Van Camp v. Chrome Horse Motorcycle Inc., 2012 ABQB 175

Court of Queen ’ s Bench of Alberta Citation: Van Camp v. Chrome Horse Motorcycle Inc., 2012 ABQB 175 Date: 20120314 Docket: 0503 17706, 0903 09288 Registry: Edmonton Between: Action No. 0503 17706 Robert Van Camp and Jeanette Van Camp Plaintiffs - and - Chrome Horse Motorcycle Inc., Maurice Moreau, Mark Semrau, Mark Semrau carrying on business as SI Financial Ltd., SI Financial Ltd., and Laurentian Bank of Canada Defendants and Between: Action No. 0903 09288 Laurentian Bank of Canada Plaintiff - and - Robert Van Camp and Jeanette Van Camp Defendants _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice Brian R. Burrows

_______________________________________________________ [ 1 ] Robert Van Camp and Jeanette Van Camp appeal from an order of the Master granting

summary judgment in favour of the Laurentian Bank of Canada for $17,809.84 plus interest and dismissing the Van Camps ’ application for

summary judgment against the Bank. [ 2 ] In January 2005 the Van Camps attended a motorcycle show and talked to Maurice Moreau, the principal of Chrome Horse Motorcycle Inc., about purchasing two motorcycles. Moreau told them it would take 6 to 8 weeks to deliver the motorcycles. [ 3 ] In February 2005 the Van Camps visited the premises of Chrome Horse, discussed the purchase again and were again told that delivery would take 6 to 8 weeks. The Van Camps agreed to purchase the motorcycles.

Thereafter they were contacted by Mark Semrau who worked for SI Financial, a finance broker, and who held himself out as a business agent for Chrome Horse and who assisted customers of Chrome Horse to obtain financing for the purchase of Chrome Horse motorcycles. [ 4 ] On February 10, 2005 Semrau prepared an application to the Bank for financing for the Van Camps ’ purchase and submitted it to the Bank. He then completed a form of conditional sales contract for each of the two motorcycles on the Bank ’ s form and sent them to the Van Camps for their signature.

The Van Camps signed the forms and returned them to Semrau. [ 5 ] The two conditional sales contracts were dated February 20, 2005. They were signed by the Van Camps as purchaser and by Semrau as seller. The form included an assignment by Chrome Horse of all “ right, title and interest of the Seller in and to the Contract and the Goods (but none of its obligations thereunder) ” to the Bank. [ 6 ] After the conditional sales contracts were assigned to the Bank, the Bank paid the total amount of the purchase price directly to Chrome Horse.

The Van Camps began making monthly payments to seller Chrome Horse ’ s assignee, the Bank. The total payment required under the two agreements was $110,617.60 including interest. By the fall of 2005 the Van Camps had paid $37,496.96. But the motorcycles had not been delivered. They never were delivered. The Van Camps stopped making payments. The Bank demanded that Chrome Horse return the funds they had received. Chrome Horse did not do so. [ 7 ] In October 2005 the Van Camps commenced Action 0503 17706 seeking, among other things, recovery of the funds they had paid.

Nearly 4 years later, in June 2009, the Bank commenced Action 0903 09288 seeking recovery of the unpaid price under the conditional sales contracts. [ 8 ] The Van Camps applied in the first action for

summary judgment in respect of their claim against the Bank, and

summary dismissal of the Bank ’ s claim as against them. The Bank applied in the second action for

summary judgment in respect of its claim against the Van Camps and

summary dismissal of the Van Camps ’ claim as against it. [ 9 ] The Master said: Chrome Horse or Moreau were crooks. They kept the money but never provided the motorcycles. Now there is nothing to recover. The cross applications for

summary judgment brought by the Van Camps and the Laurentian Bank really come down to a question of ‘ which of two innocent parties should bear the consequences of the defaults and defalcations of Chrome Horse or Moreau. ’ [ 10 ] There had been alterations to one of the conditional sales contracts after the Van Camps had signed it. The serial number of the motorcycle had been changed. The Van Camps were not involved in that alteration and did not consent to it. The Master held:

