



COURT OF APPEAL FOR ONTARIO

CITATION: Ridel v. Goldberg, 2019 ONCA 636

DATE: 20190731

DOCKET: C65776

Feldman, van Rensburg and Benotto JJ.A.

BETWEEN

Jean-Marc Ridel, Nadine Suzanne Josephine Ridel

and Marc H. Ridel

Plaintiffs (Appellants)

and

Robert Goldberg

Defendant (Respondent)

Philip Anisman, for the appellants

Niklas Holmberg and Breanna Needham, for the respondent

Heard: March 11, 2019

On appeal from the order of Justice Thomas J. McEwen of
    the Superior Court of Justice, dated July 6, 2018, with reasons reported at
    2018 ONSC 3113, 62 C.B.R. (6th) 68.

van Rensburg J.A.:

Introduction

[1]

This is an appeal from the dismissal of an action.
    The appellants, judgment creditors of a bankrupt company, e3m Investments Inc.
    (e3m), took an assignment of a claim of e3m from the trustee in bankruptcy and,
    in October 2016, commenced an action against e3ms former principal, Robert
    Goldberg, for breach of his duties as director of e3m. The central issue is
    whether the motions judge, who was considering competing motions for summary
    judgment, erred in concluding that the appellants claim was statute-barred
    under the
Limitations Act
, 2002
,

S.O. 2002, c. 24, Sched. B.
    (the 
Limitations Act
).

[2]

For the reasons that follow, I would dismiss the
    appeal. Pursuant to s. 12 of the
Limitations Act
, because the appellants were pursuing a
    claim belonging to e3m, which was assigned to them by e3ms bankruptcy trustee,
the two-year limitation period for the claim ran from
    the earlier of when either the appellants or e3m knew or ought reasonably to
    have known of the elements of s. 5(1)(a) in relation to the claim.

[3]

The motions judge erred in concluding that the
    appellants had discovered the claim before the bankruptcy of e3m, and before
    they were able to sue in e3ms name. However, the motions judge did not err in
    concluding, in the alternative, that e3m, as the appellants predecessor in
    relation to the claim, had discovered the claim against Goldberg more than two
    years before the appellants commenced their action. Whether or not Goldbergs
    control of e3m was relevant to e3ms discovery of the claim, by April 2013 at
    the latest, a committee of e3ms shareholders knew of the facts underlying the
    claim and ought reasonably to have known that an action by or on behalf of e3m would
    be appropriate, within the meaning of s. 5(1)(a)(iv) of the
Limitations Act
.

Facts

[4]

In December 2006, the appellants commenced an
    action (the Prior Action) against their broker, Armando Cassin, and his
    employer, e3m, for negligence, breach of contract and breach of fiduciary duty
    in the management of their investment accounts. They alleged, among other
    things, that e3m, contrary to legal and regulatory requirements, had failed to
    supervise Cassins handling of their accounts. On April 17, 2013, after a ten-day
    trial, Pepall J. (as she then was) granted judgment against e3m and Cassin (the
    2013 Judgment), concluding that e3m was vicariously liable for Cassins
    conduct and also directly liable to the appellants. The direct liability of e3m
    was based on its failure to supervise Cassin:
Ridel v. Cassin
, 2013
    ONSC 2279. The reasons for judgment were critical of Goldberg, who was the
    founder, CEO, president and sole director of e3m: at paras. 222-229. On
    November 3, 2014, the 2013 Judgment was upheld on appeal to this court, and the
    cross-appeal seeking to recover certain additional amounts was granted:
Ridel
    v. Cassin
, 2014 ONCA 763.

[5]

On January 20, 2015, e3m made an assignment in
    bankruptcy. At the time, the appellants were owed the sum of $1,036,245.85 under
    the 2013 Judgment, including post-judgment interest.

[6]

On October 25, 2016, the appellants, as creditors
    of e3m, obtained an order under s. 38 of the
Bankruptcy
    and Insolvency Act
, R.S.C. 1985, c. B-3 (the 
BIA
)
    from the Registrar in Bankruptcy, authorizing the assignment to them by the
    trustee in bankruptcy of e3ms right to sue Goldberg. The s. 38 order provided
    that the appellants were authorized to commence and prosecute an action against
    Goldberg to recover the damages for which e3m became liable pursuant to [the
    2013 Judgment, as amended in the cross-appeal to this court] in their own name
    and at their own expense and risk,
based on Mr. Goldbergs failure to fulfil
    his obligations as a director and officer of e3m by abdicating his
    responsibility to supervise the [appellants] accounts at e3m
 (emphasis
    added).

[7]

Pursuant to the order, the trustee assigned the
    appellants its right, title and interest to pursue e3ms right of action
    against Goldberg. The appellants commenced their action the day they obtained
    the s. 38 order, October 25, 2016.
[1]
The claim alleged that Goldberg was liable to compensate e3m for the amount of
    the 2013 Judgment. The claim asserted that the 2013 Judgment resulted from a
    breach of Goldbergs fiduciary obligations and duty of care to e3m, and from a
    breach of his duties to e3m under s. 134 of the
Ontario
Business
    Corporations Act
,
    R.S.O. 1990, c. B.16 (the 
OBCA
)
.

[8]

The appellants brought a motion for summary
    judgment, claiming the sum of $262,165.10, the amount remaining unpaid after they
    had received payment under the 2013 Judgment from Cassin and as creditors in
    e3ms bankruptcy. As evidence in support of their claim, the appellants relied
    on the findings of Pepall J. in the Prior Action with respect to Goldbergs
    wrongdoing. They argued that Goldberg was estopped from denying the findings in
    Pepall J.s reasons, and that his actions, on this evidence, constituted a
    breach of his duty of care and fiduciary duties to e3m, contrary to s. 134 of
    the
OBCA
.

