1384034 Alberta Ltd. v. Amy Miller-Longson, 2011 ABQB 599

Court of Queen ’ s Bench of Alberta Citation: 1384034 Alberta Ltd. v. 1180263 Alberta Ltd., 2011 ABQB 599 Date: 20110929 Docket: 1103 12583 Registry: Edmonton Between: 1384034 Alberta Ltd. and Amy Miller-Longson Plaintiffs (Respondents) - and - 1180263 Alberta Ltd., Cynthia Powell, and 1180187 Alberta Ltd. Defendants (Applicants) _______________________________________________________ Reasons for Judgment of the Honourable Mr.

Justice Donald Lee _______________________________________________________ [1] The Applicant Cynthia Powell was removed as an Officer and Director of 1180187 Alberta Ltd. operating as Riverview Veterinary Clinic ( “ Riverview ” ) on September 1, 2011. The Respondents proceeded to terminate any and all agreements between the Applicant Cynthia Powell and/or the corporate Applicant 1180263 Alberta Ltd. and 1180187 Alberta Ltd..

The result of this termination was that the Applicant was evicted, the locks were changed to the Riverview premises, and all access denied. [2] These parties had had an agreement for 3 ½ years prior to September 1, 2011, that the Applicants and the Respondents would maintain equal and active roles in the operation, ongoing growth, and development of Riverview, particularly given that Riverview was the parties ’ sole source of income.

[3] As a result of the removal and termination, the Applicants are now essentially cut off from not only their Riverview business that they spent the past six years developing, they are also left with no source of income. The Applicants seek an order abridging time for service of this application. They also seek the following: (

a) setting aside the “ Resolution of the Director Amy Miller-Longson ” , dated September 1, 2011, which removed the Applicant, Cynthia Powell, as President and Director of 1180187 Alberta Ltd., and terminated all of the Applicant (or its agent) ’ s agreements for services, and/or employment with same; (

b) restoring the Applicants, Cynthia Powell, position as President and Director of 1180187 Alberta Ltd.; (

c) restoring all of the Applicant (or its agent) ’ s agreements for services, and/or employment with 1180187 Alberta Ltd.; (

d) that Amy Miller-Longson be removed as a Director of 1180187 Alberta Ltd.; (

e) that the shares of 1180187 Alberta Ltd. owned by Amy Miller-Longson be valued and redeemed in accordance with the provisions of the Business Corporations Act , R.S.A. 2000, c. B-9 (the “ Business Corporations Act ); (

f) that the Applicants be entitled to interim relief pending final resolution of this matter, but not limited to the following: i. full access to financial statements of Riverview including weekly accountings and any other financial information requested; ii. provision of weekly management reports outlining the decisions made by management; iii. an Order that the Respondent be enjoined from making any payments outside the ordinary course of running the business; and iv. an Order that the Applicant be entitled to a monthly draw out of the business in the amount of $5,000.00. (

g) such further and other remedies as this Court may deem appropriate in light of the conduct and circumstances of this case including costs on a solicitor/client basis. [4] Counsel for the Respondent Amy Miller-Longson and 1384034 Alberta Ltd. respond that the present Application by the Applicants is fundamentally flawed, and should not be entertained by the Court. The Applicants are proceeding under the Respondents ’ Originating Application where the only remedy sought by the Respondents was to compel the holding of a Shareholder ’ s Meeting and to fix the number of Directors at one.

The present Applicants eventually consented to that Order, which led to their subsequent termination and eviction. [5] The Affidavit of Amy Miller-Longson sworn on August 4, 2011, describes the background in this matter leading up to the demand for a shareholders meeting by the Respondents: 1 . I am a Director of 1180187 ALBERTA LTD. ( “ 118 ” ) and the sole shareholder and Director of 1384034 ALBERTA LTD. ( “ 034 ” ), and as such have firsthand knowledge of the matters deposed hereto except as stated to be based upon information and belief.

