518718 Alberta Ltd. v. Canadian Forest Products Ltd., (1998) 231 A.R. 21 (QB)

• Judge: Romaine, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: July 03, 1998
• Citations: (1998), 231 A.R. 21 (QB)

518718 Alta. Ltd. v. Cdn. Forest Products (1998), 231 A.R. 21 (QB)

MLB headnote and full text

Temp. Cite: [1998] A.R. TBEd. JL.066

518718 Alberta Ltd. carrying on business under the name and style of Alberta Business Capital (plaintiff) v. Canadian Forest Products Ltd. (defendant)

(Action No. 9501-10562)

Indexed As: 518718 Alberta Ltd. v. Canadian Forest Products Ltd.

Alberta Court of Queen's Bench

Judicial District of Calgary

Romaine, J.

July 3, 1998.

Summary:

An assignee of debt sued an account debtor for amounts paid out and set-off against debts owing by the assignor after the debtor received notice of the assignments.

The Alberta Court of Queen's Bench awarded judgment to the assignee of debt.

Choses in Action - Topic 1003

Assignment of book debts - General - Effect of assignment on right to set-off - Section 41(2)(b) of the Personal Property Security Act provided that, inter alia, the rights of an assignee of intangible assets were subject to the account debtor's claim against the assignor that accrued before the account debtor had knowledge of the as­signment - The Alberta Court of Queen's Bench held that s. 41 did not require that the debt was payable, but only that it had "completely constituted" - See paragraph 54.

Choses in Action - Topic 1003

Assignment of book debts - General - Effect of assignment on right to set-off - Timberline and Canfor entered into an advance agreement - Canfor advanced monies to Timberline - Timberline delivered timber to Canfor - Canfor deducted an amount of money for logs delivered to repay the amount advanced - If the full amount was not repaid by a certain date, the parties were to agree to a repayment schedule - Timberline factored Canfor's invoices to ABC - In paying ABC, Canfor deducted amounts as pay­ment of Timberline's debt - Canfor failed to correct ABC's misunderstanding respect­ing the extent of the deductions - ABC sued Canfor - Section 41(2)(b) of the Personal Property Security Act provided that, inter alia, the rights of an assignee of intangible assets were subject to the account debtor's claim against the assignor that accrued before the account debtor had knowledge of the assignment - The Alberta Court of Queen's Bench held that Canfor had a right of set-off, but had disentitled itself from relying on the full extent of its contractual deduction in light of its con­duct - See paragraphs 48 to 64.

Choses in Action - Topic 1012

Assignment of book debts - General - Persons bound by assignment - Timberline, a logging company, entered into an advance agreement and log purchase agree­ments with Canfor, which owned saw mills - Canfor owed monies to Timberline - Timberline factored Canfor invoices to ABC - ABC sued Canfor - At issue was whether there was a three-cornered agree­ment between Timberline, Canfor and ABC - The Alberta Court of Queen's Bench held that there was no three-cor­nered agreement - ABC proceeded with the first factoring prior to receiving any writ­ten confirmation from Canfor and Canfor made no inducements to ABC - There was no enforceable agreement where there was no consideration flowing to Canfor - See paragraphs 38, 39.

Personal Property - Topic 6002

Security interests - General - Application of legislation - Timberline, a logging company, entered into an advance agree­ment and log purchase agreements with Canfor, a saw mill owner - Under the advance agreement, Canfor advanced monies to Timberline - Timberline delivered timber to Canfor - Canfor deducted an amount of money for logs delivered to repay the amount advanced - The log purchase agreements were simple contracts of sale and purchase - At issue was the application of the Alberta Per­sonal Security Property Act - Under s. 4(d), the Act did not apply to the creation or trans­fer of an interest in present or future wages, salary, pay, commission or other compensation for labour or personal ser­vices - The Alberta Court of Queen's Bench held that the agreements did not relate to compensation for labour or ser­vices, but to the sale of logs - Accordingly, the Act applied - See paragraphs 43 to 47.

Personal Property - Topic 6013

Security interests - General - Intangible personal property - What constitutes - The Alberta Court of Queen's Bench held that factored invoices were assignments of intangibles under s. 41 of the Personal Property Act - See paragraphs 48 to 51.

Personal Property - Topic 6014

Security interests - General - Obligation to act in good faith - [See second Choses in Action - Topic 1003 and Practice - Topic 1843 ].

Practice - Topic 1843

Pleadings - Counterclaim and set-off - Set-off - Circumstances when set-off can or cannot be claimed - Section 41(2)(b) of the Personal Property Security Act provided that, inter alia, the rights of an assignee of intangible assets were subject to the account debtor's claim against the assignor that accrued before the account debtor had knowledge of the assignment - An assignee asserted that the account debtor had disentitled itself to full set-off by its con­duct - The account debtor claimed that the application of equitable rules to the be­haviour of parties would undermine the Act as the Act pre-empted most of the existing and common law and equitable rules - The Alberta Court of Queen's Bench held that s. 66 provided for a con­tinued role for common law and equity - It was therefore necessary to consider whether the account debtor had disentitled itself from its right of set-off - See para­graphs 66 to 79.

Cases Noticed:

Gauthier Estate et al. v. Pysh et al. (1992), 129 A.R. 12 (Q.B.), refd to. [para. 38].

Telford v. Holt, [1987] 2 S.C.R. 193; 78 N.R. 321; 81 A.R. 385; 54 Alta. L.R.(2d) 193; 21 C.P.C.(2d) 1, refd to. [para. 53].

Hydroelectric Power Commission (Ont.) v. Albright (1922), 64 S.C.R. 306, refd to. [para. 54].

Strathcona Brewing Co. et al. v. Eldee Investment Corp. et al. (1994), 153 A.R. 63; 17 Alta. L.R.(3d) 405 (Q.B.), refd to. [para. 69].

Canadian Admiral Corp. Ltd. v. L.F. Dommerich & Co., [1964] S.C.R. 238, refd to. [para. 74].

Canadian Imperial Bank of Commerce v. A.K. Construction (1988) Ltd. et al. (1995), 171 A.R. 326 (Q.B.), refd to. [para. 76].

Statutes Noticed:

Personal Property Security Act, R.S.A. 1990, c. S-4.05, sect. 41(2)(b) [para. 49].

Authors and Works Noticed:

Cuming, Robert and Wood, Roderick, Alberta Personal Property Security Act Handbook (3rd Ed. 1996), pp. 18, 19 [para. 50]; 490 [para. 68]; 493 [para. 69].

Cuming, Robert, Banking and Finance Law Review (1991), 6 B.F.L.R. 307, generally [para. 54].

Counsel:

Shaun T. MacIsaac (Pittman MacIsaac & Roy), for the plaintiff;

C. Richard Jones (Milner Fenerty), for the defendant.

This case was heard before Romaine, J., of the Alberta Court of Queen's Bench, Judicial District of Calgary, who delivered the fol­lowing judgment on July 3, 1998.