Vista Radio Ltd. v. Tivadar, 2017 BCSC 1195

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Vista Radio Ltd. v. Tivadar, 2017 BCSC 1195 Date: 20170713 Docket: 16-3534 Registry: Victoria Between: Vista Radio Ltd. Plaintiff And: Paul Tivadar, Jason Tivadar, Bryan McInnes Defendants Before: The Honourable Mr. Justice Bracken Reasons for Judgment Counsel for the Plaintiff: K. L. Simmons, Q.C. and D. Melnick, Articling Student Counsel for the Defendants: S.T.C. Warnett Place and Date of Trial/Hearing: Victoria, B.C. April 21, 2017 Place and Date of Judgment: Victoria, B.C.

July 13, 2017 [ 1 ] The plaintiff Vista Radio Ltd. (“Vista”) applies for judgment in the amount of $299,995.50 against each of the defendants Paul Tivadar, Jason Tivadar and Bryan McInnes. The parties proceeded by way of

summary trial pursuant to Rule 9-7 of the Supreme Court Civil Rules . [ 2 ] The action is based upon promissory notes signed by each of the defendants as security for loans related to a business investment. The defendants submit that the action against them is barred by the Limitation Act , S.B.C. 2012, c. 13, as it was commenced outside of the two-year time limit established by s. 6(1) of the Limitation Act . [ 3 ] There is no dispute that the defendants entered into the agreement to purchase shares or that they each signed the promissory notes and employment agreements in the terms alleged by the plaintiff.

The only issue in dispute is whether the plaintiff is barred from enforcing payment upon the promissory notes by the terms of the Limitation Act . [ 4 ] The defendants have not paid any of the money that the plaintiff claims is owed to it. Background Facts [ 5 ] The defendants were shareholders of a corporation called Vista Broadcast Group Inc.

That corporation was purchased by another corporation and the two corporations were then amalgamated to form the plaintiff Vista. [ 6 ] As part of the arrangements made, the defendants, as key employees of Vista Broadcast Group Inc., were to become employees of the plaintiff and the defendants agreed to purchase shares in the plaintiff. The plaintiff and each of the defendants entered into share purchase agreements and employment agreements.

By the terms of those agreements, the defendants became employees of the plaintiff and each defendant agreed to purchase shares in the plaintiff upon the closing of the transaction. The price to be paid was $5.25 per share. The shares were to be common shares and the defendants each purchased 57,142 shares for a total price for each of the defendants of $299,995.50. [ 7 ] The purchase of the shares was financed by a loan from the plaintiff to each defendant in the full amount of the purchase price of $299,995.50. Each defendant signed a promissory note in favour of the plaintiff.

All of the agreements were signed on August 1, 2012. [ 8 ] The promissory notes were payable upon the expiry of five years after August 1, 2012, or upon the sale or transfer of the shares by the defendants. Another provision was that the notes would become payable “six months following the [Employee's] termination of employment with [Vista Radio Ltd.].” [ 9 ] The employment agreement contained a term that the plaintiff could “terminate this Agreement at any time and for any

reason.” [10] On June 25, 2013, the plaintiff terminated the employment of each of the defendants. By the terms of the promissory note, themoney due on each note became due and payable on December 25, 2013, six months after the termination of the defendants’employment. [11] On September 24, 2015, the defendants commenced an action against the plaintiff and Westerkirk Capital Inc. in the CourtenayRegistry of this court under Action No. S09045 (the “Courtenay action”).

That action was in the nature of an “oppression action”claiming relief as a result of certain changes the plaintiff planned to institute in its corporate organization. [12] In their action, the defendants alleged that the plaintiff planned to issue preferred shares that carried an attached right topurchase common shares in the plaintiff at a reduced rate. The defendants claimed that the issuance of the preferred shares with suchrights attached, would de-value the common shares that they had purchased on August 1, 2012.

