



COURT OF APPEAL FOR ONTARIO

CITATION: 1100997 Ontario Limited v. North Elgin Centre Inc.,
    2016 ONCA 848

DATE: 20161114

DOCKET: C61621

Weiler, Blair and van Rensburg JJ.A.

BETWEEN

1100997 Ontario Limited

Applicant (Appellant)

and

North Elgin Centre Inc.

Respondent (Respondent on Appeal)

James P. McReynolds, for the appellant

Martin P. Zarnett, for the respondent

Heard: September 20, 2016

On appeal from the order of Justice John R. McCarthy of the
    Superior Court of Justice, dated December 15, 2015

van Rensburg J.A.:

A.

Introduction

[1]

The issue in this appeal is whether, three years after the commencement
    of an application for a declaration that the appellant had a valid and
    subsisting lease, the motion judge erred in refusing to direct a trial of the
    issues and to permit the delivery of a statement of claim for damages for
    wrongful termination of the lease and loss of equipment and inventory. The
    motion judge refused such relief on the basis that the proposed statement of
    claim raised new claims that were statute-barred. For the reasons that follow,
    I would allow the appeal. The claims advanced arise from the same factual nexus
    set forth in the application and do not assert new causes of action.

B.

Facts

[2]

The appellant, 1100997 Ontario Limited (110), operated a convenience
    store in a strip mall on Yonge Street in Richmond Hill in premises owned by
    North Elgin Centre Inc. (North Elgin). In 1997, 110s predecessor (1252795
    Ontario Limited or 125) entered a lease with North Elgin for a five year
    term. In 2003, after the bankruptcy of 125, 110 and North Elgin negotiated a
    lease for a five year term, with an option to renew for a further five year
    term. The 2003 lease was never executed. 110 continued to operate the
    convenience store at the premises, paying rent to North Elgin until 2012.

[3]

In March 2012, following a default in payment of rent, North Elgin gave
    one months notice of termination of 110s tenancy, taking the position that
    110 was an overholding month-to-month tenant.

[4]

110 commenced an application in the Superior Court of Justice seeking,
    among other things, a declaration that it had a lease of the premises. 110
    brought an emergency motion for interim relief from forfeiture. Mullins J.
    dismissed the motion on April 30, 2012, and North Elgin took possession of the
    premises on May 1, 2012.

[5]

Neither party took any further steps in the proceeding until October
    2015, when 110 moved for an order directing a trial of the issues and for leave
    to serve a statement of claim. 110 proposed to seek damages for the termination
    of its tenancy.

C.

Decision Below

[6]

The motion judge concluded that the amendments in the proposed statement
    of claim raised new causes of action that were not asserted in the application
    and that such claims, having arisen more than two years earlier, were
    statute-barred under the
Limitations Act, 2002
, S.O. 2002, c. 24,
    Sched. B. When the application was commenced the tenancy was subsisting, and
    the proposed claims were new and discrete causes of action flowing from events
    occurring between April 30, 2012 and August 2012. As such, the new claims were
    not based on the same factual nexus as that found in the application. The
    motion judge also observed that Mullins J. made a real finding, rather than
    an interim finding, that no written lease was in existence.

[7]

The motion judge dismissed the motion and awarded costs against 110 in
    the amount of $3,000. It is from this decision that 110 appeals.

D.

Positions of the Parties

[8]

110 contends that the motion judge erred in concluding that its proposed
    statement of claim raised new causes of action, and in concluding that Mullins
    J. had already determined whether there was a written lease on a final basis.
    110 contends that the remedies it now seeks  damages for North Elgins
    termination of 110s tenancy and re-entry and for loss of its inventory and
    equipment  are based on the very facts that were alleged in its application.
    110 says that, in considering whether the factual nexus is the same, the court
    should compare the facts alleged in the application and its supporting
    affidavit with the proposed statement of claim. An alternative theory of
    liability based on the same factual nexus does not constitute a new cause of
    action that is statute-barred. If the amendments are viable, the court should
    direct a trial of the issues as there are factual issues in dispute.

[9]

North Elgin seeks to uphold the motion judges order. As a preliminary
    point, North Elgin argues that this court should not entertain 110s appeal as
    the order in the court below was interlocutory. Under s. 19(1)(b) of the
Courts
    of Justice Act
, R.S.O. 1990, c. C.43, an interlocutory order of the
    Superior Court of Justice is properly appealed to the Divisional Court, with
    leave. Further, North Elgin asserts that, if the motion judge erred in
    concluding that Mullins J. decided the issue of whether there was a lease on a
    final basis, this conclusion had no effect on the decision. North Elgin
    disagrees that 110s proposed amendments should be compared against the
    affidavit delivered in support of its notice of application in this case.
    Finally, North Elgin argues that the judge was correct to observe that the
    facts on which 110 relies for its new claims all arose since the date North Elgin
    re-entered the premises, which was more than two years before 110 brought its
    motion.

