CITATION: Moore et al v. Moore, 2011 ONSC 6728
COURT FILE NO.: DC-884-11
DATE: 20111114
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
ROBERT MOORE and THE ESTATE OF MICHAEL MOORE
Plaintiffs
– and –
ARLENE LOIS MOORE in her capacity as Estate Trustee of the ESTATE OF GARY WAYNE MOORE, deceased, and ARLENE LOIS MOORE, in her Personal Capacity.
Defendant
Annette A. Casullo, Solicitor for the Plaintiffs
Tamara Ramsey, Solicitor for the Defendant.
HEARD: October 21, 2011
GAUTHIER, J.
Introduction:
[1] The Defendant, Arlene Lois Moore, ( “Arlene”) seeks an Order granting leave to appeal to the Divisional Court, the decision of O’Neill J. made on June 6, 2011, granting the Plaintiffs leave to add Arlene as a Defendant, in her personal capacity, and finally determining that a personal claim against Arlene was not discovered until approximately December, 2010.
[2] The Defendant relies on Rule 62.02(4)(b) of the Rules of Civil Procedure, and alleges that the motion Judge erred as follows:
(a) exceeding his jurisdiction by finally determining the issue of discoverability of the personal claim against Arlene;
(b) Not granting leave to Arlene to plead a limitations defence;
(c) Finding that Arlene could be added as a party after the expiry of the limitation period;
(d) Failing to consider that the Plaintiffs’ proposed amended pleading did not explain the discovery of the claim against Arlene;
(e) Finding that a personal claim against Arlene was not discovered until approximately December, 2010; and
(f) Failing to consider the lack of evidence of the Plaintiff’s due diligence and failure to make inquiries as to the ownership of Trailside Park, and the contents of Gary Wayne Moore’s estate, and by failing to consider that the Plaintiffs ought to have discovered their cause of action in October, 2007, when they learned that Trailside Park was being sold.
[3] The Plaintiffs oppose the motion for leave to appeal.
[4] The Notice of Motion also requested an Order extending the time for service of the Notice of Motion, nunc pro tunc. The Plaintiffs did not oppose that request. I am making an Order extending the time for service, pursuant to Rule 62.02 (2) as requested.
Facts:
[5] Michael and Robert Moore are the sons of Gary Wayne Moore (“Gary”), who died on June 11, 2008. Arlene Moore is the stepmother of Michael and Robert, having been married to Gary.
[6] Trailside Park (“Trailside”) is a trailer park which was owned by Gary’s father, then by 1034038 Ontario Inc., (“the corporation”) carrying on business as Trailside Park. Gary and Arlene were the sole shareholders of the corporation.
[7] According to the evidence of the Plaintiffs, the boys worked at Trailside for little pay, on the understanding that eventually Trailside would be theirs.
[8] In November, 2007, Trailside was sold. The sale was effected by way of a share purchase agreement between the corporation and Linwood Properties Inc.
[9] After Gary died, the Plaintiffs became aware that Arlene was the estate trustee and the main beneficiary of their father’s estate. The Plaintiffs were not named as beneficiaries in their father’s will.
[10] According to the Plaintiffs’ evidence, Arlene never discussed the administration of Gary’s estate with the boys. They did not know how much money was in the estate, or that probate had been granted, or that, ultimately, the administration of Gary’s estate was complete. The Plaintiffs were afraid to speak to Arlene about what plans she had to provide for them as she had said she would.
[11] The Plaintiffs first consulted counsel in May, 2010, instructing her to commence an action, but to not serve the claim until they had an opportunity to discuss matters with Arlene.
[12] In November, 2010, the Plaintiffs instructed their counsel to serve the Statement of Claim. The Claim was against Arlene Lois Moore in her capacity as Estate Trustee of the Estate of Gary Wayne Moore, and claimed the following:
a) Damages in the amount of $1,500,000 from the estate of Gary Wayne Moore (“Gary”) on the basis of proprietary estoppel;
b) In the alternative, damages in the amount of $1,500,000 on the basis of breach of contract;
c) In the alternative, payment of the sum of $1,000,000 for services rendered by Michael to Gary on a quantum meruit basis from Gary’s Estate;
d) In the further alternative, damages in the amount of $1,000,000 on the basis that Gary’s Estate has, to such extent, been unjustly enriched by Michael;
[13] According to the Plaintiffs, they were advised in December, 2010, through counsel, that there was less than $145,000 in Gary’s estate. As well, the Plaintiffs say that they did not know that Trailside was owned by the corporation and not Gary personally, or that the proceeds of sale of Trailside were paid to the corporation, or the extent of Arlene’s ownership in the corporation and her entitlement to the proceeds of sale of Trailside.
