2015 TCC 173
MAJESTY THE QUEEN,
The respondent brought a motion for an Order:
adjourn the appeal for 60 days to allow the appellant, 1455257 Ontario Inc.,
(“1455257”) to revive its corporate status pursuant to subsection 241(5) of the
Ontario Business Corporations Act, RSO 1990, c. B.16 as amended (the
“OBCA”) and to advise the Court and the respondent as to its progress.
to quash the appeal.
the further alternative, to require 1455257 to post security for costs in the
amount of $7,000 or other just amount, and to require undertakings from the
former director and/or other interested person in his or her personal capacity
to comply with all Orders and Judgments issued by the Tax Court in this appeal.
I. Background Facts
1455257 was incorporated
on December 15, 2000. It became a dissolved corporation on or around January 29,
2007 and the corporate certification was cancelled by the Province of Ontario on February 11, 2007 pursuant to section 241 of the OBCA.
The Minister of National Revenue issued a Notice
of Assessment, dated October 18, 2010, against 1455257 pursuant to section 160
of the Income Tax Act (the “Act”) relating to the tax
indebtedness of 1473661 Ontario Limited as at that date.
1455257 objected to the Assessment. The Minister
then issued a Notice of Confirmation of the Assessment. Consequently, 1455257
filed a Notice of Appeal with the Court on October 16, 2012.
The respondent’s Reply to the Notice of Appeal
was filed with the Court on December 31, 2012.
By Orders dated June 13, 2013 and October 31,
2013, the Court ordered that both parties serve a partial disclosure list of documents, pursuant to section 81 of the Tax Court of Canada
Rules (General Procedure) (“Rules”), on the opposing party by August 6,
2013; complete examinations for discovery by January 6, 2014; satisfy
undertakings given at the discovery by April 7, 2014 and communicate, in
writing, with the Hearings Coordinator on or before May 7, 2014. Those steps
Prior to the dissolution, Enrico Lisi was the
president, secretary and the sole director of 1455257.
The issues are:
1. Whether 1455257 lacks the capacity to continue with the appeal?
2. If not, who instructs counsel on behalf of 1455257?
3. Whether 1455257 is to post security for costs to pursue the
appeal and if the former director or other interested person is required to
provide a personal undertaking to comply with all Orders and Judgments of this
Subsections 241(5) and 242(1) of the OBCA
are the relevant provisions. These provide as follows:
241.(5) Where a corporation is dissolved
under subsection (4) or any predecessor of it, the Director on the application
of any interested person, may, in his or her discretion, on the terms and
conditions that the Director sees fit to impose, revive the corporation; upon
revival, the corporation, subject to the terms and conditions imposed by the
Director and to the rights, if any, acquired by any person during the period of
dissolution, shall be deemed for all purposes to have never been dissolved.
1999, c. 12, Sched. F, s. 9.
Actions after dissolution
242.(1) Despite the dissolution of a
corporation under this Act,
(a) a civil, criminal or administrative
action or proceeding commenced by or against the corporation before its
dissolution may be continued as if the corporation had not been dissolved;
(b) a civil, criminal or administrative
action or proceeding may be brought against the corporation as if the
corporation had not been dissolved;
(c) any property that would have been available
to satisfy any judgment or order if the corporation had not been dissolved
remains available for such purpose; and
(d) title to land belonging to the
corporation immediately before the dissolution remains available to be sold in
power of sale proceedings. R.S.O. 1990, c. B.16, s. 242 (1); 1998, c. 18,
Sched. E, s. 27 (1, 2).
III. Parties’ positions
The respondent’s position is that as a dissolved
corporation, 1455257 did not have the capacity to bring the appeal, to conduct any
other step in the appeal nor instruct counsel unless and until it is revived. Thus,
upon dissolution 1455257 ceased to be a legal entity incapable of initiating
and continuing with the appeal. Allowing 1455257 to
initiate proceedings and take further litigation steps constitutes an abuse of
the Court’s process. Direction from the Court is necessary to bind a person with capacity relating to any
Orders of the Court.
