Date: 19980626
Docket: A-874-96
(T-2674-92)
OTTAWA, Ontario, Friday, June 26, 1998.
CORAM: MARCEAU J.A.
DESJARDINS J.A.
LÉTOURNEAU J.A.
BETWEEN:
LES ENTREPRISES A.B. RIMOUSKI INC.
AND ALDÈGE BANVILLE
PLAINTIFF
Appellant
- and -
HER MAJESTY THE QUEEN
DEFENDANT
Respondent
J U D G M E N T
[1] The appeal is allowed and the judgment to dismiss is set aside. The file is referred back to the Trial Judge for reconsideration and judgment on the merits of the case. The whole with costs.
Louis Marceau
J.A.
Certified true translation
M. Iveson
Date: 19980626
Docket: A-874-96
(T-2674-92)
CORAM: MARCEAU J.A.
DESJARDINS J.A.
LÉTOURNEAU J.A.
BETWEEN:
LES ENTREPRISES A.B. RIMOUSKI INC.
AND ALDÈGE BANVILLE
PLAINTIFF
Appellant
- and -
HER MAJESTY THE QUEEN
DEFENDANT
Respondent
Hearing held at Québec, Quebec on Monday, May 25, 1998.
Judgment delivered at Ottawa, Ontario on Friday, June 26, 1998.
REASONS FOR JUDGMENT BY: MARCEAU J.A.
CONCURRED IN BY: LÉTOURNEAU J.A.
CONCURRING REASONS BY: DESJARDINS J.A.
Date: 19980626
Docket: A-874-96
(T-2674-92)
CORAM: MARCEAU J.A.
DESJARDINS J.A.
LÉTOURNEAU J.A.
BETWEEN:
LES ENTREPRISES A.B. RIMOUSKI INC.
AND ALDÈGE BANVILLE
PLAINTIFF
Appellant
- and -
HER MAJESTY THE QUEEN
DEFENDANT
Respondent
REASONS FOR JUDGMENT
MARCEAU J.A.
[1] The action which gave rise to the judgment on appeal in the instant case was brought jointly on October 29, 1992 by a small construction company which builds maritime structures, Les Entreprises A.B. Rimouski Inc., and the president, director-general and sole shareholder of this company, Aldège Banville. The action sought the amount of $218,122.55 for the company, that is to say the amount owing on a contract in the amount of $489,491.00 which the company was awarded by the Department of Public Works of Canada in October 1989, following a public call for tenders, as well as an additional amount for the losses incurred due to the Department's failure to meet its commitments. Concurrently, the action sought an amount for damages which Aldège Banville had personally suffered as sole shareholder of the company as a result of the Department's failure to fulfill the contract. The purpose of this contract was the [TRANSLATION] "demolition of the old commercial wharf at Cap-Chat on the St. Lawrence River before March 1990". The parties had different opinions on the issue of whether or not the contract had been performed in full in accordance with the plans and specifications, and the plaintiffs found it necessary to have recourse to the courts following the failure of discussions between the parties.
[2] The Attorney General of Canada, who was the defendant named at first instance [it was later, and apparently on the initiative of the Trial Judge that the style of cause was changed] filed the defence in time, alleging essentially that the contract had not been performed in full and that Public Works Canada was correct not to pay.
[3] On February 23, 1993, a judgment of the Superior Court of the District of Rimouski (Bankruptcy Division) refused to extend the time which had been previously granted to Les Entreprises A.B. Rimouski Inc. to pay its creditors pursuant to an accepted proposal and required the assignment of the company's property. In December 1993, the trustee in bankruptcy assigned all movable and immovable property of Les Entreprises A.B. Rimouski Inc., including [TRANSLATION] "all book debts and accounts, present and future" to the Caisse populaire Desjardins of St-Robert de Rimouski, the secured creditor of the bankrupt company. In July 1994, the Caisse populaire Desjardins of St-Robert de Rimouski assigned in turn 75% of its potential rights and interest in the action still pending between Les Entreprises A.B. Rimouski Inc. and the Attorney General of Canada with regard to the contract for the demolition of the wharf at Cap-Chat. The deed of assignment stipulated that Banville would proceed with the action at his expense and he agreed to pay to the Caisse populaire 25% of what he received. On August 15, 1995, the statement of claim in the action was amended to take into account the two assignments and to change the form of the pleadings accordingly with prior leave but without any verification by the Court. The Attorney General then filed an amended defence which, in addition to restating the allegations regarding the non-performance of the contract, challenged the validity of the assignments under the terms of the Financial Administration Act[1]and argued that the remedies sought were extinguished by prescription.
