Wilhelmina Tyler Applicant - v. -, 2012 ABQB 631

Court of Queen’s Bench of Alberta Citation: Tyler v. Envacon Inc., 2012 ABQB 631 Date: 20121016 Docket: 1203 00223 Registry: Edmonton Between: Wilhelmina Tyler Applicant - and - Envacon Inc. Respondent Corrected judgment: A corrigendum was issued on November 6, 2012; the corrections have been made to the text and the corrigendum is appended to this judgment. _ ________________________________________ ______________ Memorandum of Decision of the Honourable Madam Justice A.B. Moen _________________________________________ ______________ Introduction [ 1 ] This is an originating application by Ms.

Wilhelmina Tyler (“Ms. Tyler” or “Applicant”) seeking access as a director to and inspection of the Accounting Records of the Respondent, Envacon Inc. [1] (“Envacon” or “Corporation”). [ 2 ] Ms. Tyler was appointed a director of Envacon on August 8, 2011. Prior to her appointment, the Board of Directors passed a resolution curtailing the right of individual directors from seeing financial records, among other things, of the Corporation. [ 3 ] Ms.

Tyler, claiming that it was her duty to understand the financial affairs of the Corporation, requested a copy of the general ledger and access to Envacon’s financial information. She first requested this information at a directors’ meeting on November 16, 2011.

She was refused. She subsequently requested that information in writing twice more. [2] She received no response. Hence, she brings this application. [ 4 ] The Corporation says she has no right to that information. They also complain that Ms. Tyler will use the information for the benefit of another corporation, 829693 Alberta Ltd. (829693) [3] . Why? Because it says there is a dispute [4] between 829693 and the Corporation concerning rent and Ms. Tyler is a director and shareholder of that numbered company. 829693 was the Corporation’s landlord. [ 5 ] The issues that must be decided in this application are: 1.

Is Ms. Tyler entitled to access and inspect the records of the Respondent Corporation as a director of the corporation? 2. Are the circumstances such that they should operate to deny her access to these records based on the best interest of the corporation? Discussion [ 6 ] Ms. Tyler makes this application under CBCA , ss. 238 and 247 and seeks an Order directing the Respondent Envacon to produce the following financial records (the “documents”) for inspection: (

a) General ledger of Envacon Inc. for 2010 and 2011; (

b) Available Trial Balance for 2011; (

c) Tax returns of Envacon Inc. for the period of 2008 to 2010, and for 2011 when available; (

d) T4 slips for the period of 2008 to 2011; (

e) T4A summaries for 2010 and 2011; (

f) All bank statements, including copies of cleared cheques, for 2011; (

g) Supplier invoices for the period of November 1, 2008 to present; (

h) Customer files regarding orders and receivables for the period of November 1, 2008 to present; and (

i) All documents in regard to borrowing of Envacon Inc., including any agreements securing those borrowed funds whether involving Envacon Inc. Or other parties, for inspection. [ 7 ] She further seeks a declaration that the Corporation’s Resolution of May 7, 2010 is invalid as it purports to remove the authority of individual directors to obtain any information for inspection. [ 8 ] The Statutory provisions that apply are set out in Appendix “A” appended to these reasons. 1. Is Ms. Tyler entitled to access and inspect the records of the Respondent Corporation as a director of the corporation? [ 9 ] I note that my findings in this

section are ultimately subject to my finding about the second issue as to whether she should be denied access to the documents in the best interest of the corporation. [ 10 ] There are five issues here: a. Does s. 20 of the CBCA pertain to a single director? b. Are the documents which Ms. Tyler wishes to inspect included under s. 20? c. Is Ms. Tyler entitled to inspect the documents? d. Is Ms. Tyler entitled to inspect those documents in order to fulfill her duty as a director? e. Is the resolution of the Corporation that purports to deny her access ultra vires the Corporation? a.

