Mega Cranes Ltd. v. Statesman Group of Companies Ltd., 2011 ABQB 249

Court of Queen ’ s Bench of Alberta Citation: Mega Cranes Ltd. v. Statesman Group of Companies Ltd., 2011 ABQB 249 Date: 20110415 Docket: 0901 05611, 0901 05612, 0901 05613 Registry: Calgary Between: Docket: 0901 05611 Mega Cranes Ltd. Plaintiff - and - The Statesman Group of Companies Ltd., Statesman Corporation and Statesman Riverside Quay Ltd. Defendants And Between: Docket: 0901 05612 Mega Cranes Ltd. Plaintiff - and - The Statesman Group of Companies Ltd., Statesman Corporation, Statesman Master Builders Inc., and Statesman Riverside Quay Ltd. Defendants And Between: Docket: 0901 05613 Mega Cranes Ltd. Plaintiff

- and - The Statesman Group of Companies Ltd., Statesman Corporation and Statesman Riverside Quay Ltd. Defendants _______________________________________________________ Memorandum of Decision of the Honourable Madam Justice J. Strekaf _______________________________________________________ I.

Introduction [ 1 ] The Plaintiff Mega Cranes Ltd. appeals from orders granted by Master Mason on November 23, 2009 directing that Mega Cranes Ltd. (“Mega Cranes”) post security for costs totalling $224,475.00 in three related actions arising from work done by Mega Cranes and related companies at the Statesman Riverside Quays (“Project”) in Calgary.

Pursuant to a consent order granted by Justice Graesser on July 20, 2010, Rule 500 of the previous Rules of Court is to apply for the purposes of the appeals, notwithstanding that they were heard after November 1, 2010. [ 2 ] Security for costs in the amount of $39,695.00 were awarded in Action #0901-0561, which is an action by Mega Cranes for amounts allegedly owing to it by the Defendants for renting a crane used in the construction of the Project.

Security for costs in the amount of $29,590.00 were awarded in Action #0901-05612, which is an action by Mega Cranes, as assignee of a cause of action that its related company, MBS Structural Engineering Inc., claims from the Defendants for fees owing for design work done for the Project.

Security for costs in the amount of $155,190.00 were awarded in Action #0901-05613, which is an action by Mega Cranes, as assignee of a cause of action that its related company, Mega Building Systems Ltd., claims for amounts owing for the supply and erection of a structural steel building system in connection with the construction of the Project. [ 3 ] One of the Defendants, Statesman Riverside Quays Ltd., commenced action # 0901-05501 against Mega Cranes and various related companies claiming costs and damages arising out of deficiencies and delays in the work performed by the Mega companies on the Project.

The claims in this action involve similar issues to those raised in the Statements of Defence by the Defendants in the three actions which are the subject of this application. [ 4 ] The Plaintiff argues that the Master erred: - by finding that Mega Cranes is not a resident of Alberta within the meaning of Rule 593(1)(a); - by finding that Mega Cranes did not discharge its onus of showing that it had sufficient property within the jurisdiction for a security for costs order to be refused under Rule 595; and, - by failing to take into account the action commenced by one of the Defendants against the Plaintiff and its related companies arising out of the work done on the Project and the identity of interest between the Defendants in each of the three actions.

[ 5 ] Rule 593(1) provides that security for costs may be ordered in various circumstances, including: (

a) where the plaintiff resides out of Alberta; or, [...] (

i) where under any statute the defendant is entitled to security for costs. [ 6 ] Section 254(1) of the Business Corporations Act , R.S.A. 2000, c.

B-9, as amended states: In any action or other legal proceeding in which the plaintiff is a body corporate, if it appears to the court on the application of a defendant that the body corporate will be unable to pay to pay the costs of a successful defendant, the court may order the body corporate to furnish security for costs on any terms it thinks fit. [ 7 ] Rule 595 provides that an application for security for costs shall be supported by an affidavit of the defendant or his agent, who can speak positively to the facts, alleging that there is a good defence to the action on the merits and specifying the nature thereof.

There is no issue that the Defendants have met this requirement. [ 8 ] Rule 595 provides that an order for security for costs may be refused if it is made to appear that the plaintiff is possessed of sufficient property within the jurisdiction that will be available for the defendant’s costs. [ 9 ] An appeal from the Master pursuant to Rule 500 is a de novo hearing, particularly where additional evidence that was not before the learned Master has been filed. II. Issues [ 10 ] There are a number of issues to be considered on this application: 1.

