Currie v Craig, 2017 ABQB 435

Court of Queen’s Bench of Alberta Citation: Currie v Craig, 2017 ABQB 435 Date: 20170711 Docket: 1701 06126 Registry: Calgary Between: Dan Currie Plaintiff - and - Brent Allan James Craig, Ana Maria Craig, Wesley Craig, and Karen Craig Defendants _______________________________________________________ Memorandum of Decision of A. R. Robertson , Q.C., Master in Chambers _______________________________________________________ Introduction [ 1 ] This application came before me in morning chambers on May 11, 2017. In light of the extent of the materials, the application was adjourned to June 1, 2017.

No briefs were expected or provided. [ 2 ] The applicant wants to amend the amended statement of claim to sue on a promissory note. The note is attached to a caveat he has now registered against the certificate of title to land. The original statement of claim was a foreclosure claim on a mortgage. It was amended in 2013. [ 3 ] The proposed amendment does not add new parties.

[ 4 ] The defendants apply to have the claim dismissed, although that application has been adjourned for now. [ 5 ] The plaintiff sued on the original mortgage, and even when he was told of the actions of a rogue agent that had represented him, he proceeded under the original claim. He was successful before a Master in Chambers, but that decision was set aside by a Justice and the Court of Appeal upheld the decision of the Justice. (All decisions are unreported.) [ 6 ] The result is that the plaintiff’s mortgage has been removed from title by court order.

In the meantime, time has run and the defendants now say his claim is statute-barred by the Limitations Act , RSA 200, c. L-12. [ 7 ] My decision is that the amendment is allowed. Facts Background [ 8 ] The background is somewhat complicated. This case has been the subject of several applications just to get to this point. [ 9 ] Originally there was a mortgage to the plaintiff Mr. Currie on the land, there was a dispute, a settlement was said to have been reached, and it was agreed that the mortgage would be discharged.

Unfortunately, the settlement was reached with an agent of the plaintiff who turned out to be a rogue, not with the plaintiff lender directly. The plaintiff was unaware of the settlement that the agent had made with the borrowers. [ 10 ] The plaintiff sued, the defendants argued that the mortgage should no longer be on title. They advised that that they had paid $75,000 on the debt and the balance of the claim had been replaced by the new promissory note.

The plaintiff refused to remove the mortgage from title. [ 11 ] The defendants’ application to dismiss will be heard as a special application, if the amendment sought is allowed to proceed.

If the application to amend is not successful, then the claim will apparently likely be resolved by agreement between counsel. [ 12 ] For the purposes of this application, the only issue is the possible application of the Limitations Act , because one of the grounds for refusing the amendment is that the limitation period for advancing the claim has already expired: Dow Chemical Canada Inc. v Nova Chemicals Corporation , 2010 ABQB 524 , 495 AR338 at paragraph 64 – 65 . [ 13 ] If I am able to determine that the limitation period has expired to advance the claim that the plaintiff now wishes to advance under the $160,000 promissory note, than the amendment should be disallowed.

However, if either I conclude that the limitation period has not expired, or I am not certain, then the amendment should be allowed subject to the determination of the limitation period at trial: Dow Chemical . [ 14 ] This requires a detailed review of the sequence of events. [ 15 ] In September 2010, a mortgage broker, Emilio Fuoco arranged for a loan from the plaintiff Mr. Currie to some of the defendants, the Craigs, for $200,000, secured by one mortgage over two properties. One of those properties was in Edmonton and the other was in Clearwater, Alberta.

Later on the registration against the Clearwater property was foreclosed off by a prior mortgagee. [ 16 ] In addition to the mortgage, a promissory note was given for $200,000, by the same borrowers for the same amount, including the same interest rate. [ 17 ] That loan was due March 15, 2011. The Craigs did not pay it. [ 18 ] Mr. Fuoco then engaged in fraudulent activities. The Craigs refinanced with the Toronto-Dominion Bank, and the lawyer representing them was in touch with Mr. Fuoco. The address for service on the mortgage was Mr.

Fuoco’s address, and so the lawyer representing the Craigs reasonably thought he was to deal with Mr. Fuoco. [ 19 ] However, Mr. Fuoco told Mr. Currie that the Craigs were selling the property, and that Mr. Currie would be paid. With this representation, Mr. Currie signed a discharge of mortgage, although that discharge has apparently made it into Mr. Fuoco’s hands and otherwise never seen the light of day. [ 20 ] The lawyer also requested a payout statement from Mr.

