Fox Lake Indian Band v. Reid Crowther & Partners Ltd., 2005 FC 96

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2005 FC 96

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Date: 20050121

Docket: T-501-88

Citation: 2005 FC 96

OTTAWA, Ontario, January 21^st, 2005

Present: THE HONOURABLE MR. JUSTICE KELEN

BETWEEN:

FOX LAKE INDIAN BAND and ROBERT WAVEY as CHIEF and CLARA WAVEY

and GORDON ANDERSON as COUNCILLORS of the said FOX LAKE INDIAN BAND, CLIFFORD STEVEN SAUNDERS and RANK ELECTRONICS LTD.

Plaintiffs

and

REID CROWTHER & PARTNERS LIMITED

and HER MAJESTY THE QUEEN

Defendants

REASONS FOR ORDER AND ORDER

[1] This action concerns the funding of a construction project completed on the Fox Lake Reserve in Bird, Manitoba approximately twenty years ago. To bring closure to this protracted litigation, Prothonotary Hargrave ordered a trial on June 23, 2004 pursuant to Rule 107 of the Federal Court Rules, 1998 to address issues central to the case. The determination of these issues will either dispose of the action or narrow its focus. This decision addresses those issues.

THE FACTS

[2] In 1984 and 1985, a roads and a water and sewer system were constructed at the town site of the Fox Lake Indian Band (the "Band") in Bird, Manitoba. The construction project was managed and carried out by the Band in joint venture with a local contractor, CBJ Northern Inc. ("CBJ Northern"). The defendant, Reid Crowther & Partners Ltd.("Reid Crowther"), was hired by the joint venture to provide engineering specifications for the water and sewer system.

[3] Funding for the project was provided to the Band by the Crown through several Capital Contribution Agreements.

[4] There were difficulties with the construction project and CBJ Northern incurred additional costs as a result of remedial work that had to be performed. CBJ Northern claimed compensation for its additional costs from the Band and Reid Crowther. However, instead of pursuing its own action against the Band and Reid Crowther, CBJ Northern purportedly assigned its rights in the debt to the plaintiff, Clifford Saunders ("Saunders").

[5] Saunders subsequently commenced an action against the Band, Reid Crowther and the Crown for recovery of the debt. In February 1988, the Band entered into an agreement with Saunders in which the Band purportedly assigned its rights to any proceeds from a lawsuit against Reid Crowther and the Crown to Saunders. In consideration for the assignment, Saunders agreed to discontinue the action against the Band and commence another action against Reid Crowther and the Crown. As a result, Saunders commenced the current action on March 16, 1988.

[6] When Prothonotary Hargrave issued his Order on June 23, 2004, three parties remained in this action: Clifford Saunders and his company, Rank Electronics ("the plaintiffs") and the Crown ("the defendant"). As there is no direct contractual relationship between the plaintiffs and the Crown, the plaintiffs rely on the purported assignments discussed above as the basis for their claim against the Crown. The plaintiffs allege that the Crown has failed to provide funding for the remedial work as required by the Capital Contribution Agreements and that, by virtue of the assignments, the debt is now owed to the plaintiffs.

ORDER OF PROTHONOTARY HARGRAVE

[7] Since the plaintiffs can only succeed in this action if one or more of the purported assignments is valid, Prothonotary Hargrave ordered a trial on June 23, 2004 to determine issues relating to the validity of the assignments. His Order provided as follows:

The primary issues to be determined are those relating to the assignment of rights to payment for installing water and sewer services on the Fox Lake Reserve; that is:

(a) which, if any, of the alleged assignments purports to assign Crown debt to either Clifford Saunders or Rank Electronics Ltd.?

For each such alleged assignment:

(b) what is the nature of the Crown debt purported assigned?

(c) does that Crown debt fall within the exceptions to the general prohibition against the assignment of Crown debts?; and

(d) if so, was that Crown debt validly assigned, that is, in accordance with the requirements of sections 68 and 69 of the Financial Administration Act?

THE ALLEGED ASSIGNMENTS

[8] The parties provided six documents in an Agreed Book of Documents which the plaintiffs submit are assignments which, when read together, support their claim against the Crown. The defendant submits that only one of the documents could possibly support the plaintiffs' claim and that document is too vague to constitute a proper assignment of Crown debt.

RELEVANT LEGISLATION

[9] The relevant portions of the Financial Administration Act, R.S.C 1985, c. F-11 are as follows:

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

(3) The assignment referred to in subsections (1) and (2) is effectual in law, subject to all equities that would have been entitled to priority over the right of the assignee if this section had not been enacted, to pass and transfer, from the date service on the Crown of notice of the assignment is effected,

(a) the legal right to the Crown debt;

(b) all legal and other remedies for the Crown debt; and

(4) An assignment made in accordance with this Part is subject to all conditions and restrictions in respect of the right of transfer that relate to the original Crown debt or that attach to or are contained in the original contract.

[...]

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.

(2) Service of the notice referred to in subsection (1) shall be deemed not to have been effected until acknowledgment of the notice, in prescribed form, is sent to the assignee, by registered mail, under the hand of the appropriate paying officer.

