Augdome Corporation Ltd. v. Gray et al., [1975] 2 SCR 354

Supreme Court of Canada

Augdome Corporation Ltd. v. Gray et al., [1975] 2 S.C.R. 354

Date: 1974-10-01

Augdome Corporation Limited Appellant;

and

Ann Gray and Walter Williston Respondents;

and

New Augarita Porcupine Mines Limited Intervenant.

1974: January 30, 31; 1974: October 1.

Present: Laskin C.J. and Martland, Judson, Ritchie, Spence, Pigeon and Dickson JJ.

Contract—Interpretation—Omission of items from operative clause—Intention of the parties—Admissibility of evidence—Rectification.

Limitation of actions—Judgment date—Appeals—Reference to Master—Date of Master’s report—The Limitations Act, R.S.O. 1970, c. 246, s. 45.

The intervenant at a directors meeting passed a by-law to effect a sale “of its mining claims and all of its other assets of whatever nature and kind” to the appellant; and at a subsequent general meeting of shareholders of the intervenant a resolution was passed approving, ratifying and confirming the said by-law. The formal agreement drawn up as between the intervenant as vendor and the appellant as purchaser was subsequently executed, bearing date July 5, 1957, and purported to sell “…the assets more particularly described as follows consisting of the mining claims located in the township of Tisdale in the District of Cochrane in the province of Ontario in consideration of …” without reference to other assets of the vendor. The question arose as to whether the interest in a judgment obtained by the vendor against James Joseph Gray, under whose last will and testament the respondents are the surviving executors, was effectively transferred to the purchaser. On the basis that the interest had passed, judgments were given to the effect that the purchaser could proceed in its own name and issue a writ of execution. Gray however successfully appealed to the Court of Appeal for Ontario which, having come to the conclusion that the agreement was not ambiguous, refused to consider extrinsic evidence.

Held: The appeal should be allowed with costs.

[Page 355]

Per curiam: The agreement of July 5, 1957, refers to the by-law and the recital indicates that the agreement was an effort to carry out the transaction approved in that by-law. Notwithstanding the omission from the operative clause of the agreement the intention is clear that the transfer was to be of those assets referred to in the by-law including the judgment which the vendor had against James Joseph Gray.

Per Laskin C.J. and Ritchie and Pigeon JJ.: Since the agreement of July 5, 1957, should be interpreted to operate as a transfer of the judgment it is not necessary to deal with the question of rectification of the agreement.

Per Martland, Judson, Spence and Dickson JJ.: There being more than sufficient evidence to permit the Court to rectify the agreement of July 5, 1957, rectification can be granted despite the fact that there was no claim in any action for it. There is no inflexible rule that rectification should not be granted on affidavit evidence but merely that such jurisdiction should be exercised with great caution. Furthermore no alleged third party rights of the late James Joseph Gray or his surviving executors should affect the right of the appellant or intervenant to rectification of the agreement.

As the judgment in issue did not become final and capable of immediate enforcement until after the abandonments of the appeals from the report of the Master i.e. at some date subsequent to June 29, 1954, the 20-year period of limitation (The Limitations Act, R.S.O. 1970, c. 246, s. 45) affords no defence.

[Hart v. Boutilier (1916), 56 D.L.R. 620; Joscelyne v. Nissen, [1970] 2 Q.B. 86; Butler v. Mountview Estates, [1951] 2 K.B. 563; Doel v. Kerr (1915), 34 O.L.R. 251; Bonhote v. Henderson, [1895] 1 Ch. 742; Wise v. Axford, [1954] O.W.N. 822; Powley v. Mickleborough (1910), 21 O.L.R. 556; Parks v. Simpson (1915), 33 O.L.R. 382 referred to; Borthwick v. Elderslie Steamship Company, [1905] 1 K.B. 516 distinguished]

APPEAL from a judgment of the Court of Appeal for Ontario allowing an appeal from orders of Morand J., refusing to quash an ex parte order to proceed, and of Donohue J., giving leave to issue executions. Appeal allowed, orders of Morand J. and Donohue J. restored, with costs.

[Page 356]

Michael Armstrong, and Thomas R. Hawkins, for the appellant.

W.A. Kelly, for the respondents.

The judgment of The Chief Justice and Ritchie and Pigeon JJ. was delivered by

RITCHIE J.—I agree with Mr. Justice Spence that the agreement of July 5, 1957, which he has reproduced in his reasons for judgment, should be interpreted to operate as a transfer to Aug-dome Corporation Limited of the judgment which New Augarita Porcupine Mines Limited had against James Joseph Gray. In view of this conclusion, I do not find it necessary to deal with the question of rectification of the agreement.

In the result I would dispose of this appeal in the manner proposed by my brother Spence.

The judgment of Martland, Judson, Spence and Dickson JJ. was delivered by

SPENCE J.—This is an appeal from the judgment of the Court of Appeal for Ontario pronounced on September 14, 1972. By that judgment, the Court of Appeal for Ontario allowed an appeal against the orders of Morand J. pronounced on April 11, 1972 and Donohue J. pronounced on March 23, 1972.