Fuoco, and he provided one, saying that the mortgage could be discharged for $75,000, and agreed that the balance which was approximately $145,000 in principal, but also there was much accrued interest, would be dealt with by way of a new promissory note for $160,000. [ 21 ] Mr. Fuoco apparently did not tell Mr. Currie any of this. Mr. Currie was simply waiting to get paid out in full, having sent a discharge of mortgage. [ 22 ] However, the Craigs believed that they made an arrangement to discharge the first mortgage to Mr.

Currie by payment of $75,000 and by signing the new promissory note, although the original has not been located and the copy of the note that is now available only shows two out of three signatures. [ 23 ] Eventually Mr. Currie became involved personally and decided to sue on the mortgage, which was still registered on title to the Edmonton property, despite requests being made by counsel for the Craigs to have it discharged. Those requests were made of Mr. Fuoco. [ 24 ] The limitation period for suiing on the mortgage, based upon its due date, would have been in March 2013. [ 25 ] In Mr.

Currie’s foreclosure proceedings, which set out the facts asserted by the Craigs, described above, they acknowledged

the initial mortgage, but they asserted that they were entitled to discharge of it. They also acknowledged the existence of the new$160,000 promissory note. The new note specifically charges the Edmonton property as security for the debt. [26] Counsel for Mr. Currie asked counsel for the Craigs for the documents that supported the position taken by the Craigs, and hesent them. He attached them to an email of September 24, 2013. He attached copies of the promissory note, the mortgage statement fordischarge purposes from Mr. Fuoco’s company, the letter forwarding the $75,000 amount, and an email from Mr.

Fuoco dated April 18,2013 which confirmed the basics of the mortgage discharge agreement and the Craigs’ compliance with it. [27] However, the proceedings were brought in the foreclosure action only to enforce the mortgage. Before Master Schlosser inDecember, 2014, Mr. Currie’s position prevailed. Accordingly, Mr. Currie’s counsel saw no reason to amend the claim to make anyclaim on the promissory note that Mr. Currie had previously had nothing to do with. [28] However, the master’s decision was appealed to a Justice of the Court of Queen’s Bench in January 2016, and it was reversed. Mr.

Currie appealed to the Alberta Court of Appeal, and the Chambers judge’s decision was upheld in February 2017. [29] The day before the hearing before the Court of Appeal Mr. Currie’s counsel filed an application to amend the claim to seekrecovery, in the alternative, on the $160,000 promissory note. At about the same time I he filed a caveat asserting a charge on the land asset out in the note. At that point the property was owned by Brent Craig, Wes Craig, and Karen Craig. It had previously been owned byBrent Craig and Anna Craig, but it appears to counsel for Mr.

Currie that the Toronto Dominion Bank required additional covenantorsfor their mortgage, and as a result there was a transfer of land, bringing in Wesley Craig and perhaps Karen Craig, but Anna Craigceased to be an owner, and so she was not expected to sign the new mortgage to the TD Bank or the new promissory note. [This needs tobe straightened out. The note was signed by Anna, Brent and Wes]. [30] Counsel for Mr. Currie believes that the new promissory note payable to his client was probably signed before the newmortgage to the TD Bank. [31] Counsel for Mr.

Currie has filed a fresh application for an amendment, claiming an “equitable mortgage”, and he is also fileda second caveat on the title. He acknowledges that same basic limitation issue applies to both applications and both caveats, so there isno separate application underway dealing with the second caveat. [32] Mr. Currie argues that any uncertainty in the application of limitations is to be resolved in favour of the party whose claim isat risk of being lost: Toronto Dominion Bank v Letendre, 2012 ABQB 323, 2012 CarswellAlta, at paragraph 24.

At paragraph 43 theCourt said that it is trite law that, “limitations statutes and provisions are restrictive in nature and attract strict

interpretation”. [33] That decision was upheld by the Court of Appeal at 2014 ABCA 232, 2014 CarswellAlta 1133, and on the appeal the Courtfocused specifically on the words in section 3(1)(a)(iii) of the Limitations Act which requires that the “injury”, assuming liability on thepart of the defendant, “warrants bringing a proceeding”. The Court distinguished Novak v Bond, (SCC), [1999] 1S.C.R. 808, where the Supreme Court of Canada was considering British Columbia’s limitations legislation, which contains differentwords.

