COURT FILE NO.: CV-20-0366-00
DATE: 2022-12-13
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Robert Bradley Olson
J. Jacobs, for the Plaintiff, Moving party
Plaintiff
- and -
River Green (Thunder Bay) Inc., Matt Pearson, James Elof Peterson, 1401366 Ontario Ltd., o/a Plymouth Landing, 2801100 Ontario Inc. and Sophia’s Garden (Artisan) Inc.
C. O’Sullivan, making representations for Randall MacLeod and 2801100 Ontario Inc. responding parties
Defendants
HEARD: December 2, 2022 at Thunder Bay, Ontario
Mr. Justice F. B. Fitzpatrick
Judgment on Motion
Background
[1] This is a motion in an oppression remedy case. The corporation at the centre of this matter is a commercial cannabis business called River Green (Thunder Bay) Inc. (“River Green”). River Green was incorporated in 2018.
[2] River Green’s first cannabis crop failed. The cannabis crop (such as it was), was destroyed in December 2020. The crop failure set off a series of maneuvers in the Fall of 2020 which various factions involved with the company took various steps related to the business. The lease for the company was purported to be terminated. Growing equipment was seized. People were fired. At least eight different court actions were commenced at Thunder Bay.
[3] In an attempt to most efficiently utilize court resources, I have been case managing this file, and at least seven others, for the past 18 months. This case management process has included at least eight case conferences and several attendances involving contested motions.
[4] On October 6, 2021, I made a procedural endorsement in respect of an original motion brought by the plaintiff Robert Bradley Olson (“Olson”) (Olson v. River Green (Thunder Bay) Inc., 2021 ONSC 6679). About a week later, certain shareholders of River Green passed resolutions that were the narrow subject of the proceedings today. Those resolutions shifted the ground under Olson and others. Between October 6, 2021, and now, it appears to me that the directions I gave in the October 6, 2021 order were not fully complied with. I mention this only to highlight that this file is not proceeding in as efficient a manner as was originally hoped.
[5] On this attendance, Cian O’Sullivan made representations on behalf of Randall Stephen Macleod (“Macleod”) and the defendants 2801100 Ontario Inc. Mr. O’Sullivan is not licenced to practice law in Ontario. In the interests of moving this matter forward, counsel for the moving party, Olson, did not oppose Mr. O’Sullivan being allowed to make representations on this motion. As I have been case managing this matter, I am familiar with Mr. O’Sullivan’s involvement with matters to date. I was content for this motion alone that Mr. O’Sullivan be allowed to address the court in opposition to the relief sought.
The Motion Materials
[6] Olson originally brought this motion in February 2021. It sought significant relief. The relief sought has “evolved”. An amended notice of motion has been filed. The relief sought before the court on this attendance was limited to the following:
An Order that nullifies the resolutions of a select group of shareholders of River Green (Thunder Bay) Inc. that removed the Plaintiff and Jordan Smith as Officers and Directors of River Green (Thunder Bay) Inc, which were made on October 14, 2021, without notice given to the Plaintiff, and that appointed Randall Stephen MacLeod as the sole Director and President and Secretary of River Green (Thunder Bay) Inc. (the "Corporation");
An Order that injuncts Randall Stephen Macleod from acting as a Director and Officer or acting in any other capacity on behalf of River Green (Thunder Bay) Inc.
[7] The other relief requested in the amended notice of motion, and which was included in the original motion of February 2021, remains outstanding. I will make further directions in regard to that relief at the conclusion of these reasons.
The Present Relief Requested
[8] In my view, for the relief requested on this attendance, there are a number of deficiencies in Olson’s materials of a procedural nature.
[9] First, there is no originating process commenced by Olson that contains a prayer for relief in the nature of what is being sought by him on the motion today. Second, of the “select group of shareholders” (hereinafter referred to as the “Selects”) who participated in the resolutions that Olson now wants “nullified”, only James Peterson is a party to the within action. There are three individual members of the Selects, shareholders Salvatore Romeo, Donald Perry and Greg Troilo, who are not parties to this action. Third, MacLeod against whom an injunction is sought, is not a party to these proceedings. MacLeod attended today but left it to Mr. O’Sullivan to make submissions on his behalf in the interests of not being duplicative.
