neil deveREaux PLAINTIFF AND: kevin j. lewis DEFENDANT AND: forrest pierce FIRST THIRD PARTY AND: F. PIERCE ATLANTIC SEAFOODS LIMITED SECOND THIRD PARTY v. BETWEEN:, 2011 NLTD 132

IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR TRIAL DIVISION ( GENERAL ) Citation : Devereaux v. Lewis , 2011 NLTD(G) 132 Date : 201109 30 Docket : 200001T0651 BETWEEN: neil deveREaux PLAINTIFF AND: kevin j. lewis DEFENDANT AND: forrest pierce FIRST THIRD PARTY AND: F. PIERCE ATLANTIC SEAFOODS LIMITED SECOND THIRD PARTY AND BETWEEN: KEVIN J. LEWIS PLAINTIFF BY COUNTERCLAIM AND: NEIL DEVEREAUX FIRST DEFENDANT BY COUNTERCLAIM AND: FORREST PIERCE SECOND DEFENDANT BY COUNTERCLAIM AND: F.

PIERCE ATLANTIC SEAFOODS LIMITED THIRD DEFENDANT BY COUNTERCLAIM __________________________________________________________________ Before: The Honourable Mr. Justice Robert M. Hall __________________________________________________________________ Place of Hearing: St. John’s , Newfoundland and Labrador

Dates of Hearing: January 17, 18, 19, 20, 21, 24, 25, 26, 27 and 28, 2011; February 1, 2 and 3, 2011; March 15 and 16,2011; April 4, 5 and 13, 2011 Appearances: Thomas E. Williams, Q.C. Counsel for the Plaintiff/First Defendant by and Ian S. Patey Counterclaim Anne M. Fagan, Q.C. Counsel for the Defendant/Plaintiff by Counterclaim John R. Sinnott, Q.C. Counsel for the First Third Party/Second Defendant by Counterclaim, and Second Third Party/ThirdDefendant by Counterclaim Authorities Cited: CASES CONSIDERED: R. v. Campbell, (ON CA), [1977] O.J. No. 1684, 38 C.C.C. (2d) 6 (C.A.).

STATUTES CONSIDERED: Limitations Act, S.N.L. 1995 c. L-16.1. TEXTS CONSIDERED: Sopinka, Lederman & Bryant, The Law of Evidence in Canada, 3rd ed. (Canada: LexisNexis Canada, 2009). REASONS FOR JUDGMENT AFTER TRIAL Hall, J.: INTRODUCTION [1] In the late 1980’s the Federal Department of Fisheries and Oceans (“DFO”) initiated a policy whereby fishers who heldgroundfish licenses for vessels over 35 feet in length and under 65 feet in length could combine those licenses for use on a vessel of alength no greater than 64 feet 11 inches (“64’ 11” License”).

The Plaintiff, Neil Devereaux (“Devereaux”) was a resident of the Town ofTrespassey and that at times relevant to this matter was engaged in several forms of business from time to time. These included asupermarket, a fish plant, and ships chanderling and supply business. In the ships chanderling and supply business, Devereauxconducted business with one or more companies or vessels owned by the First Third Party/Second Defendant by Counterclaim, oneForrest Pierce, a resident of Shelburne, Nova Scotia.

In addition to operating and owning fishing vessels, some of which frequented thefishery zones off of Newfoundland, Mr. Pierce through his company F. Pierce Atlantic Seafoods Limited operated a fish plant inShelburne, Nova Scotia. Forrest Pierce shall be referred to herein as “Forrest Pierce” and F. Pierce Atlantic Seafoods Limited as “F.P.A.Ltd.”. Devereaux testified that he regularly supplied fuel, equipment and supplies to vessels owned or controlled by Forrest Pierce orF.P.A. Ltd.

He testified that his arrangement was in the nature of a “gentleman’s agreement”, which he testified meant that there was nowritten agreement between himself and Forrest Pierce or F.P.A. Ltd. and that all of the dealings were oral. He also testified that duringthe course of his dealings there were no problems with Mr.

Pierce or his companies and that all of the accounts of Devereaux were paidin full and on a timely basis. [2] Devereaux testified that during the course of his dealings with Forrest Pierce in supplying fuel etc. to the Pierce companies,Forrest Pierce indicated a desire to obtain access to the fishing zones offshore in Newfoundland whereby he could employ one of hisvessels. At the given time, late 1989, the fishery for boats the size of the one Mr. Pierce wished to employ was quite successful in thevarious fishing zones around Newfoundland.

In order to fish in Newfoundland waters, however, it was necessary that a license for thevessel to fish in the Newfoundland zones be held by a licensed Newfoundland resident fisherman. The vessel which Mr. Pierce intendedto use would have fallen in the DFO category of a 64’ 11” License. As a result of discussions between Devereaux and Forrest Pierce, itwas apparently agreed between them that Devereaux would seek out fishers who held licenses for over 35’ vessels who would beprepared to sell those licenses so that they could be combined into a 64’ 11” License and transferred to a licensed Newfoundland fisher.

Devereaux expended some effort and some monies in locating two fishermen, namely one Oakley R. Johnson and one Gordon F. Careen, who held licenses that could be combined into a 64’ 11” License. Devereaux negotiated with Johnson and Careen for the purchase of their licenses, each for the sum of $5,000, as appears in the documentation executed by them. [ 3 ] The requirement for the combined 64’ 11” License to be held by a licensed Newfoundland resident fisher was met by the introduction of the Defendant, Kevin J. Lewis (“Lewis”), into the scenario.

At the relevant time Lewis held a groundfish license and owned two boats which were licensed, both of which were under 35’. Lewis’s license for a boat under 35’ in length could not be one of the licenses that were to be combined under the DFO Regulations. Devereaux was familiar with Lewis, who resided in St. Shott’s, a community not far from Trepassey, because they had both gone to the same school and both played recreational hockey together.

They were, however, acquaintances and not friends, nor were they previous business associates. [ 4 ] The inshore fishery off of Newfoundland, particularly in the zone for which Lewis held his own license, had been in serious decline in the late 1980’s and the fishery for Lewis had been little better than a subsistence fishery. For additional income he relied upon employment insurance and his wife had a full-time job at the local fish plant.

I am satisfied that, notwithstanding the testimony of Lewis to the effect that he could have “got along” with the income he was making from his own fish license, that living would have been marginal at best. [ 5 ] In late 1989, or perhaps early 1990, Devereaux approached Lewis with the notion that Lewis would hold a newly combined 64’ 11” License and would get a job as a deckhand on the vessel fishing that license. Devereaux did not disclose to Lewis at the relevant time the name of the vessel owner nor did he disclose the nature of his dealings with that vessel owner, Forrest Pierce.

I am satisfied that Devereaux painted a rosy picture of the potential income that Lewis might make from a deckhand’s share on the larger vessel fishing offshore. Lewis himself testified that he anticipated he could make as much as $40,000 to $50,000 a year in such a position. Naturally, given the small income which Lewis was earning from the fishery and from other part-time jobs such as taxiing, that amount of income annually was enticing to him. There was no evidence that Devereaux had expressed to Lewis that an income of that level was possible.

Lewis however had information from other fishers who were making significant incomes. He testified that his own brother was fishing offshore and had made more than $5,000 on one trip alone. Such success lent support to Lewis’s positive aspirations. Devereaux and Lewis discussed briefly over periods of 15 to 20 minutes on two separate occasions whether Lewis was prepared to enter into such an arrangement and ultimately Lewis agreed to do so. Devereaux then set about making the final arrangements to get the licenses of Johnson and Careen transferred.

Lewis was not aware of any of the mechanics being employed by Devereaux to combine these licenses. He was aware however of Devereaux having an involvement with Forrest Pierce (as of then unidentified to Lewis) whom Devereaux described as a “millionaire”. Devereaux indicated that as a result of this transaction he and Lewis would make a lot of money. [ 6 ] Devereaux retained the services of a solicitor practicing in St. John’s by the name of Graham Wells (“Wells”).

Wells had had some experience involving the fishery and at the same time had been working for Devereaux on a similar license combining arrangement with two other fishers, which transaction was ultimately completed. Wells completed the necessary legal documentation in order to effect the transfer of the Johnson and Careen licenses to Lewis.

