Berman v, 2021 ABQB 434

Court of Queen’s Bench of Alberta Citation: Berman v 905952 Alberta Ltd, 2021 ABQB 434 Date: 20210602 Docket: 1901 13773 Registry: Calgary Between: Stephanie Joy Berman Plaintiff - and - 905953 Alberta Ltd., Boulevard Investments Corp., Richard Daniel Bland Berman, and Harold Sicherman Defendants _______________________________________________________ Reasons for Decision of the Honourable Mr. Justice D.A. Labrenz _______________________________________________________ Introduction [ 1 ] Ms.

Berman applies for oppression remedies against the defendants, alleging that they have engaged in a course of conduct designed to harm her interests in two corporate entities. The defendants include Ms. Berman’s former spouse, Mr. Berman, along with Mr. Sicherman who was Mr. Berman’s business partner for many years. The remaining defendants are the two corporations Mr. Berman and Mr. Sicherman jointly own and use to manage and develop real estate in Calgary.

[ 2 ] Ms. Berman’s interest in the corporations derives from a matrimonial property and support judgment that granted her an equitable interest in Mr. Berman’s shares in the corporations. [ 3 ] To remedy the suggested oppression, Ms. Berman seeks an order liquidating and dissolving the two corporations, so that she may receive payment of the funds owed to her. Background [ 4 ] This action is related to ongoing litigation between Mr. Berman and Ms. Berman following the breakdown of their marriage.

A trial was conducted before me in 2019 to resolve issues of matrimonial property, parenting, child support and spousal support. At the end of trial, Ms. Berman was awarded $307,788 in retroactive child and spousal support, $153,828 in prospective child and spousal support, and a matrimonial property equalization payment of $917,816. These amounts totalled $1,379,432. An ongoing issue is Mr. Berman’s claimed inability to satisfy the culminative awards made against him. [ 5 ] During the parties’ marriage and separation, Mr.

Berman received a substantial income from the management and development of real estate with Mr. Sicherman through six different corporate entities. By the time of trial, only two corporations remained active, 905953 Alberta Ltd. (“905”) and Boulevard Investments Corp. (“BI Corp”), with Mr. Berman and Mr. Sicherman being 50% shareholders of both entities. [ 6 ] At trial, Mr. Berman advised the Court that his managerial work with the corporate entities had ended, and that he was unemployed and impecunious.

He had not been paying child support at levels commensurate with his income or in accordance with court orders. Other than the value in his corporate shareholdings, which were valued at just over 2 million dollars, Mr. Berman owned little in assets. [ 7 ] It was also revealed at trial that Mr. Berman’s history and credibility relating to financial matters was poor. One example is that in an attempt to settle the matrimonial property dispute prior to trial and provide Ms. Berman with settlement funds, Mr. Sicherman and Mr. Berman accepted a third party offer to purchase the two apartment buildings owned by 905.

Mr. Berman was under a court order at the time to place his share of net proceeds into trust with Ms. Berman’s counsel. Mr. Berman failed to do this and instead drew down on the capital to his own benefit. No matrimonial settlement agreement was reached. [ 8 ] At the time of trial, 905’s only remaining asset was a loan of $2.2 million it made to BI Corp. [ 9 ] BI Corp’s assets consisted of commercial properties close to the Stampede grounds in Calgary, which were valued between $4.3 and $4.75 million dollars (prior to the assessment of tax liabilities).

The properties are rented to tenants and do not generate profits. They are “holding properties,” being held for future redevelopment when market conditions improve. [ 10 ] The trial took place on various dates commencing in December 2018 and ultimately concluded in April 2019. During that period of time Mr. Berman and Mr. Sicherman initially expressed a willingness to list the BI Corp properties for sale, but later both reversed this position . [ 11 ] After various tax liabilities and shareholder loans were taken into consideration, I found that the value of Mr.

Berman’s corporate interests for the purpose of matrimonial property distribution was $2,075,515. When other assets and liabilities were taken into consideration the amount owing to Ms. Berman for an equalization payment was $917,816. [ 12 ] During closing arguments made at trial, given Mr. Berman’s financial situation and poor history of cooperating with previous orders of this Court, Ms. Berman advocated for a practical remedy that would help to secure payment of the award.

She relied on the approach of Schultz J in Peregrym v Peregrym , 2015 ABQB 176 , asking me to declare that she holds an equitable interest in Mr. Berman’s shares in 905 and BI Corp. [ 13 ] As in Peregrym , the Bermans’ matrimonial property was held in a closely-held corporation, and there was a third-party shareholder who refused to consent to a transfer of shares (consent from Mr. Sicherman being required under the articles of incorporation). [ 14 ] I note the issue of a share transfer was somewhat contentious at trial. Mr. Sicherman’s evidence, under oath, was that he would not consent to a transfer of shares.

However, he later represented off the court record that he would consent to a transfer of shares based on stipulated conditions. Those conditions were unfavourable when viewed from Ms. Berman’s perspective as they would make Mr. Sicherman the sole director of the corporations with the unfettered ability to determine when the corporations would be dissolved. Due to the unsworn nature of the representation, as well as the unfavourable conditions, I rejected this approach. [ 15 ] I agreed to follow the approach in Peregrym , and declared that Ms. Berman holds an equitable interest in Mr.

Berman’s shares in 905 and BI Corp. My declaration meant that Mr. Berman holds his shares in trust for Ms. Berman equal to the equalization payment. Additionally, the child and spousal support obligations owed were secured against any remaining value in Mr. Berman’s shares. The total of all these amounts was $1,379,432. I also declared that Ms. Berman’s beneficial ownership conferred both in personam and in rem rights to the shares. [ 16 ] Additionally, consistent with Peregrym , in order for Ms.

Berman to benefit from her equitable interest, I ordered that she commence an oppression action under s 242 of the Business Corporations Act , RSA 2000, c B-9 (the “ BCA ”) to resolve her interest in the corporations in an equitable manner. [ 17 ] After the trial, costs owing to Ms. Berman of $128,339.97 were also ordered secured against Mr. Berman’s shares. [ 18 ] My prior trial decision in relation to this matter was reported as SJB v RDBB, 2019 ABQB 624 . Mr. Berman’s unsuccessful appeal of the trial decision is reported as SJB v RDBB, 2020 ABCA 108 .

Events Post-Trial [ 19 ] Ms. Berman called an Annual General Meeting (AGM) for 905 and BI Corp in early 2020 in furtherance of her rights as a beneficial shareholder under the BCA . Prior to the meeting, she received financial statements and minute books for 905 and BI Corp. [ 20 ] This financial disclosure provided more details of the sale of the 905 assets, which became a source of concern for Ms. Berman. It appears that Mr.

Berman’s gains from the sale were significantly higher than was discovered at trial, and those gains were not disclosed or shared with her pursuant to the court orders of Justice deWit. [ 21 ] The disclosure also revealed the full extent of the “roll and redeem” transactions that provided tax savings to 905 and BI Corp in June 2019. These transactions occurred after trial and argument, but before judgment was ultimately given. Although Ms. Berman consented to the roll and redeem transactions at the time, she was not made aware of the specifics of those transactions. Upon discovery of the specifics, Ms.

Berman was alarmed to discover that were capital dividends and promissory notes issued, along with the cancelling of shareholder loans. [ 22 ] At the AGMs, the following items were added to the agenda on Ms. Berman’s request:

i) A review of all past transactions by directors and shareholders; ii) Sale of shares in Mr. Berman’s name (beneficial owner Ms. Berman) to Mr. Sicherman; iii) A review of the intercompany transactions between 905 and BI Corp; and iv) Listing and sale of assets of the company. [ 23 ] At the AGMs, Ms. Berman was told she was not entitled to vote, pursuant to s 142 of the BCA . Ms. Berman’s counsel, on the other hand, took the position that it was Mr. Berman who could not vote as he did not have beneficial ownership of the shares, and had not taken instructions from Ms. Berman on how to vote.

