DR. NANCY BELL Applicant - v. -, 2023 SKKB 258

KING’S BENCH FOR SASKATCHEWAN Citation: 2023 SKKB 258 Date: 2023 12 04 Docket: KBG-SA-00553-2023 Judicial Centre: Saskatoon ___________________________________________________________________________ BETWEEN: DR. NANCY BELL Applicant - and - ANGUS HOLDINGS LTD., KENMORE LAND CO. LTD., FOXIE 8T HOLDINGS LTD., and DUNCAN McKERCHER Respondents Counsel: Jared D. Epp for the applicant Douglas C. Hodson, K.C. for the respondents, Angus Holdings Ltd., Kenmore Land Co. Ltd., and Foxie 8T Holdings Ltd. Jay D.

Watson for the respondent, Duncan McKercher ___________________________________________________________________________ FIAT BARDAI J. December 4, 2023 ___________________________________________________________________________ [ 1 ] Dr. Nancy Bell [Nancy] applies pursuant to the oppression remedy in The Business Corporations Act, 2021 , SS 2021, c 6 [ Act ], for relief. Nancy, her brother Duncan McKercher [Duncan] and others are shareholders in Angus Holdings Ltd. [Angus].

Angus is a company initially set up by Robert McKercher [Robert] and Peggy McKercher [Peggy], who are the parents of Duncan, Nancy and Malcolm McKercher [Malcolm]. Duncan presently controls the voting shares in Angus, while Nancy holds non-voting preferred shares in the company. Others also hold shares in Angus, but those interests are not the focus of the current application. [ 2 ] For the last number of years, Angus has been redeeming a portion of Nancy’s non-voting preferred shares, resulting in payments to Nancy of between $30,000 and $87,000 a year since 2005. Those redemptions have recently stopped.

Nancy applies to have all of her shares which, according to her, are worth more than $2,000,000 redeemed or, at least, a portion of her shares redeemed annually in accordance with the historic practice, pending the outcome of this matter at trial. [ 3 ] Angus is only one of a number of companies set up by Robert and Peggy. Angus is the controlling shareholder of the respondent, Kenmore Land Co. Ltd. [Kenmore]. Another one of Kenmore’s shareholders is the respondent, Foxie 8T Holdings Ltd. [Foxie].

Foxie, Kenmore and Angus are hereafter referred to collectively as the “McKercher Corporations”. [ 4 ] Kenmore owns and operates the College Park Mall in Saskatoon and the Crossmount Senior Living Community and Cidery south of Saskatoon. Kenmore is Angus’s sole source of revenue. Angus generates revenue when Kenmore declares dividends or pays management fees to Angus, but not otherwise. [ 5 ] In addition to the McKercher Corporations, two family trusts, being the Robert Family Trust and the Malcolm Family Trust, also hold shares in the McKercher Corporations.

The McKercher Corporations, their shareholders and their relationship to one another is set out in the following flowchart:

[ 6 ] Much of the evidence adduced in connection with the application before the Court focuses on Robert’s intentions and wishes. What he wanted for Nancy. What he wanted for Duncan. What he wanted for the McKercher Corporations, and what he wanted for his children and grandchildren.

Unfortunately, Robert suffered a mini-stroke on September 21, 2021, and is not in a position to provide the Court with evidence as to his intentions. [ 7 ] Duncan suggests that Robert’s intentions are clear from the way he set up the McKercher Corporations, whom he trusted with powers of attorney and what he told his trusted solicitor and accountant about his wishes. Nancy, meanwhile, says she had private discussions with her father where he expressed his wishes to her.

She also says that the circumstances surrounding the granting of powers of attorney to Duncan raise questions about undue influence. [ 8 ] The core issue between the parties is whether Nancy is entitled to have some or all of her shares in Angus redeemed.

Nancy says that Duncan, who effectively now controls both Kenmore and Angus, has acted in a manner that is oppressive, unfairly prejudicial and unfairly disregards her interests by: a. refusing to disclose financial information respecting Kenmore and Angus; b. failing to have Kenmore declare dividends in favour of Angus, making it impossible for Angus to redeem Nancy’s shares; and c. refusing to redeem her shares in Angus.

Nancy says this behaviour is oppressive. [ 9 ] Duncan, meanwhile, says that Nancy is simply a non-voting shareholder in Angus and that she has no right to have any say in the balance of the McKercher Corporations, which were set up in a way that was and is designed to prevent Nancy from dictating what should happen in the McKercher Corporations, including Angus.

According to Angus, Kenmore, Foxie and Duncan, collectively [Respondents], Nancy has no right to information of Kenmore or Foxie and she cannot demand a redemption that would, if paid, result in contravention of the liquidity or cashflow tests set out in s. 5-14 of the Act . The Respondents say that Angus simply does not have funds to pay Nancy. [ 10 ] There are really two aspects to Nancy’s oppression application. One aspect concerns disclosure, while the other relates to payments. In her Originating Notice, Nancy seeks the following relief pursuant to s. 18-4 of The Business Corporations Act, 2021 : 1.

