Date: 20090722
Docket: T-736-03
Citation: 2009
FC 748
[UNREVISED ENGLISH CERTIFIED TRANSLATION]
Ottawa,
Ontario, July 22, 2009
PRESENT:
Madam Prothonotary Tabib
BETWEEN:
INSTALLATION GLOBALE
NORMAND
MORIN & FILS INC.
Applicant
-
and -
PUBLIC
WORKS AND GOVERNMENT
SERVICES
CANADA
Respondent
REASONS
FOR ORDER AND ORDER
[1]
This
motion involves the interpretation of paragraph 68(1)(a) of the Financial
Administration Act, R.C., 1985, c. F-11 (the Act).
[2]
The
applicant, Installation Globale Normand Morin & Fils Inc., commenced an
action against the federal Crown, claiming not only the cost of storage
services provided to the Crown under a standing offer between the applicant and
respondent, but also damages for loss of profit, unnecessary expense, loss of
reputation, loss of credit, pain and suffering, etc., allegedly resulting from
the respondent’s deliberate failure to pay the amounts due under the storage
contract and its unjustified and malicious refusal to renew the standing offer.
[3]
After
the institution of the proceedings, the applicant company made an assignment in
bankruptcy and a trustee in bankruptcy was appointed. In the bankruptcy
proceedings, the applicant’s trustee agreed to assign to Normand Morin all of
the applicant’s rights of action, including all of the applicant’s rights,
titles and interests in the remedies and rights of action underlying this
proceeding. It is common ground that this was an assignment by mutual
agreement, and not an involuntary assignment under section 38 of the Bankruptcy
Act.
[4]
Mr. Morin,
through his counsel, then disclosed the assignment document to the respondent,
pursuant to subsection 69(1) of the Financial Administration Act and
section 117 of the Federal Courts Rules, according to which the person
seeking to carry on a proceeding as an assignee of the rights or obligations at
issue in the proceeding must serve a notice on the other party of this
intention and of the basis for the assignment.
[5]
The
respondent is challenging Mr. Morin’s right to continue the proceeding
under this assignment, at least with respect to the damages claimed, on the
grounds that this part of the claim is not assignable pursuant to the Financial
Administration Act.
[6]
Section 67
of the Act sets out an absolute prohibition on the assignment of a Crown debt:
|
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.
|
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.
|
[7]
Subsection
68(1) of the Act authorizes the exceptional assignment of certain specific
Crown debts:
|
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.
|
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.
|
[8]
It
should be noted that the parties agree that the amounts claimed in the
proceeding do not belong to a prescribed class within the meaning of paragraph
68(1)(b) of the Act. The moving party, Mr. Morin, nevertheless
submits that all of the amounts claimed in the proceeding constitute assignable
debts pursuant to paragraph 68(1) of the Act and that he should therefore be
allowed to continue the proceeding in his own name as a result of the
assignment.
[9]
While
the respondent concedes that the part of the claim involving payment for
storage services that the applicant alleges to have provided to the respondent
under the standing offer are debts “that is an amount
due or becoming due under a contract” and are therefore assignable, it submits that the
remaining claims, namely the various heads of damages claimed as a result of
the failure to meet the obligations under the standing offer contract, do not
constitute such amounts and are therefore not assignable.
[10]
For
the purposes of this analysis, I will assume, without making any formal finding
to this effect, that the damages claimed in the proceeding are indeed, as
Mr. Morin submits, damages arising directly from the failure to meet the
obligations under the standing offer contract, and therefore, according to the
provisions of the Civil Code of Québec, damages under contract, and not
damages based on the extracontractual liability of the respondent’s servants,
as the respondent argues. Because I find that damages under contract are not
debts corresponding to an amount due or becoming due under a contract,
it is not necessary for me to make this distinction.
