Court of Appeal for Ontario
Date: 2017-06-20 Docket: C62705
Judges: Simmons, Rouleau and Roberts JJ.A.
Parties
Between
Doyle Salewski Inc. in its capacity as Trustee in Bankruptcy Golden Oaks Enterprises Inc. and Joseph Gillis Jean Claude Lacasse
Plaintiff (Respondent)
and
Monique Lalonde and Paul Lalonde
Defendants (Appellants)
AND BETWEEN
Doyle Salewski Inc. in its capacity as Trustee in Bankruptcy Golden Oaks Enterprises Inc. and Joseph Gillis Jean Claude Lacasse
Plaintiff (Respondent)
and
Lorne Scott
Defendant (Appellant)
Counsel
For the appellants: Alyssa Tomkins and Anne M. Tardif
For the respondent: Robert De Toni and John D. Dempster
Heard: May 2, 2017
On appeal from: The judgment of Justice Stanley J. Kershman of the Superior Court of Justice, dated August 22, 2016, with reasons reported at 2016 ONSC 5313.
By the Court
Introduction
[1] The appellants appeal from an order dismissing a motion made on behalf of themselves and others to strike all or part of several statements of claim and granting a cross-motion permitting amendments to several statements of claim.
[2] At the appeal hearing, we raised the question whether the order under appeal is final or interlocutory and whether this court has jurisdiction to entertain the appeal. After hearing submissions, we reserved our decision on the jurisdiction issue. We then heard the substantive arguments on appeal and indicated that if we concluded the order is interlocutory, we would seek permission from the Chief Justice of the Superior Court to reconstitute ourselves as a panel of the Divisional Court.
[3] For reasons we will explain, we have concluded that the order under appeal is interlocutory and that accordingly, this court has no jurisdiction to entertain the appeal. We have also concluded that the appellants' motion was premature and that as a result this is not an appropriate case in which to seek permission to reconstitute ourselves as a panel of the Divisional Court. The appeal is therefore quashed.
Background
[4] The appellants are among the defendants in several actions in which the respondent, as trustee in bankruptcy of the promoters of an alleged Ponzi scheme, is seeking to recover monies allegedly paid out as part of the scheme.
[5] According to the facts as pleaded, the respondent, Doyle Salewski Inc. ("DSI"), is a trustee in bankruptcy acting in its capacity as trustee in bankruptcy of Golden Oaks Inc. and Jean Claude Lacasse, and was appointed as such on July 26, 2013.
[6] In its statements of claim, issued in July 2015, DSI alleges that, in 2010 or early 2011, Golden Oaks began a real estate "rent-to-own" program under which individuals could rent dwellings with an option to purchase. However, DSI claims that, following investigation, it learned that Golden Oaks was engaged predominately in the business of selling promissory notes to investors and that this activity generated over 96% of its revenue. According to DSI, Golden Oaks was never profitable and the promissory notes it and Lacasse issued offered interest rates of up to 66,981% on an annualized basis. DSI also claims that there was a referral scheme in place under which referral commissions were paid to various parties who referred investors to Golden Oaks.
[7] In its action against the appellants, Monique Lalonde and Paul Lalonde (collectively "the Lalondes"), DSI alleges that the Lalondes entered into usurious promissory notes with Golden Oaks under which they loaned money to Golden Oaks at usurious rates of interest and that the Lalondes knew or ought to have known that Golden Oaks was operating at a massive loss and could not withstand payment of the usurious rates of interest. DSI states that the interest paid to the Lalondes came from investments by other investors and not Golden Oaks' business operations. DSI claims that the usurious interest paid by Golden Oaks is "misappropriated monies of stakeholders" which should be returned to DSI, representing the interests of all stakeholders. DSI relies on s. 347 of the Criminal Code and claims the return of usurious interest based on the doctrine of unjust enrichment.
[8] In its action against the appellant, Lorne Scott, DSI alleges that Scott is a licensed real estate agent and that he received commissions from Golden Oaks for referring investors to Golden Oaks. DSI claims that the commissions are unlawful and contrary to the Securities Act, R.S.O. 1990, c. S.5, because Scott is not licensed to sell promissory notes, or receive remuneration for their sale. DSI claims that the commissions paid by Golden Oaks are "misappropriated monies of stakeholders" which should be returned to DSI, representing the interests of all stakeholders. In addition, and among other causes of action, DSI relies on unjust enrichment to claim recovery of commissions paid to Scott.
