Precision Forest Industries Ltd. v. Cox, 2013 ABQB 524

Court of Queen ’ s Bench of Alberta Citation: Precision Forest Industries Ltd. v. Cox, 2013 ABQB 524 Date: 20130923 Docket: 0503 08080 Registry: Edmonton Between: Precision Forest Industries Plaintiff - and - Kevin Cox Defendant - and - David Shynkar Third Party _ ________________________________________ ______________ Reasons for Judgment of the Honourable Mr. Justice Donald Lee

_________________________________________ ______________ [ 1 ] On November 17, 2003 Precision Forest Industries Ltd. (“Precision”) the Plaintiff in this action signed a real estate form contract agreement with Kevin Cox to purchase nine parcels of land, located in the High Prairie area that was forested. Precision was interested in the lands and the timber located on it. [ 2 ] The Defendant Kevin Cox at all material times was the owner of the lands that are the subject matter of the legal action. David Shynkar has been named as a Third Party in this action by Kevin Cox.

David Shynkar is the lawyer practising in the Peace River/High Prairie area who acted for both Precision and Kevin Cox with respect to the closing. [ 3 ] This action was originally commenced by Precision seeking specific performance and, in the alternative, damages for the failure of Kevin Cox to complete on the real estate sale transaction. Precision paid the sum of $50,000.00 by way of a deposit towards the purchase of the subject lands for the sum of $345,000.00 directly to Kevin Cox. He has retained the deposit.

It is the position of Precision that Kevin Cox breached the real estate contract and failed to close on the transaction notwithstanding the fact that his legal counsel forwarded closing documents for him to execute. [ 4 ] The action has become more complicated since the alleged failure of Kevin Cox to close on the transaction. He caused to be sold all of the wood products off of the subject lands to Tolko Industries Ltd. and has kept the proceeds.

Also, he has started to remove gravel product from the subject lands which has prompted an amendment to the Plaintiff’s claim which significantly increased the damages claimed. Prior to the negotiated sale transaction, there had been no gravel operations conducted on any of the subject lands but Precision had noted the possibility of gravel on the lands. [ 5 ] Examinations for Discovery of Kevin Cox were conducted on January 19, 2007 and subsequent thereto on March 26, 2010.

It is the position of the Plaintiff that the Defendant, Kevin Cox, has neglected or failed to properly and fully answer the Undertakings he gave and to provide the documents that are necessary to address the issues of damages. In particular, the removal of the gravel product from the subject lands represents a loss of value in the lands. It is the position of the Plaintiff, that documentation relating to the sale of gravel and costs of gravel operations is necessary in order to properly quantify the nature and extent of the damage claim in the trial of the action.

Further, Kevin Cox is the person who is in control of subject lands and is the recipient of all of the benefits associated with the sale of gravel (and lumber). [ 6 ] The March 26, 2010 Undertakings and their subsequent answers were as follows: Undertaking No. 18 Produce any agreement or communications that Cox Contractors received from Tolko. Response: Agreement has already been provided. No communications found. Undertaking No. 19 Produce any documents with respect to the manner in which Mr. Cox had acquired the properties from his brother Don Cox that are the subject matter of this sale.

Response: None found Undertaking No. 20 Advise what timber land Mr. Cox owned either himself or in conjunction with his brother that were the subject matter of the sale with Precision and what lands Mr. Cox was dealing with in Tolko. Response: What deal with Tolko is being referenced? Undertaking No. 21 Inquire of Tolko as to whether they have any records as to how they converted the tons to meters in relation to the business transaction involving Mr. Cox. Response: No Undertaking No. 22 Confirm the numbered company for Mr. Cox’s son, Ryan Cox. Response: 776176 Alberta Ltd.

Undertaking No. 23 Produce the lease between Cox Contractors and Ryan Cox with respect to the use of equipment. Response: Undertaking No. 24

Produce the test results of the testing of the presence of gravel. Response: Reports are in the possession of Ryan Cox; he is unwilling to provide the same. Undertaking No. 25 Produce the test results of the samples taken of the gravel and sent away for analysis. Response: Reports are in the possession of Ryan Cox; he is unwilling to provide the same. Undertaking No. 26 Advise what the land description is where Cox Contractors were operating the pit. Response: SE Quarter 19; 73; 12; W5th Undertaking No. 27 Produce a copy of the gravel royalty agreement that Mr. Cox entered into with his son.

Response: Agreement has not yet been located. Undertaking No. 28 Produce the name of the Surveyor that surveyed Cox’s pit, the address of the surveyor and the results of the survey. Response: CG Contracting Undertaking No. 29 Produce any communication with the county with respect to the construction of the road from Mr. Cox’s property. Response: Information is in the possession of Ryan Cox; he refuses to disclose the same. Undertaking No. 30 Determine how long the road that was built. Response: Information is in the possession of Ryan Cox; he refuses to disclose the same. Undertaking No. 31 Advise whether Mr.

Cox or his son had any communications with the provincial government concerning the set up or operation of the gravel pit. Response: Undertaking No. 32 Advise when Cox Contractors began operations of the pit and created stockpiles. Response: Stockpiles were created when crushing. Undertaking No. 33 What quantity of gravel was used on the road? Response: 350 m3 Undertaking No. 34 Produce any written agreement involving construction of the road. Response: Agreement has not yet been located. Undertaking No. 35 Advise how much Mr. Cox owes his son and provide the basis for that calculation. Response:

Undertaking No.36 Produce the contract between Cox Contractors and MD of Big Lakes. Response: Enclosed Undertaking No. 37 Advise how much material Cox Contractors sold to the county. Response: See Undertaking 39, enclosed. Undertaking No. 38 Produce the weigh scale tickets that Cox Contractors has. Response: Still locating. Undertaking No. 39 Produce the invoices for Cox Contractors’ sale of gravel to other parties. Response: Enclosed Undertaking No. 40 Produce information as to how the source of gravel is identified for invoicing purposes.

