Weinrich v Weinrich, 2015 ABQB 813

Court of Queen ’ s Bench of Alberta Citation: Weinrich v Weinrich, 2015 ABQB 813 Date: 20151218 Docket: 1403 16283 Registry: Edmonton Between: Scott Weinrich Plaintiff - and - Robert August Weinrich Defendant ____________________ _________________________________ Reasons for Judgment of the Honourable Mr. Justice R. Paul Belzil _______________________________________________________ The Action [ 1 ] On November 6, 2014, Scott Weinrich (Scott) issued a Statement of Claim against his half brother Robert Weinrich (Robert).

Scott and Robert are 50% shareholders of Weinrich Contracting Ltd. (WCL), whereas Robert is the sole Director. [ 2 ] In brief compass, Scott alleges that Robert has oppressed him and breached fiduciary duties owed to him. [ 3 ] The Statement of Claim seeks the removal of Robert as the Director and seeks leave to commence, on behalf of WCL, a derivative action against him.

[4] To date, Robert has not filed any pleadings in response to the Statement of Claim. The Application [5] On September 28, 2015, counsel for Robert filed an Application seeking to enforce an order of the Court pronounced onNovember 25, 2014 (Order) by way of a Judgment against Scott in the amount of $10,518,430 being the adjusted sale price for Robert’sshares, as determined by an independent valuation. The Application involves the

interpretation of the Order and as well, engages thelimitations of Case Management of a commercial dispute. Factual Background [6] In addition to being co-shareholders in WCL, the parties are also co-shareholders of ESB Inc. (ESB). Weinrich Air Ltd.(WA), is a related company, thus the Order of November 25, 2014 referred to valuations of the three companies. The parties arecompletely estranged and entirely distrust each other. It is common ground that any type of co-management of these companies iscompletely unworkable but there is no common ground as to how they can sever their corporate relationships.

Given the impassebetween the parties, senior managers are operating WCL under Court supervision.

The Decision of Richter v Battle [7] In Richter v Battle, (AB KB), [1996] 2 WWR, 548, McKenzie J, issued an order requiring certain partiesto purchase the shares of another party. [8] The share purchase did not proceed and the aggrieved parties moved for judgment in the amount of $117,500 against thedefaulting party, which application was granted. [9] Robert’s counsel argues that Richter is analogous to the facts before me and while conceding that the decision is not bindingon me, urges me to follow the same reasoning and hold that Scott is liable to Robert, as a result of Scott’s failure to complete the sharepurchase. [10] The Richter decision was not appealed and has never been followed.

It was distinguished by the Alberta Court of Appeal inone decision. [11] There are significant factual differences between the situation in Richter and the factual situation before me. [12] In Richter the vendor of the shares was the oppressed party whereas Scott alleges as potential purchaser, he is the oppressedparty. [13] In Richter the court order created a contract whereas in this factual situation it is Scott’s position that the Order did not create acontract and was not intended to do so. [14] Unlike the situation in Richter, paragraph 9 of the Order expressly stipulates that the parties return to the Court for furtherdirection, if a binding agreement were not reached. [15] In Richter, prior to the sale share being ordered, it was represented that finances would be no problem, whereas in thissituation it was never represented to the Court that Scott had guaranteed financing. [16] I do not accept that the factual situation before me in this case is analogous to the factual situation in Richter or that Richter isauthority for the proposition that it is just and equitable to grant the relief Robert is seeking. [17] Moreover, it is necessary to bear in mind, that in any event, any order granted pursuant to s 242 of the Business CorporationsAct, RSA 2000, c.

B-9 (as am) (BCA) is discretionary. [18] Nonetheless, it is still necessary to determine the effect of the Order to determine if its terms justify the relief Robert isseeking.

What is the Correct Characterization of the Order of November 25, 2014? [19] The Order reads as follows: UPON the application of the Plaintiff for relief pursuant to the Business Corporations Act and other remedies, and UPON having heard representations by counsel for the Plaintiff, counsel for the Defendant, counsel for the Operations Manager and Business Managerof Weinrich Contracting Ltd., and counsel for the Non-Party Respondent, Aero Auction Sales Inc., and UPON having read the Affidavitsfiled in support of, and opposition to, the Plaintiff’s Application, and UPON being advised that the Plaintiff and the Defendant have agreedthat it is in the best interests of Weinrich Contracting Ltd. that a sale of the Defendant’s shares in the corporation be made to the Plaintiff; and UPON being advised that the Plaintiff and the Defendant have agreed to a framework for the purchase of theDefendant’s shares in Weinrich Contracting Ltd. by the Plaintiff, including who to retain to conduct a business valuation, the specific levelof review for the business evaluation, and who to retain to provide tax advice; and UPON being advised that the Plaintiff has agreed toproceed with the purchase of the two 627H Scrapers from Aero Auction Sales Inc. subject to the terms and conditions set out herein; andUPON noting that no determination of the merits of the Plaintiff’s Application have been made, IT IS HEREBY ORDERED THAT: 1.

