Myers v AlanRidge Homes Ltd, 2017 ABQB 631

Court of Queen’s Bench of Alberta Citation: Myers v AlanRidge Homes Ltd, 2017 ABQB 631 Date: 20171018 Docket: 0801 06032 Registry: Calgary Between: Michael Myers, Jyoti Myers, Sam Ranieri, Carmen Raniere, Will Saskoley, Janice Saskoley, Amish Sabharwal and Christine Coutts Plaintiffs - and - AlanRidge Homes Ltd., Jager Homes Inc., 1181435 Alberta Ltd., Hon Enterprises Limited., Dominic Hon, Nicholas Hon, John Does(

s) and ABC Limited Defendants _______________________________________________________ Reasons for Judgment of the Honourable Madam Justice C.S. Anderson _______________________________________________________ Introduction [ 1 ] Together, the plaintiffs obtained four judgments against AlanRidge Homes Ltd. This trial arises out of their inability to realize on their judgements, as AlanRidge is now insolvent. The plaintiffs challenge a number of transactions that AlanRidge undertook in winding up its affairs.

The plaintiffs ask this Court to void these transactions relying upon the Fraudulent Preferences Act, RSA 2000, c F-24 ( FPA ), and the Fraudulent Conveyances Act, 1571 (UK), 13 Eliz I, c 5 ( Statue of Elizabeth ). They also ask that this court find the

defendants conspired to defeat the plaintiffs’ claims. Background [ 2 ] In February 2005, Dominic Hon and Nicholas Hon (through a numbered company) purchased 60% of AlanRidge, a custom home builder, (which also owned another custom home builder, Jager Homes Inc.) for $7.5 million. [ 3 ] Less than a year later, in December 2005, the Hons learned that AlanRidge’s CEO had been misappropriating funds. They terminated her employment and hired new management. [ 4 ] New management quickly determined that AlanRidge was not financially sustainable.

They recommended that AlanRidge finish any custom homes on which construction had already commenced, but cease taking any new work. In addition, they recommended cancelling the contracts for thirty-eight custom homes that AlanRidge had not yet started.

These contracts ‘were below costs’ and would not be profitable. [ 5 ] To that end, on February 27, 2006, AlanRidge sent letters to those thirty-eight custom home purchasers advising of its decision to cancel the contracts and offering to return their deposits. [ 6 ] AlanRidge then began laying off employees, securing additional financing and selling assets in order to complete its ongoing projects and wind down its affairs with a view, at least at the beginning, of paying off all of AlanRidge’s creditors. [ 7 ] During this time, AlanRidge also faced a lawsuit from its former CEO.

That lawsuit and AlanRidge’s dire financial position resulted in AlanRidge’s bank reducing its credit facility. The lawsuit was not settled until the summer of 2007. Until that time, the CEO retained a 40% interest in AlanRidge. [ 8 ] Of the thirty-eight custom home purchasers whose contracts were cancelled, six sought redress. Although I do not know when AlanRidge was first notified of these six claims, in July, 2006 there was a court order directing the plaintiffs’ claim to proceed to arbitration. These claims were dealt with by AlanRidge’s management.

Nicolas Hon (Hon) did not become aware of them until the fall of 2006. [ 9 ] In November 2006, the arbitration commenced. On May 30, 2007, the arbitration decisions and awards were released. AlanRidge appealed four of the six awards and paid out the two that were not appealed. By November 2007, the four decisions under appeal were resolved resulting in judgements totalling $1.242 million.

By that time, however, AlanRidge no longer had the funds to pay the four outstanding judgments. [ 10 ] As a result, the four sets of unpaid award holders commenced this action, challenging six of the transactions that occurred during the winding up of AlanRidge. They maintain that three of the transactions should be set aside because they are contrary to the FPA and the Statute of Elizabeth.

They also maintain that these three transactions along with three others support a finding that the Hons conspired to strip AlanRidge of its assets so as to avoid paying the plaintiffs’ claims. [ 11 ] I will address here one of the defendants’ arguments that applies to all three transactions: that the FPA does not apply to unliquidated claims. They argue that the FPA applies only to liquidated claims and the plaintiffs’ claims were not liquidated until their appeal was resolved in November 2007, or, alternatively, when the award was first delivered to the AlanRidge in July, 2006.

