CITATION: Investissements Calnar Inc. v. Amore Foods Corporation, 2007 ONCA 836

DATE: 20071203

DOCKET: C46957

COURT OF APPEAL FOR ONTARIO

BLAIR, JURIANSZ and MACFARLAND JJ.A.

BETWEEN:

INVESTISSEMENTS CALNAR INC.

Applicant (Respondent in Appeal)

and

AMORE FOODS CORPORATION

Respondent (Appellant)

Scott A. Rosen for appellant

A.T. McKinnon for the respondent

Heard and released orally: November 28, 2007

On appeal from the judgment of Justice C. Campbell of the Superior Court of Justice dated March 6, 2007.

ENDORSEMENT

[1] Investissements Calnar Inc. (known as “SPB” in this litigation) had a claim in the amount of approximately $350,000 against Amore Sweets Corporation for goods sold and delivered.

[2] Amore Sweets asserted a $21 million counterclaim (since reported to be about $2 million) in response in the proceedings. Amore Sweets and a related corporation, Pasta Amore fell into financial difficulties and a receivership application ensued. SPB, an unsecured creditor was not given notice of the receivership proceedings.

[3] Cameron J. heard the receivership motion and a motion for approval of the sale of the assets of Amore Sweets and Pasta Amore to a new corporation, Amore Foods. Without being told of the SPB claim, Cameron J. granted an Appointment Order and a Vesting Order transferring the assets, without the liabilities, to Amore Foods. As a result of the Vesting Order, the claim of SPB against the purchase assets was expunged.

[4] Amore Foods subsequently obtained an Order to Continue the SPB action and counterclaim in its name, pursuant to Rule 11 of the Rules of Civil Procedure. SPB became aware of the situation and eventually moved before Colin Campbell J. for an order varying the Appointment Order and the Vesting Order to permit SPB to prosecute its action or, in the alternative, for an order varying the Order to Continue Proceedings to permit SPB to continue the prosecution of its claim against Amore Foods.

[5] Although it may be inferred from the reasons of Campbell J. that he was sympathetic to the argument that SPB ought to be able to pursue its claim against Amore Foods as opposed to simply asserting a set-off, he did not grant the first claim for relief sought; rather, he varied the Order to Continue the proceedings to provide in para. 1 that the order : “be and the same is hereby varied to the extent necessary to permit SPB Canada Inc. to pursue its original claim in that proceeding substituting Amore Foods Corporation for Amore Sweets Corporation as a defendant/plaintiff by counterclaim.”

[6] Respectfully, we do not think he had the authority to do so. A Rule 11 Order to Continue Proceedings is procedural and neutral only. It simply allows the continuation of a proceeding where there has been a transmission of the interest in that proceeding to another. It cannot create substantive rights.

[7] What Campbell J. in effect did was to create a substantive right on the part of SPB to pursue its claim against Amore Foods and to do so, as a stand alone claim. SPB’s right to pursue the claim against the purchased assets, however, has been expunged by the Vesting Order which still remains unvaried and in effect. It no longer existed as a liability to be transmitted to Amore Foods, given the terms of the Vesting Order.

[8] The appeal must therefore be allowed and the order of Campbell J. varied to the extent that para. 1 provides for the right of SPB to pursue its original claim against Amore Foods as a stand alone claim. SPB is entitled to assert that claim by way of set-off in the Amore Foods counterclaim, however, and we see no error in that portion of the order of Campbell J. so providing.

[9] Costs of the appeal to the appellant fixed at $12,500 all inclusive. We would not interfere with the costs below.

“R.A. Blair J.A.”

“R.G. Juriansz J.A.”

“J.L. MacFarland J.A.”