Litigation with the Atlantic Canada Opportunities Agency (ACOA)

In November, 2007, ACOA attorneys ended a long period of delay an inaction by filing a Notice of Intention to Proceed and also giving the American investors a Notice regarding the disclosure of partners' names. There was an obscure court rule--Civil Procedure Rule 7.02-- that said that by giving such a Notice to a partnership, the partnership must then reveal the names and addresses of all partners at the time the accrual of the cause of action occurred.

There were at least three major and obvious problems with this Notice. First, the accrual of the cause of action was the alleged default that ocurred in 2001, occasioned by the sale of a piece of land near Yarmouth in mid August, in yet ACOA was arguing that the accrual occurred in 1998.

Second, the partnership in question was dissolved in April, 1998 and formally registered with the Registry of Joint Stocks as dissolved on June 25, 1998. Therefore, when the cause of action arose, the partnership had been dissolved for more than 3 years.

Third, ACOA was claiming that the cause of action accrued when the offer for ACOA financing was formalized on June 5, 1998, which goes against all laws and definitions regarding contracts--you cannot have the right to bring a lawsuit for breach of contract go back to the date the contract was signed.

So, the American investors refused to respond to the Notice, and they wrote to ACOA's attorney telling him why.

Nevertheless, ACOA filed an application with the court for hearing on June 5, 2008 seeking to force the Defendants to respond to the Notice. ACOA provided no legal argument or evidence justifying the application. The judge heard no substantial arguments in court regarding why the order should be granted.

Nevertheless, after prompting by ACOA's attorney in November, 2008, the judge granted an Order written by ACOA's attorney telling the sole served defendant to reveal partners' names and addresses.

To appeal such a discretionary order from a Supreme Court judge, one only has 10 calendar days to file with the Court of Appeal. The Supreme Court prothonotary failed to get the order to the Defendants on the day it was granted, and instead got it to them 2 days later, thereby eliminating 20% of the time to prepare an appeal.

The judge gave no oral or written decision or justification for the Order.

The Order itself contained the same errors that caused the Defendant to not respond to the Notice from ACOA: It stated that the accrual of the cause of action was June 5, 1998: the day the agreement with ACOA was signed. On its face, this is wrong.

The accrual of the cause of action occurred in 2001, at which time there was no partnership, only a corporation. The partnership was actually dissolved before the offer from ACOA was received.

Despite the time constraints and the holidays, the American investors managed to file an appeal of the order. According to the court rules, a hearing to set a date for the appeal and to grant leave to appeal had to be heard at the next possible sitting of an Appeal's Court judge in chambers. This date was December 29, 2008.  

The attorney for ACOA told the Defendants that he could not appear on that date--despite that fact that it could all be done by telephone. The Defendants therefore asked the Registrar of the Court of Appeal if the date could be delayed, and they were told that the rules were the rules, and that no delay would be allowed under any circumstances. If ACOA's attorney could not appear, that was his problem.

The Defendants relayed this to ACOA's attorney, who then wrote to the Court stating that he could not appear on December 29. The court wrote back giving ACOA a date of January 7, 2009, and reversing what the Registrar had told the American investors about the rules.

At the same time, the Americans made the ususual request for a hearing about a stay of execution of the order to be made via tele-conference. The Court of Appeal judge allowed this to be heard over the objections of ACOA.

To receive a stay in Nova Scotia, one must prove either that you are going to suffer irreperable harm or there there are exceptional circumstances involved in the lower court's decision. The Americans argued for both, but truly focused on the fact that the order was clearly wrong on its face--the accrual of the cause of action was in 2001 not 1998, and when accrual occurred the partnership had been dissolved for more than 3 years.

ACOA provided no argument to support why the order was correct or why a stay should not be granted, other than to simply state that no harm would be suffered and there were no exceptional circumstances. During the hearing, the judge was incredulous that an appeal should be based on such a minor matter as the simple disclosure of partners' names, especially when ACOA already knew the name of the other partner and ACOA had sought no other way to serve him, such as an application for substituted service, which is quite common. The Americans argued that this was a matter of appealing a decision that was clearly flawed on its face, no matter how seemingly minor the consequences. To not challenge the order would be to allow it to contradict the facts and also centuries of established contract law.

The Court of Appeal judge shocked the Americans with his written decision. Instead of finding that the order was wrong on its face--which is an exceptional circumstance--he went beyond the arguments made by either side and beyond what was presented at the original hearing. He found that the order was not wrong on its face because the registration of the partnership's dissolution on June 25, 1998 must have been a cause of action--that is, ceasing to do business. ACOA has never claimed that the partnership dissolution was related to one of their claims against the Americans.

The judge conflated what the order says--that the cause of action accrued on June 5, 1998--with an event that was never raised as a claim or accrual event by anyone, including ACOA. This allowed him to state that the order was not clearly wrong on its face, and to deny the application for a stay.

In April, 2009, the American investors tired of waiting for a written order from the Supreme Court judge, and wrote asking him to recuse himself. On that same day, he finally provided a written order that simply ordered ACOA to produce documents in its possession, but did nothing to delve into the issues of document destruction brought to light the past November.

With this order in hand--even though it was against ACOA--the American investors once again filed an appeal. They also asked that both appeals be heard at the same time, which was granted.

The 3-judge panel of the Court of Appeal heard the American investors--self represented--in September, 2009 and issued a decision in October, 2009.

The Court set aside the order about partners' names and refused to alter the lower court's order regarding document production.

The Court of Appeal's decision made important points. To quote from the final paragraphs of that deccision:

• ït is not necessary to deal with the [Supreme Court] judge's unfortunate failure to give reasons. In these particular cirumstances, and in the interests of judicial efficiency, I am satisifed that it is in the interests of justice the the Disclosure Order be set aside in total to the effect that ACOA cannot rely on it to obtain any information from the appelants and the appelants may proceed to prosecute their crossclaim.
• One can understand the appelants' exasperation and confusion with the way in which this case has unfolded. The record here is not stellar. At the hearing counsel for ACOA admitted that the process and progress to date has been "abysmal."
• Dr. Leary's excellent submissions make it clear that the appellants' complaints are hardly frivolous and deserve a hearing.