At the same time Wells prepared a trust agreement between Devereaux and Lewis, which recited that Careen and Johnson owned groundfish licenses which they had agreed to convey to Devereaux for $5,000 each, that Devereaux and Lewis had agreed that the licenses would be transferred into the name of Lewis on the records of the DFO after the trust agreement was executed by Devereaux and Lewis, and, as well, that after the transfer of the licenses into the name of Lewis he would apply to have a new 64’ 11” License (“the License”) issued in his name.

The terms of the trust agreement provided inter alia that Lewis was to hold the new 64’ 11” License “in trust” for Devereaux. Devereaux covenanted and agreed that he would enter into an agreement with the boat owner of the vessel that would be used to fish the 64’ 11” License to the effect that the boat owner would be responsible for any violations of DFO regulations or legislation committed while prosecuting fishery under the License.

The trust agreement also provided that it would be binding upon the heirs, executors, administrators, successors and assigns of the parties and would be construed in accordance with the laws of Newfoundland. [ 7 ] When the necessary agreements to transfer the licenses from Careen to Lewis were completed, Wells met with Johnson and Careen and executed agreements whereby they acknowledged the payments from Devereaux and certified that they had signed transfer documents with respect to their licenses, leaving a blank space for insertion of the name of the intended fisher and left them with Wells so that he, on the instructions of Devereaux, could insert the name of the party to whom the License was to be made over.

Careen and Johnson also signed letters dated March 21, 1990, and March 20, 1990, respectively, and addressed “TO WHOM IT MAY CONCERN”, leaving a blank space for both the insertion of the name the License was to be transferred to as well as the insertion of the S.I.N. of that person.

The documents also indicated that, by transferring the Groundfish License, Careen and Johnson were each: “… relinquishing all my rights I have in the Commercial ____________ Fishery”. [ 8 ] These two letters addressed “TO WHOM IT MAY CONCERN” were subsequently completed with the name and S.I.N. of Lewis as well as with the fishery to which the license rights were being given up by Careen and Johnson being entered as the commercial “Groundfish”. [ 9 ] Additionally, the “TO WHOM IT MAY CONCERN” letters signed by Careen and Johnson indicated that each wished “… to transfer my Groundfish License”. [ 10 ] Shortly after these letters were signed, Devereaux arranged with Lewis to drive to St.

John’s to effect the transfer of the licenses to Lewis and to attend at the offices of DFO to obtain the new 64’ 11” License. At no time prior to this drive to St. John’s did Devereaux ever mention to Lewis that he would be required to attend at the lawyer’s office for the purpose of signing any documents. The trust agreement was never mentioned to Lewis prior to the drive to St. John’s. What occurred at Wells’ office at the time of Lewis signing the trust agreement and other documents is contested.

Lewis claims that he had no advice as to the effect of the trust agreement, that he signed it and a blank sheet of paper, and further states that Devereaux misrepresented to him the purpose of the trust agreement. Lewis claims that Devereaux told him that he had to sign the trust agreement in order to work as a deckhand on the vessel owned by the fish plant owner in Nova Scotia. I will deal later in this judgment with the issues arising from the execution of the trust agreement and related documents.

[ 11 ] After the meeting in Wells’ office, Devereaux and Lewis drove to the DFO offices where Lewis entered and effected the transfer of the licenses from Johnson and Careen to himself and applied for the 64’ 11” License, which was subsequently issued to him a brief time thereafter. A representative of Forrest Pierce subsequently advised Lewis that the Natalie Don II was the motor vessel that he would be fishing on and that it would be ready for the fishery on a particular day.

Lewis was advised that an airline ticket would be available for him to fly to the airport at Halifax, Nova Scotia and there he would be picked up by a person for whom he was given a physical and clothing description only. Lewis went to the DFO office, paid for the new License and went to the airport and arrived in Halifax where he was picked up by one Ernie Pierce, a relative of Forrest Pierce. Ernie Pierce drove him to Shelburne and took him to the dock where the vessel Natalie Don II was tied up. There was no one on the vessel and no one to greet him.

He waited an hour and a half until other crew members showed up and then boarded the vessel. The Natalie Don II with Lewis as a deckhand made six voyages only, the first voyage which departed on Good Friday 1990 being terminated by reason of engine difficulties. Lewis returned to St. Shott’s and went back to Nova Scotia in June of 1990 where he completed five more voyages. These voyages were a disaster collectively and individually. A total of only approximately 53,000 pounds of cod were caught on the five voyages.

All parties to this action agreed that this catch would not have been sufficient to pay for the cost of the voyage let alone make any great profit. Lewis received two payments totaling about $4,000 for his efforts on these five trips. After the fifth trip Forrest Pierce ordered that the Natalie Don II be tied up and Lewis never again fished on this vessel. The last voyage of Lewis on the Natalie Don II was sometime in July of 1990. [ 12 ] From the time of the last voyage of the Natalie Don II on which Lewis was a deckhand until December of 1990 Lewis was without a vessel on which to fish.

His concern was for the upcoming 1991 season so he approached Beverley Green, the director of licensing with DFO, about reverting to his under 35’ license. He says it was at this time that he was advised for the first time that once he had applied for and obtained the 64’ 11” License he was no longer permitted to revert to his under 35’ license and that his right to this license was gone forever. This left Lewis in a difficult situation because he personally had limited ability to obtain a 64’ 11” boat on which to fish his 64’ 11” License.

Shortly after his conversation with Beverley Green at DFO, Lewis testified that he spoke to Devereaux on the wharf at Trespassey. Obviously this conversation angered Lewis considerably. He essentially felt that as a result of this conversation Devereaux had thrown him, as he expressed it, “to the woods”. He said that Devereaux told him that the whole arrangement was a “bad deal gone sour” and that all Lewis had was “a number”, meaning a vessel registration number and not a boat of the size to suit his License.

Lewis felt that Devereaux had completely abandoned him and that it was Devereaux’s obligation to obtain a boat suitable to fish the 64’ 11” License.

Because of a conversation that Lewis had with Forrest Pierce on the wharf at Shelburne at the time of his first trip there in April of 1990, Lewis had received some information which led him to believe that notwithstanding the trust agreement, which provided that the 64’ 11” License was the property of Devereaux and notwithstanding the License being registered with DFO in Lewis’s name, that it was possible that in fact Forrest Pierce or one of his companies owned the 64’ 11” License.

At this stage in the judgment it is appropriate to deal with what is the core issue in this matter, namely, was the money which was supplied by Pierce’s company, Natalie Don Fisheries Limited, to Devereaux for the purchase of the licenses of Careen and Johnson a loan made by Forrest Pierce or Natalie Don Fisheries Limited to Devereaux to permit Devereaux to purchase the two licenses in his own right, or was Devereaux merely acting in some capacity such as a broker or agent for Forrest Pierce and/or his companies in obtaining the 64’ 11” License?

This issue has given rise to considerable controversy with respect to the admission of certain evidence. At this juncture I would intend to deal with the issues of the admissibility of that evidence and describe in detail its nature. core issue – whether there was a loan to devereaux by forrest pierce [ 13 ] The core issue in this case is whether there was a loan to Devereaux by Forrest Pierce or one of his companies. I am satisfied that by a cheque dated March 16, 1990, from Natalie Don II Fisheries Ltd. (not Natalie Don Fisheries Limited) for $13,000 was paid by that company to Neil Devereaux.

At various times during the trial there were discussions of $14,000 having been sent by Forrest Pierce or one of his companies to Neil Devereaux. I am satisfied that Neil Devereaux never received more than $13,000 by way of the cheque set out above and no more. Devereaux claims that these funds were provided to him as a loan. The submission of the Third Parties (Forrest Pierce and F.P.A. Ltd.) is that there was no such loan.

The position of the Third Parties is that the License in question was purchased from funds advanced by Natalie Don Fisheries Ltd. (not Natalie Don II Fisheries Limited) and that the License was owned at the material times by Natalie Don Fisheries Limited. I am satisfied that there was no Nova Scotia company by the name of Natalie Don II Fisheries Limited. No explanation was offered in evidence for the use of a cheque with this corporate name.

Essentially, I am satisfied on the evidence that the $13,000 paid to Neil Devereaux was paid by Natalie Don Fisheries Limited because its 1990 financial statements indicate an increase in their asset base by the acquisition of “License” in the amount of $13,000 in that fiscal year. [ 14 ] At this juncture I want to deal with issues which relate to evidence obtainable from the records of Devereaux’s lawyer, Wells, and the viva voce evidence of Mr. Wells. Counsel for Forrest Pierce and F.P.A.

