Boyd v. Cook, 2012 ABQB 284

Court of Queen ’ s Bench of Alberta Citation: Boyd v. Cook, 2012 ABQB 284 Date: 20120430 Docket: 1101 08509 Registry: Calgary Between: Frank Boyd, Scrabo Holdings Ltd., and Frank Boyd (as the litigation representative of the estate of Pamela Boyd) Plaintiffs - and - Darrell Cook Defendant _______________________________________________________ Reasons for Judgment of J.B. Hanebury, Master in Chambers _______________________________________________________ [ 1 ] This is an application to dismiss an action on the basis that it is out of time.

The application raises two issues: what is the injury that started the clock ticking; and, when did the claimant know that the injury warranted bringing an action? FACTS [ 2 ] Mr. Cook and Mr. Boyd were friends and also had a business relationship.

[ 3 ] In 2005 Mr. Cook approached an investment fund of which both he and Mr. Boyd were directors, and sought financing for a development called the Salt Spring Project, a recreational condominium development on Salt Spring Island. The funding request was rejected. Mr. Cook asked Mr. Boyd to personally invest in the project. Mr. Boyd advised that he was not interested, wanted nothing to do with that particular investment and would not recommend it to others. [ 4 ] Mr. Cook was the sole director of a company called Gibraltar Mortgage Corporation.

It sold investments in TMIC Inc., which was a mortgage investment company. TMIC raised investor funds, pooled them and invested in a portfolio of registered mortgages, and then paid dividends to the investors. Mr. Cook was a director of TMIC and Gibraltar Mortgage was its manager. [ 5 ] In 2007 Mr. Cook introduced Mr. Boyd to TMIC and Mr. Boyd, his wife Pamela Boyd, and his company, Scrabo Holdings Ltd., purchased $1,325,000.00 worth of shares.

They were purchased pursuant to an offering memorandum that provided that the mortgages held by TMIC would be secured against property in Alberta, British Columbia, Saskatchewan, Manitoba and Ontario. Mr. Boyd said that he understood the mortgages financed by TMIC were conservative and would pay out 9 to 10 % annually. [ 6 ] The Boyds and Scrabo Holdings received dividends from their investment in TMIC until the summer of 2008, when the payments stopped. [ 7 ] Various reports were sent to the investors in September, November and December of 2008.

They indicated that TMIC had invested in the Salt Spring Project and it was in trouble. Mr. Boyd says that he did not receive these reports. [ 8 ] However, as a result of receiving no dividends, Mr. Boyd began questioning Mr. Cook on the status of the mortgages held through TMIC . He was assured that their investments were safe and financial statements and details of the mortgage portfolio would soon be provided. [ 9 ] On March 30, 2009, Mr. Boyd received a letter from Gibraltar Mortgage reporting on TMIC. He then learned, for the first time, that TMIC had invested in mortgage loans to the Salt Spring Project.

The information provided indicated that the Salt Spring Project had troubles: the lodge had burned down; there were issues as to possible expiration of permits; there was a receiver in place; and, the project was in foreclosure. [ 10 ] Mr. Boyd was not happy. He was concerned that his money had not been invested in line with the conservative investments outlined in the offering memorandum and had been invested in the Salt Spring Project. He confronted Mr. Cook, who told him that there was significant value in the Project and their investments were safe. [ 11 ] On May 5, 2009, Mr.

Boyd’s son attended an information meeting on the TMIC investment portfolio and, in particular, the Salt Spring Project. The information provided was apparently scanty and did not alleviate Mr. Boyd’s concerns. [ 12 ] On May 8, 2009, Mr. Boyd emailed Gibraltar a very detailed request for specific information on the Salt Spring Project. The initial response included a sheet of appraisal information that showed the property appraised at $17,250,000.00 on an “as is” basis as of December 5, 2007, with a value of over $29 million on that date, if built. Outstanding against it was over $30,000,000.00.

The information provided also indicated that there were problems with the building permits for the development. The response did not answer most of his questions, although further information was promised at a later date. [ 13 ] On May 27, 2009, a further page of information was sent by Gibraltar Mortgage to Mr. Boyd. It was entitled “Provision for Doubtful Accounts (Draft Internal Purposes Only)” and it included the two mortgages related to the Salt Spring Project, totalling almost $30,000,000.00.

