2012 QCCQ 286, 2012 QCCQ 286

Birchall c. Knox 2012 QCCQ 286 COURT OF QUEBEC CANADA PROVINCE OF QUÉBEC DISTRICT OF HULL LOCALITY OF GATINEAU Civil Division No. 550-22-012408-108 DATE: January 16, 2012 ______________________________________________________________________ PRESENT: THE HONOURABLE MARIE PRATTE J.C.Q. ______________________________________________________________________ KEN BIRCHALL Plaintiff v. JAMES E. KNOX Defendant and 7115539 CANADA INC.

Intervening party ______________________________________________________________________ JUDGMENT [TRANSLATION] ______________________________________________________________________ [ 1 ] Ken Birchall and James E. Knox, the parties to the dispute, were two long-time friends. One is now the creditor of the other. [ 2 ] In 2004, in the wake of rather nebulous circumstances, Ken Birchall (the lender) agreed to lend a sum of money to James Knox (the borrower). However, the money, in the form of investments, was not available immediately.

He therefore made the necessary arrangements with The Canada Trust Company to make available to James Knox more than $25 000 out of his assets. [ 3 ] On February 17, 2005, in accordance with the lender's instructions, The Canada Trust Company, as trustee of the self- directed retirement plan registered in the name of Ken Birchall and bearing number 62B241S, extended a loan of $27 146.26 to James Knox (P-1). [ 4 ] The terms were quite strict: the loan was repayable in a lump sum within 12 months. The rate of interest was 10% and a penalty of 5% applied in the event of default.

A hypothec on an immovable belonging to James Knox guaranteed repayment of the loan. [ 5 ] James Knox did not fulfil his contractual obligations: he did not repay one cent of the loan. The lender let months and years go by, with the result that, on February 17, 2010, the amount of the debt totalled $45 905.31, including the principal, interest and the penalty. [ 6 ] On June 18, 2010, more than four years after the deadline provided for in the contract, Ken Birchall brought a suit for payment. The people around him prompted him to bring the suit against his friend.

As he knew he was very ill, the lender wanted to ensure his spouse's financial security. [ 7 ] On September 6, 2011, 7115539 Canada Inc. was authorized to intervene in the case. It asked the Court to dismiss the motion introductive of suit, declare the debt prescribed and cancel the hypothec held by the plaintiff on behalf of The Canada Trust Company as a guarantee of the loan of February 17, 2005. On July 14, 2011, the intervening party was declared the owner of the hypothecated immovable. [ 8 ] The borrower did not contest either the existence of the contract or the calculation of the amount claimed.

However, he contended that, since the obligation was prescribed, it was no longer payable.

[ 9 ] The lender claimed the opposite.

He invoked in support of his position both the interruption of prescription, and renunciation of the acquired prescription. [ 10 ] The intervening party reiterated the borrower's arguments and added that, since the lender did not sign the loan agreement, the suit he brought was inadmissible because he was pleading on behalf of others. [ 11 ] On this subject, it must be stressed that, in its proceedings, the intervening party designated Ken Birchall as the creditor of the borrower; in its conclusions, it also sought to cancel the hypothec held by Ken Birchall on behalf of The Canada Trust Company.

So it is surprising that the intervening party's attorney affirmed in his arguments that Ken Birchall was not the lender and was pleading on behalf of others. [ 12 ] Furthermore, it is clear, from both the loan contract and the lender's testimony, that the funds placed at the disposal of James Knox were from Ken Birchall's assets. The Canada Trust Company signed the loan agreement as trustee of a self-directed retirement savings plan registered in the name of Ken Birchall. Hence, he has the legal interest required to institute this proceedings, which the borrower's attorney, in fact, did not dispute.

Lastly, it must be noted that the motion introductive of suit was instituted in the name of Ken Birchall acting on behalf of The Canada Trust Company, the trustee of the self-directed retirement plan registered in the name of Ken Birchall and bearing number 62B241S .

