Pinto Ventures Ltd v Soost, 2016 ABQB 454

Court of Queen ’ s Bench of Alberta Citation: Pinto Ventures Ltd v Soost, 2016 ABQB 454 Date: 20160818 Docket: 1501 11956 Registry: Calgary Between: Pinto Ventures Ltd. Plaintiff (Applicant/Respondent) - and - Kurt Soost, Richard Soost, Charlotte Soost, Gary Soost and 1251097 Alberta Ltd. Defendants (Respondent/Applicant) 1251097 Alberta Ltd. Plaintiff by Counterclaim -and- Pinto Ventures Ltd., Brian Lovig and Christy Lovig Defendants by Counterclaim _______________________________________________________

Memorandum of Decision of the Honourable Mr. Justice C.M. Jones _______________________________________________________ I. Introduction [ 1 ] On October 9, 2015, I granted a Mareva injunction and an attachment Order (“Original Order”) to the Plaintiff on an ex parte basis. The Original Order had the effect of freezing all of the Defendants’ assets. The order also included provisions on how it could be varied, extended or terminated. [ 2 ] Two consent amending orders narrowed the terms of the Original Order and fixed a date for the matter to come back before me: 1.

A Consent Amending Order (“Consent Amending Order”) dated October 22, 2015, significantly abrogated the terms of the Original Order. Notably, Kurt Soost, Richard Soost, Charlotte Soost and Gary Soost were removed from the prohibitions. The order delineated prohibitions against 1251097 Alberta Ltd., prohibiting it from dealing with assets in the TD Direct Investing Account maintained by 1251097 Alberta Ltd., and also from trading, selling or otherwise dealing with any Marapharm Ventures shares. 2.

A further Amending Order (“Further Amending Order”), dated November 27, 2015, dealt with scheduling of applications. [ 3 ] Ultimately, the matter came back before me on February 22, 2016 for the following four applications: 1. Plaintiff’s application to extend the attachment order against 125 as set out in the Consent Amending Order; 2. Defendants’ application for security for costs; 3. Defendants’ application for security for Plaintiff’s Undertaking for Damages; and 4.

Plaintiff’s application to find the Defendants in civil contempt of Court for alleged breach of the Original Order. [ 4 ] Since the status of the applicant and respondent varies as between applications, the terms “Plaintiff” and “Defendants” will be used throughout for ease of reference. [ 5 ] At the end of a lengthy hearing on February 22, 2016, I advised the parties that I would order and review the transcript and advise if further written submissions were required.

Based on my review of the transcript and the materials already submitted by counsel, I have concluded that this matter can be properly decided without further written submissions. II.

Summary of Decision [ 6 ] For reasons set forth below, the applications are decided as follows: 1. the Plaintiff’s application to extend the attachment order, limited to shares of Marapharm Ventures Inc. (“Ventures”) currently held by the Defendant 1251097 Alberta Ltd. (“125”) (“Remaining Ventures Shares”) in the TD Direct Investing Account maintained by 1251097 Alberta Ltd. (“125 Account”), is granted. 125 is free to deal with its assets other than the Remaining Ventures Shares as it sees fit; 2. the Defendants’ application for security for costs is granted in the amount of $80,000.00; 3. the Defendants’ application for security for the Plaintiff’s undertaking as to damages is granted in the amount of $200,000.00; and 4.

The Plaintiff’s application to find the Defendants in civil contempt of court is dismissed. III. Background a. Parties And Others Involved [ 7 ] Pinto Ventures Ltd. (“Pinto”) is the Plaintiff in the main action and is one of the Defendants by Counterclaim. Pinto is a corporation incorporated in British Columbia and is currently registered extra-provincially in Alberta.

Its activities include real estate and securities investing. [ 8 ] Brian Lovig (“Lovig”) is one of the Defendants by Counterclaim and is and was at all material times, a director and officer of Pinto. [ 9 ] The Defendants Richard Soost (“Richard”) and Kurt Soost (“Kurt”) are sons of the Defendants Gary and Charlotte Soost (“Soost Parents”). Richard, Kurt and the Soost Parents all live in Calgary.

[ 10 ] Lovig, Richard and Kurt have been extensively involved in the securities business. There was some suggestion before me that Gary Soost is also experienced in such matters. Charlotte Soost, it appears, also has some experience in implementing trades in securities. [ 11 ] 1251097 Alberta Ltd. (“125”) is a defendant in the main action and is also the Plaintiff by Counterclaim. 125 is a corporation formed pursuant to the laws of Alberta.

Richard and Kurt were each a director and 50% voting shareholder of 125 until April 30, 2014 and the Soost Parents have each been a director and 50% voting shareholder of 125 from April 30, 2014 on. [ 12 ] 125’s status, whether it be as beneficial owner of Ventures shares or agent, trustee, or accommodating third party for someone else who beneficially owns Ventures shares, will be important to the resolution of this lawsuit. [ 13 ] Marapharm Ventures Inc. (“Ventures”) is a publicly traded corporation.

It appears to have been formed to promote and profit from the use of medical marijuana. [ 14 ] Terry Yuck (“Yuck”) was a consultant to Pinto and, through a corporation called Bayside Management Ltd., was a consultant to Ventures. b. The Plaintiff’s Allegations [ 15 ] Pinto alleges that in April and early May of 2014, Lovig and Yuck, on behalf of Pinto, engaged in discussions with Richard and Kurt.

It alleges those discussions were directed at Richard and Kurt being engaged as promoters of Ventures and its’ successful entry into the public market. 1) Original Agreement [ 16 ] On May 13, 2014, Pinto and 125 entered into an agreement (“Original Agreement”). The Original Agreement provided for the sale of 1.5 million shares of “Capital Auction Market Inc., a public company which is currently in the process of changing its name to Marapharm Ventures Ltd.” (“Company”) for a purchase price of $150,000.

Gary Soost signed on behalf of 125. [ 17 ] The Original Agreement post-dates a document, dated April 30, 2014, which purports to be a handwritten agreement to sell shares, not of Ventures, but of a corporation called Marapharm, Inc. (“April 30 th Document”).

The April 30th Document was signed on behalf of the vendor (Pinto) but was not signed by the purchaser, (125). [ 18 ] The Original Agreement provided for payment of the purchase price as follows: 1. $75,000 to be paid by 125 upon execution of that agreement; and 2. $75,000 to be paid by 125 upon confirmation by Pinto to 125 that shares of the Company (“Venture Shares”) had been trading publicly on a stock exchange for a period of three months. [ 19 ] The first payment of $75,000 was made on May 29, 2014.

The second payment was never made. 2) Oral Condition [ 20 ] The Plaintiff alleges that at the time of the Original Agreement, Pinto, Richard and Kurt arrived at a “collateral oral agreement” (“Oral Condition”).

The Oral Condition, it asserts, was that 125’s retention of the Ventures Shares was contingent on Richard and Kurt actively promoting and participating in bringing Ventures to public market, with the intention that the stock price at the commencement of public trading of Ventures would be at least $1.00 per share and would increase to several dollars shortly thereafter. [ 21 ] The Defendants deny the existence of the Oral Condition.

Part of their denial is based on the assertion that it would have been an illegal transaction in the securities business. [ 22 ] As evidence of the alleged Oral Condition, the Plaintiff alleges that Kurt moved into Ventures’ Calgary office in early May of 2015 so that he could be better positioned to discharge his undertaking to promote Ventures to potential investors and so that Yuck could monitor his activities in that regard. [ 23 ] The Plaintiff alleges that no effort was made to fulfill the Oral Condition and Kurt moved out of Ventures’ office on August 2, 2015 after a dispute with Yuck. [ 24 ] Yuck asserts that on August 2, 2015, he verbally communicated to Kurt that Lovig expected 125 to make the second $75,000 payment or unwind the Original Agreement and transfer shares of Ventures back to Pinto. [ 25 ] An email exchange spanning August 2 and 3, 2015, reveals that Kurt wished to disassociate himself from Ventures and its promotion. 3) Unwinding Agreement [ 26 ] An email exchange between Lovig and Richard reveals efforts directed, at least on Lovig’s part, towards unwinding the Original Agreement, revesting Ventures Shares in Pinto and returning the first payment of $75,000 to 125.

