Sun Life Assurance Company of Canada v. Tom, 2010 ABQB 815

Court of Queen ’ s Bench of Alberta Citation: Sun Life Assurance Company of Canada v. Tom 2003-1 Limited Partnership #2, 2010 ABQB 815 Date: 20101221 Docket: 0901 03930 Registry: Calgary Between: Sun Life Assurance Company of Canada, by its agent Bentall LP Plaintiff - and - Tom 2003-1 Limited Partnership #2, Can Am Kitchens Limited Partnership, Can Am Kitchens Limited Partnership by its General Partner 1042946 Alberta Ltd., Tom 2003-1 Master Limited Partnership, Tom 2003-1 Master Limited Partnership by its General Partner 1042946 Alberta Ltd. and the said 1042946 Alberta Ltd.

Defendants _______________________________________________________ Memorandum of Decision of the Honourable Mr. Justice W.A. Tilleman _______________________________________________________ Introduction [ 1 ] The case involves the distribution of auction proceeds held in escrow pursuant to a Creditor’s agreement in a Landlord- Tenant situation that fell apart. A breakdown occurred with the Tenancy Agreement between Sun Life Assurance Company, by its agent Bentall LP, and the tenant, Can-Am who abandoned the premises.

Two issues arise: the first deals with the life of an Attachment Order and the second deals with new Rule 5.12 of the Alberta Rules of Court , Alta. Reg. 124/2010 (the “new Alberta Rules of Court” ).

Attachment Order [ 2 ] According to the Applicant (Defendant), one of the representatives of Sun Life, Ms. Murphy, saw Can-Am about to leave the premises [1] in what could be described as a tenant’s “midnight move”. This would lead inter alia to a distress of goods. [ 3 ] The Defendant’s main concern is with an Ex-Parte Attachment Order the landlord initially obtained to cover the proceeds of an auction that was to occur in March 2009. The Defendant’s [2] position as per Mr. Robinson is that the Order should terminate pursuant to either the Civil Enforcement Act , R.S.A. 2000, c.

C-15, or because of the passage of time, and in any event, the basis of granting the Order no longer exists. [ 4 ] In deciding the matter, the Court faces two different Attachment Orders. The Defendants have asked me to decide whether these two Orders are the same and whether the last Order should stand. I am not sitting in appeal of either Order so I will just set them out below to give context to this Memorandum of Decision. The first Attachment Order is from Justice Sullivan, issued March 13, 2009, and it says: “1.

The Defendants, their employees, servants or agents or any person under their instructions, and any other person or persons having knowledge of this Order shall be and they are hereby restrained and enjoined from disposing, encumbering or removing from the Province of Alberta any and all assets of the Defendants, and, in particular, without restricting the generality of the foregoing, any furniture, equipment, machinery, display suites, trade goods or other personal property from the Leased Premises, known municipally as 52 nd Street Commerce Plaza in Calgary, Alberta. 2.

No civil enforcement agency with notice of this Order shall distribute any money realized through writ proceedings as against the Defendants, until the termination of this Order or further order of this Court. 3. The Attachment Order may be registered against the Defendants at the Personal Property Registry pursuant to

Section 22 (

a) of the Civil Enforcement Act , R.S.A. 2000, c. C-15. 4. This Order shall expire 21 days from the date upon which this Order is granted, unless extended by application by the Plaintiff with notice to the Defendants. 5. The costs of this application shall be in the cause.” When looking at the style of cause of this action, one can see not all Defendants are found on that first Order, namely: Master Limited Partnership or its general partner 1042946 Alberta Ltd.

The argument, then, is that the Order does not extend to Master Limited Partnership [3] . [ 5 ] Following the Ex-parte Order being issued by Justice Sullivan, Defendant’s Counsel got in contact with the other side to work things out inter alia , with respect to the Master Limited Partnership Agreement.

Further to the dispute, an auction took place in March of 2009 and the net proceeds of roughly $74,000.00 were held, and continue to be held by Century Services, without interest. [ 6 ] To continue the attachment ordered by Sullivan, J., the landlord had to go back and seek extension of the Order, with notice of course, and that extension occurred in front of Madam Justice Erb on April 3, 2009. As I will explain later, much of the focus of my Special Chambers hearing centred on the differences between these two Orders.

