Abbotsford Flight Centre Ltd. v. Yes Capital Corp. Date:, 2015 BCPC 341

Citation: Abbotsford Flight Centre Ltd. v. Yes Capital Corp. Date: 20151124 2015 BCPC 0341 File Nos: 22157,22158, 22159,22160,22161,22162 Registry: Abbotsford IN THE PROVINCIAL COURT OF BRITISH COLUMBIA (SMALL CLAIMS COURT) BETWEEN: ABBOTSFORD FLIGHT CENTRE LTD. CLAIMANT AND: YES CAPITAL CORP., carrying on business as PACIFIC AVIATION ACADEMY DEFENDANT REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE K. D. SKILNICK Appearing for the Claimant: P. Dholliwar Appearing for the Defendant: S, Mandair Place of Hearing: Abbotsford , B.C.

Dates of Hearing: September 2, 30, November 4, 2015 Date of Judgment: November 24, 2015

Summary of Evidence [ 1 ] This action is actually the consolidation of six separate small claims files which were commenced in the Surrey, BC small claims registry. On November 3, 2014, an order was made by the Honourable Judge Arthur-Leung transferring these files to Abbotsford for all purposes. [ 2 ] The Claimant characterizes this action as concerning the sale of a flight school. However each action concerns the sale of an individual airplane by the Claimant to the Defendant.

The documents entered into evidence by the Claimant show that the parties made six separate agreements for the sale of individual aircraft, not one agreement for the sale of a flight school. [ 3 ] Following is a table summarizing each action and the respective airplane it concerns: Surrey File No. Abbotsford File No. Airplane Type Airplane Call No.

Contract Price Balance Claimed as Owing 74649 22157 Cessna 152 GZSX $25,001.00 $7,396.82 74652 22158 Cessna 150 GSAQ $20,001.00 $928.64 74654* 22159 Cessna 152 GUGU $27,001.00 $6,263.88 74653 22160 Cessna 172 CFIIU $50,001.00 $8,264.99 74651 22161 Cessna 150 FWQC $20,001.00 $2,880.39 74650 22162 Cessna 150 FXET $18,001.00 $3,715.50 *This aircraft was formerly registered in the United States under the call number N5090.

In the sale purchase agreement for this aircraft, the vendor is shown as “Energy Solutions”. [ 4 ] In each of these actions, the Defendant has filed a Reply in which the Defendant states that all amounts owing for these aircraft have been paid in full. In the evidence presented at trial, the Defendant took the position that full and final payment was made by means of a subsequent oral agreement made between the parties.

The Defendant also has alleged that the Claimant misrepresented the state of the aircraft, although in its Replies, the Defendant states that this is the subject of a Supreme Court action. [ 5 ] Pravinder Dholliwar is the principal of Abbotsford Flight Centre Ltd., the Claimant in this action. According to the testimony of Mr. Dholliwar, in the spring of 2008 he was looking to wind down his business, known as Abbotsford Flight Centre, which was operating as a flight training school. Sarbjeet Mandair, the principal of the Defendant Yes Capital Corp., testified that he had met Mr.

Dholliwar the previous summer, just as he was in the course of retiring him his position as CEO of another company. Mr. Mandair had an inactive pilot’s license at the time and was looking for some further flight instruction. He trained with Mr. Dholliwar in order to renew his pilot’s license, and in the course of doing so, Mr. Mandair testified that he developed a friendship with Mr. Dholliwar. [ 6 ] According to Mr. Mandair, Mr. Dholliwar approached him in September of 2007 to discuss the possibility of helping with the financing of Mr. Dholliwar’s company. Mr.

Mandair testified that a friendship developed and he came to trust Mr. Dholliwar. In March of 2008, Mr. Dholliwar closed his company and he discussed the possibility of Mr. Mandair purchasing the assets. The parties have differing versions of how their negotiations took place. Mr. Mandair had a tendency to give long, non-responsive answers filled with a lot of information collateral to, but not directly addressing the issues at hand. Mr. Dholliwar was more direct and to the point in giving his version of events.

