HML Contracting Ltd v Twisted Pair Technical Services Inc, 2021 ABQB 899

Court of Queen’s Bench of Alberta Citation: HML Contracting Ltd v Twisted Pair Technical Services Inc, 2021 ABQB 899 Date: 20211110 Docket: 1603 05446 Registry: Edmonton Between: HML Contracting Ltd. Plaintiff - and - Twisted Pair Technical Services Inc. and Daniel Pinder Defendants _______________________________________________________ Memorandum of Decision of the Honourable Madam Justice L.K.

Harris _______________________________________________________ [ 1 ] On October 8, 2020, the Plaintiff HML Contracting Ltd. (“HML”) was granted Judgment against the Defendant Daniel Pinder (“Pinder”) pursuant to a personal guarantee signed by Pinder in favor of the Plaintiff in the amount of $176,900.59 plus costs of $111,906.58 for a total of $288,807.17 (the “Guarantee Action”). [ 2 ] Pinder now applies for a stay of execution of the judgment in the Guarantee Action until his appeal of that judgment to the Alberta Court of Appeal is heard.

The appeal is scheduled to be heard March 1, 2022 (para. 2, Pinder Affidavit). The Court of Appeal has granted HML security for costs in the amount of $25,000, which has been posted by Pinder (para. 22 Beckhuson Affidavit).

[3] There is a second action relating to a shareholder dispute that is ongoing, being Action No. 1903 03931, in which Pinder is aPlaintiff and HML is a Defendant (the “Shareholder Dispute Action”). In the Shareholder Dispute Action, Pinder and 1917959 AlbertaLtd. (“1917959”) claim damages as a result of the alleged breach of a Unanimous Shareholder Agreement by HML and its principals. [4] The Alberta Rules of Court provides direction with respect to applications for stays pending appeal (Rule 14.48). However,Pinder argues that he is not applying for a stay pending appeal under that Rule. He argues that the Court has jurisdiction to stay theexecution of the judgment against him pursuant to

section 17 of the Judicature Act. I also note that Rule 1.4(

h) provides the Court withauthority to “adjourn or stay all or any part of an action, application or proceeding, extend the time for doing anything in the proceeding,or stay the effect of a judgment or order.” [5] Regardless of what provision Pender says applies to his application, he seeks a stay only until his appeal is heard. I. Pinder’s Position [6] Pinder relies upon s. 17(1) of the Judicature Act, R.S.A. 2000 c. J-2 which states: 17(1) In a proceeding (

a) for the recovery of a debt or liquidated demand, (

b) for the enforcement of a security or charge on land, (

c) for the determination or specific performance of an agreement for the sale of land, or (

d) for the possession of land, the Court in its discretion may at any stage of the proceeding grant a stay of proceedings on any terms that the Court may prescribe, andin like manner the Court in its discretion may with or without imposing terms, after final judgment in any proceeding whatsoever, grant astay of execution of an order for sale or of other similar process, including a stay of an order for possession of land, and may by an ordergranting the stay extend the time for payment of a judgment debt or the time for doing any act or making any payment prescribed by aprevious order of the Court. [7] Pinder also states that in addition to the authority granted pursuant to s. 17 of the Judicature Act, the Court has inherentjurisdiction to grant stays of execution of its own judgments. [8] Royal Trust Corp. of Canada v Kendal Adjusters Ltd., 1984 ABCA 241, (“Royal Trust”) involves a claim by a landlord forrent and the tenant’s counterclaim for damages.

In Royal Trust, the Court confirmed it had discretion to order a stay of execution underthe Judicature Act, and further, that it had inherent jurisdiction to order a stay of proceedings to allow time for related proceedings toconclude where the related proceedings provided the judgment debtor with a just claim for damages that could be set off against thejudgment already obtained. Citing Wells v Knott, (1910), (MB KB), 20 Man R. 146: “…Whether or not the defendant has a such a claim can only be determined when the counterclaim is tried.

