O'Hanlon Paving Ltd. v. Serengetti Developments Ltd., 2013 ABQB 428

Court of Queen ’ s Bench of Alberta Citation: O'Hanlon Paving Ltd. v. Serengetti Developments Ltd., 2013 ABQB 428 Date: 20130729 Docket: 1103 19995, 1103 19997 Registry: Edmonton Between: Action No.: 1103 19995 O'Hanlon Paving Ltd. Plaintiff - and - Serengetti Developments Ltd., Gocan Corp. and U Construction Ltd. Defendants And Between: Action No.: 1103 19997 Waiward Construction Management Inc. Plaintiff - and – Serengetti Developments Ltd., Gocan Corp. and U Construction Ltd. Defendants

_ ________________________________________ ______________ Reasons for Judgment of the Honourable Mr. Justice Thomas W. Wakeling _________________________________________ ______________ I. Introduction [ 1 ] The plaintiffs in these two actions seek

summary judgment enforcing promises given in 2011 by the three defendants to pay O’Hanlon Paving Ltd. (“O’Hanlon”) $1,148,305.23 on demand (“O’Hanlon instrument”) and Waiward Construction Management Inc. (“Waiward”) $1,392,853.18 on demand (“Waiward instrument”). [ 2 ] The defendants allege in their statements of defence that they “provided the Promissory Note ... on the clear understanding and condition that the Plaintiff was not entitled to negotiate the same or demand payment of same until its recourse against the fund held by the City of Edmonton had been exhausted”. II.

Questions Presented [ 3 ] Are the O’Hanlon and the Waiward instruments promissory notes within the definition of s. 176(1) of the Bills of Exchange Act , R.S.C. 1985, c.

B-4 (“ Bills of Exchange Act ”)? [ 4 ] If so, can each of O’Hanlon and Waiward commence an action to enforce the demand promissory notes without having made a demand for payment to the defendants? [ 5 ] Is there any evidence that collateral agreements exist which preclude the plaintiffs from demanding payment of the promissory notes when they did? [ 6 ] If not, have the defendants, as the makers of these promissory notes, failed to discharge their obligations? [ 7 ] If not, are the plaintiffs entitled to

summary judgment under rule 7.3 of the Alberta Rules of Court , Alta. Reg. 124/2010 (“ Alberta Rules of Court ”)? Are the plaintiffs’ cases so compelling that the likelihood of success is extremely high? Do the defendants have any defence to the plaintiffs’ claims? [ 8 ] If so, to what rate of pre-judgment interest are the plaintiffs entitled? Is it the rate set out in the Interest Act , R.S.C. 1985, c. I-15, s. 3 (“ Interest Act ”) or the Judgment Interest Act , R.S.A. 2000, c. J-1, s. 2(1) (“ Judgment Interest Act ”)? III.

Brief Answers [ 9 ] The O’Hanlon and Waiward instruments are promissory notes under s. 176(1) of the Bills of Exchange Act . They contain unconditional promises in writing signed by the defendants to pay an identified payee a specified sum on demand. [ 10 ] O’Hanlon and Waiward may commence an action for the enforcement of a demand promissory note without having made a demand for payment. The law in Alberta was settled many years ago. [ 11 ] O’Hanlon and Waiward have adduced evidence that the three defendants have not paid to the plaintiffs the sums due under the O’Hanlon and Waiward instruments.

The defendants implicitly admit in their statement of defence that they have not paid O’Hanlon and Waiward the sums set out in the O’Hanlon and Waiward instruments. [ 12 ] The plaintiffs are entitled to

summary judgment. They have met the requirements set out in rule 7.3 of the Alberta Rules of Court . Their cases are so strong that the likelihood of success is very high. The defendants have no defence to the plaintiffs’ claims. The defendants declined to file affidavits setting out the defence raised in their statements of defence. Their questioning of the deponents who filed affidavits in support of each of the actions elicited nothing which assisted the defendants. There is no genuine issue to be tried and the plaintiffs are entitled to judgment as a matter of law.

The facts and the law on which the plaintiffs rely are incontrovertible. [ 13 ] The plaintiffs are entitled to interest under the Interest Act for the period commencing December 21, 2011, the date the plaintiffs filed their actions, and concluding the date of this judgment. IV. Applicable Rules of Court and Statutory Provisions

[ 14 ] Rule 7.3 of the Alberta Rules of Court is as follows: 7.3(1) A party may apply to the Court for

summary judgment in respect of all or part of a claim on one or more of the following grounds: (

a) there is no defence to a claim or part of it; (

b) there is no merit to a claim or part of it; (

c) the only real issue is the amount to be awarded.

(2) The application must be supported by an affidavit swearing positively that one or more of the grounds described in subrule (1) have been met or by other evidence to the effect that the grounds have been met.

(3) If the application is successful the Court may, with respect to all or part of a claim, … do one or more of the following: (a) … give judgment for or in respect of all or part of the claim or for a lesser amount; [ 15 ] The key parts of the Bills of Exchange Act follow: 22.

(1) A bill is payable on demand (

a) that is expressed to be payable on demand or on presentation; … 133. Where a bill is dishonored, the measure of damages, which shall be deemed to be liquidated damages, are (

a) the amount of the bill; (

b) interest thereon from the time of presentment for payment, if the bill is payable on demand …; and (

c) the expense of noting and protesting. … 176.

