Agriculture Financial Services Corporation v Luthra, 2017 ABQB 403

Court of Queen’s Bench of Alberta Citation: Agriculture Financial Services Corporation v Luthra, 2017 ABQB 403 Date: 20170626 Docket: 1503 18961 Registry: Edmonton Between: Agriculture Financial Services Corporation Plaintiff/Applicant - and - Trimove Inc., Geeta Luthra, Vishal Luthra, and Karen Luthra Defendants/Respondents _______________________________________________________ Memorandum of Decision of the Honourable Madam Justice J.B. Veit _______________________________________________________

Summary [ 1 ] In a special chambers hearing, Agriculture Financial Services Corporation, AFSC, applies for

summary judgment against the individual defendants as individual guarantors of the corporate defendant's loans. AFSC asserts that the guarantor respondents have no valid defence to its claim. [ 2 ] The respondents assert that serious questions of fact and law make

summary disposition inappropriate. They maintain that the assets in respect of which the loans had been granted to Trimove were sold by Trimove's receiver "recklessly . . . far below forced market value". The respondents' main contention on that issue appears to be that the vehicles were sold "clumped together, as opposed to individual bidding on each tanker". Also, the respondents complain of "misconduct" by the Receiver in failing to preserve the confidentiality of an appraisal of forced liquidation values for the assets.

[3]

Summary judgment is granted. [4] The Supreme Court of Canada has held that

summary judgment must be granted where there is no genuine issue requiring atrial: Hryniak. [5] An applicant for

summary dismissal must establish a prima facie entitlement to judgment; the respondent then bears theevidentiary burden of establishing that a question of fact or law which requires a trial: Head West Energy Inc. [6] Here, the applicants established that: the respondents contracted with AFSC to pay Trimove's debts if Trimove did not pay itsloans to AFSC; Trimove did not pay its debts to AFSC, and, the guarantor respondents did not pay to AFSC what Trimove owed. [7] The respondents have not challenged any of those facts. [8] The duties of the parties under a contract of guarantee are established by the contract: King Art. [9] In their written contracts, the guarantors agreed that they have no right to rely on any alleged misconduct between Trimove'sreceiver and Trimove. [10] The respondents do not point to any aspect of the contract which allows them to challenge the liquidation of Trimove assets byTrimove's receiver. [11] Indeed, assuming that the respondents rely on a general, non-contractual, equitable duty on the part of AFSC to deal fairlywith them, it is not clear which standard the respondents allege applies to Trimove's receiver's sale of Trimove's assets.

On the one hand,they rely on Case Credit which speaks of a "commercially reasonable manner". On the other, they rely on Black which states that theperson with the power of sale must not act "in bad faith or by his sacrificing the property wilfully or recklessly".

As is obvious, those aretwo very different standards. [12] In any event, even if the respondents' guarantees were affected by Trimove's receiver's sale of Trimove's assets, which it isnot, and even if the court adopted the standard of a "commercially reasonable manner" rather than the lower standard established inBlack, the respondents have not provided any suggestion that the sale was conducted otherwise than in a commercially reasonablemanner.

On the contrary, the applicant's evidence establishes that Trimove's Receiver assessed the kind of assets that had to be sold inthe context of the debtor's overall circumstances, concluded that the best way to liquidate the assets was by way of auction, asked forproposals from several auctioneers and, as between the two best auction proposals, outlined a commercially reasonable basis forpreferring one to the other; in other words, the applicant has established a prima facie commercially reasonable sale of Trimove assets.The fact that the eventual auction did not produce what the independent appraiser retained by the Receiver had opined as a forced salevalue for the assets does not make the Receiver's choice of sale framework unreasonable; on the contrary, where it is legally permissibleto examine the Receiver's actions, a court ought to respect a Receiver's commercial decisions: Skyepharma. [13] Moreover, these guarantors had the opportunity of contesting the Receiver's recommendation for a specific auction formatand did not do so; their arguments on this motion are, therefore, not only ill-founded in law but also constitute an unacceptable indirectattack on a previous court order. [14] The respondents' allegation that, in the Trimove proceedings, the Receiver improperly revealed, prior to the auction sale, aconfidential appraisal of the value of the assets, is simply contrary to the evidence and based on a misunderstanding of the open courtprinciple. [15] In

summary, the respondents have not established that there is a genuine issue requiring a trial. Cases and authority cited: [16] By the applicant: Trimove Inc. v Servus Credit Union Ltd. 2017 ABQB 50; Servus Credit Union Ltd. v Trimove Inc. 2015ABQB 745 [17] By the respondents: Trimove Inc. v Servus Credit Union Ltd. 2017 ABQB 50;Case Credit Ltd. v Rhodan Contracting Ltd.2004 BCSC 1783; Case Credit Ltd. v Rhodan Contracting Ltd. 2004 BCSC 1784, J.W. Investments v Black (1963) (BC CA), 38 D.L.R. (2nd) 251 (BCCA); Personal Property Security Act, RSA 2000, c.

