Soler & Palau Canada Inc. Plaintiff / Defendant by Counterclaim - v. -, 2012 ABQB 496

Court of Queen ’ s Bench of Alberta Citation: Soler & Palau Canada Inc. v. Meyer ’ s Sheet Metal Ltd., 2012 ABQB 496 Date: 20120727 Docket: 1101 01191 Registry: Calgary Between: Soler & Palau Canada Inc. Plaintiff / Defendant by Counterclaim - and - Meyer ’ s Sheet Metal Ltd . Defendant / Plaintiff by Counterclaim _______________________________________________________ Memorandum of Decision of J.B. Hanebury, Master in Chambers _______________________________________________________ [ 1 ] At issue in this application for

summary judgment is whether the extension of the limitation period by partial payments applies to all of the outstanding invoices, or only the one against which the payments were applied. FACTS [ 2 ] Soler & Palau Canada Inc. sells fans. Meyer’s Sheet Metal Ltd. was one of its customers. Meyer’s got behind on the

payment of Soler’s invoices in the summer of 2008. It sued Meyer’s on January 26, 2011, more than two years after the default. It now seeks

summary judgment arguing that in light of the circumstances, the limitation period for the invoices was extended to at least January 27, 2011. [ 3 ] Soler says that on October 2, 2008, it offered to continue supplying fans to Meyer’s on the basis that the company prepay all new invoices issued and provide payment of an additional 50% of the value of any new invoice, which additional payment would be applied to retire the outstanding debt. There is a letter of that date making this offer addressed to Meyer’s which Soler now refers to as a settlement agreement.

There is no written response to this letter by Meyer’s. [ 4 ] However, on October 7, 2008, in a fax to Meyer’s in relation to the price for some fans, Soler’s included a requirement that the additional payment be made. An amount close to that set out in the fax was paid by Meyer’s by cheque dated the next day.

The requested fans were then shipped to Meyer’s, and on October 29, 2008, an invoice was provided for the same amount as the already- received cheque. [ 5 ] On October 30, 2008, in response to another request for a price quote from Meyer’s, Soler sent a fax setting out a similar calculation for further fans.

It included 50% of the value of the order to be paid and applied against overdue invoices. [ 6 ] A cheque stub from Meyer’s indicates a cheque was sent dated January 12, 2009, for the sum requested. [ 7 ] The requested goods were shipped by Soler on Monday, January 26, 2009. [ 8 ] Soler says the cheque was received on Tuesday, January 27, 2009, the day after the goods were shipped, and the cheque was deposited the same day. [ 9 ] Meyer’s originally disputed this saying that, based on the date of mailing, the cheque should have been received earlier, and the shipping of the goods in advance of the receipt of that cheque would have been contrary to the terms of the settlement agreement alleged by Soler. [ 10 ] During the hearing of this application an unfiled affidavit was provided setting out the written responses of Soler’s representative to various questions posed by Meyer’s counsel.

In that affidavit Soler’s representative states that as a result of a conversation with Meyer’s representative, who assured him that the cheque was in the mail, the shipment was sent out before the cheque was received. With this evidence Meyer’s conceded that the cheque was received on January 27, 2009, as alleged by Soler. [ 11 ] The business relationship of the parties ceased with this transaction. [ 12 ] From April, 2009, to June, 2011, Soler sent invoices to Meyer’s seeking payment of the sum outstanding, $103,437.45. The statement of claim in this action was issued on January 26, 2011.

A defence and counterclaim was filed. The counterclaim alleges that Soler breached an exclusive distributorship agreement with Meyer’s by marketing and supplying fans to Meyer’s competitors in the year 2008. It claims for lost business and damages in the sum of $875,000. ISSUES [ 13 ] Soler argues that the monies are due and owing and

summary judgment should be granted. It says that the original limitation of two years was extended by the payment received January 27, 2009, or by its demand for payment of April, 2009. It states that only with the failure of Meyer’s to respond to that demand was Soler in a position to know that proceedings were warranted.

