Budd v MBE Jet Ltd., 2014 ABQB 778

Court of Queen ’ s Bench of Alberta Citation: Budd v MBE Jet Ltd., 2014 ABQB 778 Date: 20141223 Docket: 1101 13093 Registry: Calgary Between: Thomas Budd and Focus Energy Advisory Corporation Plaintiffs - and - M.B.E. Jet Ltd. and Marc Bombenon and M.B.E. Jet Ltd. as the General Partner of each of Friendship One Limited Partnership and Friendship Two Limited Partnership and Friendship One Limited Partnership and Friendship Two Limited Partnership Defendants _______________________________________________________ Oral Reasons for Judgment of the Honourable Madam Justice K.M.

Eidsvik _______________________________________________________ [ 1 ] I heard four applications brought by the parties to this action as case manager for the multiple actions arising out of the fallout from the purchase and operation of several jets and a helicopter. [ 2 ] M.B.E. Jet Ltd. (“MBE Jet”) went bankrupt in April 2013 and Mr. Marc Bombenon seeks to take over its action pursuant to

s. 38 of the Bankruptcy and Insolvency Act , R.S.C. 1985, c.B-3 (the “ BIA ”) against the various parties that have sued them (the “Investors”). The Investors oppose the application and in the alternative seek to have Mr. Bombenon post significant security for costs. [ 3 ] Certain investors (Mr.

Budd, his company, Focus Energy Advisory Corporation (“Focus”), MNM Travel Ltd. (“MNM”), Parkave Real Estate Investments Ltd. (“Parkave”), the Tsubouchis and the Moiseys ( who I will refer to collectively as “the Investors”) have brought applications to attach money held in trust resulting from the sale of a property owned by 744811 Alberta Ltd. (“744” - a company owned by Marc Bombenon Enterprises Ltd. (“MBE”) whose sole shareholder is Mr. Bombenon) and to attach a Hawaii property owned by the Bombenon Family Trust, pending the trial of these actions which is set in April 2015. The

Section 38 application [ 4 ] MBE Jet and Mr. Bombenon brought action 1101 17408 as against the Investors in December 2011 in response to the various actions brought by the Investors against them in the fall of 2011. The Investors complained that Mr. Bombenon fraudulently misrepresented the investment arrangement in the jets and helicopter, and generally misused his position (via MBE Jet) as a general partner and fiduciary and thereby fraudulent misappropriated funds and improperly took personal advantage of opportunities to the detriment of certain Investors. [ 5 ] Mr.

Bombenon denies that he misrepresented the investment arrangement, that he was entitled to the funds he gained in the purchase of the jets and helicopter as a fee for the services he provided, and that he has properly carried out his duties as an employee of MBE Jet, the general partner of two limited partners, and with respect to his personal and investment involvement with the jets and helicopter. [ 6 ] Mr. Bombenon alleges that the Investors improperly withheld funds for the operation of the jets and helicopter which led to the demise of MBE Jet and its ultimate bankruptcy. Mr.

Bombenon seeks compensation on behalf of himself and MBE Jet for the outstanding operation costs improperly withheld from the Investors and for MBE Jet’s future loss of profits. [ 7 ] Earlier, by agreement, I allowed Mr. Bombenon to take over the defence of MBE Jet in the various actions brought by the Investors. . [ 8 ] Mr. Bombenon argues that he has fulfilled all of the requirements pursuant to s. 38 of the BIA to pursue the MBE Jet claim against the Investors. These include that: 1. He is a recognised creditor by the Trustee of the MBE bankrupt estate 2. He has requested the trustee to take over the action 3.

The Trustee has not taken over the action citing financial reasons 4. A successful prosecution of the Investors will amount to a monetary gain to the estate, and 5. The action is not “obviously spurious”. [ 9 ] The Investors vehemently deny that Mr. Bombenon is a creditor of MBE Jet and claims that the action is “spurious”. Discussion and decision on the

Section 38 application 1. Is Mr. Bombenon a creditor of MBE Jet’s estate ? [ 10 ] The Trustee of MBE Jet’s estate has admitted Mr. Bombenon’s claim in the amount of $604,000. Mr. Bombenon has led evidence that this amount relates to advances to MBE Jet in shareholder loans, payments of operational costs for several months, and outstanding salary. [ 11 ] The Investors argue that these amounts are not properly accounted for and that the outstanding salary for Mr.

Bombenon is excessive and improper after MBE Jet ceased operations. . [ 12 ] I understand the Investors’ concerns that the accounting is not properly done. MBE Jet appeared to have accounting problems even during its existence as an operating company. The tax department was auditing its books. Many income tax returns had not been filed. Mr. Bombenon was not happy with the services of its accountant, PWC . The general ledger is not in order (that’s putting it mildly).

Its new accountant Catalyst was of limited assistance in its evidence in its affidavit and upon cross-examination as no audit has been completed by them. [ 13 ] The Investors have not led evidence yet about their expert accounting findings. [ 14 ] In my view, the applicant for a s. 38 application does not have to prove to the exact cent what amount is owing by the bankrupt estate at the time of its application. Nor does an approved claim necessarily answer the question. In exercising the Court’s discretion to allow the application it is reasonable to look behind the numbers in the Proof of Claim.

[ 15 ] Here, the shareholder advances have not been shown to be accurate according to the evidence led so far. I accept however that MBE Jet likely had to make payments for operational expenses for the jets and helicopter for a period after the Investors stopped paying and that since MBE Jet had no incoming cash it is reasonable to accept, for the purposes of this application, that Mr. Bombenon may have had to forward some of his own funds to allow MBE Jet to pay these expenses. The amount, if any, can be determined in due course. [ 16 ] Further, it is likely in the circumstances that Mr.

Bombenon would not have received his salary for a period of time as he has alleged. Again, to the extent that the Investors have some say over this salary, which I don’t need to decide now, the exact amount can be determined in due course. [ 17 ] Finally, it is to be noted that Mr. Bombenon has been allowed to continue actions on behalf of MBE Jet in two other actions by Justice Jeffery (as against former employees) and I have allowed Mr. Bombenon to step in and defend MBE Jet in the various actions brought by the Investors – all pursuant to s. 38 . So in effect Mr.

Bombenon has already been found to be a creditor in those Orders by this Court. [ 18 ] Accordingly, I agree that Mr. Bombenon is a creditor of the MBE Jet bankrupt estate for the purposes of this application. 2. Is MBE Jet’s claim spurious? [ 19 ] Our Court of Appeal in Smith v Pricewaterhousecoopers Inc 2013 ABCA 288 has recently reiterated that a s. 38 applicant must lead evidence about the merits of its claim and show that it is not “spurious” in that there is a threshold case sufficient to warrant the Court’s approval to proceed.

The bar is low. [ 20 ] There was significant ink spilled and oral submissions made on this point. The Investors argue that the claim is without merit and it’s a foregone conclusion that it cannot succeed. [ 21 ] More particularly, the Investors argue that in the circumstances, MBE Jet would not have been in a position to carry on with its business, and in any event, if it wanted to purchase new jets with new investors, there was nothing stopping it from doing so.

MBE Jet on the other hand argues that in light of the improper withholding of funds as it alleges, it could not continue to operate and that this action by the Investors crippled it from taking further steps in its operation. [ 22 ] Frankly, it is difficult to understand that MBE Jet could have continued successfully considering its customers’ serious concerns about the financial arrangements and operations conducted by Mr. Bombenon which were either fraudulent as the Investors allege, or at the very least very poorly communicated and understood.

Further, the tax returns filed by MBE Jet and financial statements show that MBE Jet consistently lost money. Having said that, the accuracy of these statements is in serious doubt. [ 23 ] As well, claims dealing with the damages arising from the seizures of aircraft appear to be poorly made considering the plethora of court orders, most by consent of Mr.

Bombenon, that authorized these actions and the Order of Justice Wilson dated April 4, 2012 that confirmed the seizures. [ 24 ] In sum, in my view the future loss of profits claim by MBE Jet is a very weak one. [ 25 ] If the action included only the loss of profit claim, I would have almost have been inclined to agree with the Investors that the action didn’t have ‘the merest chance of success’, however the action also includes a claim for loss of operating costs that are due and owing. [ 26 ] In that regard, one of the main investors in these actions is Mr. Budd.

He indicated in his evidence that he withheld operational amounts owing to MBE Jet when he became suspicious of accounting problems in early 2011. He had these funds placed in his lawyer’s trust account pending resolution of those problems. As we know, instead of these accounting problems being resolved, things escalated and more problems surfaced which ultimately led to these actions. [ 27 ] Nonetheless, it is acknowledged that these amounts from Mr. Budd, and from other investors, are owing and they do form part of the action in question. These amounts are several hundred thousands of dollars.

