



COURT OF APPEAL FOR ONTARIO

CITATION: Nadeau v. Caparelli, 2016 ONCA 730

DATE: 20161006

DOCKET: C61648

Hoy A.C.J.O., Brown and Huscroft JJ.A.

BETWEEN

Henri Nadeau

Plaintiff (Respondent)

and

Angelo Caparelli
, Jacques Chatelain, and
2292819
    Ontario Inc.

Defendants (
Appellants
)

Thomas W. Curran, for the appellants

Hank Witteveen, for the respondent

Heard: July 22, 2016

On appeal from the judgment of Justice Timothy D. Ray of
    the Superior Court of Justice dated December 30, 2015, with reasons reported at
    2015 ONSC 6944 and 2015 ONSC 8042.

Brown J.A.:

Overview

[1]

The appellants, Angelo Caparelli and 2292819 Ontario Inc. (229),
    appeal the summary judgment in the amount of $70,000 granted against them in
    favour of the respondent, Henri Nadeau,

and 1117251 Ontario Inc. (111), a corporation controlled by Nadeau.

[2]

The appellants submit the motion judge erred in failing to find that
    a genuine issue requiring a trial existed as to whether 111 had made a valid
    equitable assignment to Nadeau of an October 19, 2011 promissory note in the
    principal amount of $70,000 executed by Caparelli and another in favour of 111 (the
    Note) and guaranteed by 229. The appellants also submit the motion judge
    erred in adding 111 as a party plaintiff
nunc pro tunc
.

[3]

I would dismiss the appeal. The evidence supported the motion
    judges finding that no genuine issue requiring a trial existed on the issue of
    whether 111 had assigned the Note to Nadeau. As well, by adding 111 as a
    co-plaintiff
nunc pro tunc
more than two years
    after the due date of the Note, the motion judge did not deprive the appellants
    of a limitation defence because the
Limitations Act, 2002
, S.O. 2002, c. 24, Sched. B,

was not engaged in the circumstances.

Chronology of events

[4]

As part of the 2011 sale of a nursing home business by 111 to 229,
    Caparelli and another executed the Note.  229 gave 111 a guarantee of the obligations
    under the Note.

[5]

At the time of the sale, Nadeau and his wife were the sole officers,
    directors and shareholders of 111; Nadeaus wife died before this action was
    started. Following the sale, shareholder loans remained due and owing from 111
    to Nadeau.

[6]

By an assignment dated November 1, 2011 (the 2011 Assignment), 111
    assigned to Nadeau all its rights to a possible claim in respect to deposit monies
    paid under terms of the subject agreement for the sale of the nursing home.
    The assignment provided that the proceeds of such claim were to be applied and
    credited to Nadeaus shareholder loan to 111.

[7]

No payment was made on the Note when it became due on July 21, 2013.

[8]

No steps were taken to recover on the Note until March 31, 2015,
    when counsel for Nadeau wrote to the appellants advising that Nadeau was the
    assignee of the Note and enclosed a copy of the 2011 Assignment. Counsel
    demanded payment of the Note by April 15, 2015 on behalf of Nadeau.

[9]

No payment was made in response to the demand, so Nadeau commenced
    this action on May 7, 2015 seeking payment on the Note and Guarantee. He did
    not name 111 as a co-plaintiff in the action. The Statement of Claim pleaded
    that following the sale of the nursing home business, 111 ceased operations and
    assigned the promissory note  to the plaintiff
Nadeau
(italics in original). No particulars of the assignment were
    pleaded.

[10]

The appellants defended the action.
Their
    main defence was that
111 was insolvent and indebted to third
    parties at the time it allegedly assigned the Note, with the result that the
    assignment was invalid at law as an attempt to defraud the creditors of 111.