Ultimately, I am satisfied that the parties wisely executed written contracts which set out the terms of what they agreed to. I say “wisely” because if the parties had not written the terms of their agreement and had instead relied on an oral agreement, it is unlikely that consensus would exist today as to precisely it was that they agreed to. [ 7 ] The parties signed six written Sale/Purchase Agreements, one for each aircraft. Four of these were signed on March 5, 2008. The Claimant was named as the seller and the Defendant as the buyer in these agreements.

Each agreement had identical terms aside from the purchase price, and the identification of the aircraft. Those terms may be summarized as follows: 1. The contracts opened by confirming the agreement of the seller to sell and of the buyer to buy the subject aircraft, along with equipment relating to the aircraft as set out in an attached schedule. 2. The seller warranted that it is the owner of the aircraft and that it had the lawful authority to sell the aircraft and listed equipment to the buyer. 3. The parties agreed that the buyer would make payments under the agreement to the seller by paying Mr.

Dholliwar. 4. The purchase price of the individual aircraft was set out, along with a deposit, a further sum to be paid upon receipt of the Operating Certificate for the aircraft from Transport Canada, and a

schedule of payments for the balance was set out in a schedule. 5. The seller agreed to provide the buyer with log books for the aircraft and to pay the cost of any deficiencies which were recorded, reported or required by Transport Canada Regulations. 6. The seller warranted that there were no impediments to the transfer of the aircraft such as lien, charges or “other issues”. 7. The buyer agreed that it had inspected “all visual components” of the aircraft to its satisfaction.

8. The seller agreed to deliver the aircraft and all listed components in “a fair working condition” at the time of final transfer, along with all logs, operation manuals, maintenance manuals and other relevant records concerning the aircraft. 9. The seller agreed to sign any documents reasonably required to register the aircraft. [ 8 ] In the agreement of sale for one of the aircraft (GSAQ), an additional clause was included in which the Claimant agreed to sell the Defendant two other aircraft (FXET and GUGU) by May 30, 2008 for specified prices. [ 9 ] The four contracts which were signed on March 8, 2008 contained a

schedule D which provided that interest on any unpaid balances would accrue at a rate of 6% per annum, and that the last payment was to be made by March 31, 2013.

The Claimant reserved the right to register a Personal Property Security Act (PPSA) security agreement, and the Defendant agreed to keep the aircraft insured and to maintain the aircraft as required by Transport Canada standards. [ 10 ] On April 16, 2008, the parties executed a written Addendum to these agreements in which the Defendant waived the requirements of operating certificates, the Claimant agreed to provide an amortization chart for the balance of the payments, and the Defendant authorized the release of the deposits for the aircraft to the Claimant. [ 11 ] On, June 2, 2008, an agreement on similar terms was signed by the parties for the sale of the aircraft numbered as FXET.

On the same day an agreement was signed on similar terms for the aircraft originally numbered as N5090 (which later was given the Canadian designation of GUGU). This agreement was slightly different however in that the seller was listed as being “Energy Solutions”. Energy Solutions is a sole proprietorship operated by Mr. Dholliwar. It is not a part of the Claimant. [ 12 ] According to records kept by the Claimant, the Defendant made all payments for the aircraft for over four years.

Initially, the Defendant made a blended payment of $2,078.28 per month, commencing on May 1, 2008, covering what was owed for the first four aircraft. After the two additional aircraft were sold to the Defendant, the monthly payment was increased to $2,948.26. The Defendant continued to make payments pursuant to this agreement for over four years, making its last payment on August 1, 2012. The Defendant has made no payments since. [ 13 ] In his testimony, Mr. Mandair alleged all sorts of violations of Transport Canada regulations and other misrepresentations about the state of the aircraft.

No witness from Transport Canada was called to independently verify any non-compliance with regulations and Mr. Mandair did not specifically refer to any regulations which were violated. He states that he is unable to do so because the necessary documentation to prove this was taken from him. [ 14 ] Sandeep Dua is an Aircraft Maintenance Engineer who used to work for the Defendant. He testified about the duty to record defects with aircraft in the log book for that aircraft, the importance or recording those defects and the consequences for poor record keeping. Mr.

Dua testified that he had performed work for the Claimant for which he was not paid. Mr Dua certified the log books for the aircraft. It was not suggested that there was anything improper in the certification signed by Mr. Dua or that he had falsely certified any aircraft. In fact he was clear in his evidence that he would never sign off on an aircraft that was not air worthy. His complaint was that he did the work but he has not been paid by the Claimant. The Defendant has argued that the Claimant misrepresented the state of the aircraft sold. However this was not supported by the testimony of Mr.

