COURT FILE NO.: 17-74403 DATE: 2020/04/22 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

ROYAL BANK OF CANADA Plaintiff – and – DANIEL BEDARD and COLLEEN BEDARD Defendants

Counsel: G. Douglas, for the Plaintiff L. Levencrown, for the Defendants

HEARD: September 23, 24, 25 and 27, 2019 and October 1, 2019, at the City of Ottawa

Reasons for Decision

KANE J.

[1] The Royal Bank of Canada (“RBC”) seeks:

a. a finding that RBC advanced loan proceeds pursuant to a Conditional Sales Contract as to the defendants (“the Bedards”) purported purchase of a 2003, fifty-seven-foot Carver motor boat (the “57 Carver”) based on the false pretenses and fraudulent misrepresentations by the Bedards; and

b. judgment against the defendants jointly and severally, for $309,035 being the balance of the RBC loan to the Bedards (the “RBC Loan”), plus pre-judgment and post-judgment interest thereon at the rate of 7.16% per annum or alternatively, pre and post-judgment interest pursuant to s. 128 of the Courts of Justice Act, R.S.O. 1990, c. C. 43, together with costs on a substantial indemnity scale.

[2] The quantum of RBC’s above claim includes:

a. $264,740.97, being the principal balance of RBC’s loan to the defendants as of September 1, 2019;

b. per diem interest of $51.93 on the above unpaid principal loan balance since September 1, 2019; and

c. RBC’s legal costs of $37,633.04 in a prior proceeding (the “Spiegel Application”) as to the competing priority claims regarding entitlement and ownership of the 57 Carver.

[3] Mr. and Mrs. Bedard deny RBC’s claims and seek judgment by counterclaim against RBC for all monthly loan payments they have made to RBC.

[4] In the alternative, the Bedards allege that they are current in making all monthly payments to the RBC Loan and that RBC is contractually obligated to continue to extend such loan to them until its 2022 maturity date.

[5] The issues in this proceeding relate to the Bedards’ purchase of several motor boats from Crate Marine Sales Limited (“Crate”). Crate purchased, sold and serviced new and used motor boats at several of its Ontario marinas.

[6] The motor boats in issue are:

a. a 2007 fifty-five-foot Marquis (the “55 Marquis”) purchased by the Bedards from Crate in approximately 2007 or 2008;

b. a new 72-foot Marquis (the “72 Marquis”) purchased by the Bedards from Crate on March 29, 2012; and

c. the 2003 57 Carver, allegedly purchased by the Bedards from Crate on March 31, 2012.

[7] In February and March of 2012, the Bedards agreed to terms of their purchase of the 72 Marquis from Crate on March 29, 2012.

[8] The Bedards traded-in their 55 Marquis to Crate against their purchase from Crate of the 72 Marquis.

[9] The Bedards allege that on March 31, 2012, they purchased from Crate and became the owners of the 57 Carver and that the RBC Loan proceeds in issue were paid to Crate as part of their purchase price of the 57 Carver.

[10] RBC alleges that the Bedards, with the assistance of Crate, fraudulently misrepresented the purpose and use of the RBC Loan as being for their purchase of the 57 Carver however, such loan proceeds were intended and used by them for other purposes, namely that $300,000 of the $427,288 RBC Loan proceeds were applied towards their purchase price of the 72 Marquis and the remaining $127,288 was lent by the Bedards to Crate.

[11] RBC alleges that the Bedards fraudulently misrepresented to RBC that they had purchased and owned the 57 Carver, to RBC, in order for the Bedards to post the 57 Carver to RBC as security and thereby qualify and obtain the $427,288 RBC Loan allegedly to pay that $427,288 towards the $599,900 purchase price of the 57 Carver purchase price, when such loan proceeds in fact were paid to Crate in payment of the $300,000 balance due on the Bedards’ purchase price of the 72 Marquis, the $127,288 balance was lent to Crate and with their intention that the RBC Loan amount would be repaid to RBC upon Crate’s sale of the 55 Marquis and/or the 57 Carver.

[12] The central factual issues are whether the Bedards intended to, purchased and became the owners of the 57 Carver and obtained and used the $427,288 RBC Loan proceeds in payment of most of that boat’s $599,900 purchase price, or whether the Bedards, with the assistance of Crate, prepared the 57 Carver “purchase” documentation in order to represent their purchase thereof and post that boat as security to obtain the RBC Loan and used such loan proceeds for other purposes.

[13] Determination of such issues requires examination and determination of the related transactions and facts regarding the 55 Marquis and the 72 Marquis.

Analysis

[14] The three boats were traded-in or purchased by the Bedards with Crate in March 2012.

[15] The 57 Carver at all relevant times was located at Crate’s marina in Keswick, on Lake Simcoe. The Bedards lived in Pembroke.

[16] The undisputed evidence is that:

a. the Bedards owned and operated the 55 Marquis for several years for several years prior to March 2012;

b. on March 29, 2012, Crate and Mr. Bedard agreed to terms of the Bedards’ $2,800,000 purchase of the 72 Marquis, against which the Bedards traded-in their 55 Marquis for a credit initially of $750,000. Upon learning that the Bedards owed some $1,200,000 against the 55 Marquis, its trade-in value on the 72 Marquis became $750,000 plus 50% of any higher sale proceeds received on the sale of the 55 Marquis;

c. the sale of the 72 Marquis to the Bedards required that Crate first purchase the 72 Marquis to permit it to then sell it to the Bedards. In March 2012, Crate did not have the financial capacity to purchase the 72 Marquis for re-sale to the Bedards and therefore obtained the Bedards’ agreement that they would borrow money needed by Crate to permit its purchase of the 72 Marquis for re-sale to the Bedards on the understanding that the Bedards’ loan would be paid upon Crate’s sale of the 55 Marquis;

d. on March 31, 2012, Crate and the Bedards signed a Marine Purchase Contract (the “Purchase Contract”) and a Marine Conditional Sale Contract (the “Conditional Contract”) pursuant to which the Bedards allegedly purchased the 57 Carver for $599,000, of which, $427,288 was to be borrowed by the Bedards from RBC and $250,000 was to be paid by the Bedards as deposit or cash down payment. On March 31, 2012, the Bedards also signed a Notice of Insurance Coverage and provided proof to RBC of the insurance coverage they had obtained for the 57 Carver which indicated themselves as purchasers/owners;

e. on April 4, 2012, RBC advanced the $427,288 RBC Loan proceeds to Crate on the basis of the Bedards’ purported purchase of the 57 Carver;

f. the Conditional Contract signed as to the purported purchase of the 57 Carver contains the terms of the RBC Loan which state that such $427,288 loan was borrowed to pay that amount of the 57 Carver’s $599,299 purchase price, that title remained with the vendor until payment of the RBC Loan and that Crate, as vendor, transferred its interest therein as to the amount borrowed thereunder to RBC;