[ 14 ] Meyer’s raised a number of issues in response, two of which are no longer relevant. [ 15 ] Meyer’s originally argued that the claim cannot be brought as Soler was not registered in Alberta. The Court was subsequently advised that this argument had been adjourned sine die as steps have been taken to register the company in this jurisdiction. [ 16 ] Originally in issue was the question of whether the receipt of the cheque or the cashing of the cheque restarted the limitation period. However, as it was acknowledged that the evidence indicates the cheque was received and deposited on January 27, 2009, that issue is also no longer relevant. [ 17 ] What remains at issue is: (

a) do the partial payments extend the limitation period for all of the outstanding invoices or only that one against which the payments were applied; (

b) was the limitation extended because proceedings were not warranted until the demand of April, 2009; and (

c) can

summary judgment be granted in light of the nature of the counterclaim? ANALYSIS Test for

Summary Judgment [ 18 ] The test for

summary judgment is not in dispute and is set out in rule 7.3 of the Alberta Rules of Court. There must be either no defence to a claim or part of it; no merit to the claim or part of it; or the only real issue is the amount to be awarded. [ 19 ] The test is found in Pioneer Exploration Inc. (Trustee of) v. Euro – Am Pacific Enterprises Limited , 2003 ABCA 298 . The plaintiff must prove its cause of action on a balance of probabilities which includes each and every fact necessary to support the claim. The defendant can defeat a

summary judgment application by showing that there is a genuine issue for trial. For the Court to grant

summary judgment, it must be beyond doubt that there is no genuine issue for trial. [ 20 ] While this decision and many others were decided under the former rule 159, this jurisprudence is still relevant to the application of rule 7.3: Manufacturers Life Insurance Co. v. Executive Center at Manu-life Place Inc. , 2011 ABQB 189 . The test remains that to grant

summary judgment the Court must be satisfied that there is no genuine issue for trial. Do the Partial Payments Extend the Limitation Period for all of the Outstanding Invoices or Only that One Against Which the Payments were Applied? [ 21 ] Meyers argues that either Soler elected to apply the payments to the oldest invoice or the Rule in Clayton’s case is applicable with the result that the monies paid are credited against the oldest invoices. The partial payments, it says, can only extend the limitation for the specific invoice against which they were applied.

All other invoices are therefore out of time and no claim can be made for them [1] . [ 22 ] It is acknowledged that Meyer’s did not stipulate which invoices were to be paid with the extra funds. However, the reconciliation provided by Soler indicates that payments were credited toward the oldest invoice.

[ 23 ] Does that mean that the other invoices are out of time? The fundamental question is whether there are five separate claims and five separate limitation periods or if the payments made by Meyer’s extended the limitation for the entire indebtedness. [ 24 ] The case law is not definitive on this issue. There is one case in Alberta and several cases in British Columbia which provide some guidance, but the applicable British Columbia limitations legislation is different than that found in Alberta. [ 25 ] In Kamloops Estates Ltd. v.

Avon Holdings Ltd. , 2001 BCCA 685 , an action on a mortgage, the defendant owed a number of debts to the lender and the payments were not allocated by the borrower or the lender. Therefore, in law, the payments were allocated to the oldest debt, which was not the mortgage. The Court held that the claim for the mortgage was statute barred. [ 26 ] In Chiang v. Hefzi , 2006 BCSC 32 , the plaintiff gave a man with whom she was romantically entangled, a series of loans. The Court noted that the repayment was not appropriated to any particular debt but rather to the total accumulated debt.

The Court declined to apply the repayment to the oldest loan but found that the payment confirmed the cause of action for all of the loans. In essence, the Court found on the facts that there was a global debt. [ 27 ] The question of whether there was a global claim or individual claims was considered in Alberta in Sawchuk v. Bourne , 2004 ABQB 344 [2] . That case also involved a series of loans between friends. The plaintiff kept a running ledger and took the funds he lent from his own revolving line of credit. The Court found that the loans were separate claims.

