336239 Alberta Ltd. v. Mella et al., [2016] A.R. TBEd. AU.003

• Judge: Schutz, J.A.
• Court: Court of Appeal (Alberta)
• Case Date: July 21, 2016
• Citations: [2016] A.R. TBEd. AU.003;2016 ABCA 226

336239 Alta. v. Mella, [2016] A.R. TBEd. AU.003

MLB being edited

Currently being edited for A.R. - judgment temporarily in rough form.

Temp. Cite: [2016] A.R. TBEd. AU.003

Francis Emanuel Mella, Matrix Consulting Ltd., M2 Systems Inc., ABC Corp., and Mella Fitness Consulting Ltd. (applicants/defendants) v. 336239 Alberta Ltd. carrying on business as Dave's Diesel Repair (respondent/plaintiff)

(1603-0112-AC; 2016 ABCA 226)

Indexed As: 336239 Alberta Ltd. v. Mella et al.

Alberta Court of Appeal

Schutz, J.A.

July 27, 2016.

Summary:

In 2014, the plaintiff discovered that the individual defendant (Mella) had fraudulently misappropriated its funds and conveyed them to various other defendants. The plaintiff sued the defendants for fraud, breach of fiduciary duty, breach of trust, and wrongful conversion. The plaintiff obtained an attachment order which, inter alia, prohibited Mella's household expenditures from exceeding $2,000/month and required him to maintain and provide, on the plaintiff's written request, detailed monthly records of such household expenditures. The plaintiff determined that Mella's household expenditures for November and December 2014 were $11,133.37 in excess of the amount stipulated in the attachment order. On February 4, 2015, the plaintiff applied to hold the defendants in contempt of the attachment order. On February 11, Mella paid $5,000 into his bank account, which was accessed by the plaintiff. On February 19, Manderscheid, J., found Mella in contempt of court. Among other things, he ordered Mella to purge his contempt by "making full repayment of the monies exceeding the maximum permitted monthly Household Expenditures." He also provided that, if Mella failed to do so by February 26, the defendants would be subject to a $1,000 fine and an ongoing fine of $200/day for each day that the contempt remained unpurged. On February 27, the plaintiff applied for summary judgment. Before that application was heard, the defendants consented to judgment against them in the amount of $2,269,757 for fraudulent misappropriation of funds. After the judgment was entered into, Mella transferred approximately $100,000 to the plaintiff. The plaintiff applied for a second finding of contempt against the defendants.

The Alberta Court of Queen's Bench, in a decision reported at [2016] A.R. TBEd. MR.124, allowed the application. The court held that, where Mandersheid, J.'s order did not specify to whom the fine was to be paid, the assumption should be that such fines were payable to the Clerk of the Court; therefore, the payment did not purge the contempt. The court concluded that there was a continuing failure to abide by the terms of the initial attachment order and subsequent contempt order, and the contempt did not merge with the consent judgment. Having failed to repay the $11,133.37 which had been overspent contrary to the attachment order, Mella remained in contempt of the court's order. Having failed to pay the overage by February 26, 2015, also meant that the penalty provision of the contempt order came into effect. The court held that vacating the attachment order did not change Manderscheid, J.'s finding that Mella was in contempt of court. The contempt finding continued, whether or not the attachment order continued. Mella continued to be in contempt and liable for both the $1,000 fine and the daily fine provided for in Manderscheid, J.'s order. The court rejected the defendants' argument that they had taken reasonable steps to comply with orders and had cooperated. The defendants' conduct after agreeing to the consent judgment had been designed to avoid argument that they had taken reasonable steps to comply with orders and had cooperated. The defendants' conduct after agreeing to the consent judgment had been designed to avoid enforcement of that judgment. As such, it constituted contempt of the judgment and "was conduct calculated and designed to interfere with the due administration of justice". The court ordered the immediate payment to the plaintiff of $6,133.37 (the amount requested, although the amount might arguably be $11,133.37), to be credited to the amount owing under the consent judgment; immediate payment to the court of $46,000, being the fine owing under Manderscheid, J.'s contempt order to the date this application was made; ordering the immediate payment to the court of an additional $10,000 fine; and solicitor and client costs in favour of the plaintiff, in relation to all proceedings taken by the plaintiff in this action, from March 27, 2015, to and including all costs related to this application. The contempt under the second order was not purged. On June 24, 2016, Mella was imprisoned for three months. Mella appealed and sought a stay of the proceedings pending appeal.

The Alberta Court of Appeal, per Schutz, J.A., dismissed the application, but expedited the appeal.

Editor's Note: In a decision reported at [2016] A.R. TBEd. AP.010, the Alberta Court of Queen's Bench found that Mella's transfers of money to his wife constituted a fraudulent conveyance made with the intent to defeat, hinder or delay the plaintiff's claim, but dismissed the application for judgment against the wife.

Contempt - Topic 6000

Appeals - General - Mella was the subject of two contempt orders, the first regarding an attachment order and the second regarding a consent judgment - The contempt under the second order was not purged - Mella was imprisoned for three months - Mella appealed and sought a stay of the proceedings pending appeal - Mella submitted, inter alia, that the parties' agreement to vacate the attachment order had the legal effect of voiding the contempt under the first contempt order and extinguishing the accumulating fines - The Alberta Court of Appeal, per Schutz, J.A., dismissed the application - The court stated, inter alia, that Mella had not appealed, or applied to vary, the first contempt order - The court held that Mella could not now collaterally attack the first contempt order, nor could he do so at the hearing for the second contempt order - See paragraph 20.

Contempt - Topic 6035

Appeals - Right of appeal - Stay of execution pending appeal - Mella was the subject of two contempt orders, the first regarding an attachment order and the second regarding a consent judgment - The contempt under the second order was not purged - Mella was imprisoned for three months - Mella appealed and sought a stay of the proceedings pending appeal - The Alberta Court of Appeal, per Schutz, J.A., dismissed the application, finding no serious question to be tried on appeal - The court stated that "The applicant had knowledge of the court orders and did not comply. The basic prerequisites for a finding of contempt were, therefore, met. None of the arguments made undermine the findings of contempt. Fines, imprisonment and costs are sanctions authorized by law. The decision to find contempt was reasonable, as were the sanctions imposed, including fines, imprisonment and costs. [A] three-month term of imprisonment is entirely proportionate, and necessary." - However, the court expedited the appeal - See paragraphs 19 to 39.

Practice - Topic 5408.1

Judgments and orders - General - Collateral attack - [See Contempt - Topic 6000 ].

Practice - Topic 9134

Appeals - Hearing of appeal - Expediting - [See Contempt - Topic 6035 ].

Counsel:

Francis Emanuel Mella, the applicant, in person;

S.W. Au, for the respondent.

This application was heard on July 21,2016, by Schutz, J.A., of the Alberta Court of Appeal, who delivered the following decision on July 27, 2016.