EOS Canada v. Young, 2023 BCPC 8

Citation: EOS Canada v. Young 2023 BCPC 8 Date: 20230118 File No: 16718 Registry: Salmon Arm IN THE PROVINCIAL COURT OF BRITISH COLUMBIA BETWEEN: EOS CANADA INC. CLAIMANT AND: LEE YOUNG DEFENDANT CORRIGENDUM TO THE REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE J. GUILD Counsel for the Claimant: L. Daly, by telecommunication Counsel for the Defendant: No appearance Place of Hearing: Salmon Arm , B.C. Date of Hearing: November 17, 2022 Date of Judgment: January 18, 2023

A Corrigendum was released by the Court on January 26, 2023. The corrections have been made to the text and the Corrigendum is appended to this document. Introduction [ 1 ] On September 6, 2018, easyfinancial Services Inc. (“efS”) loaned the defendant Lee Young and another person, Tammy Law, $10,701.45 at an interest rate of 44.96%. Lee Young and Tammy Law are alleged to have not paid back the loan as required by the loan agreement.

Although it appears there were no payments made after July 1, 2019, it was only on November 22, 2019, that efS considered that the two had defaulted on the loan, which then became due and payable, thereby creating a debt which included interest payable (the “Debt”). [ 2 ] EOS Canada Inc. (“EOS”) was a debt-collection company. On March 17, 2022, EOS changed its name to Transworld Systems Canada Inc. (“TSI”). TSI has not sought to amend the style of cause to reflect its current legal name.

Accordingly, I will continue to refer to the claimant as EOS. [ 3 ] EOS says it acquired the Debt from efS on November 25, 2019 by way of an assignment agreement. On October 7, 2021, EOS filed a Notice of Claim only against Lee Young for the Debt, including interest EOS claimed it was entitled to at the rate of 44.96%, up until the date of judgment (the “Claim”). No Reply to the Claim was filed. [ 4 ] On September 21, 2022, EOS filed an Application for a Default Hearing. These are my reasons on the default hearing held on November 17, 2022.

In an affidavit apparently sworn in Ontario and filed on September 21, 2022, EOS set out the basis for its application for a default order. On October 11, 2022, a default hearing was scheduled before another judge of this Court. It was adjourned to allow EOS to make submissions on whether the decision in EOS Canada Inc. v. Oppenheimer [i] could be distinguished. EOS was apparently not ready to make submissions on that occasion despite having had that decision for two months and the same employee, Ms.

Wheeler, appearing and making submissions in Oppenheimer and in this case on October 11. [ 5 ] A further affidavit apparently sworn in Ontario was filed by EOS on November 14, 2022. It incorporated what was in the affidavit filed in September and added further information. Ms. Daly appeared for EOS at the default hearing before me on November 17, 2022 and made submissions as to why the default order should be granted. I reserved judgment. These are my reasons.

Discussion Notice of Assignment [ 6 ] I set out in Oppenheimer the requirements for a valid notice of assignment of a debt under the Law and Equity Act (“LEA”) [ii] and the Business Practices and Consumer Protection Act (“ BPCPA ”) [iii] and some of the requirements for a debt collection agency to pursue a claim. I set out my analysis here in some further detail. [ 7 ] The LEA sets out how an assignment of debt becomes effective in law. The LEA states: Assignment of debts and choses in action 36

(1) An absolute assignment, in writing signed by the assignor , not purporting to be by way of charge only, of a debt or other legal chose in action, of which express notice in writing has been given to the debtor , trustee or other person from whom the assignor would have been entitled to receive or claim the debt or chose in action, is and is deemed to have been effectual in law , subject to all equities that would have been entitled to priority over the right of the assignee if this Act had not been enacted, to pass and transfer the legal right to the debt or chose in action from the date of the notice , and all legal and other remedies for the debt or chose in action, and the power to give a good discharge for the debt or chose in action, without the concurrence of the assignor. [Emphasis added.] . . . [ 8 ] The important points for notice of assignment to be effective in law in this case are: the notice must be “express notice”; the notice must be given to the debtor (or other person from whom efS would have been entitled to claim the Debt); and the legal right to the Debt is transferred to EOS from the date of that express notice, not before. [ 9 ] “Debtor” and “person” include the plural pursuant to s. 28 (3) of the

Interpretation Act: [iv] Use and forms of words 28 . . .

