Green Theme Design Ltd v, 2024 ABKB 7

Court of King’s Bench of Alberta Citation: Green Theme Design Ltd v 0974016 B.C.

Ltd, 2024 ABKB 7 Date: 20240104 Docket: 2101 07041 Registry: Calgary Between: GREEN THEME DESIGN LTD. also known as RGA DESIGN Plaintiff/Defendant by Counterclaim - and - 097 4016 BC LTD., INTEGRATED LAND DEVELOPMENT SOLUTIONS INC., THE VAULTS DEVELOPMENT CORP., THE VAULTS DEVELOPMENT GROUP INC., THE VAULTS STONEY CORP.,THE VAULTS SOUTH CALGARY CORP., THE VAULTS DEVELOPMENT KELOWNA AIRPORT CORP., THE VAULTS DEVELOPMENT KELOWNA CORP., THE VAULTS DEVELOPMENT VERNON CORP., JOSEPH MAHOVLICH, LANA MAHOVLICH, RICHARD FRONTAIN, FRONTAIN HOLDINGS LTD., JAMES MURRAY, BLACKCREST MANAGEMENT INC., DONALD SANFORD, ABC CORPORATION AND XYZ CORPORATION Defendants - and - THE VAULTS STONEY CORP., FRONTAIN HOLDINGS LTD., JAMES MURRAY, DONALD SANDFORD AND JOSEPH MAHOVLICH Plaintiffs by Counterclaim _______________________________________________________ Reasons for Decision of the Honourable Justice Darren J.

Reed

_______________________________________________________ Introduction [ 1 ] There were initially three applications before the court for determination in this action: (

a) An application by the Plaintiffs, Green Theme Design Ltd. also known as RGA Design (“GTD”) which seeks, among other things, leave of this Honourable Court to commence three derivative actions in the names of: (

i) The defendant, Integrated Land Development Solutions Inc. (“ILDS”) as against all other named defendants in this action; (ii) The defendant, The Vaults Development Corp. (“VDC”) as against all other named defendants in this action, except ILDS; and (iii) The defendant, The Vaults Stoney Corp. (“Vaults Stoney”) as against all other named defendants in this action, except ILDS and VDC (“Derivative Application”). (

b) An application by the defendants, the substance of which seeks to strike all or some of GTD’s Statement of Claim, pursuant to R. 3.68 of the Alberta Rules of Court , Alta Reg 124/2010 on the basis of either (

a) disclosure of no cause of action or (

b) that the Statement of Claim is frivolous, vexatious, or an abuse of process (“Strike Application”); and (

c) An application by the Plaintiffs by Counterclaim, The Vaults Stoney, Frontain Holdings Ltd. (“Frontain Holdings”), James Murray, Donald Sandford and Joseph Mahovlich to have a certificate of lis pendens filed May 28, 2021 (“GTD CLP”) removed from title to certain lands owned by Frontain Holdings and Vaults Stoney, as well as damages for wrongful registration of the CLP and the release of $350,000 held in trust by their counsel, Field LLP to Vaults Stoney (“CLP Application”). [ 2 ] The parties indicated they were able to resolve the Derivative Application during the course of the hearing and a consent order will be entered into in relation to that application.

As of the date of these reasons, the consent order arising from that application has not yet been received by the court. [ 3 ] As a result, these reasons for decision only address the Strike Application and the CLP Application. Procedural Background [ 4 ] This action was commenced by GTD against the Defendants on May 28, 2021. The Defendants filed their statement of defence and counterclaim against GTD on August 10, 2021, which was defended by GTD on July 14, 2023. [ 5 ] GTD’s Derivative Application was filed, along with evidence, on February 28, 2022.

Cross examination on the affidavit of Sylvia Gibson, representative of GTD, took place on March 8, 2023. The transcript, exhibits and undertaking responses were filed with the court. [ 6 ] On June 13, 2022, the Strike Application and CLP Application were filed, along with the affidavit of James Murray. Further affidavits were filed from James Murray, Joseph Mahovlich and Richard Frontain for Vaults Stoney on November 1, 2023. Mr. Frontain’s affidavit also provided evidence on his own behalf and on behalf of Frontain Holdings. GTD elected to not cross examine on those affidavits.

GTD also elected not to file evidence in response to the Strike Application or CLP Application. Ms. Gibson’s evidence in the Derivative Application does not address the issues raised in the CLP Application. The Defendant’s Application to Strike the Plaintiff’s Claims Brief Overview of the Action: The Claim and Counterclaim [ 7 ] The substance of the action will be discussed in detail in these reasons. I have appended a copy of the Statement of Claim for reference at

Schedule “A.” However, for the purpose of a brief

summary only, at the centre of the Statement of Claim lie allegations that GTD, as a 50% shareholder in ILDS, has been oppressed by the actions of the defendant 0974016 B.C. Ltd. (“097”) and its principal, the defendant Joseph Mahovlich due to the alleged improper transfer out of ILDS and it’s 80% owned subsidiary, VDC, of certain business plan, marketing, and strategy information and intellectual property of a concept for high-end condominium storage units called “The Vaults” to The Vaults Development Group Inc (“VDG”). [ 8 ] The concept for this business, it is alleged, was the brainchild of Mr.

Randall Gibson, one time principal of GTD, and Mr. Mahovlich. The plan was to build, construct and sell units to The Vaults in cities across Canada and the US, using a structure consisting of ILDS, VDC, and various corporations that would hold the properties, construct the buildings, and sell units. The claim alleges that the plan, all along, was for profits to flow through these organizations to the shareholders of ILDS, being GTD and 097. [ 9 ] However, in 2015, Mr. Gibson passed away. His widow, Ms. Sylvia Gibson, now controls GTD. [ 10 ] At the time of Mr.

Gibson’s passing, the Vaults project was already being rolled out in accordance with the business plan alleged in the Statement of Claim via ILDS, VDC and Vaults Stoney. The claim also alleges that after Mr. Gibson’s passing, some of the defendants worked together to carve out the business from ILDS/VDC and place that business into the various defendant corporations, to

the benefit of the defendants and the detriment of GTD. [11] The claim alleges Vaults South Calgary Corp., The Vaults development Kelowna Airport Corp., The Vaults DevelopmentKelowna Corp., The Vaults Development Vernon Corp. (“Other Vaults Corps”) were incorporated by the defendants to run the businessof VDG that had been improperly moved from ILDS and VDC, and that these corporations have built and sold units in properties thatwere built according to the vaults concept. [12] The claim alleges that all defendants (to some degree) were participants in these acts, and that as a result, both GTD and ILDShave suffered loss and damage, since GTD has not received any profits from the Vaults Stoney project or from the Other Vaults Corpsand ILDS does not have an ownership interest in any of those corporations.

Substance of the Application [13] The Strike Application sought to have this Court strike some or all of the Plaintiff’s Statement of Claim against some or all ofthe Defendants. In oral hearing, the scope of this application was narrowed to striking the Statement of Claim in whole or in part asagainst the Other Vaults Corps and the defendant Blackcrest Management Inc. (“Blackcrest”).

As a result, I address only those entities. [14] Rule 3.68 states in part: Court options to deal with significant deficiencies 3.68(1) If the circumstances warrant and a condition under subrule (2) applies, the Court may order one or more of the following: (

a) that all or any part of a claim or defence be struck out; ...

(2) The conditions for the order are one or more of the following: (

a) the Court has no jurisdiction;... (

b) a commencement document or pleading discloses no reasonable claim or defence to a claim;... (

c) a commencement document or pleading is frivolous, irrelevant or improper;... (

d) a commencement document or pleading constitutes an abuse of process; ...

(3) No evidence may be submitted on an application made on the basis of the condition set out in subrule (2)(b). [15] The application engages Rule 3.68(

a) and several branches of Rule 3.68(2). [16] The first branch engaged is Rule 3.68(2)(b), that the Statement of Claim discloses no reasonable claim. No evidence can beconsidered on an application under this subrule, per Rule 3.68(3), and I have not considered any of the evidence before me in reachingmy determination on this part of the Defendants’ application. I base my decision solely on a review of the Statement of Claim as filed,and the applicable law. [17] The second and third branches engaged are Rule 3.68(2)(

c) and (d), that the Statement of Claim of the Plaintiff is frivolous,irrelevant or improper or that it constitutes an abuse of process. Law Under Rule 3.68(2)(

b) and Application to the Statement of Claim [18] The law applicable to a Rule 3.68(2)(

b) application is well settled. I summarize it briefly below. [19] A Statement of Claim will only be struck pursuant to Rule 3.68(2)(

b) if it is plain and obvious, assuming the facts pleaded tobe true, that the pleading discloses no reasonable cause of action. The plaintiff is entitled to a broad reading of the pleadings. It must bebeyond doubt that the claim will fail. The challenging party bears this onus. It is not determinative that the law has not yet recognized aparticular claim and a court should be generous and err on the side of permitting a novel, but arguable claim to proceed to trial.

