Calmont Leasing Ltd. v. Kredl et al., (1993) 142 A.R. 81 (QB)

• Judge: Russell, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: July 27, 1993
• Citations: (1993), 142 A.R. 81 (QB)

Calmont Leasing Ltd. v. Kredl (1993), 142 A.R. 81 (QB)

MLB headnote and full text

Calmont Leasing Ltd. (plaintiff) v. Otto Kredl and 105319 Canada Inc. (defendants)

105319 Canada Inc. and Otto Kredl (plaintiffs) v. Calmont Leasing Ltd., 123241 Canada Inc., Warholdings Inc., 82803 Holdings Ltd., Robert Beveridge, Leonard Desharnais, George Faulkner, Robert Howell, Lawrence Pudlowski and Warren Soper (defendants)

Calmont Leasing Ltd., 123241 Canada Inc., Warholdings Inc., 82803 Holdings Ltd., Leonard Desharnais, George W. Faulkner, Robert Howell, Lawrence Pudlowski and Warren Soper (plaintiffs by counterclaim) v. 105319 Canada Inc. and Otto Kredl (defendants by counterclaim)

(Action Nos. 9203-12892; 9203-12991)

Indexed As: Calmont Leasing Ltd. v. Kredl et al.

Alberta Court of Queen's Bench

Judicial District of Edmonton

Russell, J.

July 27, 1993.

Summary:

The defendant director of the plaintiff corporation obtained unauthorized benefits from the plaintiff without the knowledge of the other directors. The plaintiff sued the defendant director for breach of fiduciary duty and also brought an oppression action under the Alberta Business Corporations Act. The defendant director also brought an oppression action, claiming against the corporation and other directors for failing to pursue legal action against corporation employees guilty of the same conduct.

The Alberta Court of Queen's Bench held that the defendant director was liable for breach of fiduciary duty and allowed the corporation's oppression action. The court stayed the defendant director's oppression action, with a direction that legal action against the employees be resolved within one year.

Company Law - Topic 4266

Directors - Duties - Breach of fiduciary duty - What constitutes - A director improperly secured personal benefits from the corporation - He, inter alia, leased and purchased vehicles at low prices, took an interest free loan and charged excessive management fees without proper docu­mentation - The other directors had no knowledge - The Alberta Court of Queen's Bench stated that the director did not act honestly and in good faith with a view to the best interests of the corporation - The court found the director breached his fiduciary duty to the corporation - See paragraphs 36 to 103.

Company Law - Topic 9783

Actions against corporations and directors - Action for oppressive conduct - Persons entitled - Section 231(b)(iii) of the Alberta Business Corporations Act defined a complainant who may bring an oppression action or unfairness action as including any person "who, in the discretion of the court, is a proper person to make an appli­cation" - The Alberta Court of Queen's Bench held that the corporation itself could be a "proper person" under s. 231(b)(iii) - See paragraphs 127 to 128.

Company Law - Topic 9785

Actions against corporations and directors - Action for oppressive conduct - Oppression, prejudice or disregard of interests - A director breached his fiduciary duty to the corporation by im­properly taking benefits to which he was not entitled - The director abused his position and power in a manner that was unfair and prejudicial to the interests of other shareholders and directors - The Alberta Court of Queen's Bench stated that the director's conduct was oppressive or unfairly prejudicial within the meaning of s. 234 of the Alberta Business Corpo­ra­tions Act - See paragraphs 129 to 134.

Company Law - Topic 9785

Actions against corporations and directors - Action for oppressive conduct - Oppression, prejudice or disregard of interests - A corporation took legal action against a director guilty of breach of fiduciary duty for improperly taking bene­fits to which he was not entitled - There was evidence that employees were guilty of similar conduct - The corporation had not yet taken legal action against the employees, but planned to do so - The director claimed the corporation's failure to pursue legal action against the employees was oppressive within the meaning of s. 234 of the Alberta Business Corporations Act - The Alberta Court of Queen's Bench stayed the oppression action, with a direc­tion that the director return for the court to determine his action if the legal action against the employees was not resolved within one year - See paragraphs 135 to 139.

