Court File and Parties
COURT FILE NO.: 05-41/11 DATE: 20170512 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
MICHAEL MINSHALL, LESLIE BARKER and SHARON MINSHALL Plaintiffs
- a nd -
GREGORY SHAWN MINSHALL, PATRICK MINSHALL and BARABARA JOYCE MINSHALL in their capacity as Estate Trustee of the Estate of Aubrey Wilson Minshall and AUBREY W. MINSHALL HOLDINGS LIMITED, G.S. MINSHALL HOLDINGS INC. and P. MINSHALL HOLDINGS INC. Defendants
BEFORE: F.L. Myers J.
COUNSEL: Bradley Phillips and David Wagner, counsel for the plaintiffs. R.S.M. Woods and Iris Antonios, counsel for the defendants other than Barbara Joyce Minshall. Alex Zavaglia, counsel for the defendant Barbara Joyce Minshall.
HEARD: May 1, 2, and 9, 2017
Endorsement
The Motions
1The plaintiffs moved for:
a. an interim and final order removing Shawn, Patrick, and Barbara Minshall as estate trustees of the Estate of Aubrey Wilson Minshall;
b. an interim and final order removing Shawn, Patrick, and Barbara Minshall as trustees of the spousal trust established pursuant to Aubrey Minshall’s will:
c. an order appointing interim or final replacement trustees;
d. an interim or final order appointing a receiver over the assets and undertaking of Aubrey W. Minshall Holdings Limited; and
e. payment of their costs.
2The defendants, other than Barbara Minshall, but with her support, cross-moved for:
a. an order dismissing this action for delay;
b. in the alternative, for the imposition of another timetable for the action;
c. an order that the non-resident plaintiffs post security for costs; and
d. payment of their costs.
3Since instructing counsel to bring the motion in late 2016, the plaintiffs Michael Minshall and Sharon Minshall have stopped participating in this proceeding. They are no longer represented. They do not respond to communications about the proceeding. They failed to appear at the hearing of their motion. By endorsement dated May 2, 2017, I dismissed the action brought by those two plaintiffs as abandoned and for delay. I reserved costs for this decision.
4The sole remaining plaintiff is Leslie Barker.
5For the reasons that follow, Ms. Barker’s motion is dismissed. The defendants’ motion for dismissal for delay against Ms. Barker is dismissed. However, Ms. Barker is required to post security for costs as set out below.
The Parties
6Aubrey Minshall had five children - the three plaintiffs and the defendants Shawn and Patrick Minshall.
7Barbara Joyce Minshall was Aubrey Minshall’s second wife. She is not the mother of any of his five children.
8The three plaintiffs all spent time estranged from their father although all had made some amends and had some relationship with him before his death. The three plaintiffs all live abroad.
9The two defendant children, Patrick and Shawn Minshall, worked with their father in his business until his death.
10Aubrey Minshall died unexpectedly on November 23, 1994 shortly after his marriage to Barbara. His will created a spousal trust that made some arrangements for her. Aubrey left 10% of the residue of his estate to each of the three plaintiffs. The remaining 70% was to be shared by Shawn and Patrick at 35% each.
11After the death of Aubrey Minshall, with the approval of Revenue Canada, the parties agreed to implement posthumously an estate freeze over his holding company Aubrey W. Minshall Holdings Limited which is the subject matter of the underlying lawsuit. On the closing of the agreed upon estate freeze transactions in 1995, the plaintiffs each received cash of approximately $3.6 million on a tax fee basis. Their sole remaining interest is in 10% of the preferred shares of Aubrey W. Minshall Holdings Limited each. The preferred shares are being held for the plaintiffs in the testamentary spousal trust. On the death of Barbara Minshall, the preferred shares are to be redeemed by the holding company so that each plaintiff will become entitled to the additional sum of $6.37 million before tax.
12Sean, Patrick, and Barbara are the estate trustees of Aubrey’s estate. They are also the trustees of the testamentary spousal trust. After the transactions mentioned above were completed, Shawn and Patrick became the directors and officers of Aubrey W. Minshall Holdings Limited and its sole common shareholders.
