Court of Appeal for Ontario

Date: 2018-11-29 Docket: C65232

Judges: Hoy A.C.J.O., Feldman and Huscroft JJ.A.

Between

Jacob Van Halteren Plaintiff (Appellant)

and

De Boer Tool Inc. Defendant (Respondent)

Counsel

Anton M. Katz, for the appellant

Tyler H. McLean, for the respondents Gary De Boer, Marcia De Boer and De Boer Tool Inc.

Heard: November 16, 2018

On appeal from: the order of Justice James A. Ramsay of the Superior Court of Justice, dated March 6, 2018, with reasons reported at 2018 ONSC 1554, [2018] O.J. No. 1226 (Sup. Ct.).

Reasons for Decision

Overview

[1] This is an appeal from an order denying the appellant, Jacob Van Halteren, leave to amend his statement of claim.

[2] The motion judge dismissed the appellant's motion for leave to amend his statement of claim for two reasons, either of which would be a sufficient basis for dismissing the appellant's motion. First, the motion judge found that the proposed amendments raised causes of action that were statute-barred by s. 4 of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B. Second, he found that the motion for leave to amend the statement of claim was an abuse of process. The appellant argues that both findings are tainted by reversible error.

[3] The appellant also seeks leave to appeal the motion judge's costs order.

[4] For the reasons that follow, the appeal is dismissed and leave to appeal the costs order is denied.

Background

[5] Some context is helpful before addressing the issues on appeal.

[6] This litigation arose out of the appellant's attempt to recover the $500,000 he advanced to the respondent De Boer Tool Inc. (the "Corporation") in 2002.

[7] The appellant commenced his action by Notice of Action on October 17, 2012. He issued his statement of claim on November 6, 2012.

[8] The appellant initially based his action on a promissory note said to have been executed in 2008 (the "2008 Note"). The appellant's position, at this point in the litigation, was that he was a creditor of the Corporation and had not become a shareholder. In its statement of defence dated January 11, 2013, the Corporation took the position the 2008 Note was a forgery.

[9] On May 28, 2013, the appellant sought leave to amend his statement of claim (the "2013 Statement of Claim"). In particular, he sought to: (1) add the respondents Gary De Boer and Marcia De Boer (the directors, officers and shareholders of the Corporation) as defendants; and (2) in the alternative to his claim on the 2008 Note, plead entitlement to relief under the oppression remedy as a creditor or a security holder of the Corporation. The appellant further alleged that the De Boers paid themselves dividends on their shares of the Corporation to the exclusion of the appellant.

[10] On December 2, 2013, Glithero J. denied the appellant's motion for leave to amend his statement of claim on the basis that the appellant's claims based on oppression were statute-barred by the Limitations Act, 2002: Van Halteren v. De Boer Tools Inc., 2013 ONSC 6736, [2013] O.J. No. 5540 (Sup. Ct.).

[11] Glithero J. held that there were no facts pled in the original statement of claim that could support a claim for relief in the nature of the oppression remedy. He noted that the appellant had taken the position throughout the lawsuit that he had never received any shares and relied on a promissory note. He wrote, at para. 26:

In my opinion, this is a case where a plaintiff faced with a denial of the promissory note upon which the action was originally based, seeks to avoid any problems which may arise from alleged forgery of the note, and instead switch to a new cause of action in respect of which the Limitations Act has expired.

[12] The appellant did not appeal the order of Glithero J.

[13] On August 20, 2014, Parayeski J. granted the appellant leave to amend his statement of claim, in order to advance a claim based on a separate promissory note issued by the Corporation in 2003 (the "Original Note"), which was "re-signed" by the parties on November 21, 2005. The Original Note was stated to be due on demand or by September 1, 2006, whichever came earlier. It was also stated to be "in force until a share agreement is put in place." No shareholders' agreement was put in place.

