1498587 Alberta Inc. Applicant - v. -, 2012 ABQB 324

Court of Queen ’ s Bench of Alberta Citation: 1498587 Alberta Inc. v. Devani, 2012 ABQB 324 Date: 20120517 Docket: 1201 03562 Registry: Calgary Between: 1498587 Alberta Inc. Applicant - and - Afshin Devani Respondent _______________________________________________________ Memorandum of Decision of the Honourable Mr. Justice K.D. Yamauchi _______________________________________________________ I. Introduction [ 1 ] 1498587 Alberta Inc (“1498587") makes an application for an attachment order pursuant to

section 17 of the Civil Enforcement Act , RSA 2000, c C-15 [" CEA "]. II. Facts [ 2 ] Afshin Devani (“Devani”) is the registered owner of a parcel of land located in Calgary (the “Afshin Lands”). Devani’s wife, Kelly Devani is the registered owner of 2 parcels of land in Calgary, which are 2-sides of a duplex (collectively, “Kelly Lands”). 1498587 registered a builders’ lien against the Afshin Lands in the amount of $212,129. As well, it registered builders’ liens against each

of the Kelly Lands in the amount of $192,497. The builders’ liens registered against the Afshin Lands and the Kelly Lands are collectively referred to as the “Builders’ Liens.” [ 3 ] Devani commenced these proceedings by way of an Originating Application, which he filed on March 16, 2012.

In these proceedings, he sought to have the Builders’ Liens discharged from the titles to the Afshin Lands and the Kelly Lands, on his payment into court of an amount representing the face amount of the liens, “or such other amount as may be determined by this Honourable Court.” Any such payment was to be “without prejudice to the right of the Applicant to question the validity” of the Builders’ Liens and their amounts. [ 4 ] Master Prowse signed a consent order on April 4, 2012, which said that once Devani paid $365,547.27, being the full amount of the builders’ lien registered against the Afshin Lands and a partial amount of the builders’ liens registered against the Kelly Lands, plus 10% of those amounts as security for costs, the Registrar of the South Alberta Land Registration District was directed to cancel the Builders’ Liens. [ 5 ] Master Prowse’s Order specifically stated that Devani was making those payments without prejudice to Devani’s right to question his liability to 1498587, and to question Kelly Devani’s liability to 1498587.

The amount paid into court would “stand as security” for the Builders’ Liens. [ 6 ] Devani is affiliated with other corporations, including Devani Homes Ltd. and Beyond Homes Ltd. (the “Related Corporations”). The Related Corporations and 1498587 started working together sometime in 2009, in the development and renovation of homes and properties in Calgary, Alberta. 1498587's principal is an individual named Matthew Wiens (“Wiens”). [ 7 ] In 2010, 1498587 and Devani (or the Related Corporations) entered into verbal agreements, in which 1498587 would help Devani (or the Related Corporations) develop lands.

Among other properties, 1498587 would perform construction work on the Afshin Lands and the Kelly Lands. In his affidavit that he swore on April 2, 2012, Wiens deposes that 1498587 completed the construction work. The amounts allegedly representing that work and the amounts that have been allegedly paid to 1498587 are as follows: Afshin Lands Amount for the work $340,771.43 Amounts paid $118,327.10 Amount allegedly owing $222,444.33 Kelly Lands Amount for the work $405,435.24 Amounts paid $285,248.55 Amount allegedly owing $120,186.69 Thus, the total amount allegedly owing is $342,631.02.

[8] 1498587 has commenced at least 2 other actions against, among others, Devani (the “Two Actions”). Kelly Devani is notnamed in the other actions. [9] In his affidavit that he swore on April 16, 2012, Devani deposes that he has not personally entered into any contracts with1498587 concerning 1498587's work on the Afshin Lands or the Kelly Lands. All such contracts were between 1498587 and one of theRelated Corporations. As well, all of 1498587's invoices were rendered to one of the Related Corporations.

The numerous invoices thatare attached to Wiens’ affidavit that he swore on April 2, 2012, bear out this fact. Devani denies that he ever entered into a contract with1498587 in his personal capacity. [10] Wiens attached to the affidavit he swore on March 30, 2012, letters in which Devani acknowledged indebtedness to 1498587in the amount of $752,768.56 plus interest (the “Acknowledgment Letter”).

