Columbia Drilling & Contracting Ltd. v. Siemens

2011 BCSC 684 Columbia Drilling & Contracting Ltd. v. Siemens

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Columbia Drilling & Contracting Ltd. v. Siemens, 2011 BCSC 684 Date: 20110307 Docket: S115228 Registry: New Westminster Between: Columbia Drilling & Contracting Ltd. Plaintiff And: Lucas Siemens Defendant Before: The Honourable Mr. Justice Cullen Oral Reasons for Judgment Counsel for Plaintiff: I. Moes The Defendant, L. Siemens: Appearing on his own behalf Date and Place of Hearing: March 7, 2011 New Westminster, B.C. Date and Place of Judgment: March 7, 2011 New Westminster, B.C. [1] THE COURT: In this action the plaintiff seeks judgment against the defendant for the sum of $125,000, together with interest at seven percent per annum, dating from June 13th, 2008. The action is based on a promissory note entered into between plaintiff company and the defendant on September 13th, 2005. The promissory notes reads as follows: I, LUCAS SIEMENS ("Siemens") promise to pay to COLUMBIA DRILLING & CONTRACTING LTD. ("Columbia"), or order at Abbotsford, British Columbia, the principal amount of ONE HUNDRED AND TWENTY-FIVE THOUSAND ($125,000.00) DOLLARS (the "Principal Amount") of lawful money of Canada, with interest thereon at the rate of SEVEN (7%) PER CENT per annum calculated from the 13th day of September, 2005, as follows: Interest only on the outstanding Principal Amount shall be paid monthly, commencing the 13th day of October,

2005 and continuing on the 13th day of each and every month thereafter up to and including the 13th day of September, 2006, when the whole of the outstanding Principal Amount, together with accrued interest, shall be due and payable in full. [2] On September 13th, 2005, a bank draft drawn on the plaintiff company's account made payable to Siemens Contracting Ltd. was issued. The defendant made interest payments on the note from September 13th, 2005 to June 13th, 2008. He fell into arrears initially between September and December of 2007, but in response to a letter from the plaintiff's counsel, brought the arrears of interest up to date. No amount of principal has been paid. [3] The defendant fell into arrears on the interest payment again in July and August of 2008 and failed to respond to a letter of demand sent September 2nd, 2008. As a result this lawsuit was launched on September 19th, 2008, claiming, as I said, the principal amount of $125,000, together with interest and costs. [4] The statement of claim is short and it reads as follows: 1. The Plaintiff, Columbia Drilling & Contracting Ltd. ("Columbia"), is a company duly incorporated pursuant to the laws of British Columbia, having an office at 6162 - 264th Street, Aldergrove, British Columbia, V4W IP4.

2. The Defendant, Lucas Siemens ("Siemens"), is a businessman who maintains an address at #24 - 2337 Townline Road, Abbotsford, British Columbia, V2T 6Gl.

3. On or about September 13, 2005, Columbia entered into an agreement (the "Contract") with Siemens wherein Columbia agreed to loan Siemens $125,000 (the "Principal Amount"). The Contract provided that Siemens was to pay interest at a rate of 7% per annum, paid monthly on the 13th day of every month. The Contract also provided that the whole of the outstanding Principal Amount along with any accrued interest would be due and payable on September 13, 2006.

4. Pursuant to the terms of the Contract, Columbia loaned Siemens the Principal Amount.

5. Siemens continued to make interest payments under the Contract until June of 2008.

6. Columbia has demanded payment of the Principal Amount in full plus interest due under the Contract. Despite this demand, and in breach of the Contract with Columbia, Siemens has refused or neglected to make any payment since July of 2008: There remains due and owing to Columbia from Siemens the sum of $125,000 plus interest of $1,607.75 for a total of $126,607.75, as at September 18, 2008. WHEREFORE THE PLAINTIFF CLAIMS: (a) Judgment against the Defendant, Lucas Siemens, for the sum of $126,607.75; (b) Interest pursuant to the Contract at the rate of 7% per annum until paid, or alternatively pursuant to the Court Order Interest Act; (c) Costs; (d) Such further and other relief as this honourable court may deem just and reasonable. [5] In response, in an amended statement of defence filed June 15th, 2009, the defendant resisted the plaintiff's claim by pleading firstly that the defendant did not enter into a contract with the plaintiff as alleged in the statement of claim, or, in the alternative, that if he did: It was an oral term of the agreement, evidenced in part by the promissory note, that the $125,000 would only be payable if the Whatcom Road project broke even or was profitable and the bond funds were not needed for other obligations in relation to the Whatcom Road project. The defendant also pleaded that: The promissory note was made by the defendant solely for the