In such acase, the Statement of Claim should be struck only if it is clear that in law the case cannot succeed, based on principles directlyapplicable to the case as set out in the pleadings (see, for example, PricewaterhouseCoopers Inc v Perpetual Energy Inc, 2021 ABCA16 at paras 68, 70, 72-75 and the cases cited therein, leave to appeal to SCC refused, (SCC); Rudichuk v GenesisLand Development Corp, 2019 ABQB 132 at paras 8-11 and the cases cited therein, aff’d 2020 ABCA 42). [20] This type of application is not focused on the ultimate viability of the Statement of Claim, or chances of success.

If areasonable cause of action is disclosed, that is enough to pass the threshold for survival of the claim under R. 3.68(2). The pleadings arenot held to a standard of perfection; indeed it is usually the ‘less than perfect’ pleadings that are scrutinized in these types of applications. [21] In short, the Defendants have argued that, on a plain reading of the Statement of Claim, no reasonable cause of action is madeout against the Other Vaults Corps and Blackcrest. They also suggest that the inclusion of the Other Vaults Corps and the inclusion of

ABC Corporation and XYZ Corporation evince an intent to continue to add any new vaults corporations that may be incorporated by the defendants and that this is somehow vexatious or an abuse of process.

While some of the arguments of the Defendants headed into merit- based territory, that is not the test under R.3.68(2). [ 22 ] GTD on the other hand, argues that there are viable causes of action made out and the claim ought not be struck as against those parties, and that the Other Vaults Corps and placeholder parties are necessary. [ 23 ] In my view, on a plain reading of the Statement of Claim, accepting the facts pleaded as true, and taking a broad reading of the pleading, the other Vaults Corporations and Blackcrest have not satisfied their onus.

It is not beyond doubt the claims, as pled against those parties, will fail. There are causes of action made out against the Other Vaults Corps and Blackcrest on the face of the pleadings. [ 24 ] The Statement of Claim, as noted above, pleads that the concept of the Vaults was the brainchild of Mr. Gibson and Mr. Mahovlich. It pleads that the entire business of the Vaults was intended to be held in ILDS and VDC, with individual corporations incorporated to hold real estate developments. Those developments were to be subdivided into condominium units and sold to the public, branded with the name “the Vaults”.

The Statement of Claim defines this as the “Vaults Projects” or “Vaults Project”. It alleges Mr. Gibson and GTD funded startup costs (Statement of Claim, paragraphs 21-25). [ 25 ] The claim also clearly pleads that ILDS planned to operate and roll out the Vaults project through a series of corporations that would function under ILDS’s control and to ILDS’s benefit. Each of these corporations would be governed by VDC. ILDS planned that the land for each of the projects would be held by a corporation imbued with a vaults title, followed by an identifier of where the particular project would be built.

These are defined as “City Corps” (Statement of Claim, paragraphs 26-27). [ 26 ] ILDS incorporated VDC, and then ILDS or VDC established Vaults Stoney (Statement of Claim, para. 28). VDC and Vaults Stoney are defined at para 28 as the “ILDS-Owned Vaults Corporations”. [ 27 ] With respect to the Other Vaults Corps, the Statement of Claim pleads that the defendants established wholly new development corporations and City Corps through which they continue the Vaults Projects (Statement of Claim, para. 50, introductory paragraph).

It goes on to list, at para. 50(a)-(f), each of VDG and the Other Vaults Corps, with facts about them. The conclusory sentence of para. 50 defines VDG and the Other Vaults Corps as the “Misappropriated Vaults Corporations” and merges the definition with the definition of ILDS-Owned Vaults Corporations to the catch all term, collectively, of “Vaults Corporations”.

This is important in analysing the remainder of the pleading. [ 28 ] The Statement of Claim goes on to allege that shares in the Misappropriated Vaults Corporations are held by 097, Frontain Holdings, Blackcrest (and the placeholder ABC/XYZ corps), which group is then collectively defined as the “Investor Holding Companies”.

It states that the Investor Holding Companies and their directors are responsible for directing the directors of the Misappropriated Vaults Corporations to exclude ILDS from the Vaults Projects and to misappropriate the rightful property of ILDS (ownership of shares in the Other Vaults Corps and certain corporate knowledge and property related to the Vaults Projects) for their own gain (Statement of Claim, para. 52). [ 29 ] It also alleges that GTD has been denied access to minute book and shareholder information related to the Misappropriated Vaults Corporations, including shareholder structure, as well as similar allegations relating to the Vaults corporations (Statement of Claim, para. 56-57). [ 30 ] GTD also alleges that it has not, despite request, received or been provided access to complete financial statements and constating documents of the Vaults Corporations, so that this appears to be a deliberate effort to “obscure the details or particulars of the Defendants’ suspicious financial transactions or other improper or oppressive business conduct, as well as the misappropriated ILDS corporate assets by the Misappropriated Vaults Corporations” (Statement of Claim at para 59). [ 31 ] The claim then pleads that “the Defendants” have caused a result or otherwise carried on the business or affairs of ILDS or the Vaults Corporations in a manner that is oppressive or unfairly prejudicial to “the Plaintiff as shareholder of ILDS and as beneficial owner of the Vaults Projects” (Statement of Claim, para. 61). [ 32 ] The claim then goes on to plead that due to Mr.

Mahovlich's breaches of duty owed to ILDS and the ILDS-owned Vaults Corporations, and the “actions or omissions of any or all of the Individual Defendants were in breach of their fiduciary duties to any or all of the Vaults Corporations, as the case may be” so that “the corporate veil should be lifted with respect to ILDS and any or all of the Vaults Corporations, as the case may be, as failure to do so would be contrary to the principles of justice.” (Statement of Claim at paras 62-63). [ 33 ] After this, an allegation is made that the Misappropriated Vaults Corporations and Investor Holding Companies have “misappropriated corporate property, opportunity and concepts with respect to the business and Vaults development plans, structures, systems, trademarks and arrangements.” (Statement of Claim at para 64). [ 34 ] Finally, the claim alleges a plea of GTD furnishing labour, services, investment funds and work for the benefit of ILDS and the Vaults Project for which it has not been fully paid and seeks “restitution for unjust enrichment” or recovery on a quantum meruit basis (Statement of Claim, para. 65). [ 35 ] GTD seeks relief against the Other Vaults Corps and Blackcrest in the prayer for relief at para. 66. [ 36 ] As acknowledged by GTD’s counsel in argument, the main cause of action relied upon by GTD against the Other Vaults Corps is oppression under s. 242 of the Alberta Business Corporations Act , RSA 2000, c B-9 (“ ABCA ”).

Much of the pleading is focussed on wrongs done to ILDS, not GTD itself. At most, if these claims are proven, this could have impacted GTD’s income from ILDS to the extent there was any profit to be distributed to ILDS’s shareholders. The claim clearly pleads Blackcrest as a party involved and complicit in such oppression.

The Oppression Claim [37] GTD’s oppression claim against the Other Vaults Corps and Blackcrest are brought in GTD’s capacity as a “shareholder of ashareholder”. The Statement of Claim pleads that absent the wrongful acts of the Defendants as a whole, ILDS would have been ashareholder in the Other Vaults Corps. [38] This analysis engages ss. 239 and 242 of the ABCA, which is the source of the ostensibly pleaded oppression claim. Thosesections state in part:

Definitions 239 In this Part, (a) “action” means an action under this Act or any other law; (b) “complainant” means (

i) a registered holder or beneficial owner, or a former registered holder or beneficial owner, of a security of a corporation or any of itsaffiliates, (ii) a director or an officer or a former director or officer of a corporation or of any of its affiliates, (iii) a creditor (

A) in respect of an application under

section 240, or (

B) in respect of an application under

section 242, if the Court exercises its discretion under subclause (iv), or (iv) any other person who, in the discretion of the Court, is a proper person to make an application under this Part. ... Relief by Court on the ground of oppression or unfairness 242(1) A complainant may apply to the Court for an order under this section.

(2) If, on an application under subsection (1), the Court is satisfied that in respect of a corporation or any of its affiliates (

a) any act or omission of the corporation or any of its affiliates effects a result, (

b) the business or affairs of the corporation or any of its affiliates are or have been carried on or conducted in a manner, or (

c) the powers of the directors of the corporation or any of its affiliates are or have been exercised in a manner ... that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer, theCourt may make an order to rectify the matters complained of. ... [39] GTD can only be a “complainant” vis-à-vis the Other Vaults Corps using the provision in s. 239(b)(iv), by proving it is a“proper person” to make an application.

Those words have not been specifically plead in the Statement of Claim, but that is notdeterminative. [40] What then, at law, can constitute a “proper person”? [41] The court has broad power under s. 239(b)(iv). This is a broad power of justice and equity whereby a Court may allow aperson who would not otherwise be a “complainant” to take proceedings in order to “right a wrong done to the corporation which wouldotherwise not be righted” or to “obtain compensation himself or itself where his or its interests have suffered”. (Builders’ Floor CentreLtd v Thiessen, 2012 ABQB 86 at para 38 (Alta.