I must say I am surprised Counsel did not pick up on the differences or omissions at the time. ( I will explain this further, below). And I will repeat that I only reference the Orders to give context to my decision.

[ 7 ] Just prior to the chambers Order that Madam Justice Erb granted, an Amended Statement of Claim was filed on March 31, 2009 and a second Affidavit of Nadine Murphy on behalf of Sun Life Assurance, was filed. What is relevant in the second Affidavit, according to the Defendants, is that the only evidence tendered to support the Plaintiff’s (Respondent’

s) position that there has been a fraudulent conveyance, is one sentence in the Affidavit . That sentence, at para. 5, states as follows: “Can-Am has also apparently granted to TOM a Quit Claim over all of its present property to TOM and the Plaintiff is concerned that this may have been a fraudulent conveyance as well.” Madam Justice Erb extended the original Order and did so in this fashion: ...“AND UPON noting that no one appeared on behalf of the Defendants; IT IS HEREBY ORDERED THAT: 1. This Court hereby directs that the Ex Parte Attachment Order granted by The Honourable Mr. Justice W. P.

Sullivan of this Court on March 13, 2009, as entered and filed on March 16, 2009 ("Attachment Order"), remains in effect until the Attachment Order terminates in accordance with

Section 19 of the Civil Enforcement Act, RSA 2000, c. C-15, as amended, or as otherwise directed by this Court. 2. The Attachment Order is hereby extended to include the Proceeds of Sale of any of the property attached by the Attachment Order ("Property") and specifically, the proceeds of the auction of the Property that was conducted by Century Services Inc. on March 26, 2009; 3.

Century Services Inc. shall not distribute the Proceeds, except to pay such Proceeds into this Court or pursuant to a further order of this Court, and no Civil Enforcement Agency with notice of the Attachment Order shall distribute any money realized through writ proceedings as against the Defendants, until the termination of the Attachment Order or further order of this Court. 4. The Attachment Order and this Order may be registered against the Defendants at the Personal Property Registry pursuant to

Section 22(

a) of the Civil Enforcement Act, R.S.A. 2000, c. C-l5. 5. The costs of this application shall be in the cause. [ 8 ] The Defendants claim Madam Justice Erb only extended the original Order, as her Order states it does in para. 1, and that it does not specifically deal with Master Limited Partnership. The counter argument is premised in part that the second style of cause somehow became amended and it does include Master Limited Partnership and its General Partner 1042946 Alberta Ltd. [ 9 ] More important, the Defendants point out that the Attachment Order should be discontinued as per the Civil Enforcement Act . Under that Act and the procedure for beginning an Order, sections 17(1)(2)(

a) and 17(1)(2)(

b) state as follows:

(2) On hearing an application for an attachment order, the Court may, subject to subsection (4), grant the order if the Court is satisfied that (

a) there is a reasonable likelihood that the claimant's claim against the defendant will be established, and (

b) there are reasonable grounds for believing that the defendant is dealing with the defendant's exigible property, or is likely to deal with that property, (

i) otherwise than for the purpose of meeting the defendant's reasonable and ordinary business or living expenses, and

(ii) in a manner that would be likely to seriously hinder the claimant in the enforcement of a judgment against the defendant. (emphasis added)

Section 19 of that Act is important and I will review it below at para. 16. [ 10 ] By way of

summary then, the Defendants first argues this Attachment Order does not catch a proper party. Second, they say the Order has been in place with no steps taken for roughly one year, and, as such, the Order should be discontinued by this Court. Further to that point, in December of 2009, Justice Wilson granted an Order, inter alia , dismissing the Plaintiff’s application (that the distresses were legitimate) even though that Order did grant partial success to the Plaintiff regarding a registered judgment against Can- Am.

Nevertheless, the Defendants argue that the Plaintiff cannot be serious about prosecuting the fraudulent preference claim, because one year has gone by since Wilson, J.’s Order. [ 11 ] In short, certain Defendants represented by Mr. Robinson state that the Plaintiff’s position either lives or dies on the Attachment Order including (or not) Master Limited Partnership.

