Harvest Capital Management (Re), 2016 ABQB 364

Court of Queen’s Bench of Alberta Citation: Harvest Capital Management (Re), 2016 ABQB 364 Date: 20160705 Docket: 1201 06934 Registry: Calgary In the Matter of the Companies’ Creditors Arrangement Act , R.S.C. 1985, c.C-36, as amended And In the Matter of the Business Corporations Act , R.S.A 2000, c.B-9 And In the Matter of 1252064 Alberta Ltd., 1330075 Alberta Ltd. and Harvest Capital Management Inc.

Corrected judgment: A corrigendum was issued on December 20, 2016; the corrections have been made to the text and the corrigendum is appended to this judgment. _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice D.B. Nixon _______________________________________________________ I.

Introduction [ 1 ] This is an application for Advice and Direction regarding the enforceability of mortgages that underlie an investment which was participated in by 49 individuals (collectively, the “ Investors ”). [ 2 ] Calmar Lands Ltd. (“ CLL ”) issued mortgages secured by undivided interests in specified real property (the “ UDI Mortgages ”) to the Investors in exchange for cash.

CLL is now arguing that the Investors cannot enforce the UDI Mortgages because the limitation period has expired. [ 3 ] While only 47 of the 49 Investors are represented in these proceedings, this Court will address matters in respect of all of the Investors. The reason for considering all 49 Investors is because the Court is following a sequence of transactions, and it will be reviewing the flow of funds in the aggregate. II. The Issue [ 4 ] Are the UDI Mortgages enforceable or are they statute-barred pursuant to the Limitations Act , RSA 2000, c.L-12?

III. Facts A. The Economic Backdrop [ 5 ] There are a variety of parties involved in the transactions that underlie this dispute. The primary participants are Mr. Ronald Aitkens, the Investors, CLL, 1330075 Alberta Ltd. (“ 133Co ”) and Foundation Mortgage Corporation (“ FoundationCo ”). [ 6 ] The relevant transactions include:

a) the steps taken by CLL to raise capital from the Investors;

b) the acquisition of two lots located in Calmar, Alberta (collectively, the “ Calmar Lands ”) by CLL from Mr. and Ms. Hancar;

c) the subsequent transfer of the Calmar Lands by CLL to 133Co; and

d) the financing provided by FoundationCo to assist 133Co in the acquisition of the Calmar Lands. (The aggregate of these transactions will be referred to collectively as the “ Calmar Land Transactions ”.) [ 7 ] The directors of CLL are Mr. William J. Martenson and Ms. Jean L. Martenson. They own 53.68% and 46.32% of the voting shares of CLL, respectively. [ 8 ] CLL needed investment capital. Mr. Martenson knew that Mr. Ronald Aitkens had been successful at raising investment capital for real estate. As a result of that knowledge, CLL entered into an arrangement with Mr. Aitkens. [ 9 ] Mr.

Aitkens assisted CLL in raising the $1,548,400 that the Investors advanced in exchange for the UDI Mortgages. The assistance of Mr. Aitkens is evidenced by the fact that during the March 2005 to May 2005 period he signed ten “Agreement[s] to Purchase Mortgage & Ownership Units” (“ Investment Agreements ”) in a representative capacity. [ 10 ] The ten Investment Agreements that Mr. Aitkens signed with the Investors represented $450,000 of aggregate $1,548,400 mortgage funds raised by CLL. Mr. Aitkens was paid a commission by CLL for his services. [ 11 ] CLL ultimately entered into 49 Investment Agreements.

Those Investment Agreements were subsequently transitioned into the 49 UDI Mortgages which the Investors now hold. [ 12 ] On June 17, 2005, CLL purchased the Calmar Lands from Mr. Todd Hancar and Ms. Amanda Hancar for $1,550,000. CLL funded that purchase by paying cash of $992,481 and granting a mortgage to Mr. and Mrs. Hancar in the amount of $557,519 (the “ Hancar Mortgage ”). (The Calmar Lands are comprised of two parcels, which are sometimes referred to as “ Lot 1 ” and “ Lot 2 ”). [ 13 ] On July 6, 2005, Lot 2 was separated into 49 titles and the UDI Mortgages were registered on that date.

Each title constituted an undivided interest in the underlying real property. [ 14 ] The 49 UDI Mortgages can be broken out into three classes. The particulars of each of those classes are as follows: a. Class A UDI Mortgages: i. The Class A UDI Mortgages have an annual interest rate of 10%, with interest calculated and paid in quarterly installments. ii. There are 11 Class A UDI Mortgages outstanding. The underlying 11 Investors in these mortgages advanced $242,800 to CLL, with $217,800 being in respect of RRSP funds and $25,000 being in respect of non-RRSP funds. b. Class C UDI Mortgages: i.

The Class C UDI Mortgages have an annual interest rate of 12%, with 2% of the accrued interest being paid quarterly, and the remaining 10% accruing and compounding quarterly.

ii. There are 36 Class C UDI Mortgages outstanding. The underlying 36 Investors in these mortgages advanced $1,251,600 to CLL, with $1,201,600 being in respect of RRSP funds and $50,000 being in respect of non-RRSP funds. c. Class D UDI Mortgages: i. The Class D UDI Mortgages have an annual interest rate of 12%, with the full amount of interest accruing and compounding quarterly. ii. There are 2 Class D UDI Mortgages outstanding.

The underlying 2 Investors in these mortgages advanced $54,000 to CLL, with the entire $54,000 being in respect of non-RRSP funds. [ 15 ] Commencing in 2005, quarterly interest payments were made on the Class A UDI Mortgages and the Class C UDI Mortgages. [ 16 ] On September 3, 2008, CLL sold the Calmar Lands to 133Co for a purchase price of the $7,182,150. That purchase price was funded as follows. a. 133Co assumed the existing mortgages on the Calmar Lands, in the amount of $2,411,800.

This assumption included the UDI Mortgages, which had previously been registered on July 6, 2005. b. 133Co granted a vendor-take-back mortgage to CLL in the amount of $2,055,452 (the “ Vendor-Take-Back Mortgage ”). The Vendor-Take-Back Mortgage was registered over the Calmar Lands on September 22, 2008. c. 133Co made a cash payment in the amount of $2,714,898 to CLL. The funds for that cash payment were sourced from a loan that FoundationCo made to CLL. That loan was secured by a mortgage over the Calmar Lands.

The mortgage associated with that loan was registered on July 7, 2009 (the “ Foundation Mortgage ”). [ 17 ] The Hancar Mortgage has a first charge over the Lot 1 component of the Calmar Lands. Further particulars of the Hancar Mortgage are as follows. a. Interest was last paid on the Hancar Mortgage on May 31, 2011. b. Some principal repayments have been made on the Hancar Mortgage. As at approximately October 31, 2012, the amount due on that mortgage was $375,407. That balance was the aggregate of an outstanding principal amount of $332,162 and accrued interest of $43,245. c.

