QUEEN’S BENCH FOR SASKATCHEWAN Citation: 2017 SKQB 205 Date: 2017 07 07 Docket: QBG 2314 of 2013 Judicial Centre: Regina BETWEEN: ṢEKERBANK T.A.S. and HṺSEYIN ARSLAN and MURAD AL-KATIB Counsel: Peter T. Bergbusch for the plaintiff Keven C. Mellor for the defendant, Hṻseyin Arslan Deron A. Kuski, Q.C. and K. James Rose for the defendant, Murad Al-Katib JUDGMENT BARRINGTON-FOOTE J. JULY 7, 2017 I. INTRODUCTION [1] On January 9, 2014, a preservation order was granted in this action [Order], pursuant to s. 5 of The Enforcement of Money Judgments Act, SS 2010, c E-9.22 [EMJA]. The Order prohibited any dealings with 850,000 shares of Alliance Green Traders Inc. [AGT], pending a final decision on the merits of the plaintiff’s claims against the defendant Hṻseyin Arslan in Turkey, and the conclusion of this action. The following applications are now before me: 1. On January 20, 2016, the defendants applied pursuant tos. 8 of the EMJA to terminate the Order. In the alternative, they seek an order reducing the number of shares subject to the Order, and requiring the plaintiff to post $3,081,463.14 as security pursuant to ss. 5(7) of the EMJA, and $40,000 security for costs. 2. On March 8, 2016, the plaintiff Ṣekerbank T.A.S. [Ṣekerbank] and Alternatifbank A.S. [ABank], a second Turkish bank which asserts a debt claim against Mr. Arslan, applied pursuant to Rules 3-72 and 3-84 of The Queen’s Bench Rules for an order that ABank be added as a plaintiff, and to amend the Statement of Claim. [2] The defendants’ application to terminate the Order is based on the allegation that the plaintiff has failed to prosecute this action without delay. For the reasons that follow, that application is denied. The defendants’ application to amend the Order is granted in part. The application to add ABank as a plaintiff, and to amend the draft Amended Statement of Claim which has been filed, is granted. II. THE ENFORCEMENT OF MONEY JUDGMENTS ACT This is fraudulent preference and fraudulent conveyance action. As such, the Order was authorized pursuant to ss. 5(1)(a)(ii) of the EMJA. The relevant provisions of s. of the EMJA are as follows: 5(1) In this Part: (a) "action" means legal action that would, if successful, result in: ... (ii) an order declaring gift, conveyance, assignment, transfer, delivery over or payment of property by the defendant void as fraudulent conveyance or fraudulent preference; (b) "transferee" means person who has received an interest in property from the defendant pursuant to transaction mentioned in subclause (a)(ii). (2) An application for preservation order may be made to the court by any of the following persons: (a) plaintiff in an action commenced in Saskatchewan; (5) The court may grant preservation order if the court is satisfied that: (a) the action would, if successful, result in: ... (ii) an order described in subclause (1)(a)(ii); (b) if the preservation order is not granted, the enforcement of judgment or order against the defendant or transferee is likely to be partially or totally ineffective as result of the disposition of, damage to, dissipation of, destruction of, concealment of or any dealing with property...; and (c) the action will be prosecuted without delay, other than delay caused by the defendant or transferee. (6) preservation order may do one or more of the following: (a) prohibit the disposition of property other than for purpose mentioned in subclause (5)(b)(i), (ii) or (iii); (b) prohibit the damage to, dissipation of, destruction of or concealment of property; (7) preservation order shall require the plaintiff to provide security in an amount that, in the opinion of the court, is sufficient to compensate the defendant or other person affected by the preservation order for pecuniary loss that may be caused as result of the preservation order unless, in the court’s opinion, requiring the plaintiff to provide security would cause undue hardship to the plaintiff. (9) The court may grant preservation order against any of the following persons: (a) the defendant, with respect to property of the defendant and property acquired by the defendant after the date of the preservation order; (b) transferee, with respect to property received from the defendant; [3] The defendants’ application to terminate or modify the Order is authorized by s. of the EMJA, which is as follows: 8(1) plaintiff, judgment creditor, defendant, judgment debtor or any other person affected by preservation order may apply to the court to have the preservation order extended, renewed, modified or terminated. (2) Section applies, with any necessary modification, to an application made pursuant to this section. (3) In an application to extend, renew, modify or terminate preservation order, the onus is on the applicant to establish that the preservation order should be extended, renewed, modified or terminated. (4) On application made pursuant to this section, the court may make any order that the court considers appropriate in the circumstances, including: (a) an order doing one or more of the things mentioned in subsection 5(6); and (b) an order extending, renewing, modifying or terminating preservation order. [4] The Order initially provided as follows: THIS COURT ORDERS THAT: 1. Pursuant to section 5 of The Enforcement of Money Judgments Act, the respondents Hṻseyin Arslan and Murad Al-Katib, as trustee of The Carme Trust, or prohibited from disposing of, transferring or undertaking any transaction with respect to 850,000 shares (the “Shares”) of Alliance Grain Traders Inc. transferred by Hṻseyin Arslan to Murad Al-Katib, as trustee of The Carme Trust, on about June 3, 2013. 