Van Lent v Place, 2013 ABQB 494

Court of Queen ’ s Bench of Alberta Citation: Van Lent v Place, 2013 ABQB 494 Date: 20130830 Docket: 1103 17838 Registry: Edmonton Between: Tony Van Lent, Wade Werenka and the Original Bonanza Buffet Co. Plaintiffs - and - Janice Place, Lorne Drever, Cedar ll Mortgage Corporation, Locate Technologies Inc., Don Nason and 706166 Alberta Ltd. Defendants _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice Don J. Manderscheid _______________________________________________________ A.

Introduction [ 1 ] The applicants/defendants, being Lorne Drever ( “ Drever ” ), Janice Place ( “ Place ” ), Don Nason ( “ Nason ” ), Locate Technologies Inc. ( “ Locate ” ), and 706166 Alberta Ltd., ( “ 706 ” ) (collectively referred to as the “ Applicants or Defendants ” ) apply to set aside the judgment obtained by Tony Van Lent ( “ Lent ” ), Wade Werenka ( “ Werenka ” ) and the Original Bonanza Buffet Co., ( “ Bonanza ” ), (collectively referred to as the “ Respondents ” or the “ Plaintiffs ” ), on May 22, 2012, for an amount owing to the Plaintiffs of $313,000.00, plus $20,000.00 for punitive damages, plus pre-judgment interest and costs.

The Plaintiffs oppose the application.

B. Facts [ 2 ] The salient facts involved in this application are stated in the Plaintiffs ’ Brief and are as follows: 1. Drever and Nason worked together providing services to Locate and 706. 2. On April 18, 2008, the Alberta Securities Commission ordered that Locate, 706 and Drever cease trading or purchasing any securities and that all trading in or purchasing of Locate securities cease (the “ First Alberta Order ” ).

The basis for the First Alberta Order was a prior cease trade order by the New Brunswick Securities Commission and evidence these parties had been involved in the sale of securities in contravention of securities regulations. 3. On November 5, 2008, the Alberta Securities Commission issued a further order with respect to Locate, 706 and Drever (the “ Second Alberta Order ” ). The Second Alberta Order stipulated: (

a) Locate and 706 must permanently cease trading that would involve their issuing securities; (

b) Locate and 706 could no longer access exemptions in Alberta securities laws; (

c) Drever must permanently cease trading in any securities; and, (

d) the First Alberta Order was no longer in effect. 4. Notwithstanding the Second Alberta Order and in direct contravention of its terms, the Defendants continued offering shares of Locate for sale by: (

a) filing draft prospectuses in the United States Securities and Exchange Commission in preparation for the sale of shares to American investors, which constituted an “ illegal distribution ” by Locate and 706 and was directed by Drever; and, (

b) On April 14, 2012, and June 20, 2010, selling shares of Locate to individuals in Alberta. 5. Drever, Locate and 706 later executed a Statement of Admissions filed with the Alberta Securities Commission (on March 30, 2012) admitting they knowingly participated in these unlawful actions, which contravened the Second Alberta Order and

Section 110 of the Securities Act , RSA 2000, c S-4 (the “ Act ” ). Drever and Locate also admitted they violated Sections 2(3)(

a) of 92(3)(

b) of the Act by representing that Locate securities would be listed on an exchange and would increase in value. The following specific admissions were included in the Statement of Admissions and agreed to by the relevant defendants: (

a) Drever directed and authorized the above described illegal distribution by Locate and 706 and the violation of the Second Alberta Order by Locate; (

b) On or around April 14, 2010, an agent of Locate sold 650,000 Locate securities to an investor (Investor A), resident living in Alberta, for $0.27 per share. The same agent later sold Investor A a further 10,000 - 15000 Locate Shares. All steps in relation to these trades took place in Alberta. Locate received funds from Investor A, but never provided share certificates. Locate made no effort to determine if Investor A fit under an exemption to prospectus requirements and in fact he did not; (

c) On June 20, 2010, the same Locate agent sold a further 80,000 Locate securities to another individual (Investor B), resident and living in Alberta, at $0.25 per share. On or around July 26, 2010, the same Locate agent sold a further 30,000 Locate securities to Investor B at approximately $0.17 per share. All steps in relation to these trades took place in Alberta. Locate received funds from Investor B, but never provided share certificates. Locate made no effort to determine if Investor B fit under an exemption to prospectus requirements and in fact he did not. (The trades in Alberta described in paragraphs (

b) and (

c) above will be collectively referred to as

the “ Alberta Trades ” ); (

d) In making the Alberta Trades, the Locate agent stated to Investor A and Investor B that its shares would soon be listed in the United States and would thereafter increase substantially in value; (

e) Drever authorized, permitted, or acquiesced in the Alberta Trades. He further personally met with both Alberta investors in order to solicit further investment and similarly stated that Locate's shares would be listed on an exchange in the United States and would thereafter increase substantially in value; and (

f) Drever admits that he authorized, permitted, and acquiesced in the Alberta Trades. 6. During his cross-examination, Drever confirmed that Investor A and Investor B were in fact Werenka and Van Lent. 7. On August 14, 2008, Drever, Locate and 706 entered into a settlement agreement with the New Brunswick Securities Commission ( “ NBSC ” ) in which they admitted to violations of New Brunswick Securities Act involving trading in securities or engaging in acts in furtherance of trading without registration and without filing a prospectus, violating cease trade orders and misleading the NBSC.

The NBSC ordered sanctions against Drever, Locate and 706 on August 25, 2008, which included various fines, penalties and orders permanently barring Drever, Locate and 706 from issuing or trading securities. 8. On January 22, 2009, the British Columbia Securities Commission made a reciprocal order permanently barring Drever from trading in securities, acting as a director or officer of an issuer, and acting in a consultative capacity in connection with activities in the securities market. 9.