Response: Driftpile pit Undertaking No. 41 In relation to Cox Contractors’ dealings with the county, advise the amount of tonnage that was sold to them and particulars of payment. Response: Still locating Undertaking No. 42 Produce a copy of the tender with the MD of Big Lakes with backup calculations; backup invoices for any costs with respect to the cost of production of the gravel. Response: See Undertaking 36. None found. Undertaking No. 43 With respect to the previous Undertaking, provide particulars of Ryan Cox’s costs. Response: Information is in the possession of Ryan Cox.

Undertaking No. 44 With respect to the previous Undertaking, provide particulars of third party costs. Response: Information is not in the possession of the Defendant. Undertaking No. 45 Provide the contracts that Cox Contractors has for any third party for the supply of gravel as well as any invoices submitted. Response: Undertaking No. 46 Provide particulars of any cash sales of gravel from this project. Response: There are no cash sales. Undertaking No. 47 [Refused] Response:

Undertaking No. 48 Does the equipment in the photograph marked Exhibit D-12 belong to Cox Contractors of Ryan Cox? Response: Cox Contractors Undertaking No. 49 Confirm whether the two pits are on one parcel of land or two parcels of land; if they are on more than one parcel of land. Response: The pits are on the same parcel of land. Undertaking No. 50 Produce the deposit slip referred to in Undertaking No. 5. Response: Cannot locate Undertaking No. 51 Produce any record which would disclose if or when Mr. Cox sent a copy of the sale agreement between Precision and Cox to David Shynkar.

Response: No records located. Undertaking No. 52 Produce telephone numbers of Cox Contractors’ clients to determine what phone communications occurred between Kevin Cox and Mr. Shynkar’s office. Response: 780-523-4458;780-523-6264 Undertaking No. 53 Produce a more responsive answer to Undertakings 15 and 16 if any records are located.

Response: No records located. [ 7 ] The responses of Kevin Cox provided the morning of May 24, 2013 to legal counsel for the Plaintiff when this matter was first before me to have the Defendant’s defence struck are as follows: Undertaking Answer 23 3/26/10 Produce the lease between Cox Contractors and Ryan Cox with respect to the use of equipment 6/22/10 Outstanding 7/19/12 If the lease cannot be located, the particulars of the lease, including date, terms of payment, and equipment involved. 8/10/12 Agreement has not been located.

It would have been in or about April-May, 2005 and involved lease of excavation equipment. Without a hardcopy of the agreement, Defendant does not recall and cannot speak to terms of payment. 11/16/12 To provide copies of any records relating to the lease Agreement with Kevin Cox or Cox Contractors Ltd.

Relating to a gravel operation on lands set out in paragraph 3 of the Amended Statement of Claim, cancelled cheques with respect to payments on the Lease, invoices or records with respect to what equipment or materials were involved in the Lease that relate to the costs of gravel operations on the said lands. 1/17/13 3/26/10 Produce a copy of the gravel royalty agreement that Mr. Cox entered into with his son. 6/22/10 Gravel royalty agreement could not be located.

27 7/9/12 In the event that the gravel royalty agreement in writing cannot be located, the full particulars of the gravel royalty agreement shall be provided including price per ton, date of agreement and any amendments with respect to changes in royalty rates. 8/10/12 The agreement was signed in 2005. The royalty was based on what the Crown would charge. To best of the Defendant’s recollection, that rate was approx. 60 cents for every cubic meter. Payment would be a family trade off to better the farmland. 31 3/26/10 Advise whether Mr.

Cox or his son had any communications with the Provincial Government concerning the set up or the operation of the gravel pit. 6/22/10 Outstanding 7/9/12 Provide particulars of any communications with the Provincial Government including any supporting documentation that they have received in relation to the setup.

Operation of the gravel pit, including any bonding and communications in respect to the reclamation of the pit or pits. 8/10/12 There were no communications with the Provincial Government in respect to the setup or reclamation of the pit or pits. 3/26/10 Produce any written agreement involving the construction of the road 6/22/10 Agreement has not been located 34 7/9/12 Provide the written copy of the agreement with respect to construction of the road and in the absence of locating the same, to provide full particulars with respect to the terms of the agreement including price, length of road costs, quantity of gravel used in relation to construction of the road and any documentation associated with respect to that arrangements, including any lease of equipment to or from Kevin Cox to his son, Ryan Cox, with respect to construction of the road. 8/10/12 No written agreement or associated documentation has been located.

Agreement with respect to construction of the road was possibly entirely verbal. Price per tonne would be equal to what the Provincial Government would charge.

Cost to construct the road was approx. $350,000.00 11/16/15 To provide particulars of all costs associated with respect to the construction of the road on lands set out in paragraph three of the amended statement of claim, including payment of wages, payments of equipment, fuel costs, survey costs, and any other documents or records to support the cost of constructing a road in the amount of $350,000.00 including records relating to the details of the road such as length, width, manner of construction and any contracts. 1/17/13 35 3/26/10 Advise how much Mr.

Cox owes his son and provide a basis for that calculation 6/22/10 Outstanding 7/9/12 Provide particulars of the monies that are owed by Kevin Cox to his son, Ryan Cox, and the basis for the calculation as it relates to the road, gravel production or sales in relation to the lands in subject to this litigation 8/10/12 Monies owed to Ryan Cox totals approx.. $450,000.00 This is for road construction and pit works. Price per tonne would be equal to what the Provincial Government would charge.

11/16/12 To provide all records including any computer printout records, financial statements, invoices, records of any type and nature that would relate to the testing for presence of gravel and the production of gravel for sale in relation to the lands that are set out in paragraph 3 of the amended statement of claim totaling a cost of $450,000 of which $350,000 is for the alleged cost of the road. 1/17/13 36 3/26/10 Produce the contract between Cox Contractors and MD of Big Lakes 6/22/10 Enclosed 7/9/12 Produce a copy of the contract between contractors and the MD of Big Lakes – to the extent that it has not been provided to date. 8/10/12 Enclosed (Attachment “A”) 38 3/26/10 Make available the weigh scale tickets that Cox Contractors has 6/22/10 Still attempting to locate. 7/9/12 Provide the weigh scale tickets that Cox Contractors have with respect to gravel removal from the lands to June 20, 2012. 8/10/12 Cannot provide scale receipts.

