COURT FILE NO.: 10-CV-49582

DATE: 2013/01/14

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Schreiber Foods, Inc.

Plaintiff

– and –

Wepackit Inc., Wepackit 2009 Inc., and David Wiggins

Defendants

Tate E. McLeod, for the Plaintiff

John R. Hart, for the Defendants

HEARD: October 15-17, 2012

REASONS FOR DECISION

Métivier j.

[1] The plaintiff in this trial, Schreiber Foods, Inc. (“Schreiber”), makes claims of its oppression as a judgment creditor, and that a fraudulent conveyance had been made. The plaintiff alleges that the individual defendant, David Wiggins, has manipulated three corporations of which he is the director and operating mind, in order to avoid paying an Ontario Superior Court of Justice judgment, as well as a costs order of the Ontario Court of Appeal.

The Parties

[2] Schreiber is a Wisconsin corporation. Its principal place of business is in Green Bay, Wisconsin. Schreiber is a manufacturer and marketer of dairy products to the global foodservice and retail markets.

[3] The defendants, Wepackit Inc. (“Wepackit”) and Wepackit 2009 Inc. (“Wepackit 2009”), are Ontario corporations. Their principal place of business is in Orangeville, Ontario. Wepackit and Wepackit 2009, have each carried on business, at different times, as manufacturers and suppliers of assembly packing equipment.

[4] The individual defendant, David Wiggins (“Mr. Wiggins”), is the controlling mind, as well as the sole officer and director of both Wepackit and Wepackit 2009. Mr. Wiggins is in control of every decision made by Wepackit and Wepackit 2009.

[5] The sole shareholder of both Wepackit and Wepackit 2009 is, 1164154 Ontario Inc. (“116 Ontario”), another company of which Mr. Wiggins is the sole officer and director.

[6] On May 15, 2006, Schreiber and Wepackit entered into an Equipment Purchase Agreement. That Agreement provided, among other things, that Wepackit would manufacture, deliver and install a case packing system to Schreiber.

History of Litigation

[7] On March 4, 2008, Schreiber commenced a proceeding against Wepackit in Green Bay, Wisconsin, for recovery of damages arising from the Agreement.

[8] On May 21, 2008, the Circuit Court of the State of Wisconsin granted Schreiber’s motion for default judgment and entered a judgment against Wepackit (the “Wisconsin Judgment”) for US $266,774.56, plus post‑judgment interest at the rate of 12 per cent per annum.

[9] Wepackit failed to pay any portion of the Wisconsin Judgment to Schreiber.

[10] Schreiber issued a statement of claim in the Province of Ontario (the “Ontario Action”) against Wepackit on July 16, 2008, claiming judgment in the amount of the Wisconsin Judgment, in addition to costs and interest.

[11] Schreiber brought a motion for summary judgment in the Ontario Action. On February 24, 2009, McNamara J. ordered judgment (the “Ontario Judgment”) against Wepackit in the amount of the Wisconsin Judgment, plus interest at a rate of 12 per cent per annum and $17,500.00 in costs.

[12] Wepackit appealed from the decision of McNamara J. On June 3, 2009, Lang J.A., of the Ontario Court of Appeal, granted a motion brought by Schreiber and ordered that Wepackit pay into court, on or before June 30, 2009, the sum of $15,000.00, as security for costs of the appeal. Lang J.A. also ordered that if Wepackit failed to pay the security, the appeal would be deemed to be abandoned.

[13] Additionally, Lang J.A. ordered Wepackit to pay to Schreiber $3,000.00 in legal fees for the costs of the motion.

[14] Wepackit failed to pay the security for costs and the appeal was deemed abandoned.

[15] Despite numerous requests for payment, Wepackit has failed to pay to Schreiber any amount of the Ontario Judgment or the Court of Appeal costs order.

Transition from Wepackit to Wepackit 2009

[16] The premises in which Wepackit carried on business was owned by a related company, 116 Ontario. It had purchased the building some years earlier with the assistance of a $2 million loan from Business Development Bank of Canada (“BDC”). Under the terms of the lease, Wepackit was to pay $36,000 per month for 93,000 square feet of space. The space, at least initially, was shared with another related company, T & G Machinery Inc. (“T & G”), also controlled by Mr. Wiggins. There is no evidence as to whether this entity was responsible for any rent. According to Mr. Wiggins’ evidence at trial, nothing in the lease mentions this latter company and it was inactive. Nevertheless, it is shown on several years’ financial statements thereafter. It also appears in the Forbearance Agreement with the Business Development Bank of Canada, dated June 27, 2012.