[9]

In response, among other things, Goldberg argued
    that the decision in the Prior Action could not be used as a finding of
    personal liability against him because he was not a party to the Prior Action. Goldberg
    also claimed that the assigned action was an abuse of process because the action
    made claims against him that could have been asserted in the Prior Action.

[10]

Goldberg brought a cross-motion for summary dismissal of the action on
    the basis that the appellants claims were statute-barred under the
Limitations Act
.

Decision of the Motions Judge

[11]

The motions judge dismissed the appellants motion, finding that there
    were issues requiring a trial. He concluded that, while the reasons of Pepall
    J. in respect of the 2013 Judgment were admissible, they were not determinative
    of Goldbergs personal liability to e3m. The parties to the Prior Action were
    different, as were the causes of action. Goldberg had not been called upon in
    the Prior Action to defend himself regarding his personal liability under the
OBCA
.
    Nor was Goldberg a privy of e3m, such that he would be estopped from
    contesting Pepall J.s findings: at paras. 22-35.

[12]

The motions judge rejected the respondents argument that the action
    was an abuse of process. While the appellants could have sued Goldberg in the
    Prior Action, in the normal course they would have expected to recover their
    entire claim against Cassin and e3m. And, although e3m could have joined
    Goldberg to the Prior Action, Goldberg was the directing mind, the sole
    director and in charge of e3ms defence. It was hardly surprising that
    Goldberg did not authorize e3m to pursue a lawsuit against himself, and e3ms
    pursuit of Goldberg for breaching his obligation to supervise would have run
    contrary to the defences the corporation was raising, at Goldbergs direction,
    against the Ridels claim: at paras. 36-42.

[13]

The motions judge considered the inadequate state of the record, with
    the appellants relying entirely on Pepall J.s findings, and the respondent
    pointing to potential defences, but refusing to answer relevant questions in
    his cross-examination. He concluded that it was not possible to determine the
    issue of Goldbergs liability, which should be dealt with on a full record, in
    a contextualized fashion, with
viva voce
evidence: at paras. 44-49.

[14]

The motions judge then considered Goldbergs motion for summary dismissal
    based on the alleged expiry of a two-year limitation period. Because the
    appellants obtained their right to advance e3ms claim by assignment from the
    trustee in bankruptcy, s. 12 of the
Limitations Act
was engaged:
Indcondo Building Corporation
    v. Sloan
, 2010 ONCA 890, 103 O.R. (3d) 445, at paras.
    17-18. This meant that the date of the appellants knowledge of the matters
    referred to in s. 5(1)(a) of the
Limitations Act

was the earlier of (1) the day the
    predecessor in right, title or interest first knew or ought to have known of
    such matters, and (2) the day the person claiming first knew or ought to have
    known of those matters.

[15]

The motions judge concluded that, based on the findings of Pepall J.,
    which referred to certain admissions by the appellants, as well as the absence
    of any evidence to the contrary, the appellants became aware of the facts
    forming the claim against Goldberg in July 2006, namely his failure to
    supervise Cassin. This was the case even though the appellants could not have
    brought an action on behalf of e3m against Goldberg until the companys
    bankruptcy: at paras. 63-66.

[16]

The motions judge concluded in the alternative that the limitation
    period began to run against e3m in December 2006, when e3m was served with the
    statement of claim in the Prior Action, and therefore knew that Goldbergs
    conduct was at issue, or at the very latest when the 2013 Judgment was released
    (on April 17, 2013), and when e3m and its investors received a legal opinion
    about the poor prospects of an appeal shortly thereafter. By that point, e3m
    had all the material facts required for a potential claim against Goldberg: at
    paras. 70-75.

[17]

The motions judge accepted that, because the action was a claim for
    contribution and indemnity, the appellants had the onus of rebutting the
    presumption, under s. 18(1) of the
Limitations Act
, that the claim was
    discovered when the statement of claim was served on e3m in the Prior Action:
    at para. 71.

[18]

The motions judge rejected the argument, based on s. 5(1)(a)(iv) of the
Limitations Act
,  that, because
    a successful appeal might have eliminated the damages it was required to pay
    the appellants, e3m would not have known that an action against Goldberg was an
    appropriate means to seek to remedy its losses until November 2014, when the
    appeal of the 2013 Judgment was dismissed: at paras. 78-80.

[19]

Finally, the motions judge considered the argument that e3m would not
    have sued Goldberg because this would have been against its own interest and
    would have amounted to Goldberg suing himself. While he accepted that this was
    a reason to dismiss the argument that the proceedings were an abuse of process,
    he stated that he did not find that this was relevant to the limitations period
    issue: at para. 81.

Issues

[20]

At issue in this appeal is whether the motions judge erred in
    concluding that the appellants claim against Goldberg was statute-barred. In
    particular, did the motions judge err when he concluded that (i) the appellants
    personally had knowledge of the claim against Goldberg, and (ii) e3m, as the
    predecessor of the appellants in respect of the claim, had knowledge of the
    claim more than two years before the action was commenced?

[21]

As I will explain, in my view the trial judge erred in concluding that
    the limitation period ran against the appellants because of their personal
    knowledge of the relevant facts, when they had no capacity to sue in e3ms name
    until after the company was bankrupt. However, the trial judge did not err in
    concluding that the limitation period ran against their predecessor, e3m, based
    on its knowledge in relation to a claim against Goldberg  including, in the
    particular circumstances of this case, the knowledge of its shareholders  of the
    relevant matters under s. 5(1)(a) of the
Limitations Act
.

