Kitchenham v Koster, 2023 ABKB 501

Court of King’s Bench of Alberta Citation: Kitchenham v Koster, 2023 ABKB 501 Date: 20230901 Docket: 2101 08362 Registry: Calgary Between: Georgina Kitchenham Plaintiff - and - Joe Koster Defendant _______________________________________________________ Reasons for Judgment of the Honourable Justice D.B. Nixon _______________________________________________________ I. Introduction [ 1 ] This case considers the proper application of section 178(1) of the Bankruptcy and Insolvency Act , RSC 1985, c B-3 (“ BIA ”) following a default judgment, in circumstances where the conduct engaging that

section was not discovered until after the default judgment was obtained. The underlying question is whether a judgment creditor, who discovers alleged fraudulent conduct after receiving judgment, is able to bring a claim under section 178(1) of the BIA or is such an application by its nature res judicata ?

[ 2 ] The application filed by Ms. Kitchenham is for

Summary Judgment (the “ Application ”). The Application focuses on four remedies: (

i) judgment for damages in the amount of $89,947.73; (ii) a declaration that Mr. Koster misappropriated the funds of Ms. Kitchenham while acting in a fiduciary capacity; (iii) a declaration Mr. Koster obtained the funds from Ms. Kitchenham by fraud while acting in a fiduciary capacity; and (iv) a declaration Mr. Koster obtained the funds from Ms. Kitchenham by false pretences or fraudulent misrepresentations (collectively, the “ Declarations ”). [ 3 ] Mr. Koster remains an undischarged bankrupt. The Declarations are intended to have the

Summary Judgment sought by Ms. Kitchenham survive the bankruptcy of Mr. Koster. Mr. Koster brought a cross-application (the “ Cross-Application ”) to have the Application dismissed as being res judicata and/or to strike the pleadings as being duplicative. [ 4 ] On June 24, 2021, Master Prowse, QC (now Applications Judge Prowse) granted leave to commence the within Action. He also seized himself of this Action. [ 5 ] On October 1, 2021, Applications Judge Prowse ordered this Application be heard alongside Mr. Koster’s Application to strike/dismiss. II.

Background [ 6 ] The parties submitted a variety of written materials for this hearing, relying on the affidavits and briefs that had been submitted to Applications Judge Prowse. Before addressing the heart of the matter, it is important to summarize the events that have led to this Application. Those events provide context. [ 7 ] Georgina Kitchenham met Joe Koster in 2012, shortly after the death of her husband. Prior to his death, Ms. Kitchenham’s husband had been the person in charge of the family finances. [ 8 ] Ms. Kitchenham and Mr.

Koster signed an investment agreement on April 24, 2012 (the “ Investment Agreement ”). Under that Investment Agreement, Ms. Kitchenham advanced $50,000 to Mr. Koster. Following messages from Mr. Koster for more funds, Ms. Kitchenham advanced him another $50,000 on May 25, 2012. [ 9 ] Payments were missed very soon after. However, consistent payments did occur in year 2 and 4 of the Investment Agreement. Notwithstanding that fact, by May 30, 2017, Ms. Kitchenham had only received $36,000 from Mr. Koster. [ 10 ] On March 6, 2019, Ms.

Kitchenham filed her statement of claim for Action No. 1901-03381 (the “ 1901 Action ”). This statement of claim did not contain allegations relating to misappropriation or fraudulent representation. Further, that statement of claim did not seek the above Declarations. On August 19, 2019, Mr. Koster filed his statement of defence. [ 11 ] On December 13, 2019, Ms. Kitchenham filed an application seeking

summary judgment.

Summary judgment was obtained against Mr. Koster on January 9, 2020, for $89,947.73 plus $1500 in costs. Mr. Koster did not appear at the hearing. [ 12 ] Following the

summary judgment, a series of subsequent court appearances and orders occurred. I summarize those events as follows. - On February 21, 2020, Justice Anderson issued an order requiring Mr. Koster to complete the Form 13 – Financial Statement of Debtor (Individual Debtor). - On August 21, 2020, Justice Anderson issued an order requiring Mr. Koster to appear for Questioning in Aid of Execution and to produce banking statements from April 1, 2014 to August 1, 2020. - On September 14, 2020, Justice Davidson issued an order requiring Mr.

