General Litigation Case Study
Case name: Delmas v. Orion 2000 Technologies Ltd.
Between
George Delmas and Terry Wong, plaintiffs, and
Orion 2000 Technologies Ltd., Orion Technologies, Inc., Edgar
Quinto, Abe Industries (1980) Inc. and Gordon Ellis,
defendants
[1997] B.C.J. No. 836
Vancouver Registry No. C970915
British Columbia Supreme Court
Vancouver, British Columbia
Burnyeat J.
(In Chambers)
Heard: March 18, 1997.
Judgment: filed April 7, 1997.
(24 pp.)
Practice — Interim proceedings — Preservation of property — When order for preservation of property available — What constitutes property — Mareva injunction — Requirements — Assets within jurisdiction — Injunctions — Interlocutory or interim injunctions — Balance of convenience — Irreparable injury.
This was an application for a preservation order. The plaintiffs claimed that the parties had agreed that the plaintiffs would be appointed as the defendant's exclusive agent with respect to investors and government agencies to make the shares public. An escrow agreement provided that the defendant would issue to the plaintiffs, for services rendered, 7,992,072 common shares at a deemed price. The escrow agent was entitled to release portions of the certificates on receipt of specified sums by the target dates. The plaintiffs claimed that the deadline for filing under the agreement had not been met as the defendant's lender failed to provide the financial statements. The defendant moved most of its assets out of the province in light of an anticipated amalgamation. The plaintiffs sought an order to preserve 7,992,072 common shares of the defendant's capital stock pursuant to Rule 46(1) of the British Columbia Rules of Court or under the court's inherent jurisdiction. In the alternative the plaintiffs sought an interlocutory injunction restraining the defendants from selling, transferring, removing, disposing of or otherwise dealing with the shares pending final disposition at trial.
HELD: The application was dismissed. To obtain a preservation order under Rule 46(1), the plaintiffs had to show that any right they had, to require the defendant to issue shares, was "property". Authorized but unissued shares were not property. Similarly, the court's inherent jurisdiction could not be called upon to detain, take custody of or preserve property which did not exist. The plaintiffs failed to meet the two pronged test for the granting of an interim injunction within the province. While there was a fair question to be tried, the plaintiffs did not establish that the balance of convenience favoured the granting of an interim injunction. On the question of irreparable harm, the balance favoured the defendants. A Mareva injunction was not appropriate here since there were no remaining significant assets of the defendant within the jurisdiction.
Statutes, Regulations and Rules Cited:
British Columbia Rules of Court, Rules 45, 46(1).
Counsel:
R.L. Basham, Q.C. and B.E. Brown, for the plaintiff.
W. Kosteckyj, for the defendants, Orion 2000 Technologies Ltd., Orion Technologies, Inc. and Edgar Quinto.
C.A. Wallace, for the defendants, ABE Industries (1980) Inc. and Gordon Ellis.
1. BURNYEAT J.:— The plaintiffs apply pursuant to Rule 46(1) and the inherent jurisdiction of the Court in order to preserve 7,992,072 common shares of the capital stock of the defendant, Orion 2000 Technologies Ltd. or, alternatively, pursuant to Rule 45 and the inherent jurisdiction of the court, for an order that the defendants be restrained and enjoined from selling, transferring, removing, disposing of or otherwise dealing with those shares in any way pending a final disposition of this action.