[22]

Having determined that the action was properly dismissed on the basis
    of the expiry of a limitation period, it is unnecessary to address the appellants
    argument that the motions judge erred in refusing summary judgment in their
    favour, when he concluded that Goldberg was not e3ms privy and therefore
    estopped from denying the findings concerning his conduct in the Prior Action.

Analysis

[23]

Because the appellants action against the respondent in respect of his
    breaches of duty to e3m was commenced on October 25, 2016, the question to be
    resolved is whether the motions judge erred in concluding that the appellants
    claim was discovered or ought reasonably to have been discovered prior to
    October 25, 2014.

(1)

Relevant
statutory
provisions
    and legal principles

[24]

I begin my analysis of the limitations issue by setting out the
    relevant statutory provisions and legal principles.

[25]

The claim asserted by the appellants is subject to the basic two-year
    limitation period provided for under s. 4 of the
Limitations Act
. The
    two years run from the discovery of the claim, which under s. 5 is defined as
    follows:

5(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.

[26]

In addition to the deeming provision in s. 5(2), because the claim in
    this case was for contribution and indemnity (in respect of amounts owed by e3m
    under the 2013 Judgment), s. 18 is relevant. That section provides:

18(1) For the purposes of subsection 5(2) and
    section 15, in the case of a claim by one alleged wrongdoer against another for
    contribution and indemnity, the day on which the first alleged wrongdoer was
    served with the claim in respect of which contribution and indemnity is sought
    shall be deemed to be the day the act or omission on which that alleged
    wrongdoers claim is based took place.

(2) Subsection
(1)
    applies whether the right to contribution and indemnity arises in respect of a tort
    or otherwise.

[27]

Under s. 18, unlike the prior limitations regime for claims for
    contribution and indemnity, the two-year limitation period presumptively runs from
    the day the first alleged wrongdoer is served with the claim in respect of
    which contribution and indemnity is sought:
Canaccord Capital Corporation
    v. Roscoe
, 2013 ONCA 378, 115 O.R. (3d) 641, at para. 20.  The presumptive
    limitation period start date that arises from a combination of ss. 18(1) and
    5(2) can be rebutted by the discoverability principles prescribed in s. 5(1):
Mega
    International Commercial Bank (Canada) v. Yung
, 2018 ONCA 429, 141 O.R.
    (3d) 81, at paras. 67, 74.

[28]

To rebut the presumption under s. 5(2) (and therefore under s. 18(1)), a
    claimant may point to evidence to establish that the claim was discovered on
    a date other than the date on which the act or omission took place  in a
    claim for contribution and indemnity, the date of service of the claim on the
    first alleged wrongdoer. As this court observed in
Morrison v. Barzo
, 2018
    ONCA 979, 144 O.R. (3d) 600,
at para. 31
: The
    presumption is displaced by the courts finding as to when the plaintiff
    subjectively knew he had a claim against the defendants. The evidentiary
    threshold to rebut the presumption in s. 5(2) is relatively low:
Presley v.
    Van Dusen
, 2019 ONCA 66, 144 O.R. (3d) 305, at para. 24;
Morrison
,
    at para. 31;
Apotex Inc. v. Nordion (Canada) Inc.
, 2019 ONCA 23, 431
    D.L.R. (4th) 262, at para. 87.

[29]

On bankruptcy, the property of the bankrupt vests in the trustee:
BIA
,
    s. 71. The bankrupts property includes any cause of action the bankrupt may
    have:
BIA
, s. 2;
Douglas v. Stan Fergusson Fuels Ltd
.
,
    2018 ONCA 192, 139 O.R. (3d) 721, at para. 60, leave to appeal refused (2018), 68
    C.B.R. (6th) 3.  The trustee, with the permission of the inspectors, is
    empowered to bring, institute or defend any action relating to the property of
    the bankrupt:
BIA
,
s. 30(1)(d). The trustee in bankruptcy may
    also have a range of other claims that can be asserted in its name, such as
    claims to set aside transfers at undervalue:
BIA
,
s. 96. Thus,
    a trustee is entitled to assert both claims that previously belonged to the
    bankrupt and claims that arise by virtue of the bankruptcy.

[30]

Section 38 of the
BIA

permits the assignment of those
    claims to a creditor of the bankrupt:

38(1) Where a
    creditor requests the trustee to take any proceeding that in his opinion would
    be for the benefit of the estate of a bankrupt and the trustee refuses or
    neglects to take the proceeding, the creditor may obtain from the court an
    order authorizing him to take the proceeding in his own name and at his own
    expense and risk, on notice being given the other creditors of the contemplated
    proceeding, and on such other terms and conditions as the court may direct.

[31]

Assignment of a cause of action raises the application of s. 12(1) of
    the
Limitations Act

because the assignor of a claim is
    considered a predecessor in right, title or interest. This section provides:

12(1) For the purpose of clause 5(1)(a), in
    the case of a proceeding commenced by a person claiming through a predecessor
    in right, title or interest, the person shall be deemed to have knowledge of
    the matters referred to in that clause on the earlier of the following:

1.

The day the predecessor first knew or ought to have known of those
    matters.

2.

The day the person claiming first knew or ought to have known of
    them.

[32]

As the motions judge correctly noted, this courts decision in
Indcondo

is
    authority that s. 12 applies to claims asserted by a creditor who has taken an
    assignment of a claim of a bankrupt under s. 38 of the
BIA.
The
    relevant discoverability date is the earlier of that of the predecessor (in
Indcondo
,
    the predecessor was the trustee in bankruptcy) or the person
claiming through the predecessor (the
    assignee of the claim from the trustee). The assignment does not have the
    effect of restarting the running of the limitation period:
Indcondo
, at
paras. 18-20. I will say more about
Indcondo
in the course of
    these reasons, and in particular, I will explain why that case is not determinative
    of the question of the appellants knowledge of the claim against Goldberg,
    that is raised in this appeal.