Koster to attend on September 28, 2020 to show cause why should not be held in civil contempt. - On September 28, 2020, Mr. Koster was found in contempt by Justice Millar. - On October 9, 2020, Mr. Koster made an assignment into bankruptcy. - On October 27, 2020, Justice Campbell declared that Mr. Koster could only purge his contempt upon providing Ms. Kitchenham with information about how her funds were utilised. - On November 30, 2020, Mr. Koster provided Ms. Kitchenham with outstanding banking statements and provided answers to the questions ordered by Justice Campbell.

[ 13 ] Following the receipt of the banking statements that Ms. Kitchenham sought, an application for advice and direction was heard before Applications Judge Prowse on June 24, 2021. The Applications Judge granted Ms. Kitchenham leave to begin these proceedings. [ 14 ] In this Application, Ms. Kitchenham relies extensively on the affidavit and cross examination evidence filed in the 1901 Action. III. Positions of the parties A. Ms. Kitchenham’s position [ 15 ] Ms. Kitchenham argues that it was only upon receipt of Mr.

Koster’s banking statements that she realised that as opposed to her initial view that this was negligent management case; it was in fact fraudulent conduct matter. She points to the banking statements which outlined the application of the funds as follows: (a) $21,100 in payments applied to Mr. Koster’s personal credit card; (b) $38,000 in uncharacterized transfers on April 24, 2012, May 3, 2012, June 4, 2012 and June 11, 2012; (c) $23,350.35 in loan and interest payments for the benefit of Mr. Koster; (d) $7,251.34 in transfers that were applied to Mr.

Koster’s personal bank account; and (e) $21,298.31 in transfers that were applied to Mr. Koster’s personal line of credit. [ 16 ] Ms. Kitchenham argues that the Investment Agreement, which opens with the sentence “I Joe Koster herby [ sic ] acknowledge receipt of $50,000 (fifty thousand) dollars CDN, to be invested on behalf of Gina Kitchenham”, placed Mr. Koster in a fiduciary relationship toward her. [ 17 ] On May 22, 2012, Mr. Koster wrote Ms. Kitchenham and advised her to “put $100,000 into investment b now to get better income in july/aug.” [sic] Ms.

Kitchenham claims that she had felt pressured by this, and eventually advanced him another $50,000. [ 18 ] Of note, both Mr. Koster and Ms. Kitchenham agree that the advances made by her were to be invested to fund a business. Although Ms. Kitchenham stated that she did not understand how Mr. Koster would use the funds, he stated that he was to invest the proceeds in CARe. The CARe business was his start-up endeavour. [ 19 ] Since the funds were not used in the way that had been represented to Ms. Kitchenham, she argues that this is a claim that would properly fall within section 178(1) of the BIA . B. Mr.

Koster’s position [ 20 ] Mr. Koster denies any of the allegations made by Ms. Kitchenham. He has stated that he was not properly served, which is the only reason he did not appear during the

summary judgment hearing concerning the 1901 Action. [ 21 ] His Cross-Application for

summary judgment relies on the claim that Ms. Kitchenham’s argument is duplicative of the 1901 judgment. As a result, Mr. Koster asserts that the issue is res judicata , and that this Application is an attempt to recharacterize an already determined judgment to pierce through his bankruptcy. [ 22 ] Alternatively, Mr. Koster has applied to strike the Application as being frivolous, irrelevant and improper and constitutes an abuse of process. He cites Rule 6.3. [ 23 ] The argument advanced by Mr. Koster is largely based on res judicata and merger.

He asserts that the statement of claim is identical to that of the 1901 Action but for a few additional paragraphs which simply repeat facts and allegations from that original statement of claim. [ 24 ] Mr. Koster further argues that “the plaintiff had an obligation to bring forward her whole case and it is not open for the plaintiff because of ‘negligence, inadvertence or even accident’ to omit part of her case”. [ 25 ] Mr. Koster highlights the importance of finality in a judgment and argues that it would be unfair to allow the plaintiff to bring this duplicative claim. IV.

Issues [ 26 ] The issues to be determined in the case are as follows: a. Is Ms. Kitchenham able to bring her claim under section 178(1) of the BIA following the previously obtained default judgment? b. If so, is Ms. Kitchenham entitled to the judgment and declarations in this case?

