ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 2074/13 (Milton)
DATE: 20140429
B E T W E E N:
THE BANK OF NOVA SCOTIA
Mark Hartman, for the Plaintiff
Plaintiff
(Moving Party)
- and -
124155 CANADA INC. TRADING AS MCLENNAN & ASSOCIATES, ALEC MCLEOD MCLENNAN also known as ALEX MCLEOD MCLENNAN and MARY LYNN MCLENNAN also known as LYNN MCLENNAN
Alec McLennan, for the Defendants
Defendants
(Respondents)
HEARD: November 25, 2013, April 17, 2014
REASONS FOR JUDGMENT
Justice D.L. Edwards
INTRODUCTION
[1] Both parties bring summary judgment motions.
[2] The defendant, Alec McLennan, acknowledges entering into a credit agreement for business dated March 14, 2003 (“Credit Agreement”) on behalf of the defendant, 124155 Canada Inc. (“124”), as the primary debtor; on his own behalf personally as guarantor; and under a power of attorney on behalf of Lynn McLennan, as guarantor. A ScotiaLine Visa Card for Business was then issued to 124.
[3] By letters dated March 15, 2013 the plaintiff demanded payment of the balance outstanding on this debt. As the debt was not paid, it commenced this action.
[4] For the following reasons I grant the plaintiff’s motions and dismiss the defendants’ motions.
PRELIMINARY MATTER
[5] On November 14, 2013, Justice Belleghem, sitting as a judge of the Divisional Court on a matter involving Alec McLeod McClellan and Mary Lynn McClellan, ordered that their pleadings be struck in the matter before me, if they did not pay certain costs prior to 10:00 a.m. on November 25, 2013.
[6] These motions began on November 25, 2013 after 10:00 a.m. It was agreed that the cost amount had not been paid.
[7] I interpreted Justice Belleghem’s endorsement to mean that only the pleadings of the individual defendants Alec McLeod McClellan and Mary Lynn McClellan were struck, including their Statement of Defence and evidence, and that the pleadings of the defendant 124 remain, as 124 was not before Justice Belleghem on the other matter.
[8] Oral argument began with the plaintiff's submissions.
[9] It became apparent that the defendants intended to argue that the plaintiff had charged an improper rate of interest.
[10] The plaintiff objected on the basis that this issue had not been pled.
[11] The defendants were given the option to proceed with oral argument excluding the issue of the rate of interest, or alternatively to adjourn the matter in order to amend the pleadings.
[12] The defendants elected to adjourn the proceedings to amend the pleadings. I ordered that the defendants must pay costs in the amount of $1,000.00 prior to amending the pleadings.
[13] The defendant 124 paid the $1,000.00 cost award and amended its Statement of Defence.
[14] Oral argument was completed on April 17, 2014.
BACKGROUND
[15] The plaintiff alleges that:
a. 124 as principal debtor entered into a Credit Agreement and that the individual defendants Alex MacLeod McClellan and Mary Lynn McClellan executed the Credit Agreement guaranteeing the indebtedness of 124.
b. Pursuant to the Credit Agreement the plaintiff issued a Scotia line Visa Card for business to 124, limited to the sum of $50,000.
c. Mary Lynn McClellan executed the Credit Agreement by her attorney Alex McLeod McClellan. The power of attorney is dated the 15th day of March 1996.
d. The Credit Agreement incorporates by reference the Revolving Credit Agreement and the Credit Agreement for business Companion Booklet to which the defendants bound themselves.
e. 124 utilized the Visa Card. The principal outstanding on the loan is $29,175.38. Interest at the rate of 12.5% interest per annum to May 27, 2013 is $26,218.79. This results in a total outstanding as of May 27, 2013 of $55,394.17.
f. By letters dated March 15, 2013 the plaintiff demanded payment from the defendants of the amount due and owing under the Credit Agreement, the Credit Agreement for business Companion Booklet and the Revolving Credit Agreement.
[16] The defendants acknowledge executing the Credit Agreement but deny receiving the Revolving Credit Agreement and the Credit Agreement for business Companion Booklet.
[17] The defendants argue that this claim is statute barred. In the alternative, the plaintiffs submit that the plaintiff has charged an improper rate of interest.
THE LAW RE: SUMMARY JUDGMENT
[18] The Supreme Court of Canada in Hryniak v. Mauldin, 2014 SCC 7, 2014 S.C.C. 7 recently reconsidered when summary judgment may be granted on the basis that there is “no genuine issue requiring trial" as per Rule 20.04(2)(a).
[19] As noted in paragraph 49 of that decision:
There will be no genuine issue requiring trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.
[20] The overarching issue to be answered is:
Whether summary judgment will provide a fair and just adjudication… [T]he standard for fairness is not whether the procedure is as exhaustive as a trial, but whether it gives the judge confidence that she can find the necessary facts and apply the relevant legal principles so as to resolve the dispute.”