The FPA cannot apply, it is argued, to any transactions that occurred before that earlier date. The plaintiffs, however, rely upon 1007374 Alberta Ltd v Ruggieri , 2014 ABQB 641 , aff’d 2015 ABCA 205 , where the court found that despite the uncertain outcome of a trial, an outstanding claim was sufficient to trigger the provisions of the FPA . [ 12 ] I note that few of the custom home purchasers whose contracts were cancelled pursued a claim against AlanRidge so such claims cannot be viewed as inevitable at the time the contracts were cancelled, in February 2006.

However, by July 2006, AlanRidge knew or ought to have known of the plaintiffs’ claims. Unlike the decision in Ruggieri , I heard no evidence regarding AlanRidge’s assessment of the claims. In this decision, I have proceeded on the basis that the plaintiffs were creditors under the FPA as of July 2006, in accordance with Ruggieri . Issues [ 13 ] The first issue before is me is whether the following three transactions, involving related or non-arm’s-length parties, were fraudulent preferences, contrary to the Statute of Elizabeth and/or the FPA : 1.

The Jager Homes Inc. (Jager) building sale to 1181435 Alberta Ltd. (118) for $2.85 million; 2. The sale of Jager shares to Hon Enterprises Limited (HEL) for $3.19 million; 3.

A loan in the amount of $1.2 million from 118, the granting of security as a result, the substitution of security and its repayment. [ 14 ] As full and fair consideration was paid in each of these transactions, the issue before me is whether AlanRidge intended by these transactions to defraud, defeat, hinder, delay, or prejudice the plaintiffs ( Krumm v McKay , 2003 ABQB 437 ). [ 15 ] I can infer such intent, if the plaintiffs raise a prima facie inference of such intent by showing that certain badges of fraud existed at the time of transfer: Ruggieri.

If so, the burden then shifts to the defendants to rebut the inference. [ 16 ] Next, if I find that the defendants have successfully rebutted this inference such that they (or any of them) are not contrary to either the Statute of Elizabeth or

section 1 of the FPA , I am nonetheless asked to find that the second and third transaction are contrary to sections 2 and 3 of the FPA. That is to say that, I am asked to find that by selling the Jager shares or paying the 118 loans, the defendants

intended to give preference to another creditor over the plaintiffs (section 2 of the FPA ) or that, regardless of intent, the transactions had the effect of doing so (section 3 of the FPA ). If so, I then consider whether sections 6 and/or 9 of the FPA apply, thereby exempting the transactions, in any event. [ 17 ] Finally, I am asked to consider the elements of the tort of conspiracy and whether these three transactions, set out in paragraph thirteen herein, along with the following three, together, demonstrate that the defendants conspired to intentionally and unlawfully defeat the plaintiffs’ claims: 4.

A loan to Jager in August 2007 for $2.5 million; 5. General accounting expenses of $579,000; and 6. The payment of two of the arbitration awards (that were not appealed). Transaction #1 – Jager Building sale [ 18 ] The plaintiffs are seeking to set aside the sale of the Jager building to a related company, 118 (wholly owned by 698828 Alberta Ltd., which is owned by the defendants, Dominic and Nicholas Hon and other members of their family). [ 19 ] The Jager building was sold to 118 on May 14, 2007, shortly before the arbitration awards were released.

The plaintiffs, therefore, allege that the timing of the sale to a related party, one of the Hon companies, is suspicious or prima facie fraudulent. [ 20 ] Assuming, as I have done in these reasons, that the close relationship between Jager and 118 (concurrent intent) and the timing of this transaction are sufficient to raise a prima facie inference of fraud, the burden to rebut this inference then shifts to the defendants. [ 21 ] The defendants have explained the reasons for and the circumstances in selling the Jager building.

