VirtualLEDGER Inc v Neilson, 2021 ABQB 458

Court of Queen’s Bench of Alberta Citation: VirtualLEDGER Inc v Neilson, 2021 ABQB 458 Date: 20210611 Docket: 1401 06770, 1401 10843 Registry: Calgary Between: VirtualLEDGER Inc. Plaintiff - and - J. Russ Neilson Defendant And Between: Christopher Nadeau Plaintiff - and - J. Russell Neilson also known as James Russell Neilson Defendant

_______________________________________________________ Reasons for Judgment on Appeal from Judgment of Master J.R. Farrington of the Honourable Mr. Justice G.H. Poelman _______________________________________________________ Table of Contents I. Introduction . 2 II. Facts . 3 A. Relationship Between the Parties . 3 B. Communications Prior to Agreement 4 C. Drafts of the Agreement 8 D. Neilson’s Property . 9 E. Procedural History . 10 III. Decision of the Master 10 IV. Standard of Review .. 11 V.

Summary Judgment 11 VI. Analysis and Findings . 11 A. Introduction . 11 B. Unilateral Mistake . 12 C. Certainty . 15 D. Applicability of Dower Act 16 VII.

Summary of Conclusions . 19 I. Introduction [ 1 ] This appeal from the learned master’s

summary judgment decision involves competing claims to security against a residential property in Canmore known as Benchlands. [ 2 ] Mr. Neilson and his company gave security to VirtualLEDGER Inc. (“VirtualLEDGER”) against their personal property and interests in land, excepting land covered by the Dower Act , RSA 2000, c D-15 . A subsequent encumbrancer registered a charge against Benchlands, for which Mr.

Neilson’s wife gave a dower consent. [ 3 ] The issues are whether the dower exclusion is, as a matter of contract law, part of the parties’ agreement and enforceable; and if so, whether the Benchlands property and proceeds from its judicial sale would in any event be covered by the Dower Act . [ 4 ] The evidence before the master and before me is an affidavit by Michael Mauws, sworn April 5, 2019; two affidavits by Mr. Neilson, affirmed September 15 and October 27, 2017; the transcript of Mr. Neilson’s cross-examination on his second affidavit, conducted on March 18, 2019; and Mr.

Neilson’s undertaking responses arising from the cross-examination. II. Facts A. Relationship Between the Parties [ 5 ] Mr. Neilson was a professional accountant. He provided network-based accounting services to clients through a numbered company operating as ABACA Solutions (“Abaca”).

[ 6 ] In December 2012 and January 2013, the parties made two contracts between Mr. Mauws, ultimately through VirtualLEDGER, and Abaca. The first was a “Confidential Non-Disclosure Agreement.” The other was “Advisory Board Agreement” through which consulting services were provided to Abaca and to Mr. Neilson as chief executive officer. In February and July 2013, VirtualLEDGER purchased a total of fifty common shares in Abaca. [ 7 ] Mr. Neilson states in his affidavit that he had a personal relationship with Mr.

Mauws and, in his cross-examination, testified that he considered him a friend. [ 8 ] By late 2013 and through the spring of 2014, Mr. Neilson and Abaca encountered personal and financial difficulties. These came to include conflict with Mr. Mauws, who expressed concerns about Abaca’s affairs, demanded funds he claimed were owed for consulting services and threatened to disclose what he knew about Abaca to other shareholders – something Mr.

Neilson considered a breach of his confidentiality obligations. [ 9 ] These conflicts led to an agreement by which Abaca would repurchase the shares held by VirtualLEDGER, entitled “Agreement to Purchase Shares and General Release” (the “Agreement”). It compromises about four and a half pages and contains recitals, seventeen numbered headings and places for execution – which were signed by Mr. Neilson for himself and Abaca and Mr. Mauws for VirtualLEDGER. [ 10 ] Clause two of the Agreement provided for sale of the Abaca shares owned by VirtualLEDGER to Mr.

Neilson, effective March 28, 2014, for a total price of $200,000.

The amount was payable by $5,000 upon execution, $95,000 on or before April 11, 2014 and the balance of $100,000 on or before April 30, 2014. [ 11 ] The same clause two contains the following provision: As security for the performance of all of Neilson’s obligations hereunder, Neilson grants to the Shareholder a security interest in all of Neilson’s present and after acquired personal property and any interests in land held by Neilson, excepting land covered by the Dower Act , and the Shareholder is hereby authorized to make such registrations as is necessary to give effect to such security interests. [ 12 ] Clause three contains what are referred to as mutual releases, in which each party releases the other from “any and all manner of claims” which it may have against the other “for, upon or by reason of any matter dealing with the subscription for the ABACA Shares.” [ 13 ] The Agreement contains a number of representations and warranties and other clauses that are not in issue.

Clause fourteen provides that each provision will be interpreted “in such manner as to be effective and valid” but goes on to provide that if any provision is unenforceable, it will not affect any other provision “but this Agreement will be reformed, construed, and enforced in such jurisdiction as if such invalid, illegal, or unenforceable provisions had never been contained herein.” B. Communications Prior to Agreement [ 14 ] The communications leading to the Agreement are contained in a lengthy email exchange. In their submissions, the parties focused on several emails.

I reviewed them all for a full understanding of the context. There is a gap between emails on March 7 and the March 26, 2:07 email. [ 15 ] The following is a point-form

summary, with quotations, of the email communications giving rise to the signed agreement:

a) Mauws to Neilson, cc various persons, including Stephanie Neilson (Mr.

Neilson’s wife), subject “The Commitments,” March 6, 9:04 a.m.: Writing to remind Neilson of commitments made at a meeting the previous week and a later text “suggesting that I could expect to see very soon a copy of a tentative agreement to refund monies I paid to Abaca.” Complains of breaking commitments, losing trust, and being convinced “that you either need a very good doctor/counsellor or a very good lawyer,” explaining why he took “the extraordinary step of cc’ing this message to your wife.” Adds that if his wife is not already aware of his conduct, she might help him get professional help, and if she is unaware of his unpaid bills and failure to communicate with those who invested their savings, then she might need a good lawyer as well.