E.

Analysis

[10]

I will first dispense with the preliminary issues: first, whether the
    motion judges order is final or interlocutory, and, consequently, whether this
    court has jurisdiction to hear an appeal from that order; and second, whether
    the issue regarding the existence of a written lease had been determined at the
    emergency motion on a final basis.

[11]

I will then turn to the main issue on appeal, namely whether the proposed
    statement of claim seeks to advance new causes of action not arising out of the
    factual nexus pleaded in 110s application. As I will explain, the motion judge
    erred in his analysis of this issue. In determining this matter, I will address
    whether a court can look to affidavit evidence filed in support of a notice of
    application for the purpose of determining what facts were relied upon to found
    the causes of action in the original proceedings.

(1)

This Court Has Jurisdiction to Hear the Appeal

[12]

Orders refusing leave to amend a pleading to add what is determined to
    be a new cause of action outside a limitation period are typically treated as
    final orders, subject to appeal to this court: See for example,
Frohlick v.
    Pinkerton Canada Ltd.
, 2008 ONCA 3, 88 O.R. (3d) 401;
Dee Ferraro Ltd.
    v. Pellizzari
, 2012 ONCA 55, 346 D.L.R. (4th) 624; and
Keparutis v.
    Canamould Extrusions Inc.
, 2012 ONCA 844. The motion judge dismissed the
    motion to direct a trial of the issues because he concluded that 110 proposed
    to pursue new causes of action that did not arise from the factual nexus
    contained in the notice of application and were therefore statute-barred. The
    order is therefore final and this court has jurisdiction to entertain the
    appeal.

(2)

Whether a Written Lease Existed Was Not Determined on a Final Basis

[13]

Next, I turn to the motion judges observation that Mullins J., in the
    interim emergency motion, decided that no written lease was in existence on a
    final basis. The issue before Mullins J. was whether 110 was entitled to relief
    from forfeiture. Mullins J. refused the relief. She did not make a final
    determination as to the rights of the parties, stating with respect to the
    lease: [t]here is no clear definitive evidence that there is a written lease
    between the parties. She considered all of the circumstances in refusing
    interim relief, including that 110 was in arrears of rent and that only by
    mortgaging his home could its principal pay some but not all of the rents
    owing. That she did not purport to decide what was a key issue in the
    application on a final basis is clear from her disposition of costs of the
    motion, which she reserved to the justice hearing the application on the
    merits.

[14]

I therefore agree with 110 that the motion judge erred in concluding
    that Mullins J. found that there was no written lease, and in treating her
    decision as a final determination of this issue. That said, I agree with North
    Elgin that this conclusion did not have any real effect on the motion judges
    decision in this case as his decision did not turn on this issue. Rather, he
    dismissed the motion after finding 110s proposed amendments were new claims
    that were statute-barred.

(3)

The Proposed Amendments Ought to Have Been Permitted

(a)

The Court Can Look to Affidavit Evidence in Support of the Notice of
    Application

[15]

Where a proceeding is commenced by way of application, it is necessary
    to consider both the notice of application and the supporting affidavit
    material referred to therein to determine whether the proposed amendment sets
    forth a new cause of action.

[16]

A notice of application may be amended in the same manner as a pleading:
    r. 14.09. However, a notice of application is not a pleading as it is
    required to state only the precise relief sought, the grounds to be argued and
    the documentary evidence to be used at the hearing of the application: r.
    38.04. It is therefore the supporting affidavit that typically contains the
    relevant facts.

[17]

In
Energy Probe v. Canada (Attorney General)
(1989), 68 O.R.
    (2d) 449 (C.A.), leave to appeal refused 37 O.A.C. 160 (S.C.C.), in determining
    whether a cause of action was disclosed, this court stated that affidavit
    materials on an application are to be considered as the pleadings (at para.
    10). Further, where oppression proceedings commenced by notice of application
    were converted into an action in
Przysuski v. City Optical Holdings Inc.
,
    2014 ONSC 3686, Perell J. refused to strike paragraphs of the statement of
    claim as raising unanticipated claims as an abuse of process because [t]he
    Notice of Application should be read with its supporting affidavits and with
    the evidentiary record for the Application (at para. 11).

