PATRICK 1703 CONDOMINIUM CORPORATION PLAINTIFF - v. -, 2023 SKKB 151

KING’S BENCH FOR SASKATCHEWAN Citation: 2023 SKKB 151 Date: 2023 07 13 Docket: QBG-SA-00850-2017 Judicial Centre: Saskatoon BETWEEN: PATRICK 1703 CONDOMINIUM CORPORATION PLAINTIFF - and - FIRST DEGREE DEVELOPMENTS LTD. DEFENDANT Counsel: John B. Benesh for the plaintiff Grant A. Richards for the defendant ___________________________________________________________________________ FIAT ELSON J.

July 13, 2023 ___________________________________________________________________________ Introduction [ 1 ] In this litigation, the plaintiff, a registered condominium corporation, asserts that the defendant, the developer of the condominium and vendor of the individual condominium units, has failed to correct various deficiencies in the condominium property and has also failed to meet its obligations relative to maintenance of the condominium’s reserve fund. The plaintiff seeks damages equal to the cost to remedy the deficiencies as well as a judgment for $222,677 to cover the shortfall in the reserve fund.

The defendant has defended the action, denying all the claim’s allegations as well as the quantum of damages sought. [ 2 ] In the meantime, there is no dispute that the defendant is in financial difficulty and struggles to meet its obligations. This appears to be attributable, at least in part, to the fact that it has not yet sold all the units it has developed. Meanwhile, the plaintiff fears that it will not be able to enforce any judgment it receives against the defendant.

Accordingly, it now seeks a preservation order, pursuant to The Enforcement of Money Judgments Act , SS 2010, c E-9.22 [ EMJA ], preventing the defendant from disposing of any more units. [ 3 ] In response to the application, the defendant proposed to pay a sum of money into court after certain expenses were covered, including payment of outstanding accounts to the counsel who are, and have been, representing the defendant in the

defence of this claim and one other action brought by the plaintiff. Alternatively, it asserts that the requisite conditions for the preservation order do not exist. One of those conditions in the EMJA specifically precludes preservation orders for dispositions of property in the ordinary course of business. At the very least, the defendant posits that the sale of the units falls within this exception.

The plaintiff is not satisfied with the defendant’s proposal and rejects, without reasons or analysis, the defendant’s argument. [ 4 ] Before going further, I must note that neither counsel provided the Court with any authorities or helpful analysis of the legal principles of law related to this application. In particular, the Court received no analysis about the defendant’s “ordinary course of business” argument.

Indeed, it is noteworthy that, when I asked the plaintiff’s counsel for any legal authority that he might have to support his position that this exception should not apply, he rather unhelpfully told the Court that he preferred to rely on the facts rather than law. I can only respond to this comment by observing that, while counsel may believe he has the luxury of ignoring the law, this Court does not. [ 5 ] For the reasons that follow, I am satisfied that, having regard to the evidence before me, the requisite provisions of the EMJA preclude the Court from granting the requested preservation order.

Accordingly, the application must be dismissed with costs. Background [ 6 ] The plaintiff’s statement of claim was first issued in this matter on June 14, 2017, and later amended pursuant to a fiat of Currie J., dated September 21, 2020. I note that the plaintiff’s counsel neglected to take out an order pursuant to that fiat.

I also note that the defendant’s counsel, whether the current or former counsel, neglected to plead a defence to the amended statement of claim. [ 7 ] Although the amended statement of claim is worded in a somewhat rambling fashion, I discern the plaintiff’s assertions of liability to be twofold, namely, a claim for construction-related deficiencies and a claim for the shortfall in the reserve fund.

