Roth v Garber, 2016 ABQB 103

Court of Queen ’ s Bench of Alberta Citation: Roth v Garber, 2016 ABQB 103 Date: 20160222 Docket: 1503 19322 Registry: Edmonton Between: Olatope Roth and Shawn Roth Plaintiffs/Defendants by Counter-claim Applicants - and - Allan Garber, Shanel Prue, Allan Garber Professional Corporation and Prairie Western Development Corporation Defendants/Plaintiffs by Counter-claim Respondents _______________________________________________________ Memorandum of Decision of the Honourable Madam Justice J.B. Veit _______________________________________________________

Summary [ 1 ] Ms. Roth applies, on notice, to extend the attachment order she obtained without notice on December 21, 2015; that order attached 24% of the proceeds of the sale of any former partnership properties in the hands of the defendants. Her grounds remain the same: the defendants would up the partnership in breach of the partnership agreement. [ 2 ] The defendants do not oppose the extension; however, they apply to postpone Ms. Roth’s attachment order to a mortgage obtained by the defendant Prue after the purported wind-up of the partnership.

In addition, the defendants/plaintiffs by counter-claim apply for an attachment order on the former partnership property now in Ms. Roth’s name. [ 3 ] Ms. Roth’s application is allowed: the defendants acknowledge that the partnership was not wound up according to the agreement and that there has been no full accounting to Ms. Roth of the proceeds of the sale of one partnership asset. [ 4 ] The defendants’ application is denied: as to their requested change in priority of Ms. Roth’s attachment order, the effect of postponing Ms.

Roth’s attachment order to a $500,000.00 post-attachment obligation would, in the circumstances here, negate Ms. Roth’s order. As to their claim for an attachment order on Ms. Roth’s property, they have not met the first branch of the test articulated in s. 17(2) of the Civil Enforcement Act ; while they may be successful at trial in their claims against Ms. Roth, on this application, they have presented insufficient evidence to allow the court to make an assessment of whether there is a “reasonable likelihood” that they will be successful at trial.

Cases and authority cited [ 5 ] By the plaintiffs/applicants : GEMBA LLC v Nixious Investments Inc . 2014 ABQB 197 . [ 6 ] By the court: 3972674 Canada Inc. v. 101114762 Saskatchewan Ltd . 2014 SKQB 210 at para. 32 . 1. Background [ 7 ] The parties entered into a partnership agreement and a bare trust agreement in October, 2014. The business of the partnership was the construction and selling of residences on 6 lots in Cold Lake, Alberta. Construction and management were delegated to Prairie Western Development Corporation, a company of which the defendant Prue was a principal.

The partnership agreement states that a “Resolution” “means a resolution in writing by the partners, where that resolution is approved by all the partners or the respective representatives of all the Partners”: art. 1.1(dd).

Article 13 of the Partnership Agreement deals with dissolution of the partnership;

article 13.1 states: “The Partnership shall be dissolved on the authorization of such dissolution by Resolution”. The

article goes on to describe how partnership property will be distributed on dissolution. Ms. Roth was to contribute $40,000.00, plus her mortgage creditworthiness, to the project in return for a 24% interest in the partnership. The nature of the arrangement was that each of the partners would be the bare trustee of one or more of 6 residential lots and each of the partners would “enter into such mortgages as may be required from time to time by senior lenders for project financing and to pledge their credit on behalf of the partnership”. Ms.

Roth contributed $40,000.00, became the bare trustee of Lot D, and obtained course of construction financing from ATB Financial for Lot D. [ 8 ] On October 28, 2015, the defendant Garber, a lawyer, sent to the plaintiff Olatope Roth a text message which reads, in part: Our partnership is broken beyond repair. I will be circulating a resolution today to dissolve the partnership. . . . There will be a full accounting of monies received and spent to date . . . After that is done you will see that you owe me money – not the other way around. Title to your house will remain in your name.

You can do with it what you will. [ 9 ] On October 28, a written resolution of the partnership, signed by Mr. Garber and Ms. Prue purported to terminate the partnership and the bare trust agreement. [ 10 ] Prior to October 28, 2015, an offer to purchase was received on Lot C, a lot of which the defendant Garber was the bare trustee; the closing of the sale of Lot C occurred after October 28, 2015.

