Porter v Anytime Custom Mechanical Ltd, 2016 ABQB 322

Court of Queen ’ s Bench of Alberta Citation: Porter v Anytime Custom Mechanical Ltd, 2016 ABQB 322 Date: 20160614 Docket: 0703 01403 Registry: Edmonton Between: Dave Porter Plaintiff (Applicant) - and - Anytime Custom Mechanical Ltd and Terry McCoy, Wayne Flight and Edgar Sagun Defendants (Respondents) _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice Don J.

Manderscheid _______________________________________________________ Introduction [ 1 ] In about 2004, the Applicant, Dave Porter, and the Respondents, Terry McCoy, Wayne Flight, and Edgar Sagun [1] , started a business, incorporated as Anytime Custom Mechanical Ltd. (Anytime), each owning 25% of the shares, having each invested $15,000.00. Mr. Porter, Mr. McCoy, a mechanic, and Mr. Flight, a welder, were employees and directors of the corporation. Mr. Sagun was solely an investor in Anytime and did not work for it or serve as a director. The parties had a falling out and Mr.

Porter stopped working for Anytime in December 2006 and was removed as a director in September 2007.

[ 2 ] In January 2007, Mr. Porter filed an Originating Notice against the Respondents including Anytime, seeking various relief under the oppression

section of the Business Corporations Act , RSA 2000, c B-9 and an interlocutory injunction for a Standstill Order (the Oppression Action). In the same year, he also commenced another action against the same parties, alleging wrongful dismissal and further oppression (Wrongful Dismissal Action). Mr.

Porter now seeks two orders, the first finding the Respondents in contempt of court and the second for relief from continuing oppression, either in addition to the contempt application or in the alternative. [ 3 ] There have been numerous applications in this matter, a number of orders, and three visits to the Court of Appeal. Below I summarize the procedural history Procedural History [ 4 ] January 30, 2007: Mr.

Porter filed the Originating Notice seeking an interlocutory and permanent injunction alleging oppression under the Business Corporations Act . [ 5 ] January 31, 2007 : Because the application was brought on only one day’s notice, the Respondents sought an adjournment so the Applicant could be questioned on his affidavit and they could file evidence of their own. Justice Read granted the adjournment, but she also granted an Interim Standstill Order. Read J’s order (the Standstill Order) provided: 1. That the Parties shall obtain the next earliest Special Chambers date to have this Application heard on its merits.

The granting of this Order is without prejudice to the hearing of the Application and final determination of same. 2.

That the Respondent Corporation shall pay to the Applicant the sum of $4500.00 at the beginning of February 2007, or so soon thereafter as practical, to be paid in care of the Applicant’s solicitor, Cameron & Cameron, Barristers and Solicitors and continue to make those payments on a monthly basis at the beginning of each month as long as this Application remains pending on its merits and without prejudice to the ability of the Parties to characterize the nature of this payment in the settlement of the matter.

In the event that the Parties cannot agree as to the nature of this payment, then the Honourable Trial Judge that finally resolves this matter, shall determine the nature of the payments as to whether they are salary, damages, charges against the Applicant’s shareholder account, partial consideration for purchase of the Applicant’s shares in the Respondent Corporation or such other characterization as the Honourable Trial Judge may see fit in his or her unfettered discretion. 3.

That all receipt of receivables owing now and in the future of the Respondent Corporation are to be deposited into the said Corporate Bank Account and accounted for by keeping proper accounting records of same. 4. That the Corporate Respondent shall not make any payments to any Parties outside of its usual course of business practice and daily operations and shall keep proper accounting records of same. 5. That none of the Respondents are entitled to receive dividends, bonuses, payments, or benefits otherwise than in the usual course of their employment with the Corporate Respondent. 6.

That the Respondents are hereby restrained from forfeiting or in any other way dealing with the Shares of the Applicant or of the Corporate Respondent, Anytime Custom Mechanical Ltd. 7. That the Corporate Respondent shall be at liberty to continue to pay the normal established salaries of the Respondent Shareholders. 8. That the balance of the Applicant’s application is adjourned to Special Chambers. 9.

That costs of this Application shall be at the discretion of the Justice reviewing this matter on its merits. [ 6 ] May 30, 2007 : The Special Chambers application was heard and Marceau J granted an Order (Marceau Order #1) requiring the corporation to: 1. Reset the books to reflect a debt of $6,700.00 owed to Mr. Porter for vacation pay; 2. Place back on the Corporate Books the $41,000.00 bonus shown on the corporation’s December 2006 Financial Statements, unless that $41,000.00 has been paid out; 3. Mr.

Flight was required to repay a loan of $22,260.00 to the Corporation. [ 7 ] Marceau J further found that the Applicant had no grounds to complain about the corporate purchase of a service truck because its purchase was in the best interests of the corporation. Further, he held there was insufficient evidence upon which to find oppression in the reduction of inventory, but he gave the Applicant leave to bring back the inventory issue at a later date by filing a new notice of motion specifying the issues complained about. He also immediately terminated the $4500.00 payments to Mr.