Pursuant to clause 1(b)(iii) of the Hancar Mortgage document, that mortgage matured, and became due and payable, on December 15, 2015. [ 18 ] The UDI Mortgages have a first charge over the Lot 2 component of the Calmar Lands. Further particulars of the UDI Mortgages are as follows. a. Interest was last paid on the Class A UDI Mortgages and the Class C UDI Mortgages on March 31, 2011. No interest has ever been paid on the Class D UDI Mortgages, which is consistent with the terms of the underlying argument. b. No principal repayments have been made on any class of the UDI Mortgages. c.

Pursuant to the terms of the Investment Agreements, and to clause 2(

a) of the UDI Mortgage documents, the UDI Mortgages matured, and became due and payable, on December 31, 2010. None of the UDI Mortgages were paid out at that time or thereafter. [ 19 ] The Vendor-Take-Back Mortgage has a second charge over the Calmar Lands. More specifically, that mortgage is registered against both Lot 1 and Lot 2. Further particulars of the Vendor-Take-Back Mortgage are as follows.

a. Interest was last paid on the Vendor-Take-Back Mortgage on May 31, 2011. b. Some principal payments have been made on the Vendor-Take-Back Mortgage. As at approximately October 31, 2012, the amount due on that mortgage was $1,588,328. That balance is the aggregate of an outstanding principal amount of $1,387,665, accrued interest of $180,663 and legal fees of $20,000. c. Pursuant to clause 2(

c) of the Vendor-Take-Back Mortgage document, that mortgage matured, and became due and payable, on December 21, 2008. [ 20 ] The Foundation Mortgage has a third charge over the Calmar Lands. More specifically, that mortgage is registered against both Lot 1 and Lot 2. Further particulars of the Foundation Mortgage are as follows. a. The amount of interest paid on the Foundation Mortgage is unknown. b. The amount of principal that has been repaid on the Foundation Mortgage is unknown. A

schedule that was provided in evidence indicated that Foundation Mortgage had advanced an aggregate of $2,737,402 to 133Co as at December 31, 2008. The accrued interest as at that same date was $136,050.43. As a result, the principal and accrued interest owed under the Foundation Mortgage as at December 31, 2008 was an aggregate of $2,873,452. In contrast, the amount that 133Co reports owing under the Foundation Mortgage as at May 31, 2011 is only $2,689,425.

This suggests that some component of the principal on the Foundation Mortgage was paid in priority to the UDI Mortgages, but the Court does not have sufficient information to make a finding on that matter. c. Pursuant to the Promissory Note, and clause 2 of the Foundation Mortgage, that mortgage matured on June 1, 2010. [ 21 ] The UDI Mortgages were administered by CLL until June 30, 2009. This was the case notwithstanding that the UDI Mortgages were assumed by 133Co on September 3, 2008. [ 22 ] The UDI Mortgages were administered by 133Co after June 30, 2009.

After that date, 133Co functioned as the mortgage administrator, the borrower and the mortgagor. [ 23 ] Mr. Aitkens issued three letters to the Investors in 2011. Each of those letters provided updates on the development of the Calmar Lands. Those three letters were dated January 6, 2011; June 27, 2011; and December 12, 2011, respectively (collectively, the “ Three Aitkens Letters ”). To the best of its knowledge, 133Co sent the Three Aitkens Letters to all of the Investors. [ 24 ] The January 6, 2011 letter from Mr.

Aitkens was framed as an update, and it informed the Investors that their UDI Mortgages would be paid, along with accrued interest, in the first half of 2011, and that during the interim period the interest would continue to be paid into the registered accounts. The January 6, 2011 letter was signed by Mr. Aitkens (the “ First Aitkens Letter ”). [ 25 ] The June 27, 2011 letter was framed as an update, and it informed the Investors that 133Co was considering either selling the Calmar Lands or continuing with development.

That letter also advised the Investors that quarterly interest payments had ceased, and that the delays in the project were being caused by the global economic crisis.

However, that letter went on to state that while “[t]he market has slowed down...once the project gets financed or gets sold your investment amount will be paid to you in full.” The June 27, 2011 letter was unsigned, but it had the name of “Ron Aitkens” printed in standard salutation format at the bottom of the letter (the “ Second Aitkens Letter ”). [ 26 ] The December 12, 2011 letter was framed as an update, and it informed the Investors that there was a large environmental issue associated with the Calmar Lands which had been caused by oil drilling and related issues.

That letter went on to state that 133Co would not have the ability to make interest payments until the situation was rectified. The December 12, 2011 letter was unsigned, but it had the name of “Ron Aitkens” printed in standard salutation format at the bottom of the letter (the “ Third Aitkens Letter ”). [ 27 ] Mr. Aitkens was aware that the Second Aitkens Letter and the Third Aitkens Letter had been sent to the Investors. Mr.

Aitkens could not explain why these two letters were not signed. [ 28 ] On June 7, 2012, 133Co, 1252064 Alberta Ltd, and Harvest Capital Management Inc. obtained an Order under the Companies’ Creditors Arrangement Act (the “ CCAA ”) protecting them from their creditors (the “ CCAA Order ”). Ernst & Young Inc. was appointed the monitor under the CCAA Order (the “ Monitor ”). To support this initial application under the CCAA, Mr. Aitkens swore and filed an affidavit on June 5, 2012 (the “ Aitkens June 2012 Affidavit ”).

The Aitkens June 2012 Affidavit included financial statements for 133Co for the period ended May 31, 2011. [ 29 ] The financial statements for 133Co, dated May 31, 2011, reported each of the UDI Mortgages, the Hancar Mortgage, the Vendor-Take-Back Mortgage and the Foundation Mortgage under the “Long-Term Liabilities”

section of balance sheet. [ 30 ] On or about June 13, 2012, the Monitor sent a copy of the CCAA Order to Canadian Western Trust Company (“ CWT ”) and posted a copy of that Order on its website. The Monitor did not send a copy of the CCAA Order to the Investors. [ 31 ] On July 5, 2012, FoundationCo and Foundation Mortgage “2” Corporation obtained protection from their creditors under the CCAA . Ernst & Young Inc. was again appointed Monitor.

[ 32 ] BTM Advisory Services Inc. and Gary Bentham were appointed chief restructuring officers (“ Foundation Group CRO ”) for FoundationCo and Foundation Mortgage “2” Corporation. [ 33 ] In December 2012, Mr. Aitkens provided the Foundation Group CRO with the files concerning the UDI Mortgages.

