Taylor v. Sarhan, 2013 ABQB 588

Court of Queen ’ s Bench of Alberta Citation: Taylor v. Sarhan, 2013 ABQB 588 Date: 20131004 Docket: 1301 00392 Registry: Calgary Between: Karen Taylor Plaintiff - and - Jihad Sarhan Defendant - and - Melvin Dias Third Party _ ________________________________________ ______________ Reasons for Judgment of Andrew R. Robertson, Q.C. , Master in Chambers _________________________________________ ______________

The Application [ 1 ] Karen Taylor and her husband, Melvin Dias, sold some residential property to Jihan Sarhan. Some of the purchase price, $75,000, was to be paid later but it was not. Ms. Taylor and Mr. Dias are estranged and not cooperating with each other in trying to collect the money. [ 2 ] Cross applications have been brought. Ms. Taylor, suing alone, asks for

summary judgment for the entire debt and Mr. Sarhan asks for

summary dismissal of the action because he says the claim is statute-barred [ 3 ] I have concluded that the claim is not statute-barred, and judgment should be granted summarily for part of it – but the claim is complicated by Mr. Dias’ failure to be involved as plaintiff. His absence as plaintiff is addressed in these reasons. The Parties and the Background [ 4 ] Ms. Taylor’s estranged husband, who was also an owner and vendor, is not a plaintiff. However, he has been added as a third party by the defendant.

The defendant seeks an indemnity for amounts he says should be credited against the $75,000, if he is required to pay it at all. The estranged husband, Mr. Dias, is unrepresented and did not appear on the application. [ 5 ] The failure of Ms. Taylor and Mr. Dias to cooperate in advancing this claim raises the question of what the Court’s role is to make sure that justice might be done on the merits.

To what extent is the Court to find its own creative solutions, within its jursidiction, in light of the intent expressed in the Foundational Rules of the Alberta Rules of Court ? [ 6 ] It is not just the pleadings that are problematic. The paperwork recording both the debt and the set-off amounts claimed is lacking: (

a) the agreement sued upon, regarding the sale of land, provided that there was to be an “attached Financing Schedule”, but there was no

schedule attached; (

b) the parties never wrote down how and when the $75,000 should be paid; (

c) set-off amounts claimed by Mr. Sarhan were not recorded in writing; and (

d) the demand for payment was not clearly made on behalf of both creditors. [ 7 ] The defendant purchaser Jihad Sarhan admits that he was to pay the $75,000, although he says the claim is now statute- barred. If he must pay, he claims a set-off, but did not plead the set-off by counterclaim.

As mentioned, he raised the set-off in his statement of defence and issued a third party claim against the estranged husband. [ 8 ] The former Alberta Rules of Court required that a set-off in an action be pled by way of counterclaim (former Rule 93(2)), but the Rules which came into force in 2010 allow the set-off to be asserted in the defence (Rule 3.59), so there is no pleading error here in not delivering a counter-claim. [ 9 ] In the statement of defence to the third party claim filed by the unrepresented husband, he asserts that he is a plaintiff and that he is entitled to the benefit of the claim.

What the estranged husband says in his third party statement of defence is this: The third party defendant [sic], Melvin Dias (“Dias”), is a proper plaintiff in the within action, and states that the Statement of Claim herein was filed without his authorization or approval. All claims made in the Statement of Claim by the plaintiff, Karen Taylor (the “Plaintiff”), are properly made in the names of Melvin Dias and the plaintiff jointly, and Dias is equally entitled to any judgment or other remedy to which the Plaintiff is found to be entitled by this Honourable Court.

The Little Red Hen [ 10 ] The result is that while he has not been named as a plaintiff in the statement of claim, and is not incurring the costs of the lawsuit, he nonetheless asserts that he is a plaintiff (not that he should have been a plaintiff but that he is a plaintiff), and he claims a beneficial interest in the outcome.

It appears that he is not interested in paying any part of his estranged wife’s legal fees, but he wants to share in the reward. [ 11 ] The Court is reminded of the children’s story of the little red hen, who did all the work to plant the grain, grind it, make the flour, mix the ingredients, and bake a cake without assistance from the other farm animals even when they were asked, but who were then happy to join her when it came time to eat the cake. However, as discussed below, the difficulty here is that Mr. Dias’ non- participation as a plaintiff may jeopardize the claim entirely.

