Edwards Land Services Ltd v Semrau, 2022 ABKB 641

Court of King’s Bench of Alberta Citation: Edwards Land Services Ltd v Semrau, 2022 ABKB 641 Date: 20220928 Docket: 2101 13810 Registry: Calgary Between: Edwards Land Services Ltd. Appellant - and - Kristine Semrau Respondent _______________________________________________________ Reasons for Judgment of the Honourable Justice M.H. Hollins _______________________________________________________

Appeal from the Judgment by The Honourable Judge D.B. Higa Filed on the 08th day of October, 2021 Dated the 08th day of October, 2021 (Docket: P1890104445) [1] This is an appeal from the judgment of Judge Higa of the Provincial Court of Alberta (the trial judge), in which he dismissedthe civil claim of the Appellant. The Appellant, Edwards Land Services Ltd is a judgment creditor of The Alberta Collection Inc (TACI),a company wholly owned by the Respondent, Ms. Semrau. The Appellant sought judgment against Ms.

Semrau personally on the basisof allegedly fraudulent information she provided under oath in the course of the Appellant’s attempts to realize on its judgment againstTACI. The trial judge dismissed the claim as being unsupported by the evidence and improperly pleaded. Standard of Review [2] Under s.51 of the Provincial Court Act, this is an appeal on the record.

I had a complete record before me, including thetranscript of the proceedings in the Court below, the exhibits and the record of pleadings. [3] The standard of review on appeal from Provincial Court to this Court was aptly summarized by my brother, Justice Feasby,as follows: The applicable standard of review in an appeal of a Provincial Court decision is correctness in relation to questions of law and palpableand overriding error with respect to findings of fact.

The standard of review for questions of mixed fact and law is palpable andoverriding error unless there is an extricable question of law in which case the standard is correctness: see Morin v Edmonton, 2018ABQB 104 at para 6, adopting the standard approach for appellate review set out in Housen v Nikolaisen, 2002 SCC 33 , [2002]2 SCR 235.

Baran v Can To Can, 2021 ABQB 827 at para.5. [4] The Notice of Appeal complains that the trial judge “failed to address the factual and legal issues as outlined in the AmendedCivil Claim” and failed or chose not to follow a legal authority presented to him for the relief of piercing the corporate veil. [5] Without better articulation of the grounds of appeal, choosing the appropriate standard of review is difficult.

In argument,counsel for the Appellant submitted that these were questions of mixed fact and law as the trial judge was comparing the facts as hefound them to a pleading that was not the proper pleading. While not being able to break that down any further, counsel posited that theAppellant could satisfy the higher test of palpable and overriding error in any event. [6] Any judge’s disinclination to follow a particular case is not a reviewable error of any kind unless the authority is binding onhim or her.

In this case, although it was never explained in the Notice of Appeal or in argument, it appears that the case referred to was acase of the Quebec Superior Court. As another superior court, its judgments do not bind the courts of this Province, including theProvincial Court, even if – which was not the case and admitted in argument not to be the case – the facts were similar enough to invokethe doctrine of stare decisis.

As a result, that ground of appeal is dismissed without further discussion. [7] However, the trial judge’s failure to take into account the amended pleadings is, in my view, an error of fact or alternatively,of inextricable mixed fact and law. To overturn these, I would need to find palpable and overriding error, which I do. The Appellant’s Attempts to Enforce its Judgment [8] The Appellant obtained a judgment on December 8, 2016, in the amount of $73,366.33 against the Respondent for damagesarising from a breach of a commercial lease. It took steps to try to enforce its judgment.

The first was to obtain a Form 14 StatutoryDeclaration of the Respondent under the Civil Enforcement Regulation (Alta. Reg. 267/95) on January 23, 2017. In that swornDeclaration, the Respondent declared under oath that TACI had no exigible property. Specifically, she swore that TACI had no bankaccounts, no receivables or ongoing contracts and no revenue. [9] The next month, on February 23, 2017, the Respondent was questioned under oath as provided for under s.35.11 of the CivilEnforcement Regulation.

At this Questioning, she gave the following evidence under oath: p.6 TACI stopped operating when the Appellant brought its initial action against it p.12 (U#3) In the year prior to being struck, TACI had only one bank account at National Bank p.13 TACI had no receivables at the time of judgment p.13ff TACI had no contracts or listings at the time of judgment but neither could it produce any documents showingassignments or terminations of the listings in TACI’s name (this evidence was contained over various portions of the transcripts andmore particularly in the undertaking responses of the Respondent)

[ 10 ] It would be difficult to overstate the degree of obfuscation and evasion demonstrated by the Respondent, and frankly her counsel as well, during this Questioning. [ 11 ] Based on information from third parties and other sources, the Appellant began to investigate the status of TACI and found multiple active real estate listings under TACI’s name. As a result, the Appellant commenced this Action against Ms. Semrau personally on November 2, 2018.