In B.C., time will not run until a reasonable person “acting reasonably in light of his or her own circumstances and interests could– not necessarily should – bring an action.” The words of s. 6(4) of B.C.’s Limitation Act is as follows:

(3) Time does not begin to run against a plaintiff with respect to an action referred to in subsection (3) until the identity of the defendantis known to the plaintiff and those facts within the plaintiff’s means of knowledge are such that a reasonable person, knowing those factsand having taken the appropriate advice a reasonable person would seek on those facts, would regard those facts as showing that (

a) an action on the cause of action would, apart from the effect of the expiration of a limitation period, have a reasonable prospect ofsuccess, and (

b) the person whose means of knowledge is in question ought, in the person’s own interests and taking the person’s circumstances intoaccount, to be able to bring an action. [34] In Alberta the time runs from the date when bringing an action is “warranted.” Subsection 3(1)(a)(iii) of the Limitations Actsays time runs when (among other things) the claimant learns “that the injury, assuming liability on the part of the defendant, warrantsbringing a proceeding”. [35] Letendre dealt with a subsequent mortgagee “piggybacking” on the foreclosure proceedings brought by a prior-registeredmortgagee.

The Court addressed the Law Reform Institute’s comment on the proposed amendments to the limitations legislation inAlberta, in which they explained that “the discovery period will not begin until the claimant first knew that his injury was sufficientlyserious to have warranted bringing a proceeding, that is, there must be relatively serious harm.” [36] The Court concluded that a subsequent mortgagee did not need to commence foreclosure proceedings on its mortgage whenthe first mortgagee was taking proceedings, the borrower was not making any payments to anyone, and it was clear that the firstmortgagee would be paid out, and after dealing with an intervening caveat, the subsequent mortgagee would be entitled to the surplus.The Court found that parallel duplicative proceedings were not warranted. [37] The circumstances here are said to be significantly different.

Suing on the promissory note would not necessarily beduplicative. As the facts ultimately came to be understood, following the decision of the Chambers judge and the Court of Appeal, suingon the promissory note is the only road to success. The defendants argue that there was no certainty that Mr. Currie was going to getpaid on his first mortgage, and when their counsel sent to Mr.

Currie’s counsel the critical documents, it should have been clear that notgetting paid under that first mortgage, which the Craigs said had been fully satisfied, was the more likely outcome. [38] Based on this approach, the Craigs argue that the time for suing on the promissory note began running on September 24,2013, when the Craigs’ lawyer sent the documents to Mr. Currie’s lawyer. Mr. Currie’s response is that until at least the Chambers Judgereversed the Master’s decision, reorganizing the nature of the claim was not warranted. The Master’s decision was final, subject only to

appeal. It was not until at least the Chambers Judge reversed that decision that there was any need to modify the claim, and accordingly he argues that the nature of the injury (nonpayment of the debt) did not warrant bringing a proceeding. Since that occurred in January 2016, the limitation period would run in January 2018. [ 39 ] Furthermore, he argues that section 6(2) of the Limitations Act specifically allows, in certain circumstances, a claim to be added to a proceeding previously commenced.

Since the plaintiff does not plan to add or substitute either a claimant or a defendant, or change the capacity in which the claimant sues or the defendant is sued, the applicable condition is that, “the added claim must be related to the conduct, transaction or events described in the original pleading in the proceeding.” [ 40 ] The applicable parts of the

section are these: Claims added to a proceeding 6

(1) Notwithstanding the expiration of the relevant limitation period, when a claim is added to a proceeding previously commenced, either through a new pleading or an amendment to pleadings, the defendant is not entitled to immunity from liability in respect of the added claim if the requirements of subsection (2), (3) or (4) are satisfied.

(2) When the added claim (a) ..., or (

b) does not add or substitute a claimant or a defendant, or change the capacity in which a claimant sues or a defendant is sued, the added claim must be related to the conduct, transaction or events described in the original pleading in the proceeding.

