IN THE SMALL CLAIMS COURT OF NOVA SCOTIA
Cite as: Wonnacott v. Dedrick, 2017 NSSM 62
Claim:SCY464699 Registry: Shelburne
Between:
JOHN ROBERT WONNACOTT
CLAIMANT
– and –
DARREN CHRISTOPHER DEDRICK
DEFENDANT
Adjudicator: Andrew S. Nickerson, Q.C.
Heard: August 2, 2017, September 20, 2017, November 23, 2017
Decision: November 28, 2017
Appearances: The Claimant, self-represented
The Defendant, represented by Matthew J. Fraser
DECISION
Facts
[1] At the outset of this proceeding the Defendant’s counsel made a preliminary motion arguing that this court did not have jurisdiction to hear the matter. I heard submissions on this motion on September 20, 2017. On the authority of the decision of Justice Moir in Graves v. Hughes et al 2011 NSSC 68 I ruled that this court had the jurisdiction to determine whether the claim survived an approved and completed consumer proposal pursuant to Section 178 of the Bankruptcy and Insolvency Act R.S.C., 1985, c. B-3 and trial was subsequently set for and was held on November 23, 2017.
[2] The essential facts are not in dispute except as to one point regarding whether a promise to pay made after the consumer proposal had been accepted.
[3] The Defendant signed a promissory note dated April 11, 2007 for $35,000 with the purpose of assisting in buying a fishing vessel. The parties agree that funds were used for that purpose. The Claimant was the Defendant’s father-in-law at that time and assisted in the delivery of the vessel and sailing it to home port. The Claimant acknowledged that the original loan was not obtained fraudulently.
[4] The Defendant made two payments; $5,506 on Jan 7, 2011 and $2365 on Feb 3, 2011. This left a balance greater than $25,000 but the Claimant stated that he would abandon the excess and have this court adjudicate and seek a judgement limited to $25,000.
[5] A consumer proposal was filed on October 12, 2011, showing debts of 135,900 and Assets of $121,000. The proposal showed a proposed dividend of $0.70 on the dollar. The proposal lists “42’ Lobster Boat with Lobster Licence, financed with John Wannacott“ as having a value of $100,000.
[6] The notice provided, in accordance with the legislation, that Creditors were to file claims within 45 days of the proposal date. The Claimant did not receive notice of the proposal within the 45 day period. The Claimant contacted the trustee and was advised that it was too late to request a creditors meeting and a vote but that he could file a claim and participate in the dividend. The Claimant did not file a claim. The trustee was discharged on March 20, 2015.
[7] The Claimant filed his claim in this court on June 19, 2017.
[8] At trial the Claimant testified that shortly after the consumer proposal was accepted he had a telephone conversation with the Defendant. He alleges that in this conversation the Defendant told him that he had appreciated everything that the Claimant had done for him and would pay the full debt despite the consumer proposal. The evidence did not indicate that this was in exchange for the Claimant doing anything or refraining from doing anything in relation to the consumer proposal or anything else. The Defendant’s evidence was that he did not recall having this conversation.
[9] The Claimant alleged that the Defendant had made false statements in the consumer proposal which would result in the Defendant’s assets being greater that in his debts and thus making him ineligible to make a consumer proposal. The Claimant testified that the Defendant grossly undervalued his fishing assets and failed to include an ATV and for some firearms. The Claimant had personal knowledge that the Defendant had these items at the time. The purpose of this was to demonstrate that the Defendant was not eligible to make a consumer proposal. [10] The Defendant stated that all fishing assets including electronics, fishing gear and equipment were included in the value of $100,000 that he placed in the proposal and that he in fact did have an ATV and some firearms at the time of the proposal.
[11] In the course of the trial to support these allegations the Claimant submitted a letter of opinion from a boat broker which stated that the value of the Defendant’s vessel and fishing assets including license and equipment had a value almost double the $100,000 which the Defendant had listed in his consumer proposal.
[12] I ruled that, although the Small Claims Court has the authority to apply the principled exception to the hearsay rule focusing on “reliability” without consideration of “necessity”, that this letter did not carry sufficient reliability on its face that I should admit it. In my view, it would not be appropriate in respect of matters of opinion such as this to deny an opposing party the right to cross-examine. There are too many questions in relation to the methodology, the basis of the opinion and the data relied on to accept such evidence as an exception to the hearsay rule in a contested matter. As will be seen in this decision my rejection of this evidence has not affected the ultimate result.
Issues
[13] I must resolve the following issues:
1. Whether the limitation period imposed by the prior or current Limitations Of Actions Act bars the Claimant
2. What is the effect of Section 198 of the Bankruptcy and Insolvency Act and is it applicable to my consideration of Section 178 of the Bankruptcy and Insolvency Act?