The Defendants stress there was no evidence to include Master Limited Partnership in that Order for a party that did not ask for it. [ 12 ] For judicial consideration, I was referred a few cases but I point out Equiplan Mortgage Investors Fund Ltd. v. Cross Country Homes Marketing

(1993) Ltd. , 2007 ABQB 276 , 420 A.R. 47. which established the point, inter alia , that stigmatization follows an Attachment Order. Plaintiff’s Position [ 13 ] The Plaintiff argues the opposite position and of course wants the Attachment to continue. The Plaintiff says there is still an outstanding claim against TOM, which claim supported the granting of the Order.

As it relates to delay, the Plaintiff told the court that although the passage of time is one year since Justice Wilson’s hearing, it really is a six month delay because of the application filed on July 2, 2010 that eventually brought the matter in front of me. [ 14 ] Among other things, the Plaintiff pointed out that the Attachment Order of Madam Justice Erb, on its face does include Master Limited Partnership and the general partner. As for the merits of why Master Limited Partnership is there, Plaintiff pointed out to me that the problem is ownership of the escrow funds involving a fraud.

Plaintiff’s Counsel told me that the second Attachment Order of Justice Erb was granted – weaknesses or not, but it was granted; one way or another, the evidence was all in front of Madam Justice Erb, and that Order not having been appealed, should on its face continue. On the latter point, I repeat my hesitancy in discussing the Order of a colleague. [ 15 ] More to the point I am dealing with, Attachment Orders cannot continue forever. Among the grounds I have to decide is the matter of delay and other issues, and whether or not they form a valid reason (to discharge).

On delay, I am pointed to the case of Calmusky v. Hodgins , 2007 ABQB 417 , 420 A.R. 85. I am told that Madam Justice Kenny in that case found delay albeit several years not 6-12 months as the case at Bar. Furthermore, and perhaps more important, the Order ought not to continue if the reasonable grounds upon which the attachment was ordered, no longer exist. I will address these matters below. Analysis - Attachment Order [ 16 ] The duration of the extension of the attachment turns in part, on

section 19 of the Civil Enforcement Act , R.S.A. 2000, c. C-15.

Section 19 of that legislation states: “19(1) Subject to

section 18 and except as otherwise ordered by the Court, an attachment order terminates on whichever of the following occurs first:

(

a) on the dismissal or discontinuance of the claimant’s proceedings; (

b) on the 60th day from the day of the entry of a judgment in favour of the claimant.

(2) The Court may extend the operation of an attachment order beyond the times set out in subsection (1) if it appears just and equitableto do so.” [17] Thus, 60 days after the entry of a judgment the Attachment Order will lapse from the entry of “a” judgment and in this casethere has already been one entry of judgment several months ago, albeit a partial one. [18] Even if there is no cancelling effect of a prior partial judgment on the Order, the Attachment’s equitable clock on such anextraordinary remedy is ticking as it is almost one year since the Order of Justice Wilson and that was six months after Justice Erb’sOrder.

What concerns me with allowing the Attachment Order to continue, for who knows how long, is the Court’s unfriendly viewsregarding prejudgment execution - and it is not necessarily favourable. See e.g. First Mortgage Fund Inc. v. Boychuk, 2003 ABQB 217,336 A.R. 319. Then, there is the delay in prosecuting the proceeding. [19] Under the new Rules, efficiency is one of our goals: Rule 1.2. And in Calmusky, delay, which relates to efficiency, was one ofJustice Kenny’s concerns.

She said this: [11]The only decision which the Defendants were able to find dealing with the issue of vacating an Attachment Order in thesecircumstances comes out of Newfoundland: Guarantee Co. of North America v. Noonan (1996), (NL SC), 138Nfld. & P.E.I.R. 210; 4 R.D. 210; 46 C.P.C. (3d) (Nfld. T.D.). The facts of that case are almost identical to the ones in this case. InGuarantee, the Plaintiff gave an undertaking to prosecute the proceeding without delay and to pay damages; however, six and one-halfyears later, the matter had not proceeded diligently.

In that case the Plaintiff also raised the issue of intervening events and attempted toargue that there were other grounds on which to justify the continuation of the attachment order. [12] Justice Green set aside the attachment order on the basis of delay and refused to allow in new evidence with respect to theDefendant's dealings with his property to justify a continuation of the original attachment order.