[17] In early 2009, Mr. Wiggins instructed 116 Ontario to “seize all assets of Wepackit” for arrears in rent. He then had a new corporate entity created – “Wepackit 2009” – by renaming a shell company. The change of name took place on February 2, 2009. This was the very date on which McNamara J. granted judgment incorporating the Wisconsin Judgment.

[18] However, the new company did not begin operating until perhaps March, according to a financial statement, and public notices were sent out in early May 2009 announcing the existence of Wepackit 2009.

[19] The evidence discloses that Wepackit was, financially speaking, spiralling downwards, in the years prior to 2008 and owed money to several creditors. The sales of the company had diminished from $4,749,950.00 in 2007 to $2,485,507.00 in 2008. The loss in 2007 was $1,606,024.00, but in 2008, it had lessened, and was $1,432,545.00.

[20] The evidence of Mr. Wiggins is that Wepackit had stopped paying rent and owed $324,867.65 to its corporate landlord, 116 Ontario. Mr. Wiggins testified that realty taxes were also in arrears. His evidence suggested that the tax liability was Wepackit’s, although that was not clear and was specifically excluded in the Lease.

[21] However, between September 2008 and March 2009, Wepackit had sales of $319,926.00, of which approximately 90 per cent would have been received, and further sales for February and March (no sales in January 2009) of $358,185.00, of which 40 per cent would have been received.

[22] Accounts receivable were noted to be $420,496.00 and inventory at year end on August 31, 2008, was $205,500.00. The latter consisted of materials, finished goods, and work in progress.

[23] At the end of its fiscal year, on August 31, 2008, according to an unaudited statement by a certified general accountant provided by the defendant, Wepackit was showing liabilities of $1,084,629.00.00 with a net income of $347,916.00.

[24] Those statements also show an amount owing to the director of $430,726.00, including a bonus declared earlier.

[25] While Mr. Wiggins, according to his oral evidence and a letter to that effect, instructed his company 116 Ontario to “seize” the assets of Wepackit for non-payment of rent, there is no other documentary evidence supporting such a seizure. Mr. Wiggins’ evidence is that Wepackit’s assets remained in the premises. He has also said that Wepackit owned none of the equipment, although several financial statements show revenue from “building and equipment rental.” The financial statements as of the last year-end show some significant value in the company.

[26] At about the same time as its predecessor stopped operating, on or about April 30, 2009, Wepackit 2009 entered into an agreement to lease the same premises from 116 Ontario. Wepackit 2009 began using Wepackit’s assets and began operating substantially the same business. No money was ever paid for the assets, nor was any value ascribed to them. No financial statements for either company exist from August 2008 until April 2010. The first such statement deals with a corporate year from March 2009 to April 2010.

[27] The predecessor company’s website was changed as to name, but emphasized that Wepackit Inc.’s experience and reputation remained. The website described Wepackit 2009 as, “a leader in case packing automation for over 20 years;” a claim that was true of Wepackit, but not of Wepackit 2009.

[28] Wepackit’s customer lists were taken over by the new corporation and Mr. Wiggins acknowledged that Wepackit 2009 had done work for at least 55 different customers who had been customers of Wepackit.

[29] Wepackit’s inventory was also taken over by Wepackit 2009. No documentary evidence of the nature or value of this inventory was provided.

[30] The new company also took over a number of jobs that the old company had started, and Mr. Wiggins has provided no evidence as to the value of those jobs. Some receivables were collected by the new company, but it is not clear what these were.

[31] Wepackit 2009 laid off a number of employees on Friday, May 1, 2009, and re‑hired many of them on Monday, May 4, 2009. One of these employees was governed by a non‑solicitation and non‑competition agreement with Wepackit, but this was ignored.

Parties’ Positions

[32] The plaintiff company alleges that these actions by the defendants constitute oppressive conduct that is unfairly prejudicial to it. Further, the plaintiff alleges that the conveyance of all assets to the new corporate entity was fraudulent.

