Dingwall v. Foster, 2012 ABQB 476

Court of Queen ’ s Bench of Alberta Citation: Dingwall v. Foster, 2012 ABQB 476 Date: 20120724 Docket: 0803 04671 Registry: Edmonton Between: Terry Dingwall, Hyunik Yang and Hyunsuk Chai Plaintiffs - and - Ronald Foster, Patrick Cochrane and Frederick Dornan Defendants Editorial Notice: On behalf of the Government of Alberta personal data identifiers have been removed from this unofficial electronic version of the judgment. _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice Brian R. Burrows _______________________________________________________ [ 1 ] Two of the Plaintiffs, Terry Dingwall and Hyunsuk Chai, seek

summary judgment in their claim to enforce, in Alberta, a judgment granted to them by the Supreme Court of the State of Nevada, U.S.A. against the Defendants Ronald Foster, Patrick Cochrane and Frederick Dornan. The judgment was granted on February 25, 2010 on appeal from the District Court Clark County, Nevada. The portion of the judgment sought to be enforced in Alberta is for a total of $US 3,660,084.74 (plus pre and post judgment interest) made up as follows:

a) Monetary relief for the Plaintiffs derivatively on behalf of a Nevada corporation, Innovative Energy Solutions Inc. (IESI) composed of: (

i) compensatory damages against Foster, severally, in the amount of $US 324,236.00; (ii) compensatory damages against Cochrane, severally, in the amount of $US 265,373.43; (iii) compensatory damages against Dornan, severally, in the amount of $US 220,815.56; (iv) compensatory damages against Foster, Cochrane and Dornan, jointly and severally, in the amount of $US 2,080,588.41; (

v) pre-judgment interest from and after August 29, 2007 at the rate of 10.25% per annum adjusted periodically in accordance with Nevada legislation until satisfied; and (vi) post-judgment interest at the rate of 10.25% per annum.

b) Monetary relief for Dingwall individually, jointly and severally against Foster, Cochrane and Dornan as follows: (

i) costs and attorney’s fees in the amount of $619,160.79; and (ii) post-judgment interest at the rate of 10.25% per annum.

c) Monetary relief for Chai individually, jointly and severally against Foster, Cochrane and Dornan as follows: (

i) costs and attorney’s fees in the amount of $149,910.55; (ii) pre-judgment interest from and after August 29, 2007 at the rate of 10.25% per annum adjusted periodically in accordance with Nevada legislation until satisfied; and (iii) post-judgment interest at the rate of 10.25% per annum. [ 2 ] The Defendants oppose the application. Further, Mr. Dornan, in a cross-application, seeks

summary judgment dismissing the Plaintiffs ’ claim as it relates to the portion of the Nevada judgment by which Dingwall recovered damages derivatively on behalf of IESI. [ 3 ] The portion of the Nevada judgment described above as being in favour of the Plaintiff Chai was actually in favour of the Plaintiffs Chai and Yang jointly. The material before me, however, indicates that since the commencement of this action Mr. Yang has renounced his entitlement under the Nevada judgment. Mr. Wilson has ceased to act for him in this action and no other counsel has taken his place. Mr.

Yang has not discontinued this action. He is not an applicant before me and did not participate in the application, though an affidavit sworn by him was filed by counsel for Mr. Dornan. I shall refer to that affidavit further later in these reasons. I shall refer to Mr. Dingwall and Mr.

Chai as “ the Plaintiffs ” in this decision. [ 4 ] The factual and procedural history which resulted in the judgment sought to be enforced in Alberta was summarized by Hardesty J. in the majority reasons of the Nevada Supreme Court: The underlying suit arose in August 2005 when Innovative Energy Solutions, Inc. (IESI), a full-service energy corporation, filed a suit against, among others, Dingwall, a director of IESI. In its complaint, IESI alleged that Dingwall breached his corporate fiduciary duties, usurped corporate opportunities, and engaged in civil conspiracy and conversion.

On behalf of IESI, Dingwall filed an amended answer and third-party complaint, where he asserted claims ¹ against appellants Frederick Dornan, Ronald Foster, and Patrick Cochrane, other directors of IESI, in their individual capacities.

[ ¹ Specifically, Dingwall alleged claims for breach of contract, breach of the covenant of good faith and fair dealing, breach of fiduciary duties, conspiracy, intentional and negligent misrepresentation, abuse of process, intentional interference with contractual relations and prospective economic advantage, unjust enrichment, receivership, indemnity, contribution, accounting, and conversion.] After Dingwall filed his third-party complaint, IESI shareholders Yang and Chai moved to intervene in the action.

The district court granted the motion to intervene, and Yang and Chai asserted derivative claims on behalf of IESI and individual claims against Dornan, Foster, and Cochrane. Subsequently, Yang and Chai moved the district court for an appointment of a receiver alleging that IESI was mismanaging the corporate assets; however, the parties later agreed that a special master should be appointed to examine the records of IESI. During discovery in November 2006, the parties agreed that depositions of Dornan, Foster, and Cochrane would occur on specified dates in January 2007.

Dingwall’s counsel agreed to fly to Canada to depose Dornan and Cochrane in their hometown and to depose Foster in Las Vegas, Nevada. In December 2006, counsel for Dornan, Foster, and Cochrane moved the court to withdraw due to unpaid legal fees. While awaiting the court’s decision on the motion, counsel for Dornan, Foster, and Cochrane notified Dingwall that the depositions could not proceed as scheduled because IESI’s counsel was also withdrawing and IESI needed to retain new corporate counsel.

In response, Dingwall expressed his intent to proceed with the depositions, maintaining that withdrawal of IESI’s counsel had no affect on the depositions, and travel had already been arranged and expenses incurred. After counsel for Dornan and Cochrane again informed Dingwall that neither Dornan nor Cochrane would be available for their depositions in Canada, Dingwall stated that he would proceed with the depositions unless the court issued a protective order.

Dingwall also warned Dornan’s and Cochrane’s counsel that if they failed to attend without obtaining a protective order, he would seek severe sanctions, including striking all pleadings and an entry of default. A protective order was not obtained, and neither Dornan nor Cochrane appeared for his deposition. Similarly, Foster also stated that he would not attend his deposition, citing his inability to afford legal counsel to represent him. Additionally, Foster notified Dingwall that IESI had filed for bankruptcy.

In response, Dingwall maintained that Foster’s inability to afford legal representation did not excuse him from attending his scheduled deposition, and absent a protective order, the deposition would continue as scheduled. Dingwall further informed Foster that if Foster failed to attend, he would seek sanctions, including a request to strike all pleadings. Foster replied, stating that he would nevertheless not attend his deposition because of health concerns. Foster did not appear for his deposition and no protective order was entered.

During this time, Dornan, Foster, and Cochrane had also failed to provide complete responses to Dingwall’s interrogatories and failed to produce requested documents. The court ultimately granted Dornan, Foster, and Cochrane’s counsel’s motion to withdraw. Dornan, Foster, and Cochrane’s counsel drafted the formal order granting the withdrawal motion, which the court signed on January 12, 2007. In the order, counsel listed a Henderson, Nevada, address where Dornan, Foster, and Cochrane could receive further notice.

Also included in the withdrawal order was the following statement: “IT IS FURTHER ORDERED ADJUDGED AND DECREED, that the deposition of the Counterdefendant/Third Party defendant, Ronald Foster is currently scheduled for January 18, 2007. ( Stay pursuant to Bankruptcy filing ).” 2 (Emphasis added.) [ 2 IESI had filed for

Chapter 7 bankruptcy on January 9, 2007. However, neither Dornan, Foster, nor Cochrane had personally filed for bankruptcy at any time during pendency of the underlying suit.] Thereafter, due to Dornan’s, Foster’s, and Cochrane’s failures to appear for their noticed depositions and other alleged discovery violations, Dingwall filed his first motion seeking to strike the pleadings and enter default. Shareholders Yang and Chai joined. Neither Dornan, Foster, nor Cochrane opposed Dingwall’s motion for sanctions.