The original claim was based on the allegation that the Respondent’s evidence at Questioning disclosed that TACI had diverted revenue from itself to a new company, 2008863 Alberta Ltd., incorporated by the Respondent on December 2, 2016, days before the Appellant obtained its judgment.

TACI remained a registered Alberta company until it was struck on July 2, 2017. [ 12 ] The Respondent filed her Dispute Note on November 16, 2018, denying any transfers from TACI to 2008863 Alberta and alternatively, denying any fraudulent intent. [ 13 ] By Order of Judge McCorqodale dated December 2, 2019, the Respondent was compelled to deliver a number of documents to the Appellant, which she did. Among those were bank statements from an Royal Bank of Canada (RBC) account in the name of TACI, which showed deposits and withdrawals in the period of February 1, 2017 to May 1, 2017.

This was contemporaneous with the Respondent’s Statutory Declaration and her Questioning. [ 14 ] When the Appellant discovered this information, it applied for and was granted leave to amend its Civil Claim. That Amended Civil Claim, filed January 22, 2021, sought the lifting of TACI’s corporate veil on the basis of the Respondent fraudulently hiding assets and revenues. That allegation was based on the new information showing TACI’s banking activity.

It also increased the damage claim from $30,000 to $50,000 based on the supposition that, had the Respondent disclosed this bank account when she should have, the Respondent would have successfully garnished that amount. The Reasons of the Trial Judge [ 15 ] The reasons for judgment of the trial judge make it clear that he was assessing the evidence at trial in the framework of the original Civil Claim, not the Amended Civil Claim. Among other things, he repeatedly references the paragraph numbers and quantum of damage claim in the original claim.

Assuming this is what happened, it is obviously an innocent error but led to findings of fact that were palpably erroneous. [ 16 ] His reasons for dismissing the claim can be summarized as follows: 1. There was no evidence that TACI diverted money to 2008863 Alberta Ltd; 2. The real estate listings that showed the TACI was still active in the period of time between the Appellant obtaining its judgment and TACI’s being struck from the corporate registry (December 8, 2016 to July 2, 2017), were inadmissible hearsay and so not available to support the Appellant’s claims; 3.

Evidence led at trial regarding the false statements in the Respondent’s Statutory Declaration and her Questioning were not related to any matters in the Appellant’s pleading; and 4. There was no allegation of fraud made upon which to consider lifting the corporate veil. Disposition on Appeal [ 17 ] Of the above-captioned conclusions, I would not disturb the finding of the trial judge on the first of these. He had all evidence regarding the claim of diversion before him and made a finding that it did not support tortious liability.

There is no palpable or overriding error in having done so. [ 18 ] However, the remaining findings cannot stand. Because he had not adverted to the amended claim, it is not clear that he understood the purpose of the Appellant’s attempt to introduce the third-party real estate listings information. That evidence, which was indeed hearsay, was accepted at trial subject to weight but later assigned no weight at all. I would not interfere with the discretion of a trial judge in this regard. [ 19 ] However, in the transcript of the Respondent’s evidence at trial, she clearly acknowledges these listings were active.

She talked about them being listings of “2008863 Alberta operating as TACI”, which is a corporate impossibility as no such entity existed. Further, she admitted that the listing themselves remained in name of TACI, that the listings were never terminated in favour of 2008863 Alberta and that the revenues from those listings were run through TACI’s RBC bank account. [ 20 ] In other words, irrespective of the hearsay evidence, the direct evidence overwhelmingly established that TACI indeed had ongoing operations in the spring of 2017 when it was failing or refusing to pay the judgment debt to the Appellant.

Although the Respondent attempted at trial to say that the RBC account was not TACI’s but belonged to 2008863 Alberta Ltd, she was eventually forced to acknowledge that the account was in TACI’s name, which anyone could see on the face of the document.

The bottom line is that TACI did indeed have a bank account and revenues coming into that account at the time the Respondent swore a Statutory Declaration saying it did not. [ 21 ] The Respondent’s explanation of this was that the money coming in and out of TACI’s RBC account was owed to other individual brokers and that she did not receive any of that money to her personal benefit. However, that does not change the fact that her Statutory Declaration and her evidence at Questioning were blatantly false.

Whether or not other people might have had a claim on the deposits of TACI at that time does not change that falsity.

