PDP Importing v. Tiffany Gate Foods Inc., 2015 ONSC 576
COURT FILE NO.: CV-12-455284
DATE: 20150218
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
PDP IMPORTING A DIVISION OF 863704 ONTARIO LIMITED
Plaintiff/Defendant by counterclaim
– and –
TIFFANY GATE FOODS INC.
Defendant/Plaintiff by counterclaim
Jack Copelovici, for the Plaintiff
Julian D. Heller, for the Defendant
HEARD: January 27, 2015
REASONS FOR JUDGMENT
Carole j. brown j.
[1] Tiffany Gate Foods Inc. (“Tiffany Gate” or the “defendant”), the defendant/plaintiff by counterclaim, appeals from the decision of Master Muir dated April 28, 2014, as well as the costs order of June 12, 2014, as regards two motions: a motion for leave to maintain the action and to amend the statement of claim brought by PDP Importing (“PDP” or the “plaintiff”), the plaintiff/defendant by counterclaim; and a cross-motion brought by the defendant to stay or dismiss the proceedings.
[2] Master Muir ordered as follows:
That leave be granted to PDP to maintain this action pursuant to s. 7(2) of the Business Names Act, R.S.O. 1990, c. B.17 (the “BNA”), and s. 18(2) of the Corporations Information Act, R.S.O. 1990, c. C.39 (the “CIA”), and to amend its statement of claim accordingly;
That Tiffany Gate’s cross-motion to stay or dismiss the appeal be dismissed;
That PDP be awarded $10,000 in costs.
[3] PDP is the business name registered to 863704 Ontario Limited (“863”), the defendant by counterclaim. PDP is in the business of importing food products and, from time to time, sold certain imported food products to the defendant, commencing May 20, 2010, when the parties first transacted business. In 2012, a dispute arose between PDP and the defendant in connection with the various pasta products imported by PDP and resold to the defendant, products which the defendant alleges were of poor quality and did not meet its requirements. As a result, the defendant refused to pay invoices rendered by PDP or to take delivery of additional quantities of pasta products imported by PDP for the defendant. The total amount owing on the invoices sent by the plaintiff to the defendant and remaining unpaid was $106,858. The parties, on consent after the claim was commenced, reduced the amount to $76,476 plus interest and costs. There is also a counterclaim in the amount of $110,000.
[4] The action, commenced June 5, 2012, has a lengthy and somewhat unfortunate procedural history, including numerous adjournments, motions and cross-motions, which have delayed the proceeding in an unfortunate way, taking into account that it is, as the Master observed in an earlier endorsement, “in reality a simplified procedure matter.”
[5] The Master seized himself of this motion and other preliminary motions regarding undertakings and refusals sought by the defendant. In total, there were three motions heard by the Master, for which the parties came before the Master on five occasions prior to the reasons for decision now under appeal.
[6] The motions included a lengthy motion for refusals brought by the defendant, in which the Master found that the “vast majority of [the defendant’s] requests [were] nothing more than fishing expeditions,” a motion by the plaintiff granting leave to amend its statement of claim to include its full corporate name, and a cross-motion by the defendant seeking an order staying this action on the basis that it is a nullity by virtue of the operation of the provisions of the BIA and the CIA. These motions were argued before the Master for a full day on April 24, 2014.
[7] As found by the Master, the evidence indicates that the PDP business name had been registered as required pursuant to the relevant provisions of the BNA and the CIA, but had expired at some time during the course of the parties’ business transactions and was not registered at the time this action was commenced. Further, as found by the Master, 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, in contravention of the legislation, and was habitually late in filing income tax returns. At the time of the Master’s decision, however, the plaintiff was properly registered under the legislation, was properly identified on its business documentation and was up-to-date in its income tax filing.
[8] Indeed, the evidence before the Master included e-mail correspondence from counsel for the defendant dated August 9, 2012, advising counsel for the plaintiff that PDP was not the registered business name and not the proper party. Counsel for the defendant stated “your re line said PDP Importing but the POs state PDP Importing, a Division of 863704 Ontario Limited. As previously advised, the named plaintiff PDP Importing is an expired business name. Please confirm that the proper plaintiff is the numbered company and confirm that you will be amending the claim accordingly.”
