PDP IMPORTING v. TIFFANY GATE FOODS INC., 2014 ONSC 2644
COURT FILE NO.: CV-12-455284
MOTION HEARD: APRIL 24, 2014
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: PDP Importing v. Tiffany Gate Foods Inc.
BEFORE: MASTER R.A. MUIR
COUNSEL:
Jack Copelovici for the plaintiff
Julian Heller for the defendant
REASONS FOR DECISION
[1] There are two motions before the court. The plaintiff seeks leave to maintain this proceeding pursuant to section 7(2) of the Business Names Act, R.S.O. 1990, c. B.17 (the “BNA”) and pursuant to section 18(2) of the Corporations Information Act, R.S.O. 1990, c. C.39 (the “CIA”). The plaintiff also seeks leave to amend its statement of claim to correct the name of the plaintiff as it appears in the title of proceedings.
[2] The defendant, on the other hand, seeks an order from the court dismissing this action as a result of the plaintiff’s non-compliance with the BNA and with the CIA. Alternatively, the defendant seeks an order permanently staying the plaintiff’s action.
[3] PDP Importing (“PDP”) is a business name registered to 863704 Ontario Limited (“863”). PDP is in the business of importing food products. From time to time it sold certain imported food products to the defendant. At some point in 2012 a dispute arose between PDP and the defendant in connection with various pasta products imported by PDP and re-sold to the defendant. The defendant alleges that the pasta products supplied were of a poor quality and did not meet its requirements. The defendant has refused to pay invoices rendered by PDP and has also refused to take delivery of certain other quantities of pasta products imported by PDP on behalf of the defendant. The total amount PDP alleges it is owed is less than $100,000.00.
[4] At the outset of the argument of these motions on April 24, 2014, a preliminary issue arose with respect to the delivery of additional materials. The plaintiff wished to file an affidavit served on April 23, 2014. The defendant wished to file an amended amended notice of motion, also served on April 23, 2014.
[5] The plaintiff’s April 23, 2014 affidavit is in response to an amended notice of motion served by the defendant at some point in the middle of January 2014. The plaintiff had ample time to respond to the amended notice of motion but did not do so until the day before the latest return date for these motions. Moreover, these motions have been scheduled and rescheduled on several occasions. A great deal of time and expense has already been devoted to dealing with preliminary matters. Under the circumstances, I was not prepared to allow this further affidavit to be admitted into evidence and I refused to accept the document for filing.
[6] For the same reasons, I refused to accept the amended amended notice of motion for filing. The defendant became aware of the facts apparently requiring the service of the amended amended notice of motion on or about April 11, 2014. Given the long history of these motions, the amended amended notice of motion should have been served well in advance of the hearing date.
[7] The relevant sections of the BNA read as follows:
- (1) No corporation shall carry on business or identify itself to the public under a name other than its corporate name unless the name is registered by that corporation.
(6) A corporation and such other persons as are prescribed carrying on business under a registered name or, in the case of a corporation, identifying itself to the public under a registered name, shall set out both the registered name and the person’s name in all contracts, invoices, negotiable instruments and orders involving goods or services issued or made by the person.
- (1) Upon payment of the required fee, any person may register a name for the purpose of complying with section 2 or 2.1 or section 44.3 or 44.4 of the Partnerships Act.
(1.1) The registration is effective for five years from the date it is accepted for registration by the Registrar.
(4) If there is a change in information set out in a registration, the registrant shall register, in the prescribed form within fifteen days after the change, an amended registration showing the change.
- (1) A person carrying on business in contravention of subsection 2 (1), (2) or (3) or subsection 4 (4) or (6) is not capable of maintaining a proceeding in a court in Ontario in connection with that business except with leave of the court.
(2) The court shall grant leave if the person seeking to maintain the proceeding satisfies the court that,
(a) the failure to register 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 person is not in contravention of this Act or the regulations.
(3) No contract is void or voidable by reason only that it was entered into by a person who was in contravention of this Act or the regulations at the time the contract was made.
[8] The relevant provisions of the CIA read 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.
(3) No contract is void or voidable by reason only that it was entered into by a person who was in contravention of this Act or the regulations at the time the contract was made.
[9] As can be seen from these legislative provisions, corporations doing business in Ontario must comply with various registration and informational requirements. They must also ensure that their tax filings are kept up to date and that any fees and penalties are paid promptly. There is obviously a strong public interest in ensuring that members of the public are fully aware of who they are dealing with and that corporations in Ontario are generally meeting their public obligations. This is why the legislature has seen fit to enact provisions that take away a corporation’s right to maintain an action when it is in default of those obligations.
[10] It is common ground that the PDP business name had expired at the time this action was commenced and for a period of time when the plaintiff was dealing with the defendant. The registration of the business name has now been renewed but it was only done so after the defendant raised the issue in its statement of defence.
[11] It is also clear from the evidence that 863 was, from time to time, carrying on business under the PDP name without clearly identifying its full corporate name on its invoicing and other business communications. Finally, the evidence shows that for many years 863 was habitually late in filing its income tax returns. That problem also now appears to have been rectified and its tax filings are up to date.
[12] The defendant’s primary submission is that this action is a nullity because it was commenced at a time when the PDP business name had expired. The defendant argues that this fact is fatal to the plaintiff’s action and the claim must be dismissed. The defendant’s argument in this regard is based on the decision of the Court of Appeal in Kaltenback v. Frolic Industries Ltd., 1948 CarswellOnt 34 (C.A.). In Kaltenback, the Court of Appeal held that the failure of the plaintiff to register its name pursuant the applicable partnership legislation in place at the time meant that its action was a nullity and the action was therefore dismissed. See Kaltenback at paragraphs 36 and 37. In my view, however, Kaltenback, is distinguishable from the facts before me on these motions. The partnership name used by the plaintiff in Kaltenback was never registered with the appropriate ministry. A partnership search would not have revealed the identities of the persons behind the named partnership. In the case before me, however, the registration of the PDP business name had simply lapsed. A search would and did reveal the expired business name and identified 863 as the person carrying on business under that name.
