2005 BCCA 621 Gordon v. McDonald

Before:	The Honourable Madam Justice Southin
	The Honourable Madam Justice Ryan
	The Honourable Madam Justice Kirkpatrick

S.K. Gudmundseth, Q.C. J.L. Gartner	Counsel for the Appellant
C.A. Millar	Counsel for the Respondent
Place and Date of Hearing:	Vancouver, British Columbia
14 November 2005
Place and Date of Judgment:	Vancouver, British Columbia
15 December 2005

Written Reasons by:

The Honourable Madam Justice Kirkpatrick

Concurred in by:

The Honourable Madam Justice Southin
The Honourable Madam Justice Ryan

Reasons for Judgment of the Honourable Madam Justice Kirkpatrick:

[1] The appellant (plaintiff at trial), Huntly Gordon ("Gordon"), appeals from the April 22, 2005 order of the Supreme Court, in which his claim for damages for breach of contract was dismissed.

[2] The appellant advanced several arguments in support of his contention that the trial judge failed to adequately consider the evidence before him in dismissing the appellant's claim. Because I hold the opinion that the trial judge made two palpable and overriding errors of fact such as to warrant the order of a new trial, I need not address the other alleged errors in the reasoning and conclusions of the trial judge.

BACKGROUND

[3] The respondent (defendant at trial), Glen Robert McDonald ("McDonald"), owned a 40‑foot racing sailboat, the Aquila I ("Aquila"), that he purchased in 1990 for $85,000 USD. McDonald and Gordon knew each other through their mutual interest in sailing. Gordon had served as a crew member on the Aquila during races in 1992.

[4] On February 23, 1993, Gordon agreed to purchase a one‑half interest in the Aquila for $50,000 CAD. The agreement between Gordon and McDonald provided a "put option" at clause 8.13 of the Vessel Purchase and Co-Owners Agreement (the "Agreement"):

Purchaser's Option to Sell. The Purchaser has the option, irrevocable within the time herein limited for its exercise, to sell his Interest to the Vendor for an amount equal to the Purchase Price notwithstanding the condition of the Vessel at that time. The option shall be open to the Purchaser to exercise effective the first anniversary date of the Closing. The option must be exercised by delivering a written notice to the Vendor before the first anniversary date of the Closing and the sale of the Purchaser's Interest shall be completed within thirty (30) days after the first anniversary date of the Closing. Time shall be of the essence of the completion of the sale of the Purchaser's Interest to the Vendor.

[5] Relations between Gordon and McDonald deteriorated shortly after the purchase. Prior to a race in mid‑June 1993, McDonald told Gordon that he was "out of the boat". McDonald only sailed the Aquila once more himself after the end of June 1993. He sold his interest in the vessel to Michael Abbott in March 1999 for $15,000.

[6] After the June 1993 falling out, Gordon sent a letter to McDonald on July 26, 1993 that he now says, for the first time, constitutes notice under clause 8.13 of the Agreement. That letter reads as follows:

Re: Aquila I

I hereby agree to sell my 50% Interest in the Vessel on the following terms and conditions:

1. Capitalized words used in this letter agreement shall have the meanings described in that Vessel Purchase and Co-Owners Agreement made the 23rd day of February, 1993, between us (the "Co-Owners Agreement").

2. I agree to sell my Interest to you and to sign all forms you present to me to transfer my Interest to you upon receipt of $50,000.00 (the "Sale Price"), which Sale Price shall be paid by you on or before the 23rd day of February, 1994 (the "Completion Date").

3. On the day you agree to this letter agreement, you will issue me a promissory note in the amount of the Sale Price, without interest, payable on the Completion Date provided that if you do not pay me the Sale Price on the Completion Date, then the unpaid portion shall accrue interest at the rate of 12% per annum.

4. As further consideration for you entering into this letter agreement, I agree that I will no longer use the Vessel provided that you are not in default hereunder.

5. From the date of this letter agreement, you agree that all costs and expenses associated with the Vessel, including but not restricted to moorage, repairs, insurance and maintenance, are solely your responsibility.

6. Prior to the Completion Date we shall divide the equipment for the Vessel such that I may take pieces of equipment equal to one-half of the total value of all equipment acquired by us for the Vessel since I became an owner of the Interest.

7. The Co-Owners Agreement is modified to the extent as described in this letter agreement.

8. Time shall be of the essence of this letter agreement.

If you are in agreement with the terms and conditions of this letter agreement, please sign the enclosed copy.

[7] McDonald never signed (or, indeed, acknowledged) the July 26, 1993 letter.

