Walsh,
J:—This
action
arises
out
of
the
seizure
in
the
hands
of
plaintiff
companies
of
certain
assets
allegedly
belonging
to
them
for
income
tax
and
other
tax
arrears
owed
by
one
Kenneth
Richard
Allen
and
a
company
owned
and
operated
by
him
and/or
his
wife
Emily
Allen
known
as
Ken
Allen
and
Sons
Limited,
the
said
assets
consisting
primarily
of
purebred
Percheron
show
horses
and
farm
equipment
required
in
connection
with
the
maintenance
and
showing
at
exhibitions
of
the
said
horses.
Plaintiffs
allege
that
Mr
Allen
has
no
beneficial
interest
or
status
of
a
shareholder
in
either
of
the
plaintiff
companies
nor
any
interest
in
their
assets,
but
that
following
the
seizure
some
of
the
said
horses
were
removed
from
the
property
of
the
Ontario
company
(hereinafter
referred
to
as
a
matter
of
convenience
as
the
numbered
company)
in
Markdale,
Ontario,
and
that
this
seizure
made
by
sheriffs
in
Markdale
and
in
Maple
Leaf,
Ontario,
where
the
Maple
Leaf
Lumber
Company
carried
on
a
lumbering
operation,
but
where
some
of
the
horses
were
also
kept
at
the
time
of
seizure,
was
done
without
sufficient
inquiry
having
been
made
as
to
the
ownership
of
the
assets
and
resulted
in
damages
to
plaintiffs
who
claim
$300,000
for
wrongful
seizure
and
detention,
and
also
in
order
that
defendant
give
up
forthwith
possession
of
the
assets
seized
in
good
condition.
There
have
been
a
number
of
preliminary
motions
before
the
matter
came
to
trial,
including
an
order
by
Mahoney,
J
on
October
9,
1980,
nearly
four
months
after
the
seizures
on
June
17,
1980,
directing
that
the
assets
held
under
technical
seizure
at
the
two
places
should
remain
in
the
physical
possession
of
plaintiffs
who
might
however
sell
them
provided
that
any
payments
be
held
by
plaintiffs’
solicitor
in
trust
and
that
he
might
deduct
and
remit
to
plaintiffs
their
operating
expenses
for
the
months
of
October,
November
and
December,
1980,
as
agreed
upon
by
the
parties
or
failing
such
agreement
as
fixed
by
the
court,
and
that
any
sums
over
and
above
this
to
be
paid
to
the
sheriffs
of
the
county
in
which
the
particular
asset
was
located.
Actually
the
horses
which
had
been
removed
from
Markdale
at
the
time
of
the
seizure
were
returned
some
three
days
later
on
or
about
June
1,
1980,
but
remained
under
technical
seizure.
Prior
to
the
order
of
Mahoney,
J
when
the
horses
were
returned
to
plaintiffs
under
technical
seizure
it
was
on
plaintiffs’
undertaking
not
to
sell
them
without
the
prior
consent
of
the
sheriffs
and
that
the
proceeds
of
any
sale
would
then
be
deposited
in
the
account
of
the
sheriffs
pending
the
adjudication
of
the
action.
This
left
little
incentive
for
plaintiffs
to
endeavour
to
sell
the
horses,
and
effectively
stopped
the
flow
of
funds
part
of
which
would
be
required
for
their
maintenance,
as
recognized
in
Mahoney’s,
J
judgment.
Defendant,
in
addition
to
denying
that
there
was
any
negligence
in
the
seizure
or
that
any
damages
were
caused
by
it,
as
it
was
carried
out
under
the
supervision
of
veterinarians
and
other
person
with
specialized
knowledge
and
experience
to
care
for
the
transportation
and
boarding
of
horses,
also
relies
onThe
Fraudulent
Conveyance
Act,
RSO
1970,
c
182,
sections
2
and
3,
stating
that
the
purported
sale
of
assets
by
Mrs
Emily
Allen
to
the
numbered
corporation
in
June
1978
was
a
fraudulent
conveyance
with
the
purpose
of
defrauding
creditors
and
was
not
to
a
bona
fide
purchaser
for
good
consideration.
It
is
alleged
that
she
has
an
eventual
50%
future
interest
in
the
company
and
that
the
alleged
consideration
for
the
sale
was
a
promissory
note
in
the
amount
of
$100,000
payable
without
interest
in
June
1981,
which
amount
has
been
reduced
by
$50,000
(at
the
trial
it
was
brought
out
that
it
has
been
reduced
by
some
$64,000)
as
the
result
of
plaintiff
corporation
paying
off
creditors
of
Ken
Allen
with
her
concurrence.
Furthermore,
while
Ken
Allen
has
no
interest
in
the
numbered
corporation
he
has
been
personally
guaranteeing
bank
loans
to
it.
It
is
further
alleged
that
the
chattel
mortgage
between
Emily
Allen
and
Ken
Allen
and
Sons
Limited
in
1976
was
a
fraudulent
conveyance
for
the
purpose
of
defrauding
creditors
of
Ken
Allen
and
Sons
Limited,
no
consideration
having
been
given
by
her
for
it
and
that
it
was
granted
to
her
to
transfer
the
ownership
of
the
assets
to
defraud
creditors.
It
was
brought
out
in
proof
that
she
took
possession
of
the
assets
by
virtue
of
this
chattel
mortgage
and
sold
them
to
the
Ontario
companies.
It
is
further
alleged
that
gifts
to
the
minor
Randy
Allen
used
in
trade
for
the
purchase
of
a
Ford
Tractor
5600
in
May
1976
were
conveyances
to
defraud
creditors
of
Ken
Allen
and
Sons
Limited
as
was
the
purchase
of
this
tractor
in
the
name
of
Randy
Allen.
The
provisions
of
subsection
3(6)
of
the
Crown
Liability
Act,
RSC
1979,
c
c-38
are
also
invoked.
It
was
further
pleaded
that
in
the
event
that
the
sheriffs
were
negligent
in
the
conduct
of
the
seizure,
which
is
denied,
defendant
is
not
liable
for
the
alleged
negligence
of
the
sheriffs.
It
was
not
until
March
26,
1981,
that
a
Consent
Order
was
granted
complementing
the
other
decisions
of
Mr
Justice
Mahoney
on
October
9,
1980,
and
establishing
the
reasonable
operating
expenses
of
plaintiffs
for
the
months
of
October,
November
and
December
1980,
at
$2,500
per
month
and
directing
the
sheriff
forthwith
to
pay
to
the
solicitor
for
the
plaintiffs
the
sum
of
$2,950
held
at
that
time
by
the
sheriff
together
with
accumulated
interest
thereon.
On
March
20,
1981,
Cattanach,
J
permitted
defendant
to
amend
her
defence
so
as
to
plead
The
Fraudulent
Conveyances
Act
of
Ontario,
as
indicated.
It
was
argued
before
him
that
a
conveyance
that
is
fraudulent
and
void
as
against
creditors
is
merely
voidable
as
between
the
parties
to
it,
and
that
since
it
is
not
void
but
merely
voidable
there
must
be
a
positive
declaration
that
it
has
been
found
to
be
void
in
an
action
seeking
declaratory
relief,
and
that
a
Statement
of
Claim
seeking
to
declare
a
conveyance
to
be
fraudulent
and
void
is
not
within
the
jurisdiction
of
this
Court.
While
section
2
of
The
Fraudulent
Conveyances
Act
provides
that
such
a
conveyance
is
void
not
only
against
the
person
making
it
but
their
assigns
section
3
provides
that
this
does
not
apply
if
the
property
is
conveyed
upon
good
consideration
and
bona
fide
to
a
person
not
having
at
the
time
of
the
conveyance
to
him
notice
or
knowledge
of
the
intent
set
forth
in
section
2.
In
rendering
judgment,
Cattanach,
J
stated
that
he
could
see
no
impediment
to
pleading
a
provincial
law
as
a
defence
in
a
matter
before
the
court
as
is
frequently
done
with
respect
to
the
Statute
of
Frauds
and
Statute
of
Limitation.
He
therefore
permitted
The
Fraudulent
Conveyances
Act
to
be
pleaded
as
a
defence.
He
found
that
the
amendment
was
essential
to
bring
the
complete
issues
in
dispute
before
the
trial
judge.
While
there
is
considerable
doubt
in
my
mind
as
to
whether
the
present
proceedings
are
the
best
or
even
the
proper
method
for
raising
the
question
of
plaintiffs’
ownership
of
the
assets
seized,
certainly
defendant
must
be
entitled
to
plead
in
defence
that
the
plaintiffs
do
not
have
a
valid
title
to
the
assets,
not
having
obtained
them
in
good
faith,
“not
having
at
the
time
of
the
conveyance
notice
or
knowledge
of
the
intent”
of
the
vendor
to
defraud
creditors
and
in
particular
defendant.
Pursuant
to
section
223
of
the
Income
Tax
Act
amounts
due
to
the
Receiver
General
of
Canada
for
taxes
may
be
certified
and
on
production
to
the
Federal
Court
of
the
certificate
which
is
registered
in
the
court
this
has
the
same
effect
as
if
a
judgment
had
been
obtained
in
the
court
for
the
amount
due.
When
a
seizure
is
made
as
in
the
present
case
and
a
third
party
claims
ownership
of
some
or
all
of
the
assets
seized,
the
appropriate
procedure
is
for
it
to
make
an
opposition
to
seizure
in
which
the
ownership
can
be
determined
in
a
summary
manner.
The
burden
is
on
the
third
party
to
establish
ownership
of
the
assets.
Instead
of
doing
this
plaintiffs
by
bringing
the
present
proceedings
for
damages
for
alleged
unlawful
seizure
of
assets
belonging
to
them
are
commencing
with
the
premise
that
they
own
the
assets
and
attempting
to
impose
the
burden
on
defendant
to
prove
that
they
do
not.
While
I
do
not
suggest
that
the
decision
of
this
case
will
depend
on
the
issue
of
burden
of
proof,
certainly
plaintiffs
by
proceeding
in
this
manner
have
to
give
defendant
the
opportunity
of
making
this
proof,
and
cannot
contend,
as
they
did
before
Cattanach,
J
that
this
court
is
without
jurisdiction
to
hear
uch
a
defence,
or
that
defendant
should
have
taken
proceedings
in
the
Ontario
courts
under
The
Fraudulent
Conveyances
Act
to
set
aside
the
acquisition
of
the
assets
by
plaintiffs
before
seizing
them.
Plaintiffs
contend
that
before
bringing
the
present
proceedings
they
sought
advice
and
were
informed
that
they
could
not
proceed
by
way
of
opposition
to
seizure
to
recover
the
assets
seized
and
that
there
was
a
constitutional
question
as
to
whether
the
Ontario
Sheriffs
who
made
the
seizure
were
subject
to
the
jursidiction
of
this
court.
