Turner v. Turner, 2011 ABQB 21

Court of Queen ’ s Bench of Alberta Citation: Turner v. Turner, 2011 ABQB 21 Date: 20110120 Docket: 0903 02223 Registry: Edmonton Between: Doyle Thomas Turner, Doyle Turner Family Trust, 661254 Alberta Ltd. carrying on business as Noremac Industrial Coatings, and Noremac Industrial Coatings Plaintiffs - and - Stacey William Turner, Stacey Turner Family Trust and 724849 Alberta Ltd.

Defendants Docket: 0803 04515 and Between: Stacey William Turner and Stacey Turner Family Trust Applicants - and - Doyle Thomas Turner, Doyle Turner Family Trust , Stewart John Cameron, Stewart Cameron Family Trust and 724849 Alberta Ltd. Respondents _______________________________________________________ Memorandum of Decision of the Honourable Madam Justice J.B. Veit _______________________________________________________

Summary [ 1 ] In February 2009, Doyle Turner sued Stacey Turner and 724849 Alberta Ltd. for various relief including declaratory relief, correction of the corporate registry, and the issuance of appropriate corporate securities in the capital stock of 724. 724 is a closely-held, family-owned, company incorporated in 1997 to acquire real property in Fort McMurray; at incorporation, 50 Class “A shares were registered to Stacey Turner, and 25 Class “A” shares were registered to each of Doyle Turner and Stewart Cameron. All 3 shareholders were also directors of 724.

In 2006, a capital reorganization introduced family trusts for each of the original shareholders; the capital reorganization mirrored the original share distribution; as part of the re-organization, each shareholder executed a Unanimous Shareholder Agreement. [ 2 ] The dispute at the core of the proceedings concerns the beneficial ownership of 724 and pits Doyle Turner and his brother- in-law, Stewart Cameron, on one side, and Stacey Turner, Doyle’s father, on the other.

Doyle Turner asserts that, despite the 1997 and 2006 corporate formalities, Stacey Tuner beneficially owns, at the most, a 25% interest in 724 and that it is Doyle Turner - and his related family trust - who beneficially own 50% of 724.

The inability of the parties to agree on fundamental corporate objectives has resulted in a court order to liquidate the company. [ 3 ] Invoking s. 240 of the Business Corporations Act , Stacey Turner now asks the court for leave to intervene in the action for the purpose of defending the action brought against 724; he also asks the court to use its power under s. 241 of the Act to require 724 to pay reasonable legal fees incurred by him in connection with the defence.

He argues that 724 may have a complete defence to this action under the Limitations Act. [ 4 ] Doyle Turner opposes the application on the following grounds: - a derivative action is not necessary since the limitations defence, if any, will be raised by Stacey Turner in his personal capacity; - the only relief claimed against 724 is relief necessary to give effect to any judgment Doyle Turner may obtain against Stacey Turner; - a derivative action is not in the best interests of the company since there is an equal division amongst the shareholders about what is in the company’s best interests; - Stacey Turner has not satisfied the requirement to demonstrate a reasonable chance of success in any derivative litigation.

The only evidence presented in support of the motion is evidence which suggests that none of the other parties, i.e. Doyle Turner, Stewart Cameron, or the liquidator, has shown any interest in pursuing the litigation; - if anyone should undertake the responsibilities of a derivative action, it should be the liquidator. [ 5 ] Stewart Cameron, who has been given leave to not actively participate in the lawsuit, supports Doyle Turner’s position.

He adds that the cost of having anyone defend 724 in these proceedings will impose an inordinate cost on 724. [ 6 ] The liquidator takes no position on the application other than indicating that it is, of course, willing to abide by any order issued by the court. [ 7 ] Stacey Turner’s application is allowed, in part; 724 can defend Doyle Turner’s claim, but, because of the conflict between Stacey and Doyle Turner and the problems that arise because of that conflict, 724's liquidator - rather than Stacey Turner - should control the corporate defence. [ 8 ] The decision to grant leave to take derivative action is discretionary.

