



COURT OF APPEAL FOR ONTARIO

CITATION: 465519 Ontario Limited v. Sacks, 2015 ONCA 175

DATE: 20150316

DOCKET: C59330

Cronk, Gillese and Brown JJ.A.

BETWEEN

465519 Ontario Limited,

Winston Village Partnership,

Meyer Isenberg and Miriam Isenberg

Plaintiffs/

Appellants

and

David
    Sacks, Gary Pollock,

Cecil
    Schwartz, Hutchinson Cowling LLP,

Neil
    Cowling, Deighton Hutchinson,

Robert
    Milne, Silpit Industries Co. Ltd.,

Lesmill
    Consulting Inc.,
Cliffwood Plaza Corp.
,

Michael
    Klein, ABC Corporation and John Doe

Defendant/

Respondent

F. Scott Turton, for the appellants

Oscar Strawczynski, for the respondent

Heard: March 9, 2015

On appeal from the order of Justice Mary E. Vallee of the
    Superior Court of Justice, dated August 28, 2014.

By the Court:

[1]

The appellants appeal from the motion judges order dated August 28,
    2014 striking the claim of 465519 Ontario Limited (465 Ltd.) and the entire
    action as against the respondent, Cliffwood Plaza Corp. (Cliffwood).

Background in Brief

[2]

Cliffwood moved under rule 21.01(b) of the
Rules of Civil Procedure
to
    strike the appellants entire pleading as against it on the basis that it
    disclosed no reasonable cause of action.  Cliffwood argued that although the
    appellants action was commenced prior to the expiry of the applicable two-year
    limitation period, 465 Ltd.s claim was a nullity because its corporate charter
    had been revoked and it was a dissolved corporation when the action was
    initiated.  Since 465 Ltd.s corporate status was not revived until after the
    running of the limitation period, Cliffwood argued that 465 Ltd.s claim, as
    well as the proposed derivative claims of the remaining appellants (the
    Individual Appellants), could not succeed.  Cliffwood also maintained, in any
    event, that the appellants pleading of the only claim against Cliffwood, that
    of civil conspiracy, was fatally deficient and incapable of success.

[3]

The motion judge accepted Cliffwoods limitation period argument and
    struck 465 Ltd.s claim against Cliffwood on the ground that it was
    statute-barred. In light of that ruling, she found it unnecessary to address
    Cliffwoods argument that the appellants conspiracy pleading was fundamentally
    flawed.  As we will discuss, at the request of Cliffwoods counsel, the motion
    judge subsequently amended her ruling to also strike the entire action
    including, therefore, the claims of the Individual Appellants, as against
    Cliffwood.

Issues

[4]

There are two issues on appeal:

(1)

Did the motion judge err by holding that 465 Ltd.s claim against
    Cliffwood was statute-barred due to the expiry of the applicable limitation
    period and, hence, that it could not succeed?

(2)

Did the motion judge err by striking the entire action against
    Cliffwood, including the claims of the Individual Appellants?

Discussion

(1)

465 Ltd.s Claim Against Cliffwood

[5]

We do not accept the appellants contention that the motion judge erred
    by holding that 465 Ltd.s claim against Cliffwood was statute-barred by reason
    of the expiry of the relevant limitation period.

[6]

The claims sought to be advanced by the appellants arise from the sale of
    a property registered in 465 Ltd.s name to Cliffwood under a third party
    mortgagees power of sale.  The sale closed on June 29, 2010.  However, on June
    28, 2010, one day earlier, 465 Ltd.s corporate charter was revoked and the
    corporation was dissolved.  The appellants action was commenced on February 8,
    2012.
[1]
465 Ltd.s corporate status was reinstated on June 6, 2014, more than two years
    later.

[7]

465 Ltd. had no legal status to commence an action while it was
    dissolved.  Accordingly, we agree with the motion judge that the action
    commenced in its name on February 8, 2012 was a nullity:
602533 Ontario
    Inc. v. Shell Canada Ltd.
, 1998 CanLII 1775, 155 D.L.R. (4th) 562.

[8]

Since 465 Ltd. must be taken to have known the material facts supporting
    its claim against Cliffwood by the date of issuance of its statement of claim, at
    the latest, the two-year limitation period in this case began to run on February
    8, 2012 when the action was commenced and expired  again, at the latest  on February
    9, 2014.  Thus, the limitation period ran its course prior to the date of 465
    Ltd.s revival.

[9]

That, however, does not end the matter.  The Individual Appellants have
    moved before the Superior Court of Justice for leave under s. 246 of the
Business
    Corporations Act
, R.S.O. 1990, c. B.16 to pursue a derivative action on
    465 Ltd.s behalf as against Cliffwood.  Their leave motion is pending in the
    Superior Court.  Should leave to proceed with a derivative action be granted on
    a
nunc pro tunc
basis, thus regularizing the action commenced in 465
    Ltd.s name, the Individual Appellants submit that, as a matter of law, the
    action must be viewed as having been commenced on a timely basis, that is, prior
    to the expiry of the limitation period.

