Shefsky v. California Gold Mining Inc, 2014 ABQB 730

Court of Queen ’ s Bench of Alberta Citation: Shefsky v. California Gold Mining Inc, 2014 ABQB 730 Date: 20141128 Docket: 1303 17979 Registry: Edmonton Between: Martin Shefsky and 2350183 Ontario Inc. Applicants - and - California Gold Mining Inc., Michael Churchill, Kevin Cinq-Mars, Patrick Cronin, R.W. Tomlinson Limited, John Doe #1-50 and ABC Corporation #1-50 Respondents _______________________________________________________ Memorandum of Decision of the Honourable Mr. Justice D.R.G. Thomas _______________________________________________________ Table of Contents I. Introduction and

summary . 3 II. Background and approach . 3

III. Uncontested facts or facts that can be inferred from the affidavit evidence and documents 4 1. Cast of characters . 4 2. CGMI tries to raise money to buy a California property . 5 3. Shefsky and CGMI enter into an agreement with Shefsky to assist in the financing . 5 4. Attempts to raise $5 million by December 31, 2012 fail 5 5. Restructuring of the Board as set out in the Term Sheet does not proceed . 6 6. $5 million is raised by February 2013, but there are disagreements about who should get credit for raising the funds . 8 7. The April 2013 annual meeting . 8 8. Moeller is terminated as COO .. 8 9.

The “Secret Private Placement” . 9 10. The termination of Shefsky . 10 IV. Contested Facts . 10 1. Was CGMI unable to raise the funds on its own? . 10 2. Did Churchill agree that Shefsky could name a third member to the Board when Cohen indicated unwillingness to join the Board? . 10 3. Did Shefsky agree to a five member board with the fifth nominee to be mutually agreed on as set out in Churchill’s email to Tomlinson? . 10 4. How much investment did Shefsky secure? . 10 5. Moeller’s termination . 12 6. Shefsky’s termination . 12 V. Issues . 12 VI. Analysis . 13 1. The law .. 13 2.

What reasonable expectations are alleged by Shefsky? . 15 3. Were these expectations reasonable? . 15 a. The Term Sheet 15 b. Appointment of a director to replace Cohen . 19 c. Control 21 VII. Conclusion . 22 I. Introduction and

summary [ 1 ] The Applicants, Martin Shefsky and his solely owned holding company, 2350183 Ontario Inc (235 Inc), (referred to collectively as Shefsky), bring an oppression application against the Respondents, California Gold Mining Inc (CGMI), its directors and some shareholders. Shefsky alleges that the Respondents breached his reasonable expectations that in return for raising at least $5 million in investment he would control CGMI.

In particular, he would be entitled to name three of five directors on the board (the Board) and would retain control through the shares owned by him and the investors he introduced to CGMI. He asserts that some of the Respondents engaged in oppressive conduct, including a secret placement of shares which diluted his voting powers. [ 2 ] The Respondents argue Shefsky did not raise the agreed upon $5 million within the agreed upon deadline.

Further, they argue that he could not rely on an agreement with them (ultimately described as the Term Sheet) to evade shareholder democracy by determining who would be elected to the Board. As to control, the Respondents assert that Shefsky never had control of CGMI before the additional share issue, and therefore their actions could not have deprived him of control. [ 3 ] The oppression remedy is directed at ensuring that the reasonable expectations of any security holder, creditor, director, or officer are not violated by oppressive conduct.

For the reasons which follow I find that, while Shefsky had a reasonable expectation that

the Term Sheet would be complied with and that he could name a third candidate to the management slate of directors, those expectations were not breached. He did not name a third candidate and the Respondents, therefore, never refused to add his nominee to the management slate. Further, there is no evidence, beyond Shefsky’s belief, that he had sufficient votes to control CGMI before the alleged secret placement. In the result, the application is dismissed. II. Background and approach [ 4 ] The Applicants and Respondents filed numerous affidavits, supplementary affidavits, and examinations on affidavits.

Several of the affidavits contain many exhibits, some of which are lengthy. There are numerous disputed facts in these affidavits. I canvassed with counsel whether this was an appropriate matter to be heard in Chambers and whether the parties, if determined to proceed in this venue, would be prepared to agree not to appeal any decision I arrived at, given these evidentiary concerns.

The Applicants were unwilling to agree to that proposal. [ 5 ] However, there were some matters removed from the table, including the Applicants’ request to unwind the secret placement and the alleged wrongful terminations of Shefsky and Eric Moeller (Moeller) which are questions of contract. Any findings of fact on these allegations can only be made in a suit for wrongful termination and not through an application for an oppression remedy.

To the extent that the terminations form part of the contextual facts surrounding the question of whether there was oppression, I will take into account the fact that the employment of Shefsky and Moeller was terminated, but will not consider whether that was for cause or was wrongful. [ 6 ] I agreed to hear the application, but in light of the Alberta Court of Appeal’s admonition that it would be an error to decide matters “on the basis of conflicting affidavits and documents that would support either party's position” ( Charles v Young , 2014 ABCA 200 (at para 4 and 5 and cases cited therein)), I have reviewed the extensive materials to ensure that I make findings based on uncontested facts or, where there are contested facts, on reasonable inferences which can be drawn from uncontested facts, objective evidence, and the conduct of the parties.

I have identified these facts, inferences, and many of the instances where the affidavit evidence conflicts. [ 7 ] I add that I do not express any disagreement with the desire of the parties to avoid the expense and complication of trial if possible, in light of the fact that most, if not all, of the witnesses are in Ontario, some of the lawyers are from Ontario, and the matter is relatively time sensitive. The Supreme Court of Canada in Hryniak v.

Mauldin , 2014 SCC 7 at para 2 ) noted recently that a culture shift is required to ensure timely and affordable access to civil justice: This shift entails simplifying pre-trial procedures and moving the emphasis away from the conventional trial in favour of proportional procedures tailored to the needs of the particular case . The balance between procedure and access struck by our justice system must come to reflect modern reality and recognize that new models of adjudication can be fair and just. (Emphasis added) [ 8 ] The Alberta Court of Appeal has adopted this approach in Windsor v.

Canadian Pacific Railway Ltd , 2014 ABCA 108 , at para 15 : In other words, the myth of trial should no longer govern civil procedure. It should be recognized that interlocutory proceedings are primarily to "prepare an action for resolution", and only rarely do they actually involve "preparing an action for trial". Interlocutory decisions that can resolve a dispute in whole or in part should be made when the record permits a fair and just adjudication. [ 9 ] In this case, the parties chose a chambers procedure, knowing the limitations of affidavit evidence and aware of the implications of such a decision.

