HMTQ v. Canadian Northern Shield et al. Date:, 2017 BCPC 167

Citation: HMTQ v. Canadian Northern Shield et al. Date: 20170609 2017 BCPC 167 File No: 40958 Registry: Kamloops IN THE PROVINCIAL COURT OF BRITISH COLUMBIA Small Claims BETWEEN: HER MAJESTY THE QUEEN IN RIGHT OF THE PROVINCE OF BRITISH COLUMBIA CLAIMANT AND: CANADIAN NORTHERN SHIELD INSURANCE COMPANY DEFENDANT AND: JACK PENNELL THIRD PARTY REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE R.C. DICKEY Counsel for the Claimant: Mr. J. Bagan Counsel for the Defendant: Ms. L. Tsang Counsel for the Third Party: Mr. R. Gunnarson

Place of Hearing: Kamloops , B.C. Date of Hearing: January 26, 2017 Date of Judgment: June 9, 2017 [ 1 ] The Claimant in this matter is Her Majesty the Queen in Right of the Province of B.C. (the “Province”). The Defendant is the Canadian Northern Shield Insurance Company (the “CNS”). The Third Party is Jack Pennell (“Pennell”). The Province claims against CNS for payment on a bond that was issued by CNS to Pennell. Pennell was involved in the purchase of cattle from Dominion Creek Ranch (“Dominion”) to Black Creek Ranch (“Black Creek”).

Black Creek failed to pay for the cattle, giving rise to this litigation. [ 2 ] Livestock dealers are required to hold a bond, in this case Pennell had his bond with CNS. If the livestock dealer is in default of payment on the purchase of livestock then the Province can claim against the bond in an attempt to compensate the unpaid party, in this case Dominion. CNS has refused to pay on the bond arguing that Pennell is not a livestock dealer. [ 3 ] The parties agree that the primary issue, therefore, is whether Pennell was a “livestock dealer”.

If Pennell is found to have acted in this matter as a livestock dealer then it triggers the legislative scheme found under the Animal Disease Control Act , R.S.B.C. 1996, c.14 (“ ADCA ”), and its Regulations ( BC Regulation150/66 ), (the “ Regulations ”). [ 4 ] The evidence on whether Mr.

Pennell acted in the capacity of a livestock dealer comes from a Joint Statement of Facts, and two witnesses called by the Claimant, Betty Peters from Dominion and Marla Ronquist (the former operations manager at Black Creek), and two witnesses called on behalf of the Defendant, Jack Pennell, and Trevor Kempthorne (who oversaw Black Creek during the relevant time), and an expert report by Bruce Wilcox filed on behalf of the Defendant. [ 5 ] The Defendant CNS further argues that even if Mr.

Pennell was operating as a livestock dealer, his bond was not recoverable under the Regulations . [ 6 ] The Defendant CNS further argues, in the alternative, that if the court finds the bond is payable under the legislative scheme, then the Defendant CNS is entitled to indemnification from Mr. Pennell. [ 7 ] The Third Party, Mr. Pennell, argues that all three issues raised by CNS should be answered in the negative. A. Was Mr. Pennell Acting as a Livestock Dealer 1.

Facts [ 8 ] This litigation involves Black Creek’s purchase of fourteen head of cattle (the “Cattle”), involving eleven transactions between April 2012 and April 2013, from Dominion. The purchase price of the Cattle was $17,176.94. Mr. Pennell was involved in these purchases in a number of different capacities. The evidence is clear, and the parties agree, that Mr. Pennell provided for the trucking of the Cattle. [ 9 ] The Claimant places great emphasis on the fact that Mr.

Pennell, on each of the Bills of Sale recording the eleven transactions, has written his name above the signature line of the purchaser and beside his name has written “agent”. These transactions occurred over a period of approximately one year. Mr. Pennell now says in hindsight he should have written “witness”. There is no evidence that anyone expected Mr. Pennell to pay for the purchases. It was always understood that Black Creek was the purchaser of the Cattle. Black Creek bought cattle from Dominion since 2010 or 2011 and Black Creek had always paid for such purchases. [ 10 ] I find that Mr.

Pennell considered himself to be acting as an agent on behalf of the purchaser Black Creek. I make this finding because of the number of times he intentionally added “agent” beside his name and that it was done over a lengthy period of time. I do not find this was a mistake, as in hindsight Mr. Pennell testified to, but rather Mr. Pennell’s view at the time of the transactions. I find that his evidence at trial appears to be responsive to this litigation and not his view at the time the transactions were occurring. Mr.