g. on April 10, 2012, ten days after the Bedards’ alleged purchase thereof, Crate sold the 57 Carver to MP Accounting for $580,000 as to which MP Accounting received a $500,000 trade-in allowance for a boat it then owned;

h. on April 13, 2012, RBC having advanced the RBC Loan proceeds, registered its security interest in the 57 Carver pursuant to that Conditional Sales Contract under the Personal Property Security Act, R.S.O. 1990, c. P.10 (the “Act”);

i. the annual rate of interest and term of the March 31, 2012 RBC Loan was 5.74% and five years, maturing on March 31, 2017;

j. on June 3, 2014, Crate sold the 57 Carver to Mr. Spiegel whose company, Mr. Crate testified, had lent considerable money to Crate over the years;

k. MP Accounting sold the 57 Carver back to Crate in July 2014 and registered a security interest thereon as to Crate’s obligation under a loan agreement to MP Accounting;

l. in November 2014, Crate filed a notice to make a bankruptcy proposal which was unsuccessful. An interim receiver was appointed. Crate was then petitioned into bankruptcy by a corporation controlled by Mr. Spiegel in December 2014;

m. the Bedards made all monthly payments on the RBC Loan commencing in April 2012 to April 2015, and did not advise RBC during those years of any issues as to the 57 Carver, their ownership of that boat or RBC’s security interest therein;

n. RBC received notice from the Bedards’ legal counsel in April and June 2015 that there were competing claims to the 57 Carver which were to be determined in a court application brought by Mr. Spiegel;

o. on May 2, 2016, RBC notified the Bedards that they had breached the terms and conditions of the Conditional Contract, namely their promise therein that the 57 Carver would only be used for their personal use, that they would not part with possession or control of that boat or sell or dispose of it without RBC’s consent, that any such breaches constituted default and that RBC accordingly demanded payment of the RBC Loan and related litigation costs;

p. RBC erred in sending the Bedards a letter on March 1, 2017, offering to amend the RBC Loan by extending the maturity date of that loan for a further five years at a higher interest rate, unless the Bedards chose to repay the RBC Loan which matured on March 31, 2017;

q. the Bedards did not pay the RBC Loan by March 31, 2017 and allowed RBC to continue to deduct the monthly RBC Loan payments from their account at the amended higher interest rate from April 1, 2017 onward;

r. on September 18, 2017, RBC notified the Bedards that they had breached the terms and conditions of the Conditional Contract including their failure to take and retain possession or control of the 57 Carver, to promptly notify RBC of any changes in the information contained in the Conditional Contract and/or any claim involving such boat and that RBC, based on such acts of default, demanded payment of the RBC Loan balance and related litigation costs.

Purchase of 72 Marquis

[17] In February 2012, Mr. Bedard decided to buy the 72 Marquis against which the defendants traded-in their 55 Marquis. Mr. Bedard’s then stated position to Crate was that he did not want to own two boats.

[18] The 72 Marquis was then located in Florida. It was to be purchased by Crate for its resale to the Bedards and brought to Ontario.

[19] There are three Marine Purchase Contracts as to Mr. Bedard’s purchase of the 72 Marquis from Crate. The first version signed by Mr. Bedard and the second version signed by Crate, contain identical information as to the purchase price of $2,350,000, a $750,000 trade-in allowance for the 55 Marquis, a $10,000 deposit and a $1,798,000 balance due on delivery.

[20] The third version signed only by Crate contains a higher purchase price of $3,717,588, a higher trade-in value for the Marquis of $1,200,000, a higher amount of HST, but has the same $10,000 deposit and the same $1,798,000 payable on delivery.

[21] BOM on March 13, 2012 agreed to lend the Bedards $1,498,000 on their purchase of the 72 Marquis on the basis that the Bedards were to pay the remaining $300,000 of the $1,798,000 payable on closing from their own resources.

[22] The evidence indicates that the Bedards then owed more than $750,000 on the 55 Marquis and that their debt on that boat was approximately $1,200,000. Mr. Bedard’s Spiegel Application affidavits state he believed the value of the 55 Marquis in March 2012 was $1,200,000, but he agreed to the lower $750,000 trade-in value for the 55 Marquis because he wanted to buy the 72 Marquis.

[23] Crate subsequent to March 2012 was unable to sell the 55 Marquis quickly. That delay and its trade-in value against the 72 Marquis are related to the Bedards’ payment of their purchase price of the 72 Marquis and the RBC Loan.

[24] It appears that the $300,000 balance of the Bedards’ purchase price of the 72 Marquis was paid to Crate as there is no dispute that the Bedards purchased and became the owners of the 72 Marquis. The issue is whether the Bedards paid that $300,000, 72 Marquis purchase price balance out of the RBC Loan proceeds or by other means.

[25] RBC alleges such $300,000 balance of the 72 Marquis purchase price was paid out of the proceeds of the RBC Loan which RBC lent and advanced towards the Bedards’ alleged purchase at the same time of the 57 Carver. The Bedards dispute RBC’s theory and allege the $427,288 RBC Loan proceeds were borrowed and applied solely towards their purchase of the 57 Carver.

[26] On the defendants’ version of events as of March 29, 2012, they had traded-in their five-year old 55 Marquis for $750,000, which is later increased by 50% of any higher sale proceeds obtained, on their $2,800,000 purchase of a new 72 Marquis, and at the same time were also buying the nine-year old 57 Carver, despite Mr. Bedard’s statement to Crate that he wanted to own one and not two boats.

[27] Documentation between the Bedards and Crate in March 2012 and the testimony of Mr. Crate and Mr. Bedard, indicates that following the Bedards’ purchase of the 72 Marquis, Crate owed the Bedards $127,288, interest thereon and the Bedards’ cost to insure the 57 Carver. Although not conclusive, $127,288, plus the $300,000 72 Marquis purchase price balance which according to BMO was to come from the Bedards’ own resources, equals the $427,288 advanced under the RBC Loan for their alleged purchase of the 57 Carver.

[28] Crate confirmed its agreement with the Bedards to the terms of the 72 Marquis sale and purchase by letter dated March 29, 2012. That letter deals with the 72 Marquis, the 55 Marquis and the 57 Carver and states:

a. Crate will honor their agreement as to the 72 Marquis purchase;

b. Crate will pay the monthly interest on the extra $127,288 that Mr. Bedard was borrowing for Crate;

c. Crate will pay Mr. Bedard the $127,288 with interest, upon sale of the 55 Marquis; and

d. Crate will refund Mr. Bedard the total cost for insuring the Carver 57.

[29] The obvious questions related to these undertakings by Crate in this letter include:

a. why were the Bedards, as purchasers of the 72 Marquis and allegedly of the 57 Carver, borrowing $127,288 for Crate;

b. from whom were the Bedards borrowing the extra $127,288 for Crate;

c. if the Bedards were borrowing the extra $127,288 for Crate, is that amount from the RBC Loan proceeds advanced towards the Bedards’ purchase price of 57 Carver and why was Crate in this letter agreeing to pay that amount back to the Bedards; and

d. why was Crate agreeing to pay the Bedards’ cost to insure the 57 Carver which they allegedly had just purchased from Crate?

