



COURT OF APPEAL FOR ONTARIO

CITATION:
Georgian Properties Corporation v. Robins Appleby LLP, 2022
    ONCA 245

DATE: 20220328

DOCKET: C69443

Simmons, Pardu and Brown JJ.A.

BETWEEN

Georgian Properties Corporation

Plaintiff (Appellant)

and

Robins Appleby LLP, Leor
    Margulies and Anthony Romanelli

Defendants (Respondents)

Milton Davis and Ronald Davis, for the
    appellant

Peter Wardle and Evan Rankin, for the
    respondents

Heard: February 9, 2022 by
    video conference

On appeal from the judgment of Justice Grant
    R. Dow of the Superior Court of Justice, dated May 6, 2021, with reasons
    reported at 2021 ONSC 1591.

REASONS FOR DECISION


[1]

The appellant, Georgian
    Properties Corporation, appeals from a summary judgment dismissing its negligence
    action against the respondent lawyers
as statute barred under s. 4 of the
Limitations
    Act, 2002
, S.O. 2002, c.
    24, Sched. B (the Act).

[2]

The negligence claim
    arose from the respondent lawyers work in preparing disclosure documents, two
    mortgages and a promissory note for the developer of a condominium project that
    was registered in 2010. Once the condominium was turned over to the unit
    holders, the condominium corporation refused to pay the two mortgages and the
    promissory note. Litigation ensued. The condominium corporation attacked the
    adequacy of the disclosure documents in a factum delivered in June 2017. On
    July 7, 2017, a judge declined to strike the factum. In May 2018, the same
    judge held that the disclosure documents were insufficient, that the two
    mortgages and the promissory note were oppressive and that the promissory note also
    violated the
Condominium Act, 1998
, S.O. 1998, c. 19 (the 
Condominium Act
).
    She accordingly reduced the principal amount of the two mortgages and held the promissory
    note was void.

[3]

Georgian Properties
    commenced its negligence action against the respondent lawyers in November
    2019. On a summary judgment to address the limitation issue, the motion judge concluded
    that the appellant knew or ought to have known no later than July 7, 2017, when
    a judge declined to strike the condominium corporations factum, that it had a
    claim against the respondent lawyers for which a proceeding was an appropriate
    remedy.

[4]

For the reasons that
    follow, we allow the appeal.

Background

[5]

Georgian Properties
is the successor
[1]
to a developer that, in 2010,
    completed development of a Scarborough residential condominium.

[6]

The condominium was
    registered as Toronto Standard Condominium Corporation No. 2051 (TSCC 2051)
    on February 1, 2010. On April 12, 2010, the original developer-controlled TSCC
    2051 board of directors was turned over to an elected unit holders board of
    directors (the Board turnover).

[7]

The respondent lawyers
    acted for the developer in relation to the development of the condominium
    project and the sale of individual units.

[8]

As part of their retainer,
    the respondents drafted various documents relating to the condominium project, including:
    disclosure documents for distribution to potential unit purchasers; agreements
    of purchase and sale for unit purchasers; and the following two vendor-take-back
    mortgages and a promissory note from TSCC 2051 to the developer that were
    entered into prior to the Board turnover:

·

a multi-year mortgage in the amount of $2,122,000
    plus 10% annual interest for the cost of HVAC system components sold by the
    developer to TSCC 2051 to be installed in individual residential units but form
    part of the common elements (the HVAC mortgage);

·

a multi-year mortgage in the amount of
    $1,026,375 plus 10% annual interest relating to surplus parking spaces and
    storage units sold by the developer to TSCC 2051 (the parking unit mortgage);
    and

·

a promissory note for $90,034.26 plus 12% annual
    interest to cover the cost of land transfer tax paid by TSCC 2051 when the developer
    transferred the condominium to TSCC 2051 (the promissory note) (the foregoing
    will be collectively referred to as the "debt instruments).

[9]

Following the Board
    turnover, TSCC 2051 refused to make payments to the developer or its successors
    on account of the debt instruments.

[10]

On September 20, 2011,
    TSCC 2051 sued the developer and its principals and successors (hereafter, collectively
    the developer). TSCC 2051 advanced several claims, including negligence,
    breach of contract and breach of warranty relating to construction deficiencies.
    In addition, TSCC 2051 requested declarations that the HVAC mortgage, the
    parking unit mortgage and the promissory note were null and void, alleging overpricing,
    oppression
[2]
and failure to comply with the
Condominium Act
. In a statement of defence and
    counterclaim, the developer counterclaimed for enforcement of the debt
    instruments. Among other things, in relation to the enforceability of the debt
    instruments, the developer asserted it had made proper disclosure as required
    under the
Condominium Act
.