2 . On or about February 29, 2008, 034 purchased 51% of the voting shares of 118. At that time, 034 also purchased 49% of the non-voting shares of 118. 3 . From February 29, 2008 until the present, to the best of my knowledge, which I verily believe to be true, 1180263 ALBERTA LTD. ( “ 263 ” ) has been controlled by Cynthia Powell. 4 . From February 29, 2008 until the present, Ms. Powell and I have been the only directors of 118. 5 .

From February 28, 2008 until present, 263 has owned 49% of the voting shares of 118 and 51% of the non-voting shares of 118. 6 . 118 operates a veterinary clinic, called the Riverview Veterinary Clinic, in the Town of Devon, Alberta (the “ Clinic ” ). 7 . I am registered with the Alberta Veterinary Medical Association to practise veterinary medicine in Alberta. I am the veterinarian who treats animals at the Clinic. 8 . Although both me and Ms. Powell are the two directors of 118, Ms.

Powell has performed all bookkeeping functions and has looked after the day-to-day management of the Clinic, since I became a director on or about February 28, 2008. 9 . Despite several verbal demands, Ms. Powell has not provided me with all requested financial and business information with respect to the Clinic. 10 . Over the last year, Ms. Powell ’ s attendance at the Clinic has become irregular. This is making it difficult to run the Clinic, as she has been the primary person responsible for day-to-day management. 11 . I have tried to take a more active role in the management of the Clinic.

To that end, I have made formal demands for financial and corporate information upon the registered office of 118, through my solicitors, McCuaig Desrochers LLP on February 15, 2011 and February 28, 2011, copies of which are attached as Exhibit 1 to this my Affidavit. My solicitors, McCuaig Desrochers. LLP, inform me that these letters were emailed to the registered office of 118 on February 16, 2011 and February 28, 2011, which I verily believe to be true. 12 . On April 21, 2011, I served a demand to Cynthia Powell and 263, by hand delivery to Cynthia Powell, for additional financial information.

I also formally requested a meeting of the shareholders to discuss the removal of Ms. Powell as director of 118. Attached as Exhibit 2 to this my Affidavit is a copy of this correspondence. 13 . Although Ms. Powell provided additional disclosure, she, through her counsel, Brian Futoransky of Field LLP, refused to hold the shareholders meeting. Attached as Exhibit 3 to this my Affidavit is a copy of an email from Mr. Futoransky dated April 28, 2011, refusing this meeting. 14 .

Through my counsel McCuaig Desrochers LLP, on May 13, 2011, I formally requested another shareholders ’ meeting and a directors ’ meeting to be held on May 18, 2011 to discuss the calling of a shareholders ’ meeting and the removal of Ms. Powell as director. Also, the Clinic ’ s lease with 1167655 Alberta Ltd. had expired and it began a month-to- month arrangement with its landlord. The landlord ’ s representative, Don Trooch, asked me to arrange for 118 to sign a new lease or possibly face eviction. By the same May 13, 2011 correspondence I also formally requested a directors ’ meeting to discuss a new lease.

Attached as Exhibit 4 to this my Affidavit is a copy of that correspondence. 15 . My counsel, McCuaig Desrochers LLP, inform me, and I verily believe to be true, that Ms. Powell, through her counsel, Brian Futoransky of Field LLP, refused the request for a directors ’ meeting.

16 . I made further demands on June 14, 2011 for the remaining information. Upon the advice of my accountants, I also noted certain irregularities in the GST reporting and payroll withholdings reportings which I wrote a formal letter to 118 and Ms. Powell, a copy of which is attached as Exhibit 5 to this my Affidavit. 17 . I verily believe that without becoming the sole director of 118 all of the information I am unable to take a more active management role in the Clinic and to work out my shareholder dispute with Ms. Powell. 18 .

Also, I verily believe that without becoming the sole director of 118, I am unable to take steps to avoid an eviction under our leasing arrangements with the current landlord, as Ms. Powell and I are unable to come to a decision. 19 . I attach a copy of By-law No. 1 of 118 as Exhibit 6 to this my Affidavit, which is up to date. There is no unanimous shareholders ’ agreement between 034, 118, and 263. 20 . Both a shareholders ’ meeting to remove Ms. Powell as a director and a subsequent directors ’ meeting to deal with all leasing issues are required forthwith. 21 . As Ms.

