COURT OF APPEAL FOR ONTARIO
CITATION: 1100997 Ontario Limited v. North Elgin Centre Inc., 2016 ONCA 848
DATE: 20161114
DOCKET: C61621
Weiler, Blair and van Rensburg JJ.A.
BETWEEN
1100997 Ontario Limited Applicant (Appellant)
and
North Elgin Centre Inc. Respondent (Respondent on Appeal)
James P. McReynolds, for the appellant
Martin P. Zarnett, for the respondent
Heard: September 20, 2016
On appeal from the order of Justice John R. McCarthy of the Superior Court of Justice, dated December 15, 2015
van Rensburg J.A.:
A. Introduction
[1] The issue in this appeal is whether, three years after the commencement of an application for a declaration that the appellant had a valid and subsisting lease, the motion judge erred in refusing to direct a trial of the issues and to permit the delivery of a statement of claim for damages for wrongful termination of the lease and loss of equipment and inventory. The motion judge refused such relief on the basis that the proposed statement of claim raised new claims that were statute-barred. For the reasons that follow, I would allow the appeal. The claims advanced arise from the same factual nexus set forth in the application and do not assert new causes of action.
B. Facts
[2] The appellant, 1100997 Ontario Limited (“110”), operated a convenience store in a strip mall on Yonge Street in Richmond Hill in premises owned by North Elgin Centre Inc. (“North Elgin”). In 1997, 110’s predecessor (1252795 Ontario Limited or “125”) entered a lease with North Elgin for a five year term. In 2003, after the bankruptcy of 125, 110 and North Elgin negotiated a lease for a five year term, with an option to renew for a further five year term. The 2003 lease was never executed. 110 continued to operate the convenience store at the premises, paying rent to North Elgin until 2012.
[3] In March 2012, following a default in payment of rent, North Elgin gave one month’s notice of termination of 110’s tenancy, taking the position that 110 was an overholding month-to-month tenant.
[4] 110 commenced an application in the Superior Court of Justice seeking, among other things, a declaration that it had a lease of the premises. 110 brought an emergency motion for interim relief from forfeiture. Mullins J. dismissed the motion on April 30, 2012, and North Elgin took possession of the premises on May 1, 2012.
[5] Neither party took any further steps in the proceeding until October 2015, when 110 moved for an order directing a trial of the issues and for leave to serve a statement of claim. 110 proposed to seek damages for the termination of its tenancy.
C. Decision Below
[6] The motion judge concluded that the amendments in the proposed statement of claim raised new causes of action that were not asserted in the application and that such claims, having arisen more than two years earlier, were statute-barred under the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B. When the application was commenced the tenancy was subsisting, and the proposed claims were new and discrete causes of action flowing from events occurring between April 30, 2012 and August 2012. As such, the new claims were not based on the same factual nexus as that found in the application. The motion judge also observed that Mullins J. made a “real finding,” rather than an “interim finding,” that no written lease was in existence.
[7] The motion judge dismissed the motion and awarded costs against 110 in the amount of $3,000. It is from this decision that 110 appeals.
D. Positions of the Parties
[8] 110 contends that the motion judge erred in concluding that its proposed statement of claim raised new causes of action, and in concluding that Mullins J. had already determined whether there was a written lease on a final basis. 110 contends that the remedies it now seeks – damages for North Elgin’s termination of 110’s tenancy and re-entry and for loss of its inventory and equipment – are based on the very facts that were alleged in its application. 110 says that, in considering whether the factual nexus is the same, the court should compare the facts alleged in the application and its supporting affidavit with the proposed statement of claim. An alternative theory of liability based on the same factual nexus does not constitute a “new” cause of action that is statute-barred. If the amendments are viable, the court should direct a trial of the issues as there are factual issues in dispute.
[9] North Elgin seeks to uphold the motion judge’s order. As a preliminary point, North Elgin argues that this court should not entertain 110’s appeal as the order in the court below was interlocutory. Under s. 19(1)(b) of the Courts of Justice Act, R.S.O. 1990, c. C.43, an interlocutory order of the Superior Court of Justice is properly appealed to the Divisional Court, with leave. Further, North Elgin asserts that, if the motion judge erred in concluding that Mullins J. decided the issue of whether there was a lease on a final basis, this conclusion had no effect on the decision. North Elgin disagrees that 110’s proposed amendments should be compared against the affidavit delivered in support of its notice of application in this case. Finally, North Elgin argues that the judge was correct to observe that the facts on which 110 relies for its new claims all arose since the date North Elgin re-entered the premises, which was more than two years before 110 brought its motion.