[14] The Motion to add Arlene as a Defendant in her personal capacity resulted in the Order of O’Neill J. on June 9, 2011, permitting the amendment of the Statement of Claim to include Arlene in her personal capacity, and setting out time lines for the delivery of the amended pleadings.
[15] Although the formal Order did not remove the availability of a limitation period defence, the motion judge made a finding that the claim against Arlene personally was not discovered until December, 2010; the motion judge expressed the view that discoverability should not be an issue at trial.
[16] The Plaintiff Michael Moore died on May 31, 2011, and an Order to Continue was granted on August 17, 2011.
Rule 62.02(4)(b)
[17] Grounds on which leave may be granted – Leave to appeal shall not be granted unless there appears to the judge hearing the motion good reason to doubt the correctness of the order in question and the proposed appeal involves matters of such importance that, in his or her opinion, leave to appeal should be granted.
[18] On this motion for leave to appeal, the Defendant is really complaining about paragraphs 13 and 14 of O’Neill J’s reasons on the motion to amend, which I reproduce:
On this motion, the parties have placed a record before me, in relation to the issue of discoverability. On that record, I have determined that a personal claim against Arlene Moore was not discovered against her until approximately December of 2010, when the Plaintiffs received a copy of the Share Purchase Agreement. I see no reason why this determination, made on this motion, should now be relitigated (absent an appeal) on a summary judgment motion or at trial. That alone would offend the General principle (Rule 1.04(1)) that requires the rules to be liberally construed to secure the just, more expeditious and least expensive determination of every civil proceeding on its merits.
Accordingly I do not believe that discoverability should be a triable issue at trial. That issue has now been decided on the motion before me on materials filed by both counsel. What remains of course are the alleged causes of action against the named defendants and any defences pleaded in relation to those causes of action.
Defendant’s Position
[19] The Defendant suggests that the first prong of the test set out in Rule 62.02(4)(b), that is, that there is good reason to doubt the correctness of the Motion Judge’s decision, is satisfied in two distinct ways:
(1) The judge misapplied the law by making a final determination on the issue of discoverability of the personal claim against Arlene instead of determining whether or not there was a “live issue” regarding discoverability; and
(2) The judge wrongly applied a subjective test, rather than an objective test, and therefore failed to consider the Plaintiffs’ lack of reasonable diligence regarding the matter of discoverability.
[20] With regard to the second prong of the test, the Defendant says that the appeal involves matters of importance, being:
(1) The scope of a motion judge’s power to determine issues related to discoverability and section 5 of the Limitations Act, 2001, on a motion to add a party as well as the application of Rule 1.04(1) to convert interlocutory rulings into final rulings; and
(2) The correct interpretation and application of section 5 of the Limitations Act, 2002, on a motion to add a party.
[21] With regard to the first part of the test, the Defendant relies on Pepper v. Zellers Inc. (2006), 2006 ONCA 42355, 83 O.R. (3d) 648, 2006, (C.A.) where the court refers to the live issue test:
Contrary to the appellants’ argument, the motion was not akin to a rule 26.01 motion to amend a pleading, which “shall” be granted absent compensable prejudice. Rather, a rule 5.04(2) motion to add parties, and, in this case, to add parties after the apparent expiration of a limitation period, is discretionary. While the threshold on such motion is low, the motion judge is entitled to consider the evidentiary record to determine whether there is a live issue of fact or credibility about the commencement date of the limitation period.
[22] Paragraph 18 of the above decision makes reference to Wong v. Adler (2004), 2004 ONSC 8228, 70 O.R. (3d) 460, where the proper approach to discoverability on a motion to add a party was set out:
What is the approach a judge or master should take on a motion to add a defendant where the plaintiff wishes to plead that the limitation period has not yet expired because she did not know of and could not with due diligence have discovered the existence of that defendant? In my view, as is clearly implied in Zapfe, the motions court must examine the evidentiary record before it to determine if there is an issue of fact or of credibility on the discoverability allegation, which is a constituent element of the claim. If the court determines that there is such issue, the defendant should be added with leave to plead a limitations defence. If there is no such issue, as for example where the evidence before the motions court clearly indicates that the name of the tortfeasor and the essential facts that make up the cause of action against such tortfeasor, were actually known to the plaintiff or her solicitor more than two years before the motion to amend, the motion should be refused. If the issue is due diligence rather than actual knowledge, this is much more likely to involve issues of credibility requiring a trial or summary judgment motion, provided of course that the plaintiff gives a reasonable explanation on proper evidence as to why such information was not obtainable with due diligence. That is not to say that such motion could never be denied if the evidence is clear and uncontradicted that the plaintiff could have obtained the requisite information with due diligence such that there is no issue of fact or credibility.