3. Pursuant to section 7(1)(c) and section 7(2) of The Enforcement of Money Judgments Act, this preservation order shall remain in effect until the Turkish Court has rendered final decision on the merits of the Applicant’s claim against Hṻseyin Arslan and until such time as the within action is concluded, or until further court order. [5] The Order was amended by consent on October 30, 2014, to provide that Mr. Al-Katib would hold the 850,000 shares pursuant to an escrow agreement. The October 30 order also provided as follows: 3. Pursuant to section of The Enforcement of Money Judgments Act and pursuant to the terms of the escrow agreement referred to above, the Respondent Murad Al-Katib, as escrow agent, is prohibited from disposing of the Shares or undertaking any action which is contrary to the escrow agreement with respect to the Shares for the duration of this preservation order. 5. Pursuant to section 7(1)(c) and section 7(2) of The Enforcement of Money Judgments Act, the escrow agreement and this preservation order shall remain in effect until further court order of Saskatchewan court. [6] This is not the first application to terminate the Order. The defendants first applied to terminate on May 6, 2014 four months after the Order was granted alleging that the proceedings taken by the plaintiff in Turkey to prove and enforce guarantees executed by Mr. Arslan [Turkish Proceedings] had failed, and that the plaintiff had failed to prosecute those proceedings without delay. That application would finally take 32 months to wend its way through the courts. It was initially dismissed by this Court July 14, 2014: see Ṣekerbank T.A.S. Arslan, 2014 SKQB 215 (CanLII), 450 Sask 76 [Ṣekerbank #1]. The defendants’ appeal of that decision was dismissed by the Court of Appeal on June 20, 2016: see Arslan Ṣekerbank T.A.S., 2016 SKCA 77 (CanLII), 480 Sask 235 [Ṣekerbank CA]. On September 16, 2016, the defendants applied to the Supreme Court of Canada for leave to appeal Ṣekerbank CA. Leave was refused February 9, 2017 at [2016] SCCA No 384 (QL). [7] In Ṣekerbank #1, the matters at issue in the Turkish Proceedings and in this action are summarized as follows: The plaintiff alleges that the defendant Hüseyin Arslan has defaulted on his obligation to pay the plaintiff $13,813,544.88 pursuant to certain guarantees. Mr. Arslan denies that the guarantees are binding or enforceable. The plaintiff has pursued various legal actions in Turkey in an attempt to prove and enforce those guarantees. This action results from the plaintiff's concern that it will be unable to realize on any judgment which it may obtain in Turkey. The plaintiff wishes to ensure that it will be able to enforce that judgment against certain shares that Mr. Arslan transferred to Murad Al-Katib in trust. It accordingly commenced this action, which attacks this transfer as fraudulent preference or fraudulent conveyance, and, as interim relief, seeks preservation order pursuant to s. of The Enforcement of Money Judgments Act, S.S. 2010, c. E-9.22 ("EMJA"). [8] This description but for the fact that the Order is now in place remained accurate when the defendants made this application. The plaintiff continues to pursue final judgment against Mr. Arslan in two actions in Turkey. One of those actions is an enforcement proceeding. The other an action in the Turkish Commercial Court to prove that Mr. Arslan is liable pursuant to the guarantees. [9] Ṣekerbank #1 dealt with and describes the progress of the Turkish Proceedings prior to June 2014. The March 11, 2016 affidavit of Dr. Oztunc filed in response to the defendants’ application to terminate or modify the Order outlines the progress of the Turkish Proceedings from June 2014 to March 2016. Dr. Oztunc deposed that Mr. Arslan applied to have the judge in both Turkish actions recused. That application was dismissed. Mr. Arslan also objected to final ancillary attachment decisions granted in the enforcement proceedings on various grounds. Those objections were finally dismissed on May 12, 2015, resulting in final ancillary attachment decisions in favour of the plaintiff. [10] The action in the Commercial Court has also moved forward. Dr. Oztunc deposed that senior official of the debtor companies acknowledged the debts on behalf of both the companies and the guarantors in March 2015, and “accepted” the debts at court hearing on April 20, 2015. That hearing was adjourned to October 2015. [11] There is, however, third action which has further delayed the final resolution of the Turkish Proceedings. On July 13, 2015, the debtor companies were found to be insolvent in Turkish bankruptcy proceeding. On October 1, 2015, the court ordered stay of the plaintiff’s enforcement proceedings. The plaintiff objected to the stay in October 2015 and in February 2016. Those objections resulted in further process which, according to Dr. Oztunc, could result in final decision against Mr. Arslan and other objecting guarantors at hearing scheduled for June 30, 2016. If that occurred, Mr. Arslan could appeal, and further delay enforcement proceedings pending disposition of the appeal. [12] The defendants filed two affidavits in support of their application. The December 9, 2015 affidavit of Akin Arikan describes the status of the Turkish Proceedings, and the bankruptcy proceedings. His description was consistent with that of Dr. Oztunc. However, Mr. Arikan did not agree that the Turkish Proceedings might be concluded by June 2016. He deposed that they would take three more years. [13] The defendants also filed January 19, 2016 affidavit sworn by Murad Al-Katib. Mr. Al-Katib deposed that the plaintiff has done nothing to prosecute this fraudulent preference action since filing the Statement of Claim. The plaintiff does not deny that allegation. [14] The Al-Katib affidavit also contains evidence in support of the alternative application to modify the security. It appends an opinion from Jeremy Herbert, lawyer at Felesky Flynn LLP [Herbert opinion], that “it is reasonable to expect” the Carme Trust [Trust] and its beneficiaries would have reduced their Canadian tax liability by $2,004,321 in 2014 and 2015 if it had been possible for the Trust to cease being Canadian resident “on or about January 9, 2014”. The Herbert opinion states that the migration of the Trust was delayed “largely as