Court of Appeal for Ontario
Date: February 14, 2017 Docket: C62149 Judges: MacPherson, Hourigan and Miller JJ.A.
Between
625805 Ontario Ltd. Plaintiff (Appellant)
and
Silverwood Flooring Inc., Tamar Royt and John Doe Defendants (Respondents)
Counsel
Brad Teplitsky, for the appellant
Inga B. Andriessen, for the respondents
Heard
January 12, 2017
On Appeal
On appeal from the judgment of Justice Barbara A. Conway of the Superior Court of Justice, dated May 16, 2016.
MacPherson J.A.
A. Introduction
[1] The appellant 625805 Ontario Ltd. ("625") appeals from the judgment of Conway J. of the Superior Court of Justice granting the respondent's motion for summary judgment. The motion judge held that the appellant had not commenced its action within the two year period prescribed by s. 4 of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B (the "Act").
B. Facts
(1) The Parties and Events
[2] Henry Smith and his son Carl Smith are home builders who carry on business through 625.
[3] Tamar Royt, a former family friend of the Smiths, is in the business of hardwood supply through her business Silverwood Flooring Inc. ("Silverwood"). Silverwood supplies hardwood flooring to large scale residential high rises and commercial projects.
[4] On November 16, 2009, the parties entered into a Joint Venture Agreement ("JVA") with a stated purpose:
to combine their efforts and co-operate for the purposes of selling and installing hardwood flooring to low rise developers and selling hardwood flooring products to high rise development projects.
[5] The business of the joint venture was defined in s. 1.1(c) of the JVA:
"Business" means the business of selling hardwood flooring to low rise and high rise development projects and installing hardwood flooring on low rise development projects, where such projects and customers have been referred to RoytCo by anyone of the Smith Group.
[6] By virtue of s. 2.7 of the JVA, all parties acknowledged that Silverwood would continue to engage in its hardwood flooring supply business with customers who were not referred to it by the Smiths.
[7] Pursuant to s. 2.2 and Schedule "C" of the JVA, Ms. Royt was responsible for managing the joint venture and would receive two percent of the gross sales of the business as a management fee.
[8] In or about March 2010, the Smiths secured a significant customer for the joint venture, M5V Condominiums Project (the "M5V Project"), which was embarking on a multi-level (35 storey) residential condominium development.
[9] The Smiths terminated the joint venture in April 2010. The Royt Group accepted the termination. In an email to the Smiths on May 12, 2010, Ms. Royt said:
Also wanted to confirm that all open orders in the system up to and including April 30th 2010 will be shared as per the agreement as well as M5V of course…. I'm looking forward to working with you on M5V…. I'll keep you posted on M5V regularly.
[10] In the months following termination of the JVA, the M5V Project was developed. The former partners to the JVA could not agree on their respective obligations and benefits from this project.
[11] On December 9, 2010, the Smiths commenced an application against Ms. Royt, 2219970 Ontario Inc., and an independent company potentially involved in hardwood flooring supplies for the M5V Project. The application sought, inter alia:
An accounting of all amounts owing by Tamar Royt and 2219970 Ontario Inc. to the Applicants pursuant to the terms of the Joint Venture Agreement made November of 2009.
[12] The Smiths did not name Silverwood as a defendant in the application because it was not a party to the JVA and the Smiths claim they had no knowledge, at the time of commencing the application, that Silverwood supplied hardwood flooring on the M5V Project.
[13] Ms. Royt provided an affidavit on behalf of the respondents on the application. During a cross-examination on her affidavit on January 20, 2012, Ms. Royt testified that Silverwood, not the joint venture, had supplied the hardwood flooring for the M5V Project.
[14] During the same cross-examination, this crucial exchange took place:
Q. Aside from any third party expenses or your 2 percent management fee, has Silverwood or you or any company received any funds relating to any proceeds of M5V, aside from the 2 percent fee and paying expenses to third parties?