Porter under para 2 of the Standstill Order, and dismissed Mr. Porter’s allegations of oppression, but for the three corrections referred to above and the unresolved issue regarding inventory. [ 8 ] June 25, 2007 : The Standstill Order was appealed to the Court of Appeal ( 2007 ABCA 208 ).

The Court partially granted the appeal, giving the Respondents leave to apply to the Court of Queen’s Bench for the re-payment of the $4500.00 payments made under the Standstill Order and amending the Standstill Order to add a new paragraph permitting the Respondents, on notice, to move to vary or rescind the Standstill Order. [ 9 ] April 18, 2008: Justice Marceau heard a further application dealing with the inventory issue, the payments made to Mr.

Porter under the Standstill Order, and whether the parties had complied with Marceau Order #1. Mr. Flight had transferred a truck to the corporation as partial payment of the debt he was required to repay, and Mr. Porter alleged that the value of the truck was insufficient. Marceau J (Marceau Order #2) ordered: • the Respondents to provide evidence of the sufficiency of the value of the truck; • Mr.

Porter to repay the funds paid to him under the Standstill Order, but stayed enforcement of that repayment until the Wrongful Dismissal Action was resolved; and • that the Standstill Order continue, except for the provision dealing with the $4500.00 payments to Mr. Porter. [ 10 ] Marceau J further held that the allegations of fraud had not been made out, although Mr. Porter had proved oppression in regards to the three issues under Marceau Order #1. As a result, each party was to bear their own costs.

He further ordered that the shareholder employees were entitled to draw $5000.00 a month salary while employed full time by the company. He dismissed the balance of the Originating Notice of Motion. [ 11 ] October 29, 2009 : The Respondents unsuccessfully appealed Marceau Order #2: 2009 ABCA 371 . [ 12 ] December 7, 2011 : Crighton J heard two applications: the first dealing with the value of the truck, finding that the value of the transferred truck was sufficient for Mr. Flight to have repaid the loan, and the second finding Mr. McCoy and Mr.

Flight in contempt of Court for not keeping and producing proper accounting records (the Contempt Order). She ordered the Respondents to produce proper accounting records by February 25, 2012 to prove they were not in contempt. [ 13 ] February 24, 2012: Mr. McCoy and Mr.

Flight both filed affidavits producing accounting records (February 24, 2012 affidavits). [ 14 ] November 2013 : The Respondents successfully appealed the Contempt Order ( 2013 ABCA 369 ), the Court of Appeal holding that the Chambers judge erred by reversing the onus in finding that there was no evidence that they had kept proper accounting records. The Standstill Order (and the other orders) did not require the Respondents to produce the accounting records, and so they could not be found in contempt for failing to do so. [ 15 ] February 2014 : Mr.

Porter brought this application by Notice of Motion alleging contempt of the Standstill Order, swearing an affidavit in support, filed on February 12, 2014. [ 16 ] June 5, 2015 : Mr. Porter filed a second Notice of Motion alleging oppression. On June 10, 2015, the date set for the hearing of the contempt application and the new oppression application, Justice Marceau adjourned the matter to February 24, 2016, and ordered that Mr. McCoy and Mr. Flight be made available for questioning on their February 24, 2012 affidavits and set timelines for undertaking answers and filing of briefs.

Contempt The Law [ 17 ] The Supreme Court of Canada in Carey v Laiken , 2015 SCC 17 set out some of the basic principles of civil contempt. First, contempt proceedings are bifurcated into a liability phase and, if liability is established, a penalty phase (para 18). Civil contempt has three elements, each of which must be established beyond a reasonable doubt (para 32): 1. The Order alleged to have been breached must state clearly and unequivocally what should and should not be done (para 33); 2. The alleged contemnor must have had knowledge of the Order (para 34); and 3.

The alleged contemnor must have intentionally done the act the Order prohibits or intentionally failed to do the act the Order compels (para 35). [ 18 ] In Point on the Bow Development Ltd v William Kelly & Sons Plumbing Contractors Ltd , 2006 ABQB 775 , aff’d 2007 ABCA 204 , Rooke J (as he then was) discussed these three required elements and added a further qualifier to the third element, based on the language of the Alberta Rules of Court , then R. 703(a) (now r 10.52): “without adequate excuse” (at para 19). [ 19 ] Further, the contempt power is discretionary and courts have discouraged its routine use to obtain compliance with a Court order.

In Carey , Cromwell J noted (at para 36): If contempt is found too easily, "a court's outrage might be treated as just so much bluster that might ultimately cheapen the role and authority of the very judicial power it seeks to protect"... As this Court has affirmed, "contempt of court cannot be reduced to a mere means of enforcing judgments": Rather, it should be used "cautiously and with great restraint"...

It is an enforcement power of last rather than first resort. (Emphasis added, citations omitted) [ 20 ] In regards to intent, the Supreme Court held that all that is necessary is proof beyond a reasonable doubt of the intentional act or omission that is a clear breach of the Order; an intent to disobey the Order is not necessary. Contumacy, or lack of it, goes to the penalty phase of the hearing (para 38).