The Investors say that these amounts can be set off against the amounts they argue is owed to them from MBE Jet, which is likely correct. But in the interim, it cannot be said that these amounts owing, or the claim for them, is a “spurious” one. [ 28 ] I considered whether it would be appropriate to allow portions of claims to go ahead and disallow others. However, it does not appear to me that s. 38 deals with that at this stage.

Instead, if certain steps need to be taken in the litigation with respect to portions of the claim, it is better to do so more directly once the action is in play. [ 29 ] Accordingly, although portions of this action are very weak, I cannot conclude that the whole of the action is “spurious”. Conclusion on s. 38 application [ 30 ] Mr. Bombenon has met the criteria to take over MBE Jet’s action against the Investors and accordingly, I will allow his application in this regard. Security for Costs application [ 31 ] The Investors argue that if Mr.

Bombenon is allowed to conduct MBE Jets’ action, then he should post security for costs.

They say that the evidence discloses that there is a real risk that Mr. Bombenon may not be able to pay the costs of this action if he and the company are not successful at trial, which they suggest is likely. They seek costs to be posted in the amount of $388,000. [ 32 ] Mr. Bombenon argues that the Investors have delayed bringing this application for costs for two years and as a result should not be allowed to bring it so late, especially since the trial in this matter has been set. Mr. Bombenon is resident in Alberta and has significant assets.

Further, there is merit to the claim, the success of which can only be properly assessed after a credibility finding has been made by the trial judge. He suggests that the financial evidence does not support a finding that Mr. Bombenon dealt with the assets fraudulently and that any errors he or MBE Jet may have committed were “simply errors”. Finally, if costs are awarded they should only be for steps taken from now on and that the amount of costs requested to be posted is grossly overinflated.

Discussion and decision re Security for Costs [ 33 ] The Investors bring this application pursuant to Rule 4.22 and s. 254 of the Alberta Business Corporations Act , RSA 2000, c B-9 (the “ ABCA ”). Since MBE Jet is bankrupt however and I have allowed Mr. Bombenon to continue its action, the relevant rule is only Rule 4.22. This Rule has four factors that must be established by the applicant, subsections (

a) through (

d) of the Rule. The final factor is a general “any other matter”. If all of these factors have been satisfied then the Court must decide overall whether the Order is “just and reasonable” to allow (see Attila Dogan Construction. v AMEC Americas Limited , 2011 ABQB 175 at para 24 ).

a) and

b) Likelihood of enforcing a costs order against assets in Alberta and the ability of Mr. Bombenon to pay [ 34 ] The Investors acknowledge that Mr. Bombenon has significant assets that it is aware of including his residence just outside Calgary, several vehicles, shareholdings in several companies, and a property in Sicamous B.C.. However, they argue that Mr. Bombenon’s assets are heavily encumbered and that he has granted security over all of his present and after-acquired property to a third party lender. Further, Mr.

Bombenon has significant debt. [ 35 ] The Investors therefore argue that the costs of defending this action will be significant and therefore there is a real risk that a costs order would not be able to be enforced. [ 36 ] Mr. Bombenon on the other hand points to his significant assets both in and out of Alberta and as a longstanding successful member of the Calgary business community, the Investors have not met their onus that he will be unable to pay a cost order. [ 37 ] The costs of this action will be significant. The Bill of Costs attached as an exhibit to Mr.

Budd’s affidavit sets out costs in the amount of $595,000. However it was conceded in argument that the costs with respect to steps from now through trial are in the amount of $390,000 (in that approximately $205,000 have been incurred to date) and that an Order for security for costs should only be for the future portion of the costs to be incurred. [ 38 ] Further, some acknowledgement must be made for the fact that some of these costs will be incurred in the other actions as well so the Court will have to be aware of potential double counting.

Nonetheless – they will be significant. [ 39 ] The actions against MBE Jet and Mr. Bombenon by the Investors, if successful will result in significant damage awards – there are approximately $5 million in claims. [ 40 ] In sum, I share the Investors’ concerns that if they are successful in defending this action it will likely mean that they will be successful to a certain extent with their own action – whether it is based on fraudulent or poor practices of Mr. Bombenon. As a result, the claims including these costs will be significant. Mr. Bombenon may have assets but they are encumbered.

In light of the evidence that the assets were so encumbered, Mr. Bombenon failed to show to what amount they were – this evidence was in his hands and this failure leaves the Court with a concern that they are significantly encumbered, meaning that there will not be enough to satisfy a costs award. Accordingly, I am satisfied that the Investors have met the onus of showing that Mr. Bombenon would have difficulty in paying these potential costs as a result.

c) The merits of the action [ 41 ] I have already spoken about the merits of this action to a certain extent. Although a portion of it is strong, i.e. an amount owing for operation costs of the aircraft, that portion of the case will be determined likely in the other actions as a set off to the Investors’ claims for damages. The main part of this claim, i.e. the loss of future profit, is nebulous on its merits.

Defending the claim will require more accounting and business expert opinions than are needed in the Investors’ actions since the focus will be different (i.e. the potential business prospects of MBE Jet) and will require further witnesses. [ 42 ] It is not for this Court to decide whether the action will succeed or not in the end, but the overall merit of the defence needs to be taken into account in order to determine whether a costs award would be just and reasonable in the circumstances. Here, this factor weighs more heavily on the Investors’ side in my view.

d) Undue prejudice [ 43 ] Mr. Bombenon does not argue that he could not post security for costs but does suggest that he has been prejudiced by the delay in bringing this action leading him into a false sense of security that he would not have to post such costs. [ 44 ] I agree with the Investors that once MBE Jet went bankrupt in 2013 and the trustee did not seek the stay to be lifted in this action that there would be no pressing reason to bring a security for costs application. It is only when Mr. Bombenon sought to continue this action by way of the s. 38 application that the security for costs application became warranted. This application was brought shortly

after notice of the s. 38 one, so I am of the view that there has not been undue delay and there will not be undue prejudice to allow a costs order against Mr. Bombenon.

e) Other matters [ 45 ] As discussed above, the Investors are seeking $388,000 in costs to be posted by Mr. Bombenon. They seek this amount to cover costs for questioning, applications, case management attendances, preparation for trial, trial, transcripts and miscellaneous disbursements. They seek costs on column 5 tripled because of the amount claimed (over $30 million). [ 46 ] Mr.

Bombenon argues that the amount claimed is overstated since it doesn’t take into account the fact that many of these costs will be incurred as a result of the six other actions brought by the Investors and there needs to be some credit for that. In oral argument, Mr. Bombenon argued that a reasonable alternative would be about $200,000 costs for questioning, trial preparation, trial, based on double column 5, including $40,000 for disbursements.

He suggested that they divide the costs by six for a total cost of this action in the amount of $33,000. [ 47 ] In my view, triple column five is appropriate considering the amount claimed by Mr. Bombenon and MBE Jet in their Statement of Claim. [ 48 ] I accept Mr. Bombenon’s suggestion that there remains approximately 15 ½ days of questioning, so this cost would be $67,500. [ 49 ] The trial preparation cost would be $30,000, trial with second counsel would be closer to $250,000 for 14 days.

Transcripts may reach $40,000 and I note that no expert fees have been included, but I note that these may be significant and could easily be another $50,000. I will not include them since they have not been claimed. [ 50 ] From this point on, the six Investors’ actions have been consolidated with this action. Nonetheless each investor’s case is slightly different and will take individual time to deal with. Overall however the Investors claim is similar. Here the action is distinct and deals with a new line of inquiry – i.e. MBE Jet’s future profit claim.

In sum, I don’t believe that it would be fair to divide the costs in six but am of the view that a third, two third division is more reasonable. A third would be an amount of $130,000. [ 51 ] I want to add that this proposed cost order will not bind the trial judge in due course but these are my views for the purpose of this application only. [ 52 ] In sum, I agree that the claim made by the Investors for the amount to post is inflated at $388,000 and I am of the view that $130,000 is more reasonable.

Reasonable and just? [ 53 ] Having considered all of the factors in Rule 4.22, the final question is whether, in these circumstances, such an order is reasonable and just. [ 54 ] In my view, there is little merit to the largest and most complicated portion of this action. It will be time consuming to properly defend and the costs may be very difficult to realize on if successful. As a result, it is reasonable and just for Mr. Bombenon to post security for costs for the amount it will take to defend this action through trial, in the amount of $130,000. Mr. Bombenon will have 30 days to pay this sum into Court.

The 744 attachment application [ 55 ] Mr. Budd, Focus Energy, Parkave and MNM (the 744 Applicants) brought an application against 744 on May 20, 2014. This application was sparked by 744’s application to summarily dismiss the action against it. In the 744 Applicants’ application and initial brief filed May 23, 2014 it sought an attachment of the Proceeds pursuant to s. 17 of the Civil Enforcement Act, RSA 2000, c C-15 (the “CEA”) .

A portion of these Proceeds were paid out by consent to pay various debts of 744 and the remainder, $857,696.85, plus interest, remains in trust. [ 56 ] 744 is owned by Marc Bombenon Enterprises Ltd. (“MBE”), which is owned and operated solely by Marc Bombenon. As such the 744 Applicants argue that Mr. Bombenon indirectly is the sole beneficial owner of the proceeds. Based on what the 744 Applicants knew at the time this application was brought, they felt that they had a strong, relatively unopposed case against Mr. Bombenon and MBE Jet, with damages well in excess of the Proceeds.

Further, that considering the serious suspicions of fraudulent activity, they were very concerned that these Proceeds would be dissipated by Mr. Bombenon and put out of their reach pre judgement, like a fair amount of their original investments in the aircraft. [ 57 ] 744 filed a brief for the

summary dismissal application May 23, 2014 and assumed in there that if it won that application, then the funds would be released. Subsequently, after almost three years since Mr. Budd started raising questions about accounting issues, Mr. Bombenon filed a comprehensive affidavit replying to these issues in some detail. 744, Mr. Bombenon, and MBE Jet also filed a reply brief June 9, 2014 which incorporated the new evidence found in Mr. Bombenon’s new affidavit. [ 58 ] The application set for June 13, 2014 went ahead only with respect to the

summary dismissal application as against 744 which went by way of consent, but the attachment application was adjourned until the next available date for all parties, which was September 23, (and 24 as it turned out) 2014 to allow for the cross-examination on the new extensive affidavit of Mr. Bombenon. [ 59 ] Thereafter, by way of a Rebuttal brief filed on August 22, 2014, the 744 Applicants sought to attach the Proceeds as well by

way of an injunction and alternatively sought to attach Mr. Bombenon’s shares in MBE, or in the further alternative, Mr. Bombenon’s rights that flow from those shares to direct the financial management of the Proceeds. No further application was filed however seeking that relief. [ 60 ] A further brief was filed by Mr. Bombenon, MBE Jet and 744 and a further attachment application was brought (which I will deal with subsequently) on August 29, 2014. [ 61 ] In the second brief filed August 29, 2014, Mr.

Bombenon et al argued that the original application only asked for an attachment against 744 and since the action had been dismissed as against it, it was no longer a Defendant to the action and could not be a respondent to an attachment application and that the CEA does not allow attachment of the assets of a non-party. Further, they argued that there was no application against Mr. Bombenon with respect to his assets, therefore, there is no remaining basis to attach the Proceeds which are the property of 744. [ 62 ] Finally, Mr.

Bombenon et al argue that even if he was named in the application, there is no basis to allow an injunction about the use of a third party’s property, that there has been no notice of shares being attached (and in any event that you cannot attach them pre-judgement) and that “rights” are not proprietary and so cannot be attached.

Discussion and Decision on the 744 attachment application [ 63 ] In my view, for the reasons that follow, an attachment order over the Proceeds is not appropriate at this stage in light of the evidence before the Court, the legal tests and the stage of proceeding presently. [ 64 ] In general terms, in order to be entitled to an attachment order pursuant to the CEA the 744 Applicants would have to show: 1. That there is a reasonable likelihood of success against Mr. Bombenon. 2. That there are reasonable grounds for believing that Mr.

Bombenon is dealing with his property otherwise than for the purposes of his reasonable and ordinary business or living expenses, and in a manner that would likely seriously hinder the 744 applicants in the enforcement of a judgement against Mr. Bombenon. Reasonable Likelihood of Success ? [ 65 ] I note as an aside here that I do not consider that it is fatal that the 744 Applicants did not name Mr.

Bombenon personally in the original 744 attachment application brought on May 20, 2014 as he was given notice, and his lawyer, who is the same as for 744, filed his original brief without raising this issue and argued the merits of the application, therefore Mr. Bombenon has not been prejudiced by this oversight. Further, considering the effort and timing issues, it would be a waste of court resources and counsel effort to have the application dismissed on this ground only to have the application refiled within the same day. Instead, I will consider this application as if it has been amended to include Mr.