On the face of the documents, Laurentian Bank financed a different motorcycle than the one the Van Camps agreed to purchase. Accordingly, there was a total failure of consideration with respect to [that motorcycle]. The Van Camps got neither title nor possessionof this motorcycle and they do not have to pay for it. To look at it another way, the Bank’s claim against the Van Camps for this second motorcycle fails for want of proof that the secondmotorcycle purchased by the Van Camps was financed by the Bank. The Bank cannot blame the Van Camps because Moreau orChrome Horse took, or misapplied their money. [11] On that basis the Master dismissed the Bank’s application for

summary judgment against the Van Camps with respect to thesecond motorcycle. [12] The Master however granted

summary judgment to the Bank in respect of the other motorcycle and the conditional salescontract relating to it. He reasoned: The Van Camps have argued failure of consideration because they never received this motorcycle; however, they did receive title. Thedecided cases distinguish between use, or possession and title. Title is the crucial element. (Rowland v. Divall [1923] 2 K.B. 500(English Court of Appeal)) In this case, the effect of the documentation is to pass title to the [motorcycle] to the Van Camps when the funds were advanced.

TheVan Camps got title to this motorcycle even though they never got possession of the motorcycle itself. Since title is the crucial elementof ownership, the obligation to repay the Bank is not impaired by the dealer’s default. [13] The Master granted

summary judgment to the Bank for the difference between the price (with interest) of one motorcycle andthe total amount the Van Camps had paid. [14] The Laurentian Bank has not appealed from the dismissal of its application in respect of one of the conditional sales contract. The Van Camps appeal the grant of

summary judgment against them to the Bank and the implicit dismissal of their application forsummary judgment against the Bank for the amount they have paid. Appeal from a Master [15] Counsel for both parties submitted that the standard of review tests set out in Housen v. Nikolaisen 2002 SCC 33 ,[2002] 2 S.C.R. 235 apply to an appeal from the Master. In many decisions Judges of this Court have held that the adoption of the newRules of Court in 2010 and in particular the wording of Rule 6.14, the rule dealing with appeals from a Master, has this result.

Irespectfully disagree. [16] Macklin J. was one of the first to address this point. In Janvier et al v. 834474 Alberta Ltd. (2010), 2010 ABQB 800, 48 Alta. L.R. (5th) 156; 511 A.R. 76; 2010 ABQB 800 he said: 10 Rule 6.14 of the new Rules provides, in part: 6.14(3) An appeal from a master's judgment or order is an appeal on the record of proceedings before the master and, if the judgepermits, may also be based on new evidence that is significant enough that it could have affected the master's decision.

(4) The record of proceedings is

(

a) the application before the master, (

b) affidavits and other evidence filed by the parties respecting the application before the master, (

c) any transcript of proceedings before the master, unless the Court dispenses with this requirement, and (

d) the master's judgment or order and any written reasons given for the decision. . . . 12 Historically in Alberta, appeals from decisions of masters were considered de novo. That is, there was a new hearing before aQueen's Bench Judge who was not bound, in any way, by the decision of the master. There was no deference given to the master'sdecision. Such was the state of the law in Alberta for over 90 years (see United Utility Workers Association of Canada v.

TransAltaCorp., 2004 ABCA 200 at para. 4). 13 Rule 6.14 of the new Rules has changed the way in which an Appeal Court is to consider an appeal from a decision of theMaster. An appeal from a Master is no longer a hearing de novo. It is now an appeal on the record. As such, the standard of review forthe decision of the Master must be determined before the Appeal Court considers the appeal on its merits. 14 In Housen v. Nikolaisen, 2002 SCC 33 , [2002] 2 S.C.R. 235, the Court considered the different standards of reviewapplicable to different issues that may arise on appeal.

On a pure question of law, an Appeal Court is free to replace the opinion of thetrial judge with its own. The standard of review is one of correctness (at para. 8). 15 The Master generally does not have jurisdiction to determine disputed or contentious questions of fact: Court of Queen's BenchAct, R.S.A. 2000, c. C-31, s. 9(3)(b).