More particularly, the plaintiff asserts that: a. the defendant, as developer and seller of the condominium units, breached its statutory, contractual and fiduciary duties owed to the plaintiff by: i. failing to complete the construction of the common property, common facilities and services of the condominium pursuant to the building permits, zoning bylaws, specifications and plans in a good and workmanlike manner; ii. failing to fulfil promises and warranties made to buyers and owners of the units to build and construct the property in accordance to agreed specification and the general plans; iii. failing to rectify the deficiencies pursuant to orders to remedy contraventions issued by the City of Saskatoon; iv. failing to address circumstances that resulted in the City of Saskatoon issuing a Notice of Violation on July 5, 2019; and v. failing to provide the plaintiff with documentation as required under the statute and/or regulations; b. the defendant failed to take the necessary steps related to the reserve fund, resulting in a $222,677 deficiency in the fund. [ 8 ] It is noteworthy that in both the original and amended statement of claim, the plaintiff alleges: (1) that the defendant was the “developer” of the condominium; and (2) that the defendant “as seller of the units in the condominium” entered into contracts by which it gave various warranties and representations.

Although the defendant did not serve and file a defence after the claim was amended, it did serve and file a statement of defence to the initial claim. In that defence, the defendant expressly admitted, among other things, that it was the “developer” of the condominium. As for acting as “seller of the condominium units”, the defendant did not specifically deny this allegation. Rather, it simply asserted that it had met its contractual, statutory and fiduciary obligations to the plaintiff and the individual owners.

In the absence of an express denial of the allegation that the defendant is the seller of the units, I am satisfied that the defendant must be taken to have admitted the allegation. [ 9 ] In its application, the plaintiff seeks a preservation order that preserves three units of the condominium, namely, Units #5, #29 and #46 from disposition. That said, there now appears to be no dispute that two of these units have now been sold, leaving only Unit #46 as the subject of this application.

While the plaintiff’s primary remedy is for a preservation order on Unit #46, it is prepared to accept an arrangement whereby the properly adjusted proceeds of sale from a bona fide fair market sale of any of these units be paid into court pending further agreement or court order.

That said, the plaintiff’s counsel said nothing about whether such an arrangement fell within the Court’s jurisdiction to make a preservation order under s. 5(6) of the EMJA . [ 10 ] The stated grounds for the plaintiff’s application includes the assertion that any conveyance of the remaining units to third parties is believed to be for the purpose of defrauding, hindering and prejudicing the plaintiff’s interests . [ 11 ] In support of the application, the affidavit of one of the plaintiff’s directors was served and filed.

With respect to the contention that the sale of units to third parties is for the purpose of defrauding, hindering and prejudicing the plaintiff’s interests, the director refers to an arrangement whereby the defendant granted security to its former solicitors, who were previously defending this claim, on certain units to cover its liability for unpaid accounts. Beyond that reference, no other evidence is presented. [ 12 ] The director also goes on to describe the quantum of the plaintiff’s construction related claim.

In this regard, he asserts that the cost to complete the common property, as identified in a report the plaintiff has obtained, amounts to $1,015,000. [ 13 ] Further, as evidence of the defendant’s ongoing defaults, the director deposes that the defendant has consistently

and chronically been in arrears in paying the assessments levied on the units it continues to own. As of November 4, 2021, the defendant’s arrears amounted to $217,814.46. In short, the director expresses concern that the defendant will not have assets to satisfy any liability it will owe to the plaintiff. [ 14 ] At this point, I digress from the narrative to add some observations about the assessments levied against the defendant. These assessments are the subject of a second action between the plaintiff and the defendant, commenced in 2021 on court file QBG-SA-01202-2021 [2021 action].

In a perplexingly worded statement of claim on the 2021 action, the plaintiff asserts that the defendant then owed the amount described in the director’s affidavit, all as outstanding assessments on nine condominium units still owned by the defendant. The particulars for the assessments are pleaded in a less than straightforward manner. For each of Units #5, #6, #29 and #46, the amounts claimed include alleged arrears for: (1) condominium fees; (2) an amount for a lien for arrears; (3) accelerated condominium fees; (4) retroactive condominium fees; and (5) a “special assessment”.

