a "final determination by a court or the Arbitrator of the subject matter of the Rolnick Action as evidenced by the tendering by Rolnick or the company of a copy of a final order or an order of the Arbitrator . . .". However, if this conclusion is wrong, and the pleadings do contain facts which satisfy all the elements of estoppel, the Rule 20 motion for summary judgment ought to have been considered by Morawetz J. as dispositive.

[35] I now turn to the Rule 20 motions.

The Rule 20 Motions

[36] The motion judge also erred in dismissing the Rule 20 motions for summary judgment on the basis that the "primary position" of the moving parties was that the claims of Rolnick should be struck under Rule 21 as failing to disclose a cause of action.

[37] Justice Morawetz has effectively and incorrectly ruled out the ability of a party to seek dismissal of an action on alternative bases under Rules 20 and 21 by linking the success of a Rule 20 motion to that of a Rule 21 motion brought at the same time. There is no support in the relevant jurisprudence or in the language of the rules of practice which justifies this approach to the two rules. Justice Morawetz erred in law by linking the outcome of a Rule 20 motion to that of the distinctly different Rule 21 motion.

[38] Both rules are important tools to assist in the effective administration of justice. Both assist in the weeding out of cases which have no chance of success. On the other hand, it is imperative that both rules be understood and applied as they are intended, that is, as discrete and different ways of enabling a court to dispose of a case without the necessity of trial. The appellants correctly submit that motions under Rules 20 and 21 require a distinct and separate analysis.

[39] Rule 21 permits a party to bring a motion seeking a disposition based on the facts as pleaded. Pursuant to such a motion, the facts as pleaded by a plaintiff in a statement of claim are taken as proven for purposes of the motion. The question before the trial judge is: is it plain and obvious that the claim will fail if the facts as pleaded are proven? As the Ontario Court of Appeal stated in Transamerica Life Canada Inc. v. ING Canada Inc. (2003), 68 O.R. (3d) 457, at paras. 36-39:

When the motion is brought under rule 21.01(1)(b), the essential question is whether it is plain and obvious that the pleadings disclose no reasonable cause of action or defence: Hunt v. Carey Canada Inc., [1990] 2 S.C.R. 959.

The "plain and obvious" test is also applicable to motions brought under rule 21.01(1)(a): MacDonald v. Ontario Hydro (1994), 19 O.R. (3d) 529 (Gen. Div.).

On a motion to strike a pleading, the court must take the facts alleged in the challenged pleading as true unless they are patently ridiculous or incapable of proof. The court should read the pleading generously, making allowances for drafting deficiencies: Hunt, supra; Nash v. Ontario (1995), 27 O.R. (3d) 1 at 6 (C.A.).

On a pleadings motion, a court should not dispose of matters of law that are not settled in the jurisprudence. Where the law in a particular area can be described as "muddy", the court will not strike that part of the pleading, nor hold that the claim or defence must fail: Nash, supra.

[40] Rule 20, on the other hand, is based on an assessment of evidence before the motion judge through a written record. As rule 20.04 states, evidence is necessary and the responding party to a Rule 20 motion for summary judgment may not merely rest on pleadings but must respond to the motion and put his best foot forward.

[41] The jurisprudence relating to summary judgments is clearly set out in two oft-cited cases, Canada (Attorney General) v. Lameman, 2008 SCC 14, [2008] 1 S.C.R. 372, [2008] S.C.J. No. 14, 292 D.L.R. (4th) 49 and Dawson v. Rexcraft Storage and Warehouse Inc., [1998] O.J. No. 3240, 164 D.L.R. (4th) 257 (C.A.). The Supreme Court of Canada in Canada (Attorney General) v. Lameman (at paras. 10-11) states as follows:

The summary judgment rule . . . prevents claims or defences that have no chance of success from proceeding to trial. . . . It is essential to the proper operation of the justice system and beneficial to the parties that claims that have no chance of success be weeded out at an early stage. Conversely, it is essential to justice that claims disclosing real issues that may be successful proceed to trial.

The court then set out in some detail the applicable principles [at para. 11].

For this reason, the bar on a motion for summary judgment is high. The defendant who seeks summary dismissal bears the evidentiary burden of showing that there is "no genuine issue of material fact requiring trial": Guarantee Co. of North America v. Gordon Capital Corp., [1999] 3 S.C.R. 423, at para. 27. The defendant must prove this; it cannot rely on mere allegations or the pleadings: 1061590 Ontario Ltd. v. Ontario Jockey Club (1995), 21 O.R. (3d) 547 (C.A.); Tucson Properties Ltd. v. Sentry Resources Ltd. (1982), 22 Alta. L.R. (2d) 44 (Q.B. (Master)), at pp. 46-47. If the defendant does prove this, the plaintiff must either refute or counter the defendant's evidence, or risk summary dismissal: Murphy Oil Co. v. Predator Corp., (2004), 365 A.R. 326, 2004 ABQB 688, at p. 331, aff'd (2006), 55 Alta. L.R. (4th) 1, 2006 ABCA 69. Each side must "put its best foot forward" with respect to the existence or non-existence of material issues to be tried: Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1996), 28 O.R. (3d) 423 (Gen. Div.), at p. 434; Goudie v. Ottawa (City), [2003] 1 S.C.R. 141, 2003 SCC 14, at para. 32. The chambers judge may make inferences of fact based on the undisputed facts before the court, as long as the inferences are strongly supported by the facts: Guarantee Co. of North America, at para. 30.

