Canada v. Kilback Stock Farm Ltd.

Canada v. Kilback Stock Farm Ltd.
Court (s) Database
Federal Court Decisions
Date
2020-10-19
Neutral citation
2020 FC 981
File numbers
T-122-19
Decision Content
Date: 20201019
Docket: T-122-19
Citation: 2020 FC 981
Ottawa, Ontario, October 19, 2020
PRESENT: The Honourable Madam Justice Strickland
BETWEEN:
HER MAJESTY THE QUEEN IN RIGHT OF CANADA
Plaintiff
and
KILBACK STOCK FARM LTD.
ALLEN BLAIR KILBACK
DENISE ANNE KILBACK
Defendants
JUDGMENT AND REASONS
[1] This is a motion in writing, pursuant to Rule 369 of the Federal Courts Rules, SOR/98-106 [Rules], brought on behalf of the Plaintiff, Her Majesty the Queen in Right of Canada [Crown]. The motion seeks an order, pursuant to Rule 213(1), granting summary judgment in favour of the Plaintiff in the amount of $595,046.62 as of March 10, 2020, plus interest and costs.
[2] The subject action concerns a debt owing to the Crown pursuant to an application made by the corporate Defendant, Kilback Stock Farm Ltd. [Kilback Farm], and an advance payment under the federal Agricultural Marketing Programs Act, SC 1997 c 20 [AMP Act] made by the Manitoba Pork Credit Corporation [MPCC] to Kilback Farm for the 2008-2009 crop year. As shareholders of Kilback Farm, the defendants Allen Blair Kilback and Denise Anne Kilback [Individual Defendants] guaranteed the advance payment.
[3] On July 2, 2020, the Plaintiff filed its Motion Record. This included the affidavit of Mark De Luca, Supervisor of Recoveries Officers, Ottawa Office, Agriculture and Agri-Food Canada [AAFC] sworn on May 26, 2020 [De Luca Affidavit] and the affidavit of Shelley Warner, a paralegal with the Department of Justice, sworn on June 25, 2020 [Warner Affidavit], both affidavits provided in support of the motion. The Plaintiff also filed a Reply on October 5, 2020. The Plaintiff submits that all of the elements necessary to establish the Defendants’ liability for this debt are before the Court and there is no genuine issue for trial.
[4] The Defendants filed their Motion Record on September 25, 2020, which included the affidavit of Allen Kilback, as an individual Defendant and former Chief Executive Officer [CEO] of Kilback Farm, sworn on September 25, 2020. The Defendants request that the Plaintiff’s claim against the guarantors be dismissed on the basis that the applicable limitation period has expired and that the Plaintiff’s claim against Kilback Farm be set down for trial.
Background Facts
[5] The background facts are largely not in dispute and the relevant supporting documentation is attached as exhibits to the De Luca Affidavit.
[6] In April 2008, Kilback Farm submitted an Application & Repayment Agreement – Corporation/Cooperative/Partnership Information for an advance payment under the AMP Act for the 2008-2009 crop year [Advance Payment Agreement]. The application included a Joint and Several Guarantee of the advance payment signed by each of the Individual Defendants on April 18, 2008 [De Luca Affidavit, para 2 and 4, Exhibit A].
[7] Kilback Farm received the advance payment in the total amount of $400,000.00 on or about April 30, 2008 and May 5, 2008 [Advance Payment]. The total amount owing as of December 31, 2018 is $557,639.19 (De Luca Affidavit, para 3, Exhibits B and C).
[8] On April 6, 2009, Allen Kilback, as an authorized signing officer, signed an Acknowledgment of a March 24, 2009 letter from the MPCC to Kilback Farm regarding the Advance Payments Program [APP]. The letter advised that the Minister had granted a Stay of Default for hog and cattle producers for the 2008-2009 advances received under the APP and by signing the Acknowledgement the producers agreed to repay their outstanding 2008-2009 advances in accordance with the terms and conditions set out in the letter (De Luca Affidavit para 5, Exhibit D).
