Citation:
Irly Distributors Ltd. v .
Powell River Town Centre Ltd.,
2007 BCCA 124
Date: （略）
Docket: CA033480
Between:
Irly Distributors Ltd.
Respondent
(Plaintiff)
And
Powell River Town Centre Ltd. and
Ron Moss Enterprises Ltd.
Appellants
(Defendants)
Before:
The Honourable Madam Justice Southin
The Honourable Madam Justice Rowles
The Honourable Madam Justice Ryan
J. D. Mostowich
Counsel for the Appellants
P. J. Goodwin and D. L. McGillivray
Counsel for the Respondent
Place and Date of Hearing:
Vancouver, British Columbia
12th October, 2006
Place and Date of Judgment:
Vancouver, British Columbia
27th February, 2007
Written Reasons by:
The Honourable Madam Justice Southin
Concurred in by:
The Honourable Madam Justice Rowles
The Honourable Madam Justice Ryan
Reasons for Judgment of the Honourable Madam Justice Southin:
[1] This is an appeal by the defendants below from a judgment of the Honourable Mr. Justice Romilly awarding the plaintiff below, upon its application pursuant to Rule 18A, judgment in the sum of $104,946.77 together with interest and costs. The reasons for judgment may be found at 11 B.L.R. (4th) 318, 2005 BCSC 1524.
[2] At issue is the true construction of this guarantee given by the appellants to the respondent in June 2001:
G U A R A N T E E
TO: IRLY DISTRIBUTORS LTD.
IN CONSIDERATION of IRLY Distributors Ltd. (hereinafter called "IRLY"), at the request of the undersigned, agreeing to sell goods to:
BURG & JOHNSON BUILDERS' SUPPLY LTD.
of
4750 Joyce Avenue, Powell River, British Columbia, V8A 3B6
(hereinafter called the "Customer") at any one time or from time to time hereafter, upon such terms of credit as IRLY deems fit, the undersigned hereby jointly and severally guarantee(s) the due payment and discharge of all liabilities to IRLY of the customer, incurred before, upon and after the date hereof, and whether incurred by the Customer alone or jointly with others, and whether as principal or surety, and whether such liabilities are matured or not, and whether absolute or contingent, including but without limiting the generality of the foregoing, liabilities in respect of goods sold and delivered by IRLY to the Customer and interest upon such liabilities or sold and delivered to the Customer by any other supplier at IRLY's request and for which IRLY has agreed to pay on behalf of the Customer.
This Guarantee shall be a continuing guarantee to the extent of and shall extend to and be security for any sum or sums of money in excess of the sum of DOLLARS THREE HUNDRED THOUSAND ($300,000.00) (herein the "Secured Amount") which may be owing by the Customer to IRLY as at the date of demand for payment by IRLY or upon the date that the customer shall cease to carry on business, whichever shall be the sooner. PROVIDED HOWEVER that no sum in excess of the sum of DOLLARS FIVE HUNDRED THOUSAND ($500,000.00), (herein the "limit") shall be recoverable from the undersigned under this Guarantee.
The undersigned hereby acknowledges that any securities now held or which may at any time hereafter be held by IRLY from the Customer are held by IRLY as security for repayment of the Secured Amount and, in the event that the realization of any such securities by IRLY shall result in the payment to IRLY of less than the Secured Amount, then the undersigned shall not be liable for any such deficit, PROVIDED HOWEVER that any excess shall be applied firstly to reduce any indebtedness owing to IRLY in excess of the Limit and secondly to reduce the liability of the undersigned under this Guarantee.
IRLY shall not be obliged to exhaust its recourse against the Customer or any others on any securities IRLY may hold before being entitled to payment of the monies hereby guaranteed from the undersigned or anyone or more of them if more than one.
Notwithstanding the discontinuance of this Guarantee as to one or more of the undersigned, it shall remain a continuing security as to other or others of them, as the case may be. Moreover, this Guarantee shall, as to any of the undersigned who gives written notice of discontinuance, remain in force and cover all liabilities of the Customer inclusive of liabilities incurred up to the expiration of one month after written notice of discontinuance has been received by IRLY, and copies of any such written notice of discontinuance shall be forwarded by the person signing the same to each of the other of the undersigned.
IRLY shall have the right at any time to refuse further credit to the Customer, to release any collateral or other securities, to extend the time for payment to the Customer or any others liable upon any collateral or other security which IRLY may at any time hold, and to compromise or compound with the Customer or any such others, and to realize any collateral or other securities when and in such manner as IRLY may think expedient, without notice to the undersigned and without discharging or affecting the liability of the undersigned.
