South Yukon Forest Corporation v. Canada

South Yukon Forest Corporation v. Canada Court (s) Database Federal Court of Appeal Decisions Date 2006-01-27 Neutral citation 2006 FCA 34 File numbers A-641-04 Notes Digest Decision Content Date: 20060127 Docket: A-641-04 Citation: 2006 FCA 34 CORAM: ROTHSTEIN J.A. NADON J.A. PELLETIER J.A. BETWEEN: SOUTH YUKON FOREST CORPORATION Appellant and HER MAJESTY THE QUEEN Respondent Heard at Vancouver, British Columbia, on December 1, 2005. Judgment delivered at Ottawa, Ontario, on January 27, 2006. REASONS FOR JUDGMENT BY: NADON J.A. CONCURRED IN BY: ROTHSTEIN J.A. PELLETIER J.A. Date: 20050127 Docket: A-641-04 Citation: 2006 FCA 34 CORAM: ROTHSTEIN J.A. NADON J.A. PELLETIER J.A. BETWEEN: SOUTH YUKON FOREST CORPORATION Appellant and HER MAJESTY THE QUEEN Respondent REASONS FOR JUDGMENT [1] This is an appeal from the decision of Madam Justice Heneghan of the Federal Court, dated November 23, 2004, as amended by an Order dated January 11, 2005, which dismissed, in part, the appellant's motion seeking to: 1. add as a co-plaintiff Liard Plywood & Lumber Manufacturing Inc. ("LPL"); 2. amend its Statement of Claim to add a new cause of action in breach of contract; 3. make various incidental amendments to its Statement of Claim with respect to existing causes of action. [2] It will be useful, at the outset, to reproduce the two Orders made by the learned Motions Judge: Order of November 23, 2004: The Plaintiff's motion to join LPL as a plaintiff is dismissed. The Plaintiff's motion to amend the statement of claim and to introduce a claim in contract is allowed. The Plaintiff shall serve and file a clean statement of claim, omitting the proposed amendments which sought to incorporate LPL as a plaintiff in this action, within ten (10) days of this Order. Leave is granted for the Defendant to serve and file an amended statement of defence within two week after the receipt of the clean statement of claim. The parties shall serve and file their submissions on costs as follows: the Plaintiff shall serve and file its submissions within seven days of this Order and the Defendant to serve and file its submissions within seven days after receipt of the Plaintiff's submissions. There will be no reply material. **************** Order of January 11, 2005: UPON it appearing that there is a clerical error in paragraph 2, line 1 of the Order issued on November 23, 2004, addressing the Plaintiff's motion to amend the Statement of Claim; AND pursuant to the Federal Court Rules, 1998, SOR/98-106 (the "Rules"), in particular Rule 397(2) the said Order is hereby amended by removing the word "and" so that the first sentence of paragraph 2 reads as follows: The Plaintiff's motion to amend the statement of claim in contract is allowed. In all other respects, the Order remains unchanged. [Emphasis Added] [3] I also reproduce Rules 104 and 397 of the Federal Court Rules, 1998, which are relevant to the determination of the issues before us: 104. (1) At any time, the Court may (a) order that a person who is not a proper or necessary party shall cease to be a party; or (b) order that a person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all manners in dispute in the proceeding may be effectually and completely determined be added as a party, but no person shall be added as a plaintiff or applicant without his or her consent, signified in writing or in such other manner as the Court may order. ... 397. (1) Within 10 days after the making of an order, or within such other time as the Court may allow, a party may serve and file a notice of motion to request that the Court, as constituted at the time the order was made, reconsider its terms on the ground that (a) the order does not accord with any reasons given for it; or (b) a matter that should have been dealt with has been overlooked or accidentally omitted. (2) Clerical mistakes, errors or omissions in an order may at any time be corrected by the Court. 104. (1) la Cour peut, à tout moment ordonnner : a) qu'une personne constituée erronément comme partie ou une partie dont la présence n'est pas nécessaire au règlement des questions en litige soit mise hors de cause; b) que soit constituée comme partie à l'instance toute personne qui aurait dû l'être ou dont la présence devant la Cour est nécessaire pour assurer une instruction complète et le règlement des questions en litige dans l'instance; toutefois, nul ne peut être constitué codemandeur sans son consentement, lequel est notifié par écrit ou de telle autre manière que la Cour ordonne. [...] 