Ultimately, the vote proceeded without Ms. Berman being permitted to vote. [ 24 ] The agenda items requested by Ms. Berman were raised at both meetings. At the 905 meeting, the requested discussion on items

i) through iv) were rejected by Mr. Berman and Mr. Sicherman. [ 25 ] At the BI Corp meeting, items

i) through iii) were also rejected as items for discussion. Item iv), the sale of the properties owned by BI Corp, resulted in a mixed vote. Mr. Sicherman voted to list the properties for sale, while Mr. Berman voted against the sale. Mr. Berman stated flatly that he was not interested in listing the properties for sale. The motion did not pass as a consequence. [ 26 ] Since the trial, Mr. Berman has managed to contribute $49,000 towards his support obligations. The remainder of the judgment remains outstanding. Current Action [ 27 ] Ms.

Berman argues that her interests have been oppressed, unfairly prejudiced, or unfairly disregarded by the defendants. She alleges four grounds of oppression:

i) The defendants’ refusal to follow the court orders of Justice deWit from 2017 and 2018, upon the sale of 905’s assets, and the failure to disclose the 905 sale transactions in a timely manner; ii) The “roll and redeem” transactions in June 2019 that she characterizes as a “liquidity event”, which were not properly disclosed until February 2020; iii) Mr. Berman’s disregard for Ms. Berman’s interests as a beneficial owner at the AGM in March 2020 ; and iv) Mr. Berman’s continued refusal to sell the BI Corp properties, resulting in a deadlock in the corporation ; [ 28 ] Ms.

Berman asks that the court remedy this oppression by ordering a liquidation and dissolution of 905 and BI Corp, so that she may obtain some satisfaction of the amounts owed to her. [ 29 ] The defendants counter that there has been no oppression in this case. Mr. Berman argues that he is under an obligation to act in the best interests of the corporations, and that he has always done so. The roll and redeem transactions in 2019 resulted in significant tax savings to the corporations, and were to the benefit of all parties, including Ms. Berman.

The transactions themselves were the matter of disclosure during the trial and were expressly consented to by Ms. Berman. [ 30 ] Regarding the corporate properties, Mr. Berman states that the best interests of BI Corp are to continue to hold the commercial properties until the existing market conditions improve. BI Corp has held the properties since 2006, with the goal of demolishing them for redevelopment in the future. Sensibly, Mr.

Berman argues that it would be inopportune to sell the properties at this time because to do so would go against the legitimate interests of the corporation and its stated purpose. [ 31 ] Mr. Sicherman points out that he took no

part in anything that Ms. Berman categorizes as oppressive. He was not a party to the divorce action (or the deWit orders), and confirms that the 2019 transactions were for tax-purposes. Mr. Sicherman advises that he is

willing to sell the BI Corp properties, simply as a means of extraditing himself from the Bermans’ high-conflict litigation. He agrees that this is an inopportune time to sell the properties, but will do so upon certain conditions being met. Law [ 32 ] In recent years, there has been increasing crossover between family law and corporate law principles when one or both spouses have interests in closely held corporations.

These areas of law must at times meaningfully intertwine as, for example, when determining income for support purposes or for the purpose of quantifying and distributing matrimonial property. [ 33 ] This intersection of family law and corporate law was the subject of recent comment by our Court of Appeal, though the decision was not specific to the oppression remedy. In Aubin v Petrone , 2020 ABCA 13 , Antonio JA, writing for herself and Martin JA, spoke about intersecting corporate and matrimonial property law principles.

Justice Antonio noted that the protections offered by the corporate veil can sometimes create an injustice where, for example, a company is legally owned by one spouse, but the company’s profitably was built upon the direct and indirect contributions of both spouses. See paras 20, 28 as follows: Corporations are legal persons, independent of their owners. The concept of corporate separateness is central to the place of corporations in the common law, and is signified by the metaphor of a "corporate veil".

The veil represents the opaque skin of the corporation, defining it as an entity distinct from its owners, directors and other stakeholders. It generally prevents the stakeholders' liabilities from flowing to the corporation and the corporation's liabilities from flowing to the stakeholders. In particular, the assets of the corporation are not the assets of the shareholders and vice versa. ... Assets held by a company belong to the company and generally remain behind the corporate veil.

But the courts have seen numerous cases where a company was built on the direct and indirect contributions of two spouses while being legally controlled by one.

This arrangement can work for everyone while the relationship is healthy, but is open to abuse when the marriage breaks down. [ 34 ] Ultimately, Aubin signals that “ obligations imposed by family law are on equal footing with other legal obligations and deserve fair balancing where interests compete ,” at para 36. [ 35 ] The question before me asks how corporate law and family law obligations should be resolved in context of the corporate oppression remedy.

Added to this question, as was the case in Aubin , is the added complication of a third-party shareholder. [ 36 ] This appears to be a novel case. [ 37 ] Although the oppression remedy is sometimes used after a matrimonial relationship has ended in situations where spouses can no longer agree on running their family owned and operated corporation [1] , I am concerned here with a different problem. Here, the oppression remedy is being invoked to resolve a distribution of matrimonial property.

Peregrym raised the possibility of utilizing the oppression remedy in this particular context, but it appears the parties in that case ultimately resolved their matter outside of the court process. [ 38 ] Ultimately, I proceed upon the basis that the general principles that apply to an oppression action are well-settled. The parties, however, disagree regarding the application of those principles to Ms. Berman’s present application and her proposed remedy. [ 39 ] Ms. Berman’s claim relies upon both s 242 and s 215 of the BCA .

Section 242 [ 40 ]

Section 242, permits a complainant to apply for relief from oppression or unfairness by a corporation. The relief is meant to address acts or omissions that are “oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer.” 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 , the Court may make an order to rectify the matters complained of. ... [ 41 ] Oppression is an equitable remedy that gives the court a broad discretion to ensure the fair treatment of corporate

stakeholders: BCE Inc v 1976 Debentureholders , 2008 SCC 69 at para 58 . The goal of the legislation is to settle internal corporate disputes premised upon equitable principles, as opposed to reliance on strict legal rights: Keho Holdings Ltd v Noble , 1987 ABCA 84 , at para 19 . [ 42 ] In order for a complainant to establish oppression or unfairness, a two-part test must be met: first, that a reasonable expectation has been breached; and second, that the breach amounts to “oppression,” “unfair prejudice” or “unfair disregard”: BCE at para 68.

What is a reasonable expectation? [ 43 ] Determining whether a stakeholder’s expectation is reasonable or not can be complicated. Stakeholders may have different reasons for entering into a relationship with a corporation and those reasons can conflict. Corporate decisions will not always satisfy all stakeholders or benefit them equally, but shareholders can expect to receive fair treatment by the corporation: BCE at para 64. [ 44 ] Beyond this general statement concerning “fair treatment”, whether or not an expectation is reasonable will depend on a number of factors.

Cases will always be fact-specific, but the following relevant factors have emerged from the jurisprudence: general commercial practice; the nature of the corporation; the relationship between the parties; past practice; steps the claimant could have taken to protect itself; representations and agreements; and, the fair resolution of conflicting interests between corporate stakeholders: BCE at para 72.

Oppression or unfair treatment [ 45 ] If a reasonable expectation is established, the next step is to establish whether the expectation was breached by corporate conduct that amounted to oppression, unfair prejudice and unfair disregard. The meaning of these terms was discussed in BCE , at para 67: ... Even if reasonable, not every unmet expectation gives rise to claim under s. 241. The

section requires that the conduct complained of amount to "oppression", "unfair prejudice" or "unfair disregard" of relevant interests. "Oppression" carries the sense of conduct that is coercive and abusive, and suggests bad faith. "Unfair prejudice" may admit of a less culpable state of mind, that nevertheless has unfair consequences. Finally, "unfair disregard" of interests extends the remedy to ignoring an interest as being of no importance, contrary to the stakeholders' reasonable expectations: see Koehnen, at pp. 81-88. ...

Remedy [ 46 ] If the complainant satisfies the two-step test, a court is given the broad discretion to make whatever orders it deems necessary to rectify the oppression or unfairness: 864789 Alberta Ltd v Haas Enterprises Inc , 2008 ABQB 555 at para 47 . Section 242(3) sets out a number of potential remedies, including the liquidation and dissolution sought by Ms. Berman: 242

(3) In connection with an application under this section, the Court may make any interim or final order it thinks fit including, without limiting the generality of the foregoing, any or all of the following: (

a) an order restraining the conduct complained of; (

b) an order appointing a receiver or receiver-manager; (

c) an order to regulate a corporation's affairs by amending the articles or bylaws; ... (

n) an order for the liquidation and dissolution of the corporation;

Section 215 [ 47 ] Ms. Berman also relies upon

section 215 of the BCA for her claim.

