Search by
Background and business relationships
The dispute arises out of a complex business venture to develop multiple retail liquor stores in Saskatchewan following the province’s decision to privatize liquor sales. David Dunn and Randy Wilson verbally agreed in 2017 to develop several “Urban Cellars” liquor stores, with each store to be held through a separate operating company and with Wilson having an interest in each of eight stores. Five planned stores—Cumberland, Market Mall, Warman, Brighton and Whiskey Jacks—were in the Saskatoon area. RIP Beverages Co. Ltd. was created as the vehicle through which Wilson, Ian MacDonald and Peter Klassen would invest in three of these locations, later called the “Enterprise stores” (Cumberland, Market Mall and Warman). Between May 2018 and April 2019, the RIP side (RIP, MacDonald Jewellery Design Ltd., Wilson, MacDonald and Klassen) advanced approximately $3.5 million to entities controlled by Dunn. The understanding on RIP’s side was that these funds were to be used to develop the Enterprise stores in which they were to acquire equity. However, Dunn was also working with another investor group, the “Bison group,” on three additional stores—Golden Mile, Quance and Brighton—collectively referred to as the “Bison stores,” as well as the Whiskey Jacks store.
Use of RIP funds and the emerging dispute
It later became clear that RIP’s funds had been commingled with other monies and used not only for the Enterprise stores but also to finance development of non-Enterprise stores. A March 12, 2020 spreadsheet, prepared by Dunn’s associate Kevin Kasha and emailed to Klassen, Wilson and Dunn, became the key evidentiary document. RIP’s position was that this spreadsheet was the first reliable accounting of where their funds went and showed that $1,168,604 of RIP money had been used for non-Enterprise stores: approximately $828,565 for Golden Mile, $48,039 for Brighton, $160,000 for Quance, and $132,000 for Whiskey Jacks. RIP’s witnesses swore that they did not know their funds had been used outside the Enterprise stores until they received and reviewed that spreadsheet, and they framed their claim and set-off around the alleged “misappropriated funds.” Dunn, by contrast, maintained that he did nothing improper and that RIP always understood its capital would also support Wilson’s equity participation in other stores beyond the Enterprise locations. On Dunn’s account, RIP was funding both its direct equity in the Enterprise stores and Wilson’s contributions in other outlets, so using those funds outside the Enterprise stores was consistent with their arrangement. Tensions escalated as Klassen and MacDonald sought better accounting and expressed concern over how their investment was being deployed by early 2019, signalling a brewing dispute about both governance and finance in the liquor-store group.
Share sale, release and deferred payout structure
After the spreadsheet was circulated in March 2020, the parties negotiated a restructuring of their business interests. Those negotiations culminated in a Share Purchase Agreement effective November 13, 2020, among Dunn, Kasha, RIP, Wilson, MacDonald, Klassen and various holding corporations. The effect of this deal was to sell Dunn’s and Kasha’s interests in the Cumberland and Market Mall stores to RIP and its principals, consolidating ownership of those two locations on the RIP side. Several associated contracts were executed at the same time. A mutual release was entered into between, on one side, Wilson, MacDonald, Klassen, RIP and related corporations, and, on the other, Dunn, Kasha and their company, releasing each other from specified causes of action. In addition, a Deferred Payout Agreement required payment of $1,750,000 to Dunn’s investment companies in monthly instalments, commencing six months after closing, calculated by reference to the sales generated by the Cumberland and Market Mall stores. The agreement also granted Dunn’s entities access to those stores’ sales records so they could verify amounts due. To secure performance of this deferred payment obligation, Wilson, MacDonald and Klassen each executed a limited guarantee of one-third of the total payable under the Deferred Payout Agreement. The share sale closed in November 2020. RIP later made one payment under the Deferred Payout Agreement in 2021 but then refused to provide ongoing access to sales information, which became central to Dunn’s later collection efforts.