Scale is not in use.

The scale was only used for MD of Big Lakes Gravel Supply Contract and after that the load transmitter was stolen. 11/16/12 Copies of any weigh scale tickets that he has in his possession regarding the gravel removes from the subject lands of Kevin Cox or other records or measurements. 1/17/12 39 3/26/10 Produce the invoices that Cox Contractors sent out to customers in relation to the sale of gravel. 6/22/10 Enclosed (Attachment “B” – record generated 6/11/10) 7/29/12 Produce the invoices for the sale of gravel to all third parties to the present date of June 20, 2012. 8/10/12 With new computer system in place Defendant is unable to track gravel sold to all third parties.

Attachment “B” is again provided. 41 3/12/10 In relation to Cox Contractors’ dealings with the County, advise as to the amount of tonnage that was sold to them and any particulars of payment that Cox Contractors received. 6/22/10 Still locating these particulars 7/9/12 Provide particulars with respect to the dealings of Cox Contractors Ltd.

With the County of Big Lakes including copies of any contracts, the amounts of tonnage sold to the County, particulars of invoices and payments. 8/10/12 Enclosed (Attachment “C”) 11/16/12 To provide records as it relates to the invoices and tonnage of gravel sold to the municipal district of Big Lakes by Kevin Cox and any company is associated with including Cox Contractors Limited in relation to the lands which are set out in paragraph 3 of the Amended Statement of Claim 1/17/13 3/12/10 Provide particulars with respect to Ryan Cox’s costs. 6/22/10 Information is in the possession of Ryan Cox 43/44 7/9/12 Provide particulars of Ryan Cox’s costs that Kevin Cox is claiming in relation to the cost of gravel produces and/or the sale of gravel. 8/10/12 Despite Defendant’s best efforts, this information has not been provided by Ryan Cox. 3/12/10 Provide particulars of third party costs 6/22/10 Information is not in the possession of the Defendant 7/9/12 Particulars of third party costs which Plaintiff is claiming in relation to the crushing of gravel or the sale of the same 8/10/12 Information is not in the possession of the Defendant.

Question is unclear.

11/16/12 To provide the full particulars of the cost that Kevin Cox has incurred in relation to the cost of gravel production and/or the sale of gravel from January 1, 2007 to the present time by way of all-time records and other documents he has in his possession and control. Analysis of the Undertakings in Conjunction with the Court Orders [ 8 ] The first set of answers provided by the Defendant Kevin Cox reveals the following: a. Undertaking No. 18 requires Cox to produce the Tolko Agreement and communications between Cox and Tolko. The Agreement with Tolko was never provided by the Defendant.

Rather, it was provided by Tolko. Kevin Cox does not produce one email, letter, or other document, relating to what is a $500,000.00 transaction sale of timber. b. Undertaking No. 19 relates to producing documents on his acquiring the lands relevant to the closing. Kevin Cox was re- examined on the issue of producing documents showing how he acquired the properties that were the subject matter of sale from his brother. Even though he would have had legal counsel complete the transaction between himself and his brother, again, nothing was produced. c.

Undertaking No. 20 is not answered except by rhetorical question as to what deal with Tolko is being reference. There was only one transaction involving a sale of timber by Cox to Tolko. d. Undertakings No. 23. 24. 25, 27, 29 and 30 are all relevant questions to issues in dispute and either they have not been answered, or, the answer is that Ryan Cox is in possession and unwilling to produce the same. Ryan Cox’s lawyer in Court advised he had no such documents. e.

Undertakings No. 24 and 25 refer to the existence of reports, yet Kevin Cox will not produce them and Ryan Cox, through his legal counsel, represented in Court before Justice Burrows, that their client had absolutely no records in relation to this matter. f. Though not pursued further by the Plaintiff, Undertaking No. 28 was to provide the name, address and the results of the survey. The only information that was provided was the name of the survey company. The results of the survey on the property is the most important document and it is not produced. g.

Undertaking No. 30 is another answer which Cox defers to his son as the particulars of the gravel road. His son then represents through his legal counsel in Court that he does not have such information. This would be a simple case of measuring the road. Clearly Kevin Cox has some information on it as Undertaking No. 33 is answered with respect to the quantity of gravel used on the road. While the quantity would no necessarily establish the length of the road, it at least established that he knows what road we are talking about; namely, the road what was used for the exiting of the gavel from the property.

This goes to the issue of $350,000.00 in costs Kevin Cox is claiming for the road. h. Undertaking No. 32 is another example of a vague answer. He was asked when the gravel operations began and stock piles were created. It is clear that a date was intended in relation to an answer. The answer is simply that stock piles were created when crushing began which is obvious. i. Undertaking No. 34 requests the agreement for the road construction but Kevin Cox states he cannot locate it.

When this is pursued further in Court as to costs, the global amount of the costs of $350,000.00 without any breakout or any substantiation is provided. j. Undertaking No. 35 again is a question involving Kevin Cox’s son as to how much is owed between these family members. The critical part of the question was to “provide the basis for the calculation.” This question has never been answered notwithstanding the multiple Orders issued. No particulars have been provided except a global amount of $450,000.00 for the road and gravel work. k.

Undertaking No. 36 and 39 relate to the contract with the Municipal District of Big Lakes and producing invoices for the sale of gravel. The contract with Big Lakes was provided but no invoices. The answer to Undertaking No. 39 is impossible to understand. It does not contain invoices to establish amounts received by the Defendant. l.