They sought certain remedies includingan injunction to restrain the plaintiff from offering the preferred shares. [13] On October 15, 2015, an order was granted by this court restraining Vista from issuing or offering the preferred shares until theCourtenay action had been heard.

That order was set aside by the court on October 19, 2015. [14] On June 15, 2016, the plaintiff sent a letter to each defendant demanding payment of the amounts secured by the promissorynotes. [15] The defendants say that the offices of Westerkirk Capital Inc. in Toronto was closed and all of its employees dismissed in late2013, and the defendants have had no further communication with the executives or management of Westerkirk. The only discussionsbetween the defendants and the plaintiff have been with respect to the value of the defendants’ shares.

It does not appear that thedefendants’ action has advanced since October 19, 2015.

Positions of the Parties [16] The plaintiff argues that the defendants waived their right to a Limitation Act defence in that each promissory note contained aterm waiving their right to raise a defence under the Limitation Act. [17] The note contains these terms: FOR VALUE RECEIVED, the undersigned hereby acknowledges himself indebted to the Corporation in the aggregate principalamount of TWO HUNDRED NINETY-NINE THOUSAND NINE HUNDRED NINETY-FIVE DOLLARS AND FIFTY CENTS (Cdn.$299,995.50) and promises to pay to or to the order of the Corporation such principal upon the earliest of:

a) the sale or other transfer of the Shares by the undersigned other than a pledge by the undersigned of the Shares as security for theobligations of the undersigned hereunder;

b) the fifth anniversary of this Note; and

c) six months following the Management Employee’s termination of employment with the Corporation. No interest shall be payable on the principal amount of this Note. … The undersigned waives presentment for payment, notice of non-payment, protest and notice of protest of this Note and diligencein collection or bringing suit. [18] The plaintiff argues in the alternative, that in the Courtenay action, the defendants acknowledged they were indebted to theplaintiff in the amounts claimed.

The plaintiff submits that the acknowledgement is set out in the petition and affidavit material filedbetween September and December of 2015, prior to the expiry of the limitation period for the plaintiff's claim on December 25, 2015.

The plaintiff says that the acknowledgement satisfies the requirements of s. 24 of the Limitation Act. [19] The defendants submit that the words of the note cannot constitute a waiver of their rights to rely on the provisions of theLimitation Act to claim the plaintiff's action is statute-barred. [20] The defendants say that even if there is an acknowledgement contained in the pleadings or affidavits in the Courtenay action,any acknowledgement of the debt is protected by the absolute privilege that attaches to pleadings and documents in a court proceeding.

Discussion [21] The plaintiff's first submission is that the defendants waived their right to rely on the Limitation Act defence. The plaintiffrelies on the terms of the promissory note that states, “the undersigned waives presentment for payment, notice of non-payment, protestand notice of protest of this Note and diligence in collection or bringing suit.” [22] The plaintiff submits that it is open to the parties to agree not to enforce a limitation. See Tolofson v. Jensen, (SCC), [1994] 3 S.C.R. 1022 at para. 88. [23] The plaintiff further argues that the proper

interpretation of that term depends to a large degree on the “factual matrix” in whichthe contract arose. Reference was made to Jacobsen v. Bergman, 2002 BCCA 102 at paras. 3 and 4 where the court said: [3] The applicable principles may be stated in this way. It is not sufficient in interpreting a clause in an agreement to look only at the

wording of the clause in order to decide on its meaning and application; instead the clause must be examined in its place in the agreementas a whole. Further, the agreement as a whole, and the clause in particular, must be examined in the context of the factual matrix whichgave rise to the agreement and against which the agreement and the clause were intended to operate. [4] Just as in statutory

interpretation, so also in contract

interpretation. The fact that the

section or clause seems to have a plainenough meaning when viewed in isolation does not preclude, but indeed requires, an examination of the whole text of the statute oragreement, and a consideration of the

section or clause in their place in the whole text and in the factual matrix in which they wereintended to operate. That process is required in every case of

interpretation of either a statute or an agreement. [24] However, the court also said at para. 6: [6] It must always be borne in mind that the function of an interpreting court is to give effect to the mutual intention of the partiesand not to create an agreement or an obligation that the parties did not intend, merely because they might well have intended it. [25] The plaintiff acknowledges that the factual matrix of any agreement is properly kept in the background while the text of thecontract is in the foreground. The words must not be overwhelmed by the contractual analysis. See Domtar v.

