Nikel Investments Ltd. v Gallaher, 2012 ABQB 276

Court of Queen ’ s Bench of Alberta Citation: Nikel Investments Ltd. v Gallaher, 2012 ABQB 276 Date: 20120425 Docket: 0903 16143 Registry: Edmonton Between: Nikel Investments Ltd. Plaintiff - and - Ken Gallaher Defendant _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice Don J. Manderscheid _______________________________________________________ I. Introduction [ 1 ] In this action the Plaintiff is seeking judgment for amounts it claims are owing under a loan it gave the Defendant. The matter came before this Court by way of a

summary trial with oral evidence on January 10, 2011. II. Facts

[ 2 ] The parties filed an Agreed Statement of Facts and Documents (the “ ASFD ” ), the salient facts agreed to being: 1. On February 20, 2001, the Plaintiff loaned the Defendant $60,000. The Defendant agreed to repay the Plaintiff $90,000, as set out in the promissory note attached as Exhibit “ A ” to the ASFD (the “ Loan ” ). 2. Payment of the Loan was due and owing on August 31, 2001. Any amount that had not been paid by August 31, 2001 was subject to interest in the amount of 15 percent per annum. 3.

The Defendant failed to repay the outstanding balance of the Loan to the Plaintiff on or before August 31, 2001. 4. From August 22, 2005 onward, the Defendant made e-mail acknowledgments of the debt owing. On August 22, 2005, the Plaintiff deposited a cheque from the Defendant in the amount of $1,000, made as payment towards the amount owing. On September 15, 2005, the Plaintiff deposited a cheque from the Defendant in the amount of $500, made as payment towards the amount owing.

The Defendant provided two cheques to the Plaintiff dated July 1, 2006 totalling $5,000, made as payment towards the amount owing, but requested they not be deposited until he provided further notification. The Plaintiff never deposited the cheques. 5. The Plaintiff ’ s representative, Curtis Nikel ( “ Nikel ” ), is no longer in possession of nor able to obtain e-mail correspondence from the employment e-mail address he had prior to 2004. 6.

It is an issue between the parties whether, from September 1, 2001 to August 31, 2003, the Defendant provided the Plaintiff with any written acknowledgment of the debt owing and, if he did, when such acknowledgment was made. III. Statute Law [ 3 ] The following statutory provisions of the Limitations Act , RSA 2000, c L-12 (the “ Act ” ) are germane to this lawsuit: 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 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 the claim. . . . 8(1) In this section, “ claim ” means a claim for the recovery, through the realization of a security interest or otherwise, of an accrued liquidated pecuniary sum, including, but not limited to a principal debt, rents, income and a share of estate property, and interest on any of them.

(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 .

(3) A claim may be acknowledged only by an admission of the person liable in respect of it that the sum claimed is due and unpaid , but an acknowledgment is effective (

a) whether or not a promise to pay can be implied from it, and (

b) whether or not it is accompanied with a refusal to pay.

(4) When a claim is for the recovery of both a primary sum and interest on it, an acknowledgment of either obligation, or a part payment in respect of either obligation, is an acknowledgment of, or a part payment in respect of, the other obligation. 9(1) An agreement and an acknowledgment must be in writing and signed by the person adversely affected . [Emphasis added.] [ 4 ] In calculating the time period referred to in s 3(1)(

a) of the Act , resort must be had to the

Interpretation Act , RSA 2000, c I-8, s 22(7), which provides: 22(7) If an enactment provides that anything is to be done within a time after , from, of or before a specified day , the time does not include that day. [Emphasis added.] [ 5 ] The following provisions of the Electronic Transactions Act , SA 2001, c E-5.5 also are of relevance: 11. A legal requirement that information or a record be in writing is satisfied if the information or record is (

a) in electronic form, and (

b) accessible so as to be usable for subsequent reference. . . . 16(1) Subject to subsection (2) and

section 22, a legal requirement that a record be signed is satisfied by an electronic signature.