Devani deposes in the affidavit he swore on April 16, 2012,that there was an agreement collateral to the Acknowledgment Letter, where 1498587 would be provided participation in another project,which would fully satisfy any claims it had against the Related Corporations. [11] The Defendants, including Devani, in the Two Actions have filed statements of defence. [12] In essence, 1498587 argues that this Court should grant an attachment order for the amount it claims that Devani owes it($752,768.56 plus interest), less the amount that Devani has already paid into Court in this action. III.

Issue [13] The main issue is whether 1498587 is entitled to pre-judgment relief in the form of an attachment order in relation to its claimagainst Devani. IV. Analysis Pre-Judgment Relief Generally [14] An attachment order is pre-judgment relief under Alberta law. The CEA gives Alberta courts the discretion to grant suchrelief, but they must not lose sight of the fact that pre-judgment relief is an extraordinary remedy. In Rea v Patmore, 1999 ABQB 759 atpara 4, Veit J said: Although pre-judgment relief is incorporated into the Civil Enforcement Act, it remains an extraordinary remedy.

Even a litigant whomeets all the statutory prerequisites for the remedy may be denied the remedy: the court retains discretion to grant the remedy.

Whilethere is no catalogue of factors that will necessarily apply in all situations, when deciding whether to grant the remedy, the court will beguided by the "judicial abhorrence for prejudgment execution.” In a later decision, Chipewyan Prairie First Nation No. 470 v Kent, 2008 ABQB 157 at para 81, 43 AR 56, Veit J referred to a pre-judgment attachment order as a “powerful” remedy. [15] The Supreme Court of Canada in Aetna Financial Services Ltd v Feigelman, (SCC), 1985 CarswellMan 19 atpara 8, [1985] 1 SCR 2, 15 DLR (4th) 161, quoted with approval the statement from Barclay-Johnson v Yuill, [1980] 3 All ER 190 at193, [1980] 1 WLR 1259 (Ch D), where the court said: [A plaintiff] cannot prevent the defendant from disposing of his assets pendente lite merely because he fears that by the time he obtainsjudgment in his favour the defendant will have no assets against which the judgment can be enforced.

Were the law otherwise, the waywould lie open to any claimant to paralyse the activities of any person or firm against whom he makes his claim …

[ 16 ] With this backdrop, this Court will analyze whether 1498587 is entitled to the pre-judgment relief it is seeking. Attachment Order [ 17 ] CEA s 17 provides: 17

(1) A claimant may apply to the Court for an attachment order where (

a) the claimant has commenced or is about to commence proceedings in Alberta to establish the claimant’s claim, or (

b) the claimant has commenced proceedings before a foreign tribunal to establish a claim if (

i) a judgment or award of the foreign tribunal could be enforced in Alberta by action or by proceedings under an enactment dealing with the reciprocal enforcement of judgments or awards, and (ii) the defendant appears to have exigible property in Alberta.

(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.

(4) The Court shall not grant an attachment order unless the claimant undertakes to pay any damages or indemnity that the Court may subsequently decide should be paid to the defendant or a third person and where the Court grants an attachment order, the Court may require the claimant (

a) to give any additional undertaking that the Court considers appropriate, and (

b) to provide security in respect of any undertaking.

(5) When an attachment order is granted, it should be granted in such a manner that it causes as little inconvenience to the defendant as is consistent with achieving the purposes for which the order is granted.

(6) An attachment order shall not attach property that exceeds an amount or a value that appears to the Court to be necessary to meet the claimant's claim, including interest and costs, and any related writs, unless the Court is of the view that such a limitation would make the operation of the order unworkable or ineffective. [ 18 ] It is arguable that the requirement set forth in CEA s 17(1)(

a) is satisfied in this case, as 1498587 has commenced proceedings in Alberta to establish its claim. This was done through its filing of the Builders’ Liens against the Afshin Lands and the Kelly Lands. It still must comply with the balance of the Builders ’ Liens Act , RSA 2000, c B-7 , to retain its liens. 1498587 also grounds its claim on the Two Actions. Curiously, it did not bring this application in the Two Actions, as well. [ 19 ] Nonetheless, this Court will proceed on the basis that 1498587 has, at least, commenced proceedings in Alberta by virtue of its registration of the Builders’ Liens.

Accordingly, this Court must move on to consider whether 1498587 has satisfied the two branches of CEA s 17(2). The first is whether there is a reasonable likelihood that the 1498587’s claim against Devani will be established.