Says he needs some demonstration that he is serious by noon Friday (the next day) or he will be contacting other shareholders to determine other options.

b) Neilson to Mauws, cc to others, March 6, 4:11 p.m.: Encloses an agreement to buy back the shares, proposing to present to each of the shareholding parties who invested “with an eye on US expansion,” inviting input on the document. Attaches draft agreement between Abaca and shareholder, price left blank.

c) Mauws to Neilson and Neilson to Mauws, cc’s by Mauws to Janke and Stephanie Neilson, March 7, various times: Mauws demanding concrete steps, including payment of outstanding fees, by end of day, failing which he will pursue all available legal remedies against Neilson and Abaca, “including your conditionally sold house” in Canmore and would “happily start sharing what I know about Abaca with [other shareholders].” Demands payment if Neilson wants him to cease communications about Abaca. Neilson responds in brief emails, expressing desire for further communications, and wanting share repurchase finalized as a priority. Invites comments on the agreement.

d) Janke to Neilson, cc Mauws, subject “Share Purchase and Release (Revised),” March 26, 2:07 p.m.: Encloses black line and clean copy of agreement “that contemplates you purchasing the shares with a staggered payment of the purchase price” and asks, if satisfied with revisions, to return signed copy. Attachments are “share purchase agreement and release,” v4 to v5, and v5.

e) Neilson to Janke, cc Mauws, March 26, 3:48 p.m.: Minor formatting, spelling comments, “only had a chance to cast a quick glance at the document.”

f) Neilson to Janke, cc Mauws, March 26, 3:49 p.m.: Text of email hidden, two attachments of agreement: v5 to v6, and v6.

g) Janke to Neilson, cc Mauws, March 26, 5:48 p.m.: Makes suggested changes, adds new black line and clean copies.

h) Mauws to Janke, cc Neilson, March 28, 1:27 p.m.: Requests Janke to remove references to the US expansion, and send revised version to Neilson. Some of text hidden.

i) Janke to Mauws, cc Neilson, March 28, 1:38 p.m.: Makes some requested changes to the recitals.

j) Mauws to Janke and Stephanie Neilson, cc Neilson, March 28, 5:01 p.m.: Relevant parts as follows: We’d previously agree that you would provide me with the funds and a signed agreement by 2:00 p.m. today. The funds appear to be in my bank account. However, it’s now 5 and I’ve not yet received the agreement from you nor have you provided any explanation . . . . By not following through with your commitments (again), you’re putting me in an awkward situation. Russ, I really don’t want to do anything that would undermine the transaction you currently have in the works.

However, if I don’t receive a signed purchase agreement today, I will be terminating our advisory agreement and contacting all the shareholders I know to say as much. I will also take that opportunity to share with them some of my concerns about Abaca and its management.

k) Stephanie Neilson to Mauws, cc Janke and Neilson, March 28, 6:41 p.m.: States she spoke with Neilson on the phone, indicates he’s returning to Canmore, has been traveling and meeting all afternoon, and advises he will contact Mauws to finalize and sign agreement when he gets home.

l) Neilson to Janke, cc Mauws, March 28, 7:49 p.m.: Advises just getting on computer, notes a reference to US expansion they had agreed to remove. Then states: I do not see why there is a security interest paragraph now. It opens up complications of Dower Act . However, if there is going to be security, then the agreement will need to be considered as finalized and binding in entirety on both parties effective the date of signature. Also refers to a need to have shareholder (that is, Mauws) undertake to destroy or return information.

m) Mauws to Neilson, cc Janke, March 28, 8:52 p.m.: “Wish you’d raise these points earlier given that you knew the time frame, but so be it.” Reference to US expansion can be deleted, but “the security interest is absolutely necessary precisely because the agreement becomes binding as of the effective date.” Will return requested materials. “I trust this satisfies your concerns. If so, please indicate as much so that Michael can make the changes and we can finalize this transaction.”

n) Neilson to Mauws, cc Janke, March 28, 9:06 p.m.: “I will re-read and see why I had a concern regarding the point at which the agreement becomes binding.”

o) Mauws to Neilson, cc Janke, March 29, 10:24 a.m.: Revised version of the agreement attached (attachment titled “Share Purchase Agreement and Release (v6).” Email indicates no longer a reference to US expansion, closing date changed to Monday, please sign and return. (It is unclear whether Mr. Mauws made these changes, or received them from Mr. Janke in an email that is not in evidence.)

p) Neilson to Mauws, cc Janke, March 29, 3:04 p.m.: Indicates has read document, “I’m having difficulty understanding the wording of the security paragraph.” Says he understands the desire for protection if payment not made, but “the wording would suggest to me, as a lay person, this is a much broader clause” and asks if Janke could provide an explanation of what the paragraph means.

q) Janke to Neilson and Mauws, March 29, 3:16 p.m.: Advises as follows: If Russ breaches the Agreement by failing to make a payment when required, VirtualLEDGER is entitled to take action to realize the default amount by having a Civil Enforcement Agent seize and sell property owned by Russ. VirtualLEDGER is entitled to register its lien(

s) immediately to protect its interest/priority, and is obliged to discharge them once the contract is completed.

r) Neilson to Mauws, cc Janke, March 29, 3:18 p.m.: Explains how he understands document, notes difference between effective date (March 25) and closing dates (March 31), and asks why releases apply only on April 30, 2014, asks for clarification.

s) Janke to Neilson and Mauws, March 29, 3:20 p.m.: “The Release is not effective until VirtualLEDGER is paid in full. If released before you paid, the Release would prevent VirtualLEDGER from collecting.”

t) Neilson to Janke, cc Mauws, March 29, 3:23 p.m.: “So which of the clauses/undertakings become effective on March 25.”

u) Mauws to Neilson, cc Janke, March 29, 3:39 p.m.: Asks if he would be satisfied if clauses 8 and 9 were effective immediately.

