Mintage Financial Corporation v Altenhofen, 2014 ABQB 735

Court of Queen ’ s Bench of Alberta Citation: Mintage Financial Corporation v Altenhofen, 2014 ABQB 735 Date: 20141202 Docket: 0103 08894 Registry: Edmonton Between: Mintage Financial Corporation Plaintiff - and - William Altenhofen, 486203 Alberta Ltd., 759630 Alberta Ltd. carrying on business as W.J. Mountain Truck and Trailer Leasing, and Janice Altenhofen, Jeff Barton also known as Roland G. Barton also known as Roland Geoff Barton, Joan C. Barton and Geoff Lake Holdings Ltd. Defendants _______________________________________________________ Reasons for Judgment of W. S. Schlosser , Master in Chambers _______________________________________________________

[ 1 ] There are two questions in this case. First, whether unproved allegations of fraud merit an award of solicitor and client costs. The second question is whether it makes a difference if the action is dismissed for delay. [ 2 ] The Applicants, Janice Altenhofen and Joan Barton, succeeded in having the action against them dismissed under Rule 4.31 for delay. The application was argued just before Rule 4.31 was amended to incorporate a presumption of significant prejudice if inordinate and inexcusable delay were proved.

In this case, the Applicants proved not only inordinate and inexcusable delay but also significant prejudice. [ 3 ] The allegations against Janice Altenhofen were: 6 The Defendant Janice Altenhofen (“Janice”) is the spouse of the Defendant Altenhofen and resides with him at or near Calgary in the Province of Alberta. 29 The Defendants Altenhofen and Janice have unlawfully and fraudulently conspired and agreed to defraud the Plaintiff by reason of the misrepresentation made by Altenhofen to the Plaintiff.

Altenhofen and Janice have further conspired to defraud the Plaintiff and to prevent the Plaintiff recovering sums due to it under any judgment that may be granted. 30 In pursuant of the conspiracy, Altenhofen and Janice have caused to be placed in the name of Janice all property, real or personal, with the exception of certain shares in the Defendant 486203, in an effort to thwart the Plaintiff’s pursuit of judgment against Altenhofen. [ 4 ] The allegations against Joan Barton are as follows: 5 The Defendants Joan C.

Barton (“Joan”) . . . resides at or near Airdrie, Alberta. 5a Geoff Lake Holdings Ltd. (“Geoff Lake”) is a body corporate incorporated pursuant to the laws of the Province of Alberta and conducts business in the City of Calgary and elsewhere in the Province of Alberta and is owned by the Defendants, Joan and Geoff. 32 On or about July 6 th , 2001, the Defendant Geoff Lake transferred its interest in the Lands to its shareholders, Geoff and his spouse the Defendant Joan with a view to hinder, delay or prejudice the efforts of the Plaintiff and other creditors in the pursuit of their claims. [ 5 ] Attachment Orders against the property referred to above were obtained April 9, 2001 and March 11, 2002, respectively.

The property remained attached until the claim was dismissed for delay. Examinations for Discovery had been conducted in December 2002. [ 6 ] Mrs. Altenhofen’s property consisted of six lots in Calgary, once jointly owned by Kimco Enterprises Inc. and Geoff Lake Holdings Ltd. Janice Altenhofen worked as Kimco’s bookkeeper. In 2000 Kimco transferred its one half interest in the lots to her for unpaid wages. She had claimed these unpaid wages on earlier tax returns. Kimco was being wound up at the time of the transfer.

These were the lots that were frozen by the Plaintiff. [ 7 ] Geoff Lake Holdings owned the other half interest in the Calgary lots. That company was owned by Joan and Geoff Barton. Geoff Lake transferred a one quarter interest to Joan and a one quarter interest to Geoff. Geoff said this was done for tax purposes, on the advice of their accountant. Joan said it was to pay out her interest in Geoff Lake and for estate planning purposes. Janice Altenhofen [ 8 ] An unproved allegation of fraud does not necessarily lead to award of solicitor and client costs. In Hamilton v.

Open Window Bakery Limited , 2004 SCC 9 , [2004] 1 SCR 303, (per Arbour J.) we find: 26 . . . An unsuccessful attempt to prove fraud or dishonesty on a balance of probabilities does not lead inexorably to the conclusion that the unsuccessful party should be held liable for solicitor-and-client costs, since not all such attempts will be correctly considered to amount to “reprehensible, scandalous or outrageous conduct”. However, allegations of fraud and dishonesty are serious and potentially very damaging to those accused of deception.

When, as here, a party makes such allegations unsuccessfully at trial and with access to information sufficient to conclude that the other party was merely negligent and neither dishonest nor fraudulent (as Wilkins J. found), costs on a solicitor-and-client scale are appropriate: see, generally, M.M. Orkin, The Law of Costs, (end ed.(loose-leaf), at para. 219. [ 9 ] See also Northland Material Handling Inc. v. Parkland (County) , 2012 ABQB 586 , per Viet J., esp paras. 13-18 (and the cases cited there).

