Court File and Parties

CITATION: Skylark Holdings Limited v. Minhas, 2018 ONSC 1568

DIVISIONAL COURT FILE NO.: DC-17-0067

DATE: 20180308

SUPERIOR COURT OF JUSTICE – ONTARIO

DIVISIONAL COURT

RE: Skylark Holdings Limited Respondent

• and -

Mohinder Minhas, 2012111 Ontario Inc. and 2295181 Canada Inc. Appellants

BEFORE: Sachs, Wilton-Siegel, and Myers JJ.

COUNSEL: Jason Squire, lawyer for the Appellants James S.G. Macdonald, lawyer for the Respondent

HEARD at Brampton: March 6, 2018

Endorsement

Myers J. (Orally):

[1] The appellants appeal the order of Mr. Justice Price, dated February 27, 2017, dismissing their motion for summary judgment and granting the respondent leave to amend its statement of claim. The issue on both motions below was whether there is a genuine issue requiring a trial that the limitation period had expired before the respondent commenced this legal proceeding.

[2] The appellant Minhas owns both corporate appellants. The respondent sued the appellants alleging that in 2002 the appellants agreed to transfer to the respondent five per cent of the common shares of 2012111 Ontario Inc. as payment for the respondent’s services to help the appellants obtain financing for a business venture proposed for the appellant 2295181 Canada Inc. The respondent says the agreement was fully executed, and accordingly, it is an equitable shareholder in 2012111 Ontario Inc. The appellants claim that the 2002 agreement was overtaken by a new agreement between the parties entered into in 2003 under which the appellants paid the respondent in full in cash for its services rendered. They say that the respondent first asserted an ongoing right to receive shares in addition to the cash that it was paid more than eight years later – well after the limitation period had expired.

[3] The appellants moved for summary judgment to dismiss the claim based on the expiry of the limitation period. The respondent answered with a motion to amend its statement of claim. The amendments proposed to remove nearly all of the relief that the respondent had claimed against the appellants and all allegations of breach of contract. Instead, the respondent proposed to limit the relief that it claimed to a simple declaratory judgment that it is the legal and beneficial owner of five per cent of the shares of 2012111 Ontario Inc.

[4] Subsection 16 (1)(a) of the Limitations Act, 2002, SO 2002, c 24, Sch B, provides:

There is no limitation period in respect of…a proceeding for a declaration if no consequential relief is sought.

[5] The motions judge dismissed the appellants’ motion for summary judgment and granted the respondent leave to amend the statement of claim on the basis that there was a genuine issue requiring a trial as to whether the 2003 agreement rescinded the respondent’s right to a five per cent interest in the shares of 2012111 Ontario Inc. His Honour ruled that a declaration of ownership of shares could be made in the present without consequential relief.

[6] Pursuant to s. 19 (1)(b) of the Courts of Justice Act, an appeal lies to the Divisional Court from an interlocutory order of a judge of the Superior Court of Justice with leave. Justice André granted the Appellants leave to appeal on July 28, 2017.

[7] In Alguire v. The Manufacturers Life Insurance Company (Manulife Financial), 2018 ONCA 202, the Court of Appeal recently discussed the interpretation of s. 16 (1)(a) of the Limitations Act, 2002 as follows:

[28] In the context of a limitation period analysis, declaratory relief should be narrowly construed so as to ensure that s. 16(1)(a) is not used as a means to circumvent applicable limitation periods: Joarcam, LLC v. Plains Midstream Canada ULC, 2013 ABCA 118, 90 Alta. L.R. (5th) 208, at para. 7.

[29] I conclude that this subsection is unavailable to Manulife in the circumstances of this case, as it is seeking consequential relief. The remedy of rectification sought in this case has significant consequences for the parties and goes beyond clarifying the nature of a particular obligation. Mr. Alguire stands to receive significantly less money as a result of the rectification compared to what he argued he was entitled to on the Policy’s face.

[8] This case was only decided after the motions judge made his decision and it is therefore not surprising that the motions judge did not conduct his analysis in accordance with the directions set out in the Court of Appeal’s decision. This was an error of law. To decide whether s. 16 (1)(a) is being used to circumvent an application limitation period, the motions judge was required to assess the essential nature of what the respondent is seeking. In this case, the respondent claims to be entitled to a five per cent interest in 2012111 Ontario Inc. as a result of the fulfillment of the 2002 agreement. Any entitlement that it has today flows from a contract - the meaning and enforceability of which is in dispute - but any cause of action that the respondent may have in respect of the 2002 contract is statute barred.

[9] To overcome this difficulty, the respondent seeks to use the device of a declaration to do an end run around the applicable limitation period.

[10] Moreover, were the respondent to obtain the declaration, the circumstances are akin to those found by Madam Justice Harvison Young in para. 16 of Bailey v. Canada (Attorney General), 2008 53128 (ON SC). It is readily apparent from the record that the declaration sought will be ineffective without further mandatory relief directed to the corporation or a shareholder to implement the shareholding interest if possible. A determination that the respondent is entitled to a five per cent interest does not say from whom and by what means the shareholding interest is to be implemented. Therefore, a declaration of entitlement alone is of no avail without further consequential relief which brings it outside s. 16 (1)(a) of the Limitations Act 2002.

Sachs J. (Orally):

[11] For reasons given orally by Myers J., this appeal is allowed and judgment is granted dismissing the action. The respondent does not object to the appellants’ request for costs in the appeal in the amount of $17,500, all-inclusive and it is so ordered. The issue of the costs of the action was adjourned to be heard by us, if not resolved, on Thursday March 8^th^, 2018 at 9:45 a.m. If the issue is resolved by that time, the parties may advise us in writing and there is no need to attend.

Myers J.

I agree _______________________________ Sachs J.

I agree _______________________________ Wilton-Siegel J.

Date: March 8, 2018

Date of Release: