David M. Gottlieb, Professional Corporation v. Olympia Trust Company, 2012 ABQB 262

Court of Queen ’ s Bench of Alberta Citation: David M. Gottlieb, Professional Corporation v. Tymkow, 2012 ABQB 262 Date: 20120419 Docket: 0901 05263 Registry: Calgary Between: David M. Gottlieb, Professional Corporation and Olympia Trust Company Plaintiffs - and - Lance Dean Tymkow Defendant _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice A.D.

Macleod _______________________________________________________ Introduction [ 1 ] On March 29, 2010, an Order for sale was made, as a result of foreclosure proceedings in respect of lands owned by the Defendant Lance Dean Tymkow (the Lands). On December 17, 2010 I made an Order to disperse funds from the sale of the Lands to various interest holders. On April 21 2011 I heard an application brought by Blair and Nick Nikiforuk to set aside, vary or discharge the December 17, 2010 Order because they alleged that they held interests in priority to the interests ordered to be paid in the December 17,

2010 Order and had not been given notice of the previous hearing. Because there had been no formal hearing on the validity of the caveats that Blair and Nick Nikiforuk allege had been transferred to them, the December 17, 2010 Order was stayed and matter was adjourned sine die. [ 2 ] It now appears that the enforceability of some of the Nikiforuk claims (the Lamoureux and Tymkow claims) comes down to the applicability of the Limitations Act , R.S.A. 2000, cL-12, and on December 12, 2011 I directed the parties to provide written argument in this regard.

Facts [ 3 ] On October 4, 2006, Lance Tymkow executed a demand promissory note in the amount of $286,000 and agreement charging the Lands in favour of Sandra Joy Lamoureux (the Lamoureux Note). A caveat was filed by Lamoureux on November 7, 2006 (the Lamoureax Caveat).

On July 24, 2007, he executed a demand promissory note in favour of Joan Tymko in the amount of $46,181.98 (the Tymko Note), and a caveat was filed on August 13, 2007 (the Tymko Caveat).On or about March 28, 2010, the Lamoureux and Tymko Notes were transferred to the applicant, Blair Nikiforuk [ 4 ] The Lamoureux Note was repayable in full within 90 days of demand, with interest at the rate of 7% per annum, calculated yearly.

No copy of the Tymko Note has been provided to me, but by Affidavit dated August 31, 2011, Blair Nikiforuk swears that the Tymko Note provided for interest at a rate of 10% per annum compounded semi-annually. Mr.

Nikiforuk further swears that it is his understanding that Joan Tymkow never received any monies from the Defendant towards payment of the Tymkow Note. [ 5 ] In March, 2010, when the Lamoureux Note was transferred to Blair Nikiforuk, the Defendant signed an Acknowledgment of Indebtedness, wherein he stated that he owed Lamoureux the sum of $286,000, plus interest at the amount set out in the Lamoureux Note. By Affidavit dated August 3, 2011, Sandra Lamoureux swears that she never received payment towards the loan secured by the Lamoureux Note.

Issues [ 6 ] On December 12, 2011 I directed the Parties to provide written argument with respect to the following issues: 1. Does a competing encumbrancer have status to raise a limitations argument against another competing encumbrancer? 2. When does the limitation period begin to run in respect of a demand promissory note? 3. What is the effect of an acknowledgment of debt after the expiry of a limitation period? 4. Costs. Law and Analysis 1. Standing of Competing Encumbrancers to Raise Limitations [ 7 ] All of the parties directed me to the decision of Master Schlosser in Toronto Dominion Bank v.

Letendre , 2011 ABQB 369 , [2011] A.J. No. 659, wherein he held, at paras.11-13:

The policy underlying the [Limitations] Act, which is to provide a Defendant with repose by conferring an immunity at the Defendant'soption, may have no direct application to a contest between competing creditors. In many instances the Defendant may have no activeinvolvement in the proceedings. However, in my view, a proper determination of the entitlement of an interested party to funds in court requires a consideration of therelevant limitations even if the limitation is raised by one of the competing parties rather than the Defendant debtor.

It is a relevantconsideration for determining whether or not a competing creditor has "an enforceable claim." To hold otherwise would, in effect, permit the courts to enforce what would otherwise be an unenforceable claim. Therefore, unless itcan be shown that there is a compelling reason that the Defendant would not have raised the limitations defence, the Court is bound toconsider it. A number of decided cases appear to have proceeded on this basis even though the point may not have been directly raised orargued. [8] I agree. It is open to a competing creditor to raise the Limitations Act. 2.

The Limitation Period for a Demand Promissory Note [9] The parties are also agreed that the Limitations Act has changed earlier law to the effect that the limitation period on ademand promissory note commences to run from the date of execution. The change is described by Feehan J. in Sawchuk v. Bourne,2004 ABQB 344, [2004] A.J. No. 526, at paras. 21-23: At common law, the cause of action on a demand loan accrues from the date of advancement of the loan: Berry v. Page (1989), (BC CA), 60 D.L.R. (4th) 289 at 290 (C.A.); Chitty on Contracts, 28th ed., vol. 1 (London: Sweet & Maxwell, 1999) atpara. 29-032.