Section 215 gives a court discretion to order liquidation and dissolution of a company if certain criteria are met. The criteria can be the same as are found under the oppression/unfair treatment grounds, or based upon a finding that it would be ‘just and equitable’ to do so: 215

(1) The Court may order the liquidation and dissolution of a corporation or any of its affiliated corporations on the application of a shareholder, (

a) if the Court is satisfied that in respect of a corporation or any of its affiliates (

i) any act or omission of the corporation or any of its affiliates effects a result, (ii) the business or affairs of the corporation or any of its affiliates are or have been carried on or conducted in a manner, or (iii) 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, or

(

b) if the Court is satisfied that (

i) a unanimous shareholder agreement entitles a complaining shareholder to demand dissolution of the corporation after the occurrence of a specified event and that event has occurred, or (ii) it is just and equitable that the corporation should be liquidated and dissolved. ... [ 48 ]

Section 215 permits a corporation to be wound-up even if oppression is not proven, in those circumstances where it is just and equitable to do so. The principles relating to this remedy were outlined succinctly in Osman v Elsiddeig , 2019 ABQB 324 , by Master Smart of this Court. The remedy permits the court to look behind the corporate structure where necessary, however, a court-imposed winding-up is considered to be a drastic measure.

In this regard, Master Smart states the following at paras 15-16: Ebrahimi v Westbourne Galleries Ltd, [1972] 2 All ER 492 (UK HL) is considered one of the leading cases on the "just and equitable" test in winding up applications. In that case Lord Wilberforce stated at 499-500: The foundation of it all lies in the words "just and equitable" and, if there is any respect in which some of the cases may be open to criticism, it is that the courts may sometimes have been too timorous in giving them full force.

The words are a recognition of the fact that a limited company is more than a mere judicial entity, with a personality in law of its own: that there is room in company law for recognition of the fact that behind it, or amongst it, there are individuals, with rights, expectations and obligations inter se which are not necessarily submerged in the company structure... The "just and equitable" provision does not, as the respondents suggest, entitle one party to disregard the obligation he assumes by entering a company, nor the courts to dispense him from it.

It does, as equity always does, enable the court to subject the exercise of legal rights to equitable considerations; considerations, that is, of a personal character arising between one individual and another, which may make it unjust, or inequitable, to insist on legal rights, or to exercise them in any particular way. The Court has wide discretion when exercising the power to grant a winding up application where it is just and equitable. This is a drastic remedy that is not to be granted lightly: see Keho Holdings Ltd v Noble , 1987 ABCA 84 .

The Court should not make a winding up order where equity can be achieved through other means: Keho at para 61; see also Scozzafava v Prosperi, 2003 ABQB 248 at para 60 . The Court must be attuned to the circumstances of each case to determine whether it would be just and equitable to wind up the corporation. [Emphasis added] [ 49 ] There are four potential grounds to that can justify imposition of the ‘just and equitable’ remedy for dissolution: 1.Deadlock in management; 2.Business is akin to a partnership; 3.Loss of substratum; or 4.Loss of confidence in management.

Scozzafava v Prosperi , 2003 ABQB 248 , at paras 45-46 ; Osman at para 17 . [ 50 ] This

section will be discussed in further detail later in my decision. Analysis [ 51 ] I now turn to address the arguments advanced by Ms. Berman. She bases her claims on four events, three of which she argues justify the imposition of the oppression remedy, and the fourth of which she argues meets the test for liquidation based on the just and equitable test that I have just reviewed. I will deal with each in turn. I – Refusal to follow court orders pertaining to the sale of 905’s assets [ 52 ] Ms.

Berman first argues that the defendants engaged in oppressive conduct by 1) failing to abide by the orders of Justice deWit from December 2017 and April 2018 (the “Orders”) when disbursing the proceeds from the 905 sale; and 2) by failing to disclose the details of that sale in a timely manner. [ 53 ] The December 2017 Order required Mr. Berman to provide his share certificates for 905 and BI Corp to Ms. Berman’s counsel in trust. It also required Mr. Berman to place his share of any sales proceeds from the sale of 905 or BI Corp’s assets into trust with Ms.

Berman’s counsel. [ 54 ] The April 2018 Order required Mr. Berman to disclose, within 30 days, all monies paid to him in 2017 and 2018 from BI Corp and 905, including salary, bonuses, dividends and shareholder loans. It also ordered that beyond Mr. Berman’s monthly salary, any further monies paid to him from the companies were to be divided equally between Mr. and Ms. Berman until trial. [ 55 ] During the matrimonial trial Ms. Berman discovered that 905 had sold all of its assets, being the two apartment buildings in May 2018, for a sale price of $7.317 million. She also discovered that Mr.

Berman had received at least $153,000 from the sale. This information was not disclosed to her within 30 days of the transaction occurring, nor were the proceeds placed in trust with her counsel.

Finally, the sale proceeds were not shared with Ms. Berman as this Court ordered. [56] Ms. Berman notes that Mr. Sicherman acknowledged that he was aware of the April 2018 Order. [57] Details regarding the proceeds from the 905 sale were not disclosed to Ms. Berman until February 2020 when she received thefinancial statements for 905 and BI Corp for 2018 and 2019. According to Ms. Berman’s calculations, Mr. Berman actually profitedfrom the 905 sale to a far greater degree than the $153,000 that he represented he had received at trial. Ms.

Berman, at the time, askedfor but did not receive, further corporate information related to 905. [58] Ms. Berman asked that all past transactions between directors and shareholders be discussed at the March 2020 AGMs, buther requests were denied, and in fact the transactions were approved. [59] Ms. Berman alleges that she had a reasonable expectation that the defendants would follow the Orders of Justice deWit, andthe failure to do so violated her expectation. The failure to follow the Orders meant Ms.

Berman was prevented from recovering anymonies from 905 to satisfy her entitlement to the matrimonial property and support awards, which were forthcoming. She alleges thatMr. Sicherman aided Mr. Berman by doing nothing as Mr. Berman withdrew the proceeds for himself, while simultaneously beingaware of the April 2018 Order. [60] Ms. Berman notes that the transactions were not fully disclosed at trial, even though it was apparent by January of 2019 thatMs. Berman sought to become a beneficial shareholder under the Peregrym approach.

She submits that her status as a potentialshareholder is sufficient to qualify her as a complainant for the purpose of bringing an oppression action, relying on GeorgianWindpower Corporation et al v Stelco (2007), [2007] OJ No 5761 (ONSC, Master) [Stelco]. [61] Ms. Berman further argues that by failing to disclose the details of the 905 sale and proceeds, the directors and shareholdersof 905 and BI Corp acted in an oppressive manner towards her. She notes that delays in disclosure have been found in some cases to beoppressive: Krulc v Krulc, 2015 ABQB 213.

Krulc also held that there is a higher degree of transparency required with respect tocorporate information, in a closely-held corporation, where a shareholder does not have an ability to protect their interests. [62] Ms. Berman also relies on Envirodrive Inc v 836442 Alberta Ltd, 2005 ABQB 446, at para 85, noting that as in that case, thestatements were prepared on March 4, 2019, but were not distributed or produced to Ms. Berman until almost a year later, even thoughthe parties appeared at trial on March 25, 2019, and the judgment made her an equitable shareholder in August 2019.

There was nodisclosure until Ms. Berman’s counsel requested it ahead of the March 2020 AGM. I agree with the conclusion in Sexsmith and Watergroup that the failure to provide financial statements due to mismanagement, pooraccounting systems, or a tradition of informal operation will not amount to oppression where there has been no disregard for the interestsof the minority. In many cases the appropriate remedy will be an order for production, not an oppression action.

Where, however,financial statements are produced, but they are simply not distributed, that may well amount to oppression, especially where there arenumerous shareholders who are not involved in day-to-day operations. This will particularly be so when the failure to report is part of anoverall climate of disregard for the interests of the minority. That is especially the case where (as with Envirodrive Inc.) the financialstatements disclose otherwise secret non-arm's length transactions between management and the corporation.