[9] In addition to its actions against the appellants, DSI commenced over 20 other actions, some in Small Claims Court and some in the Superior Court, seeking to recover usurious interest and/or unlawful commissions in relation to the Golden Oaks program.
The Motion to Strike
[10] By agreement among the parties, the appellants moved on behalf of themselves and other defendants sued by the respondent. Among other things, the appellants claimed an order striking the claims for usurious interest and unlawful commissions and also striking amendments made to the Scott statement of claim prior to service.
[11] In their notice of motion, the appellants relied on rules 21.01(1)(b), 25.06, 26.01 and 37 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. They also sought an order that the result on the motion apply to the claims for usurious interest and unlawful commissions in the actions involving the other defendants on whose behalf they had agreed to bring the motion.
The Formal Order
[12] In relation to the motion to strike the claims for usurious interest and unlawful commissions, the formal order states:
THIS COURT ORDERS that the Defendants' motion for striking the claim for receipt of Usurious Interest and Unlawful Commissions be and is hereby dismissed.
[13] The formal order also includes paragraphs delineating the claims to which it applies, dismissing a motion to strike a conspiracy claim in the Scott action and granting the respondent leave to amend its statements of claim in various actions.
The Parties' Positions Concerning the Final/Interlocutory Issue
(i) The appellants' position
[14] The appellants submit that the order under appeal is final because, in their written and oral submissions on the motion, they sought a determination of a question of law under rule 21.01(1)(a) that the usurious interest claims and the unlawful commissions claims are statute barred.
[15] Rule 21.01(1)(a) provides that a party may move before a judge for the determination, before trial, of a question of law raised by a pleading where the determination of the question may dispose of all or part of the action, substantially shorten the trial or result in a substantial saving of costs.
[16] Relying on Beardsley v. Ontario, 57 O.R. (3d) 1 (C.A.), at para. 21, the appellants argued before the motion judge that a claim can be struck under rule 21.01(1)(a) based on the expiry of a limitation period "where it is plain and obvious from a review of a statement of claim that no additional facts could be asserted that would alter the conclusion that a limitation period had expired".
[17] The appellants assert that they sought determination of the legal issue that the respondent's claims for unjust enrichment are statute-barred on the basis that the bankrupts are "a predecessor" of the trustee under s. 12 of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B (the "Act"). Under s. 12, where a proceeding is commenced by a person "claiming through a predecessor in right, title or interest", the basic limitation period established under ss. 4 and 5(1) of the Act runs from the earlier of the day the predecessor (in this case, the bankrupts) first knew or ought to have known about their claim or the day the person commencing the proceeding (in this case, the respondent) first knew or ought to have known about the claim.
[18] Before the motion judge, the appellants argued that the claims for usurious interest and unlawful commissions formed part of the property of the bankrupts as defined in s. 67 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the "BIA"), and, upon bankruptcy, vested in the trustee under s. 71 of that act. Further, based on the facts as pleaded (or as revealed by documents referred to in the statement of claim), it is clear that the unjust enrichment claims are statute-barred and that no other facts could be pleaded that would alter that conclusion.
[19] The last promissory note the bankrupts issued to the Lalondes was dated February 22, 2013 and was repayable by April 8, 2013. According to the appellants, on a plain reading of s. 5(1) of the Act, the limitation period began to run from the date the promissory notes came due. Similarly, the last commission payment to Scott was made on March 5, 2013, and under s. 5(1) the basic limitation period runs from that date. In both instances, the statements of claim were issued on July 23, 2015, which is beyond the two-year limitation period set out in the Act.
[20] Relying on ss. 30(1)(d), 67 and 71 of the BIA, Giffen (Re), [1998] 1 S.C.R. 91, and Lefebvre (Trustee of); Tremblay (Trustee of), 2004 SCC 63, [2004] 3 S.C.R. 326, the appellants submit that, where claims such as these are advanced by a trustee in bankruptcy, there can be no question but that the trustee in bankruptcy steps into the shoes of the bankrupt and does not bring the action in a representative capacity on behalf of the unsecured creditors. As the bankrupts gave the alleged usurious promissory notes and paid the alleged unlawful commissions, there can also be no question that they knew of their potential claims when they paid the sums at issue.
