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Background and commercial relationship
Anhui Huaxing Chemical Industry Co. Ltd. (Huaxing) is a chemical manufacturer based in Anhui Province, China. For many years, it supplied glyphosate herbicide to AgraCity Crop & Nutrition Ltd. (AgraCity), a major Canadian distributor of generic crop inputs, for resale to AgraCity’s agricultural customers. The business relationship involved repeated large-volume sales of glyphosate over multiple seasons, with Huaxing acting as a key trade creditor and product source for AgraCity’s glyphosate line. In September 2023, Huaxing commenced an action in the Saskatchewan King’s Bench against AgraCity, alleging that AgraCity had failed to pay its accounts. Huaxing claimed that AgraCity was indebted in the total sum of USD $6,721,700, together with interest at a contractual rate of 0.8% per month, arising from unpaid invoices for glyphosate supplied and delivered.
Procedural posture and applications before the court
The decision concerns interlocutory applications rather than trial of the debt claim itself. Huaxing brought two main applications. First, it applied to amend its statement of claim under Rules 3-72 and 3-84 of The King’s Bench Rules. While AgraCity did not oppose most of the textual amendments, it resisted Huaxing’s proposal to add several new defendants: Jason Mann and James Mann (the “Manns”), 101114752 Saskatchewan Ltd. (752 SK), FNA Fertilizer GP Inc. operating as FNA Fertilizer Limited Partnership (FNA), and NewAgco Inc. (collectively, the “corporate defendants”). The key question was whether these individuals and corporations ought to be joined as proper or necessary parties to the contract debt action against AgraCity. Second, Huaxing sought protective relief over AgraCity’s assets. It requested a preservation order under s. 5 of The Enforcement of Money Judgments Act (EMJA), alleging a risk that AgraCity would dissipate assets and frustrate enforcement. In the alternative, it sought an interim injunction with similar effect under the oppression remedy provisions of s. 18-4 of The Business Corporations Act, 2021 (BCA), seeking to leverage its status as an alleged creditor to control AgraCity’s dealings with related entities.
Legal framework for amending pleadings and adding parties
The court began by setting out the procedural standards for amendment. Under Rule 3-72, after a statement of defence is filed, a party may amend its pleading only with leave of the court or by consent, including amendments to add, remove or correct parties. Rule 3-84 authorizes the court to order that a person be added as a party where that person ought to have been joined or where their presence is necessary to adjudicate effectively and completely on the issues. In interpreting these rules, the court relied on the Saskatchewan Court of Appeal’s guidance in Cupola Investments Inc. v Zakreski and subsequent application in Johnson v Witchekan. Three core principles govern amendments: whether the amendment will allow adjudication of the real points in dispute; whether the proposed amendment would itself be vulnerable to being struck as improper or plainly doomed; and whether material prejudice would result that cannot be cured by costs or adjournment. These principles apply equally when the amendment seeks to add new parties. The question before the court was therefore not just technical joinder but whether any pleaded facts, if proven, could reasonably ground liability or a proper role for the Manns and the related corporations in Huaxing’s contract action.
Attempt to add related corporations as defendants
Huaxing argued that 752 SK, FNA and NewAgco were related entities that had received funds or assets from AgraCity in a way that potentially undermined Huaxing’s ability to recover on its trade debt. It relied heavily on an earlier Court of Appeal decision, Mann v Mann, which involved a shareholder dispute between Jason and James Mann and included an affidavit by a forensic accountant, Sara Jimenez. In that earlier case, Ms. Jimenez had reviewed AgraCity’s financial statements up to 2017 and identified issues involving transactions with related corporations, including 752 SK, FNA and NewAgco, and she raised concerns about AgraCity’s solvency and reliance on unsecured financing from trade creditors such as Huaxing. However, in Mann v Mann, both the chambers judge and the Court of Appeal ultimately concluded that Ms. Jimenez’s evidence did not support a finding of wrongdoing in relation to the business or affairs of AgraCity or the related entities. Her concerns were discounted as insufficient to establish oppressive or improper conduct. In the present case, Huaxing attempted to use the same passage from the Court of Appeal’s reasons as a platform to allege that the related corporations had been used to divert funds that should have been applied to Huaxing’s outstanding accounts.