[4] The action was properly set for inquiry and hearing after a judge refused to grant the defendant of record's motion to strike based on prescription and the invalidity of the assignments before the trial. The trial lasted 11 days, which were essentially devoted to examining the claims of the parties concerning the performance of the contract. The Trial Judge did not however have to decide between them as he simply felt compelled to give effect to the Attorney General's arguments of law. In fact, the impugned judgment dismissed the action with costs on the ground that the remedies sought were prescribed or that they were without merit as clearly non-existent or based on illegal assignments. Was the dismissal of this action, based on a pure argument of law before the claims of non-performance of the contract were investigated, valid? The purpose of the appeal is to examine this question.
* * *
[5] In my view, the judge came to the appropriate conclusion for part of the action, but not for the main part. My reasons follow.
[6] A. I believe that it was necessary to dismiss the action for the remedy sought by the appellant, Aldège Banville, in his own name. This remedy was necessarily delictual. Banville was not personally a party to the contract. He could not blame Public Works Canada for the non-performance of the contract as a co-contracting party. In order to maintain that the defendant is liable for the damages which he personally suffered, Banville has to prove that Public Works Canada is responsible within the meaning of article 1053 of the former Civil Code of Lower Canada[2](because it is of course the law of Quebec which applies through the Crown Liability and Proceedings Act[3]) due to its refusal to pay the balance owing on the contract and that this delictual act was the direct cause of the personal damage to Banville's reputation and solvency. In addition, his delictual remedy must have been exercised during the period of prescription also set by Quebec law (section 39 of the Federal Court Act[4]), which is two years (article 2261 of the former Civil Code[5]).
[7] However, Banville does not meet any of these requirements. The cutoff date for the prescription may be debatable, given the discussions between the parties which continued even after the letter dated May 15, 1990, in which Public Works Canada informed its co-contracting party that it intended to take the necessary steps to ensure that the work would be completed, as well as the other letter dated June 1, 1990, in which the Department put the surety in default to meet its surety obligation with regard to the completion of the work. It does not seem possible, however, to believe that these discussions actually delayed the date of the establishment of the quasi-offence to bring it within the two year period before the action was filed. Next, in order for Public Works Canada's reaction to be considered delictual, it must be judged by reference to bad faith or culpable negligence, which is certainly not the case. Finally, the causal connection between the reaction of Public Works and the appellant's personal damages is somewhat tenuous as this connection must pass through the bankruptcy and the decisions of the Caisse populaire. The Trial Judge was correct when he found that the appellant's personal remedy was groundless and non-existent.
[8] B. On the contrary however, the immediate dismissal of the action as it was brought by the company does not, in my view, appear to be well founded.
[9] The Trial Judge relied first on the operation of prescription in order to dismiss a portion of the claim made in the name of the company, namely the portion concerning the damages resulting from the non-performance by the Department of its contractual obligations. He believed that this remedy in damages was subject to the two year prescription of article 2261 of the former Civil Code. I do not agree. The remedy in damages brought by one contracting party against another for non-performance of its contractual obligations, a remedy which as we know is limited to foreseeable damages, is of the same order as the remedy in performance of the actual contractual obligations. It is a contractual remedy which is subject to the five year prescription of article 2260 of the former Civil Code[6]. However, in order to dismiss the entire claim made in the name of the company, the judge subsequently and primarily relied on the provisions of the Financial Administration Act which entrenches the principle of the non-assignability of debts against the Crown ("Crown debts" in the Act), which allows assignment only in rare, very specific cases which are then subject to strict conditions.
