ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
BRUCE MOORE
Plaintiff
– and –
JAMES HENRY MOORE, LONE STAR DRILLING & ELEVATOR CAISSONS LTD., LONE STAR WELL DIGGING LTD. And DEBORAH LEAH MOORE
Defendants
J. Barzo, for the Plaintiff
D.J. Spiller, for the Defendants James Henry Moore and Lone Star Well Digging Ltd.
HEARD: November 28 and December 2, 2019
REASONS FOR DECISION
1This two-day motion was heard on November 28 and December 2, 2019. Both parties sought wide-ranging and diametrically opposed relief. Although not styled as such, it is clear that both parties sought partial summary judgment with respect to various aspects of relief sought in the Statement of Claim or Statement of Defence. If relief was granted a trial would still be required to deal with substantial matters including damages.
BACKGROUND
[2]
Background
The Plaintiff Bruce Moore (the “son”) is the son of the Defendant James Henry Moore (the “father”). Through the corporate structure, which I will describe in these Reasons, they carried on a successful well drilling and caisson drilling business. The company was licenced to drill wells and could drill other types of wells for the construction industry. The company had a substantial amount of equipment including rigs and drilling equipment that had been accumulated over the years.
3In January 2018, the son issued a Statement of Claim against his father seeking an oppression remedy under s. 248 of the Business Corporation Act, R.S.O. 1990, c. B.16, as well as restraining orders and other forms of relief. The father filed a Statement of Defence denying the claim. More recently in October 2019, the father commenced a separate action against the son and additional defendants not named in the first action. As part of the proceedings at this motion, the son brought a motion seeking to consolidate both actions. That relief was granted on consent. The son’s motion seeking leave to issue a counterclaim was adjourned to a date to be fixed by the Trial Coordinator.
4Before reviewing the history of the litigation, a review of the corporate structure will provide some context for the discussion that follows.
THE FIRST CORPORATION
[5]
The First Corporation
James Moore incorporated a company called Lone Stone Well Digging Ltd. (“Digging”) in 1985. The company was licenced for well drilling and conducted its successful operations from land owned by the father personally. The company assembled a substantial inventory of equipment and rigs over time.
THE SECOND CORPORATION
[6]
The Second Corporation
In 1992 the father incorporated a second company, Lone Star Drilling & Elevator Caissons Ltd. (“Drilling”). In 1994 the father restructured this company dividing the common shares one-third to himself, one-third to his son Bruce and one-third to his son Peter, who subsequently passed away. Peter’s shares were transferred to his widow Deborah. In addition, the father kept preferred shares in Digging. The father is now the sole director of this company, having removed his son Bruce as director and vice-president. The father continues to draw salary from Drilling of about $100,000, as does the son Bruce. The salary to Deborah was terminated by reasons of the order of Quinlan J. which I will review later in these Reasons.
THE VALUATION OF CLASS A SHARES
[7]
The Valuation of Class A Shares
When the father incorporated Drilling he reserved to his company Digging, a certain number of Class A preferred shares. Those shares have been drawn down over time. Currently there are 54,579 preferred shares. The father submits that based on the report from BDO Canada LLP (“BDO”), the entire market value of the company belongs to the Class A shareholder Digging. This BDO report was served and filed just before the return of the motion and the value of the shares was raised by the father for the first time in oral argument. The son submits that the value of these shares is $1.00 per share for a total of $54,579.
8The son takes issue with the conclusion in the BDO report that all of the value of Drilling belongs to the father’s company Digging by virtue of the Class A shares. The son has not had an opportunity to obtain an expert report on the BDO conclusion, nor has the author of the BDO report been qualified as an expert to provide independent opinion evidence to the court. I make no decision on this issue; however, I pause to note that if that is accepted as true, the father incorporated a company in 1994 and created common shares for his sons that are effectively worthless. Thereafter, both sons worked in the company. Peter until his death and Bruce continuously thereafter. The BDO report does not seem to reflect the commercial reality that three shareholders operated the company for over 20 years.
THE THIRD CORPORATION
[9]
The Third Corporation
The son incorporated a new company, Lone Star Drilling Services Limited (“Services”) in July 2018. The son is the sole director, his father is not involved with this company. This company has a licence to drill wells enabling it to continue the well drilling services that Digging and Drilling companies have carried on historically. Stephen Moore, the grandson of James Moore, is the licenced well driller for this company.
THE DISPUTES
[10]
The Disputes
The son began the oppression and other remedy against father based on certain events which he describes as the tipping point of their relationship. He alleges that his father wrote personal cheques from the account of Drilling to pay his own income taxes, pointing to two such cheques that were written. An argument between father and son in the company office turned physical and father was ordered off the property in September of 2017. Although there was an allegation of an assault, no charges were laid. Still, it is clear that the relationship became poisoned at that point.