Damages - Topic 806

Assessment - "Wholesome" rule - De-fendant's conduct makes assessment im­possible - A director improperly paid himself excessive management fees - The Alberta Court of Queen's Bench stated that the director deliberately misled, deceived and defrauded the other directors and share­holders - The director was entitled to some management fees and reasonable expenses, but actual entitlement was im­possible to determine on the evidence - The court assessed excess management fees by reducing fees credited to the direc­tor by 40% - The court applied the "wholesome" rule, which provided that if a person by a deliberate tortious act destroyed the evidence necessary to ascer­tain the extent of the injury he inflicted, that person must suffer all the inconve­nience of his own wrong - See paragraphs 67 to 68.

Equity - Topic 3646

Fiduciary or confidential relationships - Breach of fiduciary relationship - By director of company - [See Company Law - Topic 4266 ].

Equity - Topic 3655

Fiduciary or confidential relationships - Breach of fiduciary relationship - Dam­ages - The Alberta Court of Queen's Bench stated that "the fusion of equity and the common law meant that common law principles of damages applied to claims for breach of fiduciary duty, which invokes considerations of foreseeability or remote­ness. Whether the claim is framed in com­mon law or equity it should receive the same redress, with the result that foreseeability is the test." - See paragraph 100.

Evidence - Topic 4724

Witnesses - Examination - Impeaching credit - Notice - The Alberta Court of Queen's Bench referred to the rule that "if a cross-examiner intends to impeach the credibility of a witness, the witness must be given notice of his intention" - The court stated that the rule was not absolute - The extent and manner of its application was to be determined by the trial judge on the circumstances of the case - See para­graph 75.

Interest - Topic 5401

As damages (prejudgment interest) - Breach of fiduciary relationship - The Alberta Court of Queen's Bench stated that "where a plaintiff suffers damages in the form of a loss of interest arising from a breach of a fiduciary duty involving a usurpation of the plaintiff's property, the court has equitable jurisdiction to award damages which include that interest, and in so doing is not restricted by the provisions of the Judicature or the Judgment Interest Act. Though the amount of interest need not be ascertained before judgment as in the case of a debt action, because equity is concerned with compensation, the amount must be ascertainable. It would not be proper to estimate the quantum of interest as proposed by plaintiff." - See paragraph 112.

Cases Noticed:

Sturrock et al. v. Ancona Petroleums Ltd. et al. (1990), 111 A.R. 86; 75 Alta. L.R.(2d) 216 (Q.B.), refd to. [para. 68].

Lamb v. Kincaid (1907), 38 S.C.R. 561, refd to. [para. 68].

Browne v. Dunne (1893), 6 R. 67 (H.L.), refd to. [para. 75].

R. v. Palmer, [1980] 1 S.C.R. 759; 30 N.R. 181, refd to. [para. 75].

Nocton v. Lord Ashburton, [1914] A.C. 932, refd to. [para. 98].

Canadian Aero Services Ltd. v. O'Malley, [1974] S.C.R. 592; 40 D.L.R.(3d) 71, refd to. [para. 99].

Canson Enterprises Ltd. et al. v. Boughton & Co. et al., [1991] 3 S.C.R. 534; 131 N.R. 321; 6 B.C.A.C. 1; 13 W.A.C. 1; 85 D.L.R.(4th) 129, refd to. [para. 100].

Penvidic Contracting Co. v. International Nickel Co. of Canada Ltd., [1976] 1 S.C.R. 267; 4 N.R. 1, refd to. [para. 103].

R. v. MacKay, [1930] S.C.R. 130, refd to. [para. 104].

Custodian (The) v. Blucher, [1927] S.C.R. 420, refd to. [para. 104].

Wallersteiner v. Moir (No. 2), [1975] 1 All E.R. 848 (C.A.), refd to. [para. 107].

Brander Estate, Re (1986), 67 A.R. 345; 43 Alta. L.R.(2d) 38 (Surr. Ct.), refd to. [para. 108].

Bagby v. Gustavson International Drilling Co. et al. (1980), 24 A.R. 181 (C.A.), refd to. [para. 110].

