



COURT OF APPEAL FOR ONTARIO

CITATION: Fram Elgin Mills 90 Inc. v. Romandale Farms
    Limited, 2016 ONCA 404

DATE: 20160526

DOCKET: M46058 (C61462 and C61465)

Weiler, Hourigan and Huscroft JJ.A.

BETWEEN

Fram
    Elgin Mills 90 Inc.

(Formerly Frambordeaux
    Developments Inc.)

Plaintiff (Appellant)

and

Romandale
    Farms Limited,
Jeffrey Kerbel

2001251 Ontario Inc.
and

First
    Elgin Mills Developments Inc
.

Defendants (Respondents/
Appellants
)

Sarit E. Batner and Adam Goldenberg, for the moving
    party Romandale Farms Limited

Robert Rueter and Janet Lunau, for the responding party Fram
    Elgin Mills 90 Inc.

John J. Longo, for the responding parties Jeffrey Kerbel,
    2001251 Ontario Inc. and First Elgin Developments Inc.

Heard: April 1, 2016

Weiler J.A.:

[1]

Romandale Farms Limited (Romandale) brings this motion to quash appeals
    by Fram Elgin Mills 90 Inc. (Fram) and Jeffrey Kerbel et al. (Kerbel) on the
    basis that this court lacks jurisdiction because the orders under appeal are
    interlocutory, not final, orders: see
Courts of Justice Act
, R.S.O.
    1990, c. C.43,

s. 19(1)(b) and s. 6(1)(b).

[2]

For the reasons that follow, I would agree that the orders are
    interlocutory and quash the appeals.

A.

factual background to the litigation as set out in pleadings

[3]

In order to appreciate the context of the appeals, I will set out a
    simplified version of the facts based on the pleadings, proposed amendments and
    the motion judges reasons.

[4]

Fram and Romandale were co-owners of two parcels of land, known as the
    Elgin Mills Lands in Markham, with ownership apportioned at 5% to Fram and 95%
    to Romandale. Their ownership of the lands was governed by two separate but
    identical co-owners agreements (COA). The COA gave Fram the right to require
    Romandale to sell its 95% share to it.

[5]

On August 29, 2005, Romandale entered into a contract to sell its
    interest in the lands to 2001251 Ontario Inc. (hereinafter Kerbel except as
    specifically noted).

[6]

Fram issued a claim alleging that Romandale breached the co-ownership
    agreement and sought a declaration that the August 29, 2005 agreement was void
    and should be set aside. It claimed specific performance of the COA requiring
    Romandale to sell its interests in the lands to Fram and also damages against
    Kerbel.

[7]

Fram settled its action against Kerbel in 2010. Romandale did not
    participate in the settlement.

[8]

The settlement agreement provided, among other things, that Fram would
    not seek a declaration that the August 29, 2005 agreement was void, that Fram
    would seek no relief against Kerbel, and that Kerbel would grant Fram an option
    to purchase a 50% interest in the lands Kerbel could acquire through the August
    29, 2005 agreement.

[9]

On November 29, 2011, Spence J.s order granted leave to Fram to amend
    its Statement of Claim against Romandale to conform to the settlement agreement.
    He held that if Romandale had a proper basis for keeping Kerbel in the
    litigation, it could endeavor to do so by bringing a crossclaim or a third party
    claim.

[10]

When Romandale received Frams proposed Amended Statement of Claim, it
    brought a motion before Master Graham to amend its Statement of Defence and to
    commence a crossclaim or third party claim against Fram and the Kerbel
    defendants.

[11]

In its proposed draft 
Amended

Amended
Statement of Defence, Crossclaim and
    Counterclaim, Romandale asserted at para. 62 that in order to trigger the
    buy-sell provision of the COA it was first necessary to develop the lands so
    that they could obtain secondary plan approval. The August 29, 2005 agreement
    between it and Kerbel provided for them to co-operate in developing the Elgin
    Mills Lands to that point with Kerbel responsible for the development costs. At
    para. 68, Romandale asserted that the August 29, 2005 agreement was now
    terminated as a result of the September 2010 settlement agreement between Fram
    and Kerbel.

[12]

Fram and Kerbel submitted that the September settlement agreement
    contemplated performance of the August 29, 2005 agreement in accordance with
    its terms.

[13]

Master Graham observed that although the language of r. 26.01 with
    respect to amendment of pleadings is mandatory, the court still retains the
    discretion to scrutinise the proposed amendments and to refuse them if they are
    not tenable in law. He held at paras. 13-14:

[13] I accept that the settlement between [Fram] and the Kerbel
    defendants does not amount to a breach of the August 29, 2005 agreement because
    whatever the Kerbel defendants do with the lands once Romandales interest in
    them is conveyed to them pursuant to that agreement is none of Romandales
    concern. [Fram] is free to abandon its claim for specific performance under its
    co-owners agreements with Romandale, mitigate its damages to the extent of the
    50% interest to be conveyed to it by the Kerbel defendants and claim damages
    from Romandale in respect of the remaining 50%.

