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Debt - Assignment

Assignment - Legal v Equitable

Landmark Vehicle Leasing Corporation v. Mister Twister Inc. (Ont CA, 2015)

In this case the Court of Appeal considered the situation of an assignment of a debt or chose in action for which no written notice was given to the debtor/obligor. Where notice was given though not in writing the court held than an equitable assignment had nonetheless occured, and thus would have required that the original creditor/obligee to be added as a party:
THE FAILURE TO GIVE WRITTEN NOTICE OF THE ASSIGNMENT

[9] The Conveyancing and Law of Property Act, R.S.O. 1990, c. C.34, applies to the lease assignments. Section 53(1) reads in part:
Any absolute assignment made on or after the 31st day of December, 1897, by writing under the hand of the assignor, … of any debt or other legal chose in action of which express notice in writing has been given to the debtor … is effectual in law, subject to all equities that would have been entitled to priority over the right of the assignee if this section had not been enacted, to pass and transfer the legal right to such debt or chose in action from the date of such notice, and all legal and other remedies for the same, and the power to give a good discharge for the same without the concurrence of the assignor. [Emphasis added.]
[10] Section 53(1) requires “express notice in writing” to the debtor. Although there is some ambiguity in her reasons, it would appear that the trial judge found that Mr. Blazys had express notice of the assignment, but not notice in writing. Ross Wemp Leasing therefore did not assign the leases to Landmark in law: see 80 Mornelle Properties Inc. v. Malla Properties Ltd., 2010 ONCA 850 (CanLII), 327 D.L.R. (4th) 361, at para. 22. Ross Wemp Leasing did, however, assign the leases to Landmark in equity. An equitable assignment does not require any notice, let alone written notice: Bercovitz Estate v. Avigdor, [1961] O.J. No. 20 (C.A.), at paras. 16, 25.

[11] The appellants, relying on DiGuilo v. Boland, 1958 CanLII 92 (ON CA), [1958] O.R. 384 (C.A.), aff’d, [1961] S.C.C.A. vii, argue that as the appellants did not have written notice of the assignment, Landmark could not sue on its own. Instead, Landmark had to join Ross Wemp Leasing in the action. The appellants argue that the failure to join Ross Wemp Leasing requires that the judgment below be set aside.

[12] DiGuilo does in fact require that the assignor of a chose in action be joined in the assignee’s claim against the debtor when the debtor has not received written notice of the assignment. The holding in DiGuilo tracks rule 5.03(3) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194:
In a proceeding by the assignee of a debt or other chose in action, the assignor shall be joined as a party unless,

(a) the assignment is absolute and not by way of charge only; and

(b) notice in writing has been given to the person liable in respect of the debt or chose in action that it has been assigned to the assignee. [Emphasis added.]
[13] Yet the assignee’s failure to join the assignor does not affect the validity of the assignment or necessarily vitiate a judgment obtained by the assignee against the debtor. Rule 5.03(6) reads:
The court may by order relieve against the requirement of joinder under this rule.
[14] The joinder requirement is intended to guard the debtor against a possible second action by the assignor and to permit the debtor to pursue any remedies it may have against the assignor without initiating another action: DiGuilo, at p. 395. Where the assignee’s failure to join the assignor does not prejudice the debtor, the court may grant the relief in rule 5.03(6): see Gentra Canada Investments Inc. v. Lipson, 2011 ONCA 331 (CanLII), 106 O.R. (3d) 261, at paras. 59-65, leave to appeal refused, [2011] S.C.C.A. No. 327.

[15] In this case, the trial judge found that Mr. Blazys, and effectively all of the appellants, gained actual notice of the lease assignments very shortly after the assignments were made and well before Landmark sued. Armed with actual, albeit not written, notice of the assignment, the appellants could fully protect themselves against any prejudice from Landmark’s failure to join Ross Wemp Leasing. Had the appellants seen any advantage in joining Ross Wemp Leasing, either to defend against Landmark’s claim or to advance a claim against Ross Wemp Leasing, the appellants could have moved for joinder under rule 5.03(4). The appellants’ failure to bring a motion to add Ross Wemp Leasing speaks loudly to the absence of any prejudice caused by Landmark’s failure to join the assignor.

[16] Ross Wemp Leasing perhaps should have been a party to the proceeding. Landmark’s failure to join Ross Wemp Leasing, however, did not prejudice the appellants and should have had no impact on the trial judgment. If requested, this court will make a nunc pro tunc order relieving Landmark from the requirement of joining Ross Wemp Leasing in the action.

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