I
seriously
question
the
validity
of
this
advice
in
view
of
subsection
56(4)
of
the
Federal
Court
Act
which
reads
as
follows:
56.
(4)
Every
claim
made
by
any
person
to
property
seized
under
a
writ
of
execution
or
other
process
issued
out
of
the
Court,
or
to
the
proceeds
of
the
sale
of
such
property,
shall,
unless
otherwise
provided
by
the
rules,
be
heard
and
disposed
of
as
nearly
as
may
be
according
to
the
procedure
applicable
to
like
claims
to
property
seized
under
similar
writs
or
process
issued
out
of
the
courts
of
the
province.
Defendant
refers
to
the
Ontario
Rules
of
Practice
in
Interpleader
Proceedings,
Rules
632
and
following,
and
it
appears
to
me
that
this
would
have
been
a
much
more
rapid
and
economical
manner
for
plaintiffs
to
assert
their
claim
to
the
assets
seized
than
the
present
proceedings
which
stress
the
so-called
damages
claimed
and
only
incidentally
ask
for
the
return
of
the
property
seized
on
the
basis
of
their
claim
that
they
are
the
owners
of
it.
Since,
in
order
to
render
a
judgment
in
the
present
proceedings
it
is
unnecessary
to
decide
whether
or
not
a
different
procedure
would
have
been
more
appropriate
I
will
refrain
from
doing
so
however.
During
the
course
of
the
proceedings
the
Consent
Order
of
March
19,
1981,
fixing
reasonable
operating
expenses
of
plaintiffs
for
the
months
of
October,
November
and
December
1980,
was
modified
by
a
further
order
of
Mahoney,
J
on
April
7,
1981,
permitting
the
deduction
of
expenses
of
January,
February,
March,
April
and
May
1981
in
the
amount
of
$2,050
per
month
with
the
authority
to
sell
property
being
limited
to
include
only
the
property
listed
in
the
Schedule
to
the
Order.
This
was
apparently
the
result
of
a
confession
of
judgment
by
defendants
dated
March
19,
1981,
to
the
effect
that
part
of
the
property
seized
by
the
sheriffs
identified
in
Schedule
A
was
to
be
released
from
technical
seizure,
not
being
subject
to
seizure
pursuant
to
writs
of
execution
against
the
property
of
Kenneth
Allen
or
Kenneth
Allen
&
Sons
Limited.
The
list
of
properties
so
released
is
identical
to
that
included
in
Justice
Mahoney’s
order.
The
assets
remaining
in
dispute
are
those
shown
on
a
list
produced
as
Exhibit
D3
at
trial
entitled
“Assets
Which
the
Plaintiffs
Either
Have
not
Proven
Ownership
of
or
may
have
Acquired
Ownership
as
a
Result
of
a
Fraudulent
Conveyance”.
Since
certain
items
were
deleted
and
others
added
as
a
result
of
evidence
during
the
course
of
the
trial
it
may
be
convenient
to
reproduce
it
here:
EQUIPMENT
Ford
Tractor
Four
Wheel
EZ
Loader
1974
Green
Chevy
Cab
(described
as
a
GM
Tractor
on
Schedule
A)
Ford
Riding
lawn-mower
Horse
drawn
manure
spreader
Beatty
feed
wagon
yellow
fertilizer
spreader
New
Holland
baler
and
thrower
red
hay
wagon
brown
four
wheel
show
wagon
show
harnesses
for
six
horses
green
and
yellow
two
wheel
show
cart
Red
show
wagon
Snowmobile
Snow
cutter
Black
and
red
show
buggy
Black
and
red
2
seater
sleigh
HORSES
Cindy
Jack
Clyde
four
colts
8
unidentified
horses
seized
at
Hastings
The
main
issue
is
of
course
whether
the
numbered
company
acting
through
its
principals
was
a
bona
fide
purchaser
and
has
acquired
the
property
for
good
consideration
and
not
having
at
the
time
of
the
conveyance
knowledge
of
any
intent
on
behalf
of
the
vendors
to
defraud
their
creditors,
if
such
was
in
fact
the
case,
and
hence
within
the
exception
of
section
3
of
The
Fraudulent
Conveyances
Act.
The
secondary
issue
is
what
if
any
damages
plaintiffs
have
suffered
and
whether
in
any
event
defendant
can
be
held
liable
for
them.
The
evidence
taken
as
a
whole
reveals
that
the
Allens
are
a
very
closely
knit
family,
have
always
worked
together
at
Kenneth
Allen’s
farming
enterprise.
He
is
a
very
successful
breeder
of
horses,
especially
Percheron
draft
horses
which
he
also
trains
to
work
in
teams,
and
exhibits
and
competes
successfully
in
many
fairs
and
exhibitions
including
the
Royal
Winter
Fair
in
Toronto
where
his
horses
have
won
many
ribbons
and
awards.
He
carried
on
the
business
on
owned
and
rented
farms
in
Markdale,
Ontario,
using
the
name
Allendale
Farms
in
connection
with
his
horse
breeding
business
which
appears
to
have
been
successful.
Unfortunately
for
him
he
also
commenced
a
real
estate
development.
His
subdivision
plan
was
approved
and
according
to
his
evidence
he
spent
some
$500,000
on
the
property
to
install
services.
He
had
purchased
prefabricated
houses
and
14
of
them
had
been
sold
to
customers
to
put
on
the
lots.
It
was
only
when
the
plans
were
well
advanced
and
large
sums
of
money
had
been
spent
that
he
found
he
was
unable
to
get
hydro
services
for
the
property
and
he
was
unable
to
return
the
deposits
paid
so
a
number
of
judgments
were
obtained
against
his
company.
He
was
carrying
on
his
business
under
the
name
of
Ken
Allen
&
Sons
Limited
and
was
apparently
the
sole
shareholder
save
for
qualifying
shares.
The
financial
statement
of
the
company
as
of
October
31,
1975,
did
not
show
a
state
of
insolvency
as
assets
are
listed
at
$1,771,296
and
liabilities
$1,339,483
but
there
was
an
absence
of
adequate
cash
flow,
current
assets
being
shown
in
the
amount
of
$325,166
which
however
included
$166,461
as
inventory
of
homes
and
furniture,
and
current
liabilities
of
$246,181.
In
any
event
Kenneth
Allen
was
assessed
for
income
tax
liability
for
the
years
1966,
1967
and
1968
by
a
certificate
issued
by
the
Federal
Court
on
May
23,
1980,
for
$36,555.41
with
interest
at
6%
on
$24,297.66
from
February
1971.
Further
certificates
were
registered
in
the
court
on
April
8,
1980,
for
income
tax
due
for
the
1969
to
the
1972
years,
Unemployment
Insurance
payments
and
Canada
Pension
Plan
payments
for
the
same
years
in
the
total
amount
of
$7,944.93
with
interest
on
$4,238
from
March
29,
1980.
A
certificate
was
registered
in
the
Federal
Court
on
May
20,
1977,
against
Ken
Allen
and
Sons
Limited
for
amounts
due
as
of
March
21,
1977
for
income
tax,
Canada
Pension
Plan
and
the
Unemployment
Insurance
dues.
Other
certificates
were
also
registered
against
Ken
Allen
&
Sons
Limited.
The
detailed
amounts
are
not
of
significance
in
the
present
proceedings
but
Mr
William
O’Neil
of
the
Department
of
National
Revenue
testified
and
stated
that
writs
had
been
issued
against
both
Ken
Allen
and
Sons
Limited
and
Kenneth
Richard
Allen
both
in
the
Supreme
Court
of
Ontario
and
the
Federal
Court
of
Canada,
the
total
tax
indebtedness
of
Ken
Allen
being
$62,688.15
and
Ken
Allen
and
Sons
Limited
$7,264.59.
What
is
significant
is
that
Mr
Allen
must
have
been
well
aware
of
his
tax
indebtedness,
commencing
from
the
years
in
which
it
was
incurred
and
long
before
the
certificates
of
judgment
were
registered
against
him
and
the
company,
which
certificates
in
turn
were
registered
before
the
incorporation
of
the
plaintiff
companies.
Kenneth
Allen’s
wife,
Emily
Allen,
for
her
part
had
raised
a
family
of
seven
children
and
as
she
herself
testified
had
been
too
fully
occupied
in
doing
so
to
take
gainful
employment.
The
children
all
worked
on
the
farm
from
a
very
early
age,
including
Randy
Allen
who
is
now
married
and
has
a
farm
of
his
own
and
whom
I
found
to
be
a
very
clear
and
dependable
witness.
At
the
age
of
14
in
1972
he
claims
he
purchased
a
Cockshutt
tractor
in
his
own
name.
On
May
4,
1976,
this
was
traded
by
him
as
part
of
a
downpayment
for
a
Ford
diesel
tractor
purchased
by
him
at
a
price
of
$11,537,
a
trade
in
allowance
of
$6,887
being
allowed
including
$4,500
for
the
Cockshutt
tractor
leaving
a
balance
of
$4,650
due.
Time
payments
of
$1732.08
brought
this
to
$6,382.08
which
he
undertook
to
pay
in
payments
of
$132.96
each
month
beginning
June
4,
1976.
After
he
had
made
about
half
of
these
payments
he
sold
it
to
the
plaintiff
numbered
company.
The
Cockshutt
tractor
used
as
a
trade
in
appears
on
the
balance
sheet
of
Ken
Allen
and
Sons
Limited
as
at
May
15,
1972,
at
a
value
of
$6,000
so
it
would
appear
that
if
he
was
allowed
to
use
it
as
a
trade
in
in
1976
when
he
bought
the
Ford
tractor
this
was
done
in
the
nature
of
a
gift
from
the
company
to
him.
Certainly
in
1972
at
age
14
he
would
not
have
been
in
a
position
to
buy
a
$6,000
tractor
and
pay
for
it
himself.
He
testified
that
he
had
been
working
on
the
farm
and
this
was
given
to
him
in
compensation,
and
that
he
had
had
some
help
from
his
mother
in
connection
with
the
cash
payment
at
the
time.
There
is
no
deed
of
transfer
from
the
company
to
him
however
nor
any
documents
to
corroborate
this
evidence.
When
he
sold
the
new
tractor
to
the
numbered
company
it
took
over
the
remaining
payments
and
the
company
owed
him
some
$9,000
for
his
equity
in
the
new
tractor.
The
company
never
paid
him
for
it
however
but
instead
he
authorized
the
company
to
make
the
payments
to
his
mother
and
it
was
allegedly
set
up
as
a
credit
in
her
favour
in
the
company’s
books.
Here
again
nothing
was
done
in
writing
by
way
of
assigning
his
claim
to
his
mother,
but
he
states
that
he
believes
he
owed
her
about
$7,000
at
the
time.