V. Analysis [ 27 ] The applicable provisions of the BIA upon which Ms. Kitchenham relies in her efforts to obtain a declaration that her claim will survive discharge from bankruptcy from Mr. Koster are s. 178(1) (

d) and (

e) which read as follows: 178(1) An order of discharge does not release the bankrupt from [...] (

d) any debt or liability arising out of fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity or, in the Province of Quebec, as a trustee or administrator of the property of others; (

e) any debt or liability resulting from obtaining property or services by false pretences or fraudulent misrepresentation, other than a debt or liability that arises from an equity claim; [ 28 ] There does not appear to be a dispute between the parties as to how this

section is applied. Instead, the argument has focused on whether Ms. Kitchenham can bring her claim under the ambit of section 178(1) or if it would be barred from consideration as being res judicata . I turn to address these matters. A. Is Ms. Kitchenham able to bring her claim under s. 178(1) of the BIA following the previously obtained default judgment? [ 29 ] The core dispute at play in this Application and Cross-Application is whether the previously obtained default judgment bars Ms. Kitchenham from obtaining a remedy in this case. Mr.

Koster cites the recent Alberta Court of Appeal judgment in Johansen v Wallgren , 2021 ABCA 234 [ Johansen ] for the position that this application is res judicata and/or an abuse of process. [ 30 ] In Johansen , the court briefly highlighted the previous judgments of HY Louie Co Limited v Bowick , 2015 BCCA 256 [ H.Y.

Louie ] as well as Lawyers’ Professional Indemnity Company v Rodriguez , 2018 ONCA 171 [ Rodriguez ] to illustrate the approach that has been adopted by appellate courts when determining whether a claim falls under section 178(1) of the BIA : see also Bryant c Benjamin , 2023 QCCA 1021 at paras 48-57 . [ 31 ] After summarising this jurisprudence, the Alberta Court of Appeal in Johansen outlined the following: [29] These cases do not support the appellant’s “abuse of process”

interpretation, but they do illustrate the difference between an action in fraudulent misrepresentation or fraudulent preference and a conclusion that a resulting judgment is exempt from discharge. At the time of the partial

summary judgment application before Master Mason, nothing prohibited the appellant from pursuing his fraudulent misrepresentation and fraudulent preference claims. It may have been premature to invoke

section 178, but that can be a separate application, as the history of these proceedings shows. [30] The

summary trial judge did not err in finding, in this case, that res judicata applied to the successful

summary judgment. Because Mr. Johansen chose to pursue a

summary disposition of the debt part of his claim without relying on the allegations of fraudulent misrepresentation and fraudulent preference, he is now estopped from relitigating the debt claim. The

summary trial judge relied on the reasons of the majority in HY Louie Co Limited v Bowick , 2015 BCCA 256 , where the court explained at paragraphs 63-66 that the principles of res judicata , cause of action estoppel or merger in the judgment are used interchangeably, and all bar subsequent proceedings covering the same subject matter and arising out of the same relationship between the parties, even though the second litigation may be based on a different legal description or conception of the cause.

Once a final order or judgment is granted, the cause of action is extinguished such that even if there were two possible claims emanating from the same cause of action, and even if proceeding with the other claim may have been more fruitful, once judgment is rendered in one claim, the other is extinguished. [31] For the

summary trial hearing, Mr. Johansen filed an additional affidavit containing details about the alleged fraudulent behaviour. However, the

summary trial judge found the additional evidence was extraneous as it was not before Master Mason and did not contribute to the basis for her judgment. The decision to exclude that evidence was correct; the evidence could not have led to a recharacterization of Master Mason’s judgment. [32] The Ontario and British Columbia appellate courts, respectively, in Lawyers’ Professional Indemnity Company v Rodriguez , 2018 ONCA 171 , and HY Louie Co Limited , held that a court cannot look at extraneous evidence on an application for a post-judgment declaration under

section 178 of the BIA . A judge can look at materials filed that led to the obtaining of the judgment debt, including facts pleaded, any evidence that was presented at the time to secure the debt, and any reasons that might have been given. But evidence which was “not grounded in the process that produced the judgment debt” is extraneous evidence and cannot be considered: Lawyers’ Professional at para 6.