For Units #1, #17, #22, #33 and #34, the amounts claimed are each confined to a “special assessment”. The special assessment amounts vary among the nine units, but the total of the special assessments for all nine, as described in the statement of claim, amounts to $186,354. [ 15 ] No material facts are pleaded in the statement of claim to set out the basis for these particulars. Not surprisingly, the defendant served and filed a demand for particulars.

In it, the defendant sought particulars about the special assessments, with a specific inquiry as to whether the assessment was levied against all units in the condominium and the amounts paid for the assessment. The defendant also sought particulars about the retroactive condominium fees charged. Regrettably, the plaintiff did not provide an informative response to the demand.

Rather, it simply asserted, incorrectly in my view, that the responses, about the special assessment and the retroactive condominium fee allegations, amounted to matters of evidence and not matters of pleading. [ 16 ] As an aside, there is another observation about the plaintiff’s claim for outstanding assessments, which factors in the defendant’s contention that the special assessment has been improperly created and applied. In a pending application for

summary judgment on the 2021 action, affidavit evidence discloses that, while the special assessment is to apply to all unit holders, none of the unit holders have paid it. It further discloses that the plaintiff has pursued enforcement of the special assessment against the defendant, only. [ 17 ] Returning to the present application in this action, the Court also received the affidavit of Colin Zhang, the president, director and shareholder of the defendant. Mr. Zhang denies the plaintiff’s assertion about the cost of correcting the common property deficiencies. In his view, the cost would not exceed $100,000.

This is consistent with earlier affidavit evidence provided on behalf of the defendant. Mr. Zhang also deposed that all the units, except for Unit #46, have been sold. Upon the sale of Unit #46, the defendant plans to pay the outstanding debt owed to its defence counsel as well as make payments towards the assessment that it believes is properly owed to the plaintiff. [ 18 ] As a final observation about the background facts, I note that the plaintiff neither offered nor arranged for any security associated with its preservation order request. Law and Analysis [ 19 ] The EMJA is relatively new legislation.

Passed by the legislature in 2010, it was proclaimed in force on May 28, 2012. The EMJA represents somewhat of a codification of Saskatchewan law related to the enforcement of money judgments. Prior to its enactment, such enforcement was rather uncoordinated, drawing on various other sources of law. The EMJA represented an effort to corral the means of enforcement in one statute, including very limited pre-judgment relief. [ 20 ] Preservation orders represent the only form of pre-judgment enforcement under the EMJA . They are governed by

Part II of the statute. More particularly, the Court’s discretionary authority to grant such an order is governed by s. 5, the full text of which reads as follows: 5

(1) In this Part: (a) ”action” means a legal action that would, if successful, result in: (

i) a judgment; or (ii) an order declaring a gift, conveyance, assignment, transfer, delivery over or payment of property by the defendant void as a fraudulent conveyance or fraudulent preference; (b) ”transferee” means a person who has received an interest in property from the defendant pursuant to a transaction mentioned in subclause (a)(ii). 5(2) An application for a preservation order may be made to the court by any of the following persons: (

a) a plaintiff in an action commenced in Saskatchewan; (

b) a plaintiff in an action commenced in another jurisdiction, if the action would, if successful, result in a judgment that is enforceable as a judgment of the court. 5(3) Two or more plaintiffs in separate actions may apply jointly for a preservation order pursuant to subsection (2). 5(4) In the case mentioned in subsection (3), the discontinuance of one of the actions does not affect the application or the preservation order with respect to the other action. 5(5) The court may grant a preservation order if the court is satisfied that :

