Hall v. Willcox, 2011 ABQB 78

Court of Queen ’ s Bench of Alberta Citation: Hall v. Willcox, 2011 ABQB 78 Date: 20110211 Docket: 0914 00261 Registry: St. Paul Between: Cheryl Marie Hall Plaintiff - and - Tim Willcox and Phoenix Structural Moving Corporation Defendant _______________________________________________________ Memorandum of Decision of the Honourable Mr. Justice R.A. Graesser _______________________________________________________ Nature of Application [ 1 ] Ms. Hall, a judgment creditor of Tim Willcox, seeks orders that: 1. Mr.

Willcox is in contempt of the order of Martin J. dated August 23, 2010 requiring him to provide a Financial Report pursuant to old Rules of Court 369 and 370 within 15 days from the date of the order; 2. Mr. Willcox is in contempt of the order of Burrows J. dated December 6, 2010 requiring him to pay $375.30 in costs ordered to

be paid within 14 days; and 3. The transcript of his examination on his Statutory Declaration be permitted to be used in other proceedings. [ 2 ] Separate collection proceedings are ongoing with respect to Ms. Hall’s judgment against Phoenix Structural Moving Corporation. Background Facts [ 3 ] Mr. Willcox was a house mover, working for Phoenix Structural Moving Corporation. The corporation is controlled by his mother, Sylvia Willcox. [ 4 ] On May 27, 2009, Mr. Willcox, on behalf of Phoenix, provided a quote to “Mr. and Mrs. Mike Hall” to move a garage from Lloydminster, Alberta to Sandy Beach, Saskatchewan.

The move took place on June 24, 2009. [ 5 ] During the move, which was carried out under Mr. Willcox’s direction, the garage was destroyed. Ms. Hall commenced action against Mr. Willcox and Phoenix for damages on August 21, 2009. Mr. Willcox and Phoenix filed a Statement of Defence on September 3, 2009. [ 6 ] The Statement of Defence was struck by order of Ouellette J. dated December 14, 2009, who granted judgment against both Defendants in an amount to be determined on assessment. Ms.

Hall was given leave to apply to assess damages against the Defendants on 10 days’ notice to the defendants. [ 7 ] An application for judgment was filed on June 16, 2010. It was adjourned on one occasion by consent of counsel for Ms. Hall and for the Defendants. On June 29, 2010, the Defendants’ lawyer filed a Notice of Ceasing to Act, and provided a last known address for the Defendants. The assessment proceeded on July 12, 2010 and was unopposed. Nielsen J. assessed damages in the amount of $46,474.50 plus costs. [ 8 ] Ms. Hall immediately began enforcement proceedings.

A Notice to Provide Financial Report was sent by registered mail to Mr. Willcox at the address in the Notice of Ceasing to Act. It was returned unclaimed. Ms. Hall then applied before Martin J. on August 23, 2010 for an order requiring Mr. Willcox to provide a Financial Report, and allowing for service of her order and “further matters” by ordinary mail to the address in the Notice of Ceasing to Act. [ 9 ] Kristin Rogers deposes in an affidavit dated October 1, 2010 that she served the order on Mr.

Willcox by mailing it from Lloydminster, Saskatchewan to his address in Spruce Grove, Alberta, on September 2, 2010. [ 10 ] No Financial Report was filed within the 15 day time period specified in Martin J.’s order. Ms. Hall then applied ex parte before Verville J. on November 16, 2010. By order dated November 16, 2010, Verville J. ordered that Mr. Willcox comply with Martin J.’s order within 7 days from that date. He also ordered that Mr. Willcox appear in Court in St. Paul on December 6, 2010 to show cause why he should not be held in contempt of Court. [ 11 ] Mr.

Willcox was apparently served with Verville J.’s order by process server. He had in the meantime provided Ms. Hall with a Statutory Declaration. He appeared on December 6, 2010 and Burrows J. ordered him to submit to examination on his Statutory Declaration in Lloydminster on December 21, and to advise Ms. Hall as to several specific matters within 7 days. He adjourned the outstanding contempt application to January 31, 2011. He ordered Mr. Willcox to pay costs to Ms. Hall in the amount of $375.30 within 14 days.

[ 12 ] Mr. Willcox assigned himself into bankruptcy on December 16, 2010. [ 13 ] Notwithstanding the assignment, Mr. Willcox appeared in Lloydminster on December 21, 2010 and was examined on his Statutory Declaration and on issues relating to the outstanding contempt application. [ 14 ] By December 21, 2010, Mr. Willcox had complied with Martin J.’s order, Verville J.’s order and all of Burrows J.’s order except for the payment of costs. Under Burrows J.’s order, the costs should have been paid by December 20, 2010, but by that time, Mr. Willcox was in bankruptcy. Mr.