Powell has ignored formal requests in the past, I verily believe that a shareholders ’ meeting will not be accomplished without a court order. 22 . I make this Affidavit in support of a Court Order pursuant to the Business Corporations Act (Alberta), s. 143, calling a shareholders ’ meeting to discuss the removal of Ms. Powell as a director of 118. [6] Section 242(1) and (2) of the Business Corporations Act reads as follows: 242

(1) A complainant may apply to the Court for an order under this section.

(2) If, on an application under subsection (1), the Court is satisfied that in respect of a corporation or any of its affiliates (

a) any act or omission of the corporation or any of its affiliates effects a result, (

b) the business or affairs of the corporation or any of its affiliates are or have been carried on or conducted in a manner, or (

c) the powers of the directors of the corporation or any of its affiliates are or have been exercised in a manner that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer, the Court may make an order to rectify the matters complained of. [7] The Affidavit of Cynthia Powell sworn on September 20, 2011, in support of the Application presently before me for an interim injunction lists the background to Riverview and then describes this alleged “ oppression ” which reads as follows: 1.

I am a shareholder of 1180263 Alberta Ltd. ( “ 1180263 ” ), and at all times prior to September 1, 2011, a former director of 1180187 Alberta Ltd. operating as Riverview Veterinary Clinic ( “ Riverview ” ). As such, I have personal knowledge of the mailers

hereinafter deposed to, except where stated to be based upon information and belief, in which case I verily believe the same to be true. 2. I am a registered Animal Health Technologist having graduated from the two year program at NAIT in 1991. 3. From January 1992 through June 1999, I was the Head Technologist and Office Manager of the Veterinary Pathology Laboratory (the “ VPL ” ). During that time and in the course of my duties, I came to work with Dr. Dave Harris, of Harris Veterinary Services ( “ Harris ” ). 4. On or about June 1999, and after several discussions regarding same, Dr.

Dave Harris and I decided to open and operate the Devonian Veterinary Clinic (the “ DVC ” ) in Devon, Alberta. As Dr. Dave Harris and his family were out of the country at the time, it was agreed that I would be responsible for, and oversee all renovations to the DVC, and be the primary contact for all decisions concerning the set up, opening, and operations of the clinic (the “ Responsibilities ” ). 5. I maintained the Responsibilities upon the return of Dr. Dave Harris to the DVC, and carried on employment at same in the capacity of Office Manager and Head Technologist, until my resignation in December of 2004.

Throughout this time, I was responsible for all management decisions for the DVC. 6. It was also on or about this time that I came to know Dr. Bev Wolney ( “ Dr. Wolney ” ). 7. Over the course of several months, Dr. Wolney and I discussed the need for another veterinary clinic in Devon, Alberta, and the potential benefits of same. Dr. Wolney and I shared a unique perspective on what we thought would make a great clinic, and the benefits that competition with other clinics would bring (the “ Discussions ” ). 8.

Following the Discussions, in or about June 2004, I started pulling together a business plan for the new clinic, researched possible locations, contacted places available for lease, contacted distributors and suppliers, attended to various banking requirements, and essentially handled all mailers necessary for making the Discussions, and our new clinic, a reality (collectively, the “ Business Plan & Efforts ” ). . . . 12. On or about May 1, 2005, Riverview opened its doors to the public. 13. At all times subsequent to May 1, 2005, Dr.

Wolney and I conducted ourselves in accordance with the Discussions and the Agreement, with Dr. Wolney tending to all veterinarian-related duties associated with Riverview, and I attending to Technologist and all management duties, including client management, promotions, and day-to-day operations. BACKGROUND TO DEALINGS WITH DR. AMY MILLER-LONGSON 14. On or about late 2007 / early 2008, Dr. Wolney advised me that she would not be able to continue working at Riverview beyond February 29, 2008, and that I would need to find a suitable replacement veterinarian. 15.