(1) A promissory note is an unconditional promise in writing made by one person to another person, signed by the maker, engaging to pay, on demand or at a fixed or determinable future time, a sum certain in money to, or to the order of, a specified person or to bearer. ... 179.

(1) A note may be made by two or more makers, and they may be liable thereon jointly, or jointly and severally, according to its tenor. … 183.

(3) When no place of payment is specified in the body of the note, presentment for payment is not necessary in order to render the maker liable. 185. The maker of a note, by making it, (

a) engages that he will pay it according to its tenor; ... 186.

(1) Subject to this part, and except as provided by this section, the provisions of this Act relating to bills apply, with such modifications, as the circumstances require, to notes. ... [ 16 ]

Section 3 of the Interest Act provides that “[w]henever any interest is payable by agreement of the parties or by law, and no rate is fixed by the agreement or by law, the rate of interest shall be five percent per annum”. V. Statement of Facts A. The Waiward Action [ 17 ] In Court of Queen’s Bench of Alberta action no. 0903 15624 commenced by Canadian Western Bank against Proland Corp. and the three defendants in this action, Donald Oborowsky, the president of Waiward, filed an affidavit sworn on June 1, 2012. He set out some of the events leading up to the making of the Waiward instrument.

A more complete account was provided in the course of questioning on Mr. Oberowsky’s affidavit. Waiward had entered into three contracts in 2009 and 2010 with Jo-Di Construction Ltd.

(“Jo-Di”) for construction services relating to the Maple Ridge Subdivision. Waiward completed the construction work it had promised to perform under the contracts and Jo-Di owed it $2,404,762.70 for the work performed.

Before Waiward commenced work, Jo-Di’s representatives assured Waiward that it “would be paid … out of funds from a letter of credit held by the City of Edmonton and if necessary the PAC funds that would be forthcoming from the City of Edmonton”. [1] While Waiward was performing its construction work, a dispute arose between the owners of the Maple Ridge Subdivision and the Canadian Western Bank which concerned Waiward.

The owners’ representative assured Waiward that a performance bond would produce sufficient funds to allow Jo-Di to discharge its obligations to Waiward “if sufficient funds from the letter of credit … [or] PAC funds were not available”. [2] Waiward received some funds from the letter of credit held by the City of Edmonton but not enough to cover the obligation of Jo-Di to Waiward. The shortfall is approximately the amount of the Waiward instrument, which reads as follows: Demand Promissory Note FOR VALUE RECEIVED: Gocan Corp., Serengetti Developments Ltd. and U Construction Ltd.

Hereby promise to pay to the order of WAIWARD CONSTRUCTION MANAGEMENT INC the sum of One Million Three Hundred Ninety Two Thousand Eight Hundred Fifty Three Dollars & Eighteen Cents ($1,392,853.18) Dollars payable on demand. Dated at the City of Edmonton, in the Province of Alberta, this 15 Day of February A.D. 2011. Signed Witness Signed Gocan Corp. Signed Witness Signed Serengetti Developments Ltd. Signed Witness Signed U Construction Ltd. Waiward Construction Management Inc.

Per. signed. [ 18 ] Waiward commenced this action on December 21, 2011 against the defendants seeking judgment for $1,392,853.18, the sum due on demand under the Waiward instrument, interest and costs. [ 19 ] The three defendants filed a joint statement of defence, a part of which follows: 2. The Plaintiffs entered into an agreement with Jo-Di Construction Ltd. dated the 7 th day of October, 2009, pursuant to which the Plaintiff performed certain services. 3.

It was a term of the agreement between the Plaintiff and Jo-Di Construction that the Plaintiff would receive payment of the amount that might come due to it from a particular fund held by the City of Edmonton. 4. There is not now nor has there ever been a contract or agreement between the Plaintiff and the Defendants for the provision of services as described in paragraphs 4 and 5 of the Statement of Claim or at all. [3] 5.

As a further assurance of payment and by way of a guarantee of payment to the plaintiff by Jo-Di Construction Ltd. in the event that the fund held by the City of Edmonton proved insufficient or otherwise deficient, the Defendants provided the Promissory Note dated February 15, 2011 on the clear understanding and condition that the Plaintiff was not entitled to negotiate the same or to demand payment of the same until its recourse against the fund held by the City of Edmonton had been exhausted. 6.

The Plaintiff has not exhausted its recourse against the fund held by the City of Edmonton and is not entitled to make demand on the Promissory Note or negotiate the same. … 7. The Plaintiff has not demanded payment nor is it entitled to demand payment on the Promissory Note in accordance with the agreements between the parties. 8.

