Lay v Lay, 2023 ABKB 354

Court of King’s Bench of Alberta Citation: Lay v Lay, 2023 ABKB 354 Date: 20230620 Docket: 1001 15614 Registry: Calgary Between: Melanie Anne Lay, Terry Holmes Lay Plaintiffs/Respondents - and - Bradley Lay, Marlene Lay and 228916 Alberta Ltd, formerly known as Steep Rock Construction Materials Ltd Defendants/Applicants _______________________________________________________ Reasons for Judgment of the Honourable Justice D.B. Nixon _______________________________________________________ This Endorsement is in lieu of Oral Reasons for Judgment I.

Introduction [ 1 ] This application (the “Application”) is the latest step in litigation that the Respondents describe as civil war within a family. The Applicants seek an Order declaring certain transactions void. The allegation is that the Respondent Melanie Lay made unlawful transfers of property. [ 2 ] The Respondents filed cross-applications to which the Applicants indicated they “...will respond separately...”. As a result, this Decision does not address those cross-applications. II. Facts and Findings [ 3 ] This matter has a long procedural history.

The “Procedure Card” maintained by the Court is over thirty pages long. There are at least five written decisions in respect of this Action: Lay v Lay , 2012 ABCA 303 , Lay v Lay , 2017 ABQB 29 (the “ Dismissal

Decision ”), Lay v Lay , 2017 ABQB 279 (the “ Costs Decision ”), Lay v Lay , 2019 ABCA 21 and Lay v Lay , 2019 ABCA 355 . There also have been many other hearings and determinations. [ 4 ] On January 30, 2017, in the Dismissal Decision , this Court granted

summary dismissal of a claim by the Respondents. On April 20, 2017, in the Costs Decision , this Court granted costs in favour of the Applicants as follows: (

a) Party/party

Schedule “C” Costs on Column 5: para 13. (

b) Initial multiplier of 3 because of failure to prove an allegation of fraud: para 16. (

c) Additional multiplier of 2 because there had been a Formal Offer of Settlement: para 21. [ 5 ] The Court directed the Applicants’ costs to taxation: Costs Decision at para 22. The Applicants’ costs were approved in the amount of $440,285.26. The Respondents previously had paid $60,000 into Court as security for costs, which was used to offset the approved costs, resulting in judgment in favour of the Applicants in the amount of $380,285.26. [ 6 ] The Respondents appealed certain orders, alleging a reasonable apprehension of bias.

Those appeals were dismissed: Lay v Lay , 2019 ABCA 21 at para 4 . [ 7 ] The Applicants were granted costs of the unsuccessful appeals in the amount of $59,850 and subsequent awards for costs following the dismissal of the unsuccessful appeals. Those subsequent awards are not addressed in this Decision. A.

Share Transfers [ 8 ] On March 15, 2017, following the Dismissal Decision , Melanie Lay transferred shares (the “Share Transfers”) of 1133137 Alberta Ltd (“113Co”), 1035826 Alberta Inc (“103Co”) and 970316 Alberta Ltd (“970Co”) (collectively, the “Three Corporations”) to her three daughters, Chloe Lay, Olivia Lay and Tessa Lay (collectively, the “Daughters”). The Share Transfers were effected approximately a month before the Court issued the Costs Decision .

There is no evidence that Melanie Lay received any consideration for the Share Transfers. [ 9 ] Notwithstanding the Share Transfers, Melanie Lay signed a Form 13 Statutory Declaration on May 13, 2019 entitled “Financial Statement of Debtor” (the “Financial Statement”) which reported that she was still receiving a salary from 113Co. [ 10 ] On her 2017 income tax return, Melanie Lay reported $118,404 in taxable dividends from taxable Canadian corporations. In the 2018 fiscal year, Melanie Lay reported no taxable dividends from taxable Canadian corporations on her income tax returns.

The evidence is that she has not filed an income tax return for any calendar year after 2018. [ 11 ] Based on the combination of the Share Transfers, the radical decrease in dividend income reported on her 2018 income tax return, and the Financial Statement, I infer that the Share Transfers substantially reduced the value of property held by Melanie Lay. This inference is bolstered by the fact that she has not filed an income tax return since the 2018 calendar year. [ 12 ] The Applicants seek to set aside the Share Transfers.

I note, however, that the remedy claimed in the Application refers only to the shares of 113Co, while the Applicants’ brief seeks to challenge all of the Share Transfers. B. The Mortgage 1. Context [ 13 ] The context surrounding the subject mortgage is instructive. On April 19, 2017, Melanie Lay registered a mortgage against her property (the “Mortgage”) in favour of her brother, Barrie Mann. The Mortgage was registered approximately 2.5 months after the Dismissal Decision was issued and one day before the Costs Decision was issued. [ 14 ] The

preamble and clause 1 of the Mortgage state that Barrie Mann loaned $350,000 to the Mortgagor, Melanie Lay. The Mortgage included the following features: (

i) it was payable upon demand; (ii) there was no term; and (iii) interest was calculated monthly, but Melanie Lay had no obligation to pay it. There is no evidence that any payments have ever been made on, or in respect of, the Mortgage. 2. The Mayo Clinic Expenditures [ 15 ] On May 13, 2022, Applications Judge Farrington granted an order (the “Farrington Order”) permitting Rule 6.8 questioning of Terry Lay about the Mortgage. Terry Lay was ordered to provide to the Applicants any documents related to the consideration for the Mortgage. [ 16 ] The Questioning of Terry Lay was scheduled for June 27, 2022. Ten days before that event, the Applicants received two documents, namely a

schedule of payments to the Mayo Clinic in respect of invoices dated September 2019 or later and a copy of the Mortgage. The

schedule of payments itemized payments to the Mayo Clinic totaling $204,572.96 (the “Mayo Clinic Payments”) in respect of cancer treatments for Melanie Lay. [ 17 ] The Respondents advised that Melanie Lay was diagnosed with cancer in or about August 2019. This is consistent with the timing of the first of the Mayo Clinic Payments on or about September 24, 2019, over two years after the Mortgage was registered. 3. Litigation Costs

[ 18 ] Rod Pantony was in-house counsel to the Mann family and to Farmers of North America (“FNA”), which was owned by James Mann, another of Melanie Lay’s brothers. The Respondents asserted during the hearing that the Mortgage was granted as a mechanism to ensure recovery of funds FNA and the Mann family had committed to having Mr. Pantony litigate the Action on behalf of the Respondents. Notwithstanding the terms of the Farrington Order, the Respondents provided no documentation linking Mr. Pantony’s alleged legal efforts to the Mortgage.