[11]
It
appears that the issue of whether the damages claimed from the Crown because of
non-performance of the contract are assignable has never been subject to
judicial determination. However, the case law does recognize that a case based
on torts committed by servants or agents of the Crown does not generate an
amount due or becoming due under a contract
(Tacan v. Canada, 2003 FC 915), that the exceptions
contained in section 68 of the Act must be interpreted narrowly and that
the terms “contract” and “marché” in the English and French versions of
section 68 of the Act are restricted to commercial transactions, therefore
excluding amounts owing under an Indian treaty, even though such treaties are
often equated to contracts (Beattie v. Canada, 2004 FC 674).
[12]
The
closest the courts have come to interpreting the provisions of
paragraph 68(1)(a) of the Act with respect to contractual damages
can be found in Entreprises A.B. Rimouski Inc. c. Canada, [1998] F.C.J. No.
934 (FCA), in which the Court wrote the following:
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.
(Emphasis
added.)
[13]
Note
that this part of the decision is clearly obiter, the basis for the
decision being that even if the validity of an assignment is challenged, the
trial judge presiding over the proceedings, which were commenced by the company
to which the debt was initially owed, could not summarily dismiss the proceedings,
given that the company’s right of recovery continued to exist, even in cases
where the assignments were found to be invalid. It is nevertheless relevant to
note that the Court of Appeal did admit the possibility of distinguishing
between the claim for the payment of the balance owing on the contract and the
claim for damages.
[14]
It
is clear that the standing offer allegedly at the root of the claim is a
“contract”, defined by section 66 of the Act as a “contract involving the
payment of money by the Crown”. Counsel for Mr. Morin submits that any claim
arising directly from this contract, including claims in damages, is a debt
that is “an amount due or becoming due under a contract”.
[15]
I
cannot accept this interpretation.
[16]
In
my view, both the restrictive approach called for in interpreting an exception
and Parliament’s clear intention to make an exception for the protection only
of commercial transactions militate in favour of the interpretation that this
provision applies only to amounts owing on the contract itself. Therefore, an amount
due or becoming due under a contract is an amount the payment of which is
expressly set out in the actual terms of the contract, such as the payment of
the sale price of goods,
services or securities, or even, when expressly set out in the contract, a
predetermined amount of damages in the event of a breach of the contract
obligations. In contrast, even though the right to claim compensation for the
losses or damages suffered by a party to the contract as a result of the other
party’s failure to execute its obligations is a right granted by suppletive
law, and even though such claims are rightly considered contractual claims,
they cannot be considered claims for amounts under the contract. They are not
amounts owing as a result of the execution of obligations set out in the
contract, but rather amounts that become due as a result of a failure to
execute the obligations set out in the contract.
[17]
This
distinction is consistent not only with the specific wording employed in section 68
of the Act: “An amount due or becoming due under a contract” (« Les créances
(…) qui correspondent à un montant échu ou à échoir aux termes
d’un marché »),
but also with the judicial interpretation of Parliament’s intent to protect
through this section only commercial transactions, thereby ensuring the
security and transferability of debts arising from commercial transactions.
Note that the damages that may be suffered by a contracting party as a result
of the non-execution of the obligations set out in a contract are specific to
that party. They are not defined by the contract, they depend on the particular
circumstances of the party, and, contrary to accounts receivable, are generally
not themselves subject to commerce and financial transactions. Given
Parliament’s intent to authorize the assignment of purely commercial debts
only, there is no more reason to maintain the assignability of claims for
contractual damages than there is for extracontractual damages.
[18]
The
order to substitute Mr. Morin for the applicant will therefore be granted,
but only in relation to the claim for amounts owing for services rendered in
accordance with the standing offer, namely, the amount of $504,000, plus any
interest provided for in the contract.
[19]
As
for the other claims, the respondent concedes that the applicant Installation
Globale Normand Morin et Fils Inc. retains, through the trustee in bankruptcy,
its right to continue its proceedings against them. This order therefore
stipulates that the trustee in bankruptcy of Installation Globale Normand Morin
et Fils Inc. will have 30 days from the date of this order to indicate his
desire to continue pursuing the claim; if he fails to do so, the respondent
will be entitled to seek, by way of motion, to have this part of the proceedings
dismissed for delay.
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