[33]

I turn now to consider when the appellants had personal knowledge of
    the claim in this case.

(2)

Discovery
of the Claim by the Ridels

[34]

The appellants say that the motions judge erred in his conclusion that
    their action is statute-barred because they personally knew of the matters
    listed in s. 5(1)(a) more than two years before they commenced the action
    against Goldberg to sue for wrongs allegedly done to e3m. They assert that the
    motions judge erred in drawing an adverse inference against them, when they had
    not offered affirmative evidence of the matters referred to in s. 5(1)(a), and in
    concluding that they had knowledge of the claims, based on the reasons of
    Pepall J., in July 2006.    They say that the limitation period could not have
    commenced until after e3m was bankrupt, and indeed until they ought reasonably
    to have obtained the s. 38 order. Until that point, it would not have been possible
    for them to have prosecuted a claim by e3m against Goldberg.

[35]

For his part, the respondent asserts that the motions judge did not err
    in concluding that the appellants had knowledge of the claim before they sued
    him in the Prior Action, at the time the Prior Action was commenced, or at the
    latest when they received the 2013 Judgment. He says that the motions judge was
    correct in concluding that the appellants did not offer evidence to rebut their
    knowledge of the claim, and further that the limitations issue in this case is
    similar to and governed by this courts decision in
Indcondo
.

[36]

I begin with a brief comment on the motions judges treatment of the
    presumption and the evidentiary record. At para. 15 of his reasons, the motions
    judge referred to the prior decision of this court allowing the appeal of the
    dismissal of the action on a r. 21 motion:
Ridel v. Goldberg
, 2017
    ONCA 739. He noted this courts conclusion that a more complete record was
    required in order to determine the issues raised by the parties concerning the
    limitation period issue, and he observed, at para. 16, that the appellants had
    not filed any materials in support of their defence of the motion to have the
    action dismissed. At para. 63, the motions judge was critical of the
    appellants failure to offer evidence as to when they discovered the matters referred
    to in s. 5(1)(a). At para. 66, he drew an adverse inference against the
    appellants because they failed to submit evidence as to when they had acquired personal
    knowledge of the contested facts. The motions judge then determined that, while
    the appellants could not have brought an action on behalf of e3m against Goldberg
    until the companys bankruptcy, Pepall J.s reasons demonstrated that they were
    well aware of the material facts required to commence a claim against him as
    early as July 2006 and they had submitted no evidence to the contrary.

[37]

I agree with the appellants that, to the extent the motions judge
    determined the issue of their knowledge of the matters listed in s. 5(1)(a)
    based on their failure to submit evidence, this was an error. In the r. 21 appeal,
    this courts observation that an evidentiary record was required was based on
    the fact that the limitations issue had been determined by the motion judge
    based only on the pleadings. The fact that there was no evidentiary record at
    all prevented the proper determination of the limitations issue. By contrast,
    in this case, there was an evidentiary record. Even if the appellants had not
    put forward evidence about their own discovery of the claim, they relied on the
    evidence of Goldberg (who had filed an affidavit with various exhibits and been
    cross-examined) as well as the findings contained in Pepall J.s reasons.

[38]

In any event, the appellants response to the issue was not to
    challenge the timing of their own knowledge of Goldbergs wrongdoing in
    relation to e3m, but to argue that they were not in a position to do anything
    about it, at least until the bankruptcy. It is to this issue that I now turn.

[39]

I begin my analysis with
Indcondo
. As I will explain, while
    that case confirms that s. 12(1) applies in the context of an assignment of a
    claim by a trustee in bankruptcy under s. 38, it is not determinative of the
    question of when the appellants in this case knew of or ought reasonably to
    have known of the matters listed in s. 5(1)(a) in relation to the particular claim
    they are advancing.

[40]

In
Indcondo
,
a
    creditor of David Sloan, the bankrupt, brought certain alleged fraudulent conveyances
    to the attention of the trustee in bankruptcy, which the trustee chose not to
    pursue. After Sloans discharge, Indcondo obtained an order under s. 38 of the
BIA
authorizing the assignment of the trustees claim and permitting it to bring
    fraudulent conveyance proceedings. At issue was whose knowledge was relevant
    for determining the discovery of the cause of action. Because of the timing,
    the transition provisions of the
Limitations Act
applied. If the
    trustees discovery date were used, the claim would be statute-barred. If the
    earlier (creditors) discovery date were used, there was no limitation period
    defence, as under the former legislative scheme (carried over by operation of
    s. 24(6) of the
Limitations Act
) there was no limitation period for
    fraudulent conveyance claims. Accordingly, it was in Indcondos interest to
    establish that the limitation period ran from when it first discovered the
    claim, prior to Sloans bankruptcy.

[41]

The court concluded that the limitation period ran from the date of Indcondos
    knowledge of the claim, and that neither the bankruptcy nor the s. 38 order suspended
    or restarted the running of the limitation period. Accordingly, the action was
    not statute-barred.

[42]

The respondent says that, like the creditor in
Indcondo
,
the appellants knew all of the material
    facts relevant to a claim against Goldberg when they were involved in the Prior
    Action, and that the limitation period accordingly has run against them since
    2006.

