COURT FILE NO.: 2267/17
DATE: 2019 10 01
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Edward Bruce Fulcher, Robert Austin Fulcher and 1644000 Ontario Inc., Applicants
AND:
Novitherm Canada Inc., Frank Snyder a.k.a. Franklin Deland Snyder, Steven Snyder, David Snyder, Christine B. Lee, 1562447 Ontario Inc., The Canadian Plastics Group Ltd., Ceilings International Inc., 1772482 Ontario Limited, Sensory Care Inc., 975357 Ontario Limited, Del Rossi Imports Ltd., Del Rossi Agencies, 6294189 Canada Limited, and Kathleen Lee, Respondents
BEFORE: Conlan J.
COUNSEL: Angela Assuras, Counsel for the Applicants
Stephen R. Jackson, Counsel for the Respondents
HEARD: September 30, 2019
ENDORSEMENT
I. Introduction
[1] As the Case Management Judge in this proceeding, I heard two Motions, one brought by each side, at Court in Milton on September 30, 2019.
[2] Novitherm Canada Inc. (“Novitherm”) is a relatively small, closely-held corporation based in Oakville, Ontario. It installs technology in buildings in order to make them more energy-efficient. It has had dealings with some mighty players in the energy industry, including Enbridge Inc.
[3] The Applicants, the Fulchers, are minority shareholders of the corporation. Edward Bruce Fulcher is a director and the vice-president of Novitherm. The Respondents, the Snyders, are the corporation’s majority shareholders. Frank Snyder is the president and a director of Novitherm.
[4] In June 2017, the Fulchers commenced an Application. Essentially, this is an oppression remedy case, and the Fulchers seek, in the main, an Order that Novitherm be independently valuated and the Snyders be compelled to purchase the Fulchers’ shares at their fair market value.
[5] On June 21, 2017, a consent Order was made by Miller J. Among other things, it set out various terms to ensure that the Fulchers and their expert received the documents and records that they desired.
[6] The proceeding languished, however. Not because the lawyers were at fault but rather because the parties became bogged-down in whether the Snyders had produced what they were required to produce.
[7] Thus, on September 19, 2018, more than one year later, a new timetable was ordered, again on consent, by Justice Shaw.
[8] Unfortunately, the “productions dispute” continued to linger. Another year later, here we are, not much further ahead.
II. The Snyders’ Motion
[9] The Snyders want two things: (i) to vary the Order of Justice Miller and (ii) to set a firm timetable going forward.
[10] In my view, both requests ought to be granted.
[11] On the former, when one examines what was before Justice Miller on June 21, 2017, and when one remembers that this is an Application and not an action, it becomes inescapably obvious that nobody reasonably expected that the parties would still be squabbling over productions more than two years after the said Order was made.
[12] The said Order includes a clause, paragraph 3, that, in my view, given the inordinate passage of time to date, unduly and unnecessarily restricts the ability of the majority shareholders to govern the corporation’s disbursements. For ease of reference, that clause is reproduced below, verbatim (spelling errors included).
This Court Orders That the express written consent of Bruce Fulcher is required for all cheques (disbursements) transfers from Novitherm Canada Inc. bank accounts and investment accounts that are made to the Respondents Frank Snyder, Christine Lee, David Sndyer, Steve Snyder, and Kethleen Lee that are individually or in aggregate more than $6,000.00 per month.
[13] This Court orders that the said clause, effective immediately, is of no force or effect.
[14] In normal circumstances, it would not be a requirement that the express written consent of Edward Bruce Fulcher be obtained in advance of any such disbursement. Further, although that restriction may have been deemed necessary in June 2017 in order to protect the Fulchers, the conduct of the parties since that time and the stalling of the proceeding to date both point away from that as being a necessity today. Put bluntly, there is nothing in the record before me to suggest that the Snyders are out to sabotage the corporation or the Fulchers’ investment in it.
[15] On the latter, the timetable, the best predictor of future behaviour is often past conduct. Two Orders have been made to date, but none with firm deadlines and both open to conflicting interpretations.
[16] This Court, therefore, orders the following:
(i) the Application, on its merits, if not resolved between the parties, must be heard in Court within nine (9) months of September 30, 2019;
(ii) if the Application is converted into an action, then this Court will order a deadline for the passing of the Trial Record and place the case on a specific trial sittings list, in consultation with counsel;
(iii) any expert(s) report(s) on behalf of the Respondents shall be delivered within seven (7) months of September 30, 2019;
(iv) if the Applicants choose to deliver a reply/replies to the expert(s) report(s) tendered by the Respondents, that shall be done within thirty (30) calendar days of receipt of the report(s) on behalf of the Respondents; and
(v) any expert(s) report(s) on behalf of the Applicants shall be delivered within five (5) months of September 30, 2019.
[17] Court timetables are best understood by all participants in reverse chronological order, thus, the wording set out above is deliberate.
III. The Fulchers’ Motion
[18] The Fulchers want two things: (i) to reinstate monthly compensation and benefits paid by Novitherm to Edward Bruce Fulcher up to the end of December 2018 but terminated in January 2019 and (ii) an Order for certain outstanding productions to be provided by a firm deadline, or at least authorizations and directions to be provided for same.
[19] In my view, both requests ought to be granted.
