CITATION: Sax v. Aurora, 2018 ONSC 1834
DIVISIONAL COURT FILE NO.: 704/17 DATE: 20180319
ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT
BETWEEN:
ADAM SAX
Plaintiff/Respondent
– and –
RICK AURORA, 2349336 ONTARIO LTD. o/a THE CONDO MALL, ROYAL LEPAGE WEST REALTY GROUP LTD., JESSICA LENOUVEL (LEUNG), JASWINDER AURORA, and PRITINA BHAVSAR
Defendants/Appellant
Danny Kastner and Gregory Ko, for the Plaintiff/Respondent
Katrina Marciniak, for the Defendant, Royal LePage West Realty Group
HEARD at Toronto: March 6, 2018
reasons for judgment
Cavanagh J.
Introduction
[1] The Defendant (Appellant) Royal LePage West Realty Group Ltd. (“Royal LePage”) commenced an appeal, without seeking leave, from the order of Ferguson J. made on a motion by the Plaintiff (Respondent).
[2] The motion judge’s order grants leave to the Plaintiff, on a nunc pro tunc basis, to commence and prosecute a derivative action on behalf of 2349336 Ontario Ltd. (“234”) against Royal LePage. The motion judge’s order provides that the effective date of the nunc pro tunc order granting leave to commence and prosecute the derivative action be reserved to the trial judge to decide.
[3] The Plaintiff moves to quash the Royal LePage’s appeal on the ground that the motion judge’s order is an interlocutory order, and that Royal LePage failed to obtain leave to appeal. The Plaintiff submits that, absent leave to appeal, the Divisional Court lacks jurisdiction to hear the appeal and, therefore, the appeal must be quashed. The Plaintiff submits that an extension of time for a motion for leave to appeal should not be granted.
[4] The issues on this motion are:
a. Is the motion judge’s order a final order or an interlocutory order?
b. If the order is interlocutory and leave to appeal is required, should Royal LePage be granted an extension of time to move for leave to appeal?
[5] For the following reasons, I have concluded that the motion judge’s order is a final order and that the Plaintiff’s motion to quash the appeal should be dismissed.
Procedural Background
The Plaintiff’s motion to seeking leave, nunc pro tunc, to commence a derivative action
[6] The Plaintiff commenced the underlying action by a statement of claim issued on February 13, 2014. The statement of claim was amended on consent of all parties on August 22, 2016. The amended statement of claim included statements that alleged that Royal LePage breached a joint venture agreement between it and 234 - a company in which the Plaintiff is a minority shareholder.
[7] The Plaintiff moved for an order granting the Plaintiff leave to amend the amended statement of claim and for leave under s. 246 of the Ontario Business Corporations Act, R.S.O. 1990, c. B. 16 (the “OBCA”) to commence and prosecute a derivative action in the name and on behalf of 234 against Royal LePage on a nunc pro tunc basis.
[8] Royal LePage opposed the Plaintiff’s motion on the grounds that (a) the proposed amendments sought to add a new cause of action which would cause prejudice to Royal LePage; (b) the Plaintiff’s failure to obtain leave within the limitation period to commence a derivative action was fatal to the derivative action against Royal LePage, and (c) the Plaintiff did not satisfy all of the requirements to bring a derivative action.
Motion judge’s endorsement and order
[9] In her endorsement, the motion judge noted that in bringing a derivative action, the Plaintiff must seek leave of the court, which leave must be obtained within two years from the discoverability date. The motion judge wrote that the Plaintiff acknowledges that he discovered that 234 had a claim against Royal LePage by November 12, 2014, the date of the examination for discovery of Royal LePage, and that he did not seek leave to commence a derivative action until April 11, 2017, the date of the Plaintiff’s notice of motion.
[10] The motion judge referred to the Plaintiff’s position that all parties had notice of the Plaintiff’s factual allegations from the breach by 234 of the joint venture agreement in the statement of claim that was amended on August 22, 2016 and that the proposed amendments would not contribute a “new” cause of action for the purposes of the limitations legislation. The motion judge reviewed the relevant paragraphs in the amended statement of claim and expressed her agreement with the Plaintiff’s submission that for Royal LePage to now claim ignorance of these factual allegations that were already pled and consented to is “completely untenable”.
[11] The motion judge then gave the following reasons for her conclusion that the Plaintiff had not failed to obtain leave to commence a derivative action before the expiry of the limitation period:
[18] I agree that the fact that the amended statement of claim did not specifically frame the claim as a “derivative action” is not a bar to Sax amending his claim. The proposed amendments arising from this motion do not constitute a “newly” pled cause of action, but merely a clarification of the legal consequences of material facts already pled.
[19] I agree that the amended statement of claim provided sufficient notice to Royal LePage of the joint venture claims and Royal LePage was - on its own admission - fully aware of these claims no later than June 30, 2016, when it was served a copy of the amended statement of claim.
