Condominium Corporation No, 2021 ABQB 75

Court of Queen’s Bench of Alberta Citation: Condominium Corporation No 0421647 v MacEwan Village Ltd, 2021 ABQB 75 Date: 20210202 Docket: 1703 06662 Registry: Edmonton Between: Condominium Corporation No. 0421647 Plaintiff - and - MacEwan Village Ltd and Curtis Penner Defendants _______________________________________________________ Reasons for Decision of Brian W. Summers , Master in Chambers _______________________________________________________ The Applications [ 1 ] These are cross applications for

summary judgment/summary dismissal. The primary issue is whether the Defendant MacEwan Village Ltd (“MVL”) made a fraudulent conveyance to the Defendant Curtis Penner (“Mr. Penner”) contrary to the Statue of Elizabeth , 13 Eliz. 1,

chapter 5 or contrary to the Fraudulent Preferences Act , RSA 2000,

chapter F-24 . [ 2 ] MVL took no

part in these applications. The Plaintiff Condominium Corporation 0421647 (“Condo Corp”) and Mr. Penner agree that it is appropriate that these applications be determined summarily and a trial is not required.

The Facts [ 3 ] The facts relevant to the applications before me are as follows: Judgment against MVL (

a) MVL was the developer, builder and general contractor of the condominium project called MacEwan Village (“Condo Project”). (

b) Condo Corp consists of all of the owners of units in the Condo Project. (

c) In 2012 Condo Corp sued MVL and others for damages, alleging negligence and other claims, with respect to the construction of the Condo Project (“2012 Action”). (

d) On March 3, 2016 MVL was noted in default. On February 28, 2017 Condo Corp obtained default judgment against MVL in the 2012 Action in the amount of $508,741.34 (“the Judgment”). Commencement of this Action (

e) When Condo Corp began to take steps to enforce the Judgment, it learned that in September 2015, MVL had transferred Unit 169 in the Condo Project to Mr. Penner (“the Transfer”). (

f) Condo Corp commenced this action against MVL and Mr. Penner in 2017 (“2017 Action”). The Statement of Claim sought a declaration that the Transfer was a fraudulent conveyance or a fraudulent preference; an order that Unit 169 be conveyed to the Plaintiff in trust for the creditors of MVL; or judgment against Mr. Penner for the value of Unit 169. Other Parties (

g) Parties related to MVL were involved in the Transfer. (

h) The shareholders of MVL were MacEwan Investments Corporation (“MIC”) and Real Estate Strategies Group Inc (“RESG”), each as to 50%. (

i) Mr. Penner’s father, Allan Penner, was a director of MVL and RESG (“Mr. Penner’s Father”). (

j) A corporation owned by Mr. Penner’s Father (and mother) owned 50% of RESG. (

k) MIC was owned by Robert Harris. Harris also had another company called Centron Group of Companies Inc (“Centron”). Centron had been contracted by MVL in the construction of the Condo Project. The Transfer (

l) Mr. Penner first expressed interest in purchasing Unit 169 in July of 2020. (

m) A lawyer named Roy Shouldice acted for all of the parties with respect to the Transfer. His email to those involved summarized the structure of the Transfer as follows: (

i) Mr. Penner would purchase a one-half interest in Unit 169. RESG would purchase the other one-half interest; (ii) The price would be $180,000 plus GST ($9,000); (iii) Mr. Penner would pay cash for his one-half and that amount would be paid to MVL; (iv) RESG would pay for its one-half by issuing a demand promissory note in the amount of $94,500 payable to MVL (“the PN”); (

v) RESG and Centron would each issue an invoice to MVL in the amount of $90,000 plus GST of $4,500.00; (vi) MVL would pay the Centron invoice by cheque and the RESG invoice by assignment of the PN; (vii) Title to Unit 169 would be transferred to Mr. Penner and he would sign a Trust Declaration confirming that he holds a one-half interest in Unit 169 in trust for RESG. (“Shouldice Plan”) (

n) The Transfer occurred in accordance with the Shouldice Plan. The Transfer of Land was dated September 14, 2015 and registration of the Transfer of Land occurred on October 5, 2015. Knowledge of Mr. Penner at the time of the Transfer (

o) Mr. Penner was aware of all aspects of and steps in the Shouldice Plan including the fact that the money he was paying to

MVL would be immediately flowed out by MVL to Centron in payment of Centron’s invoice. (

p) Prior to and at the time of the Transfer, Mr. Penner was a member of the Board of Directors of Condo Corp. (

q) In the Minutes of a meeting of Condo Corp dated August 31, 2015, it is noted that when Condo Corp’s legal counsel reported that he had received from all parties named in the 2012 Action a willingness to participate in a mediation, except MVL, “...Mr. Penner offered to contact MVL representatives and enquire on a willingness to participate in a mediation process”. Parking Stalls (

r) In 2019 Mr. Penner filed a Statement of Claim against Condo Corp and its property manager Laidley Management Ltd (“Laidley”) alleging that he was the owner of 77 parking leases with respect to 77 parking stalls (“Parking Stalls”) at the Condo Project (“2019 Action”). The Parking Stalls do not have separate titles. They are part of the common property which may be licensed or leased for exclusive use. (