result of the Preservation Order”. It does not identify the other factors that may have contributed to that delay. There is no evidence as to the training or experience that may have qualified Mr. Herbert to provide the opinion. Some, but not all, of the assumptions underlying the opinion are disclosed. [15] Mr. Al-Katib also deposed that the price of AGT shares increased from $16.80 on January 9, 2014, to $36.19 on January 15, 2016, and that the Canadian dollar had appreciated against the Turkish lira by 4.282%. In the result, he deposed that the value of the 850,000 AGT shares subject to the Order was $30,761,500 as of January 15, 2016, or $18,435,647.45 more than the plaintiff’s claim. V. THE APPLICATION TO ADD ALTERNATIFBANK A.S. [16] shall deal first with the application by Ṣekerbank and ABank to add ABank as party, and to amend the Statement of Claim [ABank application]. Ṣekerbank claims that Mr. Arslan has failed to pay 27.872.906,68 Turkish Lira owing to Ṣekerbank pursuant to certain guarantees. It says it has been denied the opportunity to enforce that payment obligation as result of the wrongful transfer of shares by Mr. Arslan to Mr. Al-Katib as the trustee of the Trust. It seeks various forms of relief pursuant to The Fraudulent Preferences Act, RSS 1978, F-21 and the Fraudulent Conveyance Act, RSO 1990, F.29. [17] ABank wishes to pursue the same relief. It seeks amendments to the Statement of Claim that would allege that Mr. Arslan has failed to pay 21.114.869,82 Turkish Lira owing to ABank, and that it is entitled to the same relief as Ṣekerbank, as result of the same fraudulent transfer by Mr. Arslan. The source of the alleged debt owing by Mr. Arslan to ABank is different than the alleged debt owing to Ṣekerbank. [18] The ABank application refers to Rules 3-72 and 3-84 of The Queen’s Bench Rules, which provide as follows: 3-72(1) party may amend the party’s pleading, including an amendment to add, remove, substitute or correct the name of party, as follows: (c) after statement of defence is filed: (i) by agreement of the parties filed with the Court; or (ii) with the Court’s prior permission, in any manner and on any terms that the Court considers just. 3-84(1) At any stage of the action, the Court may order that any person be added as party if: (a) that person ought to have been joined as party; or (b) the person’s presence as party is necessary to enable the Court to adjudicate effectively and completely on the issues in the action. (2) At any stage of the action, the Court may grant leave to add, delete or substitute party, or to correct the name of party, and that leave shall be given, on any terms that the Court considers just, unless prejudice will result that cannot be compensated for by costs or an adjournment. [19] In its brief, the defendants also responded to this application on the basis that it engaged s. 20 of The Limitations Act, SS 2004, L-16.1. They were correct to do so. The defendants’ claim that the limitation period that applies to ABank’s claim has expired, and that the application should be denied for that reason. Section 20 relates to the addition of parties and claims after the expiration of limitation period. It provides as follows: 20 Notwithstanding the expiry of limitation period after the commencement of proceeding, judge may allow an amendment to the pleadings that asserts new claim or adds or substitutes parties if: (a) the claim asserted by the amendment, or by or against the new party, arises out of the same transaction or occurrence as the original claim; and (b) the judge is satisfied that no party will suffer actual prejudice as result of the amendment. [20] In my view, this application should be disposed of pursuant to s. 20. As Richards J.A. (as he then was) said in Cameco Corp. Insurance Co. of State of Pennsylvania, 2008 SKCA 54 (CanLII), 310 Sask 89 [Cameco]: 105 As this Court has said on four separate occasions, s. 20 confers an unfettered discretion to be exercised judicially limited by the requirements listed in s. 20(a) and (b) and no others. The legislature could not have made its intent more clear. Section 20 is not addressed solely to adding party, but substituting party and adding claim. [21] The question, accordingly, is whether the two conditions specified in ss. 20(a) and (b) are met. First, did ABank’s claim arise out of the same transaction or occurrence as Ṣekerbank’s claim? In Stomp Pork Farm Ltd. Lombard General Insurance Co. of Canada, 2008 SKQB 405 (CanLII), 316 Sask 262 [Stomp Pork], Ottenbreit J. (as he then was) summarized the meaning of “same transaction or occurrence”, as follows: 61 …The section does not refer to the same "claim" or the same "injury, loss or damage" or the same "act or omission". In my view the terms "same transaction or occurrence" are broad terms in the sense of precipitating event which allows the court to step back and take view of what is reasonable in the circumstances. It allows for situations where an event happens which results in varying injury, loss or damage as result of varying acts or omissions, resulting in varying claims which may or should nevertheless be tried together. 62 This meaning of "transaction or occurrence" is alluded to by Richards J.A. in Cameco at para. 31 when he refers to the case of Dusterbeck v. Beitel 1988 CanLII 5386 (SK CA), [1988] W.W.R. 669 (Sask. C.A.) and at para. 32 to the words of Sherstobitoff J.A. who at p. 671 of the case said: ... While the judge was correct in describing Dusterbeck's claim as new cause of action, it was one which was permitted by the section because: (a)it arose out of the same occurrence (the accident) as the original action; ... 