Hecke v Canalta Concrete Works Ltd, 2014 ABQB 697

Court of Queen ’ s Bench of Alberta Citation: Hecke v Canalta Concrete Works Ltd, 2014 ABQB 697 Date: 20141113 Docket: 0803 13122 Registry: Edmonton Between: Jeff Van Hecke and Hecker Consulting Ltd. Plaintiffs - and - Canalta Concrete Works Ltd., Claudio Martins and Bonita Martins Defendant _______________________________________________________ Memorandum of Decision of the Honourable Madam Justice J.M. Ross _______________________________________________________ Introduction [ 1 ] The Plaintiffs sue for damages for non-performance of an oral contract between Mr. Van Hecke and the Defendants. The

Defendants deny that any contract was agreed between the parties. By amendments permitted at the commencement of trial, the Plaintiffs further claim that the Defendants are estopped by their conduct from alleging that no contract existed, or that the Defendants have been unjustly enriched. [ 2 ] Alternatively, the Plaintiff Mr. Van Hecke seeks relief as an oppressed minority shareholder pursuant to

section 242 of the Business Corporations Act , RSA 2000, c B-9. Plaintiffs’ Evidence [ 3 ] Jeff Van Hecke is one of the Plaintiffs and a director and shareholder of the other Plaintiff, Hecker Consulting Ltd. (“Hecker”). Mr. Van Hecke is now 36 years old. He started working as a labourer in the concrete business in 2004, eventually providing these services through Hecker to companies in the business, including the Defendant Canalta Concrete Works Ltd. (“Canalta”). [ 4 ] Through this work Mr. Van Hecke became acquainted with, and eventually friends with, the owners of Canalta, the Defendants Mr. and Mrs.

Martins. [ 5 ] Discussions regarding Mr. Martins’ retirement from the concrete business, and Mr. Van Hecke possibly taking over Canalta, began in mid-2005. By 2006, Mr. Van Hecke wanted some assurance that there would be an eventual handover of the company. He told Mr. Martins he wanted an ownership position in the company. Mr. Martins suggested he put his request in writing and Mr. Van Hecke did so. The letter, dated April 22, 2006 and addressed to Mr. and Mrs. Martins, provided a “list of terms regarding [Mr. Van Hecke’s] purchase of a portion of Canalta”. The terms provided that Mr.

Van Hecke would purchase 10% of Canalta at a value to be determined, that Mr. Van Hecke would become an employee of Canalta and would only be entitled to the shares on the condition that he did not quit working for Canalta. The terms also acknowledged that Mr. Martins would “continue to have full decision-making power at this time.” [ 6 ] The shares were transferred. The 2006 Annual Return for Canalta filed on February 8, 2007 confirms that Mr. Van Hecke held 10% of the voting shares of Canalta. Mr. Martins held 51%; Mrs. Martins 39%. Mr.

Van Hecke did not become an employee of Canalta; he continued to provide services through Hecker, but his services were provided exclusively to Canalta. No purchase price for the shares was agreed to; the understanding was that Mr. Van Hecke paid for the shares by working for Canalta. [ 7 ] Over time, Mr. Van Hecke took on more management and bid work for Canalta. By October 2007, he was in charge of all employees and on-site operations. Mr. Martins had started referring to Mr.

Van Hecke, in front of other persons including clients of Canalta, as his successor in the company. [ 8 ] Canalta’s financial year ends October 31st. During the fall of 2007, Canalta was involved in an industrial project in Cold Lake, Alberta. Mr. Van Hecke recalls a conversation during the first portion of the Cold Lake job, when Mr. Martins told him that he planned to retire at the end of that corporate year, October 31, 2007. Mr. Martins said that it was time for them to make a deal. [ 9 ] Prices were discussed; Mr. Van Hecke recalled that Mr.

Martins wanted $250,000 for Canalta, but, after thinking about it overnight, Mr. Van Hecke told him that he would not pay more than $100,000. Mr. Van Hecke recalled that Mr. Martins agreed with this price, and they also agreed that Mr. Van Hecke would take over operations of the company, and would use his earnings through the company to pay the $100,000. Mr. Van Hecke’s earnings would differ depending on the job. For the Cold Lake job that had already commenced, Mr.

Van Hecke would complete this work and be paid for his work as he had previously been paid – in other words, the Cold Lake job was excluded from the new deal. For jobs that Canalta had already secured but not commenced, in particular a job for AT Plastics, Mr. Van Hecke would complete the work and he and the Martins would share the net profits 50/50. For new work that Mr. Van Hecke successfully bid for and completed, Mr. Van Hecke would be entitled to 100% of the net profits which would be used to fund the purchase of Canalta. Mr.