FACTS
2. The plaintiffs say that their entitlement to those shares arises out of various transactions between April 1996 and November 1996 wherein it was agreed that the plaintiffs would be appointed as the exclusive agent of Orion 2000 Technologies Ltd. ("Orion") with respect to investors and government regulatory agencies with the intent of taking the shares of Orion public in the United States by way of a registration statement or some other form of filing. By letter dated April 23, 1996 from the defendant, Edgar Quinto, to the plaintiffs, Mr. Quinto and Orion appointed and authorized the plaintiffs as the "exclusive agent" of those defendants to proceed as noted above. In consideration of them proceeding in that manner, the plaintiffs were entitled to appoint two of the five directors of the Board of Directors of Orion and were also authorized to assign their right to purchase shares of Orion to various "financing groups and/or any other groups of individuals or entities that they may deem necessary to facilitate the registration statement of the public offering. . .". At the same time, Mr. Quinto and Orion agreed to complete audited financial statements for Orion and give their full co-operation for the completion of the registration statement or other forms required for the public offering. While there were provisions in this letter indicating that the plaintiffs would be sold 57% of the shares of Orion for the sum of $10.00 ". . . upon the acceptance by the Securities and Exchange Commission of a registration statement for Orion and a financing of a minimum of US $300,000 into Orion, either by way of debt or equity" and indicating that the plaintiffs were to use their best efforts to raise financing of an additional $2,700,000.00 (US) in Orion, those two provisions were deleted from the April 23, 1996 letter agreement. Pursuant to paragraph 8 of this agreement, the term of the arrangement was 90 days from April 12, 1996 although it could be extended "if necessary" for up to 12 months providing the registration statement or other documents required to make a public offering of the shares of Orion had been filed with the appropriate regulatory authorities within 60 days of April 23, 1996. It is clear that the filing was not done by the June deadline: - the plaintiffs say as a result of the failure of Mr. Quinto and Orion to complete the financial statements required; the defendants say as a result of the inability of the plaintiffs to perform as promised.
3. Orion and the plaintiffs entered into a Escrow Agreement in June 1996 wherein Orion agreed to issue to the plaintiffs "in consideration for services rendered" 7,992,072 common shares in the capital of Orion at a deemed price of $.001 per share with the Escrow Agent entitled to release the Share Certificates to the plaintiffs as follows:
(a)Share Certificates representing 1,998,018 shares as soon as all share certificates had been received by the Escrow Holder;
(b)Share Certificates representing 1,998,018 shares upon notice that $600,000.00 (US) had been received on or before August 26, 1996;
(c) Share Certificates representing 1,998,018 shares upon written notice of a further $1,000,000.00 (US) had been received on or before November 26, 1996;
(d) Share Certificates representing 1,998,018 shares upon written notice that $1,000,000.00 (US) had been received on or before May 26, 1997
.It was also outlined in the Escrow Agreement that it was contemplated that a corporation ("Newco") might well be acquiring all of the issued and outstanding shares of Orion and that a further new corporation ("Holdco") might well become the parent of Newco or might merge with Orion and/or Newco. Regarding this Escrow Agreement, it is alleged by the plaintiffs that, by Consent Resolution dated July 11, 1996, the Directors of Orion unanimously agreed to enter into the Escrow Agreement referred to above. However, it is clear that no shares were ever delivered to the Escrow Agent. It is also clear that none of these shares were ever issued and that no share certificates were ever created.
4 . While it is not clear how much money became available to Orion as a result of the efforts of the plaintiffs, it is clear that there is a dispute between the parties whether the target amounts to be met by August 26 and November 26, 1996 were actually met. By letter dated November 8, 1996 from Orion to the plaintiffs and signed by the defendant, Edgar Quinto, the plaintiffs were advised:
For the record, I would like to inform you that you have failed to comply with our agreement to fund Orion 2000 Technologies Ltd. with a total of One Million Dollars in US Funds as of August 23rd, 1996.
In this regard it is in the best of our mutual interest that we should have a formal and cordial discussion on how we can equitably terminate this agreement.
Meanwhile, please refrain from pursuing any form of fund raising for the company.
In response to that letter, the solicitors then acting for the plaintiffs responded by letter dated November 14, 1996:
. . . We are of the view that our clients have fully complied with the terms of the agreement referred to in your correspondence and that the agreement continues to be in full force and effect.
We have also reviewed the terms of the Escrow Agreement made between Orion 2000 Technologies Ltd. and our clients and write at this time to demand that you immediately authorize the escrow agent to deliver to our offices the 3,996,036 shares referenced at paragraphs 4(a) and (b) of the agreement.