Master), aff’d 2013 ABQB 23) [42] The definition of “complainant” in

section 239(

b) of the ABCA is not limited to minority shareholders, or directors who do notcontrol the board of directors. A complainant may be another who, in the discretion of the Court is found to be a proper person to makean application for oppression remedies - even if that person does not fit neatly into the defined categories. A “complainant” might be abeneficial owner of a corporation or any of its affiliates, not just a shareholder or a director. (AMFAM Trust v Tallahassee PetroleumInc, 2017 ABQB 16 (Alta.

Master) [43] A person who could reasonably be entrusted with the responsibility of advancing the interests of the corporation by seeking aremedy to right the wrong allegedly done to the corporation and might even encompass an applicant who is not a creditor but was aperson who at the time of the act or conduct might have a contingent liability.

There must be a nexus between the applicant and the harmdone. (See, First Edmonton Place Ltd v 315888 Alta Ltd, (Alta QB) at paras 50-51 and 58; (though this order wasstayed as being premature and appeal adjourned by the Court of Appeal at 1989 ABCA 274, the decision was never overturned nor the

appeal concluded); HSBC Capital Canada Inc v First Mortgage Alberta Fund (

V) Inc, 1999 ABQB 406 at paras. 28 and 29; 698828Alberta Ltd v Elite Homes

(1998) Ltd, 2019 ABQB 393 at para 98, rev’d but not on this issue, 2020 ABCA 154, leave to appealdismissed, 2020 Can LII 84081 (SCC)). [44] GTD relies on RBL Management Inc v Royal Island Development Ltd, 2007 BCSC 960, where the British ColumbiaSupreme Court, in interpreting s. 227 of the Business Corporations Act, SBC 2002, c 57, found that a shareholder of a shareholder wasan “appropriate person” within the meaning of that

section of the BC BCA. [45] In Ginther v Rainbow Management Ltd., [1989] BCJ No 636 (BCSC) at para 13, the Court held, interpreting a similarprovision, that a shareholder of a shareholder with a direct financial interest in how a company is managed can be a proper person tomake an application for an order that the affairs of a company are being conducted in an oppressive manner. See also, Furry CreekTimber Corp v Laad Ventures Ltd, (BC SC). [46] I am satisfied that there is enough in the pleadings, and a basis in law for GTD to clear this hurdle for the purposes of R.3.68(2)(

b) with respect to a potential oppression claim against the Other Vaults Corporations. The law could permit GTD, as ashareholder of a shareholder to bring a claim under s. 242 of the ABCA as a complainant. GTD’s claim, in essence, is that ILDS wassupposed to be a shareholder in each of the Other Vaults Corps, just as it was in Vaults Stoney, and the misappropriation by thedefendants resulted in a loss of ownership of those corporations by ILDS and thus a loss of profit to GTD.

It is possible that GTD couldbe found to be a “proper person”. [47] Further, GTD as a complainant must meet two requirements to bring an oppression claim under s. 242 of the ABCA: 1. It must identify the expectations claimed to have been violated by the conduct at issue and must establish that thoseexpectations were reasonably held. 2.

It must show the reasonable expectations were violated by the corporation in a manner that was oppressive, unfairlyprejudicial, or that unfairly disregarded their interests as a “security holder, creditor, director or officer”. (See, ABCA s. 242; Wilson vAlharayeri, 2017 SCC 39; BCE Inc v 1976 Debentureholders, 2008 SCC 69 (“BCE”)). [48] I am mindful of the fact that since oppression is an equitable remedy, the court “should look at business realities, not merelynarrow legalities” (BCE at para 58). [49] With respect to the first of the two requirements, the court is to consider commercial practice, the nature of the corporation,relationships, past practice, preventive steps, representations and agreements, and fair resolution of conflicting interests, among others(BCE at paras 70-88). [50] The claimant, here GTD, must prove wrongful conduct, causation and compensable injury (BCE at para 90). [51] With respect to the second of the two requirements: a.

Oppressive conduct is conduct that is burdensome, harsh and wrongful, a visible departure from standards of fair dealing, andan abuse of power in relation to how the corporation’s affairs are conducted (BCE at para. 92). b. Unfair prejudice describes “less offensive” conduct, which includes but is not limited to squeezing out a minority shareholder,failing to disclose related party transactions, preferring some shareholders with management fees, etc. (BCE at para 93). c.

Unfair disregard is the least severe conduct, examples of which include improperly reducing a shareholder’s dividend orfailing to deliver property belonging to the claimant (BCE at para 94). [52] When the Statement of Claim is read as a whole, GTD’s claim is that the very business developed by Mr. Gibson, to be heldwithin ILDS and VDC, was carved out by Mr. Mahovlich and through actions of the other defendants, including the Other Vaults Corpsand Blackcrest.

The expected business model has been executed with one clear omission: the involvement of GTD and any flow throughof profits, if any, from the Other Vaults Corps to GTD via the corporate structure that was envisioned as pled. [53] GTD’s reasonable expectations, as pled, were that it would continue to be involved in the Vaults Project through its shares inILDS and ILDS’s share ownership in the Other Vaults Corps.

The claim alleges that did not occur. [54] While the Statement of Claim does suffer a bit from “overdefining” terms and could have been drafted more clearly, I amsatisfied that a plea of oppression is made out vis-à-vis GTD and the Other Vaults Corps. I make no comment on the ultimate viability ofsuch claims. The test under Rule 3.68 is a stringent one.

On a plain reading, the cause of action is made out and there is reasonablesupport for it being one known at law. [55] When the claim is read as a whole, with respect to Blackcrest, the plea is that Blackcrest is a complicit party to the oppressioncarried out through the Other Vaults Corps and otherwise, caused ILDS loss and damage and thus GTD loss and damage. It is a properdefendant to such claims, and there are sufficient facts and pleas made (as canvassed above).

Other Causes of Action in the Statement of Claim [56] The other causes of action in the Statement of Claim relate to piercing the corporate veil and quantum meruit. [57] I do not think that the quantum meruit claim can in any way be said to be related to the Other Vaults Corps or Blackcrest, andit is not pleaded as such. [58] The claim also seeks to pierce the corporate veil. The applicable law related to veil piercing has been articulated in decisions

of this court in UBG Builders Inc (Re), 2017 ABQB 401 at paras. 68-76; Vila Holdings Inc v Rivnell Projects Inc, 2020 ABQB 388 atparas. 35-37 (“Vila Holdings”). [59] The court in Vila Holdings provided a useful

summary: [35] However, in certain limited circumstances, the Court may affix personal liability to an individual notwithstanding that she or hehas acted through a corporate vehicle. The corporate veil may be pierced if that person has engaged in fraud or other improper conduct,or where the corporate actor and the individual behind it are alter egos of each other: UBG Builders Inc (Re), 2017 ABQB 401. [36] Among the factors to be considered are whether : (

a) the shareholder treats itself and the corporation interchangeably; (

b) thecorporation is merely intended to deflect monies from their proper usage; (

c) the shareholder intermingles the corporations affairs withits own, such that the shareholder fails to recognize the corporations separate identity; (

d) the shareholder treats the corporation’sproperty as though it belongs to the shareholders without regard for the interest of those dealing with the corporation: UBG at para 74;Tirecraft Group Inc v High Park Holdings ULC, 2010 ABQB 653 at paras 21, 22 and 25. [37] While fraudulent conduct is one basis for piercing the corporate veil, it is not a necessary prerequisite. The Court must look at theoverall context and interests of justice.

It will pierce the veil when the corporation has been completely dominated and controlled byanother company or individual and has been used as a shield for fraudulent or improper conduct Elbow River Marketing LimitedPartnership v Canada Clean Fuels Inc., 2012 ABCA 328 at para 16. [60] The Court of Appeal has affirmed that the wrongdoing involved must be “akin to fraud” or “grave misconduct employed tocause harm”. (Aubin v Petrone, 2020 ABCA 13 at para. 192) [61] With respect to the veil piercing plea, while the core of the legal plea is sparsely worded (Statement of Claim, paras. 62 and63), I am satisfied that viewing the pleading as a whole, there are sufficient facts pleaded which, if taken as true, make out a cause ofaction for piercing the corporate veil with respect to the Other Vaults Corps and Blackcrest.

The thrust of the pleadings is that thedefendants, concertedly, have used VDG and the Other Vaults Corps to remove the viable business of ILDS and VDC to thosecompanies, causing GTD loss and damage, and that they have refused or otherwise failed to provide documentation relating to thosecorporations, including the shareholdings of same. [62] Again, this type of application is not an assessment of ultimate viability in substance of the claims alleged. That is the role ofapplications under Rules 7.2 or 7.3 of the Rules of Court, or trial. Conclusion on Rule 3.68(2)(b) [63] The Statement of Claim is not perfect.

