NOVA SCOTIA COURT OF APPEAL
Citation: DRL Coachlines Ltd. v. GE Canada Equipment Financing G.P.,
2011 NSCA 23
Date: 20110222
Docket: CA 322580
Registry: Halifax
Between:
DRL Coachlines Limited and
Ruth Roberts-Tetford
Appellants
v.
GE Canada Equipment Financing G.P.
Respondent
Judges: Oland, Hamilton, Beveridge, JJ.A.
Appeal Heard: January 18, 2011, in Halifax, Nova Scotia
Held: Appeal is dismissed with costs payable to the respondent in the amount of $4,000, plus disbursements as agreed or taxed, per reasons for judgment of Oland, J.A.; Hamilton and Beveridge, JJ.A. concurring.
Counsel: Gavin Giles, Q.C., and Jeff Aucoin for the appellants
David G. Coles, Q.C. and Joshua J. Santimaw and
Matthew A. Conrad, Articled Clerk, for the respondent
Reasons for judgment:
[1] The litigation which led to this appeal arose from a $5.9 million loan in 2003 by the respondent, GE Canada Equipment Financing G.P., to DRL Vacations Limited to purchase buses for its Nova Scotia operation. At all material times, the appellant Ruth Roberts-Tetford was the owner and president of Vacations. Her son, the late Javis Roberts, operated that business in this province. Over the years, the GE loan was reduced to some $635,000.
[2] When Vacations failed to pay the outstanding balance, GE commenced action in March 2006 against Vacations and the guarantors of that loan, namely Ms. Roberts-Tetford, the appellant DRL Coachlines Limited, and 3068485 NSL Limited. Javis had signed the Coachlines’ guarantee as its corporate secretary, which he was not. Ms. Roberts-Tetford was Coachlines’ only officer and director. Javis died soon after GE commenced proceedings.
[3] In August 2006, GE obtained summary judgment against Vacations and 3068485 NSL for the amount it claimed was outstanding.
[4] The trial of GE’s claims against the appellants, Ms. Roberts-Tetford and Coachlines, pursuant to their guarantees was heard by Justice John D. Murphy. He found that their guarantees in favour of GE were valid and enforceable, and the appellants jointly and severally liable for the full indebtedness owed by Vacations to GE. He ordered them, jointly and severally, to pay over $810,000 to GE, being the balance of the loan plus special damages, and interest.
[5] In determining the validity of the guarantees and the liability of the appellants, the judge rejected Ms. Roberts-Tetford’s arguments concerning her personal guarantee. She claimed that she: had not received the entire guarantee document, did not understand what she was signing, had been pressured to sign by her son Javis, and had nothing to gain from the loan to Vacations. She also argued that Javis was GE’s agent, and certain documents had been forged. The judge’s lengthy and detailed decision is reported as 2009 NSSC 414. His order issued on December 14, 2009.
[6] The parties were unable to agree on costs and their counsel filed submissions which the trial judge considered. In a separate decision reported as 2010 NSSC 204, he ordered costs pursuant to Scale 2 of the Tariff. His cost order is dated July 6, 2010.
[7] The appellants, Coachlines and Ms. Roberts-Tetford, appealed both the trial decision and order, and the decision and order on costs. At the hearing of the appeal, their counsel advised that Coachlines was not pursuing its appeal. Accordingly, this decision deals only with the personal guarantee of Ms. Roberts-Tetford.
ISSUES
[8] In the Amended Notice of Appeal, Ms. Roberts-Tetford summarized the issues as follows:
1. The Learned Judge erred in ascribing to Roberts-Tetford business knowledge, business successes and related financial means which she did not have;
2. The Learned Judge erred in ascribing to Roberts-Tetford a business interest or profit motive in Vacations’s operations which she did not have;
3. The Learned Judge, in erring as described in paragraphs 1, and 2 above, misdirected himself as to the true and accurate role of Roberts-Tetford as an “accommodation guarantor” only in the dealings between Vacations and the Respondent;
4. The learned Judge erred at law in determining the legal burden of proof to be applied to the evidence and as such misdirected himself on the onus accruing to the Respondent to demonstrate that at all of the material times Roberts-Tetford was aware of and fully informed on all of the ramifications of her guarantee;
5. The Learned Judge erred in failing to properly consider the role of the late Javis Roberts in securing the guarantees and the influences of Javis Roberts on Roberts-Tetford in securing her guarantee;
6. The Learned Judge erred in failing to find that the late Javis Roberts was for all intents and purposes the agent of the Respondent for the purposes of securing Roberts-Tetford’s guarantee;