The Plaintiff has received payment to the credit of the indebtedness of Jo-Di Construction Ltd. with the result that the amount owed by Jo-Di Construction Ltd. to the Plaintiff and in the respect of which the Plaintiff may, at some future date, be entitled to look to the Defendants for payment is less than the amount claimed in the Statement of Claim. [ 20 ] On October 22, 2012 Waiward applied for

summary judgment alleging that the defendants “have no defence to the Plaintiff’s claim for a liquidated debt … of $1,392,853.18”. [ 21 ] In support of its

summary judgment application, Waiward filed the affidavit of Mr. Oborowsky sworn on October 16, 2012. Attached to his affidavit is the affidavit he swore on June 1, 2012 in the action commenced by Canadian Western Bank against the three defendants and Proland Corp. In his October 16, 2012 affidavit Mr. Oborowsky states as follows: “I know of no defence to the claim of Waiward against the Defendants and I know of no merits to any of the defences raised in

the Statement of Defence filed by the Defendants in this action”. [ 22 ] Counsel for the defendants questioned Mr. Oborowsky on his June 1 and October 16, 2012 affidavits. Mr. Oborowsky explained that the owners of the Maple Ridge Subdivision wanted Waiward to do more construction work. Because they could not pay, they offered to give Waiward a promissory note. An extract from the questioning follows: [4] Waiward Construction had a conversation with the owners of the project requesting to be paid on prior work.

They wanted the additional work done, and they gave us - - the owners of the project put together this promissory demand note which was received as a company, which we, as a company signed and accepted as a demand promissory note to proceed with additional work and to cover off work that was already done. ... … So Waiward had a conversation with the owner and that’s how we got the promissory note. [ 23 ] Counsel for the defendants also asked Mr. Oborowsky under what conditions could Waiward demand payment. Mr. Oborowsky, on a number of occasions, replied “lack of payment”. [5] [ 24 ] Mr.

Oberowsky admitted in questioning that Waiward made no demand to the defendants for payment of the Waiward instrument before it filed the statement of claim in this action. [6] This concession is inconsistent with Waiward’s statement of claim which asserted that the “Plaintiff has demanded payment in accordance with the terms of the Promissory Note”. B. The O’Hanlon Action [ 25 ] Thomas Fath, O’Hanlon’s president, filed an affidavit in the action between Canadian Western Bank and Proland Corp. and the three defendants in each of these actions, as Mr. Oborowsky did. Mr.

Fath’s affidavit sworn July 17, 2012 primarily provides information about the steps O’Hanlon and Waiward took to increase the likelihood they would be paid for the work their businesses did on the Maple Ridge Subdivision project. [ 26 ] O’Hanlon commenced this action against the defendants on December 21, 2011 seeking judgment for $1,148,305.23, the sum due on demand under the O’Hanlon instrument, which is identical to the Waiward instrument with the exception of the payee. [ 27 ] The three defendants filed a joint statement of defence, the body of which is identical to the body of their statement of defence in the Waiward action. [ 28 ] Like Waiward, O’Hanlon has also filed for

summary judgment. O’Hanlon, in support of its

summary judgment application filed the affidavit of its president sworn October 22, 2012. Mr. Fath’s July 17, 2012 affidavit referred to above is an attachment to Mr. Fath’s October 22, 2012 affidavit. Part of Mr. Fath’s most recent affidavit contains this statement: “I know of no defence to the claim of O’Hanlon against the Defendants and I know of no merits to any of the defences raised in the Statement of Defence filed by the Defendants in this action”. [ 29 ] When counsel for the defendants questioned Mr.

Fath, he provided more information about the nature of the work O’Hanlon performed on the Maple Ridge Subdivision project. Mr. Fath stated that O’Hanlon performed paving and related work at the Maple Ridge Subdivision project between the fall of 2009 and sometime in 2011 pursuant to a contract with Jo-Di dated October 7, 2009. As of February 16, 2011, Jo-Di owed O’Hanlon “a considerable sum of money”. [7] [ 30 ] Mr. Fath indicated that the O’Hanlon instrument was executed on February 17, 2011. Counsel asked Mr.

Fath if the makers of the O’Hanlon instrument imposed any conditions with respect to its use. [8] A I don’t remember having any written conditions attached. Q Fair enough, no written conditions. What do you recall the conditions to have been that were unwritten? A I don’t - - I don’t recall - - any specific conditions specifically limiting it. Q Let’s break down your answer. ... What conditions were imposed whether you believe them to be specifically limiting or not? A I don’t - - I don’t remember any conditions that really limited us getting it. Q Do you remember any conditions at all?

A I - - I would say that there would be - - it would have been accompanied by Jo-Di stating that he expected to - - to be paying us, but not specifically putting conditions on it. ... Q So can you tell me why the prom ... what you have referred to as the demand promissory note was not instantly demanded if there were no conditions attached to its use or what you did with it? A Because we work with our - - our - - our clients and our customers. Q So why didn’t you simply demand the payment of what you have referred to as

the demand promissory note on February 17? A Because the expectation is that it would be coming reasonably soon. [31] Mr. Fath, during questioning stated that Jo-Di owes O’Hanlon roughly $1,523,000 plus interest.[9] [32] The defendants’ counsel secured the same admission from Mr. Fath as he did from Mr. Oborowsky – “no written [or verbal]demand was given by O’Hanlon Paving on the demand promissory note ... prior to the Statement of Claim”. [10] VII. Analysis A.