[10] I am concerned that in the normal course, the failure to include a party in an originating process when subsequently orders are being sought that might affect that party(s) personal interests, raises procedural fairness issues. In this litigation because of my involvement, it seems to me there has been an emphasis on procedural mechanics when those circumstances favour the party advocating adherence to the rules. On the other hand, I have observed in my course of case managing of all of the River Green files, conduct on behalf of a number of parties where all form and adherence to the Rules of Civil Procedure “goes out the window” if it interferes with whatever a particular party wants the court to do on any given attendance.
[11] Despite all these problems, I see it as in the interests of all parties to deal with this motion on the basis of the material filed. Further I see it as appropriate to adjudicate on Olson’s requests for relief despite the procedural irregularities of his materials.
Disposition
[12] In this matter, Olson seeks to “nullify” three resolutions purported to be passed on October 14, 2021, by the Selects. For ease of reference, I call them Resolutions A, B and C. I will recite the text of each specific resolution. All three resolutions had a common introductory “background” recitation which I will set out first.
BACKGROUND:
A. The Corporation is a corporation organized and operating in accordance with the laws of the Province of Ontario.
B. The Corporation adopted by-laws on 24th November 2018, (the "By-Laws").
C. The Corporation has issued 48 Class A Common Shares, each of which is entitled to a single shareholder vote.
D. The Corporation has issued 25.78 Class B Common Shares, each of which is entitled to a single shareholder vote.
E. Pursuant to the By-Laws, and the Articles of Incorporation, each vote for Class A, and Class B shall have the same weight and authority.
F. The Articles of Incorporation of the Corporation do not permit the voting of a fractional share.
G. A majority of Shareholders for the Corporation is equal to 37.0 or greater.
H. The Shareholders desire to make certain resolutions.
I. The Ontario Business Corporations Act (the "Act"), Section 104 provides for shareholders resolutions in lieu of meetings.
J. The Act, Section 110 provides for shareholders to appoint proxies to act in their place.
K. Duly executed proxies have been executed and documented herein.
[13] On the face of the text of the resolutions I could not discern which came first in time as they are all dated October 14, 2021. I think logically they probably went in the A, B, C order I am naming them in. The express resolutions contained in each are as follows:
Resolution A
In accordance with Section 2.10 of the By-Laws, and the Act be it resolved that Randy MacLeod, of Goderich Ontario, is appointed as a Director of the Corporation, effective immediately as supported by the attached consent, which is in compliance with Section 2.04, and 2.06 of the By-Laws.
Be it resolved that Randy MacLeod terminate all officer titles from all former directors, employees, consultants and any other persons associated with the Corporation.
Be it resolved that Randy Macleod, of Goderich Ontario, shall thereafter appoint himself the title of President, and Secretary.
In accordance with Health Canada obligations, be it resolved that Randy Macleod shall attach his CTLS number to the Corporation under the title of RPIC.
Be it resolved that Randy Macleod shall forthwith submit the applicable Form 1 required by the Ministry of Government and Consumer Services as soon as practically possible.
Resolution B
- Be it resolved that sole Director, Randall Stephen Macleod, is instructed to contact any and all lawyers of the Corporation and suspend WITH IMMEDIATE EFFECT any and all actions, lawsuits, or legal proceedings where the Corporation is the Plaintiff/Applicant/Complainant.
Resolution C
In accordance with Section 2.08 of the By-Laws, and the Act, be it resolved that Jordan Smith, of Thunder Bay Ontario, be removed as a Director of the Corporation, effective immediately.
In accordance with Section 2.08 of the By-Laws, and the Act, be it resolved that Robert Bradley Olson, be removed as a Director of the Corporation, effective immediately.
[14] Based on my experience as the case management judge, I am also aware there is another motion in a related action involving River Green (2711463 Ontario Inc. et al v. River Green (Thunder Bay) Inc. et al – CV-21-0264-00) where the authority to have certain shares voted by proxy in respect of these resolutions is challenged. For the purposes of this motion, I am of the view that this other motion can await another day as its resolution will not impact the result I am going to order here.