[30] Mr. Bedard’s testimony in relying upon their March 31, 2012 Sale Contract as evidence of their ownership of the 57 Carver does not answer the above questions.

[31] One possible answer to the above questions is that the Bedards made an agreement with Crate that in order to and as part of their purchase of the 72 Marquis, they would borrow $427,288 from RBC as reflected in that Conditional Contract, $300,000 of which would be used to pay their $300,000 72 Marquis purchase price balance, with the remaining $127,288 borrowed from RBC to be lent to Crate until sale of the 55 Marquis and that in order to justify the basis and obtain that RBC Loan, Crate and the Bedards would sign and give RBC false documentation representing that the Bedards were purchasing the 57 Carver for which they needed the RBC Loan and to use the 57 Marquis as security for the RBC Loan until payment of that loan upon Crate’s sale of the 55 Marquis or the 57 Carver. This scenario is consistent with Crate agreeing to refund the Bedards only $127,288 plus their cost to insure the 57 Carver and not the $300,000 which equaled their 72 Marquis purchase price balance.

[32] Mr. Crate testified that the Bedards agreed to purchase the 57 Carver and that Crate received the $427,288 from RBC advanced to purchase that boat. He testified however that sale of the 57 Carver to the Bedards did not proceed as the Bedards failed to take delivery of the 57 Carver and that Crate therefore held the RBC Loan proceeds on its books to the credit of the Bedards.

[33] Mr. Crate acknowledged:

a. the Bedards’ purchase and ownership of the 72 Marquis;

b. his company’s receipt of $427,288 from the RBC Loan; and

c. his company’s liability to the Bedards of $127,288, plus interest and the Bedards’ cost to insure the 57 Carver.

RBC Loan and 57 Carver

[34] Motor boats, particularly those of the size and value of the 57 Carver, normally are registered by the owner with the relevant public transportation authority which in this case was the Ontario Boat Registry. There is no evidence the Bedards ever registered their ownership of the 57 Carver with any such public authority.

[35] What is surprising and creates doubt as to the Bedards’ alleged purchase of the 57 Carver includes Mr. Bedard’s testimony that:

a. he and his wife agreed to and purchased the 57 Carver on March 31, 2012, sight unseen, for $599,299;

b. that they never saw the 57 Carver they allegedly purchased for some $599,299 between March 2012 until the first time which was perhaps in the late summer of 2014;

c. the Bedards never used the 57 Carver at any time after their alleged purchase thereof;

d. the Bedards immediately upon their alleged purchase of the 57 Carver never took possession of it and agreed that Crate would continue to keep it in its inventory and continue its listing for sale, as had been its status before the Bedards’ alleged March 31, 2012 purchase thereof; and

e. the Bedards made all monthly payments on the RBC Loan which they allegedly borrowed and used for their purchase of the 57 Carver despite Crate’s sale of the 57 Carver 10 days later on April 10, 2012 to MP Accounting, which sale the Bedards did not notify RBC about between 2012 and 2014.

[36] Mr. Bedard and Mr. Crate each testified that the Bedards agreed to “floor plan” part of the trade-in value of the 55 Marquis against their purchase of the 72 Marquis.

[37] Mr. Crate explained this “floor planning” by the Bedards in his testimony as his company’s lack of financial capacity to pay for the 55 Marquis trade-in value portion of the 72 Marquis purchase price for its resale to the Bedards. He testified Crate agreed to accept the 55 Marquis as a trade-in but the Bedards were required and agreed to borrow and lend Crate some of the 55 Marquis trade-in value until the subsequent sale of the 55 Marquis and receipt of its sale proceeds, upon which Crate would pay the Bedards the amount of their interim loan.

[38] Mr. Bedard testified that Crate needed financial assistance in March 2012 as to their purchase of the 72 Marquis, that the Bedards agreed to financially assist Crate by lending it $300,000 until Crate was able to sell the 55 Carver, however Crate unilaterally then increased that amount it required to $427,288, which Mr. Bedard reluctantly agreed to borrow from RBC and lend to Crate, provided he was given security for repayment of that RBC Loan.

[39] The RBC Loan and the Bedards’ alleged purchase of the 57 Carver based on the above testimony of both men, is directly related to the Bedards’ purchase of the 72 Marquis, Crate’s need for the Bedard’s to borrow and lend it sufficient funds to permit Crate to purchase the 72 Marquis for resale to the defendants and the Bedards obtaining the $427,288 RBC Loan.

[40] On March 31, 2012 Crate and the Bedards signed a Marine Purchase Contract as to their alleged purchase of the 57 Carver (“the Purchase Contract”) which states that the purchase price is $599,000, plus $77,908 for HST, of which $250,000 would be paid by deposit leaving a balance payable on delivery of $427,288. That Purchase Contract states that title of the 57 Carver will pass upon the vendor’s receipt of full payment.

[41] On March 31, 2012, Crate and the Bedards also signed the Marine Conditional Contract (the “Conditional Contract”) as to their purchase of the 57 Carver which was assigned to RBC. That Conditional Contract:

a. recites a purchase price of $599,299, taxes of $77,908, a total purchase price of $667,288 and a $250,000 “cash down payment”;

b. states that $427,288 of the $599,299 purchase price of that boat is to be financed over five years with RBC;

c. states that title and ownership of the 57 Carver will not pass on its delivery to the Bedards and will remain with the vendor until payment of that loan;

d. states that Crate assigns its interest in that contract to RBC; and

e. contains requirements that the Bedards:

• will defend the 57 Carver from claims of any other;
• will only use the 57 Carver for personal use and to not part with their possession or control thereof, nor sell any interest therein without consent of RBC; and
• are required to promptly notify RBC of any change to the information therein or of any claim or litigation in relation to the 57 Carver.

[42] The Conditional Contract specifies the following events of default would entitle RBC to seek immediately payment of the RBC Loan:

a. failure to perform any obligation in the contract;

b. breach of any promise in such contract;

c. if any contractual information provided proves to be false; or

d. RBC has reasonable cause to believe the 57 Carver was in jeopardy.

[43] RBC as stated on April 4, 2012 advanced the RBC Loan proceeds to Crate towards their alleged purchase of the 57 Carver and registered its security interest on that 57 Carver on April 13, 2012 under the Act.

[44] Mr. Bedard filed two affidavits in the Spiegel application. Several of his statements on those affidavits lend support to RBC’s position that the RBC Loan proceeds were borrowed and used for purposes other than the alleged purchase of the 57 Carver.

