CITATION: Canaccede Credit LP v. Dyment, 2020 ONSC 325
COURT FILE NOS.: DC-19-63-00 and DC-19-64-00
DATE: 2020 01 16
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
BETWEEN:
Canaccede Credit LP
Appellant
– and –
Susan J. Dyment a.k.a. Susan Jane Dyment
Self-Represented
Respondent
HEARD: November 22, 2019
REASONS FOR JUDGMENT
Doi J.
Overview
[1] This is an appeal from a decision by a Deputy Judge of the Small Claims Court made on June 11, 2019 that granted the Respondent’s motion to dismiss the Appellant’s claims brought in two (2) proceedings against her for unpaid debts.[^1]
[2] The Appellant submits that the learned Deputy Judge erred by finding that it could not lawfully bring its claims because: a) it was not registered as a collection agency under ss. 4(1) of the Collection and Debt Settlement Services Act, RSO 1990, c. C.14, as am. (the “Act”); and b) it had failed to show a requisite absolute assignment of the debts that allowed it to sue the Respondent in its own name. More specifically, the Appellant submits that it is not a “collection agency” as defined under ss.1(1)(d) of the Act, and that the evidence is uncontroverted that the debts had been absolutely assigned and that not naming an assignor as a party should not defeat its claims. As explained below, I agree with these submissions and would allow the appeal on this basis.
[3] The Appellant also argued that the Deputy Judge erred by not applying the principles of procedural fairness. I am not persuaded by this argument.
Background
[4] The Appellant brought two (2) claims in the Small Claims Court to recover unpaid debts from the Respondent on three (3) credit accounts that she had with The Bank of Nova Scotia (the “Bank”), namely a line of credit account, a personal loan account, and a credit card account.[^2] After charging off the accounts as bad debts, the Bank sold and assigned the unpaid debts to Canaccede International Investments Ltd. (“CIIL”) under an Account Purchase Agreement (the “APA”) dated April 28, 2017. CIIL then immediately sold and assigned the unpaid debts to the Appellant, an affiliated company, who is the current and rightful owner of the debts.
[5] As part of the transaction to sell the unpaid debts, the Bank (the “Assignor”) and CIIL (the “Assignee”) executed an Assignment and Assumption Agreement dated April 28, 2017 (the “Assignment Agreement”). Article 2.1 of the Assignment Agreement provides:
2.1 Assignment of Accounts.
(a) The Assignor hereby absolutely and irrevocably sells, assigns and transfers to the Assignee, all of the Assignor’s rights, title, benefit and interest in and to the Accounts, which accounts are listed in Schedule “A hereto (the “Assignment”).
(b) The Assignee hereby confirms and accepts the Assignment.
[6] Article 1.3 of the Assignment Agreement expressly confirms that its stated purpose, “is solely to confirm the transfer of the Accounts” and “if necessary, to provide evidence of such transfers to third parties.”
[7] Between May 9, 2017 and July 24, 2018, the debts were assigned to authorized collection agencies acting for the Appellant. After payment arrangements for the debts were not secured, the debts were recalled from the agencies on July 25, 2018 and placed with Canaccede International Management Ltd. (“CIML”), a registered collection agency and an affiliate of the Appellant, that proceeded to perform all debt collection work on the accounts for the Appellant.
[8] In July 2018, CIML issued notices of assignment to advise the Respondent that the Appellant had purchased the debts that CIML would service. CIML asked the Respondent to resolve the unpaid debts by remitting payment on the debt accounts to CIML.
[9] The Respondent did not pay her debts on the accounts. The debt balances on the accounts remain outstanding.
[10] On July 27, 2018, the Appellant commenced its claims in the Small Claims Court against the Respondent who defended the claims on September 26, 2018. Subsequently on October 19, 2018, the Respondent amended her defences to the claims.
[11] At the December 21, 2018 settlement conference, the claims did not resolve. A trial of the claims was set for June 11, 2019.
[12] On May 25, 2019, the Respondent retained new counsel.
[13] On June 3, 2019, the Respondent delivered a notice of motion on June 3, 2019 to adjourn the trial date in order to amend further her defence, to obtain disclosure of additional documents regarding the assignment of the debts, and to await a decision by the Registrar of Collection Agencies in respect of her complaint to the Ontario Consumer Protection Branch that the Appellant had operated as an unregistered collection agency in breach of the Act. By way of alternate relief on her motion, the Respondent sought to strike the claims on the grounds that the Appellant lacked authority to bring the claims because: a) it was not registered as collection agency as required under s.4 of the Act; and b) it had not shown that it had an absolute assignment of the debts (i.e., because it had not disclosed the APA) as required for it to sue in its own name.
[14] On June 11, 2019, the Deputy Judge heard the Respondent’s motion. The Appellant did not oppose the motion to adjourn the trial. However, it opposed the motion to dismiss its claims by asserting that it was not required to register as a collection agency under the Act as a precondition to bringing the claims, and by taking the position that the Assignment Agreement clearly showed that the debts had been absolutely assigned.
[15] In his Endorsement dated June 11, 2019, the Deputy Judge dismissed the claims after finding that:
a) the Appellant was not registered under the Act as a collection agency which left it unauthorized to carry on collections business and, therefore, unable to have commenced the claims in court; and
b) the Appellant had not produced the APA which left the court unable to determine whether there had been an absolute assignment of the unpaid debts to entitle the Appellant to sue in its own name.
