Citation: Trans Canada Credit v. Judson Date: PESCTD 57 Docket: SCC Registry: Charlottetown

Transcription

1 Citation: Trans Canada Credit v. Judson Date: PESCTD 57 Docket: SCC Registry: Charlottetown PROVINCE OF PRINCE EDWARD ISLAND IN THE SUPREME COURT - TRIAL DIVISION BETWEEN: TRANS CANADA CREDIT PLAINTIFF AND: JAMES JUDSON DEFENDANT BEFORE: The Honourable Justice Wayne D. Cheverie Philip Mullally, Q.C. - Solicitor for the plaintiff Horace B. Carver, Q.C. - Solicitor for the defendant Place and date of hearing - Charlottetown, Prince Edward Island June 24, 2002 Place and date of judgment - Charlottetown, Prince Edward Island September 6, 2002

2 Citation: Trans Canada Credit v. Judson 2002 PESCTD 57 SCC BETWEEN: TRANS CANADA CREDIT PLAINTIFF AND: JAMES JUDSON DEFENDANT Prince Edward Island Supreme Court - Trial Division Small Claims Section Before: Cheverie J. Heard: June 24, 2002 Judgment: September 6, 2002 [7 pages] Small Claims - Promissory Note - plea of non est factum - allowed. CASES CONSIDERED: Glenville Savings and Mortgage Corp. v. Slevin (1992), 93 D.L.R. 4 th, 268; Marvco Color Research Ltd. v. Harris, [1982] 2 S.C.R. 774; Northside Economic Development Assistance Corp. v. Strickland, [1990] N.S.J. No. 52 (N.S.S.C.); Royal Bank of Canada v. Wood, [1989] B.C.J. No (B.C.S.C.); Canadian Imperial Bank of Commerce v. P.E.I. Mussel King Inc.; Vandenbremt (1984), 49 Nfld. & P.E.I.R RULE CONSIDERED: Rules of Civil Procedure, Rule 74.22(2)(a). Philip Mullally, Q.C. - Solicitor for the plaintiff Horace B. Carver, Q.C. - Solicitor for the defendant

3 Cheverie J.: Introduction [1] Trans Canada Credit is a company in the money lending business. It has an office in the City of Charlottetown in the province of Prince Edward Island. In this Small Claims action, Trans Canada Credit seeks to enforce a promissory note which bears the signature of the defendant, James Judson. Trans Canada Credit claims the sum of $3, plus interest at the rate of 28.97% per year, plus court costs on the strength of the note dated January 25, all of which is claimed against Judson. [2] Trans Canada Credit sees this as a straightforward matter. Judson came into its Charlottetown office to sign the promissory note and add his signature to that of Melvin MacNeil who had already executed the note in Nova Scotia. The account had to be brought up to date and the promissory note was the vehicle used by Trans Canada Credit to give effect to this transaction. For his part, Judson offers a different version of the facts as they relate to the promissory note, and pleads the defense of non est factum. In essence, Judson admits to signing the document, but says he did so in order to lend his good credit rating to Melvin MacNeil so Melvin MacNeil could obtain a better rate of interest. Factual background [3] The case for Trans Canada Credit consists primarily of the promissory note dated January 25, 2001 (Exhibit P-1), several other credit documents and the testimony of the Charlottetown branch manager, Andrew Aitken. It is fair to say Trans Canada Credit saw this as a fairly routine and straightforward transaction. The account in question needed to be brought up to date, and this was the reason for having Exhibit P- 1 executed. No new money was advanced. Aitken s evidence is that he met with Judson and witnessed his signature to Exhibit P-1. He did not see the document signed by Melvin MacNeil, as it had been forwarded to the Charlottetown office from a branch in Nova Scotia. [4] Judson admits to going to the Trans Canada Credit office to sign a document. He says he did so at the request of his daughter, whose boyfriend at the time was Melvin MacNeil. Judson gave evidence that because he had a good credit rating, he was being asked to lend his name as a reference for Melvin MacNeil, so that MacNeil could get lower payments. I accept Judson s evidence that he has very little formal education; his ability to read is extremely limited; and his hearing is so poor he requires the assistance of two hearing aids, although he can only afford one. In short, Judson says he did sign the promissory note, Exhibit P-1, but he thought it was for an entirely different purpose. [5] The limited capabilities of Judson were supported at trial by the evidence of his

