



COURT OF APPEAL FOR ONTARIO

CITATION: 625805 Ontario Ltd. v. Silverwood Flooring Inc.,
    2017 ONCA 125

DATE: 20170214

DOCKET: C62149

MacPherson, Hourigan and Miller JJ.A.

BETWEEN

625805 Ontario Ltd.

Plaintiff (Appellant)

and

Silverwood Flooring Inc., Tamar Royt and John Doe

Defendants (Respondents)

Brad Teplitsky, for the appellant

Inga B. Andriessen, for the respondents

Heard: January 12, 2017

On appeal from
    the judgment of Justice Barbara A. Conway of the Superior Court of Justice,
    dated May 16, 2016.

MacPherson J.A.:

A.

introduction

[1]

The appellant 625805 Ontario Ltd. (625) appeals from the judgment of
    Conway J. of the Superior Court of Justice granting the respondents motion for
    summary judgment. The motion judge held that the appellant had not commenced its
    action within the two year period prescribed by s. 4 of the
Limitations Act
,
    2002, S.O. 2002, c. 24, Sched. B (the 
Act
).

B.

facts

(1)

The parties and events

[2]

Henry Smith and his son Carl Smith are home builders who carry on
    business through 625.

[3]

Tamar Royt, a former family friend of the Smiths, is in the business of
    hardwood supply through her business Silverwood Flooring Inc. (Silverwood).
    Silverwood supplies hardwood flooring to large scale residential high rises and
    commercial projects.

[4]

On November 16, 2009, the parties entered into a Joint Venture Agreement
    (JVA) with a stated purpose:

to combine their efforts and co-operate for the purposes of
    selling and installing hardwood flooring to low rise developers and selling
    hardwood flooring products to high rise development projects.

[5]

The business of the joint venture was defined in s. 1.1(c) of the JVA:

Business means the business of selling hardwood flooring to
    low rise and high rise development projects and installing hardwood flooring on
    low rise development projects, where such projects and customers have been
    referred to RoytCo by anyone of the Smith Group.

[6]

By virtue of s. 2.7 of the JVA, all parties acknowledged that Silverwood
    would continue to engage in its hardwood flooring supply business with
    customers who were not referred to it by the Smiths.

[7]

Pursuant to s. 2.2 and Schedule C of the JVA, Ms. Royt was responsible
    for managing the joint venture and would receive two percent of the gross sales
    of the business as a management fee.

[8]

In or about March 2010, the Smiths secured a significant customer for
    the joint venture, M5V Condominiums Project (the M5V Project), which was
    embarking on a multi-level (35 storey) residential condominium development.

[9]

The Smiths terminated the joint venture in April 2010. The Royt Group
    accepted the termination. In an email to the Smiths on May 12, 2010, Ms. Royt
    said:

Also wanted to confirm that all open orders in the system up to
    and including April 30
th
2010 will be shared as per the agreement as
    well as M5V of course. Im looking forward to working with you on M5V. Ill
    keep you posted on M5V regularly.

[10]

In
    the months following termination of the JVA, the M5V Project was developed. The
    former partners to the JVA could not agree on their respective obligations and
    benefits from this project.

[11]

On
    December 9, 2010, the Smiths commenced an application against Ms. Royt, 2219970
    Ontario Inc., and an independent company potentially involved in hardwood
    flooring supplies for the M5V Project. The application sought,
inter alia
:

An accounting of all amounts owing by Tamar Royt and 2219970
    Ontario Inc. to the Applicants pursuant to the terms of the Joint Venture
    Agreement made November of 2009.

[12]

The
    Smiths did not name Silverwood as a defendant in the application because it was
    not a party to the JVA and the Smiths claim they had no knowledge, at the time
    of commencing the application, that Silverwood supplied hardwood flooring on
    the M5V Project.

[13]

Ms.
    Royt provided an affidavit on behalf of the respondents on the application.
    During a cross-examination on her affidavit on January 20, 2012, Ms. Royt testified
    that Silverwood, not the joint venture, had supplied the hardwood flooring for
    the M5V Project.

[14]

During
    the same cross-examination, this crucial exchange took place:

99.     Q.     Aside
    from any third party expenses or your 2 percent management fee, has Silverwood
    or you or any company received any funds relating to any proceeds of M5V, aside
    from the 2 percent fee and paying expenses to third parties?

