Perry, Farley & Onyschuk v. Outerbridge Management Limited et al. [Indexed as: Perry, Farley & Onyschuk v. Outerbridge Management Ltd.]

54 O.R. (3d) 131

[2001] O.J. No. 1698

Docket No. C34942

Court of Appeal for Ontario,

Abella, Charron and Sharpe JJ.A.

May 7, 2001

Limitations--Fraudulent Conveyances Act actions--Action to set aside fraudulent conveyance under Fraudulent Conveyances Act--Action to set aside fraudulent conveyance not action on "simple contract"--Action to set aside fraudulent conveyance not action "upon the case"--Action to set aside fraudulent conveyance not statute-barred by Limitations Act--Equitable doctrine of laches may apply to bar action but issue should be tried--Summary judgment dismissing action set aside--Fraudulent Conveyances Act, R.S.O. 1990, c. F.29--Limitations Act, R.S.O. 1990, c. L.15, s. 45.

PF & O, which was a law partnership, was a creditor of Lexicom Systems Ltd. ("Lexicom"), which was the management corporation for IO, one of PF & O's partners. PF & O had guaranteed Lexicom's line of credit with the Toronto-Dominion Bank. In June 1988, when Lexicom owed the Bank approximately $360,000, Lexicom exercised an option to repurchase assets that it had sold to First City Capital Limited ("First City") in a financing transaction that provided working capital ("the 1988 conveyance"). In exercising the option, Lexicom directed that the assets be conveyed to OML, a company owned by IO's wife. The transfer was not disclosed to PF & O, which subsequently was called upon to pay $350,000 under the guarantee. In December 1989, Lexicom made an assignment into bankruptcy, and PF & O proved its claim as a creditor for the amount it paid on the guarantee. In the autumn of 1990, some of the assets that had been conveyed to OML were destroyed in a warehouse fire and, no insurance apparently being available, Lexi com's trustee in bankruptcy took no steps to challenge the transfer of the assets to OML.

In May 1991, unbeknownst to PF & O, IO commenced an action for damages for the loss of the assets in the fire. In February 1996, the trustee in bankruptcy and PF & O learned about the action, which was then being vigorously defended, but they took no steps either with respect to the action or with respect to the 1988 conveyance to OML. In February 2000, having obtained an order pursuant to s. 38 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 authorizing it to commence proceedings in its own name, PF & O commenced an action for a declaration that the 1988 conveyance was void as a fraudulent conveyance under the Fraudulent Conveyances Act. Subsequently, a $500,000 judgment was granted in the action for damages for the fire loss.

In the fraudulent conveyance action, both parties moved for summary judgment. The motions judge found that PF & O's claim was barred either under the Limitations Act or by the doctrine of laches. The motions judge dismissed the action, and PF & O appealed.

Held, the appeal should be allowed and the summary judgment should be set aside.

No limitation period applied to bar PF & O's action. The Fraudulent Conveyances Act contained no limitation provision. The Limitations Act contained no residual, catch-all provision. It did not apply to all civil actions, only to those specifically enumerated and, for PF & O's action to be subject to the Limitations Act, there were only three possibilities, that is, PF & O's action would have to be: (1) on a "simple contract"; (2) "upon the case"; or (3) a "specialty". It was not necessary to consider whether the action was a specialty because if it was such, then the action was timely and not barred by the Act. That left two possibilities. Of these, the action was not upon a simple contract; while the claim for relief under the Fraudulent Conveyances Act related to a contract, it was an action to set aside the contract, the very opposite of asserting rights acquired by way of a contract. Finally, the action was not an action "upon the case", which historically was an action that had derived from the action of trespass. The action upon the case is a flexible and residual form of action that captures many, but not all, personal actions. One necessary element for an action on the case is that damages are necessary. Another essential element is that there be an allegation of a legal duty and a breach of that duty. An action to set aside a conveyance under the Fraudulent Conveyances Act did not fall within the admittedly elastic category of an action upon the case. Therefore, the action was not caught by any provision of the Limitations Act.

