Docket: T-286-25
Citation: 2025 FC 1135
Ottawa, Ontario, June 25, 2025
PRESENT: Mr. Justice Pentney
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BETWEEN: |
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ST. JOHN’S PORT AUTHORITY |
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Plaintiff
(Defendant by Counterclaim) |
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and |
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THE CITY OF ST. JOHN’S |
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Defendant
(Plaintiff by Counterclaim) |
ORDER AND REASONS
[1] Southside Road is a municipal road within the boundaries of the City of St. John’s, Newfoundland and Labrador (the Defendant and Plaintiff by Counterclaim in this matter, referred to as “the City”). A 1.6 km stretch of this road was included within the property managed by the St. John’s Port Authority (the Plaintiff and Defendant by counterclaim, referred to as “the Port”) when its Letters Patent were issued in May 1999.
[2] The motion before the Court concerns a dispute relating to the portion of the road falling within the lands managed by the Port. Over the past several years, the Port has attempted without success to transfer full responsibility for the road to the City. The City, however, continues to maintain and provide services for the entire road, including the portion that is managed by the Port. In 2022, after unsuccessful efforts to transfer the road, the Port purported to charge the City a license or user fee for the road, but none of these bills have been paid. The Port has launched an action to recover amounts it says are owed to it as a result of the unpaid license/user fees. For its part, the City has filed a counterclaim, seeking to recover an amount withheld by the Port as compensation for remediation work it had done to minimize the risk of a rock fall onto the road.
[3] The Port has brought a motion to strike the City’s counterclaim. That is the matter before the Court. For the reasons set out below, the Port’s motion will be dismissed.
I. Background
[4] On the limited record before the Court, there are indications that questions about the status of the road date back to the mid-1960s. For the purposes of this motion, it is not necessary to go back that far. Over the past several years, the Port and the City have engaged in discussions with a view to arranging to transfer the portion of the Southside Road from the Port to the City. As of now, the parties have not agreed on the terms of such a transfer. It appears there may be several issues in dispute between the parties relating to the transfer of the road.
[5] Two things are not in dispute, however. First, it is agreed by both parties that the City has operated the road as a municipal thoroughfare and has maintained it, for example by making necessary repairs and providing snow plowing and garbage collection services. Second, the parties agree that the Port has paid payments in lieu of taxes (referred to as “PILT”) to the City for the value of the land under its authority, including the portion of the road. These payments have been made pursuant to the Payments in Lieu of Taxes Act, RSC 1985, c M-13 [the PILT Act] and the Crown Corporation Payments Regulations, SOR/81-1030 [the Regulations] made pursuant to para 9(1)(f) of the PILT Act.
[6] Failing an agreement to transfer the road, the Port decided to impose a charge on the City, under the authority of the Canada Marine Act, SC 1998, c 10 [the Act], and the Letters Patent issued to the Port under s. 8 of that Act. The Port describes the charge as a “user license/fee.” Since April 2022, the Port has sent invoices to the City, but no payments have been made.
[7] To complete the background, in late 2020 to spring 2021, the Port performed work on its property adjacent to the road to mitigate the risk of a rock fall. The Port says that this work was done following a study by the City, but the City refused to undertake the project because the land was part of the Port. The Port arranged to have the remediation work done to address the risk. It shared the total cost of this work with the Department of Fisheries and Oceans, with each paying $750,000 for the project. Pursuant to paragraph 9(c) of the Regulations, the Port decided to deduct $750,000 from its PILT payments to the City because it took the view that the City was responsible for the remediation work but refused to get it done and pay for it.
[8] On January 30, 2025, the Port filed a Statement of Claim in this Court, seeking to recover over $1.4 million, the amount it says the City owes by virtue of the user license or fee. On March 13, 2025, the City filed its Statement of Defence and Counterclaim. The City’s defence to the claim denies that the Port has the authority to impose the licensing fee. The City’s counterclaim seeks to recover the $750,000 in PILT that it says was wrongly withheld by the Port. For its part, the Port’s reply to the counterclaim claims that it had full authority under the PILT Act and the Regulations to deduct its expenditures for the remediation it undertook because the City was unwilling to pay for it. This recital of the background brings us to the issue before the Court.
[9] On April 22, 2025, the Port filed a motion in writing seeking to strike the City’s counterclaim under Rule 221 of the Federal Courts Rules, SOR/98-106 [the Rules].