(3) When the added claim adds or substitutes a claimant, or changes the capacity in which a claimant sues, (

a) the added claim must be related to the conduct, transaction or events described in the original pleading in the proceeding, (

b) the defendant must have received, within the limitation period applicable to the added claim plus the time provided by law for the service of process, sufficient knowledge of the added claim that the defendant will not be prejudiced in maintaining a defence to it on the merits, and (

c) the court must be satisfied that the added claim is necessary or desirable to ensure the effective enforcement of the claims originally asserted or intended to be asserted in the proceeding. (4) ....

(5) Under this section, (

a) the claimant has the burden of proving (

i) that the added claim is related to the conduct, transaction or events described in the original pleading in the proceeding, and (ii) that the requirement of subsection (3)(c), if in issue, has been satisfied, and (

b) the defendant has the burden of proving that the requirement of subsection (3)(

b) or (4)(b), if in issue, was not satisfied. [ 41 ] Mr. Currie argues that he is still suing for the same debt. He has never been paid. The capacity in which he sues is the same. He is the creditor, the principal behind the rogue agent.

He acknowledges that he may be stuck with the payment of the $75,000 amount to his fraudulent agent, but the remaining $160,000 due on the promissory note is essentially the balance of the original claim, rounded somewhat to reflect the accrual of interest. [ 42 ] Accordingly, he argues that the claim that he now wishes to add is “related to the conduct, transaction or events described in the original pleading in the proceeding ”. [ 43 ] He refers the court to McDonnell v Csaki , 2014 ABQB 452 , at para. 41 , citing Calgary Mack Sales Ltd v Shaw , 2005 ABCA 304 , 380 A.R. 195 for the proposition that the requirement for adding a claim is that the added claim “be related to the conduct, transaction or events described in the original pleading”.

This is a very broad test. It was “related to the [original loan] transaction”. [ 44 ] Here, he points out that everything arose out of the same advance of funds. There was no new advance of funds even under Mr. Fuoco’s fraudulent renegotiation. The arrangement was simply that a different form of security would be taken, being only a promissory note, with a charging clause, rather than a mortgage as well as a promissory note. [ 45 ] Mr.

Currie also refers to Divestco Inc v Devon Energy Corporation , 2011 ABQB 750 which also cited Calgary Mack Sales as well as to earlier cases for the proposition that “related to” has a very broad meaning.

Although in Divestco the proposed amendments related to a distinct agreement that was entered into three years after the original agreement sued upon that formed the basis of the original claim, Master Mason said (at para. 19), “simply because a new contract is referenced, does not necessarily mean the new claims are not related to the conduct, transaction, or events of the original pleading”, citing Dow Chemical Canada Inc v Nova Chemicals Corp , 2010 ABQB 524 , 495 A.R. 338, at para. 85 . [ 46 ] Mr. Currie also refers to Royal Trust Corporation of Canada v The Lodge at Waterton Lakes Inc. , 2005 ABQB 775 .

In that

case Royal Trust applied to amend its claim to add the third party who had bought an interest in the property secured to the plaintiff but not registered the title in its name. The property was owned by the general partner of a limited partnership, and it was that general partner that granted the general security agreement and an assignment of rents. The property became part of a joint venture agreement between the limited partnership and another company.

Yet another company, called Tourism Capital, acquired all of the shares of that second company, all of the shares of the general partner, and all of the units of the partnership. It then immediately assigned the rights to the proposed new defendant. The proposed new defendant then made mortgage payments for over two years.

Royal Trust wanted to add that new defendant even though it was not on the title, and had not signed the loan agreement. [ 47 ] At paragraphs 42 and 43, Master Hanebury noted that the original statement of claim cited the security agreements, including a mortgage, guarantees and assumption agreement and at the joint venture agreement. It asked for judgment against the defendants for the debt, and in the alternative, a sale of the asset and judgment for any deficiency.

The proposed new claim was in relation to the same property, it sought judgment for the same amount pursuant to the same mortgage and assumption agreement, and the conduct complained of was the same as that alleged against the new proposed defendant, which was the failure to pay the amount outstanding. [ 48 ] The Court noted that, “[t]he proposed amendments seek to continue the chain of events described in the statement of claim to include the involvement of [the proposed new defendant] in the business venture of the defendants.” She allowed the amendment (other than an amendment to change the interest rate claimed, for which the plaintiff offered no evidence in support). [ 49 ] Mr.