An Order, pursuant to

section 18-4 of The Business Corporations Act, 2021 , SS 2021, c 6 (the “ Act ”), that the Respondents produce for, and provide to, the Applicant, the following information:

a) Comparative financial statements for Angus Holdings Ltd., Kenmore Land Co. Ltd. and Foxie 8T Holdings Ltd. (the “ Respondent Corporations ”), and Meg Holdings, Blackstone Land & Cattle Corp, 604835 Saskatchewan Ltd., Crossmount Land and Cattle Inc., and Crossmount Senior Health Corp. (the “ Amalgamated Corporations ”) for the past ten (10) years;

b) The auditors report for each of the Respondent Corporations and Amalgamated Corporations, if any, for the past ten (10) years;

c) The tax returns for each of the Respondent Corporations and Amalgamated Corporations, for the past ten (10) years;

d) Documentation and records of all monies provided by the Respondent Corporations and the Amalgamated Corporations to the Respondent, Duncan McKercher, and/or his wife and children, for their use or to their benefit, including, but not limited to, all share redemptions and/or dividends and/or loans;

e) Any further information respecting the financial position of the Respondent Corporations and the Amalgamated Corporations required by the articles, the bylaws or any unanimous shareholders agreements for the Respondent Corporations and the Amalgamated

Corporations for the past ten (10) years; and

f) Any further financial information necessary to determine the financial liquidity of the Respondent Corporations. 1.1 An Order pursuant to

section 18-4 of the Act requiring the Respondents to resume the redemption of 2900 of Applicant’s Preferred Class “F” Shares of Angus Holdings Ltd. at and for the price of $2.50/share monthly, commencing on the first day of the month following court order and continuing each month thereafter until further order of this Court. 2. An Order pursuant to

section 18-4 of the Act requiring the Respondents to redeem or purchase the balance of the Preferred Class “F” Shares of Angus Holdings Ltd. owned by the Applicant at and for the price of $2.50/share. 2.1 An Order that, with the exception of any award of costs which may be ordered in this matter, each Respondent shall be solely responsible for its own respective legal fees incurred in this matter, and with the exception of such fees incurred by Angus Holdings Ltd., such fees shall not be paid out by, be reimbursed by, be attributed to, or be the responsibility of Angus Holdings Ltd. in any way. 2.2 An Order pursuant to

section 18-4(3)(

i) of the Act that Angus Holdings Ltd. shall prepare and provide to the Applicant an accounting of all its expenditures for legal fees in this matter, including such fees it did or will pay on behalf of any other Respondent. 2.3 Costs. [ 11 ] In support of the relief sought, Nancy has filed affidavits dated May 18, 2023, and August 28, 2023, and a reply affidavit dated September 26, 2023. [ 12 ] In response to the application, the Respondents have filed affidavits from Duncan sworn September 7, 2023; Nikki Rudachyk, sworn September 8, 2023; and Terry Baerg, sworn September 8, 2023, and October 23, 2023.

Evidence of the Applicant [ 13 ] In approximately 2000, Robert gifted each of his three children shares in Angus. In 2009, Nancy received preferred non-voting shares in Angus. Angus has paid considerable moneys to Nancy in the form of dividends or, alternatively, through share redemptions over the years. Between 2005 and 2008, she received approximately $30,000 a year from Angus. These payments increased over time to the point that by 2020 she was receiving $87,000 a year from Angus in the form of share redemptions. [ 14 ] In around 2019, Nancy began looking at retirement.

This included discussions with her father about her financial security, how her retirement would be funded and the redemption of her shares in Angus. According to Nancy’s evidence, concerns were raised about whether Duncan would agree to a redemption after their parents no longer controlled the McKercher Corporations. Nancy was provided with a draft share redemption agreement from counsel for Angus, Nikki Rudachyk [Ms. Rudachyk] which her father, by email dated September 11, 2019, recommended that she not sign absent a better arrangement being made.

In 2021, Robert recommended she seek the advice of counsel about how to proceed with redeeming her shares. Nancy, with the assistance of Stevenson Hood Thornton Beaubier, began discussions with Ms. Rudachyk, counsel for the McKercher Corporations, about how the redemption of Nancy’s shares might be accelerated. [ 15 ] Duncan, who is now the sole director of Angus and holds sole powers of attorney for both Robert and Peggy, has refused to provide information in a timely fashion and, with the assistance of Ms.

Rudachyk (according to Nancy), reported that redemption is not possible because Angus does not have the money to pay for such redemptions. Nancy has sought disclosure from Foxie, Kenmore and Blackstone (Blackstone was amalgamated with Kenmore). This disclosure request was refused. [ 16 ] Nancy says that while these issues were being sorted out, she was promised continuation of payments. She points to an email dated October 5, 2021, from Ms. Rudachyk: In the last decade, Robert and Peggy made it a priority of theirs (working with me) to have their intentions papered for the corporate files.

This included agreements between the corporation and each of the children as to the aim of the corporate entities to maintain the annual share redemptions at the current level. Nancy has always expressed concerns to her parents that she feared that her payments would cease or be decreased once her parents were gone. Duncan was more than agreeable to having such an agreement in place, however, this was an agreement that Nancy ultimately refused to sign.

When she did so, Robert instructed me to abandon any efforts in trying to paper the corporate minute books with these intentions as it related to Nancy, as the only hurdle in him attempting to do so was herself. This has, and continues to be, a large stress for Robert and Peggy. For your information, I attach hereto a copy of the last version of this agreement that was sent to Nancy. As indicated, this agreement is not [ sic ] longer on the table for discussion, nor will we engage in any discussions relating to any differing arrangement for Nancy and her redemptions.

Duncan has always maintained that his intention is and will be to continue the payments as per his parents [ sic ] wishes, in a manner that will not negatively impact the family business operations. [ 17 ] Nancy says that Robert told her not to sign the agreement. In an email purportedly from Robert, he states: Afternoon Nancy: Just scanned recent draft agreement sent to you from Nikke [ sic ]. Highly recommend that you do not sign this document. I will reflect and comment further.