Van Hecke would be doing all of the work involved in obtaining contracts and ensuring that they were completed. Mr. Martins would have no involvement in this. Mrs. Martins would continue her bookkeeping role with the company until the sale was complete. In that way the Martins would be able to control the company accounts to secure their position until the sale was complete. [ 10 ] Mr. Van Hecke and Mr. Martins did not document this deal. Mr.

Van Hecke testified that they planned to get a lawyer when there was enough money available to complete the purchase, which he thought would be by the end of the 2008 corporate year. Mr. Van Hecke was not concerned about the lack of documentation. He had a great relationship with the Martins. He thought it was a good deal for both. The Martins would get the money that they wanted out of the company, and Mr. Van Hecke would be able to finance his purchase of the company through his own work. [ 11 ] There was a list of equipment owned by Canalta.

This included two personal vehicles used by the Martins, a Ford Superduty truck and an Acura. They agreed that the two vehicles would not form part of the purchase. The other company-owned equipment, which was stored on the Martins’ property, was moved to Mr. Van Hecke’s property during November 2007. [ 12 ] From November 1, 2007, Mr. Van Hecke was in charge of all aspects of Canalta operations except for bookkeeping. His invoicing for his own work varied depending on the job.

For the Cold Lake job, he invoiced as he had in the past, for hours worked plus a supplement if his monthly income was less than $4000 (this had been agreed, as compensation for his agreement to work for Canalta exclusively). For the AT Plastics job, at Mr. Martins’ request, he invoiced and was paid 50% of net profits. For subsequent jobs that he bid for and supervised on his own, Mr. Van Hecke invoiced in some but not all months a flat rate of $5000.

He explained that, while he needed some income to support his family during this period, he was leaving as much of the net profits as possible in the company in order to amass the funds needed for the purchase. [ 13 ] In December 2007 Mr. Van Hecke made successful bids for three small jobs with High Time Industries Inc. These jobs, located in Acheson, Red Deer and Fort Saskatchewan, were completed in early 2008. Around the same time, Mr. Van Hecke made a successful bid for another job with High Time Industries, in Waupisoo, Alberta. This became the largest and most profitable contract ever performed by Canalta.

[ 14 ] The work at Waupisoo started in March 2008. The first part of the job was completed and invoiced in May 2008. Mr. Van Hecke knew that the job had been very profitable, and that there would be profits well in excess of the $100,000 needed to purchase Canalta. When the invoice was paid, Mr. Martins called Mr. Van Hecke and told him that payment had been received. Mr. Van Hecke went to the Martins’ home to complete the deal. The deal that was then presented to Mr. Van Hecke by Mr. Martins, had the Martins retaining most of the company profits over and above the $100,000 purchase price.

The proposal was to leave approximately $25,000 in the Canalta account after the Martins had received dividends plus the $100,000 purchase monies. Mr. Van Hecke did not believe that the remaining amount would be sufficient to cover Canalta’s tax liability that would be his responsibility. He became very angry and left. [ 15 ] In the days that followed, Mr. Martins had a lawyer draw up a draft agreement and forward it to Mr. Van Hecke. No agreement was reached between them. They did discuss work that remained to be done on the Waupisoo job. Mr.

Van Hecke did that work in May 2008, on the understanding that he, not Canalta, would receive the profits for that work. That did not happen. Canalta invoiced High Time Industries for $78,000 plus GST on July 14, 2008. Mr. Van Hecke was not paid. [ 16 ] In June 2008, after negotiations had broken down, Canalta demanded the return of its equipment. Most of the equipment was returned, but a few items (stamp mats, a drill, and pallet forks and a bucket for a skid steer) were not. Mr. Van Hecke estimated the value of these items in total as less than $4000. [ 17 ] Mr.

Van Hecke had no further involvement with Canalta. He received no compensation for and no dividends in respect of his 10% shareholding. He was never given notice of shareholders’ meetings nor informed that Canalta had made shareholders’ loans to the Martins and to a company owned by them [ 18 ] Kory Webber lived with the Martins during October and November 2007, and worked with Mr. Van Hecke. He was told by Mr. Martins that Mr. Van Hecke would take over Canalta when Mr. Martins retired. He helped move equipment from the Martins’ property to the Van Hecke property in November 2007.

He understood that the move was because Mr. Van Hecke was to take over the company. This understanding came from the Martins. [ 19 ] Cory Mohr is a friend of Mr. Van Hecke, who also helped move equipment in the fall of 2007. He recalled Mr. Martins saying that Mr. Van Hecke should do well with the company. He was aware that Mr. Van Hecke and Mr. Martins had a deal, but did not know the details. [ 20 ] Sandra Van Hecke is married to Jeff Van Hecke. She recalled Mr. Van Hecke coming home one day and discussing with her the price of $250,000 for Canalta. Mr.