[14] Accordingly, as [Frams] settlement with the Kerbel
    defendants does not constitute a breach of any agreement or agreements between
    any of the parties, it does not give rise to any cause of action or defence in
    favour of Romandale. Romandales proposed amendments are therefore not tenable
    at law and its motion to amend its pleading is also dismissed.

[14]

Romandale appealed the decision of Master Graham to a single judge of
    the Divisional Court and the appeal was heard by Kitely J.

[15]

In dismissing Romandales appeal on June 20, 2014, Kitely J. held that
    the Master did not make findings of fact but assumed the facts as pleaded
    including the settlement agreement and stated at paras. 14-15 of her reasons:

[14] A review of the settlement agreement demonstrated that it
    was plain and obvious that the proposed pleading would not survive rule 21
    [entitling a party to strike out a pleading on the ground that it discloses no
    reasonable defence]

[15] The Master focused on the settlement agreement because it
    was the foundation of the motion. However, that did not mean that he erred by
    failing to consider the other causes of action proposed. His conclusion with
    respect to the settlement agreement meant that it was unnecessary to deal with
    the other proposed causes of action. The Master could readily conclude that the
    proposed amendments were not tenable, nor was the proposed cross-claim and
    counterclaim since both depended on the asserted interpretation of the
    settlement agreement.

[16]

Romandale did not appeal the decision of Kitely J.

[17]

While Kitely J.s decision was under reserve, Romandale commenced a
    separate action against Kerbel party 2001251 Ontario Inc. seeking a declaration
    that the August 29, 2005 agreement had been terminated by reason of breaches of
    fiduciary duty on account of conflict of interest. Romandale alleged 2001251
    delayed pursuing approval for development of the Elgin Mills Lands by reason of
    its interests in neighboring tracts of land.

B.

The Order Below

[18]

Romandale once again brought a motion seeking leave to amend its
    statement of defence (and other ancillary relief not relevant to this motion).
    It submitted that neither Master Graham nor Kitely J. prohibited Romandale from
    making further amendments to their pleadings to make them tenable or otherwise
    compliant with the rules regarding pleadings. At para. 43 of its Notice of Motion,
    Romandale asserted:

Romandales
Further

Amended
Statement of Defence raises no claims, seeks no
    remedy, and is not statute barred by any legislation including, without
    limitation, the
Limitations Act 2002.
[Emphasis in original.]


[19]

Romandale also submitted that the Kerbel parties were necessary parties
    to the litigation and their presence before the Court was necessary as they
    were likely to be affected by the Court order determining the rights between
    Fram and Romandale and the legal status of the settlement agreement.

[20]

The motion judges order granted Romandale leave to amend its statement
    of defence and joined Kerbel party 2001251 as a defendant for certain limited
    purposes.

[21]

In making the order he did, the motion judge first held there was no
    prejudice to Fram. Although Romandale again proposed to plead that the settlement
    agreement between Fram and Kerbel resulted in the repudiation of both the COA
    and the August 29, 2005 agreement, it pleaded facts and theories that the
    motion judge, who was also the case management judge, held were tenable
    defences to Frams pleading of the settlement agreement and request for its
    approval.

[22]

He observed at paras 68-69:

[68] [T]he Settlement Agreement lifted from [Frams] shoulder
    the prospect of having to finance an immediate acquisition of approximately $40
    million of land [if it exercised the buy-sell clause in the COA] and the full
    assumption of the risks of ownership thereof thereafter (including development
    and approval risk) and replaced it with a fixed-price option without up-front cost
    that it may or may not choose to exercise years in the future.

[69] By entering into the Settlement Agreement, [Fram]
    knowingly assumed the risk that it could obtain that benefit without
    Romandales consent. Romandale seeks only to plead that this is not so and why

[23]

In response to Fram and Kerbels submissions that Romandale could not
    amend its statement of defence on account of
res judicata
and that to
    allow an amendment would constitute an abuse of process,

he held at
    paras. 3 and 4:

[3] Failure to advance theories of defence at a prior
pleadings
motion does not operate to deprive a party of the ability to make a full
    answer and defence when the claim against it is ultimately heard. No party will
    be compelled to attend trial with its hands tied behind its back by reason of
    prior errors that can yet be corrected without injustice. The abuse of process
    would consist in failing to hear such defences and risking a miscarriage of
    justice.

[4] There is no question here of abandoning the principles of
res
    judicata
. There has been no examination of any of these issues on the
    merits.  This was a case of a failed pleadings amendment dismissed due to its
    evident deficiencies without examination of the merits [Emphasis in original.]