These files contained the Mortgage Agreements, UDI Mortgages, and the Interest Payment Schedule. [ 34 ] On December 11, 2013, a tolling agreement was entered into whereby the operation of any applicable limitation periods respecting the enforceability of the UDI Mortgages was suspended against the Investors (the “ Tolling Agreement ”). [ 35 ] As at the date of the Tolling Agreement, there is no evidence that 133Co, in its capacity as the mortgagor in respect of the UDI Mortgages, had given any of the Investors, in their capacity as mortgagees, notice in writing of its intent to repay any of the UDI Mortgages. [ 36 ] The Calmar Lands were appraised on November 6, 2012 at a value of $5,180,000. [ 37 ] The aggregate debt, accrued interest, and liens owing on the Calmar Lands as at July 31, 2013 was an aggregate of $9,741,351.

The combined principal and interest owed to each of the creditors as at that date was approximately as follows: a. UDI Mortgages – $3,305,000, which is composed of a principal balance of $1,548,400 and accrued interest of $1,756,600. b. Hancar Mortgage – $375,407, which is composed of a principal balance of $332,162 and accrued interest of $43,245. c. Vendor-Take-Back Mortgage – $1,588,328, which is composed of a principal balance of $1,387,665, accrued interest of $180,663 and legal fees of $20,000. d.

Foundation Mortgage – $4,453,930, which is composed of a principal balance of $2,737,402 (being the aggregate of $2,714,898 used to fund the purchase of the Calmar Land plus additional funds borrowed in the amount of $22,504) and accrued interest of $1,716,528. e. Wedler Engineering (Builders Lien) – $18,686 [ 38 ] The Calmar Lands were listed for sale in August 2013. The Receiver has entered into a conditional Purchase and Sale Agreement for the Calmar Lands. The Receiver will bring an application for approval of the sale when all of the conditions are satisfied. B.

CLL Position [ 39 ] CLL asserts that the limitation periods in respect of the UDI Mortgages expired as follows. a. On January 1, 2013 in respect of the Class D UDI Mortgages. That date is asserted by CLL on the premise that there was no activity which would have extended the commencement of the limitation period beyond the maturity date of December 31, 2010. b. On March 31, 2013 in respect of the Class A UDI Mortgages and Class C UDI Mortgages.

That date is asserted by CLL on the premise that the last interest payments were made on those mortgages on March 31, 2011. [ 40 ] By July 31, 2013, CLL had realized net cash proceeds of $3,938,604 from the Calmar Land Transactions. That net cash balance is the aggregate of the following three components. a. The $555,919 that CLL retained in 2005 when it raised funds to finance the acquisition. This is the net amount from the $1,548,400 raised from the UDI Mortgages less the amount of $992,480 that was paid to the Hancar’s when the Calmar Land was purchased. b.

The $2,714,898 that CLL received in 2008 when it sold the Calmar Land to 133Co. c. The $667,787 of principal that CLL has been paid on the Vendor-Take-Back Mortgage since that instrument was issued. This amount is the difference between the original sum of the Vendor-Take-Back Mortgage, which was $2,055,452, and the July 31, 2013 balance, which was $1,387,665. C. Investors’ Position

[ 41 ] While there was more than a two year span between: (

a) the maturity date stipulated in the UDI Mortgages (being December 31, 2010); and (

b) the date of the Tolling Agreement (being December 11, 2013), the Investors submit that they did not know, and, in the circumstances, had no cause to believe that a claim against 133Co had arisen. [ 42 ] In a communication as late as June 27, 2011, the Investors were told that while “[t]he market has slowed down...once the project gets financed or gets sold your investment amount will be paid to you in full.” That communication undoubtedly created an expectation, and a sense of financial comfort for the Investors. [ 43 ] It was not until the Third Aitkens Letter dated, December 12, 2011, that the Investors were alerted to an environmental issue that might be cause for concern.

In that December 12, 2011 letter, Mr. Aitkens informed the Investors that 133Co had entered into a standstill agreement with both the Hancars and CLL. No further particulars were given in respect of the details concerning the standstill agreement. D. A Security Review – Priority Levels [ 44 ] The priorities associated with Lot 2 of the Calmar Land Transactions initially had four levels. The first level was with the Investors, who held the UDI Mortgages. The Investors had first priority. The second level was with CLL, which held the Vendor-Take- Back Mortgage. CLL had second priority.

The third level was with FoundationCo, which held the Foundation Mortgage. FoundationCo had third priority. The fourth level was with the unsecured creditors, which included 133Co. That level had no security. The unsecured creditors simply took the residual amounts. [ 45 ] While the primary focus in this case is on the UDI Mortgages, the Court will review each of these four levels. Each of those priority levels has attributes that are relevant to this analysis, directly or indirectly. 1. First Priority – The UDI Mortgages [ 46 ] CLL put the UDI Mortgage investment package together. Mr.

Aitkens was involved in the arrangement. [ 47 ] Under the arrangement, Mr. Aitkens was to source investors for CLL. The transaction was structured so that investors would loan funds to CLL in exchange for security in the form of an undivided interest first charge mortgage against specified real property. Ultimately, the specified real property was Lot 2 of the Calmar Lands. [ 48 ] The Investors hold the UDI Mortgages. All of the Investors are individuals. As part of the investment process, the Investors participated in a number of steps. [ 49 ] First, the Investors signed an Investment Agreement.

In some cases, a particular Investment Agreement was executed by more than one Investor, such as a husband and wife. [ 50 ] Second, each of the Investors was subsequently granted a UDI Mortgage in exchange for cash. Each of the UDI Mortgages was registered against a separate title component of Lot 2. [ 51 ] The two relevant clauses of the UDI Mortgages are as follows: 2(

a) The whole of the principal sum including any interest thereon, together with all other monies secured by this mortgage, is to be fully paid and is due and payable on DECEMBER 31 st , 2010 [(the “ UDI Mortgages Repayment Clause ”)]. ... 13. If the principal sum or any part thereof, be not paid at maturity, the Mortgagor shall not be at liberty to pay the same, except after six (6) months’ notice in writing to the Mortgagee [(the “ UDI Mortgages Non-Payment Clause ”)]. [ 52 ] The mortgagor on each of the UDI Mortgages was initially CLL.

After the sale of the Calmar Lands by CLL to 133Co on September 3, 2008, 133Co assumed the position as the mortgagor of the UDI Mortgages. [ 53 ] CWT was named as the mortgagee on 42 of the UDI Mortgages. In each of those situations, CWT was the mortgagee in trust for the Investor associated with the underlying UDI Mortgage (“collectively, the CWT UDI Mortgagees ”).

Each of the 42 CWT UDI Mortgagees funded their investments in the UDI Mortgages from their registered retirement savings plans (“ RRSP ”). [ 54 ] On the other seven UDI Mortgages, the Investors were named as the mortgagees (collectively, the “ Independent UDI Mortgagees ”). Each of the seven Independent UDI Mortgagees funded their investments in the UDI Mortgages from non-RRSP sources. 2. Second Priority – Vendor-Take-Back Mortgage [ 55 ] The Vendor-Take-Back Mortgage was registered over both Lot 1 and Lot 2. That mortgage was ranked second in priority over the aggregate of the Calmar Lands.