P-7, s. 66(1) [18] By the court: Hryniak v Mauldin 2014 SCC 7; Royal Bank of Canada v. Head West Energy Inc. 2007 ABQB 171; CanadaPermanent Trust v King Art Developments Ltd. 1984 ABCA 182; Mutual Loan Fund Association v Sudow (1858) 141 E.R. 183;Skyepharma PLC v. Hyal Pharmaceutical Corp. [1999] O.J. No. 4300; Case Credit Ltd. v Rhodan Contracting Ltd. 2004 BCSC 1783;Toronto-Dominion Bank v. 1737929 Ontario Inc. 2011 ONSC 5528; Smith v Pricewaterhousecoopers 2013 ABCA 288; NorthlandBank (In Liquidation) v Kocken 1998 BCJ No. 1691; K.P. McGuinness, Law of Guarantee, 3nd ed., Carswell, at

article 7.29 1. Background

a) Factual [19] Over various months in 2014, Trimove Inc. entered into lease-to-own agreements with T"N"T Tank & Trailer Repair LP inrelation to 7 tanker trucks, the serial numbers of which are not in dispute. [20] As of April 22, 2014, AFSC agreed to loan Trimove Inc. the principal sum of $380,000.00. The purpose of the loan was tobuy out leased equipment to a value of $438,000.00 and to provide working capital of $10,000.00; AFSC was to advance $380,000.00 ofthe project and Trimove was to provide the remainder.

The security for the loan was a promissory note and a security agreement on allpresent and after-acquired personal property of Trimove. The offer letter, accepted by Trimove, contained the following:

If you fail to make any payments when due or fail to perform any promise, term or condition in this or any other agreement with AFSC, you will be in default under this Offer Letter. [ 21 ] Each of the guarantors entered into a guarantee with AFSC. Each guarantee contained typical commercial guarantee terms including: 2. The guarantor covenants and agrees with AFSC that: (

a) Between the Guarantor and AFSC, the guarantor shall be liable as principal debtor for the prompt, full and complete performance of all duties and obligations of the Borrower to AFSC. If the Borrower defaults in the performance of any of the Guarantee Obligations, the Guarantor shall perform such Guarantee Obligations for which the Guarantor is obligated by this Guarantee, whether or not the Borrower can then be lawfully forced to perform such Guarantee Obligations. . . . (

e) AFSC may, at any time in its sole discretion, without notice to or consent from the Guarantor and without affecting, limited or terminating the liability of the Guarantor for the Guarantee Obligations: . . . (iv) Obtain judgment in any court of competent jurisdiction to enforce the Guarantee Obligations against the Borrower or any surety, including the Guarantor, without affecting AFSC's right to recover interest of any moneys owed AFSC at the contracted rate(

s) until paid in full and the Guarantor hereby waives the provisions of any limiting legislation to the contrary and no exercise of its discretion or any neglect, omission, error or default by AFSC relating to any of the foregoing shall affect limit or terminate the Guarantee Obligations . . . . 3.(

c) The Guarantor waives the benefit of any right of set-off or counterclaim which it may at any time have against the Borrower, AFSC and any surety for the Borrower's obligations. [Emphasis added] Each guarantor provided the required certificate of notary public relating to compliance with the Guarantees Acknowledgment Act . [ 22 ] As of January 26, 2015, Trimove entered into a loan arrangement with AFSC similar to the April 22, 2014 agreement, in relation to other similar purchases.

That arrangement confirmed, for example, that T"N"T had discharged its registrations in relation to units 6929 and 6935. [ 23 ] On March 20, 2015, Trimove purchased 3 of the tankers it had leased from T"N"T - serial numbers 6928, 6937 and 6933 - for purchase prices which varied somewhat, because of the varying down payments made by Trimove and varying rent credits; Trimove paid approximately $92,000.00 each for two of those vehicles and approximately $97,000.00 for the third. [ 24 ] On April 4, 2015, Trimove leased unit 6913 to Muhiyo Trucking on the basis of a lease agreement which contained an option to purchase the unit; Trimove entered into the agreement as owner of that tanker, although no Bill of Sale for that unit from T"N"T to itself is produced by Trimove.

The option to purchase term stated that the Renter - Muhiyo - had the option to purchase the nit "for the fair market value of the Equipment at the time of the signing of the lease".

