Order Up! Court Of Appeal Clarifies The Final vs. Interlocutory Conundrum

The Court of Appeal for Ontario has provided much-needed guidance on the issue of differentiating between a final and interlocutory order in the context of summary judgments. This can be a perplexing question for appeal counsel, and one that has implications for which appeal route one must take.

In 1819472 Ontario Corp. v. John Barrett General Contractors Limited, 2024 ONCA 333, the court confirmed that whether an unsuccessful motion for summary judgment is a final or interlocutory order depends on the motion judge's intention to make a final determination on a question of fact or law. The court advised that it is a best practice for motion judges to explicitly state that they are doing so (and to cite the relevant rules of the Rules of Civil Procedure), but the failure to do so does not change the outcome. It is the motion judge's intention that is key.

FACTS

Susan Barrett and her husband operated Kleinberg Nursery, a garden centre in Woodbridge. Ms. Barrett owned the common shares of John Barrett General Contractors Limited ("JGBC"), which in turn owned Kleinberg Nursery, and Ms. Barrett's husband owned the nursery's lands. Ms. Barrett and her husband sold the business and lands to James Zaza. Mr. Zaza incorporated two corporations for the purpose of acquiring the business and lands: 1819472 Ontario Corp. ("9472"), which purchased the lands through a $525,000 vendor take-back mortgage that matured on April 12, 2017; and 1819471 Ontario Corp. ("9471"), which acquired the shares of both 9472 and JBGC

Subsequently, there was a default on the promissory note and 9472 sold the land. This led Ms. Barrett to object given that it jeopardized her collateral. Mr. Zaza then caused 9472 to disburse the sale proceeds before assigning 9471 into bankruptcy on April 12, 2017. 9471 then defaulted on the payment of the roughly $1.9 million that was due to Barrett under the promissory note and which had been secured by the lands. Ms. Barrett was 9471's only creditor.

Ms. Barrett became the sole officer, director, and shareholder of 9472 and caused 9472 to commence action to recover funds disbursed by Mr. Zaza. The respondent corporation, 9472, brought an action alleging that Mr. Zaza caused it to loan approximately $2.5 million to JBGC, causing another related corporation to default on a promissory note to Ms. Barrett in the process.

MOTION JUDGE'S DECISION

Mr. Zaza brought a motion for summary judgment, seeking a dismissal of the action on the basis that it was statute-barred under the Limitations Act. He argued that Ms. Barrett learned of the claim in May 2017, and the limitation period began at that time. The motion judge disagreed, and found the limitation period began on January 6, 2021, when Ms. Barrett became director of 9472.

The motion judge rejected Mr. Zaza's argument that Ms. Barrett's knowledge could be attributed to 9472 in May 2017, when the bankruptcy trustee had stated that she had "released" the shares of 9472 to Barrett pursuant to her security. The motion judge also found that in light of the limited information she received from the trustee in bankruptcy, it was reasonable for Ms. Barrett to bring the application to have the inspector appointed.

COURT OF APPEAL'S DECISION ON JURISDICTION

Although both parties agreed that the order under appeal was a final order, and that the Court of Appeal had jurisdiction, the court provided a helpful analysis on this issue, as the form of the order under appeal did not make the legal basis of the order obvious. The starting point for this analysis, as affirmed by the court, is that parties "cannot confer jurisdiction on a court if it does not have it".

The court reaffirmed that 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 this court. However, it gets more complicated where the motion is dismissed.

In dismissing the motion, the motion judge may have either intended to: (1) decide a substantive issue (whether the limitations defence is available); or, (2) decide that there is a genuine issue requiring trial, without intending that any findings made be binding on any subsequent proceeding. The court noted there is a presumption that, unless the motion judge specifically references the powers under r. 20.05(1) or r. 20.04(4) of the Rules of Civil Procedure to make binding determinations of fact or law, and specifies what material facts or questions of law are now not in dispute, the motion judge did not intend to make binding determinations of fact or law, and those determinations will remain to be made by the trial judge.

As a matter of best practice, the court recommended that a motion judge who intends to make a final determination on a question of fact or law ought to state the rule under which the determination has been made in the order issued. Although it would have been advisable for the motion judge to have referenced r. 20.04(4) in the order, there was no confusion about the nature of the order that was made. The order was a final order that disposed of the issue of the limitations defence. The appeal was properly brought in the Court of Appeal.

Each party understood that the motion judge had intended to decide the legal question of whether the action had been commenced within the period stipulated by the Limitations Act, 2002, and that this was intended to be a final order. The court held that the motion judge's reasons for a decision made this conclusion clear, even though the formal order did not. The limited scope of the motion explained why the motion judge did not grant summary judgment in favour of the plaintiff: the liability of the appellants was simply not before him for determination. The only issue was the limitations defence.

IMPLICATIONS

On the substantive issues for the appeal, the court determined that it was reasonable for Ms. Barrett to have waited until the facts of Mr. Zaza's wrongful distributions were confirmed, meaning the motion judge made no error in finding the matter was not statute-barred.

Although the parties agreed that the order was final and that the Court of Appeal had jurisdiction, it is important for counsel to keep in mind that parties cannot bestow jurisdiction upon the court. It is for the court to determine whether it has jurisdiction and if the parties selected the proper route of appeal. In order to best aid the court – and their clients – counsel must always be mindful of jurisdiction and the type of order they are appealing.