[21] The appellants argue that the motion judge's reasons disclose that, in dismissing their motion to strike, he finally determined that (i) the respondent is not a person advancing its claims through a predecessor in right, title or interest under s. 12 of the Act, and (ii) the limitation clock therefore runs based on the respondent's knowledge of the claims, rather than the bankrupts' knowledge of the claims. As an example, they point to paras. 132 to 134 of the motion judge's reasons, where he said:
It was not until the Trustee's Fourth Report dated May 30, 2014 that the Trustee was able to confirm with certainty that usurious interest rates and unlawful commissions were being received.
Notwithstanding the arguments put forward by the [appellants] that the [respondent's] claims are statute-barred because discoverability is based on the date that Golden Oaks discovered or should have discovered the claim, the Court finds that because of the fraudulent scheme, the matter was not discoverable or discovered until the Fourth Report was prepared in May 2014. Therefore, the Court finds that the discoverability clock ran from the time that the Fourth Report was prepared.
All of the Trustee's Statements of Claim were issued by July 2015. Therefore, the Court finds that these claims are not statute barred.
[22] The appellants assert that the motion judge's finding that the respondent is not a person claiming through a predecessor under s. 12 of the Act will make that issue res judicata or subject to issue estoppel. Accordingly, as the appellants will be barred from raising that defence in the future, the motion judge's order is a final order: Ball v. Donais (1993), 13 O.R. (3d) 322 (C.A.), at p. 324.
(ii) The respondent's position
[23] At the appeal hearing, respondent's counsel indicated they had initially advised the appellants' counsel that they took the position the order under appeal is interlocutory. However, they later withdrew that objection because they believed that the order permitting the respondent to amend its statements of claim is final and gives rise to a claim of res judicata or issue estoppel on the question forming the subject matter of the appellants' appeal. The respondent therefore did not raise jurisdiction as an issue in its factum filed on the appeal.
[24] Following colloquy with the panel at the appeal hearing, the respondent's counsel withdrew their assertion that the question forming the subject matter of the appeal is subject to a claim of res judicata or issue estoppel.
Discussion
[25] We reject the appellants' submission that the order under appeal is a final order for three reasons.
First Reason: The Formal Order and Notice of Motion
[26] First, none of the notice of motion, the motion judge's reasons or the formal order delineates the precise legal issue the appellants say has been determined. As we have explained, the appellants did not rely on rule 21.01(1)(a) in their notice of motion and the formal order simply dismisses the motion to strike. Although the motion judge's reasons contain certain findings, the reasons do not include a disposition section in which the motion judge formally invokes rule 21.01(1)(a) and purports to determine a question of law.
[27] While not necessarily determinative, in general, the content of a formal order is "integral" to determining whether the order is final or interlocutory: Ashak v. Ontario (Director, Family Responsibility Office), 2013 ONCA 375, 115 O.R. (3d) 401, at para. 13. Moreover, it is trite law that an appeal lies from the formal order, not the underlying reasons: Grand River Enterprises v. Burnham (2005), 197 O.A.C. 168 (C.A.), at para. 10.
[28] In this case, the notice of motion to strike invoked only rule 21.01(1)(b) and the formal order simply dismisses the motion. On the face of these documents, the order under appeal is interlocutory: S.(R.) v. H.(R.) (2000), 52 O.R. (3d) 152 (C.A.).
Second Reason: No Binding Determination
[29] Moreover, even accepting that the appellants' motion could proceed under rule 21.01(1)(a) for a determination that the limitation period for the unjust enrichment claims had expired, it does not follow that dismissal of the appellants' motion results in a binding determination that the limitation period had not expired.
[30] Rather, this court will look to the formal order and the underlying reasons to assess whether the order is final or interlocutory. For example, in Ball, in holding that an order dismissing a motion under rule 21.01(1)(a) was final, this court noted that the motion judge " determined " that the action was not statute-barred under s. 180(1) of the Highway Traffic Act, R.S.O. 1980, c. 198, and " made an order accordingly ." The formal order in that case included the motion judge's determination that the action was not barred by that provision: S.(R.), at para. 17.
