Salmon v. Daum Date:, 2015 BCPC 188

Citation: Salmon v. Daum Date: 20150624 2015 BCPC 0188 File No: C13667 Registry: Port Coquitlam IN THE PROVINCIAL COURT OF BRITISH COLUMBIA BETWEEN: ROBERT SALMON CLAIMANT AND: TYRONE DAUM DEFENDANT REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE T.S. WOODS Counsel for the Claimant: W. van der Sande Counsel for the Defendant: J. Shewfelt Place of Hearing: Port Coquitlam , B.C. Dates of Hearing: September 10, 2014 and January 14, 2015; Written Submissions of Claimant: March 9, 2015 Written Submissions of Defendant: March 30, 2015

Written Reply Submission of the Claimant: April 8, 2015 Date of Judgment: June 24, 2015 INTRODUCTION [1] In these proceedings the claimant, Robert Salmon (“Mr. Salmon”), brings action against the defendant, Tyrone Daum (“Mr.Daum”), for debt in the amount of $20,000 plus prejudgment interest, filing fees of $156 and service fees of $100. He claims that heloaned money and provided a number of valuable services to Mr. Daum over a period of months when Mr. Daum was down on his luck. Mr.

Salmon also alleges that, at a certain point, he considered it necessary to bring more formality to their arrangement and that,accordingly—at his request—Mr. Daum executed a promissory note on August 21, 2010 evidencing a previously acknowledgedindebtedness to Mr. Salmon in the claimed amount of $20,000 (the “Personal Promissory Note”). [2] Mr. Daum has answered Mr. Salmon’s Notice of Claim with a Reply that amounts to little more than a bare denial. In itsentirety it reads: “The defendant Tyrone Daum disputes each and every allegation and holds the claimant to the strictest line of proof.

This matter isalready before the Supreme Court of British Columbia Action No. S129035 Vancouver Registry.” [3] Notwithstanding the skeletal nature of his pleading, Mr. Daum—who was unrepresented at the time he filed his Reply but hadretained counsel to act for him by the second day of trial—called evidence and then advanced arguments in closing submissions thatrelate to three substantive legal defences, viz: (

a) That any debt to Mr. Salmon incurred by Mr. Daum was incurred by him on behalf of a corporate debtor, 0873394 B.C. Ltd.(“NumCo”) and not by Mr. Daum in his personal capacity; (

b) That the Personal Promissory Note was executed by him under duress and is thus unenforceable; and (

c) That the obligation evidenced by the Personal Promissory Note was, in any event, a contingent obligation and the contingency thatmust be fulfilled to render the debt payable has never been fulfilled. [4] I would not wish to be taken to condone the practice, by parties, of entering pro forma pleadings and then invokingunmentioned substantive causes of action or defences at trial. That is a perilous practice.

As Low J.A. (for the court) stated in respect ofa Supreme Court proceeding that was before him on appeal, “Pleadings define the issues before the court and the inquiry by the courtshould be limited thereby”: Adams Lake Indian Band v. British Columba (Lieutenant Governor in Council), 2012 BCCA 333 at para.63. [5] That said, this court necessarily holds its litigants to a lower standard of pleading than do the

section 96 courts, in part byreason of s. 2(1) of the Small Claims Act which stipulates that proceedings in Provincial Court shall be conducted “in a just, speedy,inexpensive and simple manner”. I must confront this problem with that legislative admonition in mind. [6] Then there is the fact that, until the second day of trial, Mr. Daum did not have counsel. In other words, until partway throughthe actual hearing of the case against him, he was an unrepresented litigant and must accordingly be treated somewhat liberally withrespect to the weaknesses in his Reply: Popular Shoe Store Ltd. v.

Simoni (1998), (NL CA), 24 C.P.C. (4th) 10(Nfld. S.C. – A.D.) at paras. 24-25. [7] Most importantly, however, having not raised any objection—either at the time evidence relating to unpleaded substantivedefences was called at trial, or afterward when the case was argued—Mr. Salmon cannot now claim to have suffered prejudice as a resultof Mr. Daum’s cryptic pleading. He responded to those defences in his testimony and his counsel responded to them in final argument. Therefore, following the example set recently by Harrison P.C.J. in Synergy Counselling Associates Ltd. v. Dunvegan Enterprises Ltd,[2013] B.C.J.