Dua. [ 15 ] Mr. Mandair testified that Mr. Dholliwar worked for the Defendant after the aircraft was sold. This relationship broke down and Mr. Dholliwar’s association with Defendant was ended sometime in 2009. Mr. Mandair says that after firing Mr. Dholliwar, a number of records and other documents pertaining to this aircraft were taken from his office. He accused Mr. Dholliwar of doing this. The matter was reported to the RCMP, who investigated the matter. No charges have been laid and according to Mr. Mandair, he was told that the police considered this to be a civil dispute rather than a criminal matter. Mr.

Mandair claims that it cost him over $13,000 to replace these records. Mr. Dholliwar denies any responsibility for taking the items he is accused of removing. [ 16 ] In December of 2012 the Claimant attempted to have a bailiff seize the aircraft pursuant to the Personal Property Security Act. An argument ensued over whether or not the bailiff had the right to seize the aircraft. Ultimately they remained in the Defendant’s possession. [ 17 ] Mr. Mandair testified that the parties reached an oral agreement at the time that payments stopped.

Essentially, he says that the agreement was that the Claimant was considered to be paid in full, in return for which the Defendant would abandon any claims it had for misrepresentation. When asked why this oral agreement was never confirmed in writing, Mr. Mandair said “because we had trust in one another.” He also says that the existence of an oral contract is proven by the fact that, for several months in 2011, the monthly payment that he made was only $2,500. Mr. Dholliwar disputes this. He says that there was no such oral contract.

He says that he took no action when the Defendant reduced the amount of its payment for those months because the Mr. Mandair asked if he could reduce his payments due to a lack of business at the time. [ 18 ] Darlene Klaric, a friend of Mr. Mandair’s gave evidence about being present on several occasions at a pub in Surrey when the principals of the Claimant and Defendant were present. Much of her evidence was a repeating of things that she had been told by Mr. Mandair. She testified that she had never seen the contracts signed by the parties.

She recalled a discussion between the two men about why one of the cheques for payment of the purchase price of the aircraft was smaller than expected and recalls Mr. Mandair saying that this was because one of the aircraft had been paid for. She described Mr. Mandair as a very smart businessman. [ 19 ] The Defendant takes the position that it has a number of defences to these claims.

These include: (1) the oral contract made between the parties in which it was agreed that he had paid for the aircraft in full; (2) the Defendant’s set off for $31,000 for repair bills to the aircraft; and (3) the Claimant is a dissolved company, having failed to file its annual return as required under the BC Business Corporations Act . The Defendant asserts that because of this, the Claimant is precluded from prosecuting this action. Analysis [ 20 ] The Defendant has raised five defences on which it rests its position that it should not be required to pay the Claimant what it

has contracted to pay. I will address each of these individually. 1. Oral Variation of a Written Contract [ 21 ] In this case, both of the parties are now, and at all material times were, represented by experienced business persons. This is not a situation where there is any imbalance of power in the bargaining relationship between the parties. At several times in giving his evidence, Mr. Mandair took great pains to point out that, at the time of the sale, Mr. Dholliwar was experiencing some personal financial difficulty. If true, one might suppose that if there was a power imbalance in the relationship, Mr.

Mandair may have been in a position to take advantage of Mr. Dholliwar’s vulnerability. However I find that no such imbalance existed in the dealings between the parties. Both men had experience in the business world and both knew or ought to have known the importance of documenting their business dealings in order to protect their interests. [ 22 ] At the time of the transaction of sale of these airplanes, the parties were careful to execute a written agreement setting out the terms of what it was that they had agreed to.

Although the parties did not avail themselves of the opportunity to seek legal advice at the time the contract was negotiated, it appears that in their written agreements they addressed all of the essential terms that needed to be addressed, namely a description of the property being transferred, the purchase price, how that price was to be paid, along with the seller’s warranty that the airplanes would be sold free and clear of any liens, charges or encumbrances, the buyer’s agreement that it had inspected “all externally visual components” of the airplanes to its satisfaction, and the seller’s agreement to furnish the log books and other ancillary documents and items. [ 23 ] The Defendant has asserted that after these agreements were signed, a subsequent oral agreement was made between the parties.

