



COURT 
    OF APPEAL FOR BRITISH COLUMBIA




Citation:


Kenneth 
          Cole Trucking Ltd. v. Marene Projects Ltd.,






2006 
          BCCA 13



Date: 20060106





Docket: CA032788

Between:

Kenneth 
    Cole Trucking Ltd.

Respondent

(
Plaintiff
)

And

Marene 
    Projects Ltd., William Dobinson,

Also 
    known as Bill Dobinson, and Georgios Kouvousis

Appellants

(
Defendants
)








Before:


The 
          Honourable Madam Justice Rowles




The 
          Honourable Madam Justice Ryan




The 
          Honourable Mr. Justice Low



Oral Reasons for Judgment




G.H. 
          Dabbs


Counsel for the Appellant




H. 
          Wiebach


Counsel for the Respondent




Place 
          and Date:


Vancouver, British Columbia




6 January 2006



[1]

LOW, J.A.
:  This is an appeal by two of three defendants 
    of an order that 50 shares of Marene Projects Ltd. be transferred to the plaintiff/respondent 
    as an assignee from E. Sands & Associates Inc., the trustee in bankruptcy 
    of William Dobinson.  The two defendants also appeal an award of one set 
    of special costs against all defendants.  The defendants Marene and Georgios 
    Kouvousis are the appellants.  The other defendant, Mr. Dobinson, did not 
    appeal and has not participated in the appeal.

[2]

The appellants say that the trial judge erred in ordering transfer 
    of the shares because that remedy did not arise from the pleadings and the 
    action should have been dismissed with costs to them because, as the trial 
    judge found, the respondent, Kenneth Cole Trucking Ltd. (KCT) failed to 
    prove all elements of the tort of civil conspiracy it alleged.  The appellants 
    also say that because they made a formal settlement offer under R. 37 of the 
    Rules of Court, they should recover double costs in accordance with that rule.

[3]

The facts can be stated in chronological form.

[4]

On 10 December 1998, in foreclosure proceedings, KCT obtained personal 
    judgment against Mr. Dobinson in the amount of $56,996.79.

[5]

Pursuant to a writ of seizure and sale dated 13 July 1999, a bailiff 
    acting on behalf of KCT in the foreclosure action seized 50 shares of Marene 
    owned by Mr. Dobinson.  Mr. Kouvousis owned the other 50 shares in the company.  
    The court bailiff advertised the seized shares for sale but received no offers.

[6]

On 14 July 1999, Mr. Kouvousis and Mr. Dobinson caused Marene to issue 
    9,900 shares to Mr. Kouvousis, thereby purporting to reduce Mr. Dobinsons 
    interest in the company to a nominal amount.  At trial, they claimed that 
    this was done pursuant to an agreement made between them in 1997.  Mr. Kouvousis 
    pleaded that he was the beneficial owner of Mr. Dobinsons fifty shares under 
    this agreement and testified that allotment of the 9,900 shares was for the 
    purpose of realizing on that interest.  However, the trial judge rejected 
    this evidence and found that the sole purpose of the defendants in making 
    the share allotment was to delay or hinder KCT in its efforts to execute against 
    Mr. Dobinsons shares in satisfaction, or partial satisfaction, of KCTs judgment 
    against Mr. Dobinson.  The appellants now take no issue with those findings 
    or with the characterization of their conduct as being egregious.

[7]

On 12 January 2000 Mr. Dobinson made an assignment in bankruptcy and 
    E. Sands & Associates Inc. was appointed trustee.  Mr. Dobinsons sworn 
    statement of affairs disclosed the fifty shares, the fact of their seizure, 
    and an assertion that they had no value.  Two months later, the bailiff delivered 
    the fifty seized shares to the trustee.  The trustee took no steps to realize 
    on their value for the benefit of the estate.

[8]

In January 2001, an order was made in the bankruptcy proceedings discharging 
    Mr. Dobinson from bankruptcy.  As of the date of trial at least, the trustee 
    was not discharged.

[9]

On 17 May 2001 KCT commenced this action against Marene, Mr. Kouvousis 
    and Mr. Dobinson claiming,
inter alia
, damages for conspiracy as well 
    as interim and permanent injunctive relief restraining Marene from allotting 
    and issuing shares.  In a later amendment to its statement of claim, KCT sought 
    special costs against all three defendants.

[10]

On 13 September 2001 Marene and Mr. Kouvousis delivered a formal offer 
    under R. 37 to settle the action upon payment by them to KCT of $100 plus 
    costs.  KCT never accepted the offer.

[11]

A year later, on 6 September 2002, Mr. Kouvousis with the concurrence 
    of Mr. Dobinson, caused Marene to unwind the allotment of the 9,000 shares 
    to him.  This resulted in the share structure of Marene being restored so 
    that each shareholder held fifty shares, Mr. Dobinsons shares still being 
    held by the trustee.  This was done because it was discovered that the allotment 
    did not meet certain technical requirements of the
Company Act
, 
    not on the basis that it was fraudulent.

[12]

On 17 June 2004, KCT obtained an order from a master of the court pursuant 
    to s. 38 of the
Bankruptcy and Insolvency Act
permitting it 
    to bring the within action.  The order authorized KCT to continue its action 
    against the three defendants for damages resulting from a fraudulent share 
    issuance by [Marene].

[13]

On 12 August 1994, in compliance with the masters order, the trustee 
    executed an assignment of its interest in the action to recover damages arising 
    out of the share allotment.