[9] On December 3, 2010, the MPCC sent a letter to Kilback Farm advising that, effective October 1, 2010, the Minister had granted a further Stay of Default to producers having APP hog advance payments outstanding for the 2008 production period. The new stay would extend the repayment deadline to March 31, 2013. The letter requests that each shareholder review the attached Acknowledgement Document and states that if the producer is a corporation, only the signing authority needed to sign it. On January 24, 2011, Allen Kilback signed the Acknowledgment Document accepting the described terms and conditions of the Stay of Default (De Luca Affidavit paras 6 and 7, Exhibits E and F).
[10] On March 29, 2012, Allen Kilback, as CEO, producer and shareholder of Kilback Farm, signed an APP Amendment to the Application and Repayment Agreement [Advance Payment Agreement Amendment] as between the MPCC and Kilback Farm on behalf of that entity (De Luca Affidavit para 8, Exhibit G).
[11] After the default date of March 31, 2013, MPCC sent letters dated May 3, 2013 and May 23, 2013 to the Defendants advising that the Advance Payment received from MPPC was now in default, requesting repayment of the outstanding amount plus interest and costs, and indicating available payment options (De Luca Affidavit para 9, Exhibits H and I). MPCC also sent an email to the Individual Defendants on August 16, 2013, concerning which repayment term option they wished to select. MPCC sent another email dated October 16, 2013, indicting that because there had been no communications since September 5, 2013 the file would be sent to AAFC who, in turn, would send the file to their collections department (De Luca Affidavit para 9, Exhibits J and K).
[12] By letter of February 18, 2014, the APP Default Claim Unit of AAFC advised the MPCC that the Minister had honoured the guarantee under s 5 of the AMP Act on behalf of the producer, Kilback Farm. The Minister made a payment of $446,058.03 to MPCC (De Luca Affidavit para 10, Exhibits L and M).
[13] AAFC sent correspondence dated March 21, 2014, September 10, 2014, October 30, 2014, November 27, 2015, May 6, 2016, October 21, 2016 and May 23, 2017 to Kilback Farm advising of the outstanding balance and requesting a response (De Luca Affidavit para 11, Exhibit N).
[14] The De Luca Affidavit states that as of the date of default, April 1, 2013, the outstanding balance of the Advance Payment, together with interest calculated from the date the advance was issued, pursuant to s 6.2(a) of the terms and conditions under the Application and Repayment Agreement, was $438,379.80 (De Luca Affidavit para 12, Exhibit C). After the date of default, pursuant to section 6.2(b) of the terms and conditions of the Application and Repayment Agreement, interest accumulates on the outstanding amount at the prime lending rate plus 1.5%, calculated daily and compounded monthly, until the date of full payment (De Luca Affidavit para 13, Exhibit C). Further, that the Plaintiff has attempted to collect payments from the Defendants but the Defendants have failed or neglected to provide payment of the indebtedness. Therefore, the Defendants have breached the terms of the Advance Payment Agreement (De Luca Affidavit para 14).
[15] A final demand for payment was made by letters dated December 6, 2017 from the Department of Justice to each of Allen Kilback and Denise Kilback (Werner Affidavit, para 3, Exhibits A and B).
[16] This action was commenced by the Plaintiff on January 14, 2019.
[17] The Warner Affidavit sets out a calculation of the amounts owing pursuant to the Advance Payment Agreement as well as the Plaintiff’s calculation of its claimed costs and disbursements.
[18] In their written submissions, the Defendants state that the facts are not in dispute other than:
a) The guarantors (the Individual Defendants) did not agree to extensions of the time for repayment or alteration of the original loan agreement;
b) The guarantors did not acknowledge the debt at any time after the advance was made;
c) Neither the principal debtor (Kilback Farm) nor the guarantors agreed to a limitation period other than the provincial limitation period.
Issue
[19] The Plaintiff states that the sole issue to be determined is whether summary judgment should be issued in its favour against the Defendants.
[20] The Defendants do not specifically address the question of whether summary judgement is appropriate, but raise a number of issues being: what is the effect of the fact that the Plaintiff’s claim is subrogated; what is the applicable limitations period; was the limitation period modified by contract; when did the limitations period begin to run; what is the effect of the expiration of the limitations period; what was the effect of the modification of the loan agreement; and, is the Plaintiff estopped from pursuing its claim?
[21] In my view, what must be determined in this motion is determined by Rule 215(1).