Each was a “distinct transaction.” Even though the plaintiff may have considered the arrangement as allowing the defendants access to his line of credit, there was no evidence that the defendants understood that to be the case. [ 28 ] From this case law it is clear that the determination of whether a claim for a series of debts is a single claim or multiple claims is totally dependent on the facts. [ 29 ] The relevant facts in this case are not definitive.

The letter sent by Soler to Meyer’s setting out the arrangement for the payment of the amount outstanding states: As of today’s date Meyer’s Sheet Metal’s account with Soler & Palau Canada stands owing at: $110,944.70 with $90,284.64 over 90 days and in fact more than half of the “over 90 days” is actually over 1 year. We cannot continue to carry this debt for you. ...

I therefore propose another option that, if agreed upon and followed through in its entirety, will bring us to full solution. - When Meyer’s requires fans; S&P will receive a cheque to cover the amount of the new purchase order as well as an additional amount equal to 50% of the value of the new order and that will be used to pay down the outstanding balance on the Meyer’s Sheet Metal account. ... Please consider my proposal. It is Soler & Palau’s intention to resolve the outstanding balance effectively and completely.

[ 30 ] The first quotation provided by Soler to Meyer’s after this letter indicates that the extra funds to be paid will “be applied to outstanding balance on account.” The invoice, no. IN006399, says in the comment section: “Waiting for cheque in $10,236.45 to pay for this order and payment of overdue accounts before shipping”. On the cheque stub is a handwritten notation: “IN006399. Rest to oldest Rec’vable”. [ 31 ] The next document is a fax in relation to a purchase order advising of the extra amount required by cheque prior to shipping.

It states that the extra funds are “to be credited to overdue invoices on your account.” The subsequent invoice has a handwritten addition saying that the extra funds were applied to IN002685, which was the oldest outstanding receivable. [ 32 ] An accounting dated April 16, 2009, indicates that the two credits have been made against the oldest invoice, IN002685, which remains outstanding in the sum of $41,108.59. [ 33 ] These facts are insufficient to clearly find that the debt was treated by the parties, or even just by Soler, as a single global debt.

The invoices were separate, billed separately, and paid separately. While the invoices were amalgamated and listed on one page for collection purposes, they were not treated as a single debt as, for example, would be a revolving line of credit. Therefore, there is a genuine issue for trial as to whether there was one claim or several claims, with the result that the last payment either restarted the limitation period only for the invoice against which it was applied or for all of the outstanding invoices.

Was the Limitation Extended because Proceedings were not Warranted until the Demand of April, 2009? [ 34 ] The test to be applied to establish a limitation period is found in

section 3 of the Limitations Act , R.S.A. 2000, c. L-12. 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. [ 35 ] These three requirements are conjunctive: the limitation period starts to run when the last requirement has been satisfied. [ 36 ] Soler argues that it did not know, nor ought to have known, both that it had suffered an injury, and that a proceeding was warranted, until Meyer’s failed to continue business under the settlement agreement and failed to repay the debt pursuant to Soler’s demand of April 16, 2009. [ 37 ] Therefore, the first question is when did Soler know that it had suffered an injury? [ 38 ] Clearly, by the date of the alleged settlement agreement, Soler knew that it had been injured, and knew that it had a claim, and it acknowledged as much in its letter to Meyer’s where it referred to its long-outstanding invoices.

[39] Soler next argues that it did not know that the injury warranted bringing proceedings until its demand of April 16, 2009. [40] In Boyd v. Cook 2012 ABQB 284 I discussed the test used to determine when an injury warrants bringing proceedings: 41 The test to determine when this criteria has been met is: in light of his or her own circumstances and interests, at what point couldthe plaintiff reasonably have brought an action: N(

J) v. Kozens, 2004 ABCA 394, para. 14, 15. See as well: Gayton v. Lacasse, 2010 ABCA 123; Calibre Coatings (Edm.) Ltd. v. Thierman Construction Ltd., 2004 ABPC. [41] However, in the case of invoices the Court has held that a proceeding is warranted when payment has not been tendered bythe due date of an invoice and a course of conduct, a commercial relationship, negotiations or a promise to pay are each insufficient toextend that time: National Motor Coach Systems Ltd. v. Sunshine Coach Ltd., [2006] A.J. No. 8 (Master) para. 9. See as well: Penhold(Town) v. Boulder Contracting Ltd., [2009] A.J.