The second is whether there are reasonable grounds for believing that Devani is dealing with his exigible property, or is likely to deal with that property otherwise than for the purpose of meeting his reasonable and ordinary business expenses and in a manner that would be likely to seriously hinder 1498587 in the enforcement of any judgment it might obtain against him. [ 20 ] 1498587 has the burden of proving each of these components, Industrial Rewind & Supply Inc v Kuntz & Kramer Services Inc , 2001 ABQB 123 at para 5 , 11 CPC (5 th ) 76 [“ Industrial Rewind ”]. [ 21 ] With respect to the first component, in Osman Auction Inc v Belland , 1998 ABQB 964 at para 39 , 235 A.R. 180 [“ Osman ”], Burrows J said that an applicant: ... need not show that it has a strong prima facie case.

The standard is lower than that – there must be a reasonable likelihood that the case will be established. The standard is higher than would be employed if [the respondent] sought

summary judgment dismissing the claim – in which case the question would be whether on the materials presented there was a genuine issue to be tried. [ 22 ] Thus, 1498587 need not show that it has a strong prima facie case. Nor will the fact that there is a genuine issue to be tried between it and Devani be sufficient to meet its burden. There may be a genuine issue to be tried, but 1498587 must go beyond that and show that there is a reasonable likelihood that its claim will be established . What does this mean?

If one were to look at the term “establish” in a dictionary sense, it would mean to “prove; to convince”: Black ’s Law Dictionary , 9 th ed, sub verbo “establish.” Another way of looking at this term is that the applicant must convince a court that “there is a reasonable likelihood of his getting a money judgment against the defendant”: Institute of Law Research and Reform, Prejudgment Remedies for Unsecured Claimants: Report No. 50 (Edmonton, 1988) at para 8.31 (“ILRR Report”). In other words, in this sense, “be established” in CEA s 17(2)(

a) can be equated with “succeed.” The applicant must not merely show that it has commenced the action against the respondent. It must show that the action has a reasonable likelihood of success. As Burrows J said in Osman , this is certainly not as high a standard as a “strong prima facie case,” but it is closer to that standard than a “genuine issue to be tried.” [ 23 ] The “reasonable likelihood” aspect adds an element of objectivity to the analysis.

This is sensible, inasmuch as the court, at this stage, does not have sufficient evidence on which to make a determination of whether the claimant will succeed in its claim. It has only the affidavits that the parties have presented and the transcripts of questioning on those affidavits, if any. [ 24 ] Devani contests that the Related Corporations owe 1498587 anything, because of cost overruns on fixed price contracts, deficiencies and overcharging. 1498587 itself concedes that the arrangement between it and Devani (or the Related Corporations) were oral arrangements.

This is not unlike the case before the court in Team Trading Enterprises Ltd v Bergen , 2000 ABQB 963 , where the court said: The very nature of disputed verbal agreements, let alone disputes over the operation of written agreements and collateral agreements thereto, make the marshalling of evidence to support the reasonable likelihood test difficult at best.

[ 25 ] Because of the conflicting positions of the parties, as evidenced by the many affidavits they have already filed in this matter, these issues must be resolved through a trial. Disputed affidavit evidence was all that was before this Court on this application and, although the parties questioned each other on this evidence, there is nothing in the transcripts on which this Court can find that 1498587 has shown a reasonable likelihood that it will succeed, or establish its claim, in its lawsuits. It should be noted that this Court is not saying that 1498587 will not succeed.

It is only saying that it cannot, on the evidence before it, say that “there is a reasonable likelihood that the claimant's claim against the defendant will be established.” [ 26 ] If there is a question concerning the amount of money the Related Corporations owe to 1498587, and that amount grounds Devani’s alleged liability to 1498587, then one must equally question Devani’s alleged liability to 1498587. [ 27 ] Furthermore, this Court questions whether Devani owes any money to 1498587 at all. 1498587 issued its invoices to one of the Related Corporations.

Either the Related Corporations or Devani paid some of these invoices. Simply because a party pays an invoice does not, ipso facto , make that party an assignee of the contract. [ 28 ] 1498587 also says that the Acknowledgment Letter makes Devani personally liable, in any event, for the amounts set forth in that letter. It argues that the Acknowledgment Letter makes Devani a principal debtor. In other words, the Acknowledgment Letter is not a guarantee of the obligations of the Related Corporations.