[22] Rule 215(1) states that if, on motion for summary judgment, the Court is satisfied that there is no genuine issue for trial with respect to a claim or defence, the Court shall grant summary judgment. Rule 215(2)(b) states that if the Court is satisfied that the only genuine issue is a question of law, the Court may determine the question and grant summary judgment.
[23] In Manitoba v Canada, 2015 FCA 57, the Federal Court of Appeal considered Rule 215 and, citing Burns Bog Conservation Society v Canada (Attorney General), 2014 FCA 170, held that there is no genuine issue if there is no legal basis for the claim based on the law or the evidence brought forward (para 15). The Court found that this was consistent with the Supreme Court of Canada’s decision in Hryniak v Mauldin, 2014 SCC 7, which held that there is no genuine issue if there is no legal basis to the claim or if the judge has the evidence required to fairly and justly adjudicate the dispute.
[24] Although the burden lies on the moving party to establish that there is no genuine issue for trial, Rule 214 requires that the party responding to the summary judgment to set out specific facts and adduce evidence showing that there is a genuine issue for trial. This requires the responding party to “put his best foot forward” or to “lead trump or risk losing” (The Source Enterprises Ltd. V Canada (Public Safety and Emergency Preparedness), 2012 FC 966 at para 18). Put otherwise, “while the ultimate burden on a motion for summary judgment rests with the moving party, there is an evidentiary burden on a responding party to put forward evidence to show that there is a genuine issue for trial” (Cabral v Canada (Citizenship and Immigration), 2018 FCA 4 at para 23). The test is whether the case is so doubtful it deserves no further consideration (Granville Shipping Co. v Pegasus Lines Ltd. SA, [1996] 2 FC 853).
[25] I am satisfied that this issue can be determined summarily. Whether the Defendants have a genuine issue for trial in this matter turns on the question of what limitation period applies, when that limitation period began to run and, with respect to the Individual Defendants as shareholders/guarantors, if the Stays of Default and the Advance Payment Agreement Amendment continued their surety obligations. No genuine issue for trial exists because the evidence before me is sufficient to permit me to fairly and justly adjudicate this question (see Leo Ocean S.A. v Westshore Terminals, 2015 FCA 282). And, even if this issue amounts to a genuine issue, it is a question of law, which I am able to determine, and, accordingly, I may dispose of the matter by summary judgment.
Legislative Scheme
[26] The purpose of the AAP is described in s 4 of the AMP Act as being to improve marketing opportunities for the agricultural products of eligible producers by guaranteeing the repayment of the advances made to them as a means of improving their cash-flow. The AMP Act sets out a scheme whereby administrator organizations involved in the marketing of a particular agricultural product, the MPCC in this case, make advance payments to agricultural producers. Agricultural producers who obtain an advance payment must repay the advance plus interest to the administrator organizations. Advance payments made by the administrator organizations to producers are guaranteed by the Minister in the event that producers default on repayment.
[27] An individual producer who wishes to obtain an advance payment may do so by entering into a repayment agreement with the administrator organization (AMP Act, s 10(2)). Section 10(1) of the AMP Act lists the producer eligibility requirements for a guaranteed advance during a program year, including that:
(d) if the producer is a corporation with two or more shareholders, a partnership, a cooperative or another association of persons,
(ii) each of the shareholders, partners or members, as the case may be, must agree in writing to be jointly and severally, or solidarily, liable — or a guarantor prescribed by the regulations must agree in writing to be liable — to the administrator for the producer’s liability under section 22 and to provide any security for the repayment of the advance that the administrator requires
[28] Section 22 states that a producer who is in default is liable to the administrator for the outstanding amount of the guaranteed advance, interest and costs. Pursuant to section 23 of the AMP Act, when a producer defaults on repayment of an advance, the administrator organization may request the Minister to repay the amount owing in place of the producer. When the Minister makes such a payment, the Minister is subrogated to the administrator organization’s rights against the producer and any persons who are jointly and severally liable with the producer:
23(1) If a producer is in default under a repayment agreement and the Minister receives a request for payment from the administrator or lender to whom the guarantee is made, the Minister must, subject to any regulations made under paragraphs 40(1)(g) and (g.1), pay to the lender or the administrator, as specified in the advance guarantee agreement, an amount equal to the Minister’s percentage of
(a) the amounts mentioned in paragraphs 22(a) and (c); and
(b) the interest at the rate specified in the advance guarantee agreement on the outstanding amount of the advance, calculated from the date of the advance.