Univar Canada Ltd.,2011 BCSC 1776 at para. 44 where the court stated: [44] In interpreting a contract, the objective is to determine the intention of the parties at the time the contract was made. Thisintention is to be determined by the words used in the contract itself, and in light of the whole of the contract. Where a literal meaningwould bring about an unrealistic result, the court should consider the words in the context in which the contract was made. InConsolidated-Bathurst v.

Mutual Boiler, (SCC), [1980] 1 S.C.R. 888, Estey J. for the majority made these oft-quotedcomments in the context of an insurance contract (at 901): … literal meaning should not be applied where to do so would bring about an unrealistic result or a result which would not becontemplated in the commercial atmosphere in which the insurance was contracted. Where words may bear two constructions, the morereasonable one, that which produces a fair result, must certainly be taken as the

interpretation which would promote the intention of theparties. Similarly, an

interpretation which defeats the intention of the parties and their objective in entering into the commercialtransaction in the first place should be discarded in favour of an

interpretation of the policy which promotes a sensible commercial result. [26] The plaintiff submits that the language of the note is clear and the words have well known and accepted meanings. Theplaintiff says that “diligence” is defined as applying care and attention to a task and that promoting diligence is one of the rationales thatunderlies the policy of imposing limitation periods. See Novak v.

Bond, (SCC), [1999] 1 S.C.R. 808 at paras. 64 to 67. [27] The second part of the contract term, that is, to use diligence in collection or bringing suit, is defined as to initiate legalproceedings in a suit or an action.

See Black's Law Dictionary (6th ed., 1990, West Publishing Co., Toronto, Ontario). [28] The plaintiff submits that the words in the note waiving “…diligence in collection or bringing suit” can only mean that theplaintiff was not required to comply with s. 6 of the Limitation Act. [29] The defendants submit that parties who wish to limit or waive a limitation period by a term of their contract must use clearlanguage before such a waiver is effective. The defendants rely on Boyce v. Co-operators General Insurance Co., 2013 ONCA 298 atparas. 18 to 20, where the court referred to Armak Chemicals Ltd. v.

Canadian National Railway Co., (ON CA),[1991] 3 O.R. (3d) 1 (C.A.) at para. 16 where the court said: [18] In Armak, this court indicated that “very clear language” was required before a contractual provision could successfully shift astatutory obligation from one party to another.

In Hunter Engineering Company Inc., the majority of the Supreme Court of Canadarequired “clear and direct language” before interpreting a term in a contract as relieving against a statutorily imposed warranty. [30] The defendants say that the words regarding waiver in the promissory note in this case are not sufficiently clear to waive aLimitation Act defence.

They say the words used do not amount to a clear and unequivocal waiver of the substantive legal right of thedefendants to rely on the Limitation Act. [31] The defendants argue that to give the term in the promissory note the effect suggested by the plaintiff would extend thelimitation period indefinitely. That may overstate the case, but it would certainly tend to undermine the policy considerations thatunderlie the Limitation Act.

The defendants say such an extension would require very clear words to be an effective waiver of theirrights. [32] The defendants also submit that as the plaintiff was the author of the note, where the words in an agreement are unclear anyambiguity must be resolved against the plaintiff. [33] I agree with the defendants. The law requires any waiver of a statutory obligation from one party to another to be supported by“very clear language” (see Boyce). The words used in the promissory note make no reference to the Limitation Act.