Dad [ 18 ] By June 2022, the relationship between the parties had deteriorated, there was obvious conflict and, on June 17, 2022, John Pringle, counsel for Angus, advised that no further monthly payments would be made to Nancy absent her agreement with six conditions, namely, that Nancy: a. waive the Angus financial audits;

b. grant Duncan discretion about whether Nancy could redeem her shares and the ability to pay her from company profits (as per the 2019 Agreement); c. withdraw her December 2, 2021, share redemption notice; d. attest to the validity of her parents’ 2015 Powers of Attorney and their 2021 Renunciations granting Duncan sole Power of Attorney; and e. sign a McKercher firm Conflict of Interest Waiver. [ 19 ] Nancy did not agree to these conditions, resulting in a standoff.

Evidence of the Respondents [ 20 ] The evidence of Duncan is that Robert specifically limited Nancy’s ability to control or even have a say in the affairs of the McKercher Corporations. Nancy has preferred non-voting shares in Angus but no shares in Kenmore because Robert did not want Nancy to be able to interfere in Kenmore’s business by unilaterally demanding a redemption of shares or money from Kenmore.

The Respondents say that the timing and quantum of share redemptions was always to be determined not by Nancy but by the McKercher Corporations. [ 21 ] Robert and Peggy were directors of the McKercher Corporations; however, Duncan is now the sole director of each of the McKercher Corporations. Duncan also holds powers of attorney for each of his parents. [ 22 ] Within days of Robert’s stroke in September 2021, Nancy began making demands that her share redemption be increased from $87,000 per annum to $285,000.

The Respondents say this was contrary to Robert’s wishes and was one of Robert’s worries, which is why he set up the corporate structure for the McKercher Corporations the way he did. Duncan worked closely with his father in the McKercher Corporations, while Nancy did not. [ 23 ] Ms. Rudachyk and Mr. Baerg (the chartered accountant for the McKercher Corporations) were trusted advisors to Robert for many years, and both attest that payments for the preferred shares were to come from profits of the McKercher Corporations only.

Robert did not want to liquidate or encroach on the assets generating cash for the purposes of funding any share redemption. The redemption was/is to occur over a long period of time such that the financial health and success of the businesses is not jeopardized.

Robert’s share redemption plan was to be more than simply a means of funding Nancy’s retirement, it was intended to be a legacy for future generations. [ 24 ] The Respondents all say that Robert expressed concern that Nancy would interfere with the McKercher Corporations and that Robert wanted to provide not only for Nancy but for Nancy’s son and grandchildren without letting Nancy dictate how and when funds would be advanced. [ 25 ] The Respondents say that Nancy was intentionally not given voting shares in Angus, not given any interest in Kenmore and that control of the McKercher Corporations was left in the hands of Robert and now Duncan. [ 26 ] In support of their position, the Respondents point to the language at paragraphs 4.2 and 4.3 of the draft February 1, 2019 Agreement that was not signed, which states in part: 4.2 Loans, Share Redemptions and Dividends. (

a) Each month during each calendar year, NB [Nancy Bell] (or any subsequent holder of THE Class “F” Series I shares) shall receive no less than the (collectively, if applicable) amount of $6,250.00 CAD from the Corporation recorded as a loan. On or prior to the 31st day of December in each calendar year, the Corporation shall bring NB’s loan balance to nil by way of Share redemption using the set redemption value of $2.50 per Class “F” Series I Share held by NB (or any subsequent holder of the Class “F” Series I Shares). (

b) In any year, at the sole discretion of the Board of the Corporation, loans, Share redemptions or dividends may be issued, allowed or declared as long as sufficient resources are available and the loans/redemptions/dividends will not disrupt or hinder ongoing business operations and expansion of the corporate group of companies as determined by the Board. 4.3 Restriction.

Nothing herein shall be deemed to permit or oblige the Corporation to, and the Corporation shall not make a loan to a Shareholder, declare a dividend on, or redeem or repurchase, any class or classes of Shares if the loan, dividend, or redemption or repurchase, would contravene any applicable statute, regulation or rule of law or equity. [Affidavit of Dr. Nancy Bell, Exhibit 52] [ 27 ] The Respondents say that any accelerated redemption would be contrary to Robert’s intentions.

He wanted Nancy, his grandchild and great-grandchildren to benefit from this legacy. [ 28 ] According to Duncan, Nancy took advantage of Robert’s failing health and almost immediately after his stroke began making demands for more and more money but Angus simply did not and does not have any money in it to pay. According to the Respondents, Nancy began making abusive, disparaging and defamatory comments about her family, the power of attorney granted to Duncan, the lawyers at the McKercher law firm, a firm which bears the family name, and the family’s accountant. This included, for example, allegations that Ms.

Rudachyk was in a conflict and in breach of the Law Society Code of Conduct. The Respondents say that Nancy’s evidence is scandalous, irrelevant and ought to be disregarded. [ 29 ] The Respondents say that Robert knew his daughter, predicted how she would behave and designed a corporate structure that ensured Nancy would not be rewarded for her poor behaviour. This evidence comes not only from Duncan but from Ms.

Rudachyk, who was Robert’s trusted advisor and lawyer. Narrowing of Issues at the Hearing [ 30 ] At the outset of the hearing, the parties agreed that the issues had been narrowed somewhat. The questions for me to decide are whether further disclosure should be ordered and/or whether interim share redemptions should be made pending a trial on the issue of whether oppression has occurred warranting an accelerated redemption schedule. Nancy seeks that the monthly payments of $7,250 resume in the interim. [ 31 ] In terms of disclosure, Nancy acknowledges receipt of some of the disclosure sought but says the following documents remain missing: 1. … (

d) Accountant prepared financial statements of Angus for the year ending January 31, 2023 and if any management prepared financial statements exist for the Quarter 2 ending July 31, 2023; (

e) Accountant prepared T2 Tax Return of Angus for the year ending January 31, 2023, complete with all schedules; (

f) Refundable Dividend Tax on Hand (RDTOH) account of Kenmore for 2019-2023; (

g) Clarification of the assumption of total value of the investment in Kenmore being $3,208,750; … (

l) Clarification as to which shareholder, which share class, and what type of dividend was paid out of Angus for Fiscal 2018 and 2019; and (

m) Financial statements of Kenmore as at the last fiscal year end and the previous 2 fiscal year ends to assess the overall value of Angus’ investment. [ 32 ] The Respondents, for their part, say that if I grant what Nancy characterizes as “interim relief” being a partial share redemption, I am essentially granting final relief and that no relief ought to be granted given the highly contradictory affidavit evidence. The Respondents are prepared to disclose and produce records pertaining to Angus but not records pertaining to Kenmore.

