Alberta Treasury Branches v. Gammell, 2011 ABQB 351

Court of Queen ’ s Bench of Alberta Citation: Alberta Treasury Branches v. Gammell, 2011 ABQB 351 Date: 20110526 Docket: 0901 17269 Registry: Calgary Between: Alberta Treasury Branches Plaintiff - and - Stuart Hugh Gammell and James D. Quinn Defendants And Between: James D. Quinn Plaintiff by Counterclaim - and - Alberta Treasury Branches, Bruce Edgelow, Brad Heck and Ken Tunnicliffe Defendants by Counterclaim _______________________________________________________ Reasons for Judgment

of the Honourable Madam Justice C.A. Kent _______________________________________________________ [ 1 ] The Master granted

summary judgment against James Quinn on the basis of a personal guarantee that Mr. Quinn signed, guaranteeing the indebtedness of Jurassic Oil & Gas Ltd (Jurassic). The guarantee was limited to $550,000. Jurassic was put into receivership. After realizing on Jurassic’s assets, $512,859.91 was left owing. That was the amount of money granted by way of

summary judgment. Mr. Quinn appeals that judgment. [ 2 ] Mr. Quinn signed the guarantee on June 15, 2007 and the Certificate of Notary Public was signed on July 5, 2007. The guarantee provides that Mr. Quinn guarantees and promises to pay existing and future debts and liabilities to a maximum of $550,000 and that the guarantee would not be subject to any promise or condition that limited his liability or any representation that would alter or waive the obligations of the guarantee. At the time that Mr. Quinn signed the guarantee, Jurassic owed $1.1 million.

On June 27, 2007, ATB offered an extension of the existing loan plus a Bulge facility up to $550,000 (the Commitment Letter) on condition that certain security including the Quinn guarantee be provided. Mr. Quinn signed the Commitment Letter on July 5, 2007. On January 30, 2008, Jurassic, its principal and Quinn signed an amended and restated commitment letter. That letter was reviewed in July, 2008 at which time ATB determined that Jurassic was in breach of the commitment letter. There were forbearance agreements executed in July and in November, 2008 and March, 2009. Mr. Quinn signed those documents. [ 3 ] Mr.

Quinn argues that despite the documentary evidence,

summary judgment should not be granted because of the evidence he can offer about the circumstances surrounding the execution of the documents. Mr. Quinn had no financial interest in Jurassic. At the time that Mr. Quinn was requested by his friend, Mr. Gammell, to sign the guarantee, Jurassic was already indebted to ATB for $1,100,000. Mr. Quinn said that he told Mr. Heck, the responsible officer at ATB, that he would not give a personal guarantee if there was any chance that ATB would realize on it, particularly for the existing debt. He said that Mr.

Heck advised him that Jurassic had sufficient assets to cover the debt and that the guarantee was only a formality. Mr. Quinn said that Mr. Heck knew that if Jurassic needed to repay the debt, it would be done from Jurassic assets and that Mr. Quinn’s guarantee would not be called. Mr. Quinn also said that Mr. Heck told him that his guarantee would be restricted to the Bulge facility and that that indebtedness would be paid off first. It was on the basis of those representations that Mr. Quinn gave the guarantee.

He also advanced $50,000 to Jurassic to assist in cash flow. [ 4 ] The commitment letter signed by Mr. Quinn contained the following words: Continuing Guarantee from James D. Quinn - limited to $550,000 - To be released once Facility #2 [the Bulge Facility] is repaid and cancelled in its entirety and the Borrower is onside with all existing loan terms and conditions. [ 5 ] The issue before me is whether the Master erred in granting

summary judgment against Mr. Quinn. Standard of Review [ 6 ] Rule 6.14 governs an appeal from a Master. The hearing is not de novo but is on the record. ATB argues on the basis of Eng v. Eng , [2010] ABCA 19 that the standard of review is correctness in terms of the test to apply to grant

summary judgment and reasonableness for the decision to grant

summary judgment. Mr. Quinn argues that by virtue of the constitutional jurisdiction of superior court judges, a superior court trial judges cannot be fettered by a decision of a Master. Moreover, a Master cannot decide disputed

questions of fact. [ 7 ] I accept Macklin, J’s

summary of the standard of review on an appeal from the Master under the new Rules. He says in Janvier v. 834474 Alberta Ltd. , 2010 ABQB 800 at para. 18 : In

summary, the standard of review on a decision from the Master on a question of law is correctness. The standard of review for facts accepted by the Master or factual inferences drawn by the Master from the evidence is reasonableness. The finding must amount to a palpable and overriding error. The imputed error must be plainly identified and must be shown to have affected the result.

On a question of mixed fact and law, if the principle of law cannot be extricated from the question, then the standard of review is again one of reasonableness only to be interfered with if a palpable and overriding error can be shown. If the principle of law can be extricated from the question, then the standard of review on the principle of law is correctness. [ 8 ] I will add that if a dispute can only be resolved by weighing evidence, the Master has no jurisdiction. The issues [ 9 ] Mr. Quinn raises two issues on appeal. The first is based on his defence that the guarantee was limited to the Bulge facility.