397. (1) Dans les 10 jours après qu'une ordonnance a été rendue ou dans tout autre délai accordé par la Cour, une partie peut signifier et déposer un avis de requête demandant à la Cour qui a rendu l'ordonnance, telle qu'elle était constituée à ce moment, d'en examiner de nouveau les termes, mais seulement pour l'une ou l'autre des raisons suivantes : a) l'ordonnance ne concorde pas avec les motifs qui, le cas échéant, ont été donnés pour la justifier; b) une question qui aurait dû être traitée a été oubliée ou omis involontairement. (2) Les fautes de transcription, les erreurs et les omissions contenues dans les ordonnances peuvent être corrigées à tout moment par la Cour. [4] The appellant, South Yukon Forest Corporation, commenced proceedings in the Federal Court on November 9, 2001, and an Amended Statement of Claim was filed on August 27, 2002. Briefly put, the appellant alleges that on the basis of an agreement with and representations and promises made by the Department of Indian Affairs and Northern Development (the "Department") to the effect that a certain minimum volume of wood would be allocated to the Watson Lake area of the Yukon, it proceeded to construct a sawmill in that area. The appellant says that the Department's failure to make the minimum volume of wood available has given rise to claims for breach of contract, negligent representation, negligence, breach of fiduciary duty and abuse of public office. [5] On February 13, 2004, the appellant filed the motion which is the subject matter of the two Orders made by the Motions Judge. As appears from those Orders, the Motions Judge denied the appellant leave to add LPL as a plaintiff and granted leave in respect of the introduction of a new cause of action, i.e. breach of contract. With respect to that part of the appellant's motion which sought to make what have been characterized as "incidental amendments", there is some doubt, by reason of the Judge's second Order, as to what she ordered. [6] Before turning to the grounds put forward by the appellant in seeking to add LPL as a plaintiff, a brief review of the affidavit of Alan Glen Kerr, at one time the President of both the appellant and LPL, sworn on February 9, 2004, is necessary. Mr. Kerr's affidavit was filed by the appellant in support of its motion to add LPL as a plaintiff. [7] Mr. Kerr testified that LPL, which was incorporated on January 26, 1996, entered into discussions in the summer of 1997 with the principals of 391605 B.C. Ltd., for the specific purpose of concluding an agreement concerning the construction of a wood manufacturing complex at Watson Lake in the Yukon. Whereas 391605 B.C. Ltd. would provide financial support and expertise to design, fabricate, install and operate the proposed wood manufacturing complex, LPL would provide the venture capital, business plans, goodwill, mill site lease, logging agreements and interests and equities in the project. [8] To implement their agreement, LPL and 391605 B.C. Ltd. agreed that a new entity, namely South Yukon Forest Corporation, the appellant, would be incorporated with LPL holding a sole issued share in trust for LPL and 391605 B.C. Ltd. It was agreed between the parties that the appellant would carry out the project on their behalf, including the construction and operation of the wood manufacturing complex. The appellant was incorporated on November 5, 1997. [9] At paragraphs 20 to 27 of his affidavit, Mr. Kerr refers to that part of the Amended Statement of Claim and, in particular, to paragraph 12 thereof, wherein allegations are made concerning assurances, representations, commitments and promises made by the respondent, prior to the incorporation of the appellant on November 5, 1997, and states that those assurances, representations, commitments and promises were made by the respondent to LPL or its officials, agents, employees or representatives. [10] At paragraph 32 of his affidavit, Mr. Kerr states that during the course of the examination for discovery of the appellant on February 6, 2003, counsel for the appellant informed counsel for the respondent that all of the rights of LPL had been assigned to the appellant as of the date of incorporation of that entity. [11] The appellant's primary position in this litigation is that it is entitled to pursue all rights of action against the respondent, more particularly, on the basis that all of LPL's causes of action against the respondent were assigned to it. However, in the alternative, it is the appellant's contention that should the assignment be found to be