However, a respondent will not be held in contempt for breach of an implied or inferred term in an order, since the Order must be clear, precise and unambiguous, and further the alleged contemnor is entitled to the most favourable

interpretation of the order: Milne v Milne , 2014 BCSC 2423 (at para 57 and 47 ). [ 21 ] An Order for contempt is a final order and therefore hearsay is not admissible: Letal v Lakeland Roman Catholic Separate School District N. 150 , 2000 ABQB 801 (at para 17 ); Kulyk v Wigmore , 1987 ABCA 127 , 53 Alta LR (2d) 44 (CA) (at para 3 ). See also Kadar v. 720294 Alberta Corp , 2002 ABQB 1019 (at para 21 ); Bee Chemical Co v Plastic Paint & Finish Specialties Ltd (1979), 47 CPR (2d) 172 (Ont. CA) (at para 9 ); Krien v Krien , [1997] BCJ No. 643 (BCSC) .

Further, contempt applications are matters of strictissim juris ( Letal at para 32 ) and contempt allegations are serious and quasi-criminal, therefore procedural fairness is essential ( Brown v Arès , 2005 ABCA 438 , at para 5 ; Kadar at para 21 ; Continuing Care Employers' Bargaining Association v AUPE , 2002 ABCA 148 , 303 AR 137 (CA)). [ 22 ] In Arrow-West Equipment Ltd v GDT Trading Ltd , 2006 ABQB 762 , Acton J noted that the particulars of alleged contempt must be sufficient to put the respondents on notice as to the alleged grounds (para 30).

General allegations are not sufficient and the Respondents must not be left to guess at the specifics of the matters complained of. Mr. Porter’s allegations of Contempt [ 23 ] Mr. Porter alleges that Mr. McCoy and Mr. Flight have breached the Standstill Order and are in contempt, alleging the following specifics in its Application, filed February 13, 2014 (paragraph numbers refer to the paragraphs in the Application): 1.

Anytime did not comply with the Standstill Order prohibiting payments to any parties outside of its usual course of business practice and daily operations and requiring it to keep records (para 13); 2. Anytime did not comply with the Standstill Order requiring that all Anytime’s receivables be deposited in Anytime’s Bank Account and be accounted for (para 14); 3. The Respondents paid money to themselves in excess of the amounts permitted under the Standstill Order (para 15); 4.

The Respondents allowed Anytime to fail and be struck from the Corporate Registry in breach of the Standstill Order restraining them from forfeiting or in any other way dealing with Mr. Porter’s shares or Anytime’s shares (para 16). [ 24 ] None of these allegations are particularized, but Mr. Porter’s February 19, 2014 affidavit provides some further information, setting out a number of allegations of contempt. I have divided these allegations based on where they fall within the grounds alleged in the Application and the paragraph numbers refer to the corresponding paragraph in the affidavit.

Some of the allegations fall under more than one category. There are some allegations that do not fall at all within the allegations in the Notice of Motion. Payment to third parties outside of usual course of business [ 25 ] Lump sum payments by Anytime (para 24(c)). [ 26 ] Payments from Anytime to ASAP (para 24(e)). [ 27 ] Payments to third parties (24(f)). [ 28 ] A number of payments were made to Mr. Flight, Mr. McCoy and Mr. Sagun, totalling $25,165.00 and payments totalling 24,031.15 were made to ACE Machining and Manufacturing (ACE). Mr.

Porter deposes that “To the best of my knowledge all of the above payments are outside of the normal established salaries of any of the recipients” (para 26). [ 29 ] Even after salaries ceased, there continued to be payments to Workers Compensation in May, June and October 2008. Also payment of bills to CIBC, Aviva, and EPCOR from March 2008 to June 2009 (para 39). Payments to Respondents in excess of the Standstill Order [ 30 ] The payment of $11,585.50 to each of Mr. Porter, Mr. Flight and Mr.

Sagun, and no corresponding payment to himself (para 20); [ 31 ] The Respondents’ responses to the Notice to Admit Facts denied receiving dividends, bonuses, payments or benefits other than those in the usual course of their employment (para 21). [ 32 ] $831.37 removed from Anytime’s bank account, emptying it, without accounting for it (para 23). [ 33 ] A number of payments were made to Mr. Flight, Mr. McCoy and Mr. Sagun, totalling $25,165.00 and a payments totalling $24,031.15 were made to ACE Machining and Manufacturing (ACE).

He states that “To the best of my knowledge all of the above payments are outside of the normal established salaries of any of the recipients” (para. 26). [ 34 ] Mr. McCoy and Mr. Flight continued to receive salary income from Anytime in excess of “the amount permitted by the court orders s ( sic) amended” (para 29). Keeping proper accounting records [ 35 ] $831.37 removed from Anytime’s bank account, emptying it, without accounting for it (para 23). [ 36 ] Lack of supporting documents and details of Anytime’s expenses and revenue (24(g)).

Deposits to corporate bank account [ 37 ] The Affidavit makes no specific allegation in this regard. The bank account was closed because of service charges eating into the balance when the business was failing – discussed infra. Dealing with shares [ 38 ] Anytime was struck from Corporate Registry (para 24(h)). Miscellaneous allegations [ 39 ] The following allegations do not fall within the grounds set out in the Application, but do appear in the Affidavit: • Failure to advise or involve Mr. Porter in ongoing shareholder matters (para 24(

a) and (b)); • Failure to disclose payments to parties outside of the usual course of business practice (para 25); • Relationship to A.S.A.P.

