Vision Integrity Engineering Ltd v Endeavour Inspection Ltd, 2017 ABQB 592

Court of Queen’s Bench of Alberta Citation: Vision Integrity Engineering Ltd v Endeavour Inspection Ltd, 2017 ABQB 592 Date: 20171002 Docket: 1601 03814 Registry: Calgary Between: Vision Integrity Engineering Ltd. Plaintiff - and - Endeavour Inspection Ltd. and Kristie Oslund Defendants _______________________________________________________ Memorandum of Decision of A. R.

Robertson , Q.C., Master in Chambers _______________________________________________________ Background [ 1 ] This is an application for declaratory relief on issues that are said to be central to the dispute as between the plaintiff, Vision Integrity Engineering Ltd., and the defendant, Kristie Oslund. [ 2 ] The application makes reference to rules 1.2 (“Purpose and Intention of These Rules”), 6.2 (“Application to the Court to Exercise its Authority”) and 7.1 (“Application to Resolve Particular Questions or Issues”). However, the nature of the application is one of

summary judgment because the questions involves an analysis of a contractual agreement; its commercial setting; facts giving rise to the claim that has been advanced; and some analysis, if not weighing, of the evidence so as to make a final ruling. [ 3 ] I have concluded that the application must be dismissed.

Baclground [ 4 ] Ms. Oslund was a part owner of a company called Endeavour Inspection Ltd., with her husband, Trevor Thorburn. Their personal relationship went very sour and she wanted to see the company sold, or at least she wanted out of the company. [ 5 ] The result was a Share Purchase and Sale Agreement dated September 30, 2015 made amongst three parties: (

a) Ms. Oslund, as vendor of her shares; (

b) Vision Integrity Engineering Ltd., as purchaser of her shares; and (

c) Endeavour Inspection Ltd. as the corporation whose shares were being purchased. Each had some obligations. I will sometimes refer to this as the “ tripartite agreement ”. [ 6 ] There are many anomalies in the records that cause some confusion. The first one is that although the tripartite agreement was dated September 30, 2015, the intended Closing Date was September 28, “or such other date as the parties may agree”. However, the parties never actually agreed on a specific date other than September 28. [ 7 ] It seems to have closed over the next several days, in early October.

The exact date of the closing may be of some importance because there were deadlines that ran from the “Closing Date”, but it is likely not critical to the resolution of the dispute between the parties. [ 8 ] For the purposes of this application the precise closing date is not material. [ 9 ] There are a number of other anomalies that arise in the evidence that set out the position of Ms. Oslund.

It is clear that she was quite anxious to have this transaction closed, and at the time the agreement was signed she was not actively part of the management of Endeavour Inspection Ltd. because of the deterioration of the relationship between her and Mr. Thorburn. That may explain some of the confusion that followed. [ 10 ] Ms. Oslund was initially represented by an Edmonton law firm, but just shortly after the agreement was put in place, she had terminated their representation.

The agreement had specifically provided for monthly payments to her lawyers (in trust for her) of $10,000 commencing on the first day of each month, commencing November 1, 2015 and continuing to April 1, 2016. At that time there was to be a lump sum payment of $370,000 to her. [ 11 ] The tripartite agreement expressly provided, in

section 2.3, that the interest that she was selling, shall be held in escrow by the Purchaser’s legal counsel until such time as payment of the Purchase Price is made in full to the Vendor’s legal counsel as set out herein, afterwhich [sic] the Share Certificates may be released to the Purchaser. [ 12 ] That obligation to send the money to her former lawyers became problematic in light of the termination of their legal representation. [ 13 ] Her former lawyer’s legal assistant sent Ms.

Oslund an email on November 24, 2015 (which was after the first $10,000 payment had been made, and shortly before the second $10,000 payment was due) and encouraged her to contact Ms. Bertsch of Vision Integrity to make arrangements to receive the further purchase payments directly. [ 14 ] Around the same time, Vision Integrity was changing legal counsel as well. Don Scott Law Office had acted on the purchase. That law firm contacted Ms. Bertsch and asked for further monies to be paid their in trust for Ms. Oslund. However, that was not done.