[15] Olson asserts the resolutions were passed in a manner that violates the Ontario Business Corporations Act R.S.O. 1990, c. B.16 as amended (the Act). As the resolutions were not passed in accordance with the Act, Olson submits this permits the Court to “nullify” the resolutions. Olson argues the Court has jurisdiction to make this “nullifying” relief requested pursuant to section 107(1) of the Act which states;
107 (1) A corporation, shareholder or director may apply to the court to determine any controversy with respect to an election or appointment of a director or auditor of the corporation. R.S.O. 1990, c. B.16, s. 107 (1).
Court order
(2) Upon an application under this section, the court may make any order it thinks fit including, without limiting the generality of the foregoing,
(a) an order restraining a director or auditor whose election or appointment is challenged from acting pending determination of the dispute;
(b) an order declaring the result of the disputed election or appointment;
(c) an order requiring a new election or appointment and including in the order directions for the management of the business and affairs of the corporation until a new election is held or appointment made; and
(d) an order determining the voting rights of shareholders and of persons claiming to own shares.
[16] The responding parties submit the Court does not have the jurisdiction to make any order as requested on this motion. I disagree. This is an oppression case. The relief requested arguably falls within the general relief sought against alleged oppression made initially by Olson in the originating process commenced in October 2020. The Act is remedial legislation. It should be broadly interpreted. Strictly speaking section 107(1) talks about a party advancing claims by way of application and not by way of motion. Long before this return date, Olson should have amended his pleading to specify he would be seeking interim and permanent relief as now requested. However, in the interests of moving this complex matter forward and buoyed by the broad remedial powers endowed by the Legislature on the Court by directing in section 107(2) that “the court may make any order it thinks fit”, I am proceeding to dispose of the two aspects of Olson’s motion placed before me on this attendance.
[17] Olson specifically argues that the provisions of section 104(1) and 123(2) of the Act were violated in the making of the resolutions outside of a regular or special meeting of the shareholders. Olson argues that at least a portion of the actions taken sought to remove him from his positions as Director, the Selects were required to give him express notice of their intentions and allow him to respond. Their failure to do so should lead to all the resolutions made on October 14, 2021, being “nullified”.
[18] The responding parties argue that section 104 confers no such right on any director. The responding parties submit the resolutions were validly made.
Section 104(1) states:
104 (1) Except where a written statement is submitted by a director under subsection 123 (2) or where representations in writing are submitted by an auditor under subsection 149 (6),
(a) a resolution in writing signed by all the shareholders or their attorney authorized in writing entitled to vote on that resolution at a meeting of shareholders is as valid as if it had been passed at a meeting of the shareholders;
(b) a resolution in writing dealing with all matters required by this Act to be dealt with at a meeting of shareholders, and signed by all the shareholders or their attorney authorized in writing entitled to vote at that meeting, satisfies all the requirements of this Act relating to that meeting of shareholders; and
(c) in the case of a corporation that is not an offering corporation,
(i) a resolution in writing signed by the holders of at least a majority of the shares or their attorney authorized in writing entitled to vote on that resolution at a meeting of the shareholders is as valid as if it had been passed by ordinary resolution at a meeting of the shareholders, and
(ii) a resolution in writing dealing with all matters required by this Act to be dealt with at a meeting of shareholders where all business to be transacted at the meeting is to be passed by an ordinary resolution, and signed by the holders of at least a majority of the shares or their attorney authorized in writing entitled to vote on that resolution at a meeting of the shareholders, satisfies all the requirements of this Act relating to that meeting of shareholders
[19] Section 104(3) provides;
Notice to shareholders
(3) Within 10 business days after a resolution referred to in clause (1) (c) is signed by the holders of at least a majority of the shares or their attorney authorized in writing entitled to vote on that resolution at a meeting of the shareholders, the corporation shall give written notice of the resolution to the shareholders entitled to vote on the resolution who did not sign it. 2020, c. 34, Sched. 1, s. 3 (2).
