TCC Mortgage Holdings Inc. v. Rohland

2019 BCSC 190 TCC Mortgage Holdings Inc. v. Rohland

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: TCC Mortgage Holdings Inc. v. Rohland, 2019 BCSC 190 Date: 20190130 Docket: S1811991 Registry: Vancouver Between: TCC Mortgage Holdings Inc. Plaintiff And Gregory Rheinhard Rohland and Inga Zane Defendants Corrected Judgment: the first page was corrected to delete reference to C. Rempel as Articled Student on February 19, 2019. Before: The Honourable Madam Justice Jackson Oral Reasons for Judgment Counsel for the Plaintiff: S. Batkin C. Rempel Counsel for the Defendant, Inga Zane: N. Preshaw Place and Date of Hearing: Vancouver, B.C. January 28, 2019 Place and Date of Judgment: Vancouver, B.C. January 30, 2019

INTRODUCTION [1] These are my oral reasons for judgment pertaining to two applications which I will refer to in turn as the "CPL Application" and the "Document Application". As these are oral reasons, if a transcript is ordered, I may make stylistic, organizational and grammatical changes, but the substance of my reasons will not change. [2] The CPL Application was part of an amended notice of application filed by the defendant Inga Zane ("Ms. Zane") seeking two categories of relief: · an order under R. 9-6 of the British Columbia Supreme Court Civil Rules [Rules] striking portions of the notice of civil claim filed by the plaintiff TCC Mortgage Holdings Inc. ("TCC") on the basis that they raise no genuine issue for trial (this was the "amendment" to the original notice of application); and · relief under s. 256(1) of the Land Title Act, R.S.B.C. 1996, c. 250 [LTA], specifically, an order cancelling the certificate of pending litigation filed at the Land Title Office on November 7, 2018, under the registration number CA177341 (the "CPL") against lands and premises situated at 1774 Billington Road on Bowen Island (Strata Lot 5 District Lot 2958 Group 1 New Westminster District Strata Plan BCS4476) (the "Property") on the basis of hardship and inconvenience. [3] At the outset of the hearing, I was advised that the first category of relief claimed in the amended notice of

application was being adjourned generally. I was also advised that TCC had only been informed of the adjournment on the preceding business day (which was a Friday) at 6:00 p.m., after TCC had expended time, energy, and money in preparation for that aspect of Ms. Zane's application. I heard submissions on throwaway costs regarding the R. 9-6 aspect of the motion and awarded costs to TCC in any event of the cause. [4] Only the second aspect of the CPL Application proceeded before me. [5] The second application before me, the Document Application, was filed by TCC and sought an order for the production of documents from Ms. Zane and related relief.

THE CPL APPLICATION Background [6] This action generally involves assertions by TCC, as a judgment creditor, that the defendant judgment debtor, Mr. Rohland, has an undisclosed beneficial interest in the Property, which is registered solely in Ms. Zane's name. TCC alleges Ms. Zane is Mr. Rohland's romantic partner. Ms. Zane admitted that she and Mr. Rohland used to be romantically involved, but says they broke up in 2017, although they remain close friends. [7] In 2009, TCC obtained a judgment against the defendant, Mr. Rohland (the "Judgment"). As of October 31, 2018, the unpaid balance of the Judgment was $16,066,413.31, plus interest and costs. Mr. Rohland is an undischarged bankrupt. TCC has been involved in numerous proceedings seeking to recover upon the Judgment from Mr. Rohland and his associated entities: see TCC Mortgage Holdings Inc. v. Rohland, 2016 BCSC 1328. [8] On or about November 25, 2016, Ms. Zane became the registered owner of the Property. On November 6, 2018, TCC filed the notice of civil claim in this proceeding, which alleges: (a) Mr. Rohland is engaged in a fraud wherein he uses individuals and legal entities controlled by him (each, a "Nominee") to receive and hold assets on his behalf, including as bare trustees or agents; (b) Ms. Zane holds the Property, in whole or in part, as a Nominee of Mr. Rohland, or upon a constructive trust for Mr. Rohland,