Currie further argues that the amendment should be allowed, at the very least, so as to permit a set-off against damages claimed by the Craigs. He argues that since his claim is made in response to a defence and counterclaim which have raised the promissory note, the proposed new amendment is, in a sense, a counterclaim to a counterclaim. Section 6(2)(

a) allows a claim to be advanced where it “is made by a defendant of the proceeding against a claimant in the proceeding”, and that in this context the plaintiff is the defendant by counterclaim and thus the requirement is satisfied. However, that is not the actual amendment that he proposes to make (counterclaim to a counterclaim), but rather the proposal is to amend the original claim. [ 50 ] The question is then whether the events here are sufficiently or related to the original claim as to justify an amendment, notwithstanding the argument that the limitation period has otherwise passed. [ 51 ] Mr.

Currie acknowledges that he did not sue for a monetary judgment in the original statement of claim, although he does sue now, since the mortgage has been taken off the title. [ 52 ] The Craigs argue that these are two separate agreements. The mortgage related to a $220,000 loan that was registered against the land. The new loan increased the debt slightly, and the note that was given had slightly different parties. The original mortgage was to be discharged, as it eventually was by virtue of the order of the Chambers Judge, and the new loan is for $160,000.

Although there is a debate as to exactly how much interest had accrued, the actual balance owing under the original loan is not precisely the same as the $160,000 set out in the promissory note. [ 53 ] As is proposed to be pled in the amended amended statement of claim, this is an alternative claim, which the Craigs say must be a different claim. Otherwise it would not be made in the alternative. Mr.

Currie was specifically put on notice that his mortgage had been paid out by the $75,000 payment plus the promissory note, and having being put on notice of the activities of his agent he chose not to sue on the new note. He now wants to sue on this new claim in the alternative. [ 54 ] The Craigs refer to Singh v Kaler , 2009 ABQB 632 , 2009 CarswellAlta 1933, where a party had been served with an originating notice of motion and a supporting affidavit in 2006 disputing his claim that he had an interest in land.

At paragraph 37 of the decision, Master Laycock said, “at that time he had all the information necessary to understand that he had a claim, that the claim was against the owners and that a proceeding was warranted.” This case is put forward to suggest that knowledge of the dispute places a claimant in a position where he or she knows that seeking a remedial order is “warranted”.

This is argued to be a different circumstance than existed in Letendre , where the Court of Appeal recognized that a claimant could have sued, but the particular circumstances (foreclosure proceedings were underway by a prior mortgagee) meant that circumstances did not “warrant” a suit. The “certainty” that was present in Letendre is said to be a critical difference. [ 55 ] The Craigs argue that Hur v 726913 Alberta Ltd , 2013 ABQB 208 , 2013 CarswellAlta 2963 is on all fours with the facts here. The claim was advanced based on an asset purchase agreement, and shortly before an application for

summary dismissal the plaintiffs applied for leave to amend their statement of claim to very substantially recast it, to described the asset purchase agreement as essentially only a preliminary event, and sue on a share purchase agreement. More than two years had run since the time for suing on the share purchase agreement was available. [ 56 ] The Court noted, at paragraph 51, that the reference in section 6(2)(

b) of the Limitations Act to “the original pleading in a proceeding” requires that an added claim relate to the conduct, transaction or events described in either the Statement of Claim or, where relevant, the Originating Application. The Plaintiffs cannot rely, for the purposes of satisfying section 6(2)(b), upon the Defendants’ reference in the statement of defence to the share purchase agreement.

The Amended Claim must relate to the conduct, transaction or events described in the Statement of Claim. [ 57 ] The Court recognized previous case law stating that the requirement that something be “related to” something else should be determined liberally. However, at paragraph 54, the Court concluded that the two claims were not sufficiently related. The Court said: The difficulty in the Plaintiff’s’ position is that they are not seeking merely to add to a claim, which is what section 6(2)(

b) permits. Rather, they are seeking to substitute one claim for another, but advancing a new set of facts is the basis for the claim, and by abandoning the set of facts alleged as the basis for the original claim in the statement of claim. The asset purchase agreement need not have been mentioned at all in the amended claim. It is superfluous to the allegations in the amended claim, contributing nothing more than collateral, background narrative.