There is no "fair market value" definition or value in the Lease agreement; there is, in the description of the unit, after the "serial number" of the equipment a heading described as "Amount" where "$118,000.00 +GST" has been inserted. [ 25 ] On May 19, 2015, this court appointed MNP Ltd. as Receiver of Trimove Inc. [ 26 ] On May 28, 2015, the Receiver filed its First Report, (following the initial report as interim receiver dated May 7, 2015) in which it sought approval to sell the serial numbered assets of Trimove at auction and one asset via private sale.

That report contained the following information: On May 20, 2015, the Receiver issued a request for auction proposals to five auction companies. Due to the fact that Trimove does not have its own yard a condition of the auction proposals was that the auction company would need to supply a location to complete the auction from. The Receiver was advised one of the auction companies contacted that it would not be submitting a proposal due to the requirement to provide a location.

On May 20, 2015, Ritchie Bros. auctions provided the Receiver with confirmation that it could include the assets of Trimove in its upcoming Edmonton Auction scheduled for June 9 and 10 on the condition that the assets were transported to the yard before the end of May. The Ritchie Bros. proposal, as set out in greater detail in the confidential Supplement, is for a straight commission auction with no guaranteed minimum.

Aero Auction, one of the auction companies contacted by the Receiver, has submitted a proposal to the Receiver with a net minimum guarantee, as set out in greater detail in the Confidential supplement. The receiver is supportive of the Ritchie Bros. proposal.

. . . The Ritchie Bros. auction provides an option to realize on the serial numbered assets of Trimove which would minimize the asset preservation costs to the estate such as yard rental, insurance and monitoring of the assets.

Ritchie Bros. is a reputable auction company attracting international buyers to its Edmonton auctions (both online and in person) providing for a robust marketing of the assets to potential purchasers. [ 27 ] The Receiver's Confidential Addendum, also dated May 27, 2015, included an appraisal - dated May 26, 2015 - by an independent third party of the forced liquidation value of Trimove's assets.

Unit 6913 was not viewed by the appraiser, but was assigned the same value, $67,500.00, as was assigned to the majority of the other 2013 Heil Tridem aluminum tank trailers that were included in Trimove's property; one unit was assigned a value of some $62,000.00 as a result of an insurance claim.

The appraisal describes its estimate as being: The estimated amount, expressed in terms of cash in Canadian dollars, that could typically be realized from a properly advertised and conducted public auction, with the seller being compelled to sell with a sense of urgency on an "as-is condition, where-is location" basis as of a specific date. [ 28 ] The appraisal goes on to say: For the purpose of this appraisal, the appraiser has considered an unreserved public auction sale, held under present day economic trends, within 30 days of the effective date of this Appraisal . . . [ 29 ] The appraisal also notes: Although some of the assets were locked, we had no access to certain information, such as mileage, VIN plates, axle ratings and engine models.

All crude trailers are assumed to not have any interior liners. [ 30 ] The Confidential Addendum contained the following additional comments about the proposed auction: The Ritchie Bros. proposal is for an unreserved public auction to be held in Edmonton on or about June 9 and 10, 2015. The proposal includes the following terms: a. Receiver to deliver Equipment to Ritchie Bros. site at the Receiver's expense; b. The following costs and expenses to be deducted from the sale proceeds of the Equipment: i. 10% commission payable on all lots realizing more than $2,500; ii.

Refurbishing (including provision of glass, parts, welding, cleaning and sandblasting, painting) costs plus a 10% surcharge (to a maximum amount as pre-approved by the Receiver); and, iii. $65 document administration fee per item of Equipment. The Aero Auction proposal is for a Net Minimum Guarantee, NMG. This proposal includes the following terms: a. Aero Auction to arrange for transport of Equipment at Aero's expense; b. NMG of $1,050,000.00, and, c. Amounts above the NMG to be split as follows, 85% to Receiver and 15% to Aero Auctions.

Although the Aero Auction proposal provides for a NMG, the NMG value includes the duplicate asset value referenced in paragraph 12 and with the removal of this asset the NMG would be reduced significantly resulting in the Ritchie Bros. proposal providing for a higher net estimated realization. [ 31 ] As is to be expected from careful practitioners in this area, the Confidential Addendum was submitted by the Receiver to the court in confidence "to prevent any public access to the appraised values prior to realization".

As is required of all practitioners who respect the open court principle, the Receiver proposed that, once the public sale of the property had been concluded, the confidential appraisal would be added to the public file.

