Commercial Construction Supply Ltd v Ghost Riders Farm Inc, 2016 ABQB 165

Court of Queen ’ s Bench of Alberta Citation: Commercial Construction Supply Ltd v Ghost Riders Farm Inc, 2016 ABQB 165 Date: 20160318 Docket: 1203 14269 Registry: Edmonton Between: Commercial Construction Supply Ltd. Plaintiff - and - Ghost Riders Farm Inc., Rico D'Elia, Jenny D'Elia, ABBA 96 Inc., Carlo D'Elia, 819542 Alberta Inc. and Commercial Construction Supply (Edmonton) Ltd. Defendants - and – Ghost Riders Farm Inc. Plaintiff by Counterclaim - and – Commercial Construction Supply Ltd., Boyd Distributors Inc., Dennis Bigham, Mardy Edward Rust, James Gerard Doyle and Nina Halliwell Defendants by Counterclaim _______________________________________________________

_______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice K.G. Nielsen _______________________________________________________ I. Introduction [ 1 ] Boyd Distributors Inc. (Boyd), James Gerard Doyle (Doyle) and Nina Halliwell (Halliwell) (collectively, the Applicants) apply for an order summarily dismissing the claims against them in the within Amended Counterclaim. The action and counterclaim relate to a failed business venture undertaken in Edmonton, Alberta by Commercial Construction Supply (Edmonton) Ltd. (CCSE).

In addition to this action and counterclaim, five other actions have been commenced arising out of the failure of CCSE. CCSE is also now involved in bankruptcy proceedings. I am the assigned Case Manager for all proceedings involving CCSE. II. Background [ 2 ] Commercial Construction Supply Ltd. (CCS) is a company incorporated pursuant to the laws of British Columbia and registered in Alberta, which carries on business as a supplier of building materials in British Columbia and Alberta. [ 3 ] In April 2010, the shareholders in CCS were Boyd, 0719322 B.C. Ltd. and Bricon Holdings Ltd.

The shareholders in Boyd were Bricon Holdings Ltd., 0719322 B.C. Ltd. and Kel-Chris Holdings Ltd. Bricon Holdings Ltd. is a company controlled by Doyle, 0719322 B.C. Ltd. is a company controlled by Halliwell, and Kel-Chris Holdings Ltd. is a company controlled by Mardy Edward Rust (Rust). [ 4 ] At all material times, the directors of CCS were Doyle and Rust, Halliwell was the president and general manager of CCS and Rust was the secretary-treasurer of CCS. [ 5 ] Comwest Cartage Corp. (Comwest) is a company incorporated pursuant to the laws of British Columbia and is extra provincially registered in Alberta.

It is a subsidiary or affiliated company of CCS. [ 6 ] Dennis Bigham (Bigham) was not a director or officer or involved in the shareholdings of CCS at any material time. He was, however, described as the “Representative” for CCS in certain agreements ultimately entered into in the formation of CCSE and has been variously described in these proceedings as an advisor to the management committee of CCS and as the operating mind of some of the entities involved in this group of companies. Bigham and Halliwell are husband and wife. [ 7 ] Rico D’Elia (D’Elia) is involved in a number of companies in Alberta.

Insulation & More Building Materials Ltd. (Insulation & More) carried on a building material supply business in and around Edmonton, Alberta in April 2010. ABBA 96 Inc. (ABBA) carries on business as a drywall contractor in the Province of Alberta. Ghost Riders Farm Inc. (GFI) is a company incorporated in and carrying on business in Alberta.

D’Elia is a shareholder and director of Insulation & More, ABBA and GFI. [ 8 ] Sometime prior to April 1, 2010, negotiations were entered into between CCS and Insulation & More with respect to the creation of an entity to carry on business as a supplier of building materials in northern Alberta. CCSE was the entity created. CCS and GFI each held 50% of the shares issued in CCSE.

