SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: 08-CV-346679
MOTION HEARD: AUGUST 16, 2012

RE: Bill Co. Incorporated v. Yellowstone Property Consultants Corp.

BEFORE: MASTER R.A. MUIR

COUNSEL:
Robert L. Colson for the plaintiff
Brett Harrison for the defendant and the proposed defendant, Titan Outdoor Canada Company

REASONS FOR DECISION

[ 1 ] The plaintiff brings this motion pursuant to Rules 5.04(2) and 26.01 of the Rules of Civil Procedure , R.R.O. 1990, Reg. 194 (the “Rules”) for an order granting it leave to amend its statement of claim to add Titan Outdoor Canada Company (“Titan”) as a defendant to this action. It also seeks leave to amend its statement of claim to advance certain other causes of action and claims against the existing defendant Yellowstone Property Consultants Corp. (“Yellowstone”). Yellowstone and Titan both oppose the granting of the relief sought by the plaintiff.

BACKGROUND

[ 2 ] On February 7, 2000 a lease agreement (the “Agreement”) was entered into between 984 Bay Street Inc. (“984 Bay”) and Eye See Advertising Inc. (“Eye See”). The Agreement provided, among other things, that the north wall of certain property owned by 984 Bay and located at 984 Bay Street, Toronto (the “Property”) was to be leased to Eye See for the purpose of erecting and displaying advertising murals. The Agreement also granted a right of first refusal to Eye See with respect to “ any other display space available on the walls of the building” located on the Property. [emphasis added]

[ 3 ] On May 1, 2000, Eye See assigned its rights and obligations under the Agreement to the plaintiff. The plaintiff then began sub-leasing the advertising space to Mediacom Inc., who eventually assigned its rights to Titan.

[ 4 ] At some point in March, 2005, 984 Bay was placed into receivership. It appears that approximately one year later Yellowstone acquired 984 Bay’s interest in the Property.

[ 5 ] By letter dated November 27, 2006, Yellowstone purported to terminate the Agreement, effective December 31, 2006. It appears that prior to the purported termination of the Agreement, Yellowstone had entered into an agreement directly with Titan (the “Titan Agreement”) to lease space on the north wall of the Property. This was the same space the plaintiff was leasing from Yellowstone. The Titan Agreement was entered into without first offering the space to the plaintiff.

[ 6 ] The plaintiff takes the position that the right of first refusal in the Agreement obligated Yellowstone to offer the space to the plaintiff on the same terms and conditions as contained in the Titan Agreement. As a result, the plaintiff alleges that it has suffered damages equal to the amount of its potential profits on rental revenue it would have received had its agreement with Yellowstone continued on the same terms as the Titan Agreement.

[ 7 ] This action was commenced on January 8, 2008. The original statement of claim simply sought damages from Yellowstone for breach of contract. In June, 2011, the plaintiff brought a motion before Master Brott seeking an order granting it leave to amend its statement of claim to include a claim for rectification. Specifically, the plaintiff sought rectification of the Agreement in order to make it clear that the right of first refusal applied to all of the available advertising rental space on the walls of the building located on the Property and not just to space other than the space the plaintiff was leasing pursuant to the Agreement.

[ 8 ] The plaintiff’s motion was dismissed by Master Brott. She concluded that the plaintiff was seeking to add a new cause of action after the applicable limitation period had expired. A notice of appeal from her decision may have been delivered but it is clear that no appeal was pursued.

[ 9 ] The plaintiff, through its new counsel, now brings this second motion for an order granting it leave to amend its statement of claim. It wishes to advance the following claims against Yellowstone and Titan:

(a) damages for wrongful interference with economic relations and conspiracy;

(b) damages to recover profits of land and rents paid or accrued;

(c) damages for unjust enrichment;

(d) damages for breach of trust; and,

(e) rectification of the Agreement;

(the “Proposed Claims”).

[ 10 ] The plaintiff takes the position that the Proposed Claims are not subject to the two year limitation period set out in the Limitations Act, 2002 , S.O. 2002, c. 24, Schedule B (the “Limitations Act, 2002”). Rather, the plaintiff argues that the Proposed Claims are governed by the 10 year limitation period set out in the Real Property Limitations Act , R.S.O. 1990, c. L.15 (the “RPLA”). It appears that this argument was not raised before Master Brott. There is certainly no reference to the RPLA in her reasons or in the materials that were before her.

ANALYSIS

[ 11 ] Rule 5.04(2) provides as follows:

(2) At any stage of a proceeding the court may by order add, delete or substitute a party or correct the name of a party incorrectly named, on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.

[ 12 ] Rule 26.01 provides as follows:

26.01 On motion at any stage of an action the court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.

[ 13 ] The relevant provisions of the Limitations Act, 2002 read as follows:

2. (1) This Act applies to claims pursued in court proceedings other than, (a) proceedings to which the Real Property Limitations Act applies.

3. Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.

4. (1) A claim is discovered on the earlier of,

(a) the day on which the person with the claim first knew,

(i) that the injury, loss or damage had occurred,

(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,

(iii) that the act or omission was that of the person against whom the claim is made, and

(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and

(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a).

(2) A person with a claim shall be presumed to have known of the matters referred to in clause (1) (a) on the day the act or omission on which the claim is based took place, unless the contrary is proved.

[ 14 ] The applicable provisions of the RPLA provide as follows:

4. No person shall make an entry or distress, or bring an action to recover any land or rent, but within ten years next after the time at which the right to make such entry or distress, or to bring such action, first accrued to some person through whom the person making or bringing it claims, or if the right did not accrue to any person through whom that person claims, then within ten years next after the time at which the right to make such entry or distress, or to bring such action, first accrued to the person making or bringing it.

5. (1) Where the person claiming such land or rent, or some person through whom that person claims, has, in respect of the estate or interest claimed, been in possession or in receipt of the profits of the land, or in receipt of the rent, and has, while entitled thereto, been dispossessed, or has discontinued such possession or receipt, the right to make an entry or distress or bring an action to recover the land or rent shall be deemed to have first accrued at the time of the dispossession or discontinuance of possession, or at the last time at which any such profits or rent were so received.

6. (5) Where a person is in possession or in receipt of the profits of any land, or in receipt of any rent by virtue of a lease in writing, by which a rent amounting to the yearly sum of $4 or upwards is reserved, and the rent reserved by the lease has been received by some person wrongfully claiming to be entitled to the land or rent in reversion immediately expectant on the determination of the lease, and no payment in respect of the rent reserved by the lease has afterwards been made to the person rightfully entitled thereto, the right of the person entitled to the land or rent, subject to the lease, or of the person through whom that person claims to make an entry or distress, or to bring an action after the determination of the lease, shall be deemed to have first accrued at the time at which the rent reserved by the lease was first so received by the person so wrongfully claiming, and no such right shall be deemed to have first accrued upon the determination of the lease to the person rightfully entitled.

7. At the determination of the period limited by this Act to any person for making an entry or distress or bringing any action, the right and title of such person to the land or rent, for the recovery whereof such entry, distress or action, respectively, might have been made or brought within such period, is extinguished.

[ 15 ] At the outset, it is important to note that where an applicable limitation period has expired, a plaintiff cannot avoid the application of that limitation period by amending an existing claim to add a new party or advance a new cause of action. The common law doctrine of special circumstances, which was previously used by the courts to extend limitation periods, no longer applies. See Joseph v. Paramount Canada’s Wonderland , 2008 ONCA 469 at paragraphs 16 and 25-27 .

[ 16 ] Mr Colson candidly admitted during the course of argument that if the Limitations Act, 2002 applies to the Proposed Claims they are now statute barred (with the possible exception of the claims for wrongful interference with economic relations and conspiracy which I will deal with below). All of the acts that allegedly give rise to the Proposed Claims took place in October or November of 2006. Moreover, the plaintiff certainly knew about virtually all of the facts necessary for it to discover the Proposed Claims in or around that time. It was notified of the termination of the Agreement by letter on November 27, 2006. With respect to the claims for wrongful interference with economic relations and conspiracy, Mr. Colson submitted in argument that the plaintiff was not aware of those potential claims until production was made in this action and certain documents exchanged between Yellowstone and Titan came to light. The difficulty I have with this argument is that there is simply no evidence before the court with respect to this issue. Section 5 of the Limitations Act, 2002 is clear. A plaintiff is deemed to have discovered a claim on the day the act or omission giving rise to the claim took place unless the contrary is proved. No such proof has been provided. In my view, if the Limitations Act, 2002 is applicable, all of the Proposed Claims are statute barred and the proposed amendments cannot be permitted.

[ 17 ] This brings me to the main thrust of the plaintiff’s argument, the applicability of the RPLA . Pursuant to section 2(1) of the Limitations Act, 2002 , that Act does not apply to claims governed by the RPLA. The plaintiff submits that all of the Proposed Claims arise out of the Agreement. The Agreement was, in essence, a lease agreement in respect of real property through which the plaintiff derived rental income by sub-leasing the space to third parties at a profit. The plaintiff argues that it has now lost those potential rental receipts because of Yellowstone’s breach of the Agreement in connection with the right of first refusal. The plaintiff’s position is that all claims that may arise from the breach of a lease agreement in respect of real property are governed by the RPLA.