Positions of the Parties [ 33 ] Nancy’s position is that her parents set up a mechanism to ensure her continued support and for approximately twenty years have been redeeming her shares or declaring dividends through Angus, providing her with stable and consistent income. Now that Duncan is in control, he has cut off that income stream that her parents always envisioned she would have. Duncan is, in effect, using his position within Kenmore and Angus to stop the flow of cash to her.

Kenmore has the means to pay dividends or management fees to Angus but is choosing not to, which means that Angus no longer has the means to redeem her shares over time. [ 34 ] Nancy’s position is that she is being punished by her brother because of her request for the redemption of shares and that her reasonable expectation, established by a 20-year track record, was that funds would continue to flow. [ 35 ] The Respondents for their part, say that Robert designed a complex corporate structure for exactly this eventuality.

They say Robert knew his daughter and, while he wanted to provide for her and her children, he wanted to be in control at all times and make sure there would be no reward for bad behaviour. In particular, he gave Nancy only preferred non-voting shares in Angus. She has no interest in Kenmore and no basis on which to ask for anything in Kenmore. Angus, meanwhile, cannot pay the amounts she is seeking, and she has no right to demand such amounts. Law and Analysis [ 36 ] Nancy’s oppression application is brought pursuant to s. 18-4 of the Act . Sections 18 -1 and 18-4 provide:

Interpretation 18-1 In this Part: “action” means an action pursuant to this Act ; “complainant” means: (

a) a registered holder or beneficial owner, and a former registered holder or beneficial owner, of a security of a corporation or any of its affiliates ; … (

d) any other person who, in the discretion of a court, is a proper person to make an application pursuant to this Part. … Application to court re oppression

18-4

(1) A complainant may apply to a court for an order pursuant to this section.

(2) On an application pursuant to subsection (1), a court may make an order to rectify the matters complained of if the court is satisfied that, respecting a corporation or its affiliates, its business or affairs have been carried on or conducted in a manner, its directors have exercised their power in a manner, or its actions or omissions have effected a result, that: (

a) is oppressive or unfairly prejudicial to the interests of any security holder, creditor, director or officer; or (

b) unfairly disregards the interests of any security holder, creditor, director or officer.

(3) In connection with an application pursuant to this section, the court may make any interim or final order it considers appropriate, including, without limiting the generality of the foregoing: (

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 or creating or amending a unanimous shareholder agreement; (

d) an order directing an issue or exchange of securities; (

e) an order appointing directors in place of or in addition to all or any of the directors then in office; (

f) an order directing a corporation, subject to subsection (6), or any other person, to purchase securities of a security holder; (

g) an order directing a corporation, subject to subsection (6), or any other person, to pay to a security holder any part of the moneys that the security holder paid for securities; (

h) an order varying or setting aside a transaction or contract to which a corporation is a party and compensating the corporation or any other party to the transaction or contract; (

i) an order requiring a corporation, within a time specified by the court, to produce to the court or an interested person financial statements in the form required by

section 13-2 or an accounting in any other form that the court may determine; (

j) an order compensating an aggrieved person; (

k) an order directing rectification of the registers or other records of a corporation pursuant to

section 18-6; (

l) an order liquidating and dissolving the corporation; (

m) an order directing an investigation pursuant to

Part 17 to be made; (

n) an order requiring the trial of any issue. …

(6) A corporation shall not make a payment to a shareholder pursuant to clause (3)(

f) or (

g) if there are reasonable grounds to believe that: (

a) the corporation is or would after that payment be unable to pay its liabilities as they become due; or (

b) as a result of the payment, the realizable value of the corporation’s assets would be less than the aggregate of its liabilities. … [Emphasis added] [ 37 ] In order for Nancy to succeed in her application, she must establish three things: a. that she is a complainant within the meaning of s. 18-1 of the Act ; b. that her reasonable expectations have been breached; and c. that the breach of her reasonable expectations amounts to oppression, unfair prejudice or unfair disregard of her interests.

See: The Business Corporations Act, 2021 , s 18-1; BCE Inc. v 1976 Debentureholders , 2008 SCC 69 , [2008] 3 SCR 560 [ BCE Inc. ] ; and Sieminska v Boldt, 2013 SKCA 136 , 427 Sask R 166 . Is Nancy a Complainant? [ 38 ] Nancy, in the context of her application, seeks two things. First and foremost, she wants payments historically made by Angus to resume. Of course, Angus can only pay Nancy if Angus has money to do so. That means that she needs Kenmore to pay Angus so that Angus can pay her. Accordingly, she is seeking relief against not only Angus but Kenmore as well.

Specifically, she asks that I order Kenmore to produce financial records.

[ 39 ] To be clear, counsel for the McKercher Corporations was very candid with the Court in argument in saying that Kenmore is solvent. It may not have the funds to pay Angus all that would be required to redeem all of Nancy’s preferred Class “F” shares in the time frame Nancy seeks, but it would have the $7,250 monthly, which is what Nancy was receiving previously. From the McKercher Corporations perspective, they say it is not in the best interests of either Kenmore or Angus to, in effect, buckle to Nancy’s demands.