Ltd. assert that this evidence is not admissible in this case for any purpose. [ 15 ] In Sopinka, Lederman & Bryant, The Law of Evidence in Canada , 3rd ed. (Canada: LexisNexis Canada, 2009), the authors at page 395 and following deal with self-serving evidence and the rules and exceptions relating to the admissibility or inadmissibility thereof. At paragraph 7.1 they state: 7.1 There is a general exclusionary rule against the admission of self-serving evidence to support the credibility of a witness unless his or her credibility has first been made an issue.

The rule is generally applied to prior consistent statements of the witness. Although contradictory statements may be used against a witness, “you are not entitled to give evidence of statements on other occasions by the witness in confirmation of her testimony”. [ 16 ] At paragraph 7.2 the authors continue: 7.2 The rule is not limited to statements, but is applicable to any out-of-court evidence which is entirely self-serving and would shed no light on the material issues in the case. … [ 17 ] At paragraph 7.3 the authors state: 7.3 Two different rationales have been given for the exclusion of such evidence.

The one most commonly relied on is that, due to the

risk of fabrication, no person should be allowed to create evidence for him or herself. That is a hearsay danger inherent in such out-of-court statements. The other view emphasizes a valuelessness of such evidence since a witness’ story is not made more probable ortrustworthy by any number of repetitions of it.

Moreover, it would take needless trial time in order to deal with the matter that is notreally in issue, for it is assumed that the witness is truthful until there is some particular reason for assailing his or her veracity. [18] Counsel for the Third Parties asserted that he did not make any allegation that Devereaux was fabricating his testimony tosupport the argument that the advanced money from Forrest Pierce or Natalie Don Fisheries Limited was by way of loan, as opposed tomerely putting Devereaux in funds to act as broker or agent for Forrest Pierce or his companies in obtaining the 64’ 11” License.

Counsel for the Third Parties therefore asserts that there not having been any allegation of recent fabrication, the evidence of GrahamWells, either through his notes or viva voce, is not admissible. In R. v. Campbell, (ON CA), [1977] O.J. No. 1684,38 C.C.C. (2d) 6 (C.A.), Martin, J.A. indicated that the imputation of recent fabrication may not have been expressed but may be impliedfrom the circumstances of the case or the way in which it is presented.

He stated at paragraph 47 of his decision: 47 I accept the proposition that an express allegation of recent fabrication in cross-examination is not necessary before the exception,with respect to rebutting an allegation of recent fabrication, becomes operative, and that a suggestion that the accused’s story has beenrecently contrived may also arise implicitly from the whole circumstances of the case, the evidence of the witnesses who have beencalled and the conduct of the trial.

Where the circumstances are such as to raise the suggestion that the accused’s evidence is a recentfabrication, counsel may properly anticipate the allegation of recent fabrication in cross-examination and examine the accused in chiefwith respect to previous statements to other persons, prior to his being cross-examined [citations omitted]. [19] I am satisfied that the manner of conduct in cross-examination of Neil Devereaux in this matter has given rise to the implicationthat the description of the arrangement between Forrest Pierce and Neil Devereaux as a “loan” had not previously been asserted byDevereaux in discovery or otherwise.

The obvious implication therefore is that Devereaux has changed his story or recently fabricatedthe evidence with respect to the loan. I am therefore satisfied that the evidence of Graham Wells is admissible for the limited purpose ofrebutting the presumption that the evidence of Devereaux with respect to a loan is recently concocted. The law is clear on this point thatsuch evidence in response to an implication of fabrication can only be used to rebut the suggestion of recent fabrication. However, thereare other bases on which such evidence may be admitted.

In The Law of Evidence in Canada, at page 407, the authors state: 7.31 An earlier statement by the witness while the event is question is taking place may be part of the res gestae and the admissibleevidence as an exception to hearsay rule. Such statements are admissible in their own right as proof of the contents therein and they neednot be consistent testimony given in court on the same point.

Accordingly, even if the prior consistent statement would have beeninadmissible because no allegation of recent fabrication had been made, it may still be received provided that the statement was madeduring the carrying out of

an act or transaction and so related in time as to be part of it. A prior consistent statement which is admittedunder the res gestae hearsay exception, is also relevant to the witness’ credibility. [20] Also at page 407, at paragraph 7.33, the authors state: 7.33 Prior consistent statements which do no qualify as part of a res gestae may, nevertheless, be admitted for limited purposes if theyform a necessary part of a narrative.

It has been said that the narrative exception is “essentially a convenient label for instances fallingoutside the traditional exceptions where the fact that the witness has made prior statements about the incident has some probativevalue”. … If the prior statements are not an essential part of the narrative, they should not be admitted. [21] At page 326, paragraph 6.304, the learned authors state: 6.305 … conversations which have the legal result of the creation or the termination of contracts are admissible, not as part of the resgestae, but as original evidence or the very fact in issue.

So, if X says to Y, “I offer to sell my car to you for $300”, X’s words arelegally operative in their very nature to bind X to the contract if Y accepts. The articulation of those words is an objective act andconstitutes original evidence. … [22] Clearly, if Forrest Pierce had sued Neil Devereaux alleging a loan, the statements which Devereaux made to Wells would beadmissible to bind Devereaux to the loan arrangement.

I am satisfied that the instructions given by Devereaux to Wells with respect tothe intended consolidation of the fishing licenses of Careen and Johnson and the arrangements with Lewis and Forrest Pierce areadmissible as part of the narrative of this whole transaction and part of the res gestae. I therefore allow the viva voce evidence ofGraham Wells and his notes, tendered in evidence, to be admitted for the truth of the statements made and the truth of the instructions ofNeil Devereaux to Graham Wells as indicated in Graham Wells’ contemporaneous notes upon receiving those instructions.

Thisevidence is admissible for all purposes and not merely to repudiate any implication of recent fabrication. [23] Another issue with respect to the admissibility of statements in this matter relates to statements purportedly made by ForrestPierce to Lewis when he and Lewis first met on the wharf in Sheburne in April 1990. Here it is necessary to set out some background tothe manner in which the statements of Forrest Pierce were made. Lewis says he was introduced to Mr.

Pierce on the wharf at Sheburneprior to the vessel Natalie Don II leaving for its first voyage (which voyage was terminated by engine difficulties). Lewis describes theirmeeting as being very cordial and that Mr. Pierce was very friendly. During the course of the conversation Lewis stated to Pierce thatDevereaux had taken him to see a lawyer to sign some papers in relation to the 64’ 11” License in Lewis’s name. Lewis testified that hehimself had no understanding of these documents.

However, he states that when he mentioned to Pierce that Devereaux had him signsome documents at the lawyer’s office, Lewis says that Pierce’s attitude changed immediately. He described Pierce as “going ballistic”,as being “angry”, his appearance changing, and that Pierce made statements variously describing Devereaux’s rights along the lines of“he had no right to get you to sign any papers” and “that is my license – I paid for it”. [24] Devereaux’s counsel has resisted the admission of these statements as being hearsay and self-serving.

Nevertheless, I amsatisfied that these statements are admissible under the “spontaneous exclamation” exception to the hearsay rule. In The Law of Evidencein Canada the learned authors at page 342, paragraph 6.347 and following, state: 6.347 The doctrine of res gestae has also been invoked to admit statements “made by those present when a thing took place, madeabout it, and importing what is present at the very time … “

6.348 Thus, the statement is received because it was made contemporaneously with the event to which it related, so as to be inextricably connected with that event. The mere intimacy of the utterance with the event makes the statement relevant. 6.349 The hallmark of admissibility of contemporaneity of the statement with the act.

Because of the coincidence in time of the statement to the event, the hearsay dangers are minimized: (1) there is little time for calculated insincerity on the part of the declarant, as a physical and mental shock of the event stills conscious reflection; (2) there is no problem or faulty memory as the event is still transpiring or has just been completed; and (3) the perception of the declarant may well be heightened by the event. [ 25 ] Canadian courts have had difficulty with respect to the degree of proximity in time between the act and the making of the statements so as to meet the requirement of contemporaneity.

The suggestion here would be that the statements of Forrest Pierce took place some considerable weeks after Lewis had been taken to Wells’ office by Devereaux and signed documents in Wells’ office. It may be argued that Pierce’s utterances were not sufficiently contemporaneous to be admissible.

