ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 7680/13
DATE: 2013-12-16
B E T W E E N:
740170 Ontario Inc. o/a Bell Contracting
Richard J. W. Andrews, for the Appellant/Plaintiff
Plaintiff
(Appellant)
- and -
Bromac Construction & Engineering Ltd. and Bromac Construction Inc.
Peter A. Mahoney, for the Respondents/Defendants
Defendants
(Respondents)
HEARD: December 13, 2013
THE HONOURABLE JUSTICE J. R. HENDERSON
DECISION ON APPEAL
INTRODUCTION
[1] This is an appeal by the named plaintiff, 740170 Ontario Inc. o/a Bell Contracting (hereinafter called “740”) from the decision of Small Claims Court Deputy Judge Claude F. Leduc dated July 25, 2013.
[2] In his Reasons for Judgment the Deputy Judge dismissed the Plaintiff’s Claim pursuant to Rule 12.02(1)(c) of the Small Claims Court Rules on the grounds that the claim had no meaningful chance of success, that its dismissal at trial was a forgone conclusion, and that permitting the trial to continue would be a waste of time.
[3] There were two primary reasons for the decision of the Deputy Judge. First, the Deputy Judge found that 740 did not exist at the time the contract was signed, and second the Deputy Judge found that the limitation period for this claim had expired.
THE BACKGROUND
[4] The named plaintiff, 740, was incorporated on October 13, 1987. 740 at all relevant times was controlled by John Bell and Teresa Bell (“the Bells”).
[5] 740 claims that it entered into a contract to provide services regarding a construction project at Orchard Park School. In fact that there is a written contract between “Bell Contracting and Equipment 740170 Ontario Inc.” and Bromac Construction & Engineering Ltd. (hereinafter called “the defendant”) in the form of a purchase order that was signed by the defendant on May 28, 2009, and by Teresa Bell on June 15, 2009.
[6] In the Plaintiff’s Claim, 740 alleges that it performed the services referred to in the written contract, with some adjustments, but it was not paid in full. The plaintiff claims the amount of $11, 306.00.
[7] In its Defence, the defendant claims that no money is owed to 740 or to the Bells. Further, the defendant states that 740 did not exist at the time the contract was made in 2009 as it had been amalgamated into another corporation, 1736084 Ontario Inc. (hereinafter called “173”), on September 28, 2007. The defendant also alleged that the limitation period had expired, as the Plaintiff’s Claim was issued on November 19, 2012.
[8] Further, it was discovered that 173 had registered the business name of “Bell Contracting and Equipment” on November 5, 2007, under the Business Names Act, but that registration had expired on November 4, 2012.
[9] In addition, by way of a Defendant’s Claim, the defendant made a claim against the Bells personally regarding another contract with respect to a construction project at Riverview School.
[10] There were motions brought by both parties prior to the start of the trial. The defendant brought a motion to dismiss the Plaintiff’s Claim pursuant to Rule 12.02 on the ground that 740 did not exist at the time of the 2009 contract, and on the alternative ground that the limitation period had expired.
[11] The plaintiff brought a motion to amend the name of the plaintiff to that of the amalgamated corporation, 173, and for leave to continue the action notwithstanding the non-compliance with the Business Names Act. The plaintiff also brought a motion to strike out the claim against the Bells personally regarding the Riverview School project.
[12] All of these motions collectively resulted in the decision of the Deputy Judge that is the subject of this appeal.
GROUNDS FOR THE APPEAL
[13] The appellant raises three grounds of appeal as follows:
The appellant submits that the Deputy Judge erred by dismissing the appellant’s motion to amend the plaintiff’s name in the Plaintiff’s Claim.
The appellant submits that the Deputy Judge erred by finding that the Plaintiff’s Claim was barred because the limitation period had expired.
The appellant submits that the Deputy Judge erred by failing to deal with the plaintiff’s motion to strike the Defendant’s Claim against John Bell and Teresa Bell personally.
THE STANDARD OF REVIEW
[14] It is not the role of an appellate court to reconsider all of the matters that were before the trial judge. An appellate court should not rehear the matter and substitute its own decision for that of the trial judge.
[15] If an appeal is based upon an error of law, the standard of review is that of correctness. If the appeal is based upon an error of fact, the standard of review is a palpable and overriding error. Further, if there is an alleged error of mixed fact and law, the standard of review is a palpable and overriding error. See the case of Housen v. Nikolaisen, 2002 SCC 33, [2002] S.C.J. No. 31.
ANALYSIS
1. The Name of the Plaintiff
[16] The plaintiff acknowledges that 740 was amalgamated into 173 on September 28, 2007. The Bells controlled both 740 and 173. The plaintiff submitted that the Bells inadvertently referred to 740, and should have referred to 173, when they negotiated the contract with the defendant in 2009. Therefore, the plaintiff brought the motion to amend the plaintiff’s name in the proceedings.
[17] After reciting the affidavit evidence that was before him, the Deputy Judge wrote: “It is clear that the plaintiff was not the corporation who should have taken legal action as they were not part of the contract, and they did not exist at the time the contract was signed.” Further, the Deputy Judge wrote, “I disagree it is simply a procedural mistake they made. They have made numerous mistakes that cannot be fixed.”
[18] In my view, the Deputy Judge has made several errors with respect to the issue of the name of the plaintiff. First, the Deputy Judge did not analyze the effect of the amalgamation on the terms of the contract. It is clear that there was a contract formed in writing in 2009, but that one of the parties to the contract was misnamed, allegedly through inadvertence. The simple statement that “they did not exist at the time” is not the end of the issue. This issue is a complex one that requires a thorough analysis. The Deputy Judge made a finding that 740 was not a party to the contract, but he erred by failing to identify the proper parties to the contract.
