CITATION: Skylark Holdings Limited v. Minhas, 2017 ONSC 4599

COURT FILE NO.: CV-12-2249-00

DATE: 20170728

CORRECTED: 20170912

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: SKYLARK HOLDINGS LIMITED, Plaintiff

AND:

MOHINDER MINHAS, 2012111 ONTARIO INC. and 2295181 CANADA INC., Defendants/Moving Party

BEFORE: Justice Irving André

COUNSEL: J. Squire, for the Plaintiff

J.S.G. MacDonald, for the Defendants

HEARD: In writing

ENDORSEMENT

Correction notice

SEPTEMBER 12, 2017: The following paragraph [8] replaces the corresponding paragraph in the original judgment issued on July 28, 2017

Introduction

[1] The defendants seek leave, pursuant to Rule 62.02(4) of the Rules of Civil Procedure, to appeal the order of Justice Price dismissing their motion for summary judgment and permitting the plaintiff company (“Skylark Holdings”) to amend its statement of claim.

Background Facts

[2] The defendant 2012 Ontario owns and operates the Pearson Convention Centre. It purchased the land for its business in 2002, and constructed the Convention Centre building in 2002 and 2003. It borrowed money to fund the construction, and was required to borrow money to “take out” the construction loan when construction was completed.

[3] Skylark Holdings is a mortgage broker. The company assisted 2012 Ontario in arranging the “take out” financing, which was ultimately secured by a mortgage in 2003.

[4] Skylark Holdings claims that the consideration it agreed to receive for arranging the take out financing included, not only fees totalling in excess of $123,000, but also 5% of the shares of 2012 Ontario.

[5] Skylark Holdings maintains that a written agreement in 2002 or 2003 entitles it to that shareholding interest. The agreement provides that “any necessary documentation to give effect to the 5% ownership, including the issuing of share certificates by 2012111 Ontario Inc., will be completed on or before the registration of the take out mortgage”. There is no dispute that the last date any take out mortgage was registered was December 19, 2003.

[6] The plaintiff did not bring its claim until May 28, 2012, by way of Statement of Claim issued more than eight years after the registration of the take out mortgage, i.e. more than eight years after the plaintiff did not receive the shares it claims to have been entitled to receive.

[7] Following discoveries, the defendants brought a motion for summary judgment on the threshold issue that the limitation period expired prior to the commencement of the plaintiff’s claim. There is and was no issue as to the discoverability of the plaintiff’s claim: after the transaction in question, the plaintiff continued to have business dealings with the defendants. The plaintiff was never treated as a shareholder of 2012 Ontario, and was never issued any share certificates as contemplated in the agreement it is now suing on.

[8] In response to the defendants’ motion for summary judgment, the plaintiff sought leave to substantially amend its Statement of Claim to remove almost all heads of relief, and all alleged facts relating to the alleged breach of the agreement to issue 5% of the shares of 2012 Ontario to Skylark Holdings. With that amendment, all that remained of the plaintiff’s claim was a declaration that:

The Plaintiff is the legal and beneficial owner of 5% of the shares of 2012111 Ontario Inc.

[9] The motions judge ruled in favour of the plaintiff. He permitted the plaintiff to amend its Statement of Claim and dismissed the defendants’ motion for summary judgment.

Price J.’s Decision

[10] In deciding whether Skylark Holdings should be permitted to amend its Statement of Claim, Price J. relied on Rule 26.01 of the Rules which provides that 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. He concluded at para. 53 that:

Skylark should not be prevented from proceeding to trial on its proposed amended claim if there is a genuine issue for trial as to whether the relief it seeks in that claim would be barred by a limitations defence. A plaintiff should not be deprived of its right to a trial of its claim by reason of defective pleading alone, when the defect is capable of being cured by amendment without prejudice to the defendant that cannot be compensated for by an award of costs.

[11] Price J. considered whether Skylark Holding’s motion for a declaration was caught by s. 16(1)(a) of the Limitations Act. He relied on Solosky v. R., 1979 9 (SCC), [1980] 1 S.C.R. 821, at p. 830 for the proposition that: “Declaratory relief is a remedy neither constrained by form nor bounded by substantive content, which avails persons sharing a legal relationship, in respect of which a “real issue” concerning the relative interests of each has been raised and falls to be determined.”

