IN THE SUPREME COURT OF BRITISH COLUMBIA

Date: 20100707

Docket: 07-3199

Registry:
Victoria

Between:

Tirling Sheet
Metal Ltd. and Tirling Refrigeration & Air Conditioning Ltd.

Plaintiffs

And

Estate of Brad
Alan Troutman, Deceased

Defendant

Before:
The Honourable Mr. Justice B. MacKenzie

Reasons for Judgment

[1]          
The plaintiffs ask the court that they be paid monies owing to them from
the estate of Brad Troutman, who died in a motor vehicle accident on
July 19, 2007. They say they are entitled to these proceeds because sometime
in June or early July 2007, Mr. Troutman equitably assigned to them the net
proceeds of a property he was planning to sell.

[2]          
The estate and Ecco Heating Products Ltd. (“Ecco”) and Emco Corporation
(“Emco”), two creditors, oppose the plaintiffs’ application. The two creditors
oppose the plaintiffs’ application for the obvious reason that if it was to
succeed, there would be insufficient funds to pay their outstanding claims.
Counsel for Ecco and Emco presented arguments at this hearing with the consent
of all other counsel.

[3]          
The plaintiffs are two businesses owned by Eldon Tirling. These two
companies supplied heating and air-conditioning equipment and sheet metal to M.N.B.
Metalcraft Ltd. (“MNB”), a company owned and operated by Mr. Troutman. MNB then
resold these products to various customers for a profit.

[4]          
The agreed statement of facts did not specify the exact duration of this
business relationship; the parties just agreed that it was “[o]ver many years.”
In Mr. Tirling’s witness statement, he claimed that he and Mr. Troutman had
been friends for 30 years.

[5]          
In August 2007, the plaintiffs issued writs against MNB and the
estate of Mr. Troutman for debts incurred by MNB, and Ecco filed a writ against
MNB and Mr. Troutman. In September 2007, Emco sued MNB and Mr. Troutman’s
estate. Mr. Troutman had provided Ecco and Emco with personal guarantees in
addition to the written agreements between them and MNB. The plaintiffs did not
have a written agreement with MNB or a personal guarantee from Mr. Troutman.

[6]          
The property at issue is a condominium in Victoria that was purchased by
Mr. Troutman in 2006 and registered to him in his personal capacity. It was
sold, after his death, in November 2008. After the mortgage was discharged,
the net proceeds were insufficient to satisfy the claims of all of MNB’s creditors.

[7]          
The basis for the plaintiffs’ action are statements made by Mr. Troutman
to four persons sometime in June and July 2007. I note that para. 11 of
the agreed statement of facts states:

For a number of years prior to his death in 2007, Troutman
told Tirling that Troutman intended to sell [his property] and use the sale
proceeds to pay MNB’s debts to Sheet Metal and Refrigeration.

Clearly, if Mr. Troutman did not purchase the property
until 2006 and died in 2007, he could not have told Mr. Tirling that he
intended to sell it for “a number of years”. Further, this statement is
contradicted by the evidence in the witness statements submitted by the
plaintiffs.

[8]          
Except in rare circumstances, a court should accept an agreed statement
of facts, especially when opposing counsel has not sought to amend it or to
withdraw agreement. However, in this case, it would be unjust to accept certain
agreed facts that are contradicted by the evidence presented by the plaintiffs
who drafted the statement of agreed facts.

[9]          
In Patterson v. Scherloski, [1971] 3 O.R. 753, 21 D.L.R. (3d) 641
at 645 (H.C.J.), Wright J. determined that the court’s discretion to alter an
agreed statement of facts should be “warily exercised, normally, to defeat
fiction, to help establish truth, and to relieve clients of fatal mistakes by
lawyers.” The rationale for altering an agreed statement of facts is likely
that expressed by the court in Avco Delta Corp. v. Mackay, 76 D.L.R.
(3d) 541, [1977] 5 W.W.R. 4 at 8 (Alta. S.C.), a case in which the agreed facts
had the effect of establishing a fact contrary to the law:

As a general rule no court of whatever level should permit
itself to be used and knowingly adjudicate upon any issues presented by
opposing litigants based on an erroneous premise; to do so would only serve to
erode the credibility and prestige of the judicial system.