When I enquired about the supporting documentation, the Respondents informed me that they had no back-up documents. [ 19 ] The Respondents asserted that the aggregate of Mr. Pantony’s legal fees was approximately $350,000. When I asked the Respondent for details concerning the nature of the relationship and Mr. Pantony’s charge out rate, I was not provided with anything concrete. The Respondents advised that Mr.

Pantony provided the alleged legal services between 2010 and 2013, but provided no explanation for the four-year gap before the Mortgage. [ 20 ] I find no evidence of a retainer between the Respondents and Mr. Pantony. Further, there is no evidence linking Mr. Pantony’s alleged legal services and the Mortgage. Neither commentary nor argument constitutes evidence. C. Outstanding Judgments – Respondents Payments [ 21 ] The Respondents have made only two payments towards the judgments obtained by the Applicants. As noted above, the Respondents paid $60,000 into Court as security for costs.

Second, the Applicants enforced a judgment against the Respondents’ property in Saskatchewan, resulting in the Respondents paying $82,027.92 to the Applicants on February 16, 2022. [ 22 ] The Applicants asserted that the absence of additional payments supported their view that the Respondents were insolvent. I disagree. More evidence is needed to establish that Melanie Lay, in particular, was insolvent in March and April of 2017. III. Issues [ 23 ] The questions to be addressed are as follows. 1. Is the relief sought by the Applicants barred by the statute of limitations? 2.

Should the Court issue an order voiding the Share Transfers? 3. Should the Court issue an order discharging the Mortgage? IV. Prior Rulings [ 24 ] In November 2022, the Respondents raised a couple of preliminary issues. My determinations concerning these two preliminary issues are as follows. A. Rule 6.3 – Statute of Elizabeth [ 25 ] Rule 6.3(2) of the Alberta Rules of Court requires that an application state the grounds or irregularity to be relied on: William A.

Stevenson & Jean E Côté, Alberta Civil Procedure Handbook , 2023 ed by Jean E Côté, Frans Slatter & Vivian Stevenson (Edmonton: Juriliber, 2023) vol 1 at 6-12 (“Stevenson 2023”). If evidence on a key point is not clear, the Court may adjourn to get better evidence: Watts v Canadian Lawyers Insurance Association , 2014 ABCA 33 at paras 5 , 6, and 17; see also Stevenson 2023 at 6-15. In my view, this same requirement applies to the relevant provisions of statutes: Rule 6.3(d). [ 26 ] The Respondents noted that the Statute of Elizabeth , 13 Eliz 1, c 5 was not plead or otherwise referred to in the Application.

They assert that is a deficiency in the Application and that the Court therefore must not allow reference to that statute. [ 27 ] In most cases, I would agree with the Respondents on this. However, there are three distinguishing factors in this case. [ 28 ] First, at the outset of the hearing, there was discussion of an adjournment. Notwithstanding the alleged deficiencies, the Respondents indicated that they did not want to adjourn. [ 29 ] Second, the Respondents had notice far in advance of the Applicants’ intention to rely on the Statute of Elizabeth .

Indeed, the Applicants had raised the Statute of Elizabeth in a Brief filed with the Court on July 16, 2021 and the Respondents addressed it at length in their own brief. [ 30 ] Third, in response to a question from the Court, the Respondent acknowledged that the Statute of Elizabeth is almost always raised in conjunction with the Fraudulent Preferences Act , RSA 2000, c F-24 (the “ FPA ”).

Since the FPA was raised in the Application, I infer that reference to, and reliance on, the Statute of Elizabeth came as no surprise to the Respondents. [ 31 ] In addition, I note that Rule 6.3(2) says that the Court may “otherwise permit”. The purpose of that Rule is to ensure that a respondent understands the case it needs to meet: Reeves v Grassi , 2019 ABQB 416 at para 14 . Where arguments have been set out in writing weeks in advance, this Court has acknowledged that any concerns about prejudice to the effect that the respondent does not know

the basis for the application fade: Reeves at para 15 . These concerns are often best dealt with by way of a costs order: Reeves at para 15 . [ 32 ] Accordingly, I permitted the Statute of Elizabeth to be referred to in this Application. B. Limitations [ 33 ] In their brief filed on November 10, 2022, the Respondents raised a limitation argument.

In response, the Applicants pointed to a brief they had filed on July 16, 2021 (the “July 2021 Applicants Brief”), which addressed the limitation argument. [ 34 ] The Respondents asserted that I was not entitled to review the July 2021 Applicants Brief because it was not filed as part of this Application, notwithstanding that it was part of the Court record. The Respondents provided no authority to support that proposition.

They subsequently conceded that I was entitled to review the July 2021 Applicants Brief, but argued that I should discount its weight. [ 35 ] Based on my review of the evidence, my analysis of the law, and the Respondents’ concession, I determined that I would permit the July 2021 Applicants Brief for purposes of this Application, but I would take into consideration the weight that I give its contents. V. The Law A.

The Statutory Framework [ 36 ] The purpose of both the Statute of Elizabeth and the FPA is to protect creditors by permitting courts to “strike down all conveyances of property made with the intention of defrauding creditors, except for conveyances made for good consideration and bona fide to persons not having notice of fraud”: Krumm v McKay , 2003 ABQB 437 at para 13 . The case law indicates that this legislation is to be interpreted “liberally” to include any kind of transfer or conveyance made with the intent to defraud creditors: Krumm at para 13 . 1.

The Fraudulent Preferences Act [ 37 ] The FPA allows the courts to set aside both fraudulent conveyances and fraudulent preferences: sections 1 and 2 . [ 38 ] A fraudulent conveyance requires the following elements: i. a transaction; ii. when the person is in insolvent circumstances or is unable to pay the person’s debts in full or knows that the person is on the eve of insolvency; iii. for nominal value; and iv. with the intent to defeat the debtor’s creditors: FPA s 1. [ 39 ] A fraudulent preference requires the following elements: i. a transaction; ii. when the person is in insolvent circumstances or is unable to pay the person’s debts in full or knows that the person is on the eve of insolvency; iii. with the effect of preferring one creditor over other creditors; and iv. with the intent to defeat the debtor’s other creditors: FPA s 2. [ 40 ] In my view, neither the Share Transfers nor the Mortgage constitutes a “preference” under the FPA because there is no evidence that any of the Daughters or Barrie Mann was a creditor of Melanie Lay at the time of these transactions as required by sections 2 (

b) and 3 (

b) of the FPA . Accordingly, I have focused on whether either or both of these transactions constituted a fraudulent conveyance. [ 41 ] As is evident from the elements set out above, for the FPA to apply, the subject transaction must be effected “when the person is in insolvent circumstances or is unable to pay the person’s debts in full or knows that the person is on the eve of insolvency”: ss 1, 2, and 3.