Van Hecke said he didn’t think the company was worth that, and he intended to offer $100,000. They discussed plans to come up with that sum, and Mr. Van Hecke told her that the funds would come from his work during the next fiscal year. [ 21 ] She recalled, during the fall of 2007, hearing Mr. Martins introduce her husband as the “guy taking over” Canalta, and she recalled a discussion with the Martins in their kitchen during which Mr. Martins indicated that Mr. Van Hecke was taking over as of November. [ 22 ] During the fall of 2007 Mr. Van Hecke was very busy with work, and even busier in the new year.

He was out of town a lot, and preoccupied with business when he was home. There was a financial impact after he made the deal to purchase Canalta, as he was not being paid much. [ 23 ] In May or June 2008, after the Waupisoo job was done, she understood it was profitable and that Mr. Van Hecke felt it was time to move ahead with the deal. He went to the Martins to discuss this, and came home very angry. Later he and Mr. Martins had a phone conversation about grouting work on the Waupisoo job. At first Mr.

Van Hecke was not going to do this, and when he decided to do it, she understood he expected to get the profits of that job. Later there was another phone conversation, after which she understood that Mr. Martins had invoiced and been paid for the grouting work. Mr. Van Hecke was very angry. [ 24 ] “Read ins” from Mr. Martins’ examination for discovery included the following: Q. …Now, sir, up to this point in time had you discussed with Mr. Van Hecke him paying you $100,000 for your shares in the company? A. Yes … Q. And had you discussed with him that the purchase price for the company would be $100,000? A.

Yes. … Q. There was another agreement? A. Yes. Q. Whereby he was to pay $100,000 for the company? A. Yes. Q. And under that agreement you were going to sell him the 90 shares? A. Under certain conditions.

… Q. So in November of ’07 he was to acquire the shares for $100,000? A. Once payment is done, yes. A. …I was waiting for Mr. Van Hecke to find that money there which he could not find and we had to keep on going with the business of the company. So we kept on going as if nothing has changed. Defendant’s Evidence [ 25 ] Claudio Martins is 59 years old. He is multi-lingual, speaking Portuguese, French, English and some Spanish and Italian. He has been involved in the concrete industry since he was 23 years old. He moved to Alberta in 1987 or 1988 and started Canalta soon after that. [ 26 ] Mr.

Martins agreed with Mr. Van Hecke’s recollection of his acquisition of 10% of the shares of Canalta. Mr. Van Hecke earned the shares by working for Canalta and was entitled to 10% of dividends issued by the company; however, Mr. Martins retained full control of corporate decision-making. [ 27 ] Mr. Martins also recalled that he and Mr. Van Hecke had discussions in 2007 about Mr. Van Hecke buying Canalta. Mr. Martins recalled that he originally said he wanted $300,000 for the company, and that Mr. Van Hecke said he would think about it and subsequently said he would not be interested in purchasing at that price.

Discussions progressed until they agreed on a price for the shares of $100,000. Mr. Martins would not provide a non-competition covenant. Canalta’s equipment as listed on an inventory would be included in the deal. Mr. Van Hecke agreed with these terms. However, Mr. Van Hecke did not have the funds to purchase the company, so no deal was completed in 2007. [ 28 ] Mr. Martins agreed that Mr. Van Hecke’s responsibilities with Canalta changed in 2007. He became the foreman and supervisor and did some bidding. While his responsibilities changed, Mr.

Van Hecke continued to be paid on an hourly basis until early 2008, when he started receiving a monthly salary. This change in compensation was probably because Mr. Van Hecke’s responsibilities changed and because he needed the money to support his family. [ 29 ] In August 2007, Mr. Martins had bid on a very large job for High Time Industries known as the Suncor Firebag job. Canalta did not get the job at that time or later, but Mr. Martins did submit modified bid documents in January 2008. [ 30 ] Mr. Martins recalled that he was asked to bid on the Waupisoo job in early 2008, and that he told Mr.

Van Hecke that this would be a good time to “get his feet wet”. He agreed that Mr. Van Hecke alone completed the Waupisoo bid and work. It was a very large job and Mr. Van Hecke stayed on site in northern Alberta to complete it. The price on the job was better than Mr. Martins had expected. [ 31 ] When the Waupisoo job was completed, Mr. Martins arranged to meet with Mr. Van Hecke to tell him what was going to happen relating to his purchase of Canalta would be. Because of the Waupisoo job, not only would Mr. Van Hecke get his 10% of the profit, $100,000 of the profit would be utilized for Mr.