The RIP Action: misappropriation and limitation issues
On March 2, 2022, the RIP side commenced the “RIP Action” in the Court of King’s Bench. RIP, its principals and related entities sued Dunn, his company Dave Dunn Enterprises Ltd. and others. They alleged that funds advanced to Dunn to develop the Enterprise stores had been improperly diverted to the non-Enterprise or Bison stores and Whiskey Jacks. Their statement of claim pleaded multiple causes of action—conversion, breach of contract, civil fraud, breach of trust and unjust enrichment—and quantified their loss and Dunn’s corresponding enrichment by reference to the $1,168,604 that allegedly went into non-Enterprise locations, as revealed in the March 2020 spreadsheet. The Dunn defendants denied wrongdoing, asserted that Wilson knew and approved of the allocation of RIP funds to non-Enterprise stores, relied on the 2020 share sale as a settlement of outstanding disputes, and raised The Limitations Act as a complete bar. They argued that Klassen and RIP knew, or ought reasonably to have known, how their capital had been allocated by April 2019 and in any event no later than June 29, 2019, putting their claim outside the two-year basic limitation period when the RIP Action was filed in March 2022. On summary judgment in the RIP Action, the Chambers judge accepted that the loss (RIP money going into non-Enterprise stores) occurred by April 2019 and held that all elements of discoverability were met more than two years before the RIP Action was commenced. He concluded that the RIP Action was discovered or discoverable outside the limitation period and therefore barred under s. 19 of The Limitations Act, which prohibits maintaining a proceeding once it is established that the applicable limitation period expired before commencement.
The Dunn Action: debt claim under the deferred payout
Separately, on May 17, 2022, Dunn commenced the “Dunn Action” against RIP, the Urban Cellars companies and the RIP principals. In that action, Dunn sought judgment for amounts he said were owing under the November 2020 share sale structure, particularly under the Deferred Payout Agreement, plus related guarantees. He alleged that RIP had failed to make the required deferred payments and had wrongfully refused access to sales information for the Cumberland and Market Mall stores, thereby preventing proper calculation of the sums due. The RIP defendants responded with a statement of defence that, among other things, pleaded set-off. They sought to reduce or extinguish any sums owing under the Deferred Payout Agreement by asserting the same “misappropriated funds” described in the RIP Action as a set-off equal to, or exceeding, any amount Dunn might recover. Importantly, although their pleading used language broad enough to include both legal and equitable set-off, they later accepted they could not rely on legal set-off and were therefore confined to equitable set-off, a doctrine allowing a defendant to deploy its own cross-claim as a substantive defence to the plaintiff’s demand when the cross-claim is closely connected and it would be manifestly unjust to ignore it. Dunn attacked this pleading on both procedural and substantive grounds in the summary judgment application. He argued that any set-off was barred by the same limitation analysis that defeated the RIP Action, and that in any event the defendants had no viable claim to set-off “under the contract or at common law.”
Summary judgment decisions at first instance
Both the RIP Action and the Dunn Action came before the same Chambers judge on summary judgment applications heard together. In the RIP Action, the Dunn side accepted solely for purposes of the motion that RIP could otherwise prove an actionable misappropriation, but urged that the limitation defence was dispositive. The judge agreed, concluding that the claim was discovered or discoverable more than two years before March 2, 2022, and ordering summary dismissal of the RIP Action as statute-barred under s. 19 of The Limitations Act. In the Dunn Action, the judge granted summary judgment to Dunn by striking the RIP defendants’ set-off defence on the same limitation reasoning. Because the set-off plea rested on the same factual matrix and causes of action as the now-time-barred RIP Action, he held that the defence was itself barred under s. 19 and “could not be maintained.” Having effectively removed the only substantial defence that could reduce Dunn’s claim, the judge granted summary judgment in Dunn’s favour. He went further, in obiter, and stated that if he had been wrong about limitations, the defendants had in fact established equitable set-off on the merits, as there was a sufficient connection between Dunn’s claim for deferred purchase price and RIP’s claim about the earlier deployment of capital across the Urban Cellars stores. Nonetheless, he did not frame that conclusion in an operative order, and his actual judgment was based solely on limitations.
