LLS America LLC (Trustee of) v. Dill

2017 BCSC 469 LLS America LLC (Trustee of) v. Dill

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: LLS America LLC (Trustee of) v. Dill, 2017 BCSC 469 Date: 20170323 Docket: L140303 Registry: Vancouver Between: Bruce P. Kriegman, solely in his capacity as court-appointed Chapter 11 Trustee for LLS America LLC Plaintiff And David Dill Defendant Before: The Honourable Mr. Justice Walker Reasons for Judgment Counsel for the Plaintiff: K. McEwan, Q.C. D. McEwan Counsel for the Defendant: J. Shields Place and Dates of Trial/Hearing: Vancouver, B.C. February 23-24, 2016 March 2-4, 2016 June 27, 2016 August 17-19, 2016 November 7, 2016 February 1-3, 2017 Place and Date of Judgment: Vancouver, B.C. March 23, 2017 Table of Contents Introduction. 3 Duty of Disclosure on Ex Parte Applications. 7 Facts. 12 The Financial Transactions Involving Mr. Dill 12 LLS America Seeks Bankruptcy Protection. 14 Consolidation of the US Bankruptcy Proceeding of LLS America. 16 Mr. Kriegman's Application for a Consolidation Order 16 The BC Companies are Excluded from the Consolidation. 18 The Status of the BC Companies is Material 26 The Extraterritorial Aspect of the Consolidation Order 27 Conclusion. 38 The Action Against Mr. Dill 40 Underlying Cause of Action. 40 Initial Steps in the Action Against Mr. Dill 44 Mr. Kriegman's Application for a Substituted Service Order 47 Mr. Dill's Attempts to Challenge Jurisdiction. 50 The Trial of the Adversary

Complaint 53 Registration of the Judgment in British Columbia. 54 Initial Registration by Desk Order 54 The Extension Application. 60 Determination. 62 Mr. Kriegman's Failure to Discharge His Duty of Disclosure. 62 Mandatory Bars to Registration. 67 Final Comments. 69 Introduction [1] These reasons concern an application brought by the defendant, David Dill, to set aside two orders concerning a foreign judgment registered in this court ex parte by the plaintiff, Bruce P. Kriegman, pursuant to the Court Order Enforcement Act, R.S.B.C. 1996, c. 78 [COEA]. [2] Mr. Kriegman is a lawyer and trustee in bankruptcy licensed to practice in the United States. He obtained a judgment against Mr. Dill ("Judgment") from the United States District Court in the Eastern District of Washington State in his capacity as trustee of the bankrupt estate of a United States entity known as LLS America LLC ("LLS America"). The Judgment, issued on January 24, 2014, concerned financial transactions that Mr. Dill made with certain companies incorporated in British Columbia that were alleged to be associated with LLS America. The Judgment amount exceeds $1.64 million. In these reasons, I refer to the specific United States District Court that issued the Judgment as the "District Court". [3] Mr. Kriegman then registered the Judgment with this Court through the desk order process pursuant to the COEA. Part 2

of the statute permits ex parte registration of a judgment from a court in a reciprocating state on a desk order basis in certain circumstances. The order of this Court registering the Judgment was issued on September 18, 2014. [4] One of the requirements for such registration, as set out in s. 29(2) of the COEA, is to show that the judgment debtor was personally served with the originating process in the underlying litigation that led to the judgment or otherwise attorned or submitted to the jurisdiction of the original court: 29 (2) An order for registration under this Part may be made without notice to any person in any case in which (a) the judgment debtor (i) was personally served with process in the original action, or (ii) although not personally served, appeared or defended, or attorned or otherwise submitted to the jurisdiction of the original court, and (b) under the law in force in the state where the judgment was made, (i) the time in which an appeal may be made against the judgment has expired and no appeal is pending, or (ii) an appeal has been made and has been disposed of. [Emphasis added] [5] Nonetheless, even where personal service has been effected or attornment occurred, s. 29(6) sets out an enumerated list of mandatory bars prohibiting registration of the Judgment. Registration must not be made if the Court is satisfied that any one of the following

mandatory bars is engaged: 29(6) An order for registration must not be made if the court to which the application for registration is made is satisfied that (a) the original court acted either (i) without jurisdiction under the conflict of laws rules of the court to which application is made, or (ii) without authority, under the law in force in the state where the judgment was made, to adjudicate concerning the cause of action or subject matter that resulted in the judgment or concerning the person of the judgment debtor, (b) the judgment debtor, being a person who was neither carrying on business nor ordinarily resident in the state of the original court, did not voluntarily appear or otherwise submit during the proceedings to the jurisdiction of that court, (c) the judgment debtor, being the defendant in the proceedings, was not duly served with the process of the original court and did not appear, even though he or she was ordinarily resident or was carrying on business in the state of that court or had agreed to submit to the jurisdiction of that court, (d) the judgment was obtained by fraud, (e) an appeal is pending or the time in which an appeal may be taken has not expired, (f) the judgment was for a cause of action that for reasons of public policy or for some similar reason would not have been entertained by the registering court, or (g) the judgment debtor would have

a good defence if an action were brought on the judgment. [Emphasis added] [6] The legislature has, through the COEA, mandated that the Court's officer who reviews a registration application should ensure that the requirements of s. 29(2) are met and that none of the mandatory bars in s. 29(6) are engaged. In that respect, the Court's role is not purely ministerial or administrative as Mr. Kriegman maintains, but instead entails a review and evaluation of facts to determine if registration is appropriate. [7] Mr. Dill's application is premised on three bases. [8] The first is that the Judgment could not be registered with this Court because the requirements concerning service and attornment in s. 29(2)(a) were not met. [9] The second relates to s. 34(2), which permits a person such as Mr. Dill to apply to set aside the registration on the basis that one or more of the mandatory bars in s. 29(6) applies: 34 (1) If a judgment is registered under an order made without notice to any person (b) the judgment debtor, within one month after he or she has had notice of the registration, may apply to the registering court to have the registration set aside. (2) On an application under subsection (1) (b), the court may set aside the registration on any of the grounds referred to in section 29 (6) and on terms the court thinks fit. [10] Mr. Dill asserts that, with the exception of s.

29(6)(e), each of the mandatory bars to registration found in s. 29(6) are engaged. [11] The third basis is Mr. Dill's claim that Mr. Kriegman failed to discharge his duty of disclosure when he sought to register the Judgment through the ex parte desk order process. [12] In reaching my decision, I have been mindful not to evaluate the merits of the underlying claim: Chevron Corp. v. Yaiguaje, 2015 SCC 42 at para.

44. My decision is premised primarily on Mr. Kriegman's failure to discharge his duty to disclose material facts. I disagree with Mr. Kriegman's submission that the duty of disclosure is inapplicable to registration under the COEA. In these reasons, I will describe how the COEA incorporates that duty by specific reference to the Supreme Court Civil Rules ("Rules") and the duty of disclosure applicable to ex parte applications. [13] Mr. Kriegman's application materials submitted in support of his request to register the Judgment represented that Mr. Dill had been served with the underlying originating process in Washington. The materials also asserted that none of the bars to registration, as enumerated in s. 29(6) of the COEA, applied in these circumstances. That information was inaccurate. [14] I have also determined that Mr. Kriegman failed to disclose other material facts, which I will review in detail in these reasons. [15] Mr. Kriegman did not serve the registration order ("Desk Order") on Mr. Dill within the requisite time limits. He then applied for, also on an ex parte basis, and obtained an order from Master Scarth extending the time in which he could serve the Desk Order ("Extension Application" and "Extension Order", respectively). [16] The materials filed in support of Mr. Kriegman's application to obtain the Extension Order not only repeated the inaccurate

information submitted on the registration application, but added a further misstatement that Mr. Dill's impugned financial transactions had been found by courts in this province to be a Ponzi scheme. No such finding had been made as of that time. [17] Once Mr. Dill was served with the Desk Order and Extension Order, he applied to this Court to set aside one or both of them. [18] For the reasons set out below, I agree with Mr. Dill that both orders should be set aside due to Mr. Kriegman's failure to disclose material facts relating to: (a) service; (b) attornment; (c) the nature and effect of a consolidation order made in the bankruptcy proceeding of LLS America upon which the underlying action and Judgment against Mr. Dill were founded; (d) the circumstances in which that order was sought and made; and (e) the distinct nature of the underlying cause of action. [19] The Desk Order and the Extension Order should also be set aside because in respect of some of these matters, Mr. Kriegman allowed inaccurate and incomplete information to be put before the Court. [20] Disclosure of material facts and a statement of accurate facts would have, I find, impacted upon the initial registration process and the Extension Application. It would have been apparent that defences to registration existed for Mr. Dill in respect of ss. 29(2) and (6) and that at least one of the s. 29(6) mandatory

prohibitions to registration was engaged so as to prohibit registration of the Judgment. Duty of Disclosure on Ex Parte Applications [21] Before I turn to the facts underlying this application and the reasons for my determination, it is important to describe the duty of disclosure incumbent on a party applying for registration of a foreign judgment ex parte. [22] When a party applies for an order ex parte, they must make full and frank disclosure to the court. Disclosure must be made of all material facts. A material fact is one that may or might affect the outcome of the case. It is ultimately for the court, and not the applicant or counsel, to determine if a fact is material. [23] In some cases, courts have said the duty is to disclose all material facts, including those that might have influenced the court's decision: Pierce v. Jivraj, 2013 BCSC 1850 at para. 37; Pierce v. Baynham, 2015 BCCA 188 at para. 1, leave to appeal ref'd [2015] SCCA No. 289; Money in a Minute Auto Loans v. Price, 2001 BCSC 864 at paras. 12-13, aff'd 2002 BCCA 507; C.P.R. v. U.L.T.U. loc. 144 (1970), 14 D.L.R. (3d) 497 (B.C.S.C.) at 500-501. However, in Evans v. Umbrella Capital LLC, 2004 BCCA 149 at para. 32, Mr. Justice Donald described the obligation as applying to all relevant facts. [24] Regardless, the applicant is undoubtedly required to ensure that all important aspects of the evidence are

disclosed and must point out what defences may be available to the opposing party: Khatra Enterprises Ltd. v. Mega Wraps B.C. Restaurants Inc., 2005 BCSC 656. In addition, an applicant must also not exaggerate or misrepresent the strength of their case: Green v. Jernigan, 2003 BCSC 1097 at paras. 24-25. [25] The fundamental nature of the duty of disclosure and the consequences arising from a failure to comply with it were made clear by the Court of Appeal in Evans at para. 32: There is no disagreement between the parties on the principles of disclosure. The rule on ex parte applications (which was the nature of the proceeding on 18 December 2002) was described in the frequently cited decision of Wilson J., later C.J.S.C., in Gulf Islands Navigation Ltd. v. Seafarers International Union of North America (Canadian District) et al. (1959), 18 D.L.R. (2d) 216 at 218: I find there is some divergence of judicial thought as to the grounds upon which an ex parte order ought, upon notice, to be discharged. The area of divergence does not include such generally accepted fundamental concepts as this: That the ex parte order is obtained periculo petentis so that if there has not been made to the Judge a full and frank disclosure of relevant facts, the order will be voided. Sheppard J.A. in Kraupner v. Ruby (1957), 7 D.L.R. (2d) 383 at p. 391 cites Scrutton L.J. in Lazard Bros. & Co. v.

Banque Industrielle de Moscou, [1932] 1 K.B. 617 at p. 637: "'Persons applying ex parte to the Court must use the utmost good faith, and if they do not, they cannot keep the results of their application.'" . [Emphasis added] [26] In Khatra, Madam Justice Bennett (as she then was) cited the following remarks of Mr. Justice Sharpe (as he then was) in U.S.A. v. Friedland, [1996] O.J. No. 4399 at paras. 26-28, which stressed that the applicant seeking an ex parte order must inform the court of any points of fact or law known to it which may favour the other side: For that reason, the law imposes an exceptional duty on the party who seeks ex parte relief. That party is not entitled to present only its side of the case in the best possible light, as it would if the other side were present. Rather, it is incumbent on the moving party to make a balanced presentation of the facts in law. The moving party must state its own case fairly and must inform the Court of any points of fact or law known to it which favour the other side. The duty of full and frank disclosure is required to mitigate the obvious risk of injustice inherent in any situation where a Judge is asked to grant an order without hearing from the other side. [Emphasis added] See also Lougheed Enterprises Ltd. v. Armbruster (1992), 10 BCAC 226. [27] The disclosure obligation extends to counsel as well. In Pierce, the Court

of Appeal said at para. 1: As every litigation lawyer should know, counsel who seeks a court order ex parte is bound to make "full and frank disclosure" of all relevant facts to the court. The judge hearing the application must in turn exercise "the utmost scrupulosity and care". (See Gulf Islands Navigation Ltd. v. Seafarers International Union of North America (Canadian District) et. al. [citation omitted] at paras. 5 and 3 respectively.) The usual consequence of counsel's failure to make full disclosure is the vacating of the ex parte order: see Girocredit Bank Aktiengesellschaft der Sparkassen v. Bader et al. (1999) 28 C.P.C. (4th) 264 (B.C.C.A.) at paras. 47-49. [Emphasis added] [28] Donald J.A. made the point in Evans at para. 33 that the duty on counsel is to disclose any facts which might have influenced the court's decision: The appellant may have convinced himself that no notice to the other parties was required and that their claims were immaterial in respect of his application for an order absolute, but his counsel was obliged as an officer of the court to disclose any facts which might have influenced the court's decision. [Emphasis added] [29] In Watson v. Slavik (1996), 5 C.P.C. (4th) 315 (B.C.S.C.), Romilly J. said that failing to abide by that duty is worthy of rebuke: [12] The courts cannot over-emphasize the duty of counsel to be profoundly fair when

presenting the facts to the court on an ex parte application. To fail to be anything other than eminently fair with the presentation of the material facts on such an application is nothing short of reprehensible and deserves the censure and rebuke of the court which relies solely on that counsel to give it all the relevant facts upon which to do justice. [30] As these cases make clear, where the duty to disclose is not met, the usual consequence is for the order to be set aside without regard to its merits: Money at para. 12; Pierce at para. 1; U.S.A. at 28. [31] Not every omission results in the order being set aside. When considering whether to set aside the order, the court must consider the importance of the non-disclosed fact to the issues which were to be decided by the judge at the ex parte hearing. An innocent non-disclosure or misrepresentation is an important consideration but not determinative: Jivraj at para. 37. [32] Mr. Kriegman submits that even if he failed to disclose material facts, there is no basis to set aside either order. He says that the COEA is a complete code for the registration of foreign judgments. He argues that there is no codification of the duty to disclose in the COEA, so that any failure to disclose a material fact cannot amount to a reason to set aside the registration order. I disagree. [33] Mr. Kriegman relies in part on the decision of the