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.

(3) Sous réserve des droits qui, en l'absence du présent article, auraient pris rang avant celui du cessionnaire, la cession a pour effet de transférer, à compter de la date de la signification de l'avis_:

a) le droit à la créance sur Sa Majesté;

b) les recours juridiques et autres concernant la créance;

c) le pouvoir de donner quittance à cet égard sans l'assentiment du cédant.

(4) Une cession faite en conformité avec la présente partie est assujettie à toutes les conditions et restrictions, relatives au droit de transfert, qui se rattachent à la créance originale ou qui découlent du marché original.

[...]

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.

(2) La signification de l'avis n'est considérée comme effective qu'après envoi au cessionnaire, par courrier recommandé, d'un accusé de réception établi en la forme réglementaire et signé par l'agent payeur compétent.

ANALYSIS

First Issue set out by Prothonotary Hargrave

Which, if any, of the alleged assignments purports to assign Crown debt to either Clifford Saunders or Rank Electronics Ltd.?

[10] Section 67 of the Financial Administration Act provides that a debt owed by the Crown is not assignable except if the Crown debt is an amount due or becoming due under a contract and the assignment is "absolute and in writing". This means that the purported assignments of the Crown debt must be clear and unconditional. The Court will now analyze the six documents in the Agreed Book of Documents which the plaintiffs state are assignments of Crown debt.

[11] The first document provided by the parties is dated December 17, 1985 and is an assignment by CBJ Northern to Saunders. The document states that CBJ Northern has a claim and cause of action against the Band for $279,864.45 and that CBJ Northern is assigning to Saunders $200,000 of the "debt due to it by The Fox Lake Band." There is no reference to the Crown or a Crown debt in the document.

[12] The second document, dated March 21, 1986, is very similar to the first. It is an assignment by CBJ Northern to Saunders of an additional $50,000 of the debt due to it by the Band. Again, no reference is made to a Crown debt.

[13] In the third document, dated June 25, 1987, CBJ Northern and its principal shareholder, Ron Zettergren, state that they:

...have hereby assigned and set over all our interest in any Right of Action against the Fox Lake Indian Band and Reid Crowthers Consulting Engineers as a result of a debt owing to C.B.J. Northern Inc. and Ron Zettergren for work and services rendered to and incurred on behalf of the Fox Lake Indian Band.

CBJ Northern and Ron Zettergren also appoint Saunders as their attorney for the purpose of recovering the debt. However, neither the Crown nor a Crown debt is mentioned in the document.

[14] The fourth document, dated January 15, 1988, employs almost identical language to the third document except that it makes specific reference to the two contracts under which the debt to CBJ Northern arose. The parties to those contracts are Reid Crowther and the Band (on behalf of the joint venture). Again, there is no reference of the Crown or a debt Crown.

[15] The fifth document, dated February 15, 1988, is an assignment by the Band to Saunders of a right of action against Reid Crowthers arising out of two agreements between Reid Crowthers and the Band. No reference is made to the Crown.

[16] Based on my review of the five foregoing documents, I am satisfied that none purports to assign a Crown debt to either Saunders or Rank Electronics Inc. It is clear that there can be no assignment of a Crown debt if the document purporting to assign the debt fails to mention the Crown or a Crown debt. Thus, this leaves the sixth document for consideration by the Court.

[17] The final document is a memorandum of agreement between the Band and Saunders dated February 15, 1988. As it is the only document that makes reference to the Crown, it has been the primary focus of the plaintiffs' submissions. The plaintiffs submit that although the agreement does not clearly articulate an assignment of Crown debt, the assignment can be construed by reading the operative provision together with the preamble. In support of this contention, the plaintiffs point to the following excerpts from the agreement:

Preamble

AND WHEREAS by virtue of an Assignment dated the 15^th day of January, 1988 Saunders is the assignee of all rights of title and interest in agreements entered into by the Fox Lake Indian Band and Reid Crowther dated January 19^th, 1984 and February 9^th, 1984 pursuant to a Joint Venture Agreement dated the 8^th day of July, 1984 between the Fox Lake Indian Band and C.B.J. Northern Inc. undertaking the terms of a contribution agreement with the Minister of Indian and Northen Affairs for the construction of water and sewer facilities and a community road on the Fox Lake Reserve at Bird, Manitoba.

AND WHEREAS on the 8^th day of July, 1984 C.B.J. Northern Inc. entered into a Joint Venture Agreement with the Band to fulfill contractual obligations undertaken by the Fox Lake Indian Band under the terms of the contribution agreement with the Minister of Indian and Northern Affairs for the construction of water and sewer facilities and a community road on the Fox Lake Indian Reserve at Bird, Manitoba.

AND WHEREAS Saunders has commenced an action against Reid Crowther, the Department of Indian and Northern Affairs and the Band.

AND WHEREAS the parties have reached an agreement herein and Saunders will discontinue the aforementioned action and issue a new action.