At all material times, Rust was the sole Director. [ 9 ] Upon the creation of CCSE, several agreements were entered into with respect to the creation and operation of CCSE. [ 10 ] Effective April 1, 2010, a Purchase Agreement (the Purchase Agreement) was executed between Insulation & More, CCSE, Comwest, GFI and CCS. Pursuant to the Purchase Agreement, Insulation & More sold certain property valued at $852,000 to Comwest and CCSE. The purchase price was allocated as follows: (

a) Comwest was to pay $64,000 to GFI for the purchase of two vehicles; (

b) The shareholders loan account of GFI was to be credited the sum of $288,000; and (

c) CCSE was to pay the balance of $500,000 to Insulation & More in six equal monthly payments of $83,333.33 commencing June 15, 2010. [ 11 ] The amount owing of $500,000 to Insulation & More by CCSE was guaranteed by CCS. [ 12 ] The Purchase Agreement indicates that Insulation & More was indebted to GFI and, therefore, a portion of the proceeds of the sale of the property in question was assigned to GFI. CCSE executed a Promissory Note dated April 1, 2010 (the Promissory Note) to GFI pursuant to which the sum of $500,000 would be paid in six equal monthly installments of $83,333.33 commencing June 15, 2010.

The Promissory Note was executed on behalf of CCSE by Halliwell. [ 13 ] GFI alleges that at some point in time, without its knowledge or consent, the loan pursuant to the Promissory Note was

converted to a $500,000 shareholders loan by GFI to CCSE. [ 14 ] None of the $500,000 was ever paid to Insulation & More or GFI. [ 15 ] The Purchase Agreement also provided that CCS would pay to CCSE the sum of $288,000 as a shareholders loan. [ 16 ] The Purchase Agreement was signed by D’Elia on behalf of Insulation & More and GFI and by Halliwell on behalf of CCS, Comwest and CCSE. [ 17 ] Effective April 1, 2010 a Supply and Distributorship Agreement (the Distributorship Agreement) was executed between CCS and CCSE.

Pursuant to the Distributorship Agreement, CCS agreed to supply and sell to CCSE certain products as identified in the Distributorship Agreement. CCSE had the right to distribute the products in a territory in northern Alberta commencing just north of Red Deer but excluding Red Deer, Ft. McMurray and Grande Prairie. The Distributorship Agreement provided that CCS would “not sell or otherwise supply or distribute any Products to other construction supply outlets competing directly with” CCSE in the territory agreed to.

The Distributorship Agreement also provided, generally for the obligations of both CCS and CCSE and the terms of their relationship. The Distributorship Agreement was signed by Halliwell on behalf of both CCS and CCSE. [ 18 ] Also effective April 1, 2010, a Shareholders’ Agreement (the Shareholders’ Agreement) was executed between GFI, CCS and CCSE. The Shareholders’ Agreement, generally, governed the operation of CCSE and the relationship between CCS and GFI.

The Shareholders’ Agreement provided that for the purposes of the Shareholders’ Agreement the “Representative” of GFI was D’Elia and of CCS was Bigham. [ 19 ] The Shareholders’ Agreement contained a non-competition clause which provided that so long as the shareholders owned any shares in CCSE and for a period of time thereafter, the shareholders “either individually or in partnership, whether by way of trust, agency or otherwise, jointly or in connection with any person or persons, including without limitation any individual, firm, association, syndicate, company, corporation or other business enterprise, as principal, agent, shareholder, director, officer, employee or in any manner whatsoever” would not be engaged in a business that was similar to or competitive with any business carried on by CCSE within a radius of 50 miles of any place CCSE carried on business. [ 20 ] The Shareholders’ Agreement was signed by D’Elia on behalf of GFI and by Halliwell on behalf of CCS and CCSE. [ 21 ] Boyd has since approximately 1999 carried on business in British Columbia, Alberta and Saskatchewan as a wholesale building supply distributor to retail building stores and selected applicators.