[18]

In this case, the affidavit of Manir Yousif (the Yousif Affidavit),
    the principal of 110, was filed in support of 110s notice of application. In
    considering whether 110s proposed statement of claim sought to advance new
    causes of action that are statute-barred, the motion judge ought to have
    considered this affidavit.

(b)

Legal Principles Regarding the Amendment of Pleadings

[19]

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:
Letang
    v. Cooper
, [1965] 1 Q.B. 232 (C.A.), at pp. 242-43, as adopted by this
    court in
July v. Neal
(1986), 57 O.R. (2d) 129 (C.A.), at para. 23.

[20]

In
Morden & Perell,
The Law of Civil
    Procedure in Ontario
, 2nd ed. (Markham: LexisNexis Canada Inc., 2014), at
    p. 142, the authors state:

A new cause of action is not asserted if the amendment pleads
    an alternative claim for relief out of the same facts previously pleaded and no
    new facts are relied upon, or amount simply to different legal conclusions
    drawn from the same set of facts, or simply provide particulars of an
    allegation already pled or additional facts upon which the original right of
    action is based. [Footnotes omitted.]

[21]

In
Dee Ferraro Ltd. v. Pellizzari
, this court noted the
    distinction between pleading a new cause of action and pleading a new or
    alternative remedy based on the same facts originally pleaded. The appellants
    had commenced an action against their lawyer claiming damages for breaches of
    contract, trust and fiduciary duty and for fraud and negligence. The appellants
    then sought to amend their pleading. This court, in overturning the motion
    judges dismissal of the motion to amend, concluded that the proposed
    amendments, such as claims for a mandatory order and a constructive trust over
    shares, could be made because they flowed directly from facts previously
    pleaded.

[22]

By contrast, a proposed amendment will not be permitted where it
    advances a fundamentally different claim after the expiry of a limitation
    period:
Frohlick v. Pinkerton Canada Ltd.
In that case, the court did
    not permit the plaintiff in a wrongful dismissal action to amend the statement
    of claim to assert a claim for damages for constructive dismissal on the basis
    that the limitation period had expired. This court dismissed the appeal. The
    amendment regarding constructive dismissal related to events that occurred
    prior to the events described in the original statement of claim that were
    unrelated to that claim. The defendant was unaware of the new allegations prior
    to the plaintiff seeking the amendments, and the events were not put in issue
    or encompassed within the original claim.

[23]

Based on the foregoing, an amendment will be refused when it seeks to
    advance, after the expiry of a limitation period, a fundamentally different
    claim based on facts not originally pleaded.

(c)

The Principles Applied

[24]

I turn to consider and to compare what was asserted in the application
    with the facts pleaded and relief sought in the proposed statement of claim.

[25]

The notice of application sought a declaration confirming that 110 had a
    valid and subsisting lease, and a declaration confirming that there had been
    sufficient part performance under the lease to give the lease full force and
    effect as if it had been executed by the parties (and to take it out of the
    scope of s. 1 of the
Statute of Frauds
, R.S.O. 1990, c. S.19). The
    notice of application also sought relief from forfeiture and an interim
    injunction, an order fixing 110s rent at $5,000 per month for the remainder of
    the term of the lease and [s]uch further and other relief as this Honourable
    Court may deem just.

[26]

As grounds for the application, the notice of application set forth the
    fact that 110 was North Elgins tenant; that 110 was occupying the premises
    pursuant to an unexecuted lease; that 110 and its predecessor had continuously
    occupied the premises for 14 years and seven months; that the lease was to
    expire November 30, 2013; that there was an agreed rent of $5,000 per month,
    which had been paid at that rate for the past year; that 110s principal
    shareholder and director drew his sole livelihood from the business and would
    suffer irreparable harm if deprived of that livelihood; and that 110 had over
    $100,000 of inventory on the premises, much of it perishable.

[27]

The Yousif Affidavit expanded on these facts. Of particular importance
    to 110s motion to amend is the affidavits reference to the conduct of the
    landlord suggesting that it recognized the lease was in force (referring to
    obligations under the lease and rent paid thereunder), the leasehold
    improvements that 110 made, the inventory and equipment present at the premises
    and the disastrous consequences to 110 and to Yousif personally if locked out
    of the premises.

[28]

110s proposed statement of claim seeks the same relief sought in the
    notice of application, as well as damages in the amount of $250,000 for breach
    of contract, unjust enrichment, conversion and bad faith, and punitive damages
    in the amount of $50,000.