[31] Second, although the motion judge referred in his reasons to the appellants' submissions premised on rule 21.01(1)(a), we are not persuaded that, read fairly, his reasons for dismissing their request for a determination that the limitation period for the unjust enrichment claims had expired reveal an intention to make a binding determination that: (i) in advancing its claims, the respondent was not "a person claiming through a predecessor in right, title or interest" (namely, the bankrupts) within the meaning of s. 12 of the Act; or (ii) that the limitation period for advancing the unjust enrichment claims had not expired.
[32] The appellants' motion to strike was made based on the allegations contained in the statement of claim, prior to the close of pleadings and prior to a defence being delivered. As the motion judge recognized, this required that he proceed on an assumption that the allegations contained in the statement of claim are true.
[33] The appellants' position on the motion was that the unjust enrichment claims could be struck as statute-barred under rule 21.01(1)(a) because it is plain and obvious from a review of the statement of claim that no additional facts could be asserted that would alter the conclusion that a limitation period has expired. If the motion judge accepted that position, it was the appellants' assertion that he could properly find the unjust enrichment claims were statute-barred.
[34] However, even assuming that assertion is correct, it does not follow that, if he rejected the appellants' submissions, the motion judge could make a binding declaration that the limitation period had not expired. That is because the motion judge was not in a position, on a pleadings motion, to make binding determinations of fact. At best, he could posit circumstances in which the limitation period would not have expired. His reasons must be read in this context.
[35] Accordingly, although the motion judge may have expressed a conclusion that the respondent's limitation period had not expired, and although that conclusion may have been premised, at least in part, on a further implicit conclusion that, in the context of the Ponzi scheme the respondent alleges, the respondent was not a person claiming through the bankrupts as predecessors under s. 12 of the Act, those conclusions could serve as no more than the motion judge's explanation for rejecting the appellants' motion to strike based on the expiry of a limitation period. The motion judge was not in a position to find that a Ponzi scheme as alleged by the respondent existed. Considered in their proper context, any conclusions expressed by the motion judge cannot be read as binding determinations giving rise to res judicata or issue estoppel.
[36] Again, our conclusion in this respect is reinforced by the fact that the motion judge did not include a disposition section in his reasons invoking rule 21.01(1)(a) and purporting to make a binding declaration, in addition to the fact that the formal order simply dismisses the appellants' motion to strike.
[37] In a similar context, namely, orders dismissing a motion for summary judgment where a party claims that a motion judge has made binding determinations of fact or law, this court has said that a court proposing to exercise its powers to make such determinations under either rule 20.04(4) or (5) should specifically invoke the rule and that, reference to the rule, as well as the particular determination made, should form part of the formal order: Ashak, at paras. 8, 11, 13; Skunk v. Ketash, 2016 ONCA 841, 94 C.P.C. (7th) 141, at paras. 35-36.
[38] Although failure to do so is not determinative in the summary judgment context, this court has also said that in the absence of an express indication by the motion judge that any conclusions expressed in dismissing a motion for summary judgment are intended to be binding on the parties, it should be presumed that they are not: Skunk, at para. 58.
[39] This is because the motion judge's conclusions in dismissing a summary judgment motion are often simply a means of expressing why he or she dismissed the motion – and the force with which a motion judge expresses conclusions should not determine whether an order is interlocutory or final. Moreover, holding formal orders to be final where they do nothing more than dismiss a summary judgment motion could lead to confusion and uncertainty about the effect of reasons for judgment and appropriate appeal routes: Skunk, at paras. 56-58, 60; Ashak, at para 11.
[40] In our view, the same considerations apply in this case. As we have said, the appellants did not serve a notice of motion invoking rule 21.01(1)(a) or detailing the precise legal ruling they sought. The precise ruling the appellants say the motion judge made does not appear in his reasons or in the formal order. Holding that the motion judge's reasons constitute a final order giving rise to res judicata or issue estoppel in relation to a particular issue in these circumstances could lead to confusion about the effect of reasons for judgment and resulting appeal routes.
Third Reason: Authority to Make Binding Determination
[41] Third, and in any event, we are not satisfied that the motion judge had authority to make a binding determination under rule 21.01(1)(a) in this case. His decision should not therefore be treated as doing so.
[42] In our view, this court's comment in Beardsley about the ability to seek a ruling under rule 21.01(1)(a) concerning a limitations defence prior to the close of pleadings has likely been overtaken by the enactment of the Limitations Act, 2002, in cases where the Act applies. We are also of the view that the comment in Beardsley was never intended to apply to a case that is legally or factually complex.