Although the sale did not close until May 2007, the transaction actually began in August 2006, when Jager needed funds to fulfill a contractual obligation to purchase lots from Qualico Communities Ltd. (Qualico). Jager had earlier given a deposit on some lots with the balance due to Qualico in August 2006. In August 2006, Jager was having cash flow issues similar to AlanRidge and could not get bank financing. Had Jager failed to make this payment, it would have lost its deposits and the lots.

In response, Jager’s management recommended selling Jager’s non-core assets, one of which was the Jager building. [ 22 ] Weidman Reliance Group undertook an independent appraisal of the building and appraised it at $2.85 million. 118 agreed to purchase the Jager building. [ 23 ] 118 then advanced Jager $1,135,520 in August 2006, the amount that Jager needed to pay Qualico. The advance was used as a deposit towards the purchase of the Jager building.

It is noteworthy, that although 118 was a related party to the Hons, at the time of this loan to Jager, the former CEO, who is independent of 118, owned 40% of AlanRidge. [ 24 ] Approximately four months later, in December 2006, 118 made a formal offer to purchase the Jager building for its fair market value, $2.85 million, and the transaction closed on May 14, 2007.

The accuracy of the appraisal is not disputed or in issue. [ 25 ] The directors of Jager received independent legal advice regarding the sale. [ 26 ] In his testimony, Hon explained that rather than listing the property for sale with an agent, Jager decided to sell the Jager building to 118 because it gave Jager certainty; certainty as to the timing of the sale and the amount realized. Jager knew that 118 would pay the fair market value for the building with no conditions. I accept this evidence. I found Hon to be forthright and candid in his evidence in both chief and cross examination.

The decision to sell the Jager building to 118 made commercial sense. Jager needed cash and 118 provided it. [ 27 ] Jager has provided an accounting of where the funds were expended.

In addition to purchasing the lots from Qualico ($1,135,520), it paid down its liabilities ($1,198,378 to an arm’s-length mortgagee to discharge the first mortgage against the building) and the balance of approximately $505,000 was deposited into Jager’s account to reduce its $3.6 million operating line of credit with HSBC. [ 28 ] The evidence does not support the plaintiffs’ argument that in selling the Jager building, the defendants were systemically stripping the assets of AlanRidge (Jager being a wholly owned subsidiary of AlanRidge) so as to avoid plaintiffs’ claims.

I am satisfied that Jager sold its non-core asset for cash so that it could meet its immediate contractual and financial obligations. [ 29 ] Unlike the cases of Krumm and Ruggieri , 118 paid Jager much needed cash on a timely basis, cash that Jager could not access from its bank. [ 30 ] In the words of plaintiffs’ counsel, I am satisfied that the defendants have ‘disproved intent’ to defraud, defeat, hinder, delay or prejudice the plaintiffs in the selling of the Jager building. [ 31 ] I therefore decline to void the transaction under the Statute of Elizabeth or

section 1 of the FPA . Transaction #2 - Sale of Jager Shares [ 32 ] The plaintiffs also seek to set aside AlanRidge’s sale of Jager shares to HEL, a non-arm’s-length company, owned by the Hon Family Trust and Dominic Hon.

[ 33 ] AlanRidge sold the shares in Jager in August 2007, after the arbitration awards were released. These shares, it is argued, would have fully satisfied the plaintiffs’ claims.

Given the timing of the sale to a related party, the plaintiffs allege the transaction is prima facie fraudulent. [ 34 ] Assuming, as I have done in these reasons, that these circumstances are sufficient to raise a prima facie inference of fraud, the burden to rebut this inference then shifts to the defendants. [ 35 ] Hon has testified as to the reasons for and the circumstances in selling the Jager shares in the face of the plaintiffs’ claims.

Similar to the sale of the Jager building, the actual sale of the Jager shares was contemplated and set in motion much earlier than the closing date of August 2007. [ 36 ] From February 2006, when AlanRidge decided to wind down its operations, AlanRidge’s financial situation deteriorated. By July 2006, it could not meet its payroll obligations, nor pay its debts as they came due. [ 37 ] In order to address its urgent financial needs and to proceed with winding up, AlanRidge borrowed money from 118.