In approximately March 2011, Boyd opened an Edmonton facility (Boyd Edmonton). [ 22 ] Doyle has deposed that he founded Boyd and worked at Boyd from September of 1999 to June 30, 2014. Doyle states that Boyd Edmonton was operated as a wholesale distributor and has not operated as a retailer for contractor and cash sales, Boyd Edmonton was not established to compete with CCSE, and Boyd Edmonton has not and did not compete with CCSE. [ 23 ] The Business Marketing Plan for Boyd Edmonton prepared by Doyle states that Boyd Edmonton has “the principle [sic] purpose of being a wholesale building material distributor”.

D’Elia, however, has deposed that the website for Boyd provides that Boyd supplies “a wide variety of customers starting with the individual contractor up to large lumber yards, and everything in between”. [ 24 ] Halliwell has deposed that she was not involved in the discussions and negotiations that led to the incorporation of CCSE and was not involved in the decision to open Boyd Edmonton, having become a director of Boyd only after that decision had been made. [ 25 ] None of the Applicants are party to any agreement with GFI. [ 26 ] D’Elia has further deposed that Boyd Edmonton did in fact compete with CCSE.

He has identified eight customers on a customer list of Boyd Edmonton as of August 31, 2012 who were also customers of CCSE. Halliwell has provided evidence on information and belief as to the dealings between Boyd Edmonton and the eight customers.

No one has provided sworn evidence on the basis of personal knowledge as to these relationships. [ 27 ] Carlo D’Elia, D’Elia’s son, who was involved in the management of CCSE has deposed that with respect to the sale of foam insulation, a few months after Boyd Edmonton was formed, customers who had previously purchased foam insulation from CCSE were now purchasing it from Boyd Edmonton. [ 28 ] CCSE operated in Edmonton from April 2010 to mid to late 2012. Issues arose between CCS and GFI, and the principals thereof, and the litigation referred to earlier in these Reasons for Judgment has ensued.

GFI has alleged, inter alia , that CCS supplied material to Boyd Edmonton to directly compete with CCSE, that CCS failed to provide proper financial statements for CCSE and that CCS failed to properly account to CCSE for product rebates received. [ 29 ] Pursuant to the Distributorship Agreement, CCS provided accounting functions for CCSE during the period of time it operated. Halliwell was involved in much of the accounting work provided by CCS to CCSE.

During this period of time, Halliwell also performed accounting work for Boyd and CCS. [ 30 ] As at the date of this Application, no questioning has taken place of Halliwell, Doyle or the officer of Boyd with respect to issues raised in the Amended Counterclaim. III. Positions of the Parties [ 31 ] The Applicants argue that there is no merit to the allegations in the Amended Counterclaim against them. GFI has advanced direct claims for breach of contract against CCS, and claims of oppression and breach of duty against Rust, the director of CCSE. The

Applicants argue that GFI’s claims against them are based on a series of alleged conspiracies which are founded on the same factual underpinning and conduct, and are for the same losses it claims in its direct claims against CCS and Rust. GFI had no contracts with any of the Applicants and none of the Applicants owed any duties to GFI. There is no evidence of any conspiracy. The likelihood of success by the Applicants in this matter is very high and, therefore, the claims against them should be dismissed on a

summary basis. [ 32 ] GFI argues that there is merit to the claims of GFI advanced against the Applicants in the Amended Counterclaim and that those claims require a trial. It would not be fair and just to GFI to summarily dismiss its claims against the Applicants.

GFI argues that given the relationships of Halliwell and Doyle with the other Defendants by Counterclaim, and given their involvement in the various corporations involved in the matters in issue, there is a basis for inferring that agreements must have been made between the Defendants by Counterclaim which were detrimental to CCSE and, by extension, detrimental to GFI. IV. Issue [ 33 ] The Court must determine whether the Applicants are entitled to an order summarily dismissing the claims in the Amended Counterclaim against them. V.