This
is
one
of
the
items
in
which
defendant
disputes
plaintiffs’
ownership.
Leo
Norgard
who
is
in
construction
business
in
Toronto
and
Helen
Walker,
a
real
estate
dealer
he
has
known
for
five
years
and
whom
he
plans
to
marry
both
testified.
They
had
bought
a
house
from
Allen
in
Markdale,
Ontario,
for
skiing
in
February
or
March
of
1978,
having
had
no
dealings
with
him
before
though
they
knew
him
around
the
community.
Mrs
Walker
was
very
fond
of
horses
and
they
knew
Alien’s
reputation
as
a
good
breeder
and
thought
it
would
be
interesting
to
enter
into
a
business
of
their
own
buying
and
selling
horses
and
exhibiting
them
at
shows.
They
incorporated
their
numbered
company
on
May
5,
1978,
the
sole
shareholders
being
Mrs
Walker
and
himself.
Mrs
Allen
was
to
have
put
the
horses
and
equipment
she
claimed
she
owned
into
it
and
they
were
to
put
up
cash.
Kenneth
Allen
was
to
be
employed
by
the
company
to
manage
its
business
at
a
salary
of
$300
a
week.
According
to
a
letter
dated
September
18,
1980,
from
their
counsel
to
counsel
for
the
Department
of
Justice
the
total
financial
contributions
of
Mr
Norgard
and
Mrs
Walker
to
or
on
behalf
of
the
numbered
company
amounted
to
$71,002.69
together
with
a
guarantee
of
the
company’s
indebtedness
in
the
amount
of
$121,000;
cheques
and
bank
statements
corroborating
this
are
attached.
It
is
definitely
necessary
to
examine
a
most
extraordinarily
ambiguous
agreement
drawn
by
the
attorney
they
retained
at
the
time
they
commenced
business
with
the
Allens.
The
agreement
provides
that
the
“parties”
have
caused
the
numbered
company
to
be
incorporated
to
engage
in
construction,
contracting,
farming
and
development
work.
No
mention
is
made
of
the
horses
although
this
was
their
principal
interest,
nor
is
any
mention
made
of
breeding
of
horses
in
the
charter
of
the
company.
The
agreement
provides
that
Walker
and
Norgard
will
guarantee
a
bank
loan
between
$25,000
and
$30,000.
Paragraph
4
states
“All
assets
listed
in
Schedule
A
are
to
be
conveyed
to
the
company
by
the
parties
hereto
by
way
of
a
loan*
to
the
said
company
and
the
company
shall
provide
the
parties
hereto
with
evidence
of
indebtedness
for
all
such
assets
so
transferred”.
Schedule
A
was
the
list
of
horses
and
other
equipment
conveyed.
Paragraph
7
states
“Advances
of
funds
or
assets
to
the
company
by
parties
hereto
which
constitute
loans*
shall
bear
no
interest
for
one
year
from
the
date
of
such
advances
to
the
company;
thereafter
interest
shall
be
borne
at
the
rate
of
10%
per
annum
and
interest
shall
accrue
until
there
are
sufficient
profits
to
allow
payments
out
of
the
interest”.
Paragraph
9
states
“All
shares
of
the
company
384238
Ontario
Limited
shall
be
owned
by
Walker
and
Norgard
jointly
until
the
company
has
earned
a
total
of
$30,000
pre-tax
arid
allowing
5%
depreciation
annually.
Fifty
percent
of
the
outstanding
common
shares
will
be
transferred
to
Emily
Allen”.
Paragraph
10
states
“Ken
Allen
will
have
cheque
writing
authority
for
the
company
for
day
to
day
operations.”
Paragraph
16
provides
that
all
major
undertakings
including
the
acquisition
of
property
or
disposition
of
substantial
assets
or
entering
major
contracts
and
remuneration
of
the
parties
“shall
require
unanimous
consent
from
the
parties
hereto”.
(This
would
include
the
Allens
who
are
parties.)
Paragraph
19
states
“Any
future
issuing
of
shares
shall
be
made
to
the
parties
in
accordance
with
the
intention
of
the
agreement
so
that
the
Allens
will
own
50%
and
Walker-Norgard
will
own
50%
subject
to
the
provisos
of
the
shares
initially
being
owned
by
Walker
and
Norgard
as
set
out
above”.
Paragraph
25
provides
that
all
liability
arises
from
the
operations
of
the
company’s
business
including
the
loans
which
have
been
guaranteed
by
any
or
all
the
parties
is
to
be
shared
equally
by
the
parties
hereto,
ie
Helen
Walker
and
Leon
Norgard
50%
and
Emily
Allen
50%.
Despite
the
use
of
the
word
“loan”
in
Paragraph
4
Mr
Norgard
and
Mrs
Walker
as
well
as
Mrs
Allen
insisted
that
the
assets
were
in
fact
sold
by
her
to
the
company.
The
attorney
who
drew
the
agreement
stated
that
he
always
uses
the
term
“loan”
for
what
he
deems
to
be
tax
advantages
when
funds
In
payment
of
the
assets
are
withdrawn
from
the
company.
Some
support
for
plaintiffs’
contention
that
it
was
really
a
sale
and
not
a
loan
is
found
in
an
Indenture
of
Sale
made
June
1,
1978
(the
same
date
as
the
agreement)
between
Emily
Allen
and
the
numbered
company
in
which
she
sells
all
the
items
listed
in
Schedule
A
(horses
and
equipment)
which
she
states
she
has
acquired
by
default
on
a
chattel
mortgage
which
she
held
on
them.
(I
will
deal
with
her
alleged
title
to
the
assets
later
so
as
not
to
digress
here.)
On
the
same
date
the
numbered
company
gave
Emily
Allen
a
promissory
note
for
$100,250
payable
three
years
after
date,
that
is
to
say
on
June
1,
1981.
No
mention
is
made
of
interest.
The
company’s
bankers
the
Canadian
Imperial
Bank
of
Commerce
obtained
personal
guarantees
from
all
the
parties
including
Ken
Allen.
The
general
security
agreement
with
the
bank
refers
to
the
numbered
company
as
carrying
on
business
as
Allendale
Farms.
Another
company
was
incorporated
early
in
1979
known
as
Maple
Leaf
Lumber
company
which
carries
on
a
lumbering
business
in
the
County
of
Hastings
at
some
distance
from
Markdale
in
the
County
of
Grey.
The
shares
of
the
lumber
company
are
owned
by
the
numbered
company.
Kenneth
Allen
was
given
a
share
in
it
and
on
April
20,
1979,
signed
a
declaration
of
trust
indicating
that
he
was
holding
it
for
the
numbered
company.
He
operated
the
lumber
company
also
and
as
he
spent
most
of
his
time
there
some
of
the
horses
were
there
at
the
time
of
the
seizure
which
is
why
there
are
two
separate
sheriffs’
writs
of
seizure.
Mr
Norgard
testified
that
as
the
Allen
horse
breeding
business
had
always
been
known
as
Allendale
Farms
the
numbered
company
continued
to
use
this
as
a
trade
name.
When
the
numbered
company
purchased
the
assets
from
Emily
Allen
he
accepted
her
declaration
that
she
owned
them
by
virtue
of
a
chattel
mortgage
and
made
no
further
inquiries
nor
did
he
check
to
find
if
she
had
any
creditors.
He
stated
that
although
the
Allens
received
house
and
expenses
Kenneth
Allen
was
never
paid
any
salary
although
subsequently
Emily
Allen
was
paid
a
salary
for
looking
after
the
books.
He
stated
that
it
was
understood
that
the
company
had
to
produce
a
profit
before
Allen
would
be
paid.
Some
of
the
Allen
creditors
were
bothering
the
numbered
company
however
so
at
Mrs
Alien’s
request
they
were
paid
off
to
the
extent
of
some
$65,000,
these
payments
being
deducted
from
the
amount
due
her
on
the
promissory
note.
These
payments
were
apparently
made
to
creditors
of
Kenneth
Allen
or
Ken
Allen
and
Sons
Limited
and
there
were
no
written
instructions
from
Mrs
Allen
to
this
effect.
The
payments
however
are
reflected
in
the
balance
sheet
of
the
numbered
company
on
October
1,
1978,
which
shows
notes
payable
in
the
amount
of
$89,343
and
as
of
the
same
date
in
1979
$42,248.
The
company
Ken
Allen
and
Sons
Limited
was
formally
dissolved
on
June
23,
1980.
The
actual
cheques
issued
allegedly
on
instructions
of
Mrs
Allen
to
pay
off
various
creditors
were
signed
by
Kenneth
Allen
since
the
banking
resolution
of
the
numbered
company
contained
the
extraordinary
provision
that
cheques
could
be
signed
by
either
Mrs
Walker,
Mr
Norgard
or
Mr
Allen.
While
Mr
Norgard
maintained
that
this
was
a
convenience
as
it
was
Allen
who
was
really
conducting
the
day
to
day
business
of
both
companies
and
that
major
cheques
were
only
issued
subject
to
his
authorization,
it
is
evident
that
both
Mr
Norgard
and
Mrs
Walker
took
very
little
interest
in
the
operations
of
the
company,
leaving
the
entire
operations
of
the
businesses
to
Mr
Allen,
and
continuing
to
use
the
name
Allendale
Farms
under
which
he
had
always
operated.
A
copy
of
the
Spring
1980
issue
of
the
Draft
Horse
Journal
published
in
the
United
States
and
said
to
be
widely
circulated
both
there
and
in
Canada
contained
a
half
page
ad
at
page
138
for
Allendale
Farms
stating
“Ken
Allen
owner”
plus
his
weekday
and
weekend
phone
numbers
and
“Harry
Burnside,
Farm
Manager”.
It
contains
the
statement
“Is
it
any
wonder
that
we
won
40
firsts,
24
seconds,
11
thirds,
two
fourths,
three
fifths
and
two
sixths
at
10
shows
under
10
different
judges
in
1979.
These
shows
include
the
Royal
Winter
Fair.”
While
some
attempt
was
made
to
explain
the
designation
of
Allen
as
owner
had
been
an
error
no
proof
was
submitted
that
the
numbered
company
ever
protested
to
the
publishers.
It
was
also
suggested
that
the
material
for
the
ad
might
have
been
prepared
by
Allen
himself
but
I
do
not
believe
that
Mr
Norgard
and
Mrs
Walker
or
the
numbered
company
can
avoid
responsibility
even
if
erroneous
statements
were
made
by
the
manager
to
whom
they
gave
a
completely
free
hand.
While
the
statement
in
the
advertisement
does
not
of
course
establish
the
ownership,
third
parties
had
every
reason
to
believe
that
there
had
been
no
change
whatsoever
in
the
operation
of
the
business
which
had
for
so
many
years
been
operated
by
Mr
Allen,
especially
as
he
was
given
a
free
hand
by
Mr
Norgard
and
Mrs
Walker
to
conduct
it
as
he
always
had.