(3) In an enactment words in the singular include the plural , and words in the plural include the singular. [ 10 ] Express notice of assignment pursuant to the LEA must therefore include notice to all debtors if there is more than one.

Interpretation of s. 36 of the LEA [ 11 ] In Buhecha v. Impact Imaging Ltd ., [v] Justice Saunders set out the history of the

interpretation of

section 36 of the LEA . A strict approach was mandated in a number of cases. At common law, an assignee had to sue in the name of the assignor because legal title could not pass without the consent of the debtor. In 1879, legislation changed that legal limitation, which is now reflected in s. 36 of the LEA . Statutory

interpretation led to the conclusion that the wording of the statute was clear: legal title, and therefore the right to sue in the assignee’s name, did not pass to the assignor until there was express notice to the debtor. [vi] [ 12 ] Although there remained at common law the right to sue based on an equitable assignment, any such suit had to be in the name of the assignor, because the assignee had no legal right, only an equitable one. [ 13 ] In subsequent decisions, the strict application of the law relating to legal assignment was relaxed as required by the facts of specific cases.

In the leading case regarding a relaxed standard, O.T.S. Overseas Transport Systems Inc. v. Neto Investments Ltd., [vii] the court did not refer to United Metal in coming to the conclusion that “the [purpose] of notice is to provide a shield to the innocent debtor who has bona fide paid the account elsewhere.

It is not designed as a trap which the debtor can rely upon to avoid his just obligations.” That led the court to conclude that in that case, the pleadings could amount to “express notice”. [ 14 ] Justice Saunders concluded that O.T.S. simply stood “for the proposition that equitable considerations in a particular case might justify loosening the strict requirements of the statute” [viii] and that flexible approach was too well-entrenched to disregard. I am bound by those conclusions. Accordingly, I must look to whether the circumstances in this case would justify loosening the strict requirements.

To do so, I must have regard to the BPCPA .

Interpretation of the BPCPA [ 15 ] The purpose of the BPCPA is to protect consumers (which includes debtors) and the Act must be interpreted in their favour. [ix] It is “a comprehensive and exhaustive code for the regulation of consumer transactions and affairs” that includes enforcing statutory rights and obligations. [x] [ 16 ] In this case, the relevant aspects for notice under the BPCPA are: Legal proceedings 121

(1) If a debt has been assigned to a collector, the collector must not (

a) bring or continue a legal proceeding for the recovery of the debt as plaintiff unless the debtor has been given notice of the assignment, or (

b) bring a legal proceeding for the recovery of the debt unless the collector first gives notice to the debtor that the collector intends to bring the proceeding.

(1.1) Subject to subsection (1), a collector must not bring a legal proceeding for the recovery of a debt unless the collector first gives notice to the debtor that the collector intends to bring the proceeding. [ 17 ] I must interpret the

section considering the Act as a whole and its purposes. [xi] I did not receive any more submissions on

interpretation of that

section in light of Oppenheimer . [ 18 ] Section 121(1) refers to circumstances where a debt has been assigned to a collector. In ss. (a), the phrase “continue a legal proceeding for the recovery of the debt as plaintiff” refers to situations where the lender, or creditor, has started a legal proceeding to recover the debt, assigns its rights to a collector, and the collector takes over the claim as a plaintiff. It is inapplicable to this case. [ 19 ] The other circumstance referred to in subsection 121(1)(

a) is where a debt has been assigned to a collector and no proceedings have been commenced to collect it. The collector/assignee is prohibited from filing a claim for the debt in its own name until the debtors have been given notice of the assignment. To protect debtors, there must be effective notice, that is, the debtors must be aware that the debt has been assigned. Given the purposes of the BPCPA , there is no room for a relaxed approach as there can be under the LEA . [ 20 ] Subsection 121(1)(

b) stipulates that a collector that is an assignee is prohibited from starting a legal action to recover the debt in its own name or in another’s name, unless the collector has given notice to the debtor that the collector intends to bring that legal action. For the same reasons, there must be actual notice. [ 21 ] Subsection 121(1.1) refers to “a debt” rather than “the debt”. “The debt” refers to a debt that has been assigned to a collector; therefore, “a debt” is not such a debt. The subsection refers to situations where the debt has not been assigned, as it would be superfluous if it included assigned debts.