The efforts of the little red hen may not result in a cake for anyone to enjoy. [ 12 ] To be fair, Mr. Dias has not done nothing at all. Ms. Taylor’s affidavit shows that on his own behalf and as agent for Ms. Taylor, he signed and registered a caveat claiming an unpaid vendor’s lien. It was dated March 20, 2010 and the affidavit in support was apparently sworn by him April 21, 2010. It was registered at the Land Titles office April 22, 2010. The caveat did not state the amount that was then claimed to be owing.

The Demand for Payment [ 13 ] Almost two years ago (November 7, 2011) the plaintiff made a demand for payment of the $75,000. The demand was written only by her, although it is worded in the first person plural: “We require payment of this loan immediately.” The defendant says he never received the demand and that is why he did not respond to it. Eventually, Ms. Taylor sued, on her own.

The Plaintiff’s Position [ 14 ] The plaintiff says that she is entitled to judgment for $75,000, and if money is paid her lawyer properly acknowledges that there will have to be an accounting as between Ms. Taylor and Mr. Dias and that the proceeds should either be paid into court or to his trust account pending either an agreement between them or court order. Her lawyer recognizes that there is an obvious anomaly here - both Taylor and Dias should have been plaintiffs - but he says that Mr.

Dias is simply “putting his head in the sand”, a common expression incorrectly describing the behaviour of the ostrich, meaning that he is simply not dealing with it. Ms. Taylor recognizes that she has to deal with it, or eventually the claim will be statute-barred. The Defence Position [ 15 ] The defendant purchaser Mr. Sarhan says that the claim is already statute-barred. He says that the last time he and the plaintiff interacted was March 1, 2010 when Ms.

Taylor’s right to occupy the premises ended. [ 16 ] In the alternative, he claims set-off both for the rental value he says he is entitled to and for the value of a vehicle he transferred to Mr. Dias in part payment of the debt. The Rental Set-Off [ 17 ] The transaction closed in late 2009, and he says that he allowed Ms. Taylor to live in the premises until March 1, 2010. He says in his affidavit that he did not agree that she could stay there for free, but he does not depose that he made an agreement with her. He says that he “had understood and agreed with Mr.

Dias that the amount of rent would be applied towards the vendor financing.” In her affidavit, Ms. Taylor denies there was any such agreement. [ 18 ] Although Mr. Sarhan says that the proper rental price, or at least the fair value, was $3,500 per month, he does not depose that any amount was actually agreed to, and the only agreement he had at all was with Mr. Dias, not Ms. Taylor. He offers no basis for his assertion that $3,500 is the fair value. It was Ms. Taylor who was to occupy the premises for a few months after closing. None of this arrangement about a tenancy, or payment for it, was recorded in writing.

Mr. Sarhan’s claim of an entitlement to rent is based only on an oral discussion he says that he had with Mr. Dias. The Transferred Vehicle [ 19 ] The defendant Mr. Sarhan also states that he transferred a Cadillac Escalade to Mr. Dias in December 2009 for a credit on the loan of $12,500. But Ms. Taylor says she knows nothing of that. In his statement of defence to the third party claim Mr. Dias admits that the transaction occurred, although he is not sure of the date it happened. The Issues [ 20 ] The issues are these: 1.

Is the claim for the debt statute-barred under the Limitations Act as a result of the passage of time? 2. If the claim is not statute-barred, should the Court craft a remedy to avoid injustice resulting from Mr. Dias’ “plaintiff” claim appearing in a defence to the third party claim? 3. If so, what is that remedy? 4. Is the claim clear, such that there is no genuine issue of material fact requiring a trial, or (as the courts have alternatively stated the test for

summary judgment) is the claim plain and obvious in whole or in part, such that

summary should be granted, and if so for what amount? The Limitation Defence [ 21 ] Mr. Sarhan’s position is that the entire claim is statute-barred because the limitation period expires two years from March 1, 2010, the last time the parties had any interaction at all. The Statement of Claim was not issued until January 10, 2013.