In his conclusions, the lender asked the Court to condemn the defendant to pay The Canada Trust Company, the trustee of the self-directed retirement plan registered in the name of Ken Birchall and bearing number 62B241S, the sum of $45 905.31, plus the contractual interest at the rate of 10% a year as of February 18, 2010 and the additional indemnity provided for by law as of service. [ 13 ] The only issue in dispute is that of prescription. [ 14 ] A distinction must be made between renunciation of acquired prescription and acknowledgement of debt, which interrupts prescription. [ 15 ] The possibility of renouncing acquired prescription is provided for in

article 2883 of the Civil Code of Québec : Prescription may not be renounced in advance, but prescription which has been acquired or any benefit of time elapsed by which prescription has begun may be renounced. [ 16 ] It contemplates the case where a debtor renounces, to the benefit of prescription, the period of time of which has elapsed. That renunciation reduces the time elapsed to zero. After such renunciation, prescription begins to run again for the same lapse of time". [1] [ 17 ] That renunciation is not, in principle, subject to any requirement of form.

However, since the renunciation of a right is not presumed, [TRANSLATION] "acts of abandonment must—'necessarily'—demonstrate unambiguously the intention of the person who renounces, through the payment of interest or the payment of an instalment". [2] [ 18 ] However, the second paragraph of

article 2885 of the Civil Code of Québec imposes a formality in the case of the renunciation of acquired prescription in respect of immovable real rights, which " shall be published at the registry office". Hence, it must be both explicit and in writing. [ 19 ] Renunciation of acquired prescription is distinguished from acknowledgement of debt as provided for in

article 2898 of the Civil Code of Québec , which reads as follows: Acknowledgement of a right, as well as renunciation of the benefit of a period of time which has elapsed, interrupts prescription. [ 20 ] Acknowledgement of debt constitutes [TRANSLATION] "an admission by the debtor that the debt is actually due", [3] [TRANSLATION] “it [therefore] contains acknowledgement by the debtor of the creditor's rights; as such, it interrupts prescription begun.

But it does not prevent another prescription from beginning to run, because it is null as renunciation of prescription that has not yet been acquired". [4] It is comparable to renunciation of the benefit of the period of time elapsed: therefore, renunciation occurs during the time period and interrupts prescription. [ 21 ] As Baudouin and Jobin wrote, that acknowledgement: [TRANSLATION] is not subject to any imperative legal formality. It may be explicit or tacit. In order to be valid when it is tacit, it must, however, clearly show the debtor's willingness to acknowledge the debt.

The payment, or the offer to make partial payments or instalments, is therefore tantamount to acknowledgement and results in interruption. The same is true when the debtor pays the creditor the interest, since, by doing so, the debtor implicitly admits the existence of the obligation when he or she claims a grace period from the creditor or agrees to provide the creditor with additional guarantees (security or a hypothec). [5] [ 22 ] Acknowledgement of debt, just like renunciation of acquired prescription, must therefore be clear and unambiguous.

They must both be demonstrated by the person invoking them—in this case, the lender. [ 23 ] The loan extended by the lender was supposed to be repaid on February 18, 2006. Since the suit is prescribed by three years (article 2825 C.C.Q.), prescription was, in principle, acquired on February 19, 2009. [ 24 ] The lender invoked an event in 2010 that, considered in isolation, could constitute renunciation of prescription that was at that point acquired. He also reported a number of acknowledgements of debt that, between 2006 and 2008, could have interrupted prescription.

[ 25 ] We will now examine each of the lender's contentions, beginning with the meeting in 2010. [ 26 ] On June 21, 2010, the lender arrived at the borrower's home unexpectedly, accompanied by his son Mike. [ 27 ] The borrower had been served with the motion introductive of suit that very morning. He was therefore irritated, said he was busy and was not very hospitable. The meeting was brief. The lender affirmed at the hearing that he did not know that his friend had been served with the suit.

