Docket: CACV2361 Rack Petroleum Ltd. Appellant - v. -, 2013 SKCA 104

THE COURT OF APPEAL FOR SASKATCHEWAN Citation: 2013 SKCA 104 Date: 2013-10-09 Between: Docket: CACV2361 Rack Petroleum Ltd. Appellant - and - Dennis Michael Gidluck, Donna Marie Gidluck, Devin John Gidluck, Gordon James Gidluck, and Jenny Gidluck Respondents Coram: Richards C.J.S., Lane and Herauf JJ.A. Counsel: Deron Kuski and Joshua Morrison for the appellant Jay Watson for the respondents Appeal: From: 2012 SKQB 525 Heard: June 27, 2013 Disposition: Appeal dismissed

Written Reasons: October 9, 2013 By: The Honourable Chief Justice Richards In Concurrence: The Honourable Mr. Justice Lane The Honourable Mr. Justice Herauf Richards C.J.S. I. introduction [ 1 ] This appeal concerns the question of whether a foreclosure action is statute barred. The action was commenced by the appellant, Rack Petroleum Ltd., against the respondents, members of the Gidluck family (“the Gidlucks”). [ 2 ] In the spring of 2005, the Gidlucks mortgaged land to secure an existing debt owed to Rack Petroleum.

Rack Petroleum verbally demanded payment from the Gidlucks in the fall of 2005 and seized some grain. It ultimately commenced a foreclosure action in 2011. The Gidlucks defended the action by saying it was statute barred. A Queen’s Bench Chambers judge agreed with the Gidlucks. [ 3 ] Rack Petroleum appeals from the Chambers decision.

It contends that the demand for payment made in 2005 was not sufficiently particular to trigger the running of the applicable limitation period. [ 4 ] In my view, this case ultimately reduces to a finding of fact about the nature of the demand for payment made by Rack Petroleum in the fall of 2005. The conclusions of the Chambers judge on that point are reasonable. As a result, and as explained below, this appeal must be dismissed. II. the facts [ 5 ] On May 31, 2005, the Gidlucks granted a mortgage in favour of Rack Petroleum.

It was then duly registered against 17 parcels of land. [ 6 ] The mortgage was granted for the purpose of securing $455,000 of existing indebtedness to Rack Petroleum. The principal sum plus interest (which was specified as being due on May 1 and November 1 of each year) was payable on demand. Paragraph 2 of the mortgage reads as follows: 2.

That the Mortgagor will pay to the Mortgagee in lawful money of Canada, at the address of the Mortgagee in the Province of Saskatchewan, set out hereinbefore, the sum lent to the Mortgagor as aforesaid, UPON DEMAND, with interest thereon at the rate of TEN POINT FIVE (10.5%) per centum per annum, as follows: Interest shall be paid on the 1 st of November and the 1 st of May in each and every year, the first instalment to be made on the 1 st day of November, 2005. [ 7 ] The Gidlucks made a payment on the mortgage in the amount of $8,000 on June 20, 2005. [ 8 ] The Agreed Statement of Facts prepared by Rack Petroleum and the Gidlucks sets out the following description of what happened in the fall of 2005 and early 2006: 5.

In the Fall of 2005, the Plaintiff verbally demanded payment on the mortgage. When no payments were forthcoming, the Plaintiff took possession of canola stored on the Defendants' property. Grain was seized in October of 2005 from the Defendants' property. Some of the grain seized was sold in the Fall of 2005 and some was sold in early 2006. The Plaintiff credited the Defendants' mortgage account as follows:

a) December 12, 2005 $32,665.53

b) February 20, 2006 $23,368.54 [ 9 ] It is also agreed that the Gidlucks were in default on the mortgage at the time the grain was seized.

[ 10 ] Rack Petroleum retained legal counsel to commence enforcement proceedings on or about June 5, 2006. However, no demand was made and no claim was issued. In or about January of 2010, Rack Petroleum discovered its lawyer’s failure to act. [ 11 ] Rack Petroleum’s statement of claim was issued by new counsel on September 30, 2011.

It recites the particulars of the transaction between Rack Petroleum and the Gidlucks and asks for the foreclosure of the mortgage and the sale of the mortgaged land. [ 12 ] The Gidlucks’ statement of defence says the claim is statute barred because of Rack Petroleum’s failure to commence the action on a timely basis. [ 13 ] I note that Rack Petroleum’s factum refers in several places to facts that are not found in the Agreed Statement of Facts. I have ignored that material and restricted my analysis to the facts placed before the Court by agreement.