Pennell’s view, of course, is not determinative of what legally was his role during these transactions, but just one factor that must be considered. [ 11 ] Ms. Peters says Mr. Pennell became involved in Back Creek purchases of cattle from Dominion Creek Ranch in 2010 or 2011. She says she was aware of Mr. Pennell being a bonded livestock dealer and this was a positive factor in Dominion agreeing to sell to Black Creek without money being paid up front. [ 12 ] Ms. Peters says generally purchases by Black Creek occurred by Mr. Pennell contacting her to inquire about available cattle.

She says he would then place an order and make an arrangement for purchase. Mr. Pennell agreed with this. [ 13 ] Ms. Ronquist said that a purchase by Black Creek started with a customer contacting her and placing an order. She would then speak to Trevor Kempthorne. She said that Mr. Kempthorne would then contact Mr. Pennell asking him to obtain the cattle for Black Creek. She says she understood that Mr. Pennell would order cattle from Dominion, if available, and if not would attend and purchase from the auction. Mr. Pennell confirmed that he also purchased cattle from the auction. [ 14 ] Mr.

Kempthorne testified that Ms. Ronquist, on behalf of Black Creek, would contact Ms. Peters at Dominion with respect to the purchase of cattle. As noted above, this was not the evidence of Ms. Ronquist or Ms. Peters, who both testified that Mr. Pennell contacted Ms. Peters. This evidence was confirmed by Mr. Pennell. I find on the evidence of the witnesses that the persons involved in the purchase of cattle by Black Creek from Dominion was not a rigid process. I find, however, that in most cases it was Mr. Pennell who contacted Ms. Peters about the purchase of cattle but at times it may have been Ms. Ronquist.

[15] Mr. Pennell and Ms. Peters both said that a purchase would occur by Mr. Pennell attending at Dominion, viewing the cattle, attimes selecting certain cattle for purchase, weighing the cattle, and then agreeing on a purchase price and the cost of shrinkage. Ms.Pennell and Ms. Peters testified that the price per pound was determined by what cattle were going for at the auction at the time. [16] Mr. Pennell would then truck the cattle to an abattoir.

He was paid by Black Creek on an hourly basis, and for the use of histruck. [17] Black Creek was supposed to pay Dominion for the sale of the Cattle, but failed to do so. [18] The Claimant, in April of 2014, provided notice through the local newspaper and by mail to Mr. Pennell, of their intention toclaim on the bond of Mr. Pennell. [19] I find the evidence of the expert Mr. Wilcox is of limited assistance. It provides evidence of one role that a livestock dealermay fulfill, that is the role of someone purchasing and re-selling cattle.

The definition of livestock dealer under the ADCA and itsRegulations is much broader than this fairly narrow role, and includes a person who acts as an “agent for another”. Mr. Wilcox’sexperience of the role of a livestock dealer does not define a “livestock dealer”; we must look at the ADCA and the Regulations for thebreadth of its meaning. [20] The bond entered into on behalf of Mr. Pennell with CNS, provides security in the sum of $20,000, and provides that CNS isbound to the Province. In the bond Mr.

Pennell is identified as the “Licensee” and a “Livestock dealer” pursuant to the provisions of theLivestock Brand Act. The bond states as follows: Now, the condition of the above-written obligation is such that if the Licensee shall pay all moneys due for purchase of livestockpurchased by the Licensee, or for or on behalf of the Licensee by a person acting on behalf of the Licensee, or by the Licensee for anyperson for whom the Licensee acts in making the purchase, then this obligation shall be void, but otherwise shall be and remain in fullforce, virtue, and effect; 2. Law [21]

Section 1 of the ADCA defines “livestock dealer” as follows: "livestock dealer" includes a person who, whether on the person's own behalf or as agent for another, and whether on a commissionbasis or otherwise, (

a) buys or offers to buy livestock, or (

b) sells or offers to sell, or possesses for sale any livestock or livestock carcasses or portions, but does not include a resident of British Columbia or Alberta who is a farmer; [22]

Section 18.1 requires that a livestock dealer be licensed and bonded to carry on business in that capacity. [23] The Defendant CNS relies on the case of Grosvenor Canada Ltd. v. South Coast British Columbia Transportation Authority,2015 BCSC 177 , 2015 B.C.S.C. 177, for the following principle of agency: [58] The parties agree the essential elements of an agency relationship are (

a) the principal's control of the agent's action, (

b) theconsent of both the agent and the principal, and (

c) the authority of the agent to affect the principal's legal position.