[11]

On September 1, 2015 Nadeau, as an officer and director
    of 111, executed a further assignment from the company to himself (the 2015
    Assignment). The recitals stated the 2011 Assignment purported to assign all
    the remaining assets of 111 to Nadeau, but had failed to specifically mention the
    Note. The recitals continued by stating 111 wishes to further evidence its
    intention to assign all of its assets to  Nadeau in consideration of his
    shareholder loans to the Corporation including the [Note]. 111 assigned to
    Nadeau all its rights in any remaining assets including without limitation the
    [Note].

[12]

Nadeau then initiated a summary judgment motion.

The rulings of the motion judge

[13]

The motion judge rejected the appellants
    argument that 111 could not make the 2011 Assignment because it was insolvent:
    2015 ONSC 6944, at para. 6. The motion judge found that a valid equitable
    assignment of the Note to Nadeau took effect March 31, 2015 when the written
    demand on the defendant was made: 2015 ONSC 8042, at para. 7.

[14]

In dealing with the
appellants

limitation defence

argument,
the motion

judge
concluded
    that when Nadeau commenced the action in his name on May 7, 2015, Nadeau had
    the legal right to commence the action as the equitable assignment of the [Note]
    had taken effect: 2015 ONSC 8042, at para. 9. The action therefore was not
    statute-barred.

[15]

Nadeau had not sought to add 111 as a
    co-plaintiff as part of the relief specified in his notice of motion, but did
    seek such relief at the hearing of the motion. The motion judge held there would
    be no prejudice to the appellants by joining 111: [B]ecause the plaintiff is
    also the directing mind of 111, failure to join 111 as a party plaintiff smacks
    of a technicality: 2015 ONSC 8042, at para. 11. He added 111 as a plaintiff
nunc
    pro tunc
.

ANALYSIS

The validity of the assignment

[16]

The appellants submit the motion judge erred in
    concluding 111 made a valid equitable assignment of the Note to Nadeau which
    took effect on March 31, 2015, when Nadeau made a written demand on the
    appellants.

[17]

I would not accept this submission.

[18]

The parties agreed no assignment of the Note
    took place from 111 to Nadeau that complied with s. 53(1) of the
Conveyancing
    and Law of Property Act
, R.S.O. 1990, c. C.34.
[1]
The issue on the motion then became whether Nadeau had demonstrated no genuine
    issue requiring a trial existed as to whether 111 had made an equitable
    assignment of the Note to Nadeau.

[19]

Equity does not require a particular form to
    effect a valid assignment, but whatever form is used must clearly show an
    intention that the assignee is to have the benefit of the debt or chose in
    action assigned:
Halsburys Laws of Canada
, Personal
    Property and Secured Transactions (Markham: LexisNexis Canada, 2013), at
    HPS-110 and HPS-111; G.H.L. Fridman,
The Law of Contract in Canada
,

6th ed. (Toronto: Thomson Reuters Canada, 2011)
, at pp. 648-49. As summarized by Michael Furmston in
Cheshire,
    Fifoot & Furmstons

Law of Contract
, 16th
    ed. (Oxford: Oxford University Press, 2012), at p. 636:

The transaction upon which the assignee relies
    need not even purport to be an assignment nor use the language of an
    assignment. If the intention of the assignor clearly is that the contractual
    right shall become the property of the assignee, then equity requires him to do
    all that is necessary to implement his intention. The only essential and the
    only difficulty is to ascertain that such is the intention. [Citations omitted.]

[20]

Where a corporation assigns an asset to its
    shareholder, one usually would expect to see evidence of the assignment in the
    form of a corporate resolution or written assignment, such as the 2015
    Assignment executed in September 2015. In the present case, however, the motion
    judge relied on two acts to find that 111 had made an equitable assignment of
    the Note: (i) the sending of the March 31, 2015 written demand for payment to
    the appellants; and (ii) the commencement of the action on May 7, 2015.