s) Condo Corp defended the 2019 Action and amended its Statement of Claim in the 2017 Action to seek a declaration that Mr. Penner had no interest in the Parking Stalls. (

t) Revenue from the Parking Stalls is being held in trust. Condo Corp and Mr. Penner each claim entitlement to that revenue. Consolidation of Actions (

u) On February 26, 2020 this Court ordered that the 2019 Action be continued or asserted as a Counterclaim to the 2017 Action. That order also directed that the opposing

summary judgment/dismissal applications of the parties be heard in a Special Chambers hearing. The Issues [ 4 ] There are two issues for determination, as follows: (

a) Was the Transfer a fraudulent conveyance contrary to the Statute of Elizabeth or contrary to the Fraudulent Preferences Act ? (

b) Who is entitled to the Parking Stalls? Was the Transfer a Fraudulent Conveyance? [ 5 ] The tests for a fraudulent conveyance under the Statute of Elizabeth and under the Fraudulent Preferences Act are slightly different. Under the provincial legislation it is necessary for the plaintiff to prove that the transferor was insolvent or on the eve of insolvency when the transfer occurred. [ 6 ] In this case there is no evidence before the court that MVL was insolvent, or on the eve of insolvency at the time of the Transfer.

Consequently, my focus will be upon the requirements under the Statute of Elizabeth. [ 7 ] To obtain a remedy under the Statute of Elizabeth , a plaintiff must establish the following: (

a) There must be a conveyance of real or personal property; (

b) For no or nominal consideration; (

c) With intent to defraud, delay or hinder creditors; (

d) The party challenging the conveyance must be someone who was a creditor at the time of the conveyance or someone with a legal or equitable right to claim against the transferor; and (

e) The conveyance must have had the intended effect. Palechuk v Fahrlander, 2006 ABCA 242 and Milavsky v Milavsky, 2011 ABCA 231 . [ 8 ] As stated above, proof of insolvency is not required. [ 9 ] I will deal with the three requirements for a fraudulent conveyance that are not really in issue in this case. They are as follows: (

a) Mr. Penner admits that the Transfer was a conveyance of real property. (

b) The Transfer of Unit 169 and execution of the Shouldice Plan did have the effect of keeping this asset, and its value, out of the hands of MVL’s creditors. (

c) Although Mr. Penner asserts that Condo Corp cannot succeed because it did not have a judgment against MVL at the time of the Transfer, that argument fails. All that is necessary is that Condo Corp had a legal or equitable right to claim against the transferor

MVL at the time of the Transfer. That requirement is met. [ 10 ] In my view the Shouldice Plan was clearly a plan made and carried out with the intent to defraud MVL’s creditors. It removed the asset and its value from MVL. The “creation” of invoices by RESG and Centron, as some sort of justification for removing money from MVL, is a clear badge of fraud. (I add that the invoices have never been located or put into evidence). That RESG received the benefit of a one-half interest in Unit 169 without having to pay anything for it is also a clear and unmistakable badge of fraud. The fact that Mr.

Penner’s cash was immediately moved out of MVL to a party related to MVL (Centron’s principal Robert Harris was a director of MVL and a director and shareholder in MIC which owned one-half of the shares in MVL) is also a badge of fraud. Finally, the fact that the details of the Shouldice Plan were hidden and not learned until counsel for Condo Corp obtained a court order requiring production of Mr. Shouldice’s file, is also a badge of fraud. [ 11 ] Mr. Penner asserts that none of the badges of fraud attach to him and that he had no intent to defraud the creditors of MVL.

I do not accept that for at least two reasons. [ 12 ] Firstly, Mr. Penner was aware of all aspects of the Shouldice Plan, including the creation of invoices and the immediate transfer of the PN and cash out of MVL. Even if a fraudulent conveyance to defraud creditors of MVL was not Mr. Penner’s primary motivation, he certainly knew that was the effect and he willingly played a

part in executing the Shouldice Plan. [ 13 ] Mr. Penner argues that he did not share a fraudulent intent to defraud MVL’s creditors because: (1) at the time of the Transfer, the 2012 Action was several years old, with no progress and obviously without merit and Condo Corp did not have a judgment; and

(2) MVL was a single purpose corporation whose function was long ago complete and it was “normal” to flow money out to the shareholders in such a situation. [ 14 ] I find Mr. Penner’s statement regarding the 2012 Action disingenuous. At the very moment that he is involved in executing the Shouldice Plan, Mr. Penner is offering to approach MVL about participating in a mediation with respect to the 2012 Action. It is clear that he knew very well that the 2012 Action was still very much alive and MVL was a Defendant in that action and Condo Corp was looking to pursue it. [ 15 ] With respect to Mr.

