Court File and Parties

CITATION: Hazout v. The Attorney General of Ontario, 2023 ONSC 5321

DIVISIONAL COURT FILE NO.: 23-00000200-0000

DATE: 20230914

SUPERIOR COURT OF JUSTICE – ONTARIO

DIVISIONAL COURT

RE: The Attorney General of Ontario Respondent

AND:

Marc Hazout Appellant

BEFORE: Justice O’Brien

COUNSEL: Laura Daly, for the Respondent

Allan Rouben, for the Appellant

HEARD: September 14, 2023, at Toronto by videoconference

Reasons for decision

Overview

[1] In January 1996, the appellant Mr. Hazout took out a $15,000 business loan offered by the Bank of Montreal through an economic development program of the Ontario government, the New Ventures Program. His new business venture did not go as planned and he defaulted on the loan. Ontario guaranteed the loan under the terms of the loan agreement. It therefore repaid the bank and, in 2019, Ontario started an action in Small Claims Court against Mr. Hazout to recover the amount owed.

[2] Deputy Judge Bay of the Small Claims Court allowed Ontario’s action. Mr. Hazout now appeals the Deputy Judge’s order. Mr. Hazout’s primary argument is that the action is barred by the general two-year statutory limitation period. He maintains that, although Ontario would not otherwise be bound by a limitation period, Ontario is an assignee of the loan and bound by the limitation period that would apply to the bank. He also submits that Ontario should be prevented from pursuing the action by the doctrine of laches.

[3] I am not persuaded by these arguments. While Ontario admittedly took a long time to start the action, it is permitted by statute to do so. I also would not interfere with the Deputy Judge’s finding that Ontario took active steps over the years to collect the amounts owing and therefore did not acquiesce to Mr. Hazout’s non-payment. For the reasons that follow, the appeal is dismissed.

Did a limitation period bar Ontario from starting the action?

[4] Mr. Hazout submits that Ontario was not a party to the loan agreement and only gained its standing to bring the action as an assignee. He emphasizes that an assignee to an agreement stands in the shoes of an assignor and is subject to the benefits and burdens of the underlying agreement. In his submission, this means that, on assigning the loan, Ontario remained subject to the burden of the two-year limitation period that would have applied to the bank.

[5] I do not accept these submissions. At the outset, I have some concern about addressing these arguments on appeal. They were not directly raised before the Deputy Judge. The Deputy Judge found that Ontario was exempt from a statutory limitation period, but Mr. Hazout did not specifically argue that Ontario was bringing the action as an assignee. Therefore, the Deputy Judge did not have an opportunity to rule on the nature of Ontario’s standing to bring the action.

[6] If it is appropriate to reach a determination on this point by review of the documents, I would dismiss Mr. Hazout’s arguments. By way of background, Ontario is not subject to the general two-year limitation period set out in s.4 of the Limitations Act, 2002, S.O. 2002, c. 24, Schedule B (the “Act”). Paragraph 16(1)(j) of the Act, read together with s. 16(2), provide that “[t]here is no limitation period in respect of” a proceeding brought by the Crown in respect of claims relating to “the administration of social, health or economic programs.” There is no dispute that the New Ventures Program constitutes such a program.

[7] Contrary to Mr. Hazout’s submission, Ontario was not limited to starting the action as an assignee of the loan agreement. Instead, Ontario was also a guarantor of the loan. Section 4 of the loan agreement, signed by Mr. Hazout, provides that the loan is guaranteed by the Province of Ontario. In consideration of that guarantee, Mr. Hazout agreed “to indemnify the Province of Ontario upon demand for all payments made by the Province of Ontario pursuant to the Guarantee.”

[8] As a guarantor, Ontario had an independent right to be indemnified for the loan. As Hunt J.A. explained (in concurring reasons) in Canada (A.G.) v. Becker, 1998 ABCA 283, 223 AR 59, at paras. 32-39, the right to indemnity is different from a subrogated in that it permits the guarantor to sue in its own name. See also Ormston v. Manchester, 2019 ONSC 6529, at para. 14.