Further, the action was not barred by the doctrine of laches. In this regard, the court, however, was not precluded from considering the equitable defence merely because the claim arose under a statute. Rather, the equitable defence did not necessarily arise on the facts of the immediate case. A party relying on the defence of laches must show a combination of delay and prejudice. At the very least, there was a triable issue on whether it would be inequitable in all the circumstances to allow PF & O's claim to proceed. While the motions court judge correctly stated that prejudice must be shown, she did not specify the nature of the prejudice suffered by the respondents that would justify barring the claim. On the present record, neither party was entitled to summary judgment, and the judgment dismissing the action should be set aside.

APPEAL from a summary judgment of Macdonald J. (2000), 2000 22491 (ON SC), 20 C.B.R. (4th) 129 dismissing an action under the Fraudulent Conveyances Act, R.S.O. 1990, c. F.29 on the grounds that the action was barred.

Cases referred to A.M. Smith & Co. v. R., 1981 4716 (FCA), [1982] 1 F.C. 153, 20 C.P.C. 126, 36 N.R. 206, 120 D.L.R. (3d) 345 (C.A.), affg 1980 4326 (FC), [1981] 1 F.C. 167, 112 D.L.R. (3d) 478 (T.D.); Abco Asbestos Co. Ltd., Carmichael and Milne, Re (1981), 40 C.B.R. (N.S.) 250 (B.C.S.C.); Chippewas of Sarnia Band v. Canada (Attorney General) (2000), 2000 16991 (ON CA), 51 O.R. (3d) 641, 195 D.L.R. (4th) 135 (C.A.); Lindsay Petroleum Co. v. Hurd (1874), L.R. 5 P.C. 221, 22 W.R. 492; M. (K.) v. M. (H.), 1992 31 (SCC), [1992] 3 S.C.R. 6, 96 D.L.R. (4th) 289, 142 N.R. 321, 14 C.C.L.T. (2d) 1; Manitoba Fisheries Ltd. v. Canada, 1978 22 (SCC), [1979] 1 S.C.R. 101, 88 D.L.R. (3d) 462, 23 N.R. 159, [1978] 6 W.W.R. 496 (sub nom. Manitoba Fisheries v. R.); Peel (Regional Municipality) v. Canada, 1992 21 (SCC), [1992] 3 S.C.R. 762, 98 D.L.R. (4th) 140, 144 N.R. 1, 12 M.P.L.R. (2d) 229, affg 1988 9432 (FCA), [1989] 2 F.C. 562, 21 F.T.R. 240n, 55 D.L.R. (4th) 618, 89 N.R. 308, 41 M.P.L.R. 113 (C.A.), revg 1986 6784 (FC), [1987] 3 F.C. 103, 7 F.T.R. 213; Simpson (Robert) Co. Ltd. v. Foundation Co. of Canada Ltd. (1982), 1982 1750 (ON CA), 36 O.R. (2d) 97, 134 D.L.R. (3d) 459, 20 C.C.L.T. 179, 26 C.P.C. 51 (C.A.), revg (1981), 1981 2887 (ON SC), 34 O.R. (2d) 1, 126 D.L.R. (3d) 469, 19 C.C.L.T. 117 (S.C.); Thomson v. Lord Clanmorris, [1900] 1 Ch. 718 (C.A.) Statutes referred to Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, s. 38 Director's Liability Act, 1890 (53 & 54 Vict.), c. 64 Fraudulent Conveyances Act, R.S.O. 1990, c. F.29, s. 2 Limitations Act, R.S.O. 1990, c. L.15, s. 45 Personal Property and Security Act, R.S.O. 1990, c. P.10 Statute of Elizabeth, 1571 (Fradulent Conveyances) (13 Eliz. 1), c. 5 Statute of Limitations, R.S.N.S. 1967, c. 168, s. 2 Authorities referred to Bacon, Abridgment, 7th ed., vol. 1 (London: J. & W.T. Clarke Co., 1832) Bennett, F., Creditors' and Debtors' Rights and Remedies, 4th ed. (Scarborough: Carswell, 1994) Blackstone, Sir W., Commentaries on the Laws of England, vol. 3 (Philadelphia: Rees Welsh & Co., 1897) Fleming, J.G., The Law of Torts, 8th ed. (Sydney: The Law Book Company, 1992) Klar, L.N., Tort Law, 2d ed. (Scarborough, ON: Carswell, 1996) Maitland, F.W., The Forms of Action at Common Law (Cambridge: Cambridge University Press, 1909) Mew, G., The Law of Limitations (Toronto: Butterworths, 1991)