Thus, pursuant to Eighth Judicial District Court Rule (EDCR) 2.20(b), as it existed in 2007, 3 the court deemed all allegations in Dingwall’s motion admitted. [ 3 EDCR 2.20 was amended, effective April 23, 2008, and the language of former EDCR 2.20(

b) is now found in EDCR 2.20(c).]

On March 1, 2007, the court entered an order [the “first sanctions order”] issuing lesser sanctions against Dornan, Foster, and Cochrane and did not strike the pleadings at that time. The court clarified any confusion as to the January 12, 2007, withdrawal order, by deleting the “Stay pursuant to Bankruptcy filing” language because the stay did not apply to Dornan, Foster, and Cochrane. The court also compelled Dornan, Foster, and Cochrane to supplement their previously deficient responses to interrogatories and requests for production of documents within 10 days.

In addition, the court ordered Dornan, Foster, and Cochrane to attend depositions within 30 days. The court expressly warned Dornan, Foster, and Cochrane about their discovery tactics, finding, in part, that they had been acting in bad faith. The court warned that Dornan’s, Foster’s, and Cochrane’s failures to comply with the court’s order would result in further sanctions, including an order to strike their pleadings and entry of judgment against them, including an award of fees and costs.

Dingwall faxed and mailed multiple copies of the order to Dornan, Foster, and Cochrane at both the designated Henderson address and at IESI’s address in Canada. Dornan, Foster, and Cochrane failed to comply with the court’s order. Dornan and Cochrane failed to attend their court-mandated depositions, despite the court’s clarification that IESI’s bankruptcy stay did not affect Dornan’s, Foster’s, and Cochrane’s discovery obligations. And although Foster attended his deposition, the court determined that Foster refused to answer many relevant questions.

In addition, Dornan, Foster, and Cochrane did not supplement their responses to interrogatories or requests for production of documents. As a result, Dingwall filed a second motion seeking sanctions, again requesting that the court strike the pleadings against Dingwall and enter default against Dornan, Foster, and Cochrane. Neither Dornan, Foster, nor Cochrane opposed Dingwall’s motion. Consequently, the court held an evidentiary hearing on the factors set forth in Young v. Johnny Ribeiro Building , 106 Nev. 88, 93, 787 P.2d 777 , 780 (1990), to determine whether the sanction was proper.

Following the evidentiary hearing, the court granted Dingwall’s second sanction motion and struck Dornan’s, Foster’s, and Cochrane’s pleadings and entered default against them. The court also announced that it would hold an NRCP 55(b)(2) prove-up hearing to determine the amount of damages. At the subsequent prove-up hearing, the court first heard from Dingwall, who testified that he had worked with a certified public accountant to calculate an estimate of damages. He also presented demonstrative evidence to show how his asserted causes of action related to the damages sought.

Second, the court heard from Yang, who testified that his derivative claims were based on the testimony and evidence presented by Dingwall. Thereafter, the court entered a judgment detailing its findings of fact, conclusions of law, and award of damages. The court ultimately awarded Dingwall, derivatively on behalf of IESI, compensatory damages totaling approximately $2,890,000, and punitive damages for approximately $8,673,000. In response to Yang and Chai’s request to reinstate their IESI stock, the district court declared that Yang and Chai were entitled to their vested shares.

The court also awarded Yang and Chai compensatory damages totaling $15,000,000, and punitive damages totaling $45,000,000. The court further awarded Dingwall, Yang, and Chai attorney fees and compelled Dornan, Foster, and Cochrane to pay all special-master fees. Dornan, Foster, and Cochrane appeal. 4 [ 4 Although the district court awarded punitive damages to Dingwall, Yang, and Chai, all three parties withdrew their claims for punitive damages during oral argument. Therefore, we do not address the propriety of the punitive damages award.] [ 5 ] I note an error in this

summary of the procedural history. Hardesty J. stated in the third last paragraph quoted above that, “ Neither Dornan, Foster, nor Cochrane opposed Dingwall ’ s motion ” . This was a reference to Dingwall ’ s second motion seeking sanctions. In fact shortly before the motion Dornan, Foster and Cochrane re-retained the counsel who had withdrawn in January 2007.

That counsel filed a pleading entitled “ Opposition to Dingwall ’ s Motion to Strike Pleadings; for Entry of Default and for Judgment Against Foster, Cochrane and Dornan. ” That counsel represented Foster, Cochrane and Dornan at the evidentiary hearing mentioned by Hardesty J. in the same paragraph. The purpose of the evidentiary hearing was to determine the degree of wilfulness in Foster ’ s, Cochrane ’ s and Dornan ’ s failure to obey the court order.

Foster, Cochrane and Dornan each testified at the evidentiary hearing. [ 6 ] The issues before the Nevada Supreme Court were first whether the District Court ’ s order to strike the pleadings filed by Foster, Cochrane and Dornan was a proper discovery sanction and second whether Dingwall, Yang and Chai had satisfied the burden of proof that rested upon them in the “ prove-up ” hearing to establish damages following the entry of default. [ 7 ] Hardesty J. writing for himself and three other judges including the Chief Justice, invoked a “ somewhat heightened standard of review ” than might otherwise apply to a review of a district court ’ s imposition of a discovery sanction, since the sanction imposed was the striking of pleadings resulting in judgment by default.

He said, “ Under this somewhat heightened standard, the district court abuses its discretion if the sanctions are not just and do not relate to the claims at issue in the discovery order that was violated. ”

[ 8 ] After reference to authorities where discovery sanctions of similar significance had been imposed in similar situations, Hardesty J. said: After reviewing the record and the court ’ s order, we conclude that the court ’ s decision to strike the defendants ’ pleadings and enter default was just, related to the claims at issue in the violated discovery order, and supported by a careful written analysis of the pertinent factors.

Additionally, we conclude that the appellants ’ continued discovery abuses and failure to comply with the district court ’ s first sanction order evidences their willful and recalcitrant disregard of the judicial process, which presumably prejudiced Dingwall, Yang and Chai. . . . In light of appellants ’ repeated and continued abuses, the policy of adjudicating cases on the merits would not have been furthered in this case, and the ultimate sanctions were necessary to demonstrate to future litigants that they are not free to act with wayward disregard of a court ’ s orders.

Moreover, we conclude that Dornan ’ s, Foster ’ s, and Cochrane ’ s failure to oppose Dingwall ’ s second motion to strike constitutes an admission that the motion was meritorious. . . . Accordingly, we affirm the district court ’ s decision to strike Dornan ’ s, Foster ’ s, and Cochrane ’ s pleadings and enter default against them. [ 9 ] I note that the conclusion stated in the last sentence of the second last quoted paragraph appears to be founded on the error I previously noted. Dornan, Foster and Cochrane did oppose Dingwall ’ s second motion.

The conclusion that they should be taken as having admitted that the motion was meritorious appears to me to be in error. [ 10 ] The minority of the Nevada State Supreme Court, consisting of three judges, dissented from the conclusion of the majority quoted above. Writing for the dissenting judges, Cherry J. said: As to Dornan, Foster, and Cochrane, I would hold the following: (1) these parties did not display the requisite degree of willfulness necessary to support the striking of pleadings and ordering of sanctions under Young ;

(2) Dornan suffered from health problems;

(3) Dornan did not act willfully because he reasonably believed that the IESI bankruptcy stayed discovery;

(4) Dornan was unable to comply with Dingwall ’ s discovery requests; (5) the district court failed to properly consider Dornan ’ s justification for noncompliance; (6) the sanction was too severe in light of the totality of the circumstances, and lesser sanctions would have been adequate to remedy the situation; (7) the district court erred when it assumed prejudice to Dingwall; (8) the district court did not consider the feasibility and fairness of alternative, less severe sanctions; and

(9) Dornan, Foster, and Cochrane were denied a trial on the merits concerning liability and also were denied a trial on the merits concerning damages. I also question how the sanctioning of these parties is just, fair, and has a deterrent purpose as to other cases in our state. [ 11 ] As to the second issue on the appeal, all seven judges agreed. They held that under Nevada law where a party is in default the facts alleged in the pleadings of the party not in default will be deemed admitted. The court will consider whether the facts deemed admitted establish a prima facie case for liability.

