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Assignment - Limitations. Hazout v. The Attorney General of Ontario
In Hazout v. The Attorney General of Ontario (Div Court, 2023) the Divisional Court considers whether Ontario, which is not normally subject to a limitation period [under s.16(1)(j) and s.16(2) Limitations Act] nonetheless is subject to the standard s.4 two-year limitation where it takes assignment or has direct standing as a guarantor (which was also found) of a debt:[4] Mr. Hazout submits that Ontario was not a party to the loan agreement and only gained its standing to bring the action as an assignee. He emphasizes that an assignee to an agreement stands in the shoes of an assignor and is subject to the benefits and burdens of the underlying agreement. In his submission, this means that, on assigning the loan, Ontario remained subject to the burden of the two-year limitation period that would have applied to the bank.
[5] I do not accept these submissions. At the outset, I have some concern about addressing these arguments on appeal. They were not directly raised before the Deputy Judge. The Deputy Judge found that Ontario was exempt from a statutory limitation period, but Mr. Hazout did not specifically argue that Ontario was bringing the action as an assignee. Therefore, the Deputy Judge did not have an opportunity to rule on the nature of Ontario’s standing to bring the action.
[6] If it is appropriate to reach a determination on this point by review of the documents, I would dismiss Mr. Hazout’s arguments. By way of background, Ontario is not subject to the general two-year limitation period set out in s.4 of the Limitations Act, 2002, S.O. 2002, c. 24, Schedule B (the “Act”). Paragraph 16(1)(j) of the Act, read together with s. 16(2), provide that “[t]here is no limitation period in respect of” a proceeding brought by the Crown in respect of claims relating to “the administration of social, health or economic programs.” There is no dispute that the New Ventures Program constitutes such a program.
[7] Contrary to Mr. Hazout’s submission, Ontario was not limited to starting the action as an assignee of the loan agreement. Instead, Ontario was also a guarantor of the loan. Section 4 of the loan agreement, signed by Mr. Hazout, provides that the loan is guaranteed by the Province of Ontario. In consideration of that guarantee, Mr. Hazout agreed “to indemnify the Province of Ontario upon demand for all payments made by the Province of Ontario pursuant to the Guarantee.”
[8] As a guarantor, Ontario had an independent right to be indemnified for the loan. As Hunt J.A. explained (in concurring reasons) in Canada (A.G.) v. Becker, 1998 ABCA 283, 223 AR 59, at paras. 32-39, the right to indemnity is different from a subrogated in that it permits the guarantor to sue in its own name. See also Ormston v. Manchester, 2019 ONSC 6529, at para. 14. . Attorney General of Ontario v. Hazout
In Attorney General of Ontario v. Hazout (Div Court, 2023) the Divisional Court, in considering the merits element of a motion to extend time to commence an appeal, considers whether an assignment to the Crown was effective to avoid an otherwise expired limitation period (this case involved the old Limitations Act, the new one binds the Crown):[13] Counsel for Hazout submits that the appeal has merit as there are at least arguable errors in the Merits decision. One asserted error is the Deputy Judge’s rejection of the application of the Limitations Act 2002, S.O. 2002, c. 24, or its predecessor, the Limitations Act, R.S.O. 1990, c. L.15, to bar the action. This action would have been statute-barred for being out of time if it had been brought by the Bank of Montreal; however, the debt was assigned to the Crown which was not subject to the limitation period in s. 45(1)(g) of the old Limitations Act: Attorney-General for Ontario v. Watkins, 1975 CanLII 375 (ON CA). Similarly, as the Deputy Judge found in this case, s. 16 of the current legislation, which came into force in 2004, exempts the Crown from limitation periods in claims relating to “the administration of social, health or economic programs” which include the recovery of “economic development loans.”
[14] A fundamental maxim of the law relating to assignments is that “you cannot assign what you do not have”: First City Capital Ltd. v. Petrosar Ltd.,; Casselman Financial Underwriters Ltd. et al., Third Parties, 1987 CanLII 4434 (ON SC), 1987, 61 O.R. (2d) 193 (H.C.) In the context of arbitration clauses, this Court has stated that “a party seeking to enforce assigned rights under an agreement can only do so subject to the terms and conditions embodied therein”, citing a long line of authority: ABN Ambro Bank Canada v. Krupp Mak Maschihnenbau GmbH, 1996, 135 D.R.L. (4th) 130 (Div. Ct.). I have not been provided with any authority that addresses whether the Crown, as an assignee of a debt, may then avoid the limitation period that otherwise would have applied to a private lender. Thus, I conclude that there is at least one arguable issue and therefore Hazout has satisfied me that the appeal has merit.
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