HONEYBADGER ENTERPRISES LTD. PLAINTIFF - v. -, 2023 SKKB 193

KING’S BENCH FOR SASKATCHEWAN Citation: 2023 SKKB 193 Date: 20 23 09 19 Docket: KBG-SC-00086-2023 Judicial Centre: Swift Current BETWEEN: HONEYBADGER ENTERPRISES LTD. PLAINTIFF - and - NORMAN BUE and INNOVATION CREDIT UNION DEFENDANTS Counsel: Travis Kusch for the plaintiff Jean-Pierre Jordaan for the defendant, Norman Bue Reid Lester for the defendant, Innovation Credit Union JUDGMENT RICHMOND J. September 19, 202 3 [ 1 ] A crime has been committed and the perpetrator is unlikely to be found. HoneyBadger Enterprises Ltd. [HoneyBadger] is a seller of cryptocurrency. Norman Bue [Mr.

Bue] is a 66 year old retiree from Cabri, Saskatchewan. Mr. Bue authorized HoneyBadger to debit his account at the Innovation Credit Union for the purchase of cryptocurrency and made a couple of purchases. But for the actions of an unknown criminal, it is unlikely the parties to this action would find themselves embroiled in litigation. Unfortunately, unbeknownst to Mr. Bue, shortly after establishing his business relationship with HoneyBadger, his email account was compromised. Individual(

s) purporting to be Mr. Bue proceeded to purchase cryptocurrency. HoneyBadger after receiving requests from Mr. Bue’s email, withdrew funds from Mr. Bue’s account which it claims it was authorized to do pursuant to a pre- authorized debit agreement [PAD agreement] and delivered cryptocurrency into virtual wallets unlikely to be seen again. When Mr. Bue became aware of the withdrawal, he immediately contacted the Innovation Credit Union where his accounts were located. Innovation Credit Union was able to retrieve $240,000 from HoneyBadger’s accounts.

HoneyBadger, having transferred the cryptocurrency in accordance with the emailed instructions, claims it is entitled to the money. Mr. Bue neither requested, nor did he receive the cryptocurrency and claims he is entitled to the money. Unfortunately, the cryptocurrency is unlikely to ever be recovered and ultimately the question of who shall bear the loss from the actions of this theft must be answered.

For now, HoneyBadger requests a preservation order with respect to the $240,000 retrieved by the Innovation Credit Union from the HoneyBadger accounts [ 2 ] Justice MacMillan-Brown granted a without notice order preserving the funds for a period of thirty days on June 23, 2023 which was subsequently extended by a consent order granted by Danyliuk J. on July 13, 2023. HoneyBadger now seeks a further extension and Mr. Bue is opposed.

The Innovation Credit Union takes no position. [ 3 ] HoneyBadger has brought their application pursuant to section 63(2) of The Personal Property Security Act, 1993 , SS 1993, c P-6.2 and Rules 6-41 and 6-42 of The Queen’s Bench Rules for the following relief: (

a) The defendants, and their respective agents and employees, are restrained from disposing of, encumbering, moving, or otherwise dealing with the $240,000 in Mr. Bue’s deposit account at the Innovation Credit Union; (

b) This order shall continue to be in force and affect until the return of this matter to before the court or further agreement of the parties; and (

c) Costs of this application in the amount of $2,500. [ 4 ] Rules 6-41 and 6-42 provide as follows:

How applications are made 6-41 Subject to the provisions of The Queen’s Bench Act, 1998 , the Court may make an interim order for mandamus, an injunction, the appointment of a receiver or for the interim preservation of property on an application: (

a) without notice; or (

b) on any notice that the Court may direct. Interim preservation of property 6-42 If there is a dispute arising on a contract or any alleged contract affecting the title to any property, the Court may on application make any of the following orders without prejudice to the rights of any party to the action: (

a) an order respecting the preservation or interim custody of the property; (

b) an order directing that the amount in dispute be paid into Court or otherwise secured; (

c) an order directing the sale of the property and the payment of the proceeds into Court. [ 5 ]

Section 63 of The Personal Property Security Act , 1993 states: Applications to court 63(1) In this section, “secured party” includes a receiver.