As a result, on or about January 2008, I sought out and entered into discussions with Dr. Amy Miller-Longson ( “ Amy ” ), as a potential replacement for Dr. Wolney. 16. After several discussions regarding Dr. Wolney ’ s role at Riverview, the role that each of us had played in getting it up and

running, the Business Plan & Efforts, and the Agreement, Amy indicated that she was interested in replacing Dr. Wolney, but needed to review the financials with her accountant prior to making a decision. 17. After reviewing the financials, Amy and I met to once again discuss and confirm the respective roles that we would be responsible for at Riverview. I once again confirmed the relationship that was in place with Dr.

Wolney prior to Amy ’ s recruitment, and again confirmed that while she would be responsible for veterinarian-related functions, and I would assist as the Head Technician, I would remain responsible for the management, day-to-day operations, and “ business-side ” of Riverview (the “ Confirmation ” ). 18. It was also at this time that Amy advised that, although she realized the situation wasn ’ t fair to me, she was unable to purchase Dr. Wolney ’ s shares in Riverview, as she was experiencing several personal financial difficulties. As a result, and following discussions with Dr. Wolney, it was agreed that Dr.

Wolney ’ s shareholder loans would transfer to myself, and that Amy would not be required to immediately inject any cash into Riverview, and would instead inject $100,000.00 to Riverview for the purchase of her shares within a year or two after taking over from Dr. Wolney. Notwithstanding, Amy and I agreed that my shareholder loans needed to be taken care of very quickly, as I was willing to keep them outstanding solely because she was experiencing personal financial hardships (the “ Shareholder Loan Discussions ” ). 19.

Following the Confirmation and the Shareholder Loan Discussions, Amy agreed to join Riverview, as my partner. We agreed that we would continue to operate Riverview in the same fashion that Dr. Wolney and I had, and that although Riverview was statutorily required to have Amy (as the veterinarian) in the position of “ majority shareholder ” , we would continue to operate, and conduct all business, on a 50/50 basis, with both of us acting as directors and officers, and maintaining control over our respective roles. 20.

At the time of joining Riverview, Amy and I agreed that, given her financial situation, we would do everything in our power to ensure that she was paid $5,000.00 per month, so that she would be able to meet her monthly expenses (the “ Monthly Payment ” ). 21. Although there have been months where we were not able to pay everything on the 15th and/or the last day of the month, the Monthly Payment has always been paid to Amy.

On several occasions, this was made possible by foregoing payment of my own monthly payment, notwithstanding that wages are to be given to both myself and Amy equally, given our position as employees / subcontractors at Riverview. 22. Aside from the Monthly Payment Amy and I have not taken money out of Riverview in any other manner. Specifically there have been no dividends declared or management bonuses. There have been very minor payments made to my shareholder loan account; however, they have not been significant enough to cover the interest. 23 .

Although there is no formal written agreement between all of myself, Amy, or our respective corporations and Riverview, it was always agreed that Amy would take responsibility for the veterinarian-related aspects of the clinic, while I would maintain responsibility for all of the financial, management, and other day-to-day operations of the clinic. Indeed, Amy made it clear to me on several occasions throughout our relationship that she had no interest in management mailers, as it was not something that she was accustomed to or interested in. 24 .

Without a doubt, it was at all times understood, and my reasonable expectation, that we (and our respective corporations) would maintain equal and active roles as directors, officers, and employees/subcontractors in the operation, ongoing growth and development of Riverview, particularly given that Riverview was our sole source of income. THE WITHIN PROCEEDINGS. TERMINATION & LOCK-OUT 25 .

On or about August 8, 2011, Amy filed the within proceedings against me, seeking an Order of the Court to set a meeting where she could remove me as a director and officer of Riverview, citing some irreconcilable dispute that she purports to have with me, and my alleged refusal to sign a lease renewal for the Riverview premises, as the reasons for same. I am not sure of the reasons underlying the request, or why Amy determined that an Order of the Court was necessary to accomplish same.