All debts and liabilities present and future of the Customer to the undersigned are hereby postponed to the liabilities of the Customer to IRLY and all monies received by any of the undersigned thereon shall be received as trustee(s) for IRLY and shall be paid over to IRLY until all monies hereby guaranteed shall be paid.
Any account settled or stated by or between IRLY and the Customer shall be accepted by the undersigned as conclusive evidence that the balance or amount thereby appearing is due to the Customer by IRLY.
The undersigned, or each of the undersigned, (if more than one) acknowledges that no representations have been made to the undersigned, or any of the undersigned (if more than one) on behalf of IRLY, and that the liability of the undersigned is embraced in this Guarantee: that this Guarantee has nothing to do with any other guarantee: that the undersigned intend(s) this Guarantee to be binding whether any other guarantee or security is given to IRLY or not: and that this Guarantee shall be binding upon every person signing it, notwithstanding the non-execution hereof by any proposed guarantor.
This Guarantee shall be construed in accordance with the laws of the Province of British Columbia and for the purpose of legal proceedings this guarantee shall be deemed to have been made in the said Province and to be performed there, and the courts of that Province shall have jurisdiction over all disputes which may arise under this Guarantee, provided always that nothing herein contained shall prevent IRLY from proceeding in its election against the undersigned in the Courts of any other province or country.
The benefits and obligations herein contained shall enure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and assigns.
[3] For the reasons which follow, which differ from those of the learned judge below, I would dismiss the appeal.
[4] Burg & Johnson Builders' Supply Ltd., the principal debtor, in January 1988, had become, by a written agreement, a dealer of the respondent which operates a wholesale distribution business in building products.
[5] In the words of the learned judge:
[5] Pursuant to the Dealer Agreement, Burg & Johnson was permitted to purchase goods from IRLY on credit, through a “trade account” maintained by IRLY.
[6] In addition to this trade account, IRLY maintained an “equity account” and “deposit account” on behalf of Burg & Johnson, which represented the amount of credits that the latter had accumulated as a dealer of IRLY products. Clause 18 of the Dealer Agreement provided that “IRLY shall, subject to any assignment to IRLY’s bankers, have sole right to apply or set-off a member’s equity or deposit account against a member’s trade account. ” Burg & Johnson also held preferred shares of IRLY, which were redeemable by IRLY upon certain terms and conditions being fulfilled, such as the termination of the Dealer Agreement.
[7] When Burg and Johnson entered into the Dealer Agreement in 1988, the balance of its trade account could be offset by the approximately $150,000 it cumulatively held in its deposit account, equity account, and in its preferred shares. As time went on, however, the amount of debt in Burg & Johnson’s trade account began to regularly exceed the amount of credits against which it could be “set-off” in this manner. As a result, on October 14, 1988, Powell River Town Centre Ltd. executed a guarantee in favour of IRLY wherein it guaranteed the repayment of all debts owed by Burg & Johnson to IRLY up to a maximum of $200,000 over and above the $150,000 that Burg & Johnson cumulatively held in the equity account, deposit account, and in its preferred shares. According to the terms of the guarantee, Powell River Town Centre Ltd. would not be responsible for any amount of debt falling below the $150,000 threshold.
[8] By 2001, the trade account of Burg & Johnson was fluctuating between $400,000 and $750,000, while the cumulative value of its equity account, deposit account, and its preferred shares had accrued to approximately $300,000. As a result, the defendants agreed to execute another guarantee in favour of the plaintiff. It is this Guarantee which is the subject of the dispute between the parties.
[6] On 24th April, 2003, when the balance of the trade account was approximately $580,000.00 and the security which the respondent held approximately $300,000.00, the respondent demanded of Burg & Johnson Builders' Supply Ltd. payment of all overdue accounts.
[7] Some months later, having set-off against the trade account the security which it held, the respondent then demanded payment from the appellants of $124,299.57 and then, on the 15th October, 2003, commenced this action for that sum.
[8] In their statement of defence, the appellants, having sensibly admitted the guarantee, pleaded:
2. With respect to paragraph 7 of the Statement of Claim, the Defendants admit that they executed a joint and several guarantee in writing wherein they jointly and severally guaranteed repayment to the Plaintiff of all liabilities, present and future, of Burg & Johnson in excess of $300,000.00. However, the agreement did not provide that the liability under the guarantee arose upon date of demand for payment by the Plaintiff upon Burg & Johnson. Rather, the guarantee agreement provided merely that the liability arose at the date of demand or upon the date which Burg & Johnson ceased to carry on business, whichever was earlier.