In some places it is a bit confusing. The use of multiple defined terms and merger ofdefined terms require very close reading. However, it is not plain and obvious, assuming the facts plead to be true, that the pleadingdiscloses no reasonable cause of action. That is not to say that the defendants cannot pursue other avenues to challenge such claims, suchas

summary dismissal. Simply, the test in Rule 3.68(2)(

b) has not been met, and the Defendant’s application under this Rule is dismissed. Law Under Rules 3.68(2)(

c) and (d) – Frivolous and Vexatious, Abuse of Process [64] It has been held by this court that a vexatious proceeding is one in which the litigant’s mental state goes beyond mere animusagainst the other side and rises to the point where the litigant is seeking or attempting to abuse or misuse the legal process.

This requiresa review of the entire history of the matter. (Chutskoff v Bonora, 2014 ABQB 389 at paras 86-88; see also West Edmonton MallProperty Inc v Proctor, 2020 ABQB 161 at paras 52-53). [65] Some indicia of what constitutes a vexatious claim have been held to include (but not be limited to): collateral attack; hopelessproceedings; escalating proceedings; bringing proceedings for an improper purpose; initiating “busybody” lawsuits to enforce allegedrights of third parties; unsubstantiated allegations of conspiracy, fraud, and misconduct; scandalous or inflammatory language inpleadings before the court (Chutskoff at para 92). [66] Abuse of process is principally used by the courts to control abuses of the judicial system.

Abuse of process can arise in manydifferent contexts, and there is no universal test or statement of law to encompass all examples (Reece v Edmonton (City), 2011 ABCA238 at para 16, leave to appeal to SCC refused, (SCC)). Conclusion on Rules 3.68(2)(

c) and (d) [67] The Defendants did not push this argument strenuously in application. Their materials on this issue focussed more on theproposed derivative claims by GTD, which have been resolved by way of consent order. [68] Even so, I find there is no basis upon which to find the filing and prosecution of the Statement of Claim has been, to date,frivolous, vexatious, or an abuse of process. The defendants adduced no evidence of this on the application, and even if I were to haveregard to the evidence of GTD before the court on the Derivative Application, I would still find that the bar has not been met to strike theStatement of Claim under Rules 3.68(2)(

c) and (d). This portion of the Defendant’s Strike Application is dismissed. The CLP Application [69] On May 28, 2021, GTD filed the GTD CLP. It was registered shortly thereafter against several condominium units, fourowned by Vaults Stoney, one by Frontain Holdings. Those units have been defined as Units 45, 55, 1, 24, and 56 (“Units”).

[ 70 ] The Units were originally part of the land purchased by Vaults Stoney in 2014 for the purpose of developing the land and constructing a luxury storage condominium complex.

While ILDS holds 34% of the shares of Vaults Stoney, neither it nor GTD have ever been a registered owner of the lands, nor any of the units formed from the registration of a condominium plan related to the building constructed thereon. [ 71 ] Units 45 and 55 were, at the time of registration of the GTD CLP, pending transfer to third party bona fide purchasers for value. [ 72 ] Unit 55 was subject to a May 3, 2021 purchase and sale agreement with Vaults Stoney. On August 16, 2021, GTD agreed to discharge the GTD CLP from Unit 55, since its pending registration occurred after that of the third party purchaser.

This sale closed and the proceeds were released to Vaults Stoney on or around September 8, 2021. [ 73 ] Unit 45 was subject to a May 12, 2021 purchase and sale agreement with Vaults Stoney. The purchaser’s lender refused to advance funds to close with the GTD CLP on title. On August 31 of 2021, a Consent Order was entered into between GTD and Vaults Stoney that resulted in the discharge of the GTD CLP from Unit 45 in exchange for Vaults Stoney’s counsel holding sale proceeds of $350,000 in trust pending consent of GTD or a court order for disbursement of same to Vaults Stoney.

GTD has not consented to the release of these funds and they are still held by Field LLP, counsel for the defendants, pursuant to the terms of the Consent Order. [ 74 ] Unit 1 was owned, at the time of registration of the GTD CLP, by the defendant Frontain Holdings, who purchased that unit from Vaults Stoney in February of 2017 pursuant to a purchase and sale agreement similar in form and content to the ones used for the sales of Units 55 and 45. At the time of the application hearing, that ownership interest had been transferred to Richard and Kelly Frontain (“Mr. and Mrs.

Frontain”). [ 75 ] At the outset of hearing this application, I raised the issue with counsel for the plaintiffs by counterclaim that there was no application before me from Mr. and Mrs. Frontain, and that they were not parties to the counterclaim. Counsel, in the hearing, requested an amendment to include them, seeking the same relief as applicants for Unit 1. Counsel for GTD consented, noting that to force Mr. and Mrs. Frontain to “re-do” the same application would be a waste of the parties’, and the court’s, resources.

As a result, for the remainder of these reasons for decision, I will call the applicant plaintiffs by counterclaim and Mr. and Mrs. Frontain the “CLP Applicants”. [ 76 ] The evidence before me establishes that Units 24 and 56 are part of the designated common property of the condominium corporation that now owns the Vaults Stoney project and were so designated at the time the GTD CLP was registered. This resulted from the registration of a condominium plan registered pursuant to the Condominium Property Act , RSA 2000, c. C-22 (“ CPA ”) as follows: a. On title to Unit 56: May 4, 2021; b.

On title to Unit 24: January 5, 2018. [ 77 ] Unit 24 is an outer/exterior wall, and unit 56 is a mechanical room. Due to the existence of the GTD CLP, these units have yet to be transferred by Vaults Stoney to the condominium corporation responsible for them under the CPA . I am mindful of the fact that title to these units were created as “units” instead of common property, but find that this is not determinative. the nature of units 24 and 56 is such that they fall, in substance, within the definition of common property in the CPA .

I am also mindful of the terms of the CPA and some relevant discussion of the ‘form over substance’ approach in Condominium Corporation No 0840294 v Oakley , 2023 ABKB 668 at paras 53-59 (although discussed in the context of standing of a condominium corporation to sue for damage to common property). [ 78 ] The CLP Applicants assert that there is no viable plea in the Statement of Claim that would give GTD any registrable interest in land to support the filing of the GTD CLP and its registration against title to the Units.

They assert that GTD improperly registered and maintained the GTD CLP on the Units, causing the CLP Applicants loss and damage. [ 79 ] The Plaintiffs by Counterclaim, in essence, seek

summary judgment on this portion of their counterclaim and seek judgment for damages for wrongful registration of the CLP in the amount of $75,877.22, as of the date of hearing, as well as an order releasing $350,000 currently held in trust by Field Law LLP, as well as interest on any damages award at the rate of 8% per annum or such other amount as the court may order. [ 80 ] GTD opposes the application on all grounds, arguing that the Statement of Claim creates a sufficient interest upon which to support the GTD CLP, and disputing the CLP Applicants right to any damages or relief. [ 81 ] The application by the Plaintiffs by Counterclaim (not the application by Mr. and Mrs.

Frontain, which I address solely from the perspective of the provisions of the Land Titles Act , RSA 2000, c L-4 (“ LTA ”)) also engages Rule 7.3 of the Rules of Court and the law relating to that rule. The Law of

Summary Judgment Applicable in this Case [ 82 ] Rule 7.3 states: 7.3(1) A party may apply to the Court for

summary judgment in respect of all or part of a claim on one or more of the following grounds: (

a) there is no defence to a claim or part of it; (

b) there is no merit to a claim or part of it; (

c) the only real issue is the amount to be awarded.

(2) The application must be supported by an affidavit swearing positively that one or more of the grounds described in subrule (1) have been met or by other evidence to the effect that the grounds have been met.