(

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

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

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

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

c) the action will be prosecuted without delay, other than delay caused by the defendant or transferee. 5(6) A preservation order may do one or more of the following: (

a) prohibit the disposition of property other than for a purpose mentioned in subclause (5)(b)(i), (ii) or (iii); (

b) prohibit the damage to, dissipation of, destruction of or concealment of property; (

c) require the defendant or transferee to pay money to the sheriff, whether as a single amount or through a series of payments; (

d) require a person who is or who will become indebted to the defendant or transferee to discharge the debt by payment to the sheriff when the debt becomes payable; (

e) prohibit the defendant or transferee from collecting an account; (

f) appoint a receiver pursuant to

Part VIII, with or without security, in which case

Part VIII applies with any necessary modification; (

g) allow the defendant or transferee to retain and use property affected by an order subject to conditions; (

h) instruct the sheriff to seize property on such terms and conditions as the court considers appropriate; (

i) instruct the sheriff, a receiver, the defendant, a transferee or another person to sell property pursuant to

Part XI if: (

i) the property is likely to depreciate substantially in value before expiry of a preservation order; or (ii) the costs of storage of the property are disproportionately large in relation to its value; (

j) in the case of a sale mentioned in clause (

i) by a person other than the sheriff or a receiver, instruct that person to pay the net proceeds of the sale to the sheriff; (

k) direct the defendant or transferee to disclose to the court or to the sheriff the existence and location of property in the manner specified, which may include an examination of the defendant under oath or affirmation; (

l) make any other provision that the court considers necessary for the effectiveness of the preservation order. 5(7) A preservation order shall require the plaintiff to provide security in an amount that, in the opinion of the court, is sufficient to compensate the defendant or other person affected by the preservation order for pecuniary loss that may be caused as a result of the preservation order unless, in the court’s opinion, requiring the plaintiff to provide security would cause undue hardship to the plaintiff. 5(8) A preservation order shall not relate to property located outside Saskatchewan if the action in connection with which the order is made was commenced outside of Canada. 5(9) The court may grant a preservation order against any of the following persons: (

a) the defendant, with respect to property of the defendant and property acquired by the defendant after the date of the preservation order; (

b) a transferee, with respect to property received from the defendant; (

c) a person, other than the defendant or a transferee, with respect to property of the defendant and property acquired by the defendant after the date of the preservation order. 5(10) A preservation order may be granted on application by a judgment creditor. 5(11) Subsections (1) to (9) apply, with any necessary modification, to an application pursuant to subsection (10). [Emphasis added] [ 21 ] In Ronald C.C. Cuming, Q.C. and Donald H. Layh, Q.C. (as he then was), The Saskatchewan Enforcement of Money Judgments Act: Commentary and Analysis , (Regina: Office of the Queen’s Printer, 2012) [ EMJA Commentary ], the authors

comment that

Part II reflects the legislature’s response to the popularity of Mareva injunctions (named after the English Court of Appeal judgment in Mareva Compania Naviera S.A. of Panama v Int. Bulkcarriers S.A. , [1980] 1 All ER 213 ). As such, the statutory framework within

Part II follows the basic approach of Mareva injunction applications. In this context, the EMJA Commentary addressed the purpose of

Part II as follows at page 61:

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

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

Part II. [ 22 ] In relation to the discretionary aspect of preservation orders, the authors of the EMJA Commentary emphasized, at page 64, that the language in s. 5(5) is permissive, with the word “may”. As such, it is evident that the legislature wished the Court to retain discretion to deny a preservation order even where the requisite conditions to grant such an order have been met. [ 23 ] Having said all the above, and in the specific context of this application, it is clear that a preservation order may only be granted “if the court is satisfied” that all three conditions in s. 5(5)(a), (

b) and (

c) exist. As in the case of the essential elements for a Mareva injunction, the burden of satisfying the Court in this respect lies with the applicant. In keeping with the dictionary definition of the word “satisfy”, this means that the plaintiff bears the burden of persuasion by argument and/or evidence that the conditions exist.