[10] The Port submits that the City’s counterclaim discloses no cause of action (Rule 221(1)(a)); is immaterial (Rule 221(1)(b)); and is an abuse of process of the Court (Rule 221(1)(f)). The City argues that the Port has failed to meet the high test that applies to striking a pleading at a preliminary stage, and it says that the affidavit the Port filed in support of its motion should be ignored. The City argues that the Port’s motion should be dismissed, and it challenges the admissibility of the affidavit filed by the Port as part of its motion record.
II. Issues
[11] The only issue is whether the Port’s motion to strike should be granted. A related question is whether the affidavit filed by the Port in support of its motion is admissible.
III. Analysis
A. Legal framework for a motion to strike a counterclaim
[12] Rule 189(1) provides that a “defendant who claims to be entitled to relief against a plaintiff may make a counterclaim instead of bringing a separate action.” This confirms that a counterclaim is essentially an independent action which proceeds within the same procedural vehicle as the main action. Therefore, the same test applies to a motion to strike either a statement of claim or a counterclaim.
[13] This is confirmed in abundant case-law, which has found that a counterclaim must be treated as a separate and distinct action. Under this approach, a counterclaim can continue even if the main action does not proceed because it is struck, settled, stayed or discontinued: see Rule 190; Purcell Systems, Inc v Argus Technologies Ltd, 2008 FC 1210 at para 30. Similarly, “(e)ven if the main action falls squarely within the Court’s jurisdiction, the jurisdiction of the Court to entertain the counterclaim must be assessed independently…:” Farmobile, LLC v Farmers Edge Inc, 2018 FC 915 at para 18 (aff’d on appeal: 2018 FC 1269) [Farmobile].
[14] Rule 221 sets out the grounds on which a motion to strike may be brought in this Court. The relevant portions are:
Motion to strike
221 (1) On motion, the Court may, at any time, order that a pleading, or anything contained therein, be struck out, with or without leave to amend, on the ground that it
(a) discloses no reasonable cause of action or defence, as the case may be,
(b) is immaterial or redundant,
(f) is otherwise an abuse of the process of the Court, and may order the action be dismissed or judgment entered accordingly.
Evidence
221 (2) No evidence shall be heard on a motion for an order under paragraph (1)(a).
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Requête en radiation
221 (1) À tout moment, la Cour peut, sur requête, ordonner la radiation de tout ou partie d’un acte de procédure, avec ou sans autorisation de le modifier, au motif, selon le cas :
a) qu’il ne révèle aucune cause d’action ou de défense valable;
b) qu’il n’est pas pertinent ou qu’il est redondant;
f) qu’il constitue autrement un abus de procédure. Elle peut aussi ordonner que l’action soit rejetée ou qu’un jugement soit enregistré en conséquence.
Preuve
(2) Aucune preuve n’est admissible dans le cadre d’une requête invoquant le motif visé à l’alinéa (1)a).
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[15] The three grounds that are relevant here are set out in paragraphs (a) discloses no reasonable cause of action or defence; (b) is immaterial or redundant; and (f) is otherwise an abuse of process of the Court.
[16] The principles that apply to a motion to strike a claim on the basis that it discloses no reasonable action were recently summarized by the Federal Court of Appeal in Brink v Canada, 2024 FCA 43:
[43] […] a statement of claim should not be struck unless it is plain and obvious that the action cannot succeed, assuming the facts pleaded in the statement of claim to be true: Hunt v. Carey Canada Inc., 1990 CanLII 90 (SCC), [1990] 2 S.C.R. 959, [1990] S.C.J. No. 93 at 980; Pro-Sys Consultants Ltd. v. Microsoft Corporation, 2013 SCC 57 at para. 63. In other words, the claim must have no reasonable prospect of success: R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42 at para. 17.
[44] The onus is on the party who seeks to establish that a pleading fails to disclose a reasonable cause of action: La Rose v. Canada, 2023 FCA 241 at para. 19; Edell v. Canada, 2010 FCA 26 at para. 5. The threshold that a plaintiff must meet to establish that a claim discloses a reasonable cause of action is a low one: Brake v. Canada (Attorney General), 2019 FCA 274 at para. 70.
[45] Pleadings must, moreover, be read generously, in a manner that accommodates any inadequacies in the allegations that are merely the result of deficiencies in the drafting of the document: see Operation Dismantle Inc. v. The Queen, 1985 CanLII 74 (SCC), [1985] 1 S.C.R. 441, [1985] S.C.J. No. 22 at 451.