III. the chambers decision [ 14 ] Rack Petroleum and the Gidlucks settled on a Rule 188 application as the means of determining the merits of the Gidlucks’ defence. [ 15 ] The Chambers judge considered the terms of the mortgage and the facts put before him by agreement and concluded that Rack Petroleum had demanded payment of both the principal and interest in the fall of 2005 and that Rack Petroleum’s action had not been commenced within the applicable two-year limitation period prescribed by The Limitations Act , S.S. 2004, c. L-16.1.

As a result, he concluded that the action was barred. [ 16 ] The key to the Chambers judge’s reasoning is set out below: [10] It is agreed that the plaintiff made a verbal demand prior to October of 2005. The mortgage makes no specific provision on the method of demand whether it be verbal or written. The plaintiffs pursuant to the demand, seized grain from the defendants.

The plaintiffs by February 20, 2006 had sold the grain realizing $56,034 plus they had received a payment of $8000 for a total funds realized from the defendants on the mortgage of $64,034. [11] When one analyses the provisions of the mortgage the monthly interest charged on the principal would be $3981.12 per month. The commencement date of the mortgage is May 1, 2005 and therefore the interest on the full principal amount of $455,000 accrued on the mortgage to February 28th, 2006 would be $35,831.25.

The plaintiff as a result of their demand and grain seizure in October of 2005 received $28,203 surplus funds in addition to the interest that accrued on the mortgage. It can only be presumed that this amount would have been credited on the principal amount owing to the plaintiff as there is no evidence supplied by the plaintiff that any other handling of the funds occurred, such as a refund, or credit on some other account. I am satisfied that it is the plaintiff's obligation to have provided evidence to the court that the funds of $28,203 had not been credited on the principal account.

There being no such evidence I find that the sum of $28,203 was credited on account of principal after the demand in the fall of 2005. [12] I find that the demand in the fall of 2005 was for both principal and interest and the action was required to be commenced by the plaintiff on or before November 1, 2007. It has not been commenced within that time frame and I find the action is statute barred. IV. the limitations act [ 17 ] Rack Petroleum and the Gidlucks agree that the outcome of the Rule 188 application is governed by The Limitations Act and that the relevant limitation period is two years.

Sections 5 and 6 of that Act read as follows: 5 Unless otherwise provided in this Act, no proceedings shall be commenced with respect to a claim after two years from the day on which the claim is discovered. 6(1) Unless otherwise provided in this Act and subject to subsection (2), a claim is discovered on the day on which the claimant first knew or in the circumstances ought to have known: (

a) that the injury, loss or damage had occurred; (

b) that the injury, loss or damage appeared to have been caused by or contributed to by

an act or omission that is the subject of the claim; (

c) that the act or omission that is the subject of the claim appeared to be that of the person against whom the claim is made; and

(

d) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it.

(2) A claimant is presumed to have known of the matters mentioned in clauses (1)(

a) to (

d) on the day on which the act or omission on which the claim is based took place, unless the contrary is proved. [ 18 ]

Section 10 of the Act was also referred to by counsel. It speaks to the question of when the clock begins to run on a limitation period for a claim based on a default in performing a demand obligation: 10 Unless otherwise provided in this Act, in the case of a default in performing a demand obligation, the day on which

an act or omission on which a claim is based takes place is the day on which the default occurs. [ 19 ] I also note s. 18 of the Act . It provides that, if a limitation period is raised against a claimant, the claimant has “the burden of proving that…the limitation period has not expired.” The full text of s. 18 is set out below: 18 If, in a proceeding, a limitation period is raised against a claimant, the claimant has the burden of proving that: (

a) the limitation period has not expired; or (

b) there is no limitation period that applies to the claim. V. analysis [ 20 ] Rack Petroleum submits that the Chambers judge erred in finding as he did because the notice that it gave to the Gidlucks in the fall of 2005 was not sufficient to trigger the running of the applicable limitation period. In Rack Petroleum’s view, a demand must, in order to be effective, include the amount of the payment requested, the date by which payment is to be made and a statement as to the consequences of the failure to comply with the request for payment.

Indeed, Rack Petroleum goes so far as to say that, in order to be effective, a demand must be in writing. [ 21 ] In specific reference to the situation in this case, Rack Petroleum says that the demand it made in the fall of 2005 fell short of what was required because neither it nor the Gidlucks are able to recall (

a) the precise date on which the demand was made, (

b) whether Rack Petroleum provided the Gidlucks with a balance owing, or (

c) whether Rack Petroleum indicated that it would commence a foreclosure action if its demand was not met. [ 22 ] As the Gidlucks point out, there is a certain irony in Rack Petroleum’s arguments about the alleged deficiencies in the 2005 demand. This is so because, at the time it was made, Rack Petroleum obviously considered the demand to have been adequate enough to warrant the seizure of grain valued at significantly more than the amount of interest due and owing.