Bombenon with respect to the statutory attachment application. [ 66 ] To return to the tests then under s. 17 of the CEA , in my view, the 744 Applicants have met the first test that they have a reasonable likelihood of success as against Mr. Bombenon. The bar in this regard is not very high and on the evidence it is clear that they have a reasonable prospect of getting a money judgement against Mr. Bombenon. [ 67 ] Mr. Bombenon suggests that the 744 Applicants have to show a reasonable prospect of getting a judgement in the nature of fraud. I do not agree.

Although the nature of the pleadings do allege fraud, breaches of fiduciary duties and misrepresentations, even if the 744 Applicants are not successful in proving fraud (and this is not to be discounted in light of the serious accounting issues), the 744 Applicants could also be successful for a money judgement on the basis of breach of contract, improper management of the fleet and generally negligent use of funds. Indeed with respect to the purchase of the helicopter, Mr. Bombenon has acknowledged that he discovered “errors” in the way Mr. Budd was invoiced for the helicopter purchase (which of course Mr.

Budd says was deliberate fraud) and that he made “an error of judgement” with respect to the insurance invoice. [ 68 ] Mr. Bombenon suggests that given key areas of disagreement about the contractual relationship, fiduciary duties owed, what Mr. Bombenon could expect as remuneration etc, this Court cannot find that the 744 Applicants have a reasonable prospect for success. I agree that in light of the new information, in my view, Mr.

Bombenon has raised issues that will have to be determined at trial about whether he was indeed fraudulent as alleged or whether this is a situation of very poor business dealings and inept management and communication (to put it mildly) which led to a breakdown of the relationship between Mr. Bombenon and his investors. However it is too high a bar to suggest that a court can’t determine if there is a reasonable likelihood of success. [ 69 ] A prima facie case does not need to be shown and this is not the place to decide if a burden has been met – we’ll leave that decision to the trial judge.

On the evidence, there is a real possibility that damages will be awarded to the 744 Applicants and that is enough to satisfy this first part of the test. Are the proceeds Mr. Bombenon’s “exigible property”? [ 70 ] It is the second parts of the test that I have more concern with.

Firstly, it is my view that an attachment order cannot attach the Proceeds that are owned by 744 in the circumstances before the Court. [ 71 ] The land from which the Proceeds emanate from was purchased long before the 744 Applicants were on the scene, so there is no argument of tracing here. [ 72 ] I understand that the 744 Applicants are frustrated since they point to the fact that indirectly, through two corporations, Mr.

Bombenon ultimately has control over these Proceeds. They point to some English cases in this regard where third parties have been named defendants in their process and the courts have allowed injunctions against these third parties to freeze their assets ( T.S.B.

Private Bank International S.A. v Chabra (1991) 1 WLR 231 Ch Div; Yukong Line Ltd of Korea v Rensberg Investments Corp of Liberia (The Rialto ) [2001] 2 Lloyd’s Rep 113 (C.A.) ). [ 73 ] This application is dealing with the CEA only, although I agree that it is sometimes useful to look at common law decisions for assistance if their ratio can be applicable in our jurisdiction and with our statutory scheme. The CEA, in my view, is clear that the property to be attached must belong to the Defendant.

I do note however, that in some circumstances that a non-party can be added as a respondent to the application to force them to give up property owned by a Defendant for instance, see s. 17 (3) in this regard. Therefore the fact that 744 is no longer a Defendant in this action is not fatal to this attachment application. [ 74 ] However, in my view the English cases do not really assist the 744 Applicants much in the circumstances before this Court. For one thing, the facts in the Chabra case are distinguishable.

Firstly the Court found that the assets vested in the company’s name (owned 90% by the defaulting defendant) were beneficially owned by the Defendant. On the facts it was alleged that land that the company owned had in fact been owned earlier by Mr. Chabra and it had just been flipped into the company’s name. The company did not list the land as its asset. There was no detailed or contradictory evidence that the company’s assets were in fact Mr. Chabra’s. Mr.

Chabra had left the jurisdiction “for good” shortly after a demand was made on him on a guarantee and he had failed to comply with disclosure orders so that the court could determine what assets Mr. Chabra and the company had. [ 75 ] Mr. Justice Mummery felt that he was “handicapped in the exercise of any discretion in favour of Mr. Chabra by the absence of any indication in the evidence as to whether he has any defence to the claim against him....” (at p. 236). He felt that an injunction against the company as well as Mr.