A. Yes. M5V is not part of the joint venture agreement. That's my position.
Q. You will have to be very clear, because this is, just from my clients' perspective, very serious. You, Ms. Royt, or perhaps Silverwood, has received some of the proceeds yourself of the M5V project ?
A. I would say yes.
- Q. And the proceeds you have received are not only the 2 percent management fee, correct?
A. Actually, I don't even think it would amount to as much as the 2 percent management fee ….
- Q. Are you saying that the money you received -- did the project make a profit, earn a profit ?
A. Yes.
- Q. Let me make sure of this. The profit -- and that was the question where you interrupted counsel. The profit from M5V was less than 2 percent of the project?
[Ms. Royt's counsel]: She's already answered that question.
[Emphasis added.]
[15] Based on Ms. Royt's answers, the Smiths knew that Silverwood had supplied the hardwood flooring for the M5V Project. The Smiths did not add Silverwood as a respondent in their application at this juncture.
[16] The parties engaged in settlement discussions relating to the Smiths' application. They were unsuccessful.
[17] On September 9, 2015, the Smiths' numbered company, the appellant, issued a statement of claim against Silverwood, Ms. Royt and John Doe. [1] The principal relief sought in the action is a declaration that the defendants have been unjustly enriched at the plaintiff's expense and an accounting from the defendants as to the amount by which they have been unjustly enriched.
[18] On September 28, Silverwood and Ms. Royt filed a statement of defence. In short order, the parties filed amended statements of claim and defence.
[19] On January 19, 2016, Silverwood and Ms. Royt moved for summary judgment dismissing the action on the basis that the relevant limitation period had expired.
(2) The Motion Judge's Decision
[20] Following a hearing on May 16, 2016, the motion judge granted the motion. The core of the reasoning in her endorsement is:
In my view, by 2012 the [plaintiff] knew the following:
That [Silverwood] had supplied the flooring on the M5V project;
That the [plaintiff] considered the M5V project to have been a JV project;
That [Silverwood] had made a profit from the project; and
That [Silverwood] had derived revenues from the project that the [plaintiff] considered belonged to the JV.
At that point, the [plaintiff] knew or ought to have known all the material facts that gave rise to a claim of unjust enrichment against [Silverwood]. Essentially, [Silverwood] had retained monies that belonged to the JV….
The [plaintiff]'s position that it did not know the JV would have made a profit on the project draws the line too narrowly. The [plaintiff] knew or ought to have known that it sustained some damage … in that monies were retained by [Silverwood] that the [plaintiff] considered to belong to the JV and that there was no juristic reason for it to do so. That was sufficient to trigger the start of the [limitation] period.
The [plaintiff] further had the means to determine and explore the revenues actually generated from the M5V project and whether the JV would have made or not made a profit thereon, by bringing the appropriate motion at that time.
The action was commenced out of time. I grant [summary judgment] dismissing it. There is no genuine issue requiring a trial.
[21] The appellant appeals from this decision.
C. Issue
[22] The sole issue on the appeal is: did the motion judge err by concluding that the appellant's action was commenced outside the relevant two-year period?
D. Analysis
[23] The appellant acknowledges that the motion judge is correct in saying that it became aware on January 20, 2012 that Silverwood had supplied the hardwood flooring on the M5V Project. Thus the appellant's issuance of its statement of claim against Silverwood and Ms. Royt on September 9, 2015 is, prima facie, outside the applicable two-year limitation period in the Act.
[24] However, the appellant contends that this prima facie conclusion, which the motion judge accepted, should not stand. The appellant says that in cross-examination on her affidavit on January 20, 2012, Ms. Royt lied about the profits made on the M5V Project. The appellant's position on this issue is stated by Henry Smith in his affidavit dated March 9, 2016, at para. 9:
We only found out that M5V had in fact made at least $200,000 in profit during my meeting with her in 2015 as referenced in the Amended Claim, the details of which as referenced in that document are true.