[43] In Beardsley, at para. 21, this court explained that the expiry of a limitation period does not render a cause of action a nullity, but rather, it is a defence that must be pleaded. This court went on to say that "it would be unduly technical to require delivery of a statement of defence in circumstances where it is plain and obvious from a review of a statement of claim that no additional facts could be asserted that would alter the conclusion that a limitation period had expired".
[44] To support this statement, in a footnote tied to para. 21, this court gave the example of the expiry of a two-year limitation period under the Highway Traffic Act, R.S.O. 1990, c. H.8, "in connection with a claim for property damages only, where it is clear the discoverability rule does not apply" (emphasis added).
[45] However, the basic limitation period established by the Limitations Act, 2002 is now premised on the discoverability rule. The discoverability rule raises issues of mixed fact and law: Longo v. MacLaren Art Centre, 2014 ONCA 526, 323 O.A.C. 246, at para. 38. We therefore question whether there is now any circumstance in which a limitation issue under the Act can properly be determined under rule 21.01(1)(a) unless pleadings are closed and it is clear the facts are undisputed. Absent such circumstances, we are sceptical that any proposed limitation defence under the Act will involve "a question of law raised by a pleading" as required under rule 21.01(1)(a).
[46] In any event, as we have said, in our view, this court's comment at para. 21 of Beardsley was never intended to apply in a situation such as this, where the fact situation is not straightforward and has not been fully defined by the pleadings, and where the respondent seeks to advance what may be a novel claim. In particular, although the respondent has delivered a statement of claim, it is not yet clear what allegations it will make in response to a limitations defence, for example, whether explicit allegations of fraud will be made and against whom such allegations, if any, will be made, i.e., against the bankrupts or against the bankrupts and the appellants. See also: Tran v. University of Western Ontario, 2016 ONCA 978, at paras. 19 to 21.
[47] The respondent's claim may be novel, at least in part, because rather than asserting that it stands in the shoes of the bankrupts or that representative claims for unjust enrichment are authorized in this case by statute, the respondent, as trustee in bankruptcy, purports to act in a representative capacity for unsecured creditors because the claims are premised on fraudulent conduct of the bankrupts. As we have said, the allegations of fraud are not yet clearly defined – but they could be more clearly defined in a reply responding to a limitations defence.
[48] Further, it is also not clear to what extent the respondent will rely, in responding to any limitations defences, on assertions about when the bankrupts, or either of them, knew or ought to have known that "a proceeding would be an appropriate means to seek a remedy" within the meaning of s. 5(1) of the Limitations Act, 2002. Any such assertions may well raise issues of mixed fact and law.
[49] As indicated above, the example on which this court relied in the footnote tied to para. 21 of Beardsley was neither legally nor factually complex. Beardsley pre-dated the enactment of the Limitations Act, 2002, and the example this court posited involved a straightforward, undisputed fact situation in which the cause of action had accrued and to which the discoverability rule did not apply. That is not this case.
[50] In our view, the appellants' motion was premature. We conclude that the motion judge could not properly have made a final determination of the limitations issue in favour of the appellants prior to the close of pleadings and without the benefit of a more fulsome record. In these circumstances, his reasons for dismissing the appellants' motion should not be read as a final determination of the limitations issue in favour of the respondent giving rise to res judicata or issue estoppel.
Disposition
[51] Particularly in light of our conclusion that the appellants' motion was premature, this is not an appropriate case to seek permission from the Chief Justice of the Superior Court to reconstitute ourselves as a panel of the Divisional Court to dispose of the substantive issues on appeal. We also note that the parties did not address the issue of leave. In the case of an interlocutory order made outside of Toronto, a request for leave must be made to a single judge of the Superior Court: ss. 19(1) and 21(3) of the Courts of Justice Act, R.S.O. 1990, c. C.43; rule 62.02. Moreover, no right of appeal exists until leave has been granted: Hillmond Investments Ltd. v. Canadian Imperial Bank of Commerce (1996), 29 O.R. (3d) 612 (C.A.), at p. 620.
[52] Based on the foregoing reasons, the appeal is quashed. Given that the issue of jurisdiction was raised by the panel at the appeal hearing, we decline to award costs.
Released: June 20, 2017
Janet Simmons J.A.
Paul Rouleau J.A.
L.B. Roberts J.A.