Brock v. Cole (1983), 142 D.L.R.(3d) 461 (Ont. C.A.), refd to. [para. 111].

Central Trust Co. v. Rafuse and Cordon, [1986] 2 S.C.R. 147; 69 N.R. 321; 75 N.S.R.(2d) 109; 186 A.P.R. 109; 37 C.C.L.T. 117; 42 R.P.R. 161; 31 D.L.R.(4th) 481; 34 B.L.R. 187, refd to. [para. 116].

Pirelli General Cable Works Ltd. v. Faber (Oscar) & Partners, [1983] 1 All E.R. 65 (H.L.), refd to. [para. 116].

Luscar Ltd. et al. v. Pembina Resources Ltd. (1992), 131 A.R. 79; 25 W.A.C. 79 (C.A.), refd to. [para. 117].

Costigan v. Ruzicka (1984), 54 A.R. 385 (C.A.), refd to. [para. 117].

R. v. Olan, Hudson and Hartnett, [1978] 2 S.C.R. 1175; 21 N.R. 504, refd to. [para. 118].

Photinopoulos v. Photinopoulos et al. (1988), 92 A.R. 122; 63 Alta. L.R.(2d) 193 (C.A.), refd to. [para. 119].

Luscar Ltd. and Norcen Energy Resources Ltd. v. Pembina Resources Ltd. (1991), 122 A.R. 83; 85 Alta. L.R.(2d) 46 (Q.B.), refd to. [para. 124].

K.M. v. H.M. (1992), 142 N.R. 321; 57 O.A.C. 321; 96 D.L.R.(4th) 289 (S.C.C.), refd to. [para. 125].

Gainers Inc. et al. v. Pocklington et al. (1992), 132 A.R. 35 (Q.B.), refd to. [para. 127].

Brant Investments Ltd. v. KeepRite Inc. et al. (1991), 45 O.A.C. 320; 3 O.R. 289 (C.A.), refd to. [para. 130].

Westfair Foods Ltd. v. Watt et al., [1990] 4 W.W.R. 685; 115 A.R. 34 (C.A.), refd to. [para. 130].

Cheung v. Forgen Computer Systems Ltd. (1991), 123 A.R. 357 (Q.B.), refd to. [para. 130].

First Edmonton Place v. 315888 Alberta Ltd. (1988), 60 Alta. L.R.(2d) 122 (Q.B.), refd to. [para. 131].

Keho Holdings Ltd. and Oliver v. Noble et al. (1987), 78 A.R. 131; 52 Alta. L.R.(2d) 195 (C.A.), refd to. [para. 132].

Stech v. Davies (1987), 80 A.R. 298; 53 Alta. L.R.(2d) 373 (Q.B.), refd to. [para. 133].

Statutes Noticed:

Business Corporations Act, S.A. 1981, c. B-15, sect. 117(1) [para. 97]; sect. 231(b)(iii) [para. 127]; sect. 234 [para. 130].

Judgment Interest Act, S.A. 1984, c. J-0.5, generally [para. 109].

Judicature Act, R.S.A. 1980, c. J-1, sect. 15 [para. 106].

Limitation of Actions Act, R.S.A. 1980, c. L-15, sect. 4(1)(c) [para. 114]; sect. 4(1)(e) [para. 115]; sect. 4(1)(g) [para. 114]; sect. 6 [para. 115].

Rules of Court (Alta.), rule 403 [para. 141].

Authors and Works Noticed:

Ferguson, Keith A., The Oppression Rem­edy: Trends Anyone?, p. 640 [para. 130].

Phipson on Evidence (14th Ed. 1990), ss. 12, 13 [para. 75].

Thrasher, R.J., Recovery of Interest as Damages (1983), 22 Alta. Law Rev. (No. 2) 154, generally [para. 106].

Counsel:

Barry Zalmanowitz, for Calmont et al.;

Alex Trawick, for Kredl et al.

These actions were heard before Russell, J., of the Alberta Court of Queen's Bench, Judicial District of Edmonton, who delivered the following judgment on July 27, 1993.