The Plaintiff alleges that an August 21, 2015 email from Richard to Lovig evidences an agreement to that end (“Unwinding Agreement”). [ 27 ] That email exchange included the following comment from Richard:

Good morning Brian. I finally spoke to bro. He is good with anything I do. I think $100,000.00 is a super fair number for the shares and common. If you want to send a bank draft or certified cheque made out to 1251097 Alberta Ltd.

I will have the 1.5 mill shares issued to any name or entity you wish...: (Affidavit of Brian Lovig, filed October 9, 2015, Exhibit “F”). [ 28 ] Pursuant to the alleged Unwinding Agreement, the Plaintiff claims that, in addition to the Plaintiff receiving the shares of Ventures then held by 125 and 125 receiving $75,000, Richard was to receive payment of $25,000 from the Plaintiff as commission he was apparently entitled to receive from Ventures for assisting in a private placement of shares of Ventures some months earlier. [ 29 ] The Defendants deny the existence of the Unwinding Agreement. [ 30 ] The Plaintiff claims that the Defendants then embarked upon a systematic effort to avoid obligations under the Unwinding Agreement (“Avoidances”).

The Avoidances, the Plaintiff alleges, are evidenced in email exchanges and take place between August 21, 2015 and early October, 2015. [ 31 ] The Plaintiff alleges that the Avoidances included attempts on the part of Richard and Kurt to avoid causing 125 to complete the necessary documentation on the basis that the Soost parents were the only persons able to sign on 125’s behalf and that they were unavailable due to an out of town family illness.

The Defendants deny any attempts to avoid an agreement which they claim never existed. [ 32 ] Meanwhile, it appears that prior to August 21, 2015, 125 had taken steps to monetize at least some of its shareholdings in Ventures. On June 16, 2015, 1500 Ventures shares were transferred by 125 to the 125 Account.

On August 12, 2015, its’ remaining 1,498,500 Ventures shares were transferred to that account. [ 33 ] This latter transfer, the Plaintiff alleges, was affected by Gary Soost with Richard’s assistance. [ 34 ] The Plaintiff alleges that between August 28 and October 16, 2015, 125 sold 490,500 shares of Ventures through the 125 Account, rendering the identity of the seller untraceable. [ 35 ] 125 reinvested some of the sale proceeds in other securities.

Accordingly, the 125 Account now consists of the Remaining Ventures Shares, cash and other securities. [ 36 ] When confronted via text message on October 4, 2015 by Lovig, Richard disavowed ownership or control of shares of Ventures held by 125. His response was that decisions of 125 with respect to Ventures shares rested with Gary and Charlotte (“Disavowance”). c. The Counterclaim [ 37 ] By Counterclaim, 125 asserts that Lovig had misrepresented the number of shares to be sold to 125, the corporation which would issue those shares and Ventures business prospects.

The Counterclaim also asserts that Christy Lovig (Lovig’s daughter and a lawyer practicing in Kelowna) breached various obligations to the Defendants in the main action and assisted Lovig in his misrepresentations and fraudulent actions. [ 38 ] The Defendants by Counterclaim are Pinto, Lovig and Christy Lovig. d. Preliminary

Summary [ 39 ] The essence of the Plaintiff’s action against the Defendants is that the Original Agreement was never performed. The share transfers were incomplete because 125 never paid the second $75,000 and the Oral Condition was never performed. 125 was selling shares of Ventures it had no right to sell because it had not paid the entire purchase price. Its defaults were further exacerbated by 125’s non-performance of the Unwinding Agreement. [ 40 ] The Plaintiff wants the Remaining Ventures Shares back.

The Plaintiff has, in addition to damages, sought a mandatory injunction compelling return of the remaining shares held in the 125 Account by virtue of the Consent Amending Order. [ 41 ] The Defendants allege that Pinto and Lovig are engaged in fraudulent efforts to manipulate the trading price of shares of Ventures and seek to recover the Remaining Ventures Shares held by 125 in order to assist in effecting that scheme. The Defendants take the position that the Remaining Ventures Shares risk declining in value to zero.

They want to sell these shares now and limit their loss of investment return, in the event they are successful in the lawsuit. [ 42 ] The Plaintiff responds that it believes shares of Ventures will rise in value and it believes that it is entitled to the return of shares currently held in the 125 Account. IV. Attachment Order a.

The Plaintiff’s position on its Attachment Order extension application [ 43 ] The Plaintiff applies pursuant to section 18(4) Civil Enforcement Act (RSA 2000, c C-15) [ CEA ], to extend the October 9, 2015 Original Order, as amended by the October 22, 2015 Consent Amending Order and the November 27, 2015 Further Amending Order, and to have it terminate only in accordance with

section 19 CEA .

[ 44 ] The Plaintiff explains that the Original Order is no longer a Mareva injunction as it has been written down by the Consent Amending Order to be an attachment order.

As such, the Original Order has been amended to directly comply with section 17(5) CEA which requires an attachment order to be granted in a manner that “causes as little inconvenience to the Respondents [Defendants] as is consistent with achieving the purposes for which the order is granted”. [ 45 ] For the present application, the Plaintiff submits that the lower test of an attachment order (section 18(6)) is the test to be used, notwithstanding that the established facts also meet the higher test for a Mareva injunction. [ 46 ] In applying to extend the attachment order, the Plaintiff acknowledges that the current application is a de novo hearing where the Court is not limited to consideration of only the material before the Court granting the Original Order.

It also acknowledges that it bears the onus of establishing that the attachment order should be continued. [ 47 ] The Plaintiff submits that it has met the onus of establishing that the Consent Amending Order should be extended. It reasons that since both parts of the two-part tests for both the Mareva injunction and the attachment order were met on the original application, and since the evidence available and known circumstances continue ( section 18(6) (b), CEA ), the continued existence of the attachment order is justified. [ 48 ] Harkening back to the

section 17 CEA factors the Plaintiff proved at the ex parte application, it argues that there is evidence of a reasonable likelihood of success (per 17(2)(

a) CEA ) . (It also argues there is evidence of a strong prima facie case which is the higher standard for a Mareva injunction). The reasonable likelihood of success / strong prima facie case is proven by considering allegations in the Statement of Claim and applying the standard as against the evidence available to prove the allegations.

The Plaintiff claims that the available relevant evidence for this application mirrors and directly confirms the allegations set out in the Statement of Claim, in that the Ventures Shares were surreptitiously and unlawfully sold by 125, via the Soost Parents, on the advice and with the assistance of the Soost Brothers, in breach of the Oral Condition, contravention of the Unwinding Agreement and without 125 having paid the Purchase Price required by the Original Agreement.

It further concludes that the Defendants actively took steps to conceal and otherwise delay discovery of the sale of the shares by making the Avoidances and the Disavowance. [ 49 ] For section 17(2)(

b) CEA / second part of the Mareva injunction test, the Plaintiff argues that there is now unequivocal evidence of misappropriation or dissipation of assets, and that the only thing preventing the Defendants from continuing to liquidate the shares and the sale proceeds therefrom, and thereby entirely preventing or delaying the Plaintiff from recovery of judgment, is the Consent Amending Order. [ 50 ] In support of its argument, the Plaintiff submits that the only business of 125 has been the ownership and sale of Ventures Shares.

Once the shares are sold, there will be no ability to undo or take back ownership or control of the shares.

In support of its argument, it points to the following evidence: Gary Soost’s affidavit where it says he asserts his belief that 125 has the full right and entitlement to sell the Ventures shares and that 125 was precluded from doing so by virtue of the Original Order; that Kurt, despite the terms of the Original Agreement and the Unwinding Agreement, asserts that 125 is entitled to profit from its investment; and finally that the surreptitious nature of the sale of the shares was in breach of the Original Agreement, the Oral Condition, and the Unwinding Agreement. b.

The Defendants’ position on the Attachment Order extension application [ 51 ] The Defendants’ position is that the attachment order is unwarranted and that it should not be extended. The Defendants point out that an attachment order is extraordinary prejudgment relief that should not be granted lightly and that section 18(6) (

b) of the CEA codifies a presumption in favour of discontinuance.