The confidential addendum was added to the public file on October 1, 2015. [ 32 ] On May 29, 2015, upon the application of the Receiver of Trimove and upon hearing submissions from the Receiver, Servus Credit Union Ltd., AFSC and Trimove, this court ordered the private sale of unit 6913 to the parent company of the renter of that unit, and the sale of the remaining assets "by public auction, by way of straight commission auction proposal presented by Ritchie Bros." [ 33 ] As a further term of the order, the court authorized the Receiver to defer filing of its confidential memorandum containing the appraisal information until the later of the completion of all of the sales approved by the order or September 30, 2015, or any later date approved by the Court. [ 34 ] The public auction approved by the court was held at Ritchie Bros. in early June, 2015.

What I will describe for simplicity's sake as the Heil Tridem units were each sold for $42,000.00, except for one unit which sold for $60,000.00. The net recovery to the Receiver from the Heil Tridem units that were the subject of the AFSC guarantees was, of course, considerably lower than the gross sales proceeds, after having taken into account the various sales costs.

b) Legislative

[35] The respondents rely on s. 66(1) of the Personal Property Security Act which reads as follows: 66(1) All rights, duties or obligations arising under a security agreement, under this Act, or under any other applicable law shall beexercised or discharged in good faith and in a commercially reasonable manner. 2. General principles: applications for

summary judgment; standard of care of a receiver [36] Since 2014, as a result of the decision in Hryniak, the general Canadian approach to

summary judgment applications hasexperienced a sea change:

Summary judgment motions must be granted whenever there is no genuine issue requiring a trial. There will be no genuine issuerequiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for

summary judgment. This willbe the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to thefacts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result. [From the head-note; emphasis added] [37] Prior to Hryniak, in Head West Energy Inc. Bielby J., as she then was, reviewed the procedure on a

summary judgmentapplication. That outline of the steps to be taken on a

summary judgment application continue to provide useful guidance: 22 In Pioneer Exploration Inc. (Trustee of) v. Euro-Am Pacific Enterprises Ltd. (2003) 2003 ABCA 298 , 27 Alta. L.R.(4th) 62 (C.A.) at page 65 our Court of Appeal approved of a two-step process set out by Hutchinson J. in Royal Bank v. McLean (1997) (AB KB), 211 A.R. 297. The two-step process contemplates the applicant proving its cause of action on a balance ofprobabilities after which point an evidentiary burden shifts to the respondent to demonstrate that there is a genuine issue for trial.

Theapplication must fail if the respondent shows that there is at least a reasonable doubt as to whether there is a genuine issue for trial. 23 In Jager Industries Inc. v. Canadian Occidental Petroleum Ltd. (2000) 2000 ABQB 592 , 273 A.R. 1 Justice Rooke ofthis Court set out 5 propositions which apply to applications for

summary judgment at pages 10-11, three of which are relevant to thisapplication:

(1) It is not open to a respondent on a

summary judgment application to argue that a triable issue exists based upon facts or evidencenot currently available but which may emerge at discovery or trial. "Here the appellant defendants (plaintiffs by counterclaim) made out a strong prima facie case for

summary judgment. Therefore, therespondent plaintiff who alleges there is a triable issue and resists

summary judgment, had to produce evidence to show a triable issue(as the pleadings did not raise a purely legal arguable issue). It is not enough for such a respondent merely to argue that there may befacts somewhere which might emerge at trial and might turn out to be relevant": Brown v. Northey, [1991] A.J. No. 214 (C.A.), at para. 11; Suncor Inc. v. Canada Wire and Cable Ltd., (AB KB),[1993] 3 W.W.R. 630; [1993] A.J. No. 4 (Q.B.), at para. 9; Western Canadian Place Ltd. et al v. Con-Force Products Ltd. et al, [1997]A.J. No. 1299; (AB KB), 208 A.R. 179 (Q.B.), at paras. 49-50.

(2) Where an Applicant has shown there are no facts in issue for trial, it is incumbent upon the respondent to adduce evidence that ithas a reasonable chance of success at trial. Guarantee Co. of North America v. Gordon Capital Corp., (SCC), [1999] 3 S.C.R. 423, [1999] S.C.J. No. 60, at para.27; 620684 Alberta v. Royal Insurance Co., [2000] A.J. No. 441 (Q.B. - Master Funduk), at para. 8 & 9; Russel v. Tambosso, [1999]A.J. No. 1419 (Q.B. - Master Funduk).