In exchange for cash, it pledged to 118, or its nominee, the shares of Jager. [ 38 ] AlanRidge retained Clark Valuation Services to appraise the shares. The shares were privately held, wholly owned by AlanRidge. Typically, shares in privately held companies are illiquid, in that there is no ready public market, and therefore not easily transferrable. [ 39 ] Clark opined that as of June 13, 2007, the value of the shares ranged between $2.74 million to $3.19 million. HEL agreed to buy the shares at the highest range set by Clark, $3.19 million.

On August 9, 2007, HEL paid AlanRidge $3.19 million in cash, which AlanRidge deposited into its general account. The accuracy of the appraisal is not disputed or in issue. [ 40 ] AlanRidge used the cash to pay off its debts. The Agreed Statement of Facts sets out where these funds were spent. [ 41 ] Approximately $820,000 was paid to secured creditors, HSBC and Fisgard, an unrelated party. Approximately $186,000 was paid to preferred creditors (CRA and New Home Warranty Program) and approximately $609,000 was paid to trade creditors.

Hon testified that the trades were paid because they could register liens against the custom homes, homes that AlanRidge needed to sell. [ 42 ] AlanRidge also used part of the proceeds or cash received from HEL ($2.5 million) to advance a loan to Jager on August 30, 2007. Of course, as AlanRidge no longer owned Jager by this date, the plaintiffs understandably question why AlanRidge would have loaned Jager these funds, when it was in such dire straits financially. [ 43 ] I accept that there was a history of loans between the two companies.

I also accept Hon’s evidence that he was not involved in this loan nor did he know the reason for the loan but that it was likely directed by AlanRidge’s controller or staff, who were “probably not aware of the share transfer” and not aware that AlanRidge no longer wholly owned Jager. [ 44 ] More importantly, for this analysis, Jager repaid the loan in four installments within a five month period, from October 2007 to January 2008 ($250,000 on October 30, 2007; $300,000 on November 9, 2007; $700,000 on December 27, 2007; and $1,752,000 on January 21, 2008).

The evidence demonstrates that, indeed, Jager overpaid the amounts owing to AlanRidge. At the time of its wind up, AlanRidge owed significant funds to Jager. [ 45 ] In August 2007, one of the two award holders whose awards were not appealed, StormHaven, was threatening to enforce its judgement, which would have resulted in additional costs for AlanRidge. As a result, in August, 2007 AlanRidge paid StormHaven’s judgement, in the approximate amount of $422,000. I accept Hon’s evidence as to why StormHaven was paid in August and the plaintiffs were not.

The StormHaven award was due, the plaintiffs’ awards were not. [ 46 ] The circumstances surrounding the sale of the Jager shares are distinguishable from the facts in Krumm and in Ruggieri . HEL paid and AlanRidge received $3.19 million cash for the shares, cash that AlanRidge could not access from its bank. In addition, AlanRidge has provided a commercially sound reason for selling the shares.

I find the sale of the shares to be a bona fide transaction, with the amount, as set by an independent appraisal, fully paid. [ 47 ] I am satisfied that the defendants have ‘disproved intent’ to defraud, defeat, hinder, delay or prejudice the plaintiffs in the selling of the Jager shares. I therefore decline to void the transaction under the Statue of Elizabeth or

section 1 of the FPA . [ 48 ] The plaintiffs also ask that I consider the sale of the Jager shares under sections 2 and 3 of the FPA . Sections 2 and 3 are subject to

section 6 of the FPA .

