Stewart v Timber Bear Developments Ltd, 2017 ABQB 594

Court of Queen’s Bench of Alberta Citation: Stewart v Timber Bear Developments Ltd, 2017 ABQB 594 Date: 20171004 Docket: 0903 10095 Registry: Edmonton Between: Joy Stewart Plaintiff - and - Timber Bear Developments Ltd, Barry Stewart and Brian Stewart Defendants _______________________________________________________ Reasons for Decision of R.P. Wacowich , Master, Court of Queen's Bench of Alberta _______________________________________________________ 1.

Introduction [ 1 ] Joy Stewart (the Plaintiff/Applicant) applies for an order compelling further and better production of documents and questioning of the Defendants’ accountant, Mr. Pennock, about what she argues are material and relevant facts concerning the surrounding circumstances of a 2000 Share Purchase Agreement (SPA) between herself and her brothers, Barry and Brian Stewart, and a 2007 agreement between Barry and Brian (the Buy-out Agreement). In particular, Joy seeks: 1. Full access to Mr. Pennock’s relevant and material records about the 2000 SPA and the 2007 Buy-out Agreement; 2. Leave to question Mr.

Pennock under r 5.17 or 5.18 of the Alberta Rules of Court before trial; 3. Answers to issues arising from questioning and production, including adequacy of production, adequacy of answers to undertakings, and objections. 2. Facts [ 2 ] Joy, Brian, and Barry are three siblings who were the Managing Directors of the partnership, Igloo Building Supplies Group

Partnership, established in 1982. They held equal shares in it. The partnership consisted of three Northwest Territories corporations, registered extra-provincially in Alberta: Northern Joy Developments Ltd, Treeline Investment Ltd, and BJ Northern Enterprises. Each of these partner corporations were wholly owned subsidiaries of three corporations: Donalisa Developments Ltd, Trevco Developments Ltd, and Timber Bear Developments Ltd, whose shares were wholly owned by Joy, Brian, and Barry respectively. Mr.

Pennock and his firm, Pennock Acheson Nielsen Devaney Chartered Accountants, were the long-time accountants for Igloo, the corporations, and the Stewarts individually. [ 3 ] In 2000, Joy’s interest in the business was purchased by Brian and Barry through the SPA. Between the original drafts and the final version of the 2000 SPA, the wording of

Article 6.4 changed. There is currently no evidence whether the changes to this particular

section were “blacklined” (i.e. that the edits were explicitly identified). However, experienced senior legal counsel for all the parties provided opinions, which are schedules to the 2000 SPA, indicating that they had reviewed the SPA. [ 4 ] The final version of

Article 6.4 of the 2000 SPA reads: In the event that at any time during the Option Period neither Barry or Brian, nor both Barry and Brian, shall directly or indirectly control the Partnership, or there is a Substantial Sale of the assets of the Partnership, and at the time of such change in control or Substantial Sale all or any portion of the Joy Shareholder’s Loan or the Joy Preferred Shares shall not have been by Barry, Brian, Trevco or Timber Bear, to the extent that the aggregate value of the Partnership and the corporate partners, Donalisa, Trevco and Timber Bear for the purpose of such sale or change in control exceeds the sum of Six Million ($6,000,000.00) Dollars, Joy shall be entitled to participate in any payment or consideration received in excess of Six Million ($6,000,000.00) Dollars in an amount which is determined when the fraction that has as its denominator the sum of Six Million ($6,000,000.00) Dollars and has as its numerator the aggregate amount of the said portion of the Joy Shareholder’s Loan and the Joy Preferred Shares which are outstanding multiplied by the portion of the said payment or consideration received in excess of Six Million ($6,000,000.00) Dollars, i.e. [followed by the formula] [ 5 ] In 2007, Barry effectively purchased Brian’s interest in the business through the Buy-out Agreement. [ 6 ] The dispute between the parties focuses on

Article 6.4: (

i) What does

Article 6.4 mean? (ii) Did the Buy-out Agreement trigger

Article 6.4? (iii) If

Article 6.4 is triggered, what is Joy entitled to? [ 7 ] Joy argues that any sale or change in control, whether to a third party or from both brothers to only one brother, triggers

Article 6.4. Conversely, the brothers argue that

Article 6.4 would only be triggered if both control of the partnership went to, or the assets were sold to, a third party. 3. Principles of Contractual