(3) It is not sufficient for a respondent who resists

summary judgment to present only bare allegations of fact; the respondent mustpresent evidence which lends some support to the claims it advances. Royal Bank v. McLean, (AB KB), [1997] A.J. No. 1172 (Q.B.) at 5, affirmed (1998), 1998 ABCA 163 ,216 A.R. 172 (C.A.); Tuscon Properties v. Sentry Resources, (AB KB), [1982] A.J. No. 775 (Q.B.), at 2. 24 As Master Funduk described in Tuscon Properties, if a respondent could defeat an application for

summary judgment on the basisof allegations alone, unsupported by evidence, Rule 159 would be rendered sterile. Any application for

summary judgment could bedefeated by a draftsman who simply raised allegations which might defeat the claim, not a difficult task. Rather, to successfully resistthis type of application some evidence must be led which lends some support to the defences raised in the pleadings, whether it is foundin the applicant's own evidence, or in an affidavit filed by the defendant or in cross-examination upon same. [38] AFSC's legal claim in these proceedings depends upon their contract with the guarantors; similarly, the guarantors' claimsagainst AFSC depend on the guarantors' contractual obligations: King Art.

In the latter decision, the Court of Appeal was dealing with amortgage on real property which is an entirely different type of fact situation than the one we have here. However, the reasoning of thecourt in that case is applicable in the situation here: 46 Prima facie a guarantor's obligations are co-extensive with those of the principal debtor but the starting point must always be toanalyze the nature of the guarantor's undertaking.

Depending upon the terms of the guarantor's contract with the creditor, his obligationmay persist even though the creditor is temporarily or even permanently disabled from pursuing the debtor to collect the debt. It is alsoimportant to an analysis of the problem to remember that though the obligations of surety and principal debtor are often co-extensivethey are, nevertheless, separate and distinct obligations. 47 There are numerous examples in the case law where a guarantor remains liable though the debtor is released when the contractcreating the guarantee obligations so provides.

The classic example is Perry v. National Provincial Bank of England, [1910] 1 Ch. 464.

In that case, the surety had contracted that the creditor would be permitted to compound and make arrangements with the debtor or tovary, exchange, or release any security. The creditor took a bond for 1,900 pounds and discharged all claims against the debtor. 1,630pounds remained unpaid.

It was held that as to 1,900 pounds the surety was discharged but that he remained liable for the 1,630 poundsdespite the release of the debtor. 48 Similarly the trio of recent English cases on instalment contracts show instances where the surety remained liable for unpaidinstalments even though the contract between creditor debtor had been rescinded: Moschi v. Lep Air Services Ltd., [1973] A.C. 331;Hyundai Shipbuilding and Heavy Industries Ltd. v. Pournaras, [1978] 2 Lloyd's Rep. 502; Hyundai Heavy Industries Co. Ltd. v.Papadopolous, [1980] 1 W.L.R. 1129.

In other cases dealings by a creditor with his debtor which impaired the securities he held, to theprejudice of the surety, were held not to discharge the surety where the surety had contracted himself out of the protection which the lawwould usually afford him: Bauer v. Bank of Montreal, (SCC), [1980] 2 S.C.R. 102; 32 N.R. 191, Roynat Ltd. v. Denis, (SK CA), [1982] 5 W.W.R. 509; 17 Sask.R. 415 (Sask.

C.A.). 49 Though co-extensiveness of the obligations of the debtor and the surety may be varied by the surety's contract with the creditor, Ihave difficulty in envisioning the contractual term which would hold a surety liable when the debt guaranteed has been paid. The essenceof suretyship contracts is that the surety is to see that the obligations between creditor and debtor are satisfied. Every Perry v.

NationalProvincial Bank of England (supra) which stands for the proposition that a surety may be liable under his contract even though the debtorcan no longer be sued, holds that as to the L1,900 paid by the bond, the surety was discharged.

The learned author of Rowlatt on the Lawof Principal and Surety (4th Ed.), at page 92 cites the Perry case for the proposition: "The surety is, of course, not liable if the principal has paid the guaranteed debt, nor, if part has been paid, for more than the amountunpaid." 50 Whether the ingenuity of legal draftsmen can or will be equal to the task of keeping the surety liable though an order offoreclosure has operated "as full satisfaction of the debt secured by the mortgage" I will leave to another day and the proper case. Sufficeit to say that no term of the guarantees in the present case goes so far.

Had the mortgagee in this case obtained an order of foreclosurerather than acquiring title on the court sale, the satisfaction of the debt would have ended the liability of the guarantors. [39] The characterization of the nature of the interest of a guarantor is, of course, important because the duties owed to a guarantorare likely to be different from those owed to the owner of secured property. [40] The respondents did not, in their Statement of Defence to AFSC's claim, identify any legal or equitable defence. As set outabove, fundamentally AFSC's cause of action sounds in contract.

Nonetheless, from very early days, common law courts have recognized- even in the absence of any explicit language to that effect in the contract of guarantee - that if the beneficiary of a guarantee wastes thegoods which have been pledged, the beneficiary will not be able to recover from the surety: Sudow. The latter case was, interestingly, ajury case where the guarantee was for an effective £30 where the principal debtor had pledged furniture.