and TCC is entitled to recover against the Property in partial satisfaction of the Judgment. Mr. Rohland's interest in the Property arises from the financial or other contributions he has made to the Property, or from the fact Ms. Zane and Mr. Rohland developed and are developing the Property as partners or as a joint venture; and (c) Mr. Rohland and Ms. Zane have acted and continue to act in an unlawful means conspiracy. [9] On November 7, 2018, upon filing the notice of civil claim, TCC registered the CPL against the Property. [10] Ms. Zane is also involved in another piece of litigation, specifically, a petition brought by Bowen Island Municipality ("BIM") in the Supreme Court of British Columbia's New Westminster Registry (the "Construction Petition"). From the affidavits filed by Ms. Zane and others involved in the Construction Petition, it is clear Ms. Zane is building a large home on the Property (the "House") and that she has extensively used Mr. Rohland's services for design, construction, consulting and management, as well as the services of Mr. Rohland's son, Grayson Rohland ("Grayson"), for the actual construction work. [11] The hearing of that matter is set for two days starting on February 6, 2019. In that matter, BIM seeks orders that Ms. Zane: · remove a structure constructed on the Property without a building permit; and · either obtain a proper building permit

for the House as constructed or remove it. [12] Ms. Zane claims she has not made any monetary payments to Mr. Rohland or Grayson for their work, but claims that she has or will compensate them as follows: (a) for the "construction drawings", which she says are worth $9,000, she provided Mr. Rohland and Grayson with "room and board" for approximately nine months from September 2016 to June 2017; (b) by paying for the food consumed by Mr. Rohland and Grayson from September 2017 to July 2018, while they lived aboard a 93-foot vessel of which Mr. Rohland is captain; (c) when she has the money, she will pay Mr. Rohland $8,750 by cheque for the 350 hours of "construction work" she estimates he has provided, which she values at $25/hour; and (d) she owes Grayson $30,000 for his estimated 2,500 hours of construction work, which she values at $13/hour. Legal Principles and Analysis [13] A registered owner in land against which a certificate of pending litigation has been registered may apply for an order that the registration of that certificate be cancelled: LTA, s.

256. An applicant seeking the cancellation of a CPL must satisfy the court that they are suffering or are likely to suffer "hardship and inconvenience": LTA, s.

256. Section 257(1) of the LTA states: Powers of court to order cancellation (1) On the hearing of the application referred to in section 256 (1), the court (a) may order the cancellation of the registration of the certificate of pending litigation either in whole or in part, on (i) being satisfied that an order requiring security to be given is proper in the circumstances and that damages will provide adequate relief to the party in whose name the certificate of pending litigation has been registered, and (ii) the applicant giving to the party the security so ordered in an amount satisfactory to the court, or (b) may refuse to order the cancellation of the registration, and in that case may order the party (i) to enter into an undertaking to abide by any order that the court may make as to damages properly payable to the owner as a result of the registration of the certificate of pending litigation, and (ii) to give security in an amount satisfactory to the court and conditioned on the fulfillment of the undertaking and compliance with further terms and conditions, if any, the court may consider proper. [14] As noted by Justice Newbury, in order to satisfy the preliminary hardship threshold, an applicant must establish hardship which is more than "trifling" or "insignificant": Youyi Group Holdings (Canada) Ltd. v. Brentwood Lanes Canada Ltd., 2014 BCCA 388 at para.

28. There must be "a degree of oppression": Liquor Barn Income Fund v. Mather, 2009 BCSC 1092 at paras. 5-12, aff'd 2011 BCCA 141 [Liquor Barn CA] at para. 7. [15] The applicant must also satisfy the court the hardship is caused by the registration of the CPL: Liquor Barn CA, para. 26. [16] In this case, Ms. Zane alleges four types of hardship: · her financial institution has refused to provide a previously scheduled draw against a construction mortgage taken out with regard to the Property (the "Construction Mortgage"); · she cannot pay the tradespeople the amounts they are owed; · the construction will be delayed; and · she and her two children are "essentially homeless". [17] Even if I am satisfied the CPL has caused or is likely to cause Ms. Zane to experience the required degree of hardship, cancellation of the CPL is still a discretionary order: Youyi Group Holdings, para.