[10] Of course, it was first the amendment which counsel for the plaintiffs had to file in order to take into account the bankruptcy and the assignments - an amendment which was necessary to meet the requirements of section 71 of the Bankruptcy Act[7]which provides for the vesting in the trustee of the rights and actions of the bankrupt and Rules 1724 and 1725 of the Federal Court Rules[8](which have become Rules 116 and 117 in the new rules) - but mainly the amendment to the pleadings of the action which was thought to be necessary at the time, which invited a defence based on the provisions of the Financial Administration Act. They no doubt thought it useful to indicate that there was no longer any obstacle to the prosecution of the action as it was filed, but what effect could the validity or invalidity of the assignments have on the prosecution of the proceedings made in the name of the company? The action is not that of the "pseudo-assignee" but that of the company which continues to have a complete legal existence, despite the bankruptcy and regardless of the state of its activities. It is true, as was stated above, that the pleadings in the action were amended to limit the potential award to 75% of the amount claimed by the company and to ask that these amounts be paid to Banville himself as assignee, which, it should be noted, did not correspond to the assignment agreement which provided, as we saw, the prosecution of the action itself by Banville and a repayment of 25% of the amount recovered to the Caisse populaire. The judge is not bound by these amended pleadings, however, if he or she believes that the assignment is not enforceable against the defendant, and nothing prevents him or her from returning to the initial, unamended pleadings. If the facts as adduced in evidence during the trial establish that a debt against the Crown exists, it is difficult to believe that the untimely amendment brought at the last moment would prevent the Court from doing justice. The respondent does not argue, and in fact could not argue, that the action of the company must automatically fail because the company itself no longer exists or because it was under the administrative tutelage of a trustee. Moreover, the respondent does not argue that a decision in favour of the company would be impossible of performance. It is clear that an attempt to assign a Crown debt contrary to the provisions of the Financial Administration Act does not operate to extinguish that debt. The question of the validity of the assignments and their effect would not arise until after a judgment confirmed the existence of a debt owed to the company, if that were the case, and even then only for the parties to the case: the trustee, the Caisse populaire and of course Banville, the sole shareholder of the company.
[11] Moreover, I must respectfully question the Trial Judge's conclusion that the assignment was totally void against the respondent. Let us review the provisions of the Financial Administration Act which would be the basis for such a conclusion:
| 66. In this Part,
. . . "Crown debt" means any existing or future debt due or becoming due by the Crown, and any other chose in action in respect of which there is a right of recovery enforceable by action against the Crown; "contract" means a contract involving the payment of money by the Crown; "Crown" means Her Majesty in right of Canada;
67. Except as provided in this Act or any other Act of Parliament,
(a) a Crown debt is not assignable; and
(b) no transaction purporting to be an assignment of a Crown debt is effective so as to confer on any person any rights or remedies in respect of that debt.
68. (1) Subject to this section, an assignment may be made of
(a) a Crown debt that is an amount due or becoming due under a contract; and
(b) any other Crown debt of a prescribed class.
(2) The assignment referred to in subsection (1) is valid only if (a) it is absolute, in writing and made under the hand of the assignor; (b) it does not purport to be by way of charge only; and (c) notice of the assignment has been given to the Crown as provided in section 69.
. . . 69. (1) The notice referred to in paragraph 68(2)(c) shall be given to the Crown by serving on or sending by registered mail to the Receiver General or a paying officer, in prescribed form, notice of the assignment, together with a copy of the assignment accompanied by such other documents completed in such manner as may be prescribed.
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| 66. Les définitions qui suivent s'appliquent à la présente partie. . . . « créances sur Sa Majesté » Créance existante ou future, échue ou à échoir, sur Sa Majesté, ainsi que tout autre droit incorporel dont le recouvrement peut être poursuivi en justice contre Sa Majesté. « marché » Contrat prévoyant un versement de fonds par Sa Majesté. « Sa Majesté » Sa Majesté du chef du Canada.