Willcox was not in default of payment at the time of his bankruptcy assignment. Position of Parties [ 15 ] Mr. Hall, on behalf of Ms. Hall, acknowledged that because of the bankruptcy, Mr. Willcox could not have complied with Justice Burrows’ cost order after the bankruptcy filing because payment to Ms. Hall would have been a preference. He submits, however, that Mr. Willcox should have made the cost payment to the Trustee. [ 16 ] Mr. Hall further submits that seeking a contempt declaration against Mr. Willcox is not contrary to s. 69 of the Bankruptcy and Insolvency Act , R.S.C. 1985 c. B-3.

He is seeking only declarations of contempt and costs. He confirmed that he was not looking for Mr. Willcox’s incarceration. [ 17 ] Mr. Hall candidly acknowledged that he considers that a finding of contempt against Mr. Willcox will be of assistance in opposing Mr. Willcox’s discharge application when that time comes. It is unclear whether Mr. Hall considers that some part of Ms. Hall’s judgment or costs may survive the bankruptcy because of Mr. Willcox’s conduct. [ 18 ] Mr.

Willcox denies that he was in contempt of Court and opposes any remedies on the basis that he is in bankruptcy and everything to do with his creditors should be dealt with in that forum. Analysis [ 19 ] It is clear that Ms. Hall is not a secured creditor. She succeeded in a damage action against Mr. Willcox. No fraud or other circumstances that might take the judgment debt out of bankruptcy proceedings and have the judgment survive a discharge were plead. [ 20 ] From a review of the file, it appears clear that the Defendants filed an unmeritorious Statement of Defence. It was struck.

An application was brought to have the Defendants produce their records, although it appears that the application did not proceed as an affidavit of records was filed shortly after the application was served. Even if no defence had been filed and the Defendants had allowed themselves to be noted in default, damages still had to be assessed. The eventual assessment was not contested. Costs, including costs for the striking motion, were awarded in favour of Ms. Hall. [ 21 ] Thereafter, Mr. Willcox was without counsel. Ms.

Hall attempted to serve a Notice to Provide a Financial Report at his last known address, but the registered mail was returned unclaimed. She then applied ex parte for an order requiring the provision of a financial report and allowing that order to be served by ordinary mail. The order was granted on August 23, 2010 but was not mailed to Mr. Willcox until September 2.

If it was received at the address in the ordinary course of post, (which I would assume to be at least 2 days from Lloydminster, SK to Spruce Grove, AB) it may have been received on September 4, but September 4 was a Saturday, and Monday, September 6 was Labour Day. The likely receipt day was thus September 7, with the report being due pursuant to Martin J.’s order that same day.

[ 22 ] Mr. Hall examined Mr. Willcox on December 21, 2010 pursuant to Burrows J.’s order of December 6. On that examination, Mr. Willcox testified that he had only physically been at the mailing address “maybe five days since May” and the first he knew of any obligation to file anything was when he was served by a process server with Verville J.’s order of November 16, reiterating the need to comply with Martin J.’s order within 7 days, and requiring him to appear in Court on December 6. [ 23 ] When Mr.

Willcox appeared in Court on December 6, 2010, he had apparently complied with the requirement of filing a statutory declaration; hence Burrows J.’s order that he attend to be examined on December 21, and that he provide certain details relating to some assets. [ 24 ] If Mr. Willcox was in contempt of Martin J.’s order, he had by December 6, 2010 purged his contempt. [ 25 ] Burrows J. adjourned the contempt application, and consideration of any sanction or punishment for contempt, to January 31, 2011, undoubtedly to see if Mr. Willcox complied with his orders of December 6 and had become more cooperative.

He was on December 6 in as good a position as am I to determine whether Mr. Willcox was in contempt of Martin J.’s order. [ 26 ] Having examined Mr. Willcox on December 21, 2010, Mr. Hall is stuck with Mr. Willcox’s answers as I cannot make credibility findings on an interlocutory application. Mr. Willcox’s evidence was that he did not see Martin J.’s order or become aware that he had an obligation to file a Financial Report until he was personally served with Verville J.’s order of November 16. It appears from the transcript that Mr. Willcox was served with Verville J.’s order on November 30, 2010.

It is not clear on the materials before me when Mr. Willcox actually provided the statutory declaration to Ms. Hall, but it was clearly within 7 days of actual receipt of Verville J.’s order by Mr. Willcox. [ 27 ] It is not argued that Mr. Willcox was in breach of Verville J.’s order. [ 28 ] The evidence before me, then, is that Mr. Willcox was not in knowing or wilful breach of Martin J.’s order. That was confirmed in a note on the Statutory Declaration provided by Mr.

