IN THE SUPREME COURT OF BRITISH COLUMBIA
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Citation: |
Giuffre v. Nevada Copper Corporation, |
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2017 BCSC 1658 |
Date: 20170921
Docket: S176152
Registry: Vancouver
Between:
Joseph Giuffre
Plaintiff
And
Nevada Copper Corporation
Defendant
Before: District Registrar Nielsen
Reasons for Decision
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Counsel for the Plaintiff: |
P. Senkpiel |
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Counsel for the Defendant: |
C. Veinotte |
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Place and Date of Hearing: |
Vancouver, B.C. August 30 and September 11, 2017 |
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Place and Date of Judgment: |
Vancouver, B.C. September 21, 2017 |
[1] This is an application by the defendant, Nevada Copper Corporation (“NCC”) for an order setting aside a garnishing order before Judgment dated July 4, 2017 obtained by the plaintiff; payment out of the $283,060 garnished; and, costs.
[2] NCC has brought its application pursuant to s. 5(2) of the Court Order Enforcement Act, R.S.B.C. 1996, c.78 (“COEA”) although much of its argument focused upon s. 3(2) of the COEA and whether the garnishing order before judgment ought to have been granted at all.
[3] NCC is a junior mining company (copper) traded on the TSX Venture Exchange. It is headquartered in Vancouver, British Columbia. For 11 years, between November 6, 2006 and February 24, 2017, the plaintiff, who is a senior corporate securities solicitor, sat on NCC’s board as a director.
[4] The plaintiff provided legal advice to NCC on occasion, but not after December 2012. From January 2013 to February 24, 2017, the plaintiff only acted for NCC solely in his capacity as director. The plaintiff resigned from the board of NCC on February 24, 2017.
[5] Directors of NCC had, in the past, received fees to sit on its board. However, following the economic downturn of 2008, and a drop in the world price of copper, NCC had difficulties with its cash flow. As a result, on September 19, 2013, NCC adopted a deferred share unit (“DSU”) plan which was amended on March 25, 2014, and February 10, 2017.
[6] After originally creating the DSU plan in 2013, in late 2014, NCC entered into a senior loan facility with Red Kite for $200 million and, in 2015, a junior loan facility for $30 million with Pala Investments. NCC alleges the terms of both loans were approved by the board of NCC, which included the plaintiff.
[7] The president and CEO of NCC deposes that the loan agreements precluded NCC from paying ex-directors dividends or cash payments out of capital stock, including the DSU units. In addition, strict budgetary controls were imposed upon NCC by its lenders. These conditions had been agreed to by NCC in exchange for the loans.
[8] NCC alleges that the plaintiff, as a director and a senior securities lawyer, was aware of these restrictions, and for the plaintiff to claim otherwise, lacks credulity in all the circumstances.
[9] It is the DSU plan and the allegation of a breach thereof, which forms the basis of the plaintiff’s legal action against NCC. The plaintiff alleges he is entitled to a liquidated sum of damages for breach of contract and debt.
[10] NCC alleges the plaintiff is not entitled to the sum claimed, and could not be paid a liquidated amount due to the agreements NCC had entered into with its senior and junior lenders; agreements which were allegedly approved by the plaintiff when he was a director of NCC.
[11] NCC further alleges that the plaintiff is not entitled to the money as he had settled his claim whereby he agreed to take shares rather than cash by way of a debt settlement agreement.
[12] The plaintiff denies he settled his claim as alleged, and also takes issue with NCC’s assertion that the contracts with its senior and junior lenders prevented the cash payment claimed.
[13] Section 3(2) of the COEA defines the statutory criteria that must be met in order to obtain a garnishing order. Section 3(2) provides:
3(2) A judge or a registrar may, on an application made without notice to any person by
(a) a plaintiff in an action, or
(b) a judgment creditor or person entitled to enforce a judgment or order for the payment of money,
on affidavit by himself or herself or his or her solicitor or some other person aware of the facts, stating,
(c) if a judgment has been recovered or an order made,
(i) that it has been recovered or made, and
(ii) the amount unsatisfied, or
(d) if a judgment has not been recovered,
(i) that an action is pending,
(ii) the time of its commencement,
(iii) the nature of the cause of action,
(iv) the actual amount of the debt, claim or demand, and
(v) that it is justly due and owing, after making all just discounts,
and stating in either case
(e) that any other person, hereafter called the garnishee, is indebted or liable to the defendant, judgment debtor or person liable to satisfy the judgment or order, and is in the jurisdiction of the court, and
(f) with reasonable certainty, the place of residence of the garnishee,
order that all debts due from the garnishee to the defendant, judgment debtor or person liable to satisfy the judgment or order, as the case may be, is attached to the extent necessary to answer the judgment recovered or to be recovered, or the order made, as the case may be.
