Piscine Energetics Inc. v. Choi

2010 BCSC 874 Piscine Energetics Inc. v. Choi

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Piscine Energetics Inc. v. Choi, 2010 BCSC 874 Date: 20100622 Docket: S083147 Registry: Vancouver Between: Piscine Energetics Inc. Plaintiff And William Byung-Bu Choi Defendant (Plaintiff by Counterclaim) And Piscine Energetics Inc., 0723622 B.C. Ltd., Nuri D. Fisher, Robert Fisher and Jacob Gechman Defendants by Counterclaim Before: The Honourable Mr. Justice Willcock Reasons for Judgment in Chambers Counsel for Plaintiff and Defendants by Counterclaim Piscine Energetics Inc., Robert Fisher and Jacob Gechman: T. Delaney Counsel for Defendant (Plaintiff by Counterclaim): A.G. Sandilands Counsel for Defendants by Counterclaim 0723622 B.C. Ltd. and Nuri Fisher : K.E. Siddall Place and Date of Hearing: Vancouver, B.C. April 16, 2010 Place and Date of Judgment: Vancouver, B.C. June 22, 2010 [1] This is an application by the plaintiff, Piscine Energetics Inc. ("Piscine") for an order for judgment on a promissory note for $202,500 and for payment out of the sum of $155,718.49, garnished into court on May 6, 2008. [2] Piscine's claim is simple. It says the defendant William Byung-Bu Choi ("Choi") gave it a promissory note for the amount of $202,500 on November 10, 2005. The note was made jointly and severally by 0723622 B.C. Ltd. (the "Numbered Company"), Choi and Nuri D. Fisher ("Fisher"). It is alleged that demand has properly been

made on the note and payment has been refused. Piscine says $243,387.52 was owed on the note on May 1, 2008 and interest accrues on the note at $42.36 per day. [3] Choi seeks an order dismissing the claim and setting aside the garnishing order. He says that he and Fisher signed the note for the accommodation of the Numbered Company. As an accommodation-maker, he says he is released from any claim or obligation under the note because the creditor, Piscine, has reached an agreement with the principal debtor, the Numbered Company, to forbear from demanding payment from it or Fisher. Further, he says, the garnishment should be set aside as the funds in the hands of Fisher were not due or accruing due to him when they were garnished by Piscine. [4] In the alternative, if Piscine's action succeeds, Choi seeks judgment on his counterclaim for indemnity against the Numbered Company. He says it was an express or implied term of the loan secured by the note that the Numbered Company would pay the loan and indemnify him from and against liability to pay it. Last, he says even if he is a joint debtor, rather than a surety, he is entitled to contribution in equal measure from the other signatories, the Numbered Company and Fisher. He consents to the dismissal of the third party claim against Robert Fisher and Jacob Gechman ("Gechman"). [5] In reply to the claim for indemnity, the Numbered Company says Choi has released it from all claims, including claims for indemnity. [6] All parties seek the summary disposition of the claim and counterclaim pursuant to Rule 18A.

EVIDENCE [7] When John Lee Granberg ("Granberg") discovered that mysis shrimp in lakes in the Okanagan Valley could be harvested and put to commercial use, he developed and patented a method for harvesting and freezing the shrimp. He developed a business selling the product through a limited company, of which he was the founder and owner. That company, initially known as Timber Tire Limited, later became Piscine. [8] In 2005, Fisher and Choi agreed to buy Piscine from Granberg. They used the Numbered Company to do so. On October 31, 2005, the Numbered Company entered into a contract to purchase the shares of Piscine from Granberg for $400,000. [9] As Fisher and Choi had only $50,000 each to put into the venture, they required $300,000 to finance the Piscine share purchase. Gechman was brought into their plans as a partner and financier. He agreed to pay $100,000 to the Numbered Company for 9.6% of the shares of Piscine, an option to purchase additional shares of Piscine from the Numbered Company, and an option to purchase some of the shares of the Numbered Company from Fisher and Choi. He agreed to provide guarantees to the Numbered Company to assist it in obtaining financing for the purchase of the remainder (90.4%) of the Piscine shares. [10] Piscine provided financing for the purchase of its shares by lending $202,500 to the Numbered Company. That loan was consideration for the note upon which Piscine now sues. The note reads as follows:

PROMISSORY NOTE $202,500 November 10, 2005 FOR VALUE RECEIVED, 0723622 B.C. LTD., a British Columbia Company, NURI FISHER and WILLIAM CHOI hereby JOINTLY AND SEVERALLY promise to pay TIMBER TIRE LIMITED, a British Columbia Company, ON DEMAND, the principal amount of $202,500 in lawful money of Canada, such principal amount to bear interest, both before and after default and maturity, at an annual rate equal to the Prime Rate (as hereinafter defined) plus 1.60% per annum, calculated and compounded monthly, not in advance, until paid. For the purposes of this Promissory Note, the term "Prime Rate") shall mean the rate of interest from time to time announced by the main branch of HSBC Bank Canada in Vancouver, British Columbia as its "prime" commercial lending rate of interest for Canadian dollar loans made in Canada. [11] When the loan and note were issued, Fisher and Choi, as directors of Piscine, executed a Declaration and Notice of Interest disclosing their interest in the Numbered Company as the borrower. When the loan from Piscine to the Numbered Company was approved by the Piscine board on November 10, 2005, the following appeared in the board meeting minutes, approved by Fisher and Choi: Mr. Fisher provided the meeting with a form of promissory note evidencing the Loan (the "Promissory Note"), such Promissory Note to be executed on a joint and several basis by the Borrower

[the Numbered Company] Nuri Fisher and William Choi, and directed that the draft Promissory Note be appended to the minutes of the meeting. UPON MOTION DULY MADE AND SECONDED, IT WAS RESOLVED, with Nuri Fisher and William Choi abstaining, that the Company make the Loan to the Borrower and advance the sum of $202,500 to the Borrower upon receipt of the Promissory Note duly executed by the Borrower, Nuri Fisher and William Choi. [12] In February 2007, Choi concluded he could no longer work with Fisher. He made an offer pursuant to an earlier-executed buy-sell agreement to purchase Fisher's shares in the Numbered Company for $300,000 or to sell his shares to Fisher for the same amount. Fisher exercised his right to purchase Choi's shares. [13] The Fisher-Choi share purchase agreement was executed on May 7, 2007. It provided that Choi would be paid $75, 000 on the closing date, $75,000 plus interest six months later and $150,000 plus interest one year later, on May 7, 2008. Unbeknownst to Choi, Gechman was financing Fisher's purchase of Choi's shares. [14] Attached to and forming part of the share purchase agreement was a release of the Numbered Company executed by Choi. The release read, in part, as follows: The undersigned (the "Releasor") [Choi] ... in consideration of the sum of $10.00 paid to the Releasor (the receipt and sufficiency of which is hereby acknowledged by the

Releasor), DOES HEREBY ABSOLUTELY REMISE, RELEASE AND FOREVER DISCHARGE the Releasees [the Numbered Company and its successors] of and from any manner of actions, causes of action, suits, claims, demands, liabilities, debts, damages, rights, entitlements and obligations, of every kind whatsoever, at law or in equity, whether known or unknown, which the Releasor ever had, now have [sic], or may hereafter have against the Releasees ... for or by reason of, or in any way arising out of, any cause, matter or thing existing up to the date hereof relating to any of the Releasees or the operations or affairs thereof, and more particularly, but not so as to restrict the generality of the foregoing, any claims relating to, or arising directly or indirectly by reason or consequence of the Releasor's position as a shareholder, director, member, officer or employee of any of the Releasees, as the case may be, or as a party to any agreement or arrangement with the Releasees. [15] The Fisher-Choi share purchase agreement is silent with respect to liability for the note. Neither party claims to have expressly discussed the note at the time of the signing of that agreement. [16] On October 15, 2007, Piscine demanded payment of the note. Gechman says this was done because the parties were aware that Choi would be leaving the company without having made arrangements to repay the loan and because

the loan was secured by the note. There was no response to the demand from Choi; Fisher advised Piscine that he was unable to pay the note. There is no evidence of the Numbered Company's response to the demand. [17] Fisher then took the disingenuous position that because Choi had not disclosed the debt secured by the note at the time of the execution of the share purchase agreement (which debt ought to have been equally known by Fisher), that Choi was solely liable to pay the loan and discharge the note. That argument was not advanced before me. [18] On May 1, 2008 the amount of principal and interest owing on the loan was $243,387.52. Interest was accruing at 1.6%. Piscine issued a garnishing order before judgment on May 5, requiring Fisher to pay into court the last instalment payable to Choi under the Fisher-Choi share purchase agreement. [19] Choi says that as of that date the last payment to him by Fisher was not yet due. Gechman had not yet advanced funds to Fisher to permit Fisher to make the contemplated payment to Choi. Payment was due on May 7, 2008.