[16] After dismissing the claims, the Deputy Judge awarded the Respondent $6,485.71 in costs for the motion, being 15% of the total amount of the claims, pursuant to s.29 (Limits on costs) of the Courts of Justice Act.
Issues
[17] The following central issues arise on this appeal:
(a) Did the Deputy Judge err in finding that the Appellant is a collection agency under the Act?
(b) Did the Deputy Judge err in finding insufficient evidence of an absolute assignment of the unpaid debts? and
(c) Did the Deputy Judge err by failing to apply the principles of procedural fairness?
Standard of Review
[18] On an appeal from the order of a judge, the standard of review is correctness for a question of law, and palpable and overriding error for findings of fact. On an appeal from a judicial decision on a question of statutory interpretation, the standard of review is correctness: Housen v. Nikolaisen, 2002 SCC 33 at para 8; Mega International Commercial Bank (Canada) v. Yung, 2018 ONCA 429 at para 60. A question of mixed fact and law is subject to a standard of palpable and overriding error unless the judge made an extricable error in principle which amounts to an error of law: Housen v. Nikolaisen, 2002 SCC 33 at paras 8, 10 and 27-28. The interpretation of a negotiated contract is subject to a deferential standard of review, but where it is possible to identify an extricable question of law on which the judge at first instance erred (e.g., by not applying contractual interpretation principles, or by not considering a relevant factor), the correctness standard of review applies: Deslaurier Custom Cabinets Inc. v. 1728106 Ontario Inc., 2017 ONCA 293 at paras 17-19, 41, 55 and 74-75.
[19] In addressing an alleged breach of procedural fairness on an appeal, a standard of review analysis is unnecessary as the appellate court is to determine whether procedural fairness was accorded: Brooks v. Ontario Racing Commission, 2017 ONCA 833 at para 5.
Analysis
a. The Appellant is not a Collection Agency under the Act
[20] As explained below, I find that the Deputy Judge erred by finding that the Appellant is a collection agency under ss.1(1)(d) of the Act.
[21] In his endorsement, the Deputy Judge held that the Appellant was a collection agency under ss.1(1)(d) of the Act. As it had not registered as a collection agency under ss.4(1) of the Act, the Deputy Judge found that the Appellant was not lawfully authorized to carry on business as a collection agency. In turn, the Deputy Judge found that the Appellant was unable to bring the underlying actions and dismissed its claims.
[22] The Respondent claims that the Deputy Judge’s finding is supported because the Appellant had purchased the Respondent’s debts in arrears and brought its claim in the Small Claims Court to collect the debts and thereby satisfied the “collection agency” definition under ss.1(1)(d) of the Act. It is undisputed that the Appellant is not registered as a collection agency under ss.4(1) of the Act.
[23] The Appellant submits that it is not a collection agency as it did not “collect” the debts as contemplated by ss.1(1)(d) of the Act by bringing the lawsuit, and thus did not fall within the statutory definition of a collection agency.
[24] Under the modern approach to statutory interpretation, the words of a statute are to be read in their entire context and in their grammatical and ordinary sense and harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament: Ayr Farmers Mutual Insurance Company v. Wright, 2016 ONCA 789 at para 26, citing Rizzo & Rizzo Shoes Ltd. (Re), 1998 837 (SCC), [1998] 1 SCR 27 at para 21. Principles of statutory interpretation require the court to look first at the plain meaning of the statute. If the words have a plain meaning and give rise to no ambiguity, then the court should give effect to those words: Skunk v. Ketash, 2018 ONCA 450 at para 8.
[25] Section 2(0.1) (Application of Act) of the Act provides:
This Act applies to a collection agency or collector that deals with a debtor if either the debtor or the applicable one of the collection agency or the collector is located in Ontario when the dealing takes place. [Emphasis added]
[26] Subsection 4(1) (Registration) of the Act provides:
No person shall carry on the business of a collection agency unless the person is registered by the Registrar under this Act. [Emphasis added]
[27] Subsection 1(1) (Definitions) of the Act defines the terms “collection agency” and “collector” as follows:
“collection agency” means,
(a) a person, other than a collector, who obtains or arranges for payment of money owing to another person or who holds oneself out to the public as providing such a service,
(b) any person who sells or offers to sell forms or letters represented to be a collection system or scheme,
(c) a person, other than a collector, who provides debt settlement services, or
(d) a person who purchases debts that are in arrears and collects them;
“collector” means an individual employed, appointed or authorized by a collection agency to collect debts for the agency, to deal with or trace debtors for the agency or to provide debt settlement services to debtors on behalf of the agency; [Emphasis added]
As well, s.5 (Use of name to collect debts) of the Act states:
No creditor shall deal with the debtor for payment of the debt except under the name in which the debt is lawfully owing or through a registered collection agency.
[28] Both parties accept that the Appellant purchased unpaid debts in arrears, including the debts owed by the Respondent. The key question in deciding whether the Appellant is a collection agency under ss. 1(1)(d) is whether it “collects” its debts. The Appellant submits that it did not collect its debts because it outsourced its collection work. I agree with this.
