56730 Alberta Ltd. Applicant - v. -, 2013 ABQB 233

Court of Queen ’ s Bench of Alberta Citation: 56730 Alberta Ltd. v. Lavigne, 2013 ABQB 233 Date: 20130417 Docket: 1203 06732 Registry: Edmonton Between: 56730 Alberta Ltd. Applicant - and - Darren Joseph Lavigne Respondent _______________________________________________________ Memorandum of Decision of the Honourable Madam Justice J.B. Veit _______________________________________________________

Summary [ 1 ] In this special chambers application, 56730 Alberta Ltd. asks for

summary judgment on the claim it issued in May, 2012 against Darren Lavigne based on the latter ’ s guarantee: it says that the evidence clearly establishes that Mr. Lavigne guaranteed a $530,000.00 loan, of which only $200,000.00 has been repaid. Mr. Lavigne invokes the protection of limitations: he says that it must have been clear to 56730 that he would not pay the guarantee even before, but certainly no later than, April 27, 2010 when 1414087 Alberta Ltd. went into bankruptcy.

In response, 56730 alleges that the limitation period did not commence until it made a demand in writing from Darren Lavigne for payment on the guarantee. 56730 agrees that if a demand to enforce Mr. Lavigne's guarantee can be made orally, there is an issue to be tried and

summary judgment cannot be granted. [ 2 ] The application for

summary judgment is denied.

[3] The guarantee executed by Darren Lavigne does not require that a demand be made in writing; it merely provides that if ademand is made in writing, in a particular way, it will be deemed to be an effective notice of demand for payment from the guarantor,presumably whether or not the guarantor actually receives the written demand. Here, evidence will have to be called to determine if aneffective demand was made within the limitation period. Cases and authority cited [4] By the Applicant, 56730 Alberta Ltd.: Alberta Rules of Court, Rule 7.3; Murphy Oil Company Ltd. v.

PredatorCorporation Ltd., 2006 ABCA 69; Alta. Treasury Branches v. Wenley Enterprises & Sales Ltd., 1985 CarswellAlta 371; PapaschaseIndian Band No. 136 v. Canada (Attorney General), 2008 SCC 14 , 2008 CarswellAlta 398; David M. Gottlieb, ProfessionalCorp. v. Tymkow, 2012 ABQB 262; Enokhok Development Corp. v. Alberta Treasury Branches, 2011 ABCA 322. [5] By the Respondent, Darren Lavigne: Another Look Ventures Inc. v. 642157 Alberta Ltd., 2012 ABCA 253; Kendell v.Kendell, 2006 ABQB 664; R.P. Choma Financial and Associates Inc. v. McDougall, 2008 ABQB 359; Do All Metal Fabricating Ltd.v.

Embury, 2013 ABQB 135. [6] By the Court: Royal Bank of Canada v W. Got & Associates Electric Ltd. (AB KB), [1994] A.J. No. 94(Q.B.); Bellevue Home Entertainment v Headline Entertainment Inc. [1991] O.J. No. 1893 (Gen. Div.); Sysco Canada Inc. v C.J. M.Service Ltd. 2011 NLTD(G) 46; Bell Aliant Regional Communications Limited Partnership v Cabletec Ltd. 2013 NSSC 3; CaribouHotels

(1980) Inc. v 5857 Yukon Ltd. [1990] B.C.J. No. 2344 (C.A.). Appendix A: Reconciliation - 1414087 Ltd. - National Courier Services Ltd. 1.

Background [7] Darren Lavigne acknowledges that, on January 23, 2009, he signed and sealed a guarantee of the debts of 1414087 AlbertaLtd. in favour of 56730 Alberta Ltd., that his guarantee was properly certified under the Guarantees Acknowledgement Act, and that hisguarantee pledged his interest in 972111 Alberta Ltd. [8] The guarantee in question contained the following terms: FOR VALUABLE CONSIDERATION, receipt hereof is hereby acknowledged, the undersigned hereby guarantees payment on demandto 56730 ALBERTA LTD. (hereinafter called the "Lender") of all debts and liabilities, present or future, direct or indirect, absolute orcontingent, matured or not, at any time owing by 1414087 ALBERTA LTD. (hereinafter called the "Borrower") to the Lender orremaining unpaid by the Borrower to the Lender, heretofore or hereafter incurred or arising anywhere and whether incurred by or arisingfrom agreement or dealings between the Lender and the Borrower or by or from any agreement or dealings with any third party by whichthe Lender may be or become in any manner whatsoever a creditor of the Borrower or however otherwise incurred or arising anywhere and whether the Borrower be bound alone or with another or others andwhether as principal or surety (such debts and liabilities being hereinafter called the "liabilities").