(2) On application by a debtor, a creditor of a debtor, a secured party, a sheriff or a person with an interest in the collateral, the court may make one or more of the following orders: (

a) an order, including a binding declaration of a right and an order for injunctive relief, that is necessary to ensure compliance with this Part or

section 17, 36, 37 or 38; (

b) an order giving directions to any person regarding the exercise of rights or the discharge of obligations pursuant to this Part or

section 17, 36, 37 or 38; (

c) an order relieving a person from compliance with the requirements of this Part or

section 17, 36, 37 or 38; (

d) an order staying enforcement of rights provided in this Part or

section 17, 36, 37 or 38; (d.1) an order addressing a dispute arising in connection with rights mentioned in subsections 55(8) to (14); (

e) any order that is necessary to ensure protection of the interest of any person in the collateral. [ 6 ] In argument, it was suggested that an order should be made pursuant to The Enforcement of Money Judgments Act , SS 2010, c E-9.22 [ EMJA ] . However, Mr. Bue’s counsel pointed out that no reference had been made for this relief in the notice of application. As HoneyBadger’s brief of law addressed almost exclusively the EMJA , Mr. Bue and/or his counsel cannot claim to be taken by surprise. Furthermore, the EMJA should be considered.

The Saskatchewan Court of Appeal in Arslan v Şekerbank T.A.Ş. , 2016 SKCA 77 ,400 DLR (4th) 193 [ Arslan ] cited at para. 77 : : [77] In the later work The Saskatchewan Enforcement of Money Judgments Act: Commentary and Analysis , (Regina: Office of the Queen's Printer, 2012) [ EMJA Commentary ], Professor Ronald C.C. Cuming and Donald H. Layh, Q.C. (as he then was) make the following statements in general about the statute (at page 18): ¶5[4]

Part II provides an asset preservation remedy that employs within a statutory framework the basic approach of the Mareva Injunction. It embodies the assumption that a balance between the need to ensure that assets are not put out of the reach of judgment enforcement measures before those measures can be invoked, on the one hand, and the need to protect defendants' and third parties' property rights, on the other, can best be achieved through discretionary judicial intervention exercised within clear statutory parameters. However, a preservation order available under

Part II reflects the functional effect of an equitable injunction, without invoking all of the concepts and uncertainty associated with it. Undoubtedly, the use of Mareva Injection in the context of money judgment enforcement has been completely pre-empted by the integrated and balanced system of

Part II. ¶5[5] This is not to say, however, that the general power of the court to issue injunctions as provided in

section 45 of The Queen's Bench Act and other legislation such as section 234(3) of The Business Corporations Act , R.S.S. 1978, c. B-10 , has been completely displaced by

Part II in the context of judgment enforcement.

Section 114 of the EMJA gives the court power to order injunctive relief that is "necessary to ensure compliance with the Act or to facilitate enforcement of a judgment." This provision gives to the court power to employ injunctions when necessary to supplement money judgment enforcement measures provided by the Act. What is precluded is the use of equitable jurisdiction to negate or circumvent limitations on the use of preservation orders as set out in

Part II in cases where a money judgment is being sought by the applicant or where a fraudulent conveyance or preference is the basis for the action. For example, clause 5(5)(

b) precludes the use of a preservation order respecting property used in the ordinary course by the defendant to carry on a business.

Section 6 limits the period of time during which a preservation order is effective. These limitations cannot be circumvented by a court taking the position that it is issuing a Mareva Injunction and not a preservation order. [ 7 ] Subsection 5(5) of the EMJA provides:

(5) The court may grant a preservation order if the court is satisfied that:

(

a) the action would, if successful, result in: (

i) a judgment in favour of the plaintiff; or (ii) an order described in subclause (1)(a)(ii); (

b) if the preservation order is not granted, the enforcement of a judgment or order against the defendant or transferee is likely to bepartially or totally ineffective as a result of the disposition of, damage to, dissipation of, destruction of, concealment of or any dealingwith property, other than disposition for the purposes of: (

i) meeting reasonable living expenses of the defendant and dependants of the defendant; (ii) carrying on the business of the defendant in the ordinary course; or (iii) acquiring income to pay the expenses of defending orresponding to the action; and (

c) the action will be prosecuted without delay, other than delay caused by the defendant or transferee. This action, if successful, would result in a judgment if favour of HoneyBadger? [8] HoneyBadger referenced Grant Thornton Alger Inc. v Jorgenson, 2013 SKQB 250, 424 Sask R 252 for theproposition that the court must simply be satisfied that the plaintiff’s underlying action rests on a recognized cause of action that is notgroundless.