Even where all of the codified elements are met, they assert that it remains a discretionary decision that must be just and equitable. [ 52 ] They argue that the possibility of a mandatory injunction arising from a decision at trial directing return of the Remaining Ventures Shares does not justify this extraordinary remedy. [ 53 ] They agree that the Plaintiff’s application to extend the attachment order is brought under section 18(4) of the CEA , and that the Plaintiff bears the onus of justifying the continuation of the ex parte attachment order; that the ex parte attachment order shall not be continued unless the current circumstances justify its continued existence, all to which they add that if it is established that the Plaintiff failed to make full and fair disclosure of material information to the Court at the time of the ex parte application, the Court may vacate the attachment order for that reason alone. [ 54 ] The Defendants submit that there is no reasonable likelihood that the Plaintiff’s claim will be established.

In support of this assertion, they explain that there is insufficient evidence of an “Oral Condition”, and indeed, that there is absolutely no documentary evidence of same. Even if there was such an Oral Condition, they maintain that it would be unlawful and thus unenforceable. They argue that the existence or plausibility of this “Oral Condition” is in direct conflict with the evidence.

The Defendants put forward approximately eleven examples of this alleged direct conflict in their argument. [ 55 ] The Defendants argue that the Oral Condition would, had it existed at all, have been an unenforceable contract under British Columbia Securities Act , RSBC 1996, c 418, [ BCSA ]. Specifically, they refer to the prohibition under section 52(2) of the BCSA and assert that it prohibits a company like Pinto, engaging in investor relations, from engaging Kurt and Richard to provide investor relations services to Ventures. [ 56 ] The Defendants make a similar argument in relation to the application of

section 50 of the BCSA . That

section provides that a person (Pinto) engaged in investor relations cannot agree to repurchase shares and refund money. This prohibition, the Defendants argue, renders the alleged Unwinding Agreement unenforceable. [ 57 ] Next, the Defendants argue that there was no evidence of a binding “Unwinding Agreement”, and that at all times 125 has been the registered owner of the Ventures Shares, with no express or implied conditions on its ability to deal with those shares. The

Defendants highlighted portions of evidence from Gary Soost and Richard and Kurt which they allege proves that there was no unwinding agreement. Ultimately, they conclude, the fundamental factual discrepancies involved in this matter will need to be determined by weighing the credibility of the evidence proffered by Richard, Yuck and Lovig at trial.

They argue that there is no contest that Richard’s evidence should be preferred over the evidence of Yuck and Lovig. [ 58 ] On the point of whether an attachment order should be continued or not, the Defendants submit that there is absolutely no evidence that any of the Defendants are removing, hiding or dissipating their assets to frustrate a judgment. They argue that the only evidence proffered by the Plaintiff were the transactions on the 125 account.

They claim that what the Plaintiff overlooked, however, were the two elements from the Cho v Twin Cities test ( 2012 ABCA 47 at paras 10-12 ) that required the dealings to be out of the ordinary course of business, and with an intent to evade enforcement. The Soost Parents, it is argued, traded in the 125 account in the ordinary course with the intention of increasing the value of the assets, and indeed were successful in increasing the value.

Other than the $7,000 which the Soost Parents removed, there has been no evidence of any removal or reduction of assets. [ 59 ] In terms of whether the Defendants were dealing with the Remaining Ventures Shares otherwise than for the purpose of meeting reasonable and ordinary business expenses, the Defendants argue that 125’s only business is buying and selling securities. Therefore, they argue, monetization of the Remaining Ventures Shares would be something that would take place in the ordinary course of its business activities.

Further, they argue that the Remaining Ventures Shares are likely going to deteriorate in value. Therefore, 125 should be permitted to monetize those shares and redeploy sale proceeds to more profitable investments. [ 60 ] The Defendants further argue that, pursuant to section 18(6) CEA , since the Plaintiff failed to make full and fair disclosure to the Court at the time of the ex parte application, it is appropriate for the Court to vacate the attachment order. This is especially true, they say, since the information is material in that its disclosure would have changed the outcome of the ex parte application.

Specifically, they claim that there were numerous materially misleading statements and omissions, including that the supposed “Oral Condition” was not disclosed to Ventures, that the purported “Oral Condition” and “Unwinding Agreements” are unlawful transactions, that Lovig and Pinto switched the shares sold to 125, that Ventures was subject to a Cease Trade Order at the time of the Original Agreement, that Lovig is an insider and control person of Ventures, that Pinto refuses to disclose the share price for other founding investors, and that 125 and the Soost Parents were never notified of the dispute. [ 61 ] Finally, the Defendants argue that it would not be just and equitable for the Court to exercise its discretion to grant this prejudgment relief since the Plaintiff does not come to Court with clean hands.

They argue that Lovig is attempting to control how investors are dealing with their shares on the open market in order to increase the value of Ventures’ shares to a point that he can sell for a maximum profit, colloquially known as a “pump and dump” scheme. [ 62 ] In

summary, the Defendants point out that an attachment order is extraordinary prejudgment relief and that section 18(6) (

b) of the CEA codifies a presumption in favour of discontinuance of the Consent Amending Order. They argue that the possibility of a mandatory injunction arising from a decision at trial directing return of the Remaining Ventures Shares does not justify this extraordinary remedy. c. The Law on the Attachment Order extension application [ 63 ] Section 18(4) Civil Enforcement Act provides that: The Court, on application on notice to the defendant, may direct that an attachment order that was granted on an ex parte application remains in effect until the order terminates in accordance with

section 19 or as otherwise directed by the Court. [ 64 ] The Plaintiff, having brought an application under section 18(4) for an extension of the Consent Amending Order, is bound by the provisions of section 18(6) : When an application on notice to the defendant is made under subsection (4) the following applies:

a) the onus is on the claimant to establish that the attachment order should be continued;

b) the Court shall not continue the attachment order unless the circumstances that exist at the time of hearing the application justify the continued existence of the order;

c) the Court may terminate the order if the Court is satisfied that the claimant failed to make full and fair disclosure of the material information that existed at the time that the claimant made the ex parte application for the attachment order. [ 65 ]

Section 19 provides that:

(1) Subject to

section 18 and except as otherwise ordered by the Court, an attachment order terminates on whichever of the following occurs first:

a) on the dismissal or discontinuance of the claimant’s proceedings;

b) on the 60th day from the day of the entry of a judgment in favour of the claimant.

(2) The Court may extend the operation of an attachment order beyond the times set out in subsection (1) if it appears just and equitable to do so. [ 66 ]

Section 18, referred to in the introductory wording of section 19(1), provides, inter alia , that an attachment order granted ex parte will be terminated by the Court in certain circumstances.

d. Decision on Attachment Order [ 67 ] The Plaintiff seeks an extension of the Consent Amending Order pursuant to section 18(4) of the Civil Enforcement Act , to terminate only in accordance with

section 19 of the CEA . [ 68 ] Although the Original Order was both a Mareva injunction and an attachment order, given that it was written down by the Consent Amending Order to be an attachment order only, consideration only need be given to the CEA test for extending an attachment order. [ 69 ] Since the application is a de novo hearing, it allows for an expansion of the evidentiary matrix first put before the Court on October 9, 2015.

Counsel for both parties cautioned that I should resist performing an in-depth analysis of the merits when determining if the Original Order should be extended and, if so, on what terms, as that is a matter for trial. I agree. [ 70 ] The Plaintiff bears the onus of establishing that the attachment order should be continued. This onus comes from section 18(6) (a):

(6) When an application on notice to the defendant is made under subsection (4) the following applies: (

a) the onus is on the claimant to establish that the attachment order should be continued [...]. [ 71 ] If the Plaintiff is able to satisfy the Court that the requirements of sections 17(2)(

a) and (

b) have been met, it will have met the test for continuance provided for in section 18(6) (b): (

b) the Court shall not continue the attachment order unless the circumstances that exist at the time of hearing the application justify the continued existence of the order; [ 72 ] However, notwithstanding fulfillment of these various requirements, if it is determined that the Plaintiff was not forthcoming with me on October 9, 2015, I may terminate the Consent Amending Order by virtue of section 18(6) (

c) which provides: (

c) the Court may terminate the order if the Court is satisfied that the claimant failed to make full and fair disclosure of the material information that existed at the time that the claimant made the ex parte application for the attachment order. [ 73 ] Although this application to continue the attachment order is pursuant to the CEA , by way of background it is helpful to set out the two-part test for a Mareva injunction which the Plaintiff, on October 9, 2015, already satisfied me was met.