[29] The record is clear that the Appellant acquired the subject unpaid debts and then retained third party collection agencies to collect them from May 9, 2017 to July 24, 2018. After the Respondent did not repay her debts, the accounts were recalled and placed with CIML, a collection agency registered under the Act. CIML then gave the Respondent notices of assignment in July 2018 advising her that the Appellant had purchased her debts. Later, on July 27, 2018, CIML brought the claims against the Respondent in the Appellant’s name as its authorized representative. On July 30, 2018, the Small Claims Court issued the claims which clearly name CIML as the Appellant’s representative in the litigation.
[30] It follows that the Appellant is not a collection agency under ss.1(1)(d) of the Act as it did not collect the debts that it purchased. Rather than collect them itself, the Appellant clearly had CIML and other third-party agencies collect its unpaid debts including those owed by the Respondent.
[31] The Registrar of Collection Agencies arrived at the same conclusion. In decision letters dated June 24, 2019, the Registrar dismissed the Respondent’s complaint that the Appellant was acting as an unregistered collection agency. After reviewing the facts of this matter, the Registrar found that the Appellant had purchased debts in arrears but did not collect those debts because all collection activity was carried out by registered collection agencies, including but not limited to CIML. As such, the Registrar held that the Appellant was not a collection agency and, therefore, was not required to be registered under the Act. While the Registrar’s decision clearly is not binding on this court, I find the regulator’s opinion to be instructive as it sets out its interpretation of its statute.
[32] Based on the foregoing, I conclude that the Appellant was not a collection agency under ss.1(1)(d) of the Act, which conjunctively requires a person to buy debts in arrears and collect them in order to be a collection agency. Although the Appellant had purchased debts in arrears, it did not collect them and instead arranged for its collection activities to be performed by registered collection agencies. Accordingly, I find that the Appellant is not a collection agency and is not required to be registered as one under s.4 of the Act.
[33] The Deputy Judge also found that the Appellant had acted as a collection agency under ss.1(1)(d) because claims in its name were brought in the Small Claims Court against the Respondent to recover her unpaid debts. However, it is clear on the face of the pleadings that CIML, a registered collection agency, acted as the Appellant’s representative when it commenced and pursued the claims against the Respondent (i.e., after it had serviced the debt accounts before commencing the litigation). As such, I find that the Appellant clearly did not collect the debt by suing the Respondent because it engaged CIML to bring the claims and to litigate them against her. Even if litigating a debt claim arguably constitutes a form of collecting a debt under the Act, which I seriously question as further explained below, I find that ss.1(1)(d) was not engaged on the facts of this case because the Appellant itself did not litigate these claims. Instead, it arranged for CIML, a registered collection agency, to undertake this debt litigation on its behalf.
[34] The Respondent submits that the Appellant acted as a collection agency because it was the named plaintiff in the claims that CIML brought and litigated against the Respondent. I am unpersuaded that this is a proper basis to find that the Appellant is a collection agency that must be registered under the Act. It is clear from the language of ss.1(1)(d) that a debt purchaser is not a collection agency if it does not collect its debts but retains a third-party collection agency to do so on its behalf. When this occurs, a collection agency will service a debt account by identifying the debt being collected as belonging to the debt purchaser, as CIML did here. This practice is consistent with s.5 (Use of name to collect debts) of the Act, which provides:
No creditor shall deal with the debtor for payment of the debt except under the name in which the debt is lawfully owing or through a registered collection agency. [Emphasis added]
[35] In my view, a debt purchaser is not a collection agency under ss.1(1)(d) solely because it is named as a plaintiff or claimant (i.e., because it bought and owns the debt obligation) in debt recovery litigation in which a registered collection agency is acting as its representative. Such a conclusion would, in my view, entirely defeat the conjunctive requirement under ss.1(1)(d) for a debt collector to purchase and collect debts. Simply naming the debt owner in litigation to recover the debt cannot bring the debt owner within the definition of a collection agency under ss.1(1)(d) without some direct activity by the owner to collect the debt. Here, the litigation claims against the Respondent was commenced and pursued by CIML, the Appellant’s litigation representative and registered collection agency. The fact that the Appellant was named as the plaintiff in the litigation pursued by CIML reflected its ownership of the debt which complied with the requirements under ss.23(3) of General Regulation 74, RRO 1990 (the “Regulation”) that places certain requirements with respect to naming the creditor or plaintiff in debt recovery litigation.[^3]
[36] The Appellant also submits that the Act’s regulatory scheme is only intended to regulate collections agencies and collectors in their dealing with debtors to collect unpaid debts up to the commencement of debt recovery litigation and was not intended to regulate the general conduct of litigation proceedings before the courts. I agree with this submission.
[37] Although ss.2(0.1) (Application) of the Act provides that the statute generally applies to a collection agency or collector that deals with a debtor, ss.2(1)(a) of the Act and ss.18.2(3) of the Regulation expressly provide that the Act does not apply to a lawyer or paralegal in the regular practice of his or her profession, or to their employees. This broad exclusion for legal professionals is subject to exceptions under ss.18.1(4) and 18.2(4)(Exemptions) of the Regulation that apply the regulatory scheme to lawyers and paralegals or their employees who publicly hold themselves out as providing debt collecting services (i.e., by obtaining or arranging for payment of money owing to another person) in addition to their professional business.[^4] In effect, lawyers, paralegals and their employees generally are exempt from the regulatory scheme except for those who engage in debt collection services and provide legal services in a regular law practice.
