Hoffman v Hoffman, 2023 ABKB 71

Court of King’s Bench of Alberta Citation: Hoffman v Hoffman, 2023 ABKB 71 Date: 20230206 Docket: 1703 06394 Registry: Edmonton Between: The Estate of Susan Hoffman by her personal representative Jody Caskey Applicant - and - Debora Hoffman, Grand Supreme Investments Ltd., and Marquis Developments Ltd. Respondents _______________________________________________________ Judgment of the Honourable Justice Susan L. Bercov _______________________________________________________ I.

Introduction [ 1 ] Susan Hoffman and Debora Hoffman were sisters who were each gifted shares in their father’s company, Grand Supreme Investments Ltd (“Grand Supreme”). The sisters are the only two shareholders. While each was given an equal equity interest in Grande Supreme, Debora Hoffman has voting control. Grand Supreme holds land for development in Manitoba. [ 2 ] There has been considerable conflict in the Hoffman family since at least 2005. Hubert Hoffman died in 2009. The family

has been involved for some time in litigation over their parents’ wills. [ 3 ] In 2014, notwithstanding that both parties were directors of Grand Supreme, they each took actions regarding Grand Supreme, without consulting the other. The parties disagreed on when and how the lands Grand Supreme owned should be developed. Susan Hoffman applied to re-zone 18 acres of the lands for development. Debora Hoffman opposed the application to re-zone and develop the 18 acres. The re-zoning application did not proceed.

Susan Hoffman incurred significant expenses in connection with the re- zoning application that remain unpaid. Debora Hoffman voted herself sole director in 2015. Debora Hoffman did not complete timely financial statements, did not file timely tax returns, and has failed to call an Annual General Meeting since 2016. [ 4 ] In 2017, Susan Hoffman filed an Originating Application and Affidavit seeking relief, under s 242(1)(

c) of the Business Corporations Act, RSA 2000, c B-9 (“ Act ”) , for the actions of Debora Hoffman that Susan Hoffman argues are oppressive, or unfairly prejudicial to or that unfairly disregards the interests of Susan Hoffman. Susan Hoffman passed away on May 6, 2019. The action is now brought by Jody Caskey, the personal representative of the estate of Susan Hoffman.

The Applicant seeks an order for the liquidation and dissolution of Grande Supreme or, in the alternative, an order directing that the shares of Debora Hoffman be sold to the Applicant at fair market value. [ 5 ] The Respondents oppose the application arguing that the Applicant’s evidence does not prove on a balance of probabilities that Debora Hoffman’s conduct is oppressive. In the alternative, if Susan Hoffman did engage in oppressive conduct, the appropriate remedy is not liquidating Grande Supreme or directing a buy out of Debora Hoffman’s shares. [ 6 ] The issues I must decide are: a.

Was Debora Hoffman’s conduct oppressive? b. If so, what is the appropriate remedy II. Procedural History [ 7 ] This application has an unusual procedural history. [ 8 ] Susan Hoffman started this action by filing an Originating Application with a supporting Affidavit on April 3, 2017. On January 25, 2018, Mr. Caskey sworn an Affidavit very similar to Susan Hoffman’s Affidavit. On March 17, 2018, counsel for the Respondents at the time asked to cross examine on Susan Hoffman’s Affidavit. Susan Hoffman refused to be examined.

While the Applicant argues this was due to health reasons, there is no evidence of this. [ 9 ] The Special Chambers Hearing scheduled on March 21, 2018 did not proceed because Susan Hoffman’s brief was not filed in time. [ 10 ] Susan Hoffman passed away in May 2019. [ 11 ] On June 19, 2017 Gordon Wilson, the President of Grande Supreme during part of the 2017 year, attended a questioning. [ 12 ] On October 13, 2021, Mr. Caskey, purportedly as the executor of Susan Hoffman’s estate, filed an application for the equitable division of the lands held by the two Respondent Companies. Mr.

Caskey also filed another Affidavit sworn on July 19, 2021. [ 13 ] A procedural Order was granted in November 20121 scheduling a Special Chambers Application for May 27, 2022. The Special Chambers Hearing was adjourned to allow for cross examination on Affidavits. [ 14 ] Mr. Caskey was cross-examined on his two Affidavits on August 30, 2022. [ 15 ] Debora Hoffman filed an Affidavit on April 7, 2022 and a supplemental Affidavit on September 9, 2022. She was cross examined on both Affidavits on September 20, 2022.

