Tirecraft Group Inc. v. High Park Holdings ULC et al., 2010 ABQB 653

• Judge: Yamauchi, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: October 05, 2010
• Citations: 2010 ABQB 653;(2010), 511 A.R. 17 (QB)

Tirecraft Group Inc. v. High Park Holdings ULC (2010), 511 A.R. 17 (QB)

MLB headnote and full text

Temp. Cite: [2010] A.R. TBEd. OC.115

Tirecraft Group Inc. by Ernest & Young Inc., its Court Appointed Receiver and Manager (applicant) v. High Park Holdings ULC, Metplas Holdings Inc., Tire Industries Inc., Anastasios Votis and George Votis (respondents)

(0903 05810; 2010 ABQB 653)

Indexed As: Tirecraft Group Inc. v. High Park Holdings ULC et al.

Alberta Court of Queen's Bench

Judicial District of Edmonton

Yamauchi, J.

October 14, 2010.

Summary:

The applicant sought an order requiring the individual respondents to respond to certain questions that arose during their examinations for discovery. It also sought to have the respondents provide undertakings taken under advisement and to provide more adequate and complete responses to undertakings that the respondents had provided.

The Alberta Court of Queen's Bench determined which questions needed to be answered and what documents needed to be produced.

Company Law - Topic 310

Nature of corporations - Lifting the corporate veil - General - The Alberta Court of Queen's Bench discussed what factors the courts had found to be significant in determining whether to find a corporation to be a "sham, cloak or alter ego" and pierce the corporate veil - The court held that "When one parses through the various tests and criteria courts have established to determine whether they will pierce the corporate veil, they all come down to the 'persuasive argument' that Justice Wilson provided us in Kosmopoulos at para. 13, where she said: '13 There is a persuasive argument that "those who have chosen the benefits of incorporation must bear the corresponding burdens, so that if the veil is to be lifted at all that should only be done in the interests of third parties who would otherwise suffer as a result of that choice"...'" - See paragraphs 13 to 23.

Company Law - Topic 310

Nature of corporations - Lifting the corporate veil - General - The applicant sought an order requiring the individual respondents Anastasios Votis and George Votis to respond to certain questions that arose during their examinations for discovery - The applicant argued that it required the information it requested, so that it might establish a case for the court to "pierce" the various corporate veils that the Votises had established and impose liability on the Votises personally - The Alberta Court of Queen's Bench noted that the pleadings did not allege fraud on the part of the Votises, although there was reference to "improper conduct" - As well, the pleadings used terminology from the Fraudulent Preferences Act, although the applicants did not use the term "fraud" or "fraudulent" - The court stated that "It is only when the promoter uses the corporate structure as a cloak, sham or alter ego in such a way as to perform a wrongful, unlawful, fraudulent or improper act that causes third parties to suffer, will a court pierce the corporate veil. This is a very narrow opening. ... Generally, each case differs on its facts and, especially in the case of an interlocutory application, courts simply have not enough information to make a rational decision. This Court is simply not in a position to make very important findings of fact required to determine whether the Applicants have made out a case for piercing the corporate veil. However, that is not what the Rules require this Court so to do. It requires this Court to determine whether the questions are 'relevant and material' ... to significantly determine one or more of the issues raised in the pleadings, Rule 186.1. However, this Court must be cautious not to allow the Applicant to go on a fishing expedition to find some evidence to support the allegations it is making, Franco v. Hackett (2000), 262 A.R. 127; 2000 ABQB 241(Master) at para. 34. There must be some underlying foundation on which it is basing its allegations in the first place." - See paragraphs 24 to 26.

