Father & Son Investments Inc. v. Maverick Brewing Corp., 2007 ABQB 752

• Judge: Bielby, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: November 06, 2007
• Citations: 2007 ABQB 752;(2007), 439 A.R. 247 (QB)

Father & Son Inv. Inc. v. Maverick Brewing (2007), 439 A.R. 247 (QB)

MLB headnote and full text

Temp. Cite: [2008] A.R. TBEd. JA.032

In The Matter Of the Interim Receivership of Maverick Brewing Corporation.

Father & Son Investments Inc. (applicant) v. Maverick Brewing Corporation (respondent)

(BK03 114978; 2007 ABQB 752)

Indexed As: Father & Son Investments Inc. v. Maverick Brewing Corp.

Alberta Court of Queen's Bench

Judicial District of Edmonton

Bielby, J.

December 12, 2007.

Summary:

Maverick Brewing Corp. operated a brewery in a building owned by Five Oaks Inc.  Father & Son Investments Inc. was a subordinate secured creditor of Maverick. In August 2005, Gajek (a Maverick shareholder) and Father & Son executed guarantees of all of Maverick's indebtedness to Alberta Treasury Branches (ATB). In February 2007, Five Oaks became the assignee of the guarantees when it purchased ATB's security on Maverick's assets. Father & Son's application for the appointment of a receiver of Maverick was granted on July 4, 2007. Father & Son was awarded its costs of the application on a substantial indemnity basis with such priority as the court was to determine. The sale proceeds generated in the receivership were inadequate to pay out the preferred creditors and then to pay out the first secured creditor. Father & Son applied for a declaration that it was entitled to its costs in the receivership application and subsequent applications to rank in priority to all other charges except the receiver's own and that of the Canada Revenue Agency.

The Alberta Court of Queen's Bench, in a decision reported at (2008), 436 A.R. 130, allowed the application in part. Father & Son's award of costs under the July 4, 2007, order was entitled to priority over all other claims except for that of the receiver and its counsel. Father & Son was not entitled to priority for other costs it had incurred on its own behalf as creditor. The receiver applied for distribution. Five Oaks claimed entitlement under the guarantees to the costs award and Gajek's commission. Five Oaks also opposed the distribution because it did not provide for payment of its occupation rent claim for storage of the Maverick assets during the period between the appointment of the receiver and their ultimate sale.

The Alberta Court of Queen's Bench held that all of Five Oaks' claims failed. Father & Son was awarded solicitor and client costs of this application against Five Oaks. Gajek, who was unrepresented, was also awarded $500 in costs against Five Oaks.

Creditors and Debtors - Topic 8

General - Debt defined - [See first Guarantee and Indemnity - Topic 1034 ].

Estoppel - Topic 1163

Estoppel in pais (by conduct) - Representation - By conduct - Practice or course of conduct - [See Landlord and Tenant - Topic 605 ].

Guarantee and Indemnity - Topic 1034

Liability of surety to creditor - Construction of contract - Extent or scope of liability of surety - Amounts recoverable - Maverick Brewing Corp. operated a brewery in a building owned by Five Oaks Inc. - Father & Son Investments Inc. was a subordinate secured creditor of Maverick - In August 2005, Gajek (a Maverick shareholder) and Father & Son executed guarantees of all of Maverick's indebtedness to Alberta Treasury Branches (ATB) - In February 2007, Five Oaks became the assignee of the guarantees when it purchased ATB's security on Maverick's assets - In July 2007, Father & Son's application for the appointment of a receiver of Maverick was granted - The sale proceeds generated in the receivership were inadequate to pay out the preferred creditors and then to pay out the first secured creditor - Father & Son obtained a declaration that it was entitled to its costs in the receivership application to rank in priority to all other charges except the receiver's own and that of the Canada Revenue Agency - On the receiver's application for distribution, Five Oaks claimed entitlement to the costs under the guarantee - The Alberta Court of Queen's Bench held that Five Oaks' claim failed - The taxable costs to Father & Son were not a debt of Maverick but rather an indemnity for costs incurred that benefited all creditors of the estate - An indemnity differed from a debt - Therefore, the guarantee, which purported to catch "all indebtedness ... from [Maverick] or for its account" was insufficiently wide to catch the court-ordered costs - The receiver was ordered to pay the taxable costs directly to Father & Son - See paragraphs 25 to 30.

Guarantee and Indemnity - Topic 1034

Liability of surety to creditor - Construction of contract - Extent or scope of liability of surety - Amounts recoverable - [See Receivers - Topic 5404 ].

Landlord and Tenant - Topic 605

Occupation rent - General - When available - Maverick Brewing Corp. operated a brewery in a building owned by Five Oaks Inc. - Father & Son Investments Inc. was a subordinate secured creditor of Maverick - In July 2007, a receiver of Maverick was appointed - A sale of Maverick's business assets was arranged - In November 2007, the receiver applied for distribution - Five Oaks, which was also a Maverick secured creditor with first priority, opposed the distribution because it did not provide for payment of its occupation rent claim for storage of the Maverick assets during the period between the appointment of the receiver and their ultimate sale - The Alberta Court of Queen's Bench held that Five Oaks' claim for occupation rent failed due both to the timing of the claim and the evidence led - The first time the claim was advanced was on the receiver's application for distribution - Even had Five Oaks led evidence to establish the rental that would have been due under Maverick's lease, plus evidence to show that this reflected current fair market rental for the premises, Five Oaks' lack of a timely claim deprived the receiver of an opportunity to consider options such as moving the assets to minimize storage costs - The court concluded that Five Oaks, by its actions, had represented that it would not be claiming occupation rent - The receiver relied on those representations and would suffer damage if required to pay rental now - See paragraphs 32 to 44.