[8] Notwithstanding the position taken by Gordon on this appeal with respect to the July 26, 1993 letter, the position taken at trial, and upon which four days of evidence was focussed, concerned Gordon's allegation that he received a form of notice from his lawyer on February 22, 1994 and delivered it to McDonald in person on the same day, in compliance with the terms of clause 8.13 of the Agreement (the "Notice"). That Notice, which is headed by a facsimile reference, reads as follows:

02/22/94 10:31 604 669 5791 FRASER & COMPANY

NOTICE

TO: GLEN ROBERT McDONALD

RE: AQUILA I

I hereby give you notice that I am exercising my option to sell my interest in Aquila I to you pursuant to paragraph 8.13 of our Vessel Purchase and Co-Owner's Agreement made February 23, 1993.

DATED this 22nd day of February, 1994.

"Huntly Gordon"

_________________
HUNTLY GORDON

A handwritten note on the Notice in Gordon's handwriting reads:

Delivered personally to Glen
McDonald at 6:30 approximately
Feb 22/94 P.M.
"HG"

[9] Gordon testified that he received the form of Notice from his lawyer on February 22, 1994 and, as noted on the Notice in evidence, he delivered the document to McDonald on the same day. McDonald denied meeting with Gordon on February 22, 1994, and said that the first time he saw the Notice was at his examination for discovery. McDonald's common law wife, Linda Jenkins, testified that, contrary to Gordon's evidence that he saw her in McDonald's home on February 22, 1994, Gordon had never been into their home.

ISSUE AT TRIAL

[10] As can be seen, the central issue in the case concerned whether the Notice dated February 22, 1994, was delivered to McDonald within the time necessary to invoke the provisions of clause 8.13 of the Agreement. It was therefore necessary to carefully consider the credibility of the various witnesses and, most particularly, Gordon and McDonald.

TRIAL DECISION

[11] The trial judge found Gordon to be "evasive, argumentative, and defensive in his evidence". He found that McDonald's evidence "suffered from far too many internal contradictions Ö to give me great confidence in the accuracy of his memory" (at para. 47). The trial judge considered that McDonald's faulty memory was excusable in part because of the long delay between the events in question and the trial.

[12] The passages in the trial judgment upon which this appeal was primarily focussed read as follows:

[41] Leaving aside the collateral attacks, then, I next consider what I can make of the notations on Tab 14 of Exhibit 1 and Exhibit 2. The notations that might assist are twofold: the facsimile header that states the name of Gordonís lawyerís firm and his facsimile number, and the notation of delivery Gordon says he put on the document shortly after delivery.

[42] The first, the facsimile header, was a matter on which there was no other evidence. To be admissible at all, it must be something of which judicial notice can be taken. To be proof that the document was sent by facsimile to Gordon by his lawyer, it must be shown to be both reliable and necessary. No attempt was made to show the basis on which the Court should accept the header as proof that it was transmitted on the date set out, by the law firm noted or from the number stated. I do not accept the notation as proof that it was sent on the date and at the time noted, by the law firm noted, or from the number noted. It is not necessary to consider whether the imposition of such information by facsimile machines is so notorious that proof of the facsimile process need not be offered because if the banner cannot assist in proving the fact of delivery to Gordon from his lawyer, on the date and at the time stated on the document, it is of no relevance to the issues.

[43] As to the notation Gordon says he put on the document soon after delivery of a copy to McDonald, I consider that to be inadmissible as self-serving. Gordon testified quite clearly about the delivery. No note made by him confirming that is admissible as there was no attack on his testimony on the basis of recent fabrication.

[44] Other evidence considered is the letter from Gordonís lawyer at the time, Mr. Rabson, to McDonald on March 21, 1994. In that letter, Mr. Rabson states:

We are advised that on February 22 1994 our client served you with notice that he was exercising his option to sell his interest in Aquila I to you pursuant to paragraph 8.13 of the Vessel Purchase and Co-Owners Agreement made February 23, 1993.

[45] The letter states that it was sent by courier. McDonald testified that he never received the letter, that he recalled one occasion where a courierís card was left in the door of the office/shop building on his property, that the card was multi-coloured, and that was the closest he had been to a courier in relation to this dispute. I was presented with no other evidence, whether from the lawyer or the courier, to prove delivery of this letter. I am not prepared to draw an inference adverse to McDonald from his failure to object to the assertion that delivery of the notice had been made in a timely fashion.

[Emphasis added.]

