Case: 1819472 Ontario Corp. v. John Barrett General Contractors Limited, 2024 ONCA 333 (CanLII)

Keywords: jurisdiction of Court of Appeal; final order; summary judgment motion

Audio: You can listen to the following case summary using the player below or on Spotify, courtesy of dicta. Recordings of the full-text of Court of Appeal and SCC reasons for judgment are available on dicta premium.

Synopsis:

Intending to retire, Mr. John and Mrs. Susan Barrett agree to sell Kleinberg Nursery, a garden centre in Woodbridge, Ontario to a former employee, Mr. James Zaza Jr. For the purpose of completing the transaction, Mr. Zaza incorporates two corporations, including the Respondent 1819472 Ontario Corp. (9472). Following a series of transactions involving the corporations and John Barrett General Contractors Limited (JBGC) which net Mr. Zaza $2,948,221.45, Mrs. Barrett obtains an order under s. 161 of the Business Corporations Act, R.S.O. 1990, c. B. 16 appointing an inspector to investigate suspicions that Mr. Zaza misused corporate resources. (See paras. 5-12).

The inspector’s report details that a substantial proportion of funds from the sale are distributed to Mr. Zaza’s family members and others who were not arm’s length. (See para. 13). Two years later, Mrs. Barrett takes ownership of the shares of 9472. After becoming its sole officer, director, and shareholder, she causes 9472 to commence an action alleging it was defrauded by Mr. Zaza and various others (the Appellants). (See para. 16).

On a motion for summary judgment, the Appellants say the action is outside the relevant limitation period and statute-barred. The Motion Judge (Bale J.), dismisses the motion, finding the limitation period began to run when Mrs. Barrett became a director of 9472 because no one with knowledge of the alleged fraud controlled 9472 prior to that. (See para. 18). The Court of Appeal (Miller, Favreau, and Copeland JJ.A.) dismisses the appeal. (See paras. 2-3).

Importance:

A preliminary question arose as to the jurisdiction of the Court of Appeal. While both parties agreed that Bale J.’s order was final, the Court conducted a thorough review of the law as to its jurisdiction to hear the appeal.

As noted by the Court of Appeal, parties “cannot confer jurisdiction if a court does not have it”. (See para. 21; J.N. v. Durham Regional Police Service, 2012 ONCA 428, at para. 25; 2650971 Ontario Inc. v. Shameti, 2022 ONCA 62, at para. 7).

For the Court of Appeal, it is not “invariably the case” that a dismissal of a motion for summary judgment brought solely on the basis of a limitation period will be a final order. For the Court, it was necessary to explain the basis for jurisdiction “from first principles”. (See para. 23).

The Court of Appeal affirmed the direction in Skunk v. Ketash, 2016 ONCA 841 that an order dismissing a motion for summary judgment should clearly state that the motion judge is exercising a power to finally decide some question of fact or law. The Court noted that, had that direction been followed, “this exercise would not have been necessary”. (See para. 22).

The following “first principles” propositions were set out by the Court of Appeal:

  • Where a defendant brings a successful motion for summary judgment on the basis that the action is statute-barred due to having been commenced out of time, the resulting order is final, and an appeal lies to the Court of Appeal. (See para. 24).
  • However, where there is a dismissal of a summary judgment motion, there is a potential ambiguity (i.e., either the Motion Judge intends to decide the substantive issue or decide there is a genuine issue requiring a trial). (See para. 25; Skunk at para. 34; Ashak v. Ontario (Family Responsibility Office), 2013 ONCA 375 at para. 7).
  • To avoid uncertainty, there is a presumption that the Motion Judge did not intend to make binding determinations. (See para. 25; Skunk at para. 36; Ashak at para. 11).
  • As a “matter of best practice”, a Motion Judge who intends to make a final determination “ought to state the rule under which the determination has been made in the order issued”. (See para. 26).
  • Despite this, the failure to make such a statement is not determinative. The Court of Appeal can make a determination about the nature of the order based on the Motion Judge’s reasons. (See para. 26).

Applying these principles, the Court of Appeal observed that the order under appeal “simply states the motion for summary judgment is dismissed”. If the analysis stopped with the order itself, the general rule would apply and the appeal would lie to Divisional Court with Leave. (See para. 27). However, in this case, the Court of Appeal looked to the Motion Judge’s reasons. For the Court of Appeal, the reasons are “abundantly clear” as to the Motion Judge’s intention to make a final order. (See paras. 28-31).

As to the substantive merits of the appeal, the Court of Appeal determined that, prior to the inspector’s report, Mrs. Barrett was unaware of the facts that would make Mr. Zaza’s distributions wrongful – that it was reasonable, in the circumstances, to wait until those facts were confirmed beyond mere suspicion. (See paras. 47-48). For the Court, the Motion Judge made no reviewable error in finding the matter was not statute-barred. (See para. 48).

Counsel for the Appellants: Vito Scalisi and Rauf Azimov (Scalisi Barristers, Concord)

Counsel for the Respondent: Shawn Tock (Tock Dispute Resolution, Toronto)

Discuss on CanLii Connects