On October 12, 2022 she filed a third Affidavit that she was not cross examined on. [ 16 ] This unusual procedural history poses some evidentiary issues. One significant issue is that I have no direct evidence from Susan Hoffman. The Respondents argue that Mr. Caskey’s Affidavits contain inadmissible hearsay and opinion evidence. The parties rely on conflicting evidence and both parties impugn the credibility of each other. [ 17 ] I cannot decide issues of credibility or resolve conflicting evidence without a viva voce hearing.

I agree with the Respondents that as the Applicant seeks a final order, hearsay evidence is not admissible: r 13.18(3). III. Background Facts [ 18 ] The following facts are not in dispute: • Grand Supreme is a corporation incorporated pursuant to the Act . Marquis Developments Ltd. (“Marquis”) is a corporation incorporated pursuant to the laws of Manitoba. Grand Supreme now owns all the shares of Marquis. • In 1975, Hubert Hoffman, the father of Debora and Susan Hoffman, purchased 5 parcels of land north of Winnipeg, Manitoba in the Rural Municipality of West St. Paul.

The 5 parcels were purchased through Grand Supreme. Another parcel, adjacent to the 5 parcels, is owned by Marquis. I will refer to the 6 parcels as the “Lands”. • Apart from holding the 6 parcels of land, neither Grande Supreme nor Marquis have any other business or source of revenue.

• During his lifetime Hubert Hoffman gifted shares in Grand Supreme to Debora and Susan Hoffman. The two daughters, Susan and Debora were each gifted 50% of the non-voting shares. Susan Hoffman was gifted 1 voting share while Debora Hoffman was gifted 2 voting shares, making Debora Hoffman the controlling shareholder. There are no other shareholders. • In 2005 Debora Hoffman and her father had a falling out. Debora Hoffman insisted on being removed as a director and shareholder from all family business.

Debora Hoffman was removed from all family business with the exception of her interest in Grand Supreme. • Hubert Hoffman continued to be involved in Grand Supreme until his death in 2009. • In 2013 Hubert Hoffman’s executor informed Debora and Susan Hoffman that Grand Supreme owed unpaid property taxes and that the daughters needed to step up and pay the taxes. To avoid a tax sale, Susan Hoffman paid the taxes. • In 2013 Susan Hoffman and Jody Caskey investigated the development of the Lands.

Jody Caskey was involved as the financial advisor, employee, and accountant for Susan Hoffman before she died. • On March 10, 2014 Mr. Caskey informed Debora Hoffman by letter that Susan Hoffman retained David Romanow to act as a consultant for Grand Supreme for the development of 18 acres of land owned by Marquis. Mr. Caskey advises in the letter that Susan Hoffman has applied to have an 18-acre parcel rezoned for her proposed development.

The municipality is scheduled to review the rezoning application in three days. • The next day a lawyer, Carman McNary, emails Susan Hoffman, Jody Caskey and Ed Bridges, counsel for Susan Hoffman. Mr. McNary indicates he will meet with Debora Hoffman to discuss her proposed course of action. In the meantime, Mr.

McNary cautions against anyone taking any further action regarding the company or the project until Susan Hoffman and Carman McNary advise further. • In April 2015 Debora Hoffman hires Gordon Wilson as President of Grand Supreme. • On April 15, 2014 Susan Hoffman approves a plan to acquire all remaining shares of Marquis. At that time a third party owned 50% of the Marquis shares. The plan involved Debora and Susan Hoffman each contributing $614,157.00 to acquire the remaining shares of Marquis. Marquis owned 48 acres of land adjacent to the land owned by Grand Supreme.

In terms of Susan Hoffman’s proposed plan to develop 18 of the 48 acres of land, Mr. McNary told Mr. Caskey that Mr. Wilson will investigate the proposed plan and make his recommendations to the directors of Grande Supreme on whether to continue the plan or some alternative course of action. In the meantime, no further steps are authorized by any other person on behalf of either Grand Supreme or Marquis beyond those required to implement the purchase of the Marquis shares. • On April 24, 2014 Gordon Wilson reports to Jody Caskey that he is back and that the ladies have got a winner. He asks Mr.

Caskey to give him a call. He also asks Mr. Caskey to copy the back up information to the expenses he has paid on behalf of Grand Supreme indicating that Mr. Wilson wants to get Mr. Caskey paid. • On May 2, 2014, Ed Bridges writes to Carman McNary indicating his understanding that the meetings Gordon Wilson had with David Romanow went well and it appears appropriate to have the zoning and subdivision application proceed. Mr. Bridges asks for Debora Hoffman’s approval. • On May 5, 2014 Mr.

McNary responds that further decisions will have to wait until he can meet with Debora Hoffman as there is work to do that requires her direction and rushing will be counter productive. • On May 8, 2014, the subdivision and rezoning applications submitted by Susan Hoffman were adjourned because some procedural requirements regarding advertising were not met. • In August 2014 Debora Hoffman terminated Gordon Wilson’s employment. • On September 11, 2014 Susan Hoffman’s RC rezoning application did not pass the third and final reading. • On October 7, 2014 Mr.

Caskey reports to Debora Hoffman that the application for RC zoning rezoning did not pass. Mr. Caskey indicates that the next step is to apply for RG zoning that allows for three lots per acre verses RC zoning that allows four lots per acre. Mr. Caskey advises that if Debora Hoffman is not prepared to move forward and apply for RG zoning, Susan Hoffman is prepared to purchase the 18 acres from Grand Supreme and split the remaining 750 acres. • On October 11, 2014 Mr. McNary responds to Mr. Caskey’s report indicating that he will be meeting with Debora Hoffman to discuss Mr.

Caskey’s report and potential next steps. His current instructions are that no steps should be taken, and no costs incurred pending a decision on whether, when and how to proceed. No such decision has been made. • Prior to October 30, 2014, Mr. Caskey and Susan Hoffman proceeded with the application for RG zoning. • On December 15, 2014, Mr. McNary confirms Mr. Bridges advice that no further steps are to be taken until and unless explicit instructions have been approved by both directors of the company. • On December 30, 2014 Mr.

McNary is advised of a public hearing scheduled for January 8, 2015, to consider the applications filed by Mr. Romanow. Mr. McNary requests copies of the applications to determine what Mr. Romanow was seeking. • On January 7, 2014, Debora Hoffman withdrew the applications filed by Mr. Romanow. • On February 2, 2014 at a shareholders meeting, Debora Hoffman voted to appoint herself as a director. Debora Hoffman did not vote to appoint Susan Hoffman as a director.

IV. Was Debora Hoffman’s Conduct Oppressive? a. Legal Principles [ 19 ] Section 242(2) (

c) of the Act sets out the statutory cause of action for oppression. The Act provides the court with the power to make any order it thinks fit where the powers of the directors of a corporation have been exercised in a manner that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder. [ 20 ] In BCE Inc v 1976 Debentureholders , 2008 SCC 69 (“ BCE ”), at para 68 , the Supreme Court directs that in determining whether Debora Hoffman’s conduct was oppressive, I must conduct the following two inquires: 1.

Whether the evidence supports the reasonable expectations asserted by Susan Hoffman; and 2. Whether the evidence establishes that the reasonable expectations were violated by conduct falling within the terms “oppression, unfair prejudice or unfair disregard” of a relevant interest. [ 21 ] BCE provides the following guidance in conducting the two inquiries: • The onus is on the Applicant to establish oppression or unfairness, para 119. • Oppression is an equitable remedy. It gives a court equitable jurisdiction to enforce not just what is legal but what is fair.

The reasonable expectations of the stakeholders is the cornerstone of the oppression remedy, paras 58 and 61. • Oppression is fact specific. What is just and equitable is judged by the reasonable expectations of the stakeholders in the context and in regard to relationships at play; para 59. • Reasonable expectations are objective and contextual. The question is whether the expectation is reasonable having regard to the facts of the specific case, the relationships at issue, and the entire context, including the fact that there may be conflicting claims and expectations, para 62. b.