Companion appeal on the RIP Action
RIP appealed the summary dismissal of the RIP Action. In the companion judgment, RIP Beverages Co. Ltd. v Dave Dunn Enterprises Ltd., 2026 SKCA 9, the Court of Appeal upheld the Chambers judge’s decision that the RIP Action was brought outside the applicable limitation period and must remain dismissed. The appellate court concluded that the RIP plaintiffs were precluded from suing for damages arising from the alleged misappropriation of their monies because their claim was discovered or reasonably discoverable earlier than two years before they filed. As a result, the underlying standalone damages claim against Dunn and his company based on diversion of RIP funds to non-Enterprise stores is definitively statute-barred and cannot proceed. That conclusion forms the backdrop for the present appeal, which focuses only on whether the RIP defendants can still rely on equitable set-off in the Dunn Action notwithstanding the time bar on any affirmative damages action.
Scope and operation of The Limitations Act
In the present appeal (2026 SKCA 10), the Court of Appeal first addressed the reach of The Limitations Act. Section 3(1) says that the Act applies to “claims pursued in court proceedings” that are commenced by statement of claim or originating notice. The RIP defendants argued that because they raised set-off in a statement of defence rather than a statement of claim, the Act could not apply at all to their pleading. Dunn argued that the relevant subject of s. 3(1) is “court proceedings,” so any claim pursued within an action begun by statement of claim—whether by counterclaim, third-party claim or otherwise—falls within the statute. The Court preferred Dunn’s general reading on this point. It held that The Limitations Act is not confined to claims in statements of claim; it also applies to claims advanced in other pleadings (such as counterclaims, cross-claims and third-party claims) provided they are pursued within a proceeding commenced by statement of claim. The court relied on the text, overall statutory structure, and previous Saskatchewan cases where third-party claims and counterclaims were struck or saved by reference to limitation provisions. However, the court expressly reserved for later analysis the separate question of whether every issue raised in a statement of defence—including a pure defence such as equitable set-off—is a “claim” for limitation purposes.
Equitable set-off as a substantive defence, not a claim
The core of the appellate reasoning is its treatment of equitable set-off. The Act defines “claim” as “a claim to remedy an injury, loss or damage that occurred as a result of an act or omission.” Building on Supreme Court of Canada jurisprudence, the Court accepted that “claim” broadly equates to a cause of action giving rise to a remedial order, but stressed that the definition adds the crucial qualifier “to remedy.” It interpreted this to mean that not every assertion of a cause of action in litigation is a “claim” under the Act—only those where a party is actually seeking a remedy for injury, loss or damage. Equitable set-off, as pleaded here, operates differently. Under the criteria set out in Holt v Telford, a party alleging equitable set-off must rely on a cause of action that is so closely connected with the plaintiff’s claim that it would be manifestly unjust to allow the plaintiff to enforce payment without accounting for the cross-claim. But when used defensively, the defendant is not seeking a positive money judgment or separate remedial order; instead, it is using the cross-claim solely to defeat or reduce the plaintiff’s demand. On that footing, the Court held that equitable set-off is a substantive defence that does not itself constitute a “claim to remedy an injury, loss or damage” within the meaning of The Limitations Act. Even if the underlying cause of action could have supported a separate damages suit (now time-barred) it remains available as a defence so long as the close connection test for equitable set-off is met.