[21]

On their face, both acts were undertaken by Nadeau,
    not by 111, the owner of the Note. However, Nadeau was the sole director,
    officer and shareholder of 111, within whose sole control lay the formalities
    of any assignment of the Note from 111 to himself. In those circumstances,
    instructing counsel to send a letter informing the appellants of the assignment
    of the Note by 111 before commencing the action operated as sufficient evidence
    of a clear intention by 111 to assign the Note to Nadeau. Accordingly, I see no
    error in the motion judges conclusion that by the time the action was
    commenced, 111 had made an equitable assignment of the Note to Nadeau.

Addition of 111 as a party
    plaintiff

[22]

The appellants also submit the motion judge
    erred by adding 111 as a party plaintiff
nunc pro tunc.


[23]

First, the appellants contend the motion hearing
    process was unfair because the motion judge added 111 on his own initiative. I
    see no merit in that submission. Although Nadeau did not request the joinder of
    111 in his notice of motion, counsel requested such relief at the continuation
    of the hearing on December 23, 2015. I see no unfairness in that process. It
    lay within the discretion of the motion judge to consider Nadeaus request to
    add the assignor as a party as long as he considered any potential prejudice to
    the appellants, which he did:
Landmark Vehicle Leasing Corp. v.
    Mister Twister Inc.
, 2015 ONCA 545, at para. 14; r.
    5.03(6).

[24]

Second, the appellants argue the addition of 111
    caused them prejudice. In their submission, Nadeau could not bring suit on the
    Note without joining the assignor, 111, as a necessary party. Since he did not
    do so before the expiry of the July 21, 2015 limitation date, the subsequent
    joinder of 111 as a plaintiff
nunc pro tunc
deprived
    the appellants of their limitation defence, with the result the motion judge
    erred in granting summary judgment against them.

[25]

I would not accept this submission. In my view,
    111 was not a necessary party to the action, so no limitation period issue
    arose.

[26]

In
Freudmann-Cohen v. Tran
(2004), 70 O.R. (3d) 667 (C.A.), at para. 31, this court commented
    that whether an assignee can or cannot sue in its own name is a facet of the
    law that is shrouded in mystery and history. While the question of joinder certainly
    is linked to the history of the former division between the courts of common
    law and the courts of equity, the shrouds of mystery were largely dissipated by
    this court in
DiGuilo v. Boland
, [1958] O.R.
    384, (C.A.), affd [1961] S.C.R. vii.

[27]

DiGuilo
clarified that there are four
    kinds of assignments: legal assignments of legal and of equitable choses in
    action, and equitable assignments of legal and of equitable choses. According
    to
DiGuilo
, the following principles determine
    whether an assignee must join an assignor as party to an action to enforce an
    assignment:

(i)      In
    the case of a legal assignment of either a legal or equitable chose  i.e. an
    assignment that complies with s. 53
(1)
of the
Conveyancing
    and Law of Property Act

the assignee can sue alone:
DiGuilo
, at p. 397;

(ii)      An assignee also can sue alone where there is an equitable
    assignment of an equitable chose in action. This followed from rule 89 (then rule
    88) of the former
Rules of Practice
, R.R.O. 1980, Reg. 540, as amended, which stated:
    An assignee of a chose in action may sue in respect thereof without making the
    assignor a party. In
DiGuilo
, this court limited the scope of former rule 89 to equitable
    assignments of equitable choses in action (at p. 402-3);

(iii)     In
    the case of an equitable assignment of a legal chose in action, however, the
    assignee must join the assignor as a necessary party (at pp. 397 and 403).

[28]

When, in 1985, the
Rules of Practice
were replaced by the
Rules of Civil Procedure
, former rule 89 gave way to what is now rule 5.03(3), which states:

5.03(3)
In a proceeding by the assignee of a debt or other chose in action, the
    assignor shall be joined as a party unless,

(a) the
    assignment is absolute and not by way of charge only; and

(b) notice in
    writing has been given to the person liable in respect of the debt or chose in
    action that it has been assigned to the assignee.