E. Analysis
[10] I will first dispense with the preliminary issues: first, whether the motion judge’s order is final or interlocutory, and, consequently, whether this court has jurisdiction to hear an appeal from that order; and second, whether the issue regarding the existence of a written lease had been determined at the emergency motion on a final basis.
[11] I will then turn to the main issue on appeal, namely whether the proposed statement of claim seeks to advance new causes of action not arising out of the factual nexus pleaded in 110’s application. As I will explain, the motion judge erred in his analysis of this issue. In determining this matter, I will address whether a court can look to affidavit evidence filed in support of a notice of application for the purpose of determining what facts were relied upon to found the causes of action in the original proceedings.
(1) This Court Has Jurisdiction to Hear the Appeal
[12] Orders refusing leave to amend a pleading to add what is determined to be a new cause of action outside a limitation period are typically treated as final orders, subject to appeal to this court: See for example, Frohlick v. Pinkerton Canada Ltd., 2008 ONCA 3, 88 O.R. (3d) 401; Dee Ferraro Ltd. v. Pellizzari, 2012 ONCA 55, 346 D.L.R. (4th) 624; and Keparutis v. Canamould Extrusions Inc., 2012 ONCA 844. The motion judge dismissed the motion to direct a trial of the issues because he concluded that 110 proposed to pursue new causes of action that did not arise from the factual nexus contained in the notice of application and were therefore statute-barred. The order is therefore final and this court has jurisdiction to entertain the appeal.
(2) Whether a Written Lease Existed Was Not Determined on a Final Basis
[13] Next, I turn to the motion judge’s observation that Mullins J., in the interim emergency motion, decided that no written lease was in existence on a final basis. The issue before Mullins J. was whether 110 was entitled to relief from forfeiture. Mullins J. refused the relief. She did not make a final determination as to the rights of the parties, stating with respect to the lease: “[t]here is no clear definitive evidence that there is a written lease between the parties.” She considered all of the circumstances in refusing interim relief, including that 110 was in arrears of rent and that only by mortgaging his home could its principal pay some but not all of the rents owing. That she did not purport to decide what was a key issue in the application on a final basis is clear from her disposition of costs of the motion, which she reserved to the justice hearing the application on the merits.
[14] I therefore agree with 110 that the motion judge erred in concluding that Mullins J. found that there was no written lease, and in treating her decision as a final determination of this issue. That said, I agree with North Elgin that this conclusion did not have any real effect on the motion judge’s decision in this case as his decision did not turn on this issue. Rather, he dismissed the motion after finding 110’s proposed amendments were new claims that were statute-barred.
(3) The Proposed Amendments Ought to Have Been Permitted
(a) The Court Can Look to Affidavit Evidence in Support of the Notice of Application
[15] Where a proceeding is commenced by way of application, it is necessary to consider both the notice of application and the supporting affidavit material referred to therein to determine whether the proposed amendment sets forth a new cause of action.
[16] A notice of application may be amended in the same manner as a pleading: r. 14.09. However, a notice of application is not a “pleading” as it is required to state only the precise relief sought, the grounds to be argued and the documentary evidence to be used at the hearing of the application: r. 38.04. It is therefore the supporting affidavit that typically contains the relevant facts.
[17] In Energy Probe v. Canada (Attorney General) (1989), 1989 CanLII 258 (ON CA), 68 O.R. (2d) 449 (C.A.), leave to appeal refused 37 O.A.C. 160 (S.C.C.), in determining whether a cause of action was disclosed, this court stated that “affidavit materials on an application are to be considered as the pleadings” (at para. 10). Further, where oppression proceedings commenced by notice of application were converted into an action in Przysuski v. City Optical Holdings Inc., 2014 ONSC 3686, Perell J. refused to strike paragraphs of the statement of claim as raising unanticipated claims as an abuse of process because “[t]he Notice of Application should be read with its supporting affidavits and with the evidentiary record for the Application” (at para. 11).
