Gaudet et al. v. Dugas, (2015) 434 N.B.R.(2d) 45 (TD)

• Judge: Ouellette, J.
• Court: Court of Queen's Bench of New Brunswick (Canada)
• Case Date: September 06, 2013
• Jurisdiction: New Brunswick
• Citations: (2015), 434 N.B.R.(2d) 45 (TD);2015 NBQB 59

Gaudet v. Dugas (2015), 434 N.B.R.(2d) 45 (TD);

    434 R.N.-B.(2e) 45; 1132 A.P.R. 45

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Sommaire et texte intégral

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Temp. Cite: [2015] N.B.R.(2d) TBEd. MY.007

Renvoi temp.: [2015] N.B.R.(2d) TBEd. MY.007

Peter Gaudet, Adam Gaudet, 508571 N.B. Limited, 100167 PEI Inc. (plaintiffs) v. Cyrennus Dugas (defendant)

(MC-506-05; 2015 NBQB 59; 2015 NBBR 59)

Indexed As: Gaudet et al. v. Dugas

Répertorié: Gaudet et al. v. Dugas

New Brunswick Court of Queen's Bench

Trial Division

Judicial District of Moncton

Ouellette, J.

February 27, 2015.

Summary:

Résumé:

The Dugas' (husband and wife) sold their family commercial fishing business to Peter and Adam Gaudet. The business consisted of a fishing vessel, its nautical equipment, the fishing tackle and, most importantly, a snow crab licence issued by Fisheries and Oceans Canada (FOC) alod with two other licences, and held by Mr. Dugas personally. FOC oversaw commercial fisheries and the transfer of licences from one fisher to another. Adam Gaudet did not qualify to hold title to the fishing licences and to request a transfer. Under a trust agreement, Mr. Dugas held legal title to the licences on Gaudet's behalf pending an eventual transfer. The $1.4 million purchase price was paid on January 29, 1999, when the sale closed. The purchasers operated the fishing business for three years with the vendors' cooperation. On the pretext that FOC was going to revoke the fishing licences and that it would not be possible to transfer them, Mr. Dugas unilaterally terminated the trust agreement on January 31, 2002, reappropriated the fishing licences and resumed fishing with his wife. On February 13, 2002, the Gaudets sued to enforce the original agreement. On August 22, 2002, Mr. Dugas agreed to pay them $2.1 million to settle the matter. The agreement was included in a consent order executed on August 23, 2002. Mr. Dugas declared bankruptcy 63 days after executing the order, allowing him to keep the fishing licences, the original purchase price from the sale of the business and reimburse the Gaudets through the trustee for only a tiny fraction of the amount agreed to in the order. On December 21, 2004, the Gaudets applied to have the consent judgment set aside (later converted to an action). The Dugas defended and counterclaimed. Mr. Dugas moved to have the trial judge recuse himself based on a reasonable apprehension of bias because of remarks the trial judge had made in reasons for decision in his bankruptcy proceedings.

The New Brunswick Court of Queen's Bench, Trial Division, in a decision reported at [2013] N.B.R.(2d) Uned. 131, dismissed the motion.

The New Brunswick Court of Appeal, per Bell, J.A., in a decision reported at [2013] N.B.R.(2d) Uned. 130, granted leave to appeal.

The New Brunswick Court of Appeal, in a decision reported at (2014), 416 N.B.R.(2d) 389; 1079 A.P.R. 389, dismissed the appeal and ordered the defendant to pay one set of costs in the amount of $5,000. The court referred the issue of throw-away costs to the trial judge.

The New Brunswick Court of Queen's Bench, Trial Division, allowed the action and dismissed the counterclaim. The court set aside the consent judgment and enforced the trust agreement. The court ordered, inter alia, that Mr. Dugas cooperate and take all necessary steps to ensure and facilitate the transfer of the fishing licences. The Gaudets were awarded $2,384,162 damages (included some interest) for breach of fiduciary duty, $125,533 costs, HST and disbursements.

Bankruptcy - Topic 8983

Discharge of debtor - Liabilities not released by discharge - Act of defalcation or misappropriation in fiduciary capacity - [See Practice - Topic 5509 ].