There is no Current Basis to Remove the Estate Trustees or the Trustees of the Spousal Trust
13Radford v. Radford Estate, 2008 ONSC 45548, 2008 CarswellOnt 5297 (Ont. SCJ) Quinn J. summarized the factors to be considered on an application to remove trustees as follows:
(1) the court should not lightly interfere with the discretion exercised by a person in choosing the person or persons to act as his executors and trustees;
(2) interfering with the discretion and choice of a person in preparing his last will and testament must not be not only well justified, but must amount to a case of clear necessity;
(3) removal of an estate trustee should only occur on the clearest of evidence that there is no other course to follow;
(4) in deciding whether to remove an estate trustee, the court’s main guide should be the welfare of the beneficiaries;
(5) it must be shown that the non-removal of the trustee will likely prevent the proper execution of the trust;
(6) the removal of an estate trustee is not intended to punish for past misconduct; rather, it is justified on the basis that past misconduct is likely to continue and that the estate assets and the interests of the beneficiaries must be protected. (see paras. 100-107)
14The plaintiffs make several allegations against Shawn, Patrick, and Barbara as trustees of the spousal trust, estate trustees, and as against Shawn and Patrick as directors and officers of the holding company. There is substantial overlap between the allegations made to support the motion to remove trustees and the substantive issues for trial in which breach of trust is overtly in issue. I am disinclined to make interlocutory findings of fact or law on issues of misconduct that are issues for trial. The risk of inconsistent findings and duplicative proceedings is great. In any event, given the view that I take of this matter, it is not necessary for me to make findings on the contested allegations of past misconduct.
15Assuming, without deciding, that Ms. Barker was able to make out each of the allegations of misconduct alleged, in my view there is no still reason to remove the estate trustees or the trustees of the spousal trust pending trial or permanently.
16Cutting to the chase, the three plaintiffs’ sole remaining interests in their father’s estate is that they are each entitled to receive $6.37 million before tax in cash on the death of Barbara Minshall. The total funds required to pay all three plaintiffs’ claims is approximately $19.11 million (3 x $6.37 = $19.11). The funds are to be provided by the holding company redeeming preferred shares being held for the plaintiffs in the spousal trust. The plaintiffs are therefore concerned to ensure that the holding company retains sufficient assets on Barbara’s death to allow it to fund the redemption of the spousal trust’s preferred shares to pay to the plaintiffs at that time.
17Despite the past misconduct alleged, pursuant to the parties’ agreements, the holding company owns a $25 million life insurance policy insuring Barbara’s life. Under the terms of the agreements among the parties, the proceeds of the insurance policy are to be held in trust to pay taxes and the three plaintiffs’ entitlements. The evidence is that the best estimate of future taxes varies between $3 million and $11 million. At worst therefore, approximately $30 million is required by the holding company to fund the plaintiffs $19.11 million plus $11 million in taxes.
18The insurance policy is funded by a cash deposit of approximately $2.5 million. The deposit should produce a return above the annual cost of the insurance so that the capital amount is likely to be preserved.
19In addition, pursuant to an order made by Whittaker J. on consent on June 18, 2012, the sum of $5.7 million is required to be held as security to ensure payment to Barbara of the annuity payments to which she is due during her lifetime under the will. That amount too is not being encroached upon but stands as security.
20In all therefore, there is already $25 million plus $2.5 million plus $5.7 million or $33.2 million available to fund the plaintiffs’ entitlement, plus taxes, plus Barbara’s annuity if necessary.
21In addition, the holding company also currently has another $24 million approximately in liquid and fixed assets. It does not carry on any active business at this time and has not since at least the commencement of this litigation in 2011. Shawn and Patrick do take some annual compensation from the remaining assets as they are entitled to do at corporate law (if not prevented by trust law).
22The further $24 million in assets in the corporation provides a very substantial cushion that is far above the amounts reasonably needed to secure the plaintiffs’ future entitlements. The plaintiffs did not provide any evidence to establish a risk of greater taxes or other liabilities competing for the assets in the holding company. While counsel postulated a fear of unknown future liabilities, the plaintiffs presented no evidence at all to establish that there is any air of reality or reasonableness to those fears.
