HSBC Bank Canada v. Billett, 2012 ABQB 782

Court of Queen ’ s Bench of Alberta Citation: HSBC Bank Canada v. Billett, 2012 ABQB 782 Date: 20121220 Docket: 1110 00568 Registry: Red Deer Between: HSBC Bank Canada Plaintiff - and - Lesley Jerry Billett and Lorraine Jane Billett Defendants _______________________________________________________ Memorandum of Decision of K.R. Laycock, Master in Chambers _______________________________________________________ [ 1 ] The plaintiff applies for an order correcting an error in the Redemption Order granted September 6, 2011.

The error is said to arise from a mistake made in the preparation of the affidavit of default filed August 29, 2011. [ 2 ] The statement of claim alleges that on June 23, 2003 the parties entered into an Equity Power Facility Letter Agreement whereby the defendants would obtain a number of credit facilities from the plaintiff, all being secured by a mortgage. The defendants executed a mortgage on June 23, 2003 and had it registered against their property located in Red Deer. [ 3 ] The statement of claim alleges that the parties entered into a mortgage loan agreement on June 23, 2003, pursuant to which

the plaintiff would lend $304,200 with interest at 4.65% per annum. [ 4 ] It is further alleged that on September 4, 2007 the parties entered into a second letter agreement which granted additional credit facilities to the defendants which took the form of a Line of Credit Agreement. This agreement made available to the defendants a total of $200,000. [ 5 ] The statement of claim alleges that the mortgage loan portion as of March 14, 2011 was $238,626.46. It alleges that the Line of Credit balance was then $205,037.54.

The plaintiff alleges that default had been made in payments of the indebtedness and they sought foreclosure remedies. [ 6 ] The defendants were noted in default on July 6, 2011. [ 7 ] In the affidavit of default, Allison Lee swore to the existence of the mortgage loan agreement and attached a copy of the agreement as an exhibit to her affidavit. She also swore to the second agreement and attached a copy of the Line of Credit Agreement as an exhibit. She described the line of credit agreement which allowed the defendants to borrow up to $200,000.

She exhibits a demand letter sent by the law firm Bishop & Mackenzie dated March 16, 2011, wherein the total indebtedness was stated to be $445,778.99 plus interest and costs. [ 8 ] Attached to the Lee affidavit as exhibit “H” is a statement of the calculation of the balance outstanding on the mortgage loan portion of the indebtedness. It states the balance of $243,135.97 as of the date of the affidavit. Attached as exhibit “I” is a statement of the line of credit balance and declared to be $2,136.27.

It appears that the defendants had another small loan that was mistakenly referred to in the affidavit of default. A separate action had been commenced to collect it. [ 9 ] On September 6, 2011 I granted a Redemption Order declaring the total indebtedness to be $247,235.89. The defendants were allowed a six-month redemption period. [ 10 ] The mortgage was not redeemed and the property was listed for sale. Offers were obtained on the property and on May 1, 2012, the property was sold by court order for $668,789. Paragraph 4(

f) of the order directed that money from the sale be used to “pay the amount owing to the plaintiff under and pursuant to the mortgage”. The sale was to close on June 30, 2012. [ 11 ] The sale proceeds have been used to pay the real estate commission, property taxes and the amount owing under the mortgage loan agreement. There remains in trust $362,022.84. [ 12 ] At the time of the sale there was an agreement charging land registered against the lands in favor of Alberta Mortgage Funding Inc. There are 2 judgments registered on title against the defendant Leslie Jerry Billett.

There is a judgment in favor of Servus Credit Union Ltd. against both defendants in the amount of $53,678 and costs. [ 13 ] The plaintiff wishes to pay out the balance outstanding on the line of credit agreement which exceeds $200,000 rather than paying out the small loan agreement that is described in the affidavit of default and the Redemption Order in the amount of $2,136.27. Lorraine Jane Billett opposes the application. [ 14 ] I provided counsel with an oral decision on November 6, 2012 and promised to provide formal written reasons. Amount owing pursuant to the mortgage:

[15] The plaintiff argues that the Order for Sale allows them to pay out the line of credit balance of over $200,000.00 because theOrder for Sale states that they can “pay the amount owing to the plaintiff under and pursuant to the mortgage”. The Order for Salehowever must be read in conjunction with the Redemption Order which declares the balance owing under the mortgage. The plaintiffcannot revert to its pleadings for the amount owing under the mortgage.