In the meantime execution ofthe plaintiff’s judgment ought to be stayed unless there is some good reason why that course should not be followed.” [9] Pinder referred to MacLean v Lounsbury Industries Ltd., 1972 CarswellNB 158, in which the Court held that a stay ofexecution of a judgment should be granted in that case pending the outcome of a second related action, on the condition that thejudgment debtor be required to provide to the judgment creditor a satisfactory bond to guarantee payment of the judgment debt shouldthe second action not succeed. [10] In situations where there is a plausible counterclaim or set-off, the Court may grant a stay of execution, though it may bemade conditional on payment of part or all of the disputed amount into Court: Royal Trust Corp. of Canada v Kendal Adjusters Ltd.,(1984), 1984 ABCA 241 , 32 Alta.

L.R. (2d) 383 (Alta.

C.A.). [11] The Court in Schacher v National Bailiff Services, 1999 ABQB 46 (“Schacher”) stated that: “the Court has the inherent jurisdiction and the absolute and unfettered discretion to order the stay of enforcement of a money judgmenteither absolutely or for such period and subject to such conditions as the Court deems fit. [12] However, the practice of the Court should not be to deprive a successful party of the fruits of the litigation and, accordingly, astay should only be granted if the Court is satisfied that there are special circumstances which render it inexpedient to enforce thejudgment or order or that the applicant is unable from any cause to pay the money: Humberstone v Trelle, (1910), 14 W.L.R. 145 (Alta.S.C.); Athabaska Airways Ltd. v Saskatchewan Government Airways, (1957), (SK CA), 24 W.W.R. 379 (Sask.

C.A.);Jager Industries Inc. v Leduc (County) No. 25, (1997), 1997 ABCA 309 , 55 Alta. L.R. (3d) 77 (Alta. C.A.). [13] Pinder argues that the “special circumstances” are that the Guarantee Action and the Shareholder Dispute Action are related;they arise from the same series of transactions, have some of the same parties, and both consider issues of the operations andmanagement of the various corporate entities. If Pinder succeeds in the Shareholder Dispute Action he says he will be able to use anyjudgment obtained to reduce the amount owed pursuant to the judgement against him in the Guarantee Action.

These are the “specialcircumstances” which “render it inexpedient to enforce” the judgement in the Guarantee Action. [14] Pinder argues that there is a three-part test for determining whether or not a stay of proceedings shall be granted incircumstances where there is a second action commenced which, if successful, would result in a set off to reduce or eliminate the amountowed:

(

a) there shall be a "preliminary and tentative" assessment of the merits of the case; (

b) the Court shall consider whether the applicant for the relief otherwise would suffer irreparable harm. In this case, given the relatively small financial amounts at stake, this step may merge into or become part of the third step; (

c) the Court shall consider the balance of convenience or, more appropriately in this case, "the balance of inconvenience" in granting the relief. ( Horsemen's Benevolent Protective Assoc. of Alberta v Alberta Racing Commission , (1989), 97 A.R. 287 (Alta. C.A. [In Chambers])) (“ Horsemans ”). [ 15 ] Pinder states that should HML be permitted to enforce its Judgment in the Guarantee Action, he will suffer irreparable harm. The only assets he has which could be used to satisfy the Judgment are the shares he owns in 1917959.

He fears that if a stay is not granted, the Respondent will seize those shares and in effect, bring the Shareholder Dispute Action to an end.

Alternatively, Pinder states that HML will petition him into bankruptcy which will result in the loss of his ability to prosecute the Shareholder Dispute Action. [ 16 ] Pinder relied upon his Affidavit sworn September 9, 2021 and filed in this action, as well as his Affidavit sworn June 30, 2021 and filed in the Shareholder Dispute Action to support his contention that the Shareholder Dispute Action was meritorious and that he would suffer irreparable harm if not granted a stay.

He sets out the history of the parties’ relationship, explaining that late 2015 he and the principals of HML reached an agreement whereby he would sell half of his interest in his company, Twisted Pair Technical Services Inc. (“Twisted Pair”) and at the same time, would purchase shares in 1917959 Alberta Ltd. (“1917959”). 1917959 would then operate all telecommunications and utility work that the parties had previously done, ostensibly to the benefit of all of the parties. The parties signed a unanimous shareholders agreement to give effect to the arrangement.

Twisted Pair was also granted a loan by HML in order to satisfy Twisted Pair’s obligations to Canada Revenue Agency (a portion of which loan ultimately became the subject of the Guarantee Action). [ 17 ] In early 2016, Pinder alleges he learned that 1917959 was successful in winning a bid in competition with Twisted Pair. He alleges that he was then “squeezed” out of the business contrary to the terms of the Unanimous Shareholders Agreement. Further, having lost the bid, Twisted Pair no longer had the funds to satisfy the loan it had been given by HML.