See Yorkton (City) v Mi-Sask Industries Ltd. , 2021 SKCA 43 at para 37 , [2021] 6 WWR 18 [ Mi-Sask ] . [ 24 ] Further to the decision in Mi-Sask , the Saskatchewan Court of Appeal conducted a thorough review of the relevant authorities as to the nature of an applicant’s burden in s. 5(5). After completing this review, the Court discussed the contextual factors that parties and application judges are obliged to consider in assessing the existence of the s. 5(5) conditions. To some measure, but not entirely, these discussed factors relate to the ability to access the relevant information.

This discussion appears at paras. 53, 54 and 56 in the judgment of Barrington-Foote J.A.: 53 A judge hearing an application for a preservation order can take account of the nature of such an application and the evidence that a plaintiff is capable of adducing. The manner in which those factors will impact the judge’s reasoning will depend on the circumstances of the case. A defendant will frequently have exclusive or, at a minimum, far better access to the financial and other information relevant to an application for a preservation order.

That would weigh in favour of a less stringent approach when determining whether the evidence is sufficiently clear and persuasive to make the plaintiff’s case. From the defendant’s perspective, this could be characterized as resulting in a tactical burden on the defendant to lead better evidence, such as evidence as to the extent and confirmation of insurance coverage; evidence of other assets, cash flow and revenue; and evidence of anticipated expenditures.

However, there will also be occasions where the plaintiff has or has ready access to the necessary information. 54 This analysis is not intended to suggest that the ability to access relevant evidence is the only relevant circumstance in this context. The potential impact of a likely shortfall in judgment enforcement or of a preservation order being granted are other examples. Further, I would emphasize that mere allegations that enforcement may be ineffective are not enough. Evidence of a likely shortfall is required.

The case law relating to s. 5(5) ands. 8 has correctly stressed that requirement. …. 56 In the result, I conclude that while the evidential burden on a s. 5(5) application is that the plaintiff must adduce or point to evidence that constitutes prima facie proof of the conditions noted above, the persuasive burden is proof that those conditions exist on a balance of probabilities.

If the court is unable to conclude on a balance of probabilities that those conditions exist, the plaintiff will not succeed. [Emphasis added] [ 25 ] Applying these considerations to the present case, I am satisfied that there is nothing in the evidence to suggest, or lead to the inference, that information relevant to the existence of the s. 5(5) conditions is meaningfully more inaccessible to the plaintiff than it is to the defendant.

It follows that the plaintiff bears both the evidential burden in this application and that the persuasive burden is, more or less, evenly divided between the parties. [ 26 ] Turning to the three conditions in s. 5(5), I discern no dispute between the parties that the conditions described in s. 5(5)(

a) and (

c) exist. Given the pleadings, there is no doubt that, if its action is successful, the plaintiff will receive a judgment for damages. Of course, the quantum of those damages remains very much in dispute. As for the condition in s. 5(5)(c), I am satisfied that, despite the slow pace of this litigation, the plaintiff is doing what it can to prosecute the action without further delay, possibly by

summary judgment. [ 27 ] This leaves the condition described in s. 5(5)(b), which is very much in play. In the specific context of the present application, an inquiry into the presence of this condition calls for a two-step analysis. At the first step, the plaintiff must satisfy the Court that, if the preservation order is denied, the plaintiff’s enforcement of a future judgment against the defendant is likely to be partially or totally ineffective due to the expected disposition of Unit #46.

If the first step is met, the plaintiff must move to the second step and satisfy the Court that the disposition of Unit #46 does not serve one of the purposes in s. 5(5)(b)(i), (ii) and (iii). The second step underscores the legislature’s view that not all dispositions of property by a defendant will necessarily justify a preservation order, even where the disposition will adversely impact a plaintiff’s ability to collect a future judgment.

[28] Assessing these steps, I am satisfied that the plaintiff has met the first step. Having regard to all the evidencebefore me, including evidence from the defendant, I find that the defendant has outstanding obligations it cannot presently pay, includingobligations to its current and former counsel.