[14]

The trial of the action took place from 8 February to 11 February 2005 
    and the trial judge, Mr. Justice Wong, gave oral judgment on 21 February 2005.  
    As already noted, he ordered transfer of Mr. Dobinsons shares from the trustee 
    to KCT.  He later refused to hear argument that the court was without jurisdiction 
    to make that order.

[15]

As I have mentioned, the trial judge did not accept the evidence of 
    the personal defendants as to the reason for the share allotment.  He found 
    that there was no agreement between them for Mr. Dobinson to relinquish his 
    equity in Marene to Mr. Kouvousis.  He also found that the share allotment 
    was a contrivance to delay or hinder KCTs realization on the shares of Mr. 
    Dobinson in Marene.  He stated the applicable law with respect to civil conspiracy 
    as follows:

[31]  
    The elements of conspiracy are discussed in the case of
Can-Dive Services 
    Ltd. v. Pacific Coast Energy Corp.
(1993) B.C.J. No. 2958 (B.C.C.A.) 
    where the court held at paragraph 5:

Accordingly, 
    the following elements must be proved:

1.         
    an agreement between two or more persons;

2.         
    concerned action taken pursuant to the agreement;

3.         
    (i) if the action is lawful, there must be evidence that the conspirators 
    intended to cause damage to the plaintiff;

(ii) if the action is unlawful, there must at least be evidence that the conspirators 
    knew or ought to have known that their action would injure the plaintiff (i.e. 
    constructive intent);

(4)        
    actual damage suffered by the plaintiff.

[16]

The trial judge found that elements of 1 to 3(1) of the tort were established 
    by KCT but he was unable to find that KCT suffered damage as a consequence.  
    He did not discuss the evidence with respect to the value of Marene but the 
    evidence did disclose that the company owns real property in Fort St. John.  
    It is said that charges against the property and perhaps other corporate debt 
    total more than the value of the property.  It appears from his reasons that 
    the trial judge concluded that the shares in Marene were of negligible value, 
    more on the basis of the fact that the shares did not sell while in the hands 
    of the bailiff.  But he did not find that the shares were worthless.  He merely 
    found that sufficient value was not shown to give rise to an assessment of 
    damages.

[17]

This action, however, was not just about damages arising out of share 
    manipulation.  It was also about protecting the integrity of the Dobinson 
    shares in case of a future increase in the value of the company.  Reversal 
    of the share allotment by the defendants did not prevent future manipulation 
    by them of the share structure to the detriment of the bankrupt estate and 
    to KCT, the only creditor of the estate willing to pursue the matter.  Therefore, 
    it made some sense for KCT to pursue the action in order to obtain the injunctive 
    relief it claimed from all three defendants.  That relief became unnecessary 
    because of the decision of the trial judge to order transfer of the shares 
    to KCT but, in my opinion, it was relief to which KCT had established entitlement.  
    It was relief that ought to have been granted if the share transfer had not 
    been ordered.

[18]

There is some merit in the argument of the appellants that the order 
    transferring the shares from the trustee to KCT did not arise from the pleadings.  
    KCT, on the other hand, says it was open to the trial judge to make the order 
    on the basis of such further and other relief [the court] may deem meet and 
    just in its prayer for relief.  I do not think it is advisable for us to 
    resolve the issue because the parties affected by the order are not before 
    us.  The trustee was not made a party on the appeal and Mr. Dobinson, the 
    original owner of the shares, did not appeal with respect to their disposition.  
    We are told that the trustee has complied with the order by transferring the 
    shares to KCT.  The appellants who are before us have no status with respect 
    to disposition of the shares just as they would have no basis for interfering 
    if the trustee had decided to sell the shares to KCT.  Therefore, the order 
    as to transfer of the shares must stand.

[19]

On the issue of costs, the trial judge simply said:  This is a case 
    for special costs.  There was reprehensible conduct by way of fraudulent conveyance 
    giving rise to the litigation as well as misconduct within the litigated by 
    way of the concocted contribution agreement defence.  One set of special costs 
    are therefore awarded to the plaintiff against all defendants.

[20]

The appellants contend that under R. 37 they were entitled to double 
    costs from the appropriate date under the rule.  They say that their offer 
    exceeded recovery by KCT of valueless shares.  I disagree.  The offer was 
    nominal and did not address what the litigation was really about.  The offer 
    did not include consent to an order that the share allotment be reversed.  
    When the share allotment was reversed a year later, it was done only for technical 
    reasons under corporate law and KCT continued to have a legitimate concern 
    to prevent, by way of injunctive relief, further attempts by the defendants 
    to water down the value of the Dobinson shares.  The willingness of the personal 
    defendants to continue to practice their deception during trial, and the finding 
    of the trial judge with respect to their credibility and their intent, make 
    the decision of KCT to continue to pursue the action reasonable.  Establishment 
    at trial by KCT of the basis for injunctive relief by itself exceeded the 
    nominal offer made by Mr. Kouvousis and Marene under R. 37, regardless of 
    whether the order transferring the shares was properly made.  I would not 
    disturb the costs order made by the trial judge.

[21]

I would dismiss the appeal.

[22]

ROWLES, J.A.
: I agree.

[23]

RYAN, J.A.
: I agree.

[24]

ROWLES, J.A.
: The appeal I dismissed.

The Honourable Mr. Justice Low


