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PAYMENT AND DISCHARGE OF DEBT - Payment to third party

Friday, August 16, 2019 @ 8:09 AM  


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Appeal by the plaintiffs from a judgment quantifying a debt owed by the defendants. Doctor Brar worked as a physician through a professional corporation. He also developed properties through the two Moga companies with the assistance of his son, Manjit. Following Doctor Brar's divorce, several interests in land and companies were transferred within the family. Manjit held the shares of one of the Moga companies and his two brothers held his share in the other Moga company. The plaintiffs sued the defendants for title to the three properties and repayment of a substantial loan made by Doctor Brar's professional corporation to Moga Corporation. The trial judge found insufficient documentation to support the claim regarding the transfer of the disputed properties. The judge accepted that the loan from Doctor Brar's company to Moga was not extinguished through repayment of the Doctor's creditors. The judge ordered Moga to repay the loan in the amount of $1.58 million. The plaintiffs appealed on the basis the correct loan amount was $1.69 million. Moga cross-appealed, arguing that the trial judge erred in failing to find the debt was extinguished via payment to a third party.

HELD: Appeal allowed, and cross-appeal dismissed. The trial judge's calculation of the amount owed under the loan was made without explanation and therefore was not entitled to deference. The plaintiffs established that the loan was in the amount claimed, with the trial judge's order varied accordingly. The trial judge did not err in the application of the test for third-party debt repayment by imposing a requirement of a formal arrangement. Although the trial judge erred by failing to allow the parties to make submissions on the test applied, the omission had no impact on the outcome and caused no significant prejudice. Ordering a new trial on all issues would be unfair, as the conclusion on the extinguishment issue was not successfully challenged.

Brar v. Brar, [2019] A.J. No. 883, Alberta Court of Appeal, M.S. Paperny, P.A. Rowbotham and J. Antonio JJ.A., July 5, 2019. Digest No. TLD-August12019010