Undertaking No. 41 was never answered even in the answers that were submitted on May 24, 2013 by the Defendant. [ 9 ] It is noted that the Order of Justice Stevens dated July 8, 2012 directed the Application for Contempt be adjourned sine die , the Defendant was order to pay $500.00 in costs and answer the undertakings in 10 days.

This is consistent with the Court’s policy of attempting to encourage the Defendant to answer the undertakings. [ 10 ] Paragraph 3 of the Order of Justice Stevens required Kevin Cox to answer within ten (10) days from the date of the Order, a number of undertakings which are set out therein. The answers that were provided to legal counsel on May 24, 2013 are made just prior to the initial application before me. The Plaintiff’s legal counsel only received the legal argument dated June 21, 2013 but it was never sent until July.

When the Brief was received there were two additional pages attached at that time, being pages 10 and 11. The two pages were not attached and made available to the Plaintiff’s counsel for the application on May 24, 2013. [ 11 ] It is also noted that even though the Order of Justice Stevens is dated July 8, 2012, and directed that the answers be provided within ten (10) days, nothing was provided until August 9, 2012.

[ 12 ] Further attempts to address the continuing deficiencies and to encourage legal counsel and/or Kevin Cox to properly comply with the Order of Justice Stevens were directed to legal counsel on September 6, 2012. This letter was not responded to by legal counsel for the Defendant. [ 13 ] In a further effort to attempt to get answers to the undertakings, Mr. Stachnik requested a meeting with legal counsel for Kevin Cox on September 28, 2012.

There was no response provided and this prompted the further Application before Justice Burrows in November of 2012. [ 14 ] Kevin Cox in his examination states there is an agreement between himself and his son that relates to equipment and materials utilized to construct a road, excavate the gravel pit and to deal with the gravel crushing. A copy of the lease was requested. Kevin Cox was ordered by Justice Stevens to provide particulars of the lease including the date, terms of payment, and equipment involved.

This undertaking has not been answered, nor has the specific particulars set out in Justice Stevens Order (paragraph 3(

a) been provided in any meaningful way. The terms of Justice Stevens Order are repeated in the Order of Justice Burrows dated November 16, 2012 at paragraph 2(a). A reading of the answer provided by the Defendant clearly establishes it is not a fit and proper answer to undertaking 23 or responses to Justice Stevens Order (paragraph 2(

a) or Justice Burrows’ Order. [ 15 ] In Undertaking No. 34 Kevin Cox is making a claim for the costs of constructing a road on the property for gravel removal of $350,000.00. If true, this figure would reduce the amount of revenue or profits from the sale of gravel.

Both Justice Stevens, at paragraph 3(d), and Justice Burrows, at paragraph 2(b), make it clear that in the absence of locating the agreement, particulars of all costs are to be provided including payment of wages, payment for equipment, fuel costs, survey costs, and any other documents or records to support the cost construction of a road in the amount of $350,000.00 including records relating to the details of the road such as length, width, manner of construction and any contracts be provided. It is inconceivable that not one record exists in conjunction with this.

Justice Burrows issued a follow-up Order after lengthy argument, and no response has been provided by the Defendant. [ 16 ] Undertaking No. 35 relates to the accounting between Kevin Cox and his son, Ryan Cox. The total amount relating to accounting is for $450,000.00, a portion of which presumably relates to the road construction with the balance relating to pit works. There is no improvement to the answer to Undertaking No. 35 after the Order of Justice Burrows. [ 17 ] The Plaintiff had attempted to go in multiple directions to attempt to get some measure of accounting from the Defendant on the gravel removed.

They sought the weigh scale tickets under Undertaking No. 38. The first answer was “still attempting to locate”, and then the answer changed to “cannot provide the scale receipts”. The absence of scale receipts emphasized the importance of invoicing records, deposit records or other information relating to the revenues generated from the sale of the gravel by Kevin Cox. [ 18 ] Undertaking No. 39 as per the Order of Justice Stevens was to produce invoices for the sale of gravel to all third parties to the date of June 20, 2012. It is an incomprehensible document and is certainly not invoices.

Further the date on the document is shown as June 11, 2010. This is approximately two years short of what information was directed to be provided. Further, the actual information contained only provides information to November 12, 2009. A careful review of this document establishes that there is not one invoice produced or deposit record. This is not an answer or proper record to support an answer. [ 19 ] Undertaking No. 43 requests particulars with respect to Ryan Cox’s costs regarding the road and gravel works. Legal counsel for Ryan Cox advised the Court that he has no such records.

If a claim is being made for costs of gravel removal, Kevin Cox clearly must know the amount and the basis for the same. He would need such expenses for income tax purposes. [ 20 ] Undertaking No. 44 was to provide any third party costs which Kevin Cox is claiming in relation to the crushing of gravel or the sale of the same. This has never been responded to in any fashion. [ 21 ] Undertaking No. 45 is a request to provide contracts that Cox contractors may have for any third party sales of gravel.

While the answer purports to attach records, there was nothing ever provided. [ 22 ] Justice Burrows ordered Kevin Cox provide a

summary of the total revenues, total expenses, and a list of documents held by him regarding the gravel operations at paragraph 3 of his Order. The first time legal counsel for the Plaintiff saw pages 10 and 11 was on August 28, 2013. There is no meaningful list of documents.

The document provided May 24, 2013 ended at page 9 with references to expenses and revenues, but no particulars whatsoever. [ 23 ] Legal Counsel for the Defendant was aware of the request for total revenues, expenses and a list of the documents, as per the e-mail trail dated November 16, 2012, which was the morning Counsel was to appear in Court before Justice Burrows. [ 24 ] Kevin Cox has by his conduct, delayed the trial of this action. Numerous courtesies were extended to his counsel by delaying the filing of the application.