Interpretation Extrinsic Evidence [ 8 ] The overarching issue in this application is whether certain evidence can be admitted to assist in interpreting a single clause in the 17-year old agreement. Before turning to the specific requests in this application, it is helpful to consider the relevant principles of contract

interpretation. [ 9 ] According to Sattva Capital Corp v Creston Moly Corp, 2014 SCC 53 at para 47 , [2014] 2 SCR 633 contract

interpretation has “evolved towards a practical common sense approach, not dominated by technical rules of construction.” [ 10 ] Contractual terms that are in dispute “must be interpreted, not in isolation, but in light of the contract as a whole”: IFP Technologies (Canada) Inc v EnCana Midstream and Marketing , 2017 ABCA 157 at para 79 , 53 Alta LR (6th) 96. As stated (at para 89): [C]ontractual

interpretation is not an exercise in second guessing what could have been included in a contract while discounting or dismissing relevant terms of a contract and uncontradicted contextual information. It is instead an exercise in determining what the parties objectively intended having regard to the entire written text, relevant contextual background and commercial context.

As such, courts are permitted, subject to the parol evidence rule, to consider the circumstances surrounding the formation of the contract (i.e. the “factual matrix”). [ 11 ] The parol evidence rule “precludes admission of evidence outside the words of the written contract that would add to, subtract from, vary, or contradict a contract that has been wholly reduced to writing”: Sattva at para 59. When the Rule Applies [ 12 ] There are two main circumstances where the parol evidence rule applies. [ 13 ] First, it precludes evidence of the parties’ subjective intent.

This evidence is irrelevant and generally inadmissible as an aid to

interpretation, except “perhaps in the limited cases where such evidence is necessary to resolve a latent ambiguity”: Geoff R Hall, Canadian Contractual

Interpretation Law, 3 rd ed (Toronto: LexisNexis, 2016) at 85 [ Hall ]; Sattva at para 59; IFP Technologies (Canada) at para 87; Gainers Inc v Pocklington Financial Corporation, 2000 ABCA 151 at paras 19-20 , 23-24, 255 AR 373.

Furthermore, such evidence should not be used to try and evade an entire agreement clause and using it “to create ambiguities isbackwards”: Gainers at para 23. [14] Second, evidence (such as the surrounding circumstances) must never be allowed to overwhelm or contradict the expressterms of the agreement: Sattva at para 57, citing Hayes Forest Services Ltd v Weyerhaeuser Co, 2008 BCCA 31 at para 14, 42 BLR (4th) 1; Hall at 85. [15] The rule generally does not apply to preclude evidence of the factual matrix or if there is ambiguity in the contract: Sattva atpara 60; IFP Technologies (Canada) at para 86; United Brotherhood of Carpenters and Joiners of America, Local 579 v BradcoConstruction Ltd, (SCC), [1993] 2 SCR 316 at para 44, [1993] SCJ No 56.

The distinction between factual matrix andambiguity arises because “in interpreting a contract, a trial judge must consider the relevant surrounding circumstances even in theabsence of ambiguity”: IFP Technologies (Canada) at para 82. Furthermore, the Ontario Court of Appeal has held that the conclusionthat the contract is ambiguous cannot be made without first considering the factual matrix: Arthur Andersen Inc v Toronto DominionBank (1994), (ON CA), 17 OR (3d) 363 at para 18, [1994] OJ No 427 (ONCA), leave to appeal refused.

Factual Matrix [16] The factual matrix must be considered in every case and “constitutes an essential element of contractual

interpretation in allcases, even when there is no ambiguity in the language”: Hall at 24. The focus should be on the words of the contract with the factualmatrix somewhat in the background, not a split approach where the words are considered first and then the factual matrix: Hall at 34. Inthis regard, the Court looks to the wording of the agreement and reads the agreement as a whole to determine the objective intent.

Thewords are given their ordinary and grammatical meaning: Sattva at para 47. [17] The scope and nature of the factual matrix depends on the case, but can include “absolutely anything which would haveaffected the way in which the language of the document would have been understood by a reasonable man”: Sattva at para 58 citing LordHoffman in Investors Compensation Scheme Ltd v West Bromwich Building Society (1997), [1998] 1 WLR 896 (UK HL) at 913; IFPTechnologies (Canada) at para 83.

But, it can only include facts “objectively known to both parties at the time of contracting”: Hall at27; IFP Technologies (Canada) at para 79.

