McGovern-Burke v Martineau, 2016 ABQB 514

Court of Queen’s Bench of Alberta Citation: McGovern-Burke v Martineau, 2016 ABQB 514 Date: 20160915 Docket: 1301 05701 Registry: Calgary Between: Shawna McGovern-Burke Applicant - and - Alanna Martineau and Wine-Ohs Inc Respondent Docket: 1401 02859 Registry: Calgary Between: Shawna McGovern-Burke Plaintiff - and - Wine-Ohs Inc Defendant Docket: 1301 09223 Registry: Calgary Between: McGovern-Burke Enterprises Ltd Plaintiff

- and - Wine-Ohs Inc Defendant _______________________________________________________ Reasons for Decision of the Honourable Mr. Justice K.D. Yamauchi _______________________________________________________ I. Introduction [ 1 ] These reasons deal with 3 separate actions involving related parties, the trials of which this Court heard over 3 days. The 3 actions, in general terms, are as follows: (

a) an action that the Applicant / Plaintiff Shawna McGovern-Burke commenced against the Respondents Alanna Martineau and Wine- Ohs Inc pursuant to

section 242 of the Business Corporations Act , RSA 2000, c B-9 [ BCA ]; (

b) an action that Ms. McGovern-Burke commenced against the Defendant Wine-Ohs Inc (“Wine-Ohs”), in which she seeks to recover shareholder loans that she allegedly made to Wine-Ohs, and expenses that she allegedly incurred on Wine-Ohs’ behalf; and (

c) an action that McGovern-Burke Enterprises Ltd (“M-B Ltd”) commenced against Wine-Ohs in which M-B Ltd seeks to recover payments for materials and services that M-B Ltd allegedly provided to Wine-Ohs. II. Background [ 2 ] Ms. McGovern-Burke and Ms. Martineau met each other in the Fall of 2011, while they worked at Talisman Energy Inc. Ms. McGovern-Burke was interested in doing something outside of her work for Talisman Energy Inc, and in or around December of 2011, she discussed this with Ms. Martineau. Ms. Martineau told Ms. McGovern-Burke that she had prepared a business plan for a wine bar and bistro. Ms.

McGovern Burke thought Ms. Martineau’s idea was interesting, so they met for lunch. Ms. Martineau asked Ms. McGovern-Burke to sign a non-disclosure agreement before showing her the business plan, which Ms. McGovern-Burke signed. When Ms. McGovern-Burke asked Ms. Martineau whether she wanted an investor or a partner, Ms. Martineau said that she would be open to either. [ 3 ] Ms. Martineau’s plan was to open a wine bar and bistro in the East Village in Calgary 2 or 3 years “down the road,” but each would “keep their eyes open” for potential opportunities. In March of 2012, while at a dinner, Ms.

McGovern-Burke learned that the space occupied by Piq Niq and Beat Niq in downtown Calgary was for sale (the “premises”). Ms. McGovern-Burke immediately contacted Ms. Martineau to advise her of the opportunity. They, along with Ms. McGovern-Burke’s husband, Ron McGovern-Burke, went to look at the premises 2 days later. The main floor of the premises would meet their needs, but the basement required considerable work. Mr. McGovern-Burke is a designer and musician, who wanted to look at the premises to determine if the basement area would work as a wine bar and musical performance venue. [ 4 ] Ms.

McGovern-Burke left for a vacation shortly thereafter. The parties began costing the business and premises and, as well, explored other places in which they might be interested. Ms. McGovern-Burke was gone for 2 weeks, but she and Ms. Martineau kept in touch throughout that time via email. [ 5 ] When Ms. McGovern-Burke returned from her vacation, the parties again went to the premises. Before they made the offer to purchase the premises, they discussed how they would structure the business. Ms. Martineau had incorporated Wine-Ohs on April 28, 2009.

She had done some minor things with Wine-Ohs, as she had intended on using it to open and operate her new business. Ms. McGovern-Burke and Ms. Martineau met with Ms. Martineau’s accountant to determine how Ms. McGovern-Burke could become a shareholder in Wine-Ohs. The accountant advised them that he had not created a minute book for Wine-Ohs and Wine-Ohs had not yet filed income tax returns. Ms. Martineau was Wine-Ohs’ only shareholder, although Wine-Ohs had neither created nor issued shares or share certificates to her. [ 6 ] On April 16, 2012, Ms. McGovern-Burke and Ms.

Martineau, on Wine-Ohs’ behalf, offered to purchase the premises. They both signed the offer, as they thought they were, at this time, equal shareholders. The purchase price was $125,000. Ms. McGovern-

Burke provided a $10,000 personal cheque that accompanied the offer as its deposit, as Wine-Ohs had not yet created a bank account. The closing date was scheduled to be May 22, 2012. [ 7 ] Ms. Martineau effected a change on April 24, 2012, with the Alberta Registrar of Corporations by filing Wine-Ohs’ annual return (the “Annual Return”), which showed Ms. Martineau and Ms. McGovern-Burke as Wine-Ohs’ directors. The Annual Return also showed each of them holding fifty percent of the voting shares. Wine-Ohs still had no minute book, although Ms. Martineau testified that they intended that she and Ms.

McGovern-Burke would be equal shareholders. [ 8 ] Wine-Ohs had to obtain a liquor license to operate the business. Part of the application process required Wine-Ohs to complete a form “Particulars of Incorporation of Company” that Alberta Gaming and Liquor Commission had created. On May 1, 2012, Ms. Martineau and Ms. McGovern-Burke met with a lawyer from Fraser Milner Casgrain (as it was then known) to complete the form. Ms. McGovern-Burke filled out the form, and certified it as correct, as did the lawyer. It, like the Annual Return, showed Ms. McGovern-Burke and Ms.

Martineau as directors and that each held fifty shares in Wine-Ohs. Ms. Martineau did not object to the substance contained in this form. Alberta Gaming and Liquor Commission issued the liquor license. Interestingly, the lawyer certified this document without ever seeing a minute book for Wine-Ohs. In fact, at the time they went to see the lawyer, no minute book had been prepared. All the lawyer had was the confirmation from the Alberta Registrar of Corporations that showed Ms. Martineau and Ms. McGovern-Burke as equal shareholders and that they were both directors. Ms. McGovern-Burke does not know whether Ms.

Martineau has submitted a new form the Alberta Gaming and Liquor Commission. [ 9 ] To Ms. McGovern’s mind, the parties were operating the business as though they were equal shareholders. Each had put in about $80,000 to purchase the premises and as initial cash-flow. The bank statement that was made an exhibit in these proceedings confirmed this. Ms. Martineau and Ms. McGovern-Burke decided that they did not want to finance their business. Ms. Martineau eventually put in a further $25,000 for renovations to the premises, which made her contribution $105,000. Ms. Martineau acknowledges that Ms.

McGovern-Burke put in the additional $25,000. There was never any discussion of the due date for repayment or interest that would accrue. Ms. McGovern-Burke vehemently denied that she would have contributed this amount had she not been a shareholder in Wine-Ohs. She felt that Wine-Ohs would repay her quickly. To her mind, the idea was that Wine-Ohs would first pay expenses, including those the shareholders had paid on its behalf. It would then repay the loans that the shareholders had made to it. It was only then that the shareholders would receive any dividends or salary. Ms.

McGovern-Burke testified that there was no agreement that Wine- Ohs would pay the loans back when it decided so to do. Ms. Martineau, on the other hand, testified that there was no agreement of when the loans and expenses would be paid back [ 10 ] Despite all this, there were never any directors’ resolutions issuing or transferring shares to Ms. McGovern-Burke. She did not know whether she would be receiving shares from Ms. Martineau or whether the shares would be issued from treasury. All that she knew was that she was a fifty percent shareholder in Wine-Ohs, along with Ms.

Martineau. [ 11 ] After Wine-Ohs purchased the premises, the parties discussed entering into a unanimous shareholder agreement. Drafts were exchanged but it was never signed. [ 12 ] The transaction to purchase the premises closed on May 22, 2012. The business was a “turn-key” operation, so it continued to operate as it had before the closing, but Wine-Ohs had to get its own licenses. Ms. McGovern-Burke testified that she was taking care of the business’s finances, including payroll, accounts payable, purchasing supplies, arranging private bookings, and hiring and firing staff. Ms.

Martineau was in charge of branding, booking music, designing the basement and ordering wine. Neither of them was paid for these services, as they felt this was their “sweat equity” that was necessary to make the business a success. [ 13 ] With their initial monetary contributions, the business had sufficient cash-flow for food, liquor and other expenses. It was doing well. As for ongoing expenses, both Ms. McGovern-Burke and Ms. Martineau used their personal credit cards to pay suppliers and other vendors. They tried to share these expenses. Ms.

McGovern-Burke testified that she would give her back-up receipts to the bookkeeper. She does not know what has happened to those receipts as they were out of her hands. They would submit their expense reports and sign off on the expense reports of the other. Although Wine-Ohs repaid some of these expenses, the parties wanted to build their bank account to pay for the renovations they were intending to undertake in August of 2012. [ 14 ] Ms. McGovern-Burke provided this Court with a number of her expense reports, and cross-referenced these to her credit card statements.

She testified that she had incurred all these expenses on behalf of Wine-Ohs. Ms. McGovern-Burke also provided this Court with a spreadsheet that Ms. Martineau had requested, which shows the expenses that each of them had incurred on Wine-Ohs’ behalf and amounts that Wine-Ohs had paid to each of them to cover these expenses. This spreadsheet shows that Wine-Ohs still owes Ms. McGovern-Burke $38,213.76. [ 15 ] When Ms. McGovern-Burke and Ms. Martineau first looked at the premises, they decided that the basement required extensive renovations. Ms. McGovern-Burke suggested that Mr.

McGovern-Burke could assist with the renovations, both as a designer and general contractor. This would save them money. Mr. McGovern-Burke’s role was to oversee the renovations. He would hire the tradespeople who would do the actual work. He would also do some of the work himself, although he does not hold any journeyman’s tickets. He would keep Ms. McGovern-Burke and Ms. Martineau apprised of the progress of the renovations. [ 16 ] Ms. Martineau testified that she did not feel they were going to pay Mr. McGovern-Burke for his services. There was certainly no discussion about making him a shareholder.

Despite this, Ms. Martineau acknowledged that Mr. McGovern-Burke did a fair amount of work during the renovations. When he completed his role in the renovations at end of August 2012, Mr. McGovern-Burke discussed his payment with Ms. Martineau and Ms. McGovern-Burke. He testified that he amassed about 500 hours of work, and the parties came up with a number of $35,000 for his work. Instead of cash, they decided he would get 10% of Wine-Ohs’ shares. Mr. McGovern-Burke was never issued his 10% of the shares. Nor did he receive payment for his services. After he completed the renovations, Mr.

McGovern-Burke became Wine-Ohs’ handyman. He would complete whatever tasks were required of him. His services were required constantly to maintain the 100-year old building in which Wine-Ohs was located. He did not keep track of any hours for his work as a handyman, as, in his mind, he was now a shareholder, and whatever he did was for the betterment of the business. When the McGovern- Burkes no longer came to the premises, Ms. Martineau stated that there were still many things that had to be completed and there were

defects that had to be resolved. She never advised Ms. McGovern-Burke of these additional tasks or of the defects. [17] In February of 2013, Ms. McGovern-Burke and Ms. Martineau decided that they simply could not work together. There wereexchanges of emails that discussed how they would structure Ms. McGovern-Burke’s buy-out. This Court will discuss details of theemail exchanges later in these reasons. [18] The initial offer that Ms. McGovern-Burke made to Ms. Martineau was a “shotgun-type” arrangement, in which Ms.Martineau would buy-out Ms. McGovern-Burke, or Ms. McGovern-Burke would buy-out Ms. Martineau.

It was eventually decided thatMs. Martineau would buy-out Ms. McGovern-Burke, and that Ms. McGovern-Burke would provide Ms. Martineau with time to pay. Ms.Martineau wanted a valuation of Wine-Oh’s business, but this was never done. [19] Even though the buy-out deal had not yet closed, Ms. Martineau changed the locks to the premises so Ms. McGovern-Burkecould not gain access to them. Ms. Martineau also removed Ms. McGovern-Burke’s access and authority with Wine-Ohs’ bank. In otherwords, Ms. Martineau was moving forward as though the buy-out deal had closed, but had not yet provided Ms.

McGovern-Burke withthe promissory note and security that Ms. McGovern-Burke had requested as part of the buy-out transaction. Ms. McGovern-Burke feltthat Ms. Martineau was “changing the deal,” in that she did not want to provide Ms. McGovern-Burke with any security for the amountson which they had agreed, or that any security that Ms. Martineau provided to her would be postponed to any other security that Ms.Martineau wanted to grant to others. [20] The buy-out deal did not close. Despite this, on March 5, 2013, Ms. Martineau changed the corporate records with the AlbertaRegistrar of Corporations. It showed Ms.

Martineau as the sole shareholder. Ms. McGovern-Burke had not authorized this change. [21] Part of the transaction on which Ms. McGovern-Burke had agreed involved Mr. McGovern-Burke, as he was allegedly ashareholder by this time. After the parties had their falling out, Mr. McGovern-Burke, at Ms. Martineau’s request, sent Wine-Ohs aninvoice on behalf of M-B Ltd for $68,281, which represented the hours he had put into the renovations and other tasks, including thosehe completed before undertaking the renovations.

He created this invoice using text messages, emails and his “memory.” He did not keeprecords of the time he spent doing the various tasks. He sent this to Ms. Martineau on June 11, 2013. This included the $35,000 he hadinitially been promised. Ms. Martineau was “shocked” when she received this, as they had never agreed to this, or that Mr. McGovern-Burke was even going to be paid an hourly rate. The hourly rate was high ($65 per hour) and she cannot even determine how many hourshe actually worked. These, she says, were created after-the-fact. [22] Ms.

McGovern-Burke claims that she is still owed the balance of the expenses she incurred on Wine-Ohs’ behalf, and her$105,000 initial investment. Although she says that she issued a demand, no written demand was ever produced to this Court. She did,however, tell Ms. Martineau on several occasions what she felt she was owed and how much. The financial statements that were preparedfor 2012 and 2013, do not properly reflect what is owed to her. [23] Mr. McGovern-Burke claims he is still owed something for the work he performed for Wine-Ohs. III. Discussion A.

The “Without Prejudice” Correspondence [24] A preliminary matter with which this Court must deal concerns the correspondence that the parties had which involved Ms.McGovern-Burke’s buy-out. Ms. Martineau argues that these correspondences were “without prejudice,” as they were made incontemplation of litigation. Ms. McGovern-Burke argues that these correspondences merely reflected the parties’ positions (andagreement) on how Ms. Martineau would buy her out. [25] Ms.