[24]

He further held in relation to
res judicata
at para. 98 of his
    reasons:

The rejection of the proposed pleading by Kitely J. establishes
    no more than that the particular proposed pleading
as pleaded
disclosed
    no reasonable cause of action. It cannot be taken to foreclose the prospect of
    a revised pleading passing muster. Even pleadings dismissed pursuant to Rule 21
    of the Rules of Civil Procedure are normally done with leave to amend
unless
it is plain and obvious that the claim cannot be pleaded back into life:
AGF
    Canadian Equity Fund et al. v. Transamerica Commercial Finance Corporation
    Canada et al.
, (1993) 14 O.R. (3d) 161 at para. 21. To hold otherwise
    would be contrary to the policy that cases should be finally decided on their
    merits, not on technicalities arising from mispleading, and contrary to the
    liberal approach to pleading found in Rule 26.01:
AGF
, (
supra
)

per Borins J. (as he then was) at para. 35. [Emphasis in original.]

[25]

The motion judge also rejected the submission that the proposed
    amendment was barred by the
Limitations Act, 2002
, S.O. 2002, c. 24,
    Sched. B
.
In this regard, he dealt with the argument that Romandales
    proposed amended statement of defence coupled with the request for joinder of
    the Kerbel parties amounted to making claims against them that were statute
    barred. He commented, at para. 111: Were Romandale to bring a claim against
    2001251 seeking damages or other relief as against 2001251, this assertion may
    well have merit. That is not the case here. He dismissed the argument because,
    Section 4 of the
Limitations Act, 2002
prohibits the commencement of
    a proceeding in respect of a claim. The raising of a proper defence to a claim
    asserted is by its very nature not subject to that prohibition.

[26]

Romandale also sought to have the Kerbel parties added generally as a
    party defendant to the litigation. In adding only Kerbel party 2001251, the
    motion judge stated, at para. 118: only 2001251 is a party to the August
    Agreement and it is the intersection of the August Agreement with the
    Settlement Agreement that is the basis of Romandales motion. Accordingly,
    only 2001251 was added as a party defendant for the limited purpose of being
    bound by any determination made by the court  regarding: a. Whether the
    Settlement Agreement ought to be approved and on what conditions; b. whether the
    August Agreement remains enforceable as against Romandale; and c. Whether, in
    the alternative, Romandale can repudiate the August agreement unilaterally as
    it claims.

[27]

Both Fram and Kerbel appealed the decision of the motion judge to this
    court
[1]
and also sought leave to appeal the motion judges costs order. Romandale
    brought this motion to quash the appeals.

C.

Discussion

[28]

An order granting leave to amend a pleading is an interlocutory order: see
Dynasty Furniture Manufacturing Ltd. v. Toronto-Dominion Bank
, 2015 ONCA
    137, at paras. 5-7;
Natario v. Rodriguez
,

2015 ONCA 227, 71
    C.P.C. (7th) 285, at para. 7. An order adding a party defendant is also an
    interlocutory order: see
Hunter v. Richardson
,

2013 ONCA 731,
    at para. 2. The rationale in both instances is that the litigation continues
    and the order made does not affect a partys substantive rights.

[29]

By contrast, an order under r. 21.01(1)(a) to determine a question of
    law before trial where the determination disposes of all or part of a claim or
    defence is final because it precludes the party from raising the issue going
    forward: see
Ball v. Donais
(1993), 13 O.R. (3d) 322 (C.A.), at para.
    3;
Abbott v. Collins
(2002),

62 O.R. (3d) 99 (C.A.), at
    paras. 5-7. Where an order deprives a party of a substantive right that could
    be determinative of the action, that order is final:
Stoiantsis v. Spirou
,

2008 ONCA 553, 91 O.R. (3d) 184, at paras. 19-22.

[30]

The nature of the underlying motion is an important consideration in
    deciding whether the order is final or interlocutory. For instance, regardless
    of the reasons given by the judge for dismissing a motion under r. 21.01(1)(b)
    to strike a pleading on the ground it discloses no reasonable cause of action
    or defence, it is reasonable to think that  the judge does not have the power
    to make a final order under that provision:
S. (R.) v. H. (R.)
(2000),
    52 O.R. (3d) 152 (C.A.), at para. 18, per Morden J.A.

[31]

There is an intersection between a motion under r. 26.01 where, in the
    absence of non-compensable prejudice, an amendment to pleadings must be allowed
    where a tenable cause of action or defence is disclosed and r. 21.01(1)(b)
    dealing with a motion to strike a pleading as disclosing no cause of action or
    defence. In
Spar Roofing & Metal Supplies Limited v. Glynn
,

2016
    ONCA 296, at para. 43, this court recently held: Put another way, an amendment
    [to a pleading] is to be granted unless it would have been struck out under
    r. 21.01(1)(b) if it had been pleaded originally (citation removed).