v) Neilson to Mauws, cc Janke, March 29, 3:49 p.m.: Would be comfortable if 7, 8 and 9 were effective immediately; “I’m not comfortable with a security clause that would allow liens/registrations prior to default on my part.” Indicates he will pick up the thread later, has to go into Calgary for computer repairs.

w) Mauws to Neilson, cc Janke, March 29, 3:54 p.m.: Indicates has altered those clauses as requested, but for security, registration is required to maintain priority and is also common practice, as with home mortgages. Sees no reason to alter this clause, looks forward to receiving a signed agreement. Attaches a document described as “Share Purchase Agreement and Release (v7).”

x) Neilson to Mauws, cc Janke, March 29, 8:32 p.m.: “I am waiting for a response from my lawyer on the last version.”

y) Mauws to Neilson and Stephanie Neilson, cc Janke, March 30, 8:43 a.m.: Don’t know whether your lawyer works on Sundays, Russ, but if not, I wouldn’t bother running the agreement past her/him. I’m done

making change. I am also done with your games and delays, Russ. It’s painfully obvious you have no intentions of signing the agreement or, if you do intend to sign, you’ll only do so if you think you can weasel out of paying the money that’s due. (Why else the concern with security?) So rather than waste my time and Michael’s time, I’m going to proceed with my original plan to work with all of the other shareholders and aggrieved parties to retrieve my money. I’m off to the hill to snowboard today, Russ. If there’s a signed agreement waiting for me upon my return, perhaps we can proceed.

But if it’s not there this afternoon, please don’t waste my time by asking for more time to come up with new reasons not to sign . . .

z) Neilson to Mauws, cc Janke, subject “Revision 8,” March 30, 3:47 p.m.: Echoes sentiments that “it is in our interest to put this behind us and focus on the future,” indicates he attaches a revised agreement and has signed it. “By agreeing to the terms of purchase and providing security for the financial obligations there should be a transfer of rights on the Effective Date and a completed deal.” Questions whether need provisions for witness signatures, pleasantries about hoping the weather on the hill was good.

Attachment labeled “Version 8.” aa) Mauws to Neilson, cc Janke, March 30, 6:41 p.m.: Indicates unacceptable, because he said there would be no more changes, and the change “would undermine the security clause as I’d now be barred from taking action from the date of execution.” Gives until tomorrow at 8:00 a.m. to sign previous version, otherwise “I’m pursuing other remedies.” bb) Neilson to Mauws, cc Janke, March 30, 6:50 p.m.: “The intent is not to undermine the security clause. I’m not trying to play games.

Are you available to speak this evening?” cc) Mauws to Neilson, cc Janke, March 30, 7:36 p.m.: “If you’re not trying to undermine the security clause, then why make the change?” Just pay more quickly if you want the releases more quickly.

Emphasizes he has no intention of taking or encouraging any action against Neilson as long as payments made on specified dates; doesn’t want to cause harm, just wants out. “Please sign the previous version of the agreements so we can be done with this.” dd) Neilson to Mauws, cc Janke, March 31, 7:16 a.m.: “I attach a signed agreement and look forward to receiving back a signed copy.” Attachment indicates “signed.pdf.” ee) Mauws to Neilson, cc Janke, March 31, 11:07 a.m.: “Thanks for this, Russ.

I’ve signed it, scanned it, and attached a copy of it to this email.” Asks whether Neilson wants him to continue as advisor and what he can do to assist. Attachment is “Share re-purchase Agreement (Signed Copy).pdf.” ff) Neilson to Mauws, cc Janke, March 31, 11:39 a.m.: “A quick note to acknowledge receipt.” C. Drafts of the Agreement [ 16 ] The communications summarized above refer to and often attached numerous drafts of what became the Agreement. From the correspondence, I have identified the following versions of the Agreement (only two of which are in evidence):

a) Mr. Neilson sent the first draft on March 6 which is exhibited to Mr. Mauws affidavit. It seems designed for use by any shareholder selling shares back to Abaca in recognition (as stated in the recitals) that Abaca “has decided to indefinitely delay its expansion into the US market” and has therefore agreed to repurchase shares at their original subscription price. The draft includes mutual releases for “any matter dealing with the subscription for the ABACA shares.”

b) On March 26, Mr. Janke sent a revised draft agreement which appears to be version five. No copy of this document is in evidence, and the evidence contains no information on what changes were made between Mr. Neilson’s first draft and version five. Later that day, Mr. Janke made several minor formatting and spelling changes, generating a new draft.

c) On March 28, at Mr. Mauws request, Mr. Janke sent a new draft which removed some references to the US expansion (but apparently not all).

d) On March 29 at 10:24 a.m., Mr. Mauws sent a revised draft to Mr. Neilson which removed the remaining references to the US expansion and set a new closing date. Again, there is no copy of this document in evidence.

e) On March 29 at 3:54 p.m., Mr. Mauws sent version seven of the agreement to Mr. Neilson, apparently changing some effective dates but leaving the early registration date for security as it was. Again, we do not have a copy of this draft in evidence.

f) On March 30, Mr. Neilson sent revision eight. Again, a draft is not in evidence, but from the other evidence it can be inferred that Mr. Neilson made all provisions (including the releases) effective March 25.

g) The final version, which of course is in evidence, was exchanged and signed by both parties on March 31. [ 17 ] From the above, there appear to be at least seven versions referred to in the correspondence. In addition, there would have been changes between March 6 and March 26, a period for which there is no correspondence in the evidence. Only two versions are in evidence: the first one by Mr.

Neilson on March 6, and the second, the executed copy which appears to have been the March 29 3:54 p.m. document (version seven) with the added dower exclusion. [ 18 ] From correspondence, it can be inferred that the March 26 2:07 p.m. version included security for the staggered payment of VirtualLEDGER’s shares, because of how Mr. Neilson responded on March 28 at 7:49 p.m. The covering note for the March 26 draft indicates introduction of staggered payments but does not mention a new clause for security.

However, it indicates that clean and blackline versions are attached (although those are not in evidence). [ 19 ] Later exchanges and communications focus on removing references to the delayed US expansion and the various dates in the

Agreement – whether registration of securities should be permitted only on default and whether the releases should become effective immediately, along with the other parts of the Agreement. [ 20 ] The central issue between the parties concerns the last paragraph of clause two, the clause entitled “Purchase of ABACA Shares”, which is generally referred to as the security clause.

