Citation: Giffin v. Soontiens, 2010 NSSC 438
Date: 20101203
Docket: Hfx No. 292594
Registry: Halifax
Between:
GORDON GIFFIN
Plaintiff
v.
NICOLE SOONTIENS, ILONA MACALPINE, XL ELECTRIC LIMITED, a body corporate, HUNTEC LIMITED, a body corporate, and CNCA HOLDINGS LIMITED, a body corporate
Defendants
Judge: The Honourable Associate Chief Justice Deborah K. Smith
Heard: July 7th and July 8th, 2010
Final Written By the Plaintiff: July 16th, 2010
Submissions: By the Defendants: July 23rd, 2010
Counsel: John A. Keith, Esq., for the Plaintiff
George W. MacDonald, Q.C., for the Defendants
By the Court:
[1] This case involves what is commonly known as an oppression remedy claim brought by Gordon Giffin against two of his cousins, Nicole Soontiens and Ilona MacAlpine, as well as a number of companies that they hold an interest in. The specific matter before me involves a motion by Mr. Giffin against XL Electric Limited for interim costs pursuant to s. 7(4) of the Third Schedule of the Nova Scotia Companies Act.
[2] The facts of the case are quite detailed and are set out in the pleadings and the materials that have been filed. At the heart of the matter lies a dispute between Mr. Giffin, his two cousins and Mr. Giffin’s uncle, Tibor Berta. Mr. Berta is Ms. Soontiens and Ms. MacAlpine’s father. While he is not a party to the action he is involved in the matters that give rise to this lawsuit.
[3] Tibor Berta owned and controlled a company known as Western Electrics (2004) Incorporated (hereinafter referred to as “Western Electrics”). Mr. Giffin, Ms. Soontiens and Ms. MacAlpine were, at one time, all employed with Western Electrics. According to Ms. Soontiens’ evidence this company is no longer in active operation.
MR. GIFFIN’S VERSION OF EVENTS
[4] According to Mr. Giffin, in early 1998, Mr. Berta approached Mr. Giffin, Ms. Soontiens and Ms. MacAlpine (who were then working for Western Electrics) with the idea of starting a new electrical contracting business (hereinafter referred to as “XL Electric Limited”). Mr. Giffin says that it was anticipated that this new company could operate free of the union obligations associated with Western Electrics and could eventually replace Western Electrics in the market. Mr. Giffin, Ms. Soontiens and Ms. MacAlpine agreed to pursue this new venture and, on October 2nd, 1998, XL Electric Limited was incorporated and registered. According to Mr. Giffin, he was appointed one of the company’s three directors at the time of incorporation.
[5] Mr. Giffin says that he and his two cousins agreed that they would be treated as equals in the new business. Despite this, on October 4th, 1999, Mr. Giffin, Ms. Soontiens, Ms. MacAlpine and XL Electric Limited entered into a written Shareholder Agreement which provided Ms. Soontiens and Ms. MacAlpine each with 51 Class A Special Voting Common Shares, 10 Class B Common Shares and 34 Class C Common Shares in XL Electric Limited. Mr. Giffin was only allotted 10 Class B Common Shares in the company. All of the parties were represented by the same law firm at the time that the Shareholder Agreement was entered into.
[6] Mr. Giffin provides an explanation for this unequal share structure. He says that Mr. Berta offered to loan XL Electric Limited startup capital of approximately $85,000.00. As security for this loan, it was agreed that Mr. Berta would have a form of equity in the new company. Mr. Giffin says that Mr. Berta’s equity interest had to be taken through his daughters (Ms. Soontiens and Ms. MacAlpine) in order to maintain a degree of separation between Mr. Berta (who owned the unionized Western Electrics) and XL Electric Limited (which was non-unionized). Mr. Giffin says it was for this reason that Ms. Soontiens and Ms. MacAlpine were given greater shareholdings than himself. Mr. Giffin also states that Mr. Berta’s loan was to be repaid once the new company was able to do so and that immediately upon repayment of the loan the additional shares that were held by Ms. Soontiens and Ms. MacAlpine would be “cancelled” or “equalized”. Mr. Giffin further deposed that despite the terms of the written Shareholder Agreement he was assured by both Ms. Soontiens and Ms. MacAlpine that their “underlying commitment to equality” would be honoured.
[7] According to Mr. Giffin’s evidence, XL Electric Limited developed successfully as a company and Western Electrics became less and less active in the market. Mr. Giffin states that for years he, Ms. Soontiens and Ms. MacAlpine were treated as equals in the company including the sharing of the company’s profits. According to Mr. Giffin, in 2004, Mr. Berta told Ms. Soontiens and Ms. MacAlpine to sell to Mr. Giffin (at a nominal price) sufficient Class C Common Shares to equalize the ownership of these shares. Mr. Giffin says that he saw this as the beginning of the process whereby Mr. Berta’s loan would be repaid and Mr. Giffin’s equal interest in the company would be formally recognized.