It is appropriate, then, to decide the issues that I can, based on the best available evidence before me. III. Uncontested facts or facts that can be inferred from the affidavit evidence and documents 1. Cast of characters [ 10 ] It is necessary to get to know the dramatis personae before embarking on a review of the facts. 1. Michael Churchill (Churchill) was the President and CEO of CGMI. 2. Patrick Cronin (Cronin) was a director and chairman of the Board. 3. Kevin Cinq-Mars (Cinq-Mars) was a director and the nominee of RW Tomlinson Ltd. (Tomlinson Ltd) the largest shareholder in CGMI. 4.

Nuno Brandolini (Brandolini) was a director recruited by Shefsky and later voted off the Board. 5. Pierre Caland (Caland) was an investor recruited by Shefsky and was the second largest shareholder after Tomlinson Ltd. 6. Moeller was a geologist, at one point the COO of CGMI and was fired by Churchill. 7. Thomas Sills (Sills) was also a geologist and was the COO before Moeller. 8. Gregory McKenzie (McKenzie) was the managing director of Haywood Securities Inc. (Haywood)

9. R. W. Tomlinson (Tomlinson) – CEO of Tomlinson Ltd. [ 11 ] All of the above, except Cinq-Mars and Tomlinson, swore at least one affidavit in the application and there were also affidavits made by: 1. Behn Conroy (Conroy), the Secretary and CFO of CGMI; 2. Eric Szustak (Szustak), an investor and shareholder in CGMI; 3. Kevin McAllister (McAllister), an investor and shareholder in CGMI. 2. CGMI tries to raise money to buy a California property [ 12 ] CGMI is a public junior mining company, listed on the Toronto Stock Exchange.

In 2011, CGMI entered into an agreement to purchase a property in California (the Property), but did not raise the necessary funds to close that deal. In January 2012, it entered into another agreement to purchase the Property, and in April 2012 it contracted with Haywood to act as its financial advisor to raise the necessary money to complete the purchase. [ 13 ] Neither CGMI nor Haywood could raise all of the money needed to close the new deal. Haywood was paid in shares of CGMI for its participation in securing the funding which it did raise. 3.

Shefsky and CGMI enter into an agreement with Shefsky to assist in the financing [ 14 ] In September 2012 McKenzie, as managing director of Haywood, introduced Shefsky to CGMI. On October 19, 2012 Shefsky and CGMI entered into an indicative term sheet (the “October Term Sheet”) under which Shefsky would arrange financing of $5 to $8 million for a private share placement by November 30, 2012 (the “Initial Private Placement”) and, if that condition was met, there would then be a change in the management and the Board.

Those changes would be that: a. two existing board members resign in favour of Shefsky and his nominee, Charlie Cohen (Cohen); b. if Bandolini invested at least $100,000.00, the Board would be increased to five members and he would be appointed to the Board; c. Churchill would resign as CEO but remain as President, and Shefsky would be appointed as CEO in his place; and d.

Sills would resign as COO, be retained as a consultant and Moeller would be appointed COO. [ 15 ] As to the election to the Board, it was the evidence of Churchill that the CGMI shareholders had never voted against the slate of directors proposed by management. 4. Attempts to raise $5 million by December 31, 2012 fail [ 16 ] As of November 30, 2012 Shefsky had not raised the $5 million in subscriptions, but he continued to work on raising the funds and CGMI did not take any actions to indicate it considered the arrangement represented by the October Term Sheet to have terminated.

In fact, on November 30, 2012, Conroy wrote Shefsky and Moeller indicating that they were to be appointed as officers, the CEO and the COO respectively, with the proviso that if the transaction in the October Term Sheet was not completed they would resign. In keeping with that, Conroy asked both to provide undated signed resignations that he would delete or destroy if the transaction proceeded. They did so, and on December 21, 2012 CGMI announced that Shefsky and Moeller were appointed as CEO and COO.

Neither were paid any salary for these positions until February 15, 2013 when the Initial Private Placement closed. [ 17 ] On December 13, 2012 the October Term Sheet was replaced with another agreement (Term Sheet) which provided for essentially the same terms as the October Term Sheet. The changes included a deadline date of December 30, some adjustments to the salaries of the officers, and some adjustment to the warrant provision. [ 18 ] Conroy’s evidence in cross-examination was that the December 30, 2012 deadline was not firm, saying: At some point, we reserved the right to put an end to it.

I suppose in the term sheet, we put the December 30 endpoint on it, but in discussing Shefsky’s appointment as CEO, I guess you could say that implicit in that was some acknowledgement that we would do what was in the best interests of the company, if we were missing a little bit of money on December 30, we wouldn’t necessarily shut it down. [ 19 ] On December 19, 2012, Shefsky learned that Cohen preferred not to serve on the Board, and Shefsky advised Churchill that he would have to nominate someone else. [ 20 ] As of December 30, 2012, Shefsky had not arranged the full amount of the required financing.

However, the parties continued towards completing the Initial Private Placement and Shefsky and Moeller continued in their roles as CEO and COO. On January 7, 2013 CGMI issued a press release regarding the initial placement, and on January 9, 2013, Conroy destroyed the signed and undated resignation letters of Shefsky and Moeller. 5. Restructuring of the Board as set out in the Term Sheet does not proceed [ 21 ] In a series of emails on January 11 and 12, 2013, Churchill told Tomlinson that the structure of the Board needed to be

reconfigured. Under the Term Sheet two members were required to resign to make room for a fifth director.

Churchill noted that neither Cinq-Mars nor Cronin were prepared to resign, and that the “new money”, presumably a reference to Shefsky, would not agree to a six member board, but “did agree to a 2 and 2 with a mutually agreed upon 5 th .” In cross-examination on his affidavit, Churchill testified that to give effect to the Term Sheet, he would have resigned if neither Cinq-Mars nor Cronin agreed to do so. [ 22 ] The email from Churchill to Tomlinson reads, in part: As you are aware, the original deal with the new money was they would represent $6 M of $8 M total and would grant them 3 of 5 board seats with 2 seats remaining for the original shareholders.

Kevin [Cinq-Mars] has made it clear to me that he expects to remain on the board as a condition of the Tomlinson investment.

The issue that come up over the last two weeks, is Pat Cronin has elected to invest much more ... in this round than he originally indicated. ...Pat has now indicated that he’d like to remain on the board as he will represent the largest single shareholder on our side (original shareholders) after we close the California transaction... [ 23 ] In his affidavit, Shefsky agrees that he rejected the 6 member board, but expressly denies agreeing to the mutually agreed upon 5 th member, saying that he did not reject it outright, but neither did he agree to it.