While
Mr
Allen
was
forced
to
concede
that
Ken
Allen
and
Sons
Limited
was
virtually
bankrupt
in
1976
in
the
sense
of
not
being
able
to
pay
the
claims
of
its
creditors
as
they
became
due,
despite
the
excess
of
assets
over
liabilities
on
its
balance
sheet,
he
did
not
put
the
company
into
bankruptcy
but
merely
ceased
active
operation,
liquidating
some
of
the
property.
Defendant
produced
a
list
of
writs
of
execution
issued
against
Ken
Allen
and
Sons
Limited
in
1976
amounting
to
$237,108.56.
Both
he
and
Mrs
Allen
testified
that
they
wanted
to
pay
off
all
the
company’s
creditors
and
this
is
why
the
company
was
not
put
into
bankruptcy
and
why
she
instructed
the
numbered
company
to
pay
off
certain
creditors,
deducting
the
payments
from
the
amount
due
to
her.
While
this
attitude
is
highly
commendable
it
must
also
be
noted
that
had
the
company
gone
into
bankruptcy
the
Allens
most
probably
would
have
lost
the
horses
and
equipment.
Mr
Allen
strongly
denied
that
this
was
a
motivation
for
failing
to
do
so.
It
is
also
of
some
interest
to
note
that
while
some
of
the
Allen
creditors
have
been
paid
off
by
the
numbered
company
since
1978
no
attempt
was
made
to
make
any
payments
to
the
Minister
of
National
Revenue
for
the
taxes
due.
Mrs
Allen
testified
that
she
and
her
husband
had
lived
in
Markdale
for
13
years
but
that
he
moved
to
Maple
Leaf,
Ontario,
where
the
lumber
company
is
located
in
January
and
she
joined
him
there
in
June.
She
works
for
the
lumber
company
doing
office
work
and
also
has
kept
the
books
for
the
numbered
company
since
it
started
business.
In
what
well
may
have
been
a
Freudian
slip
but
is
somewhat
revealing
she
said
that
her
husband
had
moved
to
Maple
Leaf
when
Ken
“bought
the
lumber
company”
which
she
immediately
corrected
to
“the
numbered
company
bought
the
lumber
company”.
In
one
of
the
exhibits
produced
which
is
a
notice
published
in
the
Ontario
Gazette
on
March
15,
1980,
listing
various
companies
not
complying
with
The
Corporation
Tax
Act
of
1972
Ken
Allen
and
Sons
Limited
is
shown
as
having
been
incorporated
on
April
21,
1972.
She
was
unable
to
distinguish
between
assets
owned
by
it
and
assets
owned
by
Ken
Allen
personally.
When
questioned
as
to
the
origin
of
her
own
funds
she
was
especially
vague
stating
that
she
owned
a
certain
property
in
Grey
jointly
with
one
John
McArthur.
She
was
unable
to
establish
where
she
obtained
the
funds
to
put
into
this
property.
However
$22,500
cash
was
paid
to
one
Fred
Hines
who
sold
them
the
property
taking
a
mortgage
for
another
$30,000
on
April
24,
1970.
Further
sums
were
obtained
by
them
by
another
mortgage
later
in
the
same
year
but
this
need
not
concern
us
here.
On
October
27,
1970,
they
sold
the
property
to
Ken
Allen
and
Sons
Limited
for
$52,500
cash.
Mrs
Allen
testified
that
Mr
McArthur
was
paid
his
share
and
she
received
a
promissory
note
from
the
company.
On
the
same
day
Ken
Allen
and
Sons
Limited
mortgaged
the
property
to
an
investment
company
for
$50,000
and
one
month
later
on
December
14,
obtained
another
mortgage
for
$110,000.
These
mortgages
were
guaranteed
by
Kenneth
Allen.
As
a
further
example
of
the
careless
business
practices
of
the
parties,
the
indenture
is
dated
December
14,
1933
but
the
affidavit
of
the
subscribing
witness
is
dated
December
28,
1973
and
it
is
evident
that
it
was
a
1973
mortgage.
Mrs
Allen
appears
from
the
October
31,
1975
financial
statements
of
the
company
as
being
owed
$84,053
by
way
of
advances
by
shareholders.
(Advances
to
Ken
Allen
in
the
amount
of
$15,778
are
also
shown.)
When
asked
as
to
how
the
$26,250
allegedly
owing
her
for
the
sale
of
the
property
owned
jointly
with
McArthur
had
amounted
to
$84,053
she
was
unable
to
give
any
full
explanation.
She
stated
that
when
the
Markdale
property
on
which
the
business
was
carried
on
was
turned
back
to
the
company
by
the
Royal
Bank
which
had
a
mortgage
on
it,
this
might
have
explained
the
difference.
This
property
had
been
bought
by
Kenneth
Allen
in
1966
for
$28,000
and
on
the
same
day
was
mortgaged
by
Mr
Allen
for
$25,000,
with
Mrs.
Allen
intervening
in
the
deed.
On
February
14,
1968,
it
was
mortgaged
to
the
Royal
Bank
of
Canada
for
$210,000
with
Mrs
Allen
again
intervening.
An
earlier
mortgage
had
previously
been
assigned
to
the
Royal
Bank
and
the
Royal
Bank
had
also
made
an
earlier
loan
of
a
small
amount.
On
January
30,
1974
the
Royal
Bank
conveyed
to
Ken
Allen
and
Sons
Limited
all
its
interests
in
the
property
releasing
all
the
earlier
mortgages
but
retaining
on
the
property
a
mortgage
granted
on
December
28,
1973,
registered
as
No
83730,
which
does
not
appear
to
have
been
produced.
While
some
argument
was
made
as
to
Mrs
Allen’s
dower
rights
this
was
not
pressed
except
that
plaintiffs’
counsel
stated
that
this
would
not
prevent
an
inter-party
agreement
being
made
which
would
establish
her
interest.
No
such
agreement
was
produced
however.
The
acquisition
by
the
company
of
the
Markdale
property
does
not
explain
how
the
amount
of
the
advance
to
her
as
a
shareholder
of
$84,053
appears
on
the
balance
sheet.
On
August
4,
1976
Ken
Allen
and
Sons
Limited
granted
a
chattel
mortgage
to
her
for
$100,000
on
the
assets
described
in
the
schedule
thereto,
and
it
is
a
result
of
her
foreclosure
on
this
chattel
mortgage,
as
previously
stated,
that
she
claims
title
to
said
assets
which
she
then
conveyed
to
plaintiffs.
It
is
defendant’s
contention
that
the
chattel
mortgage
itself
was
given
in
fraud
of
the
creditors
of
the
company
but
the
evidence
of
both
Mr
Allen
and
Mrs
Allen
states
that
at
the
time
their
marriage
was
in
some
danger
of
breaking
up
and
that
the
only
reason
for
the
conveyance
was
to
protect
her
and
her
children.
She
did
not
consider
the
promissory
note
of
the
company
to
be
sufficient
to
protect
her.
There
was
no
explanation
whatsoever
as
to
how
the
amount
of
$84,053
increased
to
$100,000.
She
said
that
the
amount
was
due
to
her
as
“Ken
and
I
had
made
mortgage
payments”
but
could
not
state
how
much
she
had
paid
or
where
she
would
have
obtained
the
funds
to
do
so.
She
stated
that
she
was
not
aware
of
any
creditors
of
Ken
Allen
and
Sons
Limited
at
the
time
she
took
the
chattel
mortgage,
but
this
appears
incredible
since
51
executions
had
been
made
up
to
1976,
and
she
admitted
that
she
knew
these
judgments
though
not
the
details.
When
she
took
the
chattel
mortgage
she
signed
no
other
document
renouncing
any
further
claims
against
the
company
and
does
not
know
what
entries
were
made
in
the
company’s
books
to
cancel
its
alleged
indebtedness
to
her.
As
I
have
already
stated,
they
have
always
operated
as
a
closely
knit
family
unit
and
still
do.
While
this
is
admirable
it
is
evident
that
Kenneth
Allen,
who
testified
that
he
did
not
have
a
great
deal
of
education,
and
his
wife
Emily
Allen
make
little
if
any
distinction
between
assets
owned
by
each
of
them
or
by
Ken
Allen
and
Sons
Limited,
or
even
by
the
children
such
as
Randy
Allen.
The
Supreme
Court
case
of
Murdoch
v
Murdoch,
[1975]
1
SCR
423,
while
not
directly
in
point
as
it
dealt
with
a
division
of
assets
following
a
judicial
separation,
rejected
the
wife’s
claim
made
on
an
equitable
basis
to
one-half
of
certain
assets
claimed
by
way
of
a
constructive
trust
on
the
basis
of
her
contributions
over
many
years
to
the
acquisition
of
them.
Here
there
is
no
doubt
that
the
wife
and
children
contributed
greatly
to
Kenneth
Allen’s
business
enterprise
and
he
readily
recognizes
this
and
his
wife’s
claim
to
certain
assets
resulting
therefrom.
While
this
may
be
acceptable
inter
partes
the
various
transfers
of
assets
cannot
be
properly
invoked
against
third
party
creditors.
Mrs
Allen
is
fully
entitled
as
she
points
out
to
own
property
separate
and
apart
from
that
of
her
husband
but
she
was
unable
to
establish
in
any
convincing
manner
the
origin
of
the
credits
set
up
in
her
favour
in
the
books
of
the
company
and
later
converted
to
a
chattel
mortgage
for
an
even
greater
amount.
It
is
not
even
necessary
to
establish
that
the
transfers
were
made
with
intent
to
defraud
creditors
in
order
to
find
that
Mrs
Alien’s
title
to
the
assets
was
defective
for
want
of
consideration.
This
finding
does
not
necessitate
a
conclusion
however
that
plaintiffs,
who
acquired
title
from
her,
do
not,
if
they
were
acting
in
good
faith,
have
a
valid
title
which
can
be
invoked
against
third
parties
such
as
the
defendant
herein.
Section
2
of
The
Fraudulent
Conveyances
Act
of
Ontario
RSO
1960,
c
154
sets
out
that
fraudulent
conveyances
are
void
as
against
creditors,
but
section
3
reads
as
follows:
3.
Section
2
does
not
apply
to
an
estate
or
interest
in
real
property
or
personal
property
conveyed
upon
good
consideration
and
bona
fide
to
a
person
not
having
at
the
time
of
the
conveyance
to
him
notice
or
knowledge
of
the
intent
set
forth
in
that
section.
See
also
Halsbury,
Second
Edition,
para
462
which
reads:
Purchases
for
value
from
the
grantee
are
also
within
the
protection
of
the
section
if
they
take
without
notice
of
the
fraud
for
the
alienation
by
the
debtor
is
good
until
it
is
avoided.
