1254748 Alberta LTD., 1606893 Alberta Ltd., Art Stirrett v. Medix Safety Inc., 2023 ABKB 264

Court of King’s Bench of Alberta Citation: 1254748 Alberta LTD. v McBurney, 2023 ABKB 264 Date: 20230501 Docket: 2304 00089 Registry: Grande Prairie Between: 1254748 Alberta LTD., 1606893 Alberta Ltd., Art Stirrett and Medix Safety Inc. Plaintiffs - and - Christopher McBurney and ELEV8 Hockey Corp operating as AK Hockey Grande Prairie Defendants _______________________________________________________ Endorsement of the Honourable Justice M. J. Lema _______________________________________________________ I.

Introduction [ 1 ] The plaintiffs seek a contempt sanction against the individual defendant for failing to produce order-directed records in this business dispute. [ 2 ] I find the asserted failure and grant a contempt sanction, as explained below.

II. Background A. Dispute origin [ 3 ] The individual parties formerly carried on the Medix Safety Inc. business together, with each being a 50 per cent shareholder (directly or through holding corporations) and director. [ 4 ] Difficulties arose, leading to Mr. McBurney continuing the Medix business (or a subset of it) on his own and beyond the knowledge of the plaintiffs and, eventually, this litigation. B.

Inglis Order [ 5 ] The plaintiffs (collectively “125”) assert they were left in the dark about Medix’s affairs after the rupture point (if not earlier), which rupture (on the available evidence) was on or about July 1, 2020. [ 6 ] On July 29, 2022, 125 applied for an order compelling Mr.

McBurney to provide various Medix information, back to 2017. [ 7 ] Via order that date, Inglis J. granted various relief obliging McBurney to provide “an accounting of the assets and financial records of Medix” to 125 by September 6, 2022, including: 1. an accounting of all profits made by Medix since 2017; 2. copies of any outstanding invoices for Medix; 3. general ledgers for Medix from January 2017 to the date of this Order; 4. bank statements of Medix from January 1, 2017 to the date of this Order, including but not limited to deposit accounts and credit card statements; 5. shareholders’ loan account statements for Medix from January 1, 2017 to the date of this Order; 6. financial statements including but not limited to balance sheets, cash flow statements, income statements and an account of profits for Medix, from January 1, 2017 to the date of this Order; and 7. [a] completed Financial Information Statutory Declaration in the form authorized under the Civil Enforcement Act … for Medix … with such Statutory Declaration to include information regarding any and all bank accounts opened and/or used by [McBurney] on behalf of Medix. [ 8 ] Among other relief, the Order also required McBurney to pay costs of $500 to 125. [ 9 ] McBurney contended then, and now, that he does not have, and never had, much of the requested information.

He did provide, in early to mid-September 2022, some invoice and bank-account information to 125’s counsel. C. Clackson Order [ 10 ] On November 18, 2022, 125 applied for an order gauging McBurney’s compliance with the Inglis Order inadequate and accordingly declaring McBurney to be in civil contempt, with a purge-contempt deadline (for full compliance) of January 15, 2023. [ 11 ] On November 18, 2022, Clackson J. granted that (among other) relief: [McBurney] is hereby declared to be in civil contempt of Court pursuant to Rule 10.52 of the Alberta Rules of Court ….

To purge his contempt, [McBurney] is hereby ordered to comply with the [Inglis Order] by no later than January 15, 2023. D.

March 27, 2023 Order [ 12 ] On March 27, 2023, I heard an application by 125 for further contempt relief, per its position that McBurney had still not fully complied with the Inglis Order, and granted an order including these terms: [McBurney] must submit proof of his compliance with each paragraph of the Inglis Order prior to January 15, 2023 (pursuant to the Clackson Order) by letter to the Court no later than April 14, 2023 . [125] may respond to [McBurney’s] letter to the Court outlining his alleged compliance with each paragraph of the Inglis Order by letter to the court no later than April 21, 2023 . ...

Justice Lema reserves his decision on [125’s] cross-application [for further contempt relief] pending review of the above documentation. [ 13 ] McBurney was present at all three applications.

E.