63 In Duke v. Vervaeck, [2000] S.J. No. 591, 2000 SKQB 414 (CanLII), Mr. Justice Klebuc (as he then was) authored comprehensive analysis of what constitutes claim arising out of the same transaction or occurrence as the original claim. After reviewing number of authorities he opted for broad interpretation and stated at para. [21] ... there need only be some temporal and factual relationship between the occurrences on which the original claim is based and those on which proposed counterclaim or similar claim is based. [22] In 1348623 Alberta Ltd. Choubal, 2013 SKQB 439 (CanLII), at paras 29-37, 435 Sask 70 [Choubal], Ryan-Froslie J.A. (ex officio) cited Stomp Pork with approval, and adopted (at para. 32) “the definition of “transaction or occurrence” as being, in broad terms, precipitating event”. Kovach J. reviewed the case law in Pollock Saskech Inspection Ltd., 2013 SKQB 409 (CanLII), at paras 26-37, 432 Sask 227 [Pollock], adopting the test proposed in Duke Vervaeck, 2000 SKQB 414 (CanLII), 197 Sask 253. That is: is there sufficient temporal and factual relationship between the original and amended claims? See also, to the same effect, Klaptchuk Tiefenbach, 2012 SKQB 195 (CanLII), 398 Sask 100 [Klaptchuk]. In Cameco (at para 29), Richards J.A. provided guidance as to limits of the court’s discretion, commenting that “the notion of an "amendment" necessarily carries with it the idea that the proposed changes to the original pleadings must not be so dramatic as to effectively create wholly new proceeding”. [23] There is, in my respectful opinion, sufficient temporal and factual relationship between the Ṣekerbank and ABank claims that they arise out of the same transaction or occurrence. That is so despite the fact that their rights to seek the relief sought in this action are based on different debt claims against Mr. Arslan. The claims of both Ṣekerbank and ABank are based on the allegation that Mr. Arslan transferred AGT shares to the Trust on or before June 3, 2013, at time when he had ceased paying his debts or was unable to pay his debts in full. Both allege that they have, as result of that transfer, and Mr. Al-Katib’s agreement to assist Mr. Arslan by acting as the trustee, been denied the opportunity to collect on their debts. Both seek the same relief, including judgment against both defendants under The Fraudulent Preferences Act and The Fraudulent Conveyances Act. The addition of ABank as a plaintiff, and amending the Statement of Claim in the manner proposed, would not create a wholly new proceeding. [24] The second question, then, is this: am I, as required by ss. 20(b) of The Limitations Act, satisfied that neither of the defendants will suffer “actual prejudice” as result of the proposed amendments? In Stomp Pork (at para 67), Ottenbreit J. held citing 287993 B.C. Limited Nanaimo (Regional District), 2006 BCCA 507 (CanLII), that “actual prejudice” means “prejudice associated with the delay itself which affects the ability of the opposing party to respond to the amended claim”. The same test was adopted in Cameco, Choubal, Pollock and Klaptchuk. [25] The defendants submit that there is rebuttable presumption that defendants will be prejudiced by delay, and that the prejudice will increase with the passage of time. They cite Tanguay Brouse, 2010 ONCA 73 (CanLII) in support of that proposition. That case related to an application to dismiss for want of prosecution. In International Capital Corp. Schafer, 2010 SKCA 48 (CanLII), at para 45, 350 Sask 160 which also related to dismissal for want of prosecution Richards J.A. confirmed that “a court can infer that the passage of time will typically have at least some effect on the memories of witnesses”. [26] The defendants claim that there has been delay of as much as three years from the time ABank knew it had cause of action. am prepared to infer that memories may have faded to some extent. There is, however, no evidence that documents or witnesses are no longer available. Nor is there any evidence that fading memories would have particular impact on the ability of the defendants to respond to this new claim. The necessary prejudice has not been demonstrated. [27] In the result, the two conditions specified in ss. 20(a) and (b) exist. It is, in my view, appropriate that exercise my discretion to order that ABank be added as plaintiff, and that the Statement of Claim be amended in accordance with the draft Amended Statement of Claim filed with the application. [28] will deal next with the application to terminate or modify the Order. VI. THE APPLICATION TO TERMINATE OR AMEND THE ORDER 1. The Legal Test [29] The legal test that applies on an application to terminate preservation order pursuant to s. of the EMJA that has been granted by consent was settled in Ṣekerbank CA. Caldwell J.A. there adopted the following test from Ṣekerbank #1: 103 For these reasons, endorse the following approach set forth by the Chambers judge for addressing applications arising under s. of the EMJA to set aside preservation order obtained by consent: [55] In my view, this is the correct approach. It is open to the court to terminate preservation order granted by consent pursuant to s. of the EMJA if the applicant shows grounds that would vitiate contract. It is also open to the court to terminate consent preservation order if the facts or the law on which the consent order was based have changed to the extent that the plaintiff, as result of those changes, no longer meets the three conditions specified in s. of the EMJA. Failing that, the court should not terminate the order, or revisit the issues which the parties intended to resolve through that order. That is so regardless of whether the order is expressly made "until further order of the court", unless there is evidence that the parties intended that phrase to mean that the order was not intended to resolve the issues. [30] In this case, the issue is whether the facts on which the Order was based have changed to the extent that the plaintiff no longer meets the third of the three conditions specified in s. of the EMJA, which will repeat for ease of reference: (5) The court may grant preservation order if the court is satisfied that: (c) the action will be prosecuted without delay, other than delay caused by the defendant or transferee. [31] The