Insufficiency of pleaded facts against corporate defendants
The court rejected this approach. It noted that the passage from Mann v Mann did not find wrongdoing or misappropriation but simply recited an accountant’s preliminary concerns that had already been found to be of limited assistance in the oppression context. As a result, the suggestion that those comments demonstrated that the proposed corporate defendants “have a role to play” in transferring funds away from Huaxing was described as untenable. More fundamentally, the draft amended statement of claim contained no factual allegations that, if taken as true, could lead to a finding that 752 SK, FNA or NewAgco owed legal duties to Huaxing, assumed liability for AgraCity’s trade debts, or engaged in specific wrongful transfers designed to defeat Huaxing’s recovery. Huaxing attempted to anchor its claim to the EMJA by seeking relief against these corporations under s. 5, but the court stressed that s. 5 requires a foundation of fact supporting a legal obligation and potential liability to pay money to the plaintiff. In the absence of pleaded facts establishing such a duty or any actionable wrongdoing, the prayer for relief was said to be “without foundation.” On this basis, the court held that the corporate defendants were neither proper nor necessary parties to a straightforward action in debt against AgraCity and denied the application to add them.
Attempt to add the Mann brothers and to pierce the corporate veil
Huaxing also sought to join Jason and James Mann as personal defendants. The draft amendments alleged that the Manns were directors of AgraCity and that Jason Mann was a director of 752 SK and FNA. Notably, the core contractual relief remained directed at AgraCity: the original and amended statement of claim both alleged that AgraCity alone was bound to perform the underlying sale contract and owed the unpaid accounts. Only in the prayer for relief did Huaxing seek a judgment against the Manns personally for AgraCity’s alleged debt, invoking corporate veil-piercing and oppression concepts. In paragraphs 23–25 of the proposed pleading, Huaxing asserted that the Manns and AgraCity had engaged in “Oppressive Conduct” under s. 18-4 of the BCA by failing or refusing to pay Huaxing’s invoices, transferring assets to the related corporations, and providing funds to those entities while leaving Huaxing unpaid. It then concluded that the corporate veil should be pierced so that diverted funds could be paid to Huaxing by the Manns personally and/or by the related corporations. The court characterized these as bare conclusions without any factual foundation. To claim that the Manns owed a direct legal obligation to pay the invoices, Huaxing needed to plead facts showing personal assumption of liability or another recognized basis for director liability. No such facts were alleged. Likewise, if paragraphs 23(b) and (c) were meant to plead fraudulent conveyance or preference, the pleading lacked the particularized facts that could support that theory, such as specific transfers, dates, amounts and intent to hinder creditors. As a result, the court found that the proposed claim against the Manns could not succeed as pleaded and that they were not proper or necessary parties to a debt action against AgraCity. The application to add them as defendants was refused.
Statutory framework for preservation orders under the EMJA
The court then considered Huaxing’s request for a preservation order under s. 5 of the EMJA. The EMJA is a comprehensive code governing enforcement of money judgments in Saskatchewan, displacing older common-law and equitable remedies in this area. Section 5(5) sets out three cumulative conditions that must be proven on a balance of probabilities for a preservation order: first, that the underlying action, if successful, would result in a judgment in favour of the plaintiff; second, that if an order is not granted, enforcement of the judgment is likely to be partially or totally ineffective as a result of damage to, disposition, dissipation, destruction, concealment or other dealings with property, excluding dispositions in the ordinary course of business; and third, that the action will be prosecuted without delay. Previous authorities such as Arslan v Sekerbank T.A.S., Yorkton (City) v Mi-Sask Industries Ltd., and Lawless v Avalerion Corp. emphasize that the plaintiff bears the persuasive burden to establish all elements and that mere assertions of risk or fear of dissipation are insufficient, particularly where the defendant operates an ongoing business.
Application of the EMJA test to the evidence
The court accepted that Huaxing’s claim in contract for unpaid invoices plainly constituted a recognized cause of action and that, if proven, it would result in a judgment. AgraCity’s argument that a potential set-off through its counterclaim could reduce the net value of any judgment to zero was rejected as inconsistent with s. 5(5)(a), which focuses on whether the plaintiff’s claim, standing alone, could lead to a judgment in its favour, not on any eventual net position after counterclaims. However, Huaxing failed on the critical second element. Its primary evidentiary support was the affidavit of corporate counsel, Xiaoshuang Peng, who expressed “serious concerns” about AgraCity’s ability to pay the USD $6,721,700 plus interest, especially if assets were dissipated. The affidavit referred again to the Mann v Mann passage and to corporate profile and land registry searches indicating that AgraCity and the related corporations did not own Saskatchewan real property. Peng also stated general concerns about transfers to related companies, but without detailing any specific transactions, timing or amounts. AgraCity responded with an affidavit from Jason Mann, who explained that AgraCity is a large agricultural retailer with revenues over $55 million in prior years, more than $75 million in 2023, around 85 employees, and over 100 crop products. While acknowledging a downturn attributed to Huaxing’s alleged non-delivery of glyphosate in 2022, he stated that AgraCity had recovered strongly, reporting a profit of $12,731,380 in 2023 and securing new glyphosate supply relationships, with millions of litres purchased from other suppliers in 2023 and 2024. Peng did not contradict these operational figures, acknowledging she had no knowledge of them.