McBurney’ s compliance (per him) [ 14 ] Aiming to show compliance, or at least the possible compliance, with the Inglis Order and that he has no contempt to purge (per the Clackson Order), McBurney pointed (in his recent “compliance” communication) to his application filed September 26, 2022 (seeking various information from 125 and other companies) and same-date supporting affidavit, his affidavit of records filed October 31 2022, and his affidavit filed November 18, 2022. [ 15 ] In the first affidavit, McBurney states (among other things) that: 1. he is seeking financial information from Medix for use in his then-ongoing divorce proceedings; 2. 125 responded that he (McBurney) already has that information; 3. he “did not have the ability to obtain the records that [were] ordered by Madam Justice A.

B. Inglis due to not having access to Medix Financial Information, not having bank access information and [his] many requests [to Medix] for information [having] gone unanswered …”; 4. he “has never had the ability to access the Medix safety accounting software [him]self”; and 5. “In relation to the records requested [he has] sent the following: Bank Statements, Copies of Invoices.” [Neither species of documents was further detailed, and no copies of either were attached to this affidavit]. [ 16 ] McBurney’s affidavit of records lists 60 documents (all in

Schedule 1 – “no objection to produce”), none of which (from their capsulized description (e.g. “email from [McBurney] to [Stirrett] [and another]”) appear to be any of the documents required under the Inglis Order. [ 17 ] Nothing in McBurney’s third affidavit reflects any information provided by him to 125 or its counsel, let alone any aimed at complying with the Inglis Order. [ 18 ] All to say here: per his affidavits, the only information provided by McBurney to 125 or its counsel per the Inglis Order was “Bank Statements [and] Copies of Invoices”, with no copies provided with the noted affidavit or with his “compliance report” and no other details provided then or now. [ 19 ] In McBurney’s view, despite this modest (and undetailed-later) disclosure, he has complied to the maximum extent possible with the Inglis Order.

Addressing each provision of that Order, he says: (

a) An accounting of all profits made by Medix Safety since 2017: This was not provided as I do not have access to this information and never have . (

b) Copies of any outstanding invoices for Medix: All invoices we sent to Marie Dussault [125’s counsel] 09/07/2022 (see screenshot of emails ) (

c) General ledgers for Medix from January 2017 to the date of this order: This was not provided as I do not have access to this information and never have . (

d) Bank statements of Medix Safety from January 1, 2017 to the date of this order, including but not limited to deposit accounts and credit card statements. All bank statements for ATB were provided in approximately 110 – 115 emails to Marie Dassault on 09/07/2022 which she stated in your court room as she did not recall receiving them on March 27/2023. (see screenshot of emails ) No bank statements for Medix RBC account were provided because I was locked out of the account by Art Stirrett and the account was also closed by Art Stirrett sometime later. (

e) Shareholder loan account statements for Medix from January 1, 2017 to the date of this order: This was not provided as I do not have access to this information and never have . (

f) Financial statements, including but not limited to balance sheet, cash flow statements, income statements, and an accounting of profits for Medix, from January 1, 2017 to the date of this order: This was not provided as I do not have access to this information and never have . (

g) Complete financial information statutory declaration in the form authorized under the civil enforcement act, RSA 2000, c C-15 (and all regulations thereto), for Medix, from McBurney , with such statutory declaration to include information regarding any and all bank accounts opened and/or used by McBurney on behalf of Medix. ATB Bank statements, account numbers were provided to Marie Dassault in the 110-115 emails sent to her as stated above. RBC bank account / line of credit / credit card accounts I was locked out of by Art Stirrett and those accounts were later closed by Art Stirrett as stated above. [emphasis added]

[ 20 ] The noted screen shots (five in all) reflect one ATB Financial deposit account statement (one page) with an accompanying “attachment image” (146 KB); one Medix invoice (one page) with an accompanying “attachment image” (405 bytes); two pages of 15 more attachment images (sizes not provided); and one page of emails between McBurney and 125’s counsel on September 6, 2022 to the effect that McBurney’s emails are not sending (“too large”) and that he will try to send them one at a time. [ 21 ] I cannot tell from these screen shots what documents were provided to 125’s counsel (other than the note single bank statement and single invoice).

F.

McBurney’s compliance (per 125) [ 22 ] 125 has a different view of McBurney’s compliance with the Inglis and Clackson Orders. [ 23 ] It acknowledges receipt of “some invoices and limited financial information, such as general ledgers of Medix’s ATB account, … provided by [McBurney] between September 6, 2022 and September 10, 2022. [ 24 ] 125’s position is that, beyond that, “[McBurney] failed, refused or otherwise neglected to provide any additional financial information as required under the Inglis Order.” [ 25 ] It says that neither it nor its counsel received any records of any kind from McBurney after November 18, 2022 i.e. the date of the Clackson Order.