Although the decision is citedas authority for the proposition that a "creditor owes a duty to the surety to realize as much as possible from any collateral security heldin respect of the guaranteed debt:" in the Law of Guarantee, the appeal decision is somewhat inconclusive, commenting as it does on theSudow litigant as being a "joint principal" - who would naturally have equitable rights. (The decision also seems somewhat odd since thereporter indicates that one of the appeal judges "said nothing").

What was, however, clear from the decision was that the creditor hadwasted the goods pledged, and that in those circumstances, the appeal court would not reverse the jury's verdict. [41] I am therefore prepared to acknowledge that, even in a contract case based on a written guarantee which contained no term forequitable relief, a court could relieve a guarantor from obligations if evidence established that the plaintiff had acted recklessly indisposing of pledged property. [42] The respondents in this case have not provided any explanation of how they rely on s. 66(1) of the PPSA: the guaranteeswhich they executed do not give them any property or security interest in the assets which were the security for the loans which theyguaranteed.

That

section of the PPSA simply does not apply. [43] The Case Credit decisions on which the respondents rely have limited direct application to the situation here because thosedecisions are concerned, firstly with a security agreement, not a guarantee: 2004 BCSC 1783 at para. 3.

The words of the guarantee thatthe defendants had executed in that situation were, understandably in oral reasons given for the benefit of the parties who knew whatthose words were, not set out in the decision; this has the effect, however, of preventing us from seriously considering the aspects of theCase Credit matter which bear on the obligations incurred under the guarantee. In any event, there are material differences between theCase Credit facts and the facts here: the first of those differences is the fact that the creditors in that case were being sued by the personwho had obtained a secured interest.

That is not the situation here. Here, while Trimove is being sued by AFSC, and Trimove hadborrowed from both Servus Credit Union and AFSC and Servus had had a Receiver appointed for Trimove, Trimove is not representedon this application. The relationship of the parties on this application is therefore materially different; only the guarantors arerepresented. Not only is the basis of the claim different here, the specific marketing efforts in that case were markedly different fromthose set out in the applicant's materials: see para. 7.

Also, those decisions speak of efforts by the borrowers to assist in the marketing ofthe secured assets (see 2004 BCSC 1784, at para 6); there is no evidence of any such efforts here. Finally, the respondents do not suggestthat AFSC committed a fraud against them and that the language set out in para. 10 purported to relieve AFSC from fraud and shouldtherefore be void as against public policy. [44] A similar criticism can be made of the Black decision on which the respondents rely: that case turns on the obligation owedby a mortgagee to a mortgagor pursuant to the language of the mortgage.

That case discusses the duties of a mortgagee to a mortgagorwhere there is a power of sale. Both the majority and the minority agree that the standard is: It is sufficient on this point to say that I agree with my brother Tysoe's reasoning and conclusion that a mortgagee is only liable to amortgagor for sale of a security below a proper price if it is caused by the mortgagee's acting in bad faith or by his sacrificing theproperty wilfully or recklessly. (p. 253) [45] In a decision issued after its decision in Black, and which specifically referred to Black, the B.C. Court of Appeal held that it

had not yet settled the question of whether a "subjective" or an "objective" test applies to the duty of the seller: Northland Bank (InLiquidation) at para. 9. [46] Nonetheless, the decision of the BC Court of Appeal in Black is peripherally interesting because it emphasizes that the onus ofestablishing both that the sale was fraudulent or reckless and that a non-reckless sale would have realized a greater price is on the personalleging an improvident sale, here the guarantors. [47] In Smith, the Alberta Court of Appeal referred with approval to the Black decision: 28 When discussing the cause of action plead as improvident realization, the bankruptcy judge inquired about the elements of thecause of action.

Improvident realization has been recognized as a defence available to a guarantor, and may obviate the guarantor'sobligations to the debtor if it is demonstrated that the debtor's manner of selling the collateral was improvident and the debtor's failure toact in a commercially reasonable manner resulted in the recovery of less money than would otherwise have been the case: Bank ofMontreal v. Tolo-Pacific Consolidated Industries Corp, 2012 BCSC 1785 at para 98, 97 CBR (5th) 56, citing J & W Investments Ltd v.Black (1963), (BC CA), 38 DLR (2d) 251 at 264 (BCCA) and HSBC Bank Canada v.

Kupritz, 2011 BCSC 788 at para35. See also Alberta Treasury Branches v. New Hatchwear Co, 2012 ABQB 788; 97 CBR (5th) 227. The applicant conceded that it wasthe court appointed receiver who conducted all realizations of Caliber's assets, not Servus, the only named defendant in the proposedstatement of claim. Further, there was evidence from the respondents that all sales were conducted with court supervision and approvaland that the total realization of Caliber's assets yielded a higher return than their appraised value.