[46] Motions judges should not delve into the merits of a plaintiff’s argument, but should, rather, consider whether the plaintiff should be precluded from advancing the argument at all: Salna v. Voltage Pictures, LLC, 2021 FCA 176 at para. 77. Recognizing that the law is not static, motions judges must also err on the side of permitting novel, but arguable claims to proceed to trial: R. v. Imperial Tobacco, above at paras. 19-25; Mohr v. National Hockey League, 2022 FCA 145 at para. 48, leave to appeal to SCC refused, 40426 (20 April 2023).
[47] That said, it must also be recognized that there is a cost to access to justice in allowing cases that have no substance to proceed. The diversion of scarce judicial resources to such cases diverts time away from potentially meritorious cases that require attention: Mohr, above at para. 50; Coote v. Lawyers’ Professional Indemnity Company, 2013 FCA 143 at para. 13.
[17] Pleadings, or portions of pleadings, may also be struck under Rule 221(1)(b) because they are “immaterial or redundant.” This ground can apply in a wide variety of circumstances, including where a pleading raises extraneous matters that are not material to the claim: 9107-7438 Québec Inc v Trust Express Inc, 2022 FC 1197 at paras 27 and 29; where a pleading refers to and relies on a procedural step that has no legal force, and is thus extraneous to the main claim: Distrimic Inc v. Dispill Inc, 2006 FC 1229 at para 52 ; or to a pleading that lacks sufficiently clear allegations of fact to support the claim: Biosig Instruments Inc v Sears Canada Inc, 2006 FC 206 at para 33. On the other hand, the Court will refuse to strike out “surplus statements” included in pleadings that are not prejudicial: Apotex Inc v Glaxo Group Ltd, 2001 FCT 1351 (CanLII) at para 6.
[18] Striking a claim as an abuse of process also covers a wide terrain. It is commonly raised in situations where a claim seeks to relitigate essentially the same dispute that has previously been determined in another process, or where it seeks to circumvent the usual process to challenge a decision: Zhao-Jie v TD Waterhouse Canada Inc, 2024 FC 261 at paras 8–11 and the cases cited therein.
[19] With this background, I turn to the issues raised in this case.
B. The affidavit is admissible only in respect of the second and third grounds raised by the Port
[20] The Port filed the affidavit of Sean Hanrahan, the President and Chief Executive Officer of the St. John’s Port Authority with its motion record. The City objects to the affidavit, noting that a motion to strike a claim as disclosing no cause of action under Rule 221(1)(a) must be decided with reference only to the pleadings, as set out in Rule 221(2). The Port claims that the affidavit was filed solely in support of its claims under the other headings of Rule 221.
[21] There is no dispute that under Rule 221(2), no evidence may be considered on the question of whether the counterclaim discloses a reasonable cause of action. That question is to be determined on the basis of the wording of counterclaim, and the allegations therein shall be taken as true unless they are incapable of proof, a factor which is not pertinent in this case.
[22] The affidavit sets out the Port’s perspective on the context and background for the remediation work and the withheld PILT that lies at the heart of the City’s counterclaim. It also expresses certain views regarding the Port’s view that the dispute over the rockfall remediation project and the PILT payment are separate and apart from the license fee issue.
[23] There is some overlap in the Port’s arguments on the motion to strike for not disclosing any cause of action. For example, as discussed below, the Port argues that the counterclaim should be struck because it amounts to a collateral attack on its decision to withhold the $750,000 PILT. This is one of the Port’s main arguments that the counterclaim fails to disclose a reasonable cause of action. The Port also advances this point in its submission that the counterclaim is an abuse of process. To the extent that the affidavit relates to any of the Port’s arguments on the validity of the cause of action, it is not admissible. That said, I accept the Port’s submission that the affidavit pertains to its other two grounds, and it is admissible solely for that purpose.
C. The motion to strike
[24] Before discussing the submissions on the motion to strike, it is first necessary to characterize the essential nature of the counterclaim. As noted previously, the City seeks to recover the $750,000 PILT that was withheld by the Port in 2021. The City argues that the Port had no legal basis to withhold this amount.
