Michelle Jane Peddle Applicant And: Leslie (Junior) Peddle Respondent, 2021 NLSC 2

court crest IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR GENERAL DIVISION Citation : Peddle v. Peddle , 2021 NLSC 2 Date : January 6, 2021 Docket : 201502F0956 Between: Michelle Jane Peddle Applicant And: Leslie (Junior) Peddle Respondent Before: Justice Katherine O’Brien Place of Hearing: Grand Bank, Newfoundland and Labrador Date of Hearing: September 15, 2020

Summary: The applicant made two applications: one for contempt and one for the preservation of corporate assets. The contempt application was denied. Although the applicant established all three elements of civil contempt beyond a reasonable doubt, the Court exercised its discretion not to make a finding of contempt because enforcement proceedings were ongoing and the respondent had acknowledged the court order and had made recent efforts to comply with it, including making voluntary partial payments of the debt owing. The application for the preservation of corporate assets was granted in part. Appearances: Jean V. Dawe, Q.C. Appearing on behalf of the Applicant

Thomas F. Hutchings Appearing on behalf of the Respondent Authorities Cited: CASES CONSIDERED: Peddle v. Peddle, 2019 NLSC 130; Carey v. Laiken, 2015 SCC 17; Meadus v. Meadus, 2011 NLTD(F) 32;Meadus v. Meadus, 2013 NLCA 59; Squires v. Smith, 2019 NLCA 54; Daley v. Coady, 2011 NLTD(G) 22; Hurley v. Slate VenturesInc. (1996), (NL SC), 136 Nfld. & P.E.I.R. 341, 423 A.P.R. 341 (Nfld. S.C.(T.D.)); Hart Leasing & Holdings Ltd. v.St. John’s (City) (1992), (NL CA), 101 Nfld. & P.E.I.R. 131, 321 A.P.R. 131 (Nfld. C.A.); American Reserve EnergyCorp. v.

McDorman (1999), (NL SC), 174 Nfld. & P.E.I.R. 217, 556 A.P.R. 40 (Nfld. S.C.(T.D.)) STATUTES CONSIDERED: Corporations Act, R.S.N.L. 1990, c. C-2; Judgment Enforcement Act, S.N.L. 1996, c. J-1.1; Family LawAct, R.S.N.L. 1990, c. F-2 RULES CONSIDERED: Rules of the Supreme Court, 1986, S.N.L. 1986, c. 42, Sch. D REASONS FOR JUDGMENT O'Brien, J.: INTRODUCTION [1] Michelle Peddle, now Michelle Penney, filed an application seeking to have her former husband, Leslie (Junior) Peddle, foundin contempt of court for the second time (the “Contempt Application”).

She filed a second application seeking an order in relation to hiscorporate shares and corporate assets (the “Preservation of Assets Application”). The applications were heard together on September 15,2020 and the parties later filed written submissions. I reserved my decision until now. BACKGROUND [2] The background of this matter is set out in Peddle v. Peddle, 2019 NLSC 130 (Peddle No. 1). In that decision, I found Mr.Peddle in contempt of court for failing to comply with a consent order made on November 28, 2018 in their family law dispute (the“Consent Order”). Mr.

Peddle had failed to make payments as required by the Consent Order when due, had failed to provide Ms.Penney with a Letter of Credit from a

Schedule One Canadian Chartered Bank, and had not entered a share pledge agreement in relationto his shares in 56557 Newfoundland and Labrador Limited (“56557”) and BANA Properties Inc. (“BANA”) as required. In an oraldecision dealing with the penalty for his contempt Peddle v. Peddle, 5 July 2019, Grand Bank 201502F0956 (N.L.S.C.) (PenaltyDecision), I ordered that the Consent Order be amended to increase the interest payable on overdue amounts and that Mr. Peddle deliverthe Letter of Credit within sixty days or pay Ms. Penney a penalty of $15,000. [3] Since then, Mr.

Peddle has not delivered the Letter of Credit but he has paid Ms. Penney the $15,000 penalty. He has madefurther voluntary payments on the amounts due but he has not paid all that he owes. Ms. Penney has also recovered amounts throughenforcement proceedings. As of October 5, 2020, Ms. Penney calculates there remains $2,631,891.27 owing in relation to the ConsentOrder. Mr. Peddle has not signed a share pledge agreement but his share certificates have been delivered to Ms. Penney’s lawyer. ISSUES [4] The issues arising from the applications are: 1. Should Mr.

Peddle be found in contempt, or continuing contempt, of the Consent Order? 2. Should additional orders be made as requested in the Preservation of Assets Application regarding the shares and assets of thecompanies in question? ISSUE 1: CONTEMPT The Three Elements of Civil Contempt [5] Rule 53 of the Rules of the Supreme Court, 1986, S.N.L. 1986, c. 42, Sch. D (“Rules”) deals with contempt orders. Rule 53.02requires leave to make a contempt application.

Leave for the Contempt Application was granted by a consent order issued on January30, 2020. [6] The Supreme Court of Canada reviewed the law of civil contempt in Carey v. Laiken, 2015 SCC 17. Civil contempt has threeelements each of which must be established beyond a reasonable doubt. The first is that the order alleged to have been breached must

state clearly and unequivocally what should and should not be done. The second element is that the party alleged to have breached the order must have actual knowledge of it. The third is that the party allegedly in breach must have intentionally done the act that the order prohibits or intentionally failed to do the act that the order compels. I will review each of these elements in turn. [ 7 ] I found in Peddle No. 1 that the terms of the Consent Order are clear and unequivocal. I will not repeat my reasoning here but it remains applicable.

The amendment to the interest amount made in the Penalty Decision does not affect this finding. [ 8 ] There is no dispute that Mr. Peddle had actual knowledge of the Consent Order, as amended by the Penalty Decision . [ 9 ] The parties disagree as to whether Mr. Peddle has intentionally failed to comply with the Order. The element of intent was considered by the Supreme Court of Canada in Carey at paragraphs 38 to 43 . All that is required is proof beyond a reasonable doubt of an intentional act or omission that is in breach of a clear order of which the alleged contemnor has notice.

It is not required to establish that the alleged contemnor intended to breach or disobey the order. The intention to disobey authority, sometimes referred to as “contumacious intent,” does not need to be proven. [ 10 ] Mr. Peddle submits that he has not willfully disobeyed the Consent Order with the intention to cause harm to Ms. Penney. He acknowledges that he has not made payments in accordance with the Consent Order schedule, but he states that he has made payments as he has been able and he has been trying to get financing in order to pay Ms. Penney in full.

He says that this process has taken longer than he expected and that he would have paid her by now if it were not for the COVID pandemic, which caused a sale of his business to fall through. As I understand his submission, he argues that his failure to comply with the Consent Order has not been intentional, but rather due to forces beyond his control. [ 11 ] I will summarize Mr. Peddle’s evidence on his efforts. Clarenville Ford Sales Limited [ 12 ] Following the Penalty Decision , Mr.

Peddle and his business partner, Stephen Lewis, continued their efforts to sell Clarenville Ford Sales Limited (“CFSL”), which is a wholly-owned subsidiary of 56577 of which Mr. Peddle owns 51% of the shares and Mr. Lewis owns 49%. They were working with Confederation M&A as a sales broker. In December 2019, they received three formal offers for a share purchase and they accepted one of them. They signed a Letter of Intent with the prospective purchaser on January 14, 2020. Mr. Peddle notified Ms.

Penney’s lawyer of the Letter of Intent but did not share details because they were subject to a non-disclosure agreement. Mr. Peddle intended to pay Ms. Penney from his proceeds of sale. The sale was scheduled to close on February 28, 2020, but was extended to March 31, 2020, due, in part, to a state of emergency declared in St. John’s after a snowstorm in January 2020 that prevented the purchaser from completing its due diligence. On March 30, 2020, Mr.

Peddle was contacted by his legal counsel for the transaction who advised that, due to the COVID-19 pandemic, the prospective purchaser wanted to put the deal “on a 45-day pause.” On April 28, 2020, Mr. Peddle learned that the prospective purchaser would not be proceeding. Although in his affidavit Mr. Peddle affirmed that other potential purchasers who had submitted offers were contacted but they did not want to proceed either, on cross- examination he said that they were not contacted. [ 13 ] After the share sale fell though, Mr. Lewis offered to sell his shares to Mr. Peddle. Mr.

Peddle was interested and began discussions with four different banks regarding financing for him to purchase Mr. Lewis’ shares and pay Ms. Penney. The discussions with the banks proceeded through the summer of 2020. Mr. Peddle has chosen the bank he wishes to work with and says that he has been in continued discussions with them and his accountant to get everything in order. When he testified on September 15, 2020, he stated that his accountant fulfilled the last requests from the bank on the preceding Sunday evening and he was hoping to hear later that day from the bank regarding a timeframe for the financing.

He provided email evidence in support of his statements. Letter of Credit [ 14 ] Mr. Peddle admits that he has not sought a Letter of Credit as required by the Consent Order. As I understand his position, he has focused his efforts on getting financing to buy out Mr. Lewis and pay Ms. Penney. He has not sought financing sufficient to pay his debt to Ms. Penney only, but rather has chosen to seek a larger amount to accomplish both of his goals. Mr. Peddle testified that his priority is to pay Ms. Penney as soon as possible. Share Pledge Agreement [ 15 ] Mr.

Peddle admits that he has not signed a share pledge agreement as required by the Consent Order. He says that he learned some time last year that if he signed the share pledge agreement it would put him in breach of his commitments to his bank, which would put the current financing arrangements for the companies in peril. He is not willing to do this. He filed a letter from a lawyer on behalf of Scotiabank written to Ms.

Penney’s lawyers and copied to his, which stated that any change in ownership of the corporations without the prior consent of the Scotiabank could result in Scotiabank exercising its legal remedies pursuant to the security granted to it by the corporations. Ms. Penney’s Position [ 16 ] Ms. Penney takes a different view of Mr. Peddle’s actions. She submits that since being found in contempt in July 2019, Mr. Peddle has simply continued his contemptuous conduct and has shown a “wanton disregard” for his obligations to the Court and to Ms. Penney. Ms. Penney considers that Mr.

Peddle’s efforts to obtain financing as preliminary and notes he has not provided any executed offers or commitments. She states that Mr. Peddle continues to arrange matters, for him and his companies, as he wants them and fails to acknowledge that he owes the money to Ms. Penney, not his companies. She notes that he has organized his affairs such that his only assets of value are his corporate holdings.

For example, he has encumbered his personally-held real property with mortgages such that there is little realizable value and he uses vehicles and a recreational boat that were purchased by CFSL. [ 17 ] Additionally, Ms. Penney points to Mr. Peddle’s efforts to thwart garnishment. When he found out that one of his bank

accounts had been garnished, Mr. Peddle arranged to have his paycheque from CFSL deposited into his current common-law partner’sbank account. Mr. Peddle readily acknowledged he did this. His reason was that if he did not have access to his paycheque he would notbe able to make bill and mortgage payments or support himself. Ms. Penney also submits that Mr. Peddle has conducted the business ofCFSL in such a way as to ensure there is no money readily available to disburse to him, choosing to use retained corporate earnings toexpand the business in 2019 rather than pay a shareholder dividend.

Finding of Intentional Breach [18] Although Mr. Peddle has assets worth in excess of his debt to Ms. Penney, having reviewed the evidence, I accept that he doesnot currently have liquid assets sufficient to pay her what she is owed. I accept that Mr. Peddle fully acknowledges his debt to Ms.Penney, and he has been making efforts to get himself in a financial position to pay her. I find that his communications with the bankthat reference the creation of a new company that would be subsequently amalgamated with 56557 refer to a refinancing plan that has asone of its goals Ms.

Penney being paid, and is not evidence of an attempt by Mr. Peddle to defeat any security interest she may have. Ialso accept that, were it not for the COVID-19 pandemic and its economic consequences, Mr. Peddle would most likely have settled hisaccount with Ms. Penney by now. However, I find that Mr. Peddle’s omissions to pay Ms. Penney, seek a Letter of Credit, and providethe share pledge agreement have been intentional. He has made a choice not to fulfill the terms of the Consent Order. I accept that Mr.Peddle intends to pay Ms.

Penney, but he continues to wish to do it on terms that convenience him, not on the terms set out in theConsent Order. His intention is to arrange his affairs so that Ms. Penney is paid and he maximizes the value of his assets for his ownbenefit at the same time. [19] All three requirements of civil contempt have been established beyond a reasonable doubt. However, that does not necessarilyresult in a finding of contempt because such a finding remains subject to the Court’s discretion.