It is alleged by Roth that the proceeds from the sale of Lot C were not used for partnership purposes. [ 11 ] After October 28, 2015, Roth became aware of builders’ liens, totalling approximately $77,600.00 which had been registered against Lot D; no such liens have been registered on Lots A, B, and C which were in the names of the other partners. [ 12 ] Ms.

Roth obtained a without notice attachment order on December 21, 2015; she registered that order on that date against the properties owned by the partnership on the date of alleged dissolution. [ 13 ] As of January 15, 2016, in answer to foreclosure proceedings initiated on two lots registered in her name, the defendant Prue refinanced the existing $190,000.00 mortgage on those lots with a $500,000.00, arms’ length mortgage.

She says that she used the new mortgage proceeds to pay off the old mortgage and to pay off trades who had completed work on the project. [ 14 ] In his counter-claim, Allan Garber alleges that Ms. Roth agreed to provide accounting services to the partnership and that she breached her agreement by failing to provide those services.

He alleges that if the mortgage proceeds were to be used as alleged by Roth in her statement of claim, which is denied by Garber, then Garber alleges that Roth was negligent in failing to ensure that the mortgage funds obtained by the Garbers for the lots registered in their names were used solely for the benefit of the houses registered on those lots. Mr. Garber also alleges that the parties entered into a lease agreement to rent space in Edmonton for three years commencing August 1, 2015 and that Ms.

Roth agreed to pay $1,200.00 per month in respect of the lease; in the affidavit in support of his application for an attachment order, Mr. Garber alleges that the rental agreement was made by the partnership. Mr. Garber alleges that Ms. Roth abruptly vacated the leasehold premises on September 8, 2015 and has failed to make any lease payments since September 1, 2015. Mr. Garber also states that Ms. Roth unlawfully accessed his email account between September 11, 2015 and October 27, 2015 thereby breaching Mr.

Garber’s privacy and breaching “his” solicitor-client privilege, by which he means, of course, his clients’ solicitor-client privilege.

[ 15 ] All 5 properties remaining in the names of the original partners are currently listed for sale. [ 16 ]

Section 17 of the Civil Enforcement Act states: 17(1) A claimant may apply to the Court for an attachment order where (

a) the claimant has commenced or is about to commence proceedings in Alberta to establish the claimant's claim ...

(2) On hearing an application for an attachment order, the Court may, subject to subsection (4), grant the order if the Court is satisfied that (

a) there is a reasonable likelihood that the claimant's claim against the defendant will be established, and (

b) there are reasonable grounds for believing that the defendant is dealing with the defendant's exigible property, or is likely to deal with that property, (

i) otherwise than for the purpose of meeting the defendant's reasonable and ordinary business or living expenses, and (ii) in a manner that would be likely to seriously hinder the claimant in the enforcement of a judgment against the defendant. . . .

(4) The Court shall not grant an attachment order unless the claimant undertakes to pay any damages or indemnity that the Court may subsequently decide should be paid to the defendant or a third person and where the Court grants an attachment order, the Court may require the claimant (

a) to give any additional undertaking that the Court considers appropriate, and (

b) to provide security in respect of any undertaking.

(5) When an attachment order is granted, it should be granted in such a manner that it causes as little inconvenience to the defendant as is consistent with achieving the purposes for which the order is granted.

(6) An attachment order shall not attach property that exceeds an amount or a value that appears to the Court to be necessary to meet the claimant’s claim, including interest and costs, and any related writs, unless the Court is of the view that such a limitation would make the operation of the order unworkable or ineffective. 2. The Roth claim [ 17 ] On this application, Ms. Roth relies on the same evidence she relied on when she made her without notice application for an attachment order: the evidence of the partnership agreement itself.

The evidence before the court, both in December and on this application, is that the provisions of the partnership agreement do not appear to have been respected both in relation to dissolution and in dealing with proposed sales of partnership property and, one property which is arguably partnership property was sold without an adequate accounting to Ms. Roth. In the result, her attachment order should be confirmed. [ 18 ] Indeed, on this application the respondents assert that they do not contest Ms.