IV. Issues [ 6 ] There is no dispute that the Plaintiff failed to file its claim within the original two year limitation period. The main issues to be decided are whether the Defendant acknowledged the debt, in writing, during that two year period, thereby extending the time period for the Plaintiff to file its claim, and whether the Plaintiff filed its claim within any such extended limitation period. Further issues raised by the Plaintiff are whether the Defendant is estopped by his actions from relying on the limitation period, and whether the analysis of these issues should be informed by public policy surrounding

interpretation and application of the Act ? V. Evidence [ 7 ] The Defendant and Nikel provided conflicting testimony concerning their communications relating to the Defendant ’ s intention to pay the Loan. A.

Evidence of Nikel [ 8 ] During examination-in-chief, Nikel testified that he only used his employment e-mail account at Norsat when corresponding with the Defendant from August 31, 2001 up until he stopped using that e-mail address in early 2004. [ 9 ] Nikel testified that after the Defendant failed to repay the Loan by August 31, 2001, he would contact the Defendant by telephone to follow up on the debt outstanding under the Loan. He said the Defendant often responded by e-mail.

Nikel stated that he did not receive any e-mails from the Defendant in 2001, but he did recall receiving e-mails from him in 2002 and in 2003, after the Defendant had commenced employment with the City of Calgary. [ 10 ] When asked during cross-examination on an affidavit filed by the Plaintiff in these proceedings whether or not he recalled the contents of the e-mails he received from the Defendant prior to August 31, 2003, Nikel answered that he did not. However, Nikel testified at trial that the Defendant, in these reply e-mails, said something to the effect of, “ I got your voice message today.

I couldn ’ t respond to you by phone so I wanted to send you a note just giving you an update on my situation. ” Nikel further stated that the Defendant advised in these e-mails that he did not have the capacity to repay Nikel at that time, but was working towards earning additional monies to repay the Loan.

Nikel could not remember the precise date of any of these e-mails. [ 11 ] Nikel testified that he was unable to produce any e-mails from his pre 2004 employment e-mail address as he did not have access to that information and, in any event, he had been advised his employer had not retained the e-mails. [ 12 ] Nikel acknowledged that the earliest relevant e-mail he is able to produce is dated January 11, 2005. It is to the Defendant and reads: Happy New Year. Hope you had a wonderful Christmas and wish you the best for the ’ 05 year.

When we last spoke in November you had indicated that you were on track to set up partial repayment with the bank in January of ’ 05. Can you update with me on the progress. By the way, my new email address is below. [ 13 ] Nikel confirmed that the first e-mail he received from the Defendant he is able to produce is from February 2007 (NIK17 from Tab E of the ASFD).

[ 14 ] Nikel testified that, as noted in the ASFD, the Defendant did pay $1,500 in 2005 towards the outstanding monies owing on the Loan, and provided two cheques together with a note asking that he hold onto them until the Defendant could confirm that he had adequate money to cover them. [ 15 ] Nikel identified the following e-mail, which he sent to the Defendant on March 25, 2008: For many years now I ’ ve been optimistic that you would be in touch with me to make arrangements to repay the loan you have outstanding.

Each of our communications has been an explanation of how you are managing with your health and family leading to how you have no spare capacity for servicing the debt. Every time you write with an explanation my patience has had me accepting your actions and waiting. B. Evidence of the Defendant [ 16 ] The Defendant confirmed he borrowed money from the Plaintiff and, aside from two small payments made in 2005, he had not paid it back.

The Defendant further confirmed he made verbal acknowledgments of the debt and promised to pay it when speaking with Nikel between September 1, 2001 to August 31, 2003, and beyond. [ 17 ] During examination-in-chief, the Defendant said that he started e-mailing Nikel with respect to the debt in early 2007, as his office arrangement at work had changed and he had moved from having a private office in which he could make personal calls to an open concept office, which did not afford any privacy. He testified he was not aware of any e-mails he might have sent to Nikel prior to the one on February 14, 2007.