Furthermore, the goal of examining extrinsic evidence of the surrounding circumstancesleading up to the contract is to “deepen a decision-maker’s understanding of the mutual and objective intentions of the parties asexpressed in the words of the contract”: Sattva at para 57. [18] As such, parties to a contract cannot provide evidence of negotiations, except perhaps in the most general terms: IFPTechnologies (Canada) at para 85; Keephills Aggregate Company v Riverview Properties Inc, 2011 ABCA 101, 200 ACWS (3d) 1186;Hall at 30.

The same inadmissibility applies to opinion evidence provided by a third party (even if a knowledgeable member of theindustry) or expert evidence on the meaning of the contract: Dow Chemical Canada Inc v Shell Chemical Canada Ltd, 2010 ABCA126 at paras 17-18, 477 AR 112. [19] Finally, prior drafts of an agreement are also generally not admissible: IFP Technologies (Canada) at para 85, citing WesbellNetworks Inc (Receiver of) v Bell Canada, 2015 ONCA 33 at para 13, [2015] OJ No 279. Ambiguity [20] Mere difficulty in interpreting a contract or the existence of competing

interpretations is not the same as an ambiguity: IFPTechnologies (Canada) at para 87; Hall at 80. “A contract is ambiguous when the words are ‘reasonably susceptible of more than onemeaning’": IFP Technologies at para 87 citing Hi-Tech Group Inc v Sears Canada Inc (2001), (ON CA), 52 OR(3d) 97 at para 18, [2001] OJ No 33. In the face of ambiguity, the

interpretation promoting business efficacy is to be preferred so long asit is supported by the text: IFP Technologies (Canada) at para 86; Keephills at para 12. [21] Furthermore, an ambiguity in the contract allows the court to consider evidence of the parties' post-contract conduct, but onlyif the contract remains ambiguous after considering the contracts text and the factual matrix: IFP Technologies (Canada) at 87;Shewchuk v Blackmont Capital Inc, 2016 ONCA 912 at paras 46, 56, 404 DLR (4th) 512. But, little to no weight may be given to thisevidence: Hall at 102. 4.

Analysis Extrinsic Evidence [22] While I am not resolving the issues in the main litigation, what the Applicant is attempting to do is have this court order thatextrinsic evidence be provided to her that would expand the scope of what has been plead. This evidence includes access toMr. Pennock’s records, further questioning of Mr. Pennock, and further responses to undertakings (including the questioning BrianStewart for a third time). In essence, the Applicant is attempting to gain access to information, going back as far as the beginning of thepartnership in 1986, relating to three things: 1.

The circumstances surrounding and leading up to the closing of the 2000 SPA, including the intention of the parties in the relevanttime periods; 2. The circumstances surrounding and leading up to the closing of the Buy-out Agreement, including the Defendants’ intention inrelation to the transaction; 3. Information about the subsequent conduct of the parties that would provide insight into the 2000 SPA or the 2007 Buy-out

Agreement. [23] The Applicant argues that this information is an attempt to understand the original genesis of

Article 6.4 including: a. who wanted the inclusion of this provision and why; b. consideration of

Article 6.4 in the larger context of the 2000 SPA, including the concessions made by Joy regarding other benefitsand protections; c. the agreement, which was part of the seminal draft prepared by the Defendants lawyers, reached by the parties in relation to Joy’sparticipation in a future sale prior to the execution of the 2000 SPA; and d. absence of any blacklining, correspondence, or other discussions or notice to alert any of the parties that the terminology changedwithin

Article 6.4 with the intention of changing Joy’s rights to participate in a future partial sale of the partnership’s interest. [24] Furthermore, Joy argues that she is attempting to determine how the Buy-out Agreement should be analyzed to evaluate itsstatus as a triggering event, including how it affected control of the partnership and to assess how the purchase price affects the Article6.4 consideration. [25] This evidence falls under the categories of extrinsic evidence normally excluded, including: prior negotiations, prior drafts ofthe contract, parties’ subjective intent, and subsequent actions.

In the context of this application, this evidence goes beyond the scope ofwhat is admissible for the purposes of considering the factual matrix of the contract. I do not find that this information will deepen thetrial judge’s “understanding of the mutual and objective intentions of the parties as expressed in the words of the contract”: Sattva atpara 57.