Professor Fridman inCanadian Agency Law 2nd Ed. (Toronto: LexisNexis Canada Inc., 2012) defines agency at common law as follows (at p. 4): Agency is a relationship that exists between two persons when one, called the agent, is considered in law to represent the other, calledthe principal, in such a way as to be able to the affect the principal's legal position in respect of strangers to the relationship by themaking of contracts or the disposition of property. [59] The existence of an agency relationship is a question of fact and it may arise between parties who have another legal relationship.

In the context of trustees acting as agents, see Advanced Glazing v. Multimetro et al., 2000 BCSC 804. It is irrelevant that the partieshave used the term agency in describing their relationship (Fridman, Canadian Agency Law at p. 6). No express agreement is necessaryto establish an agency relationship, and therefore it can be implied from the circumstances: Trident Holdings Ltd. v. Danand InvestmentsLtd. (1988), (ON CA), 64 O.R. (2d) 65 (C.A.). [24] The issues before the Court require statutory

interpretation. All parties rely on the leading case of R. v. McIntosh, (SCC), [1995] 1 S.C.R. 686. The following statements of law were relied on: [18] In resolving the interpretive issue raised by the Crown, I take as my starting point the proposition that where no ambiguity ariseson the face of a statutory provision, then its clear words should be given effect. This is another way of asserting what is sometimesreferred to as the “golden rule” of literal construction: a statute should be interpreted in a manner consistent with the plain meaning of itsterms. Where the language of the statute is plain and admits of only one meaning, the task of

interpretation does not arise (Maxwell on the

Interpretation of Statutes (12th ed. (1969), at p. 29). [25] The Defendant refers to para. 26 of R. v. McIntosh, which states as follows: Second, the contextual approach allows the courts to depart from the common grammatical meaning of words where this is required by aparticular context, but it does not generally mandate the courts to read words into a statutory provision. It is only when words are“reasonably capable of bearing” a particular meaning that they may be interpreted contextually. I would agree with Pierre-Andre Cote’s observation in his book “The

Interpretation of Legislation in Canada” (2nd ed. 1991) at p.231, that:

Since the judge’s task is to interpret the statute, not to create it, as a general rule,

interpretation should not add to the terms of the law. Legislation is deemed to be well drafted, and to express completely what the legislator wanted to say…. [26] The Claimant also refers to the decision of Rizzo and Rizzo Shoes Ltd. (Re), (SCC), [1998] 1 S.C.R. 27, at para. 21, in which the Court adopted the words of Elmer Driedger in Construction of Statutes (2nd ed. 1983). The Court adopted thefollowing approach: Today there is only one principle or approach, namely the words of

an Act are to be read in their entire context and in their grammaticaland ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament. 3. Analysis and Decision [27] The Claimant Province argues that Mr. Pennell was acting as an “agent for another”, the other being Black Creek, and boughtlivestock from Dominion. The Province argues that Mr. Pennell, who was a bonded “livestock dealer”, was acting in this capacityduring these transactions. [28] The Province argues that the evidence supporting an agency relationship between Mr.

Pennell and Black Creek includes Mr.Pennell at times contacting Dominion to arrange the purchases, attending at Dominion to select, weigh, determine price and shrinkage,and transport the Cattle to a slaughterhouse. Mr. Pennell signed the Bill of Sale of the transactions as purchaser with “agent” writtennext to his name. [29] The Defendant CNS argues that the evidence does not support a finding that Mr. Pennell was acting as an agent on behalf ofBlack Creek. [30] I agree with the Defendant that Mr. Pennell identifying himself as an agent in the Bill of Sales does not determine whether he islegally an agent.

This is just one factor that must be considered in determining the relationship. It is important to remember, however,that Mr. Pennell did hold himself out as an agent on behalf of Black Creek in signing the Bill of Sale. [31] CNS also argues that Mr. Pennell attended Dominion on behalf of various parties and therefore was not subject to control byBlack Creek. I don’t find this conclusion can be drawn from the fact that Mr. Pennell acted on behalf of others.