invalid or defective, either in law or in equity, then LPL is entitled to pursue all of its rights against the respondent. These submissions are reflected in paragraphs 6 and 7 of the proposed second Amended Statement of Claim dated April 27, 2004, which was attached to the appellant's motion of February 13, 2004: 6. In or about 1997, LPL caused South Yukon Forest Corporation to be incorporated for the purposes of acting as the operating entity of the joint venture and LPL assigned to South Yukon Forest Corporation all of its rights, titles, interests and equities in the Watson Lake sawmill project, including any and all actions, claims, demands, causes of action that it had or may have had against the Defendant. 7. Alternatively, in or about 1997, LPL entered into an agreement with 391065 British Columbia Ltd. wherein LPL contributed to the venture certain rights, titles, interests and equities, but retained any and all rights, claims, demands, causes of action against the Defendant with respect to assurances, representations, commitments and promises made by the Defendant to LPL. [12] Consequently, the appellant submits that LPL must be added as a plaintiff to the action, so as to protect all rights of action against the respondent. [13] The Judge dismissed the appellant's request to add LPL as a plaintiff. Firstly, she found that the issue arising from the alleged assignment of rights from LPL to the appellant was a question of fact and that it did not necessarily follow that a person became a necessary party to an action simply because it could produce evidence pertaining to a relevant issue. The Judge was also of the view that the issue of the assignment was peripheral to that part of the appellant's motion which sought to amend the Statement of Claim so as to plead breach of contract. In her view, there was not "a necessary connection between the two issues". [14] Secondly, the learned Judge pointed out that, contrary to Rule 104(1)(b) which requires written consent on the part of the proposed plaintiff, there was no written consent on the part of LPL before the Court. [15] As I have just indicated, the appellant seeks to add LPL as a plaintiff, not to make proof of the assignment of LPL's rights, but to protect the rights of action against the respondent should the assignment be found invalid or defective. At paragraphs 32 to 65 of its Memorandum of Fact and Law, the appellant explains in great detail why it is possible that the Trial Judge might conclude that there is a problem with the assignment. Specifically, the appellant submits that the Trial Judge might find that the assignment is a non-absolute, equitable assignment of legal choses in action, or that the assignment is invalid because LPL's claims against the respondent constitute "Crown debts" which cannot be assigned. In the appellant's submission, in either of these circumstances, LPL must be joined as a plaintiff to protect the rights of action against the respondent. [16] The respondent, in opposing the joining of LPL as a plaintiff and, thus, in supporting the decision of the Motions Judge, makes a number of submissions. [17] Firstly, it says that as the Order is a discretionary order, this Court should not intervene unless persuaded that the Judge either erred in principle or that she was clearly wrong on the facts. The respondent submits that the Judge did not make any such error. [18] Secondly, the respondent submits that the Judge made no error in holding that a written consent from LPL was required in order to comply with Rule 104(1)(b). [19] Thirdly, the respondent argues that the Judge was correct in finding that the appellant, whose onus it was to show that LPL's presence was necessary, failed to meet its burden. [20] In my view, the learned Judge erred in refusing to allow the joining of LPL as a plaintiff. I am satisfied that the Judge's error results from both a misunderstanding of the appellant's reasons for seeking to add LPL as a plaintiff and an erroneous interpretation of Rule 104. [21] With respect to LPL's failure to provide a written consent, I am of the opinion that in concluding that Rule 104(1)(b) required the filing of a written consent by LPL, prior to her determination, the Judge erred in law. [22] Rule 104(1)(b) simply provides that "no person is to be added as a plaintiff without his or her consent, signified in writing or in such manner as the Court may order". The Rule does not make it an absolute condition that a person file a written consent prior to a determination of the issue, nor does it limit the giving