LLS America LLC v Dill, 2017 MBCA 12

Citation: LLS America LLC v Dill, 2017 MBCA 12 Date: 20170119 IN THE COURT OF APPEAL OF MANITOBA Coram: Chief Justice Richard J. Chartier Madam Justice Holly C. Beard Mr. Justice William J. Burnett Docket: AI16-30-08563 BETWEEN : BRUCE P. KRIEGMAN in his capacity as ) Court Appointed

Chapter 11 ) Trustee for LLS AMERICA LLC ) ) R. L. Tapper, Q.C. and (Applicant) Respondent ) K. M. Coutts ) for the Appellants - and - ) ) ROBERT DILL JR. and TRACEY DILL ) R. C. Roy and ) C. A. Roy (Respondents) Appellants ) for the Respondent ) - and - ) ) Docket: AI16-30-08575 ) Appeals heard and BETWEEN : ) Decision pronounced: ) January 19, 2017 BRUCE P. KRIEGMAN in his capacity as ) Court Appointed

Chapter 11 ) Trustee for LLS AMERICA LLC ) ) (Applicant) Respondent ) ) - and - ) ) ROBERT DILL SR., LILLIAN DILL and ) LILROB LTD. ) ) (Respondents) Appellants ) On appeal from 2016 MBQB 20 , 325 ManR (2d) 147 CHARTIER CJM (for the Court): [ 1 ] For the purposes of this appeal, the applicant, Bruce Kriegman in his capacity as Court appointed Trustee of the bankrupt estate will be referred to as the Trustee and Robert Dill Sr., Lillian Dill, Lilrob Ltd., Robert Dill Jr. and Tracey Dill will be referred to as the respondents.

The respondents appeal the decision of the motion judge dismissing their application to set aside the registration and enforcement in Manitoba of a judgment issued by a Washington State Court (the Washington Court). They also bring a motion to adduce fresh evidence on appeal. [ 2 ] With respect to the motion, we are all of the view that the fresh evidence was available through the exercise of due

diligence. It therefore fails the Palmer test and is not admissible (Palmer et al v The Queen, (SCC), [1980] 1 SCR 759). [3] There is one further matter on the fresh evidence motion. In their motion brief, the respondents make (and we usetheir word) “accusations” against the Trustee.

For example, the respondents state that the order drafted by Washington counsel “does notaccurately reflect what was set out by the Judge in the Oral Ruling”; that the “Trustee’s failure to disclose the evidence in the withinaction, it is submitted, amounts to dishonesty on the part of the Trustee at worst, and material nondisclosure at the very least”; and thatthere is a “stench of apparent dishonesty and nondisclosure against the Trustee”. [4] The Trustee, an officer of the Washington Court, submits that the respondents’ reckless attempt to smear hisreputation, along with that of his Washington counsel, amounts to reprehensible conduct deserving of an order of solicitor and clientcosts. [5] We agree with the Trustee that these “accusations” are wholly unsubstantiated and deserving of censure.

As thisCourt stated in J-Sons Inc v Paterson (NM) & Sons Ltd, 2003 MBCA 156 at para 26, 180 ManR (2d) 178, a person’s “professionalintegrity and trustworthiness ought not to be sullied by allegations of contemptuous conduct that have no foundation in fact” (see alsopara 27).

Our view of the respondents’ conduct is adequately expressed by the imposition of increased costs on the fresh evidencemotion which, after hearing from the parties, we fix at $2,500 all inclusive and, in any event of the cause, payable by the respondents tothe Trustee within 30 days. [6] We now turn to the appeal proper. [7] As already stated, the applicant is the Trustee of the bankrupt estate of certain companies which, as found by theWashington Court, were operated as a Ponzi scheme.

While the respondents were creditors of the bankrupt because they had lent moneyto it, the Trustee was of the view that they had also participated in the scheme. As a result of this, the Trustee commenced an action inthe Washington Court against them to recover any money improperly paid to them. After retaining legal counsel in Washington torepresent them and after unsuccessfully challenging the jurisdiction of the Washington Court, the respondents filed a defence to theTrustee’s claim.

As part of their defence, they admitted that the Washington Court had jurisdiction over the subject matter, but deniedany involvement in the Ponzi scheme and relied on the defence of good faith. At the last minute, the respondents decided not to attendthe trial and give evidence. Their defence was dismissed and judgment was entered against them. They did not appeal the judgment. [8] In his reasons, the motion judge, after reviewing at some length the evidence before him, correctly stated and appliedthe legal principles.

He correctly noted that Washington State is listed as a reciprocating jurisdiction under The Reciprocal Enforcementof Judgments Act, CCSM c J20. He also understood that his role was not to reconsider the merits of the original dispute but, rather, to besatisfied that the respondents had been granted a fair process in that dispute. He was not persuaded that the respondents had met theirburden in that regard.

Key to his decision were his findings that the respondents had attorned to the jurisdiction and that there was a “realand substantial connection” between the Washington Court and the subject matter of the dispute being the bankruptcy proceedingsinvolving the respondents.

See Morguard Investments Ltd v De Savoye, (SCC), [1990] 3 SCR 1077; Beals v Saldanha,2003 SCC 72, [2003] 3 SCR 416; Pro Swing Inc v Elta Golf Inc, 2006 SCC 52, [2006] 2 SCR 612; and Chevron Corp v Yaiguaje, 2015SCC 42, [2015] 3 SCR 69. [9] We are all of the view that the respondents have not demonstrated any error in principle by the motion judge or anypalpable and overriding error with respect to the evidence referred to in his analysis. [10] In the result, the motion for fresh evidence is dismissed and, as explained above, we order increased costs in regards tothat motion.

In addition, the appeal is dismissed with costs. CJM JA JA