[11]

Prior to the
    developers 2016 bankruptcy, an agreement was reached under which:

·

the claim for construction deficiencies was
    settled;

·

the debt instruments were assigned to Georgian
    Properties;

·

Georgian Properties was entitled to pursue the
    counterclaim for enforcement of the debt instruments and would be bound by the
    decision in the action concerning their validity and enforcement; and

·

the claims and counterclaim concerning the debt
    instruments would be dealt with by summary judgment motion.

[12]

Prior to the scheduled
    summary judgment motion, TSCC 2051 sought leave to amend its statement of claim
    to add, among other things, claims that the condominium disclosure documents were
    inadequate. On May 3, 2016, a master permitted the amendments. On December 15,
    2016, a Superior Court judge overturned the masters decision regarding the
    disclosure documents and disallowed those amendments.

[13]

The parties subsequently
    exchanged factums addressing the validity and enforceability of the debt
    instruments for the summary judgment motion. In its factum seeking judgment for
    payment of the debt instruments, Georgian Properties claimed the debt
    instruments had been properly disclosed under the
Condominium
    Act
. In a responding
    factum, TSCC 2051 attacked the adequacy of the disclosure documents.

[14]

On July 5, 2017,
    Georgian Properties moved to strike TSCC 2051s factum. On July 7, 2017,
    Akbarali J. declined to strike the TSCC 2051 factum paragraphs alleging
    inadequate disclosure. She ruled that as Georgian Properties was relying on the
    adequacy of its disclosure documents, it would be unfair to preclude TSCC
    [2051] from joining in those issues.

[15]

In November 2017, Georgian
    Properties rejected an offer to settle from TSCC 2051 for $3,500,000.

[16]

The summary judgment
    motion was argued before Akbarali J. on April 3-4, 2018.

[17]

While the decision on
    the summary judgment motion was under reserve, Georgian Properties offered to
    settle the action for $6,000,000.

[18]

Subsequently, on May 31,
    2018,
Akbarali J. found the developers
    disclosure with respect to the debt instruments insufficient. She held that the
    HVAC mortgage was oppressive based on the reasonable expectations of the
    purchasers concerning what was included in their purchase. She reduced the principal
    amount from $2,122,000 to $652,050.

[19]

Based on expert opinion
    concerning the value of unsold parking spaces and storage units, Akbarali J. also
    found the parking mortgage oppressive and reduced the principal from $1,026,375
    to $73,000.

[20]

Finally, Akbarali J.
found the
$90,034.26
promissory note oppressive and contrary to s. 56(3) of the
Condominium Act
and set it aside in its entirety.

[21]

In the result,
Akbarali J.
found TSCC 2051 owed Georgian Properties approximately
    $1,625,000 for principal and accrued interest in relation to the debt
    instruments out of roughly $7,000,000 that had been claimed. This court upheld
    her decision on January 24, 2019.

[22]

On November 19, 2019, the
    appellant issued its statement of claim alleging the respondent lawyers were
    negligent in preparing disclosure documents for the condominium project and in
    providing advice concerning the debt instruments.

Relevant Provisions of the Act

[23]

Section 4 of the Act
    sets out the basic limitation period of two years from the date a claim was
    discovered:

4. 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.

[24]

Claim is defined in
    s. 1 to mean, a claim to remedy an injury, loss or damage that occurred as a
    result of an act or omission.

[25]

Sections 5(1) and (2)
    set out the basic principles governing discovery of a claim:

(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.

The Motion Judges Decision on the Limitation
    Issue

[26]

The parties agreed that
    the limitation issue could be disposed of by way of summary judgment motion.

[27]

The motion judge rejected
    Georgian Properties argument that it did not suffer a loss until Akbarali J.s May
    2018 decision. He found that Georgian Properties was suffering a loss as of April
    2010 when TSCC 2051 refused to make payments under the debt instruments. He
    further held that Georgian Properties knew or ought to have known it had a
    claim against the respondent lawyers for which a proceeding was the appropriate
    remedy no later than July 7, 2017, when Akbarali J. refused to strike portions
    of TSCC 2051s factum alleging inadequate disclosure.

The Appellants Position on Appeal

[28]

On appeal, Georgian
    Properties submits the motion judge erred in holding it was suffering a loss
    when TSCC 2051 refused to make payments on the debt instruments. It contends
    that mere default on a fully secured mortgage or debt instrument does not give
    rise to injury, loss or damage under s. 5(1)(a)(i) of the Act. It reiterates
    its position in the court below that it suffered no injury, loss or damage
    until Akbarali J.s May 2018 decision. Moreover, it asserts it would have no
    cause of action until that finding. Nor would a proceeding be an appropriate
    means to seek a remedy under s. 5(1)(a)(iv) of the Act until that finding was
    made.