Court of Appeal in Kriegman v. Wilson, 2016 BCCA 122. At para. 74, the Court said that the COEA provides a statutory process for a timely application to set aside registration and that the COEA was indeed a code for the grounds on which registration may be set aside. The Court went on to find that it did not have inherent jurisdiction to avoid the time limits specifically set out in s. 34. [34] The Court of Appeal did not, however, endorse the position taken by Mr. Kriegman on the instant application. At paras. 72-73, it said that there is inherent jurisdiction in the courts to "prevent abuse of process and miscarriages of justice" and to regulate procedures (though the court warned that this power should not be used to effect changes in substantive law). [35] In the context of this case, the principles surrounding a litigant's duty of disclosure on ex parte applications does not involve changes in substantive law. Moreover, and quite apart from the Court's inherent jurisdiction to prevent abuse and miscarriages of justice, the COEA specifically incorporates the procedural rules found in the Supreme Court Civil Rules ("Rules") per ss. 35-36, which provide: Rules of Court 35 Rules of Court may be made for practice and procedure, including costs, in proceedings under this Part and, until rules are made under this section, the rules of the registering court, including rules as to

costs, apply with the necessary changes. Exercise of powers 36 Subject to the Rules of Court, any of the powers conferred by this Part on a court may be exercised by that court. [36] Consequently, in the absence of any provisions in the COEA concerning the duty of disclosure on an ex parte application, the Rules stand in place to determine the procedural requirements for an applicant seeking an order on that basis. One such procedural requirement is the duty to disclose. Rule 8-4, which concerns ex parte applications, and the case authorities concerning such applications brought under that Rule (and like predecessors), are therefore incorporated into the COEA. As exemplified in the case law, it is an important obligation that promotes and maintains the fairness and integrity of the justice system. [37] Thus, where the application is brought ex parte, the only mechanism by which the court has access to the facts necessary to make a determination is via the applicant's duty to disclose. By the very nature of the application, the judgment debtor is not present to raise them. Any fact that bears on a determination or finding under ss. 29(2) and (6) must be disclosed on an ­ex parte application so that the Court, and not the applicant, may determine, as it is required to do, whether the requirements of s. 29(2) are met and whether those facts invoke any of the mandatory bars to

registration in s. 29(6). [38] In this case, the Court should have been made aware of those facts known to Mr. Kriegman at the time (or capable of being known had proper enquiries been made), which were material to registration under the COEA, including the facts that may support Mr. Dill's case opposing registration. This is necessary to permit the court to fully consider and decide the merits of the ex parte registration. [39] As I said at the outset, my determination of Mr. Dill's application is predicated primarily on Mr. Kriegman's failure to disclose material facts along with his submission of inaccurate material facts. The evidence adduced on the application shows that Mr. Kriegman, who has admitted to being an officer of the court in the United States, failed to disclose material facts, failed to identify relevant defenses on behalf of Mr. Dill, and permitted information to go before and to be relied upon by the Court that in some instances he knew to be incorrect. Regardless of the merits of either party's case, as the presider on this application, it is my obligation to ensure procedural fairness and to prevent an abuse of the Court's process. Facts [40] I now turn to my findings of fact that bear on this application. My findings are set out throughout this part of the reasons. The Financial Transactions Involving Mr. Dill [41] I will start with the financial

transactions between Mr. Dill and the British Columbia companies that are said to found the underlying litigation in Washington State and the Judgment. [42] Mr. Dill is a businessman who has lived in the Lower Mainland of British Columbia for over 24 years. He did not carry on business or reside in the United States. [43] Beginning in 2001, he loaned money to three companies incorporated by Doris Nelson in British Columbia (she was a resident of British Columbia at that time) called the Little Loan Shoppe Ltd. ("LLS BC"), 639504 B.C. Ltd., and 0738126 B.C. Ltd. [44] LLS BC operated in this province as a pay day loan business. Specifically, Mr. Dill says that he loaned $550,000 to these three companies. The financial transactions are evidenced by promissory notes ("Promissory Notes"). [45] Mr. Kriegman disputes Mr. Dill's characterization of those financial transactions and says that they were investments in a Ponzi scheme that involved LLS America in the United States. [46] For convenience, and without in any way deciding the character of those financial transactions, I will refer to them as the "Loans" as that is how they were recorded and appear on the face of the Promissory Notes. [47] I will also use the term "BC Companies" when I refer to LLS BC, 639504 B.C. Ltd., and 0738126 B.C. Ltd. collectively. [48] The Loans were made to the BC Companies in British Columbia and in

Canadian dollars. They were evidenced by the Promissory Notes, which were given by the BC Companies. Ms. Nelson signed the notes on their behalf; she did not sign or make them in her personal capacity. Mr. Dill did not loan or advance any money to LLS America or any other companies incorporated in the United States. [49] Each of the Promissory Notes stated that they were "to be construed in all respects and enforced in accordance with the laws of the Province of British Columbia, Canada." [50] Ms. Nelson subsequently moved to the United States, where she ran the business of LLS America. [51] Mr. Dill continued to loan money to the BC Companies over time. He continued to cash cheques he received from them on account of interest and repayment of principal until 2008. At that time, the cheques he received from the BC Companies were returned due to insufficient funds after he deposited them into his account. [52] Ms. Nelson made similar arrangements with other residents of this province and throughout Canada. According to Mr. Kriegman, she used companies incorporated in various provinces to feed her operation in the United States. She encouraged other Canadians to make similar types of loans to companies incorporated in this country and offered rates of return of at least 40%, plus a commission if they referred others to her. [53] The interest rate payable on the Promissory Notes

was just below the interest rate prohibited by the Criminal Code, R.S.C. 1985, c. C-46. Mr. Dill received substantial returns on his loans. In addition to being repaid his principal, he was paid over $1 million in interest and fees. [54] Except for nine small payments made between February and August 2006 totalling $3,175.98, which came from LLS America, all of the payments that were made to Mr. Dill were in Canadian funds on cheques drawn on the bank accounts of the BC Companies. Mr. Dill's evidence is that he does not know why the nine payments were made from LLS America. His unchallenged evidence is that he thought he was "dealing with the Canadian entities" throughout. There is no evidence from Mr. Kriegman to explain why those specific payments were made from LLS America, let alone any evidence connecting them to the Loans. LLS America Seeks Bankruptcy Protection [55] On July 21, 2009, approximately eight years after Mr. Dill made the Loans, LLS America sought bankruptcy protection in the United States pursuant to Chapter 11 of the United States Bankruptcy Code. LLS America filed for bankruptcy in the United States Bankruptcy Court for the District of Nevada; the venue was subsequently changed to the Eastern District of Washington State by a court order issued on November 4, 2009. The Eastern District of Washington State is a district of the United States District Court,

which is a federal court with districts throughout the United States. The United States Bankruptcy Court is associated with the District Court. In these reasons, I shall refer to the specific United States Bankruptcy Court that presided over the LLS America bankruptcy as the "Bankruptcy Court". [56] In November 2009, Mr. Dill received an "urgent" letter from LLS America's creditors' committee dated November 9, 2009. No trustee in bankruptcy had been appointed at that time. The letter suggested that Mr. Dill take immediate steps to file a proof of claim. It also advised him that if he did not file, he would be excluded from any settlement that may be made in the bankruptcy: Dear LLS Creditor, URGENT!! If you have not filed a B10 Eastern Washington State Proof of Claim with the court, please take this action immediately. If you do not file this claim, you will be excluded from any settlement that may be made. This is bankruptcy law!! The Washington court has granted an extension to the deadline to file your Proof of Claim. The deadline has been extended to February 23, 2010. Please fill in the B-10 Proof of Claim form and send it with all attachments to: [Emphasis added] [57] The letter also advised Mr. Dill of the court case number and to "Write in 'Money Loaned'" in the area of the proof of claim entitled "Basis for Claim". It also asked him to write on the form the address

where payment should be sent. [58] The letter does not state that a person filing a proof of claim will be deemed by the law of the United States to have attorned to the jurisdiction of the United States Bankruptcy Court. There is no mention of attornment at all. [59] Mr. Dill filed a proof of claim dated November 12, 2009 because he thought that was what he had to do to ensure that his claim against the BC Companies for the debt owed to him from the returned cheques was included in any settlement, even though the proof of claim only referred to LLS America and not to any of the BC Companies or the Loans secured by the Promissory Notes. He filed a claim in the amount of $832,643. [60] Almost a year after Mr. Dill sent in his proof of claim, he received a letter from John Munding, a Washington State attorney, dated September 13, 2010, advising him that he was appointed to "act as counsel for the Debtor," LLS America. Of interest to this application, Mr. Munding told Mr. Dill that, "To the extent that a claimant is not able to verify their initial loan to LLS [America] and/or its affiliates, their claim may be denied." [61] Mr. Munding also advised Mr. Dill that his law firm required further information from him in order to evaluate his claim and that it would seek to recover funds incorrectly paid, for the benefit of LLS America and its affiliates, or both. [62] Approximately

seven months later, on April 21, 2011, Mr. Kriegman was appointed as the trustee in bankruptcy of LLS America by the Bankruptcy Court. He summarily rejected Mr. Dill's proof of claim. Mr. Kriegman also took the position that Mr. Dill had attorned to the jurisdiction of the United States Bankruptcy Court when he submitted his proof of claim. [63] Mr. Dill's evidence, which has not been challenged, is that when he sent in the proof of claim, he did not appreciate the difference in law between LLS America and the BC Companies. It is also Mr. Dill's unchallenged evidence that he did not understand that he was attorning to the jurisdiction of the United States Bankruptcy Court when he submitted his proof of claim. In this application, he claims that his attornment was obtained through misrepresentation or fraud. I do not need to decide the merits of that claim on this application because Mr. Kriegman concedes that Mr. Dill's purported attornment to the jurisdiction of the Bankruptcy Court has no bearing on the issue of his attornment to the jurisdiction of the District Court, which is the court that issued the Judgment. Consolidation of the US Bankruptcy Proceeding of LLS America Mr. Kriegman's Application for a Consolidation Order [64] In the summer of 2011, Mr. Kriegman sought to expand what was then the bankruptcy proceeding of LLS America ("Bankruptcy Proceeding") to include a

large number of companies incorporated by Ms. Nelson in the United States and Canada (including the BC Companies). As far as I am aware, none of the Canadian companies were subject to any bankruptcy proceedings in this country, nor were they involved in any proceeding before the Bankruptcy Court. Mr. Kriegman filed an application to "consolidate" those entities with the Bankruptcy Proceeding and ultimately obtained a consolidation order ("Consolidation Order") for that purpose. In his application materials, Mr. Kriegman described the Canadian companies, which included the BC Companies, as "non-debtor estates" and alleged that they were used by Ms. Nelson as feeder funds for LLS America. [65] The form of the Consolidation Order that was entered with the Bankruptcy Court was granted, nunc pro tunc, so as to have retroactive effect. The Consolidation Order stated that the consolidation was in effect as of the commencement of the Bankruptcy Proceeding, which was commenced over two years beforehand in July 2009. According to the court records in evidence, the Consolidation Order was entered on September 8, 2011 and made effective as of July 21, 2009, the same date that LLS America made its filing into bankruptcy. [66] The Consolidation Order was then used as a basis to found the action brought against Mr. Dill by Mr. Kriegman in the District Court. [67] The Consolidation Order also

asserted extraterritorial effect over the assets of the companies incorporated in Canada. In the action he brought in the District Court, Mr. Kriegman took the position that the BC Companies were included within the ambit of the Consolidation Order. He alleged that the funds paid to Mr. Dill by the BC Companies were part of the Ponzi scheme and were improper payments that were required to be returned to LLS America for the benefit of its creditors. [68] In his submissions, Mr. Dill points out that without the retroactive effect of the Consolidation Order, Mr. Kriegman would have been time barred from proceeding with the underlying action in the District Court. [69] The BC Companies did not exist in law at the time that the Bankruptcy Proceeding was commenced because they had been struck from the register maintained by the Registrar of Companies of British Columbia. Consequently, their assets escheated to the Crown and became assets of the Province per s. 344 of the Business Corporations Act, S.B.C. 2002, c. 57 [BCA]: Effect of dissolution 344 (1) Subject to sections 346 and 347, when a company is dissolved under this Part or under section 422 or 423, the company ceases to exist for any purpose. (2) If, when a company is dissolved, the company has an asset that has not yet been distributed, the asset vests in the government unless (a) the asset is one in which the company is a

joint tenant, in which case the asset vests in the other joint tenant on dissolution, or (b) the asset is land located in British Columbia, in which case the asset is, subject to paragraph (a) of this subsection, deemed to escheat to the government under section 4 of the Escheat Act. [70] On the present application, Mr. Kriegman argues that the dissolution of the BC Companies is of no consequence because he submits it was qualified in the sense that they could be revived status quo ante and could, pending restoration, be sued: see, e.g., Saini v. Grand Forks (City), 2012 BCSC 320 at paras. 23-24. Accordingly, he says that the Consolidation Order properly included them. [71] There are a number of problems with that submission. Before I turn to them, it is important that I set out my finding that the Consolidation Order issued by the Bankruptcy Court does not apply to the BC Companies. The BC Companies are Excluded from the Consolidation [72] In October 2016, during the course of the hearing of this application, Mr. Dill obtained a transcript of the oral reasons of the bankruptcy judge, given on August 9, 2011, granting the Consolidation Order. The recording of those reasons, as well as an internal memorandum of the judge's reasons prepared by Mr. Kriegman's Washington law firm, were produced as a term of a second affidavit sworn by Mr. Kriegman's Washington lawyer being admitted

into evidence on this application (which was admitted over the objection of Mr. Dill). I was advised by counsel that until that time, the reasons of the bankruptcy judge had not been transcribed. There is also no evidence to suggest otherwise. The transcript was prepared by an official court reporter in this province. Mr. Kriegman takes no issue with the accuracy of the transcript. [73] The transcript of the hearing shows that during submissions at the hearing of the consolidation application, the bankruptcy judge was made aware by Mr. Kriegman's Washington lawyer that a number of alleged "feeder" companies, including the BC Companies, were no longer in existence. [74] An application is referred to as a "motion" in the United States Bankruptcy Court. I shall now do likewise in these reasons. [75] Mr. Kriegman's counsel also took issue with the standing and merits of submissions made by counsel appearing for some of those entities, including Canadian and United States companies (whom Ms. Nelson hired to act on their behalf in order to object to the Consolidation Order). Mr. Kriegman also attended the hearing. The transcript shows that he confirmed his attendance to the Bankruptcy Court. [76] When the bankruptcy judge issued the Consolidation Order, she said that it was in respect of companies that "exist". The judge's remarks are recorded at p. 34 of the transcript as