That test required the Plaintiff to establish that: 1. there is a strong prima facie case by the Plaintiff against the Defendants; and 2. there is a real and substantial risk that the Defendants will dispose of their assets, so that the Applicant would be hindered in the recovery of any judgment [ 74 ] The somewhat lower threshold required of the Plaintiff on October 9, 2015 to satisfy me that I should issue an ex parte attachment order is found in section 17(2) of the CEA . [ 75 ] Under section 17(2)(

a) the Court must be satisfied that there is a reasonable likelihood that the claimant’s claim against the Defendant will be established. These observations must inform a high level assessment of the merits of the Plaintiff’s case. Such an assessment is a component of any decision to extend the Consent Amending Order, and if extended, on what terms. [ 76 ] The Defendants argue that, for various reasons, there is no merit to the Plaintiff’s claim. It was open to them, instead of seeking release of the attachment order, to seek expedited

summary dismissal of the Plaintiff’s claim or an expedited

summary trial. [ 77 ] Secondly, under section 17(2)(

b) the Court must also be satisfied that: 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. [ 78 ] The Plaintiff’s principal arguments in support of its claim against the Defendants are that the Defendants (notably 125) have breached the Original Agreement by not paying the second installment of $75,000.00, that title to the Ventures Shares was never effectively conveyed under that agreement, that it is a nullity and the Remaining Ventures Shares belong to Pinto. [ 79 ] The Plaintiff asserts that it had no obligation to transfer the Venture Shares until they were paid for.

It occurs to me that, despite what the Plaintiff may, with the benefit of hindsight, state was its intention with respect to conveying title to the Ventures Shares, a possible

interpretation of the Original Agreement is that the Plaintiff was willing to affect a transfer subject to deferred payment. Subject to limited exceptions, a Court is to construe the words of a contract as it is, not what the parties say they intended those words to mean. [ 80 ] I question whether the Original Agreement only contemplated that title to Ventures Shares would pass when the second tranche of the purchase price was paid or if title passed on May 13, 2014, subject to deferred payment of the second tranche. Failure to

pay that second tranche might, at trial, lead to the conclusion that title to the Ventures Shares indeed passed to 125 and that relief should be limited to one or more of the several forms of damages available to a successful plaintiff. [ 81 ] Alternatively, it might lead to the conclusion that title never did transfer, permitting recovery of the Remaining Ventures Shares if 125 still possessed them. Arriving at the appropriate conclusion would require a more fulsome consideration of the terms of the Original Agreement, augmented by additional evidence of the parties’ intention, if permitted under rules of contract

interpretation. [ 82 ] The Defendants believe that title to the Ventures Shares was effectively transferred on May 13, 2014. They point to the fact that

section 1 of the Original Agreement states: The vendor sells the shares to the purchaser and the purchaser buys the shares from the vendor…on the date of this agreement. [ 83 ] The Defendants note that there is nothing in the Original Agreement which suggests that there is any restriction on dealing with Ventures Shares acquired by 125 until the second payment of $75,000 is made.

The effective date of the sale of shares, they argue, is the date of the Original Agreement - May 13, 2014. [ 84 ] The Plaintiff’s argument in this regard is further undermined by the fact that it was quite possible for 125 to divest itself of some of the Ventures Shares it held and give good title to the purchasers of those shares. [ 85 ] The Plaintiff did not provide any case law which would support its assertion that the Original Agreement was a nullity for non-payment of the second tranche. [ 86 ] The Plaintiff asserts that evidence of the Oral Condition can be found in an August 3, 2015 email from Kurt to Lovig wherein Kurt says: I will discuss with Rich what the verbal agreement was as I was not involved in those discussions.

We agreed to help, but I will discuss with my brother on what exactly was agreed to….: Kurt Soost undertaking Responses, tab 2. [ 87 ] This, the Plaintiff argues, directly acknowledges that there was some level of oral agreement that existed in conjunction with the written agreement. [ 88 ] The Plaintiff incurs the challenge of establishing that this acknowledgement of willingness “to help” rises to the level of a term of the Original Agreement, is sufficiently certain to be enforceable and operates to affect the rights to Ventures Shares of the entity ultimately determined to own them. [ 89 ] Uncertainties surrounding the existence and nature of the Oral Condition undermine my confidence that there is a reasonable likelihood that the Plaintiff’s claim against the Defendants will be established. [ 90 ] The Plaintiff asserts that Richard’s email to Lovig of August 21, 2015, evidences the existence of an Unwinding Agreement. [ 91 ] The Plaintiff argues that, at an earlier stage, Kurt and Richard were, as initial directors and officers of 125, agents of 125 capable of committing it to legally binding obligations.

That state of affairs, the Plaintiff argues, continues notwithstanding a change in the directors, officers and shareholders of 125. The Plaintiff goes on to argue that 125 is thus bound by Richard’s agreement to unwind the Original Agreement. [ 92 ] Richard claims that his email of August 21, 2015 was written out of fear that Lovig would engage a criminal organization to harm him if he did not say what he said.

As noted below, the Defendants argue that no agreement was concluded and that Lovig failed to take action after August 21, 2015 which would corroborate the assertion that the parties had a binding Unwinding Agreement. [ 93 ] The Plaintiff asserts that the fact that Ventures Shares were being sold by 125 through the 125 Account beginning on August 28, 2015, despite Richard purporting to enter into a binding Unwinding Agreement on August 21, 2015, when viewed in the context of the Avoidances and the Disavowance, undermines the Defendants’ credibility and casts a surreptitious pall over the events at the time. [ 94 ] This conduct, the Plaintiff argues, is fraudulent and relieves the Plaintiff of the onus of establishing there has been actual dissipation of assets by 125: Osman Auction v Belland , 1998 ABQB 964 , paras 48 , 49. [ 95 ] This becomes important when applying the requirements of section 17(2) (

b) of the CEA , which requires, as a condition precedent to the continuation of an attachment order, that: 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. [ 96 ] Further, the Plaintiff argues that were it required to substantiate concerns that one or more of the Defendants were dealing with the Remaining Ventures Shares otherwise then for the purpose of meeting reasonable and ordinary business expenses, it could do so. It argues that 125’s only business is dealing in securities.

To the extent it has expenses associated with this activity they could not reasonably be construed as requiring liquidation of the Remaining Ventures Shares. [ 97 ] The Defendants argue that there is no evidence that they are dissipating assets for the purpose of evading judgment. With respect, I do not read section 17(2) (

b) CEA as requiring that as a purpose which justifies an attachment order. It is sufficient if the

Defendants seek to deal with their assets other than for the purpose of meeting reasonable and ordinary business and living expenses. The Defendants seek to liquidate the Remaining Ventures Shares for a different reason: they believe they are going down in value. [ 98 ] The Defendants argue that the alleged Oral Condition purports to bind Richard and Kurt and that they are not even parties to the Original Agreement.

How can the alleged Oral Condition be part of the Original Agreement when the parties to it are not parties to the Original Agreement? [ 99 ] Who was and is beneficially entitled to the Ventures Shares and in what representative capacity, if any, was and is 125 acting, remains to be determined at trial. [ 100 ] On the assumption that the Remaining Ventures Shares belong beneficially to 125, no evidence was tendered by the Defendants to suggest that 125 had a current payable to the Soost Parents, say, for example, by way of shareholder loan payable on demand.