1455257’s position is that it is defending an
assessment issued against it by the Minister after it was dissolved capable of
taking all litigation steps “as if the corporation had
not been dissolved” in accordance with paragraph 242(1)(b) of the OBCA.
Enrico Lisi, as director, is implicitly authorized to continue
to provide instructions on behalf of 1455257 “as
if the corporation had not been dissolved.”
Further, no rule exists under the Rules
addressing security for costs applicable to 1455257’s situation. Rule 160 applies
only to an appellant “resident outside of Canada”.
Finally, no provision exists in the Act, under the Rules
or otherwise requiring a personal undertaking to comply with all Orders and
Judgments issued by the Tax Court as a pre-condition to pursue a statutory
right of appeal.
If a corporation fails to comply with the
governing legislation specified in section 241 of the OBCA, there is a
risk of dissolution.
Upon default, a notice of dissolution is issued. Under subsection 241(4), the
certificate of incorporation is then cancelled. However, subsection 241(5)
enables any interested party to remedy the default and apply for the
corporation to be revived. Upon revival, the corporation is deemed for all
purposes to have never been dissolved.
A dissolved corporation may be sued civilly,
prosecuted or be subject to an administrative proceeding. Paragraph 242(1)(a) of
the OBCA authorizes a dissolved corporation to continue to pursue an
action or proceeding, by or against it, that was commenced prior to its
dissolution as if the corporation had not been dissolved. Paragraph (b)
authorizes the bringing of an action or proceeding against the dissolved
corporation after its dissolution as if the corporation had not been dissolved.
The principal focus in this application is the
interpretation of paragraph 242(1)(b) of the OBCA and the conflicting lines
of authorities. Numerous authorities were provided by each of the parties. I
will address only the key authorities in these reasons. The respondent became
aware sometime between January 2014 to May 7, 2014 that 1455257 had been
dissolved in 2007.
The respondent argued that the appeal was
brought by, not against, 1455257 after its dissolution (in 2007) and lacked capacity
in its dissolved state to initiate the appeal in 2012 nor can it bring any
further steps unless and until it is revived. 
She relies on the decision of GMC
Distribution Ltd. v Her Majesty the Queen, 2012 TCC 262,  TCJ No. 206
in which Webb J. held that unless and until GMC, a dissolved OBCA corporation,
is revived, it could not continue with the action.  This finding was made in the
context of an application for leave of the Court by a non-lawyer to represent GMC.
Webb J. relied on the decision in Reliable Life Insurance v Ingle,
 OJ No. 2312, which also involved a motion for leave to grant an
individual the ability to represent two dissolved un‑revived corporations
so that the corporations could mount a full defence to a civil action.
Similar to GMC, Reliable involved
paragraph 242(1)(a) in which Master Haberman held that unless and until the
corporations do what is required to be revived, they are non-entities and have
no rights in the litigation.
He referred to the decision in Wolf Offshore Transport Ltd. v Sulzer Canada
Inc.,  NJ No. 82 in which the Court noted that a dissolved company is
akin to a deceased person, non-existent and without any capacity unless it is
revived within the time permissible under the OBCA. He also referred to the
decision in Swale Investments Ltd. v National Bank of Greece (Canada),
 OJ No. 4997 in which the Court held that while a dissolved corporation
may be sued “as if it had not been dissolved,” it does not have the ability to
defend itself unless and until it is revived.
At paragraph 44, Master Haberman states:
I am satisfied that while a dissolved
corporation may be sued “as if it had not been dissolved”, it does not have the
ability to defend itself unless and until it is revived. If the shareholder is
concerned about his personal exposure and whether he will be able to defend in
the shoes of the corporation when he is sued, the onus is on him to take steps
to revive the companies in order to protect his personal interests….