If there remains a dispute on material facts at the time of the application, there must be a trial.However, if one party's evidence on material facts is either destroyed by cross-examination on affidavit or the introduction of otherevidence rendering that party's evidence completely non-credible, then the Master may accept certain facts or may draw inferences offact. Such findings or inferences of fact are not to be interfered with unless the Master made a "palpable and overriding error".

That is,the Master is entitled to a high degree of deference on findings or inferences of facts drawn from the evidence. 16 Questions of mixed fact and law involve applying a legal standard to a set of facts (Housen at para. 26). The applicable level ofdeference depends upon the characterization of the error made. Where the erroneous finding can be traced to an error in law, there is lessdeference given and the applicable standard is one of correctness.

Where the legal principle cannot readily be extricated from the factualquestions, then the finding is subject to the more stringent standard of palpable and overriding error (Housen at para. 37; De Shazo v.Nations Energy Co., 2005 ABCA 241). 17 The standard of review from the dismissal of an application for

summary judgment is correctness in identifying the legal test forsummary judgment and reasonableness in the decision itself (Airco Aircraft Charters Ltd. v. Edmonton Regional Airports, 2010 ABCA364 at para. 7). The Alberta Court of Appeal has said that in the absence of an error of law, the Chambers Justice "has considerablediscretion in an application for

summary judgment" and interference is warranted only where "the Justice has come to an unreasonableconclusion" (Baugh v. Faculty Assn. of Red Deer College, 2004 ABCA 203 at para. 6). 18 In

summary, the standard of review on a decision from the Master on a question of law is correctness. The standard of review forfacts accepted by the Master or factual inferences drawn by the Master from the evidence is reasonableness. The finding must amount toa palpable and overriding error. The imputed error must be plainly identified and must be shown to have affected the result. On aquestion of mixed fact and law, if the principle of law cannot be extricated from the question, then the standard of review is again one ofreasonableness 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. [17] In my view, it does not necessarily follow from the fact that an appeal is “on the record” that it is not a hearing de novo. [18] It might reasonably be argued that an “appeal” and a “de novo hearing” are mutually exclusive concepts. In a true “appeal” itis generally not sufficient that the Appeal Court disagrees with the decision from which the appeal is taken.

Generally the Appeal Courtmay not substitute its view unless it is shown that the decision appealed was founded on an error of law, a palpable and overriding erroras to the facts, or an unreasonable exercise of discretion. [19] Old Rule 500 called the process by which a Master’s decision was reviewed by a Judge of the Court of Queen’s Bench an“appeal”. However, despite the use of that term, the proceeding was not a true appeal. As Macklin J. noted, appeals from a Master wereapplications de novo.

The Judge was free to substitute his or her view for that of the Master without determining whether the Master hadmade an error of law, a palpable and overriding error as to fact, or an unreasonable exercise of discretion. [20] In the process of law reform which resulted in the new Alberta Rules of Court, one committee, the General RewriteCommittee, examined whether appeals from the Master should continue to be de novo. In its report, the Committee noted that in the fourCanadian jurisdictions where appeals from Masters’ decisions to a Judge of the Court are permitted, two different approaches had beenadopted.

Only Alberta Courts had adopted the purely de novo approach. The other three jurisdictions had adopted what the Committeecalled the “Ontario approach” which contemplates de novo hearings in limited circumstances. [21] The Committee said: British Columbia, Ontario and the Federal Court all take the “Ontario approach” to the conduct of appeals from a master. The Ontarioapproach restricts hearings de novo.

If deciding a matter requires the exercise of judicial discretion and the question is vital to the finalissue of the case, then the appellate judge will exercise that discretion de novo and substitute his or her discretion for the master’s. Because the question is vital to the final issue of the case, the litigant is entitled to have a judge’s discretion exercised to decide it, ratherthan simply that of a master. The appellate judge will rehear the matter – but based only on the evidence that was before the master.