[14] On August 5, 2015, Parayeski J. dismissed the appellant's motion for summary judgment: Van Halteren v. De Boer Tool Inc., 2015 ONSC 4939, [2015] O.J. No. 4136 (Sup. Ct.). He found that the action on the Original Note was statute-barred and that the 2008 Note was a forgery and could not ground a cause of action or serve as an acknowledgement of the underlying debt. Parayeski J.'s order was upheld by this court on appeal: Van Halteren v. De Boer Tool Inc., 2016 ONCA 559, [2016] O.J. No. 3709 (Sup. Ct.).

[15] Parayeski J. had not dismissed the action. On September 13, 2016, the Corporation moved for summary judgment dismissing the action, based on the findings of Parayeski J.

[16] In response to the Corporation's motion for summary judgment, the appellant moved on October 7, 2016 to amend his statement of claim (the "2016 Statement of Claim") in order to add Gary De Boer as a defendant, to claim damages for fraud, and to seek a declaration that he owns 25% of the common voting shares of the Corporation.

[17] In February 2018, before the motion was heard, the appellant sought to further amend his proposed statement of claim (the "2018 Statement of Claim"). In the 2018 Statement of Claim, the appellant seeks to add both Gary and Marcia De Boer as defendants and seeks a declaration that he is the owner of 12.5% of the common shares of the Corporation. He alleges that the respondents deceitfully concealed that he was a shareholder. He alleges that had he known he was a shareholder, he would not have elected to sue on the basis of a loan. He also alleges, seemingly in the alternative, that the De Boers falsely represented to him that they would recognize his interest as a shareholder. He repeats the allegation in the 2013 Statement of Claim that the Corporation paid dividends, but not to him, and again seeks relief under the oppression remedy provisions of the Business Corporations Act, R.S.O. 1990, c. B. 16.

[18] In particular, he pleads that the Corporation's tax filings for the years 2004 through 2010, which were disclosed to him on August 22, 2017, show that he is a shareholder, but that the Corporation's tax returns for 2011 through 2016 show that he is no longer a shareholder. He also alleges that, some time after 2010, the De Boers converted, or caused the Corporation to convert, his shares.

[19] The motion judge considered the 2018 Statement of Claim.

The Limitation Issue

[20] The appellant asserts – both on this appeal and the motion below – that he only discovered his claim to an equity interest in the Corporation, and that his interest was converted by the respondents, when the Corporation's tax filings for the 2004 to 2010 years were disclosed to him on August 22, 2017. Accordingly, he maintains that the shareholder based claims in the 2018 Statement of Claim are not statute-barred.

[21] The motion judge held that s. 16(1)(a) of the Limitations Act, 2002, which provides that there is no limitation period in respect of a proceeding for a declaration if no consequential relief is sought, did not apply. In the motion judge's view, the "pith and substance of the claim is damages or a property interest in shares to compensate for the $500,000 advanced": at para. 6. Accordingly, the motion judge held that the applicable prescription was the general limitation period of two years after the cause of action is discovered or discoverable, pursuant to s. 4 of the Limitations Act, 2002. The appellant does not challenge this finding.

[22] The motion judge also found that the appellant discovered that his right to an interest in the Corporation, in any form, was disputed no later than April 8, 2014, when the appellant swore an affidavit in which he acknowledged the respondents' admission that no shares had been issued to him: at para. 7. Since the appellant did not move until October 7, 2016 (more than two years after April 8, 2014) to amend his statement of claim to seek a declaration that he is or was a shareholder, and to seek consequential relief, his action was statute-barred.

[23] Further, in the portion of his reasons addressing the issue of abuse of process, the motion judge held that it was res judicata that the cause of action with respect to the shares had been discovered by December 2, 2013, when Glithero J. dismissed the appellant's earlier motion for leave to amend to seek relief as a shareholder under the oppression remedy: at para. 9.

[24] On appeal, the appellant argues that the motion judge erred by considering the appellant's own affidavit evidence in rejecting the appellant's position that he did not discover his possible claim as a shareholder, within the meaning of s. 5 of the Limitations Act, 2002, until the Corporation's tax filings were produced to him in 2017.

