SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-07-CV327670-0000
MOTION HEARD: January 11, 2012

RE: Quality Pallets & Recycling Inc. et al

v.

Canadian Pacific Railway Company et al

BEFORE: Master Thomas Hawkins

COUNSEL:
Laura R. Baron for moving defendant
Canadian Pacific Railway Company
Fax No.: 416-364-7813

Hartley M. Isenberg for responding plaintiffs
Quality Pallets & Recycling Inc. and
Mega Placement and Personnel Company Inc.
Fax No.: 416-889-1698

Domenic Rosso, plaintiff, in person
Fax No.: 905-889-1698

Michael Hook for defendants
Sutton Group Assurance Realty Inc. and Voyt Reich
Fax No.: 416-595-8695

REASONS FOR DECISION

[ 1 ] This is a motion by the defendant Canadian Pacific Railway Company (“C.P.R.”) for an order staying this action as regards the plaintiff Quality Pallets & Recycling Inc. (“Quality”). Originally, C.P.R. also sought an order dismissing this action as regards the plaintiff Mega Placement and Personnel Company Inc. (“Mega”). However, counsel for C.P.R. withdrew that part of her motion at the outset. She intends to bring that part of her motion against Mega as a motion before a judge for summary judgment dismissing this action as regards Mega under subrule 21.01(3)(b) on the ground that Mega is without legal capacity to commence or continue this action because its articles of incorporation were cancelled on August 16, 2004, before this action was commenced.

[ 2 ] No relief was sought by or against Mr. Rosso. He simply supported the submissions of counsel for Quality.

[ 3 ] Counsel for Sutton Group Assurance Realty Corp. (“Sutton”) and Voyt Reich (“Reich”) supported the submissions of counsel for C.P.R. Sutton and Reich did not bring their own parallel motion.

[ 4 ] C.P.R. moves for an order staying this action as regards Quality under section 106 of the Courts of Justice Act, R.S.O. 1990 c. C.43 . This section provides as follows.

A court, on its own initiative or on motion by any person, whether or not a party, may stay any proceeding in the court on such terms as are considered just.

[ 5 ] Counsel for C.P.R. relies upon subsections 18(1) and (2) of the Corporations Information Act, R.S.O. 1990, c. C.39 (the “C.I. Act”). These subsections provide as follows.

(1) A corporation that is in default of a requirement under this Act to file a return or notice or that has unpaid fees or penalties is not capable of maintaining a proceeding in a court in Ontario in respect of the business carried on by the corporation except with leave of the court.

(2) The court shall grant leave if the court is satisfied that,

(a) the failure to file the return or notice or pay the fees or penalties was inadvertent;

(b) there is no evidence that the public has been deceived or misled; and

(c) at the time of the application to the court, the corporation has filed all returns and notices required by this Act and has no unpaid fees or penalties.

[ 6 ] Quality was incorporated as of April 29, 2005 under the provisions of the Business Corporations Act, R.S.O. 1990 c.B.16 with Mr. Rosso as its sole director.

[ 7 ] The term “corporation” is defined as follows in section 1 of the C.I. Act .

In this Act,

“corporation” means any corporation with or without share capital wherever or however incorporated and includes an extra-provincial corporation.

[ 8 ] Quality is therefore a corporation within the meaning of the C.I. Act .

[ 9 ] The evidence before me on this motion indicates the following as regards Quality.

[ 10 ] Quality is required by section 2 of the C.I. Act to file an initial return within 60 days of the date of its incorporation on April 29, 2005.

[ 11 ] Section 2 of the C.I. Act provides as follows.

(1) Every corporation other than an extra-provincial corporation or a corporation of a class exempted by the regulations shall file with the Minister an initial return setting out the prescribed information as of the date of filing.

(2) The initial return shall be filed within sixty days after the date of incorporation, amalgamation or continuation of the corporation.

[ 12 ] Quality does not belong to a class of corporations exempted from this filing requirement by the regulations made under the C.I. Act .

[ 13 ] Quality was required to file an initial return by June 28, 2005. Quality has not yet filed the required initial return.

[ 14 ] The combined effect of section 3.1 of the C.I. Act and R.R.O. 1990 Regulation 182 under the C.I. Act requires Quality to file both an annual return and an income tax return as required by the Income Tax Act (Canada), R.S.C. 1985 c.1 (5th Supp .), section 150 .

[ 15 ] Section 3.1 of the C.I. Act provides as follows.

(1) Every corporation, other than a corporation of a class exempted by the regulations, shall file a return each year with the Minister in accordance with the regulations, by delivering it to the prescribed person or entity in the prescribed manner and within the prescribed time.

(2) If the person or entity prescribed for the purposes of subsection (1) is not the Minister, the person or entity shall receive the return on behalf of the Minister.

[ 16 ] Quality does not belong to an exempted class of corporations.

