Desjardins et al. v. Côté et al., 2006 NBCA 81

• Judge: Daigle, Larlee and Deschênes, JJ.A.
• Court: Court of Appeal (New Brunswick)
• Case Date: July 27, 2006
• Jurisdiction: New Brunswick
• Citations: 2006 NBCA 81;(2006), 304 N.B.R.(2d) 40 (CA)

Desjardins v. Côté (2006), 304 N.B.R.(2d) 40 (CA);

    304 R.N.-B.(2e) 40; 788 A.P.R. 40

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[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Temp. Cite: [2006] N.B.R.(2d) TBEd. JL.045

Fernand Côté (defendant/appellant) v. Élide Desjardins and Léonide L. Côté (plaintiffs/respondents)

The Town of Grand Falls/La Ville de Grand-Sault, a town incorporated under the Municipalities Act of the Province of New Brunswick, and Friends of the Physically Handicapped of Madawaska Victoria/Amis(es) des personnes handicapées physiquement de Madawaska-Victoria, an unincorporated association (third parties/respondents) and l'Association régionale des personnes handicapées physiquement de Grand-Sault Inc. (defendant/respondent)

(101/03/CA; 2006 NBCA 81)

Indexed As: Desjardins et al. v. Côté et al.

New Brunswick Court of Appeal

Daigle, Larlee and Deschênes, JJ.A.

July 27, 2006.

Summary:

Two members of a non-profit corporation brought a derivative action against the com­pany and its president, defendant Côté. They sought the return to the company of parcels of land and sums of money they claimed were illegally transferred to defendant Côté as payment of an alleged debt of gratitude. A non-profit organization and a municipality paid part of the legal costs incurred by the plaintiffs. The defendants issued a third party claim against the organization and the mu­nicipality. They claimed that these contribu­tions constituted either maintenance or cham­perty.

The New Brunswick Court of Queen's Bench, Trial Division, in a decision reported at 267 N.B.R.(2d) 115; 702 A.P.R. 115, allowed the action and dismissed the third party claim. As for costs, the Court, in a decision reported at 267 N.B.R.(2d) 354; 702 A.P.R. 354, ordered the defendants to pay, jointly and severally, costs of $120,000 plus disbursements to the plaintiffs as well as costs of $29,175 plus disbursements to the municipality. In addition, defendant Côté had to completely indemnify the company for the amounts that it had to pay to the plaintiffs and to the municipality. Finally, since this was a derivative action for the benefit of the company, the company was ordered to pay the plaintiffs $50,000. Defendant Côté ap­pealed.

The New Brunswick Court of Appeal dismissed the appeal.

Company Law - Topic 6588

Nonprofit corporations (incl. charities) - Rights of members and interested persons - Derivative actions - Two members of a non-profit corporation brought a derivative action against the company and its presi­dent - They sought the return to the com­pany of parcels of land and sums of money they claimed were illegally transferred to the president as payment of an alleged debt of gratitude - The trial judge held that the plaintiffs had the right to sue and allowed the action - The New Brunswick Court of Appeal confirmed the decision - See para­graphs 38 to 40.

Company Law - Topic 6607

Nonprofit corporations (incl. charities) - Directors and officers - Fiduciary duties - [See Limitation of Actions - Topic 6010 ].

Limitation of Actions - Topic 1906

Actions - General - Derivative actions - On October 27, 1992, two members of a non-profit corporation brought a derivative action against the company and its presi­dent - On September 18, 1998, the plain­tiffs amended their Statement of Claim to include a claim for reimbursement of the sums of money they claimed were illegally transferred to the president as a result of an agreement to pay an alleged debt of gratitude, which agreement was signed on August 3, 1992 - They also asked that the agreement be set aside - When the plain­tiffs commenced their action on October 27, 1992, they were not aware of the agreement of August 3, 1992 - The New Brunswick Court of Appeal held that the plaintiffs had, at the very least, until Octo­ber 27, 1998 (sect. 9 of the Limitation of Actions Act), to commence the action to set aside the agreement - Their action was not statute barred - See paragraphs 41 to 43.