One can conceive of a situation in which, assuming the Defendants could establish that 125 beneficially owned the Remaining Ventures Shares, it might be reasonable to distribute funds from the sale of its Remaining Ventures Shares to the Soost parents in repayment of its debt to them. [ 101 ] On the assumption that the Remaining Ventures Shares belong beneficially to one or more of the Defendants other than 125, no evidence was tendered by the Defendants to suggest that those Defendants had reasonable and ordinary business or living expenses which necessitated monetization of those shares. [ 102 ] The obvious problem with the Defendants’ argument is that section 17(2) (b)(

i) of the CEA contemplates relief from attachment if the Defendants are proposing to deal with their property for the purpose of discharging reasonable and ordinary business expenses. It does not contemplate relief if the Defendants simply want to restructure the nature of their holdings. [ 103 ] However one resolves the application of section 17(2) (b)(

i) CEA , this

section would still appear to pose a problem for the Defendants. The Defendants want to sell the Remaining Ventures Shares in order to mitigate the risk of future declines in value. Irrespective of which of the Defendants truly is the beneficial owner of the Remaining Ventures Shares, such a monetization would certainly appear to seriously hinder the Plaintiff in the enforcement of a judgment against the Defendants. [ 104 ] Part of the relief the Plaintiff seeks is to get the Remaining Ventures Shares back.

If I allow the Consent Amending Order to terminate and the Remaining Ventures Shares are sold, that would obviously not be possible. Alternatively, it might be possible to allow the Plaintiff to recover different Ventures Shares. [ 105 ] Assuming the Plaintiff succeeds in obtaining judgment, procures a mandatory injunction directing transfer of the Remaining Ventures Shares to it; and that the shares of Ventures are then, as traded, worth a significant amount of money, it is conceivable that the Plaintiff’s success would be illusory.

Whomever the Plaintiff obtains judgment against may not be financially able to acquire shares of Ventures to specifically convey to the Plaintiff, were that a condition of my Order. [ 106 ] Further, the Defendants may not have the financial resources to pay cash in lieu of a mandated share transfer. [ 107 ] This underscores the difficulty in applying the tests in section 17(2) (b)(ii) CEA equitably in a situation involving an asset of questionable future value. The Plaintiff wants shares back and it expects they will appreciate in value.

The Defendants believe those shares will decline in value and want to protect their financial position irrespective of the outcome of the litigation. [ 108 ] Granting the Plaintiff’s application could expose: 1. the Plaintiff to less risk of an unsatisfied judgment, if the Remaining Ventures Shares appreciate in value and it succeeds in its action; 2. the Defendants to less risk having to call upon other resources if the Remaining Ventures Shares appreciate in value and the Plaintiff is successful; 3. the Plaintiff to greater risk of an unsatisfied judgment if the Remaining Ventures Shares decline in value, it succeeds in its action and the Defendants have been denied the ability to preserve financial resources by disposing of these shares an investing in other assets; and 4. the Defendants to greater litigation and financial risk if the Remaining Ventures Share decline in value, the Plaintiff is successful in its action and they have been denied the ability to preserve financial resources by disposing of these shares and investing in other assets. [ 109 ] If the Plaintiff’s request is denied, Remaining Ventures Shares released to the Defendants and liquidated, the risk result in each scenario is reversed, if my Order contains a term requiring the Defendant to purchase Ventures Shares on the open market to satisfy a judgment against them. [ 110 ] Two variables are in play here which the Court is unable to manage or foresee: the outcome of this lawsuit and the future trading value of Ventures Shares. [ 111 ] It is not, however, impossible for the Court to affect some measure of equity in these circumstances.

The Court’s ability, for example, to order security for the Plaintiff’s undertaking for damages affords a tool in furtherance of that result. Doing so assists in responding to the economic concern of the Defendants that pre-judgment relief of the kind the Consent Amending Order effects works only to their economic disadvantage. [ 112 ] I agree with the Defendants that pursuant to section 18(6)(

c) the Plaintiff bears the onus of ensuring full and fair disclosure at the initial ex parte application. It is easy to say with the benefit of hindsight and investigation that a party seeking prejudgment relief

should disclose at an ex parte application matters uncovered by the other side only after extensive investigation and which might be relevant to the determination of legal relationships at a trial. Some common sense has to be applied in evaluating the conduct of the party seeking pre-judgment relief. [ 113 ] After carefully reviewing the materials filed since October 9, 2015 and the transcript of the February 22, 2016 hearing, I find that the Plaintiff did provide full and fair disclosure at the ex parte hearing.

Much of the material which the Defendants suggest should have been put before me on October 9, 2015 only came to light through document production and questioning after that date. [ 114 ] Some of the other justifications offered by the Defendants in support of their view that there was an absence of full and fair disclosure are simply attempts to cast aspersions on Lovig’s and Yuck’s characters. They argue, for example, without offering any evidence in support, that Lovig and Pinto are engaged in an inappropriate “pump and dump” scheme.

They argue that Lovig has gone to great lengths to hide the true extent of his influence over and his holdings of shares in Ventures. This, they suggest, is evidence that he does not come to court with clean hands and that the Plaintiff should therefore be denied the relief it seeks. [ 115 ] Perhaps some of those inferences would, if tested through viva voce evidence, reveal deficiencies in their character, undermine their credibility and influence a determination of the merits for purposes of the applications before me.

Both the applicant and respondent declined the opportunity to conduct these applications with viva voce evidence, which I find an interesting outcome in light of Defendants’ counsel’s comments, at the close of her argument regarding extension of the Consent Amending Order, when she observed: And it all boils down to a text message and an email and how the court can interpret that from two different perspectives.

And how you approach that depends on who you find to be more credible : Hearing Transcript, page 78, lines 35-37 [emphasis added] [ 116 ] Unresolved questions of who was doing what and whether or not what that person was doing put that person in breach of British Columbia securities legislation (questions for trial) do not assist the Defendants in their assertions that the Plaintiff failed to make full and fair disclosure before me on October 9, 2015.

The Defendants offered no case law in support of their arguments regarding the allegedly nullifying effects of British Columbia securities legislation. [ 117 ] I am prepared to assume that as far as the Plaintiff was concerned, on October 9, 2015 it was in compliance with British Columbia securities legislation. Should it have been expected to alert me to allegations, which the Plaintiff was then unaware the Defendants might be raising, about improper securities activities?

I think not. [ 118 ] A further example, the Defendants argue, is that the Plaintiff failed to disclose to me the existence of the unsigned, handwritten April 30th Document which purported to deal with shares of Marapharm Inc., not shares of Ventures. [ 119 ] Had the existence of this earlier document been brought to my attention on October 9, 2015, it would not have changed my view regarding the need for pre-judgment relief.

Its significance, if any, in light of the Original Agreement which was typed, dated, fully executed and to which Richard, in addition to Gary Soost, was apparently privy, is yet another issue for trial. [ 120 ] The Defendants assert that the Plaintiff should have disclosed to me that Lovig, members of his immediate family and his various companies, own approximately 14 million shares of Ventures out of a market capitalization of around 35 million. Pinto itself would appear to hold approximately 3.5 million shares.

This non-disclosure, the Defendants argue, underscores the Plaintiff’s failure to make full and fair disclosure before me on October 9, 2015. [ 121 ] Had I been advised on October 9, 2015 that Lovig and related or affiliated persons or entities held a significant portion of outstanding Ventures stock I likely would have attached even greater significance to his request for pre-judgment relief.

Ensuring the ability to potentially recover several hundred thousand shares of a corporation when your shareholdings are beginning to look like a controlling interest in that corporation may take on added importance. [ 122 ] The Defendants argue that the Plaintiff bears the burden of establishing that damages would not be sufficient in the event the Plaintiff is successful and that an attachment order is required to maintain the integrity of the Remaining Ventures Shares. They argue that the value of Remaining Ventures Shares has declined.

The inference they would have me draw is that requiring that shares be held in specie will not materially add to the integrity of a successful claim by the Plaintiff. [ 123 ] In effect, the Defendants seek to impose their current valuation of the prospects of Ventures on the Plaintiff and the Courts, notwithstanding their earlier optimism which lead them to acquire Ventures Shares in the first place. [ 124 ] The Defendants argue that the Plaintiff’s claim for damages would remain, even if I were to terminate the attachment order and permit disposal of the Remaining Ventures Shares.