[38] In addition to the Act’s general exclusion of legal professionals from its regulatory scheme, ss.2(1)(c)(Exceptions) of the Act expressly provides that its scheme does not apply to a person acting under the Courts of Justice Act, or other specified statutes:
(1) This Act does not apply,
(c) to an assignee, custodian, liquidator, receiver, trustee or other person licensed or acting under the Bankruptcy and Insolvency Act (Canada), the Corporations Act, the Business Corporations Act, the Courts of Justice Act or the Winding-up and Restructuring Act (Canada) or a person acting under the order of any court; [Emphasis added]
[39] Notably, ss. 22 (Small Claims Court) to 33 (Deputy Judges Council) of the Courts of Justice Act, RSO 1990, c.C.43, as am, establish the Small Claims Court as a branch of the Superior Court of Justice and provide for its jurisdiction, composition, mode of hearing, and other features, including its judicial officers, that set out the Small Claims Court’s structure, process and powers.[^5]
[40] Having regard to ss.2(1)(c) of the Act and the above-mentioned provisions of the Courts of Justice Act that establish the Small Claims Court, I find that the regulatory scheme for debt collecting does not apply to a person litigating claims before the Small Claims Court or acting under an order by the court. The Courts of Justice Act also establishes other courts in Ontario, including the Court of Appeal for Ontario and the Ontario Superior Court of Justice, among others.[^6] It follows that ss.2(1)(c) similarly exempts the regulatory scheme from applying to proceedings before any such courts or actions taken under their orders.
[41] The exemption of court proceedings from the Act’s regulatory scheme finds support in s.2.1 (Anti-avoidance) of the Act which expressly directs a court or tribunal to consider the real substance of an entity or transaction in deciding whether the regulatory scheme for collection agencies under the Act applies to regulate a particular situation:
2.1 In determining whether this Act applies to an entity or transaction, a court or other tribunal shall consider the real substance of the entity or transaction and in so doing may disregard the outward form.
[42] In considering the regulatory scheme, it is helpful to consider s.2 of the Act which provides that the statute applies to a collection agency or a collector that deals with a debtor if either the debtor or the agency or collector is located in Ontario when the dealing takes place. The term “collection agency” is defined under ss.1(1) as an entity that collect debts through various means by corresponding with debtors, offering debt settlement services, generally dealing with or tracing debtors, and servicing debt accounts on unpaid amounts owed by debtors. A “collector” under ss.1(1) is an individual employed, appointed or authorized by a collection agency to collect debts for the agency, deal with or trace debtors for the agency, or provide debt settlement services. This focus on the interactions that collection agencies and collectors have with debtors in the course of collecting unpaid debts is consistent with the object and intent behind the regulatory scheme, “to protect debtors by requiring all those who deal with them to register in order that the Registrar may ascertain which, if any, parts of the legislation may apply:” Ontario (Ministry of Consumer and Business Services) v. Gnish, 2004 ONCJ 399 at p. 17.
[43] The regulatory scheme under the Act features provisions in the Regulation to assist debtors by conferring rights and protections in respect of debt collection activities. A collection agency and its officers and directors must satisfy eligibility criteria to be registered for business, and must file all forms and form letters to be used in dealing with debtors along with financial statements.[^7] A collection agency must operate from a non-residential and permanent business location that is open during normal business hours, and must have a working toll-free telephone number so that debtors may call without incurring long-distance charges.[^8] A collection agency must provide certain disclosure to a debtor,[^9] and retain financial records to permit its activities to be reviewed.[^10] A collection agency may not engage in the business of lending money apart from renegotiating terms for the payment of a purchased debt that cannot involve extending further credit to the debtor.[^11]
[44] The regulatory scheme under the Act imposes requirements and prohibits certain practices for collecting debts. Among other things, written notice of the debt to be collected must be delivered to the debtor along with prescribed information, and the debtor cannot be contacted before the sixth day after the notice is provided, subject to certain exceptions.[^12] In prescribed scenarios, the regulatory scheme limits the ability of a collection agency or collector to contact a debtor or his/her spouse, family members, neighbours or friends, or employer,[^13] and also limits the times of day when collection calls may be made.[^14] Collection agencies with 10 or more collectors are required to record all phone calls.[^15] Certain representations as to debt settlement services agreements are prohibited,[^16] and debt settlement services agreements between a collection agency and a debtor must include mandatory provisions.[^17] The regulatory scheme also imposes certain requirements before a collection agency may receive payment for its services.[^18]
[45] Based on the foregoing, I find that the regulatory scheme under the Act is focussed on pre-litigation collection activities undertaken by collection agencies and collectors, essentially to the point when a proceeding is lawfully commenced before a court to recover a debt. The scheme clearly affords debtors with protections and safeguards that are consistent with its consumer protection mandate, while regulating the ability of collection agencies and collectors to pursue and collect unpaid debts in a fair and reasonable manner until such time as legal proceedings are brought before the courts.