[22] The trial judge repeatedly acknowledged that there was evidence to this effect but also repeatedly noted, incorrectly, that nocause of action based on that evidence had been pleaded. [23] In my view, the Appellant has proven palpable and overriding error and the decision of the trial judge cannot stand.

TheProvincial Court Act does not allow me to remit this matter back to Provincial Court for a re-hearing so I must make my own decision onliability and damages. [24] Taking into account all the evidence that forms the trial record in the face of the amended pleadings, I find that the Appellanthas indeed established that the Respondent committed the tort of fraud when she gave false information under oath, both through herStatutory Declaration and her answers at Questioning. [25] Having done so, I am also of the view that it is appropriate to lift the corporate veil to allow the Appellant to collect from theRespondent the damages it has suffered as a direct result of that fraud.

The Respondent was candid that 2008863 Alberta Ltd wasincorporated in the face of and in response to the Appellant’s lawsuit. [26] While this is not a fraudulent transfer or tracing case, the Respondent clearly intended to simply carry on her business for herown benefit believing herself immunized from any obligation to pay the resulting judgment. Aside from these indicia of fraudulentintent, the fact is that she did not actually transfer the business nor the revenues to the new company.

She claimed she had done so, butthe listings and the revenue continued to be under TACI’s bank account, contrary to her sworn statement and her testimony under oath.As the sole shareholder and directing mind of TACI, it is appropriate to hold her personally responsible for this improper conduct;Halpern Investments Ltd v Sovereign General Insurance Company, 2004 ABQB 865 at para.16. Damages [27] Notwithstanding its having proven liability, the Appellant has difficulties with proving its damages.

In a case like this, theproper measure of damages for tort is the amount the claimant would have recovered but for the fraud; Opron Construction Co vAlberta, (AB KB), 1994 CarswellAlta 470 at para.821. In its amended claim, the Appellant sued for $50,000 on thebasis that, had it known about the RBC bank account when it should have, it would have successfully garnished the entire amount. [28] The trial judge quite properly noted that service of a garnishee summons is hardly a guarantee that the judgment debtor willrecover its debt.

This is often dependant on what amounts are on deposit in the account when the Garnishee Summons is served. When ajudgment debtor realizes that his account has been emptied, he may take steps to divert incoming deposits elsewhere. While the judgmentcreditor still has other options for recovery if that happens, it is far from assured that any judgment creditor ultimately collects what it isowed. [29] Had the Appellant sued successfully for fraudulent transfer of assets to 2008863 Alberta Ltd, it could have simply transferredits right to pursue that entity for the entire judgment debt. But it did not do that.

Instead, the Appellant sued the Respondent in the tort offraud, where the damages awarded must be only those caused by the commission of the tort. [30] As the Respondent testified at trial, without challenge, the bulk of the revenue from real estate sales went to the individualbrokers while TACI took 5% of the commissions.

The Appellant, reviewing the RBC bank statements, found $331,000 of revenue thatflowed through the TACI accounts between the time it obtained judgment and the date on which TACI was struck. [31] Assessing damages in this case is difficult, particularly when so little thought was given by the parties to the proper approach.I have no way of knowing when the Garnishee Summons would have been issued, for how long it would have been effective, what otherclaims might have been made against those monies once paid into Court or how successful the Appellant might have been in furthertracing of that money, if necessary.

I just know that there was more than enough money there to cover the Appellant’s claim, even atdiscrete points in time. I also know that those amounts were subject to a legitimate claim by the Appellant, which would have recoveredsomething had the fraud not occurred. [32] It is not mathematically correct to say that all $331,000 would have been available to the Appellant, at least not withoutknowing whether the agents who generated those commissions would have been able to recover something for themselves.

I agree withcounsel for the Appellant that they, as unsecured creditors, would have had no better claim to that money than the Appellant. [33] At trial, the Respondent herself calculated 5% of $300,000 as $16,000, as the maximum amount that could have beenavailable to the Appellant. This is as good an estimate as any.

While it assumes that the agents would have recovered 100% of their ownclaims to these commissions, it also gives the Appellant the benefit of using the total deposits over the material time period to calculatewhat it might have received. [34] Accordingly, the Appellant will have judgment for 5% of the $331,000 representing the total deposits through the materialtime period, or $16,500.

Costs [35] Given the lack of assistance provided with respect to the basis for appeal, the standard of review and the proper calculation ofdamages, I direct that there are no costs to either party of either the trial or this appeal. Heard on the 23rd day of September, 2022. Dated at the City of Calgary, Alberta this 28th day of September, 2022.

M.H. Hollins J.C.Q.B.A. Appearances: Mr. Shaun T. MacIsaac, KC for the Appellant Ms. Kristine Semrau Self Represented