Van Hecke to buy the company. The only thing that Mr. Van Hecke would have to do would be to pay the taxes. This was not something they had agreed to; rather Mr. Martins was telling Mr. Van Hecke what the deal was going to be. [ 32 ] Regarding Mr. Van Hecke’s description of a handshake deal reached in October 2007, Mr. Martins said that they had discussed many deals but none of them “came through”. When Mr. Van Hecke got the Waupisoo job, Mr. Martins was prepared to make his time worthwhile when he bought the company. This was the intent of the deal offered in May 2008. [ 33 ] Mr.

Martins agreed that Canalta equipment had earlier been moved to Mr. Van Hecke’s property. This was done because Mr. Van Hecke was doing the onsite work, and it would be more convenient for him. [ 34 ] Mr. Martins acknowledged that Mr. Van Hecke received 50% of the profits on the AT Plastics job. He said that this occurred in lieu of Mr. Van Hecke receiving salary and 10% of profits, and also because Mr. Van Hecke needed the money. He denied that he had agreed to this; it was something he offered to Mr. Van Hecke. [ 35 ] Mr. Van Hecke started working for a $5000 salary in January or February 2008.

This salary was paid when Mr. Van Hecke invoiced. Mr. Martins did not know why the salary was not invoiced or paid every month. [ 36 ] Mr. Martins denied that he decided to retire in 2007; in early 2008 he was still working on the bid for the large job for High Time Industries. However, he did not work on-site from November 2007, except on the Cold Lake job. After the equipment was moved to Mr. Van Hecke’s property, Mr. Van Hecke did all the field work. Mr. Martins was on vacation in December 2007 and he had hand surgery in January 2008. [ 37 ] Mr. Martins acknowledged that no dividends were paid to Mr.

Van Hecke as such, although 50% of profits on the AT Plastics job was paid in lieu of a dividend. In 2008, no dividend was paid to Mr. Van Hecke because he had retained equipment belonging to Canalta, which Mr. Martins believed was worth $16,000. [ 38 ] Mr. Martins acknowledged that he and Mrs. Martins started taking money out of Canalta for personal use in January 2008, as a management bonus and as dividends. [ 39 ] Mr. Martins agreed that Mr. Van Hecke completed grouting work on the Waupisoo job and that Canalta invoiced for and received payment for this work. He did not know if Mr.

Van Hecke was paid for this work. He did not recall if Mr. Van Hecke had

invoiced Canalta. [ 40 ] Mrs. Martins was not involved in discussions between her husband and Mr. Van Hecke regarding the purchase of shares in Canalta; she left these matters up to her husband. Mr. Martins was thinking about retirement in 2007. So far as she knew there were “loose” discussions about Mr. Van Hecke purchasing the company. Mr. Martins had mentioned that the price for the company would be $100,000. Contract Claim [ 41 ] The first claim made by the Plaintiffs is in contract. As submitted by both counsel for the Plaintiffs and counsel for the Defendants, the major issue is credibility. [ 42 ] If Mr.

Van Hecke’s evidence is accepted, there was an oral agreement in October of 2007. The Plaintiffs submit that there was certainty as to the essential terms of a contract for the sale of shares, namely price, quantity of shares and the closing date: USB Securities Canada Inc. v Sands Brothers Canada Ltd , 2009 ONCA 2082, at para 79 . It was agreed that Mr. Van Hecke would purchase 90 shares of Canalta from the Martins. The agreed price was $100,000. The closing date was certain; it was to occur when Mr. Van Hecke had accumulated enough profit in the company, based on the following split of profits: • Mr.

Van Hecke would receive no profit on the Cold Lake job that was underway; • He would receive half the profit on work agreed to but not yet under construction, in particular the AT Plastics job; • He would receive all of the profit for new work that he bid for and completed. [ 43 ] The Defendants submit that the contract described by Mr. Van Hecke was not simply a share purchase agreement, as it also dealt with entitlement to corporate profits prior to the transfer of shares. That does not necessarily introduce any further legal issues – the Plaintiffs submit that, if Mr.

Van Hecke’s evidence is accepted, the essential terms relating to profit-sharing were also certain. [ 44 ] Mr. Van Hecke’s evidence was clear and was given in a straightforward manner. It was internally consistent and consistent with the evidence of other witnesses. Very importantly, his evidence and the contract he described were consistent with actions of the parties during the fall and winter of 2007-2008, until their disagreement arose in May 2008. [ 45 ] Mr.