Making that determination requires an

interpretation of the contract in conjunction with a determination regarding the admissibility of parole evidence. The standard of review for the first is reasonableness and the second is correctness. Mr. Quinn says that the context and background given by Mr. Quinn’s evidence in addition to the following facts found on the face of the documents supports his

interpretation. Those facts are: - the limit of the guarantee is the same as the Bulge facility, - the only consideration for the Quinn guarantee was the credit advanced through the Bulge facility, -the timing of the Quinn guarantee and the advances under the Bulge facility were very close, - Mr. Quinn signed the guarantee for a friend rather than for a business reason. [ 10 ] ATB argues that Mr.

Quinn’s argument has no merit because the documents do not say that the guarantee is limited to the Bulge facility but rather all obligations, there is a “no representations” clause in the guarantee, the Commitment letter only releases the guarantee if Jurassic is onside with all other loan obligations, and Mr. Quinn acknowledged the outstanding amount of the debt in other documents. [ 11 ] The Master says the following at para. 30-31: Mr.

Quinn argues that this clause in the commitment letter is ambiguous and therefore parole evidence of his discussions with the ATB should be considered to resolve the ambiguity: Gallen v. Butterley 1984 Can LII 752 (B.C.C.A.). The clause is not ambiguous. Its terms are conjunctive and provide that if the bulge facility was repaid, the guarantee would only be released if Jurassic was in good standing on all of its existing loan terms and conditions. This never happened. Jurassic was in default on its obligations, went through several forbearance arrangements, all signed by Mr.

Quinn, and was finally placed in receivership. [ 12 ] The second issue is whether parole evidence is admissible to permit evidence of representations made by employees of the bank when there is a “no representations clause”. [ 13 ] Whether or not parole evidence is admissible is a question of law so the standard is correctness. In her decision, the Master relies upon two cases for the proposition that where there is a “no representations” clause, parole evidence is not admissible. She says at para. 38-40:

The ATB relies on this clause and the decisions of this court in Alberta Treasury Branches v. Robinson 1999 ABQB 627 (Master) andBarrie v. Villeneuve Sand & Gravel Alberta Ltd., 1999 ABQB 799. The latter decision contains a statement at paragraph 29 that “the law in Alberta is clear that if the parties intended that the writtencontracts would constitute the entirety of their agreement, then parol evidence is inadmissible to contradict those contracts.” The case of ATB v. Robinson considers a guarantee with a no representations clause similar to the one at issue in this case.

The courtsaid at paragraph 15 et seq.: There needs to be certainty in commerce so equity and the common law have devised some ground floor rules to govern commercialtransactions. One is that pre-contract discussion between the parties is not admissible to vary or contradict a written contract...

Evidence of pre-guarantee representations by the Plaintiff that is not found in the guarantee contradicts the guarantees because theDefendants have expressly agreed that there are none ... “No representations” clauses in contracts are valid ... [underlining in original] [14] ATB says that the cases referred to by the Master are a complete answer. Mr. Quinn argues that one of the exceptions to theparole evidence rule is where a misrepresentation is alleged. In addition to Gallen v. Butterfly, Mr. Quinn cites Beer v.

Townsgate I Ltd., (ON CA), 36 O.R. (3d) 136 at para. 30 where the court says: The appellant argues that the parol evidence rule renders the allegations of Astrug and Privis inadmissible. They argue that, since thelanguage of the contract is clear and unambiguous, parol evidence may not be admitted to alter the meaning, especially where it wouldcontradict the agreement.

In my opinion, the parol evidence rule cannot operate to exclude evidence of a misrepresentation that inducedthe making of the contract and thus be used to allow the defendant to rely on a clause in the face of the misrepresentation: see CanadianIndemnity Co. v. Okanagan Mainline Real Estate Board et al. (1970), (SCC), 16 D.L.R. (3d) 715 at 720 (S.C.C.). [15] Mr. Quinn also cites 1250810 Alberta Ltd. v. 1284768 Alberta Ltd., 2010 ABQB 125 which, he says, is factually identical tothis case. [16] In 1250810, there was a “no representations” clause.

The defendant alleged that the contract was void and unenforceablebecause of misrepresentations. The court reviewed the relevant principles including the principles that limitation clauses in a contractcannot excuse fraud (para. 45) and that a “no representations” clause which does not specifically refer to negligent misrepresentationsdoes not exclude liability for negligent misrepresentation (para. 49). [17] These facts appear to create a Catch-22. ATB says because there is a “no representations” clause, there can be no paroleevidence. Mr.

Quinn says that parole evidence is admissible to show a misrepresentation. [18] It cannot be the law that evidence of what really happened is inadmissible on the basis of a clause in the contract that is theroot of the alleged misrepresentation. The principle of certainty of contract must yield to truth. If Mr. Quinn’s evidence, weighed at trialis not accepted, then the ATB will succeed. Before that can happen, however, there must be an examination of the facts surrounding theexecution of the documents. That can only be done through the admission of parole evidence.

[ 19 ] It may be argued that this ruling will cause many people who have signed guarantees that are legally enforceable to challenge that enforceability on the basis of representations made. If such representations are made, they should not be made. If they are not made, then the person alleging them will not succeed. [ 20 ] The appeal from the Master is allowed. Heard on the 29th day of March, 2011. Dated at the City of Calgary, Alberta this 26th day of May, 2011. C.A. Kent J.C.Q.B.A. Appearances: Nicole T. Taylor Smith Miller Thomson LLP for the Plaintiff and Defendants by Counterclaim Timothy C. Platnich Caron & Partners LLP for the Defendant and Plaintiff by Counterclaim