Executive Summary: Key Legal and Evidentiary Issues

• The court considered whether Pacific West Systems Supply Ltd could establish a reasonable likelihood of success against both A&K Tiles & Drywall Ltd and Dhothar Developments Inc under section 17(2) of the Civil Enforcement Act.
   
• Evidentiary conflicts arose over whether a $400,000 or $350,000 transfer from A&K to DDI was connected to the purchase of the 81 Ave property.
   
• Justice Mah examined whether Pac West's tracing evidence was sufficient to link A&K's funds to DDI's acquisition of 81 Ave.
   
• DDI raised a limitations defence, arguing that Pac West's knowing receipt claim was filed too late after Pac West learned of the transfer in 2022.
   
• Questions about the credibility of the Dhothar family's statements, including a retracted admission by Paramjit Dhothar, were raised but ultimately found not determinative.
   
• An offer by DDI to hold the net proceeds of the 81 Ave sale in trust factored into the court's assessment of the risk of asset dissipation.
   

Facts of the case

Pacific West Systems Supply Ltd (Pac West), a supplier of drywall products and accessories, brought two related actions in the Court of King's Bench of Alberta. The first was against A&K Tiles & Drywall Ltd (A&K), a tile and drywall installer, and its sole director and shareholder Joga Dhothar, for contractual debt. The second was against Dhothar Developments Inc (DDI), a related property development company, for wrongful receipt of funds. Pac West's theory was that funds belonging to A&K, which should have gone toward its debt, were instead diverted to DDI and used to acquire and develop a property on 81 Avenue in Edmonton (81 Ave), which was in the process of being sold at the time of the application. Pac West sought a pre-judgment Attachment Order under section 17 of the Civil Enforcement Act (CEA) to freeze the net proceeds of that sale, estimated at approximately $200,000. A&K had a credit relationship with Pac West dating back to 2011, and its account became significantly overdue in February 2022, prompting Pac West to request financial statements. Pac West's deponent, Ms. Tomé, said she began questioning an apparent $400,000 cash advance from A&K to DDI starting in 2022, and that Joga signed a personal guarantee of A&K's debt in November 2024. Pac West later learned that DDI had purchased 81 Ave in October 2024, and Ms. Tomé deposed that Paramjit Dhothar had at one point verbally confessed that the transfer funded the 81 Ave purchase, a statement Paramjit later recanted. Pac West alleged that A&K owed approximately $802,000. A&K and DDI disputed the extent of that debt and denied any connection between the transfer and 81 Ave, asserting that the sum in question was actually $350,000, originating from a 2021 loan by the Business Development Bank of Canada (BDC) to A&K, which was advanced to DDI and used to acquire and develop a separate property on 77 Avenue (77 Ave). They said the shareholder's loan was repaid to A&K, which in turn repaid BDC, and that 81 Ave was a distinct project financed through a $1 million loan from Servus Credit Union in August 2024.

Policy and legislative provisions at issue

The application turned on section 17(2) of the Civil Enforcement Act, which requires the court to be satisfied that there is a reasonable likelihood the claimant's claim against the defendant will be established, and that there are reasonable grounds for believing the defendant is dealing, or likely to deal, with its exigible property other than to meet reasonable business or living expenses and in a manner likely to seriously hinder the claimant's ability to enforce a judgment. The court also considered sections 17(5) and 17(6) of the CEA, which direct that an attachment order be fashioned to cause as little inconvenience to the defendant as is consistent with its purpose, and, where feasible, not attach property exceeding the value of the claim.

Reasoning and analysis

Justice Mah drew on prior authority, including Bank of Nova Scotia v Five Star Motor Group Ltd, 2020 ABCA 244, for the principle that the "reasonable likelihood" test is lower than a strong prima facie case but requires more than mere suspicion, and on 1498587 Alberta Inc v Devani, 2012 ABQB 324, and Edmonton Region Community Board for Persons with Developmental Disabilities v Pearl Villa Homes Ltd, 2003 ABQB 1026, for the indicia relevant to whether a defendant is dealing improperly with its assets, such as disappearing assets, non-arm's-length transfers below market value, or unexplained fund movements. Applying these principles, the judge found that Pac West had a reasonable likelihood of establishing at least part of its debt claim against A&K, even accounting for A&K's reconciliation defence. However, he found Pac West conceded there was no tracing evidence connecting funds belonging to A&K in 2022 to the acquisition of 81 Ave, and that the documented BDC loan for 77 Ave and separate Servus loan for 81 Ave refuted that assertion at this stage. The suggestion that unpaid-for materials from Pac West were incorporated into 81 Ave was characterized as conjecture. The judge also found DDI had a more than arguable limitations defence, since Pac West was aware of the disputed transfer by 2022 but did not commence its knowing receipt action against DDI until February 2026. Because the claim against DDI did not meet the reasonable likelihood threshold, and the two branches of the statutory test are conjunctive, the judge found it unnecessary to fully resolve the second branch, though he noted that DDI's offer to hold the 81 Ave sale proceeds in trust pending settlement or further court order removed any real risk of dissipation.

Ruling and overall outcome

The court dismissed Pac West's application for a pre-judgment Attachment Order as it pertained to all defendants and respondents, finding that Pac West had not shown a reasonable likelihood of establishing its claim against DDI, the party whose property was the actual target of the application. Notwithstanding the dismissal, DDI was directed, through its counsel, to hold the net proceeds of the sale of 81 Ave in trust until both actions are settled or the court makes a further order concerning those proceeds. The court also ordered the two actions consolidated into one proceeding. On costs, the decision does not state a specific amount; the judge encouraged the parties to address costs as part of their broader settlement discussions and directed that, if costs cannot be agreed, written submissions may be made within 30 days of the decision. As no costs figure was fixed, the monetary outcome of this application is Not Specified.