Concrete Equities Inc. (Re), 2011 ABQB 338

Court of Queen ’ s Bench of Alberta Citation: Concrete Equities Inc. (Re), 2011 ABQB 338 Date: 20110519 Docket: 0901 11048 Registry: Calgary In the Matter of the Companies ’ Creditors Arrangement Act , R.S.C. 1985 c. C-36 , as amended, Section 13(2) of the Judicature Act , R.S.A. 2000, C.J-2, as amended, and

Section 99(

a) of the Business Corporations Act , R.S.A. 2000, c.

B-9 , as amended AND in the matter of Concrete Equities Inc., Wealthcrete Investment Corporation, Concrete Associates Investment Corporation, Concrete Associates Investment II Corporation, Concrete Associates Investment III Corporation, Concrete Associates Investment IV Corporation, Concrete Associates Investment V Corporation, El Golfo Investment Corporation, Costa Koraal Investment Corporation, Luna Morada Investment Corporation, Concrete Equities Executive Club Inc., 1456775 Alberta Ltd., Concrete Place Properties Ltd. and Concrete Associates VIII Corp. _______________________________________________________ Reasons for Judgment of the Honourable Mr.

Justice G.C. Hawco _______________________________________________________ [ 1 ] The Applicant, Dave Aurora, was an investor with one of the Respondents, El Golfo Investment Corporation (“El Golfo”).

Concrete Equities Inc., Wealthcrete Investment Corporation, Concrete Associates Investment Corporation, Concrete Associates Investment II Corporation, Concrete Associates Investment III Corporation, Concrete Associates Investment IV Corporation, and Concrete Associates VIII Corp. (the “Concrete Equities Group”) were individual corporations who acted as general partners in a number of limited partnerships formed for the purpose of investing in real estate in the province of Alberta and other jurisdictions, including Mexico.

The Applicant is the father of Vinny Aurora, one of the principles of the Concrete Equities Group. [ 2 ] Some time in 2008, El Golfo, which had invested in Mexico, needed money to close a number of transactions in that country. It is clear that all of the Respondents were quite involved in a large number of investments in Canada and elsewhere. The principles of each of the Concrete Equities Group were the same. The companies lent each other money and were involved in the same businesses. They even intermingled their money. There was a clear and close connection among all of them.

[ 3 ] Vinny Aurora approached his father in 2008 and asked him to lend some money to El Golfo. The Applicant deposes that he said he would lend El Golfo money, but only if he got a promissory note signed by El Golfo and seven of the other Concrete Equities Group, to whom he referred to as the Concrete companies. [ 4 ] In early August, 2008, the Applicant loaned $778,980.80 to El Golfo . In December of 2008, he loaned another $103,000. On August 15, 2008, some two weeks after the money was actually transferred to El Golfo , Mr.

Vinny Aurora, as a director of the Concrete Equities Group and El Golfo, signed a promissory note on behalf of all of the companies promising to pay Mr. Dave Aurora the sum of $778,980.80 together with interest at the rate of 24% per annum.

On December 11, 2008, again some two weeks or so after the $103,000 had been loaned, Vinny Aurora again signed a promissory note on behalf of the same companies. [ 5 ] On July 29, 2009, the Concrete Equities companies sought and obtained protection from their respective creditors under the Companies’ Creditors Arrangement Act (“CCA”), pursuant to the order of Madam Justice Romaine of this Court.

Justice Romaine’s order provided, among other things, that no proceedings could take place against any of the general partners nor could any proceedings be taken against any of the limited partnerships until August 28, 2009 or such later date as the Court may order. [ 6 ] On December 14, 2009, Justice Romaine issued a Claims Process Order, providing a process for parties claiming to be creditors of any of the corporations or of the limited partnerships to file proofs of claim. Claims disputed by the CCA monitor, Ernst & Young Inc., were to be determined by motion.

That order provided that any creditor who failed to file a proof of claim in accordance with the Order on or before the claim’s bar date would be barred from asserting any proof of claim against any of the Applicants. The claims bar date was set for January 22, 2010. [ 7 ] Dave Aurora filed seven proofs of claim, one against El Golfo and one against each of the other Respondents named in paragraph 1 of these Reasons. The claims listed the Respondents, but did not name them as general partners or describe them in any way other than by their corporate names.

The monitor accepted the claim against El Golfo, but disputed the balance of the claims against the other Respondents. In accordance with the Claims Process Order, Mr. Aurora filed an application to determine the disputed claims. This is the application before me, as well as a further application to determine what, if any, rights Mr. Aurora might have, were his claims successful, against the limited partners. [ 8 ] There is quite a history involving the Concrete Equities Group of companies. There is some debate as to whether a receiving order was ever really required.

Nevertheless, for the purposes of this application, all that is required is to determine whether the Notice of Disallowance with respect to the seven claims should be set aside as against the Concrete Equities Group. There is a subsidiary issue which is, perhaps, the more important issue and that is whether, should the Applicant be successful in having the Notice of Disallowance set aside, he has any claim as against the property of the Safeguard Limited Partners. [ 9 ] The Applicant’s argument is that each of the signatories to the promissory note (Mr.

Vinny Aurora having signed on behalf of all of them) did receive value and that even if they did not, they were accommodation parties and therefore liable. [ 10 ] With respect to the second issue, the Applicant argues that as each of the seven companies were general partners, all of the limited partners for whom they were general partners should also be liable. [ 11 ] Neither the Monitor nor the Receiver elected to respond to the Applicant’s Notice of Dispute.