[10]       
Further, if I did rely on erroneously stated material facts in this
special case, my ruling could be set aside, as occurred in Reichl v.
Rutherford-McRae Ltd. (1964), 47 W.W.R. 227 at 229 (B.C.C.A.), to “avoid a
possible miscarriage of justice”. Justice Davey at 230 further found that “[i]t
would reflect little credit on the law if the mistakes of the solicitors in
preparing the special case should prevent a proper decision on the merits.”

[11]       
Finally, as in R. v. National Bank of Canada, [1993] 3 F.C. 664
at 668, [1993] 2 C.T.C. 161 (T.D.):

This is not a case in which facts have been agreed upon, on
the express understanding that while they may be inaccurate, the parties, for
various reasons, have agreed to be bound by them notwithstanding. Nor to my
knowledge is this a case in which one party or the other acted to its detriment
as a result of the agreement as to facts.

Here, opposing counsel never actually acknowledged the
agreed statement of facts, although they did proceed with the special case.
Thus, there was no express understanding that the hearing would be based on
inaccuracies. Further, the agreed statement of facts was not referred to at the
hearing. There is no indication that counsel relied on any of the erroneous
facts and did not present certain evidence because of them. Rather, it is the
evidence they did present that led to this problem. Therefore, when the
evidence contradicts the agreed statement of facts, I rely on the evidence to
make my findings.

[12]       
Turning to the evidence of statements made by Mr. Troutman, Mr. Tirling
claimed in a signed statement, which was attached to the affidavit of Alexandra
Speth, a legal assistant:

5. On several occasions in the months preceding Brad’s death,
Brad and I spoke about MNB’s outstanding accounts with both Tirling
Refrigeration and Tirling SM.

…

8. Over the period June 1, 2007 to June 30, 2007,
Brad and I spoke at least three times on the telephone about MNB’s indebtedness
to Tirling Refrigeration and Tirling SM. Brad advised me that he planned to
sell his house … and, among other things, pay out in full, MNB’s indebtedness
to Tirling Refrigeration and Tirling SM with the net sale proceeds.

9. On or about July 4, 2007 and during the course of
business, Brad telephoned me at the offices of Tirling Refrigeration and
Tirling SM and told me:

 a) that the Oliver House was going to be listed for
sale within the     month; and

 b) that after paying out the first and second
mortgages, the balance of        funds would be used firstly, to payout MNB’s
indebtedness to Tirling             Refrigeration and Tirling SM and, secondly,
to purchase a house he      had found in Lake Cowichan.

[13]       
Even though the parties agree that this was the gist of the
conversation, it is also clear that this is not a verbatim recording of what
Mr. Troutman said.

[14]       
Similarly, two employees of MNB in signed statements said that Mr. Troutman,
on or about July 1, 2007, and on at least three occasions in the two weeks
preceding his death, told them that he planned to sell his house, and after
paying out the first and second mortgages charged to the property:

he was going to use the Balance to:

 (i) firstly, pay MNB’s outstanding indebtedness
to Tirling Refrigeration         and Air Conditioning Ltd.;

 (ii) secondly, pay MNB’s outstanding indebtedness
to Tirling Sheet Metal Ltd; and

 (iii) lastly, apply the remaining monies towards
the purchase of a     house in the Lake Cowichan area.

[15]       
Joe Kobetitch, the General Manager of Tirling Refrigeration & Air
Conditioning, claimed in a signed statement:

6. In the last year of our personal and business
relationship, Brad spoke to me in great detail about his personal life and his
financial problems and in particular, MNB’s climbing debt to Tirling
Refrigeration.

7. On or about July 1, 2007 and during the course of
business, Brad called me at Tirling Refrigeration and told me that he had found
a house in Lake Cowichan that he wanted to purchase. Brad went on to say that
he planned to sell his house in Langford, straighten out his personal affairs
and pay off the debts of MNB specifically, the debt owing by MNB to Tirling
Refrigeration.

[16]       
Interestingly, three of the statements refer to a second mortgage, when
there was only one mortgage registered on title. I also note that all four
statements had the wrong date of death and the statements from the employees
were exactly the same. Additionally, it is curious that statements were made to
employees and a general manager during the course of business on a statutory
holiday, Canada Day. However, ignoring these irregularities, I accept that
these conversations did take place.