follows: These LLS affiliates, I believe is what the trustee labels them, should be substantively consolidated with LLS America. I - - the evidence is that a third of those under these no longer exist. So I'm not sure what I'm substantively consolidating, but whatever does exist should be substantively consolidated so that we have one proceeding in which all creditors can participate, in which all assets can be used to pay all the creditors who relied upon the financial wherewithal of all of these entities, even if they didn't know their names, and hopefully the trustee can continue to operate the underlying business purpose, which is the pay-day loan business. [Emphasis added] [77] The internal memorandum prepared by Mr. Kriegman's Washington law firm concerning the hearing of the consolidation motion records the reasons of the bankruptcy judge in that respect. The memorandum describes the words used by the judge in her reasons, making it clear that she was consolidating the companies that did exist in law. The memorandum is dated August 10, 2011, the day following the hearing. [78] After she issued her oral reasons, two United States companies, alleged to be affiliated with LLS America as feeder companies, sought a reconsideration of the bankruptcy judge's decision. They objected to the decision on the basis that it was made without jurisdiction and also challenged some of

the judge's conclusions (unrelated to the issue raised by Mr. Dill on the instant application). The bankruptcy judge rejected their reconsideration motion on September 8, 2011. In her decision, the judge confirmed that her oral ruling of August 9, 2011 was incorporated in its entirety by reference into her reasons of September 8, 2011. [79] Mr. Dill did not attend either hearing and was not aware of them because he had not been served with the Adversary Complaint or with Mr. Kriegman's consolidation motion. His conditional notices of appearance were not filed with the District Court and Bankruptcy Court until November and December of that year, respectively. Mr. Dill was also not aware of the reasons of the bankruptcy judge until they were transcribed at the request of his counsel last fall. [80] At the conclusion of the first hearing, the bankruptcy judge asked Mr. Kriegman's lawyer if she wanted a standard form of order that relied upon her oral reasons or something different: All right. So what, I guess, counsel, we have the usual question; do you want the single sentence standard form order that grants the motion and relies upon the oral comments, or do you want something fancier than that? [Emphasis added] In response, counsel asked for something "fancier with the findings of fact and the conclusions." [81] A draft form of the Consolidation Order was prepared by Mr.

Kriegman's Washington law firm. The form of the Consolidation Order stated that Mr. Kriegman's consolidation motion was granted and that the oral reasons are incorporated into the order. The oral reasons are described in the Consolidation Order as an "oral ruling". For consistency, I will use that term as well to describe the bankruptcy judge's oral reasons for judgment. [82] The form of the order was reviewed, amended (in other respects), and signed by the bankruptcy judge. It was entered with the Bankruptcy Court registry on September 8, 2011. The form of the entered Consolidation Order specifically references, in two different places, the oral ruling and states that it is incorporated into the order. It is also stated to be a final order. [83] The first reference to the oral ruling is in the preamble, and states: The oral ruling which the Court rendered on the Motion for Consolidation is hereby incorporated herein in its entirety by reference pursuant to FRBP 9014 and 7052. [Emphasis added] [84] The second reference is found as one of the terms of the Consolidation Order itself:

ORDER 7. The Court's oral ruling is incorporated herein and made a part hereof by reference. [Emphasis added] [85] Those two references to the oral ruling are contained in the draft form of the Consolidation Order prepared by Mr. Kriegman's Washington law firm. [86] Without having in hand a transcript of the Court's oral ruling, it would not be possible for a third party reading it to know of the Court's exclusion of companies that did not exist. A reader not familiar with the oral ruling would assume the consolidation motion was granted without exception. [87] Unfortunately, some confusion is caused by a report that the bankruptcy judge signed and submitted to the District Court almost two years later, on July 1, 2013. The purpose of the report was to provide the bankruptcy judge's recommendation to the District Court concerning Mr. Kriegman's summary judgment application in respect of certain common issues. In her report, the bankruptcy judge referred to the consolidation motion. She referred to the companies that Mr. Kriegman alleged were feeder funds for LLS America. She wrote that "the examiner's investigation revealed dozens of legal entities related to and formed by the owner of [LLS America] that existed in various western states and in Canada." She remained alive to the fact that some of the entities did not exist, stating, "Several of the entities appeared to have

been and continued to be inactive, but many did not." [88] However, in remarks that are inconsistent with her oral ruling and the Consolidation Order itself, the bankruptcy judge reported that the Consolidation Order was granted in respect of 12 entities, which she reported to include the BC Companies. [89] I will also say that it does not appear from the materials in front of me that the Chief Judge of the District Court was made aware of the oral ruling of the Bankruptcy Court judge who granted the Consolidation Order or of their effect. As I noted, counsel on this application advised that they are not aware of the oral reasons having been transcribed prior to this hearing. [90] It is therefore not surprising, in view of that statement by the bankruptcy judge in her report and in absence of any other information to the contrary, such as a transcript of the oral ruling, that the District Court approved Mr. Kriegman's action to proceed against Mr. Dill. [91] I enquired of counsel whether they had attempted to sort out the discrepancy in the report when compared to the oral ruling and the face of the Consolidation Order. I was advised that it was not possible to do so with the bankruptcy judge as she has retired from the bench. [92] Mr. Dill argues that if the oral ruling had been transcribed or if the form of the Consolidation Order was drafted to include the specific term

concerning companies that existed, as distinct from those that did not, the District Court would not have accepted jurisdiction insofar as the BC Companies are concerned. Consequently, he submits, the action would not have proceeded against him in the District Court and the Judgment would not have been issued against him. [93] While I cannot comment on what the District Court may or may not have done, I can say that the oral ruling of the bankruptcy judge issued in respect of Mr. Kriegman's consolidation motion, along with the bankruptcy judge's reasons issued in respect of the reconsideration motion brought by two United States entities and the form of the entered Consolidation Order itself, make it clear that the BC Companies were not included in the consolidation. I do not have an opinion from a foreign law expert to explain, on the one hand, the effect of the conflict between the Consolidation Order and the oral ruling, and on the other hand, the report to the District Court. In this jurisdiction, it is the order that governs, and on that basis, I accept Mr. Dill would have a good defence to an action on the Judgment per s. 29(6) on the basis that there was no authority or jurisdiction to issue the Judgment against him. [94] On a separate point, Mr. Dill asserts that if he did attorn to the Bankruptcy Proceeding as a result of filing the proof of claim (which he does not

admit), he did not attorn to the Consolidation Order, including its nunc pro tunc aspect, because he was not given notice of the motion. Further, he submits that the appearance that he did file with the Bankruptcy Court registry was a conditional appearance putting, inter alia, service and jurisdiction in issue. He defends against registration of the Judgment because, he argues, it is premised on the Consolidation Order which cannot bind him. [95] Consequently, and in my opinion, Mr. Dill's defence to registration of the Judgment arising from the factual circumstances surrounding the Consolidation Order bears on the s. 29(6) mandatory bars concerning jurisdiction in respect of the conflict of laws rules in this Court, the authority of the District Court to grant the Judgment, service, attornment, and a good defence to the Judgment, and renders those facts material. They should have been disclosed. [96] The oral ruling of the bankruptcy judge was not disclosed by Mr. Kriegman when he sought the Desk Order and the Extension Order, or at any time thereafter until October 2016, after the order was issued to do so during the instant hearing in August 2016. [97] I do not agree with Mr. Kriegman that the subsequent appeal of the decision of the bankruptcy judge by the two United States entities who had sought the reconsideration of the judge's decision has any bearing on this

application. The appeal focused to a large degree on the alleged "abuse of discretion" by the bankruptcy judge in failing to conduct an evidentiary hearing. The Bankruptcy Appellate Panel ("BAP"), composed of three judges from the United States Court of Appeals, sustained the decision of the bankruptcy judge without making any reference to the exception for companies that did not exist. There is no indication in the BAP's reasons that it was made aware of the exception for entities that did not exist. Nor is there any evidence to show, either directly or indirectly, that the bankruptcy judge's oral ruling was before the BAP. [98] In addition, the BAP's decision focused in part on the wording of the promissory notes concerning the appellants. Those notes contained language authorizing the use of funds by any "associated company", which would include LLS America. That wording is entirely different than the language contained in the Promissory Notes signed by Mr. Dill. There is no mention of use by any other companies in the Promissory Notes and no provision is made for it. [99] I also agree with Mr. Dill's submission that there is no basis to say that the Consolidation Order, which included the oral ruling of the bankruptcy judge, was varied by the BAP. [100] I also reject Mr. Kriegman's submission that he has provided sufficient evidence to establish that neither he nor his

Washington lawyer thought that the Consolidation Order excluded the BC Companies. The Consolidation Order is clear on its face that it includes the oral ruling. Both Mr. Kriegman and his Washington lawyer were in attendance at the hearing when the oral ruling was made. In addition, the bankruptcy judge's oral ruling concerning the entities that do not exist is also confirmed in the law firm's internal memorandum. On its own, the bankruptcy judge's July 2013 report does not provide a sufficient evidentiary basis to support the submission. [101] Further, a court order is not governed by the subjective views of counsel or the parties after it is made. In Atlantic Waste Systems Ltd. v. Canada (Attorney General), 2017 BCSC 19 at para. 85, the Court said that orders are not interpreted in a vacuum; the circumstances in which an order is made are important: The approach to be followed in the interpretation of a court order was recently discussed by the Court of Appeal in Warde v. Slatter Holdings Ltd. [citations omitted]. Court orders are not interpreted in a vacuum. The interpretation of a court order is not governed by the subjective views of one or more of the parties as to its meaning after the order is made. Rather an order, whether by consent or awarded in an adjudicated disposition, is a decision of the court. As such, it is the court, not the parties, that determines the

meaning of its order. The correct approach to interpreting the provisions of a court order is to examine the pleadings of the action in which the order is made, the language of the order itself, and the circumstances in which the order is granted. [Emphasis added] See also Integris Credit Union v. Mercedes-Benz Financial Services Canada Corporation, 2016 BCCA 231 at paras. 25-28. [102] In support of his submission that these facts are not material, Mr. Kriegman relies on a recent decision of the Manitoba Court of Appeal involving two of Mr. Dill's family members in transactions with Ms. Nelson to support his submission that the Consolidation Order has been determined by an appellate court in Canada to include the BC Companies. With respect, I cannot agree that the decision stands for that point. In LLS America (Trustee of) v. Dill, 2017 MBCA 12, the appellants sought leave to adduce fresh evidence concerning the Consolidation Order and its exclusion of defunct companies. The case argued before the Queen's Bench did not address the issue raised by Mr. Dill on this application, which arises from the recently transcribed oral ruling of the bankruptcy judge. The Court of Appeal denied the application and thus did not admit or rule on the effect of the oral ruling of the bankruptcy judge as incorporated into the Consolidation Order. [103] The Court of Appeal was highly critical of

submissions advanced on behalf of the Dills concerning the alleged impropriety (put at the level of dishonesty) of Mr. Kriegman and his Washington lawyer in failing to properly draft the form of the bankruptcy judge's order. It ordered increased costs of $2,500 payable to Mr. Kriegman within 30 days. However, the point raised by Mr. Dill on this application was not determined by the Court of Appeal. [104] Mr. Kriegman also argues that Mr. Dill should be seeking to set aside the Judgment in the United States in light of his characterization of the decision of the bankruptcy judge. I respectfully disagree. As Mr. Dill points out, the COEA specifically allows him to apply to set aside the registration in this Court based on any one of the mandatory bars in s. 29(6) without requiring him to first apply for relief in the foreign court. It is in this province, where Mr. Kriegman seeks to enforce the Judgment and has, following the Desk Order, registered it against title to Mr. Dill's home. Enforcement of the Judgment in Washington State is of no consequence to Mr. Dill because, I am advised by counsel, he has no assets there. The Status of the BC Companies is Material [105] I will turn now to point out three difficulties with Mr. Kriegman's submission that the dissolution of the BC Companies is of no consequence and immaterial. [106] First, an application to revive a dissolved

company has to be brought within two years of dissolution, with notice to all interested persons (BCA, ss. 354-363), and none was. [107] Prior to the hearing of this application, various affiants, including Mr. Kriegman, Mr. Dill, and one of Mr. Kriegman's Washington State lawyers, were cross-examined pursuant an order of Mr. Justice Kent made on August 4, 2015. [108] During his cross-examination, Mr. Kriegman admitted that at the time the trial of the underlying litigation against Mr. Dill proceeded, he knew that the BC Companies did not have any proper corporate status and that he did not apply to reinstate them: Q But you knew at the time of the trial in the United States that these three B.C. entities were no longer in existence, right? A I believe I - - to the best of my recollection, I believe - - I don't know if I personally knew it, but through my attorneys or myself, I had knowledge of that. Q Did you make any efforts to resurrect any of these three companies to proper corporate status? A We never thought they had proper corporate status, so we didn't try to do that, and we wouldn't because that wasn't my job. [Emphasis added] [109] Second, although s. 349(2) the BCA provides that a judgment creditor may seek to recover the assets (other than land in British Columbia) that a dissolved company owned prior to dissolution, the judgment creditor must take that step within

two years of the date of dissolution by applying to the Minister of Finance (s. 349(2) and (3)). That was never done. [110] Third, only one of the BC Companies fell within the two-year window, 0738126 B.C. Ltd. It was struck on May 16, 2011. Otherwise, LLS BC was struck on January 2, 2006 and 639504 B.C. Ltd. on August 6, 2007. The Extraterritorial Aspect of the Consolidation Order [111] Mr. Kriegman's position that the Consolidation Order included the BC Companies. If that is correct, then the fact that the Consolidation Order purported to be extraterritorial in its scope without him having served notice of the motion on the Province, other stakeholders of 0738126 B.C. Ltd. (since it was the only entity capable of restoration), and Mr. Dill is material. [112] The Province was never given notice of or served with the Consolidation Order, the Desk Order, and the Extension Order nor the motion and application materials seeking them. Its interests in the assets of the BC Companies were not considered by the Bankruptcy Court on the consolidation motion. There is also no evidence that notice was given to any potential stakeholders of 0738126 B.C. Ltd., including persons who had loaned money bona fide to it, or that their potential interests were considered on the consolidation motion. For example, if Mr. Dill or others who loaned money to 0738126 B.C. Ltd. bona fide, they could