[18] In this case, the affidavit of Manir Yousif (the “Yousif Affidavit”), the principal of 110, was filed in support of 110’s notice of application. In considering whether 110’s proposed statement of claim sought to advance new causes of action that are statute-barred, the motion judge ought to have considered this affidavit.
(b) Legal Principles Regarding the Amendment of Pleadings
[19] A cause of action is “a factual situation the existence of which entitles one person to obtain from the court a remedy against another person”: Letang v. Cooper, [1965] 1 Q.B. 232 (C.A.), at pp. 242-43, as adopted by this court in July v. Neal (1986), 1986 CanLII 149 (ON CA), 57 O.R. (2d) 129 (C.A.), at para. 23.
[20] In Morden & Perell, The Law of Civil Procedure in Ontario, 2nd ed. (Markham: LexisNexis Canada Inc., 2014), at p. 142, the authors state:
A new cause of action is not asserted if the amendment pleads an alternative claim for relief out of the same facts previously pleaded and no new facts are relied upon, or amount simply to different legal conclusions drawn from the same set of facts, or simply provide particulars of an allegation already pled or additional facts upon which the original right of action is based. [Footnotes omitted.]
[21] In Dee Ferraro Ltd. v. Pellizzari, this court noted the distinction between pleading a new cause of action and pleading a new or alternative remedy based on the same facts originally pleaded. The appellants had commenced an action against their lawyer claiming damages for breaches of contract, trust and fiduciary duty and for fraud and negligence. The appellants then sought to amend their pleading. This court, in overturning the motion judge’s dismissal of the motion to amend, concluded that the proposed amendments, such as claims for a mandatory order and a constructive trust over shares, could be made because they flowed directly from facts previously pleaded.
[22] By contrast, a proposed amendment will not be permitted where it advances a “fundamentally different claim” after the expiry of a limitation period: Frohlick v. Pinkerton Canada Ltd. In that case, the court did not permit the plaintiff in a wrongful dismissal action to amend the statement of claim to assert a claim for damages for constructive dismissal on the basis that the limitation period had expired. This court dismissed the appeal. The amendment regarding constructive dismissal related to events that occurred prior to the events described in the original statement of claim that were unrelated to that claim. The defendant was unaware of the new allegations prior to the plaintiff seeking the amendments, and the events were not put in issue or encompassed within the original claim.
[23] Based on the foregoing, an amendment will be refused when it seeks to advance, after the expiry of a limitation period, a “fundamentally different claim” based on facts not originally pleaded.
(c) The Principles Applied
[24] I turn to consider and to compare what was asserted in the application with the facts pleaded and relief sought in the proposed statement of claim.
[25] The notice of application sought a declaration confirming that 110 had a valid and subsisting lease, and a declaration confirming that there had been sufficient part performance under the lease to give the lease full force and effect as if it had been executed by the parties (and to take it out of the scope of s. 1 of the Statute of Frauds, R.S.O. 1990, c. S.19). The notice of application also sought relief from forfeiture and an interim injunction, an order fixing 110’s rent at $5,000 per month for the remainder of the term of the lease and “[s]uch further and other relief as this Honourable Court may deem just.”
[26] As grounds for the application, the notice of application set forth the fact that 110 was North Elgin’s tenant; that 110 was occupying the premises pursuant to an unexecuted lease; that 110 and its predecessor had continuously occupied the premises for 14 years and seven months; that the lease was to expire November 30, 2013; that there was an agreed rent of $5,000 per month, which had been paid at that rate for the past year; that 110’s principal shareholder and director drew his sole livelihood from the business and would suffer irreparable harm if deprived of that livelihood; and that 110 had over $100,000 of inventory on the premises, much of it perishable.
[27] The Yousif Affidavit expanded on these facts. Of particular importance to 110’s motion to amend is the affidavit’s reference to the conduct of the landlord suggesting that it recognized the lease was in force (referring to obligations under the lease and rent paid thereunder), the leasehold improvements that 110 made, the inventory and equipment present at the premises and the disastrous consequences to 110 and to Yousif personally if locked out of the premises.
[28] 110’s proposed statement of claim seeks the same relief sought in the notice of application, as well as damages in the amount of $250,000 for breach of contract, unjust enrichment, conversion and bad faith, and punitive damages in the amount of $50,000.
