Sax v. Rick Aurora, 2019 ONSC 3573

CITATION: Sax v. Rick Aurora, 2019 ONSC 3573

DIVISIONAL COURT FILE NO.: 704/17

DATE: 20190621

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

Ellies R.S.J., Sachs and Backhouse JJ

BETWEEN:

Adam Sax

Respondent(Plaintiff)

– and –

Rick Aurora, 23493336 Ontario Ltd. o/a The Condo Mall, Royal LePage West Realty Group, Jessica Lenouvel (Leung), Jaswinder Aurora and Pritna Bhavsa

Appellant(Defendants)

Danny Kastner and Gregory Ko for the Respondent/Plaintiff

Katrina Marciniak, Counsel for Royal LePage West Realty Group, Appellant/Defendant

Backhouse J.

HEARD at Toronto June 3, 2019

1This is an appeal by the Defendant, Royal LePage West Realty Group (“Royal LePage”), from the order of the Honourable Justice Ferguson made October 23, 2017, in which she granted the plaintiff’s motion for leave to commence a derivative action on behalf of 2349336 Ontario Ltd.(“234”) pursuant to s.246 of the Business Corporations Act, R.S.O. 1990, c.B.16 (the “OBCA”).

2Section 255 of the OBCA provides a right of appeal to the Divisional Court, without the necessity of obtaining leave to appeal.

The Facts

3The plaintiff worked for Royal LePage as a real estate agent. He sought to create a one-stop shop where builders could sell their pre-construction real estate to purchasers all in one location. 234 was incorporated for this purpose and it leased space to house where sales would take place. The plaintiff is a minority shareholder in 234. Royal LePage and 234 entered into an agreement whereby a portion of every commission earned by Royal LePage operating out of 234’s space was to be paid to 234.

4On January 17, 2014, the plaintiff’s employment with Royal LePage was terminated. On February 13, 2014 the plaintiff commenced an action against Royal LePage. By November 14, 2014, the plaintiff had discovered that Royal LePage had not made any payments to 234 since the date of his dismissal and did not intend to abide by the payment terms of the agreement.

5The original statement of claim was amended on consent on August 22, 2016. The plaintiff made a motion on April 11, 2017 to further amend the amended statement of claim and for leave to commence a derivative claim on behalf of 234. The motion was heard by the motion judge on September 19, 2017. Royal LePage opposed the motion on the grounds that the claim was statute barred.

The Decision

6The motion judge found that the statement of claim gave Royal LePage notice of the factual matrix to support a derivative action within the limitation period and that the requirements for leave under s.245 of the OBCA were satisfied. She granted leave to the plaintiff to commence a derivative action against Royal LePage as set out in the amended statement of claim on a nunc pro tunc basis, the effective date of which was left to be determined by the trial judge.

Submissions of the Parties

7Royal LePage submits that the plaintiff failed to bring his motion for leave within the limitation period and his motion ought to have been denied. The plaintiff concedes that derivative claims arising before April 11, 2015, being two years prior to the filing of the motion for leave, are statute barred. However, he submits that the derivative claim includes damages for repeated breaches of the agreement continuing before, through and beyond the filing of the motion for leave. He submits that he continued to be a shareholder of 234 which continued to operate, including continuing with the lease until the fall of 2018.

8Royal LePage responds by arguing that continuing breaches were not pleaded, there is no evidence of sales that would trigger the obligation to pay commission and 234 ceased operating after one year. The limitation period expired in November 2016, two years after the claim was discovered and before the plaintiff sought leave. According to Royal LePage, this failure creates the basis for a nullity, not an irregularity, and the expiry of the limitation period is an insurmountable obstacle which the plaintiff cannot overcome. Royal LePage submits that even in a case of continuing breaches, failure to bring the motion for leave within two years of discoverability is fatal.

Analysis

Standard of review

9The errors raised by Royal LePage are errors of law. The standard of review is correctness.

Whether the Motion Judge Erred by Granting the Plaintiff’s Motion for Leave

10The parties agree that in finding that the statement of claim gave Royal LePage notice of the factual matrix to support a derivative action within the limitation period, the motion judge failed to correctly apply 1186708 Ontario Inc. v. Gerstein, 2016 ONSC 1331 (hereinafter “Gerstein”), which followed the law set out in Canadian Imperial Bank of Commerce v. Green; IMAX Corporation v. Silver; and Celestica Inc. v. Trustees of the Millwright Regional Council, 2015 SCC 60 (the "CIBC Trilogy").

11The decision of the Supreme Court in the CIBC Trilogy leaves no room for doubt that the doctrine of nunc pro tunc cannot be used to cure an expired limitation period and is not available where a motion seeking leave to bring a derivative action is filed after the expiry of the applicable limitation period.

12Royal LePage offers no authority in support of its submission that leave to commence a derivative action cannot be granted more than two years from the date of discovery, even where breaches of the agreement continue after that date. To the contrary, the authorities support the proposition that where there is a failure to make the periodic payments that are due under an agreement, each individual failure to make such required payment constitutes a new breach of the agreement for which a new limitation period begins. (Sungard Availability Services (Canada) Ltd. v. ICON Funding ULC, 2011 ONSC 7367, at para. 38). The analysis would be different in the event the agreement in question ceased to operate or there were no sales. However, the issue of whether there are continuing breaches is not something that can be resolved on this record. That issue is for the trial judge to determine.

13Royal LePage did not appeal the motion judge’s finding that the plaintiff had satisfied the factors under s. 246 of the OBCA for leave to commence a derivative action. Therefore, that part of the motions judge's order must stand. However, the order cannot be issued nunc pro tunc. Instead, it can only be effective to permit claims for damages for breaches arising within a period commencing two years prior to the date the motion for leave is filed.

Conclusion

12In the result, the order of the motion judge will stand subject to Paragraphs 2 and 3 being replaced with the following:

“2. This Court Orders that derivative claims arising before April 11, 2015, being two years prior to the filing of the motion for leave, are statute barred.

3. The Plaintiff is granted leave, effective April 11, 2017, 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”.”

Costs

15The plaintiff submits that there should be no order as to costs. Counsel for Royal LePage submits that costs should be in the range of $9,000 to $9,500 and follow the event. As success was divided, I have concluded that there should be no costs either for the motion or on the appeal.

Backhouse J.

I agree

Ellies R.S.J.

I agree

Sachs J.