Executive Summary: Key Legal and Evidentiary Issues

• Scope of the “full and frank disclosure” duty on an ex parte pre-judgment garnishing order, and whether failure to include defence correspondence and emails justified setting the order aside.
• Characterization of the defendant’s complaints (non-performance, alternative payment methods, promissory notes) as true “just discounts” or merely defences to liability not required to be disclosed on the garnishing application.
• Whether alleged oral terms (payment in shares or via future private placement; delayed start of marketing contract) could limit what was “justly due and owing” despite not being in the written agreements.
• Treatment of Zimtu’s alleged underperformance or non-performance of services as a liquidated set-off versus an unliquidated dispute about value and performance to be resolved at trial.
• Evidentiary sufficiency and reliability of the defendant’s hearsay-based affidavits, particularly regarding additional oral terms and the linkage between employee promissory notes and the second “additional services” installment.
• Application of the “just discounts” test to a liquidated promissory-note theory where the quantum and connection to the pleaded debt remained uncertain and was expressly denied by the plaintiff.

Factual background and the commercial relationship

Zimtu Capital Corp. is a publicly traded investment issuer that operates as an incubator for private companies intending to go public. It agreed to assist Capacitor Metals Corp., a privately held mining exploration company, in its goal of becoming listed on a Canadian stock exchange. Their relationship was documented primarily through a Management Services Agreement (MSA) and a proposed marketing services agreement referred to as the “Zimtu Advantage Agreement.” Under the MSA, Zimtu was to provide administrative and management services, including office space, to Capacitor. The parties agreed that Capacitor would be charged $15,000 per month plus GST for these services. The MSA also contemplated “additional services,” essentially strategic input to help Capacitor become listed, for a fee of $150,000 plus GST, payable in two equal installments: one at the outset and one upon completion of Capacitor’s first private placement. The first $75,000 installment was paid, and the MSA’s original 10-month term was extended for a further 12 months around December 1, 2024.
A second arrangement, the Zimtu Advantage Agreement, involved a proposed 12-month marketing program at $12,500 per month plus GST. The written document referred to “ratification” but did not specify how ratification would occur. Zimtu claimed this marketing contract was entered into and its start date delayed to September 1, 2024, whereas Capacitor maintained the parties only intended to sign a one-year marketing agreement after Capacitor’s shares were actually listed. Pending that event, Capacitor said only limited “basic” marketing services would be provided for free and that no binding Zimtu Advantage Agreement ever came into force.

Disputed payment structure and the promissory notes

A further complication arose from employee share acquisitions. In or about April 2024, Zimtu loaned money—secured by promissory notes—to its employees so they could purchase shares in Capacitor. Capacitor argued that the issuance of those shares to Zimtu’s employees, funded by Zimtu’s loans, was effectively how the second $75,000 installment for the additional services under the MSA was paid. On this theory, the debt was satisfied when Capacitor issued shares that ultimately resulted in Zimtu being repaid through employee repayments of the promissory notes, meaning no second installment remained owing. Zimtu firmly denied any such linkage, characterizing the promissory-note transactions as a separate internal arrangement between it and its employees and insisting that the second installment remained unpaid.
Capacitor placed in evidence proof of some promissory-note repayments totalling $48,500, but it did not establish repayments of the full $78,500 that it asserted was tied to Zimtu’s claim. Zimtu’s chief financial officer swore a follow-up affidavit expressly denying that the promissory notes formed part of the debt claimed in the litigation and affirming that the loans were simply how Zimtu chose to use the first installment that Capacitor had paid.

