A-293-74
Leesona Corporation (Plaintiff) (Respondent)
v.
Consolidated Textiles Mills Ltd. (Defendant)
(Appellant)
and
Consolidated Textiles Ltd. (Defendant pursuant
to amendment) (Appellant)
Court of Appeal, Pratte, Urie and Ryan JJ.—
Ottawa, February 28 and March 14, 1975.
Practice—Statement of claim—Plaintiff-Respondent suing
wrong company—Trial Division granting leave to amend—
Whether amendment substitution of party—Whether action
prescribed by Quebec Civil Code Quebec Civil Code, art.
2261 and 2267 Federal Court Rules 424 and 425—Federal
Court Act, s. 46.
Appellant appeals from a judgment of the Trial Division
granting respondent leave to amend its statement of claim to
correct the name of the defendant. Plaintiff brought an action
for patent infringement. Intending to sue the Company which
was conducting the operations, it named the holding company,
Consolidated Textiles Mills Ltd., thinking it was naming the
operating company Consolidated Textiles Ltd. A second action
was instituted, naming the proper party, and subsequently,
plaintiff moved for leave to correct the name in the first action.
Held, the decision is set aside and the motion to amend is
dismissed.
Per curiam: It was not contested that part of the damages
claimed were prescribed by virtue of article 2261 of the Quebec
Civil Code. When an action is prescribed under article 2261,
"the debt is absolutely extinguished, and no action can be
maintained" (article 2267). The Court cannot, under the Fed
eral Court Rules, revive a debt which, under the applicable
substantive law, is absolutely extinguished.
Also, per Ryan J.: If the Federal Court Rules in question
were applied, and the extinguished debt were revived, it would
take the attempted application beyond the scope of rule-making
powers delegated by section 46 of the Federal Court Act.
Mitchell v. Harris Engineering Co. Ltd. [1967] 2 Q.B. 703
(C.A.), discussed.
APPEAL.
COUNSEL:
G. A. Macklin for plaintiff-respondent.
P. O'Brien for defendant-appellant and
defendant pursuant to amendment-appellant.
SOLICITORS:
Gowling & Henderson, Ottawa, for
plaintiff-respondent.
Stikeman, Elliot, Tamaki, Mercier and
Robb, Montreal, for defendant-appellant and
defendant pursuant to amendment-appellant.
The following are the reasons for judgment
rendered in English by
PRATTE J.: This is an appeal from a judgment
of the Trial Division granting the respondent leave
to amend its statement of claim "to correct the
name of the defendant from Consolidated Textiles
Mills Ltd. to Consolidated Textiles Limited".
Consolidated Textiles Limited and Consolidated
Textiles Mills Ltd. are two different companies.
Consolidated Textiles Limited carries on the busi
ness of producing, importing and selling textile
yarns; it is a subsidiary of Consolidated Textiles
Mills Ltd. which is merely a holding company.
Both companies have the same directors and offi
cers and both have their head office at the same
address in Montreal.
On August 31, 1972, the solicitors of Leesona
Corporation sent to Consolidated Textiles Limited
a letter reading as follows:
We are the solicitors for Leesona Corporation. As you may
be aware, Leesona Corporation is the owner of Canadian
Letters Patent nos. 552,104 and 552,105, which relate to a
process and apparatus for producing false twisted crimped or
textured nylon and polyester yarn, and as such has granted
non-exclusive licenses under said patents to a number of
Canadian companies engaged in the manufacture of textured
yarns for the use in mens' and ladies' hosiery and knitted and
woven textile goods.
It has come to the attention of our client that your company
may be producing textured yarn in Canada using false twist
machines of the type covered by Canadian Letters Patent
552,105 and using a process covered by Canadian Letters
Patent 552,104, which machines and process are not presently
licensed by Leesona Corporation.
It is our client's position that the unlicensed use of such
machines and process is infringement of the above noted
patents.
With a view to avoiding litigation, we are prepared to meet
with a representative of your company to explore the possibility
of a settlement of this matter, both in the respect of our client's
claim for past damages and for the future use of its inventions.
If you are interested in such a meeting, would you please
contact the undersigned within 10 days.
If we do not hear from you, we shall assume you are not
interested in a settlement and we shall seek further instructions
from our client.
In the event you have no unlicensed machines, would you
similarly contact the undersigned within the 10 day period.
Following that letter, Leesona's solicitors had
meetings, discussions and correspondence with
officers of Consolidated Textiles Limited. Both
parties apparently hoped to arrive at an amicable
settlement. Those negotiations continued for a
year. During that time, the only correspondence
that Leesona's solicitors received from Consolidat
ed Textiles Limited were three letters written by
one Mr. Speirs, a Vice-President of that company.
Those letters, however, were written on the letter
paper of Consolidated Textiles Mills Ltd. and the
signature of Mr. Speirs, on each one of those
letters, was preceded by the typewritten name of
that company. After having received those letters,
Leesona's solicitors apparently assumed that the
alleged infringer of their client's patents was Con
solidated Textiles Mills Ltd. rather than Con
solidated Textiles Limited. Accordingly, when, on
August 29, 1973, they considered that the protec
tion of their client's rights required that proceed
ings be initiated, they commenced an action
against Consolidated Textiles Mills Ltd. claiming
various remedies including damages.