Martineau presented this Court with the decision of Wachowich J, as he then was, in Ed Miller Sales & Rentals Ltd vCaterpillar Tractor Co (1990), Alta LR (2d) 330, (AB KB), 105 AR 4 (QB), in support of the proposition that thecontent of “without prejudice” negotiations cannot be adduced as evidence during trial or examined for discovery.

This Court agrees withthe policy principle that Wachowich J puts forth at para 6 of his decision that “parties should be encouraged to settle their disputeswithout litigation; to expose admissions made during negotiations for settlement would undermine this policy.” He was dealing,however, with a situation where the plaintiff had already commenced the action. Thereafter, the parties began their negotiations. Here,neither Ms. McGovern-Burke nor M-B Ltd had commenced their actions. In fact, when one reviews the correspondence, no legalproceedings were even contemplated until, as Ms. McGovern-Burke alleges, Ms.

Martineau “changed the deal.” [26] Ms. Martineau also provided this Court with the decision of Slatter J, as he then was, in Hansraj v Ao, 2002 ABQB 385,[2002] 8 WWR 725 [Hansraj] , rev’d on other grounds 2004 ABCA 223, [2005] 4 WWR 669, 34 Alta. LR (4th) 199, 354 AR 91. SlatterJ provides the 3 conditions that must exist for a party to be able to take advantage of the “without privilege” nature of communicationsThey are as follows: (

a) A litigious dispute must be in existence or within contemplation; (

b) The communication must be made with the express or implied intention that it would not be disclosed to the Court in the eventnegotiations failed; and (

c) The purpose of the communication must be to attempt to effect a settlement. Hansraj at para14 (citations excluded). [27] Slatter J went on to say “[t]he appropriate approach is to examine the correspondence as a whole, and in context, and to seewhether the rationale for the privilege exists”: Hansraj at para 20 (emphasis added). As mentioned earlier, there was no litigious dispute

in existence or within contemplation at the time parties started their discussions and negotiation of Ms. McGovern-Burke’s exit fromWine-Ohs. The parties were simply negotiating the terms of her exit. In fact, it appeared that the parties had negotiated those terms, andwere simply awaiting the comments of Ms. Martineau’s legal counsel concerning those terms. There was certainly a “dispute” inasmuchas Ms. McGovern-Burke wanted Ms. Martineau to buy her out of Wine-Ohs. However, they were nowhere nearing a “litigious dispute.”The “dispute” only became “litigious” when Ms.

Martineau said “technically, you don’t have shares in the company” on March 12,2013, after which Ms. McGovern-Burke said she is “about to call a lawyer and begin a lawsuit.” [28] Because there was no “litigious dispute,” there was nothing to settle. Even after the March 12, 2013, exchange between theparties, they were still working on how best to facilitate Ms. McGovern-Burke’s buy-out. When they could not come to terms, Ms.McGovern-Burke commenced her litigation.

As far as this Court is aware, no further efforts to “effect a settlement” were undertakenthereafter. [29] In any event, when this Court reviews the correspondence, it provides little more than the parties’ testimony during the trial ofthis matter. The correspondence simply repeats what the parties provided to this Court as part of their viva voce evidence. B. Ms. McGovern-Burke’s “Standing” [30] As one can see from the foregoing exchange that took place between Ms. Martineau and Ms. McGovern-Burke on March 12,2013, Ms. Martineau takes the position that Ms.

McGovern-Burke was “technically” not a shareholder in Wine-Ohs. Accordingly, sheargues, this case should be one of specific performance to enforce the alleged share purchase agreement. Ms. McGovern-Burke did notcomplete a subscription for the purchase of her shares, the directors did not approve the issuance or transfer of shares into her name, andWine-Ohs never issued a share certificate to her. In short, there was no offer, acceptance, or consideration for the purchase of the sharesand the subject-matter was not even clear. [31] Ms.

McGovern-Burke argues that the real key is the parties’ words, on which they do not substantially disagree, and theiractions following their initial meetings. From this, she argues, this Court may infer a consummated contract for the purchase of theshares. [32] It is clear that from the outset, the parties intended that they would be equal shareholders in Wine-Ohs. They testified to thisfact. Ms. Martineau went further. She filed the Annual Return soon after they had their initial meetings, which showed Ms. McGovern-Burke as a fifty percent shareholder.

Like the parties with whom Goss J was dealing in Nowosad v Boutilier, 2015 ABQB 763[Nowosad], Ms. Martineau and Ms. McGovern-Burke were not sophisticated businesswomen. Goss J went on to say the following, whichis very similar to what is before this Court: Tyler and Jordy are not sophisticated businessmen. They launched HBII with little in the way of documentation.

The evidence before theCourt is that the intention of the parties was that 50% of the shares of HBII would be issued to the Nowosads and 50% to the Boutiliers.Jordy's Affidavit evidence, confirmed on questioning, is that it was ultimately decided that the shares would be held equally by Tylerand Jordy. Nowosad at para 64. [33] Whether Wine-Ohs issued treasury shares to Ms. McGovern-Burke or Ms. Martineau was going to transfer one-half of hershares to Ms. McGovern-Burke matters not to this Court. The parties were ad idem on the structure of Wine-Ohs; Ms. Martineau wouldhave fifty percent of the shares and Ms.

McGovern-Burke would have fifty percent. There was little in Wine-Ohs at the time of the initialdealings between the parties. Ms. Martineau admitted as much. In any event, Ms. McGovern-Burke contributed the $10,000 very soonafter the parties’ initial discussions as the down payment for the premises. Thereafter, each of the parties contributed an almost equal,substantial amount of money to facilitate the purchase of the premises and cash flow for Wine-Ohs.

This Court is unclear how Ms.Martineau wants this Court to categorize these monies, but it is clear that the parties were treating each other as equal shareholders. [34] Ms. Martineau argues that Wine-Ohs did not issue a share certificate to Ms. McGovern-Burke or undertake the usualcorporate formalities that would evidence the issuance of the shares to Ms. McGovern-Burke. Like the parties in Nowosad the parties“launched” into the business of Wine-Ohs with little in the way of documentation.

They simply began carrying on the business equally.This Court agrees completely with Ground J in Fund of Funds Ltd, Re (2004), (ON SC), 2 CBR (5th) 191 (Ont SupCt Just) at para 8, when he said the following: … With respect to the lack of share certificates, I think it is settled law that a share certificate is simply evidence of the ownership of theshares and that it is possible for a person to be a shareholder of a corporation without having a share certificate issued to him or herevidencing his or her ownership of the shares of the corporation.

See also Lindsey Estate v Strategic Metals Corp, 2009 ABQB 212 at paras 19-22. [35] Of course, there must be evidence to show that the person is, indeed, a shareholder in the corporation. It would be ludicrousfor a person to say that they own shares in a particular corporation, with no evidence on how or when they purchased the shares. In thecase at bar, there is adequate evidence to show that Ms. McGovern-Burke acquired a share interest in Wine-Ohs. [36] In an email that Ms. Martineau sent to Ms.

McGovern-Burke on February 14, 2013, she said “I’m still 50% owner [of Wine-Ohs].” When questioned who the other fifty percent owner was, she admitted that it was Ms. McGovern-Burke. Furthermore, Ms.Martineau filed the Annual Return which showed Ms. McGovern-Burke as a fifty percent shareholder. No one forced her to do this. Shedid it of her own volition. This is the clearest evidence of the intention of the parties. [37] This Court has no hesitation in finding that Ms. McGovern-Burke was, and continues to be, a fifty percent shareholder inWine-Ohs, with the other fifty percent shareholder being Ms. Martineau.