HoneyBadger also referenced Arslan to clarify that “if successful” does not suggest an evaluation of the merits of theplaintiff’s action, but rather asks the court to assume the action is successful and then determine whether that success would result in ajudgment in favour of the plaintiff. Both decisions reference the EMJA. [9] Mr.

Bue, referencing Buchberger v Carter, 2008 SKQB 377, 339 Sask R 154 does not disagree that thethreshold test at this point is a low one quoting para. 14: 14 In RJR-MacDonald [RJR-MacDonald Inc. v Canada (Attorney General), (1994) (SCC), 1 SCR 311], supra, theSupreme Court of Canada discussed the question of whether there was a serious question to be tried at pp. 337-338: What then are the indicators of a "serious question to be tried"? There are no specific requirements which must be met in order to satisfythis test. The threshold is a low one.

The judge on the application must make a preliminary assessment of the merits of the case. ... Once satisfied that the application is neither vexatious nor frivolous, the motions judge should proceed to consider the second and thirdtests, even if of the opinion that the plaintiff is unlikely to succeed at trial. A prolonged examination of the merits is generally neithernecessary nor desirable. [10] There is no dispute that Mr. Bue entered into a PAD agreement with HoneyBadger, allowing HoneyBadger towithdraw agreed upon sums from Mr. Bue’s deposit account at Innovation Credit Union.

There is also no dispute that six purchases ofcryptocurrency were made between April and June 2023 from Mr. Bue’s email account. There is also no dispute that HoneyBadgerdelivered the cryptocurrency to the wallets as it was directed in the emails. There is also no dispute that Mr. Bue instructed InnovationCredit Union to recover the funds debited which did, in fact, occur. Given the above, HoneyBadger maintains there has been a breach ofcontract and conversion of property which are recognized causes of action and, if successful, would result in a judgment in its favour.Mr.

Bue, however, argues HoneyBadger is conveniently ignoring a vital part of their agreement which raises the question as to whetherHoneyBadger had the right to withdraw the funds in the first place. Simply put, Mr. Bue argues HoneyBadger violated the PADagreement signed and but for HoneyBadger’s failure to abide by the PAD agreement, neither party would be in this predicament. Mr.Bue has counterclaimed for this, amongst other things. If Mr.

Bue is successful, HoneyBadger has no right to the funds. [11] In Arslan, Caldwell J.A. summarized the law and concluded: [61] Pointedly, the phrase “if successful” does not suggest an evaluation of the merits of the plaintiff’s action or any defences to it—itjust asks: if the action were successful—presumably, as pled—would it result in a money judgment or an order described in s. 5(1)(a)(ii)? This is largely a yes-or-no question; however, it may call for some explanation depending on the circumstances.

If the action ispredicated on a known cause of action and is properly framed in the pleadings, the answer to this question would likely be a simple yes.Where, however, the action is novel or is badly or ineptly pled, more in-depth analysis may be required as to the cause of action claimed,but not its merits. Section 5(5)(

a) does not ask whether the action would be successful; it asks the court to assume it would be successfuland then to determine whether that success would result in a “money judgment” in favour of the plaintiff or an order described in s. 5(1)(a)(ii). Framed in these terms, the threshold presented by s. 5(5)(

a) is quite low and “not groundless” is as good a description as any. [12] Given the pleadings and the evidence tendered, the action is not groundless. Mr. Bue may very well have adefence to the action but that is not to be evaluated at this stage. A judgment against Mr. Bue is likely to be ineffective due to Mr. Bue’s dealings with the funds [13] HoneyBadger, to obtain the preservation order, must establish that enforcement of a judgment against Mr. Bueis likely to be ineffective.

HoneyBadger argues it need only provide sufficient evidence to satisfy the court on a prima facie basis that apreservation order is required to prevent Mr. Bue from dealing with the funds in a manner which is likely to frustrate the enforcement ofa potential judgment. That submission overstates the matter. It is not a question of whether Mr.