The Ontario Superior Court of Justice in 1141824
Ontario Ltd v Shannon  OJ No. 2165 and the Ontario Superior Court of
Justice Commercial List in Cold River Resources LLC v 1279514 Ontario Inc.,
 OJ No. 5867 applied the principle in Reliable and in the later
case the Court agreed with Master Haberman’s characterization of the provisions
1455257 argued that the appeal of the assessment
issued against it, constitutes a defence in accordance with paragraph 242(1)(b)
“as if the corporation had not been dissolved” and revival was unnecessary.
It relied on the decision of 460354 Ontario
Inc. v Her Majesty the Queen, 92 DTC 6534 (FCTD), in which the Court held
that the right to take advantage of an appeal procedure in the context of an administrative
proceeding (the assessment) must be available to a dissolved corporation by
virtue of the statute which authorizes the action. 460354 had
voluntarily dissolved and challenged reassessments issued following its
dissolution. Subsequently, the Minister moved to strike 460354’s appeal
because it had no capacity, as a dissolved corporation, to challenge the
reassessments. Dismissing the motion, the Court held that the issuance of an
assessment against a taxpayer under the Income Tax Act is an
administrative proceeding within the meaning of paragraph 241(1)(b) (now
242(1)(b)) of the OBCA. Thereafter, the taxpayer has the right to
exercise all his rights of appeal - from the filing of a notice of objection
and ultimately launching an appeal - as part of the appeal procedure under the Income
Tax Act because all subsequent steps are directed against the assessment.
Therefore, all subsequent steps (the appeal) are consequential upon the
assessing action of the Minister.
That approach was affirmed by the Federal Court
of Appeal in the decision of 495187 Ontario Ltd. v Her Majesty the Queen,
94 DTC 6229 (FCA).
495187, an OBCA corporation, was reassessed unbeknownst to the Minister
and the Tax Court in dealing with the appeal over one year after its
The Federal Court of Appeal allowed 495187’s appeal, directed that it
was the proper party to the appeal and noted that the Minister’s position was
1455257 also relied on the decision in Malamas
v Crerar Properties Corp.,  OJ No. 4726, 2009 CarswellOnt 6878 (Ont
Sup Ct). Malamas brought a motion to strike Crerar’s statement of
defence because of its lack of capacity. Malamas had commenced the action after
Crerar had been dissolved. Matlow J. dismissed the motion based on his interpretation
and finding that implicit in paragraph 242(1)(b) is the
right of Crerar to defend itself because that provision authorized the bringing
of an action against Crerar and it would be
“unthinkable” and a “presumption against absurdity” for the law to recognize
the right of Malamas to bring an action against Crerar and, at the same time,
deny Crerar the right to defend itself. 
The Court in Tomken Kamato (V) Ltd. v 752458
Ontario Ltd., 2014 CarswellONT 10331 (Ont Sup Ct) preferred the analysis in
Malamas to that of Reliable.
Tomken’s motion was dismissed and 752458 was permitted to defend the motion,
bring its own motion, and proceed with the counterclaim. The Court held that the
courts’ interpretation of paragraph 242(1)(b) in Malamas, is consistent
with the language in paragraph 242(1)(a), which authorizes a corporation that
is sued before it is dissolved to defend the action as if it had not been
dissolved, and noted that in Reliable the only issue was whether two
dissolved corporations could be represented by a non-lawyer. Despite the
Court’s comment that Malamas was rendered one month prior to Reliable
and was not referenced in Reliable, I note that the decision in Reliable
was rendered on May 27, 2009 and Malamas was rendered on November
1455257 submitted that any comments made in Reliable and GMC
with respect to the capacity of a dissolved
corporation to defend itself were rendered per incuriam, obiter dicta and conflicted with relevant jurisprudence
(460354 and 495187). As well, the Wolf and the Swale
decisions dealt with a dissolved corporation “initiating”
a claim after dissolution against a third party, not defending a claim.