The Order pronounced by the Honourable Justice Belzil on November 7, 2014, and entered on November 13, 2014 is an Order to

pr e ser v e t he s t a t us q uo pr e - N o v ember 7 , 2 0 1 4 , su b j e c t o nl y t o t he t e r m s set o u t w i t h i n t h a t Or d e r . 2.

W e i n r i ch C o n t r acti n g L t d . ’ s G e n eral M a n a g e r , A n drew K e n t , a n d O p e r a t i o n s M a n a g er, D a v i d Smith, are t o co n t i n u e w i t h t he o p e r ati o n a nd m a n a g e m e n t o f W e i n r i ch C o n tr a c t i ng Lt d . a s t h e y h a d p r i or t o N o v ember 7 , 2 0 14 w i t h o ut i nt e rr u p t i o n or i nte r f e r e n ce from the Plaintiff or the Defendant, su b j ect o nl y t o t he t e r m s o f t he N o v ember 7, 2 0 14 O r d e r . 3.

T he l e g al f e e s o f A n d r ew K e n t a nd D a v i d Smith, t o t he e x t e n t t h a t t h e y r e t a i n e d i n d e p e n d e nt l e g al co u n s el f or t he p u r p o ses o f t h e se p r oc e e di n g s , s h a l l be p ai d by W e i n r i ch C o n t r acti n g L t d . Paragraphs 4 to 6 deal with the purchase of equipment which is not germane to this application. 7.

T he Pl a i ntif f , S c o t t W e i n r i ch, sh al l p u r ch a se t he De f e n d a n t , R o b e r t A u g u st W e i n r i ch ’ s sh a r es in W e i nrich C o n t r acti n g L t d . and the Defendant, Robert August Weinrich, shall purchase the Plaintiff’s shares in ESB Inc. ( t he “ S h a r e S a l e” ) . 8. T he f o ll o w i ng i s ord e r ed i n r es p e c t o f t he S h a r e S a l e: A. The parties shall act in good faith to complete the Share Sale; B .

T he Pl a i ntif f , S c o t t W e i n r i ch ’ s o f f e r t o p u r ch a se t h e D e f e n d a n t , R o b ert A u g u st W e i n r i ch ’ s sh a r e s i n W e i nrich C o nt r acti n g L t d . s h a l l n o t be su b j e c t t o , o r c o n t a i n, a shot g un b u y - se l l p r o v i s i o n ; C .

T h e r esa R e i ch e r t o f D e l o i tt e T o u che T o m atsu L i m i t ed sh al l be r eta i n e d by W e i n r i ch C o n t r acti n g L t d . t o cond u ct an “ E s t i m a t e V a l u a t i on R e p o r t ” , a m i d- l e v el b u s i n e ss v a l u a t i on o f W e i nrich C o n tr a c t i n g L t d . , W e i n r i ch A i r L t d . a n d ES B I n c . (t he “ B us i n e ss V a l u a t i o n ”) ; D .

T he p a r t i es, a n d W e i n r i ch C o nt r a c t i n g L t d., sh al l co o p e r ate f u ll y a n d t o t h e best o f t h ei r ca p a bili t i es t o p r o v i de a l l i n f or m a t i on r e q u ested by M s. R e i ch e r t f or t he p u r p o ses o f t he B us i n e ss V a l u a t i o n ; E . A ny i n f o r m ati o n pro v i d e d t o M s.

R e i ch e r t , i nc l u di ng b u t n o t li m i t ed t o t h o se co n cern i n g t he f i n a n c i al s t atu s , i nc l u di n g as s et a nd e q u i pment li s t s , o f W e i nrich C o n tr a c t i ng Lt d . , W e i nri c h A i r L t d. a n d E S B I n c . must be approved by both the Plaintiff and the Defendant ; F . F e es f o r p r o f e s s i o n al se rv i ces p r o v i d e d by M s. R e i ch e r t sh al l be p ai d by W e i n r i ch C o n t r acti n g L t d . ; G .

T he B us i n e ss V a l u a t i on sh al l i nc l u d e, b u t n o t be r est r i c t ed t o, an o pi n i on a s t o t he v a l ue o f t he sh a r es o f W e i n r i ch C o n t r a c t i ng L t d. a n d ES B I n c . ( t he “ S h a r e V a l u a t i o n ” ) H. T he S h a r e Va l u a t i on sh a l l be f i n a l a n d b i n di n g on t he p a rt i es; I. T he S h a r e Va l u a t i on sh a l l d e t er m i ne t he p u r ch a s e p r i ce f or t he S h a r e s a l e; J.