Instead, the funds were paid to Vision Integrity’s new legal counsel, Mr. Zinner. [ 15 ] Ms. Oslund then retained new legal counsel, Mr. McKinney. He wrote by letter of December 9, 2015 responding to a letter from Mr. Zinner and asked that Mr. Zinner take no immediate steps to afford his office adequate time to review the contents of the file. He also said: In the interim, we ask that you confirm that the installment payment referenced in your correspondence dated November 25, 2015, in the amount of $10,000.00, due and payable to our client, has been deposited into your trust account. [ 16 ] Mr.

Zinner’s November 25 letter is not in evidence. It was discussed in cross-examination but not marked as an exhibit. [ 17 ] Mr. Zinner responded on December 14, 2015. He wrote that he would not take steps without giving Mr. McKinney a reasonable opportunity to review the contents of the file and without reasonable prior notice, provided that the limitation be suspended during the period of his review. He also confirmed that he held $10,000 in trust. [ 18 ] It is important to note that Mr. McKinney did not ask that the monthly payments be sent to him, nor did he ask that they be sent directly to Ms.

Oslund. [ 19 ] Mr. McKinney wrote again on January 6, 2016. He asserted various alleged breaches of the share purchase agreement by either Vision Integrity or Endeavour Inspection. This is one of the anomalies in the facts: Mr. McKinney is not clear as to which corporation is alleged to have been in breach of the tripartite agreement. He seems to have treated both Endeavour Inspection and Vision Integrity as the same entity. [ 20 ] The three stated breaches were these: (

a) they (or one of them) had failed to pay off and RBC loan with respect to a 2013 GMC Yukon currently in Ms. Oslund’s possession and to provide to her confirmation of the discharge of the RBC lien; (

b) they (or one of them) had failed to pay to Ms. Oslund of the monthly instalment payment payable in the amount of $10,000 on the first of each month “for a period of 6 (six) months”;

(

c) they (or one of them) had failed to provide confirmation of the discharge of Ms. Oslund as a guarantor by RBC for security on the GMC Sierra. [ 21 ] The letter went on to say that if “your client” fails to rectify the breaches by January 15, 2015, Mr. McKinney had instructions from Ms. Oslund “to file a claim as against your client and the personal guarantors to the agreement, namely Adam Maclean and Trevor Davies.” (Mr. Maclean and Ms.

Davies were with Vision Integrity, and they had guaranteed the performance of the Share Purchase and Sale Agreement.) [ 22 ] The letter was not copied to Don Scott Law office, nor was it copied directly to Vision Integrity.

It is argued that this is important because the tripartite agreement had specifically provided that in the event that one party wished to serve another with a notice pursuant to the agreement, the notice shall be in writing and may be served by hand to the address of the parties set out below…. [ 23 ] For the purposes of Vision Integrity, the addresses that were given were both Vision Integrity’s business office as well as Don Scott Law office. Vision argues that that letter was not in compliance with the tripartite agreement, and therefore there was not proper notice under it on Vision Integrity.

The argument, therefore, is that there was no demand in law. [ 24 ] I do not accept that argument. Vision Integrity and its new lawyer Mr. Zinner knew that Mr. McKinney represented Ms. Oslund, and Vision Integrity was made known of her assertions, unless Mr. Zinner did not discuss it with his client. [ 25 ] The agreement did not require that notice be sent to the stated addresses. It said a notice “may be” served in a certain way. If notice were given in another manner, it might still be valid.

The agreement simply set out a way in which notice could be given, and if it were given that way Vision Integrity could not complain. [ 26 ] Mr. Zinner responded to the letter on behalf of Vision Integrity on January 25, 2016. He said that it was his understanding that items (

a) and (

c) had been performed. He further said, “we anticipate the delivery to this office of further payment prior to month- end.” [ 27 ] It is not in controversy that by that time, Mr. Zinner held $20,000 in trust. That amount reflected the payments due December 1 and January 1. [ 28 ] There was a meeting on February 6, 2016, involving Alberta Treasury Branches. Ms. Oslund learned that the loan from ATB remained outstanding and that she was a guarantor of that loan, approximately $1,200,000. She said, in cross-examination, that that was the main reason why she decided she wanted her shares back. [ 29 ]