New Augarita Porcupine Mines Limited had obtained a judgment from MacFarlane J. on October 15, 1949 against James Joseph Gray. That judgment had been appealed to the Court of Appeal for Ontario and the latter Court varied the judgment by its judgment of March 3, 1950. Following a further appeal to the Judicial Committee of the Privy Council, the judgment was again varied by its judgment of March 24, 1952. The final paragraph of Lord Radcliffe’s reasons for the Judicial Committee reads:

For these reasons their Lordships will humbly advise Her Majesty that the order of the Court of Appeal for Ontario of March 3, 1950, should be varied except so far as it deals with the costs of the

[Page 357]

action and the costs of the appeal before it, and that in lieu of the account of damages and judgment therefor directed by the said order there should be substituted an order to the following effect: (1) a Declaration that the defendant Gray is liable to account to the Plaintiff Company for the profit that he realized by the settlement agreement made on December 9, 1941; (2) an inquiry to ascertain what was the total of the sums for which defendant was accountable to the plaintiff at that date, the defendant being charged for the purposes of this inquiry with (a) all such profits as he had made by selling shares of the plaintiff issued to him without valid authority (b) all monies belonging to the plaintiff drawn by him and utilized for his own purposes together with interest on such monies or the profit realized by their use as the plaintiff may elect, and (c) all other monies which may have been owing by him to the plaintiff at that date; and (3) judgment for the plaintiff for the amount (if any) by which the total of the sums so ascertained exceeds the sum of $18,759.29 already paid by the defendant. Each party must bear his own costs of this appeal.

In accordance with those reasons Barlow J., on October 15, 1952, ordered that the enquiry thereby directed be referred to the Master of the Supreme Court of Ontario, Mr. F.G. Cushing, for trial. In New Augarita Porcupine Mines Limited v. Gray[1], Judson J., then a judge of the Supreme Court of Ontario, described that proceeding as follows:

What has happened here is that this case has been sent back, in part at least, for a new trial and that this trial has been referred for convenience to the Master under s. 68(b) and (c) of The Judicature Act, R.S.O. 1950, c. 190. This is no mere reference to take an account. This is the trial of an action or issue of fact going on before the Master by order of this Court.

Cushing Master made his report which, by the date at the top, was made on Thursday, January 14, 1954. But in para. 7, the Master directed the recovery of interest and said para. reads in part:

[Page 358]

…from the 9th day of December, 1941, to the 8th day of April 1954, being the date of signing of this my report…

I am of the opinion that April 8, 1954, and not January 14, 1954, must be taken as the date of that report. Both New Augarita Porcupine Mines Limited and James Joseph Gray served notice of appeal from that report and on the cover of the Notice of Motion of such appeal appears the endorsement:

Evidence not ready. Adjourned sine die to be brought on on five days notice, which notice may be given in long vacation, if necessary.

Neither of the appeals were ever formally disposed of and must now be considered abandoned.

On June 13, 1957, the directors of New Augarita Porcupine Mines Limited enacted By-Law No. 65. This By-Law I quote in full:

NEW AUGARITA PORCUPINE MINES LIMITED

(No Personal Liability)

being a By-Law providing for the Sale of All the

Company’s Assets.

BE AND IT IS HEREBY ENACTED AS By-Law No. 65 of NEW AUGARITA PORCUPINE MINES LIMITED (No Personal Liability) as follows:

1. THAT the Company do sell all of its mining claims and all of its other assets of whatever nature and kind to Augdome Exploration Limited, and subject to the assumption of the liabilities by Augdome Exploration Limited, for the consideration of one fully paid and non‑assessable share, with no fractions, of the capital stock of Augdome Exploration Limited, for every five fully paid

[Page 359]

and non-assessable issued shares of the capital stock of New Augarita Porcupine Mines Limited (No Personal Liability), provided that any certificates when issued, representing any shares now held in escrow, shall be delivered to the Guaranty Trust Company, 70 Richmond Street West, Toronto, Ontario, to be held in escrow by it, subject to release prorata to the parties entitled thereto, only upon the written consents of the Ontario Securities Commission and a majority of the Directors of Augdome Exploration Limited.

2. THAT a Special General Meeting of the Shareholders of the Company be called and held at a time and place to be fixed by the Directors of the Company, as soon as may be convenient, for the purpose of considering and if deemed advisable, to approve, ratify and confirm the sale of the Company’s mining claims and other assets of whatever nature and kind pursuant to the terms of this By-Law.

PASSED BY THE DIRECTORS of the Company this 13th day of June, 1957.

A resolution was passed at a general meeting of the shareholders of New Augarita Porcupine Mines Limited on July 4, 1957. That resolution I quote:

The Chairman then requested that a resolution be passed approving, ratifying and confirming the said By-Law No. 65.

UPON MOTION of acceptance by Mr. Magee, seconded by Mr. Hergott, and carried unanimously,

IT WAS RESOLVED that By-Law No. 65 enacted by the Directors on the 13th day of June, 1957, be and the same is hereby ratified, approved and confirmed.

On July 5, 1957, the directors of Augdome Exploration Limited now, by supplementary Letters Patent known as the appellant Augdome Corporation Limited, met at a meeting the minutes of which were produced in this litiga-

[Page 360]

tion. Those matters will be discussed in detail thereafter. Sufficient to quote here the resolution passed at the said directors meeting:

UPON MOTION regularly made, seconded and unanimously carried, IT WAS RESOLVED THAT the Company do purchase from New Augarita Porcupine Mines Limited (No Personal Liability) the assets of the said New Augarita Porcupine Mines Limited (N.P.L.) as set out in the draft agreeement between New Augarita Porcupine Mines Limited (No Personal Liability) and Augdome Exploration Limited dated the 5th day of July, 1957, on the terms and conditions as therein set forth, and that the President and Secretary of the Company be, and they are hereby authorized, instructed and empowered to execute the said Agreement on behalf of the Company and to affix thereunto its Corporate Seal.

