RBD Victoria Homes Inc. v. 0717227 B.C. Ltd.

2021 BCSC 774 RBD Victoria Homes Inc. v. 0717227 B.C. Ltd.

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: RBD Victoria Homes Inc. v. 0717227 B.C. Ltd., 2021 BCSC 774 Date: 20210331 Docket: S212804 Registry: Vancouver Between: RBD Victoria Homes Inc. and GRD Victoria Homes Inc. Plaintiffs And 0717227 B.C. Ltd. and Kenneth Helm Defendants Before: The Honourable Mr. Justice Riley (appearing by teleconference) Oral Reasons for Judgment In Chambers Counsel for the Plaintiffs appearing by teleconference: C.R. Bacon For the Defendants No appearance Place and Date of Hearing: Vancouver, B.C. March 30, 2021 Place and Date of Judgment: Vancouver, B.C. March 31, 2021 [1] THE COURT: This is my ruling on an ex parte application for a Mareva injunction. The court has authority to grant such relief under Rule 10‑4(3) of the Supreme Court Civil Rules, s. 39 of the Law and Equity Act, R.S.B.C. 1996, c. 253 and the court's inherent jurisdiction: see Fernandes v. Legacy Financial Systems, Inc., 2020 BCSC 885 [Fernandes] at para. 7. [2] I will summarize the background, underlying facts of the claim brought by the plaintiff, as follows, and here I have points (a) through (l): a) a company called RBD (Cariboo) Developments entered an agreement to purchase a parcel of real property in Coquitlam from the corporate defendant, 0717227 B.C. Ltd. b) RBD (Cariboo) subsequently assigned its interest as purchaser to the plaintiff, RBD Victoria Homes Inc. c) The

agreement included a warranty that 0717227 B.C. Ltd. would take steps to have the property zoned and basic municipal services installed. d) The agreement also included a provision giving the purchaser the option to complete the sale without prejudice to its right to claim damages in the event of the vendor's breach of the warranty in relation to, among other things, the servicing for the property. e) The original completion date was 28 October 2016. f) 0717227 B.C. Ltd. was unable to complete the necessary zoning and arrange for the servicing of the lot before the original completion date, so the completion date was extended a total of three times by agreement, the final completion date being 28 January 2019. g) By that date, the subject property had still not yet been serviced, but believing, on assertions given by 0717227 B.C. Ltd.'s principal, that this was soon to be taken care of, RBD Victoria Homes opted to proceed with completion of the sale. h) RBD Victoria Homes paid the purchase price of some $8,550,000 and the sale completed. i) Thereafter, the servicing for the lot was not completed on time and was not substantially completed until 14 December 2020. j) In the meantime, the plaintiff RBD Victoria Homes had sold the subject property to another party, but did not complete the sale because the lot servicing was not finished. k) The plaintiff RBD Victoria Homes alleges

that in the period of time during which it owned the property, but the servicing was delayed, the plaintiff incurred damages of some $1,279,000. The damages consist principally of interest, bank charges, and property taxes during the period that RBD Victoria Homes held the property but could not complete its sale to the purchaser. [3] So that is the nature of the claim. It is a claim for damages in breach of contract arising from the defendant 0717227 B.C. Ltd.'s breach of the warranty term to supply municipal services to the subject property. The associated delay resulted in identifiable damages of $1,279,000. [4] In terms of the context in which the Mareva injunction is brought, the plaintiff has adduced evidence to show that at one point in time, the defendant 0717227 B.C. Ltd. owned a number of parcels of real property, but over time had disposed of a number of them, and here I have a number of subparagraphs (a) to (c): a) by my count, 0717227 B.C. Ltd. originally owned a total of 12 lots; b) of those, i. Lot 10, which is the subject of the current lawsuit, was sold to the plaintiff RBD Victoria Homes; ii. Lot 3 was transferred in or about December 2018 to a family member of the personal defendant for one dollar; iii. Lot 4 was transferred in or about December of 2018 to a third party for an unspecified sale price or unspecified consideration; iv. Lot 5 was transferred in

or about April 2020 to a family member of the principal, of the personal defendant, for one dollar; v. Lots 1, 2, 6, 7, 8, and 9 were all transferred on or about 15 January 2021, to an arm's length company, Vancor Development, for unspecified consideration in connection with what would appear on the evidence presently before the court to be a joint venture arrangement between 0717227 B.C. Ltd. and Vancor. Those lots are actively being developed in the joint venture arrangement. The plaintiff RBD Victoria Homes has no information about the precise nature or value of 0717227 B.C. Ltd.'s continuing financial interest in the property in connection with that joint venture. c) So, of the 12 lots that were originally owned by 0717227 B.C. Ltd. at the time the company entered into the contract of purchase and sale, at this point the defendant still holds title to only two of those, being: i. Lot 20, which has a tax‑assessed value of $4,140,000; and ii. a portion of a parcel entitled Section 8, the northwest quarter of Section 8, which has a tax‑assessed value of $4,458,000. [5] The plaintiff RBD Victoria Homes has no information about any unsecured debt, obligations, or even inter alia mortgages that might affect 0717227 B.C. Ltd.'s interest in these two remaining parcels of property held by it. [6] Apart from its continued ownership of these two parcels of property, 0717227 B.C. Ltd.

