Bank of Montreal v. Linden Leas Limited

Bank of Montreal v. Linden Leas Limited Court Supreme Court Date 2018-08-01 Citation 2018 NSSC 182 Docket Tru. No. 470166 Judge/Registrar/Adjudicator Rosinski, Peter P. (Honourable Justice) Document Type Decision Decision Content SUPREME COURT OF Nova Scotia Citation: Bank of Montreal v. Linden Leas Limited, 2018 NSSC 182 Date: 2018-08-01 Docket: Tru. No. 470166 Registry: Truro Between: Bank of Montreal Applicant v. Linden Leas Limited Respondent Judge: The Honourable Justice Peter P. Rosinski Heard: March 20, 2018, in Truro, Nova Scotia Final Written Submissions: July 27, 2018 Counsel: Bruce Clarke, Q.C., and Leon Tovey for the Applicant Jillian Foster representing the Respondent By the Court: Introduction [1] BMO successfully sought a receivership order against Linden Leas.[1] Before issuance of the order, Linden Leas paid $200,000 to BMO. I advised the parties that, in these particular circumstances, that payment having been made was a material change in circumstances, which caused me to decline to issue a receivership order. [2] Although Linden Leas was successful, in the sense that no receivership was ordered in the result, to do justice between the parties, it is necessary that the court order costs against Linden Leas. [3] I award costs to BMO in the amount of $1500, inclusive. Background [4] The Bank of Montréal was involved in providing financing to Linden Leas for many years. Linden Leas’ cattle herd was its primary security. Only BMO had the cattle herd as security. [5] BMO became seriously concerned about the level of indebtedness of Linden Leas. Linden Leas had not made any repayment towards principal and interest since October 2016.BMO made a demand for the immediate full payment of the amounts outstanding on September 20, 2017. [6] On October 30, 2017, BMO filed a Notice of Application in Chambers seeking, “an order appointing a receiver to take possession of all or substantially all of the inventory of Linden Leas Limited, exercise control over the company’s inventory, and take any other actions this honourable Court deems advisable, just or convenient.” [7] On December 5, 2017, Linden Leas filed its Notice of Contest, and Notice of Pending Counterclaim and Notice of Third Party Claims (Chambers Application). Therein it joined of the Nova Scotia Farm Loan Board, her Majesty the Queen of Canada, as represented by Agriculture and Agri-Food Canada (AAFC). [8] The hearing proceeded March 20, 2018, and my written decision was released April 11, 2018. In my decision, I stated at paras. 46 – 47: … I am satisfied that it is convenient or just to appoint a receiver… Although it is not necessary to articulate a precise amount of indebtedness in the order, I am satisfied it is more likely than not that LL [Linden Leas] is indebted to BMO for an amount of at least $200,000 as at March 23, 2018. The receiver will effect a reasonable timely reduction of LL’s indebtedness to BMO, only toward payment for any true principal and interest thereon outstanding as of March 23, 2018, and to a maximum of $200,000.2 Footnote 2 - The receiver shall also pay from the proceeds before paying BMO’s indebtedness: its costs incurred in acting as receiver, including its own fees, charges and expenses; any statutory claims due and owing, which have priority over the secured claim of BMO. The receiver will reduce that indebtedness, by making payments to BMO arising from the revenue generated by sales of portions of LL’s cattle herd. [9] On April 26, 2018, Linden Leas made the $200,000 payment in favour of BMO. Position of BMO [10] The Bank stated in its July 3, 2018 brief: … Although your Lordship eventually found Bank of Montréal’s application for the appointment of a receiver is not warranted at this time, we note the actual results of the proceeding are not firmly in favour of Linden Leas. In your decision dated April 11, 2018, your Lordship found (at paragraph 17, 40 and 46) that Linden Leas is indebted to BMO and is in default under that indebtedness. Prior to your Lordship’s decision, no payments on that indebtedness had been made since October 2016. After your decision was rendered, Linden Leas made a payment of $200,000 to BMO. BMO therefore submits it was at least partially successful in the proceeding, as a finding of indebtedness in default was made against Linden Leas, which resulted in a payment by Linden Leas to BMO. We further note that Linden Leas conduct throughout this proceeding warrants adverse costs consequences [citing Justice Wright’s decision in Thirteen Rivers Ltd. v. 3285548 Nova Scotia Limited, 2016 NSSC 232 at para 33].… Linden Leas in its Notice of contest… attempted to bring third parties into the litigation and join BMO’s application with unrelated claims involving the Nova Scotia Farm loan Board and Agriculture and Agri-Food Canada. Linden Leas went on, in its written submissions to the court of February 13, 2018, to accuse BMO of attempting to mislead the court, of misrepresenting its actions, and of acting in bad faith in its dealings with Linden Leas. It intimated that BMO had engaged in some kind of conspiracy with [the Nova Scotia Farm Loan Board and Agri-Food] and asserted the present proceeding therefore amounted to an abuse of process.