3. These Defendants say that their liability under the guarantee did not arise until a demand was made upon them. No demand was made pursuant to the guarantee upon these Defendants as guarantors prior to August 26, 2003. As of the date of demand, the amounts owing by Burg & Johnson to the Plaintiff were less than $300,000.00, and consequently no funds are owing pursuant to the guarantee.
[9] What their argument comes to is this: "The respondent could have sent to us a copy of its letter of demand of 24th April, 2003, and, if so, we would have been liable as the set-offs had not then been effected on the respondent's books for the amount over the set-off amounts. But, as the respondent effected the set-offs, the liability of Burg & Johnson Builders' Supply Ltd. fell below $300,000.00. We are only liable for an amount over $300,000.00 if such an amount is due at the date of demand on us. Therefore, there is no obligation on our part even though as shareholders we knew about the demand made on Burg & Johnson."
[10] Whether the appellants are correct is a matter of the construction of this instrument.
[11] Apposite in the circumstances is this passage from the judgment of Lord Wilberforce in Prenn v. Simmonds, [1971] 3 All E.R. 237 (H.L.) at 239-240:
In order for the agreement of 6th July 1960 to be understood, it must be placed in its context. The time has long passed when agreements, even those under seal, were isolated from the matrix of facts in which they were set and interpreted purely on internal linguistic considerations. There is no need to appeal here to any modern, anti-literal, tendencies, for Lord Blackburn's well-known judgment in River Wear Comrs. v. Adamson [(1877) 2 App. Cas. 743 at 763, [1874-80] All E.R. Rep. 1 at 11] provides ample warrant for a liberal approach. We must, as he said, enquire beyond the language and see what the circumstances were with reference to which the words were used, and the object, appearing from those circumstances, which the person using them had in view.
[12] The passage from Lord Blackburn's judgment is, in part, this, at 763-764:
... I shall therefore state, as precisely as I can, what I understand from the decided cases to be the principles on which the Courts of Law act in construing instruments in writing; and a statute is an instrument in writing. In all cases the object is to see what is the intention expressed by the words used. But, from the imperfection of language, it is impossible to know what that intention is without inquiring farther, and seeing what the circumstances were with reference to which the words were used, and what was the object, appearing from those circumstances, which the person using them had in view; for the meaning of words varies according to the circumstances with respect to which they were used. I do not know that I can make my meaning plainer than by referring to the old rules of pleading as to innuendoes in cases of defamation. Those rules, though highly technical, were very logical. No innuendo could enlarge the sense of the words beyond that which they prima facie bore, unless it was supported by an inducement or preliminary averment of facts, and an averment that the libel was published, or the words spoken, of and concerning those facts, and of and concerning the Plaintiff as connected with those facts. If those preliminary averments were proved, words which prima facie bore a very innocent meaning might be shewn to convey a very injurious one, and it was for the Court to say whether, when used of and concerning the inducement, they bore the meaning imputed by the innuendo....
In construing written instruments I think the same principle applies. In the cases of wills the testator is speaking of and concerning all his affairs; and therefore evidence is admissible to shew all that he knew, and then the Court has to say what is the intention indicated by the words when used with reference to these extrinsic facts, for the same words used in two wills may express one intention when used with reference to the state of one testator's affairs and family, and quite a different one when used with reference to the state of the other testator's affairs and family.
In the case of a contract, the two parties are speaking of certain things only, and therefore the admissible evidence is limited to those circumstances of and concerning which they used those words: see Graves v. Legg [9 Exc. 709]. In neither case does the Court make a will or a contract such as it thinks the testator or the parties wished to make, but declares what the intention, indicated by the words used under such circumstances, really is.
[13] One aspect of the context of an instrument is the object of the transaction. Here, the object was to protect the respondent from a loss exceeding the amount of its security which was worth, at the time of the entering into of the guarantee, about $300,000.00. To accept the appellants' submission would be to defeat that object.
[14] The learned judge, in accepting the appellants' submission as to whether a demand had to be made upon the appellants, invoked the contra proferentem "rule" of construction.
[15] With all respect, it is my opinion that in this case that rule of construction had no place.
[16] Therefore, although for reasons different from those of the learned judge below, I would dismiss this appeal.
“The Honourable Madam Justice Southin”
I agree:
“The Honourable Madam Justice Rowles”
I agree:
“The Honourable Madam Justice Ryan”
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