It is quoted above, but repeated here for ease of reference: As security for the performance of all of Neilson’s obligations hereunder, Neilson grants to the Shareholder a security interest in all of Neilson’s present and after acquired personal property and any interests in land held by Neilson, excepting land covered by the Dower Act , and the Shareholder is hereby authorized to make such registrations as is necessary to give effect to such security interests. [ 21 ] The words “excepting land covered by the Dower Act ,” which I refer to as the “dower exclusion,” was added by Mr.

Neilson to the version he signed and sent on March 31. In his second affidavit, he states that March 29 and 30 were a Saturday and Sunday and he was unable to get legal advice. He advised Mr. Mauws and Mr. Janke on March 29 that he wanted legal advice, but they imposed deadlines which prevented him from doing so. He inserted the words, he said in his affidavit, in the absence of legal advice and intending to protect his wife’s interest in the property. Mr. Mauws stated that he signed the Agreement believing it was the same as the previous version seven. D.

Neilson’s Property [ 22 ] The security clause does not refer to any specific property. Rather, it grants “a security interest in all of Neilson’s present and after acquired personal property and any interests in land held by Neilson.” [ 23 ] The record indicates that as of the time the Agreement was executed, Mr. Neilson owned two residential properties in Canmore: one known as Benchlands (purchased in August 2013) and the other as Cougar Point (purchased in 2012 or 2013 and sold in early 2014 with a closing date of April 30, 2014). Presumably Mr. Neilson also owned various forms of personal property.

There is no indication in the evidence that any of this property, real or personal, was of specific interest during the negotiations nor was there any form of disclosure requested or given. [ 24 ] According to Mr. Neilson’s second affidavit, he discussed home equity loans with Alpine Credits Limited and Aaron Acceptance on June 16 and 17, respectively. He dealt with their recommended lawyers. With respect to both potential lenders, he states that “as my wife was not in Canada and in order to expedite the signing of documents, I agreed to sign Dower Consent forms that were not correct.

This was a mistake” (paras 20 and 22), although only one of these dower consent forms is in evidence. Neither lender provided loans. [ 25 ] On June 26, 2014, Christopher Nadeau provided bridge financing of $65,000. It was secured by an interest in Benchlands for which Ms. Neilson provided dower consent. Mr. Neilson states that he used a law firm of his own choosing for this transaction, and became aware of “the mistake” made with respect to the potential home equity lenders and thereafter made efforts to correct it. E. Procedural History [ 26 ] Mr.

Neilson’s financial difficulties and the collapse of his accounting business led to creditors enforcing charges against his property. In registered order, the remaining encumbrances are the following:

a) Caveat by VirtualLEDGER relating to the Agreement, June 20, 2014;

b) Aaron Acceptance Corporation Mortgage, June 30, 2014;

c) Alpine Credits Limited Mortgage, July 7, 2014;

d) Royal Bank of Canada writ for $116,639, now represented by the bankruptcy trustee; and

e) Mortgage to Christopher Nadeau, October 2, 2014. [ 27 ] The Benchlands property was foreclosed upon by Mr. Nadeau. After payments to prior encumbrancers (a bank and the Director of Maintenance Enforcement, relating to a prior marriage), the judicial sale resulted in funds now constituting approximately $135,000 paid into court. VirtualLEDGER seeks to recover those funds in its

summary judgment application. III. Decision of the Master [ 28 ] The proceedings before the master were framed as competing applications for priority to funds in court, paid as proceeds from Mr. Nadeau’s foreclosure on the Benchlands property. One of the applications before him was by VirtualLEDGER for

summary judgment, which he took as an application to prove its security claim summarily (para 3). Mr. Nadeau, a subsequent encumbrancer, brought a cross-application seeking a declaration that VirtualLEDGER’s security was void for non-compliance with the Dower Act . [ 29 ] The master reviewed the factual history, and found in relation to the Benchlands property, that “there is no question that Mr.

Neilson lived in the Benchlands property for at least some period of time prior to execution of the Agreement . . . on March 31, 2014” and thus, any disposition of it would require dower consent. [ 30 ] The master found that while Mr. Neilson did nothing to bring the addition of words relating to dower rights in the security clause to Mr. Mauws, he did not conceal it either. The last twenty-four hours of negotiations were contentious. Nevertheless, he found that “a quick read of the clause . . . would have easily disclosed that the clause was not as Mr. Mauws had hoped” (para 25).

[31] The master denied rectification, finding there was no agreement reached that was different from what was reduced towriting. As Ms. Neilson was not a party to the Agreement, it was clear that Mr. Neilson did not want to seek consent from her for whathe was doing (para 32). That background, in the master’s view, informed the words used in the additional dower clause. [32] The master concluded there was no basis for rectification or a claim of mistake because there was no prior agreement and noconduct that could be described as fraud or its equivalent.

The words of the Agreement had to be given their ordinary meaning, so thatthe security claim of VirtualLEDGER over the Benchlands property must fail. The unqualified charge over land sought byVirtualLEDGER was never granted. “Ironically, it may be that no land was actually encumbered by the security clause given by Mr.Neilson, but that was the extent of the clause that he was prepared to give and which he gave” (para 33). [33] The master was satisfied that the record enabled him to determine the issue of VirtualLEDGER’s security summarily and,likewise, to rule on Mr. Nadeau’s cross-application. IV.

Standard of Review [34] The standard of review on appeal from a master, on all issues, is correctness: Bahcheli v Yorkton Securities Inc., 2012ABCA 166, para 30. There is no dispute between the parties on this appeal as to application of this standard. V.

