Here's some DD on Urban!!
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Alberta >> Court of Queen's Bench >>
Citation: White Bear Construction Ltd. v. Casavant, 1999 ABQB 1013
Date: 1999-12-22
Docket: 9903-03107
URL: http://www.canlii.org/ab/cas/abqb/1999/1999abqb1013.html
White Bear Construction Ltd. v. Casavant, 1999 ABQB 1013
Date: 19991222
Action No. 9903 03107
IN THE COURT OF QUEEN'S BENCH OF ALBERTA
JUDICIAL DISTRICT OF EDMONTON
BETWEEN:
WHITE BEAR CONSTRUCTION LTD., KEN HODGSON
AND SHARON HODGSON
Plaintiffs
- and -
URBAN CASAVANT, ALLAN MOEN, MCM MINERALS INC.,
FULL TIME MANAGEMENT INC., AND PAN PACIFIC GEM
INDUSTRY (TIANJIN) CO., LTD.
Defendants
_______________________________________________________
MEMORANDUM OF DECISION
of the
HONOURABLE MADAM JUSTICE J.B. VEIT
_______________________________________________________
APPEARANCES:
Barry M. King
for the Plaintiffs
Gregory J. Leia
for the Defendants
Summary
[1] The defendants asks the court to lift the ex-parte attachment order the court issued on December 17, 1999; they argue that the plaintiffs have failed to comply with the requirements of s. 17 of the Civil Enforcement Act and that the plaintiffs have failed to file adequate undertakings in damages.
[2] The application is allowed in part. On an interim interim basis, that is until the hearing of the plaintiffs’ application for a pre-judgment attachment order on January 11, 2000, the ex parte injunction is set aside as it relates to Mr. Casavant’s spouse and children.
Cases and authority cited
[3] By the court: Rea v. Patmore [1999] A.J. No. 1168 (Q.B.); Osman Auction Inc. v. Belland [1998] A.J. No. 1443 (Q.B.); Canadian Engineering Surveys Co. v. Esso Resources Canada (1988) 89 A.R. 35 (M.) and cases discussed by Stevenson & Cote under R. 214(1).
1. Background
[4] The plaintiffs obtained an ex-parte attachment order on the basis of affidavits from Ken Hodgson, Frank Olson and Norm Sparks.
In his affidavit, Mr. Hodgson swears that:
- both White Bear and he in his personal capacity have advanced funds to the defendants Allan Moen and Urban Casavant which funds were to be repaid to White Bear;
- demand has been made for repayment, but no repayment has been received;
- the plaintiffs are owed $1,037,902.35;
- he is not aware of any assets of Moen and Casavant in Alberta other than a claim they have advanced against John Bergen for 130,000 shares and 65,000 warrants in Radar Acquisitions Corp. He states that he believes Moen and Casavant to be judgment proof;
- 85,000 shares of Radar Acquisitions Corp were traded on the 14th and 15th of December 1999 by brokerage houses normally used by Urban Casavant and Allan Moen;
- the list price for Radar Acquisitions Corp has dropped by more than $0.27 per share since December 14th;
- Urban Casavant and Allan Moen have engaged in a number of situations where stock listing prices have been manipulated including personal information of involvement in transactions involving Sepik Gold Corporation;
- Allan Moen obtained 130,000 shares and 65,000 warrants in Radar Acquisitions Corp. as a result of a private placement which became free trading in October, 1999;
- he is aware that several other investors have similar claims against Moen and Casavant.
[5] He swore that the plaintiffs were likely to be seriously hindered in the enforcement of any judgments that they would obtain in this action because the defendants are trading Radar Acquisitions Corp. shares in a pattern which will result in the disposition of the shares at less than their real value.
[6] In his affidavit, Frank Olson swears that Sky Rise Farms Ltd. has advanced $1,333,080.00 to Allan Moen and Urban Casavant, that the monies should have been repaid, and that although demand has been made for repayment, repayment has not been made. Mr. Olson also swears that he has been involved with Allan Moen and Urban Casavant for a number of years, and that he is not aware of any assets owned by them in Alberta.
[7] In his affidavit, Norm Sparks swears that Norsand Farms Ltd. has advanced more than $650,000.00 to Messrs. Moen and Casavant, which funds were to be repaid, and that although demand has been made for repayment, repayment has not been made. He also states that he has been involved with Messrs. Moen and Casavant for many years and that he is not aware of any assets owned by them in Alberta.