29. Counsel for TCC says even if the CPL caused Ms. Zane hardship, there are good reasons why I should exercise my discretion not to cancel the CPL in this case. [18] I will address each of the alleged types of hardship in turn.

1. Ms. Zane's Financial Institution has Refused to Provide a Previously Scheduled Draw [19] TCC submits the CPL is not the reason Coast Capital (Ms. Zane's lender) has refused to advance further funds under the Construction Mortgage, but rather that Ms. Zane's unreasonable conduct is preventing her from accessing those monies. Counsel for TCC submits his client has no interest in preventing Ms. Zane from accessing the Construction Mortgage funds since TCC is seeking to claim against that Property (or Mr. Rohland's interest in it, if any) in partial satisfaction of its Judgment. The better and more advanced construction is, and the better the Property's condition, the more TCC stands to gain. [20] Shortly after the notice of civil claim was served and the CPL was registered, Ms. Zane's solicitor contacted counsel for TCC seeking to have the CPL removed so Ms. Zane could obtain the next draw, and then re-registered. In response, counsel for TCC suggested the CPL did not need to be cancelled in order to make an advance under the Construction Mortgage. Instead, TCC suggested a priority letter from TCC, confirming its agreement that the additional draw would have priority to the CPL, would likely suffice. Ms. Zane's solicitor agreed. [21] Counsel for TCC, Ms. Zane's solicitor and counsel for Coast Capital had further communications about the specific terms of a priority agreement.

Although Ms. Zane was a party to the draft priority agreement, the proposed agreement did not impose any obligations on her, nor did it require her to make any concessions. Counsel for Coast Capital advised TCC that if it could "present a form of priority agreement [Ms. Zane] is prepared to move forward with, [Coast Capital] is prepared to continue the discussion on the form of the agreement and incur the related cost". All seemed to be proceeding smoothly until Ms. Zane's litigation counsel objected to counsel for TCC participating in the discussions regarding the priority agreement and indicated Ms. Zane was "not interested in entering into a priority agreement since it is her position the CPL is improperly on title". As noted earlier, that aspect of Ms. Zane's amended notice of application has now been adjourned generally. [22] Based on the evidence before me, I find both Coast Capital and TCC were willing to agree to a priority agreement, but Ms. Zane refused. I find the CPL is not the cause for Ms. Zane's inability to access the next construction draw; the cause is her refusal to agree to a priority agreement which would cost her nothing except perhaps a perceived strategic advantage in the litigation.

2. Ms. Zane Cannot Pay the Tradespeople the Amounts they are Owed [23] Ms. Zane asserts she is on the verge of bankruptcy and owes money to tradespersons for the development of the Property which she cannot pay. I find she has failed to establish this type of hardship for several reasons. First, I am not convinced the debts to tradespeople exist, since there is little in the way of objective evidence to support Ms. Zane's claims on that point. Second, although the evidence filed by Ms. Zane included her bank statements, they were heavily redacted. While I appreciate her comments that she was given permission to redact documents during an earlier preliminary appearance before this Court, as was acknowledged before me, she was not required by the Court to do so. In my view, her failure to make candid disclosure of her financial situation, in the face of her claim of impecuniosity, is fatal. Third, if Ms. Zane agreed to a priority agreement, she would receive the construction draw. She deposed she would use that draw to pay the tradespeople. The option of a priority agreement is available to her but, as I noted earlier, she has refused to exercise it. Even if I were to find this hardship exists, which I do not, once again I would find the CPL is not the cause. The cause of any such hardship is her refusal to enter into a priority agreement.

