CITATION: Carfrae Estates Limited v. 2108790 Ontario Inc., 2009 ONCA 396
DATE: 20090513
DOCKET: C49186
COURT OF APPEAL FOR ONTARIO
Laskin, Simmons and Lang JJ.A.
BETWEEN
Carfrae Estates Limited and Cornerstone Properties Inc.
Appellants (Plaintiffs)
and
2108790 Ontario Inc. and 1510232 Ontario Inc.
Respondent (Defendants)
F. Scott Turton, for the appellants
David R. Rothwell, for the respondent
Heard: May 5, 2009
On appeal from the judgment of Justice Rose T. Boyko of the Superior Court of Justice dated August 22, 2008
By the Court:
[1] The appellants moved for summary judgment in an action in which they are claiming a discharge of a debenture currently registered against the title to a 99-acre parcel of vacant land (the “Urlindale lands”). The debenture was granted in 1979. The appellants claim that the limitation periods relating to its enforcement have expired.
[2] The motion judge dismissed the appellants’ motion, holding that steps have been taken to enforce the debenture and that, in any event, the validity and enforceability of the debenture were determined in another action. Based on the latter finding, the motion judge also granted a cross-motion by the respondent 2108790 Ontario Inc. for summary judgment: i) dismissing the appellants’ action; and ii) granting 2108790’s counterclaim and cross-claim for orders expunging all registrations against the title to the Urlindale lands by the appellants or by the co-defendant 1510232 Ontario Inc.
[3] Although we agree that the motion judge properly dismissed the appellants’ motion for summary judgment, we conclude that she went too far in making findings given the state of the record before her on the summary judgment motions and that she should have ordered that the action, counterclaim and cross-claim proceed to trial.
Background
[4] The appellant, Carfrae Estates Limited, is a successor corporation to the company that granted the debenture to the Canadian Imperial Bank of Commerce on October 9, 1979. The debenture is a fixed and floating charge debenture and by its terms, it is payable on demand. Carfare is also a successor corporation to a second company that acquired title to the Urlindale lands in 1976. Carfare amalgamated with both companies in 1982.
[5] CIBC demanded payment of the debenture from Carfrae on November 15, 1984; it subsequently appointed a receiver-manager under the debenture on May 1, 1985. Later, on February 25, 1986, CIBC registered the debenture against the title to the Urlindale Lands.
[6] Mr. Anthony Graat is a principal of Carfrae. In the summer of 1984, the Graat group of companies owed the CIBC approximately $38,000,000. Carfare was directly responsible for $2,022,879.81 of this indebtedness; it was also responsible for the remainder of the $38,000,000 indebtedness under guarantees.
[7] Between November 1984 and March 1985, the CIBC commenced various actions against Mr. Graat and his companies to realize on its security. In March 1985, the parties reached a compromise under which Mr. Graat and his companies consented to various monetary judgments as well as to the appointment of private receiver managers of certain companies, one of which was Carfrae.
[8] During the course of the Carfrae receivership, CIBC discovered that Carfrae had conveyed the Urlindale lands to the appellant Glencairn Plaza Limited (another Graat company) on April 25, 1985, prior to registration of the debenture. In addition to certain other proceedings against Mr. Graat and various Graat companies, the CIBC brought an action to set aside the conveyance to Glencairn as being fraudulent against the CIBC. The CIBC’s actions were tried together. On November 13, 1992, the CIBC obtained a judgment declaring that the conveyance to Glencairn is void as against the CIBC. On appeal to this court, that judgment was upheld.
[9] The CIBC assigned the 1979 debenture to the respondent, 2108790, on October 31, 2006. Subsequently, the appellants brought their action claiming that the debenture is unenforceable because of the expiry of the applicable limitation periods. The appellant Cornerstone Properties Inc. is a successor to Glencairn.
Discussion
[10] The motion judge’s decision to dismiss the appellants’ motion for summary judgment and to grant 2108790’s motion for summary judgment was premised on the following conclusions:
i) the debenture is not statute barred because the CIBC previously took steps to enforce it by appointing a receiver manager, one of the enforcement mechanisms mentioned in the debenture;
ii) the validity and enforceability of the debenture was in issue, at least implicitly, in the fraudulent conveyance action and was therefore determined by the judgment in that action; and
iii) because the validity and enforceability of the debenture was in issue in the fraudulent conveyance action, the appellants’ action for a discharge of the debenture based on the expiry of the limitation is an abuse of process.
[11] We are sceptical that the motion judge’s first conclusion is legally correct. We have not been provided with any authority to support the proposition that appointing a private receiver is “an entry or distress”, “an action to recover land or rent”, an “action ... to recover any sum of money”, or an “action upon a covenant” within the meaning of the Real Property Limitations Act, R.S.O. 1990, c. L-15.
[12] Further, based on our review of the record before the motion judge and of the trial judge’s reasons concerning the fraudulent conveyance action, it is far from apparent that a finding that this specific debenture was then enforceable was essential to a finding that the conveyance to Glencairn was fraudulent and void against the CIBC. In any event, depending on what the limitation period is, a determination that the debenture was valid and enforceable when the fraudulent conveyance action was decided may not demonstrate that the debenture remains enforceable now. The motion judge did not make a finding concerning the applicable limitation period.
[13] In the circumstances, if the appellants have a potentially viable claim that the debenture is statute barred, the motion judge's orders dismissing the appellants’ action and expunging the appellants’ title to the Urlindale lands cannot stand.
[14] However, given the lengthy history of litigation between the Graat companies and the CIBC, we are not satisfied that the appellants have met the onus of demonstrating that there is no genuine issue for trial in relation to their claim for a discharge of the debenture based on expiry of the relevant limitation periods.
[15] Apart from the debenture, the assignment of the debenture, some demand letters and the reasons and formal judgment in the fraudulent conveyance actions, none of the relevant documents relating to the steps taken by the CIBC to enforce its security are in the record that was before the motion judge. Particularly in the light of the trial judge’s conclusions in the fraudulent conveyance action that effectively rejected several portions of Mr. Graat’s testimony, in our view, the record before the motion judge falls short of demonstrating that the debenture is statute barred.
[16] Accordingly, the appeal is allowed, paragraphs 2 and 3 of the motion judge’s judgment are set aside and a paragraph is substituted stipulating that the cross-motion is dismissed. Costs of the appeal are to the appellant on a partial indemnity scale fixed in the amount of $4,000.00 inclusive of disbursements and G.S.T. Costs of the motions in the court below are in the cause.
RELEASED: May 13, 2009 “John Laskin J.A.”
“J.L.” “Janet Simmons J.A.”
“S.E. Lang J.A.”