On January 24, 2010, the New Brunswick Securities Commission released, In The Matter of Locate Technologies and Tubron Controls Corp (Respondents) Reasons for the Decision . Locate was found to have intentionally breached the terms of the above noted settlement agreement by failing to refund the money of investors who had purchased shares of Locate. 10. On January 25, 2010, the British Columbia Securities Commission made a reciprocal order permanently barring Nason from trading in securities and acting as a director or officer of an issuer. 11.

Notwithstanding the Second Alberta Order, in 2010 the Defendants induced the Plaintiffs to loan monies to Locate and promised shares of Locate as security. Beginning on or about May 14, 2010, the Plaintiffs advanced $313,000.00 to the Defendants secured by shares in Locate, which were represented would be immediately listed on a public exchange by June 28, 2010. The Defendants provided receipts for the advances (save $13,000.00) of money but did not ever deliver the shares. 12.

On October 13, 2010, the Defendants also promised the Plaintiffs security in three properties, one of which was the home in which Drever and Place resided together. Two of the properties were: Plan 5414NY Plan 0940727 Block 5 Block 4 Lot 22 Lot 14 Excepting thereout all Mines Excepting thereout all Mines and Minerals and Minerals (the “ Matrimonial Home ” ) (the “ Cottage Property ” )

13. The Defendants represented the Matrimonial Home had a value of $960,000.00 and was encumbered with a Mortgage in the amount of $177,000.00; and the Cottage Property had a value of $540,000.00 and had no encumbrances upon title. 14. On December 1, 2010, the Ontario Securities Commission ordered that trading in securities in Locate and 706 cease permanently. Drever and Nason were permanently barred from trading in securities and from acting as directors or officers of issuers. 15.

On April 21, 2011, the New Brunswick Securities Commission imposed the maximum administrative penalty of $750,000.00 upon Locate and another corporation. 16. On June 27, 2011, Drever and Place (who are husband and wife) executed a series of transactions with respect to real property (the “ Transactions ” ). In particular: (

a) the Matrimonial Home was encumbered with a blanket mortgage in the amount of $840,000.00. (

b) title to the Cottage Property, which was originally beneficially owned jointly by Drever and Place, was transferred into Place's name alone; and, (

c) the Cottage Property was also cross-collaterally encumbered with the blanket mortgage in the amount of $840,000.00. 17. Drever and Place received $840,000.00 as a result of the Transactions. 18. Although the transfer involved in the Transactions indicated consideration was in the amount of $250,000.00, Place never paid any money to anyone nor was there any underlying sale contract. 19. Drever was the primary income earner and he and Place lived mainly upon income derived from his dealings with Locate. With respect to these transaction, Place did as Drever directed. 20.

On or about August 23, 2011, Drever asked one Mr. Edward John Pastuszek to participate in a scheme to misdirect Werenka. 21. On November 9, 2011, the Statement of Claim in this action was filed in the Court of Queen's Bench at Edmonton. The Statement of Claim refers to conduct by the Defendants in early 2010, whereby the Defendants fraudulently induced the Plaintiffs to make various loans to Locate in the total amount of $313,000.00. 22. On December 16, 2011, the Honourable Mr. Justice A.B. Sulatycky granted an Ex Parte Attachment Order in this action directing that: (

a) the Clerk of the Court may issue a Garnishee Summons before judgment with respect to certain garnishees; (

b) such Garnishee summons shall be with respect to all exigible property of Drever, Place and Locate; and, (

c) Drever and Place were prohibited from further encumbering, transferring, or entering into any contractual agreement in respect of exigible real property without leave of the Court. 23. On March 22, 2012, the Amended Statement of Claim in this action was filed. On April 12, 2012, the Amended Amended

Statement of Claim in this action was filed. 24. On April 13, 2012, Patricia Herreros, a process server carrying on a business in Edmonton, personally served Drever, Place, Locate and 706 with the following pleadings and orders: (

a) Statement of Claim filed November 9, 2011; (

b) Amended Statement of Claim filed March 22, 2012; (

c) Amended Amended Statement of Claim filed April 12, 2012; (

d) Attachment Order of Justice Sulatycky of December 16, 2011; (

e) Attachment Order of Justice Manderscheid of December 19, 2011; and, (

f) Attachment of Order of Justice Goss of March 26, 2012. 25. Upon being served with the documents referred to above, Nason and Place gave the documents to Drever who advised that he would look after it. 26. On April 13, 2012, Herreros personally served Nason with the following pleadings: (

a) Statement of Claim filed November 9, 2011; (

b) Amended Statement of Claim filed March 22, 2012; and (

c) Amended Amended Statement of Claim filed April 12, 2012. 27. On May 7, 2012, the Defendants were noted in default, and on May 22, 2012, Manderscheid J., granted Judgment for the Plaintiffs in the amount of $313,000.00 for liquidated damages; $20,000.00 for punitive damages; and $3,604.40 for costs (the “ Judgment ” ). 28. On May 23, 2012, the Writ of Enforcement issued with respect to the Judgment was filed. 29. On June 1, 2012, Drever filed a Notice of Objection to Seizure of Personal Property (the “ Notice of Objection ” ). The Notice of Objection stated “ The claim of the plaintiffs is disputed.

The defendants are going to apply to set aside the default judgment ” : see, Brief of the Respondents/ Plaintiffs, Tab 8 - Affidavit of Werenka at para 13; Exhibit ‘ J ’ - Notice of Objection to Seizure, dated June 1, 2012. 30. On June 5, 2012, the Alberta Securities Commission released its decision in proceedings against Locate, 706 and Drever. The Alberta Securities Commission various findings included that: (

a) agents of Locate unlawfully sold shares of the corporation to investors in Alberta; (

b) these activities were at Drever's direction and authorization; and (

c) the corporation received money from purported investors but did not deliver share certificates. C. Issue

[ 3 ] The issue to be considered in this application is whether the Default Judgment made against the Defendants in the within action should be set aside. D. The Law [ 4 ] The law relevant to this application is contained in the Alberta Rules of Court , Alta Reg 124/2010, rr 9.15 and 9.16 which read: 9.15(1) On application, the Court may set aside, vary or discharge a judgment or an order, whether final or interlocutory, that was made (

a) without notice to one or more affected persons, or (

b) following a trial or hearing at which an affected person did not appear because of an accident or mistake or because of insufficient notice of the trial or hearing.

