Executive Summary: Key Legal and Evidentiary Issues

• The appeal centres on whether the motion judge properly granted summary judgment ordering Agromart to pay PricewaterhouseCoopers Inc. under New Brunswick's Debtor Transactions Act.
   
• Agromart challenged the finding that Warehouse never authorized it to satisfy its payment obligation by setting off against a debt owed by a related company, Hillspring Farms Ltd.
   
• A key evidentiary dispute involved a May 7, 2021 letter purportedly confirming Warehouse's authorization, which the motion judge characterized as a sham.
   
• Because Agromart was found not to be a creditor of Warehouse at the time of the transactions, the claim under section 95 of the Bankruptcy and Insolvency Act failed.
   
• New Brunswick's Court of Appeal considered, as a new issue raised for the first time on appeal, whether the one-year limitation period under section 27(2) of the Debtor Transactions Act had expired.
   
• Questions also arose regarding whether mutuality of parties and debts existed to support a contractual or equitable set-off defence.
   

Facts of the case

Grand Falls Agromart Ltd. purchased two rail cars of oats from Hillspring Warehouse and Logistics Inc. on March 12 and March 31, 2020, for $46,844.86 and $385,534.38 respectively. Warehouse was owned by Jeremy Brake, while a related company, Hillspring Farms Ltd., was owned by his father, Benjamin Brake. Agromart maintained that it paid for the oats by setting off the purchase price against a debt Farms owed to Agromart, and it asserted that Warehouse had authorized this arrangement. In June 2020, Warehouse and Farms were adjudged bankrupt, and PricewaterhouseCoopers Inc. was appointed receiver of Warehouse and agent for the Canadian Imperial Bank of Commerce with respect to Farms' debts. PWC commenced an action against Agromart in February 2021 to recover the unpaid balance owed by Agromart, and it later amended its claim after discovering the set-off, alleging the transactions were fraudulent preferences under section 95 of the Bankruptcy and Insolvency Act and, alternatively, transactions made without consideration under the Debtor Transactions Act. Central to the dispute was a letter dated May 7, 2021, in which Jeremy Brake appeared to acknowledge that he had authorized the set-off; Brake later swore that he had been misled into signing it. PWC brought a motion for summary judgment, and the motion judge accepted Agromart's evidence that it was not a creditor of Warehouse at the time of the transactions but rejected its evidence that Warehouse had authorized the set-off, finding the May 2021 letter to be a sham. Based on this finding, the motion judge granted an order under the Debtor Transactions Act and dismissed PWC's related claims against Benjamin and Jeremy Brake. Agromart appealed the resulting order to pay PWC.

Policy and legislative provisions at issue

The case engaged section 95 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, which permits a trustee to set aside fraudulent preferences but requires the applicant to establish that the debtor was a creditor at the relevant time. Also at issue was New Brunswick's Debtor Transactions Act, S.N.B. 2015, c. 23, which came into force in December 2019 and repealed the province's former Assignments and Preferences Act. Under section 6(1)(a) of the DTA, an order may be granted regarding a non-creditor transaction where the transferor received no consideration and was insolvent at the time of the transaction. Section 27(1) imposes a general one-year limitation period on applications under the DTA, while section 27(2) extends that period where the transferee conceals the transaction or material facts, running the limitation from the time the applicant acquired knowledge, subject to an outer five-year limit. Section 2(2) of the DTA defines the "date of a transaction" as the date the benefit is conferred or, for a series of closely related events, the date those events are substantially completed. Procedurally, Rule 22 of the Rules of Court governs summary judgment, requiring that there be no genuine issue requiring a trial, while Rule 38.09(b) requires an application to proceed to trial where there is a substantial dispute of fact.

Reasoning and analysis

Justice French, writing for the Court of Appeal, first addressed PWC's contention that the motion judge had not granted summary judgment in making the DTA order but had instead relied solely on the statutory authority conferred by the DTA. After reviewing the pleadings, the parties' submissions, and the motion judge's reasons, the Court concluded that the order was made by granting summary judgment under Rule 22, since PWC's motion was tethered to and dependent on a finding that there was no genuine issue requiring a trial, and the motion judge's reasons did not indicate he had adopted PWC's alternative submission that summary judgment was unnecessary.

Turning to Agromart's assertion that the motion judge applied an unduly onerous evidentiary standard given disputed facts, the Court found no error. Neither party had sought cross-examination on the affidavits, and the parties had chosen to proceed on the record before the court. The Court also rejected Agromart's argument that the motion judge acted inconsistently by accepting Danny Blanchette's evidence on the creditor issue while rejecting his evidence on the authorization of the set-off, noting that the motion judge had fully explained his reasons for preferring Jeremy Brake's uncontradicted evidence regarding the circumstances of the May 2021 letter.

On the limitation issue raised for the first time on appeal, the Court applied the test from Quan v. Cusson for permitting new issues to be raised, namely whether the interests of justice and a sufficient evidentiary record support an exception to the general rule. The Court found the record sufficient, relying on the affidavit of PWC's officer David Boyd, which indicated that PWC first learned of the set-off in April 2021, after Agromart provided its statement of account for Farms. Since PWC amended its claim in August 2021, within a year of acquiring that knowledge, the Court concluded that the limitation defence under section 27(2) of the DTA had no merit.

Finally, the Court found no error in the motion judge's application of the law of set-off or the DTA. It agreed that Agromart failed to establish either a contractual or equitable set-off, given the absence of mutuality of parties as between Warehouse and Farms, and it upheld the finding that the May 2021 letter did not reflect a genuine authorization but was fabricated after the fact to justify the transactions retrospectively.

Ruling and overall outcome

The Court of Appeal dismissed Agromart's appeal, upholding the motion judge's order under the Debtor Transactions Act in favour of PricewaterhouseCoopers Inc., the successful party. The judgment's introduction describes the amount at issue as $423,378.38, while the motion judge's underlying order, as recounted later in the same judgment, refers to a payment obligation of $432,378.38, representing the combined price of the two oat shipments; this discrepancy appears in the source document itself and could not be resolved from the material provided. The appeal was dismissed with costs of $3,000 awarded to PWC.