Norfolk Southern Railway Co. v. Crowshaw, 2014 ABQB 273

• Judge: Nixon, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: August 16, 2013
• Citations: 2014 ABQB 273;(2014), 589 A.R. 103 (QB)

Norfolk Southern Railway v. Crowshaw (2014), 589 A.R. 103 (QB)

MLB headnote and full text

Temp. Cite: [2014] A.R. TBEd. MY.033

Norfolk Southern Railway Company (applicant) v. James Colin Real Crowshaw (respondent)

(1201 13982; 2014 ABQB 273)

Indexed As: Norfolk Southern Railway Co. v. Crowshaw

Alberta Court of Queen's Bench

Judicial District of Calgary

Nixon, J.

May 6, 2014.

Summary:

Norfolk Southern Railway Company applied for registration of a Pennsylvania default judgment in the amount of $937,997.76 (USD), plus costs and interest, against Crowshaw. Norfolk also sought a declaration that the default judgment survived Crowshaw's bankruptcy of pursuant to s. 178(1)(d) of the Bankruptcy and Insolvency Act.

The Alberta Court of Queen's Bench dismissed the application.

Bankruptcy - Topic 8987

Discharge of debtor - Liabilities not released by discharge - Act of fraud of debtor - Crowshaw resided in Alberta - He was sole officer, director and shareholder of Power Source Supply Inc. (PSS) and Power Source Holdings Ltd. (PS Holdings) - Each of PSS and PS Holdings had its registered head office in Alberta and was incorporated under the laws of Alberta - PSS was in the business of purchasing, recycling and re-selling used railway equipment - Norfolk Southern Railway Company was an interstate rail carrier, incorporated under the laws of the State of Virginia, and had its principal place of business in Norfolk, Virginia - In February 2005, PSS contracted with Norfolk to purchase locomotives, engines and other equipment - Only a portion of the purchase price was paid to Norfolk - The equipment was subsequently sold by PSS - Norfolk sued PSS for the balance of the purchase price in Pennsylvania, pleading breach of contract and unjust enrichment - The Pennsylvania Court held that it had jurisdiction and granted summary judgment in favour of Norfolk - Norfolk obtained a judgment in Alberta enforcing the Pennsylvania judgment - Crowshaw, as officer of PSS, was examined in aid of execution in respect of the Alberta judgment - During the course of his examination, he was asked what happened with the funds from the re-sale of the equipment PSS had purchased from Norfolk - Crowshaw described using funds for payment of taxes and a loan to PS Holdings - He also took money from PS Holdings to pay gambling debts - In March 2011, Crowshaw made an assignment into bankruptcy - In March 2011, Norfolk commenced another action in Pennsylvania against Crowshaw personally, as well as against PSS and PS Holdings, alleging fraud, misappropriation and conversion - The Pennsylvania Court issued default judgment against Crowshaw personally - Norfolk applied for registration of the default judgment against Crowshaw - Norfolk also sought a declaration that the default judgment survived Crowshaw's bankruptcy pursuant to s. 178(1)(d) of the Bankruptcy and Insolvency Act - The Alberta Court of Queen's Bench dismissed the application - While Crowshaw was deemed to have admitted facts in the Pennsylvania 2011 action by virtue of his failure to defend that action, there was no finding by the Pennsylvania Court of fraud - His evidence on examination in aid of execution upon which the 2011 action was based was not sufficient to establish deceit in relation to obtaining funds or property - It was the use of funds that was put in question - While deemed admissions could be taken into account in determining whether there had been a finding of fraud, the allegation against Crowshaw was that he inappropriately dealt with the funds of PSS, not that there was fraudulent acquisition of the equipment or the sale of the equipment to third parties - Further, while the bald assertion of fraud in the 2011 Pennsylvania action was deemed to be admitted, the court was not satisfied that there was clear and unequivocal evidence of fraud with respect to the use of funds - Before a judgment would survive bankruptcy, there had to be a clear finding that Crowshaw obtained property by deceit - The court could not make such a finding on the deemed facts and the evidence - See paragraphs 79 to 105.