[20] The responding parties pointed out that section 104(1)(c) and 104(3) are relatively new additions to the Act being given Royal assent in June of 2021.
[21] Section 123 of the Act provides:
Entitlement of director
123 (1) A director of a corporation is entitled to receive notice of and to attend and be heard at every meeting of shareholders. R.S.O. 1990, c. B.16, s. 123 (1).
Idem
(2) A director who,
(a) resigns;
(b) receives a notice or otherwise learns of a meeting of shareholders called for the purpose of removing him or her from office; or
(c) receives a notice or otherwise learns of a meeting of directors or shareholders at which another person is to be appointed or elected to fill the office of director, whether because of the resignation or removal of the director or because his or her term of office has expired or is about to expire,
is entitled to submit to the corporation a written statement giving the reasons for the director’s resignation or the reasons why he or she opposes any proposed action or resolution, as the case may be. R.S.O. 1990, c. B.16, s. 123 (2).
[22] The responding parties submit Olson had no right to be notified of the intention of the majority of the shareholders to pass the resolutions. I disagree with this submission specifically as it relates to Resolution C. In my view, the responding parties’ submission ignores the language contained in the first sentence of section 104(1).
[23] Section 104(1) creates an express exception to the ability of all shareholders, in the case of resolutions referred to in 104(1)(a) and (b), and a majority of shareholders in a non offering corporation as provided in subsection (c), to pass resolutions in writing where there has been a written statement provided by a director under section 123(2).
[24] The provisions of section 123(2) deals with the specific circumstance of resignations of directors or resolutions of shareholders to remove directors from office. It gives a director the right to submit to the corporation “a written statement giving the reasons for the director’s resignation or the reasons why he or she opposes any proposed action or resolution, as the case may be”. In my view Section 104(1) cannot be utilized by shareholders without regard to section 123(2) where the resolutions involve the resignation or removal of a director. As section 123(2) speaks to occasions where a director is about to be removed it seems to me that any attempt to utilize the provisions of section 104 (a)(b) or (c) to remove a director necessarily requires the director to be given reasonable notice of the intentions of the shareholder.
[25] This is not an onerous requirement. It makes business sense. A director is a significant stakeholder in any corporate structure. They are granted the power from section 115(1) of the Act to manage or supervise the management of the business and the affairs of a corporation subject to unanimous shareholder agreement. They are given the ability to address the shareholders in writing. However, that power to address does not include a power to nullify or veto resolutions made by the shareholders.
[26] The bylaws of River Green provide for the removal of directors. By law 2.08 states:
2.08 Removal
Subject to the provisions of the Act, the shareholders may, by ordinary resolution passed at a meeting of shareholders or otherwise pursuant to subsection 104(1) of the Act, remove any director from his or her office before the expiration of his or her term and may, by a majority of the votes cast at a meeting of shareholders or otherwise pursuant to subsection 104(1) of the Act, elect any person in his or her place for the remainder of his or her term.
[27] Removal of a director of River Green is still subject to the Act and specifically section 104(1). Also, the bylaw contemplates a meeting of shareholders be called when a director is to be removed.
[28] The responding parties point out the bylaws were created prior to the new provisions of the Act sections 104(1)(c) and 104(3) being enacted. Apparently, the bylaws have not been changed to reflect the new statutory provisions. None of the parties to this motion provided the Court with any of the Legislative background or policy reasons for these new additions to the Act. Section 104(1)(c) appears to eliminate the need for a shareholder meeting for resolutions passed by a majority of shareholders for non-offering corporations. Nevertheless, the prerequisite connection to section 123(2) is maintained in section 104(1). It is a trite principle of statutory construction that the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament. Parliament created an exception to the ability of shareholders to pass resolutions without the necessity of a shareholder meeting. One of those occasions is where the resolution involves the removal of a director.