Once it defaulted on the loan, Twisted Pair was then placed into receivership (with the consent of Pinder), and subsequently became bankrupt. Some of the loan was repaid through the receivership but HML pursued Pinder for the shortfall under the personal guarantee he signed in favour of HML. [ 18 ] Finally, Pinder says that the balance of convenience rests with him. HML will suffer no prejudice by not being able to collect on its judgment now. He points to the fact that they have taken few steps to collect until recently. II. HML’s Position [ 19 ] HML opposes the application for a stay of execution.

It says that the Guarantee Action and the Shareholder Dispute Action are not related to a degree that would support the granting of a stay as “special circumstances”, and as such, this case is distinguishable from Royal Trust and the other cases relied upon by Pinder. [ 20 ] HML relies upon the Affidavit of Casey Beckhuson (“Beckhuson”), one of the principals of HML and a defendant in the Shareholder Dispute Action, to refute the allegations made by Pinder. Needless to say, Beckhuson has a very different view of things compared to Pinder.

Beckhuson states that the agreement between the parties was, in part, meant to grant Pinder a share in the profit of HML’s operations, which were more limited in scope than what is described by Pinder. Beckhuson states that Pinder was a Director of 1917959 from inception and so clearly knew what the assets and operations of 1917959 were – there were no attempts to “squeeze” him out of the business.

It wasn’t until HML took steps to enforce the Guarantee that Pinder raised concerns about 1917959’s business and Pinder threatened to bring the Shareholder’s Dispute Action. [ 21 ] HML argues that Pinder has acted inappropriately, including by facilitating improper payments by Twisted Pair to another company owned by Pinder and to Pinder himself prior to the Receivership. The Receiver subsequently sought reimbursement for some of those payments.

HML also says that Pinder delayed the Receivership unnecessarily by disputing amounts owed. [ 22 ] Pinder was questioned on his Affidavit sworn in support of his application for a stay of execution. Mr.

Beckhuson believes that based on information provided by Pinder that Pinder is acting “in concert” with a competitor to the detriment of 1917959 and its principals, which in itself is a breach of the USA. [ 23 ] In essence, HML says that Pinder lacks the “clean hands” necessary for the Court to exercise an equitable jurisdiction to grant a stay. [ 24 ] In any event, HML argues that Pinder cannot meet the three-part test set out in Horsemans . It points to Alberta Treasury Branches v E. Dyck Holdings Ltd. , 1993 CarswellAlta 865 (“ ATB ”) where the Court stated that not every case warrants the granting of a stay.

An applicant for a stay must establish a case for it. The fact that execution will cause financial hardship is not a ground for a stay of execution. A bare assertion of prejudice is not sufficient. The existence of a procedural cross-claim is not in and of itself sufficient. If HML has a judgment, it is entitled to attempt to collect on it. III.

Decision [ 25 ] Accepting for the moment that Pinder’s application is not an application for a stay pending appeal under Rule 14.48, but rather, a more general application for a stay given the special circumstances created by the initiation of the Shareholder Dispute Action, I agree that the Court does have a broad discretion pursuant to s. 17(1) of the Judicature Act , and as well, has inherent jurisdiction to grant

a stay of execution of proceedings. That authority is also provided for within Rule 1.4(h). A. Availability of Set Off [ 26 ] The case authorities put forward by Pinder suggest that the Court’s discretion to grant a stay of execution is not unfettered. The discretion may be exercised in circumstances where there is a “plausible counterclaim or set off”: Schacher v National Bailiff Services , supra, at para 61 .

Put another way: The court may otherwise grant a stay "where exceptional circumstances exist and it is fit and just to do so": Attila Dogan , ibid. [ 27 ] On the issue of whether the Shareholder Dispute Action constitutes a “plausible counterclaim or set off” or “exceptional circumstances”, I note that that it has some different parties as compared to the Guarantee Action (Mark Beck and Casey Beckhuson are personally named as Defendants along with GCS General Contracting Services Inc. and HML). [ 28 ] Further, even though the two actions arise out of the same series of transactions, (Beckhuson states that the USA was entered into “contemporaneously” with the “business transaction” that resulted in the loan guaranteed by Pinder), they involve the consideration of very different issues; the Guarantee Action involved an assessment of whether Pinder owed money to HML pursuant to the terms of a personal guarantee and general security agreement, and if so, in what amount (see the Decision of Rothwell, J. in HML Contracting Ltd. v Twisted Pair Technical Services Inc. and Daniel Pinder of October 8, 2020, Exhibit “A” to the Beckhuson Affidavit).