(2) Unless the Court otherwise orders, the application must be made within 20 days after the earlier of (

a) the service of the judgment or order on the applicant, and (

b) the date the judgment or order first came to the applicant ’ s attention.

(3) The Court may, on any terms the Court considers just, (

a) permit a defence to be filed by a party who has been noted in default, (

b) set aside, vary or discharge a judgment granted upon application against a defendant who was noted in default, or whose statement of defence was struck out under rule 3.37, or (

c) set aside, vary or discharge a judgment entered in default of defence by the plaintiff for the recovery of property under rule 3.38, or for a debt or liquidated demand under rule 3.39.

(4) The Court may set aside, vary or discharge an interlocutory order (

a) because information arose or was discovered after the order was made, (

b) with the agreement of every party, or (

c) on other grounds that the Court considers just. 9.16 An application under rule 9.12, 9.13, 9.14 or 9.15 must be decided by the judge or master who granted the original judgment or order unless the Court otherwise orders. [ 5 ] Poelman J in Palin v Duxbury , 2010 ABQB 833 at paras 20-21 , 15 CPC (7th) 191 noted that the guidelines established under the former rule 158 of the Alberta Rules of Court should inform the determination of an application to set aside a default judgment under the new rule 9.15(3) . He indicated that the test to be applied is that the Defendants must show that: (

a) they have an arguable defence; and (

b) they did not deliberately let judgment go by default and have some excuse for the default, such as illness or a solicitor's inadvertence; and (

c) after learning of the default judgment, they moved promptly to open it up. E. Discussion Janice Place

Place ’ s Position [ 6 ] Place submits that when she was served with the Respondents ’ Amended Amended Statement of Claim on April 13, 2012, she consulted her husband Drever. He assured her that he would “ take care of it ” . However, Drever took no steps to defend on her behalf. As a result, the garnishee order was granted against Place.

Place is now without counsel, and applies to this Court to set aside the Default Judgment so that she can defend the case against her on its merits. [ 7 ] Place maintains that she has an arguable defence to the Respondents ’ claims, namely, that she has had no involvement with the Respondents in any capacity. In her Affidavit of June 29 th , 2012, she swears that she has never made representations to the Respondents, she never promised security over her matrimonial home or the cottage property, and she has not participated in any fraudulent conveyance of those lands.

Place also submits that any claim made against her with respect to the land transfer would need to comply with the Statute of Frauds , and that the Respondents have failed to do so. [ 8 ] Place also claims in her Brief that there was only a one week delay between the time that the Judgment was entered and when Drever spoke with counsel regarding what she must do to resolve the situation.

Place suggests that this step constitutes prompt action taken to open up the Default Judgment, and as a result that she did so without delay. [ 9 ] With respect to whether Place has a valid excuse, she argues that after having been served, Drever advised that he would “ take care of ” the issue for her. In her Affidavit, Place swears that based on her husband ’ s representations she believed that the Amended Amended Statement of Claim was improperly served, and thus ineffective, and that should a Statement of Defence be necessary this would be prepared by her husband on her behalf.

Respondents ’ Position [ 10 ] The Respondents maintain that Place has no defence to the claims against her, based on her purported role in her husband ’ s transactions. They assert that she has deliberately and fraudulently worked with Drever to defeat their interest in the matrimonial home and cottage properties, she participated in encumbering the properties with mortgages to drain their equity, and she was aware of and complicit in the transferring of the cottage into her name alone.

They further claim that Place directly benefited from the fraudulent activities of her husband, as the funds Drever acquired from the Respondents went to supporting her family. [ 11 ] The Respondents submit that Place ’ s failure to file a Statement of Defence cannot be excused based on her ignorance of the law. They cite Master Funduk in Aldie v Moze , [1988] A.J. No. 1263 ( Aldie ) , for the proposition that individuals who unconcernedly fail to retain legal advice and respond to the Statement of Claim cannot thereafter claim they were ignorant of the consequences.

Finally, the Respondents state that the Applicant has deliberately allowed the Default Judgment to go against her, and that she was not prompt in applying to open it up. They submit that the Default Judgment was obtained on May 22, 2012, and that the application to open up the Default Judgment was filed and served on July 3, 2012. They contend that over one month passed between when the Default Judgment was obtained and when Place filed to set it aside, and that this delay bars her from applying to do so now.

Analysis Arguable Defence [ 12 ] The first ground is whether Place has a defence to the Respondents ’ claims. There is significant disagreement as to whether Place knew of or had any dealings in the fraudulent business practices that gave rise to this lawsuit. [ 13 ] The Respondents claim that Place was a party to her husband ’ s conspiracy and fraud. However, Place was at all

material times a mother and a school teacher, and appears to have had no involvement in her husband ’ s business. When asked why she failed to ask her husband why he had not paid Mr. Van Lent back yet, Place responded: “ Because he is a shareholder. I don ’ t know how those things operate ” (Book of Transcripts, Tab 1, Questioning of Janice Place; 33/7-10). Similarly, with respect to the transfer of the secured properties into her name alone, Place ’ s answers on questioning raise the question of whether she was wilfully defeating the Plaintiffs ’ interests, or simply an unknowing participant in the transfer.

Place ’ s affidavit and answers on questioning support an arguable defence to the allegations against her. Having so found, there is no need to address the Statute of Frauds claim. Excuse for not Defending [ 14 ] In the Alberta Civil Procedure Handbook , vol 1 (Edmonton: Jurliber, 2011) at 9.25, WA Stevenson and JE Côté suggest that a defendant may have a valid excuse where s/he was ill, or where the solicitor inadvertently failed to file. There are no such extenuating circumstances present here.

