



COURT OF APPEAL FOR ONTARIO

CITATION: Abrahamovitz v. Berens, 2018 ONCA 252

DATE: 20180315

DOCKET: C63272

Laskin, Feldman and Miller JJ.A.

BETWEEN

Faigie Abrahamovitz and Frances Spiro

Plaintiffs (Respondents)

and

Mark Berens, Megapro Property Management Ltd.,
    3030 Danforth Ltd., T.W.M. Consolidated Holdings Inc., and Lois Kalchman

Defendants

Samuel S. Marr and Zachary Silverberg, for the appellant,
    the Estate of Gabriel Zimmerman

David P. Jacobs, for the respondents

Heard: August 21, 2017

On appeal from the order of Justice Robert F. Goldstein
    the Superior Court of Justice, dated January 11, 2017, with reasons reported at
    2017 ONSC 184.

Feldman J.A.:

A.

Introduction

[1]

The respondents, Faigie Abrahamovitz and Frances Spiro, are two of four shareholders
    of a holding company that owns a commercial property. They brought this action against
    the defendants, claiming their full share of the annual rental income from the
    property.

[2]

One of the defendants, Megapro Property Management Ltd., has been the
    manager of the property since late 2009, following the illness and death of the
    prior property manager, Gabriel Zimmerman. It has collected the rents, but is
    holding back part of the entitlement of the respondents because of a claim to part
    of their share of the funds by the Estate of Mr. Zimmerman. That claim is based
    on two separate Acknowledgements purporting to be signed by each of the
    respondents in 2002. The Acknowledgements gave Mr. Zimmerman a 25% interest in
    the respondents respective entitlements to the rental and sale proceeds of the
    property.

[3]

In 2011, the respondents sued Megapro and the other defendants for the
    funds Megapro has been holding back. In 2016, the defendants brought the motion
    under appeal for an order adding the Estate as a necessary party to the action.
    The defendants also sought an interpleader order allowing Megapro to pay the
    funds it is holding into court to await the outcome of the issue of the validity
    and effect of the Acknowledgements. The Estate participated in the motion,
    supporting the defendants argument that it should be added as a necessary
    party to the action.

[4]

The motion judge dismissed the defendants motion on the basis that the
    Estates claim is statute barred, as Mrs. Zimmerman, the Estate trustee,
    discovered the Acknowledgements in 2010 following her husbands death. On this
    appeal, the appellant is the Estate. The defendants did not participate on the
    appeal.

B.

Factual Background to the motion

(1)

Acquisition and Management of the Property on Danforth Avenue

[5]

In September 1982, the defendant, 3030 Danforth Ltd., purchased the property
    at 3026-3032 Danforth Avenue in Toronto. 3030 Danforth was incorporated for the
    purchase in order to reflect the ownership interests of the share owners as
    follows: Faigie Abrahamovitz, 2 common shares; Frances Spiro, 1 common share; T.M.W.
    Consolidated Holdings Inc., 2 common shares; and Michael Berens, 1 common share.

[6]

The relationships between the various parties are as follows. The defendant,
    Lois Kalchman, was Michael Berens niece. Upon his death, she inherited his
    common share in the property. The defendant, Mark Berens, was Michael Berens
    nephew. Mark Berens is a director and officer of the defendants, Megapro, 3030
    Danforth, and T.M.W. He and Mr. Zimmerman were law partners before Mr.
    Zimmerman died in 2010. The respondent, Mrs. Spiro, was Mr. Zimmermans sister;
    the respondent, Mrs. Abrahamovitz, is married to Mr. Zimmermans cousin. Mrs.
    Blanca Zimmerman is the widow of Gabriel Zimmerman and the Estate trustee.

[7]

Mr. Zimmerman managed the Danforth property from 1982 and collected a
    management fee for this service until he became ill in 2009. In 2002, he began
    to collect an extra fee from the respondents, pursuant to a signed
    Acknowledgement from each of them, which gave him a 25% interest in the
    respondents respective shares of the rental income and the right to purchase
    25% of their respective interests in the property for $1 if it were to be sold.