Conflict of Laws - Topic 643

Jurisdiction - Submission to jurisdiction - What constitutes - Crowshaw resided in Alberta - He was sole officer, director and shareholder of Power Source Supply Inc. (PSS) and Power Source Holdings Ltd. (PS Holdings) - Each of PSS and PS Holdings had its registered head office in Alberta and was incorporated under the laws of Alberta - PSS was in the business of purchasing, recycling and re-selling used railway equipment - Norfolk Southern Railway Company was an interstate rail carrier, incorporated under the laws of the State of Virginia, and had its principal place of business in Norfolk, Virginia - In February 2005, PSS contracted with Norfolk to purchase locomotives, engines and other equipment - Only a portion of the purchase price was paid to Norfolk - The equipment was subsequently sold by PSS - Norfolk sued PSS for the balance of the purchase price in Pennsylvania, pleading breach of contract and unjust enrichment - The Pennsylvania Court held that it had jurisdiction and granted summary judgment in favour of Norfolk - Norfolk obtained a judgment in Alberta enforcing the Pennsylvania judgment - Crowshaw, as officer of PSS, was examined in aid of execution in respect of the Alberta judgment - During the course of his examination, he was asked what happened with the funds from the re-sale of the equipment PSS had purchased from Norfolk - Crowshaw described using funds for payment of taxes and a loan to PS Holdings - He also took money from PS Holdings to pay gambling debts - In March 2011, Crowshaw made an assignment into bankruptcy - In March 2011, Norfolk commenced another action in Pennsylvania against Crowshaw personally, as well as against PSS and PS Holdings, alleging fraud, misappropriation and conversion - The Pennsylvania Court issued default judgment against Crowshaw personally - Norfolk applied for registration of the default judgment against Crowshaw - The Alberta Court of Queen's Bench dismissed the application - Enforcement of a foreign judgment in Canada required that the foreign court, whose order the applicant sought to enforce, took jurisdiction in accordance with Canadian conflict of laws rules - There had to either be a "real and substantial connection" in Pennsylvania, or Crowshaw had to attorn to the jurisdiction - Crowshaw neither filed anything with the court in Pennsylvania nor took any steps to protest the jurisdiction until this present application for enforcement - The evidence was not sufficient to establish Crowshaw attorned to the jurisdiction of the Pennsylvania Court - There was correspondence between Crowshaw and Norfolk but no defence or appearance was filed - Crowshaw's actions did not constitute participation in the merits of the action sufficient to constitute submission to the jurisdiction of the Pennsylvania Court - See paragraphs 16 to 33.

Conflict of Laws - Topic 7285

Contracts - Jurisdiction - Real and substantial connection - He was sole officer, director and shareholder of Power Source Supply Inc. (PSS) and Power Source Holdings Ltd. (PS Holdings) - Each of PSS and PS Holdings had its registered head office in Alberta and was incorporated under the laws of Alberta - PSS was in the business of purchasing, recycling and re-selling used railway equipment - Norfolk Southern Railway Company was an interstate rail carrier, incorporated under the laws of the State of Virginia, and had its principal place of business in Norfolk, Virginia - In February 2005, PSS contracted with Norfolk to purchase locomotives, engines and other equipment - Only a portion of the purchase price was paid to Norfolk - The equipment was subsequently sold by PSS - Norfolk sued PSS for the balance of the purchase price in Pennsylvania, pleading breach of contract and unjust enrichment - The Pennsylvania Court held that it had jurisdiction and granted summary judgment in favour of Norfolk - Norfolk obtained a judgment in Alberta enforcing the Pennsylvania judgment - Crowshaw, as officer of PSS, was examined in aid of execution in respect of the Alberta judgment - During the course of his examination, he was asked what happened with the funds from the re-sale of the equipment PSS had purchased from Norfolk - Crowshaw described using funds for payment of taxes and a loan to PS Holdings - He also took money from PS Holdings to pay gambling debts - In March 2011, Crowshaw made an assignment into bankruptcy - In March 2011, Norfolk commenced another action in Pennsylvania against Crowshaw personally, as well as against PSS and PS Holdings, alleging fraud, misappropriation and conversion - The Pennsylvania Court issued default judgment against Crowshaw personally - Norfolk applied for registration of the default judgment against Crowshaw - The Alberta Court of Queen's Bench dismissed the application - Enforcement of a foreign judgment in Canada required that the foreign court, whose order the applicant sought to enforce, took jurisdiction in accordance with Canadian conflict of laws rules - There had to either be a "real and substantial connection" in Pennsylvania, or Crowshaw had to attorn to the jurisdiction - While the cause of action brought against Crowshaw in Pennsylvania arose out of Norfolk's efforts to enforce the previous judgment it obtained in Pennsylvania against PSS in the contract action, considering the true nature of the current dispute, his subsequent use of funds, the connection between Crowshaw and the 2011 Pennsylvania action did not meet the test to enforce a foreign judgment of establishing a real and substantial connection - See paragraphs 34 to 78.

Cases Noticed:

Beals v. Saldanha et al. (2003), 314 N.R. 209; 182 O.A.C. 201; 2003 SCC 72, refd to. [para. 10].

Morguard Investments Ltd. et al. v. De Savoye, [1990] 3 S.C.R. 1077; 122 N.R. 81, refd to. [para. 10].

Van Breda et al. v. Village Resorts Ltd. et al. (2012), 429 N.R. 217; 291 O.A.C. 201; 2012 SCC 17, refd to. [para. 10].

Spartan Securities Group Ltd. et al. v. Cote (2012), 532 A.R. 184; 2012 ABQB 9, affd. (2012), 536 A.R. 233; 559 W.A.C. 233; 2012 ABCA 278, refd to. [para. 12].