I am not aware of anylegal requirement that an individual cannot be an agent if they act on behalf of more than one principal. [32] I find on the evidence set out above that Black Creek controlled Mr. Pennell’s actions, that Mr. Pennell acted with the consentof Black Creek, Mr. Pennell consented to act on behalf of Black Creek as an agent, and that Mr. Pennell had the authority to enter into apurchase and sale agreement of the Cattle on behalf of Black Creek. I emphasize that the transactions occurred over a one year periodwithout the parties ever questioning Mr.

Pennell referring to himself as “agent” and signing on behalf of the purchaser. [33] CNS argues that if the Court finds Mr. Pennell acted as an agent on behalf of Black Creek, Mr. Pennell was not involved in theact of purchasing the Cattle. Mr. Pennell, the Third Party, argues that he was not the “buyer” of the Cattle. The definition of “livestockdealer” requires that a person acting as an “agent for another” buys livestock, “on a commission basis or otherwise”. I find that Mr.Pennell did not purchase livestock directly, and therefore was not the buyer.

The definition of “livestock dealer” under the ADCA doesnot require the livestock dealer to be the buyer. The definition includes a person acting as “agent for another” buying livestock. I findthat Mr. Pennell acted as an agent on behalf of Black Creek in purchasing the Cattle from Dominion. [34] The reference to “on a commission basis or otherwise” suggests that the agent will be paid by commission or otherwise. Inthese circumstances Mr. Pennell was paid an hourly rate, which I find would fall into the

interpretation of “or otherwise”. [35] I find, therefore, that Mr. Pennell acted within the definition set out in the ADCA of a “livestock dealer”. B. Is the Bond Recoverable Under the Regulation? [36] The Defendant CNS further argues that even if Mr. Pennell was operating as a livestock dealer, his bond is not recoverableunder the Regulations. 1. Law [37]

Section 6.06 of the Regulations requires a livestock dealer to hold a bond in favour of the government as security againstdefault by the licensee for money due for livestock purchased “by, though, or on behalf of the licensee”.

Sections 6.06(1) and 6.08 statethe following: Reg. s.6.06(1) An applicant for a slaughterhouse operator’s license or livestock dealer’s license must furnish to the director, and a holderof a slaughterhouse operator’s license or livestock dealer’s license must maintain, security in the form of a bond, in favour of thegovernment as oblige and holder of the bond, of a surety licensed under the Insurance Act, as security against default by the licensee ofpayment of money due for the purchase price of livestock purchased by, through or on behalf of the licensee.

Reg. s.6.08 On receiving information in writing that the holder of a slaughterhouse operator’s license or livestock dealer’s license is indefault on the payment of money due for the purchase price of livestock, the director may, by publication in a newspaper published inthe area where the licensee’s place of business is located, give notice that (

a) the government intends to claim against the bond furnished by the licensee, (

b) any person to whom the licensee owes money for the purchase should claim by giving particulars of the indebtedness to the directorby a date, at least 3 months following the first publication in the newspaper, specified in the notice, and

(

c) the distribution of net proceeds recovered by the government under the bond will only be on a pro rata basis in response to claimsreceived under paragraph (

b) and verified. 2. Analysis and Decision [38] The Defendant and Third Party argue that s. 6.08 sets out the process by which the Province can make claim where there is adefault on payment of the purchase price of livestock. They argue that a reading of the legislation does not allow a claim where thelivestock dealer is not in default of payment. They argue that Mr. Pennell, the livestock dealer, is not in default of payment as theagreement was always that Black Creek would pay for the Cattle. [39] The issue is what

interpretation should be provided to this legislation, and specifically whether

section 6.08 should beinterpreted to include circumstances where the livestock dealer has purchased livestock as agent for another and the principal has failedto pay. [40] The Province argues that the bond is intended to protect the seller if a default occurs, whether the payment was to be made bythe agent or the final purchaser. They argue that s. 6.06 of the Regulations specifically includes agency situations by the inclusion of theterm “through”. [41] This

section sets out the purpose of requiring a livestock dealer to obtain security in the form of a bond. Its purpose is toprovide security against default by the licensee of the purchase price for livestock, “purchased by, through or on behalf of the licensee”. [42] The Defendant argues

section 6.08 only applies to claims in circumstances where the holder of a livestock dealer’s license is indefault on the “payment of money due for the purchase price of livestock”. They argue that in the present case Mr. Pennell is not indefault of payment as the evidence is clear that payment was due from Black Creek to Dominion. [43] The first issue I must determine is whether the legislation is ambiguous. I find that it is.