One of the issues is that the defamation privilege that attaches to allegations in a lawsuit makes the Plaintiff immune from a lawsuit based on what they put in their pleadings. This, and the seriousness of the allegations, places a heavy onus on the Plaintiff to plead responsibly or suffer the consequences in costs. [ 10 ] The allegations of fraud were not completely unfounded. William Altenhofen was convicted criminally of fraud. However, the case against Janice Altenhofen was much more attenuated. Despite the allegations of active involvement, the most the Plaintiff had was guilt by association.

In my view, it should have been clear from the time of the questioning in 2002 that no case in fraud could be made out against her. Joan Barton [ 11 ] The allegations against Ms. Barton are essentially that she was the recipient of property transferred to her as a preference. If there is a distinction to be drawn here, it is that Mrs. Altenhofen’s alleged fraud was active; Mrs. Barton’s was passive, by receipt.

[ 12 ] In Condo Corp. No. 0321365 v. 970365 Alberta Ltd. , 2011 ABQB 325 , Mr. Justice Hall found that there was no significant distinction between amending to add allegations of a fraudulent preference, and amending to add allegation of fraud. In both cases, there must be extraordinary circumstances and evidence in support. [ 13 ] With respect, I have some difficulty applying that principle to costs. In Mrs. Altenhofen’s case, she is accused of conspiracy and deliberate fraudulent acts. In Mrs.

Barton’s case, she is the recipient of property transferred to her, which, in the circumstances, had the effect of preferring her to other (potential) judgment creditors. [ 14 ] Whether something is a preference and is liable to be set aside is an operation of the Statute of Elizabeth , the Fraudulent Preferences Act or the Bankruptcy and Insolvency Act . There are many layers of decided cases. It is the effect that matters. Intent of the transferor is often inferred from what have been called ‘the badges of fraud’.

In my view, the same stigma does not attach to the recipient of preferential transfer for costs purposes unless it is also alleged that the recipient is actively involved. As noted, both Mrs. Barton, and Mrs. Altenhofen tendered evidence that provided a lawful justification for the transfers. I agree with Graesser, J. in Piikani Energy Corp (Re) , 2012 ABQB 187 , at para 97 , (though in a bankruptcy setting) when he said: [97] At the beginning of this analysis, it should be made clear that the term “fraudulent preference” is in many cases an overly-strong term.

A fraudulent preference is a reviewable transaction, not necessarily a dishonest one. The term gives a highly pejorative tone to claims against parties who have been involved in transactions that would have been of no legal consequence had the debtor not gone bankrupt three or twelve months later. It is a term that relates to the intention of the debtor in making the payment, not the creditor in receiving it. Some creditors receiving payments are unfairly tarnished by the term. The case was overturned on appeal but not on this point. In my view the comments are apt in this context. The starting point for Mrs.

Barton is not solicitor-client costs.

Does it matter that the action was struck out for delay? [ 15 ] I note that Madam Justice Kent in Burcevski v Ambrozic , 2011 ABQB 7 , at para. 6 , draws a distinction between cases in which a fraud claim is made unsuccessfully, and a claim that is struck out for an abuse of process, even if it is grounded in fraud and perjury. [ 16 ] In my view, Madam Justice Kent simply affirms the principle that a pleading of fraud does not necessarily lead to an award of solicitor and client costs if the pleading is not proved, but that the court, in the exercise of its discretion, ought to consider all of the circumstances.

As I see it, this is what the Open Window Bakery case and the Parkland case, cited earlier, are really telling us. [ 17 ] The allegations against Mrs. Altenhofen were that she deliberately and actively conspired to defraud the Plaintiff. In my view, it should have been clear at least by the time that examinations for discovery were conducted in 2002 that such a claim could not be made out. Nonetheless, the Plaintiff did not withdraw its allegations and it maintained its attachment of Ms. Altenhofen’s property for another 11 years.

In my view, these circumstances and this conduct justifies an award of solicitor and client costs for all steps taken after the questioning, and party-party costs before, which are to be assessed on notice. [ 18 ] The allegations against Mrs. Barton are milder. She too claimed a legitimate reason for the allegedly preferential transfer. It should have been apparent from the time of the questioning that the alleged preference and the basis for the attachment was very weak. In my view, the circumstances pertaining to Mrs.

Barton do not justify an award of solicitor and client costs but given the allegations and the attachment, costs on an elevated scale are warranted. Mrs. Barton’s counsel suggests costs on a scale of one and one half times the appropriate column and I agree. She will receive costs on this scale for all steps taken after the questioning and costs on the appropriate column before. [ 19 ] It was argued that there should be a doubling effect because of a formal offer made along the way.

The difficulty with this is that the formal offer was made on behalf of three Defendants, Geoff Barton, Joan Barton and Geoff Lake Holdings Ltd. for a blanket discontinuance without costs. It was made in 2012 and expressed to expire December 6, 2012. I would be content to consider a doubling effect if the offer had been made only on behalf of Mrs. Barton. [ 20 ] The successful Applicants are entitled to their costs of this application on the appropriate column. Dated at the City of Edmonton, Alberta this 2 nd day of December, 2014. W. S. Schlosser M.C.C.Q.B.A.

Appearances: Natasha Sutherland Duncan & Craig for the Plaintiff Jonathan Selnes, Burnet Duckworth & Palmer LLP for the Defendant, Janice Altenhofen James Wachowich, Wachowich & Company for Defendant, Joan C. Barton