3. Does this action survive by virtue of the provisions of Section 178 of the Bankruptcy and Insolvency Act?
4. Is the Claimant entitled to now receive the dividend under the consumer proposal that he would have received had he proved his claim?
5. Is the Claimant entitled to succeed on the basis of a promise to pay after consumer proposal was filed and approved?
Law and analysis
[14] Mr. Fraser, on behalf of the Defendant, acknowledged that the Claimant would have the benefit of a six year limitation since his claim was filed before the end of August 2017 when the absolute two year limitation came into effect in Nova Scotia by virtue of the Limitation of Actions Act 2014, c. 35. He says however the claim was filed after the expiry of the six year period measured from the time of the last payment. The Claimant argues that he was barred by the stay of proceedings in the consumer proposal from making the claim until the trustee had been discharged and that time should not be counted in the calculation of the limitation.
[15] I decline to rule on this issue. I do not find it necessary for the resolution of the case as I have founded my decision on other grounds.
[16] I turn to a consideration of section 198 (1) of the Bankruptcy and Insolvency Act which reads as follows:
198 (1) Any bankrupt who
(c) makes a false entry or knowingly makes a material omission in a statement or accounting,
…….
is guilty of an offence and is liable, on summary conviction, to a fine not exceeding five thousand dollars or to imprisonment for a term not exceeding one year or to both, or on conviction on indictment, to a fine not exceeding ten thousand dollars or to imprisonment for a term not exceeding three years, or to both.
[17] This provision must be read in light of Section 66.3 of the Bankruptcy and Insolvency Act
66.3 (1) Where default is made in the performance of any provision in a consumer proposal, or where it appears to the court
(a) that the debtor was not eligible to make a consumer proposal when the consumer proposal was filed,
(b) that the consumer proposal cannot continue without injustice or undue delay, or
(c) that the approval of the court was obtained by fraud,
the court may, on application, with such notice as the court may direct to the consumer debtor and, if applicable, to the administrator and to the creditors, annul the consumer proposal.
……
(3) A consumer proposal, although accepted or approved, may be annulled by order of the court at the request of the administrator or of any creditor whenever the consumer debtor is afterwards convicted of any offence under this Act.
[18] Section 2 of the Bankruptcy and Insolvency Act defines “court” as follows:
court, except in paragraphs 178(1)(a) and (a.1) and sections 204.1 to 204.3, means a court referred to in subsection 183(1) or (1.1) or a judge of that court, and includes a registrar when exercising the powers of the court conferred on a registrar under this Act; (tribunal)
[19] Section 183 provides that within the Province of Nova Scotia that “court” is the Supreme Court of Nova Scotia.
[20] Section 198 deals with offenses for which charges may be laid and the consequence of the violation is a conviction and the imposition of a penalty. That is clearly not within the mandate of the Small Claims Court.
[21] A remedy for the allegations made by the Claimant is provided for in section 66.3. However I consider the “court” that has jurisdiction in respect of that section is the Supreme Court of Nova Scotia and not the Small Claims Court. My reading of the sections together leads me to conclude that if the Claimant has a remedy in relation to misrepresentations I do not have the authority to grant it. I find nothing either in the words of the statute or anything in the decision in Graves v. Hughes et al that would permit me to rule in this case on anything other than issue arising out of section 178.
[22] I now turn to a consideration of section 178. The operative provisions that I must consider are as follows:
178 (1) An order of discharge does not release the bankrupt from
…….
(d) any debt or liability arising out of fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity or, in the Province of Quebec, as a trustee or administrator of the property of others;
(e) any debt or liability resulting from obtaining property or services by false pretences or fraudulent misrepresentation, other than a debt or liability that arises from an equity claim;
(f) liability for the dividend that a creditor would have been entitled to receive on any provable claim not disclosed to the trustee, unless the creditor had notice or knowledge of the bankruptcy and failed to take reasonable action to prove his claim;
[23] As to subsection (d), I do not find that there is any fiduciary capacity involved in the facts before me and this subsection is inapplicable.
[24] In my view the clear wording of subsection (e) relates to fraudulent or deceitful matters which occurred at the time that the debt originated. I believe the use of the word “obtaining” makes it clear.
[25] Subsection (f) clearly states that to grant relief under this section the claim must not have been disclosed to the trustee. This is not the case on the facts before me. The debt was disclosed in the consumer proposal.
[26] However there is another basis upon which I must consider whether the Claimant is entitled to the amount of the dividend that he would have received had he in fact filed his claim. I believe section 66.4 and section 150 address this question.
66.4 (1) All the provisions of this Act, except Division I of this Part, in so far as they are applicable, apply, with such modifications as the circumstances require, to consumer proposals.