Van Hecke testified that, shortly after the October 2007 meeting at which agreement was reached, Canalta’s equipment, with the exception of two vehicles that were excluded from the deal, was moved from the Martins property to his property. Mr. Mohr and Mr. Webber both testified that they helped with the move, and that they both were told by Mr. Martins that Mr. Van Hecke would be taking over the company. [ 46 ] The Defendants agree that the equipment was moved. Mr. Martins testified that this was simply for convenience, as Mr. Van Hecke was going to be supervising site work. [ 47 ] Mr.

Van Hecke testified that Mr. Martins was retiring as of the end of October 2007. Mrs. Martins would continue bookkeeping. All of the evidence is consistent that Mr. Van Hecke did in fact take over site work as of this date. Mr. Van Hecke supervised the completion of Canalta’s existing contracts and bid for and completed new ones. Mr. Martins stopped going to work sites, except for the Cold Lake job. To Mr. Van Hecke’s knowledge, Mr. Martins stopped doing any work for Canalta. Mr. Martins gave evidence that he submitted paperwork on the Suncor Firebag bid in January 2008.

This bid had been originally submitted by Mr. Martins in August 2007. Mr. Van Hecke was not aware that Mr. Martins was still pursuing the bid after their deal. There is no suggestion that the bid, had Mr. Martins been successful in obtaining it, would have been subject to the deal. Mr. Martins agreed that he could have performed it through another corporation that he owned, Canalta Industrial Ltd. [ 48 ] Mr. Martins testified that he was still in charge of Canalta, and everything was continuing as before, except that Mr. Van Hecke was taking over more responsibility for more bidding and site work. But Mr.

Van Hecke did not take over some responsibility, or take over responsibility in a gradual way. From November 2007, Mr. Van Hecke did all of Canalta’s bidding and supervision work, with the only exceptions being the Cold Lake job, that was excluded from the deal, and the Suncor Firebag bid, that Mr. Martins undertook without Mr. Van Hecke’s knowledge. [ 49 ] I find it very significant that the invoices submitted by Mr. Van Hecke and paid by Canalta before and after October 2007 were consistent with the deal described by Mr. Van Hecke, and inconsistent with Mr.

Martins’ evidence that everything was continuing as before. [ 50 ] Through October 2007, Mr. Van Hecke invoiced for his work on an hourly basis. His hourly invoices detailed dates, hours, jobs worked on, the nature of work done and the hourly rate charged. Where his hours resulted in pay of less than $4000 in a month, he invoiced for an additional amount described in the invoice as “shop and office work” and in his evidence as “top up” pay, which had been agreed to in return for Mr. Van Hecke’s agreement to work exclusively for Canalta. [ 51 ] On November 15, 2007 Mr.

Van Hecke invoiced on an hourly basis for work on the Cold Lake job, the job that he testified was excluded from the deal. This invoice, like previous ones, included particulars as to dates and hours worked. This was the last time that Mr. Van Hecke invoiced for work on an hourly basis. [ 52 ] The next invoices from Mr. Van Hecke related to the AT Plastics job, the job on which he testified they had agreed to share profits 50/50.

He issued two invoices in January 2008; one for $3000, inclusive of GST, which stated “AT Plastics sidewalk”, and another for $15,442.88, inclusive of GST, which stated “AT Plastics pads”. Mr. Van Hecke described the first as an invoice for work done on the AT Plastics job, and the second as his 50% share of profits on the job. He said he invoiced the second amount at Mr. Martins’ request. Both invoices were paid.

[53] Mr. Van Hecke sent two more invoices for work done, at the end of February and March 2008. The February invoice was for$5000 inclusive of GST for “High Time Acheson, Fort Saskatchewan and Waupisoo”, the March invoice was for $5250 inclusive ofGST for “High Time at Waupisoo. These invoices were paid, as was a separate invoice for expenses for the High Time Waupisoo job. [54] Mr. Van Hecke said that he invoiced only what he needed for family expenses, as he wished to leave profits in the company tobe used for the purchase. [55] Mr. Martins acknowledged that Mr.

Van Hecke was paid 50% of profits on the AT Plastics job. He gave evidence that thiswas in lieu of a dividend. However, no further dividend or profit payment in lieu was made to Mr. Van Hecke in 2008. Mr. Martinstestified that any dividend would not be payable until the end of the fiscal year. This begs the question as to why a dividend or profitpayment was made with respect to AT Plastics in January 2008. No dividends were owing or paid from 2007 as Canalta did not make aprofit that year. [56] Mr. Martins also testified that the profit-share on the AT Plastics job was intended to provide Mr.