2. The Statute of Elizabeth [ 42 ] The basic principles for the application of the Statute of Elizabeth in a fraudulent conveyance action were set out in Proulx v Proulx , 2002 ABQB 151 at para 14 : 1. There must be a conveyance of either real or personal property; 2. The transaction must have been for no or nominal consideration; 3. It must have been the intent of the settlor to defraud, hinder or delay his creditors; 4. The intent of the settlor may be inferred from his circumstances and the circumstances of the settlement or may be the result of direct evidence; 5.

The fact that there was no consideration or voluntary consideration will in most cases justify the inference of necessary intent absent evidence rebutting that inference; 6. Inference of intent will be strong if the settlor was insolvent at the time of settlement or the settlement effectively denuded him of assets sufficient to cover the existing obligations; 7. The party challenging the conveyance must be a creditor or someone with a legal or equitable right to claim against the settlor; 8.

The conveyance must have had the intended effect. [ 43 ] While the Statute of Elizabeth does not require the Applicants to prove that the Respondents were insolvent on the date of the subject transactions, they must prove that the conveyance had the intended effect. While the Statute of Elizabeth is relevant, for the reasons set out below, I find that it is not necessary for me to rely upon it. 3.

Elements Required [ 44 ] The difference in the necessary elements under the FPA and the Statute of Elizabeth is relevant in this case. [ 45 ] In Moody v Ashton , 2004 SKQB 488 , the Court conducted an in-depth review of the law, including a comparison of the Fraudulent Preferences Act , RSS 1978, c F-21 (the “ Sask FPA ”) and the Statute of Elizabeth. I note that the Sask FPA is similar to the FPA . [ 46 ] The Court in Moody commented that the law applicable under the two statutes is similar. Both require proof of fraudulent intent to defeat creditors on the part of a transferor.

However, there is an important difference between the Statute of Elizabeth and the Sask FPA . [ 47 ] Similar to the FPA , the Sask FPA requires that at the time of the subject conveyance the transferor: (

i) be in insolvent circumstances; (ii) be unable to pay its debts in full; or (iii) know that it is on the eve of insolvency. By contrast, the Statute of Elizabeth has broader application because it does not require proof of insolvency: Moody at paras 122 and 116-165 . [ 48 ] Under either statute, the key element to prove in a fraudulent conveyance action is fraudulent intent on the part of a debtor.

This is often difficult to establish because debtors are not likely to admit such intent. [ 49 ] The Court in Moody noted this difficulty and held that intent can be determined by examining “badges of fraud”, which are suspicious factual circumstances that suggest fraud. Such suspicious circumstances can provide circumstantial evidence of fraudulent intent and may be enough to establish a prima facie case of fraudulent conveyance.

The more badges of fraud that are proven, the stronger will be the prima facie case of fraudulent intent. [ 50 ] The Court in Moody held that there is a rebuttable presumption when a conveyance is made in insolvency and made the following instructive comments at paras 139-143 (see also Convoy Supply Alberta Ltd v Apex Insulation 1996 Ltd , 2003 ABQB 1 ): Although determining the intent of a person is usually a difficult task, judges and juries are routinely required to do it. The difficulty of the task does not relieve the court from making the determination.

Nor do the criminal law principles of presumption of innocence and proof beyond a reasonable doubt apply to this determination. A civil court should not hesitate to conclude, on a balance of probabilities, that fraudulent intent has been proved in circumstances where there is no credible and cogent evidence to counter the strong inferences of fraudulent intent that are raised by the factual circumstances of the case. Sometimes there is direct evidence of intent, but most often there is only indirect or circumstantial evidence of intent.

The intent or motive of a person usually has to be inferred from the time-tested common sense presumption that he or she intended the natural consequences of his or her actions considered in the light of the circumstances of the particular case before the court. I make these observations to demonstrate that this is what the evidentiary aids developed by the case law were designed to do. Although they are given different terms, they all achieve the same purpose.

Once the creditor establishes a factual basis to demonstrate that the necessary consequence of the voluntary conveyance in the circumstances of the case was to defeat creditors, the fraudulent intent to defeat creditors on the part of the transferor is presumed and the creditor has established a prima facie case.

Absent cogent and credible evidence from the transferor or from any other source tending to show that the conveyance was bona fide and not indicative of a fraudulent intent, the prima facie case becomes proof that the conveyance constitutes a fraudulent conveyance that is void pursuant to the Statute of Elizabeth . In other words, although proof of fraudulent intent to defeat creditors is required in all cases where the necessary consequence of the impugned transaction is to defeat creditors, proof of fraudulent intent will be presumed absent cogent and credible evidence to the

contrary. Where there is such cogent and credible evidence to the contrary, the presumption of fraud no longer applies, the evidentiaryburden of proving fraud shifts back to the creditor and the court must determine, on a consideration of all of the evidence available to it,whether the creditor has established on a balance of probabilities that the transferor had the fraudulent intent to defeat his or hercreditors.

Many cases observe that upon proof of a voluntary conveyance in suspicious circumstances or where the parties did not deal at arm’slength, the evidentiary burden of proof respecting the bona fides of the conveyance shifts to the transferor. In my view, this is simply adifferent way of describing an evidentiary presumption of fraud that arises once certain suspicious facts are established by the creditor.These suspicious facts are often termed “badges of fraud”.

Where suspicious circumstances call for an explanation, such as where atleast one or more “badges of fraud” are established, an inference of fraudulent intent arises that is sufficient to shift the evidentiaryburden to the transferor to prove that the conveyance was bona fide. Badges of fraud are simply a collection of diverse suspicious circumstances that have been identified by the case law. The more badgesof fraud that are proven, the stronger the prima facie case of fraudulent intent will be.