They say that the whole structure was set up in a way to make sure that if Nancy behaved poorly, she would not be in a position to demand anything of the McKercher Corporations as she has non-voting shares in Angus and no direct connection to Kenmore. This was done, according to them, because Robert anticipated that Nancy may at some point become difficult. [ 40 ] There is no question that Nancy is a complainant in respect of Angus.

She is the registered owner of a security in Angus being the Class “F” preferred non-voting shares. [ 41 ] Of course, in order for Nancy to succeed in her oppression application against Kenmore, she must also qualify as a complainant of Kenmore because she is seeking records from Kenmore and asking that Kenmore be ordered to ultimately pay moneys to Angus so that Angus can redeem her shares. [ 42 ] The McKercher Corporations argue that there is no basis for any claim by Nancy against Kenmore.

They say she has no cause of action against Kenmore because she is not a shareholder of Kenmore, was never a director or officer of Kenmore, has no contract with Kenmore and is not a creditor of Kenmore. She has no connection to Kenmore whatsoever. This is certainly an issue that caused the Court pause at the hearing.

However, when we examine the share structure of Kenmore, look at the definition of “complainant” within the meaning of the Act and the definition of “affiliate” within the legislation, I am satisfied that Nancy meets the threshold of establishing that she is a complainant of Kenmore within the meaning of the legislation. [ 43 ] The definition of “complainant” is broad and includes the holder of a security of a corporation or any of its affiliates. [ 44 ] The term “affiliate” is defined in s. 1-2(1) of the Act , as follows: 1-2

(1) In this Act : … “affiliate” means an affiliated body corporate within the meaning of subsection (2); … [ 45 ]

Section 1-2(2) states: 1-2

(2) For the purposes of this Act : (

a) one body corporate is affiliated with another body corporate if one of them is the subsidiary of the other or both are subsidiaries of the same body corporate or each of them is controlled by the same person ; and (

b) if 2 bodies corporate are affiliated with the same body corporate at the same time, they are deemed to be affiliated with each other. [Emphasis added] [ 46 ] Finally, the term “subsidiary” is defined in s. 1-2(5), which provides: 1-2

(5) A body corporate is a subsidiary of another body corporate if: (

a) it is controlled by: (

i) that other body corporate; (ii) that other body corporate and one or more bodies corporate each of which is controlled by that other body corporate; or (iii) 2 or more bodies corporate each of which is controlled by that other body corporate; or (

b) it is a subsidiary of a body corporate that is a subsidiary of that other body corporate. [Emphasis added] [ 47 ] The evidence before the Court is that Kenmore’s shareholders are as follows: 53. Based on the Kenmore Profile Report, the current shareholders of Kenmore are as follows: • Angus Holdings 300 Class “A” (voting) • Duncan McKercher 1,200,400 Class E Series III (non-voting) • Foxie 8T 10,799,610 Class E Series III (non-voting) [Affidavit of Dr. Nancy Bell, sworn May 18, 2023] [ 48 ] What this means is that Kenmore is controlled by Angus. Angus is the sole voting shareholder of Kenmore.

Kenmore is therefore a subsidiary of Angus. The term affiliates includes subsidiaries, such that Nancy meets the definition of“complainant” of Kenmore within the meaning of the Act. She is a shareholder of Angus, and Angus, as the only voting shareholder ofKenmore, controls Kenmore and is affiliated with Kenmore as that term is defined in the legislation. Reasonable Expectation of the Claimant [49] At this stage of the analysis, the court must answer whether the evidence supports the reasonable expectationasserted by Nancy.

In considering whether a reasonable expectation exists, consideration is given to the general commercial practice, thenature of the corporation, the relationship between the parties, past practice, steps the claimant could have taken to protect themselves,representations and agreements and the fair resolution of conflicting interests between corporate stakeholders. See: BCE Inc., at para 72;and Gordon v White, 2020 SKCA 129. [50] It should be noted that not every expectation will be “reasonable”.

As noted by the Supreme Court of Canada inBCE Inc. at paragraphs 62-63: [62] As denoted by “reasonable”, the concept of reasonable expectations is objective and contextual. The actual expectation of aparticular stakeholder is not conclusive. In the context of whether it would be “just and equitable” to grant a remedy, the question iswhether 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. [63] Particular circumstances give rise to particular expectations.

Stakeholders enter into relationships, with and within corporations,on the basis of understandings and expectations, upon which they are entitled to rely, provided they are reasonable in the context: see820099 Ontario [(1991), 3 BLR (2d) 113 (Ont Div Ct)]; Main v. Delcan Group Inc. (1999), (ON SC), 47 B.L.R.(2d) 200 (Ont. S.C.J.). These expectations are what the remedy of oppression seeks to uphold. [51] Nancy’s application puts in issue the behaviour of her brother Duncan. Duncan is, of course, the sole director ofboth Angus and Kenmore.

In BCE Inc., at para 66, the Court looks at the role and responsibility of directors to different stakeholders,noting that while directors may need to consider the impact of their decisions on shareholders and other stakeholders, the reasonableexpectation of stakeholders is simply that the directors act in the best interests of the company. Directors, of course, owe their duty to thecorporation, not to any particular stakeholder. [52] The evidence before the Court on the issue of reasonable expectations is wildly conflicting.

Nancy’s evidence isthat her reasonable expectation is that her shares in Angus would all be redeemed in a timely fashion. The relief she is ultimately seekingis that all of her shares in Angus be redeemed. Her counsel acknowledges that this is a triable issue but says that interim relief should begranted to Nancy pending a final determination. He argues that there should be a return to the status quo where Nancy’s shares werebeing redeemed at a rate of $7,250.00 a month.

