Alberta Treasury Branches v. The New Hatchwear Co. Ltd., 2012 ABQB 635

Court of Queen ’ s Bench of Alberta Citation: Alberta Treasury Branches v. The New Hatchwear Co. Ltd., 2012 ABQB 635 Date: 20121016 Docket: 0901 00389 Registry: Calgary Between: Alberta Treasury Branches Plaintiff - and - The New Hatchwear Co. Ltd., 859260 Alberta Ltd., Sandra Dimitrijevic and Michael Dimitrijevic Defendants And Between: The New Hatchwear Co. Ltd. Plaintiff by Counterclaim - and - Alberta Treasury Branches Defendant by Counterclaim

_______________________________________________________ Reasons for Judgment of K.R. Laycock, Master in Chambers _______________________________________________________ [ 1 ] The plaintiff is suing The New Hatchwear Co. Ltd. for repayment for outstanding loans and a MasterCard debt. It is alleged that the other defendants are guarantors. The plaintiff alleges that the loans are evidence by a series of promissory notes, payable on demand. The plaintiff demanded repayment of all of its loans on October 29, 2008.

The plaintiff commenced this proceeding on January 9, 2009 and claimed an indebtedness of $266,601.15. [ 2 ] All defendants have filed a statement defence alleging that the plaintiff failed to act in a commercially reasonable fashion and failed to proving it realized properly upon it’s security. The borrower filed a counterclaim alleging that the lender breached its duty of confidentiality by disclosing the borrower’s financial information to the borrower’s customers.

They further allege a breach of fiduciary obligation in relation to the disclosure of information. [ 3 ] The borrower alleges that it had a long term relationship with the Calgary Islamic School to supply school uniforms which generated revenues of $50,000 per year and net profit of $15,000 per year. It is alleged that the lender disclosed financial information to the Calgary Islamic School which resulted in their business relationship being terminated in May 2008. [ 4 ] The borrower alleges that after the loss of the Calgary Islamic School, the lender demanded additional security for its outstanding loans.

The borrower alleges that, had they not suffered the loss of business, the lender would not have demanded the additional security. The counterclaim asserts that the borrower and the guarantors refused to provide additional security, which in turn resulted in the lender making a demand for repayment of the loan.

Immediately after the demand, the lender seized all of the borrower’s assets and disposed of them, causing the borrower to suffer damages. [ 5 ] The plaintiff denies the existence of a fiduciary duty to the borrower and denies that any of the borrower’s financial information was disclosed to the Calgary Islamic School. [ 6 ] In December, 2010, the plaintiff applied for

summary judgment against the defendants and a

summary dismissal of the counterclaim. On March 25, 2011 Master Hanebury granted

summary judgment against the guarantors in the amount of $258,103.87 plus costs on a solicitor and own client basis. The application for

summary judgment with respect to the counterclaim was dismissed with leave to reapply. The defendants have appealed the Master’s order and the appeal was heard by Justice Park on May 31, 2012. His decision is pending. [ 7 ] On September 25, 2012 the plaintiff reapplied for

summary judgment dismissing the counterclaim. The plaintiff argues that there is no evidence to support the counterclaim. The first

summary judgment application was supported by an affidavit sworn by Jafar Haimour, the plaintiff’s Senior Underwriting Manager who is alleged to have disclosed the defendant’s financial affairs. The new application was supported by an additional affidavit from Noel Haymour, the School Services Coordinator of the Calgary Islamic School. [ 8 ] Mr. Haimour swears that he did not disclose any financial information to the Calgary Islamic school. Noel Haymour swears that Jafar Haimour did not advise her of any financial difficulties being encountered by the borrower. The main reason for changing suppliers was that a new company offered prices superior to those offered by the borrower.

[9] Sandra Dimitrijevic swore affidavits in opposition to this application. At questioning on her affidavit, she acknowledged thatshe had no information about the plaintiff disclosing confidential financial information to any other of its customers besides the CalgaryIslamic School. She testified that it was a sequence of events that led her to believe that the plaintiff disclosed information to the CalgaryIslamic school.

The plaintiff argues that there is no evidence to support the counterclaim and that the plaintiff by counterclaim is relyingon speculation only. [10] The borrower argues that there is some conflict in the evidence given by Jafar Haimour and Noel Haymour about the date of ameeting between the parties and therefore it is open to a trial judge to disbelieve their evidence in its entirety.

It is further argued that thedisclosure of financial information to the Calgary Islamic School could only have come from the lender. [11] The borrower has no evidence proving that a conversation took place in which the Lender disclosed any information to theCalgary Islamic school. The alleged participants deny any such disclosure and there is no written document or e-mail exchange tocorroborate or even suggest that such disclosure occurred.