(2) The Minister is, to the extent of any payment under subsection (1), subrogated to the administrator’s rights against the producer in default and against persons who are personally liable under paragraphs 10(1)(c) and (d).
(3) The producer is liable to the Minister for interest on the subrogated amount, calculated in accordance with the repayment agreement, and the costs incurred by the Minister to recover that amount, including legal costs.
(4) No action or proceedings may be initiated by the Minister to recover any amounts, interest and costs that are owing more than six years after the day on which the Minister is subrogated to the administrator’s rights.
[29] I note that the above is the version of the AMP Act that was in force at the time the Defendants made their Application for Advance Payment (S.C. 1997, c.20), which the Plaintiff says is the applicable version of the legislation. In 2015, sections of the AMP Act were amended (Agricultural Growth Act, SC 2015, c 2, section 136(2)), including s 23, where the limitations provision was changed and subsections 23(6) – 23(9) were added. Section 23 now states:
(2) The Minister is, to the extent of any payment under subsection (1) or (1.1), subrogated to the administrator’s rights against the producer in default and against persons who are liable under paragraphs 10(1)(c) and (d) and may maintain an action, in the name of the administrator or in the name of the Crown, against that producer and those persons.
(3) The producer is liable to the Minister for interest on the subrogated amount, calculated in accordance with the repayment agreement, and the costs incurred by the Minister to recover that amount, including legal costs.
(4) Subject to the other provisions of this section, no action or proceedings may be taken by the Minister to recover any amounts, interest and costs owing after the six year period that begins on the day on which the Minister is subrogated to the administrator’s rights.
(5) The amounts, interest and costs owing may be recovered at any time by way of deduction from, set-off against or, in Quebec, compensation against any sum of money that may be due or payable by Her Majesty in right of Canada to the person or their estate or succession.
(6) If a person acknowledges liability for the amounts, interest and costs owing, whether before or after the end of the limitation or prescription period, the time during which the limitation or prescription period has run before the acknowledgment of liability does not count in the calculation of the limitation or prescription period and an action or proceedings to recover the amounts, interest and costs may be taken within six years after the day of the acknowledgment of liability.
(7) An acknowledgement of liability means
(a) a written promise to pay the amounts, interest and costs owing, signed by the person or his or her agent or other representative;
(b) a written acknowledgment of the amounts, interest and costs owing, signed by the person or his or her agent or other representative, whether or not a promise to pay can be implied from it and whether or not it contains a refusal to pay;
(c) a payment, even in part, by the person or his or her agent or other representative of any of the amounts, interests and costs owing;
(d) any acknowledgment of the amounts, interest and costs owing made by the person, his or her agent or other representative or the trustee or administrator in the course of proceedings under the Bankruptcy and Insolvency Act, the Farm Debt Mediation Act or any other legislation dealing with the payment of debts; or
(e) the person’s performance of an obligation under the repayment agreement referred to in subsection (1).
(8) Any period in which it is prohibited to commence or continue an action or proceedings against the person to recover the amounts, interest and costs owing does not count in the calculation of a limitation or prescription period under this section.
(9) This section does not apply in respect of an action or proceedings relating to the execution, renewal or enforcement of a judgment.
[30] The Defendants make no specific submissions to the version of s 23 that applies in this matter and, in my view, nothing turns on the point in these circumstances.
Applicable Limitation Period
[31] The Defendants submit that the AMP Act does not establish a separate limitation period for the principal debt and it is therefore governed by provincial limitation period. They submit that s 7.8 of the Advance Payment Agreement states that it is to be interpreted in accordance with the laws of the province of Saskatchewan. The Saskatchewan Limitations Act, SS 2004, c L-16.1, s 5 provides for a two-year limitation period. According to the Defendants, while s 23(4) of the AMP Act somewhat modifies the limitation period, s 23(4) is subordinate to s 23(2). Further, s 23(4) confirms the nature of the Minister’s claim as a derivative one. Therefore, until the Minister makes the guarantee payment triggering the six-year limitation period, the two-year Saskatchewan limitation period applies. Here the Minister made the guarantee payment after the MPCC’s two-year limitation period expired on the principal debt and the payment of the guarantee by the Crown “does not revive the ability of [the Minister] to take action because the debt is still a derivative claim”. That is, the federal Crown ought to be in the same position as the MPCC with respect to the limitation period.