See also, Valastiak v Valastiak , 2010 BCCA 71 ; Cruise Connections Canada v Szeto , 2015 BCCA 363 . [Emphasis added] [ 32 ] This eloquently outlines the approach taken across Canada when determining whether a claim should survive bankruptcy in circumstances where the evidence on which judgment was obtained was all available previously. This provides a clear process that has been embraced by appellate courts across Canada and helps ensure consistency in these judgments. [ 33 ] However, in recent years an exception has developed.

The exception applies in circumstances where the judgment creditor has no prior knowledge of the conduct relating to section 178(1)(

d) of the BIA and could not have discovered it with reasonable diligence. [ 34 ] This approach was outlined in Royal Bank of Canada v Kim , 2019 ONCSC 798 [ Kim ]. In Kim , RBC had provided a loan to a dentist, Dr. Kim. When the loan had not been repaid, the bank demanded payment and brought an action against the dentist. There were

no allegations in the original statement of claim against Dr. Kim based on fraud, fraudulent misrepresentation or false pretences, and theaction was defended by a statement of defence. [35] The bank brought a motion for

summary judgment against Dr. Kim. This motion also made no reference to alleged fraud,fraudulent misrepresentation or false pretences. Dr. Kim did not appear on that motion.

Summary judgment was granted against Dr. Kimand that judgment also made no reference to fraud, fraudulent misrepresentation or false pretences. [36] Following the

summary judgment event, Dr. Kim was adjudged bankrupt. RBC brought a new action against Dr. Kimclaiming a declaration that he had obtained property and/or services from the bank by false pretences or fraudulent misrepresentation.The statement of claim in this second action alleged that Dr. Kim had made multiple intentional misrepresentations in personal statementsof affairs that he had delivered to the bank and on which the bank had relied in granting him credit. [37] Dr. Kim opposed this action and brought a motion for

summary judgment to dismiss the action claiming that this was solelyan attempt to reconstitute the judgment debt obtained in the first action in which there were no allegations of fraud, something which wasbarred following Rodriguez.

The issue for the court to determine in the Kim case, therefore, was whether Rodriguez applied when thejudgment creditor did not know and could not have known with reasonable diligence of the alleged fraud prior to bringing its originalaction or obtaining judgment. [38] Following a review of the jurisprudence on section 178(1) of the BIA and in particular the reasoning given in Rodriguez,Justice Broad stated the following: [47] It is noted that Justice Nordheimer concluded his reasons in Rodriguez at para. 49 by stating “while this result may seem unfair tothe respondents [the judgment creditors], given the admitted conduct of the appellant [the judgment debtor], the respondents had theright to frame their claim as they chose.” He noted that the respondents “knew all about the improper actions of the appellant when theycommenced their action on the mortgage” and could have sued him based upon his mistaken receipt of the funds and his subsequentdisposal of them, but chose not to do so.

He observed that the judgment creditors “cannot now attempt to recast their claim in order tobring it under an exception in s. 178(1)(d).” [48] The implication of Justice Nordheimer’s observations in para. 49 is that, because the judgment creditor knew about the offendingconduct of the judgment debtor at the time of the initial action and did not act upon such knowledge by referring to it in its pleadings andleading evidence on it, there was no unfairness to the judgment creditor in barring it from leading that evidence on a subsequent s. 178(1)application. [49] The corollary to Justice Nordheimer’s observations is that there may very well be unfairness if a judgment creditor, who did notknow of the debtor’s conduct that would engage s. 178(1) and could not have discovered it with the exercise of reasonable diligence priorto taking action, is barred from leading “extraneous evidence” of such conduct on a subsequent application under s. 178. [50] In my view the principle in Rodriguez barring a judgment creditor from leading evidence of conduct of the judgment creditor thatwould qualify under s. 178(1) unless the evidence was grounded in the process that produced the judgment debt is not applicable to asituation where the judgment creditor did not know of the debtor’s offending conduct and had no reasonable means of discovering itprior to commencing action and obtaining judgment. [51] I make this finding in

part in light of Justice Nordheimer’s particular emphasis on the issue of fairness in para. 49. In my view, thepanel could not have intended to bar creditors who had no means of discovering the debtor’s offending conduct from availing themselvesof s. 178(1) of the BIA simply by having reduced their claims to judgment. [52] The following illustration highlights the unfairness that may result from such a holding.

