Superior Court of Justice – Ontario

COURT FILE NO.: CV-15-539645

DATE: 20211125

RE: ALL-TERRAIN TRACK SALES AND SERVICES LTD. and ANDRE BOUDREAU Plaintiffs

AND:

798839 ONTARIO LIMITIED, JACOBUS HANEMAAYER, 153078 CANADA INC., COMMUNITY EXPANSION INC., GREAT LAKES NICKEL LIMITED, ROBIN LOWE and RIO TINTO EXPLORATION CANADA INC. Defendants

BEFORE: Mr. Justice Chalmers

COUNSEL: D. Melamed, for the Plaintiffs/Responding Parties

S. J. Gearing for the Defendants/Moving Parties, 153078 Canada Inc., Great Lakes Nickel Limited and Robin Lowe

HEARD: September 2, 2021 by Videoconference

ENDORSEMENT

Overview

[1] The Defendant, Great Lakes Nickel Limited (“GLN”) brings this motion for an order directing that all money paid into court for the credit of this action be paid out to GLN. The motion was initially brought in writing. Following my review of the material, I was of the view that I would benefit from oral submissions. The oral hearing took place on September 2, 2021 by videoconference.

[2] Three orders were granted with respect to the payment of money into court; the order of Belobaba, J., dated November 16, 2015, the order of Wilton-Siegel, J., dated October 12, 2016, and the order of Pollak, J., dated December 20, 2017 (the Orders). The Orders required GLN to pay the sum of $900,000 into court to the credit of this action.

[3] GLN argues that as result of the decision of O’Brien, J. on the partial summary judgment motion, it cannot be found liable to pay damages to the Plaintiffs, and therefore the money it paid into court, ought to be returned to it.

[4] The Plaintiffs argue that the Orders were made on consent or were unopposed. The Orders provide that GLN is to pay money into court for the benefit of the action. The action was not dismissed as against GLN and is continuing. The Plaintiffs argue that the foundation for the Orders remains the same as when the Orders were granted.

[5] For the reasons set out below, I dismiss the motion brought by GLN to vary the Orders. The money is to remain in court until the action as against GLN is finally determined, or until further Order of the Court.

Background Facts

Sale of Pardee Claim from GLN to RTEC

[6] In 1969, GLN was incorporated under the laws of Ontario. In 1973, it became a reporting issuer under the securities legislation of Ontario. GLN’s only asset of consequence was a mining claim known as the Pardee Claims.

[7] In 1988, GLN entered into an option agreement (Option Agreement) with 708839 Ontario Limited (39 Ontario). The Option Agreement granted to 39 Ontario the option to acquire an 80% interest in the Pardee Claims. To exercise the option, 39 Ontario was required to spend $2,000,000 on the exploration and development of the property within three years. According to GLN, 39 Ontario failed to exercise the option and did not acquire any interest in the Pardee Claims.

[8] In 2001, GLN invited Robin Lowe to join the board. When he joined the board, Mr. Lowe owned approximately 7% of the shares of GLN. At the time Mr. Lowe joined the board, Jacobus Hanemaayer owned or controlled approximately 46% of the shares of GLN through his companies, 153078 Canada Inc. (78 Canada) and Community Expansion Inc. (Community).

[9] In 2002, the Ontario Securities Commission (OSC) issued a cease trade order against GLN for failing to file financial statements. The company was inactive. GLN did not have sufficient assets to develop the Pardee Claims. The board did not meet between 2002 and 2011.

[10] In 2010, Rio Tinto Exploration Canada Inc. (RTEC) expressed an interest in purchasing the Pardee Claims from GLN. Mr. Hanemaayer had previously refused to sell his shares to RTEC. RTEC advised Mr. Lowe that it would be interested in purchasing GLN if he could obtain a controlling interest.

[11] On September 15, 2010, Mr. Lowe applied to the OSC to lift the cease trade order so he could purchase additional shares in GLN. On November 2, 2010, the OSC granted the application and lifted the cease trade order.

[12] On February 11, 2011, Mr. Lowe purchased 78 Canada from Mr. Hanmaayer. Mr. Lowe also purchased additional shares of GLN from Community. The total amount paid by Mr. Lowe for the GLN shares was $109,640.00. Following the purchases, Mr. Lowe owned approximately 54% of the shares in GLN.

