Court of Appeal for Ontario

Date: 20221130 Docket: C70410

Judges: Tulloch, Thorburn and George JJ.A.

Between:

Brian Wayne Flight c.o.b. as Heritage Painters & Services and Amber Nicole Flight Plaintiffs (Appellants)

And:

Julie Leblanc Defendant (Respondent)

Counsel:

Tara Vasdani, for the appellants Jason Squire and Lucy Sun, for the respondent

Heard: November 14, 2022

On appeal from the order of Justice Alissa K. Mitchell of the Superior Court of Justice, dated February 18, 2022.

Reasons for Decision

[1] In September 2019, while an undischarged bankrupt, the appellant, Brian Flight, and his spouse, Amber Flight, commenced an action against the respondent, Julie Leblanc. The appellant claims that the respondent stole and misappropriated funds from his sole proprietorship, Heritage Painters & Services (“Heritage”). Amber Flight initially sought damages under the Family Law Act, but she abandoned her claim at some point on or before January 17, 2022. [1]

[2] In September 2020, the appellant’s trustee in bankruptcy commenced a similar action against the respondent (“Trustee Action”).

[3] The appellant brought a motion for summary judgment on January 17, 2022, and the respondent brought a cross-motion for summary judgment in her own favour.

[4] The motion judge granted summary judgment and dismissed this action. She found that the appellant’s action was a nullity, as it was commenced when he was bankrupt.

[5] The appellant claims the motion judge: 1) erred by finding that his action was a nullity; 2) miscalculated the limitation period; 3) should have recused herself because of a reasonable apprehension of bias; and 4) erred by not setting aside his waiver of the motion judge’s conflict of interest. Should we allow the appeal, the appellant asks that we grant summary judgment in his favour. The trustee is not a party to this appeal.

[6] At the conclusion of oral argument, we advised counsel that the appeal is dismissed for reasons to follow. These are those reasons.

[7] Heritage has a history of insolvency. The appellant and respondent were once married. Though they separated in 2009, the respondent continued to provide bookkeeping services for Heritage until 2018.

[8] The appellant claims that on January 9, 2018, he discovered that the respondent had, through several e-transfers, moved $58,000 from a Heritage account (holding funds to be used to pay taxes) to her personal account. He further claims that, by September 2018, he learned that the respondent had misappropriated over $147,000. The Canada Revenue Agency was Heritage’s majority creditor in each of its prior bankruptcies.

[9] After the appellant advised the respondent that he was aware of the theft, the respondent agreed to repay some of the funds. However, in June 2019 – after repaying only some of what was owed – the respondent advised that she would no longer be doing so. On September 30, 2019, while the appellant was an undischarged bankrupt, he filed the statement of claim in this action which initially sought damages in excess of $6 million, alleging breach of contract, fraudulent misrepresentation, unjust enrichment, breach of fiduciary duty, and conversion.

[10] On September 11, 2020, the appellant’s trustee in bankruptcy filed an identical action against the respondent. On February 22, 2021, a consumer proposal submitted by the appellant was approved, annulling his bankruptcy and revesting in him all choses in action, including the one commenced by the trustee.

[11] The appellant then sought summary judgment in the amount of $180,000. At the same time, the respondent brought an informal cross-motion for summary judgment, seeking to dismiss the action as statute-barred. The motion judge dismissed the appellant’s action, finding that he had discovered his claim against the respondent on January 9, 2018 – which began the limitation period – and that when the claim was commenced he, as an undischarged bankrupt, did not have the capacity to bring an action relating to property. Pursuant to s. 71 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (“BIA”), the action vested in the trustee. Further, the claim did not re-vest in the appellant until February 2021, after the limitation period had expired.

[12] The appellant also sought leave to bring an action against the trustee for his failure to detect and prevent the respondent’s theft while administering his bankruptcies. This leave motion was scheduled to be heard in October 2020, at the same time as a r. 21 motion in this matter. The motion judge, who had worked with the trustee in the past, recused herself from hearing the motion for leave to bring an action against the trustee. However, the appellant’s counsel – who is also counsel on this appeal – indicated she had no concerns with the motion judge hearing the r. 21 motion. That r. 21 motion was adjourned, and in January 2022, the same judge heard the competing summary judgment motions. The appellant’s counsel – who presumably remained aware of the judge’s relationship with the trustee – did not object to her hearing those motions.

