Skrepnek et al. v. Peterson Krochak et al., (2014) 590 A.R. 243 (QB)

• Judge: Read, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: June 17, 2014
• Citations: (2014), 590 A.R. 243 (QB);2014 ABQB 358

Skrepnek v. Peterson Krochak (2014), 590 A.R. 243 (QB)

MLB headnote and full text

Temp. Cite: [2014] A.R. TBEd. AU.038

Olive Skrepnek and East Texas National Bank, Trustee of the Estate of Olive Skrepnek (plaintiff) v. Peterson Krochak and Dale A. Strebchuk (defendants) and Douglas Skrepnek and Peace River Shopping Centre Ltd. (third parties)

(0403 14005; 2014 ABQB 358)

Indexed As: Skrepnek et al. v. Peterson Krochak et al.

Alberta Court of Queen's Bench

Judicial District of Edmonton

Read, J.

June 17, 2014.

Summary:

The defendant was retained in August 2001 to draft documents to secure a loan of $680,000 made by the plaintiff to the anchor tenant (the debtor) in a shopping centre owned by her family. The defendant failed to register a financing statement at the personal property registry in August 2001. Funds were dispersed beginning in September 2001. In February 2003, another creditor whose security had a first charge commenced enforcement proceedings against the debtor. An auction netted $42,867.48, which went to the other creditor. The plaintiff lost the entire principal of her loan. The defendant admitted negligence in not filing a financing statement in August 2001. At issue was whether he was negligent otherwise and what caused the plaintiff's loss in order to determine the quantum of damages.

The Alberta Court of Queen's Bench found the defendant to have been negligent in other aspects of the transaction as well. The damages were $365,919.06, the amount remaining from the loan after deducting an October 2001 cheque to a general contractor for $176,841.18. The losses due to a number of cheques that were written in September 2001 were not due to the defendant's negligence.

Editor's Note: For a decision regarding prejudgment interest and costs in this action, see (2014), 590 A.R. 265.

Barristers and Solicitors - Topic 1007

Retainer - General principles - Scope of - The defendant was retained in August 2001 to draft documents to secure a loan of $680,000 made by the plaintiff to the anchor tenant (the debtor) in a shopping centre owned by her family - The defendant failed to register a financing statement at the personal property registry in August 2001 - Funds were dispersed beginning in September 2001 - In February 2003, another creditor whose security had a first charge commenced enforcement proceedings against the debtor - An auction netted $42,867.48, which went to the other creditor - The plaintiff lost the entire principal of her loan - The defendant admitted negligence in not filing a financing statement in August 2001 - At issue was whether the defendant had a duty to advise the plaintiff not to advance funds until a certain point in time - The Alberta Court of Queen's Bench concluded that the provision of this advice was within the scope of the parties' retainer - The retainer's substance was that the defendant would determine what security documents were necessary to secure the loan and to obtain a first charge on the debtor's assets - While the defendant had not undertaken to control the advances in funding, he was clearly well aware of the importance of having the loan documents signed before any funds were dispersed and that it was necessary to warn the plaintiff about the danger of advancing funds before then - The defendant was negligent in failing to do so - See paragraphs 41 to 67.

Barristers and Solicitors - Topic 1007

Retainer - General principles - Scope of - The defendant was retained in August 2001 to draft documents to secure a loan of $680,000 made by the plaintiff to the anchor tenant (the debtor) in a shopping centre owned by her family - The defendant failed to register a financing statement at the personal property registry (PPR) in August 2001 - Funds were dispersed beginning in September 2001 - In February 2003, another creditor whose security had a first charge commenced enforcement proceedings against the debtor - An auction netted $42,867.48, which went to the other creditor - The plaintiff lost the entire principal of her loan - The defendant admitted negligence in not filing a financing statement in August 2001 - The Alberta Court of Queen's Bench concluded that doing adequate PPR, Bank of Canada, and other public registry searches both before registration of the security and on the date of the advance was a part of the scope of the defendant's retainer - His failure to do so constituted negligence - See paragraphs 68 to 87.

Barristers and Solicitors - Topic 1007

Retainer - General principles - Scope of - The defendant was retained in August 2001 to draft documents to secure a loan of $680,000 made by the plaintiff to the anchor tenant (the debtor) in a shopping centre owned by her family - The defendant failed to register a financing statement at the personal property registry (PPR) in August 2001 - Funds were dispersed beginning in September 2001 - In February 2003, another creditor whose security had a first charge commenced enforcement proceedings against the debtor - An auction netted $42,867.48, which went to the other creditor - The plaintiff lost the entire principal of her loan - The defendant admitted negligence in not filing a financing statement in August 2001 - The Alberta Court of Queen's Bench found that a usual retainer regarding a secured loan transaction would include imposing controls so as to ensure coordination of the execution of documentation, registration and the advance of funds - Apparently, the defendant's instructions were simply to send the documents to the debtor's lawyer - A solicitor was not obliged to take instructions that would prevent him or her from meeting a professional duty - The defendant had a duty to coordinate the transaction to achieve the result expected of him - His failure to do so constituted negligence - See paragraphs 88 to 97.

Barristers and Solicitors - Topic 1550

Relationship with client - Duty to client - General - Duty respecting secured transactions - [See all Barristers and Solicitors - Topic 1007 ].