As to damages, the party seeking default judgment must sufficiently demonstrate by substantial evidence that it is entitled to the damages or relief sought. Hardesty J. said: . . . although allegations in the pleadings are deemed admitted as a result of the entry of default, the admission does not relieve the nonoffending party ’ s obligation to present sufficient evidence to establish a prima facie case, which includes substantial evidence that the damages sought are consistent with the claims for which the non-offending party seeks compensation.

In other words, where the nonoffending party seeks to establish monetary relief, a prima facie case requires the nonoffending party to establish that the offending party ’ s conduct resulted in damages, the amount of which is proven by substantial evidence. . . .

We therefore stress that we do not read Young and Hamlett as entitling a nonoffending party to unlimited or unjustifiable damages simply because default was entered against the offending party. [ 12 ] The appeal court held that in the District Court prove-up hearing Dingwall had provided evidence sufficient to justify the damages which had been awarded to him. It noted that Dornan, Foster and Cochrane had been permitted to participate in the prove-up hearing. Their counsel had cross-examined Dingwall and, although offered the opportunity, had declined to cross-examine Dingwall ’ s certified public accountant.

The Court upheld the District Court ’ s damage award to Dingwall.

[13] The appeal court rejected the argument that the award to Yang and Chai was improper because Yang and Chai had not shownthat they could prevail on the merits at trial.

Hardesty J. said, “Where default is entered as a discovery sanction, the nonoffending partyis not required to prove likelihood of success on the merits; rather, it is only requited to prove a prima facie case to support its claim.” Asto the damage award to Yang and Chai, however, the appeal court held that the District Court had erred “. . . because the award wasduplicative, and even if not duplicative, Yang and Chai did not present substantial evidence to support the amount of damages sought.” The District Court’s award of $15,000,000 damages to Yang and Chai was reversed.

The other aspects of the award to Yang and Chai(other than the punitive damages) were upheld. Standard in Applications for

Summary Judgment [14] The applications before me are for

summary judgment pursuant to Rule 7.3. To succeed in their application the Plaintiffsmust show that there is no defence to their claim or part of it. To succeed in his application Mr. Dornan must show that there is no meritto the portion of the claim which he seeks to have summarily dismissed. The bar on a motion for

summary judgment is high. It must beplain and obvious that the defence or action cannot succeed, is bound to fail, or has no prospect of success. Enforcement of Foreign Judgments [15] In Pro Swing Inc. v. Elta Golf Inc. 2006 SCC 52 , [2006] 2 S.C.R. 612, Deschamps J. summarized the law relatingto the enforcement of a foreign judgment in Canada. 10 The traditional common law rule is clear and simple. In order to be recognizable and enforceable, a foreign judgment must be“(

a) for a debt, or definite sum of money (not being a sum payable in respect of taxes or other charges of a like nature or in respect of a fine or other penalty); and (

b) final and conclusive, but not otherwise” (Dicey and Morris on the Conflict of Laws (13th ed. 2000), vol. 1, Rule 35, at pp. 474-75 (footnotes omitted)). Similarly, J.-G. Castel and J. Walker, in Canadian Conflict of Laws (6th ed. (loose-leaf)), atpara. 14.6, state that “[a] foreign judgment in personam given by a court of competent jurisdiction is enforceable provided that it is finaland conclusive, and for a definite sum of money”. 11 The foreign judgment is evidence of a debt.

All the enforcing court needs is proof that the judgment was rendered by a court ofcompetent jurisdiction and that it is final, and proof of its amount. The enforcing court then lends its judicial assistance to the foreignlitigant by allowing him or her to use its enforcement mechanisms. Professor Vaughan Black explains the consequences of therecognition and enforcement of a money judgment at common law in “Enforcement of Foreign Non-money Judgments: Pro Swing v.Elta” (2006), 42 Can. Bus.

L.J. 81, at p. 89: That is, [the Canadian court] always uses its own rules on such matters as the availability of garnishment, the effect of garnishment onemployment, the effect of a payment into court, the date of conversion from a foreign currency into the local money, and the properprocedures for seizure and attachment. Likewise, even when enforcing a money judgment from [a foreign court, the Canadian court]employs its own exemptions legislation, its own rules for controlling competition among judgment creditors, and its own rules on post-judgment interest.

In short, when a Canadian court recognizes a foreign judgment that says that the defendant must pay the plaintiff asum of money, that foreign judgment is simply evidence of a debt. The recognizing court goes about collection (or limiting collection)of that debt in its own way. [Emphasis in original.] 12 As this Court confirmed in Beals v.

Saldanha, [2003] 3 S.C.R. 416, 2003 SCC 72 (S.C.C.), absent evidence of fraud or of aviolation of natural justice or of public policy, the enforcing court is not interested in the substantive or procedural law of the foreignjurisdiction in which the judgment sought to be enforced domestically was rendered. Is the Nevada Judgment a Punishment for Contempt of Court? [16] The Defendants submit that the Nevada judgment is not recognizable or enforceable in Alberta because it is penal in nature.

They submit that the judgment resulted from the Defendants’ disobedience of the “first sanctions order” issued by the Nevada DistrictCourt on March 1, 2007. Because it found they had wilfully disobeyed the first sanctions order, the court struck their pleadings, and,

after receiving evidence as to the amount of damages, awarded judgment for those damages as a penalty for the wilful disobedience ofthe first sanctions order. Having the character of a penalty for contempt of a court order, the judgment is unenforceable in Alberta. [17] In support of this submission the Defendants cite the Supreme Court of Canada decision in Pro Swing. Pro Swing sued EltaGolf, an Ontario company, in Ohio alleging trade-mark infringements. The parties reached a settlement which became a consent orderof the Ohio court.

Thereafter Pro Swing brought civil contempt proceedings alleging that Elta had breached the consent order. TheOhio court issued a contempt order. Among other things, the contempt order enjoined Elta from the actions which constituted breachesof the consent order, required Elta to deliver up infringing product and other things which it held in breach of the consent order, requiredElta to account for infringing product it had sold, and ordered Elta to pay compensatory damages based on profits earned through salesof infringing product.

Pro Swing sued in Ontario to enforce the Ohio consent order and Ohio contempt order. Elta objected on the basisthat the Ohio orders were not for a fixed monetary amount (they granted non-monetary relief) and on the basis that the contempt orderwas quasi-criminal in nature and therefore excluded from recognition and enforcement in Ontario. [18] The Ontario Superior Court judge held the common law limitation that only final foreign judgments for a fixed monetaryamount could be recognized and enforced required relaxation.

She held that the consent order and the portions of the contempt order thatwere final (which she severed from those that were not) were enforceable in Ontario. She held that the contempt order was not penal. Itwas restitutionary and engaged the private law dispute between the parties. The Ontario Court of Appeal reversed this decision. [19] In the Supreme Court of Canada, Deschamps J., writing for a majority of four members of the court, held that the Ohiocontempt order could not be recognized or enforced in Ontario.

She observed that the Ontario Superior Court judge’s characterization ofthe contempt order as restitutionary and of a private law nature conflicted with the express finding of the Ohio judge that, “[b]ased uponthese violations, Elta Golf is in contempt of this Court”. Deschamps J. cited Vidéotron Ltée v.