A copy of the said draft agreement dated July 5th, 1957, was directed to be annexed to the Minutes of the Meeting.

At that meeting of the directors of Augdome Exploration Limited it was determined that a shereholders meeting should be held on July 19, 1957, for the purpose of confirming the said agreement dated July 5, 1957:

providing for the purchase of assets of New Augarita Porcupine Mines Limited consisting of certain mining claims…

Notice of that meeting of shareholders was sent out as verified by the secretary of Augdome Exploration Limited and the business cited in the Minutes of Meeting was to ratify and confirm an agreement of July 5, 1957:

providing for the purchase of all the assets of New Augarita Porcupine Mines Limited (No personal Liability) consisting of certain mining claims…

Such a meeting of shareholders of Augdome Exploration Limited was held on July 19, 1957. The minutes recite that the Chairman stated that the purpose of the meeting was approving and confirming an agreement dated July 5, 1957, between the Company and New Augarita Porcupine Mines Limited “regarding the purchase of

[Page 361]

assets of the latter company”. The chairman read to the meeting the agreement dated July 5, 1957, and also read Schedule B, being By-Law No. 65 of New Augarita Porcupine Mines Limited and Schedule C, being the resolution passed at the general meeting of July 4, 1957, which I have recited above. The resolution was simply that the purchase of mining claims from New Augarita Porcupine Mines Limited, as set forth in the agreement of July 5, 1957, be approved. That agreement between New Augarita Porcupine Mines Limited and Augdome Exploration Limited was executed on July 5, 1957. Despite the regrettable length of that document, I find it necessary to quote it in full:

THIS AGREEMENT made and entered into this 5th day of July, One thousand nine hundred and fifty seven,

BETWEEN:

NEW AUGARITA PORCUPINE MINES LIMITED (no personal liability) a Company duly incorporated under The Ontario Companies Act, hereinafter called the “Vendor”

OF THE FIRST PART

and

AUGDOME EXPLORATION LIMITED a Company duly incorporated under Part IV of The Corporations Act 1953 of Ontario, and having its Head Office at the City of Toronto in the Province of Ontario, hereinafter called the “Purchaser”

OF THE SECOND PART

WHEREAS the Vendor owns or controls those certain mining claims situated in the Township of Tisdale in the county of Cochrane in the Province of Ontario, more particularly set out as follows:

[Page 362]

1860—SE¼-S½-Lot 1-Con 1

1861—SW¼-S½-Lot 1-Con 1

1862—NE¼-S½-Lot 1-Con 1

1863—NW¼-S½-Lot 1-Con 1

1864—SE¼-N½-Lot 1-Con 1

1865—SW¼-N½-Lot 1-Con 1

1866—NE¼-N½-Lot 1-Con 1

1867—NW¼-N½-Lot 1-Con 1

1868—SE¼-S½-Lot 1-Con 2

1909—SW¼-S½-Lot 2-Con 1

1910—NE¼-S½-Lot 2-Con 1

1911—NW¼-S½-Lot 2-Con 1

1912—N½-Lot 2-Con 1

1958—NE¼-S½-Lot 3-Con 1

AND WHEREAS the Vendor was duly incorporated and organized under the Ontario Companies Act, with capitalization of $4,000,000 divided into 4,000,000 shares of the par value of $1.00 each;

AND WHEREAS the Purchaser has been duly incorporated under Part IV of the Corporations Act 1953 of Ontario, with a capilization of $4,000,000 divided into 4,000,000 shares of a par value of $1.00 each, and has the right to sell its shares at a discount;

AND WHEREAS a By-Law was enacted at a meeting of the Directors of the Vendor Company held on the day of June, 1957, as a By-Law no.    , and which by-law was subsequently approved and confirmed at a Special General Meeting of the Shareholders of the Vendor Company held on the 4th day of July, 1957, authorizing the sale of the assets of the Vendor Company, consisting of the mining claims as hereinabove enumerated on the terms and conditions hereinafter set forth;

AND WHEREAS the Purchaser has agreed to assume and pay all the outstanding liabilities of the Vendor Company;

AND WHEREAS it is agreed between the Vendor and the Purchaser that the maximum number of shares to be issued and alloted to the shareholders is not to exceed in amount 800,000 shares;

AND WHEREAS the Vendor has agreed to sell and the Purchaser has agreed to purchase the assets, more particularly described as follows:

[Page 363]

1860—SE¼-S½-Lot 1-Con 1

1861—SW¼-S½-Lot 1-Con 1

1862—NE¼-S½-Lot 1-Con 1

1863—NW¼-S½-Lot 1-Con 1

1864—SE¼-N½-Lot 1-Con 1

1865—SW¼-N½-Lot 1-Con 1

1866—NE¼-N½-Lot 1-Con 1

1867—NW¼-N½-Lot 1-Con 1

1868—SE¼-S½-Lot 1-Con 2

1909—SW¼-S½-Lot 2-Con 1

1910—NE¼-S½-Lot 2-Con 1

1911—NW¼-S½-Lot 2-Con 1

1912—N½-Lot 2-Con 1

1958—NE¼-S½-Lot 3-Con 1

WITNESSETH that in consideration of the premises that the mutual covenants and agreements hereinafter contained, it is agreed by and between the parties hereto as follows:—