[14] Although NCC has framed their application under s. 5(2) of the COEA, much of their argument canvassed the issue of whether it was appropriate to grant the garnishing order before judgment pursuant to s. 3(2) of the COEA given the plaintiff’s alleged failure to disclose relevant facts; namely, the allegation of NCC that the plaintiff had settled his claim for cash on the basis of taking shares in lieu, and NCC’s allegation that the DSU plan did not allow for cash payments.
[15] NCC submits that had the plaintiff disclosed these two material facts in their application for a prejudgement garnishing order, the order would not have been granted. In this regard, NCC relies upon Key Insurance Services Partnership v. T. Clarke Insurance Services Ltd, 2010 BCSC 1857 where the court stated at paras. 57, 58 and 61:
[57] Section 5(2), which is specifically relevant to an application to set aside a garnishing order, emphasizes the importance of the remedy being “just in all the circumstances” and confirms the discretionary nature of the remedy. The provision does not expressly assist in determining whether a discretionary factor, at odds with the initial grant of a garnishing order, should be disclosed at the outset.
[58] A purposive analysis strongly supports the need for full disclosure when the remedy is first sought. A principal object of the remedy is to provide an applicant with security for the claim being advanced. There is nothing in this purpose which is inconsistent with requiring such full disclosure as is necessary for the court to be satisfied that the grant of the remedy is, in the circumstances of the case, appropriate.
. . .
[61] The severity of the remedy and its potentially dramatic negative consequences militate strongly in favour of early and full disclosure of evidence or information which, if known to the court, would prevent the order from being made.
[16] The courts approach in Key Insurance Services, supra, was confirmed by the British Columbia Court of Appeal, with qualifications, in Environmental Packaging Technologies, Ltd. v. Rudjuk, 2012 BCCA 342, where the court stated at para. 51:
[51] For the most part, I accept the very comprehensive analysis of Voith J., but with this caveat: the required disclosure must be that which is relevant and material to the prescribed contents of the affidavit. An application for a garnishing order is not free-standing; it is authorized by statute and the statute prescribes the criteria for obtaining the relief. A registrar or judge is entitled to have for consideration all material that is relevant and material to these criteria. The tendered material may be narrower in scope than would be required to obtain an ex parte injunction. The standard I have identified respects the legislative intent as expressed in ss. 7 and 8, that is, that satisfaction of the prescribed criteria is sufficient, with the gloss that the full context of the criteria must be presented to the registrar or judge.
[17] A similar situation to the case at bar arose in Coombes & Sons Administration Inc. v. Copper Lake Resources Limited, 2016 BCSC 1433. One of the issues raised was whether a garnishing order would have been issued if the plaintiff had disclosed that the defendants alleged the plaintiff had agreed to take shares in lieu of a debt.
[18] The court declined to set aside the garnishing order before judgment, emphasizing that the mere fact that a claim is disputed is not a basis for setting aside a garnishing order – that fact will be assumed by the registrar in virtually every case. In Coombes, supra, at paras. 25-28, Master Muir states:
[25] In the notice of civil claim, Coombes Inc. pleads a contractual history, sets out the monthly amounts due under the consulting agreement at various times, and provides copies of the invoices that were provided to Copper Lake for the months in question.
[26] The claim is clearly a liquidated one. As noted, Copper Lake does not suggest that there are just discounts that should have been made.
[27] That Copper Lake disputes the claim and its amount, says Coombes Inc. subsequently agreed to take shares for debt (which is denied) or that Copper Lake did not have the resources to pay the invoices rendered is completely irrelevant to whether this claim is liquidated. Those assertions show no more than that the claim is disputed, just as Mr. Justice Schultes noted in Jefferies v. American Cumo Mining Corporation, 2013 BCSC 1150 at para. 20:
[20] In essence, this information shows no more than that there is another side to his claim, something the registrar must assume applies in virtually every case. …
[28] Thus, there was no need to provide any additional information for consideration by the Registrar and I conclude that the disclosure provided by Coombes Inc. was adequate to support the garnishing order granted.
[19] In my view, the current state of the law is that a garnishing order is a statutory remedy requiring disclosure of all material facts which are relevant, to the extent that they inform the statutory criteria. A garnishing order will not be set aside simply because a claim is disputed. That state of affairs will be present in virtually every case.
[20] There is no doubt the plaintiff’s claim is for a liquidated amount. There was material disclosure by the plaintiff to the extent that each of the statutory criteria could be adequately addressed and the garnishing order properly granted.
[21] Pursuant to s. 5 of the COEA, the Court has a broad discretion to set aside a garnishing order in whole or in part. In the exercise of that discretion, the court must consider all relevant circumstances. Section 5 of the COEA provides:
5 (1) If a garnishing order is made against a defendant or judgment debtor, he or she may apply to the registrar or to the court in which the order is made for a release of the garnishment, and if a judgment has been entered against him or her, for payment of the judgment by instalments.