[8] According to Mr. Giffin, XL Electric Limited was becoming increasingly profitable. He suggests that as XL’s prospects and profits improved Ms. Soontiens, Ms. MacAlpine and Mr. Berta began to take steps which were unfairly prejudicial to his interests and which were contrary to the agreements that Mr. Giffin says the parties entered into when the company was formed. In particular, Mr. Giffin alleges that Ms. Soontiens and Ms. MacAlpine began to exploit their majority on the Board of Directors to declare unequal dividends for themselves. Further, according to Mr. Giffin – Mr. Berta, Ms. Soontiens and Ms. MacAlpine eventually indicated that they had no intention of altering the Class A share structure to equalize ownership between Mr. Giffin and his two cousins. Mr. Giffin alleges that Ms. Soontiens and Ms. MacAlpine appropriated to themselves a disproportionate share of the company which he had helped to establish and grow for over eight years. Mr. Giffin says that ultimately he felt that he had no option but to resign from XL Electric Limited which he did effective March 30th, 2007. Shortly thereafter, Ms. Soontiens and Ms. MacAlpine voted to remove Mr. Giffin as a Director of XL Electric Limited and a related holding company, Huntec Limited. Mr. Giffin says that since that time he has been denied access to various corporate and financial records.
[9] On February 27th, 2008, Mr. Giffin filed an Originating Notice (Application Inter Partes) alleging, inter alia, oppression and seeking relief including relief under the Third Schedule of the Nova Scotia Companies Act. This application was subsequently converted to an action.
[10] In addition to XL Electric Limited, Mr. Griffin has sued in relation to two other companies known as Huntec Limited and CNCA Holdings Limited.
[11] According to Mr. Giffin’s evidence, in 2000, Mr. Giffin, Ms. Soontiens and Ms. MacAlpine bought from Mr. Berta all the shares in a shell company called Huntec Limited. This company was used as a corporate vehicle to purchase a property located at 4 Waddell Drive in Dartmouth, Nova Scotia. XL Electric Limited eventually operated from this property for a period of time. Mr. Giffin says that as Huntec was only going to be used as a holding company, no financial support was required from Mr. Berta in relation to this second company and accordingly there was no need to repeat the share structure that had been used for XL Electric Limited. Accordingly, Huntec shares were divided equally between Mr. Giffin, Ms. Soontiens and Ms. MacAlpine. Mr. Giffin says that this share arrangement “confirmed the reality that existed throughout our business arrangements including XL Electric.”
[12] Mr. Giffin says that by 2005, XL Electric Limited had outgrown 4 Waddell Drive and they eventually moved from this property. In 2009, with the consent of all shareholders, 4 Waddell Drive was sold. The net proceeds of that sale are presently held in an interest bearing trust account as the parties have been unable to agree on how these funds should be dispersed.
[13] According to Mr. Giffin, after he resigned from XL Electric Limited and was removed from the Board of Directors, Ms. Soontiens and Ms. MacAlpine incorporated a new company called CNCA Holdings Limited. This company eventually purchased a property located at 36 Topple Drive in Dartmouth, Nova Scotia. Mr. Giffin alleges that a portion of the purchase price of this property was paid using XL Electric Limited funds and that use of this cash and the transaction “generally” occurred without his knowledge or consent. In addition, he alleges that CNCA Holdings Limited used XL Electric Limited’s credit to complete this transaction – again without his knowledge or consent.
[14] The Statement of Claim filed in support of Mr. Giffin’s action has been amended a number of times. In the most recent amended Statement of Claim filed with the Court the Plaintiff seeks the following relief:
An Order:
(a) Requiring XL Electric to repay to MacAlpine and Soontiens or, alternatively, Berta, any and all amounts necessary to equalize XL Electric’s indebtedness to each of MacAlpine, Soontiens and Giffin;
(b) Requiring MacAlpine and Soontiens to repay and/or reverse any and all unequal dividends declared and/or paid under XL Electric’s Class A Shares from 2004 forward;
(c) Requiring Soontiens and MacAlpine to repay to XL Electric any and all monies paid to Kevin Soontiens between 2004 and March, 2007;
(d) An order setting aside the Shareholders Agreement dated October 4, 1998;
(e) An order requiring MacAlpine and Soontiens to surrender for cancellation all of their Class A Special Voting shares so as to permanently enshrine and preserve the principle of equality as between the Plaintiff Giffin and the Defendants Soontiens and MacAlpine;
(f) An order requiring MacAlpine and Soontiens to purchase the Plaintiff’s shares in Huntec for fair value together with an order , if necessary, directing that a certified business valuator be appointed to determine the fair value of said shares;
(g) An order requiring MacAlpine and Soontiens to purchase the Plaintiff’s shares in XL Electric for fair value together with an order, if necessary, directing that a certified business valuator be appointed to determine the fair value of said shares according to such instructions as the Court may provide with respect to how fair value is determined;
(h) Damages for the misappropriation of corporate opportunities by CNCA and including an order requiring CNCA to return all monies transferred by XL Electric to CNCA related to the purchase of the lands and buildings at 36 Topple Drive;
(i) Damages for the misappropriation of company monies to finance MacAlpine’s and Soontiens’ response to these complaints and an order requiring MacAlpine and Soontiens to immediately repay to XL Electric any and all monies taken from the company in respect of this matter;
(j) Alternatively, damages for misrepresentation or breach of contract;
(k) Pre-judgment interest;
(l) Costs; and
(m) Such further relief as this Honourable Court deems just.