But again, badges of fraud simply invoke anevidentiary presumption which will not apply where there is cogent and credible evidence to show that the conveyance is bona fide... [51] The Court in Moody enumerated the following badges of fraud at para 143: (

a) a transfer is made pending a writ; (

b) there was secrecy respecting the transaction; (

c) the grantor retains some benefit in the property; (

d) the consideration was grossly inadequate; (

e) the grantor continued in possession after the transfer; (

f) the transfer amounted to a trust of the property; (

g) the deed contained false statements as to the consideration; (

h) there was unusual haste in making the transfer; (

i) the property is shown as an asset of the grantor after the transfer; and (

j) the transfer substantially reduces the property of the grantor that would be available to his creditors otherwise. [52] Moody has been considered with approval by the courts in both Saskatchewan and Alberta: Paragon Capital Corporation Ltdv Morgan, 2014 ABCA 363 at para 10; Johnson v Johnson, 2012 SKCA 87 at paras 80 – 82; 1007374 Alberta Ltd v Ruggieri, 2013ABQB 420 at paras 32 – 35; and Nature Conservancy of Canada v Waterton Land Trust Ltd, 2014 ABQB 303 at para 468. B.

Badges of Fraud – Evidentiary Issues [53] In Moody, the Court addressed whether a defendant’s testimony regarding the intention for a conveyance must becorroborated. The Court noted authority that testimony cannot be considered unless it is backed up by independent evidence, but foundthat this approach could work injustice and fetter the discretion of a trial judge.

The Court held at para 144 that while self-servingevidence should be approached with caution and accorded less weight where it is not credible, there are circumstances where suchevidence should be viewed as credible and given weight: There is some case authority for the evidentiary rule relied upon by the Moodys, that the uncorroborated testimony of the parties to animpugned conveyance may not be considered by the court unless there is other independent cogent and credible evidence that supportssuch testimony.

Such a rule, however, fetters the discretion and role of the trial judge and, if routinely adopted, could result in aninjustice in much the same manner as can the irrebuttable evidentiary presumption of intent set out in Freeman v. Pope. With respect,this uncorroborated testimony rule should be interpreted as a caution respecting the weight to be given to self-serving evidence, ratherthan as a condition of its admissibility. See Dunlop, last paragraph, p. 616.

Courts are routinely required to deal with self-servingevidence and usually give such evidence less weight and consider it less credible than independent evidence. But at times such evidenceis credible and should be given considerable weight. [Emphasis added.] [54] Credibility was also at issue in Mawdsley v Meshen, 2012 BCCA 91.

At para 38, the Court of Appeal noted the trial judge’sconclusion that, although she was not prepared to reject the plaintiff’s testimony on all contentious matters, it would be unsafe to accepthis evidence “on any pivotal factual issue in dispute where it is not corroborated by independent evidence which I find to be credible andreliable”. The appellate court appeared to accept the trial judge’s view. [55] The case law indicates that I have discretion to draw an adverse inference from a party’s failure to adduce corroboratingevidence.

In Murray v Saskatoon (City), , the Saskatchewan Court of Appeal held as follows at paras 19 and 20: The subject is dealt with at length by the learned author in Wigmore on Evidence, 3rd ed., vol. II., pp. 162 et seq.

On p. 16 it is stated inpart: “* * * The failure to bring before the tribunal some circumstance, document, or witness, when either the part himself or his opponentclaims that the facts would thereby be elucidated, serves to indicate, as the most natural inference, that the party fears to do so, and thisfear is some evidence that the circumstance or document or witness, in brought, would have exposed facts unfavourable to the party[.]These inferences, to be sure, cannot fairly be made except upon certain conditions; and they are also open always to explanation by

circumstances which make some other hypothesis a more natural one than the party’s fear of exposure. But the propriety of such aninference in general is not doubted.” The party affected by the inference may, of course, explain it away by showing circumstances which prevent the production of thewitness; but, where the failure to produce the witness is not explained, the inference may be drawn that the unproduced evidence wouldbe contrary to the party’s case or at least would not support it.

In the pages in Wigmore on Evidence following the above quotation manyauthorities are referred to which indicates that in the courts of the United States the rule is of wide application. [56] In Kostiuk (Re) (1999), (BC SC), 10 CBR (4th) 303 (BCSC), the Court focused on the badges of fraud andpresumptions relating to transfers to close relatives. In that case, the transfers of property were made from husband to wife shortly afterthe RCMP raided the husband’s offices and a cease trading order was issued for his company.

At the time, there was a strong possibilitythat the applicant could obtain a large judgment against the husband. As well, the husband was unable to pay his debts as they becamedue, and the transferred property represented the only assets he had to pay his debts.

The husband continued to reside in one of thetransferred properties. [57] The Court in Kostiuk cited Ocean Construction Supplies Ltd v Creative Prosperity Capital Corp (1995), (BC SC), 34 CBR (3d) 241 (BCSC) for the proposition that a finding of fraudulent conveyance required an applicant to show that thetransfer of property was done with the intent to delay, hinder or defraud creditors or others.

The Court in Kostiuk held that fraudulentintent is a question of fact that may be proved through drawing inferences from the circumstances surrounding the transaction.Suspicious circumstances, or badges of fraud, may be found where there is inadequate consideration or where a transaction renders thetransferor insolvent. The Court at para 7 rejected the argument that a transfer which renders the transferor insolvent gives rise to anirrebuttable presumption of fraudulent intent.

Rather, as in Moody, the Court found that such facts are strong evidence of an intention todefraud: The applicant contends, however, that the fact that after the conveyances the transferor was insolvent is conclusive as to his improperintention. Although there is authority that where the transfer of property renders the transferor insolvent an inference of fraudulent intentmust be drawn (see Sun Life Assurance v.

Elliot (1990), 31 S.C.R. 91), in Ocean Construction, supra, Baker J. followed a line ofauthority that indicated that such a fact was “very strong evidence of an intention to defraud his creditors.”. [58] When parties to a transaction are related and there are suspicious circumstances (such as other badges of fraud), a prima faciecase is often made out and the “burden of explanation” then falls on the related parties: Ocean Construction at 246. In suchcircumstances, the testimony of the related parties must be scrutinized with care and may be rejected if it is not corroborated byindependent evidence.

However, the Court in Kostiuk made clear at para 4 that the court has discretion to require corroboration: I will, at the outset, refer to a useful

summary of the applicable law under our fraudulent conveyance legislation as described by MadamJustice Baker in [Ocean Construction]. There she briefly addresses each of the issues that arise on this application. … …If a transferor with debts makes a transfer the effect of which is to render him unable to meet his then existing liabilities, thatcircumstance furnishes very strong evidence of an intent to defraud his creditors. Mandryk v. Merko (1971), (MB CA),19 D.L.R. (3d) 238 (Man C.A.).