G. 125’s evidence showing McBurney’s Medix activities since July 2020 [ 26 ] 125 points to the following evidence (from Mr. Stirrett’s affidavits sworn July 2 and October 18, 2022) of McBurney’s involvement in and activities with Medix as signaling the kinds and extent of Medix-related documents and information he must or should have in his possession: 1. “[As a result of McBurney’s actions or directions], assets, equipment and corporate records were removed from Medix in 2020, which neither Mr.

Stirrett nor other Plaintiffs have access to”; 2. “Until Medix stopped operating …, [McBurney] was the day-to-day manager of Medix”; 3. “[McBurney] continued to operate Medix, without the Plaintiffs’ knowledge or consent until the spring of 2021”; 4. “[McBurney] was operating an ATB Financial bank account in connection with Medix’ operations, to which neither of the Plaintiffs have or previously had access.

Though a general ledger of that account was provided, despite requests , [McBurney] provided no supporting information regarding the withdrawals or deposit from that account since Medix stopped operating …”; 5. “[McBurney] used Medix funds from Medix’s account(s), and has refused to provide any information as to how or when the funds were exhausted, even though they were withdrawn by [McBurney] without any invoicing or documentation to support each transaction.

For example, several withdrawals made by [McBurney] to the Medix ATB account remain unaccounted for”; 6. “[McBurney] refused or otherwise failed to provide proper financial information regarding Medix’ accounts receivable, invoices, funds received and accounting records, despite requests since 2020.

Some previous inquiries were partially answered, though in most cases, remain entirely unanswered., despite this information being required in order for Medix to properly complete its taxes and year- end statements”; 7. “[McBurney] refused to provide a list of Medix’s accounts receivable for work previously done by Medix and for which employees were paid by Art, on behalf of Medix, either with Medix funds or through shareholder loans to Medix, and are estimated to be in the amount of $85,000”; and 8. “[McBurney] refused, despite requests, to provide information relating to his personal sale of Medix’s assets, such as a 2018 Dodge.

To date, the proceeds resulting from the sale of the sold Medix assets are unaccounted for, which is in excess of $30,000.” H. Synopsis of McBurney’s inadequate disclosure (per 125) [ 27 ] 125 particularizes McBurney’s non-compliance with the Inglis and Clackson Orders as follows: … [he has] failed, refused or neglected to provide any … financial information as required under the Inglis Order [i.e. other than the acknowledged “some invoices and … general ledgers of [the] ATB account” …. [McBurney] is also in breach of many other provisions of the Inglis Order.

For example, [he] was required to provide a list of Medix’s assets in his possession and control. That said, [he] failed to provide this list prior to September 6, 2022 [i.e. the deadline set by Inglis J.], or at all . Further, on various occasions, [McBurney] represented to [125’s] counsel that Medix had between $50,000 and $70,000 in [accounts receivable]. That said, the total of the invoices provided in September 2022 fall short of those amounts. In further breach of [the Inglis Order], [McBurney] continues to operate Medix vehicles and has used Medix funds for his personal endeavors.

Lastly, it is undisputed that [McBurney] has failed to pay the costs award of $500 to Mr. Stirrett. I.

Remedies requested by 125 [ 28 ] For these perceived shortfalls, 125 seeks an order: • declaring [McBurney] to still be in … civil contempt pursuant to Rules 10.51, 10.52 and 10.53 of the Alberta Rules of Court , and directing that [he] is liable to one or more of the sanctions set out in Rule 10.52, which include: 1. directing that [McBurney’s] defence in the within action be struck; and 2. a fine, and in default of paying the fine, imprisonment of not more than 6 months. • ordering [him] to return all Medix assets and funds to [125] within seven days from the date of the order being granted; • removing [him] as a shareholder and director of Medix; and • directing that [he] pay the plaintiffs forthwith, in any event of the cause, costs on a solicitor-and-his-own-client basis, for all steps taken in the action, such payment to be made no later than seven days from the date of the order being granted.

III. Analysis A. Has McBurney purged the contempt found by Clackson J.? [ 29 ] Clackson J. found McBurney to in contempt of Inglis J.’s order as of November 18, 2022 and gave him until January 15, 2023 to purge that contempt by full compliance with it. B.