[25] As it appears from the limited material before me, the Port withheld the amount it paid towards the remediation work on the basis of paragraph 9(c) of the Regulations, because it contended that the City had failed to provide the Port property with a municipal service (see also paragraph 7(c) of the PILT Act). The City takes the position that the Port is responsible for the management of the lands within its boundaries, including both the road and the rock face on which the remediation work was done. Because of that, the City argues that the Port had no authority to withhold the $750,000 PILT. In its counterclaim, the City seeks payment of that amount. That is the essence of its claim: that the Port misinterpreted or misapplied the authority granted to it under the Regulations by deducting an amount of PILT that was otherwise payable.
[26] The Port advances two arguments in support of its claim that the City’s counterclaim discloses no reasonable cause of action. It says the counterclaim amounts to an impermissible collateral attack on the Port’s October 2022 decision to withhold PILT. The Port submits that the City was required to seek judicial review of that decision, under s. 18(3) of the Federal Courts Act, RSC 1985, c F-7 (“Federal Courts Act”) but it failed to do so within the 30-day statutory time limit set out in s. 18.1(2) of that Act and it has not sought an extension of time. Therefore, according to the Port, the City cannot now seek damages by way of counterclaim. The Port argues that its decision to withhold PILT is now final and binding, and the Port is barred from seeking damages by way of counterclaim.
[27] In addition, the Port submits that the counterclaim should be struck because it fails to disclose essential elements of the claim and wrongly conflates the remediation project payment issue with the license fee issue. The Port argues that these are separate and distinct matters. In addition to seeking damages for the $750,000 PILT that was withheld, the City’s counterclaim seeks repayment of any PILT that has been withheld as payment for the license user fee. The Port submits that the counterclaim fails to provide any indication that PILT has been withheld to offset the unpaid license user fee, or to provide any facts on which this aspect of the claim is based. The Port says that it has paid its PILT in full, and the only deduction was to offset the cost of the remediation.
[28] For its part, the City contends that the Port’s arguments should be rejected. It says that a claim should only be struck when it is “plain and obvious” that it cannot succeed, and that novel claims should not be struck at an early stage simply because they raise new issues: Hunt v Carey Canada Inc, 1990 CanLII 90 (SCC); Coastal Float Camps Ltd v Jardine Lloyd Thompson Canada Inc, 2014 FC 906 at para 19.
[29] The City argues that its counterclaim should not be struck as a collateral attack on the Port’s decision to withhold PILT. It contends that its claim for recovery is not barred by its failure to challenge the Port’s decision in 2022 by way of judicial review. According to the City, the Port’s argument on this point is inconsistent with the law as set forth in Parrish & Heimbecker Ltd v Canada (Agriculture and Agri-Food), 2010 SCC 64 [Parrish], and Canada (Attorney General) v TeleZone Inc, 2010 SCC 62 [TeleZone].
[30] As for the argument that its pleading is deficient, the City submits that the proper relief is to grant leave to amend the pleading rather than striking it out.
[31] I am not persuaded that the counterclaim should be struck because it does not disclose a reasonable cause of action. Accepting the allegations in the counterclaim as true, as I am required to do by the jurisprudence, the Port purported to withhold PILT that would be otherwise payable, to offset its share of the cost of the remediation work that was done to prevent rock fall onto the road. The Port purported to rely on para 9(c) of the Regulations, which provides:
[32] The City’s counterclaim is based on its argument that the Port had no basis to rely on this provision because the remediation work was performed on property within the Port that abuts the portion of the road under the Port’s management. The dispute between the parties is, in essence, about the interpretation of para 9(c) of the Regulations and its application, if any, to the facts relating to the remediation project.
[33] I agree with the City that its claim cannot be defeated as a collateral attack on the Port’s decision to withhold PILT. There is no doubt that the City could have launched an application for judicial review to challenge the Port’s decision to withhold the PILT amount around the time that the decision was taken: see, for example: Montréal (City) v Montreal Port Authority, 2010 SCC 14 [Montreal Port]; Laval (Ville) c Canada (Procureur général), 2025 CAF 46; Ottawa (City) v Canada (Public Services and Procurement), 2025 FC 315. However, I cannot agree with the Port’s claim that the City’s failure to do so means that its counterclaim amounts to a collateral attack on the decision.