defendants submit that the plaintiff no longer meets this condition. They do not allege that the plaintiff has failed to proceed expeditiously in the Turkish Proceedings. Rather, they note that the plaintiff has chosen to await the outcome of the Turkish Proceedings before taking any steps to advance this action. It is their position that this action is “totally independent” from the Turkish Proceedings, and that even if there is “some logic” in securing the Turkish judgment before dealing with enforcement, that approach became unacceptable once preservation order with the impact of the Order was in place. The defendants also note that in his affidavit filed in Ṣekerbank #1, Dr. Oztunc estimated that the Turkish Proceedings could be concluded in early 2015, which is now long past, and that the Turkish Proceedings may take years to complete. [32] In response, the plaintiff submits that the Turkish Proceedings and this action cannot be viewed in isolation. It notes that it must prove that Mr. Arslan is liable pursuant to the guarantees that is, it must succeed in the Turkish Proceedings in order to succeed in this action. Defendants’ counsel conceded that is so. The plaintiff argues that sequential approach awaiting the outcome in Turkey before pursuing this action is justified for that reason. [33] The failure to prosecute an action without delay could call for termination of preservation order. As noted in Ṣerkerbank #1: 69 There are certainly circumstances in which evidence of failure by plaintiff to prosecute its claim without delay could constitute sufficient change in the facts to justify the termination of preservation order. However, not every delay meets that mark. The court must consider the extent of and reasons for the delay, in the context of the proceedings as whole. If the defendants wish to rely on change in circumstances to justify termination, they have the onus to satisfy the court that the change is sufficient to justify that result. [34] However, do not read the requirement that the action “be prosecuted without delay, other than delay caused by the defendant or transferee” to mean that the plaintiff must litigate as if speed is the only consideration. Rather, the plaintiff must proceed expeditiously, in manner intended to conclude the action as soon as is reasonably possible. Further, while the plaintiff must be held to high standard, its actions should not be measured against standard of perfection, with the benefit of hindsight. [35] The question of whether the plaintiff has complied with this requirement turns on the facts. The relevant circumstances include the nature, extent and cause of the delay. Relevant evidence may include, among other things, the complexity of the action; whether tactical, procedural or other litigation decisions that caused the delay were comprehensible, or reasonable; and whether any part of the delay is attributable to, the defendants, third party, institutional delay or other events beyond the control of the plaintiff. [36] The defendants submit that should take the same approach in considering the failure to prosecute the action without delay as would if this preservation order was an interlocutory injunction. In my view, the case law relating to applications to terminate interlocutory injunctions as result of delay is of some assistance. However, it must be applied with care, given that very different test applies on an application for an interlocutory injunction. [37] An unreasonable delay in bringing matter to trial may result in an order to dissolve an interlocutory injunction: see, for example, Bauscher-Grant Farms Inc. Lake Diefenbaker Potato Corp. (1999) 1999 CanLII 12463 (SK QB), 178 Sask 119 (QB), at paras 19-30; Ciba-Geigy Ltd. Novopharm Ltd., 1997 CanLII 6388 (FC), [1998] FC 527, at paras 28-30; and Hutchens Scam.com, 2011 ONSC 56 (CanLII), at paras 170-174. Those cases reflect similar approach to that suggested above. That is, while past delay may be significant, it is not conclusive. The decision is contextual, and must take account of the test that applies to the grant of an interlocutory injunction. Here, it must take account of the test that applies to the grant of preservation order. [38] The defendants also submit that must terminate the Order if find that the plaintiff has failed to prosecute the action without delay. With respect, do not agree. Section 5(5)(c) is forward looking. It is open to me to continue or modify the Order, provided that am satisfied as stated in s. 5(5)(c) that the action will be prosecuted without delay. past failure to prosecute without delay is relevant, but not conclusive. [39] If the court concludes that the plaintiff has not prosecuted the action without delay, it is entitled to consider the appropriate remedy. In some cases, delay will call for immediate termination. In others, the court may decide it should do nothing, or modify the order. The facts relevant to that decision may include, for example, the risk of and the potential extent of the damage to the defendant if the order is continued, and to the plaintiff if the order is terminated; whether the existing or additional security posted by the plaintiff would adequately mitigate the potential impact on the defendant; the risk that the plaintiff will not proceed expeditiously in the future; and whether time limits or other terms could be imposed to ensure that it does. [40] Further, the court can modify preservation order even if it finds that the plaintiff has prosecuted the action without delay. It may, for example, decide it is appropriate to increase or decrease the amount of the security provided by the plaintiff, if there has been sufficient change in the facts or law that the assumptions that resulted in an order in that amount no longer hold true. Changed circumstances relevant to the amount of security could, as here, include evidence of changes in the value of the security, or of the likelihood or extent to which the plaintiff may be unable