of a consent to a written expression. The Court may, depending on the circumstances, be satisfied that a person's consent, signified in a manner other than in writing, is sufficient. [23] In my view, the fact that both LPL and the appellant are represented by the same solicitors and that counsel informed the Judge at the hearing that LPL consented to be joined as a plaintiff, should have led the Judge to conclude that there was consent on the part of LPL and that, as a result, the requirements of Rule 104(1)(b) had been met. At the very least, in those circumstances, the Judge should have, as the appellant suggests, made an order conditional on the filing of a written consent by LPL. [24] I now turn to the appellant's main contention, i.e. that LPL is a necessary party to this litigation and, thus, under Rule 104, an order allowing it to be added as a plaintiff ought to have been made by the Judge. [25] Although it is true, as the respondent correctly points out, that the Court must be very cautious in interfering with a Judge's discretionary order, I am of the opinion that the Judge was clearly wrong on the facts. In my view, she misunderstood the basis upon which the joining of LPL as a plaintiff was being sought. At paragraph 13 of these Reasons, I indicated the basis upon which the Judge dismissed the appellant's motion to add LPL as a plaintiff. Her reasoning is found at paragraphs 17 and 18 of her Reasons, which read as follows: [17] The alleged assignment is a question of fact and consequently, a question of evidence. A person is not a necessary party merely because that person can produce relevant evidence; see Stevens v. Canada(Commissioner, Commission of Inquiry), [1998] 4 F.C. 125 (C.A.). [18] It appears to me that the issue of the assignment is peripheral to the Plaintiff's proposed amendment of the statement of claim in order to plead breach of contract. I do not see a necessary connection between the two issues. [26] It is clear from the above passages that the Judge did not give any consideration to the specific ground put forward by the appellant in seeking leave to add LPL as a plaintiff, i.e. that should the assignment not be valid, it was necessary to have LPL in the litigation so as to protect the rights of action against the respondent. [27] The respondent, in supporting the Motions Judge's decision, points to the lack of evidence concerning the assignment by LPL of its rights to the appellant. More particularly, it says that the appellant failed to particularize the type of assignment and the type of chose in action asserted. [28] These considerations are irrelevant. What was before the Motions Judge was not whether LPL effectively assigned its rights to the appellant, but whether, in the circumstances, it was necessary to allow the joining of LPL as a plaintiff in order to permit a proper determination of the issues raised by the pleadings. In my view, the answer to that question can only be in the affirmative. [29] The position asserted by the appellant and LPL appears clearly in paragraphs 6 and 7 of the proposed second Amended Statement of Claim, which I have already reproduced. The appellant and LPL take the position that LPL's rights of action against the respondent have been assigned to the appellant. If that contention is right, then, should there be liability on the part of the respondent, the appellant may be entitled to obtain the remedies which it seeks. However, should the assignment not be effective, then full recovery against the respondent will not be possible unless LPL is joined as a party. [30] Consequently, in these circumstances, contrary to the position taken by the respondent, I do not see that on its motion to add LPL as a plaintiff, the appellant need go further than allege the assignment which, it says, was made by LPL. Whether or not, in the end, it succeeds on that issue is not a relevant consideration for us in this appeal, nor should it have been for the Motions Judge. [31] I therefore conclude that in refusing to grant leave to the appellant to add LPL as a plaintiff, the learned Judge was clearly wrong on the facts before her. [32] I now turn to the issue concerning the incidental amendments. This issue arises by reason of the second Order made by the Judge on January 11, 2005, which I have already reproduced with the first Order. To complete the picture, it is also necessary to refer to paragraphs 23 to 25 of the Reasons given by the Motions Judge in support of her first Order: [23] The proposed amendments are not for the purpose of altering the capacity in which the Plaintiff brings this action but for the dual purpose of introducing a new party and a new cause of action, that is breach of contract arising from an implied contract with the Defendant. Otherwise, the proposed amendments refer to contractual arrangements between LPL and others, and particularize the claim in negligence against the Defendant. [24] The recent jurisprudence from the Federal Court of Appeal concerning amendments to pleadings seems to favour granting such amendments. In this regard, I refer to Society of Composers, Authors and Music Publishers of Canada v. Landmark Cinemas of Canada Ltd. et al.