That may be of limited consolation to the Plaintiff if any of the Defendants found liable have insufficient other assets to satisfy a judgment. [ 125 ] The Defendants argue that after Richard’s August 21, 2015 email to Lovig, which the Plaintiff claims evidences the Unwinding Agreement, the Defendants heard nothing from Lovig. This, they argue, is consistent with their assertion that no such agreement had been reached. When Lovig got back to Richard and inquired if they had a deal or not, that, the Defendants argue, is evidence that no Unwinding Agreement had been reached. [ 126 ] Another

interpretation of this circumstance is that Lovig, thinking he had an Unwinding Agreement based on Richard’s August 21, 2015 email, was waiting for the Defendants to produce a document evidencing this agreement. That is also consistent with the assertion that Lovig thought that the Plaintiff had a deal with the owner of the Ventures Shares by which the Plaintiff could reacquire those shares and he was simply inquiring of Richard why performance was delayed.

Once again, arguments that need to be tested with viva voce evidence. [ 127 ] The Plaintiff does not enjoy the ability to use the mechanism of an attachment order to grant it a super priority over other claimants to the Defendants’ assets (

section 23 , CEA ). With one exception, it has not provided me with evidence which satisfies me that there are reasonable grounds for believing that the Defendants are dealing with their exigible property, or are likely to deal with that

property, (

i) otherwise than for the purpose of meeting their reasonable and ordinary business or living expenses, and (ii) in a manner that would be likely to seriously hinder the Plaintiff the enforcement of a judgment against the Defendant. [ 128 ] The one exception that satisfies me involves the Remaining Ventures Shares which the Defendants acknowledge they wish to dispose of and which the Plaintiff wants back.

That is why the Consent Amending Order will be further amended to apply strictly to Remaining Ventures Shares in the possession of 125. [ 129 ] The Court should only grant an Attachment Order when it is just and equitable to do so, taking into account the interests of the claimant, the defendant and affected third parties: Equiplan Mortgage Investors Fund Ltd v Cross Country Homes Marketing

(1993) Ltd , 2007 ABQB 276 , para 32 . [ 130 ] Despite certain reservations about the merits of the Plaintiff’s case – which cannot be determined without the benefit of viva voce evidence – I am satisfied that it is just and equitable to extend the attachment order. [ 131 ] I am satisfied that the requirements of section 17(2) of the CEA have been met.

I am satisfied that extending the Consent Amending Order, but with further limitations, minimizes inconvenience to the Defendants while protecting the Plaintiff’s ability to realize upon its request for a mandatory injunction compelling 125 to return the Remaining Ventures Shares, should it succeed at trial. 125 is to be permitted to deal with its assets, other than the Remaining Ventures Shares, as it sees fit. [ 132 ] The Plaintiff has discharged the onus conferred upon it pursuant to section 18(6)(a).

The circumstances as they existed on February 22, 2016 justify the continued existence of the Consent Amending Order, subject to the following amendment: the prohibition on dealings with assets in the 125 Account applies only to the Remaining Ventures Shares. It is inconsistent with the Plaintiff’s stated objective for this prohibition to apply to anything else. I find the Plaintiff made full and fair disclosure in their ex parte application before me on October 9, 2015. V. Security for Costs a.

The Defendants’ position on the Security for Costs application [ 133 ] The Defendants request that the Plaintiff post $159,264 as security for costs pursuant to

section 254 of Alberta’s Business Corporations Act, RSA 2000, c B-9, [ABCA] , and rule 4.22 of the Rules of Court. The Defendants argue that they satisfy the overlapping tests in both rule 4.22 and

section 254 of the ABCA . The Defendants apply for an order for the Plaintiff to post security for costs, irrespective of whether or not the Consent Amending Order is extended. [ 134 ] The Defendants submit that both statutory provisions have the same purpose: avoidance of mischief. The mischief to be avoided is allowing a limited company with few assets in this jurisdiction to enjoy the proceeds of a lawsuit if it wins and walk away if it loses. [ 135 ] Rule 4.22 of the Rules of Court provides that: The Court ma y order a party to provide security for payment of a costs award if the Court considers it just and reasonable to do so, taking into account all of the following:

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

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

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

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

e) any other matter the Court considers appropriate. [ 136 ] In considering the first two factors set out in the rule, the Defendants claim that they will be unable to enforce a judgment against the Plaintiff in Alberta since Pinto has failed to provide evidence of assets in Alberta, or generally, or any other evidence showing that it can pay a costs award.

They note the volatile nature of Ventures Shares, the questionable value of securities held in the Plaintiff’s account with National Bank, that the Plaintiff’s balance with the TD bank as of November 2, 2015 is approximately $105,000, and that the Richardson GMP account has, since the Original Order, been closed,. Further, they say that the Plaintiff has no business operations in Alberta and was only registered extra-provincially in Alberta upon commencement of this action.

They cite a $92,069.04 judgment outstanding against Brian Loving since 2005. [ 137 ] In assessing the third factor – the merits of this action - the Defendants contend that an in-depth analysis of the action is not necessary at this stage, but that they have met the threshold of having a reasonably meritorious defence. They submit that the balance of the evidence supports their position that there was no “Oral Condition” on 125’s purchase of the shares.

Further, they submit that the Defendants offer a reasonable explanation for the nature of the share purchase transaction, which is in contrast to the Plaintiff’s inherently contradictory explanation. Finally, they say that under oath, the Soosts have denied the existence of an “Unwinding Agreement.” The Defendants purport to have provided a complete defence to the Plaintiff’s allegations of both an “Oral Condition” and an “Unwinding Agreement”, thus satisfying the onus for this factor.

[ 138 ] The Defendants submit that, having established a prima facie case for security for costs, the onus shifts to the Plaintiff to (

i) prove that it would suffer undue prejudice in continuing on with its action if it was required to post security and (ii) establish that it would not be just or reasonable to grant an order for security for costs. [ 139 ] As for rule 4.22(d), the Defendants argue that the Plaintiff put forth a complete lack of any sufficient evidence that would show that a security for costs order would unduly prejudice the Plaintiff’s ability to continue the action. [ 140 ] Considering all the factors, the Defendants argue that it would be just and reasonable under rule 4.22 for the Court to make an order for the Plaintiff to post security for costs. [ 141 ] Further to Amex Electrical Ltd v 726934 Alberta Ltd [Amex], 2014 ABQB 6 , at para 74 (

e) and (g), the Defendants note that they brought the security for costs application at the earliest possible opportunity and that they do not seek security for steps already taken. [ 142 ]

Section 254 of the ABCA provides that: In any action or other legal proceeding in which the plaintiff is a body corporate, if it appears to the court on the application of a defendant that the body corporate will be unable to pay the costs of a successful defendant, the court may order the body corporate to furnish security for costs on any terms it thinks fit. [ 143 ] The Defendants argue that for the reasons set out in their rule 4.22 argument, the Plaintiff is unable to pay costs as required by

section 254 ABCA . They allege that the “appearance of inability to pay costs”, referred to in

section 254 ABCA , requires the Court to examine:

a) the presence or absence of assets in Alberta;

b) the nature and circumstances of the assets to determine whether or not there is a substantial risk that the nature or value of the assets will not be sufficient to respond to a costs order;

c) whether the security for costs application was brought at the applicant’s earliest opportunity;

d) is the applicant seeking security for costs in connection with litigation steps already taken;

e) whether the issues raised in the Plaintiff’s application are of sufficient public importance that they need to be resolved and ordering security for costs might operate to defeat that opportunity; and

f) what are the “merits”? Based on something other than a detailed review of the merits, do the Defendants have a reasonably arguable defence, based on a review of the pleadings and the affidavit evidence? [ 144 ] The $159,264 sought in security for costs from the Plaintiff is set out in a draft bill of costs and was determined by multiplying Column 4,

Schedule C amounts by two. In seeking enhanced costs, the Defendants refer to Buchanan v. Lamoureaux , 2011 ABQB 256 [ Buchanan ]. They argue that this case is authority for the proposition that when there are unproven allegations of impropriety and fraud, then those allegations warrant solicitor-client costs or, at a minimum, enhanced

Schedule C costs. [ 145 ] In

summary, the Defendants argue that they are entitled to security for costs as it appears that the Plaintiff has no exigible assets in Alberta and is not carrying on any business operations in Alberta; the Plaintiff will be unable to pay the costs if unsuccessful in their action; the principal of Pinto (Lovig) remains in default of an Alberta judgment registered against him in 2005; Pinto will not be prejudiced by an Order for security for costs; and, no factors exist that would lead the Court to exercise its discretion to dismiss the application. b. The Plaintiff’s position on Security for Costs [ 146 ] In response to the Defendants’ application, the Plaintiff argues that

section 254 of the ABCA , and not rule 4.22 of the Rules , is the appropriate standard by which to assess a request for security for costs. It argues that

section 254 is more stringent because it requires the court to be satisfied that the Plaintiff “will be” unable to pay costs. [ 147 ] The Plaintiff further argues that the Defendants bear the onus of establishing that the Plaintiff has insufficient assets in Alberta. [ 148 ] As of the end of October, 2015, the Plaintiff claims it had assets located across Canada with a market value of $1,300,000. [ 149 ] The Plaintiff asserts that, as of the end of January, 2016, the Plaintiff continued to maintain approximately $105,400 in its TD Bank account in Calgary.