[ 58 ] The Court went on to say that although the Asset Purchase Agreement might be viewed as part of an overall chronology of events that included the Share Purchase Agreement, that is not enough to support a conclusion that a claim arising from one is “related to” a claim arising from the other, thereby satisfying section 6(2)(b). [ 59 ] The Craigs argue that that is exactly the same as has happened here.

The original mortgage is now merely “collateral background narrative”, and need not even have been mentioned in a claim based on the $160,000 promissory note. [ 60 ] The Court of Appeal commented, in Desoto Resources Ltd v Encana Corp , 2010 ABCA 110 , 2010 CarswellAlta 616, at para. 8 that the determination of whether new pleading arises from the same “conduct, transaction or events” requires an assessment of the whole factual and legal context. “No firm line can be drawn between unrelated new claim, and what has previously been pleaded.

Too general a definition would give the plaintiff an unlimited ability to add statute barred claims”. In that case, the Court commented on the relevance of prejudice, at paragraph 10:

Section 6 allows the addition of new claims because the defendant will not be prejudiced or surprise since they arise out of the same conduct, transactions and events. Therefore, one test of whether a new claim is involved is to examine the extent to which a new set of conduct, transactions and events would have to be proven at the trial.

The documents and other evidence that would be needed to prove the appellant’s new allegations would differ significantly from those required to prove the originally pleaded facts. [Emphasis added.] [ 61 ] Having noted that the misrepresentations proposed to be sued upon were made to different persons at different times in different contexts, the Court had little difficulty in concluding that the proposed amendments were not sufficiently connected to the original pleading.

Analysis [ 62 ] In my view, the fact of the successful appearance before Master Schlosser made it clear to the plaintiff, at that time, that amending the claim to seek recovery on the replacement promissory note was not then “warranted”. The Master’s decision was final unless it was reversed. [ 63 ] Although it was later reversed, that did not re-write history.

Although it might have been a cautious step to apply earlier for an amendment to add the replacement note as an alternative claim, it was not necessary. [ 64 ] As stated in Letendre , “limitations statutes and provisions are restrictive in nature and attract strict

interpretation”. Although the claim could have been amended earlier to add the replacement promissory note claim in the alternative, that is not the test in Alberta. [ 65 ] Furthermore, the debt is the same debt. Mortgage loans are often re-financed with the same financial institution. A renewal agreement is generally signed when a mortgage matures, sometimes at a different rate of interest with a different term, but sometimes the land has been transferred since the money was first lent and the mortgage is renewed with completely new owners as borrowers. It has new terms, and new borrowers. But it is the same debt, just assumed by new debtors. [ 66 ]

Section 58 of the Land Titles Act , RSA 2000 c. L-4 deems a covenant to be given to pay the mortgage debt, unless it is negatived under

section 59 . The deemed covenant to pay the debt that occurs on a transfer of land is a common event. No one would suggest that a new debt results. [ 67 ] Similarly, the change of terms and owners/borrowers here did not make it a new debt. [ 68 ] This is not a case such as Hur where the claim has been completely re-cast. In Hur a breach of a completely different kind of agreement was proposed to be asserted in place of the original claim. Conclusion [ 69 ] For these reasons, the amendment is allowed.

A remedial order was sought on this debt in time, and the proposed amendment seeks recovery on a claim that is related to the transaction described in the original claim.

Furthermore, the amendment to specifically make a claim on the replacement promissory note was not warranted until after the Justice reversed the decision of Master Schlosser, which was less than two years prior to the application to amend. [ 70 ] The amended amended statement of claim is required to be filed within two weeks of the date the order reflecting this memorandum is filed, and served within a week thereafter. [ 71 ] I compliment counsel for their arguments, made in morning chambers, on this interesting matter. [ 72 ] If the parties cannot agree on costs, they may contact the Masters’ Chambers clerk to arrange to address the Court.

Heard on the 1 st day of June, 2017. Dated at the City of Calgary, Alberta this 11 th day of July, 2017.

A. R. Robertson, Q.C. M.C.C.Q.B.A. Appearances: Ryan Pelletier Pelletier Litigation for the Applicants (Defendants) Anthony J. Di Lello Fric, Lowenstein & Co. LLP for the Respondent (Plaintiff)