Section 6 exempts a bona fide transfer of securities or property, for a present actual bona fide advance of money, if the money paid bears a fair and reasonable relative value to the consideration for it. [ 49 ] The defendants have satisfied me that this sale was without intent to deceive or defraud and therefore bona fide. Further, they have satisfied me that full, fair and reasonable consideration of actual money was given in exchange. The transaction is therefore not voidable under sections 2 or 3 of the FPA . [ 50 ] Even in the absence of

section 6 , I am satisfied that the dominant intent of this transaction was not to give the Hons or their related companies any preference over the plaintiffs’ claims, contrary to

section 2 of the FPA . The purpose was to allow AlanRidge to meet its immediate financial obligations, dating back to July 2006 and onward, when AlanRidge could not meet its payroll obligations. Transaction #3 – Granting Security and Loan Repayment to 118 [ 51 ] The third and final transaction that the plaintiffs seek to set aside arises out of two loans from 118 to AlanRidge and the

subsequent granting of security. The plaintiffs argue that this transaction is the most egregious of the three transactions. [52] In July 2007, when the plaintiffs’ claims were outstanding (albeit under appeal), AlanRidge executed a General SecurityAgreement (GSA) in favour of 118. The GSA was executed by Rowena Chow, Hon’s cousin, who was employed by the Hons’companies. The GSA related to two loans in 2006.

The loans were repaid to 118 in August 2007 and a month later, the GSA was thenregistered. [53] The plaintiffs argue that each step of this transaction, the initial granting of security, the execution of the GSA and therepayment were a clear attempt to defraud or defeat the plaintiffs’ claims and give priority to the Hons and their related companies.

I amsatisfied that the circumstances here are sufficiently suspicious such that the burden shifts to the defendants to justify this transaction andto disprove any fraudulent intent. [54] Ruggieri sets out that if a person makes a settlement which subtracts from the property, an amount without which the debtscannot be paid, then the court can infer intent of the settlor to defeat or delay a creditor unless the debtor can put before the court cogentevidence that it did not intend to defeats its creditors. [55] The defendants have put the reasons for and the circumstances of the loan before me. 118 loaned AlanRidge funds twice in2006.

In June 2006, approximately 3 ½ months after AlanRidge hired new management, 118, the same company that would advanceJager money in August 2006, loaned AlanRidge $900,000 so that it could continue its operations. In exchange, on June 30, 2006,AlanRidge executed a demand collateral mortgage against a number of lots in favour of 118.

There is no issue that AlanRidge actuallyreceived these funds nor that a collateral mortgage was given as security for the loan (see Agreed Statement of Facts). [56] Approximately one month later, in July 2006, AlanRidge requested a further $150,000 from 118 so that AlanRidge could meetits month-end payroll obligations. HSBC had refused to advance these funds to AlanRidge. Understandably, 118 was reluctant tocontinue to loan monies to AlanRidge, which was insolvent at the time.

However, it agreed to another loan on a number of conditions,including that the monies be repaid by December 31, 2006, that AlanRidge pledge its Jager shares as security and that AlanRidge grantto 118 or its nominee an exclusive and irrevocable option to purchase the Jager shares at the fair market value. There is no issue thatAlanRidge actually received these funds nor that the Jager shares were pledged as security (see Agreed Statement of Facts). [57] AlanRidge did not repay 118 by December 31, 2006. [58] The security given for these loans was not registered until after it was repaid.

The failure to register this securities may affect118’s priority as a secured creditor, but not its status as a secured creditor. [59] By 2007, AlanRidge intended to (and indeed did) sell the underlying properties (the lots and the Jager shares) over which 118had security.

In order to do so, AlanRidge exchanged or substituted one security for another. [60] On August 31, 2007, after the sale of the Jager shares, AlanRidge repaid $1,222,855 to 118, which included interest($174,480) minus an earlier repayment of $1625. [61] The presence or absence of fraudulent intent is a question of fact, to be determined from all the circumstances (Tracey Estatev. Wobick, 1999 BCSC 2530). The facts in Tracey Estate are distinguishable from the facts before me, where, among other things, thedebtor registered a debt against a property three weeks before trial.

The facts are also distinguishable from BDBC v Snood, 2016 ABQB429, upon which the plaintiffs rely. In BDBC, the guarantor transferred his assets to a numbered company without consideration oneweek before a payment to BDBC was due. [62] In considering the facts before me, I consider that the granting of security can itself be a fraudulent preference (CIBC v GrandCache Motor Inn Ltd. (AB KB), 1977 AJ 496).