4 Page: 2 wife, Doreen Judson. Like her husband, she has very limited formal education and her evidence supports that of her husband. In addition, Shirley Beck was called on behalf of the defendant and testified she has known him since the mid-1960 s and has provided assistance to him and his wife over the years in various life skill situations. She described Judson as being very vulnerable, as far as his daughter, Cathy, is concerned; she confirmed Judson s need for a hearing aid; and she confirmed Judson essentially can t read or write, and his comprehension level is low. Promissory note [6] The defendant admits signing the promissory note (Exhibit P-1). He says he did so for the purposes set out above. His evidence is, and I accept as fact, the transaction took place relatively quickly. He was not offered any independent legal advice, and he did not ask for any such advice. Aitken also indicated during the course of his evidence that Trans Canada Credit chose to pursue Judson because Melvin MacNeil was bankrupt. [7] Exhibit P-1, although it is a form document, is not as clear as it might be. I note the following: (1) In the box headed Borrowers appears MACNEIL,, MELVIN, JAMES. On the right hand side of the document appears a box headed Co-Borrowers. It is blank. No names appear in this box. (2) At the foot of the document above the signature of James Judson appears the signature of Melvin MacNeil. Aitken admitted although his signature appears to the left of the MacNeil signature, he, Aitken, did not witness it. He only witnessed the Judson signature. While it may not be necessary to have the signatures witnessed at all, the document does provide for witness space, and it does appear on its face that Aitken witnessed MacNeil s signature. However, the evidence clearly indicates this was not the case and, in fact, MacNeil signed it at another time and in another province. (3) To the left of MacNeil s signature, the words Borrower s Signature appear, and Borrower s is circled. Does this mean MacNeil was the borrower? The same term Borrower s to the left of the Judson signature is not circled. Perhaps Judson is a co-borrower? However, his name does not appear in the Co-Borrower s box in the promissory note. In all, given the fact the promissory note requires very little by way of completion, more attention to detail in this case would certainly have been helpful. Indeed, the fact

5 Page: 3 Exhibit P-1 is unclear in these noted areas, coupled with Judson s limited education and reading and writing skills, serves to support Judson s plea of non est factum and diminish Trans Canada Credit s case. Can Judson rely on the plea of non est factum? [8] The literal translation of non est factum is - it s not my deed. It has been described as a form of mistake where the mistake goes to the very nature of the document which is being signed. Where such a mistake is established, it is invariably a fundamental mistake causing the contract to be void. See Glenville Savings and Mortgage Corp. v. Slevin (1992), 93 D.L.R. 4 th, 268 at p [9] Trans Canada Credit relies on the case of Marvco Color Research Ltd. v. Harris, [1982] 2 S.C.R This is a decision of the Supreme Court of Canada and the judgment of the court was delivered by Estey J. Specifically, Trans Canada Credit relies on the following statements of Cartwright J. found at p. 779 of the case report and cited, with approval, by Estey J.:... generally speaking, a person who executes a document without taking the trouble to read it is liable on it and cannot plead that he mistook its contents, at all events, as against a person who acting in good faith in the ordinary course of business has changed his position in reliance on such document. Shortly thereafter, on the same page as the decision, Estey J. had this to say: He concluded, therefore, that any person who fails to exercise reasonable care in signing a document is precluded from relying on the plea of non est factum as against a person who relies upon that document in good faith and for value. [10] In relying on these passages, Trans Canada Credit concedes Judson couldn t read the document. Notwithstanding that, their view of the transaction suggests Judson didn t exercise reasonable care in signing the document, or should have taken further steps and made further inquiries before executing this document. On the basis of that conclusion, Trans Canada Credit says Judson cannot rely on the plea of non est factum. [11] While I accept Trans Canada Credit s statement that Marvco represents the leading authority in this area, I do not believe the facts in the case at bar result in a denial of Judson s plea. As I indicated earlier, I find as fact that Judson has very limited formal education; his ability to read is minimal - he certainly couldn t read Exhibit P-1 when it was shown to him at the trial; and his hearing is impaired. I also find as fact that on the evidence before me the meeting which was held at the Trans Canada