[8]

Megapro began managing the Danforth property following Mr. Zimmermans
    illness and continued managing the property following his death in August 2010.
    When Blanca Zimmerman learned about the Acknowledgements after her husbands
    death in the fall of 2010, she told the respondents she was seeking to enforce
    the Acknowledgements, and brought them to the attention of Mark Berens,
    claiming an ongoing right to 25% of the interests of the respondents.

[9]

That claim is contested by the respondents, who deny signing the
    Acknowledgements. A lawyer retained by Mrs. Abrahamovitz sent a letter to Mark
    Berens on behalf of Megapro on December 22, 2010, demanding that no further
    funds be paid to the Estate and that the full amount of the respondents share
    of the rents be paid out to them.

[10]

In
    March 2011, a letter from Mark Berens advised that Megapro would not distribute
    any funds to the respondents or the Estate until their dispute was resolved,
    and that Megapro would await that resolution. It also indicated that Megapro
    would pay the monies into court if the matter proceeded to litigation.

(2)

The Pleadings in the Underlying Action

[11]

The
    respondents issued their statement of claim against the defendants, but not against
    the Estate, in September 2011, claiming that there was no legal impediment to
    the payment of the rents collected by Megapro. The respondents requested the funds
    be paid in accordance with the shareholdings of the shareholders of 3030
    Danforth.

[12]

The
    statement of defence acknowledged the respondents claims, claimed no interest
    over the money, and stated that the defendants were prepared to pay all
    disputed funds into court. The defendants pleaded that they had held back the
    rents because of the Acknowledgements, which purported to entitle the Estate to
    a portion of the respondents rental income.

[13]

The
    respondents delivered a reply, where they denied signing the Acknowledgements,
    pleading in the alternative that the Acknowledgements were void.

[14]

There
    is no pleading that the claim of the Estate is statute barred.

(3)

The Motion to Add the Estate as a Necessary Party

[15]

The
    action remained outstanding as of 2016. In April 2016, the defendants lawyer
    sent a letter to the Estate, inviting the Estate to assert an interest in the
    disputed funds. That letter was forwarded to the respondents, together with a
    separate letter from the defendants lawyer indicating that the Estate had confirmed
    it intended to assert its interest, and requesting that the Estate be added as
    a party to the action on consent.

[16]

When
    consent was not granted by the respondents, in June 2016 the defendants brought
    the motion for an order to add the Estate as a necessary party to the action
    under r. 5.03 of the
Rules of Civil Procedure
, R.R.O. 1990, Reg. 194, and
    also moved for an interpleader order to allow them to pay into court the
    outstanding undistributed funds in the amount of $67,000, and release them from
    liability for that amount. Under the grounds pleaded for the interpleader order,
    Megapro stated that it remained willing to deposit the undistributed rental
    profits with the court or dispose of it as the court directs.

[17]

The
    Estate was made a party to the motion and joined in the request to be added as
    a party to the action. The Estates position (and that of the defendants) was
    in essence that the validity of the Acknowledgements had to be determined in
    order to determine which party is entitled to the funds.

C.

The Decision of the Motion Judge

[18]

The
    motion judge set out the positions of the parties to the motion: the defendants
    sought to add the Estate as a necessary party that was required to adjudicate
    the issues effectively, while the respondents raised a limitation issue, taking
    the position that the limitation period for the Estate to bring an action had
    expired. They also asserted that the test for adding a necessary party had not
    been met. The Estates position was that its cause of action had not yet
    crystallized because the property had not been sold, nor the rental proceeds
    distributed.

[19]

The
    motion judge determined that the Estates claim had crystallized and was
    discovered in August 2010, shortly after the death of Gabriel Zimmerman, when Mrs.
    Zimmerman found the Acknowledgements and relied on them to claim from Megapro payment
    of 25% of the respondents rents. The motion judge concluded that the
    limitation period under s. 4 of the
Limitations Act, 2002
,
S.O. 2002 c. 24, Sch. B

applied, that
    the Estates claim was statute barred, and that s. 21(1)
[1]
of the Act prevented adding the Estate to the proceeding.