[12] He also noted approvingly, at para. 72, the following passage from Harrison v. Antonopoulos (2002), 2002 28725 (ON SC), 62 O.R. (3d) 463 (Sup. Ct.), paras. 27-28:

Declaratory relief, being only a declaration of parties' rights, is mainly sought in commercial matters to help parties define their rights, and as a means to settle matters amicably where reasonable people would otherwise disagree on their mutual obligations and wish to resolve the matter in order to avoid future disputes. In other words, a cause of action need not be extant at the time a party requests declaratory relief. Because declaratory relief is in essence a request for an advance ruling, courts have discretion to refuse such relief. This is the type of relief contemplated by s. 108(2) of the CJA -- a declaration of parties' rights with no coercive effect or remedial entitlement.

The essence of the relief requested by the plaintiff in this case is a declaration of fact for the purpose of obtaining executory or coercive relief. In pith and substance, it is not "declaratory relief" as that term is used in s. 108(2) of the CJA either in a public or a private law context. Accordingly, I dismiss the plaintiff's motion to strike the jury notice. [Emphasis added by Price J.]

[13] Justice Price added at para. 73 that:

In LeBar v. Canada, in 1988, the Federal Court of Appeal stated:

A declaration differs from other judicial orders in that it declares what the law is without pronouncing any sanction against the defendant, but the issue which is determined by a declaration clearly becomes res judicata between the parties and the judgment a binding precedent. [Emphasis added by Price J. Citations omitted.]

[14] Price J. noted further at para. 74 that:

Skylark’s claim for a declaration may be viable provided it seeks only guidance as to the legal relationship that exists between it and 2012 Inc., so as to enable them to govern their future conduct toward each other accordingly. If Skylark is seeking the declaration for the sole purpose of enforcing 2012 Inc.’s contractual obligation, embodied in the Equity Agreement, to issue share certificates to it and to grant it the legal rights that those share certificates entailed, then it would be seeking, in pith and substance, a coercive judgment against 2012 Inc. based on a cause of action that is statute-barred.

[15] Price J. concluded at para. 113 that:

[113] I find that there is a genuine issue for trial as to whether Skylark has a beneficial interest in 2012 Inc. A declaration of that interest could be made which would have value to Skylark without consequential relief. If Skylark is found to have a valid basis for a declaration as to its ownership, such declaration, being a form of equitable relief within the meaning of s. 16 of the Limitations Act, 2002, may not be statute-barred.

Governing Principles

[16] Rule 62.02(4) of the Rules provide that:

(4) Leave to appeal [to the Divisional Court] shall not be granted unless,

(a) there is a conflicting decision by another judge or court in Ontario or elsewhere on the matter involved in the proposed appeal and it is, in the opinion of the judge hearing the motion, desirable that leave to appeal be granted; or

(b) 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.

[17] Section 16(1)(a) of the Limitations Act, S.O. 2002, c. 24 provides that:

16 (1) There is no limitation period in respect of,

(a) a proceeding for a declaration if no consequential relief is sought;

[18] Rule 20.04 of the Rules provides that where there is no genuine issue for trial with respect to a claim or defence, the court shall grant summary judgment accordingly:

(2) The court shall grant summary judgment if,

(a) the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence; or

(b) the parties agree to have all or part of the claim determined by a summary judgment and the court is satisfied that it is appropriate to grant summary judgment.

[19] In Hryniak v. Maudlin, 2014 SCC 7, [2014] 1 SCR 87, the Supreme Court of Canada noted at para. 49 that:

There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.

[20] The test that leave to appeal should be granted where the reviewing judge has “good reason to doubt the correctness of the order in question” merely involves a consideration of whether the decision is open to serious debate: see Judson v. Mitchele, 2011 ONSC 6004; Brownhall v. Canada (Ministry of National Defence) (2006), 2006 7505 (ON SC), 80 O.R. (3d) 91 (Sup. Ct.).

Analysis

[21] This motion raises the following issues:

1. Is there a good reason to doubt the correctness of Price J.’s order?

2. Does the proposed appeal involve matters of such importance that, in the court’s opinion, leave to appeal should be granted?

Issue No. One: Is there good reason to doubt the correctness of Price J.’s Order?

[22] I note, parenthetically, that the question of whether there is a conflicting decision by another court or judge on the issue of declaratory relief is subsumed in this issue.

