CITATION: Henry v. Greig, 2015 ONSC 168

COURT FILE NO.: DC-14-0007-00

DATE: 2015-1-08

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Michael Henry v. John Greig

BEFORE: Barnes, J.

COUNSEL: Antal Bakaity, for the Respondent

Enio Zeppieri, for the Appellant

HEARD: April 25, 2014

E N D O R S E M E N T

1This is an appeal of the decision of Deputy Judge Oliver, dated December 2, 2013. On that date Deputy Judge Oliver dismissed the Appellant’s motion seeking to dismiss the Respondent’s statement of claim and awarded costs to the Respondent. The Appellant seeks to set aside this Order. The Appellant also seeks to introduce fresh evidence for consideration on this appeal.

2Upon reading the materials filed and hearing the submissions of counsel this court orders:

(i) the Appellants motion to introduce Fresh Evidence on this appeal is dismissed;

(ii) the order of Deputy Judge Oliver, dated December 20, 2013, is set aside and the matter is remanded to small claims court to be set for trial; and

(iii) there shall be no cost awarded to either side.

OVERVIEW

3The Appellant brought a motion in small claims court pursuant to Rule 12.02(1) of the Small Claims Court Rules. He sought an order that the Respondent’s claim be struck on the basis that the claim was commenced outside the two year limitation period.

4The Respondent and Appellant entered into an agreement for the Respondent to purchase a tractor from the Appellant for $16,000. The Appellant gave the Respondent a cheque, dated June 20, 2009, for 16,000.

5After giving the Appellant a cheque for $16,000, the Respondent expressed some concerns about the serial number for the tractor and terminated the agreement. As a result, the Appellant gave the Respondent a promissory note, dated June 24, 2009, in which he promised to repay the Respondent $16,000 with interest.

6The Respondent brought a motion in Small Claims Court seeking an order dismissing the Appellant’s claim on the basis that the claim was commenced outside the two year Limitations Period set out in the Limitations Act.

7The Deputy Judge concluded that the limitations period began to run when the Respondent filed the Statement of Claim, therefore, the Appellant’s claim was commenced in time. The Deputy Judge also concluded that the Appellant had no other defence, other than the limitation period defence, dismissed the Appellant’s claim and awarded costs against the Appellant. The Appellant appeals the decision.

ISSUES

8The Appellant raises these issues on appeal:

(a) Did the Deputy Judge make a palpable and overriding error in finding the Respondent made a clear and unequivocal demand only when the statement of claim was filed?

(b) Did the Deputy Judge have the jurisdiction to strike the Appellant’s statement of defence when the issue of striking the Appellants statement of defence was not before the court?

FRESH EVIDENCE

9I will deal first with the Appellant’s application to introduce fresh evidence. The Appellant seeks an order permitting him to introduce Fresh Evidence for consideration in this appeal. I have concluded that the application for the introduction of fresh evidence shall be dismissed.

10The Appellant explains that this evidence will show that he was only an intermediary for a third party and was not subject to any agreement with the Respondent.

11The test for admitting Fresh Evidence on an Appeal is described in Visagie v. TVX Gold Inc. (2000), 2000 5749 (ON CA), 49 O.R. (3d) 198 at para. 53, 187 D.L.R. (4th) 193 (C.A.).

(1) the evidence should generally not be admitted, if by due diligence it could have been adduced at Trial;

(2) the evidence is relevant to a decisive or potentially decisive issue;

(3) it is reasonably capable of belief; and

(4) if believed, it could reasonably, when taken with the other evidence adduced at Trial, be expected to have affected the result.

12The Appellant submits that the said fresh evidence raises a valid and meritorious defence to the claim.

13In an affidavit dated, March 14, 2014, the Appellant explains that after the decision of the Deputy Judge, he discovered a bank draft in the amount of $10,000. According to the Appellant, this bank draft was made out to Manay Sodoma as part of the transaction with Respondent. The Appellant submits that this supports his position that he only acted as an intermediary.