67. Sous réserve des autres dispositions de la présente loi ou de toute autre loi fédérale_: a) les créances sur Sa Majesté sont incessibles; b) aucune opération censée constituer une cession de créances sur Sa Majesté n'a pour effet de conférer à quiconque un droit ou un recours à leur égard.
68. (1) Sous réserve des autres dispositions du présent article, les créances suivantes sont cessibles_: a) celles qui correspondent à un montant échu ou à échoir aux termes d'un marché; b) celles qui appartiennent à une catégorie déterminée par règlement.
(2) La cession n'est valide que si les conditions suivantes sont remplies_: a) elle est absolue, établie par écrit et signée par le cédant; b) elle n'est pas censée faite à titre de sûreté seulement; c) il en a été donné avis conformément à l'article 69.
. . . 69. (1) Toute cession visée au paragraphe 68(2) est communiquée à Sa Majesté par un avis accompagné d'une copie de l'acte de cession, signifié ou envoyé par courrier recommandé au receveur général ou à un agent payeur; la forme de l'avis et la nature des autres documents qui doivent l'accompagner, ainsi que la manière d'établir ceux-ci, sont fixées par règlement.
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[12] The Trial Judge considered that the rights of the company exercised in the action did not fall within the exception of paragraph 68(1)(a) of the Act because they did not concern amounts "due or becoming due under a contract" and that in any case, the assignment was not absolute because the assignee acquired the right to 75% only and the notice required under section 69 of the Act had not been given. In my view, these arguments do not appear to be sound.
[13] First, I cannot accept that the expression "debt due or becoming due" within the meaning of paragraph 68(1)(a) means a liquid, due and payable debt which is required for the purposes of legal compensation. Even if a debt is challenged in court, if its alleged existence is directly related to a contract, it seems impossible in my view to say that it does not fall within the exception. Otherwise, all the Crown would have to do to prevent any assignments would be to raise an objection, which would unduly interfere with commercial transactions. This is certainly not what Parliament wanted. At the very most, a distinction could be made between the claim for the payment of the balance owing on the contract and the claim for damages. It seems clear that a judgment favourable to the company would indicate that the assigned debt was in fact due and payable at the time of the assignment, certainly for the balance due on the price for the work if not for the damages.
[14] Next, is it not clear that an assignment may be absolute even if it only covers 75% of the debt at issue (assuming we accept here that the division was to be made at the outset and not simply after the fact resulting in an obligation to repay)? An absolute assignment, in my view, is simply an assignment without conditions, which is not contingent, revocable or "by way of charge only", as the text says.
[15] Finally, even though it has already been held that the required notice is a strict condition for validity, I cannot accept that this condition could not be sufficiently and validly met by the amendments brought in the pleadings. Notice is required in this case as it is for any other assignment under the ordinary law and the formalities here are to ensure that the notice is adequate and not simply to introduce a doubtful kind of formalism. Moreover, should the requirement under section 68 not take full effect only once the debt is recognized and a payment must be made?
[16] I must accordingly conclude with respect that the Trial Judge was mistaken in summarily dismissing the action of the company without determining if the arguments submitted for and in the name of the company were well founded. At the time of his judgment, if he deems it appropriate to hear the parties again on the issues of payment, he simply has to do so. In my view, his judgment of dismissal must for the present be set aside with costs. This being the case, there is no alternative but to return the case to him for reconsideration and judgment on the action.
Louis Marceau
J.A.
I concur.
Gilles Létourneau, J.A.
Certified true translation
M. Iveson
Date: 19980626
Docket: A-874-96
Coram: MARCEAU J.A.
DESJARDINS J.A.
LÉTOURNEAU J.A.
Between:
LES ENTREPRISES A.B. RIMOUSKI INC.
AND ALDÈGE BANVILLE
PLAINTIFF
Appellant
- and -
HER MAJESTY THE QUEEN
DEFENDANT
Respondent
REASONS FOR JUDGMENT
DESJARDINS J.A.
[1] In Carex v. Canada,[9] this Court found that the dismissal of an action brought by an assignee for recovery of a Crown debt, on the ground that the formal assignment procedures under subsections 81(1) and 82(2) of the Financial Administration Act[10] then in effect had not been respected, was well founded.
