Tiamat Resources Inc v Procyon Resources Corp, 2021 ABQB 646

Court of Queen’s Bench of Alberta Citation: Tiamat Resources Inc v Procyon Resources Corp, 2021 ABQB 646 Date: 20210813 Docket: 1601 16471 Registry: Calgary Between: Tiamat Resources Inc. Plaintiff/Applicant - and - Procyon Energy Corp. Defendant/Respondent _______________________________________________________ Endorsement of the Honourable Mr. Justice J.T.

Eamon _______________________________________________________ Overview [ 1 ] Tiamat applied to set aside general security agreements between Procyon and related parties, as fraudulent preferences that favour other creditors under the Fraudulent Preferences Act , RSA 2000, c F-24 (“ FPA ”).

I dismissed Tiamat’s application in Tiamat Resources Inc v Procyon Resources Corp , 2021 ABQB 509 (the “fraudulent preference decision”). [ 2 ] Tiamat now applies to reopen the decision. [ 3 ] I would have set aside the general security agreements if Tiamat had proved it was a creditor when the general security agreements were made (June 2020), but it did not prove it was a creditor at that time. In FPA claims, the Courts interpret the term “creditor” narrowly. Tiamat had to show it was the holder of “an obligation to pay a sum certain or a sum readily ascertainable with

certainty”. The evidence showed that in June 2020, Tiamat merely held a claim for unliquidated damages for alleged breach of a farm outagreement between Tiamat and Procyon. The fact that it later recovered a judgment on the damages claim in August 2020 did not qualifyit as a creditor under the FPA. All this is explained in the fraudulent preference decision. [4] Tiamat seeks to reopen the decision so it can provide additional evidence to prove it was a creditor under the FPA beforeJune 2020.

The evidence is an invoice dated November 15, 2016 from Tiamat to Procyon under the farm out agreement for $831.75 andan affidavit from Tiamat’s representative that this invoice was issued to Procyon under that agreement but unpaid. [5] I refuse Tiamat’s application. The additional evidence probably would have changed my decision that Tiamat was not acreditor, but Tiamat did not prove that it could not have provided the evidence to the Court on the fraudulent preference applicationthrough reasonable diligence.

There must be an end to litigation, and the needs for certainty and finality in Court cases outweighTiamat’s interest in providing additional evidence after judgment was pronounced. Test for re-hearing and allowing additional evidence [6] The formal judgment reflecting the fraudulent preference decision has not been signed or entered.

The Court can reopen andreconsider the decision (as confirmed by Rule 9.13 of the Alberta Rules of Court, AR 124/2010), but “the Courts should be very sparingin their reopening of a pronounced decision, and should not do so simply for the asking.” (Alberta (Child, Youth and FamilyEnhancement, Director) v BM, 2009 ABCA 258 at para 11).

The discretion must be exercised “sparingly and with great care” (671122Ontario Ltd v Sagaz Industries Canada Inc, 2001 SCC 59 , [2001] 2 SCR 983 at para 61). [7] A fundamental underpinning of this principle is the need to avoid abusive case splitting and to promote finality in litigation(Kay v Wirstiuk (1977), (AB QB), 8 A.R. 405 at para 18). As Côté JA stated in BM, “If parties are not forced to provefully their whole case once and for all, then endless wrangling and never-ending rehearings will result ...” Further, “Oral hearings andtrials are adversarial processes.

Parties are expected to put their best foot forward.” (CZ v RB, 2019 ABCA 445 at para 24). [8] In Kay at para 28, Steer J described the general considerations in an application to reopen following pronouncement of thedecision: [28] My conclusion is that the following are the three general factors that must be weighed in this kind of application:

(1) The fundamental consideration is that a miscarriage of justice does not occur and therefore the discretion is unfettered. In this regardit is important to keep in mind that regard must be had to the interests of the defendant as well as those of the plaintiff.

(2) Once reasons have been given, the successful party is not to be deprived of it without very solid grounds.

(3) The greatest care must be exercised to avoid abuse of the court’s process. [9] BM at para 13 lists a variety of criteria that a judge might consider when asked to reopen a case before the formal judgmentis entered: 1. Would there be a miscarriage of justice without the reopening? … 2. The power to reopen is to be used sparingly, and the pronounced decision is not to be taken away without very solid grounds. … 3. Is the applicant trying to raise a new issue which [it] could have raised earlier? 4. A new argument alone is not enough; new important facts are necessary… 5.