Discretion of the Court [20] Even though the elements of civil contempt have been established, the contempt power is discretionary and courts haveconsistently discouraged its routine use to obtain compliance with court orders. [21] The discretionary nature of the power is discussed in Carey at paragraphs 36 and 37. Paragraph 37 states: For example, where an alleged contemnor acted in good faith in taking reasonable steps to comply with the order, the judge entertaining acontempt motion generally retains some discretion to decline to make a finding of contempt: see, e.g., Morrow, Power v.

NewfoundlandTelephone Co. (1994), (NL CA), 121 Nfld. & P.E.I.R. 334 (Nfld. C.A.), at para. 20; TG Industries, at para. 31. WhileI prefer not to delineate the full scope of this discretion, given that the issue was not argued before us, I wish to leave open the possibilitythat a judge may properly exercise his or her discretion to decline to impose a contempt finding where it would work an injustice in thecircumstances of the case. [22] In family law matters, the Court’s discretion to find contempt should be exercised sparingly (see Meadus v. Meadus, 2011NLTD(F) 32, upheld at Meadus v. Meadus, 2013 NLCA 59).

Our Court of Appeal has recently reiterated this message in Squires v.Smith, 2019 NLCA 54. In Squires, the Court of Appeal quoted the following passage from paragraph 36 of Carey, omitting citations: The contempt power is discretionary and courts have consistently discouraged its routine use to obtain compliance with court orders. If contempt is found too easily, “a court’s outrage might be treated as just so much bluster that might ultimately cheapen the role andauthority of the very judicial power it seeks to protect”.

As this Court has affirmed, “contempt of court cannot be reduced to a mere means of enforcing judgments”. Rather, it should be used “cautiously and with great restraint”. It is an enforcement power of last rather than first resort. [23] At paragraph 41 of Squires, the Court of Appeal again stated that contempt should not be the usual procedure of enforcement ofcourt orders, particularly in family law matters. [24] Ultimately, Ms. Penney seeks to enforce a monetary judgment. As a result of the Penalty Decision, she received an additional$15,000 as a consequence of Mr.

Peddle’s failure to provide a Letter of Credit and her lawyer is in possession of the share certificates

even though a share pledge agreement, the terms of which were not set out in the Consent Order, has not been signed. Ms. Penney hasbeen pursuing enforcement and has had some success collecting money. She has not yet received all that she is owed, and she has hadsome difficulties with the enforcement process, describing it in submissions as “exceedingly frustrating, time consuming, expensive, andgenerally ineffective.” However, the contempt power cannot be used simply to facilitate or substitute for enforcement proceedings,regardless of how frustrating, time consuming, or expensive they may be.

Otherwise, every party with a monetary judgment that was notreadily satisfied, would be encouraged to apply for a contempt finding. The Supreme Court of Canada has been clear that contempt ofcourt cannot be reduced to a mere means of enforcing judgments. Ms. Penney has not exhausted enforcement remedies. A judgmentcreditor examination of Mr. Peddle was held just days before the hearing of this application and Ms. Penney’s counsel expected toreceive further information from Mr. Peddle. [25] Mr. Peddle acknowledges his debt to Ms. Penney and is actively taking steps to comply with the Consent Order.

He has maderecent voluntary and substantial payments. His efforts have been hampered by a global pandemic. Although Mr. Peddle’s conduct hasnot been unimpeachable, his recent efforts, combined with the fact that enforcement proceedings are ongoing, are sufficient for me toexercise my discretion not to make a finding of contempt. ISSUE 2: ADDITIONAL ORDERS SOUGHT REGARDING THE SHARES AND ASSETS OF THE COMPANIES Orders Sought [26] In the Preservation of Assets Application, Ms. Penney seeks orders: a. Requiring Mr.