23In light of the fact that in the six-plus years since this litigation commenced far more money than is reasonably required to secure the plaintiffs’ future entitlement has been held by the holding company, the defendants are not prepared to undertake to continue to hold the full $24 million in perpetuity on top of the $33.2 million that is already being held. However, the defendants Shawn and Patrick, on behalf of themselves, the holding company and their personal holding companies have undertaken:
a. not to remove cash from the insurance policy;
b. to advise the plaintiffs in advance of any proposed changes that may be agreed upon with Barbara to the amount being held under the order made by Mr. Justice Whittaker;
c. to provide the plaintiffs with annual audited financial statements of the holding company;
d. to advise the plaintiffs in advance if the holding company decides to carry on any active business; and
e. to advise the plaintiffs before undertaking any transaction or any number of transactions involving a change in the current status of the corporation’s assets of over $8 million in the aggregate. The number was designed to be large enough to allow the directors of the corporation flexibility with up to one-third of the remaining assets. They will give notice if they propose to affect the last two-thirds of the assets of the holding company (or approximately $16 million) that is currently available as security over and above the $33.2 million that is already being held through the insurance policy and the order of Whittaker J referenced above.
24There is a large cushion of money or assets that will remain idle under these undertakings over and above the amount reasonably required under the best available evidence of the parties. However, given Barbara’s current age, the money may need to be held for several decades before the redemption of the preferred shares occurs. The evidentiary record may change over time. If the plaintiffs are given notice of proposed transactions that they fear may unreasonably erode their future economic safety or leave them at unreasonable risk, they will be free to oppose or to go to court as necessary and as they may be advised. In the meantime, in light of these undertakings, that are to be recited as orders of the court, there is no current basis to find that the spousal trust or the estate of Aubrey Minshall may not perform their obligations to the plaintiffs whatever historic misconduct might have been proven against the defendants, if any.
25It follows from the discussion above that I do not find that misconduct, if any, is likely to continue or that there is any need to remove trustees or estate trustees in order to protect the assets of the estate or the interests of the beneficiaries. More than enough assets are frozen or being carefully monitored to protect the limited and fixed interests of the plaintiffs.
Oppression Remedy and Receivership
26As part of the grounds to remove the trustees and to support the appointment of a receiver to hold the assets of the holding company, the plaintiffs rely on the oppression remedy under the Business Corporations Act. They make two broad claims.
27First, they say that Shawn and Patrick acted in conflict of interest, made misrepresentations, and bullied them into agreeing to limit their inheritance to the cash payments and promise of future cash through the redeemable pref. shares discussed above. The structure arose through a series of agreements that culminated in a final agreement in 1995 referred to as the 3rd variation agreement. For this cause of action I do not need to make findings on whether any of the defendants acted in breach of their duties as trustee or committed any other pre-contractual breaches of obligations. It is only conduct regarding the holding company that is the subject matter of the oppression remedy under s. 248 (2)(a) to (c) of the OBCA. The oppression remedy is not concerned with the efforts by the trustees and beneficiaries to engage in the estate freeze that initially provided the common shares to Shawn and Patrick and cash and redeemable pref. shares to the plaintiffs. These transactions were conducted at the shareholder level that preceded and created the parties’ corporate interests. They are not corporate acts concerning the management or affairs of the corporation that fall within s. 248.
28Moreover, even if the oppression remedy were engaged, the plaintiffs had independent legal advice, independent accounting advice, independent business valuation advice, and more than ample opportunities to protect themselves or reject the estate freeze had they wished to do so. Even if Shawn and Patrick undervalued corporate assets, the plaintiffs in hand their own valuation showing a higher value. Ms. Barkers’ professed lack of memory and her unwillingness to cooperate while under cross-examination leaves her with no real evidence to rebut the paper record and the recollections of her brothers. The evidence that is available shows that the plaintiffs’ accountants and valuators were engaged fully and provided advice to the plaintiffs as to how to cash out their interests tax efficiently including advising that the values being proposed were possibly low by as much as $30 million (or almost 50% of the value propounded by Shawn and Patrick). The plaintiffs negotiated through their professionals on those bases.