ISSUES Accommodation and Discharge [20] Choi says he signed the note as an accommodation-maker, as defined in the Bills of Exchange Act, R.S.C. 1985, c. B‑4 [Act]: one who signs for the benefit of a principal debtor, without receiving value. An accommodation-maker will be liable to the holder of the note despite the absence of consideration but may have defences unavailable to the principal debtor (Mollot v. Monette, [1981] 2 SCR 133). An accommodation-maker is a surety; he is not the principal debtor. His obligation is to pay the debt if and only if the principal debtor fails to pay its creditor. He is entitled to be indemnified by the principal debtor if called upon to pay its debt. He may be discharged of his liability as a surety by dealings between the creditor and the principal debtor. [21] Choi says it was the intention of all parties that the Numbered Company described in the loan documents as the borrower would be the principal debtor. He and Fisher signed as sureties and neither received consideration for the note. It is common ground that the proceeds of the loan secured by the note were paid to the Numbered Company rather than to Choi or Fisher and that the funds advanced were used by the Numbered Company to acquire the shares of Piscine. When the note was issued the Numbered Company had no assets; Choi says it was for that reason that the creditor sought

sureties. [22] Piscine says that some of the evidence upon which Choi seeks to rely on this application is inadmissible because it is parol evidence, introduced in an attempt to vary the terms of an unambiguous agreement in writing. If the circumstances surrounding the making of the note are examined, Piscine says the court should conclude that Choi received substantial benefit for the loan, which was value for the note. The loan enabled his company to purchase the shares of Piscine and permitted Choi to profit from the growth and income of that company. Choi's return on the loan secured by the note was substantial. His 45% interest in the Numbered Company became substantially more valuable, as reflected in the Fisher-Choi share purchase agreement. Piscine says the funds need not have passed directly to Choi for there to have been consideration. [23] In the event that he is considered to have been an accommodation party, Choi says that the dealings between the parties since the issuance of the note should result in his discharge as a surety. He urges upon the court a finding that Fisher and the other defendants by counterclaim conspired to prevent him from receiving the proceeds of the sale of his shares to Fisher. He complains that there has been no effort to collect the amount due under the note from the Numbered Company or Fisher. He says this speaks of an agreement not to

enforce the note. [24] Piscine, for its part, denies that it has released any of the other debtors. It says there is no evidence of an agreement to postpone collection or an election not to pursue them. Piscine says it is simply seeking to collect the debt from an accessible and exigible asset. [25] In relation to this defence the issues are: 1) whether Choi can lead extrinsic evidence to establish the note was made as accommodation of the Numbered Company; 2) whether Choi was an accommodation-maker as defined by the Act: (a) without receiving value therefor; and (b) for the purpose of lending his name to some other person; and 3) if so, whether the conduct of the creditor was discharged the surety afforded by Choi as accommodation-maker. Garnishment [26] There is a challenge to the garnishment. While in his statement of defence Choi seeks to have the garnishing order set aside on the ground it was not authorized by a directors' resolution that argument was not advanced before me. There is a short response to that argument: it does not lie in the mouth of the debtor to question the authority of the corporation to act for its shareholders. The more substantial challenge is founded upon the allegation the monies garnished were not due or accruing due to Choi at the time of the issuance of the order. Choi says, relying upon Bank of Nova Scotia v. Lockwood, [1989] B.C.J. 608 (Co.

