Court File and Parties
COURT FILE NO.: CV-16-11568-00CL DATE: 20191007
SUPERIOR COURT OF JUSTICE - ONTARIO
APPLICATION UNDER section 96, 161, 162, 163, 245, 248 and 253 of the Ontario Business Corporations Act, R.S.O. 1990, c. B.16
RE: JAMROCK BROADCASTING CORPORATION and DELFORD BLYTHE, Applicants
AND:
THE ESTATE OF FITZROY GORDON, MAJA MEDIA GROUP INC., INTERCITY BROADCASTING NETWORK INC., and MAJA MEDIA INC., Respondents
BEFORE: Dietrich J.
COUNSEL: Michael W. Carlson, for the Applicants Osborne G. Barnwell, for the Respondent, Intercity Broadcasting Network Inc. Krina Mahaisuria, for the Respondent, The Estate of Fitzroy Gordon, Maja Media Group Inc. and Maja Media Inc. Greg Azeff and Stephanie De Caria, for the Receiver, A. Farber & Partners Inc. Karen Cunningham, for Korey Gordon and Andrew Gordon, sons of the late Fitzroy Gordon seeking intervenor status
HEARD: September 30, 2019
ENDORSEMENT
[1] The Respondent Intercity Broadcasting Network Inc. (“IBN”) operates a radio station that provides programing focused on the Caribbean-African community in the Greater Toronto Area.
[2] The radio station was launched in 2011 by the late Fitzroy Gordon. At that time, there were four shareholders, including the applicant Jamrock Broadcasting Corporation (“Jamrock”), controlled by the applicant Delford Blythe. Mr. Gordon held a majority of the shares of IBN, through Maja Media Group Inc. The other two shareholders were 2164322 Ontario Inc. and Tony Hamblin. The principals of each of the three corporate shareholders were a directors of IBN, as was the shareholder Mr. Hamblin. The shareholders entered into a shareholders agreement dated January 25, 2010, which was amended in 2011 and 2012.
[3] Over time, through his company, Maja Media Inc., Mr. Gordon acquired the shares of the shareholders other than Jamrock. Sharon Luck, the principal of 2164322 Ontario Inc., and Mr. Hamblin then ceased to be directors of, and to have any ongoing role at, IBN. At the time of his death on April 30, 2019, through Maja Media Group Inc. and Maja Media Inc., Mr. Gordon held 81 percent of the shares of IBN. Mr. Blythe held the remaining 19 percent.
[4] From the inception of IBN, Mr. Gordon was a director, the Chief Executive Officer and the controlling mind of the company. Following Mr. Gordon’s death, Mr. Blythe is the only director of IBN.
[5] Mr. Blythe is a chartered professional accountant and once held the position of Vice President, Treasurer and Chief Financial Officer of IBN. He entered into a financial and management services agreement with IBN to provide accounting and financial services and to oversee regulatory payments and reporting.
[6] In June 2015, Mr. Gordon terminated this agreement and Mr. Blythe was denied further access to the radio station. He remained a director and shareholder of IBN.
[7] Following this termination, Mr. Blythe brought an application seeking relief from oppression. The application was stayed in 2017 when Mr. Gordon suffered a stroke.
[8] Shortly after Mr. Gordon’s death, Jamrock and Mr. Blythe brought this application seeking the appointment of a receiver for IBN, among other relief. By order of Justice Conway, dated June 3, 2019, A. Farber and Partners was appointed as an investigative receiver for the limited purpose of overseeing, monitoring and managing the records, bank accounts and receivables of IBN. The receiver’s duties do not include the active management of the business of IBN.
[9] The receiver’s reports show that significant demands for payment have been made to IBN by the Canada Revenue Agency and the Canadian Radio-television and Telecommunications Commission (the “CRTC”). In addition, there are two significant judgments against IBN that will come due in December 2019. It is common ground that IBN is in financial distress. All parties are concerned that IBN is or will be unable to pay its liabilities and meet its regulatory requirements.
Issues
[10] A number of issues arise in the context of this application, including the following:
IBN challenges the jurisdiction of this court to hear this application in face of the shareholders agreement that requires the shareholders to resolve disputes through arbitration. Accordingly, it seeks to stay the proceeding or, alternatively, to quash or vary Justice Conway’s order appointing the receiver.
The legal and beneficial owners of the IBN shares held indirectly by Mr. Gordon’s estate remain to be determined. Mr. Gordon’s widow, Marvette Powell, is appointed as Executrix and Trustee, and the sole beneficiary, of Mr. Gordon’s secondary will. In that will, he leaves his shares in private corporations, including his shares in Maja Media Group Inc. and Maja Media Inc., to her. However, his two sons from a prior marriage, Korey Gordon and Andrew Gordon, have filed a notice of objection to the issuance of a Certificate of Appointment of Estate Trustee with a Will to Ms. Powell. They seek to challenge their late father’s last wills, alleging that he lacked testamentary capacity when he made them and that they were procured by undue influence.
The directing mind of IBN must also be determined. Mr. Blythe, as the remaining director of IBN, seeks resolution of governance issues including a determination of: the officers of IBN; who will have management and control of IBN; and the ongoing role of the receiver, if any.
The receiver seeks to have its second report, its fees and the fees of its counsel approved. IBN objects to this approval.
[11] Each of these matters will be addressed at one or more hearings scheduled for later this year.
[12] The discrete issue before the court at this hearing is whether IBN had the authority to appoint legal counsel to represent its interest in the application.