[43]

I do not accept this argument. In
Indcondo
, there was no
    dispute about when the creditor knew all the elements of s. 5(1)(a) in relation
    to the claim that was assigned to it by the trustee. The claim was to set aside
    fraudulent conveyances, a claim that Indcondo, as a creditor, could have
    brought against Sloan under provincial statute, but for his bankruptcy. Indeed,
    before Sloans bankruptcy, Indcondo had already sued in respect of the alleged
    fraudulent conveyance of Sloans house to his wife. Indcondo subsequently
    discovered other potential fraudulent conveyances, which it brought to the
    attention of the trustee. All that was at issue was whether the limitation
    period ran from Indcondos prior knowledge of the potential claim, which it
    could have brought in its own name, or whether Sloans bankruptcy restarted the
    limitation period. This court held that, by virtue of s. 12, the limitation
    period ran from the earlier of Indcondos or the trustees knowledge of the
    claim, and did not restart with either the bankruptcy or the s. 38 order.

[44]

In this case, by contrast, the appellants are pursuing a claim that initially
    belonged to e3m and that vested in the trustee on e3ms bankruptcy. The claim
    for breach of Goldbergs fiduciary and other duties to e3m is not one that the
    appellants could have pursued before e3ms bankruptcy.
Indcondo
did
    not address the question of when the limitation period under s. 12 would run in
    respect of a creditor who may well have known of the potential claim by the
    bankrupt, but had no way to enforce it until the bankruptcy.

[45]

The appellants characterize the motions judges error here as a failure
    to consider s. 5(1)(a)(iv) of the
Limitations Act

in relation
    to the claim against Goldberg. Whether a proceeding was an appropriate means to
    remedy a claim is an essential element in the discoverability analysis and the
    failure to consider s. 5(1)(a)(iv) is an error of law:
Presley
, at
    para. 15.

[46]

I agree with the appellants that, because they lacked capacity to bring
    a claim in the name of e3m against Goldberg, any personal knowledge they might
    have had before e3ms bankruptcy respecting a claim did not cause the
    limitation period to run against them pursuant to s. 12(1). In my view,
    however, this result does not flow from the application of s. 5(1)(a)(iv).

[47]

In determining when the limitation period began to run in respect of
    the appellants claim, the question is when they, as claimants  that is, as
    persons who reasonably had the claim in question  knew or ought to have known
    of the matters referred to in s. 5(1)(a). The application of the test in s.
    5(1)(a) requires first that the claims at issue be defined or identified:
Morrison
,
    at paras. 33, 49.

[48]

In this case, the claim advanced in the appellants
    action is not a claim by them personally, or one that they could have advanced
    personally (as was the case in
Indcondo
), but a claim they are
    asserting on behalf of the bankrupt, e3m, against its former principal,
    Goldberg. Section 5(1) applies to the person with the claim. When they were
    litigating against e3m in the Prior Action, the appellants may well have known of
    the various matters under s. 5(1)(a) in the general sense, but because they
    were not and could not have been the persons with the claim at that stage,
    any such knowledge was immaterial.

[49]

Until e3m was bankrupt, any claim against Goldberg for breach of his
    duties as a director could only be pursued by e3m. The appellants had no right,
    title or interest in the claim. They had no ability to bring the claim while the
    claim continued to belong to e3m.

[50]

In
Saran (Re)
, 2018 ONSC 2998, 60 C.B.R. (6th) 296, at paras.
    43-45, 50, a bankruptcy trustee sought to challenge a transfer of the
    bankrupts business to a corporation controlled by her spouse at undervalue.
    The transferee relied on the expiry of a two-year limitation period alleged to
    have run from when the trustee was in place during a proposal that was rejected
    by the bankrupts creditors. Kershman J. pointed to the fact that the property
    of the bankrupt vested in the trustee only on bankruptcy, and that until then
    the bankrupt had control of all of her assets. He held that any prior
    knowledge that a trustee had while wearing the hat of a proposal trustee was
    not imputed to the trustee as bankruptcy trustee so as to result in an earlier
    date for the start of a limitation period.

[51]

Similarly, in this case, the appellants could not have asserted a claim
    against Goldberg for wrongs done to e3m until they obtained the s. 38 order. In
    other words, until they obtained the s. 38 order, they had no standing to claim
    for e3ms losses. Any knowledge of Goldbergs wrongdoing in relation to e3m,
    whether by virtue of what they themselves had pleaded in the Prior Action, or
    when they received Pepall J.s reasons in the 2013 Judgment, was not sufficient
    for them to be able to act.

[52]

The motions judges conclusion that, because of their personal
    knowledge of the material facts in relation to e3ms claim against Goldberg, the
    limitation period began to run against the appellants as early as July 2006 and
    as late as April 2013, was therefore in error. Their knowledge of those matters
    did not become relevant until they had or ought reasonably to have had the
    authority to pursue the claim, which was, at the very earliest, upon the
    bankruptcy of e3m in January 2015.

[53]

Under this analysis, s. 5(1)(a)(iv) is not engaged. The question is not
    whether the appellants knew or ought to have known that a proceeding by the
    company would be an appropriate remedy for Goldbergs alleged wrongs. Until
    they had control over the claim, or the means to obtain such control (by moving
    promptly in e3ms bankruptcy), they were not claimants for the purpose of s.
    5(1)(a) and therefore their knowledge was not the knowledge of claimants under
    the section.

(3)

Discovery of the Claim by e3m

[54]

I turn to consider the alternative discovery date for the limitation
    period under s. 12 of the
Limitations Act

 that is, when the
    appellants predecessor knew or ought reasonably to have known of the claim
    against Goldberg.