[32] In my view, the Defendant’s position cannot succeed.
[33] As noted by the Plaintiff, the Crown Liability and Proceedings Act, RSC 1985, c C-50 provides that provincial limitations legislation does not apply where Parliament has provided its own limitation period provisions within federal legislation:
32 Except as otherwise provided in this Act or in any other Act of Parliament, the laws relating to prescription and the limitation of actions in force in a province between subject and subject apply to any proceedings by or against the Crown in respect of any cause of action arising in that province, and proceedings by or against the Crown in respect of a cause of action arising otherwise than in a province shall be taken within six years after the cause of action arose.
[34] In this case, the relevant federal legislation, the AMP Act, does exactly this by way of s 23(4). Section 23(4) requires the Minister to commence proceedings within six years after “the day on which the Minister is subrogated to the administrator’s rights”. The fact that s 7.8 of the Advance Payment Agreement states that the agreement is to be interpreted in accordance with the laws of Saskatchewan does not alter the fact that s 23(4) of the AMP Act displaces the Saskatchewan limitation period which might otherwise apply to the Minister’s right of action.
[35] This Court has recently dealt with summary judgment motions for recovery of advance payments made under the AMP Act in Canada v Klesse, 2020 FC 45 [Klesse], Canada v Moodie, 2020 FC 46 [Moodie], Canada v Harman, 2020 FC 47 [Harman], and Canada v McKinna, 2020 FC 48 [McKinna]. In each of those actions, the defendants had defaulted on repayment of advance payments and the Minister had commenced actions within six years of being subrogated to the administrator’s rights. The defendants argued that the Minister was bound by the provincial limitation periods that would have been applicable to the repayment agreements entered into between the producers and the respective administrators.
[36] Justice Pentney decided all four of those motions and found that the Minister’s right of action was distinct from that of the administrator and was governed by the AMP Act. In Klesse, Justice Pentney found that:
[28] The Plaintiff’s right of action in this case derives from the operation of the AMPA; this is a claim based on statute, not contract. The relevant terms of the statute, and in particular the Minister’s subrogation rights, are reflected in the agreements signed by the Defendant, but that does not have the effect of transforming their essential nature. I do not accept the Defendant’s contention that these are to be interpreted as equitable or contractual claims. I will discuss the “clean hands” argument below.
[29] I find that the agreements and the AMPA are consistent and clear: the Minister’s right to bring an action for recovery of the amounts due arises only when a number of conditions have been met. First, the producer must be in default (section 22, AMPA). Second, the administrator must have made a demand to the Minister for payment of the amount specified by the legislation and Regulations (subsection 23(1), AMPA). Third, the Minister must have made a payment to the administrator pursuant to that demand (subsections 23(1) and (1.1), AMPA). Only if these conditions have been fulfilled does the Minister become subrogated to the rights of the administrator (subsection 23(2), AMPA). Once this occurs, the producer is liable to the Minister for the subrogated amount (subsection 23(3), AMPA). This is when the statutory limitation or prescription period begins to run, subject to the other provisions regarding time limitations set out in subsections 23(6) to (9) of the AMPA.
….
[32] I therefore reject the argument that the agreements and the AMPA must be interpreted and applied as though the Minister and the administrators are “one and the same” entities. A number of conclusions flow from this finding.
[33] First, the Minister’s subrogation rights did not trigger at the same time as the Defendant went into default under the agreements. The terms of the agreements were subject to the provisions in the AMPA, which sets out the statutory pre-conditions pursuant to which the Minister’s subrogation rights arise. An interpretation that these rights arise at the same time as the default on the obligation to the administrator is inconsistent with both the terms of the agreements and the scheme of the AMPA.
(see also Moodie at paras 25-31, 34; Harman at paras 26-35; McKinna at paras 24-33.)