The Respondents Position on Appeal

[29]

The respondent lawyers argue
    that injury, loss or damage within the meaning of s. 5(1)(a)(i) of the Act occurred
    when the debt instruments were first given or, in the alternative, when TSCC
    2051 refused to make payments under the debt instruments. They point to
Central Trust v. Rafuse
, [1986] 2 S.C.R. 147, involving a mortgage that was
    found to be void
ab initio
. However, the court noted, at p. 219, that
    the usual date for damage to occur in a solicitors negligence case is at the
    time of the solicitors breach of duty. See also
Hamilton
    (City) v. Metcalfe & Mansfield Capital Corporation
, 2012 ONCA 156, at para. 49, where this
    court observed that the determination in
Central
    Trust
as to when damage
    occurred was premised on the mortgagee receiving something less valuable than
    what it had transacted for as a result of the solicitors negligence.

[30]

In this case, Akbarali J.
    found the debt instruments oppressive. The respondent lawyers submit the debt
    instruments were thus worth less than their true value from the outset and that
    is when Georgian Properties suffered injury, loss or damage. Accordingly, the
    real question is when Georgian Properties discovered, or ought reasonably to
    have discovered, that injury, loss or damage had occurred.

[31]

Relying on
Grant Thornton LLP v. New Brunswick
, 2021 SCC 31, at para. 42, the respondent
    lawyers submit that Georgian Properties negligence claim against them was
    discoverable when it had knowledge, actual or constructive, of the material
    facts upon which a plausible inference of liability on [the respondent
    lawyers] part [could] be drawn.

[32]

The respondent lawyers
    submit the motion judge found as a fact that the loss or damage was
    discoverable on July 7, 2017 when Akbarali J. declined to strike TSCC 2051s
    factum alleging insufficient disclosure. Moreover, they assert that finding, as
    set out below, is subject to deference on appeal:

Clearly, as of the Endorsement of Justice
    Akbarali on July 7, 2017, [Georgian Properties] was specifically made aware a
    reason for the dispute was the prospect that the disclosure to unit holders was
    inadequate and the Promissory Note was void. Equally clear, the loss it was
    facing could be the result of an act or omission of the individuals or law firm
    that drafted the documents [Georgian Properties] was relying on. That is, if
    TSCC 2051s defence and allegations were correct, [Georgian Properties] had a
    claim against [the respondent lawyers] for any shortfall in its recovery.

[33]

Further, once Georgian
    Properties claim was discoverable, it was not entitled to wait and see the
    result of the summary judgment motion concerning the enforcement and validity
    of the debt instruments. A proceeding was appropriate under s. 5(1)(a)(iv) of
    the Act once Georgian Properties knew the material facts upon which a plausible
    inference of liability could be drawn.

Discussion

[34]

We accept Georgian
    Properties position that the motion judge erred in law in holding it had
    suffered a loss when TSCC 2051 failed to make payments under the debt
    instruments.

[35]

The injury, loss or
    damage at issue under s. 5(1)(a)(i) of the Act must be caused by or contributed
    to by an act or omission of the defendant in the action: s. 5(1)(b) and
    (c) of the Act.

[36]

In an action for
    solicitor negligence, the question whether injury, loss, or damage has occurred
    within the meaning of s. 5(1)(a)(i) will not generally turn on compliance by
    third parties with their obligations under documents or instruments prepared by
    the solicitor. The fact that the mortgages in this case were fully secured
    illustrates the point. Had the mortgages in this case been valid and fully
    enforceable, Georgian Properties could have recovered the full amount owing to
    it by enforcing its security. No loss would have occurred even though the
    mortgages had remained unpaid for many years.
[3]

[37]

In a solicitor
    negligence case such as this, the question of whether injury, loss or damage
    has occurred must turn on matters such as the validity and enforceability of the
    documents and instruments that were prepared.

[38]

However, even assuming the
    respondent lawyers position that injury, loss or damage occurred when the debt
    instruments were given is correct, we are satisfied that the motion judges erroneous
    finding that Georgian Properties was suffering a loss when TSCC 2051 failed to
    pay skewed his analysis of when Georgian Properties ought to have discovered
    its injury, loss or damage.

[39]

It is well-established
    that the question when a party has, or ought to have, discovered a claim under
    s. 5 of the Act requires a fact-based analysis dependent on the circumstances
    of each case:
Kaynes v. BP p.l.c.
, 2021 ONCA 36, at para. 56;
Ferrara v. Lorenzetti, Wolfe Barristers and Solicitors
, 2012 ONCA 851, 113 O.R. (3d) 401, at
    paras. 71-2;
Lipson v. Cassels Brock &
    Blackwell LLP
, 2013 ONCA
    165, 114 O.R. (3d) 481, at paras. 76-77, 84.