[33] The defendants state that oppressive conduct is necessarily one which depends on the particular facts of each case. The defendants’ submission is that personal benefit to the director is required before oppression can be found. Given the financial position of the two companies, and the amounts owing to Mr. Wiggins, there was no benefit to him. As to the fraudulent conveyance, the defendants submit that no “badges of fraud” can be found here, nor proof of intent to defeat, hinder, or delay creditors.

Issues

[34] According to the plaintiff, the following questions are to be answered:

(1) Is Schreiber a “proper person” to make an oppression remedy application?

(2) Has the defendants’ conduct, or the conduct of any one of them, been oppressive, unfairly prejudicial to, or unfairly disregarded the interests of Schreiber?

(3) Have Wepackit 2009 and Mr. Wiggins made fraudulent conveyances as defined in the Fraudulent Conveyances Act, R.S.O. 1990, c. F.29 (“FCA”)?

(4) What is the significance, if any, of Wepackit’s alleged other debts?

(5) What remedies, if any, are appropriate for the court to grant to Schreiber?

Analysis

(1) Is Schreiber a “proper person” to make an oppression remedy application?

[35] It is undisputed that Schreiber falls within the ambit of ss. 245 and 248 of the Ontario Business Corporation Act, R.S.O. 1990, c. B.16 [OBCA], and is entitled to bring this application.

(2) Has the defendants’ conduct, or the conduct of any one of them, been oppressive, unfairly prejudicial to, or unfairly disregarded the interests of Schreiber?

[36] It is clear that a complainant seeking relief from alleged oppression need not prove that the acts were done in bad faith: Brant Investments Ltd. v. KeepRite Inc. (1991), 3 O.R. (3d) 289, 1 B.L.R. (2d) 225 (C.A.), at para. 21.

[37] In Gignac, Sutts and Woodall Construction Co. v. Harris (1997), 36 B.L.R. (2d) 210 (Gen. Div.), regarding the test of unfair prejudice or unfair disregard, the court considered factors such as the nature of the relationship between the corporation and the creditor; the type of rights affected; the extent to which the acts complained of were unforeseeable; and whether the creditor could reasonably have protected itself from such acts.

[38] The plaintiff states that the rights affected here are those conferred by the Judgment of the Court.

[39] Facts similar to those present in the case at bar have founded remedies in oppression in other cases.

[40] In Far East Food Products Ltd. v. 110472 Ontario Ltd. (2009), 59 B.L.R. (4th) 75, (Ont. Sup. Ct.), the plaintiff company supplied baking supplies to a company, who, as a result, became indebted to it. The corporate defendant closed its bakery, and reopened another one, at a different location, with many of the same employees, equipment, accounts receivable and goodwill. T.A. Bielby J. held, at paras. 19-24:

In reviewing the authorities provided, I agree that the actions of 1104 and Skruch were oppressive and prejudicial to the interests of the plaintiff. I am guided by SCI Systems Inc. v. Gornitzki Thompson & Little Co., [1997] O.J. No. 2115. In this case a corporate defendant owed a debt pursuant to a promissory note. The corporation, prior to judgment, transferred assets to individual respondents, and paid out shareholder loans and paid dividends to, in effect, render the company insolvent. At paragraph 28 the court notes it is well established that a creditor has status to bring an application as a complainant. At paragraph 30 it is clear that bad faith is not essential to a finding of oppression.

The court ruled that it was clear that the actions taken prevented the plaintiff from realizing on its judgment. At paragraph 36 the court states and I quote,

I agree that the oppression remedy is designed to protect reasonable expectations. However, one of the most reasonable of all expectations of those dealing with corporations must be that the directors will manage the company in accordance with their legal obligations.

I find that Mark Skruch as a director of 1104 did not manage it in accordance with its legal obligations, as was determined in the SCI case. In that case, as in ours, the proper way to rectify this result is to require, the offending director(s) to compensate the creditor for the amount of the outstanding indebtedness.