C ar m en M c N ary o f D e n t o n s C a n a d a LLP sh al l b e r e t a i n e d by W e i nrich C o n tr a c t i ng Lt d . t o a ss i st i n t he s t r u c t uri n g o f t he S h a r e Sa l e in a m a n n e r t h a t w il l m i n i m i z e t he t ax co n s e q u e n ces t o b o t h Sc o t t W ei nrich a n d R o b e r t W e i nri c h ( t he “ T ax A d v i ce” ) ; K. T he p a r t i es, a n d W e i n r i ch C o nt r a c ti n g L t d . , sh al l co o p e r ate f u ll y a n d t o t h e best o f t h ei r ca p a bili t i es t o p r o v i de a l l i n f or m a t i on r e q u ested by M r .

M c N ary f o r t he p u r p o ses o f t he T ax A d v i ce, and this information must be approved by both the Plaintiff and the Defendant; L. N o o t h e r pr o f ess i o n al a d v i sor sh al l be r e t a i n e d f o r t he p u r p o ses o f t he T ax A d v i ce and t he p a rt i es a r e bou n d by M r . M c N ar y ’ s r ec o mm e n d a t i o n s i n t h i s r e g ar d ; M. F e es f o r p r o f e s s i o n al se rv i ces p r o v i d e d by M r . M c N ary sh al l be p ai d by W e i nrich C o n tr a c t i ng Lt d . ; a n d N .

T he t e rm s f o r t he comp l e t i on o f t he S h a r e S a l e, i n c l u di ng p a y m e n t t i m e li n e s sh al l be b a sed on c o mm e r c i a ll y r e a so n a bl e t e rm s . 9. I f t he p a r t i es h a v e n o t e nte r ed i nto a b i n di ng c o nt r a c t f o r t he S h a r e S a l e, on or b e f o r e F e bruary 2 8 , 2 0 1 5 , t he p ar t i es sh al l r et u r n b e f ore Justice B e l z i l f o r f u r t h e r d i r ecti o n. 10. T he p a r t i es h a v e l e a v e t o a p p e ar b e f o r e Jus t i ce B e l z i l on su b s t a n t i v e m at t ers on 5 d a y s’ n o t i ce. 11.

C osts o f t h i s A p pli cati o n are r es e r v e d . 12. T h i s O r d e r m ay be e x e c uted i n cou n t e r p a r t a n d b y f a c s i m il e. [ 20 ] Counsel for Robert argues that the Order creates a binding contract, which obligated Scott to purchase Robert’s shares, such that Scott’s failure to complete the purchase renders him liable to pay to Robert the adjusted sale price of his shares of approximately $10.5 million. [ 21 ] Counsel for Scott argues that the Order did not create a binding contract but rather created a process for the purchase of

Robert’s shares by Scott which process could not be completed because Scott was unable to obtain financing. It necessarily follows, according to counsel for Scott, that Scott is not liable to Robert as alleged. [ 22 ] The background leading up to the signing of the Order is significant as well as the fact that it must be read in its entirety. [ 23 ] As noted, Scott issued a Statement of Claim against Robert on November 6, 2014.

Shortly thereafter, counsel for Scott and the original counsel for Robert, appeared before me in my capacity as a Commercial Duty Judge and represented that both counsel saw considerable merit in avoiding protracted litigation. They requested time to draft an order which would allow for Scott’s purchase of Robert’s shares in WCL, Robert’s purchase of Scott’s shares in ESB and as well deal with WA. [ 24 ] I agreed to this request and on November 25, 2014, counsel presented me with an order they drafted, which I signed. [ 25 ] Ms.

Riechert of Deloitte Touche prepared the mid-level business valuations for WCL, ESB and WA. [ 26 ] Scott was unable to arrange financing, thus the share purchase/sale was not completed. [ 27 ] Although not titled a “Consent Order”, in substance the Order is a Consent Order, as it was not drafted by me following a contested hearing but, rather, the Order was drafted entirely by counsel. [ 28 ] It is extremely significant that the

Preamble of the Order contains the following statement: UPON noting that no determination of the merits of the Plaintiff’s Application have [sic] been made. [ 29 ] This statement in the

Preamble, clearly reflects that the allegations in the Statement of Claim were not admitted by Robert, leaving them to be litigated if the share sale/purchase were not completed. [ 30 ] In other words, the parties never intended that the Order would constitute a determination of the merits of the allegations against Robert in the Statement of Claim. [ 31 ] Paragraph 9 of the Order, clearly stipulates that if the parties had not entered into a binding contract for the share sale by February 28, 2015, they were to return before me for further direction. [ 32 ] In my view, paragraph 9 must be interpreted to mean that the Order did not create a binding contract, otherwise there would be no need for paragraph 9 to be included. [ 33 ] Counsel for Robert argues, that the Order does not contain a “subject to” financing clause.