However, under s. 3(1) of the new Limitations Act, the start of the limitation period is not the date the cause of actionarose. Section 3(1) reads: 3(1) Subject to

section 11, if a claimant does not seek a remedial order within (a) 2 years after the date on which the claimant first knew, or in the circumstances ought to have known, (

i) that the injury for which the claimant seeks a remedial order had occurred, (ii)that the injury was attributable to the conduct of the defendant, and (iii) that the injury, assuming liability on the part of the defendant, warrants bringing a proceeding, or (b) 10 years after the claim arose, whichever period expires first, the defendant, on pleading this Act as a defence, is entitled to immunity from liability in respect of theclaim. "Injury" is defined under s. 1(e)(iv) as meaning "non-performance of an obligation . . . ". In this case, s. 3(1)(

a) applies as it is the shorter of the limitations periods. In accordance with s. 3(1), the limitation period started to run

when the Plaintiff knew or ought to have known that the injury had occurred, that the Defendants were responsible for the injury and that the injury warranted bringing an action... [ 10 ] Similarly, in Kendell v. Kendell , 2006 ABQB 664 , [2006] A.J.

No. 1117, Moen J. concluded that under the Limitations Act the determination of when the limitation period commences to run in respect of a demand promissory note requires a consideration of the “factual matrix” under s.3(1). [ 11 ] The parties are agreed, and the case law supports the proposition that the limitation period in respect of the Lamoureux and Tymkow notes commences to run from the date when the lenders knew or ought to have known that the Defendant would not repay the loans they made to him upon notice. Whether or not the Defendant made payments on the loans is, in the circumstances, irrelevant.

An injury under s.3(1)(

a) occurs in respect of a demand promissory note when a demand is made and not met. [ 12 ] Section 3(5) of the Limitations Act provides as follows:

(5) Under this section, (

a) the claimant has the burden of proving that a remedial order was sought within the limitation period provided by subsection (1)(a), and (

b) the defendant has the burden of proving that a remedial order was not sought within the limitation period provided by subsection (1) (b). [ 13 ] Where a debtor, or in this case competing creditors, rely upon the limitation period under s.3(1)(a), it is the claimant creditor, in this case Nikoforuk, who bears the onus of proving that the claim is brought within the limitation period. In the present case, this requires Nikiforuk to prove that no demand for payment was made to the Defendant under the Lamoureux and Tymkow Notes. In some circumstances it may be difficult to prove a negative, but it is not so here.

Clear evidence from the lenders Lamoureux and Tymkow, and from Nikiforuk himself, that no demand was ever made might suffice. Instead, the only evidence before me is Lamoureux’s assertion that no payments were ever made on the Lamoureux Note, and Nikiforuk’s assertion, which is hearsay, that he understands that Joan Tymkow never received any monies toward payment of the Tymkow Note. What is entirely missing is any evidence to the effect that no demand was ever made in respect of either the Lamoureux and Tymkow notes. 3. The Effect of an Acknowledgment of Debt [ 14 ] Mr.

Tymkow signed an acknowledgment of debt in respect of the Lamoureux Note in March, 2010. There is no similar acknowledgment in respect of the Tymkow Note before me. [ 15 ] Section 8(2) of the Limitations Act provides: 8(2) Subject to subsections (3) and (4) and

section 9, if a person liable in respect of a claim acknowledges the claim, or makes a part payment in respect of the claim, before the expiration of the limitation period applicable to the claim, the operation of the limitation period begins again at the time of the acknowledgment or part payment. [ 16 ] By the clear language of s.8(2), to be effective in renewing the limitation period, an acknowledgment of debt must be made within the limitation period. The point is not argued by the Applicant, who simply alleges that the limitation period has never commenced because no demand was made on the Lamoureux Note.

If the limitation period did not commence because no demand was ever made, the Acknowledgment of Debt is irrelevant. If the acknowledgment was made after the limitation period expired, it is not effective in respect of the limitation period. The Acknowledgment of Debt is only relevant in the event the limitation period commenced to run, but there is no evidence upon which I can determine this question.

Conclusion [ 17 ] The Applicant bears the onus of proving that the claim is brought within the limitation period set out in s.3(1)(

a) of the Limitations Act . In my view, this requires the Applicant to prove that no demand was ever made in respect of the Tymkow and Lamoureux Notes. The Applicant has failed to discharge his onus in this regard, and as a result, the Application is dismissed. Costs [ 18 ] If the parties cannot agree on costs, they may make submissions. Heard on the 12 th day of December, 2011. Dated at the City of Calgary, Alberta this 19 th day of April, 2012. A.D. Macleod J.C.Q.B.A. Appearances: Mark H.

Demas Duncan & Craig LLP for Blair and Nick Nikiforuk Ryan Quinlan Fraser Milner Castrain LLP for McEwen’s Fuels & Fertilizers Inc. James F. Reich Reich Law Office for Dominion Properties Mortgage Investment Corporation