Bue, if the money is returned to him, willdeal with the funds but rather whether enforcement of a judgment or order will be partially or totally ineffective if an order is not granted.HoneyBadger may not be able to recover these particular funds but the question is whether a judgment can be enforced. [14] HoneyBadger makes note of the fact that Mr. Bue has already begun liquidating assets including a travel trailerand skid-steer loader and has limited cash on hand. He has indicated an intention to spend the funds on his day-to-day expenses and

although he owns land and other assets he has provided no evidence of same. HoneyBadger concedes Mr. Bue owns land but speculates it is his residence and is therefore likely not property against which it can enforce a judgment. Mr. Bue has offered no evidence to the contrary. [ 15 ] Mr. Bue argues HoneyBadger’s preservation request has no merit citing Lister & Co. v Stubbs , [1886-90] All ER 797 (CA) as authority for the proposition that there are no grounds for a plaintiff to seek security for a possible judgment.

As pointed out in Arslan at para 73 : “…the Legislature intended that the EMJA completely displace prior law.”, and went on to conclude in para. 74: [74] To be clear, however, the complete range of remedies available for the enforcement of money judgments and the parameters within which these remedies may be exercised are now found in the EMJA (along with accompanying amendments to The Land Titles Act, 2000 , SS 2000, c L-5.1 ). They are no longer found in traditional money judgment enforcement law or the inherent jurisdiction of the Court of Queen’s Bench acting as a court of equity.

In that regard, while the EMJA retains some of the basic features of prior enforcement law, the Legislature has abandoned antiquated common law concepts and obsolete approaches to money judgment enforcement to focus on the effective implementation of its policy choices ( Final Report [Tamara M. Buckwold & Ronald C.C. Cuming, Modernization of Saskatchewan Money Enforcement Law (Final Report) , (Saskatoon: College of Law, 2005) at page 3). This means the common law and prior statute law are less valuable as extrinsic aids to the

interpretation of the EMJA , if they hold any value at all. [ 16 ] In Yorkton (City) v Mi-Sask Industries Ltd. , 2021 SKCA 43 , [2021] 6 WWR 18 [ Mi-Sask ] , the Court of Appeal addressed circumstances where the chambers judge refused to grant a preservation order as there was insufficient evidence to establish the judgment could not be satisfied and considered the onus. Beginning at para. 40, the court noted that a judge must be convinced on a balance of probabilities and commented: [40] How, then, does this conclusion compare to the case law?

As is noted above, Mills J. held in Avramenko [ Saskatchewan Crop Insurance Corporation v Avramenko , 2014 SKQB 96 , 436 Sask R 179 ] that the onus of satisfying the court of the circumstances specified in s. 5(5) (

b) obliged the plaintiff to establish those circumstances “on a prima facie basis” (at paras 26 and 30). He described that obligation as an “initial onus…on the plaintiff to provide evidence that the enforcement of the judgment is likely to be partially or totally ineffective if the requested order is not granted”, and as the “evidentiary threshold” to establish those circumstances (at para 30).

He said that if the plaintiff meets this standard, “the court would be in a position to grant the order”(at para 26) and that the onus would shift to the defendant to “respond to its abilities to satisfy the judgment” (at para 33). [ 17 ] At para. 41, the Court of Appeal qualified its agreement with Mills J.’s characterization of the evidentiary threshold stating: “At most, the defendant could be said to bear a ‘common sense’ or ‘tactical’ burden – as opposed to a legal burden – to adduce evidence once the evidential burden has been met.

However, that ‘burden’ does not arise because the defendant must either lead such evidence or lose. Rather, it exists because the court will make the decision based on the evidence it has, and evidence that would weigh against the plaintiff’s case would improve the defendant’s prospects of success.” [ 18 ] The Court of Appeal went on to comment with respect to the second concern: [43] My second concern is that Mills J. describes the burden of making out a prima facie case as the plaintiff’s onus.

This statement is understandable, but only in the sense that it is the applicant that seeks relief, and that relief cannot be granted if the evidence does not constitute a prima facie case. However, as is noted above, the evidential burden can be met regardless of whether the plaintiff has adduced sufficient evidence. The issue is whether there is sufficient evidence on the record, whatever the source, to raise the issue and thus enable the court to decide.

To that extent, the description of this as an “onus” and “burden” that must be met by the plaintiff can be misleading. [44] With those qualifications, it is my view that Mills J. was correct. That is so because I have concluded that he was speaking to the evidential burden, rather than the persuasive burden. Although his analysis is not entirely clear on the point, it is telling that he describes this burden as an “initial onus…on the plaintiff to provide evidence” and as an “evidentiary threshold” (at para 30).