Further evidence is not automatically admissible, but must meet the same test for the admission of fresh evidence on appeal (althoughthat test may not always be applied with the same stringency as in an appeal from a trial decision). The Federal Court of Appeal has theorized that the difference between the Alberta and Ontario approaches is due to differentconstitutional attitudes to the office of master. Ontario does not see s. 96 of the Constitution Act as prohibiting the province fromappointing an officer of the court who may exercise some judicial functions.

Thus, Ontario is more willing to give greater deference to amaster’s decisions by using hearings de novo more sparingly. But Alberta characterizes any deference to the decisions of provincially-appointed masters as fettering the discretionary jurisdiction of (and diminishing the status of) federally-appointed s. 96 judges. So judgesmust hear everything de novo. Alberta Law Reform Institute The Rules Project, Motions and Orders Consultation Memorandum No. 12.10 July 2004, page 22, paras. 72 and 73 [22] Laycraft J. (as he then was) explained the “Alberta approach” in Wright v.

Disposal Services Ltd. (1977), (AB KB), 80 D.L.R. (3d) 671; 4 Alta. L.R. (2d) 173; 8 A.R. 394 (Alta. S.C.T.D.). He said (para 13): It was urged upon me during argument that as the Master had exercised his discretion, I should follow the practice of Appellate Courtsand not interfere with that discretion even if I disagreed with the result, unless it was plainly based on wrong principle. In my opinion,however, the rule followed by the Appellate Division in an appeal from a Trial Judge involving an exercise of discretion does not apply

to an appeal from the decision of a Master-in-Chambers. While that decision is entitled to the greatest respect, the discretionaryjurisdiction possessed by a Superior Court Trial Judge cannot be fettered in any way by the previous decision of the Master. The SuperiorCourt Judge possesses that jurisdiction by virtue of his Federal appointment under the powers given the Federal Crown by The BritishNorth America Act. His status resulting from that appointment cannot be diminished by the decision of the Master appointed by theProvincial Crown. In Evans v.

Bartlam [1937] A.C. 473, where the Queen's Bench Judge acquired a discretion under the Rules of Court,Lord Atkin considered that the discretion could not be affected by any action previously taken by the Master. At page 478 he said: I ... mention a contention of the respondent that the Master having exercised his discretion the judge in Chambers should not reverse himunless it was made evident that the Master has exercised his discretion on wrong principles.

I wish to state my conviction that wherethere is a discretionary jurisdiction given to the Court or a judge the judge in Chambers is in no way fettered by the previous exercise ofthe Master's discretion. His own discretion is intended by the rules to determine the parties rights: and he is entitled to exercise it asthough the matter came before him for the first time. He will, of course, give the weight it deserves to the previous decision of theMaster but he is in no way bound by it. [23] The Alberta Court of Appeal quoted and adopted Laycraft J.’s reasoning in Willman v.

Alberta (Motor Vehicle AccidentClaims Act Administrator) (1979),1979 ABCA 332 , 107 D.L.R. (3d) 191; 11 Alta. L.R. (2d) 110;17 A.R. 608, at para. 12. Seealso Fern Investments Ltd. v. Burnet Duckworth & Palmer, 2004 ABCA 329. [24] The General Rewrite Committee, after addressing other aspects of the issue, decided not to propose any change to the“Alberta approach”. It said: Not only does the Committee question the view that in practice [appeals from the Master] must surely be a waste of judicial resources,the Committee is also reluctant to displace the constitutional perspective that underlies the Alberta approach.

So, although theCommittee recognizes that there are arguments to the contrary, it recommends that appeals from the Master continue to be heard denovo, with new or additional evidence allowed as of right. Alberta Law Reform Institute The Rules Project, Motions and Orders Consultation Memorandum No. 12.10 July 2004, page 23, para. 76 [25] The recommendation of the General Rewrite Committee was presented for public comment. The Committee reconsidered itsrecommendation after receiving that comment.

It submitted its final recommendation to the Steering Committee of the Rules Projectwhich submitted a recommendation to the Board of the Alberta Law Reform Institute which, in turn, submitted recommendations to theRules of Court Committee. The process produced Rule 6.14 in the form in which it came into force in November 2010. [26] Rule 6.14 as eventually adopted in that process stated that an appeal from the Master would be “an appeal on the record”. Itset out the materials which would form the record.

