1704604 Ontario Ltd. v. Pointes Protection Association

[Indexed as: 1704604 Ontario Ltd. v. Pointes Protection Association]

Ontario Reports Court of Appeal for Ontario Doherty, D.M. Brown and Huscroft JJ.A. August 30, 2018

142 O.R. (3d) 161 | 2018 ONCA 685

Case Summary

Civil procedure — Summary dismissal of action

Plaintiff suing defendants for breach of contract on the basis that defendants breached a settlement agreement when one defendant testified before the Ontario Municipal Board ("OMB") about environmental consequences of plaintiff's proposed development. Defendants moving under s. 137.1 of Courts of Justice Act for order dismissing claim. Motion judge finding that testimony before OMB constituted expression relating to public interest under s. 137.1(3) but that plaintiff had satisfied its onus under s. 137.1(4)(a) and (b) with respect to merits of claim and public interest in permitting it to continue. Defendants' appeal allowed. Motion judge erring in interpreting "substantial merit" in s. 137.1(4)(a)(i) as referring to seriousness of subject matter of claim rather than potential merits of claim. No reasonable prospect existing that plaintiff could persuade reasonable trier that there was substantial merit to its claim that settlement agreement foreclosed testimony before OMB.

Facts

The plaintiff wanted to develop a subdivision in Sault Ste. Marie. The defendants, who opposed that development on environmental grounds, brought an application for judicial review of resolutions of the Sault Ste. Marie Region Conservation Authority ("SSMRCA") approving the development. While that application was pending, the plaintiff appealed to the Ontario Municipal Board from a decision of city council refusing to amend the city's official plan.

Before the OMB heard that appeal, the plaintiff and the defendants settled the judicial review proceeding. The settlement agreement provided that, in any proceeding before the OMB or in any other subsequent legal proceeding, the defendants would not advance the position that the SSMRCA resolutions were illegal, invalid or contrary to the relevant environmental legislation.

In the course of the OMB hearing of the plaintiff's appeal, one of the defendants testified that, in his opinion, the proposed development would result in substantial environmental damage. The OMB dismissed the appeal, and the development did not proceed.

The plaintiff sued the defendants for breach of contract, alleging that they breached the terms of the settlement agreement by giving evidence about the potential environmental impact of the development at the OMB hearing. The defendants brought a motion under s. 137.1 of the Courts of Justice Act to dismiss the action.

The motion judge accepted that the action related to expression on a matter of public interest, but found that the plaintiff had met its burden under s. 137.1(4)(a) and (b) with respect to the merits of its claim and the public interest in allowing it to continue. The motion was dismissed. The defendants appealed.

Decision

The appeal was allowed.

Reasoning

The Concept of "Public Interest" Under Section 137.1(3)

The concept of "public interest" as it is used in s. 137.1(3) is a broad one that does not take into account the merits or manner of the expression, or the motives of the author. The determination of whether an expression relates to a matter of public interest must be made objectively, having regard to the context in which the expression was made and the entirety of the relevant communication.

If the defendant meets the test under s. 137.1(3), the burden then shifts to the plaintiff under s. 137.1(4) to satisfy the judge that:

(a) there are grounds to believe that: (i) the proceeding has substantial merit; and (ii) the defendant has no valid defence in the proceedings; and

(b) the harm likely to be or have been suffered as a result of the defendant's expression is sufficiently serious that the public interest in permitting the proceeding to continue outweighs the public interest in protecting that expression.

Interpretation of "Substantial Merit"

A claim has "substantial merit" for the purposes of s. 137.1(4)(a)(i) if, upon examination, the claim is shown to be legally tenable and supported by evidence, which could lead a reasonable trier to conclude that the claim has a real chance of success.

The motion judge erred in interpreting "substantial merit" as referring to the seriousness of the subject matter of the claim rather than the potential merits of the claim. Claims involving very serious matters can be self-evidently devoid of any merit.

The motion judge required the claim to pass a "frivolous or fleeting" standard. Neither word appears in s. 137.1(4)(a)(i). The "substantial merit" requirement sets a higher bar.

Application to the Contract Interpretation

The settlement agreement could not reasonably be read as imposing any obligations on the defendants beyond those expressly set out in the language used. There was no reasonable prospect that the plaintiff could convince a reasonable trier that there was substantial merit to its claim that the agreement foreclosed the impugned testimony before the OMB.