[13] The trial judge concluded:

Having reviewed my notes of the evidence, and having weighed all of the evidence, not just those portions set out in these reasons, I am not persuaded, on a balance of probabilities, that Gordon delivered the notice to McDonald in time to involve the provisions of clause 8.13 of the contract. [at para. 50]

ISSUES ON APPEAL

[14] The issues on appeal were stated by the appellant as follows:

(a) Did the learned trial judge err by finding that the Appellant failed to give notice of his intention to exercise the option, prior to its expiry date?

(b) Did the learned trial judge err by finding that the Respondent is not required to indemnify the Appellant for the claim for costs and expenses relating to the maintenance, repair, moorage and use of the Aquila?

ANALYSIS

[15] The appellant's fundamental argument is that the trial judge failed to consider the evidence as a whole and accordingly did not properly assess credibility.

[16] The two significant errors exposed in the Reasons for Judgment relate to the trial judge's findings concerning the preparation and delivery of the Notice by Gordon's lawyer and the related need to prove the facsimile header; and the non-delivery to McDonald of a letter dated March 21, 1994.

[17] As to the Notice, it is obvious that the trial judge overlooked the submissions of counsel on the first day of trial concerning the document agreement between the parties, in which the following exchange took place:

	MR. ASHCROFT:	Ö I have prepared what is the plaintiff's book of document, which will be -- I will be asking to be admitted as an exhibit at the trial. My friend, as I understand it, does not object to any of the documents going in as an exhibit. But of course he does not agree that the contents are necessarily accurate in relation to some of the letters and things of this nature.
	THE COURT:	I see. So I can accept them, can I, Mr. Millar, as exhibits, but you reserve the right to challenge either contents or relevance?
	MR. MILLAR:	That's correct.
	THE COURT:	Thank you.
	MR. MILLAR:	So it's basically that they are true copies of the documents of which they purport to be copies. That with respect to some of the letters written by lawyers, that they were sent, so my friend doesn't have to call the lawyer to say I sent this letter. One document I'm going to ask to have the original put in as an exhibit as opposed to the copy is the one found at tab 14. [Emphasis added.]

Among those documents was the Notice from Gordon's lawyer. In my opinion, if McDonald did not dispute that the Notice was sent by Gordon's lawyer, there was no reason to dispute the facsimile header that reveals the time and date on which it was sent.

[18] Thus, it was agreed between the parties and admitted that, at the very least, the Notice was sent by Gordon's lawyer to Gordon. McDonald does not agree that the Notice was received by either Gordon (from his lawyer) or by McDonald (from Gordon), but there is, by reason of the parties' agreement and contrary to the judge's finding, evidence that the Notice was sent at the time indicated on the facsimile header.

[19] This, of course, is not conclusive of Gordon's assertion that he delivered the Notice to McDonald on February 22, 1994. However, it does form a substratum from which it would be open to a trier of fact to conclude that if Gordon's lawyer sent the form of Notice to Gordon on February 22, 1994, then the balance of probabilities would suggest that Gordon received it on the day it was transmitted. That finding, in turn, could support Gordon's evidence that he delivered the Notice later in the day to McDonald.

[20] As to Gordon's note on the Notice, it was, of course, open to the trial judge to disbelieve Gordon's evidence that he made the note at the time he said he did. But the note itself is not, as found by the trial judge, inadmissible. It is admissible, but is obviously subject to whatever weight the trier of fact decides it should be given.

[21] As to the issue concerning the delivery of the March 21, 1994 letter, it is important chiefly because, as the appellant argued, McDonald had, on five other occasions (apart from his denial as to receiving the Notice), denied receiving copies of other documents, which denials were either contradicted by McDonald's own evidence or that of other witnesses.

[22] As can be seen from paras. 44 and 45 of the trial judge's Reasons, the trial judge accepted McDonald's evidence that he never received the March 21, 1994 letter.

[23] However, it appears that the trial judge overlooked an admission made by McDonald at his examination for discovery that was read‑in to the record as part of the appellant's case. The relevant passage reads:

	Q.:	This is a letter addressed to you from Mr. Rabson dated March 21, 1994. Do you recall receiving that letter?
	A.:	I don't recall it, but obviously -- I don't remember reading it ever.
	Q.:	That's your correct address, is it?
	A.:	Yes. This -- just give me a sec here. The time frame is different. 1994. Yes, that was my address in 1994. I didn't realize the time frame.
	Q.:	Just read it through and tell me if that -- if you recall receiving it?
	A.:	Could you give me your question regarding this again please?
	Q.:	Having read that letter, does it jog your memory in terms of whether you received it or not?
	A.:	I believe I did. I don't remember particulars of it.