No. 1296 (Master) para. 11. [42] As Justice Clackson said, in Condominium Plan 9421549 v. Mainstreet Developments Ltd. [2005] A.J. N0. 324 at para. 11: There is nothing in s. 3 [of the Limitations Act] which suggests that an exception operates when negotiations for resolution of the disputeare ongoing. There is nothing in s. 3 which suggests that if the miscreant makes a promise, representation or does something that mightlead to a settlement, the limitation clock does not start.

Furthermore there is nothing in s. 3 that would assist in understanding when theclock would actually start if the miscreant's promise, representation or action doesn't pan out. [43] In this case the alleged settlement agreement does not meet the requirements of the Act that it be signed by the partyacknowledging the claim. Soler merely received two cheques that it credited toward the indebtedness. In my view, the evidencepresently before this Court is insufficient to establish that Soler only knew that proceedings were warranted after April 16, 2009.

Thereis a genuine issue for trial on this question. [44] As a result,

summary judgment is granted only for the balance outstanding under the oldest invoice, in the sum of $41,108.59.The applicant has not proven its entitlement to the remainder of its claim, as the Court has not been satisfied that there are no triableissues in relation to the limitations defences raised by Meyer’s. This, of course, does not mean the limitations defence is bound tosucceed, merely that it is an issue in play between the parties: Balm v. Atkins MacAuley & Thorvaldsen LLP, 2012 ABCA 96, paras.16, 17. Can

Summary Judgment be Granted in Light of the Nature of the Counterclaim? [45] However, that is not the end of the matter as Meyer’s argues that judgment on this lesser amount should not be granted at thistime as it has filed a counterclaim that is inextricably linked with the claim. [46] The defence and counterclaim of Meyer’s allege that it had an exclusive distributorship agreement with Soler, which Solerbreached.

It states that as a result of Soler’s provision of fans to Meyer’s competitors, Soler could not meet Meyer’s supply requirements.Meyer’s alleges it lost business and seeks damages for a loss of profits in the amount of $875,000.00. [47] Rule 3.58 provides that a counterclaim is an independent action. It will not, in and of itself, prevent a plaintiff from obtainingsummary judgment, unless the counterclaim constitutes a defence. A legal or equitable setoff, as defences, may prevent

summaryjudgment. Procedural set-off does not. [48] Legal set-off applies between liquidated claims, which is not the situation in this case: McBride v. Kolenko (1990) 115 A.R.348, paras. 23-26 (Master), Canadian Imperial Bank of Commerce v. Tucker Industries Inc. , (1983) (BC CA), 149

D.L.R. (3d) 172, (BCCA), para. 6 . [49] Equitable setoff requires that certain tests be met.

The party relying on the set-off must show some equitable ground for beingprotected from the plaintiff’s demand; the equitable ground must go to the very root of the plaintiff’s claim; the cross-claim must be soclearly connected with the plaintiff’s demand that it would be manifestly unjust to allow the plaintiff to enforce payment without takingthe cross-claim into account; the claim and cross-claim need not arise out of the same contract; and unliquidated and liquidated claimsare on the same footing: Coba Industries Ltd. v. Millie’s Holdings (Canada) Ltd.

And Tsang, (BC CA), [1985] 6W.W.R. 14, para. 22 - 27; Holt v. Telford, (SCC), [1987] 2 S.C.R. 193, para. 35. [50] Is there equitable set-off in this case? [51] No evidence was filed by Meyer’s supporting the allegations set out in the pleadings. It relies on the letter sent to it by Soler,the alleged settlement agreement, which was filed as part of Soler’s evidence. That letter states that “ ”[b]oth of our companies haveenjoyed the fan business that we have created together.” [52] That statement does not substantiate Meyer’s allegations in its pleadings.