Rectification and Entire Agreement Clause [26] The Applicant originally filed the Statement of Claim against Barry and the Partnership eight years ago in June 2009.Although the Applicant amended the Statement of Claim more than two years later in September 2011 to add Brian as a party to theaction, she did not amend the substance of her pleadings. In particular, Joy did not allege that

Article 6.4 of the 2000 SPA was in any wayambiguous or did not clearly express the intention of the parties, or did not reflect her understanding of the agreement reached by theparties. Indeed, Joy continues to recite

Article 6.4 in its entirety in the Amended Statement of Claim and relies upon that clause as thebasis for her claim. [27] While Joy has never amended the substance of her claim, she now alleges in her written Brief that the final wording of Article6.4 (upon which she relies in paragraph 9 of the Statement of Claim) had been different in earlier draft versions of the 2000 SPA beforethe parties signed the final 2000 SPA. She claims that the final version materially changes the meaning of

Article 6.4 and was notbrought to her or her lawyer’s attention before signing. [28] It is clear that much of the intended questioning of the parties’ accountant, Bruce Pennock, revolves around obtainingevidence leading up to the signing of the final agreements in issue in this litigation because of this new unpleaded allegation. Joy states atparagraphs 104 – 106 of the Applicant’s Brief: 104 The Plaintiff is seeking Mr. Pennock’s evidence on absolutely critical matters. The current production and evidentiary recordprovides no indication that the Defendants, or the Plaintiff, actually intended to change the meaning of

Article 6.4 regarding the type ofsale to trigger it after March 2000. 105 If Mr. Pennock has evidence that the Defendants changed the terminology to

Article 6.4 with full intent to alter the impact of theprovision, there was no discussion or, notice to, the Plaintiff about that change (emphasis added). 106 Such evidence from Mr. Pennock would result in the Plaintiff having a very different cause of action, namely a rectification claim.The Plaintiff must be able to definitively ascertain that prior to trial by, at minimum, confirming that Mr.

Pennock has no additionalevidence to provide. [29] As stated by Joy, the draft versions of the 2000 SPA were known to her as early as April 2000, however, she did not pleadthese facts until much later in the June 2009 Statement of Claim and 2011 Amended Statement of Claim. To date, no amendments havebeen made at this late stage in the proceedings. The Defendants have been examined at least twice and hundreds of undertakings havebeen given.

This action was started eight years ago based on facts known to the Applicant at all times. [30] I am aware that if the Applicant had pleaded rectification this would permit almost “unrestricted admission of extrinsicevidence,” which could include the parties’ subjective intent: Hall at 84; Sylvan Lake Golf & Tennis Club Ltd v PerformanceIndustries Ltd, 2002 SCC 19 at para 37, [2002] 1 SCR 678. However, rectification has not been pleaded.

Instead, the claim deals withinterpretation of the contract and I am mindful of the Court’s obligation to limit the scope of evidence in this context. [31] What the Applicant has done is taken a wide ranging “kitchen sink” approach, relying on numerous grounds and overlappingarguments to gain access to information she deems important to this matter. Notably, both the 2000 SPA and the Buy-out Agreementcontain the same “entire agreement” clause.

Unless a contract has been entered into based upon a misrepresentation, the parties arebound by an entire agreement clause signed by them even if the result is harsh: JI Case Threshing Co v Mitten (1919), (SCC), 59 SCR 118 at para 20, 49 DLR 30 (SCC).

Furthermore, where a contract states that “all agreements and conditions are statedherein” no other agreements or conditions can be introduced into evidence in light of the clause: Terrace Consulting Inc v Jackson,2011 ABQB 108 at paras 30-33, 521 AR 22. [32] In the case at bar, all parties were represented by experienced senior legal counsel throughout the negotiations leading up to

signing the 2000 SPA. They chose to include a comprehensive entire agreement clause as one of the terms of their contract. This clause precludes consideration of any prior understandings, agreements, negotiations, or discussions between the parties – most of which are the subject of the questions objected to. They also state that there are no representations, warranties, terms, conditions, undertakings or collateral agreements or understandings, express or implied, between the parties other than expressly set forth in the 2000 SPA and the Buy-out Agreement. Ambiguity [ 33 ] The Applicant argues that

Article 6.4 is ambiguous, thus this warrants a broader admission of evidence including considering post-contract conduct of the parties. She argues ambiguity on two grounds: first, that it is ambiguous as to what type of sale was intended to trigger

Article 6.4, and second, there is ambiguity as to what form of change in control would serve as a triggering event. [ 34 ] The Defendants submit that