Our clients have instructed us to inform you that they are prepared to meet with you and your solicitors at your convenience in order to discuss any issues you may want to discuss at this time. We also advise you that if you fail to deliver the above mentioned shares and we are unable to reach, through mutual agreement, a satisfactory resolution of the issues that have arisen between Orion and our clients, that we shall take such further steps as we deem necessary without further notice.There were apparently some discussions between the parties as to a possible settlement of these matters but those discussions did not come to fruition.
INVOLVEMENT OF THE DEFENDANT, ABE INDUSTRIES (1980) INC.
5. By a letter agreement dated May 16, 1996 as between the plaintiffs and the defendants, Orion and ABE Industries (1980) Inc. ("ABE"), it was confirmed that the total of $3,000,000.00 (US) was required for Orion within 12 months and that the plaintiffs were prepared to relinquish 40% (out of their 57%) of the shares of Orion if ABE would assist in raising the required funds. In this agreement, the financial needs of Orion were forecast as being $400,000.00 (US) within 30 days, $600,000.00 (US) within 90 days, $1,000,000.00 (US) within six months, and $1,000,000.00 (US) within 12 months. The proposal of ABE which was accepted by the plaintiffs and Orion was that ABE would create a new U.S.-domiciled company ("Shell USA"), that the shareholders of Orion or Orion itself would grant Shell USA the option to acquire all of Orion's business in exchange for 6,000,000.00 common shares of Shell USA, that ABE or its nominee would take the initial equity position in Shell USA and would raise at least $400,000.00 (US) so that this sum could be advanced to Orion by June 15, 1996, that an application would be prepared and submitted for an "OTC Bulletin Board" listing, and that, if Orion completed certain "Measurable Goals" (as defined in the agreement), Shell USA would exercise its option to purchase Orion or Orion's business and distribute the 6,000,000 common shares with ABE to receive 4,000,000 common shares in the share capital of Shell USA in consideration for raising $3,000,000 (US) as required and gaining a "NASDAQ Small Cap Market listing for Shell USA". This agreement gave further detail to the "reverse take-over" contemplated by the parties in the Escrow Agreement and the references contained in it to Newco and Holdco. It appears that "Shell USA" was what was what had been referred to as "Newco". Subsequent to or perhaps prior to the November 8, 1996 letter from Orion to the plaintiffs terminating the agreement as between Orion and the plaintiffs, ABE became the agent of Orion to do and accomplish that which the plaintiffs say was the essence of the contract as between themselves and Orion. In their statement of claim, the plaintiffs say that ABE breached both a fiduciary duty and a duty of confidentiality owed to the plaintiffs and that all of the defendants conspired to injure the plaintiffs when ABE becoming the agent of Orion.
SUBSEQUENT CORPORATE EVENTS
6. The defendant, Orion Technologies, Inc. ("Technologies"), filed to become an incorporated company in the State of Nevada on June 5, 1996 with authorized capital stock of 25,000,000 shares with a par value of $.001 per share (authorized capital stock of $25,000.00). Technologies thereby probably became what the parties had referred to as either Newco or Shell USA.
7. Orion which had been incorporated in British Columbia on May 11, 1992, was "continued out" of the province on March 4, 1997 with an effective date of January 31, 1997 thereby becoming a State of Delaware company as at January 31, 1997. This was accomplished pursuant to Section 37 of the British Columbia Company Act which provides in part: 37(2)
A company shall cease to be a company within the meaning of this Act on and after the date on which it is continued under the laws of the other jurisdiction and the company shall promptly file with the registrar a copy of the instrument of continuation certified by the proper officer of the other jurisdiction.