[29] A number of facts pleaded in the statement of claim are substantially identical to those set forth in the application. For example, the statement of claim refers to 110 and its predecessor’s continuous occupation of the premises, its substantial leasehold improvements and substantial part performance, as well as the $100,000 of inventory at the premises.
[30] The statement of claim additionally pleads that, as at May 1, 2012, when North Elgin took possession of the premises, the premises contained inventory and equipment worth in excess of $200,000, that North Elgin refused 110 access to the inventory and equipment and that North Elgin leased the premises to another convenience store operator and sold the inventory and equipment without 110’s knowledge. 110 claims a failure to account, and that North Elgin’s actions in terminating 110’s lease were motivated by North Elgin’s dealings with a third party, Bulk Barn.
[31] North Elgin says that at the time of the commencement of the application, the tenancy between 110 and North Elgin was subsisting and that all of the relief claimed sought the continuation of a lease with respect to the premises. By contrast, the proposed amendments claim new relief – including damages and punitive damages – arising out of what happened subsequently, after North Elgin retook possession of the premises on May 1, 2012. North Elgin asserts that the claims for the failure to account to 110 for inventory and equipment that remained in the leased premises after the tenancy was terminated, and for unjust enrichment, bad faith and conversion in relation to North Elgin’s dealings with the inventory and equipment, are all new allegations that could not have been made in the notice of application because they took place only after the re-entry. North Elgin says that the motion judge was correct to consider the proposed amendments as advancing new, distinct and discrete causes of action not pleaded in the original notice of application.
[32] I disagree with the approach of the motion judge and North Elgin.
[33] The underlying question is whether, by reason of what was asserted in the application, North Elgin had knowledge of the facts underlying 110’s damages claims. In my view, there is no new cause of action pleaded.
[34] The application asserts that 110 had rights as a tenant of the premises under the unexecuted 2003 lease. It claimed part performance and that North Elgin was not entitled to terminate the lease on one month’s notice. It referred to the presence on the premises of valuable inventory and equipment and the effect the termination of the lease would have. While the relief sought in the notice of application was foreclosed by North Elgin’s conduct in retaking possession, 110’s claim for damages arises out of exactly the same circumstances that were set forth in the notice of application and supporting affidavit, namely the conduct of North Elgin in terminating the lease and retaking possession of the premises. The pleading that North Elgin’s conduct was motivated by its dealings with a third party is a new fact, but not one that is essential to the causes of action pleaded.
[35] The actionable fact in the notice of application was the threatened termination of 110’s tenancy. The notice of application adverted to the harm 110 would suffer as a result of the termination. The statement of claim is based on the same actionable fact: the termination of 110’s tenancy. The only difference is that 110 pleads additional facts about what transpired after the lease was terminated. As such, the claim for damages is simply an alternative remedy based on the same factual nexus as originally pleaded in the notice of application.
[36] While the notice of application originally sought only declaratory and injunctive relief, 110’s damages claim is not a “fundamentally different claim” based on a set of facts not originally pleaded.
[37] Further, the claims for breach of contract, unjust enrichment and bad faith set forth in the statement of claim, but not pleaded in the notice of application, are not new causes of action. They are new legal characterizations of the wrong that was alleged in the notice of application, and arise out of the same factual nexus.
[38] I therefore conclude that the proposed amendments contained in the statement of claim ought not to have been refused on the basis that they raised new claims based on new causes of action.
[39] Since it is clear that there are and will continue to be material facts in dispute, it is appropriate to direct a trial of the issues in the application and to permit 110 to deliver a statement of claim in the form proposed.
F. Disposition
[40] For these reasons, I would allow the appeal. Pursuant to r. 38.10, I would order that the application proceed to trial, that the proceeding be treated as an action, and that 110 have leave to deliver its statement of claim in the form attached to its notice of motion.
[41] I would award costs of the motion in the court below to 110 fixed at $3,000, and costs of the appeal to 110 fixed at $5,000, both amounts inclusive of disbursements and applicable taxes.
Released: “K.M.W.” November 14, 2016
“K. van Rensburg J.A.”
“I agree K.W. Weiler J.A.”
“I agree R.A. Blair J.A.”