(2004), 316 N.R. 387 (F.C.A.) and Iris, Le Groupe Visuel (1990) Inc. v. Trustus International Trading Inc., [2004] F.C.J. No. 752. [25] In the result, the Plaintiff's motion to join LPL is dismissed. The motion to amend the statement of claim to introduce a claim in contract is allowed, on the basis that the Plaintiff shall bear all costs occasioned by such amendments. [33] At paragraph 25 of her Reasons, the Judge says that she is allowing "[t]he motion to amend the statement of claim to introduce a claim in contract...". However, the Order reads differently. It says that "[t]he Plaintiff's motion to amend the statement of claim and to introduce a claim in contract is allowed..." [34] The Order further provides that in serving and filing a new Amended Statement of Claim, the appellant is to omit "the proposed amendments which sought to incorporate LPL as a plaintiff in this action...". In other words, the plaintiff is to include in its new Amended Statement of Claim all amendments sought, save those pertaining to the joining of LPL as a plaintiff. [35] On the basis of the first Order and the Reasons given by the Judge for that Order, the appellant filed and served a second Amended Statement of Claim incorporating the "contract" amendments and the incidental amendments. In an Amended Statement of Defence filed and served in answer to the second Amended Statement of Claim, the respondent replied to both the "contract" amendments and the incidental amendments resulting from the first Order. The second Amended Statement of Claim and the second Amended Statement of Defence were served and filed prior to the Judge's second Order. [36] I must say, at the outset, that the first Order is clear. There is no ambiguity in that there cannot be any doubt that the Judge allowed the incidental amendments. Not only does the Order provide that the appellant's motion to amend the Statement of Claim and to introduce a claim in contract is allowed, but it directs the appellant to serve and file "a clean statement of claim" which is to incorporate the amendments sought, save for those pertaining to the joining of LPL as a plaintiff. The Order made by the Judge follows logically from what she says at paragraphs 23 and 24 of her Reasons. At paragraph 23, she explains that the amendments sought by the appellant are made for the purpose of introducing a new cause of action, i.e. in breach of contract, and for the purpose, inter alia, of particularizing the existing claim in negligence against the respondent. At paragraph 24, she refers to the jurisprudence of this Court regarding amendments to pleadings and states that that jurisprudence favours the granting of amendments. Thus, the wording of the first Order comes as no surprise. In fact, both the appellant and the respondent, in serving and filing their amended Statements of Claim and Defence, assumed that the Judge had granted leave to the appellant to make the incidental amendments. In my view, on the wording of the first Order, the appellant and the respondent were correct in their view that the incidental amendments had been allowed. [37] In any event, it seems to me that, having pleaded to the second amended Statement of Claim without objection, it does not now lie in the respondent's mouth to argue that it is improper. If that is the respondent's view, it ought to have brought its own motion under Rule 58 before pleading to the second amended Statement of Claim. [38] In her Order of January 11, 2005, the Judge, purporting to correct a clerical error pursuant to Rule 397(2), deleted the words "and to introduce a claim" from the first sentence of the second paragraph of the first Order. As a result of this Order, the appellant is in doubt as to whether the incidental amendments have been allowed. [39] Although the Judge made her second Order on the basis of Rule 397(2), I am of the view that she was not entitled to make the Order on that basis. Rule 