Welding & Hydraulics Ltd. (ASAP) in spite of Respondent’s Reply to Notice to Admit Facts denying a relationship between them and ASAP (paras 32); • Even after salaries ceased, there continued to be payments to Workers Compensation in May, June and October 2008 (para 30); • ASAP was incorporated in April 2008 and there is an ongoing relationship between Anytime and ASAP including (para 31): • Co-location and ongoing utility payments by Anytime; • Anytime sold a truck to ASAP; • ASAP has ongoing contracts with Anytime customers doing similar work to what Anytime performed for these customers; (no evidence in support) • No evidence of disposition of Anytime shop supplies or assets to a third party and the “subsequent probable use by ASAP ... of these assets” (attached as an exhibit is a photo of ASAP name plate); • Mr.

McCoy and Mr. Flight having signing authority on ASAP bank accounts and government tax records (attached as exhibits to the affidavit are copies of a cheque payable to “Keelan Wickens” drawn on an account of ASAP Welding & Hydraulics and a Record of Employment for “Keelan Wickens” with an employer name of ASAP Welding and Hydraulics”); • Payments of $1050.00 a month to ASAP from June 1, 2008 to April 1, 2009, except for November 18, 2008 payment of $1176.00 and a further payment of $4714.32 on January 22, 2009. Mr. Porter deposes that there is no evidence that the $1050 was for rent except for Mr.

Flight’s affidavit. He argues there is no support to show the value for the expenditure. [ 40 ] Mr. Porter’s affidavit also states that “to the best of my knowledge” ACE is owned by Edgar Sagun (para 27). He gives no source for this belief. [ 41 ] I give no weight to any of the hearsay evidence, including whether ACE was owned by Mr. Sagun and the copies of the paycheque payable to Keelan Wickens and the Record of Employment of Keelan Wickens. [ 42 ] The affidavit also references Responses to Notice to Admit #9 and #10.

Notice to Admit #9 stated: The individual Respondents operate a business under the name ASAP Welding and Hydraulics which is essentially the same going concern entity as Anytime Custom Mechanical Ltd. The response stated: In respect of point number 9 in the Notice to Admit Facts, the individual Respondents do not operate a business under the name of A.S.A.P. Welding & Hydraulics Ltd. A.S.A.P. Welding & Hydraulics Ltd. is a company which is not owned by any parties to this Action and that company is not essentially the same going concern entity as Anytime Custom Mechanical Ltd.

Custom Mechanical Ltd. was a body corporate duly incorporated under the Laws of the Province of Alberta and A.S.A.P. Welding & Hydraulics Ltd. is also a company duly incorporated under the Laws of the Province of Alberta and there is no connection or relationship between the two companies. Notice to Admit #10 stated: The individual Respondents own the business, A.S.A.P. Welding & Hydraulics Ltd. The response stated: In respect of point number 10 in the Notice to Admit Facts, the individual Respondents do not own a business called A.S.A.P. Welding & Hydraulics Ltd.

[ 43 ] Mr. Porter’s Brief alleges that the following constitute contempt: 1. The June 1, 2009 payment of $11,585.50 to each of Mr. McCoy, Mr. Flight and Mr. Sagun in breach of the Standstill Order; 2. The February 25, 2010 withdrawal of the Anytime bank balance of $831.37; 3. Failing to advise Mr. Porter regarding ongoing shareholder matters; 4. Lump sum payments made by Anytime; 5. The relationship of Anytime to ASAP Welding & Hydraulics Ltd. (ASAP) and payments from Anytime to ASAP; 6. Payments to third parties; 7. Lack of supporting documents and details regarding Anytime expenses and revenue; 8.

Anytime was struck from corporate registry. [ 44 ] Some of the allegations in the Brief are more specific than those in the Application or the Affidavit. The Brief mentions some specific allegations that are not in the Motion or the Affidavit, while the Affidavit speaks to allegations not in the Motion or the Brief. 1. The Revenue Canada refund [ 45 ] The June 2009 payments of $11,585.50 to each of Mr. McCoy, Mr. Flight and Mr. Sagun were revealed through the disclosure in the February 24, 2012 affidavits. In his affidavit, Mr.

McCoy deposed that in 2008 Anytime was in serious financial difficulty with its expenses exceeding its income, and both he and Mr. Flight took paid employment elsewhere, but continued to work for the company on evenings and week-ends. They rented an office from ASAP and kept a phone, preparing proposals for some existing customers, but no new work was obtained. [ 46 ] Mr. McCoy further deposed that in December 2008 Anytime received a refund of $32,622.09 from Revenue Canada for pre- paid taxes.

By June 2009, it having become apparent that none of Anytime’s proposals to former clients were going to be accepted, and with the bank account falling to $35,829.73, cheques were issued to McCoy, Flight and Sagun. In cross-examination on his affidavit, Mr. Flight said they were closing the account down because the bank was charging service charges.