[29]

The motion judge did not refer to rule 5.03(3)
    in his reasons, and it is not clear that the parties drew his attention to it.

[30]

The impact of rule 5.03(3) on the principles of
    joinder laid down in
DiGuilo

has not received prior
    consideration by this court. In the present case, the parties agreed the
    assignment of the Note did not meet the requirements of s. 53
(1)
of the
CLPA
. It follows that the assignment
    was an equitable assignment of a legal chose of action. While the principles stated
    in
DiGuilo
would require the joinder of the
    assignor for an action on such an assignment, in my view rule 5.03(3) modifies
DiGuilo
to the following extent: as long as the assignment was absolute and
    notice in writing was given to the appellants of the assignment, Nadeau was not
    required to join 111 as a party.

[31]

The evidence disclosed the assignment was
    absolute. The March 31, 2015 letter from Nadeaus counsel to the appellants
    contained no suggestion that 111 had retained any interest in the Note, as was
    confirmed by the subsequent commencement of the action in Nadeaus name alone.
    As well, the March 31, 2015 letter gave written notice that Nadeau was the
    assignee of a promissory note given by [the appellants]. The requirements of
    r. 5.03(3) were thereby met, permitting Nadeau to bring a proceeding on the
    assigned Note in his own name without joining 111 as a party. That being the
    case, no limitation period issue arose because Nadeau, as the sole necessary
    party, commenced the action on the Note within two years of its due date.

[32]

Since the appellants contend the assignment of
    the Note did not meet the requirements of r. 5.03(3), I would conclude by
    observing that even if it did not, in the circumstances of this case there
    would be no reason to interfere with the motion judges conclusion that the
    appellants did not suffer any prejudice from the joinder of 111. An equitable assignees
    failure to add an assignor as a party would be an irregularity, leaving it open
    to the motion judge to grant all necessary amendments or other relief, on such
    terms as are just, to secure the just determination of the real matters in
    dispute: rule 2.01(1).

[33]

Nor would the joinder
    of the assignor
nunc pro tunc
deprive the appellants of the substantive
    right of a limitation defence, as contended by them. This court rejected a
    similar argument in
Canning v. Avigdor
, [1961] O.W.N. 59, at p. 65:

[I]t was argued that it was too late at the date of the trial
    to have [the assignors] added, because by that time the Statute of Limitations
    had run against them. For this reason, it was urged they should not be added,
    and consequently, in the absence of the assignors as parties, there was no
    cause of action in the plaintiff.

In my view, however, the assignor, having no interest, the
    Statute of Limitations has no application and cannot, in such case, be used for
    the purpose of preventing the addition of an assignor as a party.

[34]

In the event the
    assignment of the Note had not complied with r. 5.03(3), the reasoning in
Canning
would apply equally to the present case, with the result that the joinder of 111
    as a plaintiff would not have engaged issues under the
Limitations Act, 2002
.

[35]

Accordingly, the motion judge did not err in
    granting summary judgment.

DISPOSITION

[36]

For the reasons set out above, I would dismiss the appeal.

[37]

The respondent is entitled to its costs of the appeal fixed at
    $10,000, inclusive of HST and disbursements.

Released: October 6, 2016 (AH)



David Brown J.A.

I agree Alexandra Hoy A.C.J.O.

I agree Grant Huscroft J.A.





[1]
Section 53(1) Any absolute assignment made on or after the 31st day of
    December, 1897, by writing under the hand of the assignor, not purporting to be
    by way of charge only, of any debt or other legal chose in action of which
    express notice in writing has been given to the debtor, trustee or other person
    from whom the assignor would have been entitled to receive or claim such debt
    or chose in action is effectual in law, subject to all equities that would have
    been entitled to priority over the right of the assignee if this section had
    not been enacted, to pass and transfer the legal right to such debt or chose in
    action from the date of such notice, and all legal and other remedies for the
    same, and the power to give a good discharge for the same without the
    concurrence of the assignor.