A month later the Order of Justice Burrows was still not returned by Counsel for the Defendant. Legal counsel for the Plaintiff requested the opportunity to attend at the offices of Ali Moughel to pick the Order up. Notwithstanding numerous phone calls and e-mails, the Plaintiff could not get the Defendant to comply with the Order of Justice Burrows. An example of this is an e-mail trail dated March 11, 2013 where there was a promise to provide materials by legal counsel for the Plaintiff but nothing forthcoming. Another example is the Application before me on May 24, 2013.

The Plaintiff’s counsel sent out the Order in May but it was never returned back until June 20, 2013. [ 25 ] It is significant in relation to this Application that the Order of Justice Stevens and Justice Burrows refer to the same Undertakings.

Undertakings number 23, 34, 35, 36, 41, 43 and 44 are referred to in both Orders as being required to be addressed by Kevin Cox. [ 26 ] In relation to the Application before Justice Burrows, one of the issues that arose is that in conjunction with the Answers to the Undertakings provided in response to the earlier Order of Justice Stevens, some of the purported answers made reference to the fact that Ryan Cox was in possession and control of documents or records relating to the costs of developing the grave pit and road. Ryan Cox is Kevin Cox’s son.

For example, Undertaking 43 was to provide particulars of Ryan Cox’s costs that Kevin Cox was claiming in relation to the costs of gravel production and sale of gravel. The response as of August 10, 2012 was “despite the Defendant’s best

efforts, this information has not been provided by Ryan Cox”. Similar answers were provided for example in relation to undertaking 41with respect to the dealings of County of Big Lakes where the reference was that the materials were in the possession of Ryan Cox.When this application was argued before Justice Burrows, Ryan Cox retained his own counsel and successfully argued that he had nosuch records. Therefore the matter needed to be addressed by Kevin Cox in terms of a full response.

The claim against Ryan Cox wasbased on the production of relevant records in the hands of a third party, but it was denied by Justice Burrows. [27] As a result of the foregoing default of the Defendant, the Plaintiff has been left frustrated with respect to trying to get any kindof information as to revenues received from the gravel sales and the costs of the road and gravel removal to address the issue of a claimfor damages. Further the Third Party has no information to properly quantify their potential liability.

There is an agreement on the recordthat parties adverse in interest have the full right to use all transcripts. Relevant Law [28] In Koerner v Capital Health Authority, 2011 ABQB 191 the Court establishes the following elements of civil contempt in acase where the contemptuous behaviour is a breach of a Court Order at paragraphs 43 and 44 which read: 43 The requirements for finding civil contempt were outlined in Point on Bow Development Ltd. v. William Kelly & Sons PlumbingContractors Ltd., 2006 ABQB 775, 405 A.R. 1, where Rooke J. (as he then was) noted (at para. 19) that there must be: • 1.

An existing requirement of the court; • 2. Notice of the requirement to the person alleged to be in contempt; and • 3. An intentional act (or failure to act) that constitutes a breach of the requirement. This should be without adequate excuse, inaccordance with Rule 703(1)(a). 44 A judge must be satisfied beyond a reasonable doubt that each of these elements have been met in order to make a finding ofcontempt. Moreover, the decision to find a party in contempt is within the court's discretion (Metropolitan Life Insurance Co. v.

Hover,1999 ABCA 123 at para. 10). [29] The standard of proof in civil contempt is proof beyond a reasonable doubt. Civil contempt is composed of two elements –the required mindset, and the required action ie: an actus reus and the necessary mens rea. Wong v Booker, 2009 ABQB 1369 atparagraph 2, 10 and 11 states this as follows: 2 The application is denied: even civil, as opposed to criminal, contempt must be proved beyond a reasonable doubt. Contempt iscomposed of two elements - the required mind set and the required action.

Here, the applicants have proved that the court's orders werebreached; they have therefore proved the action, or actus reus, component of contempt beyond a reasonable doubt. ... 10 Contempt, both civil and criminal, must be proved beyond a reasonable doubt. 11 Contempt is composed of two elements, having the necessary mind set, or mens rea, and having committed the necessary act, oractus reus. [30] The standard of proof required herein is also discussed in Schitthelm v Kelemen, 2013 ABQB 42 at paragraphs 41 to 43: 41 For the accuser to prove a breach of an existing requirement in a court order, they must prove the existing requirement.

The actusreus of the breach constitutes the action in breach of the court order or the failure to perform

an act that the court order requires. Themens rea is the alleged contemnor's intention to commit the prohibited act or the intentional, willful or reckless failure to perform therequired act. 42 Authority for the mens rea in mandatory court orders is found in the remarks of Côté JA in Michel v. Lafrentz, 1998 ABCA 231 atpara 21, 219 AR 192, where he says: "[w]here someone is ordered by the court to do something, he or she must use a sufficient degree ofdiligence to perform, or to have the act performed". This quote is cited with approval by a panel of the Alberta Court of Appeal in Brodav.

Broda, 2004 ABCA 72 at para 7, 346 AR 372. 43 In many cases, a court may infer the mens rea from the contemnor's actions and the surrounding circumstances, but this is notalways the case. What is important, however, is that the accuser prove the actus reus and the mens rea: Calgary (City) v. Chisan (2002),32 MPLR (3d) 256 (Alta QB) [Chisan]. If there is a lack of clarity in the existing requirement, the accuser might fail on one or the otherof these elements.

Later, this Court will discuss the standard of proof that the accuser must meet. [31] Sloppy practice may not be contempt as discussed in Miller v 32807 Alberta Ltd. (1986), 1986 ABCA 123 , 70 A.R.303 (C.A.), the Defendant failed to provide adequate responses to undertakings given at discovery [as required by an order]. Stevenson,J.A. for the Court stated as follows at paragraphs 2 and 3: “material before the learned chambers judge was, to say the least, skimpy. There were responses given to the undertakings. The Plaintiffconsidered those responses to be inadequate in the sense that ‘clarification’ was required.