[9] Documentation obtained on the cross-examination of Mr. Zuccaro, principal of the plaintiff Corporation, included an Ontario Business Name Report Expired Record for PDP with registration date of 2005/08/29 and expiry date of the 2010/08/28, and also listing the corporate name as 863704 Ontario Limited, as well as the Corporate Profile Report listing the director of 863704 as Frank Zuccaro. There was, as well, a CIA annual return filed 2012/06/02. It appears, from the e-mail correspondence sent by counsel for the defendant to counsel for the plaintiff that he had at least most of the documentation.
[10] After being notified of the de-registration of PDP, the plaintiff brought a motion for leave pursuant to the BIA some eight months later. As indicated, due to the many delays occasioned by adjournments and preliminary motions, this issue did not come before the Master for hearing until April of 2014. However, prior to that time, the corporation was re-registered and all other defaults under the BNA and the CIA had been remedied.
Issue
[11] The only issue to be determined by this Court is whether the Master properly applied the legislation in granting leave of the court pursuant to ss. 7(1) and (2) of the BNA and ss. 18 (1) and (2) of the CIA.
Standard of Review
[12] An appellate court will only set aside a decision of a master where the master made an error in law, exercised his or her discretion on the wrong principles, or misapprehended the evidence such that there is a palpable and overriding error: Zeitoun v. The Economical Insurance Group (2008), 2008 20996 (ON SCDC), 91 O.R. (3d) 131 (Div. Ct.), 292 D.L.R. (4th) 313. A master is accorded deference in his or her exercise of discretion.
[13] Both parties are in agreement as to the standard of review on appeal of the decision from the Master.
[14] It is the position of Tiffany Gate, the defendant in the action and the appellant in this Court, that the Master erred in three areas. Firstly, the Master failed to properly determine the issue of whether this action was a nullity and therefore cannot be maintained. Secondly, the Master erred in failing to apply the relevant tests as set forth in the relevant legislation. And thirdly, the Master erred in exercising his discretion in the absence of a finding of “exceptional circumstances.”
Nullity
[15] Tiffany Gate argued that this action is a nullity and cannot be maintained, even in the face of the provisions of the BNA and CIA. It argues that where an action is commenced while the corporation is not registered pursuant to the relevant legislation, it cannot be saved or “maintained” by provisions of the legislation; it is a nullity ab initio. It relies on the case of Kaltenback v. Frolic Industries Limited (1948), 1948 124 (ON CA), O.R. 116 (C.A.), 1 D.L.R. 689 [Kaltenback], as well as the more recent case of C & F Industrial Parts Co. v. Wastecorp Pumps Canada Inc., 2011 CarswellOnt 15157 (S.C.), 211 A.C.W.S. (3d) 826 [C & F Industrial], which followed Kaltenback. PDP argues that this latter case is distinguishable from the one before me, as it was determined on its facts and the evidence before the court at the time the motion was brought, which the plaintiff argues is the instrumental time as regards determination of the issues. It argues that the court held, in C & F Industrial, that there was no evidence to indicate that as at the date of the motion, the corporation, which commenced the action in the name that was not a legal entity, had been properly registered pursuant to the BNA.
[16] As regards the allegation that the action is a nullity from its inception because it was commenced at a time when the PDP business name had expired, I am of the view that the Master fully canvassed the caselaw in this regard. He analyzed the decision relied upon by the plaintiff, Kaltenback, supra, and noted that it had been determined in 1948, at a time when the BNA and the CIA did not contain provisions similar to s.7(2) of the BNA and s.18(2) of the CIA. He further observed that, in C & F Industrial, unlike the case before him, the partnership name used by the plaintiff had never been registered with the appropriate Ministry at all, while in this case it had been registered but the registration had lapsed. He thereafter analyzed more recent case law, including the Court of Appeal decision in Finlay v. Van Paassen, 2010 ONCA 204, 101 O.R. (3d) 390, which distinguished Kaltenback. He further followed the law set out by Perell J. in Excalibur Special Opportunities LP v. Schwartz Levitsky Feldman LLP, 2013 ONSC 3271; leave to appeal refused, 2013 ONSC 4901 (Div. Ct.), at paras. 45 and 46. I am of the view that this analysis and application of the law was appropriate and proper. I do not find that the action in this case is a nullity ab initio such that the “saving provisions” of the BNA and CIA are not applicable.