Accordingly, it was reasonable for thebankruptcy judge to have concluded that there was no factual basis to allege an improvident realization claim against Servus. [48] However, although the language of "guarantor" is used in Smith, the facts establish that the proceedings in Smith, and also inthe decisions on which that case relies, were actions against a receiver for improvident realization.

That is not the factual situation thatwe are facing here. [49] As to the general approach of a court to a Receiver's commercial decisions, although it was offered in a different fact situation,the reasoning of Farley J. in Skyepharma applies here: 4 As to the providence of the sale, a receiver's conduct is to be reviewed in light of the (objective) information a receiver had andnot with the benefit of hindsight: Soundair at p. 7.

A receiver's duty is not to obtain the best possible price but to do everythingreasonably possible in the circumstances with a view to obtaining the best price: see Greyvest Leasing Inc. v. Merkur, [1994] O.J. No.2465 (Gen. Div.) at para. 45. Other offers are irrelevant unless they demonstrate that the price in the proposed sale was so unreasonablylow that it shows the receiver as acting improvidently in accepting it. It is the receiver's sale not the sale by the court: Soundair at pp. 9-10. 3.

Application of the principles here [50] Here, AFSC has proved its case on a balance of probabilities by way of affidavit. It has demonstrated that the guarantorrespondents unreservedly guaranteed the indebtedness of Trimove and, when Trimove did not pay off its loans to AFSC, the guarantorsdid not make the required payments. That satisfies the first step of the process. [51] Pursuant to the principles outlined in Head West Energy, the guarantors then assumed the evidentiary burden of establishingthat the matter should go to trial.

For the reasons set out below, I have concluded that the guarantors have not satisfied that burden.

a) The necessary findings of fact can be made on the affidavit materials before the court [52] As I will discuss below, the highest claim in equity which can be advanced by the guarantors on their contract of guarantee isthat the court should relieve them of their obligations if AFSC has dealt with the property which was pledged to AFSC by Trimove wasdealt with recklessly by AFSC. [53] AFSC has proved that: Trimove had been placed in receivership by a creditor, Servus Credit Union, which had a higher claim;Trimove's Receiver was dealing with a debtor which had a lot of rolling stock and no yard; the Receiver chose an auction sale as the bestway of selling the property; the auctioneer had a good reputation and an international reach. 2015 was a time of crisis in the Alberta oilindustry as the guarantors themselves acknowledge, none of the Receiver's decisions concerning the liquidation of Trimove assetsappears, on its face, to be negligent or commercially unsound. [54] Clearly, the mere fact that the auction sale achieved only between 60% and 65% of the appraised forced valuation of theassets is not, by itself, proof that the receiver acted negligently. [55] At trial, the respondents would have to establish that the receiver failed to make sufficient efforts to get the best price for theequipment.

On this application, the respondents have not advanced any facts which point to the possibility of establishing that theapplicants were reckless in choosing the Ritchie Bros. auction as the sale mechanism. On the contrary, the receiver considered the typeof asset which it had to sell, considered that auction sales were the most effective way of dealing with that type of asset, receivedproposals for auction from 5 persons, and gave reasons for preferring one of the best proposals to the next best proposal.

Moreover,AFSC has established that the guarantors had notice of the Receiver's proposal relating to the auction sale of the tankers, had theopportunity of challenging the proposal, and did not oppose it. [56] In any event, even if there were evidence that AFSC had acted negligently, the respondents would still have to prove that ifAFSC had acted properly there would have been higher sale proceeds. The respondents have not provided any hint of any evidence ofthat type. [57] On the contrary, the main complaint of the respondents is that the sale of these items was conducted as a batch sale.

There isno evidence of the sales of the AFSC - pledged tankers were sold in that way. Even if they were sold in that way, there is no evidencethat a batch sale - in which the successful bidder on the first item has the option of taking, or refusing, all of the other items in the batch -

will necessarily produce a lower price. On the contrary, logic suggests that all bidders could bid on the first item in the batch and then refuse the remainder of the batch, thereby ensuring that the best price is achieved for all the items in the batch; if there is expert evidence of how batch sales at auctions work out in practice, that evidence was not presented.