This case is also authority for the proposition that where parties to a transaction are related to eachother, and the circumstances are suspicious, the burden of explanation falls on the related parties. In such a case the testimony of therelated parties must be scrutinized with care and suspicion, and a judge may reject the evidence absent corroboration. As Justice Duffsaid in Koop v. Smith (1915), (SCC), 51 S.C.R. 554, 8 W.W.R. 1203, 25 D.L.R. 355, at page 1205 [W.W.R.]: …. it is very seldom that such evidence can safely be acted upon as in itself sufficient.

Later on the same page, Justice Duff said: … I think the true rule is that suspicious circumstances, coupled with relationship, make a case of res ipsa loquitur which the tribunal offact may and will generally treat as a sufficient prima facie case, but that it is not strictly in law bound to do so; and that the question ofthe necessity of corroboration is strictly a question of fact. [59] As in Moody, the Court in Kostiuk held at paras 8 and 9 that a conveyance to close relatives coupled with suspiciouscircumstances may be enough to infer fraudulent intent: The burden is, of course, on the applicant to prove the transferor’s fraudulent intention, but the applicant may prove the transferor’sintent by circumstantial evidence.

As C.R.B. Dunlop said in Creditor-Debtor Law of Canada, 2d ed. (Toronto: Carswell, 1995) at page613: Even when fraud must be proved as a fact, the courts as early as Twyne’s Case developed evidentiary rules which would enable them tofind fraud unless the supporters of the transaction could explain away the suspicious circumstances. These rules have come down to ustoday as the so-called badges of fraud.

While the legal persuasive burden to prove the case remains on the plaintiff throughout the trial, the plaintiff may raise an inference offraud sufficient to shift the evidentiary burden to the defendant if the plaintiff can establish that the transaction has characteristics whichare typically associated with fraudulent intent. No doubt proof of one or several badges of fraud will not compel a finding for theplaintiff, but it does raise a prime facie case which it would be prudent for the defendant to attempt to rebut.

Conveyances to close relatives in suspicious circumstances can be a badge of fraud from which the requisite intention may be inferred.The leading authority on the point is the decision of the Supreme Court of Canada in Koop v. Smith (1915), (SCC), 25D.L.R 355 at 358...

C. Insolvency Test [ 60 ] Insolvency is at the heart of this Application. To be granted the relief they seek under the FPA , the Applicants must establish that Melanie Lay either was insolvent at the time of the Share Transfers and the Mortgage or was rendered insolvent by them. As noted above, solvency need not be proved under the Statute of Elizabeth . [ 61 ] The relevant substantive questions are how insolvency is determined and when it occurs. Put simply, insolvency occurs when a person cannot comply with their financial obligations to pay their creditors and lenders on a timely basis.

This typically occurs when a person’s aggregate debt exceeds the aggregate value of their assets. Notwithstanding this apparent simplicity, it is not always easy to determine whether a person becomes insolvent. The concept of insolvency is often glossed over or assumed but is actually complicated and situational. In this case, the issue is the alleged insolvency of Melanie Lay. Accordingly, I will focus on the insolvency of individuals, as opposed to corporations, partnerships, or trusts. [ 62 ] The scope of an insolvency test is important.

An over-inclusive test would be detrimental because it would decrease the investment opportunities of businesspersons and constrain their ability to raise capital. Likewise, an under-inclusive test would be detrimental to creditors because they would be left with little from which to recover debts due. [ 63 ] There are two principal approaches to insolvency that focus on different issues.

These are the balance sheet test and the cash flow test: Janis P Sarra and Justice Barbara Romaine, ed, Annual Review of Insolvency Law 2017 (Toronto: Carswell, 2018) at 20 and 21. [ 64 ] Under the balance sheet test, insolvency occurs when an individual debtor’s liabilities exceed the fair market value of their assets. To determine solvency, the individual must list every asset owned and indebtedness owed. Assets include cash on hand, amounts in chequing accounts and savings accounts, stocks and bonds, and other personal property and interests in all real property.

The amount paid for an asset or the book amount recorded for an asset is generally irrelevant. The relevant amount for insolvency purposes is the aggregate fair market value of these assets (the “Aggregate Asset Value”). Indebtedness includes debts and enforceable obligations of all sorts, including loans, promissory notes owed, income taxes due, and credit card obligations.

The aggregate of these obligations will be an individual’s total liabilities (the “Aggregate Debt Burden”). [ 65 ] Generally, balance sheet insolvency refers to the situation where an individual’s Aggregate Debt Burden exceeds their Aggregate Asset Value. It is a point in time test. A person may be balance-sheet insolvent but liquid enough to address current creditor demands. [ 66 ] Under the cash flow test, also known as the “ability to pay” test, insolvency occurs when the individual cannot pay his or her debts as they become due in the ordinary course because they lack financial liquidity.

This is a broader concept than balance sheet solvency because it is not simply a point in time test; it is forward-looking by nature. [ 67 ] In assessing cash flow insolvency, common sense needs to be applied. To illustrate the point, a person’s ability to pay their current debts is not equivalent to their expected cash flow, or the total of their possible cash flows measured by their probabilities. That is, a person may have a large potential cash inflow but a small likelihood of being able to realize on that potential cash inflow.

As a result, from a cash flow perspective, they may not be able to pay their bills. D. Definition – “Transaction” [ 68 ] The definition of the term “transaction” is defined as follows in B.A. Garner, Black's Law Dictionary , 11th ed. (St. Paul, MN: Thomson Reuters, 2018) sub verbo “west” at 1802: l. The act or an instance of conducting business or other dealings; esp., the formation, performance, or discharge of a contract. 2. Something performed or carried out; a business agreement or exchange. 3. Any activity involving two or more persons. 4. Civil law.

An agreement that is intended by the parties to prevent or end a dispute and in which they make reciprocal concessions. [ 69 ] Given the above definition, I find the scope of the term “transaction” to be broad. VI. Application of the Law to the Facts A. Assertions of the Applicants [ 70 ] The Applicants assert that the Share Transfers and the Mortgage (collectively, the “Transactions”) are fraudulent conveyances or, in the alternative, fraudulent preferences. As I mentioned above, I do not think either of the Transactions constitutes a “preference” under the FPA .