[13] As well, it is important to note that the legislation in place at the time Kaltenback was decided did not contain provisions similar to section 7(2) of the BNA and section 18(2) of the CIA. In my view, the harsh result of the decision of the Court of Appeal in Kaltenback must be viewed within the context of the clear intention of the legislature in enacting these remedial sections of the BNA and the CIA.
[14] Finally, I would note the observations of the Court of Appeal in Finlay v. Van Paassen, 2010 ONCA 204 at paragraph 12 where Justice Laskin stated as follows:
12 Under the pre-1985 Rules, procedural missteps characterized as nullities were incapable of being cured. To give but one example, if a sole proprietor carrying on business under a firm name started an action in the firm name, the action was a nullity. The court had no power to amend the claim to substitute the name of the sole proprietor for the name of the firm, even if the defendant was not misled: see Kaltenback v. Frolic Industries Ltd., 1948 124 (ON CA), [1948] O.R. 116 (C.A). That case, of course, would be decided entirely differently under our current Rules.
[15] The Finlay case was not brought to the attention of this court during the course of the argument of these motions.
[16] For these reasons, I do not view Kaltenback as binding on this court.
[17] Rather, I agree with the summary of the law in this area set out by Justice Perell in his recent decision in Excalibur Special Opportunities LP v. Schwartz Levitsky Feldman LLP, 2013 ONSC 3271; leave to appeal refused, 2013 ONSC 4901 (Div. Ct.). After a careful review of the applicable authorities (although Kaltenback was not among them) Justice Perell concluded at paragraphs 45 and 46 as follows:
45 All this case law indicates that an action commenced while the plaintiff is non-compliant is not a nullity but may be stayed and if stayed, then the stay may be lifted by the court granting leave, in which case, the existing action moves ahead.
46 Apart from the case law that supports a gentle interpretation of the business name statutes and putting aside the policy rationales for a strict or restrictive interpretations of what it means to be "capable of maintaining a proceeding ... except with leave of the court," my own opinion is that the literal meaning of s. 28 is that the court has the jurisdiction to grant leave to continue an existing proceeding. I say this because the work "maintaining" is in the progressive tense and this suggests an on-going activity, and because, as conceded by SLF, to maintain something connotes the idea that there is something in existence to be maintained. Maintaining something has the connotation of continuing or sustaining something not just having something.
[18] I would also note that Justice Lederer, in hearing the leave application, found at paragraph 10 of that report that there was “no good reason to doubt the correctness” of Justice Perell’s decision.
[19] It is also important to emphasize the fact that the courts have consistently held that the failure of a plaintiff to meet all requirement of section 7(2) of the BNA or section 18(2) of the CIA does not exhaust the court’s discretion to grant leave in any event. The court retains a residual discretion. See Excalibur at paragraphs 39-42.
[20] In my view, it is therefore appropriate to apply a “gentle” interpretation of the BNA and the CIA and grant the leave requested by the plaintiff if it would be just to do so.
[21] In my view, it would be just to grant leave to the plaintiff to maintain this action and to amend its statement of claim, as requested. I should note, however, that I come to this conclusion reluctantly and in my view, the plaintiff is being afforded a substantial indulgence.
[22] The evidence is clear that 863 habitually and consistently failed to meet its obligations under the BNA and the CIA. Its business name registration was allowed to expire. It was only renewed after the defendant brought the matter to 863’s attention. 863 carried on business without properly identifying itself to the public and for many years it failed to file its tax returns on time. Its evidence as to why it ignored its obligations lacks specificity and reveals what appears to be a serious lack of attention to its obligations as a limited liability corporation carrying on business in Ontario.
[23] However, it now appears that all of these issues have been satisfactorily addressed by 863. There is no specific evidence that any member of the public was actually misled. Importantly, there is no suggestion that the defendant itself was misled by the manner in which 863 carried on business. In fact, the defendant knew exactly who was behind PDP as is evidenced by the fact that 863 was added as a party to the defendant’s counterclaim. There is no evidence that 863 deliberately chose to ignore the requirement of the BNA or the CIA or that it did so in order to gain some form of a benefit. In my view, the totality of the evidence simply shows a corporation that was indifferent to its obligations under the legislation.
[24] I agree with, and have applied, the observations of Justice Valin in Bazinet v. Kinross Gold Corp., 1999 CarswellOnt 584 (S.C.J.) where he stated at paragraph 14:
. . . The general purpose of the Act is to ensure that businesses are registered. The limitation placed on the ability of an unregistered business to maintain a proceeding seems to be in part disciplinary. There needs to be some consequence for failing to register a partnership. However, where the failure to register is inadvertent, and no harm flows from it, the disciplinary function of the Act becomes largely irrelevant. It would be unfair to bar actions in such circumstances.
[25] For the reasons set out above, I am satisfied that it is just that I exercise my discretion and grant leave to the plaintiff to continue this action, as requested. In my view, it would be unfair to dismiss or stay the plaintiff’s action under these circumstances.
[26] I am therefore granting the relief requested by the plaintiff at paragraphs 1 and 2 of its notice of motion. The defendant’s motion is dismissed. If the parties are unable to resolve the issue of the costs of these motions, they shall provide the court with brief submissions in writing by no later than May 30, 2014.
Master R.A. Muir
DATE: April 28, 2014