He testified, “Instead of just one guy holding on the money, we split it three ways, not to be spent” (21/10-12)... “We had no intention to spend it or whatever.” (21/16). “Like I said it was just to be held and if three people held it – you know if one guy held it and got rid of it, what do you do?

So three people held it...” (21/22-25). [ 47 ] Following Justice Crighton’s order (December 7, 2011), the Respondents provided the accounts and bank statements to their lawyer, who explained that the cheques should not have been written, but the bank account was closed, so they paid the money into trust with their lawyer. [ 48 ] Mr. Porter argues that this is the clearest indication of contempt, alleging that the payment of these monies was in breach of paragraph 5 of the Standstill Order.

He argues that in Response to the Notice to Admit Facts, filed April 13, 2011, the Respondents said “... the individual respondents have not since 2007 received dividends, bonuses, payments or benefits other than those in the usual course of their employment with the Corporate Respondent.” [ 49 ] The Respondents have provided an explanation for the cheques written to the three of them following the Revenue Canada refund. Whether this is an “adequate excuse” is immaterial at the moment.

The contempt, if it was contempt, was purged when the parties repaid the money to their lawyer’s trust account in 2012, as soon as they were told that it was wrongfully paid out. In keeping with the admonition that courts should use their contempt powers sparingly, I see no basis for finding contempt in regards to an action that was remedied two years before the application for contempt was even brought. 2. The bank balance [ 50 ] Anytime’s bank account was closed on February 25, 2010 with the withdrawal of $831.37. Mr. McCoy’s affidavit evidence was that the account was closed.

The respondents note nothing in the Standstill Order prohibited closing the account, there is no evidence of where that money went, the Standstill Order does not prohibit money from being withdrawn from the bank account, and that money was paid into trust at the same time as the Revenue Canada refund. [ 51 ] As with the Revenue Canada refund, if there was contempt, it was purged when it was repaid into trust. I decline to find contempt in the circumstances. 3. Failing to advise Mr.

Porter regarding ongoing shareholder matters [ 52 ] There is nothing in the Standstill Order requiring this and therefore no breach and no contempt.

4. Lump sum payments made by Anytime [ 53 ] Mr. Porter alleges that there were a number of “lump sum” payments made to third parties and to the Respondents that contravene paragraphs 4 and 5 of the Standstill Order. The Notice to Admit Fact #5 alleged that the Parties made payments outside of Anytime’s usual course of business and failed to keep records.

The Respondents’ Response: In respect of point #5 in the Notice to Admit Facts, the previously made Orders say what they say and these parties will not paraphrase or interpret the previously made Orders. [ 54 ] For ease of reference, I reproduce paragraphs 4, 5 and 7 of the Standstill Order: 4. That the Corporate Respondent shall not make any payments to any Parties outside of its usual course of business practice and daily operations and shall keep proper accounting records of same. 5.

That none of the Respondents are entitled to receive dividends, bonuses, payments, or benefits otherwise than in the usual course of their employment with the Corporate Respondent. 7. That the Corporate Respondent shall be at liberty to continue to pay the normal established salaries of the Respondent Shareholders. [ 55 ] These paragraphs in the Standstill Order do not state clearly and unequivocally what should and should not be done as required in Carey . The terms are quite general.

For example, in April 2008, the Marceau #2 order brought greater specificity to the Standstill Order by permitting the shareholder employees to draw $5000.00 a month salary. It is difficult to assess what “payments to any Parties outside of its usual course of business practice and daily operations” means or what “proper accounting records” consist of. Similarly “otherwise than in the usual course of their employment” is not particularly clear and unequivocal, nor is “the normal established salaries”. a. Vacation pay [ 56 ] The first specific allegation raised by Mr. Porter is that Mr. McCoy and Mr.

Flight were paid vacation pay. In oral argument, counsel for Mr. Porter suggested that vacation pay is a form of bonus prohibited by paragraph 5 of the Standstill Order. That is untenable. Vacation pay is required under s. 40 of the Employment Standards Code for employees who are paid hourly wages. Mr. Flight and Mr. McCoy were paid an hourly wage (Examination on Affidavit of Mr. Flight read in during oral argument; questioning of Mr. Porter on his affidavit 63/1-5). This was a payment in the ordinary course of their employment. [ 57 ] Mr. Porter alleges that payment of vacation pay to Mr. McCoy and Mr.

Flight was unfair because his vacation pay still sits on the corporate books as a debt to him, by virtue of Marceau #1. He does not identify what is unfair, let alone how this breaches the Standstill Order. Vacation Pay is not “dividends, bonuses, payments, or benefits otherwise than in the usual course of their employment” and is, in fact, payment in the usual course of employment. Marceau J did not order Anytime to pay out Mr. Porter’s vacation pay, but he did order him to repay the $4500.00 monthly payments made to him under the Standstill Order.

He stayed enforcement of that order until all the accounting and characterization of payments were worked out in the Wrongful Dismissal action. b. July 1, 2008 payment to Mr. Flight [ 58 ] Mr. Flight received a payment on July 1, 2008 of $1333.80. He does not remember what the payment was for. Other than the cheque and the bank records, there is no other evidence to identify what this payment was for.

