SUPERIOR COURT OF JUSTICE – ONTARIO

COURT FILE NO.: 587/13

DATE: 20140228

RE: CHRISTOPHER LUXON (Applicant) v. ROY’S NORTHLAND CAMP LIMITED, ROBERT MORRISSEY, MICHELLE FORTIER, GALE DARLING and LINDA DARLING-PAY (Respondents)

BEFORE: Lemon, J

COUNSEL:
W. Gerald Punnett, for the Applicant

Bassam Lazar, for the Respondents

HEARD: January 14, 2014

E N D O R S E M E N T

The issue

[1] The applicant seeks an injunction to prevent the sale of a piece of property. He also seeks a mandatory injunction for the respondents to return his personal chattels. Affidavits were filed and cross-examinations were carried out. Both counsel agreed that there was no need for viva voce evidence. Even though credibility issues were argued, both counsel expressly wished me to decide the issues on the paper record.

[2] Roy's Northland Camp Limited was incorporated on March 23, 1973. The individual parties are shareholders of the company. The parties agree that the company's primary business was the rental of cottages to hunters and fishermen. That business is operated on property owned by the company. That property is the land in question. The chattels in issue were, at least at some point, on the property.

[3] On or about March 12, 2012, Michael Luxon died. He had been one of the original shareholders of the company. He bequeathed his shares to his son, the applicant, Christopher Luxon and Michelle Fortier, one of the respondents. They are the co-executors of Michael's estate.

[4] After Michael's death, the executors were unable to find the corporate minute book. Accordingly, with the assistance of counsel, a shareholders meeting was called for June 27, 2012. It is agreed that on June 21, 2012, all shareholders received a notice of the meeting.

[5] The notice of the meeting provided an agenda that set out that the meeting would deal with authorization of two shares in the name of Michael Luxon to be transferred to Michelle Fortier and Christopher Luxon; discussion of the realty tax arrears; and to review offers to purchase shares or assets of the company. The notice also set out that the most recent appraisal of the property, on May 9, 2012, was $201,000.

[6] Emails crossed between the various shareholders as to what could be agreed upon at the meeting; however, only Ms. Darling-Pay and Ms. Fortier were in attendance at the meeting. Mr. Luxon, Ms. Darling and Mr. Morrissey apparently did not attend the meeting. Although proxy votes were submitted to the estate lawyer, he did not attend at the meeting and the proxies were not at the meeting. Ms. Darling-Pay, in her cross examination, acknowledged that she had not seen the proxies.

[7] Minutes of the meeting were produced. From those minutes, it appears that the only thing that occurred at the meeting was an appointment of directors and an appointment of officers. The respondents, Mr. Morrissey, Ms. Darling-Pay and Ms. Fortier, were named directors. Ms. Darling-Pay was elected president and Ms. Fortier was appointed secretary. No treasurer was appointed.

[8] The minutes include "The next meeting for the Board of Directors is to be announced". There appears to have been no discussion with respect to tax arrears or the sale of shares or assets of the company.

[9] The property was listed for sale July 2012. Without further notice to the applicant, Mr. Luxon, an agreement of purchase and sale was signed by Ms. Fortier and Ms. Darling-Pay on July 2, 2013. That transaction was to close August 16, 2013.

[10] In his application, first returnable August 14, 2013, Mr. Luxon deposed that he was aware that the transaction was to close August 16, 2013 for $145,000, but that he had no other knowledge of the terms of sale. Although he had asked for a copy of the offer, he had not been provided with one. The application also requested the return of Mr. Luxon’s goods that were still on the property and were listed in a one-page memo attached to his affidavit.

[11] The matter first came on before Justice Herold on August 14, 2013. He granted the injunction to prevent the sale of the property but did not grant the order returning the chattels. The matter was otherwise adjourned to Tuesday, August 20, 2013.

[12] The application has been adjourned on consent a number of times and finally came before me January 14, 2014.

[13] It is agreed that the sale has fallen through and is no longer pending. Despite that, the parties still seek a ruling.

