Cho v. Twin Cities Power-Canada, 2011 ABQB 707

Court of Queen ’ s Bench of Alberta Citation: Cho v. Twin Cities Power-Canada, 2011 ABQB 707 Date: 20111116 Docket: 1101 01630 Registry: Calgary Between: Allan Cho Plaintiff - and - Twin Cities Power-Canada, U.L.C., Twin Cities Power, L.L.C. Twin Cities Power Holdings, L.L.C., Twin Cities Power Services, L.L.C. and Twin Cities Energy, L.L.C. Defendants _______________________________________________________ Memorandum of Judgment of the Honourable Mr. Justice G.C. Hawco _______________________________________________________ [ 1 ] On February 2, 2011, Mr.

Allan Cho, a former officer and director of Twin Cities Power-Canada, U.L.C., (Twin Cities Canada) one of the Defendants obtained an ex parte Mereva injunction from Justice Alan Macleod wherein Justice Macleod directed that $1.8 million which Mr. Cho had withdrawn from Twin Cities Canada bank accounts be deposited into the trust account of his counsel.

He further ordered that the Defendants be restrained from withdrawing any funds from or in closing down any of a number of Canadian bank accounts. [ 2 ] On February 15, 2011, pursuant to a Consent Order of Justice Sullivan, the parties consented to Justice Macleod’s order being vacated and that the monies would be moved from the trust account of Mr. Verjee to the trust account of Heenan Blaikie, the Defendants’ solicitors. The parties further agreed that those monies would not be disbursed without the consent of counsel or upon

further order of the Court. [3] The Defendants have argued that the Plaintiff made a number of serious and repeated misrepresentations to Justice Macleodon February 3, and as a result the order should be vacated immediately.

However, Justice Macleod’s order has been vacated by consent.It is therefore not necessary, nor particularly productive, to argue a moot point. [4] The Defendants now seek to have the $1.8 million of funds released to them and the Plaintiff seeks to have a new Marevainjunction issued, or in the alternative, an attachment order. [5] To obtain a Mareva injunction, a party must, among other things, satisfy the Court that it has strong prima facie case and thatthere is a significant risk that the assets of the Respondent within the jurisdiction are about to be removed or so disposed of in order torender nugatory any judgment to be obtained and to avoid the consequences of a judgment. [6] The Plaintiff claims that it does indeed have a strong prima facie case, and that there is indeed a significant risk that theassets of Twin Cities Canada will be removed from the jurisdiction or so rearranged or disposed of so as to render any judgmentineffective. [7] In support of this position, the Plaintiff points to the fact that a

Summary Judgment Application against the Defendants is totake place within a number of weeks. The Defendants, of course, take issue with this argument. Some courts have found that it is enoughif a plaintiff has a good arguable case. I need not decide which is a better approach as I am satisfied in this case that the Plaintiff has notmet the second criteria to which I have referred.

It has not satisfied me that there is a real risk that a judgment he might receive mightultimately be unsatisfied because of the actions and intent of the Defendants. [8] The Plaintiff has argued that this Court should take a more flexible approach to this criteria such as our Court of Appeal didin Hamza v Hamza, 1997 ABCA 263 , [1997] A.J. No. 836. At para 35 of that decision, Justice Conrad, on her behalf and onthe behalf of Chief Justice Fraser stated: I am satisfied this is an exceptional case that justifies the Chambers Judge's exercise of discretion.

O'Leary J.A. has stated that the orderin question simply constitutes execution before judgment. I do not agree. It is an attempt to preserve assets so there is a possibility ofexecution after judgment. There was sufficient evidence for the Chambers Judge to conclude that assets will be removed or collectionwill be made difficult without injunctive relief. Further, I agree with the comments in Mooney v. Orr. In the circumstances of this case,Mr.

Hamza should not be permitted to use this Court to his advantage while effectively disavowing in advance any judgment against him. [9] This statement, however, must be read together with Justice Conrad’s statement in para 26 where she said: As mentioned, the justification for the order was the need to secure funds. While it is true, as pointed out by my colleague O'Leary J.A.,that there is no evidence that the Societies themselves dissipated assets, there is certainly evidence that Dr.

Hamza moved moneys fromhis name into the names of what he now claims are separate legal entities, thereby creating all of the difficulties of tracing those funds.Mr. Hamza has control of the Societies. It is not a giant leap that there is a risk that Mr. Hamza would cause the Societies to move themoneys again simply to hinder collection if they are unsuccessful in the property claim. [10] Justice O’Leary, in dissent, said this in para 56: 56 As pointed out earlier, there is no evidence that the Societies on their own initiative or through Mr.

Hamza have or are in the courseof dissipating their assets or dealing with them so as to frustrate recovery by Mrs. Hamza of the judgment she may obtain against eitherMr. Hamza or the Societies. The assets have never been in Canada and their status and location remain essentially as they were beforethe domestic dispute arose. Further, Mrs. Hamza has always been aware that these assets were located abroad.