Nancy submits that this interim relief is a reasonable expectation, reflects the practicethat has been going on for many years and is in accordance with her father’s wishes to provide her with consistent funding. [53] The redemption of shares, whether one share or 2,900, is, by its very nature, final relief because once a share isredeemed, it is redeemed.

In effect, what Nancy seeks is better described as partial final relief as opposed to interim relief. [54] The evidence of the McKercher Corporations and Duncan is that the entire structure of the McKercherCorporations was designed so that Nancy would not be able to make such demands. There was a concern that Nancy would becomedifficult after Robert was no longer involved in the McKercher Corporations, and so he set up a structure designed to minimize thedamage she could cause.

They say that Robert’s concerns have now come to pass, with Nancy attacking all of the people that Roberttrusted in an effort to get more money now. The Respondents argue that the reasonable expectation was that Nancy would have no say orcontrol over redemptions, which were always to remain within the discretion of Angus’ and Kenmore’s board of directors. They say thata redemption now is not in the best interests of the McKercher Corporations and that the reasonable expectation was that there would beconsequences for attacking the family in the manner Nancy has done.

Certainly, it is not in dispute that the articles of amalgamation forAngus do not create any sort of right to redemption of the Class “F” shares or power to vote. Paragraphs 6(

c) and (

d) of the Articles ofAmalgamation for Angus provide: 6. … (

c) VOTING PRIVILEGES: The holders of Class “F” shares shall not be entitled to any voting rights nor shall they be entitled toreceive notice of or attend meetings of shareholders, except as specifically required in the Act. (

d) REDEMPTION: Subject to the provision of the Act, the Corporation may, at its option, redeem the whole or from time to time anyportion of the issued and outstanding Class “F” shares of the Corporation at and for the Redemption Value per Class “F” share withrespect to each Class “F” share being so redeemed. … [Emphasis added] [55] Similarly, the articles of Kenmore place the power to declare a dividend in the hands of the Kenmore board ofdirectors. [56] The Respondents argue that the reasonable expectation would be that the McKercher Corporations would actexactly as they are acting in the event Nancy engaged in personal attacks against the family and its closest advisors. [57] When determining what were the reasonable expectations of the claimant, the entire context must be taken intoaccount.

This was noted in Stromberg v Olafson, 2023 SKCA 67 at paras 135-136 [Stromberg], by the majority:

[135] In my view, the same is true in this case. The Chambers judge decided that oppression had occurred based on a very thin slice of the evidence, relating to a particular aspect of past practice – essentially, the tombstone data as to how distributions had been made and David’s evidence that he did not take account of the contributions of the parties in the year in question. The Chambers judge expressly held that he could not make findings about the broader context.

To reiterate, the context included, for example, any understanding between the parties that contributions and compensation were to be linked, even if not year to year; the genesis of the dispute that led to the breakdown of the parties’ relationship, and the effect of the resulting course of dealings, including Kyle’s demand that the parties be paid differently than in the past; the extent and value of Kyle’s contributions to Micro Oil, and whether he had effectively stopped providing services; whether Kyle was constructively dismissed; and whether the Stock Option Agreement was binding and in effect. [136] The extent to and manner in which these and other contextual factors should be found to affect the question of reasonable expectations as well as the seriousness of any breach and the appropriate remedy is, of course, not for this Court, but for the judge who ultimately decides the case on the merits.

However, the legal principles demanded that the whole context be taken into account in relation to both the finding of oppression and remedy. The decision that they need not be and the failure to do so constituted an error of law. [ 58 ] There is clearly a great deal of conflict and animosity between the parties, complicated by an elaborate corporate structure and difficult family dynamic. In the face of the highly contested evidence, the Court is not in a position to determine whether the expectations of Nancy are reasonable. A trial is needed.

That the breach of her reasonable expectation amounts to oppression, unfair prejudice or unfair disregard of her interest. [ 59 ] Not every breach of a reasonable expectation will result in a remedy. The conduct must be oppressive, unfairly prejudicial or unfairly disregard the applicant’s interests.

See: BCE Inc. , at paras 56, 67-68 and 89 ; and Harvard Developments Inc. v Park Manor Condominium Corporation, 2018 SKCA 81 , [2019] 2 WWR 227 . [ 60 ] In BCE Inc. , at paras 91-93 , the Court delineates the differences between oppression, unfair prejudice and unfair disregard as follows: [91] The concepts of oppression, unfair prejudice and unfairly disregarding relevant interests are adjectival. They indicate the type of wrong or conduct that the oppression remedy of s. 241 of the CBCA [

Canada Business Corporations Act , RSC 1985, c C-44 ] is aimed at. However, they do not represent watertight compartments, and often overlap and intermingle. [92] The original wrong recognized in the cases was described simply as oppression, and was generally associated with conduct that has variously been described as “burdensome, harsh and wrongful”, “a visible departure from standards of fair dealing”, and an “abuse of power” going to the probity of how the corporation’s affairs are being conducted: see Koehnen [ Oppression and Related Remedies (Toronto: Thomson/Carswell, 2004], at p. 81.

It is this wrong that gave the remedy its name, which now is generally used to cover all s. 241 claims. However, the term also operates to connote a particular type of injury within the modern rubric of oppression generally — a wrong of the most serious sort. [93] The CBCA has added “unfair prejudice” and “unfair disregard” of interests to the original common law concept, making it clear that wrongs falling short of the harsh and abusive conduct connoted by “oppression” may fall within s. 241. “Unfair prejudice” is generally seen as involving conduct less offensive than “oppression”.

