Brightman Capital Ventures Inc. v. J.P. Haynes & Associates Inc.

Ontario Supreme Court

Date: 2001-02-06

Docket: Toronto 801/99

Appellant (Plaintiff): Brightman Capital Ventures Inc.

Respondents (Defendants/Plaintiffs by Counterclaim): J.P. Haynes and Associates Inc., J. Paul Haynes, Junior also known as Jerry Paul Haynes Junior and J. Paul Haynes Senior also known as Paul Haynes Senior

Defendants to the Counterclaim: Brightman Capital Ventures Inc. and Jay Brightman

Ontario Superior Court of Justice (Divisional Court) Before: Southey J. Heard: January 11, 2001 Judgment: February 6, 2001[^1]

Counsel: R.L. Colson, for Appellant/Plaintiff R.C. Harason, for Respondents/Defendants

Reasons for Judgment

Southey J.:

[1] This is an appeal by the plaintiff from the judgment of Case Management Master Polika, dated November 2, 1999, dismissing the plaintiff’s action. The judgment was part of the disposition of a motion by the defendants for security for costs. The Master fixed costs of the motion at $1,200 and ordered that they be paid forthwith by the plaintiff and its solicitors. All other costs of the action were also to be paid by the plaintiff and its solicitors forthwith after assessment.

[2] The defendants cross-appealed the provision for costs in the judgment, claiming that costs of the motion and of the action should be awarded on a solicitor and client basis, to be paid forthwith after assessment by the plaintiff and the plaintiff’s solicitors.

[3] The reason given by Master Polika for the dismissal was that the action was a nullity, because it had been commenced (September 17, 1997) after the plaintiff corporation had been dissolved (July 23, 1994) and before it had been revived by Articles of Revival (September 2, 1999). The motion for security for costs had originally been returnable on May 25, 1999, but had been adjourned to August 31, 1999, because it could not be reached on the earlier date. The fact of dissolution was known to the plaintiff’s solicitors from the original date of return, but no steps were taken to obtain Articles of Revival until after the conclusion of the argument on the merits on August 31, 1999. Completion of the hearing of the motion was put off until September 14, 1999, at the request of the plaintiff’s counsel, to enable material to be filed respecting liability for costs. The plaintiff’s solicitors represented that the evidence sought to be adduced did not deal with dissolution or whether the proceeding was a nullity.

[4] The plaintiff then obtained Articles of Revival, dated September 2, 1999, and filed an affidavit to which those Articles were an exhibit. The affidavit stated that the plaintiff’s solicitors had acted in good faith and that they and Jay Brightman, the principal of the corporate plaintiff, believed that the plaintiff was a valid and subsisting Ontario corporation until informed otherwise on the defendants’ motion for security for costs. Contrary to the representation given on August 31, 1999, the issue of whether the proceeding was a nullity was addressed again on September 14, 1999. The Master reserved his decision and gave judgment on November 2, 1999, dismissing the action as a nullity.

[5] The Master made his decision on the basis of the state of affairs as of August 31, 1999, save for representations and additional material relating to the plaintiffs solicitors’ liability for costs. He was acting in accordance with the general rule that a court hearing a motion will ignore anything done after notice of the motion was served. (See Bruce v. John Northway & Son Ltd., [1962] O.W.N. 150 (Ont. Master); Cafissi v. Vana, [1973] 1 O.R. 654 (Ont. H.C.).

[6] It is common ground that an action commenced on behalf of a corporation that has been dissolved is a nullity, unless the corporation has been revived before the action was commenced.

[7] Section 241(5) of the Business Corporations Act deals with the revival of a dissolved corporation. The subsection, as contained in R.S.O. 1990, c.B.16 reads as follows:

(5) Where a corporation is dissolved under subsection (4) or any predecessor thereof, the Director on the application of any interested person immediately before the dissolution, may, in his or her discretion, on such terms and conditions as the Director sees fit to impose, revive the corporation and thereupon the corporation, subject to the terms and conditions imposed by the Director and to any rights acquired by any person after its dissolution, is restored to its legal position, including all its property, rights and privileges and franchises, and is subject to all its liabilities, contracts, disabilities and debts, as of the date of its dissolution, in the same manner and to the same extent as if it had not been dissolved.

[8] A slightly revised version of the subsection came into force on December 18, 1998. It reads as follows:

(5) Where a corporation is dissolved under subsection (4) or any predecessor of it, the Director on the application of any interested person immediately before the dissolution, may, in his or her discretion, on such terms and conditions as the Director sees fit to impose, revive the corporation and the corporation, subject to the terms and conditions imposed by the Director and to any rights acquired by any person during the period of dissolution, shall be deemed for all purposes to have never been dissolved.