Has any other party relied on the order to [its] detriment? … 6. Does the applicant’s new factual stance contradict its earlier factual assertions or evidence? … [10] Both parties accept that the decision should be reopened if Tiamat satisfies the test for admission of new evidence.

Recently,the Alberta Court of Appeal described the test as follows: [12] The test for introducing fresh evidence at the trial level was best articulated in Scott et al v Cook et al, (ONSC), [1970] 2 OR 769-775: It would appear from the proceeding discussion that on an application to open up the proceedings made to the trial Judge on the groundsof newly discovered evidence, the applicant must show that the evidence he seeks to adduce is such that, if it had been presented at trial,it would probably have changed the result.

On the other hand, a party seeking leave to introduce new or further evidence on appeal mustshow that the evidence is such that, if adduced, it would be conclusive or practically conclusive and not merely corroborative. In bothinstances, the party must also prove that such evidence could not have been obtained by reasonable diligence before the trial.

This test was applied by the SCC in 671122 Ontario Ltd v Sagaz Industries, 2001 SCC 59 , [2001] 2 SCR 983 at paras 59-65. (MAK v TJK, 2020 ABCA 196 at para 12)[1]. [11] Although not argued by counsel, the Court might have discretion to reopen a case for the purpose of hearing additionalevidence in exceptional cases where this test is not met[2]. In any event, “the fundamental consideration is that a miscarriage of justicedoes not occur” and “it is important to keep in mind that regard must be had to the interests of the defendant as well as those of theplaintiff” (Kay at para 28).

Whether the additional evidence probably would have changed the result [ 12 ] Tiamat made no effort on the fraudulent preference application to assert that it held a debt, in the sense that term is used in fraudulent preference cases, before the consent judgment was granted in August 2020.

On the present application Tiamat says it did hold a debt at the relevant time because the farm out agreement obliged Procyon to pay maintenance costs to Tiamat and the amounts are readily ascertainable. [ 13 ] Counsel for both sides agree that para 8 of the farm out agreement (which is not in the evidence) provided that Procyon shall be responsible for paying all of Tiamat’s costs of maintaining the property including but not limited to mineral lease rental costs, property taxes, insurance, surface lease rental costs, and any other payments required to maintain the mineral leases in good standing. [ 14 ] Tiamat says it paid mineral lease rentals to a third party pursuant to the farm out agreement and included these in its invoice to Procyon dated November 15, 2016.

Procyon did not pay the invoice. If these amounts, as small as they are, were proved then Tiamat would be a creditor under the FPA when the general security agreements were made. [ 15 ] Procyon’s counsel submits that the evidence underlying the invoice might be disputed, therefore Tiamat has not shown that the evidence would probably change the result. [ 16 ] I do not agree. Some of the entries on the invoice are vague, but the mineral lease rental payments are not. Mineral lease rental costs are a category of expense explicitly assigned to Procyon in para 8 of the farm out agreement.

Tiamat’s affidavit could be more detailed, but left unchallenged I would infer that Tiamat paid the lease rental costs as required under the farm out agreement. There was enough evidence to shift the burden to Procyon, yet it did not file any evidence that suggests the invoice might be invalid, the rentals might not have been paid by Tiamat to the third party, or that a protracted hearing would be required to decide whether Procyon was responsible for these amounts.

I consider this evidence practically conclusive. [ 17 ] Procyon’s counsel also suggested the relevant limitation period in which to sue for the amounts would have expired before the general security agreements were made. [ 18 ] I do not agree. Tiamat filed its statement of claim in this action, for breach of the farm out agreement, on December 7, 2016. On January 26, 2017 it filed particulars of the alleged breaches, that Procyon failed to drill a test well and failed to pay the maintenance costs including the mineral lease rental costs.

Consequently, these costs were included in the claim long before the potential expiry of any limitation period. If some formal amendment were required to include these costs in the claim, it is very likely that Tiamat was entitled to amend under sub- section 6(2) (

b) of the Limitations Act , RSA 2000, c L-12 even if a limitation had expired. [ 19 ] Therefore, Tiamat likely would have proved it was a creditor at the relevant time if it had tendered the additional evidence at the fraudulent preference application. If the standard is higher, such as “practically conclusive”, I come to the same conclusion.