stand as creditors of that entity. They were not provided the opportunity to ensure that their interests in the assets of 073816 B.C. Ltd. were protected. [113] There was, however, an opportunity for their interests to be judicially considered, either following service of the consolidation motion or upon a recognition proceeding brought in Canada per the Bankruptcy and Insolvency Act, R.S.C., 1985, c. B-3 [BIA]. For the reasons set out below, the absence of a recognition proceeding having been brought in Canada is also material. [114] Part XIII of the BIA provides a comprehensive procedure for the recognition and enforcement of cross-border insolvencies and orders made in courts in the United States. The stated purpose of that Part is, per s. 267, to "provide mechanisms for dealing with cases of cross-border insolvencies and to promote": (a) cooperation between the courts and other competent authorities in Canada with those of foreign jurisdictions in cases of cross-border insolvencies; (c) the fair and efficient administration of cross-border insolvencies that protects the interests of creditors and other interested persons, and those of debtors; (d) the protection and the maximization of the value of debtors' property; [115] Within Part XIII are provisions dealing with applications for recognition of foreign bankruptcy proceedings: ss. 268-272. If a recognition order is

brought in a bankruptcy court in Canada, an order may be made that entrusts "the administration or realization of all or part of the debtor's property located in Canada to the foreign representative or to any other person designated by the court": s. 272(1)(c). That is one of a number of orders that may be made. To the opposite, however, an order may be made appointing a trustee or receiver to take possession of all or any part of the debtor's property in Canada for a term that the court thinks appropriate: s. 272(1)(d). [116] No recognition application was brought in Canada. If it had been, Mr. Kreigman would have been obliged to demonstrate that the monies that Mr. Dill paid to the BC Companies were assets of LLS America. The interest of the Province in those funds would also have been considered. Since only 0738126 B.C. Ltd. was capable of restoration, and presuming it was, then the interests of its other stakeholders would also have been considered. None of this information was disclosed on either the registration application or the Extension Application. [117] Mr. Kriegman argues that Mr. Dill has not pointed to any authority that requires him to bring a parallel insolvency proceeding in Canada in respect of the BC Companies. Although courts in Canada and the United States show great deference to each other (as is discussed in Morguard Investments Ltd. v. De Savoye, [1990]

3 S.C.R. 1077 and Beals v. Saldanha, 2003 SCC 72), Mr. Kriegman's submission overlooks a line of case authorities that speaks of the need for timely and appropriate recognition proceedings in Canada in cross-border insolvencies. It also overlooks the approach taken in this country to foreign insolvency proceedings, referred to as "modified universalism": see MtGox Co., Ltd. (Re), 2014 ONSC 5811 at paras. 10-12; Janis Sarra, Rescue! The Companies' Creditors Arrangement Act, 2d ed. (Toronto: Carswell, 2013 at 637). In the absence of having sought judicial recognition in Canada when seeking consolidation, Mr. Kreigman must now establish, in his attempt to recover on the Judgment, that the Consolidation Order not only included the BC Companies, but that consolidation was appropriate in respect of Canadian law (which includes notice to and considerations of fair treatment to all stakeholders). [118] Even if the Consolidation Order was intended to include the BC Companies as Mr. Kriegman asserts that it does, then given the different approaches taken to consolidation applications in Canada and consolidation motions in the United States, it does not necessarily follow that it would have been recognized in proceedings brought in Canada per the BIA. [119] Courts in the United States have taken divergent approaches to consolidation in insolvency proceedings, applying three different

tests that differ from the uniform approach taken by courts in this country: Redstone Investment Corp. (Re), 2016 ONSC 4453 at paras. 48-50. [120] In Canada, consolidation is an equitable remedy that is used to ensure the equitable treatment of all creditors. The test was set out in Northland Properties Ltd. (Re), [1988] B.C.J. No. 1210 (S.C.), aff'd Northland Properties Ltd. v. Excelsior Life Insurance Co. of Canada, [1989] B.C.J. No. 63 and reiterated in Redstone at para.

47. In Redstone, at para. 47, Senior Regional Justice Morawetz said that in deciding whether to impose consolidation, the court must be satisfied that the "elements of consolidation" exist and "that the consolidation would prevent a harm or prejudice or would effect a benefit generally." It is, Morawetz R.S.J. said at para. 89, a remedy that "effectively redistributes wealth among creditors of the related entities" and that "individuals will invariably realize asymmetric losses or gains." [121] At para. 47, he described the elements of consolidation to be: (i) difficulty in segregating assets; (ii) presence of consolidated financial statements; (iii) profitability of consolidation at a single location; (iv) co-mingling of assets and business functions. [122] Janis Sarra, one of Canada's leading scholars in the field of insolvency law, explains the process to be followed in assessing whether to consolidate estates in her authoritative text, Rescue! The Companies' Creditors Arrangement Act (previously cited). The following excerpt from her text is cited with approval in Redstone at para. 75: Generally, the courts will determine whether to consolidate proceedings by assessing whether the benefits will outweigh the prejudice to particular creditors if the proceedings are to be consolidated. In particular, the court will examine whether the assets and liabilities are so intertwined

that it is difficult to separate them for purposes of dealing with different entities. The court will also consider whether consolidation is fair and reasonable in the circumstances of the case. [123] In proceedings brought in this country, such as a recognition proceeding per Part XIII, Mr. Kriegman would have to address these criteria. The aims and tests involved in consolidation in Canadian insolvency law would have been considered. Mr. Kriegman would have to demonstrate that the Consolidation Order was fair and reasonable in the circumstances of the case. In my respectful opinion, that would be difficult to do without, at a minimum, giving notice to the Province and any other stakeholders of 0738126 B.C. Ltd. [124] The importance of timely recognition proceedings in cross-border insolvencies has been commented upon by courts in Canada. [125] In Recoton Canada Ltd. (Re) (12 June 2003), Ontario Superior Court of Justice, 03-CL-5005, Mr. Justice Farley made these comments, when he was asked to approve a sale of the company's assets as part of an auction process in the United States which had already been approved and conducted in Chapter 11 proceedings involving a Canadian affiliate, where no approval of a Canadian court had been previously sought: It is puzzling that the approval of the Canadian court to the marketing and sale process was not sought in advance but rather

after the fact with respect to this motion. However, I do note that on the application last month for the appointment of the Interim Receiver, that application did disclose the U.S. marketing and sale process including the stalking horse aspect. I must, however, emphasize that it would be prudent and respectful for the integrity of the Canadian insolvency regime and court process in the overall interests of justice for approval of the Canadian court to be sought explicitly in advance (particularly when proceeding in a "non-traditional" process) rather than implicitly in arrears. I am satisfied with the additional shoring up material given me today that the marketing and sale process met the Soundair tests and is fair and reasonable in the circumstances. It also appears that the allocation of proceeds to the Canadian side is additionally fair and reasonable in the circumstances and that the Canadian creditors are not being disadvantaged. Canadian proceeds are in excess of liquidation values and indeed are in excess of book value. [Emphasis added] See also: Delano Technology Corporation (Re) (25 April 2003), Ontario Superior Court of Justice, 03-CL-4692. [126] The approach taken in Recoton to ensure fairness to all stakeholders has been followed in numerous other cases in Canada. I have already referred to Redstone, and I will mention a few more. [127] In Singer Sewing Machine

Co. of Canada Ltd. (Re), 2000 ABQB 116, a bankrupt corporation in the United States with a Canadian subsidiary attempted to include all foreign subsidiaries, including its Canadian subsidiary, in a proceeding brought per Chapter 11 of the United States Bankruptcy Code. The Canadian subsidiary brought an application in Alberta to stay proceedings commenced by a Canadian creditor who had obtained judgment against it. The stay was refused on the basis that comity did not require the court to recognize that order concerning a Canadian company carrying on business only in Canada whose assets were all in this country. [128] In Babcock & Wilcox Canada Ltd. (Re), [2000] O.J. No. 786 (S.C.J.), at para. 21, Farley J. identified a number of factors to be considered when ordering a stay or otherwise recognizing insolvency orders of a foreign court. Two of the factors are set out in the following excerpt: (c) All stakeholders are to be treated equitably, and to the extent reasonably possible, common or like stakeholders are to be treated equally, regardless of the jurisdiction in which they reside. (e) The role of the court and the extent of the jurisdiction it exercises will vary on a case by case basis and depend to a significant degree upon the court's nexus to that enterprise (iv) the substantive and procedural law which may be applied so that the aspect of undue prejudice may be

analyzed; (f) Where one jurisdiction has an ancillary role, (ii) stakeholders in the ancillary jurisdiction should be afforded appropriate access to the proceedings in the principal jurisdiction. [129] In respect to that last factor, stakeholders in the present case would include the Province and any other stakeholders of 0738126 B.C. Ltd. [130] In Braycon International Inc. v. Everest & Jennings Canadian Ltd., [2001] O.J. No. 511 (Ont. S.C.J.), a stay granted in respect of a United States company in a bankruptcy proceeding in that country was recognized and enforced, so that the action in Ontario was stayed pending the determination of the bankruptcy proceedings in the United States. A stay was refused, however, against the Canadian subsidiary, which was a separate entity and solvent. The Court did not accept that a related claim might proceed in the United States against the subsidiary established a sufficient reason to stay a proper claim in Ontario. [131] In Sagecrest Dixon Inc. (Re), [2009] O.J. No. 1127 (S.C.J.), Morawetz J. (as he then was) considered the overall fairness of the position of construction lien claimants, who filed liens in respect of property located in Ontario when deciding whether to grant a stay of proceedings in that province, and whether to recognize the bankruptcy proceeding extant in the United States as a foreign main proceeding: paras. 22,

25-26. [132] In Holt Cargo Systems Inc. v. ABC Conatinerline N.V. (Trustees of), [2001] 3 S.C.R. 907, the Supreme Court of Canada considered competing claims to a ship between a bankruptcy trustee appointed in a Belgian insolvency proceeding and American creditors advancing an in rem maritime lien claim for stevedoring services. A Quebec court recognized the Belgian bankruptcy order, but the Federal Court, who dealt with the maritime lien claim, refused to give effect to the Quebec court's order and declined to stay the lien proceedings. The Supreme Court of Canada held that even though the Federal Court lacked jurisdiction to deal with the insolvency issues, the Belgian court order could not prevent it from dealing with the lien claim. In his reasons, Mr. Justice Binnie rejected the notion that Canada's modified universalist approach towards foreign insolvency proceedings (which he called the "plurality approach") should be replaced in favour of unrestricted universalism: paras. 68-91. [133] A model cross-border insolvency law has been developed to coordinate related bankruptcy and restructuring proceedings brought in different countries: UNCITRAL Model Law on Cross-Border Insolvency (1997). The purpose of the protocol is to facilitate and promote international cooperation and comity among the courts in respect of insolvencies of companies carrying on business, either directly

or through subsidiary or affiliated entities, in both jurisdictions. The model law has been adopted by Parliament: Caterpillar Financial Services Corporation v. Boale, Wood & Company Ltd., 2014 BCCA 419 at paras. 51-55. A protocol which is consonant with the model law, or versions of that protocol, have been adopted in cross border and international insolvency proceedings in this country under the BIA and the United States Bankruptcy Code: see, e.g., Olympia & York Developments Ltd. (Re), [1993] O.J. No. 1748 (Ont. Gen. Div.); Pope & Talbot Ltd. (Re), 2009 BCSC 1014 at para. 18; Eddie Bauer of Canada, Inc. (Re), [2009] O.J. No. 2647 (Ont.S.C.) at paras. 27-28. [134] I do not accept Mr. Kriegman's submission that the decision of Mr. Justice Grauer in LLS America LLC (Trustee of) v. Grande, 2013 BCSC 1745 obviates compliance with Part XIII of the BIA in this case. Mr. Kriegman relies on the remarks of Grauer J. in obiter dicta suggesting that the Consolidation Order appropriately captured the BC Companies. The difficulty is that Part XIII and the authorities concerning cross-border insolvencies referred to on the present application were not argued in Grande. Further, the oral ruling of the bankruptcy judge was not put before Grauer J. Accordingly, he had no opportunity to consider the import of Part XIII of the BIA, the authorities, the ruling of the bankruptcy judge, and the

prerequisites in Canadian law to ordering consolidation in insolvency proceedings. [135] When Mr. Kriegman was cross-examined about the extraterritorial effect of the Consolidation Order, he did not mention the ruling of the bankruptcy judge or the carve-out of the BC Companies. Instead, he said that he was unsure of the extraterritorial effect of the Consolidation Order but thought that the domestic law of the United States may have extraterritorial effect over the BC Companies: Q But you're aware from your experience as a lawyer in Washington state that there are courts in the judicial system in Canada, right? A Oh, yeah. Q And there are separate bankruptcy laws in Canada which differ from the American bankruptcy law, right? A Right. Q And that one forum for proceedings against you and B.C. based entities would be British Columbia, right? A I - - yeah, right, I think that's true. I want to be careful about one thing. I don't want to say something that could be misconstrued. When you're asking me about jurisdiction, I'm not saying that our courts tell your courts or tell its citizens what to do. All I'm talking about is our laws may apply beyond our borders, that's all - - I just want to be careful about that. I don't want you to think that I'm presuming something beyond that. [Emphasis added] [136] Yet, Mr. Kriegman admitted on his cross-examination that he knew there were

separate bankruptcy laws in Canada. He also admitted that he knew that the Promissory Notes contained clauses stipulating the jurisdiction and proper law to be that of British Columbia. [137] Thus, in effect, Mr. Kriegman seeks to enforce the Consolidation Order with extraterritorial effect in the absence of a recognition proceeding without notice to the Province and other stakeholders. I do not accept his submission that the BIA was inapplicable because the assets of the BC Companies were in fact the assets of LLS America. Although that position was advanced in the Bankruptcy Proceeding, it has not been judicially recognized or otherwise determined here. Moreover, as noted, stakeholders, such as the Province, were not given notice of the consolidation motion. [138] I also reject Mr. Kriegman's submission that Mr. Dill lacks standing to raise defences concerning the extraterritorial aspect of the Consolidation Order and Mr. Kriegman's failure to bring recognition proceedings in Canada. The Judgment is predicated on the Consolidation Order. If the latter cannot be enforced in Canada, then Mr. Dill has a potential defence that the Judgment which flows from it cannot be enforced as well. [139] Mr. Dill submits that I should find that the extraterritorial effect of the Consolidation Order was offside the law of the United States. He made that submission in response to Mr.