Kevin McElcheran and Lisa Corne, for appellant. Miles O'Reilly, Q.C., and Carene Smith, Q.C., for respondents on appeal. Cynthia Sefton, for respondents on cross-appeal.

The judgment of the court was delivered by

[1] SHARPE J.A.:--This appeal raises the issue of what limitation period, if any, applies to an action brought by a creditor pursuant to the Fraudulent Conveyances Act, R.S.O. 1990, c. F.29 to attack a conveyance of assets as void.

Facts

[2] The appellant claims declaratory and related relief in an action brought pursuant to the Fraudulent Conveyances Act. The appellant alleges that the transfer of certain assets to the respondent Outerbridge Management Limited (OML) is void as a fraudulent conveyance and that, as a creditor of the transferor, it is entitled to immediate possession of the assets or the proceeds from the assets.

[3] The appellant moved for summary judgment on its claim under the Fraudulent Conveyances Act and was met with the respondents' cross-motion for summary judgment, asking that the appellant's claim be dismissed on the ground that it was barred by the Limitations Act, R.S.O. 1990, c. L.15. The motions court judge accepted the respondents' limitations argument and gave summary judgment, dismissing the appellant's action.

[4] In view of the narrow issues before this court, it is unnecessary to review the facts in detail. What follows appear to be the essential and undisputed facts.

[5] The appellant carried on the practice of law in partnership with the respondent Ian W. Outerbridge during 1987 and 1988. Lexicom Systems Limited ("Lexicom") was the management firm for the Outerbridge practice.

[6] Before the partnership was formed, in July 1985, Lexicom sold furniture, fixtures, equipment, and antiques used by Outerbridge in connection with his law practice (the "assets"), appraised at over $400,000, to First City Capital Limited ("First City") for a purchase price of $300,000. At the same time, First City leased the assets back to Lexicom, and granted Lexicom an option to repurchase the assets for $60,000 at the expiry of the three-year lease. This financing transaction provided Lexicom with working capital. In view of the value of the assets, the option clearly had a value in excess of the $60,000 required to redeem the assets.

[7] In connection with its partnership with Outerbridge, the appellant guaranteed Lexicom's line of credit with the Toronto- Dominion Bank. On June 28, 1988, at a time when it owed the Toronto-Dominion Bank approximately $360,000, Lexicom advised First City that it was exercising the option and that title to the assets should be transferred to the respondent OML. OML is a company owned by Outerbridge's wife, and is related to both Lexicom and Outerbridge. On July 4, 1988, the assets were transferred to OML by First City, apparently for the stated purchase price of $64,815, equal to the option price plus tax and transfer fees. This transfer was not disclosed to the appellant.

[8] The appellant was called upon to pay more than $350,000 pursuant to its guarantee to satisfy Lexicom's indebtedness to the Toronto-Dominion Bank. On December 1, 1989, Lexicom made an assignment for the general benefit of its creditors pursuant to the provisions of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the "BIA"). The appellant proved its claim as a creditor of Lexicom for the amount it had paid to the Toronto- Dominion Bank on the guarantee.