Reviewing the material before the chambersjudge it would be impossible to say whether the order had been complied with. We are told that the chambers judge expressed grave concerns about the failure of the Defendant’s solicitor to respond to the

correspondence about the clarification. Those facts would not, however, justify this order on this notice of motion. Striking out the defense and permitting the default judgment is a drastic remedy, for what it is, in reality, sloppy and unacceptable practice as distinct from contempt.” [Emphasis added.] [ 32 ] Rule 10.52 provides that a person may be found in civil contempt if he has complied with an Order of the Court or has not observed an Undertaking given to the Court. [ 33 ] Rule 10.53 is relevant with respect to addressing the issue of punishment for civil contempt of Court. Rule 10.53(d)(

i) provides that a pleading may be struck out in appropriate circumstances, although any Order can be made given the Court’s inherent jurisdiction with respect to contempt. The Defendant’s Argument Undertaking No. 23 – Lease Agreement re: Gravel Operation [ 34 ] In his response of August 10, 2012, the Defendant stated that the lease agreement could not be located. This, in essence, would answer the original agreement could not be located. This, is essence, would answer the original undertaking to simply produce the lease itself.

The Defendant did volunteer certain details regarding the lease to the best of his recollection. The Order of Justice Burrows was to provide records ancillary to the lease, such as cancelled cheques or invoices. The Defendant cannot locate these records and has replied accordingly. [ 35 ] The Plaintiff is unhappy that it has not been provided these records, and elucidates the importance such documentation would have to Precision Forest’s claim. Such considerations are not relevant to the issue of whether the Defendant has answered the Undertaking at issue.

The Plaintiff’s dissatisfaction with the content of that response does not change the fact that the Undertaking has been addressed. Undertaking No. 34 – Costs for Access Road [ 36 ] Again, the original undertaking was simply to produce any written agreement involving construction of the road. As the road construction contract was between Mr. Cox and his son, the Defendant’s evidence that there was no written agreement is reasonable. [ 37 ] As the most recent response to this Undertaking, the Defendant has again provided as much as he can in the way of detail sought by the Plaintiff.

The Plaintiff reiterates displeasure at the lack of documentary record, but the evidence of the Defendant on this point has remained consistent since such the Undertaking was first answered two and half years ago. Undertaking No. 35 – Records re: Testing for Gravel [ 38 ] This Undertaking elucidated in the Order of Justice Burrows bears little resemblance to the Undertaking No. 35 originally requested during Questioning in March of 2010.

The original questions of how much money Kevin Cox owed to his son in relation to gravel and access development of the Property was answered on August 10, 2012. [ 39 ] Kevin Cox has stated that the records at issue are in the possession of his son, Ryan Cox. The Plaintiff’s application to compel Ryan Cox to produce these records was denied. Undertaking No. 38 – Weigh Scale Tickets (incorrectly recorded as Undertaking 36 in the Order of Justice Burrows)/Undertaking No. 41 – Records re: Gravel Sold to MD of Big Lakes [ 40 ] These Undertakings were answered on August 10, 2012.

In lieu of weigh scale tickets, the Defendant has provided a

summary of gravel tickets that he was able to locate, which would provide some data as to the gravel sold. This

summary detailed sales of gravel to the MD of Big Lakes. [ 41 ] The Plaintiff takes issue with a perceived lack of information to calculate the gravel that it suspects was sold to the Municipal District of Big Lakes, for instance, and seeks to hold Kevin Cox in contempt as a consequence of this alleged disappointment, but paragraph 4 of Justice Burrows’ Order stipulates that the MD of Big Lakes was to provide all pertinent records within 45 days.

In that regard I note that the answers provided by the MD of Big Lakes as to the significant amount of gravel sold to them by the Defendant reinforces the extent of the contempt given the non-responsiveness of the Defendant’s Answer to Undertaking, or worse the extent of his misleading Answers. [ 42 ] The Defendant however submits that this approach of a Plaintiff taking the initiative to doing whatever is necessary to uncover evidence required for substantiation of a claim, is preferable to threatening a Defendant with contempt should he fail to produce material the Plaintiff desires.

Conclusion [ 43 ] Undertaking 23 was to provide the lease between Kevin Cox and Ryan Cox and “if the lease cannot be located, particulars of the lease, including date, terms of payment and equipment involved.” The response provided is not fully responsive. The last answer provided was August 10, 2012 gave no details of the terms of payment, equipment involved, or otherwise. This made it impossible for the Plaintiff to determine what the costs allegedly being claimed by Ryan Cox and/or Kevin Cox are for the excavation, crushing and sale of the gravel.

Such costs are relevant in terms of the damage claim, and there is a claim for the sale value of the gravel removed. Any sales would have to include a deduction for reasonable costs associated with respect to the same. The Plaintiff is unable to test the reasonableness of any claim for costs as no particulars are provided and certainly no documents or particulars provided. [ 44 ] Undertaking 34 has not been answered in any meaningful fashion. Again, there is no answer provided subsequent to the Order of Justice Burrows. Kevin Cox simply provides for a number for road construction of $350,000.00.

There is no indication of the length

of the road, width of the road, how the road was built, or the equipment which was utilized.

The Undertaking contemplated that in the absence of producing any kind of written contract, the full particulars need to be provided including the “price, length of road, costs, quantity of gravel used in relation to the construction of the road and any documentation associated with respect to that arrangement, including any lease of equipment to or from Kevin Cox to his son, Ryan Cox.” There is not one document provided to support this substantial claim. [ 45 ] Further Undertaking 35 has not been answered in any meaningful fashion in response to Justice Burrow’s Order.

The undertaking was to provide particulars as to the amount of money owing between Kevin Cox and his son Ryan Cox. It would relate to the costs of the construction of the road and gravel removal. There have been no invoices to support a claim for $450,000.00 for road construction and pit works. [ 46 ] Undertaking 38 was to provide the weigh scale tickets for the removal of gravel. In the first answer identified June 22, 2010, Cox alleged he was attempting to locate the documents.

