Citation: Pyramid Properties Ltd. v. 3105010 Nova Scotia Ltd.,
2010 NSSC 50
Date: 20100209
Docket: Hfx 315391
Registry: Halifax
Between:
Pyramid Properties Limited
Appellant
v.
3105010 Nova Scotia Limited
Respondent
Judge: The Honourable Justice Patrick Duncan
Heard: November 17, 2009, in Halifax, Nova Scotia
Decision: February 9, 2010
Counsel: Lisanne M. Jacklin, for the Appellant
William L. Mahody, for the Respondent
By the Court:
INTRODUCTION
[1] A falling out amongst business partners resulted in a total of five claims being filed in the Small Claims Court. The dispute has its origins in a business transaction involving the purchase of an income property in July of 2006. The decisions in four of those claims have been appealed by one defendant, Pyramid Properties Ltd. (Pyramid), which was held liable for various amounts, and to various persons. The claims under appeal are: (with appeal file numbers in brackets)
[2] SCCH 298725 (HFX 315391) (the subject of this appeal)
Patrick Matthew Johnston, David Anthony Yetman and 3105010 Nova Scotia Ltd. v. Pyramid Properties Ltd., John Walter Chennell and George Graham
This action claimed the sum of $1,989.97 as the outstanding balance of a loan of $22,000 alleged to have been made by 3105010 Nova Scotia Limited to the defendant(s).
[3] SCCH 298727( HFX. 315392 )
UC Investments Inc. v. Pyramid Properties Ltd., John Walter Chennell and George Graham
This action claimed the sum of $4,000, being the balance of a loan alleged to have been made by UC Investments Inc. to the defendant(s).
[4] SCCH 298728 (HFX. 315393)
Patrick Matthew Johnston and David Yetman v. Pyramid Properties Ltd., John Walter Chennell, and George Graham
This action claimed the sum of $12,882 as a real estate commission alleged to be payable by the defendant(s).
[5] SCCH298730 (HFX. 315395)
Patrick Matthew Johnston and Tracey MacDonald v. Pyramid Properties Ltd., John Walter Chennell, and George Graham
This action claimed the sum of $22,000 made as a personal loan to the defendant(s).
[6] By agreement of the parties the claims were litigated in a single hearing, both at trial and on appeal.
FACTS
[7] The adjudicator rendered a single decision that addressed each of the four claims. The following are the facts as set out in that decision.
[8] Patrick Johnston and David Yetman were principals of Century 21 Team One Realty Inc. (Century 21). Mr. Johnston also worked as a real estate agent for the company. David Yetman was an active real estate agent who held a broker’s licence.
[9] Mr. Johnston was a principal of, and through a holding company held shares in, UC Investments Inc. (UC). UC purchased underperforming apartment buildings, improved them and then either rented the units or resold the building.
[10] George Graham has been a contractor, who over the years has accumulated a number of income properties. He often buys buildings in need of repair, and renovates them, either to improve their ability to generate income or for purposes of resale at a profit.
[11] Messrs. Graham and Johnston met sometime in the latter part of the 1990s. In approximately 2005 they joined with Mr. Yetman to incorporate a company identified as 3105010 Nova Scotia Limited (310 NSL). It was formed to purchase a property on Miller Road. Their intention was to renovate the property and then resell it for profit. Messrs. Yetman and Johnston would achieve their profit in the form of the real estate commission on the sale while Mr. Graham would achieve his return on the renovation work performed on the property.
[12] 310 NSL had a $20,000 line of credit available to it.
[13] In early 2006, Mr. Johnston located a run down rental property at 505 Herring Cove Road in Halifax. He suggested to Mr. Graham that it was a good property to buy, renovate and rent. Mr. Graham agreed.
[14] On or about March 22, 2006, Graham “or Assignee” entered into an Agreement of Purchase and Sale for 505 Herring Cove Road at a purchase price of $565,000. Century 21 was listed as the “cooperating brokerage”. The Agreement notes that the buyer had an agency relationship with Century 21 as the broker, and with Messrs. Johnston and Yetman as sales persons. Pursuant to Clause 18 of the Agreement, the seller agreed to pay commission to “the listing brokerage and/or the cooperating brokerage”.