[40]

Here, a predominant feature of the motion
    judges discoverability analysis was his finding that Georgian Properties had
    suffered a loss by virtue of TSCCs non-payment of the debt instruments.
    Examined through that lens, given that the loss had crystalized and was obvious,
    the motion judge moved easily to a conclusion that Georgian Properties ought to
    have discovered its claim, at the latest, when Akbarali J. refused to strike
    TSCC 2051s factum attacking the sufficiency of the disclosure documents, which
    had been prepared by the respondent lawyers.

[41]

However, once it is recognized the motion
    judges finding that Georgian Properties suffered a loss when TSCC 2051 failed
    to pay the debt instrument is incorrect, the discoverability analysis must become
    more nuanced. Even assuming the respondent lawyers are correct that loss
    occurred when the debt instruments were given because they were ultimately
    found to be oppressive, the loss had not crystalized as of July 7, 2017 when
    Akbarali J. declined to strike TSCC 2051s factum. Considered in that context,
    the issue of Georgian Properties reasonable expectation of success on its
    counterclaim to enforce the debt instruments takes on greater significance. Even
    if the respondent lawyers breached the standard of care in relation to disclosure,
    no injury, loss, or damage would be caused by their conduct if the debt
    instruments remained valid and enforceable.

[42]

The principals of Georgian Properties gave
    unchallenged evidence that they expected to be successful on their counterclaim
    to enforce the debt instruments. No issue of implied waiver of privilege was
    raised and there is no indication in the record that anyone advised them
    otherwise. Their stance in rejecting an offer to settle for $3,500,000 and
    offering to settle for $6,000,000 supports the credibility of their claim.

[43]

Further, the circumstances of this case are
    unusual. TSCC 2051 did not raise the issue of inadequate disclosure in its
    original 2011 statement of claim. When it attempted to amend its pleadings to
    add that claim in 2016, its request was denied. Nonetheless, it was permitted
    to raise the issue in a 2017 factum. However, inadequate disclosure was only
    one facet of TSCCs arguments in the factum and Georgian Properties advanced
    arguments in response.

[44]

Given the overall circumstances of this case, we
    are not persuaded the record demonstrates Georgian Properties, or a reasonable
    person with its abilities and in its circumstances, had all the material facts
    necessary to draw a plausible inference of liability with respect to any
    potential negligence claim against the respondent lawyers prior to November 19,
    2017.

[45]

In general, the mere fact that allegations are
    made in a proceeding that could trigger a claim for solicitor negligence if
    successful should not automatically signify that the requirements of s. 5(1) of
    the Act are met and that the party with the potential claim must immediately
    commence action against the solicitor(s). Further investigation and assessment may
    be required. To hold otherwise could lead to costly and unnecessary litigation.

[46]

Here, the allegations were made in a factum delivered
    many years after the proceeding had been commenced, had previously been
    foreclosed on appeal and were only one facet of the arguments advanced. To conclude
    that Georgian Properties ought to have drawn a plausible inference that it had
    suffered a loss and recognized that a proceeding was an appropriate remedy
    between July 7, 2017 and November 18, 2017 would, in our view, be unreasonable.
    In our view, the motion judges conclusion that
the appellant knew or ought to have known no later
    than July 7, 2017 that it had a claim against the respondent lawyers for which
    a proceeding was an appropriate remedy was tainted by his incorrect conclusion
    that loss occurred when TSCC 2051 stopped paying the debt instruments. There is
    no suggestion on this record that there was any tactical reason for not
    starting the action earlier, or that proceeding in this manner inappropriately
    fragmented the resolution of the issues, by litigating in installments.

Disposition

[47]

Based on the foregoing reasons, the appeal is
    allowed, the motion judges order dismissing the action is set aside and
    summary judgment is granted to Georgian Properties dismissing the respondent
    lawyers limitation defence.

[48]

Costs of the appeal are to Georgian Properties
    on a partial indemnity scale fixed in the amount of $50,000 inclusive of
    disbursements and HST.

Janet Simmons J.A.

G. Pardu J.A.

David Brown J.A.





[1]
The developer and a successor company declared bankruptcy in 2016.
    Georgian Properties is an assignee of the debt instruments forming the subject
    matter of the negligence claim against the respondent lawyers. It is also a
    bankruptcy creditor of the developer and its successor.



[2]
The oppression claim was added by an October 31, 2011 amendment.



[3]

We would observe that the prescription periods for an action
    by a mortgagee against a mortgagor generally are governed by the
Real Property Limitations Act
, R.S.O.
    1990, c. L.15, not the
Limitations Act,
    2002
.


