STACKARD v 1256009 ALBERTA LTD

The Plaintiff, the Estate of Nora Stackard, applied for declarations concerning ownership of a transferred mortgage and its proceeds, restitution of allegedly misappropriated funds, contempt findings, and related relief.

The Plaintiff alleged that the corporate Defendant (the “Corporation”) and Rosa Dorath, the representative of the Defendant, the Estate of Arthur Stackard (Nora’s son), breached a Consent Order that prohibited the use of mortgage proceeds pending determination of ownership. The Plaintiff sought findings of civil contempt arising from withdrawals from the Corporation’s bank account and later tax-related payments. The Plaintiff also sought costs against Defendant counsel personally on account of, among other things, the counsel’s refusal to accept service by email.

Nora Stackard transferred a $1.7 million vendor-takeback mortgage to the Corporation, controlled by her son, Arthur, under a hastily drafted Mortgage Transfer Agreement (“MTA”) intended to protect Nora’s finances. A central issue in this case was whether the MTA transferred the beneficial ownership of the mortgage and whether any mortgage proceeds were misappropriated during Nora's lifetime. The dispute arose within a longstanding family conflict over control of Nora and her assets, with mistrust between her children (Arthur, Deborah, and Alex) influencing key decisions about her finances, estate planning, and care. The Court found that this conflict permeated the parties' Actions and complicated the administration of the mortgage proceeds, particularly after Arthur's death, when Rosa assumed control of the Corporation and withheld funds intended for Nora's living expenses.

Justice Eamon carefully limited the evidence to be considered, rejecting subjective intentions, after-the-fact opinions, and irrelevant materials when interpreting the MTA, emphasizing that only objective evidence and legally admissible surrounding circumstances could be used. Eamon J. held that the MTA was not a binding contract, admitted the prior Affidavits of deceased witnesses Nora and Alex because the opposing party had adequate opportunities to cross-examine them, and ruled that Arthur's communication with counsel was not protected by solicitor-client privilege but ultimately gave it no evidentiary weight due to its unreliability.

Justice Eamon found that the MTA was not supported by consideration and was instead a gratuitous transfer, giving rise to a resulting trust. The mortgage was transferred to the Corporation solely to protect the Plaintiff's financial interests and facilitate banking arrangements, with no intention to confer a beneficial interest on the Corporation. Eamon J. determined that the Corporation breached its obligations under the MTA by failing to pay the Plaintiff's living expenses and misappropriating mortgage proceeds for unrelated purposes.

In relation to the claim for costs against Defence counsel, the Court acknowledged that if counsel did not specifically provide an address for the transmission of information or data pursuant to Rule 11.21, then the counsel was not obliged to accept service by email.

In assessing the Application for Civil Contempt against the Corporation and Rosa, Justice Eamon applied Rule 10.52 and held that contempt required proof beyond a reasonable doubt that the Order was clear, the alleged contemnor had actual knowledge of it, intentionally breached it, and lacked a reasonable excuse. The Court emphasized that corporate officers bound by an Order must exercise due diligence to ensure compliance. Eamon J. found that the Consent Order unambiguously prohibited use of mortgage proceeds in the Corporation’s account. Rosa knew of the Consent Order, failed to investigate and stop the withdrawals, and had no reasonable excuse for her inaction. However, Justice Eamon distinguished between Rosa and the Corporation itself, finding that the Corporation was not directly bound by the relevant prohibition.

Eamon J. concluded that Rosa was in contempt for failing to ensure compliance with the Consent Order and for knowingly or wilfully blindly permitting continued withdrawals of mortgage proceeds. The Court dismissed the contempt Application against the Corporation and rejected contempt allegations relating to later tax payments. Justice Eamon also declined to award costs against defence counsel pursuant to Rule 10.50 because there was no evidence of serious misconduct or gross neglect.