Further, he does not say the court must grant an order if such evidence is adduced, but rather, that “the court would be in a position to grant the order” (at para 26, emphasis added). This discloses that when he concluded there is an obligation to establish the relevant circumstances on a prima facie basis, Mills J. meant that there must be sufficient evidence to enable the judge to decide. That correctly described the evidential burden relating to the criteria that must be proved on a s. 5(5) application. He found the evidence did not meet that mark in Avramenko .

I am unable to conclude that he took the extraordinary step of finding that the usual persuasive burden that applies in civil cases does not apply here. Rather, Mills J. did not deal with the issue of the persuasive burden. [45] Avramenko has been repeatedly cited with approval in the Court of Queen’s Bench: see, for example, Şekerbank T.A.Ş. v Arslan , 2014 SKQB 215 at paras 41–44 , 450 Sask R 76 ; Alliance Pulse Processors Inc. v Hudson Bay Port Company , 2016 SKQB 307 at para 8 ; and Custom Foundations Ltd. v Welcome Homes Ltd. , 2017 SKQB 148 at paras 24–27 [ Custom Foundations ] .

However, none of these nor any other case of which I am aware has distinguished between the evidential burden and the persuasive burden on an application pursuant to s. 5(5) .

Put differently, none have discussed whether the fact there is evidence that is sufficient to constitute a prima facie case means the judge may exercise their discretion to grant relief, without having first decided they are convinced or persuaded by that evidence. [ 19 ] After further consideration of the case law and legislation, the Court of Appeal concluded: [56] In the result, I conclude that while the evidential burden on a s. 5(5) application is that the plaintiff must adduce or point to evidence that constitutes prima facie proof of the conditions noted above, the persuasive burden is proof that those conditions exist on a balance of probabilities.

If the court is unable to conclude on a balance of probabilities that those conditions exist, the plaintiff will not succeed. [ 20 ] Applying its analysis to the case under appeal, the Court of Appeal allowed the appeal and made the following observations: [73] It is important to recall that the City was not required to make out a prima facie case that enforcement would be ineffective in whole

or in part. It was only required to make out a prima facie case that enforcement was likely to be ineffective in whole or in part as a result of actions on the part of Mi-Sask specified in s. 5(5) (b), other than a disposition for one or more of the three specified exceptions. It was open to the Chambers judge to reach that conclusion despite the fact that he found there was some insurance coverage relating to this $8,000,000 claim.

This is particularly so because Mi-Sask did not lead evidence that there was sufficient insurance to pay any shortfall, including any amount not falling within the three exceptions. [74] Further, here, as in relation to proof on a balance of probabilities, it is important that the evidence as to the particulars of the insurance lay entirely with Mi-Sask. It, not the City, was the party that knew whether the insurer had confirmed coverage in relation to all aspects of the City’s project claim.

Mi-Sask, not the City, knew the type of coverage, the policy limits, the deductible, and other terms that might affect the amount available. Mi-Sask provided none of this information and now argues that the uncertainty created by its minimal disclosure is a sufficient answer to the City’s prima facie case.

In these circumstances, a less stringent approach should have been taken when determining whether the evidence was sufficient to demonstrate a prima facie case, just as it would if Mi-Sask had adduced evidence that it had an unspecified amount on deposit with an unidentified bank. [Emphasis in original] [ 21 ] Applying the above analysis to the facts before me I am satisfied that HoneyBadger has established a prima facie case that enforcement is likely to be ineffective in whole or in part as it has shown Mr.

Bue intends to spend these funds, he has been liquidating assets and although he has land, it is likely to be subject to an exemption claim. Mr. Bue had an opportunity to show otherwise and like Mi-Sask argues that the uncertainty created by minimal disclosure is sufficient answer. It is not. [ 22 ] Lastly, HoneyBadger has argued it will prosecute the action without delay and there is no reason to doubt that claim. [ 23 ] Although I am sympathetic that Mr.

Bue finds himself embroiled in circumstances brought about by an unknown fraudster, I am nonetheless satisfied that HoneyBadger should have the preservation order as requested and, as a result, the current preservation order granted on a without notice basis and renewed by consent shall continue until further written agreement of the parties or court order. [ 24 ] Costs are in the cause. J. C.M. RICHMOND