[23] The Defendant further submits that, although the Order of O’Neill J. did not formally preclude the Defendant from raising the limitation period as a defence, his directions on the discoverability issue are meant to prevent the parties from litigating the issue of the Plaintiff’s discovery of the claim. This creates uncertainty and ambiguity as to whether or not the Defendant can raise a limitation defence, and whether or not the trial judge will be bound by the motion judge’s decision on the issue of discoverability. The judge’s decision on discoverability is prejudicial to the Defendant, effectively preventing her from pleading a limitation defence.
[24] The motion Judge focussed his inquiry on when the Plaintiffs learned that Arlene was a beneficial owner of shares in Trailside and when they learned the value of their father’s estate, and did not consider when the Plaintiffs ought to have learned of these facts, had they exercised diligence.
[25] Finally, the Defendant suggests that the motion judge essentially converted a motion to amend, into a summary judgment motion resulting in unfairness. The Defendant could not foresee that, and made strategic decisions to not cross-examine the Plaintiffs, or to file or not file responding affidavits, on the basis of what she understood the test to be, that is, whether there is a live issue about the Plaintiffs’ exercise of reasonable diligence in attempting to discover the claim within the limitation period.
[26] The above errors of the motion Judge should cause the court to doubt the correctness of his decision.
[27] With regard to the general importance requirement on a motion for leave to appeal, the Defendant submits that it is important:
(a) for the law to be clear with regard to the scope of a motion judge’s power to determine issues relating to discoverability and section 5 of the Limitations Act, 2002, on a motion to add a party; and
(b) that Rule 1.04(1) is not applied to convert interlocutory rulings into final rulings.
[28] Finally, the Defendant suggests that the interpretation and application of section 5 of the Limitations Act, 2002 on a motion to add a party is an important issue that arises frequently.
Plaintiffs’ Position:
[29] The Plaintiffs submit that, unless the decision under appeal is wholly erroneous, palpably wrong, or is one where an incorrect principle was applied, I should defer to the motion Judge’s exercise of discretion.
[30] The Plaintiffs had the onus, on the motion to add, of rebutting the presumption “that a claim is discovered on the day the act or omission on which the claim is based took place”. See Section 5(2) of the Limitations Act, 2002. They discharged that onus by way of the evidence of Robert Moore. The Defendant neither cross-examined Robert Moore, nor provided evidence of steps the Plaintiffs might have taken to ascertain the information before the expiry of the limitation period.
[31] The Plaintiffs suggest that the motion judge had the power to decide the issue of discoverability, based on the material before him, and pursuant to Rule 1.04(1) of the Rules of Civil Procedure which provides as follows:
General Principle – These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.
[32] According to the Plaintiffs, the Court of Appeal in Zapfe v. Barnes, 2003 ONCA 52159 appears to indicate that, had the record before it provided sufficient information, the diligence of a party could be answered with finality on a motion to amend. This in turn would eliminate the need to grant leave to the party being added to plead a limitation defence, and to have the matter re-argued at either a summary judgment motion or trial.
[33] The Plaintiffs also rely on Guay v. BHD Financial Group, 2007 ONSC 37359, [2007] O.J. No. 3405 for the proposition that, on a motion to add a party, if the evidence satisfies the court that there are no issues of fact or credibility, and that the party seeking the amendment could not have, through the exercise of due diligence discovered the claim against the defendant, then the amendment adding the party should be allowed. It is only where the court determines that there is an issue of fact or credibility that leave to plead a limitation defence should be granted to the party added.
[34] A judge has discretion to deny leave to add a party, and the discretion to add a party with the right of the party added to plead a limitation defence. A judge must also have discretion to grant leave to add a party without the right of the party added to plead a limitation defence.
[35] Turning now to the second part of the test for leave to appeal, the Plaintiffs correctly submit that matters of “such importance” extend beyond the interests of the parties; general importance relates to matters of public importance and matters relevant to the development of the law and the administration of justice. See Nichols v. Brown Estate, [2005] O.J. No. 960.
[36] On the motion for leave to amend, O’Neill J. was not being asked to determine a question of principle, nor was he called upon to (nor did he) establish or extend a new proposition of law or practice, or to modify or overturn any established one. He was simply applying existing propositions of law to the facts as he analyzed them.