Generally speaking, it can be permissible to vary a written agreement by a subsequent oral agreement, provided that everyone acknowledges that the subsequent agreement was in fact made. Frequently disputes arise between parties to an unwritten contract about whether such an agreement exists or not and what the terms of such an agreement are.

Allegations of an undocumented agreement are at the root of many small claims actions and where significant sums of money are involved, wise parties steer clear of oral agreements and set to writing the terms of their agreements, in order to avoid future misunderstandings. [ 24 ] Where one party asserts the existence of collateral oral terms of a written agreement which are inconsistent with what is in the written agreement, the general rule is that evidence of the collateral oral contract is inadmissible.

The fundamental rule is that if the language of the written contract is clear and unambiguous, then no extrinsic parol evidence may be admitted to alter, vary, or interpret in any way the words used in the writing. The reason for this is that evidence of oral agreements are normally unreliable, and if the parties have taken care to set out the terms of their original contract in writing, it is unlikely that they would make a material change to that agreement without taking the same care to set out the change in writing as well.

Oral changes to a written contract have the added problem that there is potential for both parties to have a different understanding about them, and where that occurs, no agreement has ever really been reached. Unless both parties acknowledge the existence of an oral agreement and a common understanding as to its terms, it is extremely difficult to prove the existence of such a variation. The refusal to allow evidence of an oral agreement collateral to a written agreement is sometimes called the “parol evidence rule.” [ 25 ] An example of this principle is found in Pacific Paragon Capital Group Ltd. v.

PDC Biological Health Group, Corporation 2014 BCSC 1725 . In that case, the plaintiff sued the defendant for repayment of three loan agreements for the total sum of $82,500. In their defence, the defendants said that there was a collateral oral agreement which provided that if the plaintiff was not paid its money by the defendant, then the loans could be paid from any public funds raised by a third-party. Justice Sigurdsen of the BC Supreme Court held that the alleged oral agreement contradicted the terms of the written agreement.

The reasons for judgement in that case read as follows: [54] I find that it is appropriate to determine the issue of the admissibility of the parol evidence, and for the reasons I have stated, that evidence of the defendant is not admissible as it clearly contradicts the terms of the parties’ written agreement… [ 26 ] In this case, I do not accept the evidence of Mr. Mandair that the parties varied their written agreements, in which they had been so careful to set out the terms of their bargain, by an oral agreement forgiving the balance owing by the Defendant to the Claimant.

The likelihood of two experienced businessmen doing so without at least some sort of documentation of this fundamental change in their agreement is extremely unlikely. [ 27 ] Even if the Defendant somehow believed that this was what was taking place, it is clear that the Claimant never agreed to this and the parties were never ad idem of what the Defendant claims to be an oral agreement.

Even if I accepted the Defendant’s version, the absence of any written record of such a fundamental contradiction to the written agreement would entitle the Claimant to a finding that any evidence of the oral agreement is inadmissible. For these reasons, this defence must fail. 2. Misrepresentation [ 28 ] The Defendant has also alleged that the Claimant misrepresented the state of the aircraft and their fitness as well as the state of their repair and their compliance with Transport Canada regulations. This defence must also fail for a number of reasons.

Firstly, the Defendant has failed to produce any evidence proving this. No evidence was called from Transport Canada to show that the aircraft were not in compliance with their regulations. No expert evidence was called regarding the state of the aircraft, other than the evidence of Mr. Dua, whose evidence did not match the characterization it was given by the Defendant. Mr. Dua’s complaint was that the Claimant never paid him for the work he performed. Mr. Dua did not give evidence that the aircraft were not air worthy. His evidence was to the contrary.

He signed off on the aircraft and said, in cross-examination, that he would not sign off on any aircraft that was not air worthy, and that he did sign off on these aircraft. [ 29 ] A second problem with this allegation of misrepresentation is that the party who asserts that there has been a misrepresentation must not cause any unreasonable delay in the bringing of that allegation. In this case, the Defendant had the aircraft for over four years and continued to make payments as agreed during that time.

Waiting over four years before complaining about a misrepresentation is certainly an unreasonable delay in the case of aircraft, where the Defendant continues to use the aircraft. The Defendant’s claim for a remedy for misrepresentation must fail for this reason also.