In this case the failure toreport the financial affairs of the corporation, combined with McPeak's other conduct, did unfairly disregard the interests of the MinorityShareholders. [63] The multiple failures to follow the Orders, from not holding the proceeds of the sale in trust, to the delayed and incompletedisclosure, amounts to oppression in Ms. Berman’s submission. [64] To analyze Ms. Berman’s claim, the first step is to determine whether she had a reasonable expectation that the Orders ofJustice deWit would be followed. [65] I find that although it was reasonable of Ms.

Berman to expect compliance with court orders, the non-compliance here doesnot qualify as oppression. I come to this conclusion because Ms. Berman was not a shareholder at the time that the Orders were madeand breached. [66] Any corporate expectations and rights that Ms. Berman possesses exist only the extent that she is a shareholder: Naneff vCon-Crete Holdings Ltd (1993), (ON SC), 19 OR (3d) 691 (ON DivCt, varied (1995) 23 OR (3d) 481 (Ont. C.A.). [67] Although Ms.

Berman cited Stelco for the proposition that a potential shareholder qualifies as a complainant in an oppressionaction, I do not find that case assists Ms. Berman on the present facts. Stelco considered whether an applicant for oppression qualified asa “complainant” or not. The applicant sought to qualify as a complainant by showing they were a creditor of Stelco, such that theyshould be considered as “a proper person to make an application” for oppression. [68] The real question was whether a breach of contract automatically turns a party into a creditor. The Court held that it did not.

While making this finding, the Court noted that the party must be an “actual or potential” creditor at the “time of the alleged oppression”to qualify as a complainant, at para 20.[2] Being on the receiving end of a breach of contract was not sufficient to meet either the“potential” or “actual” characterization of a creditor. [69] Ms. Berman seeks to take this language of “actual or potential” and apply it to her pre-judgment status as a “potential”beneficial shareholder to qualify as a complainant.

I reject this argument for three reasons. [70] First, in Stelco the Court did not have actual statutory language to interpret because the applicant was applying under thediscretionary clause of a “proper person”. In this case, Ms. Berman applies to be a complainant as a beneficial shareholder, which isspecifically provided for in the BCA:

Part 19 Remedies, Offences and Penalties

Definitions (

A) in respect of an application under

section 240, or (

B) in respect of an application under

section 242, if the Court exercises its discretion under subclause (iv), 239 In this Part, (a) "action" means an action under this Act or any other law; (b) "complainant" means (

i) a registered holder or beneficial owner, or a former registered holder or beneficial owner, of a security of a corporation or anyof its affiliates, … (iv) any other person who, in the discretion of the Court, is a proper person to make an application under this Part. [71] The clear definition suggests that one must be a registered holder or beneficial owner, past or present, of corporate securities inorder to qualify as a complainant. Using basic principles of statutory

interpretation, I find the plain meaning of this clause does notinclude “potential” or “future” shareholders or beneficial shareholders: Opetchesaht Indian Band v Canada, (SCC),[1997] 2 SCR 119 at para 73. [72] Second, the case law makes it clear that a shareholder’s reasonable expectations arise at the time the shareholder acquirestheir shares: Allowing a shareholder to obtain compensation for past oppression is also inconsistent with reasonable expectations, which is thetouchstone to entitlement to compensation for oppression. Reasonable expectations by their nature are forward looking.

See LSILogic Corp. of Canada, Inc. v. Logani, 2001 ABQB 710 , [2001] A.J. No. 1083, 204 D.L.R. (4th) 443 (Q.B.), at paras. 126-27. Iagree with the trial judge's comments at para. 231 in reference to the LSI case: [page123] In LSI, supra, Fruman J. emphasized that the date of acquiring shares is particularly relevant to determining whether ashareholder is a proper complainant. This seems appropriate and fair from a policy standpoint. The oppression remedy isprotective of reasonable expectations by shareholders while considering the relevant circumstances.

A shareholder should not beable to claim oppression in respect of an asserted reasonable expectation if it did not exist at the time of his or her sharepurchase.

Arguably, the reasonable expectations of a new shareholder generally pertain to the future decision-making of managementunless there are past and continuing misrepresentations, which create false expectations at the point of purchase of the shares. [Emphasis added] Ford Motor Co of Canada v Ontario Municipal Employees Retirement Board (2006), (ON CA), 79 OR (3d) 81 (Ont.CA), at para 122. [73] See also Lucas v Rockcrest Estates Ltd, 2013 BCSC 285, at para 61: “The question of whether an expectation is reasonable isto be assessed as of the date the shareholder acquired his shares: Callahan v.

Callahan, 2011 BCSC 40, para. 24...”. [74] Therefore, it is clear that Ms. Berman’s reasonable expectations only arose at the time she became a beneficial shareholder,which was when the judgment was released on August 12, 2019. [75] The Orders were granted in December 2017 and April 2018, and the sale of 905’s assets occurred in May 2018, with proceedsbeing disbursed shortly thereafter. These events all occurred well before Ms. Berman’s beneficial ownership in the shares was granted.

She was not a beneficial shareholder at the time of the alleged oppression, and does not qualify as a complainant on this ground. [76] Ms. Berman became a beneficial shareholder in August 2019, and from that time forward she could expect fair treatment.

Although the disclosure of the financial statements did not occur until February 2020, they were provided in a timely fashion oncerequested, and I do not find a breach of her reasonable expectations in that regard. [77] Finally, I do not believe that because this case concerns family law obligations, it should permit altering this basic premise orpermit a “potential” owner to be a complainant. If Ms.

Berman’s position in this regard was accepted, (that her rights arose when shefirst claimed beneficial ownership January 2019) it would place an unfair and unwieldy burden on corporations – making themresponsible for discovering and considering potential shareholders expectations, before they become shareholders, when makingcorporate decisions. Ms. Berman’s submission is this regard is therefore not sound in law or policy. [78] Finally, I agree with Mr. Sicherman’s submission that Justice deWit’s Orders were directed at Mr. Berman and that it was Mr.Berman who failed to comply with the orders, not Mr.

Sicherman. [79] Mr. Berman’s failure to follow the court orders was improper conduct, but it was not oppression. Ms. Berman has thereforefailed to prove this ground. II – Failure to properly disclose the corporate transactions in the spring of 2019 [80] As noted, during the matrimonial trial 905 and BI Corp entered into corporate transactions for tax savings purposes, referredto as a “roll and redeem.” The trial was spread over various dates from December through to April of 2019. During oral submissions on

March 25, 2019, the parties informed this Court about the pending “roll and redeem.” At that time, counsel for Ms. Berman consented to the transaction on the understanding that there would be no dilution of her share position. The necessary corporate transactions for the “roll and redeem” took place on June 19 and 21, 2019. [ 81 ] Ms. Berman now claims that Mr. Berman’s counsel’s representations were inaccurate.

She states that she was not informed of the full extent of the transactions, and only discovered what had occurred in February 2020, when she received the financial statements and minute books for 905 and BI Corp. This was at a time before the AGM. Ms. Berman claims that instead of a purely tax savings measure, significant corporate transactions took place during which capital dividends and promissory notes were issued, and shareholder loans were cancelled. She refers to this as a “liquidity event”, and argues that it resulted in removing all liquidity from 905 and BI Corp. [ 82 ] Ms.

Berman alleges that the outcome of the transactions was to provide Mr. Berman and Mr. Sicherman with $955,000 in promissory notes and the cancellation of existing shareholders loans, resulting in net payable amounts to Mr. Berman of $431,055 and to Mr. Sicherman of $713,703. Ms. Berman argues that these transactions also breached the December 2017 Order because the net sale proceeds were not placed into trust with her counsel. Finally, Ms. Berman argues that the transactions breached the April 2018 Order by permitting monies (including dividends and shareholder loans) to be transferred to Mr.

Berman prior to trial. [ 83 ] Ms. Berman states that the corporate transactions violated her reasonable expectation of fair treatment by the shareholders. She argues that the removal of liquidity from the corporations prevented her from receiving her interest in Mr. Berman’s shares and frustrated the trial Reasons for Judgment. She submits that the corporate transactions preferred the defendants’ interests over hers, violating her reasonable expectation of being treated fairly. [ 84 ] Similar, to her prior argument, Ms.

Berman relies on Stelco to say that she was a potential beneficial shareholder as of January 2019, and that her reasonable expectations arose at that time to be treated fairly. Further, Ms.