[20]

The
    motion judge added that had the claim not been statute barred, then it is
    likely that the Estate would have been added as a party. In making this
    conclusion, the motion judge followed Molloy J.s reasons in
Ontario
    Federation of Anglers and Hunters v. Ontario (Minister of Natural Resources and
    Forestry)
, 2015 ONSC 7969, 128 O.R. (3d) 501, at paras. 10-11, regarding
    adding necessary parties under r. 5.03.

D.

Issue

[21]

Did
    the motion judge err in dismissing the motion on the basis that the Estates
    claim is statute barred?

E.

Analysis

[22]

Section
    4 is the basic limitation section of the
Limitations Act, 2002
and
    provides:

Unless this Act provides otherwise, a proceeding shall not be
    commenced in respect of a claim after the second anniversary of the day on
    which the claim was discovered.

(1)

The Statement of Defence Already Pleads the Estates Claim

[23]

The
    Estate argues on the appeal that even if its claim was known in 2010, because
    the statement of defence pleads all of the facts regarding the Acknowledgements
    that it relies on, its claim has essentially been pleaded and has therefore
    already been commenced in the action before the court. For that reason, the
    Estates claim is not statute barred, and adding the Estate as a party would
    not amount to commencing a new claim within the meaning of s. 4 of the
Limitations
    Act, 2002
.

[24]

I
    would not accept this argument for two reasons. First, the Estate has not
    commenced any proceeding or claimed any relief. The essence of this argument
    amounts to invocation of the old common law doctrine of special circumstances
    that no longer applies under the
Limitations Act, 2002
. See:
Joseph
    v. Paramount Canada's Wonderland
, 2008 ONCA 469, 90 O.R. (3d) 401. The
    Estate is essentially saying that because all of the facts have already been
    pleaded in the action, there is no surprise and no prejudice to the defendants
    (or other parties) to allow the Estate to be added as a party now, even though
    the limitation period has expired.

[25]

That
    was what occurred in the case of
Thoman v. Fleury
(1996), 28 O.R. (3d)
    398 (C.A.), decided under the former
Limitations Act
, R.S.O. 1990, c.
    L.15, where the doctrine of special circumstances was applied.

[26]

In
Thoman
, the plaintiffs brought a motion to add Thoman as a defendant
    in an action relating to a motor vehicle accident. Thoman was already a
    plaintiff in the larger action, claiming damages under the
Family Law Act
, R.S.O. 1990, c. F.3
. She was also the
    owner of the car in which the accident occurred. The court noted that the claim
    against Thoman was technically statute barred, but could be saved by applying
    the doctrine of special circumstances. The court observed that her addition
    made no difference to the defendant insurer, as it had pleaded all the defences
    it would have pleaded had Thoman been named as a defendant from the outset. The
    court relied on a relevant special circumstance identified by the Supreme Court
    in
Basarsky v. Quinlan
, [1972] S.C.R. 380: that all of the facts
    [underpinning the new claim] were pleaded in the original statement of claim.

[27]

While
    this approach may well have assisted the Estate under the former
Act
and the common law, as this court explained in
Canadas Wonderland
,
    the current
Limitations Act, 2002
is intended to be comprehensive and
    does not allow a party to be added after the limitation period has expired on
    the basis of special circumstances. The doctrine of special circumstances is
    a common law principle which is no longer applicable under the new
Act
.

[28]

Second,
    to give effect to the Estates submission would allow one party to assert
    another partys claim, and effectively toll the limitation period for that
    party indefinitely beyond the two-year limit, regardless of that partys discovery
    of its claim. Such a result would be contrary to the scheme of the
Act
.

(2)

The Statement of Defence Does Not Plead a Limitations Defence

[29]

Although
    I would not give effect to the submission by the Estate that it is entitled to
    relief because the statement of defence already pleads its claim, the fact that
    the defendants have pleaded those facts in order to put the issue of the
    validity of the Acknowledgements before the court and did not raise any
    limitation argument, made it an error for the motion judge to find that the
    Estates claim was statute barred.

