George Armstrong Investments v. Transport Development Inc.
CITATION: George Armstrong Investments v. Transport Development Inc., 2017 ONSC 6112
DIVISIONAL COURT FILE NO.: DV-1046-16AP
DATE: 2017-10-12
ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT
Kiteley, Conway and Mulligan JJ.
BETWEEN:
George Armstrong Investments Ltd., 1239122 Ontario Inc., William George Armstrong, Estate Trustee for the Estate of George Armstrong, deceased Plaintiffs (Respondents)
– and –
Transport Development Inc. Defendant (Respondent)
– and –
Vale Canada Limited Garnishee (Respondent)
– and –
1447311 Ontario Limited and 1499545 Ontario Limited Interested Parties (Appellants)
COUNSEL:
Anthony J. O’Brien, for the Plaintiffs (Respondents) No one appearing on the appeal for Transport Development Inc., Defendant (Respondent) Dhiren Chohan, for the Garnishee (Respondent) Daniel Sheppard, for the Interested Parties (Appellants)
HEARD at Sudbury: October 12, 2017
ORAL REASONS FOR JUDGMENT
CONWAY J.
[1] 1447311 Ontario Limited and 1499545 Ontario Limited (the “Interested Parties”) appeal, with leave, the order of Del Frate J. dated October 11, 2016.
[2] The order relates to an upcoming garnishment hearing before Justice Del Frate. He ordered the garnishee, Vale Canada Limited (formerly Inco Limited) (“Vale”) and the Interested Parties to use best efforts to produce all contracts and assignment documents between them for the period January 1, 2000 to January 1, 2007 in order to quantify and determine amounts at stake at the garnishment hearing. The documents include assignment agreements, purchase orders, invoices, and history of payments between Vale and the Interested Parties for the subject period.
[3] The history of these proceedings dates back to events in 2001. On January 25, 2001, Vale entered into a contract for transport services with the defendant Transport Development Inc. (“TDI”), together with a purchase order. The contract and purchase order were assigned by TDI to 1447311 Ontario Limited (“1447311”) pursuant to assignment agreements dated January 29, 2001. Vale issued a replacement purchase order in the name of 1447311 on August 30, 2001. There is an issue as to whether that purchase order was subsequently assigned to another company. The plaintiffs take the position that these assignments were not valid.
[4] In November 2001, the plaintiffs obtained a default judgment against TDI in the amount of $570,000. The plaintiffs served Vale with a garnishment notice dated November 16, 2001 with respect to amounts owed by Vale under the contracts. Vale responded that it owed no debt to TDI and that TDI was no longer on Vale’s vendor file.
[5] Nothing happened on the garnishment until 2012 while the plaintiffs pursued other efforts to collect on their judgment. In 2012, the plaintiffs had a private receiver appointed over the assets of TDI to enforce the judgment against TDI. The receiver sent a notice of renewal of garnishment to Vale. Vale again responded that it had no debt to TDI that could be garnished.
[6] The plaintiffs then delivered a notice of garnishment hearing before a judge. That led to cross-examination of Vale’s representative in which questions were asked about contracts and purchase orders between Vale and TDI and assignments of those contracts and purchase orders to other entities. Vale’s representative produced some assignment documents for the January 25, 2001 contract and purchase order from TDI to 1447311 but refused to answer other questions or produce other documents that were in Vale’s possession, due to privacy and confidentiality concerns with the Interested Parties. Vale’s representative took the position that these documents in its possession would not be produced without a court order.
[7] The plaintiffs then moved for a production order with respect to all contracts, purchase orders, invoices, history of payments and assignments as between Vale, TDI and other companies.
[8] The motions judge granted the production order. He relied on Rule 60.08(16)(d) which provides that at a garnishment hearing the court may “determine any other matter in relation to a notice of garnishment”.
[9] The motions judge noted the assignment of the January 25, 2001 contract and purchase order to 1447311, the new purchase order issued directly from Vale to 1447311, and the apparent further assignment of that purchase order to another company. He acknowledged the plaintiffs’ position that the inquiry into the further assignment of these rights was necessary to determine whether there had been an attempt to avoid the effect of the garnishment proceedings.