(11) No suit based on this guarantee shall be instituted until demand for payment has been made, and demand for payment shall bedeemed to have been effectually made upon any guarantor if and when an envelope containing such demand, addressed to such guarantorat the address of such guarantor last known to the Lender, is posted, postage prepaid, in the post office, and in the event of the death ofany guarantor demand for payment addressed to any of such guarantor's heirs, executors, administrators or legal representatives at theaddress of the addressee last known to the Lender and posted as aforesaid shall be deemed to have been effectually made upon all ofthem.

Moreover, when demand for payment has been made, the undersigned shall also be liable to the Lender for all legal costs (on asolicitor and his-own client, full indemnity basis) incurred by or on behalf of the Lender resulting from any action instituted on the basisof this guarantee. All payments hereunder shall be made to the Lender at a branch or agency of the Lender.

(Emphasis added) [ 9 ] Darren Lavigne confirms that, during 2008, 56730 Alberta advanced a total of $530,000.00 to 1414087. [ 10 ] 56730 asserts that 1414087 has only repaid $200,000.00 of the loans it received and that those payments were received in early 2009. Darren Lavigne disputes this contention, stating that 1414087 only owes 56730 a total of $95,144.55, as set out in a document prepared by Darren Lavigne ’ s mother, and reproduced as Appendix A.

Darren Lavigne acknowledges that he himself made no personal payments on the loan; he has not led any direct documentation to prove that something less than $330,000.00 is owing on the loan. [ 11 ] No evidence has been led by 56730 of any written demand for payment on Darren Lavigne ’ s guarantee. [ 12 ] On April 27, 2010, 1414087 went into bankruptcy. In June, 2010, 56730 filed a claim in that bankruptcy. [ 13 ] On May 26, 2011, in separate proceedings from these, Darren Lavigne issued a statement of claim against 972111 Alberta Ltd., Victor Lavigne and Mairead M.

Lavigne asking, amongst other relief, for the liquidation of 972111. On June 16, 2011, 97211, Victor Lavigne and Mairead M. Lavigne issued a counter-claim in the lawsuit initiated by Darren Lavigne. In the counter-claim, the Plaintiffs by Counter-claim referred to the outstanding $350,000.00 loan owed by 1414087 to 56730 and stated: 9. The Lavignes have made numerous requests to the Defendant by counterclaim for repayment of the Loan. To date, no payments have been made on the Loan.

The parties have agreed amongst themselves that documents filed in the May 26, 2011 proceedings can be used in this lawsuit. [ 14 ] On May 3, 2012, 56730 issued the statement of claim on which this application for

summary judgment depends. [ 15 ] The applicable limitation period is 2 years. 2. Test for

summary judgment - no genuine issue for trial [ 16 ] The parties agree, and I agree with them, that the test for

summary judgment requires 56730, the applicant here, to establish that it is plain and obvious that the defence cannot succeed. Indeed, 56730 further narrows the real issue on this application: it acknowledges that, unless the guarantee signed by Darren Lavigne requires a written demand for payment, the application for

summary judgment cannot succeed. 3. There is no genuine issue for trial in relation to the amount outstanding on the loan [ 17 ] During questioning on an affidavit he had filed in these proceedings, Darren Lavigne contests 56730's claim that $330,000.00 is still owing on the monies advanced to 1414087. He points to the fact that the reconciliation his mother, Mairead Lavigne, prepared stated that many documents were inaccurate or had been lost.

Essentially, he claims that, at best, the portion of the reconciliation which states that the amount owed to 56730 is $95,144.55 establishes the maximum possible amount of 56730's claim. [ 18 ] With respect, Darren Lavigne ’ s evidence does not create a genuine issue for trial. The reconciliation on which he relies clearly consists of two portions, a first portion which deals with the loans and loan payments, which portion is separated from the remainder of the reconciliation by a line across the page, and a second, multi-page portion, which clearly outlines, and totals, only operating expenses

as between the “ Old ” National Courier Services Ltd. and the “ New ” National Courier Services Ltd., to use the terminology employed by the parties themselves. [ 19 ] Darren Lavigne cannot point to any documentation to show that anything more than $200,000.00 has been paid in relation to the advances of $530,000.00. [ 20 ] It would be unfair to force the applicant to go to the expense of a trial to prove that $330,000.00 is outstanding when it has already proved that result on this application.

Darren Lavigne ’ s own evidence establishes that he would not have any more evidence available at trial than he has led to date. On the state of the evidence to date, a court would have to conclude that Darren Lavigne has no defence to 56730's claim based on the amount of debt outstanding. There is no way that Darren Lavigne ’ s defence to the outstanding amount of the loan could be successful at trial. [ 21 ] The only real issue to be determined on this application is, therefore, whether Darren Lavigne can benefit from the potential immunity from suit by reason of the expiry of the limitation period. 4.

