LLS America LLC v. Dill, (2016) 325 Man.R.(2d) 147 (QB)

• Judge: Rempel, J.
• Court: Court of Queen's Bench of Manitoba (Canada)
• Case Date: January 25, 2016
• Jurisdiction: Manitoba
• Citations: (2016), 325 Man.R.(2d) 147 (QB);2016 MBQB 20

LLS Am. LLC v. Dill (2016), 325 Man.R.(2d) 147 (QB)

MLB headnote and full text

Temp. Cite: [2016] Man.R.(2d) TBEd. FE.022

Bruce P. Kriegman, in his capacity as Court Appointed Chapter 11 Trustee for LLS America LLC (applicant) v. Kevin Dill (respondent)

(CI 14-01-91687)

Bruce P. Kriegman, in his capacity as Court Appointed Chapter 11 Trustee for LLS America LLC (applicant) v. Robert Dill Sr., Lillian Dill and Lilrob Ltd. (respondents)

(CI 14-01-91688)

Bruce P. Kriegman, in his capacity as Court Appointed Chapter 11 Trustee for LLS America LLC (applicant) v. Robert Dill Jr. and Tracey Dill (respondents)

(CI 14-01-91689)

(2016 MBQB 20)

Indexed As: LLS America LLC v. Dill

Manitoba Court of Queen's Bench

Winnipeg Centre

Rempel, J.

January 25, 2016.

Summary:

The applicant Trustee in Bankruptcy for LLS America LLC sought to enforce a judgment issued by a bankruptcy court in Washington, U.S.A. against the respondents. The court in Washington ultimately concluded that LLS and the related corporations were part of a Ponzi scheme participated in by the respondents. Judgment was awarded against the respondents for the principal they loaned to LLS and the interest payments they received. The respondents resided in Manitoba. The Trustee registered the judgment under Manitoba's Reciprocal Enforcement of Judgments Act. The respondents moved to set aside the judgment. They argued that they had been ensnared in the bankruptcy proceedings in Washington by way of underhanded tactics employed by the Trustee and that they never attorned to the jurisdiction of the courts in Washington.

The Manitoba Court of Queen's Bench denied the respondents' motion. There was no basis to advance the respondents' arguments under the Reciprocal Enforcement of Judgments Act or they were otherwise irrelevant. There was a real and substantial connection between the Washington court and the underlying dispute. In any event, the respondents did in fact attorn to the jurisdiction of the Washington court.

Conflict of Laws - Topic 643

Jurisdiction - Submission to jurisdiction - What constitutes - [See fifth Conflict of Laws - Topic 5602 ].

Conflict of Laws - Topic 5602

Bankruptcy and insolvency - General - Recognition of foreign bankruptcy - The applicant Trustee in Bankruptcy sought to enforce a judgment against the respondents (Manitoba residents) - The Trustee had registered the judgment, issued by a bankruptcy court in Washington, U.S.A., under Manitoba's Reciprocal Enforcement of Judgments Act - The respondents moved to set aside the judgment - The Manitoba Court of Queen's Bench rejected the respondents' argument that the Trustee breached a duty of good faith as an officer of the court by failing to inform the respondents that they should obtain legal advice prior to submitting proof of claim forms - "This is essentially the ensnarement argument advanced by the Respondents and it is a substantive issue that could have, or should have, been adjudicated by their lawyers under the laws of Washington. The alleged failure by the Trustee to live up to the standards or duties imposed on a Trustee in Bankruptcy under Canadian law is not a recognized basis to object to the registration of a Judgment under the [Reciprocal Enforcement of Judgments] Act." - See paragraph 31.

Conflict of Laws - Topic 5602

Bankruptcy and insolvency - General - Recognition of foreign bankruptcy - The applicant Trustee in Bankruptcy sought to enforce a judgment against the respondents (Manitoba residents) - The Trustee had registered the judgment, issued by a bankruptcy court in Washington, U.S.A., under Manitoba's Reciprocal Enforcement of Judgments Act - The respondents moved to set aside the judgment - The Manitoba Court of Queen's Bench rejected the argument advanced by the respondents that the Trustee breached the duty to act with an even hand - "The taking of an adversarial position against the Respondents does not amount to a breach of this duty by the Trustee. Trustees in Canada often take positions against the interests of persons, like the Respondents, who seek to collect monies they claim are owing to them by a bankrupt estate." - See paragraph 31.

