Executive Summary: Key Legal and Evidentiary Issues

• A pre-judgment garnishing order was improperly obtained due to failure to disclose material facts.

• The omitted documents directly contradicted the core allegation that $50,000 remained unpaid under a share purchase agreement.

• The trial judge’s finding that the non-disclosure was immaterial was found to be a palpable and overriding error.

• The Court of Appeal held that even if non-disclosure was “innocent,” the high materiality of the documents required the order to be set aside.

• The appeal was allowed and the garnishing order was vacated, with funds ordered returned to the appellant’s counsel.

• Costs at both trial and appeal were awarded against the estate of the deceased, not personally against the respondent executor.

Background of the dispute

This case arose from estate litigation involving a share transaction between the deceased, Philip Eric Peterson, and his nephew, the appellant Troy Owen Donaldson. The estate’s executor, Gail Ann Sistrunk, alleged that Mr. Donaldson had agreed to purchase 100 common shares for $100,000 but paid only $50,000. On that basis, she sought and obtained a pre-judgment garnishing order without notice, relying on the Court Order Enforcement Act.

However, in her garnishment application, Ms. Sistrunk failed to disclose three key pieces of information already in her possession:

1. Contract Addendum 3, which outlined the terms of the share transfer and indicated full payment was due on execution;

2. A photograph of the deceased holding Mr. Donaldson’s $50,000 cheque;

3. A 2024 email from a director of the company confirming that the deceased had used the “final payment” to purchase a GIC.

These items directly addressed the central claim that money was still owed.

Chambers decision

In July 2024, the B.C. Supreme Court heard Mr. Donaldson’s application to set aside the garnishing order. He argued that the order was obtained through material non-disclosure, warranting its reversal and an award of special costs.

The chambers judge:

• Accepted that there was non-disclosure, but found the missing information was not material.

• Concluded the omission was “innocent”, not a deliberate attempt to mislead.

• Denied the request to set aside the garnishment and dismissed the special costs application.

Appeal to the B.C. Court of Appeal

The Court of Appeal overturned the chambers decision, focusing on two key errors:

1. Error in assessing materiality: The Court found that the omitted documents were clearly relevant. Taken together, they could reasonably support an inference that Mr. Donaldson had already paid in full, contradicting the claim of an unpaid debt. The chambers judge's conclusion that the documents were immaterial was a palpable and overriding error.

2. Misapplication of the law on “innocent” non-disclosure: While Canadian law allows some flexibility for innocent mistakes in ex-parte proceedings, this discretion does not override the duty to disclose material facts. Given the high relevance of the omitted documents, the Court held that the non-disclosure — innocent or not — could not justify keeping the garnishing order in place.

Final outcome

The Court of Appeal:

• Allowed the appeal,

• Set aside the garnishing order, and

• Ordered the return of the garnished funds to Mr. Donaldson’s counsel.

Additionally, the Court ordered that costs at both levels of court be paid out of the deceased’s estate, emphasizing that the executor had acted in her fiduciary role, not for personal gain.

This ruling reinforces the strict disclosure obligations for ex-parte garnishment applications and affirms the high standard of fairness expected when seeking extraordinary interim remedies.