His assertion is that the limitation period started in March of 2010 at the latest, and it did not start from the date the demand for payment was made, November 7, 2011. [ 22 ] This aspect of the case is perhaps the easiest to answer: until there was a demand and no response, or a response indicating the defendant was not going to pay, the limitation period did not start to run. Subsection 3(1) of the Limitations Act says that he limitation starts to run on the date on which the claimant first knew, or in the circumstances ought to have known, (

i) that the injury for which the claimant seeks a remedial order had occurred, (ii) that the injury was attributable to the conduct of the defendant, and (iii) that the injury, assuming liability on the part of the defendant, warrants bringing a proceeding. [ 23 ] The documents are seriously lacking, but the Residential Real Estate Purchase Contract form agreement that was used was clear that there was to be a payment of $75,000 made by and it would not be paid on closing. There was a reference to a Financing Schedule, never completed, and there was a further reference to late payments in

section 4.6 of the agreement, where it said this: If the Seller agrees in writing to accept the late payment of the Purchase Price, then the Buyer will pay interest to the Seller

calculated daily from and including the Completion Date to (but excluding) the day the Seller is paid in full. Payment received after noon on any day will be be payment as of the next Business Day. Interest means the prime lending rate of the Province of Alberta Treasury Branches at the Completion Day plus 3%. [ 24 ] In my view the references to the “Seller Financing” and the “Payment Schedule”, without any details of the schedule, constitute an agreement in writing to accept late payment, and the failure to agree upon a

schedule means that the debt was due on demand. It clearly was not due as of the date of closing – it was expected to be paid later. The parties never agreed upon how or when. [ 25 ] Furthermore, the defendant says he transferred the vehicle to Mr. Dias in partial payment. As of the date he did that, he was implicitly recognizing that the debt was owing and that more would be paid at a later date. As of that time in December 2009, no one knew that he did not plan on paying it. Using the words of the Limitations Act, there was no injury at that time.

Accordingly, there was no reason to sue then. [ 26 ] The issue of the limitation period was, in my view, clearly dealt with by Macleod, J. in Gottlieb v. Tymkow , 2012 ABQB 262 at paragraph 11 , where he said this: Whether or not the Defendant made payments on the loans is, in the circumstances, irrelevant. An injury under s. 3(1)(a) [of the Limitations Act ] occurs in respect of a demand promissory note when a demand is made and not met. [ 27 ] Counsel for Mr. Sarhan says that a demand promissory note is different from the claim here.

I agree that it may be distinguished from a promissory note, because a promissory note is an instrument made under the Bills of Exchange Act and accordingly it has certain legal attributes pursuant to the Bills of Exchange Act that a promise to pay in a sale agreement does not have. But that distinction does not matter. There was no reason to sue until there was a breach. There was no breach until a demand was made and there was no payment. [ 28 ] In the unusual circumstances of this case, it is arguable that no proper demand was made in November 2011 because it was only made by Ms.

Taylor, even though her letter was written in the first person plural. However, Mr. Dias had filed the caveat on his own behalf and on behalf of Ms. Taylor, and he joined in the exercise, after the fact, in his statement of defence to the third party claim. He has stated his support for the assertion of the debt claim twice – first in the caveat and again in his pleading. [ 29 ] Regardless, at this point I need not decide whether the demand was proper because it was only made by one of the creditors.

If it were not, the Statement of Claim combined with the statement of defence to the third party notice would appear, in a kind of gerry- rigged manner, to satisfy the concern about a demand. That is, whether the demand is to be read as if written only on her behalf, either: (

a) she has made her demand by letter, and he has made his demand in his pleading; or (

b) there was no proper demand by letter– and therefore no commencement of the limitation period - until the statement of claim was issued. The failure to make a formal demand before commencing the court proceedings is not a valid defence: Alberta Opportunity Company v. Moulton , 1990 CarswellAlta 203 (C.A. 1990) at para. 56 . And nothing here expressly required a formal demand. [ 30 ] Accordingly, the application for

summary dismissal on the basis that the claim is statute-barred is dismissed, subject to the next part of the analysis, because there is an issue as to whether any claim has been sufficiently advanced. The Unusual Pleadings and Analysis: Should the Court Craft a Remedy? [ 31 ] Perhaps no claim has properly been made at all. The debt is owed to both Ms. Taylor and Mr. Dias, but only Ms. Taylor has issued a Statement of Claim. However, Mr. Dias says that he is a plaintiff, too, even though he says that in his defence to the third party claim. [ 32 ] Ms. Taylor and Mr.