No. 931 (Prov. Ct.) at paras. 19-23, I have reached the conclusion that in deciding this matter I can consider, on theirmerits, the unpleaded, substantive defences that Mr. Daum now invokes in order to defend Mr. Salmon’s claims. UNCONTROVERSIAL FACTS [8] While some facts are demonstrably controversial, there is much regarding the background to this litigation that is essentiallyundisputed. Accordingly, in order to provide the necessary context, I will first set down here a brief

summary of the uncontentious factsthat I have found based upon the evidence I have heard and seen at trial. [9] Although this action revolves around benefits of various kinds allegedly conferred upon Mr. Daum by Mr. Salmon in late 2009and 2010, those two individuals were essentially unknown to each other until a matter of days before Mr. Salmon is said to have begunconferring the subject benefits. They were not friends, or even acquaintances, until they first met sometime in September of 2009. However, by the end of September of 2009, Mr. Salmon had permitted Mr.

Daum to move into his house, rent-free, and he had begun toprovide him with money, dinners and entertainment; he also paid expenses of various kinds that Mr. Daum incurred, permitted him touse his vehicles, and so forth. This carried on for a period of months. [10] Mr. Salmon first came to know Mr. Daum through an introduction made by one Mike Clapci in September, 2009. Mr. Clapciwas a long-time associate of Mr. Salmon.

All three men had an involvement of one kind or another in an ultimately unsuccessfulbusiness venture, that being a project aimed at turning a hotel and bar near Kelowna (the “Beaverdell Hotel”) into a profitable, goingconcern. [11] Mr. Clapci introduced Mr. Daum to Mr. Salmon as his (Mr. Clapci’s) “business partner” in relation to the Beaverdell Hotel

venture, and asked Mr. Salmon to help Mr. Daum out as he (Mr. Daum) was at the time down on his luck. Mr. Salmon agreed to provide support for Mr. Daum, in answer to Mr. Clapci’s request, but his evidence was clear that he did so as a means of supporting the Beaverdell Hotel venture. In Mr. Salmon’s own words under cross-examination regarding the various forms of assistance he provided, “These were all personal things for [Mr. Daum] to get back on his feet. By getting him back on his feet, he can – he can run his company ”: Trans. , January 14, 2015, p. 21, emphasis added. [ 12 ] That testimony accords with Mr.

Salmon’s evidence given during his direct examination regarding (for example) fees paid relating to some court proceedings involving the Beaverdell Hotel and truck usage—two specific types of expenses or needs that Mr. Salmon took care of in the interim for Mr. Daum: “Q And when he asked for the money, what did -- how did he ask for the money? A Well, if it needed to be paid, just whatever form of payment I had in my pocket. So if it was debit, it was debit, if I had cash, it was cash. Q And why did you do this? A Because I was trying to help him and -- and Mike [Clapci] to get going or make it to the hotel.

They needed to -- he needed to do these things to get -- to start the hotel up . Q You say he borrowed your truck. A Yeah. Q What did he use your truck for? A He went to Kelowna in January to pull out things from the [Beaverdell] hotel and from his cabin .” (emphasis added) Trans. , September 10, 2014 [ 13 ] The close relationship between the obligation evidenced by the Personal Promissory Note and the fate of the Beaverdell Hotel venture is further underscored by the fact that on its own terms that Note expressly ties the obligation to repay the subject $20,000 to the business performance of that venture.

It does so by specifying that the subject $20,000 was to be paid “from my profits of the Beaverdell Hotel’s revenue”: see Exhibits 3 and 4. Many times during the course of his testimony, Mr. Salmon confirmed that he understood that repayment would come out of Beaverdell Hotel revenues. “Q Did you ask him for payment? A When we came up with the figure, that was -- that was because I was asking to get paid for money for while he was living with me, that's why we sat in the kitchen on April 7th and came up with the figure. And he said when the bar opens, he would -- he would settle up with me.