[41] Again, in Pitney Bowes of Canada Ltd., v. Belmonte, 2011 ONSC 3755, 98 B.L.R. (4th) 306 (Sup. Ct.) very similar facts led to a finding of oppression. The court provided, at paras. 22‑25, an answer to the question of whether the evidence supported a finding of oppression:

The answer to this question is yes. It is clear from the evidence that Mr. Belmonte abandoned the respondent judgment debtor corporation and that he removed or transferred the entire operating business related to the manufacture and sale of logo products from the respondent judgment debtor corporation to 1734385 Ontario Inc., another company controlled by him. The evidence is also clear that he did this for the specific purpose of escaping obligations to creditors, in particular, obligations to his landlord and to Pitney Bowes. Mr. Belmonte made a conscious decision to “abandon” 1140311 Ontario Inc. and to abandon its obligation to make monthly rent payments for equipment leased from the applicant Pitney Bowes and to transfer the business and the revenue stream of that company to a new company - 1734385 Ontario Inc. - operating under the same name. As a result, the revenues of the respondent corporation were diverted from 1140311 Ontario Inc. either to 1734385 Ontario Inc. (which was incorporated on May 10, 2007 for the purpose of taking over the business of the judgment debtor company) or directly to the joint bank account of Lisa and Aldo Belmonte. The bottom line is that the earnings of the respondent 1140311 Ontario Inc. are no longer available to satisfy the applicant's judgment and are sheltered for the use of Mr. and Mrs. Belmonte or for the use of corporations which he or his wife control.

The reasonable underlying expectation of the applicant creditor was that the respondent 1140311 Ontario Inc. would continue to generate revenue by the sale of its logo products and that such revenue generation would enable 1140311 Ontario Inc. to continue to make the lease payments to Pitney Bowes for the equipment which it had rented. Pitney Bowes had no reason to expect that Mr. Belmonte would transfer the operating business of 1140311 Ontario Inc. to another corporation and/or to divert revenue from the sale of its product to Mr. and Mrs. Belmonte thus depriving 1140311 Ontario Inc. of its revenue stream.

There is no doubt that the purpose of the transfer by Aldo Belmonte of the operating business of 1140311 Ontario Inc. was to avoid obligations to creditors - including the applicant Pitney Bowles. The conduct complained of was not foreseeable by the applicant and the applicant creditor could not reasonably have protected itself against such conduct.

The evidence supports a conclusion that the judgment debtor and Mr. and Mrs. Belmonte have acted in a manner which is oppressive or unfairly prejudicial to or that unfairly disregards the interests of the applicant creditor and that the applicant creditor has been oppressed within the meaning of section 248 of the OBCA.

[42] In the case at bar, the evidence as to the reason for the formation of the new company is vague and unpersuasive. It was Mr. Wiggins, himself, making the decision, for his company Wepackit, to not pay rent to 116 Ontario, another one of his companies. Notwithstanding that Mr. Wiggins, in his evidence, made an attempt to explain that what differentiated Wepackit from Wepackit 2009 was that Wepackit 2009 developed a new technology, specifically a different design of machinery, and went into detail about this innovation, there was no credible reason why Wepackit could not have done exactly the same thing. Mr. Wiggins conceded as much in his evidence, at pp. 69-70, when asked by counsel for the plaintiff:

Q. So you made a decision to make a – from my perspective a small change in the types of machinery that you were producing and you did – you happen to do that when you started Wepackit 2009 but that is something that you could have done with Wepackit?

A. I would agree with your last statement...

[43] Indeed, when Mr. Wiggins was directly asked what Wepackit 2009 was doing that Wepackit could not have done, the only answer Mr. Wiggins could supply was that, it “was difficult to say.”

[44] On the whole, Mr. Wiggins’ evidence was unpersuasive. Mr. Wiggins maintained that he would not have been able to pay Schreiber because of the financial difficulties in which his companies found themselves. But he declined to produce certain documents; such as, those of 116 Ontario, and any of his own personal documents. He had no documents showing the accrual of the alleged rental arrears. The documents he did produce did show the financial difficulties of both Wepackit 2009 and Wepackit. But some documents were merely handwritten, some he could not explain. He testified that there were “no documents” for T & G, a company that may have owned some of the equipment, according to his own testimony. Some equipment may also have been owned by 116 Ontario, but that was never clarified. Despite his assertions that T & G had basically shut down in 2005, when the building was bought, T & G remained in the financial statements as a company to whom or from whom money was owed to Wepackit.

[45] When questioned about the fact that one of the Wepackit employees had a contract in which a restraining clause was included which would have been affected by the transition, Mr. Wiggins testified that the contract was in place, and then contradicted himself, saying that it was “never put into force”.

