Island Seafoods, LLC Plaintiff - v. -, 2012 NSSC 348

SUPREME COURT OF NOVA SCOTIA Citation: Island Seafoods, LLC v. R. & L. Fisheries Ltd., 2012 NSSC 348 Date: 20121012 Docket: Yar. # 356561 Registry: Yarmouth Between: Island Seafoods, LLC Plaintiff - and - R. & L. Fisheries Limited Defendant R. & L. Fisheries Limited Plaintiff by Counter-Claim - and - Island Seafoods, LLC Defendant to Counter-Claim Judge: The Honourable Justice Pierre L. Muise Heard: September 6, 2012, in Yarmouth, Nova Scotia Oral Decision: September 6, 2012 Counsel: Allen C. Fownes, for the plaintiff Andrew S. Nickerson, Q.C. for the defendant ORALLY

ORALLY [1] This is the matter of Island Seafoods, LLC and R. & L. Fisheries Limited. The file number is Yarmouth number 356561. I’lldeal first with the motion by R.& L. Fisheries Limited to stay the action, because the Plaintiff is not registered under the corporations - orwas not registered under the Corporations Registration Act, R.S.N.S., 1989, c. 101 at the time that the action was filed. [2] The named Plaintiff company, Island Seafoods, LLC is a foreign corporation without a registered office in Nova Scotia.

Island Seafood II, LLC is a Delaware company that is now registered in Nova Scotia. [3] The Defendant argues that the Plaintiff company is not permitted to maintain or bring this cause of action. The action wasfiled September 28, 2011.

Island Seafood II, LLC was only registered to do business in Nova Scotia on June 15, 2012 and that onlyhappened after being notified of the non-registration. [4] Section 17(1) of the Corporations Registration Act provides that: “Unless and until a corporation holds a certificate of registration that is in force, it shall not be capable of bringing or maintaining anyaction, suit or other proceedings in any court in the Province in respect to any contract made in whole or in

part in the Province inconnection with any part of its business done or carried on in the Province while it did not hold a certificate of registration that was inforce, provided however, that this

Section shall not apply to any company incorporated by or under the authority of

an Act of theParliament of Canada or by or under the authority of

an Act of the Legislature.” [5] Those types of companies, that are excepted from the application of this section, are sometimes, in the case law, referred to as“dominion” and “domestic” corporations. [6] I will leave aside, for the moment, the issue of whether the - sorry, the issue of the Plaintiff company being accidentallymisnamed on the Statement of Claim. I will assume for the moment, that Island Seafood II, LLC is the named Plaintiff. [7] In the case at hand, there is no dispute whether section 17(1) applies to the Plaintiff company. It is not disputed that it not a“domestic” nor a “dominion” corporation.

It is not disputed that the subject matter of the litigation involves a contract made in whole orin

part in Nova Scotia and the business was done in Nova Scotia. [8] The real issue in this case is that the timing of - is that of the timing of the registration of the Plaintiff company. It started theaction without being registered, though it mistakenly used an incorrect name. It has now registered under the Corporations RegistrationAct of Nova Scotia.

The question is whether that subsequent registration cures the lack of registration when the action was commenced. [9] Our Court of Appeal in Jacobsen v. 1358751 Nova Scotia Ltd, 2008 NSCA 45, at paragraphs 24 to 34, pointed out that itsdecision in Industrial Acceptance Corp. v. Donald E. Hirtle Transport Ltd et al (1978), 28 N.S.R. (2d) 482, which I’ll refer to as I.A.C.,and in C.B.M.Contracting & Developing Ltd v. Johnstone (1980), (NS CA), 39 N.S.R. (2d) 156, which I’ll refer toas C.B.M., were not in conflict. [10] It noted that I.A.C. and a case following it, Kaesser Compressors Inc. v.