[46] The regulatory scheme contains a few provisions that overlap to a degree with the litigation process. For instance, a collection agency or collector cannot threaten or state an intention to bring a legal proceeding to collect a debt unless it has the creditor’s written authorization to sue, and the proceeding is not otherwise prohibited by law.[^19] Similarly, a collection agency or collector cannot bring a proceeding in the name of the creditor without its written authority to do so, or commence a proceeding as the named plaintiff unless specific criteria are satisfied.[^20] The scheme also prohibits a collection agency or collector from giving false or misleading information, misrepresenting itself in respect of the debt, or using any summons, notice, demand or other documents without lawful authority.[^21] However, none of these provisions conflict with the general exemption under s.2(1)(c) of the Act, that exempts the scheme from applying to persons acting under the Courts of Justice Act or the order of any court, which dovetails with ss.22(1) of the Regulation that directs a collection agency or collector to halt any attempt to contact a debtor who disputes the debt and suggests that the matter be taken to court.
b. The Appellant Did Not Need to Produce the APA
[47] The learned Deputy Judge also dismissed the claims after concluding that he could not determine whether the Appellant could sue in its own name because it did not produce the APA to show whether there had been an absolute assignment of the unpaid debt. I respectfully disagree with this reasoning.
[48] The Respondent’s unpaid debts were sold by the Bank to CIIL, the Appellant’s affiliate, under the terms of the APA dated April 28, 2017. Immediately thereafter, the unpaid debts were sold and assigned to the Appellant. Pursuant to the APA, the Bank and CIIL executed the Assignment Agreement to provide evidence of the assignment of the accounts contemplated under the APA. In this regard, the Assignment Agreement provided:
1.3 Subject to the Account Purchase Agreement. This Agreement is subject to the terms and conditions of the Account Purchase Agreement. In the event of any conflict or inconsistency between the provisions of this Agreement and the provisions of the Account Purchase Agreement, the provisions of the Account Purchase Agreement will prevail. This Agreement does not create, and will not be interpreted as creating, any rights or obligations of the Parties other than those set forth in the Account Purchase Agreement, nor does it derogate from, or will it be interpreted as derogating from, any rights or obligations of the Parties under the Account Purchase Agreement, it being understood that this Agreement is solely to confirm the transfer of the Accounts and Assumed Liabilities set forth in Sections 2.1(a) and 2.1(b) of the Account Purchase Agreement, respectively, and, if necessary, to provide evidence of such transfers to third parties. [Emphasis added]
ARTICLE 2
ASSIGNMENT OF ACCOUNTS AND ASSUMPTIONS OF ASSUMED LIABILITIES
2.1 Assignment of Accounts.
(a) The Assignor hereby absolutely and irrevocably sells, assigns and transfers to the Assignee, all of the Assignor’s right, title, benefit and interest in and to the Accounts, which accounts are listed in Schedule “A” hereto (the “Assignment”)
(b) The Assignee hereby confirms and accepts the Assignment.
3.4 Successors and Assigns. This Agreement is binding on, and enures to the benefit of, the Parties and their respective successors and permitted assigns.
[49] The Assignment Agreement’s clear commercial purpose is to serve as a “stand-alone” conveyance document that the Bank and CIIL executed on closing the debt purchase transaction to evidence the transfer and assumption. Pursuant to article 1.3, its stated purpose is to evidence to third parties the absolute assignment and transfer of the unpaid debts, initially to CIIL and subsequently to the Appellant to whom it later assigned the unpaid debts. Pursuant to article 3.4, the Assignment Agreement was binding on CIIL and later on the Appellant once it assumed the assignment of the unpaid debts.
[50] The assignee of a debt may bring proceedings in its own name pursuant to Rule 5.03(3) of the Rules of Civil Procedure where the assignment is absolute and notice in writing has been given to the person liable on the debt. Rule 5.03(3) provides:
5.03(3) In a proceeding by the assignee of a debt or other chose in action, the assignor shall be joined as a party unless,
(a) the assignment is absolute and not by way of charge only; and
(b) notice in writing has been given to the person liable in respect of the debt or chose in action that has been assigned to the assignee. [Emphasis added]
[51] Although the Rules of the Small Claims Court lack a comparable rule to Rule 5.03(3), it is noteworthy that Rule 1.03(2) of the Rules of the Small Claims Court expressly permits the court to make any order that is just by appropriate reference to the Rules of Civil Procedure:
Matters Not Covered in Rules
(2) If these rules do not cover a matter adequately, the court may give directions and make any order that is just, and the practice shall be decided by analogy to these rules, by reference to the Courts of Justice Act and the Act governing the action and, if the court considers it appropriate, by reference to the Rules of Civil Procedure.
[52] In this case, the Assignment Agreement fulfilled its purpose by unambiguously setting out in article 2.1 that the unpaid debts that the Respondent owed to the Bank had been assigned absolutely and irrevocably to CIIL. Based on this, the assignment was absolute: Cheshire, Fifoot & Furnston’s The Law of Contract, 17th ed. (2017) at 632. It is also apparent from article 3.4 that the Assignment Agreement bound the Appellant and inured to its benefit. In addition, by letter dated July 25, 2018, CIML gave the Respondent written notice that her debt had been assigned to the Appellant. As such, the requirements of Rule 5.03(3) of the Rules of Civil Procedure were met. Accordingly, pursuant to Rule 1.03(2) of the Rules of the Small Claims Court, I find that it was appropriate for the claims in the Appellant’s name to proceed on the assigned debt without joining the Bank as a party: Nadeau v. Caparelli, 2016 ONCA 730 at paras 27-31.
