



COURT OF APPEAL FOR ONTARIO

CITATION: Holley v. Northern Trust Company, Canada, 2014 ONCA
    719

DATE: 20141021

DOCKET: C58493

Strathy C.J.O., Rouleau and Hourigan JJ.A.

BETWEEN

Jennifer Holley

Appellant (Plaintiff)

and

The
    Northern Trust Company, Canada

and the Royal Trust
    Company

Respondents (Defendants)

Proceeding under the
Class
    Proceedings Act, 1992

Peter R. Jervis, Joel P. Rochon and Remissa Hirji, for
    the appellant

Jeff Galway and Nicole Henderson, for the respondent Northern
    Trust Company, Canada

Christine Lonsdale and Richard Lizius, for the respondent
    Royal Trust Company

Heard: October 6, 2014

On appeal from the order of Justice Paul M. Perell of the
    Superior Court of Justice, dated February 11, 2014, with reasons reported at
    2014 ONSC 889.

By the Court:

[1]

This is an appeal from a Rule 21 motion that dismissed the appellants
    claim in the context of a proposed class action. The motion judge found that a
    court-approved settlement, granted in the course of Nortels
Companies'
    Creditors Arrangement Act
, R.S.C. 1985, c. C-36 (CCAA) proceedings, had
    released the respondents from all claims based on constructive fraud, and that
    the pleading did not disclose a cause of action for what he characterized as
    common law fraud. The motion judge also concluded that, in any event, any claims
    were statute-barred under the
Limitations Act, 2002
, S.O. 2002, c. 24,
    Sch. B.

[2]

The appellant raises several grounds of appeal. Among these grounds is
    her submission that the motion judge erred in finding that her claims were statute-barred.

[3]

For the reasons that follow, we would dismiss the appeal. On the facts found
    by the motion judge, the limitation period began to run at the latest in March
    of 2010, and the appellant was well beyond the two-year limitation when she
    filed her notice of action on August 27, 2012.
[1]


[4]

On February 18, 2010, the Monitor in Nortels CCAA proceedings issued
    its 39
th
report. This report provided the appellant with all of the
    material facts she required to pursue her proposed cause of action against the
    respondents for their alleged mishandling of trust funds.

[5]

Specifically, the Monitors 39
th
report disclosed that the Health
    and Welfare Trust (HWT) administered by the respondents was seriously underfunded
    and that some of the trust assets consisted of an amount owed to the trust by
    Nortel (the Due).

[6]

In March of 2010, a motion was brought in the Nortel CCAA proceeding to
    approve a settlement and release of claims against the trustees and others related
    to the management of the HWT. The appellant filed materials and appeared on the
    motion to oppose the granting of a release to Nortel, the respondents, and
    others, from potential claims respecting the HWT, including claims related to
    the administration and underfunding of the HWT.

[7]

In the materials filed by the appellant in that proceeding, it is
    apparent that she understood that she had a potential cause of action against
    the respondents for their administration of the HWT. The appellant had received
    a copy of the Monitors 39
th
report and had retained an expert to
    review it. From this review, the appellant considered that the respondents had
    breached their trust obligations and that she had a viable claim against them.
    In her factum opposing the settlement order, she argued that a release of
    potential claims against the HWT trustees should not be granted because the
    proposed release would have barred any breach of trust claim she might advance.

[8]

Specifically, in the factum she filed for the March 2010 motion, the
    appellant asserted that the information disclosed in the Monitors 39
th
report established that:

1.

the HWT had been massively depleted;

2.

the $37.1 million Due shown as a trust asset was an amount owing from
    Nortel;

3.

the Due was likely created by Nortel borrowing money from the HWT to
    fund pay-as-incurred beneficiaries of the trust (the pay-as-incurred
    beneficiaries were paid their medical and dental plan claims by the HWT on an
    ongoing basis, and Nortel would, from time to time, reimburse the HWT for those
    payments);

4.

the Due would be compromised during the Nortel CCAA process;

5.

the HWT was underfunded by more than of $100 million; and

6.

the information disclosed in the Monitors 39
th
report
    evidenced a clear breach of trust during the period that the respondents were
    responsible for the administration of the trust.

