Canada (Attorney General) v. Rostrust Investments Inc., 2007 ONCA 867

CITATION: Canada (Attorney General) v. Rostrust Investments Inc., 2007 ONCA 867

DATE: 20071210

DOCKET: C46747

COURT OF APPEAL FOR ONTARIO

O’CONNOR A.C.J.O., CRONK and LaFORME JJ.A.

BETWEEN:

ATTORNEY GENERAL OF CANADA

Plaintiff (Respondent)

and

ROSTRUST INVESTMENTS INC.

Defendant (Appellant)

L. David Roebuck and Samuel Robinson, for the appellant

I.H. Fraser, for the respondent

Heard and released orally: November 30, 2007

On appeal from the order of Justice Robert J. Smith of the Superior Court of Justice dated January 30, 2007.

ENDORSEMENT

[1] On this appeal, the appellant seeks to vary, in part, the order of Smith J. of the Superior Court of Justice dated January 30, 2007 made on the Crown’s motion to answer three questions of law and to dismiss the appellant’s counterclaim pursuant to rule 21.01(1)(a) of the Rules of Civil Procedure.

[2] At issue is the motion judge’s disposition regarding the third question posed on the motion, namely, whether the Crown’s option to purchase certain lands under an Option Agreement made as of July 1, 1975 has expired, or whether the Crown is now otherwise disentitled from exercising its right under the option to purchase the relevant property.

[3] The motion judge considered and answered both parts of this question in the negative. This led to the dismissal of the appellant’s counterclaim with leave granted to the appellant, on the motion judge’s own initiative, to amend its counterclaim to assert a claim for any damages it may have suffered as a result of the Crown’s registration on title to the property of a notice of purported exercise of the option.

[4] For the following reasons, we are satisfied that the appeal must be allowed.

[5] First, on our reading of the record before the motion judge, the motion judge erred by concluding that no material facts were in issue with respect to the third question posed on the motion. In its statement of defence and counterclaim, the appellant alleged, among other matters, that in delivering a notice purporting to exercise the option and subsequently commencing civil proceedings against the appellant, the Crown was “over-reaching and attempting to acquire the property on terms that are not provided for in the Option Agreement”.

[6] The appellant also pleaded that, by registering the notice on title, the Crown (i) acted in a manner inconsistent with and in breach of the Option Agreement; (ii) attempted to appropriate the entire value of the appellant’s reversionary interest in the property; and (iii) impaired the appellant’s right to deal with its reversionary interest in the property. The appellant alleged that, in so doing, the Crown acted in a manner that was funda-mentally inconsistent with the purpose of the Option Agreement.

[7] Thus, in its pleading, the appellant claimed that the Crown, by its own conduct, had fundamentally breached the Option Agreement with the result that the appellant was freed of its obligations thereunder and the Option Agreement came “to an end”.

[8] In its reply and defence to counterclaim, the Crown specifically denied each of these allegations. Consequently, contrary to the motion judge’s finding, the facts alleged by the appellant concerning the Crown’s conduct and its consequences for the remedial relief sought by the appellant were in dispute between the parties at the time of the motion. On this ground alone, the motion judge was precluded from considering and answering the third question on the motion. Based on the pleadings as framed by the parties, material facts bearing upon the determination of question three were in dispute.

[9] Nor, despite the able argument of counsel for the Crown, do we accept the Crown’s assertion before this court that the facts admittedly in dispute are not material to the matters raised by question three. Read broadly, the appellant’s pleading extends to an allegation of bad faith against the Crown. There is no dispute that the pleadings stage is not the appropriate point at which to finally determine an allegation of bad faith.

[10] Moreover, on a motion of this kind, no evidence was admissible. The effect of the motion judge’s challenged disposition was to determine a crucial question ‘in play’ in this litigation, involving disputed material facts, without the benefit of a full evidentiary record, leading to the dismissal of the appellant’s counterclaim at the pleadings stage.

[11] It was not open to the motion judge on this motion to adjudicate disputed facts or to determine questions of mixed law and fact in the absence of a proper evidentiary foundation. Accordingly, his disposition concerning the third question on the motion cannot stand.

[12] In these circumstances, it is unnecessary to address the other ground of appeal advanced by the appellant.

[13] The appeal is therefore allowed. The appellant is entitled to its costs of the appeal, fixed in the amount of $10,000, plus disbursements and G.S.T.

“D. O’Connor A.C.J.O.”

“E.A. Cronk J.A.”

“H.S. LaForme J.A.”