However, before reaching the point where judicial

[8] The decision to grant leave to take derivative action is discretionary.

However, before reaching the point where judicialdiscretion can be exercised, an applicant for leave must satisfy four statutory pre-conditions. [9] Of the four statutorily mandated pre-requisites to the granting of leave to commence a derivative action, Stacey Turnerclearly meets the first two - he is a “complainant” within the meaning of the Act, and he has given reasonable notice of his application tothe other directors of the company. [10] The remaining pre-requisites, that of being in good faith and of acting in what appears to be in the interest of the corporation,are intertwined and must be considered together.

As our Court of Appeal held in Acapulco Holdings, it is not bad faith to have a personalinterest in the outcome of litigation: “bad faith would more often be inferred from absence of a belief in an arguable cause of action, notfrom self-interest”. [11] Although the corporate limitations defence is not fully developed in Stacey Turner’s application, it is at least sketched out.That admittedly minimal outline is sufficient, in the circumstances here, to allow the court to flesh out the argument by reference toinformation contained in earlier proceedings before this court, such as the fact that, from at least 1997 onwards, the parties have hadaccess to an experienced, sophisticated legal adviser, and that in the mid-2000s, they had access to corporate tax, accounting andbusiness advice from a sophisticated adviser.

That information can be taken into account in determining whether a corporate limitationsdefence is bound to fail. [12] There is no suggestion here that Stacey Turner does not believe in a corporate limitations defence to Doyle Turner’s claim. [13] The Act does not deal separately with an application to initiate derivative action and an application to defend on a derivativebasis.

Nevertheless, it may be appropriate to have a different “chance of success” test apply to each: while one may not be able to start anaction with impunity, once someone else has started an action, it may be axiomatic that you should be allowed to defend. In any event,however, even if the same “chance of success” test applies to defending an action as to starting one, it is at least arguable that 724 has alimitations defence to Doyle Turner’s claim. Therefore, it appears to be in the interest of 724 to determine whether its apparentshareholding is its beneficial shareholding. [14] In

summary, Stacey Turner has met all four mandatory pre-requisites to the granting of leave to defend an action on aderivative basis. A court could, therefore, grant him leave. [15] In determining whether it should exercise its discretion in favour of granting leave, the court considers the claim made byStewart Cameron and the overall situation. [16] Stewart Cameron argues that the granting of leave to act in a derivative capacity will place an undue burden on thecorporation.

With respect, the facts establish that the corporate property is worth tens of millions and that the company even has liquidassets of approximately one half million.

It cannot be reasonably expected that the proposed lawsuit will compel the corporation to incurinordinate expenses. [17] Another factor which the court considers is that Doyle Turner took advantage of corporate expenditures on legal, accountingand tax advice with respect to a corporate re-organization rather than paying for that advice personally [18] Overall, although it appears to be in the best interest of 724 to defend the action taken against it by Doyle Turner, because ofthe conflict of interest between Stacey Turner and Doyle Turner, the liquidator, rather than Stacey Turner, should control 724's defence.

Cases and authority cited [19] By the applicant Stacey Turner: Acapulco Holdings Ltd. v Jegen 1997 ABCA 40 , 1997 CarswellAlta 115, 193A.R. 287 (C.A.); O’Fearghail Holdings Ltd. V Bignold 2001 ABQB 514, 295 A.R. 163; Cook v K.C.C. Inv. Inc. 234 O.A.C. 182, 2008CarswellOnt 1647.

[ 20 ] By the respondent Doyle Turner: Valgardson v Valgardson 2006 ABQB 253 ; Bennett v Rudex 2008 BCSC 1278 ; Cook v K.C.C. Inv. Inc. 234 O.A.C. 182 , 2008 CarswellOnt 1647 . [ 21 ] By the court: On whether a different likely success standard applies to starting an action and defending an action: Safarik v Hall 2006 BCSC 283 , [2006] B.C.J. No. 360 ; Bank of Montreal v Cochrane 2010 ABQB 578 , [2010] A.J. No. 1047 . [ 22 ] On whether the settlement of a dispute between two shareholders is in the best interest of the company of which they are shareholders: Maxwell v Shuman 2005 BCSC 1430 , [2005] B.C.J.

