





CITATION:
Clark v. Werden, 2011 ONCA 619



DATE: 20110930



DOCKET: C51975



COURT OF APPEAL FOR ONTARIO



Doherty, Feldman and Epstein JJ.A.



BETWEEN



Patrick Peter Clark



Plaintiff
          (Respondent)



and



Leonard James Werden



Defendant (Appellant)

AND BETWEEN

Patrick
          Peter Clark

Plaintiff (Respondent)

and

Leonard James Werden

and Maximum Swine Marketing Ltd.

Defendants (Appellants)

and

John
          Muller and J & C Muller Farms Inc.

Third Parties (Respondents)



Andrew C. Murray, for the appellant
          Leonard James Werden



J. Douglas Skinner, for the respondent Patrick Peter Clark



Heard:  March 9, 2011



On appeal from the judgment of Justice Lynne Leitch of the
          Superior Court of Justice, dated March 19, 2010, with reasons reported at 2010
          ONSC 1674.



Feldman J.A.:



Overview

[1]


Peter
    Clark, James Werden and John Muller were once friends and business associates,
    before Peter Clark and James Werden had a falling out. John Muller had loaned
    James Werden $120,000 in 2001. The loan was in default when John Muller
    assigned it to Peter Clark in 2004 for him to collect. Peter Clark sued James
    Werden for the balance of the loan and obtained judgment.

[2]

On this appeal, the
    only issue raised by Werden is his claim that the loan agreement was not
    enforceable by Peter Clark because of the law against champerty and
    maintenance. For the reasons that follow, I would dismiss the appeal.

Facts

[3]

The three protagonists
    in the story of the events leading up to this action are the appellant, Werden,
    the respondent, Clark, and the third party, Muller, who is no longer a party on
    the appeal. All three were involved in the pork business, Clark and Werden as
    brokers, and Muller as a producer. Werden and Clark began as co-workers, became
    friends, and after Werden founded his own company, Maximum Swine Marketing Ltd.,
    which Clark joined, Werden became Clarks employer. At the time, Muller and his
    company were clients of Maximum.

[4]

When Clark left
    Maximum to establish his own pork brokerage in 2003, he brought over a number
    of Maximums clients including Muller. This led to a successful action by
    Werden wherein he obtained a temporary injunction against Clark, preventing him
    from dealing with Muller for 90 days, as well as an order for $16,000 costs. It
    also led to the breakdown of their friendship. Although they re-established
    their relationship for a period in 2005-06, after that they were no longer
    friends.

[5]

When Werden needed
    $120,000 to purchase a property with his wife, he borrowed the funds from
    Muller, and on March 1, 2001 they entered into a loan agreement calling for
    quarterly payments and an eight per cent interest rate. At trial, Werden
    claimed there was no loan and this was instead a refund of trust monies that
    Muller was holding as part of a fictitious tax-saving scheme. The trial judge
    rejected his evidence and found that the loan agreement evidenced a legitimate
    loan transaction.

[6]

Clark and Muller had remained
    business associates. When Werden defaulted on two loan payments, Muller and
    Clark agreed that Muller would assign the Werden loan to Clark and that Clark would
    collect it from Werden. The loan was assigned by an agreement dated June 11,
    2004, and notice was given to Werden on June 12, 2004. Although Clark paid
    nothing to Muller at the time of the assignment, they agreed that when Clark
    recovered the money, he and Muller would sit down and discuss how they would
    share the proceeds.

[7]

The trial judge found
    that the assignment was valid and properly documented. She further found that
    the fact that no consideration was paid for the assignment did not detract from
    its validity. The trial judge referred to s. 6 of the
Conveyancing and Law
    of Property Act
,

R.S.O. 1990, c. C.34, which deals with the issue of
    consideration as between the assignor and the assignee, then observed that
    regardless of any issue of consideration between Clark and Muller, s. 53 of the
    Act made the assignment effective as against Werden. Finally, she concluded:

As a result, Patrick Clark is not a stranger to
    this litigation. He obtained a
bonafide
assignment of the loan and
    issues of champerty and maintenance do not arise.

Issue

[8]

The sole issue raised
    on the appeal is whether the assignment of the loan and its enforcement by Clark
    were prohibited because they amounted to champerty and maintenance.

Analysis

[9]

The history of the
    common law prohibitions against champerty and maintenance was discussed and
    explained in detail by OConnor A.C.J.O. in
McIntyre Estate v. Ontario (AG)
(2003), 61 O.R. (3d) 257 (C.A.), a case concerning the propriety of lawyers
    contingency fees. At paragraph 26, he described the prohibited conduct:

Although the type of conduct that might constitute
    champerty and maintenance has evolved over time, the essential thrust of the
    two concepts has remained the same for at least two centuries. Maintenance is
    directed against those who, for an improper motive, often described as wanton
    or officious intermeddling, become involved with disputed (litigation) of
    others in which the maintainer has no interest whatsoever and where the
    assistance he or she renders to one or the other parties is without
    justification or excuse. Champerty is an egregious form of maintenance in which
    there is the added element that the maintainer shares in the profits of the
    litigation.