Berman argues that the failure to provide a shareholder with advance notice of corporate changes and the failure to provide an opportunity to give input to decision makers constitutes oppression, citing Boreta Estate v McRory , 2014 ABQB 498 at para 62 . [ 85 ] The defendants take the position that the nature of the transaction was disclosed in open court, and that it was a complicated financial transaction orchestrated at the behest of the corporations’ accountants to provide tax savings in the approximate amount of $360,000.

The defendants maintain that the share structure did not change and the trust and equitable interest of Ms. Berman was not negatively affected by the transactions. The net effect of the transactions was large tax savings to the benefit of the shareholders, including Ms. Berman. Moreover, Ms. Berman’s counsel consented to the transaction on her behalf. [ 86 ] In addition, both Mr. Sicherman and Mr. Berman state that no cash was distributed to Mr. Berman in the transactions, which were all merely paper transactions. They say there has been no negative impact to Ms. Berman, or her equitable interest in the shares.

They note that she has admitted the transactions did not dilute her shares or their value. [ 87 ] I find that Ms. Berman’s second ground must fail for the same reasons as the first – she was not a beneficial owner of shares at the time that the alleged oppressive acts occurred. [ 88 ] I also would have denied Ms. Berman’s claim here due to a lack of evidence to substantiate her claim. The transcripts of the proceedings from March 25, 2019 show the following exchange took place: MR. LECLAIR: A couple of other minor points.

I met with a guy named Mike Lynch, who is the accountant at a company called DLA, who does all of the financials for 905 and Boulevard ... So, the one piece of good news is that the accountant has figured out a transaction, he calls it a roll and redeem, between 905 and Boulevard has to be completed to the end of June 2019. And the projected corporate tax savings is $360,000 between the two corporations. I have agreement from Mr. Hayher. The shares, though, are subject to an order that they’re in the possession of (INDISCERNIBLE) and Company. Do we need to do something [to] be able to do the roll and redeem? MR.

HAYHER: I mean, whatever we need to get done, we’ll get it done. ... MR. LECLAIR: We’ll just consent to it. THE COURT: Sorry. Explain this to me again. I am -- MR. HAYHER: It’s a tax - - basically it is an extension of the taxes rules change on June 1, 2019. If the shares are rolled and redeemed before that, there’s a $300,000 savings to the corp. ... MR. LECLAIR: It took him 45 minutes to explain it to me. I’m not going to try and repeat it, but it related to the sale of 905’s property. ... Mr. LECLAIR: 905 paid a bunch of tax.

Now, if 905 and Boulevard – its not a full amalgamation, but if they’re combined to some degree, there’s tax savings of $280,000 in one and 80,000 in the other. ... Mr. LECLAIR: 905 is owed about $2 million by Boulevard, but it relates to some fairly, at least to me, esoteric accounting principles. And in any event, it just makes sense to do it. It maximizes the amount of net monies available to all parties. THE COURT: All right.

MR. LECLAIR: And it doesn’t dilute the share position at all. THE COURT: Okay. MR. HAYHER: And we’re totally fine with that. [ 89 ] Based on this exchange, it is apparent that Mr. Berman’s counsel and Ms. Berman’s counsel spoke before making these representations to this Court, and agreed that the roll and redeem transaction was in all parties’ best interests due to the tax savings that would benefit all shareholders. [ 90 ] Although Ms.

Berman states the use of promissory notes, dividends and shareholder loans were unexpected features of the transaction, there is no evidence of counsel’s discussion, or whether it is typical in a roll and redeem for those types of transactions to occur. [ 91 ] There is also no evidence that the transactions prevented Ms. Berman from receiving her interest in Mr. Berman’s shares. There was a representation to the Court that her share position would not be diluted, and it was not. Absent expert evidence, I do not find anything to substantiate Ms.

Berman’s complaints, nor is the Court able to parse the complicated “roll and redeem” transactions on its own. [ 92 ] If Ms. Berman had a reasonable expectation to be consulted before this type of transaction, it appears that such consultation occurred. [ 93 ] Finally, regarding Ms. Berman’s argument concerning the potential violations of the Orders, it appears Ms. Berman’s counsel also waived compliance with their terms (“whatever we need to get it done, we’ll get it done”). [ 94 ] Ms. Berman has therefore failed to prove this ground of oppression. III - Mr. Berman’s disregard for Ms.

Berman’s interests as a beneficial owner at the AGM in March 2020 [ 95 ] Ms. Berman’s third ground of oppression relates to her treatment at the AGM in March 2020. When Ms. Berman requested the meeting in late January 2020, she also expressed a desire to vote as the beneficial owner of Mr. Berman’s shares, pursuant to the judgment which gave her in personam and in rem rights to Mr. Berman’s shares in 905 and BI Corp. This request was denied, as she was informed that she had no standing to vote by counsel for Mr.

Berman and the companies, pursuant to section 142(1) of the BCA : 142(1) The registered holders or beneficial owners of not less than 5% of the issued shares of a corporation that carry the right to vote at a meeting sought to be held may requisition the directors to call a meeting of shareholders for the purposes stated in the requisition, but the beneficial owners of shares do not hereby acquire the direct right to vote at the meeting that is the subject of the requisition. [Emphasis added] [ 96 ] When the meeting occurred on March 3, 2020, Ms. Berman’s counsel voiced objection to Mr. Berman voting, premised on

section 142. Ultimately, Ms. Berman was not permitted to vote at the meeting and Mr. Berman did vote. As I earlier reviewed, Mr. Berman voted against the requests made by Ms. Berman as follows: to review of all past transactions by directors and shareholders; to discuss a sale of shares in Mr. Berman’s name (beneficial owner Ms. Berman) to Mr. Sicherman; to review the intercompany transactions between 905 and BI Corp; and, to discuss the listing and sale of assets in both companies. Mr.

Sicherman also voted down all of the items, with the exception of selling the properties of BI Corp. [ 97 ] At BI Corp’s AGM, the item concerning listing and sale of the properties received some discussion. Mr. Sicherman indicated that he was willing to consent to the sale of the properties at a price of $5.25 million dollars. [ 98 ] Mr. Berman voted against listing and selling the properties. [ 99 ] Mr. Berman’s counsel and Mr. Berman both addressed the meeting as to Mr. Berman’s rationale in voting. Mr.

Berman’s counsel noted that pursuant to the trial judgment, BI Corp could not dispose of, transfer, or encumber any of its property prior to the resolution of the plaintiff’s oppression action pursuant to

section 242 of the BCA . Ms. Berman’s counsel countered that the discussion was about listing, not selling. Mr. Berman then spoke and stated “I’m not interested in listing.” [ 100 ] Mr. Berman’s counsel added that there was no business purpose for the proposed sale as the assets were purchased for capital appreciation, and that considerable development was pending in the area. He also noted the sale would trigger tax costs to the corporations that would not be shared by Ms. Berman. Finally, counsel stressed that the corporation had no liability to Ms. Berman in relation to the personal debt of Mr.

Berman. [ 101 ] Mr. Berman followed up by saying that he was “voting no on behalf of listing and selling for now, for the company and myself.” [ 102 ] Ms. Berman argues that she had a reasonable expectation that Mr. Berman would act in her best interests as a trustee at the AGM. Mr. Berman was voting as a shareholder at the meetings, but as one holding his shares in trust for Ms. Berman. Ms. Berman, referencing general trust principles, suggested that Mr.

Berman as trustee must act with honesty and competence, and in the best interests of the beneficiary: Valard Construction Ltd v Bird Construction Co , 2018 SCC 8 at para 58 ; Boreta Estate at para 64 . [ 103 ] Consequently, Ms. Berman argues that Mr. Berman should have asked for her input and was obligated to vote in accordance with her wishes at the AGM. Ms. Berman says that instead, Mr. Berman voted against her interests. Ms. Berman submits this conduct was oppressive, prejudicial and disregarded her interests.

[ 104 ] Ms. Berman points out that although Mr. Berman states he is prevented “from exercising any control of the corporations” because of the judgment of the Court, Mr. Berman did exert control by preventing her from voting and by voting himself. That action, and his vote against the sale, unfairly thwarted Ms. Berman’s attempt to realize on the judgment. [ 105 ] Mr. Berman argues that Ms. Berman’s expectations are not reasonable and are contrary to basic principles of corporate law. Mr.