150 A creditor who has not proved his claim before the declaration of any dividend is entitled on proof of his claim to be paid, out of any money for the time being in the hands of the trustee, any dividend or dividends he may have failed to receive before that money is applied to the payment of any future dividend, but he is not entitled to disturb the distribution of any dividend declared before his claim was proved for the reason that he has not participated therein, except on such terms and conditions as may be ordered by the court.
[27] I cite section 66.4 to make clear that although this is a consumer proposal and not a bankruptcy that section 150 applies. Section 150 in its plain wording precludes a creditor from participation in the distribution of the dividend which has occurred prior to the filing of the creditor’s claim. In this case the claim was not proved in the bankruptcy proceeding at any time. In my view this section bars me from granting the relief which the Claimant seeks even if I otherwise had jurisdiction.
[28] I now turn to the allegation of the promise to pay. One of the fundamental concepts in the common law of contract is the notion of “consideration”. In effect, no contract can be created unless each party receives something of value. This can be met by the giving up of a claim or other legal right or remedy, or refraining from doing something that that party can lawfully do. There are many cases but to give one example I will cite Harris v. Muntener, 1995 CanLII 2301 (BC SC) as it has some similarity to the matter before me. Justice Meiklem’s decision outlines the facts and the result:
4 Mr. Muntener represented himself, as he had done in Small Claims Court, and Mr. Harris was represented by counsel, as noted above. Whereas the claim was advanced in the Notice of Claim for repayment of a personal loan made by Mr. Muntener to Mr. Harris, it is very clear from the evidence before me that Mr. Muntener (by a cheque made by his company Muntener Advertising Ltd. payable to RMH Home Innovations in the sum of $30,000, dated March 11, 1988) purchased one third of the issued shares of RMH Home Innovations Ltd. for $1,000.00 and advanced $29,000.00 as a shareholder's loan to RMH Home Innovations Ltd.
5 On this hearing, Mr. Muntener based his claim on Mr. Harris' oral promise that he would guarantee the repayment of the investment. Mr. Harris' defence is that this promise was made after the investment was made, and was therefore unenforceable, being a gratuitous promise made without consideration. Mr. Harris does not deny making the promise, which was a natural one to make since the company's balance sheet of December 31, 1988 shows $30,490.00 due to shareholders, and since $29,000.00 of this was Mr. Muntener's investment, Mr. Harris and the third shareholder had virtually no money in the company. Mr. Harris testified that he made the promise upon leaving the offices of the law firm on March 11, 1988, after the director's resolution transferring shares to Mr. Muntener was signed, his share certificate was issued, and Mr. Muntener's cheque for $30,000.00 was delivered.
…….
8 Mr. Muntener is the plaintiff and bears the onus of proving his case on the balance of probabilities. It is trite law that a promise not in writing under seal is only enforceable if it is in exchange for some consideration and that past consideration will not suffice. On the evidence before me I am unable to find that Mr. Muntener has established on a balance of probabilities that Mr. Harris' promise was part of the investment transaction, rather than an independent, gratuitous promise. [the underlined portions are my emphasis]
[29] I make no factual determination of whether or not this promise was actually made as in my view it is not necessary to my decision. For the purposes of this analysis I will assume that the promise was made. There is nothing in the evidence before me that establishes that the Defendant asked for or offered in exchange for this promise to pay for the Claimant to do or refraining from doing anything. Indeed the Claimant did not so allege. As was made clear by Justice Meiklem, the consideration necessary cannot be based on any past events but must be a fresh consideration concurrent with the time that the promises made. On the basis of the evidence before me I cannot consider the Defendant’s promise, if made, to be anything more than a “gratuitous promise” which under the law of this province does not afford the Claimant a basis to claim liability against the Defendant.
[30] While completely obiter dictum, I can understand the Claimant’s dismay that the Defendant would not, on at least a moral basis, offer the Claimant, even at this late date, some compensation for having helped him to achieve a successful business. I do note that the consumer proposal showed a difference in assets and liabilities that may well have been challenged at the time. There is an element of unfairness here, in my view, but I have no authority in equity and must strictly apply the law as I find it. I can find no basis that is supportable in law to grant relief to the Claimant. I have given my best careful consideration to all the possible legal foundations for liability and have concluded that I have no authority to grant relief to the Claimant.
[31] I thank both the Claimant and Mr. Fraser for their assistance in the matter as I found this case to be a matter worthy of being fully canvassed and deserving of careful consideration. Despite the Claimant’s considerable and quite impressive efforts and able arguments I can find no legal basis to impose liability on the Defendant.
[32] Therefore I dismiss the case without costs to any party.
Dated at Yarmouth this 28th day of November, 2017.
Andrew S. Nickerson Q.C., Adjudicator