[10]

We
    reject the suggestion that this would dictate a different result regarding 465
    Ltd.s claim against Cliffwood.  The outcome of the leave motion, of course, is
    not yet known.  However, even assuming that leave is granted on a
nunc pro
    tunc
basis, the leave order would not operate to deprive Cliffwood of its
    entitlement to rely on a post-dissolution legal right accruing to it while 465
    Ltd. was a dissolved corporation and prior to the granting of the leave order. 
    As this court held in
Shell Canada
, the expiry of an applicable
    statutory prescription period is such a right.

[11]

Contrary
    to the appellants argument,
Shell

Canada
has direct
    application here.  It is dispositive of 465 Ltd.s claim against Cliffwood.  The
    motion judge correctly held that Cliffwood was entitled to rely on the expiry
    of the limitation period, as a right that accrued to it while 465 Ltd. was
    dissolved, to defeat 465 Ltd.s claim against it.

[12]

This
    ground of appeal therefore fails.

(2)

The Individual Appellants Claims Against Cliffwood

[13]

The
    appellants next submit that the motion judge erred, in any event, by striking
    the Individual Appellants claims against Cliffwood.  In the particular circumstances
    of this case, we agree.

[14]

In
    her original reasons, the motion judge struck only 465 Ltd.s claim against
    Cliffwood.  As we have said, as framed in the appellants amended pleading,
    that claim is a claim for damages arising from an alleged conspiracy among
    Cliffwood, as the purchaser of the property in question, and others (including
    the mortgagee/vendor) to effect the transfer of the property at less than fair
    market value.

[15]

Following
    the release of the motion judges reasons, Cliffwoods counsel proposed to
    write to the motion judge, seeking confirmation that the entire action as
    against Cliffwood, in addition to 465 Ltd.s claim, had been struck under the
    motion judges ruling.  The appellants counsel declined to consent to this
    out-of-court communication.  Indeed, he actively opposed the delivery of the
    proposed letter to the motion judge.

[16]

Nevertheless,
    the letter was sent to the motion judge.  Shortly thereafter, she revised her
    reasons to provide that both 465 Ltd.s claim and the entire action against
    Cliffwood were struck.  The effect of this revision was to strike the claims of
    the Individual Appellants against Cliffwood, as well as that of 465 Ltd.

[17]

The
    appellants submit that the post-hearing communication with the motion judge was
    improper, contrary to rule 1.09, and prejudicial to the Individual Appellants.

[18]

In
    our view, the delivery of the letter in question, without the consent of the
    appellants counsel and in the face of his opposition to its delivery to the
    motion judge, was inadvisable and contrary to rule 1.09.  That rule authorizes
    out-of-court communications with judges in respect of proceedings before the
    court only where all parties consent, in advance, to the communication or the
    court otherwise authorizes the communication.  Neither circumstance applied
    here.  In our view, on the facts here, the appropriate procedure was for
    Cliffwoods counsel to seek an appointment with the motion judge, on notice to
    the appellants, to settle the terms of her order.

[19]

Cliffwood
    submits that the change to the motion judges ruling prompted by the letter was
    inconsequential since it reflected merely a clarification of the motion judges
    original ruling.

[20]

We
    are unable to accede to this submission.

[21]

If
    the Individual Appellants pleaded claims against Cliffwood were unequivocally
    and exclusively derivative of 465 Ltd.s claim against Cliffwood, it may well
    be that the change to the motion judges ruling would be of no moment.  In
    those circumstances, if 465 Ltd.s claim was statute-barred, the derivative
    claims of the Individual Appellants would fall on the same basis.

[22]

But
    the motion judge made no finding that the Individual Appellants claims were
    solely derivative of 465 Ltd.s claim against Cliffwood.  Further, the reasons
     both in their original and amended form  contain no analysis of the material
    facts pleaded with respect to the Individual Appellants including, especially,
    in relation to their alleged status as trust beneficiaries of the property
    conveyed to Cliffwood.  Consequently, this court cannot be satisfied as to the
    basis on which the motion judge struck the entire action as against Cliffwood.

[23]

In
    the result, in our opinion, the letter in question precipitated a significant
    amendment to the motion judges ruling, whereby the Individual Appellants
    claims as against Cliffwood were struck without explanation and without the
    motion judge having had the benefit of submissions from counsel for the
    Individual Appellants on the change to her ruling sought by Cliffwoods
    counsel.  In the circumstances confronting the motion judge, the change to her
    ruling sought by Cliffwood should not have been made without providing the
    appellants counsel with an opportunity to challenge the requested change and to
    make further submissions if so advised.

[24]

The
    motion judges ruling striking the entire action as against Cliffwood,
    therefore, cannot stand.  Fundamental fairness requires that this part of the
    motion judges decision be set aside.

Disposition

[25]

For
    the reasons given, the appeal is allowed in part, by striking the words and
    the entire action from paragraph one of the motion judges order without
    prejudice to Cliffwood renewing its motion to strike the Individual Appellants
    claims against Cliffwood.  In all other respects, the appeal is dismissed.  As
    success on the appeal has been divided, we make no order as to the costs of the
    appeal.

Released:

MAR 16 2015                                   E.A.
    Cronk J.A.

EAC                                                 E.E.
    Gillese J.A.

David
    Brown J.A.





[1]
Throughout her reasons, the motion judge refers to February 28, 2012 as the
    date when the appellants claim was issued.  There is no dispute that this is
    an error and the correct date is February 8, 2012.