7. The Learned Judge erred in making the award of party/party costs in favour of the Respondent which was made.
STANDARD OF REVIEW
[9] The first three, fifth and sixth issues concern findings of fact and so attract the standard of review of palpable and overriding error: Housen v. Nickolaisen, 2002 SCC 33 at ¶ 6. The fourth issue as stated concerns the burden of proof. The standard of review is correctness: F.M. v. Nova Scotia (Community Services), 2010 NSCA 37 at ¶ 22.
[10] Costs awards are discretionary. Appellate intervention is not warranted unless there has been an application of incorrect legal principles or the decision is so clearly wrong as to amount to a manifest injustice: Awan v. Cumberland Health Authority, 2010 NSCA 50.
ANALYSIS
[11] The first six grounds are inter-related, and I will deal with them together.
[12] On appeal, Ms. Roberts-Tetford argues that the trial judge erred in describing her as the “matriarch of a family transportation business”. She emphasizes that she had had little formal education. According to Ms. Roberts-Tetford, the evidence as to her involvement with Vacations and Coachlines was irreconcilable with the judge’s description of her. She claims she relied on Javis and that he misrepresented her net worth and his authority with respect to the companies to GE. She faults GE’s limited contact with her concerning the personal guarantee, reiterates that she signed it without reading it, and says that she did not sign subsequent documents relating to the loan.
[13] The trial lasted four days. The senior manager for GE Capital Solutions in Atlantic Canada, Ms. Roberts-Tetford, and her son Jason who is the manager of Coachlines in Newfoundland, testified. In final submissions, the trial judge heard all the arguments now being made on appeal by Ms. Roberts-Tetford. In his decision, he carefully considered and addressed each squarely. In order to provide context for my reasons, I will include some extracts from his judgment in my review of his decision which follows.
[14] GE did not escape criticism. After determining that it took reasonable steps to obtain security documentation and there had been no reason for it to be concerned as to the identity or authority of the persons purporting to sign the guarantees, the trial judge noted that the litigation might not have arisen if GE had followed a lender’s preferred practice when advancing substantial loans. In this regard, the judge referred to legal opinions from solicitors representing guarantors with respect to authenticity of signatures, and the validity and enforceability of security documentation.
[15] The judge correctly stated that the liability of Ms. Roberts-Tetford would be resolved by determining whether she executed the relevant documentation with sufficient understanding of the commitments being made and, if so, whether her obligations should be relieved based upon GE’s subsequent dealings which gave rise to prejudice.
[16] As to Ms. Roberts-Tetford’s sophistication, business knowledge and acumen and credibility, the trial judge wrote:
[48] I have carefully considered the whole of Ms. Roberts‑Tetford's evidence, and the testimony of Jason Roberts. I had the opportunity to observe Ms. Roberts‑Tetford on the witness stand for a long time.
[49] I have concluded that Ms. Roberts‑Tetford is much closer to the experienced, astute businesswoman portrayed by Plaintiff's counsel than the elderly, unsophisticated, confused and grieving mother described by Defence counsel.
[50] I did not find Ms. Roberts‑Tetford to be a credible witness. ...
[51] I have no confidence in Ms. Roberts‑Tetford's evidence.
. . .
[53] Ms. Roberts‑Tetford gave me the impression that between 2000 and 2006, including during while the GE Loan and security documents were in play, Ms. Roberts‑Tetford as matriarch of a family transportation business allowed Javis to act with substantial autonomy in Nova Scotia without significant supervision of his activities, despite his working through Vacations and Coachlines, companies which she owned and of which she was president. Ms. Roberts‑Tetford trusted Javis, and she relied upon him to operate the businesses in Nova Scotia, including dealing with GE. She was prepared to follow his advice and direction, execute any document he requested or advised that a lender required her to sign, and she did not question his motive or judgment. When the Nova Scotia operation collapsed financially, Ms. Roberts‑Tetford had been placed at risk as a result of her delegation of authority to Javis and reliance upon him. . . . My impression, after observing her carefully as a witness, is that because she has concluded that she did nothing wrong (except perhaps to misplace trust in her son to run a business and provide her with honest reports and advice), she should not suffer financially. Having made that judgement, she gave such answers as she felt were appropriate to protect her position, as she feels any wrongdoing was Javis’ and not hers.