Van Hecke with money thathe needed for family expenses. This does not explain either the form or amount of the profit-share invoice as compared with the smallerwork invoices for work done that were submitted by Mr. Van Hecke. [57] Mr. Martins had no explanation for why nothing was paid to Mr. Van Hecke for work done after March 2008, other than thatMr. Van Hecke was paid whatever he invoiced. In fact, this was not always the case. Mr. Van Hecke submitted an invoice for vehicleexpenses on October 31, 2007, that Mr. Martins refused to pay because he felt Mr.

Van Hecke should have used a company vehiclerather than his own. [58] Mr. Van Hecke described a particular meeting in October in Mr. Martins’ garage where the deal was agreed and they shookhands. Mr. Martins denied that such a meeting took place although he agreed that there were a number of discussions and that at somepoint they agreed that Mr. Van Hecke would purchase Canalta for $100,000 if he could obtain funding. He testified that this agreementdid not go forward because Mr. Van Hecke could not obtain financing. [59] There was no evidence that Mr.

Van Hecke ever took any steps to seek financing to purchase Canalta, or that Mr. Martinsever sought information from Mr. Van Hecke about his efforts in this regard. [60] Mr. Martins testified that there was no deal because, if there were, he would have put it in writing. He also said that, when hemet with Mr. Van Hecke in May 2008, he told Mr. Van Hecke what the deal would be because Mr. Van Hecke did not know. Thesestatements do not assist the Defendants’ position. This was not the type of contract that was required to be in writing. Further, the legalissue is not whether Mr.

Martins subjectively considered himself to be bound by contract, but whether reasonable persons would haveconsidered this as a result of the interactions between them: Constantly reiterated in the judgments is the idea that the test of agreement for legal purposes is whether parties have indicated to theoutside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract. The law isconcerned not with the parties’ intentions but with their manifested intentions.

It is not what an individual party believed or understoodwas the meaning of what the other party said or did that is the criterion of agreement; it is whether a reasonable man in the situation ofthat party would have believed and understood that the other party was consenting to the identical terms. As Fraser C.J.A. said in RonGhitter Property Consultants Ltd. v.

Beaver Lumber Co.: The parties will be found to have reached a meeting of the minds, in other words be ad idem, where it is clear to the objective reasonablebystander, in light of all the material facts, that the parties intended to contract and the essential terms of that contract can be determinedwith a reasonable degree of certainty. G.H.L. Fridman, The Law of Contract in Canada, Sixth Edition (Toronto: Carswell, 2011), at 15, citing (2003) 2003 ABCA 221, 17 Alta.L.R. (4th) 243 at 249 (Alta. C.A.) [61] Mr. Martins was an impatient, somewhat short-tempered witness.

He seemed to regard the claim against him as completelyunfounded, and many of the questions about how he managed Canalta and what he did with its resources as offensive. Mr. Martinsthought that Mr. Van Hecke’s expectations were essentially irrelevant. In Mr. Martins view, he was in control of Canalta, and until therewas a formal transfer of power, he could deal with the company as he liked. He thought that Mr. Van Hecke should take what he wasprepared to give him when he was prepared to give it. While I accept that, subjectively, Mr. Martins did not think he was bound by hisdiscussions with Mr.

Van Hecke, it is clear to me that Mr. Martins was not considering their interactions from the perspective of anobjective observer. [62] There were other problems with Mr. Martins’ evidence. He did not have a good memory for many details. He did notremember how often or where or when he and Mr. Van Hecke discussed the purchase of Canalta. He did not remember when or how orwhy Mr. Van Hecke’s compensation changed from hourly compensation to profit share or monthly salary. He was also unwilling toadmit even matters clearly demonstrated by the evidence. For example, the evidence demonstrated that Mr.

Van Hecke by his soleefforts and very hard work obtained and completed the most profitable job in the history of Canalta. It was clear that a salary of $5000per month would be far below market rate for this work. Mr. Martins would not admit this. Further, after their disagreement, it was clearthat Mr. Van Hecke agreed to complete the grouting work on the Waupisoo job on the understanding that he would receive the profit forat least that part of the work. Mr. Martins would not admit that either. [63] Counsel for the Defendants submitted that the fact that English is not Mr.

Martins’ first language should be taken into accountin assessing his evidence and in considering what Mr. Van Hecke believed he heard from Mr. Martins. Mr. Martins’ spoken English wasperfectly understandable to me and also to trial witnesses who had dealt with him in the past, including in a business context. There is nosubstance to this alleged issue. [64] Counsel for the Defendants submitted that I should not find Mr. Van Hecke to be credible because the deal he described,

under which he would use company profits to purchase the shares, was just too good to be true. I do not accept this submission. There was precedent between these parties for Mr. Van Hecke to acquire an interest in the company through his work; that is how he obtained 10% of the shares in 2006. Further, when Mr. Martins did offer to sell in May 2008, it was a term of the deal that he proposed that the purchase price of $100,000 would be paid from company profits. [ 65 ] The price of $100,000, which was agreed, reflected a reasonable price for the company in October 2007.

