The Ontario Court of Appeal has affirmed earlier case law and the plain language of Ontario's Business Corporations Act, R.S.O. 1990, c. B.16 (the "OBCA") concerning the retroactive effect of the statute's corporate status revival provision.
In Achilles Motors Limited v. 1717222 Ontario Inc., 2014 ONCA 139, Achilles appealed the dismissal of its application to have an agreement of purchase and sale with the respondent 171 declared void because the numbered company had been dissolved and not yet revived at the time the parties entered into the contract. Neither party had been aware of the dissolution (which occurred following 171's failure to file a Notice of Change Form 1) at the time of contracting, and 171 acted immediately to have the company's charter reinstated upon being informed by Achilles' counsel of the lapse a year and a half later. The charter was reinstated within two months.
On appeal, 171 relied on the plain words of the OBCA's re-enactment provision:
241(5) Where a corporation is dissolved under subsection (4) or any predecessor of it, the Director on the application of any interested person, may, in his or her discretion, on the terms and conditions that the Director sees fit to impose, revive the corporation; upon revival, the corporation, subject to the terms and conditions imposed by the Director and to the rights, if any, acquired by any person during the period of dissolution, shall be deemed for all purposes to have never been dissolved. [Emphasis added.]
Achilles relied on Swale Investments Ltd. v. National Bank of Greece (Canada), 1997 CanLII 12439 (ON SC), in which a judge distinguished between reviving a company's existence and reviving its "legal position" in a dispute:
[13] In my view, the plaintiff corporation, having been dissolved and not having been revived, has no legal existence. Section 241(5) merely provides that the corporation, upon revival, has all the rights and privileges and liabilities it would have had if it had not been dissolved. This does not mean that upon revival its legal position is restored retroactively. [Emphasis added.]
The Court in Achilles implicitly rejected this distinction, finding that the phrase "shall be deemed for all purposes to have never been dissolved" in section 241(5) clearly signals that reinstatement is meant to be retroactive in effect, and that an interpretation favouring retroactivity is in keeping with the curative intent of the provision. It distinguished Swale on the basis that no revival of the company had been attempted in that case (rendering the revival provision irrelevant, and the judge's comments on retroactivity obiter), and noting that the judge in that case erred in rejecting the reasoning of an earlier case ultimately upheld by the Court in Zangelo Investments Ltd. v. Glasford State Inc. (Ont. C.A.), 1988 CanLII 4532 (ON CA). The Court confirmed that Zangelo is still the law in Ontario.
The decision in Achilles confirms that a company's "legal position" may indeed be restored retroactively upon revival (subject, as the statute says, to conditions the Director may impose at its discretion). It also reaffirms that brevity by the Court does lessen the impact of its decisions. The Court's relatively brief endorsement rejects the appellant's argument that the Court's endorsement in Zangelo should not be followed because it too was brief.
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