[8] In support of their application to have the ex-parte attachment order set aside, Urban Casavant and Allan Moen have sworn affidavits. In his affidavit, Mr. Casavant has sworn that:
- Ken Hodgson told him that he had purchased 600,000 shares of Sepik Gold Corporation for approximately $0.80 per share for a gross cost of approximately $480,000.00 He advised he sold the same shares for gross proceeds of $270,000.00. The alleged trading loss was approximately $210,000.00. Ken Hodgson asked to indemnify him for such losses and I agreed to provide the following consideration:
cheque $20,000.00
cheque $10,000.00
interbroker transfer from Arnold Guptka (IPO Capital) to
Canaccord in the name of Ken/Sharon Hodgson (60,000 shares
of Kincho Global Enterprises ($0.75 per share) and 50,000 shares
of Sepik Gold Corporation ($0.40 share) $100,000
100,000 shares of Radar Acquisition Corp. $ 80,000
[9] Mr. Casavant does not explain why he would agree to compensate Mr. Hodgson for the latter’s trading losses, but Mr. Casavant asserts that Mr. Hodgson never provided proof of such losses.
- On April 8, 1998, White Bear advanced to him $45,000.00 on behalf of Full Time Management Inc., a receipt for which is attached. I delivered to White Bear 100,000 shares of Sepik Gold Corporation at a value of $58,850. White Bear wrote a cheque to me for the difference being $13,850.00, a receipt for which is attached.
- In the spring of 1998, White Bear advanced to me the sum of $55,000. I delivered to White Bear 100,000 shares of Sepik Gold Corporation with a value of $55,000.00.
- On April 1,1998, White Bear advanced $37,450.00 to me on behalf of Full Time Management Inc., a receipt for which is attached. This was a debt of Full Time Management Inc. to pay for corporate staking. I was not to be personally liable for this indebtedness.
- On or about June 15, 1998, I signed an accommodation letter/promissory note in favour of White Bear with respect to the purchase by Pan Pacific of the 4 Chip Trailers. The accommodation letter/promissory note refers to $126,502.35 and 9,000 shares of Sepik Gold Corporation, a copy of which note is attached. I believe that this debt would have been retired upon the sale by White Bear of the 4 Chip Trailers.
- I attach a copy of my cheque #054 dated June 1,1998 in the amount of $190,000.00. Ken Hodgson never advanced $190,000.00 to myself.
- I attach a copy of my cheque #177 dated December 9, 1998 in the amount of $325,000.00. Ken Hodgson did not advance $325,000.00 to myself.
- I attach a copy of my cheque #178 dated January 7, 1999 in the amount of $230,000.00. Ken Hodgson did not advance $230,000.00 to myself.
- I provided the plaintiffs with five blank cheques as sign of good faith that debts for which I was personally responsible would be paid. Two cheques were used to pay out the first transaction relating to the trading loss. The remaining three cheques were completed by the plaintiffs without my authorization.
[10] Mr. Casavant also swears that a corporation owned by his children, Team Trading Enterprises is owed at least 800,000 shares of Radar Acquisition Corp having a market value of $2,040,000, and his spouse is owed at least 300,000 shares of Radar, having a market value of $700,000.00 and his brother-in-law Eric Reid is also owed at least 300,000 shares of Radar.
[11] In his affidavit, Mr. Moen swears that:
- he agreed to sell to White Bear a 5% interest in Pan Pacific if White Bear made a loan of approximately $150,000 to $175,000 to Pan Pacific. White Bear made the loan by assigning its equity in a 1994 Peterson Pacific Chipper Model - with a market value of $450,000 - for $1.00 and assumption of the existing lease financing to the Bank of Nova Scotia, Prince Albert, in the amount of $300,000.00, and attaches the bill of sale signed by Pan Pacific and White Bear. On April 15, 1998, Pan Pacific sold the 1994 Peterson to Wajax Industries Ltd. for $450,000.00 plus GST, and attaches a letter outlining the terms of sale. The Bank of Nova Scotia financing was paid out on sale. The net sale proceeds of $170,000 inclusive of GST would have been owing by Pan Pacific to White Bear.