[29] Counsel for Olson indicated he could locate only one authority dealing with an interpretation of section 123(2). This is a decision of Forestell J. in Kaiser v. Borilla Holdings Inc. 2007 18729 (ONSC). In that matter a proper oppression remedy application had been commenced and in response to an interim motion Forestell J. stated at paragraph 8:
[8] Sections 122 and 123 of the Business Corporations Act set out the manner in which a director can be removed from office. Notice must be given to the director of the shareholder meeting at which the removal is to be proposed and the director must be given an opportunity to submit to the corporation a written statement giving the reasons why s/he opposes the removal.
[30] Based on the above, I find the procedure used by the Selects for Resolution C in regard to Olson was contrary to section 104(1) of the Act. Given the express connection of section 123(2) to the provisions of section 104(1), this failure to follow the Act in respect of a resolution directed at the removal of a director cannot be allowed to stand.
[31] A meeting of shareholders was not called. Olson had no notice of the intentions of the Selects that he was to be removed. He was not afforded the procedural opportunity to address the shareholders in writing of his opposition to their actions. He should have been given that opportunity given what was at stake for him personally.
[32] By virtue of section 107, I have a broad discretion to make whatever order that I think fit in the circumstances. In this case I am ordering that Olson be reinstated as a Director of River Green effective December 2, 2022.
[33] The other person who was impacted by Resolution C was Jordan Smith. Mr. Smith is not a party to this action. I could not locate any pleadings in Caselines where he is a plaintiff. There are two cases where he appears to be a defendant but no materials were filed in any bundles connected to those files. I do not see it as my role to go around looking for files when the parties themselves have not seen fit to place them before the Court. Jordan Smith did have counsel appear on this attendance. Out of courtesy to his solicitor I allowed him to make brief representations on the merits of Olson’s motion. Unsurprisingly he was supportive of me making an order as requested by Olson.
[34] My reluctance to make orders against non-parties in other River Green litigation on previous occasions (see 2801100 Ontario Inc. v. River Green (Thunder Bay) Inc., 2021 ONSC 5972) has persuaded me not to make a similar order in respect of Jordan Smith on this matter. If Jordan Smith has commenced an originating process which claims relief in the nature of what I am granting to Olson today, then he should seek consent to an order from the opposing parties. Failing that he has his remedy to bring his own motion.
[35] I am also concerned from a practical perspective that reinstating Jordan Smith on the basis of the materials I have before me will invite further unnecessary attendances and would add yet another degree of complication to this matter.
[36] I am not persuaded to grant any further relief to Olson on this attendance today for the following reasons.
[37] Despite the flaws in the procedure to pass resolutions on October 14, 2021, the substance of Resolutions A and B do not directly affect Olson. The resolutions appoint MacLeod as a director and require him to take certain steps. I do not see how this adversely affects Olson. He started this litigation against River Green in October 2020. How he remained a director of a company he was suing for over a million dollars strikes me as incongruous. In my view, nullifying these particular resolutions do not achieve anything practical for either the litigation or River Green.
[38] Practically, the direction given by Resolution A to MacLeod concerning ceasing any litigation involving River Green appears to have been completely ineffectual. River Green had a lawyer who was actively taking various positions on different River Green files at least until the removal of River Green’s counsel, Mr. Singh, as of November 22, 2022. River Green is now subject of a bankruptcy application. Olson has advocated that the bankruptcy cannot go forward until the director question is resolved. Based on what I have done now I disagree with this assertion.
[39] It seems to me that Olson and MacLeod are going to have to figure out a way to appoint counsel if River Green wants to oppose the bankruptcy proceeding that is now scheduled to continue on March 1, 2023. And for the benefit of that proceeding, short of a major return of the pandemic or somebody significant to the proceeding being in the hospital, we will be going ahead that day with or without somebody acting for River Green.
[40] Otherwise, I have no idea what any other party is doing (except for the motion in Court file CV-21-0264-00 noted above) to push their matters forward. Olson may not like what the Selects have done, but this is not sufficient for me to intervene any further in the affairs of this company at least based on the materials I have before me now and the less than satisfactory state of Olson’s pleadings.