Summary Judgment Is Designed To Identify and Resolve Meritless Claims and Defences as Soon as Possible [33] A

summary judgment protocol recognizes that it is not unjust to deny a plaintiff with a meritless claim or a defendant with ameritless defence access to all stages of the litigation process. A litigant whose claim or defence is so weak that its chance of succeedingis very low, cannot reasonably expect the state to make available all parts of a publicly funded judicial process.

As I stated in Beier v.Proper Cat Construction Ltd., 2013 ABQB 351, ¶ 56, “[t]he common law principle that a person has a right to be heard or to have hisday in court is not more important than speedy resolution of meritless claims or defences the continuation of which drive up the cost oflitigation for everyone not just those prosecuting an action or maintaining a defence which has no real prospect of success”. [34] Legislators in the United Kingdom, Canada and United States have introduced

summary judgment into their litigation modelto ensure that dispute resolution takes place at the earliest point in the litigation continuum where it is just to do so.[11] A

summaryjudgment protocol promotes expeditious dispute resolution and efficient use of private and public legal resources. Canada v. Lameman,2008 SCC 14 , [2008] 1 S.C.R. 372, 378 (“Trying unmeritorious claims imposes a heavy price in terms of time and cost on theparties to the litigation and on the justice system”) & Beier v. Proper Cat Construction Ltd., 2013 ABQB 351, ¶ 71. [35] The Westminster Parliament introduced a

summary judgment procedure in England in 1855 when it passed the

SummaryProcedure on Bills of Exchange Act, 18 & 19 Vict., c. 67. According to the recital, Parliament acted to deliver expeditious justice to“bona fide holders of dishonored bills of exchange and promissory notes [who] are often unjustly delayed and put to unnecessaryexpense recovering the amount thereof by reason of frivolous or fictitious defences”.

The commercial community was frustrated by thelitigation process: Before the middle of the nineteenth century a defendant sued in the plainest of plain cases – e.g. for the price of goods sold and deliveredor upon a dishonoured cheque – had merely to put upon the record a plea, no matter how devoid of merits or remote from the actual facts,and the case had to go for trial with all the delay and expense necessarily involved. At the trial the defendant often did not appear.Eventually the bankers and other holders of bills in the City of London complained so vigorously that in 1855 the

Summary Procedureon Bills of Exchange Act (“Keating’s Act”) was passed. In cases to which the Act applied the defendant had to get leave to appear,which he could only do by paying the money into court or setting out his defence in an affidavit. D. Casson, Odgers on High Court Pleadings and Practice 108 (23rd ed. 1991). [36] Professor Bauman, in “The Evolution of the

Summary Judgment Procedure: An Essay Commemorating the CentennialAnniversary of Keating’s Act”, 31 Ind. L.J. 329, 350 (1956), explained why the earliest

summary judgment rules were limited to theenforcement of bills of exchange and promissory notes: The remedy may be restricted to cases where the court may safely determine even in the absence of demeanor evidence that plaintiff isentitled to judgment without a trial. ... The success of Keating’s Act may be attributed in large measure to the legal doctrine governingthe type of case to which it applied. The negotiable instrument has been described as a “courier without luggage”, because in order forthe instrument to be negotiable the obligation is severely circumscribed as to form.

Moreover, the proof of the plaintiff’s case is aided bystatutory presumptions, and the available defences are limited by the substantive law. In actions on negotiable instruments, whenplaintiff establishes his claim by the production of the instrument, and the defendant fails to attack its validity or substantiates any otherdefence, the court is justified in ordering judgment for the plaintiff. See also Lloyd v. Lawrence, 472 F. 2d 313, 316 (5th Cir. 1973) (“Suits to enforce negotiable instruments are among the most suitableclasses of cases for

summary judgment”). [37]

Summary judgment procedures have frequently and successfully been invoked in Canada, the United Kingdom and the UnitedStates in actions seeking the enforcement of promissory notes. E.g., Dushenski v. Lymer, 2010 ABQB 605 , 500 A.R. 48, 54(Q.B. 2010); HSBC Bank of Canada v. Vallet, 2009 ABQB 743 , 483 A.R. 240 (Q.B. 2009); State Bank of Butler v. Benzanson, (AB KB), 16 D.L.R. 848 (Alta. Sup. Ct. 1914); Bank of Montreal v. Mangold, (AB KB), 86 A.R.215 (Master 1988); Stolberg Mill Construction Ltd. v. Selkirk Spruce Mills Ltd., 22 W.W.R. 605, 608 (B.C. Sup.

Ct. 1957); Butkovsky v.Jalbuena, (BC SC), 132 D.L.R. 3d 177, 180 (B.C. Co. Ct. 1982); Heaman v. Schnurr, 2011 ONSC 2661; QuickCredit v. 1575463 Ontario Inc., 2010 ONSC; Fierro v. Sinclair, 2012 NSSC 429; Field & Platt Ltd. v. Najjar, [1969] 1 W.L.R. 357 (C.A.); Griffon LLC v. 11 East 36th LLC, 934 N.Y.S. 2d 472 (App. Div. 2011); Federal Deposit Insurance Corp. v. Willis, 497 F. Supp.272 (S.D. Ga. 1980); Arthurs J. Nonneman v. Murphy, 2012 Bankr. Lexis 4264 (Bankr. Ct. E.D. Ky.) & Wells Fargo Bank, NA v. Ortega, 2012 WL 3570734 (10th Cir.). B. Alberta’s