It does not indicate that there was an agreement foran exclusive distributorship. It does not indicate that there was a breach of that alleged agreement. It does not indicate that Meyer’s lostbusiness or suffered damages. [53] The question of if and when evidence should be filed in response to a

summary judgment application has been considered bythe Courts on a number of occasions. Master Funduk, in an often cited case, Tucson Properties Ltd. v. Sentry Resources Ltd. (AB KB), [1982] A.J. No. 775, said it best: Whether a defendant can satisfy the burden imposed on him by the Rule merely by relying on his pleading, being the statement ofdefence, depends upon the issues raised in the pleading. If a defendant raises an issue of law in his statement of defence, that may be sufficient to meet the burden, if the court is of theview the the issue of law raised is not beyond all doubt.

If a defendant raises issues of fact in his statement of defence, that alone is not sufficient to meet the burden imposed on him. If astatement of defence raises issues of fact it is because of the allegations of fact in the statement of defence. Allegations of fact are justthat, allegations. They are not evidence. A pleading is not evidence. If a defendant could rely on the allegations of fact in his statement of defence to meet the burden imposed by the Rule, it would make theRule sterile.

All that would be required is that the draftsman be astute enough to draft a statement of defence which raises issues of factby making appropriate allegations of fact. If there is no evidence to support the issues the defendant raises in his defence, there is nothing for the court to weigh. The scales tipentirely in one direction, that direction being in favour of the plaintiff. If there is some evidence to support the issues the defendantraises, the court must then weigh that evidence and decide whether the plaintiff’s claim is beyond all doubt. [54] This decision is under the former rules of Court.

However it has been cited approvingly in relation to the new Rules of Court,and by the Supreme Court of Canada: Hall v. HSBC Capital (Canada) Inc., 2012 ABQB 114, para. 34; Canada (Attorney General) v.Lameman, 2008 SCC 14, para. 11; and see as well Lorne H. Reed & Associates Ltd. v. ProMax Energy Inc., 2003 ABQB 121, para.12. See also: Jager Industries Inc. v. Canadian Occidental Petroleum Ltd., 2000 ABQB 592, para. 23.

[ 55 ] In this case the pleadings raise certain facts that are unsubstantiated by evidence. Mere pleadings alleging relevant facts cannot create a triable issue. Otherwise, as Master Funduk pointed out, a defence or counterclaim could stymie every application for

summary judgment. [ 56 ] In the result, I find that the counterclaim does not bar the judgment as granted. Soler is entitled to judgment in the sum of $41,108.59. If the parties cannot agree as to the interest to which Soler is entitled, they may reappear before me or the matter can be dealt with at trial. [ 57 ] As there was mixed success in this matter and as Soler provided an affidavit containing relevant evidence only at the hearing of the application, I will not determine costs without hearing from the parties.

If the parties cannot agree as to costs, they may be spoken to within 30 days of the release of this decision. Heard on the 06 th day of June, 2012. Dated at the City of Calgary, Alberta this 27 th day of July, 2012. J.B. Hanebury M.C.C.Q.B.A. Appearances: Courtney Kachur Blake, Cassels & Graydon LLP for the Plaintiff / Defendant by Counterclaim Brian K. Dell Wilson Laycraft LLP for the Defendant / Plaintiff by Counterclaim [1] The settlement agreement did not restart the limitation period as it does not meet the requirements of s. 9(1) that it be in writing and signed by the party acknowledging the claim.

It was suggested that the cheques providing the payments for the outstanding invoices could be seen as acknowledgements of the debt under sections 8 and 9 of the Limitations Act . I do not need to decide if that is the case, as, even if they were so construed, the argument remains the same: Was the cheque an acknowledgement of the entire indebtedness or only the debt against which it was credited?

[2] Upon an application to restore the appeal to the list, the Alberta Court of Appeal upheld Justice Feehan ’ s decision and found the appeal to be without merit: 2005 ABCA 382 .