Date: 20100125
Docket: A-618-08
Citation: 2010 FCA 26
CORAM: NADON
J.A.
EVANS
J.A.
TRUDEL
J.A.
BETWEEN:
STEPHEN ANTHONY EDELL
Appellant
and
HER MAJESTY THE QUEEN (Canada Revenue
Agency),
THE SUPERINTENDENT OF BANKRUPTCY and
RISMAN & ZYSMAN INC.
Respondents
REASONS FOR JUDGMENT
TRUDEL J.A.
Background
[1]
The
appellant, formerly a proposed debtor under the Bankruptcy and Insolvency
Act, R.S.C. 1985, c. B-3 (BIA), is now deemed to have made an
assignment in bankruptcy because the Canada Revenue Agency (CRA), his only
creditor, has refused his proposal. This, he claims, is evidence of bad faith
on the part of the CRA and constitutes a breach of its duties as a public
official, giving rise to a cause of action for damages.
[2]
Therefore,
he has commenced an action in the Federal Court against the CRA, the Superintendent
of Bankruptcy (Superintendent) and the Trustee, seeking judgment against the
CRA only. The appellant claims against the CRA:
a)
An
order requiring this defendant to accept a proposal made by the plaintiff
pursuant to the provisions of the BIA, in accordance with its terms;
b)
In
the alternative to 1a), an order requiring this defendant to accept such
further and other amended proposal as to This Honourable Court may seem
appropriate and just;
c)
Damages
in the amount of $100,000.00 or, in the alternative, nominal damages;
d)
Special
damages, the full particulars of which will be provided as soon as possible and
prior to the trial of this action;
e)
Punitive
damages in the amount of $250,000.00;
f)
Costs
of this action, including applicable goods and services tax, calculated on a
solicitor and client basis or otherwise in the discretion of This Honourable
Court;
[3]
The
CRA and the Superintendent have succeeded in having the statement of claim
struck out. This is the appeal from the judgment of Mandamin J. (the Judge)
striking the appellant’s statement of claim on the basis that it disclosed no
reasonable cause of action and denying his request for an interim stay [2008 FC
1306].
[4]
Before
reaching his conclusion, the Judge made the following findings, which are
relevant to this appeal:
1. The appellant
has failed to allege material facts that would sustain his claim for damages
either in the tort of misfeasance or in the tort of negligence. Therefore, it
was plain and obvious that the statement of claim disclosed no reasonable cause
of action (ibidem at paragraphs 36, 37, 38 and 46).
2. There is no
legal authority for a court to stay the operation of paragraph 57(a) of
the BIA (ibidem at paragraphs 44 and 46).
Analysis
[5]
In
ruling on a motion to strike a pleading, the Court is “narrowly limited to
assessing the threshold issue of whether a genuine issue exists as to material
facts requiring a trial (Macneil Estate v. Canada (Indian and Northern
Affairs Department), 2004 FCA 50 at paragraph 38, Aguonie v.
Galion Solid Waste Material Inc., [1998] 38 O.R. (3d) 161). All allegations
of fact, unless patently ridiculous or incapable of proof, must be accepted as
proved (Giacomelli v. Canada (Attorney General), (2005) 78
O.R. (3d) 388 at paragraph 7). The defendant who seeks summary dismissal bears
the evidentiary burden of showing the lack of such genuine issue (Canada (Attorney
General) v. Lameman, [2008] 1 S.C.R. 372, 2008 SCC 14 at paragraph
11).
[6]
Applying
these principles to the present appeal, I am of the view that it should be
allowed in part as it was not “plain and obvious” that the appellant’s entire
action failed to disclose a reasonable claim or that allowing this action to
proceed would amount to an abuse of process. I shall now briefly discuss each
claim.
[7]
As
for claims 1a) and 1b), I agree with the Judge that these orders cannot issue
from the Federal Court (reasons for judgment, at paragraph 30).
[8]
Claims
c) d) and e), relate to the appellant’s allegations in the tort of negligence,
as well as in the tort of misfeasance in public office.