[42] In Dawson v. Rexcraft Storage and Warehouse Inc. (at paras 13 and 17) the Ontario Court of Appeal stated [at para. 13]:

. . . a motion for summary judgment under Rule 20 permits the motions judge to consult not only the pleadings, but affidavits, cross-examination of the deponents, examinations for discovery, admissions and other evidence to determine whether there is a genuine factual dispute between the parties. No witnesses testify (unless, in exceptional circumstances, leave is granted under rule 39.03(4)). The essential purpose of summary judgment is to isolate, and then terminate, claims and defences that are factually unsupported. Because a motion for summary judgment is decided on the basis of documentary evidence, American commentators have described summary judgment as "a form of quick 'paper trial'." See S.C. Yeazell, J.M. Landers and J.A. Martin, Civil Procedure, (3rd ed., 1992, Little, Brown & Co.) at 653. Rule 24.04(2), which is mandatory, provides that a motion for summary judgment is to be granted where the record shows "[t]here is no genuine issue for trial with respect to a claim or a defence," and the moving party is entitled to judgment as a matter of law.

[43] At the summary judgment stage, the court wants to see what evidence the parties have to put before the trial judge, or jury, if a trial is held. Although the onus is on the moving party to establish the absence of a genuine issue for trial, as rule 20.04(1) requires, there is an evidentiary burden on the responding party who may not rest on the allegations or denials in the party's pleadings, but must present by way of affidavit, or other evidence, specific facts showing that there is a genuine issue for trial. The motion judge is entitled to assume that the record contains all the evidence which the parties will present if there is a trial. In deciding whether there is a genuine issue for trial, the motion judge may make inferences of fact based on the undisputed facts before the court, as long as the inferences are strongly supported by the facts: Canada (Attorney General) v. Lameman (supra).

[44] I agree with Justice Swinton that it is difficult to understand Justice Morawetz's conclusion that there were factual disputes sufficient to create a genuine issue for trial because Mr. Rolnick did not file any affidavit material in response to the Rule 20 motions for summary judgment. He was examined as a witness under rule 39.03 by the moving parties who placed the record of this examination before the motion judge. Mr. Rolnick relied on the factual assertions in his pleadings without putting in affidavit evidence notwithstanding rule 20.04 which provides that the responding party "may not rest on the mere allegations or denials of the party's pleadings, but must set out, in affidavit material or other evidence, specific facts showing that there is a genuine issue for trial". In those circumstances, it was not open to Justice Morawetz to conclude that there were sufficient facts in dispute to raise a triable issue. In so concluding, Morawetz J. ignored the provisions of rule 20.04 and committed an error of law.

The Estoppel Defence Raised by Rolnick for the First Time in the Appeal

[45] At the outset, I question whether this court acting as an appellate court should entertain the estoppel argument which, while raised in Rolnick's reply to defence to third party claim, was not argued before Morawetz J. I am mindful in making this comment of the Court of Appeal decision in McNaught v. Toronto Transit Commission (2005), 74 O.R. (3d) 278, [2005] O.J. No. 224 (C.A.) and Justice Gillese's statement that [at para. 57]:

As this court has repeatedly stated, new issues should not be raised on appeal unless the party seeking to raise the new issue demonstrates that the interests of justice require it. See, for example, Wasauksing First Nation v. Wasausink Lands Inc., [2004] O.J. No. 810, 184 O.A.C. 84 (C.A.). No reason for the failure to raise this issue in a timely fashion was advanced. There is no apparent reason why the respondent could not have made the argument in the earlier proceedings.

With respect to raising an entirely new argument on appeal, the controlling principle was articulated by the Supreme Court of Canada in R. v. Perka, [1984] 2 S.C.R. 232, [1984] S.C.J. No. 40, where Dickson J., speaking for the Supreme Court of Canada, stated, at p. 240 S.C.R.:

In both civil and criminal matters it is open to a respondent to advance any argument to sustain the judgment below, and he is not limited to appellants' points of law. A party cannot, however, raise an entirely new argument which has not been raised below and in relation to which it might have been necessary to adduce evidence at trial. See Brown v. Dean, [1910] A.C. 373; Dormuth v. Untereiner, [1964] S.C.R. 122; The SS. "Tordenskjold" v. The SS. "Euphemia" (1908), 41 S.C.R. 154; Dairy Foods, Inc. v. Co-operative Agricole de Granby, [1976] 2 S.C.R. 651.

Although we are not considering an appeal from trial, we are reviewing a motion record based on evidence in the summary judgment proceeding and the concerns expressed by the Supreme Court of Canada in Perka are apposite.

[46] However, in deference to our colleague Wilson J. who has dealt with the estoppel issue in some detail, I feel it necessary to decide the following question: on the evidence, in the context of a Rule 20 motion, is Rolnick's alleged defence of estoppel a triable issue?

[47] Rolnick did not file any material in response to the Rule 20 motions. The only evidence from Rolnick was his cross-examination pursuant to rule 39.03 and it was correctly placed before the motion judge by the moving parties. Rolnick, in his cross-examination, stated that the understanding between the parties was that funds ($2.2 million) would be put aside to stand against his claim for commission relating to the sale of the company. A fair reading of the transcript supports a conclusion that the purpose of this payment into trust was to increase the "saleability" of the company.