8. A resolution of the shareholders of Orion apparently passed on February 21, 1997 was in evidence. That resolution states that Orion will soon be merging with Technologies and that the amalgamated company will be known as Orion Technologies, Inc. Pursuant to a notice filed in Nevada, it appears that Technologies will issue 6,664,040 common shares in its treasury to the shareholders of Orion in order that the Orion shareholders will then have a 66.64% interest in the merged entity.
9. There appears also to be a Letter of Intent signed by a company called Geoasia Enterprises Ltd. ("Geoasia") to acquire all of the shares of Orion Technologies, Inc. Although it is not clear whether it is the shares of the merged company or the shares of Technologies which will be acquired by Geoasia, it is clear that the entity formerly known as Orion will no longer exist after the contemplated merger.
RULE 46(1) AND THE INHERENT JURISDICTION OF THE COURT
10. Rule 46(1) provides:
The court may make an order for the detention, custody or preservation of any property that is the subject matter of a proceeding or as to which a question may arise and, for the purpose of enabling an order under this rule to be carried out, the court may authorize a person to enter upon any land or building.
In order to come within the provisions of this Rule, it will be necessary for the plaintiffs to show that any right they have to require Orion, Technologies, or the merged entity to issue shares to them is "property" within the meaning of the Rule. While it is clear that issued shares in a company are "property", no case authority was provided by the plaintiffs for the proposition that the right to have shares issued (assuming that there were sufficient unissued shares of the authorized capital of the company to allow an issuance of the shares requested) is, for the purposes of this Rule, "property" for which an order for the detention, custody or preservation can be made. It is not surprising that counsel for the plaintiffs could not find support for the proposition they advanced. It is clear that authorized but unissued shares cannot be "property". For instance, Welling in Corporate Law in Canada (2nd edition) 1991 says:
A share, like any other form of property, must have been created; shares are created by being issued by a corporation. (at p. 607)
There is no evidence before the court that the shares contemplated by the Escrow Agreement of June 1996 were ever created in order to become "property". The court cannot be called upon to preserve "property" which does not exist. Accordingly, that part of the application of the plaintiff which is pursuant to Rule 46(1) is dismissed. Similarly, the inherent jurisdiction of the court cannot be called upon to detain, take custody of or preserve property which does not exist.
RULE 45 AND THE INHERENT JURISDICTION OF THE COURT
11. Rule 45(1) provides:
An application for an interlocutory injunction may be made by a party whether or not a claim for an injunction was included in the relief claimed. The application shall be made upon notice to all other parties.
Although it was not specifically pleaded, I will assume that this application is also pursuant to Section 36 of the Law and Equity Act which provides in part:
A mandamus or injunction may be granted . . . by an interlocutory order of the court in all cases in which in appears to the court to be just or convenient that the order should be made, and the order may be made either unconditionally or on terms and conditions the court thinks just. If an injunction is asked either before, or after the hearing of any cause or matter, to prevent any threatened or apprehended waste or trespass, the injunction may be granted if the court thinks fit, whether the person against whom the injunction is sought is or is not in possession under any claim of title or otherwise or, if out of possession, does or does not claim a right to the act sought to be restrained under any colour of right, and whether the estates claimed by both or either of the parties are legal or equitable.
The proposition advanced by the plaintiffs is that the court is in a position to make an order that the defendants, "their authorized principals, agents, employees and servants and anyone having notice of this order be restrained and enjoined from selling, transferring, removing, disposing of or otherwise dealing with the Property [7,992,072 common shares of the capital stock of the defendant, Orion], in any way pending the final disposition of this action . . .". This relief is sought even though Orion is no longer a British Columbia company, Orion and Technologies have or will shortly merge so that Orion and Technologies will cease to exist as separate entities, Orion is a Delaware company, Technologies is a Nevada corporation, and there was evidence before the court that all of the shares of the merged entity will shortly be acquired by Geoasia. Based on the ruling noted above, I am not prepared to make an order restraining and enjoining the defendants from "selling, transferring, removing, disposing of or otherwise dealing with" the 7,992,072 shares of the capital stock of the defendant, Orion. However, although the motion of the plaintiffs did not specifically set out such a request, much of the argument before the court revolved around the question of whether an order could be made which would require Orion to issue 7,992,072 of its common shares, place those shares in accordance with the Escrow Agreement and/or restrain and enjoin the defendants from dealing with 7,992,072 of its common shares otherwise in accordance with the agreement which the plaintiffs say is in place with the defendant, Orion, including the Escrow Agreement. After a review of the materials before me and the law dealing with the granting of injunctions in British Columbia, including Mareva injunctions, I am satisfied that this relief should not be available to the plaintiffs.