In
the
British
case
of
Harrods
Limited
v
Stanton,
[1923]
1
KB
517
the
defendant
had
made
a
deed
of
gift
to
his
wife
of
his
chattels
and
household
effects
allegedly
in
order
to
cheat
or
defraud
the
plaintiff.
The
third
party,
one
Winston
claimed
under
a
bill
of
sale
the
furniture
and
effects
which
had
been
seized
by
the
sheriff
and
an
interpleader
issue
was
tried.
At
520
Bailh-
ache,
J
stated:
It
is
however
contended
that
a
bill
of
sale
can
only
be
granted
by
the
true
owner
of
the
goods
and
that
Mrs
Stanton
was
not
the
true
owner.
The
ground
for
that
contention
is
that
the
deed
of
gift
when
set
aside
was
void
ab
initio.
But
in
my
opinion
until
a
deed
of
gift
is
set
aside
the
donee
under
the
deed
of
gift
is
the
true
owner
of
the
goods
comprised
therein.
It
is
true
that
the
donee
has
a
defeasible
title,
but
unless
and
until
the
deed
of
gift
is
set
aside
the
title
is
a
good
title,
and
if
the
donee
conveys
to
a
purchaser
for
value
without
notice
before
the
deed
of
gift
is
set
aside
he
makes
a
good
title.
The
facts
were
substantially
the
same
as
in
the
present
case.
Before
dealing
with
the
factual
question
however
of
whether
or
not
Mr
Norgard
and
Mrs
Walker
at
the
time
of
the
conveyance
to
the
company
had
notice
that
the
title
of
the
vendor
Mrs
Allen
was
defective
there
are
a
few
other
collateral
issues
which
should
be
dealt
with
and
disposed
of.
Evidence
was
given
respecting
the
proper
registration
of
purebred
horses.
A
Mr
Fred
Hampson
a
horse
breeder
and
director
of
the
Percheron
Horses
of
Ontario
stated
that
these
horses
are
registered
in
Ottawa,
under
the
Livestock
Pedigree
Act
RSC
1970,
c
L-10
the
registration
showing
markings,
age
and
ownership.
Sometimes
however
when
a
sale
takes
place
and
the
first
purchaser
expects
to
resell
at
an
early
date
he
does
not
have
the
registration
transferred
to
his
name
so
that
a
search
of
the
registration
records
in
Ottawa
would
still
show
the
vendor
as
being
the
owner.
There
is
frequently
a
six
to
eight
week
delay
before
a
transfer
is
registered.
Geldings
are
not
registered
and
neither
are
farm
horses
which
are
not
purebred.
For
an
unregistered
horse
frequently
no
papers
are
exchanged
on
its
sale.
In
cross-examination
he
admitted
that
it
would
be
difficult
to
sell
a
purebred
horse
unless
it
had
been
registered
in
the
Livestock
Pedigree
Act,
or
to
enter
it
in
an
exhibition.
A
purchaser
would
wish
to
get
a
signed
transfer
to
find
out
who
was
the
registered
owner.
Fred
Clark,
Director
of
the
Canadian
National
Lifestock
records
for
11
years
testified
with
respect
to
the
requirements
of
the
Livestock
Pedigree
Act.
He
stated
that
neither
the
numbered
company
nor
Mr
Norgard
nor
Mrs
Walker
ever
appeared
as
registered
owners
of
any
horse.
As
of
June
1980
Kenneth
Allen
appeared
as
the
registered
owner
of
four
horses.
The
registration
of
Jack
indicates
a
purchase
on
December
29,
1976,
which
was
only
recorded
on
May
26,
1978.
(The
sale
from
Emily
Allen
to
the
numbered
company
was
dated
June
1,
1978.)
In
the
certificate
for
the
horse
Cindy
issued
in
February
1981
(after
the
date
of
the
seizure)
it
is
indicated
that
she
had
been
bought
by
Ken
Allen
in
1976
but
on
November
3,
1979
this
horse
had
been
transferred
to
Allendale
Farms.
He
stated
that
Allendale
Farms
had
applied
for
membership
in
the
Association
in
September
1980
and
applications
for
the
transfer
of
two
horses
from
Ken
Allen
to
Allendale
Farms
had
been
backdated
to
May
1978.
On
October
17,
1980
Allendale
Farms
was
registered
as
a
name
and
style
used
by
the
numbered
company.
With
respect
to
the
sale
to
Donald
Brown
of
a
horse
known
as
Allen’s
April
born
on
April
13,
1979,
Kenneth
Allen
on
November
20,
1979
signed
the
portion
of
the
form
indicating
“owner
at
birth”
reading
“I
hereby
declare
that
I
owned
the
above-
named
animal
at
the
time
of
birth,
that
the
foregoing
information
is
in
accordance
with
my
private
record,
and
is
to
the
best
of
my
knowledge
and
belief
true”.
The
horse
is
indicated
as
having
been
the
property
of
Allendale
Farms
which
had
no
corporate
existence.
This
is
not
of
course
one
of
the
horses
seized
but
the
significance
of
this
exhibit
is
that
Mr
Allen
continued
to
indicate
in
public
records
that
he
was
the
owner
of
horses
which
were
clearly
owned
by
the
numbered
company
at
the
time.
While
admittedly
the
failure
to
register
purebred
horses
under
the
Livestock
Pedigree
Act
does
not
affect
the
title
to
them
which
can
be
conveyed
by
a
bill
of
sale,
or
even
without
documentation,
the
absence
of
such
registration
is
clearly
misleading
to
third
parties
and
the
failure
to
register
any
such
horses
in
the
name
of
the
numbered
company
and
the
toleration
by
it
of
Ken
Allen
keeping
some
of
them
registered
in
his
own
name
confused
creditors
seeking
to
check
ownership
by
obtaining
information
from
this
register.
To
add
to
the
confusion
the
numbered
company
had
on
its
property
a
substantial
number
of
horses
being
looked
after
by
Kenneth
Allen
which
however
belonged
in
part
to
third
persons.
The
very
lawyer
who
had
drawn
the
Memorandum
of
Agreement
at
the
time
the
numbered
company
was
formed,
which
Agreement
I
have
criticized
above,
acting
through
another
numbered
company
in
which
he
had
an
interest
purchased
a
number
of
horses
kept
on
the
property
of
the
numbered
company.
When
the
investigator
of
the
Income
Tax
Department,
Mr
O’Neil,
asked
him
for
proof
of
purchase
of
the
horses
by
the
numbered
company
he
claimed
solicitor
and
client
privilege.
Mr
Allen
testified
that
this
was
not
an
unusual
arrangement
in
horse
breeding
circles.
The
numbered
company
had
bought
21
horses
at
about
the
same
time
and
did
not
have
sufficient
liquid
funds
to
afford
others
so
the
lawyer
put
up
funds
for
them.
It
was
a
good
investment
for
him
to
have
someone
to
look
after
them
and
get
half
the
profits
when
they
were
sold.
It
was
good
for
the
numbered
company
too
as
they
had
the
feed
to
look
after
the
horses.
A
similar
arrangement
was
made
by
another
person,
a
former
pastor
who
put
up
the
money
to
buy
37
horses
which
were
looked
after
by
the
numbered
company,
the
profits
on
resale
to
be
divided
equally.
One
of
the
sheriffs
who
testified
said
that
he
had
made
three
trips
from
Markdale
to
Maple
Leaf
involving
a
distance
of
about
157
kilometres
each
way
trying
to
identify
the
eight
horses
which
were
kept
there.
While
Mr
Allen
was
polite
he
was
uncooperative,
refusing
to
give
him
the
names
of
the
horses.
Accompanied
by
two
other
sheriffs
on
November
6
he
seized
a
total
of
62
horses
in
six
different
barns
and
was
only
able
to
get
the
names
of
four
of
them,
two
being
Prince
and
Major.
The
other
two
at
Maple
Leaf
were
running
around.
It
was
of
course
impossible
for
him
to
identify
all
the
horses.
There
was
no
possible
way
in
which
he
could
know,
without
the
cooperation
of
Mr
Allen
or
others
looking
after
the
horses,
which
belonged
to
the
numbered
company
and
which
they
shared
in
co-ownership
with
the
lawyer
or
pastor
who
had
horses
on
the
Markdale
property
operated
by
the
numbered
company.
It
was
not
possible
to
segregate
those
acquired
from
Mrs
Allen
from
those
it
purchased
subsequently.
Eventually,
as
previously
indicated
defendant
confessed
judgment
releasing
from
seizure
some
of
the
horses
and
other
equipment
upon
being
satisfied
that
these
had
not
been
acquired
by
the
numbered
company
from
the
Allens.
The
evidence
discloses
no
negligence
on
the
part
of
the
sheriffs
carrying
out
the
seizure,
and
in
any
event
subsection
3(6)
of
the
Crown
Liability
Act
would
appear
to
protect
the
Crown
from
any
claim
arising
from
the
manner
in
which
the
seizure
was
made
as
a
result
of
the
judgment
rendered
pursuant
to
the
provisions
of
the
Income
Tax
Act.
If
there
were
to
be
any
claim
against
the
Crown
under
section
3
of
the
Crown
Liability
Act
it
would
have
to
be
by
virtue
of
some
negligence
on
the
part
of
William
O’Neil
the
employee
of
the
Department
of
National
Revenue
charged
with
the
matter.
For
such
a
claim
to
be
effective
negligence
would
have
had
to
be
such
as
to
give
rise
to
a
cause
of
action
in
tort
against
him
pursuant
to
subsection
4(2)
of
the
Crown
Liability
Act.
Beginning
on
April
2
he
went
to
Maple
Leaf,
and
finding
Mr
Allen
away,
examined
the
books
and
records
of
the
company
and
on
April
9
he
spoke
to
Mr
Allen
and
found
him
to
be
abusive.
He
refused
to
show
him
any
records.
He
spoke
to
Mr
Matchwood
whose
company
Matchwood
Investments
Limited
had
foreclosed
a
mortgage
on
the
Allendale
Farms
on
June
27,
1978.
In
an
unsigned
agreement
the
property
was
licensed
by
them
to
Ken
Allen
and
Ken
Allen
and
Sons
Limited
to
continue
his
horse
breeding
operations
commencing
on
August
1,
1978
and
expiring
on
September
30,
1979.
Ken
Allen
had
agreed
to
pay
$3,000
for
the
licence.
This
document
bears
Ken
Alien’s
Signature
but
not
that
of
Matchwood
Investments
Limited
so
apparently
was
never
completed.
There
is
no
mention
whatsoever
of
the
numbered
company
however.