MS. SOONTIENS’ VERSION OF EVENTS
[15] The Defendants deny Mr. Giffin’s allegations. Ms. Soontiens has filed two affidavits in response to this motion. In her affidavits she denies, inter alia, that her father (Tibor Berta) loaned money to XL Electric Limited, she denies that there was any agreement between the shareholders of XL Electric Limited other than the Shareholder Agreement dated October 4th, 1999 and she denies that either she or Ms. MacAlpine ever intended or agreed to be equal partners with Mr. Giffin in XL Electric Limited.
[16] Ms. Soontiens states that in or about 1998, her father (Mr. Berta) inquired as to whether she and her sister (Ms. MacAlpine) were interested in inheriting Western Electric[s]. She says that she and her sister declined this offer. She says that in lieu of inheriting this business her father gifted $47,500.00 to both she and her sister to start their own business. Ms. Soontiens says that she and her sister chose to invest these gifted funds to start XL Electric Limited. She says that she and her sister informed Mr. Giffin of their plans to start this new company and invited him to participate in the business as a minority shareholder and employee.
[17] Ms. Soontiens says that the shares in XL Electric Limited were structured to reflect the significant difference between the investments made by the three shareholders. She further says that the Shareholder Agreement signed on October 4th, 1999, is the entire agreement between the shareholders regarding the share structure of XL Electric Limited and says that there was never any agreement, express, implied or otherwise, that the parties would ever equalize the share structure of this company.
[18] Ms. Soontiens says that Mr. Giffin was provided with a copy of the Shareholder Agreement prior to signing it and that he was encouraged to obtain independent legal advice in relation to this document but he declined to do so.
[19] In relation to Huntec, Ms. Soontiens states that in or around 1997 she purchased this company from her father and became the sole shareholder, Director and Officer of Huntec. She says that in or around 2000 (when it was decided that Huntec would be used to purchase the property from which XL Electric Limited would operate) she sold one-third of the shares in Huntec Limited to both her sister and Mr. Giffin so that they would each own an equal interest in this company.
HISTORY OF THE PROCEEDINGS
[20] In the fall of 2009, Mr. Giffin filed a Notice of Motion seeking an Order for disclosure of financial information pertaining to the payment of the Defendants’ legal costs, the winding up of Huntec Limited and interim payment of the Plaintiff’s legal costs in the amount of $139,000.00. The motion was heard before me on November 19th, December 9th and 18th, 2009. At the time of the motion, I ordered Ms. Soontiens to answer questions concerning the payment of the Defendants’ legal costs. In an oral decision rendered on December 31st, 2009, I declined to order the winding up of Huntec Limited and I dismissed the Plaintiff’s motion for interim costs in the amount of $139,000.00. At the time of that decision I stated:
As indicated previously, the ability of the Court to order the payment of interim costs is unique and is designed to insure that a claimant with a case of sufficient merit to warrant pursuit is not denied the opportunity to present the claim. Mr. Giffin has not provided me with sufficient information concerning his ability to borrow funds in order for me to be satisfied, on a balance of probabilities, that he will be precluded from pursuing this claim without receiving the interim costs that have been requested. Accordingly, his motion for interim costs will be dismissed.
As is clear from the above, Mr. Giffin’s financial situation is not static. Some of the evidence that I have relied on in coming to this decision was only available within the last few weeks and it is possible that his financial situation may change........Nothing in this decision prevents the Plaintiff from bringing a further motion pursuant to s. 7(4) of the Third Schedule of the Company’s Act upon filing further and updated financial information, including additional information concerning his ability to borrow and service a loan to finance this litigation. In my view, such a motion could be made during or after the trial. I will remain seized of the matter for the purpose of such a hearing should the Plaintiff choose to proceed with a further motion.
[21] The trial of Mr. Giffin’s action commenced on January 11th, 2010 but was subsequently adjourned at the request of the Plaintiff due to late documentary disclosure by the Defendants. The trial judge ordered further disclosure and additional discovery examinations. The trial is now scheduled to reconvene on Monday, January 17th, 2011.