At page 348, paragraph 6.361 the authors state: 6.361 … Both English and Canadian cases have insisted that the declaration must be directly in relation to an event or transaction which is in issue. … the Privy Council stated that what had to be shown was “the involvement of the speaker and the pressure of the drama, or the concatenation of events leading up to the crisis”. [ 26 ] I am satisfied that the statements of Forrest Pierce attributed to him by Lewis, if believed, are sufficiently spontaneous and contemporaneous with his first awareness of some involvement with a lawyer on the part of Lewis and Devereaux.

It is part of a continuation which forms part of the total narrative of this story and I am satisfied to admit same for the truth thereof. [ 27 ] It is now necessary to turn to the surrounding evidence concerning these two events, i.e., the instructions to Graham Wells by Devereaux and the conversation of Lewis with Forrest Pierce to determine the credibility of these distinctly different narratives. Evidence Regarding Forrest Pierce’S position [ 28 ] The major portions of evidence which support the contention of the Third Parties, Forrest Pierce and his company F.P.A. Ltd., consist of the following: A.

First Meeting of Lewis and Pierce [ 29 ] I had referred earlier to discussions between Lewis and Pierce on the wharf in Sherburne at the time that Lewis first went to Shelburne to join the crew of the Natalie Don II. Basically, the evidence of Mr. Lewis is that he engaged in a friendly conversation with Mr. Pierce and then happened to ask Mr. Pierce if he knew Mr. Devereaux. During the course of this portion of the conversation, Lewis says that he mentioned to Pierce that he had attended at the office of a lawyer with Mr. Devereaux and signed some agreements.

In his testimony with respect to his meeting with lawyer Wells, Lewis contended that he did not even understand the nature of the documentation but knew that it had to do with the combining of the licenses of Careen and Johnson into a new 64’ 11” License and transfer of that License into his name. He says he did not in any way understand the trust agreement which he signed between himself and Mr. Devereaux. However, Lewis testified that when he mentioned signing an agreement with Mr. Devereaux that Forrest Pierce completely changed his demeanour and he “went ballistic” and was “angry”.

Lewis says that Pierce immediately commented that Devereaux had no right to get him to sign any agreement and that the License belonged to Pierce not to Devereaux and that Pierce had paid for it.

Thus, the existence of this evidence, if believed, strongly supports the position of the Third Parties that there never was any loan made by Pierce or his companies to Devereaux and that Devereaux merely acted as a broker or agent for Pierce in obtaining the License in question. [ 30 ] Countering this evidence, however, is the whole issue of the probability of this event having happened in the manner described by Lewis particularly with reference to the very adverse reaction of Mr. Pierce to the statement by Lewis that he had signed an agreement in the lawyer’s office. Without conveying in any way to Mr.

Pierce the nature of the agreement which he signed, it is difficult to accept that the reaction of Pierce, whom all parties have described as being a gentleman, as being so animated and adversarial when the level of information that could have been conveyed to him by Lewis at this time was minimal to say the least. This observation casts doubt upon the evidence of Lewis with respect to these events. [ 31 ] Nevertheless, the subsequent dealings of Pierce with Lewis concerning the License tend to support the position of the Third Parties that the License was owned by Pierce or Natalie Don Fisheries Limited. B.

Financial Records of Natalie Don Fisheries Limited [ 32 ] The financial statements of Natalie Don Fisheries Limited for the years which were relevant to this matter were tendered in evidence and admitted for the truth of their contents. These records showed a change in the category of assets on the balance sheet of the company described as “licenses” whereby the licenses owned by the company increased in value by the amount of $13,000 in the 1990 financial year. This amount, of course, coincides with the amount which was forwarded by Forrest Pierce to Devereaux.

Additionally, these licenses were carried on the books of the company and were depreciated at a straight-line depreciation rate of 2.5 percent indicating a 40-year amortization of the value of the licenses as capital an asset of the company. There was no record on the books of the company of any loan made to Devereaux or an account receivable from him. Ultimately, the value of the License on the books of the company was reduced to one dollar and a write-off taken for the undepreciated balance of the $13,000. This left the License as an asset of the company but with nominal value. Mr.

Oakley, a chartered accountant practicing in Nova Scotia testified his firm acted as the accountants for the Pierce group of companies. He advised that even though the financial statements of Natalie Don Fisheries Limited

were not audited statements, each year his accounting company obtained a representation letter which was signed by Mr. Pierce confirming that the auditors had reviewed the financial statements with Forrest Pierce and that Pierce accepted them as correct. If the assertion of Mr. Devereaux is correct that all Forrest Pierce was seeking was access to the fishery, then it is curious why the $13,000 payment made to Devereaux was simply not expensed as opposed to the License being treated as an asset.

This would have been more advantageous to the Pierce company in that it would have given an immediate write-off of this amount against the 1990 tax year taxes of the company. Capitalizing the asset, however, only gave the company the opportunity to write-off 2.5 percent of the $13,000 in that year, if the asset was a capital asset as it was in fact treated on the books of the company. These actions, with respect to the accounting records, support the position of the Third Parties as to the ownership of the License. C.

Accounting to Devereaux for Devereaux’s Alleged Share of the Catch [ 33 ] There is nothing in the records of Mr. Pierce’s company which was produced in evidence showed in any way that any amount of money was allocated or paid to Mr. Devereaux for his purported 5 percent share of the gross catch of Natalie Don II. Devereaux himself says that because the catches were so small he did not pursue this amount as his share would have been less than $3,000 and he valued his business relationship in other regards with Mr. Pierce and thus basically acquiesced in not having received that share.

The fact that nothing was paid by Pierce or his companies to Devereaux for his purported 5 percent interest in the catch supports the position of Pierce and his company as to their ownership of the License. However, Devereaux’s explanation as to why he did not seek anything for his 5 percent interest in the catch is also plausible. D. Pierce’s Dealings With Lewis [ 34 ] Even if there is uncertainty about the reaction of Mr. Pierce on the wharf at Shelburne when he first met Mr.

Lewis, clearly Lewis garnered some knowledge that Pierce claimed an interest in the License because he approached Pierce in 1991 with respect to acquiring it from him. This occurred after Lewis said that Devereaux basically abandoned him when Lewis discussed it with Devereaux in December of 1990. This evidence tends to support the notion that by December of 1990 or early 1991 Lewis had formed the opinion that Pierce had some interest in the License. E.

Purpose in Pierce Acquiring the License [ 35 ] Devereaux testified that the only interest of Pierce was to gain access to the Newfoundland offshore fishery and that ownership of the License was not of any concern to Pierce as long as he had such access. Devereaux’s actions in acquiring the combined License and putting it in the name of Lewis achieved this result. Unfortunately, these events occurred on the eve of the collapse of the Newfoundland offshore groundfish fishery and the ultimate “cod moratorium”.

Obviously the financial insignificance and ultimate futility of fishing offshore Newfoundland became quite clear to Mr. Pierce very early on. At that juncture, if he in fact owned the License, as opposed to Mr. Devereaux, the best case scenario for Mr. Pierce would have been to obtain all or some portion of the monies that he had expended to Mr. Devereaux in obtaining the License if in fact there was a loan from Pierce to Devereaux. There is no evidence that Mr. Pierce demanded documentation from Devereaux transferring the License to him or his companies.

Similarly, there is no evidence that he demanded payment from Mr. Devereaux. The lack of a demand for transfer of the License to Pierce or his companies supports Devereaux’s argument. The lack of demand from Pierce to Devereaux for repayment on the money supports the Third Parties’ argument that the License was bought, paid for and owned by Pierce or Natalie Don Fisheries Limited. I am satisfied on the evidence of Mr. Lewis that in 1991 Lewis did tell Pierce the fact that Devereaux was claiming ownership of the License. This is evident in the January and February 1991 written correspondence from Lewis to Pierce.

However, even that correspondence did not produce any demand from Pierce to Devereaux that the situation be clarified. That fact supports Devereaux’s position. F. Pierce’s Ultimate Receipt of Payment for the License [ 36 ] While an agreement was entered into between Pierce and Lewis in 1991 for payment of the sum of $11,000, being $10,000 originally paid for the licenses and $1,000 advanced to Lewis to get it transferred to another boat, repayment to Pierce by the 5 percent of the catch was not received by Pierce until approximately eight years later. At no time did he demand interim payments from Lewis.

