Russo, Trustee of the Estate of Lo Faso v. Ferracuti et al.

[Indexed as: Lo Faso Estate v. Ferracuti]

Ontario Reports Ontario Superior Court of Justice Emery J. October 23, 2018 143 O.R. (3d) 525 | 2018 ONSC 6308

Case Summary

Civil procedure — Pleadings — Amendment — Plaintiff granted leave to amend statement of claim after expiry of limitation period to add citation particulars to statutes already pleaded and to plead ss. 2 and 4 of Statute of Frauds and other legislation in order to plead legislative requirements for transfer of land — Plaintiff not asserting new cause of action by adding statutory references — Statute of Frauds, R.S.O. 1990, c. S.19, ss. 2, 4.

The plaintiff was suing to enforce a judgment. The defendants moved successfully for partial summary judgment dismissing the plaintiff's claim for an interest in certain property. The plaintiff's appeal from that order was allowed. The appeal judge noted that "the parties should give consideration to their pleadings particularly with respect to the interplay between section 2 and section 4 of the Statute of Frauds ". The plaintiff then moved for leave to amend his statement of claim to add citation particulars to statutes already pleaded and to plead ss. 2 and 4 of the Statute of Frauds and other legislation. The defendants opposed the motion on the basis that the amendments were new claims that were barred by a limitation period.

Held, the motion should be granted.

The statutory references that the plaintiff sought to add by way of amendment to the pleading were not causes of action. A new theory of liability based on allegations of material fact already pleaded is not a new cause of action. The amendments were not statute-barred.

Cases referred to

A1 Pressure Sensitive Products Inc. v. Bostik, Inc., [2013] O.J. No. 3248, 2013 ONSC 4734 (Div. Ct.); Castillo v. Castillo, [2005] 3 S.C.R. 870, [2005] S.C.J. No. 68, 2005 SCC 83, 260 D.L.R. (4th) 439, 343 N.R. 144, [2006] 3 W.W.R. 595, J.E. 2006-111, 52 Alta. L.R. (4th) 199, 376 A.R. 224, 36 C.C.L.T. (3d) 167, 21 C.P.C. (6th) 50, 26 M.V.R. (5th) 1, 144 A.C.W.S. (3d) 646; Farmers Oil and Gas Inc. v. Ontario (Ministry of Natural Resources) (2016), 134 O.R. (3d) 390, [2016] O.J. No. 5212, 2016 ONSC 6359 (Div. Ct.); Kent v. Ellis (1900), 31 S.C.R. 110, [1900] S.C.J. No. 66, 21 C.L.T. 153; Sigrist v. McLean, [2011] O.J. No. 5865, 2011 ONSC 7114, 283 O.A.C. 100, 15 R.P.R. (5th) 33 (S.C.J.); Tolofson v. Jensen, [1994] 3 S.C.R. 1022, [1994] S.C.J. No. 110, 120 D.L.R. (4th) 289, 175 N.R. 161, [1995] 1 W.W.R. 609, J.E. 95-61, [page526] 51 B.C.A.C. 241, 100 B.C.L.R. (2d) 1, 77 O.A.C. 81, 26 C.C.L.I. (2d) 1, 22 C.C.L.T. (2d) 173, 32 C.P.C. (3d) 141, 7 M.V.R. (3d) 202, 52 A.C.W.S. (3d) 40; United Food and Commercial Workers Canada, Local 175, Region 6 v. Quality Meat Packers Holdings Ltd., [2018] O.J. No. 3981, 2018 ONCA 671

Statutes referred to

• Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, s. 38 [as am.]
• Conveyancing and Law of Property Act, R.S.O. 1990, c. C.34, s. 9
• Limitations Act, 2002, S.O. 2002, c. 24, Sch. B, ss. 4, 5 [as am.]
• Statute of Frauds, R.S.O. 1990, c. S.19, ss. 2, 4

Rules and regulations referred to

• Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 26.01, 26.05, 37.15

MOTION for leave to amend a statement of claim.

John Lo Faso and L. Pillon, for plaintiff. C. Linthwaite, for defendants.

[1] EMERY J.: — The plaintiff Gaetano Lo Faso served a motion dated July 31, 2014 in which he requested leave to amend the fresh as amended statement of claim in this action, as well as declaratory relief that essentially seeks partial summary judgment against the Ferracuti defendants, including 518391 Ontario Inc. ("518"), which holds title to the property known in these proceedings as "Haines Road". The plaintiff estate (Mr. Lo Faso died in January 2018) brings that part of the motion for leave to amend before the court at this time. The motion for partial summary judgment is yet to be heard.