No. 2188 . Appendix A: ss. 239 - 241 Business Corporations Act, R.S.A. 2000, c. B-9 Appendix B: Extracts from the Amended Statement of Claim 1. Background [ 23 ] 724849 Alberta Ltd. is a closely-held, family-owned, company which was incorporated in 1997 to acquire real property in Fort McMurray; that property is now worth tens of millions. In 1997, 50 Class “A shares were registered to Stacey Turner, and 25 Class “A” shares were registered to each of Doyle Turner and Stewart Cameron.

In 2006, a capital reorganization introduced into 724 family trusts for each of the original shareholders; the capital reorganization mirrored the original share distribution.

As part of the capital reorganization, as of August 31, 2006, Stacey Turner and Doyle Turner each executed a Unanimous Shareholders’ Agreement which agreed to the issuance of the new shares and which also contained two further provisions: 1.6 Supersedes Prior Agreements The provisions of this Unanimous Shareholder Agreement supersedes all former agreements relating to the disposition by any party of their Shares or Advances in the Corporation and all such other agreements are hereby declared to be of no further force or effect whatsoever, except to the extent that the substance thereof is incorporated into the terms of this Agreement. 12.12 Agreement This Agreement constitutes the entire Agreement between the Parties hereto and there are no statements, representations, warranties, undertakings or agreements, written or oral, express or implied, direct or indirect, collateral or otherwise between the Parties hereto, except as herein set forth. [ 24 ] The dispute at the core of the proceedings, which dispute has already provided the basis for an order for the liquidation of the company as one result of these proceedings, is a dispute between Doyle Turner and his brother-in-law, Stewart Cameron, on one side, and Stacey Turner, Doyle’s father, on the other.

Doyle Turner essentially asserts that his father does not beneficially own the shares of which he is the apparent owner; he maintains that Stacey Turner beneficially owns, at most, 25% of the shares of 724. [ 25 ] Doyle Turner commenced proceedings against his father and 724 and Stewart Cameron in February, 2009. [ 26 ] The court has issued written decisions on various matters which arose in these proceedings; those decisions can be found at 2008 ABQB 590 , 2008 ABQB 747 , 2009 ABQB 164 , and 2009 ABQB 746 .

The decisions refer to some of the evidence that was placed before the court on various applications. [ 27 ] In a consent order agreed amongst the parties in March 2009, the liquidator was directed not to file a Statement of Defence on behalf of 724 in the proceedings, and that 724 was not to be noted in default in the proceedings. 2. Has Stacey Turner met the four mandatory statutory pre-requisites: being a “complainant”, having given notice to the

directors of the corporation of his intention to apply, acting in good faith, acting in the interests of the corporation? [ 28 ] The Business Corporations Act requires that a person who applies for leave to commence a derivative action meet four statutory requirements before the application can be considered: s. 240(2) .

a) Is Stacey Turner a “complainant”? [ 29 ] The short answer is, Yes. All parties agree that, as a registered shareholder and director of 724, Stacey Turner is a complainant within the meaning of the Act

b) Has Stacey Turner given reasonable notice to the directors of the corporation of his intention to apply to the court for leave to intervene in the proceedings if the directors do not diligently defend the action? [ 30 ] The short answer is, Yes. Stacey Turner has provided a copy of a registered letter sent on November 26, 2010 to the other shareholders and directors of 724 demanding that they take steps to diligently defend the action. Stacey Turner has received no reply to this demand.

c) Is Stacey Turner acting in good faith? [ 31 ] The court concludes that Stacey Turner is acting in good faith. [ 32 ] In coming to that conclusion, the court observes that, in Alberta, the determination of what constitutes “good faith” in this context has been clarified by our Court of Appeal in Acapulco Holdings Ltd. , where the court said: 16 The bad faith suggested by the appellants seems to be this. The respondents have wanted for some time to come to a parting of the ways with the appellants, but have not been able to sell their (respondents') shares.

