Executive Summary: Key Legal and Evidentiary Issues

• Dispute centered on alleged breaches of a settlement agreement known as the Reorganization Settlement Agreement (RSA).

• Core issue was whether the applicable limitation period was a "once and for all" or "rolling" limitation period.

• Defendants repudiated the RSA in February 2017 and stopped honoring obligations, including share transfers and monthly payments.

• Plaintiffs delayed legal action until March 2020, beyond the two-year limitation period under the Limitations Act, 2002.

• Court found plaintiffs had sufficient knowledge by February 2017 to commence an action, triggering the limitation period.

• Summary judgment was granted to the defendants, dismissing the action as statute-barred.

Facts and procedural history

The plaintiffs, Joseph Schwarz, Michael Weisspapir, Pharcon Inc., and RMW Pharma Consulting Inc., entered into a Reorganization Settlement Agreement (RSA) with the defendants, Eastgate Biotech Corp., Eastgate Pharmaceuticals Inc., Rose Perri, and Anna Gluskin, on October 14, 2016. The RSA required the defendants to make monthly installment payments totaling US$188,200 through 96 post-dated cheques and to transfer shares and pay rent for a laboratory used by the plaintiffs. The defendants honored only the initial payments and then, on February 1, 2017, placed stop payment orders on the remaining cheques. They also failed to transfer the agreed-upon shares and stopped paying rent, leading to the plaintiffs’ eviction from the lab in August 2017.

On February 14, 2017, the defendants sent a letter stating the RSA was “null and void” due to alleged breaches by the plaintiffs, including the disclosure of confidential information. In response, the plaintiffs’ counsel issued a letter on February 23, 2017, threatening legal proceedings unless the defaults were cured by March 9, 2017. Despite this, the plaintiffs did not initiate proceedings until March 6, 2020. The defendants moved for summary judgment, arguing that the action was commenced outside the two-year limitation period under the Limitations Act, 2002.

Legal issues and analysis

The legal question focused on whether the limitation period was “once and for all” (triggered by a single breach) or “rolling” (renewed with each subsequent breach, such as monthly missed payments). The court applied the framework from Richards v. Sun Life Assurance Co. and Karkhanechi v. Connor, Clark & Lunn Financial Group Ltd., distinguishing between disputes over entitlement to periodic payments (which can support rolling periods) and disputes over entitlement to any payments at all (which support a once and for all limitation period). Justice Koehnen found that this case fit the latter category, as the defendants had repudiated the entire agreement in February 2017.

The plaintiffs’ reliance on anticipatory breach was rejected. The court clarified that once a breach has occurred and the plaintiff has knowledge of it and its consequences, the limitation period begins to run—even if all resulting damages have not yet materialized. The plaintiffs failed to provide any explanation as to why they waited until March 7, 2018, to attempt to cash another cheque or how that date revealed new information regarding the defendants’ repudiation. The court also rejected arguments that partial performance (e.g., payment of patent-related legal fees or monthly stop-payments) revived or extended the limitation period.

Outcome and costs

Justice Koehnen granted the defendants’ motion for summary judgment and dismissed the action as statute-barred. The court fixed costs in favor of the defendants at $37,000 on a partial indemnity scale, considering the level of lawyer involvement and potential duplication of effort. The plaintiffs’ arguments concerning factual disputes or contract interpretation were deemed insufficient to resist summary judgment in the face of a clear limitation period breach.