100.   A.      Yes.
    M5V is not part of the joint venture agreement. Thats my position.

100.   Q.     You
    will have to be very clear, because this is, just from my clients perspective,
    very serious.
You, Ms. Royt, or perhaps
    Silverwood, has received some of the proceeds yourself of the M5V project
?

A.      I would say yes.

101.   Q.
And the proceeds you have received are not only the 2
    percent management fee, correct?

A.
Actually, I dont even think it would amount to as
    much as the 2 percent management fee
.

102.   Q.     Are
    you saying that the money you received --
did
    the project make a profit, earn a profit
?

A.      Yes.



104.   Q.     Let
    me make sure of this. The profit -- and that was the question where you
    interrupted counsel. The profit from M5V was less than 2 percent of the
    project?

[Ms. Royts counsel]: Shes already answered that question.

[Emphasis
    added.]

[15]

Based
    on Ms. Royts answers, the Smiths knew that Silverwood had supplied the
    hardwood flooring for the M5V Project. The Smiths did not add Silverwood as a
    respondent in their application at this juncture.

[16]

The
    parties engaged in settlement discussions relating to the Smiths application.
    They were unsuccessful.

[17]

On
    September 9, 2015, the Smiths numbered company, the appellant, issued a statement
    of claim against Silverwood, Ms. Royt and John Doe.
[1]
The principal relief sought in the action is a declaration that the defendants
    have been unjustly enriched at the plaintiffs expense and an accounting from
    the defendants as to the amount by which they have been unjustly enriched.

[18]

On
    September 28, Silverwood and Ms. Royt filed a statement of defence. In short
    order, the parties filed amended statements of claim and defence.

[19]

On
    January 19, 2016, Silverwood and Ms. Royt moved for summary judgment dismissing
    the action on the basis that the relevant limitation period had expired.

(2)

The motion judges decision

[20]

Following
    a hearing on May 16, 2016, the motion judge granted the motion. The core of the
    reasoning in her endorsement is:

In my view, by 2012 the [plaintiff] knew the following:

1.

That [Silverwood] had supplied the flooring on the M5V project;

2.

That the [plaintiff] considered the M5V project to have been a JV
    project;

3.

That [Silverwood] had made a profit from the project; and

4.

That [Silverwood] had derived revenues from the project that the [plaintiff]
    considered belonged to the JV.

At that point, the [plaintiff] knew or ought to have known all
    the material facts that gave rise to a claim of unjust enrichment against [Silverwood].
    Essentially, [Silverwood] had retained monies that belonged to the JV.

The [plaintiff]s position that it did not know the JV would
    have made a profit on the project draws the line too narrowly. The [plaintiff] knew
    or ought to have known that it sustained some damage  in that monies were
    retained by [Silverwood] that the [plaintiff] considered to belong to the JV
    and that there was no juristic reason for it to do so. That was sufficient to
    trigger the start of the [limitation] period.

The [plaintiff] further had the means to determine and explore
    the revenues actually generated from the M5V project and whether the JV would
    have made or not made a profit thereon, by bringing the appropriate motion at
    that time.

The action was commenced out of time. I grant [summary
    judgment] dismissing it. There is no genuine issue requiring a trial.

[21]

The
    appellant appeals from this decision.

C.

issue

[22]

The
    sole issue on the appeal is: did the motion judge err by concluding that the
    appellants action was commenced outside the relevant two-year period?

D.

analysis

[23]

The
    appellant acknowledges that the motion judge is correct in saying that it
    became aware on January 20, 2012 that Silverwood had supplied the hardwood
    flooring on the M5V Project. Thus the appellants issuance of its statement of claim
    against Silverwood and Ms. Royt on September 9, 2015 is,
prima facie
,
    outside the applicable two-year limitation period in the
Act
.

[24]

However,
    the appellant contends that this
prima facie
conclusion, which the
    motion judge accepted, should not stand. The appellant says that in cross-examination
    on her affidavit on January 20, 2012, Ms. Royt lied about the profits made on
    the M5V Project. The appellants position on this issue is stated by Henry
    Smith in his affidavit dated March 9, 2016, at para. 9:

We only found out that M5V had in fact made at least $200,000
    in profit during my meeting with her in 2015 as referenced in the
Amended
Claim, the details of which
    as referenced in that document are true.

