Ontario Superior Court of Justice

Court File No.: CV-22-00682375-0000
Date: 2025-01-17

Between

First Walden Holdings Inc., Kris Ferguson and Walden Electrical Ltd.
Applicants

– and –

Brendon Fenton, Nicholas Gatien and PowerNorth Utility Contractors Inc.
Respondents

Harvin D. Pitch and Adam Brunswick, Lawyers for the Applicants
Joseph Groia and Cheyenne Parsons, Lawyers for the Respondents

Heard: November 13, 2024

Reasons for Decision

G. Dow

Introduction

[1] The applicants seek Ontario Business Corporations Act, R.S.O. 1990, c. B.16 relief under Section 245 and Section 248 in the form of payment of 45 percent of the value of the respondent corporation, PowerNorth Utility Contractors Inc. (“PowerNorth”) arising from their previous business dealings.

Background

[2] The applicants, First Walden Holdings Inc. and Walden Electrical Ltd. (“Walden”), are electrical contractors in Sudbury. The applicant, Kris Ferguson, is the Chief Executive Officer of the other two applicants. The business is known to the public and business world as “Walden Electric”. Their business involves low voltage electrical installation and maintenance.

[3] The respondent, Nicholas Gatien, is the principal and operator of PowerNorth that sought to commence operations in the Sudbury area as a high voltage electrical business in 2020. This business became the respondent, PowerNorth. The respondent, Brendon Fenton, was a co-founder of PowerNorth.

[4] Nicholas Gatien had expertise in high voltage electrical work and a desire to start his own business. However, he lacked infrastructure given the company where he worked and developed his skills, (which was started by his grandfather). It was subsequently majority owned by his father, Wayne Gatien, and had recently been sold. Nicholas Gatien began negotiations in January 2020 with Kris Ferguson. With the onset of the COVID global pandemic in March 2020, Nicholas Gatien was laid off from his existing position.

[5] By July 2020, Nicholas Gatien admits that he began operating PowerNorth out of an equipment shop on the Walden premises as a result of negotiations between the parties. The parties continued discussions on how to proceed. The key evidence relied on by the parties included a July 26, 2020 email from Kris Ferguson to Nicholas Gatien which addressed Kris Ferguson’s understanding that Nicholas Gatien was not to be an employee of Walden but was seeking to build his own company. This followed Nicholas Gatien having been presented with and not signing an employment contract with Walden on July 8, 2020. This email also refers to Nicholas Gatien’s father to be included in a meeting to determine next steps given his expertise in setting up an electrical systems business.

[6] Wayne Gatien sent an email on October 9, 2020 to Bruce Munro, Walden’s Chief Financial Officer, detailing “Shared Services” to be supplied by PowerNorth. A second email from Wayne Gatien detailed premises to be occupied and rent to be paid. Importantly, the first two years from September 20, 2020 are to be free of charge.

[7] By October 15, 2020, although apparently signed November 6 or 24, 2020, Nicholas Gatien, Kris Ferguson and Brendon Fenton had reached agreement on a “Non-Binding Term Sheet” setting out the corporate structure to be created. Walden was to be issued 45,000 of the 100,000 common shares. Walden was to and did invest $100,000 in addition to providing the services and infrastructure referenced in Wayne Gatien’s emails. That is, Walden was to have a 45% ownership interest in PowerNorth. Kris Ferguson and Nicholas Gatien were to be the directors of the corporation.

[8] As indicated in the title of this document, the last two lines of the first paragraph of the document recognizes it was not to be a binding agreement “and will not impose any obligation or liability on any such Party if such transaction is not consummated. Any such agreement will be made only and if and when the Transaction Documents are agreed to and executed.”

[9] Unfortunately, no provisions were made for how the investment by each party was to be divided if no final agreement was reached.

[10] With assistance by Walden, the extent of which is disputed by PowerNorth, it became successful while completion of the “Transaction Documents” languished. I find it relevant and important that no documented complaint was made about the assistance Walden was providing until early 2022 and the respondents’ refusal to proceed with executing Transaction Documents.