Article 6.4 is not ambiguous. The Supreme Court of Canada in Bell ExpressVu Limited Partnership v Rex , 2002 SCC 42 at para 30 , [2002] 2 SCR 559 discussed the concept of ambiguity in relation to statutory

interpretation. The Court cautioned against inferring the mere fact of ambiguity based purely on disagreement: For this reason, ambiguity cannot reside in the mere fact that several courts - or, for that matter, several doctrinal writers - have come to differing conclusions on the

interpretation of a given provision. Just as it would be improper for one to engage in a preliminary tallying of the number of decisions supporting competing

interpretations and then apply that which receives the "higher score", it is not appropriate to take as one's starting point the premise that differing

interpretations reveal an ambiguity. [ 35 ]

Article 6.4 is not ambiguous. It is clear that there has to be a sale of the company by both Barry and Brian for the pay provision to Joy to be triggered. It requires both of them to directly or indirectly lose control of the Partnership. There has to be that change of control or a substantial sale of the assets of the Partnership. [ 36 ] The Agreement is clear. In 2000 the SPA valued the company at $6 million, and Joy received 1/3 being $2 million. If her brothers sold their interest for a higher amount than $6 million she would receive a percentage of that increased value.

If it was sold for less than $6 million she did not share in the loss. She is hopeful there was a profit in Brian’s sale to Barry that she can profit from. The agreement does not allow for her to share in any profit made on the sale by Brian to Barry.

Article 6.4 says clearly that it is not triggered in this circumstance, despite her subjective intent. [ 37 ] I make these comments in relation to the Applicant’s attempts to obtain additional information. The trial Judge will ultimately determine the

interpretation of

Article 6.4. 5. Other Issues [ 38 ] For the sake of comprehensiveness there are four other matters to address:

i) scope of discovery; ii) request for Brian Stewart to re-attend questioning; iii) request to question the accountant, Mr. Pennock; and iv) request for responses to undertakings. i. Scope of Discovery [ 39 ] It is required that “litigants must disclose all documents that are relevant and material”: Kaddoura v Hanson, 2015 ABCA 154 at para 9 , 600 AR 184. Rule 5.2 of the Alberta Rules of Court, Atla Reg 124/2010 outlines the scope of discovery and further supports that the evidence the Applicant seeks is unnecessary.

Rule 5.2 reads: 5.2(1) For the purposes of this Part, a question, record or information is relevant and material only if the answer to the question, or the record or information, could reasonably be expected (

a) to significantly help determine one or more of the issues raised in the pleadings , or (

b) to ascertain evidence that could reasonably be expected to significantly help determine one or more of the issues raised in the pleadings .

(2) The disclosure or production of a record under this Division is not, by reason of that fact alone, to be considered as an agreement or acknowledgment that the record is admissible or relevant and material [emphasis added]. [ 40 ] Rule 5.2 is to be narrowly construed and is much narrower than its predecessor: Geophysical Service Inc v NWest Energy Corp, 2017 ABQB 232 at para 28 , 278 ACWS (3d) 708. It is not necessary to go beyond the wording of r 5.2(1) to hold that the evidence sought is outside the scope of discovery.

The language used by the rule is that the information must “significantly” help determine the issues raised in the pleadings: NAC Constructors Ltd v Alberta (Capital Region Wastewater Commission) , 2006 ABCA 246 at paras 12- 13 , 412 AR 272. [ 41 ] As already discussed, the information the Applicant is attempting to elicit will not significantly assist the Court in interpreting

Article 6.4. I am attempting to ensure the evidence that is permitted deals with the true scope of issues pleaded. There appears to be confusion of the issues and the evidence requested by the Applicant, such as that relating to the aggregate value of the partnership and holding companies in 2007, is unnecessary. For instance, the formula under

Article 6.4 deals with the amount of consideration received, thus evidence relating to the value of the partnership is not required. There is not even a “plausible line of argument” that the evidence sought would assist the Applicant: Kaddoura at para 14 .

ii. Re-attend Questioning [ 42 ] I will briefly address the request to have Brian Stewart re-attend questioning. It should be noted that the Applicant seeks the Court’s direction whether Brian Stewart has any obligation to answer questions that arise from documents that were produced as part of Barry Stewart’s (the other Defendant) answers to undertakings. [ 43 ] Since counsel has provided no authorities and the only limited arguments as to why Brian Stewart should be questioned again, I turn to r 5.1. Rule 5.1 states: Purpose of this Part 5.1(1) Within the context of rule 1.2, the purpose of this

Part is (

a) to obtain evidence that will be relied on in the action, (

b) to narrow and define the issues between parties , (

c) to encourage early disclosure of facts and records, (

d) to facilitate evaluation of the parties’ positions and, if possible, resolution of issues in dispute, and (

e) to discourage conduct that unnecessarily or improperly delays proceedings or unnecessarily increases the cost of them .

