Wood v. Bevan
In Wood v Bevan, 2021 ABQB 981, the Alberta Court of Queen’s Bench was tasked with deciding whether a corporation or its sole shareholder was liable to repay a loan in circumstances where primary evidence of the indebtedness (i.e., promissory notes) were not available.
The debt arose between 2007 and 2012, when the defendant Bevan borrowed sums totalling $1.8 million from the plaintiff Wood to support Spherical Capital Inc., a commercial leasing business solely owned by Bevan. The parties documented each advance from 2008 onward using a promissory note made out by Wood, and signed by Bevan personally. Unfortunately, all but one of these promissory notes were stolen in a burglary of Wood’s home in 2015, and Bevan refused to execute a replacement promissory note to evidence the outstanding debt of $1.8 million plus interest.
Wood subsequently sought to recover the outstanding debt from Bevan personally despite the loss of almost all of the documentary evidence. Wood adduced digital examples of notes he claimed had been signed by Bevan in the past, and their associated metadata on his laptop, to support his claim. The Court for its part observed, quite rightly, that the loss of a promissory note does not eliminate the promise. Nor would the fact of a debtor failing to provide or sign a promissory note to evidence the debt and repayment obligation when they had promised to provide such a note. The absence of such evidence undoubtedly makes it more difficult to prove the debt/claim, but the absence of documentary evidence in this context is not itself evidence of absence.
Justice Mah for the Court considered the available evidence, including expert opinions on the authenticity of the sole surviving note apparently signed by Bevan in his personal capacity, and circumstantial evidence including emails and tax records. Justice Mah’s overall conclusion despite inconsistency in the available evidence was that the debt was owed, and that Bevan was personally liable for the outstanding amount of $1.8 million plus interest.
Despite the successful outcome for Wood, this case is a helpful reminder for parties in ongoing debtor-creditor relationships of the importance of documenting any loan(s) clearly and preserving said documents. It is also a timely reminder for debtors of the importance of confirming whether they are signing loan documentation on their own behalf or on behalf of a corporation, regardless of the destination or intended use of the funds. Just because the funds are to be used by a corporation does not necessarily mean that it is the corporation that owes the debt.
Xiyuan Feng – Supervised by Professor Maharaj
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