[13] On November 18, 2011, GLN entered into an agreement with RTEC. Pursuant to the agreement, RTEC had the right to acquire a 100% interest in the Pardee Claims upon payment of $5,500,000 over the course of seven years. RTEC exercised its option in 2018. After an amendment to the agreement that reduced the price, GLN conveyed the Pardee Claims to RTEC for $4,975,000.

ATTS action against Hanemaayer and 39 Ontario

[14] The Plaintiffs, All-Terrain Truck Sales and Services Ltd. (“ATTS”) and Andre Boudreau (the Plaintiffs) were hired under the direction of Mr. Hanemaayer and 39 Ontario as contractors on several mining projects in Northern Ontario. The Plaintiffs allege they were not paid for equipment supplied for one of the projects. In 1993, the Plaintiffs brought an action against Mr. Hanemaayer and 39 Ontario for payment of the equipment; Court File No.: 2298/93 (Hanemaayer Action).

[15] The Hanemaayer Action proceeded to trial between January and July 2013. On January 31, 2014, Penny, J. granted judgment in favour of the Plaintiffs against Mr. Hanemaayer and 39 Ontario (the Judgment). As of September 30, 2015, the total outstanding amount of the Judgment was $2,781,109.35, inclusive of the award, costs and interest.

[16] 39 Ontario and Hanemaayer did not pay the Judgment. The Plaintiffs took the position that Mr. Hanemaayer, in conjunction with his two companies, Community and 78 Canada, fraudulently transferred his shares in GLN to Mr. Lowe to put his assets beyond the reach of the Judgment creditors.

Fraudulent Conveyance Action

[17] This action was commenced by the Plaintiffs by Statement of Claim issued on November 2, 2015. The Plaintiffs claim damages arising from two separate transactions. They allege that the conveyance of shares in February 2011 from Mr. Hanemaayer’s companies to Mr. Lowe was a fraudulent conveyance. The Plaintiffs also allege that 39 Ontario had fraudulently conveyed back to GLN the 80% interest in the Pardee Claims it had acquired pursuant to the Option Agreement.

[18] The Plaintiffs obtained three orders that required GLN to pay into court the annual payments it received under the RTEC agreement dated November 18, 2011, for the years 2015, 2016 and 2017 (the Orders). The total amount was $900,000.

[19] On November 16, 2015, Belobaba, J. heard the first motion. GLN did not attend the motion although properly served. The Court ordered GLN to pay into court the sum $400,000.00 that GLN was to receive from RTEC pursuant to the agreement dated November 18, 2011. The order states that the Plaintiffs provided an undertaking as to damages. The second order is dated October 12, 2016. On the consent of the parties, Wilton-Seigel, J. ordered GLN to pay into court the amount of $500,000. This was the amount GLN was scheduled to receive on November 18, 2017 from RTEC. The order provides that the funds are for the “credit of this action.”. On consent, the parties obtained an order varying the order of Wilton-Siegel, J. to provide that the amount of $250,000.00 would be paid into court on November 18, 2016 and $250,000.00 paid into court on November 18, 2017. The order was granted by Pollak, J. on December 20, 2017. Her order provides that the funds are “to the credit of this action.”

[20] On February 11, 2019, the Plaintiffs amended the Statement of Claim to abandon the allegation that 39 Ontario had fraudulently conveyed back to GLN the 80% interest in the Pardee Claims it had acquired pursuant to the Option Agreement.

[21] On March 28, 2019, the Plaintiffs brought a motion for partial summary judgment. The Plaintiffs sought a declaration that 39 Ontario had earned up to an 80% interest in the Pardee Claim pursuant to the Option Agreement. GLN opposed the motion and sought partial summary judgment in its favour on the grounds that 39 Ontario did not exercise the option and had not acquired any interest in the Pardee Claims.

[22] The motion was heard by O’Brien, J. She concluded that 39 Ontario had not obtained an interest in the Pardee Claims. She granted partial summary judgment in favour of GLN. Justice O’Brien declined to decide all other issues raised by the parties. The action was not dismissed as against GLN. Counsel for GLN states that the release of the funds that had been paid into court pursuant to the Orders, was raised before O’Brien, J., but she did not address this issue in her endorsement.