Industries Microlec ProduitsÉlectroniques Inc., (SCC), [1992] 2 S.C.R. 1065 where Gonthier J. said: (at para. 12) The penalty for contempt of court, even when it is used to enforce a purely private order, still involves an element of "public law", in asense, because respect for the role and authority of the courts, one of the foundations of the rule of law, is always at issue. [20] In Pro Swing Deschamps J. said: (at paras. 35 and 36) In Canadian law, a contempt order is first and foremost a declaration that a party has acted in defiance of a court order.

Consequently, amotion for contempt of court cannot be reduced to a way to put pressure on a defaulting debtor or a means for an aggrieved party to seekindemnification. . . . The “public law” element of a declaration of contempt and the opprobrium attached to it eclipse the impact of a simple restitutionaryaward.

As a matter of principle, the quasi-criminal nature of the contempt order precludes the enforcement of such orders in Canada. [21] By contrast McLachlin C.J. writing for the dissenting three members of the court said: (paras. 105 - 108) Elta Golf's second defence was that the orders should not be enforced because they were penal in nature. The motions judge rejected thisdefence on the ground that the orders were restitutionary in nature since they engaged a private dispute between the parties and sought tocompensate the wronged party. In my view, this conclusion is unassailable.

I respectfully disagree with Deschamps J.'s characterization of the contempt order as "penal". This Court has long maintained adistinction between civil and criminal contempt orders. In United Nurses of Alberta v. Alberta (Attorney General), (SCC), [1992] 1 S.C.R. 901, it was held at p. 943 that "[t]he purpose of criminal contempt was and is punishment for conduct calculatedto bring the administration of justice by the courts into disrepute.

On the other hand, the purpose of civil contempt is to securecompliance with the process of a tribunal including, but not limited to, the process of a court" (Sopinka J. dissenting, but not on thispoint).

Vidéotron Ltée v. Industries Microlec Produits Électroniques Inc., (SCC), [1992] 2 S.C.R. 1065, which Deschamps J.cites as authority for the "unified approach" to contempt orders, is clearly distinguishable. Vidéotron dealt with the possibility ofimprisonment for contempt under the Quebec Code of Civil Procedure and the guarantees against compulsory self-incrimination underthe Canadian Charter of Rights and Freedoms and the Quebec Charter of Human Rights and Freedoms.

In my view, Vidéotron standsfor the principle that persons cited for contempt are entitled to constitutional procedural protections vis-à-vis state coercion. It does nottransform the private, restitutionary or compensatory aspects of a civil contempt order into public law. Foreign criminal contempt orders are clearly penal and cannot be enforced by Canadian courts. The same should not be said of foreigncivil contempt orders.

When a foreign court issues a contempt order to secure compliance with a private remedy flowing from a privatedispute, the order does not necessarily contain a "penal" aspect that should preclude enforcement by Canadian courts. Some foreignorders for "civil" contempt could nevertheless contain penal elements sufficient to disqualify them from enforcement by Canadiancourts; in other cases, the penal elements could be severable, allowing Canadian courts to enforce the private elements only.

Thedevelopment of these principles can be left for future cases. [22] In my view the Nevada judgment sought to be enforced in this case does not have the character of the Ohio contempt orderwhich was the subject of Pro Swing. The Nevada judgment is not penal or quasi-criminal. [23] The Defendants’ disobedience of the first sanctions order (which required them to complete discovery and cooperate with thedeposition process) resulted in the second sanctions order.

The penalty or sanction that was imposed was that the Defendants’ pleadingswere struck out and default was entered against them. [24] The court also ordered that Dingwall, Yang and Chai could “prove-up” the amount of their damages and they did so. Significantly, the damages that were awarded in the ultimate judgment were entirely unrelated to the breach of the first sanctions order. They were not awarded because the Defendants had engaged in conduct which they had been ordered not to engage in.

They wereawarded in respect of the causes of action on which Dingwall, Yang and Chai had initially sued. [25] To put it another way, the Ohio contempt order in Pro Swing required Elta to account for the proceeds of the activities itundertook in violation of the Ohio consent order. In the consent order the Ohio court ordered it not to sell infringing product. Incontempt of that order, it sold infringing product. The Ohio contempt order, according to the majority of the Supreme Court of Canada,imposed a penalty on Elta for its contemptuous actions.

By contrast, in this case, the judgment sought to be enforced does not awarddamages resulting from the Defendants’ disobedience of the first sanctions order. Rather it awards damages for the losses suffered bythe Plaintiffs as a result of the actions of the Defendants which gave rise to the causes of action which the Plaintiffs initially sued on. [26] As a result of their pleadings having been struck, the Defendants were in the same position they would have been in had theynever invoked or attorned to the jurisdiction of the Nevada courts.

They were placed in the same position as the defendants in Beals v.Saldanha 2003 SCC 72 , [2003] 3 S.C.R. 416 and other cases where parties sued in another jurisdiction did not attorn, anddefault judgment was awarded against them. The reform of the law relating to enforcement of foreign judgments effected by theSupreme Court of Canada in the last 22 years (since Morguard Investments Ltd. v. De Savoye (SCC), [1990] 3 S.C.R.1077) has made it perilous for a party sued in a foreign jurisdiction (which has a real and substantial connection to the cause of action andthe parties) to ignore those foreign proceedings.

If the Defendants’ position in this case were correct, such a party could confound andfrustrate the reformed law by initially defending the foreign suit but then not participating in the discovery process. Eventually hispleadings would be struck by reason of his non-participation and judgment would be entered against him.

But, if the present Defendants’position were correct, that judgment would not be recognizable and enforceable in the defaulting parties’ home jurisdiction. [27] In my view a judgment resulting from failure to cooperate with the discovery process is practically indistinguishable from ajudgment resulting from default of appearance.

If the other requirements for recognition and enforcement of a foreign judgment aresatisfied, recognizing and enforcing a judgment awarded in default of appearance but not a judgment awarded in default of cooperationwith the discovery process would create an unacceptable paradox. [28] The Nevada judgment sought to be enforced is final, for a fixed amount, and has no penal or quasi-criminal character. In myview it is plain and obvious that the Defendants’ argument that the Nevada judgment is penal cannot succeed. Real and Substantial Connection

[ 29 ] A foreign judgment is enforceable in Alberta where two conditions are met: 1. There was a real and substantial connection between the foreign jurisdiction and the action or the parties, and 2. No defence such as breach of natural justice, fraud or breach of public policy (the list is not exhaustive) can be raised against the foreign judgment. [ 30 ] The Defendants concede the first condition. There is no doubt that there was a real and substantial connection between the State of Nevada and the cause of actions on which judgment was granted and the parties.

The company for which Dingwall sought derivative damages, IESI, was a Nevada corporation. The judgment was granted in counterclaims brought by Dingwall, Yang and Chai in an action commenced by IESI, on the initiative of the Defendants, against Dingwall and others in Nevada. The Defendants had chosen the jurisdiction. They acknowledged the necessary real and substantial connection when they did so. Breach of Natural Justice [ 31 ] The Defendants allege that the Nevada judgment was obtained in breach of natural justice.

They say that they were not properly served with notice of the application which resulted in the first sanctions order or with notice of the first sanctions order itself. [ 32 ] The Plaintiffs applied for the first sanctions order because the Defendants had not appeared to be deposed as required. At the time the depositions were organized the Defendants had been represented by counsel, Mr. Marc Cook. Mr. Dingwall ’ s counsel, Mr. Waite, had served the appropriate notices requiring the individual Defendants to appear to be deposed at a specified time and place. Mr. Dornan and Mr.