[15] In time the purchaser was determined to be the appellant, Pyramid Properties Limited, a Graham run company. As the closing date approached, it became apparent that Pyramid would not be able to raise all of the necessary funds needed to close the transaction. The adjudicator noted problems with the evidence of the various witnesses as to how that shortfall was to be met, but concluded that he was satisfied that Johnston, Yetman and Graham reached the following agreement:
(a) $12,882.00 would be contributed by way of the real estate commission due to Century 21, in exchange for shares in Pyramid for Yetman and Johnston.
(b) $44,000.00 would be advanced by UC by way of a short term bridge financing loan to Pyramid.
(c) $22,000.00 would be advanced by 310 NSL by way of a loan to Pyramid; and
(d) $41,000.00 would be advanced by way of personal loan to Pyramid from Johnston.
[16] The purchase closed and Pyramid received the title to 505 Herring Cove Road in July 2006.
[17] In the year following the closing, protracted but unsuccessful negotiations took place regarding the issuance of shares by Pyramid to Mr. Yetman and Mr. Johnston. As a result of the failure of negotiations, the respondent together with others who provided financial assistance to Pyramid made demand for payment of their respective debts.
[18] The adjudicator concluded that Pyramid was the sole beneficiary of the monies claimed and therefore that it was solely liable for any outstanding debts owed to the claimants. Following three nights of hearings, the adjudicator found Pyramid liable to the following “persons”, with the amounts ordered to be paid:
Century 21 Team One $ 12,882.00
Patrick Johnston (UC Claim) $ 4,000.00
310 NS Ltd. $ 1,989.97
Patrick Johnston $ 18,500.00
This appeal is against the decision to award the sum of $1,989.97 to 310 NSL. The adjudicator accepted that Pyramid had already paid $20,000 on the respondent’s line of credit but that the respondent’s claim for $1,989.97, being an amount that was held by the respondent in its bank account at the time of the loan to Pyramid, was still owing. A cross claim for the sum of $20,000 was dismissed.
ISSUES
[19] The issues, as restated by appellant’s counsel in argument, are:
1. Did the adjudicator err at law when he considered an action and/or made an award for a corporation which does not validly exist and whose standing had been revoked?
2. Did the adjudicator err in law and/or misapply the facts when he failed to consider relevant evidence in finding it is not relevant who paid on the line of credit for the respondent prior to the discharge of the line of credit in June 2008 effectively denying reimbursement of interest and penalties to the appellant by the respondent?
3. Did the adjudicator err in law when he allowed Patrick Johnston in his personal capacity and in his capacity as principal of the respondent and other companies to split a claim arising from one transaction into four separate claims which had the effect of granting an award to Patrick Johnston that exceeds the $25,000 monetary limit of Small Claims Court?
STANDARD OF REVIEW
[20] The statutory basis upon which an appeal may be advanced is found in the Small Claims Court Act R.S.N.S. 1989 c. 430:
Appeal
32 (1) A party to proceedings before the Court may appeal to the Supreme Court from an order or determination of an adjudicator on the ground of
(a) jurisdictional error;
(b) error of law; or
(c) failure to follow the requirements of natural justice,
by filing with the prothonotary of the Supreme Court a notice of appeal.
[21] Saunders J. (as he then was), writing in Brett Motors Leasing Ltd. v. Welsford 1999 NSJ 466 (S.C.) considered the scope of what constituted an “error of law”:
14 One should bear in mind that the jurisdiction of this Court is confined to questions of law which must rest upon findings of fact as found by the adjudicator. I do not have the authority to go outside the facts as found by the adjudicator and determine from the evidence my own findings of fact. "Error of law" is not defined but precedent offers useful guidance as to where a superior court will intervene to redress reversible error. Examples would include where a statute has been misinterpreted; or when a party has been denied the benefit of statutory provisions under legislation pertaining to the case; or where there has been a clear error on the part of the adjudicator in the interpretation of documents or other evidence; or where the adjudicator has failed to appreciate a valid legal defence; or where there is no evidence to support the conclusions reached; or where the adjudicator has clearly misapplied the evidence in material respects thereby producing an unjust result; or where the adjudicator has failed to apply the appropriate legal principles to the proven facts. In such instances this Court has intervened either to overturn the decision or to impose some other remedy, such as remitting the case for further consideration.