[46] Mr. Wiggins’ evidence was that, while Wepackit 2009 had finished some of the contracts in place at the transition, he did not know what part they finished. When asked which accounts receivable of the predecessor company had been collected, his answer was, “I don’t believe 116 chased these, they were probably uncollectible.” The amount of these, according to the financial statements, was $420,496.00.

[47] Overall, the evidence of Mr. Wiggins was vague and contradictory. I conclude that much of his evidence was not credible.

[48] The purpose of the creation of the new corporate entity remains unexplained. Wepackit 2009 was left to continue generating income and, at present, despite losses over the past few years, is expected to have sales of $10-12 million in 2012. This all enures to the benefit of Mr. Wiggins. It is clear that the transfer of all assets to a new company resulted in creditors being left without recourse and that judgments of two courts were to remain unpaid. There was no way that Schreiber could have foreseen this conduct, nor could it reasonably have protected itself against it.

[49] Where a director or shareholder is the controlling mind of the corporation, this may be sufficient to ground personal liability.

[50] Justice Bielby went on in Far East Products, supra to refer to the case of C-L & Associates Inc. v. Airside Equipment Sales Inc. 2003 MBQB 104, [2003] M.J. No. 160 which he found

... particularly helpful. Goods were sold and delivered but payment not made. The creditor obtained judgment. The individual defendant who controlled the judgment debtor simply stopped operating the business by one company and moved it over to another. He left the old company with no assets. The court in referencing the Manitoba oppression remedy pierced the corporate veil and ordered individual defendants personally liable.

Accordingly I hold the defendant Mark Skruch personally liable for the debt.

[51] Far East Food Products, at para. 20, was cited with approval in SCI Systems Inc. v. Gornitzki Thompson & Little Co. (1997), 147 D.L.R. (4th) 300 (Gen. Div.), at para. 36:

[T]he oppression remedy is designed to protect reasonable expectations. However one of the most reasonable of all expectations of those dealing with corporations must be that the directors will manage the company in accordance with their legal obligations.

[52] In Sidaplex-Plastic Suppliers Inc. v. Elta Group Inc. (1998), 40 O.R. (3d) 563 (C.A.), at para. 3, citing with approval Sidaplex-Plastic Suppliers Inc. v. Elta Group Inc. (1995), 131 D.L.R. (4th) 399, 25 B.L.R. (2d) 179 (O.C.J.), the trial judge, set out at para. 22, when it is appropriate to make orders against the directors personally:

Courts have made orders against directors personally, in oppression remedy cases: see, for example, Canadian Opera Co. v. Euro-American Motor Cars, supra; Prime Computer of Canada Ltd. v. Jeffrey, supra; Tropxe Investments Inc. v. Ursus Securities Corp., [1993] O.J. No. 1736 (QL) (Gen. Div.) [summarized 41 A.C.W.S. (3d) 1140]. These cases, in particular, have involved small, closely held corporations, where the director whose conduct was attacked has been the sole controlling owner of the corporation and its sole and directing mind; and where the conduct in question has redounded directly to the benefit of that person.

[53] Further, Blair J., in Sidaplex, at para. 24, spoke of judges tending to worry and fuss a great deal about whether or not a given set of circumstances permit the piecing of the “corporate veil.” Regarding this, Blair J. stated, at para. 24, that:

While personal liability of a director in an oppression remedy situation may be founded upon such a base…the issue…is not so much one of piercing the corporate veil as it is a question of the overall application of subsection 248(2) of the OBCA and the interplay between its various provisions.

[54] Subsection 248(2) of the OBCA reads as follows:

(2) Where, upon an application under subsection (1), the court is satisfied that in respect of a corporation or any of its affiliates,

(a) any act or omission of the corporation or any of its affiliates effects or threatens to effect a result;

(b) the business or affairs of the corporation or any of its affiliates are, have been or are threatened to be carried on or conducted in a manner; or

(c) the powers of the directors of the corporation or any of its affiliates are, have been or are threatened to be exercised in a manner,

that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer of the corporation, the court may make an order to rectify the matters complained of. R.S.O. 1990, c. B.16, s. 248 (2).

[55] Given the evidence, it is clear to me that Mr. Wiggins, through the control he had over several inter-related companies, acted in a manner which was oppressive or unfairly prejudicial to his creditors, namely Schreiber. Accordingly I find him to be personally liable.