Summary Judgment: [12] The Alberta Court of Appeal in Brown v. Northey 115 A.T. 321, [1991] A.J. No. 214 granted

summary judgment incircumstances where the plaintiff resisted an application for

summary judgment hoping to produce evidence in the future to support itsposition. The court stated: Here the Appellant Defendants (Plaintiffs by counterclaim) made out a strong prima facie case for

summary judgment. Therefore, theRespondent Plaintiff who alleges there is a triable issue and resists

summary judgment, had to produce evidence to show a triable issue(as the pleadings did not raise a purely legal arguable issue). It is not enough for such a respondent merely to argues that there may befacts somewhere which might emerge at trial and might turn out to be relevant. [13] In Spurrell (Next Friend of) v. Bradford, 2004 ABCA 288, the chambers judge dismissed a

summary judgment applicationbecause there was a genuine issue regarding the defendant’s credibility. The plaintiff could not recall the accident and therefore the onlyevidence before the chambers judge had been the defendant’s evidence and the defendant’s accident reconstruction expert. The AlbertaCourt of Appeal granted the

summary judgment because “the mere possibility of a credibility issue is not enough to prevent

summaryjudgment”. (para 5) [14] In Smith v. Royal Insurance Company Limited, 1983 ABCA 58 , 25 Alta. L.R. (2d) 48 (C.A.) at p. 56 the courtstated: The learned trial judge relied in part on the fact that he chose not to believe Smith when he testified. He is, of course, free to do so. Butthis disbelief merely removes an obstacle to the acceptance of the case put in by the party with the onus, here the respondent. It cannot,however, be used to bootstrap that case if it does not meet the onus set by law. In other words, disbelief of a defendant does not aid theplaintiff who cannot make out a prima facie case.

That is the situation here. [15] The plaintiffs by counterclaim at trial must adduce some evidence that the lender disclosed banking information. Theevidence at this

summary judgment application discloses that they have no evidence. They have suspicion and speculation only. That isnot sufficient at trial or to defeat a

summary judgment application. [16] Sandra Dimitrijevic deposed that in late 2006 or early 2007 she had a conversation with Noel Haymour wherein it was statedthat she was aware New Hatchwear was in financial difficulty. Upon being questioned about the source of that information it is allegedthat Noel Haymour replied, “I have my sources”. Noel Haymour denies such a conversation ever took place.

Even assuming theconversation did take place, there is no evidence that the source of information was any of the employees of the lender. [17] It is interesting to note that New Hatchwear continued to be the supplier of school uniforms as usual in the fall of 2007. Theschool did not change its supplier until the fall of 2008. Noel Haymour and the school vice principal both state that the reason for thechange was they moved to a cheaper supplier.

[18] Counsel for the plaintiffs by counterclaim points to a telephone conversation involving Sandra, Noel and Jafar that took placein this summer or fall of 2007 to support their position that a trial is necessary. Sandra Dimitrijevic was talking to Noel when Jafararrived in Noel’s office. Sandra Dimitrijevic deposes in her affidavit that the conversation was very brief and nothing of substance wasdiscussed. The plaintiff argues that it is merely coincidental that Jafar was in Noel’s office at the time of the telephone conversation.

Thisis not proof that the plaintiff leaked confidential information to the Calgary Islamic School. [19] The problem of proof of the allegations made by the plaintiffs by counterclaim becomes evident when you consider that theplaintiffs by counterclaim have no direct evidence of any improper disclosure. At trial who would the plaintiffs called to supply thatevidence? The plaintiffs by counterclaim have no such knowledge. Since the lender does not have to call Jafar Haimour or NoelHaymour, they would have to be called as witnesses for the plaintiff by counterclaim.

They could not be cross examined and, as can beseen from this application, they denied that any financial information was exchanged. As stated in the Smith decision, disbelief of thesetwo witnesses does not prove the plaintiff’s case. [20] To obtain

summary judgment, it must be plain and obvious that the action of the plaintiff by counterclaim cannot succeed:Boudreault v. Barrett, 219 A.R. 67, 1998 ABCA 232; Prefontaine v. Veale, 339 A.R. 340, 2003 ABCA 367; Murphy Oil Co. v. Predator Corp.2006 CarswellAlta 233, 2006 ABCA 69, 55 Alta. L.R. (4th) 1, [2006] A.W.L. D. 1540 1540, 2006 ABCA 69 , [2006] A.W.L.D. 1592, [2006] A.W.L.D. 1483, [2006] A.W.L.D. 1484, [2006] 5 W.W.R. 385,384 A.R. 251, 367 W.A.C. 251. [21] In my opinion the action of the plaintiffs by counterclaim cannot succeed, therefore the applicant is entitled to

summaryjudgment dismissing the counterclaim. Even if Justice Park allows the appeal of Master Hanebury’s order and judgment against theguarantors is set aside, it will not affect my conclusion that the counterclaim is hopeless. Costs may be spoken to. Heard on the 25th day of September, 2012. Dated at the City of Calgary, Alberta this 16rth day of October, 2012. K.R. Laycock M.C.C.Q.B.A. Appearances:

Russell N. Avery Bishop & McKenzie LLP for the Plaintiff Richard N. Billington Billington Barristers for the Defendants