As a result, I take no notice of the assertion that there was an agreement on this point. [ 24 ] During the week of January 14, McKenzie asked Shefsky how much money he needed to get the deal done and he responded that he needed another $300,000.00, and McKenzie said he would get it. [ 25 ] A meeting of the Board was held on January 18, 2013 and the draft minutes of that meeting reflect: Mr. Churchill confirmed that, as per the TSX-Venture’s approvals, closing of the private placement must occur on or before February 11.

At this time, Martin Shefsky had arranged for $4.3 million of subscription agreements with another $500 thousand firmly committed and a further $500 thousand softly committed. Churchill had arranged for $2,435,000 committed which included a $500,000 commitment from Tomlinson. Mr.

Churchill confirmed that he had soft commitments for a further $1 million. [ 26 ] On January 24, 2013, according to Conroy’s examination on affidavit, Conroy prepared a draft circular for the upcoming meeting of shareholders listing a slate of prospective members of the Board that conformed to the Term Sheet: Churchill, Shefsky, Brandolini, Cohen and either Cronin or Cinq-Mars. Conroy was unsure of which. On January 26, 2013, according to his affidavit, Conroy reviewed a later version of the circular which listed Churchill, Shefsky, Brandolini, Cronin, and Cinq-Mars.

He asserted that this is evidence supporting his hearsay statement that Churchill told him that Shefsky agreed that Cohen would not join the Board because Shefsky had not reached the $5 million goal (see discussion of this point in

section on ‘Contested Facts’). [ 27 ] On January 29, 2013, Churchill in an email to Moeller notes that Shefsky was 90 days past raising the money agreed to. He continues: I think we will be able to close but the deal has morphed significantly from the original term sheet with a [ sic ] your side also being made up of much smaller investors than we had originally discussed. Originally, Martins investors were going to be larger and fewer, but as time has marched on this simply has not been the case. I’m not complaining mind you, but pointing out some realities we are experiencing as the deal has progressed .

I’ve been actively working with Martin and I realize that this is a team effort but I think your comments do not reflect the original term sheet for a number of reasons most importantly the current lack of funds from your group.

Martin and I have tried to balance everything out within the context of the deal as it has evolved ... (Emphasis added) [ 28 ] Notably, nothing in this email suggests that the deal is terminated, only that it has “morphed” and that he and Martin are trying to balance things “within the context of the deal”. 6. $5 million is raised by February 2013, but there are disagreements about who should get credit for raising the funds [ 29 ] On February 5, 2013, Conroy and Shefsky had an email exchange in which Shefsky indicated: “My subs are in at 5.5” [ 30 ] Conroy replied: Yes Martin – subs received from you are at $5,515,000.00. [ 31 ] The evidence of Conroy in his affidavit was that he was merely confirming the information Shefsky had provided to him.

[ 32 ] The private placement closed in two tranches on February 8 and February 15, 2013, and Shefsky and Moeller began to be paid as the CEO and COO respectively. [ 33 ] The parties disagree on whether Shefsky reached the $5 million threshold; the evidence on this point will be discussed in the next

section dealing with ‘Contested Facts’. 7. The April 2013 annual meeting [ 34 ] On March 1, 2013, the management information circular for the April 4, 2013 meeting of the shareholders was sent out. The list of nominees for the Board had changed from the earlier draft with the removal of Cohen and the inclusion of both Cronin and Cinq- Mars. [ 35 ] Shefsky’s evidence was that Churchill assured him on several occasions that he could nominate a new candidate once a suitable replacement for Cohen was found and so he voted for the slate as presented.

Churchill’s evidence was that he did not have that discussion or discussions with Shefsky. [ 36 ] This is a question of credibility, and in keeping with the decision in Charles v Young , supra , it would be an error for me to determine if these conversations occurred on the basis of conflicting affidavits. I conclude that the evidence of whether these conversations took place is not necessary to resolve the issues as stake here, and I will not take it into account.

There is evidence, however, that Churchill was trying to accommodate the wish of Shefsky to nominate a third director, see the January 11 and 12 emails referred to earlier between Churchill and Tomlinson. [ 37 ] None of Cinq-Mars, Cronin or Churchill agreed to resign, and the slate of directors proposed by management were elected. Shefsky voted his shares in favour of the slate. 8. Moeller is terminated as COO [ 38 ] Moeller was terminated as COO by Churchill on July 30, 2013.

The parties take differing positions on whether the termination was for cause or was in retaliation for the attempts by Shefsky to enforce the Term Sheet. [ 39 ] This is not a question that can be answered in this proceeding. 9. The “Secret Private Placement” [ 40 ] The minutes of the Board meeting of August 2, 2013 (unanimously approved to by the Board including Shefsky, at the August 21, 2013 meeting) record that Shefsky expressed concerns over the termination of Moeller and over breaches of contracts between his corporation and CGMI.

No details appear in the minutes of whether the contracts in issue were the Term Sheet or the consulting agreements, although in argument Shefsky asserts that the latter was the case. Conroy’s notes (exhibits in both his affidavit and the affidavit of Shefsky) do not specify what breaches Shefsky was concerned about. Notations to Conroy’s notes by Shefsky suggest that his concerns related to inconsistent notice periods between his and Churchill’s employment agreements and the failure to observe the contract requirement that both he and Churchill agree on terminations of employees.

Shefsky deposed that he expressed a wish to call a meeting of shareholders to replace certain members of the Board. That does not appear in the minutes, but is in Conroy’s notes. [ 41 ] On August 12, 2013 CGMI’s lawyers filed a price reservation with the TSX-V for a private placement with a share price of $0.05. This was approved by the TSX. That information was not provided to Shefsky. [ 42 ] The next board meeting was held on August 21, 2013.

Those minutes mention that there was a discussion about the financial position of CGMI, and Churchill is reported to have stated that he would seek financing of at least $500,000.00 “in the short term”. [ 43 ] At the same meeting, Shefsky again expressed that he wanted to call a shareholders meeting. Cinq-Mars comment in the minutes was that was not in the best interests of the company.

Conroy’s affidavit states that Churchill expressed support for calling such a meeting, while Shefsky deposed that Churchill, Cinq-Mars and Cronin opposed a meeting of shareholders being called by Shefsky. [ 44 ] Churchill approached investors to invest in the new private placement from within the original investors group and persons related to them.

He did not approach Shefsky, Caland, or any of the investors brought in by Shefsky. [ 45 ] On September 9, 2013, a notice was sent to the Board members that there would be a vote the next day on a new private placement (the secret placement) to raise $793,000 by issuing 15,860,000 units at $0.05 a share.