Whether the additional evidence could not have been obtained through reasonable diligence before the fraudulent preference application [ 20 ] Tiamat submits that the maintenance costs were not part of its original claim, Tiamat was not focussed on maintenance costs in its recovery efforts, and Tiamat overlooked this evidence. Therefore, I should allow the application to reopen and admit additional evidence. [ 21 ] Tiamat’s application focusses on the knowledge and personal circumstances Tiamat’s principal.

She deposed that she did not understand the significance of, and had forgotten about, the November 15, 2016 invoice until she read my decision finding that Tiamat was not a creditor. She described a number of personal circumstances that led to her lack of understanding. I accept this evidence. [ 22 ] However, the fact the invoice and debt were not present to her mind when she instructed counsel in the fraudulent preference application is not sufficient. Most clients would not understand the technical requirements of proving a fraudulent preference claim.

That is not a reason to deprive the opposing party of a judgment in its favour and undermine the objective of finality in litigation. Tiamat must also prove its counsel could not have obtained the evidence through reasonable diligence. [ 23 ] Consequently, the following must also be considered: [ 24 ] First, Tiamat was represented by the same counsel throughout the damages action and fraudulent preference application. [ 25 ] Second, Tiamat’s counsel delivered the reply to demand for particulars in January 2017 advising the maintenance costs claim was part of the damages claim.

Tiamat later particularized the claim, including reference to the date and exact amount of the invoice now tendered, in undertaking responses delivered in February 2018. [ 26 ] Third, Procyon delivered its written argument responding to Tiamat’s fraudulent preference application about three weeks before the scheduled hearing date. The argument included that Tiamat’s evidence would not establish it was a creditor. [ 27 ] Fourth, Tiamat had a fair opportunity to provide evidence. Both sides were allowed supplemental evidence under a consent order leading up to the application.

Tiamat could have applied, even as late as the exchange of written arguments, to extend the deadline

to submit evidence for good cause [3] and a judge could have decided how to proceed with fairness to both sides. At the hearing I raised whether the record was sufficient to determine the issues (see the fraudulent preference decision at para 8 of 2021 ABQB 509 ) and no concerns were raised. [ 28 ] Fifth, the invoice was available if requested by counsel. There is no suggestion that the invoice was lost.

Tiamat provided a copy in its affidavit in support of the present application to reopen, less than three weeks after I dismissed Tiamat’s fraudulent preference application. [ 29 ] Tiamat has not proved this aspect of the test on the present record.

Miscarriage of justice? [ 30 ] Some might wonder why Procyon should avoid responsibility when the additional evidence would likely have persuaded me to allow Tiamat’s claim under a statute concerning “fraudulent preferences”. [ 31 ] In assessing miscarriage of justice, both sides’ interests must be considered. [ 32 ] Tiamat did not prove that Procyon acted with fraudulent intent. There is more than one basis to set aside transactions under the FPA . I would have set the agreements aside because they had a prohibited effect on other creditors, not because of Procyon’s intent.

All this is explained in the fraudulent preference decision. [ 33 ] It is important to recognize that Procyon is entitled to timely, certain and final court proceedings. It had waited many months for a hearing date and a decision. An exceptional, interim order of November 17, 2020 constrained its business affairs pending the fraudulent preference application.

Procyon would reasonably expect to be able to rely on its general security agreements and the final judgment on the merits (subject only to appeal) in deciding how to move forward to address its financial problems. [ 34 ] It might be that in cases where reopening is sought based on new evidence, a Court could reopen in exceptional circumstances even though an applicant did not satisfy the test for admitting new evidence (para 11 above).

None were suggested in this case, and given the circumstances of this case I would adopt Moen J’s words from Nelson v 1153696 Alberta Ltd , 2010 ABQB 130 at para 26 that “the test for admitting new evidence itself operates to avoid a miscarriage of justice”. Conclusion [ 35 ] The application to reopen the judgment is dismissed. The parties may speak to costs. Heard on the 10 th day of August, 2021. Dated at the City of Calgary, Alberta this 1 3 th day of August, 2021. J.T. Eamon J.C.Q.B.A. Appearances: Michael B Niven QC for the Applicant Spencer Chimuk for the Respondent