Instead, Place suggests that her reliance on her husband and his representations that he would “ take care ” of the lawsuit constitute a valid excuse for failing to file. [ 15 ] Canadian courts have recognized the oftentimes unequal and detrimental nature of marital relationships, particularly where one spouse wholly relies on the other in matters of business or finance. In Bank of Montreal v Collum , 2004 BCCA 358 , 29 BCLR (4th) 18 ( Collum ) , the British Columbia Court of Appeal considered whether a judgment in favour of the plaintiff bank could be enforced against Mrs.

Collum as guarantor of her husband ’ s loans. Defending against the assertion that they failed to disclose some of the husband ’ s outstanding loans to Mrs. Collum, the bank maintained that given the marital relationship between the parties, the husband should have informed his wife of his actual financial situation. The Court rejected this argument, and found the guarantee to be unenforceable against her.

The bank was unable to shift its responsibility to disclose onto the husband, and its argument to the contrary failed to take into account the undue influence and inequality of power that can exist in spousal relationships. At paragraph 38, the Court cited Barclays Bank Plc v Coleman , [2001] 4 All ER 449 at para 36 : …the high degree of trust and confidence and emotional interdependence which normally characterises a marriage relationship provides scope for abuse. One party may take advantage of the other’s vulnerability. Unhappily, such abuse does occur.

Further, it is all too easy for a husband, anxious or even desperate for bank finance, to misstate the position in some particular or to mislead the wife, wittingly or unwittingly, in some other way. The law would be seriously defective if it did not recognise these realities [emphasis added]. [ 16 ] As early as the beginning of the 20 th century, the King ’ s Bench of England documented “ the existence of a special influence ” that may arise as between husbands and wives in the legal context: Chaplin & Co Limited v Brammall , [1908] 1 KB 233 at 235 ( Chaplin ) .

It is important to note that Chaplin and Collum deal with wives who were misled into personally guaranteeing the debts of their husbands. On the facts before me, Place has not signed or guaranteed anything on behalf of her husband.

Nevertheless, this Court must have regard to the circumstances that give rise to a spouse ’ s legal obligations, including the nature of the marital relationship and the presence or absence of undue reliance. [ 17 ] In the case at bar, it appears that Place typically relied on her husband in legal and business matters, and did so rely on him when he said he would “ take care of ” the legal claims against her. During questioning on her Affidavit, Place describes her reasons for failing to respond: Q: And after reading each of the documents you were satisfied that you knew that you were being sued?

A: Yes, I was upset. Q: And you knew that it was a very serious matter? A: Yes. Q: And you read the contents of the documents, and it was very clear that you were going to be sued or that you were being sued, and you would be held liable unless you did something? A: Yes. Q: Correct? A: Yes.

Q: And at that point in time what did you do? A: I gave it to Lorne and said, What are we going to do? And he said, Give it to me. I will take care of it. Q: So that was the exact response that he provided you, correct? A: Pretty much, yes. I don’t recall saying anything different. Q: You don’t recall any other words that he provided to you, correct? A: No. Q: He said he will take care of it, correct? A: He might have. I took it to mean that he would get the lawyer to look at it.

Q: And is it fair to say that the next time you had any conversation with him regarding those documents, the ones that said you were being sued, was when you found out that you were being garnisheed as a teacher, correct? A: Yes. [ 18 ] Place ’ s deference to her husband on this issue, particularly given her understanding that this was a serious matter, was unwise. However, it was not uncharacteristic or unreasonable given the reliance she generally placed on her husband.

The reality is that, in some marriages, one spouse may defer entirely to the authority of the other, especially in areas where they have little experience. In this case, Place has made it clear that she has very limited knowledge of both her husband ’ s business and the Respondents ’ claim against her.

Although she is educated as a teacher, she is by no means the “ sophisticated defendant ” whose business or legal expertise bars a defendant from claiming ignorance as an excuse. (See for example, Bank of Montreal v Sarne , [2001] 42 RPR (3d) 216 , 2001 CarswellOnt 1844 (Sup Ct) . [ 19 ] I find that Place ’ s unquestioning reliance on her husband ’ s representation that he “ would take care of ” this legal issue on her behalf constitutes a valid excuse for failing to respond. Explanation for Delay/Promptness [ 20 ] The final question to consider is whether Place acted promptly in opening up the Default Judgment.

The Judgment Place seeks to set aside was obtained on May 22, 2012. The next step in the action occurred on June 1, 2012, when Drever filed a Notice of Objection to Seizure of Personal Property, advising that the Defendants were going to apply to set aside the Default Judgment. Contrary to the Respondents ’ submissions, that application was filed with this Court on June 29, 2012. In my view, Drever ’ s Notice of Objection does not constitute a prompt step to set aside the Default Judgment.

The proper step to consider under this portion of the test is the date the Application or Motion to set aside was filed; in other words, the issue is whether there was “ delay in the bringing of a motion to set aside a default judgment ” : Halsbury ’ s Laws of Canada (Markham, Ont: LexisNexis, 2010), “ Default Judgments – Setting Aside ” , HCV -125. [ 21 ] The question remains whether Place delayed in bringing her application. The Respondents have suggested in their Brief that this one-month period is too long a delay to be considered “ prompt ” under the three-part test.

I disagree; the extent to which an applicant will be found to have delayed must be considered in context. In some instances the Courts have found delay of up to ten months reasonable (see, Nelligan v Lindsay , [1945] OWN 295 , 1945 CarswellOnt 173 ). On the facts here, there is no evidence that any steps were taken with regard to preparing a defence to this action prior to default. Place was effectively at square one at the time she learned of the Default Judgment and her wages started to be garnished. Place required a reasonable time to retain counsel and file an affidavit.