Summary Judgment [35] The cross-applications before the master were treated as competing

summary judgment applications, which would in effectdetermine priorities as between them. While VirtualLEDGER suggested in its brief the master improperly weighed evidence, neitherparty in argument took issue with the suitability of these applications for

summary judgment. [36] To paraphrase Weir Jones Technical Services Incorporated v Purolator Courier Ltd., 2019 ABCA 49, para 47, I agree thatthe record before me enables a fair determination of the issues on a

summary basis. VI. Analysis and Findings A. Introduction [37] Counsel for VirtualLEDGER made three arguments, namely: 1. The Agreement should be rectified to remove the dower provision, on the basis of unilateral mistake; 2. The dower provision cannot be enforced because of uncertainty, and can be severed from the rest of the Agreement; and 3. The Benchlands property and the funds derived therefrom are not covered by the Dower Act, and VirtrualLEDGER’s securityinterest is therefore enforceable against the funds in court. [38] I will consider each in turn. B.

Unilateral Mistake [39] As stated in Performance Industries Ltd. v Sylvan Lake Golf & Tennis Club Ltd., 2002 SCC 19, “rectification is an equitableremedy whose purpose is to prevent a written document from being used as an engine of fraud or misconduct ‘equivalent to fraud’ and isavailable as a remedy for unilateral mistake where ‘certain demanding preconditions are met’”: para 31.

The preconditions aredemanding because of the need not to open the “proverbial floodgates” to dissatisfied parties who want to extricate themselves from apoor bargain; thus, “high hurdles are placed in a way of a business person who relies on his or her own unilateral mistake to resile fromthe written terms of a document which he or she has signed and which, on its face, seems perfectly clear”: Performance Industries, para35. [40] The first precondition is proof of the existence and content of a prior oral agreement inconsistent with the executed contract,something again primarily designed to make the remedy unavailable to those who simply fail to read the documents or have later regrets:Performance Industries, para 37.

I take the reference to “oral agreement” in its broadest sense: that is, an agreement based oncommunications not reduced to a final, written, executed document. [41] The master was correct to hold that the parties never reached an agreement prior to the impugned written contract. The emailcorrespondence demonstrates tension between the parties over how broad and on what terms security would be given over property.Even though Mr. Neilson provided the first draft of a contract on March 6, a security provision was not proposed by Mr. Mauws until theafternoon of March 26. Mr.

Neilson’s concerns about the security interest were given on the evening of March 28, apparently the firsttime he reviewed the document in detail. [42] VirtualLEDGER emphasizes Mr. Neilson’s email on the evening of March 30 that “the intent is not to undermine the securityclause” but he continued to be concerned and wanted to speak with Mr. Mauws that evening (something in which Mr. Mauws apparentlywas not interested). [43] This is not a case such as Alberta Treasury Branches v Koska, (1995) (AB KB), 34 Alta LR (3d) 39

(ABQB), where there was evidence of a common continuing intention to provide guarantees, mutual mistake, and an error that was not disputed: para 35. Here, shortly before execution of the Agreement, VirtualLEDGER added security that it wanted included; Mr. Neilson had concerns about dower implications, about registration of security before default and about how the security would interact with mutual releases.

There was never an agreement between the parties to grant the type of unrestricted security interest in personal and real property that VirtualLEDGER now alleges. [ 44 ] The second precondition to rectification based on involuntary mistake is showing not only that the written document differs from the alleged prior agreement, but that Mr. Neilson “either knew or ought to have known of the mistake in reducing the oral terms to writing”: Performance Industries , para 38.

His actual or constructive knowledge must be such that permitting him to take advantage of the document would be fraud or equivalent to fraud: ibid . [ 45 ] VirtualLEDGER argues Mr. Neilson’s March 31 7:16 a.m. email, to which he attached the signed Agreement, amounted to a holding out that he agreed to Mr. Mauws’ last version. In the email, Mr. Neilson stated, “I attach a signed agreement and look forward to receiving back a signed copy,” not advising of changes and not attaching a blacklined document. In written and oral argument, VirtualLEDGER relied heavily on the assertion that Mr.

Neilson had never raised any issue regarding the security agreement other than whether it would apply prior to a default. [ 46 ] That is not born out by the evidence, however, as I have made clear. Three days before execution, Mr. Neilson raised a concern regarding the relationship between the security clause and dower rights. This cannot be dismissed as an idle concern, because as noted by the master, Mr. Neilson was married and, as other evidence shows, she was in the process of immigrating to Canada. Of course this was well known to Mr. Mauws, who took the unusual step of involving Ms.

Neilson in some of his acrimonious exchanges with Mr. Neilson. [ 47 ] Mr. Neilson also raised a concern about when the security clause would be registered – after default, as he suggested, or upon execution of the Agreement. Finally, Mr. Neilson expressed a concern about why the effective dates of the release would be later than other effective dates in the Agreement, a point on which VirtualLEDGER refused to consider making changes. [ 48 ] The email attaching the signed agreement closely followed several days of back-and-forth negotiations, during which Mr.

Mauws ignored a request for a discussion and showed frustration and impatience with Mr. Neilson’s attempts to modify the draft. [ 49 ] The context in which the March 31 7:16 a.m. email and attachment must be considered to determine if there was fraud-like conduct. [ 50 ] The email itself is, of course, carefully worded. It says “I attach a signed agreement and look forward to receiving back a signed copy” (my emphasis). [ 51 ] It does not say that Mr. Neilson signed version seven or the copy Mr.

Mauws had requested on March 30 at 7:36 p.m. [ 52 ] In the absence of previous communications that would have suggested Mr. Mauws had some basis for believing Mr. Neilson was agreeable to his last version, I cannot infer that this short, carefully-worded email was fraud-like conduct. [ 53 ] The security clause in the Agreement is five lines in length, with the dower exclusion (the only change to the clause proposed by Mr. Mauws) constituting the equivalent of about one line. As the master observed, a quick read of the clause would have easily disclosed that it was not the one proposed by Mr.

Mauws. [ 54 ] In my view, the master was correct in holding that the email and modified document did not amount to fraud or its equivalent. Mr. Neilson was certainly not overly forthcoming, but that was hardly the pattern of dealings between these parties over the previous days. Nothing Mr. Neilson said expressed agreement to Mr. Mauws’ demands. [ 55 ] Mr. Neilson’s failure to identify the fact that he made a change is not to his credit. But, in my view, it has to be seen in the context of these parties’ exchanges over the previous days and weeks. Mr. Neilson’s attempts to engage Mr.