[13] We see no error in the motion judge’s decision. Her conclusion that the claim is statute-barred flows from her finding that January 9, 2018 was the date on which the appellant discovered his claim, even though the full extent of the loss was not yet known. In other words, the fact that the appellant continued to discover misappropriated funds beyond January 2018 is of no consequence.

[14] The appellant also raises for the first time on appeal the argument that the limitation period was delayed by the respondent’s promise to repay, and partial repayment of, her debt. He relies on Presidential MSH Corporation v. Marr, Foster & Co., 2017 ONCA 325, 135 O.R. (3d) 321, and Presley v. Van Dusen, 2019 ONCA 66, 144 O.R. (3d) 305, for the proposition that an out-of-court ameliorative process may postpone the limitation period, since it would mean a legal proceeding is not an “appropriate means” to remedy one’s loss: Limitations Act, 2002, S.O. 2002, c. 24, Sch. B, s. 5(1)(a)(iv).

[15] We note first that the respondent contests the facts on which the appellant relies, which were not the subject of any findings by the motion judge. In any case, we need not decide whether an informal promise to make restitution can delay the commencement of a limitation period. Here, the appellant filed a criminal complaint immediately upon learning of the respondent’s alleged fraud, a strong indication that he knew a civil proceeding was appropriate at that time. Moreover, counsel for the appellant said in oral argument that the reason the appellant did not immediately commence a civil proceeding was because the proceeding vested in the trustee in bankruptcy, not because of an ameliorative process with the respondent. Accordingly, we agree with the motion judge that in this case, the limitation period commenced January 9, 2018, and expired two years later on January 9, 2020.

[16] We also see no error in the motion judge’s conclusion that the appellant’s action, commenced September 30, 2019, was a nullity that could not be “regularized” by an order granting leave, nunc pro tunc, to commence it. The appellant relies on authorities where the BIA – as exceptions to the general rule that a bankrupt’s choses in action vest in the trustee – allowed actions to be commenced with leave, but the parties did not seek leave prior to commencing the action. In those cases, leave was granted nunc pro tunc (“now for then”), “regularizing” the actions. The trial judge was not aware of, and the appellant did not refer us to, any provision in the BIA that would have allowed him to commence this action had he applied for leave at the relevant time. Absent such a provision, the trial judge correctly found that this action could not be “regularized” by an order granting leave nunc pro tunc.

[17] Moreover, even if an order nunc pro tunc could have been granted, the motion judge correctly held that the lapsed limitation period precluded her from issuing such an order: Douglas v. Stan Fergusson Fuels, 2018 ONCA 192, 139 O.R. (3d) 721, at para. 103.

[18] Lastly, as she was not called upon to consider the trustee’s potential personal liability, we see no merit to the argument that the motion judge should have recused herself because of a reasonable apprehension of bias.

[19] In any event, in the proceeding below, the appellant’s counsel explicitly waived the conflict. Even if there was a meaningful distinction between the r. 20 and r. 21 motions, it is still the case that at the hearing of the later r. 20 motion, and in the face of a prior waiver, the appellant did not seek to revisit this issue. The point being, this court should not countenance a party taking such a position only after an unfavourable decision is released, absent new information that might shed some light on the potential conflict.

[20] The appeal is dismissed.

[21] Costs to the respondent in the amount of $11,321.58, inclusive of HST and disbursements.

“M. Tulloch J.A.”

“J.A. Thorburn J.A.”

“J. George J.A.”

Footnotes

[1] While this appeal was brought in her name, and while the motion judge refers to the “plaintiffs” throughout her reasons, Amber Flight has no standing to appeal. The only appellant is Brian Flight, carrying on business as Heritage Painters & Services, an unincorporated business registered under the Business Names Act.