[55]

Two preliminary points are worth mentioning. First, in this case, the
    predecessor, for the purpose of the s. 12 analysis, is not the trustee in
    bankruptcy of e3m, but e3m itself. This is not a claim that arose on the
    bankruptcy, but a claim that vested in the trustee on e3ms bankruptcy, and then
    was assigned to the appellants. It is a claim that, subject to discoverability
    under s. 5(1)(a), e3m could have made itself against its director, Goldberg,
    prior to the bankruptcy. Accordingly, the two-year limitation period began to
    run against e3m in respect of the claim against Goldberg on the earlier of when
    e3m first knew or ought reasonably to have known of the matters set out in s.
    5(1)(a): that the injury, loss or damage to e3m had occurred, that the injury,
    loss or damage was caused by or contributed to by an act or omission of
    Goldberg, and that having regard to the nature of the injury, loss or damage,
    a proceeding would be an appropriate means to seek to remedy it.

[56]

Second, the claim against Goldberg is in respect of the amount owed to
    them as judgment creditors of e3m following the Prior Action. The statement of
    claim expressly claims indemnification of e3m for the amount of the 2013
    Judgment. Accordingly, the two-year limitation period presumptively runs from
    the date the statement of claim was served in the Prior Action (in December
    2006), subject to the appellants proving that e3m did not know or that a
    reasonable person in e3ms circumstances would not have known of the matters
    referred to in s. 5(1)(a) in relation to e3ms claim for indemnity at the time
    the Prior Action was commenced. Section 18(1) of the
Limitations Act

places the onus on the appellants to rebut this presumption.

[57]

The appellants say that e3m could only have known of the matters
    referred to in s. 5(1)(a) in respect of a claim against Goldberg, at the
    earliest, when e3m made an assignment in bankruptcy (in January 2015) and the
    trustee took control of the companys property, including any potential claims.
    It was only at that point that e3m knew or ought to have known of a potential
    claim against Goldberg, or that legal proceedings against Goldberg were
    appropriate.

[58]

The appellants principal argument that a claim against Goldberg was
    not discoverable in 2006 is that time ought not to have run against e3m while
    the company was controlled by Goldberg. The appellants argument is twofold.
    First, they say that e3m did not know about Goldbergs wrongdoing, because
    Goldberg, who was the directing mind of the company, had no such knowledge
    himself. They point to Goldbergs evidence on cross-examination, where he
    denied that he had done anything wrong.

[59]

Second, because of Goldbergs control of e3m, until e3m was bankrupt,
    the company would not reasonably have known that a proceeding against Goldberg
    was the appropriate means to recover the amount awarded against e3m in the
    Prior Action. This argument focusses on s. 5(1)(a)(iv) of the
Limitations
    Act
. If Goldberg knew of such wrongdoing or ought reasonably to have known
    of it, his knowledge ought not to be attributed to e3m for the purpose of the
    running of the limitation period because he would never have acted on such
    knowledge and caused e3m to sue himself. e3m would not reasonably have known,
    having regard to the nature of the injury, loss or damage, [that] a proceeding
    [against Goldberg] would be an appropriate means to seek to remedy it.

[60]

The appellants point to the conclusions of the motions judge (when he
    dismissed the respondents argument that the action was an abuse of process)
    that because Goldberg was the directing mind of e3m and, at the time of the
    Prior Action, the sole director and in charge of e3ms defence, it was hardly
    surprising that Mr. Goldberg did not authorize e3m to pursue a lawsuit against
    himself, and that doing so would have run contrary to the defences the corporation
    was raising, at Mr. Goldbergs direction, against the Ridels claim: at paras.
    39-40. The appellants assert that the motions judge erred when, after making
    these observations, he concluded that Goldbergs control of e3m was irrelevant
    to the limitations issue: at para. 81.

[61]

Finally, in arguing that the motions judge erred in his alternative conclusion
    that the appellants discovered the claim at the latest when the 2013 Judgment
    was released, the appellants contend that the running of the limitation period
    was suspended under s. 5(1)(a)(iv) until after this court disposed of e3ms
    appeal of the 2013 Judgment in November 2014.

[62]

The respondent argues that there was no error in the motions judges
    conclusion that the limitation period began to run against e3m in July 2006,
    based on the findings in the Prior Judgment. The respondent also asserts that the
    appellants have failed to rebut the presumption that e3m knew of the claim against
    Goldberg at the time it was served with the statement of claim in the Prior
    Action, and that whether or not Goldberg had control over e3m is irrelevant.
    Further, an action is appropriate when it is legally appropriate and there
    is no principle in the cases interpreting s. 5(1)(a)(iv) that would extend the
    limitation period in these circumstances.

[63]

In the alternative, even if Goldbergs control over e3m could be a
    relevant factor, the respondent points to the evidence that, while Goldberg was
    the majority shareholder, he reported regularly to and consulted with an
    investor group that had full knowledge of both the Prior Action and, in
    particular, of the 2013 Judgment and its ability to cause e3m to make a claim
    against Goldberg.

[64]

Finally, if the limitation period ran from the 2013 Judgment, the
    respondent argues that the motions judge was correct in refusing to extend the
    limitation period on account of the appeal.

[65]

Based on the following analysis, I would uphold the motions judges
    decision that the limitation period had expired against e3m by the time the
    appellants commenced their action against Goldberg for breach of his duties to
    e3m. In the particular circumstances of this case, it is reasonable to conclude
    that e3m knew or ought to have known of a potential claim against Goldberg, at
    the latest, by the time of the 2013 Judgment, including that a proceeding
    against Goldberg would be appropriate.

a)

e3ms
    knowledge of Goldbergs alleged wrongdoing in April 2013

[66]

It is unnecessary to determine for the disposition of this appeal
    whether an assessment of the s. 5(1)(a) factors as of 2006, and in particular,
    the appropriateness of a proceeding against Goldberg, were affected by
    Goldbergs control of the company and his knowledge as its directing mind.