…Linden Leas did not put forward a single scrap of evidence supporting [these allegations]. Nor did it even seriously argue them at the hearing on March 20, 2018. BMO therefore submits this is exactly the kind of case meriting “sharp adverse costs consequences” that Justice Wright contemplated in Thirteen Rivers. In light of the foregoing…BMO should be entitled to costs against Linden Leas in this matter. BMO submits that the costs outlined in Tariff C are appropriate… in the range of $1500 in favour of BMO. [11] Alternatively, BMO argued that if the court is disinclined to award costs in favour of BMO, there should be no costs award, given that Linden Leas was self-represented. Position of Linden Leas [12] Ms. Foster filed a comprehensive affidavit and legal brief on July 16, 2018. I say comprehensive because the affidavit covers events from approximately 2003 to 2017. [13] Linden Lea’s position is that all of this historical context is relevant to demonstrating that its excessive indebtedness arose as a result of “a perfect financial storm” of unfavourable events, largely traceable to the actions of other parties and circumstances beyond its control. [14] Linden Leas says BMO’s handling of their financial relationship compounded its existential financial difficulties, with the result that its ability to continue on a path to financial recovery was sidetracked. Linden Leas notes that substantial monies owing to BMO, were accumulations of interest charges and other costs arising out of previous litigation between Linden Leas and BMO, and other parties. [15] They seek from the court an order that would: a. Cause all the accounts of Linden Leas with BMO to have a $0 balance; b. Indemnify Linden Leas from any more billings their advisers may submit; c. Pay Linden Leas $100,000 forthwith; and d. Be banned from revising [sic, revisiting] this matter or any other matter before the courts for collection of the debt that may have been the subject of these proceedings. [16] Underlying their position, is the contention by Linden Leas that BMO has allocated, or will allocate, their solicitor-client fees associated with this application in chambers for a receivership as charges on the assets of Linden Leas, pursuant to the contractual provisions between them regarding the indebtedness.[2] [17] Linden Leas also submits that the conduct of BMO was abusive, the litigation unnecessary in all the circumstances, and for which Linden Leas as the successful party, should on a Rule 77, Scale 3 basis, receive $45,000, adjusted with a multiplier of four times, or $190,000. To do justice between the parties [18] Linden Leas was represented by Dr. Jillian Foster, a veterinarian, and one of the children of Frank and Edna Foster, the founders of Linden Leas Limited. She does not have legal training, nor I infer was Linden Leas advised by legal counsel during the proceeding. [19] I conclude that, while Dr. Foster may have conducted the litigation on behalf of Linden Leas in what might appear to some to have been a strident manner, she did so genuinely believing it to be in the best interests of Linden Leas, and if there was conduct by Linden Leas which could otherwise be characterized as unreasonable, it is sufficiently explained by her lack of legal training, and not a deliberate or reckless effort to interfere with the orderly and timely progression of this proceeding. [20] Nevertheless, Linden Leas did not address the outstanding indebtedness until the court had determined that an amount of at least $200,000 was outstanding, and that it would appoint a receiver. [21] Linden Leas’ inability to pay, or refusal to do so, necessarily lead to BMO’s turning to the court for a remedy. Linden Leas’ payment of $200,000 after the court had decided to appoint a receiver was a material change in circumstances which nullified the appropriateness of the receivership order, but Linden Leas remains exclusively responsible for having caused BMO to engage this Application process. [22] Therefore, Linden Leas, although successful in the result, should be responsible to pay BMO costs. [23] As Justice Cromwell (as he then was) noted, albeit in dissent, in Fraser v. Westminer Canada Ltd., 2005 NSCA 27: 55 I acknowledge that costs are within the discretion of the trial judge. I accept that the exercise of this discretion must only be interfered with on appeal if the judge has erred in legal principle or his order is so clearly wrong as to amount to a manifest injustice. While costs should generally follow the event, a judge has a discretion to depart from this principle for good reason. Moreover, in fixing costs, the judge may, under Rule 63.04(c) [the present rule is reworded but similar: CPR 77], consider the conduct of any party which tended to shorten or unnecessarily lengthen the duration of the proceeding. That said, the judge's costs order, at the end of the day, must do substantial justice between the parties in all of the circumstances. [my italicization] [24] The “proceeding” in this case is an Application in Chambers filed October 30, 2017. This proceeding will come to an end in accordance with my letter of June 7, 2018 confirming that the material change in circumstances rendered inappropriate my earlier stated intention to order the appointment of a receiver as requested by BMO. [25] In assessing what is a costs award that would do justice as between the parties, my focus is therefore on that the time interval between September 2017 and July 31, 2018. During that interval, BMO conducted itself reasonably. BMO is entitled to costs. [26] Linden Leas references its potential preparedness to have paid approximately $200,000 to BMO before the litigation began. Nevertheless, Linden Leas did not do so. BMO was acting reasonably and in its own interests in engaging the litigation process in October 2017. For all intents and purposes, BMO was successful, until Linden Leas made a belated payment that rendered the anticipated appointment of a receiver, no longer just or convenient. [27] BMO has reasonably suggested that $1500 “is appropriate in light of the complexity of the matter and the amount of effort involved in preparing for the Application.” Conclusion [28] I order Linden Leas to pay forthwith to BMO the amount of $1500. Rosinski, J. [1] See my decision setting out the history of the matter and outcome – 2018 NSSC 82 [2] Whether BMO is entitled to do so, and to what extent a court will permit it to do so, is a matter that I am not authorized to decide as it is a premature enquiry at present.