(3) If the application is successful the Court may, with respect to all or part of a claim, and whether or not the claim is for a single and undivided debt, do one or more of the following: (

a) dismiss one or more claims in the action or give judgment for or in respect of all or part of the claim or for a lesser amount; (

b) if the only real issue to be tried is the amount of the award, determine the amount or refer the amount for determination by a referee; (

c) if judgment is given for part of a claim, refer the balance of the claim to trial or for determination by a referee, as the circumstances require. [ 83 ] The parties provided the Alberta Court of Appeal decision in Weir-Jones Technical Services Incorporated v Purolator Courier Ltd, 2019 ABCA 49 (“ Weir Jones ”) as the guiding test for

summary judgment in these circumstances. The four considerations outlined by the court in that decision, at para 47, are: The proper approach to

summary dispositions, based on the Hryniak v Mauldin test, should follow the core principles relating to

summary dispositions, the standard of proof, the record, and fairness. The test must be predictable, consistent, and fair to both parties. The procedure and the outcome must be just, appropriate, and reasonable. The key considerations are:

a) Having regard to the state of the record and the issues, is it possible to fairly resolve the dispute on a

summary basis, or do uncertainties in the facts, the record or the law reveal a genuine issue requiring a trial?

b) Has the moving party met the burden on it to show that there is either “no merit” or “no defence” and that there is no genuine issue requiring a trial? At a threshold level the facts of the case must be proven on a balance of probabilities or the application will fail, but mere establishment of the facts to that standard is not a proxy for

summary adjudication.

c) If the moving party has met its burden, the resisting party must put its best foot forward and demonstrate from the record that there is a genuine issue requiring a trial. This can occur by challenging the moving party’s case, by identifying a positive defence, by showing that a fair and just

summary disposition is not realistic, or by otherwise demonstrating that there is a genuine issue requiring a trial. If there is a genuine issue requiring a trial,

summary disposition is not available.

d) In any event, the presiding judge must be left with sufficient confidence in the state of the record such that he or she is prepared to exercise the judicial discretion to summarily resolve the dispute. To repeat, the analysis does not have to proceed sequentially, or in any particular order. The presiding judge may determine, during any stage of the analysis, that

summary adjudication is inappropriate or potentially unfair because the record is unsuitable, the issues are not amenable to

summary disposition, a

summary disposition may not lead to a “just result”, or there is a genuine issue requiring a trial. [ 84 ] Facts must be proven on a balance of probabilities, and the applicant bears the burden of doing so, however, the mere establishment of the facts to that standard is not a proxy for

summary adjudication. ( Weir Jones at paras 35-37 ; P & C Lawfirm Management Inc v Sabourin , 2020 ABCA 449 at para 39 ; Hannam v Medicine Hat School District No 76, 2020 ABCA 343 at para 150 ) The Law Relating to Registration and Removal of CLPs Discharge of the GTD CLP [ 85 ] The application of the CLP Applicants engages the LTA , specifically sections 148 , 152 , and 190 thereof.

Those sections state: Registration of certificate of lis pendens 148(1) A person claiming an interest in any land, mortgage or encumbrance may, instead of filing a caveat or after filing a caveat, proceed by way of action to enforce the person’s claim and register a certificate of lis pendens in the prescribed form.

(2) A person who has proceeded by way of action to call into question some title or interest in any land may register a certificate of lis pendens in the prescribed form. ... Cancellation of certificate of lis pendens 152 The Registrar shall cancel the registration of a certificate of lis pendens on receiving (

a) a certificate from the clerk of the court stating that the proceedings for which the certificate of lis pendens was granted are (

i) discontinued, or (ii) dismissed and the time for commencing an appeal has expired and no appeal has been commenced, or if commenced, has been finally disposed of or discontinued, (

b) a withdrawal of the certificate of lis pendens signed by the person on whose behalf the certificate was registered, or (

c) where a certificate of lis pendens relates to a caveat that was signed by an attorney or an agent, a withdrawal of the certificate of lis pendens signed by (

i) the attorney or the agent, as the case may be, or

(ii) the person on whose behalf the certificate was registered. ... Power of judge to cancel, correct, etc., duplicate certificate 190(1) In any proceeding respecting land or in respect of any transaction or contract relating to it, or in respect of any instrument, caveat,memorandum or entry affecting land, the judge by decree or order may direct the Registrar to cancel, correct, substitute or issue anycertificate of title or make any memorandum or entry on it and otherwise to do every act necessary to give effect to the decree or order.

(2) In particular and without limiting the generality of subsection (1), in any case where a title to land has been issued and the owner hasentered into any contract relating to the sale or disposition of the land and if it can be shown to the satisfaction of the judge that (

a) the applicant is entitled to a transfer of the land and to be registered as its owner and the registered owner has no further interest inthe land, and (

b) the registered owner is dead and no transfer of the land to the purchaser has been made or the registered owner has not been locatedafter a reasonable inquiry and no transfer of the land to the purchaser has been made, the judge on the giving of any notice to any persons that the judge may require, may by order direct the Registrar to cancel the existingcertificate of title and issue a new certificate of title in the name of the purchaser. [86] The first step of the inquiry is to apply s. 148(1) of the LTA and determine whether or not the Statement of Claim in thisaction encompasses any claim to an interest in land.

A damages claim will not support a CLP (Alberta Drywall & Stucco Supply Inc vTilt-Tech Construction Ltd, 2017 ABQB 325 at paras 32 and 33 (“Alberta Drywall”), citing also Blue Hill Capital Corporation v DaonProperty Corporation, 2014 ABCA 282 at para 9).

The registration of a CLP does not create an interest in land, it serves merely to givenotice that the title to land is being questioned. (Alberta Drywall at para 34). [87] I accept the submissions of the CLP Applicants that pleadings are critical to showing a prima facie interest in the CLP Units.The Statement of Claim is the basis upon which the GTD CLP was filed, and it is that document that a party, whose title is encumberedby the GTD CLP, must review to ascertain the nature of the claims made and the interest being asserted to form the basis for the CLPitself. (See, for example, Canadian Imperial Bank of Commerce v Ramsay, (Sask QB) at paras 12-18). [88] Having reviewed the entirety of the Statement of Claim at

Schedule A, and having considered the evidence before the Courton this application, I am satisfied that the Statement of Claim does not “call into question some title or interest in any land”, and certainlydoes not do so with respect to the Units. [89] A plain reading of the entirety of the Statement of Claim shows that GTD has not pleaded a claim to any title or interest in thereal property of Vaults Stoney, and no interest whatsoever in the Units (let alone with respect to any of the other Defendants).

Thoughnot determinative on this point, it is worth noting that the lands owned by Vaults Stoney are not mentioned with any particularity and theUnits are not mentioned at all. While the GTD CLP’s claim some interest in lands or the proceeds thereof, the Statement of Claimdiscloses no such interest. [90] The Statement of Claim is predominantly a claim for damages and other relief under s. 242 of the ABCA. (see, Statement ofClaim at paras 22, 25, 27, 48).

Its allegations of wrong to ILDS relate to shareholdings, not property. (see, Statement of Claim at paras51, 52) While GTD argued that the claim, as part of the relief plead, seeks appointment of an inspector to perform accounting and tracing(Statement of Claim at para 66(a)-(c)) and further argued that courts can award proprietary remedies as relief for a finding of oppression,the Statement of Claim does not seek any such relief. [91] While the Statement of Claim does plead, as a part of the oppression claim, that “the Defendants” have caused a result orotherwise carried on the business or affairs of ILDS or the Vaults Corporations in a way that harms “the Plaintiff as shareholder of ILDSand as beneficial owner of the Vaults Projects” (Statement of Claim, para. 61), I do not think this is enough to satisfy s. 148 of the LTA.The Vaults Projects is a defined term in the claim at para 23, but when this paragraph is read, along with the entirety of the pleading, thebeneficial ownership claimed is clearly one of GTD as a “shareholder of a shareholder” meaning the corporate structure envisioned GTDowning 50% of ILDS (which it does), and then ILDS having a majority shareholding in the Other Vaults Corps (Statement of Claim atparas 51-52,). [92] This is really a claim for entitlement to profit by GTD, which would require profit to exist in the Other Vaults Corps, be paidby dividend to ILDS, and then in if ILDS realized a profit, ILDS would pay a portion of that profit by dividend to GTD. [93] GTD’s unjust enrichment claim appears to be one against ILDS and the Vaults Projects.

To the extent it extends farther thanthat, it does not assist GTD. It seeks restitution for unjust enrichment, or in the alternative, compensation on a quantum meruit basis for“labour, services, investment funds and work”. (Statement of Claim at para 65) This is not proprietary in nature. [94] GTD pleads, and claims, no proprietary interest in the property of Vaults Stoney, of Frontain Holdings, or of Mr. and Mrs.Frontain.

Instead, following investigation and accounting the prayer for relief seeks to have an independent valuation of the of the shares“of the entities comprising ILDS and the Vaults Corporations” and then direct “the Defendants to purchase GTD's shares in ILDS attheir fair market value calculated on the basis of ILDS' rightful interest in the Vaults Corporations, any other corporations or projectsmisappropriated from the Vaults Corporations, and the profits therein.” It also seeks damages. (Statement of Claim at paras 66(d)-(f)). [95] The closest the claim gets to a seeking a proprietary remedy is a claim in the prayer for relief to register liens against theproperty of the defendants “to secure payment of damages”.

Such relief would be awarded after trial and a finding of liability and anaward of damages in GDC’s favour. This paragraph in the prayer for relief is not sufficient to “call into question some title or interest toany land” for the purposes of registration of the GTD CLP.

[96] GTD also argued that its pleas of breach of fiduciary duty and to pierce the corporate veil somehow gives rise to proprietaryrights such that a CLP could be registered against the property of Vaults Stoney (the Units). GTD referred to the ability of the court toaward a remedial constructive trust for breach of fiduciary duty per Lac Minerals Ltd v International Corona Resources Ltd, (SCC).