[11] Both parties addressed the involvement of Vanessa Kirwan as relevant to the factual matrix. She was hired away from another company in 2019 by Walden as a controller with a view to succeeding Walden’s soon to retire Chief Financial Officer, Bruce Munroe. She also oversaw PowerNorth’s financial records as of July 2020. Ms. Kirwan ultimately chose to work for PowerNorth exclusively as of February 2022. She swore an affidavit and was cross-examined in a counter-application by PowerNorth regarding unpaid invoices. These invoices were subsequently paid.

[12] This application was issued June 7, 2022.

Analysis

[13] The first issue raised by the respondent is whether the applicant should be found to be a “complainant” under section 245 of the Business Corporations Act. The applicant relied on Fedel v. Tan et al., 2010 ONCA 473 (at paragraph 68) where there is “a broad discretion to determine who is a proper person to bring an application under s. 248”. The respondents dispute that statement of the law should be applied here on the basis that the factual matrix in Fedel v. Tan et al., supra was far stronger given there was a partnership relationship for approximately 10 years and the complainant-Fedel relied on the promises by Tan that he was to be a 40 percent owner. Further, the respondents relied on a statement in Royal Trust Corp. of Canada v. Hordo, (1992) 10 BLR 86 that caution should be exercised not to have debt actions routinely turn into oppression actions. I agree with that characterization of the law but disagree it is not applicable to the facts before me.

[14] The fact that the parties reduced their business relationship to writing where Walden was to be issued 45 percent of the common shares (which did not occur) and invest $100,000 plus provide itemized services (which did occur) is compelling. I am satisfied Walden’s investment would not have occurred without some prospect of a return on same if the business was successful and that the investment of cash and services significantly increased PowerNorth’s likelihood of success.

[15] With regard to the Non-Binding Term Sheet, the respondents also relied on Bawitko Investments Ltd. v. Kernels Popcorn Ltd., (1991) 2734 ONCA (at paragraph 104) for the statement that “even if there is no uncertainty as to the terms of their agreement, is that their legal obligations are to be deferred until a formal contract has been approved and executed, the original or preliminary agreement cannot constitute an enforceable contract”. However, that statement of the law needs to be compared to that as contained in the previous paragraph of that decision where the Court states where the parties “agree on all of the essential provisions to be incorporated in a formal document with the intention that their agreement shall thereupon become binding, they will have fulfilled all the requisites for the formation of a contract”.

[16] Thus, while the “Non-Binding Term Sheet” may not be enforceable, I find it can be utilized as evidence in the form of determining whether the applicant can be found to be a “complainant” under the Business Corporations Act.

[17] As a result, I find the applicants to properly be a complainant under section 245 of the Business Corporations Act, supra and entitled to claim the remedies available under section 248.

[18] Similar to section 245, the Ontario Business Corporations Act, supra, at section 248, is also quite broad setting out 14 different possible orders prefaced with “the court may make any interim or final order it thinks fit including, without limiting the generality of”.

[19] I find it is clear PowerNorth has become more successful and done so more quickly as a result of the initial assistance from Walden. In fact, during submissions it was raised that PowerNorth refused to provide its more recent financial statements. This raises the inference it has been more successful than it wishes to disclose.

[20] I also find it is clear that these parties no longer wish to nor should be business partners. That is, directing Walden be issued a 45 percent ownership interest in PowerNorth would not be a suitable remedy. Both companies appear to be successful and should be allowed to continue with a minimum of interference by, for example, the involvement of receivers, valuators, or court intervention.

[21] Instead, I find there is sufficient evidence for me to calculate an award payable by the respondents to the applicants. In this regard, both parties tendered evidence as to the value of the investment and services provided by Walden to PowerNorth. These were itemized at paragraph 22 of Kris Ferguson’s affidavit sworn July 6, 2022 and responded to at paragraph 49 of Nicholas Gatien’s affidavit sworn September 30, 2022.

[22] Regarding the $100,000 cash injection made by Kris Ferguson to PowerNorth, both parties agreed on this amount and that it was paid for as of December 9, 2020. It shall be repaid as part of the remedy to be imposed under section 248 of the Business Corporations Act, supra.