[48] The oft-referred-to jurisprudence related to summary judgments establishes: (1) Each side must "put its best foot forward" with respect to the existence or non-existence of material issues to be tried. (2) The party who seeks summary dismissal bears the evidentiary burden of showing that there is "no genuine issue of material fact requiring trial". (3) A party cannot rely on mere allegations or the pleadings. (4) The chambers judge may make inferences of fact based on the undisputed facts before the court, as long as the inferences are strongly supported by the facts.

[49] The task of the court on the summary judgment motion is to determine whether there is a genuine issue for trial. In Mount Sinai Hospital Center v. Quebec (Minister of Health and Social Services), 2001 SCC 41, [2001] 2 S.C.R. 281, [2001] S.C.J. No. 43, Binnie J. described the doctrine of promissory estoppel as it operates in public law (at para. 45):

The party relying on the doctrine must establish that the other party has, by words or conduct, made a promise or assurance which was intended to affect their legal relationship and to be acted on. Furthermore, the representee must establish that, in reliance on the representation, he acted on it or in some way changed his position . . .

See, also, Maracle v. Travellers Indemnity Co. of Canada, [1991] 2 S.C.R. 50, [1991] S.C.J. No. 43, in which Sopinka J. states, at para. 13:

The principles of promissory estoppel are well settled. The party relying on the doctrine must establish that the other party has, by words or conduct, made a promise or assurance which was intended to affect their legal relationship and to be acted on. Furthermore, the representee must establish that, in reliance on the representation, he acted on it or in some way changed his position.

In John Burrows Ltd. v. Subsurface Surveys Ltd., [1968] S.C.R. 607, Ritchie J. stated, at p. 615:

It seems clear to me that this type of equitable defence cannot be invoked unless there is some evidence that one of the parties entered into a course of negotiation which had the effect of leading the other to suppose that the strict rights under the contract would not be enforced, and I think that this implies that there must be evidence from which it can be inferred that the first party intended that the legal relations created by the contract would be altered as a result of the negotiations.

This passage was cited with approval by McIntyre J. in Engineered Homes Ltd. v. Mason, [1983] 1 S.C.R. 641, at p. 647. McIntyre J. stated that the promise must be unambiguous but could be inferred from circumstances.

[50] The payment of money into a trust account is not an admission of liability or an acknowledgment that commission was owed. The claim of Rolnick against the funds was specifically subject to final determination by a court or by arbitration. Indeed, in Maracle, Sopinka J. holds that the admission of liability itself is not a basis upon which estoppel can be based but is only one factor to consider. At para. 16, Justice Sopinka states:

An admission of liability is frequently made in the course of settlement negotiations. This is often a preliminary step in order to clear the way to enter into a discussion as to quantum. Indeed, when an offer to pay a stated amount is made by one party to the other, an admission of liability is usually implicit. In this type of situation, the admission of liability is simply an acknowledgment that, for the purpose of settlement discussions, the admitting party is taking no issue that he or she was negligent, liable for breach of contract, etc. There must be something more for an admission of liability to extend to a limitation period. The principles of promissory estoppel require that the promissor, by words or conduct, intend to affect legal relations. Accordingly, an admission of liability which is to be taken as a promise not to rely on the limitation period must be such that the trier of fact can infer from it that it was so intended. There must be words or conduct from which it can be inferred that the admission was to apply whether the case was settled or not, and that the only issue between the parties, should litigation ensue, is the issue of quantum. Whether this inference can be drawn is an issue of fact. If this finding is in favour of the plaintiff and the effect of the admission in the circumstances led the plaintiff to miss the limitation period, the elements of promissory estoppel have been established.

[51] Neither is there any evidence that the setting aside money sufficient to satisfy a claim is an admission of liability which could defer the running of the limitation period within the meaning of s. 13 of the Limitations Act, 2002. It provides as follows:

13(1) If a person acknowledges liability in respect of a claim for payment of a liquidated sum, the recovery of personal property, the enforcement of a charge on personal property or relief from enforcement of a charge on personal property, the act or omission on which the claim is based shall be deemed to have taken place on the day on which the acknowledgment was made.

In my opinion, not only is there no evidence that the appellants made any admission of liability but there was never a claim for a liquidated sum, the recovery of personal property, the enforcement of a charge on personal property or relief from enforcement of a charge on personal property within the meaning of s. 13 which has no application in this case.

[52] The payment of money into trust was made to increase "saleability" of the company and to remove a contingent claim as a barrier to sale but not to resolve the litigation or with the intention of deferring the running of the limitations period. It is at least consistent with this conclusion that in the factum of the respondent, there is no reference to any of Rolnick's testimony in the cross-examination in support of the estoppel defence. Indeed, there is no reference in the respondent's factum to any evidence in any affidavit or to any other evidence to establish that there is a triable issue relating to estoppel. The estoppel issue was not completely new. It was raised in the pleadings (in Rolnick's reply to defence to third party claim) and -- by Rolnick's choice -- not advanced before Morawetz J., with the result that, on the summary judgment motion, there was no affidavit evidence from Rolnick.