Does s. 20 of the CBCA pertain to a single director? [ 11 ] Ms. Tyler argues that pursuant to CBCA , s. 20 the accounting records of Envacon must be open to inspection by the directors of the corporation, including herself; since the meaning of “director” under the s. 2 of the statute includes a single director. S. 20 provides that the Corporation must keep adequate financial records and must make them available to the Directors. [5] [ 12 ] The Corporation agrees that the reasonable

interpretation of the relevant sections of the CBCA is that “directors” and “board of directors” includes a single director. [ 13 ] In Canada, the general rule is that corporate directors collectively have the statutory power to “manage, or supervise the

management of, the business and affairs of a corporation” subject only to any unanimous shareholder agreement: CBCA, s. 102(1); BruceWelling, Corporate Law in Canada: The Governing Principles, 3d ed (Adelaide, Australia: Scribblers Publishing, 2006) at 314 (Welling,Corporate Law in Canada). [14] These directors also have personalized statutory powers and duties that must be discharged in the best interest of thecorporation: CBCA, s. 122(1); Welling, Corporate Law in Canada, ibid. [15] I find that “directors” of the corporation include a single director.

The plain language of the statute leads to this conclusion, asdoes the law as interpreted by the courts. b. Are the documents which Ms. Tyler wishes to inspect included under s. 20? [16] The documents at issue are listed above. [17] Ms. Tyler submits that all of the records which she has specifically requested access to and inspection of should be producedin order to meet the legislative requirement of the CBCA. [18] Ms. Tyler says that the documents to which she seeks access fit within the meaning of “accounting records” in s. 20(2) of theCBCA.

She contends that “adequate accounting records” as indicated in this legislation “must be more extensive than financialstatements which are prepared from accounting records” and consist at least of “entries from day to day of all moneys received and paidout and of the matters in respect of which these payments occurred”: Roles v 306972 Saskatchewan Ltd, (SK CA),[1993] 4 WWR 68 at paras 5-6, 105 Sask R 300 (WL) (Roles). [19] The Corporation in its oral submissions suggested that the General ledger of Envacon Inc. for 2010 and 2011; the availableTrial Balance for 2011; and all bank statements, including copies of cleared cheques, for 2011 to present were probably accountingrecords as indicated in the legislation. [20] I fail to see a distinction and the Corporation has not set out in detail why there should be such a distinction in this case. [21] In terms of the meaning of the phrases “accounting records” and “adequate accounting records” pursuant to CBCA, s 20(2)and as applicable here, I accept Ms.

Tyler’s submission that the scope “must be more extensive than financial statements which areprepared from accounting records” and consist at least of “entries from day to day of all moneys received and paid out and of the mattersin respect of which these payments occurred”: Roles at paras 5-6. [22] I find that all of the documents set out above in paragraph 6 are accounting records and, subject to my discussion on improperpurpose, Ms. Tyler is entitled to see them as a director of the Corporation. c. Is Ms.

Tyler entitled to inspect the documents? [23] Given that I have found that the documents are records under s. 20 of the CBCA, and that one director is included in thephrase “the directors”, I must now ask whether she is entitled to inspect the documents. [24] Historically at common law, a director by virtue of his office has the right at any time, and not at board meetings only, to seeand take copies of documents belonging to the company: Burn v London & South Wales Co. (1890), 7 TLR 118. [25] Under the relevant statutory provisions a director of a corporation has an unconditional right to inspect the books and recordsof the corporation and is not required to provide a reason for his or her inspection or audit: Klianis v Poole (1992), 33 ACWS (3d) 1228,1992 CarswellOnt 3204 at para 9 (Klianis), Ontario Court of Justice (General Division).6 [26] Envacon notes that Ms.

Tyler has not made any specific allegations of corporate wrongdoing, suggesting that this wasnecessary for a director to inspect books. Further, Envacon says that Ms. Tyler’s request is unfounded because the CBCA, s. 123(5)protects a director from liability by the appointment of an auditor where the director has relied on a written report of the auditor of thecorporation. [27] Ms.

Tyler argues that the appointment of an auditor by the Corporation would neither remove her right as a director, norrelieve her of the duty to approve financial statements, nor limit the requirement that she obtains access to inspect the corporation’saccounting records. [28] The CBCA is very clear on the right of directors to inspect accounting records when it provides that “records [including,‘adequate accounting records’, ‘minutes of meetings’ and ‘resolutions’ ] shall be kept at the registered office of the corporation or at suchother place as the directors think fit and shall at all reasonable times be open to inspection by the directors”: s. 20(4). [29] Therefore, the question whether the appointment of an auditor and a subsequent report of that auditor would satisfy Ms.Tyler’s request in this case.