[67]

On the evidence in this case, irrespective of
    Goldbergs knowledge of the claim or his unwillingness to act on such knowledge
    on behalf of e3m, at least by April 2013, all of the other e3m shareholders had
    received a copy of the reasons of Pepall J. and the 2013 Judgment, which
    included the various references to Goldbergs wrongdoing, and they had the
    ability to cause e3m to sue or to bring a derivative claim on its behalf.

[68]

The evidence on the motions was that Goldberg was the sole shareholder
    of e3m until September 10, 2003, when e3m issued nearly half of its outstanding
    common shares to nine sophisticated and active investors (referred to as the
    Investor Group).  A Unanimous Shareholder Agreement granted the Investor
    Group the unfettered right to appoint a majority of e3ms five-member board of
    directors at any time, however the investors permitted Goldberg to remain the
    sole director.  According to Goldberg, throughout the seven-year litigation in
    the Prior Action, he had open and free-ranging discussions with the Investor
    Group. Various documents, including emails Goldberg exchanged with members of the
    Investor Group both before and after the 2013 Judgment were released, confirm
    that the Investor Group was consulted about the litigation, including the
    decision to appeal the 2013 Judgment. Although Goldberg did not recall advising
    the Investor Group of his failure or that of e3m to supervise Cassins
    activities,

once they received the 2013 Judgment
    and reasons of Pepall J., which were sent to them directly by Goldberg, they
    had the necessary information to have reasonably concluded that e3m had a
    potential claim against Goldberg. The appeal proceeded with the informed
    agreement of the Investor Group, and without the assertion of any claim on
    behalf of e3m against Goldberg.

[69]

It is apparent from this evidence that, even accepting that Goldberg
    did not disclose the extent of his wrongdoing to the shareholders and assuming that
    in 2006 they could not have appreciated that a wrong had been done to e3m, when
    the trial decision was released they independently acquired knowledge of Goldbergs
    alleged breaches of duty to e3m. At that time, for the purposes of the
    discoverability analysis under s. 5(1)(a) of the
Limitations Act
, e3m
    knew that: an injury had occurred; its loss was caused by an act or omission;
    the act or omission was allegedly that of Goldberg; and a proceeding was an
    appropriate means to remedy it. Irrespective of Goldbergs control of the
    defence to the litigation, the shareholders could have assumed control of e3ms
    board of directors and caused e3m to make a claim against Goldberg, or they
    could have commenced a derivative action on e3ms behalf. That the shareholders
    opted instead to pursue the appeal was an informed choice that, for the reasons
    explained below, did not halt the limitations clock.

b)

The effect of the appeal of the 2013 Judgment

[70]

The appellants rely on s. 5(1)(a)(iv) of the
Limitations Act
to
    argue that the appeal of the 2013 Judgment postponed the running of the
    limitation period against e3m. They say that, because the appeal may have
    eliminated e3ms liability to the Ridels and hence e3ms claim against
    Goldberg, they would not reasonably have known that an action was an
    appropriate means to seek to remedy e3ms losses until the appeal was
    dismissed.

[71]

Appropriateness must be assessed on the facts of each case, and case
    law applying
s. 5(1)
(a)(iv) is of
    limited assistance:
Brown v. Baum
, 2016 ONCA 325,

397 D.L.R. (4th) 161
, at para. 21.
The jurisprudence has recognized two
    particular circumstances where the issue of appropriate means under s. 5(1
)(a)(iv) most often delays the date on which a claim is discovered:
Zeppa v. Woodbridge Heating & Air Conditioning Ltd.
, 2019 ONCA 47, at para. 48. The first category concerns cases where
    a defendant, typically one with some level of expertise, has undertaken to
    repair a problem before an action is brought: see e.g.
Presley
, at paras. 17-22;
Presidential MSH Corporation v. Marr Foster
    & Co. LLP
, 2017 ONCA 325, 135 O.R. (3d) 321, at paras. 20-26;
Brown
,
    at para. 18.
The second category concerns cases where
    there is a statutory or other alternative non-judicial process that has been or
    must be invoked for determination of the dispute: see e.g.
Presidential,
at paras. 28-29, 48, 53;
407
    ETR Concession Company Limited v. Day
, 2016 ONCA
    709,

133 O.R. (3d) 762, at para.
    40, leave to appeal refused, [2016] S.C.CA. No. 509;
Kadiri v.
Southlake
    Regional Health Centre
,
2015 ONSC 621
, at paras.
52-57
, affd
2015 ONCA 847
, 343
    O.A.C. 186.


[72]

The appellants rely on this courts decision in
Independence Plaza
    1 Associates, L.L.C. v. Figliolini
, 2017 ONCA 44, 136 O.R. (3d) 202, a
    case involving an action in Ontario to enforce a foreign judgment, in support
    of their argument that it was not legally appropriate to commence a claim
    against Goldberg until the appeal of the 2013 Judgment was determined. In
Figliolini
,
this court held, at para. 77:

In the usual case, it will not be
    legally appropriate to commence a legal proceeding on a foreign judgment in
    Ontario until the time to appeal the judgment in the foreign jurisdiction has
    expired or all appeal remedies have been exhausted. The foreign appeal process
    has the potential to resolve the dispute between the parties. If the judgment
    is overturned, the debt obligation underlying the judgment creditors
    proceeding on the foreign judgment disappears.