Bent, (2006), 2006 NSSC 285 , 247 N.S.R.(2d) 359 (S.C.), dealt with a detailed consideration of section 17(1) and the proviso in it that it does not apply to “domestic” or“dominion” corporations. [11] In contrast, C.B.M .dealt with the issue of timing. The issue in the case at hand is one of timing. Therefore, in my view, I.A.C.and Kaesser do not assist in our determination. [12] The Court of Appeal in Jacobsen, at paragraph 32, indicated that the issue of timing was not before it, so it did not deal with it.

[13] In C.B.M., the company in question was properly registered when the action was started, but before trial its registration wasrevoked, and that is noted at paragraph 67. The issue it had to address - the issue the Court had to address is whether the company couldmaintain the action after rectifying the lapsed registration. The Court found that it could. In so doing, it cited with approval a portion ofShore v. Cantwell and Cantwell (1975), (NS SC), 21 N.S.R. 288 (N.S.S.C., T.D.), which addressed a situation -which addressed - sorry, which discussed situations the word “maintain” would cover.

However, it did not comment on whether itapproved of the approach in Shore regarding situations where there is no registration when the action is commenced. [14] Allto-Imports and Fairbanks (1988), (NS CA), 84 N.S.R. (2d) 380 (N.S.C.

A) does not answer the questionin the case at hand either, because the Court found that when Allto-Imports commenced the action, section 44(1) of the CorporationsRegistration Act, which is now section 17(1), did not apply to it, because it was not carrying on business in Nova Scotia. As such, therewas no bar to the commencement of the action and it could be maintained by the assignee company, which itself became registered in thecourse of the proceedings, and thus could maintain the action after it was registered. [15] Similarly, in MacMullin v.

D’Addario (1988), (NS SC), 88 N.S.R. (2d) 383 (N.S.S.C., T.D.), it appears thatthe issue was also whether an action commenced while registered could be maintained after it was - after the registration subsequentlylapsed and was reinstated. I say it “appears”, because the decision is vague on that point. However, at paragraph 54, it refers to“bringing and maintaining an action by a company not duly registered under the Act”, and the only word in that phrase that is highlightedis the word “maintaining”.

Further, that case follows C.B.M. where there was no issue of non-registration when the action was started. [16] The only case, in my view, which has been provided which clearly addresses the issue of non-registration, at the time of theaction - at the time of the commencement of the action, is Shore. Shore dealt with registration under what was

section 19 of thePartnership and Business Names Registration Act, R.S.N.S., 1967, c. 225. That

section read: “Unless and until a partnership holds a certificate of registration that is in force, the partnership or the members thereof shall not becapable of bringing or maintaining any action, suit or other proceeding in any court of Nova Scotia in respect to any contract made inwhole or in

part in Nova Scotia in connection with any of the purposes or objects of the partnership carried out in Nova Scotia whilst itdid not hold a certificate of registration that was in force; provided that in the event of a certificate of registration having been cancelledowing to the dissolution of the partnership, the members of such partnership shall be capable of bringing and maintaining an action, suitor other proceeding in any court in Nova Scotia in respect to any contract at any time made by the partnership in the same manner and aseffectual to all intents and purposes as if this Act had not been passed.” [17] With the exception of the proviso, the wording in

section 19, of the then Partnership and Business Names Registration Act, isessentially identical to section 17(1) of the now - current Corporations Registration Act. The Plaintiff partnership in that case hadregistered only after the start of the action. [18] At paragraph 17, in Shore, the Court stated: “The sole issue here is to determine whether under the provisions of

Section 19 of the said Act the plaintiff having registered subsequentto the commencement of the action can continue to ‘maintain’ this action.” [19] The Court struck the Statement of Claim. It’s reasons included the following. [20] At paragraph 29: “Counsel for the plaintiff argues that the use of both words i.e. ‘bring or maintain’ in conjunction with the words ‘unless and until’allows a party to register after commencement of action and still maintain the proceeding.