And then as time went on, the money never came. So on August 21st, that's when he signed the actual paper one, because it was -- it was looking -- I was wondering if I was ever going to get the money. So I needed -- I needed to have something written on paper.” (emphasis added) Trans., September 10, 2014, p. 17. See also, pp. 6, 10, 12 and 14. [ 14 ] Beyond all of that, in his own mind, at least originally, it was Mr. Salmon’s belief that to the extent he was owed a debt in relation to what he had given to, or taken care of for, Mr. Daum, that debt was part and parcel of what was payable to him (Mr.

Salmon) by the Beaverdell Hotel’s operating company, NumCo, and could be claimed in separate Supreme Court proceedings that were already on foot against NumCo. That is to say, it wasn’t until he was advised that his claim regarding what he had given to, or taken care of for, Mr. Daum could not be advanced in those separate proceedings against NumCo that Mr. Salmon began to view his claim as being one that he could assert against Mr. Daum personally. “My question to you, Mr. Salmon, then, is that up to that point in time, you thought that this was a debt to be paid by the company?

A I didn't know how to collect it. I didn't have a lawyer. Mr. Clapci thought that he would just be able to put it in with his documents and it would all just get paid together, and then he was told, no, it's not -- it can't. Q Yes, it would get paid by the company. A It would be paid through the whole legal proceeding between the two of them. Q Yes, ultimately from company funds? A Well, I don't know how that all works out. But he was trying to put his paperwork together with my paperwork. Q And so --

A And then we were told that it can't be like that. Q All right, and the decision to say it can't be like that, that was not a decision of the court, was it? A That was a decision of Ty. He said anything to do with -- that had my name on it had to be done separately. He didn't recognize anything with my name because my name wasn't on the application. Q Because you weren't a party to the litigation between Mr. Clapci and Mr. Daum and the corporation, correct? A That's correct.

Q And it wasn't until that event that you then understood that this was a debt that, if it was going to be repaid at all, had to be repaid not by the company, but by Mr. Daum personally? A That's correct .” Trans. , January 14, 2015, pp. 32-33 (emphasis added). See also, Exhibit 3 and Trans., September 10, 2015, pp. 23-25 [ 15 ] That is, in my opinion, cogent evidence that Mr. Salmon saw his $20,000 as having been spent to benefit the venture, not to benefit Mr. Daum personally, separate and apart from the venture. [ 16 ] The state of Mr.

Salmon’s belief revealed in the quoted passage explains how it came to pass that one copy of the Personal Promissory Note that is in evidence before me—the one marked as Exhibit 3—has inscribed on it the words, “ LOAN TO COMPANY ”. Those words (which are manifestly inconsistent with Mr. Salmon’s claim that the loan was to Mr. Daum personally) were inscribed on the Personal Promissory Note by an agent whom Mr. Salmon had engaged to organise his documents. Mr.

Salmon testified in his direct examination that the Personal Promissory Note was initially allocated to the stack of documents that related to claims to be pursued against NumCo because he (Mr. Salmon) believed a claim in relation to the debt secured by that note, notwithstanding its identification of Mr. Daum as borrower/promissor, could and should be asserted against NumCo and not Mr. Daum personally: “Q And the words at the top, "Loan to company", what's that about? A When I was trying to figure out where it was supposed to go, I thought this was -- I thought it was supposed to go against the company .

But when -- when they did the financial end, Ty said that this was not to the company, this was separate, and that's why it had to go to Small Claims Court. It had to be separate, because I wasn't on the -- I wasn't on the application with him and Mike, so he said this -- this is separate.” Trans. , September 10, 2014, pp. 23-24. See, also, for example, pp. 24-25 [ 17 ] That state of belief on Mr. Salmon’s part—namely, that his dealings with Mr.

Daum were all of a piece with the Beaverdell Hotel venture—also goes some distance to explain why there is another promissory note in evidence (the “Corporate Promissory Note”), signed by him, which secures the same $20,000 obligation to Mr. Salmon but which identifies NumCo as the borrower/promissor: see Exhibit 7. [ 18 ] Importantly, the Beaverdell Hotel venture was one that co-venturer Mr. Salmon supported in other ways beyond simply lending help to co-venturer number two—Mr. Daum—at the invitation of his longtime friend and co-venturer number three, Mr.