Kriegman's argument on this application that the Consolidation Order actually includes the BC Companies. In answer to that submission, counsel for Mr. Dill not only referred to the oral ruling of the bankruptcy judge, but also brought certain case law from the United States to my attention. It includes a decision of a District Court from another circuit of the federal court concerning the extraterritorial reach of statutes of the United States: Sec. Inv. Protection v. Bernard L. Madoff, 513 B.R. 222 (2014). Madoff was decided after the decision of the Chief Judge confirming the Consolidation Order for use in the District Court. [140] Those cases suggest that there is longstanding authority from the United States Supreme Court that absent a contrary intention appearing in an act of Congress, legislation in that country is meant to apply only within the territorial jurisdiction of the United States: see also, Morrison v. National Australia Bank Ltd., 561 U.S. 247 (2010). The presumption against extraterritorial application of United States federal statutes "serves to protect against unintended clashes between [United States federal] laws and those of other nations which could result in international discord": EEOC v. Arabian American Oil Co., 499 U.S. 244 (1991). [141] Mr. Dill submits that I should find, in light of the longstanding presumption in the United States against

extra-territoriality, that Mr. Kriegman's efforts to use the Consolidation Order to recover the funds given and received by Mr. Dill from the BC Companies, was a "remarkable exercise of extraterritorial application". [142] In Madoff, Judge Rakoff applied the presumption to prevent a trustee in bankruptcy from bringing into the bankruptcy proceeding certain foreign entities allegedly involved in a Ponzi scheme operated by Bernie Madoff's domestic company, Bernard L. Madoff Investment Securities LLC ("Madoff Securities"), through a consolidation order. In that case, a number of foreign feeder investment funds had pooled their customers' assets with Madoff Securities. The trustee in bankruptcy of Madoff Securities sought to recover monies paid to foreign residents who had invested in the foreign feeder funds. None of the defendants had invested in Madoff Securities, however. They had, instead, invested in funds established by companies incorporated in the British Virgin Islands and the Cayman Islands. Judge Rakoff dismissed the trustee's claim because the transfers were "predominantly foreign: foreign feeder funds transferring assets abroad to their foreign customers and other foreign transferees": at 228. [143] Mr. Dill also relies on the decision of the Privy Council in Stichting Shell Pensioenfonds v. Krys, [2014] UKPC 41, at para. 15, in support of his submission that the

purported extraterritorial reach of the Consolidation Order provides an unfair treatment of creditors because it puts a "ring fence" around local assets for the benefit of a foreign creditor and does not ensure that creditors are treated equally. [144] In response, Mr. Kriegman argues that Madoff is inapplicable to the facts of this case, in part because it involved third party intermediaries. [145] I am not able, nor would it be appropriate for me, to make findings concerning the application of Madoff to the decision of the District Court in Mr. Dill's case. I lack the evidence of a foreign law expert in which to consider United States law. In addition, out of consideration of comity, it would be inappropriate to make any finding in this regard or to remark on the merits of the decision of the learned Chief Judge insofar as United States law is concerned. [146] I can, however, go so far as to state that any proceeds owed to or owned by the BC Companies that are recovered as a result of the Consolidation Order will be for the benefit of the creditors of a foreign bankrupt - LLS America - who voluntarily assigned itself into bankruptcy and obtained the Consolidation Order in the absence of notice to Mr. Dill, the Province, and other stakeholders. Those proceeds will also be recovered to the benefit of LLS America's creditors in the absence of proceedings (such as a foreign

recognition application) having been brought in Canada (per the BIA) or a judicial determination or recognition in this country that those assets belong to LLS America. Conclusion [147] In the result, I find that the following are material facts that should have been disclosed on the ex parte applications to obtain the Desk Order and the Extension Order: (a) the nature and effect of the oral ruling of the bankruptcy judge; (b) the nunc pro tunc aspect of the Consolidation Order obtained without notice of the motion to Mr. Dill; (c) the purported effect of the Consolidation Order on Mr. Dill in light of his conditional appearances which he subsequently filed in the Bankruptcy Court and the District Court contesting jurisdiction; (d) the purported extraterritorial scope of the Consolidation Order; (e) the lack of notice of the consolidation motion to the Province and other stakeholders and the absence of any consideration of their interests in any of the assets of the BC Companies; and (f) the absence of any judicial involvement in this country pursuant to the BIA. [148] In my opinion, those circumstances bear upon, at least, the following: (a) s. 29(6)(a)(i) - whether the original court acted without jurisdiction under the conflict of laws rules of the court to which application is made (i.e., this Court) in issuing the Judgment predicated on the Consolidation Order; (b) s.

29(6)(a)(ii) - the authority of the District Court to grant the Judgment given the effect of the oral ruling of the bankruptcy judge consolidating only those companies that did exist; (c) s. 29(6)(b) - whether Mr. Dill attorned, or if he did, voluntarily, to the Bankruptcy Proceeding, and if he did, does his attornment encompass the Consolidation Order because it was issued nunc pro tunc pursuant to a motion that was not served upon him; (c) s. 29(6)(d) - whether the Judgment was obtained by (equitable) fraud going to jurisdiction (as per Lang v. Lapp, 2010 BCCA 517 at para. 20 and Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd., [2002] 1 S.C.R. 678 at para. 39) because of the effect of the oral ruling of the bankruptcy judge excluding the BC Companies from the Consolidation Order; (d) s. 29(6)(f) - whether the Judgment was founded on a proceeding that for reasons of public policy would not have been entertained by this Court; and (d) s. 29(6)(g) - whether Mr. Dill would have a good defence if an action were brought in this Court on the Judgment. [149] I will conclude by noting that the Consolidation Order was not mentioned in either Mr. Kriegman's application materials to register the Judgment or his application to obtain the Extension Order. It was first mentioned in a second affidavit that Mr. Kriegman's Washington lawyer sought to introduce, over the

objection of Mr. Dill, during the hearing. Even then, as I have pointed out, there was no mention of the oral ruling of the bankruptcy judge. The Action Against Mr. Dill Underlying Cause of Action [150] I will now turn to the nature of the cause of action upon which the Judgment was founded. [151] In the United States, legislation exists which permits recovery of both the interest payments made to an investor in a Ponzi scheme, as well as recovery of the investor's payment(s) on account of principal. According to reasons for judgment issued in the District Court in respect of the Judgment, once a Ponzi scheme is established, a reverse onus arises on the part of someone in Mr. Dill's position to prove that they were not engaged in the fraud (or in other words, to prove that they acted in good faith). There is no requirement on the part of Mr. Kriegman to prove fraudulent conduct on the part of someone in Mr. Dill's position. As far as I am aware, there is no equivalent legislation in Canada concerning Ponzi schemes with such a reverse onus provision. [152] I disagree with Mr. Kriegman's submission that the reverse onus and claw back of principal aspects of the cause of action are not material because Canadian law incorporates similar provisions. [153] Mr. Dill's defence is that a public policy issue exists in respect of those aspects of the underlying cause of action that has not been determined by courts in this country sufficient to constitute stare decisis. [154] In support of his submission to the opposite, Mr. Kriegman pointed to the decisions in Den Haag Capital, LLC v. Correia, 2010 ONSC 5339, Titan Investments Ltd. Partnership (Re), 2005 ABQB 637, and Zayed v. Cook, [2009] O.J. No.

5513. Mr. Dill, on the other hand, submits that Titan and Den Haag must be confined to their applicable provincial fraudulent preference statutes, which he argues differ in key respects from this case. [155] The parties provided considerable submissions concerning the relevance of the facts and effect of Titan and Den Haag. For example, Mr. Dill pointed out that, instead of relying on a statutory reverse onus to prove their claims (as was the case in the proceeding in the District Court involving Mr. Dill), the plaintiffs in Titan and Den Haag proved the requisite fraudulent intention necessary to void the transactions, such that the defendants were not entitled to retain any of the funds or proceeds involved or associated with them. In an alternative submission, Mr. Dill argued that even if the law in Canada requires the disgorgement of principal as well as profits, the onus rests on the claimant to prove fraud first, such that a judgment flowing from the reverse onus aspect of United States law is contrary to public policy. [156] Even though Mr. Kriegman relies on the decision of Rempel J. in LLS America LLC (Trustee of) v. Dill, 2016 MBQB 20, in support of some of his defences to Mr. Dill's submissions on the instant application, he distances himself from one aspect of Rempel J.'s holding. At para. 31, Rempel J. said that unlike the law in the United States, the approach

generally taken in Canadian law requires only the net gain or profits to be disgorged but not the principal: Washington law apparently requires participants in Ponzi schemes to disgorge not only their net gains but also their initial investments in bankruptcy proceedings. Canadian jurisdictions on the other hand tend only to attach the net gains. [157] Mr. Kriegman cited a more recent decision of Mr. Justice Funt of this Court in LLS America, LLC (Trustee of) v. Bjarnason, 2016 BCSC 909 to support his position that the nature of the underlying cause of action has been determined not to be contrary to public policy. [158] According to Mr. Kriegman, I am bound by Re Hansard Spruce Mills, [1954] 4 D.L.R. 590 (B.C.S.C.) to follow the decision in Bjarnason, and consequently, Mr. Dill's purported reliance on a public policy defence should be dismissed at this juncture as having no merit. [159] In his reasons, Funt J. said, at para. 119, that it was not "contrary to the fundamental morality of the Canadian legal system that the gains an innocent person enjoys from a Ponzi scheme are returned so that all harmed may share the purported 'gains' or 'winnings' generated by the Ponzi scheme." The reasons do not set out the arguments and cases provided by the parties. Nor do the reasons show that the cases cited by Mr. Dill on this application were before Funt J. Likewise in Mr. Kriegman's

case before the Manitoba Court of Queen's Bench, although Rempel J. said that he did not find United States law to be "repugnant" or "contrary to the fundamental morality of the Canadian legal system," there is no explanation or analysis for that determination and no case authorities are mentioned or discussed. [160] In these circumstances, I cannot agree that Hansard Spruce Mills applies. The decision of Chief Justice Wilson in that case specifically holds that a judge of this Court is not bound by the decision of another judge of the Court where it is demonstrated that a binding authority was not considered or where the judgment failed to consider other relevant cases: para. 4. [161] In conclusion, I agree with Mr. Dill that the matter has not been determined in a manner so as to constitute binding authority that engages Hansard Spruce Mills. Although public policy is narrowly construed in terms of enforcing foreign judgments for money (see e.g., Beals at paras. 71-77), I accept Mr. Dill's submission that the reverse onus and claw back provisions of the underlying cause of action are material facts. The defence he has raised to registration has not been determined in any manner sufficient to constitute stare decisis in Canada. [162] I also agree with Mr. Dill that Mr. Kriegman cannot say that he was relieved of his obligation to disclose the nature of the cause of action in

this proceeding in light of Bjarnason because the case had not yet been decided when he obtained the Desk Order and the Extension Order. [163] Relying on Hansard Spruce Mills in a different context, Mr. Dill submits that I am bound by the decision of Mr. Justice Affleck in a prior action brought by Mr. Kriegman in this province to register a judgment against a different judgment debtor. In LLS America LLC (Trustee of) v. Wilson, 2015 BCSC 441, Affleck J. said, at paras. 27 and 47, after considering the facts of the case that bear remarkable similarity to the instant case, that he could not "detect a real and substantial connection between the defendant and the foreign Washington Court." His finding is set out in the following excerpt from his reasons: [47] I cannot detect a real and substantial connection between the defendant and the foreign Washington Court which gave judgment against her. The only connection whatsoever is the notarial seal on the promissory notes. As I have already commented there is nothing in the evidence to indicate where the maker of the notes, Dee Nelson, signed them. They may have been signed by her in British Columbia and the notarial seal may have been applied later in Washington State. The promissory notes are subject to British Columbia law which suggests they were made in British Columbia. The seal may be indicative of some connection to

Washington State, but it had no effect on the validity of the notes pursuant to British Columbia law and is such a "fleeting or relatively unimportant connection" to Washington State that the test of connection in Beals is not met. [164] Mr. Dill says that I am obliged to make the same finding in this case concerning the absence of a real and substantial connection. [165] Ms. Wilson's application ultimately did not succeed because she did not bring it within the requisite time limit. Affleck J. concluded that as a result, he did not have jurisdiction to set aside the registration of Mr. Kriegman's judgment against her. The decision was sustained in the result by the Court of Appeal: 2016 BCCA 122. The Court of Appeal said at para. 36 that it was not necessary to resolve the numerous defences raised by Ms. Wilson to the registration, including the mandatory bars in s. 29(6), because it concluded that Affleck J. had not erred in his finding that he lacked jurisdiction. But in writing for the Court, Mr. Justice Savage went on to say at para. 37 that if any of Ms. Wilson's arguments had merit, "she would have been entitled to succeed in setting the Registration Order aside as provided for in s. 34(2), based on the defects enumerated in s. 29(6)." The Court of Appeal did not comment on the real and substantial finding made by Affleck J. [166] Although the facts of this case are

remarkably similar to Wilson insofar as the real and substantial connection issue is concerned, the issue was not determined by the Court of Appeal. Consequently, I would be reluctant to reach the same conclusion as Affleck J. solely on the basis of Hansard Spruce Mills. [167] It is also not necessary for me to decide this point in order to determine this application. My decision to set aside the Registration Order and the Extension Order is premised on Mr. Kriegman's failure to discharge his duty of disclosure and also upon my finding (discussed in a subsequent section of these reasons) that at least one of the mandatory bars, s. 29(6)(g), is engaged. Initial Steps in the Action Against Mr. Dill [168] On July 15, 2011, Mr. Kriegman commenced a lawsuit against Mr. Dill (along with others) for recovery of both the interest payments he received from the BC Companies as well as the total principal amount of the Loans. [169] The originating document for the lawsuit is called an Adversary Complaint. Mr. Kriegman filed it with the District Court as opposed to the Bankruptcy Court because jurisdiction to pursue the claim is with the former. Mr. Kriegman claimed that Mr. Dill had received fraudulent transfers from LLS America as part of a Ponzi scheme. As noted, the only evidence of payments made to Mr. Dill from any entities other than the BC Companies is of $3,175.98, and there is no