In this context, it is not hard to conclude that the disposition of Unit #46 will diminish theeffectiveness of any measures the plaintiff will take to enforce a future judgment. [29] As for application of the property exceptions in s. 5(5)(b)(i), (ii) and (iii), I am of the view that the burden ofproof remains on the plaintiff, albeit in an indirect way, similar to that which arises when a party raises a defence in the face of theopposing party’s overall burden.

In this circumstance, it is up to the defendant to raise evidence that gives some reality to the exception.Where that occurs, the plaintiff bears the burden of negating the exception. [30] In the present case, there is evidence and/or argument that the exceptions in s. 5(5)(b)(ii) and (iii) are engaged.For the exception in s. 5(5)(b)(ii), there is evidence that the sale of Unit #46 is simply the last sale of the units the defendant developedin the construction of the condominium. As such, the argument arises that the disposition is for the purpose of carrying on its business inthe ordinary course.

For the exception in s. 5(5)(b)(iii), the uncontradicted evidence of the defendant is that a portion of the proceeds ofdisposition will be applied to satisfy the accounts of counsel who have been engaged in the defence of both actions. [31] One of the earliest reported decisions that articulated the test for a disposition or transaction that is in theordinary course of business is the English Court of Appeal judgment in Oppenheimer v Attenborough & Son, [1908] 1 KB 221[Oppenheimer]. In Oppenheimer, the issue involved the pledge of a diamond by a diamond broker as security for a loan.

The lenderaccepted the pledge in good faith, unaware that diamond brokers had no right to pledge diamonds. The Court held that the lender had noreason to believe that the pledge was not carried out in the ordinary course of business. In setting out the test for determining whether atransaction falls within the ordinary course of business, the Court focused on the manner of the transaction rather than its inherent qualityor characteristics.

In this regard, Buckley L.J. wrote the following at page 230: I think it means, ‘acting in such a way as a mercantile agent acting in the ordinary course of business of a mercantile agent would act;’that is to say, within business hours, at a proper place of business, and in other respects in the ordinary way in which a mercantile agentwould act, so that there is nothing to lead the pledgee to suppose that anything wrong is being done, or to give him notice that thedisposition is one which the mercantile agent had no authority to make.

Dealing with it in that way, it seems to me that there is no greatdifficulty in the Act of Parliament. [32] As dated as the decision in Oppenheimer obviously is, the test articulated in it remains good law.

The test hasbeen generally accepted in Canada, including Schafhauser v Shaffer, (SKDC), [1943] 1 WWR 118 (Sask Dist Ct);Thoresen v Capital Credit Corporation Ltd. (1964), (BC CA), 43 DLR (2d) 94 (BCCA); Commercial CreditCorporation v Massey-Ferguson Industries Ltd. (1973), (SK KB), 42 DLR (3d) 456 (Sask QB); Mortimer-Rae vBarthel (1979), (AB KB), 105 DLR (3d) 289 (Alta SC); and Ilic v Chrysler Credit Canada (2002), 4 PPSAC (3d) 70(Ont Sup Ct). [33] A more contemporary articulation of the test, not inconsistent with that set out in Oppenheimer, was penned inFairline Boats Ltd. v Leger (1980), 1 PPSAC 218 (QL) (Ont H Ct J).

In the context of a repossession claim by a boat manufacturer,Linden J. reviewed the authorities and related texts that addressed transactions in the ordinary course of business, primarily pertaining tothe sale of personal property. Following this review, he drew much the same conclusion as that drawn by Buckley L.J., namely, that themanner of the transaction, having regard to all the circumstances, is the controlling feature.

In this regard, Linden J. wrote the followingat paras. 12-14: 12 Thus in deciding whether a transaction is one that is in the ordinary course of business, the courts must consider all of thecircumstances of the sale. Whether it was a sale in the ordinary course of business is a question of fact. (See the Ziegel article, supra, atp. 86.) The usual, or regular type of transaction that people in the seller’s business engage in must be evaluated. If the transaction is onethat is not normally entered into by people in the seller’s business, then it is not in the ordinary course of business.