He could not recall communicating with Nikel at all in writing about the debt between August 31, 2001 and the end of 2006. He stated that any communication he had with Nikel was by telephone and he believed he spoke with Nikel once or maybe twice in person during that time period.

However, the Defendant agreed in the ASFD that from August 22, 2005 onward, he made e-mail acknowledgments of and partial payments on the debt owing, including a cheque for $1,000 deposited by the Plaintiff on August 22, 2005, another for $500 deposited by the Plaintiff on September 15, 2005, and two cheques dated July 1, 2006 which he provided to the Plaintiff but, at his request, were never deposited by the Plaintiff. [ 18 ] During the course of the trial, the parties made a request to the City of Calgary under the Freedom of Information and Protection of Privacy Act , RSA 2000, c F-25 to obtain any e-mails sent by the Defendant to the Plaintiff during the time period in question.

The City of Calgary responded, advising that all of the Defendant ’ s e-mails were destroyed shortly after his departure from his employment with the Calgary Housing Company. [ 19 ] At trial, the Defendant confirmed that, prior to filing his statement of defence, he had never denied he owed the Plaintiff the amount outstanding on the Loan. He agreed that, aside from the limitation period, he had no other reason to deny the debt. VI. Analysis A.

Was There A Written Acknowledgment of the Debt by the Defendant Prior to Expiry of the Limitation Period? [ 20 ] In FH v McDougall , 2008 SCC 53 at para 49 , the Supreme Court of Canada confirmed the standard of proof in civil actions: ... in civil cases there is only one standard of proof and that is proof on a balance of probabilities. In all civil cases, the trial judge must scrutinize the relevant evidence with care to determine whether it is more likely than not that an alleged event occurred.

[21] In the case at bar, the relevant limitation period commenced on September 1, 2001, the day following the date the Loan wasto be paid in full by the Defendant, but was not. Ordinarily, it would have run for a period of two years. [22] In John Barlot Architect Ltd v 973189 Alberta Ltd, 2008 ABQB 458, Graesser J, in discussing the approach that should betaken when interpreting the Act, had this to say at para 140: As a result, the cases in Alberta provide little guidance with respect to the

interpretation of s. 8 and s. 9. Since the application oflimitation periods limits a person's right to commence action, the provisions of this statute should not be interpreted liberally. Indeed, asthe Limitations Act is legislation encroaching on individual rights and freedoms, in the event ambiguity or doubts arise,

interpretationshould avoid a breach of individual rights and freedoms: Canadian Wheat Board v.

Nolan, (UK JCPC), [1952] A.C.427 at 450 (P.C.). [23] Furthermore, in the same case, Graesser J discussed the requirement under s 8 of the Act that an acknowledgment be inwriting, and concluded that neither s 8(3) of the Act nor the case law mandates any particular form an acknowledgment must take, citingas authority Re Heffren, (MB KB), [1922] 2 WWR 1038 (Man KB), in which MacDonald J stated at p 767: “[a]nywords are a sufficient acknowledgment if they either expressly or by implication amount to an unconditional acknowledgment of a debtor to a promise to pay.” [24] In the case at bar, counsel for the Defendant conceded that an acknowledgment by e-mail would constitute a written andsigned acknowledgment for the purpose of satisfying s 8 of the Act. [25] However, the Defendant did not concede that he provided any written acknowledgment of the debt, by e-mail or otherwise,during the limitation period, and the Plaintiff failed to provide proof that the Defendant did so. [26] The Plaintiff submits that extrinsic evidence may be considered to establish that an acknowledgment was made, referring toSwiderski v Meer, 2003 ABQB 836 at paras 6-7.

The Plaintiff notes in this regard that while the Defendant denies he acknowledged thedebt in writing during the limitation period, he admits to having verbally acknowledged it during that time period. It contends thisadmission by the Defendant amounts to extrinsic evidence of the acknowledgment. [27] The Act requires written acknowledgment. Accepting a verbal acknowledgment as extrinsic evidence would defeat thisrequirement of the Act. In Swiderski, the extrinsic evidence was admissible to establish that a cheque which had been written by thedefendant was an acknowledgment of the debt in issue in that case.