It showed an appraised value of $54,000,000.00 for the property and a “foreclosure &/or market value” of $17,250,000.00.

[ 14 ] On June 5, 2009, Mr. Boyd prepared a draft letter to be sent to other investors advising that Mr. Cook had agreed to “stand back” from the day to day operations of the Salt Spring Island account and a management group of investors would take over the management of the project “to try and recover as much money as possible for the Investors”. The group would retain a manager to assess the project, review its financial status and present scenarios for its development and sales. Mr. Boyd was to be one of the members of the management group. It is unclear when and if this letter went out. Shortly thereafter Mr.

Boyd’s wife died. [ 15 ] As to the management committee, while it toured the project in July, 2009, he said that it fell apart as it could not get the information it needed to make meaningful recommendations. Mr. Cook, he said, had no interest in solving the problems through the committee. [ 16 ] A subsequent report by Gibraltar dated November 3, 2009, stated that a committee of investors toured the project in July, and met with Gibraltar management in August and September. The property was listed for sale at $18,000,000.00. [ 17 ] In his affidavit Mr.

Boyd states that by mid June, 2009, he “still did not have any information that suggested the TMIC loans were in jeopardy but I was concerned because of Gibraltar’s failure to provide meaningful information to TMIC shareholders.” He said that by November or December, 2009, he suspected that he “would suffer a loss in my TMIC investment as a result of the loans to the Salt Spring Project” but did not take legal action as he did not know if it was significant enough to justify the costs of legal proceedings. [ 18 ] When cross-examined on his affidavit, Mr.

Boyd stated that he was the president and CEO of a development company and considered himself sophisticated in the land development business. He said that after he got the information about the Salt Spring Project in March, 2009: [he] complained to [Darrell Cook] a dozen times. He always said the same thing to me, Frank, there is lots of money in this project. I’m going to get you your money back. Don’t you worry about it. I’m going to get you your money back. That is what Darrell said to me. I talked to him lots of times about it.

He always was apologetic about things, but he said, I will get you your money back. [ 19 ] Mr. Boyd was then asked if he had concerns whether he was going to get his money back after he received the March, 2009, letter. He responded that “you couldn’t help but be concerned”. He went on to state: I think it would be based on this information, you would have to assume you are not going to get all your money back or my interest money that was owed to me on the project. It was highly unlikely. It doesn’t say here anywhere that I could see what the loss is.

It just talks about all the things they’re going to do, all the actions they are going to take. Darrell [Cook] was always very upbeat about the fact that it was just getting appraisals done, and it was appraised at millions and millions of dollars and that there was loads of value in there, and everything was going to be just great. [ 20 ] When asked if he sought legal advice in 2009 in relation to the investment, Mr. Boyd responded: No. Why would I have sought legal advice? I was dealing with my friend Darrell.

He told me I was going to get my money back. [ 21 ] He went on to say that he didn’t know then if he’d been defrauded as he didn’t have information, and had received nothing but “vague reports”. He said: That is all we ever got. We never saw anything. Darrell would never tell anybody the status of the project. That is why I put this demand in. Give me some information, which I never got. I got some, but I didn’t get it all. That was done because I could not find out anything about the project.

[ 22 ] Ultimately, the issues with the property were not resolved satisfactorily and this action resulted. In the interim Mr. Cook died and his and Ms. Boyd’s involvement in this action is through representatives. ISSUE [ 23 ] The issue before this Court is whether this action should be summarily dismissed on the basis that it is barred due to the passage of time. In the facts of this case two determinations must be made to decide this question: what is the nature of the injury for which a remedy is being sought, and when did the claimant know or ought to have known that the injury warranted bringing an action? ANALYSIS [ 24 ] The test for

summary judgment, or in this case

summary dismissal, is not in issue. It must be “plain and obvious” that the action will fail or, in other words, the action is “bound to fail” or has “no prospect of success”: Murphy Oil Co. v. Predator Corp. , 2006 ABCA 69 , para. 24 ; Boudreault v. Barrett , 1998 ABCA 232 , para. 9 . . This test has carried forward into the present Rules of Court: Kwan v. Superly Inc. , 2011 ABQB 343 . [ 25 ] In light of this test, the action should be summarily dismissed if the Court is satisfied that it is plain and obvious that the claim is barred by the Limitations of Actions Act , R.S.A. 2000, c. L-12 .