29I say nothing about whether Shawn and Patrick violated any duties as trustee or estate trustee leading up to the closing of the 3rd variation agreement that created the shareholding structure. But nothing that they did leading up to the implementation of the share structure in 1995 can be seen to be oppressive under the Business Corporations Act as the plaintiffs were fully and capably advised and had every opportunity to protect themselves. The time pressure imposed at the outset in 1994 was due to existing tax deadlines that had to be met. Regardless of the short time frame involved, the plaintiffs obtained independent advice from their counsel and their accountants before first agreeing to the outlines of the estate freeze. The threats made in 1995 were in response to anticipatory breaches of prior agreements threatened by Ms. Barker. Ms. Barker’s change of position was rejected not only by Shawn and Patrick but by the two other plaintiffs as well. The myriad of professional advice and active, arms length negotiations among the parties and their professionals belie Ms. Barker’s bald and unsupported suggestion of economic duress in any event.
30The second basis for the plaintiffs’ oppression claim is that shortly after the closing of the estate freeze in 1995, Shawn and Patrick commenced discussions that led to the sale of one of the active businesses owned by the holding company called Spacemaker Limited. The sale closed in 1997 at a price far above the prior valuation. Shawn and Patrick ultimately took over $25 million from the holding company essentially pocketing the value of Spacemaker.
31Sean and Patrick are the sole common shareholders. There breached no corporate law in selling a corporate asset or in declaring dividends on their common shares. Moreover, the 3rd variation agreement provides limits on when dividends can be declared and it provides for notice if the corporate assets fall beneath a fixed floor value. These provisions were negotiated by the plaintiffs and Barbara to protect their future entitlements under the 3rd variation agreement. The sale of Spacemaker and subsequent dividends did not offend the contractual protections.
32In her factum, Ms. Barker asserts three broadly worded reasonable expectations that she says were offended by the sale of Spacemaker and the subsequent dividend. First, she says she reasonably expected that Shawn and Patrick would preserve and enhance the value of the company beyond the value it had at the closing of the estate freeze. Second, she says she reasonably expected that Shawn and Patrick would provide timely disclosure of any material decrease in the net realizable value of the assets of the holding company or its subsidiaries. Third, she says that she reasonably expected that the trustees, Shawn, Patrick, and Barbara would oversee operations of the holding company to protect the interests of all of the beneficiaries of the spousal trust (i.e. to protect the future redemption of the pref. shares being held in the trust).
33There is no basis upon which Ms. Barker can say that she subjectively held the first two expectations or, if she did, that they were reasonably held. The 3rd variation agreement speaks directly to both of them. Any enhancement of the value of the company after implementation of the estate freeze under the 3rd variation agreement is expressly for the benefit of Shawn and Patrick as the common shareholders. There is a term preventing dividends taking the company below the frozen value. As noted above, that term was not breached by the sale of Spacemaker and the subsequent dividend. Similarly, the 3rd variation agreement required annual disclosure to the plaintiffs of a certificate showing that the assets of the holding company were worth more than a fixed floor. That was the negotiated disclosure. There is no basis for the plaintiffs to subjectively expect different or more disclosure. Nor would such an expectation be reasonable in light of the express contractual disclosure agreement. [1]
34As to oversight of the corporation by the trustees of the spousal trust and the estate trustees, that is not a corporate matter at all. As beneficial owners of 30% of the pref. shares, complaints about oversight by the trustees are not complaints about the management of the affairs of the corporation. It concerns the carrying out by trustees of their duties to their beneficiaries. That is not the subject of an oppression remedy. If the plaintiffs have concerns about the conflicts of interest of Shawn and Patrick as trustees and estate trustees and Barbara’s alleged abdication of her responsibilities, those are issues for trial.
35Finally, in her recent cross-examination, Ms. Barker advanced a new expectation that is not pleaded or submitted in her factum. She says that the estate trustees could have sold the business and just paid the beneficiaries their inheritances in 1993 or 1994. The point of the estate freeze agreed upon by the beneficiaries was to continue their father’s legacy operating and growing the family business. The plaintiffs agreed to take some cash then and to defer the rest at a fixed value until later only because Shawn and Patrick convinced them that they wanted to keep the business intact and run it as their father would have wanted.
36As a consequence of there being no estate freeze in place when Aubrey Minshall died, very substantial capital gains taxes became due. Paying the tax would have required sale of assets or the company undertaking substantial indebtedness. Both of these outcomes were undesirable to the children. It is clear in the evidence that at the time that their father passed away unexpectedly, he was working on an estate freeze with his professional advisors. He presciently signed a will shortly before he married Barbara to put something in place to protect her in the interim. But he knew that his will would have to change when the estate freeze was implemented.