accommodation of the plaintiff and there never was any consideration for the making of the note by the defendant. [6] The plaintiff's reply to the statement of defence reads as follows: 1. In reply to paragraph 5, the Plaintiff denies that the repayment of the Principal Amount was dependent upon the success of the Whatcom Road Project, as alleged, or otherwise. The Plaintiff further says that the principal amount of $125,000 (the "Principal Amount") was not advanced by the Plaintiff in relation to any project being undertaken by the Defendant or by the Defendant's company, Siemens Construction Ltd. ("SCL"), but says that the Principal Amount was lent to the Defendant personally to do with it as he pleased.

2. In reply to paragraph 6 of the Statement of Defence, the Plaintiff says that it advanced the Principal Amount to the Defendant's company, SCL, at the request of and on behalf of the Defendant. [7] The basis on which the plaintiff seeks judgment against the defendant are deemed admissions of fact, pursuant to a notice to admit served on him on February 9th, 2011, by leaving it at his address for delivery. [8] Although originally represented by counsel, Mr. Siemens has represented himself since his counsel got off the record in January 2010. [9] The notice to admit, which was served under Rule 7-7(1), requested admissions of the following facts: 1. On or about September 13, 2005, Columbia Drilling & Contracting Ltd. ("Columbia"), entered into an agreement (the "Contract") with Lucas Siemens ("Siemens"), wherein Columbia agreed to loan Siemens $125,000 (the "Principal Amount").

2. The terms of the Contract are contained in the promissory note (the "Promissory Note") dated September 13, 2005 and provide that (a) Siemens would pay interest at a rate of 7% per annum on the 13th day of every month, and (b) the whole of the outstanding Principal Amount along with any accrued interest would be due and payable on September 13, 2006.

3. Pursuant to the terms of the Contract, Columbia loaned Siemens the Principal Amount.

4. The Promissory Note became overdue as at September 13, 2006.

5. Siemens continued to make interest payments under the Contract until June of 2008.

6. Siemens has failed to make any payments under the Contract for interest or principal after June 2008.

7. There remains due and owing to Columbia from Siemens the sum of $125,000 plus interest at the rate of 7% per annum.

8. It was not an oral term of the Contract that the $125,000 would only be payable if the Whatcom Road Project broke even or was profitable and the bond funds were not needed for other obligations in relation to the Whatcom Road Project.

9. The repayment of the Principal Amount was not dependent upon the success of the Whatcom Road Project.

10. The Principal Amount was not advanced by Columbia to Siemens in relation to any project being undertaken by Siemens or his company, Siemens Construction Ltd.

11. The Principal Amount was lent to Siemens personally to do with it as he pleased.

12. Columbia advanced the Principal Amount to Siemens' company, Siemens Construction Ltd., at the request of and on behalf of Siemens.

13. The Promissory Note was not made by Siemens solely for the accommodation of Columbia.

14. Siemens received valuable consideration for making the Promissory Note. [10] The notice to admit also sought admissions of the authenticity of certain documents as follows: 1. Promissory Note in the amount of $125,000.00 in favour of Columbia Drilling & Contracting Ltd. dated September 13, 2005.