Therefore, I will focus on whether there has been a fraudulent conveyance. B. Key Events – Timing and Sequence [ 71 ] The timing of the following events is important: a. On January 30, 2017, this Court dismissed the Respondents’ claim and awarded Costs in the Dismissal Decision , although the Costs were not quantified until approximately four months later. b. On March 15, 2017, Melanie Lay made the Share Transfers to her Daughters. There is no evidence that the Daughters paid any

consideration for the Share Transfers. c. On April 19, 2017, Melanie Lay registered the Mortgage in favour of her brother, Barrie Mann. Subject to my analysis below, there is no evidence that Barrie Mann advanced the funds referred to in the Mortgage document. d. On April 20, 2017, this Court issued the Costs Decision . Costs in favour of the Applicants were subsequently approved by the Court in or about May 2017. e. For the year-ended December 31, 2017, Melanie Lay reported Line 150 income of $142,404. Of that Line 150 amount, $118,404 was dividend income. f.

For the year-ended December 31, 2018, Melanie Lay reported no dividend income. g. The Financial Statement indicates that Melanie Lay was insolvent on the date she signed that document, which was May 13, 2019. C. Badges of Fraud [ 72 ] As alluded to above, the insolvency issue arose coincidental with the Dismissal Decision . In that decision, Justice Millar stated the following at para 87: Costs are awarded to the Applicants.

The parties have 30 days from the date of this judgment to send their written submissions on costs. [ 73 ] Although the extent of the award was not known until an Order was issued on May 17, 2017, the foundation for the Costs award was granted on January 30, 2017. Any transaction Melanie Lay effected after the Dismissal Decision had the potential to be a fraudulent conveyance. [ 74 ] While I will review the particulars further below, the badges of fraud with which I am concerned are as follows: (

a) The Transactions involved close relatives. The Share Transfers were made by Melanie Lay to the Daughters. The Mortgage was granted by Melanie Lay to her brother, Barrie Mann. (

b) There is no evidence that consideration was provided to Melanie Lay for either of the Transactions. That said, I will address below the alleged consideration concerning the Mortgage. (

c) The Transactions were effected in the face of the forthcoming costs determination, between the Dismissal Decision and the Costs Decision . (

d) Melanie Lay retained some benefit from the property. In particular, under the Mortgage, she was entitled to continue residing in the property, which prevented the Applicants from enforcing against it under the Civil Enforcement Act . (

e) Notwithstanding the Share Transfer, Melanie Lay continued to be involved in, and employed by, 113Co. (

f) The Transactions substantially reduced the value of the property Melanie Lay held. Subject to these proceedings, the Transactions allegedly prevented enforcement against any of Melanie Lay’s property in Alberta. Notwithstanding that, her real estate and businesses have all continued to operate. (

g) The Transactions effectively rendered Melanie Lay insolvent when assessed with reference to the cash flow test. D. Addressing the Issues 1. Is the relief sought by the Applicants barred by the statute of limitations? [ 75 ] The principle of discoverability is codified in

section 3 of the Limitations Act , RSA 2000, c L-12 . Accordingly, the limitations clock begins to run not when the event happens, but when the injury is discovered: Sun Gro Horticulture Canada Ltd v Alberta Metal Building Sales Inc , 2006 ABCA 243 at para 10 .

Knowledge is a prerequisite for the commencement of a limitation period: Alberta Law Reform Institute Limitations Report No. 55 (1989) at p. 1 (the “ ALRI Limitations Report No 55 ”). [ 76 ] A limitation period will start to run only when the claimant has knowledge of a cause of action: Canadian Natural Resources Limited v Husky Oil Operations Limited , 2020 ABCA 386 at para 30 ; Milota v Momentive Specialty Chemicals , 2020 ABCA 413 at paras 21 and 22 . This will be considered to have occurred when the claimant has discovered or ought to have discovered: (

i) that the injury had occurred; (ii) that it was to some degree attributable to the conduct of the defendant; and (iii) that it was sufficiently serious to have warranted commencing a proceeding: ALRI Limitations Report No 55 at 1. However, a claimant cannot just be passive, but is required to exercise due diligence: Canadian Natural Resources at paras 31 and 33; Luscar Ltd v Pembina Resources Limited , 1994

ABCA 356 at para 138; Central Trust Co v Rafuse, (SCC), [1986] 2 SCR 147. [77] After the claim has been discovered, the claimant has two years within which to seek redress in a civil judicial proceeding:Canadian Natural Resources at para 33; Luscar at para 138; ALRI Limitations Report No 55 at 1.

The Respondents assert that the levelof subjective or objective knowledge that triggers the start of the limitation period is the presence of sufficient information available tothe claimant to put that person on inquiry and if claimants fail to make reasonable inquiries or exercise reasonable diligence to confirmmatters during the limitation period, they do so at their own peril: Canada (Attorney General) v Utah, 2020 FCA 224 at para 33;Pioneer Corp v Godfrey, 2019 SCC 42 at para. 31; Canadian Natural Resources Ltd v Jensen Resources Ltd, 2013 ABCA 399 at paras46-48; Geophysical Service Incorporated v Encana Corporation, 2018 ABCA 384 at para. 20. [78] The Respondents assert that the Applicants ought to have discovered the insolvency issue when they pulled the Certificate ofTitle and noted registration of the Mortgage.

I disagree. [79] Based on the evidence before me, I find the narrative about the Mortgage misleading. Its

preamble states that $350,000 waslent to the Mortgagor, Melanie Lay, by Barrie Mann. Clause 1 further states that the amount of principal to be advanced was $350,000. Ifthat had been the case, Melanie Lay would have had both an asset of $350,000 in cash (or in whatever she invested the funds) and anobligation of $350,000. [80] A plain reading of the document suggests that Melanie Lay acquired the cash in exchange for the Mortgage. There is nothinguntoward about that and nothing on the face of the Mortgage document should have put the Applicants on inquiry concerning the bonafides of the Mortgage.

In the circumstances, the Applicants’ knowledge of the Mortgage by at least October 2017 was not sufficientknowledge to impose a positive obligation on them to make reasonable inquiries: 1332721 Alberta Inc v Jenkins & Associates, 2020ABQB 8 at paras 36 and 44 to 46. [81] Notwithstanding the terms of the Mortgage, the evidence is that no funds were ever “lent” by Barrie Mann to Melanie Lay.Further, there is nothing in the Mortgage document to suggest that it related to a past or future obligation of Melanie Lay. That is part ofthe fraud and, in my view, fraud changes everything.