Peddle to sign a Share Transfer Form, or if he refuses, then authorizing the Deputy Registrar to sign in his place; b. Restraining Mr. Peddle and others from removing any assets, including cash, for his benefit from any of the companies: 56557,CFSL or BANA, except in respect of CFSL in the ordinary course of business of a Ford motor vehicle dealership; c. Prohibiting: i. Any fundamental change, as defined in the Corporations Act, R.S.N.L. 1990, c. C-2, of 56557, BANA orCFSL, including but not limited to, merger, amalgamation, reorganization, and/or change in the share structure; ii.

The transfer of any of the shares of 56577, BANA or CFSL except to comply with the Share Transfer Formor with the prior written consent of Ms. Penney; and iii. Each of 56557, BANA and CFSL from issuing any additional shares, granting any additional encumbrancesor security interests, or increasing its debt without the prior written consent of Ms. Penney. Applicable Law [27] Ms. Penney submits that the Court’s authority to make the orders can be found in any one of four sources: (

i) Rule 22.01 of theRules, which authorizes interim injunctions; (ii) Rule 22.02, which authorizes preservation orders; (iii)

section 126 of the JudgmentEnforcement Act, S.N.L. 1996, c. J-1.1, which provides for orders in relation to exigible property of a debtor; and (iv)

section 26(

e) of theFamily Law Act, R.S.N.L. 1990, c. F-2, which authorizes the court to order a spouse give security for the performance of an order forproperty division. I will deal with these each in turn. i Rule 22.01 interim injunction [28] The circumstances in which the court will authorize an interim injunction pursuant to Rule 22.01 were considered by Fry J. (asshe then was) in Daley v.

Coady, 2011 NLTD(G) 22 at paragraph 24, wherein Fry J. adopted principles set out previously by this Court: Green, J (as he then was) outlined the principles which the court should consider in determining whether to grant an interlocutoryinjunction. He stated at paragraph 25 in Hurley v. Slate Ventures Inc. (1996), (NL SC), 136 Nfld. & P.E.I.R.341 (Nfld. T.D.)

25. The principles applicable to the grant of an interlocutory injunction in disputes between private litigants not involving a labourdispute and not raising constitutional issues in this jurisdiction can be summarized as follows: 1. The applicant must show that there is a serious issue to be tried, in the sense that the claim is not frivolous or vexatious. 2. The applicant must show he or she is suffering or will likely suffer irreparable harm, namely, loss that cannot be readily assessed interms of money or, if it can be so assessed, a loss that will be uncollectible. 3.

The applicant should give an undertaking in damages that would be adequate, if the respondent were to succeed at trial, tocompensate the respondent for loss sustained because of the granting of the injunction. The person giving the undertaking ought, as ageneral rule, to be in a financial position to honour the undertaking if called upon. 4. Where there is doubt as to the adequacy of the respective remedies in damages available to either party, the applicant must thensatisfy the court that the balance of convenience favours the granting of the injunction.

In considering this factor, the court must look atand balance, among other things, the degree of irreparable harm that may be suffered by the Plaintiff, if the injunction were not grantedand by the Defendant, if the injunction were granted. The existence and strength of the undertaking offered by the applicant is a factor tobe considered in the determination of the balance of convenience. 5. Where the application of the balance of convenience test leads to no clear resolution, the court will normally seek to preserve thestatus quo. 6.

Where the status quo is uncertain or its preservation is not a desirable result the court may consider the relative strength of eachparty's case and if the merits on one side appear to be disproportionately greater than the merits of the other then the injunctive reliefshould be granted or denied accordingly. I believe that the foregoing principles follow from the Court of Appeal decisions in Hart Leasing and Holdings Ltd. v. St. John's(City)(1992), (NL CA), 101 Nfld. & P.E.I.R. 131 and Labatt Brewing Co. v.

Carling O'Keefe Breweries Canada Ltd.(1985), 55 Nfld. & P.E.I.R. 30(affirming the decision of Goodridge J. reported at (1985), 53 Nfld. & P.E.I.R. 66). In my view, they arealso generally consistent with the discussion of general principles applicable to the granting of injunctions by the Supreme Courtof Canada in RJR-MacDonald Inc. v. Canada (AG) (SCC), [1994] 1 S.C.R. 311. [29] Ms. Penney submits that “assessing the facts of this situation against the tests for issuance of an injunction in Daley v.