[22] The Supreme Court of Canada distinguished questions of law, of fact and of mixed fact and law in the following terms, as set out by Iaccobucci J. in Canada (Director of Investigation Branch and Research) v. Southam Inc. [1997] 1 S.C.R. 748:
35...Briefly stated, questions of law are questions about what the correct legal test is; questions of fact are questions about what actually took place between the parties; and questions of mixed law and fact are questions about whether the facts satisfy the legal tests. A simple example will illustrate these concepts. In the law of tort, the question what "negligence" means is a question of law. The question whether the defendant did this or that is a question of fact. And, once it has been decided that the applicable standard is one of negligence, the question whether the defendant satisfied the appropriate standard of care is a question of mixed law and fact. I recognize, however, that the distinction between law on the one hand and mixed law and fact on the other is difficult. On occasion, what appears to be mixed law and fact turns out to be law, or vice versa.
[23] Determinations of credibility and the weight to attach to the evidence are not questions of law. The Nova Scotia Court of Appeal, in McNaughton v. Ward 2007 NSCA 8, held:
34 While the appellant casts all of the grounds of appeal as errors "in law," the first three are, with respect, conclusions that derive from the trial judge's factual findings, assessment of the witnesses, and evaluation of the evidence. These are functions well within the jurisdiction of the trial judge, who enjoys a significant advantage in seeing and hearing the witnesses first hand. Such determinations draw a high degree of deference and will not be disturbed on appeal absent palpable and overriding error. As directed in such cases as Housen, supra, and H.L. v. Canada (Attorney General), 2005 SCC 25, "palpable" refers to a mistake that is clear, in other words, plain to see; whereas "overriding" is an error that is shown to have affected the result. Both elements must be demonstrated. We, sitting as an appellate court, will not interfere with a trial judge's findings of fact unless we can plainly discern the imputed error, and the mistake is such that it discredits the result.
[24] That findings of fact are accorded a high degree of deference was reinforced in Davison et al v Nova Scotia Government Employees Union 2005 NSCA 51:
61 Findings of fact will not be reversed on appeal unless the trial judge made a palpable and overriding error. The same degree of deference is paid to inferences drawn from the evidence and to all of the trial judge's findings whether or not they are based on findings of credibility: Housen v. Nikolaisen, [2002] 2 S.C.R. 235, per Iacobucci and Major, JJ. at paras. 10 and 23 to 25.
62 The "palpable and overriding error" standard underlines that a high degree of deference is paid on appeal to findings of fact at trial. An error is palpable if it is one that is plainly seen or clear. An error is overriding if, in the context of the whole case, it is so serious as to be determinative in the assessment of the balance of probabilities with respect to that factual issue: see Housen v. Nikolaisen, supra, at paras. 1 to 5 and Delgamuukw v. British Columbia, [1997] 3 S.C.R. 1010 at paras. 78 and 80. Thus, not every misapprehension of the evidence or every error of fact by the trial judge justifies appellate intervention. The error must not only be clear, but "overriding and determinative."
[25] I will add that an appeal against the decision of a Small Claims Court adjudicator is further restricted by the absence of a record of the testimony given in the hearing.
[26] It is against this legal and practical background that an appeal of an adjudicator’s decision is determined.
ANALYSIS
Issue 1. Did the adjudicator err at law when he considered an action and/or made an award for a corporation which does not validly exist and whose standing had been revoked?
[27] The appellant submits that the respondent company was not permitted to bring or maintain this action as it did not have a valid certificate of registration issued pursuant to section 17 of the Corporations Registration Act R.S.N.S. 1989, c. 101.