For the reasons that follow, in my view the
finding in each of the decisions in GMC and Reliable that revival
is necessary is correct. In addition to GMC having moved for leave to allow a
non‑lawyer to represent GMC, the respondent sought to have the appeal
dismissed because of a lack of capacity of GMC. Webb J. concluded,
based on the decisions in Reliable, and indirectly on Wolf and Swale,
that GMC could not in its dissolved state bring a motion and allowed the
respondent’s motion. At paragraph 9, Webb J. found:
As a result, even though subsection 242(1)
of the OBCA provides that the Appellant’s appeal under the Income Tax Act
will continue despite the dissolution of the Appellant, unless and until the
Appellant is revived under the OBCA the Appellant cannot take any action in
relation to this appeal, including the bringing of a motion …
Whilst focussed on paragraph (a) because GMC was
assessed and then filed an appeal prior to its dissolution, Webb J. interpreted
subsection 242(1), comprising both paragraphs (a) and (b), as requiring the
revival of a corporation as necessary before it could continue to defend
Contrast that approach with Malamas in
which the Court construed paragraph 242(1)(a) as containing a defence, whereas paragraph
242(1)(b) did not. The later provision was interpreted as expressly authorizing
the bringing of an action as against Crerar, as a dissolved corporation, but does
not authorize Crerar to defend itself against actions brought. The Court viewed
this as a gap in the legislation and presumption against absurdity and
interpreted paragraph (b) to include an implicit recognition of the right of Crerar
to defend itself consistent with paragraph 242(1)(a). The Court reached that
conclusion on a narrow textual analysis despite finding an absurdity in the
Unlike the textual analysis in Malamas, in
Reliable, on which GMC is based, the Court construed the language
in paragraph 242(1)(a) contextually factoring in the statutory regime in section
242 and in deciding that revival is necessary notes that anyone interested can
revive pursuant to subsection 241(5). This is illustrated below:
30 Dissolution is quiet different
from bankruptcy. It does not protect a corporation from its creditors. It does
not permit the corporation to escape its debts or its liabilities or to reduce
them. A dissolved corporation may still be sued civilly, prosecuted in a
criminal court or investigated in an administrative proceeding. Their property
also remains available to satisfy any judgments and orders made against them after
dissolution. In fact, if they distribute their property to others after
dissolution, each shareholder of the corporation remains liable to pay claims
under s. 242, to the extent of the amount they received. Those who make such
claims can sue the shareholders directly to recover that property from them.
31 The purpose of s. 242 is to ensure
that a corporation cannot escape its debts by falling into a state of
non-compliance so that it can be dissolved. The goal of s. 243 is to allow a
creditor to recover what it is owed even if the dissolved corporation siphons
off its property to others.
32 Anyone who has an interest in the
outcome of these events can step in and revive the corporation. One would
normally expect the shareholders to do this, as they potentially have exposure
if any of the property of the corporation fell into their hands, as apparently
It is my view that the contextual analysis in Reliable
is proper given the language in the provision. Further, I disagree with
1455257 that the remarks in that case and that of GMC are obiter
In Malamas, it is of some import that prior
to the resumption of the previously adjourned motion, Crerar had applied for
revival and did all it needed to do. The hold up, as noted by the Court, was the
processing of the application by governmental authorities. It may well be that
the Court was influenced in deciding as it did because the application for
revival had already been made. In taking such steps, it appears that Crerar
also viewed revival as necessary.
Another difficulty I have with the Malamas line
of reasoning is that having found as it did, it then posited several germane
questions including who would be entitled to instruct counsel, who would pay
the costs of the defence and what would become of the assets of the corporation
as to the actual use before they were forfeited to the Crown. However, the
Court declined to address those questions and noted that such questions can be
left for others. These were some of the concerns, which I share in the present
appeal, that were raised by Master Haberman in Reliable.
