Court File and Parties

COURT FILE NO.: CV-19-00618084-0000

DATE: 20210318

ONTARIO SUPERIOR COURT OF JUSTICE

RE: DALTON G. JOHNSON also known as BILL JAMIESON, Plaintiff

-and-

SPECIALE LAW PC, THE ESTATE OF ANTHONY SPECIALE., Defendants

BEFORE: F.L. Myers J.

COUNSEL: Sumit Tangri, for the Plaintiff Randy Schliemann, for the Defendants Kenneth H. Page for Dodick Landau Inc., Trustee in Bankruptcy, (Non-Party)

HEARD: March 18, 2021 (videoconference)

ENDORSEMENT

Relief Requested

[1] An order dismissing this action.

Disposition

[2] The action is dismissed.

Costs

[3] On a substantial indemnity basis, fixed at $10,000 are payable by Plaintiff to Defendants by April 22, 2021.

Brief Reasons

[4] The plaintiff commenced this action on April 8, 2019. At the time, he was an undischarged bankrupt. He did not disclose the cause of action in his statement of affairs in the bankruptcy.

[5] Upon the plaintiff going bankrupt, ownership of the property of the bankrupt vested in his trustee in bankruptcy under s. 71 of the Bankruptcy and Insolvency Act, RSC 1985, c B-3. Therefore, at the time that he commenced this lawsuit, the plaintiff did not own the cause of action. In the wording of Rule 21.01 (3)(b) of the Rules of Civil Procedure, RRO 1990, Reg 194, "the plaintiff [was] without legal capacity to commence or continue the action".

[6] The plaintiff argues that he has a good claim in negligence against the defendant who was his former lawyer. Mr. Speciale was acting on a pre-existing claim worth some $800,000 and failed to prosecute the claim diligently. Para. 15 of the statement of claim against Mr. Speciale pleads that the limitation period for suing Mr. Speciale was going to expire on April 18, 2019. Rather than disclosing the cause of action to the trustee, the plaintiff waited until ten days before the limitation period expired and then sued Mr. Speciale in his own name.

[7] The plaintiff's counsel submits that it would be unjust for that claim to be lost due to a formality rather than an assessment on its merits.

[8] Once this claim was disclosed to the trustee, neither the trustee nor the other creditors wanted to fund the continuation of the claim. Therefore, the plaintiff wants it transferred back to him as unrealizable property under s. 40 of the BIA. In that way, he can once again own the cause of action and ask for the claim to be regularized as a misnomer nunc pro tunc.

[9] The plaintiff also submits that Mr. Speciale told him that, in his capacity as a creditor and an inspector of the bankrupt estate, he would buy the original $800,000 cause of action and prosecute it under s. 38 of the BIA. He did not do so before he passed away and LawPro has declined to do so as well. Mr. Tangri submits that this is a further basis to start a limitation period against Mr. Speciale. That might be the case although I do not see what rights the plaintiff would have if Mr. Speciale, as creditor, bought the claim from the bankrupt estate. But even if there were some kind of binding deal between Mr. Speciale and the plaintiff that did not violate the BIA, that has nothing to do with this lawsuit that is for negligence in Mr. Speciale's handling of a lawsuit as counsel from 2006 to 2011. If there is a cause of action concerning a contract between the bankrupt and Mr. Speciale some time in 2017 – 2019, that is a completely different matter that has not been brought and may or may not be property of the bankrupt or out of time. It has nothing to do with the motion before me.

[10] The Trustee brought a motion before Registrar Mills in January, 2020 to allow it to assign this claim against Mr. Speciale back to the bankrupt. By that time however, the limitation period pleaded by the plaintiff had expired. Even if the Registrar had allowed the trustee to assign the claim, it was too late for a nunc pro tunc validation. Claims brought by an undischarged bankrupt cannot be validated nunc pro tunc after the limitation period has expired. See: Thistle v. Schumilas, 2020 ONCA 88, at para. 27.

[11] However, the Registrar did not allow the claim to be assigned. She was of the view that it should await a decision by the Court of Appeal in a related matter. The Court of Appeal's decision has since come down and upheld the dismissal of another case brought by this bankrupt in his own name just like this one. See: Johnson v. Fisher, 2020 ONCA 613, at para. 4.

[12] This claim remains with the trustee. There is no basis to find that anything done unlawfully by the defendant or the trustee prevented the plaintiff from obtaining ownership of the claim in time to seek validation before the limitation period expired. In fact, the only thing that prevented the claim from being dealt with to preserve peoples' rights, was the plaintiff's failure to disclose the claim to the trustee until well after the limitation period expired.

[13] If the plaintiff had a valuable cause of action against Mr. Speciale and had funded the trustee to carry it or if a creditor had been willing to fund the claim (or to buy it under s. 38 of the BIA) the value might have been realized first for the creditors and then, if anything remained, perhaps for the bankrupt. The BIA allows for pre-bankruptcy causes of action to be realized for interested parties. The fact that Mr. Speciale started the claim improperly and that it was too late to fix it once it became known is a function of the facts that plaintiff (a) had to go bankrupt; and (b) failed to disclose the claim on a timely basis.

[14] There is no factual dispute that requires assessment. All the facts raised by the plaintiff relate to a time after the cause of action expired on his own plea. He did not have to wait to bring forward a claim against Mr. Speciale to the week before the limitation period expired. He could have disclosed it to the trustee and the creditors as soon as the cause of action arose. He could have dealt with it within the bankruptcy process rather than commencing the claim in his own name as he did. Nothing said or done by Mr. Speciale in the bankruptcy or by LawPro after Mr. Speciale's death affected the expiry of the limitation period of the claim pleaded by the plaintiff.

[15] The plaintiff has no answer for the two Court of Appeal cases cited above that confirm that: (a) this action was commenced by a plaintiff who was without capacity to do so; and (b) after April 19, 2019, there could no longer be nunc pro tunc validation even if the plaintiff had been able to obtain ownership of the claim from the trustee. None of the rest of the facts raised by the plaintiff concerning an alleged agreement with Mr. Speciale in the bankruptcy or events after the expiry of the limitation period matter to these two conclusions of law.

[16] The action is therefore dismissed. The defendant is entitled to costs of the motion on a substantial indemnity basis. The Court of Appeal told this plaintiff that a claim in identical circumstances to this one was untenable for the very reason asserted in this motion. Requiring the defendant to bring this motion was a waste of legal fees. Moreover, bringing the action in the plaintiff's own name without disclosure to the trustee was an abuse of the bankruptcy process. In my view, this is one of the few cases where the conduct of a party is reprehensible and ought to attract a costs penalty by the payment of substantially all of the successful party's costs as ordered above.

F.L. Myers J.

Date: March 18, 2021