Improperly Naming a Party Without Legal Capacity – Not a Simple Misnomer
In Little v. Bramcan Investments Limited, 2024 ONSC 1485, the plaintiff was an undischarged bankrupt at the time the action was commenced. The Ontario Superior Court of Justice determined that the action not being brought in the name of the trustee in bankruptcy was not a simple misnomer that could be corrected by the Court pursuant to Rule 5.04(2) of the Rules of Civil Procedure (hereinafter, the Rules).
Context
The plaintiff, John Little, operated a fitness business, Nautilus North, as a sole proprietorship out of a retail unit leased from the defendants.
On November 4, 2018, the premises was damaged by fire such that Mr. Little was unable to operate his business. According to Mr. Little, the defendants advised him that he could keep his gym equipment and personal possessions (hereinafter, the “property”) in the unit while it was being renovated.
In the fall of 2019, the plaintiff alleges to have learned that the defendants had disposed of his property without any advance warning. He commenced an action against the defendants for damages for the lost property; the Statement of Claim was issued on September 10, 2020 in the plaintiff’s own name.
It turns out, however, that the plaintiff had made an assignment in bankruptcy on April 13, 2018. BDO Dunwoody Canada Limited was appointed as the trustee in bankruptcy. The plaintiff was discharged from bankruptcy on October 21, 2021, more than one year after the Statement of Claim was issued and past the limitation period to commence the action against the defendants.
In August 2023, the defendants learned that the plaintiff was an undischarged bankrupt when he brought the action against them. They then brought a motion to dismiss the claim under Rule 21.01(3)(b) of the Rules.
Rule 21 Determination of an Issue Before Trial
21.01 (3) A defendant may move before a judge to have an action stayed or dismissed on the ground that, […]
Capacity
(b) the plaintiff is without legal capacity to commence or continue the action or the defendant does not have the legal capacity to be sued; […]
Bankruptcy and Insolvency Act, R.S.C., 1985, c. B-3 (hereinafter, the BIA)
71 On a bankruptcy order being made or an assignment being filed with an official receiver, a bankrupt ceases to have any capacity to dispose of or otherwise deal with their property, which shall, subject to this Act and to the rights of secured creditors, immediately pass to and vest in the trustee named in the bankruptcy order or assignment, and in any case of change of trustee the property shall pass from trustee to trustee without any assignment or transfer.
The term “property” is defined in section 2 of the BIA as:
property means any type of property, whether situated in Canada or elsewhere, and includes money, goods, things in action, land and every description of property, whether real or personal, legal or equitable, as well as obligations, easements and every description of estate, interest and profit, present or future, vested or contingent, in, arising out of or incident to property; [emphasis added]
“Things in action” includes tort and contract claims in relation to property (see Little at para 23).
The plaintiff argued that the action being brought in his own name, and not in the name of the trustee in bankruptcy, was a misnomer that can and should be cured under Rule 5.04(2) of the Rules.
Misjoinder, Non-Joinder and Parties Incorrectly Named
5.04 (2) At any stage of a proceeding the court may by order add, delete or substitute a party or correct the name of a party incorrectly named, on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.
To note, the first time the plaintiff asked that the style of cause be amended was in oral argument, not in a formal motion.
Decision
Justice Charney granted the defendants’ motion and dismissed the plaintiff’s action. The plaintiff was ordered to pay the defendants costs in the amount of $7,500.
Reasons
Justice Charney found that the action being brought in the plaintiff’s name was not merely a formal irregularity. The plaintiff had a duty to disclose the property to the trustee in bankruptcy and he failed to do so. Moreover, he did not disclose the bankruptcy in his Statement of Claim or in his Affidavit of Documents.
Justice Charney also determined that Rule 5.04(2) does not apply in this case because the trustee in bankruptcy is a distinct party from an undischarged bankrupt. Furthermore, the trustee in bankruptcy, BDO, had no notice that such relief was being requested.
Takeaways
This decision reminds us to confirm the proper parties are named when issuing and being served with pleadings. If circumstances change during the litigation, such as a party no longer has legal capacity, or if new information is discovered, take action to rectify the situation.
[1] Little v. Bramcan Investments Limited, 2024 ONSC 1485 (CanLII). [2] Rules of Civil Procedure, R.R.O. 1990, Reg. 194. [3] Bankruptcy and Insolvency Act, R.S.C., 1985, c. B-3.