[23] Indeed, 2012 Ontario advances two arguments in support of its position that there is good reason to doubt the correctness of Price J.’s order. They submit that, in pith and substance, Skylark Holdings is not really seeking declaratory relief; rather the plaintiff is seeking consequential relief for an alleged breach of an undertaking to transfer 5% of 2012 Ontario to Skylark Holdings. It therefore seeks to acquire all the rights of a minority shareholder. Second, 2012 Ontario submits that Price J.’s decision runs counter to the decision in Harrison v. Antonopoulos, to the effect that a declaration of fact for the purposes of executory or coercive relief is not in pith and substance “declaratory relief”. They also submit that the “Harrison line of authority may contradict cases such as McMurtry v. McMurtry”.

[24] In Harrison, the court made the following distinction between a declaratory judgment and an executory or coercive one at para. 27:

A declaratory judgment is restricted to a declaration of the parties' rights. It contains no provision ordering any party to do anything. In a coercive judgment, "the courts determine the respective rights of the parties and then order the defendant to act in a certain way, for example, by an order to pay damages or to refrain from interfering with the claimant's rights.

[25] The court denied the motion for declaratory relief in Harrison on the ground that: “The essence of the relief requested by the plaintiff in this case is a declaration of fact for the purpose of obtaining executory or coercive relief. In pith and substance, it is not “declaratory relief” as that term is used in s. 108(2) of the CJA either in a public or a private law context.”

[26] In Yellowbird v. Samson Cree Nation No. 444, 2008 ABCA 270, 433 A.R. 350, at paras. 45 and 46, the Court of Appeal adopted the following test for determining whether a remedy was declaratory or remedial:

If the Court granted the declaration, and the defendant resisted the implementation of the declaration, could the plaintiff “leave the court in peace” and enjoy the benefits of the declaration “without further resort to the judicial process”?

[27] Further clarification regarding the essence of declaratory relief emerges from the case of McMurtry v. McMurtry, 2016 ONSC 2853. The court, at para. 134, adopted the following definition of a declaratory judgment in The Law of Declaratory Judgments, 3rd ed. (Toronto: Carswell, 2007), at p. 3:

The issue of a declaratory judgment is a declaration, confirmation, pronouncement, recognition, witness and judicial support to the legal relationship between the parties without an order of enforcement or execution …

If a declaration is merely ancillary to consequential relief which is statute-barred, the entire recourse is considered as consequential relief and will fail.

[Emphasis added.]

[28] The cases of Yellowbird and McMurtry raise the following questions:

(1) If this court grants declaratory relief and 2012 Ontario resisted the implementation of the declaration, could Skylark Holdings “leave the Court in peace” and enjoy the benefits of the declaration “without further resort to the judicial process”?

(2) Is the declaration in this case merely ancillary to consequential relief and therefore statute-barred?

[29] In my view, the first question should be answered in the negative. If 2012 Ontario resisted the implementation of the declaration, Skylark Holdings would inexorably seek judicial redress to “enjoy the benefits” of the declaration.

[30] Similarly, in my view, the declaration in this case is arguably ancillary to the consequential relief sought by Skylark Holdings, which seeks the declaration as a prelude to enforcing its rights as a minority shareholder in 2012 Ontario. It is conceded that Skylark Holding’s cause of action based on 2012 Ontario’s December 19, 2003 breach of contract expired on December 19, 2009.

[31] At the very minimum, it is arguable that Price J. misapplied the test for granting declaratory relief set out in the Harrison and McMurtry decision. The court noted in McMurtry at para. 134 that the “case law and academic authorities emphasize that “declaratory relief” is to be construed narrowly specifically because relief is not subject to a limitation period.” In light of the other relief sought by Skylark Holdings in its Statement of Claim, it is at least arguable that the pith and substantive of the relief sought is consequential rather than declaratory.

Issue No. Two: Does the appeal involve matters of such importance that, in the court’s opinion, leave to appeal should be granted?

[32] It is important that the parameters of s. 16(1)(a) of the Limitations Act are fully delineated in cases where declaratory relief is sought. Should the section “come to the rescue” or “salvage” a claim for consequential relief which may be statute-barred? Should the section automatically apply where no consequential relief is expressly sought? Is there a realistic possibility that this decision will encourage claimants to circumvent the applicable limitation period set out in the Limitations Act?

[33] In my view, these questions give this appeal a significance that transcends the facts of this case.

Conclusion

[34] For the above reasons leave to appeal is granted.

Costs

[35] Costs are reserved to the Divisional Court.

André J.

Date: July 28, 2017

Corrected : September 12, 2017