Moreover, of course, a creditor like Rack Petroleum would not usually argue that notice requirements of the sort in issue here should be read as being more onerous than they appear to be on the face of the lending documents. However, be that as it may, there is a more fundamental roadblock standing in the way of Rack Petroleum’s position. [ 23 ] That roadblock is what I understand to be the Chambers judge’s finding of fact that, in the fall of 2005, Rack Petroleum made a demand for the payment of both the principal amount secured by the mortgage and the interest owing to it.

In my view, this is a reasonable inference to draw from what is set out in the Agreed Statement of Facts and, hence, is not subject to being overturned by this Court. See: Farm Credit Corp. v. Valley Beef Producers Co-operative Ltd. , 2002 SKCA 100 , [2002] 11 W.W.R. 587 at para. 118 . Specifically, in a context where the Gidlucks were in default, Rack Petroleum seized grain valued at approximately $28,000 more than the amount of the interest then owing under the mortgage. It sold some of the grain in the fall of 2005 and some in February of 2006.

Four months later Rack Petroleum retained counsel to commence enforcement proceedings. In light of all of this, it seems to me that the Chambers judge was entitled to make the finding that I take him to have made, i.e. a finding that, in the fall of 2005, Rack Petroleum had demanded payment of both interest and the whole of the principal.

He might have concluded, no doubt, that Rack Petroleum had demanded payment of only the outstanding interest plus $28,000 in principal but, to repeat, it was reasonable for him to have found as he did. [ 24 ] In any event, and in view of s. 18 of The Limitations Act , Rack Petroleum had the burden of proving that the applicable limitation period had not expired when its action against the Gidlucks was commenced.

This was a positive obligation and Rack Petroleum did not satisfy it by pointing to what amounted to no more than mere gaps in the factual record. [ 25 ] That being said, the bottom line of this appeal is readily apparent. Given the Chambers judge’s factual starting point, he was correct to then proceed on the basis that the two-year limitation period applicable to Rack Petroleum’s claim began to run in the fall of 2005 and, clearly, that it had expired long before the action against the Gidlucks was launched in 2011.

[ 26 ] I see no merit in Rack Petroleum’s argument that, to have been effective, the demand it made in 2005 must have been in writing. A requirement that notices of this sort be in written form might represent an interesting reform proposal but the Court was referred to nothing suggesting that it is currently the law. To the contrary, I note that, in Falconbridge on Mortgages , 4th ed. (Agincourt, Ont.: Canada Law Book, 1977) at p. 435, W.B. Rayner and R.H.

McLaren state: “In case a demand is required by the terms of the contract, an oral demand is sufficient, unless a demand in writing is expressly stipulated for.” If Rack Petroleum had wanted to insist on notices being in writing, it could have included a term to that effect in the mortgage. [ 27 ] Further, I see no significance in the fact that the record before the Court does not identify the specific date by which the demand made by Rack Petroleum was to be satisfied. It is clear that, whatever the precise deadline might have been, it was not met.

Otherwise, Rack Petroleum would not have seized the Gidlucks’ grain without any apparent protest from them. The date in question was self- evidently sometime in the fall of 2005 and that, obviously, is much more than two years before the date on which the action was commenced. [ 28 ] Finally, I turn to the suggestion that the demand made by Rack Petroleum cannot be seen as having started the limitation period clock because the Agreed Statement of Facts does not expressly confirm the existence of a communication that, if the demand was not met, Rack Petroleum would commence foreclosure proceedings.

We were referred to no authority for this proposition, i.e. the proposition that a demand, to be effective, must include a notice that failure to meet it will provoke enforcement proceedings. In my view, the default provided Rack Petroleum with a cause of action and marked the start of the limitation period. [ 29 ] In the end, I cannot accept Rack Petroleum’s arguments. The Chambers judge found that it made a demand for payment of principal and interest in the fall of 2005.

Due to an error by its lawyer (not counsel on this appeal), enforcement proceedings were not commenced until well after the expiry of the applicable two-year limitation period. It follows that, by virtue of the governing terms of The Limitations Act , Rack Petroleum’s action is statute barred. VI. conclusion [ 30 ] I conclude that Rack Petroleum’s appeal must be dismissed. The Gidlucks are entitled to costs of the leave application and costs of the appeal to be assessed under Column 2 of the Tariff.

DATED at the City of Regina, in the Province of Saskatchewan, this 9th day of October, A.D. 2013. “Richards C.J.S.” Richards C.J.S. I concur “Lane J.A.” Lane J.A. I concur “Herauf J.A.” Herauf J.A.