3. The Construction will be Delayed [24] As mentioned earlier, Ms. Zane is involved in other litigation with the BIM. The BIM issued two Stop Work Notices - one on February 2, 2018, and reposted on November 29, 2018. Also on November 29, 2018, the BIM posted a Do Not Occupy notice. In the Construction Petition, the BIM seeks declarations that Ms. Zane is in breach of municipal bylaws by continuing to carry out construction after two Stop Work Orders were issued, by undertaking construction on the House and a garage on the Property at variance from the issued building permits, and building a bunker on the Property without a building permit. The BIM also seeks orders that Ms. Zane demolish the bunker within one month and obtain a building permit within three months. [25] While it appears construction is delayed, even if the CPL is lifted Ms. Zane will be unable to continue construction because there are Stop Work and Do Not Occupy orders in place that prevent any further construction activity from taking place, or at least should. This point was conceded by Ms. Zane's counsel. Therefore, even though construction may be delayed, I find that any such delay is not caused by the CPL.

4. Ms. Zane and her Two Children are "Essentially Homeless" [26] Ms. Zane describes living a "nomadic lifestyle" since May of 2018, characterized by impermanent living arrangements and residing with her mother. However, the overall evidence on this point was weak at best. Further, the CPL was not filed until November of 2018. Therefore, even if this hardship exists, and I am not satisfied it does, it find it was not caused by the CPL. Conclusions on Hardship and the CPL Application: [27] After considering the totality of the evidence before me, I am not satisfied the CPL has caused Ms. Zane hardship and inconvenience, and therefore I refuse to order the cancellation of the registration of the CPL. Given my conclusion it is not necessary for me to address whether there is a basis for me to exercise my discretion not to cancel the CPL despite established hardship. [28] Counsel for TCC advised me his client was prepared to consent to the same form of order made by Justice Sigurdson in Lam v. Vancouver City Savings Credit Union, 2004 BCSC 1119 at para.

25. I am satisfied such an order is appropriate in this case. I order TCC to provide an undertaking, without security, to abide by any order this Court may make regarding damages as a result of the registration of the CPL. If the parties cannot agree on the form of the undertaking, it will be referred to the Registrar for settlement in accordance with s. 257(2) of the LTA.

THE DOCUMENT APPLICATION [29] In this application, TCC seeks various forms of documentary relief pursuant to R. 7-1(1) of the Rules. Background [30] TCC filed its notice of civil claim on November 6, 2018. Ms. Zane filed her response to civil claim on December 3, 2018 and Mr. Rohland filed his response to civil claim on December 4, 2018. [31] On January 8, 2019, TCC served its list of documents. At the same time, TCC made a formal demand that Ms. Zane provide her list of documents and copies of the documents listed by January 17, 2019. In its demand, TCC set out various categories of documents that it expected Ms. Zane to produce, including unredacted copies of Ms. Zane's bank statements. [32] On January 9, 2019, Ms. Zane delivered her list of documents and requested copies of TCC's documents. On January 10, 2019, TCC provided its listed documents. That same day, Ms. Zane provided TCC with her listed documents, but declined to include the documents formally requested by TCC in the January 8, 2019 letter, including unredacted bank statements. [33] At the outset of the hearing, counsel for Ms. Zane indicated he had not been retained with respect to the Document Application. However, the response to application is signed by him. He also advised he wished to make some preliminary comments about why the application should not proceed, but in my view it was preferable to hear such

submissions as part of Ms. Zane's response to the application. I also note that Ms. Zane did not attend the hearing to speak on her own behalf. The application proceeded and counsel for Ms. Zane made full submissions. Documentary Disclosure Obligations [34] A party to a civil action has documentary disclosure obligations imposed under R. 7-1 of the Rules, which requires them to prepare and serve a list setting out all the documents that are or have been in their possession or control and that could, if available, be used by any party at trial to prove or disprove a material fact, as well as all other documents the party intends to refer to at trial, within 35 days of the end of the pleadings period. Timeliness, in undertaking a diligent search for documents and in providing documentary disclosure, is an integral part of every party's documentary disclosure obligations. [35] Counsel for Ms. Zane argued the relief sought by TCC on this application was already decided by Justice Branch in another application on December 17, 2018. However, no transcript of those proceedings has been ordered. In addition, the order arising from that appearance has not been entered (although I was advised at the hearing that a draft order had been prepared by counsel for TCC and that while counsel for Ms. Zane has indicated the form of the order is not correct, no specific amendments or changes have