[25] We reject this argument. In any event, the motion judge's finding was amply supported by more than the appellant's affidavit evidence.

[26] As the motion judge found, it is clear that the appellant had discovered that he had a possible claim as shareholder by December 2, 2013, when he brought his motion for leave to amend before Glithero J. to seek relief as a shareholder of the Corporation. Further, in his 2016 Statement of Claim, the appellant alleged, among other things, that: from 2003 to 2010 the Corporation had provided him with financial statements that did not disclose any indebtedness owing to him;[1] on November 5, 2010, Gary De Boer confirmed that the appellant had an equity interest in the Corporation; and, in 2016, the Corporation's bankers had told him there was nothing in their files to indicate that he had any interest in the Corporation. Thus, based on the appellant's own pleadings, he had discovered that he had a possible, but disputed, claim as a shareholder arising out of the non-payment of the $500,000 before August 22, 2017, when the Corporation's tax filings were produced to him.

[27] Given our conclusion that the motion judge correctly found that the proposed amendments raised causes of action that were statute-barred by s. 4 of the Limitations Act, 2002, we need not address the motion judge's finding that the appellant's motion for leave to amend was an abuse of process.

The Costs Order

[28] As noted above, the appellant also seeks leave to appeal from the motion judge's costs order.

[29] Three motions were initially before the motion judge: (1) the appellant's motion for leave to amend his statement of claim; (2) the Corporation's motion to stay the action for non-payment of costs and/or for security for costs; and (3) the Corporation's motion for summary judgment, dismissing the appellant's action against it. The appellant paid the outstanding costs, and the Corporation accordingly did not proceed with the motion for security for costs.

[30] Before the remaining motions were heard, the parties agreed that if the appellant's motion for leave to amend were dismissed, his action would also be dismissed. Accordingly, having dismissed the motion for leave to amend, the motion judge dismissed the appellant's action. The motion judge was left to address the issue of costs for the three motions, as well as the costs of the action.

[31] The motion judge found that the appellant was unsuccessful and should pay the costs of the action and the three motions. He also concluded that the respondent was entitled to costs on a substantial indemnity scale, because the appellant had advanced unfounded allegations of fraud and attempted to bring claims that were obviously statute-barred. He noted that the respondents had made attempts to settle the case, even after the limitations period had expired. Further, he noted that the parties had appeared in court 12 times since this court upheld the order of Parayeski J. As a result, he concluded substantial indemnity costs were required to vindicate the integrity of the administration of justice. The motion judge considered the fact that money was advanced by the appellant and not repaid, but concluded that costs of $100,000 (less than the full amount claimed) were nonetheless appropriate.

[32] On appeal, the appellant argues that the costs awarded were grossly excessive, particularly given that the money he advanced to the Corporation was not repaid. He also argues there is duplication across the respondents' bills of costs for the various motions and for the action. He concedes that he had made allegations of fraud against the respondents,[2] and does not argue that the motion judge erred in principle in awarding costs on a substantial indemnity scale.

[33] In exercising his discretion, the motion judge specifically considered that the money advanced by the appellant was not repaid. The motion judge also reduced the substantial indemnity costs the respondent sought by approximately 25%. In our view, that reduction must be attributable to, and is a reasonable reduction for, duplication of time across the various bills of costs that were before the motion judge. The appellant has not identified any error of principle or satisfied us that the costs award is plainly wrong. Accordingly, leave to appeal the costs order is denied.

Disposition

[34] The appeal is dismissed and leave to appeal the costs order is denied. The respondents shall be entitled to the costs of the appeal, fixed in the agreed amount of $12,000, inclusive of HST and disbursements.

"Alexandra Hoy A.C.J.O."

"K. Feldman J.A."

"Grant Huscroft J.A."

Footnotes

[1] Rather, the financial statements, at least for some years, showed the $500,000 as forming part of shareholders equity.

[2] In his 2018 Statement of Claim, the appellant acknowledges that, in addition to alleging fraud in his pleadings, he caused the De Boers to be criminally charged with fraud. The Crown subsequently dropped the charges.