6 Page: 4 Credit office to execute Exhibit P-1 was of very short duration. There was no mention of any independent legal advice for Judson. In the words of Cartwright J., quoted above, I don t think it can be said in this case Judson executed a document without taking the trouble to read it, because the fact is he couldn t read it; nor can it be said he failed to take reasonable care in the execution of that document. [12] The case at bar is yet another example of a situation where the particular circumstances of a case must be carefully reviewed before applying the law. In concluding his reasons in Marvco at p. 787, Estey J. underlined the importance of looking at the circumstances of each case. The following appears in his judgment: I wish only to add that the application of the principle that carelessness will disentitle a party to the document of the right to disown the document in law must depend upon the circumstances of each case. This has been said throughout the judgments written on the principle of non est factum from the earliest times. The magnitude and extent of the carelessness, the circumstances which may have contributed to such carelessness, and all other circumstances must be taken into account in each case before a court may determine whether estoppel shall arise in the defendant so as to prevent the raising of this defence. The policy considerations inherent in the plea of non est factum were well stated by Lord Wilberforce in his judgment in Saunders, supra, at pp : The law... has two conflicting objectives: relief to a signer whose consent is genuinely lacking...; protection to innocent third parties who have acted upon an apparently regular and properly executed document. Because each of these factors may involve questions of degree or shading any rule of law must represent a compromise and must allow to the court some flexibility in application. As I have found, I do not believe Judson was careless so as to deny him the right to plead non est factum. In addition, I do not have the complicating factor of an innocent third party clouding the issue. Therefore, I do not have to balance the interests of a signer of the note whose consent is genuinely lacking against some other person who, perhaps, purchased Exhibit P-1 for value from Trans Canada Credit. [13] Judson s counsel has referred me to a number of cases. One of those is the decision of Glube C.J.T.D. (as she then was) in the case of Northside Economic Development Assistance Corp. v. Strickland, [1990] N.S.J. No. 52 (N.S.S.C.). Glube C.J. had no difficulty in making a finding in that case the defendant did not understand the contents of the documents which she signed, and allowed the plea of non est factum. Again, the particular facts of the case were paramount. This plea was also allowed in the case of Royal Bank of Canada v. Wood, [1989] B.C.J. No (B.C.S.C.). The facts of the Wood case are interesting in that there was no independent legal advice offered or given; both defendants were illiterate and described as unsophisticated and shy. In dealing with Marvco, as it related to the case before her,

7 Page: 5 Proudfoot J. stated: In the Marvco case the emphasis was clearly on whether a non est factum defence could stand on behalf of a careless defendant against an innocent third party who relied on the commercial certainty of the signed document. There is no doubt that the Marvco decision has provided greater protection to innocent third parties. However, there is no third party involved in the case at bar, there is no need for the court to balance the equity between a careless signer and an innocent third party. Furthermore, Estey J., in the Marvco case clearly contemplated factual situations and circumstances would arise where the defence of non est factum could still succeed. I do not think that the Marvco case totally eliminated the defence of non est factum. [14] Counsel for Trans Canada Credit took exception to the submission by counsel for Judson as to whether or not the Marvco case analysed the situation involving an innocent third party. In this regard, I wish to point out that Estey J. did refer, with approval, to the policy considerations inherent in the plea of non est factum as stated by Lord Wilberforce in the quote from Marvco at p [15] The final case to which I wish to refer is a decision of the Appeal Division of this Court in the case of Canadian Imperial Bank of Commerce v. P.E.I. Mussel King Inc.; Vandenbremt (1984), 49 Nfld. & P.E.I.R The facts of that case were quite different from the case at bar. The guarantor was a much more sophisticated borrower than Judson. However, the fact remains Mitchell J., speaking for the Court, did not allow the plea of non est factum to succeed for a number of reasons. I do not believe that on a fair reading of that decision, one can conclude that each of the six reasons set out at p. 175 of the case report must be present before a defendant would be successful in advancing the plea of non est factum. Rather, the facts of that case suggested non est factum was not available because of a lack of evidence to support the particular findings of the trial judge. The very first reason cited by Mitchell J. was there was no evidence that the respondent, when she signed the guarantee in question, believed she had signed a document of a completely different nature. As I have found, the evidence in the case at bar indicates Judson thought he was signing a completely different document. That, in itself, is sufficient to allow the plea of non est factum to succeed. Conclusion [16] In summary, I find:

8 Page: 6 1. Exhibit P-1, the promissory note, was executed by James Judson, but at the time of that execution he honestly believed he was executing it for an entirely different purpose. 2. Exhibit P-1 lacks the clarity and precision one might reasonably expect of a promissory note. 3. The plea of non est factum relied upon by Judson is allowed. 4. The claim of Trans Canada Credit is dismissed. Costs [17] Rule 74 of the Rules of Civil Procedure governs Small Claims. In particular, Rule (2) and (3) reads: (2) An unsuccessful party must pay to the successful party the following expenses, unless a judge or prothonotary orders otherwise: (a) (b) (c) any fees the party paid for filing any documents; reasonable amounts the party paid for serving any documents; any other reasonable charges or expenses that the judge or prothonotary considers directly relate to the conduct of the proceeding; (d) party and party or solicitor and client costs at 50 percent of the normal taxed amount.... (3) A judge may determine the amount of the expenses that are payable under subrule (2) or refer the matter to the prothonotary. [18] Since this is not a case calling for solicitor and client costs, Judson is entitled to his costs against Trans Canada Credit at 50% of the normal taxable amount. In order to expedite matters, I fix Judson s costs at $750 plus disbursements and applicable taxes. These costs are payable forthwith.

9 Page: 7 September 6, 2002 J.