The consideration that flows in favour of Devani is that 1498587 would continue to do work for Devani (or the Related Corporations). Without the Acknowledgment Letter, 1498587 would not have continued to continue providing services to Devani (or the Related Corporations): Transcript of Questioning of Devani, 26 April 2012, p 30, ll 20- 27; p 31, ll 1-7. [ 29 ] Devani contests this on the basis that there were collateral agreements that are not reflected in the Acknowledgment Letter.

Furthermore, if Devani has acknowledged his personal indebtedness to 1498587, he does so as a guarantor of the obligations of the Related Corporations. [ 30 ] There is insufficient evidence before this Court concerning the collateral agreements that are not reflected in the Acknowledgment Letter. The parties diverge in their views as to how the collateral agreements relate to the alleged indebtedness of Devani (or the Related Corporations) to 1498587. This will have to be resolved through a trial.

Again, this Court questions whether there is a reasonable likelihood that 1498587 will succeed, or establish its claim, in this regard. [ 31 ] There is nothing in the Acknowledgment Letter itself which indicates that 1498587 would stop providing services to Devani (or the Related Corporations) if Devani did not sign the letter. It is simply an acknowledgment of indebtedness, which would make Devani a principal debtor of another’s obligations. This is a guarantee.

The fact that 1498587 said it would continue to provide services to the Related Corporations if Devani signed the Acknowledgment Letter, does not make this a contract that is separate from the Related Corporations’ obligations, if any, to 1498587. It is still Devani’s commitment to become liable for the debts of another. Under Alberta law, 1498587 must comply with the provisions of the Guarantee Acknowledgment Act , RSA 2000, c G-11 , s 3, which it has not. [ 32 ] 1498587 also argues that Devani acknowledged his personal indebtedness to it: see eg Transcript of Questioning of Devani, 26 April 2012, p 31, ll 9-14.

What appears clear from the questioning is that Devani uses “I” to refer to the Related Corporations, as well as himself personally. The construction contracts into which 1498587 entered in these cases are all with the Related Corporations and not with Devani personally. Why else would 1498587 want Devani personally to sign the Acknowledgment Letter? To find the amounts for which Devani is personally responsible under the construction contracts would require more evidence of his entering into those contracts personally. [ 33 ] In any event, these proceedings are intended to deal with the Builders’ Lien issues.

Through a consent order, the monies representing, and standing in the place of, the Builders’ Liens have been paid into court. These proceedings are not intended to deal with all the contested disputes between the parties. In fact, the Two Actions have different parties, except for Devani. 1498587 is protected in these proceedings through the monies that Devani paid into court. [ 34 ] For the foregoing reasons, 1498587 does not succeed under CEA s 17(2)(a). The two components in CEA s 17(2) are conjunctive, so this finding would adequately deal with this issue.

The parties, however, argued the second component, so this Court will deal with it.

[ 35 ] A mere belief by the plaintiff that the defendant is dealing improperly with its assets is insufficient.

The court in Edmonton Regional Community Board v Pearl Villa Homes Ltd , 2003 ABQB 1026 at para 29 [“ Pearl Villa ”], citing Industrial Rewind at para 8, said that “the plaintiff’s mere belief that the defendant is dealing improperly with its assets is insufficient; there must be evidence.” [ 36 ] 1498587 argues that Devani allegedly told Wiens that “he had no ability to pay the Debt other than by paying the Debt out of the equity in the [Afshin Lands and Kelly Lands].” Thus, it argues, Devani is impecunious. [ 37 ] Devani, on the other hand, deposes in the affidavit he swore on April 16, 2012, that he has 3 thriving businesses and that neither he nor Kelly Devani are improperly dealing with their properties. [ 38 ] We must remember that it is 1498587's onus to provide evidence that would satisfy this Court that it should grant the extraordinary remedy of pre-judgment relief in the nature of an attachment order.

Thomas J in Welcome Ford Sales Ltd (Receiver of) v Hellec , 2011 ABQB 753 at paras 42-43 [“ Welcome Ford ”], provides us with a non-exclusive list of evidence that could satisfy this onus: assets are disappearing assets have been sold to non-arm’s length parties for less than fair market value unexplained transfers of funds hidden bank accounts liquidation of real property, investments or attempts to move assets to locations outside Alberta In fact, he held that the respondents in that case had long-time roots in Alberta, and there is no evidence that they were planning to leave Alberta or take any steps in that regard. [ 39 ] The same can be said for Devani.