Cochrane were required to appear in Edmonton at the court reporter ’ s office on January 9 and 10, 2007 respectively. Mr. Foster was required to appear in Las Vegas on January 17. He was also required to appear on January 18 to be deposed in a different action. The “ notices ” for these depositions were served on Mr. Cook in late November 2006. [ 33 ] On December 12, 2006 Mr. Cook filed a Motion to Withdraw as Counsel for Foster, Cochrane and Dornan. An affidavit sworn by Mr. Cook on December 6, 2006 was part of the motion. In it Mr.

Cook swore that he had “ . . . discussed the matter with the Defendant and the Defendant understands the need for said withdrawal and has received a copy of the Motion. ” He also swore that each of the Defendants could be served with notice of further proceedings at 565 College Drive, Suite C, PMB #115, Henderson, Nevada, 89015. That their lawyer was giving this address as their address for future service was clear from a document their lawyer swore they had received. [ 34 ] The hearing of the motion to withdraw was set for early January 2007.

Before the hearing of that motion there was considerable correspondence between Mr. Cook and Mr. Waite on the subject of the depositions planned for January 9, 10, 17 and, in another action, January 18. Mr. Waite wrote to Mr. Cook on December 20 to ensure that Mr. Cook ’ s clients, the Defendants, were aware that they would have to appear for the depositions notwithstanding Mr. Cook ’ s anticipated withdrawal. Mr. Cook replied on December 22 advising that he had advised his clients that because of the coincident withdrawal of counsel for IESI, the depositions could not proceed. Mr. Waite replied to Mr.

Cook the same day advising that withdrawal of counsel for IESI was irrelevant – the depositions would proceed as arranged. He said: Please advise Foster, Cochrane and Dornan that the depositions will go forward as planned and that I will seek appropriate relief (which may include a motion to strike their reply to counterclaim and to strike their own counterclaims) if they fail to appear. [ 35 ] On January 2, 2007 Mr. Cook wrote to Mr. Waite, Mr. Dingwall ’ s counsel, and Mr. Kohl, Mr. Yang ’ s and Mr. Chai ’ s counsel, advising that Mr. Dornan would not be available to be deposed until after March 5 and that Mr.

Cochrane would also not be available. No reason was given. Clearly Mr. Cook was still in communication with his clients. Mr. Waite replied and emphatically advised that he intended to proceed with the depositions as planned unless Mr. Dornan and Mr. Cochrane obtained a protective order. I understand that to be an order of the court providing that the depositions would not proceed though properly noticed without consequence to the parties applying for the order. Again Mr. Waite advised that:

Failure by them to appear will result in a motion for sanctions where I will ask the court to impose severe sanctions, including to strike all pleadings filed by them and to enter default (followed by default judgment) as it relates to Mr. Dingwall ’ s claims asserted against them, and to award attorneys fees and costs. I trust you will forward this message to Mssrs. Dornan and Cochrane and advise them of the possible consequences of their failure to appear. [ 36 ] Mr. Cook replied on January 3, 2007. He suggested there was insufficient time for his clients to apply for a protective order.

He suggested referring the matter to the Discovery Commissioner. He sent a copy of this letter to each of his clients. Mr. Waite replied the same day. He advised that reference to the Discovery Commissioner was not possible and indicated why that was the case. He repeated his advice that he intended to proceed with the depositions and would travel to Edmonton, as arranged, for that purpose. [ 37 ] On January 5, 2007 Mr. Cook ’ s withdrawal application was granted. The formal order was filed January 18, 2007. It was prepared by Mr. Cook for the Court ’ s signature.

It provided that the last known address of each of the Defendants was the address that had been set out in Mr. Cook ’ s affidavit – 565 College Drive, Suite C, PMB #115, Henderson, Nevada, 89015. [ 38 ] On January 9, 2007 a Voluntary Petition in bankruptcy was filed on IESI. In the petition IESI ’ s address was stated to be the same Henderson Nevada address previously mentioned. Its business address was stated to be 120, 2181 Premier Way, Sherwood Park, Alberta, Canada. Both Mr. Foster and Mr. Cochrane were listed as creditors of IESI. Mr. Foster ’ s address was listed as the same Henderson Nevada address. Mr.

Cochrane ’ s address was listed as [...] 52[...] Hwy 21, Sherwood Park, Alberta. Mr. Dornan was not mentioned. It appears that Mr. Foster signed the document as an officer of the bankrupt company. [ 39 ] Mr. Waite travelled to Edmonton for the depositions. Neither Mr. Dornan nor Mr. Cochrane appeared as required. Mr. Waite called Mr. Dornan from the court reporter ’ s office at the time he was required to appear. He was advised that Mr. Dornan had been in Edmonton earlier that day. Eventually he connected with Mr.

Dornan himself who acknowledged he was in Alberta and confirmed that he would not be appearing for the deposition. [ 40 ] On January 12, 2007 Mr. Foster faxed Mr. Waite from the IESI office in Sherwood Park and advised that he would not appear to be deposed on January 17, 2007 because he could not afford legal representation. Mr. Waite responded the same day by fax to the fax number from which Mr. Foster ’ s letter had been sent. The street address on Mr. Foster ’ s letter was shown as 120, 2181 Premier Way, Sherwood Park, Alberta. The letter was sent by fax from the IESI office.

The fax number appears in the header. [ 41 ] Mr. Waite replied that the fact that Mr. Foster did not have counsel did not excuse him from attending as required to be deposed unless Mr. Foster obtained a protective order. Again he advised as to the consequences of failure to appear. He said: Indeed, failing to appear will result in a motion where I will ask the court to impose sanctions against you (and Mssrs.

Cochrane and Dornan who have already failed to appear for the depositions), including monetary sanctions and a request that the court strike your reply to Terry Dingwall ’ s claims and to strike your claims against Terry Dingwall. Thus, I urge you to give careful reconsideration to your stated intentions of not showing for your deposition. The reply was sent by fax to the fax number from which Mr. Foster had sent his letter to Mr. Waite. [ 42 ] Mr. Foster had also advised Mr. Waite that on January 9, 2007 IESI had filed for bankruptcy. In his reply Mr. Waite advised Mr.

Foster that the fact of IESI being in bankruptcy made no difference to Mr. Foster ’ s obligation to appear to be deposed as required. He specifically advised: Further, because there are claims asserted by and against you (and Mssrs. Cochrane and Dornan) that do not directly involve iESi as a party, the automatic stay afforded to iESi does not apply to your deposition. Again, there could be serious consequences if you fail to appear in my office at 9:00 a.m. (Las Vegas time) on Wednesday, January 17, 2007. [ 43 ] Mr. Foster replied to Mr.

Waite on January 15, 2007 advising that he would not attend on January 17 for medical reasons.

He also indicated that he felt Mr. Waite was taking advantage of his financial position and unrepresented status. Mr. Foster ’ s letterhead showed the fax number used in the preceding correspondence. The letter was sent from that fax number. [ 44 ] Mr. Foster did not appear to be deposed on January 17, 2007. [ 45 ] On January 25, 2007, as he had advised on numerous occasions he would, Mr. Waite filed a motion for sanctions. The primary relief sought was the striking of the Defendants ’ pleadings and entry of default. The alternative relief sought was directions for compliance with outstanding discovery processes.

The hearing date for the motion was set for March 14, 2007. The motion included a Certificate of Mailing stating that on January 24, 2007 the motion had been served on each of the Defendants (among others) by mailing it to each of them at the Henderson Nevada address which had been stated in the withdrawal order that their former counsel, Mr. Cook, had prepared at the time he withdrew, and at the IESI office at the address in Sherwood Park from which Mr. Foster contacted Mr. Waite on January 12 and 15, 2007. [ 46 ] None of the Defendants filed any response to the motion.