(3) Were fraudulent conveyances made by Wepackit 2009 and/or Mr. Wiggins?

[56] Section 2 of the FCA, reads as follows:

Where conveyances void as against creditors

Every conveyance of real property or personal property and every bond, suit, judgment and execution heretofore or hereafter made with intent to defeat, hinder, delay or defraud creditors or others of their just and lawful actions, suits, debts, accounts, damages, penalties or forfeitures are void as against such persons and their assigns.

[57] A number of “badges of fraud” have been identified in jurisprudence. See Conte Estate v. Alessandro [2002] O.J. No. 5080, 2002 CarswellOnt. 4507, at paras. 42‑43 and 46 (Sup. Ct.); Mutual Trust Co. v. Stornelli (1995), 138 D.L.R. (4th) 316, at paras. 51-56 (O.C.J.), aff’d (1999), 170 D.L.R. (4th) 371 (Ont. C.A.).

[58] Where one or more of the following is present, a rebuttable presumption will be established that a conveyance was made with the requisite fraudulent intent “to defeat, hinder, delay, etc.”

(1) The effect of the transaction is to delay and defeat creditors.

• This is established in this case.

(2) The transfer was effected with unusual haste.

• The new company was created on the very day that a judgment against Wepackit was granted.

(3) The absence of a sound business or tax reason for the transaction.

• No such reason has been provided therefore this is established.

(4) The transferor has few remaining assets after the transfer.

• Wepackit Inc. was left with no assets.

(5) Transfer to a non arm’s length person.

• In this case, the new company had the same controlling mind, and the same sole director, therefore this was not an arm’s length transaction.

(6) There are actual or potential liabilities facing the transferor.

• A Wisconsin judgment for $266,774.56 and an Ontario Action awarding the same amount were actual liabilities.

(7) Grossly inadequate consideration.

• There was no consideration in this case.

(8) The transferor remains in possession or occupation of the property for his own use after the transfer.

• Wepackit 2009 continued to operate the same business, in the same location, with most of the same employees, with the same equipment, customer lists, website, inventory, contracts, and good will.

[59] It is a fact that Wepackit was not bankrupt, and that Wepackit 2009 has never declared bankruptcy, despite the fact it continued to post losses after 2009. Much evidence was led as to the financial difficulties experienced by both corporations over the last economically challenging years. Nevertheless, as of the time of trial, according to Mr. Wiggins, the interest on the loan from BDC for the building was in order, a forbearance agreement was in effect, and the municipal tax arrears were to be paid shortly. Wepackit 2009’s receivables as of December 3, 2012 will be in excess of $850,000.00, with operating costs of approximately $450,000.00.

(4) What is the significance, if any, of Wepackit’s alleged other debts?

[60] The defendants submit that creditors such as Schreiber could not have been defeated, hindered, delayed or prejudiced because Wepackit’s assets were worth no more than the amounts owing to various secured creditors. The lack of evidence has made it impossible to establish what such debts were and by whom they were owed.

[61] The documentary and other evidence required to support the existence of other debts is weak, self‑serving, and difficult or impossible to verify.

(a) There is a lack of supporting financial documents showing the amount of outstanding rental arrears owed by Wepackit and explaining the rent arrears/payments made by Wepackit from the period of January 31, 2008, to March 31, 2009. An undertaking to this effect by the defence was not met.

(b) The alleged secured creditors have not taken steps to enforce their security or commence legal proceedings of any kind.

(c) Documents purporting to represent loans by Mr. Wiggins to Wepackit are largely comprised of handwritten notes, ledger print-outs, cheques, and bank drafts with little or no explanation as to the terms of the loan agreement, the dates of the agreements, and other information relevant to determining what funds might have been available to Schreiber to satisfy its judgments.

(d) The financial statements refer to a significant amount owing to Mr. Wiggins since at least 2005. His explanation of an approximate $300,000.00 amount shown as monies owing to him was that this amount represents monies he put into the purchase of the building. 116 Ontario bought the building and it is puzzling as to why Wepackit alone became responsible for its repayment.

(e) With respect to the loan from BDC, the forbearance agreement produced by the defendants show that in addition to Wepackit, there were other parties liable for this debt, including 116 Ontario, T & G Machinery Inc., and Mr. Wiggins himself. The defendants’ assertion that BDC would have taken all assets of Wepackit if it had enforced its security is merely speculation. 116 Ontario may have had sufficient assets itself to satisfy the entirety of the loan, although this also is merely speculative.