[53] It is not in the interests of justice to depart from the well-established rules relating to summary judgment motions. As stated above, "the task of the court . . . is to determine whether there is a genuine issue for trial. For this purpose, we are entitled to decide on the basis that the record contains all the evidence which the parties will present if there is a trial." At the very least, to raise a triable issue, the respondent representee must "establish that, in reliance on a representation, he acted on it or in some way changed his position" (see Mount Sinai Hospital Center v. Quebec (Minister of Health and Social Services, supra). There is no affidavit evidence from Rolnick that he satisfies this threshold test.

[54] There is no triable issue raised. If the estoppel argument had been raised before the motion judge, CashCode's Rule 20 motion should have resulted in summary judgment being granted dismissing the third party claim by Rolnick.

Conclusion

[55] The Rule 21 motions ought to have been successful because it is plain and obvious that Rolnick's claims were made outside the two-year limitation period and were statute-barred.

[56] The motion judge wrongly tied the outcome of the Rule 20 motions to the success of the Rule 21 motions. By doing so, the motion judge failed to consider summary judgment as alternative relief.

[57] If based on his pleading, Rolnick had argued the estoppel defence in response to CashCode's Rule 21 motion, and if the motion judge had been unwilling to strike his third party claim, CashCode's Rule 20 motion for summary judgment ought to have succeeded because Rolnick filed no affidavit material and raised no triable issue.

[58] The appeals are therefore successful. This court orders that Rolnick's pleadings shall be struck. They are: (1) Rolnick's third party claim dated July 25, 2007 against CashCode in which he claimed, inter alia, damages for breach of contract equal to the salary, bonus and benefits that he would have received up to and including January 17, 2006, the date when the assets of the company were sold. (2) Rolnick's counterclaim dated July 16, 2007 against Saltsov claiming damages for inducing breach of contract; in the alternative, damages for intentional interference with prospective economic relations; and, in the further alternative, damages for unjust enrichment.

[59] For the reasons given above, if Rolnick had argued estoppel based on the facts alleged in the reply to defence to third party claim, and if CashCode's Rule 21 motion to strike out the third party claim had not been successful for that reason, then summary judgment dismissing his claim was warranted.

Costs

[60] The appellants are entitled to their costs in the Divisional Court and below. Brief written submissions on costs should be filed by the appellants within 20 days of this decision and responding brief written submissions filed by the respondent within 20 days of receipt by them of the appellants' costs submissions.

WILSON J. (in partial dissent):

[1] I agree with the analysis and conclusions of Murray J. with respect to the interpretation of the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B and conclude that in a constructive dismissal case, the limitation period begins to run from the date the employee accepts and acts upon the employers' repudiation of the contract. I agree as well that it is important to clearly distinguish the principles that apply in a Rule 21 as compared to a Rule 20 motion brought pursuant to the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The tests applicable for such motions should not be conflated.

[2] However, I respectfully disagree with the conclusions of Murray J. with respect to the issues of the acknowledgement and estoppel by conduct.

[3] The acknowledgement and estoppel issues were not argued before Morawetz J. and are therefore not canvassed in his reasons or the reasons of Swinton J. in the motion for leave to appeal. However, the issues have been pleaded by Rolnick, in the alternative to his other arguments, and are raised before this court. The following questions must be answered:

-- Is it plain and obvious that the claim has no chance of success, or is there a triable issue as to whether CashCode acknowledged the debt owed to Rolnick by agreeing to pay funds in trust in 2006 to protect Rolnick's claim after the sale of CashCode, triggering a new limitation period running from the date of the sale, or the date the funds were paid in trust?

-- Alternatively, in the facts of this case, including the payment of funds in trust, is it plain and obvious that the claim has no chance of success, or is there a triable issue as to whether CashCode and Saltsov are estopped by their conduct from asserting a limitation defence?

[4] Rolnick argues that the two-year limitation period begins to run from the date of sale of CashCode, relying upon the principles of acknowledgement and estoppel. The appellants argue that payment in trust of funds to protect Rolnick's claim is not an acknowledgment as contemplated by s. 13 of the Limitations Act, 2002 and that they are not estopped by their conduct from advancing the limitation defence.

Additional Background Facts Relevant to the Acknowledgement and Estoppel Arguments

[5] Rolnick was hired as president of CashCode on September 26, 2003. He was employed primarily to maximize the value of CashCode in preparation for the sale. In addition to his salary and bonus, Rolnick was entitled to a commission if he was employed at the time CashCode was sold or the sale was completed within 180 days of his termination by mutual consent of the shareholders.

[6] Rolnick began his employment with CashCode on October 1, 2003. Difficulties arose immediately with Saltsov's interference with his ability to perform his job.

[7] The difficulties escalated to the point that the Levitans commenced an application on November 26, seeking a declaration that Saltsov's conduct was interfering with the management of CashCode, and was oppressive, unfairly prejudicial to and unfairly disregarded their interests. They sought to restrain Saltsov from interfering with the management of CashCode.

[8] After initiating the court proceedings, the shareholders entered into an agreement that Saltsov would cease having any involvement in the operation of CashCode, except through Rolnick. The agreement was incorporated into a consent order of Ground J. dated December 11, 2003.