[9] Despite the transfer of the assets to OML, they remained in Lexicom's possession until Lexicom's bankruptcy. In the fall of 1990, some of the assets were destroyed in a fire in a warehouse where they were being stored. Lexicom's bankruptcy Trustee's inquiries revealed that there was no insurance to cover the loss and, in the absence of insurance or any other apparent source of recovery, the Trustee took no steps to challenge the transfer of the assets by Lexicom to OML.

[10] Unbeknownst to the Trustee and the appellant, in May 1991, Outerbridge commenced an action for damages for the loss and destruction of the assets. The defendant in that action had been working on a vehicle stored near the assets. Although coverage was denied, the named defendant was eventually found to be covered under an insurance policy.

[11] It was not until February 1996 that the Trustee and the appellant learned of the Outerbridge action. Inquiries revealed that the action was being vigorously defended. No steps were taken, either by the appellant or by the Trustee, with respect either to the action or to the 1988 transfer to OML. However, in July 1999, a tentative settlement of Outerbridge's claim was reached and, as it appeared there could be exigible proceeds, the appellant asked the Trustee to commence proceedings to attack the 1988 transfer. The Trustee refused, as there were no funds available in Lexicom's estate to commence the proceedings.

[12] The appellant obtained an order pursuant to s. 38 of the BIA, authorizing it to commence proceedings in its own name. This action was commenced on February 22, 2000, claiming a declaration that the 1988 transfer was void as a fraudulent conveyance, a declaration that the respondents held the assets or the proceeds therefrom on trust for the appellant, and payment of $500,000 as compensation for the loss of the assets. Outerbridge subsequently was awarded damages in excess of $500,000 in the action for the fire loss.

Proceedings Before the Motions Court Judge

[13] As indicated earlier, the appellant moved for summary judgment on its claim under the Fraudulent Conveyances Act. The appellant also moved to amend the statement of claim to include a claim for priority under the Personal Property Security Act, R.S.O. 1990, c. P.10 and for summary judgment on the claim as amended. The respondent brought a cross-motion to dismiss the claim on the grounds that it was barred by the Limitations Act, or in the alternative, that it was barred by laches.

[14] The primary focus of the proceedings before the motions court judge was the limitations argument. She found that the claim under the Fraudulent Conveyances Act was barred by the six-year limitation period prescribed by s. 45(1)(g) of the Limitations Act, either as an action on a "simple contract" or as an "action on the case". She also concluded that even if the action were not barred by the statute, it would be barred by laches. She noted, however, that "[t]here is no question in my mind that, had [the appellant's] claims not been barred by the operation of the Limitations Act, [the appellant] would have been able to make out [its] claims under both the [Fraudulent Conveyances Act] and the [Personal Property Security Act]".

Issues

[15] The appellant submits before this court that the motions court judge erred in finding that the claim is barred, either under the Limitations Act or by the doctrine of laches. The appellant further submits that it is entitled to summary judgment. The respondents seek leave to appeal the motions court judge's refusal to award them the costs of the motion. The issues may be summarized as follows:

1. Did the motions court judge err in finding that the claim pursuant to the Fraudulent Conveyances Act is barred by s. 45(1)(b) of the Limitations Act?

2. Did the motions court judge err in finding that the claim pursuant to the Fraudulent Conveyances Act is barred by laches?

3. If the claim is not barred, is the appellant entitled to summary judgment?

4. Did the motions court judge err in refusing to award the respondents' costs?

Analysis

Issue 1: Did the motions court judge err in finding that the claim pursuant to the Fraudulent Conveyances Act is barred by s. 45(1)(g) of the Limitations Act?