The Respondents insist that the onus is on the Applicant to prove there was a breach of the Order, and that this Court cannot infer that this is a breach of the Standstill Order. [ 59 ] While I agree with the Respondents that paragraph 4 of the Standstill Order, requiring proper accounting records is not precise, it clearly intended that the parties be able to account for the expenditures made in the usual course of business practice.

The Respondents’ inability to answer what this payment was for is indicative of a breach of the Standstill Order to keep proper accounting records, if only to record in the cheque register what the payment was for. [ 60 ] At this point, I will restrict my analysis to the finding that there was a breach of the Standstill Order, but will not make a finding of contempt. c. Payments to Ace [ 61 ] Mr. Porter then points to two payments made to Ace, totalling $24,031.15. Mr. Flight’s evidence was that Ace was paid to repair work done by Anytime that was under warranty (Examination on Affidavit, 26/21 – 28/16).

There is no evidence to contradict that this was warranty work done in the usual course of business and no basis to conclude that these payments were in breach of the Standstill Order. d. Salaries to Mr. McCoy and Mr. Flight [ 62 ] Mr. Porter alleges that the salaries paid to Mr. McCoy and Mr. Flight are more than permitted in the Standstill Order (paras 5 and 7). In oral argument, counsel for Mr. Porter alleged that the Standstill Order ordered that $4500.00 was the usual established salary payable to each of the employees, but as I pointed out in Court the Order required that Mr.

Porter be paid $4500.00 a month, but did not state a specific established salary for Mr. Flight or Mr. McCoy. [ 63 ] Mr. Flight’s evidence is that the shareholder employees were paid hourly and that they usually worked the same number of hours. Mr. Porter’s evidence in cross-examination on his affidavit, was they were paid an hourly rate, eight hours a day, five days a week “... and it worked out to everybody getting equal for myself, Wayne Fight, Terry McCoy, Edward Sagun did not draw a wage” [sic]

(63/1-5). That situation changed after Mr. Porter left and Mr. Flight and Mr. McCoy found themselves working more hours, more week- ends and evenings (Mr. Flight’s cross-examination on affidavit at 36/1-5). [ 64 ] The challenged salary amounts are those paid between March 2007 to April 2008. After April 2008, the Order was clarified when Marceau Order #2 set the salaries at $5000.00 a month. The challenged monthly wages ranged from a high of $9,297.60 in November 2007 to a low of $3521.27 paid in March 2008. In December 2007, salary draws dropped considerably and there were differences between Mr.

McCoy’s draws and Mr. Flight’s based on the hours they actually worked. From December 2007 to April 2008, the salary draws were less than $4500.00. [ 65 ] In his written Brief, counsel for Mr. Porter asserts: The February 2012 disclosure reveals that Terry McCoy and Wayne Flight continued to receive salary income until April of 2008. In our submission, these individuals were paid salaries likely for doing very little to advance the business or operations of Anytime...

We arrive at this conclusion, but are challenged to prove this, as the company stopped keeping accounting records on the computer after February 2008. We are therefore unable to examine any financial data on a “like to like” basis. We submit there is nothing to show that value was received for wages paid after February 28 th , 2008.

The Applicant is unable to examine the backup documents, such as invoices supporting the revenue. (Emphasis added) [ 66 ] I note that the highest wages were paid while accounting records were still being entered on the computer and that, after February 2008 when the administrative assistant was let go and computer records were no longer kept, Mr. McCoy’s and Mr. Flight’s wages fell below $4500.00 a month. [ 67 ] The onus is on Mr. Porter to prove that the Respondents were paid more than the normal established salaries. The evidence is that the Respondents worked evenings and week-ends and Anytime paid overtime.

While in the past the employees were not paid overtime, the evidence is that after Mr. Porter left they were working much longer hours.

Section 21 of the Employment Standards Code provides for overtime for work in excess of 8 hours on each work day or in excess of 44 hours a week, whichever is greater, and requires that an employee be paid at least 1.5 times the employees’ wage rate. The “normal established salaries” in para 7 of the Order must reasonably be interpreted to include the statutory requirements. [ 68 ] I conclude that Mr. Porter has not proved beyond a reasonable doubt that these payments were in breach of paragraphs 5 or 7 of the Standstill Order as exceeding the normal established salaries of the Respondent Shareholders. 5.

Relationship to ASAP [ 69 ] Mr. Porter alleges that there is an “ongoing relationship between the 2 companies” as evidenced by: • “Co-location/ rental or sublet / partial continuing utility payments by Anytime”; • Anytime sold a truck to ASAP; and • Shop supplies – no evidence that Anytime sold its shop supplies to a third party so “there is a probable sharing of shop supplies with ASAP”. [ 70 ] Mr. Porter further alleges that any relationship between Anytime and ASAP is a contradiction of the statement in the response to the Notice to Admit.

In my view, the responses to the Notice to Admit #9 and #10 must be read within the context of what was actually asked in the Notice to Admit. Points #9 and #10 read: 9. The individual Respondents operate a business under the name ASAP welding and hydraulics which is essentially the same going concern entity as Anytime Custom Mechanical Ltd. 10. The individual Respondents own the business , A.S.A.P.