He said at para. 25: The issue here is whether, notwithstanding the apparent legitimate issuance of the order, the Plaintiff has subsequently prosecuted thematter in a timely manner and thus minimized the potential intrusion into the Defendant's (and others') affairs. The fact that there aregrounds for granting an attachment order is taken as a given. Even though entitled to the order initially, the Plaintiff forfeits its right tothe order if it does not proceed in a timely way. The Defendant's right to have had the Plaintiff comply with its undertaking can only bevindicated by giving him the relief sought.

In these special circumstances, the Plaintiff should not be allowed ex post facto to justifycontinuation of the attachment order on another ground.” .... [17] I am satisfied that inordinate delay is a basis on which to vacate an attachment order. It is implicit in the very nature of the Orderand explicit in the undertaking as to damages wherein the Plaintiffs undertook to proceed with the action without delay.

I am satisfiedthat the delay has been inordinate without reasonable excuse and, as such, the Attachment Order should be set aside... [20] The Plaintiffs conceded that the delay, and whether it be six months or twelve months, centres on whether or not the Plaintiffscould collect or hopefully resolve the matter through other parties or means.

In a certain sense, the Order may be used as leverage and asettlement tool mechanism and that if true, is questionable (if that is any justification) even if that is practically how it played out.Motivations aside for a moment, my concern with continuing the Order is reinforced by the position taken by the Respondents that thelink to Attachment is fraud and the only evidence of fraud is found in the one sentence previously cited by Murphy in Affidavit numbertwo. I note the sworn evidence uses the words “apparently” and “may (have been a fraudulent conveyance)...”.

Failing to move forwardon that claim, and in the absence of other corroborating evidence presented to me, means the Attachment Order being an extraordinaryremedy, is discharged. On top of this and related to it, is the charging language of s.17 of the Civil Enforcement Act, is i.e., can theClaimant’s claim against the Defendant can be established both on a “reasonable likelihood” found in s.17(1)(2)(

a) and “reasonable

grounds” under s.17(1)(2)(b)? Based on what I heard in Chambers there is no longer a “reasonable likelihood” that the Plaintiffs will establish their claim. Conclusion on the Attachment Order [ 21 ] Admittedly, this is a case is complicated factually and with complex parties, but it is time to move to resolution. I will release the Attachment Order but I am not addressing the pro-rated basis of the release of the funds because I believe clearer Affidavit evidence on that pro-rated accounting (escrow funds v. all assets) should be presented to the Court. That application can be done by return to any morning Chambers.

Interpretation of Rule 5.12 [ 22 ] Additionally, the Court is faced with a decision regarding a cost penalty under former Rule 190 of the Alberta Rules of Court , Alta. Reg 390/1968, now under new Alberta Rules of Court , Rule 5.12. That issue relates to the Plaintiff’s failure to timely comply with service of Affidavit of Records. [ 23 ] Regarding the late filing of the Affidavit of Records, Plaintiff’s Counsel submits that old Rule 190 no longer applies and the cost penalty has changed from a mandatory rule to a permissive one.

For the facts, he gives me the following succinct breakdown and their position on what happened: 1. Admittedly, the Plaintiff was late with the Affidavit of Records, but merely by one week; 2. The late filing was through the inadvertence of Counsel; 3. Nevertheless, there was no prejudice to the other side; and 4. The litigation was not substantially delayed or disrupted by the late filing. In counter-argument the Defendants simply say the Plaintiff was late, that the new Rule 5.12 is still a strict rule, and double costs should follow.

Analysis - the New Rule 5.12 [ 24 ] In argument all parties agreed that the appropriate rule is Rule 5.12 of the new Alberta Rules of Court . All parties further agree the Respondents had missed a filing date by one week. [ 25 ] The new rule states: 5.12(1) In addition to any other order or sanction that may be imposed, the Court may impose a penalty of 2 times the amount set out in item 3(1) of the tariff in Division 2 of

Schedule C [Tariff of Recoverable Fees], or any larger or smaller amount the Court may determine, on a party who, without sufficient cause, (

a) does not serve an affidavit of records in accordance with rule 5.5 [When an affidavit of records must be served] or within any modified period agreed on by the parties or set by the Court,

(

b) does not comply with rule 5.10 [Subsequent disclosure of records], or (

c) does not comply with an order under rule 5.11 [Order for a record to be produced].