There may be a bankruptcy of asophisticated fraudster with multiple creditors, none of whom knew or could have known of the fraudulent activity of the bankruptgiving rise to the claims prior to the bankruptcy. One or more of the creditors may have obtained judgment by the date of the bankruptcyand some of the creditors may not have.

In my view it would be manifestly unfair in this context to permit the creditors who had notobtained judgment by the date of the bankruptcy to seek to have their claims survive the bankrupt’s discharge by relying on s. 178(1) ofthe BIA while denying the creditors who had reduced their claims to judgment any right to do so. [53] Moreover, such a result would defeat the policy underlying s. 178(1).

Sanfilippo, J. summarized this policy at para. 44 as follows: Section 178(1) contains a “catalogue of exemptions” to the general principle that a bankrupt is able to receive a general release upondischarge from bankruptcy: Skytal Ltd. v. Schiber (1997), (ON SC), 46 C.B.R. (3d) 275 (Ont. Gen. Div.) at para. 12,aff'd (1998), (ON CA), 9 C.B.R. (4th) 129 (Ont. C.A.).

These exemptions are designed to protect creditors againstfraudulent and deceitful conduct on the part of the bankrupt, providing the creditor with a special status to continue pursuit of the partywho has committed fraud, embezzlement, misappropriation, defalcation, or obtained property by false pretences or fraudulentmisrepresentation despite a discharge. In Simone v. Daley (1999), (ON CA), 43 O.R. (3d) 511 (Ont. C.A.) at p. 522,Blair J. stated that s. 178(1) is intended to ensure that the BIA is not used to release bankrupts from unacceptable conduct: Paragraphs (

d) and (

e) are morality concepts which look at conduct.

Those kinds of conduct are unacceptable to society and a bankruptwill not be rewarded for such conduct by a release of liability. [54] In my view, to bar a judgment creditor who had no reasonable means of discovering the fraudulent conduct prior to commencingaction or obtaining judgment from continuing pursuit of the fraudulent bankrupt after discharge would have the effect of rewarding thebankrupt for successfully concealing his or her fraud from the creditor. [55] As indicated, the Court of Appeal in Rodriguez focused specifically on the fact that, in that case, the judgment creditor had fullknowledge of the conduct of the debtor that may qualify under s. 178(1) of the BIA but chose not to plead that conduct or lead evidenceon it in the proceeding which resulted in judgment.

Similarly in Louie the British Columbia Court of Appeal emphasized as pertinent thefact that the judgment creditor chose not to pursue its claim based on the fraudulent conduct despite knowing of it prior to commencing

an action.

There was therefore no unfairness in either Rodriguez or Louie in barring the judgment creditor from subsequently raising the offending conduct after judgment in the context of a s. 178(1) application. [56] I find that the principle in Rodriguez and Louie has no application where a judgment creditor had no prior knowledge of the conduct engaging s. 178(1) , and could not have discovered it with reasonable diligence, as such application could result in unfairness . [Emphasis added] [ 39 ] This reasoning in Kim was subsequently approved in Yanic Dufresne Excavation Inc v Saint Joseph Developments Ltd et al , 2021 ONSC 6633 (aff’d 2022 ONCA 556 ) at para 73.

Although not binding, I find Justice Broad’s reasoning persuasive and helpful in the present case. [ 40 ] Following the line of reasoning in Kim , in the circumstances where the judgment creditor had no knowledge of the conduct that engages section 178(1) of the BIA and could not have acquired that knowledge with reasonable diligence, the principle outlined in Johansen does not apply. [ 41 ] In the present case, Ms. Kitchenham had gone to court numerous times in her ongoing efforts to obtain the necessary information from Mr. Koster. He did not engage in this process.

Indeed, he was found in contempt by this Court because of his lack of compliance. [ 42 ] It was only following the default judgment that Mr. Koster declared bankruptcy. It was only following several attempts by Ms. Kitchenham that he finally provided the information that was required.