The very precise language used in the agreement was the product of considerable negotiation between counsel for the parties. In light of that language, particularly the language of paragraph 6, the surrounding factual context, and the ongoing adversarial relationship between the parties, the agreement could not reasonably be read as precluding the defendants' testimony about environmental matters at the OMB.

The Public Interest Balancing Under Section 137.1(4)(b)

Even accepting that interference with the plaintiff's reasonable expectation of finality in the litigation could be viewed as causing some harm, there was no evidence of any other harm. In particular, there was no evidence of any damages suffered or likely to be suffered by the plaintiff as a result of the alleged breach of the agreement.

The motion material provided little, if any, insight into either the nature of the plaintiff's damage claim or the quantum of that claim. The motion judge could not make any informed assessment of the monetary damages, if any, suffered or likely to be suffered by the plaintiff as a result of the defendants' alleged breach of contract. Without that assessment, the plaintiff's claim of harm caused to it by the defendants' testimony was weak indeed.

Key Principles Established

1. Broad Definition of "Public Interest" Under Section 137.1(3): The phrase "public interest" is not qualified and does not require that the expression actually further the public interest. An expression that relates to a matter of public interest remains so if the language used is intemperate or even harmful to the public interest.

2. "Substantial Merit" Standard: The standard is higher than "frivolous or fleeting." A claim must be legally tenable and supported by evidence that could lead a reasonable trier to conclude it has a real chance of success.

3. Evidentiary Burden on Defendant for Valid Defence: Section 137.1(4)(a)(ii) contemplates an evidentiary burden on the defendant to advance any proposed "valid defence" in the pleadings and/or in the material filed on the s. 137.1 motion. Once the defendant has put a defence in play, the persuasive burden moves to the plaintiff to satisfy the motion judge that there are reasonable grounds to believe that none of the defences put in play are valid.

4. Damages Assessment Under Section 137.1(4)(b): The plaintiff cannot rely on bald allegations in the statement of claim relating to damages, or on unsourced, unexplained damage claims contained in the pleadings or affidavits filed on the s. 137.1 motion. The motion judge must be able to make an informed assessment about the nature and quantum of the damages suffered or likely to be suffered by the plaintiff.

5. Quality and Motivation Matter for Public Interest Balancing: Unlike the "public interest" inquiry in s. 137.1(3), in which the quality of the expression or the motivation of the speaker are irrelevant, both play an important role in measuring the extent to which there is a "public interest" in protecting that expression for the purposes of s. 137.1(4)(b).

6. Contract Interpretation Cases: Cases that turn on the interpretation of a contract do not fit comfortably within the s. 137.1 analysis and could be more efficiently and expeditiously resolved by way of a timely summary judgment motion under Rule 20.

Conclusion

The appeal was allowed. The order of the motion judge dismissing the defendants' section 137.1 motion was set aside and an order was made dismissing the action.

Unless the parties could agree on costs, they were to exchange and file their submissions within 30 days of the release of the reasons. The submissions were not to exceed ten pages and were to address the scale and quantum of costs on the appeal, the scale of costs in the Superior Court, whether the Court of Appeal or the Superior Court should fix the quantum of costs in the Superior Court, and the quantum of costs in the Superior Court.

Appendix A: Relevant Legislation

Prevention of Proceedings that Limit Freedom of Expression on Matters of Public Interest (Gag Proceedings)

Dismissal of proceeding that limits debate

Purposes

137.1(1) The purposes of this section and sections 137.2 to 137.5 are:

(a) to encourage individuals to express themselves on matters of public interest;

(b) to promote broad participation in debates on matters of public interest;

(c) to discourage the use of litigation as a means of unduly limiting expression on matters of public interest; and

(d) to reduce the risk that participation by the public in debates on matters of public interest will be hampered by fear of legal action.

Definition, "expression"

(2) In this section, "expression" means any communication, regardless of whether it is made verbally or non-verbally, whether it is made publicly or privately, and whether or not it is directed at a person or entity.