However, a number of the limited partners, namely Safe Guard Real Estate Investment Fund Ltd. and the Safeguard Limited Partnerships I through to V did respond because of counsel for the Applicant’s notice that if he were successful in this application, he would be seeking to claim that the general partners were indeed acting on behalf of the limited partners and that the limited partners be liable. Issues [ 12 ] The issues therefore are this: 1. Have the Concrete Equities Group received value with respect to the promissory note signed on their behalf?

2. Are the Concrete Equities corporations accommodation parties and therefore liable to the Applicant in any event? 3. If the Concrete Equities Group are liable to the Applicant, may the Applicant seek any contribution or indemnity from the SafeguardLimited Partners? Answers 1. None of the Concrete Equities companies, other than El Golfo , received any value. 2. All of the Concrete Equities companies are accommodation parties. 3. No claim exists by Mr. Aurora against the Safeguard Limited Partners. Reasoning Re: Value Received [13] By virtue of

section 57 of the Bills of Exchange Act, R.S.C. 1985, c. B-4, the signatories to a promissory note are deemed tobe parties to the note for value, in the absence of evidence to the contrary. [14] I am satisfied that there is evidence to the contrary. It is clear that no consideration flowed to any signatory other than ElGolfo. Each note was signed after the money was advanced to El Golfo. [15] The Applicant argued that he only agreed to advance the money upon being told that the notes would be forthcoming, butthere is no evidence that any of the others benefited from the money which he advanced.

The Applicant argued that the considerationwas that none of the other signatories had money to give to El Golfo so if El Golfo had requested money from them, they would havebeen prejudiced in their day-to-day operations. Unfortunately, there is no evidence that the others had any money to give El Golfo. Infact, Mr. Aurora himself said these companies do not have surplus funds at the time to give El Golfo. [16] Mr. Aurora made the advance of money to El Golfo. It, and only it, received the benefit of those funds.

There is no evidencefrom any of the Concrete Equities Group that they received any benefits or value in exchange for signing the promissory notes. Accommodation of Parties [17] While there was no consideration flowing to or from the Concrete Equities companies to or from Mr. Aurora, the fact is thatthey were, through Mr. Vinny Aurora, signatories to the note. [18]

Section 54 of the Bills of Exchange Act provides: 54(1) An accommodation party to a bill is a person who has signed a bill as drawer, acceptor or endorser, without receiving valuetherefor, and for the purpose of lending his name to some other person.

(2) An accommodation party is liable on a bill to a holder for value, and it is immaterial whether, when that holder took the bill, he knewthat party to be an accommodation party or not. [19] In Mollot v. Monette, (SCC), [1981] 2 S.C.R. 133, the Supreme Court, at page 135, stated this: The crucial question under s. 55 is whether the respondent payee is a holder for value. ...

The matter is concluded, in my opinion, by the definition in s. 2 which defines “holder” as meaning, inter alia, the payee of a note who is in possession of it. The respondent is hence a holder and he is, in addition, a holder for value of the note, given as it was for an antecedent debt to the respondent. [ 20 ] As a result, I am satisfied that Mr. Aurora is a holder for value and is therefore entitled to rely upon s.54 of the Act and that all parties signing the note are liable for the debt.

Liability of Limited Partners [ 21 ] Certain of the Concrete Equities Group acted as general partners of certain limited partnerships. Those were Safeguard LP I through to Safeguard LP V (the “Safeguard LPs”). [ 22 ] Mr. Aurora filed seven proofs of claim. I have now dealt with those. He did not file any proofs of claim against any of the Safeguard LPs even though all that was necessary to do so was to check certain boxes in the materials sent to him. His claim against the Safeguard LPs is based upon what he argues is the power of the general partners, as set out in

section 6.02 of the limited partnership agreements, to enter into any agreement which it determines appropriate.

Section 6.02 is as follows: 6.02 Powers and Authority of the Managing Partner: In addition to the other powers and authorities which the Managing Partner shall have as elsewhere set forth in this Agreement, the Managing Partner shall have the power and authority on behalf the Partnership to: d. borrow money from time to time without limit as to amount and terms and to draw, make, execute and issue promissory notes and other negotiable or non-negotiable instruments ... [ 23 ] The very premise of any partnership is that the partners of the firm are “responsible for whatever is done by any of the partners when acting for the firm within the limits of authority conferred by the nature of the business it carries on”.

See Lindley, 17th Ed. 1995, Sweet & Maxwell 12-01. [ 24 ] It follows, of course, that no partner, much less a general partner within a limited partnership, can bind its partners unless there is a holding out in some manner that the general partner is purporting to act for the partnership. The general partner must be purporting to act as a general partner of the limited partnership. It cannot act outside powers given to it without the consent of the limited partners. See Lindley, at para. 21-03. There was nothing to suggest that when Mr.

Vinny Aurora signed on behalf of various Concrete Equities companies, he was doing so in his capacity or in the company’s capacity as general partner on behalf of the Safeguard LPs. The Concrete Equities Group were individual entities. There is nothing to indicate that there was any holding out in any manner nor is there anything to indicate that they were acting as general partners. [ 25 ] It is only as of late that Mr. Aurora (the Applicant) is seeking, in some manner, to bind the Safeguard LPs and to make a claim against them.

The Claims Process Order of Madam Justice Romaine issued on December 14, 2009 was very clear and very specific. No claim has been made by Mr. Aurora against the Safeguard LPs. He has no claim against them. Heard on the 18 th day of April, 2011. Dated at the City of Calgary, Alberta this 19 th day of May, 2011.

G.C. Hawco J.C.Q.B.A. Appearances: Terry L. Czechowskyj Miles Davison LLP for the Applicant Blair C. Yorke-Slader, Q.C. Bennett Jones LLP for the Safeguard LPs