Ct.), that there was no money due at the time the order was issued and no obligation of the garnishee to pay. [27] In relation to the validity of the Garnishing Order, the issue is whether the $155,718.49 payment to be made on May 7, 2008 pursuant to the Fisher-Choi share purchase agreement was "a debt, obligation or liability owing, payable or accruing due within 7 days" after the date on which the affidavit was sworn in support of the garnishing order. Indemnity and Contribution [28] Choi says it was an implied term of the loan secured by the note that the Numbered Company would pay the loan and indemnify him against liability to pay it. In the alternative, if he is a joint debtor rather than a surety, Choi says he is entitled to contribution in equal measure from the other makers, the Numbered Company and Fisher. [29] In response to the counterclaim, the Numbered Company says Choi executed a release in its favour on May 7, 2007and the release bars him from seeking indemnity or contribution from Piscine. Choi, citing Xu v. Ching, 2008 BCSC 1796, aff'd 2009 BCCA 303, says that the release is no bar to a claim for indemnity as such a claim was not in the contemplation of the parties at the time it was executed. Fisher acknowledges that a right of contribution lies against him. [30] In relation to the claim for indemnity or contribution the issues are: 1) whether Choi is a surety or a principal debtor; 2) if he is a surety, whether the May 7, 2007 release bars his claim for indemnity or contribution from the Numbered Company; and 3) what is the extent of Fisher's liability to make contribution to Choi?

ANALYSIS Is extrinsic evidence admissible? [31] It is not open to Choi to establish an oral agreement in conflict with the terms of the note: Norman Estate v. Norman (1990), 43 B.C.L.R. (2d) 193 (S.C.); Moatafavi-Hanson (1997), 46 B.C.L.R. (3d) 197 (S.C.); Hawrish v. Bank of Montreal, [1969] S.C.R. 515; Bauer v. Bank of Montreal, [1980] 2 S.C.R. 102; Carman Construction v. Canadian Pacific Railway Co., [1982] 1 S.C.R.

958. 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. [32] Choi denies that he is urging upon the court an interpretation of the note in conflict with its terms. He says extrinsic evidence is necessary to determine the parties' real relationship. [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 a 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,

(1970) N.S.R. (2d) 321 (C.A.); Bank of Montreal v. Heidt, [1972] 3 W.W.R. 206 (Sask Dist. Ct.); and Bank of Toronto v. Smith, [1950] 3. D.L.R. 169 (Ont. C.A.)) at §28:70:10(1): "Evidence is admissible to show the real relationship between the parties if that does not contradict the face of the instrument." [35] I accept the proposition that the circumstances surrounding the execution of the note may be considered in determining Choi's status. In particular, parol evidence of consideration may be received, despite the fact the note itself says it is issued "FOR VALUE RECEIVED", and despite the ruling in Mostfavi-Naeini that evidence of no consideration would not be admissible where such a representation appears on the note. It is uncertain, in my view, on the face of the note whether each maker received consideration and, while requiring the party denying consideration to discharge the onus of disproving the prima facie effect of the note, I conclude that the evidence of no consideration should be weighed. [36] I accept the plaintiff's submission that portions of Choi's affidavit are argumentative and inadmissible. I place no weight upon Choi's evidence of his intentions or his subjective beliefs that he was an accommodation maker and the argument in his affidavit. Did Choi sign the bill as drawer for the purpose of lending his name to the Numbered Company? [37] The Act defines

an accommodation party to a bill of exchange as follows: 52. (1) Valuable consideration for a bill may be constituted by (a) any consideration sufficient to support a simple contract; or (b) an antecedent debt or liability.... 54. (1) An accommodation party to a bill is a person who has signed a bill as drawer, acceptor or endorser, without receiving value therefor, and for the purpose of lending his name to some other person. (2) An accommodation party is liable on a bill to a holder for value, and it is immaterial whether, when that holder took the bill, he knew that party to be an accommodation party or not. [38] An accommodation party is one who agrees to be bound as a surety and receives no consideration for doing so. Where the intention of acting as a surety is denied, Crawford notes: "...the onus is upon the alleged surety to prove his special status" and "signatures in the place where a maker usually signs, or signatures not clearly in a representative capacity will be given their prima facie effect..." (Crawford at §28:70:10(1)). [39] There is in this case evidence that the parties to the transaction that resulted in the promissory note regarded the Numbered Company as the borrower and principal debtor. Piscine's lending resolution provided: "that the Company make the Loan to the Borrower [the Numbered Company] and [would] advance the sum of $202,500 to the Borrower