INTERIM INJUNCTIONS IN BRITISH COLUMBIA
12. It is clear that the long standing test for the granting of an interim injunction in British Columbia is a "two-pronged" test: the applicant must satisfy the court that there is a fair question to be tried as to the existence of the right which he alleges and a breach thereof (actual or reasonably apprehended) and, second, the applicant must establish that the balance of convenience favours the granting of an injunction: see the judgment of Madam Justice McLachlin (as she then was) in British Columbia (Attorney General) v. Wale (1986), 9 B.C.L.R. (2d) 333.
13. In this case, it is clear that the plaintiffs have met the first prong of the test. In considering the "balance of convenience", a number of factors must be considered. Mr. Justice Lambert, speaking on behalf of the court, in Canadian Broadcasting Corp. v. CKPG Television Ltd. [1992] 3 W.W.R. 279 adopted and followed the approach of Madam Justice McLachlin in determining the second prong of the test:
. . . I would summarize that approach in this way: in assessing the balance of convenience, a judge should consider these points: the adequacy of damages as a remedy for the applicant if the injunction is not granted, and for the respondent if an injunction is granted; the likelihood that if damages are finally awarded they will be paid; the preservation of contested property; other factors affecting whether harm from the granting or refusal of the injunction would be irreparable; which of the parties has acted to alter the balance of their relationship and so affect the status quo; the strength of the applicant's case; any factors affecting the public interest; and any other factors affecting the balance of justice and convenience.
It should be noted that the strength of the applicant's case is a separate factor, which should be considered under the second prong of the test, quite apart from the question under the first prong of the test of whether the applicant has established a fair question to be tried. But the assessment of the relative strength of the parties' cases must recognize the degree to which those cases have not yet been revealed because of the nature of the evidence and the way it has been presented on the injunction application, which may be markedly different from the way it would be presented at trial. (at pp. 285-6)
In considering the balance of convenience, I am satisfied that I should also take into account the laches of the plaintiffs. The act complained of is that share certificates were not delivered to the Escrow Agent in June 1996. In an action commenced almost eight months later and in a motion filed almost nine months later, the plaintiffs say that the shares should be delivered up and that the plans of the defendants and of Geoasia should be changed in order to now see the 7,992,072 common shares of Orion issued and delivered or detained. It is clear from the Escrow Agreement that it was always contemplated by the defendants that there would be a reverse takeover. It appears that it was not until November 14, 1996 that the plaintiffs requested the delivery of any shares pursuant to the Escrow Agreement. Even though there may have been a falling out as between the plaintiffs and the defendants during the fall of 1996 so that communication was decreased, it is clear that one Thomas Kennedy had been appointed to the Board of Directors of Orion as a nominee of the plaintiffs so that he was in a position to keep the plaintiffs apprised as to what progress was being made by Orion to arrange a reverse takeover. In fact, Mr. Kennedy chaired the meeting on November 13, 1996 wherein it was unanimously agreed by the Board that the plaintiffs' relationship with Orion would be terminated. It also is clear that one of the steps for the "reverse takeover" took place to the knowledge of the plaintiffs when Technologies was incorporated as a Nevada company on June 5, 1996. In his March 17, 1997 affidavit, Edgar Quinto says in part:
In December of 1996, due primarily to the failure of the Plaintiffs to raise the money which they had promised to do for Orion 2000 Technologies Ltd., Orion 2000 Technologies Ltd. found itself in desperate financial circumstances and was forced to borrow money from a company called First Capital Investment Corp., which is a company not related to any of the parties to this action.