With leave of the Court, “new evidence that is significant enough that it could haveaffected the master’s decision” could be used in addition to the record. [It should be noted that the Rule was amended in 2011 in thatregard. It now says, that in addition to the record, the appeal can be “based on additional evidence that is, in the opinion of the Judgehearing the appeal, relevant and material”.] [27] It is likely that the question of whether an appeal from a Master should be a de novo hearing or a true appeal continuedthroughout the process by which Rule 6.14 was developed.

There unfortunately is no published statement of the rationale for adoptingthe Rule in its final form, or as to what was intended by the use of the term “appeal on the record”. [28] However, in my view, the words “appeal on the record” serve only to establish what will be before the Judge hearing theappeal, and to limit the right of the parties to put material before the Judge that was not before the Master. That is a change from theprocedure under old Rule 500.

[ 29 ] However, the words “ appeal on the record ” do not, in my view, have the effect of reversing the previous law that, for the constitutional reasons explained by Laycraft J. in Wright , an “ appeal ” from a Master of this Court to a Judge of this Court is not a true appeal, but rather is a hearing de novo .

A rule of law based on the constitutional foundations of the respective jurisdictions of a Judge and a Master is not subject to change through an amendment to the Rules of Court. [ 30 ] I note the commentary to Rule 6.14 in Stevenson & C ô t é , Alberta Civil Procedure Handbook , 2011 (at p. 6-44) indicates that the new rule makes no change to the nature of the appeal. It is de novo. In Alberta, an appeal from a master to a judge was traditionally de novo . That meant two things. First, new evidence or cross- examination was possible and new grounds could be raised.

New R. 6.14(3) now says these appeals are “ on the record ” , but it also allows, with leave, new evidence that is significant enough that it could have affected the master ’ s decision. Since most relevant evidence would appear to meet that test, and since whether the new evidence should be permitted is not decided as a preliminary matter, but with the appeal itself, the new rule is substantively the same as the old. Therefore if a master summarily dismisses an action an appeal from him is de novo . . . And second, the judge exercises any discretion afresh and substitutes his or her views for the master ’ s.

The test is whether the master was correct. There is (in a sense) no standard of review. [ 31 ] For these reasons, I shall approach this appeal from the Master as a de novo application. Additional Evidence [ 32 ] The Van Camps sought to adduce additional evidence on the appeal. Both counsel made submissions as to whether the test for admission of new evidence on appeal had been met.

It appears counsel were not aware of the amendment to Rule 6.14(3) which eliminates any previously existing suggestion that the new evidence on appeal rules apply to an appeal from the Master. [ 33 ] In my view the additional evidence offered, evidence that a VIN for the motorcycle had never been registered, is relevant and material. I allow it. Total Failure of Consideration [ 34 ] The Van Camps seek relief from any obligation to make further payment on the conditional sales contract on the basis that there was a total failure of consideration.

On the same basis, they also seek recovery of what they paid before they stopped making payments. [ 35 ] There clearly was a total failure of consideration. The motorcycle for which the Van Camps agreed to pay, and had partially paid, was never delivered. Chrome Horse made it clear that it would not perform its obligation to deliver the motorcycle. It repudiated the contract. The obligation which Chrome Horse breached, the obligation to deliver the motorcycle, was of vital importance to the contract.

These features of the circumstances gave the Van Camps the right to treat the contract as discharged. [ 36 ] The Bank argues, in effect, that the Van Camps are estopped from relying on the fact that the motorcycle was never delivered because of the following provision in the conditional sales contract: You [the Buyer] acknowledge having received the Goods on the date hereof (or, if a date of delivery is indicated hereafter, we [the Seller] shall deliver the Goods on such date : 02/20/2005 ). The blank for the delivery date in the standard form contract was filled in as indicated.

[ 37 ] Given that the blank was filled in with a delivery date, the first part of the provision in which receipt of delivery was acknowledged did not apply. The provision amounted to nothing more than a promise by the seller to deliver the motorcycle on the date indicated.