[37] I agree with the Plaintiff that through s 23(4) of the AMP Act, Parliament has established the limitation period that applies to the Minister in pursuing legal actions for subrogated amounts owing under the AMP Act. Further, that the Minister’s right of action is distinct from the administrator’s, the MPCC in this case. Thus, Saskatchewan’s Limitation Act has no application to the Minister’s subrogated action stemming from the Crown honouring its guarantee to the MPPC following default by the Defendants of the Advance Payment.
[38] The Defendants argue, however, that the limitation period applicable to the cause of action by the MPCC as against the Defendants expired prior to the Minister being subrogated to the rights of the MPCC and that s 23(4) therefore cannot revive the debt. As addressed above in Klesse, the Minister’s subrogation rights did not trigger at the same time as the defendant went into default under the subject advance payment agreements. In any event, as the Plaintiff points out, the Defendants were not in default until March 31, 2013. Thus, the significant point is that the MPCC had no cause of action before that date. Further, the Minister made the guarantee payment to MPCC on February 14, 2014, which was within two years of the default date, April 1, 2013. The MPCC’s cause of action was not statute barred by the Saskatchewan Limitation Act at that time. Thus, the MPCC’s two-year limitation period had not expired when the Minister made the guarantee payment to MPCC. The Plaintiff commenced this action on January 14, 2019, less than six years after the Minister became subrogated to the MPCC’s rights and within the six-year limitation period set out in s 23(4) of the AMP Act.
[39] In the result, I find that the six-year limitation period prescribed by s 23(4) of the AMP Act applies to the Minister’s subrogated action arising from the Minister’s honouring of the guarantee afforded to MPCC. Further, that the six-year limitation period had not expired when the Plaintiff commenced its action. Nor had the two-year limitation period as between MPCC and the Defendants expired when the Minister honoured the guarantee by making the guarantee payment to MPCC.
[40] This leaves the question of the liability of the Individual Defendants as shareholders and guarantors of the debt.
Liability of the guarantors
i. Expiry of limitation period
[41] The Defendants submit that the Individual Defendants signed the Joint and Several Guarantee personally in 2008, but that the guarantee did not arise upon demand and instead arose upon default. The Defendants refer to Walters v Meiner et al, 2004 BCSC 393 at paras 21-24 [Walters] and Continental Steel Ltd. v. CTL Steel Ltd, 2015 BCSC 1672 [Continental Steel], aff’d 2018 BCCA 82 in support of their submission that, in those cases, although the principal debtors acted in a way so as to extend the limitation period against them, the courts found that the principal debtors’ actions were not binding upon the guarantors. Therefore, the limitations period was not extended against the guarantors even though the guarantors were directors of the corporate principal debtors. The Defendants submit that, in this case, while the corporate principal debtor Kilback Farm acknowledged the debt thus extending the limitation period as against the principal debtor, the Individual Defendants as guarantors did not. Thus, the limitation period as against the Individual Defendants as guarantors began running on the “original date of default” under the Advance Payment Agreement, which the Defendants say was September 30, 2009, but without explanation of how they arrive at that date.
[42] I would note, unlike in this case, in Walters the plaintiff conceded that their claims were out of time under the British Columbia Limitation Act. In Walters what was at issue was whether a payment made within the limitation period by the defendant, who was also the director and sole shareholder of the corporate defendant, constituted a confirmation of the cause of action, thereby extending the limitation period such that the claims were not barred. And, if the payment was a confirmation by the corporate defendant, was it also a confirmation by the individual guarantor who had provided promissory notes due on demand (Walters at para 4-5, 16). The Court found that the payment by the corporate debtor constituted a confirmation of the plaintiff’s cause of action on all of the promissory notes (para 19).
[43] With respect to the question of whether the part payment by the corporate debtor also constituted a confirmation by the guarantor, the Court held that the fact that the guarantor was also a director and an officer of the corporate debtor did not create the contended agency relationship which would have otherwise bound the guarantor to the confirmation pursuant to the provisions of the Limitations Act. Further, the terms of the guarantee did not import any requirement that the individual debtor’s obligation was to be triggered only by a demand. As each promissory note was payable on demand, the cause of action as against both the corporate principal debtor and the guarantor arose at the time of making the promissory note, or at the very latest, at the time of the debtor’s default in failing to make the first monthly interest payment. The British Columbia Supreme Court found that in those circumstances, the part payment by the corporate principal debtor did not extend the running of the limitation period against the guarantor, and that there was no confirmation of the cause of action as against him. Thus, the action against him personally was out of time and was dismissed.