Unlike the situations described in HY Louie and Rodriguez it would be unfair to the plaintiff to bar access to section 178(1) of the BIA for not having pled fraud previously. [ 43 ] Similarly, in Johansen much attention was given to the fact that the plaintiff in that case had all the information needed for a case based in fraud, but chose to sever that action: [25] Mr. Johansen could have sought judgment based on fraudulent misrepresentation and/or fraudulent preference. As the

summary trial judge found, by the time of his application for

summary judgment, Mr. Johansen had all the information he now relies upon to assert fraudulent misrepresentation and fraudulent preference . The statement of claim was amended in June 2016 to include numerous allegations of both fraudulent misrepresentation and fraudulent preference. The

summary judgment application was in August 2016. While Mr. Wallgren later admitted that he and YMC did not tell Mr. Johansen about an ATB general security agreement , this admission only confirmed what Mr. Johansen already knew as evidenced in the amended amended statement of claim, which refers to the ATB general security agreement. [26] Mr. Johansen deliberately chose to sever his action and to obtain

summary judgment based on the promissory notes and guarantee, not on the fraudulent misrepresentation and fraudulent preference allegations . As she was asked to do, Master Mason determined the question before her, on the evidence before her, and no more. Whether judgment could have been sought on the basis of fraud is not the test. Master Mason’s judgment is not grounded in fraud. [Emphasis added] [ 44 ] None of these circumstances in Johansen apply to Ms. Kitchenham’s actions. In the present case, therefore, the principle outlined in Johansen does not apply because Ms.

Kitchenham had no prior knowledge of the conduct that engages section 178(1) of the BIA and could not have discovered it with reasonable diligence. [ 45 ] Also, it would not be accurate, in my view, to describe this as re-litigation on the same cause of action, thus invoking merger. Merger has been explained by the Court of Appeal in Sherwood Steel Ltd v Odyssey Construction Inc , 2014 ABCA 320 . That case summarises the four criteria to determine whether merger applies, or more aptly when a cause of action is exhausted. I have restated those tests as follows: a.

There must be a final decision of a court of competent jurisdiction in the prior action. b. The parties to the subsequent litigation must have been parties to, or privy to, the parties to the prior action. c. The cause of action in the prior action must not be separate and distinct. d. The basis of the cause of action and the subsequent action was argued or could have been argued in the prior action if the parties had exercised reasonable diligence: see para 19. [ 46 ] In the present case, there is a distinction.

Although it arises from the same Investment Agreement as was at issue in the 1901 Action, there are different facts in the present case. Similar to the reasoning in Kim , the case advanced by Ms. Kitchenham in this Application derives from arguments that could not have been argued previously. I make that determination because there was no foundation for the current argument in respect of fraudulent misrepresentation until the banking information was provided to Ms. Kitchenham. Mr. Koster did not disclose the relevant information until after his assignment into bankruptcy.

As a result, the cause of action underlying the Application in this case never merged with the 1901 Action. [ 47 ] Based on my view of the evidence and analysis of the law, Mr. Koster’s Cross-Application is dismissed. In

summary, I make this determination because the Application is not subject to res judicata or merger. Further, the pleadings underlying the Application are not duplicative. That being the case, the next step is to determine whether this falls under the test for fraudulent misrepresentation and false pretences. If so, that would entitle Ms. Kitchenham to the judgment and declarations sought in this Application. B. Was there a fraudulent misrepresentation relied on by Ms. Kitchenham? [ 48 ] The test for fraudulent misrepresentation under section 178(1) (

e) of the BIA was outlined in Stack v Hildebrand , 2010 ABCA 108 . The test is as follows:

The following elements must be proved to establish liability for fraudulent misrepresentation: (1) a false representation or statementmade by the representor; (2) which was knowingly false; (3) which was made with the intention to deceive the representee; and (4)which materially induced the representee to act, causing damage [...]: at para 13. [49] Specifically on section 178(1)(d), the British Columbia Court of Appeal in Valastiak v Valastiak, 2010 BCCA 71 at para 30stated the following: (

a) the money taken by the debtor to create the debt must have belonged to someone other than the debtor; (

b) the taking must involve a wrongful use of the money; and (

c) the debtor must have received the money as a fiduciary. [Emphasis removed.] [50] As for the hallmarks of fiduciary duty, this was expressed by the Supreme Court of Canada in Alberta v Elder Advocates ofAlberta Society, 2011 SCC 24, as follows: [27] The plaintiff class argues that, in addition to traditionally recognized categories like trustee or solicitor-client relationships, afiduciary duty more broadly may arise whenever one person exercises power over another “vulnerable” person.