In particular, it is ranked behind the Hancar Mortgage in respect of Lot 1 and behind the UDI Mortgages in respect of Lot 2. [ 56 ] The two relevant clauses of the Vendor-Take-Back Mortgage are virtually identical to the parallel clauses in the UDI

Mortgage document. Those clauses are as follows: 2(

c) The whole of the principal sum including any interest thereon, together with all other monies secured by this mortgage, is to be fully paid and is due and payable on the December, 21, 2008. ... 13. If the principal sum or any part thereof, be not paid at maturity, the Mortgagor shall not be at liberty to pay the same, except after six (6) months’ notice in writing to the Mortgagee. [ 57 ] The mortgagor of the Vendor-Take-Back Mortgage is 133Co. The mortgagee under that mortgage is CLL. 3. Third Priority – The Foundation Mortgage [ 58 ] The Foundation Mortgage was registered over both Lot 1 and Lot 2.

That mortgage was ranked third in priority in respect of both lots. In particular, it was behind the Hancar Mortgage and the Vendor-Take-Back Mortgage in respect of Lot 1; and behind the UDI Mortgages and the Vendor-Take-Back Mortgage in respect of Lot 2. [ 59 ] The two relevant clauses of the Foundation Mortgage are as follows. 2.

That the Mortgagor shall pay to the Mortgagee the above sum of ($2,727,402.18) Two million Seven hundred twenty seven thousand Four hundred two and 18/100 Dollars, in lawful money of Canada, at the times and places, in the manner, and with interest thereon at the rate provided in the Promissory Note or any extensions or renewals of or substitutions for the Promissory Note. 8.

That in the event of default in the payment of any part of the moneys secured by this Mortgage, or on breach of any covenant, understanding agreement or stipulation expressed or implied herein; or should there be any event of default or breach of covenant under the Promissory Note, or any extensions or renewals thereof were substitutions therefor: ... (

e) The whole of the moneys hereby secured shall, at the option of the Mortgagee, become due and payable. [ 60 ] The single relevant clause of the Promissory Note to the Foundation Mortgage is as follows. 1330075 ALBERTA LTD., the BORROWER, does hereby PROMISE TO PAY ON DEMAND, or, if demand has not earlier been made, on June 1, 2010, to the LENDER, FOUNDATION MORTGAGE CORP., of 4, 4002 – 9 Avenue North, Lethbridge, Alberta T1H 6T8, the sum of $2,727,402.18 together with interest at the rate of 12.00 per cent per annum calculated semi-annually not in advance from the date of advance of funds. [ 61 ] The mortgagor of the Foundation Mortgage is 133Co.

The mortgagee under that mortgage is FoundationCo. [ 62 ] Mr. Aitkens is the sole director of FoundationCo. He owns 40% of the voting shares in that corporation. 4. Fourth Level – Unsecured Creditors [ 63 ] One of the unsecured creditors is 133Co. For purposes of this analysis, this is the only unsecured creditor on which the Court will comment. [ 64 ] Mr. Aitkens is the sole director of 133Co. He owns 100% of the voting shares in that corporation. IV. Analysis [ 65 ] CLL has advanced seven points as to why the UDI Mortgages cannot be enforced.

The essence of those seven points can be distilled into two arguments. First, CLL argues that the UDI Mortgages are statute-barred. Second, CLL argues that the doctrine of promissory estoppel is not available to the UDI Mortgagees. [ 66 ] The issue of whether the UDI Mortgages are statute-barred requires careful consideration. The Court turns to an analysis of that question. In contrast, the Court will not address the promissory estoppel argument because of its conclusions on the statute-barred argument. A.

Were CLL and 133Co acting-in-concert in respect of the Investors? [ 67 ] Before the Court considers the law in this case, it is important to understand the background that underlies the relevant business entities, and how the Investors came to be participants in the UDI Mortgages. In particular, the context underlying the Calmar Land Transactions is significant.

[ 68 ] The transaction that CLL organized to raise the capital from the Investors was structured so that individuals could use either RRSP funds or unrestricted cash to invest in the real estate project. The use of the mortgage instrument undoubtedly gave the Investors the impression that the investment was secure. [ 69 ] The interest rate that CLL offered on all three UDI Mortgage classes promised potential investors high returns. The combination of a mortgage security and a high interest rate was attractive to the Investors. [ 70 ] Mr. Atkins was very involved in raising the capital that CLL required.

Indeed, he raised approximately 30% of the capital that the Investors advanced in respect of the UDI Mortgages. [ 71 ] Mr. Aitkens was paid a commission by CLL for the services that he rendered in raising the capital. The amount of that commission was not disclosed. While there is nothing inappropriate about a commission, the magnitude of the commission could raise questions. [ 72 ] The Calmar Land was sold by CLL to 133Co in September 2008. In that transaction, the UDI Mortgages were assumed by 133Co.

However, the UDI Mortgages continued to be administered by CLL for nine months after the September 2008 transfer. There is no evidence that 133Co paid CLL for that administration effort. If CLL did not charge 133Co for its administrative services, that would raise a question as to whether those two corporations were acting-in-concert or of a common mind. [ 73 ] The interest on the UDI Mortgages was paid by 133Co until March 31, 2011. The debtor corporation ceased the interest payments on the UDI Mortgages after that date.

In contrast, the interest continued to be paid by 133Co to CLL in respect of the Vendor- Take-Back Mortgage until May 31, 2011. [ 74 ] The payment of the interest by 133Co on the Vendor-Take-Back Mortgage until May 31, 2011 raises a question. The Court queries why 133Co would pay interest on the Vendor-Take-Back Mortgage, which is to the benefit of CLL, in preference to the amounts owed on the UDI Mortgages. [ 75 ] As at May 31, 2011, there is no doubt that the UDI Mortgages were enforceable, and in first priority in respect of Lot 2 of the Calmar Lands.

In contrast, the Vendor-Take-Back Mortgage was in second priority. Further, based on the evidence that is before this Court, the Vendor-Take-Back Mortgage had matured on December 21, 2008. The Court queries whether the Vendor-Take-Back Mortgage became statute-barred on or after December 21, 2010. [ 76 ] While that is an interesting question, the current status of the Vendor-Take-Back Mortgage is not known. It is not relevant to the question of whether the UDI Mortgages are enforceable.

That being the case, this Court will not further consider the status of the Vendor-Take-Back Mortgage. [ 77 ] The conduct in respect of the Three Aitkens Letters allegedly sent to the Investors also raises a question. The First Aitkens Letter was issued on January 6, 2011. It was signed by Mr. Aitkens. The Second Aitkens Letter and the Third Aitkens Letter were issued on June 27, 2011 and December 12, 2011, respectively. Neither of those latter two letters was signed. [ 78 ] Mr. Aitkens acknowledges the existence of the Second Aitkens Letter and the Third Aitkens Letter. However, Mr.