Given these factors, the one month period between May 22 (when the Default Judgment was entered) and June 29 (when the Application to set aside was made) is reasonable. [ 22 ]

[22] Further, there is no evidence that Place’s one-month delay wasdeliberately defiant, or the result of negligent regard for the legal system or the Respondents’ claim. It is well established law that “meredelay will not bar [an] application, unless an irreparable injury will be done to the plaintiff or the delay has been wilful” (Klein v Schile, (SK CA), [1921] 2 WWR 78, 14 Sask LR 220). It is Place’s evidence that she was unaware of the Default Judgmententered against her until her wages started to be garnished.

She immediately consulted her husband and he began taking steps to provideall of the Defendants with legal counsel. Though unwise, Place’s reliance on her husband in both responding to the Amended AmendedStatement of Claim, and in working to set aside the Default Judgment against her, cannot be construed as a wilful act in defiance of theCourt. [23] The Respondents submit that they would suffer prejudice thatcannot be compensated with costs if the Default Judgment is set aside. With respect to Place I fail to see how serious prejudice couldresult from allowing her to defend the Respondents’ claim.

Aside from the natural costs of litigation, the Respondents have not specifiedin what ways they would be prejudiced. Any witnesses required for trial are presumably still available; the lapse is not so great as to havehampered any party’s memory regarding the alleged fraud; and no detrimental steps appear to have been taken by the Respondents inreliance on the Default Judgment. For these reasons I find that the period of just over one month was reasonably prompt.

Place did notdeliberately or wilfully delay, and that there would be little if any prejudice to the Respondents if her application to set aside the DefaultJudgment were allowed. [24] I find that Place has satisfied all three factors under the test forsetting aside the Default Judgment. She is entitled to defend her case on its merits at trial.

Lorne Drever Drever’s position [25] The Applicant Drever contends that he has an arguable defence inthat the Plaintiffs/Respondents are not creditors of Locate (except with respect to the claim of “The Original Bonanza Buffet Company”that lent the sum of $30,000 to Locate) but purchasers of shares of Locate and 706. In other words, that the Respondents are investorsand shareholders in Locate, who are trying to convert their claims, as unhappy investors, into a secured debt claim against real estate.

Hesubmits that, except in special circumstances, this Court should assume, for the purpose of this application, that the facts deposed to inhis affidavit on this issue are true.

He denies making fraudulent misrepresentations; denies promising security in real estate orfraudulently conveying real estate; and denies being part of a Ponzi scheme or inducing breach of contract for Locate or 706. [26] Further, Drever states that he did not file a statement of defencebecause he believed the service of the Amended Amended Statement of Claim was ineffective as the Defendants had not been servedwith the Statement of Claim and the Amended Statement of Claim. [27] Like his wife, the Applicant Drever submits that he took promptaction to open up the Default Judgment.

He submits that the Default Judgment in this case was granted on May 22, 2012, and theapplication to set it aside was made on June 29, 2012. He alludes to his evidence during questioning which indicates that he spoke to alawyer “about the need to file” a statement of defence approximately one week after the Default Judgment was obtained against theDefendants: Brief of Applicants, para 47.

Drever submits that in the circumstances, the delay in applying to set aside the DefaultJudgment is not excessive and there is no evidence that the Respondents/Plaintiffs will be unduly prejudiced if this Court sets the DefaultJudgment aside. He submits that “mere delay will not be a bar to the application unless an irreparable injury will be done to the Plaintiffor the delay has been wilful”: Goulet v da Silva, 2002 ABQB 369 at para 72, 313 AR 32 [Goulet]. Respondents’ position [28] The Respondents submit that Drever’s contention that he wasselling shares to them as investors is not an arguable defence.

They note that at the relevant point in time, Drever was subject to AlbertaSecurities Commission’s orders, dating from 2008, which prohibited him from trading or purchasing any securities. As such, Drevercould not have lawfully followed through on the transactions, regardless of whether they were loans with shares as security or outrightsales of shares. [29] The Respondents argue that the true cause of Drever’s failure to filea defence was simply his decision not to give proper respect and attention to legal documents with which he was personally served.

Thefact and evidence before this Court demonstrate that Drever has been involved in previous litigation at Alberta Provincial Court andCourt of Queen’s Bench involving his corporations. He is a businessman, owner and president of a number of companies and, by his ownadmission before the Alberta Securities Commission, holds an MBA degree. Therefore, it is reasonable to infer that he chose to remainignorant of the importance of the documents by refusing to properly read the Statement of Claim, the Amended Statement of Claim andthe Amended Amended Statement of Claim.

[30] As with Place, the Respondents submit that the time that elapsedbetween the entering of the Default Judgment and the application to set it aside constitutes undue delay. They contend that Dreverdeliberately or wilfully ignored the commencement documents which were personally served and intentionally allowed the entry ofDefault Judgment against him in this matter. The Respondents submit that the failure to defend is typical of Drever, given the variousregulatory proceedings which involved him across Canada.

They submit that this Court should not reward the Applicant Drever bysetting aside the Default Judgment granted against him in this case. Analysis Arguable Defence [31] Watson, J (as he then was) in Goulet at para 74, said that: [T]he simple assertion of a claim of a defence is insufficient, and does not relieve the Court from evaluating whether there is a triableDefence.

In [GFK Capital Base Corporation v Fernando (1993), (MB CA), 88 Man R (2d) 125], it was put thus: The judge should be satisfied that the proposed defence is arguable, in the sense that if the facts are proved it might well succeed, andthat the wish to defend the action is genuine, in the sense that the defendant is not merely trying to further delay or to defeat a validclaim. (emphasis added) [32] In this regard, I take particular note of the fact that Drever is anindividual who had been ordered in certain Canadian jurisdictions, including Alberta, to cease trading in securities, but nonethelesscontinued to devise technical reasons which would enable him to avoid compliance with both court and tribunal orders.