does not appear to have any substantial assets. It appears to be a land holding company. [7] It is in this context that the plaintiff RBD Victoria Homes seeks a Mareva injunction. The gist of the plaintiff's position is that it has a strong claim for substantial damages, and that the corporate defendant is a land holding company which has over the past two years or so disposed of a number of parcels of property, some in non‑arm's‑length transfers. At this point, the defendant only has title to two remaining properties, and given the current demand for real estate in British Columbia, there is a real risk, says the plaintiff, that it could quickly dispose of these properties in a way that would insulate it from judgment. The law [8] In this province, the courts have adopted a "flexible approach" to Mareva injunctions, as discussed in Mooney v. Orr (1994), 100 B.C.L.R. (2d) 335 (B.C.S.C.) [Mooney] and subsequently affirmed by the Court of Appeal in, among other cases, Silver Standard Resources Inc. v. Joint Stock Co., 1998 CanLII 6468 (B.C.C.A.) [Silver Standard] at para. 19, and Kepis & Pobe Financial Group Inc. v. Timis Corporation, 2018 BCCA 420 [Kepis & Pobe] at para. 10. [9] Under the flexible approach, the court is not a prisoner to any particular formula. There is no rule of law or legal principle requiring evidence of fraud or intention to dispose of or remove assets from

the jurisdiction for the purposes of defeating a judgment. Rather, the flexible approach allows the court to take account of a wide variety of circumstances, including the relative strength and weaknesses of each party's position, evidence of irreparable harm one way or the other, potential effects on third parties, and factors affecting the public interest: Silver Standard at para. 19. [10] Still, in most cases it will not be just and convenient to tie up a defendant's assets or funds simply to give the plaintiff security for judgment they may never obtain. Courts may be reluctant to interfere with the normal business arrangements of a defendant and affect the rights of other creditors merely on the speculation that the plaintiff will ultimately be successful in its claim and have difficulty collecting if an injunction is not granted: see Silver Standard at para. 21. [11] The flexible approach involves a two‑step analysis. The first step requires a consideration of whether the plaintiff has established a strong prima facie case. If that threshold is met, the focus of the analysis shifts to the balance of justice and convenience between the parties: see Kepis & Pobe at paras. 10, 12, and Fernandes at para. 8. [12] There is another aspect to the matter. It has to do with the procedure for obtaining a Mareva injunction. It is commonly accepted that the initial step in the process

is for the plaintiff to appear ex parte to seek an initial order on the reasoning that if the defendant were given notice of the pending application, the defendant might take steps to remove or dissipate assets before an order could be obtained. [13] The second step in the process is an inter partes hearing in which the opposing party can make its position clear. It is at this stage that the justification for the order and the balance of convenience are "likely to be given flesh": see Mooney at para.

51. Analysis [14] Looking at the first stage of the analysis, I am satisfied, on the evidence placed before me on this application, that the plaintiff RBD Victoria Homes has established a strong prima facie case for its claim. [15] In fact, the terms of the contract are straightforward and do not appear to be ambiguous. The nature of the alleged breach of the warranty provision with respect to servicing is clearly identified and the damages are ascertainable and easy to determine. That is not to say there is not another side to this story that might be brought out in an inter partes hearing, but on the face of it, the plaintiff's claim is both factually and legally straightforward. I conclude that the plaintiff has a strong prima facie case. [16] I turn to the second step of the analysis, the balance of convenience. Here I have much greater concerns. I recognize that in this jurisdiction, there is no hard‑and‑fast rule requiring the plaintiff to adduce evidence of an intent on the part of the defendant to remove or dispose of assets for the purposes of frustrating a judgment. Still, literally all of the cases cited by counsel involve some circumstance or context in which there is some real reason for the plaintiff to be concerned about the dissipation, disposal, or removal of assets that could threaten the plaintiff's ability to recover. [17] In this case, the defendant is a

B.C.‑based company, not a company based outside of this jurisdiction or a company whose assets are substantially outside of this jurisdiction, and there is no evidence of assets being moved out of this jurisdiction, nor is there any clear evidence or direct evidence that the defendant has engaged in conduct that might be characterized as fraudulent, disreputable, or legally dubious. What is more, while the defendant has disposed of or transferred title to quite a number pieces of real property over the past several years, on the face of it, many of those transactions would appear to be arm's‑length transfers or transfers engaged in the course of what might be considered regular business operations for a land developer. [18] Nonetheless, on the other side of the coin, the plaintiff points out that the defendant 0717227 B.C. Ltd. would appear to be a real estate holding company with no substantial assets other than the parcels of real estate or real property that it owns. Counsel points out that in the current real estate market in British Columbia, real property can be easily and quickly disposed of or encumbered. Moreover and most significantly, the defendant has transferred a number of parcels of property to individuals who are apparently or alleged to be family members of the defendant's principal. The consideration of each instance would appear to be one dollar, and these