[17]       
The question for the court on the special case is “[d]id the actions of
Troutman amount to an equitable assignment of the sale proceeds of the …
property to Sheet Metal and Refrigeration?”

[18]       
The agreed statement of facts at para. 12 claims:

Relying on what Tirling was promised by Troutman, Sheet Metal
and Refrigeration continued to advance goods and services to MNB on credit and
refrained from taking proceedings to obtain payment.

[19]       
There are two concerns with this statement. The first is that in the
plaintiffs’ statement of claim, they pleaded that they “relied on this
representation to their detriment in continuing advance goods and services to
the Defendant despite the Defendant’s non-payment of invoices.” There is no
mention of forbearance.

[20]       
Second, based on the evidence, it is not reasonable to infer that the
plaintiffs would have stopped supplying MNB without Mr. Troutman’s statement
that he would pay from the proceeds of any potential sale of his property. Despite
speaking with Mr. Troutman in the months before his death about MNB’s
outstanding accounts, Mr. Tirling said at para. 6 of his signed statement:

Due to MNB’s past history of prompt payment of all
outstanding accounts with Tirling Refrigeration and Tirling SM, I, on behalf of
Tirling Refrigeration and Tirling SM continued to extend credit to MNB.

[21]       
I also note that based on the invoices submitted by the plaintiffs, the amount
of credit the plaintiffs extended to MNB after June 1, 2007, was relatively
small. On June 15, 2007, Tirling Refrigeration &  Air Conditioning billed MNB
$376.96, although it is unclear whether the materials and labour were provided
after June 1, 2007, as the invoice notes that they had not been told MNB should
be billed rather than certain residents. On June 7, 2007, Tirling Sheet Metal
billed MNB $305.10, on June 26, 2007, $2,005.75 was billed, and on July 27,
2007, $203.40 was billed for materials provided prior to Mr. Troutman’s death.

[22]       
I am satisfied that the plaintiffs continued to extend credit to MNB and
did not bring legal proceedings because of MNB’s past practice of paying its invoices,
albeit somewhat late from time to time, and because of the friendship between
Mr. Tirling and Mr. Troutman. I am not satisfied that it was because of the
casual, hopeful comments of Mr. Troutman that if he sold his house, which was
not yet listed, then he would “among other things” pay out his debt to the
plaintiffs.

[23]       
When the fund claimed is “not yet in existence,” for there to be an
equitable assignment of the expectancy interest, there must be consideration: Sanderson
v. Halstead, [1968] 1 O.R. 749, 67 D.L.R. (2d) 567 at 573-74 (H.C.J.). As
explained in the recent decision of Law Society of Upper Canada v. Mazzucco,
49 E.T.R. (3d) 61, 62 B.L.R. (4^th) 285 at para. 21 (Ont. S.C.J.),
without consideration it would remain open to the transferor to change his
mind. Based on my findings above, there was no consideration in these
circumstances, so there was no equitable assignment.

[24]       
Moreover, while no particular words or form is required, for an
equitable assignment to be created, the assigner must clearly intend that the
right become the assignee’s: Invicta Food Services Ltd. v. Café Suprême
Canada Inc., 2010 BCSC 634 at para. 16, citing Pantages Estate v. Bank
of Nova Scotia (1976), [1977] 1 W.W.R. 282 at 284 (B.C.S.C).

[25]       
Given the casualness and uncertainty of the statements made by Mr.
Troutman, I am unable to conclude that Mr. Troutman expressed a clear intention
to create an equitable assignment. In particular, I considered that in June
2007, Mr. Troutman told Mr. Tirling that “among other things” he would pay the
plaintiffs and, in July 2007, he told Mr. Kobetitch that he planned to
“straighten out his personal affairs and pay off the debts of MNB”. Further, he
only specifically mentioned to Mr. Kobetitch the debt owing to Tirling
Refrigeration & Air Conditioning. Whereas, on the same day, July 1, 2007,
he mentioned both companies to his two employees and an intention to purchase
another property.