Berman is a director of the corporations, and his duties are to put the best interests of the corporation first: BCE at para 66. [ 106 ] Mr. Berman argues that the sale of the properties is not in the best interests of BI Corp. The corporation was created as a long- term holding company to acquire and hold commercial real estate for eventual future development. It has held the properties since January 2006 for that purpose, and now is not an opportune time to sell.

Favourable market conditions may not exist for some years and depend on the economic recovery from COVID-19 and pending real estate development in the Stampede Park area, which may still be years away. The company is able to support itself from the commercial rents from businesses leasing the existing buildings. The legal proceedings between the Bermans do not change BI Corp’s business purposes or best interests. BI Corp has held the properties for the long term and BI Corp’s business purposes remain the same. [ 107 ] Mr. Berman notes that although the judgment provided Ms.

Berman with beneficial ownership in a portion of his shares in the corporations to satisfy the judgment against him, the amount was not quantified (as no valuation has been placed on his shares) and he is still the legal shareholder. Quantifying Ms. Berman’s interest in the shares is difficult, as the value fluctuates depending on the present market value of the properties. Regardless, Mr. Berman is the shareholder that is legally entitled to vote under s 142(1) of the BCA . [ 108 ] In light of these considerations, Mr. Berman argues it is not reasonable for Ms.

Berman to expect him to vote against the best interests of BI Corp, and opt instead to vote for a sale, which is solely in her best interests. The law of oppression protects her reasonable expectations as a shareholder, not her personal interests: Naneff ; Hui v Hoa , 2015 BCCA 128 at para 38 . Ms. Berman is remiss by electing to treat the assets of the corporation as if they were the assets of the shareholders. [ 109 ] Ultimately, Mr. Berman submits that a shareholder cannot reasonably expect a corporation to liquidate for the purpose of paying a personal judgment debt of one of the shareholders.

It would be unfair to prefer Ms. Berman’s interests over the interests of the corporation itself or other shareholders. Mr. Berman argues that Ms. Berman is out to destroy the corporation. and submits that it would be dangerous to create a precedent that would permit a family law judgment to be collected from a 50 percent shareholder through the unwarranted liquidation of the underlaying corporate assets. Were Ms. Berman’s expectations reasonable? [ 110 ] The first step is to determine if Ms. Berman’s expectations were reasonable. Ms.

Berman has premised her argument based upon two interrelated expectations arising from the AGM. She suggests first that Mr. Berman was obligated to have voted in accordance with her wishes, or alternatively that she should have been able to direct him not to vote. The second is that because of the trial judgment and her equitable interest in the properties, the corporation should have taken steps to sell the properties at the AGM. [ 111 ] This application, like most, is very dependant on its facts. What is just and equitable here may not be in another case: BCE.

One must look to the particular stakeholders in the case to understand the corporate context and the relationships at play: BCE at para 59. With that in mind, I make the following findings based upon the factors identified in BCE . Nature of Corporation(s) [ 112 ] 905 and BI Corp are two closely-held corporations which until recently were solely owned and operated by two people: Mr. Berman and Mr. Sicherman. Both Mr. Berman and Mr. Sicherman are directors and equal shareholders.

The corporations have been created with the purpose of investing in and profiting from various real estate opportunities, and both men have been successful at running such corporations in the past. [ 113 ] 905 no longer owns any assets other than the monies owed to it by BI Corp. The properties that were owned by 905 were sold in 2018, at least partly with the stated goal of using the sale proceeds to resolve the matrimonial litigation of the Bermans. This obviously did not occur. [ 114 ] BI Corp purchased the properties at issue in 2006 as holding properties, with the goal of future development.

The properties have been retained for over 14 years and it is likely that there will be new development in the areas proximate to the Stampede grounds over the upcoming years, although current economics and local politics makes a precise timeline difficult. Commercial Practice [ 115 ] In some of the oppression cases considered by the court, evidence has been led to demonstrate that management has strayed from generally acceptable business practices to a stakeholder’s detriment.

There is no evidence of that in this case, as the companies appear to be managed effectively. [ 116 ] When I consider general commercial practice, it would be unusual for a corporation to sell its assets in contravention of its stated purpose to satisfy the significant debt of one of its shareholders.

However, I would note in the present circumstances that BI Corp is a very closely-held corporation with two directors/shareholders, and in the past those same directors/shareholders have sold assets to satisfy, or attempt to satisfy, debts held by one of the shareholders arising from the Bermans’ litigation (the sale of 905’s assets). [ 117 ] I was not provided with any helpful evidence or submissions on how beneficial shareholders are typically treated when it comes to voting in the circumstances of a closely-held corporation. Relationships

[ 118 ] Mr. Sicherman and Mr. Berman are long-term partners in the real estate development business, which they have carried out by creating and running successive corporate entities. Both have enjoyed a successful business relationship over many years. Prior to this Court’s judgment, Ms. Berman was not a shareholder, nor had she ever taken on a management role on behalf of any of the corporations. Mr. Sicherman has said in the past that he was not interested in operating the business with Ms. Berman due to her lack of business experience. [ 119 ] Mr. Berman and Ms.

Berman are former spouses who have been engaged in high-conflict family litigation for a number of years. They were unable on their own to resolve their support and matrimonial property issues and remain antagonistic towards each other. [ 120 ] The judgment of August 2019 made it clear that Ms. Berman is a present stakeholder in the corporations. She was granted by my judgment a beneficial interest in the shares of both corporations. Contrary to the submissions of the defendants, I do not find that Ms.

Berman’s relationship to the corporations is simply one of a “judgment creditor to one of the shareholders.” The trial judgment granted Ms. Berman an equitable ownership interest in the companies through the division of matrimonial property, in an amount of $917, 816. She is in that sense a partial owner of 905 and BI Corp. Child support and spousal support obligations, plus costs, totalling close to $600,000 were additionally secured against Mr. Berman’s shares. [ 121 ] Although Ms.

Berman’s interest is defined in equitable and monetary terms, she was not granted the transfer of actual shares in the corporations. Determining the current value of Mr. Berman’s shares is complicated due to the corporate changes that have occurred and the changing market value of BI Corp’s properties in today’s economic climate. However, if we take the value of Mr. Berman’s corporate interests from trial, after deductions, they totaled $2,075,515. This means that Ms. Berman’s has an equitable or secured interest in well over 70% of Mr. Berman’s shares. [ 122 ] Mr.

Sicherman has been involved into the Bermans’ conflict as an unwilling participant. Mr. Sicherman is an innocent third party who has been unfortunately entangled in the Bermans’ litigation. Due to the emotional and financial strain posed by the present litigation, Mr. Sicherman has expressed present willingness, on certain terms, to sell BI Corp’s properties in the hope of extricating himself from the ongoing litigation. Past Practice [ 123 ] Historically, Mr. Berman and Mr. Sicherman have managed the corporations through consensus.

They have organized their corporate endeavours with neither party having a casting vote. As the sole shareholders and directors/officers of the corporations, there is a suggestion that the shareholders have a governance role. However, because their bylaws do not allow for a transfer of shares without consent of the other shareholder, it also suggests that both wish to maintain control over who might become a future shareholder. [ 124 ] As I have already noted, 905 sold assets in the past in an effort to aid Mr.

Berman to settle the matrimonial litigation. [ 125 ] The assets of BI Corp have been held for many years with the goal of profiting through future development when market conditions are ideal. Preventative Steps [ 126 ] Ms. Berman submits that she attempted to take preventative steps to protect her interests by obtaining the previous orders from Justice deWit, but those orders were not followed and instead were frustrated. Ms. Berman argues that she had a reasonable expectation that the past orders of the Court would be followed. [ 127 ] As is obvious, the prior orders of the Court were granted before Ms.

Berman become a beneficial shareholder. They are unrelated to the prejudice she claims to have suffered here – a prejudice related to her inability to vote or the present refusal of Mr. Berman to cast his vote to approve the sale of the properties. Representations and Agreements [ 128 ] As Ms.

Berman is a beneficial shareholder because of the trial judgment, there are no existing representations or agreements between the parties defining her interest in the corporations. [ 129 ] The only agreement in evidence specifies that the chairman of a Board meeting does not get a second or casting vote in addition to their vote as a director. The same provision exists regarding the chairman at a shareholder’s meeting. [ 130 ] This Court’s trial judgment, however, is a factor in deciding whether her expectations are reasonable or not, as it was the genesis of her involvement as a beneficial shareholder.