Subsection (1.1) is inapplicable in this case. Conclusions Regarding Notice [ 22 ] Both s. 121(1)(

a) and (

b) apply to EOS in this case. EOS was prohibited from filing the Claim until EOS had given notice to the debtors that EOS was going to file it, or until the debtors were given notice that the Debt was assigned to EOS. [ 23 ] As noted,

section 36 of the LEA sets out legal obligations regarding notice. In light of s. 121 of the BPCPA , its provisions should apply strictly in relation to a debtor who is a consumer under the BPCPA . Accordingly, under both the LEA and the BPCPA , EOS must show effective notice was given before it filed the Claim in its own name. EOS must show that the debtors, Lee Young and Tammy Law, had actually received the requisite notice of assignment, or notice of intent to bring the Claim.

[ 24 ] Further, the loan agreement made no reference as to whether liability under it was joint or several. As will be reviewed below, given the structure of the loan, with a significant portion paid out to Tammy Law, it is not clear that Lee Young was obligated to pay the entire Debt. That is another reason, apart from the

interpretation of the LEA and BPCPA , for requiring notice to both borrowers. I now turn to examine whether EOS has provided such proof. Evidentiary Issues [ 25 ] The affidavits filed in this case did not appear to have been electronically or digitally signed, and appeared to meet the requirements of s. 63 of the Evidence Act . [xii] Accordingly, they were admissible as affidavits in these proceedings. I will refer to the affidavit filed on November 14, 2022 in support of the Application for a Default Order as the November Affidavit.

No proof EOS was licensed as a collector [ 26 ] The November Affidavit affiant claimed that the affidavit included proof that EOS had the requisite license to operate in British Columbia as a debt collector. Included were two certificates for TSI, one for an address in Ontario, another for an address in New Westminster, BC. Both were effective January 1, 2022, although the name change from EOS to TSI was effective March 17, 2022. There was no evidence that EOS was appropriately licensed when the Claim was filed on October 7, 2021.

I stated in Oppenheimer that proof should be readily available to the claimant and provided to show they had legal authority to act as a debt collector in this province. EOS has failed to show that. Its claim could be dismissed on that basis alone, but there are further problems. No proof of assignment of the Debt [ 27 ] A copy of the loan agreement that allegedly provided the basis for the Debt and therefore the Claim was in the November Affidavit. The loan agreement was between efS as one party, the lender; and Tammy Law and Lee Young as the other parties, the debtors.

Both Tammy Law and Lee Young appeared to have signed the loan agreement. Both Tammy Law and Lee Young appeared to have signed a letter of direction as to how the loan amount would be distributed: $6,501 put into their joint account; $1,101.45 to a home and auto benefit plan; and $3,043.96 going exclusively to a prepaid credit card solely in Tammy Law’s name.

Both Tammy Law and Lee Young appeared to have authorized efS to take money by way of preauthorized payment from a bank account in both their names. [ 28 ] However, only Tammy Law appeared to have signed the requisite part of the agreement to be given a prepaid MasterCard. In addition, Tammy Law appeared to have been the only signatory to credit monitoring. Nothing in the loan agreement indicated in any way that only one of them could, or would, be liable for the entire amount of the Debt.

I conclude that both Tammy Law and Lee Young were debtors and consumers under the BPCPA . [ 29 ] The affiant of the November Affidavit stated that the debt under the loan agreement was assigned to EOS through a Forward Flow Credit Purchase Agreement (“FFCPA”), which was attached as an exhibit. That document is not dated. However, one of its defined terms, “Closing Date”, was initially March 1, 2019, and thereafter as agreed by the parties. Accordingly, the Debt could have been assigned under the FFCPA. [ 30 ] The Closing Date is also the date as of which various debts are sold by efS to EOS, apparently biweekly.