Amended Counterclaim [ 34 ] The Amended Counterclaim includes the following claims as against the Applicants: 19. In the spring of 2011, and in breach of the Shareholders’ Agreement and the Supply & Distributorship Agreement, CCS and its Directors, Boyd Distributors and its Directors, Rust and Bigham conspired to establish Boyd Distributors at a facility in Edmonton and since that time Boyd Distributors has operated a building materials supply business in and around the City of Edmonton in direct competition with CCSE. ... 22.

GFI states that CCS and its principals Bigham, Rust and Boyle [ sic ] have failed to work together with GFI to develop and grow the business of CCSE but have worked and conspired together to further the interests of Boyd Distributors and CCS at the expense of CCSE and GFI and have failed, neglected or refused to operate in the best interest of CCSE and GFI. ... 24. In addition, because of the nature of the shareholdings of CCSE, Rust also owed a fiduciary duty to the Shareholders as a group, including GFI, to act honestly and in good faith.

Rust has breached that fiduciary duty by making decisions on behalf of CCSE and conspiring with Bigham, the Directors of Boyd Distributors and CCS to make decisions that benefited Boyd Distributors and CCS at the expense of CCSE and the Shareholders of CCSE and more particularly, GFI. ... 26. Further, or in the alternative, the Defendants by Counterclaim conspired to defraud, withhold, misuse, misappropriate, convert or divert funds and profits that were made by CCSE so as to ensure that GFI would never receive any profits in CCSE. ... 29.

The Defendants by Counterclaim conspired to breach the Purchase Agreement, the Supply & Distributorship Agreement and the Shareholders’ Agreement for the predominant purpose of injuring the Plaintiffs [ sic ] by Counterclaim, and further knowing and fully intending that these actions would cause damage to the Plaintiffs [ sic ] by Counterclaim. 30.

At all material times the Defendants by Counterclaim conspired to destroy the business of CCSE by setting up a competitive business, Boyd Distributors, by refusing to provide the financial records of CCSE to GFI and by controlling CCSE with the appointment of Rust as sole Director of CCSE all of which was done for the predominant purpose of: (

a) Causing CCSE to be unable to fulfill its obligations to GFI pursuant to the terms of the Promissory Note; (

b) Causing CCSE to be unable to fulfill its obligations to Insulation & More pursuant to the terms of the Purchase Agreement; and (

c) Preventing CCSE from being a profitable company and thus causing a decrease in the value of the shares of GFI. 31. CCS and its Directors and Bigham have knowingly conspired to direct or allow CCS to breach the Supply & Distributorship Agreement by not only selling or otherwise distributing products to Boyd Distributors but in establishing or assisting to establish Boyd Distributors and its business in the City of Edmonton. VI. Rules of Court [ 35 ] Rule 7.3 of the Alberta Rules of Court , Alta Reg 124/2010 provides: 7.3(1) A party may apply to the Court for

summary judgment in respect of all or part of a claim on one or more of the following grounds:

(

a) there is no defence to a claim or part of it; (

b) there is no merit to a claim or part of it; (

c) the only real issue is the amount to be awarded.

(2) The application must be supported by an affidavit swearing positively that one or more of the grounds described in subrule (1) havebeen met or by other evidence to the effect that the grounds have been met.

(3) If the application is successful the Court may, with respect to all or part of a claim, and whether or not the claim is for a single andundivided debt, do one or more of the following: (

a) dismiss one or more claims in the action or give judgment for or in respect of all or part of the claim or for a lesser amount; (

b) if the only real issue to be tried is the amount of the award, determine the amount or refer the amount for determination by a referee; (

c) if judgment is given for part of a claim, refer the balance of the claim to trial or for determination by a referee, as the circumstancesrequire. VII. Test for

Summary Judgment [36] The Supreme Court of Canada recently considered the matter of

summary judgment in the context of the Ontario Rules ofCourt in Hryniak v Mauldin, 2014 SCC 7, [2014] 1 SCR 87. The Court held that

summary judgment rules must be interpreted broadly,favouring proportionality and fair access to the affordable, timely and just adjudication of claims.