37Ms. Barker argues that the whole point of the siblings agreeing to an estate freeze after the father died was to let Shawn and Patrick carry on their father’s legacy. Their near immediate sale of a major piece of the business and pocketing of the value violates that reasonable expectation and undermines the entire basis for the estate freeze.
38There is much hindsight in this claim. It is perfectly clear in the evidence that the plaintiffs did not want to be part of the business either before their father died or going forward. The plaintiffs had their accountants review the structures proposed by Shawn and Patrick to provide the plaintiffs with proposals to cash out. Although Shawn and Patrick did get approached by a buyer shortly after the estate freeze closed, the sale actually took two years to negotiate and close. The plaintiffs now like the enhanced value of the assets obtained by Shawn and Patrick in that sale compared to the lower valuation they agreed to two years earlier. That valuation was based on the value of the business when their father died another year before that. However the evidence is clear and unchallenged that the company went through a very significant period of growth and prosperity in those three years to the point that it was flush with cash and inventory and it had very low liabilities. There was nothing untoward under corporate law about the sale and dividend.
39Ms. Barker argues that Shawn and Patrick did not disclose that they had been contacted by the buyer of Spacemaker prior to the closing of the estate freeze and they artificially suppressed the value of the company by doing so. This really goes to the pre-contractual trust issues rather than to oppression in the management or affairs of the corporation.
40Did the sale violate a reasonable expectation that Shawn and Patrick would carry on their father’s legacy? As phrased, the expectation is almost meaningless. The plaintiffs did not provide any evidence that Aubrey have held all of his assets even if presented with a very lucrative opportunity to sell one. All that the plaintiffs really have is a smell that they say wafts from the fact that the contact with the buyer followed the closing of the estate freeze by just a few weeks. So, that begs the question of whether there is a reasonable expectation created by the estate freeze that Shawn and Patrick would not sell assets or pocket profit after the estate freeze closed? I do not see how that can be so subjectively or objectively.
41Shortly after the siblings agreed to elements of the estate freeze, Mr. Milne, counsel for the plaintiffs wrote to the defendants’ counsel and discussed the terms of the deal. First he noted that the plaintiffs were to receive cash on closing. Shawn and Patrick were not going to receive any up-front cash or at that time. The plaintiffs’ counsel recited their understanding that Shawn and Patrick would be the sole common shareholders of the corporation going forward. They would be entitled to exercise “unfettered control” over the company with no minority shareholders to interfere with them. He recited that as the common shareholders, Shawn and Patrick would enjoy 100% of the growth of the business. The preferred shares in the family trust would not have any dividend rights.
42Those were the key takeaways according to the plaintiffs’ lawyer. Shawn and Patrick bargained for unfettered control, all future growth, and no dividend drain on the cash flow of the company. All that had to be protected was the future redemption of the preferred shares on Barbara’s death. The funding of that event was protected by the insurance policy on Barbara’s life, the annual reporting on the fixed floor value of the company’s assets, and the prohibition on dividends if paying them would reduce the company’s value effectively below the frozen value of the preferred shares. The expectation now claimed by Ms. Barker – that the Shawn and Patrick were not entitled to sell Spacemaker or to declare the dividends to themselves - are in direct conflict with her counsel’s contemporaneous description of the business terms of the deal. In return for cash up front and a fixed cash interest at the back end, the plaintiffs were leaving the future of the company totally to Shawn and Patrick. The plaintiffs did not want their fortunes to be pinned to the future success of the company or, presumably, to their brothers’ success as managers. The plaintiffs wanted and agreed to take fixed cash interests protected under the 3rd variation agreement. They then washed their hands of their father’s business.
43No one wanted to incur unnecessary tax payments when Aubrey Minshall died. It was in all of the siblings’ interests to defer and minimize the tax. Telling the tax man that a purpose of the estate freeze was to keep the business in family hands was truthful. It is disingenuous to rely on that statement now to somehow turn the whole deal on its head and suggest that the plaintiffs had any interest at all in the ongoing business or what Shawn or Patrick did with it after being paid their up-front cash and ensuring that their future fixed cash interest was secured in the agreed upon manner.