Position of the Parties [ 22 ] The Applicant argues that Debora Hoffman violated Susan Hoffman’s reasonable expectations through a series of acts and omissions: refusing to approve and move forward with the development project put forth by Susan Hoffman; failing to share with Susan Hoffman Gordon Wilson’s recommendations; firing Gordon Wilson; removing Susan Hoffman as a director; refusing to reimburse Susan for expenses she incurred in connection with Grande Supreme; and by failing to meet statutory requirements for annual meetings, preparing financial statements and filing tax returns.

Debora Hoffman took these steps because she did not want Susan Hoffman to prosper. [ 23 ] The Respondents argue that the evidence does not support the expectations Susan Hoffman alleges and that the expectations were not reasonable considering the circumstances. Susan Hoffman retained Mr. Romanow and incurred significant development expenses without consulting Debora Hoffman.

Notwithstanding clear directions on numerous occasions not to take further steps and incur more expenses, and despite confirmation through her lawyer that she would not do so, Susan Hoffman continued to move forward with her development plans for the Lands. Given her refusal to halt her development plans until a decision was made by both directors, Debora Hoffman was justified in refusing to vote for Susan Hoffman to continue as a director. Susan Hoffman, as the non-controlling shareholder, had no right to expect that her wishes, to develop the Land immediately, would prevail.

Debora Hoffman considered the development and the Applicant’s position but disagreed with Susan Hoffman that the proposed development was in the best interests of Grand Supreme. There is no financial or objective evidence that this development would maximize the value of Grand Supreme. c. Did Debora Hoffman’s Engage in Oppressive Conduct? [ 24 ] The evidence is clear that Susan Hoffman wanted to develop the Lands, beginning with 18 acres of the 48 acres owned by Marquis.

The evidence is equally clear that Debora Hoffman did not want to proceed with Susan Hoffman’s development plan. [ 25 ] As the shareholder without voting control, Susan Hoffman has no right or expectation that her wishes will prevail. Majority governs in corporate affairs, but the majority must act fairly and honestly: Goldex Mines Ltd. V Revill; 864789 Alberta Ltd v Hass , 2008 ABQB 555 [ 26 ] The Applicant argues that she had a reasonable expectation when she funded the purchase of the Marquis shares that her proposal for developing 18 acres would proceed.

Taking advantage of a business opportunity for the company that requires an advance of capital from a shareholder and then refusing to deal with the property so that the shareholder’s loan can be repaid is unfair and oppressive. [ 27 ] I agree with the Respondents that the evidence does not support an objective reasonable expectation on Susan Hoffman’s behalf that Susan Hoffman’s plan would be approved when the Marquis shares were acquired. It is clear from the April 15, 2014 email from Mr.

McNary that when Debora Hoffman approved the purchase of the Marquis shares, Debora Hoffman was not approving Susan Hoffman’s plan. After approving the purchase of the Marquis shares through shareholder loans by both Susan and Debora Hoffman, the email concludes with the following: “Mr. Wilson will investigate the proposed plan to develop the initial 18 acres and the steps taken thus far and make recommendations to the directors of Grand Supreme as to whether or not to continue the course of action that has been commenced, or perhaps some

alternative course of action. Mr. Wilson can advise on the timing of his investigations and when Susan and Debbie can expect the report. Meantime, no further steps are authorized by any person on behalf of either Grand Supreme or Marquis Development beyond those required to implement the buyouts/settlements contemplated above.” [ 28 ] I am satisfied that the evidence supports a reasonable expectation by Susan Hoffman that following the Marquis share purchase, the plan to develop the initial 18 acres would be seriously considered based on Mr. Wilson’s recommendations and the best interests of Grande Supreme.

By April 15, 2014 Debora Hoffman was aware that Susan Hoffman invested considerable time and funds on her plan to develop the Lands. Susan Hoffman agreed to provide a shareholder loan of $614,157.00 to Grand Supreme to acquire the remaining shares of Marquis. The acquisition of the remaining Marquis shares was to acquire the 48 acres that Marquis owned, including the 18 acres that Susan Hoffman planned to develop. Mr. Wilson was hired by Debora Hoffman. Mr. Wilson had considerable experience in land development.