Aitkens could not explain why those letters had not been signed. To the best of the knowledge of 133 Co, those two letters were sent to the Investors. [ 79 ] CLL now asserts that the Second Aitkens Letter and the Third Aitkens Letter cannot be viewed as notice to the Investors for purposes of extending the limitation period because those letters lacked a signature.

CLL also asserts that none of the Three Aitkens Letters can be viewed as acknowledgements which would extend the limitation period because there is no evidence that each of the Investors actually received those letters. [ 80 ] On June 7, 2012, 133Co and other related corporations were granted protection under CCAA . In the CCAA Order, the Monitor was instructed by the Court to post certain materials on its website. However, as at the date of the CCAA Order, the Monitor was not in possession of the names and addresses of the individual CWT UDI Mortgagees.

That information was in the corresponding UDI Mortgage files, and those files were not provided by Mr. Aitkens until December, 2012, at which time those files were provided to the Foundation Group CRO. The Court takes this latter point from the Agreed Statement of Facts that were provided during this hearing. [ 81 ] The delayed delivery of those UDI Mortgagee files and information raises a question, particularly when CLL alleges that the Class D UDI Mortgages were statute-barred on January 1, 2013, and the remaining UDI mortgages were statute-barred three months later.

Further, supplying those files to the Foundation Group CRO is a substantive concern. While there is a degree of cross ownership by Mr. Aitkens in respect of FoundationCo and 133Co, FoundationCo and Foundation Mortgage “2” Corporation are legal entities that are separate and apart from 133Co and the CCAA Order that applies to it. The relevance of providing the UDI Mortgage files and related information to the Foundation Group CRO was never explained. Indeed, there is no evidence before this Court that the Foundation Group CRO had any obligation to inform the Investors.

At a minimum, the consequences of providing the UDI Mortgagee files to the Foundation Group CRO would have resulted in a further delay of the information being provided to the Investors. [ 82 ] The conduct associated with a number of these transactions give rise to the question as to whether the dealings between 133Co and CLL were at arm’s-length.

Over the years the courts have considered the issue of when a transaction between unrelated persons has features that are in the nature of a non-arm’s length transaction. [ 83 ] As a general rule, if unrelated parties are influenced in their bargaining by something other than their own self-interest, those persons would not be considered to be dealing at arm’s length. The criteria used by the courts to assess whether a transaction is at arm’s length include: a. whether a common mind is directing the bargaining for both parties to a transaction; or

b. whether the parties to a transaction are acting-in-concert, without separate interests. [84] A court may consider whether the terms of a transaction between parties reflect ordinary commercial dealings. However, itshould do so only to determine the soundness of the conclusions after applying one of the above two tests. [85] While there is not enough evidence to determine whether the above conduct involving 133Co (which is controlled by Mr.Aitkens) and CLL (which is controlled by Mr. Martenson) was conducted on a non-arm’s length basis, the resulting implications aredisquieting.

This is particularly the case in these circumstances because if the UDI Mortgages are not enforceable, the potentialbeneficiaries will be one or more of 133Co, CLL, FoundationCo and their respective shareholders. [86] The inequity is of particular concern in these circumstances because CLL has already realized net cash proceeds of$3,938,604 through the Calmar Land Transactions. That same corporation is now arguing that the Investors are statute-barred fromrecovering the principal of $1,548,400 which they had collectively invested plus the interest that has been accruing since June, 2005.

The inequity is further highlighted in this case because it was the Investors who fully financed CLL in the first instance so that it couldpurchase the Calmar Lands. B. Do the Terms of the UDI Mortgages Delay theCommencement of the Limitation Period? [87] CLL was the initial mortgagor to all of the Investors. The 49 UDI Mortgage documents signed by CLL are identical in allmaterial respects, including clauses 2(

a) and 13. 1. Clause 2(a) – Due and Payable [88] Clause 2(

a) of the mortgage documents stipulates that each of the UDI Mortgages was due and payable on December 31,2010. That type of “due and payable” clause is typical in mortgage documents. Such clauses are one of the reference points fordetermining when a limitation period commences. [89] A “due and payable” clause, such as 2(

a) of the UDI Mortgages, however, is just one factor in the determination of alimitation period. A limitation period may be extended by a number of other elements, including acknowledgements of the debt and partpayments thereon. [90] Further, other factors can extend a limitation period, such as the terms and conditions embedded in the mortgage document. The provision that is of particular interest to this Court is clause 13 of the UDI Mortgage documents. 2.

Clause 13 – Effect of Non Payment at Maturity [91] Clause 13 of the UDI Mortgages addresses the consequences when the principal is not paid at the maturity date. Thisprovision in the UDI Mortgage documents was not dealt with by the parties in their original submissions.

This Court raised a question onthe meaning of clause 13 of the UDI Mortgages during the hearing, and submissions were subsequently made on the matter. [92] In its submission, CLL argued that “[t]he somewhat perplexing phrasing of this clause [13] is... due to the prohibition in s. 8 ofthe Interest Act (Canada) of the imposition of fines, penalties or increases in interest on default of a Mortgagor.” CLL further argued thatprovisions similar to clause 13 of the UDI Mortgages have been held valid because this type of clause is designed to providecompensation for the additional time required to find alternate investments when payout of the mortgage was delayed.

The case of Mastercraft Properties Ltd v EI EF Investments Inc (1993), (ON CA), 103 DLR (4th) 759 at para 7 (ONCA) was citedas authority for this proposition. [93] This Court acknowledges the authoritative statements in Mastercraft Properties in the context of the wording that was underreview in that case.

This Court also notes that the operative phrase in Mastercraft Properties is worded as follows (the “MastercraftNon-Payment Clause”): ...in the event of non-payment of the said principal moneys at the time or times above provided, [the mortgagor] shall not require theMortgagee to accept payment of the said principal moneys without first giving three months’ previous notice in writing, or paying abonus equal to three months’ interest in advance on the said principal moneys. [94] This Court acknowledges the judicial comments of the Ontario Court of Appeal in respect of the Mastercraft Non-PaymentClause.

That said, this Court is of the view that those comments are not applicable to this case for two reasons. [95] First, this Court is not considering the validity of clause 13 of the UDI Mortgage in the context of

section 8 of the InterestAct. That issue is not relevant in this action, and will not be considered. [96] Second, the wording of the Mastercraft Non-Payment Clause is quite different than that of clause 13 of the UDI Mortgages. This difference in wording requires the Court to consider the UDI Mortgages Non-Payment Clause carefully, and contrast it with theMastercraft Non-Payment Clause.

[ 97 ] In addition to referring to the option of a “...bonus equal to three months’ interest in advance...”, the Mastercraft Non-Payment Clause is focused on the mortgagee. In particular, that clause provides that if there is non-payment of the principal in that case, the mortgagee is not required to accept payment unless there is a notice in writing for a specified period. The provision says nothing about the obligation of the mortgagor. This Court interprets that to mean that the Mastercraft Non-Payment Clause did not change the obligations of the mortgagor in the Mastercraft Properties case.