Conflict of Laws - Topic 5602

Bankruptcy and insolvency - General - Recognition of foreign bankruptcy - The applicant Trustee in Bankruptcy sought to enforce a judgment against the respondents (Manitoba residents) - The Trustee had registered the judgment, issued by a bankruptcy court in Washington, U.S.A., under Manitoba's Reciprocal Enforcement of Judgments Act - The respondents moved to set aside the judgment - The Manitoba Court of Queen's Bench rejected the "bad faith" argument against the Trustee - "Refusing to answer certain questions under cross-examination based on lawyer/client privilege is not a basis to advance a bad faith argument against the Trustee. The same can be said about answers that were less than helpful to the Respondents or otherwise deemed unresponsive by the Respondents' counsel. This is to be expected in any contested litigious proceeding." - See paragraph 31.

Conflict of Laws - Topic 5602

Bankruptcy and insolvency - General - Recognition of foreign bankruptcy - The applicant Trustee in Bankruptcy for LLS America LLC sought to enforce a judgment against the respondents (Manitoba residents) - The Trustee had registered the judgment, issued by a bankruptcy court in Washington, U.S.A., under Manitoba's Reciprocal Enforcement of Judgments Act - The bankruptcy court ultimately concluded that LLS and the related corporations were part of a Ponzi scheme - The respondents moved to set aside the judgment - The Manitoba Court of Queen's Bench rejected the argument advanced by the respondents concerning the treatment of Ponzi schemes under Washington law - "Washington law apparently requires participants in Ponzi schemes to disgorge not only their net gains but also their initial investments in bankruptcy proceedings. Canadian jurisdictions on the other hand tend only to attach the net gains. This distinction does not make Washington law 'repugnant' or contrary to the fundamental morality of the Canadian legal system. This particular argument does not give rise to a successful attack on the registration of the Judgment in Manitoba." - See paragraph 31.

Conflict of Laws - Topic 5602

Bankruptcy and insolvency - General - Recognition of foreign bankruptcy - The applicant Trustee in Bankruptcy sought to enforce a judgment against the respondents (Manitoba residents) - The Trustee had registered the judgment, issued by a bankruptcy court in Washington, U.S.A., under Manitoba's Reciprocal Enforcement of Judgments Act - The respondents moved to set aside the judgment - The Manitoba Court of Queen's Bench agreed with the Trustee that the respondents' failure to appeal their failed jurisdictional challenge was fatal to their position that they did not have a real and substantial connection to the court in Washington - The Court was also satisfied that the court in Washington had a real and substantial connection to the action itself - If wrong in that conclusion, the filing of the respondents' affirmative defence constituted the attornment to, or acceptance of, the jurisdiction of the Washington court - "As such there is a solid foundation in our law to enforce the Judgment and the argument as to the failure of the corporate Respondent to carry on business in Washington is a red herring." - See paragraphs 36 and 37, 39.

Conflict of Laws - Topic 5602

Bankruptcy and insolvency - General - Recognition of foreign bankruptcy - The applicant Trustee in Bankruptcy sought to enforce a judgment against the respondents (Manitoba residents) - The Trustee had registered the judgment, issued by a bankruptcy court in Washington, U.S.A., under Manitoba's Reciprocal Enforcement of Judgments Act - The respondents moved to set aside the judgment - The Manitoba Court of Queen's Bench, in denying the motion, stated that "[a] significant portion of the Respondents' arguments essentially amount to an effort to give the Respondents a second kick at the can after they obtained an unfavourable result in Washington." - The noted attacks by the respondents against the judgment were about "substantive matters that were part and parcel of the litigation in Washington and which were addressed, or could have been addressed there. I do not have the authority to permit those matters to be re-litigated here in Manitoba." - See paragraphs 41 and 42.