Contracts - Topic 1106

Formation of contract - General principles - Duty to negotiate in good faith - [See Practice - Topic 5509 ].

Contracts - Topic 3502

Performance or breach - Obligation to perform - Good faith - Exercise of - [See Practice - Topic 5509 ].

Contracts - Topic 3904

Performance or breach - By fiduciaries - Breach - General - [See Contracts - Topic 4106 and Practice - Topic 5509 ].

Contracts - Topic 4106

Remedies for breach - Specific performance - When available - General - The Dugas' (husband and wife) sold their family commercial fishing business to Peter and Adam Gaudet - The business's most important asset was a snow crab fishing licence issued by Fisheries and Oceans Canada (FOC) along with two other fishing licences, held by Mr. Dugas personally - FOC oversaw commercial fisheries and the transfer of licences from one fisher to another - Adam Gaudet did not qualify to hold title to the licences and request a transfer - Under a trust agreement, Mr. Dugas held legal title to the licences on Gaudet's behalf pending an eventual transfer - The $1.4 million purchase price was paid on January 29, 1999, when the sale closed - The purchasers operated the fishing business for three years with the vendors' cooperation - On the pretext that FOC was going to revoke the snow crab fishing licence and that it would not be possible to transfer it, Mr. Dugas unilaterally terminated the trust agreement on January 31, 2002, reappropriated the licence and resumed fishing with his wife - On February 13, 2002, the Gaudets sued to enforce the original agreement - On August 22, 2002, Mr. Dugas agreed to pay them $2.1 million to settle the matter - The agreement was included in a consent order executed on August 23, 2002 - Mr. Dugas declared bankruptcy 63 days later, allowing him to keep the licence, the original purchase price from the sale of the business and reimburse the Gaudets through the trustee for only a tiny fraction of the amount agreed to in the order - On December 21, 2004, the Gaudets applied to have the consent judgment set aside (later converted to an action) - The New Brunswick Court of Queen's Bench, Trial Division, declared the consent order void ab initio and set it aside - The court held that Adam Gaudet was entitled to specific performance of the trust agreement - Mr. Dugas was to take all necessary steps to ensure and facilitate the transfer of the licences - The court awarded the Gaudets a total of $2,384,162 damages (included some interest) for breach of fiduciary duty, $125,533 costs, HST and disbursements - See paragraphs 253 to 283 and 287.

Contracts - Topic 5305

Impossibility or frustration of performance - Frustration - What constitutes frustration - The Dugas' (husband and wife) sold their family commercial fishing business to Peter and Adam Gaudet - The business's most important asset was a snow crab fishing licence issued by Fisheries and Oceans Canada (FOC) along with two other fishing licences, held by Mr. Dugas personally - FOC oversaw commercial fisheries and the transfer of licences from one fisher to another - Adam Gaudet did not qualify to hold title to the licences and request a transfer - Under a trust agreement, Mr. Dugas held legal title to the licences on Gaudet's behalf pending an eventual transfer - The $1.4 million purchase price was paid on January 29, 1999, when the sale closed - The purchasers operated the fishing business for three years with the vendors' cooperation - On the pretext that FOC was going to revoke the snow crab fishing licence and that it would not be possible to transfer it, Mr. Dugas unilaterally terminated the trust agreement on January 31, 2002, reappropriated the licence and resumed fishing with his wife - On February 13, 2002, the Gaudets sued to enforce the original agreement - On August 22, 2002, Mr. Dugas agreed to pay them $2.1 million to settle the matter - The agreement was included in a consent order executed on August 23, 2002 - Mr. Dugas declared bankruptcy 63 days later, allowing him to keep the licence, the original purchase price from the sale of the business and reimburse the Gaudets through the trustee for only a tiny fraction of the amount agreed to in the order - On December 21, 2004, the Gaudets applied to have the consent judgment set aside (later converted to an action) - The Dugas' argued that the 1999 contract was frustrated - The New Brunswick Court of Queen's Bench, Trial Division, rejected the defence - Mr. Dugas had a duty to do whatever was necessary to set in motion the process of transferring the licence, to allow things to take their normal course, including the process of the FOC deciding to allow or disallow the transfer, and to allow the parties to appeal the decision if necessary - Mr. Dugas, by his January 2002 conduct, decided of his own accord and without just cause that his contractual and fiduciary duties would not be fulfilled, and that he did not think he was at all bound by the agreements - See paragraphs 235 to 252.