[9]

It is apparent, therefore, that as of March 2010, the appellant
    considered litigation to be an appropriate means to seek a remedy for the loss
    suffered as a result of the underfunding of the HWT and the respondents having
    allowed Nortel to fund the claims of pay-as-incurred beneficiaries out of HWT
    funds, causing the Due from Nortel to increase substantially.

[10]

In
    this court, the appellant argues that it was only when the Monitors 51
st
report was released on August 27, 2010, that she acquired the information needed
    to make a claim. This is precisely two years before she issued her notice of
    action on August 27, 2012. The appellant relies on the fact that the Monitors 51
st
report disclosed, for the first time, that the significant increase in the size
    of the Due as compared to the previous years was a result of Nortel deciding to
    take a contribution holiday. It was based on this new information that the
    appellant claims she first became aware that the respondents had allowed
    improper payments to be made out of the HWT.

[11]

We
    would not give effect to this submission. In our view, the appellant was
    clearly aware of the legal basis for her claim against the respondents as a
    result of the Monitors 39
th
report. Based on the materials she
    submitted in reaction to this report, the appellant believed that she had
    suffered a loss, believed that this loss occurred under one or more of the
    trustee(s) watch, and her expert attributed the cause this loss to misconduct
    by the HWT trustees in allowing Nortel to underfund or improperly withdraw
    funds from the HWT. Her factum filed at the March 2010 hearing demonstrated
    that she believed litigation was the appropriate remedy. All of the
    requirements of the
Limitations Act, 2002
, s. 5(1) were satisfied. The
    information contained in the Monitors 51
st
report was not necessary
    to discover the proposed cause of action. It simply provided additional detail
    as to the mechanism of the underfunding.

[12]

Based
    on the information in the Monitors 39
th
report, the appellants
    expert attributed the increase in the Due to the trustees having made a loan to
    Nortel so that Nortel could pay the pay-as-incurred beneficiaries. The Monitors
    51
st
report revealed that the increase in the Due was the result of
    Nortel taking a one-year contribution holiday in 2005-2006, during which
    Nortel did not reimburse the HWT for the amounts paid directly out of the HWT to
    the pay-as-incurred beneficiaries.

[13]

Thus,
    the information in the Monitors 51
st
report did not provide the
    basis for a new or different claim. The claim alleged by the appellant in the
    March 2010 proceedings was a claim for breach of trust against the trustees for
    allowing Nortel to underfund or withdraw assets from the HWT. The appellants
    understanding of the precise mechanism and amount of underfunding may have
    changed as a result of the Monitors 51
st
report, but the nature of
    the claim remained the same.

[14]

As
    a result, we agree with the motion judges conclusion that the appellant knew
    the factual basis for her constructive fraud and fraud claim against the
    [respondents] and it is plain and obvious that both her claim for
    constructive fraud and also her claim for common law fraud, if any, are
    statute-barred.

[15]

In
    view of our conclusion on this point, we not need deal with the merits of the other
    grounds raised by the appellant. The appeal is dismissed.

[16]

If
    the parties are unable to agree on costs, the respondents are to provide
    written submissions, not to exceed five pages (excluding the costs outline),
    within five days of the release of this decision. The appellant is to provide
    her written response, not exceeding five pages (again, excluding the costs
    outline), within five days thereafter.

Released: GS OCT 21, 2014

G.R.
    Strathy C.J.O.

Paul
    Rouleau J.A.

C.W.
    Hourigan J.A.





[1]
The motion judge transposes several dates by two years, such as referring to
    events which took place in 2010 as taking place in 2008. These reasons refer to
    the correct dates.