[32]

The logic of Morden J.A.s reasoning in
S. (R.)
applies equally
    to an order granting a r. 26.01 motion. Applying that logic here is sufficient
    to grant the motion to quash.

[33]

The difficulty in this case arises in part from the motion judges
    reasons. However, it is important to observe as a starting point that the law
    is clear that an appeal lies from an order, not from the reasons given by the
    judge making the order:
Grand River Enterprises v. Burnham
(2005),
    197 O.A.C. 168 (C.A.), at para. 10. Further, in most instances, the content of
    the formal order is integral to determining what has been decided against a
    party in a fashion that is binding:
Ashak v. Ontario (Family
    Responsibility Office)
, 2013 ONCA 375, 115 O.R. (3d) 401, at para. 13. In
    any event, the motion judges reasons, read as a whole, confirm the conclusion
    that his order was interlocutory.

[34]

At para. 71 of his reasons, the motion judge observed:

While leave to amend is mandatory under R. 26.01, our courts
    have long considered that there is a discretion to reject amendments where it
    is clear that they simply do not make a tenable claim or raise a tenable
    defence. The approach on such matters is not unlike a Rule 21(1)(a) motion  the
    proposed pleading is to be given a broad and generous reading and the facts pleaded
    are assumed to be true unless it is plain and obvious that they cannot be
    proved. A close examination of the merits is not called for  that will be the
    trial judges job. At this stage, my task is to assess whether the defences
    pleaded in the proposed amendment rise to the level of tenable. In my view they
    do.

[35]

Reading this paragraph in context, I take the motion judges reference
    to r. 21.01(1)(a) to be a slip and that his intended reference was to r. 21.01(1)(b).
    There is a big difference between making a
prima facie
assessment of
    whether a defence is tenable under r. 26.01, which is what the motion judge
    said he was doing, and making a determination under r. 21.01(1)(a) on a
    question of law which determines or disposes of all or part of the action. The
    former is what the motion judge is entitled to do; the latter he is not entitled
    to do on a pleading motion.

[36]

Fram and Kerbels submission that the motion judges order is a final
    order is in effect a submission that in granting Romandale leave to amend its
    pleadings the motion judge considered the factual and legal basis for the
    proposed amendment at the pleading stage and made a final determination that
res
    judicata
and the
Limitations Act, 2002
did not apply to
    Romandales defence. That is not what the motion judge indicated he was doing
    when he said that a close examination of the merits is not called for.
    Indeed, had the motion judge made a final determination on the merits of
    Romandales defence, he would have erred in law. As stated in Todd Archibald,
    Gordon Killeen & James C. Morton,
Ontario Superior Court Practice, 2016
    Edition
(Markham, ON: LexisNexis Canada, 2015), at p. 1118: A court is
    restricted to looking only at whether there is a
prima facie
meritorious
    case set out in the pleading, and cannot consider the merits of the factual
    basis for the proposed amendment.

[37]

In my opinion the motion judge did not go beyond what he was entitled to
    do on the motion.

[38]

In observing that the
Limitations Act, 2002
was not a bar to
    Romandales proposed amendment to its Statement of Defence, the motion judge
    was only stating the obvious, which is that s. 4 of the
Limitations Act,
    2002
bars claims, not defences, and therefore the low bar of a tenable
    defence had been met. In rejecting the submission that
res judicata
and
    the
Limitations Act, 2002
applied, the motion judge was merely
    rejecting arguments put forward for not allowing the proposed amendment. The
    rejection of those arguments does not convert the overall nature of the motion
    from a r. 26.01 motion into a r. 21.01(1)(a) motion or the order made from an
    interlocutory one into a final order.

[39]

Because the motion judge was only making a preliminary assessment, I see
    nothing in the order here that prevents Fram and Kerbel from bringing a motion
    under r. 21.01(1)(a) if so advised.

D.

Disposition

[40]

For the reasons given I would allow the motion to quash on the basis of
    lack of jurisdiction and quash the appeals. Accordingly, I would not grant
    leave to appeal the costs award made by the motion judge.

[41]

Costs of this motion are to Romandale. If the parties are unable to
    agree on the amount of costs or how they should be apportioned, they may make
    submissions in writing limited to three pages, served and filed in triplicate.
    Romandale shall have five days from the date of these reasons to make its
    submissions and Fram and Kerbel shall have a further five days in which to
    reply.

Released: (GP) May 26, 2016

K.M. Weiler J.A.

I agree C.W.
    Hourigan J.A.

I agree Grant
    Huscroft J.A.





[1]
Fram and Kerbel also brought motions for leave to appeal the order of the
    motion judge to the Divisional Court.