[9] However, the conflict between Saltsov and Rolnick continued and escalated. Saltsov refused to abide by the conditions requested by Rolnick's counsel, and so Rolnick left his employment on May 20, 2004.

[10] The acrimony between the parties subsided by agreement until CashCode was sold in January 2006. We do not have the complete picture. In essence, the parties agreed to a "cease fire" in their litigation to promote the sale of the business. Rolnick relies upon this agreement as triggering a new limitation period running from the date of the sale of the business.

[11] It is clear that there are undisputed, unusual facts in this case relevant to the acknowledgment and estoppel arguments raised by Rolnick.

[12] Rolnick confirmed in his cross-examination the understanding between the parties that funds would be put aside to stand against his claim, but that pending the sale no steps would be taken in his proposed lawsuit, as to do so would impede the sale of CashCode:

"That was an -- that arrangement was negotiated by Kuretsky [the lawyer for Rolnick] and it was based on a stay of actions by myself against the company because the opinion was that I would -- if I continued my actions, we could materially affect the saleability of the company, and that was not in my best interests or in the company's best interests."

"So we agreed to set aside the monies so the company could succeed in the saleablilty of the business".

"There was an understanding".

[13] This evidence was undisputed.

[14] In a letter dated November 25, 2005, counsel for Rolnick confirmed that an agreement had been reached that funds would be put aside from the proceeds of the sale of CashCode with respect to Rolnick's claim, whether pursued by arbitration or an action:

I have now had an opportunity to discuss matters with each of you respectively and would appreciate if we could reach a consensus with respect to resolving Mr. Rolnick's claim.

It is my understanding that the settlement agreement last March continues to apply in the circumstances. As per our agreement, in the event that the business is sold, money will be set aside for Mr. Rolnick in order that his issues can be litigated before an arbitrator or in court if necessary.

It would appear at this point that we have a couple of options: we can agree to an overall resolution of Mr. Rolnick's claim, or we can fix a date for arbitration. Mr. Rolnick is certainly agreeable to an early mediation prior to arbitration. [Emphasis added]

[15] This November 25, 2005 letter confirms that the agreement with respect to holding funds in trust was reached in March 2005.

[16] When CashCode was sold in January 2006, in accordance with the parties' agreement, the sum of $2.2 million was segregated from the sale proceeds and placed in trust. The agreement with respect to the funds was confirmed by two consent court orders.

[17] The appellants Saltsov and CashCode signed an Acknowledgement and Direction dated May 19, 2006 that the $2.2 million would be held in trust until the matter is finally determined by either arbitration or by a court.

[18] This document provides:

Acknowledgement and Direction

Whereas, pursuant to an Order of the Court, dated March 28, 2006, and attached hereto as Schedule "A", Davies Ward Phillips & Vineberg LLP ("DWPV") is holding in trust the sum of $2,200,000 USD in respect of the claim made against 968831 Ontario Inc. (the "Company") by Abe Rolnick ("Rolnick") for his alleged wrongful termination by the Company (the "Rolnick Action").

1. The Company and Rolnick hereby jointly direct DWPV to hold the sum of $2,200,000 USD in an interest bearing trust account and to pay out these funds or a portion thereof so determined within (a) thirty days of the final determination by a court or the arbitrator of the subject matter of the Rolnick Action as evidenced by the tendering by Rolnick or the Company of a copy of a final court order or an order of the arbitrator and upon notice to the Company and Rolnick of the same, or (b) fourteen days of the execution and delivery by Abe Rolnick to the Company of an agreed-upon release.

[19] This document entitled "Acknowledgement and Direction" does not acknowledge the debt owed, but does unequivocally confirm that a claim was made by Rolnick in the "Rolnick Action", even though at that point in time Rolnick's pleading had not yet been served.

[20] Rolnick relies on the Acknowledgement and Direction and the agreement that no steps were to be taken by any party until CashCode was sold to argue that the limitation period commenced as of the date of sale of CashCode in January 2006, or the date that the funds were paid in trust in accordance with the agreement of the parties.

[21] CashCode and Rolnick are subject to a clause for mandatory arbitration for all issues arising from Rolnick's employment. Saltsov signed the employment contract as shareholder of CashCode.

[22] The parties could not agree whether all matters should proceed by way of arbitration, or in the courts. To date, Rolnick has expressed a preference to proceed with all issues by way of arbitration, but the appellants have refused.

[23] The Arbitration clause provides the following:

ARTICLE 5 -- ARBITRATION

5.1 The Executive and the Corporation agree that any dispute arising out of this Agreement, whether arising during the term of this Agreement or after, shall be finally, exclusively and unconditionally resolved by private arbitration pursuant to the Ontario Arbitration Act, 1991 . . .

5.6 The decision of the Arbitrator(s) shall be final and binding and is not subject to appeal. The decision of the arbitrator(s) may be entered in any court of competent jurisdiction for enforcement.

[24] Rolnick reiterated his request for binding arbitration on May 19, 2006, one day before the limitation period relied upon by the appellants would expire. The e-mail from his counsel provides as follows:

Dear Sirs:

Further to our telephone conversation we have reached the point where the parties need to discuss appropriate arbitrators to hear this matter. I would suggest Steve Raymond, George Adams or Gary Caplan.

We would also be agreeable to entering into a mediation process if your respective clients are agreeable.