[9] Mr. Hazout relies on an endorsement by the bank’s account manager on the promissory note stating that “in return for full payment, we hereby assign our interest in this note to the Ministry of Economic Development and Trade.” According to Mr. Hazout, the endorsement demonstrates that Ontario was an assignee of the loan. However, I agree with Ontario’s submission that all this endorsement did was nullify the bank’s rights to enforce on the loan. It made Ontario an assignee but did not thereby require Ontario to enforce the loan as an assignee. Put otherwise, it did not remove Ontario’s rights as a guarantor.

[10] In response to Mr. Hazout’s submission that Ontario only gained its enforcement rights after it paid the bank, that is usually the nature of a guarantee. In Becker, Hunt J.A. stated at para. 39: “Normally, the right to indemnification exists when the guarantor has actually met the liability for which he has undertaken to answer.” Mr. Hazout did not justify why this removed Ontario’s right to sue for indemnification under s. 4 of the loan agreement.

[11] In conclusion, as Ontario was exempt from any limitation period under the Act, it was not statute-barred from bringing the action.

Was Ontario barred from starting the action by the doctrine of laches?

[12] I also would not interfere with the Deputy Judge’s conclusion regarding the doctrine of laches.

[13] In Husar Estate v. P. & M. Construction Limited, 2007 ONCA 191, [2007] OJ No 968 (QL) at para. 45, the Court of Appeal reproduced a description of the doctrine of laches endorsed by the Supreme Court of Canada that described it as a “defence which requires that a defendant can successfully resist an equitable (although not a legal) claim made against him” in certain circumstances. Delay alone is not sufficient to trigger the doctrine. Instead, the doctrine considers whether the delay constitutes acquiescence or results in circumstances that make the prosecution of the action unreasonable: Husar Estate, at para. 46; see also Kloos v. Tangas, 2016 ONCA 149, at para 11.

[14] The Deputy Judge did not address whether, here, the doctrine arose in the context of an equitable claim. Following from my analysis above, I would find Ontario’s right to indemnification to be contractual, given the express provision in the loan agreement. Although Ontario did not sign the agreement, it is evident it agreed to its terms. The loan agreement was entitled a “New Ventures Loan Agreement” and specifically stated that New Ventures was a “major initiative of the Government of Ontario” with loans under the program “guaranteed by the Province.” Ontario acted in accordance with its guarantee upon default of the loan. Therefore, I would find that Ontario had a legal right to indemnity and laches does not apply.

[15] However, Ontario’s claim also pleaded the equitable claim of unjust enrichment, where laches could potentially apply. The Deputy Judge dismissed the application of laches because, as he found at para. 10, Ontario “took active steps over many years to collect the debt.” He stated that “no fewer than four collection agencies attempted to collect the monies owing.” He found that Mr. Hazout could not have been taken by surprise or otherwise prejudiced.

[16] The Deputy Judge’s findings were well supported by the record. Ontario’s witness testified to both the usual practice in collecting debts and to the involvement of collection agencies in this particular case. By contrast, Mr. Hazout did not testify nor call any witnesses. The Deputy Judge was entitled to find, as he did, that there was no acquiescence and that laches did not apply.

Other Issues

[17] Mr. Hazout raised two other issues that can be disposed of summarily:

1. In written submissions, Mr. Hazout argued the action was improperly constituted from the outset in that the Crown was improperly named as the Attorney General of Ontario. This contravened s. 14 of the Crown Liability and Proceeding Act, 2019, S.O. 2019, c. 7, Sched. 17, which states that the Crown should be designated as “Her Majesty the Queen in Right of Ontario”. Mr. Hazout did not pursue this submission in oral argument. It has no merit. Mr. Hazout did not raise this issue in his pleading nor at any time prior to filing his appeal materials. Had he done so, Ontario could have corrected the error. In any event, there was no confusion about the proper parties to the trial or appeal and Mr. Hazout does not request a specific remedy arising from the error. This ground of appeal is dismissed.

2. In oral argument, Mr. Hazout complained that Ontario had failed to disclose the agreement between the province and its collection agencies in preparation for this appeal. There is no general disclosure obligation pending appeal. I also would not enforce this specific request, as it strikes me as a fishing expedition that would be unlikely to have any bearing on the outcome of the appeal.

Disposition

[18] Therefore, the appeal is dismissed. As agreed by the parties, Mr. Hazout shall pay costs of the appeal in the amount of $6,780 all-inclusive. This amount shall be paid within 30 days.

O’Brien J

Date: September 21, 2023