Chabra was the only reasonable course of action. [ 76 ] Here on the other hand, the land in question was purchased in the name of 744 long ago. This asset was leased and used for legitimate business purposes for years before it was sold. There is no evidence that it was previously owned personally by Mr. Bombenon and flipped in order to evade creditors. Mr. Bombenon is in the jurisdiction and has filed extensive evidence (albeit late in the game) that contradicts some of the Investors’ version of events. Mr.

Bombenon has assets in the jurisdiction (although the charges against them are not clear as discussed above). [ 77 ] Secondly, I note that the Chabra decision (and those that followed) may be doing no more than what is found in s. 17 (3) (

d) which allows a court to require a defendant “or a person who has possession or control of exigible property of a defendant to deliver up the property”. By making a finding that there was an arguable case that the property was beneficially owned by the debtor in that case, this sub-section would have been available if that action had been heard in Alberta to order the property to be delivered up. [ 78 ] The 744 Applicants argue that I should consider that Mr. Bombenon beneficially owns the Proceeds since he is the sole shareholder of the company that owns 744.

The English decisions do not assist in this argument. It was not Mr. Chabra’s shareholding per se that led to a finding that Mr. Chabra beneficially owned the company’s assets, but rather that Mr. Chabra’s assets had been flipped into the company’s name (including a house title where his family had been living in before he fled the jurisdiction). [ 79 ] Indeed this was clarified at para 46 of the Yukong case where the Court did not accept that the ratio of the Chabra decision was based on the fact that if the company disposed of assets this would reduce the shareholding value of Mr.

Chabra’s shares (so that there would be an interest in that regard). The English Court of Appeal noted that this was merely a “makeweight observation” of the justice in the Chabra decision to the broad principle that the assets of the company were in fact the assets of Mr. Chabra. [ 80 ] The 744 Applicants also rely on two decisions of my brother Justice Hall as authority to allow attachment over property that is not yet in the legal title of the defendant ( Gemba LLC v Noxious Investments Inc , 2014 ABQB 197 and Gaastra v Tri-Link Consultants Inc. 2012 ABQB 350 ; affd 2012 ABCA 394 ).

Both are distinguishable though in my view. In the Gemba case for instance, the defendant was about to receive a settlement so the funds in question fit squarely within the definition of “property” (as defined in the CEA ) since the subject of the attachment was a “future right” to money that could be seized. In the Gaastra case, there was an element of constructive trust to the funds which we do not have here. Both had compelling evidence of fraud. [ 81 ] In this situation Mr.

Bombenon may control the Proceeds but I agree with his solicitor, that presently there is no evidence of a future right or contingent right at this point that the 744 funds will flow to MB Enterprises, let alone to Mr. Bombenon personally. There is no evidence that 744 has or is going to be liquidated simply because it sold its main asset. Nor is there any evidence that a dividend is about to be issued. Instead there is evidence that the Proceeds will be used to pay some of 744’s debts and then will be reinvested into a new endeavour. There may be credibility issues surrounding Mr.

Bombenon’s statement in this regard, but it is not appropriate to deal with credibility at this stage. [ 82 ] In sum, I do not read either the Alberta or English decisions or anything in the CEA that allows a finding of ownership of a company’s assets based only on the shareholding position of a Defendant. Accordingly, I am of the view that in these circumstances it is not reasonable on a pre-judgement basis to pierce two corporate veils to suggest that Mr. Bombenon owns the Proceeds. Is Mr.

Bombenon dealing improperly with his property? [ 83 ] The second issue is that, setting aside for the moment the accounting issues, there has been no evidence of Mr. Bombenon moving funds to avoid creditors which would necessarily lead this Court to a presumption that Mr. Bombenon will misuse his control over the Proceeds in question prior to the trial now scheduled for April 2015. [ 84 ] The 744 Applicants rely on the fact that since there is fraud involved, it can be presumed that the funds will be misused. However, as discussed a bit earlier, the allegations of fraud are based on credibility issues.