In my view, the right of a director to access and inspect the accounting records of the corporation does notconflict with the protection from personal liability afforded under s. 123(5) of the CBCA. The two legal concepts are not strangebedfellows and can practically co-exist. In other words, even where a qualified auditor has been appointed to examine the accountingrecords of the corporation, nothing should legally stand in the way of a director who has sophistication, experience and knowledge fromaccessing and inspecting the same records.

The latter scenario, in my view, is value added for the corporation’s benefit: see, Klianiswhere the court held that a director is entitled to access corporate records and also entitled to have a chartered accountant appointed tocarry out an audit of such records. [30] From both the written and oral submissions of the Corporation, it appears to me that there is no serious dispute about the issueof Ms. Tyler’s right as a director to access and inspect the accounting or financial records of Envacon.

[31] Based on the existing jurisprudence and the positions of both parties (which does not conflict with the caselaw), I find thatboth parties were correct in their common view that as a general rule a director of a corporation is legally entitled to access and inspectthe “accounting records” of that corporation in the context of managing the business and affairs of the corporation. d. Is Ms. Tyler entitled to inspect those documents in order to fulfill her duty as a director? [32] Ms.

Tyler argues that she is obligated to review the documents to fulfill her duty as a director of the Corporation. [33] Further, she argues that even if any of those items is/are excluded under the term “adequate accounting records” she stillrequires them in order to perform her duty as a director of Envacon, including the duty to approve the corporation’s financial statements:CBCA, ss. 102 & 158. Ms. Tyler states that a director is required to “exercise the care, diligence and skill that a reasonably prudentperson would exercise in comparable circumstances”: s. 122(b).

The phrase “in comparable circumstances” has been interpreted in thecontext of s. 227.1(3) of the Income Tax Act, RSC 1985, c 1 to apply higher standards to directors depending on the particular director’slevel of sophistication and a subjective-objective approach which “requires the Court to take into consideration such things as theknowledge, experience and general business sophistication of the director”: Short v Canada (Minister of National Revenue), (FC), [1999] 3 CTC 435 at para 39, 168 FTR 90 (FCTD); Armstrong v R, 2002 GTC 270 at para 2, 2002 CarswellNat 1450(TCC); McCarthy Tetrault, Directors’ and Officers’ Duties and Liabilities in Canada, (Markham, Ont: Butterworths, 1997) at 15-16. [34] Ms.

Tyler submits that she is a sophisticated director. She gave evidence to the effect that she is legally trained and hasextensive experience with the analysis of financial statements and accounting data. She anticipates being held to the higher standardreflecting her sophistication; and contends that the subjective-objective approach/standard would require that she gets a broad access tothe financial information and records of Envacon in order for her to properly perform her duties as a director of the corporation. [35] I find that Ms.

Tyler, as a sophisticated director, is obliged to inspect the documents at issue here, as she may attract moreliability than an ordinary director that does not have financial experience. e.

Is the resolution of the Corporation that purports to deny her access ultra vires the Corporation? [36] On May 7, 2010, the directors of the Corporation Envacon passed a resolution that: IT IS RESOLVED THAT no director of the Corporation shall individually have authority to obtain any information with respect to thebusiness and affairs of the Corporation, intervene in the management of the Corporation, or give any direction to any officers oremployees of the Corporation, or transact any business on behalf of the Corporation without first being specifically authorized to do soby a resolution of the Board of Directors. [emphasis added] [37] It appears that the directors of the Corporation believe that if they pass a resolution restricting the rights of directors to inspectthe books and records of the Corporation that binds all directors regardless of the law.

That belief would be wrong. The directors of aCorporation must act in accordance with the law. [38] Ms. Tyler submits that the Resolution passed by the directors of the Corporation on May 7, 2010 which purports to deny heraccess to information of the corporation as a single director is illegal as it contravenes CBCA, ss. 20(2) & (4) and interferes with herduties as a director of Envacon.

She notes that there is no evidence or allegation of any existing Unanimous Shareholder Agreement ofEnvacon which restricts the powers of the directors to manage the corporation’s business and affairs or to inspect its accounting recordsunder CBCA, s. 146(5). [39] I agree with the submissions of Ms. Tyler. [40] I find that the resolution is ultra vires the Corporation insofar as it conflicts with s. 20 of the CBCA, particularly the part of theresolution underlined above. f. Conclusion [41] I conclude that Ms.

