Arbutus Capital Leasing Ltd. v. CSM Media Inc., 2012 ABQB 650

Court of Queen ’ s Bench of Alberta Citation: Arbutus Capital Leasing Ltd. v. CSM Media Inc., 2012 ABQB 650 Date: 20121022 Docket: 1103 04568 Registry: Edmonton Between: Arbutus Capital Leasing Ltd. Plaintiff - and - CSM Media Inc., Karen Michelle Miller, Gary E. Nash, Dorothy May Agar and Steven Richard Agar Defendants _______________________________________________________ Reasons for Decision of W. S. Schlosser, Master in Chambers _______________________________________________________ [ 1 ] This is a

summary judgment application by a lender against an individual. The Respondent ’ s defence is that he was mislead about the terms of the agreement. He did not think he was personally liable. The main problem was that he didn ’ t read the contract. [ 2 ] The Defendant, Gary E. Nash, started work for CSM Media Inc. in early 2007. He was to be a part owner. The payment for his shares was to come out of his wages. CSM was a printing company. After a time it went into financial difficulty.

[ 3 ] Xerox Canada was owed approximately $150,000.00 by CSM. If it did not receive at least $50,000.00, Xerox was going to take back its equipment, which would have put CSM out of business. So there was a lot at stake, including Mr. Nash ’ s continued employment. [ 4 ] The Defendant, Steven Agar, the principal and 45 percent owner of CSM, negotiated a loan of $50,000.00 with Arbutus Capital Corporation . The arrangements were made with a representative of ‘ Lease Plus Financial, ’ a division of Lease Plus Services Inc.

Arbutus Capital Corporation was to purchase the only machine the company owned outright and then lease it back over 48 months until the full amount, with interest, was repaid. Interest was at 32 percent. The total payment was over $90,000.00, if early buy-back options were discounted. [ 5 ] The contract was immediately assigned “ for value ” to Arbutus Capital Leasing Ltd. Payments were made for a while. Then the loan went into default. Now Arbutus Capital Leasing Ltd. claims against Mr. Nash personally. Mr. Nash says that he thought he was signing for the company.

He understood that he would not be personally liable. His position is based upon a representation of the Lease Plus representative that was contrary to the plain terms of the written agreement. [ 6 ] The agreement provided: “ This agreement is the entire agreement between you and Arbutus. Unless something is in writing and signed by Arbutus it is not binding upon Arbutus. ” [ 7 ] The terms and conditions set out in greater detail that the written terms were the entire agreement between the parties. [ 8 ] In Ko v. Hillview Homes Ltd. , 2012 ABCA 245 , Mr.

Justice C ô t é , (writing for the court) emphasized the need for certainty and predictability in commerce and the dangers of ‘ encouraging parol evidence, ignoring whole contract clauses, inventing collateral unwritten obligations, and implying far-reaching terms. . . . ’ . That case was about certainty of terms. [ 9 ] There could be no certainty or predictability if one side were excused from performing their part of an agreement solely on the basis that they hadn ’ t read it.

In this case there is no issue about the Defendant not being able to read it, or for that matter, not being able to understand it. [ 10 ] We cannot use Mr. Nash ’ s parol evidence about what he thought he was getting into to rewrite Mr. Nash ’ s personal liability out of this unambiguous written contract. That argument is a non-starter. [ 11 ] Mr. Nash next argues that he was induced to sign the contract by a misrepresentation made by Lease Plus. This argument is fundamentally different from arguing that the agreement should be modified or re-written. This question is whether the agreement is binding at all.

It is an all-or-none proposition. [ 12 ] The Respondent ’ s signature on the contract is a representation that he agreed to the terms. It provides a strong basis for the exclusion of parol evidence. Misrepresentation inducing a contract is fundamentally different because the Defendant is saying that it was the Plaintiff ’ s representation (or misrepresentation) that caused him to sign in the first place. If a Defendant can show the requisite elements such, as materiality, equity will step in to prevent someone from taking the benefit of their own false statement. In this case, however, there is a second question.

The alleged misrepresentations were not those of the Plaintiff but rather those of the assignor ’ s agent. The secondary issue is whether this alleged misrepresentation can be brought home to the Plaintiff. [ 13 ] The evidence discloses that Mr. Nash took no

part in the negotiations for the loan. He appears only to have had limited involvement with the Lease Plus representative. There appear to have been only two meetings. The Defendant, Richard Agar, made most of the arrangements.

[ 14 ] Mr. Nash was asked to provide financial information and did. The first draft included both Mr. Nash and his wife, Donna Elkow-Nash as signators. Mr. Nash took the documents but when he saw his wife ’ s name on them he told Mr. Agar it was very unlikely that she would be willing to sign. He took the documents home and his wife confirmed that she would not sign. Mr. Nash brought the documents back. He said he did not read them. I am not able to assess credibility so I will accept at face value that he did not read this first draft. [ 15 ] Mr.

Nash ’ s refusal to sign the first set of documents drafted resulted in some revisions. The parties were changed. There were now five signatories: CSM Media Inc., Karen Michelle Miller, (Mr. Agar ’ s common-law spouse), Dorothy May Agar, Gary Nash and Steven Agar. [ 16 ] On July 30, 2009, Mr. Nash met with Mr. Agar and the Lease Plus representative. Mr. Nash pointed out that he had already refused to sign the documents. The Lease Plus representative advised him that his wife ’ s name had been removed and that signing the new form of lease was the only way to save CSM. [ 17 ] Mr. Nash says in his Affidavit: 12.