The Relevant Legislation
[17] Section 7 of the BNA reads as follows:
7 (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.
[18] Section 18 of the CIA is substantially the same, with slight modification in wording. It reads as follows:
18 (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 corporation that was in contravention of this Act or the regulations at the time the contract was made.
[19] Tiffany Gate argues that the Master failed to properly apply the above three-pronged test in granting leave of the court. It maintains that there was no evidence of inadvertence, no evidence that the public had not been deceived or misled and that, in any event, the entire proceeding was a nullity given that it had been commenced while the corporation was not registered, and while it was in breach of its obligations under the legislation. It argues that the Master found that PDP was “indifferent to its obligations” such that the non-compliance with the legislation could not have been found to be “inadvertent.” It argues that the onus for such proof is on PDP and that, other than the affidavit provided, there is no positive evidence of inadvertence, nor evidence that the public was not deceived or misled. Further, it argues that the Master exercised residual discretion to grant leave on incorrect principles in not finding that there were “exceptional circumstances” that justify such an exercise of discretion.
[20] As regards the CIA, Tiffany Gate maintains that the Master again failed to apply the appropriate test and, rather than applying each test conjunctively, collapsed them and failed to consider whether PDP satisfied each element of the test.
[21] Moreover, it states that because the action was a nullity from the beginning, and as it was commenced when the plaintiff was not registered and not compliant with the BNA and the CIA, it remains a nullity. I do note that in its amended cross-motion dated April 30, 2013, the defendant notes that “PDP is not capable of maintaining a proceeding except with leave of the court.”
[22] The Master, in his decision, set out the issues and the relevant background, as well as the relevant sections of both the BNA and the CIA, as set forth in his analysis and findings at paras. 9-24 of his decision.
[23] I do not find there to be any error of law, nor any palpable or overriding error as regards the evidence which would permit this Court to set aside the decision of the Master in this case.
[24] There was sufficient evidence of inadvertence in the record before the Master. Further, when this was brought to the attention of PDP’s counsel, a motion was brought thereafter to rectify the situation and the corporation was re-registered. While the defendant attempts to argue that the Master conflated inadvertence with “indifference” in this test, I do not read the Master’s decision, and particularly paras. 22 and 23 thereof, in such a manner. Further, I note his comments at para. 24 of his decision. In my view, the Master has properly applied and given consideration to the first branch of the test under both the BNA and the CIA.
[25] As regards evidence that the public has been deceived or misled, I find there to be sufficient evidence contained in the record before the Master to conclude that this is not the case. I am satisfied that the Master sufficiently considered this second branch of the test, as it is set forth in both the BNA and the CIA. I do not find any error in his analysis. Further, it is clear, as stated above at para. 8, that the defendant itself was not misled or deceived by the de-registration and was, in fact, the party who brought the de-registration to the attention of the plaintiff, Moreover, the defendant commenced the counterclaim against 863, such that it is apparent that it did know the name of the corporation with which it was transacting and with which it was involved in this lawsuit.
[26] As regards the third branch of the test, it is clear that the plaintiff was not in contravention of either the BNA or the CIA, or their regulations, at the time of the hearing of the motion before the Master. The Master was therefore entitled to grant leave of the court for PDP to continue its action against Tiffany Gate. Kaltenback, a case on which Tiffany Gate relied heavily, was unequivocally questioned, if not set aside, in the Court of Appeal’s decision in Finlay v. Van Passen, supra. In Van Paassen, the Court, at para. 12, held the following:
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. (emphasis added)
[27] In Excalibur Special Opportunities LP, supra, Perell J. canvassed similar case law dealing with the Limited Partnerships Act, R.S.O. 1990, c. L.16, s. 28, a section functionally similar to those sections of the BNA and CIA at issue here. Justice Perell concluded, at para. 45, that “[a]ll 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.”