Limitation of Actions - Topic 6010

Trusts - General - Recovery of trust prop­erty - Two members of a non-profit cor­poration brought a derivative action against the company and its president - They sought the return to the company of par­cels of land and sums of money they claimed were illegally transferred to the president as payment of an alleged debt of gratitude - The parties agreed that the relevant limitation period was six years under section 9 of the Limitation of Ac­tions Act, unless the exception under sec­tion 56, for a claim to recover trust proper­ty still retained by the trustee, or previous­ly received by the trustee and converted to his use, applied - The trial judge held that the exception applied and allowed the claim - The president was in a position of trust with respect to the company and its assets - He had not acted in good faith and had breached his fiduciary duty - He had used his position to appropriate the com­pany's assets to its disadvantage - The New Brunswick Court of Appeal con­firmed - See paragraphs 27 to 30, 44 to 56.

Practice - Topic 6981

Costs - Entitlement - General - Two mem­bers of a non-profit corporation brought a derivative action against the company and its president - They sought the return to the company of parcels of land and sums of money they claimed were illegally transferred to the president as payment of an alleged debt of gratitude - A third party non-profit organization paid some of the legal costs incurred by the plaintiffs - The claim was allowed with costs - The plain­tiffs claimed legal fees - The president contended that no costs were payable to the plaintiffs as they had not paid any legal fees and were not liable for the legal fees of their solicitors, the firm of McInnes Cooper - The trial judge rejected this argument and ordered payment of the fees - The president appealed, reiterating his argument at trial and challenging the rea­sonableness of the award on costs - The New Brunswick Court of Appeal dismissed the appeal - See paragraphs 64 to 68.

Practice - Topic 7019

Costs - Party and party costs - Entitlement to party and party costs - General princi­ples - [See Practice - Topic 6981 ].

Torts - Topic 6280

Abuse of legal procedure - Maintenance and champerty - General - Two members of a non-profit corporation brought a de­rivative action against the company and its president - They sought the return to the company of parcels of land and sums of money they claimed were illegally trans­ferred to the president as payment of an alleged debt of gratitude - A non-profit organization and a municipality paid part of the legal costs incurred by the plaintiffs - The trial judge held that there was no maintenance or champerty - There was no evidence that the third parties were ill-intended or wanted a share of the profit of the litigation - The New Brunswick Court of Appeal confirmed the decision - See paragraphs 57 and 58.

Cases Noticed:

Foss v. Harbottle (1843), 67 E.R. 189, refd to. [para. 39].

Dupuis v. Moncton (City) (2005), 284 N.B.R.(2d) 97; 742 A.P.R. 97 (C.A.), refd to. [para. 43].

Stratis v. Stratis (1981), 34 N.B.R.(2d) 522; 85 A.P.R. 522 (C.A.), refd to. [para. 45].

J.L.O. Ranch Ltd. v. Logan Estate and Logan (1987), 81 A.R. 261 (Q.B.), consd. [para. 46].

H.C. v. New Brunswick (Minister of Fami­ly and Community Services) (2003), 263 N.B.R.(2d) 106; 689 A.P.R. 106 (Fam. Div.), consd. [para. 60].

Smith v. Human Rights Commission (N.B.) et al. (1999), 217 N.B.R.(2d) 336; 555 A.P.R. 336 (C.A.), consd. [para. 62].

University of New Brunswick Student Union Inc. et al. v. Smith (S.) et al.; University of New Brunswick Student Union Inc. et al. v. Vaillancourt et al. (1988), 88 N.B.R.(2d) 39; 224 A.P.R. 39 (C.A.), refd to. [para. 64].

Comeau v. Saint John Regional Hospital et al. (2001), 244 N.B.R.(2d) 201; 634 A.P.R. 201 (C.A.), refd to. [para. 68].

Statutes Noticed:

Limitation of Actions Act, R.S.N.B. 1973, c. L-8, sect. 9, sect. 55, sect. 56 [para. 45].

Counsel:

Gilles C. Thibodeau, Q.C., for the appel­lant;

Chantal A. Thibodeau, for the respondent The Town of Grand Falls;

Gérald Carroll, Rino Long and Rhéal Dionne, for the respondent Friends of the Physically Handicapped of Madawaska Victoria/Amis(es) des personnes handi­capées physiquement de Madawaska-Victoria;

Marc-Antoine Chiasson and Rémy M. Boudreau, for the respondent L'Associa­tion régionale des personnes handicapées physiquement de Grand-Sault Inc.

This appeal was heard on November 22, 2005, by Daigle, Larlee and Deschênes, JJ.A., of the New Brunswick Court of Ap­peal.

Deschênes, J.A., delivered the following decision for the court in both official lan­guages on July 27, 2006.