[24] Thus, the respondent admitted that he received the March 21, 1994 letter. It is of course significant that that letter specifically refers to the delivery of the February 22, 1994 Notice and the exercise of the clause 8.13 option.

[25] The trial judge's refusal to draw an inference adverse to McDonald was grounded in the erroneous belief that Gordon had failed to establish certain facts, including delivery of the March 21, 1994 letter. It leaves open to question, as the appellant asserts, whether the trial judge also neglected to consider other evidence which, if it had been considered, would have resulted in an unfavourable assessment of McDonald's credibility.

[26] As I have observed, the credibility of Gordon and McDonald was central to the determination of whether the Notice was delivered in compliance with clause 8.13 of the Agreement. Before rejecting the credibility of Gordon, the trial judge was obliged to consider all of the evidence that supported Gordon's version of events. However, in this case, the trial judge clearly overlooked evidence that the parties had agreed (for good reason) was admissible and an admission that had been made by the defendant. He singled out as unproven two facts that were central to Gordon's case.

[27] The trial judge obviously placed significant weight on these two issues. In my opinion, by overlooking these two key pieces of evidence, the trial judge made two significant errors that inevitably affected his assessment of the facts. Had the trial judge not erred in failing to instruct himself with respect to the document agreement between the parties and the respondent's admission as to receipt of the March 21, 1994 letter, the ultimate result may well have been different.

[28] The appellant has urged us to enter judgment in favour of the appellant in the sum of $50,000 CAD, as well as to order the respondent to indemnify the appellant for costs and expenses relating to the maintenance, repair, moorage and use of the vessel. The cases referred to by the appellant in support of his submission all turn on the nature of the evidence being considered on appeal and, as such, all are distinguishable from the case at bar.

[29] In the case at bar there is conflicting direct evidence between the parties to the dispute and each of them can muster limited circumstantial evidence in their favour. This is to be contrasted with the circumstances in Johnson v. Bugera (1999), 172 D.L.R. (4th) 535, 1999 BCCA 170, where the direct evidence of two witnesses for the defence was being weighed against a substantial body of circumstantial evidence. It is also in contrast with the circumstances in Faryna v. Chorny, [1952] 2 D.L.R. 354 at 359 (B.C.C.A.), where the evidence of a primary witness was found to be "entirely inconsistent with the preponderance of the probabilities that rationally emerge out of all the evidence in the case...".

[30] As regards the Reasons of the trial judge, this is not a case like Dusik v. Gooderham (1985), 62 B.C.L.R. 1 at para. 64 (C.A.), where the reasons for judgment in respect of one aspect of the decision were held to be "so sparse" that the decision could not be upheld. Rather, I have made reference to two discrete but critical errors in otherwise cogent Reasons.

[31] In my view, this Court should refrain, in the circumstances of this case, from ascertaining for ourselves whether Gordon's claim was made out. It may be that after the evidence is adduced anew and the witnesses re-examined with these two factual elements in proper context the same conclusion will be reached. Ultimately, however, this case turns on the credibility of the witnesses and must be assessed in the context of the whole of the evidence. In my opinion, the only recourse is to order a new trial.

[32] Given that conclusion, I think it wise not to address the appellant's second ground of appeal concerning the respondent's obligation to indemnify the appellant for costs related to the maintenance, repair, moorage and use of the vessel.

[33] Lastly, I must address the appellant's alternative submission that the July 26, 1993 letter from Gordon to McDonald constituted notice under clause 8.13 and was delivered to McDonald within the one‑year time period mandated by the Agreement.

[34] It is important to note that the appellant testified at trial that he did not consider the July 26, 1993 letter to be notice under the Agreement. Furthermore, the letter sets out terms and conditions (such as interest, use of the vessel, assumption of costs and expenses, etc.) that did not form part of the put option contained in the Agreement.

[35] It is obvious that the July 26, 1993 letter is not notice under clause 8.13 but is, rather, a new agreement that was never accepted by McDonald.

[36] I would therefore dismiss the appellant's alternative ground of appeal.

[37] In summary, I conclude that the trial judge made two errors in overlooking two key admissions, absent which the result at trial may have been different.

[38] In my view, the only recourse available to us is to order a new trial.

[39] The appellant is entitled to his costs of the appeal.

ìThe Honourable Madam Justice Kirkpatrickî

I Agree:

ìThe Honourable Madam Justice Southinî

I Agree:

ìThe Honourable Madam Justice Ryan ì

Citation:	*Gordon v. McDonald,*
	2005 BCCA 621