- on June 8, 1998 White Bear sold to Pan Pacific four trailers for $150,000.00 plus GST, and attaches a copy of the bill of sale. Although the document states that the sale price was $200,000.00, the sale price was to be $150,000.00. Also, although the document sates that the purchase price was paid in full no payment was made to White Bear. The changes were made to the documents to obtain financing from Sky Rise Farms Ltd. Urban Casavant and Pan Pacific jointly made a promissory note in favour of Ken Hodgson and Pan Pacific jointly for $150,000, and attaches a copy of the promissory note. There were two additional notes granted at the same time, one for $30,000.00 made by myself to Ken/Sharon Hodgson, a copy of which is attached, and one for $126,602.35 and 9,000 shares of Sepik Gold Corporation. The latter note represents the difference between $150,000.00 plus GST less the $30,000.00 from Urban Casavant. On June 15, 1998 Pan Pacific obtained a mortgage on the 4 Chip Trailers from Sky Rise Farms Ltd. (Frank Olson) in the amount of $150,000.00, and attaches a copy of the General Security Agreement. Only $120,000.00 was advanced by Sky Rise Farms Ltd. and the remaining $30,000.00 represented loan fees. White Bear received $30,000.00 from the loan proceeds in satisfaction of Urban Casavant’s note. On June 15, 1998, Pan Pacific sold the 4 chip trailers to Sky Rise Farms Ltd. On June 15,1998, Sy Rise Farms Ltd sold the 4 chip trailers to White Bear for $150,000.00 plus GST, and attaches a copy of the bill of sale. Throughout this period, White Bear retained possession of the 4 chip trailers. I was advised by Frank Olson that White Bear has sold the 4 chip trailers and retained the proceeds and has not accounted for the sale proceeds. The sale proceeds would have been applied against the $126,602.35 note. As far as I am aware, the only person who is out of pocket on this transaction is Sky Rise Farms Ltd. for their loan proceeds.
- White Bear agreed to purchase from Pan Pacific 100,000 shares of Sepik Gold Corporation for the sum of $55,000.00, and attaches the receipt.
- In August, 1999, I personally pledged 150,000 shares of Radar Acquisition Corp which I received from John Berger in July of 1999 to White Bear to secure the indebtedness of Pan Pacific to White Bear. The market value of those shares on December 17, 1999 was $382,500.00 ($2.55 per share). White Bear has not advised if they remain in possession of these shares and/or if sold White Bear has not accounted to Pan Pacific with regard to the sale. [Mr. Moen does not attach any documentation in support of this contention.]
- White Bear bought a 7% interest in Full Time for $35,000.00 on March 24, 1999 with a right to acquire an additional 7% for $35,000.00, and attaches a copy of the agreement. MCM signed a promissory note for the $35,000.00 advanced on March 24, 1998 and attaches a copy of that note. [There appears to be a write-over on the document attached. However, in the production of records from the plaintiffs, there is a copy of a document from MCM Minerals Inc. which appears to relate to this transaction and which is dated March 24th, 1998.] On April 1,1998 White Bear advanced $37,500.00 to Urban Casavant and attaches a copy of the receipt signed by Casavant on behalf of Full Time.
- At no time did I personally borrow funds from White Bear, Ken Hodgson and/or Sharon Hodgson. I agreed to sign the note of June 15, 1995 for $30,000.00 from Urban Casavant to Ken/Sharon as additional comfort for the $30,000.00 debt owing by Pan Pacific which was paid. Until White Bear accounts for the 150,000 shares of Radar Acquisition Corp it holds as lender, I cannot reconcile whether there are any funds owing by Pan Pacific to White Bear.
- I have an action against John Bergen for delivery of 300,000 shares of Radar Acquisition Corp. with a market value of $700,000.00. These shares are subject to litigation in which the solicitor for the applicant plaintiffs is the solicitor for the defendant John Bergen. John Bergen and one of the plaintiffs in this action, Ken Hodgson, are directors of Radar Acquisition Corp.
[12] White Bear and Ken Hodgson and Sharon Hodgson have provided an affidavit of documents which essentially contains the same documents as the documents appended to the affidavits of Moen and Casavant. There is no document from White Bear evidencing advances of $190,000.00, $325,000.00 and $230,000.00 to Urban Casavant.
[13] The plaintiffs/claimants have not provided any evidence about the Moen - Casavant pattern of trading in Radar Acquisitions Corp.
[14] This action was commenced in February, 1999. In July, 1999, at the request of the defendants, Master Floyd ordered the plaintiffs/claimants to file an affidavit of documents. The plaintiffs have not yet examined the defendants on discovery.
[15] The defendants assert that they have provided the plaintiffs with their complete stock trading records to July 1999.