Summary Judgment Rule [38] Rule 7.3(1) of the Alberta Rules of Court stipulates that the Court may grant

summary judgment to a plaintiff if “there is nodefence to a claim”. In Beier v. Proper Cat Construction Ltd., 2013 ABQB 351, ¶ 61, I provided this assessment of the essential features

of rule 7.3(1): Rule 7.3 of the new Alberta Rules of Court allows a court to grant

summary judgment to a moving party if the nonmoving party’sposition is without merit. A party’s position is without merit if the facts and the law make the moving party’s position unassailable andentitle it to the relief it seeks. A party’s position is unassailable if it is so compelling that the likelihood of success is very high. [39] And what does very high likelihood of success mean? [40] The Supreme Court of Canada has held that the moving party must establish that there is no genuine issue to be tried.Guarantee Co. of North America v. Gordon Capital Corp., (SCC), [1999] 3 S.C.R. 423, 438.

Our Court of Appeal hassupported a number of different measures of the high likelihood of success necessary to warrant

summary judgment. Another LookVentures Inc. v. 642157 Alberta Ltd., 2012 ABCA 253, ¶ 8 (summary judgment may be granted if it is “plain and obvious that the action cannot succeed”); Enokhok Development Corp. v. Alberta Treasury Branches, 2011 ABCA 322 , 68 Alta.

L.R. 5th 126, 131(C.A. 2011) (“summary judgment should only be granted if the matter is one factually and legally beyond doubt”) & Prefontaine v.Veale, 2003 ABCA 367 , 339 A.R. 340, 344 (C.A. 2003) (“A defendant must show more than a strong likelihood that he willsucceed; the pleadings and evidence on the motion must show that the claim has no reasonable prospects of success”). [41] All of these standards are driven by the desire to achieve one overriding purpose – the court must be satisfied that thedetermination of the dispute without making available to a party all stages of the litigation spectrum is just. C.

Strategic Considerations [42] While the moving party bears the legal or persuasive burden to “present the facts which in combination with the applicablelaw, makes its position unassailable, ... [the nonmoving party] may be at risk of losing the

summary judgment application if it fails topresent a version of the facts which is inconsistent with that relied on by the moving party”. Beier v. Proper Cat Construction Ltd., 2013ABQB 351, ¶ ¶ 66 & 67. The case law demonstrates the adverse consequences which those who decline to put their best case forwardhave suffered. Beaver Hills Holdings Ltd. v. Greenstreet Development Corp., 2012 ABQB 525, ¶ 7; Espey v. Chapters Inc., (AB KB), 225 A.R. 68, 69 (Q.B. 1998); Shell Canada Products Ltd. v. Whissel Construction (Fort McMurray) Ltd., [1993] A.J.No. 1289, ¶ 8 (Master) & Handleman v. G & G Group, 2006 CarswellOnt. 8245 (C.A.). Advice Mr. Cavanagh gave in The Law andProcedure of

Summary Judgment on Specially Endorsed Writ Under Order XIV, at 112 (1887) is still sound: “[A defendant] can rarelyrely with absolute safety [on a preliminary technical objection] ...; he ought, even where he has the best of preliminary objections, tocome forward, if possible, with an affidavit of merits, and where he has no sound preliminary objection, such affidavit ... is essential ... ”. [43] A party cannot rely on allegations made in its pleadings.

It goes without saying that a nonmoving party whose best argumentis that more access to the litigation process might disclose something which confirms its pleadings is likely to lose. Canada v. Lameman,2008 SCC 14 , [2008] 1 S.C.R. 372, 382 (“a

summary judgment motion cannot be defeated by vague references to what mightbe adduced in the future if the matter is allowed to proceed”); Poliquin v. Devon Canada Corp., 2009 ABCA 216 , 454 A.R. 61,80 (C.A. 2009) (“courts should not deny

summary judgment on the off-chance that a party might, were there to be a trial, presentevidence refuting what are indisputable facts at the

summary judgment hearing”) & Engel v. Aetna Life Insurance Co., 139 F. 2d 469,473 (2d Cir. 1943) (summary judgment confirmed because “we have from the plaintiff not even a denial of the basic facts, but only ineffect an assertion that at trial she may produce further evidence, which she is now holding back”). D. The Criteria for a Promissory Note Are Recorded in Section 176(1) of the Bills of Exchange Act [44] A promissory note is a contract with specific features. Glesby v.

Mitchell, (SCC), [1932] S.C.R. 260, 263(1931) (“A promissory note, like any other promise, cannot be enforced, as between the parties, unless there is consideration for thepromise”); Riley v. Murray, (AB CA), [1923] 3 D.L.R. 923, 924 (Alta. Sup. Ct. App. Div.) (“absence of considerationis a good defence as between the immediate parties to the note”) & Peden v. Gear, (ON SC), 64 D.L.R. 439, 440 (Ont.Sup.

Ct. 1921) (“There cannot possibly be any claim by way of action on a promissory note by the original payee to whom thepromissory note was given, if she never gave any consideration for it”). [45] Section 176(1) of the Bills of Exchange Act records the criteria which are the bench marks of a promissory note: 176.