[20] I find that all parties had notice of Sax’s factual allegations regarding the breach of the agreement and the resulting damages from the breach in the statement of claim (as amended on August 22, 2016). As previously mentioned, the court in Farmers Oil and Gas confirmed that proposed amendments that merely plead new legal consequences are allowed when the defendant already “has notice of the factual matrix underlying the claim being advanced”.
[21] The newly pleaded consequences arising out of the proposed amendments merely clarify Sax’s claims and do not constitute new causes of action for the purposes of limitations legislation. In Farmers Oil and Gas, at para. 22, the court held that if the proposed amendments arise out of the same facts, or the factual matrix, that was pleaded in the original statement of claim, then the amendment should be permitted. If they do not, and the limitations period has expired, then the amendments should be refused. The court, at para.15, quoted from Sweda Farms Ltd. v. Ontario Egg Producers, 2011 ONSC 6146, [2011] O.J. No. 4886, in which Lauwers J.A. stated that, consistent with a purposive approach to the interpretation of limitations legislation, “the defendant’s basic entitlement is to have notice of the factual matrix out of which the claim for relief arises.” As I have found, notice of the factual matrix underlying Sax’s claims was provided within the limitation period.
The motion judge then addressed in her endorsement the four requirements in the OBCA for a derivative action, and held that the Plaintiff had met these requirements.
[12] The motion judge’s formal order, in the operative paragraphs, provides:
THIS COURT ORDERS that the Plaintiff is granted leave to amend the Fresh as Amended Statement of Claim in this matter in the form attached hereto as Appendix “A”;
THIS COURT ORDERS that the Plaintiff is granted leave, on a nunc pro tunc basis, to commence and prosecute a derivative action on behalf of 2349336 Ontario Ltd. against Royal LePage West Realty Group Ltd. as set out in the Amended Amended Statement of Claim attached hereto as Appendix “A”;
THIS COURT ORDERS that the effective date of the order granting leave to commence and prosecute a derivative action set out in paragraph to be reserved to the trial judge to decide; and
THIS COURT ORDERS that if any parties wish to conduct further discoveries as a result of this order, they are so entitled.
Royal LePage’s appeal
[13] Royal LePage did not seek leave to appeal the order. Royal LePage served and filed its Notice of Appeal in respect of the order within the thirty day appeal period for a final order. In its Notice of Appeal, Royal LePage asks that the order be set aside and that an order be granted dismissing the Plaintiff’s application for leave to commence a derivative action on behalf of 234.
Analysis
[14] Section 246(1) of the OBCA provides that a complainant may apply to the court for leave to bring an action in the name and on behalf of a corporation for the purpose of prosecuting the action on behalf of the body corporate.
[15] Under s. 255 of the OBCA, an appeal lies to the Divisional Court from any order made by the court under the OBCA.
[16] Leave is required to appeal an interlocutory order made under the OBCA: Watkin v. Open Window Bakery Ltd. (1996), 1996 11788 (ON SC), 28 O.R. (3d) 441 (Div. Ct.) at paras. 16-17.
[17] Under r. 61.04(1) of the Rules of Civil Procedure, an appeal lies to an appellate court from a final order, without leave, within 30 days of the order under appeal. In respect of a final order made under the OBCA, an appeal lies to the Divisional Court pursuant to s. 255 of the OBCA.
[18] An appeal lies to the Divisional Court from an interlocutory order of a judge of the Superior Court of Justice, with leave as provided in the rules of court: s. 19(1)(b) of the Courts of Justice Act.
Is the Motion judge’s Order a final order or an interlocutory order?
[19] The Plaintiff submits that the order under appeal is an interlocutory order, and that Royal LePage requires leave to appeal. In support of this submission, the Plaintiff cites 2441472 Ontario Inc. v. Collicut Energy Services, 2017 ONCA 452 in which the Court of Appeal provided the following summary of the principles to be applied in order to determine whether an order is final or interlocutory:
An interlocutory order is one that does not determine the real matter in dispute between the parties. It is not determine the very subject matter of the litigation, but only a collateral matter: Hendrickson v. Kallio, 1932 123 (ON CA), [1932] O.R. 675, at p. 678. The classic test is whether the order finally disposes of the rights of the parties: Hendrickson, at p. 680. Furthermore, an order that disposes of an issue raised by the defence, thereby depriving the defendant of a substantive right that could be determinative of the entire action, is final: Ball v. Donais (1993), 1993 8613 (ON CA), 13 O.R. (3d) 322 (C.A.).
[20] The Plaintiff submits that the order granting leave to the Plaintiff to commence and prosecute a derivative action on behalf of 234 - while specifically leaving any limitation defences to be determined by the trial judge - is interlocutory. The Plaintiff submits that none of the parties’ substantive rights were determined by the order, and that the order preserves Royal LePage’s substantive rights to raise all limitation defences at trial.