Summary judgment is appropriatewhere there is no genuine issue to be tried. The Court outlined where no genuine issue exists: 49 There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on amotion for

summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2)allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a justresult. [37] Our Court of Appeal has considered the matter of

summary judgment since the decision in Hryniak v Mauldin on severaloccasions. [38] In Access Mortgage Corporation

(2004) Ltd v Arres Capital Inc, 2014 ABCA 280, 584 AR 68 the Court of Appeal stated: 45 The principles which govern

summary judgment in Alberta after November 1, 2010 are distilled in Beier v. Proper CatConstruction, 2013 ABQB 351 , 564 A.R. 357, 373-78 (Q.B. 2013): ... [61] Rule 7.3 of the new Alberta Rules of Court allows a court to grant

summary judgment to a moving party if the nonmoving party'sposition is without merit. A party's position is without merit if the facts and law make the moving party's position unassailable andentitle it to the relief it seeks. A party's position is unassailable if it is so compelling that the likelihood of success is very high. ... [63] First, the moving party is entitled to

summary judgment if, as a plaintiff, it presents uncontroverted facts and law which entitle it tojudgment against the nonmoving party. The court must be satisfied that the plaintiff has presented uncontested facts which establish allthe essential elements of the action. ... ... 46 O'Hanlon Paving Ltd. v. Serengetti Developments Ltd., 2013 ABQB 428 , 91 Alta. L.R. (5th) 1, 16 (Q.B. 2013) explainswhy

summary judgment is a valuable option in the dispute resolution process: A

summary judgment protocol recognizes that it is not unjust to deny a plaintiff with a meritless claim or a defendant with a meritlessdefence access to all stages of the litigation process. A litigant whose claim or defence is so weak that its chance of succeeding is verylow, cannot reasonably expect the state to make available all parts of a publicly funded judicial process. ... Legislators in the United Kingdom, Canada and United States have introduced

summary judgment into their litigation model to ensurethat dispute resolution takes place at the earliest point in the litigation continuum where it is just to do so. A

summary judgment protocolpromotes expeditious dispute resolution and efficient use of private and public legal resources. [39] In 776826 Alberta Ltd v Ostrowercha, 2015 ABCA 49, 593 AR 391 the Court of Appeal stated: 9 The governing test for

summary judgment in Alberta finds expression in Windsor v CPR, 2014 ABCA 108 at para 13, 572 AR 317;Sherwood Steel Ltd v Odyssey Construction Inc., 2014 ABCA 320, at paras 7 to 8, 59 CPC (7th) 22; Maxwell v Wal-Mart, 2014 ABCA383 at para 12; W.P. and cases mentioned therein, inter alia. From the process perspective,

summary judgment can be given if adisposition that is fair and just to both parties can be made on the existing record by using that alternative method for adjudication:Hryniak v Mauldin, 2014 SCC 7, [2014] 1 SCR 87. 10 From the substantive perspective,

summary judgment can be granted if, in light of what that fair and just process reveals, there is no

merit to the claim.

No "merit" means that, even assuming the accuracy of the position of the non-moving party as to any material andpotentially decisive matters -- matters which would usually require ordinary forensic testing through a trial procedure with viva voceevidence and which could not be resolved through the fair and just alternative -- the non-moving party's position viewed in the round hasno merit in law or in fact. 11 Stated another way, in order for the non-moving party's case to have merit, there must be a genuine issue of a potentially decisivematerial fact in the case which cannot be summarily found against the non-moving party on the record revealed by the "fair and justprocess".

The mere assertion of a position by the non-moving party in a pleading or otherwise, or the mere hope of the non-moving partythat something will turn up at a trial, does not suffice.