The account with National Bank is not maintained in Alberta.

Even though the Richardson GMP account has been closed as of September 30, 2015, the $773,000 balance in that account was sent to Lovig “as the representative of Pinto.” The Plaintiff would be prepared to consent to an order that prohibits it from removing the $105,000 currently in the TD Bank account before judgment, except if it is required to do so for reasonable business purposes. [ 150 ] The Plaintiff would undertake not to transfer any of its assets (currently in Alberta) out of Alberta or any of its non-Alberta assets that are in Canada outside of Canada, “ except within the normal course of business for Pinto ” [emphasis added]. [ 151 ] The Plaintiff would offer an undertaking for security which would require it to keep cash or publicly traded stock with an aggregate market value in some prescribed amount in its account with the TD Bank in Calgary.

It would be allowed to trade in stock in that account. If the aggregate value of assets in that account ever fell below the prescribed amount it would immediately augment assets in that account to ensure that the prescribed value of the account was maintained at all times.

[152] The Plaintiff stresses that it has established a strong prima facie case, or at the very least, a reasonable likelihood of success, andthat militates against an order for security for costs. [153] Further, the Plaintiff says that not only is there is no merit to the Defendants’ defence, but the Counterclaim advanced by theDefendants is without merit as well. [154] It argues that case law affirms that security for costs is never awarded in more than party-party amounts unless the amount ofthe claim is particularly large, and that it never is awarded on a solicitor-client basis.

It reasons that Buchanan does not apply to thissituation because it was a decision regarding assessing an appropriate award of costs after trial, not a security for costs situation. [155] As to quantum, the Plaintiff asserts that it should be no larger than 75% of party-party costs determined in accordance withColumn 4 of

Schedule C. Since it regularly maintains balances in excess of that in its TD bank account it should not be required to postsecurity for costs. c. The Law on Security for Costs [156] Two enactments set out security for costs tests:

Section 254 of the ABCA provides that: In any action or other legal proceeding in which the plaintiff is a body corporate, if it appears to the court on the application of adefendant that the body corporate will be unable to pay the costs of a successful defendant, the court may order the body corporate tofurnish security for costs on any terms it thinks fit. Rule 4.22 of the Rules of Court provides that: The Court may order a party to provide security for payment of a costs award if the Court considers it just and reasonable to do so, takinginto account all of the following: (

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

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

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

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

e) any other matter the Court considers appropriate. d. Decision on Security for Costs [157] There is some dispute as to the applicable legislative provision in this situation. The Defendants argue that these provisionsoverlap, and that they have satisfied both of the tests. The Plaintiff argues that

section 254 of the ABCA is the appropriate test. [158] In determining that

section 254 is the appropriate test, I adopt the comments of Wakeling J, as he then was, in Amex, at para 6:

Section 254 of the Business Corporations Act is the sole measure which applies if the respondent in a security-for-costs application is acorporation…In all other fact patterns r 4.22 of the Alberta Rules of Court is the template. [159] Because the Plaintiff is a corporation,

section 254 ABCA will apply. [160] The Court in Amex determined that the tests under rule 4.22 and

section 254 were discrete, and that the test for

section 254 wasthe only test to be applied when determining security for costs against a corporation. [161] In discussing the difference between

section 254 and rule 4.22, the Court in Prevalcid v Graff said “[T]he standard on which acourt will order a respondent to pay security for costs differs as between these 2 enactments. In Xpress Lube & Car Wash Ltd v Gill,2011 ABQB 457 at para 16, 23 CPC (7th) 193, Hall J said the following: To my mind, s. 254 above sets a more stringent test for the Applicant than that set out in Rule 4.22(

a) and (b).

Section 254 ABCAenvisions the situation where the body corporate will be unable to pay costs. Rule 4.22 permits an Order for security for costs where it isunlikely that the Plaintiff can pay costs. … [Emphasis in original].” [162] The process for determining a security for costs application is that in the first instance the onus is on the applicant to establishon a balance of probabilities that the respondent "will be unable to pay the costs" if the respondent's case is dismissed: that is the solecriterion set out in

section 254 ABCA. If the applicant satisfies this onus, the evidentiary burden shifts to the respondent to show why thisCourt should not exercise its discretion to make such an order against it. (Prevalcid, Amex and Toronto Dominion Bank v SuitelCanada Executive Suites Corp, 2011 ABQB 519 at paras 28-31.) [163] Given the discretionary nature of this type of relief, the Court can consider a number of factors, a non-exhaustive list of whichwas set out in Amex. An analysis of the factors follows: [164] Is the respondent a corporation and does it have assets in Alberta of a nature and value sufficient to meet any costs award, and

what is the level of risk the applicant will face in attempting to recover any costs awards granted to the applicant?: the Plaintiff is a corporation which claims to have $105,400 in an Alberta bank account. Clearly, this will be complex and expensive litigation. I do not consider marketable securities to be acceptable security. Fluctuations in the value of those securities can operate to undermine the objective of a security for costs order, especially if the value of those securities can be influenced by the actions of a significant shareholder.

I do not consider any arrangement whereby Lovig might be called upon to underwrite the Plaintiff’s obligation for security for costs to be reassuring. No evidence was put before me to suggest that he is capable of doing so. All told, this factor would favour an award of security for costs. [ 165 ] The likelihood the respondent will receive judgment against the applicant.

This may be attributable to the weakness of the respondent's case or the strength of the applicant's defence: In deciding to award security for costs it is necessary to make some determination of the merits in order to determine if the Defendants have a reasonably arguable defence, based on a review of the pleadings and the affidavit evidence. Counsel for the Defendants mentioned in the hearing that I was not required to “delve in detail into the merits”.

The merits of this case were discussed above in relation to the extension of the attachment order application, and having met the level required for an attachment order (without the benefit of viva voce evidence however), do not weigh against a security for costs award. [ 166 ] Will the security for costs order prevent the respondent from prosecuting its action? A security for costs award of an amount based on prospective steps on a single column of

Schedule C would not prevent the Plaintiff from prosecuting its action, which therefor does not weigh against an award being granted. [ 167 ] Is the applicant seeking security for steps already taken? An order with a retroactive dimension is inconsistent with the purpose of a security-for-costs order which is prospective in nature and enforced by a direction that proceedings be stayed until security is provided: The draft Bill of Costs shows that the security is sought both for past and for future steps in the litigation.

The inclusion of amounts included in the draft Bill of Costs for past steps will be a factor against an award of security for costs for those amounts. [ 168 ] Are the issues in the claim and the counterclaim different? This may be a relevant factor in refusing security or in determining the amount. The counterclaim in this action does not add so significantly to the action so as to prolong discoveries and trial that this factor would weigh against a security for costs order. [ 169 ] Did the applicant apply for a security for costs order at the earliest opportunity?

The application for the security for costs order was filed on December 18, 2015 and heard on February 22, 2016. The ex parte application was originally heard on October 9, 2015. There was no significant delay in the bringing of this application, but there was a delay in the hearing of the matter. The delay was not significant enough to prejudice the Plaintiff; this factor carries little weight towards or against a security for costs order. [ 170 ] Is the resolution of the issues presented by the respondent's action important to the greater community?