[45] In his first affidavit in the Spiegel application dated October 30, 2015, Mr. Bedard states:

a. that Crate received the 55 Marquis as a trade-in and agreed to pay the Bedards upon its sale 50% of any sale proceeds in excess of $750,000, plus $127,288;

b. without his knowledge, Crate sold the 55 Marquis and did not pay the Bedards the promised $127,288;

c. that Crate without the permission and knowledge of the Bedards sold the 57 Carver to Mr. Spiegel.

[46] In his affidavit in the Spiegel application dated November 26, 2015, Mr. Bedard states:

a. that in March 2012, Crate advised him that it had cash flow issues related to the sale of the 72 Marquis given that the 55 Marquis was not yet sold, that Crate needed cash and made a proposal to satisfy the amount that remained owing for the trade-in of the 55 Marquis;

b. that Crate thereupon proposed that the Bedards purchase the 57 Carver and that Crate would credit the defendants $250,000 on account of their trade-in of the 55 Marquis, towards their purchase of the 72 Marquis;

c. the Bedards purchased and became the owners of the 57 Carver and it became collateral for the defendants’ agreement to Crate’s proposal which included a $250,000 credit towards their 72 Marquis purchase and in order to provide the Bedards with some immediate compensation for their trade-in of the 55 Marquis;

d. the $427,288 RBC Loan financing would provide Crate with the injection of funds it needed;

e. that Crate agreed to compensate the Bedards as Crate still owed them $127,288 for the trade-in and half of any sale proceeds of the 55 Marquis in excess of $750,000;

f. that he agreed the defendants never took possession of the 57 Carver;

g. that Mr. Spiegel’s allegation that the Bedards created a transaction on paper to purchase the 57 Carver in order to obtain the RBC Loan financing and use such loan proceeds to pay the balance of the purchase price for a much larger boat and more expensive boat was essentially true; however the Bedards did not “create a transaction” but rather agreed and executed a legitimate and binding transaction for the above reasons; and

h. he denied authorizing Crate to sell the 57 Carver.

[47] The Bedards filed a claim to the 57 Carver in the Crate bankruptcy proceedings. The Trustee required proof of their payment of the $250,000 deposit/down-payment thereon. The Trustee subsequently rejected the Bedards’ ownership claim to the 57 Carver.

[48] Mr. Bedard in this trial testified that:

a. the defendants paid the 57 Carver $250,000 deposit, not by paying such amount on March 31, 2012, but that amount was credited as paid as a result of their trade-in value of the 55 Marquis and that Crate owed the Bedards a lot of money, however he could not say how much Crate owed the Bedards;

b. he did not know how much Crate sold the 55 Marquis for;

c. after signing the 57 Carver Sale Contract and the Conditional Contract which contained the RBC Loan of $427,288, he was surprised as his original agreement with Crate was that the RBC Loan was to be $300,000, not $427,288 or $127,288 higher as borrowed and advanced, so he communicated that complaint to Crate which thereupon sent its above March 29, 2012 letter promising to pay the Bedards the $127,288, their monthly interest cost thereon and their cost to insure the 57 Carver;

d. the $300,000 deposit requirement on purchasing the 72 Marquis, cited by BOM in agreeing to lend $1,498,000 for that purchase, was “paid” through the Bedards’ trade-in value of their 55 Marquis;

e. Crate paid the Bedards some $60,000 after April 2012 in partial reimbursement of their monthly RBC Loan interest cost and their cost to insure the 57 Carver;

f. that he authorized Crate to sell the 57 Carver; and

g. Crate had agreed to pay $427,288 to RBC upon the sale of the 57 Carver and/or the 55 Marquis.

[49] Mr. Bedard’s testimony that:

a. the defendants upon their purchase authorized Crate to sell the 57 Carver, contradicts his contrary statement in his first above affidavit; and

b. the Bedards never took possession of the 57 Carver, constituted an event of default under the RBC Loan.

[50] Mr. Bedard’s above second affidavit and his trial testimony has the defendants receiving a $250,000 “credit” on their 55 Marquis trade-in value against their 72 Marquis purchase price balance, and a credit in the same amount which was the same balance amount due on closing on their purchase of the 57 Carver. These were not complicated sale and purchase transactions. The alleged purchase of the 57 Carver would increase the amount that the Bedards were required to pay Crate on the purchase of two boats. The explanation of these dual crediting of $250,000 is illogical and not supported by the evidence.

[51] Mr. Bedard introduced no documentation in support of past debt in excess of $127,288 he alleged Crate in March 2012 owed the Bedards.

[52] Mr. Bedard acknowledged he wrote the hand-written comments at the foot of the 57 Carver Conditional Contract, which contract includes the amount and borrowing terms of the RBC Loan. Mr. Bedard’s written comments state:

a. Interest per month $1,810;

b. HST $77,908; and

c. Crate’s Part of Loan - $127,288, plus tax and interest.

[53] Mr. Crate’s testimony supports the position of RBC. He testified that:

a. the Bedards were supposed to but never took delivery of the 57 Carver and that sale to the Bedards therefore was never completed;

b. he did not know whether the Bedards paid the $250,000 deposit on their purchase of the 57 Carver as stipulated in the Sale Contract and Conditional Contract;

c. the Bedards left the 57 Carver with Crate in its inventory to sell and Crate as a result had money it received for the 57 Carver’s sale to the Bedards on its books;

d. the defendants’ account with Crate on their purchase of the 72 Marquis was credited with all monies received by Crate including the $1,498,000 loan advance from BOM and the RBC Loan proceeds of $427,288 it received from RBC;

e. the defendants did not want to own two boats at the same time;

f. the 55 Marquis was sold by Crate and its, unidentified, proceeds were credited by Crate to the Bedards’ purchase cost to buy the 72 Marquis; and

g. $127,288 is the balance owed by Crate to the Bedards as indicated in his March 29, 2012 letter to the defendants.

[54] Mr. Crate in response to how the Bedards paid the $300,000 balance of the 72 Marquis purchase price that BMO required be paid from their own resources, stated that amount was paid by the defendants’ purchase of the 57 Carver. What Mr. Crate is referring to is Crate’s receipt of the RBC Loan proceeds which includes the $300,000 amount which, unlike the $127,288 portion, the Bedards did not thereafter seek repayment of from Crate.

[55] A bona fide purchaser of a boat does not need the vendor’s permission, or to be allowed as testified, to grant a security interest in the goods sold to the purchaser’s lender which advanced part of the purchase price. The fact that Crate “allowed” the 57 Carver to be used for that purpose suggests the Bedards did not in fact purchase the 57 Carver, which sale Mr. Crate in any event testified was never completed as the Bedards never took possession of that boat.

[56] There is no evidence to support why Crate as vendor of the 57 Marquis to the Bedards would be responsible for and agreed to reimburse the Bedards for:

a. the $127,288 portion of the Bedards’ $427,288 RBC Loan, allegedly borrowed and applied against the purchase cost of the 57 Carver;

b. the Bedards’ monthly RBC Loan interest cost; and

c. the Bedard’s HST liability cost to purchase the 57 Carver.