Barry Kuretzky

[25] Counsel for Saltsov confirmed that his preference was to proceed with all claims in the court. On May 19, 2006, he responded that he would get back to him in a week about the method of proceeding:

Mr. Kuretzky,

Thank you for your e-mail.

As we have discussed on many occasions, if this matter is to be litigated, then it will be in a court of law as my client fully intends to prosecute a claim against Mr. Rolnick. I believe the case law is clear (and I believe you do not dispute this) that if there are claims and crossclaims and one is being asserted through arbitration and one through the judicial process, both must be dealt with in a court.

I intend to discuss your position with counsel for the Levitans and may respond further next week.

Regards,

Ian

[26] On May 19, 2006, all parties clearly contemplated that the dispute would be resolved by way of litigation or arbitration. Counsel on behalf of Saltsov makes no mention of his reliance on the pending expiry of the limitation period, but merely states that he "may respond further next week" with respect to whether all issues should proceed to arbitration or in the court.

[27] What happened between the parties between May 19, 2006, when the above noted e-mails were exchanged, and March 30, 2007, when Saltsov reactivated the proceedings by serving his amended amended Statement of Claim, is not before the court.

[28] On April 10, 2007, Rolnick brought a motion before Echlin J. that was heard over a period of three days, seeking to strike Saltsov's statement of claim or, in the alternative, for a stay of proceedings so that the matter could proceed to arbitration. Of note, the allegation of the expiry of the limitation period and hence the capacity of Rolnick to bring the motion to strike Saltsov's pleading were not raised before Echlin J.

[29] The reasons of the motions court judge confirm that there had been 38 court appearances in the various proceedings brought by Saltsov against Rolnick and others. We do not have the details of the various appearances in the litigation.

[30] In brief handwritten reasons dated April 12, 2007 [[2007] O.J. No. 5551 (S.C.J.)], Echlin J. concluded that Saltsov's claim was tenuous, but that it was not plain and obvious that the claim could not succeed in accordance with the Rule 21 test. Therefore, he dismissed Rolnick's motion.

[31] The alternative request by Rolnick to refer all the issues to arbitration was not dealt with in the brief reasons of Echlin J.

[32] On July 16, 2007, Rolnick served his counterclaim against Saltsov in response to the amended amended claim. He sought damages for inducing breach of contract or, alternatively, interference with prospective economic relations or, in the further alternative, unjust enrichment.

[33] On July 25, 2007, Rolnick filed a third party claim against CashCode seeking damages for breach of contract.

[34] One of the defences raised by CashCode and Saltsov for the first time in their pleadings was the assertion that Rolnick's claims were statute-barred, as the two-year limitation period under the Limitations Act, 2002 had expired on May 20, 2006 -- two years after Rolnick left his employment.

[35] Rolnick filed pleadings asserting that the claim was discovered in November and December 2003, and therefore the transition provisions of the Limitations Act, 2002 applied. In his reply to the defence to third party claim, he also raised in the alternative the arguments that estoppel and acknowledgement precluded reliance upon the limitation period.

[36] On July 16, 2008, the appellants brought the motion to strike the pleadings before Morawetz J.

Analysis

[37] Generally, it is not appropriate to raise new arguments on appeal. However, neither appellant objected to raising the acknowledgement and estoppel issues before this court.

[38] The court may depart from the general rule discouraging new issues on appeal where it is in the interests of justice to do so and the court has a sufficient evidentiary record to proceed on: McNaught v. Toronto Transit Commission (2005), 74 O.R. (3d) 278, [2005] O.J. No. 224 (C.A.), at para. 57; Wasauksing First Nation v. Wasausink Lands Inc., [2004] O.J. No. 810, 184 O.A.C. 84 (C.A.), at para. 102.

[39] There can be no step more drastic than striking a pleading pursuant to Rule 20 disposing of the action. The interests of justice clearly engage if such an order may not be appropriate.

[40] The concerns that underlie the general prohibition against new arguments on appeal are not applicable in the facts of this case. In R. v. Brown, [1993] 2 S.C.R. 918, [1993] S.C.J. No. 82, L'Heureux-Dubé J. articulated these concerns in the context of a criminal matter, at p. 923 S.C.R., as "first, prejudice to the other side caused by the lack of opportunity to respond and adduce evidence at trial and second, the lack of a sufficient record upon which to make the findings of fact necessary to properly rule on the new issue". Although L'Heureux-Dubé J. was writing in dissent, courts have cited her analysis of the principles with approval: see R. v. Rollocks (1994), 19 O.R. (3d) 448, [1994] O.J. No. 1458, (C.A.), at para. 16; R. v. G. (L.), 2007 ONCA 654, [2007] O.J. No. 3611, 229 O.A.C. 89 (C.A.), at para. 43.

[41] In this case, there is no prejudice to the appellants, as the issues were raised in the third party pleadings. The appellants did not argue that the estoppels issue should not be considered by this court.

[42] I conclude for reasons to be outlined that the estoppel and acknowledgment arguments raise genuine issues requiring a trial to determine whether the limitation period should begin from the date of sale of CashCode, applying the test in either Rule 20 or 21 of the Rules of Civil Procedure.