This lack of demand for payment could be interpreted as Pierce not paying a great deal of attention to this very small aspect of his business either in demanding the payment from Devereaux, according to the loan alleged by Devereaux, or demanding payment from Lewis according to their written agreement.

The fact Pierce made such an agreement with Lewis, however, is supportive of Pierce’s position on ownership of the License. satisfying the persuasive (legal) burden of proof as to ownership of the license [ 37 ] In The Law of Evidence in Canada at page 203, at paragraph 5.51 the authors state: 5.51 In civil actions, the plaintiff normally bears the persuasive or legal burden of proof because he or she is attempting to change the status quo . But, as discussed, the persuasive burden in relation to an issue may rest on the defendant.

Since society is indifferent whether the plaintiff or the defendant wins a particular civil suit, it is unnecessary to protect against an erroneous result by requiring a standard or proof higher than a balance of probabilities. … [ 38 ] Further at page 203, at paragraph 5.52 the authors state: 5.52 The degree of probability to discharge the burden of proof in a civil case has been defined by several leading jurists. Lord Denning defined it in these terms: It must carry a reasonable degree of probability but not so high as is required in the criminal case.

If the evidence is such that the tribunal can say: ‘we think it more probable than not’ the burden is discharged, but if the probabilities are equal it is not. (Miller v. Minister of Pension, [1947] 2 All E.R. 372, at 374 (KB) )

Justice Cartwright in Smith v. Smith, (SCC), [1952] 2 S.C.R. 312, at 331-332 articulated the test as follows: … that civil cases may be proved by a preponderance of evidence or that a finding in such cases may be made upon the basis ofthe preponderance of probability and I do not propose to attempt a more precise statement of the rule.

I wish, however, to emphasize thatin any every civil action before the tribunal can safely find the affirmative of an issue of fact required to be proved must be reasonablysatisfied, and that whether or not it will be so satisfied must depend upon the totality of the circumstances in which its judgement isformed including the gravity of the consequences of the finding. Simply put, the trier of fact must find that the existence of the contested fact is more probable than its nonexistence.

Conversely, where aparty must prove the negative of an issue, the proponent must prove its absence is more probable than its existence. [39] Recently the Supreme Court of Canada has dealt with the standard of proof required in civil proceedings. In The Law ofEvidence in Canada at page 210, paragraphs 5.62.1 and 5.62.2, Justice Rothstein dealt with the issue and the learned authors commentedas follows: 5.62.1 In H(F.) v. McDougall, 2008 SCC 53 , [2008] 3 S.C.R. 41, the Supreme Court of Canada revisited and clarified thestandard of proof required in civil proceedings.

Justice Rothstein held that the balance of probabilities standard was the sole standard ofproof at common law and all civil proceedings. The party with the onus of proof has the obligation to prove that the existence or non-existence of a fact or issue is more likely than not.

The lower standard of proof is justified in civil proceedings because it is notinextricably linked to the presumption of innocence and the government’s powers to penalize or take away an individual’s liberty asexists in criminal proceedings. 5.62.2 Justice Rothstein stated that context played an important role in the application of the standard of proof.

He held that a trial judgeshould not be unmindful of the seriousness of the allegations of the consequences of the event or the inherent probabilities orimprobabilities of its occurrence, but that these considerations do not change the standard or proof in civil proceedings. He rejected theproposition that a trial judge should apply different levels of scrutiny depending on the type or seriousness of the case or that theevidence must be sufficient clear, convincing and cogent to meet the more likely than not test in some factual scenarios.

Finally, he heldthat there is no rule of law as to when and to what extent the inherent improbability of an occurrence must be taken into account by a trialjudge, but that inherent improbability was a consideration as to whether or not the evidence established that it is more likely than not thatthe event occurred. [40] I have considered the internal and external consistencies and inconsistencies of the evidence of Neil Devereaux in this matter. The consistency of his assertion that there was a loan agreement between himself and Mr.

Pierce with respect to the acquisition of theLicense and that the License was to be owned by Devereaux is supported by the instructions given by Mr. Devereaux to lawyer Wells,prior to the licenses being acquired by Devereaux and placed under the trust agreement in the name of Lewis. Previously in thisjudgment I have dealt with admissibility of such prior consistent statements as being part of the narrative of the case of the res gestae. However, there are some failures on the part of Devereaux to satisfactorily make arrangements which would otherwise have lentcredibility to his full narrative.

In particular, it should be noted that: 1) He failed to make arrangements with Pierce with respect to Lewis not being liable for any violations of DFO regulations orlegislation; 2) He did not put in place any written agreement with Pierce to confirm that Pierce’s company would be responsible to pay 5percent of the gross catch to Devereaux, as the owner of the License, instead relying on what he asserted would be Forrest Pierce’sgeneral knowledge that this was the standard in the industry and that he did not demand payment of it because of the lack of the successof the voyages; 3) He failed to take any further action to find an alternate vessel for use of Lewis’s license after the fishery with Natalie Don IIconcluded unsuccessfully, although it appears from the evidence that he asserted that it was a “bad deal gone sour” when he spoke toLewis on the wharf at Trepassey in December of 1990; 4) He failed to assert to Pierce his ownership of the License when he heard gossip that Lewis was seeking to obtain it forhimself; 5) His explanation for his lack of action was that with the failure of offshore fishery there were substantial impacts upon hisbusiness and his capability to pursue the matter, his fish plant was closed and was sold by a creditor, his supermarket business failed, andthe number of vessels he was servicing for the offshore fishery diminished considerably with the cod moratorium; 6) Financially, he simply could not afford the expense of pursuing the matter although he asserts he always maintained hisposition that he was the owner of the License; and 7) He made a statement in discovery that he would have purchased the License from Forrest Pierce, had he been given theopportunity to do so.

This statement is inconsistent with his assertion that he could simply have clarified the whole issue by offering topay to Pierce the amount of the loan which he asserted was owing from him to Pierce. His failure to do this, however, is furtherexplained by a serious deterioration in his health, which caused him to be off work to recuperate for a long period of time even after theaction with respect to the License was commenced by him.

[ 41 ] On July 13, 1999, after Kevin Lewis had received demand letters from counsel on behalf of Neil Devereaux for the return of the License or compensation, he retained the services of Elizabeth M. Heneghan, Q.C. (now Madame Justice Heneghan of the Federal Court). The letter was addressed to Forrest Pierce and was captioned RE: YOU and KEVIN LEWIS and NEIL DEVEREAUX . The text of the letter reads as follows: I have been consulted by Mr. Kevin Lewis in connection with his acquisition of a fishing license in 1990.

I understand that you provided the funds for the acquisition of this license and that you provided further $1,000.00 payment to Mr. Lewis in 1991, to enable him to prepare for fishing in that year. I am in receipt of a letter dated March 8th, 1991 from Mr. Bruce Daley to you. Mr. Daley, acting on behalf of Mr. Lewis, presented this letter for your signature and the effect of this letter, in my opinion, is an agreement by Mr. Lewis to pay you the sum of $11,000 without interest, in return for the release by you of any beneficial claim that you may have in the groundfish license held by Mr. Lewis.

Your signature on that letter was your acceptance of those terms. Mr. Lewis has advised that this money is still unpaid because he has not had the funds to pay you. However, he has the money and is now prepared to pay you and I am writing at this time to advise that the money will be paid forthwith. I will be asking Mr. Lewis to bring the money in to me and I will send it to you, against delivery of a receipt and release. Please let me know whether the money should be paid to you personally or to your company, F. Pierce Atlantic Seafoods Limited.

I trust this is in order and look forward to hearing from you. [ 42 ] A copy of this letter was entered in evidence together with a written hand notation on the second page thereof which it is agreed by counsel of the Third Parties is in the writing of Forrest Pierce. It states: update Re Gillnet License for Natalie Don II 1990 10 2 ___ 2 14 + 1 = 15000 Dave, A cheque or money order was sent from FPA in 1990 for $14,000. I think to Neil Devereaux, who was handling the license purchase purchase . The price paid for gill net license was only $10,000. Neil apparently kept $4,000 for himself, unknown to Kevin or I.