He wanted to see whether there had been any "changes" in his property, particularly whether he had put it up for sale. [ 28 ] According to the lender's version, James Knox told him, in reference to his loan, that he "would take care of everything". He reportedly also told him he would have to consult an attorney. [ 29 ] According to the testimony of Mike Birchall, his father intended to ask James Knox to pay him back.

During their meeting, James Knox reportedly said he would refinance his property and repay his debt in full. [ 30 ] For his part, the borrower confirmed that he found it odd that his friend would come to see him the very day he sued him. He stated that he told his friend that he had been served with the motion and that he would consult an attorney. He also contended that the lender never asked him to repay the loan. [ 31 ] The versions of the lender and the borrower agree on the fact that the borrower said he intended to consult an attorney.

Therefore, it is unlikely that, in the same breath, he said he would repay the defendant in full. [ 32 ] Hence, the context of that brief meeting does not make it likely that the borrower truly renounced the acquired prescription. [ 33 ] Furthermore, it must be stressed that, in order to analyze the scope of an oral renunciation of prescription, the content of the words exchanged is important. [ 34 ] As Désormeau J. wrote in 1997: [TRANSLATION] The words and actions of the petitioner must therefore be such that they imply the debtor's clear willingness to abandon his or her acquired right, thereby placing himself or herself in a situation in which another obligation toward the creditor is created.

In this case, the evidence does not demonstrate that the petitioner requested additional time to pay, or paid any interest or instalment, that would make it possible to believe that he acknowledged the debt and tacitly renounced the acquired prescription. [6] [ 35 ] Author Céline Gervais confirmed the following: [TRANSLATION] . . . the jurisprudence is . . . demanding as regards the evidence required to conclude that acquired prescription has been renounced.

The willingness of the person to renounce prescription must be clear; it must stem from a proven agreement between the parties and cannot be inferred from contradictory testimony. [7] [References omitted]. [ 36 ] In this case, the lender reported only vague comments. Hence, the evidence does not make it possible to conclude that there was clear, unambiguous renunciation of acquired prescription. [ 37 ] That conclusion makes any discussion of the application of the second paragraph of

article 2885 of the Civil Code of Québec unnecessary. [ 38 ] The lender also invoked acknowledgements of debt that reportedly occurred before prescription was acquired. [ 39 ] In support of that contention, he referred to many events, which must be distinguished: a request by the borrower in 2006 for a grace period; a number of references to the loan in public places between 2006 and 2008; and an affirmation by the borrower in 2008 in the presence of Mike Birchall, the lender's son, that the borrower would repay the lender.

Let us examine them in chronological order. [ 40 ] The borrower admitted having asked, in 2006, for an extension of the repayment period. The date was not determined. If it was after the loan came due, it constitutes acknowledgement of debt, or renunciation of the benefit of the time elapsed, and it interrupts prescription.

But even assuming that it took place on the last day of 2006, prescription was nevertheless acquired at the end of 2009 and the suit instituted in June 2010 would therefore be prescribed as well. [ 41 ] The lender also invoked a series of meetings with the borrower in 2007 and 2008, in various pubs or restaurants in Ottawa. Discussing his affairs, the borrower reportedly affirmed that "he was going to take care of everything". Other people were present for those discussions. Those statements were contradicted by the borrower and were not corroborated by any independent evidence.

The comments reported, which are both vague and contradicted, do not make it possible to conclude that the borrower was clearly and unambiguously willing to acknowledge his debt. They do not demonstrate [TRANSLATION] “clearly and precisely the debtor's willingness to acknowledge the existence of the creditor's right". [8] [ 42 ] There remains the meeting in the summer of 2008. [ 43 ] In response to a request for clarifications, on November 24, 2010 the lender affirmed that, in June 2008, he was accompanied by his son when he met with the borrower.

He added the following: "the defendant mentioned that he was doing repairs in the house to sell it and then he would have the money to pay the plaintiff".