[22] The Plaintiff has now filed a further motion for interim costs. In this motion, the Plaintiff is seeking an interim payment of $275,000.00 which represents $145,000.00 owing to the Plaintiff’s solicitor (as of the date of the motion), $30,000.00 in unbilled work in progress (as of the date of the motion) and the sum of $100,000.00 which is the estimate that the Plaintiff has received from his solicitors for bringing this matter to trial.
ANALYSIS AND CONCLUSIONS
[23] As indicated previously, this motion is brought pursuant to s. 7(4) of the Third Schedule of the Nova Scotia Companies Act which provides:
In an application made or an action brought or intervened in under Section 4, 5 or 6 hereof, the court may at any time order the company or its subsidiary to pay to the complainant interim costs, including legal fees and disbursements, but the complainant may be held accountable for such interim costs upon final disposition of the application or action.
[24] In the action that Mr. Giffin has filed, he is seeking, inter alia , relief pursuant to s. 5 of the Third Schedule of the Companies Act.
[25] Section 7(4) of the Third Schedule of the Companies Act does not provide any guidance as to when an interim Order for costs should be granted. Case law has developed, however, in various provinces interpreting provisions similar to the one before me.
[26] The first case that counsel have referred me to is Wilson v. Conley, [1990] O.J. No. 2283 (Ont. Ct. J. (Gen.Div.)) where Rosenberg, J. (as he then was) noted that there were no precedents or literature to assist him regarding the criteria to be used in exercising his discretion under a similar provision of the Ontario Business Corporations Act. He concluded that the considerations applicable on the motion before him were (1) that the Applicant was in financial difficulty; (2) that the financial difficulty arose out of the alleged oppressive actions of the Respondents; and (3) that the Applicant had made out a strong prima facie case. In the circumstances of that case, the Court was prepared to grant the Applicant’s requested relief. The Respondent corporation was ordered to pay interim costs to the Applicant in the amount of $20,000.00, reserving the right of the Applicant to return to Court at a later date to seek a further payment.
[27] I note that in Wilson v. Conley, supra, Rosenberg, J. did not indicate that these three criteria were necessary in order to grant interim costs under the Ontario Business Corporations Act. He simply said that these three considerations were “applicable” on the motion before him.
[28] Approximately one year later the Ontario Court of Justice dealt with this issue again in the case of Alles v. Maurice (1992), 5 B.L.R. (2d) 146 (Ont. Ct. J. (Gen. Div. Com. List.)). Blair, J. (as he then was) reviewed Justice Rosenberg’s decision in Wilson v. Conley, supra, and, in particular, the suggestion by Justice Rosenberg that he was satisfied that the Applicant’s financial difficulties arose out of the alleged oppressive actions of the Respondents and, as well, that the Applicant had made out a strong prima facie case. Justice Blair in Alles, supra, held that there was nothing in the Ontario Business Corporations Act that required an applicant to demonstrate a cause and effect relationship between the conduct of the respondents and the need for funding — nor was there anything in the language of the statute which required an applicant to show a strong prima facie case. Justice Blair concluded at ¶19:
In the end, I would prefer to say simply that an applicant for relief under s. 248(4) need establish that there is a case of sufficient merit to warrant pursuit and that the applicant is genuinely in financial circumstances which but for an order under s. 284(4) [sic] would preclude the claim from being pursued.
[29] In Alles v. Maurice, supra, the Respondents were ordered to pay interim costs to the Applicant in the amount of $55,000.00 reserving to the Applicant the right to return to court at a later date to apply for a further Order if necessary.
[30] The provision of the Ontario Business Corporations Act that Blair, J. was considering in Alles v. Maurice, supra, is, in substance, the same as s. 7(4) of the Nova Scotia Companies Act.
[31] Alles v. Maurice, supra, was referred to with apparent approval by this Court in McKay v. Munro, [1992] N.S.J. No. 519, where Goodfellow, J. was dealing with an application for interim costs in the amount of $392,000.00 pursuant to s. 7(4) of the Third Schedule of the Nova Scotia Companies Act. In that case Goodfellow, J. laid out a number of principles which are applicable to this type of motion. They include, inter alia;
(1) An applicant who seeks interim costs must establish, on a balance of probabilities, that such should be awarded;
(2) The costs received must be for the purpose of prosecuting the action and not for other purposes;
(3) An application for interim costs should not be determined on the imbalance or apparent inequity of available family resources between the parties;
(4) Interim costs is an unusual remedy available to make certain that no litigant with a claim of some apparent merit is denied the opportunity to present such claim;
(5) An applicant should not be called upon to deregister RRSP’s, sell her home or unreasonably reduce her standard of living in order to pursue an action; and
(6) Before seeking an Order for interim costs an applicant should look to her own resources first to see the extent to which she can meet the financial costs of the litigation. This includes a consideration of the applicant’s ability to reasonably borrow funds to finance the litigation.