[17] The judge rejected Ms. Roberts-Tetford’s claims that she had not received the entire guarantee, she had been pressured to sign, she did not understand what she was signing, she did not enjoy similar bargaining power to GE and she had nothing to gain from the loan to Vacations:
[56] ...I am satisfied based on the documents showing fax transmittal information and the oral evidence that the entire Roberts‑Tetford Guarantee was transmitted to Montreal and that she received the whole document. I also find, based on the transmittal letter, that it was sent to her directly by GE, and not by Javis, and that she was not pressured to sign immediately or under duress; indeed, she was invited to contact GE if she had any questions. I disagree with the Defendant's submission that the law saves Ms. Roberts‑Tetford from liability because she did not enjoy similar bargaining power to GE. She was an experienced businesswoman who testified that she “certainly” knew she was guaranteeing repayment of the Loan, a loan which she participated in deciding Vacations should obtain in order to purchase the school buses. I disagree with the Defendant's position that she had no interest or benefit to obtain from the loan ‑ Vacations, Coachlines, and other entities were part of a family business group owned by Ms. Roberts‑Tetford, and she stood to gain or lose depending on the success or failure of any branch of the business, including Vacations, notwithstanding she may not have been receiving revenue from the company during the period the loan was outstanding. Unlike in the various authorities referenced by the Defendant ‑ Lloyd’s Bank, Limited v. Bundy [1974] 3 All E.R. 757, as well as Chaplin & Co., Limited v. Brammall [1908] 1 K.B. 233 (C.A.) and E.& R. Distributors v. Atlas Drywall Ltd. [1980] B.C.J. No. 1213 (C.A.) and others in the supplementary authority booklet, Ms. Roberts‑Tetford was the head of the business, the person who had operated the family business affairs for several years after Dorman Roberts’ death, and was not a naive parent duped by business‑wise offspring. Ms. Roberts‑Tetford was capable of appreciating what she was signing, or of seeking advice if she deemed it appropriate to do so ‑ her level of sophistication was far higher than that of the guarantors referred to in the authorities cited by the Defendants. The guarantee she was signing was her support for a business operated by Javis in Nova Scotia; she was owner, president and director of the Company running that business, and could have asserted her authority in that regard with respect to Vacations. Those circumstances do not connote inequality of bargaining power with GE.
The judge also rejected the argument that Javis was GE’s agent, which he described as an assertion not supported by the facts of the case.
[18] With respect to Ms. Roberts-Tetford’s personal guarantee, the trial judge concluded:
[60] I am satisfied that Ms. Roberts‑Tetford executed a guarantee in favour of GE on February 11, 2003, that it was signed under circumstances which were not unconscionable, that she knew what she was signing, and could have sought professional advice or questioned the lender if she had chosen to do so, instead of delegating judgement to her son and relying on him. The Roberts‑Tetford Guarantee is valid, binding and enforceable unless some activity by GE after execution prejudiced Ms. Roberts‑Tetford.
He determined that there was no such subsequent activity by GE.
[19] On appeal, Ms. Roberts-Tetford has reiterated the very same arguments that she made before the trial judge. She acknowledges that, in his decision, the judge made clear findings of credibility and of fact. She concedes the high degree of deference owed by courts of appeal to findings of fact made by trial judges: see, for example, Parker v. Parsons (1997), 160 N.S.R. (2d) 321 (N.S.C.A.) at ¶ 18; Miller v. Royal Bank of Canada, 2008 NSCA 118 at ¶ 6. However, according to this appellant, there was ample evidence upon which the judge should have found in her favour. With respect, having reviewed the record and his decision, I see ample evidence to support his findings of fact and credibility. I am unable to detect any palpable and overriding error which would permit appellate intervention in regard to any of the grounds of appeal for which this is the standard of review.