Willcox; that he was unaware of an obligation to file a Financial Report until the process server served him with the papers for the December 6 application. [ 29 ] It is axiomatic that one cannot be in contempt of a court order that has not been served. Rule 10.52(3) provides: A judge may declare a person to be in civil contempt of Court if (

a) the person, without reasonable excuse, (

i) does not comply with an order, other than an order to pay money, that has been served in accordance with the rules for service of commencement documents or of which the person has actual knowledge, (ii) is before the Court and engages in conduct that warrants a declaration of civil contempt of Court, (iii) does not comply with an order served on the person, or an order of which the person has actual knowledge, to appear before the Court to show cause why the person should not be declared to be in civil contempt of Court, (iv) does not comply with an order served on the person, or an order of which the person has actual knowledge, to attend for questioning under these rules or to answer questions the person is ordered by the Court to answer,

(

v) is a witness in an application or at trial and refuses to be sworn or refuses to answer proper questions, or (vi) does not perform or observe the terms of an undertaking given to the Court, or (

b) an enactment so provides. [ 30 ] The declarations for contempt are sought are under the Rules of Court , not any other enactment. There is no doubt that Mr. Willcox was served with Martin J.’s order in accordance with the order itself.

Even if the order did not come to his attention and he had no actual knowledge of it, he had been validly served. [ 31 ] That is a consequence of having no legal representation and not being careful to ensure that mail sent to the “last known address” in a Notice of Ceasing to Act is being regularly monitored and brought to the addressee’s attention. [ 32 ] It is clearly not the fault of Ms. Hall that Mr.

Willcox apparently did not get his mail, and had no system in place to be told about important communications during his frequent absences from the mailing address. [ 33 ] It is also clear that one should not be able to avoid the consequences of being validly served with something in accordance with either the Rules of Court or a court order by claiming to have not actually received the document.

Some level of diligence is expected of all parties to litigation, and the courts must be careful to discourage people who deliberately avoid being served with process, or make it difficult for the other party to serve him or her. [ 34 ] Mr. Willcox can certainly be faulted for not being diligent with respect to service of documents at his residence. [ 35 ] But as a starting point, there is no affidavit of service of his former lawyer’s Notice of Ceasing to Act on the Court file. Old Rule 555 required the former solicitor to serve the notice on the party and all other parties, and to file proof of service.

Only after the necessary filing could the now unrepresented party be validly served at the “last known address,” and then only in accordance with R. 555(5) requiring a notice that “This document is served by mail as no new address for service has been furnished by you.” [ 36 ] There is no evidence before me that Mr. Willcox was ever served with the Notice of Ceasing to Act. No affidavit of service was filed. So the attempt to serve Mr. Willcox in July was essentially doomed to fail.

That being said, the application before Martin J. was akin to an application under old Rule 556, permitting service to be validly affected on Mr. Willcox at the last known address, and without any obligation to use registered or recorded mail. [ 37 ] This is problematic here, as there is nothing on the record to show that Mr. Willcox knew his lawyer had ceased to act, or that court documents might be served at his residence instead of on his lawyer. [ 38 ] For there to be certainty in Martin J.’s order, it must be read as requiring compliance within 15 days of service , not 15 days from the date of the order.

Giving the order the former

interpretation would have put Mr. Willcox in default of compliance on or about September 22. There was nothing untoward in Ms. Hall applying ex parte before Verville J. on November 16 for the order requiring Mr. Willcox to comply and to appear on December 6. [ 39 ] Interpreting Verville J.’s order as requiring compliance within 7 days from service, as opposed to the date of the order, Mr. Willcox complied with it. Giving the order an

interpretation that required compliance within 7 days from the date of the order would have the unfortunate and unintended result of having Mr. Willcox in breach of an order that had not been served.

[ 40 ] Essentially, the contempt being argued is that Mr. Willcox failed to comply with an order that was mailed to his address by ordinary mail and which he says he did not see or receive. There is no pattern of evasion of service. One registered letter was not signed for, one piece of mail was either not delivered, not received personally by Mr. Willcox or not brought to his attention, or ignored. The sworn evidence before me is that it was not received personally by Mr. Willcox, although it may have been served in accordance with Martin J.’s order. [ 41 ] In these circumstances, I am doubtful that Ms.

Hall has made out a contempt of Court relating to Mr. Willcox’s noncompliance with Martin J.’s order. But I need not, and should not, make a determination for a number of reasons: 1. Any contempt has been purged and there is no useful purpose served by making such a declaration; 2. The declaration is sought for the ulterior purpose of opposing Mr. Willcox’s discharge in bankruptcy at some future date; 3. Collection proceedings against Mr. Willcox are stayed because of s. 69(1) of the Bankruptcy and Insolvency Act and the issue is moot; 4.

No leave has been sought under the BIA to permit the contempt remedy to be pursued under s. 69.4 of the BIA ; and 5. Contempt is in any event a discretionary remedy, and the circumstances are such that it would be inappropriate to exercise a discretion to grant the declaration sought, or make a declaration that would fully exonerate Mr. Willcox. It serves no useful purpose to do either in these circumstances, and may prejudge what should be determined in the bankruptcy proceedings. Failure to Pay Costs [ 42 ] With respect to the allegation of Mr.