(2) The Court may give directions or make any order necessary to achieve the purpose of this Part [emphasis added]. [ 44 ] My continuing concern is the cost and delay associated with further questionings for the purposes of this litigation. More importantly, the scope of the issues between the parties continues to be muddled. As I see it, the issue of the litigation is fairly narrow, the

interpretation of

Article 6.4, yet the Applicant continues to seek discovery and conduct questioning that unnecessarily broadens the issue. For these reasons, I do not find it necessary for Brian Stewart to be questioned for a third time. iii. Questioning Mr. Pennock [ 45 ] The Applicant argues that Mr. Pennock is an auditor or former auditor of the corporation and may be questioned under r 5.17(1)(

e) or, alternatively, r 5.18. These rules state: 5.17(1) A party is entitled to ask the following persons questions under oath about relevant and material records and relevant and material information: ... (

e) an auditor or former auditor engaged by a party adverse in interest , but not an auditor or former auditor engaged solely for the purpose of the action. 5.18(1) Subject to subrules (2) and (3), if (

a) a party cannot obtain relevant and material information from an officer or employee or a former officer or former employee of a corporation that is a party adverse in interest, (

b) it would be unfair to require the party seeking the information to proceed to trial without having the opportunity to ask questions about the information sought, and (

c) the questioning will not cause undue hardship, expense or delay to, or unfairness to, any other party or to the person to be questioned, the party may question, under oath, a person who has provided services for the corporation and who can provide the best evidence on the issue [emphasis added]. [ 46 ] The Applicant has failed to meet the requirements of either r 5.17 or r 5.18. [ 47 ] I take into consideration Harcap Investments Inc v Alberta Permit Pro Inc, 2009 ABQB 643 , 472 AR 193 as to whether Mr. Pennock, a general accountant, is an “auditor” at all.

That decision held that an external public accounting firm who only does a review, not technically an audit, was examinable under the old Rules of Court as an “auditor” (at para 29). As stated (at para 26): I cannot imagine that a professional accountant, described as a corporate party's "external accountant" and who prepares annual financial statements for the company, is not an "auditor" within the meaning of Rule 200(4) [now r 5.17]. [ 48 ] Mr. Pennock may properly be described as an “auditor” under r 5.17(1). For instance, in 2006 and 2007 he produced financial statements, although unaudited, for Timber Bear.

Furthermore, he and his firm have consistently operated as external accountants for the parties.

[ 49 ] The Defendants argue that Mr. Pennock is not engaged by a party “adverse in interest” since he was the accountant that acted for all the parties to the action, including for Joy personally until 2011, and was involved as a negotiator and advisor in both the 2000 SPA and the Buy-out Agreements. I disagree. Given a strict reading of the Rules , the fact that Mr.

Pennock was the accountant for Joy Stewart personally does not negate that he was also employed by every other individual (and their respective corporations at various times) within the partnership (i.e. parties that are adverse in interest to the Applicant). [ 50 ] Regardless of whether Mr. Pennock is an “auditor” engaged by a party “adverse in interest,” the requirements of r 5.17 have not been met since the Applicant is attempting to question Mr. Pennock on information that is not “relevant and material”: r 5.17(1). In this regard, I turn to my stated analysis under r 5.2(1).

I have already concluded that the evidence sought by the Applicant will not “significantly help determine one or more of the issues raised in the pleadings”: r 5.2(1)(a). Thus, r 5.17 is not satisfied. [ 51 ] The Applicant has also not satisfied the requirements under r 5.18 to examine Mr. Pennock, who is not a party in this action. Mainly, the Applicant is barred by r 5.18(

a) as Barry Stewart, acting as the officer of the corporate Defendant, has provided numerous undertakings to obtain the evidence from Mr. Pennock and has produced that information, including providing records from the accounting firm Pennock Acheson. I also have concerns, in accordance with r 5.18(c), that allowing Mr.

Pennock to be questioned will cause further and unnecessary delay. [ 52 ] I agree with the reasoning of Mahoney J. in Gault Estate v Gault Estate, 2017 ABQB 186 , 278 ACWS (3d) 258 who, in relation to an application to examine a non-party accountant under r 6.22(1), stated (at para 10): Obtaining information from non-parties occurs through undertakings by the examined party.

