COURT FILE NO.: FS-17-415899
DATE: 20210428
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
SAMANTHA CAMPBELL
Applicant/Moving Party
– and –
CRAIG CAMPBELL
Respondent/Responding Party
– and –
RESILIENCE CAPITAL INC.
Third Party/Responding Party
J. Zibarras & K. McArthur, for the Applicant/Moving Party
J. Rosenberg, for the Respondent/Responding Party, Mr. Campbell
A. McCoomb E. Friedman, for the Third Party/Responding Party, Resilience Capital Inc.
HEARD: April 21, 2021
O’Brien, J.
REASONS FOR DECISION
Overview
[1] The issue on this motion is whether a family law pleading constituted a demand to a corporation for the purposes of a demand loan. By this motion, the Applicant, Samantha Campbell, seeks to add a corporation, Resilience Capital Inc. (“Resilience”) as a party to the family law application. The trial of the application commenced in February 2021 and currently is adjourned for the hearing of this motion.
[2] The family law application is between Ms. Campbell and her spouse, Craig Campbell. Ms. Campbell commenced the application on March 8, 2017 (the “Application”), claiming, among other things, an equalization of net family property as well as repayment of funds which she alleges she loaned to Mr. Campbell on four occasions between December 2006 and December 2012 for the benefit of his company. Mr. Campbell’s company at the time was named Total Security Management (“TSM”). There is no dispute that Resilience is the successor to TSM. Mr. Campbell is the founder, majority shareholder and CEO of Resilience.
[3] Ms. Campbell claims to have made loans totaling $669,000 between 2006 and 2012. She alleges that approximately $322,000 has been repaid, with the balance remaining outstanding. When Ms. Campbell commenced the Application naming Mr. Campbell as the Respondent in 2017, she did not add Resilience as a Respondent.
[4] Mr. Campbell did not file an Answer to the Application until February 19, 2020. In his Answer, Mr. Campbell denied that one of the advances, for $300,000 in 2006, was a loan. He alleged that the other loans have been repaid.
[5] Although in his February 2020 Answer Mr. Campbell referenced that the loans were “payable by TSM to Smantha,” at the outset of this trial, he sought to amend his Answer. The proposed amendment both emphasized that the loans were owed by the corporation and not Mr. Campbell personally, and also pleaded that the limitation period to commence an action against TSM had expired. I allowed this amendment and also permitted Ms. Campbell to file an amended Reply. In her proposed amended Reply, Ms. Campbell sought to add Resilience as a party to the Application, leading to this motion.
[6] While this trial already is underway, Resilience does not allege that it has suffered any prejudice by not being named earlier. This makes sense. Given that Mr. Campbell is the CEO and majority shareholder of the company, Resilience had notice of Ms. Campbell’s allegations that the loans were unpaid. Indeed, Resilience provided detailed evidence on this motion, in an affidavit sworn by Mr. Campbell, in support of its position that the loans were repaid.
[7] Resilience instead submits that it cannot be added as a party because the limitation period to do so has expired. It argues that pursuant to the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B. (“Limitations Act”), the limitation period expired two years after the commencement of the Application, at the latest. In the submission of Resilience, the expiry of the limitation period is a complete bar to adding a party to ongoing litigation.
[8] It is agreed between the parties that the loans were demand loans. It is also agreed that the limitation period for a demand loan does not start to run until the demand is made. Resilience relies on the Application itself as the demand on the loans. Ms. Campbell’s position is that the Application does not constitute a clear and unequivocal demand on the loans to Resilience.
[9] For the reasons that follow, I agree with the position of Ms. Campbell. In my view, the Application did not constitute a demand to Resilience on the loans. The motion therefore is allowed.
Issue
[10] The only issue on this motion is whether the limitation period has expired to prevent adding Resilience as a party. To determine whether it has expired, I must determine whether the Application constituted a demand to Resilience for payment.
Analysis
A. Rules and Statutory Provisions
[11] Pursuant to r. 11(3) of the Family Law Rules, Ont. Reg. 114/99, the court shall permit a party to amend a pleading “unless the amendment would disadvantage another party in a way for which costs or an adjournment would not compensate.”
[12] Rule 11(3) is considered essentially the same as r. 26.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, which deals with amending pleadings in the civil context. The jurisprudence developed under r. 26.01 therefore applies in the family context: Smith v. Smith, 2021 ONSC 1990, at para. 16. This includes case law to the effect that a proposed amendment should not be permitted if it is clear that it discloses no reasonable claim or defence in law. Specifically, an amendment must be granted unless it is “plain and obvious” that it discloses no reasonable claim or defence: Smith, at para. 22; Spar Roofing and Metal Supplies Ltd. v. Glynn, 2016 ONCA 296, at para. 43.
[13] As set out above, Resilience does not rely on actual prejudice on the facts of the case. Instead, it submits that the expiry of a limitation period is a complete bar preventing its addition as a party.
[14] Section 21 of the Limitations Act prevents adding a party to an existing proceeding where a limitation period has expired. It provides:
21(1) If a limitation period in respect of a claim against a person has expired, the claim shall not be pursued by adding the person as a party to any existing proceeding.