Mauws in communications about changes mostly were met with angry dismissive replies and demands that he simply sign and challenges his motives. Perhaps there was merit in Mr. Mauws’ concerns and suspicions. But, as often happens in difficult negotiations, one party simply chose to send what he could live with and see if his counterparty accepted it. [ 56 ] I consider it doubtful that anyone in Mr. Neilson’s position, taking into account recent history, could reasonably have expected the change in this central clause to escape notice of both Mr.

Mauws and his lawyer – particularly because it was sent to both of them. [ 57 ] VirtualLEDGER relies on the evidence of Mr. Neilson in his cross-examination that he did nothing to bring the changes to Mr. Mauws’ attention. It does not establish fraud-like conduct, however, unless there is a holding out by Mr. Neilson or a course of conduct between the parties that reasonably would have led to Mr. Mauws and his lawyer to take the last email as an expression of consent to Mr. Mauws’ form of document. That was not the case, as I have concluded. [ 58 ] Finally, VirtualLEDGER submits that I should use Mr.

Neilson’s conviction of fraud stemming from illegal activity involving Abaca to help me determine that his conduct in this specific transaction with Mr. Mauws also amounted to fraud. That submissions must be rejected, based on the well-established limitations on proper use of prior convictions.

They may be used to assess credibility of a witness, but may not be used to infer that because of the conviction the person is someone of bad character who is likely to have committed another wrongful act. [ 59 ] The third precondition to rectification based on involuntary mistake is showing the precise form in which the document can be made to express the prior intention, again for the purpose of closing the floodgates to those who would invite speculation about the parties’ unexpressed intention or impose what in hindsight seems to be a preferable bargain: Performance Industries , para 40. “The court’s equitable jurisdiction,” holds Performance Industries , “is limited to putting into words that – and only that – which the parties

had already orally agreed to”: ibid. [60] The essence of VirtualLEDGER’s argument is that the parties agreed to version seven because Mr. Mauws says he thought hesigned that and Mr. Neilson held himself out as agreeing to version seven. I have explained above why I do not accept the latter, whichwould have been conduct akin to fraud. Mr.

Mauws’ subjective evidence of what he thought he signed is of little assistance when theissue is fraud or establishing a consensus ad idem. [61] There is a fourth step in the Performance Industries test regarding the standard of proof, which has been overtaken bysubsequent authority and is thus not relevant for present purposes. [62] Finally, while Performance Industries did not agree that a plaintiff should be denied rectification if the “error” could havebeen discovered with due diligence (paras 57-65), it did indicate that the conduct of the plaintiff is relevant to the exercise of the court’sdiscretion when considering the equitable remedy of rectification: para 66.

Rectification may be denied “in a case where the courtconcludes that it would be unjust to impose on a defendant a liability that ought more properly to be attributed to the plaintiff’snegligence”: para 66. VirtualLEDGER’s conduct is, in my view, relevant to how I exercise my discretion. Mr. Neilson sent his email andmodified document to both Mr. Mauws and his lawyer, and it was not returned until four hours later. It was a brief document, with thechange easily seen on a cursory review. Whatever one might think of Mr.

Neilson’s conduct, this is not the type of case for which theequitable remedy of rectification should be granted. [63] For these reasons, I conclude that the master was correct in finding that VirtualLEDGER was not entitled to rectification basedon unilateral mistake. C.

Certainty [64] VirtualLEDGER argues that if the dower exclusion is not removed on the basis of rectification grounded on unilateralmistake, then it is too uncertain to be enforceable. [65] The requirement of certainty means that “a contract must be ‘so definite, or capable of being made definite without furtheragreement of the parties, that the promises and performances to be rendered by each party are reasonably certain’”: Ironside v Smith,1998 ABCA 366, para 64, quoting Scammell v Ouston, [1941] 1 All E.R. 14 (H.L.) at 26.

In other words, the words of the contract mustbe capable of being interpreted and enforced by the court, which leaves open the possibility that methods of

interpretation (such as thoseused for ambiguous terms) may be used to determine whether the requirement of certainty is met: ibid; and Fridman, The Law ofContract in Canada, 6th ed. (Toronto: Thomson Reuters, 2011), at 17-25. [66] VirtualLEDGER argues that there are several possible

interpretations of the phrase “excepting land covered by the DowerAct.” It could cover all land of any description, because all land is covered by the Dower Act. Or, it could except land in which Ms.Neilson has a dower interest. Or, it could except land defined as “homestead” under the Dower Act. [67] The master commented that “all individually owned land is covered by the Dower Act at least in a general sense in thatcompliance with the Act must be shown on a disposition.” However, he went on to note that the context of this case was that Ms. Neilsonwas not a party to the Agreement and that Mr.

Neilson did not want to seek her consent. It is not clear to me that the master expressed afinal view on how to interpret the dower exclusion, except that it clearly excluded Benchlands, the only property at issue before him. [68] In my view, applying the usual rules of

interpretation, the dower provision satisfies the requirement of certainty. One shouldnot look for difficulties that lead to uncertainty, but rather the reverse. As noted in Canada Square Corp. v VS Services Ltd. (1981), (ON CA), 34 O.R. (2d) 250 (ONCA), at 262, “a court should not be too astute to hold that there is not that degree ofcertainty in any one of its essential terms which is the requirement of a binding contract” (see also, Hillas & Co. v. Arcos, [1932] AllE.R. 494 (HL), Lord Wright at p. 514) As the master noted, the situation is at root quite simple: Mr.

Neilson did not want security toattach to lands for which Ms. Neilson’s consent would be required for a disposition. Expressed in more technical language, that wouldexclude lands constituting a homestead under the Dower Act, sections 2 and 1(b), (

c) and (d). [69] Even if VirtualLEDGER succeeded in arguing that there were too many possible

interpretations for the dower provision to beenforceable, it would avail nothing unless it could succeed in the second part of its argument. It argues that the uncertain provisionshould be severed from the Agreement, leaving the security provision to be enforceable as it was drafted by Mr. Mauws or his counselbefore Mr. Neilson inserted the dower provision.