upon receipt of the Promissory Note duly executed by the Borrower, Nuri Fisher and William Choi" [emphasis added]. This, in my view, is sufficient evidence of the intention to add Choi and Fisher to the note as sureties. Did Choi sign the bill as drawer without receiving value therefor? [40] Dealing with value, Crawford notes, at §28:70:20(1): "As with intention to act as a surety, the onus is upon the person alleging that he received no value for the instrument to prove it". [41] Piscine refers to Bank of Montreal v. 1480863 Ontario Inc., [2007] O.J. 1494; Bank of Nova Scotia v. Hallgarth, (1986), 32 D.L.R. (4th) 158 (C.A.); and Norman Estate, (supra), in support of the proposition that the funds need not have passed directly to Choi for there to have been consideration. [42] Even an accommodation-maker will have some motive to execute a promissory note, usually an interest in obtaining some benefit or value for a third party, a spouse or business associate. As Crawford observes at §28:70:10(2), it would become impossible to qualify as an accommodation maker if the extension of credit itself were regarded as value to the surety. [43] In Donaldson v. MacInnis, [1999] B.C.J. No. 2738 (S.C.), Wilson J. reviewed many of the cases where the adequacy of consideration to a maker claiming to have been an accommodation-maker has been canvassed; among these were Bank of Montreal v.

Bonner, [1988] B.C.J. No. 115; Campbell v. Smith Estate, [1991] B.C.J. No. 3611 (S.C.); and Zubrecki v. Chase, [1994] B.C.J. No. 2167 (S.C.). [44] In Bank of Montreal v. Bonner, Legg J. considered the argument that one of the makers of the notes in question had not received the benefit of the loan for which the note was given. The argument was addressed as follows: The answer to counsel's argument that Mr. Bonner did not receive consideration because he personally did not receive any proceeds of the notes is that a party to a note may receive value for a note or consideration for a note although he does not personally receive the proceeds of a loan pursuant to it. In Smith v. Bank of Montreal (1976), 72 D.L.R. (3d) 154 (N.S.S.C. App. Div.) a Mr. Kilpatrick signed a note but did not personally receive the proceeds of a loan made on the security of his note from the plaintiff bank. The court stated at p. 157: "He [ Kilpatrick] received value for the note viz. $4,000 albeit he directed it to be paid to Smith". I therefore conclude that Mr. Bonner is liable with Mrs. Van Egmond to the Bank as the maker of the promissory notes. [45] In addressing the question whether the maker of the note was an accommodation party Legg J. concluded: The onus was upon Mr. Bonner to prove that he was an accommodation party (see Crawfold & Falconbridge, Banking and Bills of Exchange, 8th ed. Vol. 2 p.

1627, citing Richter v. Bartley and Mikelson, [1928] 4 D.L.R. 919 (Sask. C.A.). Counsel for Mr. Bonner relied upon the provisions of Section 55 of the Act to support his submission that Mr. Bonner was an accommodation party. He argued that because the Bank had entered into an agreement with Mrs. Van Egmond in January 1984 to forebear from demanding or enforcing payment of the outstanding loans for one year, Mr. Bonner was released from liability under the notes. [Then, after citing the provisions of s. 55 of the Bills of Exchange Act, the Court continued] My finding that Mr. Bonner received valuable consideration for the notes for the reasons mentioned earlier precludes my finding that he is an accommodation party because he was not a person who "signed ... without receiving value therefor". [46] The value to the maker of the note of the extension of credit to a closely related third party was dealt with as follows: On this issue, there is also a line of authorities dealing with promissory notes co-signed by a husband and wife; Mollot v. Monette et al, (1981) 128 D.L.R. (3d) 577 (S.C.C.); Bank of Nova Scotia v. Tucker, (1984) 50 Nfld. & PEIR 129, 149 A.P.R. 149 (Nfld. District Ct.); Bank of Nova Scotia v. Anderson & Anderson, (1982) 43 N.B.R., (2d) 137, 113 A.P.R. 137 (N.B.Q.B.). These cases deal with situations where the husband received the proceeds of the loans either