[53] The Deputy Judge found that the Appellant should have disclosed the APA to permit a determination to be made as to whether the debt was assigned absolutely. However, given the nature and content of the Assignment Agreement which the Appellant provided to the Respondent, I respectfully disagree that further disclosure of the APA was necessary.
[54] A commercial contract to be interpreted:
(a) as a whole, so as to give meaning to all of its terms, to avoid an interpretation that renders one or more of its terms ineffective;
(b) by determining the intention of the parties in accordance with the language they have used in the written document and based upon the "cardinal presumption" that they have intended what they have said;
(c) with regard to objective evidence of the factual matrix underlying the negotiation of the contract, but without reference to the subjective intention of the parties; and (to the extent there is any ambiguity in the contract)
(d) in a fashion that accords with sound commercial principles and good business sense, and that avoid a commercial absurdity.
Ventas, Inc. v. Sunrise Senior Living Real Estate Investment Team, 2007 ONCA 205 at para 24. Applying these principles of contractual interpretation, which I appreciate were not before the Deputy Judge on the Respondent’s motion, I conclude that the Assignment Agreement explicitly captures the unambiguous agreement of the assignor and assignee to assign the entire interest in the Respondent’s unpaid debt.
[55] It is apparent that the Assignment Agreement evidenced the transfer of the entire interest in the debt that entitled the assignee to sue in its own name. Under articles 1.3 and 2.1, the express purpose of the Assignment Agreement is to identify the existence of the assignment, which is clear and absolute. In my view, the arrangement under the Assignment Agreement was both reasonable and practical, and made good business sense in the context of purchasing debts to show an absolute assignment of the debts to third parties without producing the APA that contained private and commercially sensitive information from the debt transaction. As purchase agreements generally are executed in advance of actual conveyances and may be subject to conditions that are not relevant to the debt assignment, I accept that producing an account purchase agreement may unnecessarily complicate subsequent debt recovery matters. Moreover, as banks and other lending institutions regularly assign loans in securitization transactions, the implications of producing sensitive commercial documents in debt recovery matters may impact capital markets transactions. As a result, I accept that it would not make good business sense to require production of an account purchase agreement in debt litigation when the debt assignment is clearly evidenced by an assignment agreement.
[56] In this case, the Assignment Agreement appropriately ensured that the debt assignment was satisfactorily evidenced as expressly intended by the parties to that agreement. Respectfully, the Deputy Judge did not consider the Assignment Agreement as a whole to assign meaning to its terms and give effect to the intention of the parties in a way that made business sense and avoided the agreement from becoming meaningless and a commercial absurdity: Ventas at para 24.
[57] Alternatively, if the Deputy Judge indeed was correct in finding that the APA should have been produced, it strikes me that its only purpose would have been to show whether the claims were properly commenced in the Appellant’s name or whether the Bank should have been included as a party. But an assignee’s failure to add an assignor as a party is an irregularity that may be addressed by amending pleadings or granting other relief under Rule 2.01 of the Rules of the Small Claims Court: Nadeau v. Caparelli, 2016 ONCA 730 at para 32. To this end, Rule 2.01 provides:
Effect of Non-Compliance
2.01 A failure to comply with these rules is an irregularity and does not render a proceeding or a step, document or order in a proceeding a nullity, and the court may grant all necessary amendments or other relief, on such terms as are just, to secure the just determination of the real matters in dispute.
[58] Notably, Rule 5.04 of the Rules of Civil Procedure provides that a claim should not fail because the assignor has not been added as a party:
Proceeding not to be Defeated
5.04 (1) No proceeding shall be defeated by reason of the misjoinder or non-joinder of any party and the court may, in a proceeding, determine the issues in dispute so far as they affect the rights of the parties to the proceeding and pronounce judgment without prejudice to the rights of all persons who are not parties.
Adding, Deleting or Substituting Parties
(2) At any stage of a proceeding the court may by order add, delete or substitute a party or correct the name of a party incorrectly named, on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.
Adding Plaintiff or Applicant
(3) No person shall be added as a plaintiff or applicant unless the person’s consent is filed.
[59] Pursuant to Rule 1.03(2) of the Rules of the Small Claims Court (reproduced earlier), I find that it would be appropriate to import Rule 5.04 of the Rules of Civil Procedure into this Small Claims Court context. That being said, I find that dismissing the claims was a severe remedy and should not have been imposed as a remedy of first resort without providing an opportunity for the defaulting party to cure the default: Koohestani v. Mahmood, 2015 ONCA 56 at paras 54-55; Platinum Stairs Ltd. v. Laranjeira, 2017 ONSC 6107 at paras 28-29.