Does Mega Cranes reside outside of Alberta for the purposes of Rule 593(1)(a)? 2. Have the Defendants established that they are entitled to security for costs pursuant to Rule 593(1)(

i) on the basis that it appears that Mega Cranes will be unable to pay costs if the Defendants are successful as contemplated in section 254(1) of the Business Corporations Act ? III. Analysis A. Rule 593(1)(a). [ 11 ] The onus is on the Defendants to establish that Mega Cranes resides outside of Alberta for the purposes of this rule: Ascent Inc. v. Fox 40 International Inc. , [2007] O.J. No.1800 . [ 12 ] Corporations may have different residences for different purposes, as was recognized in Castel & Walker’s Canadian Conflict

of Laws, 6th ed., looseleaf (Markham, Ont.: LexisNexis Butterworths, 2005) at 30 - 2, which states [footnotes omitted]: A corporation may have more than one residence for different purposes, as for instance, for liability to taxation, liability to suit, securityfor costs, and enemy character. Each case depends upon its own facts and on the purpose and wording of the relevant statute or rule. [13] A foreign company may reside within the Province of Alberta so as to enable it to sue without furnishing security for costs:Frost and Wood Co. v. Howes, (AB KB), [1912] 4 D.L.R. 527 at 528.

A corporation may also be simultaneouslyresident in more than one jurisdiction for various purposes, including for determining whether security for costs should be payable: Nova Scotia Power Inc. v. AMCI Export Corp., 2005 NSCA 152, 261 D.L.R. (4th) 383 at para. 25.

In that case, which dealt with theinterpretation and application of the phrase “residence out of the jurisdiction” in respect of a corporate defendant in the context ofattachment orders, the Nova Scotia Court of Appeal reviewed the law with respect to the residence of a corporation (at paragraphs 22 -35) and characterized the thread running through the case law to be that “substance trumps form in determining a company’s residence”(para. 35). Freeman J.A. went on to state at paras. 42 - 43: In my view, "residence out of the jurisdiction" for a corporate defendant pursuant to Rule 49.01(1)(

a) must reasonably mean the lack of apresence in the province substantial enough to be a counter to the mischief of non-residence, that is, the impediments a plaintiff faces inattempting to enforce an order or judgment out of the jurisdiction. When a prima facie non-resident company has sufficient indicia ofresidence in the jurisdiction to offset the impediment of non-residence, that is, when the orders and judgments against it can be enforcedas they would be against a resident corporation, it cannot be said to be non-resident - resident "out of the jurisdiction" - for purposes ofRule 49.01(1)(a).

When such indicia of residence are lacking, attachment orders are a means of equalizing enforcement between residentand non-resident corporations. Whether the indicia of residence are sufficient for purposes of Rule 49.01(1)(

a) is a matter of fact to bedetermined on the evidence.

Evidence of such indicia would include registration as a mandatory requirement; it would include the presence of assets and the formthey took, whether they were investments, stock-in-trade or mere goods in transit to a purchaser; it would include the manner of doingbusiness; domicile and the location of the head office and other seats of decision making; maintenance and purpose of branch offices,factories or warehouses; the presence and status of employees, and any other relevant consideration. [14] It is appropriate to consider similar criteria when determining whether or not a corporation “resides outside of Alberta” for thepurpose of Rule 593(1)(a). [15] The evidence in this case establishes that: - Mega Cranes is a federal corporation that was incorporated in 2002 and which has been extra provincially registered in Albertasince October 2002; - Mega Cranes carries on business in Alberta selling, servicing and renting cranes, generators, transformers and other miscellaneoushoisting equipment to the construction industry; - In October, 2009, Mega Cranes’ equipment in Alberta included 20 self-erecting tower cranes, 9 tower cranes, 7 mobile cranes andtransportation trucks, 10 generators, 4 transformers and 1 phase convertor along with various pieces of hoisting equipment, which wasvalued by Kelly Peterson, Mega Cranes Vice-President at approximately $4.8 million; - Mega Cranes has permanent offices in Alberta.

It has had a business office is located in Blackfalds, Alberta that consists ofapproximately 2250 square feet which it has rented and occupied since October 2005. It leases 2 parcels of land in Lacombe, Albertapursuant to 10 year leases which expire in 2018 and which are used for equipment display, storage and maintenance. Since July 2008, ithas also leased 3000 square feet in an office building in Calgary which is used for marketing and sales activities; - Mega Cranes Alberta Operations Manager is David Blonski.

He has been employed by Mega Cranes since 1998 and moved toBlackfalds, Alberta in July 2004 to assume responsibility for Mega Cranes business operations in Alberta. In February 2010, Mega

Cranes employed eight other Alberta residents. As of October 14, 2010, Mega Cranes only employed Mr. Blonski and his wife CatheyBlonski; - Mega Cranes has various Alberta and municipal licenses to carry on business in Alberta, maintains a W.C.B. account, filesAlberta corporate tax returns, has Alberta telephone and fax numbers that are listed in the Red Deer yellow pages; - Mega Cranes’ head office is located in Surrey, British Columbia, along with its administrative department and accountingdepartment.