Clapci, at a point when co-venturer Daum had fallen on hard times. For example, Mr. Salmon invested $40,000 of his own money into the project in the form of a loan to Numco, the Beaverdell Hotel’s operating company; Mr. Salmon also contributed by buying an ice machine, plying the bar at the hotel with alcohol and assisting with concert bookings, all with a view to trying to make the business a success: see Trans. , September 10, 2014, p. 18 (direct) and January 14, 2015, p. 24 (cross). Mr.

Salmon was, accordingly, deeply embedded in the Beaverdell Hotel project himself and was not merely an uninvolved bystander who selflessly came to the assistance of a true participant in that project. [ 19 ] While they disagree markedly regarding the circumstances surrounding the event, Mr. Salmon and Mr. Daum do nevertheless agree that on August 21, 2010, they did meet with one another on the subject of repayment of what was owed to Mr. Salmon and that during that meeting Mr.

Daum executed the Personal Promissory Note (Exhibits 3 and 4). [ 20 ] These uncontroversial facts, taken together, make it plain that the present action—in which Mr. Salmon pursues a claim in debt against Mr. Daum personally—cannot properly be analysed or understood without regard to the business context (the Beaverdell Hotel venture) out of which the parties’ relationship arose. HAS MR. SALMON PROVEN THAT THE PARTIES’ DEALINGS CREATED AN UNCONDITIONAL, PERSONAL OBLIGATION ON THE PART OF MR. DAUM? [ 21 ] The entire premise of Mr. Salmon’s action against Mr. Daum is that Mr.

Daum is personally and unconditionally obliged to pay him $20,000. Mr. Daum vigorously disputes Mr. Salmon’s contention that the obligation was personal, or that it arose out of dealings between them that were personal, or that it was unconditional. [ 22 ] As can be seen, the evidence is equivocal on this point. However, it is Mr. Salmon who bears the onus of proving on a balance

of probabilities that the obligation he seeks to enforce was unconditional and strictly personal to Mr. Daum. Having weighed and sifted the evidence led at trial, I have concluded that Mr. Salmon has failed to discharge that onus. [ 23 ] In my opinion, Mr. Salmon’s dealings with Mr. Daum are inseparable from the business opportunity that brought the two men together, that being the Beaverdell Hotel venture. Until he and Mr. Daum were introduced to one another by Mr. Clapci, they were complete strangers. It beggars belief that Mr. Salmon would place himself in such obvious peril by providing Mr.

Daum—a man he barely knew and one who could not then even provide for his basic necessities—with goods and services of a value in the range of $20,000 over the course of several months on the faith of nothing more than an exclusively personal promise to repay that amount. Apart from his involvement in the Beaverdell Hotel venture, Mr. Daum had no apparent prospects whatsoever. He was essentially an unknown quantity to Mr. Salmon and, to the extent he was known at all, he was known to be destitute. To suggest that Mr.

Salmon stepped in and adopted the role of a selfless, disinterested, good Samaritan, no-interest lender in these circumstances, and was not motivated instead by business considerations, is simply not credible. [ 24 ] This is not a case about unalloyed altruism. [ 25 ] The preponderance of the evidence points to an entirely different motive that guided Mr. Salmon in his dealings with Mr. Daum, that being the motive of an investor. The facts I have found force the conclusion that Mr.

Salmon saw the Beaverdell Hotel venture as one that had the potential to bring him and his co-venturers a return on their financial and in-kind investments in it. He was prepared to put some of his own money at risk, and sink some of his own labours into the venture, all in the hope that he would ultimately recoup his investment and reap his rewards when the Beaverdell Hotel became a profitable, growing concern. Looking after Mr.

Daum’s needs and expenses for a time (“By getting him back on his feet, he can – he can run his company”, Trans. , January 14, 2015, p. 21) was just one of several ways he made his investment. By tying the recovery of his $20,000 into the Beaverdell Hotel’s profits (as the Personal Promissory Note does expressly), Mr.