[19] The language used by the Deputy Judge in his Reasons is from the Business Corporations Act, s. 179(a.1) that reads: “The amalgamating corporations cease to exist as entities separate from the amalgamated corporation.” However, the Deputy Judge did not deal with the fact that an amalgamation does not extinguish the old corporations, but the old corporations are amalgamated and continue as one amalgamated company. In that respect see the cases of The Queen v. Black & Decker Manufacturing Company, Limited, [1975] S.C.R. 411, and Witco Chemical Company, Canada, Limited v. The Corporation of the Town of Oakville, 1974 7 (SCC), [1975] 1 S.C.R. 273. Further, the rights and obligations of the old corporations continue with the amalgamated corporation. See the Business Corporations Act at s.179(b).
[20] There was clearly a contract between the defendant and some entity represented by the Bells. The defendant was bound to that contract and had obligations thereunder. It would be improper to relieve the defendant of its obligations under the contract simply because the plaintiff had been misnamed, or had let a business name registration expire. Technical failures by the plaintiff do not relieve the defendant from its obligations.
[21] In my view, the real issue here is the identity of the proper parties to the contract. If 740 was not a proper party, then what entity made the contract with the defendant? The plaintiff submits that 173 is the proper party, and the defendant disagrees. That disagreement can only be resolved after full consideration of all of the evidence.
[22] For 173 to be substituted as the proper party, the plaintiff would have to show, at a minimum, that the reference to 740 was mere inadvertence, and that the identity of the corporate entity was not a fundamental term of the contract from the defendant’s perspective. Did the defendant rely on the fact that the contract was with 740, or did it matter? Did the plaintiff wilfully mislead the defendant? Those issues should be decided after a hearing in a courtroom. Thus, the question of whether 173 is a proper party to the contract is a question that should be decided by a judge at trial.
[23] Second, the Deputy Judge held that this was not simply a procedural matter. He found that there had been numerous mistakes that could not be fixed. That comment was not explained in his Reasons. One can assume from his Reasons that the Deputy Judge was referring to the fact that the Bells used the name of 740 in the contract, and the fact that the registration of the business name had expired. However, both of those errors could be fixed.
[24] Third, the Deputy Judge has not dealt with the issue of amendments generally. Amendments to pleadings are generally to be permitted unless the defendant can show prejudice. In this case, the Deputy Judge has not dealt with the issue of prejudice to the defendant. Further, other than the possible expiry of the limitation period, there was no evidence of prejudice to the defendant before the Deputy Judge.
[25] In summary, on this ground of appeal I find that these errors collectively constitute a palpable and overriding error by the Deputy Judge. The Plaintiff’s Claim should have been amended to show the plaintiff as 173, and the action should have been permitted to proceed to trial. To be clear, in this appeal I make no finding as to whether 173 is a proper party to the contract; that matter will be left to the judge to determine after hearing evidence at the trial.
2. The Limitation Period
[26] Regarding the limitation period, it is accepted that the work described in the contract was completed in October 2009, and the Plaintiff’s Claim was issued in November 2012, more than two years after the completion of the work. Thus, on those simple facts, the limitation period has expired.
[27] However, the plaintiff has produced evidence, in the form of a cheque stub regarding a cheque dated June 20, 2011, whereby the defendant made a payment of $10,000.00 to the plaintiff. The plaintiff alleges that this payment is an acknowledgment of the debt, and extends the limitation period.
[28] There is a dispute between the parties as to whether this cheque related to the Orchard Park job or to another job. However, the Deputy Judge failed to deal with that factual dispute in his Reasons. Rather, the Deputy Judge simply wrote, “It is clear that the limitation period applies as it has been more than two years”. In my view, this is an incomplete analysis of the situation.
[29] This failure also constitutes a palpable and overriding error. The decision of the Deputy Judge will be set aside on the limitation period issue for this reason. Because there are factual disputes with respect to the alleged acknowledgement of the debt, the applicability of the limitation period is an issue that will also be referred to the trial judge.
3. The Personal Claims Against the Bells
[30] The Deputy Judge seems to have alluded to the plaintiff’s motion to strike the personal claims against the Bells in his Reasons for Judgment, but he made no specific finding and came to no specific conclusion on this point.
[31] In my view, the issue of whether the Bells are personally responsible, given that they are alleged to have represented that they acted on behalf of 740, is a triable issue that will require viva voce evidence, followed by findings of fact. Therefore, this matter should also be dealt with by the trial judge.
CONCLUSION
[32] For the aforementioned reasons the decision of the Deputy Judge dated July 25, 2013, will be set aside in its entirety.
[33] I make the following orders:
The Plaintiff’s Claim is hereby amended to show the name of the plaintiff as 1736084 Ontario Inc. o/a Bell Contracting and Equipment.
Leave is granted to the plaintiff to continue the action notwithstanding the non-compliance with the Business Names Act.
The defendant is given leave to amend its Defence within 20 days of service of the amended Plaintiff’s Claim.
The issues of the identity of the parties to the contract, the applicability of the limitation period, and the personal liability of the Bells are matters that are reserved to the trial judge.
[34] If either party wishes to make submissions with respect to costs they may do so in writing within 20 days addressed to the Trial Co-ordinator at Welland.
Henderson J.
Released: December 16, 2013
2013 ONSC 7774
COURT FILE NO.: 7680/13
DATE: 2013-12-16
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
740170 Ontario Inc. o/a Bell Contracting
Plaintiff
(Appellant)
- and –
Bromac Construction & Engineering Ltd. and Bromac Construction Inc.
Defendants
(Respondents)
DECISION ON APPEAL
Henderson J.
Released: December 16, 2013