[23] Regarding the trailer provided on Walden’s premises for PowerNorth to operate in, at its outset, Walden valued same at $12,500 as opposed to PowerNorth claiming it was $4,472.02. While the latter amount is precise (as opposed to the former amount) neither was supported by any documentation which I was able to locate and review, such as an invoice. As a result, I exercise the discretion afforded to me under the statute and award the mid-point of $8,486.01 be payable by the respondents to the applicants.

[24] Regarding the use of Walden’s premises (which I equate to be rent) between November 2020 to April 2022 (which I find to be a period of 18 months), the applicants appear to have estimated same to be worth $90,000 per year while the respondents used a figure of $87,400. There is reference to the payment of rent at $3,750 per month in the material after the 24 months (at Wayne Gatien’s email October 9, 2020 there is also a figure of $4,600 per month in the email from Wayne Gatien on October 13, 2020). This appears to generally be in accord with the respondents’ figure of $87,400. I find this amount to be more credible and award same payable by the respondents to the applicants.

[25] Regarding the truck provided to PowerNorth by Walden, PowerNorth put forward a figure of $21,994.57, again without providing details. This also apparently included insurance. Walden claimed an amount for the truck and included access to and use of other equipment which it valued at $850 per week. This was totalled to be $61,200. Based on the evidence tendered, I find PowerNorth did have access to and made some use of Walden’s equipment. As a result, I award Walden and order payment to the applicants by the respondents in the amount claimed of $61,200.

[26] Regarding the value of shared services which included the value of the controller, Walden sought, by my calculations, $85,000. This compared to the evidence of Nicholas Gatien of the controller services at $2,083 per month, accounting software at $625 per month and the balance of items from front desk support through to administrative support in the amount of $1,042 per month. This totalled $3,750 per month. The respondent also used a period of 19 months for a total of $71,250. I accept that evidence and the respondents shall pay the applicants $71,250.

[27] Regarding a claim for a portion of the profits of PowerNorth, I decline to do so. The main reason would be the non-binding term sheet was never completed. I also have concerns about the incomplete financial records of PowerNorth given they were limited to 2021 and the lack of clarity over the statement of earnings of $617,681. However, PowerNorth clearly had the benefit of Walden’s investment as of late 2020 and ongoing support through to April 2022. As a result, I have determined it would be appropriate to award interest in accordance with the discretion available to me under Section 130 of the Courts of Justice Act, R.S.O. c. C.43. To that end, on the $100,000 investment and the $8,486.01 awarded for the trailer ($108,486.01), I award interest from December 2020 to the present at 6% per year (which was the rate for post-judgment interest under the Courts of Justice Act, supra, at the time of submissions), being a period of four years or $26,036.64. On the remainder of the award (which I total to be $219,850) I award interest from the midpoint of the relevant time period, that is July 2021 to date, also at 6% or in the amount of $45,069.25.

[28] The total award payable by the respondents to the applicants is thus $328,336.01 plus interest in the amount of $71,105.89. The total award is $399,441.90.

Costs

[29] As required by Rule 57.01(6), the parties provided Costs Outlines. The applicants have claimed, if successful, partial indemnity fees in the amount of $81,890 plus HST ($10,645.70) and disbursements of $11,881.80. This totalled $104,417.50.

[30] The respondents’ Costs Outline set out partial indemnity fees of $101,370 plus HST ($13,178.49) and disbursements of $4,394.57. The respondents totalled this to be $118,946.06. I was advised of a respondents’ Offer to Settle that the respondents asked to defer disclosing pending my decision and I agreed to same.

[31] I urge the parties to agree on costs. I would note there appears to be divided success which raises whether the parties ought to each bear their own costs.

[32] If the parties cannot agree on costs, the applicants will forward its position to me in writing, not to exceed five (5) typed written pages in compliance with Rule 4.01 on or before February 14, 2025. The page limit shall exclude any attachments such as the Offer to Settle being relied on. The respondent shall have until March 14, 2025 to respond, identically limited.

G. Dow

Released: January 17, 2025