1. The Vendor does hereby sell and the Purchaser does hereby purchase the assets more particularly described as follows consisting of the mining claims located in the township of Tisdale in the District of Cochrane in the Province of Ontario, in consideration of the allotment and issuance to the Shareholders of the Vendor Company, of one (1) fully paid and nonassessable share of capital stock of the Purchaser Company, with no fractions, for every five (5) issued fully paid and non-assessable share of the capital stock of the Vendor, provided that the maximum number of shares of the Purchaser Company to be issued therefor shall not exceed 800,000; PROVIDED further that the certificates representing shares to be issued for shares now held in escrow by the Premier Trust Company, 19 Richmond Street West, Toronto, Ontario, are to be held by it in escrow subject to release pro rata to the parties entitled thereto, only upon the written consents of the Ontario Securities Commission and a majority of the Directors of the Purchaser Company, and subject also to transfer, hypothecation, assignment or other alienation only on the written consent of the Ontario Securities Commission.

2. The Purchaser convenants and agrees to assume the cost and expenses, including all legal fees in connection with the sale and transfer of the assets of the Vendor to the Purchasr under the terms of this agreement.

3. The Purchaser further convenants and agrees to assume all the outstanding liabilities of the Vendor Company, at the date of the transfer of the mining claims to the Purchaser, under the terms of this agreement.

[Page 364]

4. The Vendor Company hereby represents and warrants that the said mining claims as set out hereinabove are all in good standing under the mining laws of the Province of Ontario applicable thereto, and that it has the right to deal therewith under the terms of the agreement, and will deliver a proper transfer of the same to the Vendor Company.

5. This transaction is to be completed as soon as possible, and a proper transfer of the mining claims as set out hereinabove to the agreement delivered to the Purchaser for registration and the shares of the Purchaser alloted to the shareholders of the Vendor Company.

6. This agreement shall enure to the benefit of and be binding upon the parties hereto and their successors and assigns respectively.

IN WITNESS WHEREOF the parties hereto have hereunto affixed their respective corporate seals under the hands of their proper officers authorized in that behalf, at the City of Toronto in the Province of Ontario.

SIGNED, SEALED and DELIVERED

in the presence of:

NEW AUGARITA PORCUPINE MINES LIMITED

(No Personal Liability)

per G. Buchanan………………………...

per F. Harold Cook………………………

per J. Buchanan………………………....

per N. Murray………………………….....

The respondent James Joseph Gray had been from the time of the judgment of the Judicial Committee, negotiating a settlement of the litigation between him and New Augarita Porcupine Mines Limited with the Directors of that Company and, after July 5, 1957, continued to negotiate the settlement with the Directors of Augdome Exploration Limited. Despite the fact that James Joseph Gray had testified in affidavits in this litigation that he had made a settlement of the litigation, Morand J., in his judgment found:

[Page 365]

The other material filed, however, convinces me that while settlement was considered, the judgment was never paid or settled.

Percy B. Bishop who had been an executive officer in both New Augarita Porcupine Mines Limited and Augdome Exploration Limited, testified in his examination upon his affidavits that those negotiations for settlement proceeded until 1962. On April 29, 1965 the Letters Patent of the Corporation of New Augarita Porcupine Mines Limited were cancelled by the Provincial Secretary of the Province of Ontario and the Corporation was dissolved on June 1, 1965. On March 1, 1972, the appellant Augdome Corporation Limited, obtained an ex parte order to continue the action in its name. An application was made to have that order to proceed quashed and Morand J., by his order pronounced on April 9, 1972, dismissed that application to quash. Donohue J., by his order of March 23, 1972, had permitted the appellant, Augdome Corporation Limited, to issue execution upon the judgment of the Judicial Committee, dated March 24, 1952, “and the judgment report or the order of F.J. Cushing Master, dated 14th January, 1954”. From both of those judgments the defendant, James Joseph Gray, appealed to the Court of Appeal and that Court of Appeal by its judgment, pronounced on September 14, 1972, ordered that the ex parte order to proceed, dated March 1, 1972, be set aside and that the application before Donohue J. for leave to issue execution be dismissed. The appellant, Augdome Corporation Limited, appealed to this Court.

The Legislature of the Province of Ontario, by statute, enacted the New Augarita Porcupine Mines Limited Act in 1973 which, in para. 1, provided:

1. New Augarita Porcupine Mines Limited, incorporated by letters patent dated the 13th day of May, 1936, is hereby revived and is, subject to any rights acquired by any person after its dissolution, hereby restored to its legal position as a company incorporated by letters patent, including all its property, rights, privileges and franchises and subject to all its

[Page 366]

liabilities, contracts, disabilities and debts as at the date of its dissolution in the same manner and to the same extent as if it had not been dissolved.

This Court, by its order of December 17, 1973, granted leave to New Augarita Porcupine Mines Limited to intervene in this appeal as if it were an appellant. New Augarita Porcupine Mines Limited entered into an agreement with Augdome Corporation Limited on July 4, 1973, whereby New Augarita as vendor assigned, transferred and set over to Augdome Corporation as purchaser all its assets of every nature and kind including all its right, title and interest in and to the action against James Joseph Gray. James Joseph Gray died on January 6, 1973. Ann Gray and Walter Williston, the surviving executors under his Last Will and Testament, have been added as respondents by suggestion.