That is, the subject debt in the Mastercraft Properties case continued to be due at and after the time that the Mastercraft Non-Payment Clause became operational. [ 98 ] In contrast, the UDI Mortgages Non-Payment Clause is focused on the mortgagor. In particular, that clause provides that if the principal sum (or any part thereof) is not paid at maturity, the mortgagor shall “...not be at liberty to pay...” the same, unless there is a notice in writing for a specified period.

There is no option in the UDI Mortgages Non-Payment Clause to pay a bonus amount. [ 99 ] The UDI Mortgages Non-Payment Clause is identical in all 49 of the UDI Mortgages. That being the case, the Court infers that the mortgage documentation was prepared by CLL. That corporation was certainly the mortgagor in the first instance for all 49 of the UDI Mortgages, as evidenced by the fact that CLL signed all of the UDI Mortgage documents. [ 100 ] CLL arranged for the assistance of Mr. Aitkens as part of the capital raising process. The involvement of Mr.

Aitkens in respect of the UDI Mortgages is evidenced by the fact that he was a signatory on 11 of the 49 Investment Agreements.

Those 11 Investment Agreements raised $450,000 of the $1,548,400 that was secured by the UDI Mortgages. [ 101 ] Most importantly for the purposes of the question before this Court, the terms that CLL included in the UDI Mortgages Non- Payment Clause stipulate if any part of the principal sum is not paid at December 31, 2010, the mortgagor shall not be at liberty to pay the mortgagee, unless there is advanced notice in writing. [ 102 ] In this case, there is no evidence on or after December 31, 2010 that 133Co, in its capacity as the mortgagor in respect of the UDI Mortgages, gave any of the Investors, in their capacity as mortgagees, notice in writing of its intent to repay any of the UDI Mortgages.

That being the case, the debt obligation that 133Co has in respect of the UDI Mortgages is not currently due and payable. Its repayment obligation is postponed until that notice is given. [ 103 ] This legal result flows from the language which CLL chose to include in clause 13 of the UDI Mortgage document. Given the text included in UDI Mortgages Non-Payment Clause, 133Co has no duty (or obligation) to pay the Investors until the notice requirement is satisfied.

As such, the limitation period in respect of the UDI Mortgages has not commenced. [ 104 ] This finding is dictated by the terminology that CLL included in clause 13 of the UDI Mortgage documents. In particular, the use of the phrase “...the [m]ortgagor shall not be at liberty to pay...” in clause 13 means that 133Co has “no duty” to pay the mortgage balance notwithstanding that December 31, 2010 has passed, unless it gives appropriate notice to the mortgagee. [ 105 ] This is the plain language

interpretation of clause 13 of the UDI Mortgages. This

interpretation is consistent with the definition of the phrases “liberty not” and “no-duty”: see Black’s Law Dictionary , 10 th ed., at pages 1059 and 1209, respectively. [ 106 ] This Court notes that its construction of the UDI Mortgages Non-Payment Clause is also consistent with the disclosure that is presented in the financial statements of the mortgagor as at May 31, 2011. The financial statements of 133Co were disclosed in the Aitkens June 2012 Affidavit, which was part of the initial CCAA application. Such disclosure is a mandatory requirement of the CCAA at the time of the initial application by 133Co for protection from its creditors: see section 10(2) (

c) of the CCAA. [ 107 ] The financial statements of 133Co for the period ended May 31, 2011 are significant for two interrelated reasons. [ 108 ] First, the May 31, 2011 preparation date of the financial statements is important because it is subsequent to: (

a) the maturity date stipulated the UDI Mortgages Repayment Clause, which was December 31, 2010; and (

b) the last interest payment on the UDI Mortgages, which was March 31, 2011. [ 109 ] Second, the classification of the UDI Mortgages in the 133Co financial statements for the period ended May 31, 2011 tells a story.

Specifically, the manner in which 133Co reported the UDI Mortgages indicates how the corporation characterized that indebtedness in its capacity as mortgagor. [ 110 ] If 133Co was of the view that the UDI Mortgages were “due and payable” because the maturity date had past and there was no relieving provision, it would have been obligated to record the associated debt in the May 31, 2011 financial statements under “Current Liabilities”. It did not do so. [ 111 ] Instead, 133Co recorded the UDI Mortgages in the May 31, 2011 financial statements under “Long-Term Liabilities”.

That means that 133Co was of the view that the UDI Mortgages were not “current” as at that May 31, 2011 date. [ 112 ] To emphasize the importance of this point, the mortgagor cannot have it both ways. It cannot tell this Court in the Aitkens June 2012 Affidavit that the UDI Mortgages as at May 31, 2011 are “Long-Term Liabilities” and then effectively assert a couple of years later that those same mortgages are “Current Liabilities” as at that same date (or earlier).

The only way that this Court would have considered the merits of a change of classification of the UDI Mortgages as at May 31, 2011 from a long-term debt to a current liability would be if that change in accounting was reported appropriately in a subsequent financial statement, and that change in accounting was in accordance with the reporting rules of the day which dealt with changes in respect of accounting errors. In this case, nothing was provided in evidence to suggest that the financial statements of 133Co for the period ended May 31, 2011 have been “corrected”. [ 113 ] In

summary, this Court finds that the Class D UDI Mortgages were not due and payable on January 1, 2011 and that neither the Class A UDI Mortgages nor the Class C UDI Mortgages were due and payable on April 1, 2011. Further, since there is no evidence that as at the date of the Tolling Agreement that 133Co, in its capacity as the mortgagor in respect of the UDI Mortgages, had given any of the Investors, in their capacity as mortgagees, notice in writing of its intent to repay any of the UDI Mortgages, this Court finds that none of UDI Mortgages were due and payable on December 11, 2013. That being the case, this Court finds the UDI Mortgages enforceable.

[ 114 ] This finding is further supported by the fact that Mr. Aitkens is the sole shareholder and director of 133Co. As such, he is the directing mind of that corporation, and the individual responsible for its financial statements. Given his knowledge of the UDI Mortgages, this Court infers that he knew that 133Co as the debtor had “no duty” to pay the mortgage balance because of the combination of the clause 13 terms and the fact that no notice of repayment had been given to the mortgagees.

Again, absent that notice, the maturity date applicable to the UDI Mortgages has been displaced by the application of clause 13 of that security document. As such, the limitation period has not been triggered for any of the UDI Mortgages. In closing, 133Co must live by the terms that CLL included in the UDI Mortgage documents. C.

Do the Three Aitkens Letters Delay the Commencement of the Limitation Period? [ 115 ] Notwithstanding that the Court has found that none of the UDI Mortgages are statute-barred because of the terms that CLL embedded in the UDI Mortgages Non-Payment Clause, a second argument is also considered.

This argument deals with the communications that were made to the Investors, and whether those communications displaced the statute-barred argument that CLL has advanced. [ 116 ] Section 8(2) of the Limitations Act provides that an acknowledgment made prior to the expiry of a limitation period operates to restart that limitation period.