Dias should have been able to agree on advancing the claim together, or Mr. Dias should have assigned his interest in the claim to Ms. Taylor, regardless of whatever matrimonial dispute there may be, to avoid losing the claim in its entirety. [ 33 ] Leaving these concerns unaddressed is not satisfactory. Mr. Dias is unrepresented. He has not pled his case properly. The Court should not sit idly by and allow the defendant to possibly avoid an obligation to pay a debt to either Ms. Taylor or Mr.

Dias by taking advantage of confused pleadings, when the parties are all part of the same lawsuit, and everyone understands what the claim is. [ 34 ] Furthermore, Mr. Sarhan has not asserted that he should be entitled to avoid the claim on this basis, at least not yet. In fact, he wants to set off against Ms. Taylor’s claim a “payment” that he made to Mr. Dias and rent owing pursuant to an agreement that he asserts he made with Mr. Dias.

It might be said that on this point it is central to his position that the claim be brought on behalf of both of them, in order for him to obtain the set-offs resulting from dealing with Mr. Dias in a claim that has been advanced only by Ms. Taylor. [ 35 ] As well, as I pointed out during oral argument, if judgment were granted in favour of Ms. Taylor, Mr. Dias might sue Mr.

Sarhan again later, for the same debt, arguing that although he is a party to this claim he was not plaintiff, did not get judgment, and should be entitled to start the claim again - and that is certainly not in the interest of the defendant, regardless of how specious that claim might be. [ 36 ] The parties are all before the Court, one way or another. Both Ms. Taylor and Mr. Dias think they are plaintiffs. Both want the debt enforced and they have said that in their pleadings. Justice demands that the Court be the master of the Rules, not the other way around.

The unusual facts and claims demand an unusual remedy, provided that it is within the Court’s jurisdiction to grant that remedy, even though it has not been sought. [ 37 ] Foundational Rule 1.2, which requires, inter alia , that the Rules be used to facilitate the quickest means of resolving the claim at the least expense. I had asked counsel for the parties before me if it were open to me simply to direct, on my own motion, that Mr. Dias be added as a plaintiff. This was not addressed in the briefs, and my suggestion was novel. Not surprisingly, counsel did not have a

ready answer. In fact, after reviewing the Alberta Rules of Court it is clear that I cannot simply add Mr. Dias as co-plaintiff. Rule 3.74(2)(

b) requires that Mr. Dias give his consent to be added. I am told that he was given notice of the application to dismiss by email, at an email address that Mr. Sarhan’s legal counsel had used successfully in the past to reach him, but he did not attend on the application. He has not given his consent to be added as a plaintiff in the statement of claim, nor has he been asked to do so. [ 38 ] Rule 3.73 says this:

(1) No claim or action fails solely because (a) ..., (b) 2 or more parties do not join an action that they could or should have joined, or (

c) a party was incorrectly named as a party or was incorrectly omitted from being named as a party.

(2) If subrule (1) applies, a judgment entered in respect of the action is without prejudice to the rights of persons who were not parties to the action. [ 39 ] But here Mr. Dias is a party just not a plaintiff. But in his defence to the third party claim, Mr. Dias says he is a plaintiff, and he claims to be entitled to the benefit of the claim. Therefore, his claim to the money is set out in the pleadings - his assertions are just in the wrong pleading.