Significantly, atthe time when Drever contended that he was selling shares to the Plaintiffs as investors, he was apparently in contravention of the“Second Alberta Order,” issued by the Alberta Securities Commission; and as such, he had no lawful authority whatsoever to deal inshares of Locate with any investor in Alberta: see, para 2 of this Decision.

Thus, even on a less intensive scrutiny of the facts, evidenceand circumstances of Drever’s application, I am not persuaded that he has an arguable or reasonably meritorious defence in this matter. [33] Neither am I satisfied that Drever’s wish to defend is genuine,given his typical approach to legal and administrative proceedings in other jurisdictions regarding securities-related claims.

It seems tome that on the facts of this case and the evidence before me, Drever’s manifest objective is to merely try to further delay or defeat theRespondents’ valid claim; this attempt should not be encouraged or rewarded: Goulet at para 74.

Excuse for Not Defending [34] I am not convinced as to the genuineness of Drever’s claim that he“believed” that the personal service of the Amended Amended Statement of Claim on him was invalid, given his background as an MBAdegree holder, a businessman, owner and president of a number of companies, who has been involved in previous litigation at differentlevels of court in this province. [35] Given these facts, I agree with Master Funduk’s observations inAldie at paras 4-5, where he said: If the Defendant says he did not know that which the notice clearly states then he did not bother to read the statement of claim or, if hedid, he was blasé about it.

The statement of claim is a legal document issued out of this Court. Defendants who are blasé about such a document, or who are toocheap to immediately seek legal advice, cannot shelter behind a cloak of professed ignorance. Further, even if Drever genuinely did not “believe” that the service was valid, common sense dictates that he should nonetheless formallyseek legal advice to confirm the accuracy (or otherwise) of his pseudo-legal opinion by consulting a professional lawyer.

In thecircumstance, Drever’s excuse for not defending on the basis of his erroneous “belief” is untenable. [36] I therefore conclude that Drever had no reasonable excuse for notfiling a statement of defence. Explanation for Delay/Promptness

[ 37 ] Aside from Drever ’ s submission that he spoke to a lawyer “ about the need to file ” a statement of defence and that the delay was not excessive, there is no clear statement from him as to the reason for the delay in filing an application to set aside the Default Judgment. I note that the said discussion with a lawyer was about filing a statement of defence, which was long overdue, but not about the filing of an application to set aside the Default Judgment granted against Drever.

By Drever ’ s own admission, he did not even bother to consult a lawyer “ about the need to file ” a defence until approximately six weeks after the doubly amended statement of claim was served, and approximately one week after the Default Judgment was obtained against him and the other Defendants: Brief of Applicants, para 47.

Further, as noted above (at para 20), the time to consider is when the application to set aside a Default Judgment is actually brought, not when the parties contemplated doing so. [ 38 ] It seems to me that if Drever was only speaking to the “ need ” for filing a statement of defence just after he was noted in default, then he was adopting a typical, blas é attitude or approach to the present legal process and matter, as he had evidently demonstrated towards legal/administrative proceedings, documents and orders in which he had been previously involved in various Canadian jurisdictions: Aldie at paras 4-5. [ 39 ] In my view, the delay on the part of Drever to file an application setting aside the Default Judgment against him appears wilful, given the history of his conduct and approach to court orders.

Based on the evidence before me, it is clear that Drever is not a stranger to litigation and understands that a form of official response is normally required, once the service of any valid legal document, such as a default judgment, is effected. A claim of ignorance of the legal process involved in this circumstance cannot absolve Drever from his responsibilities under the law: Goulet at para 72 . [ 40 ] And further, the Respondents have already incurred legal expenses in their attempts to recover monies collected either as loan or the purchase shares that were illegally sold to them by Drever.

The Respondents should not be unfairly exposed to further losses which commenced with the prohibited activities of Drever. Therefore, I agree with the Respondents/Plaintiffs ’ position that they would suffer undue prejudice, which may not be easily compensated for by costs, if the Default Judgment against Drever is set aside. [ 41 ] Consequently, Mr. Drever ’ s application to set aside the Default Judgment must fail on the basis of wilful delay.

I draw support in my conclusion from the statement of Slatter J (as he then was) in Edwards v Ferris , 2001 ABQB 1125 at para 13 , 316 AR 41 (QL) that “ [u]sually if a Defendant deliberately allows a default judgment to go against him, knowing the effect of failing to defend, he will not be allowed to set aside the default judgment. ” This principle must apply in full effect against Drever in the particular circumstances of this case. Don Nason Nason ’ s position [ 42 ] The Applicant Nason submits that, as an employee of Locate, he never solicited loans for Locate from the Respondents.

His understanding all along was that the Respondents wanted to purchase shares of Locate and did purchase common shares in Locate, as set out in the handwritten invoices prepared by him: Applicants ’ Brief at para 29. He states that the Respondents, who are investors, were not issued share certificates because they failed to provide names in which the certificates were to issue.

And that, in fact, the ASC in its reasons for decision found that Locate shares were sold to the Respondents, although the share sale contravened the Securities Act and the trading ban imposed against Locate and Drever. [ 43 ] Further, Nason contends that the Respondents were never creditors of Locate, and denies promising security for any loan or being personally indebted to the Respondents.

He also denies being a party to a fraudulent conveyance of any real estate as he had no interest in any of the subject real properties, and denies being part of a Ponzi scheme, converting funds or being unjustly enriched. [ 44 ] Nason argues that he was served with the Amended Amended Statement of Claim on or about April 9, 2012 (or in fact on April 13, 2012), after which he discussed the service with Drever who told him that he (Drever) was going to take care of filing a defence on Nason ’ s behalf “ when the filing of such a defence was necessary. ” Nason says that Drever informed him that at that point no defence was required as Nason had not been properly served. [ 45 ] Nason ’ s position on the issue of promptness is interlocked with Drever ’ s.