(1) A promissory note is an unconditional promise in writing made by one person to another person, signed by the maker,engaging to pay, on demand or at a fixed or determinable future time, a sum certain in money to, or to the order of, a specified person orto bearer. See generally B. Crawford, The Law of Banking and Payment in Canada, ch. 35 (looseleaf ed. release no. 6 October 2012). [46] To qualify as a promissory note an instrument must contain an unconditional promise to pay.

An issue may arise as to whetherreference may properly be had to other parts of an agreement of which the instrument is an integral part to determine whether thepromise is unconditional. [47] In Range v. Corporation de Finance Belvedere, (CSC), [1969] S.C.R. 492 the plaintiff finance companyalleged that an instrument which was physically attached to a conditional sales agreement that obliged the purchaser of a fur coat to paymonthly installments towards the purchase price was a promissory note. The Supreme Court of Canada held that it was not.

Theconditional sales agreement granted the vendor the right to repossess the fur coat in the event the purchaser failed to make theinstallment payments. If the vendor selected this option, the purchaser was relieved of the obligation to make any additional payments.As Mr. Range never received delivery of the fur coat, he had no obligation under the conditional sales agreement. The Supreme Courtread the two documents together, as this was one transaction, and concluded that the instrument did not contain an unconditional promiseto pay. See Ziegel, Comment, 48 Can B.

Rev. 309, 317 (1970) (“The decision has accomplished the remarkable feat of simultaneously

antagonizing the business community and leaving the consumer as vulnerable as before”). Given that an instrument is not a promissorynote unless it features an unconditional promise to pay by the maker, this instrument could not be a promissory note and could not benegotiated. See also Resort Funding LLC v.

Fairmont Resort Properties Ltd., 2009 ABCA 337, ¶ 14 (reading the vacation property leaseagreements as a whole the appeal court concluded that there was no unconditional promise to pay). [48] Had the Supreme Court of Canada in Range concluded that the instrument was a promissory note, it would have been anegotiable instrument and the plaintiff, a holder in course, in the absence of specified conditions, could have enforced it. [49] This was the outcome in Bank of Montreal v. Abrahams, (ON CA), 68 O.R. 3d 34 (C.A. 2003). Investorspurchased residential condominium units from the developer.

A promissory note was part of the purchase price. Cash and a mortgagewere the other components of the consideration for the sale. The developer assigned the promissory notes to the Bank of Montreal andthe investors made the payments under the promissory notes to the bank until they learned that the developer had failed to transferregistered title in the condominium units to the investors.

The Ontario Court of Appeal concluded that the instruments the Bank ofMontreal relied on had to be regarded independently from other parts of the transaction because the investors agreed to pay theinstallments under the promissory note before the developer was obligated to transfer title to them. As a result, the defendants had to paythe Bank of Montreal, as a holder in due course. E.

A Payee of a Demand Promissory Note Need Not Demand Payment Before Commencing an Action To Enforce the Note [50] Although it strikes me as suspect from a logical perspective, the applicable Alberta case law clearly states that the payee of ademand promissory note need not demand payment before commencing an action against the maker of a note.

I would have thought thata formal demand constituted an essential element of a claim for the enforcement of a claim for payment of a demand promissory note,even though I accept that a payee of a demand promissory note may demand payment immediately following its delivery, and in thatsense the note is a “present debt”. Justice Chitty emphasized this point in Francis v. Bruce, 44 Ch. Div. 627, 631 (Ch. 1890). I find it oddthat a statement of claim, in effect, perfects a claim. [12] This is beside the point. Justice McGillvray’s opinion in Royal Bank v.Dwigans, (AB CA), [1933] 3 D.L.R. 178, 182, 183 & 187 (Alta.

Sup. Ct. App. Div. 1933) represents the current law inAlberta: [T]he first question which arises is whether or not the note was payable at the time the action was brought. In my opinion, it may betaken as settled that a promissory note payable on demand is payable immediately. ... ... If the proposition [that no demand is necessary before bringing an action upon a demand promissory note] ... be sound, then the note was“at maturity” before the action was brought.

As to demand for payment I think it may be said that there is no more emphatic way ofmaking a demand than by issue of a ... statement of claim demanding payment. ... ... Bearing in mind that the appellant is a maker and not an endorser I have come to the conclusion ... [that] the respondent bank had theright to bring action without presentment or demand ... . See also Canada Trustco Mortgage Co. v. 112293 Holdings Ltd., 1984 ABCA 102 , 72 A.R. 357, 357-58 (C.A. 1984) & Liskav. Bank of British Columbia, (AB KB), [1981] 4 W.W.R. 223 (Alta.

Q.B.). [51] There is another reason which supports the assertion that a payee of a demand promissory note has no obligation to demandpayment before suing. [52] Section 183(3) of the Bills of Exchange Act stipulates that “[w]hen no place of payment is specified in the body of the note,presentment for payment is not necessary in order to render the maker liable”. This means that if a promissory note, even a demandpromissory note, does not require the payee to present the note at an identified place for payment, the maker is still liable even if therehas been no presentment of the note for payment.

