Executive Summary: Key Legal and Evidentiary Issues

• Plaintiffs sought to recover a $2,242,750 judgment from the estate of William Harris, his ex-wife Luba Okun-Harris, and his son Samuel Harris after the bankruptcy of Jon Harris and dissolution of 1378882 Alberta Ltd.

• The court examined whether the $2 million transfer from 1378882 Alberta Ltd. to a bank account in William Harris’s name was a fraudulent conveyance and whether default judgments against Luba Okun-Harris and Samuel Harris should be vacated.

• Evidence established William Harris had no involvement in, knowledge of, or benefit from the funds transferred into the account in his name; all transactions were controlled by Jon Harris.

• The court found both Luba Okun-Harris and Samuel Harris had arguable defences, set aside the default judgments against them, and allowed them to file statements of defence.

• Summary judgment was denied against the estate of William Harris, and all claims against him were dismissed due to lack of evidence of his involvement or benefit.

• On costs, the court declined to award full indemnity but ordered the Plaintiffs to pay 50% of the legal fees and disbursements of the estate of William Harris.

Background and facts

The Plaintiffs, Erwin Brokop and 866565 Alberta Ltd., were judgment creditors of 1378882 Alberta Ltd. (“137”), a company formerly owned and controlled by Jon Harris. 137 was struck from the corporate registry in 2021, and Jon Harris declared bankruptcy, receiving a conditional discharge. The Plaintiffs sought to recover a portion of their damages from the estate of Jon Harris’s father, William Harris, his ex-wife Luba Okun-Harris, and his son Samuel Harris.

The Plaintiffs alleged that Jon Harris exercised complete control over 137 and used it to convey assets, including a $2 million transfer from 137 to a bank account in William Harris’s name on May 30, 2011. Both Jon Harris and William Harris had signing authority on the account, but evidence showed William Harris did not write cheques, had no involvement in the transactions, and the funds were returned to 137 over the following two years. William Harris was in his early nineties at the time, and a capacity assessment in 2020 concluded he lacked capacity from sometime prior to November 17, 2020. William Harris passed away on March 20, 2022, at the age of 101.

The Plaintiffs also alleged that Luba Okun-Harris and Samuel Harris received payments from 137. The Jiminez Report, relied on by both parties, indicated Luba Okun-Harris received about $88,000 over 3.5 years, mostly applied to a line of credit and VISA card that may have been in Jon Harris’s name or joint names. Samuel Harris received about $37,000 in 14 payments over 10 months, primarily for medical and living expenses during his recovery from cancer.

Legal proceedings and policy terms

The court first addressed the applications by Luba Okun-Harris and Samuel Harris to vacate default judgments entered against them. The court found both had arguable defences, including lack of knowledge and involvement, and issues regarding the source and application of funds. The court set aside the default judgments and allowed them to file statements of defence within 30 days of the later of the filing of the order or the filing and serving of an amended statement of claim.

Regarding the $2 million transfer to William Harris, the Plaintiffs sought summary judgment, arguing the transfer was a fraudulent conveyance under the Fraudulent Preferences Act and the Statute of Elizabeth. The court found that William Harris had no involvement in, knowledge of, or benefit from the funds, and all transactions were conducted by Jon Harris. The funds were returned to 137 or Jon Harris, and there was no evidence William Harris sold, disposed of, realized, or collected the funds. The court concluded that section 11 of the Fraudulent Preferences Act did not apply, and the Statute of Elizabeth did not create a right of action for damages in these circumstances.

The Plaintiffs also sought to amend their claim to allege conspiracy against William Harris. The court found no evidence to support an agreement or intent to injure the Plaintiffs and declined to approve the proposed amendments with respect to William Harris, but allowed amendments regarding Luba Okun-Harris and Samuel Harris.

The estate of William Harris applied for summary dismissal of all claims. The court found the record sufficiently clear to resolve the dispute and granted summary dismissal, dismissing all claims against William Harris, his estate, and his litigation representative.

Outcome and costs decision

Following the dismissal of all claims against the estate of William Harris, the court addressed costs. The estate sought solicitor-client full indemnity costs or, alternatively, double costs under Rule 4.29 of the Alberta Rules of Court. The Plaintiffs argued for no costs or, alternatively, Schedule C costs. The court found that while the Plaintiffs’ claims lacked merit, their conduct did not meet the threshold for solicitor-client costs. Instead, the court awarded the estate of William Harris 50% of legal fees plus disbursements and GST, with the final amount to be determined following a breakdown of costs and disbursements.

In summary, the estate of William Harris was the successful party, with all claims against it dismissed and a substantial costs award granted in its favor. No monetary recovery was achieved by the Plaintiffs against the estate, and the exact amount of costs to be paid will be determined after review of the breakdown of legal fees and disbursements.