Coady,proves that this is an appropriate case for the court to exercise its authority pursuant to Rule 22, to enjoin Peddle from any action whichcould dissipate the value of CFSL.” I cannot agree. The third principle enunciated in Hurley v. Slate Ventures Inc., and adopted inDaley, is that the applicant should give an undertaking in damages. Ms. Penney has not given an undertaking or even addressed theundertaking in her submissions. The quote from Daley cited in her brief had the third principle removed without any comment orexplanation. In Hart Leasing & Holdings Ltd. v. St.

John’s (City) (1992), (NL CA), 101 Nfld. & P.E.I.R. 131, 321A.P.R. 131 (Nfld. C.A.), at para. 42, Goodridge C.J.N. referred to an undertaking as an “essential element” of an order for aninterlocutory injunction. Ms. Penney bears the onus of establishing that an interlocutory injunction should issue. She has not providedan undertaking or made any submissions to the Court as to why an undertaking should not be required in this case. As a result, I find thatshe has not met the requirements of Rule 22.01. ii.

Rule 22.02 preservation order [30] Rule 22.02(1) authorizes the Court, inter alia, to make an order for the detention, custody, or preservation of any property thatis the subject matter of a proceeding, or as to which any question may arise therein. The purpose and scope of Rule 22.02(1) wasconsidered by Adams J. of this Court in American Reserve Energy Corp. v. McDorman (1999), (NL SC), 174 Nfld.& P.E.I.R. 217, 556 A.P.R. 40 (Nfld. S.C.(T.D.)): 14 In the Law Society of Newfoundland Materials for the Bar Admissions Course, 1999, Practice and Procedure, prepared by Mr.Christopher P. Curran and by the Honourable J.

Derek Green, it is stated at pp. 22.10 to 22.11: Scope Rule 22.02 provides a mechanism to invoke the court's aid to preserve property which is the subject-matter of a proceeding pending finalresolution of the litigation. The purpose of Rule 22.02 is not to enable the determination of substantive property rights of the parties(Abitibi-Price Inc. v. McKay (K.L.) Logging Ltd. and McKay at 244). The sole purpose of the rule is to maintain the status quo byensuring preservation of the property.

It does not authorize the simple shifting of custody of property from one party to another forreasons, such as convenience, that are extraneous to the need for preservation of the property (Abitibi-Price at 241-242). Although therule uses the words "detention, custody or preservation," the essence of the rule is maintenance of the security of the property bypreserving it until the litigation is finished. In that sense, a preservation order has the same effect as a prohibitory injunction.

It may gofurther, however, and provide specifically for the manner of preservation, such as the detention of the property by a suitable third partyand the mechanism for defrayment of storage costs in the interim. A preservation order also has characteristics of an order appointing areceiver; indeed, an application for the appointment of a receiver under Rule 25 may in some cases be used to accomplish the same

result. Against Whom Order Made The rule is wide enough to enable a preservation order to be made not only against a party but against any person, not a party, who hascontrol over or possession of the property. 15 In Abitibi Price Inc. v. K.L. McKay Logging Ltd. (1989), (NL SC), 77 Nfld. & P.E.I.R. 239 (Nfld. T.D.), 242(referred to in the above annotation), Hickman C.J. found, in referring to Société pour l'administration du droit de reproductionmécanique des auteurs, compositeurs & éditeurs (S.D.R.M.) v. Trans World Record Corp. (1975), (FCA), [1977] 2F.C. 602 (Fed.

C.A.) that: ... [T]he sole purpose of such rule is to maintain the status quo by ensuring the preservation of property that is the subject matter of anaction. 16 The determination of the substantive property rights of the litigants is to be left to the outcome of the trial. Ordinarily, the shiftingof custody from one party litigant to another is not essential to preserve the property although that is not outside the ambit of the rule in aproper case: See Abitibi.

As stated by the learned authors of the Bar Admission Course Materials, the rule is broad enough to enable anorder to be made against any person, not only a party, who has control over or possession of the property which is the subject of thedispute. [31] Ms. Penney did not make any specific submission with respect to a preservation order other than to state generally that Rule22.02(1) gives the Court authority to make the orders she seeks. [32] Under the terms of the Consent Order, Mr.