Section 2.3 of the tripartite agreement had specifically provided that she was entitled to a discharge by ATB as guarantor of any debts of the corporation (Endeavour Inspection) within 60 days of the closing date. Regardless of when the closing date was, it was long before February 6, 2016. [ 30 ] McKinney wrote again by letter of February 8, 2016. Rather than following up on the demand for payment of the $10,000 per month and asking that it be paid to his office in trust, and rather than complaining about Ms. Oslund’s guarantee to ATB being still outstanding, he said the following: Please be advised that our client is exercising her rights in accordance with clause 2.3(

b) of the Agreement. As such, we hereby demand that the Share Certificate currently being held by Don Scott Law Office be immediately returned to our client for non-payment of our client’s shares by Vision Integrity Ltd. [ 31 ]

Section 2.3 of the agreement specifically allowed Ms. Oslund to demand her shares back for non-payment. However, although his letter simply focused on non-payment for her shares, he referred specifically to paragraph 2.3(

b) of the agreement. That sub-paragraph did not relate to the non-payment for Ms. Oslund’s shares. Nor did it refer to the guarantee she had given to ATB. [ 32 ] It dealt with a payment of $30,000 to RBC to pay off a loan on yet another vehicle, a 2013 GMC Yukon. He had complained about that in his demand letter of January 6, and Mr. Zinner had responded that it was his understanding that the obligation had been performed. [ 33 ] In fact, the GMC Yukon load had been paid off, in October 2015. According to the tripartite agreement, the obligation to advise Ms. Oslund lay with Endeavour Inspection Ltd.

But in October 2015, Endeavour Inspection was still being managed by her estranged husband Mr. Thorburn. Apparently he did not tell her that her loan had been paid. [ 34 ] If we ignore the confusing anomalies in the correspondence, the absence of response by Mr. Zinner to the demand for payment when he merely said that he expected a further payment by the end of the month, we have a circumstance where Ms.

Oslund has demanded on January 6, through legal counsel, payment of the $10,000 per month from current legal counsel for Vision Integrity, and she threatened legal action if it was not done. [ 35 ] However legal action was not commenced, at least not initially. A demand for return of her shares was made instead. [ 36 ] It is in this context that Vision Integrity argues that Ms. Oslund was not entitled to demand the return of her shares.

More importantly, Vision Integrity argues that she had “terminated” the tripartite agreement, and that “termination” amounted to as repudiation of the tripartite agreement. [ 37 ] When she was asked in cross-examination if she terminated the agreement, she said, “Yes.” [ 38 ] However, the context of that evidence was this, starting at page 54 of the transcript:

Q. And so you, therefore, demanded the shares back? A. Yes. Q. Because of the breach as you – A It was – it was – Q -- perceived it, right? A. the ultimate reason why I took the shares back is because I was still a guarantor for ATB, and there was no rhyme or reason as to why I would still be the guarantor after four months. And the fact that I was - - they had sold assets, and I wasn’t being paid. I was also told that Visions bounced their own payroll in January or February, so I was very concerned of the overall health of everybody involved. Q. So you took your shares back, and you terminated the agreement? A.

Yes. Q. And can you confirm that under the letter of termination you relied on clause 2.3(

b) for a return of the purchase shares to you? MR. KING: If that’s what the letter says, Mr. Zinner, that’s what it says. MR. ZINNER: That’s what the letter says. MR. KING: Okay. Well - . Q. Mr. ZINNER: That is what you relied on, right? A. I relied on my counsel’s advice. Q. So this letter was written on your instructions clearly, right? A. Yes. [ 39 ] In this context, I cannot read her answer that she had “terminated the agreement” to have the literal

interpretation now argued by Vision Integrity. The terminology was selected by questioning counsel. She simply replied “Yes” to his question. However, she was clear throughout this exchange that she was relying on her lawyer to write the letter – and the letter does not say that the agreement was “terminated”. [ 40 ] Vision Integrity argues that by demanding her shares back and “terminating the agreement” Ms. Oslund repudiated the share purchase agreement, and that she was not entitled to do that.