[28] Finally, I agree with counsel for PDP that C & F Industrial, supra, is distinguishable. In that case, the court found as a fact that the proposed plaintiff’s registration had lapsed. Although counsel for the plaintiff indicated that the proposed plaintiff was properly registered pursuant to the BNA, the only evidence before the court was that its registration was still cancelled as of June 30, 2011, a date shortly before the motion. Therefore, para. 5, the passage citing Kaltenback relied upon by the defendant, was made in obiter.
[29] The information before the Master in this case included correspondence from the plaintiff’s accountant, Peter Vaneck, regarding the income tax returns. His correspondence indicates that, from 2005 to 2007, the returns were filed late, but as there was no tax payable, there was no penalty. This correspondence also indicates that the returns for 2008 to 2012 were not filed late. The defendant indicates that the evidence in this regard is, at least, conflicting. Based on the record, I am satisfied that the Master had sufficient evidence before him to conclude as he did.
[30] While the defendant thereafter requested financial proof, namely financial statements and the monetary amounts in the tax returns for the Corporation, which had not been given but rather deleted, this was not the issue. Rather, the fact of filing returns was the issue.
[31] The broad purpose of the BNA is to “ensure ethical and accountable business practices by ensuring that other individuals and businesses can know the people with whom they are doing business”: Bazinet v. Kinross Gold Corp., [1999] O.J. No. 638 at para. 16 (Gen. Div.), 86 A.C.W.S. (3d) 504. In this regard, the Master found, on the evidence, that the defendant knew with whom it was doing business and that at the time of the first transactions, the plaintiff was properly registered.
[32] I find the tests as set out in both the BNA and the CIA were properly applied, based on all of the evidence before the Master at the time of the motion.
[33] Finally, the appellant argues that the Master exercised his discretion in granting leave to the plaintiff to maintain and continue this action without first finding “exceptional circumstances” upon which to base the exercise of that discretion. The defendant relies, again, on the case of Kaltenback. The plaintiff maintains that recent jurisprudence, including Excalibur Special Opportunities LP, supra, recognizes a residual discretion in the courts to grant leave, even if the preconditions in s. 7 of the BNA and/or s. 18 of the CIA are not met in their entirety. It further argues that there is no requirement in the case law for “exceptional circumstances” in order for said discretion to be exercised or for leave to be granted, citing Bloomsbury and Butterfield Ltd. v. Economical Mutual Insurance Group, 2011 ONSC 4889, and Excalibur Special Opportunities LP, supra. I agree with the submissions of the plaintiff in this regard. However, I have also found, based on the voluminous evidence that was before the Master on the motion, that the three-pronged tests set out in the legislation were met in this case. The Master therefore did not have to rely upon any residual discretion to grant leave to continue the action.
[34] Based on the foregoing analysis, including the tripartite test and a quick analysis thereof based on the evidence, I find nothing in the Master’s decision that would cause this Court, sitting on appeal, to interfere with his decision to grant leave to continue and maintain this action. As regards the decision on costs, I find nothing which would permit this Court to interfere with the Master’s discretion in awarding costs in the amount of $10,000 in favour of the plaintiff.
[35] Accordingly, I uphold the Master’s decision regarding continuation of the action and dismiss this appeal.
Carole J. Brown J.
Released: February 18, 2015
COURT FILE NO.: CV-12-455284
DATE: 20150218
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
PDP IMPORTING A DIVISION OF 863704 ONTARIO LIMITED
Plaintiff
– and –
TIFFANY GATE FOODS INC.
Defendant
REASONS FOR JUDGMENT
Carole J. Brown, J
Released: February 18, 2015