[21] In support of his submissions, the Plaintiff relies on a decision of the Court of Appeal in Salewski v. Lalonde, 2017 ONCA 515. In Salewski, the defendants moved to strike out claims for unjust enrichment arising from payments for allegedly usurious interest and unlawful commissions on the ground that these claims were statute barred. The defendants’ motion was dismissed. The defendants appealed to the Court of Appeal. At the appeal hearing, the Court of Appeal raised the question of whether the order was final or interlocutory. The defendants submitted that the order under appeal was final because the defendants had sought a determination of a question of law under rule 21.01(1)(a) that the usurious interest claims and the unlawful commissions claims were statute barred. The defendants submitted that, in dismissing their motion, the motion judge’s reasons disclosed that he finally decided a question that determined that the plaintiff’s claims were not statute barred and, because the defendants would be barred from raising this defence in the future because of the application of the doctrine of issue estoppel, the motion judge’s order is a final order.
[22] The Court of Appeal in Salewski rejected the defendants’ submission that the order is a final order for three reasons. First, the Court of Appeal found that none of the notice of motion, the motion judge’s reasons or the formal order delineated the precise legal issue that the defendants submitted had been determined, noting that the motion judge’s reasons did not include a dispositive section in which the motion judge formally invoked r. 21.01(1)(a) and purported to determine a question of law. Second, the Court of Appeal was not persuaded that, read fairly, the motion judge’s reasons for dismissing the defendants’ motion revealed an intention to make binding determinations on questions that would decide that the plaintiff’s claims were not statute barred. Third, the Court of Appeal held that the motion judge could not have properly made a final determination of the limitations issue in favour of the plaintiffs under r. 21.01(1)(a) on a motion that was heard prior to the close of pleadings, without the benefit of a more fulsome record. The Court of Appeal in Salewski concluded that the motion judge’s reasons for dismissing the defendants’ motion should not be read as a final determination of the limitations issue in favour of the plaintiffs giving rise to res judicata or issue estoppel. The Court of Appeal held that the order was interlocutory, and quashed the defendants’ appeal because leave to appeal had not been granted.
[23] The Plaintiff submits that in light of these principles in Salewski, the order under appeal is interlocutory because (i) it simply allows the derivative claim to advance, and makes no final determinations on Royal LePage’s limitation defences; (ii) the formal order explicitly leaves the effective date of the order to the trial judge, thereby allowing Royal LePage to fully argue its limitation defences at trial; and (iii) the motion judge’s reasons do not evince an intention to make binding determinations about facts or law involving Royal LePage’s limitation defences. The Plaintiff submits that the statements in the motion judge’s endorsement concerning when the Plaintiff discovered that 234 had a claim against Royal LePage are not dispositive and will not bind the trial judge.
[24] In response, Royal LePage relies upon M.J. Jones Inc. v. Kingsway General Insurance Co., 2003 37356 (ON CA) at paras. 7-9. In M.J. Jones, the Court of Appeal held that the order under appeal was final because it finally disposed of a jurisdictional issue and deprived the appellants of a substantive right that could be determinative in opposing a remedy sought. Royal LePage submits that its substantive right to challenge the Plaintiff’s ability to make a derivative claim was lost as a result of the motion judge’s order, and that it is precluded from raising whether a derivative claim ought to be permitted, except by way of appeal.
[25] Both the Plaintiff and Royal LePage rely upon the decision of the Divisional Court in Swinkels v. American Home Assurance Co., 2012 ONSC 4345. In Swinkels, the Divisional Court heard an appeal from an order granting leave to amend a statement of claim to add a derivative claim pursuant to s. 246 of the OBCA. Leave to appeal had been granted to the appellants. The Divisional Court observed at para. 9 that “it was not necessary for the appellants to seek leave to appeal as section 255 of the Act [the OBCA] provides an unrestricted right of appeal”. Royal LePage submits that the Divisional Court held that leave to appeal this order granting leave to commence a derivative action was not needed. The Plaintiff submits, relying upon Watkin and other authorities, that the Divisional Court erred in writing that s. 255 provides an unrestricted right of appeal. The Plaintiff submits that the fact that the appellants in Swinkels sought and obtained leave to appeal supports his submission that an order granting leave to commence a derivative action is an interlocutory order.
[26] The order that was appealed in Swinkels was not made on a nunc pro tunc basis. Swinkels did not involve the question of whether the motion for leave to commence a derivative action should be barred because it was brought after the expiry of the applicable limitation period. For this reason, I do not regard the decision in Swinkels to be helpful in deciding whether the motion judge’s order is final or interlocutory.