Section 9(1) of the Limitations Act further provides that an acknowledgement under section 8(2) of the Limitations Act must be in writing and signed by the person adversely affected. [ 117 ] Section 9(3) of the Limitations Act provides that if an acknowledgment is made by or with an agent, it has the same effect as if made by or with the principal.

Section 9(4) of the Limitations Act states that a person has the benefit of an acknowledgment only if it is made with or to the person. [ 118 ] The Investors submit that notwithstanding the requirement of section 9(1) of the Limitations Act that an acknowledgment be in writing and signed, the absence of a signature does not preclude a letter from constituting an acknowledgment of indebtedness. The Investors rely on Hustad v 594971 Ltd , 2008 BCSC 1441 to support this proposition. If there are two letters, only one of which has been signed, courts have held that the two letters can be read together.

The lack of a signature on the first letter in Hustad was cured by the existence of a signature on the subsequent letter because both letters were sent by the same party and the second letter incorporated in the first letter by reference. [ 119 ] In contrast, CLL submits that without a signature neither the Second Aitkens Letter nor the Third Aitkens Letter meets the requirements of section 9(1) of the Limitations Act .

CLL submits that Hustad is distinguishable on the facts because in that case the court found that the subsequent letter, which was signed, incorporated the acknowledgement that was made in the earlier unsigned letter. Further, the subsequent letter in the Hustad case specifically referred to the earlier correspondence, and asked for a reply. [ 120 ] The conflicting position between the Investors and CLL requires the Court to examine the facts carefully. Mr. Aitkens acknowledges that he signed the First Aitkens Letter to the UDI Mortgagees on the status of their mortgages in January 2011.

Further, he stated in the First Aitkens Letter that the purpose of the correspondence was to provide the valued Investors with an “update” on their UDI Mortgages. [ 121 ] The evidence was that to the best of the knowledge of 133Co, the First Aitkens Letter was sent to all Investors. Mr. Aitkens is the sole shareholder and director of 133 Co, and this Court infers from the Agreed Statement of Facts that he does not challenge the assertion that the letter was sent. [ 122 ] Notwithstanding technology, sending letters by ordinary mail is still a common business practice.

In circumstances such as this, it is appropriate for the Court to apply common sense and its knowledge of common business practices to determine how a letter was conveyed to the addressee. [ 123 ] There is no suggestion in the evidence that the First Aitkens Letter was faxed to the UDI Mortgagees, hand delivered, couriered, or scanned and emailed to them. That being the case, the Court infers that the First Aitkens Letter was “sent” to the UDI Mortgagees through the Canada Post system. [ 124 ] This inference is supported by the Three Aitkens Letters which were provided in evidence.

Those letters were addressed in a fashion that would have allowed the addressee to have received them by way of Canada Post. That is, the letters had formal addresses noted thereon. [ 125 ] Further, there are notations on the Three Aitkens Letters that are in evidence. Those notations record the date that they had been received by the addressee.

For example, one of the Class C UDI Mortgagees made a notation on the Third Aitkens Letter to the effect that he had received that letter on December 16, 2011. [ 126 ] CLL agrees that the First Aitkens Letter would constitute an acknowledgement which would restart the limitation period as at January 6, 2011, provided that the letter was actually received. Notwithstanding that it was stated in evidence that the First Aitkens Letter was issued, CLL asserts that the letter does not constitute an acknowledgement under the Limitations Act .

CLL advances this argument on the premise that the UDI Mortgagees did not provide evidence that they actually received the letter. The Court dismisses that argument on the basis that it neglects to consider the laws of general application. [ 127 ] Concerning the issue of what the UDI Mortgagees received, the Court need look no further than the Canada Post Corporation Act , RSC 1985, c.C-10 to make a finding on this issue. To reiterate some of the key facts which are stated above, Mr.

Aitkens issued the First Aitkens Letter to the Investors on January 6, 2011; the Second Aitkens Letter to the Investors on June 27, 2011; and the Third Aitkens Letter to the Investors on December 12, 2011. Further, to the best of 133Co’s knowledge, all three of those letters were sent to

the Investors. [128] In the absence of evidence to the contrary, the Court infers that 133Co sent all three of these letters through the Canada Postsystem. For the reasons mentioned above, that common business practice is inferred here. [129] Having accepted that common business practice, this Court finds that each of the Three Aitkens Letters was delivered to theaddressees, who are the Investors. This result occurs by operation of law. Specifically, in these circumstances section 2(2) of theCanada Post Corporation Act applies. That statutory provision reads as follows: 2(2) For the purposes of this Act, (

a) leaving mail at the place of residence or business of the addressee thereof, (

b) depositing mail in a post office lock box or rural mail box or any other receptacle or device provided for the receipt of mail of theaddressee, or (

c) leaving mail with the addressee or his servant or agent or with any other person who may reasonably be considered to be authorized toreceive mail by the addressee thereof, according to the usual manner of delivering mail to that addressee, is deemed to be delivery to the addressee. [Underlining added.] [130] That statutory provision is a law of general application. On the basis of section 2(2) of the Canada Post Corporations Act, thisCourt finds that each of the UDI Mortgagees is deemed to have received all three letters.

In particular, this Court finds that the Investorswere all deemed to have received the Third Aitkens Letter. [131] Given the above analysis, the Court finds that the First Aitkens Letter constituted an acknowledgment for purposes of section8(2) of the Limitations Act because that letter was both signed and deemed received.

That being the case, the commencement of thelimitation period in respect of the UDI Mortgages is deferred until at least the date of that acknowledgement, which is January 6, 2011. [132] The next question is whether that same conclusion applies in respect of the Second and Third Aitkens Letters. This Court hasalready found that those two letters were deemed to have been delivered to the Investors. The remaining issue concerns the lack of asignature on both the Second Aitkens Letter and Third Aitkens Letter.

The narrow issue is whether the absence of a signature on thosetwo letters causes the calculation of the limitation date to commence on January 7, 2011 for the Class D UDI Mortgages and on April 1,2011 for both the Class A UDI Mortgages and the Class C UDI Mortgages. [133] This Court finds that the absence of a signature on the Second Aitkens Letter and Third Aitkens Letter does not cause thelimitation date to commence on January 7, 2011 for the Class D UDI Mortgages or on April 1, 2011 for both the Class A UDI Mortgagesand the Class C UDI Mortgages.

The reasons for this finding are twofold. [134] First, both the Second and Third Aitkens Letters had the name “Ron Aitkens” typed in at the bottom of those respective lettersin typical salutation format. Further, Mr. Aitkens does not deny that these two documents are his letters. [135] This acknowledgement by Mr. Aitkens displaces the submission that CLL made where it quoted Lord Denning, as he had beenquoted by the Ontario Court of Appeal in Re Welsford, (ON CA), [1967] 2 O.R. 496. As stated by CLL, Lord Denningmade the following comment in Goodman v J.