Tyler as a director of the corporation is entitled to access and inspect the documents of Envacon as listedabove. However, this answer takes me to the next stage which is to assess whether Ms. Tyler’s request for access to and inspection of thedocuments is an exercise of her legally conferred power as a director for improper purpose. 2. Are the circumstances such that they should operate to deny her access tothese records based on the best interest of the corporation? [42] There are two arguments of the Corporation that would deny Ms. Tyler the right to inspect the documents: a. Ms.

Tyler seeks to exercise her right for an improper purpose; and b. The Directors have acted properly in denying her that right. a. Does Ms. Tyler seeks to exercise her right for an improper purpose? [43] I turn now to a discussion of improper purpose. [44] At the heart of circumstances which would lead to denying Ms. Tyler the right to access the documents is whether she wouldexercise that right for an improper purpose.

[45] The Corporation contends that the information sought by Ms. Tyler is not being requested for the purpose of performing herduties as a director of Envacon. Envacon submits that Ms. Tyler seeks the requested information in the within application for the use of829693 for the ongoing dispute before the Alberta Court of Queen’s Bench. [46] Ms. Tyler is a shareholder and director of Envacon. She is also a shareholder and director of 829693. At one time, thenumbered company was the landlord of Envacon.

At the present time, there is a dispute between the landlord and tenant before the Courtof Queen’s Bench in another action in which Envacon is the plaintiff. [47] Envacon submits that the powers of a director, in this case Ms. Tyler, pursuant to the CBCA are not absolute as they aregranted in order to permit a director to carry out his or her duty in managing the corporation’s affairs diligently, in good faith and in thebest interests of the corporation.

This principle, it submits, is sometimes referred to as the “proper purpose doctrine.” The Corporationnotes that this doctrine has been recognized by Canadian courts and refers to Teck Corporation Ltd v Millar ( 1973), 33 DLR ( 3d) 288 atpara 161, (BC SC), [1973] 2 WWR 385 (BCSC)(WL) (Teck) where Berger J of the British Columbia Supreme Courtstated that: When a company elects its board of directors and entrusts them with the power to manage the company, the directors are entitled tomanage it. But they must not exercise their powers for an extraneous purpose.

That is a breach of their duty. [48] Although the directors of a corporation have broad powers to manage the business and affairs of the corporation, these powersare neither unconstrained nor absolute. In Teck, Berger J captured the broad scope and limitations of corporate directors’ powers.

Hestated that an elected board of directors is entitled to manage the corporation in accordance with the trust vested in them; however, theymust not breach their duty by exercising their power for an extraneous or improper purpose: at para 161. [49] Berger J then proceeded to discuss what constitutes “improper purpose” and noted that: The court's jurisdiction to intervene is founded on the theory that if the directors’ purpose is not to serve the interest of the company, butto serve their own interest or that of their friends or of a particular group of shareholders, they can be said to have abused their power.The impropriety lies in the directors' purpose.

If their purpose is not to serve the company's interest, then it is an improper purpose.Impropriety depends upon proof that the directors were actuated by a collateral purpose ... (at para 100). See also, Gainers Inc v Pocklington (1992), 132 AR 35 at para 56, 1992 CarswellAlta 659. [50] Significantly, the Alberta Court of Appeal in Canadian Jorex Ltd v 477749 Alberta Ltd (1991), 1991 ABCA 330 ,117 AR 222 at para 7, 85 Alta LR (2d) 313 (WL) also recognized the legal principle that the powers of a director cannot be exercised forimproper purpose.

A unanimous court in that case held that: One must distinguish between a power which the directors of a corporation enjoy and the manner in which that power is exercised. Here,we are concerned solely with the first question. Counsel did not suggest that the ... directors exercise the power to cancel the ... specialmeeting for any improper purpose. Of course, if the directors had done so, then that might have been a sufficient reason to treat thepurported exercise of the power as having been of no force or effect: Teck Corp. v.