I find that it was not until the questioning in May 2019 that the Applicants acquiredthe necessary knowledge concerning both the Share Transaction and the Mortgage to trigger the limitation clock. [82] During the hearing, the Respondents asserted that the Mortgage was granted as a mechanism to ensure the recovery of coststhat FNA and the Mann family had committed in having Mr. Pantony litigate the Action on behalf of the Respondents.

As noted above,the Respondents provided neither any supporting documentation nor any adequate explanation for the gap of approximately four yearsbetween the alleged legal services and the Mortgage. [83] I find the Mortgage document does not support the argument that the Applicants ought to have discovered the insolvency issuewhen they noted it on the Certificate of Title. Further, the Respondents’ attempts to justify the Mortgage based on either Mr.

Pantony’spre-2014 services or the post-August 2019 Mayo Clinic Payments further bolster my determination that the Applicants were not providedwith sufficient particulars to allow them to have discovered the insolvency issue when they pulled the Certificate of Title. [84] It is apparent that Melanie Lay’s insolvency became known to the Applicants only when they commenced enforcement stepsagainst the Respondents after the costs awards were settled in the Court of Appeal in or about April 2020. Prior to that, the Applicantshad no information as to whether the Respondents were insolvent.

Therefore, based on the evidence before me and my analysis of thelaw, I find that the relief sought by the Applicants is not barred by the Limitations Act. 2. Should the Court issue an order voiding the Share Transfers? [85] The following evidence raises the concern that the Share Transfers were made with the intention of fraudulently defeatingfuture creditors (see Ontario Securities Commission v Camerlengo Holdings Inc, 2023 ONCA 93 at para 14): a. The Share Transfers were non-arm’s length transfers. b. There is no evidence that the Daughters paid any consideration for the Share Transfers. c.

The Share Transfers were made approximately 1.5 months after this Court dismissed a claim by the Respondents and awardedCosts to the Applicant. d. The Share Transfers were made approximately one month before the Costs Decision was issued. At the time, Melanie Lay knewthe costs award had been issued, though she did not know the quantum of the award. e.

Based on my review of the evidence and the corresponding timeline, I infer that the Share Transfers were made at a time whenMelanie Lay was concerned about exposure to personal liability from the expected costs award. [86] As noted above, a fraudulent conveyance requires four elements. I now turn to address these elements in respect of the ShareTransfers. a. Was there a transaction?

[ 87 ] The Share Transfers constitute a transaction. As a result, the first element is proved. b. Was Melanie Lay insolvent at the time of the Share Transfers? [ 88 ] Based on the record before me, I do not have sufficient evidence to find that Melanie Lay was insolvent under the balance sheet test at the time of the Share Transfers. The Financial Statement was not prepared until May 2019.

I lack the necessary evidence to make an informed assessment of whether Melanie Lay was insolvent under the balance sheet test as at March 2017. [ 89 ] However, as discussed above, the cash flow test is broader because it is not simply a point in time test. At issue is how broad is the scope of the cash flow test. [ 90 ] The Ontario Court of Appeal stated in Camerlengo Holdings that an intent to defraud creditors can be found if steps are taken to judgment proof oneself in anticipation of commencing a new business venture.

The Court stated at para 11 that it is not necessary that a claimant be able to identify a particular, ascertainable creditor that the debtor sought to defeat at the time of the conveyance. It is enough to plead facts which support the allegation that, at the time of the conveyance, the debtor perceived a risk of claims from a general class of future creditors and conveyed the property with the intention of defeating such creditors should they arise.

The facts necessary to support an inference of such an intention to convey property away from present and future creditors are the typical “badges of fraud”. [ 91 ] Given the comments in Camerlengo Holdings , I am of the view that the scope of what is caught by the phrase “when the person is in insolvent circumstances or is unable to pay the person’s debts in full or knows that the person is on the eve of insolvency” in sections 1 , 2 , and 3 of the FPA is broadened for purposes of the cash flow test.

The cash flow insolvency test would take into account whether an individual would be “unable to pay [their] debts in full or knows that [they are] on the eve of insolvency”. [ 92 ] At the time of the Share Transfers, Melanie Lay knew that the Costs Decision was forthcoming. It was not a matter of “if” but “when” that decision would be issued. I find that to be a badge of fraud.

Further, considering the cash flow insolvency test, the timing of events and the information in the Financial Statement, I find that the Share Transfers were effected at a time when Melanie Lay knew, looking forward, that she would not be able to pay her debts in full or knew that she was on the eve of insolvency because of the forthcoming Costs Decision . [ 93 ] I acknowledge the Respondents’ arguments that they had an expectation of receiving some wealth from the Estate of Beryl Lay.

However, I did not consider this argument because it was Melanie Lay who effected the Share Transfers and there is no indication (or evidence) that she was entitled to any distribution from that estate. She has no claim to any entitlement Terry Lay might have had, so any potential distribution from that Estate is irrelevant to her solvency. I note that Melanie Lay did not include any expected entitlement from that estate in the Financial Statement. [ 94 ] As a result, the second element is proved. The Share Transfers were effected in circumstances where the cash flow insolvency test was violated. c.

Were the Share Transfers effected for nominal consideration? [ 95 ] There is no evidence that Melanie Lay received any consideration for the Share Transfers and I find that she received none. d. Were the Share Transfers undertaken with the intent to defeat the debtor’s creditors, as evidenced by badges of fraud? [ 96 ] To support a claim that a transfer was made with the general intent to defeat future creditors, a subsequent creditor need only plead sufficient badges of fraud to raise a suspicion that needs to be answered.

Whether the badges of fraud are in fact sufficient to establish the fraudulent intent is a matter to be established on the evidence led in the hearing: Lad v Marcos , 2020 ONSC 6215 at para 93 (c). In this case, I find that the Applicants established the fraudulent intent based on evidence led at the hearing of five badges of fraud that I touched on above: see Camerlengo Holdings at para 14. [ 97 ] Based on the evidence before me and my analysis of the law, I find that Melanie Lay undertook the Share Transfers with the intent to defeat her creditors. Applying common sense, no other

interpretation is viable given the inferences that flow from the overlapping badges of fraud. e. Conclusion [ 98 ] Consequently, I am prepared to issue an order voiding the Share Transfers. However, I will do so only in respect of the shares of 113Co because that is the only corporation referenced in the relief requested in the Application. While 103Co and 970Co were referred in the narrative of the Application, they were not included in the relief requested and mere reference in the narrative is not a foundation that permits me to grant relief broader than what was requested.