I fail to see the relevance of this submission, given that no proprietary rights are claimed nor relief sought in theStatement of Claim. [97] Further, on this point, GTD referenced “credible evidence” to argue its point about breaches of fiduciary duty, despiteproffering none in response to this application. GTD seems to have assumed it could rely upon the evidence it put forward in relation tothe Derivative Application. No notice to the Defendants was provided of GTD’s intent to do so. In any event, even having full regard tothat evidence, I find that it does not assist GTD on this issue.

I find that the evidence GTD relies upon, of Ms. Gibson (including heraffidavit, transcript, and undertaking responses), does not support GTD’s position that some proprietary interest in the Units exists, and inany event would not serve to provide notice of a claimed interest to any party reading the Statement of Claim. [98] GTD also relied on the pleaded fact in evidence on the Derivative Application from Ms. Gibson deposing that Mr. Mahovlichdisclosed that he had made himself judgment proof, arguing this somehow granted GTD the right to register the GTD CLP. I questionthe relevance of Mr.

Mahovlich’s statement about his personal affairs years before the Statement of Claim was filed. In any event, thisargument has no merit, it is not a plea made in the Statement of Claim, and it is not connected to any proprietary relief sought in theStatement of Claim. [99] With respect to Unit 1, GTD argued that the transfer of Unit 1 from Vaults Stoney to Frontain Holdings, which is now in thename of Mr. and Mrs. Frontain, was “not arm’s length.” While it was a related party transaction, there is no evidence on this applicationthat something untoward occurred in the transfer of Unit 1 to Frontain Holdings.

The transfer to that entity pre-dated the filing of theStatement of Claim by some time, and the subsequent transfer was subject to the CLP. In any event, there is simply no plea in theStatement of Claim that creates the necessary interest to register the GTD CLP. [100] This is not a case where the GTD CLP is “inextricably tied to the fate of the action”, unlike the cases relied upon by GTD.

Infact, the Statement of Claim is completely deficient in failing to plead any sufficient interest that would have given GTD a right toregister the GTD CLP pursuant to s.148 in the first place. (see, Patel v Cunningham High Performance Execution Team Corp, 2022ABCA 323 (“Patel”) and the cases cited therein). [101] With respect to the interplay of s.190 and s.148 of the LTA, the Court of Appeal in Patel stated (at para 35) that: Where a certificate of lis pendens has been issued in an action which claims or calls into question an interest in land, an application canbe brought to strike that aspect of the claim pursuant to rule 3.68, either on the basis of the pleadings where the allegations in theStatement of Claim do not disclose a reasonable claim (r 3.68(2)(b)), or on an appropriate evidentiary record pursuant to the otherprovisions of the rule.

Alternatively, an application can be brought for dismissal of that aspect of the claim pursuant to rules 7.1, 7.2 or7.3. Where the proceedings for the which the certificate of lis pendens was granted are discontinued or dismissed, its registration can becancelled by the Registrar pursuant to s 152.

Where a certificate of lis pendens was registered in respect of an action where the pleadingsdo not claim or call into question an interest in land, a court application could presumably be brought pursuant to s 190 for its dischargefor failing to meet the requirements in s 148 of the Land Titles Act. [Emphasis added] [102] MCL Development Corporation v Harbour First Mortgage Fund GP Inc, 2012 ABQB 555 (“MCL”) was cited with approvalfor its statement of the law in relation to s.190 of the LTA by the Court of Appeal in Patel.

MCL also stated at para 41 that “Undoubtedlythere are few situations where the court will exercise its equitable jurisdiction or apply s. 190 to discharge a certificate of lis pendens overthe opposition of the claimant and while the underlying action is still pending.” The Court discharged the CLP, despite opposition fromthe claimant, in circumstances where the claims pled put the claimant behind a mortgage held by a party not named in the proceedings,and where the claimant agreed that subject to the jurisdiction of the court to do so, there were grounds for removal of the CLP (see MCLat paras 16-24). [103] While the CLP Applicants rely upon a decision of the Prince Edward Island Court of Appeal in Tweel v Tweel et ors, 2019PECA 12, and GTD attempted to distinguish it, I have considered this case, and do not find it necessary to rely upon it in reaching theresult. [104] I find that the law elucidated in Patel is directly applicable to the present case and governs the outcome.

This is one of thosefew cases, suggested by MCL, where it is appropriate to discharge the GTD CLP under s. 190 of the LTA. [105] Because the Statement of Claim in this case does not in any way support the GTD CLPs, I find that GTD failed to meet therequirements in s.148 of the LTA at the time the GTD CLP was registered and continues to do so. [106] I therefore exercise my discretion under s.190 of the LTA and direct the GTD CLPs to be removed from title to Units 1, 24 and56 pursuant to LTA s. 152(a)(ii).

In the circumstances of this case, it is just an equitable in the circumstances to direct that the GTD CLPsremoved from title to Units 1, 24 and 56. There is no prejudice to GTD in reaching this conclusion since I have determined it had no rightto register its CLP in the first place. Removal of the GTD CLP before Appeal Period Expires [107] The CLP Applicants argued that removal of the GTD CLPs prior to the expiry of the appeal period could be ordered pursuant tos.191(3) of the LTA. [108] That

section states: Registration of judgment, order or certificate 191(1) Subject to subsection (3), the Registrar shall not register a judgment, order or certificate made in any proceedings of a court that

operates to cancel a certificate of title, terminate an interest in land or discharge an instrument, a caveat or an order made under

section 69 of the Law of Property Act unless the judgment, order or certificate (

a) is consented to by all the parties to the proceedings or their solicitors, (

b) was granted ex parte and states that it does not have to be served on any person, (

c) is accompanied with a written undertaking from those persons having a right to appeal from the judgment, order or certificate, or their solicitors, that no appeal from the judgment, order or certificate will be commenced, (

d) is accompanied with a certificate of the clerk of the court that issued the judgment, order or certificate to the effect (

i) that no defence or demand of notice of proceedings has been filed in the proceedings on behalf of any defendant, or (ii) that the time for appeal from the judgment, order or certificate has expired and that no notice of appeal has been filed, or (

e) is accompanied with a certificate of a solicitor to the effect (

i) that an appeal to the Court of Appeal has been finally disposed of or discontinued, that the time for an appeal to the Supreme Court of Canada has expired and that no notice of appeal has been filed, or (ii) that the judgment, order or certificate has been appealed to the Supreme Court of Canada and that the appeal has been finally disposed of or discontinued.

(2) If a judgment, order or certificate referred to in subsection (1) has been appealed to the Court of Appeal or to the Supreme Court of Canada, a copy of the final judgment shall accompany the solicitor’s certificate referred to in clause (

e) of that subsection.

(3) This

section does not apply to (

a) an order removing a builders’ lien or removing a certificate of lis pendens with respect to a builders’ lien, or (

b) a judgment, order or certificate that expressly states that it shall be registered notwithstanding the requirements of subsection (1). [ 109 ] In MCL , the Court, citing Z ukiwski v Yakmac Investments Ltd , 1999 ABCA 226 at para 14 found that “it is very dangerous to tie up someone’s land just to give someone a tactical advantage” ( MCL at para 47 ).

In invoking s.191(3) the Court in MCL found no prejudice to the plaintiffs in ordering immediate removal on terms and conditions, because the loss of the CLP was deemed to be giving only a tactical advantage, at best, in the circumstances. [ 110 ] In this case, with respect to the GTD CLP registration on Units 24 and 56, I have no hesitation and invoke the application of s.191(3) of the LTA with respect to the removal of the GTD CLP from those titles. Those units should have been transferred into the name of the condominium corporation by Vaults Stoney pursuant to the terms of the CPA . They have not been.

The Units are a part of the common property of the condominium corporation. They are an exterior wall and a mechanical room. [ 111 ] The presence of the GTD CLP on title to these two units presents a tactical advantage at best.

With no basis in the Statement of Claim to support the GTD CLPs, with no application to amend the Statement of Claim, and no evidence from GTD, I order registration of the order discharging the GTD CLP from title to those units, notwithstanding that the appeal period has not expired. [ 112 ] I decline to make the same order with respect to the registration of the GTD CLP on Unit 1, since there is no evidence before me of a statutorily required transfer nor any pending urgent need for sale of Unit 1, and no damages are claimed for registration of the GTD CLP on title to Unit 1.

The appeal period for Unit 1 shall run pending registration of removal of the GTD CLP from title.