In GMC, the Court also relied on the
decision of Cotton Inc. v 1397945 Ontario Ltd., 2010 ONSC 6548 in which
the Court found that since the three corporate entities registrations had been
cancelled, they are non-entities and cannot prosecute nor defend an action but
could be sued by virtue of section 242 of the OBCA.
Turning to the decision of 460354,
rendered in 1992, and the decision of 495187, the legislature has since
changed the wording in subsection 241(5) to provide that upon revival, a
corporation “shall be deemed for all purposes to have
never been dissolved” which differs from the previous wording in that
I find that upon dissolution in 2007, 1455257
ceased to exist. To cure that impediment, 1455257 needs to be resuscitated and
unless and until it is revived by virtue of subsection 241(5) of the OBCA
it lacks capacity to pursue or defend the appeal. Thus upon revival 1455257
"shall be deemed for all purposes to have never been dissolved”.
Whilst it may be inconvenient for 1455257
to revive, I find it is necessary to revive its corporate capacity which
1455257 had the ability to do at the time the assessment had issued against it
in 2010. Upon revival, 1455257 will be restored to its legal position and
“shall be deemed for all purposes to have never been dissolved” pursuant to
subsection 241(5). In my view this validates the bringing of the appeal and all
consequential steps; inherent in that is 1455257’s ability to defend itself.
In view of my finding, it is unnecessary to
consider the remaining issues.
The respondent’s motion is allowed. The appeal
is adjourned for 60 days from the date of this Order to allow 1455257 to take
steps to revive its corporate status pursuant to subsection 241(5) of the OBCA.
Costs are awarded to the respondent in the event.
Signed at Nanaimo, British Columbia, this 7th
day of July 2015.
 Affidavit was filed by Raphael
Rutman in support of the motion.
 Corporation Profile Report
 Notice of dissolution
241.(1) Where the Director is notified by
the Minister of Finance that a corporation is in default of complying with any
of the following Acts, the Director may give notice by registered mail to the
corporation or by publication once in The Ontario Gazette that an order
dissolving the corporation will be issued unless the corporation remedies its
default within 90 days after the notice is given:
0.1 Alcohol and Gaming
Regulation and Public Protection Act, 1996.
1. Corporations Tax Act.
2. Employer Health Tax Act.
3. Fuel Tax Act.
4. Gasoline Tax Act.
5. Land Transfer Tax Act.
6. Retail Sales Tax Act.
6.1 Taxation Act, 2007.
7. Tobacco Tax
Act. 2004, c. 31, Sched. 4, s. 1; 2008, c. 19, Sched. V, s. 1; 2010, c. 1,
Sched. 1, s.12.
(2) Where the Director is notified by the
Commission that a corporation has not complied with sections 77 and 78 of the
Securities Act, the Director may give notice by registered mail to the
corporation or by publication once in The Ontario Gazette that an order
dissolving the corporation will be issued unless the corporation complies with
sections 77 and 78 of the Securities Act within ninety days after the giving of
the notice. R.S.O. 1990, c. B.16, s. 241 (2).
(3) Where a corporation fails to comply
with a filing requirement under the Corporations Information Act or fails to
pay a fee required under this Act, the Director may give notice in accordance
with section 263 to the corporation or by publication once in The Ontario
Gazette that an order dissolving the corporation will be issued unless the
corporation, within 90 days after the notice is given, complies with the
requirement or pays the fee. 1998, c. 18, Sched. E, s. 26 (1).
(4) Upon default in compliance with the
notice given under subsection (1), (2) or (3), the Director may by order cancel
the certificate of incorporation and, subject to subsection (5), the
corporation is dissolved on the date fixed in the order. R.S.O. 1990, c. B.16,
s. 241 (4).
Time limit for
(5.1) The application referred to in
subsection (5) shall not be made more than 20 years after the date of
dissolution. 2006, c. 34, Sched. B, s. 37.
(6) The application referred to in
subsection (5) shall be in the form of articles of revival which shall be in
prescribed form. R.S.O. 1990, c. B.16, s. 241 (6).