[26]       
In these circumstances, I am satisfied that Mr. Troutman’s statements
were merely general comments expressing his desire to sort out his financial affairs,
including a hope that he would be able to pay MNB’s debts to the plaintiffs. This
was nothing more than an expectation on the part of Mr. Troutman that he would
be able to meet all of his financial obligations sometime in the future. These
statements were just a non-binding suggestion of good faith.

[27]       
Additionally, I agree with counsel for Ecco and Emco that Lawson
Graphics Pacific Ltd. v. Simpson (1987), 12 B.C.L.R. (2d) 126 (S.C.), a
case relied upon by the plaintiffs, is distinguishable. In that case, Southin
J. at 133 noted that whether the words used,  “[w]hen we get paid, you will get
paid”, constituted an assignment was “so very close to the line”. After finding
that there was an assignment, Southin J. continued:

But if the debt owing from the ministry to the company had
not been founded, in large measure, on goods supplied by the plaintiff, I would
have come to a different conclusion.

[28]       
In Lawson Graphics Pacific at 131, the connection between
the subject matter of the assignment and the debt incurred was clear and direct:
the debts owing by the Crown to the company, of which the defendants were the
officers, “arose when the Crown received the goods shipped by the plaintiff
pursuant to the company’s contract with the Crown.”

[29]       
In this case, the plaintiffs argue that there too was a direct
connection. They say that Mr. Troutman used the profit MNB made to purchase the
property rather than to pay MNB’s debts.

[30]       
However, I do not find a clear and direct connection between the debt incurred
by MNB in acquiring the plaintiffs’ materials and the sale proceeds from the
property, which was the fund allegedly assigned. Unlike in Lawson Graphics
Pacific, any debt owing from a purchaser of the property to Mr. Troutman
would not have been founded on the goods supplied by the plaintiffs.

[31]       
Further undermining the plaintiffs’ contention is the fact that the
property was purchased in September 2006 but the debt only arose between
March and July 2007. There is no evidence that the debts shown on the
relevant invoices were used in any way to purchase the property. There is no
evidence of any debt, which MNB did not subsequently pay, owing to the
plaintiffs at the time the property was purchased. In fact, the evidence is
that MNB had a good record of promptly paying the plaintiffs.

[32]       
For these reasons, the answer to the question in the special case of
whether the actions of Mr. Troutman amounted to an equitable assignment is no.
The parties agreed that if the answer to that question was no, then the court
may dismiss the plaintiffs’ action. As such, the plaintiffs’ application is
dismissed.

[33]       
Counsel for Ecco and Emco, Mr. McKechnie, also seeks costs. Ecco and
Emco are not parties of record; although they responded to this notice of
motion, they never filed an appearance. As noted by E.G. Chamberlist J. in Martel
v. Wallace, 2008 BCSC 436, 54 C.P.C. (6^th) 145 at para. 7:

[7]        … In Manufacturers Life Insurance Company v.
Dahl, 2005 BCSC 1800, 33 C.C.L.I. (4^th) 293, Silverman J. held
that non-parties who have had notice of the proceedings and have taken steps in
the proceedings, or prepared to do so, may recover costs.

[34]       
The matter of when a non-party is entitled to costs was also discussed
in Pacifica Papers Inc. (Re), 2001 BCCA 157. At para. 7, Hall J.A. found
the non-party had “a clear economic interest” in the proceeding, so while it
was legally possible for the non-party to stand aside and take no part, it was
entirely understandable that it would want to participate and lend assistance
to the petitioner. Thus, Hall J.A. found its participation was appropriate and
awarded costs to the non-party, albeit only two-thirds of its costs since the
petitioner had advanced a comprehensive argument which made it less necessary
for the non-party to advance an elaborate submission.

[35]       
As in Pacifica Papers, Ecco and Emco had a clear economic
interest in this matter. Unlike Pacifica Papers, it was Mr. McKechnie
who made the principal submissions. Ms. Hemminger, counsel for the estate,
accepted Mr. McKechnie’s submissions and only made minimal submissions of her
own. Thus, Ecco and Emco are entitled to an award of costs on Scale B against
the plaintiffs.

[36]       
As mentioned, counsel for the defendant was minimally involved in these
proceedings. Thus, the defendant is to bear its own costs.

_____________________________

 Mr.
Justice B. D. MacKenzie