[16] The defendants allege that the transactions that give rise to the claim in these proceedings arose out of a decision in June 1998 to acquire the shares of Radar, basically a dormant shell that owned some ammonite properties in northern Saskatchewan, to use as a structure to develop a mining venture in northern Saskatchewan. A group of investors agreed to buy the control block of Radar from John Bergen. The agreements were that Bergen would transfer 2.5 million shares to 5 individuals, who did not include Urban Casavant, but did include Casavant’s wife, children, brother-in-law, and Ken Hodgson. The consideration paid for the shares at that time was 4 cents a share. According to the defendants, at the end of July 1998, the first payment on the Bergen block was made, and half the shares in the Bergen control block were delivered. The defendants allege that when the stock of Radar increased from 10 cents to 80 cents a share, all the new owners of the control block wanted to do a private placement in Colorado. They then allege that the relationship among the members of the control block broke down in late 1998. The defendants allege that there was an informal pooling arrangement in place pursuant to which all members of the group would wait for the stock to reach $10.00 per share before selling any. The defendants allege that not all parties respected the pooling agreement, some sold their shares into the market, and the allegations and counter allegations began.
[17] The defendants allege that, during the trading history of Radar, the stock has dropped in increments greater than 27 cents a share.
2. Statutory and jurisprudential requirements to obtain a pre-judgment attachment order
[18] As pointed out in earlier decisions, because pre-judgment relief is extraordinary, a court is not bound to grant that relief even if an applicant satisfies all of the statutory conditions.
[19] The statutory conditions are found in s. 17 (2) of the Civil Enforcement Act:
- there is a reasonable likelihood that the claimant’s claim against the defendant will be established. (It will be noted that this is a substantially higher threshold that the requirement for an interim injunction which is only that there is a serious issue to be tried.); and
- there are reasonable grounds for believing that the defendant is dealing with the defendant’s exigible property,
- otherwise than for the purpose of meeting the defendant’s reasonable and ordinary business or living expenses, and
- in a manner that would be likely to seriously hinder the claimant in the enforcement of a judgment against the defendant.
[20] The Act also provides in s. 17(4) that the court shall not grant an attachment order unless the claimant undertakes to pay any damages or indemnity that the court may subsequently decide should be paid to the defendant or a third person and the court could require the claimant to provide security for the undertaking.
[21] In section 17(5), the Legislature has ordered that an attachment order shall not attach property that exceeds an amount or a value that appears to the court to be necessary to meet the claimant’s claim.
3. Applying the statutory and jurisprudential standards to this case
[22] On the basis of the material filed on this application, the plaintiffs have not established that there is a reasonable likelihood that the entirety of the claimants’s claim against the defendant will be established. The standard established by the legislation is a high one, but the relief requested is extraordinary.
[23] The plaintiffs have established that there is a reasonable likelihood that they will establish their claim against:
- Pan Pacific for $170,000.00, inclusive of GST, in relation to the dealings in the Peterson Pacific Chipper;
- MCM for $35,000.00 advanced on March 24, 1998;
- Urban Casavant for $37,500.00 advanced on April 1, 1998, on behalf of Full Time;
- Urban Casavant for $126,502.35 for the promissory note relating to the purchase by Pan Pacific of the 4 chip trailers.
[24] Indeed, the Statements of Defence filed in this lawsuit acknowledge that the defendants owe money to White Bear.
[25] The plaintiffs have not established that they have any claim against Urban Casavant’s spouse, or brother-in-law Eric Reid, or the Casavant children who are the owners of Team Trading. Property owned by those persons cannot, on the basis of the evidence provided on this motion, be attached since they do not owe White Bear or the Hodgsons any money. In this context, I note that the submissions made during the course of the hearing establish that Ms. Casavant, Eric Reid and Team Trading all became the legal owners of shares of Radar Acquisitions Corp. long before the plaintiffs claimed any debt against the defendants; therefore, whatever else this case may be, there is no evidence at this stage that Mr. Casavant has traded away shares that he owned to his wife, his brother-in-law and his children with a view to avoiding his debts to the plaintiffs.
[26] The plaintiffs wish to use the evidence of Mr. Moen on his cross-examination on affidavit in another action to establish that Mr. Casavant’s children have given Mr. Casavant authority to trade those shares. There is a question about whether the plaintiffs are entitled to use that evidence, obtained in another proceeding, in this lawsuit, except, obviously in the cross-examination of any of the affiants or to test the credibility of the defendants on discovery: Canadian Engineering Surveys. The weight of the jurisprudence appears to be that a statement made in another proceeding cannot be used for the truth of its contents, but only for the purpose of testing credibility. In this case, of course, although the action was commenced in February 1999, the plaintiffs have not yet examined Mr. Moen. In any event, however, even if Mr. Moen’s sworn statement in another proceeding could be used for the truth of its contents in this proceeding, the statement would not assist the plaintiffs. The mere fact that Mr. Casavant can trade shares owned by Team Trading does not mean that he is the beneficial owner of the shares legally owned by Team Trading.