Certainly the accounting issues raise some serious problems but Mr. Bombenon has now, in his latest evidence come up with many excuses about where the money has gone and in any event he maintains that he had the right to the money he took for himself. Although there are issues with this evidence, and the evidence from his own staff that Mr. Bombenon used the partnership’s money as his own “money pot” is disturbing evidence, it is not

for me at this pre-trial stage to apply tests that apply when fraud is clear compared to when a finding of fraud will ultimately turn on credibility findings. Accordingly, this presumption is not appropriate here in my view. [ 85 ] The accounting evidence, as it is, does suggest that there may be money unaccounted for that was the responsibility of Mr. Bombenon. This still needs to be further explored however, and considering the onus on the 744 Applicants, and the lack of any other evidence showing recent improper dissipation of assets, I cannot find that for the purposes of this application, that Mr.

Bombenon is dealing improperly with his assets. Other arguments [ 86 ] The 744 Applicants also argue that they should be able to attach the Proceeds by way of an attachment order over Mr. Bombenon’s shares or his “rights” via these shares to disperse with or deal with the Proceeds. Although I am prepared to overlook the fact that the 744 Applicants did not name Mr. Bombenon in the original application, I am of the view that it would be taking it too far to entertain an application for the attachment of other assets not claimed for, i.e. Mr. Bombenon’s shares and his “rights” that flow from these shares.

Accordingly, I will say no more about this issue at this stage. [ 87 ] In sum, in my view, it is not appropriate to attach the Proceeds in this case. They may be released from Mr. Bombenon’s solicitor’s trust account. The Hawaii property attachment application [ 88 ] All of the Investors have applied for an attachment of the Hawaii property in order to avoid it being sold before judgement is rendered in this case. They argue that they can trace the payment of funds from the Moiseys to Rogers & Company, solicitors for Mr. Bombenon, to a Hawaii bank account, and then to the purchase of land in Honolulu.

The land was subsequently transferred into the name of the Bombenon Family Trust. [ 89 ] The beneficial entitlement criteria (set out in the English cases) is relied upon in this application to suggest that Investors should have the right to trace and attach the money paid for the share of a jet. Further, beyond the fraud allegations they suggest that the mere fact that the land was transferred into the Trust is evidence that Mr.

Bombenon was trying to put money out of the reach of creditors. [ 90 ] There is no evidence about who the trustee is of the Trust, or whether the trustee was given notice of the application. In any event, it is clear that Mr. Bombenon is no longer the owner of this Hawaii property and considering that he transferred this property into this Trust years before any litigation began, it is not obvious that Mr. Bombenon did this in order to evade creditors instead of for tax planning purposes for instance. I would be surprised if many of the Investors themselves have not created family trusts.

Accordingly, a fraudulent conveyance is not obvious. [ 91 ] Again the Investors rely on the Gemba and Gaastra cases but in my view, on the disputed facts here, these cases are distinguishable. The Moiseys and Mr. Budd paid money for a portion of an aircraft previously owned by Mr. Bombenon. There is a dispute about whether Mr. Bombenon advised them about the financing of the aircraft. This is a dispute that will have to be settled at trial. In any event for this pre- trial application, this could be resolved in many ways, including by way of a finding of a contract breach, fraud, or by having the claim dismissed.

Therefore whether the money that the Moiseys gave to Mr. Bombenon may or may not be traceable is a live issue as the funds were not transferred as trust funds per se but rather in return for what they thought was a tangible asset – i.e. a portion of an aircraft. [ 92 ] Therefore, the first part of the test is not satisfied as Mr. Bombenon does not own the property that is sought to be attached. [ 93 ] The same can be said about considering the application of the English cases.

Although the facts surrounding the transfer of the land from personal ownership to the Trust is more akin to the facts in Chabra than the 744 situation, I do not feel that it is warranted in these circumstances, as explained earlier, to allow a pre-judgement attachment order against the Hawaii property at this time. Conclusion [ 94 ] In conclusion, I allow Mr. Bombenon to take over MBE Jet’s action pursuant to s. 38 of the BIA . [ 95 ] I order that Mr.

Bombenon post $130,000 in costs with respect to that action within 30 days. [ 96 ] I dismiss both applications for attachment of the Proceeds and the Hawaii property and the Proceeds may be released, along with any accumulated interest, from the trust account of Mr. Bombenon’s solicitor. Heard on the 23rd and 26 th days of September, 2014. Given at the City of Calgary, Alberta the 25th day of November, 2014.

K.M. Eidsvik J.C.Q.B.A. Appearances: Grant N. Stapon, Q.C. and Kelsey Meyer for the Investors Peter T. Linder, Q.C. for Mr. Bombenon, MBE Jet and 744