[73]

The appellants say that, just as this court held that the basic
    limitation period for an action to enforce a foreign judgment in Ontario runs
    from the date of exhaustion of all appeals (subject to discoverability
    principles), the same should apply to a claim that, as here, is based on a
    domestic judgment. In either case, the debt obligation underlying the claimants
    proceeding would disappear if the judgment were overturned.

[74]

In my view,
Figliolini
does not apply by analogy or otherwise.
    The main issue in
Figliolini
was whether s. 16(1)(b) of the
Limitations
    Act
(which provides that there is no limitation period in respect of,
    among other things, a proceeding to enforce an order of a court, or any other
    order that may be enforced in the same way as an order of a court) would apply
    to an action to enforce a foreign judgment. The court rejected that argument,
    and then went on to determine when the basic two-year limitation period for an
    action to enforce a foreign judgment would begin to run.

[75]

Figliolini
dealt only with actions to enforce
    foreign judgments. Strathy C.J.O. noted that a judgment creditor who brings an
    Ontario proceeding on a foreign judgment must show that the foreign court had
    jurisdiction and that the judgment is final and for the payment of money: at
    para. 51. An action to enforce a domestic judgment is, by s. 16(1)(b) of the
Limitations
    Act
, not subject to
any
limitation period. And, importantly,
    actions such as the present action  which are not to enforce a judgment, but
    to claim indemnity  are governed by their own provisions in the
Limitations
    Act
that would be entirely undermined
    if the appellants argument were given effect
.
This is the
    fatal flaw in the appellants reliance on
Figliolini
.

[76]

Unlike proceedings to enforce a foreign judgment, which require
    finality, there is no requirement that in order to effectively claim contribution
    and indemnity there must be a final judgment against the claimant. To the
    contrary, the two-year limitation period runs from the date the claim is made
    against the first wrongdoer, subject to the discoverability rules in s.
    5(1)(a):
Mega International
, at para. 74. In
Canaccord
, this
    court noted that s. 18 of the
Limitations Act
specifically departs
    from the previous law for contribution claims between tortfeasors, where the
    limitation period ran against the party claiming indemnity from the date of
    judgment: at para. 20.

[77]

While not determinative, this courts decision in
Tapak

v.
    Non-Marine Underwriters, Lloyds of London
, 2018 ONCA 168, 76 C.C.L.I.
    (5th) 197, leave to appeal refused, [2018] S.C.C.A. No. 157, is instructive. In
    that case, the appellants relied on s. 5(1)(a)(iv) to argue that an appeal
    against other parties, if successful, might have eliminated their losses and
    that they therefore did not know that their action for contribution and
    indemnity was an appropriate means to seek to remedy their losses until the
    appeal was dismissed. At para. 13, the court rejected this argument, stating:

[Section] 5(1)(a)(iv) is not
    intended to be used to parse claims as between different defendants and thus
    permit one defendant to be pursued before turning to another defendant. Rather,
    it is intended to address the situation where there may be an avenue of relief
    outside of a court proceeding that a party can use to remedy their injury,
    loss or damage.

I agree with the latter observation that
    s. 5(1)(a)(iv) is not intended to operate in the manner proposed by the
    appellants.

[78]

In the present appeal, the appellants assert that it was legally
    appropriate for e3m to delay an action against Goldberg until the Prior Action
    was finally disposed of on appeal. This is precisely the sort of litigation in
    stages which will not delay the commencement of a limitation period for
    purposes of s. 5(1)(a)(iv). In the usual case, s. 5(1)(a)(iv) will not suspend
    the limitation period as against a second defendant where a plaintiff has
    commenced a legal proceeding against another defendant for the same wrong:
Presley
,
    at para. 31. This general principle is buttressed by the specific and certain
    rules for the commencement of claims for contribution and indemnity ushered in
    by s. 18 of the
Limitations Act
. Sharpe J.A., in
Canaccord
,
    carefully described the legislative history in concluding that s. 18 provided a
    marked departure from and significant reforms to the previous regime
    governing limitation periods for claims for contribution and indemnity: at
    para. 27. Under the previous law, a tort claimant seeking contribution and
    indemnity could wait for judgment in the main action before commencing a claim
    for indemnification. In contrast, s. 18 significantly shortens the limitation
    period governing contribution and indemnity claims to two years from the date
    the first alleged wrongdoer was served with the underlying claim, thereby
    encouraging resolution of all claims arising from the wrong at the same time:
Canaccord
,
    at para. 20.

[79]

In summary, then, on this ground of appeal I am satisfied that e3m had
    knowledge of the matters covered in s. 5(1)(a) more than two years prior to the
    issuance of the Ridels statement of claim. The companys shareholders knew that
    e3m had a potential claim against Goldberg in respect of his alleged failure to
    supervise Cassin when the 2013 Judgment was issued (in April 2013). Whether or
    not Goldberg controlled e3ms defence to the litigation and would never have
    caused e3m to sue himself, by that point the shareholders could have caused e3m
    to sue or could have commenced a derivative action on its behalf. As a
    predecessor in interest, e3ms knowledge is imputed to the appellants for
    limitations purposes through the application of s. 12(1). On that analysis, the
    action is time-barred.

Conclusion and Disposition

[80]

For these reasons, I would dismiss the appeal. I would order the
    appellants to pay the respondents the costs of the appeal, fixed at $20,000,
    the amount agreed between the parties, inclusive of HST and disbursements.

Released: KF JUL 31 2019

K. van Rensburg J.A.

I agree. K. Feldman J.A.

I agree. M.L. Benotto J.A.





[1]

Another creditor, owed an outstanding amount of $14,455.28, is
    participating in the action.