In response, counsel for Scott argues that paragraph 8N incorporates the phrase “commercially reasonable terms” which must mean subject to financing. [ 34 ] From the outset, counsel for Scott made it clear that he required financing to complete the transactions and never resiled from that position.

In this context, “commercially reasonable terms” must mean, subject to financing. [ 35 ] It is noteworthy, that the Order contains no provisions outlining remedies available to the parties in the event of non- completion of the transactions and, in particular, nothing in the Order stipulates that Scott would be liable to Robert, if the transactions were not completed. [ 36 ] At no time, prior to signing the Order, was a I advised by Robert’s then counsel that Robert was maintaining that the Order created a liability against Scott in the event that he failed to complete the transactions. [ 37 ] I have concluded, that the Order created a mutually beneficial process whereby Scott would purchase Robert’s share in WCL and Robert would purchase Scott’s shares in ESB, but did not create a binding agreement obligating them to complete the transactions.

At most, it was an agreement to agree. [ 38 ] Moreover, given that the terms of the Order were drafted by counsel following negotiations between them, which I was not privy to, I also conclude that the Order was intended to be neutral between the parties. [ 39 ] As noted, the

Preamble to the Order expressly stated that the Order was not a determination of the merits of the allegations in the Statement of Claim. [ 40 ] Furthermore, if the parties agreed that the Order did not constitute a determination of the issues between them, it would be incongruous in the extreme to accept that the Order could or should be interpreted to mean that Robert could utilize it to advance a claim against Scott. Yet in substance, Robert’s application is an application for

Summary Judgment, based on an alleged breach of the Order by Scott. [ 41 ] The incongruity of this position is even more pronounced when one considers that to date Robert has not filed any pleadings and no findings of fact or credibility have been made in the action. [ 42 ] It is also noteworthy, that paragraph 8 J expressly provides for tax counsel to structure the transaction to minimize tax consequences for both parties. [ 43 ] In addition, paragraph 8 K expressly requires both parties to provide information to be disclosed with their joint approval. [ 44 ] As well, the Order expressly provides that WCL would pay valuation and tax advice expenses, which provision benefits both parties as 50-50 shareholders. [ 45 ] These provisions bear all of the hallmarks of a mutually beneficial order, not a one sided remedial order.

[ 46 ] If Robert’s argument were accepted, the result would be that in signing the Order, through counsel, Scott exposed himself to an enormous liability, whereas Robert assumed no liability, given that he would either be paid for his shares in accordance with the independent share valuation or his shares would be valued in the litigation. [ 47 ] I do accept that the Order obligated both parties to act in good faith, abide by the independent business valuations and waive any shotgun style share sale/purchase provisions. [ 48 ] However, I do not accept that the parties ever contemplated or agreed to additional obligations being imposed upon them, including an alleged obligation on Scott to purchase Robert’s shares if he could not obtain proper financing. [ 49 ] The Order was a laudable attempt to create a cost efficient and timely process for severing the parties’ corporate relationships but, unfortunately, the process did not produce the desired results.

Future Proceedings [ 50 ] Given that the process for severing of the corporate relationships of the parties did not produce the desired results, the inability of the parties to co-manage remains unresolved. [ 51 ] Counsel for Scott argues that as Case Management Judge, I should impose a revised share valuation on the parties or direct a new share valuation.

In the alternative, she argues, pursuant to s 242 of the BCA , I should order a third party sale or liquidation of the companies. [ 52 ] I do not accept that as Case Management Judge, I have the authority to make these alternative orders, absent the consent of the parties.

Moreover, as Case Management Judge, I have no authority to make findings of fact or credibility absent the consent of the parties; nor can I determine their substantive rights. [ 53 ] Given that the Order did not result in the resolution of the dispute between Scott and Robert, the parties must proceed with this litigation in the normal course. [ 54 ] As Case Management Judge, I will provide assistance as required, but expect that counsel will expedite this litigation in accordance with the Alberta Rules of Court . Conclusion and Order [ 55 ] Robert’s application for Judgment against Scott is dismissed.

Scott’s request for alternative orders is dismissed. Counsel have leave to appear before me for further directions. Costs may be spoken to. Heard on the 8 th day of December, 2015. Dated at the City of Edmonton, Alberta this 18 th day of December, 2015. R. Paul Belzil J.C.Q.B.A. Appearances: Michele A. Wolowidnyk Weir Bowen LLP for the Plaintiff William B. Hembroff Bennett Jones LLP for the Defendant