Examples include squeezing out a minority shareholder, failing to disclose related party transactions, changing corporate structure to drastically alter debt ratios, adopting a “poison pill” to prevent a takeover bid, paying dividends without a formal declaration, preferring some shareholders with management fees and paying directors’ fees higher than the industry norm: see Koehnen, at pp. 82-83. [ 61 ] In this case, the Court is not in a position to determine the question of reasonable expectation and, therefore, it is not possible, at this stage, to decide whether a reasonable expectation has been breached, and if breached, whether such breach was by behaviour that is oppressive, unfairly prejudicial or unfairly disregard’s Nancy’s interests.

What to do where the evidence is so conflicted? [ 62 ] In two recent decisions of the Court of Appeal, the Court has expressed caution when trying to determine evidentiary disputes on affidavits alone within the context of oppression remedy applications.

In Mann v Mann, 2023 SKCA 100 at paras 76-80 , the Court of Appeal offers the following guidance when it comes to dealing with evidentiary disputes on these types of applications: [76] The existence of an evidentiary dispute about these matters was identified in the September 2018 Decision [ Mann v Mann / Farms and Families of North America Inc. v AgraCity Crop & Nutrition Ltd. (28 September 2018) Saskatoon, QBG-SA-00948-2017 / QBG-SS-01336-2018 (Sask QB) ].

In it, the Chambers judge took stock of the competing evidence offered by the brothers as to “who was responsible for the creation of the current business model, how that business model operates, the relationship between FNA and AgraCity, and the responsibilities of James and Jason within those corporations”. He noted that “James and Jason each have different views of all of the above matters” and he observed that the “reality may fall somewhere between the two truths as each of them perceive them to be”. He then added that the resolution of this disagreement was an issue “for another time” (at para 5).

As previously quoted, the Chambers judge also observed that “James and Jason have differing views as to the agreements by which [FNA and AgraCity] operate with each other”. He added that there were no written agreements, but that “is precisely why the matters end up in court when disagreements arise” (at para 7).

We agree and add the important point that the conflict on these issues remained after the parties filed their affidavit evidence in support of their respective applications. [77] We would also add that, while the evidence was unequivocal that, from its inception, Jason had been put in day-to-day control of AgraCity, past practice is not inviolable. Practices and expectations can change over time.

As stated by the Supreme Court, where “valid commercial reasons exist for the change and the change does not undermine the complainant’s rights, there can be no reasonable expectation that directors will resist a departure from past practice” (BCE at para 77, referring to Alberta Treasury Branches v SevenWay Capital Corp. , 1999 ABQB 859 , 262 AR 135 , aff’d 2000 ABCA 194 , 261 AR 278 ). In Stromberg [2023 SKCA 67], Barrington-Foote

J.A. made much the same point, when he quoted from 820099 Ontario Inc v Harold E. Ballard Ltd. (1991), 3 BLR (2d) 113 (WL) (Ont Ct

J) at para 135 , for the proposition that “one cannot regard expectations as a static matter. Expectations may well evolve from the situation of the shareholder going into the corporation”. [78] In our respectful view, it was not possible for the Chambers judge to have determined James’s reasonable expectations concerning participation in the management of AgraCity without resolving the matters on which the overall dispute between the brothers turned.

However, he did not purport to do that, nor does it appear from the record that he would have been in the position to do so given that the conflict in the affidavit evidence continued in the record before him. [79] We accept that, even outside of the

summary judgment context, there are occasions where Chambers judges can weigh evidence, draw inferences and make credibility assessments based on a record that is limited to affidavits.

However, this can only be done “within long-established limits based on the recognized risks associated with affidavit evidence as to contested facts, particularly if the affiant has not been cross-examined and there is a lack of documentary evidence that corroborates their version of events” ( Stromberg at para 80 ). [80] Ultimately, this judgment is not an occasion to plumb the limits of when it is appropriate for a Chambers judge to resolve contentious issues based on contested affidavits. We say this for two reasons.

First, the parties did not present arguments on the principles applicable in such circumstances. Second, and in any event, the Chambers judge did not purport to resolve the differences in the evidence as it was presented in the competing affidavits. Instead, he treated the status quo arrangement that had existed for many years as establishing the parties’ reasonable expectations respecting the management of AgraCity. Respectfully, this approach ignored the issues that were identified in the September 2018 Decision as requiring resolution in order for the reasonable expectations of the parties to be defined.

This amounts to an error in law, requiring that the Chambers judge’s determination of this issue be set aside. This issue is remitted to the Court of King’s Bench for determination at trial or otherwise in accordance with the rules of court. See also: Stromberg . [ 63 ] In the Court’s view, a trial is required to determine the reasonable expectations of Nancy; whether such expectations were breached; and if there was a breach, whether the breach was a result of conduct that was oppressive, unfairly prejudicial or unfairly disregarded Nancy’s interests and if so, what the appropriate remedy might be.

Next Steps [ 64 ] The first step in getting this matter to trial is to determine what the Respondents must produce in terms of documentary records. The remedy sought by Nancy is the redemption of all of her shares. This is only possible if Kenmore has the funds to pass on to Angus to provide it with the liquidity required to redeem Nancy’s shares. Nancy has established that she is a complainant of Kenmore and Angus. The Act affords Nancy a basis on which to advance a claim against Angus as well as Kenmore, though whether she ultimately succeeds in such claims remains undetermined.

If she establishes the elements of oppression, she may be entitled to a remedy. [ 65 ] When looking at the issue of documentary production, the question is whether the documents sought are material, relevant and whether ordering their production would be proportionate in the circumstances. See, for example, Canadian National Railway Company v Clarke Transport , 2013 SKQB 394 , 432 Sask R 63 , and Brice v North Battleford (City) , 2023 SKKB 136 . [ 66 ] In this case, a trial is needed to determine the issues set out in Nancy’s originating notice.