No new records provided [ 30 ] No evidence shows that McBurney provided any further Inglis-Order-required records to 125 after November 18, 2022, whether by January 15, 2023, March 27, 2023 (application before me) or April 14, 2023 (date of McBurney’s “compliance report”). [ 31 ] I will proceed on the basis that my order extended the “purging deadline” from January 15, 2023 to April 14, 2023 i.e. the date I set for McBurney to show full compliance with the Inglis Order.

Via my order, McBurney was given yet another opportunity to confirm what records he had provided, to provide any further records, and to explain (for any remaining-unsatisfied prongs of the Inglis Order) why compliance was not possible. [ 32 ] McBurney provided no new financial or other business records in response to my order. C.

Full compliance not possible? [ 33 ] Did he effectively purge his contempt (as found by Clackson J.) by showing that compliance with the unsatisfi0ed portions of Inglis J.’s order was not possible? [ 34 ] The answer is no. [ 35 ] It is not plausible that McBurney has none of the additional records required by the Inglis Order i.e. beyond the limited disclosure already provided (described above). [ 36 ] Here I return to the above-noted evidence from 125 about McBurney’s involvement in and activities with Medix since July 31, 2020 i.e. the period in which (per the record) he was carrying on Medix’s business, or a subset of it, without the involvement of, and beyond the knowledge of, Stirrett (as discussed further below). [ 37 ] That evidence is reinforced by the following extracts from McBurney’s own evidence, documents or communications reflecting such knowledge and activities: 1. in a September 8, 2022 email to 125’s counsel (who had asserted that “ … work was performed and Medix’s clients paid the invoices to you” and “[t]hose amounts are not accounted for in … Medix’s accounts.

An accounting of the invoices paid, as well as the whereabouts of those funds required” – exhibit F to McBurney’s affidavit filed September 26, 2022), McBurney replied: “This statement is false.

No clients of Medix has ever paid me directly .” [emphasis added] [ Point : McBurney did not respond that Medix was not providing services during the time in question (i.e. when McBurney was in charge of Medix’s operations or a subset of them and Stirrett was “out of orbit”) or that revenue was not generated for Medix via those services – instead simply that he did not receive any of those revenues personally]; 2. in the same email (two paragraphs later), he made a statement referring to a possible “hand[ing] back of all assets”, which I infer means Medix assets in his possession; 3. in a July 31, 2020 email to Mr.

Stirrett and another person, McBurney advised (among other things) that “I have moved the Medix Safety units to my residence as this is where Medix operated out of for several years prior to the merger. At this time, as the operational component of Medix I will continue to run the BUSINESS AS USUAL from my home yard/office. I will be back next

week to clear out my office and the rest of the Medix property and stock in the evenings ….” [part of exhibit D to Stirrett affidavit sworn October 18, 2022]; 4. in a November 5, 2020 email to Stirrett, McBurney advised (in part) that “ … the trucks are currently at the new Medix yard (free of charge) at my acreage safe and secured with active video surveillance and this is where they will stay unless working …” [part of same exhibit]; and 5. in a February 25, 2021 email to Stirrett, McBurney stated (in part): As per usual (last 7 years) all invoicing will come to me and me only.

From there, they will be reviewed and confirmed by me (as per history) before they are forwarded appropriately. … Any other questions, concerns, or comments with the above can be directed through our lawyers. [part of exhibit E to the same affidavit] [emphasis added] [ 38 ] From the above, I find that after the rupture point (in and around July 1, 2020, per a February 11, 2021 email from Stirrett to McBurney, part of exhibit D to that affidavit), McBurney indeed continued to operate Medix, or a subset of Medix, effectively on his own and beyond the knowledge of Stirrett. [ 39 ] By definition, he or persons under his direction and control would have generated financial records about Medix’s operations during this post-rupture period i.e. up to the present or whenever McBurney ceased any operations under the Medix flag.

Such records would include invoices issued by Medix (under McBurney’s control) during this period, accounts receivable records showing the collective state of invoiced amounts, accounts payable records showing amounts owing by Medix in this period, general ledgers, and any financial statements generated for Medix in this period e.g. balance sheets, income statements, and cash-flow statements. [ 40 ] Also by definition, McBurney or persons under his direction and control would have had, and continue to have, access to records generated by third parties concerning Medix during this same period e.g. bank statements for (at minimum) the ATB account in question (which McBurney acknowledged having control over) and for which he provided certain statements, albeit missing the July 2021 statement and (possibly) any associated credit card statements).