What was sold biweekly, according to a Bill of Sale attached to the FFCPA as Exhibit 2, were accounts as defined in

section 1.3 of the FFCPA. That

section defines “Accounts” as efS’ accounts and receivables it is to summarize weekly in an asset schedule, the balances of which efS has written off for accounting purposes. That asset

schedule is to be put in an Account Data File, as defined in s.1.1 of the FFCPA. It is to include a listing of Accounts to be sold and other information including the account number and contact information for the debtor. [ 31 ] In

summary, the FFCPA is a contract whereby efS agreed to sell to EOS debts that efS might decide to write off at some point in the future. At the time the FFCPA was made, the debts were undetermined. They started to be determined as of March 1, 2019 and every two weeks after that, or otherwise as determined by the parties. Accordingly, the Debt was not specifically listed in the FFCPA. [ 32 ] Perhaps it was listed in an Account Data File. Perhaps not. It would be easy for EOS to provide evidence of assignment in the form of the asset

schedule or a printout of that debt from the Account Data File. No such evidence was provided. There was no evidence that showed there was an assignment, except for purported notices of assignment of the Debt, which I will discuss next in these reasons. Those notices are not sufficient proof that in fact the Debt was assigned under the FFCPA. In the circumstances, I am not satisfied the Debt was in fact sold or assigned to EOS. That too could end this Application, but there are more problems. No proof of notice of assignment of the Debt [ 33 ] Two documents were put forward as a notice of assignment of the Debt.

Both were in the November Affidavit. The affiant swore that they were a legal assistant employed with EOS and that they had “reviewed the records to the within proceedings and associated documents” and had satisfied themselves that they had sufficient knowledge and information to swear the affidavit. An affidavit is the equivalent of testimony in court. It is subject to the same examination regarding accuracy and honesty. [ 34 ] The party that makes a claim has the onus of proving it on a balance of probabilities through admissible evidence in the hearing.

To satisfy the onus of proving a claim on a balance of probabilities, evidence must be clear, convincing and cogent. [xiii] Hearsay is admissible in small claims trials, provided it is credible or trustworthy. [xiv] [ 35 ] Hearsay is an assertion of a fact made outside of the hearing, used for the truth of the assertion. Statements made by others in a document which is relied upon to prove the truth of what was stated are hearsay.

Hearsay is generally not admissible in trials because it does not have the usual measures of trustworthiness: it is not made in front of a judge; it is not made under oath or affirmation; and it cannot be tested by cross-examination. For those reasons, it is difficult to assess the accuracy and honesty of a bare hearsay assertion. Although admissible, hearsay is unlikely to be clear, convincing and cogent on its own.

[ 36 ] The point of an affidavit is to set out facts and where beliefs are concerned, to ensure the affiant conveys the grounds for their beliefs and show that their conclusions are supported by evidence. In the November Affidavit, the affiant referred to “records to the within proceedings” as a basis for their beliefs. That would be the material filed with the court in relation to the Claim, which is the proceeding. I am not sure what the associated documents would be. The affiant did not attach many of the documents as exhibits.

Accordingly, the contents of those documents are hearsay. [ 37 ] In the November Affidavit, the affiant swore that an EOS representative sent “a Letter of Assignment” in accordance with the LEA and attached a copy of that letter (the “EOS Letter”). The copy shows it was from EOS, the assignee, from an address in Ontario, addressed only to Lee Young. The letter did not say that the Debt was assigned to EOS. It stated that the account was “purchased” and “acquired” by EOS.

That is not necessarily the same as the whole of the Debt and all of the rights related to it being assigned to EOS. [ 38 ] There is no evidence, other than the hearsay and bare assertion in the affidavit, that the EOS Letter was sent. Assuming it was, it is not clear how it was sent and there is no proof it was received by anyone, let alone the intended recipient , Lee Young. In short, even if it was sent, that does not mean that Lee Young received notice of assignment of the Debt. There must be some evidence it was at least brought to Lee Young’s attention.