Peddle is required to “pledge all his shares” in each of 56557 and BANA “assecurity for the payment of the $3,000,000” … “pursuant to a Pledge Agreement in form satisfactory to” Ms. Penney and with deliveryof the share certificates to her counsel. Notwithstanding that terms of the Pledge Agreement were not included as part of the ConsentOrder, Ms. Penney’s position is that Mr. Peddle has granted her a security interest in his shares of 56557 and BANA. Ms. Penney hascommenced enforcement proceedings against Mr. Peddle pursuant to the Judgment Enforcement Act.

The shares are “exigible property”pursuant to that Act, meaning they are subject to the enforcement proceedings. I thus find that Rule 22.02(1) gives this Court authority tomake an order, on terms the Court thinks just, for the preservation of Mr. Peddle’s shares of 56557 and BANA. iii. Judgment Enforcement Act, section 126(1) [33] Section 126(1) of the Judgment Enforcement Act states: 126.

(1) Notwithstanding a rule of law or equity to the contrary, where exigible property of a debtor cannot be conveniently realized andwhere the court considers it to be just or convenient, the court on the application of a creditor may (

a) appoint a receiver of the property; (

b) order the debtor or a person in possession or control of the property to deliver the property to the sheriff or to another personnamed in the order; (

c) enjoin the debtor or another person from disposing of or otherwise dealing with the property; and (

d) make an additional order that the court considers necessary to facilitate realization of the property. [34] Ms. Penney submits that section 126(1)(

c) and (

d) give this Court authority to make the orders sought. Implicit in thissubmission is that Mr. Peddle’s shares cannot be conveniently realized. In her affidavit detailing enforcement efforts to date, Ms.Penney attests to interactions with the Office of the High Sheriff of Newfoundland and Labrador in relation to enforcement against theshares which support a finding that the shares will not be realized “conveniently.”

[ 35 ] Sections 89 to 98 of the Judgment Enforcement Act address the seizure and liquidation of securities.

Section 96 specifically addresses the liquidation procedure for private company shares. It is a fairly complex procedure that requires notice be given to the private company, every person who, to the knowledge of the Sheriff, would have a preferential right to acquire the shares on a voluntary sale of the shares by the debtor, and every registered shareholder of the private company. Having reviewed the sections, I accept that liquidation of the shares pursuant to the Judgment Enforcement Act is not a simple process and will take time. [ 36 ] The purpose of section 126(1)(

c) is similar to that of Rule 22.02 in that it is to preserve the status quo for property that is subject to further proceedings. In the case of section 126(1) (

c) specifically in relation to judgment enforcement proceedings. I find that it is applicable in the present case and that section 126(1) (

d) further authorizes this Court to make any further Order it considers necessary to facilitate realization of the shares. The limits of the authority granted by section 126(1) (

d) must be assessed in the context of the Judgment Enforcement Act as a whole, and I will return to this assessment after a consideration of the fourth source of authority relied upon by Ms. Penney for the relief she seeks. iv. Family Law Act,

section 26 (e) [ 37 ]

Section 26 (

e) of the Family Law Act states: 26. In an application made under

section 21, the court may order (

e) that either or both spouses give the security, including a charge on property, that the court orders, for the performance of an order made under this section; [ 38 ]

Section 21 of the Family Law Act entitles a spouse to apply to the court to have matrimonial assets divided. Ms. Penney’s application for division of matrimonial assets was resolved by the Consent Order. There is currently no

section 21 application before this Court and, as such,

section 26 (

e) does not apply. Moreover, Ms. Penney is not seeking to have the Court grant her security; she already considers herself a secured creditor because of the Consent Order. Evaluation of the Orders Sought [ 39 ] I have found that Rule 22.02(1) authorizes this Court to make an order for the detention, custody or preservation of Mr. Peddle’s shares in 56557 and BANA. I have also found that section 126(1) (

c) of the Judgment Enforcement Act authorizes this Court to enjoin Mr. Peddle or another person from disposing of or otherwise dealing with those shares, and section 126(1) (

d) authorizes the making of any additional order that the Court considers necessary to facilitate realization of the shares. I will now assess each of the orders that Ms. Penney seeks. Requiring Mr. Peddle to sign a Share Transfer Form [ 40 ] An order requiring Mr. Peddle to sign a Share Transfer Form would effectively sidestep the safeguards that the legislature has included in sections 89 to 98 of the Judgment Enforcement Act for the benefit of private companies, other shareholders of private companies, and those with preferential rights to the shares. The authority to make additional orders granted by section 126(1) (

d) must be interpreted in its context and harmoniously with the scheme of the act, the object of the act, and the intention of the legislature. The Judgment Enforcement Act scheme for liquidating private company shares requires that other legal entities who have a potential interest in the shares and the result of a liquidation be given notice and, in some cases, an opportunity to buy or redeem the shares. An order that effectively transfers the shares to Ms.