In order for First Capital Investment Corp. to advance $500,000.00 in U.S. funds, which is the most that they were prepared to advance at the time, I personally and members of my family, had to provide a guarantee for repayment of the monies in the event that the proposed public offering does not complete.
If any Order is made forcing Orion 2000 Technologies Ltd. to issue Shares to the Plaintiffs, the public offering will not be able to go ahead and I, and my family stand to lose our net worth.
If any form of injunctive relief is granted at this time to the Plaintiffs, I stand the possibility of not only losing my own personal net worth, but also that of members of my family.
It is only at the point in time that Orion is finally in a position to complete the contemplated reverse takeover that the plaintiffs commenced their action and filed this motion.
14. In dealing with the strength of the case of the plaintiffs and always having in mind that the evidence at a particular point of time may well be not as strong as the evidence which would be available to the plaintiffs after full discovery, it appears that the plaintiffs are not in a position to say that they have a strong case. Firstly, it is clear that they took late objection to the failure of the defendants to deliver shares to the Escrow Agent in June 1996. This failure to complain may represent either laches on their part or a modification of the earlier agreement to deliver shares to the Escrow Agent. Secondly, there was no evidence that the funds contemplated as required by Orion were arranged by or on behalf of the plaintiffs for the benefit of Orion. Thirdly, there was no evidence presented which would allow the court to conclude that the plaintiffs had not assigned their rights to shares to other parties who, in turn, then produced some or all of the funds required by Orion so that the share entitlement of the plaintiffs would be substantially less than 7,992,072 shares now claimed. It is clear that the relief sought by the plaintiffs relates to 7,992,072 common shares of Orion even though there is overwhelming evidence before the court that it was always contemplated by the plaintiffs that they would assign their rights and obligations to other parties so as to significantly reduce their ultimate share in Orion. The March 17, 1997, affidavit of Mr. Quinto says that the plaintiffs advised him at one point that they would end up with only three per cent of the shares of Orion as the rest of the shares would be used by them for the purposes of providing interim financing and also to promote the deal.
15. In dealing with the question of whether damages would be an adequate remedy available to the plaintiffs if the injunction is not granted, it is clear that the onus is on the defendants to show that damages would be an adequate remedy: Dobell v. Cowichan Copper Co. Ltd. (N.P.L.) et al (1967), 65 D.L.R. (2d) 440, B.C.S.C.). While it is clear that the onus is on the defendant, it should be noted that the Dobell decision is based on the following facts unique to that decision: the shares sought to be issued would allow the plaintiffs to obtain control of the company, they had already paid for the 450,000 shares which were the subject matter of the specific performance action, the 450,000 shares were the last unissued shares of the company, and that there was no ready market for the shares so that the plaintiff there was not in a position to go to the market to purchase the shares in order to mitigate damages and/or establish damages. Here, it is clear that the goal all along was to produce a NASDAQ listing for the company that is created as a result of the reverse takeover. If the plaintiffs are ultimately entitled to judgment so that their entitlement to shares is established, it will be an easy exercise for damages to be established as the number of their shares in Orion will be established, and the existing entitlement of shareholders in Orion to the shares in either the amalgamated entity, Orion Technologies, Inc., or in Geoasia will be known. Additionally, the trading value of shares on NASDAQ will be known. The financial position of Orion and/or Technologies is pertinent if it appears that they will not have the financial ability to pay damages if such an award is made against or both of them. There was no evidence before me that the laws of Delaware and Nevada are different from what is present in British Columbia. Accordingly, even though Orion and Technologies will be amalgamated, there is nothing to suggest that the indebtedness of Orion or Technologies (by way of their contingent liability to the plaintiffs) will not remain as a debt of the amalgamated company. In any event, Orion and Technologies are both parties to this action and, accordingly, it would be within the ability of this court to order that the amalgamated entity deliver up sufficient of its shares in order to allow the remedy of specific performance sought by the plaintiffs or to order ABE to deliver up a portion of its shares. If I am wrong and it is not within the ability of the court to make such an order after trial, then it is difficult to see how such an order could be made at this point in the proceedings.