[ 44 ] However, in his examination on discovery, held on January 28, 2011 and filed as evidence, the lender mentioned two meetings in 2008. He said the one to which his son accompanied him took place in the spring or fall of 2008, after a concert in which the borrower allegedly lost $46 000. [ 45 ] The comments reported on this subject by the lender are as follows: . . . in 2008 Michael and I drove up to see what was going on, wether or not there was any development. He had said there was going to be a small-scale development on the property. I just knocked on the door and Jim was there.

We went in and talked to him. He told us at that time that he would be paying it. He was trying to get the property set so that it was ready to be sold and that he was going to list it on the Internet. [ sic ] [Emphasis added.] [ 46 ] He also testified on the subject at the hearing. The lender contended at that time that he went with his son to the borrower's house to talk with him. The borrower reportedly affirmed that he was about to sell his immovable in order to have the funds available to repay him. [ 47 ] The testimony of Mike Birchall, who was present at that meeting, agrees with that of his father.

He said that the meeting took place in June 2008, after the date of the concert, and that the borrower, who was doing renovations, was getting ready to put his property up for sale. He reportedly stated at that time that, through the sale, he would have the funds necessary to repay Mike Birchall's father and develop the hypothecated property for his benefit. [ 48 ] The borrower confirmed that meeting, but said it occurred in July or August 2008. They reportedly discussed the health of his friend, his son, his illness and various other subjects: "life in general . . . ".

The lender reportedly asked him "what was happening with the lot at the corner of the street, what he intended to do with it". But Ken Birchall never demanded to be repaid $30 000 or $40 000 within a specific time period. [ 49 ] As the lender's attorney stressed, in that testimony James Knox did not explicitly contradict the testimony of Ken Birchall and his son. They never affirmed that the lender explicitly asked him to repay a specific amount of money within a given period of time.

It is possible, and even probable, that James Knox spontaneously acknowledged the existence of his debt, without the lender claiming explicitly from him repayment of his loan within a short period of time. [ 50 ] The lender's testimony was corroborated by that of his son. Is the son a credible witness? Of course, the close kinship between the son and the lender is a major factor in assessing the son's credibility.

However, it is not a sufficient reason to set his testimony aside. [9] The testimony was clear, consistent and coherent. [ 51 ] It will be recalled that the borrower admitted having asked for an extension of the time period in 2006. He thereby acknowledged the existence of his debt and indicated that he wanted to fulfil his obligation. It is probable that he again expressed that willingness in 2008. Note that there was a bond of friendship between him and the lender, Ken Birchall, dating back more than 20 years.

It is therefore likely that he wanted to repay him and felt the need to reassure him in that regard. [ 52 ] On a balance of probabilities, that is what happened in the 2008 meeting. The borrower not only orally expressed to the lender his intention to repay him, but he also explained to him the means he was going to take to do so. In contrast to other cases, [10] in this one, the comments were not [TRANSLATION] "idle talk", [11] or simple [TRANSLATION] "discussions". The borrower acknowledged the existence of his debt [12] and, therefore, the lender's right, which, according to

article 2898 of the Civil Code of Québec , interrupted prescription. [ 53 ] Acknowledgement of debt is clear and unambiguous in this case. [ 54 ] The three-year period began to run at that point; so prescription was not acquired in June 2010, when the lender's suit was filed. [ 55 ] THEREFORE, the Court : – AllOWS the motion introductive of suit; – CondEMNS James E.

Knox to pay The Canada Trust Company, trustee of the self-directed retirement savings plan registered in the name of Ken Birchall and bearing number 62B241S, the sum of $45 905.31, and the contractual interest at the annual rate of 10% as of February 18, 2010; – The whole with costs . __________________________________ MARIE PRATTE J.C.Q. Mtre. Normand Carrière Counsel for the plaintiff Mtre. Pierre McMartin

Counsel for the defendant Mtre. Daniel Beauchamp Counsel for the intervening party Date of hearing: September 21, 2011