The plaintiff must take the balance declared to be owing in theRedemption Order and add to it any proper and lawful costs and charges provided for under the mortgage accruing after the date of theRedemption Order. [16] The plaintiff cannot ignore the amount declared to be due and owing in the Redemption Order. The order must be amended orcorrected if possible.

Rule 9.12 [17] The plaintiff argues that it is entitled to an order correcting the amount declared to be owing in the Redemption Order basedon the Alberta Rules of Court, rule 9.12. [18] Rule 9.12 states : On application, the Court may correct a mistake or error in a judgment or order arising from an accident, slip or omission. [19] The former rule 339 provided: Clerical mistakes in judgments or orders, or errors therein arising from any accident, slip or omission may at any time be corrected by thecourt on motion. [20] In Ensign Estate v.

Hart 1998 ABCA 13, the Court of Appeal quoted Master Funduk in Guarantee Trust Co. of Canada v.Country Plaza Investors Ltd. (1983), 47 A.R. 184 where he stated at paragraph 24: The purpose of rule 339 is to allow the court to correct an error in a judgment whether it be a clerical mistake or an error caused byaccident, slip or omission. The rule allows the court to ensure that the formal judgment accurately reflects the decision of the court. Itcan only be used to make the formal judgment correspond to the decision of the court.

If the formal judgment accurately reflects thedecision of the court, rule 339 cannot come into play. A litigant cannot use the rule to re-do his case. [21] In A.T.U. v. I.C.T.U. (1998), (AB KB), 59 Alta. L.R. (3d) 1, Lutz J. concluded that the rule is not to beused to correct a slip made by counsel. [22] The Alberta Law Reform Institute conducted a project to review the Alberta Rules of Court. In Consultation Memorandumnumber 12.10 at pages 57 to 59, rule 339 was reviewed. The committee reviewed similar Federal Court rules and decided againstfollowing the Federal Court.

The committee concluded that the phrase “clerical mistakes” should be simply termed “mistakes”. Theystated that it should be made clear that mistakes are subject to the qualifier “arising from any accident, slip or omission”. [23] It is interesting to note that there was no major philosophical debate about making this change and no suggestion that it wasintended to have a major effect on previously decided cases. [24] All the cases, decided prior to the rule change, emphasized the point that once a judgment or order is drawn up, signed andentered it is final and the only recourse is to appeal.

The court is functus officio. Only the slip rule or the court in the exercise of itsinherent jurisdiction were grounds to modify an entered judgment. Different considerations apply where a judgment or order has not beenentered.

[ 25 ] In Evans v. The Sports Corporation 2011 ABQB 478 , Justice Graesser reviewed the court’s jurisdiction to vary a trial judgment. At paragraph 13 he stated, in relation to rules 9.12 to 9.14, that these provisions replace and appear to significantly expand the authority provided under the previous rule 339. [ 26 ] Justice Graesser was dealing with an error made in the

interpretation of a contract which was brought to his attention prior to the entry of his formal judgment. He concluded that he had broad authority pursuant to rule 9.13 to correct the error where it was discovered before the judgment had been entered. He did not specifically consider rule 9.12 or the effect of the minor wording change that is evident in the new rule. [ 27 ] It is my conclusion that the change in the wording of the rule is not meant to affect a substantial expansion of the court’s ability to vary an entered order or judgment.

There may be a slight change with the removal of the word “clerical” from the rule but I do not perceive the change to allow the court, pursuant to rule 9.12, to correct a mistake made by party to the litigation or its counsel. Rule 9.15(3) (b) [ 28 ] Rule 9.15(3)(

b) states: The Court may, on any terms the Court considers just, (

b) set aside, vary or discharge a judgment granted upon application against a defendant who was noted in default, or whose statement of defence was struck out under rule 3.37,... [ 29 ] The plaintiff argues that this case falls within subsection 3(b). The origins of rule 9.15 can be found in the former rule 158. A quick read of the former rule and the current expanded rule would suggest that it is only a defendant who could apply to set aside a judgment. However, it appears that, in limited circumstances, the court has allowed a plaintiff to set aside the judgment. [ 30 ] In Edwards v.

Ferris 2001 CarswellAlta 1743, 2001 ABQB 1125 , [2002] 4 W.W.R. 363, 99 Alta. L.R. (3d) 370, 316 A.R. 40, Justice Slatter, as he then was, noted that it was an unusual application where the plaintiff was the one seeking to set aside a default judgment. He reviewed the circumstances under which a defendant may successfully set aside a default judgment.