[57] In paragraph 4 of their Statement of Defence, the Bedards allege that they agreed to purchase the 57 Carver, that Crate was made to pay the taxes on that boat and requested the defendants to pay the taxes and would give the defendants security in a second boat. The defendants allege they paid such taxes.

[58] The Bedards’ response to RBC’s demand for particulars regarding that paragraph 4 of their defence alleges the following:

a. that Crate was required to pay the taxes on an invoice when the purchase was made for a boat (72 Marquis) brought in out of country;

b. the defendants agreed to pay the taxes for the boat they traded in (55 Marquis);

c. Crate was requested to pay the taxes for the new boat the defendants were purchasing that was being brought in out of country (72 Marquis) and that its payment of such taxes given its current cash flow limitations, would put Crate out of business and Crate could not afford to pay the related fees required to bring the boat (72 Marquis) into the country;

d. Crate therefore asked whether the defendants, until the sale of the defendants’ boat brought in on trade (the 55 Marquis toward their purchase of the 72 Marquis) and if Crate gave the defendants the 57 Carver, would borrow from RBC in order for Crate to get the funds to pay the related fees required to bring the boat (72 Marquis) into the country;

e. that Crate would pay their full loan with RBC when either the trade-in boat (55 Marquis) or the 57 Carver were sold, since Crate took the full proceeds from the defendants’ loan with RBC;

f. the defendants agreed to take the loan out with RBC, and a bill of sale was made up only for the proper information on the 57 Carver that RBC used for security;

g. the boat (the 57 Carver) was left in the (Crate) yard to be sold by Crate and remained there for two years. (emphasis and bracketed words added).

[59] Vendors, particularly those struggling to remain in business, customarily do not “give” a $599,299 boat away. Allowing such an asset, while retaining ownership thereof under a conditional sales contract, to be used as collateral security in order to borrow money is a more likely scenario.

[60] The defendants’ allegation that the $427,288 RBC Loan was for and applied on their purchase of the 57 Carver is contradicted by:

a. their above answers to the demand for particulars which acknowledges that part of RBC Loan proceeds was used to pay costs related to the 72 Marquis; and

b. the statements in Crate’s March 29, 2012 letter to Mr. Bedard that Crate would pay him $127,288 upon the sale of the 55 Marquis and would refund Mr. Bedard’s total cost of insuring the 57 Carver.

[61] Crate’s undertaking on March 29, 2012 to reimburse $127,288 to Mr. Bedard upon the sale of the 55 Marquis, would reduce that boat’s trade-in value and sale proceeds credited against the purchase price of the 72 Marquis. That $127,288 is in excess of the $300,000 purchase balance the Bedards agreed with BOM to advance from their own resources on their purchase of the 72 Marquis.

[62] Application of that $127,288 to pay the purchase costs of the 72 Marquis, reduced by that amount the $427,288 portion of the 57 Carver purchase cost loaned by RBC which was:

a. “payable on delivery” pursuant to its Purchase Contract; and

b. the “balance to be financed by RBC” pursuant to its Conditional Sales Contract.

[63] The Bedards as indicated purchased and took possession of the 72 Marquis. The evidence indicates that they did not as contracted use the RBC Loan proceeds including the $127,288 lent to Crate, to pay the $427,288 balance due on purchase of the 57 Carver, which they never exercised possession of and never saw before or during the next three boating season (2012-2014).

[64] Crate by November 2014 had a Receiver involved and was on the verge of bankruptcy. Mr. Bedard in cross-examination on his affidavits in the Spiegel application incorrectly stated that:

a. he did not communicate with Steven Crate between July and December 2014; and

b. he never demanded payment of $127,288 from Crate other than his claim for that amount filed in the Crate bankruptcy.

[65] Contrary to the above denial of communications, Mr. Bedard and Steven Crate had a series of email exchanges on November 19 and 25, 2014, in which Mr. Bedard stated:

a. that Mr. Crate should bring some money and post-dated cheques to their meeting that day to pay off the loan in Mr. Bedard’s name, which Mr. Bedard had paid the monthly principal and interest payments on “for you and I”;

b. that he had paid to insure a boat “in your fleet”; and

c. in response to Mr. Crate’s statement that his sister would prepare an accounting, Mr. Bedard replied such accounting need only concern what they had in writing, “the $127,000 you needed. The interest. And the insurance on the boat you have in stock or should have.”

[66] The reference in November 2014 to the 57 Marquis as being a “boat in your fleet” or in its “stock”, challenges the Bedards’ alleged March 2012 purchase of that boat.

[67] On November 25, 2014, Mr. Crate emailed Mr. Bedard and asked “that Mrs. Bedard prepare and send him the cost of borrowing for this past year. I have an idea on the 127 so it is all done. …. We need to have it all clean before the shit hits the fan.”

[68] Mr. Bedard replied: “Steve if they are moving in on you. You are better off telling them I own the boat and we will clean it up after the fact.” Mr. Bedard on discovery confirmed he here was referring to the 57 Carver. Creditors presumably did not need to be “told” in November 2014 that the Bedards owned the 57 Carver if that was and had been the case since March 2012.

[69] Fifteen minutes later, Mr. Bedard emailed Mr. Crate and stated: “Here is what you owe …. to December 2014. If not paid by then I need postdated cheques for one year at a time. Your loan to me is $127,288.15 principal only. Insurance for one year, 4,000.00 with intrust (interest). Intrust (interest) on loan for 17 months … to December 2014 is 60, 277.41. Total bill owing to December 2014, not counting intrust (interest) for using my money is 191,565.56.” (bracketed words added)

[70] On discovery examination in this action, Mr. Bedard:

a. replied “I don’t know” when asked if the RBC Loan proceeds advanced to Crate on the defendants’ purchase of the 57 Carver were applied to the defendants’ purchase of the 72 Marquis;

b. upon identifying the 57 Carver Purchase Contract, replied “no” when asked if he agreed to purchase the 57 Carver for $599,000;

c. agreed that when Crate made the proposition to him about the 57 Carver, it was understood that Mr. Bedard was not going to pay Crate the purchase price for that boat and instead, that Mr. Bedard was going to say that he was buying the 57 Carver and he was going to, by some means or individual or office, borrow monies to finance his purchase of the boat;

d. as to whether the 57 Carver Purchase Contract requirement that the Bedards pay the $250,000 deposit, he answered “never paid”, and when asked why not, he replied “I have no idea. Again, that was floorplan and Steve Crates. Steve said I needed $300,000. It becomes $427,000. It becomes I’m going to pay the insurance and the interest and everything …. It’s creative paperwork.”, and that Crate owed him money from his trade-in of the 55 Marquis on their purchase of the 72 Marquis.

[71] Crate’s financial need was for a cash injection which was to be lent by the Bedards to Crate until the sale of their 55 Marquis presuming that the net proceeds of that sale would be sufficient to pay the loan from the Bedards.