The derivative suit is said to be a way to induce the appellants to buy, or otherwise enhance the value of the shares. But it seems to us that the same could be said of almost any shareholder fight, and indeed could be said about most disputes about property. Our system of law does not require that litigants be disinterested; indeed rather the reverse is the rule. Nor do we expect war to the death; we encourage litigants to compromise. So any reasonable litigant must foresee the chance that one side will buy out the other.

Surely the only legitimate reason that almost all shareholders want their company to prosper, is to increase the value of their shares and appurtenant rights like dividends. 17 Bad faith would more often be inferred from absence of a belief in an arguable cause of action, not from self-interest. See Re Richardson Greenshield, supra, at 638.

We cannot say that the company (Testing) lacks an arguable cause of action here, still less that the respondents do not believe that there is one. [ 33 ] In Valgardson , on which Doyle Turner relies , two comments are made about the requirement of good faith: “that there is a high onus on an applicant to establish that the proceeding is brought in good faith and good faith is shown if the action is not motivated by a private vendetta”: para. 19.

It may well be that, in its entirety, that statement is not substantively different from the statement by the Court of Appeal in Acapulco , especially when one notes that, immediately before making the two comments, the Valgardson court cited the First Edmonton Place Ltd. decision as authority for the proposition that “good faith is shown if the action is not motivated by a private vendetta and if it is not frivolous or vexatious”.

Seen in that light, the first comment in Valgardson is almost superfluous. [ 34 ] In any event, the first Valgardson comment was based on a trial level decision rather than on an appeal level decision. Mackenzie v Craig, which was cited in the Valgardson decision is, like Acapulco , a 1997 decision , and although it was decided somewhat later in 1997 than Acapulco , the Acapulco decision was not cited to the Mackenzie court.

[ 35 ] In

summary, if there were a difference of approach between Valgardson and Acapulco , this court would, of course, be bound to follow Acapulco . [ 36 ] The court notes that there is not, in any event, any evidence of a vendetta being carried on by Stacey Turner against his son Doyle; the evidence which has been led earlier in these proceedings is that the parties do not agree on the direction of 724. [ 37 ] The court notes, as well, that, within the Bennett decision cited by Doyle Turner, there is reference to a decision of the New South Wales Supreme Court which is very similar in tenor to the decision of our Court of Appeal in Acapulco . [ 38 ] In order to determine whether Stacey Turner is acting in good faith in asking for derivative authority, the court must then consider whether the corporate defence which he is proposing is arguable, or if it is frivolous or vexatious.

For the reasons that follow, the court comes to the conclusion that it does appear to be in the interest of 724 to defend Doyle Turner’s claim.

d) Does it appear to be in the interest of 724 to defend the action brought against it by Doyle Turner? [ 39 ] The court concludes that it appears to be in the interest of 724 to defend Doyle Turner’s claim. [ 40 ] In coming to that conclusion, the court has considered what evidence it is entitled to examine, what the available evidence establishes with respect to the chance of success of the defence of the litigation. Before doing so, however, the court has considered whether the “chance of success” test is different according to whether it applies to a request to start an action, or to defend one. (

i) Does a different standard of chance of success apply to an application to defend an action than to an application to bring an action? [ 41 ] In Acapulco , the Alberta Court of Appeal has spoken of “an arguable cause of action” as the measure of the chance of success. Elsewhere in the case law, one can find a variety of ways in which the chance of success test in relation to derivative activity has been articulated.

The weight of the case law establishes that the threshold is not a high one; indeed, the clearest way to articulate the test is to say that the court must determine whether the proposed derivative action is bound to fail. [ 42 ] Interestingly, the Act does not distinguish between asking for leave to initiate derivative action and leave to defend on a derivative basis. Yet, in some ways it does seem fair to have the same test apply to both since the litigant who commences an action against a corporation does not have to meet any test; Doyle Turner did not have to satisfy any conditions before he sued 724.