Canalta had not made a profit in 2007, and the list of equipment owned by Canalta had a book value of $82,000. There is no evidence of any other prospective purchaser for the company. The deal described by Mr. Van Hecke gave the Martins an opportunity to get some money out of the company and to retire. I accept Mr. Van Hecke’s evidence that Mr. Martins did want to retire in the fall of 2007. Mr. Martins had introduced Mr. Van Hecke to others including clients of Canalta as his successor. Mr. Martins’ actions at the time are completely consistent with his having made the decision to retire.

He stopped doing any significant work for the company; he went on vacation in December and had elective surgery in January; he started looking into purchasing a sailboat. [ 66 ] Counsel for the Defendants suggests that the fact that Mr. Van Hecke did not put anything in writing makes his evidence less credible. I accept Mr. Van Hecke’s evidence that he did not think it was necessary, as he had a good relationship with Mr. Martins. Mr. Van Hecke had written out terms relating to his obtaining a 10% shareholding in Canalta, but that was more than a year earlier, when he did not know Mr. Martins as well.

Further, while the terms he had put in writing had not been followed, the shares had been transferred to him on a mutually acceptable basis. [ 67 ] I accept Mr. Van Hecke’s evidence over Mr. Martins’ evidence. Mr. Van Hecke’s evidence of the October 2007 discussion leading to a handshake deal was internally consistent, and was consistent with the parties’ actions following the discussion. Mr. Martins’ evidence was neither internally consistent nor consistent with what followed.

I am satisfied that a reasonable person having observed the interactions between these parties would conclude that they intended to contract and had agreed on the essential terms of the contract. Their subsequent actions implementing the terms as discussed affirms that, at that time, both parties shared this intention. It was not until an unexpectedly profitable contract followed, that Mr. Martin came to believe that he was free to change the terms of their deal. [ 68 ] The Waupisoo job was unexpectedly profitable. Mr.

Van Hecke had expected that, by taking little money out of Canalta for his own work, he would be able to earn $100,000 in profits by October. Instead, there was over $300,000 in profits by May. The parties had not considered the possibility of this kind of profit when they made their deal. But the windfall, if it is considered to be such, did not affect the underlying basis of the agreement. The profits resulted from new work obtained and completed through Mr. Van Hecke’s sole efforts, and it was agreed that any profits from such new work would belong to Mr.

Van Hecke. [ 69 ] Undertaking such a large job as Waupisoo had real and potential consequences for Canalta that were not directly considered by the parties at the time of the agreement. The Defendants gave evidence about the large amount of bookkeeping and other office work associated with the Waupisoo job. There was a clear increase in management effort required, particularly by Mrs. Martins, which in fairness should result in higher management compensation as compared with previous years. While this is the case, it does not in my view change the essential terms of the contract. It was understood that Mr.

Van Hecke’s entitlement was to receive the net profit on the work, and that compensation for management work would be deducted in the calculation of net profit. The level of compensation was not set at any particular amount, and thus should be determined by what would be reasonable for the management work required. [ 70 ] Another potential consequence of a large contract was that there could be large calls on Canalta’s line of credit while the contract work was underway. The line of credit remained the responsibility of the Martins. Mr. Van Hecke testified that he and Mr.

Martins discussed this concern, and that Mr. Martins told him he should stipulate for progress payments in the bid, rather than simply invoicing on completion. He did so, and this stipulation was accepted by High Time Industries and progress payments were made, thus avoiding this potential issue. [ 71 ] In conclusion, the unexpected circumstance of the unusually large and profitable Waupisoo job did not invalidate the contract agreed to between the parties. That contract remained in effect, and was breached by the Defendants when they refused to transfer the shares of Canalta on the agreed terms.

Damages [ 72 ] Contract damages seek to put injured parties in the position they would have been in had the contract been performed: H. McGregor, McGregor on Damages , Eighteenth Edition (London: Sweet & Maxwell, 2003) at 16. [ 73 ] Had the contract been performed, Mr.

Van Hecke would have paid $100,000 and received 90 shares of Canalta and the assets of the company including the agreed equipment and net profits, subject to net profits that the Martins were entitled to according to the agreed profit split (profits on the Cold Lake job and 50% of profits on the AT Plastics job). [ 74 ] With the passage of time, Mr. Van Hecke is not seeking specific performance nor seeking to attribute any value to the equipment that was returned to Canalta. He seeks only Canalta’s net profits, less the share purchase amount of $100,000. [ 75 ] Canalta ceased operations with Mr.