[27] The plaintiffs have not provided any explicit evidence to establish that the recent trading in Radar Acquisitions Corp. is outside the normal course of business. The absence of such evidence is, of course, fatal to an application for a pre-judgment attachment order. However, since the submissions at the hearing including a submission that, during the last 90 days the stock has traded as high as $4.00 a share, the sale of 85,000 shares by insiders over a two day period may indeed be outside the normal course of trading of the stock. The plaintiffs have, therefore, barely established the minimum evidence required to meet the statutory requirements for the relief.
[28] The plaintiffs have asked for an adjournment to allow them to cross-examine Messrs. Casavant and Allan Moen on their affidavits. They can have an adjournment, of course, but they cannot keep the ex-parte attachment order in place during the adjournment
[29] There is no documentary support for the plaintiffs’ assertion that they, or any of them, advanced over $1,000,000.00 to defendants, or any of them. There is no suggestion, except as specifically acknowledged in the affidavits of Messrs Casavant and Moen that Mr. Casavant’s spouse, or children or brother-in-law guaranteed any of the corporate debts to the plaintiffs. The fact that Mr. Casavant may have trading privileges in relation to stock legally owned by his spouse, his children and his brother-in-law is not the equivalent of concluding that Mr. Casavant is the beneficial owner of the shares in the hands of his spouse, his children, and his brother-in-law.
[30] The plaintiffs have not had the time to answer the claim from Mr. Moen that shares have been deposited as security for any outstanding indebtedness. It is clear, however, than one of the issues that will have to be addressed when the matter is heard next month, is the issue of the claimed security. The Act states that any attachment order should be as narrow as possible. If shares were pledged as security for the outstanding debt, the security might constitute a full answer to the plaintiffs’s claim.
[31] Section 17 of the Act requires, at a minimum, that the applicant for a pre-judgment attachment order establish that proceedings have been commenced in Alberta to establish his claim. Mr. Hodgson swears that he believes that many other claims are being made against the defendants. The affidavits from Olsen and Sparks support that contention. However, making a claim, and establishing that a claim is reasonably likely to be established, are two different things. Messrs. Olsen and Sparks have just commenced legal proceedings; they don’t have judgments. The Civil Enforcement Act appears to address the enforcement of well established claims; it may be that where a creditor is concerned about a debtor’s ability to meet claims as they become due, which may be a slightly different concept from that of not honouring proved claims, the creditor’s remedy is found in bankruptcy legislation. On this interim application, I do not take the evidence of Messrs. Olsen and Sparks into account.
4. Adequacy of the undertaking
[32] White Bear and Ken Hodgson filed undertakings in damages; Sharon Hodgson has filed no such undertaking.
[33] It is a small point but Sharon Hodgson, as one of the plaintiffs in this matter, and one of the claimants, is required to file an undertaking in order for the plaintiffs to technically comply with the statutory prerequisites for obtaining an attachment order.
[34] One of the issues that will be decided at the hearing on the merits is whether the plaintiffs should be required to give security for their undertakings. The parties will find some authority on this issue under the heading “fortifying an undertaking”.
5. Adjournment
[35] White Bear’s application for an attachment order is adjourned to a Special Chambers hearing on January 11, 2000 at 2 p.m. Given the need to have a hearing on the merits as soon as possible on the one hand, and the exigencies of having the affiants cross-examined on their affidavits during the holiday season on the other, the parties are relieved of the obligation to file the ususal special chambers brief. In lieu of such briefs, each party will provide the equivalent for this application of a family law special chambers letter - i.e. a short document that outlines the issues the court will have to decide and the statutory and case law on which the party applies. The plaintiffs/claimants will have carriage of the hearing on January 11. All parties will cross-examine any of the affiants they choose to cross-examine prior to the next court hearing. The plaintiffs/claimants will provide their short outline of the application to the defendants at the latest by noon on Thursday, January 6, 2000; the defendants/respondents will provide their short outline of their position to the plaintiffs at the latest by 4 p.m. on Friday, January 7, 2000
6. Costs
[36] The costs of this hearing will be dealt with by the judge who hears the special chambers hearing on January 11, 2000. By then, it will be clear, for example, whether shares
were placed with the claimants as security for outstanding indebtedness, and the resolution of that issue is likely to have an impact on the award of costs.
HEARD on the 21st day of December, 1999.
DATED at Edmonton, Alberta this 22nd day of December, 1999.
__________________________ http://www.canlii.org/ab/cas/abqb/1999/1999abqb1013.html
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