(f) At trial, during his cross-examination, Mr. Wiggins admitted that the defendants have declined to produce any financial document for 116 Ontario, T & G Machinery Inc., and for Mr. Wiggins himself. As a result there is no evidence about the financial status of these parties. BDC has not enforced its security against any of the parties jointly and severally liable for the building loan.

(g) The accounts and record keeping of Wepackit or Wepackit 2009 is unreliable and incomplete. During his cross-examination, Mr. Wiggins was unable to reconcile an internal income statement showing a year-to-date income of $5,016,922.77, with unaudited financial statements from the same time period showing a loss of $407,679.00.

(h) Mr. Wiggins appeared to treat Wepackit as a sole proprietorship, keeping incomplete records of alleged loans, commingling personal assets with corporate assets and moving money between Wepackit and his personal account without proper documentation. During 2005, payments were made between Wepackit and Mr. Wiggins over a short period of time without any satisfactory explanation as to the reasons for these transactions.

For example, on August 17, 2005, Mr. Wiggins purportedly made a payment of $55,000.00 to Wepackit. On August 30, 2005, the same amount was purportedly made to Mr. Wiggins by Wepackit. On October 5, 2005, a draft was allegedly taken from Mr. Wiggins’ account for $18,000.00, and on the same day, a payment for the same amount is shown to have been made to Mr. Wiggins. During examination‑in‑chief, Mr. Wiggins was unable to offer a satisfactory explanation for these types of transactions.

[62] In my view, there is evidence of fraudulent intent and nothing in the evidence given by Mr. Wiggins has rebutted that presumption.

[63] I find there was a fraudulent conveyance.

[64] Fraudulent transfers allow the establishment of personal liability of the individual who is the “operating mind” and sole director of both the transferor and transferee corporations involved in the conveyance: Turfquip Inc. v. 033478 N.B. Ltd. (1997), 193 N.B.R. (2d) 165 (Q.B.), aff’d (1998), 198 N.B.R. (2d) 90 (C.A.).

[65] “In such a case the impugned acts of the corporation will be deemed to be those of its controlling shareholder,” and, as a result, “a conveyance by a corporation may constitute a fraudulent conveyance by the sole and controlling shareholder of the corporation”: Moody v. Ashton, 2004 SKQB 488, 248 D.L.R. (4th) 690, at paras. 172-173.

[66] I find the personal liability of Mr. Wiggins is established on this ground.

(5) What remedies, if any, are appropriate for the court to grant to Schreiber?

[67] The defendants’ position has been earlier described as that of reliance on the assertion that Wepackit could not, in any case, have paid the judgments against it. Given my findings, that is not at all clear. I find that Schreiber was left without any way of determining what assets Wepackit or Wepackit 2009 had.

[68] The evidence of Mr. Wiggins was vague, unclear, occasionally contradictory, and overall unpersuasive.

[69] Of note also was this gentleman’s answer to the question whether he intended to pay Schreiber. Mr. Wiggins’ answer was, firstly, that it was “always possible”. Next, his answer was a flat “No”, with the additional comment that there could be a negotiated “reasonable arrangement”. The time for the latter has long passed. Court judgments are to be obeyed or appealed. Neither was done. A litigant does this at his peril.

[70] I order judgment against Mr. Wiggins personally, and Wepackit 2009 jointly and severally, in an amount of Canadian currency sufficient to purchase the sum of $266,744.56 in Canadian dollars.

[71] I also order that both Mr. Wiggins and Wepackit 2009 are severally and jointly liable for the costs of the Ontario Judgment of 2009, and the Court of Appeal order for costs. These are to be paid forthwith.

[72] With respect to costs, I will receive brief written costs submissions (maximum of three pages) within ten (10) days from the plaintiff and a subsequent seven (7) days from the defendants.

The Honourable Madam Justice M. Métivier

Released: January 14, 2013

COURT FILE NO.: 10-CV-49582

DATE: 2013/01/14

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Schreiber Foods, Inc.

Plaintiff

– and –

Wepackit Inc., Wepackit 2009 Inc., and

David Wiggins

Defendants

REASONS FOR DECISION

Métivier J.

Released: January 14, 2013