This was the first time that Shefsky and Brandolini learned of this financing. [ 46 ] By the next day, Shefsky had put together an alternative deal (the Bought Deal) under which Caland would purchase up to $1 million of shares at $0.07 a share for resale by Caland to a number of investors he knew to be interested in investing in CGMI. [ 47 ] At the meeting of the Board on September 10, Churchill, Cinq-Mars, and Cronin refused to consider the Bought Deal, declined a 48 hour adjournment to address concerns about the Bought Deal, and approved the secret placement instead.

Shefsky told them that the Bought Deal was an either/or; i.e. CGMI had to agree to either the Bought Deal or the secret placement because Caland was not interested in investing if the secret placement went ahead. [ 48 ] When Shefsky expressed concern about the effect the secret placement would have on the dilution of existing shares, he says that Cinq-Mars initially offered him an additional private placement (the Fall placement) of the same number of shares to neutralize the dilution effect on Shefsky’s shareholdings. Shefsky then alleges that Churchill refused to allow the Fall placement at the same number of

shares and only allowed Shefsky’s shareholders to invest a further $304,454.00. Churchill’s affidavit confirms that he agreed to the Fall placement to address the concerns of Shefsky and some of his principal investors about the dilutive effect, and at the September 18, 2013 meeting of the Board the Fall placement of up to 6,089,000 units was approved. These shares were sold at a slightly higher price than the secret placement price of $0.565, but less than the $0.07 contained in Caland’s Bought Deal. The Fall placement was never fully subscribed, and neither Shefsky nor Caland participated. 10.

The termination of Shefsky [ 49 ] Shefsky was terminated on October 7, 2013; he alleges that the termination was wrongful and that he was not paid the appropriate amount for termination upon change in control of CGMI. Churchill says that Shefsky was terminated for cause, including the fact that he was no longer acting in CGMI’s best interests. This is not an issue that can be resolved on this application. IV. Contested Facts 1. Was CGMI unable to raise the funds on its own? [ 50 ] Shefsky deposed that CGMI and the Haywood Group failed to raise the money required to purchase the Property.

Churchill deposed that CGMI could have raised the necessary funding internally, but chose to seek outside investors. This is a distinction without a difference; CGMI and Haywood had not raised the funds at the time that Shefsky was introduced to CGMI. 2. Did Churchill agree that Shefsky could name a third member to the Board when Cohen indicated unwillingness to join the Board? [ 51 ] Shefsky indicates that he had several discussions with Churchill about eventually appointing a third member of his choice to the five-member Board (para 14 of Shefsky’s affidavit).

Churchill deposed that those conversations never occurred. Conroy’s affidavit states that on January 26, 2013 Churchill told him that he and Shefsky had agreed that since Shefsky had not reached the $5 million goal, Cohen would not be nominated for election. However, Churchill’s affidavit on this point is consistent with Shefsky’s assertion that Cohen indicated he was unwilling to sit on the Board: In mid-December 2012, I was informed by Shefsky that Mr. Cohen was now unwilling to sit on the board of directors. 3.

Did Shefsky agree to a five member board with the fifth nominee to be mutually agreed on as set out in Churchill’s email to Tomlinson? [ 52 ] Shefsky denies Churchill’s assertion that he agreed to a fifth board member to be mutually agreed upon (para 20 of Shefsky’s affidavit). Churchill’s affidavit, while denying Shefsky’s allegations at para 14 of his affidavit, does not address para 20 of Shefsky’s affidavit. 4.

How much investment did Shefsky secure? [ 53 ] Churchill deposed that he was directly responsible for securing the following investors: K2 Principal Fund LP (“K2 Fund”) purchased 1.2 million shares @.10 per share = $120,000.00 Robocheyne Consulting (Bob Rose) (Rose) purchased 1 million shares @ 10 per share = $120,000.00 Rodney Dir (Dir) purchased 1 million shares @.10 per share = $120,000.00 McAllister purchased 1 million shares @.10 per share = $100,000.00 Haywood Group in financing services $805,000.00 for financing services paid in shares Total $1,225,000.00 [ 54 ] Shefsky contested these assertions, filing his own affidavit of January 22, 2014 and by affidavits made by McAllister (January

23, 2014), Szustak (January 22, 2014), and Moeller (January 20, 2014). Szustak swore that K2 was introduced to the CGMI investment opportunity by Shefsky, who had a pre-existing relationship with the K2 Fund. He indicated that while Churchill attended the meeting with Mr. Schultz of K2, it was at Shefsky’s invitation and Churchill was neither responsible for introducing K2 to CGMI nor involved in the pitch to K2 at that meeting.

It was Szustak who followed up with K2. [ 55 ] Rose of Robocheyne did not file an affidavit, but a letter from him was attached to Shefsky’s affidavit as an exhibit and in it he states that he would not have invested in CGMI but for Shefsky’s involvement. Shefsky swears that Rose was unable to swear an affidavit because of serious illness. [ 56 ] Dir did not swear an affidavit. Shefsky swears that Dir met Churchill on site in November, 2012 before he invested, and therefore Churchill’s assertion that Dir said he would not invest if Shefsky was in control makes no sense, since he did, in fact, invest in CGMI.

Moeller’s affidavit attaches a series of email conversations, dated between November 29, 2012 and January 2, 2013, between Moeller and Dir discussing Dir’s investment subscription in CGMI. The emails mention that Shefsky and Moeller are investing, discuss technical questions regarding the project, address the question of the funds being solicited in Canadian dollars, and seek timely return of the subscription documents. There is no mention of Churchill in the emails. [ 57 ] Churchill’s affidavit also asserted that McAllister told him that he would not invest if Shefsky was in control.

McAllister’s affidavit denies that conversation, and he swears that he would not have invested in CGMI unless there was a change in management and control of the Board. He states that he invested because he understood Shefsky would be in control. [ 58 ] McKenzie, with Haywood, swore that he drafted the October Term Sheet which called for a transfer of management to Shefsky, that he would not have invested in CGMI or recommended the investment if it were not for Shefsky’s involvement, and that neither he nor any of the Haywood investors signed any subscription agreements before Shefsky became involved.

This is significant since it was Haywood that was first retained to secure funds for CGMI. [ 59 ] The Respondents argue that since Haywood was paid in shares for the investors it brought in, none of these investments should be counted towards Shefsky’s total. [ 60 ] On this evidence alone, it is difficult to make findings of fact. The evidence of the investors ranges from hearsay to personal knowledge and are directly contradictory of statements by Churchill. There is some documentary support for Shefsky’s position because none of the investors in question subscribed until after he became involved. 5.