44In exchange for substantial amounts of money, the plaintiffs decidedly and deliberated left the future growth of the business to Shawn and Patrick. They cannot now reasonably propose an expectation that Shawn and Patrick were not entitled to enjoy that growth.
45There is no need to cite lengthy quotations from BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, for the well-understood propositions that:
a. Reasonable expectations are found first in formal corporate documentation; and
b. Parties cannot have a reasonable expectation of a matter for which they had every opportunity to protect themselves by contract.
46Both propositions apply here. The parties all had highly sophisticated lawyers, accountants, and valuators who were engaged for a long period of time. The deal terms set the expectations. There is an entire agreement clause in the 3rd variation agreement which should have brought home to all parties that if they had matters of importance on which they relied, those matters were to be spelled out in the written agreement. In any event, the question of how to protect the plaintiffs’ future entitlements was expressly the subject of significant negotiations and is indeed spelled out with clarity and specificity in the 3rd variation agreement. If the plaintiffs wanted to prevent Shawn and Patrick from realizing on excess value that accrued to them as common shareholders after the estate freeze, they had every opportunity to put that point into the agreement. It is not there because the parties did not agree to it. In fact, they agreed to the opposite as described by the plaintiffs’ own lawyers.
47Although not phrased as a motion for summary judgment, all parties agreed to the matter being determined summarily as provided by Rule 20.04 (2)(b) of the Rules of Civil Procedure. The plaintiffs make no reference at all to the court’s authority to make interim orders under s. 246 (4) of the Business Corporations Act. They treated this matter as a final order. It is clear to me that there is no further evidence that is likely to be adduced at trial on oppression. Two plaintiffs have gone away. Leslie’s evidence on cross-examination so limited her memory that she is not capable of providing any credible evidence going to the substance of the oppression claim even were she to testify at the trial. The deal documents speak for themselves and are the key component of an oppression claim. Accordingly, I am satisfied that I can apply the law to the facts and that doing so will provide a fair process in the interest of justice.
48Finally on this point, in light of the protections already in place for the remaining assets of the corporation, I see no basis to appoint a receiver over the company’s assets or undertaking in any event. The plaintiffs’ request is especially inequitable as the full costs would effectively be foisted on Shawn and Patrick because the plaintiffs’ have a fixed dollar interest. The plaintiffs did not even offer to bear the costs for the extra protection that they sought for their own interests. They also not have a proposed receiver in place at the hearing of the motion. It was only when the hearing resumed on May 9, 2017, after the defendants had pointed out the plaintiffs’ failure, that the plaintiffs came forward in reply with a receiver’s consent to serve.
49Were the matter being dealt with on an interlocutory basis, I would have much trouble finding a serious issue to be tried on oppression in light of the plain meaning of the 3rd variation agreement and in light of Mr. Milne’s description of the plaintiffs’ take on the deal discussed above. Moreover, it is neither just nor convenient to appoint an expensive professional to superintend an insurance policy and two deposits that will just sit for decades or to exercise business judgment as to any proposed uses of some portion of the additional $24 million in value that remains available over and above the base amount required today.
50While there may be issues regarding whether the sale of Spacemaker, the declaration of dividends, and subsequent corporate distributions to Shawn and Patrick while the company’s fortunes faded though the 2000’s amounted to a conflict of interest or other breach of trustees’ duties, I do not see how the key facts dealing with oppression can be relevant again at trial. The parties’ reasonable expectations are facts that relate solely to the oppression remedy. There is no risk of inconsistent verdicts if I rule that there is no genuine issue requiring a trial on oppression and that the plaintiffs failed to prove that the defendants violated any reasonable expectation so as to treat them unfairly qua pref. shareholders. Accordingly, the claim for an oppression remedy is dismissed. Under Skunk v. Ketash, 2016 ONCA 841, the formal order should contain a declaration that the defendants did not violate any reasonable expectation held by Ms. Barker in respect of the management or affairs of the corporation.
Dismissal for Delay
51This action commenced as two related applications and proceeded apace until mediation in 2013. The plaintiffs have let it languish since then. There has been no downside to them in conserving fees while the corporate assets are effectively tied up. While Justice Whittaker lifted the freeze order and this let Patrick and Shawn repay the balance of the outstanding shareholders’ loans to themselves, the bulk of the remaining assets consist of realty or liquid assets that can and have sat more or less idle.