Conflict of Laws - Topic 5602

Bankruptcy and insolvency - General - Recognition of foreign bankruptcy - The applicant Trustee in Bankruptcy sought to enforce a judgment against the respondents (Manitoba residents) - The Trustee had registered the judgment, issued by a bankruptcy court in Washington, U.S.A., under Manitoba's Reciprocal Enforcement of Judgments Act - The respondents moved to set aside the judgment - The Manitoba Court of Queen's Bench, in permitting the Trustee to take steps to enforce the judgment, stated that "[t]he fact remains that the Respondents took an active role in the litigation in Washington with the benefit of legal counsel and they filed substantive defences when the jurisdictional arguments failed. They then got cold feet and instructed their counsel not to participate in the trial after their lawyers were unsuccessful in removing themselves as counsel of record when the trial dates were close at hand. Thereafter, the lawyers for the Respondents failed to participate in the trial although they were afforded every opportunity to present or challenge evidence. The Judgment obtained in Washington was not the result of default or summary proceedings of which the Respondents knew next to nothing about. The Trustee was obliged to present his case on the merits after a substantial legal battle with the Respondents and their legal counsel in Washington. There is nothing about the legal process in Washington that can remotely be described as biased, prejudicial or repugnant. The standard of reasonable fairness, as that term is understood in Canadian jurisprudence, was met during the course of the litigation in Washington." - See paragraphs 43 and 44.

Conflict of Laws - Topic 6606

Foreign judgments - General - Recognition of judgment of foreign state - The applicant Trustee in Bankruptcy for LLS America LLC sought to enforce a judgment issued by a bankruptcy court in Washington, U.S.A. against the respondents - The court in Washington ultimately concluded that LLS and the related corporations were part of a Ponzi scheme participated in by the respondents - Judgment was awarded against the respondents for the principal they loaned to LLS and the interest payments they received - The respondents resided in Manitoba - The Trustee registered the judgment under Manitoba's Reciprocal Enforcement of Judgments Act - The respondents moved to set aside the judgment - They argued that they had been ensnared in the bankruptcy proceedings in Washington by way of underhanded tactics employed by the Trustee and that they never attorned to the jurisdiction of the courts in Washington - The Manitoba Court of Queen's Bench denied the respondents' motion - There was no basis to advance the respondents' arguments under the Reciprocal Enforcement of Judgments Act or they were otherwise irrelevant - There was a real and substantial connection between the Washington court and the underlying dispute - In any event, the respondents did in fact attorn to the jurisdiction of the Washington court.

Practice - Topic 5468

Judgments and orders - Finality of judgments and orders - Whether finality precludes relitigation - [See sixth Conflict of Laws - Topic 5602 ].

Practice - Topic 5921

Judgments and orders - Enforcement of foreign judgments - General - [See Conflict of Laws - Topic 6606 ].

Practice - Topic 5924

Judgments and orders - Enforcement of foreign judgments - Submission of defendant to jurisdiction of foreign court - [See fifth Conflict of Laws - Topic 5602 ].

Practice - Topic 5934

Judgments and orders - Enforcement of foreign judgments - Registration or enforcement - Defences - [See Conflict of Laws - Topic 6606 ].

Cases Noticed:

Yaiguaje et al. v. Chevron Corp. et al. (2015), 474 N.R. 1; 335 O.A.C. 201; 2015 SCC 42, consd. [para. 11].

Morguard Investments Ltd. et al. v. De Savoye, [1990] 3 S.C.R. 1077; 122 N.R. 81, refd to. [para. 12].

Beals v. Saldanha et al., [2003] 3 S.C.R. 416; 314 N.R. 209; 182 O.A.C. 201; 2003 SCC 72, consd. [para. 12].

Statutes Noticed:

Reciprocal Enforcement of Judgments Act, R.S.M. 1987, c. J-20; C.C.S.M., c. J-20, sect. 3(6) [para. 28].

Counsel:

Rod C. Roy, for the applicant;

Robert L. Tapper, Q.C., and Kathleen M. Coutts, for the respondents.

This motion was heard before Rempel, J., of the Manitoba Court of Queen's Bench, Winnipeg Centre, who delivered the following judgment and reasons, dated January 25, 2016.