[30] The Defendant stated in its reply to these actions that it had “a claim in court against the Claimant Company, Mr. PravinderDholliwar and his associates for damages caused through misrepresentation”. The only record of another court action was a Notice ofDiscontinuance filed in a British Columbia Supreme Court Action in which the Claimant was named as one of the plaintiffs and theDefendants were shown as Affordable Flowers Company Ltd., Yes Capital Corp. and Sarbjit Mandair. The other plaintiff in that actionis “Energy Solutions, a sole proprietorship”.

The notice of discontinuance was filed before trial and before any apparent adjudication ofthe merits of any claim for misrepresentation. [31] The claim for misrepresentation has not been proven, and it is barred in any event due to unreasonable delay. The Defendant’sdefence on this ground must also fail. 3. Corporate Status of the Claimant [32] The Defendant argues that the Claimant should not be allowed to prosecute these claims because it is not a registered company. In support of this allegation, the Defendant has filed a BC Company

summary for Abbotsford Flight Centre Ltd. dated March 21, 2013,which shows that the Claimant was dissolved on April 27, 2009 for failing to file an annual return. [33] The Claimant’s documents do not contain any evidence that the Claimant was ever restored under the BC BusinessCorporations Act, and the Claimant certainly never asserted this to be the case. The Claimant’s position was simply that this was a non-issue. [34] In raising this defence however, the Defendant has raised a valid issue concerning the Claimant’s ability to maintain this action.

Section 344 of the BC Business Corporations Act provides that when a company is dissolved, that company ceases to exist for anypurpose. Under

section 346 of the BC Business Corporations Act, a dissolved company can continue a legal proceeding that wascommenced before its dissolution. In this case however, the claims were commenced well after the April 27, 2009 dissolution date. [35] Where a dissolved company commences legal action after dissolution, the Supreme Court of British Columbia has held that theaction cannot proceed. In DeBoer v. Fletcher 2013 BCSC 143, Justice Meiklem held that the court has two options when this occurs. He wrote: “Pursuant to s. 344 of that Act, the company ceased to exist for any purpose.

Although s. 346, s-s. 1 of the Business Corporations Actprovides that litigation may be continued where it was commenced before the dissolution, such is not the case here, and Inland PackersLtd. ("Inland Packers") has no legal status or capacity to bring or retain an action as plaintiff. The only real question in this regard iswhether the action should be struck as was done in the case of Zynik Capital Corp. v. Faris, 2004 BCSC 1032, or stayed indefinitely asin the case of Willow Green Developments Ltd. v. Lucas Anderson Construction

(1993) Co., [1998] B.C.J. No. 1595. [36] In Zynik Capital Corp. v. Faris, supra, the court held that an action commenced on behalf of a corporation that has beendissolved was a nullity and should be dismissed. However in Willow Green Developments Ltd. v. Lucas Anderson Construction (1993)Co., [1998] B.C.J. No. 1595, Justice Dillon of the B.C. Supreme Court stayed an action that was commenced by a dissolved companyindefinitely until the appropriate application could be brought to restore the defendant company to the register. Justice Dillon stated thefollowing: 14.

It is well established that a company that has been struck from the register, and has not been subsequently restored, has no capacity tobring or maintain an action (or an application) on its own behalf as plaintiff (or applicant): Bute Logging, supra; Floen Holdings Ltd. v.Ruff, (BC SC), [1978] 3 W.W.R. 172 (B.C.S.C.); Vancouver Equipment Corp. v. Sun Valley Contracting Ltd. (1979), (BC SC), 16 B.C.L.R. 362 (S.C.); Morris v. Whelen, [1990] B.C.J. No. 357, (19 January 1990), Duncan 1334 (B.C.Co. Ct.); Natural Nectar Products Canada Ltd. v.

Theodor (1990), (BC CA), 46 B.C.L.R. (2d) 394 (C.A.); First GwentInvestment Corp. v. Sia (1995), 43 C.P.C. (3d) 247 (B.C.S.C.). These authorities establish that, where a corporate plaintiff is struck fromthe register, the court must either strike the plaintiff's action or else issue a stay of proceedings until the plaintiff can be restored to theregister. [37] This was the same remedy granted by Justice Meiklem in DeBoer v. Fletcher. Justice Meiklem did so because he found thatthere was “no underlying fundamental problem in this case” other than the fact that the Claimant was a dissolved corporation.