[16] There is no limitation period prescribed by the Fraudulent Conveyances Act. The relevant provisions of the Limitations Act are the following:

45(1) The following actions shall be commenced within and not after the times respectively hereinafter mentioned,

(b) an action upon a bond, or other specialty . . .

within twenty years after the cause of action arose,

(g) an action for trespass to goods or land, simple contract or debt grounded upon any lending or contract without specialty, debt for arrears of rent, detinue, replevin or upon the case other than for slander,

within six years after the cause of action arose,

[17] Ontario's Limitations Act does not apply to all civil actions, only to those that are specifically enumerated. As held by the Supreme Court of Canada in M. (K.) v. M. (H.), 1992 31 (SCC), [1992] 3 S.C.R. 6, 96 D.L.R. (4th) 289 at p. 69 S.C.R., p. 329 D.L.R., the Act "applies only to a closed list of enumerated causes of action". It follows that unless a claim for relief under the Fraudulent Conveyances Act can be identified as included within one of the causes of action enumerated in the Limitations Act, the appellant's action is not subject to any statutory limitation period.

[18] If the appellant's action is to be caught by the Act, there are three possibilities: (1) an action on "a simple contract"; (2) an action "upon the case"; or (3) an action upon "a specialty". If the cause of action falls within either of the first two possibilities, it is barred as having been brought more than six years after it arose. If it falls within the third category, it is not barred. A fourth possibility is that the Act simply does not apply.

[19] While there appears to be no decided case precisely on point, to the extent there is any authority dealing with the issue, it supports a finding that there is no limitation period. Bennett, Creditors' and Debtors' Rights and Remedies, 4th ed. (Scarborough: Carswell, 1994) at p. 124 states that there is no limitation period governing claims under the Fraudulent Conveyances Act. The very point at issue here did arise in Re Abco Asbestos Co. Ltd., Carmichael and Milne (1981), 40 C.B.R. (N.S.) 250 (B.C.S.C.), where it was held that the claim was caught by the residual, catch-all provision in the British Columbia limitations statute, governing claims not specifically provided for. As I have noted, there is no similar provision in Ontario.

(a) Action on "a simple contract"

[20] I respectfully disagree with the conclusion of the motions court judge that the claim could be considered as being grounded upon "a simple contract". While the claim for relief under the Fraudulent Conveyances Act relates to a contract, it is an action to set aside and nullify the contract, the very opposite of asserting rights acquired by way of contract. The source of the legal right asserted is not the contract, but the statute. The object of the action is to void and defeat the rights and obligations the contract purports to confer.

(b) Action "upon the case"

[21] It is perhaps trite to observe that this appeal provides twenty-first century Canadian proof of the truth of Maitland's famous observation in his classic work, The Forms of Action at Common Law (Cambridge: Cambridge University Press, 1909), at p. 296: "The forms of action we have buried, but they still rule us from their graves." The archaic language and pigeon-hole approach of the Limitations Act replicates the long outmoded categories of the common law forms of action and drives back to obscure recesses of English legal history.

[22] The action on the case was a derivation from the action of trespass. Maitland explained at p. 359 that all personal actions branched out from trespass. The writ of trespass contained the words "vi et armis contra pacem". The need to allege violence necessarily limited the scope of trespass, and gradually the clerks of Chancery allowed modified versions of the writ that omitted the words "vi et armis". In these instances, the plaintiff was said to bring an action "upon his case" or "upon the special case", the particular facts of which were set out in the writ. By the end of the 14th century, a new and very flexible form of action had evolved. It became what Maitland described at p. 361 as "a sort of general residuary action; much particularly, of the modern law of negligence developed within it". Blackstone, Commentaries on the Laws of England, vol. 3 (Philadelphia: Rees Welsh & Co., 1897), at p. 122, described the action on the case as "a universal remedy, given for all personal wrongs and injuries without force; so called because the plaintiff's whole case or cause of complaint is set forth at length in the original writ". The writ of trespass was available for immediate injury to person or property "but where there is no act done, but only a culpable omission, or where the act is not immediately injurious, but only by consequence and collaterally; there no action of trespass vi et armis will lie, but an action on the special case, for the damages consequent on such omission or act". Bacon's Abridgment, 7th ed. (London: J. & W.T. Clarke Co., 1832) vol. 1 at p. 86 explained that "where the law has made no provision, or, rather, where no general action could be framed before-hand, (the ways of injuring, and methods of deceiving being so various,) every person is allowed . . . to bring a special action on his own case, which is liberal action."

