Challenger Geomatics Ltd. v. Hasco Development Corporation, 2012 ABQB 54

Court of Queen ’ s Bench of Alberta Citation: Challenger Geomatics Ltd. v. Hasco Development Corporation, 2012 ABQB 54 Date: 20120120 Docket: 1103 05477 Registry: Edmonton Between: Challenger Geomatics Ltd. Plaintiff - and - Hasco Development Corporation and Falcon Ridge RMH General Partner Inc. Defendants _______________________________________________________ Memorandum of Decision of W. S. Schlosser, Master in Chambers _______________________________________________________ [ 1 ] This is Challenger ’ s application for

summary judgment. It is Hasco ’ s cross application to amend its defence and, if necessary, stay judgment on the claim. [ 2 ] Challenger agreed to provide engineering and consulting services for a subdivision that Hasco was developing. Challenger has sued Hasco for amounts it claims to be owing. Hasco has counterclaimed for delay.

[3] Challenger did work on the subdivision. They say they were not paid in full so they filed liens. The parties came to anagreement to discharge the liens on the provision of alternate security. Hasco gave Challenger a Promissory Note. [4] Hasco argues that the note was given as security and it remains to be proved how much Hasco owes Challenger. Hascoargues that the amount owed to Challenger isn’t just the face value of the note. Furthermore, they say that the Counterclaim should beset off against whatever might be owed to Challenger. [5] Challenger now sues on the note.

Their argument, is that the note is a negotiable instrument and, as such, set-off isunavailable. They seek judgment for the face value of this Instrument. [6] This is a nice argument but the problem with Challenger’s position is that it requires identifying the legal position of aholder for value, or a holder in due course, with that of a payee. [7] In Tomcat Machinery (EDM) Inc. v. Knight, 2001 ABQB 95, Master Funduk said: 25 There is English case law which holds that a bill of exchange or a promissory note is to be treated like cash and so the holder ofthe bill or note should be given

summary judgment on it even though there is a counterclaim. 26 Crawford and Falconbridge, Banking and Bills of Exchange (8th ed), suggest that Lord Denning is the “chief modern exponent ofthe ‘cash-like’ theory that cuts down on the defences that may be raised against claims on bills and notes”: p. 1433. In Brown, Shipley &Co. v. Alicia Hosiery Ltd., 1 Lloyd’s Rep. 668 (Eng. C.A.) Lord Denning says, p. 669: For many years the Courts of this country have treated bills of exchange as cash. In James Lamont & Co., Ltd. v.

Hyland Ltd., [1950] 1K.B. 585, this Court declared that where there is an action between the immediate parties to a bill of exchange, then in the ordinary wayjudgment should be given upon that bill of exchange as for cash and it is not to be held up by virtue of some counterclaim which thedefendant may assert, even, as in that case, a counterclaim relating to the specific subject-matter of the contract.

Here the counterclaim isin relation to a different contract altogether from that which initiated the bill of exchange. (emphasis mine) 27 Where there is no relationship between the counterclaim and the transaction giving rise to the note

summary judgment can begiven on the note, with or without a stay of execution, without resort to the “cash like” theory.

Summary judgment can be given basedupon the more logical approach set out in Royal Bank. 28 But where the lawsuit is between the immediate parties to the note and the counterclaim is on the transaction which gave rise tothe note it is not logical to give

summary judgment on the note, even with a stay of execution, and let the parties go to trial on thecounterclaim. First, there is no saving in time or cost to the parties. Here the Defendant has admitted that he gave the note and I havesummarily culled out the defences of duress and no consideration. The parties will have to go to trial on the underlying transaction,which is the debt claim based on the running credit account. What possible time or costs saving will there be if

summary judgment isgiven now on the note? I do not see any. 34 In my view, the near cash principle so fondly embraced by the English courts should not be applied here. The correct approach,where the lawsuit is between the immediate parties to the note, is whether there is a sufficient connection between the note and what israised in the counterclaim, in other words, the test applied in Royal Bank. That test is the best test, especially when there is no savings intime, in costs or other advantage to the Plaintiff in giving it judgment now on the note. [8] Challenger argues that the ‘near cash’ principle should prevail. They cite Antoniou v. Union Bank of Canada, 1920

40 (SCC), [1921] 61 S.C.R. 253 and argue that it is Master Funduk against Lord Denning and the Supreme Court of Canada. Pretty tallodds. [9] With respect, Master Funduk is right. Both Lord Denning and the Supreme Court of Canada in Antoniou invoke the nearcash principle in relation to holders after the instrument has been negotiated. In Antoniou the Respondent Bank was a holder for valueand, while agreeing that the bank was a holder in due course, Anglin J. also found that Antoniou had ‘accepted’ the instrument inexchange for the bank’s release of some bills of lading.

Acceptance is an unconditional acknowledgement that the payee will pay. [10] Until an instrument is negotiated, it is just a contract. The equities and the ordinary contractual defences apply.

The near cashtheory and the somewhat specialized law of negotiable instruments has little application except that the formal defences available under the Bills of Exchange Act are also available to a payee. (See, Crawford and Falconbridge on Banking and Bills of Exchange, 8th ed.vol. 2, para. 5005 et seq.) The holder in due course may be immune from a set off the maker had against the payee, but a payee isn’t. [11] Hasco wants to set off its damages claim against a liquidated claim. As such, legal set off is plainly not available. Even ifequitable set off were not available, procedural set off (Aboussafy v.

Abacus Cities Ltd. 1981 ABCA 136 [1981] 4 WWR 660at 670 and following, per Kerans, J.A.), would be. Procedural set off might not be a defence but judicial economy weighs in favour ofbalancing up these two claims and giving a net judgment. The facts and circumstances giving rise to claim and cross claim are closelyrelated. [12] Master Funduk’s decision in Tomcat is in harmony with the Foundational Rules. It is appropriate that both claim andcounterclaim be determined in the same proceeding. [13] Accordingly, Challenger’s application for

Summary Judgment is denied. Hasco’s application to amend its defence is allowed. [14] Given the divided success, each party will bear its own cost of the application. Heard on the 9th day of November, 2011. Dated at the City of Edmonton, Alberta this 20th day of January, 2012. W. S. Schlosser M.C.C.Q.B.A. Appearances: Ben A. Guido

Amie W. Heil Odishaw & Guido for the Plaintiff Kevin P. Chapotelle Bryan and Company LLP for the Defendants