directly by monetary payments or indirectly by forebearances on the husband's existing loans. The creditor was only willing to extend credit to the husband upon obtaining the signature of the wife, a co-maker of the note. The courts held that the extension of credit to the husband was not consideration to the wife. In these cases, the wife was liable on the notes only as an accommodation party... [47] After reviewing those cases Legg J. continued: In none of the above cases was there any suggestion that the person characterised as the accommodation party had received any benefit from the promissory notes. In the case at bar I have found that Mr. Bonner received consideration on the notes because Mrs. Van Egmond was his agent. Mr. Bonner by his conduct authorised the proceeds of the loans to be paid to Mrs. Van Egmond. Further, Mr. Bonner and Mrs. Van Egmond were associated in the purchase of the Hotel. The loans, credit, and refinancing of loans, made to Mrs. Van Egmond were to assist in this purchase. [48] In Campbell, Wilkinson J. dismissed the claim of the defendant wife that she signed the note only for the benefit of her husband and her argument that she was an accommodation-maker. The fact the loan assisted the couple in retaining a house in which the wife had an interest appears to have been critical to the outcome: I am satisfied that the consideration arose out of the

desire of the wife to assist her husband and to avoid any problem of a claim against him and ultimately against the home or his share thereof. The decision by the husband to avoid a potential forced sale at the time was undoubtedly correct and resulted in a substantial benefit to the wife when the real estate market rose. [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 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. Has the conduct of the creditor discharged the surety? [51] In any event, the evidence falls far short of establishing an agreement that the note would not be enforceable according to its tenor. [52] Relying upon Traders Finance Corp. Ltd. v. Halverson, (1968), 2 D.L.R. (3d) 666, Choi says that by discharging or giving the other debtors time to pay the debt the plaintiff has "relieved the defendant from his liability". However, as noted by McGuinness in The Law of Guarantee, 2d ed. (Scarborough: Carswell, 1996) at para. 10.99, there must be clear evidence of a release or forbearance of one debtor before the acts of the creditor will be regarded as discharging the others. "Passive inactivity in and of itself is not sufficient to release the surety" (para. 10.56). [53] Crawford puts the proposition as follows, at §28:70:30: ...[W]here the holder makes a binding agreement with the principal debtor giving additional time to pay without obtaining the concurrence of one known to be an accommodation maker or endorser of a note, he discharges the surety. As in the law of suretyship generally,

however, the extension of time must be given in a binding agreement and not merely a casual indulgence and, if the creditor obtains the consent of the surety, the latter's liability will continue unaffected. [54] I find that Choi has not established such a variation in the underlying obligation as would discharge the liability of an accommodation maker or surety. He does not have the clear evidence of the release or forbearance that is required to make out the defence. He says a "clear inference" arises from the evidence that an agreement was made between Gechman and Yuri Fisher and Robert Fisher that the Plaintiff would not pursue Fisher or the Numbered Company. The evidence does not allow me to find a legally binding agreement, capable of enforcement, between Piscine and the Numbered Company and/or Fisher to delay or forgive payment of the debt. Were the funds garnished on May 7, 2008 "a debt, obligation or liability owing, payable or accruing due within 7 days" after the date on which the affidavit was sworn in support of the garnishing order? [55] Section 3 of the Court Order Enforcement Act, R.S.B.C. 1996, c. 78, permits the issuance of an order before judgment garnishing "all debts due from the garnishee to the defendant". "Debts due" are defined as follows: "debt due" and "debts due" include debts, obligations and liabilities owing, payable or accruing due and wages that

would in the ordinary course of employment become owing, payable or due within 7 days after the date on which an affidavit has been sworn under subsection (2) or subsection (3); [56] Piscine says there is an answer to Choi's argument in the decision in Ahaus Developments Ltd. v. Savage, [1994] 8 W.W.R. 131, 92 B.C.L.R. (2d) 307 (C.A.). In that case, the court noted at para. 21 that the debt, although not yet payable, was certain and unconditional and therefore, "accruing due". It was an existing debt not yet due. [57] At the time of the swearing of the affidavit in support of the garnishing order Fisher was indebted to Choi for the final payment under the share purchase agreement: $150,000 plus interest at an agreed rate accruing from May 7, 2007. Payment of that debt would become due on May 7, 2008. The debt was not conditional. The amount payable was capable of calculation and not subject to contingencies. All that was required to make the debt payable was the effluxion of time. I find the funds due on May 7, 2008 to be debts accruing due within 7 days after the date on which the affidavit had been sworn. Accordingly the funds were subject to garnishment and the order will not be set aside. Does the May 7, 2007 release bar a claim for indemnity or contribution from the Numbered Company? [58] The Numbered Company says that a claim for contribution from it is barred by a