[44] In Continental Steel, the British Columbia Supreme Court considered a similar issue and stated that if the wording of a guarantee itself states that the guarantor’s obligation is only triggered by demand from the creditor, then the limitation period on enforcement of the guarantee will not start running until that demand is made. However, if there is no such wording, the limitation period for enforcement of a guarantee begins to run at the same time as the cause of action on the debt arises (para 149). Further, that a confirmation by the debtor can extend the limitation period for the cause of action on the debt. However, s 5(7) of the British Columbia Limitation Act, the prevailing provision, provided that a confirmation generally only applies to the party making it (i.e. debtor, not the guarantor) (para 52). While an agency relationship between the guarantor and the debtor could be sufficient to cause the confirmation resetting the limitation period to apply to the guarantor as well, such relationships are rare. And even if the guarantor is the director of the debtor company, this will not necessarily be sufficient to create such an agency relationship (para 151).
[45] The individual guarantee in Continental Steel did not stipulate a time for payment and did not require a demand for payment in order to be payable, it was due immediately. The British Columbia Supreme Court held that where a guarantee does not require a demand to be made on the guarantor before payment on the guarantee is required, the limitation period against the surety begins to run immediately after the guarantee is given. Thus, the liability and the limitation period began to run when the guarantee was given and the partial payment by the corporate debtor did not, in that case, extend the limitation period on the individual’s guarantee. On appeal, the British Columbia Court of Appeal noted that the trial judge’s findings on this point had not been challenged (para 47).
[46] In my view, these decisions do not assist the Individual Defendants.
[47] The Defendants do not assert that the limitation period began to run at the time the guarantee was given, such as the promissory notes in Walters. They acknowledge that the debt was payable on default. However, they submit that the limitation period began running on the original date of default under the loans, which they say was September 30, 2009, and thus had expired when the Plaintiff’s action was commenced. While Kilback Farm, the corporate principal debtor, acknowledged the debt thus extending the limitation period as against it as the principal debtor, the Individual Defendants, as guarantors, did not do so. Thus, the extension of the limitation period does not apply to them.
[48] Here the Advance Payment Agreement is governed by the AMP Act. The circumstances constituting default are set out in s 21(1) of the AMP Act. Section 21(2) of the AMP Act permits stays of default:
(2) Subject to any regulations, if a default is impending, the Minister may, at the administrator’s request, order the default to be stayed for a specified period on any terms and conditions that the Minister may establish.
[49] Section 22 speaks to a producer’s liability in the event of default:
22 A producer who is in default under a repayment agreement is liable to the administrator for
(a) the outstanding amount of the guaranteed advance;
(b) the interest at the rate specified in the repayment agreement on the outstanding amount of the advance, calculated from the date of the advance;
(c) the costs, including legal costs, incurred by the administrator to recover the outstanding amounts and interest, if those costs are approved by the Minister, other than the costs that the administrator has recovered by means of a fee charged to the producer under subsection 5(4); and
(d) any other outstanding amounts under the repayment agreement.
[50] And, as set out above, pursuant to s 23 of the AMP Act, in the event of default by a producer, when the Minister honours the guarantee given to an administrator, the Minister becomes subrogated to the administrator’s rights as against the producer.
[51] The provisions of the AMP Act are reflected in the Advance Payment Agreement. Section 5 of the Advance Payment Agreement the deals with default:
5. Default
5.1 The Producer is in default if the Producer:
5.1.a has not made all their obligations under the Repayment Agreement by the end of the production period;
5.1.b files a notice of intention to make a proposal or a makes a proposal under the Bankruptcy and Insolvency Act…
5.1.c is otherwise declared in default by the Administrator in accordance with the Repayment Agreement.