[32] In McKay v. Munro, supra, the Court found that the applicant had resources available to her to fund the litigation and also noted that no evidence had been produced concerning the applicant’s ability to borrow funds to finance the litigation. Accordingly, the application was dismissed.
[33] The two part test set out in Alles v. Maurice, supra, has also been accepted in other jurisdictions in Canada (see for example: the Alberta Court of Queen’s Bench decision in 416892 Alberta Ltd. v. Rocky Mountain Springs Water Inc., [1996] A.J. No. 301, and the Manitoba Court of Queen’s Bench decision in Burnside v. 2936501 Manitoba Ltd., [1998] M.J. No. 450, affirmed at [1999] M.J. No. 141 (Man. C.A.))
[34] In Perretta v. Telecaribe Inc., [1999] O.J. No. 4487 (Ont. Sup. Ct. J.), Lamek, J. seemed to introduce a third part to the test when he held that there were three conditions that had to be satisfied before an Order can be granted for interim costs pursuant to the Ontario Business Corporations Act. He found that first, the Plaintiff has to be impecunious and unable to sustain the cost of prosecuting the litigation. Further, he held that the impecuniosity has to be related to the alleged oppression. Lamek, J. stated at ¶10: “It is enough, for example (as was the case in Alles) if the alleged oppression has affected the plaintiff’s ability to finance an otherwise meritorious lawsuit. But there must be some connection between the conduct complained of and the plaintiff’s financial inability.” Finally, the impecuniosity has to be related to allegations of oppression upon which the plaintiff has a reasonable prospect of success.
[35] In the case at bar, the Defendants argue that the three part test set out in Perretta v. Telecaribe Inc., supra, is the test that has to be met by the Plaintiff in the present motion.
[36] I have difficulty with the test as set out in Perretta v. Telecaribe Inc., supra. First, Lamek, J. says that the plaintiff has to be impecunious and unable to sustain the cost of prosecuting the litigation. If, by using the term “impecunious”, he means that without such an Order the party would be deprived of the opportunity to proceed with the litigation, I would have no difficulty applying that reasoning (see the decision of LeBel, J. in British Columbia (Minister of Forests) v. Okanagan Indian Band, [2003] 3 S.C.R. 371 at ¶36.) If, however, he means that a plaintiff must be truly impecunious in order to bring such a motion then, with respect, I cannot agree. The Canadian Oxford Dictionary (Katherine Barber, ed., The Canadian Oxford Dictionary (Don Mills, Ont.: Oxford University Press, 1998) s.v. “impecunious”) defines the term “impecunious” as “having little or no money”. While an applicant for interim costs must look first to his own resources (including his ability to reasonably borrow funds) in order to finance the litigation – as noted by Goodfellow, J. in McKay v. Munro, supra, he is not required to sell his home, deregister RRSP’s or unreasonably reduce his standard of living to pursue an action. Accordingly, there will be situations where an applicant is not truly impecunious but he will qualify for interim costs if his financial circumstances are such that, without an interim Order, he will be unable to reasonably fund a lawsuit.
[37] Further, an applicant may be unable to fund a lawsuit as his financial resources are tied up in the company that is subject of the litigation (as was the case in Wilson v. Conley, supra.) In those circumstances, a plaintiff may not qualify as truly impecunious but he is, in my view, able to advance a claim pursuant to s. 7(4) of the Third Schedule of the Companies Act. The issue is whether his financial circumstances will prevent him from advancing a meritorious claim if an interim order for costs is not granted.
[38] In addition, Lamek, J. held that an applicant’s impecuniosity must be related to the alleged oppression. While ordinarily there will be a nexus between the plaintiff’s financial circumstances and the conduct complained of, I am not satisfied that such is necessary in order to obtain an Order for interim costs. In my view, not all oppressive conduct necessarily results in negative financial consequences to the complainant. For example, an impecunious shareholder may be improperly denied access to a company’s financial information or notice of shareholders’ meetings. Such conduct may not result in negative financial consequences to that shareholder but, in my view, he would be entitled, nevertheless, to claim oppression and request relief pursuant to s. 7(4) of the Third Schedule of the Companies Act. As noted by Blair, J. in Alles v. Maurice, supra, at ¶ 17:
...it is this inability to fund an otherwise meritorious lawsuit and the advantage which such a situation gives to an ‘oppressive’ majority that the power given under s. 248(4) to order costs is directed. There is nothing in the language of the statute or in its purpose which, to my mind, requires that the applicant demonstrate a cause and effect relationship between the conduct of the respondents and the need for funding.
