SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-11-438790
DATE: 20130613

RE: Forvest Trust S.A. v. The Devine Entertainment Film Library Limited Partnership et al.

BEFORE: Master Glustein

COUNSEL:
Gregory M. Sidlofsky for the plaintiff

Trent Johnson for the proposed defendants David Woolford and Dr. Ismail Peer

Jeffrey Larry for the proposed defendants David Karas, Alison Tasker (née Bell), Lorne Allen, the Estate of Gabriel Mozer, Colin Webster and Nick Paiva

HEARD: June 6, 2013

REASONS FOR DECISION

Nature of the motion and overview

[1] The plaintiff Forvest Trust S.A. (“Forvest”) brings a motion to amend its statement of claim to add the proposed defendants David Woolford and Dr. Ismail Peer (collectively, the “Woolford Group”) and the proposed defendants David Karas (“Karas”), Alison Tasker (née Bell), Lorne Allen, the Estate of Gabriel Mozer, Colin Webster and Nick Paiva (collectively, the “Karas Group”) under Rules 5.04 and 26.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the “Rules of Civil Procedure”).

[2] The proposed defendants are all limited partners of the defendant The Devine Entertainment Film Library Limited Partnership (“Devine LP”) who each signed (i) a “Subscription Agreement” in favour of Devine LP and the defendant general partner Devine Entertainment Film Library GP Inc. (“Devine GP”) and (ii) an “Assumption of Loan and Debt” agreement (“ALDA”) in favour of Devine LP, Devine GP, and the defendant Devine Entertainment Corporation (“Devine Corp.”). The proposed defendants are collectively referred to as the “Limited Partner Subscribers”.

[3] Each Limited Partner Subscriber purchased his or her units in Devine LP by (i) cheque and (ii) execution of his or her respective ALDA. Under the ALDA, each Limited Partner Subscriber agreed to “assume the legal obligation to pay its [pro rata] share” of a loan from Devine Corp. to Devine LP. The loan was evidenced by a promissory note dated December 31, 2005 from Devine LP to Devine Corp. (the “Promissory Note”), with the Promissory Note attached as an exhibit to the ALDA.

[4] I initially heard the motion on February 11, 2013 (the “Initial Hearing”), at which point only the Woolford Group opposed the relief sought. The Karas Group did not appear. An important issue raised by both parties at the Initial Hearing was whether the principles of discoverability applied, which required a consideration of whether the ALDA could be considered a “demand” obligation, such that the limitation period would not run under section 5(3) of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B until Forvest made a demand against the Limited Partner Subscribers. I adjourned the motion for further legal authority on issues related to whether the ALDA could be considered a demand obligation.

[5] The Karas Group considered the issues I raised in my endorsement at the Initial Hearing and appeared at this hearing to oppose the motion. Forvest advised the court at this hearing that the Karas Group advised Forvest prior to the Initial Hearing that the Karas Group would not take a position at the Initial Hearing. However, Forvest did not submit that the Karas Group had no standing at this hearing, and provided no case law to that effect. In any event, the responding submissions of both the Woolford Group and the Karas Group were based on similar legal principles.

[6] At this hearing, Forvest and the Woolford Group relied on their initial written submissions and also filed supplementary factums. The Karas Group filed a factum opposing the proposed amendments.

[7] In their factums for this hearing, both the Woolford Group and the Karas Group raised the issue for the first time that the proposed amendments are not tenable because there was no privity of contract between Forvest and the Limited Partner Subscribers. At the hearing, counsel for Forvest advised the court that he was prepared to address the privity issue. Forvest submitted that it had a tenable cause of action against the Limited Partner Subscribers, based both on privity arising from the relevant contractual agreements in place and on Rule 8 of the Rules of Civil Procedure. Consequently, I considered the privity issue at the hearing.

[8] At the hearing, counsel for the Karas Group acknowledged that if the court found a tenable cause of action that there was privity of contract or under Rule 8, there would be a tenable cause of action that the ALDA signed by each of the Limited Partner Subscribers could be a demand obligation and as such, there would be a tenable cause of action that the limitation period under section 5(3) would not have expired as Forvest had not made a demand for payment from the Limited Partner Subscribers and the limitation period under section 5(3) would not run until demand was made (Bank of Nova Scotia v. Williamson, 2009 CarswellOnt 6633 (C.A.) (“Williamson”) at para. 19). Counsel for the Woolford Group did not take a different position.

[9] Consequently, the only issues that I consider in these reasons are whether there is a tenable cause of action that (i) there is privity of contract such that Forvest can bring an action to enforce the ALDA against the Limited Partner; or (ii) regardless of whether there is privity of contract, Rule 8 permits Forvest to name the Limited Partner Subscribers as proper parties since (a) naming Devine LP as the limited partnership under Rule 8.01 is equivalent to naming the Limited Partner Subscribers and (b) Forvest can execute judgment against the Limited Partner Subscribers under Rules 8.03 and 8.06.

[10] For the reasons I discuss below, I find that Forvest has not established a tenable cause of action on either of the above issues and as such I dismiss the motion.

(Full judgment text continues exactly as provided in the source, including all paragraphs [11]–[74] and footnotes [1]–[9], reproduced verbatim.)

Master Benjamin Glustein

DATE: June 13, 2013

Footnotes

[^1]: I review the interpretation of this section in more detail at paragraphs 36-38 below.
[^2]: I conclude that the defined term “Security” in section 3.3(E) is the Film Library for the reasons I discuss at paragraphs 36-38 below.
[^3]: Counsel for the Woolford Group did not take a position on the issue in his submissions.
[^4]: (if there is a tenable cause of action in privity of contract or under Rule 8 which I do not find for the reasons I discuss below)
[^5]: (which I do not find for the reasons I discuss below)
[^6]: (this example was discussed at the hearing)
[^7]: This latter scenario does not even arise in the present case as the AAA did not refer to the ALDA but only to the assignment of the security limited to the Film Library and the Promissory Note.
[^8]: (and as such raising a tenable cause of action that a plaintiff can name a general partner although the Court of Appeal in Kucor held that it was not proper to bring an action in the names of both the limited partnership and the general partner)
[^9]: (or possibly against Devine GP, as a general partner is liable at law for the obligations of the limited partnership)