In a later Order compelling them to answer the Undertaking, his response is that he “cannot provide the scale receipts.” Neither the scale receipts nor any invoices or documentation whatsoever has been provided to address the production or sale of the quantity of gravel to the Municipal District at Big Lakes or to anyone. Again no invoices, deposit records, or bank statements to show what monies were received. [ 47 ] Undertaking 39 was to produce the invoices that Cox sent out to customers.

Notwithstanding removing gravel for in excess of five years, there is not one invoice that has been provided by Cox to any customer. The Defendant must have records of who its customers are, financial statements showing what the revenues are, and/or invoices, and Attachment B was too vague. [ 48 ] Undertaking 41 was to provide information with respect to the dealings with the Municipal District of Big Lakes as to what amount was sold to them and particulars of any payment. Again this Undertaking has not been responded to.

It is (or appears to be) a major sale of gravel involving Cox and he refuses to provide any details of what his revenues were. There is an attempt to answer which appears to be some type of a spreadsheet in response to the Order of Justice Stevens dealing with tonnage. However it is virtually incomprehensible and makes no reference at all to the Municipal District of Big Lakes sale.

Not one document is provided to response to “any particulars of payment that Cox Contracting received.” [ 49 ] Undertaking 43 and 44 have been responded to and are relevant to the issue of costs relating to the crushing of gravel and/or the sale of gravel. Undertaking 44 relates to issues with respect to any third party costs incurred in relation to the crushing of gravel.

Again, it has not been answered. [ 50 ] There have been unusual circumstances presented to the Court in relation to health issues involving legal counsel for the Defendant (for example attached as Appendix A at the end of these Reasons is my Order of August 14, 2013). There has also been some sloppy practice by Defendant’s counsel in this matter. However the Court is entitled to assume that Kevin Cox has received each Order and has been made aware of the applications since March of 2012. Certainly Mr.

Cox has nothing before the Court that indicates he is unaware of the Court Orders, or that it is all his counsel’s fault. Legal counsel for the Defendant cannot produce that which it has not received from the client.

I conclude that Kevin Cox has not provided material in compliance with the Undertakings and has not complied with the Orders of this Court of Justice Stevens and Justice Burrows. [ 51 ] A review of the Orders of Justice Stevens dated July 8, 2012 and Justice Burrows dated November 16, 2012; the history of the delays herein, as well as a review of the undertakings and the answers in conjunction with the Orders make it clear the Kevin Cox has not answered the undertakings in dispute.

While contempt is a serious finding that should only be made in the most extreme circumstance, I conclude that the alleged contempt has been made out. Remedy [ 52 ] In determining the appropriate remedy for the within contempt, I believe that it is important to remember the basic nature of this claim: a. On or about November 17, 2003, the Plaintiff Precision and the Defendant Kevin Cox entered into a written agreement for sale of the property from Mr. Cox to Precision Forest. b.

The Agreement was subject to the Plaintiff obtaining mortgage financing on or before December 15, 2003 and delivering written notice to the Defendant confirming that mortgage approval had been obtained. c. Pursuant to the terms of the Agreement, the closing possession date was December 10, 2003. Legal counsel acting for both Precision Forest and Kevin Cox on the matter, the Third Party David Shynkar, subsequently moved the closing date to January 30, 2004. d.

It was a term of the Agreement that time shall be of the essence, but Precision understood that Kevin Cox had to obtain full ownership of some of the lands before he could transfer title. Kevin Cox was responsible to provide a registrable transfer within a reasonable time of the first possession date. e. As it turned out, i. The Plaintiff did not provide written notice confirming mortgage approval by December 15, 2003; ii. The transaction did not close on January 30, 2004. Also mortgage documents were not finalized by then. iii.

Kevin Cox never asked Precision formally for an extension to the closing date, or made time of the essence. Ultimately he decided not to proceed to closing. iv. Numerous unsuccessful attempts by counsel David Shynkar were made both before and after the second proposed closing date of January 30, 2004 to have Mr. Cox sign the Transfer documents.

v. By the time Mr. Cox finally indicated on March 17, 2004 that he would not close, Mr. Shynkar already had in his possession allof the signed mortgage documents from Precision and their Lender needed to close the transaction. f. On or about March 19, 2004, the Plaintiff or its agent caused to be registered a caveat claiming an interest in the Propertypursuant to the Agreement. The caveat was registered at Land Titles on March 26, 2004. g. On December 30, 2004, the Plaintiff or its agent discharged the caveat it registered against the Property. h.

On March 24, 2005, the Defendant entered into a written agreement with Tolko Industries Ltd. whereby Tolko received timberrights to the Property. i. On May 6, 2005, the Plaintiff again had a caveat registered on title to the Property asserting an interest pursuant to the Agreement.On May 10, 2005 the Plaintiff filed a Statement of Claim commencing the within action. The Defendant filed a Third Party Notice asagainst Mr. Shynkar. j. The Defendant filed a notice of motion to have the Plaintiff’s action dismissed summarily.

The application was denied by JusticeBinder on March 10, 2006 in written reasons reported at 2006 ABQB 175. The Plaintiff’s cross application for a Preservation/InterimCustody of Property Order in relation to Tolko’s forestry of the Property was also denied. [53] Where compliance of the contemnor is the end to be obtained, a fine may be the most appropriate remedy. Where theobedience of the contemnor has been yielded or assured, the Court may award costs of the contempt proceedings against the offenderwithout further punishment.

In Michel v Lafrentz (1998), 1998 ABCA 231 , 68 Alta L.R. 140 (C.A.) Côté, J.A. stated asfollows at page 146: “...any kind of negligence [advertent or inadvertent, by omission or commission] is less blameworthy then deliberate defiance of a courtorder...furthermore, where the content consists of some type of failure to give the discovery, a hose of cases say that the object of theexercise is to secure the discovery, more than to punish. Sever punishments, such as

summary dismissal, or striking out a defence, havebeen later remitted after belated compliance, in a number of cases. Any kind of attempt to purge the contempt, or to apologize, is relevant.” [54] In this case I conclude that a fine will not achieve the Answers to the Questions the Plaintiff is seeking, given the lengthyprocess that has already occurred.

