Court of Appeal for Ontario

Date: 2017-06-05 Docket: C61735

Judges: Juriansz, Lauwers and Hourigan JJ.A.

Between

2441472 Ontario Inc. Appellant

and

Collicutt Energy Services Corp. Respondent

Counsel

K. William McKenzie, for the appellant

Howard D. Krupat and Brendan Clancy, for the respondent

Heard: March 31, 2017

On Appeal

On appeal from the decision of the Honourable Justice Robert MacKinnon J. of the Superior Court of Justice dated January 22, 2016 with reasons reported at 2016 ONSC 566.

Lauwers J.A.:

Decision

[1] Introduction

[1] The respondent Collicutt Energy Services Corp sold a piece of equipment known as a heat and power package and chiller HVAC to the appellant 2441472 Ontario Inc. ("244") for about $520,000. The full amount of the purchase price was not paid.

[2] The appellant's failure to pay spawned a number of actions which led to five motions before the motion judge. In one of them, the appellant challenged Collicutt's assertion that it had a valid purchase money security interest in the equipment registered under the Personal Property Security Act, R.S.O. 1990, c. P.10 ("PPSA"). It moved for an order to strike out and declare void the PPSA registration. The appellant appeals the motion judge's order dismissing the appellant's motion.

[3] 244 is the plaintiff and Collicutt is the defendant in the action in which Collicutt's motion was brought. In the action 244 claims damages in the amount of $2,500,000, punitive damages in the amount of $1,000,000 and injunctive relief restraining Collicutt from interfering with 244's business relations. The statement of claim asserts that the equipment Collicutt delivered to 244 was late and inadequate. The claim for damages relates to delay and unforeseen costs. The claim for punitive damages is based on alleged interference with 244's business relations. Collicutt counterclaims for damages because 244 did not pay for the equipment in full.

A. The Order under Appeal

[4] The appellant argued on the motion below that since the alleged security agreement was never signed by Collicutt, it is not a valid security agreement, and therefore it is not effective to create a security interest under the PPSA.

[5] On this issue, the motion judge gave the following reasons, at paras. 5-9:

Collicutt registered a Financing Statement on the PPSA system on June 15, 2015, recording the agreement between itself, 244, and 2363265 Ontario Inc. (herein "236"). A Financing Change Statement was registered June 29, 2015.

Plaintiff's counsel argues that, since there was never any produced signed security agreement between his client and Collicutt, both financing statements were improper and both should be vacated. He points to s. 11(2)(a) of the PPSA which in its material parts provides that the debtor must have signed a security agreement. He argues there was none. I disagree.

On April 9, 2014, Mr. Kocken, a principal of both 244 and 236, executed a Credit Application and Terms and Conditions of Sale which provided that title to, property in and ownership of the parts sold remain with Collicutt until all amounts were paid. Mr. Kocken signed on behalf of MCS Energy as that company's "VP" operations. MCS Energy is a business name of 236 and is a named defendant in Collicutt's Toronto trust action.

By December 12, 2014, Collicutt was issuing invoices to MCS Energy ("236") relating to its supply of the Heat and Power Package. Those invoices reserved title to the vendor. On that date Mr. Clydesdale, a principal of both MCS Energy and 244, directed Collicutt to re-issue its invoices to 244, rather than to 236. In addition, on June 5, 2015, Mr. Kocken on behalf of 244, signed an Equipment Purchase Agreement relating to that Heat and Power Package. It provided that title in the collateral at all times remained exclusively with Collicutt until its customer's payment in full of all amounts due was made. The security interest granted was a purchase money security interest (PMSI).

When considered as a whole these three documents satisfy me both that 236 and 244 intended to grant and did grant in writing to Collicutt a security interest in the Heat and Power Package. Accordingly, the plaintiff's motion for a discharge of Collicutt's security interest in that package is dismissed.

[6] The appellant submits that the motion judge erred in law because under the PPSA "there must be a security agreement signed by the appellant in favour of the respondent before notice may be registered under the PPSA security registration system."

[7] The respondent disputes that submission on the merits, but also raises a procedural issue, arguing that this court has no jurisdiction over the appeal because the motion judge's decision is interlocutory and the appeal should have been brought to the Divisional Court under s.19(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43.

B. The Issues

[8] The appeal raises two issues. The first is whether the order under appeal is final, giving this court jurisdiction to hear the appeal, or whether it is interlocutory and falls within the Divisional Court's jurisdiction under the Courts of Justice Act. The second issue is whether the motion judge's order was correct. In view of my determination that the order is interlocutory, I do not reach the second issue.