The Authority of IBN to Retain Legal Counsel
[13] The applicants assert that Alicia Wright-DaCosta, an employee of IBN, who claims to be its Chief Operating Officer (“COO”), is not a duly appointed officer of IBN. Accordingly, they submit that she had no authority to engage Osborne Barnwell or any other legal counsel to represent IBN in these matters.
[14] Ms. Wright-DaCosta submits that, following Mr. Blythe’s termination, and around the time of Mr. Gordon’s stroke, she was appointed by Mr. Gordon to be the COO. She further submits that, in that role, she has the authority to retain Mr. Barnwell to represent IBN and to bind IBN.
[15] For the reasons that follow, I find that while Ms. Wright-DaCosta was not appointed an officer of IBN in accordance with the shareholders agreement, she is the de facto COO of IBN. Based on the record, she was informally appointed COO by the only director then active in the day to day business of IBN, who also represented the majority shareholders.
[16] Ms. Wright-DaCosta deposed that she has been the COO of IBN since 2017 and has been employed at IBN since its inception in 2011. Her evidence is that she occupied a number of roles, including that of Senior Executive assisting with operations from 2015 to 2017. She produced documentary evidence of two employment contracts on which she appears to have signed as an officer with authority to bind the corporation.
[17] Ms. Wright-DaCosta also produced two letters corroborating her appointment as COO by Mr. Gordon. The first is signed by the late Mr. Gordon’s executive assistant, Sharlene McCallum. In the letter dated June 10, 2019, authored by Ms. McCallum, she states that Mr. Gordon instructed her, as his executive assistant, to advise the staff of IBN in 2017 of Ms. Wright-DaCosta’s appointment as COO. The second letter, dated June 11, 2019, signed by Vakees Vallipuram, the Chief Financial Officer of IBN, states that Ms. Wright-DaCosta had been appointed COO by the late Mr. Gordon and has had that role since October 2017. This evidence has not been challenged. The on-line obituary for Mr. Gordon also refers to Ms. Wright-DaCasta as the COO of IBN.
[18] It is not disputed that the minute book for IBN makes no mention of Ms. Wright-DaCosta having been appointed as COO. She submits that this omission owes to the fact that the corporate records for IBN have not been updated since about 2016.
[19] Ms. Wright-DaCosta also asserts that, having accepted the role of COO, she has sought to move IBN forward as mandated and guided by the founder, Mr. Gordon, with the “overwhelming support of the Executive and Management Team that [Mr. Gordon] appointed since 2017.”
[20] Her evidence is that following her appointment as COO she led a successful request to amend the condition of the CRTC licence that required a $189,000 payment of fees by August 31, 2019 to allow for a deferral of that payment to the end of February 2020. This amendment will ease some of the financial pressure currently faced by IBN. Ms. Wright-DaCosta’s testimony is that she, along with the management team, is working to fulfil the company’s mandate to the listenership, the regulators, clients, partners and service providers until Mr. Gordon’s estate is settled and the management and control of IBN is determined.
[21] The applicants argue that there is no credible evidence that Ms. Wright-DaCosta was formally appointed by Mr. Gordon. They further argue that even if that appointment were made, Mr. Gordon had no authority to do so because the shareholders agreement requires that an officer be appointed pursuant to a quorum of the Executive Committee and that the Executive Committee is comprised of four members all of whom must be directors. The shareholders agreement also requires a resolution of the Executive Committee approved by 75 percent of the members of that committee authorizing the appointment of any legal representative of IBN. The applicants argue that there was no quorum of the Executive Committee to appoint Ms. Wright-DaCosta or anyone else as an officer of IBN. Further, they argue that there was no resolution of the Executive Committee authorizing the appointment of Mr. Barnwell or any other legal representative.
[22] I agree that Ms. Wright-DaCosta was not formally appointed as COO. In appointing Ms. Wright-DaCosta, Mr. Gordon, as one of two remaining directors, did not comply with the terms of the shareholders agreement regarding the appointment of officers. He could not. There were only two directors of IBN at the time, and one of them, Mr. Blythe, was no longer active in the management or business of IBN. There was no Executive Committee. IBN no longer had four directors who could form an Executive Committee.
[23] Notwithstanding the informality with which it appears that Mr. Gordon appointed Ms. Wright-DaCosta as COO, I am persuaded that in doing so Mr. Gordon acted in good faith. At the time of her appointment in 2017 he had suffered a stroke and would, undoubtedly, have had concerns about the ongoing management of the radio station. In assembling a management team and naming Ms. Wright-DaCosta as COO, I am satisfied that he was acting in the best interests of IBN.
[24] Ms. Wright-DaCosta had been an employee of the company since its inception. She had the confidence of Mr. Gordon who represented the majority shareholders. In this sense, Mr. Gordon, as the only remaining director of IBN who was active in the day to day operations of the company, made an informed business decision to appoint her to the office of COO. Mr. Gordon’s widow, appointed in his wills as the Executrix and Trustee of his estate, submits that she supports Ms. Wright-DaCosta’s ongoing involvement in the management of IBN with oversight by the receiver.
[25] Notwithstanding that Ms. Wright-DaCosta could and should have been more cooperative in complying with Justice Conway’s June 3, 2019 order and given the receiver access to IBN when it was first requested, it appears from the record that Ms. Wright-DaCosta has been working diligently with the management team at IBN to carry on its business. Once served with the applicants’ application, it was reasonable and appropriate for her to retain counsel on behalf of IBN to represent the company’s interests. Accordingly, I find that Ms. Wright-DaCosta, as de facto COO, had the authority to appoint counsel to represent IBN in this matter and to bind the corporation.
[26] The costs of today’s hearing are reserved to the judge hearing the remaining issues in the application.
Dietrich J.
Date: October 7, 2019