[2] The amendments that the plaintiff estate seeks to make consist of adding citation particulars to statutes already pleaded in the fresh as amended statement of claim, and the addition of other statutes. There are no additional facts that the plaintiff estate intends to add as an amendment to its pleading.

[3] The defendants oppose the motion on the basis that the amendments are new claims that are barred by a limitation period. The defendants submit that the proposed amendments are untenable, and therefore amount to non-compensable prejudice.

The Basis for the Motion to Amend

[4] The action was commenced in 2009 to enforce a judgment obtained by the late Mr. Lo Faso against Kelton and Ferracuti Consultants Limited ("Kelton") on May 12, 1993 that totalled $379,837 between judgment and the costs awarded. This judgment accrues interest at the rate of eight per cent each year. According to Mr. Lo Faso's affidavit, the amount of the judgment as of May 12, 2014 approached $1,912,036.50 with interest. [page527]

[5] Kelton always showed the beneficial interest in Haines Road on its financial statements, even though 518 held title to that property. Anthony Ferracuti was the majority shareholder of both Kelton and 518.

[6] In 1998, 518 was required to refinance Haines Road to make leasehold improvements to satisfy a government tenant. Anthony Ferracuti's wife, Heather Ferracuti, agreed to a charge against the matrimonial home and gave a personal covenant to TD Bank in the amount of $200,000. In exchange, she received the transfer of all of his shares in 518.

[7] It is an open question whether the transfer of shares in 518 from Anthony Ferracuti to Heather Ferracuti had any effect on the ownership of Haines Road, or resulted in the transfer of the beneficial interest in Haines Road from Kelton.

[8] In 2006, Kelton made an assignment in bankruptcy. Pollard and Associates Inc. is currently the trustee of the bankrupt estate. Mr. Lo Faso obtained four orders under s. 38 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 to pursue Kelton outside of the bankruptcy.

[9] This motion is not the first trip to Brampton for the parties. In March 2009, Mr. Lo Faso commenced this action. In October 2011, Justice Lemon heard two motions as the justice appointed to hear all motions in this action under rule 37.15 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. One of the motions Justice Lemon heard was brought by the plaintiff for a certificate of pending litigation. The other was a counter motion of the Ferracuti defendants seeking, among other things, partial summary judgment to dismiss Mr. Lo Faso's claim for an interest in Haines Road.

[10] On April 2, 2012, Justice Lemon granted summary judgment on the defendants' motion. Mr. Lo Faso appealed Justice Lemon's order. On February 27, 2013, the Court of Appeal allowed the appeal and set aside Justice Lemon's order. The question whether the beneficial interest in Haines Road was transferred was central to the appeal decision, as there was no evidence of any document or writing for the transfer. As Justice Pepall explained, in paras. 25 and 26:

The difficulty with this theory and with the motions judge's analysis is that it improperly conflates the transfer of Kelton's shares in 518 with the transfer of Kelton's beneficial interest in Haines Road. By necessity, these were two separate transactions.

Because he conflated the two transactions, the motions judge failed to properly consider indicia reflecting an absence of any transfer of the beneficial interest. There was no evidence of compliance with s. 2 of the Statute of Frauds, which provides that no interest in lands shall be granted or surrendered unless by deed or note in writing signed by the party so granting or [page528] surrendering, or by the party's agent. Furthermore, even if the Statute of Frauds may in certain circumstances allow for the use of an oral contract as a defence to an action, the motions judge made no finding of any oral agreement between Kelton and Mrs. Ferracuti that reflected the transfer of the beneficial interest. Moreover, there was no evidence of any payment of the land transfer tax which would have been payable on the transfer of the beneficial interest in Haines Road.

[11] Justice Pepall also expressed the view that the action should be tried, even though Mr. Lo Faso had requested summary judgment in his favour. Justice Pepall offered the following comment, at para. 28:

. . . the parties should give consideration to their pleadings particularly with respect to the interplay between section 2 and section 4 of the Statute of Frauds.