Roth’s attachment order; they do, however, apply to postpone its effectiveness. [ 19 ] In the absence of any other marker for priority, as may be established for example in legislation, priority is typically established by chronology: first in time is first in right, see, for example, in relation to land title registrations: 3972674 Canada Inc . It is clear on the facts here that Ms. Roth gave notice of her claim to the world at large as of December 21, 2015 when she registered her without notice order on the title of the affected properties.

The mortgage financers which advanced funds on some of the contested properties on January 15, 2016 were well aware of Ms. Roth’s claims; theirs in not an antecedent interest which should be protected: GEMBA LLC . Naturally, Ms. Roth’s attachment order will cause the defendants inconvenience; however, that inconvenience is consistent only with the purpose of the order which is to attempt to ensure that the terms of the partnership order with respect to the disposition of property on the dissolution of the partnership are respected. There is no reason in law or in equity why Ms.

Roth should be required to postpone her interest to that of the mortgage financers. 3. The Garber/Prue claim [ 20 ] Mr. Garber makes six claims against Ms. Roth. First, he alleges that Ms. Roth has been unjustly enriched by approximately $3,400.00 because the amount of money spent on the Roth house exceeds the amount of the Roth investment. At trial, he could be successful on that claim. However, on this application, since there is not yet any full accounting of the project, there is no basis which would allow the court to conclude that there is a reasonable likelihood that Mr. Garber will be successful.

Moreover, I observe that, in addition to her money contribution, Ms. Roth also contributed her credit-worthiness to the enterprise; she may be entitled to compensation for that. [ 21 ] Mr. Garber also makes a claim for approximately $41,000.00 for lease payments. His counterclaim states that Ms. Roth entered into a lease with the other two parties; his affidavit in support of his application for an attachment order states that the partnership entered into a lease for the premises. No lease document is exhibited by Mr. Garber. Just as in the first claim, Mr.

Garber may be successful on his claim for unpaid lease obligations at trial; however, on this application, because neither the lease nor adequate partnership records are before the court, it is not possible for the court to come to any conclusion as to whether there is a reasonable likelihood that Mr. Garber will be successful on this claim at trial. [ 22 ] Mr. Garber also makes a claim of $8,000.00 for external accounting costs. Again, he may be successful at trial on this claim.

However, since neither a contract outlining Ms. Roth’s accounting obligations has been presented on this application, it is not possible for the court to come to any conclusion as to whether there is a reasonable likelihood that Mr. Garber will be successful on this claim at trial. [ 23 ] Mr. Garber claims $50,000.00 damages for what amounts to a bare allegation of unlawful access by Ms. Roth to his email account. There is no basis on which the court might determine the reasonable likelihood of success of that claim at trial. [ 24 ] Mr. Garber claims that Ms.

Roth has failed to pay approximately $82,000.00 of her 24% share of the partnership’s liability to outstanding creditors on September 8, 2015. It is not exactly clear why this date was chosen since the date of dissolution of the partnership was purportedly October 28, 2015. In any event, however, in the absence of a full accounting record – as is expected at this very early stage of the proceedings – it is impossible to make an assessment of whether there is a reasonable likelihood that Mr. Garber will be successful on this claim at trial. [ 25 ] Finally, Mr. Garber claims that Ms.

Roth has not paid her share of the shortfall of real estate commission on the sale of Lot C. Here again, a sufficient factual matrix is not before the court in relation to this claim; therefore, the court is unable to assess the likely success of Mr. Garber’s claim. [ 26 ] In

summary, on this application the plaintiffs-by-counterclaim have placed insufficient evidence before the court to allow the court to make an assessment of whether there is a reasonable likelihood that their claims will be successful at trial. Therefore, their application for an attachment order is denied. 4. Costs [ 27 ] If the parties are not agreed on costs, I may be spoken to within 30 days of the release of this decision. Heard on the 12 th day of February, 2016. Dated at the City of Edmonton, Alberta this 22 nd day of February, 2016 J.B. Veit J.C.Q.B.A. Appearances: Avnish Nanda, Nanda & Company for the plaintiffs Kember Handzic, Emery Jamieson LLP for the defendants