[60] Had it been necessary to join the Bank as a plaintiff, then this irregularity could have been addressed by adding the Bank as a party under Rules 1.03, 1.04 and 2.01 of the Rules of the Small Claims Court: Nadeau at para 32. In this context, joinder would protect the debtor from “a possible second action by the assignor [and] permit the debtor to pursue any remedies it may have against the assignor without initiating another action”: Landmark Vehicle Leasing Corp. v. Mister Twister Inc., 2015 ONCA 545 at paras 13-14. Alternatively, it was open for the Deputy Judge to decline to add the Bank as a party because the limitation period for commencing a new action on the debts in the Bank’s name had elapsed, which the Appellant concedes. As such, there would have been no prejudice to the Respondent (i.e., because no future claims could be brought by the Bank against the Respondent) if the Bank were not added as a party: Parrish & Heimbecker Limited v. All Peace Auctions Ltd., 2001 ABQB 1104 at para 80; O’Dwyer v. Banks, 1953 270 (AB SCAD), [1953] 2 DLR 204 (Alta S.C., App. Div.) at 209. In light of the other procedural options, I find that the claims should not have been dismissed.
c. Procedural Fairness
[61] The Appellant further submits that the learned Deputy Judge erred by not observing the rules of procedural fairness in determining the Respondent’s motion to adjourn the trial (i.e., to obtain documents and prepare her case for trial), or alternatively to strike the claims because the Appellant could not bring them. As set out below, I am unpersuaded by this submission.
[62] The Deputy Judge dismissed the claims based on new arguments raised by the Respondent on less than eight (8) days notice on a motion under Rule 12.02 (Motion to strike out or amend a document) of the Small Claims Court Rules that was akin to a motion under Rule 21 (Determination of an Issue before Trial) of the Rules of Civil Procedure: Van de Vrande v. Butkowsky, 2010 ONCA 230 at para 19. The Respondent’s arguments were based on a novel legal theory (i.e., to challenge the Appellant’s ability to bring the claims) that was not particularized in the Defence or Amended Defence, for which the Respondent sought leave to amend. However, the Respondent’s notice of motion gave particulars of the legal basis for her arguments that were consistent with the submissions made by Respondent’s counsel in oral argument on the motion.
[63] Having reviewed the transcript of the motion, I readily find that the Deputy Judge proceeded in a fair and just manner that upheld the principles of natural justice. He confirmed the issues in dispute and heard fulsome submissions by the parties. Counsel for the Appellant filed responding materials on the motion, did not ask to adjourn to cross-examine on the supporting affidavit filed by the Respondent, and indicated to the Deputy Judge that he was ready to proceed to argue the motion. Appellant’s counsel on the motion gave no indication that he was unprepared, that he lacked sufficient particulars, or that he needed to adjourn in order to properly argue the motion. Although the Respondent did not amend her pleadings to add the grounds raised on her motion to strike the Claims, I find that the Appellant received adequate notice of the issues and grounds for relief on the Respondent’s motion from her notice of motion and supporting materials. As a result, I find that the Deputy Judge proceeded to hear and decide the motion in accordance with the principles of natural justice, in keeping with the statutory goal under s.25 of the Courts of Justice Act for the Small Claims Court to “hear and determine in a summary way all questions of law and fact and [make] such order as is considered just and agreeable to good conscience.”
[64] Based on the foregoing, I find that the Appellant was able to make its responding submissions in a fair and just manner that met the requirements of natural justice within the statutory context of the Small Claims Court which hears and determines in summary fashion all questions of law and fact: London (City) v. Ayerswood Development Corp., 2002 3225 (ONCA) at para10; Newcastle Salvage Inc. v. 2270739 Ont. Ltd., 2019 ONSC 2810 (Div Ct) at paras. 52, 54-56 and 75; s. 25 of the Courts of Justice Act.
[65] Accordingly, I find no denial of procedural fairness.
Outcome
[66] For the reasons set out above, I find that the learned Deputy Judge erred by finding that the Appellant could not bring the claims because it was not registered under the Act as a collection agency, and because it failed to show that it had an absolute assignment of the debt to sue in its own name. Accordingly, I find that the Deputy Judge erred in dismissing the claims and the appeal is allowed on this basis. I find no error by the Deputy Judge on procedural fairness grounds in hearing the motion at first instance.
[67] The Appellant was successful on appeal and is entitled to its costs. In my view, costs should be awarded to the Appellant for the appeal on a partial indemnity scale in the amount of $14,700.00, along with costs of $6,485.71 for the motion at first instance, both amounts being inclusive of taxes and disbursements, which I find to be just and proportional to the issues raised and the nature of the claim.
[68] Accordingly, I make the following orders:
a. The appeal is allowed and the orders of the Deputy Judge dismissing the claims and awarding costs to the Respondent are set aside; and
b. The Appellant is awarded costs of the appeal and the motion at first instance in the all-inclusive amount of $21,185.71, respectively.
Doi J.
Released: January 16, 2020
CITATION: Canaccede Credit LP v. Dyment, 2020 ONSC 325
COURT FILE NOS.: DC-19-63-00 and DC-19-64-00
DATE: 2020 01 16
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Canaccede Credit LP
Appellant
– and –
Susan J. Dyment a.k.a. Susan Jane Dyment
Respondent
REASONS FOR JUDGMENT
Doi J.
Released: January 16, 2020
[^1]: The Appellant brought two (2) separate proceedings against the Respondent in Claim Nos. SC-18-0397-0000 and SC-18-0398-0000, respectively, in the Small Claims Court in Guelph.
