Gaastra v. Tri-Link Consultants Inc., 2011 ABQB 109

Court of Queen ’ s Bench of Alberta Citation: Gaastra v. Tri-Link Consultants Inc., 2011 ABQB 109 Date: 20110222 Docket: 0901 12399 Registry: Calgary Between: Hans Gaastra, 605687 Saskatchewan Ltd. and 625252 Saskatchewan Ltd.

Plaintiffs - and - Tri-Link Consultants Inc., 4040392 Manitoba Ltd., Klaus Link, Debbie Standon, Glenn Watts, 973632 Alberta Ltd., 963989 Alberta Ltd., (Carrying on Business Under the Trade Name of Canadian Achievers Financial), Oliver Forest & Carrington Ltd., Evanworth Mortgage Investment Corporation and Sherbrook Mortgage Investment Corporation Defendants - and - Tri-Link Consultants Inc., Klaus Link and 4040392 Manitoba Ltd. Third Parties _______________________________________________________ Memorandum of Decision of J.B. Hanebury, Master in Chambers _______________________________________________________

[ 1 ] This application arises as a result of the Court’s order of May 28, 2010, a decision in an application to strike the claim against 125174 Alberta Ltd. pursuant to rule 129(1)(

a) and (b). In that order the Court directed the plaintiffs to amend their statement of claim or the claim against the defendant 125 would be struck. The plaintiffs, hereinafter referred to as Gaastra, were either to obtain the consent of the defendant 125 to the amendments, or file and serve an application to amend their claim. This application was brought as consent could not be obtained. [ 2 ] I note that in coming to this decision I had the benefit of reviewing the decision of Master Laycock in this action, given orally on February 11, 2011.

The application before him was for the posting of security for costs by Gaastra and was unsuccessful. [ 3 ] The leading case on amending a statement of claim is Balm v. 3512061 Canada Ltd. 2003 ABCA 98 . The court pointed out in that case that a statement of claim requires no evidence to be filed, and a plaintiff can always issue a new statement of claim if the limitation period has not expired. When seeking an amendment evidence is not always necessary, and where it is, a party can rely on any admissible evidence.

The Court acknowledged that at a very early stage the plaintiff may not be capable of getting much evidence. Lack of a factual basis, said the court, is ordinarily not a ground to strike out a pleading, so long as it alleges facts which, if true, would support a cause of action.

In short, as acknowledged by counsel, the evidence necessary to amend a statement of claim is minimal, or as they put it, the bar is low. [ 4 ] Of the three types of amendments now being sought by Gaastra, two are opposed on the basis that they are not sufficiently supported either by the facts or by the wording of the pleading itself. [ 5 ] The first amendment is merely housekeeping to correct a name and is not opposed. The second seeks to delineate the claim against 125 and the third further articulates the claims against all of the defendants.

The Claim against 125 [ 6 ] Gaastra seeks to amend its claim, as directed by the court, to allege that when the trade name of Canadian Achievers Financial was transferred from 963989 Alberta Ltd. to 125, there was also a transfer to 125 of any obligation Canadian Achievers Financial had to him. He also seeks to amend to allege an ability to trace to 125 the monies he says are owed to him. [ 7 ] The claim by the plaintiffs is for the sum of approximately $1.8 million which they allege was given, directly or indirectly, to the defendants to be invested and secured by second or third mortgages.

The individuals primarily involved in arranging these investments were apparently Mr. Link and Mr. Watts. [ 8 ] A plan was subsequently initiated by Mr. Watts to have the plaintiffs and other investors transfer their security in some or all of these mortgages to the defendants Evanworth Mortgage Investment Corporation and Sherbrook Mortgage Investment Corporation in exchange for shares in the two corporations. Mr. Gaastra alleges that he has never received any reporting or accounting from these corporations with respect to their status and he has never received a proper accounting for his investments.

He also alleges that some of his funds were invested in ways other than he directed and in investments in which Mr. Watts had a direct or indirect interest. The statement of claim alleges fraud. [ 9 ] The allegations of fraud are particularized in subsequent paragraphs in the statement of claim. The particulars establish an allegation that money was being inappropriately or fraudulently invested or transferred. [ 10 ] Mr. Watts is or was a shareholder, director or principal officer of a number of the defendants, including 125, Evanworth, Sherbrook, and 963.

[ 11 ] Mr. Gaastra states that he advanced $500,000.00 to Canadian Achievers Financial, in 2002 and it has not been repaid. At that time 963 owned the trade name. [ 12 ] In July, 2006, after Mr. Gaastra invested his funds, the trade name Canadian Achievers Financial was transferred to 125. Mr. Watts argued at both this application and the last application that 125, operating under the trade name Canadian Financial Achievers, is a separate company providing paralegal services, was not involved at the time of Mr.