[10] The motions judge determined that the details of the assignments were relevant to the determination of the rights and liabilities of the garnishee, debtor, co-owner of the debt, any assignee or encumbrancer, as set out in Rule 60.08(16)(b). He noted that the transport contract was an ongoing performance contract that required the parties to act honestly and in good faith. He also observed that despite the assignment to 1447311 in January 2001, Vale continued to believe that Mr. Armstrong, a shareholder, officer and director of TDI, remained involved in performing these contracts given that he and TDI were copied on numerous pieces of correspondence.
[11] The motions judge recognized that disclosure of the requested information could have a detrimental business impact if it became public. He therefore imposed a sealing order, on consent, to protect the interests of the Interested Parties.
[12] Only the Interested Parties have appealed the motions judge’s decision. Vale has not appealed the order to produce these documents.
[13] The Interested Parties argue that the motions judge went beyond the scope of a garnishment hearing and permitted the plaintiffs to use it as a broad discovery tool. They argue that there was no evidence of a debt from Vale to TDI and that the documents ordered to be produced are not evidence of an assignment of a debt to the Interested Parties. They argue that what was assigned was merely a performance contract, not an existing debt that could be subject to garnishment.
[14] This was a discretionary order granted by the motions judge, who had been dealing with this litigation for years and is the judge who is going to conduct the garnishment hearing. He was clearly aware of the ongoing nature of the performance contract and purchase orders and the revenue stream that would flow from Vale under those documents over a period of years. He was aware of the assignment of the contract and purchase order by TDI to 1447311 in January 2001 and the possible further assignment of the August 2001 purchase order from 1447311 to another company.
[15] The motions judge was live to the issues that would have to be adjudicated at the garnishment hearing, namely, who was entitled to be paid for services under the contracts in question; whether they were validly assigned; what the value of the contracts and purchase orders was; and what was owing under the garnishment notice. Accordingly, he made an order that would provide the necessary information to enable him to adjudicate all matters related to the garnishment at the hearing pursuant to Rule 60.08(16). This is consistent with the broad approach the court may take on a garnishment hearing in looking at the realities of the debtor’s conduct and relationships as known to the garnishee: see International Union of Painters and Allied Trades, Local 200 v. S&S Glass and Aluminum (1993) Ltd., [2004] O.J. No. 1284 (C.A.). The Interested Parties have not demonstrated any error of law on the part of the motions judge in making this order for the purpose of adjudicating the issues on the garnishment hearing.
[16] Further, there was no palpable and overriding error in the motions judge making this production order based on his determination that all of these documents were relevant to the issues to be adjudicated at the hearing. The motions judge’s determination that he could make the production order for the garnishment hearing obviated the need to follow the procedure in Rule 60.18(6) with respect to examination of a third party.
[17] With respect to the arguments on the plaintiffs not coming to court with clean hands, the motions judge required the plaintiffs to pay specific outstanding costs awards before the production motion could proceed. Those specific outstanding costs awards have been paid. The $16,000 cost award from a different action was not raised before the motions judge as a pre-condition to the motion proceeding.
[18] Now that the garnishment hearing is proceeding, we see no reason to address the issue of delay. We further note that there is no evidence to substantiate the Interested Parties’ submission as to the extraordinary costs that will be incurred in producing the documents, nor is there any evidence that the documents themselves do not exist. Indeed, Vale’s representative indicated on cross-examination that Vale has documents in its possession.
[19] The appeal is dismissed.
[20] On agreement of counsel, the Interested Parties shall pay costs to the plaintiffs in the amount of $8,000 all inclusive.
Conway J.
I agree
Kiteley J.
I agree
Mulligan J.
Date of Reasons for Judgment: October 12, 2017 Date of Release: October 13, 2017
CITATION: George Armstrong Investments v. Transport Development Inc., 2017 ONSC 6112 DIVISIONAL COURT FILE NO.: DV-1046-16AP DATE: 20171012
ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT
Kiteley, Conway and Mulligan JJ.
BETWEEN:
George Armstrong Investments Ltd., 1239122 Ontario Inc. and William George Armstrong, Estate Trustee for the estate of George Armstrong, deceased Plaintiffs (Respondents)
– and –
Transport Development Inc. Defendant (Respondent)
– and –
Vale Canada Limited Garnishee (Respondent)
– and –
1447311 Ontario Limited and 1499545 Ontario Limited Interested Parties (Appellants)
ORAL REASONS FOR JUDGMENT
Conway J.
Date of Reasons for Judgment: October 12, 2017 Date of Release: October 13, 2017