Section 6.06 identifies the bondobtained by the livestock dealer as providing security for default of the purchase price “purchased by, through or on behalf of thelicensee”. The bonds security, therefore, does not relate only to situations where the default was on the purchase of livestock by thelicensee, as identified in

section 6.08; it also provides security where the livestock was purchased through the licensee. [44] Where I find ambiguity, as I do here, I must look at the legislation contextually. I must remember that only when words “are‘reasonably capable of bearing’ a particular meaning that they may be interpreted contextually” (McIntosh, para. 26). Further, generallythe court should not read words in to a statutory provision. [45] In these circumstances I find the ambiguity arises in the wording “the holder of a … livestock dealer’s license is in default onthe payment money for the purchase price of livestock”(s.6.08).

For this wording contextually to make sense in this legislation thereference to the holder of the livestock dealer’s license must include reference to persons in default who have “purchased, by through oron behalf of the licensee”. If this was not the case then why would the livestock dealer be required to hold a bond as security againstdefault in payment “by, through or on behalf of the licensee” (s.6.06)?

In the circumstances I find that reference to the “holder of a …livestock dealer’s license is in default” in s. 6.08 includes a default by the entity that purchased the livestock either by, though, or onbehalf of the livestock dealer. [46] I find, therefore, that the default by Black Creek to Dominion has led to the Province being able to claim against CNS on thebond. C. Is the Defendant CNS Entitled to Indemnification from Mr.

Pennell [47] The Defendant CNS further argues, and in the alternative, that if the court finds the bond is payable under the legislativescheme, then the Defendant CNS is entitled to indemnification from Mr. Pennell. 1. Law [48] The Defendant CNS and the Third Party Pennell both have relied on the case of Society of Notaries Public of British Columbiav. Dawson, (B.C.S.C.).

The Court says that there are four requirements for indemnity, that the surety must show (atpara. 65): (1) that he has been compelled by law to make the payment; (2) that he did not officiously expose himself to the liability to make payment; (3) that his payment discharges a liability of the defendant; and (4) that both he and the defendant were subject to a common demand by a third party, for which, as between the plaintiff and thedefendant, the latter was primarily responsible. 2.

Analysis and Decision [49] The Third Party argues that the Defendant’s application to be indemnified for any liability ordered by this Court must fail on thethird of these requirements. Mr. Pennell says that if there is a default, and it is not that of Mr. Pennell, then he is not liable to CNS. Thiswould mean that the payment by CNS would not discharge a liability of Mr. Pennell. [50] CNS argues that Mr. Pennell would be liable under s. 6.08 of the Regulations and their payment would discharge him of thatliability. [51] I do not find that Mr.

Pennell would be liable pursuant to the legislative scheme of the ADCA and the Regulations. Sections

6.06 and 6.08 must be read to include not only a default by the livestock dealer, but also a default of payment by someone who has purchased through the licensee. This is the factual finding I have made in this case. Mr. Pennell acted as agent on behalf of Black Creek. The evidence is clear that it is Black Creek who was the purchaser of the Cattle and who was responsible for payment. The legislative scheme found in the ADCA and the Regulations does not change this. [ 52 ] I do not find on the evidence that Mr. Pennell was liable to Dominion, or the Province, for the purchase of the Cattle.

I find therefore, that the evidence does not support the third condition. I dismiss the Defendant’s application to be indemnified by the Third Party with respect to this claim. D. CNS argues that they should be Indemnified from the Third Party on the law of Guarantee [ 53 ] I find no evidence that Mr. Pennell guaranteed the payment of Black Creek to CNS or to Dominion. On a reading of the ADCA and the Regulations a livestock dealer does not guarantee payment of the purchase price of cattle by someone who has purchased through him. That is the purpose of the bond. Mr.

Pennell, as stated above, was not liable for payment of the Cattle, even with the failure to pay by Black Creek. [ 54 ] I find that CNS should not be indemnified by Mr. Pennell under the law of guarantee. Conclusion [ 55 ] For the reasons set out above, I find the Province has proven its claim against the Defendant CNS; there will be judgement in the amount of $17,176.94. I also find that CNS is unsuccessful against Mr. Pennell and the third party claim is dismissed. [ 56 ] The Claimant is entitled to their costs and pre-judgement interest.

If the parties are unable to reach an agreement on what the amount should be I will hear submissions on this issue. [ 57 ] Counsel for all three parties have provided lengthy, thorough, and helpful written submissions in this matter. I thank them for the help they have provided in my consideration of this matter. ___________________________ R.C. Dickey Provincial Court Judge