release of claims "for or by reason of, or in any way arising out of, any cause, matter or thing existing up to the date hereof relating to any of the Releasees or the operations or affairs thereof". [59] The Court of Appeal in Bank of British Columbia Pension Plan v. Kaiser, 2000 BCCA 291, described the following rules of construction of releases at paras. 17-18: Chitty on Contracts sums up the relevant case law with respect to the interpretation of a discharge of a contract or release as follows (pp. 1074-5): 1. No particular form of words is necessary to constitute a valid release. Any words which show an evident intention to renounce a claim or discharge the obligation are sufficient.

2. The normal rules relating to the construction of a written contract also apply to a release, and so, a release in general terms is to be construed according to the particular purpose for which it was made.

3. The court will construe a release which is general in its terms in the light of the circumstances existing at the time of its execution and with reference to its context and recitals in order to give effect to the intention of the party by whom it was executed.

4. In particular, it will not be construed as applying to facts of which the party making the release had no knowledge at the time of its execution or to objects which must then have been outside his contemplation.

5. The construction of any individual release will necessarily depend upon its particular wording and phraseology. In a recent decision in this Court, Hannan v. Methanex Corp. (1998), 46 B.C.L.R. (3d) 230 at 241, Donald J.A. (for the court) quoted with approval this passage from White v. Central Trust Co. (1984), 7 D.L.R. (4th) 236 (N.B.C.A.), where La Forest J.A. (as he then was) said this, at pp. 247-8: Like other written documents, one must seek the meaning of a release from the words used by the parties. Though the context in which it was executed may be useful in interpreting the words, it must be remembered that the words used govern. As in other cases, too, the document must be read as a whole. This is particularly important to bear in mind in construing releases, the operative parts of which are often written in the broadest of terms. Thus reference is frequently made to recitals to determine the specific matters upon which the parties have obviously focused to confine the operation of general words. As Lord Westbury stated in the House of Lords' case of Directors of London & South Western R. Co. v. Blackmore (1870), L.R. 4 H.L. 610 at p. 623: "The general words in a release are limited always to that thing or those things which were specially in the contemplation of the parties at the time when the release was given." By referring to what was in the contemplation of

the parties, Lord Westbury was, of course, not opening the door to adducing evidence of what was actually going on in their minds, still less to making inferences about it. Such considerations are relevant solely to issues such as undue influence, mistake, fraud and the like which have no application here. What the statement quoted means is that in determining what was contemplated by the parties, the words used in a document need not be looked at in a vacuum. The specific context in which a document was executed may well assist in understanding the words used. It is perfectly proper, and indeed may be necessary, to look at the surrounding circumstances in order to ascertain what the parties were really contracting about. For authority for the foregoing propositions, see in addition to the cases to which I expressly refer, those cited in Halsbury's Laws of England, 4th ed., Vol. 9, pp. 412-3, and Vol. 12, p. 642. [Emphasis of Donald JA] [60] Unlike releases in common use, such as that considered by the court in Xu, the release in this case did not refer to claims "for or by any reason arising out of any cause, act, deed, matter, thing, omission or other occurrence whatsoever existing to the current date or which can, shall or may arise in the future..." [61] Neither its wording nor the circumstances in which it was executed support the conclusion that the May 7, 2007 release

was intended to foreclose claims for indemnity arising from demands made on Choi after the execution of the release. Choi's claim for contribution did not arise until payment of the debt and cannot therefore be said to be a "cause, matter or thing existing" as of the date of the release. Further, the specific reference to claims that might be made by Choi "by reason or consequence of" his position as a "shareholder, director, member, officer or employee" of Piscine may be said to reflect the nature of claims considered by the parties when the release was drafted and executed. Is Choi a surety entitled to indemnity from the Numbered Company? [62] The fact that receipt of value precludes Choi from being considered an accommodation maker under the Act does not preclude him from being a surety with the equitable rights and obligations that status entails. One of those is the right to claim indemnity from the principal debtor upon payment of his debt. Crawford at §28:70:40(1) describes the implied right of indemnity as a fundamental incident of suretyship. [63] In Turner v. Turner (1957), 11 D.L.R. (2d) 489, [1958] O.R. 31, the Ontario Court of Appeal held that it was an error on the part of a trial judge to dismiss a surety's claim for indemnity from the principal debtor on the ground the surety did not meet the statutory definition of an "accommodation maker" at p. 490-491: The