Authorities distinguishing claims from defences
In reaching this conclusion, the Court aligned Saskatchewan law with leading decisions in other jurisdictions. It drew on English authority (particularly Lord Denning’s judgment in Henriksens Rederi A/S v T.H.Z. Rolimpex) and Canadian appellate decisions such as Canada Trustco Mortgage Co. v Pierce and subsequent Ontario and Alberta cases. Those decisions uniformly distinguish between (1) claims, including counterclaims and legal set-off, which seek an affirmative remedy and are subject to statutory limitation periods, and (2) substantive defences such as equitable set-off, which serve only to reduce or eliminate a plaintiff’s claim and are not time-barred. The Saskatchewan Court noted that The Limitations Act’s choice to define “claim” in remedial terms, and to omit an earlier provision (from the prior Limitation of Actions Act) that explicitly applied limitation rules to set-off, was consistent with leaving equitable defences outside the statutory bar. The Court also explained the policy reasons: the overarching rationales for limitation periods—repose, evidentiary fairness and diligence—are less compelling where the defendant uses its cross-claim only to respond to a fresh lawsuit by the plaintiff on closely connected facts. Because equitable set-off must go to the “root” of the plaintiff’s claim and share a close factual nexus, the risk of stale evidence and unfair surprise is significantly reduced.
Unresolved questions about legal set-off
While confirming that equitable set-off is not a “claim” under The Limitations Act when raised as a defence, the Court deliberately left open how the statute applies to other forms of set-off. Rule 3-47 permits defendants to plead set-off where there are mutual debts or where the defendant’s claim arises from the same “dealings, transactions or occurrence” as the plaintiff’s claim, and it requires such a set-off to be pleaded as if the defendant were a plaintiff. The Court observed that treating every such plea as entirely immune from limitation rules would allow revival of wholly unconnected “ancient obligations” simply because the defendant was later sued, which could undermine the statute’s goals. It therefore refrained from deciding whether, and in what circumstances, legal (or “statutory”) set-off or other forms of defensive pleading might be subject to limitation periods. The present decision is explicitly confined to equitable set-off asserted purely defensively to reduce or extinguish the plaintiff’s claim.
Outcome of the appeals and practical effect
In the companion appeal (RIP Action), the Court of Appeal upheld the dismissal of RIP’s misappropriation claim as statute-barred. That means RIP and the related plaintiffs can no longer pursue a standalone damages action to recover the approximately $1.168 million they say was diverted to non-Enterprise stores; their affirmative claim is legally extinguished. In this appeal (the Dunn Action), however, the Court allowed the appeal by RIP Beverages, Urban Cellars (Market Mall and Cumberland), Klassen, Wilson and MacDonald, set aside the Chambers judge’s order striking their equitable set-off defence, and dismissed Dunn’s cross-appeal. The Court held that The Limitations Act does not apply to bar their equitable set-off, and it declined to endorse the judge’s obiter conclusion that equitable set-off had already been established on the merits. Instead, it remitted the Dunn Action to the Court of King’s Bench for full adjudication of Dunn’s claim for payment under the Deferred Payout Agreement and the RIP defendants’ defences, including equitable set-off and any remaining contractual or procedural arguments.
Successful parties and monetary consequences
Taking both decisions together, the outcomes are mixed: Dunn and his company successfully preserved the summary dismissal of the RIP Action on limitation grounds, preventing any damages award against them on the misappropriation theory; at the same time, the RIP defendants succeeded on this appeal in restoring their ability to rely on equitable set-off as a defence in the Dunn Action and in overturning the summary judgment that had been granted to Dunn. Importantly, the Court of Appeal did not itself determine whether Dunn is owed any specific amount under the Deferred Payout Agreement or what, if any, net balance remains after set-off; it simply returned the matter to the trial court. On costs, the Court ordered no costs in this appeal, treating them as offset against the costs previously awarded to the Dunn side in the RIP Action appeal. As of these appellate decisions, no party has a final monetary award, costs order or damages judgment in its favour that can be quantified on the record, and the total monetary award (if any) in favour of any successful party cannot yet be determined because the Dunn Action must still be tried and assessed on the merits.
Download documents
Plaintiff
Defendant
Court
Court of Appeal for SaskatchewanCase Number
CACV4402Practice Area
Civil litigationAmount
Not specified/UnspecifiedWinner
DefendantTrial Start Date