The "Plain and Obvious" Test Under Rule 21

[43] The test under Rule 21 is a stringent one. The moving party must prove that it is plain and obvious that the claim as pleaded cannot succeed. Courts have consistently emphasized that pleadings should only be struck for disclosing no reasonable cause of action in the clearest of cases. The Supreme Court of Canada described the test in Odhavji Estate v. Woodhouse, 2003 SCC 69, [2003] 3 S.C.R. 263, [2003] S.C.J. No. 74, at para. 15, as follows:

The test is a stringent one. The facts are to be taken as pleaded. When so taken, the question that must then be determined is whether there it is "plain and obvious" that the action must fail. It is only if the statement of claim is certain to fail because it contains a "radical defect" that the plaintiff should be driven from the judgment.

[44] The Ontario Court of Appeal reiterated the importance of allowing novel claims to proceed to trial in Freeman-Maloy v. Marsden (2006), 79 O.R. (3d) 401, [2006] O.J. No. 1228 (C.A.), at para. 18, stating, "[a] pleading should only be struck under Rule 21 where it is 'plain and obvious' that the claim has no chance of success and novel and unusual claims should be allowed to proceed to trial where they can be tested on a full factual record."

Rule 20 Motion Test

[45] In a Rule 20 motion for summary judgment, the court must consider the evidence to determine if there is a genuine issue for trial. The case law is clear that the following principles are to be applied in assessing whether a summary judgment motion should be granted: (i) The moving party who seeks dismissal of an action has the initial burden of showing that there is no genuine issue of material fact requiring a trial for resolution. Once the moving party has satisfied this burden, the responding party has an evidentiary burden to establish its claim as being one with a "real chance of success". (ii) In order to discharge that evidentiary burden when it is applicable, the party responding to a motion for summary judgment must adduce coherent evidence based on an organized set of facts to show that there is a real issue to be tried on admissible evidence. The responding party must "lead trump or risk losing". (iii) A party is not entitled to sit back and rely on the possibility that more favourable facts may develop at trial. A party is required to put its best foot forward. See Guarantee Co. of North America v. Gordon Capital Corp., [1999] 3 S.C.R. 423, [1999] S.C.J. No. 60, at paras. 27 and 31; 1061590 Ontario Ltd. v. Ontario Jockey Club (1995), 21 O.R. (3d) 547, [1995] O.J. No. 132 (C.A.), at para. 36; Aguonie v. Galion Solid Waste Material Inc. (1988), 38 O.R. (3d) 161, [1998] O.J. No. 459 (C.A.), at paras. 30-35.

Acknowledgment

[46] Section 13 of the Limitations Act, 2002 confirms that acknowledgement of liability may trigger the beginning of a new limitation period:

13(1) If a person acknowledges liability in respect of a claim for payment of a liquidated sum, the recovery of personal property, the enforcement of a charge on personal property or relief from enforcement of a charge on personal property, the act or omission on which the claim is based shall be deemed to have taken place on the day on which the acknowledgment was made.

[47] Rolnick submits that the consent payment into trust of the $2.2 million against his claim constitutes an acknowledgement within the meaning of s. 13 of the Limitations Act, 2002. The two-year limitation period would not begin to run until 2006 when CashCode was sold, or when the funds were paid into trust, and therefore the claim was not statute-barred.

[48] The appellants have clearly acknowledged their potential liability to Rolnick by depositing money into trust as security for Rolnick's claim, but the issue is whether these actions constitute an acknowledgement under s. 13.

[49] There is no case that suggests that acknowledgment of potential liability triggers a new limitation period under the previous or the current Act. The few cases that have applied s. 13 under the new Act dealt with established liability. For example, in Bank of Nova Scotia v. Christie, [2008] O.J. No. 2971, 48 B.L.R. (4th) 216 (S.C.J.), it was found that the debtor's payments towards his line of credit constituted an acknowledgement of the debt. A bank line of credit is clearly an established liability. Shaw v. Embury, [2009] O.J. No. 3335 (S.C.J.) concerned a personal loan situation. Again, however, the parties did not dispute that the defendant was liable to the plaintiff for the money lent.

[50] The meaning of s. 13 of the Act and whether acknowledgement by payment of funds in trust of a potential claim would trigger this section has not been considered by the court. The argument may be difficult to advance but I conclude that it is not plain and obvious that the claim cannot succeed. Consideration of the factual issues and the intention of the parties is relevant and should be explored in the context of a trial with viva voce evidence.

Estoppel

[51] The estoppel argument is cogent. I am of the view it is not plain and obvious that the assertion that the appellants are estopped by their conduct from asserting a limitation defence cannot succeed. Further, the factual issues are complicated and this fact-driven issue should appropriately be explored in the context of a trial.

[52] The court has no inherent jurisdiction to vary the limitation periods prescribed by the Limitations Act, 2002. The Ontario Court of Appeal has ruled that the principle of special circumstances, which gave the court jurisdiction to extend limitation periods for actions that had already been commenced, no longer applies under the Limitations Act, 2002: see Joseph v. Paramount Canada's Wonderland (2008), 90 O.R. (3d) 401, [2008] O.J. No. 2339, 241 O.A.C. 29 (C.A.).

[53] However, the issue of estoppel by conduct and how it applies to the Limitations Act, 2002 has yet to be considered by the court.

[54] Estoppel is a long-standing, stand-alone principle that may defeat a limitation defence, quite apart from the special circumstances doctrine, which is no longer the law.