Damages resulting from registration of the GTD CLP on the Units [ 113 ] In seeking a damages award, the Plaintiffs by Counterclaim rely upon Rule 7.3 and s.149 of the LTA , which states: Compensation re certificate of lis pendens 149 A person filing or continuing a certificate of lis pendens without reasonable cause is liable to make compensation to any person who may have sustained damage by that filing or continuation. [ 114 ] In assessing liability under this section, it is not necessary to show intent and malice, just that the GTD CLP was continued without reasonable cause. ( Kwan v Superfly , 2011 ABQB 343 at para 46 , aff’d 2013 ABCA 82 , citing Hennessy Cup Developments Ltd v Western Concord Manufacturing Ltd , 2002 ABCA 56 ) I also note here the absence of evidence from GTD that might have raised any triable issue in relation to GTD’s belief (if any) that it had “reasonable cause” to register the GTD CLP. [ 115 ] As a result, on the evidence before me, I find that in registering the GTD CLP, GTD contravened s. 149 of the LTA and is liable to make compensation to the extent losses were caused by such registration, provided that the Plaintiffs by Counterclaim otherwise meet the test for

summary determination, including the damages claims. [ 116 ] To be clear, the only evidence of loss or damage before the court on this application is loss claimed by Vaults Stoney for the registration of the GTD CLPs against Units 24, 45, 55, and 56. [ 117 ] With respect to Unit 1, no losses are claimed by Frontain Holdings and no evidence of damages were submitted into evidence

by Frontain Holdings. Mr. and Mrs. Frontain, the current owners of Unit 1, have no counterclaim filed in this action seeking damages (and thus no right to

summary judgment), and again, there is no evidence before me that they personally suffered any loss. [ 118 ] Further, there is no evidence of actual, provable loss in relation to Units 24 and 56 and the registration of the GTD CLP. [ 119 ] As a result, I will address whether Vaults Stoney has proven, on a balance of probabilities on admissible evidence, compensable losses at law as a result of the GTD CLP registered on Units 45 and 55, and if so, what quantum, if any, have been proven.

There must be no genuine issue for trial as to the causation of those losses or the quantum thereof, and it must be just and reasonable in the overall circumstances of the case to make such an award at this time. [ 120 ] To prove its losses, Vaults Stoney relies upon the affidavit evidence of Messrs. Murray, Mahovlich, and Frontain, as mentioned above. [ 121 ] Mr. Murray, a voting shareholder in Vaults Stoney, provided two affidavits, one filed June 13, 2022, the other November 1, 2023, by way of update. In his affidavits, in relation to damages, Mr. Murray deposes that: a.

In 2014, Vaults Stoney purchased lands at Plan 1211283, Block 3, Lot 7, Excepting Thereout All Mines and Minerals, Area: 1.165 Hectares (2.88 Acres) More or Less (“Lands”); b. On or about February 19, 2016 Vaults Stoney granted a mortgage against the lands in favour of Frontain Holdings, with a principal amount of $3.6 million, with interest accruing at 8% per annum, which was registered on title to the above lands on March 3, 2016 (“Frontain Mortgage”); c. That due to the registration of the GTD CLP, Vaults Stoney incurred the following losses and expenses: i.

That increased interest on the Frontain Mortgage was incurred with respect to the delayed closing of the sale of Unit 55 in the amount of $4,890.70 from July 8, 2021 to September 8, 2021; ii. $1,506.46 in legal costs paid to the Unit 45 purchaser for additional legal fees the purchaser paid counsel to address the presence of the GTD CLP; iii. That increased interest on the Frontain Mortgage was incurred due to the delay in receipt of sale proceeds and enhancement costs between July 8, 2021 and December 2, 2021 with respect to Unit 55, in the amount of $12,712.94; iv.

That increased interest on the Frontain Mortgage continued to accrue post closing of the sale of Unit 55 on the remaining $350,000 held in trust by Field LLP as discussed above, resulting in a total of $56,767.12 up to and including the day prior to the hearing of this matter (December 6, 2023); v. That this amount totalled $75,877.22 as at the date of the hearing of the application; and vi. Mr. Murray provided calculations in his evidence that the per diem interest rate on the $350,000.00 amount under the Frontain Mortgage is calculated to $76.71/day. [ 122 ] In his affidavit, Mr.

Mahovlich provides evidence as one of two directors in Vaults Stoney. His affidavit simply serves to ‘confirm’ the accuracy of Mr. Murray’s evidence, and he confirms the losses Vaults Stoney incurred. [ 123 ] Mr. Frontain provides evidence as one of two directors in Vaults Stoney, and as the sole director of Frontain Holdings. He indicated that he has direct knowledge of the matters deposed to in Mr. Murray’s affidavits and agreed with the contents of same. His affidavit also ‘confirms’ the accuracy of Mr. Murray’s affidavits and that the losses of Vaults Stoney were incurred. [ 124 ] Mr.

Frontain also confirms the existence of the Frontain Holdings Mortgage, which was granted February 19, 2016. He also confirmed that “Vaults Stoney incurred and continues to incur losses and expenses as a result of the improper filing of the..[GTD CLP].” He also confirmed that the balance on the Frontain Mortgage as deposed to by Mr. Murrary “continues to remain”. [ 125 ] The evidence of each of these witnesses is direct evidence deposing to Vaults Stoney incurring the claimed losses and expenses.

No proof of actual expenditures (i.e. bank statements, or receipts) was provided, given the nature of the losses claimed and the manner in which the evidence was presented. [ 126 ] GTD argued that Vaults Stoney had failed to prove its damages. GTD did not test the evidence on cross examination. [ 127 ] GTD also argued that the validity of the Frontain Mortgage is in question, due to the matters pleaded in the Statement of Claim.

As noted, the claim makes broad pleas of wrongdoing vis-à-vis the defendants, including the Plaintiffs by Counterclaim, of misappropriation, breach of fiduciary duty, and oppression. [ 128 ] The main plea in relation to Vaults Stoney is that GTD, as a 50% shareholder in ILDS, is entitled to profits from that venture but has received none, and has not received information regarding that corporations’ Vaults project. At paragraph 49 of the Statement of Claim the following is stated: The Vaults Stoney was substantially sold by approximately November 2020. Mrs.

Gibson has not received any financial payment or communications regarding same from ILDS, despite that years have gone by and that the Vaults Stoney has substantially sold the condominium units in its control. Mrs. Gibson still heard nothing from ILDS in the manner of shareholder profit. Mrs. Gibson is concerned that project managers are overspending, and over-compensating themselves with respect to the projects, in breach of their fiduciary duties to the respective corporations, and have not paid GTD anything to date despite its interest in the projects. [Emphasis added]

[ 129 ] This is as specific as the claim gets in relation to the business of Vaults Stoney. The Statement of Claim does not directly attack the validity of the Frontain Mortgage. Mrs. Gibson alleges concerns but offers no other particulars or specifics.

However, GTD points to the broad allegations in the pleadings, and the non-arm’s length nature of the Frontain Mortgage. [ 130 ] At this time, the evidence before me is that Vaults Stoney is incurring interest under that mortgage, and that Vaults Stoney suffered losses as a result of the GTD CLP by virtue of increased interest that otherwise would not have been payable to Frontain Holdings. [ 131 ] The evidence before me also shows that the defendants Mr. Mahovlich, Mr. Sanford, and Mr.

Murray also executed personal guarantees to secure certain amounts owing under the Frontain Mortgage by Vaults Stoney. [ 132 ] However, the Frontain Mortgage is not an arm’s length mortgage. It is held by Frontain Holdings, a corporation controlled by Mr. Frontain, who is also a director of Vaults Stoney. Frontain Holdings is a shareholder of Vaults Stoney. [ 133 ] While there is no direct attack on the Frontain Mortgage plead, the overall claims pleaded in the statement of claim could be interpreted broadly enough to put this mortgage in issue in the proceedings.

I am concerned that if I award Vaults Stoney damages on the Frontain Mortgage on the incomplete record before me, and at this reasonably early stage in the litigation, that this may somehow fetter a trial judge in relation making a finding as to its ultimate validity at the conclusion of this matter. In all of the circumstances of the case, this is a legitimate concern at the

summary judgment stage. [ 134 ] The claimed losses, if recoverable, were no doubt caused by the registration of the GTD CLP, and I find this is so on a balance of probabilities. [ 135 ] Keeping in mind the law under Rule 7.3, in the circumstances, I find that it is just, appropriate and reasonable to award Vaults Stoney damages at this stage for the amounts incurred in relation to the $1,506.46 in legal costs paid to the Unit 45 purchaser for additional legal fees the purchaser paid counsel to address the presence of the GTD CLP.

This is an objective third party amount incurred. [ 136 ] The $350,000.00 held in trust resulting from the sale of Unit 55 is also to be forthwith released by Field LLP to Vaults Stoney. There is no reason at law for these funds not to be released to Vaults Stoney. [ 137 ] However, I decline to award Vaults Stoney the damages amount sought in relation to additional interest accrued on the Frontain Mortgage at this time.

The amounts sought in relation to that portion of the damages claim total $74,370.76 (excluding any per diem interest that may accrue from the “cut off” date in the evidence before the court to the date that the $350,000.00 is released to Vaults Stoney). I find that this “related party” interest amount is too intertwined with the pleadings and underlying facts of the entirety of the action to be awarded on a

summary basis. I leave it for the trial judge to assess the Frontain Mortgage, and the quantum of loss to Vaults Stoney arising from the GTD CLP in all the circumstances of the case, at trial. Should the Damages Award be Stayed or “Set Off” [ 138 ] GTD argued that any damages award I may issue should be stayed pending the outcome of the action or set off against future damages awards that may be issued in its favour.