Estoppel - Topic 1389

Estoppel in pais (by conduct) - Circumstances where doctrine not applicable - Lack of prejudice or detrimental reliance by person raising estoppel - The applicant sought an order requiring the individual respondents Anastasios Votis and George Votis to respond to certain questions that arose during their examinations for discovery - It also sought to have the respondents provide undertakings taken under advisement and to provide more adequate and complete responses to undertakings that the respondents had provided - The applicant argued that the information it sought was relevant and material to issues that were in dispute - The first issue was whether the corporate respondents were the alter egos or agents of the individual respondents - The second issue, which was raised by the respondents in their statement of defence, was whether the applicant was estopped from raising or relying on the breach of a management fee agreement in establishing its claim against the respondents, because if there was a breach, it was the applicant's breach - The Alberta Court of Queen's Bench ordered the respondents to produce, inter alia, the respondent Metplas's income tax return for 2007 and financial statements for 2005, 2006 and 2007; the respondent High Park's income tax returns for 2006 and 2007; and the respondent High Park's financial statements for 2005, 2006 and 2007 - This was a financial case, in the sense that it had to do with the flow of money - The only way for the trial court to determine whether the applicant had made out the allegations contained in the statement of claim was to look at the flow of money, where it went, to whom and when - Not only did the applicant want to determine whether monies were properly paid under the agreement, the respondents had defended and counterclaimed, based on the flow of money - The respondents' estoppel argument appeared to be that the applicant's conduct in making the payments to the respondents amounted to a representation that the applicant was in a position to make the payments - The respondents received the payments unconditionally and for their absolute use - The respondents, relying on that representation, accepted the payments and thereby altered their financial positions - To now require them to repay those monies would be detrimental to the respondents - The court found it difficult to see how the respondents had altered their positions to their prejudice - They had had the use of the funds from the date they received them - If they had wrongly received the funds, they would suffer no prejudice by having to return them - The court, and the trial court that heard the matter, could not answer any of these questions without further information - See paragraphs 31 to 52.

Practice - Topic 4252

Discovery - Examination - Range of - Questions related to or relevant and material to issues between the parties - [See second Company Law - Topic 310 and Estoppel - Topic 1389 ].

Practice - Topic 4252

Discovery - Examination - Range of - Questions related to or relevant and material to issues between the parties - The Alberta Court of Queen's Bench stated that "The Alberta Rules of Court, Alta. Reg. 390/68 (the 'Rules'), limit the scope of the questions a person must answer during an examination for discovery, by providing: '200(1.2) During the oral examination under subrule (1), a person is required to answer only relevant and material questions.'" - Rule 186.1 also provided a description of the terms "relevant and material" - The court also discussed caselaw that addressed the meaning of those terms - See paragraphs 9 to 12.

Practice - Topic 4252

Discovery - Examination - Range of - Questions related to or relevant and material to issues between the parties - The applicant sought an order requiring the individual respondents Anastasios Votis and George Votis to respond to certain questions that arose during their examinations for discovery - The first issue was whether the corporate respondents were the alter egos or agents of the individual respondents - The applicant alleged that the respondent Metplas received management fees from the applicant - Anastasios refused to answer whether: he understood that the respondent Metplas signed a management agreement; anyone signed the agreement on behalf of Metplas; and Metplas was a party to or signatory of the agreement - The Alberta Court of Queen's Bench stated that these questions related to the technical aspect of whether Metplas signed the agreement and was a party to the agreement - They did not relate to any of the issues raised in the pleadings - Even when the court looked at the agreement, it saw that Metplas was not a signatory to it - Whether Metplas was an alter ego or agent of Anastasios would not be addressed through responses to these questions - Those issues were better addressed through other evidence - The respondents did not have to answer these questions - See paragraphs 28 to 30.

Practice - Topic 4252

Discovery - Examination - Range of - Questions related to or relevant and material to issues between the parties - The applicant sought an order requiring the individual respondents Anastasios Votis and George Votis to respond to certain questions that arose during their examinations for discovery - The first issue was whether the corporate respondents were the alter egos or agents of the individual respondents - Questions that Anastasios refused to answer were what were the names of the accountants for the respondent Metplas; and Metplas employees other than Anastasios - Questions George refused to answer were what were the names of the respondent High Park's accountants, bank, and subcontractors and the name of George's personal accountant; and whether the respondent High Park had contracts other than those dealing with the applicant's business - The Alberta Court of Queen's Bench held that only the banks with which the respondents conducted their business might be relevant and material - How funds flowed between or among the parties might be relevant and material to the issues set forth in the pleadings - It was not so much the bankers, but the banking statements that would arise from disclosure (or undertakings) that might assist the trial court - Accordingly, George had to answer this question - See paragraphs 31 to 37.

