Shire International Real Estate Investments Ltd. (Re), 2012 ABQB 448

Court of Queen ’ s Bench of Alberta Citation: Shire International Real Estate Investments Ltd. (Re), 2012 ABQB 448 Date: 20120710 Docket: 0901 11866 Registry: Calgary In the Matter of The Companies ’ Creditors Arrangement Act, R.S.C. 1985, c C036, As Amended, the Judicature Act, R.S.A. 2000, c. J-2 As Amended and the Business Corporations Act, R.S.A. 2000, c.

B-9 , As Amended AND in the Matter of a Plan of Compromise or Arrangement of Shire International Real Estate Investments Ltd., Shire Capital Ltd., Halama Gardens LLC, Shire Asset Management Ltd., Winn River Resort Ltd., Fort McMoney Properties II Ltd., Halama Gardens Ltd., Maples and White Sands Investment Ltd., Fort McMoney Properties Ltd., Chemainus Properties Lted. Skaha Lake Developement Ltd., Tsechum Harvour Ltd., Bearspace at 144 th Avenue Ltd., Bearspaw at 144 th Equities, Bearspaw at 144 th Bonds Inc., Tsehum Harbour Equities Ltd., Tsehum Harbour Bonds Ltd., Orilla Investments Ltd., 0726028 B.C. Ltd.

And Bosun ’ s Holding Ltd. _______________________________________________________ Reasons for Judgment of the Honourable Madam Justice C.A. Kent _______________________________________________________ [ 1 ] About 400 people invested in Maple and White Sands Investment Ltd. (MAWSIL), a project that was part of the Shire group of companies. One of the properties, the Sorento Inn was sold and the equity of about $600,000 is currently held by the monitor.

The issue that will need to be decided is whether the inn, and therefore, the remaining equity is the property of the MAWSIL investors or generally the secured investors in Shire. Counsel was retained by some of the MAWSIL investors. About one year ago, that counsel made application to have the costs of the intended application to have the equity paid out to MAWSIL investors be a first charge against that equity. That application was denied: 2011 ABQB 552 . As a result, counsel sent a letter to all of the MAWSIL investors at the address that the investors gave in the investments documents.

It was only sent to those who had email addresses. The letter outlined the proposed action and invited contributions to a litigation fund of $75,000 to fund the application. Eventually, 34 of the original investors contributed to the litigation fund. This application is for an order that the $600,000 equity be distributed to the 34 investors who contributed to the litigation fund should the application to determine ownership of the equity be successful, . [ 2 ] Counsel served all of the MAWSIL investors with this application. Some were served by email and the email bounced back.

Those whose email bounced back were then served by regular mail. Several people appeared at the application. Two others either contacted counsel or wrote to the court. They can be divided into three broad categories: those who received the original invitation to fund the litigation fund, but did not do so, those who say that they may have received the original invitation but are not sure or do not remember and did not contribute and those that said that they are sure that they did not receive the original invitation and did not contribute.

Some of these people now want to participate in the litigation and are prepared to contribute to the fund. Some simply argue that it is not fair that only those who funded the litigation should share in the equity if the litigation is successful.

[ 3 ] Dealing with the principle to apply to this application, counsel for the 34 investors cited s. 38 of the Bankruptcy and Insolvency Act , 1985 B-3 as amended. That

section provides that where a trustee refuses to take a proceeding to recover assets for the benefit of the estate, the creditor may obtain an order authorizing the creditor to take the proceedings. Any benefit from the proceedings belongs to the creditor who takes the proceeding, with the estate taking any surplus. [ 4 ] The policy behind s. 38 is that those who are prepared to take the risk to invest in the costs of proceedings should reap the benefits. That principle applies here.

Accordingly, insofar as any MAWSIL investor who is not prepared to contribute to the cost of the application, they will not share in any recovery, should there be recovery. [ 5 ] That takes me to those who argue that they were not able to take part because they had no notice but are now prepared to contribute to the costs. These people say that they never received an email. I requested that counsel provide me with a report of the emails that were sent with the letter requesting contributions as it relates to those who attended before me.

Of the people who made submissions to me and who said that they either did not get the letter by email or could not remember if they received it, counsel’s records show that two emails were bounced back. They are Mr. Schafer and Mr. Manoti. Also counsel acknowledges that Ms. Snelson and Mr. Pelech did not receive the letter. As a result, for all those people who appeared other than Mr. Schafer, Mr. Maroti, Mr. Pelech and Ms. Snelson, they did get the letter and either ignored it or chose not to take the risk. They now want a second chance to participate.

Giving them a second chance prejudices those who were initially prepared to take the risk, because it will dilute the recovery of those who were prepared to take the risk. [ 6 ] The application is granted except for Schafer, Maroti, Pelech and Snelson. In arriving at this decision, I acknowledge that it is an imperfect result. However, it is intended to balance the rights of the various investors with the practicalities of attempting recovery of any funds.. [ 7 ] I will leave it to counsel and Schafer, Maroti, Pelech and Snelson to sort out the details of their contribution to the litigation fund.

Dated at the City of Calgary, Alberta this 9th day of July, 2012. C.A. Kent J.C.Q.B.A. Appearances: Dean Hutchison of MacPherson Leslie & Tyerman LLP for the Applicant