The key is whether the circumstances require a [sic] viva voce evidence in order toproperly resolve the case: see Canada v Lameman, 2008 SCC 14 at paras 10 to 11, [2008] 1 SCR 372. 12 The concept of "merit" in this respect is to be distinguished from the test for striking out pleadings under Rule 3.68 which involvesdeciding "whether there is any reasonable prospect that the claim will succeed, erring on the side of generosity in permitting novelclaims to proceed.": compare Ernst v Alberta (Energy Resources Conservation Board), 2014 ABCA 285 at paras 13 to 15, 85 CELR(3d) 39, under motion [2014] SCCA No 497 (QL). 13 As to the substantive aspect of the test, then, this Court has also put the test for

summary dismissal into the following terms inW.P., at para. 26:

Summary judgment is therefore no longer to be denied solely on the basis that the evidence discloses a triable issue. The question iswhether there is in fact any issue of "merit" that genuinely requires a trial, or conversely whether the claim or defence is so compellingthat the likelihood it will succeed is very high such that it should be determined summarily: Windsor at para 16; Beier at paras 56, 59-68and 70. [40] Therefore, if a judge on a

summary judgment application can make the necessary findings of fact, is able to apply the law tothe facts and the process is proportionate, more expeditious and less expensive than a trial,

summary judgment is appropriate. If a fairand just adjudication can be made in determining whether a claim has merit, it is appropriate for a court to consider

summary judgment.A party’s position is without merit if the facts and law make the moving party’s position unassailable. A party’s position is unassailableif it is so compelling that the likelihood of success is very high. The key is whether the circumstances require viva voce evidence in orderto properly resolve the case. [41] Where the ultimate outcome of a case may depend on the

interpretation of some document, the test for

summary judgment iswhether the issue of law can fairly be decided on the record before the court. Unsettled or complex legal issues and those intertwinedwith the facts can necessitate a full trial to provide a proper foundation for the decision: Amack v Wishewan, 2015 ABCA 147 at para35, 24 Alta LR (6th) 44, Tottrup v Clearwater (Municipal District No 99), 2006 ABCA 380 at para 11, 401 AR 88. Contractualinterpretation involves issues of mixed fact and law, as the court must apply the principles of contractual

interpretation to the words ofthe written contract, considered in light of the factual matrix of the contract: Sattva Capital Corp v Creston Moly Corp, 2014 SCC 53,[2014] 2 SCR 633. VIII. Analysis [42] The starting point for a consideration of the tort of conspiracy is the Supreme Court of Canada decision in Canada CementLaFarge Ltd v British Columbia Lightweight Aggregate Ltd, (SCC), [1983] 1 SCR 452, 47 NR 191.

At pages 471 and472, Estey J. for the Court commented: Although the law concerning the scope of the tort of conspiracy is far from clear, I am of the opinion that whereas the law of tort does notpermit an action against an individual defendant who has caused injury to the plaintiff, the law of torts does recognize a claim againstthem in combination as the tort of conspiracy if: (1) whether the means used by the defendants are lawful or unlawful, the predominant purpose of the defendants’ conduct is to causeinjury to the plaintiff; or, (2) where the conduct of the defendants is unlawful, the conduct is directed towards the plaintiff (alone or together with others), and thedefendants should know in the circumstances that injury to the plaintiff is likely to and does result.

In situation (2) it is not necessary that the predominant purpose of the defendants’ conduct be to cause injury to the plaintiff but, in theprevailing circumstances, it must be a constructive intent derived from the fact that the defendants should have known that injury to theplaintiff would ensue.

In both situations, however, there must be actual damage suffered by the plaintiff. [43] Our Court of Appeal recently had occasion to consider the tort of conspiracy in Mraiche Investment Corp v McLennan RossLLP, 2012 ABCA 95, 524 AR 151: 40 It is important to read Lafarge accurately as to what constitutes this unusual form of economic tort.