to enforce judgment as result of dealings with property. a. Has the plaintiff failed to prosecute the action without delay? [41] Ṣekerbank failed to take any steps from June 2014 to the date of the application, period of 20 months. The plaintiff has explained why it chose to proceed as it did. It chose to await the outcome of the Turkish Proceedings, knowing that it could not succeed in this action unless it succeeded in proving Mr. Arslan is indebted to and obliged to pay the plaintiff. [42] The plaintiff also noted that there appeared to be consensus among the parties that this action needed to await the result of the Turkish Proceedings. Even if, as counsel for the defendants submitted, there was no such consensus, it is entirely understandable why the plaintiff thought there was. In Ṣekerbank #1, the defendants alleged that the plaintiff had failed to proceed expeditiously in the Turkish Proceedings. They did not rely on the plaintiff’s failure to take steps in this action. Further, the defendants made the following statement in their memorandum of law in Ṣekerbank CA: 42. The answer to the question of whether the action has been prosecuted without delay has changed with effluxion of time and in itself justifies periodic review of such an order or application by party subject to an order. In this case the Respondents have self-evidently failed to meet by at least one year their prediction of when Turkish judgment ought to have been secured by exercising due diligence. 48. Following registration, Sekerbank will need to enforce its judgment. Enforcement, however, can only occur if Sekerbank is successful in the fraudulent preference action in Saskatchewan, which cannot start in earnest until the outcome of the Turkish proceedings is known. As this court knows, proving the fraudulence or bona fides of Mr. Arslan’s gift to the Trust could take well over year, assuming no appeals. (emphasis added) [43] As the plaintiff notes, this statement appears to contemplate exactly the sequential approach that has been taken by the plaintiff. The delay resulting from that approach weighed in favour of the defendants in Ṣekerbank CA. Not surprisingly, the sequential approach was not questioned at that stage, but used to buttress the argument that there would be excessive delay. It now cuts in the opposite direction. Not surprisingly, it has been characterized by the defendants as an inappropriate choice. [44] It must also be kept in mind that the delay in pursuing this action result from delays in the Turkish Proceedings. Accordingly, the cause of those delays is relevant. In Ṣekerbank #1, found that the plaintiff could not be faulted for the delays in those proceedings to June 2014. Similarly, the evidence on this application does not establish that the delay in completing the Turkish action is attributable to the plaintiff. Rather, it is the result of Mr. Arslan’s vigorous defence, and the bankruptcy proceedings. The plaintiff’s decision to await the outcome of the Turkish Proceedings must be assessed in light of the fact that those proceedings could have been far more advanced. The delay is, to this extent, attributable to Mr. Arslan and to third parties. [45] In these circumstances, it is my opinion that the plaintiff has not failed to prosecute the action without delay. Further, the evidence does not support the conclusion that either Ṣekerbank or ABank will fail to do so in the future. They state that they are now prepared to proceed with this action. Further, Ṣekerbank and ABank jointly applied in March 2016 for the appointment of case management judge, and have been appointed for that purpose. That appointment will enable the parties to seek directions to assist in the expeditious resolution of this action. [46] For these reasons, the application to terminate the Order is dismissed. b. Should the Order be modified to reduce the number of shares subject to the Order? [47] The defendants have applied in the alternative for an order that the Order be modified to reduce the number of shares from 850,000 to 100,000. This aspect of the application engaged the second of the three conditions specified in ss. 5(5) of the EMJA: that is, will the plaintiff’s ability to enforce judgment likely to be partially or totally ineffective as result of the disposition of, damage to, dissipation of, destruction of, concealment of or any dealing with property? will deal with this issue on the basis of the action as it was when the form of the security was agreed, being claim by Ṣekerbank for $13,813,544.88. will comment briefly below on the implications of the order to add ABank as plaintiff. [48] There are various elements to the defendants’ argument that the number of shares held should be reduced. They have provided evidence that the value of the shares on January 15, 2016 was $30,761,500, or $18,435,647 more than the plaintiff’s claim from Mr. Arslan. They claim that Mr. Arslan is solvent, and could accordingly pay judgment. They submit that all or part of any indebtedness he may have pursuant to the guarantees will likely be satisfied through distribution of the assets of the primary debtors, or payments by the other alleged guarantors. That, in turn, would reduce the burden borne by Mr. Arslan. [49] In response, the plaintiff notes that the parties agreed on the number of shares to be held, well knowing that both sides bore risk that the value of the shares would fluctuate. It notes that risk remains. The plaintiff also submits that should not speculate about Mr. Arslan’s other assets. [50] In my opinion, the evidence is not sufficient to justify reduction in the number of shares subject to the Order. The defendants say Mr. Arslan is solvent. That is relevant consideration. However, they did not provide sufficient evidence that he has sufficient exigible assets to pay judgment in the amount at issue in this claim. Mr. Arikan deposed that liquidation of the debtor companies has not begun. He did not depose when it may occur. Further, there