The Hayden, Clinton National Bank v. Dixon, (AB CA), 9 W.W.R.1269, 1274 (Alta. Sup. Ct. App. Div. 1916) (“Parliament intended to make presentation unnecessary against the maker”); Union Bank v.MacCullough, (AB KB), 7 D.L.R. 694, 695 (Alta. Sup. Ct. 1912) (“the holder of a note [designating the place ofpayment] may sue the maker without presenting it for payment”); Schonemier v. King, 50 B.C.R. 174, 178 (C.A. 1930) (“presentment ofthe note [before suit] ... is not necessary”); Anderson v. Hiested, (SK KB), 10 W.W.R. 636, 637 (Sask. Sup.

Ct. 1916)(“Want of presentment where payable is not a defence where maker is sued and the plaintiff will not be deprived of his costs unlessfunds were placed there to meet the notes”); Canadian Bank of Commerce v. Bellamy, (SK CA), 25 D.L.R. 133, 137(Sask. Sup. Ct. 1915) (“The latter part of sub-sec (2) of [section 183 of the Bills of Exchange Act] clearly contemplates the bringing of anaction before presentment”); Robertson v. North Western Register Co., (MB CA), 19 Man. R. 402, 410 (Man. C.A.1910) (Justice Cameron agreed that presentment before suit was unnecessary); Freeman v.

Canadian Guardian Life Insurance Co., (BC CA), 17 D.L.R. 296, 303 (H.C. 1908) (“the only effect upon the note of a debtor on non-presentment is upon thequestion of costs, and that a note of this kind, quoad the debtor, is a promise to pay generally”); Sparks v. Conmee, 45 O.L.R. 200, 205(H.C. 1919) (followed Freeman); Merchants’ Bank of Canada v.

Henderson, 28 O.R. 360, 365 (H.C.J, 1897) (“an action may be broughtagainst the maker, even without any presentation at the particular place at the risk of the plaintiff being obliged to pay the costs of suchaction in case the maker shall shew that he had the money at the particular place to answer the note when the note fell due andthereafter”) & Sinclair v. Deacon, 7 E.L.R. 222, 224 (P.E.I. Sup.

Ct. 1909) (s. 183(2) of the Bills of Exchange Act altered the commonlaw and relieved the payee or holder in due course of presenting the note for payment before commencing an action on the note). [53] It is interesting to note that even if the note requires the payee to make a demand for payment at a specified place, the failureto do so does not discharge the obligation of the note’s maker to pay. This is clearly set out in s. 183(2) of the Bills of Exchange Act:

(2) In the case described in subsection (1), the maker is not discharged by the omission to present the note for payment on the day that it matures, but if any suit or action is instituted thereon against him before presentation, the costs thereof are in the discretion of the court. F. The Plaintiffs Are Entitled to

Summary Judgment 1. The O’Hanlon and Waiward Instruments Are Promissory Notes [ 54 ] The O’Hanlon and Waiward instruments are clearly promissory notes under s. 176(1) of the Bills of Exchange Act . [13] These instruments, prepared and signed by the defendants, contain unconditional promises for consideration to pay to the plaintiff on demand a sum certain. Viewed as stand-alone instruments, this characterization is incontrovertible. See A. Guest, Chalmers and Guest on Bills of Exchange, Cheques and Promissory Notes 688 (16 th ed. 2005) & N. Elliott & J. Odgers, Byles on Bills of Exchange and Cheques 360-61 (27 th ed. 2002). 2.

Summary Judgment Is Appropriate Because the Defendants Have No Defence to the Plaintiffs’ Claims [ 55 ] There is no evidence whatsoever that there was a collateral agreement that the “Plaintiff was not entitled to negotiate the same or to demand payment of the same until its recourse against the fund held by the City of Edmonton had been exhausted”.

Despite defendants’ counsel’s best efforts to extract an admission from the presidents of Waiward and O’Hanlon that there was such a condition, neither accommodated him. [ 56 ] As the defendants chose not to file affidavits asserting that the plaintiffs agreed not to present the Waiward and O’Hanlon instruments for payment until they had exhausted recourse against the fund held by the City of Edmonton, the O’Hanlon and Waiward instruments must be construed on an objective basis by reference only to their terms.

The defendants’ obligations to the plaintiffs are indisputable. [ 57 ] The plaintiffs have discharged the legal and persuasive burden which rests on them. Through the affidavits of each of Messrs. Oborowsky and Fath the plaintiffs have established the essential elements of their claims. They proved that the defendants are the makers of the O’Hanlon and Waiward instruments and that they have not paid the sums due under them. The plaintiffs did not have to demand payment before commencing these actions. The defendants are jointly and severally liable. Bills of Exchange Act , s. 179(1) .

The applicable law states that the payee of a dishonoured promissory note may sue for payment of the notes and interest. Bills of Exchange Act , s. 133 (b). The defendants have led no evidence to support and the questioning of Messrs. Oborowsky and Fath produced no admissions which supported the position the defendants took in their defences. I disagree with the defendants’ argument that their cross- examinations of the deponents were as helpful as they claim. Under the circumstances, the defendants needed to file their own material to substantiate the claims made in their pleadings. Pleadings are not evidence.