[72] The presentation, but in this case the absence, of evidence by the Bedards of their payment of the $300,000 deposit balance on their purchase of the 72 Marquis as required by BOM and their loan of $127,288 to Crate independent of the RBC Loan proceeds is important.

[73] Given the Bedards’ purchase of the 72 Marquis and their alleged purchase of the 57 Carver, what is not in evidence is proof of their full payment of the $2,800,000 purchase price of the 72 Marquis and the $599,900 purchase price of the 57 Carver together with the taxes thereon.

[74] The fact that Crate signed the Sale Contract with the Bedards does not alter the breach of the 57 Carver Conditional Contract requirements, as:

a. the Bedards never took possession of or restricted the use of the 57 Carver to themselves as they contracted to, as that boat remained in the possession of and was be sold by Crate;

b. the Bedards presented no evidence of payment of their $250,000 portion of the 57 Carver purchase price “deposit” and “cash down-payment” as stipulated in the Purchase Contract and the Conditional Contract, beyond Mr. Bedard’s testimony that such payment was not required as he accepted Crate’s proposal that it would consider such 57 Carver deposit paid by way of a credit in anticipation of the ultimate sale of the 57 Carver; and

c. the Bedards’ failure to advise RBC of the true purpose and use of the RBC Loan proceeds and their non-disclosure of breaches under the Conditional Contract such as not taking possession of the 57 Carver.

[75] Title to the 57 Carver pursuant to its Purchase Contract did not pass to the Bedards until they “had made payment in full for the Purchased Equipment”.

[76] Mr. Bedard in this trial as stated, acknowledged that the defendants on their alleged purchase of the 57 Carver did not fulfill the Conditional Contract requirement that they pay the vendor on closing the $250,000 “cash down payment”.

[77] Use of all or the $127,288 portion of the $427,288 RBC Loan proceeds for other purposes resulted in an unpaid portion of the 57 Carver purchase price.

[78] Such unpaid portions of 57 Carver purchase price prevented the passing of title from the vendor. That permitted Crate to sell the 57 Carver ten days later to MP Accounting.

[79] Mr. Bedard’s testimony as to becoming the owner of the 57 Carver and the use of the RBC Loan proceeds on that purchase, is contradicted by his above written notations on the 57 Carver Conditional Contract and the Crate March 29, 2012 letter, his statements in and cross-examination upon his Spiegel application affidavits, by witnesses called by RBC and by Mr. Crate. Mr. Bedard was neither credible nor reliable on material points in issue.

[80] The Conditional Contract contains the following acknowledgment by the Bedards:

Buyers Acknowledgment and Consent

Acknowledgement: You accept and acknowledge delivery of the Goods in good condition. You acknowledge that the Goods comply with the written description of them given in this Contract and that no representation, collateral agreement …… has been made by us.

[81] The Bedards as required by the Conditional Contract:

a. did not exercise possession and control of the 57 Carver and that failure breached their above acknowledgment in that contract that they had taken delivery of that boat;

b. did not limit the use of the 57 Carver to their own personal use;

c. did not defend the boat from all parties claiming an interest therein;

d. did not notify RBC of any changes in the information in the Conditional Contract; and

e. did not keep the 57 Carver free of any security interest, such as that subsequently granted to MP Accounting by Crate upon Crate’s re-purchase of that boat.

[82] The Bedards specifically failed as required in the Conditional Contract to advise RBC:

a. that control and possession of the 57 Carver after the alleged sale would and remained with Crate;

b. that their represented purchase of the 57 Carver was simply Crate “allowing” the Bedards to use that boat as security in order to obtain that bank loan;

c. that they had not paid all or a portion of the 57 Carver purchase price; or

d. that the RBC Loan proceeds were used by them for purposes unrelated to payment of the purchase of that boat.

[83] The above statements of evidence and the analysis of the evidence leads the court to conclude on a civil standard that the Bedards and Crate agreed in relation to the defendants’ purchase of the 72 Marquis, that:

a. Crate would allow the Bedards to use the 57 Carver as security to enable the Bedards to borrow the $300,000 balance of 72 Marquis purchase price;

b. Crate needed interim financial assistance, particularly because of the added costs to bring the 72 Marquis in to sell in Canada and that formed the basis for Crate obtaining Mr. Bedard’s consent that the defendants would increase their borrowing from RBC by $127,288 and why Crate agreed to pay the full RBC Loan to RBC upon the sale of the 57 Carver or the 55 Marquis;

c. Crate would further reimburse the Bedards’ monthly RBC interest cost on the $127,288 portion of the RBC Loan and their HST cost to purchase the 57 Carver;

d. Crate and the Bedards framed the 57 Carver as a sale to the Bedards in order to accomplish the above objectives; and

e. The Bedards, as intended, did not become bona fide purchasers and owners of the 57 Carver.

[84] The Bedards’ failure to advise RBC that their structuring of the 57 Carver transaction as an arms-length outright “purchase” was incorrect and negatively impacted the validity of what that Conditional Contract was intended to provide, namely valid registered security interest in the 57 Carver to RBC and its otherwise legal interest in that boat. The Bedards’ knowledge of and failure to disclose such false and incorrect information to RBC constituted default under the Conditional Contract and the RBC Loan.

[85] The Bedards misrepresented to RBC the purpose of the RBC Loan and their papering with Crate of the transaction as a “purchase” of the 57 Carver, in order obtain the RBC Loan which proceeds were then used to finance a portion of their purchase price of the 72 Marquis purchase costs and their lending of $127,288 to Crate for costs related to the purchase cost of the 72 Marquis.

[86] The court is satisfied that:

a. had it known the true purpose and intentions of the Bedards and Crate as above, RBC would not have entered into the RBC Loan, or at least not without material adjustment of its terms; and

b. RBC as a result suffered damages to the validity of and loss of its security interest in the 57 Carver.

Whether Misrepresentation was Fraudulent

[87] Fraud is a knowingly false or misleading representation of fact with the intention that it should be acted upon and was acted upon by the other party: Buland Empire Development Inc. v. Quinto Shoes Imports Ltd., [1999] O.J. No. 2807 (Ont. C.A.), para. 14, Fiorillo v. Krispy Kreme Donuts, Inc., [2009] O.J. No. 2430 (Ont. S. C. J.) paras. 66 and 67, as applied in Canada Mortgage and Housing Corp. v. Hollancid [2014] O.J. No. 973 (S.C.); affirmed [2015] O.J. No. 2521 (C.A.)](https://www.canlii.org/en/on/onca/doc/2015/2015onca2521/2015onca2521.html).

[88] Fraud may consist of representations which are literally false and suppression of what is true or half-truths: Fiorillo, paras. 68 and 69.