As I stated, unrestricted entitlement to examine non-parties leads to discovery abuse, increased costs, delay and unfairness to the non-parties , and more motion activity by the non-parties who object to being examined [emphasis added]. [ 53 ] In the alternative, even if Mr. Pennock can be properly questioned under r 5.17 or 5.18, I concluded that the Applicant is prevented from questioning him pursuant to r 5.1 (above). The questioning of Mr. Pennock will further delay this action, and continue to impose additional costs and inconvenience on the parties. iv.

Disputed Responses to Undertakings [ 54 ] The Applicant further seeks an order that the Defendants respond to certain undertakings, which the Applicant argues are relevant and material. To deal with these undertakings I adopt the approach of Poelman J. in Manson Insulation Products Ltd v Crossroads C&I Distributors, 2014 ABQB 442 at para 67-68 , 591 AR 59. I will reproduce the question from the Applicant’s brief, where necessary paraphrasing and interpreting the question, and address each undertaking individually.

I indicate whether the undertaking has been refused, taken under advisement, or inquiries are still ongoing by the Defendant(s), thus the Applicant seeks an answer; or when a more complete answer, revised response, scope of relevance, or further documentation is requested. Undertakings directed at Brian Stewart: [ 55 ] UT 3 (refused) – Review and produce any and all documents in Brian’s possession or available to him that are relevant to or relate to any amendments to the Igloo deed of partnership or restructuring of Igloo partnership between October 1986 and September 30, 2010.

UT 5 (refused) – Review all documents available to Brian that contain a reference to an amendment to the partnership agreement other than the ones already produced. Both of these undertakings can be dealt with on the same grounds: they are overly broad, especially given the discussion on extrinsic evidence and the entire agreement clause. These undertakings do not need to be answered by Brian Stewart. [ 56 ] UT 12 (more complete answer sought) – Review records to determine if Brian received any draft versions of the SPA prior to May 23, 2000, and if so, advise, if possible the dates he received them.

Brian argues that he answered this undertaking to the best of his ability, reviewing his records and finding nothing. He produced a file that he had which related to the 2000 SPA and the Buy-out Agreement, which was provided to his solicitor’s office. In addition, this information relates to prior agreements, negotiations, and drafts, and as already discussed is unnecessary for this action. This undertaking has been satisfied. Undertakings directed at Barry Stewart and Timber Bear: [ 57 ] UT 2 (refused) – Review Barry Stewart’s records and provide anything located that relates to a discussion where Mr.

Barry Stewart and Joy Stewart are canvassing the concept of buying Brian Stewart out of Igloo. This does not relate to the 2000 SPA or to

Article 6.4. Furthermore, if the discussion did occur at all, it relates to a transaction that never came to be. If it informed Joy’s reason for requesting

Article 6.4, it would only relate to her subjective motivation or intent which is not relevant. [ 58 ] UT 15 (under advisement) – Provide copies of whatever documentation was used to report the partnership income that passed from Igloo to the holding co’s, i.e., B.J. Northern, Northern Joy, and Treeline from 2001 to present. The income would only be relevant for determining the value of the holding companies, which is not in issue. [ 59 ] UT 42 (under advisement) – Produce copies of all documentation that led to the filing of document BAR 11459 (Amended declaration of Partnership) in terms of any amendments or changes to the Igloo Partnership Agreement, the structure of Igloo, as well as

any backup documentation that led to the amended declaration being filed. The

interpretation of this document is not in issue. Furthermore, the surrounding circumstances of the creation of this document are not relevant. [ 60 ] UT 74 (refused) – Inquire of Mr. Pennock and Mr. Kumar and advise as to whether they briefed Mr. Barry Stewart on the Agreement at page BAR 10491 and if so, produce any documentation or notes related to that meeting. If no documentation is available, inquire with Mr. Pennock and Mr. Kumar and advise their recollection as to what they told Mr. Barry Stewart. Mr. Pennock and Mr. Kumar’s understanding of the Buy-out Agreement is not relevant to this litigation. It does not relate to interpreting

Article 6.4 of the 2000 SPA, and any briefing they provided to Barry does not impact on whether a condition actually exists that triggers

Article 6.4. [ 61 ] UT 88 (under advisement) – With respect to clause 5.4 on page BAR 10477, ask Mr. Pennock or Igloo staff how they arrived at the $15 million figure for the purposes of that clause.