It did not replace the written acknowledgment. [28] I am satisfied on the evidence before me that the limitation period for the Plaintiff to sue on the Loan expired on August 31,2003. B. Is the Defendant Estopped from Relying on the Limitation Period? [29] The Plaintiff submits that even if the Defendant did not send e-mails to Nikel acknowledging the debt and/or promising topay it, he is estopped by his conduct from relying on the limitation period.

The Plaintiff relies on the Defendant’s evidence concedingthat, throughout the period of time when the Loan was outstanding, he verbally acknowledged the debt and promised to pay it. [30] The Plaintiff cites Brar v Roy, 2005 ABCA 260 at para 32, in which the Court of Appeal held that where a party relies onrepresentations made by the opposing party, and as a result changes its legal position to its detriment, the party who made therepresentation cannot rely on the limitation period. [31] The Plaintiff further submits that the common-law in relation to estoppel is not excluded by the Act, rather, the doctrine of

promissary estoppel continues to operate in conjunction with the Act, again citing Brar v Roy at paras 34-35 as authority. The Plaintifftakes the position that a gratuitous oral promise by one party that is intended to be and is relied on by the other to the latter’s detriment isnot required to be in writing. As a consequence, despite the requirements of the Act, the limitation period can still be extended by theDefendant’s oral promises to pay.

The Plaintiff submits that in the case at bar, the Defendant made promises to pay andacknowledgments which the Plaintiff relied on by forbearing from proceeding with legal action. Therefore, the Defendant is estoppedfrom relying on the limitation period. [32] In Brar, the court confirmed that promissory estoppel may preclude reliance on a limitation defence, stating at para. 32: Here, the appellant made an unconditional open-ended offer that was not revoked and was accepted by the respondent within areasonable time.

The trial judge found that the doctrine of promissory estoppel applied in the circumstances notwithstanding theintervening expiry of the limitation period. The appellant was estopped from relying on the Limitations Act as a bar to the respondent'sclaim. The trial judge's characterization of the adjuster's words and conduct and the lawyer's detrimental reliance on them are findings offact. There was evidence to support the underlying facts and the inferences drawn by the trial judge were reasonable. We are satisfied thetrial judge made no palpable and overriding error in arriving at his findings of fact.

Further, the trial judge's statement of the principles ofpromissory estoppel was correct.

We are unable to discern any palpable and overriding error in his application of the legal principles tothe facts as found. [33] As application of promissory estoppel is highly fact-specific (Brar at para 31, citing Maracle v Travellers Indemnity Co. ofCanada, (SCC), [1991] 2 SCR 50 and the companion case of Marchischuk v Dominion Industrial Supplies Ltd, (SCC), [1991] 2 SCR 61), it is necessary to examine the words andconduct of the Defendant and Plaintiff to determine whether the Defendant, by words or conduct, made a promise which was intended toaffect his legal relationship with the Defendant and to be acted on, and whether the Plaintiff, in reliance on the representation, changedits position to its detriment. [34] The Defendant conceded at trial that he verbally acknowledged the debt and promised to pay it when speaking with Nikelbetween September 1, 2001 to August 31, 2003, and beyond. [35] Nikel testified that after the Loan was due, he made numerous telephone calls to the Defendant.

He said that he never sent theDefendant a written demand for payment, explaining that: “I had lent money to Ken in the past, and Ken had missed the due dates, but Ialways received all the monies back, and it was by way of conversation.” When asked why the Plaintiff did not take action [within thelimitation period] against the Defendant when the Loan was not repaid, Nikel responded: I had made a number of loans to Ken over the years, and Ken had missed the due date on the loans but always repaid the loan, so all theprevious lendings I ever had were dealt with and repaid in full.