[12] Inspired by the success he achieved on appeal, Mr. Lo Faso brought this motion for leave to amend, and for partial summary judgment. The motion record as filed was the same as the motion, affidavit and draft fresh as amended statement of claim containing the proposed amendments when this motion for leave to amend was heard. In those materials, the plaintiff estate seeks to add only para. 78, which reads as follows:

78. The Plaintiff pleads and relies upon the following legislation: (a) Assignments and Preferences Act, R.S.O. 1990, c A33; (b) Fraudulent Conveyances Act, s. 2 & 4; (c) Negligence Act; (d) Ontario Business Corporations Act, s. 134, 184, 245 & 248; and (e) Bankruptcy and Insolvency Act, ss. 17, 91, 95 and 100; (f) Section 97 of the Courts of Justice Act, R.S.O. 1990 c. C43; (g) Section 9 of the Conveyancing and Law of Property Act, R.S.O. 1990 c C34; (h) Sections 2 & 4 of the Statute of Frauds, R.S.O. 1990 c S19; and (i) Bulk Sales Act R.S.O. 1990, c B14.

[Underlining in original]

Analysis

[13] Under rule 26.01, the court is mandated to 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 by an adjournment. The plaintiff estate submits that there are no new causes of action being pleaded, and that all facts in support [page529] of the proposed amendments have already been pleaded in the statement of claim. The plaintiff estate submits that the proposed amendments are intended only to particularize legislation that apply to the facts. This includes pleading the legislative requirement for written proof of the transfer of real property or an interest in land.

[14] It is also notable that the plaintiff estate argues the Court of Appeal concluded that the question is whether a beneficial interest in Haines Road had effectively been transferred to Kelton or from 518 to Ms. Ferracuti in the absence of document in writing. The court further observed that the Statute of Frauds, R.S.O. 1990, c. S.19 had not been pleaded.

[15] The defendants made few, if any submissions on the proposed amendments about making additional statutory references except with respect to the Statute of Frauds and the Conveyancing and Law of Property Act, R.S.O. 1990, c. C.34. Section 2 and 4 of the Statute of Frauds and s. 9 of the Conveyancing and Law of Property Act provide the statutory requirement that the transfer or exchange of an interest in land must be in writing. This requirement for a document, deed or note in writing signed by party giving that interest is what I consider to be the actual basis for the defendant's opposition to the amendments.

[16] The defendants do not make the submission that the amendments requested on this motion take them by surprise. Obviously, they are on notice that the plaintiff estate seeks to connect ss. 2 and 4 of the Statute of Frauds to the facts pleaded in support of the claim of the plaintiff estate. This is evident from the decision of the Court of Appeal. Rather, the defendants take the position that the motion is brought out of time, and therefore statute barred by ss. 4 and 5 of the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B. The defendants take the position that the time started to run for the making of these amendments to the fresh as amended statement of claim on the date the Court of Appeal released its decision. That happened five and a half years ago.

[17] The defendants argue that the prejudice caused by the expiry of the limitation period makes the amendments untenable. The Supreme Court of Canada has held limitation periods are fundamentally substantive, and not procedural in nature. In para. 35 of Castillo v. Castillo, 2005 SCC 83, [2005] 3 S.C.R. 870, [2005] S.C.J. No. 68, Justice Bastarache, in a separate yet concurring decision with the majority, held that "[l]imitation periods have the effect[page530] of cancelling the substantive rights of plaintiffs and of vesting a right in defendants not be sued in such cases". Justice Bastarache referred also to the decision of Justice La Forest in Tolofson v. Jensen, [1994] 3 S.C.R. 1022, [1994] S.C.J. No. 110, where he stated that limitation periods are, by the very nature, substantive as they determine the rights of both of the parties in a cause of action. As Justice La Forest explained [at para. 36], "they destroy the right of the plaintiff to bring suit and vest a right in the defendant to be free from suit".

[18] I must decide whether the requested amendments amount to a new cause of action in order to be claims that expire if a proceeding was not commenced with respect to those claims in time under the Limitation Act, 2002.

[19] I am of the view that the statutory references the plaintiff estate seeks to add by way of amendment to the pleading are not causes of action. The distinction between claims made on a common factual matrix already contained in a pleading is distinct from a cause of action that rests on whether particular facts are already pleaded or not pleaded. This distinction was examined by Justice Nordheimer (as he then was), sitting as a judge of the Divisional Court, in Farmers Oil and Gas Inc. v. Ontario (Ministry of Natural Resources) (2016), 134 O.R. (3d) 390, [2016] O.J. No. 5212, 2016 ONSC 6359 (Div. Ct.). In Farmers Oil, Justice Nordheimer wrote, at para. 22, as follows:

As may be obvious from the above, the distinction between the authorities relied upon by the appellant, and those relied upon by the respondent, turns on whether the proposed amendments do, or do not, arise out of the same facts, or the factual matrix, that was pleaded in the original statement of claim. If they do, then the amendments should be permitted. If they do not, and the limitations period has expired, then the amendments should be refused.