[20] At the hearing of her appeal, Ms. Roberts-Tetford submits that her appeal is about what kind of commercial society we have become or want, where the uneducated and the vulnerable, such as herself, are not protected by the law. Her position is that the judge erred in determining the legal burden of proof and misdirected himself as to GE’s onus to demonstrate that she was aware of and fully informed of the ramifications of her guarantee. She urges that the facts of her case are similar to those in Lloyds Bank Ltd. v. Bundy, [1974] 3 All ER 757 and Geffen v. Goodman Estate, [1991] 2 S.C.R. 353. The trial judge did not accept her argument. Neither can I.
[21] Ms. Roberts-Tetford relies on portions of the Bundy decision pertaining to inequality of bargaining power. That case also dealt with undue influence, which was considered by our Supreme Court of Canada in the Geffen decision. I will discuss the former in relation to inequality of bargaining power and the latter in relation to undue influence.
[22] In Bundy, the elderly father and his son, and the son’s company, were customers of the same bank. The father guaranteed the obligations of his son’s company and charged his home as security. He subsequently increased the amount of his personal guarantee, after consulting his own lawyer. When advised by the bank that it would only continue to support the company if he did so, the father signed documents presented to him by the bank which increased the amount of his guarantee and charge on his farm. The bank representative did not explain the company’s overdraft was at its limit or otherwise explain its accounts fully. Nor did he advise the father to obtain independent advice. The company’s situation deteriorated, and the bank proceeded to enforce the guarantee and charge against his home.
[23] In his decision, Lord Denning held that there had been inequality of bargaining power, such as to merit the intervention of the court. This principle he described as follows at p. 765:
...By virtue of it, the English law gives relief to one who, without independent advice, enters into a contract on terms which are very unfair or transfers property for a consideration which is grossly inadequate, when his bargaining power is grievously impaired by reason of his own needs or desires, or by his own ignorance or infirmity, coupled with undue influences or pressures brought to bear on him by or for the benefit of the other. When I use the word ‘undue’ I do not mean to suggest that the principle depends on proof of any wrongdoing. The one who stipulates for an unfair advantage may be moved solely by his own self-interest, unconscious of the distress he is bringing to the other. I have also avoided any reference to the will of the one being ‘dominated’ or ‘overcome’ by the other. One who is in extreme need may knowingly consent to a most improvident bargain, solely to relieve the straits in which he finds himself. Again, I do not mean to suggest that every transaction is saved by independent advice. But the absence of it may be fatal. ...
The other two judges in Bundy did not rely on inequality of bargaining power in deciding in Mr. Bundy’s favour.
[24] Ms. Roberts-Tetford argues that her situation is akin to that in Bundy: while she may have intended to sign the guarantee document, she did not appreciate its significance and she was prepared to agree to whatever her son Javis asked of her. With respect, Bundy does not apply to her circumstances.
[25] The trial judge found that, unlike the elderly farmer in that decision, despite her limited education, Ms. Roberts-Tetford was a capable and experienced businessperson who understood just what she was signing. Vacations and Coachlines were her companies; she was their owner and President. Furthermore, in Bundy, the bank representative had appeared, documents in hand, at the farmer’s home. Here, Ms. Roberts-Tetford had been faxed material and invited by GE to ask any questions, before signing the personal guarantee. She chose not to take that opportunity or to seek other or independent advice. In short, her bargaining power was not “grievously impaired by reason of . . . ignorance or infirmity.”
[26] Ms. Roberts-Tetford also argues undue influence, relying on Geffen. There, Tzina Goodman, who had a history of mental problems, inherited the family home from her mother. At the instigation of, and with her brothers, she met with a lawyer to consider options regarding the property. No agreement was reached. Afterwards, without her brothers’ involvement, Ms. Goodman continued to seek advice. With the assistance of that same lawyer, she created a trust to which the house was transferred. It provided that, on her death, the trust property would be divided equally among her mother’s surviving grandchildren. Ms. Goodman’s will left her entire estate to her own children. Following her death, her estate brought an action against the trustees claiming that Ms. Goodman had entered into the trust agreement as a result of the undue influence of her brothers.