Van Hecke’s departure following the disagreement, so there are no subsequent profits or losses to be taken into account. The financial statements for Canalta for the year ended October 31, 2008 show a net profit before taxes of $397,000. This figure does not include a management bonus in the amount of $120,000 authorized by Shareholders’ Resolution dated October 31, 2008, signed by Mr. and Mrs.

Martins. [ 76 ] As already noted, when Canalta undertook the Waupisoo job there was an unanticipated increase in management work, which should be reasonably compensated and taken into account in the calculation of net profit. There was no evidence before me as to what would be reasonable compensation for the work undertaken, apart from the Defendants’ own assessment in the form of the management bonus that they authorized. In the absence of any other evidence, I accept this figure as reasonably related to increased management responsibilities.

[ 77 ] The net profits of $397,136 have to be discounted by profits already paid to Mr. Van Hecke, and profits to which he was not entitled under the agreement. Mr. Van Hecke and Mr. Martins both testified that Mr. Van Hecke had been paid 50% profits on the AT Plastics job. Mr. Van Hecke identified the invoice in the amount of $15,442. This amount should be deducted from the damages claim, as well as an equal amount for the Defendants’ share of the profits on that job, for a total of $30,884. [ 78 ] The evidence of the profit on the Cold Lake job was not clear.

This was a job for High Time Industries, described as the Mahikan sub station. It was completed in November 2007. Canalta invoiced High Time on November 13, 2007 for $14,100 plus GST. Expenses on the job are summarized in Canalta financial records as $3119.17. This does not include Mr. Van Hecke’s invoice in the amount of $645 plus GST, and I am unsure whether there are other expenses not accounted for. To the extent that other expenses would relate to office and management costs, it may be a moot point as the Defendants would be entitled to those amounts in any event.

On the basis of the evidence, I conclude that $10,336 in profits on the Cold Lake job should be deducted from the damage award. [ 79 ] The net profits that Mr. Van Hecke was entitled to by this calculation are $355,916 ($397,136 - $30,884 - $10,336). From this amount should be deducted the agreed purchase price of $100,000. The resulting damages are $255,916. [ 80 ] The Defendants counterclaimed for value of equipment retained by the Plaintiffs. Mr. Van Hecke admitted keeping some of Canalta’s equipment. However, Mr. Van Hecke was entitled to keep that equipment under the contract.

Thus I will not deduct any amount from the damages award in respect of the retained equipment. Interest [ 81 ] The Judgment Interest Act , RSA 2000, c. J-1, provides in s. 2(1) that the court “shall award interest’ on judgments for the payment of money, “from the date the cause of action arose to the date of the judgment.” The Statement of Claim alleges that the parties expected that the purchase and sale of shares would close on or before June 1, 2008, but Mr. Van Hecke’s evidence was that he expected that he would earn the necessary profits to close by the end of the company’s fiscal year, October 31, 2008.

Corporate profits would normally be calculated as of that date. While there was an anticipated breach before that date, as the Martins had indicated their unwillingness to sell the shares on the agreed terms, in my view October 31, 2008 is a reasonable date by which Mr. Van Hecke should have been in possession of the profits, and thus the date the cause of action for damages arose. [ 82 ] Interest on pecuniary damages is calculated, under s. 4(2) of the Act , at a rate prescribed by Regulation.

Counsel for the Plaintiffs provided the court with a listing of those rates, which was 4.25% for 2008, and thereafter ranged from a low of .825% for 2010 to a high of 2.75% for 2009. Counsel submitted that I should exercise my discretion under s. 2(3) of the Act to award interest at a higher rate in view of the very low rates prescribed by Regulation. However, the I note that rates under the Regulation have decreased as market interest rates have decreased. No evidence was presented to demonstrate that a higher rate would be a fairer indication of the value of the loss of the funds for a particular year.

The Regulation rates will apply. Conclusion [ 83 ] The Plaintiffs are awarded damages for breach of contract against the Defendants jointly and severally in the amount of $255,916 plus interest under the Judgment Interest Act from October 31, 2008 to the date of judgment. [ 84 ] In view of this conclusion, it is unnecessary to consider the Plaintiffs’ alternative claims. [ 85 ] The parties may speak to me regarding costs, if they are unable to agree. Heard on the 15 th to the 19 th day of September, 2014. Dated at the City of Edmonton, Alberta this 12 th day of November, 2014. J.M. Ross J.C.Q.B.A.

Appearances: Robert L. Duke, Q.C. and Emma Johnston Miller Thomson LLP for the Plaintiffs Walter S. McKall Bishop & McKenzie LLP for the Defendant