There is no evidence that Lee Young knew of it. [ 39 ] The second purported notice is a letter from efS. Curiously, it has the same problems as a similar letter to which I referred in Oppenheimer . Exhibit D was attached to the November Affidavit and said to be a copy of that letter from efS. Exhibit D appears to be a photocopy of a form letter on letterhead from efS, signed by the Director of National Collections for efS (the “efS Letter”). It is dated “1- Sep- 21”. It is in French and English. It is addressed in English as follows: “To whom it may concern”. The French is the equivalent.

There is no address for the intended recipient. It states it is in reference to Lee Young and “easyfinancial Accounts: 7649163”. [ 40 ] The efS Letter states that by agreement dated November 21, 2019, efS sold and assigned its interest in the account to EOS. That date is different from what the affiant stated in the November Affidavit: on or about November 25, 2019. While it is true that the affiant said “on or about” that date, why November 25 was chosen rather than November 21 is unexplained.

Similarly, the affiant also deposed that the default was “on or about November 22, 2019”, although the exhibit attached was dated November 21, 2019. The fact that the assignment dates were different suggests the affiant did not have the actual assignment document, presumably the Account Data File, to review. The affiant relied on some other unknown information from which to surmise the date. I cannot assess the reliability of those assertions in the affidavit. [ 41 ] The affiant swore that a representative of efS sent the efS Letter to Lee Young.

There is nothing to show that the EOS employee had access to the records of efS, or any record, from which they could conclude – and I could conclude - that a representative of efS in fact sent the efS Letter to Lee Young. Further, it would seem impossible: the efS Letter is dated September 1, 2021, almost two years after it was supposedly sent. That discrepancy is unexplained. The affiant did not swear the copy was accurate or true, so it may be the date was inaccurate. But if the date was inaccurate, so might other aspects of it be inaccurate. It is not for me to speculate about the cause of the discrepancy.

I am left with an unexplained contradiction, which puts its accuracy – and the accuracy of averments in the November Affidavit, into question. [ 42 ] Like the EOS Letter, there is also no evidence that the efS Letter was brought to Lee Young’s attention. The efS Letter is not effective notice of the purported assignment. [ 43 ] Although no submissions were made regarding other possible means of effective notice, I am bound to examine all the evidence to determine if in fact there was effective notice.

The affiant deposed that between December 15, 2020 and March 15, 2021, an EOS agent called the last known telephone number of Lee Young and left voice messages. No other information was provided. That is not proof of notice that the Debt was assigned, and it would not qualify as notice under s. 36 of the LEA . [ 44 ] Those messages may be a cause of one of the debtors making payments to EOS. The affiant deposed that EOS received two payments from the “debtor”: a payment of $463.37 on April 21, 2021 and a payment of $431.54 on March 24, 2022.

Lee Young was defined as the “Defendant” in the November Affidavit, not the “debtor”. There were two debtors, Lee Young and Tammy Law. Again, there was only a bare hearsay assertion that one of the debtors paid, as opposed to somebody else. No record or evidence relating to the assertion is provided in support of the Claim. [ 45 ] I am not sure if payment was made by Lee Young, Tammy Law, or some other person. The records of these proceedings do not reveal the source.

Given the affiant’s other erroneous or unreliable statements, and the possibility that the telephone messages, if received, may have simply been a direction to pay EOS, I am not satisfied in all the circumstances that any payment could constitute proof of notice of assignment of all rights to the Debt, since debt collectors may collect debts on behalf of a creditor. No evidence of notice to both debtors [ 46 ] Despite having several opportunities to provide all necessary information to support its claim, EOS only provided evidence regarding possible notice to the debtor Lee Young.

That is problematic because Tammy Law was a party to the loan agreement that allegedly gave rise to the Debt. Since there were two debtors, notice had to be provided to both. Tammy Law’s name does not appear anywhere in the EOS Letter or the efS Letter. There is absolutely no evidence of notice to Tammy Law of the purported assignment of the Debt by efS to EOS. That too is sufficient to dismiss this Application.