2. Bank draft receipt in the amount of $125,000.00 made payable to Siemens Contracting Ltd. dated September 13, 2005.

3. Letter from Kuhn & Company to Lucas Siemens dated January 8, 2008.

4. Letter from Kuhn & Company to Lucas Siemens dated September 2, 2008. [11] The latter two documents were letters from the plaintiff's counsel demanding payment when the defendant fell into arrears in making interest payments under the promissory note. [12] Rule 7-7(2) of the Supreme Court Rules reads as follows: (2) Unless the court otherwise orders, the truth of a fact or the authenticity of a document specified in a notice to admit is deemed to be admitted, for the purpose of the action only, unless, within 14 days after service of the notice to admit, the party receiving the notice to admit serves on the party serving the notice to admit a written statement that (a) specifically denies the truth of the fact or the authenticity of the document, (b) sets out in detail the reasons why the party cannot make the admission, or (c) states that the refusal to admit the truth of the fact or the authenticity of the document is made on the grounds of privilege or irrelevancy or that the request is otherwise improper, and sets out in detail the reasons for the refusal. [13] There has been no response to the notice to admit within the stipulated time period, or at all. [14] There is evidence before the court by an affidavit sworn March 4th, 2011 that the defendant has failed or neglected to provide documents on his list of documents for review by the plaintiff, and that on two

occasions he has failed or neglected to attend at an appointment for his examination for discovery. [15] There is also evidence that he failed or neglected to attend at a trial management conference held on February 4th, 2011, and that he has failed to file and serve a list of witnesses as ordered by Mr. Justice Grist at the trial management conference on February 4th, 2011. [16] It is in that context that the plaintiff seeks an order for judgment against the defendant on the basis of the admissions of fact and admissions of authenticity of documents deemed under Rule 7-7(2). The plaintiff says it effectively has no other option open to it to gain the necessary admissions to prove its case or to negate the defendant's, through either examination for discovery or document discovery. The plaintiff says, given the defendant's ongoing failure to engage with the processes of the court, its hands are tied except through the process of the notice to admit. [17] The plaintiff further submits that it is open to the court to order the judgment sought on the basis of the deemed admissions, citing Rule 7-7 subrule (6) which reads as follows: (6) An application for judgment or any other application may be made to the court using as evidence (a) admissions of the truth of a fact or the authenticity of a document made (i) in an affidavit or pleading filed by a party, (ii) in an examination

for discovery of a party or a person examined for discovery on behalf of a party, or (iii) in a response to a notice to admit, or (b) admissions of the truth of a fact or the authenticity of a document deemed to be made under subrule (2) and the court, without waiting for the determination of any other questions between the parties, may make any order it considers will further the object of these Supreme Court Civil Rules. [18] The plaintiff also cites the judgment of Drake J. in Skillings v. Seasons Development Corp., (1992) 70 B.C.L.R. (2d) 14, where he held in paragraph 11 as follows: The facts set out in the Notice to Admit, if admitted or deemed to be so, would constitute proof of the claim in negligence alleged... The response of these Defendants to the Notice, being improper under the Rule and inadequate in fact, leaves me with no alternative but to deem those facts to be admitted: For the Rule, employing as it does the word "shall" makes such deeming mandatory. [19] The plaintiff submits that, in any event, the defendant has raised no defence of substance, that the Bills of Exchange Act, R.S.C. 1985, c B-4, ss. 176 and 184, preclude the defendant from contradicting the promise in the promissory note, and further that it is not open for the defendant to lead oral evidence in conflict with the terms of the note, citing in support of that proposition Piscine Energetics

Inc. v. Choi, 2010 BCSC 874. The plaintiff in particular relies on paragraph 31, which reads as follows: [31] It is not open to Choi to establish an oral agreement in conflict with the terms of note: [citations omitted]. In particular, Piscine objected on this application to the court receiving evidence with respect to Choi's intentions and expectations in relation to the note. [20] The plaintiff also submits that the defendant's assertion that there was no consideration to him, and that the promissory note was an accommodation solely for the benefit of the plaintiff is answered in Piscine, supra, at paragraphs 49 and 50 as follows: [49] In Zubrecki, a case analogous to the case at bar, the defendants and their corporation made a promissory note in favour of the plaintiff in order to secure repayment of the sum advanced by the plaintiff to release their mining leases from execution. They did not repay the note according to its terms. When the plaintiff sued, the defendants argued they had not received valuable consideration for note. That plea failed. Justice Smith held, at para. 39: In my view there is no merit in the defences put forward by the individual defendants that, as the money was advanced with respect to mining lease nominally owned by the defendant company, they received no consideration for their respective promises to pay. Their relationship with the defendant