On February 26, the Court noted that no opposition had been filed and granted the alternative relief Mr. Waite had sought. Mr. Waite prepared the formal order. It imposed deadlines for the Defendants to comply with their outstanding discovery obligations. This was the March 1, 2007 “ first sanctions order ” . [ 47 ] Evidence concerning service of the first sanctions order was placed before the Nevada Court in the context of the motion for the second sanctions order. The order was served in the same manner as the Motion – on each of the Defendants at the address which their former lawyer, Mr.

Cook, had stated in his affidavit in support of his motion to withdraw and in the order in that motion and at the IESI office in Sherwood Park by fax and mail. [ 48 ] Each of the Defendants testified at the hearing of the second sanctions motion on June 22, 2007. By that time they were again represented by Mr. Cook. Each of them was examined and cross-examined concerning their receipt of the first sanctions order. Mr. Foster acknowledged that he had received it by fax at the Sherwood Park office of IESI. The fax was sent on March 1, 2007. He also received it by mail at the same address. Mr.

Cochrane similarly acknowledged receipt of the document in March though he could not recall when in March. He acknowledged that he would receive mail sent to the Premier Way, Sherwood Park address. Mr. Dornan acknowledged receipt of the first sanctions order in April - approximately April 12, 2007. He had been out of town until the end of February 2007. He was aware that there was mail for him to review at the IESI office but did not go to do so until April 12. He thinks Mr. Foster had told him prior to April 12 that he had better get over to the office to look at the mail.

On reviewing the order he recognized that he would need to retain counsel to advise him. He did not do so until the end of May 2007. When asked by the Nevada judge why it took so long, he said, “ I don ’ t have a good answer for that. ” [ 49 ] The question of whether the Defendants had appropriate notice of the obligations imposed on them by the first sanctions order was before the Nevada court in the hearing that lead to the second sanctions order. The transcript, which is before me, demonstrates that the judge herself asked the Defendants questions concerning their receipt of the first sanctions order.

Their explanation for not complying with it was not that they did not know about it, it was that they thought they did not have to comply because they understood the IESI bankruptcy filing resulted in a stay of the action in which the first sanctions order was granted. It is apparent that the judge did not accept their evidence that they had misunderstood the effect of the bankruptcy filing. [ 50 ] The materials filed in this application establish that there was no breach of natural justice in the process that resulted in the judgment sought to be enforced.

The Defendants were properly served with notices requiring them to appear to be deposed. When they, through their counsel, tried to have the deposition arrangements cancelled, they were clearly advised that the Plaintiffs would not agree to the cancellation, that unless they obtained a protective order, their obligation to appear to be deposed would remain in place, and that if they did not appear, application for sanctions would be made.

When they did not appear, notice of the motion for sanctions was served at the address their own counsel had advised was to be used for service (and which one of them had given as his address is an unrelated document – the bankruptcy petition) and at a Canadian address where they acknowledge materials would reach them. When they did not appear to oppose the motion, the Court ordered sanctions which allowed them reasonable time from the date the order was served on them to remedy their defaults.

That order was served on each of them at the address which, to their knowledge, their withdrawing counsel had given as their address for service and at the Canadian address. Each of them acknowledged actual receipt of the order either in March or by mid April. Assuming service on the dates they acknowledge receipt, they made no effort to comply with the order within the time limits it set or at all – despite the warning it contained as to the consequences of not complying with it.

Neither did they seek any relief from the obligations or deadlines imposed by the order until they responded, several weeks later, to the Plaintiffs ’ motion for the second sanctions order. [ 51 ] In my view there is simply no doubt that the rules of natural justice regarding prior notice of court proceedings and orders

was not breached in these circumstances. It is plain and obvious that the defence of breach of natural justice raised by the Defendants cannot succeed. Public Policy [ 52 ] The Defendants submit that essentially the same facts give rise to a public policy defence.

In particular they argue that it was sharp practice for the Plaintiffs ’ Nevada counsel to serve notice of the first motion for sanctions and the first sanctions order on the address for service given by the Defendants ’ withdrawing counsel as the address at which they could be served, given that the Defendants ’ Nevada counsel had used that address in error.

To enforce a foreign judgment which resulted from counsel taking advantage of a slip by opposing counsel would be contrary to public policy, they argue. [ 53 ] The Defendants do not refer to any evidence in the material before me that the Plaintiffs ’ Nevada counsel knew or ought to have known that the Henderson Nevada address had been provided in error. Even if that were the case, however, it is clear that the Defendants had actual notice of the sanctions order.

They sought no relief from the obligations it imposed on the basis that they had no notice of the application in which it had been granted or on any other basis. They simply ignored the order and the obligations it imposed until they were served with notice of the application for the second sanctions order. [ 54 ] The Nevada judgment resulted from these defaults on the part of the Defendants, not from Plaintiffs ’ counsel taking advantage of a slip made by the Defendants ’ counsel as to the address at which the Defendants could be served. The public policy defence the Defendants now assert cannot succeed.

Reliance on Hearsay [ 55 ] The Defendants presented a third variation on their theme that service of the Defendants at the Henderson Nevada address was deficient. They noted that the Plaintiffs state in their affidavits in support of this application that they believe the motion for the first sanctions order and the order itself were legally served on the Defendants at the Henderson Nevada address. In cross-examination Mr. Dingwall acknowledged that he had no personal knowledge as to whether Mr. Dornan had been “ legally served ” . His understanding that Mr.

Dingwall was legally served, the Defendants submit, came from his Nevada counsel and is therefore hearsay and not admissible on an application of this nature. No affidavit from Mr. Waite, Mr. Dingwall ’ s Nevada counsel, was filed. [ 56 ] I reject this submission. As I have previously indicated, in my view whether or not service of the Defendants at the Henderson Nevada address was legally effective is ultimately of no significance.

This is because it is clear from the transcript of their testimony before the Nevada Court, that the Defendants had actual notice of the first sanctions order yet did nothing to either obtain relief from it or comply with it until several weeks had passed after they each had notice of it and then only in response to the Plaintiffs ’ application for the second sanctions order. Fraud: Knowledge that there were other addresses at which service might be effected [ 57 ] The Defendants submit that the Plaintiffs knew of an address for Mr.

Dornan other than the addresses to which the first sanctions order was sent, in particular his home address. The materials indicate that the order was sent to Messrs. Foster and Cochrane at their residential address as well as the Henderson Nevada address and the IESI office address in Sherwood Park. [ 58 ] In my view given that the materials establish that Mr. Dornan had notice of the order in any event, it is irrelevant that there may be another address at which it could have been sent to him.

It is plain and obvious that the Nevada Court was not fraudulently lead to believe that notice had been given when it had not been. Fraud: Conspiracy to obstruct justice and abuse the process of the Nevada Courts

[ 59 ] In the Statement of Defence he filed in this action, Mr. Dornan pleaded: (para. 4) . . . the Defendant states that the Plaintiffs, and each of them, wrongfully and maliciously conspired and combined amongst themselves to defraud, obstruct justice or, alternatively, engage in an abuse of process with respect to the Nevada proceedings. The District Court Judgment and the Supreme Court Judgment would not have been obtained absent such fraud, obstruction of justice or abuse of process and, as such, are unenforceable in this jurisdiction. Statements of Defence filed by both Mr. Cochrane and Mr.

Foster contain the same pleading. [ 60 ] The evidence offered in support of the Defendants ’ submission that this defence raises a material issue requiring trial, is contained in an affidavit sworn by the Plaintiff Hyunik Yang, who, as previously noted, is not an applicant in this application. Mr. Yang swore the affidavit on July 10, 2009 in the Nevada proceedings, almost two years after the default judgment was granted by the Nevada District Court and the Notice of Appeal to the Nevada Supreme Court was filed, though before the appeal was concluded. [ 61 ] In the affidavit Mr.