397(2) allows the Court, at any time, to correct clerical mistakes, errors or omissions in an Order. In my view, the corrections made by the Judge to her first Order do not fall within the purview of that Rule. Rather, it appears to me that the present facts might have given rise to a motion to reconsider pursuant to Rule 397(1), on the grounds that the Order did not accord with the Reasons or that a matter that should have been dealt with had been overlooked or accidentally omitted. In the event, neither party made such a motion because they perfectly understood the first Order as having granted the incidental amendments. [40] In Montreal Fast Print (1975) Ltd. v. Polylok Corp., [1984] 1 F.C. 713, an appeal before this Court dealt with a decision of a Motions Judge, who had made an Order regarding examinations for discovery, to amend that Order on a motion for reconsideration. After stating that there was no reason to believe, on the facts of the case, that there was a clerical mistake in the Order within the meaning of Rule 337(c) (now Rule 397(2)), Thurlow C.J. made the following statement at page 718: Two points should be noted. First, on the face of it there was no ambiguity or, uncertainty as to what the original order meant. Nor was there anything about it that was incomplete. Further, it was not an order that was unreasonable on its face or such as would cause one to think it had been made inadvertently. On the facts as described and having regard to the nature of the action and other considerations to be taken into account, it was not an order that would be regarded as unlikely. The other point to be observed is that, having regard to what it was that needed to be decided, the effect of the amendment was to completely reverse what had been ordered. [41] Like Thurlow C.J. in MontrealFast Print, supra, I am of the view that on the facts of the case before me, there was no clerical mistake in the Order within the meaning of Rule 397(2). Whether or not a motion for reconsideration brought under Rule 397(1) would succeed is an issue which I need not decide. However, as no such motion was brought, the first Order must stand. [42] For these reasons, I would allow the appeal with costs, set aside the Order of January 11, 2005 and set aside the Order of November 23, 2004, to the extent that it dismissed the appellant's motion to add LPL as a plaintiff. Rendering the judgment which ought to have been rendered, I would allow, in its entirety, the appellant's motion to amend its Statement of Claim. As a result, I would modify the Order of November 23, 2004 as follows: The plaintiff's motion to join LPL as a plaintiff, to amend its Statement of Claim to add a new cause of action in breach of contract and to make various incidental amendments with respect to existing causes of action is allowed. The plaintiff shall serve and file a clean Statement of Claim incorporating all of the amendments, including those pertaining to the joining of LPL as a plaintiff, within ten (10) days of this Order. Leave is granted to the defendant to serve and file an Amended Statement of Defence within two (2) weeks after service of the clean Statement of Claim. [43] Finally, I would amend the style of cause as follows, to reflect the joining of LPL as a plaintiff: SOUTH YUKON FOREST CORPORATION and LIARD PLYWOOD AND LUMBER MANUFACTURING INC. Plaintiffs AND HER MAJESTY THE QUEEN Defendant [44] One final point. As appears from the Judge's Order of November 23, 2004, she invited the parties to make their submissions on costs and, as a result, that issue was dealt with in a separate Order. As that Order was not appealed by the appellant, I have not awarded the appellant costs on its motion to amend, even though I am proposing that we allow the motion in its entirety. "M. Nadon" J.A. "I agree. Marshall Rothstein J.A." "I agree. J.D. Denis Pelletier J.A." FEDERAL COURT OF APPEAL NAMES OF COUNSEL AND SOLICITORS OF RECORD DOCKET: A-641-04 (APPEAL FROM AN ORDER OF THE FEDERAL COURT, DATED NOVEMBER 23, 2004, IN COURT FILE T-2012-01) STYLE OF CAUSE: SOUTH YUKON FOREST CORP. v. THE QUEEN PLACE OF HEARING: Vancouver, British Columbia DATE OF HEARING: December 1, 2005 REASONS FOR JUDGMENT BY: NADON J.A. CONCURRED IN BY: ROTHSTEIN J.A. PELLETIER J.A. DATED: January 27, 2006 APPEARANCES: Mr. Chris Wilson FOR THE APPELLANT Mr. Gary Whittle FOR THE RESPONDENT SOLICITORS OF RECORD: Bull, Housser & Tupper Barristers & Solicitors Vancouver, B.C. FOR THE APPELLANT Whittle & Company Barristers & Solicitors Whitehorse, Yukon Territory FOR THE RESPONDENT