D. Contempt not purged [ 41 ] McBurney’s contempt as found by Clackson J. has not been purged. [ 42 ] I cannot tell on the current record whether McBurney continues to have access to Medix records from 2017 (the reach-back year for most of the Inglis Order production) through to the rupture point. His evidence is that he does not. In fact, McBurney has applied for production of various Medix information apparently held by 125 and Stirrett to which (per McBurney) he does not have access and, for some parts, to which he never had access.

Stirrett’s evidence is that he (McBurney) has all this information, in part because (as alleged by Stirrett) McBurney took away certain Medix records at or around the rupture point. McBurney denies this.

However, without cross-examination (at minimum), I cannot tell where the truth lies on these aspects. [ 43 ] However, at minimum, I find that McBurney must or should have the above-noted records from July 2020 through to the present (or whenever all Medix operations under McBurney’s control ceased, no earlier than spring 2021, per the available evidence). [ 44 ] And he has failed to produce the vast majority of them and also to satisfactorily explain why he has not produced them. [ 45 ] Returning to the specific requirements of the Inglis Order, I find that McBurney has failed to provide: 1. an accounting of all profits made by Medix since (at minimum) July 1, 2020; 2. all of the outstanding invoices for Medix or, in the alternative, to explain the gap between the invoices provided to date and the revenue figures reported by him to 125’s counsel (per the latter’s April 21, 2023 letter); 3. general ledgers for Medix since (at minimum) July 1, 2020; 4. the July 2021 bank statement for the ATB account in question and also to provide any credit card statements since July 1, 2020 (or alternatively to show that no credit cards existed or were used in this period), as well as any bank statements for any other bank accounts used by Medix after July 1, 2020 or, alternatively, evidence that it used only the ATB account; 5. shareholders’ loan account statements for Medix from (at minimum) July 1, 2020; 6. financial statements including balance sheets, cash-flow statements, income statements and profit calculations for Medix from (at minimum) July 1, 2020; and 7. a completed Financial Information statutory declaration under the Civil Enforcement Act i.e.

Form 14 -- Financial Statement of Debtor (Corporate Debtor) -- under the Civil Enforcement Regulation . [ 46 ] Despite 125’s argument, I do not find that McBurney’s failure to pay the $500 in costs constitutes contempt: see Moshinsky- Helm v Helm , 2022 ABCA 67 (Wakeling JA in chambers) at para 8 . IV. Contempt sanction

[ 47 ] Inglis J. gave McBurney approximately six weeks to produce the required records. He produced only a very modest subset of them. [ 48 ] Clackson J. found McBurney in contempt of the Inglis Order and gave him almost two more months to purge his contempt.

And no further records were produced and (as far as I can tell) no further explanations of “not possible to produce” were provided or, in any case, given my findings here, were not actually available. [ 49 ] The effect of my order was to give McBurney, after the fact, a further fifteen months to comply or explain and then, going forward, a further two-week period to do the same. With the same (non-) result. [ 50 ] McBurney may have legitimate complaints against 125 or others for their (possible) failures to provide certain Medix records to him.

I am not ruling on that point [ 51 ] But he has no legitimate excuse for failing to the provide all the records required by the Inglis Order for (at minimum) the period after July 1, 2020 i.e. during which Medix carried on business under his control. [ 52 ] He has been flouting the three Court orders here, which cannot continue. [ 53 ] The consequence is a $1,500 fine, payable by May 31, 2023, and in default, a period of imprisonment to be set at a hearing at the request of 125, scheduled with the Seized-Matters Coordinator and requiring the personal attendance of McBurney. [ 54 ] As well, McBurney shall pay a daily fine of $100.00 for each day (business and non-business) that he remains in non- compliance with the Inglis Order i.e. that he remains in contempt of that Order. [ 55 ] I award 125 costs of bringing the current application on a solicitor-and-client basis. [ 56 ] I am seized of any further applications bearing on enforcement of these contempt sanctions and concerning who has or should have the Medix records from 2017 to the rupture point and any further production orders relating to that period.

Heard on the 27 th day of March, 2023 and by way of written submissions received on April 14, 2023 and April 21, 2023. Dated at Grande Prairie, Alberta this 1 st day of May, 2023. M. J. Lema J.C.K.B.A. Appearances: Marie Dussault Oviatt Law for the Plaintiffs Christopher McBurney Self Represented-Litigant for the Defendants