[52] Section 5.2 states that the administrator shall declare a producer in default and immediately inform the producer of this in the stipulated circumstances, which include that the producer has not met any of the obligations under the agreement within 20 days after the administrator mails or delivers a notice that the producer has not met its obligations and requesting that it do so (s 5.2.a). And upon default, the producer is liable to the administrator for the outstanding amount of the guaranteed advance, interest at the rate specified and costs (s 5.3). Further:
5.5 If the Producer is declared in default and the Minister makes payment under the guarantee, the Minister is subrogated to all rights of the Administrator against the defaulted Producer and against any other persons liable under this Repayment Agreement. The Producer is, in addition to the amounts stated in Subsection 5.3 of these Terms and Conditions, liable to the Minister for interest at the rate specified in Subsection 6.2 of these Terms and Conditions on the amount of the Producer’s liability under Subsection 5.3 of the Terms and Conditions and the costs incurred by the Minister to recover the amount, including [illegible] & costs.
(emphasis added)
[53] In this matter, the original repayment requirements under s 3.1.b of the Advance Payment Agreement were that 50% of the outstanding amount of the advance payment was to be paid within 15 days following the period of 12 months from the date the advance was issued, with the balance due within 45 days from the period of 12 months from the date that the advance was issued. The evidence is that the Advance Payment funds were issued to Kilback Farm on April 30, 2008 and May 5, 2008. Thus, the original repayment dates would have been on or about May 15, 2009 and June 15, 2009.
[54] As indicated above, the evidence is that on March 24, 2009 a Stay of Default to September 30, 2010 was granted by the Minister, which was acknowledged by Allen Kilback, as the authorized signing officer of Kilback Farm, on April 6, 2009. On December 3, 2010 a further Stay of Default was granted to March 31, 2013, which was acknowledged by Allan Kilback on January 24, 2011. A notice of default was sent by MPCC to Kilback Farm on May 3, 2013. On February 14, 2014, the Minister made the guarantee payment to MPCC. Based on these facts, default did not occur prior to March 31, 2013.
[55] And, as I have found above, the Minister made the guarantee payment within two years of the default date and the MPCC’s cause of action as against the Defendants was therefore not statue barred when the payment was made. The Minister’s action was commenced on January 14, 2019, less than six years after the Minister became subrogated to the MPCC’s rights and within the prevailing six-year limitation period set out in s 23(4) of the AMP Act.
[56] Accordingly, based on the evidence, I do not agree with the Defendants’ submission that the limitation period began running on the “original date of default” under the Advance Payment Agreement, which they say was September 30, 2009, and thus had expired when the Plaintiff’s action was commenced. Default did not occur on that date, although it could have occurred on the dates triggered by s 3.1.b of the Advance Payment Agreement, if the Stays of Default had not been granted and the Defendants did not repay the Advance Payment as required.
[57] It is significant, in the context of the Defendants’ argument, that this is not a circumstance where Kilback Farm, the corporate principal debtor, acknowledged or confirmed the debt before or after the end of the limitation period, thereby extending the limitation period as against it. Thus, a question of whether or not the limitation period was similarly extended with respect to the Individual Defendants as guarantors does not arise. Rather, here the subject action was brought within the six-year limitation period. There was no extension. Here, because of the Stays of Default as permitted by the AMP Act and acknowledged on behalf of Kilback Farm, the limitation period had simply not started to run until default on March 31, 2013.
[58] Limitation periods start running because of an event or occurrence. That is, limitation periods begin to run when the claim is discoverable, when the cause of action arises or as defined by statute. For example, the Defendants refer to the Limitations Act of Saskatchewan. It states that, unless otherwise provided in that Act, that no proceedings shall be commenced with respect to a claim after two years from the day on which the claim is discoverable. A claim is discovered on the day in which the claimant first knew, or in the circumstances ought to have known, the injury, loss or damage had occurred or otherwise as set out therein (Limitations Act, s 5, 6(1)). And, as stated in Klesse, the s 23(4) AMP Act statutory limitation period begins to run when the Minister becomes subrogated to the rights of the administrator (Klesse at para 29). In this matter, because of the Stays of Default, no cause of action on the part of the MPCC or the Minister as against any of the Defendants arose on September 30, 2009, the date the Defendants assert was the “original date of default”. No limitation period began to run on that date. Only upon the actual the date of ac