THE QUINLAN J. ORDER
[11]
The Quinlan J. Order
On 17th of April 2018 Quinlan J. made a consent order as a result of the Plaintiff’s motion to appoint an interim receiver/monitor. The Defendant, Deborah Moore, Peter’s widow, did not appear. Her salary was terminated by order. On consent of the father, an interim receiver was appointed for Drilling for the limited purpose as set out in the order. Drilling was able to carry on in the ordinary course of business and continued paying the salary of the father. The business continued to operate on the father’s lands and the court ordered rent payments to him of $3,800 per month. The father was enjoined from taking any steps to terminate the occupancy of Drilling from his lands. The father, although previously represented, was self-represented at the time this consent was entered into.
THE ORDER OF VALLEE J.
[12]
The Order of Vallee J.
The Plaintiff brought a motion to be heard during trial sittings commencing May 13, 2019 seeking to be made a director of Drilling while at the same time removing the father as a director of Drilling. The plaintiff also sought a variation of the order of Justice Quinlan with respect to the salary of James and Deborah.
THE CROSS-MOTION
[13]
The Cross-Motion
The father, now represented by counsel, brought a cross-motion seeking to vary or set aside the order of Quinlan J. He also sought to be found as a complainant under the Business Corporation Act together with an order winding up and liquidating Drilling together with other relief. The son sought an adjournment of that recently commenced cross-motion to cross-examine or prepare responding materials. The motion was granted. The interim receiver order of Justice Quinlan was not disturbed.
14An extraordinary amount of material was filed for that motion and numerous further affidavits and supplementary motion records have been filed. In addition, both parties have retained experts and those reports have been filed in these records or affidavits.
15It is useful to briefly review the extent of the materials filed by each party.
THE PLAINTIFF’S MATERIALS
[16]
The Plaintiff’s Materials
The son filed a Notice of Motion and a supporting affidavit sworn February 1, 2019. He then filed an affidavit dated May 15, 2019 with 26 exhibits. He then swore an affidavit on May 15, 2019 in support of his adjournment request. He then filed an affidavit dated May 20, 2019 setting out reasons why he opposed the winding up and sought as an alternative that the business or shares be evaluated so he could acquire them.
17He then swore an affidavit dated May 23, 2019 dealing with certain aspects of the well drilling business and the licence for “services”. On August 13, 2019 the son swore a further Affidavit with over 30 exhibits.
DEFENDANT’S MATERIAL
[18]
Defendant’s Material
As noted, the father brought a cross-motion which came before Vallee J. and was dealt with by way of adjournment. This cross-motion and response to the plaintiff’s motion was met with the father serving and filing four volumes of material in excess of 800 pages. In addition, the father brought a supplementary responding Motion Record dated May 22, 2019 containing a further affidavit from the father’s expert commenting on aspects of the interim receivers work. The father filed a further supplementary Motion Record dated November 15, 2019 which provided a valuation report from BDO prepared on behalf of the defendant. The father then served and filed a further supplementary Motion Record dated November 26, 2019.
THE RELIEF REQUESTED
[19]
The Relief Requested
The relief requested revolves around the shares or assets of Drilling. As previously noted, the common shares are owned one-third by the son, one-third by the father and one-third by Deborah Moore. The father has preferred shares which are held by his company Digging.
20The son seeks to be appointed as a director of Drilling together with an order that his father be removed as a director and his father’s salary be terminated. Because Drilling is an active corporation that he manages, he seeks an order that the valuation of the assets of Drilling be established by the parties or court order and paid into court subject to a later determination of what, if anything, is owing to the father or son.
21On the other hand, the father seeks a winding up of the company and order for Drilling to vacate his property together with sundry relief.
ANALYSIS
[22]
Analysis
Although not styled as such, in my view, what the parties are seeking is partial summary judgment of this action, an action which has recently been consolidated with the father’s separate action against the son and other defendants. The Court of Appeal considered partial summary judgment applications and provided guidance in Butera v. Chown, Cairns LLP, 2017 ONCA 783, 418 D.L.R. (4th) 657. The Court considered the substantial changes directed by the Supreme Court of Canada in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87. As the Court noted at para. 28:
In both Baywood and CIBC, the court analyzed the issue from the perspective of whether (i) there was a risk duplicative or inconsistent findings at trial and whether (ii) granting partial summary judgment was advisable in the context of the litigation as a whole. In both cases, the court held that partial summary judgment was inadvisable in the circumstances.