Clause 5.4 reads: In the event that at any time during the five (5) year period following the Closing Date, Barry shall no longer control the Igloo Group of Companies, as a result of a sale or transfer to a third party or as a result of a substantial sale, Brian, or at the option of Brian, Holdco shall be paid twenty five (25%) per cent of the purchase price received or receivable by Barry in excess of Fifteen Million ($15,000,000.00) Dollars. This is not relevant to the actual valuation of the partnership as it does not purport to be a valuation of the partnership.

In any event, the valuation of the partnership is not relevant to this litigation and this clause is not relevant to any consideration received by Brian. [ 62 ] UT 14 (under advisement) – Produce the financial statements for each of the holding companies, B.J. Northern, Northern Joy, Treeline, Trevco, Donalisa, Timber pre-amalgamation, and Timber for the period 2001 to present. The Defendants provided financial statements for all of the above companies for the relevant time period except for Treeline.

Treeline is owned by Brian and the question was asked of the Defendant, Barry, who does not have control of the financial statements. [ 63 ] UT 21 (revised response requested) – Ask Mr. Bruce Pennock to review his file and have him provide any documentation that relates to the three Agreements backdated to September 2006, which are referred to in the correspondence, document BAR 11468. Produce any of that documentation which is relevant and material to the issues in this lawsuit. The undertaking was asked of Mr. Pennock and the Defendants provided that information to the Applicant.

There is no need to provide a revised response if the Applicant is already in receipt of the documents that she was seeking. The fact that the Defendants later produced documents that they did not originally have does not undermine the adequacy of their earlier production. Rather it demonstrates the Defendants have willingly provided relevant and material documents as they became available. [ 64 ] UT 25 (more complete answer sought) – Contact Mr. Bruce Pennock and ask him to review his file for any documentation that is relevant to this lawsuit and relates to the 2007 restructuring.

The Applicant is in receipt of the documents that were requested. [ 65 ] UT 26 (more complete answer sought) – Review records for any documentation that is relevant to this lawsuit and that relates to the 2007 restructuring. This has been done and the Defendants have undertaken to provide a further Affidavit of Records to deal with any relevant documents they now have that were not identified in their filed Affidavit of Records as they did not have them at filing. [ 66 ] UT 54 (more complete answer sought) – Request from Mr. Pennock and produce drafts or versions of the 2000 SPA or the proposal that Mr.

Pennock prepared within the month of March, advise who he provided copies to and when, and provide any cover letters or faxes. The Defendants advise that the Applicant has received Mr. Pennock’s file on this matter. [ 67 ] UT 75 (further documentation requested) – Search records and produce any Igloo Building Supplies Group internal documentation or memorandums relating to the concept of the Purchase price that should be used for the Barry and Brian transaction or the fair value to the parties.

The Defendant advises that the Applicant is in receipt of the documents that were requested. [ 68 ] UT 85 (definitive response requested) – Advise if Brian Stewart has participated in or attended a board of directors meeting or voted on any issue regarding the directorship of Donalisa, Northern Joy, Trevco or Treeline since June 13 th of 2007.

An answer was provided to this question on May 25, 2017 by counsel for the Defendants. [ 69 ] UT 94 (scope of relevance requested) – Advise if Brian has received any consideration, value, payment, benefit of any kind or will in the future under the indemnity provisions of the Barry and Brian Agreement. This is not relevant to any of the issues in this litigation. [ 70 ] UT 119 (further documentation requested) – Make inquiries of Bruce Pennock and Igloo staff about what information they

may have about when draft Agreements being discussed in the letter to Bruce Pennock from Doug Shell were first prepared and also ask if they have any information about how draft Agreements were communicated or provided to joy. There is no evidence or suggestion that they have additional documents that are being deliberately withheld. It is not possible for them to provide a more complete response. [ 71 ] I should add that many of these requests for undertakings are not material or relevant based on my view that

Article 6.4 is not ambiguous and the entire clause agreement precludes these requests. 6. Conclusion [ 72 ] Based on the foregoing the application is denied. The Defendants have been entirely successful and are granted their costs. Heard on the 29 th day of June, 2017. Dated at the City of Edmonton, Alberta this 4 th day of October, 2017. R.P. Wacowich M.C.Q.B.A.

Appearances: Janet Hutchison Hutchison Law and Co-Counsel, Eric Mahood McCuaig Desrochers LLP for the Plaintiff/Applicant, Joy Stewart Tim Mavko Reynolds Mirth Richards & Farmer LLP for the Defendants/Respondents, Timber Bear Developments Ltd and Barry Stewart Carmen Plante Bishop & McKenzie LLP for the Defendant/Respondent, Brian Stewart