evidence adduced by Mr. Kriegman on this application to show its purpose or that it establishes a real and substantial connection to Washington State. [170] I will refer to the proceeding initiated by the Adversary Complaint as the "District Court Proceeding". [171] Mr. Dill has consistently denied any prior knowledge of a Ponzi scheme operated by Ms. Nelson. There is no proof adduced by Mr. Kriegman on this application to the contrary. [172] As I have noted, Mr. Kriegman agrees that Mr. Dill's proof of claim he sent to the creditors' committee of LLS America did not constitute attornment to the District Court. Mr. Kriegman knew that he was required to serve Mr. Dill with the Adversary Complaint. [173] To effect service, a court clerk of the District Court mailed the Adversary Complaint to Mr. Dill's address in West Vancouver by international registered mail on August 18, 2011. Mr. Dill never received the document. Canada Post was on strike at that time. The Adversary Complaint was returned to the District Court marked unclaimed. [174] Service by international registered mail was the only means by which Mr. Kriegman sought to effect service of the Adversary Complaint directly on Mr. Dill. [175] Mr. Dill's unchallenged evidence is that he has never been served with the Adversary Complaint. He has repeatedly stated to Mr. Kriegman and the District Court that he was never served

with the Adversary Complaint and insisted on his right to be served. Mr. Dill learned of the Adversary Complaint from another party to the litigation brought by Mr. Kriegman against others in the District Court. [176] Subsequently, Mr. Dill retained the Washington State law firm of Foster Pepper LLC. The law firm was also representing other Canadians in like circumstances. [177] Mr. Kriegman was aware throughout that Mr. Dill was never served. The best he could say to the District Court, which in fact he did in an application seeking an order for substituted service that was filed on March 9, 2012, is that service had been attempted: The Trustee has attempted service on David Dill by international registered mail sent by the Clerk of the Court to 405-1766 Duchess Avenue, West Vancouver, British Columbia, V7V 1P9. This is the address stated on Mr. Dill's proof of claim. The international mailing was returned marked "unclaimed". Decl. of Daniel J. Gibbons, ¶ 4.a.ii. [178] Mr. Kriegman eventually obtained the Judgment from the District Court against Mr. Dill. I will review the circumstances in which the Judgment was obtained in the following section. For now, I will highlight that when Mr. Kriegman sought to register the Judgment with this Court through the ex parte desk order application, he tendered in support an affidavit from his Vancouver counsel deposing that Mr. Dill had

been served with the Adversary Complaint, even though that was untrue. [179] Mr. Kriegman made that admission during cross-examination: Q Thank you. You know that Mr. Dill was not served by registered mail from the clerk of the bankruptcy court, right? A Right. Q And you've always known that, right? A Right. [Emphasis added] [180] On November 15, 2011, Mr. Dill's Washington lawyer filed a notice of appearance with the District Court, which allowed him to insist on service without attorning to its jurisdiction. The document states that Mr. Dill was not "waiving objection to improper service, venue or jurisdiction." A similar document was filed with the Bankruptcy Court on December 10, 2011. [181] Mr. Dill continued to contest the service and the jurisdiction of both the Bankruptcy Court and the District Court. He insisted, as was his right to do in the jurisdiction of those courts, that he be properly served with the Adversary Complaint. [182] Mr. Dill's unchallenged evidence is that he never received the Desk Order. In submissions on this application, Mr. Kriegman argued that Mr. Dill continued to evade service. Yet, documents in evidence show that when Mr. Dill's counsel learned from a registry search that the Judgment had been registered with this Court and that the time for service had been extended by Master Scarth, he contacted Mr. Kriegman's Vancouver lawyer (who was not

counsel on this application) requesting confirmation of service per the Extension Order, and told him that Mr. Dill had not, as of that date, received either order. Mr. Dill's counsel also offered to seek instructions to accept service on behalf of Mr. Dill. Mr. Dill's counsel followed up with Mr. Kriegman's Vancouver lawyer a week later for a response, at which time he was advised that the Extension Order had been served and given particulars of service. [183] I also disagree with Mr. Kriegman's submission that Mr. Dill was engaged in ongoing attempts to avoid service of the Adversary Complaint. Mr. Dill's reliance on his right to be properly served was put in issue from the outset. It was Mr. Kriegman's choice not to incur the expense of retaining a process server to personally serve the Adversary Complaint on Mr. Dill. The suggestion, made during submissions on this application, that it was unfair or inappropriate to expect Mr. Kriegman to have incurred the expense of retaining a local process server to serve Mr. Dill is, in my respectful opinion, without merit, particularly given the nature of the claim made in the District Court Proceeding for repayment of both interest and principal and the gain Mr. Kriegman stood to make given that his remuneration as trustee was based on a percentage of his recovery as opposed to an hourly rate. [184] In conclusion, it was a

misstatement of a material fact for Mr. Kriegman to represent that Mr. Dill had been personally served. Mr. Kriegman's Application for a Substituted Service Order [185] Mr. Kriegman subsequently applied for an order for substituted service. His motion was filed in the District Court on March 9, 2012. In it, he sought an order allowing him to serve the Adversary Complaint on Mr. Dill's Washington lawyer. It was opposed. The application was heard on May 7, 2012. The presiding judge did not grant the order sought by Mr. Kriegman. Instead, the judge gave Mr. Dill a choice: if he wished to maintain his objection that he was not served and insist on his right to be served, then Mr. Dill was required to either discharge his Washington lawyer, Mr. Dillon Jackson, or to instruct him to accept service. Mr. Dill was given 10 days to decide what to do. [186] There are no reasons for judgment issued in respect of Mr. Kriegman's substituted service application. The order of the court is memorialized in a document entitled "Proceeding Minutes/Proceeding Memo", which states: Minute Entry Re: Motion to Serve Process on Counsel for Defendants. HELD. The court will sign an Order Denying in Part and Granting in Part the Plaintiff's (Trustee) Motion to Serve Process on Counsel for Defendants pursuant to the oral decision. Mr. Gibbons will present the orders. The court required Mr. Jackson to file a

Motion to Withdraw as Counsel within 10 days or accept service of process as to the specific defendants listed in regards to the Motion to Serve Process on Counsel for Defendants. If Notices of Appearance are withdrawn by Mr. Jackson, the court required the Plaintiff to attempt service by means other than service on Mr. Jackson. [Emphasis added] [187] Mr. Dill understood that as a result of the decision, he had to choose one of two options: if he continued to assert his right to be served, then he must discharge his lawyer, who was familiar with the issues in the case and to whom Mr. Dill says he had incurred legal expense, and retain new counsel, or he must instruct his Washington lawyer, Mr. Jackson, to accept service. [188] Mr. Dill submits that he was presented with what is referred to in the case law as a "Hobson's choice", which is defined as an act, in this case a waiver of his rights, under compulsion or constraint that is not voluntary: see, e.g., Stretford v. The Football Association Ltd. & Another, [2007] EWCA Civ 238 454, at paras. 50-52; Loreley Financing (Jersey) No. 3 Limited v. Wells Fargo Securites, LLC, No. 13-1476 (2d Cir. 2015). [189] Faced with the choice of having to hire new counsel and lose what he says was his significant financial investment in Mr. Jackson, Mr. Dill waived his right to object to the lack of service of the Adversary Complaint and

instructed his Washington lawyer to accept service. From there, Mr. Dill submits that the steps he took in the litigation to dispute the Adversary Complaint, including jurisdiction, were taken under duress. Duress is defined as "a coercion of the will so as to vitiate consent": Schwarzinger v. Bramwell, 2011 BCSC 283 at paras. 46-49 (citing Pao On and others v. Lau Yiu and another, [1979] 3 All E.R. 65) at 78 (P.C.). See also, Byle v. Byle (1990), 65 D.L.R. (4th) 641 at 651 (B.C.C.A.). [190] As noted in an earlier section of these reasons, s. 29(2)(a)(i) and (ii) of the COEA state that an order for registration may be made where a judgment debtor was personally served or attorned to the jurisdiction of the original court. He asserts that in these circumstances, he was not personally served as required. I agree. [191] Mr. Dill maintained his position refuting jurisdiction and lack of personal service, but was eventually compelled to accept service. I respectfully disagree with Mr. Kriegman's submission that what occurred is not a material fact because it is without question that a judge of this Court would have made the same order in similar circumstances. The order, at least according to the case authorities that were cited to me on this application, impacted on Mr. Dill's right to choose counsel. In Mara (Guardian ad litem of) v. Blake (1996), 23 B.C.L.R. (3d) 225 (C.A.),

citing MacDonald Estate v. Martin, [1990] 3 S.C.R. 1235, the Court of Appeal agreed with counsel's submission that "although the Court retains an inherent jurisdiction to interfere with a litigant's choice of counsel, that jurisdiction should be exercised with 'the highest level of restraint' ." Moreover, courts should only interfere in "unusual circumstances calling into question the administration of justice." The Court also agreed that courts "should be reluctant to refuse the 'right of audience' to counsel on the basis of its own views of equity and good conscience": para. 13. [192] In MacDonald Estate, the Supreme Court of Canada pointed out, at 1265, the importance of a party's right to choose counsel to the integrity of the system of justice in Canada, when considering the right of a party to retain counsel licensed to practice in another province: My colleague stated that this appeal called for the balancing of three competing values, namely: the maintenance and integrity of our system of justice; the right of litigants not to be lightly deprived of their chosen counsel; and the desirability of permitting reasonable mobility in the legal profession. Of these factors, the most important and compelling is the preservation of the integrity of our system of justice. The necessity of selecting new counsel will certainly be inconvenient, unsettling and worrisome to clients.

Reasonable mobility may well be important to lawyers. However, the integrity of the judicial system is of such fundamental importance to our country and indeed, to all free and democratic societies that it must be the predominant consideration in any balancing of these three factors. [Emphasis added] [193] In his submission that the ruling on the substituted service application is not material, Mr. Kriegman relied on the remarks found in the reasons for judgment of Rempel J. in LLS America LLC that the same approach would be taken by courts in this country. In that case, the defendants (who were members of Mr. Dill's family) made a similar complaint concerning service and choice of counsel when resisting Mr. Kriegman's efforts to enforce a judgment obtained on behalf of the estate of LLS America. In his reasons, Rempel J. said, at para. 23, that the order made by the District Court "does not hit the standard of repugnancy set out in the case law," adding that, "It is not difficult to imagine a court in Manitoba making a similar order in the same circumstances." Rempel J. did not cite any case authority in his reasons. Nor did he set out the basis upon which such an order might be made in the Court of Queen's Bench. As well, none of the cases cited by Mr. Dill on this application concerning the sanctity of the right to choose counsel are cited and there is no indication from the

reasons that any of them or the applicable legal principles were put before the court. For all of those reasons, and because the Hobson's choice and public policy defences were not made before or considered by Rempel J., I am unable to find the remarks persuasive. [194] The brief decision of the Manitoba Court of Appeal (previously cited), issued in respect of the appeal of the decision of Rempel J., is not, as Mr. Kriegman submits, dispositive of the issue. The issue is not mentioned or addressed in the reasons, nor do they refer to any of the cases cited by Mr. Dill on the instant application. [195] In conclusion, I have determined that it was a misstatement of a material fact for Mr. Kriegman to say that Mr. Dill was personally served with the Adversary Complaint. The circumstances in which Mr. Dill's Washington lawyer accepted service on his behalf are also material facts because they bear on a defence that Mr. Dill raises to registration of the Judgment. Mr. Dill's Attempts to Challenge Jurisdiction [196] Mr. Dill's Washington lawyer then filed a document stipulating as to service and after that, filed defences in the District Court Proceeding and the Bankruptcy Proceeding. [197] Mr. Dill asserts that he never attorned to either the Bankruptcy or District Court, such that the requirements for registration in s. 29(2)(a)(ii) are not met. He asks me to find that he did not

attorn to the District Court when his defence was filed. [198] In his defence pleadings that were filed with both the District Court and Bankruptcy Court, Mr. Dill did not admit to the jurisdiction of either court. In looking at the documents, and in considering what is apparent from the face of the provisions of the code of civil procedure in the United States shown to me by counsel on this application, I agree with Mr. Dill's submission. On the face of his defence pleadings, it cannot be said that Mr. Dill attorned or otherwise submitted to the jurisdiction of either court. Mr. Dill has demonstrated that in the defences filed on his behalf, he maintained his position denying jurisdiction. Further, I find that the most he did was to admit that the District Court, as opposed to the Bankruptcy Court, was, as between the two courts, the appropriate court to try the action. Otherwise, Mr. Dill did not admit jurisdiction on the face of the pleadings. This was a material fact that was not disclosed. [199] Does the filing of those pleadings after he instructed his Washington State lawyer to file a document acknowledging service constitute attornment or submission to either or both the Bankruptcy Court or the District Court by Mr. Dill? That is a question that is informed by foreign law. It is not clear to me whether the foreign law is the law of Washington State or United States

federal law as both are courts of federal jurisdiction. Mr. Kriegman has not tendered any evidence of a foreign law expert to demonstrate that in spite of Mr. Dill filing his defences, as a matter of law, he nonetheless attorned to the jurisdiction of the Bankruptcy and District Court. It appears from the evidence that Mr. Dill was able to participate in the underlying process without conceding service (until ordered to choose between retaining Mr. Jackson or hiring a new lawyer) and to contest jurisdiction throughout the process. I am therefore unable to decide the matter with any certainty. [200] If domestic law applies, given the absence of evidence of foreign law, the mere fact that Mr. Dill filed a pleading that did not admit jurisdiction and instead took steps to dispute jurisdiction does not constitute an attornment to the jurisdiction of this Court. [201] However, Mr. Dill did ultimately agree to be bound by the outcome of a jurisdictional challenge brought by other defendants in the District Court Proceeding. Again, there is no foreign law evidence upon which I can make a finding equating that step with attornment. Under the law of this province, whether that step, taken subsequent to the jurisdiction application being dismissed, constitutes attornment, depends on the approach taken during the hearing (e.g. dealing with the merits of the case in a substantive way) and

thereafter. Under the law of this province, Mr. Dill's participation in the hearing of a challenge to jurisdiction application brought before this Court would not, of itself, constitute attornment: Rule 21-8(5); Litecubes, L.L.C. v. Northern Light Products Inc., 2009 BCSC 181 at paras. 34-42. [202] In argument, Mr. Kriegman pointed to other steps taken by Mr. Dill in the underlying proceeding in the District Court that he argues constitute attornment, such as filing witness declarations, participating in the trial scheduling process, filing witness and exhibit lists for trial, responding to interrogatories, and admitting that the net receipts (but not the principal) should be repaid. Mr. Dill's answer is that he did that under reservation of his right to contest jurisdiction which, he says, is permitted by the law of the foreign jurisdiction. He also maintains that he took those steps under duress following what Mr. Dill refers to as the Hobson's choice ruling. [203] Again, I have no evidence of foreign law from which to make a determination of the merits of those submissions. Applying the law of this province, and without considering the arguments concerning the Hobson's choice ruling, but looking at it strictly from the vantage point of such steps having taken by a party after being served with a notice of civil claim, Mr. Dill would be found to have attorned to the