been proposed). [36] It is my understanding that what was before Mr. Justice Branch on December 17, 2018 was TCC's application for documents within the CPL application, brought under R. 22-1(4)(c). The application before me regarding Ms. Zane's overall documentary obligations in the litigation as a whole. The Documents Requested [37] TCC says the documents it requested are relevant to issues raised by the pleadings and should be listed and produced. The documents sought are: Category of Documents Sought (a) all contractual documents related to Zane's purchase of the Property, including all addendums to the contract attached as Exhibit "A" to Zane Aff. #1; (b) all communications with the vendors of the Property and/or the vendors' realtor, before and after said realtor became a dual agent for the vendors and Zane; (c) unredacted account statements for Zane's CIBC and Coast Capital Savings accounts for the period from May, 2016, to the present date, including unredacted copies of account statements attached as Exhibits "B" and "D"--"F" to Zane Aff. #3; (d) supporting documents, including receipts and/or invoices, for all expenses charged to Zane's credit cards as listed in Exhibit "G" to Zane Aff. #3, which expenses Zane asserts relate to the construction of Zane's residence on the Property; (e) all communications between Zane and Rohland related to (i) the Property, (ii) the

plans for and the purchase of the Property, (iii) the plans for and the development of the Property, (iv) the plans for and the construction of Zane's home and other structures on the Property, (v) the services provided by Rohland to Zane, and/or (vi) the Trophy Boat; (f) all communications with any and all contractors and professionals engaged in respect of the Property, including communications engaged sent or received by Rohland on behalf of or as agent or designer of Zane; (g) all communications between Zane and/or anyone acting on her behalf as agent, including Rohland, Nils Preshaw, or Gerald Mazzei, and representatives of Coast Capital Savings regarding the Construction Mortgage, including any advances made or to be made under this mortgage; and (h) copies of all documents related to the alleged acquisition of the Trophy Boat from Rohland's brother, Michael Rohland [38] I agree with TTC that these documents are relevant and should be produced. For example, Ms. Zane pled that none of the funds used for the acquisition, maintenance, or improvement of the property came directly or indirectly from Mr. Rohland. Her bank statements are relevant to this point. Further, and again using bank statements as an example, it is the holistic picture painted by the complete disclosure of unredacted bank statements that forms part of Ms. Zane's disclosure obligations in this

case. Failure to Disclose/Disclose with Redaction [39] As noted by Madam Justice Newbury in Este v. Blackburn, 2016 BCCA 496: [19] Generally speaking, when a document is listed by a party without reservation, it must be disclosed in its entirety. In 1978, this court observed in Dufault that "any party is entitled to an order for production and inspection of a document notwithstanding that [it] may contain some information which is irrelevant or may contain information which might be embarrassing to one of the parties." (At para. 11.) Twenty years later, in North American Trust Co. v. Mercer International Inc. (1999) 71 B.C.L.R. (3d) 72 (S.C.), Lowry J. (as he then was) took a more nuanced approach. In his words: Under the rules of this court, a litigant cannot avoid producing a document in its entirety simply because some parts of it may not be relevant. The whole of the document is producible if a part of it relates to a matter in question. But where what is clearly not relevant is by its nature such that there is good reason why it should not be disclosed, a litigant may be excused from having to make disclosure that will in no way serve to resolve the issues. In controlling its process, the court will not permit one party to take unfair advantage or to create undue embarrassment by requiring another to disclose part of a document that could cause considerable harm but serve