26 . Prior to the filing of the within proceedings, I was not aware of any irreconcilable dispute between myself and Amy which would give rise to such a request. Further, I deny refusing to sign a lease renewal for the Riverview premises. While I did refuse to sign a personal guarantee (which was not requested by the landlord in any event), I was at all times willing to sign a lease renewal on behalf of Riverview, as a director and officer of Riverview. On the contrary, it was Amy that refused to sign the lease (the “ Questionable Issues ” ). I understand that the lease remains unsigned. 27 .

In any event, and notwithstanding my objections, on or about September 1, 2011 Amy removed me as a director and officer of Riverview (the “ Removal ” ). Additionally, as sole director of Riverview, and without any prior notice to me, Amy then proceeded to terminate any and all agreements between myself and/or my corporation and Riverview, and changed the locks to the Riverview premises (collectively, the “ Termination & Lockout ” ). 28 .

As a result of the Removal and the Termination & Lock-Out, I am completely cut-off from not only the venture, but also the career and dream that I was responsible for developing, maintaining, and committing to over the past 6 years of my life. As a result of this commitment, and having directed all of my efforts to its success, I am left in a position where Riverview is currently my only source of income, and my sole source of revenue for the future. 29 .

I specifically deny the allegations of Amy, express or implied, that I am currently, or have ever in the past engaged in conduct that is anything but beneficial to the ongoing growth, development and success of Riverview, and I remain dedicated to those goals. CONCERNS WITH THE MANAGEMENT CONDUCT OF AMY 30 . In addition to the foregoing personal concerns, during my time spent working with Amy at Riverview, I witnessed and/or became aware of several issues in the delivery of services provided by Amy, including: (

a) Amy not keeping appropriate medical records, even though the computer program is in place to have them done in an easy and efficient manner; (

b) All medical records from the date that Amy started are only filled in, in regards to weight, HR, Temp, RR, Subjective and Objective findings, and Diagnosis, Treatments, if the client asks for it to be faxed elsewhere (the staff may fill in the weight when it is taken at the front, but no other medical findings are listed.) Amy will fill in the records upon request of transfer, but it may be weeks/months/years since the exam or treatment; (

c) Treatments for hospitalized/animals in clinic are simply not kept. Amy may write down on the whiteboard what they need, but she does not transfer it into the file. Once the whiteboard is erased, there are no records of the treatment; (

d) Anesthetic logs are not kept; (

e) Controlled substance logs are not up to date (i.e. the valium log was last updated in April... so we cannot tell on any specific date EXACTLY what the amount should be or if any is unaccounted for); and (

f) The yearly compliance report for the ABVMA was filled out by mysef [sic] EXCEPT for the areas that Amy is deficient in; I indicated to Amy that she would have to check yes or no as she has to sign off on it, and she said “ just check yes ” , and signed it. It was then sent in to the ABVMA. (the “ Additional Concerns ” ). 31 . Since the Termination and Lockout I have concerns about how the business and affairs of Riverview have been handled. Since

the Termination and Lockout no one has been hired to fulfill the management and maintenance duties that I fulfilled. Including but not limited to: (

a) Ensuring cleanliness and maintenance of the clinic; (

b) Taking care of accounts payable and receivable; (

c) Administering discounts; (

d) General bookkeeping; (

e) Ordering/purchasing supplies; (

f) Dealing with third party professionals such as accountants; (

g) Dealing with licencing; (

h) Banking; and (

i) Payroll and human resources. (the “ Further Concerns ” ) 32 . Given the Questionable Issues raised by Amy for the Removal and Termination & LockOut (collectively, the “ Oppressive Conduct ” ), it is quite possible that the Oppressive Conduct was solely related to my awareness of the Additional Concerns, and out of fear that I may, as a result, either seek a replacement for Amy, or ultimately bring those concerns to the ABVMA. 33 .