Welding & Hydraulics Ltd. (emphasis added) [ 71 ] While the Respondents’ response to these points in the Notice to Admit denied a connection or relationship between Anytime and ASAP, it did so within the context of a Notice that was looking for an admission that they operated and owned ASAP. The Notice to Admit did not ask whether there was any other kind of relationship, like landlord/tenant or customer. Moreover, the Respondents did not deny any relationship with ASAP as they admitted Mr. McCoy and Mr. Flight had signing authority for ASAP while employed there (Notice to Admit #21 and #23).

The statements denying a relationship in answer to #9 and #10 were not deliberately false answers. [ 72 ] In fact, as conceded by counsel for the Respondents, he was unsure what issue the Notice to Admit was attempting to deal with. The Notice to Admit points #1-14, 17, 20, 22, 26-33 seek admissions about ASAP and the Responses, drafted by counsel, object to the requested admission on the basis that: ...some or all of the matters for which admissions are requested are in whole or in

part irrelevant, improper or unnecessary and specifically that the requested admissions are not relevant nor material to any issue raised in the pleadings of the subject of any outstanding application”. [ 73 ] I note that the Notices to Admit (there were two) were provided to the Respondents in 2011, after the Originating Application was dismissed by Marceau Order #2. All that was outstanding under the Originating Application was the question of the value of the truck transferred to Anytime to repay the loan and an accompanying application as to whether the Respondents were in contempt for

failing to produce accounting records. Nothing in these provisions in the Notice to Admit were relevant to either. I don’t find that there was any breach of the Standstill Order in denying a relationship between ASAP and Anytime, and that in light of the wording of the Notice to Admit and the outstanding issues in this action, that the responses to the Notice to Admit were not deliberately false. [ 74 ] A further specific allegation listed in Mr. Porter’s Brief states: “Co-location / rental or sublet / partial continuing utility payments by Anytime”.

I am not sure what this allegation specifically refers to or how it is alleged to breach the Standstill Order. The Respondents admit they rented space from ASAP; there is nothing in the Standstill Order that prohibits this. Mr. Porter has not proved that ASAP and Anytime were co-located, but in any event, even if they were, how is this in contempt of the Order? As for “partial continuing utility payments”, from March 2008 to April 2009, there is nothing that prohibits paying utilities in the Standstill Order. [ 75 ] Mr.

Porter also complains that Anytime sold a truck to ASAP; again there is nothing in the Standstill Order that prohibits such a sale. He argues that since Anytime did not operate a business of selling vehicles, such a sale was outside of the usual course of business, but there is nothing in the Standstill Order that says that Anytime cannot sell assets. Paragraph 4 says only that Anytime cannot make payments to parties outside of its usual course of business practice. [ 76 ] Similarly, Mr. Porter points to payments of $4714.32 and $1176.00 to ASAP. Neither Mr. Flight or Mr.

McCoy remembered what the payments were for, but according to counsel for Mr. Porter, the Respondents’ answers to undertakings produced invoices for those amounts from ASAP for further warranty work. Now, counsel for Mr. Porter relies on this as evidence that there was a relationship between Anytime and ASAP, but as I have already noted there is nothing contemptuous in those answers and they are explainable within the context of the way the Notice to Admit was worded.

Just as with ACE, warranty work falls within the usual course of business practice. [ 77 ] The allegation – “no evidence that Anytime sold its shop supplies to a third party” so “there is a probable sharing of shop supplies with ASAP” does not even attempt to prove contempt beyond a reasonable doubt. It acknowledges a lack of evidence and then speculates about a “probable sharing” of supplies with ASAP. Further, there is nothing in the Standstill Order that prohibits such sharing, even if it were proved. [ 78 ] In his brief, Mr.

Porter seeks a further Order of the Court permitting the owner of ASAP and the business records of ASAP to be examined regarding their relationship with Anytime. There is no filed application to that effect, nor is there any evidence that ASAP was served with notice of such an application. It is denied. 6. Miscellaneous allegations [ 79 ] These allegations include: • The failure to advise or involve Mr.

Porter in ongoing shareholder matters • The striking of Anytime from the Corporate Registry; • Payments to Workers Compensation in May, June and October 2008; • Lack of supporting documents and details regarding Anytime expenses and revenue; and • Payment to Aviva (insurance), EPCOR (utilities) and CIBC. [ 80 ] Advice or involvement in ongoing shareholder matters were not the subject of the contempt application. It is likely that this allegation falls within the further allegations of oppression. [ 81 ] Mr.

Porter alleges that allowing the corporation to be struck from the Registry breaches paragraph 6 of the Standstill Order restraining the Respondents from “forfeiting or in any other way dealing with the Shares of the Applicant or of the Corporate Respondent, Anytime Custom Mechanical Ltd”. Again, this clause is not clear and unambiguous. How would the Respondents forfeit or deal with the Corporate Respondent’s shares; it does not have any? In any event, I conclude that allowing a corporation to be struck from the Corporate Registry is not forfeiting or dealing with shares. Mr.