Vaults Stoney argued that GTD does not meet the test for a stay, and that it has not pleaded any set off at law or in equity, nor is it appropriate to grant set off in the face of an inchoate damages claim on the basis that GTD might be awarded same in the future. [ 139 ] With respect to a “stay” of the damages award, both Vaults Stoney and GTD agree that GTD must satisfy the “tripartite test” for a stay. The decision in Attila Dogan Construction and Installation Co Inc v AMEC Americas Limited , 2015 ABQB 429 , aff’d 2015 ABCA 406 (“ Atilla Dogan ”) has application here.

The Court of Appeal set out the tripartite test in brief at para 12: a. The applicant must show that there is an arguable issue; b. That it will suffer irreparable harm if the stay is not granted; and c. That the balance of convenience between the parties favours the granting of a stay, with the court retaining “residual discretion to grant a stay where the interests of justice so require”. [ 140 ] Here, GTD has not met any branch of the test. There is no “arguable issue”. It has submitted no evidence in response to this application.

Even if I have regard to the evidence it did submit on the Derivative Application, this does not assist GTD. There is no evidence that it cannot pay a damages award at this time, or that a damages award in the amount set out above will impact its ability to continue its claim against the Defendants. There is no evidence of irreparable harm.

This is a monetary award, and if, in the result, GTD is awarded damages against Vaults Stoney and it has in fact paid the damages award I have just made, that is something a trial judge can take into consideration in setting the quantum of any such award in GTD’s favour in that may issue in the final result.

On balance of convenience, I have no hesitation finding that the balance of convenience weighs in favour of Vaults Stoney at this stage of the litigation. [ 141 ] With respect to the court’s residual discretion under the tripartite test, I decline to exercise such discretion in the circumstances of this case. [ 142 ] Vaults Stoney has been successful in proving causation and damages and obtaining

summary judgment on a portion of its counterclaim. GTD was required to put its “best foot forward” on this application. It did not do so. [ 143 ] Per Atilla Dogan , there is nothing wrong with the Plaintiff’s claim and the remainder of the counterclaim proceeding to trial in the face of this decision and the damages award.

[144] GTD argued, in its written materials, that “courts have recognized the defence of set-off as a ground to prevent

summaryjudgment”. The Statement of Claim does not plead set off. GTD’s statement of defence to counterclaim does not plead set off. GTD isarguing the case it wishes it had plead, not the case it did plead, and there is no application before me to amend either the Statement ofClaim or the statement of defence to counterclaim to include such a plea.

The facts before me would not permit application of theprinciples of legal or equitable set off at this time, nor would I exercise any equitable jurisdiction to do so. (see, Telford v Holt, (SCC) for elucidation of basic principles of legal or equitable set off). [145] In the result, I decline to order any kind of set off in relation to the damages awarded to Vaults Stoney in these reasons.

Overall Conclusion [146] The Strike Application of the Defendants to have the Statement of Claim struck as against the Other Vaults Corps andBlackcrest is dismissed. [147] The CLP Application by the CLP Applicants to have the GTD CLP removed from titles to Units 1, 24 and 56 is granted, and theRegistrar of Land Titles is directed to remove the GTD CLP from title to Units 24 and 56 forthwith pursuant to s.191(3) of the LTA.

TheRegistrar of Land Titles is directed to remove the GTD CLP from title to Unit 1in accordance with s. 191(1) of the LTA. [148] The amount of $350,000.00, currently being held in trust by Field LLP pursuant to the Consent Order dated August 31, 2021and filed September 1, 2021 is hereby declared to be immediately releasable to the credit of Vaults Stoney. [149] Vaults Stoney is awarded damages due to the GTD CLP registration in the amount of $1,506.46; any damages in relation tointerest payable on the Frontain Mortgage is to be determined at trial. [150] Given that the Derivative Application went by way of consent, and that I have dismissed the Strike Application but allowed theCLP Application, the overall result on these three applications is mixed.

If counsel cannot agree on costs of these two applications, theyare at liberty to arrange for a one-hour hearing before me to argue costs. [151] I thank counsel for their detailed submissions, both in writing and orally. Heard on the 7th day of December, 2023. Dated at the City of Calgary, Alberta this 4th day of January, 2024 The Honourable Justice Darren J. Reed J.C.K.B.A.

Appearances: Joshua Koop and Nathan Fournier (Student-at-Law), Bennett Jones LLP for the Plaintiff Green Theme Design Ltd., also known as RGA Design Erika Carrasco and Brandon Harrison, Field LLP for the Defendants and Plaintiffs by Counterclaim, as well as Mr. and Mrs. Frontain, Applicants

CLERK'S STAMP Form 10 [Rule 3.25] COURT FILE NUMBER COURT COURT OF QUEEN'S BENCH OF ALBERTA JUDICIAL CENTRE calgary PLAINTIFF Green theme design ltd. also known as RGA design DEFENDANTS 097 4016 BC Ltd., Integrated Land Development Solutions Inc., The Vaults Development Corp., The Vaults Development Group Inc., The Vaults Stoney Corp., The Vaults South Calgary Corp., The Vaults Development Kelowna Airport Corp., THE VAULTS DEVELOPMENT KELOWNA CORP., The Vaults Development Vernon Corp., Joseph Mahovlich, Lana Mahovlich, Richard Frontain, FRONTAIN HOLDINGS LTD., James Murray, BLACKCREST MANAGEMENT INC., Donald Sandford, ABC Corporation, XYZ Corporation DOCUMENT STATEMENT OF CLAIM ADDRESS FOR SERVICE AND CONTACT INFORMATION OF PARTY FILING THIS DOCUMENT BENNETT JONES LLP Barristers and Solicitors 4500, 855 – 2 nd Street S.W.

Calgary, Alberta T2P 4K7 Attention: Grant N. Stapon, QC / Victoria Rudolf Telephone No.: 403-298-3204 / 403-298-3465 Fax No.: 403-265-7219 Client File No.: 91604.1 NOTICE TO DEFENDANTS: You are being sued. You are a defendant. Go to the end of this document to see what you can do and when you must do it. Statement of facts relied on: 1. The Plaintiff, Green Theme Design Ltd. (" GTD "), is a corporation incorporated pursuant to the laws of Alberta, with its corporate headquarters in Bragg Creek, Alberta. GTD also operates as RGA Design. 2.

The Defendant, 0974016 BC Ltd. (" 097 "), is a corporation incorporated pursuant to the laws of British Columbia, with its

corporate headquarters in Kelowna, British Columbia. 3. The Defendant, Integrated Land Development Solutions Inc. (" ILDS "), is a corporation incorporated pursuant to the laws of Alberta, with its corporate headquarters in Calgary, Alberta. 4. The Defendant, The Vaults Development Corp. (" VDC "), is a corporation incorporated pursuant to the laws of Alberta, with its corporate headquarters in Calgary, Alberta. 5. The Defendant, The Vaults Development Group Inc. (" VDG "), is a corporation incorporated pursuant to the laws of Alberta, with its corporate headquarters in Calgary, Alberta. 6.

The Defendant, The Vaults Stoney Corp. (" Vaults Stoney "), is a corporation incorporated pursuant to the laws of Alberta, with its corporate headquarters in Calgary, Alberta. 7. The Defendant, The Vaults South Calgary Corp. (" Vaults South Calgary "), is a corporation incorporated pursuant to the laws of Alberta, with its corporate headquarters in Calgary, Alberta. 8. The Defendant, The Vaults Development Kelowna Airport Corp. (" Vaults Kelowna Airport "), is a corporation incorporated pursuant to the laws of British Columbia, with its corporate headquarters in Kelowna, British Columbia. 9.

The Defendant, The Vaults Development Kelowna Corp. (" Vaults Kelowna "), is a corporation incorporated pursuant to the laws of British Columbia, with its corporate headquarters in Kelowna, British Columbia. 10. The Defendant, The Vaults Development Vernon Corp. (" Vaults Vernon "), is a corporation incorporated pursuant to the laws of British Columbia, with its corporate headquarters in Kelowna, British Columbia. 11. The Defendant, Joseph Mahovlich (" Mr. Mahovlich "), is a resident of Kelowna, British Columbia, a shareholder and director of ILDS, and a controlling mind of ILDS.

He is also a director of 097, VDC, VDG, Vaults Stoney, Vaults South Calgary, Vaults Kelowna Airport, Vaults Kelowna, and Vaults Vernon. 12. The Defendant, Lana Mahovlich (" Ms. Mahovlich ") is a resident of Kelowna, British Columbia, and a shareholder and controlling mind of 097. 13. The Defendant, Richard Frontain (" Mr. Frontain "), is a resident of Calgary, Alberta, and a director of Vaults Stoney, Vaults Kelowna Airport, Vaults Kelowna, and Vaults Vernon. 14. The Def

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