[23] On February 19, 2020, the Court of Appeal dismissed the Plaintiffs’ appeal. GLN brought a cross-appeal for the release of the funds paid into court, but the cross-appeal was abandoned before the appeal was argued.

The Issue

[24] Although the facts in the underlying action are complex, the issue to be determined on this motion is relatively straightforward:

• Should the Orders be varied to allow the money to be returned to GLN?

Position of the Parties

GLN’s Position

[25] GLN argues that there has been a significant change in circumstances since the Orders were made. At the time GLN was ordered to pay the money into court, the Claim against it included an allegation that 39 Ontario had fraudulently conveyed its interest in the Pardee Claims to GLN. The Claim was amended on February 11, 2019 to abandon that allegation. GLN also argues that at the time the motion for summary judgment was heard, on March 28, 2019, the only issue involving GLN was whether 39 Ontario had acquired an interest in the Pardee Claims under the Option Agreement. Justice O’Brien found that 39 Ontario had not acquired an interest in the Pardee Claims. GLN states that as a result of both the abandonment of the allegation that it was involved in a fraudulent conveyance and the partial summary judgment, there is currently no active proceeding that could result in a judgment requiring GLN to pay damages to the Plaintiffs.

[26] GLN argues that the purpose of the Orders to pay money into court, is to ensure that the rights of the Plaintiffs asserted in the action may be enforced if the action against GLN is ultimately successful. GLN states that there is currently no active proceeding that could result in a judgment against GLN, and therefore there is no foundation or purpose for the Orders. GLN argues that this is analogous to the entitlement to an injunction against a party when there is no pending or intended proceeding. In the absence of a proceeding in which a permanent injunction is claimed, the court has no jurisdiction to grant an interlocutory injunction: Cellular Rental Systems Inc. v. Bell Mobility Cellular Inc., (1995) 1995 10638 (ON SC), 23 O.R. (3d) 766 (Div. Ct.) at para. 28.

The Plaintiffs’ Position

[27] The Plaintiffs argue that the Orders were entered into on consent or were unopposed and can be set aside only in exceptional circumstances: Verge Insurance Brokers Limited v. Richard Sherk, et al., 2015 ONSC 4044, at para. 72. The Plaintiffs also argue that there has not been a material change in circumstances from when the Orders were granted. Although O’Brien, J. granted partial summary judgment in favour of the Defendants, the action against GLN was not dismissed and the fraudulent conveyance action is continuing. The Plaintiffs argue that if they are successful in the fraudulent conveyance action, GLN may be required to transfer the impugned shares to the Plaintiffs. Both parties agree that GLN continues to be a necessary party in the action.

[28] The Plaintiffs also argue that although the current Claim may not result in a judgment requiring a payment of damages by GLN, the Plaintiffs may seek an amendment of the Claim to plead that GLN is liable to pay damages. The Plaintiffs are proceeding with a production motion returnable on December 2, 2021 to determine if there is evidence to support an action against GLN, with respect to the sale of Mr. Hanemaayer’s shares. The Plaintiffs state that depending on the evidence ordered produced, the Plaintiffs may argue that the corporate veil ought to be pierced. The Plaintiffs state that as a result, there is a pending or intended proceeding against GLN and there continues to be a proper foundation for the Orders.

[29] Finally, the Plaintiffs argue that GLN raised the issue of the return of the funds held in court, on the partial summary judgment motion. O’Brien, J. did not decide the issue. GLN brought a cross-appeal to the Court of Appeal seeking an order to release the funds, but the cross-appeal was abandoned before the hearing. The Plaintiffs argue the issue is res judicata.

Analysis

[30] At paragraph 1(a) of the Amended Statement of Claim, the Plaintiffs seek a declaration that 39 Ontario acquired up to an 80% interest in the Pardee Claims. On the partial summary judgment motion, O’Brien, J. held that 39 Ontario did not acquire an interest in the Pardee Claims. This was the only issue determined by O’Brien, J. The fraudulent conveyance issue was not decided on the partial summary judgment motion. The action continues as against all Defendants, including GLN.