14The bank draft is dated June 29, 2009, some five days after the Appellant provided the Promissory Note to the Respondent. The motion before the Deputy Judge was brought by the Appellant. It is a bank document that the Respondent could have sought and obtained from the financial institution prior to the motion before the Deputy Judge. This evidence was discoverable before the motion.

15The Appellant claims that he was only acting as a third party in the transaction. The bank draft is not accompanied by any affidavit linking it to the transaction between the Appellant and the Respondent. In addition, the Appellant acknowledged the existence of the debt in his statement of claim without making any reference to a third party defence. It is thus unclear how the said fresh evidence will affect the result at trial.

16I find that the said fresh evidence could have been adduced prior to the motion. The Appellant was not diligent. The connection, of the said fresh evidence to the dispute between the parties is tenuous at best. In the absence of any affidavit or other admissible evidence linking the said fresh evidence to the dispute between the parties, the evidence is not reasonably capable of belief. Even if it were, on the record before me, having acknowledged and promised to pay back the debt, I fail to see how any agreement with a third party will have any bearing on the final outcome of this case. The Appellant’s motion for the introduction of fresh evidence is dismissed.

Did the Deputy Judge make a palpable and overriding error in finding that a demand was only made by the Respondent when the statement of claim was issued?

17The Appellant attacks the Deputy Judge’s finding of fact. The Deputy Judge found that the limitation period began to run when the Respondent filed his statement of claim. I have concluded that the Deputy Judge failed to explain how two crucial and conflicting statements made by the parties were resolved by the Court. This omission constitutes a palpable and overriding error.

POSITION OF THE PARTIES

18It is the position of the Appellant that the Respondent is statute barred by the basic limitation period set out in the Limitations Act, from bringing the Claim against the Appellant. The Appellant states that the promissory note was due and payable since June 9, 2009. In the alternative the Appellant submits that the Respondent has been requesting payment since June 2009. The Appellant submits that as the Respondent issued the statement of claim on February, 2013, the Respondent was outside the two year limitation period as set by the Limitation Act. Therefore, the Respondent is out of time to bring the claim.

19The Respondent’s position is that he did not make any formal demand after the Promissory Note was issued. He did not become aware that the Appellant would not pay back the debt until he lost contact with the Respondent in 2013. The Respondent submits that the date the Claim was issued is the date he made a formal demand and therefore that is when the clock began to run for the purposes of calculating the limitation period. The Deputy Judge made findings of fact in accordance with the Respondent’s position.

DISCUSSION

20The standard of review of the findings of fact made by a trial or motions judge is one of considerable deference requiring a reversal only when there is a “a palpable and overriding error”. Therefore, findings of fact made by the trial or motions judge are entitled to deference unless they are clearly wrong: Hausen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235 (S.C.C.).

21The relevant sections of the Limitations Act are:

4. Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered. 2002, c. 24, Sched. B, s. 4.

Discovery

5. (1) A claim is discovered on the earlier of,

(a) the day on which the person with the claim first knew,

(i) that the injury, loss or damage had occurred,

(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,

(iii) that the act or omission was that of the person against whom the claim is made, and

(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and

(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a). 2002, c. 24, Sched. B, s. 5 (1).

Presumption

(2) A person with a claim shall be presumed to have known of the matters referred to in clause (1) (a) on the day the act or omission on which the claim is based took place, unless the contrary is proved. 2002, c. 24, Sched. B, s. 5 (2).

Demand obligations

(3) For the purposes of subclause (1) (a) (i), the day on which injury, loss or damage occurs in relation to a demand obligation is the first day on which there is a failure to perform the obligation, once a demand for the performance is made. 2008, c. 19, Sched. L, s. 1.