[21] The court directs that I must first determine if there is a genuine issue requiring trial based only upon the evidence before me without using the new fact-finding powers set out in the Rules. There will be no genuine issue requiring trial if the summary judgment process provides me with the evidence required to fairly and justly adjudicate the dispute and is a timely, affordable and proportionate procedure.
[22] After completing this review, if there appears to be genuine issue requiring trial I should then determine whether the need for trial may be avoided by using the new powers under Rules 20.04(2.1) and (2.2).
FINDINGS
Guarantors
[23] Pursuant to Justice Belleghem’s endorsement, the pleadings of the guarantors, Alex McLennan and Mary McLennan, including the Statement of Claim and evidence, were struck.
[24] The plaintiff submits that it is entitled to a default judgment against the guarantors. Defence counsel objects to this and submits that the plaintiff must establish a prima facie case.
[25] I find that, in the absence of a Statement of Defence, the plaintiff is entitled to default judgment against the guarantors.
[26] In argument, counsel submitted that the guarantors had a limitation period defence.
[27] Had their defence not been struck, I would have found that the limitation period had not expired with respect to their guarantees.
[28] Defence counsel had argued that certain letters sent out by the plaintiff's counsel and by the plaintiff addressed to the guarantors in May 2008 and May 2009 caused the limitation period to begin. I do not agree.
[29] The letter dated May 8, 2008 is addressed to the individual defendants, Mary McLennan and Alec McLennan c/o 124. The letter refers to the Business Line Visa, but does not state that it is a demand upon guarantors. The letter dated May 14, 2009 is addressed to Alec McLennan and copied to 124 and Alec McLennan and Mary McLennan. It refers to “your account” and is not a demand of a guarantor. These letters are not demands upon guarantors.
[30] Even if these letters constituted a demand upon a guarantor, counsel for the defendants did not provide any case law to support his position that the limitation period began with such a letter.
[31] I find that the limitation period for the guarantors began at the earliest on the same day that the limitation period began for 124, discussed below.
[32] Further, had the Statement of Defence and evidence of the guarantors not been struck, I would have found that there was no genuine issue requiring a trial and would have granted summary judgment to the plaintiff, as my findings regarding 124 are equally applicable to the guarantors.
CORPORATE DEFENDANT
[33] 124’s primary defence is a limitation defence. Counsel submits that the evidence of Mr. McLennan is that 124 made no payments after November 2010. As this action was commenced April 15, 2013, if no payments were made after November 2010, the action would be statute barred.
[34] Mr. McLennan acknowledged that payments were made to the account on June 1, 2011 and June 15, 2011, and that these payments came from 124’s bank account; however, his evidence was that they were misapplied by the plaintiff and should have been applied to another debt. He provided no corroboration to this assertion. In addition, this issue was not raised until after this action had been commenced.
[35] Two payments were made to the account in 2012. One cheque was dated February 29, 2012 in the amount of $350.00 and the other was dated March 31, 2012 in the amount of $350.00. Defence counsel argued that there is no evidence as to who made those payments, and submitted that the bank has an obligation to prove from whom the payment was made in order for the bank to assert that these were payments as contemplated by s. 13 of the Limitations Act.
[36] The plaintiff's counsel submits that there is no obligation upon the plaintiff to provide evidence as to who made the payment. Further, he submits that the case law is clear that a verification clause, particularly in a "non-forgery situation”, protects the bank from any argument or allegations not raised within 30 days of a statement.
[37] I find that the payments in June 2011 constituted an acknowledgment of liability as contemplated by s. 13 of the Limitations Act. The funds came from 124’s bank account. Monthly statements were sent on the account; no objection was made to them until this action was commenced. 124 is bound by the verification provisions of the bank’s documentation.
[38] I also find that payments in February and March 2012 constituted an acknowledgment of liability as contemplated by s. 13 of the Limitations Act. There is no obligation on the plaintiff to provide evidence from whom the payments were made. As with the June 2011 payments, monthly statements were sent and no objection was made until this action was commenced.
[39] As the action was commenced April 15, 2013, it is not statute barred.
INTEREST
[40] The defence argued that the plaintiff had charged an improper interest rate. Defence counsel submitted that, for the plaintiff to succeed in its argument following default it was entitled to raise the interest rate, the plaintiff must prove that the defendants received a copy of the Credit Agreement for Business, the Credit Agreement for business Companion Booklet and the Revolving Credit Agreement.
[41] The plaintiff argued that, following two consecutive months of 124 failing to make the required payments, it was entitled to change the interest rate charged from the preferred rate to the standard rate.
[42] The defence admitted that all defendants had executed the Credit Agreement. That agreement provided:
This Credit Agreement, together with the Credit Agreement for business Companion Booklet, all certifications and consents provided in any application for any banking services, and any schedules attached hereto, is the complete agreement between you and the bank for the loans described here. Security for all loans is set out under heading security.