Demands, invoicing, and breakdown in the relationship

By September 9, 2025, Zimtu, through counsel, demanded payment of $456,750 said to be owing under the MSA and the Zimtu Advantage Agreement, supported by an accounts receivable statement. Capacitor’s counsel requested underlying invoices, which were then supplied on September 25, 2025. Capacitor maintained this was the first time it actually received invoices under either agreement.
On October 2, 2025, Zimtu updated its demand to add the monthly MSA fee for October ($15,750 including GST) and a QuickBooks subscription charge. Capacitor’s counsel responded on October 16, 2025, disputing the quantum claimed and asserting that $78,750 of the alleged debt related to employee promissory notes rather than any amount genuinely owing by Capacitor. The letter also asserted that Zimtu had ceased providing administrative and managerial services by September 2025 and proposed a 50% reduction of MSA fees from that point forward.
Meanwhile, on May 8, 2024, Capacitor had completed its first private placement, which, under Zimtu’s interpretation of the MSA, triggered the second $75,000 installment for the additional strategic services. At the time of the hearing, Capacitor remained privately held and unlisted, further feeding its argument that the Zimtu Advantage Agreement had not truly commenced.

The civil action and the pre-judgment garnishing order

On October 15, 2025, Zimtu commenced a civil action by filing a notice of civil claim, alleging that $472,944.80 was outstanding under the MSA and the Zimtu Advantage Agreement. Shortly thereafter, it applied without notice for a pre-judgment garnishing order to secure $472,580, comprising the contractual amounts it said were owing under both agreements plus the filing fee for the garnishing order.
The registrar granted the pre-judgment garnishing order on October 30, 2025. This remedy, obtained ex parte, attached debts allegedly owed to Capacitor by third-party garnishees so that funds would be set aside pending judgment. Although the order was in place at the time of the hearing, neither party advised the court of the actual amount, if any, that had been successfully garnished.

Defendant’s application to set aside the garnishing order

Capacitor applied under Rule 8-5(8) of the Supreme Court Civil Rules and s. 5 of the Court Order Enforcement Act to set aside the garnishing order. It did not allege that the order was substantively unjust; rather, it argued that the order was flawed on procedural and evidentiary grounds. First, it said Zimtu had failed in its duty of full and frank disclosure when it applied without notice. Second, it claimed that Zimtu had not given effect to “all just discounts” in stating the amount “justly due and owing” as required by s. 3(2)(d) and (e) of the Court Order Enforcement Act.
Capacitor pointed to several alleged omissions from the supporting affidavit of Zimtu’s CFO: the affidavit did not acknowledge that key terms were said to be oral (including payment in shares and deferral of the marketing agreement until listing), did not concede alleged non-performance or underperformance of services that would justify discounts, and did not attach the August 2025 email from Capacitor’s executive director or the September and October 2025 letters from its counsel, which set out Capacitor’s position on the debt and raised the promissory-note theory. Capacitor also argued that Zimtu had effectively billed for services that were never provided, especially under the alleged marketing agreement, and had failed to account for repaid promissory notes that, in its view, eliminated a portion of the claimed debt.

Plaintiff’s response: scope of disclosure and “just discounts”

Zimtu accepted that a high duty of disclosure applies to pre-judgment garnishing orders but emphasized that, unlike an ex parte injunction, the disclosure duty is confined to matters material to the statutory elements in s. 3 of the Court Order Enforcement Act. In particular, it argued that it was only required to disclose information relevant to whether there was a pending action, the nature of the claim, and the actual amount “justly due and owing after making all just discounts,” not to catalogue all possible defences the defendant might raise. It relied heavily on recent authority clarifying that a garnishing- order applicant is not obliged to “argue the other side’s case” and that the registrar must assume the defendant will have another side to the story.
Zimtu further submitted that Capacitor’s complaints about non-performance of services and disputes over payment terms were, at most, defences that would need to be resolved at trial, not “just discounts.” It maintained that for a deduction to be considered a “just discount” on a garnishing application, it must be a liquidated, arithmetically ascertainable claim advanced by way of set-off or counterclaim. In its view, the alleged non-performance under the marketing agreement, the purported half-reduction in MSA fees after September 2025, and the promissory-note theory did not qualify. Zimtu also noted that Capacitor had not advanced any formal counterclaim or pleaded set-off in its response to civil claim, reinforcing that these issues were defences rather than independent liquidated claims.