[34] The Port’s argument on this point runs directly counter to the teaching of the Supreme Court of Canada decision in Parrish. In that case, Parrish sought to recover damages it said were caused by decisions made by the Canada Food Inspection Agency (CFIA) in relation to permits Parrish needed to import wheat. Parrish did not seek judicial review of those decisions at the time they were made, but rather launched an action seeking damages in this Court. The action was brought under s. 17 of the Federal Courts Act, which gives this Court concurrent jurisdiction over claims against the federal Crown. The Defendant CFIA argued that Parrish could not bring a claim in damages because it did not challenge the decisions on judicial review. The Supreme Court held that there was nothing in ss. 17 or 18 of the Federal Courts Act that required Parrish to be successful on judicial review before bringing a claim for damages: Parrish at para 18.
[35] The same reasoning applies here. The counterclaim is not a collateral attack; rather, it is a direct attack on the legality of the Port’s decision, for which the City claims damages in an effort to recover the $750,000 the Port withheld from its PILT payment. The City does not seek any of the remedies set out in s. 18(1), but rather it asks for damages, relief that is not available on judicial review. The Port has not pointed to any jurisprudence that has ruled that an action in damages is barred unless a PILT decision has been found to be invalid on judicial review. Based on the guidance of TeleZone and Parrish, I cannot accept the Port’s argument on this point.
[36] The Port also argued that the City’s counterclaim should be struck because it fails to disclose the essential elements of the claim. As I understand this argument, it relates solely to the City’s claim for repayment of any PILT that was unilaterally withheld as repayment for the license or user fee. While I agree with the Port that this aspect of the claim could have been spelled out in greater detail, I am not persuaded that this is a basis to strike it at this stage of the proceeding. Any deficiency in this aspect of the pleading can be cured by amendment.
[37] The second ground advanced by the Port is that the counterclaim is “immaterial.” The Port argues that the remediation project issue is wholly immaterial to the license fee issue that lies at the heart of its Statement of Claim, since the two claims relate to different parcels of land, different time periods. and concern decisions that stand on separate legal footings.
[38] This argument can be disposed of quickly. The fact that the counterclaim arises from a separate legal dispute between the parties is not a basis to strike it out. As discussed above, the Rules and the jurisprudence recognize that a counterclaim is a separate legal action that is simply grafted onto the procedural vehicle of the main action: Rule 190 and Farmobile at para 18. The dispute here is between the same parties. Both matters concern the interpretation and application of federal law regarding PILT, and therefore this Court has jurisdiction over both the claim and counterclaim under the test set out in ITO-Int’l Terminal Operators v Miida Electronics, 1986 CanLII 91 (SCC). The fact that the claim and counterclaim involve different legal questions is a natural and normal part of the procedure and cannot provide a basis to strike the counterclaim.
[39] Finally, the Port argues that the counterclaim should be struck as an abuse of process, essentially because it amounts to a collateral attack and an attempt to circumvent the usual process for judicial review in this Court. The Port also submits that the counterclaim introduces deficient and immaterial pleadings into the main claim “through the intentional conflation of two separate and unrelated issues.”
[40] I have already explained why the counterclaim will not be struck because it raises a new and different issue from the Port’s main action; I will not repeat that discussion. I am not persuaded that the counterclaim amounts to an abuse of process. While I accept that the abuse of process ground covers a wide variety of deficiencies and failings, I can find none that condemn the City’s counterclaim in this case. The City will have to prove its claim in the usual course, and the Port will have access to the procedural protections and defences that are available in law. The mere fact that this may have the effect of adding some time and complexity to the main action is an inherent aspect of the process. Itis not itself a basis to strike the counterclaim.
[41] Moreover, the City’s counterclaim does not seek to circumvent the usual procedure for challenging PILT decisions. Among other things, the City seeks to recover damages through its action, a remedy which is not available on judicial review. In addition, as explained above, applying the rulings in TeleZone and Parrish leads to the conclusion that there is no basis to find that overturning the Port’s decision to withhold the $750,000 PILT is a precondition to the City’s action in damages.
[42] For the reasons set out above, the Port’s motion to strike will be dismissed.
[43] Exercising the discretion granted to me under Rules 400 and 401, I would grant costs on the motion to the City. This was not a particularly complicated matter, and the motion was disposed of in writing. Based on this, I find that costs should be calculated on the default scale set out in Rule 407, namely column III of Tariff B. If the parties are unable to agree on an amount within 14 days of this Order, they may advise the Court and a Direction will be issued setting the timeline for submissions.
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