Initially, they were both represented by the same lawyer, Mr. Bilsland. However, a different lawyer, Mr. Duke appeared for Nason in the within application to set aside the Default Judgment granted against him. Nason submits that he was noted in default in May of 2012. That upon learning of this development, he contacted Mr. Bilsland, who at that point was counsel for all of the Defendants, and the application was filed to set aside the Default Judgment: Transcript of Chambers ’ Application at 14/14-17. He submits that the delay in applying to set the Default Judgment aside is not excessive in this circumstance.

And further, there is no evidence that the Respondents will be unduly prejudiced if the Default Judgment is set aside. Respondents ’ position

[ 46 ] The Respondents state that the evidence is that Nason was soliciting loans with shares of Locate offered as security or alternatively, was offering to sell shares. That both options were offered through the “ Memorandum ” dated September 24, 2010 and issued by Locate requesting “ a 6 month term note for [$400,000.00.] We are in a position to offer an equity position and/or an agreed upon interest for the term note.

The Company will meet the requests of the lender . ” [ 47 ] The Respondents also point to a portion of the document which states: “ [B]eing an offer to provide “ Assets for Security ” for a “ 6 Month Term Note for Locate Technologies ” against 3 parcels of land, including the Matrimonial Home, the Cottage property and the remainder of the Quarter

Section from which the Cottage property was subdivided. [ 48 ] The Respondents submit that although Nason deposed in his affidavit that he is an employee, the evidence before this Court indicates that he is actually an independent contractor or subcontractor working in a “ team ” with Drever in various Canadian jurisdictions, including British Columbia, Ontario and New Brunswick (Book of Transcripts, Tab 2, Questioning of Lorne Drever; 53/14-19; 60/13-15, 25-27; 61/1-6); Tab 3, Questioning of Don Nason, 2/14-19).

In other words, as an independent contractor or subcontractor, he should have relied less on Drever ’ s advice and taken independent steps to determine what actions and process should be appropriately taken in response to a legal document he has been served with, in any given circumstance. [ 49 ] They submit that Nason intentionally allowed judgment to go by default. This inference, the Respondents contend, flows from the fact that failure to defend typifies Nason ’ s pattern of conduct in the various regulatory proceedings which involved him and Drever throughout Canada.

Analysis Arguable Defence [ 50 ] The evidence before me at this point does not satisfactorily clarify whether Nason is an employee or an independent contractor/subcontractor of Locate (and Drever).

The nature of his work relationship with Locate is, in my opinion, a triable issue which has to be determined in a decisive manner, given the significant ramifications it poses for the nature of his legal duties, rights, responsibilities and the consequences attached to them. [ 51 ] The existing case law authorities suggest that where an employee- employer relationship is clearly established, reliance on the representations of an employer or someone “ higher-up ” in a business relationship may constitute a valid excuse for the action or inaction of the employee: Goulet ; and Hometown Imaging Inc v Maritime Copi Systems Ltd , [1997] NBJ No 526 at para 19 .

Contra , Clayburn Industries Ltd v Recor Services Inc , 2000 BCSC 1069 , 78 BCLR (3d) 19 . [ 52 ] In my view, Nason ’ s claim that he is an employee of Locate whose understanding of the nature of the transaction with the Respondents was that they wanted to purchase shares of Locate and did purchase common shares in Locate, constitutes an arguable defence in the context of the triable issue regarding his status in the organization.

That said, I am compelled to explicitly make the observation that this Court is deeply concerned with Nason ’ s action (on behalf of Locate) when he sold shares of Locate to the Respondents, notwithstanding the clear evidence that he was aware of the Order issued by the Alberta Securities Commission to “ cease trading or purchasing any securities and that all trading in or purchasing of Locate securities cease ” : Book of Transcripts, Tab 3, Questioning of Don Nason, 4/8-27.

The relevance and effect of that evidence is an issue which I need not decide at this stage. [ 53 ] Based on the inconclusive evidence on the nature of his work status or employment relationship with Locate, I conclude that Nason is entitled to the benefit of the doubt; and as such has met this part of the test. Excuse for Not Defending [ 54 ] As I indicated earlier, Nason should be given the benefit of the inconclusive evidence as to the nature of his work status in Locate.

For the purpose of my analysis, the consequence of the presumption that Nason is an employee of Locate is that he is entitled to rely on the discussion which he had with Drever, on behalf of Locate. The information which Nason obtained from that discussion and which he is entitled to rely upon as an employee was that at that point, no defence was required as Nason had not been properly served and that Drever was going to take care of filing a defence on Nason ’ s behalf “ when the filing of such a defence was necessary. ” [ 55 ]

I am satisfied that Nason, in the presumptive status as an employee of Locate, relied and acted on the instruction from Drever, on behalf of Locate, the presumed employer in this case. [ 56 ] Therefore, based on the case law authorities stated above, the facts in this matter and particularly, the inconclusive evidence before me at this point on his work status, I conclude that Nason has established a reasonable excuse for not filing a statement of defence, and in the result has met this part of the test.

Explanation for Delay/Promptness [ 57 ] Clearly, as a presumptive employee of Locate (and Drever) it is not unexpected that Nason ’ s position on the issue of promptness would be intertwined with that of his employer that he was relying upon to file a statement of defence on his behalf. [ 58 ] Although Mr. Duke appeared before me as Nason ’ s legal counsel in this application to set aside the Default Judgment granted against him, Mr. Bilsland was the lawyer who earlier represented both Drever and Nason as defendants.

Nason indicates that once he learned that he was noted in default on May 22, 2012, he contacted Mr.

Bilsland, who at that point was counsel for all of the Defendants, and the application to set aside the Default Judgment was filed on June 29, 2012: Transcript of Chambers ’ Application at 14/14-17. [ 59 ] While Nason and his counsel have no specific or identifiable reason for the delay of over one month between the issue of the Default Judgment and the filing of the application to set the Default Judgment aside, I am satisfied that overall, the context of the facts, the inconclusive evidence which points to a presumptive existence of an employer-employee relationship, and Nason ’ s reliance on Drever ’ s information or advice constitute a tenable explanation for the relatively short delay in applying to set the Default Judgment aside. [ 60 ] I conclude that the delay in Nason ’ s circumstances is not excessive.