Given the all of the foregoing, including the Additional Concerns, Further Concerns, Amy ’ s self-professed unwillingness to engage in the management of Riverview, and the fact that Amy has never invested any monies whatsoever into Riverview, I am beyond concerned that Amy will not remain committed to the success and/or ongoing operation of Riverview, and that my venture, dream, shareholders loans, and sole source of income for the future, will either fall into a state of financial hardship from which it simply cannot recover, or simply cease to exist. 34 .

Further, as a result of the Removal and the Termination & Lock-Out, I will not receive my monthly wages on Thursday, September 15, 2011. While I have demanded the immediate re-payment of my shareholder loans, in the total amount of $226,842.00 (the “ Demand for Payment ” ), so as to ensure that funds are available for me to support both myself and family, the Demand for Payment has gone unanswered, leaving me in a position where I may not be able to meet my monthly expenses. 35 .

I swear this Affidavit in support of a Court Order finding that there has been Oppressive Conduct; however, it has been Amy ’ s conduct that has been oppressive. 36 . I further swear this Affidavit in support of an Order that it would be just and equitable to reinstate me in my former role with Riverview. 37 . I further swear this Affidavit in support of an Application for interim injunction.

Conclusion [8] I agree with the submissions by counsel for the Respondents in this matter 1384034 Alberta Ltd. and Amy Miller-Longson in that the Applicants 1180263 Alberta Ltd., Cynthia Powell and 1180187 Alberta Ltd. should not be proceeding under an action number that was actually created by the Respondents themselves in an unrelated matter. The Respondents had filed an Originating Application where the only remedy sought was to hold a shareholders meeting and to fix the number of Directors at one. Ms. Powell eventually

consented to this order sought, but now purports to use this same action number to bring her application for an interim injunction against the Respondents.

It is also correct that less than two days clear notice was provided in this matter, although it appears that little or no prejudice was directly attributable to the shortened period of notice. [9] The Court does however have broad jurisdiction in these matters, and the Applicants have filed their Undertaking with respect to the Payment of Damages. [10] I am prepared to exercise limited jurisdiction in this matter notwithstanding the major procedural irregularities.

However all of the substantive relief sought by the Applicants will have to await Examinations on Affidavits which have not taken place in these proceedings. I am only prepared to provide the Applicants interim relief pending final resolution of this matter with respect to matters and items that would nevertheless otherwise be prepared in any event by the Respondents.

These items granted now would include giving the Applicants access to financial statements of Riverview consisting of weekly accounting reports, monthly financial statements, as well as a direction that the Respondents not make any payments outside of the ordinary course of running the veterinary business.

Seven clear days notice would also be required to the Applicants before the Respondents would be able to enter into any long term contractual agreements such as a lease which this veterinary clinic does not have presently. [11] I conclude that the Applicant cannot have her $5,000 monthly draw reinstated out of the business because of the ongoing financial disputes between these parties.

It is possible at the end of the day that the Applicants may end up owing the Respondents money as opposed to the Respondents owing the Applicants monies, as claimed, given the Respondents allege that the Applicants mismanaged the business when they were running it and failed to withhold adequate taxes. It is also unclear at this time whether the Applicants are employees or independent contractors. [12] The interim Order that I have issued in this matter granting the relief specified above will only take effect after the Application(

s) have properly been commenced by Statement of Claim or Originating Application, which in any event must occur within two weeks of the date of these written Reasons. No further applications will be entertained by the Court until the examinations on Affidavits have been completed, except with the express agreement of both parties. There will be no reinstatement of any positions of authority requested in favour of the Applicants so that the remainder of the remedies sought by the Applicants will have to be dealt with after their claims are properly advanced, and the Affidavits examined on.

Heard on the 23 rd day of September, 2011. Dated at the City of Edmonton, Alberta this 29 th day of September, 2011. Donald Lee J.C.Q.B.A. Appearances: Frank Friesacher

McCuaig Desrochers LLP for the Plaintiffs (Respondents) Liza J. Wold Bryan & Company LLP for the Defendants (Applicants)