I advanced another $1,000 of which makes the total amt Neil owes me for the license. He thinks we should have the receipt for proof, but the lawyer has not asked for it yet. [emphasis added] Forrest [ 43 ] The above notation on the letter of Elizabeth Heneghan is the only commentary on the fact situation that we have from Forrest Pierce in his own words in writing . The person “Dave” to whom the note is addressed is a Dave Berkshire, a chartered accountant of the firm which is now Grant Thornton who were the chartered accountants for Pierce’s companies. Mr. Berkshire is deceased as is of course Forrest Pierce.

Thus, we have no explanation of these words and must rely on the words themselves to attempt to determine what they mean. [ 44 ] As indicated earlier in this judgment, there was not a $14,000 cheque demonstrated as having been forwarded by F. Pierce Atlantic Fisheries Limited (the “FPA” mentioned in the second line of the note). I am satisfied that the amount forwarded to Neil Devereaux was $13,000 by cheque. The second line “I think to Neil Devereaux, who was handling the license purchase” offers no indication directly as to the capacity in which Neil Devereaux was handling that purchase. Mr.

Pierce then goes on to note that the price paid for the License was only $10,000 and Neil Devereaux apparently “kept $4,000 for himself, unknown to Kevin or I”. This line appears to indicate a thought on the part of Forrest Pierce that Neil Devereaux owed him some duty of accounting for the funds which were advanced from Pierce to Devereaux. Pierce then goes on to note that he advanced another $1,000 but the note does not say to whom. Interestingly that line continues “ … which makes the total amt Neil owes me for the license”. Does this note indicate a debt

owing from Neil Devereaux to Forrest Pierce in the amount of $14,000 or $15,000? It should be noted at the top of the letter there is a notation of some figures totaling $14,000 plus $1,000 for a total of $15,000. These figures are scratched out. It is not known by whom. This evidence would appear to indicate that Forrest Pierce was of the mind that Neil Devereaux owed him $15,000. This jibes with the original mistaken thought that he had forwarded $14,000 to Neil Devereaux and thus tends to support the notation that this is the “total amt Neil owes me for the license”.

However, it is known from the evidence that the additional $1,000 was not forwarded to Neil Devereaux but was forwarded to Kevin Lewis at the time when he entered into the original agreement with Forrest Pierce to have Pierce confirm the License ownership in Lewis’s name. [ 45 ] If Devereaux was in fact acting as an agent or broker for Pierce, as Lewis asserted Pierce stated to him, it seems improbable that Pierce would be thinking that Devereaux owed him $14,000 or $15,000. Obviously there was a cost paid for the licenses themselves which Pierce evidently knew totaled $10,000.

Thus, if Devereaux was acting as a broker or agent he certainly would not have owed to Pierce the $10,000 portion of the total amount forwarded to him by Pierce unless there was a loan agreement between them. Counsel for Lewis and for the Third Parties argued that the reference that the amounts referred to in the letter made up “… the total amt Neil owes me for the license” is an incorrect reference to Neil and should be referring to Kevin Lewis. However, as is known from the testimony from Kevin Lewis, his agreement with Forrest Pierce was only for a total of $11,000 interest free.

Conclusion re Beneficial Ownership of the License [ 46 ] Certainly the notation of Forrest Pierce on the letter of Elizabeth Heneghan dated July 13, 1999 is capable of

interpretations, which favour both positions put forward, by Neil Devereaux on the one hand and by counsel for Forrest Pierce and his companies supported by Kevin Lewis on the other hand.

I need to make a decision with respect to this difficult portion of the evidence and can only do so as indicated in the previous references to The Law of Evidence in Canada dealing with burden of proof by deciding which is more probable than not of the two stories. [ 47 ] Firstly, with respect to the notations of Forrest Pierce on the letter of Elizabeth Heneghan, I am of the view that it is more probable than not that this notation constitutes acknowledgment by Forrest Pierce of some loan arrangement with Neil Devereaux.

I have no evidence on behalf of Kevin Lewis or the Third Parties that Forrest Pierce ever confronted or spoke to Neil Devereaux with respect to Lewis’s conversation with him on the wharf when Devereaux purported ownership of the License. Certainly he had an opportunity to do that when he visited Newfoundland in the summer of 1990 to have discussions with Neil Devereux regarding the purchase of the salt fish plant. No correspondence was produced with respect to this but this is perhaps understandable because most of the files of the company were destroyed after the company ceased business under of auspices of Mr.

Pierce. However, it is interesting that the company was able to produce the original cheque to Devereaux from Natalie Don II Fisheries Ltd. but no other documentation directly on point. [ 48 ] With respect to the evidence of Kevin Lewis, as noted earlier it is strange that the reaction of Forrest Pierce as described by Kevin Lewis on the wharf at Shelburne occurred as dramatically and as forcefully as Kevin Lewis asserts.

It is noteworthy that every time he repeated his story about this there was a new or different element added to it, which did not change the overall thrust of the story but which attributed additional words and expressions of attitude on the part of Forrest Pierce. This is understandable after the passage of so much time but, taken together with my perception of an attitude on the part of Lewis very hostile to Devereaux causes credibility concerns for me. Undoubtedly, Lewis somehow came to a knowledge and understanding that Forrest Pierce had some interest in this License.

This is evident by the fact that he approached Pierce to have the License sold to him. However, in expressing that interest Lewis also indicated that he wanted to be sure that he was paying the right person, i.e., Pierce or Devereaux. However, after he came to his arrangement with Pierce he made no further effort to contact Devereaux. I can speculate that Pierce was attempting to recover some or all of the money which he had expended in whatever way he could and felt that clearly having advanced money for the License he was entitled to receive the License.

Lewis on the other hand was in dire financial straits and had no ability to pay Devereaux any additional monies over and above what he had agreed to pay to Pierce namely $11,000. [ 49 ] Balancing all of this evidence with respect to ownership of the License, and considering the demeanour of Neil Devereaux and Kevin Lewis during the course of their lengthy testimonies, I have come to the conclusion that on the balance of probabilities, that the position of Neil Devereaux is the more probable of the scenarios presented to me in this matter.

Were the License simply to be held by Pierce’s company, it would have been probable that Devereaux, valuing his business relationship with Pierce, would have had the trust agreement prepared between Lewis and Pierce or Pierce’s company. Instead, it was prepared between Lewis and Devereaux. It may be argued that it was done this way simply to have somebody on the scene here in Newfoundland to enforce license ownership against Lewis if that became necessary.

The instructions of Devereaux to lawyer Wells all occurred before the finalization of the agreement and are, in my view, more supportive of the ownership argument in favour of Devereaux than is the position presented by Lewis and counsel for the Third Parties.

Conclusion on License Ownership [ 50 ] I therefore, with considerable difficulty and much consideration, come to a conclusion on the balance of probabilities that it is more probable than not that the arrangement was that Devereaux was to own the License and was to repay the money sent to him by Pierce to Pierce in accordance with the manner set out in the notes of lawyer Wells, i.e., there was 5 percent of a gross catch received by Devereaux of which he would remit 2.5 percent to Pierce or his companies to pay for the License.

I recognize that there is no other correspondence or written agreement with Pierce in this regard. However, I am prepared to accept the suggestion of Devereaux that, because Forrest Pierce was very experienced in the fishing industry, he would undoubtedly have been familiar with these trust arrangements and for the normal percentages paid by the boat to the License owner as a percentage of the catch. It is interesting to note that Pierce, in requiring payment from Lewis, used the same 5 percent figure for repayment in a different context.

This goes to show the reasonableness of 5 percent as a figure for compensation for license usage. Attributes of the 64’ 11” License [ 51 ] Devereaux has asserted that notwithstanding the fact that the License which is governed by the trust agreement only dealt with groundfish, there are certain attributes of that License which allowed Kevin Lewis to acquire certain other supplemental licenses for which ownership of the groundfish license was a necessary precondition. Particularly important amongst these licenses are the

additional licenses for crab and shrimp.

Lewis’s position is that the License which was acquired was only a groundfish license and while he disputes that Devereaux has any interest in the groundfish license at all, it is suggested by counsel for Lewis that at best all Devereaux is entitled to is the value of the groundfish license. [ 52 ] The position of Lewis in this regard is based upon the fact, which I accept, that Devereaux made absolutely no additional contribution to Lewis’s efforts in the fisheries and made no financial contribution to the acquisition of boats to fish the license or acquire equipment or pay license fees.