company is such that the advance of money for the company's benefit is sufficient to support their agreement to repay it. [50] I find there was a direct and immediate value to Choi for the making of the note. The note was given to secure a loan to a closely-held privately-owned company of which he was a principal. That company had no assets with which it could purchase Piscine and no value at the outset. It became the vehicle through which Choi and Fisher generated income and engaged in business. Choi received valuable consideration for the execution of the note and cannot be said to be an accommodation maker. [21] The plaintiff submits the same principles avail in the present case and it is not open to the defendant to argue there is no consideration to him based on the advance of funds to his company. [22] Mr. Siemens appeared on his own behalf. In effect, he sought an order permitting him to withdraw the admissions upon which the plaintiff has based its application for judgment, and he has also sought an adjournment. He produced a note from his family doctor that reads as follows: Please be advised that I am the family physician for the above-named patient. This patient has been struggling with depressed mood for quite some time. He recently came into my office and I diagnosed him with depression. His depression has prevented him from focusing his thoughts and direction. He

has had difficulty with ambition and has therefore withdrawn and not paid attention to legal issues that have come up in the recent period. I have recently started him on some medication which may be of some benefit. The medication will take some time to have its effect, but we are hopeful that he will improve in the next two to three months. I trust this is of benefit to you. [23] Mr. Siemens said that he has simply been unable to focus his attention and do what has been necessary to do to properly defend this case, that his failure to properly engage with the process has not been deliberately obstructive or "stonewalling", but the product of a mood disorder. He says there is more to this dispute than meets the eye, and in effect he asks for an opportunity to get what he described as his train back on the rails to defend against this claim properly. [24] He indicated in oral submissions that he has spoken with a lawyer, that the lawyer had spoken to counsel for the plaintiff, and the lawyer has in effect advised him that he needs time to get his tackle in order to properly defend this case. [25] The plaintiff resists Mr. Siemens' applications, asserting that there is prejudice to the plaintiff, the principal of which has now retired, and particularly if the defendant's company is in financial difficulty, or facing other creditors, any significant delay may well make it

difficult for the plaintiff to realize on its judgment. [26] The plaintiff relies on several cases, including Surerus v. Leroux, 2010 BCSC 1344, and Nesbitt v. Miramar Mining Corporation 2000 BCSC 0187. In the former case the plaintiff relies on paragraph 19, which reads as follows: [19] In 374787 B.C. Ltd. v. Great West Management Corp., 2007 BCSC 582, Madam Justice Martinson states at para. 27: 27 As a general rule, the Court must consider whether in the circumstances of the case the interests of justice justify the withdrawal of the admission. The following factors, which are not exhaustive are relevant: delay, loss of a trial date, a party is responsible for an erroneous admission, inadvertence in the making of the admission and estoppel. [Citations omitted]. [27] In the latter case, on the issue of delay, loss of a trial date, party responsible and inadvertence of an admission, Mr. Justice Drossos held as follows at paragraphs 45 through 48:

DELAY [45] The party receiving the admission can be prejudiced by delays from the time the admission was made until the application to withdraw. The more time that has passed since the admission, the more likely it is that the problems will arise in marshalling evidence and locating witnesses, whose memories of the event may be less reliable over time, or of witnesses dying. Further, the reliance of the party on the admission will be increasingly prejudicial as he or she may be lulled into believing certain factors are not in issue. [Citations omitted]. [46] If the applicant has allowed a substantial time period to lapse, from the time the facts which suggest that counsel may want to withdraw the admission came to light, and the time the application is actually made, this will further prejudice the other party. [Citations omitted].

LOSS OF TRIAL DATE [47] If the applicant makes the application for withdrawal of an admission at a late date, it may be that allowing the application will cause the loss of a trial date. In such circumstances, the prejudice to the responding party is great. [Citations omitted].

PARTY RESPONSIBLE [48] Lamperson, J. in Drake v. Clark, (1996), 24 B.C.L.R. (3d) 315 (S.C. ), found that the dilemma faced by the parties in the application was solely the responsibility of the defendant in that she was the party who initially made the erroneous admission. This factor was also significant in meeting the interests of justice.