[39] I have concluded that the two part test set out in Alles v. Maurice, supra, is the appropriate test to be applied to this motion. The burden is on Mr. Giffin to satisfy the Court that he has a case of sufficient merit to warrant pursuit and that he is genuinely in financial circumstances which, but for an Order under s. 7(4), would preclude his claim from being pursued.
[40] Without in any way deciding the merits of the action itself, I am satisfied that Mr. Giffin has established a case of sufficient merit to warrant pursuit.
[41] During the hearing of the motion, and in the written submissions filed thereafter, the Defendants raised the parol evidence rule together with clause 11.08 of the Shareholder Agreement. Clause 11.08 of the said Agreement reads as follows:
11.08 This Agreement expresses the entire agreement between the parties hereto with respect to all matters herein and its execution has not been induced by, nor do any of the parties hereto rely upon or regard as material any representations, promises or writings whatsoever not incorporated herein or made a part hereof and this Agreement shall not be amended, altered or qualified, except by a memorandum in writing signed by the parties hereto and any amendment, alteration or qualification hereof shall be null and void and shall not be binding upon such parties unless made and recorded as aforesaid.
[42] The Defendants submit that at trial the Plaintiff will be precluded from introducing parol evidence and therefore suggest that he cannot possibly succeed in this action. In support of this argument they rely on the decisions in Gainers Inc. v. Pocklington Financial Corp., [2000] A.J. No. 626 (Alta. C.A.) and Gates v. Croft, [2009] N.S.J. No. 263 (S.C.) They therefore suggest that the Plaintiff does not have a case of sufficient merit to warrant pursuit.
[43] In response, Plaintiff’s counsel notes that his client is not suing for breach of the Shareholder Agreement, but rather, is suing, inter alia, for oppression. He submits that parol evidence can be introduced to establish the reasonable expectations of the parties when dealing with an oppression remedy claim and, in support of this argument, relies on the decision in Matthews Investments Ltd. v. Assiniboine Medical Holdings Ltd., 2007 M.J. No. 353 (Man.Q.B.)
[44] In my view, it is not necessary, nor would it be appropriate for me to decide this evidentiary issue in advance of the trial. This is not a summary judgement motion – it is a motion for interim costs. Whether the Plaintiff will be permitted to advance certain evidence at the time of trial will be the decision of the Trial Judge hearing the action.
[45] In addition, during summation, Mr. Keith reviewed in detail the evidence that had been advanced in relation to the motion and invited the Court to analyze the credibility of some of the parties when coming to a decision on whether Mr. Giffin has a case of sufficient merit to warrant pursuit. In my view, it is not necessary or, in the circumstances of this motion, appropriate for me to do so. I will simply state that Mr. Giffin has satisfied me that he has established a case of sufficient merit to warrant pursuit.
[46] That takes me to the second part of the test – whether Mr. Giffin has satisfied me that he is genuinely in financial circumstances which, but for an Order under s. 7(4), would preclude the claim from being pursued.
[47] Mr. Giffin is now a member of the Royal Canadian Mounted Police. According to his most recent affidavit filed in support of this motion he has an approximate annual base salary (for 2010) of $74,682.00. Last year, he earned a base salary of $63,229.86 plus an additional $25,590.65 in overtime. Mr. Giffin’s wife is a nurse who earns between $72,876.35 and $79,243.87 per annum. While in 2009 she earned overtime of $3,320.00 she no longer receives overtime as she is now a salaried employee. Mr. Giffin’s wife also receives $725.00 a month in child support.
[48] According to Mr. Giffin’s evidence, since the beginning of this dispute he and his wife have incurred a considerable amount of debt and their standard of living has been severely reduced. He says that to date he has paid approximately $155,000.00 in legal fees, disbursements and taxes in relation to this litigation. He says that he has paid this sum by borrowing against a line of credit registered against the matrimonial home, through the sale of another property and by cashing in some of his RRSP’s.
[49] In relation to his standard of living, Mr. Giffin says that he and his family are no longer able to eat out with friends at restaurants, they no longer take family vacations (as had been their practice) and they no longer contribute to their children’s RESP’s or to their personal RRSP’s.
[50] Mr. Giffin has provided the Court with a Statement of Net Worth (as of March 31st, 2010) which indicates that he has net assets of $19,807.00 (taking into account his outstanding legal fees). This Statement does not include the interest that he has in XL Electric Limited or in Huntec Limited. It is clear (when one takes his interest in these two companies into account) that his actual net worth is much greater than this $19,807.00 figure. Having said that, I am satisfied that his interest in these two companies is not available to him at the present time and does not provide him with any practical assistance in funding this litigation.
[51] Since the time of Mr. Giffin’s first motion for interim costs he has applied to two banks for additional financing. He has been declined by both institutions. His regular bank has indicated that they will not loan the Giffins any further money unless their present debt load is reduced. Mr. Giffin says that his only available recourse to raise more funds would be to sell the family home or further surrender his RRSP’s.