The statement of claim was filed on June 16, 2011. [ 26 ] The test to be applied to establish a limitation period is found in

section 3 of the Act. It provides: 3(1) ... 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 ... [...] the defendant, on pleading this Act as a defence, is entitled to immunity from liability in respect of the claim. [ 27 ] These three requirements are conjunctive: the limitation period starts to run when the last requirement has been satisfied. At issue between the parties is the relevant time when the requirements found in subclauses (

i) and (iii) were met. In other words, did Mr. Boyd know or ought he to have known of the injury and that it warranted bringing a proceeding prior to June 16, 2009? Knowledge of the Injury [ 28 ] In relation to subparagraph one, the requirement that the claimant know that the injury had occurred, the defendants argued that the injury alleged in the Statement of Claim was essentially fraudulent misrepresentation or deceit by Mr. Cook. Mr. Boyd, they argued, was aware in March, 2009, that Mr. Cook had misrepresented to Mr. Boyd where his money would be invested. At that point he

knew of the fraud and no further information was necessary. [29] Mr. Boyd responds that the defendants confuse a cause of action with an injury and the two are different. [30] Much has been written by the Court about this difference: Sousa v. Mayo, 2005 ABQB 845, paras. 27 and 37; Sun GroHorticulture Canada Ltd. v. Alberta Metal Building Sales Inc., 2006 ABCA 243, para. 11; Mills v. Royal Bank of Canada, 2012ABCA 75, para. 34; Gayton v.

Lacasse, 2010 ABCA 123, para.27, 28. [31] The case law has held that the court is required to characterize the injury for which a remedial order is being sought utilizingthe list found in the definition of “injury” in the Act: personal injury, property damage, economic loss, non-performance of an obligation,or in the absence of any of the above, the breach of a duty. [32] There may be more than one injury in which case the discoverability period may commence at different times for differentinjuries and different claims which may arise from the same events: Limitations, Alberta Law Reform Institute Report No. 55(Edmonton: 1989) at p. 33, quoted in Sousa, para. 24; and Sun Gro, para 10. [33] In Stack v.

Hildebrand, 2010 ABCA 108, the Alberta Court of Appeal considered an application to dismiss an action fornegligent and fraudulent misrepresentation on the basis that it was filed out of time. The court found that the injury for which theplaintiff sought a remedy should be characterized as “economic loss”. [34] The claim in this case is similar, fraudulent misrepresentation and deceit and therefore the same characterization isappropriate. The injury for which a remedy is being sought by Mr. Boyd and his co-plaintiffs is economic loss. [35] Therefore, the relevant time is not simply when Mr. Boyd knew that Mr.

Cook had misdirected the funds, but when Mr. Boydknew, or ought to have known, that he had suffered the injury of economic loss. [36] As noted in Stack, perfect knowledge of that injury is not required, however mere suspicion is not enough. See as well:Condominium Plan 9421549 v. Main Street Developments Ltd., (AB KB), 2004 ABQB 962, para. 55, 56; DeShazo v. Nations Energy Co. 2005 ABCA 241, para. 31. [37] On cross-examination Mr. Boyd said that by the end of March, 2009: [Y]ou would have to assume you are not going to get all your money back or my interest money that was owed to me on the project.

Itwas highly unlikely. [38] Therefore, by then Mr. Boyd knew that Mr. Cook had been deceitful and made fraudulent misrepresentations as to the natureof the investment being made, and he knew that it was highly likely that he had suffered an economic loss. It had only to be quantified. [39] This is not a situation, as in Sun Gro, where two different economic losses resulted from the same negligent act, nor thatfound in Stack where the plaintiff only had confirmation of an aspect of the claim by way of a receiver’s report that was received lessthan two years prior to the issuance of the claim. In this case Mr.

Boyd’s evidence makes it clear that he was aware of his injury,economic loss, prior to June 16, 2009. [40] However, that does not end the matter as the limitation starts to run only once all of the three criteria found in s. 3(1)(

a) havebeen satisfied: Calibre Coatins (Edm.) Ltd. v. Thierman Construction Ltd., 2004 ABPC 46. There remains to be determined the secondquestion: whether, prior to June 16. 2009, Mr. Boyd knew that the injury warranted bringing an action.