He stayedproceedings “until such time as the company may be restored to the Register of Companies”. [38] In the case before me, the only evidence I have is that the Claimant is a dissolved company. No evidence was presentedcertifying that the Claimant ever applied to be restored as permitted under

section 356 of the BC Business Corporations Act. Until theClaimant has done so, this action cannot succeed. The Defendant is entitled to rely on this to prevent the Claimant from proceeding withthese claims. [39] The issue then is: what should the remedy for the Defendant be: a stay of proceedings until the Claimant restores his company,or a dismissal of the claims? In this case, as between these two remedies, I am satisfied that the fairer option is dismissal of the claims. The Claimant was dissolved in 2009 and over six years have passed since the Claimant was dissolved.

This means that the limitationperiod for any creditors of the Claimant to sue for debts owing by the Claimant (which may possibly include Mr. Dua) has passed. TheClaimant has been able to use its dismissal as a shield from creditors who have been unable to take any action on their claims because ofthe dissolution of the Claimant.

It would be an unjust result for the Claimant to use its status as a dissolved company in order to preventits creditors from taking action against it, only then to permit the Claimant to wait until all such limitation periods have expired beforeallowing it to reinstate legal actions for its debts. [40] In this case, the fairer option appears to be that used in Zynik Capital Corp. v. Faris, supra. The Claimant’s actions are each anullity and should be dismissed for that reason. 5.

Other Issues [41] The Defendant has also raised the issue that one of the contracts was made with Energy Solutions, and that the only evidence

before this court is that Energy Solutions is a sole proprietorship belonging to Mr. Dholliwar, not to the Claimant. This certainly accords with the notice of discontinuance filed in the BC Supreme Court, which identifies Energy Solutions as a sole proprietorship, not as a division of the Claimant. For this reason, this claim must also fail. [ 42 ] Lastly, the Defendant raises one other defence. It says that if one works out the calculations, it has paid all sums owing under the agreements in any event. The Defendant did not present evidence at trial detailing why this was so.

It sought to introduce new evidence after trial by leaving a document with the court registry. The Claimant never had the opportunity to address this document and it cannot form the basis of any defence. Costs [ 43 ] Despite presenting themselves as astute businessmen, the principal officers of the Claimant and Defendant chose to proceed with these claims without legal representation. The Defendant’s principal officer especially made much of how the Claimant’s principal was desperate for money, while he was financially secure.

Yet for some reason the Defendant elected not to expend any of its superior financial resources on legal advice which might have shorted these proceedings. [ 44 ] While parties are entitled to proceed without counsel in Small Claims Court, it is unfortunate that neither party chose to get legal advice in this case, given the amount of the claim and given the legal issues involved. If they had, the claim might have been resolved in a much more expedient fashion.

The Claimant could have learned that its claims lacked any chance of success unless it restored itself as a corporation under the BC Business Corporations Act and the Defendant could have been alerted to the problems with its assertion of misrepresentation and could have properly presented evidence of why it had in fact paid everything it had contracted to pay.

If there ever had been an oral contract as it alleged, the Defendant could have received advice about the importance of documenting such an important variation of its bargain with the Claimant. [ 45 ] The Claimant’s case was presented in a much more organized manner than that of the Defendant, while the Defendant approached the presentation of its case much like the man who brings a shoebox full of papers to his accountant and says “you figure it out.” There was a lot of surplus irrelevant information and a lot of inadmissible hearsay provided by the Defendant, without respect for the resource of court time.

Three days of badly needed court time were used, when the matter could have been presented much more expeditiously had the parties obtained some legal advice in order to narrow down the issues and point out the strengths and weaknesses of each side’s case. [ 46 ] Because the parties have had the benefit of saving money by not paying for any legal advice in a case that would have made this a wise expenditure, I am of the view that this is not an appropriate case in which to award any costs to either side. Accordingly, each side will bear their own costs of these actions.

Order [ 47 ] For the foregoing reasons, each of the claims is dismissed. Each party shall be responsible for bearing its own costs. Dated at the City of Abbotsford, in the Province of British Columbia, this 24 th day of November, 2015. -The Honourable Judge K. D. Skilnick