Leesona's solicitors did not realize that they had
sued the wrong company until the filing, on April
19, 1974, of the statement of defence which
alleged that Consolidated Textiles Mills Ltd. was
merely a holding company. In June 1974, Leesona
instituted a second action, this time against Con
solidated Textiles Limited, and, in September, pre
sented a motion for leave to correct the name of
the defendant in the first action. The second action
was apparently instituted for the sole purpose of
protecting Leesona's rights in the event it did not
obtain permission to change the name of the
defendant in the first action.
It is from the judgment of the Trial Division
granting Leesona leave to amend its statement of
claim in the first action that this appeal is brought.
At the hearing of the appeal, it was not seriously
contested that, at the time the Trial Division made
the order under attack, part of the damages
claimed by Leesona were prescribed under article
2261 of the Civil Code of the Province of Quebec.
However, counsel for Leesona argued that the
Court had nevertheless, under Rule 424, the power
to authorize the change in the name of the defend
ant. With that contention, I cannot agree.
When an action is prescribed under article 2261
of the Civil Code, "the debt is absolutely extin
guished and no action can be maintained" (art.
2267). The Rules cannot give the Court the power
to revive a debt which, under the applicable sub
stantive law, is absolutely extinguished.
For these reasons, I would set aside the decision
of the Trial Division and dismiss the plaintiff's
motion to amend.
* * *
URIE J.: I agree.
* * *
The following are the reasons for judgment
rendered in English by
RYAN J.: I agree with my brother Pratte J. that
the decision of the Trial Division should be set
aside and that the plaintiff's motion to amend
should be dismissed. The material facts are set out
in his reasons for judgment.
I have been concerned whether it is really criti
cal for present purposes that the effect of the
expiry of the prescription period under the relevant
articles of the Civil Code is to extinguish "the
debt". I have been concerned whether this effect
would in itself be sufficient to distinguish English
cases, such as Mitchell v. Harris Engineering
Company Ltd. 1 decided under Order 20, Rule 5(2)
[1967] 2 Q.B. 703 (C.A.). I do not mean to indicate that
there may not be some other ground of distinction.
and (3) of the English Rules of the Supreme Court
which for relevant purposes are the same as our
Federal Court Rules 424 and 425 2 . In the Mitch-
ell case, the limitation provision involved was one
which limited the period for bringing action. With
reference to it, Lord Denning said: "The Statute of
Limitations does not confer any right on the
defendant. It only imposes a time limit on the
plaintiff."' Even in relation to our case where a
right is involved, it does seem at least possible to
argue, as counsel argued in the Mitchell case with
reference to the English Rule, that the Rule "does
not divest the true defendants of any right for it
[presumably he meant the order issued under the
Rule] is issued against the true defendants, and
although technically the correction of the name
does substitute one legal persona for another, the
Rule is designed to enable the court to look at the
substance of the matter where there has been a
genuine mistake." 4 The mistake in our case
occurred, it might be submitted, because the plain
tiff, intending to sue the company which was
conducting the operations, named the holding
company thinking it was naming the operating
company. In allowing the amendment, the argu
ment would run, technically the operating com
pany is substituted for the holding company, but in
reality the very party intended to be sued is now
properly named. In this sense, looking at the
matter in a non-technical way, the Civil Code
prescription period was interrupted in good time
because the action itself was started in time.
2 Rule 424. Where an application to the Court for leave to
make an amendment mentioned in Rules 425, 426 or 427 is
made after any relevant period of limitation current at the date
of commencement of the action has expired, the Court may,
nevertheless, grant such leave in the circumstances mentioned
in that Rule if it seems just to do so.
Rule 425. An amendment to correct the name of a party may
be allowed under Rule 424, notwithstanding that it is alleged
that the effect of the amendment will be to substitute a new
party, if the Court is satisfied that the mistake sought to be
corrected was a genuine mistake and was not misleading or
such as to cause any reasonable doubt as to the identity of the
party intending to sue, or, as the case may be, intended to be
sued.
3 [1967] 2 Q.B. 703 (C.A.) at page 718-B.
4 Ibid., at page 713-F.
I am afraid, however, that there is a real differ
ence between suing and intending to sue a party.
The amendment sought in this case would not
merely involve the correction of a name; it would
also substitute a party. As Russell L.J. said in the
Mitchell case, "The amendment sought involves
the correction of the name of the defendant, albeit
that it is alleged and correctly so, that it also
involves the substitution of the Irish company for
the Leeds company."' The person sought to be
substituted in this case would be a person which,
prior to the substitution, had had its alleged debt,
arising out of the acts complained of, extinguished.
If the Rules in question were applied in this case,
there would be a consequent revival of the extin
guished "debt". This, in my view, would take the
attempted application beyond the scope of the
rule-making powers in respect of the regulation of
practice and procedure delegated by section 46 of
the Federal Court Act.
* * *
URIE J.: I agree.
Ibid., at page 721-D.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.