[9] The Master held that the earlier version of the subsection applied to this case. He said:

[9] This action was commenced on September 17, 1997 when the corporation was not in existence. On its face the change in legislation is substantive in nature rather than procedural. In such circumstances the defendant is entitled to the benefit of the prior version of the section.

[10] It is well settled that the revival of a dissolved corporation does not empower the corporation to bring an action that has become statute barred by a limitation period that expired before the revival. As Moldaver J.A. put it in delivering the judgment of the Court of Appeal in 602533 Ontario Inc. v. Shell Canada Ltd. (1998), 37 O.R. (3d) 504 (Ont. C.A.) at p. 512:

The fact of 602533’s dissolution did not, however, prevent the limitation clock from ticking.

[11] The Court held that the expiry of the limitation period before revival had created a post‑dissolution right in Shell, which was protected on the revival of the plaintiff. The Court adopted the following statement by Eberle J. in Profit Sharing Investors of Canada Ltd. v. Coffee Vending Services (Ottawa) Ltd. (1983), 41 O.R. (2d) 470 (Ont. H.C.), at 472:

The point is, however, in my view, important for it is clear to me that the section intends to preserve rights acquired by third persons after the dissolution of the corporation. In this case, after the dissolution of the corporation and before it was revived, the limitation period for the plaintiffs claim against the defendant expired. That, I think, is a right acquired by a person, the defendant, after the dissolution of the corporation. The words I am referring to in the subsection make it clear to me that, as submitted by counsel for the defendant, the dissolution of the corporation does not stop the clock from running with respect to a limitation period.

[12] In the case at bar, however, the plaintiff’s claim is not barred by the expiry of any limitation period. If the judgment of the Master is upheld, the plaintiff could go out tomorrow and commence a fresh action for the same relief. I consider this to be an important aspect of the case. The plaintiff relies on rule 1.04(1), which provides “These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.”

[13] We are not here concerned with the construction of a Rule of Civil Procedure, but I am satisfied the provision of the Business Corporations Act in question should be construed in a similar fashion.

[14] If the Master had decided on August 31, 1999, that the action was a nullity, because the plaintiff was not in existence, his decision to dismiss the action would be unassailable. But he made no decision. He adjourned the matter to September 14, without making a decision.

[15] The defendants claim, as a post-dissolution right, the right to the dismissal of the plaintiff’s action as a nullity. Any such right, however, was subject to the legal effect of the revival of the corporation, as occurred on September 2, 1999, before the action was dismissed. The right thus claimed was quite different from one acquired by the expiry of a limitation period, because it could be affected, if not nullified, by timely action on the part of the plaintiff. The plaintiff was under no restriction preventing it from obtaining Articles of Revival.

[16] In my judgment, the effect of revival is the same under s. 241(5) of the Business Corporations Act, whether before or after the amendment of 1998. Under either provision the corporation is deemed to have the same rights as if it had not been dissolved. One of such rights was the right to bring this action.

[17] The general rule that motions be decided on the basis of the facts as they existed on the date the motion was commenced cannot negate the effect of the plain words of the statute. The plaintiff is deemed to have had the right to bring this action as though it had not been dissolved.

[18] There is evidence that the plaintiff corporation was inactive at all material times and could not have duly authorized its solicitor to commence this action. I can see no substance in this argument. The plaintiff’s solicitors received instructions to commence the action from Jay Brightman, who is described as “principal” of the plaintiff. The intended purpose of the corporation was to receive fees earned by Mr. Brightman. The only reasonable inference is that Mr. Brightman owned or controlled the shares of the plaintiff corporation.

[19] The appeal is allowed and the judgment below will be varied by deleting paragraph 1 in which the action is dismissed.

[20] I can see no reason to interfere with the remaining provisions in the judgment below. No reason has been given for the failure of the plaintiffs solicitors to obtain Articles of Revival as soon as they became aware that the plaintiff corporation had been dissolved. Had they done so, this appeal would not have been necessary.

[21] Rule 57.01(2) provides as follows:

(2) The fact that a party is successful in a proceeding or a step in a proceeding does not prevent the court from awarding costs against the party in a proper case.

[22] The appeal is allowed in part as aforesaid, but the defendants are entitled to their costs of the appeal to be paid forthwith after assessment by the plaintiff and the plaintiff’s solicitors, Carson, Gross & Christie.

[23] The defendants in the cross-appeal seek costs on a solicitor and client basis. Leave is required for that appeal under s. 153(b) of the Courts of Justice Act. I refuse to grant such leave. The cross-appeal is dismissed without costs.

Appeal allowed in part; cross-appeal dismissed.

[^1]: Additional reasons at 2001 CarswellOnt 665, 143 O.A.C. 188 at 193 (Ont. Div. Ct.).