Operative Provision

The Band hereby irrevocably transfers, assigns and sets over unto Saunders any and all monies which may become due and payable to the Band under or pursuant to the law suit to be commenced by Saunders against Reid Crowther & Partners Limited and Her Majesty the Queen, whether such monies arise from Court determination or settlement of the law suit.

[18] The plaintiffs submit that when these provisions are read together, it is clear that the true intent of the Band was "to assign to Saunders all rights which the Band had as against Her Majesty the Queen, flowing from the various Contribution Agreements entered into by the Band and the Queen with respect to sewer, water and road projects."

[19] It is well-established that an assignment does not have to take on a particular form unless specifically required by legislation. Any form of words is sufficient, so long as they clearly show an intention that the assignee is to have the benefit of the debt assigned. See Lawson Graphics Pacific Ltd. v. Simpson, [1987] B.C.J. No. 375 (B.C.S.C.) at 4; G.H.L. Fridman, The Law of Contracts, 4^th ed. (Toronto: Carswell, 1999) at 716. Accordingly, the operative provision of an agreement can be read in conjunction with the preamble to form an assignment provided that the content of the assignment is sufficiently clear.

[20] In the present case, the central issue is whether the content of the purported assignment is sufficiently clear. In my view, it is not. The operative provision assigns to Saunders monies that may become payable under a lawsuit to be commenced against the Crown. This begs the question: what is the subject matter of the lawsuit. In other words, what debt underlies the lawsuit and what debt is being assigned to Saunders. The preamble of the agreement does not properly address these questions. Although the preamble makes reference to a contribution agreement between the Band and the Crown, it fails to clearly identify whether the lawsuit concerns a breach of a contribution agreement, it fails to identify which contribution agreement has been breached (the statement of claim refers to three contribution agreements) and it fails to identify the amount still owing by the Crown under the contribution agreement. The preamble also fails to identify the subject-matter of the original lawsuit commenced by Saunders, so the Court cannot look to that action to assist in identifying the debt underlying the current action. Consequently, it is impossible for the Court to ascertain what Crown debt, if any, is purportedly assigned in the agreement.

[21] In support of their position that the agreement contains a valid assignment of Crown debt, the plaintiffs rely on the Federal Court of Appeal's decision in Entreprises A.B. Rimouski Inc. v. Canada (1998), 239 N.R. 359, which concerned the assignment of a right of action against the Crown for a debt arising from a breach of contract. The Court of Appeal held that a Crown debt can be assigned under the Financial Administration Act even if the Crown challenges the validity of the debt. While Rimouski is similar in some respects to the present case, there is one critical difference. In Rimouski, the debt that was the subject of the assignment was clearly specified, including the contract under which the debt arose, the amount of the original contract as well as the amount still allegedly owing by the Crown. Justice Marceau, for the majority, stated at paragraph 1:

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...

By contrast, none of these details appear in the agreement relied on by the plaintiffs. Thus the principles from Rimouski concerning the validity of an assignment are not engaged in the present case because it is futile to discuss the validity of an assignment when the debt that is the subject of the assignment cannot be identified.

[22] I note that the plaintiffs have provided supplementary information concerning the debt in their statement of claim, including the title and dates of the relevant contribution agreements as well as the specific amounts owed by the Crown under the agreements. This is precisely the information that should have been set out in the assignment. The details in the statement of claim do not overcome the fact that the assignment does not specify an amount owing by the Crown under a particular contribution agreement. An assignment is a species of contract and must be construed in accordance with general contractual principles. Lawson Graphics, supra, at 5. Therefore, the Court should not rely on extrinsic evidence to interpret a contract, but rather on the words used and the circumstances at the time the contract was made. In the present case, the words of the contract fail to properly identify a debt owing by the Crown to the Band.

CONCLUSION

[23] For these reasons, none of the six documents provided by the parties assigns a Crown debt to Saunders or Rank Electronics Inc. Accordingly, the remaining questions posed by Prothonotary Hargrave regarding the validity of the assignments are not relevant.

ORDER

THIS COURT ORDERS THAT:

The six documents in the Agreed Book of Documents do not constitute an assignment of a Crown debt to the plaintiffs, Saunders and/or Rank Electronics.

"Michael A. Kelen"

JUDGE

FEDERAL COURT

NAME OF COUNSEL AND SOLICITORS OF RECORD

DOCKET: T-501-88

STYLE OF CAUSE: Fox Lake Indian Band et al v. Reid Crowthers & Partners Limited and Her Majesty the Queen

PLACE OF HEARING: Winnipeg, Manitoba

DATE OF HEARING: September 14, 2004

REASONS FOR ORDER

AND ORDER: THE HONOURABLE MR. JUSTICE KELEN

DATED: January 21, 2005

APPEARANCES:

Richard Henderson FOR PLAINTIFFS

Winnipeg, Manitoba Clifford Steven Saunders & Rank Electronics Ltd.

John Faulhammer FOR DEFENDANTS

Department of Justice

Winnipeg, Manitoba

SOLICITORS OF RECORD: