


COURT OF APPEAL FOR ONTARIO

CITATION:
Carfrae Estates
    Limited v. 2108790 Ontario Inc., 2012 ONCA 489

DATE: 20120709

DOCKET: C54235

OConnor A.C.J.O., MacPherson and Rouleau JJ.A.

BETWEEN

Carfrae Estates Limited and Cornerstone
    Properties Inc.

Plaintiffs (Appellants)

and

2108790 Ontario Inc.
and 1510232 Ontario Inc.

Defendants (Respondent)

F. Scott Turton, for the appellants

David R. Rothwell, for the respondent

Heard and released orally: July 6, 2012

On appeal from the judgment of Justice Gregory M. Mulligan
    of the Superior Court of Justice, dated July 22, 2011.

ENDORSEMENT

[1]

The appellants Carfrae Estates Limited and Cornerstone Properties Inc.
    appeal from the Judgment of Mulligan J. of the Superior Court of Justice dated
    July 22, 2011. In the Judgment, the trial judge dismissed the appellants
    action in which they sought an order discharging a debenture now owned by the
    respondent 2108790 Ontario Inc. on the basis that the debenture is
    unenforceable because any enforcement action is now outside the relevant limitation
    period.

[2]

Carfrae is a successor corporation to the company that granted a
    debenture to the Canadian Imperial Bank of Commerce on October 9, 1979. CIBC
    demanded payment of the debenture from Carfrae on November 15, 1984. However,
    CIBC never brought an action to enforce the debenture and never took possession
    of the land. Twenty-two years later, on October 31, 2006, CIBC assigned the
    debenture to the respondent.

[3]

The appellants brought an action seeking an order discharging the
    debenture from the land registry on the basis of ss. 4 and 15 of the
Limitations
    Act
, R.S.O. 1990, c. L.15, which provide:

4.       No person shall make an entry or distress,
    or bring an action     to recover any land or rent, but
within ten years
next after the        time at which the right to make such entry or distress,
    or to      bring such action, first accrued....

. . .

15.
At the determination of the period
    limited by this Act
to any        person for making an entry or distress
    or bringing any action,
the right and title of such person to the
    land
or rent, for the        recovery whereof such entry, distress or
    action, respectively,          might have been made or brought with such
    period,
is

extinguished
.         [Emphasis added.]

[4]

The trial judge held that these provisions
prima facie
applied
    to this case. He said:

The debenture between Carfrae and the CIBC was a floating
    debenture which did not require any payments until demand. The demand was
    issued on November 15, 1984.

This issue was canvassed in
McVan

supra
. As
    Cronk J.A. stated at para. 19:

This court determined in
King v. Flannigan
, [1944]
    O.R. 537 (C.A.) and
Andre v. Valade
,
    [1944] O.R. 257 (C.A.), that a

mortgagees right to claim possession of mortgaged land accrues
    upon the first default in payment of interest and that the ten-year limitation
    period established by s. 4 of the
Act
runs from that time.

The debenture having been demanded on November 15, 1984 I am
    satisfied that the limitation period would have expired on November 16, 1994
    ten years after the demand subject to my ruling which follows with respect to
    Carfraes conduct.

[5]

Turning to Carfraes conduct, the trial judge discussed three factors 
    Carfraes long delay in seeking the relief claimed in its action, Carfraes
    lengthy dissolution and the circumstances surrounding its revival, and
    Carfraes previous (1985) fraudulent conduct with respect to the debenture.
    Following this discussion, he concluded:

When all of these circumstances are weighed I am satisfied that
    it would be an injustice to allow the plaintiff to succeed on its argument that
    the
Limitations Act
ought to defeat the registered debenture. The
    plaintiffs claim is therefore dismissed.

[6]

The appellants contend that the trial judge erred in reaching this
    conclusion. We agree with the appellants position, essentially for two
    reasons.

[7]

First, the trial judge erred in determining the case on issues not
    pleaded or argued. The respondent defended the action on at least four
    different bases; an argument advancing equitable considerations as a ground for
    refusing to apply a statutory limitation period was not one of these grounds.
    Indeed, during closing submissions in response to a question from the trial
    judge, the respondents counsel explicitly disclaimed reliance on equitable
    arguments.

[8]

In a series of decisions in the last decade, this court has made it
    clear that a trial judge should not step outside the pleadings and the case as
    developed by the parties: see, for example,
Rodaro v. Royal Bank of Canada
(2002), 59 O.R. (3d) 74;
A-C-H International Inc. v. Royal Bank of Canada
(2005), 254 D.L.R. (4
th
) 327; and
TSP-INTL Limited v. Mills
(2006) 212 OAC 66. The trial judges decision in this case did not comply with
    these authorities.

[9]

Second, we do not think that equitable considerations can trump the
    clear language of the
Limitations Act
. Section 4 of the
Act
establishes a ten-year limitation period; s. 15 states a clear effect  if,
    after ten years, an action has not been commenced, the right and title of such
    person to the land ... is extinguished.

[10]

An
    example of the application of these sections is
McVan General Contracting
    Ltd. v. Arthur
(2002), 61 O.R. (3d) 240 (C.A.). In that case, on a motion
    by the chargee under Rule 21, the motion judge held that the chargees action
    for payment and possession, and power of sale, were barred by ss. 4 and 15. The
    motion judge discharged the charge and directed that it be deleted from title.
    This court affirmed the motion judges decision. Cronk J.A. stated, at para. 29,
    that the
Limitations Act
evidences an intention to establish a
    uniform ten-year limitation period for remedies under charges or mortgages.
    The relief requested by the appellants in their action in this case is the same
    as that awarded in
McVan
, namely, an order discharging the debenture
    and deleting it from title.

[11]

The
    appeal is allowed. Judgment is granted in favour of the plaintiffs. It is ordered
    that the debenture is discharged and that it be deleted from the land registry.
    The defendants counterclaim is dismissed.

[12]

The
    appellants are entitled to their costs of the appeal and the action below,
    fixed at $15,000 and $33,000, respectively, inclusive of disbursements and
    applicable taxes.

D.
    OConnor A.C.J.O.

J.C. MacPherson J.A.

Paul Rouleau J.A.