It relies upon clause 14 of the Agreement, which provides that if any provision is heldto be invalid, illegal or unenforceable, then “such unenforceability will not affect any other provision . . . but this Agreement will bereformed, construed, and enforceable . . . as if such invalid, illegal or unenforceable provision had never been contained herein.” [70] Severance as a doctrine developed primarily with respect to contracts that were unenforceable due to illegality or publicpolicy. No doubt severance is applicable, as a matter of agreement, to save contracts that would otherwise be uncertain.

However, itwould be contrary to basic principles of contract law to use severability in that context to impose a bargain contrary to what the partieshad agreed upon.

That would be the effect of allowing severance here, because part of the reason rectification is not available is thatthere was no prior “oral agreement.” It would be contradictory to find no agreement on the security clause without the dower exclusion,but then to also find that the dower exclusion can be severed to achieve that very result. [71] I do not find the dower exclusion void for uncertainty but even if that were the case, it would only mean the security clausewas unenforceable because severance would be improper. D.

Applicability of Dower Act [72] VirtualLEDGER makes a number of arguments to the effect that even if the dower exclusion is an enforceable part of theAgreement, it does not apply to the Benchlands property. The first argument is that the property did not qualify as a homestead under the

Dower Act , because neither Mr. Neilson or his wife resided there at any time prior to execution of the Agreement on March 30, 2014. [ 73 ] Mr. Neilson’s two affidavits of September 15, 2017 and October 27, 2017 give direct testimony on this point. In his first affidavit, after stating that he and his wife purchased the property on August 1, 2013 and registered it in his name only because of the complications of Ms. Neilson being out of the country, he states that “I moved into the Property with my three school-aged sons on or around August 18, 2013 and the Property became my principal residence” (para 7).

He then states he hired a cleaning service who cleaned the property on August 17, 2013 in preparation for the move (exhibit

A) and hired a gas fitter to install a kitchen stove on September 20, 2013 (exhibit B). Finally, he states that his children “were registered with the Canadian Rockies Public School transportation service starting September 1, 2013” at the Benchlands address (para 10), although no documents are exhibited in support. [ 74 ] In his second affidavit, Mr.

Neilson states again that he moved into Benchlands with his sons on or around August 18, 2013 and “from October 1, 2011 to November 30, 2014 May Belle Gison was employed as a live-in caregiver” who resided with them full time. [ 75 ] VirtualLEDGER submits that I should reject Mr. Neilson’s evidence for various reasons related to its credibility and reliability, to which I will turn presently. It submits no contrary evidence of its own. This is despite the fact that one might infer that Mr. Mauws would have something to say about when Mr. Neilson resided at Benchlands, based on Mr.

Neilson’s evidence (referred to earlier) that they had a personal relationship and were friends. VirtualLEDGER argues that Mr. Neilson has the onus of establishing Benchlands is covered by the dower exclusion. [ 76 ] In challenging Mr. Neilson’s credibility, VirtualLEDGER relies upon his conviction for fraud and money laundering between 2009 and 2014. That is a valid factor when considering the credibility of a witness. It would not be enough, however, to disregard positive evidence on a

summary judgment application where chambers judges are not to weigh evidence or credibility: Condominium Corporation No. 0321265 v Cuthbert , 2016 ABCA 46 , para 28 . [ 77 ] A stronger argument is that Mr. Neilson swore different evidence in dower affidavits on June 16 and 17, 2014.

While applying for home equity loans which ultimately did not proceed, he swore the very short form of affidavit used for land titles purposes, stating “that neither myself nor my spouse have resided on the within mentioned land [referring to Benchlands] at any time since our marriage.” [ 78 ] In his second affidavit, he explained that he was using lawyers recommended by the lenders and, “as my wife was not in Canada and in order to expedite the signing of documents, I agreed to sign Dower Consent forms that were not correct.

This was a mistake.” He further stated that when in the course of obtaining financing from Mr. Nadeau and using his own lawyer, he became aware of the “mistake” regarding the earlier dower affidavits. Beginning in early August 2014, he attempted to have these matters corrected. His affidavit exhibits copies of correspondence reflecting these efforts. [ 79 ] VirtualLEDGER submits, with good reason, that Mr. Neilson’s attempts in August 2014 to correct his “mistake” may be no more than self-serving efforts to change the record to defeat VirtualLEDGER’s claim.

By the time of those efforts, VirtualLEDGER had filed its statement of claim (June 19) and registered its caveat (June 20). [ 80 ] VirtualLEDGER’s argument about Mr. Neilson’s self-serving attempts to correct the record is, however, less telling with respect to his two affidavits in this action, both affirmed well after the Agreement and commencement of proceedings by VirtualLEDGER. By the fall of 2017, Mr.

Neilson was in bankruptcy and the contest over whether the Benchlands property was covered by the security was between competing creditors with registered interest. [ 81 ] I do not minimize the concern about Mr. Neilson having sworn inconsistent affidavits, thus making one false. Referring to an untrue dower affidavit as a “mistake” is far too charitable a description. [ 82 ] However, my task (within the context of VirtualLEDGER’s

summary judgment application) is to determine, if the evidence permits it, whether Mr. Neilson or his wife resided at the Benchlands property at the relevant times. The only direct evidence on this application is contained in Mr. Neilson’s first and second affidavits and the cross-examination thereon. The earlier dower affidavits are relevant for impeachment purposes, but the fact that a witness swore an untrue affidavit on a prior occasion is not in itself a reason to disregard a later affidavit.

Further, wrongful as it is to swear a false dower affidavit, the circumstances of a brief standard form affidavit make it more likely that it is inaccurate than two later, detailed affidavits describing the deponent’s actual circumstances. [ 83 ] The primary task is to determine whether, as VirtualLEDGER argues, the affidavits themselves do not establish residence because they contain legal conclusions and they are contradicted or at least not supported by the exhibits tendered in support of their assertions. [ 84 ] On the first point, it is true that the affidavits contain some statements that might be characterized as legal conclusions, such as the Benchlands property being a “homestead” and a “principal residence” for income tax purposes.