[ 17 ] Regulation 182 section 2.3 sets out the annual return filing requirements applicable to Quality. Section 2.3 provides as follows.

(1) A corporation that is required to file an annual return under section 3.1 of the Act shall deliver the return to the person or entity and in the manner and within the time specified in this section.

(2) A corporation that is required to file a tax return under section 150 of the Income Tax Act (Canada) or an information return under subsection 149.1 (14) of the Income Tax Act (Canada) shall deliver the annual return to the Canada Revenue Agency.

(3) Instead of delivering an annual return to the Canada Revenue Agency, a corporation referred to in subsection (2) may deliver the return to the Minister in electronic format in accordance with subsection 3(1) or in such other manner as the Minister approves.

(4) A corporation that is required to file a tax return under section 150 of the Income Tax Act (Canada) shall,

(a) deliver the annual return, together with its tax return for its last completed taxation year, within the time period for delivery of the tax return; or

(b) deliver the annual return within the time period for delivery of the tax return, if it delivers the annual return to the Minister under subsection (3).

(5) A corporation that is required to file an information return under subsection 149.1 (14) of the Income Tax Act (Canada) shall,

(a) deliver the annual return, together with its information return for its last completed taxation year, within the time period for delivery of the information return; or

(b) deliver the annual return within the time period for delivery of the information return, if it delivers the annual return to the Minister under subsection (3).

(6) A corporation that is required to file both a tax return under section 150 of the Income Tax Act (Canada) and an information return under subsection 149.1 (14) of the Income Tax Act (Canada) in a year, or more than one tax return or information return in a year, is required to file the annual return only within the time period that it is required to file its first tax return or information return during the year.

(7) In this section,

“information return” means a return for a taxation year that subsection 149.1 (14) of the Income Tax Act (Canada) requires a corporation to file with the Minister of National Revenue; (“déclaration de renseignements”) [and]

“tax return” means a return for a taxation year that section 150 of the Income Tax Act (Canada) requires a corporation to file with the Minister of National Revenue. (“declaration de revenue”).

[ 18 ] Subsection 150 (1) of the Income Tax Act (Canada) requires a corporation to file with the Minister (currently defined as Canada Revenue Agency) a return for each taxation year of the corporation within six months of the end of that taxation year if at any time during the year the corporation has been resident in Canada or carried on business in Canada.

[ 19 ] Quality has both been resident in Canada and carried on business in Canada during each taxation year since its incorporation on April 29, 2005.

[ 20 ] Quality has yet to file any annual returns since its incorporation. Quality has not yet filed any income tax returns for taxation years falling within calendar years 2007, 2008, 2009 and 2010.

[ 21 ] The word “court” appears twice in subsection 18(1) of the C.I. Act . In section 1 of the C.I. Act, the word “court” is defined as follows.

“court” means the Superior Court of Justice presided over by a judge designated by the Chief Justice of Ontario to hear applications under this Act.

[ 22 ] Counsel for Quality submits (correctly, in my view) that the first time the word “court” appears in subsection 18(1) , it must have a meaning different from the term “court” as defined in section 1. I agree. The first time the word “court” appears in this subsection it appears in the phrase “a proceeding in a court in Ontario”. In my view this means any proceeding in any court in Ontario.

[ 23 ] The present action is a proceeding in a court in Ontario, namely the Superior Court of Justice, with Quality as one of the plaintiffs maintaining the action.

[ 24 ] This action is an action in respect of the business carried on by Quality within the meaning of subsection 18 (1) of the C.I. Act . The relief which Quality claims in this action includes damages for profits which Quality has lost allegedly caused by the wrongful conduct of C.P.R. In the first paragraph of the statement of claim there are several references to the business of Quality. The profits which Quality allegedly lost were profits which Quality would have earned from its pallet manufacturing and rehabilitation business but for the alleged wrongful conduct of C.P.R.

[ 25 ] The evidence before me indicates that Quality has defaulted in meeting its filing requirements under the C.I. Act respecting an initial return, several annual returns and several income tax returns. Quality has not filed any material in response to this motion or attempted to explain or excuse its defaults in any way.

[ 26 ] I have therefore come to the conclusion that this is a proper case for an order under section 106 of the Courts of Justice Act staying this action as regards Quality until further order of this court. So ordered.

[ 27 ] This stay order shall not operate so as to prevent Quality from appealing my order or bringing an application for leave to set aside my stay order under subsection 18(2) of the C.I. Act or otherwise.

[ 28 ] C.P.R. has been successful on this motion and is entitled to the costs of it. I fix those costs at $3,000 and order Quality to pay such costs to C.P.R. within 30 days. There will be no costs order in favour of or against Mega, Mr. Rosso, Sutton or Reich.

Master Thomas Hawkins

DATE: 30-January-2012