[41] Also, I am not going to make any orders in the nature of an injunction against MacLeod. For starters he is a non-party to this action. Secondly the material and arguments placed before the Court by Olson did not satisfy me that the usual three-part test for injunctive relief set out in RJR-MacDonald Inc. v. Canada, 1994 117 (SCC), [1994] 1 S.C.R. 311 at para. 48 has been made out. Olson has not established that in respect of permanently enjoining MacLeod from continuing to act as a Director of River Green that:
a. There is a serious issue to be tried or,
b. Olson would suffer irreparable harm if the injunction is refused; and
c. The balance of convenience favours granting an injunction.
[42] Olson’s material was devoid of any reference or organization that would remotely connect what facts he asserted to an application of the RJR-McDonald framework. I am ordering Olson back as a director. There is nothing to suggest he can or should enjoy that position to the exclusion of any other people.
[43] There is now no serious issue to be tried about MacLeod being a director at least as it impacts Olson.
[44] I do not see how Olson was or is personally irreparably harmed by MacLeod acting as a Director. All the references to personal conflict alleged by Olson in the material relate to River Green and not Olson personally. River Green is not asking for the injunctive relief.
[45] I also have no evidence about why the balance of convenience favours granting a permanent injunction against MacLeod.
[46] The balance of relief claimed today is dismissed without costs. There will be no costs awarded to Olson from anybody for one issue in which he was successful.
Future attendances
[47] I have practical concerns for all these River Green files going forward. I am sure the Selects will continue their campaign to direct whatever is left of River Green in a manner that is advantageous to themselves and which will be immediately and correspondingly opposed by Olson and others aligned with his position. If Jordan Smith was also ordered reinstated as a Director, I expect there would be an attempt to simply elect more directors. That may occur anyway. I understand from reviewing the bylaws and the corporate filings provided in this matter that up to ten directors may be chosen for River Green.
[48] I hope the parties get the message that they have to take a long hard look at their respective positions and begin to make some realistic decisions about where all this litigation is heading. This file and a number of these River Green files are in very disorganized state. I am uncertain that allowing continued access to frequent case conferencing is having the desired effect of allowing the matters to be resolved or adjudicated in a just, most expeditious and least expensive manner.
[49] I had hoped that given the number of counsel involved in these cases, particularly senior counsel, that by now someone would have attempted, like in other complex commercial cases, to “take carriage” of the files and attempt to give the court a road map to resolution or trial. This is not an exercise in blame. It is a statement of my assessment of the state of all these matters after 18 months.
Further Relief in Olson’s Outstanding Motion
[50] I observe that some of the additional relief requested by Olson does not readily appear to me to be relief I would be prepared to entertain on an interim motion except if it were framed as a motion for summary judgment. The complex nature and the “continuing to evolve” fact pattern of these cases do not obviously cry out “no genuine issues for trial”.
[51] Other relief such as a request for security for costs and an order for interim disbursements as provided in section 249 of the Act strike me as relief that might be granted after an interim motion attendance. Accordingly, in addition to reinstating Olson as a director of River Green, I direct that Olson obtain a case conference date from the trial coordinator with all parties against whom he seeks interim or permanent relief for the balance of the relief claimed in his fresh as amended notice of motion dated November 29, 2021. The October 6, 2021 order I made should be revisited as a guide for that next attendance. The upcoming case conference will be scheduled on or after March 31, 2023. A timetable and a possible date for a hearing will be canvassed at that conference.
[52] Order to go reinstating Olson as a Director of River Green effective December 2, 2022. Balance of relief requested on this attendance is dismissed without costs.
“original signed by” The Hon. Mr. Justice F.B. Fitzpatrick
Released: December 13, 2022
COURT FILE NO.: CV-20-0366-00
DATE: 2022-12-13
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Robert Bradley Olson
Plaintiff
- and -
River Green (Thunder Bay) Inc., Matt Pearson, James Elof Peterson, 1401366 Ontario Ltd., o/a Plymouth Landing, 2801100 Ontario Inc. and Sophia’s Garden (Artisan) Inc.
Defendants
JUDGMENT ON MOTION
Fitzpatrick J.
Released: December 13, 2022