If those in the seller’sbusiness ordinarily do enter into such agreements, then, even though it may not be the most common type of contract, it may still be onein the ordinary course of business. 13 One factor that must be examined is where the agreement is made. If it is at the business premises of the seller it is more likely tobe in the ordinary course of business.

If it is away from the business premises of the seller, in suspicious circumstances for example, acourt may hold that it is not in the ordinary course of business. 14 The parties to the sale may also be significant, although certainly not controlling. If the buyer is an ordinary, everyday consumer,the likelihood of his being involved in a sale in the ordinary course of business is greater.

If the buyer is not an ordinary consumer, but adealer or financial institution, then the Court may take this out of the ordinary course of business, but not necessarily so because dealersand others too may, in proper circumstances, receive the benefit of the provision. [34] Applying the relevant test and subsequent commentary to the present case, I am satisfied that the plaintiff hasnot negated the suggestion that the defendant’s sale of any units has, or will be, carried out in the ordinary course of its business.

There isno evidence that the defendant plans to sell Unit #46 to anyone other than an arm’s- length purchaser. Moreover, I am satisfied that, in itspleading, the plaintiff has expressly admitted that such transactions would be in the ordinary course of business. The assertion in thepleading, admitted by the defendant, that the defendant is the developer and “seller” of the units cannot reasonably be interpreted in anyother way.

In this context, the assertion by plaintiff’s counsel that the sale of the units is not in the ordinary course of business, withouteither evidence or argument on matters of law, defies common sense. [35] Although the defendant did not expressly rely on the exception in s. 5(5)(b)(iii), I am satisfied that the plaintiffhas not negated that exception, either. Aside from the fact that the plaintiff has not contradicted the affidavit evidence of Mr. Zhang, Ifind that the plaintiff has again given evidence that supports this conclusion.

In this regard, the plaintiff’s director deposed to a concernthat the defendant had improperly granted a security interest to its former counsel. While I appreciate that the ostensible purpose of thisevidence was to raise the spectre of fraud, it redounds to support the defendant’s argument that, by virtue of the exception in s. 5(5)(iii),

it is entitled to dispose of property for the purpose of generating income to pay the costs of its counsel. [ 36 ] Aside from failing to prove the requisite conditions in s. 5(5), there is another reason that prevents the Court from directing a preservation order. In this regard, it is important to remember that s. 5(7) of the EMJA obliges the plaintiff to provide security that is sufficient to compensate the defendant, or any other person affected by the order, for pecuniary loss that may result from the order.

As articulated by the Saskatchewan Court of Appeal in 2055190 Ontario Ltd. v Zhao , 2018 SKCA 66 , [2019] 12 WWR 401 [ Zhao ] , and certain authorities cited therein, the requirement for security is mandatory – and an applicant has the duty to make submissions related to security. Zhao also stands for the authority that an undertaking to cover such damages, which would be acceptable in the context of an injunction application, does not satisfy the requirements of s. 5(7) . [ 37 ] In the present case, there is no evidence of any arrangements the plaintiff has made to provide such security.

Indeed, it is reasonably clear to me that the plaintiff would not be inclined to provide security. Accordingly, even if the plaintiff had met its burden under s. 5(5), the Court could not grant a preservation order without the proper security in place. Conclusion [ 38 ] In the result, I am not satisfied that the plaintiff has proved the existence of all three conditions necessary for the granting of a preservation order.

It necessarily follows that the plaintiff’s application must be dismissed. [ 39 ] With respect to costs, I am satisfied that the plaintiff must bear some costs for an application that, in the final analysis, was poorly thought out and had no reasonable prospect of success. That said, I am also persuaded that it would be inappropriate for the Court to award any such costs to be payable forthwith. Accordingly, I award the defendant costs in the amount of $3,000, payable in any event of the cause, but not forthwith. Rule 10-4 of The Queen’s Bench Rules is waived. J. R.W. ELSON