jurisdiction of this Court. [204] But that does not end the matter. [205] Even if it could be said that Mr. Dill did attorn to the jurisdiction of the District Court, his attornment is not fatal to his application. Attornment is one of a number of potentially applicable mandatory bars to registration; the presence of any one of those bars prohibits registration. [206] The COEA separates attornment from other mandatory bars to registration in s. 29(6), such that ex parte registration would still be prohibited if Mr. Dill can prove any of them applied. Thus, even if Mr. Dill can be seen as having attorned to the jurisdiction of the District Court, it does not render immaterial any of the facts I have found to be material. The Trial of the Adversary Complaint [207] The Adversary Complaint proceeded to trial in the District Court on December 9 to 11, 2013. Mr. Dill did not wish to participate in it. He instructed Mr. Jackson not to attend. The Court refused to let Mr. Jackson withdraw and over his protest, ordered him to attend by telephone. In that respect, Mr. Dill submits that if his counsel's presence on the telephone during trial is to be construed as an attendance at trial, it was not voluntary but was done under compulsion or duress. He relies in part on Mid-Ohio Imported Car Co. v. Tri-K Investments Ltd. (1995), 13 B.C.L.R. (3d) 41 (C.A.), where the Court of Appeal said at

para. 15, when considering the effect of a party applying to dispute an order for service ex juris: the law in British Columbia today entitles a party to an action to dispute an order for service ex juris upon him of an originating proceeding, and to challenge jurisdiction, both simpliciter and forum conveniens, without the risk that bringing such applications will constitute acceptance by him of the jurisdiction of the court. Beyond that, the common law prevails such that unless an appearance before the court is made under duress, it will be regarded as voluntary. [Emphasis added] [208] As I pointed out, the law in the United States concerning Ponzi schemes places the onus on a person in Mr. Dill's position to rebut the presumption that the funds paid to someone such as the BC Companies were fraudulent transfers; otherwise, a person in Mr. Dill's position must not only return the interest monies they were paid, but the principal as well. Since Mr. Dill did not attend the trial and did not offer any evidence, the presumption was not rebutted. Judgment was issued against him for both the interest and principal amounts he received and paid. The Judgment was granted in the amount of $1,645,044.06, of which approximately $550,000 was on account of principal. [209] In the circumstances, Mr. Kriegman's description of the manner in which the Judgment was obtained following trial,

which I describe in the next section, failed to provide important context of material facts and was misleading. Registration of the Judgment in British Columbia Initial Registration by Desk Order [210] Mr. Kriegman did not file his own affidavit in support of his application for the Desk Order. The affidavit that he filed in support of the application was sworn by his Vancouver lawyer on September 9, 2014. In it, Mr. Kriegman's lawyer deposed, based on information and belief (said to derive from one of Mr. Kriegman's Washington State lawyers), that Mr. Dill had been served by registered mail: d) The plaintiff filed an adversary complaint against David Dill in the US District Court for the Eastern District of Washington under Cause No. CV-11-362-RMP, and served David Dill via registered mail. [Emphasis added] [211] As I pointed out, that statement of fact concerning service was untrue and Mr. Kriegman knew it was untrue. [212] Mr. Kriegman was also aware that service was a key issue to registration. This is clear from his prior involvement in an application heard by Mr. Justice Grauer in Grande, a case where he sought to register a judgment concerning LLS America and two British Columbia residents who had loaned money to one of Ms. Nelson's companies in this province. [213] The affidavit from Mr. Kriegman's Vancouver lawyer filed in support also attached, as an exhibit, a copy

of a document entitled "Abstract of Judgment Against Defendant David Dill" ("Abstract"). The Abstract is a document signed by a clerk of the District Court confirming the amount of the Judgment and other details such as service. In his affidavit, Mr. Kriegman's lawyer described the Abstract in this way: 5. Attached as Exhibit "B" to this Affidavit is an original Abstract of Judgment, containing the matters set out in the certificate contemplated by Section 29(2) of the Court Order Enforcement Act, R.S.B.C. 1996, c. 78, issued by the Superior Court of the State of Washington in and for the County of Spokane on April 15, 2014. [Emphasis added] [214] The Abstract was prepared by Mr. Kriegman's law firm in Washington State. [215] The Abstract incorrectly stated that the Adversary Complaint was served on Mr. Dill. As well, it also gave the impression that Mr. Dill voluntarily acknowledged service through his counsel without mentioning the choice given to Mr. Dill by the judge hearing the substituted service application. The document reads as follows: The following is hereby certified to be true and correct according to the records of the Clerk's Office of the United States District Court for the Eastern District of Washington.

1. The adversary complaint was filed herein on July 15, 2011 and Defendant David Dill ("Defendant") was served a copy of the summons and complaint by the Bankruptcy Court Clerk via international registered mail on August 18, 2011. Further, on June 11, 2012, an Acceptance of Service was filed, signed by counsel for Defendants. [Emphasis added] [216] Yet, documents filed by the law firm acting on Mr. Kriegman's behalf with the District Court show that his Washington lawyers had information in hand to show that the Adversary Complaint had never been served by mail on Mr. Dill and that the service letter had been returned. This point is illustrated from Mr. Kreigman's admission on cross-examination that contrary to the wording of the Abstract, the court registry docket from the District Court is clear that service on Mr. Dill was unsuccessful: A It says at the top, United States bankruptcy court, Eastern District of Washington, adversary proceeding number 11-80093-FPC, and this looks like the docket - - a printing of the docket from that adversary proceeding? Q And what do you mean by docket? A The record of the court of what has been filed into the record of the court. Q Who prepares this document? A The clerk of the court. Q And it's always available to you and your counsel? A It's available to - - it is available, yes. Q If you go to page 726, please, you'll see the fourth box

from the bottom? A Right. Q References my client, David Dill; do you see that? A I do. Q And that the attempted service by double registered mail didn't work, it was undeliverable, right? A That's what it says. Q And that has been the case since September 23rd, 2011, right? A That's what the date shows, yes. Q And this record was always available to you and your counsel, right? A Right. [Emphasis added] [217] The Abstract also conveyed the clear impression that the Washington Judgment was obtained after a defence was entered and that Mr. Dill was represented by counsel: 3. A defense was entered and the Defendant was represented by counsel. [218] Mr. Dill's ongoing denial of jurisdiction in the defence pleading was not mentioned. [219] The Abstract also certified that service was proper: 2. Service of process upon Defendant was proper under Fed. R. Civ. P. 4(f)(2) and the Hague Convention. [220] At the time the Abstract was prepared, Mr. Kriegman knew, from his prior involvement in the Grande case, that there were particular requirements concerning service under the COEA that rendered the foregoing statement about service under the Hague Service Convention inapplicable. [221] In Grande, Grauer J. dealt with the prohibition to registration set out in s. 29(6)(c) of the COEA in circumstances where, in addition to attornment, Mr. Kriegman relied on the Hague Service Convention to

establish service sufficient to meet the registration requirements of s. 29(2) of the COEA. Grauer J. determined that even if service met the requirements of the Hague Service Convention, it was not necessarily sufficient per the COEA. The COEA, he held, requires that the debtor must be duly served with the original process, even where the debtor attorned or submitted to the jurisdiction of the foreign court. [222] I have set out, at para. 5 of these reasons, s. 29(6)(c). It provides that a judgment must not be registered if the judgment debtor was not duly served and did not appear even though he or she had agreed to submit to the jurisdiction of the foreign court. [223] I will pause at this moment to say that I reject Mr. Kriegman's characterization of the "duly served" mandatory bar in s. 29(6)(c) as applying only to persons who are ordinarily resident or who are carrying on business in the foreign jurisdiction. It ignores the language of that section of the COEA, which is disjunctive. Section 29(6)(c) speaks of a bar to registration where a person is not duly served, even though "he or she was ordinarily resident or carrying on business in the state of that [foreign] court or had agreed to submit to the jurisdiction of that court" [emphasis added]. Thus, a person who did not reside or carry on business in the jurisdiction of the foreign court who had nonetheless submitted

to the jurisdiction of the foreign court must still be duly served. [224] Grande was a similar case involving an application to set aside registration of a District Court judgment which Mr. Kriegman obtained on behalf of the bankrupt estate of LLS America. Approximately one year before Mr. Kriegman sought to register the Judgment against Mr. Dill in this Court, Grauer J. issued reasons holding that simply mailing the adversary complaint by international registered mail, without receiving a corresponding acknowledgment in reply, did not constitute proper service so as to enable ex parte registration even in light of the judgment debtors' attornment to the jurisdiction of the United States Bankruptcy Court. [225] Grauer J. held that notwithstanding the requirements of service in Washington (including the Federal Rules of Civil Procedure and the Hague Service Convention that Mr. Kriegman relied upon in the present case), the defendant debtors in that case must still be "duly served" in accordance with the law of this province in order to register the judgment ex parte per the COEA, even where the defendants had attorned to the jurisdiction of the Bankruptcy Court when they filed their proofs of claim. [226] Unlike the case at bar, Grande did not involve an acknowledgment of service filed by counsel or an appearance filed on behalf of the judgment debtors in the District Court

proceeding. Nonetheless, Mr. Dill argues that the following comments in the reasons for judgment, especially those in the last sentence of para. 60, mean that even where an acknowledgment of service or appearance is filed, a judgment debtor such as himself must still be duly served: [59] In my view, it does not necessarily follow, as the defendants argue, that only personal service would suffice. As this court stated in Re Gacs and Maierovita (1968), 68 D.L.R. (2d) 345, "duly served" does not necessarily mean "personally served". In the circumstances of this case, however, I find that it means more than just putting the summons in the mail. If the plaintiff had been able to produce a signed receipt showing acknowledgment by the defendants that they had received the package containing the summons, which is what registered mail is designed to accomplish, then that may well have satisfied the requirement that the defendants be "duly served". As it is, there is no acceptable evidence to counter the sworn evidence of the defendants that they did not receive notice. There is also no evidence of any attempt by the defendants to evade service, or of any knowledge on their part of what was transpiring in the Bankruptcy Court proceedings beyond their filing a Proof of Claim. [60] I consider this analysis to be entirely consistent with the scheme of section 29 of the Act. Section 29(2)

allows for registration without notice only where the judgment debtor was either personally served, or had appeared or defended or attorned or otherwise submitted to the jurisdiction of the original court. Section 29(6)(c), in essence, provides that even where the judgment debtor had agreed to submit to the jurisdiction of the court, he or she must have been duly served. [Emphasis added] [227] In response, Mr. Kriegman maintains that all that matters in this case is that Mr. Dill attorned to the jurisdiction of both the Bankruptcy Court and the District Court. [228] Neither party addressed the relationship between the words contained in the first part of the subsection, "was not duly served and did not appear", and those found in the last part of it, "even though he had agreed to submit to the jurisdiction of the court". To my mind, filing or entering an appearance is a means of submitting to a court's jurisdiction. Does the mandatory bar apply if the appearance filed on Mr. Dill's behalf in the District Court Proceeding was unconditional, thus ruling out the application of the words "did not appear"? On the other hand, is the latter part of the subsection engaged because Mr. Dill "submitted to the jurisdiction" of the District Court through his appearance, triggering the mandatory bar? [229] I do not think it appropriate to decide this issue as neither party addressed it.

Instead, and for the purpose of my decision, what is important is that, as a result of Mr. Kriegman's involvement in Grande, it was not correct for his registration and Extension Application materials to state that service of the original process was proper and that the Hague Service Convention and rules of civil procedure in the District Court had any application to this case. Further, Grande confirms that attornment does not prevent the application of the other mandatory bars. [230] Mr. Kriegman cannot claim that he did not know of Grande. The same lawyer who sought the registration and obtained the Desk Order and Extension Order in the case at bar also represented Mr. Kriegman in Grande. [231] Mr. Kriegman also admitted that he knew it was important when registering a judgment in British Columbia that he must be "completely honest at all times". [232] In the circumstances, I find it highly troubling that when Mr. Kriegman was cross-examined about the accuracy of his Vancouver lawyer's affidavit regarding service on Mr. Dill, he had to be pressed to admit that the affidavit evidence (filed in support of the Desk Order and the Extension Application) concerning personal service was untrue: Q Now, if you look at Paragraph 2 of the Williams affidavit, he says he's advised by Erik Kukuk of the law firm of Witherspoon Kelley, and that's your law firm in the States, right? A Yes. Q