The consequence, it argues, is that Vision Integrity is not required to re-pay the money it advanced for the shares. [ 41 ] However, a demand under the terms of the agreement is not a repudiation – such a demand is made in accordance with the agreement. [ 42 ] Vision Integrity was clearly not in repudiation of the agreement. Although it had not paid the $10,000 per month to Ms. Oslund, it had not given a complete refusal to pay it; rather, it had paid the funds to its solicitor in trust, and it had not been told properly to pay it to anyone else until at least January 6.

It is for this reason that Vision Integrity argues that Ms. Oslund’s actions were in repudiation of the agreement because the underlying factual circumstance for her demand for her shares back did not exist, and she was not entitled to “terminate” the entire tripartite agreement. The Issues for Decision [ 43 ] Vision Integrity asks for a final decision on the following issues: 1 Was the Share Purchase and Sale Agreement between Vision Integrity and Ms. Oslund breached by Vision Integrity? 2. If so, was the breach of a nature entitling Ms. Oslund to terminate the agreement and to treat it as terminated? 3.

Was the agreement breached and repudiated by Ms. Oslund? 4. If so, was Vision entitled to accept Ms. Oslund’s repudiation and termination, relieving it of any further obligation under the agreement, and giving it grounds to seek a recovery of the $92,020 that it had already paid to Ms. Oslund? [ 44 ] I find myself unable to answer these questions at this stage of the proceedings. As I have indicated above, it is not clear to me that Ms. Oslund had “terminated the agreement”. All that she had done was demand that her shares be returned, which she was entitled to do in the event of non-payment.

She purported to rely in

section 2.3 of the agreement, which expressly provided for this, although admittedly her lawyer made reference to the wrong paragraph. [ 45 ] It is also not clear to me that she was not entitled to make that demand. Although I can say with some confidence that Vision Integrity was not in fundamental breach of the agreement, because it was evidencing an intention to pay the $10,000 per month once it had received proper instructions, Vision Integrity’s lawyer stands on the grounds that proper notice under the contract had not been given.

However, he clearly represented Vision Integrity, and he cannot complain that he was notified instead of its former counsel. The only other party that was to be given notice of this alleged breach was Vision Integrity itself, and I assume (as I must) that he was in

communication with his client. The complaint is that Vision Integrity did not learn of the demand through the right channel. [ 46 ] I make no decision as to whether or not Ms. Oslund’s demand for the return of her shares was proper or not. I am puzzled why Mr. McKinney did not say very clearly to Mr. Zinner, when he had reviewed the file and when he realized that Mr. Zinner did, in fact have the funds, “Pay it to my office in trust.” I am also puzzled why Mr. Zinner did not send the funds to him after receiving the demand letter of February 8, despite the numerous anomalies it. It asserted a breach that Mr.

Zinner apparently felt was inappropriate – he had never refused to pay the funds, and until then he was apparently ready, willing and able to pay them as directed. He could have addressed that complaint by payment, or at least clarifying that he wanted to be told clearly to whom the funds were to be paid. [ 47 ] The circumstances may have to be examined carefully by a trial judge. All I am being asked to say today whether there was a breach as described by Vision Integrity, and whether Ms.

Oslund’s supposed termination of the agreement led to the consequences Vision Integrity says. [ 48 ] In my view based on the evidence before me, she did not terminate the agreement. She simply asked for her shares back. She may have been entitled to do that. I cannot conclude that that demand was a fundamental breach. When she demanded her shares back, that notice was sent to both Mr. Zinner and Vision Integrity’s former legal counsel. [ 49 ] In light of my conclusion that there is not clear evidence that Ms. Oslund terminated the agreement, the rest of the questions put to the Court become moot.

Conclusion [ 50 ] For these reasons, the application is dismissed. [ 51 ] Costs would normally follow the event. If counsel are unable to agree on costs, they may contact the Master’s Chambers clerk to arrange to speak to the Court. Heard on the 18 th day of September, 2017. Dated at the City of Calgary, Alberta this 2 nd day of October, 2017. A. R. Robertson, Q.C. M.C.C.Q.B.A. Appearances: Gabor Zinner Zinner Law Office for the Applicant (Plaintiff) Barry King Strathcona Law Group for the Respondent (Defendant) Kristie Oslund