[43] The section headed personal guarantees contains the following:
By signing this Credit Agreement, the guarantor agrees to be bound by this agreement and the Credit Agreement for business Companion Booklet and is responsible for the repayment of the customer's obligation to the bank, to the amount noted below, the guarantor also acknowledges having received and read the Credit Agreement for business Companion Booklet, in particular, section 13, which outlines the guarantor's obligations. (emphasis added)
[44] The section headed Signatures, which is the area where 124 signed, states: "you have received a copy of the Credit Agreement for business Companion Booklet which you have read and understood before signing this credit agreement." (emphasis added)
[45] Page 14 of the Credit Agreement for business Companion Booklet has the heading “Revolving Credit Agreement” and the following:
You agree to be bound by the terms of the revolving credit agreement which is set out on the back of the Scotiabank credit card carrier to which your ScotiaLine VISA card for business will be attached when the card is issued and delivered to you by us.
[46] The Revolving Credit Agreement states with respect to interest:
For both cards and credit line, we will tell you the applicable interest rates. We may charge interest rates from time to time in accordance with applicable law. If your credit account has standard and preferred rates, to qualify for the preferred interest rate, you must repay your credit account in accordance with its terms, otherwise, the standard interest rate will apply. If you are paying the standard interest rate, the interest rate will revert to the preferred interest rate once you have continuously complied with your obligations under this agreement for a period of time to be determined by us... (emphasis added)
[47] 124 failed to make the minimum payment due as noted on the January 27, 2006, February 27, 2006 and March 27, 2006 statements. The January and February statements warned 124 that in order to protect its preferred interest rate it needed to pay the arrears. The March 2006 statement indicated that the interest rate would increase to the standard interest rate on the next statement date. In fact, the bank did not raise the interest rate until the May 2006 statement.
[48] Mr. McLennan is a lawyer. He executed a document on behalf of himself personally, as signing officer for 124 and as attorney for Mrs. McLennan, in which he had acknowledged having received and read the Credit Agreement for business Companion Booklet. He cannot now assert that he did not receive or read the document.
[49] I find that the plaintiff had the right to increase the interest rate from the preferred interest rate to the standard interest rate in accordance with the agreements.
Bank statements
[50] The defence argued that 124 had not received monthly statements. Counsel noted that the address on the January 2006 through 2009 statements had the current address of 124, rather than the address at which 124 was located at that time.
[51] At the top of those statements the word “reprinted” can be found. From 2009 until February 2011 the correct address is indicated on the statements and these statements are not noted as “reprinted”. I draw the logical inference that the earlier statements were reprinted, and when this occurred, the current address of 124 was inserted.
[52] I also note that at no time until after the action was commenced did 124 bring to the bank's attention that it was not receiving monthly statements.
FORBEARANCE AGREEMENT
[53] Mr. McLennan alleged in his affidavit that the plaintiff agreed to accept payment in an indeterminate amount, on the basis of an indeterminate frequency and over an indeterminate period of time.
[54] I find that there is no enforceable oral collateral agreement. It is incomplete and lacks agreement in respect of essential provisions. It is inconsistent with, and contradicts, the terms of a written agreement. It also makes no commercial sense.
OTHER ISSUES
[55] The defence raised other issues in the Statement of Defence and the factum. These were not pursued in oral argument and I have treated them as abandoned. These issues included Non Est Factum, Issue Estoppel/Res Judicata, Duty to Inform, and Duty of Care. Had they been pursued, I would have found that there was no evidence or law to support such assertions.
CONCLUSION
[56] I am satisfied that I am able to make the necessary findings of fact; apply the law to those facts; and, in a proportionate, expeditious and cost effective manner, achieve a just result through this summary judgment motion. I find that there is no genuine issue requiring a trial.
[57] I grant the plaintiff's motion for summary judgment on its claim as set forth in the Statement of Claim and I dismiss the defendants’ counterclaim.
COSTS
[58] The parties may provide cost submissions not to exceed three pages (not including any offers to settle or bill of costs). Counsel for the plaintiff shall provide his submissions within five days. Counsel for the defendants shall provide his submissions within five days thereafter, with reply submissions, if any, within three days thereafter.
Edwards J.
Released: April 29, 2014
COURT FILE NO.: 2074/13 (Milton)
DATE: 20140429
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
THE BANK OF NOVA SCOTIA
- and -
124155 CANADA INC. TRADING AS MCLENNAN & ASSOCIATES, ALEC MCLEOD MCLENNAN also known as ALEX MCLEOD MCLENNAN and MARY LYNN MCLENNAN also known as LYNN MCLENNAN
REASONS FOR JUDGMENT
Edwards J.
Released: April 29, 2014