Eban LD., [1954] 1 QB 550, at 561: The virtue of a signature lies in the fact that no two persons write exactly alike, and so it carries on the face of it a guarantee that theperson who signs has given his personal attention to the document. A rubber stamp carries with it no such guarantee: because it can befixed by anyone. [136] In the above comment by Lord Denning, the concern was that the rubber stamp might have been used by a third party. Theconcern does not exist here because Mr.

Aitkens has never denied that the Second and Third Aitkens Letters were his documents, or thatthe “Ron Aitkens” salutation is not a reference to him. [137] In addition to that distinction, there are a couple of substantive reasons why this Court does not accept the position advanced byCLL: (

a) While the above quote by Lord Denning is accurate, he was in dissent in Goodman. In contrast to Lord Denning’s position,the majority in Goodman held that since the letter in issue bore a “signature” placed there by the plaintiff solicitor himself by means of arubber stamp containing a facsimile representation of his own signature, it had been “signed” for the purposes of the relevant legislationthat required a signature. (

b) The Welsford case can also be distinguished. That case dealt with a jurat. A jurat by its very naturerequires formality. The evidence required in the proper administration of a solemn oath is of such importance throughout the wholeadministration of justice that a stamped signature which could have been fixed by anyone is an insufficient guarantee of the identity ofthe person. In contrast, an information letter by Mr.

Aitken to the Investors does not require that formality, particularly where there is nodispute concerning his authorship of the letters in issue. [138] The finding by this Court that the absence of a formal signature on the Second and Third Aitkens Letters does not cause thelimitation date to commence is actually supported by comments of the Ontario Court of Appeal in Welsford. In that case, the Court ofAppeal stated that while it was going to challenge the rubber stamp on the jurat, it was not going to challenge the stamp that was placedon the Information.

Of particular interest are the following comments of the Justice McGillivray in that case, writing for the majority atpara 9: There have been many cases where the courts have held that a legislative requirement for a signature did not necessarily require that asignature be in the handwriting of the person signing. In particular instances typed names, stamped names or a man's mark have been

accepted. An extensive review of these decisions is to be found in Goodman v. J. Eban Ld. , [1954] 1 Q.B. 550, [1954] 2 W.L.R. 581 , and in Regina v. Fox , supra. [Underlining added.] [ 139 ] Second, there is sufficient linkage amongst the Three Aitkens Letters that the signature on the First Aitkens Letter is incorporated by reference into both the Second Aitkens Letter and the Third Aitkens Letter. In fairness to CLL, the Court will review its position on this particular point. [ 140 ] CLL submitted that the signature on the First Aitkens Letter cannot be incorporated into the Second and Third Aitkens Letters.

CLL also submitted that the Three Aitkens Letters did not incorporate each other by reference, as had been the case in Hustad . That being the case, CLL argued that the Three Aitkens Letters cannot be read together. [ 141 ] The Court does not agree with the submissions of CLL on this point. Before the Court addresses the legal analysis, a review of the context is warranted. [ 142 ] It is clear from the Agreed Statement of Facts that Mr. Aitkens was aware that the Second Aitkens Letter and the Third Aitkens Letter had been sent to the Investors. While Mr.

Aitkens could not explain why these two letters were not signed, he did acknowledge their existence and that, to the best of 133Co’s knowledge, all three of those letters were sent to the Investors. Further, neither 133Co nor Mr. Aitkens challenged the authenticity of the Second Aitkens Letter or the Third Aitkens Letter. [ 143 ] While the approach taken by Mr. Aitkens in respect of the Second Aitkens Letter and the Third Aitkens Letter is different from that in Hustad , the net result is the same. In both the Hustad case and in this case, the debtors were trying to keep the creditors informed.

The strings of communications in both scenarios were linked together by similar threads, albeit the sequences were reversed. In Hustad , the last letter in the sequence was signed. In this case, the first letter in the sequence was signed. [ 144 ] The narrative in both the Second Aitkens Letter and the Third Aitkens Letter refers to an update. This “update” terminology links both the Second Aitkens Letter and the Third Aitkens Letter to each other, and also to the First Aitkens Letter.

The Court also notes that the First Aitkens Letter referred to it being an “update”, and that the Second Aitkens Letter states that “[w]e will seek to keep you informed on what is happening with this project”. That statement in the Second Aitkens Letter was giving a positive indication that further communications would be forthcoming.

That further communication was in the form of the Third Aitkens Letter. [ 145 ] This Court finds that the collective “update” references are sufficient to link to the signature that was included in the First Aitkens Letter to each of the Second Aitkens Letter and the Third Aitkens Letter. This Court draws on the authority of the Hustad case to support this finding.

In the Hustad case, the lack of a signature on the first letter in that sequence was cured by the existence of a signature on a subsequent letter because both pieces of correspondence were sent by the same party and the second letter incorporated in the first letter by reference. In the case of the Three Aitkens Letters, the sequence was in the opposite direction. The first letter in the sequence was signed, but the Third Aitkens Letter was not signed.

However, all three of the Aitkens letters were sent by the same party and each of those letters referred to, and was linked by, the goal of 133Co to “update” the Investors. [ 146 ] As a final comment, the above facts distinguish the circumstances in this case from Shaw v Louie , [1998] B.C.J. No. 2415 (BCSC) , which was cited as authority by CLL for rejecting the unsigned letters.

In the Shaw case, the BC Supreme Court rejected the argument to extend the limitation period in the context of an unsigned letter, finding that “[t]he letter appears to have been written on the respondent’s behalf, but it is unsigned and is therefore ineffective to constitute a confirmation...”: at para 19. In contrast to the Shaw case, Mr. Aitkens has acknowledged both the Second Aitkens Letter and the Third Aitkens Letter, and there is no suggestion that it was written by a third party on his behalf. V. Conclusion [ 147 ] The relevant 47 UDI Mortgages are valid and enforceable in accordance with their terms.

Accordingly, those mortgages are entitled to participate in the distribution of the net proceeds realized from the sale of Lot 2, subject only to court-ordered charges in priority to those UDI Mortgages. Heard on the 17 nd day of November, 2014. Dated at the City of Calgary, Alberta this 5 th day of July, 2016.

D.B. Nixon J.C.Q.B.A. Appearances: Walker W. Macleod -McCarthy Tetrault LLP For Receiver Stephanie A. Wanke- Ogilvie LLP For Calmar Lands Ltd. Robyn Gurofsky- Borden Ladner Gervais LLP For Foundation Mortgage Corporation Kelly J. Bourassa and Laura Coffell- Blake, Cassels & Graydon LLP For UDI Mortgage Holders _______________________________________________________ Corrigendum of the Reasons for Judgment of The Honourable Mr. Justice D.B. Nixon _______________________________________________________ Counsel names reflect who they represent in the matter under appearances on Page 23.