Order to dismiss

(3) On motion by a person against whom a proceeding is brought, a judge shall, subject to subsection (4), dismiss the proceeding against the person if the person satisfies the judge that the proceeding arises from an expression made by the person that relates to a matter of public interest.

No dismissal

(4) A judge shall not dismiss a proceeding under subsection (3) if the responding party satisfies the judge that:

(a) there are grounds to believe that: (i) the proceeding has substantial merit, and (ii) the moving party has no valid defence in the proceeding; and

(b) the harm likely to be or have been suffered by the responding party as a result of the moving party's expression is sufficiently serious that the public interest in permitting the proceeding to continue outweighs the public interest in protecting that expression.

No further steps in proceeding

(5) Once a motion under this section is made, no further steps may be taken in the proceeding by any party until the motion, including any appeal of the motion, has been finally disposed of.

No amendment to pleadings

(6) Unless a judge orders otherwise, the responding party shall not be permitted to amend his or her pleadings in the proceeding:

(a) in order to prevent or avoid an order under this section dismissing the proceeding; or

(b) if the proceeding is dismissed under this section, in order to continue the proceeding.

Costs on dismissal

(7) If a judge dismisses a proceeding under this section, the moving party is entitled to costs on the motion and in the proceeding on a full indemnity basis, unless the judge determines that such an award is not appropriate in the circumstances.

Costs if motion to dismiss denied

(8) If a judge does not dismiss a proceeding under this section, the responding party is not entitled to costs on the motion, unless the judge determines that such an award is appropriate in the circumstances.

Damages

(9) If, in dismissing a proceeding under this section, the judge finds that the responding party brought the proceeding in bad faith or for an improper purpose, the judge may award the moving party such damages as the judge considers appropriate.

Procedural matters

Commencement

137.2(1) A motion to dismiss a proceeding under section 137.1 shall be made in accordance with the rules of court, subject to the rules set out in this section, and may be made at any time after the proceeding has commenced.

Motion to be heard within 60 days

(2) A motion under section 137.1 shall be heard no later than 60 days after notice of the motion is filed with the court.

Hearing date to be obtained in advance

(3) The moving party shall obtain the hearing date for the motion from the court before notice of the motion is served.

Limit on cross-examinations

(4) Subject to subsection (5), cross-examination on any documentary evidence filed by the parties shall not exceed a total of seven hours for all plaintiffs in the proceeding and seven hours for all defendants.

Same, extension of time

(5) A judge may extend the time permitted for cross-examination on documentary evidence if it is necessary to do so in the interests of justice.

Appeal to be heard as soon as practicable

137.3 An appeal of an order under section 137.1 shall be heard as soon as practicable after the appellant perfects the appeal.

Stay of related tribunal proceeding

137.4(1) If the responding party has begun a proceeding before a tribunal, within the meaning of the Statutory Powers Procedure Act, and the moving party believes that the proceeding relates to the same matter of public interest that the moving party alleges is the basis of the proceeding that is the subject of his or her motion under section 137.1, the moving party may file with the tribunal a copy of the notice of the motion that was filed with the court and, on its filing, the tribunal proceeding is deemed to have been stayed by the tribunal.

Notice

(2) The tribunal shall give to each party to a tribunal proceeding stayed under subsection (1):

(a) notice of the stay; and

(b) a copy of the notice of motion that was filed with the tribunal.

Duration

(3) A stay of a tribunal proceeding under subsection (1) remains in effect until the motion, including any appeal of the motion, has been finally disposed of, subject to subsection (4).

Stay may be lifted

(4) A judge may, on motion, order that the stay is lifted at an earlier time if, in his or her opinion:

(a) the stay is causing or would likely cause undue hardship to a party to the tribunal proceeding; or

(b) the proceeding that is the subject of the motion under section 137.1 and the tribunal proceeding that was stayed under subsection (1) are not sufficiently related to warrant the stay.

Same

(5) A motion under subsection (4) shall be brought before a judge of the Superior Court of Justice or, if the decision made on the motion under section 137.1 is under appeal, a judge of the Court of Appeal.

Statutory Powers Procedure Act

(6) This section applies despite anything to the contrary in the Statutory Powers Procedure Act.

Application

137.5 Sections 137.1 to 137.4 apply in respect of proceedings commenced on or after the day the Protection of Public Participation Act, 2015 received first reading.