Cases Noticed:

NAC Constructors Ltd. v. Alberta Capital Region Wastewater Commission (2006), 412 A.R. 272; 404 W.A.C. 272; 63 Alta. L.R.(4th) 19; 2006 ABCA 246, refd to. [para. 11].

Weatherill Estate v. Weatherill et al. (2003), 337 A.R. 180; 2003 ABQB 69, refd to. [para. 12].

Salomon v. Salomon & Co., [1897] A.C. 22 (H.L.), refd to. [para. 13].

Lee v. Lee's Air Farming, [1961] A.C. 12 (P.C.), refd to. [para. 13].

Kosmopoulos et al. v. Constitution Insurance Co. of Canada et al., [1987] 1 S.C.R. 2; 74 N.R. 360; 21 O.A.C. 4, refd to. [para. 14].

Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1996), 2 O.T.C. 146; 28 O.R.(3d) 423; 1996 CarswellOnt 1699 (Gen. Div.), affd. [1997] O.J. No. 3754; 1997 CarswellOnt 3496 (C.A.), refd to. [para. 15].

Clarkson Co. v. Zhelka et al. (1967), 64 D.L.R.(2d) 457 (Ont. H.C.), refd to. [para. 18].

Yang et al. v. Overseas Investments (1986) Ltd. et al. (1995), 166 A.R. 178; 26 Alta. L.R.(3d) 223 (Q.B.), consd. [para. 21].

Shillingford v. Dalbridge Group Inc. (1996), 197 A.R. 56 (Q.B.), refd to. [para. 21].

Pelliccione v. Hughes (John F.) Contracting & Development Co. et al., [2005] O.T.C. 843; 47 C.L.R.(3d) 104 (Sup. Ct.), refd to. [para. 21].

Frankel Structural Steel Ltd. v. Goden Holdings Ltd., [1971] S.C.R. 250, refd to. [para. 22].

Wolfe v. Moir (1969), 69 W.W.R.(N.S.) 70 (Alta. T.D.), refd to. [para. 22].

CHED-CKNG FM v. Goose Loonies Inc. et al. (1995), 172 A.R. 117; 31 Alta. L.R.(3d) 242 (Q.B. Master), refd to. [para. 22].

Franco v. Hackett (2000), 262 A.R. 127; 2000 ABQB 241 (Master), refd to. [para. 26].

Agrios v. Mediavision Inc. (1982), 48 A.R. 151; 19 Alta. L.R.(2d) 74; 134 D.L.R.(3d) 281 (Q.B.), affd. without written reasons (1982), 22 Alta. L.R.(2d) xxxvi (C.A.), refd to. [para. 40].

Maracle v. Travellers Indemnity Co. of Canada, [1991] 2 S.C.R. 50; 125 N.R. 294; 47 O.A.C. 333, refd to. [para. 42].

Capital City Oil Well Servicing Co. v. Non Marine Underwriters (1959), 27 W.W.R.(N.S.) 241; 1959 CarswellAlta 10 (S.C.), refd to. [para. 42].

Greenwood v. Martins Bank Ltd., [1933] A.C. 51 (H.L.), refd to. [para. 42].

Morgan v. Boles, [1946] 1 W.W.R. 1 (Alta. C.A.), refd to. [para. 42].

Carr v. London and North Western Railway Co. (1875), L.R. 10 C.P. 307, refd to. [para. 43].

People's Bank of Halifax v. Estey (1904), 34 S.C.R. 429; 1904 CarswellNB 55, refd to. [para. 44].

Authors and Works Noticed:

McGuinness, Kevin Patrick, The Law and Practice of Canadian Business Corporations (1999), pp. 39, 40 [para. 21].

Counsel:

Aldo Argento (Macleod Dixon LLP), for the applicant;

Wendy Thiessen (Bishop and MacKenzie LLP), for the respondents.

This application was heard on October 5, 2010, by Yamauchi, J., of the Alberta Court of Queen's Bench, Judicial District of Edmonton, who delivered the following decision on October 14, 2010.