The Shareholder Dispute Action involves questions of a breach of the USA by either Pinder or Beck/Beckhuson/HML/GCS as a result of the manner in which 1917959 carried on business. [ 29 ] The success (to date) of HML in the Guarantee Action is not determinative of the issues in the Shareholder Dispute Action. [ 30 ] Schacher considered a similar situation. There, the Defendant Bailiff sought a stay of execution on the basis that it had commenced a second action against the Respondents, the Schachers.

The Schachers had obtained a judgment against a Bailiff for the expense they had incurred caring for horses seized by the Bailiff.

After they obtained their judgment, the Bailiff commenced a separate action against the Schachers based in tort, alleging that the negligent care provided by the Schachers resulted in the horses bringing a lower price on auction. [ 31 ] Lee, J., clearly considered the second action brought by the Bailiff to be a “plausible counterclaim or set off” notwithstanding that the issues were somewhat different ( Schacher , at para. 61 ) [ 32 ] In Royal Trust , a lessor advanced a claim against the lessee for rental arrears and obtained an order for removal and sale of the distrained goods.

A stay of execution of the order was granted pending the commencement of an action by the lessee for the lessor for damages which could result in a set off against the lessor’s rent claim. [ 33 ] These authorities do not require that the issues be identical. However, they do not explicitly address the issue of whether there needs to be a mutuality of the parties as between the two actions. This may be because there was a mutuality of parties in both Schacher and Royal Trust . [ 34 ] Chubak v Corner Brook Farms Ltd. , 2015 ABQB 806 does address that issue . There, the Plaintiffs sought

summary judgment against the Defendants based upon a promissory note and guarantee. The Defendants argued they had a set off claim for the Plaintiffs’ violation of a non-competition agreement, however, that claim was not actually the Defendants’. That claim belonged to a separate company which was not a party to the debt action. Master Robertson states: The typical argument in support of a set-off claim, expressed in basic terms, is that A sues B in debt, and B claims a set-off from A either in debt or on the basis of a damage claim. But here, the damage claim is not owed by B.

It claims to set off damages sought by C against A. It is clear that there is no mutuality here at all, regardless of how "mutuality" is defined. There never was. The debt claim, which is the subject of this lawsuit, was always owed by Corner Brook to the Chubaks. The obligations under the separate agreement, which is the subject of a different lawsuit, were always owed by the Chubaks to Carnwood. [ 35 ] After reviewing a series of authorities regarding the mutuality of parties and the applicability of set-off, Master Robertson concludes: As indicated above, one of the defendants' replies to the

summary judgment application is that if judgment is allowed, its enforcement should be stayed pending the outcome of the trial of Carnwood's claim against the Chubaks. Then, we are told, if Carnwood obtains judgment against the Chubaks, it could be set off against the Chubaks' judgment against the defendants. But how would that work? We would still be faced with the problem we have now. Carnwood would have a judgment against the Chubaks, but the Chubaks would have a judgment against Corner Brook and the individual guarantors. They would be judgments against different parties.

One cannot be "set off" against the other without a new agreement, or without at least an assignment so as to make the parties cross-obligees arising from closely-related contracts. [ 36 ] The same situation arises here. HML has a judgment against Pinder. But it is Pinder who claims against not only HML, but also Mark Beck, Casey Beckhuson and GCS General Contracting Services Inc. for the breach of the USA.

Conceivably Pinder could obtain a judgment against Defendants other than HML, in which case there could be no set off. [ 37 ] Therefore, I conclude that because of the lack of mutuality of parties as between the Guarantee Action and the Shareholder Dispute Action, Pinder cannot establish that there exists a “plausible counterclaim or set off” as described in Schacher , or “exceptional circumstances” as described in Attila Dogan . Thus, I would decline to direct a stay of execution on those grounds.