Finding that enforcement risk was not established
On this evidentiary record, the court concluded that Huaxing had not met its burden under s. 5(5)(b). Its fears of dissipation and ineffective enforcement rested on the same misreading of Mann v Mann that had already been rejected and on unsupported speculation about transfers to related entities. There was no concrete evidence that AgraCity was stripping assets, acting outside the ordinary course of business, or preparing to frustrate a future judgment. While AgraCity might not own Saskatchewan real property, that fact alone did not demonstrate likely ineffectiveness of enforcement, especially given the company’s size, revenues and recent profitability. Without evidence of asset-stripping or concealment, the statutory threshold for a preservation order was not met. The court therefore denied Huaxing’s request for a preservation order under the EMJA.
Creditor oppression and interim relief under the BCA
Huaxing also sought to invoke the oppression remedy provisions of the BCA, specifically s. 18-4, attempting to frame itself as a creditor-complainant entitled to interim injunctive relief to prevent AgraCity from dealing with its assets and related corporations. However, under s. 18-1(c) and (d) of the BCA, a creditor does not have automatic standing to bring an oppression application; the court must first exercise its discretion to grant that status. The decision reviews jurisprudence from other provinces (including Brar v Brar, 1043325 Ontario Ltd. v CSA Building Sciences Western Ltd., J.S.M. Corporation (Ontario) Ltd. v The Brick Furniture Warehouse Ltd., and Wisser v CEM International Management Consultants Ltd.) to emphasize that the oppression remedy is not intended to convert ordinary debt claims into shareholder-style remedies, nor to give creditors after-the-fact protection from commercial risks inherent in unsecured dealing with a corporation. Where a creditor has a straightforward contractual remedy in debt, and the corporation remains able to meet its obligations, the oppression remedy will generally be inappropriate. Instead, oppression is reserved for situations where corporate conduct, often internal manoeuvring or restructuring, has unfairly prejudiced a complainant’s reasonable expectations in a way not otherwise addressable by ordinary legal claims.
Refusal to grant creditor standing and oppression relief
Applying these principles, the court assumed for the sake of argument that Huaxing was indeed an unpaid creditor but held that mere non-payment was insufficient to justify oppression relief or to grant standing as a complainant. To obtain standing and relief, Huaxing needed to show that AgraCity’s affairs were conducted with the specific aim or effect of thwarting its claim—for example, by diverting valuable assets to insiders or affiliates in a manner that rendered the corporation judgment-proof. As previously found in assessing the EMJA application and the joinder motion, Huaxing had not provided factual support for its suspicion of “nefarious” dealings with related corporations. The court was not persuaded that Huaxing’s contractual remedies were inadequate, nor that AgraCity’s business had been manipulated in a way that fundamentally compromised creditor expectations beyond the ordinary risk of non-payment. Consequently, the judge declined to exercise discretion under s. 18-1(d) to treat Huaxing as a complainant for oppression purposes. Without standing, Huaxing could not proceed under s. 18-4, and its application for interim relief under the BCA was dismissed.
Outcome, costs and identification of the successful parties
In the result, the court granted Huaxing only the uncontroversial relief of amending its statement of claim in ways that did not add new defendants. The applications to join the Manns, 752 SK, FNA and NewAgco as defendants were dismissed, and Huaxing was directed to remove any references to those proposed defendants from the amended pleading. The preservation order sought under the EMJA and the interim injunction under the BCA were also refused. The judge described Huaxing’s effort to broaden the defendant base as a transparent attempt to gain leverage over AgraCity, noting that little effort had been made to ground the additional claims in fact and that the repeated allegations of misconduct with affiliated corporations rested on a mischaracterization of Mann v Mann. For costs, the court treated AgraCity, Jason Mann, James Mann, 752 SK, FNA and NewAgco as the successful parties on the application. It ordered Huaxing to pay each of these six successful parties $1,000 in costs, payable forthwith and in any event of the cause. This produced a total monetary award of $6,000 in costs in favour of the successful parties, with no damages on the underlying USD $6,721,700 claim determined at this interlocutory stage.
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Plaintiff
Defendant
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Court
Court of King's Bench for SaskatchewanCase Number
KBG-SA-01152-2023Practice Area
Corporate & commercial lawAmount
$ 6,000Winner
DefendantTrial Start Date