Barristers and Solicitors - Topic 1552

Relationship with client - Duty to client - General - Duty to follow client's instructions - [See third Barristers and Solicitors - Topic 1007 ].

Barristers and Solicitors - Topic 2588

Negligence - Particular negligent acts - Failure to acquire security for loan advances - [See all Barristers and Solicitors - Topic 1007 ].

Barristers and Solicitors - Topic 2594

Negligence - Particular negligent acts - Failure to inform or advise client - [See first Barristers and Solicitors - Topic 1007 ].

Barristers and Solicitors - Topic 2671

Negligence - Damages - Re failure to acquire security for loan advances - The defendant was retained in August 2001 to draft documents to secure a loan of $680,000 made by the plaintiff to the anchor tenant (the debtor) in a shopping centre owned by her family - The defendant failed to register a financing statement at the personal property registry in August 2001 - Funds were dispersed beginning in September 2001 - In February 2003, another creditor whose security had a first charge commenced enforcement proceedings against the debtor - An auction netted $42,867.48, which went to the other creditor - The plaintiff lost the entire principal of her loan - The defendant admitted negligence in not filing a financing statement in August 2001 and was found to have been negligent in other aspects of the transaction - At issue was the extent of the damages - The defendant asserted that the loss was due to an improvident investment and that damages were limited to $42,867.48 - The Alberta Court of Queen's Bench found that the damages were $365,919.06, the amount remaining from the loan after deducting an October 2001 cheque to a general contractor for $176,841.18 - The defendant should have registered and searched in October 2001 - His negligence in failing to do so deprived the plaintiff of the opportunity to assess the situation and to decide whether or not to continue to advance money - But for the defendant's negligence, the plaintiff would have known by early October 2001 of the other creditor's first charge - The cheque to the general contractor would have been issued anyway as the plaintiff and her family would retain the benefit of the improvements - The losses due to cheques written in September 2001 were not due to the defendant's negligence - Those cheques would have been signed even if the defendant had warned of the danger of doing so - See paragraphs 98 to 134.

Barristers and Solicitors - Topic 2671.1

Negligence - Damages - Re failure to register documents - [See Barristers and Solicitors - Topic 2671 ].

Cases Noticed:

Spence v. Bell (1982), 39 A.R. 239; 1982 ABCA 282, refd to. [para. 41].

Ross v. Caunters, [1979] All E.R. 580 (Ch.), refd to. [para. 41].

Bergman v. Williams (1980), 22 B.C.L.R. 317 (S.C.), refd to. [para. 42].

ABN Amro Bank Canada v. Gowling, Strathy & Henderson (1994), 20 O.R.(3d) 779 (Gen. Div.), refd to. [para. 43].

Equitable Trust Co. v. Irvine (2001), 236 N.B.R.(2d) 141; 611 A.P.R. 141; 39 R.P.R.(3d) 90 (T.D.), refd to. [para. 43].

3464920 Canada Inc. v. Strother et al., [2007] 2 S.C.R. 177; 363 N.R. 123; 241 B.C.A.C. 108; 399 W.A.C. 108; 2007 SCC 24, refd to. [para. 44].

Major v. Buchanan et al. (1975), 9 O.R.(2d) 491 (H.C.), refd to. [para. 54].

Meier v. Rose (2012), 531 A.R. 369; 2012 ABQB 82, refd to. [para. 75].

Earl v. Wilhelm et al. (2000), 189 Sask.R. 71; 216 W.A.C. 71; 2000 SKCA 1, refd to. [para. 75].

HSBC Securities (Canada) Inc. v. Davies, Ward & Beck, [2004] O.T.C. 816 (Sup. Ct.), refd to. [para. 81].

Newton v. Marzban et al., [2008] B.C.T.C. Uned. B15; 2008 BCSC 328, refd to. [para. 81].

Central Trust Co. v. Rafuse and Cordon, [1986] 2 S.C.R. 147; 69 N.R. 321; 75 N.S.R.(2d) 109; 186 A.P.R. 109; 31 D.L.R.(4th) 481, refd to. [para. 84].

Snell v. Farrell, [1990] 2 S.C.R. 311; 110 N.R. 200; 107 N.B.R.(2d) 94; 267 A.P.R. 94, refd to. [para. 99].

Clements v. Clements, [2012] 2 S.C.R. 181; 431 N.R. 198; 2012 SCC 32, refd to. [para. 100].

Schloss v. Koehler, Koehler Estate, Knaut, Rolf and Cochrane (1977), 8 A.R. 559 (T.D.), varied (1979), 107 A.R. 96; 1979 ABCA 329, refd to. [para. 103].

Authors and Works Noticed:

Brown, J., Cause-in-Fact at the Supreme Court of Canada: Developments in Tort Law in 2012-2013 (2014), 64 S.C.L.R.(2d) 327, p. 337 [para. 100].

Counsel:

John M. Hope, Q.C., and Erin Burton (Duncan Craig LLP), for the plaintiff;

Kenneth J. Warren, Q.C., and Timothy Stock-Bateman (Gowling Lafleur Henderson LLP), for the defendant, Dale A. Strebchuk.

This action was heard on May 27 and 28, 2014, by Read, J., of the Alberta Court of Queen's Bench, Judicial District of Edmonton, who delivered the following reasons for judgment on June 17, 2014.