[27] In Salewski, the Court of Appeal wrote that “[w]hile not necessarily determinative, in general, the content of a formal order is ‘integral’ to determining whether the order is final or interlocutory”. The Court of Appeal also wrote that the court will look to the formal order and the underlying reasons to assess whether the order is final or interlocutory: Salewski, at paras. 27 and 30.
[28] The formal order granting leave to the Plaintiff to commence and prosecute a derivative action was made on a nunc pro tunc basis. The reasons of the motion judge are clear that, in making the order, the motion judge rejected Royal LePage’s submission that the Plaintiff’s motion should be dismissed because it was brought after the applicable limitation period had expired.
[29] In 1186708 Ontario Inc. v. Gerstein, 2017 ONSC 1217, the Divisional Court heard an appeal from a motion judge’s decision who dismissed a motion for leave to commence a derivative action under s. 246 of the OBCA because the leave motion was barred as having been brought after the expiry of the applicable limitation period. The order under appeal was a final order. The appellants argued that the motion judge had erred in refusing to apply the doctrine of nunc pro tunc. Swinton J., writing for the court, disagreed, holding that the motion judge had correctly applied the principles set out by the Supreme Court of Canada in Canadian Imperial Bank of Commerce v. Green, 2015 SCC 60 where it was held, in the context of a leave application under the Ontario Securities Act, that the nunc pro tunc doctrine is not available where a motion seeking leave is filed after the expiry of the applicable limitation period. Swinton J. held that the CIBC decision also applied to leave applications under the OBCA. The appellants had brought their motion for leave to commence a derivative action after the limitation period had expired and, therefore, the appeal was dismissed.
[30] The Plaintiff submits that because the motion judge’s order reserved to the trial judge the effective date of the order granting leave, nunc pro tunc, to commence and prosecute a derivative action, all of Royal LePage’s substantive rights to raise all limitation defences at trial are preserved. The Plaintiff is correct that all of Royal LePage’s limitation defences that depend on when the Plaintiff’s claims on behalf of 234 were discoverable are preserved. The motion judge’s order does not, however, preserve Royal LePage’s right at trial to oppose the remedies sought in the Plaintiff’s derivative action on the basis that the Plaintiff’s motion for leave to commence a derivative action was brought after the expiry of the applicable limitation period. If Royal LePage had succeeded in opposing the Plaintiff’s motion on this basis, this could have been determinative of the Plaintiff’s intended derivative action. It is not open to Royal LePage to revisit at trial the motion judge’s conclusion that the proposed pleadings do not constitute a newly pled cause of action or the order granting leave to the Plaintiff to commence and prosecute a derivative action.
[31] The motion judge concluded that the Plaintiff’s proposed pleading amendments do not constitute a newly pled cause of action. This conclusion was fundamental to the motion judge’s order granting leave to the Plaintiff, nunc pro tunc, to commence a derivative action. The order disposed of the issue raised by Royal LePage that the Plaintiff’s motion for leave to commence a derivative action should be dismissed because it was brought after the expiry of the applicable limitation period. The disposition of this issue deprived Royal LePage of a substantive right that could have been determinative of the entire derivative action. Such an order is final: 2441472 Ontario Inc., at para. 9; M.J. Jones, at paras. 7-9.
[32] The Plaintiff submits that the record before the motion judge included evidence that there were past breaches of the joint venture agreement and continuing breaches up to the hearing date of the motion, and that this evidentiary record allowed the motion judge to grant leave to commence the derivative action. Royal LePage disputes this submission. The motion judge did not decide the motion on this basis and, in my view, the evidentiary record before the motion judge should be addressed by the panel hearing the appeal.
[33] Because of my conclusion that the motion judge’s order is final, leave to appeal is not required, and an appeal properly lies to the Divisional Court without leave. It is not necessary for me to decide whether, if I had concluded that the order is interlocutory, an extension of time for Royal LePage to seek leave to appeal should be granted.
Disposition
[34] For these reasons, the Plaintiff’s motion is dismissed.
[35] If the parties are unable to resolve costs, Royal LePage may make written submissions within 20 days. The Plaintiff may make responding submissions within 15 days of receipt of Royal LePage’s submissions.
___________________________ cavanagh J.
Date of Release:
CITATION: Sax v. Aurora, 2018 ONSC 1834
DIVISIONAL COURT FILE NO.: 704/17 DATE: 20180319
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
BETWEEN:
ADAM SAX
Plaintiff/Respondent
– and –
RICK AURORA, 2349336 ONTARIO LTD. o/a THE CONDO MALL, ROYAL LEPAGE WEST REALTY GROUP LTD., JESSICA LENOUVEL (LEUNG), JASWINDER AURORA, and PRITINA BHAVSAR
Defendants/Appellant
REASONS FOR JUDGMENT
cavanagh J.
Date of Release: March 19, 2018