In my view it does not change the meaning of the provision that the date inserted was the date the contract was signed. [ 38 ] A provision requiring the seller to make delivery on a specific date does not amount to a representation by the buyer and cannot therefore estoppe the buyer from relying on the fact that delivery was never made. [ 39 ] The Master reasoned that despite the failure of consideration, the Van Camps were obliged to pay the remaining purchase price because they had received title to the motorcycle.

However, on the terms of the conditional sales contract they clearly never received title to the motorcycle. The contract provided in paragraph 7: The title to and ownership of the Goods will remain with us [the Seller] until all amounts owing under this Contract or any related judgment have been paid in full, at which time, title will pass to you [the Buyer]. [ 40 ] In my view there is no doubt that there was a total failure of consideration and that Chrome Horse both repudiated and breached the contract. The Van Camps had the right to treat the contract as discharged as a result.

They elected to do so when they stopped making payments and commenced their action. As of that date, the contract was at an end. The Van Camps had no further obligation under it. Neither Chrome Horse nor its assignee, the Bank, could thereafter enforce the contract against the Van Camps. [ 41 ] In the circumstances the Van Camps were relieved of any obligation to make further payment. Accordingly there is no merit to the Bank ’ s claim for payment of the remainder of the purchase price for the motorcycle.

The Van Camps ’ Claim for Repayment of What They Have Paid [ 42 ] The Van Camps also seek recovery of what they paid before the contract was discharged. [ 43 ] Where there is a total failure of consideration, a party who has performed under the contract before he elects to treat the contract as discharged is entitled to recover damages from the party who failed to perform. [ 44 ] In this case, it was clear from the contract that the Bank had no obligation to perform the obligations that had been undertaken by Chrome Horse in the contract.

It took an assignment of the Chrome Horse ’ s benefits under the contract but expressly did not acquire Chrome Horse ’ s obligations. The Van Camps agreed to this. [ 45 ] As a result of the total failure of consideration and the discharge of the contract the Van Camps acquired a right to recover damages from Chrome Horse who, even after the assignment, continued to have an obligation to perform and who failed to perform it. The Van Camps recovered judgment for such damages in the Master ’ s decision. [ 46 ] However the Van Camps acquired no right to recover damages from the Bank.

The discharge of the contract could not impose obligations on the Bank which did not otherwise exist.

Summary Judgment [ 47 ] In my view it is clear that there is no merit to the Bank ’ s claim against the Van Camps for the unpaid purchase price under the conditional sales contract which is the subject of the appeal. I allow the appeal from the Master ’ s award of judgment against the Van Camps. I grant

summary judgment dismissing the Bank ’ s claim for payment of the unpaid remainder of the purchase price.

[ 48 ] In my view it is also clear that there is no merit to the Van Camps ’ claim for recovery as against the Bank of the funds the Van Camps paid before the contract was discharged. The Master did not expressly summarily dismiss that claim though he did so implicitly. In any event, I grant

summary judgment dismissing the Van Camps ’ claim against the Bank. [ 49 ] Obviously the portions of the Master ’ s determination from which no appeal was taken are unaffected by this decision. [ 50 ] In the result, my answer to the question stated by the Master, “ . . . which of two innocent parties should bear the consequences of the defaults and defalcations of Chrome Horse or Moreau ” is that each should bear the portion of those consequences that fell to each of them as at the date the contract was discharged. [ 51 ] As success has been divided, neither party shall recover costs.

Heard on the 24 th day of January 2012. Dated at the City of Edmonton, Alberta this 14 th day of March 2012. Brian R. Burrows J.C.Q.B.A. Appearances: Darren R. Bieganek for Robert Van Camp and Jeanette Van Camp Terrence Warner for the Laurentian Bank of Canada Mark Semrau, Mark Semrau carrying on business as SI Financial Ltd., and SI Financial Ltd. did not participate in the appeal Chrome Horse Motorcycle Inc. and Maurice Moreau did not participate in the appeal