Moeller’s termination [ 61 ] Moeller was terminated as COO by Churchill on July 30, 2013. Shefsky alleges that this firing was in retaliation for the continuing disputes over the composition of the Board.

The Respondents allege he was terminated for cause, saying that his shoddy work in preparing a drill program which needed to comply with National Instrument 43-101, meant that much of the work had to be redone at a cost of about $900,000.00. [ 62 ] To support his allegations, Shefsky notes that Moeller sent Shefsky an email outlining his belief that Churchill was not changing the structure of the Board because Churchill believed that Shefsky’s money raised in the February placement was “not real”. [ 63 ] The Respondents rely on the reports of Vishal Gupta and Mark Payne that Moeller’s work was substandard and would cost $900,000.00 to rectify. [ 64 ] This is not a question that can be answered on this application. 6.

Shefsky’s termination [ 65 ] Shefsky alleges that his termination was wrongful and that he was not given the appropriate notice for termination upon change in control of CGMI. Churchill says that Shefsky was terminated for cause, including the fact that he was no longer acting in CGMI’s best interests. As with Moeller’s termination, this is not a question that can be answered on this application. V. Issues [ 66 ] The following issues will not be addressed: 1. The alleged wrongful termination of Moeller.

The termination may be relevant within the factual context to determine whether there was oppressive conduct, but the determination of whether he was wrongfully terminated is a question of contract, not an oppression action. 2. Whether the alleged secret placement should be unwound as it appears there is agreement that this need not happen in the context of this litigation. 3.

The alleged wrongful termination of Shefsky’s consulting services agreement is relevant to the factual context of whether there was oppressive conduct, but determining a breach is a matter of contract, not an oppression action. [ 67 ] The following issues raised in this application which are capable of being decided: 1. What reasonable expectations are alleged by Shefsky?

2. Were these expectations reasonable? a. The Term Sheet i. Did Shefsky meet the deadline? If not, was there conduct that could have lead Shefsky to a reasonable expectation that the deadline in the Term Sheet was extended? ii. Did Shefsky reach the goal of $5 million in subscriptions? b. Appointment of a director to replace Cohen i. Did Shefsky have a reasonable expectation that he could nominate a third director when Cohen refused a nomination? ii. Were Shefsky’s reasonable expectations regarding Board nominations breached? c. Control 3.

If any reasonable expectations were breached, did any actions of the Respondents constitute oppressive conduct? 4. If oppressive conduct is found, what is the appropriate remedy? VI. Analysis 1. The law [ 68 ] Oppression is an equitable remedy and has been partly codified in s. 242 of the Alberta Business Corporations Act , RSA 2000, c B-9.

Section 242 provides that an oppression remedy is available to “any security holder, creditor, director, or officer” to rectify conduct that is oppressive or unfairly prejudicial to their interests or unfairly disregards their interests. The

section sets out a broad range of available remedies, including an order directing an issue or exchange of securities ( s. 242(3) (e)), an order appointing directors in place of, or in addition to, all or any of the directors then in office ( s. 242(3) (f)), and an order requiring the trial of any issue ( s. 242(3) (p)). [ 69 ] The basic principles underlying oppression actions and available oppression remedies are set out in BCE Inc v 1976 Debentureholders , 2008 SCC 69 . As an equitable remedy, oppression seeks to ensure fairness, not just what is legal (at para 58).

Moreover, oppression is context and fact specific. At para 59, the Court noted: What is just and equitable is judged by the reasonable expectations of the stakeholders in the context and in regard to the relationships at play. Conduct that may be oppressive in one situation may not be in another. [ 70 ] Reasonableness implies that the analysis is objective and contextual. As the Supreme Court noted in BCE the stakeholder’s actual expectations are not conclusive.

The Court noted (at para 62): In the context of whether it would be "just and equitable" to grant a remedy, the question is whether the expectation is reasonable having regard to the facts of the specific case, the relationships at issue, and the entire context, including the fact that there may be conflicting claims and expectations. [ 71 ] Further the Court noted that the oppression remedy is addressed to upholding stakeholders’ understandings and expectations and is not limited to a determination of the parties’ legal rights (at para 69). [ 72 ] The Supreme Court went on to indicate that there is a two-step inquiry in an oppression claim (at para 68): 1.

Does the evidence support the reasonable expectation asserted by the claimant? 2. Does the evidence establish that the reasonable expectation was

a) violated by conduct that

b) falls within the terms "oppression", "unfair prejudice" or "unfair disregard" of a relevant interest? [ 73 ] Moreover, it is essential that the claimant establish wrongful conduct, causation and compensable injury (at para 91). [ 74 ] The Court (at para 72) summarized some of the useful factors the courts may consider in determining whether a reasonable expectation exists: 1. general commercial practice, 2. the nature of the corporation, 3. the relationship between the parties, 4. past practice, 5. steps the claimant could have taken to protect itself,

6. any representations and agreements, and 7. the fair resolution of conflicts between corporate stakeholders. [ 75 ] Once it is determined what an applicants’ reasonable expectations were, and that those expectations were not met, the Court must go on to determine whether the failure to meet the expectation was unfair. Not all failures to meet a reasonable expectation “will give rise to the equitable considerations that ground actions for oppression.” The conduct must be oppressive or demonstrate unfair prejudice, or unfair disregard of the claimants’ interests (at para 89).

Often the proof required to establish reasonable expectation will also be relevant to the proof of oppression, unfair prejudice or unfair disregard of interests (para 90). [ 76 ] Oppression has been described as conduct that is "burdensome, harsh and wrongful", "a visible departure from standards of fair dealing", and an "abuse of power" related to the conduct of the corporations affairs: “a wrong of the most serious sort” (at para 92).

Unfair prejudice is conduct that is less serious than oppression, and includes such things as: ... squeezing out a minority shareholder, failing to disclose related party transactions, changing corporate structure to drastically alter debt ratios, adopting a "poison pill" to prevent a takeover bid, paying dividends without a formal declaration, preferring some shareholders with management fees and paying directors' fees higher than the industry norm... (at para 93). [ 77 ] The Supreme Court went on to describe unfair disregard as the least serious of the three, and noted that it included favouring a director by failing to properly prosecute claims, improperly reducing dividends, or failing to deliver a claimant’s property. 2.