In Can-Dive Services Ltd. v.Pacific Coast Energy Corp. (1993) (BC CA), 96 BCLR (2d) 156, 26 CPC (3d) 395 (CA), McEachern CJBC wrote: 5 Accordingly, the following elements must be proved: 1. an agreement between two or more persons; 2. concerted action taken pursuant to the agreement; 3. (

i) if the action is lawful, there must be evidence that the conspirators intended to cause damage to the plaintiff;

(ii) if the action is unlawful, there must at least be evidence that the conspirators knew or ought to have known that their action would injure the plaintiff (i.e., constructive intent); 4. actual damage suffered by the plaintiff. ... 42 It is clear, as noted in Capital Estate Planning Corporation v. Lynch , 2011 ABCA 224 , 510 AR 244 that direct evidence of conspiracy will not be the usual case: 81 Capital Estate correctly pointed out that direct evidence is rarely available to prove the essential agreement between the parties, so that resort must be had to circumstantial evidence.

However, the evidentiary difficulty faced by the appellant does not relieve it of adducing at least some evidence from which it may be inferred that there was an intentional participation by the parties with a view to the furtherance of a common design. Here, there is none. 43 So the question on a

summary judgment motion is whether there is any triable case of evidence on all of the essential ingredients of the conspiracy tort. It is not enough that there is some evidence of some parts of the tort if there is no evidence of any one or more essential ingredients. What is important in the present context is the existence of an actual agreement.

The artificial imposition of a deemed agreement arising from a purely constructively determined 'ought to know' state of mind would make this tort so elastic as to make it mere negligence without proximity, privity, or fiduciary duty. ... [ 44 ] The Court of Appeal in Mraiche made it clear that there must be evidence on each of the essential elements of the tort of conspiracy. If there is no evidence on any one or more of the essential elements, the claim will fail. [ 45 ] The Applicants argue that there is no evidence on any of the elements.

They submit that there is no evidence that: there was an agreement between two or more persons, action was taken pursuant to that agreement, the action taken was unlawful or CCSE or GFI suffered any damages. As is evident from the extensive background set out in these Reasons for Judgment there are complicated inter- relationships both on a corporate and personal level involving the Defendants by Counterclaim. Rust, Doyle and Halliwell all played various roles in the management of CCS and Boyd, and their respective shareholders.

The involvement of Doyle as a director and Halliwell as the president and general manager of CCS leads to a strong inference that they must have known of the involvement of CCS in CCSE and the terms of the various agreements entered into upon the creation of CCSE. It is noteworthy that Halliwell signed the Purchase Agreement on behalf of CCSE, Comwest and CCS, the Promissory Note on behalf of CCSE, the Distributorship Agreement on behalf of both CCS and CCSE and the Shareholders’ Agreement on behalf of CCS and CCSE.

She must be taken to know the terms of those various documents and the obligations of CCS pursuant to same. [ 46 ] While Boyd is, obviously, a separate corporate entity from CCS, the principals of the shareholders in Boyd, namely, Doyle, Halliwell and Rust, were all also involved in CCS in one capacity or another.

In my view, therefore, Boyd must be impressed with the knowledge of Doyle, Halliwell and Rust to the extent of the obligations of CCS and the rights of CCSE and GFI pursuant to the various agreements executed. [ 47 ] The British Columbia Court of Appeal in Bank of Montreal v Tortora , 2010 BCCA 139 , 287 BCAC 14 rejected a “third category of conspirator”, namely someone who is drawn into the tort of conspiracy because of his or her familial or business relationship with another conspirator.

In my view, based on the evidence on this Application, it could not be said that either Doyle or Halliwell is drawn in simply because of a familial or business relationship. Both were extensively involved in the operation and management of CCS and the shareholders of CCS and Boyd. Given this involvement, there is a basis upon which there could be an ultimate finding that there was an agreement to act to the detriment of CCSE. As was pointed out in Capital Estate Planning Corporation v Lynch , direct evidence is rarely available to prove the essential conspiratorial agreement between the parties.

Therefore, the plaintiff in such a case must resort to circumstantial evidence. Given the relationships between the parties as outlined herein, in my view, there is some basis for inferring that an intentional participation by the parties existed for the “furtherance of a common design”.