On
April
14
Mr
O’Neil
communicated
with
a
Doctor
Currie
(who
testified)
from
the
Department
of
Agriculture,
Animals
Branch
in
Owen
Sound,
with
respect
to
certificates
of
tests
performed
on
horses
on
May
14,
1980.
The
certificates
all
show
Ken
Allen
of
Markdale
as
the
owner.
Mr
O’Neil
also
communicated
with
Canadian
National
Livestock
Records
and
spent
two
days
there
seeking
information
as
to
the
ownership
of
the
horses.
He
reviewed
the
income
tax
returns
of
Mr
Allen
for
five
years
during
which
he
had
shown
no
income,
with
Mrs
Allen
having
declared
income
and
claimed
Kenneth
Allen
as
a
dependant.
It
was
only
after
discussion
with
his
superiors
at
a
higher
level
that
it
was
decided
not
merely
to
place
the
horses
under
a
technical
seizure
but
to
remove
them.
He
conceded
that
there
had
been
some
claims
of
ownership
by
others
but
the
evidence
seemed
to
indicate
that
they
belonged
to
Allen
rather
than
to
the
numbered
company.
I
am
unable
to
conclude
that
there
was
any
negligence
whatsoever
on
Mr
O’Neil’s
part
in
the
instructions
he
gave
to
the
sheriffs.
If,
as
a
result,
assets
were
seized
which
should
not
have
been
seized
for
any
tax
indebtedness
of
Ken
Allen
or
Ken
Allen
and
Sons
Limited,
and
later
some
of
them
had
to
be
released
this
was
entirely
the
fault
of
the
numbered
company
whose
officers
permitted
Mr
Allen
to
continue
to
operate
exactly
as
he
had
in
the
past
with
every
indication
that
the
horses
and
farm
equipment
were
still
owned
by
him
or
Ken
Allen
and
Sons
Limited
despite
the
bill
of
sale
from
Emily
Allen
to
the
numbered
company.
Certainly
there
is
no
justification
for
the
damages
claimed
by
the
plaintiffs
in
the
amount
of
$300,000
for
illegal
detention
and
seizure.
Although
Mrs
Allen
claimed
that
she
had
no
creditors
an
execution
was
issued
against
her
in
1977
for
$3,889
by
one
Orville
Small
and
another
by
one
Anne
Scharfe
for
$3,354.13
in
December
1977.
In
August
1978
Freelance
Investments
and
Jack
Neil
took
out
an
execution
for
$25,497.03
and
on
January
2,
1978
Borg-Warner
Acceptance
Canada
Limited
for
$61,321.40
against
Ken
Allen
and
herself.
Finally
in
February
1981
the
Queen
issued
an
execution
against
her
for
$49,056.27
in
taxes.
Plaintiffs
argue
that,
having
seized
the
balance
due
to
Emily
Allen
on
the
promissory
note
for
taxes
allegedly
due
by
her,
defendant
cannot
now
seek
to
set
aside
as
fraudulent
the
sale
of
the
assets
by
her
which
gave
rise
to
the
promissory
note.
While
it
was
not
necessarily
a
fraudulent
conveyance
but
rather
a
conveyance
of
assets,
which,
unless
her
title
to
them
is
accepted,
did
not
belong
to
her,
defendant
admits
that
collection
cannot
be
made
in
both
ways.
In
support
of
this
argument
plaintiffs
refer
to
the
Canadian
Encyclopedic
Digest,
Third
Edition,
Vol
13
at
No
57
where
it
is
stated
“A
creditor
cannot
take
the
benefit
of
the
consideration
for
the
conveyance
and
at
the
same
time
attack
the
conveyance
as
fraudulent”
and
again
“A
creditor
cannot
recover
open
notes
given
to
his
debtor
for
the
purchase
money
of
property
conveyed
to
the
maker,
and
also
succeed
in
an
action
to
set
aside
the
same
conveyance
as
being
fraudulent
against
creditors”.
See
also
Wood
et
al
v
Reesor
et
al
(1895),
22
OAR
57.
While
the
principle
that
duplication
cannot
take
place
is
clear,
the
factual
situation
is
complicated
by
the
fact
that
substantial
payments
have
already
been
made,
the
balance
due
being
only
$38,147.77
according
to
a
statement
dated
June
30,
1980.
The
evidence
is
very
incomplete
as
to
the
tax
seizure
made
against
Mrs
Allen,
as
it
would
be
in
a
different
file.
While
it
may
be
contended
that
in
the
event
that
her
sale
of
the
assets
to
plaintiffs
in
the
present
proceedings
were
found
to
be
invalid
and
the
seizure
maintained
then
the
seizure
of
the
balance
due
on
the
note
in
the
tax
action
against
her
would
have
to
be
set
aside
this
is
purely
speculative.
I
do
not
conclude
that
the
fact
that
such
a
seizure,
which
was
not
made
until
February
9th,
1981,
estops
defendant
from
pleading
the
invalidity
of
the
sale
in
the
present
proceedings
which
were
instituted
on
June
19th,
1980.
The
seizure
against
her
was
precautionary,
and
if
the
seizure
of
the
goods
sold
is
maintained
as
a
result
of
the
present
action,
the
seizure
of
the
balance
due
to
her
would
be
set
aside
but
that
is
not
an
issue
in
the
present
proceedings.
It
is
now
necessary
to
go
into
the
key
issue
which
is
the
good
faith
of
Mr
Norgard
and
Mrs
Walker
at
the
time
they
effected
the
purchase
of
the
assets
from
Mrs
Allen
for
the
numbered
company.
Mr
Norgard
testified
that
before
purchasing
the
assets
from
Mrs
Allen
he
only
checked
into
the
chattel
mortgage
which
she
held
on
them
which
on
the
face
of
it
was
valid.
He
made
no
other
inquiries
about
the
company
from
which
she
had
obtained
the
chattel
mortgage
(Ken
Allen
and
Sons
Limited)
nor
whether
or
not
she
had
any
creditors.
Mrs
Allen
was
given
a
promissory
note
by
the
numbered
company
for
the
purchase
price,
and
as
already
stated
a
substantial
portion
of
it
has
since
been
paid
off
mostly
to
third
party
creditors
of
Ken
Allen
or
Ken
Allen
and
Sons
Limited
at
the
request
of
the
Allens.
In
cross-examination
he
admitted
that
he
knew
of
Mr
Allen’s
financial
problems
before
he
dealt
with
him.
Kenneth
Allen,
for
what
it
is
worth,
corroborated
the
evidence
that
all
Mr
Norgard
and
Mrs
Walker
were
told
at
the
time
of
the
agreement
was
that
the
horses
and
equipment
which
Mrs
Allen
was
contributing
had
been
obtained
by
her
by
virtue
of
a
chattel
mortage.
He
prepared
the
list
of
what
he
considered
to
be
a
fair
market
value
for
the
items
sold
by
Mrs
Allen
and
Mr.
Norgard
accepted
the
figures.
Prizes
won
at
the
Canadian
National
Exhibition
horse
show
in
the
amount
of
$305
were
paid
by
cheque
issued
to
Ken
Allen
and
Sons
on
September
15,
1978.
Horses
were
entered
in
the
show
under
the
name
Ken
Allen
and
Sons
—
owner.
As
has
already
been
pointed
out
Mr
Allen
had
signing
powers
for
the
numbered
company
and
it
is
evident
that
he
continued
to
carry
on
the
horse-breeding
business
exactly
as
he
had
before,
using
interchangeably
the
names
Ken
Allen
and
Sons
Limited,
Allendale
Farms
or
his
own
name.
His
principal
business
activity
therefore
was
never
interrupted
despite
his
financial
difficulties.
It
is
incredible
that
Mr
Norgard
who
has
an
apparently
successful
contracting
business
of
his
own
and
Mrs
Walker
who
is
a
real
estate
agent,
both
of
whom
might
be
expected
to
have
at
least
some
elementary
knowledge
of
corporate
operations,
the
necessity
of
written
documentation,
the
distinction
between
a
company
and
its
individual
shareholders,
and
other
elementary
legal
principles,
should
have
permitted
the
business
of
the
numbered
company
to
be
operated
in
this
manner.
Mr
Norgard
in
evidence
admitted
that
one
can
make
a
good
business
deal
with
people
in
trouble.
He
undoubtedly
felt
that
he
and
Mrs
Walker
were
making
a
good
deal.
The
lawyer
who
drew
up
the
agreement
admitted
that
Mr
Allen
had
stated
that
his
wife
was
to
be
the
eventual
shareholder
of
the
numbered
company
because
of
his
financial
difficulties.
Mrs
Walker
asked
no
questions
when
Mr
Allen
requested
that
his
salary
of
$300
a
week
be
credited
to
his
wife.
The
attorney
who
incorporated
the
Maple
Leaf
Lumber
Company
was
aware
of
the
many
executions
against
Allen
and
testified
that
Mr
Allen
was
very
conscious
of
his
financial
problems
and
planned
carefully.
Defendant’s
counsel
suggested
that
Emily
Allen
is
related
to
the
numbered
company,
as
she
has
a
future
share
of
50%
when
the
investment
of
Mr
Norgard
and
Mrs
Walker
in
same
has
been
repaid.
It
is
correct
to
state
that
possession
creates
a
presumption
of
ownership
and
that
the
burden
is
on
defendant
to
establish
that
the
numbered
company’s
title
to
the
assets
obtained
from
Mrs
Allen
is
defective.
Plaintiffs’
counsel
contends
that
mere
suspicion
is
not
enough
and
that
there
is
no
hard
evidence
to
indicate
that
Mr
Norgard
and
Mrs
Walker
conspired
in
any
way
with
the
Allens
to
defraud
creditors
of
Ken
Allen
or
Ken
Allen
and
Sons
Limited.
While
I
have
little
doubt
that
the
creditors
of
Ken
Allen
and
Sons
Limited
or
of
Kenneth
Allen
could
have
successfully
challenged
the
chattel
mortgage
granted
by
the
company
to
Mrs
Allen
at
the
time
it
was
granted
to
guarantee
a
book
debt
of
doubtful
origin,
the
consideration
given
for
which
was
also
very
doubtful,
the
situation
changed
when
she
conveyed
the
assets
to
the
numbered
company.
I
do
not
believe
that
at
the
time
of
this
conveyance
the
numbered
company,
through
its
officers,
Mr
Norgard
and
Mrs
Walker,
can
be
held
to
have
known
that
Mrs
Allen’s
title
to
the
assets
so
conveyed
was
defective.
While
the
subsequent
conduct
of
Mr
Allen
in
managing
the
company’s
affairs,
the
request
made
that
instead
of
receiving
a
salary
this
would
be
credited
to
Mrs
Allen,
and
other
information
learned
as
time
went
on
must
have
made
it
clear
that
the
Allens
had
acted
in
such
a
manner
as
to
avoid
payment
to
certain
creditors,
including
defendant,
while
directing
that
payments
be
made
to
certain
pressing
creditors
of
their
choosing,
this
subsequent
knowledge
would
not
affect
the
validity
of
the
transaction
at
the
time
it
was
made.