As an aside, the parties also agreed that Ms. McGovern-Burkewould be a director. This Court finds, for the same reasons, that Ms. McGovern-Burke was, and continues to be, a director of Wine-Ohs.

C. Expenses and Shareholder Loan [ 38 ] This Court is not entirely clear of the basis on which Ms. Martineau and Wine-Ohs is challenging the expense claims that Ms. McGovern-Burke paid on Wine-Oh’s behalf. It is not so much that they challenge the expenses themselves. It is the timing of the payment of those expenses that they appear to be challenging. [ 39 ] Certainly, Ms. Martineau challenged some of the expenses that Ms. McGovern-Burke said that she had paid on Wine-Ohs’ behalf. Ms. McGovern-Burke, however, justified those expenses and she was not challenged further. [ 40 ] Ms.

McGovern-Burke provided this Court with print-outs showing her expenses and cross-referenced them to her Visa statements that she also provided. She seeks to be reimbursed for those expenses and asks this Court to render judgment against Wine- Ohs for them. [ 41 ] Throughout the discussions that Ms. Martineau and Ms. McGovern-Burke had concerning Ms. McGovern-Burke’s buy-out, Ms. McGovern-Burke has always maintained that she wanted Wine-Ohs’ to repay these expenses. It should come as no surprise to Ms. Martineau that Ms. McGovern-Burke has sued to have Wine-Ohs repay them. Ms.

McGovern-Burke paid those amounts on Wine-Ohs’ behalf, and has proved to this Court that there is a balance that remains due and owing. Ms. McGovern-Burke shall have judgment for the full amount of the expenses that remain due and owing, along with interest on that amount, calculated in accordance with the Judgment Interest Act , RSA 2000, c J-1 [ JI Act ], and the regulations promulgated under the JI Act . [ 42 ] Similarly, Ms. Martineau does not challenge the fact that Ms. McGovern-Burke paid $105,000 to Wine-Ohs for the purchase of the premises and Wine-Ohs’ initial cash-flow. Wine-Ohs argues that Ms.

McGovern-Burke has not demanded payment of that amount, so there is no cause of action. Although it would have been helpful to have a written demand for payment, that is not the sine qua non for an amount to be due and owing. What is necessary is that the amounts were advanced and the creditor seeks payment of them.

Besides, the Alberta Court of Appeal said following in Canada Trustco Mortgage Company v 112293 Holdings Ltd , 1984 ABCA 102 at para 7 : Even if a demand were required to make the debt due in this case, and we do not so hold, the Dwigans decision [ Royal Bank of Canada v Dwigans , [1983] 1 WWR 672 (Alta CA)] is also authority that the issuance of a statement of claim is the most emphatic means of making the required demand.

See also Dushenski v Lymer , 2010 ABQB 605 , 500 AR 48 at paras 28-31 , 34. [ 43 ] The Alberta Court of Appeal went on to say in para 8 that “[n]o action in this case may be described as precipitous.” This Court finds the same in the case at bar. Again, Ms. Martineau and Wine-Ohs’ was well-aware of Ms. McGovern’s interest in having this amount paid. She commenced her action, but took no other steps to freeze Wine-Ohs’ assets or otherwise seek any type of prejudgment relief. She simply let Wine-Ohs carry on its business. [ 44 ] Ms.

McGovern-Burke has shown this Court that this advance was for Wine-Ohs’ benefit inasmuch as Wine-Ohs was able to purchase the premises in which it is now operating, and received the necessary cash-flow to purchase inventory and undertake improvements. [ 45 ] Ms. McGovern-Burke shall have judgment for the $105,000, plus interest in accordance with the JI Act and the regulations promulgated thereunder. D. Renovation and Other “Handyman” Expenses [ 46 ] Mr. McGovern-Burke, Ms. Martineau and Ms. McGovern-Burke agreed that the value of Mr. McGovern-Burke’s work on the renovations equated to $35,000.

This was exhibited in Ms. Martineau’s email dated February 14, 2013, in which she said “Ron was to be issued 10% of shares or payment of $35,000 not both.” There was some uncertainty in exactly how Mr. McGovern-Burke (or M-B Ltd) would acquire the 10 percent shares. Would they be issued from treasury? Would each of Ms. McGovern-Burke and Ms. Martineau give up 5 percent of their shares? Would Ms. McGovern-Burke give up 10 percent of her shares? Ms. Martineau testified that she understood the arrangement to be the latter. The McGovern-Burkes thought that each of Ms. Martineau and Ms.

McGovern-Burke would give up 5 percent of their shareholdings. Although this Court does not accept Ms. Martineau’s understanding of the arrangement, it is still uncertain exactly how the parties proposed that the arrangement would unfold. [ 47 ] Ms. Martineau also argues that there was a lack of clarity concerning who exactly was doing the work. Was it Mr. McGovern- Burke or M-B Ltd? If it was the former, then the wrong party has sued Wine-Ohs. To this Court’s mind, it matters not who the plaintiff in the action is. Mr. McGovern-Burke felt that it was M-B Ltd that was doing the work. Why should it matter to Ms.

Martineau? She got the benefit of the work no matter who did it. It would be different if she were suing Mr. McGovern-Burke for unfinished work. In such a case, if he were to say, “it was not me, but M-B Ltd that was doing the work, and M-B Ltd is impecunious,” there might be an issue of who exactly Ms. Martineau contracted with. Here, it is up the Mr. McGovern-Burke to determine who did the work.

This Court finds that it was M-B Ltd who performed the renovations. [ 48 ] This Court gives M-B Ltd judgment for the agreed-upon $35,000, plus interest in accordance with the JI Act and the regulations promulgated thereunder. [ 49 ] M-B Ltd also seeks judgment for $30,030, for work it undertook after it completed the renovations. As mentioned earlier, Mr. McGovern-Burke provided this Court with a copy of an invoice he sent to Ms. Martineau and Wine-Ohs. As mentioned earlier, Mr. McGovern-Burke has not satisfied this Court that he prepared this invoice on any principled basis.

To this Court’s mind, he simply pulled numbers out of the air and says “these are the hours I put into the premises as a handyman.” He provided no details of the work he actually did. He did not even provide this Court with photographs of the work he did. Anything might have helped his claim. He

provided nothing except the invoice. [50] Mr. McGovern-Burke argues that this Court should make an award based on quantum meruit. However, it is M-B Ltd’s onusto show the work it did and provide this Court with some evidence to help it establish the reasonable amount for the goods and services itprovided. For this Court to award M-B Ltd something for the work it did after the renovations would be to ask it to pull a number out ofthe air (much like it has found Mr. McGovern did in estimating the hours he worked). This Court basis its decisions on evidence, notspeculation.

Accordingly, it dismisses M-B Ltd’s claim for the work it did post-renovation. E. Oppression [51] This Court has found that Ms. McGovern-Burke is a fifty percent shareholder in Wine-Ohs. As well, based on her agreementwith Ms. Martineau, the other fifty percent shareholder, Ms. McGovern-Burke was to be a director of Wine-Ohs. Finally, this Court hasfound that Wine-Ohs owes her money for her loan to it, as well as the unpaid expenses that she incurred on Wine-Ohs’ behalf. In allthese capacities, Ms. McGovern-Burke is a “complainant” as defined in the BCA s 239. [52] In such capacity, Ms.

