Court File and Parties

COURT FILE NO.: 16-69413 DATE: 20160802 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Jean-Phillipe Ayotte, Rene Tougas and Patrick Page Applicants and Responding parties on the cross-motion – and – Roger Beaulne, Anne Beaulne, Roger Lebel, Yves Richard, Marc-Andre Lalande, Eric Leclair, Kristopher Ross, Curtis Coulbourne, Julie Bell, ATG Industries Inc. and 2200124 Ontario Limited Responding parties on the motion and Moving parties on the cross-motion

COUNSEL:

Andre Claude, for the Applicants and Responding Party on the cross-motion Edward Conway, for the Responding parties and Moving parties on the cross-motion Louis Racine, for the Secured creditor Responding party on the motion

HEARD: July 29, 2016

INTERLOCUTORY DECISION ON INJUNCTION

R. SmIth j.

[1] A mandatory interlocutory injunction is granted to the Applicants for the following reasons:

Prima facie case

[2] The Applicants have demonstrated a prima facie case, that the notice of default given by the Secured Creditor (“Beaulnes”) was invalid and null and void, as on the three alleged events of default, the creditor had been consulted by e-mail and had either given his written consent by e-mail, or in the case of the request to approve an increase in Mr. Ayotte’s salary had not indicated any objection and therefore his consent was implied. In addition the Applicants have established a prima facie that they have suffered oppression by the Respondents and that all of the resolutions passed at the Shareholders meeting on July 19, 2016 are null and void.

[3] The Secured Creditor entered into a separate forbearance agreement with seven of the 10 shareholders when they agreed that he would only seize control of their shares to vote them to terminate Mr. Ayotte, and change the directors of ATG. In return they would not challenge his allegation that a default had actually occurred, and that their shares would then be returned to them approximately two months later.

[4] The forbearance agreement was signed after the seven shareholders had threatened Mr. Page that if he did not vote with them his employment was in jeopardy. Mr. Page had refused to join with the seven Respondents to give them the required 80% of the votes. The unanimous shareholder agreement (“USA”) signed by all of the shareholders requires the consent of 80% of the shareholders to agree to any fundamental changes as defined in the USA. The Respondent shareholders were not able to obtain 80% consent and as a result entered into a sham arrangement with the secured creditors to allege that default had occurred, when no payments had been missed, and ATG was in good financial shape, where the secured creditor’s consent was sought for the three alleged defaults and his consent was given expressly by e-mail or implied.

[5] The Applicants have made out a prima facie case that there was no default to the secured creditors and that the seven Respondents have conspired together with the secured creditors in an attempt to defeat the terms of their USA which required 80% of all shareholders to agree to make fundamental changes like the ones made at the shareholder’s meeting held on July 19, 2016. The fact that Mr. LeBel changed the locks and did not give a key to the Applicants, blockaded Mr. Ayotte’s e-mail access and his access to the servers before the shareholders meeting occurred, in addition to being evidence of high handed conduct, is evidence that Mr. LeBel on behalf of the Respondent shareholders was the party taking the action and not the secured creditors “Les Beaulnes”. This evidence supports a finding that the Respondent shareholders and the secured creditors were working in concert to end run the terms of a unanimous shareholder agreement. Counsel for the secured creditors and the Respondent shareholders were involved in drafting and negotiating the terms of this forbearance agreement.

Irreparable harm

[6] I am satisfied that the Applicants will suffer irreparable harm that cannot be adequately compensated by damages, as their shares have been wrongly seized by the secured creditors, and voted to remove them as directors of ATG. Mr. Ayotte has been fired and has lost his employment as a result of the actions of seven shareholders and the secured creditors, when the unanimous agreement required 80% or eight of the 10 shareholders to agree before such a step was taken which did not occur.

Balance of convenience

[7] At this interim stage I find that the balance of convenience favours maintaining the status quo. As a result, the notice of default dated July 12, 2016 is stayed until a further court order and the voting of the shares by the secured creditor at the July 19, 2016 shareholders meeting or at any other meeting is declared null and void, as are all elections of new directors of ATG until the application for the oppression remedy is heard by the court and a further court order is made.

[8] The terms of the injunction are as follows:

(a) Mr. Ayotte and Mr. Tougas are reinstated to their previous positions and roles as employees, as directors and officers of ATG effective when this decision is released on August 2, 2016;

(b) Two of the three individuals, who were directors of ATG before the July 19, 2016 meeting, will constitute a quorum and they may make decisions on the day to day operations of ATG;

(c) All acts of the ad hoc directors appointed at the shareholders meeting of July 19, 2016 where “les Beaulnes” voted the shares are set aside, including terminating Mr. Ayotte’s employment and changing Mr. Tougas’s responsibilities.

(d) Any “fundamental changes” for important decisions continues require the approval of 80% of the shareholders;

(e) There shall be no increases of salary for any of the shareholders, no additional benefit maybe taken by any shareholders and no overtime or bonus maybe given to any shareholder without 80% approval of the shareholders or by further court order;

(f) The terms of the USA shall continue to be respected unless altered by a further court order;

(g) The parties shall attempt to mediate their differences with the assistance of an expert in business governance; If the parties are unable to resolve their differences, then the Court will hear the oppression remedy application and decide whether an oppression remedy under s. 248 should be granted, and if so the appropriate remedy that would be “fit and unjust” in the circumstances;

(h) The relief sought in para. 1(g)(i), 1(g)(ii), 1(g)(iii), 1(g)(iv) and 1(g)(v) of the application is also granted.

[9] I do not agree with the Respondent’s submission that the Applicants do not have standing to bring this application because:

(a) they are shareholders in 220 and officers of ATG and their shares were seized based on an alleged default which I found on a prima facie basis “was not genuine”, and as a result they have a direct interest in moving to set aside the wrongful seizing and voting of their shares in 220 when no actual default had occurred. As a result the decision in Foss & Harbuttle does not apply as the Applicants have a direct interest in the issues at stake and are not simply seeking to make a claim for relief on behalf of the corporation;

(b) the Applicants would qualify as complainants within under s. 248 of the OBCA; and

(c) in view of the interrelated aspects, leave was requested to bring a derivative action on behalf of ATG and 220 at the hearing. Leave to do so is granted to allow all of these issues to be fully and fairly heard at the same time in order to reduce expenses and costs to the parties.

Costs

[10] The Parties may make written submissions on costs within 10 days;

[11] More fulsome reasons will be given at a later date;

[12] I will have the decision translated into the French language.

Justice Robert J. Smith

Released: August 2, 2016