Yang stated that “ out of good conscience ” he withdrew from the Nevada litigation and “ was willing to voluntarily dismiss the appeal ” and the underlying judgment. (I suspect that as he was a respondent in the appeal he intended to say that he was willing to concede the appeal.) Further, he said: I, as a respondent in the Action, hereby state that while I was still an employee of iESi, I was approached by Mr. Dingwall, who was a former officer and director of the company and fired by the directors of the company. Mr.

Dingwall had a well planned plot and scheme to create enough problems for the Appellant ’ s ( sic ), including filing a series of lawsuit and numerous trivial allegations against the Appellants. Though I didn ’ t feel comfortable with that at all, I could not change the direction of that strategy implemented by Mr. Dingwall. At first I was hesitating as much as I could, but after relentless requests from Mr. Dingwall, I participated in the lawsuits and the plot against iESi and its directors. During the whole time, Mr. Dingwall helped the Nevada lawyer who represented me in this case.

I also state that I have suffered no significant financial loss in this case. [ 62 ] Mr. Yang ’ s affidavit was filed in Nevada to support an application by the Defendants to the District Court for relief from the judgment the District Court had granted. However since the affidavit was filed long after the Defendants had filed their appeal from the District Court judgment to the Nevada Supreme Court, by the Nevada process, the District Court had no authority to grant the order sought in the application.

Rather, in the context of an application in the District Court brought by the Defendants (and known as a “ Honeycutt motion ” ), the District Court certified that if it had authority to entertain the Defendants ’ application for relief from the judgment, it would do so.

On the strength of that certification the Defendants applied to the Supreme Court, to have the matter remanded to the District Court so that it could consider the relief application. [ 63 ] On the same day as the Supreme Court issued its decision in the appeal proper, it also issued its decision dismissing the Defendants ’ motion for an order remanding the case to the District Court without determining the appeal. The Supreme Court unanimously held that the time limit established by the Nevada rules of procedure for filing the “ new evidence ” offered in Mr.

Yang ’ s affidavit, six months, had long since expired and that the filing of an appeal had not stopped that time running. [ 64 ] The Defendants referred to Mr. Yang ’ s affidavit in their Statements of Defence in this action. Mr. Yang ’ s allegations are the only particulars of the alleged fraud that they have plead. [ 65 ] On June 30, 2011, Mr. Yang swore an affidavit in this action. His July 10, 2009 affidavit filed in the Nevada proceedings is exhibited.

He swore: I hereby reaffirm the contents of my Nevada Affidavit attached as Exhibit “ A ” hereto, and confirm that my evidence as given in the attached Nevada Affidavit remains true and accurate today to the best of my knowledge. There is no indication on the filed document as to which party filed it. However, at the hearing of this application I was advised that it had been filed by Mr. Dornan ’ s counsel.

[66] After it was filed, counsel for Mr. Dingwall sought to cross-examine Mr. Yang. There appears to have been somedisagreement amongst counsel as to the capacity in which Mr. Yang’s affidavit was filed. Mr. Yang continues to be a Plaintiff though heis now unrepresented. He has not discontinued his claim. He indicates in his affidavit that he has provided it “for the information of theAlberta Court”. Counsel for Mr. Dornan did not acknowledge any obligation to produce Mr. Yang for cross-examination, though, theydid point out that counsel for Mr.

Dingwall would probably be in a conflict position if he cross-examined Mr. Yang, having previouslyacted for him. Independent counsel was retained to conduct the cross-examination. Counsel for the Defendants facilitated efforts tohave Mr. Yang come to Edmonton from his home in Korea to be cross-examined. Mr. Yang did not come. He advised he was ill. Laterhe advised that he had received threats from a party to the Nevada litigation who is not a party to this action and was afraid to come to becross-examined. These applications were adjourned by consent to facilitate Mr. Yang’s attendance to be cross-examined.

However henever attended. The Plaintiffs proceeded with the application without cross-examining Mr.

Yang. [67] Apparently, in connection with a second consent adjournment of these applications in November 2011, counsel for Dingwalland Chai agreed not to argue that the Court should disregard or give Yang’s Alberta affidavit little weight on the basis of any inability tocross-examine. [68] The Plaintiffs submit that the Nevada Court determined that the Yang affidavit should have no effect on the validity of theNevada judgment and that, on the basis of res judicata, the affidavit can have no significance in these proceedings.

The Defendantssubmit that the Nevada Court did not consider the merits of the Yang affidavit. It excluded the Yang affidavit from considerationbecause, by the Nevada rules, it was filed too late. I agree with the Defendant’s submission in this regard. There having been noadjudication of its merits, the Yang affidavit is appropriately considered in this application. [69] However, in my view the information in the Yang affidavit falls far short of what is required to defeat the Plaintiffs’summary judgment application. [70] Mr. Yang first provided the information in his affidavit three years ago.

The information he provided is extremely vague andimprecise. He refers to Mr. Dingwall having a “well planned plot and scheme to create enough problems for [the Defendants], includingfiling a series of lawsuit and numerous trivial allegations against [the Defendants].” Mr. Yang says he was uncomfortable doing so buthe participated because Mr. Dingwall was relentless in his requests that he do so. He says he suffered no personal financial loss and as amatter of conscience withdrew from the Nevada proceedings. [71] There is no express allegation of fraud. There is no statement that anything Mr.

Dingwall planned was dishonest or withoutmerit. The elements of the “plot and scheme” to trouble the Defendants are not identified with any precision. There is no statement thatthe planned lawsuits were without merit. None of the “numerous trivial allegations” is identified. There is no detail as to the requeststhat Mr. Yang considered relentless. There is no explanation as to why he considered himself obliged to comply with them. There is norecanting (or even mention) of the sworn testimony Mr.

Yang gave in the “prove-up” hearing in the Nevada District Court two yearsearlier (July 17, 2007) and in which he did not give any hint of discomfort with the truthfulness of his testimony. [72] Addressing on Mr. Yang’s affidavit, counsel for Mr. Dornan at the hearing of these applications said: So, My Lord, I don’t think anybody can tell exactly what this means, but it certainly gives rise to enough questions that it justifies somesignificant investigation, because you cannot eliminate the possibility that this was a fraud. [73] In Canada (Attorney General) v.

Lameman 2008 SCC 14 , [2008] 1 S.C.R. 372 the Supreme Court of Canadaconsidered a defence motion for

summary judgment dismissing an action. The Court made the following observation about the qualityof evidence that is required to defeat an application for

summary judgment: (para. 19) We add this. In the Court of Appeal and here, the case for the plaintiffs was put forward, not only on the basis of evidence actuallyadduced on the

summary judgment motion, but on suggestions of evidence that might be adduced, or amendments that might be made, ifthe matter were to go to trial. A

summary judgment motion cannot be defeated by vague references to what may be adduced in thefuture, if the matter is allowed to proceed. To accept that proposition would be to undermine the rationale for the rule. A motion forsummary judgment must be judged on the basis of the pleadings and materials actually before the judge, not on suppositions about what

might be pleaded or proved in the future. . . . [74] The Defendants invite me to speculate that Mr. Yang, if he were to testify as to the details behind the vague statements in hisaffidavit, would reveal that the causes of action which resulted in the Nevada judgment were fraudulent and without merit. Though threeyears have passed since Mr. Yang first swore his affidavit, the Defendants have not obtained (or at least have not provided) evidencefrom Mr.

Yang to eliminate the need for such speculation. [75] Also in Lameman the Supreme Court observed: (para. 11) Each side must “put its best foot forward” with respect to the existence or non-existence of material issues to be tried. In my view, so far as the suggested defence of fraud is concerned, the Defendants have not put their best foot forward. Judgment in Derivative Claim [76] The Defendants oppose the Plaintiffs’ application, and Mr. Dornan cross-applies, for

summary judgment dismissing theaction on the basis that the bulk of the judgment sought to be enforced was recovered by the Plaintiffs in a derivative action brought forthe benefit of the corporation IESI.