Willcox being in contempt of Court for failing to pay costs as ordered by Burrows J. on December, 6, 2011, that is answered fully by S.69(1) . That

section has the effect of staying orders for the payment of money except in limited circumstances such as penalties, fines, spousal maintenance or child support. None of these exceptions is relevant here. [ 43 ] That

section is clearly invoked. The cost payment was not in default when Mr. Willcox went bankrupt. The costs he was ordered to pay are not something which might survive bankruptcy under s. 178(1)(

a) of the BIA , so Burrows J.’s order with respect to the payment of money was stayed on Mr. Willcox’s bankruptcy. [ 44 ] There can be no contempt of that portion of Burrows J.’s order. Otherwise, a debtor might be imprisoned for failure to pay a debt. Debtors’ prisons were a feature of the 19 th Century, not the 21 st . [ 45 ] Sections 70 and 71 of the BIA are also relevant. S. 70 makes it clear that a bankruptcy order takes priority over all judicial attachments, judgments or other processes against the bankrupt’s property except completed executions or the rights of secured creditors.

Payment was not complete, nor was Ms. Hall a secured creditor. [ 46 ] S. 71 in any event took away Mr. Willcox’s ability to dispose of or otherwise deal with his property. He would have been in contravention of the BIA had he paid the costs as ordered by Burrows J. after December 16. Use of Transcripts [ 47 ] As an initial comment, the examination of Mr. Willcox on December 21 st should not have proceeded without leave of the Court under s. 69 of the BIA . Notwithstanding the examination had been ordered by Burrows J., Mr.

Willcox’s intervening bankruptcy had the effect of staying all proceedings relating to the judgment debt against Mr. Willcox. The examination had nothing to do with collection proceedings against Mr. Willcox’s co-defendant.

[ 48 ] Nevertheless, the examination proceeded as Mr. Willcox voluntarily appeared. [ 49 ] Rule 5.33 codifies the common law implied undertaking of confidentiality on testimony and records produced under the compulsion of discovery processes in civil litigation. There is a difference between the confidentiality attaching to records which have been produced and answers to questioning under subdivision 3 of

Part 5 of the Rules on the one hand, and cross-examination on an affidavit or statutory declaration, or for the purposes of an application under

Part 6 of the Rules, on the other. The common law implied undertaking applied to the affidavit of records, records produced, examinations for discovery, undertakings on examinations and records produced arising out of the discovery process. The implied undertaking did not apply to cross-examinations on affidavits, which were treated as being akin to testimony in court to which the open court principle applies. [ 50 ] The new Rules did not change this difference. Because the transcript of Mr. Willcox is of a cross-examination on an affidavit or statutory declaration, the transcript is not subject to Rule 5.33.

Even though the cross-examination went beyond questioning on the affidavit or statutory declaration and went into issues relevant to the contempt application, that questioning would be akin to questioning under Rule 6.8 (like the old Rule 266 examination). Such questioning would not have been protected by the implied undertaking and is not now protected by R. 5.33. [ 51 ] Thus I do not see that Ms. Hall needs court approval, or an order under R. 5.33, to allow use of the transcript in other proceedings.

Summary [ 52 ] Mr. Willcox is in bankruptcy. S. 69(3) of the BIA stays proceedings in relation to collection of claims provable in bankruptcy. The stay goes beyond collection proceedings. S. 69.3 provides: 69.3

(1) Subject to subsections (1.1) and (2) and sections 69.4 and 69.5, on the bankruptcy of any debtor, no creditor has any remedy against the debtor or the debtor’s property, or shall commence or continue any action, execution or other proceedings, for the recovery of a claim provable in bankruptcy. [ 53 ] Ms. Hall is not a secured creditor, so the balance of s. 69.3 has no application. The

section speaks of remedies against the debtor, as well as the debtor’s property. A declaration of contempt is a remedy against the debtor. Mr. Willcox was correct that all aspects of Ms. Hall’s judgment against Mr. Willcox must now be dealt with through the trustee and in the bankruptcy proceedings. [ 54 ] Non-payment of court-ordered costs when the date for payment had not expired by the time of the bankruptcy is not a contempt of Court. [ 55 ] Ms. Hall’s applications for declarations of contempt of Court are thus dismissed. [ 56 ] Ms. Hall’s application for permission to use the transcript is not necessary. [ 57 ] Her application for costs is also dismissed.

Heard on the 31 st day of January, 2011. Dated at the City of St. Paul, Alberta this 10 th day of February, 2011. R.A. Graesser J.C.Q.B.A. Appearances: Michael S. Hall Hall & Revering for the Plaintiff Tim Willcox Appeared on his own behalf