The common design alleged is the financial enhancement of Boyd through Boyd Edmonton to the detriment of CCSE and by extension GFI. [ 48 ] It is clear that there has been a falling out between the principals of the “CCS group” and the principals of the “GFI group” and that there is a significant amount of mistrust between these individuals. It is impossible at this stage to say when the unravelling of these relationships started. It may be, however, that it was fairly early on in the relationship and that this had an impact on how the parties dealt with each other.

Ultimately, there could be a finding that this led to the Defendants by Counterclaim taking steps which were detrimental to CCSE and GFI and which form the basis of a claim in the tort of conspiracy. [ 49 ] The Applicants also argue that the claim of GFI is, essentially, the claim of a shareholder in CCSE which is precluded by the rule in Foss v Harbottle (1843), 2 Hare 461, 67 ER 189 . [ 50 ] I do not see how the claim of GFI is precluded by the rule in Foss v Harbottle . GFI has alleged damages that are separate and apart from any damages claimed by CCSE. In particular, GFI held the Promissory Note.

On its face, GFI has a claim against CCSE for the amount of the Promissory Note and under the terms of the Purchase Agreement has a claim pursuant to the guarantee provided by CCS. I appreciate that there is an issue whether the debt pursuant to the Promissory Note was properly converted to a shareholders loan by GFI to CCSE. D’Elia deposes that such conversion was done without his knowledge or consent.

If, ultimately, GFI is successful in its arguments in this regard, then the claim of GFI is separate and distinct from any claim it has as a shareholder in CCSE. [ 51 ] The Applicants also argue that GFI has suffered no direct loss. Again, if GFI is successful in its claims, particularly its claim pursuant to the Promissory Note, then it will have proven that it has suffered actual damage. [ 52 ] The Applicants are only entitled to an order dismissing the Amended Counterclaim against them if their position is “unassailable”.

That is, if the position of the Applicants is so compelling that the likelihood of success ultimately is very high. I acknowledge that claims of the tort of conspiracy are often complicated and difficult to prove. Having said that, there have, nonetheless, been cases in which such claims have been successful. While the Applicants have raised several issues with the claims being advanced

against the Applicants in the Amended Counterclaim, I am unable to say that the issues which they have raised are so compelling such that the likelihood is “very high” that the Applicants will ultimately successfully defend the claims against them in this matter. [ 53 ] At this stage, I do not find that it is possible to make the necessary findings of fact and to apply the law to those facts so as to grant the Applicants an order summarily dismissing the Amended Counterclaim as against them. In my view, this is a situation in which viva voce evidence is required to properly resolve the case.

Further, given the stage of the proceedings in the Amended Counterclaim, I am not satisfied that it is fair and just to GFI to grant the order sought. While the litigation is extensive and numerous steps have been taken, including many in the case management process, the evidence before me is that there has been no questioning of Doyle, Halliwell or the officer of Boyd in respect of the allegations in the Amended Counterclaim. In my view it is, therefore, inappropriate to summarily dismiss these claims. IX.

Conclusion [ 54 ] It would not be fair and just to grant the order sought by the Applicants dismissing the Amended Counterclaim against them. It cannot be said that the Applicants’ position is unassailable. Their application is therefore dismissed. X. Costs [ 55 ] The parties may speak to me at a future case management meeting if they cannot otherwise agree on costs on the application. Heard on the 24 th day of February, 2016. Dated at the City of Edmonton, Alberta this 18 th day of March, 2016. K.G. Nielsen J.C.Q.B.A. Appearances: Lawrence W.

Olesen, QC/ Nancy Cumming, QC Bryan & Company LLP for the Defendant/Plaintiff by Counterclaim Ghost Riders Farm Inc Clive Elkin Clive Elkin Law Corporation for the Defendants by Counterclaim Boyd Distributors Inc, James Gerard Doyle and Nina Halliwell