Millar, [ (BC SC), 1973] 2 W.W.R.385, 33 D.L.R. ( 3d) 288 (B.C.S.C). (emphasis supplied) See also Colborne Capital Corp v 542775 Alberta Ltd (1999), 1999 ABCA 14 , 228 AR 201, 69 Alta LR (3d) 265 (Alta CA). [51] From the perspective of the caselaw, it seems that the analysis for determining the nature of a director’s purpose forexercising his or her power must be conducted contextually having advertence to the particular circumstances of the case.

Themotivation that actuated the exercise of the director’s power is critical to determining whether the purpose is proper or improper:Welling, Corporate Law in Canada at p 339; Teck at para 100. [52] In the context of the powers and duties of a director, the focus of the inquiry in this application is whether Ms. Tyler’s right toinspect as a director of Envacon is actuated or motivated by a purpose which is “not to serve the interest of” Envacon or in otherparlance, “is not in the best interest of the corporation.” [53] Ms.

Tyler submits that the purpose for seeking access to and inspecting the accounting records is to enable her to meetlegislative obligations under the CBCA and perform her duty as a director of Envacon, including the duty to approve the corporation'sfinancial statements. The Corporation demurs and argues that she seeks the information in order to use it for the action between Envaconand 829693. [54] Prima facie, a director may act as a director of a rival company: London & Mashonaland Exploration Co v NewMashonaland Exploration Co, [1891] WN 165; approved in Bell v Lever Bros Ltd, [1932] AC 161 at 165.

And where there areinterlocking directorates and a person is a director of two companies which enter into transactions with one another, such person owes afiduciary duty to each of them: Gray v Yellowknife Gold Mines Ltd (No 1) (Gray No 1), (ON CA), [1947] OR 928(CA); Gray v Yellowknife Gold Mines Ltd (No 2), (ON CA), [1947] OR 994 (CA) (Gray No 2). [55] In effect, Ms. Tyler is legally permitted to be a director and shareholder of 829693 as well as a director of Envacon.

The lawalso confirms that she owes each of these corporations a duty as director. [56] Further, since a director of a corporation has an unconditional right to inspect the books and records of the corporation and isnot required to provide a reason for his or her inspection or audit, it is logical to anticipate that the burden lies on the party opposinginspection to demonstrate that inspection is sought for improper purpose: Klianis; The Oxford Legal Group Limited v SibbasbridgeServices PLC, [2008] EWCA Civ 387 at para 43 (OLG v Sibbasbridge).

[ 57 ] The Corporation refers me to the English case of OLG v Sibbasbridge where a director whose position was about to cease in a defendant company commenced two proceedings against the company: first, a statutory petition proceeding against the defendant company and secondly, a court proceeding seeking an order to inspect the company’s books of account as a director of the defendant company. [ 58 ] In the court proceedings in the High Court of Justice, Chancery Division, the trial judge Kitchin J, outlined the principles which a court should consider in deciding whether to order that books and records of a company should be produced for inspection based on the decision in another English case, Conway v Petronius Clothing Co Ltd , [1977] 1 WLR 72, 89G-91 A.

These principles include: (

i) the right of a director to inspect the books and records of the company as a right conferred by the general law rather than the provisions of the (English) Companies Act; (ii) the right is conferred to enable the director to carry out his duties as such; (iii) accordingly, the right determines when the director ceases to hold office; (iv) under the general law, the court is left with a residue of discretion whether or not to order inspection; and (

v) in particular, special considerations are likely to apply to the exercise of that discretion in a case where the director seeking to assert the right is about to be removed from office. ( OLG v Sibbasbridge at para 12) [ 59 ] The trial judge in the OLG v Sibbasbridge court proceedings found that there was an outstanding issue on the valuation of shares and the director seeking to inspect the defendant company’s books and records has been using “delaying tactics” to hang on to office as a director; a position which would have ceased, if not for those delaying tactics.

He stated that because it was plain on the evidence that the director was about to cease being a director of the company, it was difficult to see the purpose for inspecting the books and records of the defendant company. Finally, the judge noted that “there were grounds for the view that [the director] wanted inspection for the collateral purpose” of using the result of the requested inspection in the context of the statutory petition proceeding.

On the bases of his findings and analyses using the five factors above, the trial judge refused to order an inspection. [ 60 ] The director appealed the trial decision to the Supreme Court of Judicature Court of Appeal (Civil Division). The Court of Appeal unanimously dismissed the director’s appeal.