What reasonable expectations are alleged by Shefsky? [ 78 ] The Applicants argue that Shefsky’s reasonable expectation was that CGMI and its directors would honour the Term Sheet. The Respondents suggest that the Applicants have actually argued for two reasonable expectations: that the Term Sheet be honoured and that he retain control of CGMI. [ 79 ] In reviewing the Applicants’ written and oral submissions, I conclude that the Applicants are alleging three related expectations as reasonable, namely that: 1. the Term Sheet be honoured; 2. Shefsky be permitted to appoint a director to replace Cohen; and 3.

Shefsky retain control of CGMI. [ 80 ] I have added the second expectation because there is nothing in the express terms of the Term Sheet that provide a right to appoint a replacement director if one of the directors who Shefsky wanted to appoint chose not to accept the appointment. 3. Were these expectations reasonable? a. The Term Sheet [ 81 ] There is little doubt that there is a reasonable expectation that the terms of a negotiated agreement will be honoured. The issue here is whether Shefsky could reasonably expect that the Term Sheet deadline would be extended. i. Did Shefsky meet the deadline?

If not, was there conduct that could have lead Shefsky to a reasonable expectation that the deadline in the Term Sheet was extended? [ 82 ] There is no argument that by December 30, Shefsky had not raised the necessary $5 million. The Respondents argue that the question should end there as Shefsky had not met the goal, and therefore there was no further legal obligation on CGMI to complete its terms. [ 83 ] However, the oppression remedy is not focussed solely on legal rights, but looks to what is fair in the circumstances.

The October Term Sheet set a November 30 deadline, but that deadline passed, and the parties continued on without comment. Shefsky continued to solicit investment. Further, on November 30, 2012 Conroy wrote Shefsky and Moeller about being appointed as CEO and COO respectively, and asking them to sign undated resignations, which would be used if the transaction was not completed. They were appointed as CEO and COO, and the resignations were never used. [ 84 ] On December 13, two weeks after the November 30 deadline, the new Term Sheet was signed. It provided for a December 30 deadline.

The December 30 deadline passed and again no action was taken. The resignations were not used and were deleted on January 9. Shefsky continued to recruit investors, and Churchill continued to try to change the structure of the Board to that set out in the Term Sheet.

His emails of January 11 and 12 do not mention the passing of the December 30 deadline, and he refers to the reconfiguration of the Board sought by the “new money”. [ 85 ] Conroy’s evidence was that the December 30 deadline was not firm, and he indicated that if some money was still missing on December 30, they wouldn’t “necessarily shut it down.” His evidence also confirmed that he prepared a draft circular for the upcoming shareholders’ meeting on or about January 24, 2013 which listed a slate of Board members conforming to the new Term Sheet. [ 86 ] Further, the minutes of the January 18 board meeting reported that the Initial Private Placement needed to be completed by February 11, and that Shefsky had arranged for $4.3 million, with another $1 million firmly or softly committed.

[ 87 ] Shefsky confirmed with Conroy, via email, that he had reached the $5 million goal in subscriptions on February 5. [ 88 ] Keeping in mind the Supreme Court’s comments that a court determining whether there is a reasonable expectation must have regard to the facts of the specific case, the relationships at issue, and the entire context The relevant facts include: 1. The November 30 deadline passed and no steps were taken to suggest that the October Term Sheet would not be honoured, and in fact, the parties entered into the new Term Sheet two weeks later with a deadline of December 30; 2.

After December 30, the parties continued to act as though the Term Sheet was still in place: a. the resignations were not implemented and were eventually deleted, b. Shefsky and Moeller continued as CEO and COO; c. Shefsky continued to raise funds; d. Churchill attempted to negotiate a way to re-structure the Board that would meet the requirements for the so called “new money”; e. Conroy’s evidence was that the deadline was not a hard deadline; f. Conroy gave evidence that he had drafted a circular for the meeting of shareholders which set out the management slate of directors as per the Term Sheet. 3.

The Initial Private Placement closed in February and Shefsky and Moeller continued in their roles and began to be paid for their roles as CEO and COO until Moeller’s employment was terminated in July and that of Shefsky’s in October following the “secret private placement” dispute. [ 89 ] There is some disagreement on the facts about whether Churchill and Shefsky discussed the fact that the deadline had passed and they were now operating outside of the Term Sheet.

However, I find that the context, including the preponderance of objective evidence, is that the parties continued to act as though the Term Sheet would be implemented once the $5 million goal was reached.

There is no documentary evidence that the parties were not going to honour the agreement represented by the Term Sheet because of the missed deadline, and considerable evidence of conduct of the parties from which it can be inferred that the parties were operating as though the terms of the new Term Sheet were to be implemented. [ 90 ] I conclude that the failure to raise the $5 million by December 30 is not fatal to Shefsky’s assertion that he had a reasonable expectation that CGMI would honour the Term Sheet. ii.

Did Shefsky reach the goal of $5 million? [ 91 ] The Respondents also argue that Shefsky raised less than $5 million, and that some of the investors he claims as having invested with him were in fact investors solicited by the original subscribers/shareholders. [ 92 ] The Term Sheet states: Provided the Investors subscribe for at least $5,000,000 of Units, the following provisions shall apply... [ 93 ] “Investors” is a defined term in the Term Sheet: Investors Martin Shefsky and other accredited investors based in Ontario, Alberta, British Columbia, the United States or offshore (the “Investors”), subject to participation right below.

Participation Right Management of the Company reserves the right, but not the obligation, to arrange for participation in up to $2,000,000 of the Offering by existing shareholders of the Company (the “Participation Right” ). [ 94 ] Based on this definition, Shefsky argues that all the “new money” investors who participated in the share placement were “Investors” for the purposes of the Term Sheet, no matter who solicited their investment. The Respondents argue that the Applicants cannot have it both ways: insisting on a contextual

interpretation of the deadline and a strict

interpretation of the term “Investor”. [ 95 ] I do not agree with the Respondents on this point. Shefsky seeks equitable relief, not a legal enforcement of the terms of the agreement. He may have a reasonable expectation about whether the strict terms of the deadline will be relied upon, without having to eschew the express language of other terms. The Respondents are not similarly entitled. [ 96 ] However, the principles of contract

interpretation suggest that Shefsky’s

interpretation is questionable. The Alberta Court of Appeal has set out the general principles of contract

interpretation in many cases. Among those principles are: 1. “... a contract must be read and interpreted as whole, fitting all its parts together and trying to bring them into harmony...”: Humphries v Lufkin Industries Canada Ltd , 2011 ABCA 366 at para 13 : “In this search the words of one provision must not be read in isolation but should be considered in harmony with the rest of the contract and in light of its purposes and commercial context": Tercon Contractors Ltd v. British Columbia (Transportation and Highways), 2010 SCC 4 at para 64 , [2010] 1 SCR 69”: Benfield Corporate Risk Canada Limited v Beaufort International Insurance Inc , at para

