Dash Distributors Inc. v. Powlik, 2012 ABQB 770

Court of Queen ’ s Bench of Alberta Citation: Dash Distributors Inc. v. Powlik, 2012 ABQB 770 Date: 20121217 Docket: 1203 10627 Registry: Edmonton Between: Dash Distributors Inc. Applicant - and - Darcy Powlik Respondent _______________________________________________________ Memorandum of Decision of W. S. Schlosser, Master in Chambers _______________________________________________________ [ 1 ] This is an application by way of Originating Application to compel the Respondent to transfer shares. [ 2 ] There is a cross application to head it off at the pass.

The Respondent says that a Statement of Claim should have been used to commence this action. He also argues that the matter is not appropriate for

summary disposition. [ 3 ] Rule 3.2 is as follows: How to start an action

3.2

(2) A statement of claim must be used to start an action unless (

a) there is no substantial factual dispute, (

b) there is no person to serve as defendant, (

c) a decision, act or omission of a person or body is to be the subject of judicial review, (

d) an enactment authorizes or requires an application, an originating application, an originating notice, a notice of motion or a petition to be used, (

e) an enactment provides for a remedy, certificate, direction, opinion or order to be obtained from the Court without providing the procedure to obtain it, or (

f) an enactment provides for an appeal to the Court, or authorizes or permits a reference to the Court, or provides a matter to be put before the Court, without providing the procedure to be used, in which case an originating application may be used to start the action. [ 4 ] Under the old Rules, litigants were supplied with four vehicles to get into Court: Statement of Claim, Originating Notice, Petition and “ Special Application ” (old Rules 394, 395). The Petition became vestigal when it was no longer used in divorce proceedings. The main choices were Statement of Claim or Originating Notice.

The Special Application was a catch-all for those unusual situations where there was a remedy but no clear procedure. It at least got you into Court for advice and directions about how to proceed. [ 5 ] Old Rule 410 was permissive. It said when proceedings could be commenced by Originating Notice. Both old and new Rules allow the procedure to be converted if a wrong choice is made. [ 6 ] The new Rules have done away with two of the four modes of transport. The Statement of Claim is the all terrain vehicle. An Originating Application may be used if the criteria set out in 3.2(2) are met.

Other than doing away with the Petition and the Special Application, not much has changed. [ 7 ] In appropriate circumstances, an Originating Application may be more conducive to expedient resolution of a matter. It gets you into court on a specific date to have the matter heard and, where the use of it is appropriate, it dispenses with many of the steps that would follow if a Statement of Claim were chosen as the commencing document. [ 8 ] The emphasis of many of the new Rules is to keep matters moving and to shorten the horizon for the resolution of a matter brought by a Statement of Claim.

However, with a Statement of Claim you only get a trial date when you are ready to complete a Form 37. That is a long way and many steps removed from the commencing document. [ 9 ] The procedure for a matter commenced by Originating Application is not open ended. But, the price of being able to pick a court date from the outset is that the matter has to be capable of

summary determination. It is an exception to the rule that a dispute will be resolved at trial if it is not settled along the way. In this case the Applicant was eager to have the matter resolved and that, in part, dictated the choice of procedure. It was a laudable choice but not the right one.

[ 10 ] The dispute is about Mr. Powlik ’ s sale of shares in Dash Distributors Inc. Mr. Powlik acknowledges that he agreed to sell the shares but there is disagreement about the structure of the deal. If the sale was to be concluded as the Applicant says it was, the sale would bring Mr. Powlik unwelcome tax consequences. [ 11 ] The Applicant has produced in evidence a one page document entitled “ Release ” which provides ( inter alia) : IN THE MATTEROF THE SHARE RE-PURCHASE BY DASH DISTRIBUTORS OF 10 SHARES OF DASH DISTRIBUTORS INC. FROM DARCY POWLIK OF THORSBY, ALBERTA RELEASE 2.

I [Darcy Powlik] agree to the sale of 10 Class A common shares of Dash Distributors Inc. . . . 3 Once I receive the funds as set out above, I understand and confirm that I, Darcy Powlik, shall have no further interest in Dash Distributors Inc. and no further claim against it ’ s directors, employees or shareholders. . . . 5. This release will be fully effective once I have transferred the 10 Class A common shares to Ron Pauls (2 shares), and 8 to Dash Distributors Inc. [ 12 ] The Applicant says that this is the Share-Sale Agreement and seeks to compel Mr. Powlik to convey eight shares to it.

The Agreement is partly performed. Mr. Powlik has transferred two shares to Ron Pauls. The tax consequences arise if Mr. Powlik transfers the remaining eight shares to Dash Distributors Inc., unless the transfer to Dash Distributors is as agent for individual purchasers. It is the transfer back to the company that triggers the unwanted tax consequences. [ 13 ] Mr. Powlik argues that the “ Release ” is only that. He argues that the Share-Sale Agreement was oral and the Release deals only with the consequences of the transfer. Mr.

Powlik argues that if the Release was to reflect the oral agreement it would have to be rectified to (at least) add the words “ to Dash Distributors Inc. ‘ as agent ’ ” , in paragraph 5. [ 14 ] Mr. Powlik says in his Affidavit: “ Mr. Lydiatt [for Dash] and I negotiated an agreement whereby I would sell the shares to Dash employees , with Dash acting as agent to facilitate the transaction (the ‘ Disposition ’ ).

Given my initial reluctance to sell the shares, the Disposition was based on me having the benefit of the capital gains exemption ” . (para. 8, emphasis added) [ 15 ] Despite the Applicant ’ s admirable zeal to have this matter determined summarily, in my view, it is not plain and obvious that the Share-Sale Agreement was not oral and as reflected by paragraph 8 of Mr. Powlik ’ s Affidavit. [ 16 ] There is a substantial factual dispute about the precise terms of the Share-Sale Agreement with potentially big consequences.

Not only does this mean that the matter cannot be determined summarily, it means that the procedure will have to be converted pursuant to Rule 3.2(6). [ 17 ] The application for

summary determination is dismissed. The Applicant should convert its Originating Application to a “ Statement of its Claim ” in this action. The Respondent should file a “ Statement of its Defence ” within the time limit of doing so as if the matter had been commenced by way of Statement of Claim. Pleadings are mainly a formality as the battle lines are clearly drawn. [ 18 ] It would be helpful for the parties to come up with an abbreviated litigation plan to allow the Court to deal with the central issue in an expedited way.

Heard on the 15 th day of November, 2012. Dated at the City of Edmonton, Alberta this 17 th day of December, 2012. W. S. Schlosser M.C.C.Q.B.A. Appearances: Kenneth Fitz McLennan Ross for the Applicant Richard Cotter, Q.C. Fraser Milner Casgrain LLP for the Respondent