Beaver Hills Holdings Ltd. v. Greenstreet Development Corp. , 2012 ABQB 525 , ¶ 13 (“the Defendants cannot simply point to their pleadings”). 3. Interest Is Calculated in Accordance with the Interest Act [ 58 ] The plaintiffs claim that they are entitled to interest under the Interest Act [14] . [ 59 ] The jurisprudence [15] provides different opinions as to whether provisions governing pre-judgment interest in the Judgment Interest Act or the Interest Act apply to promissory notes. [ 60 ] I am satisfied that statutory

interpretation and constitutional principles support the conclusion that s. 3 of the Interest Act determine the interest rate. [ 61 ] Both enactments by their terms apply to this fact pattern. [ 62 ]

Section 133 (

b) of the Bills of Exchange Act stipulates that a maker of a promissory note who dishonours a note must pay “interest thereon from the time of presentment for payment, if the ... [note] is payable on demand”.

Section 3 of the Interest Act declares that “[w]henever any interest is payable ... by law, and no rate is fixed by ... law, the rate of interest shall be five percent per annum”. “Law”, in this case, means s. 133(

b) of the Bills of Exchange Act . As the O’Hanlon and Waiward instruments do not oblige their maker to pay interest, they are subject to s. 3 of the Interest Act . [ 63 ] The Judgment Interest Act also speaks to this fact pattern. Section 2(1) of the Act states that “[w]here a person obtains a judgment for the payment of money ... the court shall award interest in accordance with this Part from the date that the cause of action arose to the date of judgment”.

The defendants have obtained a judgment for the payment of money. [ 64 ] What are the applicable constitutional principles? [ 65 ] The operative provisions of the Bills of Exchange Act and the Interest Act are laws in relation to “Bills of Exchange and Promissory Notes” and “Interest”, classes of laws listed in s. 91 of the Constitution Act , 1867 , the provision listing the powers of Parliament.

While the Judgment Interest Act may be classified as a law in relation to “Property and Civil Rights in the Province” and the “Administration of Justice in the Province”, classes of laws listed in s. 92 of the Constitution Act , 1867, the provision cataloguing the powers of provincial legislatures, it is not operative because the federal and provincial laws make inconsistent demands upon the same person and the federal paramountcy doctrine is in play.

The federal law obliges the defendants to pay more interest to the plaintiffs than the provincial law. [ 66 ] Professor Lederman, in Continuing Canadian Constitutional Dilemmas 255 (1982) explains how conflicts of this nature are resolved: This situation envisaged here is the actual conflict between the comparable terms of the provincial statute and the federal one. One finds

that the same citizens are being told to do inconsistent things. For example, a provincial statute says that a certain creditor is a securedcreditor, but the federal Bankruptcy Act says he is an unsecured creditor. There can only be one scheme for priority among creditors inthe event of bankruptcy of the debtor, hence the federal statute prevails and the provincial one is inoperative for repugnancy. See also Canadian Western Bank v. Alberta, 2007 SCC 22 , [2007] 2 S.C.R. 3, 52-93; Law Society of British Columbia v.Mangat, 2001 SCC 67 , [2001] 3 S.C.R. 113, 133 & Multiple Access Ltd. v.

McCutcheon, (SCC), [1982] 2S.C.R. 161, 191. [67] The doctrine of federal paramountcy applies here even though it is possible for a person subject to both laws to comply withthem. By paying the higher interest rate under the federal Interest Act the defendants would also discharge their obligation to pay thelower interest rate under the Judgment Interest Act. See Law Society of British Columbia v. Mangat, 2001 SCC 67 , [2001] 3S.C.R. 113, 133.

But a declaration that both enactments were applicable would frustrate Parliament’s determination that the interest rateon a demand promissory note which fixes no interest rate be five percent. See generally 1 P.Hogg, Constitutional Law of Canada 16-7 (looseleaf ed. 5th ed. suppl. 2012 – release 1). [68] Given that the Interest Act applies, the defendants must pay interest at the rate of five percent from December 21, 2011, thedate the plaintiffs filed their actions and demanded payment, until the date of this judgment. VIII.

Conclusion [69] O’Hanlon, in action no. 1103 19995, is granted judgment against the defendants jointly and severally for $1,148,305.23 andinterest on that amount under the Interest Act from December 21, 2011 to the date of this judgment. [70] Waiward, in action no. 1103 11997, is granted judgment against the defendants jointly and severally for $1,392,853.18 andinterest on that amount under the Interest Act from December 21, 2011 to the date of this judgment. [71] The plaintiffs are entitled to one set of costs under

Schedule C, Division 2, column 4 of the Alberta Rules of Court, excludingthe cost of the commencement documents, which contained the demand for payment of the O’Hanlon and Waiward instruments. Heard on July 16, 2013. Dated at the City of Edmonton, Alberta on July 29, 2013. Thomas W. Wakeling Justice of the Court of Queen’s Bench of Alberta Appearances: A.D. (Tom) Schmit Chomicki Baril Mah LLP for the Plaintiffs

James Culkin for the Defendants [4] Questioning of Donald Oborowsky on November 20, 2012, p. 18: 8-27. See also 36: 11- 16. [7] Questioning of Thomas Fath on October 22, 2012, p. 22: 18.