[30]

This
    court explained in
Beardsley v. Ontario
(2001), 57 O.R. (3d) 1 (C.A.),
    at para. 21 that the expiry of a limitation period does not render a cause of
    action a nullity; rather, it is a defence and must be pleaded. See also:
Strong
    v. Paquet Estate
(2000), 50 O.R. (3d)
    70 (C.A.), at paras. 35-37;
Tran v. University of Western
    Ontario
, 2016 ONCA 978, 410 D.L.R. (4th) 527, at para. 18; and
Salewski
    v. Lalonde
, 2017 ONCA 515, 137 O.R. (3d) 750, at para. 43.

[31]

There
    are two aspects to the statement from
Beardsley
. One is that from a
    procedural fairness point of view, a plaintiff is entitled to plead in response
    to a limitations defence, so that if a motion is brought to dismiss the claim,
    the court will have all the facts relied on to assess discoverability, or whatever
    other factors a plaintiff may wish to raise in response:
Beardsley
, at para. 22
;
Strong Estate
, at para. 38
;
Metropolitan Toronto
    Condominium Corp. No. 1352 v. Newport Beach Development Inc.
, 2012 ONCA
    850, 113 O.R. (3d) 673, at paras. 115-116; and
Greatrek Trust S.A./Inc. v.
    Aurelian Resources Inc.
, [2009] O.J. No. 611 (Ont. S.C.J.), at para. 18.

[32]

The
    requirement that an affirmative defence, including a limitations defense, be
    pleaded to avoid surprise to the opposite party is reflected in r. 25.07(4) of
    the
Rules of Civil Procedure
, which provides:

In a defence, a party shall plead any matter on which the party
    intends to rely to defeat the claim of the opposite party and which, if not
    specifically pleaded, might take the opposite party by surprise or raise an
    issue that has not been raised in the opposite partys pleading.

[33]

The second aspect of the statement from
Beardsley
,
    however, is more germane to this case. A limitations defence is just that, a
    defence:
Lacroix (Litigation Guardian of) v. Dominique
, 2001 MBCA
    122, 202 D.L.R. (4th) 121, at para. 18. A defendant chooses whether or not to
    rely on a limitations defence, but is not obliged to do so: Graeme Mew, Debra
    Rolph, & Daniel Zacks,
The Law of Limitations
, 3rd ed. (Toronto:
    LexisNexis Canada Inc., 2016) p.166. See
e.g.
:

Strong Estate
, at paras. 35-40; and
Girsberger v.
    Kresz
(2000), 50 O.R. (3d) 157 (C.A.), at para. 13.

[34]

The
    fact that the choice belongs to the defendant is codified in s. 22 of the
Limitations
    Act, 2002
, which allows a limitation period to be suspended or extended by
    agreement.

[35]

This
    is a very important and useful provision that allows parties to a potential
    claim to suspend the running of a limitation (toll the limitation period) to
    allow them to conduct investigations or settlement discussions, without
    pressure on the claimant to commence the action unnecessarily. It promotes
    judicial economy and is cost-effective for the parties.

[36]

Obviously,
    this provision would be ineffective if another party could assert the limitation
    period in spite of the defendants agreement to toll the limitation period, or
    if the action became a nullity on the expiry of the limitation period. See for
    example,
Schreiber v. Lavoie
(2002),
59 O.R. (3d) 130 (S.C.J.), where a third party was not entitled to rely on r.
    29.05(1) (a rule which allows a third party to plead a defence not raised by
    the defendant) to assert a limitations defense that the defendant had expressly
    agreed it would not rely on.

[37]

In
    this case, it was neither the pleading nor the position of the defendants, at
    any time in this litigation, that the Estates claim is statute barred. To the
    contrary, the defendants were the ones who invited the Estate to assert its
    claim in 2016, and who initiated the motion to add the Estate as a party to the
    action when the respondents would not consent to add the Estate.