[20] On the former, even if it is correct that Edward Bruce Fulcher has never been an employee of the corporation and has not provided any services thereto since 2015, it is a fact that the parties negotiated an interim arrangement, pending the adjudication of the Application on its merits, that he be paid $5000.00 plus tax per month and receive some company benefits.
[21] That negotiated arrangement was unilaterally terminated by the Snyders at the end of last year, ostensibly because of the inordinate delays in the Applicants prosecuting their claim.
[22] Although I sympathize with the Snyders in their frustration with the lack of progress in the proceeding, I also remind them that they are partly at fault for the delay. Clearly, they have not produced everything that they were obliged to produce, at least not in a timely manner. Just one example will suffice; in June 2017, the Snyders were ordered to provide the Fulchers with access to Novitherm’s Minute Book and copies of it (clause 14 of the consent Order of Justice Miller), however, I accept the evidence of the Applicants that the said obligation, uncomplicated no doubt, was only complied with fairly recently.
[23] As best as this Court can do, the parties on both sides must be placed on fairly equal footing and not unduly prejudiced while the substantive issues raised in the Application await determination. With a firm timetable now in place, and with the lifting of the disbursements restriction that formerly existed (clause 3 of the consent Order of Justice Miller), it is only fair that the compensation paid to Edward Bruce Fulcher up to the end of last year be reinstated.
[24] Without knowing all of the details of that compensation, the extent of the company benefits for instance, the most appropriate wording of this Court’s directive is as follows.
[25] This Court orders that, effective January 2019 and until varied or terminated by a subsequent Court Order, the monthly compensation (monies and benefits) paid by Novitherm to Edward Bruce Fulcher that were being paid up to the end of December 2018 shall be reinstated.
[26] On the latter, production of documents/records/data, this Court orders as follows (all references are to the chart found at tab 1A of the Applicants’ Third Supplementary Responding Record dated September 25, 2019):
(i) on #3, the Respondents shall, forthwith, provide an executed Authorization and Direction for the Applicants’ counsel to obtain the National Bank of Canada line of credit statements for the monthly periods ending April 23, 2015, and May 23, 2015, and March 23, 2017;
(ii) on #8, the Respondents shall, forthwith, provide a written or typed summary (not just source documents) outlining Novitherm’s shareholder withdrawals from 2015 to date and its shareholder renumeration from 2016 to 2018;
(iii) on #15, the Respondents shall, forthwith, provide an executed Authorization and Direction for the Applicants’ counsel to obtain the said National Bank of Canada mortgage documentation and an executed Authorization and Direction for the Applicants’ counsel to obtain the said Royal Bank of Canada investment account documentation for these periods: January 1, 2014 to March 31, 2014, and April 1, 2015 to June 30, 2015, and April 1, 2016 to June 30, 2016, and January 1, 2017 to March 31, 2017;
(iv) on #25, the Respondents shall, forthwith, provide executed Authorization(s) and Direction(s) for the Applicants’ counsel to obtain the said 2017 Income Statement from the person who prepared the company’s 2017 income tax return or, failing that, from Canada Revenue Agency;
(v) on #35, the Respondents shall, within thirty (30) calendar days of September 30, 2019, provide the said adjusting journal entries for the years 2014 through 2018;
(vi) on #62, the Respondents shall, forthwith, provide an executed Authorization and Direction for the Applicants’ counsel to obtain the said 2012 Notice of Assessment from Canada Revenue Agency; and
(vii) on #86, the Respondents shall, forthwith, provide an executed Authorization and Direction for the Applicants’ counsel to obtain the said Notices of Assessment for those years from Canada Revenue Agency.
[27] For several of the aforementioned items, there was a consensus reached by counsel at Court on September 30th. For those that remained contentious, I prefer the position of the Applicants over that of the Respondents on whether the item in question exists and on whether the item in question has already been produced.
[28] In my view, this productions Order will dovetail nicely with the timetable ordered above. There should be no difficulty in the Applicants’ counsel having all of the information within about ninety (90) calendar days of today, leaving Ms. Posel (the Applicants’ expert) about two (2) months to complete her report(s).
IV. Other Issues Regarding Productions
[29] The Fulchers suggest that any document or record or data that is (has been or will be) produced by the Respondents be reviewable by Angela Assuras, Nicholas Assuras, and Arlene Posel (the Applicants’ expert).
[30] Without objection by the Respondents, so ordered.
[31] The Snyders suggest that they have the right to not produce anything that is private and unrelated in any way to the business of Novitherm, such as but not limited to family photographs.
[32] Without objection by the Applicants, so ordered.
[33] The Snyders suggest that they need not produce anything that is the subject of a confidentiality agreement with a third party, including but not limited to Enbridge Inc.
[34] I agree. So ordered. But, to ensure that the Applicants are aware of something being withheld on that ground, counsel for the Respondents shall advise counsel for the Applicants, without delay and in writing, of the general nature and date of any such document/record/data.
[35] Finally, the Snyders suggest that they need not produce anything that is the subject of solicitor-client privilege.
[36] Without objection by the Applicants, so ordered.
V. Costs
[37] I may be spoken to by counsel, in writing or by teleconference (whichever method counsel prefer), if either party wishes to pursue a request for costs of the Motions decided herein.
[38] My preliminary view is that success has been divided and, consequently, each side ought to bear its own costs.
Conlan J.
Date: October 1, 2019