Knowledge that the injury warrants bringing a proceeding [41] The test to determine when this criteria has been met is: in light of his or her own circumstances and interests, at what pointcould the plaintiff reasonably have brought an action: N(

J) v. Kozens, 2004 ABCA 394, para. 14, 15. [42] As noted in Condominium Plan 9421549 (supra), at para. 63: It is not every nick, bump, bruise, failing or deficiency that warrants action...The question of whether an injury warrants proceedings isnot strictly an issue of fault, nor even potential economic gain. What warrants proceedings embraces a consideration of the extent of theinjury in comparison to the economics of prospective action. This assessment involves a blended objective/subjective analysis.

As Clackson J. noted at para. 71, a form of cost-benefit analysis must be undertaken by the judge making this determination. [43] The reason for such an analysis was pointed out in the Law Reform Institute Report No. 55 at pages 33 and 67: As to the third requirement, the discovery period will not begin until the claimant first knew that his injury was sufficiently serious tohave warranted bringing a proceeding, that is, there must be relatively serious harm. This criterion will protect litigants from incurringunnecessary legal expenses, and bringing unnecessary legal action.

The discovery rule will, in effect, invite the judge to put himself inthe claimant’s shoes, to consider what knowledge he had at the relevant time, and to make the cost-benefit analysis which would bereasonable for the actual claimant. ..... 7. Comment on subc. 3(1)(a)(iii). Potential claimants rarely seek the advice of lawyers until they perceive that they have sufferedrelatively serious harm. Even if a potential claimant does seek the advice of a lawyer, the lawyer will rarely recommend the expense ofbringing a proceeding unless he is reasonably certain that the harm suffered by the claimant will justify it.

A limitation provision thatfailed to recognize these realities and which encouraged proceedings to be brought prematurely would serve neither claimants nor thelegal system. [44] Once Mr. Boyd received the March, 2009, correspondence that indicated that his money, at least in part, was invested in theSalt Spring Project, and it was in foreclosure, he sought further information. His request listed 31 separate items that he wishedaddressed. While he had frequent contact with lawyers, he did not discuss the matter with a lawyer.

He said that he saw no purpose atthat time. [45] The response of the parties behind TMIC to his questions appears evasive. The vast bulk of his questions were not addressedand the information he was provided was scanty. He was not given any appraisals. He had no audited financial statements. His attemptsto inform himself were met by the continued promises of Mr. Cook that all would be well and there was equity available.

In the absenceof this financial information, it was unclear exactly how much of his money, which had been put into a pool, was actually at risk as aresult of the investment in the one objectionable development, the Salt Spring Project. Various appraised values were provided,including one of $54,000,000.00, found in the draft statement of doubtful accounts. [46] This is not a situation where Mr. Boyd ignored the matter. He diligently tried to get answers to his questions so he couldassess the degree to which he, his wife and his company were injured as a result of the investment: Peixero v.

Haberman, (SCC), [1997] 3 S.C.R. 549, para.44; Meek (Trustee of) v. San Juan Resources Inc., 2005 ABCA 448, para 21; De Shazo v.Nations Energy Co., 2005 ABCA 241, para. 26. [47] However, he states that in March, 2009, he knew it was highly unlikely that he would get all of his money back and by June,

5, 2009, he was ready to organize and be part of a management group to “try to recover as much money as possible for the investors”. Clearly, he expected some loss, but due to the paucity of information received from TMIC and Gribraltar, it was incapable of assessment. [ 48 ] In my view this is a situation where a trial judge needs to undertake the subjective/objective assessment required to determine if the injury, economic loss, warranted taking a proceeding. I am not satisfied that it is plain and obvious that the claim is barred by the Limitations Act.

CONCLUSION [ 49 ] It is not plain and obvious that the claim is barred by the operation of the Limitations Act . The facts provided indicate a need for the trial judge to undertake the necessary analysis to determine whether or not Mr. Boyd knew or ought to have known that the injury warranted bringing a proceeding prior to June 16, 2009. The application is dismissed. [ 50 ] If costs cannot be agreed to, the parties may speak to costs within 30 days of the issuance of this decision. Heard on the 22 nd day of March, 2012. Dated at the City of Calgary, Alberta this 30 th day of April, 2012. J.B.

Hanebury M.C.C.Q.B.A. Appearances: Jeffrey D. Poole Poole Lawyer for the Defendant J. Kelly Hannan Burnet, Duckworth & Palmer LLP for the Plaintiffs