An investment company has been ordered to pay Vale Ltd. $85,000 as security in connection with an unusual lawsuit that dates back two decades.
George Armstrong Investments Inc. was ordered to pay the money, along with a numbered company and his son, William George Armstrong, who is trustee for his father’s estate.
Since 2001, Armstrong, his son and a numbered company have been involved in a lawsuit against Vale and Transport Development Inc. (TDI).
George Armstrong was sole director of all the companies suing Vale.
A transcript of the court proceedings said William Armstrong is a shareholder of TDI, a trucking company.
On Jan. 25, 2001, TDI signed a transportation contract with Vale, but a week later transferred it to 1447311 Ontario Ltd., a company in which William Armstrong is a shareholder.
“Vale was subsequently directed by TDI to make to (1447311 Ontario Ltd.) the payments due under the contract, rather than to TDI,” the transcript said.
But in November 2001, George Armstrong Investments Inc. and the others sued TDI, seeking money from the contract with Vale.
TDI, which also counts William Armstrong as a shareholder, didn’t oppose the lawsuit. At that point, they went to court to serve what’s known as a notice of garnishment on Vale.
The notice of garnishment meant the plaintiffs were trying to get Vale to pay up. They claimed Vale owed TDI money under the original contract and that money should go to the plaintiffs.
“Vale advised the plaintiffs that TDI was no longer in their vendor file and that they did not have any active transactions with TDI,” the transcript said.
The case was dormant for a decade, but in 2012, a receiver for TDI revived the suit and again tried to get Vale to pay. Legal proceedings began in 2014 and since then Vale has spent $65,000 defending the case.
“Vale attended for examinations on several occasions since that time and produced over 20,000 documents, as ordered by the court,” the transcript said.
“It estimates a further $20,000 will be required to complete the garnishment proceedings.”
LEGAL BILLS PILED UP
As the legal bills piled up, Vale went to court to argue the plaintiffs are broke and would not be able to pay Vale’s court costs should they lose the case.
In order to do that, the judge wrote Vale would have to prove two things: the plaintiffs were broke and that the lawsuit was frivolous or vexatious.
The judge ruled they have proved both.
In 2011, William Armstrong swore that the estate only had $15,000 in assets. The corporate entities involved in the lawsuit don’t have any assets.
Vale argued the suit was “frivolous and vexatious” for a number of reasons, starting with the fact TDI consented to the lawsuit when William Armstrong was linked to both sides involved in the lawsuit.
There’s also no evidence of an outstanding contract or invoices between TDI and Vale. And the judge ruled there is plenty of reason to believe the suit was vexatious.
“The defendant TDI and Vale were parties to a transportation agreement. Within days of signing the agreement, TDI, which William Armstrong owned, assigned the transportation agreement to 144, in which William Armstrong is a shareholder, and directed Vale to make payments to 144,” the judge wrote.
“The plaintiffs thereafter obtained judgment against TDI, with William Armstrong consenting to the judgment on behalf of TDI, even though he is both a plaintiff and a shareholder of the defendant in the proceedings.”
In the end, the judge ruled that if they want to continue with the case, the plaintiffs would have to pay the $85,000 up front to cover Vale’s legal costs.
If they don’t pay up, they can’t proceed with the case, except to appeal the decision.
Read the full transcript here.
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