[38]

The
    defendants have also continued to collect and retain the portion of the rents
    belonging to the respondents on the basis that the Acknowledgements, if valid,
    make part of those rents payable to the Estate. They have assured the Estate
    trustee, Mrs. Zimmerman, that they were holding the funds to await the outcome
    of the litigation. Therefore, not only has there been no pleading of a
    limitations defence, but the defendants have made it clear by their actions
    that they do not rely on such a defence.

(3)

The Estates Claim is Against the Defendants, not the Respondents

[39]

While
    the defendants never raised any limitations defence, it was the respondents
    (the plaintiffs) who took the position on the motion that the Estates claim
    was statute barred. The respondents had no standing to do so. By giving effect
    to their submission, the motion judge erred in law by treating the respondents
    as if they were defendants in an action by the Estate.

[40]

The
    respondents sued the defendants for payment of the full amount of their share
    of the rents that Megapro collected from the Danforth property. They did not
    sue the Estate because they seek no relief against the Estate, which does not
    have the money. Similarly, the Estate wants Megapro to pay it the same funds.
    The Estate did not sue the respondents for the same reason that the respondents
    did not sue the Estate: it claims no relief against the respondents because
    they do not have the money. Although the common issue of the validity of the
    Acknowledgements will determine which party is entitled to the funds from the
    defendants, there is no
lis
between the respondents and the Estate
    because neither claims any relief against the other. Either party can only obtain
    relief by claiming against the party that currently holds the funds: the
    defendants.

[41]

The
    Estate could have sued the defendants, just as the respondents did, but there
    was no need to do so, as Mark Berens assured Mrs. Zimmerman he would pay her if
    the court determined that the Acknowledgements were valid.

[42]

By
    approaching the issue on the motion as if it concerned a claim brought by the
    Estate against the respondents, the motion judge erred in allowing the
    respondents to assert a limitations defence against the Estate. As the claim of
    the Estate is against the defendants, the right to raise a limitations defence
    lies with them, not the respondents.

(4)

Adding the Estate as a Necessary Party

[43]

Rule
    5.03(1) provides for the addition of a necessary party as follows:

Every person whose presence is necessary to enable the court to
    adjudicate effectively and completely on the issues in a proceeding shall be
    joined as a party to the proceeding.

[44]

I
    agree with the motion judge that if there is no limitation issue, then the
    reasons of Molloy J. in
Ontario Federation
,
at paras. 10-11, are apt regarding the addition of
    necessary parties under r. 5.03(1):

In determining whether a person is a necessary party the
    court must consider whether they are likely to be affected or prejudiced by the
    order being sought. If the order sought will determine the rights of a person
    who is not a party, that person is entitled to be added so that his voice will
    be heard before his rights are determined.

One of the main purposes underlying these Rules is to ensure
    that all parties are before the court when an order is made affecting their
    rights. This will avoid a multiplicity of proceedings and the risk of
    inconsistent results.

[45]

The
    Estate is a necessary party to the action to ensure that it will be bound by
    the courts determination of the issue of the validity of the Acknowledgements.
    Otherwise, that issue could be re-litigated with the risk of inconsistent
    verdicts, if the Estate were to sue the defendants for payment in a separate
    action. Subsection 21(1) of the
Act
does not bar the addition of the
    Estate because, as explained, where the defendants have not pleaded a
    limitations defence, the Estates claim against the defendants has not expired.

F.

Result

[46]

I
    would therefore allow the appeal, set aside the decision of the motion judge,
    and order that the Estate be added as a party to the action. As the defendants
    did not appeal the decision of the motion judge, the issue of whether they may
    interplead and pay the funds into court is not before the court on the appeal.

[47]

Costs
    of the appeal in the agreed amount of $5000, inclusive of disbursements and HST,
    are payable by the respondents to the Estate.

Released: K.F. March 15, 2018

K.
    Feldman J.A.

I
    agree. John Laskin J.A

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





[1]
Subsection 21(1) of the Act provides: If a limitation period in respect of a
    claim against a person has expired, the claim shall not be pursued by adding
    the person as a party to any existing proceeding.