Will the growth of the law be impaired by an order that may bring an action to a premature end? The issues in this lawsuit are not of importance to the greater community and the growth of the law will not be impaired by an order that may bring an action to a premature end.

This factor would not weigh against a security for costs award. [ 171 ] Considering all the factors above on a balance of probabilities, the Plaintiff should post security for costs as it appears to this Court that it will be unable to pay the costs of a successful defendant. [ 172 ] The nature of the Plaintiff’s assets and business, and the possibility that it might have occasion to return assets to its shareholders or creditors for reasons which do not raise an inference, (that it is acting fraudulently or in a manner that responds to legitimate demands of its shareholders or creditors) causes me concern.

I am sufficiently concerned about the Plaintiff’s ability to discharge an adverse costs ruling that I consider this step necessary. [ 173 ] In looking at the quantum of the order, the first question which must be resolved is the amount of costs for which the Defendants are entitled to seek protection. An applicant must provide the court with a reliable estimate of its probable costs. The second question which must be addressed is whether the Plaintiff will be able to pay that amount in costs if its claim is dismissed.

Does it have exigible assets in Alberta? [ 174 ] The Plaintiff is directed to post $80,000 in security for costs, which is one set of Column 4,

Schedule C costs as estimated in the Defendants’ draft bill of costs attached as Exhibit “3” to the December 18, 2015 Affidavit of Kurt Soost. I believe that $80,000 reflects the appropriate resolution of the competing factors at play in applying

section 254 of the ABCA . [ 175 ] This amount must be posted in cash and paid into Court within 30 days of this decision and before any other steps may be taken by the Plaintiff. It may not be accessed by the Plaintiff for reasonable business, or any other, purposes. If the security for costs is not provided in accordance with this Order, the Plaintiff’s claim will be dismissed without further order. VI. Security for Undertaking a.

The Defendants’ position on Security for Undertaking [ 176 ] If the Consent Amending Order is extended, the Defendants ask that in addition to security for costs, that the Plaintiff be required to post security in respect of its undertaking in an amount of not less than $584,447.00.

That was the value of assets in the 125 Account immediately before the Original Order was made. [ 177 ] The Defendants further argue that: indefinite extension of the Consent Amending Order could mean that the value of the Remaining Ventures Shares could significantly decline; the Defendants have already suffered damages because the value of the 125 Account as of February 22, 2016 had declined to $350,000; and that they need security in the amount of $584,447 to offset the potential for a reduction to zero in the value of the Remaining Ventures Shares by the time the litigation, which they are assuming will go in their

favour, ends. [178] The Defendants argue that fortification of the Plaintiff’s undertaking for damages should have been ordered on October 9, 2015.They point to the downward trend of the trading price of Ventures Shares since that time in support of the assertion that they have beenput in jeopardy by being denied the right to liquidate the Remaining Ventures Shares while the Plaintiff has not been required to postsecurity to fortify its undertaking for damages in the event it is unsuccessful. [179] Restated, they ask the Court to provide them with “insurance” against the litigation risk of being unable to realize theirinvestment in assets which the Consent Amending Order attached. [180] The Defendants further argue that the Court is permitted to estimate damages when deciding whether or not to requirefortification of an undertaking for damages. b.

The Plaintiff’s position on Security for Undertaking [181] In response, the Plaintiff argues that undertakings are not usually fortified.

They allege that the Defendants bear the onus ofestablishing that an undertaking should be fortified: Before an application to fortify an undertaking can succeed, the likelihood of a significant loss arising as a result of the injunction and asound basis for belief that the undertaking will be insufficient must be shown: McCaffrey Group Inc v Bradlee,(1997) (AB KB), 204 AR 334, para 21. [182] The Plaintiff’s argument is that the case law establishes that where the Court has to make an estimate of the amount of damagesbefore fortifying an undertaking, no fortification is required.

Damages need to be clearly and simply calculable; they cannot be guessedor estimated. [183] The Plaintiff also argues that loss in the value of the 125 Account is largely attributable to poor performance of assets purchasedwith sale proceeds of Ventures Shares. c.

The Law on Security for Undertaking [184] Section 17(4) of the Civil Enforcement Act states that: The Court shall not grant an attachment order unless the claimant undertakes to pay any damages or indemnity that the Court maysubsequently decide should be paid to the defendant or a third person and where the Court grants an attachment order, the Court mayrequire the claimant

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

b) to provide security in respect of any undertaking. d. Decision on Security for Undertaking [185] As required by section 17(4) of the CEA, the Original Order required the Plaintiff to provide an undertaking as to damages. [186] Given that I have extended the Consent Amending Order, I must be cognizant of sections 17(5) and (6) of the CEA. Theseprovisions, set forth below, operate to place restraints on the limiting provisions of an attachment order:

(5) When an attachment order is granted, it should be granted in such a manner that it causes as little inconvenience to the defendant asis 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 meetthe claimant’s claim, including interest and costs, and any related writs, unless the Court is of the view that such a limitation wouldmake the operation of the order unworkable or ineffective. [187] I note that if the Defendants felt so strongly, to address this perceived inequity expeditiously they might have made greatereffort to bring this matter back before the Court in less than four months to at least address that allegedly emergent economic concern; itis always possible to seek assignment by the Chief Justice of this Court to hear a matter on an expedited basis. [188] I reject the Defendants’ reasoning that appropriate fortification of the Plaintiff’s undertaking should be $584,447.

To me it is notjust and reasonable to expect the Plaintiff to essentially “insure” the Defendants against their inability to recover their damages when it isthe Defendants who have chosen to gamble with a start-up investment. They will enjoy the upside if they succeed in the lawsuit andVentures shares appreciate, yet they seek to limit their downside if they succeed and Ventures shares decline in value.

That is not a fairresult. [189] The Plaintiff is ordered to pay $200,000 into Court as security for its undertaking within 30 days of the date of this decision.This is an appropriate amount pursuant to section 17(4) of the CEA and considering subsections (5) and (6). If the Defendants sufferirrecoverable loss in excess of that amount because they succeed in the lawsuit but the Remaining Ventures Shares are valueless whenattachment ends, that has as much to do with the Defendants’ choice of assets and their inherent volatility. VII. Contempt

a.

The Plaintiff’s position on Contempt [ 190 ] The Plaintiff seeks an order declaring either all or one of the Defendants - in particular 125 and the Soost Parents - to be in civil contempt of court, and that they be sanctioned appropriately. [ 191 ] The Plaintiff contends that the Koerner v Capital Health Authority [Koerner] test for contempt has been met: there is an existing prohibition of the Court, there was notice of it to the contemnor, and an intentional act occurred which constitutes a breach of the order: 2011 ABQB 191 , aff’d 2011 ABCA 289 . [ 192 ] The Plaintiff notes that despite the Original Order prohibiting the Defendants from selling, mortgaging, pledging, transferring, assigning, diminishing or otherwise disposing of any exigible property in which any of the Defendants have any interest pending further order of the court, 11,000 shares of Ventures held in the 125 Account were sold between October 13 and October 20, 2015.

The Plaintiff states that these sales resulted from “open orders” entered electronically by Charlotte Soost prior to the date of the Original Order. [ 193 ] The Plaintiff argues that the Soost Parents intentionally failed to cancel the “open orders” for the sale of Ventures Shares which they had placed with TD Waterhouse prior to October 9, 2015.

The Plaintiff alleges that the Defendants – having had the authority to do so - are in contempt of Court for not having cancelled, or taken any active steps to cancel, the “open order” arrangement with TD Waterhouse after being served with the Original Order. [ 194 ] To determine the sanction (set out at rule 10.53), the Plaintiff argues that in addition to the nature of the contempt, the court could consider the factors set out in Precision Forest Industries v Cox , 2013 ABQB 524 at paras 55 and 56 . [ 195 ] To remedy the contempt, the Plaintiff seeks an order requiring the Defendants to rectify all of the post-October 9, 2015 transactions by repurchasing 11,000 shares of Marapharm on the open market to be held in the 125 account, and depositing into the account the cash value of all share pur

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