EOS Was Not Entitled to File the Claim [ 47 ] Pursuant to s. 121 of the BPCPA , to ensure consumers’ – in this case debtors’ – rights are protected, notice must be given to all debtors of any assignment or intent to make a claim, as failure to do so may impact the rights of a debtor who did not get notice. It would likely give rise to – and at least risks – multiple court proceedings in respect of the same debt, wasting judicial resources and potentially leading to conflicting decisions, neither of which further the proper administration of justice.

[ 48 ] The Claim was filed before there was any actual notice to the debtors, either of the assignment of the Debt or that EOS intended to file the Claim. That is what s. 121 of the BPCPA prohibits. By filing the Claim, EOS violated the express provisions of the BPCPA . It should not be able to pursue the Claim in light of that prohibition, as it would be an abuse of the court’s process. [ 49 ] Further, the date of express notice of assignment of the Debt to each of Tammy Law and Lee Young under s. 36 of the LEA is the date when EOS would obtain the legal rights to the Debt.

Since there is no proof of notice to Tammy Law, there is no proof the legal rights to the Debt were transferred or assigned to EOS. EOS has not shown it had the legal standing to file the Claim as plaintiff. [ 50 ] For the reasons given, and those in Oppenheimer , it would be improper to grant EOS a default order, and it is improper to allow EOS to continue the Claim in the absence of any right to do so. [ 51 ] I dismiss EOS’ application for a default order and the Notice of Claim itself is dismissed. Postscript [ 52 ] I believe it is worth commenting on the interest claimed by EOS.

There were significant delays by EOS in pursuing the Debt and the Claim. There were a number of significant periods where nothing was done to pursue collection. For example, upon registered mail addressed to Lee Young being returned to EOS marked “Refused”, a process server was not engaged until about four months later. An EOS representative was apparently able to fairly quickly locate a Facebook account for Lee Young that became the means of alternate service. When it became clear it was difficult to find Lee Young, no request for substitutional service was made for several more months.

I am not criticizing EOS’ business practices. They are free to take as much time as they wish and conduct their business as they see fit. The issue is that EOS claimed interest was payable by Lee Young during all those unexplained delays at the rate of $9.36 per day. [ 53 ] Part of a judge’s task at a default hearing is to determine the amount of money that is properly payable. Given the purpose of the Small Claims Act [xv] is to have speedy, just and inexpensive resolutions to claims, it seems inconsistent to permit such interest to be payable where little was done, to the detriment of the debtor.

Section 2 of the Small Claims Act permits a judge to make any order to give effect to those purposes and under the common law, pre-judgment interest may be lowered where it would be excessive. [xvi] It may be that would have been appropriate in this case. I did not seek or receive submissions on this point and I need not decide the issue. _____________________________ The Honourable Judge J. Guild Provincial Court of British Columbia CORRIGENDUM - Released January 26, 2023 In my Reasons for Judgment dated January 18, 2023, the following changes have been made: [1] The citation now reads: EOS Canada Inc. v.

Young , 2023 BCPC 8. [2] The header on the Reasons for Judgment now reads: EOS Canada v. Young. [3] My Reasons for Judgment are hereby amended. __________________________________ The Honourable Judge J. Guild Provincial Court of British Columbia [i] 2022 BCPC 154 [ii] RSBC 1996, c 253 [iii] SBC 2004, c 2

[iv] RSBC 1996, c 238 [v] 2019 BCSC 663 [vi] United Metal Fabrications Ltd. v. Voth Bros. Const.

(1974) Ltd. [1987] B.C.J. No. 1916 (S.C.) [vii] [viii] Buhecha, at para. 23 [ix] Seidel v. TELUS Communications Inc., 2011 SCC 15 [x] Finkel v. Coast Capital Savings Credit Union, 2017 BCCA 361, at para. 58 [xi] Rizzo & Rizzo Shoes Ltd. (Re), (SCC), [1998] 1 SCR 27 [xii] RSBC 1996, c 124 [xiii] F.H. v. McDougall, 2008 SCC 53, at para 46 [xiv]

Section 16, Small Claims Act [xv] RSBC 1996, c 430 [xvi] See for example Hine v. Bentley, (BC SC)