By not being a co-plaintiff in the statement of claim, he has not arguably exposed himself, at least not as plaintiff, to costs if the claim is to be dismissed either in its entirety or partially. [ 40 ] Ms. Taylor does not dispute that he is entitled to join in the benefit of the claim, although her legal counsel proposes that the entire amount should be paid into court or his trust account until their repective entitlements are sorted out either by agreement or court order. The Remedy [ 41 ] In the circumstances, taking into account (

a) the Foundational Rule, (

b) Rule 1.3(2), which gives the Court the authority to grant a remedy whether or not it is claimed or sought, bearing in mind Mr. Dias’ awkward attempt to assert a claim in the wrong form, and (

c) the authority given to the Court in sections 10 and 11 of the Judicature Act , RSA 2000 Chap. J-2, I make the declaration that Ms. Taylor’s claim is brought on behalf of herself and on behalf of Mr. Dias. She alone is the plaintiff, but she is doing it partially in trust for him. Although she proceeded on her own initially, they are in agreement on that point, whatever their matrimonial issues otherwise may be. [ 42 ] However, to avoid mischief or further controversy, there are conditions that I attach to Mr. Dias having rights to the benefit of the claim: 1. Ms.

Taylor is entitled to prosecute the claim as she sees fit, and to settle the claim if she thinks that it is appropriate to do so on terms that she finds acceptable, provided that she must first request Mr. Dias’ input to be given within a reasonable time of the request being made, but she need not agree to any input he offers. She alone is entitled to instruct legal counsel in the prosecution and settlement of the matter, unless Mr. Dias (

i) subsequently agrees with her to be added as a plaintiff, (ii) they reach an agreement on how legal counsel is to be instructed and paid, and an application is made to add him as plaintiff; or, alternatively failing such agreement he requests to be added as a plaintiff on terms to be set by the Court. 2. Unless such an agreement is reached, or he is added as a plaintiff on terms set by the court, the legal fees, disbursements and other charges incurred in the prosecution of the claim shall be borne by Ms. Taylor, provided that in the event of a resolution in favour of her and Mr.

Dias, she is entitled to claim all of such expenses against any amount recovered as a priority to any split of the proceeds with Mr. Dias. 3. Mr. Dias shall cooperate in the prosecution of the claim, by following the requirements of production and questioning set out in the Alberta Rules of Court , in particular by providing his affidavit of records in a timely fashion, producing documents, making himself available for questioning upon reasonable advance notice, and providing information relevant and material to the claim to counsel for Ms. Taylor when reasonably requested to do so. 4. If Mr.

Dias does not cooperate as above, then Ms. Taylor shall be at liberty to apply for an order disentitling him in whole or in part from participation in the proceeds of this claim, as well as an order for costs against him as may be appropriate. 5. Mr. Dias shall have two weeks from the date of service of the order upon him (to be effected both by email, if Ms.

Taylor or her counsel have a current email address for him, and by delivery to the address for service shown in the statement of defence to third party notice) to apply for a variation of these provisions. [ 43 ] That addresses the privity of contract/proper parties/possible multiple claims issues, but does not address the merits of the claim and defences put forward. Should

Summary Judgment be Granted in Whole or in Part? [ 44 ] Mr. Sarhan claims a set-off for each of the things he asserts happened – the rent entitlement and the transfer of the vehicle.

The Rental Set-Off [45] There is no evidence of any clear agreement for the payment of rent. At most, his evidence is that he had an agreement withMr. Dias for an unstated amount to be deducted from the $75,000 outstanding on the sale. Nothing was in writing. No amount wasagreed upon. In the result he wants a set-off for a vague, unwritten, agreement he says he made with someone who was not going to bethe tenant. That was not part of the written sale agreement. At best, it was a kind of side deal he says he made with Mr.

Dias, which Mr.Dias expressly denies in his defence to the third party claim. [46] However, aside from the Statute of Frauds and unwritten agreements relating to land, his alleged agreement was not onlyvague, it was not with the person who mattered – Ms. Taylor. Mr. Sarhan claims that pursuant to this unwritten agreement, he would bethe landlord, she would be the tenant. Ms. Taylor is not Mr. Dias. It is common for married couples to negotiate through one of them asagent for both (and we see here the caveat being signed by Mr. Dias expressly on behalf of both himself and Ms.