176; 2. “A contract must be interpreted in a positive and purposive manner, trying to make it work... Therefore, where one possibleinterpretation will allow the contract to function and meet the commercial objective in view, and the other scarcely will, the former is tobe chosen” Humphries at para 15; 3. “The objective of contract

interpretation is to discover and give effect to the real intention of the parties.” 550 Capital Corp vDavid S Cheetham Architect Ltd, 2009 ABCA 219 at para 26: “Interpretation of a contract is a search for intent: Eli Lilly & Co v. Novopharm Ltd; Eli Lilly & Co v. Apotex Inc, (SCC), [1998] 2 SCR 129 at paras 52-56, citing Consolidated-Bathurst Export Ltd v. Mutual Boiler and Machinery Insurance Co, (SCC), [1980] 1 SCR 888 at 901”: Benfield, at para 175; 4. “...words are to be given their ordinary and grammatical meaning.” 550 Capital Corp at para 27. [97] The

interpretation of the Term Sheet suggested by Shefsky does not give effect to the parties’ intentions which are clear,namely, Shefsky was to solicit at least $5 million in additional investment, in return for which he would be appointed to the board, withtwo others he chose, and that he and Moeller would be appointed CEO and COO.

To read the definition of “Investor” in isolation fromthe purpose and intention of the entire agreement, would be to ignore its commercial objective – retaining Shefsky to get more investorsthan the original investors had signed up. [98] The question then becomes how much investment did Shefsky secure? [99] The Respondents point to Shefsky’s cross-examination on affidavit, in which he took the position that he had raised$5,491,250. He admitted that $56,200 worth of shares were included in error, leaving $5,435,050. This total also included the $805,000worth of shares sold to the Haywood investors.

The Respondents argue that this amount should not be credited to Shefsky sinceHaywood was paid a fee for securing these investors. As noted previously, this leads to the affidavits by the Haywood investors.

Theseinvestors say they invested because of Shefsky’s involvement; the Respondents assert that they were brought in by Haywood andHaywood was paid for raising those investments. [100] It is possible that both are correct, as Haywood recruited Shefsky; none of these Haywood investors signed subscriptionagreements until Shefsky became involved; [101] It is therefore necessary to determine if there is any objective evidence by which it can be inferred that the $5 million goal wasreached. [102] There were a number of documents in which one or more of the Respondents appeared to accept that the $5 million goal wasclose to being reached or had been reached.

On January 14, McKenzie asked Shefsky how much more money was needed to get the dealdone and he responded he needed another $300,000.00. The minutes of the January 18 board meeting reported that the Initial PrivatePlacement needed to be completed by February 11, and that Shefsky had arranged for $4.3 million, with another $1 million firmly orsoftly committed.

On February 5, Conroy confirmed that Shefsky had $5,515,000 in subscriptions. [103] Moreover, the Respondents’ actions in attempting to implement the board structure set out in the Term Sheet, and the paymentof CEO and COO salaries to Shefsky and Moeller once the private placement was accomplished as provided for in the Term Sheet,suggest that the Respondents themselves had concluded that Shefsky had reached the $5 million goal. As a result, I conclude thatShefsky’s expectation that the Term Sheet be honoured was reasonable.

That is, having regard to the particular facts, the parties’relationships, and the entire context, including the conflicting claims and expectations, it was objectively reasonable for Shefsky toconclude that his obligations under the Term Sheet had been met and that his expectations of the Respondents would also be met. b. Appointment of a director to replace Cohen i. Did Shefsky have a reasonable expectation that he could nominate a third director when Cohen refused a nomination [104] There is nothing in the Term Sheet that expressly provides Shefsky with the option of choosing another person to replaceCohen.

Further, the affidavits of Shefsky and Churchill contradict one another about what was agreed to if Cohen was unavailable. [105] Cohen chose not to accept the nomination on December 19, 2013.

On January 11 and 12, which is after the December 30deadline, Churchill and Tomlinson exchanged emails in which Churchill says: As you are aware, the original deal with the new money was they would represent $6 of $8 million total and we would grant them 3 of 5board seats with 2 seats remaining for the original shareholders. [106] He then goes on to note that neither Cronin nor Cinq-Mars are prepared to resign from the Board, particularly as they or thegroup they represent are investing more than originally planned.

He then says: I’ve gone back to the new money and indicated that our existing shareholder base will be investing somewhere between $2M and $3.5 M(which is more than we originally committed to) and asked that we revisit the board structure. (Emphasis added) [107] This appears to suggest that firstly, Churchill did not consider Cohen to be the only possible board member to be put up byShefsky since he indicated the general proposition that three out of five board seats would go to the “new money”, and secondly, that itwas necessary to renegotiate the terms of the agreement and he was seeking Shefsky’s agreement to change the structure.

From this it isa reasonable inference that the parties intended that Shefsky be able to appoint a third member to the Board when Cohen was unwillingto take the position.

[ 108 ] I conclude that Shefsky had a reasonable expectation arising from both the Term Sheet and the Board’s actions that he would be permitted to appoint a third member to the Board once he selected someone. ii. Were Shefsky’s reasonable expectations regarding Board nominations breached? [ 109 ] At the April 4, 2013 annual general meeting of shareholders, Shefsky voted his shares for the nominees proposed by management, despite not having named his third nominee.

Shefsky deposed that he did so because Churchill said that once Shefsky found a suitable replacement candidate for Cohen, one of the board members would resign so that the replacement could be appointed. Churchill denies agreeing to this.

Again I can make no finding on this express contradiction in the affidavit evidence. [ 110 ] The Respondents note that in cross-examination on his affidavit, Shefsky agreed that nothing in the circular for the April 4, 2013 meeting mentioned that he could force the replacement of one of the board members to resign in favour of his nominee; he never asked that such a disclosure be made; and that this alleged right was never disclosed to shareholders, who the Respondents argue have a right to have adequate information on which to vote. The Respondents rely on s. 122(1)(

b) of the Ontario Securities Act , RSO 1999, c. S-5 to argue that such a statement was statutorily required. Section 122(1)(

b) provides for penalties if a person or company makes a misleading or untrue statement, or does not state a necessary fact. [ 111 ] As a result, the Respondents argue, any rights under the Term Sheet were spent at the point the information circular was distributed to the shareholders without the relevant information that the Board members could change at Shefsky’s discretion. [ 112 ] The Respondents further argue that the subscription agreements signed by Shefsky ended any rights under the Term Sheet. Each subscription agreement provides the following representations: (

a) That the investor is not a Control Person (as defined under securities law) and would not become a Control Person by purchasing the number of Units subscribed for; and (

b) That the investor does not intend to act jointly or in concert with any other person to form a Control Person. (See Ex. XX of Conroy Affidavit) (Emphasis added) [ 113 ] Nothing in the subscription agreements contain any information about the composition of the Board or of management. Further, each subscription agreement contains an entire agreement clause that expressly disclaims reliance on any other agreements.