[23] The action on the case was general and flexible and it allowed for the evolution of new claims based upon unintended and consequential harm. Much of the modern law of torts derived from the action on the case. The actions for deceit and nuisance were developed as actions on the case, as were the more modern actions of defamation and negligence. The historical evolution of the action on the case is canvassed in J.G. Fleming, The Law of Torts, 8th ed. (Sydney: The Law Book Company, 1992) and L.N. Klar, Tort Law, 2d ed. (Scarborough: Carswell, 1996). Both authors explain that the action on the case developed to provide a remedy for cases where the injury suffered was not "direct", but was due to an omission or an act only consequentially injurious to the plaintiff's interests.

[24] There can be little doubt, then, that the action on the case served as a residual category. Indeed, the action on the case also produced two highly significant off-shoots that became independent actions, namely assumpsit, from which much of the modern law of contract and restitution is derived, and trover, from which the modern law of personal property evolved.

[25] When used in the context of the Limitations Act, it would appear that the category of "action upon the case" does retain something of its traditional residual character. To some extent, it serves as a catch-all or short-hand expression to embrace personal actions for damages based upon breach of a legal duty not otherwise caught by the Act. Mew, The Law of Limitations (Toronto: Butterworths, 1991) at p. 92, describes the common law action as encompassing "all actions that did not amount to trespass, namely, those injuries that were neither forcible or direct, but only consequential". When used in modern limitations legislation, Mew states that the term "refers to actions that were included in these traditional definitions, and are still not otherwise described in the limitations statutes, and includes causes of action sounding in both contract and tort". This interpretation is supported by the dictum of Strayer J. in Peel (Regional Municipality) v. Canada, 1986 6784 (FC), [1987] 3 F.C. 103 at p. 126, 7 F.T.R. 213 (T.D.), revd on other grounds, 1988 9432 (FCA), [1989] 2 F.C. 562, 55 D.L.R. (4th) 618 (C.A.), revd on other grounds, 1992 21 (SCC), [1992] 3 S.C.R. 762, 98 D.L.R. (4th) 140, holding that a restitutionary action was an action upon the case within s. 45(1)(g):

It is perhaps anomalous that we should today be required to resort to distinctions having their origin in the fourteenth century and their significance in the forms of action which Anglo-Canadian law purportedly abandoned over a century ago. But the wording of the Ontario statute obliges me to do so. An "action upon the case" should in the context of a modern statute be viewed somewhat as a residual category of action, which is indeed a role not inconsistent with its original development.

[26] On the other hand, it cannot be that the phrase "action upon the case" is a residual category broad enough the capture all personal actions not otherwise specified by the Limitations Act, for as I have already noted, it is established on the highest authority that the Act contains no residual provision. One significant limit that would seem to flow from the origins of the action on the case is that damages are a necessary element. The element of damages was referred to by Blackstone at p. 123, where it is stated that an action on the case could be brought for "any special consequential damage[s] . . . which could not be foreseen and provided for in the ordinary course of justice". Another essential element appears to be the allegation of a legal duty and a breach of that duty. In Simpson (Robert) Co. Ltd. v. Foundation Co. of Canada Ltd. (1982), 1982 1750 (ON CA), 36 O.R. (2d) 97, 134 D.L.R. (3d) 459 (C.A.), Cory J.A. considered the interpretation of s. 45(1)(g) of the Limit ations Act, and suggested at p. 101 O.R. that the "three fundamental aspects" of an action on the case were:

(a) duty owed by the defendant to the plaintiffs;

(b) a breach of that duty by the defendant; and

(c) damage suffered by the plaintiff as of a result of the breach of the duty owed to him by the defendant.