Laasch et al. v. Turenne et al. (2009), 476 A.R. 377; 2009 ABQB 267, refd to. [para. 22].

Hansraj v. Ao et al. (2004), 354 A.R. 91; 329 W.A.C. 91; 2004 ABCA 223, refd to. [para. 22].

Roglass Consultants Inc. v. Kennedy (1984), 65 B.C.L.R. 393 (C.A.), refd to. [para. 22].

1302926 Ontario Inc. v. 2334425 Nova Scotia Ltd. (2004), 221 N.S.R.(2d) 285; 697 A.P.R. 285; 2004 NSSC 55, refd to. [para. 23].

Fulford v. Reid (1996), 112 Man.R.(2d) 260 (Q.B.), refd to. [para. 23].

Canadian Kennel Club v. Continental Kennel Club, [1997] FCJ No. 1728 (T.D.), refd to. [para. 24].

Racicot v. Moore (1979), 26 N.B.R.(2d) 151; 55 A.P.R. 151 (S.C.), refd to. [para. 25].

Lazer-Tech Ltd. v. Dejeray et al., [2010] O.T.C. Uned. 1662; 2010 ONSC 1662, refd to. [para. 28].

Moore v. Vancouver Fraser Port Authority et al., [2011] O.T.C. Uned. 3692; 2011 ONSC 3692, refd to. [para. 29].

Dykes v. Goczan (No. 1) (1996), 188 A.R. 352 (Q.B.), refd to. [para. 36].

D'Onofrio v. Il Mattino, 2006 US Dist. LEXIS 24521; 430 Supp.2d 431 (Ed. Pa.), refd to. [para. 37].

Van Breda et al. v. Village Resorts Ltd. et al. (2010), 264 O.A.C. 1; 2010 ONCA 84, refd to. [para. 64].

Korea Data Systems Co. et al. v. Aamazing Technologies Inc. et al., [2012] O.T.C. Uned. 3922; 2012 ONSC 3922, refd to. [para. 83].

Pro Swing Inc. v. Elta Golf Inc., [2006] 2 S.C.R. 612; 354 N.R. 201; 218 O.A.C. 339; 2006 SCC 52, refd to. [para. 83].

McAteer v. Billes et al. (2006), 397 A.R. 365; 384 W.A.C. 365; 2006 ABCA 312, refd to. [para. 86].

McAteer v. Billes et al. (2007), 409 A.R. 143; 402 W.A.C. 143; 2007 ABCA 137, refd to. [para. 86].

Ste. Rose & District Cattle Feeders Co-op v. Geisel (2010), 255 Man.R.(2d) 45; 486 W.A.C. 45; 2010 MBCA 52, refd to. [para. 87].

Morgan v. Demers (1986), 71 A.R. 244 (C.A.), refd to. [para. 88].

Buland Empire Development Inc. v. Quinto Shoes Imports Ltd. et al. (1999), 123 O.A.C. 288; 11 C.B.R.(4th) 190 (C.A.), refd to. [para. 88].

Derry v. Peek, [1886-90] All E.R. 1 (H.L.), refd to. [para. 90].

Bourassa (Bankrupt), Re (2002), 312 A.R. 19; 281 W.A.C. 19; 2002 ABCA 205, refd to. [para. 91].

Agriculture Financial Services Corp. v. Zaborski, [2009] A.R. Uned. 660; 2009 ABQB 183, refd to. [para. 93].

Matthews (Bankrupt), Re (2003), 334 A.R. 187; 2003 ABQB 116, refd to. [para. 94].

Covey (Bankrupt), Re (2012), 547 A.R. 383; 2012 ABQB 565, refd to. [para. 96].

Lumascape Lighting Industries Pty Ltd. v. Pellegrino, 2009 QCCS 4103, refd to. [para. 97].

Perciasepe v. Smith et al. (2003) 50 C.B.R.(4th) 241 (Ont. Sup. Ct.), affd. [2004] O.A.C. Uned. 395; 1 C.B.R.(5th) 324 (C.A.), refd to. [para. 98].

Statutes Noticed:

Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, sect. 178(1)(d) [para. 1 et seq.].

Authors and Works Noticed:

Castel, Jean-Gabriel and Walker, Janet, Canadian Conflict of Laws (6th Ed. 2005) (Looseleaf), paras. 11.2.a [para. 21]; 11.2.a, fn. 20 [para. 30]; 11.2.a, fn. 20.2 [para. 26].

Counsel:

John Kingman Phillips (Phillips Gill LLP), for the applicant;

Daniel D. Peterson, Q.C. (D'Arcy & Deacon LLP), for the respondent.

This application was heard on August 16, 2013, by Nixon, J., of the Alberta Court of Queen's Bench, Judicial District of Calgary, who delivered the following reasons for judgment on May 6, 2014.