There is no evidence that the Respondents will be unduly prejudiced by that delay, if the Default Judgment against Nason is set aside. Nason has met this part of the test. [ 61 ] In the result, I set aside the Default Judgment against Nason. F. Security for Costs [ 62 ] The Respondents seek an Order of this Court that if the Default Judgment is set aside, the Applicants be required to pay into court "an amount sufficient to secure the Judgment amount and anticipated costs of the trial, including solicitor and own client costs": Brief of the Respondents/Plaintiffs, para 114(b).

I take this as an application seeking security for payment of a costs award by the Respondents. In that context, it is appropriate for me to consider the provisions of the Alberta Rules of Court , r 4.22 in order to make a determination whether the relief should be granted in the circumstances of the within application. [ 63 ] Rule 4.22 of the Alberta Rules of Court provides that: The Court may order a party to provide security for payment of a costs award if the Court considers it just and reasonable to do so, taking into account all of the following: (

a) whether it is likely the applicant for the order will be able to enforce an order or judgment against assets in Alberta; (

b) the ability of the respondent to the application to pay the costs award; (

c) the merits of the action in which the application is filed; (

d) whether an order to give security for payment of a costs award would unduly prejudice the respondent's ability to continue the action; (

e) any other matter the Court considers appropriate. [ 64 ] In Attila Dogan Construction v AMEC Americas Limited , 2011 ABQB 175 , at paras 24-25 , 504 AR 295 , Wittmann CJQB stated that a two-step approach should be adopted when the court is considering the issue of an order granting security for payment of a costs award. First, the factors enumerated in r 4.22 are to be considered; and at the second step of the process, the court should ask itself whether it considers it just and reasonable to grant the order.

[ 65 ] Based on my decision to not set the Default Judgment against Drever aside, the request for the grant of security for costs order in this application then becomes relevant only for the remaining Applicants/Defendants, namely Place and Nason. The Defendants Place and Nason did not explicitly argue or respond to the Plaintiffs application for security for costs either in a written brief or in oral arguments. Consequently, my decision on this issue is based on the limited evidence before me at this stage. [ 66 ] In considering the factors enumerated in r 4.22 vis- à -vis Place ’ s case, I have made the following findings and conclusions: (

a) Place is a teacher in Alberta whose salary is currently subject to a garnishee order issued by this Court. The evidence before me does not clarify whether there are other lawful assets of Place (taking into consideration the nature of the allegations being made against her by the Plaintiffs in the within matter) in this jurisdiction against which a judgment of this court may be enforced; (

b) Except for financial support from extended family (which she submits may soon end) it would appear that she has no other source of income outside her employment as a teacher; (

c) In her submissions, she stated that she is “ the sole wage earner for our family ” ; (

d) I have set aside the Default Judgment against her based on my finding that she has an arguable defence; (

e) Given her employment and source of income, I am satisfied that an order to give security for payment of a costs award would unduly prejudice her ability to continue the action. Further, at the second step of my analysis, I have asked myself whether it is just and reasonable to grant the order that requires her to pay security for costs. I conclude that in Place's circumstances, it is neither just nor reasonable to grant the order against her. In the result, I decline to make a security for costs order against Place. [ 67 ] Regarding Nason ’ s situation, my findings and conclusions, based on the application of r 4.22 factors are as follows: (

a) The limited evidence, presently before me, does not confirm whether Nason is in possession of assets in Alberta against which judgment could be enforced; (

b) In my view, the question of Nason ’ s ability to pay a costs award is indeterminable at this stage as it is tied to the triable issue of his work status in Locate. In other words, will Locate as the presumptive employer be vicariously responsible for Nason, or alternatively will Nason be personally responsible and assessed as a sub-contractor? (

c) Nason ’ s case is closely linked to that of Locate and Drever, save the issue of his work status. Because of the indeterminable nature of Nason ’ s work relationship with Locate, the merits of his arguable defence remain relatively unclear to me at this point; (

d) Given the magnitude of the claim in the within action, the role and involvement of Nason as an agent (either as an employee or a sub-contractor) of Locate, a corporate body, I am satisfied that granting an order to give security for payment of a costs award would not unduly prejudice Nason ’ s ability to continue the action.

And at the second stage of the analytical process for the grant of a security for costs order, I have conducted the required, self-directed inquiry and I conclude that it is just and reasonable to order Nason to provide security for payment of a costs award. [ 68 ] Consequently, I order that the Default Judgment against Nason is set aside on the condition that Nason shall provide security for costs in the sum of $5,000, by payment of cash to the Clerk of the Court, within 30 days from the date of the entry of this Order.

If he fails to post the security for costs as ordered, the Respondents/Plaintiffs shall be entitled to continue enforcement of the Default Judgment against Nason. G. Conclusion [ 69 ] In conclusion, I find that the Applicants Place and Nason have met the three-part test for setting aside the Default Judgment against them. These parties have been able to demonstrate that a trial on the merits of their submissions is necessary to determine actual liability in this matter. [ 70 ] With respect to Drever, his application is dismissed.

His behaviour reflects a pattern of flagrant disregard and abuse of court orders and processes, and allowing his application to proceed would cause demonstrable prejudice to the Respondents in this action. H. Costs [ 71 ] If the parties cannot agree on costs, they may apply to me within 30 days of the issuance of this decision for a ruling on that matter. Heard on the 4 th day of June, 2013. Dated at the City of Edmonton, Alberta this 29 th day of August, 2013.

Don J. Manderscheid J.C.Q.B.A. Appearances : Richard B. Hajduk Hajduk Gibbs LLP for the Plaintiffs Thomas V. Duke Miller Thomson LLP for Don Nason Janice Place appeared on her own behalf