The Defendant has already effectively frustrated two Court Orders such that a third Court Orderdemanding Answers to the same questions will likely meet the same result. [55] In addition to the nature of the contemptuous conduct, in determining the appropriate remedy in response to a finding ofcontempt for breach of a court order, the court may consider factors including: a. whether the contemnor has admitted the breach; b. whether the contemnor has tendered a formal apology to the court; c. whether the breach was a single act of part of an ongoing pattern of conduct; d. whether the breach occurred with the full knowledge and understanding that it was a breach rather than as a result of a mistake orunderstanding; e. the extent to which the conduct of the contemnor displayed defiance; f. whether the order was a private one, affecting only the parties to the suit of whether come public benefit lay at the root of theorder; g. the need for specific and general deterrence; and h. the ability of the contemnor to pay. i. the sanction of contempt should be proportional to the personal responsibility of the person in contempt and to the seriousness ofthe contempt. [56] In the case of breach of Court Orders which prevents an opposing party from defending an action, it may be appropriate tostrike the pleading, but even this should be done on a gradual basis.

This type of escalating response is found in for example my decisionof S.W. v K.T., 2005 ABQB 298 where fines and double fines were first imposed because the Plaintiff was unresponsive andcontradictory with respect to Answers to the Undertakings, similar to the present case. The Plaintiffs in S.W. were forced to go directly totrial and had to live with their answers.

Similarly Kevin Cox is now stuck with his answers to the Questioning until trial, which couldprove to be a major problem for him. [57] In the present case, the Plaintiff has successfully established contempt which centers around not receiving information fromthe Defendant to advance their 8 million dollar claim. I conclude however that striking the Defence in this case would be too draconian inthese circumstances.

Unlike Statements of Claim that ultimately are struck because there is no claim required to be defended against, thisDefendant may actually have a defence (or a third party claim) regarding the Plaintiff’s fundamental claim that it failed to close on thesale. Even if the Defence was struck as is being requested by the Plaintiff, Precision would still have to proceed to an assessment trial ofsome type to prove its damages, which is the same position they find themselves in now.

Disposition [ 58 ] I conclude that the appropriate remedy for contempt in this case is to require Kevin Cox to immediately pay all fees and costs associated with this successful application by the Plaintiff and by the Third Party for contempt on a solicitor-client basis, given the delay and obfuscation his Answers have caused. The successful parties can provide their draft Bill of Costs for my consideration within 60 days. The Application to Strike the Defence, and Third Party Notice are dismissed without costs. Heard on the 24 th day of May and the 11 th day of September, 2013.

Dated at the City of Edmonton, Alberta this 23 rd day of September, 2013. Donald Lee J.C.Q.B.A. Appearances: Daniel C.P. Stachnik, Q.C. Miller Thomson LLP for the Plaintiff Kember Handzic Emery Jamieson LLP for the Third Party Ali Moughel Tarrabain Law for the Defendant Appendix A Rule 10.53 Clerk’s Stamp

COURT FILE NUMBER 0503-08080 COURT OF QUEEN’S BENCH OF ALBERTA JUDICIAL CENTRE Edmonton PLAINTIFF(

S) PRECISION FOREST INDUSTRIES LTD DEFENDANT(

S) KEVIN COX THIRD PARTY DAVID SHYNKAR DOCUMENT ORDER ADDRESS FOR SERVICE AND MILLER THOMSON LLP CONTACT INFORMATION OF Banisters and Solicitors- PARTY FILING THIS DOCUMENT 2700, Commerce Place 10155-1 02 Street Edmonton, AB, Canada T5J 4GB Phone: 780.429.1751 Fax: 780.424.5866 Lawyer’s Name: DANIEL C.P. STACHNIK, Q.C. Lawyer’s Email dstachnik@millerthomson.com File No.: 59491.4 DATE OF APPLICATION: August 14, 2013, 2013 DATE ORDER ISSUED: August 14, 2013 LOCATION WHERE ORDER WAS PRONOUNCED: Edmonton, Alberta NAME OF JUSTICE WHO MADE THIS ORDER: Justice D.

Lee UPON appearing in Court on August 14, 2013; AND UPON legal counsel for the Plaintiff and the Third Party advising the Court that no prior notice of this Application had been given to either of them; AND UPON the Court directing that certain correspondence forwarded by legal counsel for the Defendant, Kevin Cox, be provided to legal counsel: IT IS HEREBY ORDERED AND ADJUDGED : 1. Legal counsel for Precision Forest Industries Ltd. and the Third Party, David Shynkar, shall be entitled to file a Response to the submissions of Kevin Cox dated July 12, 2013 on or before August 30, 2013.

2. In the event that legal counsel for Kevin Cox wishes to file a further Response to the submissions set out in paragraph one, he shall do so on or before September 6, 2013. 3. This matter shall be set for formal argument in Special Chambers on September 11, 2013 at 2:00 pm. 4. The decision of Justice D. Lee with respect to striking out the Statement of Defence and Third Party Notice of Kevin Cox issued by way of a letter dated July 5, 2013, is hereby suspended until the Chambers Application set for September 11, 2013. 5.

Ali Moughel shall obtain a medical legal report from Dr. --- and shall provide the report directly to Justice Lee before August 30, 2013. Justice Lee shall thereafter consider whether the medical report be provided to legal counsel for the Plaintiff and Third Party. Justice of the Court of Queen’s Bench of Alberta Approved as to the Order granted: Daniel C.P. Stachnik, Legal Counsel for Precision Forest Products Ltd. Ali Moughel, Legal Counsel for Kevin Cox Kember Handzic, Legal Counsel for Third Party, David Shynkar