no legitimate purpose in resolving the issues. [At para. 13; emphasis added.] (See also McGee et al. v. London Life Insurance Co. Ltd. 2010 ONSC 1408.) [20] Lowry J. in Mercer also observed that where a party has "good reason" to withhold disclosure of parts of a discoverable document, he or she should make a note to that effect on the list of documents under what is now Rule 7-1(1). The document should then be produced in redacted form and if the opposing party challenges the redaction, the listing party may seek a ruling from the court under what is now Rule 7-1(14)(a). Thus a litigant who has redacted allegedly irrelevant material within a discoverable document may be required to produce the document in unredacted form to the court, which will then rule on the propriety of the redactions: see, e.g., BNSF Railway Co. v. Teck Metals Ltd. 2015 BCSC 797; Eli Lilly Canada Inc. v. Hospira Healthcare Corp. 2009 FC 1316. [Emphasis in original.] [40] No application for such a ruling as that described in Este has been made by Ms. Zane. [41] Regarding Ms. Zane's concerns about privacy, I adopt the sentiment and observations expressed by Justice Skolrood in British Columbia (Director of Civil Forfeiture) v. Liu, 2018 BCSC 1518 at para. 52, as being applicable in this case: [52] While I accept that the defendant and his family have an interest in maintaining their privacy, the litigation

process by its nature invariably involves some intrusion into parties' otherwise private affairs. Moreover, the specific privacy interest alleged here, is asserted in only very general and vague terms. In my view, it is not sufficient to displace the requirement for full disclosure. Further, the defendant's privacy interests are to some degree protected by the implied undertaking that attaches to documents produced in litigation and limits there use to the specific proceeding. [42] I pause to note that Ms. Zane voluntarily disclosed the unredacted banking records of her elderly mother in the context of the R.9-6 motion, where she appears to have thought it would benefit her to do so. I make this point because it raises doubt about the genuine nature of the vague privacy concerns Ms. Zane expressed. [43] Although TCC's notice of application does not refer to R. 7-1(10), counsel for TCC says that is the nature of the application and submits the failure to specifically refer to that sub-rule is not fatal. I agree. While a party in receipt of a R. 7-1(10) demand for further documents is generally entitled to 35 days to respond, there was no suggestion that Ms. Zane would have done something differently had R. 7-1(10) been specifically referred to or if she had the benefit of the full 35 day period. Ms. Zane has clearly stated she is not willing to produce the documents sought by

TCC. Some categories of documents she has declined to provide at all, and some she is only willing to provide in a redacted form. I am mindful of R. 1-3 which states that the "object of the Rules is to secure a just, speedy and inexpensive determination of every proceeding on its merits". In my view it is appropriate for me to resolve this issue despite the failure to expressly rely on R. 7-1(10) of the Rules in the Document Application. [44] Counsel for Ms. Zane suggested a document production order is not necessary. He attributes Ms. Zane's intermittent-like disclosure thus far to her being a poor record keeper. He argues she has been urged to look for and continues to find documents. He says the documentary disclosure obligation is ongoing and Ms. Zane will disclose new documents as she finds them. However, the ongoing nature of a party's disclosure obligations does not negate the obligation of each party to conduct a diligent and complete search for listing of documents on a timely basis. Based on the evidence before me, I am satisfied that Ms. Zane has failed to conduct the diligent and complete search she is obliged to undertake in order to fulfil her documentary obligations and that a document production order is necessary. [45] For all these reasons, I grant the relief set out in paragraphs 1 and 2 of Part 1 of TCC's Document Application. With respect to both paragraph

1 (the list of documents) and paragraph 2 (electronic copies of the documents), the date for production is to be March 6, 2019 (which is 35 days from the date of this order). That date should ameliorate any prejudice arising from the departure from the strict procedure set out in R. 7-1(10), although no general or specific prejudice to Ms. Zane was asserted. [46] Costs of both applications will be in the cause. "The Honourable Madam Justice Jackson"