Gaastra’s investment and therefore should not be a party in this action. [ 13 ] In addition to the evidence of Mr. Gaastra available for consideration on this application, there is affidavit evidence of Mr. Watts. In it, Mr. Watts acknowledged that funds were paid by 125 to 963 for the purchase of the trade name. He did not provide any documentation in relation to the transfer of the trade name between the two corporations. [ 14 ] I drew to the attention of the parties Master Laycock’s finding that Canadian Achievers Financial charged a management fee to look after the investments of Evanworth and Sherbrook.

This finding would appear to support the ongoing involvement in the mortgage investments by 125 carrying on business as Canadian Achievers Financial. [ 15 ] Counsel argued that the evidence did not support this conclusion and Master Laycock was confused as the management fee was in fact charged by Achievers Mortgage Corporation , another company in which Mr. Watts had an interest. I was advised that there was also an Achievers Financial . Mr. Watts offered to explain the differences to the court but was advised he could only do so by relying on the evidentiary material before the court.

He gave no further explanation. [ 16 ] I also drew to the parties’ attention the letter Mr. Watts sent to Mr. Link re Mr. Gaastra in October, 2006, after the transfer of the trade name. It says in part: I write to you on behalf of Achievers Mortgage Corporation, Evanworth Mortgage Investment Corporation, Sherbrook Mortgage Investment Corporation AND Achievers Financial, as I am the primary Director/Manager of same. ... If Mr. Gaastra desires us to proceed, if Mr.

Gaastra is prepared to appoint Achievers Financial as his agent with instructions to proceed with foreclosure... [ 17 ] A review of the transcript of Mr. Watts’ cross-examination indicates that there was a company called Achievers Financial Ltd. that provided management services to Evanworth and Sherbrook and it had Mr. Watts as its directing mind. [ 18 ] In his cross examination on affidavit Mr. Watts stated at p. 30 l. 16 -19: I’ve had many different companies that I’ve been the director of in the past, and I have been shareholders of different companies.

I don’t know if I’m the sole shareholder of Achievers Financial or not. [ 19 ] Mr. Watts apparently had the trade name Canadian Achievers Financial which he moved from one company to another, a company named Achievers Mortgage Corporation and a company named Achievers Financial Ltd. It is not surprising that Master Laycock was confused and counsel too appeared at a bit of a loss. [ 20 ] Mr. Watts had difficulty answering a number of questions put to him on cross-examination on his affidavit, but did state several facts.

He stated that Achievers Financial Ltd. managed Evanworth and Sherbrooke and was obliged to provide an annual report to the shareholders and none were ever provided. He said that this failed to occur as he didn’t realize the obligation existed. (Page 44 lines

l-9). [ 21 ] At the next page of the transcript he confirmed that he did not provide Mr. Gaastra with any information on the status of the mortgages in foreclosure nor any income received from the mortgages nor any disbursements made. [ 22 ] When asked at p. 45 if he collected any money on the mortgages held by Evanworth and Sherbrook he responded that it was a tough question and he would need to look at the financials to find whether or not there were monies collected. However, the financials were not available as they had not been prepared. At p. 51 Mr.

Watts said he would have no problem asking tax counsel to put them together. [ 23 ] At page 50 he confirmed that no dividends were ever paid from the companies. When asked what Mr. Gaastra needs to do to find out how his investments are doing, Mr. Watts advised that he, Mr. Watts, could ask his tax lawyer to put the information together but he didn’t know how long it would take. [ 24 ] This statement is in contrast to the assertion in Mr. Watt’s affidavit that Exhibit “V” appended thereto demonstrates that Mr. Gaastra received an accounting in 2008 and was satisfied. Exhibit “V”, to my eyes, is a demand from Mr.

Gaastra that he be paid the funds he invested. [ 25 ] In

summary, Mr. Watts used the name “Achievers” in relation to four different companies. Two were incorporated and two were by way of a trade name. Only one, 125, allegedly had no involvement in the mortgage business. [ 26 ] Mr. Gaastra says that monies were paid to Canadian Achievers Financial and have not been properly accounted for. Mr. Watts confirmed that an accounting was not provided and financial statements have not been prepared. Mr. Watts was involved in one way or another with all of these companies and in his own correspondence he was not clear as to the differences. In his letter to Mr.

