Legal Blog

Backdate

No, we are not talking about some commercial document. We are talking about an order of the court and whether the order is to be effective on the date it is made or an earlier date. If effective as of an earlier date, it is said to be effective nunc pro tunc. This, of course, is a Latin phrase (one of the few times that Latin still rears its ugly head in legal parlance) and means “now for then.” The applicability of the use of this concept was the main issue in Thistle v. Schumilas, a 2020 decision of the Ontario Court of Appeal.

Bankrupt

The ability to assign into bankruptcy is wonderful for unfortunate debtors who have no way to claw themselves out of debt. But it is a double-edged sword. All of the bankrupt’s property, whether owned as of the date of the bankruptcy or subsequently acquired before the bankrupt’s discharge, passes to and vests in the bankrupt’s trustee in bankruptcy. The Bankruptcy and Insolvency Act defines property very widely. On occasion, this passing of property has unintended consequences. The Thistle case illustrates one of them.

Convoluted

Pay close attention. These facts are convoluted.

• June 2009 – wife takes out a $600,000 life insurance policy with husband as beneficiary.
• June 2009 – three weeks later, husband assigns into bankruptcy.
• October 2010 – wife dies. Husband, who is still an undischarged bankrupt, claims under the policy
• February 2011 – insurer denies the claim on grounds of a material misrepresentation in wife’s insurance application.
• March 2011 – husband commences an action against insurer seeking payment of the policy benefits.
• June 2011 – husband is discharged from bankruptcy.
• December 2012 – during the litigation against the insurer, husband becomes aware of a possible claim in professional negligence against the insurance broker instrumental in the issuance of the insurance policy.
• February 2013 – husband commences an action against the broker seeking damages equivalent to the policy’s value.
• January 2018 – broker brings a motion for summary judgment to dismiss the action, claiming that husband had no right to bring the action because that right belonged only to husband’s trustee in bankruptcy. Either before or after broker’s motion, husband brings a motion for an order nunc pro tunc granting husband standing to bring the action in his own name. The trustee consents.

Vesting

Was the cause of action against the broker considered to be property under the BIA that vested in husband’s trustee? Husband suggested that the court should consider importing the discoverability concept as an exemption to the automatic vesting of causes of action in a trustee. In effect, a cause of action would not vest in the trustee until either the bankrupt or the trustee discovered the claim in the first place. The court rejected this suggestion because it would create uncertainty and would give an incentive to bankrupts to avoid learning of, and disclosing, all assets to their trustees.

The court noted that its ruling would not work an injustice because, at the time that husband learned of his cause of action, he had three available courses of action: request the trustee to return the property to him so that he could commence the action in his own name, ask the trustee to assign the cause of action to him on whatever terms he and the trustee could agree, or ask the trustee to commence the action in the trustee’s name. Husband did not avail himself of any of the courses of action; he merely commenced the action in his own name.

Availability

The court had the discretion to regularise husband’s action in his own name, given the trustee’s consent. But could it backdate that order to take effect from the date of the 2013 action?

Discretion to issue a nunc pro tunc order is available only if a limitation period has not already expired by the date the motion is brought to request the order. Jurisprudence has determined that the order can be backdated no further than the date when leave is sought (i.e. the motion for leave is brought) and if that date is past the last possible limitation date, then the order would be of no practical effect.

In this case, husband brought the motion in January 2018, but the limitation period expired, at the latest, by February 2015. Accordingly, a nunc pro tunc order, which was limited to 2018 and could not go back to 2013, would have been useless.

Upshot

The motion to regularise the action was dismissed. The broker’s summary judgment motion succeeded and husband’s action against the broker was dismissed. Husband brought a motion to the Supreme Court of Canada for leave to appeal. Leave was denied.

Image courtesy of  Alexas_Fotos.

Written by Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.