[89] The elements to establish liability under the tort of fraudulent misrepresentation against a defendant are that:

a. the defendant made a false statement of fact to the plaintiff;

b. the defendant knew that the statement was false, was made without belief in its truth or was indifferent to its truth or falsity;

c. the defendant intended to deceive and have the plaintiff act upon the false statement;

d. the false statement was material in inducing the plaintiff to act; and

e. the plaintiff suffered damages as a result of so acting: Fiorillo, paras. 66 and 67 as applied in D.L.G. & Associates Ltd. v. Minto Properties Inc., 2014 ONSC 7287, para. 43, Fridman, The Law of Contract in Canada, 3rd ed. and 411397 B.C. Ltd. v. Granmour Holdings Ltd., [1996] B.C.J. No. 1310 (B.C. S.J.) paras. 33 and 34.

[90] If fraud is proven, the motive of the person committing the fraud, even if there was no intention to cheat or to injure the plaintiff or of benefiting a third party, is immaterial: Canada Mortgage and Housing Corp, paras. 75-76.

[91] The Bedards knowingly falsely misrepresented to RBC that they sought the RBC Loan to pay $427,288 of their $599,900 cost to purchase, own and exercise possession of the 57 Carver. That representation to RBC was contrary to their true intention which was to use such loan proceeds in order to pay their $300,000 purchase price balance of the 72 Marquis and to lend $127,288 to Crate until its sale of the 57 Carver.

[92] RBC relied upon this misrepresentation by the Bedards as to the purpose of the RBC Loan in approving and advancing the RBC Loan proceeds. RBC on the evidence would not have approved and advanced the RBC Loan on the terms agreed to, had the true purpose and facts been disclosed.

[93] The Bedards misrepresentations and failure to disclose their true intentions as to the use of the RBC Loan proceeds and failure to take possession of the 57 Carver which they knew was left with Crate to sell created risk to and the subsequent defeat of RBC’s security interest in that boat.

[94] RBC on a civil standard has established each of the essential elements of fraudulent misrepresentation by the Bedards and are entitled to that declaration.

Whether Subsequent Events Bars RBC’s Claim for Judgment of the RBC Loan Balance

[95] The Bedards submit that RBC is not entitled to judgment because:

a. the RBC with full knowledge as to the competing claims and ownership status of the 57 Carver, issued a renewal of the RBC Loan effective April 1, 2017, which extended the term of the loan for five years until March 31, 2022 at an increased interest rate and the defendants have since made all monthly payments thereunder;

b. RBC is therefore estopped from seeking payment of the RBC Loan balance as the defendants are current making the monthly payments thereunder;

c. RBC’s knowledge of their alleged grounds of default by the Bedards that RBC relied upon in March 2016 in demanding loan repayment due to default of such terms were therefore spent, did not continue after March 16, 2016 and cannot now be relied upon as continuing events of default in support of RBC’s September 18, 2017 second notice of default and demand for payment of the RBC Loan: Burrows et al. v. Burke et al., (1984), 49 O.R. 76 (Ont. C. A.);

d. the Bedards are entitled to judgment against RBC for all payments they made against the RBC Loan as RBC did not seek to realize the RBC Loan balance against its security interest in the 57 Carver and released its PPSA security interest in the 57 Carver, to the detriment of the Bedards; and

e. RBC in the alternative, is obligated to honour its March 1, 2017 loan renewal commitment and continue to extend the RBC Loan balance on the terms of that renewal agreement until its maturity on March 31, 2022.

[96] The Burrows decision is distinguishable as it involved a very different set of facts.

[97] The Burrows action involved a claim for damages and recession of a property lease for fraud. That court determined that the landlord’s prior fraudulent representation that the same business previously operated on the property had always been profitable, was known by the tenant to be false prior to entering into the lease and that knowledge resulted in the parties agreeing to amend the proposed lease terms, which the parties then signed and the tenant thereafter remaining in possession and paying rent for several months but then subsequently seeking recession of the lease on the basis of the prior fraudulent misrepresentation by the landlord. The court rejected the tenants’ claim to rescind the lease and held that once the tenant had disclosure of the landlord’s fraud, there was no basis to claim that the prior inducement arising from fraudulent misrepresentation thereafter continued after signing the amended terms of the lease.

[98] Counsel for the Bedards advised RBC in June 2015 that there were competing claims to the 57 Carver which would be determined in an application to be commenced in which RBC would be a party.

[99] Mr. Spiegel commenced an application in June 2015 against the Bedards, MP Accounting and RBC. MP Accounting and Mr. Spiegel each stated that Crate had sold the 57 Carver to them on April 10, 2012 and June 3, 2014 respectively.

[100] The parties filed affidavits in the Spiegel application in the fall of 2015 and were cross-examined thereon in March 2016.

[101] On March 15, 2016, RBC offered to assign its position and interest in the 57 Carver to the Bedards if the defendants would agree to pay the RBC Loan and its $40K legal costs in the Spiegel application. That offer was not accepted.

[102] RBC concluded in 2016 that it would be unsuccessful on the Spiegel application as the evidence indicated that the Bedards had not paid for the 57 Carver, had never taken and exercised possession of that boat after their alleged March 31, 2012 purchase, left the 57 Carver with Crate to be sold to others, had used the RBC Loan proceeds for purposes unrelated to the 57 Carver purchase price and were not bona fide purchasers of that boat. RBC therefore considered that its security interest in the 57 Carver was invalid and not enforceable against that boat. The court’s above assessment of the evidence and conclusion as to the Bedard’s alleged purchase, possession and ownership of the 57 Carver confirms RBC’s 2016 assessment of its unfavorable position as to the 57 Carver.

[103] RBC accordingly consented in the Spiegel application to withdraw its claim and PPSA registered security interest against the 57 Carver and pay $5K towards Mr. Spiegel’s legal costs.

[104] The Bedards deny they abandoned their claim to the 57 Carver in the Spiegel application. The Bedards’ lawyer by letter dated April 8, 2016 confirmed their abandonment of that claim in the Spiegel application due to the withdrawal by RBC of its claim in that proceeding.

[105] On May 6, 2016, RBC sent a notice of default to and demanded payment from the Bedards. RBC subsequently asked the defendants to provide but did not receive alternate, acceptable security.

March 1, 2017 RBC Loan Amending Agreement

[106] The Bedards’ alternative position to their counterclaim seeking judgment for all of their payments under the RBC Loan, is that:

a. RBC is bound by the March 1, 2017 letter offering to extend the term of the RBC Loan until March of 2022 at an increased interest rate;

b. that they are current in making monthly payments on the RBC Loan; and

c. RBC therefore is prevented from seeking recovery of the loan balance prior to the amended 2022 maturity date of that loan.

[107] RBC wrote to the Bedards on March 1, 2017, in anticipation of the March 31, 2017 maturity of the RBC Loan.