Porter’s shares still exist even though the company was struck, and the Respondents did not actually do anything with the shares. [ 82 ] Further, even if permitting the company to be struck could be construed as dealing with the shares, as contemplated in the Standstill Order, Mr. McCoy applied to have the corporation revived, purging any contempt. [ 83 ] Payments to Workers Compensation, and for insurance, utilities, and debt are within the usual course of business practice and daily operations.

While the Respondents were no longer taking a salary from Anytime, their evidence was that they continued to work evenings and week-ends. It would take much stronger evidence to establish that these payments were outside of the usual course. Again there is no proof beyond a reasonable doubt that the Respondents are in contempt. [ 84 ] Finally, there is the question of providing supporting documents. The Standstill Order reads: 4.

That the Corporate Respondent shall not make any payments to any Parties outside of its usual course of business practice and daily operations and shall keep proper accounting records of same. [ 85 ] The Order is not a model of clarity. What does “of same” refer to? It appears to say that the corporate respondent must keep “proper accounting records” of payments made to “any parties outside of its usual course of business practice.” Nor does it specify what constitutes proper accounting records. I think, however, that the intent of the Order was clear – keep records of what is spent and

received. [ 86 ] This Order must be considered in the context of the application under which it was made. It was an Interim Standstill Order brought with little notice to the Respondents amidst allegations of oppression and fraud. The oppression which was eventually proved was relatively minimal in relation to the allegations made and the allegations of fraud were dismissed entirely. [ 87 ] The Respondents readily admit that they are not professional accountants. When they had to let their assistant go, they had no one who knew how to use the accounting software.

They chose to simply keep their cheques and bank statements. There were, apparently, also some invoices and other documentation produced in undertakings. The question before me then is whether this is sufficient to conform to the requirements of the Standstill Order. [ 88 ] Mr Porter has pointed to one payment on July 1, 2008 of $1333.80 to Mr. Flight, that cannot be accounted for.

All other challenged payments are either accounted for or have not been proven beyond a reasonable doubt to be contrary to the Standstill Order. [ 89 ] Keeping in mind that the contempt power is discretionary and that the Supreme Court of Canada has cautioned that “If contempt is found too easily, "a court's outrage might be treated as just so much bluster that might ultimately cheapen the role and authority of the very judicial power it seeks to protect", I conclude that it would not be appropriate in these circumstances to find the Respondents in contempt.

No doubt, better accounting records could have been kept, but in light of the serious allegations raised by Mr. Porter and the subsequent failure to prove the vast majority of those allegations, I conclude that the failure to keep an accounting record of this payment is not contempt.

Costs consequences for proving denied facts [ 90 ] The Application sought “An Order setting a penalty for the contravention of the Rules of Court” and cited the following applicable rules: • 10.49: penalty for contravening rules; • 10.52: declaration of civil contempt; • 10.53: punishment for civil contempt. [ 91 ] In the course of oral argument, it appeared that counsel for Mr. Porter was seeking costs for having to prove facts that were denied in the Notice to Admit.

There is nothing in the Application that would alert the Respondents that this was something the Applicant was seeking. [ 92 ] In any event, as I have discussed, I do not find the answers to the Notice to Admit to be dishonest. The Revenue Canada payment was not a dividend or bonus or benefit. The Notice to Admit did not ask whether there was a connection or relationship between ASAP and the Respondents, but whether they owned or operated ASAP. They admitted to having signing authority on the ASAP bank account and to being employed there.

They refused to answer other questions because they could not see any relevance to the remaining issues in the action – the Standstill Order and the value of the truck transferred to Anytime. [ 93 ] I will not order costs for proving denied answers. Oppression [ 94 ] Mr. Porter brought a further application in this matter seeking relief for oppression in addition to, or in the alternative to, the contempt application. He relies on the evidence lead in regard to the contempt application. [ 95 ] I deny the application because this Court has no further jurisdiction to deal with anything further.

In Marceau Order #2, the remainder of the Originating Application was dismissed, leaving only the question of the value of the transferred truck (since resolved) and the Standstill Order as amended. There are no further issues under the Originating Application. [ 96 ] Mr. Porter raised allegations of oppression in his Wrongful Dismissal action. That is the appropriate forum for any further allegations, subject to any limitations defences.

However, no action has been taken to prosecute that matter. [ 97 ] Counsel for the Respondents note that the Company is a party to that action and that in an application before Justice Graesser, Mr. McCoy was refused leave to carry on the action on the company’s behalf. The Respondents now ask that the money paid into court be used to fund counsel for the corporation to act on its behalf and defend against the allegations against it. I direct parties to bring such an application. This matter has dragged on long enough. Conclusion [ 98 ] I conclude that Mr. Porter has not proved contempt beyond a reasonable doubt.

I will not order costs in relation to the denials in the Responses to the Notices to Admit. This action is at an end as all matters in the Originating Notice have been dealt with and resolved. [ 99 ] I award costs to the Respondents.

Heard on the 24 th day of February, 2016. Dated at Edmonton, Alberta this 13 th day of June, 2016 . Don J. Manderscheid J.C.Q.B.A. Appearances: James A. Wachowich Wachowich & Company for the Plaintiff (Applicant) Brian Doherty Doherty Schuldhaus LLP for the Defendants (Respondents)