16. In dealing with the question of irreparable harm, I must balance the harm alleged by the plaintiffs against the harm alleged by the defendants. The plaintiffs say that the proposed amalgamation and the reverse takeover will potentially eliminate any ability the plaintiffs may have to recover the shares contemplated by the Escrow Agreement of June 1996 and that the issuance of shares by Orion other than in a manner contemplated by the Escrow Agreement will water down those shares to the extent that they will not be as valuable. On the other hand, the defendants say that, if they are not allowed to proceed with the amalgamation and the reverse takeover, the reverse takeover always contemplated by the parties including the plaintiffs will fail and the funds advanced will be lost and Mr. Quinto's guarantee of the repayment of some of the funds will be called. In the absence of evidence as to the actual number of shares claimed by the plaintiffs rather than the 7,992,072 common shares set out in their statement of claim and in this motion and in the absence of convincing evidence as to how much money was actually raised by the plaintiffs for the benefit of Orion, it appears that the defendants will suffer more irreparable harm if the injunction was granted than the plaintiffs would suffer if it was not.
17. Regarding the question of which of the parties have acted to alter the status quo, it appears that it was the defendants who took the first step in November. However, they took this step only after (they allege) the plaintiffs failed to produce the money contemplated by the earlier agreements. Accordingly, it may well be that the plaintiffs first breached the agreement when they failed to produce the promised funds and that the defendants were only accepting that fundamental breach when they brought the contract to an end in November 1996. As a result of the agreement reached between the plaintiffs and ABE, it was clear that the plaintiffs may well have relinquished forty per cent of the total of fifty-seven per cent of the shares to which they claim. Accordingly, the "status quo" as at November 1996 may well have been an entitlement to seventeen per cent of the shares of Orion (2,383,600 shares) whereas the claim of November 14, 1996 was for 3,996,036 shares of Orion and the claim is now for 7,992,072 shares of Orion
.18. The fundamental question in each case is whether the granting of an injunction is just and equitable in all the circumstances of the case: McLachlin, J.A. (as she then was) in British Columbia (Attorney General) v. Wale (1986), 9 B.C.L.R. (2d) 333 at p. 346. Taking into account all of the circumstances, I am not satisfied that an injunction should be granted.
MAREVA INJUNCTION
19. Many of the authorities provided by counsel for the plaintiffs relate to decisions of Canadian courts dealing with Mareva injunctions and whether this particular type of injunction should be granted where assets are located outside of the jurisdiction of this court. So called "worldwide" Mareva injunctions have now been granted by our courts: see for instance Mooney v. Orr (1994), 98 B.C.L.R. (2d) 318 (S.C.) being a decision of Newbury, J. (as she then was), Mooney v. Orr (1994), 100 B.C.L.R. (2d) 335 (S.C.) being a decision of Huddart, J. (as she then was), Cussons v. Slobbe, [1996] B.C.J. No. 3028, October 9, 1996, B.C.S.C. Action No. SO 34520, New Westminster Registry), being a decision of Mr. Justice de Weerdt, and Reynolds v. Harmanis, [1995] B.C.J. No. 1129 (May 16, 1995, B.C.S.C. Action No. C951514, Vancouver Registry), being a judgment of Esson, C.J.S.C. (as he then was). While a "worldwide" Mareva injunction is available and while I will assume that the application of the plaintiff requests such an order, the basic requirements before a court will grant a Mareva injunction are not present in this case. In 1985, the Supreme Court of Canada dealt with a Mareva injunction in its decision in Aetna Financial Services Ltd. v. Feigelman et al., [1985] 1 S.C.R. 2. The unanimous decision of the court was delivered by Mr. Justice Estey. Mr. Justice Estey said that there was an "abhorrence" which the common law has always felt towards allowing execution before judgment but that there were at least four exceptions to that "abhorrence":
1. The preservation of assets which are the very subject matter of the dispute (such as the application pursuant to Rule 46(1) which I have dismissed.)