[^2]: On July 30, 2018, the Appellant issued two (2) separate claims against the Respondent. The principal amount claimed in Claim No. SC-18-0397-0000 is $22,925.97 in respect of the line of credit and personal loan debt, and the principal amount claimed in Claim No. SC-18-0398-0000 is $20,322.12 which relates to the credit card debt.
[^3]: Subsection 23(3) of the Regulation provides:
(3) No collection agency or collector shall commence a legal proceeding for the collection of a debt,
(a) in the name of the creditor, unless the collection agency or collector has the written authority of the creditor to do so; or
(b) as a plaintiff, unless the following conditions have been satisfied:
(i) The creditor has assigned the debt to the collection agency or collector by written instrument and for valuable consideration, and the creditor has no further interest in the debt.
(ii) If a legal proceeding was commenced by the creditor prior to assigning the debt, the collection agency or collector has given written notice to the debtor of the assignment.
(iii) If a legal proceeding was not commenced by the creditor prior to assigning the debt, the collection agency or collector has given written notice to the debtor of the assignment and, either separately or together with the written notice of assignment, has given notice to the debtor of its intention to commence a legal proceeding.
[^4]: There are other specific grounds that may trigger the application of the regulatory scheme under the Act to a lawyer or employees of a lawyer. For instance, the Act will apply to a lawyer or employees of a lawyer under ss.18.1(6)(a) of the Regulation where the lawyer or employee has acquired the debt and is collecting it on his or her own behalf, or under ss.18.1(6)(b) of the Regulation where the lawyer or employee contacts a debtor or certain persons related to the debtor more than 3 times in a 7-day period, or holds himself or herself out to the public as able to provide such a service unless the person being contacted consents or requests the contact. Pursuant to ss.18.1(6)(c), the Act will also apply to a lawyer or employee who employs or holds himself or herself out to the public as able to employ an automatic dialing-announcing device, a predictive dialing device, bulk texting or any other similar communication technology in communications with a debtor or certain persons related to the debtor. Pursuant to ss.18.2(4) of the Regulation, the grounds for applying the Act to a lawyer or employee equally apply to a paralegal and his or her employees.
[^5]: Sections 22(Small Claims Court) and 22 (Jurisdiction) of the Courts of Justice Act establish the Small Claims Court and its jurisdiction in an action for the payment of money or the recovery of personal property. Sections 24 (Composition of court for hearings) and 25 (Summary hearings) set out the Small Claims Court’s composition and summary mode of hearing, while sections 26 (Representation), 27 (Evidence), 28 (Instalment orders), 29 (Limit on costs), 30 (Contempt hearing for failure to attend examination) and 31 (Appeals) provide directions regarding rights of representation and appearance, rules of evidence, and powers and jurisdiction for Small Claims Court proceedings and appeals, respectively. Section 32 (Deputy judges) and 33 (Deputy Judges Council) of the Courts of Justice Act set out the mechanism to appoint Deputy Judges of the Small Claims Court, and address any complaints alleging misconduct by a deputy judge, respectively.
[^6]: See ss. 2(Court of Appeal), 10 (Court of Ontario), 11 (Superior Court of Justice), and 18 (Divisional Court) of the Courts of Justice Act.
[^7]: See ss.12, 15 and 13(1)-(6) of the Regulation.
[^8]: See ss. 12(10) and (10.1) of the Regulation.
[^9]: For example, ss.13(14.1) of the Regulation requires a collections agency to disclose its name in correspondence and communications. Under ss.13(10.2), and at the request of a debtor, a collection agency is required to provide the debtor with a breakdown of the current amount owing under the debt. Where a collection agency collects debts for a creditor that exercises direct or indirect control over the agency, ss.13(14) of the Regulation requires the agency to disclosure in all correspondence and communications the full name of the creditor and an itemized breakdown of each account in arrears owing to the creditor.
[^10]: Every collections agency is required under ss. 13(12) and (12.1) of the Regulation, respectively, to keep on its premises proper records and books of accounts showing money received and paid out (i.e., which must include a receipts journal, disbursements journal, general journal, clients’ ledger, general ledger and other additional records that the Registrar considers necessary in accordance with double entry bookkeeping), which must be stored separately from the records it maintains with respect to any other activities. Under ss.13(13) of the Regulation, collections agencies must retain entries in a record book of account for a period of six years. Generally, all funds received by a collection agency from clients or debtors are deemed to be trust funds that are subject to special requirements for maintaining, disbursing and accounting for these funds: ss.17 and 18 of the Regulation.
[^11]: See ss. 13(15) and (15.1) of the Regulation.
[^12]: See s. 21 and 21.1 of the Regulation.
[^13]: See ss.22(1)-(4) of the Regulation.
[^14]: See ss.22(6) and (7) of the Regulation.
[^15]: See s.31 of the Regulation.
[^16]: See ss.16.3(1) of the Act and s. 26 of the Regulation.
[^17]: See ss.16.5(1)(a) of the Act and s. 27 of the Regulation.
[^18]: See s. 28 of the Regulation.
[^19]: See s.23(1) of the Regulation.
[^20]: See s.23(3) of the Regulation.
[^21]: See s.24 of the Regulation.