However, as the passages I have quoted make clear, they contain facts that support those legal conclusions, namely the details of Mr. Neilson’s residence at the property. Thus, they cannot be so easily dismissed. [ 85 ] VirtualLEDGER argues that the three exhibits attached to the second affidavit failed to support Mr. Neilson’s evidence that he resided at Benchlands commencing August 1, 2013. I will deal with these documents in order:

a) School registrations: VirtualLEDGER correctly points out that the student registration forms showing Benchlands as the residence for Mr. Neilson’s children show a “last updated” date of September 1, 2016. In an undertaking response, Mr. Neilson advised that earlier, retroactive statements were not available.

b) Permanent residence: VirtualLEDGER correctly points out that the “Confirmation of Permanent Residence” document for Ms. Neilson contains a certification date of October 18, 2014, after the relevant period.

c) Caregiver’s Residence: In support of the statement in his second affidavit that Ms. Gison resided with his family, Mr. Neilson

attached a letter he wrote on April 15, 2014 to Citizenship and Immigration Canada, showing his address as Benchlands, advising that Ms. Gison was working for him as a live-in caregiver since October 1, 2011. VirtualLEDGER is correct in pointing out that the document itself does not support Mr. Neilson’s residence at Benchlands at the relevant time. [ 86 ] These documents do not corroborate the claim that Mr. Neilson lived at Benchlands at any time before March 31, 2014, but neither do they contradict that assertion. [ 87 ] The cross-examination on Mr.

Neilson’s second affidavit was conducted in a careful, contained manner. Likewise, Mr. Neilson (without his counsel present) gave very short answers directed only at the questions put. The questions specifically addressed documentation attached to Mr. Neilson’s affidavit, and other documents such as the incorrect dower affidavit. However, Mr. Neilson was not asked questions about when he resided at Benchlands nor was he challenged on the specific statements he made to that effect in the second affidavit. [ 88 ] The cross-examination did not address the first affidavit. It attaches documents in support of Mr.

Neilson’s statement that he moved into Benchlands “on or around August 18, 2013.” The exhibits confirm cleaning services at Benchlands on August 17, 2013 and plumbing and gas services at that address performed sometime before the invoice date of September 20, 2013. While not definitive (because these services might have been provided without Mr. Neilson moving into the property), the documents are some corroboration of his statements and have not been challenged. [ 89 ] There is ample reason for skepticism about Mr. Neilson’s credibility, and some documents he puts forward as corroborative are not corroborative.

However, his specific, detailed affidavits combined with some corroborative testimony persuade me that I cannot simply dismiss his first and second affidavits. They are the most direct evidence on point, and in the absence of contrary evidence, are sufficient to establish Mr. Neilson’s residency for some points in time prior to execution of the Agreement and registration of the caveat. [ 90 ] VirtualLEDGER further argues that any protection for dower rights was lost when the Benchlands property was foreclosed upon and converted into funds now held in a court account.

VirtualLEDGER bases its argument on section 3(2) of the Dower Act , which provides that the land ceases to be a homestead “when a transfer of the land by that married person is registered in the proper land titles office.” It also refers to the proposition that section 3(2) (

a) of the Dower Act applies to a transfer to a third party, as held in Re Webb , 2012 ABCA 115 , paras 19 and 20 . [ 91 ] That argument is unpersuasive. First, the question is whether the Agreement properly construed excluded the Benchlands property from VirtualLEDGER’s security interest, not what happened to the property thereafter. Second, the only reason the property could be foreclosed and converted into cash without regard to Ms. Neilson’s dower rights is that Mr. Nadeau had obtained Ms. Neilson’s dower consent as part of the financing. [ 92 ] Finally, VirtualLEDGER argues that because Ms.

Neilson never commenced proceedings under the Dower Act , the statute was never engaged and thus the Benchlands property was not “land covered by the Dower Act ” within the meaning of the Agreement. In support of this argument, VirtualLEDGER invites me to consider the distinction between void and voidable transactions, suggesting that a transaction is merely voidable for non-compliance with the Dower Act ; and, in the absence of initiative taken by the spouse with dower rights, the transaction is not void. [ 93 ] I agree with the master that it is not necessary to embark on that analysis.

It would require me to interpret the dower exclusion in a way very different to its plain meaning. Instead of “excepting land covered by the Dower Act,” I would be reading the contract to say that the security was subject to compliance with the Dower Act or subject to the commencement of valid proceedings thereunder. That is not what the Agreement says. VII.

Summary of Conclusions [ 94 ] I conclude that VirtualLEDGER’s claim fails, because its security did not attach to the Benchlands property, or to the funds paid into court. I find no error in the master’s decision, and dismiss the appeal from it. [ 95 ] Even if VirtualLEDGER succeeded in its argument on the application of the dower exclusion, there would still be an issue about enforcing its security if the Benchlands property qualified as a homestead.

As noted by the master, “as an aside, and as a matter of law, even without the addition of the exclusion for dower properties, compliance with the Dower Act would have still been an issue in any event on a disposition of any land”: para 28. [ 96 ] Because of the efficient, practical and sensible way counsel framed this matter, VirtualLEDGER’s application for

summary judgment is dismissed and Mr. Nadeau’s application for

summary judgment is granted. VirtualLEDGER’s claim to priority to the monies in court must give way to the claims of the subsequent encumbrancers, including Mr. Nadeau. [ 97 ] The parties may

schedule a further appearance if necessary to address any matters arising from this decision and to speak to costs if they cannot agree. Heard on the 26 th day of May, 2021. Dated at the City of Calgary, Alberta this 11 th of June, 2021.

G.H. Poelman J.C.Q.B.A. Appearances: Richard Harrison for VirtualLEDGER Inc. Brent Mescall for Christopher Nadeau Jeffrey Price for Trustee for the Estate of Mr. Neilson