Neither did Devereaux have any further administrative liaison with DFO to facilitate Lewis in this regard. Therefore, the position of Lewis is that at best Devereaux has an interest in the groundfish license and not in any of the other licenses. Devereaux’s position is that with respect to the crab license the issuance of this license to Lewis, as an adjunct to the groundfish license, was an automatic action by DFO.

Over the years the number of pots able to be fished under the crab fish license increased automatically and Devereaux therefore takes the position with respect to this license that he is entitled to the full benefit of the crab license portion of the total package. [ 53 ] With respect to the shrimp license, there was expert evidence to the effect that in order to acquire this license there was no automatic issuance of it by DFO.

Lewis was required to obtain the appropriate equipment in order to show a commitment to the shrimp fishery and there was evidence which I accept that this occasioned a capital expenditure of approximately $150,000.

Nonetheless, Devereaux takes the position that the shrimp license was not able to be acquired without Lewis holding the groundfish license and that, therefore, the shrimp license should also be considered part of the package of licenses of which he is the beneficial owner. [ 54 ] I do not accept Devereaux’s argument that the crab and shrimp licenses should automatically be included in the package of licenses of which he is the beneficial owner. Devereaux made absolutely no contribution to the acquisition of these licenses other than simply putting together the 64’ 11” License.

He made no contribution to the expenses that Lewis incurred over the years in running a fishing enterprise so as to build the value of those licenses to their present day value. It would be grossly unfair and unjust enrichment of Devereaux to give to him the full capital value of those licenses, simply because they brought with the groundfish license the additional attribute that the crab and shrimp licenses could also be acquired as part of the package of licenses.

Nonetheless, the ability to acquire these licenses because one held a groundfish license is an attribute of the groundfish license, which should be considered in the compensation which should be payable to Devereaux by Lewis. Therefore, it is necessary to consider the evidence with respect to the values of the various license packages involved in this transaction. Value of License(s) [ 55 ] Mr. Dwight Saunders is a marine broker with TriNav Marine Brokerage Inc., a company which carries on business in Newfoundland and Labrador, Nova Scotia and New Brunswick.

Its principal focus has been in the selling of commercial fishing vessels and licenses and after extensive examination by counsel in this matter I accepted Mr. Saunders as an expert witness to appear on behalf of Mr. Devereaux. I accepted him as an expert in providing opinion evidence on fair market value of the package of fish licenses which are the subject of this dispute.

Additionally, I accepted him as an expert on the impact of quotas for various species permitted to be caught under the various licenses and the impact of quota changes on the value of the species’ license, either alone or being sold and marketed as part of a package of other licenses. Additionally, I am satisfied that Mr. Saunders is an expert capable of giving opinion evidence on the impact of the costs of catching and delivering to a processor such catches made under the group of licenses as well as the impact of various costs on the net value of the catch. Additionally, I accepted Mr.

Saunders as able to give opinion evidence based upon his experience with DFO as to the impact of DFO’s policies and practices respecting the combining of licenses and the transfer of packages of licenses or parts thereof and the consequent impact of those regulations on the value of individual licenses or a package of licenses. At page 16 of his report filed in this matter, Mr. Saunders, after discussing the various licenses and quotas associated with the groundfish license, stated: The groundfish license is important as it provides the license holder core status.

The core status permits the holder to hold licenses for and to harvest other species. Due to its core status it is unlikely that the groundfish license would be sold as an individual license. As a result, for valuation purposes, the groundfish (with core) has been paired with the snow crab license. Together the licenses have a value of $850,000. It is important to note that the demand for core groundfish licenses as an individual license has weakened. In the past a core groundfish license by itself sold for upwards of $125,000.

However, recently the demand and value for these licenses has decreased due to the new licensing policy permitting the combining of licenses. The value of such license alone is now at the most $100,000. [ 56 ] Mr. Saunders went on to testify that the groundfish license had an attached cod quota of 3,750 pounds. It is interesting to note that Mr. Lewis indicated that the cod quota was 22,000 plus pounds. If Mr. Lewis is correct, the groundfish license should have a greater value than that put forward by Mr. Saunders, however, I have no further evidence about this and am comfortable that Mr.

Saunders was confused as to what the cod quota was, as his enterprise largely concentrates upon crab and shrimp fishing. Lewis would have better knowledge of what his groundfish quotas were. [ 57 ] With respect to the valuation of the shrimp license, Mr. Saunders further stated at page 16 of his report as follows: The northern shrimp fishery (shrimp fishing area 6) operates on an allocation basis which permits each license holder to harvest a portion of the overall quota.

If midway through the fishing season there is a portion of this allocation that is not be harvested, it may be transferred to other license holders. This practise of reallocating helps ensure the quota for the fleet sector is fully utilized. The demand for this type of license is moderate but could decrease due to the potential quota cuts for the area. Prior to the announcement of the potential quota cuts similar shrimp licenses sold for $175,000. Following the cuts, the quota declined to a level at which licenses have sold for $150,000.

A typical buyer of a shrimp license in area 6 would be looking at combining their quota and receiving a larger percentage allocation. The license package also includes a scallop license. The demand for scallop licenses for this fleet sector is weak, as the majority of harvesters have a scallop license as part of their enterprise. Furthermore, the abundance of the scallop resource in Newfoundland is low. As a result, a weak demand, strong supply and poor resource prospects the value of the scallop licenses is poor.

It is unlikely that a vessel of the size of the one registered for this license would participate in the fixed gear capelin fishery. The demand for capelin licenses of this type is low as the market for the product from Newfoundland is weakening with the re-immergence of Barents Sea capelin fishery in Norway and Russia. Seal licenses are not transferable between harvesters and therefore have no value. At page 17 of his report, Mr. Saunders summarizes the results of his evaluations of the various licenses and provides a breakdown of the various components.

The report does not attribute a separate value to the groundfish license as he values the total package at $1,000,000. The groundfish license being a condition precedent to the other licenses, its value is subsumed in the value of the other licenses. [ 58 ] Mr. Saunders was questioned about the value of the previous small boat inshore groundfish fishery license held by Kevin Lewis prior to his having the 64’ 11” License transferred into his name. It will be recalled that because of DFO regulations, albeit not known to Mr.

Lewis at the time of agreeing to take on the 64’ 11” License, the small boat inshore license was lost and he could not return to that fishery. I have concluded that the value of that license must be deducted from the total value of the package of licenses under dispute in this matter because it constitutes a contribution of Kevin Lewis to the value of the present package of licenses. If he had not lost that license as part of the combining policy, Mr. Saunders was of the opinion that that license today would have a value of $300,000.

He testified that that type of license is in high demand because it does not require the large capital investments which is required of a larger boat of the type presently fished by Mr. Lewis. As well, that fishery does not require any overnight or extensive voyages or travel far out to sea and is thus regarded as being safer by the fishers who prosecute that small boat fishery. Conclusion on Values [ 59 ] I am satisfied from Mr. Saunders’ evidence that the total package of licenses presently held by Kevin Lewis is $1,000,000.

There should, from that value, be deducted the value at this current time of the small boat inshore fishery groundfish license, which Kevin Lewis held and lost at the time of taking on the 64’ 11” License. Therefore, the net value of the package after deducting that $300,000 value would be $700,000. In order to determine the value of whatever interest Devereaux may have in the crab and shrimp license portion of the package, it is also necessary to deduct the $100,000 value ascribed to the value of the groundfish license alone given by Mr. Saunders, which value I accept.

Therefore, this brings the net value of the package associated with the shrimp and crab down to $600,000. Percentage of Value of Crab and Shrimp Licenses to be Ascribed to Devereaux [ 60 ] I am satisfied that the acquisition of the groundfish license and the placing of the License in the name of Lewis only provided Lewis with the opportunity to acquire the subsequently greater value crab and shrimp licenses.

However, in order to acquire those additional licenses he had to prosecute those fisheries and for a long period of time until 1994 his operations were not terribly successful until he started fishing on a regular basis with a boat owned by the Quinlan Group of Companies. For a number of years he got a percentage of the catch of that vessel as a deckhand and some additional compensation as the License holder. However, that income was not the significant income which accrued to him in later years.

The only value that I am prepared to ascribe to Devereaux is a percentage of the value of the crab and shrimp licenses, which I am satisfied the gross value is $600,000. Because of Devereaux’s minimal contribution to the acquisition of those licenses, I am satisfied to ascribe to Devereaux 7.5 percent of the capital value of the crab and shrimp licenses, therefore, the sum of $45,000.