Because equity favours equality, it seems harsh to impose any test on 724 with respect to its right to defend the action Doyle Turner commenced. Indeed, there is a hint of that difference of approach in para. 4 of the Cochrane decision and in paras 26 and 29 of the Safarik decision. [ 43 ] However, it is not necessary to resolve that question in this litigation.

Here, for the reasons which are set out below, a corporate limitations defence to Doyle Turner’s claim is not bound to fail. (ii) In assessing what appears to be in 724's interest, is the court entitled to take into account the information which has already been provided to the court earlier in the proceedings? [ 44 ] The court concludes that, in weighing whether it should grant leave to the applicant, it is entitled to take into account information which it has received earlier in these proceedings. [ 45 ] The only evidence filed by Stacey Turner in support of his application for leave is an affidavit from a legal assistant which includes the Amended Statement of Claim in these proceedings, a copy of the Statement of Defence filed by Stacey Turner and Stacey Turner Family Trust, a printout of the court file showing that no Statement of Defence has been filed by 724, and a copy of the letter sent by Stacey Turner to the other parties in November, 2010, which letter has already been referred to above.

[ 46 ] Doyle Turner states that there are two problems with these materials. First, the materials do not demonstrate that there is at least the possibility of a limitations defence available to the company and second, the materials do not provide adequate notice to Doyle Turner of the argument that Stacey Turner makes in support of the limitations point. [ 47 ] As to the first point, it is clear that the materials filed by Stacey Turner on this application do not argue the potential limitations defence for 724.

All the filed materials do is to put before the court Doyle Turner’s own Amended Statement of Claim, filed in February 2009, in which he sets out the 1997 - 2006 chronology, and Stacey Turner’s Statement of Defence, in which he emphasizes the importance of the August 2006 execution by Doyle Turner of the USA and claims a limitations defence. These materials constitute a sketch of the defence rather than a fully formed portrait of the defence.

Nonetheless, I am of the view that the filed materials provide adequate markers to allow both the court and the respondents to allude to other evidence, previously been presented in these proceedings, which is pertinent to a potential corporate limitations defence. [ 48 ] Among that previously presented information, the court notes in particular the fact that, at least since 1997, the parties have had access to experienced, sophisticated legal advice and that, since the mid-2000s, the parties have had access to sophisticated corporate, accounting and tax advice that was paid for by 724.

That information can be added to the information contained in the supporting affidavit to determine whether a corporate limitations defence is bound to fail. [ 49 ] On the issue of the adequacy of notice of Stacey Turner’s Notice of Application (formerly called a Notice of Motion), in my view, the materials filed by Stacey Turner on this motion are sufficient, in the circumstances, to identify the nature and the basis of the limitations defence proposed by Stacey Turner and to allow the respondents the opportunity to fully oppose the request.

The existence of Stacey Turner’s own limitations defence has been known from the time he filed a Statement of defence: the execution of the USA in August 2006 and the issuance of Doyle Turner’s Statement of Claim in February 2009 must be assessed in light of the general two year limitations period in Alberta law. [ 50 ] On the issue of notice, the only problem with the Notice of Application is, in my view, a technical problem which applies under the New Rules, Form 27 to all Notices of Application: the document lists, the court file number, the court, the judicial centre, the plaintiffs, the defendants, the name of the document and the address for service and contact information of the party filing the document, but the form does not identify who are the respondents on the application.

The Form does go on to provide a Notice to Respondents, and even a Warning to respondents, but it unfortunately does not identify who the respondents are. No doubt this oversight will be corrected as work continues on the transition to Alberta’s New Rules.

In these proceedings, since all the parties are represented by able counsel, none of the parties were left in any doubt as to which of them were respondents. (iii) Does it appear to be in 724's interest to defend Doyle Turner’s claim? [ 51 ] As discussed above, the court has taken a somewhat expansive view of what materials can be considered in determining whether it appears to be in 724's interest to defend Doyle Turner’s action. [ 52 ] From the perspective of the limitations defence itself, given the general two year time limit in Alberta law, and the fact that Doyle Turner’s lawsuit was commenced more than two years after Doyle Turner signed the USA, it is at least arguable that 724 has a limitations defence: such a defence is not doomed to fail.