Salmon revealed a willingness to entertain the risk that there would be no profits and thus no repayment—behaviour that is more consistent with that of an investor in a business enterprise than with that of a lender dealing with a borrower who stands wholly apart, as to his repayment obligations, from the business enterprise he and Mr. Daum had in common or its ultimate fate. [ 26 ] It bears repeating that Mr. Salmon contributed to the venture in more than one way. He loaned $40,000 to NumCo—the hotel’s operating company.

He bought equipment and alcohol for the bar at the hotel and worked on concert bookings for it. And when his longstanding friend Mr. Clapci introduced Mr. Daum to him as his Beaverdell Hotel “business partner” and as a person who was temporarily in need, Mr. Salmon stepped up and gave him a place to live, fed and entertained him, and paid for or subsidised numerous activities on Mr. Daum’s part, some of which were undertaken directly in furtherance of getting the Beaverdell Hotel running. He took care of some court fees associated with the hotel. He loaned Mr.

Daum his truck to use so that hotel-related tasks could be performed. When that truck was damaged by Mr. Daum in the course of some of performing those tasks, he covered the cost of the repairs. [ 27 ] It was in Mr. Salmon’s interest, as it was in Mr. Daum’s and Mr. Clapci’s interests, that Mr. Daum be kept “up on his feet” and continuing to make his contribution to their common enterprise. I find that by, inter alia , temporarily supporting Mr. Daum in the various ways he did, Mr. Salmon played his

part in the joint effort to transform the Beaverdell Hotel into a profitable, going concern. That is not the same thing at all as simply making a personal loan to Mr. Daum. While, technically, the parties may not have papered it as persons taking legal advice would have papered it, I have no doubt that Mr. Salmon’s contribution of $20,000 in goods and services to keep Mr. Daum afloat was an investment in the Beaverdell Hotel project. [ 28 ] Mr. Salmon said repeatedly in his testimony that he expected to be repaid the $20,000—the amount that he and Mr.

Daum agreed was the value of the goods and services that he had conferred upon Mr. Daum between September of 2009 and April of 2010— out of the monies he anticipated would in due course be generated by the Beaverdell Hotel as a going concern. The $20,000 and the venture that was the Beaverdell Hotel project are plainly parts of one, comprehensive whole. [ 29 ] On the evidence, the Beaverdell Hotel venture was, ultimately and to the disappointment of all, a failure. None of the co- venturers involved with it was particularly sophisticated. The dealings of Mr. Daum, Mr. Salmon and Mr.

Clapci with one another were conducted and documented in sometimes amateurish and haphazard ways. The failure of the venture left many losses strewn about in all directions. [ 30 ] Mr. Salmon would now have the court find that the assistance he gave to Mr. Daum at Mr. Clapci’s request can be isolated from the fortunes of the Beaverdell Hotel venture. Mr. Salmon seeks to recover that $20,000 from Mr. Daum personally, and to have the court accept that the assistance he rendered to Mr.

Daum be viewed as unconditional and as being separate and apart from the fate that utlimately befell the Beaverdell Hotel project. [ 31 ] That, with respect, is a fanciful

interpretation of events that the evidence simply does not support and that the court simply cannot accept. [ 32 ] The linkage between the assistance Mr. Salmon was providing to Mr. Daum on the one hand, and the Beaverdell Hotel venture on the other, was so clear in Mr. Salmon’s own mind that until relatively late in the piece he believed that the debt he now seeks to have repaid by Mr. Daum was a debt owed to him by NumCo, the company that was incorporated in February, 2010 to operate the Beaverdell Hotel. This linkage was so clear in Mr.

Salmon’s mind that he signed, as lender and promissee, the Corporate Promissory Note—a promissory note for the same $20,000 debt he now claims against Mr. Daum and in which the Beaverdell Hotel’s operating company, NumCo, and not Mr. Daum, shows as borrower and promissor. [ 33 ] Mr. Salmon sought to explain away this latter, unhelpful evidence by suggesting that he considered the Corporate Promissory Note to be a guarantee by NumCo of Mr. Daum’s personal obligation. That evidence is simply not credible. To begin, the Corporate Promissory Note is, on its face, evidence of a debt obligation owed to Mr.