C. Is the Order under Appeal Interlocutory or Final?

(1) The Governing Principles

[9] An interlocutory order is one that does not determine the real matter in dispute between the parties. It does not determine the very subject matter of the litigation, but rather only a collateral matter: Hendrickson v. Kallio, [1932] O.R. 675, at p. 678. The classic test is whether the order finally disposes of the rights of parties: Hendrickson, at p. 680. Furthermore, an order that disposes of an issue raised by the defence, thereby depriving the defendant of a substantive right that could be determinative of the entire action, is final: Ball v. Donais (1993), 13 O.R. (3d) 322 (C.A.).

(2) The Arguments on Appeal

[10] The appellant argues that the order was final because the judge said there was a security agreement, decision that will bind the appellant in the lawsuit. The order finally disposes of a substantive issue in the case, which is whether the respondent has a valid security interest in the equipment. The order is therefore final unless this court reverses it.

[11] The respondent argues the order was interlocutory for four reasons. First, the order did not determine any real matter in dispute between the parties. Second, the order did not terminate the action. Third, the order determined only a collateral issue because the PPSA registration is not referred to in any of the pleadings but only arose on the motion. Fourth, the order does not determine a claim or defence. The respondent asserts that the PPSA registration only determines what remedy might be available to the appellant if it is successful in the lawsuit. It is no more final than an order for security for costs or a preservation order.

(3) The Principles Applied

[12] I conclude that the order below was interlocutory for the following reasons.

[13] The notice of motion giving rise to the decision below sought, "an order striking out, vacating, or declaring void all PPSA registrations which were registered by the Defendant against the Plaintiff". The ground offered in the support of this request asserted that "[t]he Defendant has no security interest in the equipment which is listed in the PPSA registration and does not have a security agreement for any equipment."

[14] The jurisdictional basis for this aspect of the motion, nor any other aspect of it, was not pleaded. In particular, no sections of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, nor the PPSA were mentioned. The motion was not framed as a motion for summary judgment or the determination of an issue before trial.

[15] The motion judge dismissed the PPSA aspect of the motion. The provision in the formal order relating to it simply reads:

THIS COURT ORDERS THAT the Plaintiff's motion for a discharge of the Defendant's security interest in the Heat and Power Package is dismissed.

[16] As this court noted in Ashak v. Ontario (Family Responsibility Office), 2013 ONCA 375, 115 O.R. (3d) 401, at para. 13, "in most instances, the content of the formal order is integral to determining what has been decided against a party in a fashion that is binding." It is well-established that an appeal lies from the order, not from the reasons given by the judge making it: Ashak, at para. 13; Grand River Enterprises v. Burnham (2005), 197 O.A.C. 168 (C.A.), at para. 10.

[17] In the summary judgement context, this court has said that purported findings of fact or law by a motion judge who dismisses a summary judgment motion do not have binding effect in the subsequent proceeding unless the judge invokes the power to make such findings under rr. 20.04 or 20.05: Skunk v. Ketash, 2016 ONCA 841, 94 C.P.C. (7th) 141, at paras. 35-36. A motion judge who intends to make such findings should specifically say so, and the order should refer to the relevant rule: Skunk, at paras. 35-36.

[18] In his reasons for dismissing the motion for discharge of the respondent's PPSA registrations, the motion judge engaged in an analysis of whether or not a valid security interest existed. He considered whether an agreement between the parties gave rise to a security interest. He purported to find that there was a valid security agreement between the parties, and dismissed the motion.

[19] However, in the absence of explicit language from the motion judge finally determining the enforceability of any agreement between the parties, I am not persuaded that the motion judge did so. While he referred to documents passing between the parties, he only did so in support of his conclusion that there was no basis to discharge the PPSA registration. The motion judge simply expressed his reasoning for dismissing the motion. The formal order does not contain any final determinations, nor is there a disposition section in the reasons which purports to do so. The formal order simply dismisses the motion.

[20] Moreover, the validity of the PPSA registration is not the real issue in dispute between the parties. The real issue is who owes what to whom in relation to the equipment and its alleged deficiencies. The existence of, or basis for, a security interest in the equipment is not addressed in the statement of claim or in the statement of defence and counterclaim. Collicutt's counterclaim claims, amongst other relief, damages for breach of contract. The issue of the enforcement of the net debt, if any, owed to Collicutt is derivative to, and not determinative of, the real issue.

Decision

[21] The order is interlocutory. This court has no jurisdiction over the appeal and it is quashed with costs payable by the appellant to the respondent in the amount of $5,000 inclusive of disbursements and taxes. However, the appellant is free to pursue an appeal to the Divisional Court.

Released: June 5, 2017

"P. Lauwers J.A."

"I agree. R. G. Juriansz J.A."

"I agree. C.W. Hourigan J.A."