B. Stay Pending Appeal [38] In the event I am wrong about whether there is mutuality of parties between the Guarantee and Shareholder Dispute Actionsgiving rise to a right of set off, and that this is an application for a stay of proceedings which should be considered, I will conduct thatanalysis. [39] The test for granting a stay of proceedings pending appeal is as described by Pender: Attila Dogan Construction andInstallation Co. v AMEC Americas Ltd., 2015 ABQB 429 (Alta. Q.B.) at para. 12, citing Bernum Petroleum Ltd. v Birch Lake EnergyInc., 2014 ABQB 652 (Alta. Q.B.), which is that (

a) there is an arguable issue, (

b) he will suffer irreparable harm if the stay is notgranted, and (

c) the balance of convenience between the parties favours the granting of a stay. [40] I must first make a “preliminary and tentative assessment” of the merits of the Shareholder Dispute Action (ATB at para. 75). Such an assessment in this case is exceptionally difficult given the lengthy, detailed and conflicting Affidavits filed by the parties in thiscase. Pinder says that the threshold to determine this aspect of the test is a low one; all that is required is that the applicant mustestablish something akin to an arguable case.

HML says in response that the Court is able to look behind the argument and assess thefacts to a certain extent. If I do that, then HML says that I will see that Pinder’s arguments are without weight given his conduct in theseproceedings and the results in the Guarantee Action. [41] What is the threshold that Pinder must meet in order to satisfy the Court that his Shareholders Dispute Action has sufficientmerit to support a stay of execution in the Guarantee Action?

In MacLean v Lounsbury Industrial Ltd., 1972 CarswellNB 158,Dickson, J., commented that he had some misgivings in deciding to order a stay on the basis of the affidavit put forward by the applicantin that case because that affidavit was “silent as to the merits of the plaintiff’s claim”. Nonetheless, he ordered a stay.

It would appeartherefore that Dickson, J. considered the threshold to be very low. [42] In Schacher, Lee, J. states that in situations where there is “a plausible counterclaim or set-off, the applicants had establishedat least a “prima facie case”. [43] In ATB, Master Funduk states at paras 76-77: Where the pleas are pleas of fact it is not sufficient to merely make the assessment based on the pleading. We all know that litigantsplead all sorts of facts and often enough those pleas have no foundation. The assessment should not depend on the proficiency of thepleadings. There must be evidence.

It is not unreasonable to require a defendant which asks for a stay of execution to provide some evidence toshow that there is some merit to the counterclaim. [44] In Canadian Natural Resources Limited v Arcelormittal Tubular Products Roman S.A., 2013 ABCA 357, the Court statesat para. 7: On applications for stays, sometimes the less said about the merits of the appellant’s appeal the better, particularly when the judgehearing the stay application may be a member of the panel hearing the appeal.

Suffice to say that I cannot say that the appeal has noreasonable possibility of success: which is the test laid down by Kerans, J.A. of this Court in Triple Five Corp v United WesternCommunications Ltd, (1994), 1994 ABCA 141 , 19 Alta LR (3d) 153 at 155. (emphasis added). [45] I agree with Pinder that the threshold is low. As long as he can establish an arguable case then he will meet this part of thetest. [46] The information before me is that Pinder has commenced an action for a breach of the USA, breach of fiduciary duty andoppression.

His affidavits swear to his discovery that the Defendants were conducting business contrary to the USA and in breach oftheir fiduciary duties, in particular, by diverting business to their own companies and attempting to “squeeze” Pinder out. Pinder’s caseis at least arguable based on the evidence he has provided.

It is not clearly without merit. [47] HML argues that the inappropriateness of Pinder’s actions, including in delaying the Receivership and facilitating improperpayments by Twisted Pair prior to the Receivership is evidence that he is attempting to conduct the Shareholder Dispute Action in thesame manner, and that there is no real merit to the Shareholders Dispute Action. [48] While I accept that Beckhuson sees things very differently I am unable to make credibility findings in order to disbelieve whatPinder says based upon the very detailed and conflicting affidavits filed or based upon counsel’s arguments in morning chambers. [49] Therefore, I find that Pinder meets the first branch of the test. [50] The next question is whether Pinder can establish that he would suffer irreparable harm should a stay not be granted.

