Thompson v. Casey, 2020 ONCA 5

Thompson v. Casey et al.

[Indexed as: Thompson v. Casey]

Ontario Reports

Court of Appeal for Ontario

Brown, Huscroft and Trotter JJ.A.

January 7, 2020

150 O.R. (3d) 61 | 2020 ONCA 5

Case Summary

Civil procedure — Judgments and orders — Applicant seeking various forms of relief pursuant to assignment of promissory note — Application dismissed for applicant's failure to prove validity of assignment, but on a without-prejudice basis — Application judge stating that she would remain seized if applicant wished to bring further proceedings to prove validity of assignment — Application judge erred by putting parties to expense of further proceeding rather than directing a trial — Courts of Justice Act, R.S.O. 1990, c. C.43, s. 138 — Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 1.04(1.1), 38.10(1)(b).

Judgments and orders — Reasons for judgment — Applicant seeking various forms of relief pursuant to assignment of promissory note — Application dismissed for applicant's failure to prove validity of assignment, but on a without-prejudice basis — Application judge stating that she would remain seized if applicant wished to bring further proceedings to prove validity of assignment — Application judge erred by putting parties to expense of further proceeding rather than directing a trial — Courts of Justice Act, R.S.O. 1990, c. C.43, s. 138 — Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 1.04(1.1), 38.10(1)(b).

A corporation sold a flower shop to M, who executed a promissory note in favour of the corporation as partial payment of the purchase price. The corporation then assigned the note to its accountant, T. T had lent money to the corporation's principal, O. The corporation's bank had refused to provide a comfort letter requested by the corporation to enable the sale transaction to proceed, but the sale went ahead regardless. The bank called its loan and gave notice of its intention to realize on its security. O's common-law spouse, C, had guaranteed the corporation's debt. C paid the bank and received an assignment of the bank's security over the corporation's assets. C sued the corporation seeking indemnity for the amount she paid to the bank. She also sued O and M for payment under the security agreement assigned to her and damages for oppressive conduct. After more than six years neither action had gone to trial. M stopped making monthly payments to T on the note. T applied for various forms of relief against C, M, O, and the corporation, ultimately seeking to have M pay the balance due under the note. The application was dismissed on a without-prejudice basis. The application judge ruled that in order to determine T's [page62] assertion of priority, T first had to demonstrate the validity of the assignment of the note from the corporation, which he had failed to do. However, the application judge went on to state that she would remain seized of the matter if T wanted to bring further proceedings to prove the validity of the assignment. T appealed.

Held, the appeal should be allowed in part.

The application judge did not err in concluding that T had to demonstrate the validity of the assignment, but she erred in her disposition of the proceeding. She identified an issue that required further consideration on the merits but dismissed the application on a without-prejudice basis, thereby deferring the determination of that issue to a new proceeding, of which she seized herself. By proceeding in that fashion, the application judge's disposition ran counter to (i) the principle expressed by s. 138 of the Courts of Justice Act, to avoid, as far as possible, a multiplicity of proceedings; and (ii) the related principle found in rule. 1.04(1.1) of the Rules of Civil Procedure that the court shall make orders that are proportionate to the importance and complexity of the issues. Instead of dismissing the application on a without-prejudice basis and putting the parties to the expense of yet another proceeding, the application judge should have directed the trial of an issue, or the whole application, pursuant to rule 38.10(1)(b) and remained seized of the matter. The judge's order was set aside and the application remitted to the Superior Court of Justice for further direction and determination.

Statutes referred to

Courts of Justice Act, R.S.O. 1990, c. C.43, s. 138

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 1.04(1.1), 38.10(1), (b)

APPEAL from the order of Vallee J., [2019] O.J. No. 2327, 2019 ONSC 2760.

Christopher Salazar, for appellant.

K. Jay Ralston, for respondent Mary Eileen Casey.

1BY THE COURT: -- The sale of a modest-sized business completed on September 20, 2010 has spawned three related proceedings that have not yet reached definitive, final determinations on their merits.

2The vendor of the business, 1007937 Ontario Inc. (the "Corporation"), of which Ronald Ornsby is the principal, sold its Fendley's Flowers operation to Jennifer Matthews for $165,000. In partial payment of the purchase price, Matthews executed a promissory note in the amount of $130,000 in favour of 1007937 Ontario. The Corporation, at the direction of Ornsby, immediately assigned the note to its accountant and Ornsby's friend, the appellant Brian Thompson, who had lent money to Ornsby, but not to the Corporation.