The potential applicability of limitation periods requires a trial [ 22 ] This case raises several possible problems relating to the potential applicability of limitation immunity to Darren Lavigne. For example, there is the minor issue of whether a guarantee survives the bankruptcy of the debtor whose obligation is guaranteed.

There is also potentially an issue surrounding the need to make a demand for payment in writing: does the limitation period run from the time when the demand is made in writing, or from the time when the beneficiary of the guarantee should have known that the guarantor would not comply with the guarantee.

There is also potentially an issue about the failure to make a demand in writing prior to the issuance of a statement of claim when a limitation period has subsequently intervened. [ 23 ] However, 56730 has, most usefully and frankly, made the following acknowledgement: if Darren Lavigne ’ s guarantee does not require a demand for payment in writing, 56730's application must fail because there are clearly triable issues. 5. This guarantee does not require a demand for payment in writing [ 24 ] Because it is a collateral obligation, a guarantee must be narrowly interpreted in favour of the guarantor.

Where a guarantee is “ on demand ” , not only must a demand must be made before the guarantee becomes effective, but the demand must be made in the way required by the guarantee: Sysco Canada Inc. at para. 25. Obviously, if a guarantee expressly required a demand to be in writing, a court would insist on compliance with that requirement: see, for example, Bell Aliant at paras. 111 ff. Indeed, such a term might be interpreted so strictly that the issuance of legal proceedings, including a counterclaim, might not satisfy the requirement for a demand in writing: Caribou Hotels

(1980) Inc. [ 25 ] However, the guarantee with which we are concerned does not require a demand in writing. A term very similar to

article 11 in this guarantee was the subject of commentary by McDonald J., as he then was, in Got : 166 On behalf of Mr. Sanderlin, it is argued that he is not liable on his guarantee because demand for payment was not made in the manner prescribed by the guarantee. Clause 12 of the guarantee states:

(12) No suit based on this guarantee shall be instituted until demand of payment has been made, and demand of payment shall be deemed to have been effectually made upon any guarantor if and when an envelope containing such demand, addressed to such guarantor at the address of such guarantor last known to the Bank, is posted, postage prepaid, in the post office, and in the event of the death of any guarantor demand of payment addressed to any of such guarantor's heirs, executors, administrators or legal representatives at the address of the addressee last known to the Bank and posted as aforesaid shall be deemed to have been effectually made upon all of them.

All payments hereunder shall be made to the Bank at a branch or agency of the Bank.

The demand letter dated May 31, 1984, was not posted to Mr. Sanderlin. However, in my view clause 12 merely sets forth a mode of service which, if employed, will be deemed to be service. The clause does not say that it is the only permissible means of service. Personal service would clearly be good service. So would leaving the demand letter at Mr. Sanderlin's place of business if he in fact received it. The process server's affidavit states that at some undetermined time that day he left the letter with a receptionist at Got's business address. There is no evidence that Mr.

Sanderlin ever saw the demand letter, and I find that he did not. However, the failure to communicate demand of payment to Mr. Sanderlin before instituting this action is, despite clause 12, not a bar to the proceedings. The statement of claim itself, once served, constituted a demand. The effect of clause 12 is limited: the bank, if otherwise successful, would not recover costs of issuing and serving the statement of claim, for, theoretically, if Mr. Sanderlin had been served with the demand, he might have paid what Got owed the bank. (Emphasis added) Although McDonald J. ’ s decision did not focus on the

interpretation of the clause which is similar to

article 11 in the guarantee here, his decision was upheld both by our Court of Appeal and by the Supreme Court of Canada. Because the issue of the

interpretation of the comparable to

article 11 was not the focus of the Got judgment, neither of the appeal decisions are, technically, binding on me. Nevertheless, I adopt the approach articulated by McDonald J.: the language used in this guarantee does not require a demand in writing, but merely makes a specific form of writing effective with respect to receipt of notice by the guarantor. To the same effect, see also Bellevue Home Entertainment. [ 26 ] It must be recalled that the law also requires the content of demand to satisfy additional requirements. However, no issue of that type is raised in this application. [ 27 ] In

summary, therefore, the guarantee which is the subject of this application did not require that demand be made in writing. Therefore, the applicant itself acknowledges that its application for

summary judgment must be denied. 6. Costs [ 28 ] If the parties are not agreed on costs, I may be spoken to within 30 days of the release of this decision. Heard on the 16 th day of April, 2013. Dated at the City of Edmonton, Alberta this 17 th day of April, 2013. J.B. Veit J.C.Q.B.A.

Appearances: Janice A. Agrios, Q.C., Kennedy Agrios LLP for the Applicant, 56730 Alberta Ltd. Joseph J. Kueber, Q.C., Bryan & Company LLP for the Respondent, Darren Joseph Lavigne Appendix A