Courts - Topic 2004

Jurisdiction - General principles - Inherent jurisdiction - [See Practice - Topic 5509 ].

Equity - Topic 3655

Fiduciary or confidential relationships - Breach of fiduciary relationship - Damages - [See Contracts - Topic 4106 ].

Estoppel - Topic 426

Estoppel by record (res judicata) - Matters precluding estoppel - Fraud, dishonesty or new evidence - [See Practice - Topic 5509 ].

Fish and Game - Topic 239

Right to fish - Licensing - Transfer - [See Contracts - Topic 4106 and Practice - Topic 5509 ].

Fish and Game - Topic 239

Right to fish - Licensing - Transfer - The Dugas' (husband and wife) sold their family commercial fishing business to Peter and Adam Gaudet in 1999- The business's most important asset was a snow crab fishing licence issued by Fisheries and Oceans Canada (FOC) along with two other fishing licences, held by Mr. Dugas personally - FOC oversaw commercial fisheries and the transfer of licences from one fisher to another - Adam Gaudet did not qualify to hold title to the licences and request a transfer - Under a trust agreement, Mr. Dugas held legal title to the licences on Gaudet's behalf pending an eventual transfer - Litigation ensued respecting the agreements - The New Brunswick Court of Queen's Bench, Trial Division, discussed the transfer of fishing licences by FOC - "In practice, the contract executed between [Mr.] Dugas and the Gaudets, and the Declaration of Trust should have had no impact on Fisheries and Oceans Canada's handling of the transfer request or administration of its transfer policies in this case." - Adam Gaudet had submitted an application for recognition as a new entrant in 1999, 2001, 2002 and 2003, and Fisheries and Oceans Canada never acted in good faith in his regard - See paragraphs 112 to 183.

Practice - Topic 5509

Judgments and orders - Consent judgments - Setting aside - Grounds - The Dugas' (husband and wife) sold their family commercial fishing business to Peter and Adam Gaudet - The business's most important asset was a snow crab fishing licence issued by Fisheries and Oceans Canada along with two other fishing licences, held by Mr. Dugas personally - Fisheries and Oceans Canada (FOC) oversaw commercial fisheries and the transfer of licences from one fisher to another - Adam Gaudet did not qualify to hold title to the licences and request a transfer - Under a trust agreement, Mr. Dugas held legal title to the licences on Gaudet's behalf pending an eventual transfer - The $1.4 million purchase price was paid on January 29, 1999, when the sale closed - The purchasers operated the fishing business for three years with the vendors' cooperation - On the pretext that FOC was going to revoke the snow crab fishing licence and that it would not be possible to transfer it, Mr. Dugas unilaterally terminated the trust agreement on January 31, 2002, reappropriated the licence and resumed fishing with his wife - On February 13, 2002, the Gaudets sued to enforce the original agreement - On August 22, 2002, Mr. Dugas agreed to pay them $2.1 million to settle the matter - The agreement was included in a consent order executed on August 23, 2002 - Mr. Dugas declared bankruptcy 63 days later, allowing him to keep the licence, the original purchase price from the sale of the business and reimburse the Gaudets through the trustee for only a tiny fraction of the amount agreed to in the order - On December 21, 2004, the Gaudets applied to have the consent judgment set aside (later converted to an action) - The New Brunswick Court of Queen's Bench, Trial Division, declared the consent order void ab initio and set it aside - Mr. Dugas did not act honestly and he never intended to perform the settlement contract and pay the Gaudets over $2 million on September 23, 2002, as agreed - Mr. Dugas negotiated an agreement after breaching his fiduciary duties regarding the original contract, but did not live up to a minimum standard of honesty - Not only did he retain the benefits of the licence, but he never had to pay any consideration as agreed, although he was in a position to do so - Mr. Dugas breached the duty of honest performance that flowed from the duty to act in good faith in contract - The court had inherent jurisdiction to set aside or vary a consent order under certain circumstances - Thus, the defence of res judicata did not apply - Further, the bankruptcy did not release Mr. Dugas from his fiduciary and contractual duties by virtue of his misappropriation of the licence and his deliberate breach of trust/fiduciary duty (Bankruptcy and Insolvency Act, s. 718(1)(d)) - See paragraphs 185 to 211.