While Debora Hoffman was not approving Susan Hoffman’s development plan on April 15, 2014, considering all the circumstances, I am satisfied that Debora Hoffman provided Susan Hoffman with a reasonable expectation that Susan Hoffman’s plan or some alternative plan for development that Mr. Wilson recommended would be seriously and fairly considered and approved if it was in the interest of Grande Supreme. [ 29 ] The Applicant argues that while the Applicant owns 50% of the equity shares in Grand Supreme, her interests and input have been entirely ignored and excluded.

After hearing from Gordon Wilson that there was an excellent and very lucrative development possibility, Debora Hoffman refused to proceed with Susan Hoffman’s development plan or any alternative plan because she did not want Susan Hoffman to prosper. She wanted Susan Hoffman out of the company. Debora Hoffman then took steps to keep that opportunity for herself by not disclosing Gordon Wilson’s recommendations, firing Gordon Wilson, and terminating any further discussion of development of the Lands. [ 30 ] In advancing this argument, the Applicant relies heavily on the questioning of Gordon Wilson.

Gordon Wilson testified that when he returned from Winnipeg, he reported to Debora Hoffman immediately. The development Mr. Caskey was talking about was a very well thought out, very profitable, great first-stage development. His presentation to Debora Hoffman included the shortage of housing and why the 18 acres would be a good development. However, while Mr. Caskey and Mr. Romanow thought the Lands should all be developed as residential, Mr. Wilson saw a bigger plan to develop big-box retail like South Edmonton Common. When he finished his presentation Debora Hoffman told Mr.

Wilson that she was not going to make Susan a bunch of money. Debora Hoffman wanted to buy Susan Hoffman out because she did not want Susan to prosper. Debora Hoffman directed Mr. Wilson not to talk to Susan Hoffman or Jody Caskey anymore. [ 31 ] Debora Hoffman was cross-examined on her Affidavit. She testified that she does not remember telling Mr. Wilson that she did not want to make Susan Hoffman a bunch of money. When asked whether that is why she stopped the development application she replied, “absolutely not”. She testified that she fired Mr.

Wilson as president of Grand Supreme because he did not do his duties by providing something more substantial in reporting and investigating the Winnipeg lands. Mr. Wilson’s evidence is that the termination of his employment had nothing to do with Grand Supreme. [ 32 ] I asked counsel during oral argument whether I am in a position where I have conflicting evidence that prevents me from deciding. [ 33 ] The Applicant argues the evidence is not conflicting because Debora Hoffman did not deny telling Mr. Wilson that she did not want Susan Hoffman to prosper. She testified that she could not recall saying this.

I disagree with the Applicant that when looked at this way the evidence is not conflicting. The Applicant relies on Mr. Wilson’s evidence to argue that I should infer that Debora Hoffman refused to proceed with the development because she did not want Susan Hoffman to prosper. The difficulty is that Debora Hoffman testified that that is not why she refused to approve the development.

Accordingly, I am satisfied that there is conflicting evidence that requires an assessment of credibility. [ 34 ] The Respondents argue that it is not necessary to resolve the conflicting evidence to decide whether Debora Hoffman’s conduct was oppressive. The Respondents’ position is that even if Debora Hoffman said what Gordon Wilson testified to, the Applicant has lost nothing as the Lands are still there and can be developed at any time. There is no evidence that there was a golden opportunity to develop, and that opportunity is now gone. I disagree with the Respondents that the Applicant has lost nothing.

The Applicant lost the opportunity to recover her significant investment in a timely manner. [ 35 ] I am satisfied that there is conflicting evidence on why Debora Hoffman refused to approve Susan Hoffman’s development plan that requires a credibility assessment. I am satisfied that why Debora Hoffman refused to approve Susan Hoffman’s plan is critical to my determination of whether Debora Hoffman engaged in oppressive conduct. Accordingly, I am adjourning the application to direct an oral hearing with viva voce evidence on this issue.

The parties may contact me for a case management meeting if the parties are not able to agree on an appropriate oral hearing order. [ 36 ] The issue of costs is reserved until after the oral hearing. Heard on the 9 th day of December, 2022. Dated at the City of Edmonton, Alberta this 6 th day of February, 2023.

Susan L. Bercov J.C.K.B.A. Appearances: J. Cameron Prowse K.C. Prowse Chowne LLP for the Applicant Donald Wilson K.C. & Kathleen Ryan DLA Piper LLP for the Respondents