[ 18 ] Neither side was able to provide the court with any authority for such a proposition. In my view, that is because there is no basis for such an argument. The wording of sections 4 and 5 of the RPLA is very specific and limited. Those sections speak of profits from land and rent. They do not refer to claims arising from leases of land in general. In my view, it would be a considerable stretch to interpret that language in the manner suggested by the plaintiff. First of all, in simple terms, the plaintiff is Yellowstone’s tenant. Under the Agreement, the plaintiff paid rent to Yellowstone and not the other way around. Second, the plaintiff’s damages, for the most part, arise from its loss of potential profits it may have made had it been able to continue leasing and sub-leasing the advertising space. Its damages do not arise from some hypothetical future non-payment of rental income, at least insofar as Yellowstone is concerned. In my view, the RPLA does not apply to any and all potential claims simply because the basis of the parties’ relationship is a lease agreement involving real property. One of the purposes of the enactment of the Limitations Act, 2002 was to create certainty and finality. See Joseph at paragraph 8 . An expansive interpretation of the provisions of the RPLA would not be consistent with such a purpose.

[ 19 ] I have therefore concluded that the RPLA does not apply to the bulk of the plaintiff’s Proposed Claims. The Limitations Act, 2002 therefore applies and the Proposed Claims, subject to the exception discussed below, are statute barred. It is therefore not necessary for me to deal with Yellowstone’s other arguments with respect to res judicata , abuse of process, prejudice and whether the proposed amendments disclose a cause of action.

[ 20 ] The one exception this conclusion is what appears to be a claim against Titan for non-payment of rent allegedly owing to the plaintiff pursuant to the sub-lease between the plaintiff and Titan that was in effect prior to the purported termination of the Agreement. Paragraph 1(c) of the proposed amended statement of claim makes a claim for payment of rent owing to the plaintiff. This claim is particularized beginning at paragraph 29 of the proposed amended statement of claim. The plaintiff alleges that it had the right to lease the advertising space until at least the end of December, 2006 but Titan apparently paid rent for November and December, 2006 directly to Yellowstone or its agent. It should have paid the rent to the plaintiff. This strikes me as possibly being a claim for the non-payment of rent in respect of a lease of real property. In my view, there exists a genuine issue as to whether the RPLA is applicable to this portion of the Proposed Claims.

[ 21 ] In addition, this proposed claim was not the subject of the motion before Master Brott. That motion only dealt with the proposed claim for rectification. The doctrines of res judicata and abuse of process do not apply. I am also satisfied that the proposed amendments in this regard have been sufficiently set out and that this proposed cause of action against Titan has been properly pleaded. Finally, I reject Titan’s argument regarding prejudice. If the RPLA applies, no limitation period has expired in respect of the claim for non-payment of rent from Titan. In such circumstances, the prejudice to Titan referred to in Rule 5.04 and Rule 26.01 is prejudice that would result from being added to an already existing action and not prejudice that would result simply from being sued. If the RPLA applies to this proposed claim, the plaintiff is within the 10 year limitation period and is perfectly free to commence a separate action. While an unavailable witness or missing documents may give rise to evidentiary issues, such considerations are irrelevant to the plaintiff’s right to bring the action. See 1351428 Ontario Ltd. v. 1037598 Ontario Ltd. , [2003] O.J. No. 180 (C.A.) at paragraphs 11 and 12 . There is no evidence of prejudice to Titan if it is added to this action. The action has only progressed as far as the documentary discovery stage. Oral discovery has not taken place. No other significant events are pending.

[ 22 ] I am therefore prepared to grant leave to the plaintiff to amend its statement of claim to add Titan as a defendant for the limited purpose of advancing the claim against Titan for non-payment of rent for November and December of 2006. Titan shall have leave to plead a limitation defence if so advised. Of course, it will be up to the plaintiff to decide whether it wishes to proceed with this claim in view of the small amounts involved, which would appear to be within the jurisdiction of the Small Claims Court.

[ 23 ] There also appear to be certain other proposed amendments that do not seek to add a defendant or a new cause of action. Those amendments seek to increase the amount claimed for damages and to clarify wording or correct certain typographical and other errors in the statement of claim. They would not appear to be contentious (see, for example, the proposed amendments set out in paragraphs 1(a), 5 , 11, 13, 27, 28 and the heading above paragraph 19). However, those housekeeping amendments were not specifically addressed by the parties during argument.

CONCLUSION

[ 24 ] I therefore order that the plaintiff be granted leave to amend its statement of claim in accordance with these reasons. If the parties are unable to agree on the form of a draft amended statement of claim consistent with my decision, they may arrange for a date to appear before me to speak to the matter.

COSTS

[ 25 ] If the parties are unable to reach an agreement on the issue of costs, they may make brief submissions in writing by no later than October 5, 2012.

Master R.A. Muir

DATE: September 11, 2012