Landlord and Tenant - Topic 626

Occupation rent - Persons liable - Receivers - [See Landlord and Tenant - Topic 605 ].

Practice - Topic 7454

Costs - Solicitor and client costs - Entitlement to solicitor and client costs - Improper, irresponsible or unconscionable conduct - Maverick Brewing Corp. operated a brewery in a building owned by Five Oaks Inc. - Father & Son Investments Inc. was a subordinate secured creditor of Maverick - In August 2005, Gajek (a Maverick shareholder) and Father & Son executed guarantees of all of Maverick's indebtedness to Alberta Treasury Branches (ATB) - In February 2007, Five Oaks became the assignee of the guarantees when it purchased ATB's security on Maverick's assets - In July 2007, Father & Son's application for the appointment of a receiver of Maverick was granted - Gajek facilitated a sale of Maverick's business assets - The court ordered the receiver to pay Gajek a commission of $10,000 - Father & Son obtained a declaration that it was entitled to its costs in the receivership application to rank in priority to all other charges except the receiver's own and that of the Canada Revenue Agency - On the receiver's application for distribution, Five Oaks claimed entitlement under the guarantees to the costs award and Gajek's commission - Five Oaks also opposed the distribution because it did not provide for payment of its occupation rent claim - The Alberta Court of Queen's Bench held that all of Five Oaks' claims failed - Father & Son was awarded solicitor and client costs of this application against Five Oaks - Gajek, who was unrepresented, was also awarded $500 in costs against Five Oaks - Those costs were to be paid by the receiver from funds otherwise to be distributed to Five Oaks in priority to any claim by Five Oaks to those monies -  The costs were awarded as a reflection of Father & Son's and Gajek's success and of the late notice and inadequate format of Five Oaks' claims - See paragraphs 48 and 49.

Practice - Topic 7470.13

Costs - Solicitor and client costs - Entitlement to solicitor and client costs - Party not represented by counsel - [See Practice - Topic 7454 ].

Receivers - Topic 5404

Liabilities of receiver - General - Administration of property - Maverick Brewing Corp. operated a brewery in a building owned by Five Oaks Inc. - Father & Son Investments Inc. was a subordinate secured creditor of Maverick - In August 2005, Gajek (a Maverick shareholder) and Father & Son executed guarantees of all of Maverick's indebtedness to Alberta Treasury Branches (ATB) - In February 2007, Five Oaks became the assignee of the guarantees when it purchased ATB's security on Maverick's assets - In July 2007, Father & Son's application for the appointment of a receiver of Maverick was granted - Gajek facilitated a sale of Maverick's business assets - The court ordered the receiver to pay Gajek a commission of $10,000 - On the receiver's application for distribution, Five Oaks claimed entitlement to the commission under the guarantee - The Alberta Court of Queen's Bench held that Five Oaks' claim failed - The commission was not a debt owed by Maverick to Five Oaks, but rather a debt owed by the receiver to Gajek for services rendered after the commencement of the receivership - A receiver was a different entity in law from the debtor whose business it managed - The arrangement, whether it was contractual or not, was between the receiver and Gajek - Therefore, the commission did not fall within the ambit of monies received on account of a debt to Maverick and thus escaped the scope of the guarantee - The receiver was ordered to pay the $10,000 to Gajek directly as a disbursement incurred during the administration of the estate - See paragraphs 8 to 21.

Cases Noticed:

Bank of Montreal v. Steel City Sales Ltd. et al. (1983), 57 N.S.R.(2d) 396; 120 A.P.R. 396 (T.D.), refd to. [para. 12].

Alberta (Treasury Branches) v. Invictus Financial Corp. et al. (1986), 68 A.R. 207; 42 Alta. L.R.(2d) 94 (Q.B.), affd. (1986), 47 Alta. L.R.(2d) 94 (C.A.), refd to. [para. 12].

Soren Brothers, Re, [1926] O.J. No. 346 (Sup. Ct.), refd to. [para. 38].

Manville Road Steel Warehousing Ltd., Re, [1983] O.J. No. 968 (Sup. Ct.), refd to. [para. 38].

Nova Scotia Trust Co. v. Auto Parts Co., [1936] 2 D.L.R. 441 (N.S.S.C.), refd to. [para. 40].

Global Plastic Packaging Ltd. (Bankrupt), Re, [2004] O.T.C. 527 (Sup. Ct.), refd to. [para. 41].

Authors and Works Noticed:

Bennett, Frank E., Receiverships (2nd Ed. 1999), pp. 337 [para. 38]; 343, 344 [para. 12]; 375 to 378 [para. 13].

Kerr on Receivers (15th Ed. 1978), generally [para. 12].

Orkin, Mark M., The Law of Costs (2nd Ed.) (2007 Looseleaf update), pp. 1-1 to 1-4 [para. 28].

Shipman, Benjamin J., Handbook of Common-Law Pleading (3rd Ed. 1923), p. 132 [para. 27].

Counsel:

Bryan P. Maruyama and Dean Hitesman, for the Receiver;

Henry K. Mah, for Five Oaks Inc.;

Jeffrey M. Lee, for Father & Son Investments Inc.;

Edwin A. Bridges, Q.C., for 1242488 Alberta Ltd.;

Howard J. Sniderman, for Consolidated Civil Enforcement Inc.

This application was heard on November 6, 2007, by Bielby, J., of the Alberta Court of Queen's Bench, Judicial District of Edmonton, who delivered the following reasons for judgment on December 12, 2007.