[52] During the course of Mr. MacDonald’s argument he raised a number of issues which called into question the reliability of the information that Mr. Giffin gave to the banks when applying for additional financing. For example, Mr. Giffin provided the banks with a figure for his gross annual income but did not include his wife’s gross annual income despite the fact that all family debts and assets were listed. In addition, he did not refer to his interest in XL Electric Limited or Huntec Limited when listing his assets.
[53] In response, Mr. Keith noted that Ms. Giffin is not a plaintiff to this action (she was not a shareholder in any of the Defendant companies) and says that she has no obligation to apply for, co-sign or guarantee any loans that Mr. Giffin may apply for to fund this litigation. Accordingly, he submits that there was no reason for Ms. Giffin’s income to be included on the loan documents.
[54] Mr. Keith further noted that Mr. Giffin was obliged to list the full amount of the joint debts that Mr. Giffin has with his wife as, at law, he can be held liable for the full amount of these debts.
[55] In relation to the argument that Mr. Giffin did not refer to his interest in XL Electric Limited or Huntec Limited when listing his assets, Mr. Keith referred to clause 3.01 of the Shareholder Agreement which he says precludes Mr. Giffin from encumbrancing these shares. In addition, he notes that these shares do not generate any cash flow to service any loan that Mr. Giffin may be applying for and he submitted, inter alia, that the shares cannot effectively be liquidated. He noted that the shareholders of XL Electric Limited and Huntec Limited are embroiled in a protracted and costly legal battle and suggests that the banks that Mr. Giffin applied to would not have been interested in these shares or in Mr. Giffin’s view of their value.
[56] Unfortunately, Mr. Giffin was not cross examined on any of these issues at the time of the hearing despite the fact that the Defendants had the opportunity to do so. In Browne v. Dunn (1893), 6 R. 67, Lord Halsbury stated at pp. 76-77:
..........To my mind nothing would be more absolutely unjust than not to cross-examine witnesses upon evidence which they have given, so as to give them notice, and to give them an opportunity of explanation, and an opportunity very often to defend their own character, and, not having given them such an opportunity, to ask the jury afterwards to disbelieve what they have said, although not one question has been directed either to their credit or to the accuracy of the facts they have deposed to..........
[57] While the rule in Browne v. Dunn, supra, is not absolute, in my view it should be applied in the circumstances of this case. The Defendants should not be permitted to call into question the veracity of Mr. Giffin’s loan applications without having asked him about these issues and giving him an opportunity to explain why he completed the application forms in the manner in which he did.
[58] An applicant for interim costs is expected to make all reasonable efforts to fund the litigation themself. As indicated, however, by Goodfellow, J. in McKay v. Munro, supra, it is not necessary for an applicant to sell their home or deregister their RRSP’s before an order for interim costs can be awarded. The Defendants’ solicitor questions why the Plaintiff should be permitted to hold onto his remaining RRSP’s and suggests that Mr. Giffin should have to dispose of this asset before seeking an Order for interim costs. He notes that both Mr. and Ms. Giffin hold pension plans through their employment and suggests that, in these circumstances, it would be appropriate to find that Mr. Giffin has to dispose of his remaining RRSP’s before looking to XL Electric Limited to help fund the litigation.
[59] As indicated previously, Justice Goodfellow in McKay v. Munro, supra, held that an applicant for interim costs is not required to deregister RRSP’s in order to pursue an action. Generally, a judge of this Court is bound by a decision of another judge of this Court unless the decision is clearly wrong or there exists a strong reason to find otherwise. This policy allows for predictability and consistency.
[60] In the case at bar, I am not convinced that Justice Goodfellow’s statement relating to RRSP’s is incorrect , nor am I satisfied that there exists a strong reason to find to the contrary.
[61] Mr. Giffin only started working with the RCMP after leaving XL Electric Limited in 2007. While he was not questioned about the value of his pension through his employer – it is unlikely that it would be significant due to the limited time that he has held this employment.
[62] In my view, Ms. Giffin’s pension is irrelevant for the purpose of this motion as she is not a party to this action and we have no information on the value of this asset.
[63] Mr. Giffin has already used a line of credit and cashed in some of his RRSP’s to help fund the $155,000.00 that he has paid to date in legal fees, disbursements and taxes. I am satisfied that he does not have the financial means to pay for this litigation himself. I am also satisfied that at the present time he is unable to reasonably borrow further funds to finance the litigation. In keeping with the comments of Goodfellow, J. in McKay v. Munro, supra, in my view, it is not necessary for Mr. Giffin to sell the family home or further deregister his RRSP’s in order to pay his legal bills.