(2) If there is more than one party adverse in interest to the party ordered to pay the penalty, the penalty must be paid to the parties in the proportions determined by the Court.

(3) A penalty imposed under this rule applies irrespective of the final outcome of the action. Both sides disputed what was intended by the language of “sufficient cause”(common to both old and new rules) and the differences between the more mandatory language of the original rule, ( Rule 190 ) versus the discretionary language of the new Rule 5.12 . Under the old Rule, Watson, J. (as he then was) explained the double costs penalty for late filing was intended to have a deterrent effect for parties who drag their feet. See Wagner v. Petryga Estate , 2001 ABQB 690 , 292 A.R. 320; see also Johnston v.

Bryant , 2003 ABCA 169 , 327 A.R. 378 at para. 16 . [ 26 ] Like its predecessor, Rule 5.12 uses “without sufficient cause” [4] which I will explain below but I do not think a late party will find comfort under the new Rules just because the new 5.12 is now discretionary. I say this because the purposes [5] of the new Rules include quickness in the resolution of a claim, timely communication, and efficiency including appropriate remedies and sanctions to enforce the rules. [6] More specifically under the new Rule’s

section on Disclosure of Information , the purpose inter alia is to “...discourage conduct that unnecessarily or improperly delays proceedings...” [7] Sufficient cause has been judicially addressed under the old Rule 190 [8] and to me it still means a neglect that is excusable on sufficient grounds based on diligence of the party that has not been relieved by any other

section of the Rules , or a statute, or a related Court ruling that may otherwise affect the disposition of the matter. On the last point see e.g. Anderson v. Airsprint Aircraft Management Inc. , 2004 ABQB 12 , 352 A.R. 59 at para. 31 . Diligence means the filing party did everything it could but ran into extraordinary circumstances over which it had no practical control. Sufficient cause under Rule 5.12 will be a hard test to meet and certainly will never be captured by facts that suggest “oops, I forgot”. It is a Rule that contemplates excusable neglect but it faces a high bar.

While excuses are rare, they may include such things as flood damage, fire, documented proof of failed courier, or sudden medical emergency. I only set out potential excuses to describe the extraordinary nature of the event, and not to describe a closed list. [ 27 ] Nothing like the above excuses having been found in this case, double costs are awarded. Result [ 28 ] As previously stated, I am discharging the April 3, 2009 Order extending the Attachment Order.

Further, under Rule 5.12 , I am ordering $1,500.00 which is a double costs penalty against the Plaintiff for the late filed Affidavit of Records. [ 29 ] Court costs will be decided at final disposition. Heard on the 15 th day of November, 2010. Dated at the City of Calgary, Alberta this 21 st day of December, 2010.

W.A. Tilleman J.C.Q.B.A. Appearances: Ryan C. Penner of Macleod Dixon LLP for the Plaintiff Ronald J. Robinson for the Defendants, Tom 2003-1 Master Limited Partnership, Tom 2003-1 Master Limited Partnership by Its General Partner 1042946 Alberta Ltd. and the Said 1042946 Alberta Ltd.

John Tyrell for the Defendants, Can Am Kitchens Limited Partnership and Can Am Kitchens Limited Partnership by its General Partner 1042946 Alberta Ltd. [1] Affidavit of March 12, 2009. [2] Tom 2003-1 Master Limited Partnership, Tom 2003-1 Master Limited Partnership by its General Partner 1042946 Alberta Ltd. and the said 1042946 Alberta Ltd. [3] Contrary to that argument is the position that the contents of the Order as listed in paragraph one of Sullivan J’s order may catch the new or extra Defendants because it does speak to “any other person or persons having knowledge of the Order”. [4] Besides the earlier Rule (190) that spoke of sufficient cause, I note old Rule (188) links up though Rule 188 spoke about sufficient reason. [5] I look to the Rule ’ s Purposes not because they are ambiguous on this point, but to prove the opposite - they are clear. [6] Foundational Rules, Rules 1.2(2)(b)(d)(e). [7] Disclosure of Information, Rule 5.1(1)(e). [8] Heidinger v.

Medicine Hat Lodge No. 1073 Loyal Order of Moose , 2005 ABQB 758 , 385 A.R. 115; See supra Wagner v. Petryga Estate ; and Johnston v. Bryant .