McGovern-Burke seeks a remedy under the so-called oppression sections of the BCA. BCA s 242provides, in part, as follows: 242(1) A complainant may apply to the Court for an order under this section.

(2) If, on an application under subsection (1), the Court is satisfied that in respect of a corporation or any of its affiliates (

a) any act or omission of the corporation or any of its affiliates effects a result, (

b) the business or affairs of the corporation or any of its affiliates are or have been carried on or conducted in a manner, or (

c) the powers of the directors of the corporation or any of its affiliates are or have been exercised in a manner that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer, theCourt may make an order to rectify the matters complained of. [53] BCA s 242(3) then gives the court very broad discretion to “make any interim or final order it thinks fit,” including a list ofseventeen remedies specifically outlined. Here, Ms. McGovern-Burke wants this Court to reinstate her as a fifty percent shareholder anddirector of Wine-Ohs.

It also asks this Court to restrain Ms. Martineau from causing Wine-Ohs to make any further payments, withoutMs. McGovern’s consent, and a full accounting from May 1, 2012. Finally she seeks to have this Court direct that Ms. Martineaupurchase Ms. McGovern’s shares in Wine-Ohs. As an alternative, she seeks the dissolution and winding-up of Wine-Ohs. These are allremedies that this Court might award under BCA s 242(3). [54] Of particular interest is the fact that this Court may, pursuant to BCA s 242(3)(g), require the corporation or any other personto purchase the securities of a security holder.

This, it seems, gives this Court the discretion to resolve shareholder disputes through acompulsory purchase of shares. [55] In JSM Corp (Ontario) Ltd v Brick Furniture Warehouse Ltd (2006), (ON SC), 16 BLR (4th) 227 (OntSup Ct Just) at para 67, Cumming J said the following: Whether or not oppression has occurred is fact specific. However, our courts have provided some guidance as to the nature of the inquiryto be made.

First, it is necessary for the complainant to establish the complainant's reasonable expectations in the relationship betweenthe complainant, corporation and other stakeholders. … [O]nce it has been determined what the reasonable expectations … are, or couldbe as a matter of law, it is then necessary to determine if the defendant complied with them. The inquiry, therefore, is not focused on theintent of the potential oppressor.

While a finding of bad faith or want of probity may indicate oppression, it is reasonable expectations,and not an intent to harm, that is at the heart of the inquiry … [Citations excluded]. [56] A couple of things are important from this quotation. First, whether oppression, unfair prejudice or unfair disregarding hasoccurred is fact-specific. The parties in the case at bar have provided this Court with many cases to illustrate their arguments.

Althoughhelpful, they are only illustrations and this Court must do its own analysis to determine whether oppression, unfair prejudice or unfairdisregarding has occurred. [57] Second, it is Ms. McGovern-Burke’s onus to establish her “reasonable expectations,” and then this Court must determinewhether Ms. Martineau or Wine-Ohs has complied with or met those reasonable expectations. [58] Finally, it is important to note that this Court need not find bad faith or want of probity on Ms. Martineau’s part or Wine-Ohs’part. The focus is on effect, not motive.

Any remedy is not intended to punish the oppressor, only remedy the oppression. This isreinforced by the closing words of BCA s 242(2), which provide that “the Court may make an order to rectify the matters complained of”(emphasis added). However, the motive (or result of the exercise of that motive) might point to oppression, unfair prejudice or unfairdisregarding. [59] These notions, and the concepts that Cumming J articulated, were more recently reinforced and repeated by the SupremeCourt of Canada in BCE Inc (Re), 2008 SCC 69, [2008] 3 SCR 560 [BCE] at paras 56-59.

It went on to say that, “[t]he reasonableexpectations of these stakeholders is the cornerstone of the oppression remedy”: BCE at para 61. It then said the following: As denoted by "reasonable", the concept of reasonable expectations is objective and contextual. The actual expectation of a particularstakeholder is not conclusive. In the context of whether it would be "just and equitable" to grant a remedy, the question is whether the

expectation is reasonable having regard to the facts of the specific case, the relationships at issue, and the entire context, including thefact that there may be conflicting claims and expectations. … Determining whether a particular expectation is reasonable is complicated by the fact that the interests and expectations of differentstakeholders may conflict. … The corporation and shareholders are entitled to maximize profit and share value, to be sure, but not bytreating individual stakeholders unfairly.

Fair treatment — the central theme running through the oppression jurisprudence — is mostfundamentally what stakeholders are entitled to "reasonably expect". BCE at paras 62-64. [60] The Supreme Court of Canada then goes on to describe the bases on which BCA s 242 rests by saying the following: … Even if reasonable, not every unmet expectation gives rise to claim under s. 241. The

section requires that the conduct complained ofamount to "oppression", "unfair prejudice" or "unfair disregard" of relevant interests. "Oppression" carries the sense of conduct that iscoercive and abusive, and suggests bad faith. "Unfair prejudice" may admit of a less culpable state of mind, that nevertheless has unfairconsequences.

Finally, "unfair disregard" of interests extends the remedy to ignoring an interest as being of no importance, contrary tothe stakeholders' reasonable expectations … The phrases describe, in adjectival terms, ways in which corporate actors may fail to meetthe reasonable expectations of stakeholders. BCE at para 67. [61] The court then goes on to consider 7 factors that a court might examine to determine whether a reasonable expectation exists,only 5 of which are relevant to the case at bar. 1.

The Nature of the Corporation [62] The Supreme Court of Canada says that the corporation’s size, nature, and structure are relevant factors when a court isassessing the complainant’s reasonable expectations, and goes on to say that “[c]ourts may accord more latitude to the directors of asmall, closely held corporation to deviate from strict formalities than to the directors of a larger public company”: BCE at para74. 2.

Relationships [63] The Supreme Court of Canada says that when the corporation is widely-held, and its shareholders are at arm’s length, a“different standard” may govern their relationships: BCE at para 75.

It cites Fergusson v Imax Systems Corp (1983), (ON CA), 150 DLR (3d) 718 at para 28 (Ont CA) for this factor, where Brooke JA said, “… when dealing with a close corporation, thecourt may consider the relationship between the shareholders and not simply legal rights as such.” In Ebrahimi v Westbourne GalleriesLtd, [1972] 2 All ER 492 at para 501 (HL), Lord Wilberforce said the following: A director-shareholder may find himself no longer a director, through removal, or non-reelection; this situation he must normally accept,unless he undertakes the burden of proving fraud or mala fides.

The just and equitable provision nevertheless comes to his assistance ifhe can point to, or prove, some special underlying obligation of his fellow members in good faith, or confidence, that so long as thebusiness continues he shall be entitled to management participation … … [A] limited company is more than a mere legal entity, with a personality in law of its own: that there is room in company law forrecognition of the fact that behind it, or amongst it, there are individuals, with rights, expectations and obligations inter se which are notnecessarily submerged in the company structure. 3.

Past Practice [64] The past practice undertaken by the shareholders and directors concerning participation in the corporation’s profits andgovernance may create or, at least inform, a complainant’s reasonable expectations, especially among shareholders of a closely-heldcorporation: BCE at para 76.

It provides an example from Gibbons v Medical Carriers Ltd, 2001 MBQB 229, 17 BLR (3d) 280, wherethe court found that shareholders had a legitimate expectation that monies the corporation paid out to shareholders would be paid to themin proportion to the percentage shares they held, and any payment that did not fulfill those expectations would be a breach of thoseexpectations: ibid. 4. Preventative Steps [65] Could the complainant have taken steps to protect itself against the prejudice it claims to have suffered? This may go todetermine whether the complainant’s expectations are reasonable: BCE at para 78. 5.