Salmon directly by NumCo. It makes no mention of Mr. Daum at all, either as a principal obligor or anything else. It is not labelled as a guarantee, nor does it employ the language of a guarantee. Beyond that, Mr. Salmon was not able to offer a believable explanation as to why he did not take steps to enforce, against NumCo qua guarantor, this odd form of security—which he claims he viewed as a corporate guarantee of Mr. Daum’s personal

obligation—in this or any court. In these circumstances, Mr. Salmon’s explanation for the existence of a promissory note showing NumCo as the borrower of the same funds he says were borrowed by Mr. Daum personally cannot be accepted. And while it is not sufficient to prove conclusively that the $20,000 he seeks to recover from Mr. Daum was in fact a corporate debt, payable to him by NumCo, the existence of the Corporate Promissory Note does nevertheless stand as powerful evidence to show that the money Mr. Salmon provided to Mr. Daum and the expenses he took care of for him were, to Mr.

Salmon’s own understanding, inextricably linked to the Beaverdell Hotel project and its fortunes. CONCLUSIONS AND DISPOSITION [ 34 ] In one sense, while I have earlier concluded that Mr. Daum could place reliance on defences that were not expressly pleaded, this case in fact falls to be decided at least in part on the basis of where the burden of proof lies—something that Mr. Daum did plead. (Recall that in his skeletal pleading, Mr. Daum did hold Mr. Salmon to “the strictest line of proof” of his claim.) Mr.

Salmon, the claimant, most assuredly does bear the onus of proving that he has an actionable claim for debt against Mr. Daum in his personal capacity for the subject $20,000. For the reasons I have given, I conclude that Mr. Salmon has failed to discharge that onus. That is to say, I am unable to find, by recourse to the civil standard of a balance of probabilities, that it is more likely than not that through their dealings Mr. Daum incurred, as a borrower, an unconditional personal liability to Mr. Salmon, as a lender, for the subject $20,000. Thus, it can be said that, as he stated in his Reply, Mr.

Daum has put Mr. Salmon to the strict proof of his debt claim and Mr. Salmon has failed to prove that claim to the applicable standard. [ 35 ] The evidence that came before the court, without objection, relating to the broader context out of which the parties’ dealings arose—that is, the context of the Beaverdell Hotel project in which Mr. Salmon, Mr. Daum and Mr. Clapci were all, by my determination, co-venturers—did not fully carry the day for Mr. Daum in terms of his assertions that the subject debt was specifically a corporate debt owed by NumCo or that the Personal Promissory Note was executed by Mr.

Daum under duress. The evidence placed before me in respect of those defences is murky and sometimes contradictory and was thus unable to substantiate those particular defences conclusively. The parties’ dealings regarding that project were, as I have said, not formally structured and often ad hoc . [ 36 ] That evidence did however bring Mr. Salmon’s actions as a Beaverdell Hotel investor into focus, as did Mr. Daum’s argument that repayment of the disputed monies depended upon a condition precedent (the generation of profits by the Beaverdell Hotel) that was never fulfilled. That evidence thus derogated from Mr.

Salmon’s contentions (

a) that he had a strictly personal, lender/borrower relationship with Mr. Daum, and (

b) that the obligation he sought to enforce against Mr. Daum was unconditional. As I have said, I am satisfied by the evidence that, as regards the Beaverdell Hotel project, Mr. Salmon was a de facto investor and that his dealings with Mr. Daum were one part of his broader involvement in that project qua investor. The business context of the parties’ dealings that was established on the evidence, and in particular the circumstances under which the $20,000 in goods and services were conferred upon Mr. Daum by Mr.

Salmon, together with the purposes for which they were conferred, makes the parties’ dealings inseparable from the business context and, thus, prevents Mr. Salmon from making out his claim that Mr. Daum is indebted to him personally, pursuant to a straightforward, unconditional, personal loan arrangement, for those goods and services. To the contrary, the evidence establishes the existence of a contingent liability to Mr. Salmon, not provably borne by Mr.

Daum alone in his personal capacity, which was inextricably linked to the profitability of the failed Beaverdell Hotel project. [ 37 ] It follows from all of the foregoing that Mr. Salmon’s claim in debt against Mr. Daum must be, and is hereby, dismissed. _________________________________ Thomas S. Woods, P.C.J.