[9]
Unlike
the Judge, I have not been persuaded that the CRA, as a creditor, could never
owe a duty of care to an insolvent person in the context of the BIA. The
CRA has failed to demonstrate a valid basis to exclude its duty of care or to shelter
it completely from an action in the tort of negligence.
[10]
As
for the tort of misfeasance, I agree with the Judge that the appellant must
show that the CRA engaged in deliberate and unlawful conduct and knew that its
actions were unlawful and would likely harm the appellant (reasons for
judgment, at paragraph 36 with reference to Odhavji Estate v. Woodhouse,
[2003] S.C.J. No. 74; 2003 SCC 69; [2003] 3 S.C.R. 263). However, the Judge
struck the statement of claim, also because the appellant “failed to allege
material facts that would sustain his claim for damages in tort” (reasons for
judgment, at paragraph 46d).
[11]
In
his statement of claim, the appellant alleges that the CRA acted “…in a
high-handed, outrageous and scandalous manner designed to harass the plaintiff…
[showing] reckless disregard for the interests of reasonableness and the lawful
exercise of its discretion”. But the appellant failed to include the
particulars of his complaint except by reference to on-going pleadings in an
appeal at the Tax Court of Canada (statement of claim, appeal book, at
paragraph 12).
[12]
I
am of the view that this is not fatal and that it can be cured through an
amendment of pleadings using Rule 200 of the Federal Courts Rules,
SOR/98-106.
[13]
In
his memorandum, the Superintendent has argued that an action in tort for
damages cannot be brought by a plaintiff who is already bankrupt. This is
incorrect. It has been decided that a cause of action that is personal in
nature “does not become the property of the Trustee in bankruptcy and thus may
be pursued by [the bankrupt] in his own right” (Wallace v. United Grain
Growers Ltd. (c.o.b. Public Press), [1997] 3 S.C.R. 701 at paragraph 38).
Punitive damages such as those sought by the appellant at paragraph 16 of his
statement of claim are personal in nature (see also Re Holley,
[1986] O.J. No. 165 (On. C.A.).
[14]
It
might very well be that the pleadings reveal arguable, difficult or important
points of law, but it does not justify the striking out of the statement of
claim at this point.
[15]
Finally,
the Judge dismissed the appellant’s request for an interim stay because the BIA
does not grant “authority for a court to stay the operation of a receiving
order or assignment on either an interim or permanent basis” (reasons for
judgment at paragraph 45; Kalau v. Dahl, [1985] A.J. No. 572, 39 Alta.
L.R. (2d) 156). Although the appellant challenged that conclusion in his Notice
of Appeal, he did not renew his request at the hearing of his appeal. In any
event, I agree with the Judge.
[16]
There
remains a last matter, that of the Superintendent and Trustee being parties to
this action “for the stated purpose of providing them with notice of the
proceedings and ensuring they would be bound by orders of the Court” (reasons
for judgment, at paragraph 3). Section 215 of the BIA explicitly provides
that except by leave of the Court that has jurisdiction in bankruptcy matters,
no action lies against the Superintendent or Trustee. No such leave was
obtained. Hence, the Superintendent and Trustee must be removed as defendants
to the appellant’s statement of claim.
Conclusion
[17]
For
these reasons,
-
I
would allow this appeal in part with costs here and below in favour of the
appellant against the CRA only;
-
I
would set aside, in part, the judgment of the Federal Court and giving the
judgment that the Federal Court should have given,
-
I
would strike out claims 1a) and 1b);
-
I
would, pursuant to Rule 104, order that the Superintendent in Bankruptcy and
Risman & Zysman Inc. be removed as parties in the action, Docket T-290-08
and that the style of cause be modified accordingly so as to read;
BETWEEN:
STEPHEN ANTHONY EDELL
Appellant
and
HER MAJESTY THE QUEEN (Canada Revenue
Agency)
Respondent
-
I
would allow the action to continue against Her Majesty the Queen (Canada
Revenue Agency) on claims 1c) d) e) and f).
-
I
would allow the appellant to amend his statement of claim, in accordance with
these reasons, within fifteen days of the Judgment.
"Johanne
Trudel"
"I
agree
M.
Nadon J.A."
"I agree
John
M. Evans J.A."
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