[27] When one turns to the cases in which actions grounded on a statute have been classified as actions upon the case for limitation purposes, one finds that damages and the breach of a legal duty have been essential elements. Thomson v. Lord Clanmorris, [1900] 1 Ch. 718 (C.A.) involved an action brought under the Director's Liability Act, 1890 (53 & 54 Vict.) c. 64, imposing liability on company directors for losses suffered by reason of untrue statements in a prospectus. It was argued that the action was barred by a two-year limitation period for "all actions for penalties, damages, or sums of money given to a party grieved, by any statute". The English Court of Appeal rejected that argument on the ground that the statute created a legal duty, the breach of which gave rise to a right of action. Vaughan Williams L.J. held at p. 727 "what the section really does is to give a new action on the case. It creates a new negative duty."

[28] A.M. Smith & Co. v. R. (1981), 1981 4716 (FCA), 20 C.P.C. 126, 120 D.L.R. (3d) 345 (Fed. C.A.) dealt with an action for compensation for the loss of the right to carry on a business flowing from the enactment of a statute. The plaintiff's claim was based on the principle established in Manitoba Fisheries Ltd. v. R. (1978), 1978 22 (SCC), [1979] 1 S.C.R. 101, 88 D.L.R. (3d) 462 that a right of action arises where a statute puts a party out of business without compensation. The plaintiff commenced the action more than six years after the cause of action arose and was met with the defendant's argument that the claim was barred by the Statute of Limitations, R.S.N.S. 1967, c. 168, s. 2. In response, the plaintiff contended that the claim was for a "specialty" and that the applicable limitation period was 20 years. The plaintiff's argument was rejected by Ryan J.A., who characterized the action as one "upon the case". The plaintiff's claim was for an unliquidated sum and, in Ryan J.A.'s view, at p. 139 "actions for unliquidated sums based on causes of action provided by statute" are included in the category of actions upon the case.

[29] These authorities do not assist the respondents as they plainly turn on the fact that the action sounded in damages. In my view, the respondents' attempt to fit an action brought pursuant to the Fraudulent Conveyances Act to set aside a conveyance stretches the admittedly elastic category of "action upon the case" beyond the breaking point. The operative provision of the Act, which traces its roots back to the Statute of Elizabeth, 1571 (Fraudulent Conveyances) (13 Eliz. 1), c. 5, is s. 2:

Every conveyance of real property or personal property and every bond, suit, judgment and execution heretofore or hereafter made with intent to defeat, hinder, delay or defraud creditors or others of their just and lawful actions, suits, debts, accounts, damages, penalties or forfeitures are void as against such persons and their assigns.

[30] This provision neither creates a right of action that sounds in damages, nor does it create a legal duty, the breach of which gives rise to a cause of action. The plaintiff in a fraudulent conveyance action does not assert the breach of a legal duty, but rather asserts that the debtor has improperly placed assets beyond the reach of ordinary legal process. Any entitlement to the payment of money or damages in favour of [the] plaintiff exists independently and apart from the action to set aside the fraudulent conveyance. The Act gives no right of damages nor compensation for loss. It provides for a declaratory type proceeding that has the effect of nullifying transfers and conveyances of the debtor's property so as to make possible execution of the creditor's debt. It follows, in my view, that the appellant's claim cannot be classified as an action on the case.

[31] As the appellant's claim is neither an action on a "simple contract" nor an "action on the case", it is not caught by s. 45(1)(g) of the Limitations Act.

(c) Action upon a bond or other specialty

[32] The only other provision of the Limitations Act that might govern the claim is s. 45(1)(b), providing for a 20-year limitation period for actions "upon a bond, or other specialty". As the appellant's claim was brought within 20 years of the date the cause of action arose, it is unnecessary for me to decide whether the claim is or is not an action for a specialty.

(d) Conclusion -- Limitations Act

[33] I conclude, accordingly, that there is no provision of the Limitations Act that bars the appellant's claim.

Issue 2: Did the motions court judge err in finding that the claim pursuant to the Fraudulent Conveyances Act is barred by laches?