3The Corporation's bank -- and secured creditor to the tune of approximately $250,000 -- had refused to provide a comfort letter requested by the Corporation to enable the sale transaction [page63] to proceed. Nevertheless, it appears that Ornsby sold, and Matthews bought, the business in the face of that refusal. When the bank found out what had happened, it called its loan and gave notice of its intention to realize on its security.

4Ornsby's common-law spouse for several years, the respondent Mary Eileen Casey, had guaranteed the Corporation's debt. The bank looked to her for payment. She paid the bank and received an assignment of the bank's security over the assets of the Corporation.

5Three proceedings ensued:

(i) on March 23, 2011, Casey sued the Corporation (Barrie Superior Court file 11-0291), seeking indemnity for the amount she paid to the bank in respect of the Corporation's indebtedness;

(ii) on June 21, 2012, Casey sued Ornsby and Matthews (Barrie Superior Court file 12-0720) seeking payment under the security agreement assigned to her by the bank and damages against Ornsby for oppressive conduct in respect of the Corporation's indebtedness to the bank; and

(iii) on October 4, 2018, the appellant, Thompson, commenced this application against Casey, Ornsby, the Corporation, and Matthews seeking various forms of relief that, taken together, would require Matthews to pay the balance due under the promissory note to Thompson. The application appears to have been prompted by two events: (i) Matthews had stopped making monthly payments to Thompson on the note, and (ii) Casey's two proceedings had not yet gone to trial, despite the extensive passage of time.

6The application judge dismissed Thompson's application, but on a without-prejudice basis.

7We see no error in the application judge's conclusion that in order to determine the claim of priority asserted by Thompson to the proceeds of Matthew's promissory note, Thompson first had to demonstrate the validity of the assignment of the note from the Corporation. At para. 41 of her reasons, the application judge explained why, on the evidence filed and legal submissions made before her, she was not able to determine the issue of the validity of the assignment of the promissory note.

8Yet, the application judge went on to state that she was available to the parties to further consider the issue. In the result, although she dismissed Thompson's application, she did so "without prejudice to Mr. Thompson's bringing further proceedings to prove the validity of the assignment because he did not address that issue in this application. If he does bring further proceedings, given the complexity of this matter[,] I will remain seized": at para. 42. [page64]

9Thompson submits that the application judge erred in making that disposition because, on any view of the facts, Casey was out of time to challenge his claim to priority to the proceeds from the promissory note. In our view, that is far from clear given the matters put in issue by Casey in the pleadings in her two actions, which she started within two years of the sale transaction.

10However, for other reasons we conclude that the application judge erred in her disposition of this proceeding. While an application judge has broad discretion under rule 38.10(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 in deciding how to dispose of an application, to which this court must accord deference, the application judge erred in principle in making the specific disposition that she did. She identified an issue that required further consideration on the merits but dismissed the application on a without-prejudice basis, thereby deferring the determination of that issue to a new proceeding, of which she seized herself. By proceeding in that fashion, the application judge's disposition ran counter to: (i) the principle expressed by s. 138 of the Courts of Justice Act, R.S.O. 1990, c. C.43, to avoid, as far as possible, the multiplicity of proceedings; and (ii) the related principle found in rule 1.04(1.1) that the court shall make orders that are proportionate to the importance and complexity of the issues. Instead of dismissing the application on a without-prejudice basis and putting the parties to the expense of yet another proceeding, the application judge should have directed the trial of an issue, or the whole application, pursuant to rule 38.10(1)(b) and remained seized of the matter.

11We allow the appeal to the extent of setting aside the Order and remit the application to the Superior Court of Justice for further direction and determination.

12When the legal expenses incurred to date just in this application are compared to the modest amounts in dispute in this proceeding and the two Casey actions, these cases cry out for combined management and disposition, preceded by a vigorous pre-trial conference in the very near future. Almost a decade has elapsed since the events that spawned these proceedings. The time has come to determine them on their merits.

13We leave the issue of the costs incurred below up until the date of the Order to the final disposition of the application. Given the mixed success of the parties on this appeal, we make no order as to the costs of the appeal.