The issues in this appeal are threefold. Firstly, did the agreement between New Augarita Porcupine Mines Limited and Augdome Exploration Limited (as it was then known) dated July 5, 1957, convey to the latter company the judgment against James Joseph Gray and all of New Augarita’s rights in reference thereto? Secondly, if it did not so convey, are these two companies entitled now to rectification of the said agreement to carry out the transfer to Augdome all New Augarita’s rights under the judgment against James Joseph Gray? Thirdly, in either case are those rights barred by the Statute of Limitations of the Province of Ontario?

Morand, J., in his reasons for refusal to quash the ex parte order to proceed stated very shortly:

I am also satisfied that there was an assignement of the judgment from New Augarita Mines Limited to Augdome Corporation Limited.

Arnup J.A., giving reasons in the Court of Appeal, said:

[Page 367]

Whatever its intention may have been by way of authorizing such a transaction, it is the view of all of us that such a transaction was not carried out by the agreement between the two companies. In our view, the terms of that agreement are not ambiguous. Unless they are ambiguous on their face or can be made to appear so by admissible external evidence then evidence either of the conduct of the parties to the agreement or of the direct intention of the parties is not admissible to vary the terms of the agreement, to which effect must be given in accordance with its terms.

Having come to the conclusion that the agreement was not ambiguous, the Court of Appeal therefore refused to consider the evidence as to the conduct of the parties and interpreted the agreement as plainly not including the transfer of the judgment from New Augarita to Augdome. With respect, I cannot come to that conclusion. I think one must have regard for the whole of that agreement in order to interpret the meaning of it. That is the reason why I found it necessary to quote the agreement in full. A most significant recital from the agreement is that which refers to the by-law of New Augarita enacted on June 13, 1957. As that recital indicates that the agreement was an effort to carry out the transaction approved in that by-law, I have also quoted in full by-law No. 65 and it will be noted that in both para. 1 and para. 2 of that by-law the company (New Augarita) is to sell all of its mining claims and all of its other assets of whatsoever nature and kind. It is perfectly true that the operative clause of the agreement provided that “the Vendor does sell and the Purchaser does hereby purchase the assets more particularly described as follows consisting of the mining claims…”.I am, however, of the opinion that the agreement having specifically referred to the by-law, the intention is quite clear that the transfer was to be of those assets the confirmation of which was authorized by the by-law. Equally important provisions are those in para. 2 and 3 whereby the purchaser, that is, Augdome, agreed to pay all legal fees in connection with the sale and transfer of the assets and to assume all the outstanding liabili-

[Page 368]

ties of the Vendor Company, indicating, I believe, that the Vendor was by this agreement stripped of all its assets so that its liabilities would have had to have been paid by the Purchaser Company. Again, the provision in the agreement for the purchase price is equally consistent with that conclusion alone. The purchase price was the delivery to the Vendor Company of shares in the Purchaser Company at the rate of one share of the Purchaser for every five shares of the Vendor. In short, the Purchaser would thereafter hold all the issued shares of the Vendor Company and the Vendor Company, it is presumed, would then distribute the shares of the Purchaser Company amongst its Vendor’s shareholders so that there would be no shareholder of the Vendor Company left in existence except the Purchaser Company and again, presumably, the Purchaser Company would simply fold up the Vendor Company. This took place in 1965 when the Provincial Secretary of the Province of Ontario, acting on non-payment of fees and non-filing of returns, cancelled the Letters Patent of New Augarita Porcupine Mines Limited. Therefore, with deference, and looking only to the agreement of July 5, 1957 and the by-law referred to in that agreement, I have come to the conclusion that the agreement is ambiguous. Under such circumstances no authority need be cited for the proposition that in interpretation of the agreement extrinsic evidence may be canvassed. Such extrinsic evidence is, of course, overwhelming to the effect that the intention of the parties to the agreement was to convey the Vendors’ interest in this judgment to the Purchaser.

I have already referred to the terms of by-law 65 of New Augarita Porcupine Mines Limited and pointed out that twice in that by-law the words “and all its other assets of whatsoever nature and kind” appear. In the minutes of the meeting of the Directors of Augdome Exploration Limited held on the very day the agreement was executed, the report of the Chairman stating the purpose of the meeting was the purchase of assets of New Augarita Porcupine Mines

[Page 369]

Limited, consisting of mining claims of the Company and the arrangements had been made for the purchase of those assets, but further recite that he read to the meeting of the directors of Augdome by-law 65 to the Directors of New Augarita and its very words “of all its mining claims and all its assets, if any, of whatsoever nature and kind”. The resolution made at that meeting by the directors of Augdome was to approve the purchase of the assets of New Augarita, as set out in the draft agreement of July 5, 1957, so that when that meeting took place the draft agreement had not yet been executed and I am of the opinion that what moved the directors of Augdome was by-law 65 of New Augarita with its reference to all assets of any kind whatsoever. A meeting of the shareholders of Augdome on July 19, 1957, was held, according to the Chairman and to quote from the minutes, for the purpose of confirming the agreement between Augdome and New Augarita “regarding the purchase of the assets of the latter Company” and again, by-law 65 was presented to that meeting. A prospectus was filed by Augdome Exploration Limited with the Ontario Securities Commission. That prospectus included the auditor’s report of Augdome Exploration Limited, dated October 11, 1957, and on p. 18 of that document appeared Note No. 1(b) as follows:

New Augarita Porcupine Mines Limited also held a judgment against a former Director of that Company. Since a settlement has not been effected this asset is not certain as to value and has not been included in the balance sheet.

indicating that the judgment, for whatever it was worth, was considered an asset of Augdome Exploration Limited. In the notes to the financial statement of Augdome Exploration Limited, dated December 31, 1959, the same exact wording appears as to the judgment. As I have pointed out, it was the contention of James

[Page 370]

Joseph Gray that he had settled this litigation and, according to the evidence of both Nellie Murray, the secretary of both New Augarita Porcupine Mines Limited and Augdome Corporation Limited, the discussions as to settlement continued with the officers of the latter Company until at least 1962. I am of the opinion this is an important indication that both New Augarita and Augdome regard the interest in the judgment as having been transferred to Augdome and that James Joseph Gray was of the same opinion. I am therefore in agreement with a comment made by Arnup J.A. in his reasons for the Court of Appeal for Ontario:

It seems reasonably apparent from the consideration of all the documents that New Augarita at least contemplated the transfer to Augdome of all its assets and the assumption by Augdome of all its liabilities.

I would add that that was not only the contemplation of New Augarita, but it was a contemplation of Augdome, and that James Joseph Gray so understood, as did the auditors for both New Augarita and Augdome. I therefore have no hesitation in coming to the conclusion that the agreement of July 5, 1957, should be interpretated to operate as a transfer of the judgment which New Augarita Porcupine Mines Limited had against James Joseph Gray.

This conclusion makes it unnecessary to examine the issue of whether the appellants are entitled to rectification of the agreements of August 1957. However, lest I may be considered to be in error in my conclusion that the appellants are entitled to succeed on the issue of interpretation, I shall proceed to consider whether or not those appellants are entitled to obtain rectification of the agreement in order to effect the transfer of the appellant New Augarita’s interest in the judgment to the appellant Augdome.

In Hart v. Boutilier[2], this Court considered an

[Page 371]

action for the rectification of a deed of conveyance. Duff J., as he then was, said at p. 630:

The power of rectification must be used with great caution; and only after the Court has been satisfied by evidence which leaves no “fair and reasonable doubt” (Fowler v. Fowler (1859), 4 deG. & J. 250, at 264, 45 E.R. 97), that the deed impeached does not embody the final intention of the parties. This evidence must make it clear that the alleged intention to which the plaintiff asks that the deed be made to conform, continued concurrently in the minds of all the parties down to the time of its execution; and the plaintiff must succeed in shewing also the precise form in which the instrument will express this intention.

The Court of Appeal in England in Joscelyne v. Nissen[3], dealt with the same issue and Lord Justice Russell, at p. 98, said:

In our judgment the law is as expounded by Simonds J. in Crane’s case with the qualification that some outward expression of accord is required. We do not wish to attempt to state in any different phrases that with which we entirely agree, except to say that it is in our view better to use only the phrase “convincing proof” without echoing an old fashioned word such as “irrefragable” and without importing from the criminal law the phrase “beyond all reasonable doubt”. Remembering always the strong burden of proof that lies on the shoulders of those seeking rectification, and that the requisite accord and continuance of accord of intention may be the more difficult to establish if a complete antecedent concluded contract be not shown, it would be a sorry state of affairs if when that burden is discharged a party to a written contract could, on discovery that the written language chosen for the document did not on its true construction reflect the accord of the parties on a particular point, take advantage of the fact.

Whether one takes the “no fair or reasonable doubt” in Hart v. Boutilier or the somewhat less stringent test of “convincing proof” of Joscelyne v. Nissen, I am of the opinion that in the present case there is more than sufficient evi-

[Page 372]

dence to permit the Court to rectify the agreement of July 5, 1957. I need not repeat my references to the documents and to the evidence, which were relevant to the issue of interpretation, with which I have dealt above. The same references are equally convincing upon the proposition that the agreement should be rectified to make abundantly plain that New Augarita’s interest in the judgment against James Joseph Gray was amongst the assets transferred to New Augdome Limited.

It has been argued that rectification should not be ordered unless such remedy had been the subject of an action or at least a counterclaim. In Butler v. Mountview Estates Limited[4], Danckwerts J. dealt with action by a purchaser who at an auction sale had purchased from the defendants the unexpired residue of a lease. The action was for damages based on the contention that the vendors were in breach of covenants contained in the assignments by virtue of the provision of the Law of Property Act, 1925. Danckwerts J. found that there was a failure in the defendant vendors to carry out the covenants in the lease and that there was therefore a right of action in the purchaser against the vendor arising immediately after the execution of the assignment of the lease. Danckwerts J. was of the opinion that such result was plainly contrary to what had been the true agreement between the parties and acted on the submission of counsel for the defendants that the assignment should be rectified by limiting the covenant implied therein by the provision of the statute despite the fact that there had been no counterclaim for such rectification of the said assignments. At p. 571, he said:

In Borrowes v. Delaney a defective lease was rectified although there was no counterclaim to rectify. If a point is to be taken that a document should be rectified, it should normally be raised in the pleadings. That has not been done in this case, but having

[Page 373]

regard to the circumstances, and particularly to the fact that, if the plaintiff’s claim were to succeed, he would be getting something to which he would have no right whatever, I accede to the submission on behalf of the defendants. Therefore I propose to direct the rectification of the assignments by the addition of a proviso on the lines of the precedents of Key and Elphinstone (14th ed.), vol. 1, p. 593, with such modifications as may be required by the circumstances of the present case.