The judgment provided that Ms. Berman had an equitable interest in Mr. Berman’s shares, and that he held the shares “in trust” for her, equal to the equalization payment: SJB v RDBB , at para 200. The judgment also provided, at Ms. Berman’s request, in order that she receive a benefit from her beneficial interest, that Ms. Berman commence an oppression action to resolve her interest in an “equitable manner”: SJB v RDBB, at para 103. This is because a trust interest in the corporate entities was considered only a “partial solution, or no solution at all, given Mr.

B’s prior disregard for court orders”: SJB v RDBB, at para 104. Fair Resolution of Competing Interests [ 131 ] There are clearly competing interests in this case. Ms. Berman wishes to monetize her equalization payment as well as receive the child support and spousal support she is owed, all of which are tied up in Mr. Berman’s shareholdings. [ 132 ] Mr. Berman and Mr. Sicherman wish to continue to manage and operate BI Corp and its assets as they have for the past fourteen years – a holding property which will likely generate great profit in the future when the area is redeveloped. I note, however, that Mr.

Sicherman has expressly agreed to set aside this goal in favour of the resolution of the ongoing litigation between the Bermans.

[ 133 ] BCE provides guidance on conflicts that arise between the interests of stakeholders and the corporation, at paras 81-84: As discussed, conflicts may arise between the interests of corporate stakeholders inter se and between stakeholders and the corporation. Where the conflict involves the interests of the corporation, it falls to the directors of the corporation to resolve them in accordance with their fiduciary duty to act in the best interests of the corporation, viewed as a good corporate citizen.

The cases on oppression, taken as a whole, confirm that the duty of the directors to act in the best interests of the corporation comprehends a duty to treat individual stakeholders affected by corporate actions equitably and fairly. There are no absolute rules. In each case, the question is whether, in all the circumstances, the directors acted in the best interests of the corporation, having regard to all relevant considerations, including, but not confined to, the need to treat affected stakeholders in a fair manner, commensurate with the corporation's duties as a responsible corporate citizen. ...

There is no principle that one set of interests -- for example the interests of shareholders -- should prevail over another set of interests. Everything depends on the particular situation faced by the directors and whether, having regard to that situation, they exercised business judgment in a responsible way. [ 134 ] I agree as a matter of law that the directors of a corporation are obligated to resolve conflicting interests in accordance with their duty to act in the best interests of the corporation, while at the same time, treating individual stakeholders affected by corporate actions fairly.

The question, however, is to determine how this general statement applies to the present case. Considered from the perspective of the corporation’s best interests, in furtherance of its stated goal to profit from real estate development, it would appear that the corporation’s best interests from a profit generating perspective would be to continue to hold onto the BI Corp properties until market conditions improve. [ 135 ] On the other hand, as a responsible corporate citizen, BI Corp is obligated to treat Ms. Berman who as a key stakeholder fairly. This means that Ms.

Berman’s interests must also be taken into consideration by the corporation. This is a small closely held corporation, not a large enterprise with multiple stakeholders and multiple competing interests. BCE advises that “[r]easonable expectations may emerge from the personal relationships between the claimant and other corporate actors. Relationships between shareholders based on ties of family or friendship may be governed by different standards than relationships between arm's length shareholders in a widely held corporation” at para 75. [ 136 ] Although Mr.

Berman does not agree, he is obligated by this Court’s judgment to recognize Ms. Berman as a part owner of the corporations because of the matrimonial property division. He was also instructed to act as her trustee in relation to the shares he holds in trust for her. In circumstances such as these, Mr. Berman is obligated to consider both his corporate obligations and his family law obligations: Aubin . Consequently, I find Mr. Berman as director of the corporation, wrongfully disregarded Ms. Berman’s interests at the AGM and instead he should have voted according to Ms.

Berman’s wishes as the beneficial holder of well over 70% of Mr. Berman’s shares. It was improper is these circumstances for Mr. Berman to rely solely on the business judgment rule to the exclusion of Ms. Berman’s interests as an equitable shareholder. [ 137 ] Mr. Sicherman as director and 50% shareholder, is in a different position. He is not obligated by court order to act as a trustee on behalf of Ms. Berman, nor does Mr. Sicherman have any family law obligations that are tied up in the underlying assets of the corporation. Mr.

Sicherman was entitled to vote consistent with his view of the corporation’s best interests, while at the same time keeping in mind Ms. Berman’s fair treatment as a beneficial owner, and the valid goal of resolving the matter without involving the corporation in further and ongoing litigation. Conclusion on Reasonable Expectations [ 138 ] Based on the foregoing factors, it was reasonable for Ms. Berman to have expected Mr. Berman to vote according to her wishes as a shareholder at the AGM.

The Court of Appeal in Aubin , at para 36 , made it abundantly clear that family law obligations must be considered to be on equal footing with other legal obligations and must be the subject of fair balancing where those interests compete. Mr. Berman also is legally obligated to Ms. Berman as trustee of her shares. I therefore find that Ms. Berman had a reasonable expectation that Mr.

Berman would vote according to her instructions at the AGM. [ 139 ] 905 and BI Corp are small closely held corporations with the flexibility to consider personal interests when necessary, and indeed 905 has purportedly acted in consideration of Mr. Berman’s family obligations in the past. Although the corporations were set up so that new shareholders could only be added by consent, the trial judgment introduced Ms. Berman as a new (beneficial) shareholder. The new shareholder, Ms. Berman, has a considerable ownership interest in the corporations. Mr. Berman, as trustee of Ms.

Berman’s ownership interests, is also obligated when corporate decision-making to recognize his own family law obligations under the terms of this Court’s judgment. This obligation at the time of trial included $221,616 in retroactive and prospective child support. [ 140 ] Mr. Berman was aware that Mr. Sicherman was willing to list the properties for sale in order to put an end to the costly and time-consuming legal proceedings he has been drawn into. In circumstances, such as these, it was entirely reasonable for Ms. Berman to expect that Mr.

Berman would vote according to her wishes, even if listing and selling now may not bring maximum profit to the shareholders. Mr. Berman breached Ms. Berman’s reasonable expectations by failing to do so. [ 141 ] However, I do not find that the trial reasons for judgment created a reasonable expectation that the corporation would proceed to list and sell the properties, or that Mr. Sicherman would necessarily vote in favour of doing so. The reasonable expectation that flowed from the judgment was that Mr.

Berman would attempt to satisfy the matrimonial property equalization payment through whatever corporate arrangements he could control. Mr. Sicherman as the corporation’s only other director can only be expected to consider the fair treatment of Ms. Berman in decision-making, but he is not bound to vote in Ms. Berman’s favour when appropriately balancing sometimes competing interests. Mr. Sicherman’s decision to vote in favour of listing and selling BI Corp’s properties demonstrates the fair contemplation of Ms. Berman’s interests.

[ 142 ] Next, I must consider whether Ms. Berman’s reasonable expectation that Mr. Berman would vote in her best interests at the AGM, and according to her wishes, reaches the level of oppressive conduct, or conduct that unfairly prejudiced or unfairly disregarded her interests. [ 143 ] The characterization of such conduct appears to depend on the degree of culpability involved in the disregard for someone’s interests: BCE . At the one end of the spectrum, “oppression” is conduct that is abusive and suggestive of bad faith.

In a middle category is conduct that is “unfairly prejudicial.” This is conduct which is less culpable, but nonetheless results in unfair consequences. As a final category of conduct, is conduct that shows “unfair disregard” for a stakeholder’s interests. This is conduct which somewhat innocently ignores a stakeholder’s interests, or the reasonable expectation the stakeholder has to have their interests considered. [ 144 ] Mr. Berman’s conduct in this case went beyond passive ignorance of Ms. Berman’s interests. Instead, Mr. Berman was motivated to act contrary to Ms. Berman’s legitimate interests.

I find that this conduct is closer to the bad faith end of the spectrum, and constitutes oppression. This is evidenced by Mr. Berman’s unwillingness to sell the property despite being aware of Mr. Sicherman’s willingness to sell. In essence, Mr. Berman’s actions were taken largely for the purpose of defeating Ms. Berman’s attempts to satisfy her judgment. [ 145 ] At this juncture, it is also important to make clear that I find the breach of the reasonable expectation, and the corresponding oppressive conduct, lays at the foot of Mr. Berman personally, and not of the corporation (or Mr. Sicherman).