[2] The Trial Judge in the instant case relied on this decision to find that Aldège Banville's failure to observe the provisions of present section 69 of the Financial Administration Act[11] was fatal to the prosecution of the action as the provisions were mandatory.
[3] It is unnecessary to comment further on our decision in Carex because the instant case is distinguishable. The action was originally brought jointly by Les Entreprises A.B. Rimouski Inc. and its president-director general and sole shareholder, Aldège Banville, and not by the assignee. Furthermore, Aldège Banville, as assignee, is the only person who can continue this action because the trustee in bankruptcy and the Caisse populaire are no longer in a position to do so.
[4] What matters for the present is to establish whether the Crown is the debtor for the amount claimed. If it is, the Trial Judge must then determine if the assignment is effective against the respondent.
[5] I would dispose of this matter as my colleague Mr. Justice Marceau suggested.
Alice Desjardins
J.A.
Certified true translation
M. Iveson
FEDERAL COURT OF APPEAL
Date: 19980626
Docket: A-874-96
(T-2674-92)
BETWEEN:
LES ENTREPRISES A.B. RIMOUSKI INC.
AND ALDÈGE BANVILLE
PLAINTIFF
(Appellant)
- and -
HER MAJESTY THE QUEEN
DEFENDANT
(Respondent)
REASONS FOR JUDGMENT
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
COURT FILE NO.: A-874-96
STYLE OF CAUSE: Les Entreprises A.B. Rimouski Inc. et. al. v.
Her Majesty the Queen
PLACE OF HEARING: Québec, Quebec
DATE OF HEARING: May 25, 1998
REASONS FOR JUDGMENT OF THE COURT: Marceau J.A.
CONCURRED IN BY: Létourneau J.A.
CONCURRING REASONS BY: Desjardins J.A.
DATED: June 26, 1998
APPEARANCES
Aldège Banville representing himself
Stéphane Lilkoff for the respondent
SOLICITORS OF RECORD
Aldège Banville representing himself
Rimouski, Québec
George Thomson for the respondent
Deputy Attorney General of Canada
Ottawa, Ontario
1053. Every person capable of discerning right from wrong is responsible for the damage caused by his fault to another, whether by positive act, imprudence, neglect or want of skill.
4 R.S.C., 1985, c. F-7. The relevant provision of this section reads:
39. (1) Except as expressly provided by any other Act, the laws relating to prescription and the limitation of actions in force in any province between subject and subject apply to any proceedings in the Court in respect of any cause of action arising in that province.
5 From which I reprint the relevant provision:
2261. The following actions are prescribed by two years:
. . .
2. For damages resulting from offences or quasi-offences, whenever other provisions do not apply. . . .
2260. The following actions are prescribed by five years:
. . .
6. For hire of labour, or for the price of manual, professional or intellectual work and materials furnished, . . .
7Which states, at section (2):
71. (2) On a receiving order being made or an assignment being filed with an official receiver, a bankrupt ceases to have any capacity to dispose of or otherwise deal with his property, which shall, subject to this Act and to the rights of secured creditors, forthwith pass to and vest in the trustee named in the receiving order or assignment, and in any case of change of trustee the property shall pass from trustee to trustee without any conveyance, assignment or transfer.
1724. Where a party to a proceeding dies or becomes bankrupt, or a party who is a corporation is dissolved or otherwise ceases to exist, but the cause of action or other subject of the proceeding survives, the proceeding shall not abate by reason of the death or bankruptcy or the corporation having ceased to exist.
1725. (1) Where at any stage of a proceeding the interest or liability of any party is assigned or transmitted to, or devolves upon, some other person, the Court may, if it thinks it necessary in order to ensure that all matters in dispute in the proceeding may be effectually and completely determined and adjudicated upon, order that other person to be made a party to the proceeding and, where appropriate, may also order that the proceedings be carried on as if he had been substituted for the first mentioned party.
(2) Where an order is made under paragraph (1), it shall contain directions as to consequential pleadings or other proceedings and any interested party may apply for supplementary directions.
. . .