Positions of the parties

[14] The applicant pleads that the decision to sell the property is invalid for failure to provide him with notice in accordance with the Business Corporations Act, R.S.O. 1990, c. B.16. The respondents submit that the information put before Justice Herold was not full, fair and frank disclosure and therefore, the injunction order ought not to have been granted.

[15] With respect to the chattels, the applicant seeks the return of a variety of items that he says were personal possessions left on the property. The respondents did not specifically deal with this matter in argument, however, in the cross-examination of Ms. Darling-Pay, she either denies that the various items are the possessions of the applicant or is uncertain whether they are or not.

Sale of the property

[16] The applicant submits that pursuant to sections 96 and 125 of the Act, he was not given sufficient notice of the meeting. He submits that notice of a meeting of the shareholders shall be sent in the case of an offering corporation, not less than 21 days and, in the case of any other corporation, not less than 10 days. Therefore, he did not receive proper notice of the meeting of June 27, 2012. Further, he submits that because this was a "special meeting", he did not receive notice of the proposal to sell the property or to approve the agreement of purchase and sale. Accordingly, he submits that the agreement of purchase and sale is not valid and the transaction should not proceed.

[17] The respondents submit that, be that as it may, the applicant has been contradicted during his examination, and that he received proper notice of the shareholders meeting. Since the applicant was not full and frank in his affidavit, the order should not be granted. The respondents pointed out that the applicant has been contradicted in his affidavit by his own admissions during examination; that he apparently lied about being in possession of the corporate minute book; and that he did in fact receive notice about the shareholders meeting by mail and email. In particular, the respondents submit that the applicant attempted to retrieve his chattels even though the order of Justice Herold did not allow that.

[18] Although it is true that the applicant received notice of the June 27 meeting, pursuant to s. 96 (1) of the Act, he was to receive 10 days’ notice of the meeting. Instead he had six days’ notice. More importantly, however, pursuant to s. 184 (3) of the Act, if the corporation is making a sale out of the ordinary course of business for the corporation, it must hold a special meeting of shareholders to seek their approval of the sale. On the material filed, the sale of the property was certainly out of the ordinary course of business. No such meeting was held. On the evidence, Mr. Luxon only heard about the sale after the agreement of purchase and sale had been signed.

[19] In this case, it appears that the sale was out of the ordinary course of business and all of the corporation’s assets were to be sold; therefore, Mr. Luxon was entitled to ten days’ notice of a special meeting for consideration of the sale of assets. To deny him the right to appropriate notice of the special meeting, deprived him of his dissent rights and the right to be paid fair value for his shares: s. 185(1)(e) of the Act. On that basis the sale should be set aside and the injunction granted.

[20] While the respondents made some headway with damaging the credibility of the applicant, and it appears that he failed to be entirely forthcoming with both the court and the respondents, those incidents are not such as to overwhelm the simple reality of the complete lack of notice of the proposed sale. As such, they become irrelevant to the analysis.

Chattels

[21] As Mr. Luxon is the applicant, the onus of proof lies on him. He seeks a final order for the return of the goods. His credibility is very much in dispute. Even though Justice Herold refused the order for the return of the chattels, Mr. Luxon attended at the camp with a four-page list of items that he said needed to be returned to him. Although an undertaking was given December 16, 2013 to provide that four-page list, it was not provided. It is not clear on the record what he knew of the order and what he requested when he attended at the property. It is not clear what he received when he attended. Although Mr. Luxon testified at his cross-examination that he was told by his lawyer to attend at the property and obtain the goods, there was no evidence from Mr. Punnett. On this evidence, I am left unsure of what should be returned to the applicant.

[22] On the paper record before me, I cannot make a determination of credibility. Since I do not know one way or the other whether the items belong to Mr. Luxon or not, I can make no finding on a balance of probabilities that the items belonged to him in the first place or were not returned to him at a later date. Accordingly, this part of the application is dismissed.

Costs

[23] It appears that both sides have been partially successful; however, if the parties cannot agree on costs, written submissions may be made to me. Those submissions will be no more than three pages in length, not including any offers to settle or bills of costs. The ­­­­­ applicant shall provide submissions within 15 days and the respondents within 15 days thereafter.

Lemon, J

DATE: February 28, 2014