Mackenzie Sawmill Ltd. is back in the courts, a little more than a decade after the sum of three fires ruined a large mill built in 1938 that was located in the 11700-block of 130 Street in Surrey.
The first of three fires was on Nov. 12, 2010, followed by a second on Jan. 25, 2011 and the third on Oct. 31, 2014 essentially destroyed what was left of it.
Since then there have been lawsuits, with this latest court action involving United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, Local 2009 as the plaintiff versus defendants Mackenzie Sawmill Ltd., Rajdeep Singh Sohi, 0761979 B.C. Ltd., Pacific Lumber Remanufacturing Inc. and 0761977 B.C. Ltd.
Associate Judge Rory Krentz, presided over a hearing in B.C. Supreme Court in Vancouver, where the defendants applied for a dismissal for want of prosecution.
Mackenzie ceased operations in early 2011 after the second fire, with two groups of employees listed under a Schedule A and a Schedule B entitled to severance pay.
The court heard Mackenzie told the union the company intended to build another mill on site, enabling the union employees to keep their jobs. A letter of understanding was drawn up that those two groups would receive their severance if a re-built mill wasn't operational by March 31, 2013.
This was before the third fire, after which Mackenzie indicated it still planned to rebuild the mill but its completion would be delayed until 2016 or 2017. But the union alleges MacKenzie decided before the last fire happened that it wouldn't rebuild and the property was transferred to Pacific Lumber Remanufacturing Ltd., which began building a new mill that was completed in 2017 which PLR then sold to a company owned by Sohi's uncle.
The plaintiff represents those employees. The union alleged in this case that, unbeknownst to it, Mackenzie "immediately started to wind up its operations and, when it did not reopen the mill, Mackenzie did not pay any severance," Krentz noted in his reasons for judgment.
The union filed a grievance, which was settled by a consent order with an arbitrator in October 2014, resulting in the employees getting their severance payments. The order included a provision Mackenzie would make "reasonable efforts" to reopen a mill by September 2015. "If not, employees who had voluntarily retired would also receive severance," Krentz noted, as they were not included with the others.
"It is alleged that Mackenzie received over $20 million from its insurers and paid out all of those funds by the end of 2014, including to its creditors and to the Schedule A and B employees," the judge also noted. "However, it is alleged that a significant portion was also paid to companies that Mr. Sohi and his family members had an interest in."
The court heard that in November 2017 Mackenzie signed a second consent order with the Union, agreeing to pay 22 retired employees a total of $1,097,000 but that was never paid and in November 2018, Krentz noted, Mackenzie "was dissolved and had no assets available to satisfy the amount owing."
The union then in May 2019 commenced this proceeding, pleading "implied and resulting trust, fraudulent conveyance and preference, conspiracy and breach of contract," the judge explained. "They further alleged that Mackenzie and PLR operated as a single entity and that PLR is liable for the actions of Mackenzie."
For their part, the defendants filed a response in September 2019 pleading Mackenzie "had no role in the construction or operation of a new mill and denied that insurance proceeds were used in its construction" and "rather, the payments were used to discharge liabilities related to Mackenzie, PLR and 1979, and that those liabilities predated the second consent order and that the order only addresses rights as between Mackenzie and the Union members."
Further steps were taken and then COVID-19 hit. "The defendants submit here the delay is five years from the time the action was commenced," he noted, adding that the case remains in the early stages of litigation and no trial date has been set.
Krentz decided though the delay in prosecuting the action was "inordinate" it wasn't "inexusable."
"Accordingly, the application to dismiss for want of prosecution is denied," he concluded. "I do not find that the defendants have provided any evidence of actual prejudice."
He noted that while Mackenzie hasn't been a "going concern" since 2018 Sohi and his companies "appear to continue to operate on the same site.
"With respect to the issue of merit, on the face of the pleadings and the evidence produced to date, I cannot find that this action is bound to fail. The timing of the payment of the insurance proceeds and other payments made by Mackenzie to related parties provides, at a minimum, some basis for the plaintiff's claim."
Krentz said even if he had found the delay "to be both inordinate and inexcusable" the defendants' "inaction in the face of this lengthy delay weighs against dismissal of the action and that the delay has not caused any actual prejudice to the defendants. Also, I do not find that the claim is bound to fail. Accordingly, I would also find it is in the interests of justice to allow the claim to proceed."