Not
without
some
hesitation
therefore
I
am
reluctantly
forced
to
the
conclusion
that
the
sale
from
Mrs
Allen
to
the
company
was
valid
and
conveyed
title
to
the
assets
covered
by
it,
despite
the
clumsy
wording
of
the
Memorandum
of
Agreement
which
raised
doubt
as
to
whether
the
conveyance
was
by
way
of
loan
rather
that
sale.
In
view
of
this
conclusion
therefore
it
is
now
necessary
to
go
through
the
evidence
as
to
ownership
of
the
horses
and
equipment
still
in
dispute
item
by
item.
In
the
case
of
the
horse
Jack
the
registration
shows
that
it
was
bought
by
Allen
on
December
29,
1976,
and
therefore
could
not
have
been
subject
to
the
chattel
mortgage
on
August
4,
1976,
and
the
same
applies
to
the
red
show
wagon
which
was
not
purchased
until
October
4,
1977.
This
does
not
alter
the
situation
materially
however,
as
I
have
already
concluded
that
although
Mrs
Allen
was
selling
merchandise
to
which
she
had
no
proper
title,
the
fact
that
Jack
was
not
included
in
the
chattel
mortgage,
but
was
included
in
the
inventory
of
items
she
sold
to
plaintiffs
would
not
affect
their
title
as
purchasers
as
long
as
they
must
be
deemed
to
be
ignorant
of
knowledge
of
this.
The
bill
of
sale
merely
shows
one
show
wagon
and
another
new
show
wagon
and
hook
ups
without
indicating
the
colour
of
any
of
them.
The
schedule
to
the
bill
of
sale
also
shows
one
hay
wagon
and
rack.
It
is
difficult
to
determine
whether
this
is
the
red
hay
wagon
appearing
on
the
list
of
seized
items
still
under
dispute.
The
schedule
to
the
bill
of
sale
shows
three
spreaders.
Mr
Allen
was
unable
to
say
whether
one
of
these
was
the
horse
drawn
manure
spreader
referred
to
in
the
list
of
items
seized
which
are
still
under
dispute.
He
stated
that
there
were
two
old
ones
and
a
tractor
drawn
one
which
is
not
being
used,
but
that
a
good
new
one
was
bought
for
the
numbered
company
by
Mr
Burnside
and
Mr
Burnside
corroborated
this.
This
presumably
is
the
yellow
fertilizer
spreader
shown
on
the
list
of
assets
seized.
It
is
conceded
that
what
is
shown
as
a
1974
green
chevy
cab
on
the
list
of
items
seized
is
what
is
described
as
a
GM
tractor
in
Schedule
A
of
the
bill
of
sale,
and
hence
was
included
in
the
items
sold
by
Mrs
Allen.
The
New
Holland
baler
and
thrower
and
the
show
harnesses
for
six
horses
were
also
included
in
the
bill
of
sale.
There
may
be
some
question
as
to
the
four
colts
and
eight
unidentified
horses
seized
at
the
Maple
Leaf
property.
Mr
Allen
testified
that
of
the
four
colts
one
belonged
to
the
lawyer
who
had
invested
in
some
horses
which
the
company
was
keeping
and
three
had
been
purchased
in
Manitoba.
Of
the
eight
unidientified
horses
four
were
not
seized,
two
were
natural
offspring
after
the
numbered
company
was
formed
and
the
other
two
had
been
bought
by
Mr
Allen.
It
is
difficult
to
establish
whether
these
latter
two
were
conveyed
to
the
numbered
company
in
the
bill
of
sale
from
Mrs
Allen.
I
have
already
referred
to
the
Ford
tractor
sold
by
Randy
Allen
to
the
numbered
company
without
any
documentation,
with
payments
of
$9,000
due
being
made
to
Mrs
Allen
(see
above).
The
position
of
the
numbered
company
with
respect
to
this
item
appears
to
be
even
stronger
than
with
respect
to
the
items
purchased
from
Emily
Allen,
since
Randy
Allen
had
at
least
made
some
payments
on
it
himself,
although
when
he
purchased
it
he
had
used
as
trade-in
another
tractor
which
apparently
had
been
given
him
by
Ken
Allen
and
Sons
Limited.
It
would
seem
that
he
had
a
good
title
to
this
Ford
tractor
which
he
sold
to
the
numbered
company
and
the
fact
that
payments
for
it
were
not
made
directly
to
him
is
not
sufficient
to
conclude
that
the
officers
of
the
numbered
company
were
not
in
good
faith
when
they
bought
it
from
him.
Creditors
had
no
claim
against
him
unlike
the
situation
with
respect
to
Emily
Allen
and
Ken
Allen.
This
therefore
must
also
be
considered
as
exempt
from
seizure.
There
is
another
series
of
items
acquired
by
the
numbered
company
from
Harry
Burnside,
who
testified.
Mrs
Allen
during
her
evidence
had
testified
that
in
1977
Kenneth
Allen
and
Sons
owed
him
some
$7,000
arrears
of
wages.
He
had
worked
for
them
for
many
years.
As
the
company
was
having
difficulties
at
the
time,
he
left
to
take
a
job
at
the
Douglas
Point
Nuclear
Plant.
He
is
a
plumbing
and
heating
expert
and
had
worked
in
servicing
in
their
subdivision
project.
When
he
left
he
was
given
some
farm
equipment
in
lieu
of
salary
which
he
stored
in
a
building
which
he
owned
at
Kimberley.
There
was
some
confusion
as
to
exactly
what
he
was
given,
Mrs
Allen
referring
to
the
Ford
riding
lawnmower,
a
brown
four
wheel
show
wagon,
a
green
and
yellow
two
wheel
showcart
and
a
four
wheel
ERZ
loader
as
well
as
some
other
buggies
and
sleighs
including
a
snow
cutter,
a
black
and
red
show
buggy
and
a
black
and
red
two
seater
sleigh.
In
due
course
he
sold
the
Kimberley
building
and
with
their
permission
moved
these
items
which
allegedly
belonged
to
him,
although
there
was
no
bill
of
sale
to
establish
this,
back
to
Markdale
where
in
due
course
they
were
seized.
Mr
Burnside
himself
corroborated
this
evidence
although
he
listed
the
items
as
a
single
sleigh
and
a
double
sleigh,
the
black
and
red
two
seater
sleigh
shown
on
the
list
of
items
seized
as
two
different
sleighs.
He
also
received
the
Ford
riding
lawnmower,
the
green
and
yellow
two
wheel
show
cart
which
he
kept
on
his
property
and
which
Allen
later
borrowed
for
exhibiting
horses
at
the
Royal
Winter
Fair.
In
addition
he
received
a
snow
cutter
and
a
black
and
red
show
buggy.
When
he
learned
of
the
seizure
he
went
to
Markdale
to
help
identify
the
horses
which
had
been
seized
and
was
then
told
that
some
of
his
belongings
had
also
been
taken.
He
left
it
to
Mr
Allen
to
look
after
it
for
him.
He
now
works
for
the
Maple
Leaf
Lumber
Company.
Here
again
the
evidence
is
highly
suspicious.
It
may
well
have
been
that
the
Allens
turned
these
items
over
to
him
to
avoid
creditors,
but
there
is
no
proof
of
this,
and
Mr
Burnside’s
evidence
fully
corroborated
theirs
to
the
effect
that
he
was
given
these
items,
although
in
a
highly
informal
manner,
which
is
the
manner
in
which
the
Allens
always
apparently
conducted
their
business
affairs,
in
return
for
alleged
wage
indebtedness,
none
of
which
is
corroborated
by
the
company’s
books.
The
burden
is
on
defendant
to
prove
that
they
did
not
in
fact
belong
to
Mr
Burnside
and
defendant
has
been
unable
to
do
this.
There
may
also
be
a
question
as
to
whether
the
plaintiffs
are
not
bailees
of
these
items
(see
Halsbury,
para
731
“The
prima
facie
presumption
of
the
law
is
that
the
person
who
has
de
facto
possession
has
the
property
and
accordingly
such
possession
is
protected,
whatever
its
origin,
against
all
who
cannot
prove
a
superior
title”.)
Mr
Burnside,
being
as
uninformed
in
business
matters
and
unconcerned
as
the
other
parties
in
the
present
proceedings
apparently
had
been
quite
willing
to
leave
these
items
on
the
Markdale
property
of
the
numbered
company
and
to
allow
them
to
be
used
in
the
horse
breeding
operations
without
charging
any
compensation
for
them
or
having
any
written
proof
of
title.
While
it
might
be
said
that
as
an
old
friend
and
employee
of
the
Allens
he
is
subject
to
be
influenced
by
them,
bad
faith
cannot
be
presumed.
He
appeared
to
be
a
frank
and
honest
witness,
and
if
he
in
fact
owns
them
as
he
claims
then
they
are
exempt
from
seizure.
The
only
other
items
on
the
list
of
merchandise
seized
and
still
in
dispute
are
a
Beatty
feed
wagon
and
the
snowmobile,
both
of
which
the
parties
indicate
to
be
of
little
or
no
value.
I
therefore
conclude
that
defendant
must
release
the
seizure
of
all
the
remaining
items
seized,
except
for
the
balance
due
to
Mrs
Allen
on
the
promissory
note,
although
defendant
was
certainly
in
no
way
at
fault
in
making
the
seizure,
under
the
highly
suspicious
circumstances
to
which
the
officers
of
the
numbered
company
contributed
by
their
unbusinesslike
conduct.
It
is
not
sufficient
for
plaintiffs
to
establish
that
damages
have
been
caused
as
a
result
of
the
detention
and
seizure,
even
to
the
extent
that
they
can
do
so,
as
in
order
for
them
to
have
a
valid
claim
to
such
damages
they
must
establish
fault
on
the
part
of
defendant,
and
in
this
way
they
have
failed.
It
is
therefore
unnecessary
to
go
in
any
great
detail
into
the
claim
for
damages,
but
in
order
to
complete
my
conclusions
based
on
the
evidence,
and
in
the
event
of
a
possible
appeal
requiring
damages
to
be
assessed,
I
will
deal
briefly
with
the
conclusions
I
have
reached
as
to
the
claims
for
damages
made
under
various
headings.
The
numbered
company’s
principal
income
was
from
the
breeding
and
sale
of
horses
and
this
business
was
interrupted
by
the
seizure.
For
nearly
four
months
after
the
seizure,
and
until
Mahoney’s
J
order
of
October
9,
1980,
the
horses
could
not
be
sold
unless
the
proceeds
of
sale
were
turned
over
to
the
sheriff.
