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LIMITATION OF ACTIONS - Time - Extension, interruption, suspension and inapplicability

Tuesday, March 27, 2018 @ 8:48 AM  

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Appeal by the defendants and cross-appeal by the plaintiff from trial judgment finding the appellant CTL liable for debts owed to the respondent, allowing the claims against CTL’s principal for breach of trust but dismissing the claims against him on his personal guarantee and for repayment of a personal loan as statute barred. The respondent sued the appellants for breach of contract and breach of trust. The parties were involved in several joint ventures for 22 years pursuant to which CTL purchased steel with loans obtained from the respondent. CTL was to repay the respondent when the steel was resold and the parties would divide the profits equally. The parties did not agree in advance how, by whom or when the many advances and repayments made by CTL were to be accounted for. CTL went into receivership in 2011. At the time, many of the debts owed by CTL to the respondent were in danger of being statute barred. In preparation for its lawsuit against the appellants, the respondent re-allocated various partial payments already recorded in its accounts, with the object of reviving or extending the limitation periods applicable to such debts. The appellants disputed the reallocations and argued that their indebtedness had been paid in full or was statute-barred. With a few exceptions, the trial judge gave effect to the respondent’s 2010 reallocations and allowed its claims in contract and breach of trust, finding that the appellants failed to ensure the proceeds of the sale of the joint venture steel were deposited into CTL’s accounts and that monies received by CTL that were to be paid to the respondent were diverted to CTL. The trial judge rejected the respondent’s argument that the limitation period applicable to the personal guarantee, which would normally have expired in 2007, had been extended by CTL’s partial payments and found that the respondent was therefore statute barred from claiming personally on the guarantee.

HELD: Appeal and cross-appeal dismissed. The allocation rules gave CTL the first right to instruct where its payments would be credited. The trial judge did not err in finding that CTL failed to do so and that the respondent thus became entitled to allocate the payments. The trial judge was not wrong to proceed on the basis that at least up to 2001, neither party had communicated clearly to the other to what accounts partial payments made by the appellants were to be allocated. A vague request by CTL that the appellant apply something to the oldest debts on some unspecified occasions was not sufficient to constitute the communication of an allocation. No portion of the award made by the trial judge reflected indebtedness that had been statute-barred before the allocation of any partial payments. Any partial payments in this case were made by CTL, although at the request of its principal, and could only extend the limitation periods in respect of the indebtedness of CTL Steel, not the personal loan owed by CTL’s principal to the respondent or the principal’s personal guarantee of CTL’s debts. The trial judge did not err in finding that the funds deposited in CTL bank account were impressed with a trust. The findings that the transfers of funds into CTL’s general accounts were likely intentional and that its principal had taken the risk of using money from CTL account for personal purposes without ensuring the trust fund was maintained, were fully supported by the evidence.

Continental Steel Ltd. v. CTL Steel Ltd., [2018] B.C.J. No. 398, British Columbia Court of Appeal, R.J. Bauman C.J.B.C., M.V. Newbury and P.A. Kirkpatrick JJ.A., March 9, 2018. Digest No. TLD-March262018005