57 In my view the Order is plainly and simply pre-judgment execution in respect of an unliquidated claim in circumstances where thereis absolutely no foundation for it. [11] In Justice Robert Sharpe’s book: Injunctions and Specific Performance, Canada Law Book Co., Looseleaf Edition, JusticeSharpe, at para 2.880 says this: It is not enough to show that there is a possibility that the defendant will become insolvent, nor that assets will be removed in theordinary course of business.

Proof of a serious risk of removal or disposition of assets is required even where the action is based on fraudand it is shown that the defendant has committed a fraudulent act. The Ontario Court of Appeal has suggested that the decisive questionis the purpose of the defendant and, while hesitating to express a final view of the question, stated that the better view is “that it is only ifthe purpose of the defendant when removing the assets from the jurisdiction where the dissipating or disposing of them is for the purposeof avoiding judgment that a Mareva injunction should be issued”.

Similarly the Manitoba Court of Appeal has held that “thepreponderance of authority supports the view that Mareva injunctions are unavailable against defendants who do not evidence anintention to frustrate the plaintiff’s potential judgment. [12] He does go on to say that the British Columbia Court of Appeal takes a somewhat more flexible approach, such as thatargued by the Plaintiff in this case. [13] In Eli Lilly Canada Inc. v Novopharm Ltd., (2010), AD 2010 FC 241 , 82 C.P.R. (4th) 401, Justice Zinn conductsquite a thorough analysis of the requirements of a Mareva injunction and concludes, at para 19 as follows: In

summary, in Canada the following requirements for a Mareva injunction must be established: 1. The plaintiff must establish a strong prima facie case for potential success at trial: Aetna Financial Services Limited at 27; 2. The plaintiff must meet the five guidelines set out in Third Chandris Shipping as re-articulated and modified in Chitel, namely (

a) fulland frank disclosure, (

b) particulars of the claim, (

c) assets within the jurisdiction, (

d) risk of removal or dissipation of assets in order tofrustrate judgment, and (

e) an undertaking as to damages; and 3. The plaintiff must satisfy the regular tripartite test for an interlocutory injunction described in RJR-MacDonald Inc. v. Canada(Attorney General), (SCC), [1994] 1 S.C.R. 311 at 334, namely (

a) the presence of a serious question to be tried, (a)irreparable harm should the injunction not be granted, and (

c) that the balance of convenience favours the moving party. [14] In that case, Justice Zinn acknowledged that Lilly Canada retained no profits but sent all of its profits to Lilly US and that thecompany did not maintain any investments in Canada and that Lilly Canada had laid off a number of employees and left it in what wassome had described as “a weakened state”.

Nevertheless, Justice Zinn said this at para 36: This evidence does not establish, on the balance of probabilities, that Lilly Canada is about to remove its assets from Canada or that insending its profits to its parent, it is acting in anything other than the ordinary and usual course of business.

Further, there is nothing inthe record that proves, on the balance of probabilities, that the plaintiffs would wind up their Canadian operations rather than payNovopharm any judgment it is awarded. [15] In my respectful view, in a normal commercial case such as this, there is no need to adopt a “more flexible approach”. Thereis nothing particularly exceptional about what has occurred here.

The principle still remains that courts are reluctant to grant, in effect,execution before a judgment has been obtained where there is simply no evidence of any improper purpose in the respondent’s method ofcarrying on business. [16] The Plaintiff has argued that there is ample evidence that the Defendants have so restructured their businesses that there willbe no assets left within this jurisdiction to satisfy any judgment he may receive and the sole purpose of the restructuring is to thwart any

claim he might have. [ 17 ] The Plaintiff’s difficulty is that Mr. Jason Brown and Mr. Scott Garrett, former employees of Twin Cities Canada, have confirmed that Twin Cities Canada is still carrying on business in this jurisdiction and that its financial structures and accounting practices have not been changed since February 1, 2011. [ 18 ] Twin Cities Canada is a viable and successful business. It is carrying on business as it has been. It has assets within the jurisdiction. [ 19 ] If the Plaintiff does obtain judgment, there is nothing more than a fear and suspicion to suggest it will be worthless.

The United States is a reciprocating jurisdiction. [ 20 ] Because the Plaintiff fears he may not recover a judgment is not a ground for relief pursuant to an extraordinary remedy. Attachment Order [ 21 ] An Attachment Order is a discretion remedy pursuant to

section 17 of the Civil Enforcement Act of Alberta . Section 17(2) states 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. [ 22 ] As I have found no ulterior motives which may be legitimately ascribed to the Defendants with respect to how they conduct business within this country, I am satisfied that the Plaintiff has not established that the Defendants are dealing with exigible property otherwise for the purpose of meeting its reasonable and ordinary business and living expenses. [ 23 ] The Plaintiff’s claim is therefore dismissed, with costs.

Heard on the 14 th day of November, 2011. Dated at the City of Calgary, Alberta this 16 th day of November, 2011.

G.C. Hawco J.C.Q.B.A. Appearances: Zul Verjee Verjee & Associates for the Plaintiff D. Robb Beeman Kris Noonan Heenan Blaikie LLP for the Defendants