Same

(4) Subsection (3) applies in respect of every demand obligation created on or after January 1, 2004. 2008, c. 19, Sched. L, s. 1

22Section 22 of the Bills of Exchange Act, R.S.C. 1985, c. B-4, defines what constitutes a demand obligation:

When payable on demand

22. (1) A bill is payable on demand

(a) that is expressed to be payable on demand or on presentation; or

(b) in which no time for payment is expressed.

23In this case the law on limitation periods and demand obligations is not in dispute. Perell J. provides a comprehensive summary of the current state of the law in Skuy v. Greenough Harbour Corp, 2012 ONSC 6998 at paras. 29-45, [2012] O.J. No. 5841.

24This case deals with a present debt i.e. a debt that is payable upon demand. A succinct summary of the law on limitation periods and demand obligations, with respect to present debts, can be summarised as follows: Demand obligations include promissory notes, demand mortgages and demand guarantees; a debt obligation which is expressly payable on demand or presentation is a demand obligation. A debt obligation that does not specify a time for repayment is a demand obligation; a debt obligation repayable on a fixed date is not a demand obligation. The limitation period under the Limitations Act begins to run only when a demand is made: See Skuy at paras. 29 -33, 38-39.

25The Deputy Judge applied the correct legal principles. In her reasons for judgment, the Deputy Judge explains her finding that the Respondents made an unequivocal demand when the statement of claim was filed. The Deputy Judge states:

“The law is also clear that the issuance of the claim, at times, constitutes the clear and unequivocal demand on a specified date. The defendant’s in their materials can point to no other clear and unequivocal demand on a specified date. They simply rely on vague references to requests for payments. The fact that the defendant did not take the time to note down the dates of the “requests” satisfies me that they cannot and do not qualify as a clear and unequivocal demand. Thus, I find that the limitation period began with the issuance of the claim.”

26Thus the Deputy Judge provided full reasons for why she concluded that the Respondent’s prior conduct did not constitute a clear and unequivocal demand. This was a finding open to the Deputy Judge to make on the evidentiary record before her, however, as the Appellant pointed out, the Deputy Judge’s reasons are silent on how the court resolved the crucial contradictory evidence of when the parties last had contact with each other.

27The Respondent in his responding affidavit stated that his last contact with the Appellant was in 2013, which triggered his realisation that despite the Appellant’s promises to pay, he was not going to pay. The Respondent explains that when he came to this realisation he commenced the action.

28In his affidavit dated December 18, 2013, the Appellant states that he had not seen the Respondent since 2010. This assertion is in direct contradiction to the Respondent’s assertion that the last contact was in 2013.

29It is clear from the reasons for judgment of the Deputy Judge that the Deputy Judge accepted the Respondent’s version of events. The Deputy Judge articulates why she finds that the demand commenced with the filing of the statement of claim. The Deputy Judge’s reasons are silent on why she accepted the Respondent’s version that the last contact between the parties was in 2013, and rejected the Appellant’s version that the last contact was in 2010.

30The timing of the last contact between the parties is a crucial point. An essential component of the factual analysis is when the demand was made. For example, an acceptance of the Appellant’s version could lead to a finding that the demand was made in 2010 and therefore an action commenced three years later, in 2013, would be out of time.

31On the other hand, an acceptance of the Respondent’s version that the last contact was in 2013, could result in a finding that the demand was made at that time and therefore the action was commenced in time.

32These are only examples intended to illustrate that the date when the parties last had contact with each other was another important factor in the analysis. It is not necessary for the Deputy Judge to reach the same illustrative factual conclusions, I have suggested. On the contrary, it is open to the Deputy Judge to come to completely different factual conclusions in resolving this conflicting evidence on the basis of the evidentiary record before the court. It was open to the Deputy Judge to accept all, some or none of the affidavit evidence put before her, however, an articulation of the reasons for the resolution of this stark contradiction in the evidentiary record was necessary.

33This is a significant omission because the date of the last contact, between the parties, is an essential component of the factual analysis of which version to accept and when an unequivocal demand was made. For this reason the Deputy Judge committed a palpable and overriding error with respect to her finding of when an unequivocal demand was made.