[20] A new theory of liability based on allegations of material fact already pleaded is not a new cause of action: A1 Pressure Sensitive Products Inc. v. Bostik, Inc., [2013] O.J. No. 3248, 2013 ONSC 4734 (Div. Ct.). This view is consistent with the recent decision of the Court of Appeal in United Food and Commercial Workers Canada, Local 175, Region 6 v. Quality Meat Packers Holdings Ltd., [2018] O.J. No. 3981, 2018 ONCA 671. On that appeal, the court examined whether an amendment will be statute-barred, and when a new cause of action is not asserted in the following terms [at para. 65]:

An amendment will also be statute-barred if it seeks to add a new "cause of action": North Elgin Centre, at paras. 19-23, 33. "A cause of action is 'a factual situation the existence of which entitles one person to obtain from the court a remedy against another person'": North Elgin Centre, at para. 19. A new cause of action is not asserted if an amendment pleads an alternative claim for relief from the same facts, or in other words, if the amendment flows directly from the facts already pleaded: see North Elgin Centre, at paras. 20-21; Dee Ferraro, at paras. 13-14. [page532]

[21] The plaintiff estate submits that pleading the legislative requirements for a transfer of an interest in land will benefit both parties. The plaintiff must know the case it has to make, and the defendants are entitled to know the case they have to meet. This has been held to be expressly so where one party or the other seeks to prove compliance with, or an exception to the Statute of Frauds. I am referred in this respect to the decision of Justice Carole J. Brown in Sigrist v. McLean, [2011] O.J. No. 5865, 2011 ONSC 7114 (S.C.J.), where she held [at para. 68], relying upon the decision of Kent v. Ellis (1900), 31 S.C.R. No. 110, [1900] S.C.J. No. 66, that:

The Supreme Court of Canada in Kent v. Ellis explained the purpose behind the requirement of pleading the Statute of Frauds. Citing British jurisprudence, Clarke v. Callow (46 L.J.Q.N. 53) and Hawkins v. Lord Penrhyn (4 App. Cas. 58), the Supreme Court of Canada explained that a party must plead the Statute of Frauds because "otherwise it could not be know whether or not he intended to shelter himself under the statute, or to waive his right to shelter himself under it."

[22] In its decision to set aside Justice Lemon's order in this action, the Court of Appeal urged both sides to consider amending their pleadings. The motion to amend was brought, however imperfectly, within two years of the date that decision was released. Any issue about whether the limitation period is met by bringing a motion to amend or by obtaining an order for leave and actually making the amendment within the limitation period was not argued before me. Accordingly, I do not consider that to be an appropriate basis on which to make my decision.

[23] I also heard little argument about the applicability of s. 5, being the circumstances in which a claim is "discovered". I do not consider that to be a basis on which to make the decision as well. Even if this basis was considered, I note that the definition of "claim" in the Limitations Act, 2002 means "a claim to remedy an injury, loss or damage . . .". It is clear from the nature of the action and the facts already pleaded what remedy the plaintiff seeks, and for what loss.

Conclusion

[24] The motion of the plaintiff estate for leave to further amend the fresh as amended statement of claim by adding para. 78 is granted.

[25] As a term of this leave, I order the plaintiff estate to serve the formally amended fresh as amended statement of claim by November 23, 2018. The defendants are entitled to amend their statement of defence under rule 26.05 after the amended fresh as amended statement of claim is served. In the course of amending [page533] the statement of defence, the defendants are at liberty to plead any limitation period they consider appropriate. The plaintiff estate shall then have the right to file any reply or amended reply, as the case may be, within the time prescribed by the Rules.

[26] If any party seeks costs, they may file written submissions setting out their claim by November 1, 2018. This submission shall consist of no more than two pages, not including any offer to settle the motion, time dockets or disbursement receipts. The responding party shall then have until November 8, 2018 to file responding submissions limited to the same extent. No reply submissions are permitted without leave.

[27] All submissions on costs may be sent to my judicial assistant, Ms. Melanie Powers, by e-mail at melanie.powers

Motion granted.

End of Document