[27] In her decision, Cory J. concurring, Wilson J. stated (pp. 368, 377):
The equitable doctrine of undue influence was developed, as was pointed out by Lindley L.J. in Allcard v. Skinner (1887), 36 Ch. D. 145, not to save people from the consequences of their own folly but to save them from being victimized by other people (at pp. 182‑83). ...
. . .
What then is the nature of the relationship that must exist in order to give rise to a presumption of undue influence? . . . It seems to me . . . that when one speaks of “influence” one is really referring to the ability of one person to dominate the will of another, whether through manipulation, coercion, or outright but subtle abuse of power. . . . To dominate the will of another simply means to exercise a persuasive influence over him or her. The ability to exercise such influence may arise from a relationship of trust or confidence but it may arise from other relationships as well. ...
In the following paragraph, Wilson J. stated that, while the requirement of manifest disadvantage was perhaps appropriate on a purely commercial setting, it was a “wholly unrealistic test” to apply to a gift.
[28] Ms. Roberts-Tetford argues that her situation is identical to that in Geffen: she was unduly influenced and victimized by her son and ought to be relieved of the obligations set out in the guarantee she signed.
[29] At ¶ 59 of his decision, the trial judge referred to Geffen and stated that Ms. Roberts-Tetford was not at a “manifest disadvantage” and that the onus on GE which was dealing with Javis, who had apparent authority, was to do no more than to provide the guarantee to her and to offer to respond to inquiries, which it did. He reiterated that she was not a bystander or a non-participant, but rather a principal who, to her regret, relied upon her son. He found that Ms. Roberts-Tetford understood the ramifications of signing the personal guarantee and had been given the opportunity to seek advice. It is evident that the judge considered the doctrine of undue influence, and decided that this was a case where the appellant has not been victimized, but rather was seeking to avoid the consequences of her own decisions, made knowingly and of her own free will. I see no error which would attract appellate intervention.
[30] I would dismiss the appeal on the merits of the appeal.
[31] I turn then to Ms. Roberts-Tetford’s appeal of the judge’s costs award and order. GE sought party-party costs based on Tariff A Scale 3 totalling some $108,000. That amount included the costs motion and disbursements. Alternatively, GE suggested costs based on Tariff A Scale 2 totalling almost $87,000.
[32] The judge agreed with the appellants that the amount in issue as claimed by GE was high and, applying Tariff A Scale 2 to a lower amount, awarded party-party costs of some $69,600. In doing so, he rejected the argument that the case was a “garden variety enforcement of a guarantee”, “not complex” or “simple”. He pointed to the numerous factual and legal disputes concerning the personal guarantee and Coachlines’ corporate guarantee, over 800 pages of documentary evidence, various procedural matters, the extensive testimony given by Ms. Roberts-Tetford under direct and cross-examination, and closing submissions lasting over two and one-half hours by each of counsel for GE and for the appellants. He also rejected the appellants’ claim that costs should be awarded on a lump sum basis and that $30,000 and disbursements would be appropriate.
[33] Ms. Roberts-Tetford concedes an award of costs is discretionary. She submits that the judge erred by awarding tariff-based costs where GE had not furnished him with information regarding its actual legal expenses. The judge had rejected this argument in his costs decision, saying:
[25] ...While it would be helpful and desirable to have that information, our costs regime does not require disclosure of fees unless solicitor/client costs are claimed, and in this case I do not consider the lack of billing information to be fatal to a tariff-based award.
[34] According to Ms. Roberts-Tetford, information as to actual legal expenses is necessary in order to satisfy the principle that a costs award is to provide a substantial but partial indemnity for the legal expenses incurred by the successful party. In support of her argument, she refers to Williamson v. Williams, [1998] N.S.J. No. 498 (C.A.), Founders Square Ltd. v. Nova Scotia (Attorney General) (2000), 186 N.S.R. (2d) 189 and Bevis v. CTV Inc., 2004 NSSC 209. With respect, none of these cases demonstrates that, failing receipt of material establishing actual legal costs, a judge must not award costs using the tariffs and must award a lump sum. I can find no error in legal principle nor a manifest injustice in this discretionary costs decision. I would dismiss the appeal against costs.
[35] I would dismiss the appeal and award GE costs of $4,000 together with disbursements as agreed or taxed.
Oland, J.A.
Concurred in:
Hamilton, J.A.
Beveridge, J.A.