[29]

A number of facts pleaded in the statement of claim are substantially
    identical to those set forth in the application. For example, the statement of
    claim refers to 110 and its predecessors continuous occupation of the
    premises, its substantial leasehold improvements and substantial part
    performance, as well as the $100,000 of inventory at the premises.

[30]

The statement of claim additionally pleads that, as at May 1, 2012, when
    North Elgin took possession of the premises, the premises contained inventory
    and equipment worth in excess of $200,000, that North Elgin refused 110 access
    to the inventory and equipment and that North Elgin leased the premises to
    another convenience store operator and sold the inventory and equipment without
    110s knowledge. 110 claims a failure to account, and that North Elgins
    actions in terminating 110s lease were motivated by North Elgins dealings
    with a third party, Bulk Barn.

[31]

North Elgin says that at the time of the commencement of the
    application, the tenancy between 110 and North Elgin was subsisting and that
    all of the relief claimed sought the
continuation
of a lease with
    respect to the premises. By contrast, the proposed amendments claim new relief
     including damages and punitive damages  arising out of what happened
subsequently
,
    after North Elgin retook possession of the premises on May 1, 2012. North Elgin
    asserts that the claims for the failure to account to 110 for inventory and
    equipment that remained in the leased premises after the tenancy was
    terminated, and for unjust enrichment, bad faith and conversion in relation to
    North Elgins dealings with the inventory and equipment, are all new
    allegations that could not have been made in the notice of application because
    they took place only after the re-entry. North Elgin says that the motion judge
    was correct to consider the proposed amendments as advancing new, distinct and
    discrete causes of action not pleaded in the original notice of application.

[32]

I disagree with the approach of the motion judge and North Elgin.

[33]

The underlying question is whether, by reason of what was asserted in
    the application, North Elgin had knowledge of the facts underlying 110s
    damages claims. In my view, there is no new cause of action pleaded.

[34]

The application asserts that 110 had rights as a tenant of the premises
    under the unexecuted 2003 lease. It claimed part performance and that North
    Elgin was not entitled to terminate the lease on one months notice. It
    referred to the presence on the premises of valuable inventory and equipment
    and the effect the termination of the lease would have. While the relief sought
    in the notice of application was foreclosed by North Elgins conduct in
    retaking possession, 110s claim for damages arises out of exactly the same
    circumstances that were set forth in the notice of application and supporting
    affidavit, namely the conduct of North Elgin in terminating the lease and
    retaking possession of the premises. The pleading that North Elgins conduct was
    motivated by its dealings with a third party is a new fact, but not one that is
    essential to the causes of action pleaded.

[35]

The actionable fact in the notice of application was the threatened
    termination of 110s tenancy. The notice of application adverted to the harm
    110 would suffer as a result of the termination. The statement of claim is
    based on the same actionable fact: the termination of 110s tenancy. The only
    difference is that 110 pleads additional facts about what transpired after the
    lease was terminated. As such, the claim for damages is simply an alternative
    remedy based on the same factual nexus as originally pleaded in the notice of
    application.

[36]

While the notice of application originally sought only declaratory and
    injunctive relief, 110s damages claim is not a fundamentally different claim
    based on a set of facts not originally pleaded.

[37]

Further, the claims for breach of contract, unjust enrichment and bad
    faith set forth in the statement of claim, but not pleaded in the notice of
    application, are not new causes of action. They are new legal characterizations
    of the wrong that was alleged in the notice of application, and arise out of
    the same factual nexus.

[38]

I therefore conclude that the proposed amendments contained in the
    statement of claim ought not to have been refused on the basis that they raised
    new claims based on new causes of action.

[39]

Since it is clear that there are and will continue to be material facts
    in dispute, it is appropriate to direct a trial of the issues in the
    application and to permit 110 to deliver a statement of claim in the form
    proposed.

F.

Disposition

[40]

For these reasons, I would allow the appeal. Pursuant to r. 38.10, I
    would order that the application proceed to trial, that the proceeding be
    treated as an action, and that 110 have leave to deliver its statement of claim
    in the form attached to its notice of motion.

[41]

I would award costs of the motion in the court below to 110 fixed at
    $3,000, and costs of the appeal to 110 fixed at $5,000, both amounts inclusive
    of disbursements and applicable taxes.

Released: K.M.W. November 14, 2016

K. van Rensburg
    J.A.

I agree K.W. Weiler
    J.A.

I agree R.A. Blair
    J.A.