learned trial Judge, quite properly, held that on the evidence the plaintiff was not an accommodation maker under the Statute, - Bills of Exchange Act, R.S.C. 1952, c. 15, s. 55(1) which defines for the purposes of the Act an accommodation party to a bill as "a person who has signed a bill as drawer, acceptor or endorser, without receiving value therefor, and for the purpose of lending his name to some other person." The plaintiff did receive some value from the payee of the note, namely, the discharge of the balance of her original obligation amounting to the sum of $89.33 and I think also the sum of $10 which was remitted to her by her husband. Having found that the plaintiff was not an accommodation maker under the Statute, the learned trial Judge dismissed her action, and in so doing I think he was wrong. The plaintiff's claim is not dependent on the Statute, but on other legal considerations, and in my opinion she has pleaded and proved sufficient facts to entitle her to succeed though not for the full amount claimed by her. [Emphasis added.] [64] I find it was the intention of the Numbered Company, Choi and Fisher that the latter individuals would be sureties. It was an implied term of the loan secured by the note that the Numbered Company would pay the loan and indemnify Choi and Fisher against their potential liability to pay it. Having paid $155,718.49 of the debt of

the Numbered Company to Piscine, Choi is entitled to an order requiring the Numbered Company to pay him, as indemnity, that sum plus interest from the date of garnishment. Is Choi entitled to contribution from Fisher? [65] The claim for contribution from Fisher arises as an incident of the payment of a disproportionate share of the debt by one of two co-sureties. Choi has paid more than one-half of the debt of the Numbered Company. I cannot find on the evidence that there was any agreement between Fisher and Choi to depart from that rule. Some of the offers exchanged prior to the Fisher-Choi share purchase agreement made express provision for dealing with the debt on the note. The issue was clearly in the contemplation of the parties. In the absence of any provision in the final agreement between the parties the only conclusion that should be drawn, in my opinion, is that the parties were content to let claims for contribution be dealt with according to established principles. [66] The Supreme Court of Canada noted in Hawrish v. Peters et al., [1982] 1 S.C.R. 1083, at p. 1086, citing with approval Rowlatt on Principal and Surety (4th ed. 1982), at p. 197: No claim for contribution accrues till a surety has paid more than his share of what is unpaid by the debtor As soon as the surety has paid his share he can sue his co‑sureties toties quoties for every further payment made by

him. [67] To the same effect, the Court cited Holmstead and Gale, Rules of Practice, (Annotated), 1273: Until one surety has paid more than his due proportion of the entire debt, he cannot call on a co-surety to contribute merely because he has paid more than he presently ought to pay Strictly speaking, a right to indemnity, as such, arises only when the surety has paid the debt [68] Choi is, therefore, entitled to an order for contribution to the extent he has paid more than half of the obligation to Piscine under the note. The total indebtedness stood at $243,387.52 on May 1, 2008. Choi's pro rata share of that debt amounted to $121,693.76. He is entitled to judgement for contribution from Fisher in the amount of $34,024.73 (the difference between his share of the liability of the Numbered Company on the note and the amount garnished). In addition, he is entitled to interest on that sum from the date of the garnishment. Judgment [69] The plaintiff will have judgment against the defendant Choi on the note in the amount of $243,387.52 plus interest of $42.36 per diem from May 1, 2008 to judgment. [70] There will be an order for the payment out to the plaintiff of the funds garnished on May 1, 2008, together with any interest accumulated on that sum, on account of that judgment. [71] The defendant will have a declaration that he is entitled to be indemnified by the Numbered

Company from and against his liability to pay the judgment and shall have judgment against the Numbered Company for $155,718.49, that portion of the debt paid to date. [72] The defendant will have a declaration that he is entitled to contribution from Fisher for all payments on the judgment in excess of the sum of $121,693.76 and to judgement for contribution from Fisher in the amount of $34,024.73 and interest on that sum from the date of the garnishment to judgment. [73] The parties have leave to speak to interest calculations and to costs. _______ The Honourable Mr. Justice Willcock