Representations and Agreements [66] The Supreme Court of Canada refers to shareholder agreements, which, this Court assumes, is a reference to writtenshareholder agreements: BCE at paras 79-80. It does not address oral agreements or communications between parties. However, whenone considers the other factors that the court says are important in determining a complainant’s reasonable expectations, oral agreements

must surely be a factor that a court must consider. In fact, in Westfair Foods Ltd v Watt (1991), 1991 ABCA 122 , 79 Alta LR(2d) 363 at para 26, 115 AR 34 (CA), Kerans JA, for the court, said the following: … The company and the shareholders entered voluntarily, not by duty or chance, into a relationship. Our guides are the rules in othercontexts, such as contract law, equity, and partnership law, where the courts have also considered just rules to govern voluntaryrelationships.

In very general terms, one clear principle that emerges is that we regulate voluntary relationships by regard to theexpectations raised in the mind of a party by the word or deed of the other, and which the first party ordinarily would realize it wasencouraging by its words and deeds. This is what we call reasonable expectations, or expectations deserving of protection. Regard forthem is a constant theme, albeit variously expressed, running through the cases on this

section or its like elsewhere. I emphasize that allthe words and deeds of the parties are relevant to an assessment of reasonable expectations, not necessarily only those consigned topaper, and not necessarily only those made when the relationship first arose. [Emphasis in original]. [67] After a court determines the reasonable expectations of the complainant, it must determine whether the corporation or itsdirectors has breached those reasonable expectations.

If there has been a breach, the court must consider whether that breach isoppressive, unfairly prejudicial to or unfairly disregards the complainant’s interests. The court must exercise caution in this regard.Although BCE articulated factors the court should examine, the examination should not be done piecemeal to determine whether therehas been oppression, unfair prejudice, or an unfair disregarding.

In Calmont Leasing Ltd v Kredl (1995), 1995 ABCA 174 , 165AR 343 at para 6, 30 Alta LR (3d) 16 (CA), the Alberta Court of Appeal said the following: We cannot agree that a piecemeal approach is appropriate, still less necessary. In our view, the trial judge could and did look at all of thematters complained of together. In a criminal case, it is trite law that one incident or circumstance may leave a very large doubt as to theintent of the accused, whereas a series of incidents and circumstances may prove bad intent beyond a reasonable doubt.

That is even moretrue in a civil case. [68] An issue of some importance is whether Ms. McGovern-Burke can resort to BCA s 242, given that she is an equal shareholderwith Ms. Martineau. In Mace v Dirk, 2006 ABCA 106, 59 Alta LR (4th) 38, 412 AR 207 [Mace] at para 29, the Alberta Court of Appealsaid the following: An oppression remedy is not generally available where the only directors and officers are the two equal shareholders of a closely-heldcorporation and neither has legal or de facto control: Munro v. Nopper, 2002 ABQB 810, 326 A.R. 58 (Alta. Q.B.), Vedova v. GardenHouse Inn Ltd., [1985] O.J.

No. 408, 29 B.L.R. 236 (Ont. H.C.J.), English v. Sylvan Lands Development Corp., 2004 ABQB 479, 368A.R. 132 (Alta. Q.B.). In Stech v. Davies (1987), (AB KB), 53 Alta. L.R. (2d) 373 (Alta. Q.B.), the actions of anequal partner in unilaterally increasing his own salary and taking other financial benefits were held to be unfair and oppressive to theother shareholder.

Unlike the situation in the case at bar, it appears that one shareholder had day-to-day control of the financial affairs ofthe corporation. [Emphasis added]. [69] In Munro v Nopper, 2002 ABQB 810 at para 25, 326 AR 58, Veit J quoted from Vedova v Garden House Inn Ltd (1985), 29BLR 236 (Ont HC) [Vedova], both of which the Alberta Court of Appeal referred to in Mace, when she said the following: [The oppression sections] continue to be confined to protection of minorities. Specifically, they are not intended as a method ofmediating between opposing groups of shareholders acting from a position of equality.

On the material before me, the latter is thesituation with which I am faced. In the context of s. 247, "oppressive" connotes an inequality of power or authority. There is none in theinstant case. "Unfair" connotes an obligation to act equitably or impartially in the exercise of power or authority. I find no suchobligation here. I find no such obligation where, as here, power and authority, in the legal sense, are equally divided, and are so dividedby pre-existing arrangement. The conduct of the respondents may, in the view of the applicants, be obstinate, perverse and recalcitrant.

Itmay be so in fact; I express no view. It is not "oppressive" or "unfair" within the meaning of s. 247. [70] Mace also referred to English v Sylvan Lands Development Corp, 2004 ABQB 479, 368 AR 132 (QB). In that case, Erb Jalso referred to the quotation form Vedova and said the following at paras 24-25: In the case before me, both parties had signing authority, they were equal shareholders and directors, both had made the same financialcontribution. Both parties were entitled to equally participate in all matters pertaining to company business. Mr.

English complained that he was not provided with copies of financial information. Surely, he simply had to ask the accountant for itif his partner was not cooperating in providing them. Mr. McPeak did not have greater rights or powers that Mr. English. [71] This Court recognizes that the original source of the oppression remedy referred to the remedy necessary to cure “fraud on theminority.” But the mere fact that the parties are equal shareholders does not answer the question whether one of the shareholders is beingoppressed. The court must look at all the circumstances to determine whether oppression exists.

This is why the Alberta Court of Appealsaid in Mace that the oppression remedy is “not generally available” to shareholders holding an equal number of shares.

It then went onto provide an exception that arose in Stech v Davies (1987), (AB KB), 53 Alta LR (2d) 373 (QB) [Stech]. [72] In the older case of Re Jermyn Street Turkish Baths Ltd, [1971] 3 All ER 184 at 199, Lord Bickley said the following: In our judgment, oppression occurs when shareholders having a dominant power in a company, either (1) exercise that power to procuresomething that is done or not done in the conduct of the company’s affairs or (2) procure by an express or implicit threat of an exercise ofthat power that something is not done in the conduct of the company’s affairs … [73] In Stech, Egbert J found that even though the parties were equal shareholders, one of them who held the dominant position inthe corporations from a management perspective, carried on the business and exercised his powers as a director of the corporations in a

manner that was oppressive, unfairly prejudicial to and unfairly disregarded the interests of the other as a shareholder, director and officer of the corporations. In other words, it was not so much that they were equal shareholders, but the way in which the business and affairs of the corporations were being operated that mattered. [ 74 ] In the case at bar, the fact that Ms. Martineau and Ms. McGovern-Burke are each fifty percent shareholders does not prevent this Court from finding oppression if one of the parties exerts dominance over the other.

As all the cases have held, each case depends on the unique facts before the court. [ 75 ] What were Ms. McGovern-Burke’s reasonable expectations? Wine-Ohs’ is a small, closely-held corporation. Its structure was comprised of 2 equal shareholder, who were the corporation’s directors. In BCE , the Supreme Court of Canada said that courts would accord more latitude to directors of small, closely-held corporations to deviate from strict formalities. In the case at bar, the directors deviated substantially from strict formalities. Wine-Ohs had no minute book, and it held no formal meetings. Ms. Martineau and Ms.

