Court File and Parties

Court of Appeal for Ontario Date: 20211006 Docket: C69130

Lauwers, Harvison Young and Sossin JJ.A.

Between

2460907 Ontario Inc. Plaintiff/Appellant

and

1521476 Ontario Inc. Defendant/Respondent

Counsel: Paul Starkman and Calvin Zhang, for the appellants Elliot Birnboim and Michael Crampton, for the respondent

Heard: September 27, 2021 by video conference

On appeal from the order of Justice M.G. Ellies of the Superior Court of Justice, dated January 26, 2021 striking the appellant’s claim, with reasons reported at 2021 ONSC 634.

Reasons for Decision

[1] The appellant 2460907 Ontario Inc. (“246”) appeals from an order striking its claim under r. 21.01(1)(b) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, for pure economic loss arising from the respondent 1521476 Ontario Inc.’s (“152”) exercise of re-entry against 152’s tenant, 2456787 Ontario Inc. (“245”).

[2] The underlying facts are straightforward. 152 had entered into a lease with 245. The lease was subsequently amended to allow for renovations, for which 152 was to obtain a building permit. The building permit was delayed. 245 was unable to afford the rent, stopped paying it, and asked 152 to waive or reduce the rent, a request 152 refused. 245 then wrote to 152 advising that a new restaurant to be located in the premises would be operated by 246 and requested that the original lease and the amending agreement both be changed to reflect that the tenant would now be 246. 152 responded by re-entering the premises and distraining the chattels of 245. 245 commenced an action for wrongful distraint, to which 246 was not a party.

[3] Over a year later, 246 commenced its own action against 152 for pure economic loss damages for the profits it was going to earn by operating a restaurant in the premises formerly occupied by 245. 246 claimed to have possessory or proprietary interest in the property. 152 brought a motion under r. 21.01(1)(b) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 and was successful.

[4] The motion judge found that, as a third party, 246 did not have possessory or proprietary interests in the premises. 152 had not consented to an assignment of the lease and refused to enter into any new agreement with 246, and 246 could therefore not have acquired possessory or proprietary interest in the property. The motion judge also denied 246 the opportunity to amend its claim because (1) it had already been given that opportunity and (2) no amount of amendment would save 246’s claim.

[5] The appellant argues that the trial judge incorrectly applied the test set out under r. 21.01(1)(b) by not accepting the facts pleaded in the statement of claim as true, and that he erred in his consideration of its tort claim for pure economic loss. Both arguments must fail.

[6] First, we see no error in the motion judge’s finding that 152 did not consent to the assignment of the lease and that 246 therefore had no possessory or proprietary interest in the property. This finding was well grounded in the record before the motion judge and was open to him. The motion judge was aware that “152 failed or refused to allow 246 to occupy the premises.” The precise mechanism through which 246 did not obtain possessory or proprietary interest is not vital.

[7] Second, there is no merit to the appellant’s argument that 152 owed it a duty of care arising from its possessory or proprietary interest in 152’s property. Without such an interest there could not be an entitlement on the part of 246 to claim possessory or proprietary interest in 152’s property and thus a duty of care that could entitle it to economic loss. This was not a case like Canadian National Railway Co. v. Norsk Pacific Steamship Co., [1992] 1 S.C.R. 1021, which remains the leading case on relational economic loss and upon which the appellant relied. In that case, a barge owned by Norsk Pacific Steamship collided with a bridge owned by Public Works Canada. Although CN did not have any leasehold estate or interest in the bridge, it was, pursuant to a contract with Public Works Canada, its primary user. Nothing about this case is analogous to Norsk. 246 did not have any relationship with 152, contractual or otherwise, that would entitle it to claim possessory or proprietary interest in 152’s property.

[8] Given the motion judge’s finding that 152 had not consented to any assignment of the lease, there was nothing to ground the necessary finding of proximity. As the Supreme Court of Canada stressed in 1688782 Ontario Inc. v. Maple Leaf Foods Inc., 2020 SCC 35, 450 D.L.R. (4th) 181, at para. 21, per Brown and Martin JJ. writing for the majority, “it is proximity and not a template of how a loss factually occurred, that remains a “controlling concept” and a “foundation of the modern law of negligence”: see also, Norsk, at p.1152.

[9] The motion judge’s decision to not allow 246 to amend its claim further is owed deference.

[10] Appeal is dismissed with costs in the amount of $5,000, as agreed by the parties, awarded to the respondent.

“P. Lauwers J.A.”

“A. Harvison Young J.A.”

“L. Sossin J.A.”