Heargues that his only asset with which he can satisfy the Judgment are his shares in 1917959, and that HML will seize those shares, thuspreventing him from benefitting from 1917959’s operations, and will force him into bankruptcy. [51] There is no evidence as to what the shares in 1917959 might be worth. Beckhuson has provided evidence of the “infighting”between the Directors and shareholders of that company. He also testifies to the fact that 1917959 was unsuccessful in keeping a majorcontract with Telus.

It appears that 1917959’s operations are struggling and that Pinder’s shares, and the company itself, might not beworth much. I cannot conclude that Pinder would suffer irreparable harm as a result of HML seizing his shares. [52] I also question whether Pinder has established that he would suffer irreparable harm as a result of losing control over theShareholders Dispute Action in the event of his bankruptcy.

Pinder states in his September 9, 2021 affidavit at paragraph 19 that, “IfHML contracting is allowed to enforce its judgment against me, I face the possibility of being petitioned into bankruptcy and losing myshareholding interest in 1917959 Alberta Ltd.” He further attests to the fact that he has spoken with a trustee in bankruptcy who

provided him with advice as to the effect a bankruptcy could have on his ability to conduct the Shareholders Dispute Action. I am of the view that whether ultimately Pinder loses his Shareholders Dispute Claim in the event of a bankruptcy is somewhat speculative at this stage. [ 53 ] Pinder says “I do not currently have enough cash and assets to pay HML Contracting Ltd.’s judgment as against me”. That is a subjective statement, and Pinder has not provided any details as to his net worth, assets or liabilities to demonstrate that this is the case.

By virtue of the fact that his appeal appears to be continuing I presume that Pinder has posted the security that the Court of Appeal has ordered, and so there is some evidence that he has at least some access to cash. [ 54 ] I note the statement made by Master Funduk in ATB starting at para 67: A case for a stay of execution must still be made out. The existence of a “procedural” cross-claim is not of itself sufficient. The only evidence to support the case is the guarantor’s categorical statement in para. 8 of her affidavit, which I again set out: 8.

If the Plaintiffs (Defendants by Counterclaim) proceed to execute on that judgment, the Plaintiffs by Counterclaim will suffer severe financial hardship and as a result be severely prejudiced in the efforts to proceed with the Counterclaim. First, the fact that execution on a money judgment will cause the judgment debtor financial hardship is not a ground for a stay of execution. The Plaintiff does have a judgment and is entitled to try and collect on it. Many judgment debtors can probably say in all honesty that collection on the judgment will cause them financial hardship.

But that cannot prevent the judgment creditor from trying to reap the fruits of the judgment. Second, the guarantor says that if a stay of execution is not granted the Defendants will be "severely prejudiced in the efforts to proceed" on the counterclaim. How will they be severely prejudiced and why? This is just a bare assertion by the guarantor without any evidence to support that assertion. Is the guarantor saying that the Defendants will not be able to pay their counsel to advance the claim? I doubt that is a good ground for a stay but even if it is there must be hard evidence to show that.

What assets do the Defendants have? What income do they have? What ability to raise money to pay their lawyer do they have? [ 55 ] I cannot conclude that the evidence supports a conclusion that Pinder would suffer irreparable harm in the event HML executes on its judgment. [ 56 ] With respect to the balance of convenience, I note that Pinder’s appeal is scheduled to be heard in approximately four months’ time.

However, I reiterate the principle that HML has obtained a judgment against Pinder and is entitled to collect on it, and four months is plenty of time for Pinder to declare bankruptcy and prevent collection by HML if that is the end result. Pinder’s concerns about the effects of a seizure of his shares and a bankruptcy are addressed above. All things being equal, I am not satisfied that the balance of convenience would swing in Pinder’s favour. [ 57 ] I therefore conclude that Pinder cannot satisfy the test for a stay of execution pending his appeal. IV.

Conclusion [ 58 ] Pinder’s application for a stay of execution is denied. [ 59 ] The parties may speak to costs within 30 days if they cannot reach an agreement. Heard on the 14 th day of October, 2021. Dated at the City of Edmonton, Alberta this 09 th day of November, 2021. L.K. Harris J.C.Q.B.A. Appearances:

Mandi Deren-Dube MLT Aikins LLP for the Plaintiff Philip Prowse Prowse Chowne LLP for the Defendants