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SECURED TRANSACTIONS - Enforcement on default - Under security agreement 

Thursday, September 24, 2020 @ 6:13 AM  

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Appeal by 4 Corners from the dismissal of its application to add Smithe Residences and Schouw as defendants to its existing action and the granting of Smith and Schouw’s petition to have a security interest discharged. Purporting to exercise its right under a general security agreement with Smithe and Schouw that secured a promissory note, 4 Corners commenced the within action in its name and on behalf of Schouw and Smithe against the Boffo Group claiming any monies due to Schouw and Smithe under a joint venture agreement. The Boffo Group defended on the basis the general security agreement was invalid. 4 Corners sought to add a claim on the promissory note against Schouw and Smithe, even though the limitation period for commencing an independent claim on the debt had expired.

HELD: Appeal allowed. The chambers judge’s misapprehension of the relationship between 4 Corners’ existing claim against the Boffo Group, which was based in the validity of the general security agreement, and its claim against Schouw and Smithe, which was based in the validity of the underlying promissory note secured by the general security agreement, led him to err in his assessment of the interests of justice and convenience in adding Schouw and Smithe as parties. The chambers judge erroneously assessed the connection between the parties as minimal. Determining the rights under the general security agreement was key to addressing the validity of the Boffo Group’s assertion that 4 Corners had no standing to sue it and was an obvious reason why the 4 Corners’ debt claim should be determined as part of the same proceedings as the claim against the Boffo Group. The enforceability of the promissory note was critical to the continued viability of the general security agreement, and 4 Corners’ direct claim to the monies owing to Schouw and Smithe under their agreements with the Boffo Group. Schouw and Smithe in one capacity as plaintiffs and in another as defendants was not per se unacceptable. The application to amend the pleadings and add Schouw and Smithe was just and convenient.

Smithe Residences Ltd. v. Boffo Investment Corp., [2020] B.C.J. No. 1253, British Columbia Court of Appeal, R.J. Bauman C.J.B.C., D.C. Harris and J. DeWitt-Van Oosten JJ.A., August 11, 2020. Digest No. TLD-September212020007