I am of the opinion that Danckwerts J’s disposition of the matter, supported by authority, is sound and in this case I am ready to grant rectification despite the fact that there was no claim in an action for such rectification and indeed the proceedings merely commenced with an ex parte order granting leave to continue in the name of the appellant the action as originally instituted. The Judicature Act, R.S.O. 1970, c. 228, in s. 1(a) defines “action” to mean a civil proceeding commenced by writ or in such other manner as prescribed by the rules. The action herein was, of course, commenced by writ. If one were to take the civil proceeding to be the continuation of the action by the ex parte order, that is also a proceeding within the definition. In Doel v. Kerr[5], Middleton J., as he then was, found specifically that an action included the issue of an execution upon a judgment, when the word action was similarly defined as including “any civil proceeding” in The Limitations Act. That decision was affirmed in the Appellate Division, where Meredith C.J.O., said at p. 256:

I see no reason for differing from the conclusion of my brother Middleton, which seems to be well supported by the cases to which he refers, and I can usefully add little to the reasons which he gives to the conclusion to which he came.

[Page 374]

It has also been submitted that rectification should never be granted on other than oral evidence. The present litigation, as I have said, arose on an ex parte order to continue the action and an application to quash such order. All the material in support of, or opposing the application was by affidavit, but long cross-examinations upon those affidavits were included in the record and I have already referred to many of the documents filed.

Bonhote v. Henderson[6], is quoted as authority for the purpose. However, Kekewich J. said at p.749:

The case was first heard as a non-witness action on affidavit evidence. I declined to grant the relief asked, not only because not satisfied that a case for rectification was made on the evidence as it stood, but also because I am extremely reluctant to hear any case of this character on affidavit evidence. I must not be understood as saying that it never can be done: on the contrary, I have often done it, and am prepared to do it again where the circumstances, in my judgment, justify that course; as, for instance, where written instructions are proved, the deed as executed departs from them, and there is no reason to doubt that they are final. It must, too, be remembered that in the Court of Chancery, on which we depend for our authorities on this branch of law, suits were heard and determined on evidence of this character.

I am, therefore, of the opinion that there is no inflexible rule that rectification should not be granted upon affidavit evidence, but merely that such jurisdiction should be exercised with great caution, a caution alike that outlined by Duff J. (as he then was) in Hart v. Boutilier which I have cited above and in my view, and for reasons which I have expressed, exercising that caution in the present case, there is ample basis for an order for rectification.

[Page 375]

Finally, it is argued that rectification should never be granted when the rights of third parties are affected and what counsel for the respondents have termed the right of James Joseph Gray to resist execution is, of course, affected if the agreement of July 5, 1957, as executed should be held to be unambiguous and that agreement should be rectified. I have considered the authorities cited by the respondent upon this topic and other authorities to like effect and I have come to the conclusion that they have no application in the present situation. They are chiefly cases where the third party has relied on the conveyance as executed and has acquired rights or taken action based on that agreement. One such authority should be mentioned. In Wise v. Axford[7], the Court of Appeal for Ontario considered a case where the defendant Axford had sold to two different persons lots on the south side of a road known as Commissioner Road. The existent boundary of the property owned by Axford was a road allowance between two townships. The 99 foot lot on the corner of Commissioner Road and the township road was described as commencing at the intersection of those roads and running westerly. That lot was sold first by Axford to Cant. Then Axford sold to Wise the 99 foot lot, which was described as commencing 99 feet west of the intersection of the two roads and continuing westerly. But prior to the conveyance Axford and Wise had gone on the property, not in the presence of Cant, and there had observed a row of maple trees, or posts and wire fence, which were said to be the westerly limit of the township road. After the conveyance had been executed it was found by survey that this row of trees and or fence were 19.5 feet easterly of the true westerly limit of the township road. Wise therefore sued his vendors Axford and also Cant for a rectification of the deed. Of course, in that case the Court of Appeal in refusing rectification realized that to grant such rectification would result in Cant, who had taken no part in the observation of the line of trees and or fence which were said to be the easterly limit of his lands, losing the wester-

[Page 376]

ly 19.5 feet thereof. I must conclude that the decision in Wise v. Axford has no application in the present circumstances. It surely did not affect James Joseph Gray, or now his surviving executors, that his creditor should be Augdome rather than New Augarita. In Powley v. Mickleborough[8], the Divisional Court in Ontario considered the situation where Mickleborough had damaged by water property then occupied by George Powley and Company. Thereafter George Powley and Company was incorporated as the George Powley Paper Company Limited which company acquired and took over the assets of the partnership. That company brought an action for damages. It was urged in defence that the limited company was not entitled to recover on the ground that a tort was not assignable and that the partners who were added as party plaintiffs could not sue because Powley, on his examination, had admitted that all the assets of the firm had been transferred to the new company. Clute J. said, at p. 558:

I think that this position is entirely untenable. Both parties are before the Court, and a right of action is vested in either one or the other: it is immaterial which.