[25]

In
    its
amended
statement of claim dated
    September 28, 2015, the appellant states:

17.     In or
    about March of 2015, following an unsuccessful mediation in the Commercial
    Court action, Royt disclosed to Henry Smith that contrary to her earlier
    evidence, Silverwood had in fact made at least $200,000 in profit in respect of
    the sale of flooring to M5V. She also told him that the representation she had
    made to him in 2009 regarding Silverwoods overhead expenses was untrue in that
    it was significantly less than $40,000.00 per month. Royt made these admissions
    during the course of a meeting,
following
    further unsuccessful settlement discussions
, where Henry Smith
    again requested that the financial records relating to the sale of flooring to
    M5V be disclosed
after Royts admissions
    that she lied during her 2011 testimony
. [Emphasis in original
    to indicate amendments.]

[26]

In
    my view, in the face of this clear allegation that Ms. Royt lied about
    Silverwoods profits from the M5V Project, it is important to examine closely
    what the respondents have and have not said about this issue. After all, it is Silverwood
    and Ms. Royt who sought summary judgment dismissing the appellants entire
    claim.

[27]

I
    draw attention to two features of the respondents position on this issue.
    First, the respondents did not file any materials  for example, a reply
    affidavit by Ms. Royt  countering the appellants allegation of lying. Second,
    in cross-examination on her affidavit filed in the Smiths original
    application, Ms. Royt testified that proceeds of the M5V Project were not as
    much as the 2 percent management fee and refused to answer any further questions
    about the profitability of the M5V Project.

[28]

I
    turn to apply this factual background to the motion judges analysis and
    conclusion. I have no quarrel with the four factual conclusions made by the
    motion judge about what the appellant knew in 2012. However, with respect, I
    disagree with this component of the motion judges reasoning:

The [plaintiff] knew or ought to have known that it sustained
    some damage  in that monies were retained by [Silverwood] that the [plaintiff]
    considered to belong to the JV.

[29]

In
    light of the factual circumstances set out above, I do not think that this
    conclusion can be sustained. Although Ms. Royt admitted that the M5V Project
    made a profit, she described the profit as [not] as much as the 2 percent
    management fee in her cross-examination.

[30]

That
    was the picture facing the Smiths (including the appellant) in early 2012. In
    these circumstances, it was not unreasonable for the appellant to think that it
    had not suffered some damage. In light of the two percent management fee to
    which Ms. Royt was entitled before profits could be distributed to the joint
    venture and Ms. Royts express statement that profit from the M5V Project was
    less than her management fee, the possibility that the Smiths had suffered
    damage from the M5V Project and that the damage was caused by the respondents was
    removed from the Smiths minds. Accordingly, this is not a case where a party
    knows that it has suffered a loss but does not know the extent of the loss:
    see, for example,
Hamilton (City) v. Metcalfe & Mansfield Capital Corp.
,
    2012 ONCA 156, 290 O.A.C. 42.

[31]

It
    is true that the Smiths could have disbelieved or doubted Ms. Royts answers
    and brought a motion to compel production of financial documentation and/or to add
    Silverwood as a party to the original application. I do not think this was
    necessary. Parties are entitled to accept that information testified to under
    oath is truthful and accurate.

[32]

In
    these circumstances, the appellant discovered the potential damage that
    grounds its unjust enrichment claim when Ms. Royt told Henry Smith in 2015 that
    Silverwood made a profit of at least $200,000 on the M5V Project.

[33]

It
    follows that the appellants action, commenced on September 9, 2015, was
    commenced within the two-year period prescribed by the
Act
:
McConnell v. Huxtable
, 2014
    ONCA 86, 118 O.R. (3d) 561, at para. 50.

E.

disposition

[34]

I
    would allow the appeal, set aside the judgment of the motion judge, and dismiss
    the motion for summary judgment.

[35]

The
    appellant is entitled to its costs of the appeal fixed in accordance with the
    agreement of counsel, at $8,000 inclusive of HST and disbursements.

[36]

The
    motion judge awarded the moving party its costs of the motion and the action
    fixed at $20,000. I would set aside this award and award the appellant costs of
    the motion fixed at $8,000 inclusive of HST and disbursements.

Released: JM FEB 14 2017

J.C. MacPherson
    J.A.

I agree. C.W.
    Hourigan J.A.

I agree. B.W. Miller
    J.A.





[1]
The appellant says that there are two shareholders of Silverwood, Ms. Royt and
    an unknown second shareholder; hence the defendant John Doe.