[64] Mr. Giffin has satisfied me that, but for an Order under s. 7(4) of the Companies Act, he will effectively be precluded from pursuing this action.
[65] That takes me to the issue of the amount of interim costs that should be awarded.
[66] As indicated previously, Mr. Giffin is seeking interim costs in the amount of $275,000.00 which represents $145,000.00 owing to the Plaintiff’s solicitor (as of the date of the motion), $30,000.00 in unbilled work in progress (as of the date of the motion) and $100,000.00 which is the estimate that the Plaintiff has received from his solicitors for bringing this matter to trial.
[67] The Plaintiff has provided the Court with a basic (undetailed) Statement of Account showing the amount of money that Mr. Giffin has paid to his solicitors to date as well as the $145,114.52 which has been billed and is unpaid. He has also provided a basic Statement of Account showing unbilled time, disbursements and taxes in the approximate amount of $30,000.00. The Defendants’ solicitor argues that this is insufficient and that the Plaintiff should have filed more detailed evidence of the legal fees incurred. Further, he argues that the amount sought by the Plaintiff is “completely excessive and entirely unreasonable in the circumstances”.
[68] In response, the Plaintiff’s solicitor argues that requiring more detailed accounts at this stage of the proceeding would be improper and would force him to disclose privileged information. In addition, he argues that the Defendants’ conduct in this proceeding has driven up the cost of litigation significantly and notes that as of the date of the hearing of this motion there had been over half a dozen motions, eleven days of discovery (including several Court ordered discoveries, rediscoveries and further rediscovery of the Defendants) and many days of trial which subsequently had to be adjourned.
[69] As is often the case in family disputes, this appears to be a very acrimonious proceeding. Numerous motions have been required to date and there is a great deal of financial information and corporate history that must be reviewed in order to bring the matter to trial. Having heard two motions relating to this action, I am not surprised by the amount of fees that the Plaintiff has incurred to date.
[70] While there may be situations where the Court requires detailed statements of account in order to deal with an Order for interim costs, I am not satisfied that such is necessary in the circumstances of this case.
[71] In the pre-hearing brief filed on behalf the Defendants reference was made to 416892 Alberta Ltd. v. Rocky Mountain Springs Water Inc., supra, where Jones, J. stated at ¶ 31:
I am satisfied, in the circumstances, that an order for interim costs should be made requiring the Respondent Rocky Mountain to pay completely for the cost of the certified business valuator who will value the shares of the Applicant, including any possible minority discount factor, and report in due course with regards to his valuation. I make such an order. In doing so, I take comfort in the fact that in the circumstances of this case, should the Applicant at the end of the day, be found wanting in respect of his allegations of oppression against the Respondents, there would appear to be enough value in the shares which the Applicant owns to the extent of 30 percent, that the Respondents can easily be recompensated by reversing the order for costs when the main action is finally determined........... [Emphasis added by the Defendants’ solicitor]
[72] Section 7(4) of the Third Schedule of the Companies Act provides that upon final disposition of the action the Plaintiff may be held accountable for any interim costs that have been awarded. In the case at bar, there is a significant dispute over the value of Mr. Giffin’s interest in XL Electric Limited and Huntec Limited, however, there does not appear to be any dispute that his interest exceeds the amount of interim costs that he is seeking. This is a factor that I have taken into account when analyzing the sufficiency of the Plaintiff’s evidence concerning the costs that he has incurred to date.
[73] I have concluded that an Order should issue awarding the Plaintiff interim costs in the amount of $175,000.00. This Order will cover the $145,000.00 that has been billed by the Plaintiff’s solicitors and is unpaid as well as the $30,000.00 of unbilled time and disbursements.
[74] The remaining $100,000.00 requested by the Plaintiff is an estimate of the legal fees that will be incurred in bringing the matter to trial. While the Court has the ability to grant an Order for anticipated costs, in my view, the discretion to do so should be exercised carefully. As a preliminary matter, the figure of $100,000.00 is an estimate only. Additionally, the Plaintiff’s financial circumstances (including the need for an Order for interim costs) can change. For example, during the course of the first motion that the Plaintiff brought for interim costs, his financial circumstances changed significantly when he found a buyer for a property that he had previously been unable to sell.
[75] I am prepared to issue an Order requiring XL Electric Limited to pay to the Plaintiff interim costs in the amount of $175,000.00 reserving the right to the Plaintiff to bring a further motion pursuant to s. 7(4) to request an additional payment. This $175,000.00 shall be forwarded to the Plaintiff’s solicitor no later than December 30th, 2010. I will remain seized of the matter for the purpose of a further hearing should the Plaintiff elect to proceed with a further motion for interim costs.
[76] I anticipate that counsel will be able to agree to the costs of this motion. If not, I will accept written submissions on the matter.
Deborah K. Smith
Associate Chief Justice