Assessment of the evidentiary record and oral terms

The court scrutinized the evidentiary basis of Capacitor’s application, particularly the two affidavits of Christopher Grove, Capacitor’s president and CEO, who had only joined the company in late August 2024, after the key agreements were negotiated. Much of Mr. Grove’s evidence regarding the alleged oral terms—such as the ability to pay in shares and the deferral of the marketing agreement until listing—was hearsay and, in parts, double hearsay, with limited indication of his sources. This significantly reduced its weight.
The August 2025 email from Capacitor’s executive director was also examined. While Capacitor argued that it showed the Zimtu Advantage Agreement had never commenced, the wording was ambiguous. The email referred both to the expiry of the Zimtu Advantage Agreement and to “pre-paying the bill for future Zimtu Advantage services,” which was at least consistent with Zimtu’s position that a marketing contract existed and that some services had been provided. Given this ambiguity and the conflicting evidence that some marketing-type services were in fact performed, the court concluded that omitting this email from the original garnishing-order materials did not amount to material non-disclosure.

Non-disclosure and materiality

The court accepted that there must be meticulous compliance with the statutory prerequisites for a pre-judgment garnishing order due to its extraordinary nature and the absence of any undertaking as to damages. At the same time, it held that “material” non-disclosure is limited to matters that could realistically have changed the registrar’s decision. The written agreements and the CFO’s direct evidence regarding their terms were sufficient for the registrar to assess whether the statutory test was met.
The letters from Capacitor’s counsel in September and October 2025, while potentially relevant in some contexts, were seen primarily as articulations of the defendant’s defences, not as uncontroverted facts that would defeat the application. The September letter simply identified counsel and requested invoices, which Zimtu subsequently supplied; the October letter largely proposed a re-rating of the fee and contested elements of the claim. The court emphasized that an applicant is not obliged to lay out in full the defendant’s anticipated defence theory, especially where it is contested and not presented as a liquidated set-off.

“Just discounts” versus defences and set-off

Turning specifically to the “just discounts” requirement, the court analyzed each of Capacitor’s asserted reductions: all sums billed under the Zimtu Advantage Agreement on the basis that no such agreement had commenced and no services were provided; the $78,750 linked to promissory notes; and a cut to the MSA fees for September and October 2025 due to alleged cessation of services.
The judge held that the disputes over whether the Zimtu Advantage Agreement existed, when it commenced, and what services were actually delivered, together with the argument over how much of the MSA fee should be payable after September 2025, were classic examples of unliquidated disputes to be resolved at trial rather than arithmetically fixed set-offs. They were therefore defences to liability rather than “just discounts” that must be netted out at the garnishing-order stage. Capacitor remained free to advance those positions in the main action.
The promissory-note theory was the closest to a potentially liquidated claim. However, even there, the evidence was incomplete and largely speculative. Capacitor had not proven that promissory notes for the full $78,500 were issued and repaid; it had only shown repayments totalling $48,500, and the linkage between those repayments and the alleged second $75,000 installment remained unproven and was directly denied by Zimtu. On that record, the court concluded that the promissory-note issue had not yet matured into a proven liquidated set-off that would qualify as a “just discount” requiring deduction from the amount stated to be justly due and owing.

Outcome and practical effect

In light of the statutory framework and the jurisprudence on pre-judgment garnishing orders, the court found that Zimtu’s application materials met the disclosure standard applicable to such orders and that there had been no material non-disclosure. The registrar was entitled to rely on the written agreements and the CFO’s evidence as to the amount claimed, without being required to engage with every contested defence theory.
The court further held that the alleged non-performance, disputed payment modalities, and promissory-note theory were not the sort of liquidated, arithmetically certain set-offs that must be treated as “just discounts” on a garnishing application. Instead, they were live defences for Capacitor to press in the underlying contractual lawsuit. As a result, the defendant’s application to set aside the pre-judgment garnishing order was dismissed.
In the final paragraph of the reasons, the court ordered that the plaintiff, Zimtu Capital Corp., recover its costs of the application from the defendant, Capacitor Metals Corp. The judgment did not fix a precise dollar amount for those costs, and there was no final determination of the underlying debt, damages, or total monetary relief at this stage. Accordingly, the successful party was Zimtu Capital Corp., and while it obtained an order for its costs of the application, the exact monetary amount in its favour cannot be determined from this decision alone.