He deposed in his April 16, 2012 affidavit that he is a “lifetime resident” of Calgary. Kelly Devani has lived most of her life in Calgary. They have business interests in Calgary. In fact, it appears, the businesses in which they are involved are continuing. During the questioning on the affidavits he swore on March 16, 2012, and April 16, 2012, he advised that he had at least 3 other properties that he was developing.

As well, he has an interest in a matrimonial home: see eg Transcript of Questioning of Devani, 26 April 2012, pp 37-40. [ 40 ] Devani acknowledges that he intends to refinance the Afshin Lands and Kelly Lands. His mode of business is to buy properties, obtain financing, develop the properties and sell them for a profit. This is not an unusual mode of operation for property developers, or any developers for that matter. That is the very reason why construction financing exists. [ 41 ] Wiens has not provided any evidence of the nature that Thomas J suggested in Welcome Ford ; Devani is not going anywhere.

The ILRR Report at para 8.39 said: The attachment order is intended to provide an expeditious means of preventing a prejudicial disposition of a defendant's property. In essence, it is for emergencies. It is not intended to be a mechanism for achieving an orderly winding up of the affairs of an insolvent debtor. That is the function of legislation such as the federal Bankruptcy Act. More generally, the purpose of the attachment order is not to protect a person from the ordinary risks of being an unsecured claimant. One such risk is that one's debtor will simply run out of resources to pay his debts.

The purpose of the attachment order is to try to ensure that this situation is not brought about by an extraordinary or unreasonable disposition of the defendant's property. [Emphasis added.]

This illustrates the extraordinary nature of this type of remedy. [ 42 ] 1498587 also argues that Devani is dealing with his exigible property, or is likely to deal with that property, otherwise than for the purpose of meeting the defendant's reasonable and ordinary business or living expenses, by obtaining financing on the Afshin Lands and Kelly Lands. Essentially, it argues, Devani is obtaining the financing so there will be no equity left in those lands to meet any judgment it might obtain.

Devani concedes that the foreclosure and the obtaining of financing is not ordinary: Transcript of Questioning of Devani, 26 April 2012, pp 14-16. However, Devani had to obtain this financing to place the $365,547.27, plus 10% into court. If this is unusual, it is not necessarily because Devani was impecunious. It is because he had to pay large amount into court, as a result of 1498587 registering the Builders’ Liens. Again, Devani contests the validity and quantum of the Builders’ Liens. [ 43 ] The same can be said for the Kelly Lands.

However, it is Kelly Devani who will be obtaining the financing on those lands, not Devani. Kelly Devani owns those lands and the monies that have been paid into court “stand as security” for the builders’ liens registered against those lands. 1498587 argues that Devani has an equitable interest in the Kelly Lands by virtue of his being Kelly Devani’s husband.

This Court need not rule on that issue because, in any event, 1498587 has not met its onus of proving that Devani is dealing with his exigible property otherwise than for the purpose of meeting his reasonable and ordinary business or living expenses and in a manner that would likely to seriously hinder 1498587 in the enforcement of any judgment it might obtain against Devani. [ 44 ] One final matter that this Court needs to consider is that a pre-judgment attachment order is “stigmatizing in the business community ... [B]efore the court wields its stigmatizing power, it must carefully assess all of the effects of its order”: Equiplan Mortgage Investors Fund Ltd. v Cross Country Homes Marketing

(1993) Ltd , 2007 ABQB 276 at para. 35 . Because 1498587 has not met its onus, this Court will not wield its stigmatizing power and grant the extraordinary remedy of pre-judgment relief in the form of an attachment order. [ 45 ] Accordingly, 1498587’s application is dismissed. [ 46 ] The parties may make an appointment to appear before this Court within 45 days after the release of this memorandum of decision to speak to costs, if they are unable to agree on them. Heard on the 9 th day of May, 2012. Dated at the City of Calgary, Alberta this 17 th day of May, 2012. K.D. Yamauchi J.C.Q.B.A. Appearances: Paul S. Taylor Brownlee LLP for the Applicant

Ken Lenz Bennett Jones LLP for the Respondent