McGovern-Burke operated the business through discussions. Nothing appears to have been reduced to writing. They made decisions and acted on them. Ms. Martineau argues that Ms. McGovern-Burke is not a shareholder, as there was no subscription agreement, no directors’ resolutions, and no share certificate. Inasmuch as Wine-Ohs had no minute book, this Court highly doubts that any of those existed for Ms. Martineau’s shares or position as a director, or that any organizing minutes or resolutions were ever prepared for Wine- Ohs before Ms.

McGovern-Burke began this lawsuit. [ 76 ] Wine-Ohs is not simply a separate legal entity that exists separate and apart from Ms. Martineau and Ms. McGovern-Burke. Ms. Martineau incorporated it, but Ms. Martineau and Ms. McGovern-Burke gave it life. They contributed money and “sweat equity” into the corporation, which gave it this life. Wine-Ohs is a closely-held corporation. Ms. Martineau and Ms. McGovern-Burke shared decision-making authority from the outset, even though they undertook different roles.

This Court is left in no doubt that the parties accepted and agreed “that so long as the business continues [each of them] shall be entitled to management participation.” [ 77 ] Almost from the time Wine-Ohs purchased the premises, Ms. Martineau and Ms. McGovern-Burke were incurring costs on Wine-Ohs’ behalf. Ms. Martineau testified that there was no arrangement on how the parties would receive reimbursement for their expenses and repayment of the loans that each of them made to Wine-Ohs. Ms. McGovern-Burke testified that the arrangement was that each of them would be reimbursed for their expenses.

Once the expenses were repaid in full, they would then recover their shareholder loans. It was only after that point that the parties would receive any salaries or dividends. Their past practice indicates that their expenses were being paid, albeit not in exact amounts, but in lump sums when Wine-Ohs could afford it. This Court does not accept Ms. Martineau’s testimony that there was no arrangement. Her credibility was challenged when presented with cheques that bore her signature with a subject line which indicated “expenses.” This Court unreservedly accepts Ms. McGovern-Burke’s testimony in this regard.

Not only was her testimony credible, it made practical sense and the evidence showed that the payment of expenses was, indeed, Wine-Ohs’ past practice. Not only was this her expectation, but the payout structure was reasonable and wise for a start-up entity. [ 78 ] Could Ms. McGovern-Burke have taken any steps to prevent Wine-Ohs from meeting her reasonable expectations? Once the negotiations for Ms. Martineau to purchase Ms. McGovern-Burke’s interest in Wine-Ohs broke down, Ms. Martineau simply started running Wine-Ohs as her own. But she went further.

She changed the records with the Alberta Registrar of Corporations to show that Ms. McGovern-Burke was no longer one of Wine-Ohs’ shareholders, and that she was no longer a director. Inasmuch as Ms. Martineau thought that this is all it took to change the structure of Wine-Ohs (she had done this to make Ms. McGovern-Burke and shareholder and director in the first instance), Ms. McGovern-Burke was simply not in a position to prevent Ms. Martineau from taking the steps she did. As well, Ms. Martineau did not thereafter consult with Ms. McGovern-Burke concerning Wine-Ohs’ business and affairs.

Certainly, it is arguable that Ms. McGovern-Burke did not take any active steps to participate more actively in Wine-Ohs’ business and affairs, but she felt that Ms. Martineau had “shut her out.” In fact, Ms. McGovern-Burke took the drastic action of commencing the oppression action the moment she felt that she had lost any control over what was going to happen with Wine-Ohs. [ 79 ] The “words and deeds” of the parties speak to their agreement concerning the organization and operation of Wine-Ohs. They agreed at the outset that each would hold fifty percent of the shares, and that each would be a director.

Those are the “words.” The “deed” is clear when Ms. Martineau filed the Annual Return showing each of their shareholdings and their roles. It is completely disingenuous of Ms. Martineau, and this Court so finds, for her to say that her intent was that Ms. McGovern-Burke was simply financing the business of Wine-Ohs. Furthermore, this Court has no doubt that the parties, including Mr. McGovern-Burke, worked very hard to get Wine-Ohs up and running. Would a “banker” (and Mr. McGovern-Burke) work this hard? [ 80 ] In the end, this Court has no hesitation in finding that Ms.

McGovern-Burke’s reasonable expectations were that she was and would remain a fifty percent shareholder in Wine-Ohs and one of its directors. Ms. Martineau used her position of dominance, being the operator of the business and the person who had control over the “corporate records” to squeeze Ms. McGovern-Burke out of the corporation and the business. Furthermore, the financial statements that Ms. Martineau presented to this Court do not reflect Wine-Ohs’ actual financial situation.

Although prepared by a certified general accountant, this Court has no doubt that this is a situation of “garbage in-garbage out.” The balance sheet, and the notes thereto are simply inaccurate, and do not reflect what this Court has found. [ 81 ] This Court has no hesitation in finding that Ms. Martineau, in her capacity as a director of Wine-Ohs, and Wine-Ohs itself have breached Ms. McGovern-Burke’s reasonable expectations by unfairly disregarding her interests. This has caused her unfair prejudice.

Furthermore, by taking the actions she did in changing the corporate records filed with the Alberta Registrar of Corporations before the parties had resolved their differences, Ms. Martineau has acted oppressively as against Ms. McGovern-Burke. [ 82 ] What, then, is the remedy for these breaches?

It is important to note that the wording in BCA s 242(2) itself helps to guide this Court, when it says, “the Court may make an order to rectify the matters complained of.” Although this Court might be inclined to say that it should not “kill a fly with a sledge hammer,” Farley J said it more eloquently in 820099 Ontario Inc v Harold E Ballard Ltd (1991), 3 BLR (2d) 123 (Ont Gen Div) at 197, aff'd (1991), 3 BLR (2d) 113 (Ont Div Ct) , where he said the following: The court should not interfere with the affairs of a corporation lightly.

I think that where relief is justified to correct an oppressive type of situation, the surgery should be done with a scalpel and not a battle axe. I would think that this principle would hold true even if the past conduct of the oppressor were found to be scandalous. The job for the court is to even up the balance, not tip it in favour of the hurt

party. [ 83 ] The object of this exercise is not to destroy Wine-Ohs, or make it impossible for it to comply with any order that this Court makes. The object is, like many civil actions, to restore the parties to status quo ante . [ 84 ] Ms. McGovern-Burke asks this Court to order the following: (

a) Wine-Ohs shall issue, or Ms. Martineau shall transfer, as the case may be, to Ms. McGovern-Burke shares sufficient to make her a fifty percent shareholder of Wine-Ohs ( BCA s 242(3)(e)); (

b) Ms. McGovern-Burke will be reinstated as one of Wine-Ohs’ directors ( BCA s 242(3)(f)); (

c) Wine-Ohs shall provide Ms. McGovern-Burke with audited financial statements from May 1, 2012, to the present date ( BCA s 242(3)(k)); and (

d) Wine-Ohs shall obtain a business valuation to allow for the buy-out of Ms. McGovern-Burke by either Wine-Ohs or Ms. Martineau ( BCA s 242(3)(g). [ 85 ] This Court orders the items that Ms. McGovern-Burke has requested in (

a) and (b), above. As well, it orders that Wine-Ohs will immediately rectify its records, and those it has filed with the Alberta Registrar of Corporations, to show the issuance or transfer of the shares to Ms. McGovern-Burke and her reinstatement as a director pursuant to BCA s 242(3)(m). [ 86 ] Wine-Ohs will obtain audited financial statements from May 1, 2012, to the present date, at its sole cost and expense. The audit will be performed by a chartered accountant, who is a member in good standing with the Canadian Institute of Chartered Accountants. Of course, Ms.