The words waiverof diligence in collection or bringing suit are not sufficiently clear to convey the meaning to the defendants that they were giving up theirrights under the Limitation Act. [34] The submission of the plaintiff that the defendants have waived their right to rely on the Limitation Act is therefore notsupportable and must be dismissed. Acknowledgement of the Debt [35] The plaintiff claims in the alternative that the defendants acknowledged their liability for the debt. The plaintiff relies on s. 24of the Limitation Act. That

section provides:

(1) If, before the expiry of either of the limitation periods that, under this Act, apply to a claim, a person acknowledges liability in respect of the claim, (

a) the claim must not be considered to have been discovered on any day earlier than the day on which the acknowledgement is made, and (

b) the act or omission on which the claim is based is deemed to have taken place on the day on which the acknowledgement is made. … (6) Subsection (1) does not apply to an acknowledgement, other than an acknowledgement referred to in subsection (7), (8) or (9), unless the acknowledgement is (

a) in writing, (

b) signed, by hand or by electronic signature within the meaning of the Electronic Transactions Act , (

c) made by the person making the acknowledgement or the person's agent, and (

d) made to the person with the claim, the person's agent or an official receiver or trustee acting under the Bankruptcy and Insolvency Act (Canada) . [ 36 ] In Podovinikoff v. Montgomery, [1984] B.C.J. No. 1920 at paras. 12 and 13 the court said: [12] I am of the view, following the line of reasoning indicated by Lord Denning, that under our Act, a person may acknowledge as a bare fact that someone has asserted (probably by making a claim) a cause of action against him without acknowledging any liability. However, I am also of the view that such a bare acknowledgment of the existence of a cause of action is quite insufficient to meet the requirements of s. 5(2)(a)(

i) of the Act. Those provisions provide that a person confirms a cause of action only if he “... acknowledges a cause of action, right or title of another; ...”. The acknowledgment of a right or title must, in my view, involve the acknowledgment of some liability. The word “acknowledgment” must have the same meaning when used with reference to a cause of action. It follows, therefore, that what binds a defendant and activates s. 5(2)(a)(

i) is an acknowledgment in writing of a cause of action which admits some liability thereunder. [13] I now turn to the question: Did the trial judge err in holding that the second and third letters acknowledged the plaintiff's claim? The determinative issue, in my view, is this: Do the letters acknowledge some liability on the part of the defendant?

If this question be answered in the affirmative, the judge did not err and the cause of action was not statute-barred. [ 37 ] Thus, the test is whether the statements made by or on behalf of the defendants in their pleadings or affidavits in the Courtenay action acknowledge liability on the part of the defendants.

If there was such an acknowledgement, it was made prior to the expiry of the limitation period on December 25, 2015, and would therefore serve to extend the limitation period so that the plaintiff's action is commenced within time. [ 38 ] Clearly, in the Courtenay action, the defendants admitted that they signed the promissory notes that secured the loans. They have made essentially the same admissions in this action.

However, they did not admit that they are liable to pay the money the plaintiff claims is owed pursuant to the promissory notes. [ 39 ] The defendants say that the words used in the pleadings and affidavits in the Courtenay action cannot reasonably be interpreted as an acknowledgement of their liability. They submit that the acknowledgement they signed respecting the promissory notes does not satisfy the test in Podovinikoff . [ 40 ] I agree with the defendants on this point.

The facts admitted in the pleadings and affidavits acknowledge that the defendants signed the promissory notes and related agreements, but the admissions made do not go so far as to acknowledge an obligation that the debt is currently due and owing. Therefore, the alternative submission of the plaintiff must also fail. [ 41 ] Given my findings, it is not necessary for me to consider the submission of the defendants that any acknowledgement contained in the Courtenay action is protected by absolute privilege. [ 42 ] In the result the plaintiff’s action is dismissed. [ 43 ] Costs follow the event. “J. K.

Bracken, J.” The Honourable Mr. Justice Bracken