52In the past three years there have apparently been some settlement negotiations. I was not favoured with any details as to how three years of delay can be accounted for by bald references to ongoing talks. Moreover, during that time, the court ordered deadline for setting this action down for trial has passed. The plaintiffs have not moved to amend that deadline despite their longstanding breach.
53Having said that, the delay, while inordinate, has not been contumelious. Ms. Barker has established that no evidence has been lost during the period. The vast bulk of the trial evidence is already in evidence in the 17 affidavits filed and the many cross-examinations held to date. While some valuator’s files are unavailable and one of the original counsel is no longer able to testify, that happened previously and not as a result of the recent delay.
54The presumption of prejudice on a three year delay is weak.
55The lack of memory displayed by Ms. Barker on her cross-examination is not prejudice to the defendants. If anything, it helps them tactically.
56Although the Rule 24 test is met by rebutting the weak presumption of prejudice, in my view the plaintiff should not be entitled to continue unless she can also meet the test to amend the scheduling order. Scheduling orders are not to be ignored. If civil actions are to be efficient and affordable, they cannot be left to languish in interlocutory limbo. Here two plaintiffs have already withdrawn. Perhaps it is time to put this case to an end.
57Master Wiebe recently summarized the relevant legal test for considering whether to set aside a dismissal due to missing time limited in an action in Iacolucci v TD Waterhouse Canada Inc., 2017 ONSC 2083 as follows:
39In deciding whether to set aside a dismissal order, the Court of Appeal has made it clear that a contextual approach must be taken by the court, namely one through which it must “consider and weigh all relevant factors to determine the order that is just in the circumstances of the particular case”; see Sciani v. Prochnicki, 2007 ONCA 63 at paragraph 23. In conducting this contextual analysis, courts are guided by the four factors identified in the case of Reid v. Dow Corning Corp., [2001] O.J. No. 2365 at paragraph 41: whether the explanation for the delay is adequate; whether there was inadvertence (by the plaintiffs or their lawyer) in missing the deadline in question; whether the motion to set aside the dismissal order was brought promptly; and whether the defendants have suffered no significant prejudice on account of the delay.
40The onus to establish these factors rests on the plaintiffs. A failure to establish some, but not all, of these factors may or may not be fatal to the motion depending on the circumstances. The Reid factors must be considered in the overall context of the case. The two competing values that must be balanced on these motions are the following: the need to enforce timelines to promote timely justice; and the need to instill flexibility to allow cases to be determined on their merits and avoid “draconian” results; see Kara v. Arnold, 2014 ONCA 871, 2014 ONCA 871 (Ont. C.A.) at paragraph 9.
58In this case the explanation for the delay (settlement talks) is weak but not non-existent. I attribute to counsel the failure to request an extension of time among the relief sought in the notice of motion. The client cannot be expected to know how to treat expired scheduling orders when other relief is being sought on the merits. The defendants have suffered no significant prejudice as previously discussed. Moreover, while I am quite sure that these motions were ill-founded, I am not satisfied that there is no merit to the issues raised concerning the trustees’ conduct leading up to the 3rd variation agreement or thereafter. Shawn and Patrick were adverse in interest to the plaintiffs during negotiations. I was not shown any evidence to indicate that as trustees, they took steps to ensure the independence and even hand of the trust and estate. Nor am I clear on whether as trustees, Shawn, Patrick and Barbara had some further duties to alert the plaintiffs or to take some other steps as the value of the holding company declined. While I have found that the plaintiffs’ interests are more than adequately secured now, the path to get to that point was circuitous and difficult. There are issues for a trial. No doubt, defences are being advanced. In my view it is in the interests of justice that the matter proceeds to trial to end this action as efficiently as is reasonably possible.
Security for Costs is Required
59While this matter should be resolved at trial, I cannot ignore that the plaintiff is a non-resident of Canada. Her interest in the spousal trust is defeasible should she pass away before Barbara. Therefore that interest cannot count as an asset in the jurisdiction that will be available to pay her costs. In any event, the interest may not be exigible for more than 20 years. It is not an asset that is available to satisfy a costs order that may be made in the near term.