[15] In this case, the limitation period is two years from the date a demand under the loans was made. Section 4 of the Limitations Act sets out the standard two-year limitation period. It states that unless that act provides otherwise, a proceeding “shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.”
[16] Section 5 then deals with discoverability. Under that section, the time for a demand loan begins to run only after a demand for performance is made. Specifically, pursuant to s. 5(3), a demand obligation is discovered on the “first day on which there is a failure to perform the obligation, once a demand for the performance is made.”
B. Application to this Case
[17] In my opinion, it is not plain and obvious that the Application constituted a demand to Resilience on the loans causing the commencement of the limitation period.
[18] A demand must be “clear and unequivocal.” The onus is on the responding party to establish that a demand was made: Bank of Nova Scotia v. Williamson, 2009 ONCA 754, at para. 20 (“Williamson”); Talsky v. Waxman, 2016 ONSC 1953, at para. 35.
[19] Here, I do not accept that the Application constituted a clear and unequivocal demand requiring Resilience to make payment on the loans. The Application was brought against Mr. Campbell seeking a divorce, spousal support, child support, custody and access of the children, an equalization of net family property and repayment of the loans. Resilience relies on the following order sought in the Application:
An order for the repayment of funds lent by the Applicant to the Respondent for the benefit of his company known as Toronto [sic] Security Management, including interest on the outstanding amounts, which amounts are due and unpaid.
[20] Later in the Facts portion of the Application, Ms. Campbell alleged:
The Applicant has made the Respondent aware, at all times since the funds were loaned, that they remained outstanding less one partial payment made to the Applicant in 2013.
[21] To the extent this wording constitutes a demand to Mr. Campbell on the loan (a point which I am not deciding on this motion), it does not, in my view, constitute a clear and unequivocal demand for payment from Resilience. The Application was brought against the Respondent, Mr. Campbell. Resilience was not a Respondent to the Application. Although Resilience can be deemed to have been aware of the pleading, given that the Respondent, Mr. Campbell was its principal, this is not the same as making a clear demand for payment to Resilience directly.
[22] In Williamson, the Court of Appeal upheld the trial judge’s finding that a letter written by the bank to the appellant guarantor of a debt owed to a corporation did not constitute a demand. The appellant was an officer, director and shareholder of the corporate debtor. The bank wrote to the debtor demanding payment and, on the same day, wrote to the guarantor. In the letter to the guarantor, the bank advised that it had demanded payment from the debtor and stated that if payment was not made, it would take steps to recover payment from the guarantor. The trial judge found that the letter did not constitute a demand. Instead, the letter advised the guarantor that if the principal debtor did not pay, then the bank would look to the guarantor for payment.
[23] I draw a parallel to the situation here. Like the guarantor in Williamson, Resilience can be taken to have been aware that Ms. Campbell was seeking payment from Mr. Campbell. However, Ms. Campbell did not demand payment from Resilience directly. Ms. Campbell did not include Resilience in the pleading; Resilience is not named, and the pleading was not served expressly on Resilience. In the order she sought, Ms. Campbell did not state she was seeking repayment from Resilience, but instead that she was seeking repayment of the funds lent to Mr. Campbell “for the benefit of Resilience.” On this motion, Ms. Campbell states that she intends to seek payment first from Mr. Campbell, and only from Resilience in the alternative. Notice is different than a clear and unequivocal demand. I conclude that Resilience has not met its onus on this motion to show the Application started the running of the limitation period.
[24] I emphasize that I am not making any final determination as to whether the limitation period has expired. Resilience is not precluded from pursuing its position on this issue on further evidence at the trial. I am determining on this pleadings motion that the expiry of the limitation period is not plain and obvious.
Disposition
[25] The motion is allowed. Ms. Campbell is permitted to amend her Reply in the form attached to her draft Order. Resilience will then be entitled to file an Answer. Mr. Campbell also is entitled to file a sur-Reply to address new allegations in the Amended Reply.
[26] The parties should be prepared to address any procedural issues raised by the addition of Resilience at the trial management conference to be held on May 3, 2021 at 4 p.m.. In addition, I ask that the parties be prepared to provide their order of witnesses for the continuation of the trial, as well as estimated time for each witness.
Costs
[27] Following the hearing of this motion, the parties advised that they had reached an agreement on costs, which was that as between Resilience and Ms. Campbell, the successful party would pay costs to the unsuccessful party in the amount of $7,500. On the basis of this agreement, I order Resilience to pay costs of $7,500 to Ms. Campbell within 30 days.
O’Brien, J.
Released: April 28, 2021
COURT FILE NO.: FS-17-415899
DATE: 20210428
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
SAMANTHA CAMPBELL
Applicant/Moving Party
– and –
CRAIG CAMPBELL
Respondent/Responding Party
– and –
RESILIENCE CAPITAL INC.
Third Party/Responding Party
REASONS FOR DECISION
O’Brien, J.
Released: April 28, 2021