Taylor) but here thealleged agreement was that she would be a tenant – and not Mr. Dias. There is little basis for an inference that she had authorized him tonegotiate as her agent, and she expressly denies the alleged agreement, such as it is, under oath. Perhaps there is a claim that she hasbeen unjustly enriched by virtue of being able to remain in possession after closing, but that is not what was pled. Mr. Sarhan simplyclaimed set-off not because there was an agreement to pay rent, but because there was an unwritten agreement with Mr. Dias, yet no rentamount was agreed to.

Nothing whatsoever is asserted as against Ms. Taylor on this point. [47] A defendant to a

summary judgment application is to put his “best foot forward” on a

summary judgment application: Trans-America Life Insurance Co. of Canada v. Canada Life Assurance Co., (ON SC), 28 O.R. (3d) 423 at p. 434. Theassertion here of a vague agreement for an unstated amount, made with the wrong person, barely suggests any genuine issue of materialfact to go to trial on this point. However, it is difficult to conclude from the evidence before me that such a claim is hopeless,particularly if the claim of set-off is amended to claim quantum meruit. [48] Accordingly,

summary judgment cannot be granted against Mr. Sarhan in respect of the amounts he claims should be set off. [49] Mr. Sarhan claims a rent set-off for $3,500 per month from September 18 to March 1, 2010, but the amount pled to bededucted is $15,155. The Vehicle Set-Off [50] That leaves the claim for the Escalade vehicle transfer and the assertion that it was done in part payment, in an agreed amountof $12,500. But Ms. Taylor does not agree that the transfer happened at all – that was a deal Mr. Sarhan says that he made with Mr.Dias. Mr. Sarhan asserts partial payment in his affidavit, and Mr.

Dias admits it in his pleading, but not the date it happened. Conclusion [51] As regards Ms. Taylor, there are material factual issues here for trial, including: (

a) whether she was aware of either the rental “agreement” or the vehicle transfer; (

b) whether either was binding upon her; (

c) whether an agreement with Mr. Dias should be allowed in set-off when Mr. Sarhan made no agreement with both of them, and hedid not transfer the vehicle to both creditors; when the vehicle transfer actually occurred (even Mr. Sarhan does not give a precise date,which may have an impact on the interest portion of the claim); (

d) whether the amounts set-off (if any) should be deducted from Mr. Dias’ entitlement to the claim, not Ms. Taylor’s, because thataffects the interest calculation as between them as well as between them and Mr. Sarhan; and (

e) the amount of interest claimed - there is no evidence before me as to the prime interest rate of Alberta Treasury Branches. [52] There is clearly a principal amount of debt owing of at least $47,345, being $75,000 less the rental set-off of $15,155 and thestated value of the vehicle of $12,500. In addition, there may be interest owing. The split, if any, between Ms. Taylor and Mr. Dias isnot before this court and it may be the subject of matrimonial proceedings. [53] In the result, pursuant to Rule 7.3(3)(c): 1.

The defence under the Limitations Act is summarily dismissed; 2. judgment is granted for $47,345 in favour of the plaintiff, but the Defendant is directed to pay the amount to DLHB Barristers andSolicitors in trust in order to satisfy the judgment, and any funds collected are to be held by DLHB Barristers and Solicitors in trustpending an agreement between Ms. Taylor and Mr.

Dias as to their distribution, failing which advice of the Court may be sought or, ifappropriate, it may be addressed in the context of other proceedings between them; the balance of the Plaintiff’s claim is referred to trial; 3. the claim by Ms. Taylor is declared to have been brought on behalf of herself and on behalf of Mr. Dias, subject to the conditionsset out above as to Mr. Dias’ entitlement to the benefits of the claim; 4. The balance of the claim is directed to proceed in the ordinary course. [54] The parties may speak to the Court as to costs within 60 days.

Heard on the 18 th day of September, 2013. Dated at the City of Calgary, Alberta this 04 th day of October, 2013. Andrew R Robertson, Q.C. M.C.C.Q.B.A. Appearances: Peter G. Nieswandt Nieswandt Law for the Defendant Jihad Sarhan Derek Nash Demiantschuk Lequier Burke & Hoffinger LLP for the Plaintiff Karen Taylor