23In speaking for the Court, Pepall J.A., at paras. 30-33, provided four reasons why partial summary judgment should be viewed cautiously. Those points can be summarized as follows:
- First, such motions cause the resolution of the main action to be delayed;
- Second, a motion for partial summary judgment may be very expensive;
- Third, judges who already face a significant responsibility addressing the increase in summary judgment motions that have flowed since Hryniak, are required to spend time hearing partial summary judgment motions and writing comprehensive reasons on an issue that does not dispose of the action;
- Fourth, the record available at the hearing of a partial summary judgment motion will likely not be as expansive as the record at trial therefore increasing the danger of inconsistent findings.
24In Mak (Estate) v. Mak, 2019 ONSC 2710, Edwards J. considered the Hryniak principles in a motion for summary judgment that came before him. At para. 12, Edwards J. noted:
In this case, the record before the court involves various motion records, supplementary motion records, and further supplementary motion records, which contain in excess of 30 affidavits. As well, there are various transcripts of the cross-examinations conducted of the various affiants, together with hundreds of pages of documents. The totality of the motion material occupies two banker’s boxes.
25Edwards J. further noted at para. 15:
So much of the evidence in this case flows from numerous affidavits and exhibits that, of necessity, were drafted by the lawyers. In my view, it is close to impossible to assess the reliability and credibility of this type of evidence on a motion for summary judgement. The sheer volume of material in and of itself, should alert the court that this is not a case where the court can be confident in deciding that there is no genuine issue requiring a trial.
In dismissing the motion, Edwards J. concluded at para. 21:
There are serious credibility issues between the parties and the various witnesses, that make this case an obvious case where the court cannot be satisfied that it can reach a fair and just determination.
THE CURRENT SITUATION
[26]
The Current Situation
Both parties have filed multiple affidavits and expert reports. In my view, this case requires the full machinery of a trial. This will enable the court to evaluate the credibility of the parties and further enable the court to determine if the expert reports should be admitted into evidence and to what extent, if any, the court can rely upon them.
27Like the facts in Mak (Estate) v. Mak, the parties have spent a great deal of time and resources in preparation for a motion and cross-motion. They seek diametrically opposed remedies. The father would like to have the company wound up. The son would like to have the assets of the company evaluated, presumably so that he could continue to run the company as a going business.
28The status quo may not be satisfactory for both parties, but it does provide the following benefits. The father receives a salary of $100,000 from Drilling together with monthly land rent from Drilling. He is a director of Drilling with day-to-day obligations. The son operates Drilling successfully as an ongoing business carrying on with the digging and well drilling through the licence available to Services. The son receives a salary and the employment of the labour force is continued. The interim receiver provides oversight with respect to cheque writing and depositing for Drilling with obligations to report to the court from time to time.
29The motion of the Plaintiff son and cross-motion of the Defendant father is dismissed, save and except for an interim order regarding land rent.
LAND RENT
[30]
Land Rent
The substantive issues raised by the Plaintiff and Defendant in their motion and cross-motion having been dismissed I turn my attention to the land rent being paid by Drilling for the use and occupation of land owned by father. The consent order of Quinlan J. previously referred to, established a monthly rent of $3,800 per month, or $45,600 per year. The Defendant has now filed an appraisal from Catherine Lowe, a broker for Ed Lowe Limited. In her opinion, a fair market rent would be between $38,500 and $42,000 per year. The Plaintiff fairly concedes a rental increase ought to be considered in light of this appraisal. The Plaintiff submits that if the rent is based on the lowest level of fair market value, $38,500 plus property taxes of $8,261 plus HST, then the fair market value would be $52,840 or $4,403 per month.
31The opinion of value of Catherine Lowe was unchallenged. I am satisfied that a mid-point valuation of $40,000 is appropriate in these circumstances. When taxes of $8,261 and HST of $6,273 are added in, the annual rent is $54,534 or $4,544 per month. The order of Quinlan J. was done without the benefit of an appraisal. That appraisal is now available. I am satisfied that the rent ought to be adjusted to $4,544 per month retroactively to April 17, 2018, the date of the order of Quinlan J.
32This is clearly a case where the parties would benefit by the assignment of a trial management judge. I urge the parties to write to the Regional Senior Justice for Central East Region to seek the appointment of a trial management judge with respect to this action and the consolidated action recently commenced by the father involving the son and other defendants.
COSTS
[33]
Costs
Neither party has been successful in their motion or cross-motion other than a temporary order for a rent increase to the father. If costs are sought, I will receive the submissions from the Defendant within 30 days of the release of this Judgment. The Plaintiff will then have 15 days to submit its costs submissions. The Defendant will then have a further 10 days for reply.
MULLIGAN J.
Released: December 13, 2019