From the case law, it may be that the chance of success test - whether the derivative activity is bound to fail - is the only issue for a court to consider in relation to what appears to be in the corporation’s interest. If the chance of success is, in fact, the only thing to consider, then Stacey Turner has met that test.

But, even if the chance of success test is not broad enough to encompass other considerations, since the granting of leave is a discretionary act, then other considerations can be raised for the court’s consideration of overall fairness even if it is not entitled to weigh those considerations at the mandatory pre- requisite stage. [ 53 ] Out of an abundance of caution, for the purposes of this application I will address the other considerations raised by Doyle Turner about what appears to be in 724's interest at the mandatory pre-requisite stage.

Doyle Turner says that the limitations defence will be argued by Stacey Turner so that it is not necessary for 724 also to argue a limitations defence. [ 54 ] With respect, I do not share that view. 724 is, in law and in reality, a different person from Stacey Turner, and a person who may have different evidence available to it. In this connection, I note the attempts in the relatively recent past to distance Stacey Turner

from the direction of 724; it may well be that there is correspondence or other hard evidence which is available to 724 but of which Stacey is unaware. [ 55 ] Moreover, as the case law asserts, the mere fact that Stacey Turner’s interests and the interests of 724 may coincide is not a reason to deny the corporation an opportunity to defend itself.

It is for that reason, presumably, that there is no component of “necessity” in the test of what appears to be in the corporate interest. [ 56 ] Doyle Turner says that the only relief against 724 is relief necessary to give effect to any judgment that Doyle may obtain against Stacey. With respect, the fact that the corporate relief could well be exercised in just that way is precisely one of the points which argues in favour of having 724 defend Doyle Turner’s action.

It will be recalled that Doyle and Stacey Turner are not the only shareholders in 724; it is in the interests of all the shareholders, and of 724 itself, to come to some general finding, if that is possible, with respect to the effect of the execution of the USA on beneficial share ownership. Although at this time the contest is between Doyle and Stacey Turner, there is obviously no guarantee that, at some time in the future, there may not be issues between one or both of the Turner and Mr. Cameron, or amongst all of the family trusts.

A corporate defence to Doyle Turner’s claims will be of benefit to all shareholders by coming to conclusions that will allow them to be secure and confident in their own shareholding. [ 57 ] Doyle Turner states that what is in the best interests of 724 is neither axiomatic nor obvious since the shareholders are equally divided about what is in 724's interests.

With respect, that is precisely why the Legislature has developed a framework for derivative relief in addition to oppression relief: deadlock needs resolution in the corporate interest as well as in the interest of the owners of the corporation. [ 58 ] On the issue of whether the defence of Doyle Turner’s claim appears to be in the best interest of 724, the court concludes that it does so appear. Therefore, the court also concludes that Stacey Turner has satisfied the statutory requirement of acting in good faith.

e) Summary of statutory pre-requisites [ 59 ] In

summary, Stacey Turner has met the four statutory pre-requisites in the consideration of whether to allow derivative activity; in other words, the court finds itself in the position where it could grant leave. The real issue then becomes, should it grant leave. 3. Is there any discretionary reason why leave should be denied or granted?

a) Would granting leave impose an unfair financial burden on 724? [ 60 ] Stewart Cameron has suggested that the defence of Doyle Turner’s claim would impose an unfair financial burden on 724. With respect, in my view the circumstances here do not support that contention. [ 61 ] The evidence before the court is that the property purchased by 724 in 1997 is now worth tens of millions of dollars and that 724 has approximately a half million dollars of liquid assets. The costs of defending Doyle Turner’s lawsuit cannot, in those circumstances, be said to constitute an unfair financial burden on 724.

b) Would denying leave be unfair to the corporation? [ 62 ] Doyle Turner has had the advantage of corporate expenditure on legal, accounting, and tax advice. Although there is no evidence before the court on what such expenditures have totalled over the years, it’s obvious that this would be in the thousands and perhaps tens of thousands of dollars. Although this advice has presumably been on benefit to Doyle Turner and to his family, Doyle Turner has presumably been content to allow the corporation to incur these expenses.

