Canadian Bar Association – Civil Litigation Sub-Section (South) – Case Law Update

By: Richard E. Harrison, Wilson Laycraft
November 28, 2017
Pellerin Savitz LLP v Guindon, 2017 SCC 29

Synopsis:

The Court considered when a limitation period under a lawyer’s retainer agreement begins to run.

Case Brief:

Facts
– Client retained law firm in September 2011.
– Retainer agreement provided that “every invoice shall be payable within thirty (30) days [and that] after that time,   interest shall be computed and charged at an annual rate of 15%”.
– A total of 5 invoices were sent to the client; the last invoice was sent on March 1, 2012 for services rendered up to February 22, 2012.
– Client terminated retainer on March 21, 2012.
– Law firm brought action to claim the unpaid fees on March 12, 2015.
Law
– Quebec law has a 3 year limitation (prescription) period.
Analysis
– A creditor’s right of action arises once the debtor’s obligation has arisen and is exigible.
– The law firm sought to have the termination date act as the date when the limitation period began to run; that way all their invoices would be covered.
– Limitation period begins to run (a debtor’s obligation has arisen and is eligible) when:
– In the case of an obligation with a suspensive term (i.e. a grace period), the term expires; or
– In the case of an obligation with a suspensive condition (i.e. payable within 30 days after which interest will accrue), the condition is fulfilled.
– In this case, because the retainer provided that “every invoice shall be payable within 30 days” (suspensive condition), each payment did not become exigible, and the limitation period did not begin, until the 31st day after the invoice had been sent.
– All but the last invoice were barred by the limitation period.

Conclusion
– Retainer agreements should reflect the Court’s “suggestion” at paragraph 20:
20. …[The lawyer and client] could decide that nothing will be exigible before the termination of the contract, regardless of any interim accounts that might be sent, in which case [the limitation period] would not begin to run until the time of termination.
– This case also has general applicability to limitation periods for debtor/creditor collections.
– Rule 10.10(2) of the Alberta Rules of Court creates a 6 month limitation period “after the date on which the account was sent to the client”. Unpaid invoices and retainer agreements, however, would likely still be subject to the Limitations Act and those individual accounts may not be reviewable after 2 years.

Precision Drilling Canada Limited Partnership v Yangarra Resources Ltd, 2017 ABCA 378

Synopsis:
– The Court ruled on the correct test for fraudulent misrepresentation, overturning the lower Court’s decision on the issue, and considered whether fraudulent misrepresentation may render exclusionary clauses unenforceable by reason of public policy.

Case Brief:
Facts
– Yangarra counterclaimed and claimed a set off against the Plaintiff, Precision.
– The basis for the counterclaim was that Precision made certain fraudulently misrepresentations and/or failed to make accurate representations.
– Precision brought a Summary Judgment Application which sought Judgment for its underlying claim and dismissal of Yangarra’s counterclaim and set off.
– The Summary Judgment Application was granted by the Chambers’ Judge who also summarily dismissed Yangarra’s defence and counterlciam.
– Part of Precision’s defence to counterclaim was that its contract contained the following term, which it alleged released it from liability for fraud:
[Precision is released from any liability associated with drilling the well resulting from] negligence or other fault of either party or howsoever arising, or from any other theory of legal liability.
Law
– The test for fraudulent misrepresentation comes from the Supreme Court of Canada decision in Bruno Appliance and Furniture Inc v Hryniak, 2014 SCC 8. The Plaintiff is required to prove:
1. a false representation made by the defendant;
2. some level of knowledge of the falsehood of the representation on the part of the defendant (whether through knowledge or recklessness);
3. the false representation caused the plaintiff to act; and
4. the plaintiff’s actions resulted in a loss.

Regarding the second requirement:
– Knowledge of the falsehood, “either knowledge of the falsehood of the representation or recklessness as to the truth of the representation is required”: Motkoski Holdings Ltd v Yellowhead (County), 2010 ABCA 72; and
– The Defendant’s intention is immaterial: Derry v Peek, [1889] UKHL 1, 14 App Cas 337:
[I]f fraud be proved, the motive of the person guilty of it is immaterial. It matters not that there was no intention to cheat or injure the person to whom the statement was made.

Analysis
– The court considered the Chamber’s Judge’s decision and held that he failed to consider two issues when he dismissed Yangarra’s claims of fraudulent misrepresentation:
– Whether Precision was reckless in the way it represented, or failed to represent, certain facts to Yangarra; and
That Precision’s intention is immaterial to whether it is liable for fraudulent misrepresentation.
– The Chamber’s Judge’s decision on both topics gave the Appellant Court the basis to overrule his decision granting summary Judgment.
– In addition, the Court of Appeal considered whether the exclusionary clause in the contract (cited above) could release Precision from liability for fraudulent misrepresentation.
– The Court held that public policy may (it refused to make a final determination) intervene to render the exclusionary clause unenforceable insofar as it would apply to fraudulent misrepresentation.
– The Court held that rendering an exclusionary clause unenforceable for reasons of public policy is dependent on the conduct of the party who seeks to rely on the clause: Niedermeyer v Charlton, 2014 BCCA 165.
– The Court held that a trial would be required to determine both the issues of fraudulent misrepresentation and the enforceability of the exclusionary clause.

Conclusion
– The Court reaffirmed the test for fraudulent misrepresentation and makes two findings with respect the requirement for knowledge:
a) Recklessness of the truth may be used to establish knowledge; and
b) Intention is immaterial for establishing knowledge.
– In addition, the Court held that public policy may render exclusionary clauses unenforceable, but that it was dependent on the conduct of the party relying upon the exclusionary clause.