[108] RBC testified its internal system erred in their programmed automatic issuance of this March 1, 2017 letter in advance of the March 31, 2017 maturity of the RBC Loan, as RBC in 2015 and 2016 had already unsuccessfully litigated its security interest in the 57 Carver in Mr. Spiegel’s application, RBC then had unsuccessfully attempted to negotiate a resolution with the Bedards, including obtaining acceptable substitute security and had demanded payment of the RBC Loan on May 2, 2016 due to the Bedards’ failure to take and keep possession of the boat, their fraudulent representation that the RBC Loan proceeds were to finance a substantial portion of their 57 Carver purchase price, their intentional use of such loan proceeds for other undisclosed purposes and the resulting breaches of the Conditional Contract.

[109] This March 1, 2017 letter from RBC to the Bedards states:

The RBC Loan, with a current balance of $325,111, was about to mature on March 30, 2017.

Here are the choices you have on how to proceed:

1. You can extend your Loan…. on the terms below;

2. You can extend the loan for a different term than we propose;

3. You can repay your loan in full by March 30, 2017.

4. Extension – This letter will serve as a revised Loan Agreement that amends the terms of your Loan by renewing the Loan for a further term with a change of the interest rate and the payment amount.

The amended terms offered were a renewal term of sixty months, at 7.160%, with a maturity date of March 30, 2022.

Except for these changes, all of the other terms and conditions of your Loan remain unchanged from our original agreement. Any rights we may have to any security you have given us for your Loan remain and are not modified or prejudiced by this Agreement. Please sign this Agreement and return it in the enclosed envelope.

Client Signature Line (emphasis added)

[110] The Bedards did not communicate their election as to the three options listed, did not sign and return this March 1, 2017 letter to RBC and did not respond thereto.

[111] On April 1, 2017, RBC commenced deducting the revised higher interest monthly payments from the Bedards’ account and such monthly payments have continued to date.

[112] The Bedards are correct that RBC as of March 1, 2017, was aware of the breach issues related to the RBC Loan, RBC’s conclusion in litigation that it did not have a valid security interest in the 57 Carver and its prior demand for payment of the loan.

[113] Whether or not the March 1, 2017 letter was sent in error to the Bedards, RBC acknowledged in argument that the RBC Loan maturity date and the interest rate thereunder were amended as of April 1, 2017 as per its option 1, and “took effect”. RBC acknowledges the defendants effectively accepted option 1 of RBCs’ March 1, 2017 letter by the Bedards’ acquiescence in allowing their increased monthly payments at the increased interest level to be made.

[114] RBC’s March 1, 2017 amendment agreement changed the maturity date and the interest rate of the RBC Loan. That amending contract did not create or constitute a new loan contract as it specifically confirmed the continuation of all other terms, conditions and RBC’s security rights as contained in the March 31, 2012 Conditional Contract.

[115] The Bedards before March 1, 2017 were in breach of the above referred to terms and conditions of that Conditional Sales Contract and the RBC Loan. Those breaches pursuant to the amending agreement continued on and after March 1 and 31, 2017.

[116] RBC’s right to the security interest in the 57 Carver specified in the 2012 Conditional Contract, the Bedards’ obligations to take possession of, to use the 57 Carver for their own use and to notify RBC and defend any claims by others to that boat continued and were not modified or prejudiced as specifically stated in the March 1, 2017 amending agreement which was limited to amending the maturity date and interest rate.

[117] Mr. Bedard testified he had no recollection of ever seeing RBC’s above March 1, 2017 letter. If the Bedards did not receive or see this RBC letter, they did not act or rely upon it.

[118] The court for these reasons rejects this defence by the Bedards.

RBC’s Second Demand Letter

[119] RBC sent a second demand letter to the Bedards dated September 18, 2017. It cites their breaches of the unamended terms of the Conditional Contract, namely:

a. their failure to take and retain possession and control of the 57 Carver;

b. their failure to properly notify the Bank of any changes in the information contained in such loan contract; and

c. their failure to notify RBC of any claim involving loss of the 57 Carver: which thereby constituted default thereunder.

[120] RBC in this notice demanded payment by October 2, 2017 of $360,820, including $313,788 principal, $2,031 of accrued interest and $45,000 for legal fees incurred by the bank in response to the defendant’s breach of the contract, including the banks efforts to obtain entitlement to the 57 Carver in the Spiegel application.

[121] RBC commenced this proceeding on October 31, 2017.

Bedards’ Counterclaim

[122] The Bedards have failed to establish any evidentiary basis or legal entitlement to recover any or all of their monthly payments of the RBC Loan. They borrowed, received the proceeds of that loan and have had the use thereof.

[123] The Bedards contractually agreed to pay the amount of the RBC Loan with interest.

[124] The fact that the Bedards misrepresented their purchase of the 57 Carver to RBC in order to borrow the RBC Loan for other purposes and agreed with Crate’s proposal that they present the 57 Carver as being purchased outright, that they never took possession of that boat and breached the other above terms and conditions of the RBC Loan and Conditional Contract are their actions. Those actions and breaches defeated RBC’s security interest in the 57 Carver. The Bedards are not entitled to use their breaches in support of and entitle them to damages.

[125] The Bedards’ counterclaim accordingly is dismissed.

Conclusion

[126] The court has found as a fact that RBC advanced the RBC Loan proceeds pursuant to the 57 Carver Conditional Contract based on false pretenses and fraudulent misrepresentations by the Bedards.

[127] RBC is granted judgment against Mr. and Mrs. Bedard, jointly and severally, for the current principal balance of the RBC Loan, which presumably is less than the $264,844 balance as of September 1, 2019 as indicated in exhibit 34, plus 7.16%, pre-judgment and post-judgment interest thereon pursuant to the terms of the RBC Loan, as amended.

[128] The court retains jurisdiction to determine the current principal balance of the RBC Loan should the parties be unable to agree.

[129] The RBC Loan provides that the Bedards are to pay all of RBC’s reasonable costs, charges and expenses incurred to enforce the RBC Loan contract and its rights and security interest as to the 57 Carver.

[130] Plaintiff’s counsel in exhibit 30, filed his 2015 to 2017 invoices to RBC totaling $37,633 which are governed under the Conditional Contract by a “reasonable” requirement.

[131] The evidence as to these prior costs is restricted to exhibit 30. The court has insufficient information to determine whether the full amount of all legal costs claimed therein meet the Conditional Contract’s “reasonable” requirement. RBC however was brought into and required to respond to the Spiegel application as to its registered security interest on the 57 Carver. The court’s review of exhibit 30 establishes that at a minimum, RBC pursuant to the Conditional Contract is entitled to some “reasonable” costs as to that proceeding.

[132] RBC accordingly is granted judgment for such prior legal costs on a partial indemnity scale in the amount of $24,831, plus the original and then amended 7.16% annual interest thereon until payment.

Costs

[133] Any party seeking costs shall within 30 days file a draft bill of cost, concise cost submissions and copies of the invoices including dates, service providers and charges in support thereof.

[134] A concise response to such costs submissions is due within 21 days after the date of the submissions seeking costs.

Mr. Justice P. Kane Released: April 22, 2020