[55] The Supreme Court considered the use of estoppel to extend a limitation period in Maracle v. Travellers Indemnity Co. of Canada, [1991] 2 S.C.R. 50, [1991] S.C.J. No. 43. The court defined estoppel, at para. 13: "[t]he party relying on the doctrine must establish that the other party has, by words or conduct, made a promise or assurance which was intended to affect their legal relationship and to be acted on. Furthermore, the representee must establish that, in reliance on the representation, he acted on it or in some way changed his position." Because conduct is particularly important in this case, I emphasize that estoppels can arise by conduct and note that a person's conduct can lull a person into a false sense of security about an opponent's position

[56] Fritsch v. Magee, [2009] O.J. No. 2432, 2009 CarswellOnt 3345 (S.C.J.), at para. 24, has interpreted Maracle as requiring the following test to be met when applying promissory estoppel to a missed limitation period:

(1) the defendant has, by words or conduct, made a promise or assurance intended to affect the legal relationship between the parties and to be acted on; (2) it can be inferred from their words and conduct that they intended not to rely on a limitation.; and (3) the plaintiff missed the limitation in reliance on this promise.

[57] Rolnick submits that the parties' agreement to not pursue the litigation or arbitration pending the sale of CashCode, combined with the agreement to deposit funds into trust as security for his claim and the conduct of the appellants in continuing to discuss the mode of proceeding, was an agreement that the limitation period did not apply.

[58] Rolnick relied on the words and conduct of counsel for the appellants. Rolnick asserts that the test in Maracle as restated and amplified in Fritsch has been met.

[59] Clearly, the appellants had ample notice of Rolnick's intention to pursue his action, by arbitration, or in the courts. In the facts of this case, I am concerned about the of appearance and effect of the conduct of counsel for the appellant Saltsov.

[60] One day before the expiry of the limitation period the appellants now purport to rely upon, counsel for the parties exchanged e-mails canvassing the appropriate manner to proceed. Counsel for Saltsov wrote that he would get back to Rolnick's counsel in one week.

[61] The interpretation and application of the principles of estoppel in relation to the limitation defence raises important issues about the integrity and fairness of the litigation system, particularly in light of the strict time provisions of the Limitations Act, 2002. The issues need to be fleshed out in the context of a trial. The comments of Nordheimer J. in Xpress View Inc. v. Daco Manufacturing Ltd., [2002] O.J. No. 4078, 36 C.C.E.L. (3d) 78 (S.C.J.) may apply [at para. 15]:

Counsel have obligations to deal with each other fairly and not to take advantage of missteps by opposing counsel. This requirement is reflected in the Rules of Professional Conduct, rule 14[.]

[62] Ontario courts have confirmed that when promissory estoppel is asserted as a bar to a limitation defence, the matter is not appropriately dealt with by way of a summary judgment motion.

[63] Daley J. discussed the issue in Fritsch in the context of a motion for summary judgment under Rule 76 [at paras. 29, 30 and 32]:

As both waiver and promissory estoppel are equitable doctrines forming the basis for the finding of binding promises, special care must be taken in assessing whether there is adequate evidence to support the applicability of either of these doctrines.

Underlying the application of these equitable principles must be a true concern for fairness and the prevention of injustice. . . . . .

On the limited and equivocal evidence before me, particularly as it relates to the defendant's knowledge and intentions, I am of the view that it would be unjust to decide the applicability of the limitation period on this motion. In my view, a more fulsome evidentiary record is required and as such the issue of whether or not the limitation period was waived by words or conduct or whether the doctrine of promissory estoppel applies should be determined by trial in accordance with Rule 76.07 (9). (Emphasis added)

[64] Similarly, Mungovan D.J. stated in Johnston v. Wawanesa Mutual Insurance Co., [2006] O.J. No. 3037, 2006 CarswellOnt 4528 (S.C.J.), at para. 18, that "[c]learly, the doctrine of promissory estoppel, comprising its various elements as explained by Sopinka J., constitutes a genuine issue of material fact for trial."

[65] The authorities confirm that courts should be wary of striking or dismissing a claim where promissory estoppel may apply. Although Fritsch and Wawanesa related to motions for summary judgment, the reasoning is equally applicable to a motion to strike under Rule 21.

[66] The obiter comments expressed by Zelinski J. in Karais v. Guelph (City) (1992), 11 O.R. (3d) 89, [1992] O.J. No. 888 (Gen. Div.) are also noteworthy, though that case was decided prior to the elimination of the "special circumstances" doctrine in Paramount, supra. The court in Karais held, at para. 15, that both waiver and promissory estoppel require "clear, unambiguous language and/or conduct". They are difficult tests to meet, however they provide the only remaining mechanism to extend a limitation period or defeat a limitation defence where it is in the interests of justice to do so [at para. 32]:

Limitations are founded on equitable principles. It is unreasonable that the legislative intent to achieve fairness through a limitation can be used to deny fairness, without remedy, even when a remedy is appropriate.

[67] For these reasons, I conclude that it is not plain and obvious that the acknowledgment and estoppel arguments will not succeed. To the contrary, cogent, compelling arguments are raised. I conclude that there are facts in dispute, and there is a genuine issue for trial on these issues.

Appeal allowed.