Ken and I were communicating, and I believed his situation to be true thathe didn’t have any spare money to repay me with, and I continued to be optimistic that I would get the money back. [36] Nikel testified he did not receive any e-mails from the Defendant in 2001, but he recalled receiving e-mails from him in 2002and in 2003. During cross-examination on his affidavit, he indicated he could not recall the content of these e-mails.

At trial, however, hesaid the Defendant would advise he did not have the capacity to repay the Loan at the time but was looking at ways to pay back theLoan. [37] The evidence before this Court does not give rise to promissory estoppel. While the Defendant acknowledged his debt andpromised to pay it, he was clear that he did not have the funds to do so. The Plaintiff has not established the Defendant’s promises to paywere intended by the Defendant to be acted on and to affect their legal relationship. There is no evidence the Defendant asked thePlaintiff not to sue him.

Nor is there evidence the Plaintiff reasonably relied on the Defendant’s promises to pay in choosing not to takeaction within the limitation period.

Indeed, it would appear from Nikel’s testimony that the Plaintiff’s choice not to sue was based moreon optimism and the history of Nikel’s past dealings with the Defendant than on the Defendant’s promises. [38] To paraphrase the words of Graesser J in John Barlot Architect Ltd, in which he stated (at para 97): “[t]he evidence is simplytoo vague and uncertain to establish what representations as to payment, if any, were made, let alone that [the Plaintiff] placed anyreasonable reliance on such representations to its detriment.” C. Should the Analysis of Either Issue be Informed by Public Policy?

[ 39 ] The Plaintiff submits that the purpose of requiring the acknowledgment of the debt be in writing is to allow for confidence that the acknowledgment actually was made, in situations where the debtor later denies the existence of the obligation. The Plaintiff notes this is not the case here and points to the Defendant ’ s testimony that from 2001 onward, he acknowledged his obligation and promised to pay the Loan. It also notes his evidence that absent the limitation period, he had an obligation to repay the Loan.

The Plaintiff asserts that public policy would favor a finding of liability on the part of the Defendant. [ 40 ] In support of its position, the Plaintiff refers to the following excerpt from the Alberta Law Reform Institute ’ s December 1989 Report No. 55, Limitations , discussing the policy reasons for allowing an extension of the limitation period where there is an acknowledgment by the debtor of the debt: There are two policy reasons for the common law doctrine of acknowledgment:

(1) If a debtor has admitted his indebtedness and his legal duty to pay the debt, he has, by this conduct, renounced his need for the protection afforded by a limitations system. If he has admitted his legal liability, the reasons for limitations protection based on stale evidence, peace and repose, and economic cost are so reduced that a renewed limitation period is justified;

(2) The second reason is based on estoppel. If the debtor has promised to pay a debt, the creditor should be permitted to rely on this new promise without bringing an action for a renewed limitation period. [ 41 ] This commentary relates to the common law doctrine of acknowledgment. In my view, the policy considerations cited cannot override the strict provisions of s 9 of the Act that require that “ an agreement and an acknowledgment must be in writing and signed by the person adversely affected. ” Furthermore, as previously stated, I have not found that promissory estoppel has been established in this case VII.

Conclusion [ 42 ] As a result, I am satisfied on the evidence before me that the limitation period for the Plaintiff to sue on the Loan expired on August 31, 2003. No evidence supports any reasonable argument that the limitation period was still alive on October 14, 2009 (the date of filing of the Plaintiff ’ s Statement of Claim). Accordingly, the Plaintiff has failed to prove its case on a balance of probabilities and the action is dismissed. [ 43 ] If the parties cannot agree on costs, they may arrange an application before me to speak to costs within 60 days. Heard on the 10 th day of January, 2011.

Written Submissions provided on the 16 th day and 30 th day of March, 2012 Dated at the City of Edmonton, Alberta this 25 th day of April, 2012.

Don J. Manderscheid J.C.Q.B.A. Appearances: Alisha Hurley Miller Thomson LLP for the Plaintiff Natalie Tymchuk Emery Jamieson LLP for the Defendant