CIBC is distinguishable however, because in that case the creditorshad not taken security at the time of their investment in a company nor had they intended to do so, until it became clear that the companywas insolvent. Here, the GSA at issue was not granted because of the Hons’ earlier, initial investment, but because of a subsequent loanthat AlanRidge desperately needed that would not otherwise been given without security. The GSA was then substituted, a year later,because AlanRidge wanted to sell the underlying security. [63] At the outset, in 2006, 118 would not loan AlanRidge funds without security.

This only makes commercial sense. In additionto AlanRidge’s financial troubles which made it impossible to obtain bank financing, the former CEO continued to own 40% ofAlanRidge. She did not loan or contribute funds to AlanRidge’s operations at this time. The Hons, through 118, found themselves havingto fund 100% of AlanRidge’s operations, despite only owning 60%. I find it was commercially reasonable for AlanRidge to grantsecurity to 118 in order to obtain the loans it needed to continue its operations. [64] There is no issue before me regarding the terms of the loans.

As a result of the lawsuit, AlanRidge was careful to borrow thesefunds from 118 at the same interest rate as another arm’s-length lender of AlanRidge’s. I also find that AlanRidge has also justified thereasons for substituting the security for these loans and for its repayment. [65] I accept Hon’s evidence as to the circumstances surrounding this loan. I am satisfied that the defendants have rebutted anypresumption of fraud.

The defendants did not have any dishonest intent or intent to defraud, defeat, hinder, delay or prejudice theplaintiffs or have any intent to prefer the Hon-related companies over the plaintiffs in each step of this transaction. [66] I find the substitution of security was bona fide and made in good faith to allow AlanRidge to sell the lots over which 118 hadan unregistered mortgage and the Jager shares which were pledged to 118 or its nominee at the time the loan was advanced. [67] I accept Hon’s evidence that he was not considering the plaintiffs’ claims when the loans were granted and securitysubstituted. [68] It was not until the summer of 2007 that Hon realized that AlanRidge would be unable to pay off all of its creditors.

[ 69 ] The fact that AlanRidge does not list the plaintiffs as creditors in their financial statements of October 8, 2007 is symptomatic of poor accounting or an overwhelmed management winding up a company and not evidence of fraud or intent to deceive. [ 70 ] The defendants have also disproved that these loans and the granting of the underlying security were intended to give preference of 118’s claim over the plaintiffs (under

section 2 of the FPA ). [ 71 ] I now consider

section 3 of the FPA and whether the repayment to 118 had the effect of giving 118 preference over the plaintiffs, regardless of intent.

Section 3 of the FPA is subject to sections 6 and 9 of the FPA .

Section 6 allows for the granting of the original security as AlanRidge received bona fide payment for same.

Section 9 allows for the substitution in good faith of one security over another for the same debt so far as the debtor’s estate is not lessened in value to the other creditors because of the substitution. I am satisfied that the substitution was in good faith, an exchange of one security for another for the same debt and that AlanRidge’s estate was not lessened in value as a result, particularly vis a vis the plaintiffs, who are unsecured creditors. [ 72 ] I therefore decline to void this transaction under the Statue of Elizabeth or the FPA .

Tortious Conspiracy [ 73 ] The plaintiffs ask that I consider the above three transactions, along with the following three, transactions 4, 5 and 6, as evidence that the plaintiffs engaged in a tortious conspiracy to strip away the assets of AlanRidge in order to avoid paying the plaintiffs. [ 74 ] The necessary elements to establish the tort of conspiracy are that the allegedly-tortious action must be unlawful, and that the conspirators intended to cause damage to the plaintiffs or at least knew or ought to have known that their actions would injure the plaintiffs.

Transaction #4 - Loan to Jager $2.5 Million [ 75 ] I have already addressed this loan when I considered the sale of the Jager shares. [ 76 ] AlanRidge loaned Jager $2.5 million on August 30, 2007. These funds came from the proceeds of the share sale where AlanRidge sold its Jager shares. Therefore, at the time of this loan, AlanRidge did not own Jager. [ 77 ] Although the loan was not commercially reasonable, given AlanRidge’s financial circumstances, there is a history of loans between AlanRidge and Jager. Hon was not involved in this loan nor did he know the reason for the loan.