They rely on Frame v.Smith, (SCC), [1987] 2 S.C.R. 99, where Wilson J., in dissenting reasons later adopted and applied in Lac Minerals Ltd.v. International Corona Resources Ltd., (SCC), [1989] 2 S.C.R. 574, outlined the hallmarks of a fiduciary duty: Relationships in which a fiduciary obligation has been imposed seem to possess three general characteristics:

(1) The fiduciary has scope for the exercise of some discretion or power.

(2) The fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary’s legal or practical interests.

(3) The beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding the discretion or power. [p. 136] [28] It is now clear that vulnerability alone is insufficient to support a fiduciary claim. As Cromwell J. explained in Galambos v. Perez,2009 SCC 48, [2009] 3 S.C.R. 247, at para. 67: An important focus of fiduciary law is the protection of one party against abuse of power by another in certain types of relationships or inparticular circumstances.

However, to assert that the protection of the vulnerable is the role of fiduciary law puts the matter too broadly.The law seeks to protect the vulnerable in many contexts and through many different doctrines.

Cromwell J. concluded, at para. 68, that while vulnerability in the broad sense resulting from factors external to the relationship is a relevant consideration, a more important oneis the extent to which vulnerability arises from the relationship: Hodgkinson, at p. 406. [Emphasis in original] [51] As demonstrated within the written material in the present case, the Investment Agreement clearly stated that Mr. Koster wasto invest on behalf of Ms. Kitchenham. However, the funds provided by Ms. Kitchenham to Mr. Koster were used not for the“investment in dirt” that had been promised nor for the support of CARe.

Rather, the funds provided by Ms. Kitchenham were used byhim to pay off personal debts. I am satisfied that the banking information provided demonstrates that Mr. Koster took the funds given byMs. Kitchenham and instead of using them for the investment promised used them for his own benefit. This determination could only bemade after Mr. Koster provided the disclosure that he had inappropriately held back from Ms. Kitchenham. It is also worth noting thatMs. Kitchenham herself was particularly vulnerable after the loss of her husband and her own lack of financial acumen, both of whichwere known to Mr.

Koster. [52] Based on my review of the evidence, I find that Ms. Kitchenham’s lack of financial acumen and her professed impression thatMr. Koster was a sophisticated investor trying to help a recent widow induced her to provide him with the funds to invest. She relied onthe representations that had been made to her. Unfortunately, none of the promised investments were made by Mr. Koster. [53] Based on my review of the evidence, I find that this is a claim that covered by section 178(1) of the BIA. I make thisdetermination because I find that Ms. Kitchenham relied upon the fraudulent misrepresentations of Mr.

Koster. As a result, Ms.Kitchenham is entitled to the judgment and the declarations sought. VI. Conclusions [54] My conclusions on the issues outlined above are as follows: a. Ms. Kitchenham is entitled to bring her claim under section 178(1) of the BIA notwithstanding the previously obtained defaultjudgment. b. Ms. Kitchenham is entitled to the judgment and declarations sought in this case. [55] Based on the foregoing, Ms. Kitchenham is awarded judgment in the amount of $89,947.73. In addition, Ms. Kitchenham isgranted the following declarations: (

i) that Mr. Koster misappropriated her funds while acting in a fiduciary capacity; (ii) that Mr. Koster

obtained her funds by fraud while acting in a fiduciary capacity; and (iii) that Mr. Koster obtained her funds by false pretences or fraudulent misrepresentations thereby permitting the judgment to survive bankruptcy. [ 56 ] I reiterate, Mr. Koster’s Cross-Application is dismissed. VII. Costs [ 57 ] The parties may speak to costs if they cannot otherwise agree. Heard on the 24 th day of November 2022. Dated at the City of Calgary, Alberta this 1 st day of September 2023. D.B. Nixon J.C.K.B.A. Appearances: Richard E. Harrison for the Plaintiff Richard I. John for the Defendant