While
that
order
allowed
operating
expenses
for
the
months
of
October,
November
and
December
1980
to
be
deducted
the
amount
of
such
expenses
was
only
established
on
March
26,
1981
by
a
further
order.
Expenses
of
carrying
a
larger
inventory
of
horses
during
this
period
have,
according
to
plaintiffs,
amounted
to
some
$4,500,
in
addition
to
which
it
was
required
that
the
horses
be
insured
and
the
evidence
indicates
that
this
would
not
have
been
done
but
for
the
seizure
as
such
insurance
is
difficult
to
obtain
and
costly.
There
would
be
some
validity
to
these
claims
if
defendant
had
been
found
at
fault.
As
a
result
of
loss
of
cash
flow
plaintiffs
claim
that
the
numbered
company
was
forced
to
sell
property
it
owned
at
a
discount.
Mr
Norgard
testified
that
one
property
which
had
been
bought
for
$60,000
and
on
which
$15,000
had
been
spent
was
sold
for
$65,000
after
trying
to
sell
for
six
months
at
$90,000
and
another
property
which
had
cost
$39,000
was
sold
for
$38,000.
In
cross-examination
it
was
brought
out
that
the
property
with
respect
to
which
he
had
testified
had
been
listed
for
sale
at
$90,000
was
actually
listed
at
$79,000
and
that
it
had
been
listed
before
the
seizure.
With
respect
to
the
other
property
Ken
Allen
was
shown
as
the
owner
on
March
24,
1979
at
the
time
of
the
first
listing.
There
was
a
second
listing
on
March
29,
1980,
also
before
the
seizure.
Mr
Norgard
admitted
that
$45,000
had
been
paid
for
a
larger
parcel
which
was
then
severed
to
three
lots,
one
being
sold
for
$16,000
to
$18,000
and
two
years
later
the
other
two
were
sold
for
$17,500
each.
It
is
difficult
to
see
how
there
was
any
loss
on
the
sale
of
these
properties
which
was
in
any
way
attributable
to
the
seizure
since
both
had
been
listed
for
sale
before
it.
Mr
Norgard
testified
that
the
bank
told
him
he
had
to
move
the
property
as
a
result
of
the
seizure
because
of
the
financial
condition
of
the
company
and
that
therefore
he
was
forced
to
sell
them
at
lower
prices
than
he
had
asked.
The
fact
that
a
property
is
not
sold
for
its
asking
price
does
not
establish
a
loss.
Mr
Norgard
also
attempted
to
attribute
damages
resulting
from
the
delay
in
opening
the
new
mill
by
plaintiff
Maple
Leaf
Lumber
Company
Limited
(which
is
why
it
is
joined
as
a
co-plaintiff
in
the
action)
to
the
fact
that
loans
for
it
were
not
approved
as
a
result
of
the
seizure.
An
application
to
the
bank
for
funds
for
the
new
mill
was
first
turned
down
and
they
were
unable
to
commence
work
until
December
instead
of
starting
as
projected
on
October
15
which
made
for
more
costly
winter
construction.
An
application
for
$500,000
from
the
Eastern
Ontario
Development
Company
had
been
denied
in
March
1980,
prior
to
the
seizure.
William
MacLean,
technical
consultant
with
the
Eastern
Ontario
Development
Corporation
stated
that
the
application
by
Maple
Leaf
Lumber
Company
for
$500,000
was
made
on
March
31,
1980.
He
met
Allen
early
in
April
and
discussed
the
horses
and
saw
the
ribbons
which
they
had
won
and
so
forth.
While
the
application
for
the
development
loan
was
not
granted
it
is
very
definite
that
the
seizure
of
horses
did
not
affect
the
rejection
of
this
application.
The
loan
was
declined
because
the
Minister
of
National
Resources
did
not
support
it
after
looking
at
the
need
for
a
lumber
mill.
He
does
not
know
what
effect
if
any
the
seizure
had
on
later
funding
by
the
bank.
A
reliable
witness
as
to
the
dealings
with
the
bank
was
Norma
Barnes
who
testified
on
behalf
of
the
bank.
The
bank
was
concerned
about
the
numbered
company’s
account,
so
had
it
guaranteed
by
everyone
including
Mr
Norgard,
Mrs
Walker
and
Kenneth
Allen
himself.
She
knew
that
he
was
involved
with
the
operation
of
both
companies.
Although
he
had
no
assets
at
the
time
she
felt
that
if
the
business
of
either
company
closed
down
and
if
he
might
possibly
have
a
claim
against
them
this
could
be
set
off
against
the
bank’s
claim
as
a
result
of
his
guarantee.
It
was
considered
in
December
1979
that
it
would
be
desirable
that
some
of
the
assets
of
the
numbered
company
be
liquidated
if
the
Maple
Leaf
Company
which
was
owned
by
it
were
to
be
allowed
to
increase
the
amount
of
outstanding
loans
due
by
it
to
the
bank.
By
liquidating
some
of
the
assets
of
the
numbered
company
the
amount
of
these
loans
might
have
been
reduced.
Each
time
the
bank
advanced
more
money
to
Mr
Norgard’s
companies
they
wanted
him
to
put
in
more
equity
capital.
Before
the
time
of
the
seizure
it
had
been
decided
that
the
old
lumber
mill
of
the
Maple
Leaf
Company
would
be
replaced
by
a
more
modern
mill.
The
bank
wanted
Mr
Norgard
to
put
up
more
money
himself
since
even
the
collection
of
interest
payments
on
outstanding
loans
was
becoming
more
difficult.
The
credit
department
of
the
bank
took
six
weeks
to
make
a
decision
with
respect
to
the
construction
loan,
retaining
consultants
to
study
the
viability
of
the
new
mill.
When
the
bank
found
out
that
the
numbered
company
was
paying
some
$65,000
to
creditors
of
Ken
Allen
and
Sons
Limited
they
subsequently
prevented
it
from
paying
any
accounts
not
relating
strictly
to
the
numbered
company’s
business.
Following
January
1980
she
herself
saw
every
cheque
that
went
through
and
stopped
payments
on
behalf
of
Mrs
Allen.
She
admitted
that
the
interruption
of
sales
of
horses
reduced
the
security
and
increased
the
pressure
to
put
in
more
money.
Loans
had
also
been
made
to
the
Tweed
Forest
Products
company,
another
of
Mr
Norgard’s
companies,
which
was
doing
poorly.
There
were
cross-guarantees
by
the
various
companies
and
the
bank
did
not
want
the
credit
of
Mr
Norgard’s
construction
company,
which
was
successful,
to
be
adversely
affected
by
excessive
loans
to
his
other
companies.
While
the
witness
made
no
reference
to
it,
the
evidence
of
other
witnesses
disclosed
that
the
numbered
company
purchased
in
conjunction
with
a
lawyer
and
a
clergyman
a
large
number
of
additional
horses
at
about
this
time
and
most
probably
was
over-extending
itself
financially,
which
may
partially
account
for
why
real
estate
had
to
be
sold.
The
witness
was
quite
clear
that
the
delay
in
granting
the
loan
to
Maple
Leaf
Lumber
Company
Limited
had
nothing
to
do
with
the
seizure
of
the
horses
and
equipment.
Any
claim
by
plaintiffs
for
damages
under
this
heading
therefore
would
be
rejected.
Mr
Allen
testified
that
the
horses
were
moved
from
the
property
at
first
as
the
result
of
the
seizure
and
driven
through
the
town
and
everybody
knew
of
the
dispute
respecting
the
ownership
of
them.
Sales
almost
came
to
a
stop
as
a
result.
He
had
negotiated
the
sale
of
one
mare
for
$25,000
and
received
a
$10,000
deposit
and
was
to
deliver
her
after
exhibiting
her
at
the
Royal
Winter
Fair.
The
prospective
purchaser
stopped
payment
on
the
cheque.
It
does
not
appear
that
this
was
as
the
result
of
the
seizure
however
as
it
came
out
in
evidence
that
the
purchaser
had
objected
to
the
fact
that
this
horse
(Cindy)
had
not
yet
been
properly
registered
in
Ottawa,
so
there
was
some
objection
to
the
pedigree.
He
was
also
trying
to
sell
a
show
hitch
of
horses
to
a
buyer
from
California
for
$20,000
(US).
The
prospective
buyer
came
in
August
and
went
to
some
of
the
shows
but
withdrew
from
the
purchase,
allegedly
having
learned
the
problem
of
the
seizures.
To
say
the
least
it
Is
difficult
to
establish
that
such
sales
were
prevented
as
the
result
of
the
seizures.
Not
every
prospective
sale
is
completed.
Moreover
the
horses
could
have
been
sold,
provided
the
funds
werre
deposited
with
the
sheriff,
and
it
would
not
have
been
difficult
to
obtain
a
release
from
seizure
of
these
horses
if
such
sales
were
made.
A
number
of
lesser
sales
were
in
fact
made
after
the
seizure.
Mr
Allen
stated
that
there
would
have
been
a
total
of
$80,000
worth
of
revenue
from
sales
of
horses
in
1980
but
for
the
seizure,
although
in
the
previous
year
there
was
only
$39,000.
He
stated
that
it
takes
18
months
to
get
a
horse
ready
for
sale
and
in
1979
few
were
ready
but
they
were
maturing
and
ready
for
sale
in
1980.
Mr
Norgard’s
evidence
corroborated
this.
Mr
Allen
admitted
that
most
of
the
horses
are
sold
outside
the
area,
places
out
west
bringing
better
prices
than
in
Ontario.
He
stated
that
purchasers
come
from
all
over
the
United
States
and
Canada
to
visit
the
farm
but
after
the
seizure
fewer
came.
It
would
appear
that
only
the
local
people
would
be
aware
of
the
seizure
as
Mr
Allen
continued
to
carry
on
as
if
he
or
Allendale
Farms
was
the
owner,
but
it
may
well
be
that
some
local
sales
were
lost
and
even
some
outside
buyers
might,
when
visiting
the
farm
to
inspect
the
horses,
learn
of
the
seizure
and
not
wish
to
become
involved.
Mr
Allen
estimates
that
they
had
to
carry
an
inventory
of
perhaps
30
horses
instead
of
20
as
a
result
and
that
it
costs
$3
a
day
to
maintain
a
horse.
I
have
already
dealt
with
this
element
of
claim.
In
short,
even
if
plaintiffs
had
been
found
to
have
a
valid
claim
for
damages
this
would
have
been
limited
to
$4,500
plus
whatever
it
has
cost
to
maintain
insurance
on
the
horses.
As
there
has
been
mixed
success
in
this
action,
plaintiffs
failing
to
establish
their
claim
for
damages,
but
having
succeeded
in
forcing
defendant
to
release
the
horses
and
equipment
seized,
no
costs
will
be
allowed
to
either
party.
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