Its banking is conducted with HSBC at the Langley, British Columbia branch; - For the year ended March 2009, Mega Cranes’ Alberta business represented approximately 20% of its total revenue; and, - All of Mega Cranes’ equipment is capable of being moved out of the jurisdiction, when not in use. [16] In reaching her decision, the learned Master relied on two Alberta Queen’s Bench decisions where security for costs wasawarded against a corporation found not to reside in Alberta.

I am satisfied that these two cases are distinguishable on their facts from thecase at hand. [17] In Tracer Industries Inc. v Shell Canada Ltd., 2004 ABQB 484, 364 A.R. 186, Justice McMahon stated at paras. 18 - 21: Rule 593(1)(

a) provides that security for costs may be ordered where the plaintiff resides outside of the province. The Applicants submitthat extra-provincial registration of a corporation without more is insufficient to avoid the application of the Rule: Frost and Wood Co. v.Howes (1912), (AB KB), 4 D.L.R. 527 (Alta. S.C.); Factory Tire and Rubber Co. v. Timac Tire Sales Ltd. (1979), (AB KB), 17 A.R. 49 (S.C.T.D.); Junction Engineering Ltd. v. Gunner Industries Ltd. (1993), (AB KB), 143 A.R. 316 (Master); and Tobitron Ltd. v. Schneider, (NWT SC), [1978] 5 W.W.R. 495 (N.W.T.

S.C.).Where the corporation's head office is and where the central management and control abide will also be considered in this regard: PetMilk Canada Ltd. and Numilk Canada Co. Ltd. v. Olympia and York Developments & two other actions (1974), (ONSC), 4 O.R. (2d) 640 (Master); Gesco Industries Inc. v. Welby's Fine Furniture, (MB KB), [1986] 6 W.W.R. 573(Man. Q.B.); and Judith River Farms Ltd. v. Government of Saskatchewan (2001), 204 Sask.R. 242, [2001] S.J. No. 145, 2001 SKQB106 (Q.B.). Tracer is a Delaware corporation with its head office in Texas.

The Applicants submit that there is no evidence that it has a permanentoffice in Alberta or that it is doing substantial business here. Further, its central management and control abides outside of Alberta. Tracer concedes that it is incorporated in Delaware, but notes that it is registered to do business in Alberta, carries on business here, hasassets here and has continuing ties to the jurisdiction. Tracer is not resident within this jurisdiction, so security for costs may be ordered in accordance with Rule 593(1)(a).

Though the Rule isframed in permissive language, I see no reason why Tracer should be given relief from the plain language of the Rule. All the parties arelarge multi-national commercial ventures engaged in complex litigation. [18] In that case, there was no evidence that the Tracer Industries Inc., which was the Tracer entity who was the Plaintiff in thataction, had a permanent office in Alberta or that it was doing substantial business in Alberta. While it had a subsidiary that owned land inEdmonton, the only assets owned by Tracer in Alberta were found to be a bank account and some accounts receivable.

In this case, MegaCranes has a permanent office in Alberta, does 20% of its business in Alberta and had equipment in Alberta used in carrying on itsbusiness in Alberta that it valued at $4.8 million in October 2009. [19] In 32262 B.C. Ltd. v. Besler, 1998 ABQB 210, 224 A.R. 262, Justice Veit stated at para. 12:

Rule 593(1)(

a) states that security for costs may be ordered where the plaintiff resides out of Alberta. It has been unequivocally established that the plaintiff in this lawsuit resides out of Alberta.

Not only is the plaintiff a British Columbia company, it has been established that its operating mind resides in that province. [ 20 ] There is no indication in 32262 that the Plaintiff in that case had a permanent office in Alberta or that it did substantial business in Alberta and had substantial assets in Alberta. [ 21 ] The Defendants have not met their onus of establishing that Mega Cranes resides outside of Alberta for the purposes of Rule 593(1)(a). B. Rule 593(1)(i) [ 22 ] For the purposes of an application under Rule 593(1)(

i) based upon section 254(1) of the Business Corporations Act , the Defendants bear the onus of establishing that Mega Brands will be unable to pay costs if the Defendants are successful: XS Technologies Inc. v. Veritas DGC Land Ltd. , (2003), 49 Alta. L.R. (4 th ) 301 (Q.B.), at para. 20 . [ 23 ] The Defendants have failed to satisfy this onus. III. Conclusion [ 24 ] The appeal is allowed. If the parties are unable to agree upon costs, they are at liberty to provide written submissions within 30 days. Heard on the 2 nd day of December, 2010. Dated at the City of Calgary, Alberta this 15th day of April, 2011. J.

Strekaf J.C.Q.B.A. Appearances: Robert J. Simpson, Q.C. Fraser Milner Casgrain LLP for the Plaintiff Robert A. Rakochey Clarissa V. Pearce Macleod Dixon LLP for the Defendants