(7) Upon receipt of articles of revival
and any other prescribed documents, the Director, subject to subsection (5),
shall endorse thereon in accordance with section 273 a certificate which shall
constitute the certificate of revival. R.S.O. 1990, c. B.16, s. 241 (7).
this section and section 244,
“proceeding” includes a power of sale
proceeding relating to land commenced pursuant to a mortgage. 1998, c. 18,
Sched. E, s. 27 (3).
Service after dissolution
(2) For the purposes of this section, the
service of any process on a corporation after its dissolution shall be deemed
to be sufficiently made if it is made upon any person last shown on the records
of the Ministry as being a director or officer of the corporation before the dissolution.
R.S.O. 1990, c. B.16, s. 242 (2).
Notice of action
(3) A person who commences an action, suit
or other proceeding against a corporation after its dissolution, shall serve
the writ or other document by which the action, suit or other proceeding was
commenced, on the Public Guardian and Trustee in accordance with the rules that
apply generally to service on a party to an action, suit or other proceeding.
1998, c. 18, Sched. E, s. 27 (4).
Same, power of sale proceeding
(4) A person who commences a power of sale
proceeding relating to land against a corporation after its dissolution shall
serve a notice of the proceeding on the Public Guardian and Trustee in
accordance with the notice requirements in the Mortgages Act that apply with
respect to a person with an interest in the land recorded in the records of the
appropriate land registry office. 1998, c. 18, Sched. E, s. 27 (4).
 The respondent referred to Rule
21 of the Rules of Civil Procedure and that “capacity” means that the
plaintiff is without legal capacity to commence or continue the action or the
defendant does not have the legal capacity to be sued.
 GMC had failed to file
tax returns and was dissolved pursuant to the provisions of subsection 241(4)
of the OBCA. Paragraph 242(1)(a) applies because GMC had filed
the appeal three years prior to the dissolution. GMC had failed to pay
an adverse 2009 costs award and prosecute the appeal of eight years with due
 At paragraph 33, the Court in Reliable
shows some concern because the individual was unable to say who would
instruct him in view of the companies having been dissolved or who would honour
a cost order at the conclusion of the trial if such an order is granted.
 Wolf, the plaintiff,
involved a CBCA corporation that had dissolved in 1985. Approximately one and a
half months after the dissolution, Wolf commenced an action in the
Newfoundland Supreme Court (Trial Division). In 1990 it revived its corporate
status and the question centred on the impact of the revival on the action. The
Court held that section 242 does not permit a dissolved corporation to initiate
a claim after dissolution.
 Swale, the plaintiff, was
dissolved and initiated a claim three years after dissolution. The defendant
moved for an Order dismissing the action on the ground that Swale
initiated the action after its dissolution. The Court held that section 242 of
the OBCA did not apply to an action commenced by a dissolved corporation
 In a very brief decision, the
Court affirmed that the substantive issue in this appeal was correctly dealt
with by Jerome, A.C.J. in 460354 Ontario Inc. v The Queen,  2
C.T.C. 287, 95 D.L.R. (4th) 351 (F.C.T.D.).
 The Minister argued that the Tax
Court’s decision is a nullity and suggested that it be revived in order to
further appeal to the Federal Court Trial Division. The Federal Court did not
require revival of 495187 and held that the style of cause should
reference the last director/shareholder of the taxpayer given its dissolved
 Malamas sought but was denied leave by
the Ontario Divisional Court to appeal the interpretation of section 242: Malamas
v Crerar Properties Corp., 2010 CarswellOnt 3435 (Ont Div Ct).
 In September 2012, Tomken issued a
claim against 752458 which defended and counterclaimed in January 2013
and six days later 752468 was dissolved. Tomken brought a motion
for summary judgment, seeking dismissal of the counterclaim on the basis that 752458
had no capacity to defend the motion, bring a motion, or proceed with the