[10]

In Ontario, champerty is also prohibited by the Champerty Act (
An
    Act Respecting Champerty
, R.S.O. 1897, c. 327), an unrepealed statute of
    Ontario. Despite the fact that the Act makes no reference to motive, this court
    has held, both in
McIntyre
and earlier in
Buday v. Locator of Missing
    Heirs Inc.
(1994), 16 O.R. (3d) 257 (C.A.), at p. 267, that the Act was
    intended to reflect the common law concept of champerty and therefore must be
    read to include improper motive as a component.

[11]

However, where the assignee of a cause of action, either in tort or
    contract, possesses a

sufficient pre-existing financial interest in the
    cause of action that has been assigned, that negates the suggestion of
    maintenance and such assignment
s
are viewed as valid. Similarly, it is
    recognized that a cause of action in debt can be validly assigned and that such
    an assignment does not violate the rule against champerty and maintenance: See

Fredrickson

v.

I.C.B.C
, [1986] 3 B.C.L.R. (2d) 145
    (C.A.), at p. 160,

affirmed with reasons adopted by the Supreme
    Court of Canada,

[1988] 1 S.C.R 1089. See recently
Plant Software
    Inc. v. 9123

Investments Ltd.
(1999), 14 P.P.S.A.C. (2d) 281
    (B.C.S.C.).

[12]

In
Fitzroy v. Cave
, [1905]

2 K.B. 364 (C.A.), one of the

cases relied upon by McLachlin J.A. in
Fredrickson
, Cozens-Hardy L.J.
    held at p. 373-74, that [h]enceforth in all Courts a debt must be regarded as
    a piece of property capable of legal assignment in the same sense as a bale of
    goods. It is not easy to see how the doctrine of maintenance can be applied to
    a case like the present [concerning the assignment of a debt].

[13]

The ability to assign a debt or legal chose in action is codified in s.

53 of the
Conveyancing and Law of Property Act
, which provides that
    a debt is assignable subject to the equities between the original debtor and
    creditor and reads as follows:

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.  R.S.O. 1990, c. C.34, s. 53 (1).

[14]

In this case, the debt was assigned in accordance with s. 53.

[15]

The appellant submits that this is a case where the court should apply
    the five-part test for the indicia of champerty and maintenance set out in the
    British Columbia Supreme Court case of
NRS Block Brothers Realty Ltd. v.
    Minerva Technology Inc.
(1997),

145 D.L.R. (4th) 448,
as follows: element
    of officious intermeddling; no previous commercial connection; the assignee is
    speculating on a personal gain from the lawsuit; there is a stirring up of
    strife; the assignee initiates or promotes the commencement of the lawsuit. He
    asserts that there is evidence that Muller would not have pursued Werden on the
    debt, and that it was Clark who sought the assignment and the commencement of
    the lawsuit with no previous interest other than bad feeling toward him.

[16]

The trial judge did not address these concerns directly, because she
    found that this was a valid assignment of a debt in accordance and in
    compliance with s. 53 of the
Conveyancing and Law of Property Act
. In my
    view, she made no error in her legal conclusion. The case law is clear that an
    assignment of a debt is not a champertous transaction and the otherwise
    applicable criteria do not apply to such an assignment. In
Fitzroy
similar
    arguments were made. In concluding that the assignments of debts were valid and
    not champertous, Cozens-Hardy L.J. commented:

It is said that the plaintiff does not really
    desire to be paid and can take nothing for his own benefit under the judgment.
    For the reasons above stated, I think this is of no moment. It is further urged
    that his only object is to obtain a judgment which may serve as the foundation
    of bankruptcy proceedings, the ultimate result of which will be the removal of
    the defendant from his position as director of a company in which the plaintiff
    is largely interested.
But I fail to see that we have anything to do with
    the motives which actuate the plaintiff, who is simply asserting a legal right
    consequential upon the possession of property which has been validly assigned
    to him.
[Emphasis added.]

[17]

The appellant also submits that the trial judge erred in finding that
    the assignment constituted an absolute assignment because Clark and Muller intended
    to agree after the fact on the division of the proceeds. I do not agree. I
    infer from the decision of the trial judge and her thorough reasons that she
    was satisfied that the assignment was a valid absolute assignment in accordance
    with the documents.

Disposition

[18]

I would dismiss the appeal with costs to the respondent fixed at $3,000
    as agreed at the conclusion of oral argument.

Signed:           K. Feldman J.A.

I agree Doherty J.A.

I agree G. Epstein J.A.

RELEASED:  DH September 30, 2011