The Defendants submit that judgment obtained in a derivative action cannot be enforced by therepresentative Plaintiff who instituted the proceedings to enforce the company’s rights. [77] In this context the Defendants first observe that it is a threshold requirement to the recognition and enforcement of a foreignjudgment that the judgment be a personal judgment against the Defendants for the full amount of a fixed and final sum. [78] The Defendants cite the decision of the Alberta Court of Appeal in Magellan Morada Investments Ltd. v.

Miller 2009 ABCA124 , [2009] 8 W.W.R. 506 where Fraser C.J.A. wrote: (para. 25) However, quite apart from the two commonly stated requirements for enforcement of a foreign in personam money judgment, theenforcing court must not overlook the fact that there remains an underlying threshold requirement. The foreign judgment must not onlybe for a fixed sum and final; it must also be a personal judgment against the named defendant for the full amount of that fixed and finalsum.

Were a defendant personally liable in the foreign jurisdiction for a lesser amount than that stated in the foreign judgment, theenforcing court would have no way of determining the extent of the defendant’s personal financial liability. Hence the need for precisionin defining the extent of the obligations to be enforced by the enforcing court. [79] In Magellan Morada judgment had been recovered in Arizona against two business partners and the wife of one of them.

The wife had been named as a defendant in the action although she had no participation in the breaches of fiduciary duty and contractwhich the plaintiff in the action alleged against the two business partners. She was named because of the requirements of Arizona law inrelation to the community property she and her husband, one of the business partners, owned. It was not clear that the full amount of theArizona judgment was enforceable against her.

The Court of Appeal permitted the judgment to be enforced only as against the twobusiness partners and referred the case back to the Queen’s Bench to determine whether the necessary precondition to the enforcement ofthe judgment against the wife had been met. [80] In the case before me, the Nevada judgment as against each of the three Defendants is personal, for a fixed and final amount,and fully enforceable. [81] For the sake of certainty, and because the Defendants appear at times in their written submissions to suggest that the Nevadajudgment is not “personal” because it is derivative and for the benefit of the IESI, I observe that the “personal” characteristic which ajudgment must have is a reference to the defendant not the plaintiff.

The judgment must be enforceable against the defendantpersonally. The Nevada judgment is.

[ 82 ] The Defendants next submit that the Plaintiffs cannot enforce the judgment because it was recovered for the benefit of the company, IESI. That the bulk of the judgment sought to be enforced was recovered by the Plaintiffs for the benefit of IESI is not disputed. [ 83 ] Neither counsel has provided authority dealing with the question of whether a plaintiff who recovers a judgment in derivative proceedings taken in his own name can proceed to enforce the judgment, and I have been unable to find any authority on the point myself.

Of course the situation would not arise in a derivative action brought in this jurisdiction since the Alberta Business Corporations Act , R.S.A. 2000, c. B-9, s. 240 requires that a derivative action be brought in the name of the company. However at common law, and apparently in Nevada, derivative actions brought in the name of a shareholder on behalf of the company are possible. [ 84 ] A derivative action is permitted because those in control of a company refuse or neglect to seek a remedy for a wrong done to a company.

The party who brings the action has control over its conduct, subject, in Alberta at least, to direction by the court. It would frustrate the policy behind a derivative action, and make no sense, if the party having conduct of the action could not proceed any further than the obtaining of the judgment.

The derivative remedy would be worthless if they could not proceed to enforce the judgment obtained. [ 85 ] In my view it is no impediment to the enforcement of the Nevada judgment by the Plaintiffs that a clearly identified portion of the judgment was recovered derivatively for the benefit of IESI. [ 86 ] This ground of objection to the granting of

summary judgment in favour of the Plaintiffs is dismissed. Mr. Dornan ’ s cross- application for

summary judgment dismissing the action is dismissed. Post-Judgment Interest [ 87 ] The judgment which the Plaintiffs seek to enforce awarded post-judgment interest at the rate of 10.25%. [See paragraph [1] above.] I understand that to be post-judgment interest entitlement under Nevada law. That aspect of the Nevada judgment is not enforceable in Alberta. As noted in the learned

article quoted in Pro Swing (quoted in paragraph [15] above), the Alberta law regarding post-judgment interest would apply. Conclusion [ 88 ] In my view the Applicant Plaintiffs have satisfied the tests for

summary judgment. However I cannot grant the judgment they seek until the issues described below are addressed. Implications of the Bankruptcy of IESI [ 89 ] As previously noted, IESI was petitioned into bankruptcy in Nevada on January 9, 2007. [ 90 ] After the Plaintiffs recovered judgment in the Nevada District Court, the Plaintiffs and IESI ’ s trustee in bankruptcy entered into a settlement agreement which was approved by the United States Bankruptcy Court for the District of Nevada on July 18, 2008. [ 91 ] The settlement agreement provided for the dismissal of the claims brought by IESI against Mr.

Dingwall (that is, the original claims to which the claims brought by Mr. Dingwall, and which resulted in the judgment now sought to be enforced, were a counterclaim). The settlement agreement also provided for the distribution of proceeds of enforcement of the Nevada judgment. The proceeds would be used first, to pay unpaid costs of enforcement; second, to reimburse the Plaintiffs for enforcement costs they had paid; third, to pay the costs portion of the judgment; and fourth, to pay the portion of the judgment recovered derivatively on behalf of IESI and the damages recovered by Yang and Chai.

Funds available for this fourth stage of payment would be divided 20% to IESI and 80%

to Yang and Chai until IESI was fully paid, and then 100% to Yang and Chai. [ 92 ] The agreement was reached before the decision of the Nevada State Court, when the judgment to be enforced included the punitive damages and duplicative damages which did not survive the appeal.

The materials do not indicate that it was amended after the appeal decision reduced the amount of the judgment but the agreement recorded that the parties to it agreed to execute such additional documents and perform such further acts as might be reasonably necessary to give effect to the purposes and provisions of their agreement. [ 93 ] At the time these applications were argued, it appeared that this agreement provided reasonable assurance that any proceeds of the enforcement of the judgment which ought to go to the benefit of IESI would in fact do so. [ 94 ] Recently, however, counsel for the Plaintiffs advised that the United States Bankruptcy Court issued a “ Final Decree ” in the bankruptcy of IESI on March 16, 2012.

The Final Decree says: FINAL DECREE The estate of the debtor noted below has been fully administered: Innovative Energy Solutions, Inc. It is ordered that Timothy S Cory is discharged as trustee of the estate of the above named debtor. The

Chapter 7 case of the above named debtor is closed. [ 95 ] I will require further submissions as to the implications of this Final Decree. Does IESI still exist? Does IESI continue to have a beneficial interest in the damages awarded derivatively? If not, who, if anyone, does? If IESI ’ s beneficial interest in the judgment continues, is there a mechanism for ensuring that the benefit of any enforcement recovery realized that ought to go to IESI or the current owners of that beneficial interest, will do so? If not, what mechanism should be put in place?

What is the current status of the agreement reached between the now discharged trustee in bankruptcy and the Plaintiffs? [ 96 ] In my view it will be necessary for the parties to address these and possibly other questions that arise as implications of the bankruptcy and the Final Decree. Further argument to address these questions will likely be necessary. I invite counsel to make arrangements to appear in open chambers to discuss these questions and an appropriate procedure for determining them. Heard on the 1 st day of March 2012. Dated at the City of Edmonton, Alberta this 24 th day of July 2012.

Brian R. Burrows J.C.Q.B.A. Appearances: Donald Wilson and Patrick Stratton for the Plaintiffs Terry Dingwall and Hyunsuk Chai Charles P. Russell, Q.C., Stuart Chambers and Janet Patterson for the Defendant Frederick Dornan Conan Taylor for the Defendants Ronald Foster and Patrick Cochrane The Plaintiff Hyunik Yang did not participate in the application.