34The matter is, therefore, remitted back to the Small Claims Court for a determination of when the unequivocal demand was made. This will necessarily require a resolution of the different versions of events described by the parties.

Did the Deputy Judge have the jurisdiction to strike the Appellant’s statement of defence when the issue of striking the Appellant’s statement of defence was not before the court?

35The Appellant brought the motion to strike the Respondent’s statement of claim under s. 12.02 of the Rules of Small Claims Court. The Deputy Judge dismissed the Appellant’s motion and struck the Appellant’s statement of defence on the basis that the Appellant had no other defence.

36The Appellant submits that the issue of the striking of the Appellant’s statement of defence was not before the court and, therefore, the Deputy Judge had no jurisdiction to strike his statement of defence. I have concluded that once the Deputy Judge reached the conclusion that the Appellant had no other defence, then the Deputy Judge had the jurisdiction to strike the Respondent’s statement of defence.

POSITION OF THE PARTIES

37The Appellant denied owing the debt in his statement of defence. He further argues that if the issue of striking the statement of defence was before the court, he would have had a chance to respond. The Appellant also submits that he would have utilised the 30 days window, pursuant to the Small Claim Court Rules, to amend the statement of defence if necessary.

38The Respondent submits the Appellant’s statement of defence did not reveal any defence except the Limitation Act defence. In addition, the statement of defence did not dispute the debt. The Respondent concedes that he did not file a separate notice of motion seeking this relief. The Respondent in his factum explains that he included in the notice of motion this relief. The Appellant, therefore, could not have been caught by surprise.

39The Respondent acknowledges that rule 15.01 (1) of the Rules of Small Claims Court requires that a motion shall be made with a notice of motion and supporting affidavit and rule 15.01(3) requires that the other party be served, however, 15.03(1) of the Rules of Small Claims Court permits a motion to be brought where “the nature or circumstances of the motion make notice unnecessary”. Therefore, the argument continues, if the Respondent’s motion is found to have been brought without notice, the court has jurisdiction to entertain it where the court concludes that it is necessary in the circumstances to do so. One such circumstance is where the statement of claim reveals no other defence.

DISCUSSION

40Rule 12.02 (1) (a) of the Rules of Small Claims Court states the following:

12.02 (1) The court may, on motion, strike out or amend all or part of any document that,

(a) discloses no reasonable cause of action or defence;

(b) may delay or make it difficult to have a fair trial; or

(c) is inflammatory, a waste of time, a nuisance or an abuse of the court’s process. O. Reg. 78/06, s. 26.

41Applying Rule 12.02(1) to this case, the court can strike out or amend a motion where it concludes that there is no “reasonable defence” and/or where to proceed further will constitute a waste of time: Rule 12.02(1)(c).

42The Deputy Judge correctly concluded that based on the Appellant’s statement of defence, the expiry of the limitation period was the only reasonable defence. The Deputy Judge stated the following:

“Beyond trying to rid himself of his obligation by operation of law the defendant has raised no reasonable defence to the claim. Thus, the defence is struck.”

43In effect the statement of defence did not disclose a reasonable defence. The Deputy Judge concluded that further proceedings would be a waste of time and it was within her jurisdiction to do so. The Deputy Judge had the jurisdiction to strike the Respondent’s statement of defence. In Van de Vrande v. Butkowsky (2010), 2010 ONCA 230, 99 O.R. (3d) 641 at para. 14 to 26 (CA), the Ontario Court of Appeal notes with approval the use of rule 12.02(a) under such circumstances.

COSTS

44The Appellant was unsuccessful in the fresh evidence application; successful in the Appeal requesting a trial on the contested factual issues and unsuccessful on the issue of jurisdiction. The Respondent was successful on the fresh evidence application and the jurisdiction issue but unsuccessful on whether the Deputy Judge’s order should be set aside. Success on the appeal is mixed and neither party shall be awarded costs.

Barnes, J.