Hughes LJ, observed that the critical factor/evidence was that the director was inevitably about to cease being a director of the company whose books and records he sought to inspect; and as such, “there was in this case clear reason to say that the purpose of inspection might be other than qua director; rather it appeared to be to achieve some collateral advantage in the parallel proceedings in the Petition” ( OLG v Sibbasbridge at para 50). [ 61 ] While OLG v Sibbasbridge appears instructive from the perspective of circumstantial existence of parallel proceedings, it is distinguishable from the facts in the present matter.

Significantly, Ms. Tyler is not about to cease being a director of the Corporation Envacon and, in that context, she is still in possession of her right as a director of that corporation to access and inspect the accounting records of Envacon, regardless of the fact that she is also a director of 829693: Klianis; Gray No 1; Gray No 2 . Further, in my opinion, it is not plain on the evidence before me that the purpose for which Ms. Tyler seeks inspection might be other than as a director of Envacon. [ 62 ] The Corporation observes that Ms.

Tyler’s evidence on cross-examination during Questioning-on-Affidavit suggests that the financial disclosure provided to 829693 is not accurate. According to Envacon, this evidence demonstrates that Ms. Tyler’s “motivation” and purpose for seeking access to the Corporation’s financial information is “to bolster or supplement the case of 829693 in its ongoing dispute with Envacon.” The Corporation argues that this purpose is inconsistent with her duties as a director and directly contradicts the explicit statement of what Envacon conceives as its best interest. [ 63 ] It remains unclear to me how Ms.

Tyler’s evidence on cross-examination during Questioning-on-Affidavit, which suggests that the financial disclosure provided to 829693 is not accurate, conflicts with her duties as a director of Envacon and/or the best interest of Envacon. In my view, the Corporation’s position that this evidence demonstrates that Ms. Tyler seeks the financial information in order “to bolster or supplement the case of 829693 in its ongoing dispute with Envacon” constitutes a leap in logic or at best, is speculative. The Corporation has made no attempt to clarify or provide the details or specifics of how Ms.

Tyler’s allegation of “inaccurate” financial disclosure would impact Envacon either negatively or positively as far as Envacon’s best interest is engaged; or conversely, how that allegation would benefit 829693 or Ms. Tyler as a director of 829693 to the detriment of Envacon. I have been left to imagine or speculate on those issues. [ 64 ] Further, I have reviewed the Statement of Claim in the other action (Envacon v. 829693) and find no allegations that would be impacted by Ms. Tyler inspecting the books of Envacon.

To find otherwise would be to speculate as well. [ 65 ] Consequently, I conclude that the Corporation has not successfully discharged the burden of proving that Ms. Tyler is motivated by a collateral purpose in seeking to inspect the documents. The Corporation has failed to demonstrate that Ms. Tyler’s request as a director of Envacon for inspection of Envacon’s record is sought for extraneous or improper purpose. b. The Directors have acted properly in denying Ms. Tyler the right to inspect the documents [ 66 ] The Corporation submits that it has acted through its directors collectively to deny Ms.

Tyler the right to inspect the documents and as such, that decision cannot be interfered with by the court. [ 67 ] Envacon submits that directors are subject to the same duty as a company at a general meeting such that the powers conferred “must be exercised, not only in the manner required by law, but also bona fide for the benefit of the company as a whole, and it must not be exceeded.” The Corporation argues that its directors in the present case have acted collectively to determine that the production of the

financial records requested by Ms.

Tyler is not in the best interest of the corporation: Palmer v Carling O'Keefe Breweries of CanadaLtd (1989), (ON SC), 67 OR (2d) 161 at paras 21-22, 56 DLR (4th) 128 (Ont Div Ct). [68] The Corporation submits that while “directors” and “board of directors” includes a single director, the directors of acorporation can only act collectively in order to avoid absurd results where a corporation would conduct its business “in as many ways asit has directors.” The Corporation agrees that any individual director is obliged to carry out his or her duties with “the care, diligence andskill that a reasonably prudent person would exercise in comparable circumstances,” but notes that the will or opinion of any individualdirector does not trump the care, diligence and skill of the other directors (or the entire board of directors) in the context of protecting thebest interests of the corporation. [69] In effect, Envacon is inviting the court to defer to the decision of the board to deny Ms.