Penner’s explanation that he thought it normal to flow money to shareholders when the single purpose corporation’s work was done, I too find that disingenuous. I agree with counsel for Condo Corp that as Mr. Penner was a member of the Board of the Condo Corp, he had a fiduciary duty to act in the best interests of the Condo Corp. Participating in the execution of the Shouldice Plan is a breach of Mr. Penner’s fiduciary duty to the Condo Corp. [ 16 ] This leaves the issue as to whether the Transfer involved no or nominal consideration. Condo Corp asserts that as the PN and Mr.

Penner’s cash immediately flowed out of MVL there was no consideration to MVL for the Transfer whatsoever. [ 17 ] Mr. Penner asserts that his cash payment of $94,500 to MVL was valuable consideration as was the PN from RESG to MVL. [ 18 ] I find that RESG provided no consideration for its one-half interest in Unit 169. In so far as the Transfer was made to RESG, I find the Transfer to be a fraudulent conveyance contrary to the Statute of Elizabeth and I set aside the conveyance of that one-half interest.

I direct that a one-half interest in Unit 169 be transferred to Condo Corp in trust for the creditors of MVL. [ 19 ] Despite Mr. Penner’s willing participation in the Shouldice Plan, I find the Transfer of a one-half interest to him is not a fraudulent conveyance as he paid fair, adequate and valuable consideration for that one-half interest. [ 20 ] In argument Mr. Penner stated that if it was wrong for MVL to flow his money out to Centron, MVL could bring a fraudulent preference/conveyance claim against Centron. I agree with that. Who is entitled to the Parking Stalls? [ 21 ] Mr.

Penner seeks an adjournment of this issue. He says that Condo Corp and Laidley have documents that will substantiate his ownership of the Parking Stall leases. Although I am not totally clear on what the exact documents sought by Mr. Penner are, Mr. Penner says that there are transactional documents regarding the leases that will reflect his ownership. [ 22 ] Mr. Penner further asserts that he has been seeking this document production since at least the summer of 2019, but Condo Corp and Laidley have refused to provide it.

He says that with the amendment made to the 2017 Statement of Claim, these documents are very much relevant to both the 2017 Action and the 2019 Action. [ 23 ] Counsel for Condo Corp says that there are no such documents and there has been nothing further for Condo Corp to produce and Mr. Penner has been advised of that fact. [ 24 ] When I asked Mr. Penner why he had not brought an application in Court for these documents in the last eighteen months, he said that he had a draft application prepared and his brief on this application now advises the Court of that request. [ 25 ] I deny Mr.

Penner’s request for an adjournment. He knew that the

summary judgment/dismissal applications with respect to the 2017 Action and the 2019 Action were coming forward in this Special Hearing. In fact, I think that this current hearing was originally scheduled for May of 2020. Mr. Penner did not have an explanation as to why he could not have brought on his application earlier. [ 26 ] Consequently, there is absolutely no evidence whatsoever that Mr. Penner is the owner of the Parking Stall leases. Although Mr. Penner asserts that he acquired these leases at the same time and under the same transaction as the Transfer of Unit 169, there is not a single document or email suggesting this occurred.

[ 27 ] Condo Corp makes two further arguments with respect to its entitlement to the Parking Stalls. [ 28 ] Firstly, it notes that although Bylaw 121 allowed the developer MVL to sell a lease as part of a sale of a condominium unit, there was nothing in the Bylaws which provides that any unsold or unassigned leases accrued to or became the property of MVL. Counsel for Condo Corp refers to the decision of the Alberta Court of Appeal in Condominium Plan No 992 5205 v Carrington Developments Ltd, 2004 ABCA 243 .

That case stands for the proposition a developer does have the ability to include rights to parking stalls in purchase agreements, but to be effective developers must follow the legislative scheme under the Condominium Property Act. That legislative scheme is subsection 50(1). There must be a bylaw, lease, license or other instrument granting an owner the right to exercise exclusive possession.

In this case, there is no evidence of a bylaw, lease, license or other instrument. [ 29 ] Secondly, Condo Corp states that even if MVL did have any rights with respect to the Parking Stalls, any conveyance of them by MVL to Mr. Penner would be a fraudulent conveyance since there was no consideration provided and there is no evidence of the transfer (a badge of fraud). Mr. Penner states that the Parking Stalls have a negative value and there was some consideration because the price paid for Unit 169 was $5500 more than the assessed value ($180,000-$174,500).

Given my finding that Condo Corp owns the Parking Stall leases, I need not decide this issue. Conclusion [ 30 ] My orders and declarations are as follows: (

a) The Registrar of Land titles shall transfer an undivided one-half interest in Unit 169 to Condo Corp. Condo Corp shall hold that one-half interest in trust for the benefit of the creditors of MVL; (

b) Condo Corp is the owner of the Parking Stalls and leases with respect to the Parking Stalls; (

c) All funds held in trust arising from the leasing of these Parking Stalls shall be paid to Condo Corp. (

d) Condo Corp is entitled to its party and party costs with respect to these applications. Heard on the 22 nd day of January, 2021. Dated at the City of Edmonton, Alberta this 1 st day of February, 2021. B.W. Summers M.C.Q.B.A. Appearances: Todd Shipley Reynolds Mirth Richards & Farmer LLP for the Applicant Curtis Penner Self-Represented Litigant