Conclusion re Devereaux’s interest Lewis Licenses [ 61 ] I therefore conclude that the total value of the interest of Devereaux in the Lewis licenses is $145,000 made up of $100,000 for the groundfish license and $45,000 as an additional compensation for the attribute of the groundfish license, which permitted Lewis to acquire the valuable crab and shrimp licenses. There was no evidence to aid me in ascribing this 7.5 percent interest to Devereaux.

However, considering all of the evidence and the various efforts of the parties to this matter, I am satisfied that any larger amount ascribed to Devereaux would unjustly enrich him because of his minimal efforts after the initial acquisition of the combined licenses of Johnson and Careen. PERCENTAGE OF CATCH VALUE To be Ascribed to Devereaux [ 62 ] Lewis denies any agreement that Devereaux is entitled to any percentage of any of his catches whether groundfish shrimp, crab or any other species.

In the alternative, if I were to find Devereaux is entitled to some percentage, Lewis argues that the most that could be ascribed to Devereaux could be argued to be limited only to the groundfish catches under that license. I am satisfied that that is a reasonable argument. The percentage of the capital value of the crab and shrimp licenses which I have ascribed to Devereaux only relate to the capital value of those licenses.

I am satisfied that there could not have been and was not any agreement with respect to catches for anything other than groundfish. [ 63 ] The parties have indicated to me that, if I were to accept that there was such an oral agreement with respect to Devereaux being entitled to 5 percent of any portion of the total catches made under the combined License, they would resolve that value by an alternate dispute resolution mechanism. I am satisfied that there was not any specific agreement between Devereaux and Lewis.

Having considered all of the evidence, I am also satisfied that with respect to the groundfish license alone, a 5 percent interest in the catch of groundfish is an industry norm for the license owner. I am not satisfied on the evidence that there is a consistent practice that the owner of the license receives whatever interest in a percentage of the catch is on a gross-before-expenses basis or a net-after-expenses basis. Therefore, Mr. Devereaux not having proven that small aspect of catch entitlement, I am of the view that the percentage to which Mr.

Devereaux would be entitled would be 5 percent of the net value of the catches obtained by Mr. Lewis after he commenced fishing for his own account. There was a period of time when Mr. Lewis was fishing vessels owned by others and essentially his compensation was

wages as a deckhand calculated on a percentage of the catch and some additional amount as the owner of the License. Based on the agreement of the parties that they would submit any dispute, with respect to the compensation which should be paid to Devereaux regarding catches, to alternate dispute resolution mechanisms, minimal evidence was presented to me on catch values over the years. This evidence was largely submitted on the basis that counsel for Mr. Lewis wanted to demonstrate that his income in the early years before he obtained his own boat was minimal. I have concluded, however, that Mr.

Lewis could not in any way have controlled Mr. Pierce in requiring Mr. Pierce to pay a percentage of the value of the catch to Mr. Devereaux. The same situation would obtain when Mr. Lewis made various arrangements with other boat owners whereby he would receive deckhand wages and perhaps some small compensation for ownership of the License. It is only when Mr. Lewis became a boat owner in his own right and was able to control the whole enterprise that it is reasonable to impose upon Mr. Lewis an obligation to pay a percentage of the catch of those vessels to Mr. Devereaux. Obviously, where Mr.

Lewis is fishing a vessel of which he is only a part owner (as he presently is with his brother) any interest that Mr. Devereaux might have had in the value of a catch of groundfish alone would be limited to the percentage of that groundfish value ascribed to Mr. Lewis on a net basis after deduction of the percentage of the expenses of the voyage attributable to Mr. Lewis. No account should be taken of percentages paid to corporations or persons who have not made any contribution to fishing or supporting the enterprise by serving as crew or providing services or supplies directly to any vessel.

In the event that the parties are unable to resolve this aspect of the matter, I will remain seized of this matter so as to resolve it, if any party makes application for me to do so. [ 64 ] In conclusion therefore, I find that Mr. Lewis is obliged to compensate Mr. Devereaux as follows: 1) $100,000 for the value of the groundfish license; 2) $45,000 on a quantum meruit basis for the opportunity which obtaining the groundfish license gave to Mr.

Lewis to obtain the valuable crab and shrimp species licenses; and 3) 5 percent of the net value of groundfish catches under the License, after deduction of all expenses reasonably attributable to obtaining such groundfish catches, commencing only at a time when Mr. Lewis became the owner of his own vessel and only after factoring into that calculation the percentage value of the catch reasonably ascribed to co-owners such as Mr. Lewis’s brother and subject further to the conditions set thereon by me in paragraph [63] herein. Third Party Claims Against Forrest Pierce and F.

Pierce Atlantic Seafoods Limited by Kevin Lewis AND COUNTERCLAIM OF DEFENDANT AGAINST THE FIRST AND SECOND THIRD PARTIES [ 65 ] Having concluded that Devereaux had a beneficial interest in the groundfish license, the question therefore arises as to what impact this has regarding the counterclaim of the Defendant, Lewis, against the First and Second Third Parties. I am satisfied that that issue is governed by the document entitled as a release dated the 7th of December 1999 and made between Forrest Pierce and Kevin Lewis.

In that document Forrest Pierce is described as the releasor and in the agreement for and in consideration of the payment of $11,000 by Lewis to Pierce, Pierce as releasor states: … RELEASOR DOES HEREBY RELEASE, ASSIGN AND CONVEY unto the Releasee his beneficial interest and any right, title and interest which the Releasor may have in either the Groundfish License formerly owned by Careen and Johnson and in any Groundfish Licenses now held by the Releasee AND FURTHER the Releasor does hereby agree and covenant that the said Groundfish License now held by the Releasee is free of any encumbrances. [ 66 ] Having concluded that Devereaux had a beneficial interest in the License, I am satisfied that Devereaux’s interest in the License constitutes an encumbrance and the fact of its existence constitutes a breach of the Release Agreement between Pierce and Lewis.

Had the Release been drafted simply as a release of whatever interest Pierce had in the groundfish license without any further covenant, I would have been satisfied that there would be no recourse under the third party claim of Lewis against Pierce because Lewis clearly was aware that Devereaux was making a claim to an interest in the License and without the covenant that the License was free from encumbrances he would have no remedy as against Pierce. However, the contract creates that remedy. It is not as against F.

Pierce Atlantic Seafoods Limited, the Second Third Party, as that corporation is not a party to the release in which the covenant that the license is free from encumbrances is made. [ 67 ] The liability of Pierce pursuant to the Third Party Notice is however limited as follows: 1) To the capital value of the groundfish license earlier established in this judgment as $100,000; and 2) Reimbursement of the $11,000 paid by Lewis to Pierce for the License as expressed in the release document. [ 68 ] I find that Lewis has no entitlement to any additional indemnity by Pierce over and above that set out above, in particular not with respect to the $45,000 awarded to Devereaux on a quantum meruit basis for the opportunity under the groundfish license to purchase and fish the crab and shrimp licenses.

The only representation made by Forrest Pierce was that the License was free from encumbrances. In representing ownership of the License I am not satisfied that Forrest Pierce could foresee any further claim with respect to the crab and shrimp licenses because they were not in existence at the time of his original oral agreement with Lewis (subsequently consummated in the release agreement) and the release agreement strictly confines itself to the groundfish license and nothing more.

Limitations Act Considerations [ 69 ] I am satisfied that Devereaux’s action against Lewis constitutes an action by him as against Lewis in his capacity as a trustee of the groundfish license. It is therefore subject to a ten-year limitation under section 7(1) (

d) of the Limitations Act , S.N.L. 1995 c. L-16.1, for conversion of the trust property to his own use and with respect to proceeds of the catches these would be characterized as well as

trust property because they are inextricably tied into the subject matter of the trust, namely the License and therefore constitute trust property as well. [ 70 ] With respect to the liability of Forrest Pierce under the Release, the question of the limitation period running as against him was not raised in argument.

There is, to my mind, an issue with respect to whether the laws of Newfoundland and Labrador with respect to limitations applied to this aspect of the matter or whether the laws of Nova Scotia, where the contract of release is purported to be made, would apply to limit any action against Forrest Pierce. I grant leave to the Defendant and the First and Second Third Parties to argue this issue, should they wish, and declare that I remain seized with the matter for that purpose.

Summary of Conclusions [ 71 ] It

[…]