Tyler the right to look at thedocuments. They do so on the basis that the board has spoken and therefore, the court cannot interfere. [70] All directors must be satisfied that the financial statements presented to the board are accurate. There is a good reason whyindividual directors may inspect the books. That individual director may find irregularities that should be brought to the attention of allthe directors. [71] I do not accept Envacon’s invitation. The directors acting collectively cannot change the law. They have not satisfied me thatMs. Tyler is acting or will act for an improper purpose.

Therefore, even though the directors collectively have denied Ms. Tyler the rightto inspect the documents, they do not have the right to do that. Collectively, the directors must act lawfully. They have not done so.

Conclusion [72] In the result, I order that Envacon must produce the requested financial records for the Applicant’s inspection. [73] Further, I declare that the Resolution insofar as it purports to deny individual directors the right to inspect the records of theCorporation as defined in the CBCA is ultra vires. [74] Parties may speak to costs before me, if they are unable to agree, provided they arrange to do so within 3 days of thisjudgment. Heard on the 13th day of September, 2012. Dated at the City of Edmonton, Alberta this 16th day of October, 2012. A.B. Moen J.C.Q.B.A. Appearances: Nick J. Parker Ian M.

Hanson

Reynolds Mirth Richards & Farmer LLP for the Applicant Larry P. Carr, Q.C. David Crowe Carr & Company for the Respondent _______________________________________________________ Corrigendum of the Memorandum of Decision of The Honourable Madam Justice A.B. Moen _______________________________________________________ Paragraph [6] was changed to read the following: [6] Ms. Tyler makes this application under CBCA , ss. 238 and 247 and seeks an Order directing the Respondent Envacon to produce the following financial records (the “documents”) for inspection: (

a) General ledger of Envacon Inc. for 2010 and 2011; (

b) Available Trial Balance for 2011; (

c) Tax returns of Envacon Inc. for the period of 2008 to 2010, and for 2011 when available; (

d) T4 slips for the period of 2008 to 2011; (

e) T4A summaries for 2010 and 2011; (

f) All bank statements, including copies of cleared cheques, for 2011; (

g) Supplier invoices for the period of November 1, 2008 to present; (

h) Customer files regarding orders and receivables for the period of November 1, 2008 to present; and (

i) All documents in regard to borrowing of Envacon Inc., including any agreements securing those borrowed funds whether involving Envacon Inc. Or other parties, for inspection.

APPENDIX “A” The following provisions of the CBCA are relevant for this application: 2.

(1) In this Act, “director” means a person occupying the position of director by whatever name called and “directors” and “board of directors” includes a single director. ... 20(2) In addition to the records described in subsection (1), a corporation shall prepare and maintain adequate accounting records and records containing minutes of meetings and resolutions of the directors and any committee thereof. ...

(4) The records described in subsection (2) shall be kept at the registered office of the corporation or at such other place as the directors think fit and shall at all reasonable times be open to inspection by the directors. ... 102.

(1) Subject to any unanimous shareholder agreement, the directors shall manage, or supervise the management of, the business and affairs of a corporation. ... 122.

(1) Every director and officer of a corporation in exercising their powers and discharging their duties shall (

a) act honestly and in good faith with a view to the best interests of the corporation; and (

b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. ... 123.

(5) A director has complied with his or her duties under subsection 122(1) if the director relied in good faith on (

a) financial statements of the corporation represented to the director by an officer of the corporation or in a written report of the auditor of the corporation fairly to reflect the financial condition of the corporation; or (

b) a report of a person whose profession lends credibility to a statement made by the professional person. ... 158.

(1) The directors of a corporation shall approve the financial statements referred to in

section 155 and the approval shall be evidenced by the manual signature of one or more directors or a facsimile of the signatures reproduced in the statements. ... 247 If a corporation or any director, officer, employee, agent or mandatary, auditor, trustee, receiver, receiver-manager, sequestrator or liquidator of a corporation does not comply with this Act, the regulations, articles or by-laws, or a unanimous shareholder agreement, a complainant or a creditor of the corporation may, in addition to any other right they have, apply to a court for an order directing any such person to comply with, or restraining any such person from acting in breach of, any provisions of this Act, the regulations, articles or by-laws, or a unanimous shareholder agreement, and on such application the court may

so order and make any further order it thinks fit.