[25] In its amended statement of claim dated September 28, 2015, the appellant states:
- In or about March of 2015, following an unsuccessful mediation in the Commercial Court action, Royt disclosed to Henry Smith that contrary to her earlier evidence, Silverwood had in fact made at least $200,000 in profit in respect of the sale of flooring to M5V. She also told him that the representation she had made to him in 2009 regarding Silverwood's overhead expenses was untrue in that it was significantly less than $40,000.00 per month. Royt made these admissions during the course of a meeting, following further unsuccessful settlement discussions, where Henry Smith again requested that the financial records relating to the sale of flooring to M5V be disclosed after Royt's admissions that she lied during her 2011 testimony. [Emphasis in original to indicate amendments.]
[26] In my view, in the face of this clear allegation that Ms. Royt lied about Silverwood's profits from the M5V Project, it is important to examine closely what the respondents have and have not said about this issue. After all, it is Silverwood and Ms. Royt who sought summary judgment dismissing the appellant's entire claim.
[27] I draw attention to two features of the respondent's position on this issue. First, the respondents did not file any materials – for example, a reply affidavit by Ms. Royt – countering the appellant's allegation of lying. Second, in cross-examination on her affidavit filed in the Smiths' original application, Ms. Royt testified that proceeds of the M5V Project were not "as much as the 2 percent management fee" and refused to answer any further questions about the profitability of the M5V Project.
[28] I turn to apply this factual background to the motion judge's analysis and conclusion. I have no quarrel with the four factual conclusions made by the motion judge about what the appellant knew in 2012. However, with respect, I disagree with this component of the motion judge's reasoning:
The [plaintiff] knew or ought to have known that it sustained some damage … in that monies were retained by [Silverwood] that the [plaintiff] considered to belong to the JV.
[29] In light of the factual circumstances set out above, I do not think that this conclusion can be sustained. Although Ms. Royt admitted that the M5V Project made a profit, she described the profit as "[not] as much as the 2 percent management fee" in her cross-examination.
[30] That was the picture facing the Smiths (including the appellant) in early 2012. In these circumstances, it was not unreasonable for the appellant to think that it had not suffered "some damage". In light of the two percent management fee to which Ms. Royt was entitled before profits could be distributed to the joint venture and Ms. Royt's express statement that profit from the M5V Project was less than her management fee, the possibility that the Smiths had suffered damage from the M5V Project and that the damage was caused by the respondents was removed from the Smiths' minds. Accordingly, this is not a case where a party knows that it has suffered a loss but does not know the extent of the loss: see, for example, Hamilton (City) v. Metcalfe & Mansfield Capital Corp., 2012 ONCA 156, 290 O.A.C. 42.
[31] It is true that the Smiths could have disbelieved or doubted Ms. Royt's answers and brought a motion to compel production of financial documentation and/or to add Silverwood as a party to the original application. I do not think this was necessary. Parties are entitled to accept that information testified to under oath is truthful and accurate.
[32] In these circumstances, the appellant "discovered" the potential "damage" that grounds its unjust enrichment claim when Ms. Royt told Henry Smith in 2015 that Silverwood made a profit of at least $200,000 on the M5V Project.
[33] It follows that the appellant's action, commenced on September 9, 2015, was commenced within the two-year period prescribed by the Act: McConnell v. Huxtable, 2014 ONCA 86, 118 O.R. (3d) 561, at para. 50.
E. Disposition
[34] I would allow the appeal, set aside the judgment of the motion judge, and dismiss the motion for summary judgment.
[35] The appellant is entitled to its costs of the appeal fixed in accordance with the agreement of counsel, at $8,000 inclusive of HST and disbursements.
[36] The motion judge awarded the moving party its costs of the motion and the action fixed at $20,000. I would set aside this award and award the appellant costs of the motion fixed at $8,000 inclusive of HST and disbursements.
Released: February 14, 2017
"J.C. MacPherson J.A."
"I agree. C.W. Hourigan J.A."
"I agree. B.W. Miller J.A."
Footnote
[1] The appellant says that there are two shareholders of Silverwood, Ms. Royt and an unknown second shareholder; hence the defendant John Doe.