I accept his evidence that the loan was likely directed by AlanRidge’s controller or staff, who were “probably not aware of the share transfer” or sale. [ 78 ] Importantly, Jager repaid the loan in four installments within a five month period. In fact, Jager overpaid AlanRidge for this loan. [ 79 ] I cannot find that this loan was unlawful or supports a finding that it was part of a conspiratorial scheme or conduct intended to strip away the assets of AlanRidge or defraud the plaintiffs. Transaction #5 - AlanRidge’s G&A Expenses [ 80 ] The plaintiffs ask that I find that AlanRidge’s General and Administrative (G&

A) expenses from September 2007 to January 2008, totaling $579,990, were excessive and further evidence of tortious conduct, particularly for a company that was winding up its operations, with only one employee at the time. [ 81 ] Hon testified that these amounts were decided by AlanRidge’s controller, with advice from AlanRidge’s external accountants.

As well, these G&A expenses included significant legal fees incurred by AlanRidge during this time. [ 82 ] The plaintiffs have not put forward any expert evidence to contradict the evidence of the defendants’ expert, Barry Milliner, although they did question Milliner’s qualifications and the thoroughness of his investigation in this matter. As such, the plaintiffs ask that I give his evidence less weight. [ 83 ] Milliner opined that construction companies can charge G&A expenses of up to ten percent of their total cost of sales.

Milliner concluded that AlanRidge’s G&A throughout 2007 was eight percent of total cost of sales. He concluded that the charges were within the reasonable range. I accept his evidence. [ 84 ] The plaintiffs have failed to prove that that the G&A expenses were unreasonable, much less unlawful, nor do they support a finding that the setting of the G&A expenses were part of a scheme intended to strip away the assets of AlanRidge in order to defraud the plaintiffs.

Transaction #6 - Arbitration Settlement Payments [ 85 ] In August 2007, AlanRidge paid another award holder, StormHaven, $422,399 in settlement of its arbitration award. On October 10, 2007, a second arbitration award in the approximate amount of $206,000 was paid to Stemp/Psofimis. These were the two arbitration awards that AlanRidge did not appeal. Hon testified that he did not have a relationship with or know any of the award holders. Of the award holders, Hon had only met Michael Myers, because he was a former employee of AlanRidge. AlanRidge paid the award

holders whose amounts were due and owing. They were also threatening to execute upon their judgments. [ 86 ] The unfortunate and seemingly unfair result is that two arbritation awards were fully paid while four, the plaintiffs’, were not. By the time the four outstanding awards were finally settled on November 29, 2007, AlanRidge had insufficient funds to pay its secured creditors, much less unsecured creditors. [ 87 ] I accept Hon’s evidence relating to AlanRidge’s reasons for paying out these two award holders.

The evidence does not support a finding that such payments were unlawful or part of a scheme intended to strip away the assets of AlanRidge in order to defraud the plaintiffs. Conclusion [ 88 ] I am satisfied that the defendants did not undertake the first three transactions with the intent of defrauding, defeating, hindering, delaying or prejudicing the plaintiffs. As such, I decline to void these transactions under the Statute of Elizabeth or

section 1 of the FPA . [ 89 ] Further, the transactions are not voidable under sections 2 or 3 of the FPA . [ 90 ] Finally, the plaintiffs have failed to satisfy me that the defendants engaged in a tortious conspiracy, that the six transactions, or any of them, were undertaken with the intent to systematically strip assets from AlanRidge in order to avoid paying the plaintiffs. [ 91 ] As a result of the forgoing, I dismiss the plaintiffs’ claim in its entirety. Heard on the13 th day to 15 th day of February, 2017 and; the 28 th day of April, 2017.

Dated at the City of Calgary, Alberta this 18 th day of October, 2017. C.S. Anderson J.C.Q.B.A. Appearances: James G. Hanley for the Plaintiffs Trevor A. Batty and J. Kelly Hannan for the Defendants