If this had been the intention of theLegislature it would have adopted the Ontario wording, restricting itself to ‘maintaining.’ Our legislators saw fit to use both words and itis to be presumed that they did so with good reason.” [21] At paragraph 31:

“The use of the word ‘maintain’ would cover the situation where a certificate of registration expired during the course of court action. In order to ‘maintain’ its action, a partnership would have to renew its registration, i.e. ‘hold certificate of registration that is in force’.” [ 22 ] And, at paragraphs 38 and 39: “Prior to commencement of a court action relative to the subject matter described in

Section 19 of the said Partnerships and Business Names Registration Act , a partnership must have issued to it under the provisions of this Act a certificate of registration that is in force. Having complied with the Act as to the starting of the action, the partnership in order to carry on or continue the action is subject to the same sanction. Registration subsequent to the commencement of action is not compliance with the Act.” [ 23 ] With respect for others who have a contrary opinion, I agree with these reasons.

It makes sense to me that the ability to maintain an action can be reinstated part way through the process by registering after a lapsed registration. Maintaining an action is an ongoing event. It is merely suspended during non-registration. In contrast, commencing an action is a one time event. The party seeking to commence the action is either registered, or is not registered, at the time. It is thus either authorized, or not authorized, to commence the action. [ 24 ] This

interpretation gives effect to the wording of section 17(1). [ 25 ] Unless and until the corporation is registered, it cannot bring an action. So if it is not, at the time, it can wait until it is registered to bring the action. [ 26 ] Unless and until the corporation is registered, it cannot maintain an action.

So if it is not registered, it cannot proceed further, without the - with the action until it does become registered and can proceed further with the action. [ 27 ] Suspending an action that was started with registration in place, until the lapse in registration is rectified, gives effect to the punitive provision, that is section 17(1). [ 28 ] To allow the commencement of an action without registration to be cured by subsequent registration would retroactively forgive a contravention of a penal provision of the Act . [ 29 ] Mr.

Nickerson makes a good argument that requiring the Plaintiff to recommence an action would be contrary to the objective of the Civil Procedure Rules which is the just, speedy and inexpensive determination of proceedings. However not requiring the Plaintiff to do so, would in essence, legitimize the contravention of a penal provision of

an Act of the Legislature. [ 30 ] The Court of Appeal in Jacobsen , at paragraph 23 , noted that the restriction in the ability to bring an action is a sanction for non-registration. To allow a wrongfully commenced action to continue would eliminate that sanction. [ 31 ] There may be cases where to insist on the penalty would work an unfairness on the corporate Plaintiff that would be out of proportion with the importance of the sanction, that is the sanctioning of non-registration, and in those cases there might be situations where relief from such a penalty would be appropriate; but, in my view, the case before me is not one of those situations.

[ 32 ] The corporate Plaintiff wrongly maintained the action from September 28, 2011 to June 15, 2012 before registering. It now will be able to recommence the action.

It is not statute barred. [ 33 ] The inconvenience to the corporate Plaintiff, in my view, is minimal. [ 34 ] In this case the Plaintiff, as I indicated, was not registered, so it was not authorized to commence the action, it could not do so, and therefore the Statement of Claim is struck. [ 35 ] Given this result, it is unnecessary to address the issue of the accidental misnomer regarding the Plaintiff ’ s name. [ 36 ] The Defendant is not requesting any amendments to the pleadings at this point, and it only seeks costs of this application in the amount of $1,500.00.

The range, in accordance with Tariff “ C ” , is $750.00 to $1,000.00, less - it ’ s been less than one-half day, but more than one hour. [ 37 ] In my view, the Shore case addressed the issue. However, there has been no final word from the Court of Appeal regarding whether an action started without registration can be cured with subsequent registration. [ 38 ] There is case law that shows that a registration lapsed in the course of the action can be cured. Therefore, it was not unreasonable for the Plaintiff to contest the application.

On the other hand, it is the Plaintiff who created the situation in the first place. [ 39 ] Considering these factors, I exercise my discretion to order costs that are less than the range, and so I order costs of $500.00; but, those costs are payable forthwith. [ 40 ] So, I ’ d ask that you would prepare the order then, Mr. Fownes. ___________________________ PIERRE MUISE, J