The Respondents ask that I conclude that Shefsky and 235 Inc., by entering into the subscription agreements, terminated any rights or interests they had in controlling CGMI by placing a majority of supporters on the Board. [ 114 ] More relevant, however, is the fact that Shefsky never proposed a replacement for Cohen. Shefsky’s argument that the Term Sheet was breached because no one on the Board volunteered to resign is a red herring and moot.

Between the April 2013 shareholders meeting in which Shefsky voted for the management slate of directors and the January 2014 shareholders meeting, when a different management slate of directors was elected, Shefsky did not name a replacement, seek to call, or actually call a shareholders meeting himself, or propose a different slate of directors. [ 115 ] Admittedly, by the time of the secret placement Shefsky was convinced he would not have sufficient votes to have his nominees elected.

The secret placement closed on September 10, 2013, and, according to Shefsky, the dilution of shares caused by the newly issued shares meant that he could not hope to win in a meeting of shareholders. [ 116 ] However, there is not sufficient evidence to prove that any of the Respondents refused to name a board member of Shefsky’s choosing. In cross-examination on his affidavit, Churchill said that he would have resigned from the Board if necessary for Shefsky’s nominee. [ 117 ] Shefsky’s argument lists the following as evidence of the breach: 1. Cinq- Mars was not willing to resign; 2.

Churchill’s evidence on cross-examination was that Cronin would have been asked to resign, and Cronin’s evidence was that he was never asked to resign; 3. Churchill, agreed that he would have resigned if neither Cronin or Cinq-Mars would agree. [ 118 ] Nothing here speaks to a refusal to name a nominee. [ 119 ] Further Shefsky led no evidence to support his assertion that the investors which he brought in would vote with him. In cross- examination on his affidavit, he said that he did not contact any of them to ascertain their voting intentions.

The affidavits from investors voicing support for Shefsky, state only that they invested because of his involvement, but make no representations as to how they would have voted their shares in a shareholders meeting at which Shefsky proposed a Board nominee (or slate). [ 120 ] I find that these two factors are determinative of the issue.

Shefsky asserts a purely hypothetical breach of his expectations – if he had proposed a replacement nominee, the Board would have refused to name the nominee, and if he had proposed a dissident slate before the secret placement all the investors he brought into CGMI would have voted for his nominee. [ 121 ] I conclude that while the actions of the Board suggest that its members agreed that Shefsky could nominate a third person to the Board, thus giving rise to both a subjective and objective expectation, Shefsky never tried to act on that expectation and therefore it was never breached.

c. Control [ 122 ] Shefsky asserts that he had a reasonable expectation of control of CGMI and that the Respondents’ conduct defeated that expectation. In particular he asserts that the secret placement so diluted the proportion of shares controlled by him that he lost control. To make this argument, Shefsky claims that the shareholders he brought in would have voted with him.

Had the secret placement not occurred, he would have had enough votes to secure control at the annual general meeting of shareholders. [ 123 ] The Respondents say that Shefsky never had any control to lose by virtue of the fact that he did not have control before the secret placement. Shefsky’s evidence on cross-examination on his affidavit was that he believed that the shareholders identified in Ex NN of his affidavit would have voted with him. As noted previously, I find he has insufficient evidence to support this belief.

He did not contact the shareholders and ask how they would vote. [ 124 ] The Respondents suggest that the best evidence of the voting intentions of the shareholders is the result of the January 30, 2014 annual meeting at which, once again, the management slate of directors, this time Churchill, Cronin, Cinq-Mars, Berkenshaw, Stephens, and Le Clair, were elected by a majority of all CGMI shares issued and outstanding.

The Respondents further note that mathematically, even if you assume that all the shares created in the secret placement voted in favour of the management slate and then deducted all those shares from the proxy count in favour, there would still be a 51% majority in favour of the management slate. [ 125 ] The problem with this scenario, of course, is that much had happened between April and January and shareholders that may have been supportive of Shefsky before, were less so after the turmoil of his termination and this litigation.

This scenario does not answer whether Shefsky had control before the secret placement, and any exercise to answer that question must be purely hypothetical since no shareholder votes were held between the April shareholder meeting and the secret placement. [ 126 ] I find the fact that there is no evidence that Shefsky had control of all the shares he brought into CGMI is determinative of the issue. The investors who swore affidavits indicated they invested because of Shefsky, but not that they would have voted their shares to support him.

There are no agreements in evidence that Shefsky’s investors would vote together to support him, and in fact, the subscription agreements specifically deny such agreements. Shefsky could not form a reasonable expectation that he would have control of the corporation based on the number of shares held by himself and the investors he brought into CGMI. It follows and I find that none of the actions that allegedly deprived him of control can be said to be oppressive. VII.

Conclusion [ 127 ] Since I have concluded there were no breaches of Shefsky’s reasonable expectation that the Term Sheet be honoured and that he be permitted to name a third member to the five member Board and that he had no reasonable expectation of controlling the corporation through the votes of the investors he brought to it, it is not necessary to address whether the Respondents’ conduct was oppressive or appropriate remedies. [ 128 ] The application is dismissed. [ 129 ] The parties may speak to costs, if necessary, within 30 day of this decision. Heard on the 2 nd day of April, 2014.

Dated at the City of Edmonton, Alberta this 28 th day of November, 2014. D.R.G. Thomas J.C.Q.B.A. Appearances:

Mr. Jeremiah J. Kowalchuk (Field Law – Alberta) Ms. Krista. R. Chaytor, and Mr. Albert G. Formosa (WeirFoulds LLP - Ontario) for the Applicants – Shefsky and 235 Mr. Samuel M. Robinson, ( Stockwoods LLP - Ontario ) Ms. Charlotte Conlin, ( McMillan LLP - Ontario) Mr. Matthew J. Diskin (Gilbert’s LLP - Ontario) for the Respondents – CGMI, Churchill, Cinq-Mars, Cronin and Tomlinson Ltd. Ms. Annemarie Clarke (Witten LLP - Alberta) For the Respondents Joe Doe 1-50 and ABC Corporation #1-50