INADVERTENCE OF ADMISSION [49] It is not necessary for an admission to have been made through inadvertence or haste in order for the admission to be withdrawn. However, this is a factor to be considered. If the admission had been made inadvertently or hastily, this factor operates in favour of granting leave to withdraw the admission. (Norlympia, supra, at pp. 148-9.) [28] Drossos J. also held as follows in connection with the existence of a triable issue: [50] Another factor that works in favour of the applicant is if the admission the applicant defendant seeks to have withdrawn constitutes a triable issue that should be determined by the court. This factor is more persuasive if there is a substantial prejudice to the defendant or a potential loss due to the admission. (Whittaker, supra, at p. 389.) However, in Whittaker where the exposure to the defendant applicant, if the admission was not withdrawn, was considerable in the estimated amount of approximately $500,000.00, the court still refused leave to withdraw on considering the factors in support of the plaintiff's position. [29] In the present case, what I am confronted with is an action that although having roots in events and documents arising in 2005, was not commenced until September 2008. It appears that the plaintiff's attempts to make discovery of documents and examine the defendant for discovery began in December

2010 and the deemed admission was made as of February 23rd, 2011. The delay in this case between the application to withdraw and the admission is thus not great. [30] The trial date will, however, be lost if the adjournment is granted, or the admissions withdrawn, and that constitutes significant prejudice to the plaintiff in those circumstances. [31] The dilemma in this case is solely the responsibility of the defendant, but it appears from his submissions that he is asserting the admissions were made through inadvertence due to his mental state or mood disorder. [32] The issue as to whether there is a triable issue is a vexing one in this case. The plaintiff says in effect that there is no legal basis to resist its case. The defendant, through his pleadings at least, submits that the issue is what was the agreement between his company and the plaintiff, and what was his status as signatory of the promissory note. [33] In Piscine v. Choi, supra, while acknowledging the principle that extrinsic evidence may not contradict the terms of the note, Willcock J. noted that there were exceptions to the rule against the reception of parol evidence in aid of the interpretation of contracts. He held as follows at paragraphs 33 to 35: [33] Among the recognized exceptions to the rule that parol evidence will not be received in aid of the interpretation of contracts are those described as

follows, in Fox v. Toronto General Trusts Corporation et al., [1934] O.R. 671 (C.A.): Oral evidence may be admissible as against an immediate party, (1) to show that what purports to be a complete contract has never come into operative existence, or (2) to impeach the consideration for the contract, or (3) to show that the contract has been discharged by payment, release or otherwise, but apart from these three cases there is no variation from the general rule as above stated, and none of these cases apply to the present circumstances. [34] Further, where a party signs promissory note the court may look to surrounding circumstances to determine whether the parties intended to make signatory a surety rather than a principal debtor. As Crawford notes in The Law of Banking and Payment in Canada, looseleaf (Aurora: Canada Law Book, 2010) (citing Traders Group v. Carroll, [citation omitted]; Bank of Montreal v. Heidt, [citation omitted]; and Bank of Toronto v. Smith, [citation omitted]: "Evidence is admissible to show the real relationship between the parties if that does not contradict the face of the instrument." [34] In the present case I simply do not have from the defendant any full, complete or clear indication of what the substance of the triable issue that he asserts there is. It may be that his status as signatory to the promissory note and his corresponding liability is at

issue, but I am unable to discern whether that is so, and nor am I able to discern whether and to what extent if it were so, that would support his defence or compromise the claim of the plaintiff. [35] In my view, the appropriate disposition at this stage is not to order the admissions to be withdrawn, but to order the trial adjourned with conditions. The conditions are that: (1) The defendant will pay the plaintiff's costs of the trial management conference and its costs thrown away occasioned by this adjournment, forthwith. (2) Within 21 days of the date of this order, the defendant will bring a proper application to withdraw his admissions of fact on affidavit evidence setting forth the evidence he relies on in support of his defence and in support of there being a triable issue. (3) Within 21 days of the date of this order, the defendant will produce to the plaintiff all documents listed for inspection of the plaintiff. (4) The defendant will attend at an examination for discovery as required by the plaintiff. [36] If the defendant fails to comply with any of the conditions which I have ordered, the plaintiff has liberty to apply for judgment on the basis of the deemed admissions of fact as set forth in the notice to admit dated February 9th, 2011. Cullen J.