2. "Where generally the processes of the court must be protected even by initiatives taken by the court itself." (at p. 13 of the judgment.)
3. To prevent fraud both on the court and on one of the parties for instance where there has already been a fraudulent disposal made of the defendant's property.
4. Quia temet injunctions which Mr. Justice Estey says were ". . . generally permitted under extreme circumstances which included a real or impending threat to remove contested assets from the jurisdiction". (at p. 14 of the judgment.)
At p. 24 of the judgment, Mr. Justice Estey sets out the following criteria which must be present for Mareva injunctions which he said come under the fourth exception noted above:
There must be assets of the defendant within the jurisdiction susceptible to execution. The defendant need not be outside the jurisdiction. There must be a real risk that the remaining significant assets of the defendant within the jurisdiction are about to be removed or so disposed of by the defendant as to render nugatory any judgment to be obtained after trial. Mareva injunctions are therefore available not just to prevent the removal of assets from the jurisdiction, but also disposal within the jurisdiction.
. . .
The general rule requiring that the balance of convenience must favour the issuance of the order still exists. The overriding consideration qualifying the plaintiff to receive such an order as an exception to the Lister rule is that the defendant threatens to so arrange his assets as to defeat his adversary, should that adversary ultimately prevail and obtain judgment, in any attempt to recover from the defendant on that judgment. Short of that, the plaintiff cannot treat the defendant as a judgment debtor, . . . Additionally, subsequent cases dealing with the Aetna decision have come to the conclusion that the plaintiff must put forward a "strong prima facie case" (see for instance Mooney v. Orr (1994) 98 B.C.L.R. (2d) 318 (S.C.), Mooney v. Orr (1994) 100 B.C.L.R. (2d) 335 (S.C.) and R.V. Consolidated Fast Freight Transport Inc. (1995) 125 D.L.R. (4th) 1 (Ontario C.A.).
20. In the case at bar, all of the assets of Orion have been removed from the jurisdiction as has the defendant itself. Although the defendant has attorned to the jurisdiction of the court in this action, it is clear that it is no longer a B.C. company and that it no longer has assets within the jurisdiction. Similarly, the defendant, Technologies, is a Nevada corporation and there is no indication that it ever had or presently has assets within the jurisdiction. No case was cited to me which would support the proposition that a British Columbia court can make a "worldwide" order where there are no assets of the defendant within the jurisdiction on the basis that a "foreign" company has attorned to the jurisdiction of this court. While the plaintiffs may be in a position to require the defendants to post security and while a number of Mareva injunction cases have suggested that this is one of the reasons why such orders should be made, there is no authority for the proposition that such a "worldwide" order can be made for the purposes of forcing security from the defendants in circumstances such as are before the court in this case. Also, no case was cited to me which would support the proposition that a British Columbia court can make a "worldwide" order restraining the defendants from such actions such as the "removal, disposal, sale or transfer of assets" in other jurisdictions so that any judgment which might be obtained in British Columbia in due course is not rendered "nugatory". While I am not prepared to say that the court doesn't have jurisdiction to grant such a "worldwide" Mareva injunction where there are no British Columbia assets and where the relief sought is to force the party to an action to, firstly, create an asset and, secondly, not then to remove that asset from another jurisdiction, I am satisfied that such an order is not appropriate in this case.
21. Accordingly, the applications of the plaintiffs are dismissed with costs to the defendants and each of them on a Party and Party (Scale 3) basis.
BURNYEAT J.
QL Update: 970410
cp/d/mrz/mjb/DRS/DRS