Having taken personal advantage of the corporate structure, it would be unfair for Doyle Turner to deny the corporation the opportunity of defending its corporate interests in the information for which it has paid.

c) Does the conflict between Stacey Turner and Doyle Turner require that someone other than Stacey Turner should defend the corporate interest? [ 63 ] This is not a situation where Doyle Turner’s claim would be controlled by Stacey Turner since the application is for leave to defend Doyle’s claim against 724.

Nonetheless, I agree with the Ontario Divisional Court’s conclusion that, in circumstances such as these, there is a “conflict of interest together with the potential for an allegation of negligent representation of the company in the action”: Cook . [ 64 ] The Ontario court mentioned the possibility of a receiver becoming involved with a company or of winding up the company. Here, a liquidator has already been appointed.

That liquidator’s obligation is to act in the best interests of the company; that person is therefore an appropriate person to be appointed to undertake the defence of the company in Doyle Turner’s action.

d) Conclusion: a derivative defence of Doyle Turner’s claim will be undertaken by the liquidator [ 65 ] In

summary, Stacey Turner has met the four statutory pre-requisites for granting leave to derivative activity. The court has also considered that it should not refuse leave because of the cost burden on the company, and that it might favour leave in light of the personal advantage obtained by Doyle Turner from corporate expenditure. However, in light of the conflict between Doyle Turner and Stacey Turner, the court concludes that Stacey Turner should not control 724's defence but that the liquidator should assume that responsibility. 4.

Costs of the defence [ 66 ] Naturally, 724 will pay reasonable legal fees to the liquidator in connection with the defence of Doyle Turner’s claim: s. 241 (d). 5. Costs [ 67 ] If the parties are not agreed on costs, I may be spoken to within 30 days of the release of this decision. Heard on the 11 th and 14 th days of January, 2011. Dated at the City of Edmonton, Alberta this 19 th day of January, 2011.

J.B. Veit J.C.Q.B.A. Appendix A Business Corporations Act

Part 19 Remedies, Offences and Penalties

Definitions 239 In this Part, (a) “action” means an action under this Act or any other law; (b) “complainant” means (

i) a registered holder or beneficial owner, or a former registered holder or beneficial owner, of a security of a corporation or any of its affiliates, (ii) a director or an officer or a former director or officer of a corporation or of any of its affiliates, (iii) a creditor (

A) in respect of an application under

section 240, or (

B) in respect of an application under

section 242, if the Court exercises its discretion under subclause (iv), or (iv) any other person who, in the discretion of the Court, is a proper person to make an application under this Part. 1981 cB-15 s231; 2000 c10 s3 Commencing derivative action

240(1) Subject to subsection (2), a complainant may apply to the Court for leave to (

a) bring an action in the name and on behalf of a corporation or any of its subsidiaries, or (

b) intervene in an action to which a corporation or any of its subsidiaries is a party, for the purpose of prosecuting, defending or discontinuing the action on behalf of the corporation or subsidiary.

(2) No leave may be granted under subsection (1) unless the Court is satisfied that (

a) the complainant has given reasonable notice to the directors of the corporation or its subsidiary of the complainant’s intention to apply to the Court under subsection (1) if the directors of the corporation or its subsidiary do not bring, diligently prosecute, defend or discontinue the action, (

b) the complainant is acting in good faith, and (

c) it appears to be in the interests of the corporation or its subsidiary that the action be brought, prosecuted, defended or discontinued.