would therefore appear to be non‑arm's‑length transfers effected for consideration that is significantly below market value. All of this occurs in the context where the defendant was subject to contractual obligations to ensure completion of the servicing for the real property which is the subject of the plaintiff's lawsuit, and failed to complete that servicing in the timeframe originally committed, and it may well be aware of its potential liability to the plaintiff for costs flowing from those delays. [19] When I consider the other factors at play in the balance of convenience analysis, I would agree with plaintiff's counsel that the amount of its claim is quite substantial, the claim on its face appears to be a strong one, and that the potential prejudice to the plaintiff is significant if the corporate defendant was able to dispose of or transfer or encumber its remaining real property holdings before a judgment could be obtained and executed. Thus, there is a potential for irreparable harm to the plaintiff if no action is taken. [20] Looking at things from the defendant's perspective, at this point I have no direct evidence that an order limiting its ability to dispose of assets would present a significant prejudice to its business. To be fair, one can certainly infer that an order significantly curtailing the defendant's ability to deal with assets is likely to cause

some degree of prejudice, and the evidence suggests that the defendant is engaged in a joint venture with respect to some of the parcels of property in issue, which implies ongoing business operations that could be affected by a injunction of the breadth and scope sought by the plaintiff. I do note that the two parcels of property still held by the defendants are not at present in active development. [21] There is no direct evidence to show that an injunction against the defendant would adversely affect the interests of any third party, although again there is a possibility on the evidence before me that it could affect the other joint venture party, Vancor. I take that into account as a general concern, albeit one that is admittedly somewhat speculative on this record. [22] In terms of factors affecting the public interest, I acknowledge some concern that on a record such as this, the plaintiff may be extending the use of the Mareva injunction beyond its appropriate limits in a way that runs contrary to the historical, cautious approach to such orders. There is certainly a strong prima facie case which shows that the plaintiff's hope for recovery of damages is not speculative, but there is no direct evidence of any fraud or improper conduct, and the defendant is a B.C.-based company, and there is no evidence that it is moving assets offshore to defeat a judgment. So the

plaintiff's approach might be open to criticism, in that it effectively reverses the burden of proof on an injunctive relief application once the moving party has established a prima facie case or a strong prima facie case, I should say. That is the concern I have about the public interest in a case such as this. Nonetheless, the law in this jurisdiction is that affirmative evidence of intent to dispose of or dissipate property is not an actual requirement or prerequisite for a Mareva injunction. To paraphrase from Fernandes at paragraph 10, a Mareva injunction may be granted in this jurisdiction even where the plaintiff cannot affirmatively show a risk of the defendant moving or disposing of assets with the specific or particular intent to defeat a judgment. [23] At the end of the day, I would say that this case is very close to the line indeed. How, there are some factors which cause me to conclude that the plaintiff's ex parte application should be granted, at least in part. [24] First, I will draw on the words of Justice Huddart, as she then was, in Mooney, where Her Ladyship stated that, "[i]t is not uncommon in these courts that such an interim injunction be granted to preserve the status quo pending notice and a hearing inter partes. Indeed, such a procedure is often the most just". To be clear, it would not be appropriate to adopt such an approach as the default

position, but the fact is I have evidence of a strong prima facie case and I have evidence of a recent history of disposal or transfer of significant assets, some of which transfers do not appear to have been done at arm's length for market value. In this context, I am satisfied that there is some potential irreparable harm to the plaintiff if no action is taken. An order preventing the defendant from disposing of or dissipating some assets would preserve the status quo until the other side can at least be heard on the matter. [25] This leads to the second point. As Justice Branch explained in Fernandes at para. 31, the court has a discretion to confine a Mareva injunction to the scope necessary based on the record. In this particular case, I would grant an injunction to restrain the defendant 0717227 B.C. Ltd. from disposing of, encumbering, or dissipating its interest in the particular parcels of real property identified in the record which it presently owns, but not the other assets of the defendant. This will be subject to various other terms and limits as set out in counsel's draft order, which I will discuss with counsel in a moment. I will adjourn the balance of the relief sought by the plaintiffs in their application to the hearing of an inter partes application between the parties, should one be sought by either party. [26] I regret that this involves some tinkering

with the standard‑form Mareva injunction order presented by the plaintiffs' counsel, but in the circumstances of this case, I feel that it is necessary to achieve justice without overshooting the mark on an ex parte application. [27] So that is my ruling and that then leads us to a discussion about the form of the order that will be granted. And here, counsel, I think there might have to be a considerable number of changes to the order as you presented it. As I say, I regret that this needs tinkering with what we would call a standard‑form Mareva injunction, but frankly, based upon my reasons, I think that is necessary. [Discussion with counsel re: form of order] "Riley J."