Remedies sought should be specifically plead: Alberta Law Reform Institute Pleadings Consultation Memorandum No. 12.8 (1989) at p. xxi (the “ ALRI Pleadings Memorandum No 12.8 ”). Further, the Applicants did not make any claim for “such further and other relief as this Court may deem just”. If the Applicants had included such a “basket” clause, I would have considered whether that language allowed me to grant relief the additional relief. 3.

Should the Court issue an order discharging the Mortgage? [ 99 ] The following evidence raises concerns that the Mortgage was granted with the intention to fraudulently defeat future creditors (see Camerlengo Holdings at para 14): a. The Mortgage to Melanie Lay’s brother, Barrie Mann, was a non-arm’s length transaction.

b. There is no evidence that Barrie Mann paid consideration for the Mortgage. For the reasons set out above, I reject Melanie Lay’s assertion that the $350,000 amount of the Mortgage represents her indebtedness to Barrie Mann for legal work done by Mr. Pantony for her benefit prior to 2014 or for Mayo Clinic Payments in and after September 2019. c. The Mortgage was granted approximately 2.5 months after this Court dismissed a claim by the Respondents and awarded costs to the Applicant. d. The Mortgage was granted one day before the Costs Decision was issued.

At the time, Melanie Lay knew the Costs Decision would be forthcoming. e. Based on my review of the evidence and the corresponding timeline, I infer that Melanie Lay was concerned about personal liability for the expected costs award. [ 100 ] Again, a fraudulent conveyance requires the elements set out above, which I now turn to address in respect of the Mortgage. a. Was there a transaction? [ 101 ] As noted above, the definition of “transaction” is very broad.

It includes “[s]omething performed or carried out; a business agreement or exchange” and “[a]ny activity involving two or more persons”: Black’s Law Dictionary at 1802. While a mortgage in Alberta does not create a severance, it is an agreement between the parties which creates a charge on the land owner’s title in the form of a security: Bruce Ziff, Principles of Property Law , 7th ed. (Toronto: Thomson Reuters, 2018) at 385; see also Lyons v Lyons , [1967] VR 169 (SC) at 174.

As such, the granting of the Mortgage is an activity. [ 102 ] In my view, the granting of the Mortgage constitutes a transaction because that activity falls within the scope of a “transaction” as defined above. As a result, the first element is proved. b. Was the insolvency test violated? [ 103 ] Based on the record before me, I do not have sufficient evidence to find that Melanie Lay was insolvent under the balance sheet test at the time the Mortgage was granted. The Financial Statement was not prepared until May 2019.

As a result, I lack the necessary evidence to make an informed balance sheet insolvency assessment as of April 2017. [ 104 ] However, as mentioned above, the cash flow insolvency test is broader than the balance sheet test because it is not simply a point in time test.

As discussed above, I find that Camerlengo Holdings broadens the scope of what is caught by the phrase “when the person is in insolvent circumstances or is unable to pay the person’s debts in full or knows that the person is on the eve of insolvency” in sections 1 , 2 , and 3 of the FPA . [ 105 ] As with the Share Transfers, at the time the Mortgage was granted, Melanie Lay knew the Costs Decision was forthcoming. Indeed, the Costs Decision was issued approximately one day after the Mortgage was granted. I find this to be a badge of fraud.

Considering the cash flow insolvency test in the context of the timing of events and the information in the Financial Statement, I find that the Mortgage was granted at a time when Melanie Lay knew, looking forward, that she would not be able to pay her debts in full or knew that she was on the eve of insolvency because of the forthcoming decision on costs. [ 106 ] Again, for the reasons above, I have not considered the Respondents’ arguments about the Estate of Beryl Lay. [ 107 ] Based on the evidence before me and my analysis of the law, I find the second element is proved.

The Mortgage was granted in circumstances where the cash flow insolvency test was violated. c. Was the Mortgage granted for nominal consideration? [ 108 ] There is no evidence that Melanie Lay received any consideration when she granted the Mortgage. I do not accept that the alleged legal services of Mr. Pantony (or anyone else) provided before 2014 constituted such consideration. There is no evidence of a nexus between those alleged legal services and the Mortgage. I also do not accept that the Mayo Clinic Payments constituted consideration for the Mortgage as there is no evidence of a nexus between them.

In particular, there is no evidence that Barrie Mann made these payments for the benefit of Melanie Lay. The paper trail is incomplete. d. Was the Mortgage granted with the intent to defeat the debtor’s creditors? [ 109 ] As with the Share Transfers, based on my review of the evidence, I found five potential badges of fraud. Consequently, I find that Melanie Lay granted the Mortgage with the intent to defeat her creditors. Applying common sense, no other

interpretation is viable given the inferences that flow from the overlapping badges of trade. VII. Relevant Statutes –FPA vs Statute of Elizabeth

[ 110 ] Notwithstanding the debate between the parties and my ruling during the hearing permitting submissions on the Statute of Elizabeth , the above analysis was restricted to the application of the FPA . Given the evidence, there was no need for me to go beyond the parameters of the FPA for the purpose of addressing the issues on this Application. [ 111 ] As a final comment, I would have come to the same conclusions concerning the Share Transfers and the Mortgage if I had applied the Statute of Elizabeth instead of the FPA . VIII.

Conclusion [ 112 ] Based on my review of the evidence and analysis of the law, I make the following determinations. 1. Is the relief sought by the Applicants barred by the statute of limitations? For the reasons outlined above, I find that the Applicants are not barred by a limitation period. 2. Should the Court issue an order voiding the Share Transfers? For the reasons outlined above, I order the voiding of the Share Transfers but only in respect of 113Co because that is the sole corporation referenced in the relief requested in the Application. 3. Should the Court issue an order discharging the Mortgage?

For the reasons outlined above, I order that the Mortgage be discharged. IX. Costs [158] The parties may speak to costs if they cannot otherwise agree. Heard on the 23 rd day of November, 2022. Dated at the City of Calgary, Alberta this 20 th day of June, 2023. D.B. Nixon J.C.K.B.A. Appearances: Tom Stepper for the Plaintiffs/Respondents Richard E. Harrison for the Defendants/Applicants