(3) Notwithstanding subsection (2), when all the directors of the corporation or its subsidiary have been named as defendants, notice to the directors under subsection (2)(

a) of the complainant’s intention to apply to the Court is not required. RSA 2000 cB-9 s240; 2005 c8 s54 (Emphasis added) Powers of the Court 241 In connection with an action brought or intervened in under

section 240 or 242(3)(q), the Court may at any time make any order it thinks fit including, without limiting the generality of the foregoing, any or all of the following: (

a) an order authorizing the complainant or any other person to control the conduct of the action; (

b) an order giving directions for the conduct of the action; (

c) an order directing that any amount adjudged payable by a defendant in the action shall be paid, in whole or in part, directly to former and present security holders of the corporation or its subsidiary instead of to the corporation or its subsidiary; (

d) an order requiring the corporation or its subsidiary to pay reasonable legal fees incurred by the complainant in connection with the action. 1981 cB-15 s233

Appendix B 17. In or about May, 1997, the Regional Municipality of Wood Buffalo as Power of Attorney for Alberta Social Housing Corporation agreed to sell, and NOREMAC and the Partsfinder agreed to purchase the Lands, jointly. To effect the purchase, the parties caused 724849 Alberta Ltd. to be incorporated and to act as Trustee for the parties in holding title to the Lands as to an undivided one-half interest for each. 18.

For convenience, 50 Class “A” shares in the Authorized Capital of 724 were registered to the Defendant, Stacey Turner, in 1997, and 25 Class “A” Shares in the Authorized Capital of 724 were registered to each of the Plaintiff, Doyle Turner, and Stewart Cameron. 19.

By subsequent corporate re-organization . . . the shares issued to each of the Plaintiff, Doyle Turner, and the Defendant, Stacey Turner, and Stewart Cameron in 1997 were cancelled and the shares referred to in paragraphs 5 and 6 above were issued to those parties, and the additional non-voting shares issued to each of the Family Trusts referred to in paragraphs 5 and 6 above. 7.

The Defendant, Stacey William Turner (“Stacey Turner”) resides in the City of Fort McMurray, in the Province of Alberta, and is the registered holder of 1000 Class “G” preferred voting shares and 50 Class “F” preferred voting shares, and the Defendant, Stacey Turner Family Trust is the registered holder of 25 Class “C” common non-voting shares, in the Authorized Capital of 724. 8. The Plaintiff, Doyle Turner, and Stewart Cameron are each registered holders of 500 Glass “G” preferred voting shares, 25 Class “F” preferred voting shares and 500 Class “E” preferred voting shares, all in the Authorized Capital of 724.

The Plaintiff, Doyle Turner Family Trust, is the registered holder of 25 Class “C” common non-voting shares in the Authorized Capital of 724. The Stewart Cameron Family Trust is the registered holder of 25 Class “C” common non-voting shares in the Authorized Capital of 724. 24.

The Plaintiffs seek a declaration that 724 holds the Lands in trust for NOREMAC and the Partsfinder as to each an undivided 50% interest, or a declaration that the Defendant, Stacey Turner, and the Defendant, Stacey Turner Family Trust, hold shares of which they are the registered holder in 724 in trust for the Partsfinder and an order correcting the register of 724 by causing the transfer of 50% of the issued and outstanding shares registered to Stacey Turner and Stacey Turner Family Trust to Doyle Turner or Doyle Turner Family Trust, as may be appropriate. 27.

Further, or in the alternative, 724 holds the Lands as trustee for NOREMAC and the Partsfinder of which the Plaintiff, Doyle Turner, is a 50% owner. WHEREFORE THE PLAINTIFFS CLAIM AGAINST THE DEFENDANTS: . . . (

e) An order correcting the registry and issuing such securities as appropriate in the capital stock of 724;

Appearances: James R. Vaage, Emery Jamieson LLP for Stacey Turner W. J. Kenny, Q.C., Miller Thomson LLP for Doyle Turner Brock I. Dagenais, for Stewart Cameron and Stewart Cameron Family Trust Ray C. Rutman, Fraser Milner Casgrain LLP for Alger & Associates (Liquidator)