McGovern-Burke may challenge these financial statements by retaining her own accountant at her own cost. [ 87 ] This Court also orders that Wine-Ohs shall obtain a business valuation, at its sole cost and expense, to facilitate a buy-out of Ms. McGovern-Burke’s interest in it. What should be the valuation date?

In McAteer v Devoncroft Developments Ltd , 2001 ABQB 917 at para 502 , 307 AR 1, 99 Alta LR (3d) 6 [ McAteer ], Rooke J, as he then was, provided the following quotation from D Prentice, "Minority Shareholder Oppression: Valuation of Shares" (1986) 102 Law Q Rev 179 at184, where the author said the following: ... The other issue of importance dealt with in recent cases is the date on which the valuation should be taken to have been made. For example, should it be at the date the oppression occurs, the date of the petition, the date of judgment, or at some other date?

Keeping in mind the general principle that the oppression should not be allowed to affect the value of the shares, the following principles can be culled from the cases. First, if there is any "such a thing as a general rule" then the "date of the order or the actual valuation would be more appropriate than the date of the presentation of the petition or the unfair prejudice" ( Re London School of Electronics Ltd. , [1985] 3 W.L.R. 474 , 484B). The reason for this being that an interest in a going concern ought normally to be valued at the date of the purchase order.

However, as Nourse J. pointed out in Re London School of Electronics Ltd. , the overriding requirement of fairness may make this rule subject to so many exceptions that the exceptions will gobble up the rule: in fact the first general principle may be that there is no general principle. Second, the valuation date should not (

a) deprive the petitioner of the benefits of any contributions he has made to the business success of the company, or (

b) confer on the petitioner the benefits of contributions to the company's business for which he has not been responsible. Both of these principles are implicit in Re London School of Electronics Ltd. (see also Re O.C. (Transport) Services Ltd. [1984] B.C.L.C. 251) ... [Emphasis removed]. [ 88 ] In Smith v Ritchie , 2009 ABCA 373 [ Smith ], there were corporations comprised of 2 corporate shareholders. The principals of the corporate shareholders, Smith and the Ritchies, were directors, officers and employees of the corporation.

On August 17, 1998, Smith resigned from the corporation, but he advised the Ritchies that he would remain a shareholder and director until his buy-out was finalized. The Ritchies did not act on Smith's invitation for a buy-out at the time of Smith's resignation. They simply stopped communicating with him. Smith was given no information about the corporations and he did not participate in their management. On September 9, 2004, Smith filed an originating notice seeking relief from oppression.

On February 21, 2007, a chambers judge held that Smith's rights as a shareholder and director had been oppressed, unfairly prejudiced, and unfairly disregarded because the Ritchies had failed to provide him with the annual financial statements of the corporations and had failed to allow him to participate effectively as a shareholder and director since the date of his resignation. He ordered the respondents to purchase Smith's shares at fair market value. [ 89 ] The court held that the proper valuation date was August 17, 1998, the date of Smith's resignation.

It came to this conclusion on the basis of a variety of factors, which are transcribed in the Alberta Court of Appeal decision as follows: Therefore, taking into consideration the following factors: the duration of the shareholder relationship; the contribution made by Smith and the other shareholders to the company at the time the relationship started in 1995 and ended in 1998, whether financial or some other form; the liabilities and financial resources of the company at time Smith left; the fact that any equity the company and its successors acquired was well after the date Smith left; and those matters discussed in these reasons already, I set the valuation date of the value of the shares of the applicant in Taylor Made Homes Inc. and Ultimate Renovations and Additions Inc, at 17 August, 1998, the date Mr.

Smith left the company. Smith at para 14 . [ 90 ] This appears to be keeping with the second valuation methodology that Prentice articulates in the quotation that Rooke J provided in McAteer . Nonetheless, the Alberta Court of Appeal found that the judge erred in setting that date as the valuation date. It said that the judge focussed on Smith's conduct in leaving his employment without adequate notice, but the corporations made no claim

against him at the time, “and seemingly preferred to continue its business without any further involvement on his part.” As well, the Ritchies took no steps to acquire Smith's shares, but chose instead effectively to eliminate his participation as a director and shareholder. The valuation date that the judge chose “did nothing to protect Smith in his capacities as a shareholder and director - the reason behind the remedy.” Thus, the Alberta Court of Appeal held as follows: In our view, the respondents should not be entitled to benefit from their oppressive acts.

The fact is that after his resignation Smith continued as a shareholder and director in Taylor Homes and Ultimate Renovations, and he was entitled to continue to participate in these capacities. His participation in these corporations, however, was thwarted by the oppression of the respondents. The evidence shows that the value of Smith's shares appreciated during the period of the respondents' oppression, and his reasonable expectation, in his capacity as a shareholder, would have been to share in the increased value of his shares in the same fashion as the other shareholders.

We see no reason, therefore, in the circumstances of this case, for the court to depart from the normal situations; i.e., valuation of the shares should be made as at the date of the commencement of the action - September 9, 2004. Smith paras 23-24 . [ 91 ] There is logic to both these approaches. Certainly, after Ms. McGovern-Burke was eliminated from Wine-Oh’s operations, she continued nothing to its success, if any; except Wine-Ohs’ continued use of her money that allowed it to acquire the premises and the expenses claims for which it has not reimbursed her. However, but for the oppression that Ms.

Martineau and Wine-Ohs committed on her, she would still be a shareholder and a director and would be entitled to the fruits of any success during the period she held the shares. [ 92 ] The valuation of the business will be conducted using May 16, 2013, as the valuation date, the date Ms. McGovern-Burke commenced the action. The business valuation must take account of the amounts that this Court has awarded to Ms. McGovern-Burke for the $105,000 and the unpaid expenses.

The business valuation will be conducted by a chartered business valuator, who is a member in good standing with The Canadian Institute of Chartered Business Valuators. This valuation will be done at Wine-Ohs’ sole cost and expense, and will be completed within 90 days following the entry of the order resulting from these reasons. Of course, should Ms.

McGovern-Burke want to challenge the results of the chartered business valuator’s report, she may retain her own chartered business valuator at her sole cost and expense. [ 93 ] If, during the business valuation and audit that this Court has ordered, the persons performing those functions suspect that Wine-Ohs’ business involves other entities, they shall report that matter to this Court, which may direct that similar audits and business valuations be conducted on those entities, as well. [ 94 ] The business valuation and audited financial statements will form the foundation for Wine-Ohs or Ms.

Martineau to purchase Ms. McGovern-Burke’s share interest in Wine-Ohs, pursuant to BCA s 242(3)(g), which this Court directs. Of course, part of the closing will be that Ms. McGovern-Burke will resign as a director. IV. Costs [ 95 ] Ms. McGovern-Burke has been substantially successful in her actions. She shall have her party-party costs for the expense claim/loan action and the oppression action. [ 96 ] As there was mixed success in the M-B Ltd action, the parties will bear their own costs. Heard on the 20 th day of June, 2016 to the 22 nd day of June, 2016.

Dated at the City of Calgary, Alberta this 15 th day of September, 2016. K.D. Yamauchi J.C.Q.B.A. Appearances: Jeff W. Moroz and Chris Jones McLeod Law LLP for the Applicant / Plaintiffs

C. Michael Smith Smith Mack Lamarsh for the Respondents / Defendants