60This has been a very expensive proceeding. The initial affidavits, prior to the conversion of the original applications to an action, were extensive and detailed. The motions before me are as telling in their practical meaning as their legal. In my view, with the co-plaintiffs falling away, unwilling to invest more time or money, and Ms. Barker’s husband apparently no longer willing to see parts of his funds used further on this endeavour, this motion appears to have been a last ditch effort by Ms. Barker to get the best parts of her case before a judge to try to find some relief before the cost of a trial forces her to back away as well. This is not idle speculation as Ms. Barker’s evidence is that she cannot afford to invest further in the case. However, it is most telling that she refused to produce the detailed financial evidence required to establish that she is “impecunious” as a defence to a motion for security for costs. Without proper financial disclosure to establish the plaintiff’s impecuniosity, I do not reach the question of whether an apparently meritorious claim is being unfairly stopped in its tracks.
61If this then is Ms. Barker’s last hurrah because she cannot or will not afford to pay more as she says, then it is all the more important to order that security for costs be posted. Part of the rules of litigating in Ontario is that an unsuccessful party can be expected to be ordered to bear a significant portion of the successful party’s legal fees and disbursements. A foreign plaintiff with no assets in the jurisdiction is presumptively required to post security for this outcome to ensure that if the local defendants succeed the plaintiff will not be able to retreat behind foreign borders to avoid the costs obligation that she undertook in putting our process in motion. That is perhaps somewhat less of a concern in this case as the courts of the State of Texas and all of the United States of America give full faith and credit to judgments of this court as we stand willing and routinely do for them. However there is still an expense and inconvenience to the process of chasing an unsuccessful litigant abroad that led our Rules Committee to require foreign plaintiffs who wish to take advantage of our court system to post security to ensure that they comply with all of the rules and not just the ones that favour them.
62Ms. Barker argues that there can be no security for costs of an oppression proceeding. As I have dismissed that proceeding, the OBCA is no longer an issue. In any event, even if the oppression application continued, it is plainly just an add-on to what is essentially a trust case. It was added after the proceedings commenced and simply was a way to seek relief against the holding company directly as an alternative to trying to exercise shareholder control over the assets of the company from the estate or spousal trust level. The reasonable expectations piece is a readily severable from the bulk of the issues in the case as discussed above. The bulk of the pleadings and the issues for trial are standard estates court fare that do not involve oppression. In my view, security for costs would therefore be available even if the oppression proceeding continued. I would make a small adjustment to recognize that costs associated with that one cause of action are immune from the requirement to post security.
63I am not prepared at this stage to set the full amount of security for costs. It is clear that this has been an expensive case to date and a trial will be no less expensive. If Ms. Barker is prepared to commit to the case, then the quantum can be fine-tuned as the case moves closer to trial.
Order
64Ms. Barker’s motion is dismissed. The defendants’ motion for dismissal for delay is dismissed. Order to go in Form 56A requiring the plaintiff Leslie Barker to post $100,000 on or before June 30, 2017 as the first installment of security for the costs of the defendants. The action is stayed under Rule 56.05 until that time. If Ms. Barker posts the security as ordered, the parties shall arrange a case conference before me to schedule the remaining steps to move this action to trial and to discuss any further installment of security for costs.
Costs
65The defendants may deliver no more than five pages of costs submissions plus their costs outlines and any offers to settle on which they rely by May 19, 2017. Ms. Barker may deliver no more than five pages of submissions plus her costs outline and any offers to settle on which she relies by May 26, 2017. All documents shall be delivered as searchable PDF attachments to an email to my Assistant. There shall be no authorities or legislative material filed. Rather, any references to case law or to statutory material shall be presented as hyperlinks embedded in the party’s submissions.
F.L. Myers J. Date: May 12, 2017
1Among the plaintiffs’ complaints is that Shawn and Patrick failed to make timely disclosure ten or so years later when the company’s value did fall below the floor value. That is not part of the Spacemaker sale and dividend issue. In any event, the plaintiffs were given disclosure of the financial statements within one year of the company’s value falling below the agreed fixed floor value. They cannot show that the brief delay cause them any loss or to act any differently than they otherwise acted. The 3rd variation agreement gives the plaintiffs the right to an accounting if the floor value is breached. The plaintiffs are advancing that right in this proceeding.