[37] The issue of whether or not Arlene should be added as a party, in her personal capacity, following the expiry of the limitation period, was of importance only to the parties, and was not an issue of general importance.
Analysis:
[38] Is there good reason to doubt the correctness of the determination that the claim against Arlene was not discovered (or discoverable) until December, 2010, and removing from the Defendant the opportunity of arguing, at a summary judgment motion, or trial, that the limitation period had expired?
[39] The jurisprudence establishes that, when the limitation period may not have expired, a motion judge should grant the request to add the party, with leave to the added party to plead a limitations defence. If there is no issue of fact or credibility on the issue of discoverability, i.e. where the evidence establishes that the Plaintiff was actually aware of the essential facts that make up the cause of action against the proposed party, then the motion to add should be denied.
[40] The case law which was provided to me does not establish that a motion judge could, on the record provided on a motion to add, determine with finality that a plaintiff, by reasonable diligence could not have discovered the material facts on which to base a cause of action against the proposed defendant, before a certain date.
[41] The case law further suggests that if there is an issue of due diligence rather than actual knowledge, this will likely trigger issues of credibility requiring a trial or a summary judgment motion.
[42] Under Rule 5.04, a judge serves as a gate keeper. The Court of Appeal of Ontario described the principle driving a motion under Rule 5.04 as follows:
Both related jurisprudence and the rules themselves [...] underscore a simple common sense proposition: that a party to litigation is not to be taken by surprise or prejudiced in non-compensable ways by late, material amendments after the expiry of a limitation period. If such surprise or actual prejudice is demonstrated on the record, an amendment generally will be denied. (Mazzuca v. Silvercreek Pharmacy Ltd. (2001), 2001 ONCA 8620, 56 O.R. (3d) 768, (C.A.), at para.41)
[43] The evidentiary burden is on the moving party and the evidentiary threshold is very low. It is not akin to the evidence one is expected to lead on a summary judgment motion.
[44] The motion judge, in exercising the gate keeping function, is not required to evaluate the evidence to determine the merits of the claim or the soundness of a defence. He or she simply determines if there is an issue regarding discoverability. In the vast majority of cases “the crucial fact finding exercise has not yet occurred”. (Zapfe v. Barnes, 2003 ONCA 52159, [2003] O.J. No. 2856 (C.A.), at para. 37).
[45] As a rule, the parties will not, at this stage of the litigation process, have proceeded to the discovery of documents or to the examination for discovery, as the responding party is not yet a party to the action. In the case at hand, however, Arlene, as the Estate Trustee is privy to the discovery process in the action against Gary’s estate. It is arguable that the parties had all the requisite evidence to present to the motion judge to complete a full determination of the issue regarding the limitation period. This could remove the usual unfairness of demanding that the defendant put its best foot forward before the discovery process.
[46] However, if the motion judge’s function was one of gate keeping, and not of fact finding, then there is reason to doubt the correctness of his decision. It can be argued that the responding party on the motion to add could not anticipate that the judge would make the findings he did when courts typically have left this determination to the judge hearing the summary judgment motion or the trial. This is particularly so where the real issue was about the Plaintiff’s exercise of reasonable diligence in attempting to discover the claim within the limitation period.
[47] I turn now to the second requirement for the granting of leave to appeal, that is the general importance requirement.
[48] I agree with the Defendant’s proposition that it is important that the law be clear with respect to the scope of a motion judge’s power to determine issues related to discoverability and section 5 of the Limitations Act, on a Rule 5.04 motion.
[49] The issue of the scope of power under Rule 5.04 is relevant to the development of the jurisprudence addressing that rule.
[50] Both prongs of the test on this motion for leave to appeal have been met, and therefore leave to appeal is granted.
[51] If the parties wish to address me on the issue of costs, they are to communicate with the trial coordinator within twenty (20) days of the date of this Order, to set up a date and time for costs to be argued, by way of teleconference call. After twenty days, the parties will be taken to have reached an agreement on costs.
Madam Justice L. L. Gauthier
Released: November 14, 2011
CITATION: Moore et al v. Moore, 2011 ONSC 6728
COURT FILE NO.: DC-884-11
DATE: 20111114
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
ROBERT MOORE and THE ESTATE OF MICHAEL MOORE
Plaintiffs
– and –
ARLENE LOIS MOORE in her capacity as Estate Trustee of the ESTATE OF GARY WAYNE MOORE, deceased, and ARLENE LOIS MOORE, in her Personal Capacity.
Defendant
RULING ON MOTION FOR LEAVE
GAUTHIER J.
Released: November 14, 2011