Link he referred merely to “Achievers Financial”. He himself acknowledged in his transcript that he has been involved in a number of companies and has trouble keeping it all straight. Furthermore, records were neither prepared nor provided as required. [ 27 ] Therefore, Mr. Watts’ bald statement that no obligations were transferred with the trade name and that 125 has absolutely no involvement in this action is insufficient to satisfy this court. What rights and obligations went with the trade name are not clear at this time.

Whether 125 ultimately received any traceable assets of Gaastra cannot be ruled out. [ 28 ] The totality of evidence is sufficient to meet the very low bar necessary to amend the claim against 125. Mr. Watts can always reapply and seek

summary dismissal after he has provided a full accounting of the funds invested, provided all relevant documents and completed the discovery process. More General Amendment [ 29 ] The primary amendment at issue is the proposed paragraph 31A which states: Watts, operating through the corporate defendants 973632 AB, 963989 AB, 1251748 AB, Oliver Forest, Evanworth and Sherbrook, as his alter egos, used them from time to time to manipulate and misappropriate the plaintiffs investments and income therefrom. Despite repeated demands neither Watts nor these corporate defendants have provided an accounting.

These corporate defendants are in breach of trust and breach of fiduciary duty, and liable as constructive trustees to account to the plaintiffs for misappropriated funds and are subject to a tracing remedy in relation to all sums invested by the plaintiffs through Watts, and, to the extent they have been unjustly enriched, the plaintiffs are entitled to recover all sums or other benefits received by these corporate defendants as a result of the use of the plaintiff’s money. [ 30 ] This amendment goes further than that requested in my decision in May, 2010, and also extends the claim to allege beach of

[ 30 ] This amendment goes further than that requested in my decision in May, 2010, and also extends the claim to allege beach of trust and fiduciary duty, constructive trust and unjust enrichment. It names both 125, Watts and the corporations in which he has an interest. Other portions of the claim have also been amended to expand the allegations against Watts to include these corporate defendants. [ 31 ] 125, supported by the other defendants, is opposing the proposed amendments. They argued that there is no evidence to support the amendments and there are no particulars of the claims.

They alleged that this is the first time such claims have been raised against the corporate defendants and they particularly objected to the claim of misappropriation of funds, saying that this is the first time that misappropriation has been claimed. [ 32 ] The nature of the claims and the allegations of misappropriation should be no surprise to the defendants. Fraud has already been alleged. The details, as best known to Gaastra, are clearly particularized in the claim. The amendments simply ensure that all possible causes of action based on those particulars are captured and a tracing to Mr.

Watt’s various business entities can occur. [ 33 ] Once the funds went to Mr. Watts or his companies, the ability to trace them became stymied. For Mr. Watts and the corporate defendants to now complain that the plaintiffs lack particulars of what happened to the allegedly missing funds and therefore they cannot name the companies utilized in Mr. Watts’ investment business is disingenuous. The inability to provide that information seems to rest on the shoulders of Mr. Watts. He has not provided a complete accounting. Conclusion [ 34 ] The plaintiffs have provided enough evidence to found their claims.

It has been acknowledged that funds were received from Gaastra and have not been repaid. It is acknowledged that no financial statements for the companies have been provided. There is some evidence that Mr. Watts, or businesses in which he or his brother were involved, had an interest in properties to which Gaastra directed its funds, an interest that allegedly was not disclosed. [ 35 ] The known facts and the lack of accounting raise the spectre of the classic shell game. The truth will be discovered at trial. The claim has sufficient gravitas to proceed.

The amendments are allowed. [ 36 ] Should the allegations prove spurious, the defendants can always be compensated in costs. [ 37 ] The plaintiffs suggested costs be in the cause, including any thrown away costs required as a result of the amendments. I agree. [ 38 ] Finally, at the close of argument I asked counsel to present a litigation plan to move this matter forward, to be heard at 9 a.m. on March 2, 2011 in open court. Heard on the 14 th day of February, 2011. Dated at the City of Calgary, Alberta this 22 nd day of February, 2011.

J.B. Hanebury M.C.C.Q.B.A. Appearances: Bishop & McKenzie LLP Kari L. Sejr for the Plaintiffs Brownlee LLP Peter R.S. Leveque for the Defendants, 973632 Alberta Ltd., Evanworth Mortgage Investment Corporation and Sherbrook Mortgage Investment Corporation Jacalyn L. Symonds Professional Corporation Jacalyn L. Symonds for the Defendants 963989 Alberta Ltd., 1251748 Alberta Ltd. (Carrying on business under the trade name of Canadian Achievers Financial), Oliver Forest & Carrington Ltd. Mr. Watts Self Represented