I asked the Lease Plus representative if I was singing in my own name, and told him if I was, he better have the name of a good divorce lawyer as my wife would not be happy if I put our house at risk. The Lease Plus representative told me not to worry and advised me that I was only signing the documents related to the Lease as an authorized signatory of CSM, and that if anything went wrong, Arbutus would be taking the Equipment back and selling it. [ 18 ] There is no evidence that Mr.

Nash had authority to sign on behalf of CSM but his statement that he thought he was signing for CSM will have to be taken at face value as well. [ 19 ] Mr. Nash was also advised that Mr. Agar had put his house up as collateral ‘ so there was no way this could come back to him ’ (Nash Aff. para. 13). Although the conversation with the Lease Plus representative are not detailed beyond what is set out above, Mr. Nash understood that the collateral meant that he would not be personally responsible.

He apparently took some comfort in the word next to his signature line which say “ authorized signature ” , which is odd for someone who did not read any other part of the agreement. [ 20 ] Mr. Nash says that the misrepresentations of the Lease Plus representative induced the contract. The representations were material. However, one of the main difficulties from the Respondent ’ s perspective is that the representations sit on the very fine line between an opinion about the risk of exposure, which may not entitle Mr.

Nash to the relief that he seeks, and a factual statement about whether the contract contained terms that would make him personally liable. [ 21 ] The evidence of who said what to whom is very thin. Much of what Mr. Nash says consists of what he understood rather than hard evidence of what was said. [ 22 ] Redgrave v. Hurd , (1881) 20 Ch. D. 1 at 12, is early authority for the proposition that a Plaintiff cannot insist upon keeping a contract obtained by a false statement. Lord Jessel M.R. put it forcefully, saying: “ To do so is a moral delinquency: No man ought to seek advantage of his own false statements ” .

Waddams has a similar principle in the Law of Contracts , (6 th ed) para. 412(et seq). [ 23 ] A Plaintiff cannot avoid the consequences of this by blaming the Defendant or, in this case, by saying that Mr. Nash was negligent, which he plainly was, for failing to read the contract:

If a man is induced to enter into a contract by a false representation it is not a sufficient answer to him to say, “ If you had used due diligence you would have found out that the statement was untrue. You had the means afforded you of discovering its falsity, and did not choose to avail yourself to them. ” Redgrave v. Hurd , at p. 13. So it isn ’ t an answer to say that Nash was the author of his own misfortune by failing to read the Agreement. [ 24 ] The statements complained of in this case were not made by the Plaintiff. Lease Plus obtained the documents for Arbutus Capital Corporation.

The loan was immediately assigned to Arbutus Capital Leasing Ltd., the present Plaintiff. The assignment was expressed to be for value. Although an assignment to a third party for value can be a bar to rescission, Arbutus Capital Leasing Ltd., as assignee, can be in no better position than Arbutus Capital Corporation. [ 25 ] If the misrepresentation is the assignor ’ s then Nash can avoid the contract. If it cannot be brought home to the Plaintiff, Nash is left only with a claim over against Lease Plus. [ 26 ] Principals are free to give notice of limits to an agent ’ s apparent authority.

The contract in this case says, just above the signature line: “ the sales person, vendor, broker, or any other party that you have been dealing with, is not an agent of Arbutus and has no authority to make any representations or promises or warranties on behalf of Arbutus ” . (emphasis added) However, if Arbutus cannot rely on any part of the written agreement because it was induced by a misrepresentation, they cannot rely on this part either. In other words, Nash arguably, cannot be said to have had notice of limits on the agent ’ s authority.

The question of agency is then a question of fact arising from the circumstances. The evidence is that Nash thought Lease Plus was speaking on behalf of Arbutus. So it is arguable that the misrepresentations of Lease Plus can be brought home to the Plaintiff. [ 27 ] Mr. Nash is a Respondent to a

summary judgment application. He has to demonstrate that he has an “ arguable case ” in order to avoid judgment. He does not have to prove his case to the ordinary civil standard. In my view, he has demonstrated an arguable case only by the smallest of margins. I am not allowed to assess credibility. I am not allowed to weigh evidence. Some of the evidence seems to be incredible or contradictory and this has the potential to detract from, rather than enhance Mr. Nash ’ s position. However, there is just enough here to make the Plaintiff ’ s case fall short of the very high standard required of a Plaintiff in a

summary judgment application. That is, I cannot say that it is beyond doubt that Mr. Nash has no arguable case. [ 28 ] I am not finding that Mr. Nash will have a good case at trial. About that I make no comment. I am only finding that the Plaintiff ’ s case falls just short of being strong enough to go directly to judgment against Mr. Nash. [ 29 ] I am somewhat hesitant to reach this conclusion as it may be in Mr. Nash ’ s best interest to have this over with. Nash, having rolled the dice once by not reading the contract, is about to roll them again when the lawsuit proceeds.

Only this time, given that the consequences of losing are lawyer ’ s full indemnity costs to the Plaintiff, as the agreement provides, it is double or nothing. If there ever were an appropriate time to reflect on Rule 1.2(2)(

c) and consider the possibility of settlement, this would be it. [ 30 ] The Plaintiff ’ s application is dismissed with costs on column 1. Heard on the 20 th day of August, 2012. Dated at the City of Edmonton, Alberta this 22 nd day of October, 2012.

W. S. Schlosser M.C.C.Q.B.A. Appearances: Gregory Reid Witten LLP for the Plaintiff Derek Nash Demiantschuk Lequier Burke & Hoffinger LLP for the Defendant, Gary Nash