(2) If, under subsection (1), the registrar or judge considers it just in all the circumstances, he or she may make an order releasing all or part of the garnishment and if he or she does and a judgment has been entered, he or she must set the amounts and terms of payment of the judgment by instalments.
(3) An order under subsection (2) may be made without notice to any person, and the registrar or judge may, if he or she considers it just in view of changed circumstances of the judgment debtor, vary an instalment order at any time on application by the judgment creditor or debtor and on 3 days’ notice in writing of the application being given to the other party.
(4) If an instalment order has been made under subsection (2) or (3) and the judgment debtor is not in default under the order, a further garnishing order must not be made concerning the judgment debt.
(5) Promptly after making an order under subsection (2) or (3), the registrar or judge must mail a copy of the order to the judgment creditor and the garnishee, or their agents.
(6) Section 4 (5), (6) and (7) applies to an appeal from an order made under subsection (2) or (3) of this section.
(7) If an order is made under this section by a registrar or judge on an appeal providing for the release of a garnishing order and payment of the judgment by instalments, the order is terminated
(a) if the judgment debtor is in default of paying any of the instalments ordered for more than 5 days, or
(b) by the issue of a garnishing order against the judgment debtor in a cause of action other than that for which the instalment payments were ordered.
[22] In Coombes, supra, at para. 30, Master Muir sets out the relevant considerations on an application to set aside a garnishing order. She states:
[30] In Sequoia Mergers & Acquisitions Corp. v. CAMACC Systems Inc., 2015 BCSC 2197, Madam Justice Fitzpatrick set out the relevant considerations for such an order:
[19] When considering whether it is “just” to release a garnishment, the court must consider all relevant circumstances in the exercise of its discretion: Webster v. Webster, 101 D.L.R. (3d) 248, [1979] B.C.J. No. 2094 (C.A.) at 249-250.
[20] It is well-settled that a garnishment before judgment is an extraordinary remedy since, normally, a plaintiff is not allowed execution before it has actually proven its claim: Key Insurance Services Partnership v. T. Clarke Insurance Services Ltd., 2010 BCSC 1857, at para. 17(a). The object of the remedy is to provide a plaintiff with security so as to avoid the possibility of a “dry judgment”: Key Insurance at para. 17(b).
[21] In Key Insurance, at para. 17, Mr. Justice Voith discussed many of the common circumstances that the court will consider on such an application. These include:
a) the relative strength of the parties’ cases (although, needless to say, the court should not determine any issues);
b) whether the defendant is suffering undue hardship; and
c) whether the garnishing order is necessary.
[23] NCC has provided the outline of its defence to the plaintiff’s claim. Their view is that they have a strong defence to the claim on the basis that it was settled, and also on the basis that a cash payment was not permitted by the terms of the DSU plan, and the plaintiff is bound by this fact.
[24] An application to set aside a garnishing order is not a summary trial and the facts alleged by NCC are hotly in dispute. Both parties presented a factual basis in support of their respective claims. I am unable to conclude that either party’s case is tenuous or doomed to fail.
[25] NCC alleges that the garnishing order is working a hardship upon it as the sum garnished amounts to 30% of its current working capital.
[26] NCC’s evidence is that the company’s monthly burn rate is approximately $500,000. NCC alleges that the garnishing order puts the company’s payroll and licensing fees on its property at peril. NCC further submits that the money garnished was to be used to fund a feasibility study which needs to raise additional financing.
[27] NCC does not allege that it will be rendered insolvent if these funds are not released, or that it cannot obtain additional funding from its investors.
[28] NCC has assets, including a “shovel-ready” copper property in Nevada and has a current market capitalization of $44 million.
[29] Although NCC is not revenue positive and requires ongoing financing to maintain its operations, it enjoys the support of its lenders and is able to raise funds on the Venture Exchange, and continues to do so.
[30] NCC’s management team and headquarters are in Vancouver, as are its banking facilities.
[31] I am satisfied that the garnishing order imposes a degree of hardship on NCC but that hardship is not, in my view, “undue”.
[32] I am also of the view that there is little chance that the plaintiff would not be able to collect any judgment he may obtain. NCC is solvent, has considerable assets, is located in Vancouver, and enjoys the ongoing support of its creditors. However, this is only one of the circumstances to be considered in determining whether it would be just to set aside the garnishing order.
[33] In all the circumstances, I am not persuaded that it would be just to set the garnishing order aside.
[34] The application is dismissed. The costs of the application will be in accordance with Supreme Court Civil Rule 14-1(12)(b).
“District Registrar Nielsen”