Court File and Parties

COURT OF APPEAL FOR ONTARIO DATE: 20220321 DOCKET: C68416

Rouleau, Nordheimer and George JJ.A.

BETWEEN

Royal Bank of Canada Respondent (Plaintiff)

and

Daniel Bedard and Colleen Bedard Appellants (Defendants)

Counsel: Norman Mizobuchi, for the appellant Catherine Francis, for the respondent

Heard: March 3, 2022, by video conference

On appeal from the judgment of Justice Paul Kane of the Superior Court of Justice, dated October 2, 2020.

Reasons for Decision

[1] The appellant appeals the trial judgment awarding the respondent Royal Bank of Canada (RBC) the sum of $274,962.38 plus pre-judgment interest and costs. The trial judge also ordered that the judgment not be released by an order of discharge pursuant to s. 178(1)(e) of the Bankruptcy and Insolvency Act, R.S.C., 1985, c. B-3 (BIA).

[2] RBC’s claim was for breach of a conditional Sales Contract (Contract) for the purchase of a 2003 57-foot Carver boat (57 Carver). It claimed payment of the outstanding balance as well as reimbursement for costs it incurred seeking to enforce its secured interest in the 57 Carver. The enforcement proceeding was unsuccessful as, unbeknownst to RBC, the 57 Carver had been sold to two subsequent third-party buyers. RBC also alleged that the appellants had not used the advance made under the Contract to purchase the 57 Carver.

[3] RBC offered to renew the loan with a new maturity date and at a higher interest rate. This offer of renewal was made after RBC became aware of the alleged breaches by the appellants. The renewal offer appears to have been generated by RBC’s administration without the knowledge of the RBC personnel dealing with the problems with the appellants’ security. The appellants appear to have accepted the offer as they continued to make payments pursuant to the Contract at the new interest rate.

[4] The trial judge allowed RBC’s claim.

[5] The appellants first ground of appeal is that the trial judge erred in allowing RBC’s claim in fraud. The appellant explains that, because the loan was renewed after RBC became aware of the issues with respect to the security, it could not advance a claim that it was misled or defrauded. In that regard, they rely on Burrows v. Burke (1984), 49 O.R. (2d) 76 (C.A.), leave to appeal refused, [1985] S.C.C.A. No. 139.

[6] We reject this ground of appeal. As submitted by RBC, its claim was for breach of contract. The trial judge acknowledged that, when it sent its offer to renew the loan, RBC was aware of the fact that the loan proceeds had not been used to purchase the 57 Carver and that the 57 Carver had been seized by a third party. The trial judge found, however, that other than the maturity date and the interest rate, the renewal of the Contract maintained all other terms and conditions including RBC’s right to have security in the form of the 57 Carver. The continuing obligation of the appellants to provide RBC with a security interest in the 57 Carver distinguishes this case from the Burrows decision. The appellants’ continuing failure to provide the security constituted a breach entitling RBC to the judgment it obtained in this case.

[7] The judgment does not, as the appellants allege, rest on the trial judge’s findings and comments regarding the appellants’ misrepresentations that induced RBC to make the loan.

[8] The second ground of appeal is that the trial judge erred in awarding RBC remedies both in contract and in tort. The appellants submit that the trial judge could not both decide that RBC had been induced to enter into the Contract which entitled it to be returned to the position it would have been had the Contract not been entered into and, as well, award RBC damages for breach of that Contract.

[9] We see no error in the trial judge’s award of damages. As we have noted, the claim and recovery in this case were for breach of contract and the damage award was made on that basis.

[10] We acknowledge, however that the judge’s order that the judgment should survive bankruptcy is an error which gave rise to some confusion. The trial judge found that the original loan had been obtained by means of false pretences or fraudulent misrepresentation. He determined, therefore, that an order that the judgment not be released by an order of discharge pursuant to s. 178(1)(e) of the BIA was warranted.

[11] The trial judge erred in making this order as he did not consider the impact that the renewal may have had on the availability of such an order. As noted earlier, at the time of the renewal, RBC was fully aware of the problems with respect to the original loan and the security for that loan. In our view, the trial judge ought to have left this issue to be addressed by the Bankruptcy Court in the event that the appellants are petitioned into, or declare, bankruptcy. We therefore conclude that this provision of the judgment should be set aside. It will be for the Bankruptcy Court to address whether such an order is warranted should the issue ever arise.

[12] In conclusion, the appeal is allowed in part by striking paragraph 4 of the judgment. In all other respects, the appeal is dismissed.

[13] RBC was substantially successful and as a result, we award it costs fixed in the all-inclusive amount of $14,000.

“Paul Rouleau J.A.”

“I.V.B. Nordheimer J.A.”

“J. George J.A.”