is no evidence of the net proceeds that may be realized from any liquidation, or the amount that might be available to pay the plaintiff. Similarly, there is no evidence that the plaintiff has judgment against other guarantors, or whether they are willing and able to pay. [51] Further, the issue is whether there has been material change in the relevant circumstances since the date of the Order. Here, there has been change in the value of the shares. There is no evidence that there has been material change that reduces the risk to the plaintiff specified in ss. 5(5) in relation to the other factors identified by the defendants. [52] The defendants’ evidence as to the value of the security also falls short of demonstrating a sufficient change in circumstances. It discloses the price of AGT shares on January 9, 2014 and January 15, 2016. There is no evidence as to why the price increased, how the share price has fluctuated over time, or the likelihood that the price will remain close to or above the level it reached in January 2016. There is accordingly insufficient evidence to conclude that the plaintiff’s claim, including interest and costs, would be secured for the necessary period and to the extent contemplated by this consent Order, by a lesser number of shares. Further, and as the plaintiff noted, both parties knew that the price would fluctuate, and agreed based on factors that are not in evidence that 850,000 shares was the right number. That was one of the assumptions on which the consent Order was based. [53] In the result, am not prepared to reduce the number of shares subject to the Order. It is my view that is the correct answer without taking account of the fact that have now ordered that ABank which has very substantial claim in its own right be added as plaintiff. Even if had found that the security should be reduced if the issue was the value of the Ṣekerbank claim alone which did not would have reached the opposite conclusion based on the combined value of the claims. c. Should the plaintiff be obliged to post security? [54] It is, however, my view that the Order should be modified to provide that Ṣekerbank provide security as contemplated by ss. 5(7) of the EMJA, despite the fact that the defendants agreed to an Order that did not provide for security. reach that conclusion for two reasons. [55] First, agree with the conclusion of Danyliuk J. in Custom Foundations Ltd. Welcome Homes Ltd., 2017 SKQB 148 (CanLII), at paras 41-43 [Custom] that ss. 5(7) requires that the plaintiff provide security. Section 5(7) describes the measure to be applied: that is, the security should be in an amount “sufficient to compensate the defendant or other person affected by the preservation order for pecuniary loss that may be caused as result of the preservation order”. [56] Further, the plaintiff should, to the extent possible, deal with this issue in its application: see Custom at paras 39-40, and Alliance Pulse Processors Inc. Hudson Bay Port Company, 2016 SKQB 307 (CanLII), at para 14. That said, agree with Danyliuk J. that plaintiff may have little or no ability to quantify defendant’s potential losses. It should not be denied relief for that reason. In practical terms, the defendant may be obliged to provide evidence if it wishes to ensure there is adequate security. [57] To be clear, do not suggest that the parties acted inappropriately by failing to deal with security in the Order. There are various possible explanations. The defendants may, for example, have waived that requirement in exchange for some other consideration. They may have believed that they would suffer no losses given the nature and anticipated needs of the Trust during the relevant period. [58] Second, and particularly given the lack of clarity as to the reasons for the lack of provision for security in the Order, find there is evidence of sufficient change in circumstances to justify this modification. am satisfied that Mr. Al-Katib, or more correctly, the Trust, may have suffered and may in future suffer losses as result of the Order. The parties identified two potential sources of such losses. First, losses could arise from the inability of the trustee to dispose of or otherwise deal with the shares, which are publicly traded and have changed significantly in value. note, however, that there is no evidence that the Order has prevented specific disposition, or would prevent proposed disposition in the foreseeable future. [59] Second, losses could arise as result of increased taxes paid in 2014 and 2015. Mr. Al-Katib has counterclaimed, among other things, for the amount estimated by the Herbert opinion. am, however, not satisfied that the loss attributable to the Order could reasonably include the entire amount identified by Mr. Herbert. That is so for several reasons. [60] First, and as is noted above, there is no evidence as to Mr. Herbert’s training or experience. am accordingly unable to accept his opinion as an expert opinion. In any event, the Herbert opinion even if accepted it as an expert opinion would not constitute proof of loss of $2,004,321. It does not identify the other factors that may have delayed the migration of the Trust, and how those factors may have influenced the timing of the migration. Indeed, it is not clear from the evidence that the Trust would have migrated on or about January 9, 2014 but for the Order, or that the plaintiff is responsible for the fact that the Order was not amended to permit the migration until October 2014. [61] Further, there is no evidence that the fact that the Trust would have paid less Canadian tax in 2014 and 2015 means that the Trust will finally suffer net loss in that amount. Even if it did, and as the plaintiff noted, the tax loss related to all of the assets of the Trust. The 850,000 shares affected by the Order constituted only 25.66% of the 3,312,601 AGT shares held by the Trust as of January 9, 2014. Accordingly, and even if the tax loss was attributable entirely