Penney without any notice to these third parties would not be consistent with the scheme of the act and I find such an order would be beyond the purview of section 126(1) (d). Restraining Mr. Peddle and others from removing any assets, including cash, for his benefit from either of the companies: 56557, CFSL or BANA, except in respect of CFSL in the ordinary course of business of a Ford motor vehicle dealership [ 41 ] In the Consent Order, Mr. Peddle agreed to pledge his shares in 56557 and BANA as security for the monetary payment. He did not pledge the assets of the companies themselves.

The companies are separate legal entities and are not debtors of Ms. Penney. Ms. Penney is entitled to orders that preserve the status quo but she is not entitled to more than she is granted under the Consent Order. I will thus not make any orders enjoining anyone other than Mr. Peddle. Implicit in Mr. Peddle’s agreement to pledge his shares as security is the notion that if he did not pay Ms. Penney what she was owed when due, she would have rights to his shares and the entitlements that come with the shares.

Now being in default of his payment obligations, he should not expect to be able to exercise his shareholder rights unfettered. [ 42 ] To preserve the status quo , I will enjoin Mr. Peddle from using his shares or exercising his shareholder rights in 56557 or BANA in any way, or taking any other action, that has the effect of removing assets of 56557, BANA or CFSL for his benefit, other than in the ordinary course of business of CFSL as a motor vehicle dealership.

Prohibiting any fundamental change of 56557, BANA or CFSL; transferring any of the shares of 56577, BANA or CFSL; issuing any additional shares of 56577, BANA or CFSL; or granting any additional encumbrances or security interests, or increasing the debt of 56577, BANA or CFSL [ 43 ] These requests are all aimed at preserving the status quo and, consistent with my comments above, I will enjoin Mr. Peddle from transferring his shares of 56577 and from using his shares or exercising his shareholder rights in 56557 or BANA in any way, or taking any other action, that (

i) would effect a fundamental change of 56557, BANA or CFSL , (ii) would cause to be issued any additional shares of 56557, BANA or CFSL, or (iii) would grant any additional encumbrances or security interests, or increase the debt of 56577, BANA or CFSL, other than in the ordinary course of business of CFSL as a motor vehicle dealership. COSTS

[ 44 ] Notwithstanding the mixed results, if Mr. Peddle had honored his obligations under the Consent Order neither the Contempt Application nor the Preservation of Assets Application would have been made. Although I declined to make a finding of contempt, all three elements of civil contempt were established. As such, I am exercising my discretion under Rule 55 of the Rules of the Supreme Court, 1986 to award Ms. Penney party and party costs from Column 5 of the Scale of Costs. DISPOSITION 1. The Contempt Application is dismissed. 2. Except with the written consent of Ms.

Penney or by further order of the Court, Mr. Peddle is enjoined from using his shares or exercising his shareholder rights in 56557 or BANA in any way, or taking any other action, that has the effect of removing assets of 56557, BANA or CFSL for his benefit, other than in the ordinary course of business of CFSL as a motor vehicle dealership. 3. Except with the written consent of Ms. Penney or by further order of the Court, Mr. Peddle is enjoined from transferring his shares of 56577 and from using his shares or exercising his shareholder rights in 56557 or BANA in any way, or taking any other action, that (

i) would effect a fundamental change of 56557, BANA or CFSL , (ii) would cause to be issued any additional shares of 56557, BANA or CFSL, or (iii) would grant any additional encumbrances or security interests, or increase the debt of 56577, BANA or CFSL, other than in the ordinary course of business of CFSL as a motor vehicle dealership. 4. Mr. Peddle shall pay Ms. Penney her party and party costs of both applications from Column 5 of the Scale of Costs. _____________________________ Katherine O'Brien Justice