And Middleton J. said at p. 560:

The assignor and the assignee were both before the Court as plaintiffs, and the effect of the assignment is, therefore, quite immaterial. The right of action against the wrong-doer must be vested in either one or the other, and their respective rights are quite immaterial.

Applying that statement to the present case, subject to what is said hereafter as to limitation,

[Page 377]

the assignor and assignee are both before the Court and the right of action against the wrongdoer must be vested in either one or the other and their respective rights have been settled by the agreement between them of July 4, 1973. I am, therefore, of the opinion that no alleged third party rights of the late respondent James Joseph Gray, or his surviving executors, should affect the appellant Augdome and the intervenor New Augarita Porcupine Mines Limited in their claim for rectification. I have concluded that there should be rectification of the agreement of July 5, 1957, by adding after the words “as hereafter enumerated” in the penultimate line of the 4th recital the words “and all of its other assets of whatever nature and kind”. And Clause I should be amended in the 5th line, after the words “in the Province of Ontario” by adding the same words, that is, “and all of the other assets of whatever nature and kind”.

I turn finally to the question of the effect of s. 45 of The Limitations Act, R.S.O. 1970, c. 246, which provides:

Section 45.

(1) The following actions shall be commenced within and not after the times respectively hereinafter mentioned:

…

(c) an action upon a judgment or recognizance, within twenty years after the cause of action arose.

I have already recited in detail the dates of the various proceedings herein. It is the submission of the respondents that the 20 year period of limitation set out in the section I have quoted commenced to run at the date of the judgment of Macfarlane J. on October 15, 1949, and of course, the ex parte order of proceeding was not obtained until March 1, 1972. I cannot accept that submission. The judgment of Macfarlane J. was subject to an appeal to the Court of Appeal and was by that Court varied in material fashion. The judgment of the Court of Appeal was appealed to the Judicial Committee and the

[Page 378]

judgment of that Court, the conclusion of which I have already cited, was one granting to the plaintiff, New Augarita Porcupine Mines Limited, relief of a very different character, that is, a declaration that the defendant was liable to account to the plaintiff company for the profit which he has realized, for an enquiry to ascertain what was the total of that profit and for judgment for the amount, if any, by which that total exceeds the sum of $18,759.29.

I have already cited the view of Judson J., expressed in 1953, as to the effect of that judgment by the Judicial Committee, i.e., that the action had been sent back in part for a new trial and then by the order of Barlow J. that new trial had been referred to the Master. I therefore am strongly of the view that no execution could be taken upon the judgment until that so called new trial had taken place before the Master and his judgment had become a final one. The report of the Master, although dated January 14, 1954, was not signed until April 18, 1954. I have already expressed my opinion that the report can only be considered as having been made upon the latter date. Rule 506 of the Consolidated Rules of Practice, Province of Ontario, as they existed in 1954, provided that the report of the Master should be filed and should be deemed to be confirmed at the expiration of 14 days after the service of a notice of filing thereof, unless notice of appeal had been served within that 14 day period. Both New Augarita and Gray did serve notice of appeal and I am of the opinion that the judgment did not become a final judgment until those appeals were disposed of, or were abandoned. As I have pointed out above, the last endorsement of any judicial handling of the appeals was made on June 14, 1954, and the appeals must be considered to have been abandoned at some date thereafter. Even if the period of limitations were carried back to January 14, 1954, the date appearing at the head of the Master’s report, the period of limitations would not have expired on March 1, 1972, and, of course, dates thereafter in either April or June, or later in the year 1954, would equally not be barred by the statute.

[Page 379]

I have already cited Doel v. Kerr to indicate that section 45 applies to a motion to issue execution. I think it equally applies to an application for leave to continue an action. Respondent’s counsel cites and relies on Borthwick v. Elderslie Steamship Company[9]. That case was not concerned with the Statute of Limitations but with the problem of when interest should commence to run on a judgment. The plaintiff had failed at trial and on appeal was given judgment for an amount to be assessed upon a reference. Instead of proceeding to the reference the parties agreed on the amount which was due and for interest. It was held that interest must run from the date of the judgment in the Court of Appeal as if the amount agreed upon between the parties had been mentioned in the judgment of the Court. I take no issue with the decision, but simply find the circumstances inapplicable to the present situation. In Parks v. Simpson,[10] the Appellate Division in Ontario considered some extremely involved litigation of a petty nature between two parties and held that to be available as a cause of action, a judgment must be a definitive personal judgment for the payment of money, final in its character, remaining unsatisfied and capable of immediate enforcement. I am of the opinion that the judgment in this matter did not become final and capable of immediate enforcement until after the abandonments of the appeals from the report of the Master at some date subsequent to June 29, 1954.

For these reasons I have come to the conclusion that the Statute of Limitations affords no defence to the respondents. In the result, I would allow the appeal from the judgment of the Court of Appeal for Ontario and direct that the orders of both Morand J., refusing to quash the ex parte order to proceed, and of Donohue

[Page 380]

J., giving leave to issue executions, be restored. The appellant is entitled to its costs throughout. There should be no costs for or against the intervenor.

Appeal allowed with costs.

Solicitors for the appellant: Salter, Reilly, Jamieson & Apple, Toronto.

Solicitors for the respondents: Fasken & Calvin, Toronto.

Solicitors for the intervenant: Salter, Reilly, Jamieson & Apple, Toronto.