The problematic conduct here was not “corporate conduct,” instead it was Mr. Berman alone who acted oppressively towards Ms. Berman’s interests, in further of his own. In such a case the remedy may attach personally to Mr. Berman: Mack v Universal Dental Laboratories Ltd , 2020 ABQB 738 at paras 246-247 : The test for assessing the personal liability of directors in fashioning a remedy for oppression was recently set out by the Supreme Court of Canada in Wilson at paras 47-57. The plaintiff must show:

a) the director or officer is implicated in the oppressive conduct such that the oppressive conduct must be attributable to the individual director because of his or her action or inaction, and

b) the order must be fit in all the circumstances. Once a Court has found that oppressive conduct can be attributed to a particular director, personal liability will generally be fair if the director has received a personal benefit such as immediate financial gain or increased control of the company. If a director has breached a personal duty that they owe as a director, or misused a corporate power, personal liability may be fairly imposed. Similarly, if a remedy against the corporation would prejudice other shareholders, this may favour personal liability: Wilson at para 49.

IV – Does the deadlock on selling the BI Corp properties means it is just and equitable to liquidate and resolve the corporations? [ 146 ] Ms. Berman’s final argument is that because the opposing positions of Mr. Sicherman and Mr. Berman regarding the sale of the properties have resulted in a deadlock, it would be just and equitable for me to break the deadlock by ordering a liquidation and dissolution of the companies. [ 147 ] In her argument, Ms. Berman detailed the history of discussions between the parties regarding the sale of the properties. Ms.

Berman referred to the period from the July 2018 settlement proposal until the AGM of March 2020, referring to correspondence, affidavits, or statements made in open court. Ms. Berman points out that Mr. Berman and Mr. Sicherman have often changed their positions on whether they are willing to sell the properties or not. Although there have been some time periods where both were willing to sell, no attempts at selling the property have been made. [ 148 ] Mr.

Sicherman’s position has alternated from not being willing to sell in July 2018, to willing to sell in December 2018 and February 2019, to not willing to sell in June 2019, to willing to sell in November 2019. [ 149 ] Mr. Berman’s position has switched from being willing to sell in December 2018 and early March 2019, to not being willing to sell in late March 2019. Mr. Berman has maintained the position that he is not willing to sell from late March 2019 through to the present. [ 150 ] As noted, Mr. Sicherman was willing to sell the properties at the AGM in March 2020 and Mr.

Berman voted against selling. [ 151 ] Ms. Berman submits that three of the four grounds for ordering a corporation wound up under the ‘just and equitable’ rule are met in this case, though only one is necessary for an order to be granted. [ 152 ] First, Ms. Berman argues that this is a classic case of deadlock, similar to the case of Scozzafava v Prosperi , 2003 ABQB 248 .

As in that case, there are two equal factions in a deadlock over selling the properties, and there is no provision for a casting vote, nor is there buy-out clause in a unanimous shareholders agreement (there is actually no unanimous shareholders agreement at all): It is apparent from the facts that there are two equal factions of shareholders and that they are at odds. This is a classic case of deadlock. Nor is there any way within the corporation to resolve this deadlock.

As was indicated earlier, nothing in the organizational documents of the corporation provides for a casting vote at meetings of directors or of shareholders. Further, a review of the unanimous shareholders agreement signed by the parties shows that they decided not to include the standard buy-out or shotgun style clause and, in fact, overtly crossed it out of the draft agreement, initialling the change. For whatever reason, the parties elected not to provide in the corporation's organizational documents for a means of resolving a potential deadlock. [ 153 ] Second, is the loss of confidence ground. Ms.

Berman, as an equitable shareholder, has lost confidence in management because of the manner in which proceeds were distributed from 905, the failure of Mr. Berman and the corporations to follow Justice deWit’s

orders, the roll and redeem transactions of June 2019 and failure to disclose same, and the refusal to discuss the information relating to these transactions at the AGM. [ 154 ] Third, is the partnership ground. BI Corp. is akin to a partnership because Mr. Berman and Mr. Sicherman have been in business together for 14 years running the corporations as 50/50 shareholders. [ 155 ] Mr. Berman and Mr. Sicherman are united in opposing the liquidation and dissolution of the companies on this ground. They argue that there is no true deadlock. Neither Mr. Sicherman nor Mr.

Berman are truly in favour of selling the properties. Mr. Sicherman has only reluctantly agreed to a sale to remove himself from the Bermans’ prolonged litigation. They point out that the holding properties continue to be managed and maintained as they always have been, and there is no deadlock in relation to day-to-day operations. [ 156 ] Mr. Sicherman provided the following evidence in his most recent affidavit (from February 3, 2021) to explain why he is willing to sell the properties.

I believe that the real estate development market in Calgary has been very significantly negatively impacted as a result of COVID-19, the continued economic woes of Alberta and Calgary, and the cancellation of the Keystone XL pipeline. I am aware, for example, that the vacancy rate in downtown Calgary is approximately 30%. This is not the correct time to put a development site on the market as I expect it will result in a greatly reduced sale price from what could have been achieved a year ago, and what will hopefully be achievable in the future.

Having said that, the aggravation, emotional distress, and expense of having to be involved in the divorce of Richard and Stephanie Berman through this litigation, is a drain emotionally and financially. The dispute between Mr. and Mrs. Berman has nothing to do with me, other than Mr. Berman also owns 50% of the shares of Boulevard. His financial problems, emanating from his divorce proceedings, should not be allowed to affect me.

As a result, while I remain of the belief that a sale of the subject properties is not in the best interests of Boulevard, nor in my own financial best interests, I remain prepared to allow a sale of these properties at a list price of $5,250,000 or higher, if that sale results in a sales price of at or near $5,250,000, so long as I am provided a right of refusal to purchase the property for my own account (and not Boulevard or Richard’s account) at the offered price. [ 157 ] Mr. Berman and Mr.

Sicherman both argue that a court-ordered liquidation pursuant to s 215 would not be just and equitable, particularly to Mr. Sicherman, who is an innocent party in these proceedings. The liquidation remedy is often referred to as “draconian” in the case law: Hull Ltd v Bean Services Inc , 2013 BCSC 1208 at para 58 . A court-ordered liquidation would involve the appointment of a liquidator whose primary focus is on selling the properties, not on achieving a fair price or market value for the shareholders. Further, Mr. Berman and Mr.

Sicherman estimated the costs involved in such a process to be in the hundreds of thousands of dollars, including the tax liabilities that would be incurred. [ 158 ] Liquidating the companies would prioritize Ms. Berman’s interests to the detriment of the corporations and Mr. Sicherman and Mr. Berman’s long-term goal to profit from redevelopment of the properties. [ 159 ] It is submitted that the liquidation remedy would be particularly unfair to Mr.

Sicherman, who has been dragged into this litigation through no fault of his own, including by being named personally in this oppression action, which was not required by the judgment. Mr. Sicherman has acted fairly throughout, and his interests will suffer significantly if a winding up is ordered, especially due to the tax ramifications. As an innocent third party, this remedy would result unjust and inequitable consequences for Mr. Sicherman. [ 160 ] Finally, the defendants argue that the business of the companies, and BI Corp in particular, is not deadlocked or paralyzed.

BI Corp continues to operate the day-to-day operations of the company as it has for the past 14 years, paying its mortgage from commercial rents while waiting for the right market conditions to demolish and redevelop the properties. [ 161 ] The liquidation remedy ultimately is at the discretion of the court based upon equity: Keho . In this case, in my view, it would not be just and equitable to Mr. Sicherman to impose a court-ordered liquidation and dissolution of the companies. Mr. Sicherman has been willing to sell the properties since November 2019 and voted in favour of a sale at the AGM.

After holding onto the property for 14 years, and having acted appropriately throughout the course of the litigation, it would be unjust to have Mr. Sicherman’s interests seriously compromised through a forced sale at a likely improvident price, while also shouldering increased tax costs added to the costs of a liquidator and the liquidation process. [ 162 ] The remedy under

section 215 is considered drastic, and not one that should be granted lightly: Keho ; Osman v Elsiddeig , at para 16 . A court should not resort to this remedy where equity can be achieved by other means: Scozzafava at para 60 . [ 163 ] Considering that I have found oppression by Mr. Berman alone, any reme

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