Section 18-4 is very broad in terms of the options available to the Court on this type of application, including under s. 18-4(a), which allows for a trial to be ordered. If Nancy succeeds at trial, she may receive a remedy. That remedy could include a determination of what Kenmore has to pay to Angus for Angus to redeem Nancy’s preferred shares. Accordingly, disclosure is required from both Angus and Kenmore. This will allow the Court to have before it evidence relevant to the issue of remedy if Nancy makes out her claim. Again, whether Nancy makes out a claim for oppression remains to be seen.

To be clear, I make this production order not because of any finding of oppression, no such finding is made, rather, I find there to be triable issues. The records being ordered are relevant to the determination of those triable issues, being whether Nancy has been oppressed and, if so, what is the appropriate remedy. If Kenmore lacks funds, then it cannot pay Angus. If it has funds and there is a finding of oppression, the appropriate remedy may require a payment from Kenmore to Angus. At this stage, these are all questions that have yet to be determined.

I therefore order that the following records be produced: (

a) financial statements of Angus for the year ending January 31, 2023, and if any management-prepared financial statements exist for the Quarter 2 ending July 31, 2023; (

b) T2 tax return of Angus for the year ending January 31, 2023, complete with all schedules; (

c) Refundable Dividend Tax on Hand (RDTOH) account of Kenmore for the years 2019 to 2023; (

d) clarification as to which shareholder, which share class and what type of dividend was paid out of Angus for fiscal years 2018 and 2019; and (

e) financial statements of Kenmore as at the last fiscal year-end and the previous two fiscal year-ends to assess the overall value of Angus’ investment. [ 67 ] To the extent any of the above records now exist, they are to be disclosed and produced within 30 days. To the extent some of the above financials have yet to be completed and therefore cannot be produced within 30 days, they are to be produced within 7 days of their completion. The parties are reminded that disclosure and production are ongoing obligations. [ 68 ] The parties are on common ground that a trial of the issues is required.

However, this does not mean that a traditional trial is necessary. In this case, both parties have filed hundreds of pages of affidavit material. It seems to me that a trial that allows the parties to rely on their affidavits and conduct cross-examination on such affidavits may be the appropriate mechanism by which to determine this dispute.

[ 69 ] I note that in Hryniak v Mauldin, 2014 SCC 7 , [2014] 1 SCR 87 [ Hryniak ] , the Court endorsed the view (albeit within the context of a

summary judgment application) that there is a need to ensure prompt determination of disputes in a cost-effective fashion that requires recognition that a traditional trial may not always be the most proportionate or only way of achieving a just result. At paragraphs 27 and 28, the Court notes: [27] There is growing support for alternative adjudication of disputes and a developing consensus that the traditional balance struck by extensive pretrial processes and the conventional trial no longer reflects the modern reality and needs to be readjusted.

A proper balance requires simplified and proportionate procedures for adjudication, and impacts the role of counsel and judges. This balance must recognize that a process can be fair and just, without the expense and delay of a trial, and that alternative models of adjudication are no less legitimate than the conventional trial. [28] This requires a shift in culture. The principal goal remains the same: a fair process that results in a just adjudication of disputes.

A fair and just process must permit a judge to find the facts necessary to resolve the dispute and to apply the relevant legal principles to the facts as found. However, that process is illusory unless it is also accessible – proportionate, timely and affordable. The proportionality principle means that the best forum for resolving a dispute is not always that with the most painstaking procedure. [ 70 ] Of course, the principles set out in Hryniak are also reflected in The King’s Bench Rules . Rule 1-3(2) states: 1-3

(2) In particular, these rules are intended to be used: (

a) to identify the real issues in dispute; (

b) to facilitate the quickest means of resolving a claim at the least expense; (

c) to encourage the parties to resolve the claim themselves, by agreement, with or without assistance, as early in the process as is practicable; (

d) to oblige the parties to communicate honestly, openly and in a timely way; and (

e) to provide an effective, efficient and credible system of remedies and sanctions to enforce these rules and orders and judgments. [ 71 ] This issue of trial process was broached with the parties at the hearing. Both are amenable to crafting a simplified process that will allow them to rely on the affidavits filed (and perhaps additional affidavits and expert reports) which would then be treated as the examination-in-chief of such witnesses with cross-examination to occur in open court. Both Nancy and the Respondents want their day in court and want a decision sooner rather than later.

I have not granted relief to Nancy in terms of share redemptions, but she is entitled to have her case heard promptly and in a manner that is cost-effective. [ 72 ] In

summary, I order: 1. Angus and Kenmore shall disclose and produce: (

a) financial statements of Angus for the year ending January 31, 2023, and if any management-prepared financial statements exist for the Quarter 2 ending July 31, 2023; (

b) T2 tax return of Angus for the year ending January 31, 2023, complete with all schedules; (

c) Refundable Dividend Tax on Hand (RDTOH) account of Kenmore for the years 2019 to 2023; (

d) clarification as to which shareholder, which share class and what type of dividend was paid out of Angus for fiscal years 2018 and 2019; and (

e) financial statements of Kenmore as at the last fiscal year-end and the previous two fiscal year-ends to assess the overall value of Angus’ investment. 2. To the extent any of the above records now exist, they are to be disclosed and produced within 30 days. To the extent some of the above financials have yet to be completed and therefore cannot be produced within 30 days, they are to be produced within 7 days of their completion. Parties are reminded that disclosure and production are ongoing obligations. 3. The Local Registrar shall

schedule a call with me and with counsel for the purposes of setting a timeline for a trial of the issues. That call shall occur after the productions ordered to be made within 30 days are made. 4. Costs shall be in the cause. “N. Bardai” J. N. BARDAI