Because the plaintiff who takes a default judgment must do so deliberately and intentionally, the plaintiff must show a good reason why the default judgment should be set aside. [ 31 ] The plaintiff argues that: they proceeded expeditiously once they discovered the error; the cause of the error was an administrative mistake in referring to the wrong line of credit; and the plaintiff has a good cause of action for the enforcement of the line of credit agreement. [ 32 ] The plaintiff states that the statement of claim got it right.

The defendants were noted in default and therefore are deemed to admit the allegations contained in the statement of claim. [ 33 ] Lorraine Jane Billett has sworn an affidavit in response to this application which merely recites the steps taken in this legal action. She does not swear that she was aware of the mistake, nor does she swear that she was unaware of the error. The question remains: what is the Masters authority to remedy the mistake made by the plaintiff. [ 34 ] In Edwards , the court reviewed cases involving an application by a plaintiff to set aside a judgment entered in default.

Justice Slatter found 4 broad categories or scenarios where the court has assisted the plaintiff.

[35] At paragraph 34 he refers to the decision in Cannan v. Reynolds (1855), 26 L.J.Q.B. 62, 119 E.R. 493 where the plaintiffclaimed a lower amount than intended against some defendants. It was determined that the defendants were aware of the mistake andintentionally allowed the default judgment to go for a lower amount. The plaintiff was allowed to open a default judgment, and amend itspleadings. Other decisions referred to by Justice Slatter where the court granted similar relief to a plaintiff applicant include: S. Kaprow& Co. v. MacLelland & Co., [1948] 1 All E.R. 264; Logan v.

Royal Bank (1994), 1994 ABCA 202 , 155 A.R. 78 and Findlayv. H.T. Patmore & Co., [1948] 2 W.W.R. 558. [36] In Findlay a default judgment was opened up, the claim re-framed and new defendants added. [37] Justice Slatter noted that the cases he reviewed variously treated the matter as a question of mistake, of prejudice, ofpreserving vested rights, or simply of fairness. [38] In Morstad v. Quintal (AB KB), 1980 14 Alta L.R. (2d) 369, Sinclair C.J. determined that a mistake incalculating the amount owing that was contained in a consent Order Nisi could be corrected.

He found that the mistake was a mutualmistake and that a fresh action, brought for the purpose of correcting the mutual mistake, could be commenced to set aside the consentOrder Nisi. He further determined that it was within the courts inherent jurisdiction to grant the relief within the same action rather thanrequire a fresh action. [39] In this case it is undisputed that the wrong line of credit balance was referred to in the affidavit of default and carried forwardinto the Redemption Order.

Prior to the commencement of these proceedings the plaintiff’s solicitor made a demand for payment whichreferred to the correct line of credit balance. The statement of claim described the correct line of credit. The defendants had anopportunity to defend or challenge the allegations contained in the statement of claim and chose not to do so. Clearly there has been amistake as to the line of credit referred to in the affidavit of default. This is not just a calculation error as in Ensign Estate. [40] Lorraine Jane Billett, in resisting the plaintiff’s application, would receive a windfall if successful.

The defendant has noevidence of reliance and no payment was made on the basis of the erroneous order. In Edwards , Justice Slatter refused the applicationto set aside the judgment because the entire judgment had been paid by the defendant. [41] The plaintiff has significant prejudice if the order is not amended. There is no evidence of prejudice to the defendant. There ismore than enough money from the sale of the property to pay out their line of credit entirely. As between the plaintiff and defendants, thefairness argument would also favor the plaintiff.

Doubtless, if the plaintiff was only secured for $2,000.00 and made an error by stating abalance of $200.000.00, the Defendants would apply to correct the error. Doubtless the court would correct the error based on the samegrounds of mistake and fairness. [42] The subsequent encumbrancers on title have neither opposed or supported the plaintiff’s application. They have submitted noevidence of prejudice.

There will be some money left over after paying out the plaintiff’s line of credit agreement for distributionamongst the subsequent encumbrancers. [43] It is my conclusion that I have the ability to vary the Redemption Order under rule 9.15 (3) based on either mistake, prejudiceto the plaintiff or simply fairness. The plaintiff shall file a supplementary affidavit showing the outstanding balance on the line of creditagreement as at September 6, 2011. The amount declared to be due and owing to the plaintiff in paragraph 3 of the Redemption Ordershall be amended accordingly. Heard on the 30th day of October, 2012.

Dated at the City of Red Deer, Alberta this 20th day of December, 2012.

K.R. Laycock M.C.C.Q.B.A. Appearances: Russell N. Avery Bishop & McKenzie LLP for the Plaintiff Monica R. Brown Duhamel Manning Zeehan Warrender Glass LLP for the Defendant Lorraine Jane Billett