And you understand that Erik Kukuk is an associate with that firm, correct? A Correct. Q And he was acting on your behalf, right? A Right. Q He advises Mr. Williams on Subparagraph D on the second page that, quote, The plaintiff filed an adversarial complaint against David Dill in the U.S. District Court, end of quote. And that was the complaint you filed in the U.S. District Court, right? A Right? Q And quote, And served David Dill via registered mail, end of quote. Do you see that? A I do. Q That statement is untrue, isn't it? A I don't know if I would characterize that. That was an attempt at service of Mr. Dill. Q Well, sir, you know the difference between an attempted service and service, don't you? A I agree that it doesn't say attempted. It does say served, I agree. Q And that's wrong, isn't it? A He was not served via registered mail. Q The truth is that Mr. Dill was not served by registered mail, isn't it? A He was - - no, he was not served by - - you're right. Q This is a statement which is patently untrue, isn't it? A I'd say it's an untrue statement, I agree with that. [Emphasis added] [233] Lastly, I will mention that the affidavit tendered in support of registration of the Judgment also deposed, incorrectly, that on the basis of facts that he was advised of by counsel with the Washington law firm acting for Mr. Kriegman, the Judgment did not fall within any of the

mandatory bars prohibiting registration of a foreign judgment. The Extension Application [234] The Desk Order was not served on Mr. Dill within the 30-day period as required by s. 34(a) of the COEA. Consequently, on January 15, 2015, Mr. Kriegman applied for an order extending the time to serve it and to effect substituted service by posting it on the front door of Mr. Dill's apartment building. His application was brought ex parte and heard by Master Scarth on January 21, 2015. [235] In support of his application, Mr. Kriegman relied on his Vancouver lawyer's affidavit filed in support of the initial request for desk order registration, which included the Abstract. Mr. Kriegman continued to maintain that the Judgment was properly registered because Mr. Dill had been served by international registered mail and that he had voluntarily attorned to the jurisdiction of the courts in the United States. In addition, neither Mr. Kriegman nor his Vancouver lawyer (who spoke to his own affidavit on the application) brought the Court's attention to the decision of Grauer J. in Grande. Neither the Consolidation Order nor the bankruptcy judge's oral ruling were mentioned. [236] Mr. Kriegman's notice of application also stated (without evidence to support it) that the scheme operated by LLS America had been found by courts in this province and in Washington State to be a Ponzi scheme: Both

in Washington and British Columbia Courts it has been found that, although LLS America operated as a payday loan operation, in fact it was a Ponzi scheme. [237] That statement was incorrect insofar as courts in this province are concerned because no court in British Columbia had found as of that time that LLS America operated a Ponzi scheme. [238] As was the case with his admission concerning lack of service on Mr. Dill, an admission that this misstatement was untrue had to be drawn out of Mr. Kriegman during his cross-examination. [239] By way of example, when Mr. Kriegman was first asked to identify where a court in British Columbia had found that LLS America operated a Ponzi scheme, Mr. Kriegman answered: A I don't know what that's in reference to. [240] Then, when it was put to him that no court in this province had made that finding, Mr. Kriegman stated that he did not know what his counsel was referring to. [241] He was asked this question: Q Well, the fact - - the truth is that no British Columbia court has found that LLS America operated as a Ponzi scheme, have they?" [242] He responded: A I don't know one way or the other I don't know what my counsel was referring to there. [243] And when pressed further, and asked to concede that he was not aware of litigation in British Columbia where a court had found such a Ponzi scheme, Mr. Kriegman appeared to agree, albeit

reluctantly, and framed his answer in the form of a question: A To my knowledge, there hasn't been an independent finding by - - well, I'm not sure, but I - - I tend to agree with you on that. I don't - - I'm not aware of an explicit finding as such, as a factual finding, which is what I think you're asking me, right? Determination Mr. Kriegman's Failure to Discharge His Duty of Disclosure [244] As I highlighted at the outset of these reasons, the duty of disclosure is an integral procedural component and requirement on an ex parte application. I disagree with the plaintiff that this duty is not codified within the COEA, that the COEA is a complete code, and therefore the failure to disclose is not fatal to registration of the order. [245] As I said in an earlier part of these reasons, s. 35 of the COEA imports the Rules, such that they operate alongside the COEA unless specifically displaced by a provision of the COEA. As such, the Rules that pertain to the procedural requirements for ex parte applications are incorporated. They encompass the disclosure requirements as described at the outset of these reasons. As noted, courts have held that failure to abide by these requirements usually results in the order being set aside without regard to its merits: Money at para. 12; Pierce at para. 1; U.S.A. at 28. [246] When one party is denied their right to appear and defend an

application, the court must have all information necessary to make an informed and fair decision. It is not up to an applicant on an ex parte application to choose what gets put before the court, to misrepresent the strength of their case, to allow known inaccurate statements to go before the court, or to fail to fairly present the position of the opposing side. The duty incumbent on an applicant on an ex parte application is clear in the case law. An applicant seeking an ex parte order must be fastidious to ensure that all important aspects of the evidence are disclosed and must point out what defences may be available to the opposing party: Green at paras. 24-25. [247] In the circumstances of this case, I have determined that both the Desk Order and the Extension Order must be set aside regardless of the merits of either party's case. To do otherwise would promote an impermissible exception to a litigant's duty of disclosure on ex parte applications. To overlook the significant material factual misstatements and omissions of material facts in this case, which Mr. Kriegman asks that I do, would set a dangerous precedent, especially in circumstances where some of the facts put before the Court were known to him to be untrue. [248] Through his registration application materials, Mr. Kriegman conveyed to this Court an impression that the Judgment was obtained in a straightforward

and routine manner following a trial in which Mr. Dill had been served, represented by counsel, and defended the case. Mr. Kriegman then obtained the Extension Order by continuing to rely on application materials used to obtain the Desk Order that contained untrue information and also by representing to Master Scarth that LLS America had been found by courts in this province to be involved in a Ponzi scheme. [249] I find that the facts highlighted by Mr. Dill on this application are material facts that should have been disclosed. Mr. Kriegman failed to make full and frank disclosure of the facts surrounding service and attornment. He also did not disclose: (a) the oral ruling from the Bankruptcy Court excluding the BC Companies from the Consolidation Order; (b) the Consolidation Order's purported extraterritorial effect; (c) the lack of notice of the consolidation motion to Mr. Dill, the Province, and any other stakeholders; (d) the absence of recognition proceedings brought per the BIA; (e) the escheatment issue; (f) the reverse onus and claw back of principal aspects of the underlying cause of action; and (g) Mr. Dill's ongoing denial of jurisdiction. [250] I do not accept Mr. Kriegman's submission (which is not supported by any evidence) that he did not know what materials had been submitted by his Vancouver lawyer in support of the registration process that led to the Desk

Order, nor of the materials presented on the application for the Extension Order. Mr. Kriegman's Vancouver lawyer acted as his agent throughout. There is no evidence from Mr. Kriegman or any other evidence to show, let alone suggest, that his Vancouver lawyer acted outside the scope of his agency. Moreover, there is no evidence from Mr. Kriegman stating that he did not know that his Vancouver lawyer was filing or tendering incorrect and incomplete facts. Mr. Kriegman had several opportunities during his cross-examination to provide such evidence (e.g., when he admitted that he saw documents filed by his Vancouver lawyer in support of the Desk Order and Registration Order). Indeed, he did so in respect of the Abstract of Judgment that his Washington lawyers prepared and submitted to the District Court registry for entry. [251] Mr. Kriegman also failed in his duty to make this Court aware of the holding in Grande when he asserted that Mr. Dill had been properly served. There is an overriding duty to bring all relevant case law, such as Grande, to the attention of the court. In Lougheed Enterprises Ltd. v. Armbruster, [1992] 2 W.W.R. 657 (B.C.C.A.), the Court of Appeal articulated the duty to draw relevant case law to the attention of the court in very clear language at 16: The duty to bring relevant law to the attention of the court is founded upon the proposition that counsel

has an obligation to the court to assist in duly administering the law, as well as a duty to his client and that, in some circumstances, the former duty may override the latter. [252] This is not a situation where Mr. Kriegman is being faulted for failing to discover an unreported or otherwise obscure decision: Lougheed at 15. He was the plaintiff in Grande. [253] In summary, I am satisfied that if proper disclosure of the facts that I have found to be material was made at the time of registration, the Judgment should not have been registered by desk order and Mr. Kriegman would have instead, at a minimum, been directed to apply in chambers following service on Mr. Dill, or to sue on the Judgment. These facts inform service and attornment per s. 29(2) and most of the mandatory bars in s. 29(6). I do not agree with Mr. Kriegman that it is clear that Mr. Dill attorned to the jurisdiction of the District Court and that it is the sole material fact, such that any misstatements that he made are in respect of immaterial facts and irrelevant to this application. This is not a case involving non-disclosure of inconsequential facts or of mere imperfections in the affidavit material: see Khatra at para. 36, citing U.S.A. at para. 31. [254] In proceeding in the manner that he did, Mr. Kriegman did not meet his disclosure obligations when he applied to register the Judgment ex parte and

for the Extension Order. In this way, he withheld material facts that I find would have impacted upon registration of the Judgment and the Extension Order. He also failed to disclose a summary or précis of facts and law (of which he was aware of at that time) that favour Mr. Dill, including defenses that would have been raised by Mr. Dill. [255] The result is that no court heard Mr. Dill's possible answer and defences. [256] I also find that Mr. Kriegman overstated the strength of his case when seeking registration and the Extension Order and failed to comply with the other principles enunciated in the cases cited in these reasons, including Green at paras. 24-25 and U.S.A. at paras. 26-28. [257] In all, it is contrary to the interests of justice to permit Mr. Kriegman, who by his own admission is an officer of the court in the United States, to have availed himself of the ex parte registration process on the basis of information he knew to be incorrect and by making selective and misleading disclosure. [258] As there is a high onus on a party who seeks ex parte orders to represent both sides fully and fairly before the court, it would be against both the case authorities and public policy to reach any other conclusion in this case. This is not a circumstance, as Mr. Kriegman alleges, of a ministerial or administrative function akin to the entry of a default judgment by the

registrar, where all that needs to be shown is evidence of default. The Court must be satisfied that the requirements for registration under the COEA are met and that none of the mandatory bars to registration exist. [259] In Silverstar Properties Ltd. v. Veinotte, [1998] B.C.J. No. 2385, Mr. Justice Taylor (as he then was) said, when citing the decision of Mr. Justice LaForest in Morguard v. DeSavoye Investments Ltd., [1990] 3 S.C.R. 1077, that while the COEA facilitates enforcement of judgments where certain criteria defined by statute are met, the requirements and prerequisites for registration serve to protect a judgment debtor from being unfairly prejudiced: 49 As Mr. Justice LaForest explained in Morguard, supra, at p. 1111, the Reciprocal Enforcement of Judgments Act of the various provinces, including the British Columbia COEA, were never intended to alter the common law rules of private international law. They simply provide a more convenient and less costly procedure to enforce a judgment given in another province, where certain statutorily defined criteria are met. See also Royal Bank of Canada v. Lo (1990), 46 B.C.L.R. (2d) 161 (S.C.) at p. 164; Moss & Enochian, supra, at pp. 365-66. 50 In my opinion, the criteria of the COEA serve to ensure that a judgment debtor will not be unfairly prejudiced by the streamlined registration procedures in the Act, such as the

provisions for ex parte registration. However, as Master Horn observed in Moss & Enochian, the availability of recognition and enforcement at common law has been substantially widened by the decision in Morguard. [Emphasis added] [260] As I noted at the outset of these reasons, the consequence for failing to disclose material facts on an ex parte application is serious: the order is set aside. Accordingly, the Desk Order and the Extension Order are set aside. [261] I reject Mr. Kriegman's submission that I am without jurisdiction to set aside the Extension Order because the validity of that order has been determined by Mr. Justice Kent on a prior application. The substantive issues raised by Mr. Dill in respect of the Desk Order and the Extension Order were not determined by Kent J. Although Mr. Dill's application to set aside the Desk Order and to stay enforcement of the Judgment was before Kent J., he specifically did not deal with the relief sought. Instead, the matters he determined concerned procedural relief. Kent J. issued orders that he said in his reasons, indexed at 2015 BCSC 1467, at para. 32, would "set up a structure whereby the ongoing handling of this dispute will be fair to both sides in the unique circumstances of the case." Kent J. specifically said at para. 23, "I express no opinions on the validity of the registration." He did not determine the merits of the

Extension Order. The most he did in respect of the Extension Order was to vary it so as to provide that "service of the registration order shall be deemed to be completed for the purpose of s. 34(1) of the [COEA] on the later of 30 days of the mailing of the registration order or the posting of it to the front lobby door" of Mr. Dill's apartment building. He also ordered cross-examination on affidavits. Kent J. went out of his way to say, at para. 40, when dealing with the issue of costs, "I am going to simply defer any award to the hearing on the merits of the application to set aside the registration order." Mandatory Bars to Registration [262] Mr. Dill submits that nearly all of the mandatory bars to registration set out in s. 29(6) are engaged. He asks that I make specific findings concerning each one. On this part of his application, it is heard de novo, as if the original application for registration was being heard: Roglass Consultants Inc. v. Kennedy, [1984] B.C.J. No. 2763 (C.A.) at para. 4. [263] Though his arguments were canvassed by both parties in regard to each of these subsections, I do not need to make findings for each one, and indeed I find that there was insufficient evidence to make a conclusory finding for some (in some instances due in part to the lack of expert evidence concerning United States law). [264] Nonetheless, I am able to make a specific finding

that had the material facts been disclosed, it would have become apparent that the mandatory bar in s. 29(6)(g) is engaged on the facts and that the registration of the Judgment should not have been permitted. Hearing this application de novo, I would not permit the Judgment to be registered. [265] I say that because I am satisfied, in light of the oral ruling of the bankruptcy court judge excepting the BC Companies from the Consolidation Order, that Mr. Dill "would have a good defence" if an action were brought in this Court on the Judgment. In Auger v. Hume, 2000 BCCA 150, the Court of Appeal said the subsection applied not to a defence to the action on the claim in the underlying action, but to an action to enforce the judgment itself: [9] The question is not whether she would have had a good defence to the Alberta proceedings if Ms. Hume had chosen to assert that defence. The question is whether Ms. Hume would have had a good defence to an action brought on the Alberta judgment, either in British Columbia or, one supposes, in Alberta. But the defences to an action on the judgment are quite different to the defences to an action on the claim. The fact that the judgment is wrong in law or fact is not in itself a defence to an action on the judgment. It must be shown that it would be contrary to public policy to allow the judgment to be enforced or that it would constitute a

fraud on the court for the judgment to be enforced, or some other similar special circumstances, before there would be a good defence to an action on the judgment. Fraud is specifically covered in paragraph (d) and public policy is specifically covered in paragraph (f). One supposes that paragraph (g) was inserted by the drafters of the [COEA] in contemplation that arguments would be put forward that would sustain a defence to an action on the judgment other than fraud or public policy, though none were enunciated here. [Emphasis added] [266] In Silverstar Properties Ltd., at para. 53, a good defence was defined to include procedural deficiencies in a foreign court amounting to a denial of natural justice apparent without having to review the merits of the case. In Mr. Dill's case, proceeding to obtain judgment based upon a Consolidation Order that did not include the BC Companies, for which Mr. Dill and the District Court were unaware would, in my respectful opinion, fall within that rubric. See also Gacs v. Maierovitz (1968), 68 D.L.R. (2d) 345 (S.C.), where a manifest effort in the originating court constituted a good defence. [267] I do not agree with Mr. Kriegman that the holdings in Beals and Chevron militate against Mr. Dill's application. The defences raised by Mr. Dill in this case concerning Mr. Kriegman's failure to meet his disclosure obligations and the defence to

jurisdiction arising from the Consolidation Order that engage s. 29(6)(g) were not in issue in those cases. Chevron and Beals were not registration cases under a statute such as the COEA that codifies requirements for registration and mandatory bars to ex parte registration, but instead involved common law actions to recognize foreign judgments. Final Comments [268] I wish to address Mr. Dill submissions concerning the purported failure of Mr. Kriegman's Vancouver lawyer to ensure that full and frank disclosure was made of material facts and case law. It is not necessary or appropriate for me to deal with these submissions in order to reach my decision. I also choose not to do so, particularly in these circumstances, where it would involve commenting on the conduct of a non-party professional who has had no opportunity to speak for himself. "Walker J." ___________ The Honourable Mr. Justice Walker