[34] The appellant submits that the motions court judge erred in finding that the claim is barred by the doctrine of laches. The appellant submits, first, that as the claim arises under a statute, it is legal in nature, and the equitable doctrine has no application. Second, it is argued that even if the doctrine of laches could apply, the respondents have failed to show the necessary element of prejudice flowing from the delay.

[35] I am not persuaded by the argument that a court entertaining a claim for relief under the Fraudulent Conveyances Act would be precluded from considering equitable defences merely because the claim arises under a statute. The elements of a claim to set aside a fraudulent conveyance have a distinctively equitable flavour and the argument is inconsistent with the modern approach to the significance of the intersection between law and equity: see Chippewas of Sarnia Band v. Canada (Attorney General) (2000), 2000 16991 (ON CA), 51 O.R. (3d) 641, 195 D.L.R. (4th) 135 (C.A.).

[36] The appellant's second point, however, is a strong one. As noted by the motions court judge, without more, delay in asserting a claim does not give rise to the equitable defence of laches. A party relying on the defence must show a combination of delay and prejudice. As was stated in the often- quoted passage from the leading English case, Lindsay Petroleum Co. v. Hurd (1874), L.R. 5 P.C. 221 at pp. 239-40, 22 W.R. 492:

the doctrine of laches . . . is not an arbitrary or a technical doctrine . . . Two circumstances, always important in such cases, are, the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy.

The ingredients of an equitable defence based upon delay were recently discussed by the Supreme Court of Canada in M. (K.) v. M. (H.), supra, at pp. 77-78 S.C.R., p. 334 D.L.R.:

What is immediately obvious from all of the authorities is that mere delay is insufficient to trigger laches . . . Rather, the doctrine considers whether the delay of the plaintiff constitutes acquiescence or results in circumstances that make the prosecution of the action unreasonable. Ultimately, laches must be resolved as a matter of justice as between the parties, as is the case with any equitable doctrine.

[37] I respectfully disagree with the conclusion of the motions court judge that the respondents have made out [a] case for granting summary judgment on the basis of laches. It seems to me that, at the very least, there is a triable issue on whether it would be inequitable for the appellant's claim to proceed. While the motions court judge correctly stated that prejudice must be shown, she did not specify the nature of the prejudice suffered by the respondents that would justify barring the claim. It may perhaps be inferred from her reasons that she considered Outerbridge's pursuit of the claim for damages for the loss of the assets in the fire to be such a change of position giving rise to prejudice that made it inequitable for the appellant to pursue the fraudulent conveyance claim. If that is the basis for a finding of prejudice, I do not agree with it. It seems to me that the respondents' conduct vis-à-vis both the trustee and the appellant gives rise to a live issue as to whether it would b e inequitable for the appellant now to assert the claim. As I have concluded that on the present record, neither party is entitled to summary judgment, I need say no more.

Issue 3: If the claim is not barred, is the appellant entitled to summary judgment?

[38] The appellant submits the motions court judge's statement in her reasons that, but for the limitations defence, it would have made out its claim constitutes a finding in its favour, sufficient to support its claim for summary judgment. I do not agree. It was common ground on this appeal that the merits of the summary judgment motion were not fully argued or considered on the motion. As the limitations argument raised a discrete legal point capable of ending the litigation, the parties and the motions court judge focused entirely on it as a preliminary point and the merits of the summary judgment motion were not considered. Accordingly, it would be inappropriate for this court on appeal to treat the quoted passage from the motions court judge's reasons as constituting a finding capable of supporting summary judgment in the appellant's favour. This, of course, is without prejudice to the right of the appellant to seek summary judgment if so advised.

Issue 4: Did the motions court judge err in refusing to award the respondents costs?

[39] As I have concluded that the motions court judge erred in awarding the respondents summary judgment, the cross-appeal as to costs must be dismissed as moot.

Conclusion

[40] Accordingly, I would allow the appeal and set aside the judgment of the motions court judge in its entirety. The appellant is entitled to its costs of the appeal and of the proceedings before the motions court judge. The cross-appeal as to costs is dismissed without costs.

Order accordingly.