Indeed, the report of the sale on which the guarantors rely demonstrates that while most of the similarly described tankers sold for $42,000.00 each, one sold for $60,000.00; therefore, there was not a batch sale of all of Trimove's tankers. [ 58 ] In the result, the findings of fact necessary to determine whether the plaintiffs have proved the case set out in their pleadings can fairly be made on the materials before the court.

b) The law is sufficiently settled in this area of law to allow the court to make a determination [ 59 ] The contractual obligation of the guarantors is clear and the failure of each guarantor to meet those contractual obligations is also clear. [ 60 ] The only issue that arises is whether the guarantors have an equitable shield that would relieve them from their contractual obligations. [ 61 ] Although the provision in AFSC's guarantee contract relating to the guarantor's obligations is perhaps not as clear as the term employed in some other commercial guarantees - compare the term set out in para. 21 above with the term outlined below in 1737929 Ontario Ltd - it is clear from AFSC's guarantee that it does not bind itself to s. 66(1) of the PPSA relative to the guarantors.

The latter decision also points out some frailties in the Case Credit approach to conflating the obligations of the guarantor with those of the principal debtor: 47 Pursuant to paragraphs 5, 7 and 9 of the Guarantees, the defendants agreed to waive any right to allege any breach of duty by the bank or to set off or counterclaim against it. These paragraphs read as follows: 5.

The Bank Not Liable The Bank does not owe you any duty (as a fiduciary or otherwise) and you hereby waive any right to make any claim or counterclaim and to raise any right of set off, equitable or otherwise, arising from any of alleged breach of a duty owed to you, or the Customer or any other person. The Bank will not be liable to you nor shall you make any claim for any negligence or any breaches or omissions on the part of, the Bank or any of its employees, officers, directors or agents, or any receivers appointed by the Bank, in the course of any of its or their actions. 7.

No Setoff or Counterclaim You will make all payments required to be made under this Guarantee without regard to any right of setoff or counterclaim that you have or may have against the Customer or the Bank, which rights you waive. 9. Exhausting Recourse The Bank does not need to exhaust its recourse against the Customer or any other person or under any security interest the Bank may from time to time hold before being entitled to full payment from you under this Guarantee.

You waive all benefits of discussion and division. 48 It has been held that where a guarantor signs a guarantee which includes clear provisions that release a Bank, as against a guarantor from the duty to realize on security held in a commercially reasonable manner pursuant to the Personal Property Security Act , the guarantor will be deemed to have given up its right thereafter to hold the Bank to that standard. See Toronto-Dominion Bank v. McCowan [1995] O.J. No. 1102 , 1995 CarswellOnt 329 (Ont.

C.A.) . 49 I am satisfied that the language of the guarantees waives any right of the defendants to pursue the plaintiff for breaches of any duty concerning their alleged failure to proceed in a commercially reasonable fashion on the sale of the secured assets. 50 The defendants relied upon the comment made in Greyvest Leasing Inc. v. Merkur, [1994] O.J.

No. 2465 , 1994 CarswellOnt 780 (S.C.J.) at para. 44 for the proposition that notwithstanding exonerating language in a guarantee document, a secured creditor is still bound to act in a commercially reasonable manner in the disposition of assets constituting the security. 51 The case contains no analysis nor cites any authority to support this proposition, which in any event, I find to have been overruled by the McCowan, supra, decision. 52 Accordingly, I conclude that even were there a genuine issue concerning whether the bank improvidently sold the secured assets, the defendants have waived their rights to claim against the bank. [ 62 ] In this case, therefore, the contract of guarantee establishes a divide between AFSC's obligations to Trimove and AFSC's obligations to the guarantors.

This means that the guarantors cannot rely on any perceived lack of fairness in relation to Trimove to relieve them of their guarantee. [ 63 ] In any event, however, even if this were a situation where the guarantors could invoke equity, on the facts, they have not presented any evidence which require exploration at a trial. [ 64 ] In

summary, the law states only that a person in AFSC's position must not do anything wilful or reckless with the underlying pledged asset. The facts here not only fully satisfy that test, but also fully satisfy any higher test based on the need to act in a commercially reasonable manner. [ 65 ] Therefore, there is no legal issue requiring a trial.

c) In light of the value of the underlying litigation,

summary process is a proportionate means to achieve a just result [ 66 ] The amount in question here would certainly notionally support a trial; however, since all contested issues in the circumstances here can be decided without a trial, holding a trial is, simply, an unnecessary expense.

d) Summary process in the circumstances here can provide a fair and just determination [ 67 ] For the reasons set out above, the application for a

summary judgment is granted here because

summary process can provide a fair and just determination. 4. Costs [ 68 ] If the parties are not agreed on costs, I may be spoken to within 30 days of the release of this decision. Heard on the 21 st day of June, 2017. Dated at the City of Edmonton, Alberta this 23 rd day of June, 2017. J.B. Veit J.C.Q.B.A. Appearances: Trent Kulchar Duncan Craig LLP for the Plaintiff/Applicant Karan Luthra, S. Luthra Luthra Law Office for the Defendants /Respondents