[31] At paragraph 1(e) of the Amended Statement of Claim, the Plaintiffs seek a declaration that the conveyance of a controlling block of shares in GLN to Mr. Lowe is a fraudulent conveyance. At paragraph 1(f), the Plaintiffs seek an order that the conveyance of the shares to Mr. Lowe be declared void. At paragraph 45, the Plaintiffs seek an order that the interest in the shares be returned to Mr. Hanemaayer and Community to be held in trust for the benefit of the Plaintiffs. The relief sought at paragraphs 1(e) and (f) and paragraph 45 is unaffected by O’Brien, J.’s decision on the partial summary judgment motion.

[32] Counsel for GLN argues that it normally follows that when the action is dismissed, the interlocutory injunction is also dismissed. In other words, once the case is over the injunction should be over as well. Here the action against GLN has not been dismissed. Both parties agree that GLN is a necessary party with respect to the fraudulent conveyance action. I agree with the Plaintiffs’ submission that there is a continuing action against GLN and therefore there is an ongoing foundation for the Orders.

[33] If the Plaintiffs are successful on the fraudulent conveyance action, the court may set aside the transaction and order the return of the shares of GLN to Mr. Hanemaayer and Community to be held for the benefit of the Plaintiffs. Counsel for GLN argues that following trial there may be an order to transfer shares, but GLN will not be required to pay any monetary damages. GLN states that because no damages will be ordered, there is no basis for the payment of funds into court. I do not agree. If the court finds that Mr. Hanemaayer’s sale of shares to Mr. Lowe is a fraudulent transaction, the court may order the transfer of the GLN shares to the Plaintiffs. The only asset of GLN is the money received from RTEC. That money has been paid into court pursuant to the Orders. If the Orders are not continued and the money is released to GLN, it may be disbursed to the current shareholders. If so, any judgment to transfer the shares will have little or no value.

[34] I am of the view that the reason for the Orders to pay the money into court remains the same. The fraudulent conveyance issue has not been resolved and is continuing. The Orders provide that GLN is to pay the money received from RTEC into court for the credit of the action. The purpose of the payment into court is to ensure that if the Plaintiffs succeed in the action, there will be funds available to satisfy the judgment.

[35] I am also of the view there is no prejudice to GLN if the Orders are not set aside. In argument, counsel for GLN conceded that GLN’s only asset is the money received from RTEC. He stated that there will be no dissipation of that asset to the shareholders of GLN while the action is pending. If that is the case, it should make no appreciable difference to GLN whether the money remains with the Accountant of the Superior Court or is transferred to its own bank account. If there is an injustice to GLN as a result of the Orders continuing to the conclusion of the action, GLN has the benefit of the Plaintiffs’ undertaking to pay damages at the time the injunction was issued: Verge Insurance Brokers Limited v. Richard Sherk, et al., at para. 91.

[36] I conclude that the Orders are not to be varied to allow the money paid into Court, to be paid out to GLN. I dismiss the motion. This is without prejudice to GLN bringing a motion to vary the Orders if the action is later dismissed as against GLN.

Disposition

[37] I dismiss the motion brought by GLN to vary the Orders.

[38] The Plaintiffs are successful on the motion and are presumptively entitled to their costs. The Plaintiffs seek payment of their costs on a partial indemnity basis in the amount of $17,446.86 inclusive of counsel fee, disbursements and H.S.T. GLN filed a Bill of Costs for the costs sought if successful on the motion. GLN’s costs on a partial indemnity basis are $16,802.18. inclusive of counsel fee, disbursements and H.S.T.

[39] The fixing of costs is a discretionary decision under section 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43. In exercising my discretion to fix costs, I considered the factors identified in Rule 57.01 of the Rules of Civil Procedure. I also considered the overall objective of any costs award; that it be fair and reasonable and within the reasonable expectation of the unsuccessful party to pay: Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.), at paras. 26 and 37.

[40] The costs claimed by the Plaintiffs are slightly higher than the amount GLN would have claimed if successful on the motion. I find the costs claimed by the Plaintiffs are within the reasonable expectation of GLN. However, it is my view that the costs claimed by both parties are too high in the circumstances. The motion was argued over the course of two hours. Although the factual background is complex, the issue to be determined on the motion was fairly straightforward.

[41] I award costs to the Plaintiffs fixed in the amount of $10,000 inclusive of counsel fee, disbursements and H.S.T. The costs are payable within 30 days of the date of this endorsement.

DATE: November 25, 2021