to the Order, it appears at first blush that the loss relating to the 850,000 shares would be $514,277. [62] Ṣekerbank and ABank are unable to reasonably estimate the losses that could be suffered by Mr. Arslan or the Trust. will fix the amount of security at $1 million, an amount which takes account of the significant value of the 850,000 shares and the evidence that they have significantly changed in value. Security in that amount, in form acceptable to the defendants, shall be posted by Ṣekerbank within 30 days, and held until further order by this Court. If the parties are unable to agree on the form of the security, either of them may apply to me for further direction. [63] note that it is open to the defendants to apply to modify the Order in other respects. Mr. Al-Katib may, for example, decide that he wishes to dispose of the AGT shares and substitute other security. Further, would be prepared to consider an application, whether by consent or otherwise, to modify the Order to provide that the security be provided by both Ṣekerbank and ABank, in shares specified in the Order. [64] Finally, the defendants seek an order pursuant to Rule 4-24 of The Queen’s Bench Rules that the plaintiff post $40,000 as security for costs. Counsel for Ṣekerbank did not take issue with that application. In my view, such an order is justified based on the considerations specified in Rule 4-24. CONCLUSION [65] For the foregoing reasons, it is ordered as follows: 1. The defendants’ application to terminate the preservation order dated January 9, 2014, as amended by the order dated October 30, 2014 [Order], is dismissed. 2. The Order shall be amended to provide that Ṣekerbank shall provide security in the amount of $1 million within 30 days of the date of this order, in a form to be agreed by the parties, and failing such agreement, in a form determined by this Court on further application by any party. 3. Ṣekerbank shall pay the sum of $40,000 into court within 30 days of the date of this order as security for costs, pursuant to Rule 3-34 of The Queen’s Bench Rules. 4. Alternatifbank A.S. shall be added as a plaintiff, and the Statement of Claim may be amended in the manner specified in the draft filed. [66] Given that there has been mixed success on these related applications, there shall be no order as to costs. J. B.A. BARRINGTON-FOOTE
Civil Procedure – Queen’s Bench Rules, Rule 3-72, Rule 3-84Statutes – Interpretation – Enforcement of Money Judgments Act, Section 5, Section 8 The proposed plaintiff, Alternatifbank (Abank) applied pursuant to Queen’s Bench rules 3-72 and 3-84 to be added as a plaintiff to the action of the plaintiff, Sekerbank, against the defendants and to amend the statement of claim. ABank asserted a debt claim against the defendants. The defendants applied pursuant to s. 8 of The Enforcement of Money Judgments Act (EMJA) to terminate the preservation order, which prohibited any dealings with 850,000 shares, or alternatively they sought an order reducing the number of shares subject to the order and requiring the plaintiff to post $3 million as security pursuant to s. 5(7) of the EMJA and $40,000 security for costs. Regarding ABank’s application, it argued that its claim in debt against the defendant arose out of the same transaction based on the allegation that Arslan transferred the shares to a trust (the other defendant was the trustee) in June 2013, the time at which he stopped paying his debts in full and thus denied it the opportunity to collect its debt. ABank sought the same relief as Sekerbank: judgment against both defendants under The Fraudulent Preferences Act and The Fraudulent Conveyances Act. The defendants argued that the limitation period that applied to ABank’s claim had expired and the application should be denied. Regarding the defendants’ application, they argued that the plaintiff’s strategy in the Saskatchewan action was to await the outcome of the proceedings they had initiated in Turkey against the plaintiff. The Saskatchewan action was independent from the Turkish action, and the plaintiff’s approach was unacceptable in the circumstances of the preservation order made against them in 2014. The plaintiff had not prosecuted its actions against them without delay as required by s. 5(c) of the EMJA. The defendants asserted that the share prices increased since 2014 and were now worth $18 million more than the plaintiff’s claim. If the preservation was not terminated, they requested that the number of shares be reduced to 100,000. HELD: The proposed plaintiff’s application was granted. The defendants’ application to terminate the preservation order or to reduce the number of shares subject to the order was dismissed. The court ordered the plaintiff to post $1 million as security under the EMJA and an additional $40,000 as security for costs. The court found that although the limitation period had expired, it would add ABank as a plaintiff and amend the statement of claim pursuant to s. 20 of The Limitations Act, because to do so would not create a wholly new proceeding and the defendants had not provided evidence that they would suffer prejudice. The preservation order was not terminated after the court reviewed the history of the proceedings in both Saskatchewan and Turkey and found that the plaintiff had not failed to prosecute its action without delay. The court found that there was insufficient evidence to justify the reduction in the number of shares subject to the order.  The information of the value of the security fell short of demonstrating a sufficient change in circumstances, especially in light of the addition of ABank’s claim. The court found that the order should be modified under s. 5(7) of the EMJA to have the plaintiff provide security because there was evidence that the trust may have suffered and could suffer losses in the future as a result of the order. The order for security for costs was justified based on the considerations specified in Queen’s Bench rule 4-24.