[28] There is no evidence that this argument was made to the adjudicator nor that he had evidence before him to support it. The appellant did not make an application to introduce fresh evidence on this appeal in support of the allegation. In the absence of properly admissible evidence showing the company to have been in violation of the Act the argument cannot be sustained.
Issue 2. Did the adjudicator err in law and/or misapply the facts when he failed to consider relevant evidence in finding it is not relevant who paid on the line of credit for the respondent prior to the discharge of the line of credit in June 2008 effectively denying reimbursement of interest and penalties to the appellant by the respondent?
[29] The appellant submits that it paid amounts “by way of interest payments and penalties” that resulted in it paying “far in excess” of the amount claimed by the respondent and that the adjudicator failed to give any or adequate consideration to the evidence in support of this argument.
[30] The adjudicator held, at paragraph 49 of his decision, that the evidence showing the use of 310 NSL’s line of credit was “sketchy” and that he “was not satisfied that any such interest or penalties was related to any default on the part of the claimants.” These are findings of fact that specifically address the appellant’s concerns. On review of the available record I find that the adjudicator did not commit a palpable and overriding error in reaching his conclusion. He did not commit an error of law in deciding that the appellant was not entitled to claim the alleged “re-imbursement”.
Issue 3. Did the adjudicator err in law when he allowed Patrick Johnston in his personal capacity and in his capacity as principal of the respondent and other companies to split a claim arising from one transaction into four separate claims which had the effect of granting an award to Patrick Johnston that exceeds the $25,000 monetary limit of Small Claims Court?
[31] The jurisdiction of the Small Claims Court is limited. Relevant to the argument of the appellant are sections 9 (a) and 13 of the governing statute which read:
9 A person may make a claim under this Act
(a) seeking a monetary award in respect of a matter or thing arising under a contract or a tort where the claim does not exceed twenty-five thousand dollars inclusive of any claim for general damages but exclusive of interest;
...
13 A claim may not be divided into two or more claims for the purpose of bringing it within the jurisdiction of the Court. R.S., c. 430, s. 13.
[32] The appellant argues that Patrick Johnston split his claims which if joined as a single claim would have exceeded the $25,000 jurisdictional limit of the court.
[33] This argument was presented to the adjudicator as a preliminary motion. While it is true that Mr. Johnston was named as a claimant in three of the matters on appeal, with total claims of approximately $36,000, he was joined by different co-claimants including 310 NSL, Mr. Yetman and Ms. MacDonald. The adjudicator concluded at paragraph 25 of his decision that “... it is necessary to analyze and determine them [the four claims] before deciding whether or not the court’s jurisdiction is being exceeded”.
[34] In his Summary Report of Findings, the adjudicator responds to this ground of appeal in the following terms:
5. With respect to paragraph 5 of the Notice of Appeal, and the issue of whether the claims were being split (and this applies to all the notices of appeal in which this issue was raised),
a. In my opinion the fact that Mr. Johnston may have been a principal of a corporation or the husband of a claimant did not mean that the Corporation or the spouse were one and the same as Mr. Johnston;
b. The claims were claims that in law and on the evidence were claims by separate and distinct entities, notwithstanding that Mr. Johnston may have been involved with them.
[35] I do not find an error in the adjudicator’s conclusions. As the argument relates to this appeal, the claim of 310 NSL was its’ own, as a corporate person with the legal right to pursue the debt owed to it. This was true irrespective of whether Mr. Johnston, had an interest in, or a management role with the respondent. The personal claims of Mr. Johnston and Mr. Yetman were not successful and so do not enter into the calculation of the $25,000 jurisdictional limit of the court.
[36] The goal of the Small Claims Court in effecting a cost effective and expeditious resolution of claims was achieved by addressing all claims in a single hearing, which was done with the consent of all parties, and in accordance with section 25 of the Small Claims Court Act.
CONCLUSION
[37] I find that the adjudicator made no errors of law, committed no breach of the rules of natural justice and acted within the jurisdiction provided to that court by statute. The appeal is dismissed.
Duncan J.