Practice - Topic 5540

Judgments and orders - Consent orders - Setting aside - Grounds - [See Practice - Topic 5509 ].

Trusts - Topic 2730

The beneficiary - Rights of beneficiaries - Compensation for breach of trust - [See Contracts - Topic 4106 ].

Chasse et pêche - Cote 239

Droit de pêche - Permis - Transfert - [Voir Fish and Game - Topic 239 ].

Contrats - Cote 1106

Formation du contrat - Principes généraux - Obligation de négocier de bonne foi - [Voir Contracts - Topic 1106 ].

Contrats - Cote 3502

Exécution ou rupture - Obligation d'exécuter - Bonne foi - Démonstration - [Voir Contracts - Topic 3502 ].

Contrats - Cote 3904

Exécution ou rupture - Par des fiduciares - Généralités - [Voir Contracts - Topic 3904 ].

Contrats - Cote 4106

Recours pour rupture - Exécution en nature - Conditions d'ouverture - Généralités - [Voir Contracts - Topic 4106 ].

Contrats - Cote 5305

Contrats inexécutables - Inexécutabilité - En quoi consiste - [Voir Contracts - Topic 5305 ].

Equity - Cote 3655

Rapports fiduciaux ou de créance - Violation d'un rapport fiducial - Dommages-intérêts - [Voir Equity - Topic 3655 ].

Faillite - Cote 8983

Libération du débiteur - Dettes non libérées - Actes de détournement de fonds en capacité de fiduciaire - [Voir Bankruptcy - Topic 8983 ].

Fiducies - Cote 2730

Le bénéficiaire - Droits des bénéficiaires - Indemnité pour abus de confiance - [Voir Trusts - Topic 2730 ].

Préclusion - Cote 426

Préclusion résultant de la chose jugée - Questions excluant la préclusion - La fraude, la malhonnêteté ou de nouvelles preuves - [Voir Estoppel - Topic 426 ].

Procédure - Cote 5509

Jugements et ordonnances - Jugements par consentement - Annulation - Motifs - [Voir Practice - Topic 5509 ].

Procédure - Cote 5540

Jugements et ordonnances - Ordonnances par consentement - Annulation - Motifs - [Voir Practice - Topic 5540 ].

Tribunaux - Cote 2004

Compétence - Principes généraux - Compétence inhérente - [Voir Contracts - Topic 2004 ].

Cases Noticed:

Caissie et al. v. Canada (Minister of Fisheries and Oceans) (2001), 205 F.T.R. 193; 2001 FCT 379, refd to. [para. 90].

B.C. Packers Ltd. v. Sparrow (1989), 35 B.C.L.R.(2d) 334 (C.A.), refd to. [para. 119].

Theriault et al. v. Corkum et al., [1993] W.S.J. No. 144; 121 N.S.R.(2d) 99; 335 A.P.R. 99 (C.A.), refd to. [para. 132].

Bhasin v. Hrynew et al. (2014), 464 N.R. 254; 584 A.R. 6; 623 W.A.C. 6; 2014 SCC 71, refd to. [para. 187].

N.R. v. B.B. et al., [2009] 1 S.C.R. 295; 385 N.R. 85; 266 B.C.A.C. 1; 449 W.A.C. 1; 2009 CarswellBC 342; 2009 SCC 10, refd to. [para. 208].

A.L. Gullison Ltd. v. Ladds - see Ladds (Bankrupt), Re.

Ladds (Bankrupt), Re (2010), 353 N.B.R.(2d) 281; 910 A.P.R. 281; 2010 Carswell NB 20 (Q.B. Reg.), refd to. [para. 221].

Bennett v. Riens (2004), O.J. No. 4341 (Sup. Ct.), refd to. [para. 222].

Garlicki (Bankrupt), Re (2010), 258 Man.R.(2d) 35; 499 W.A.C. 35; 2010 MBCA 73, refd to. [para. 225].

Doucette et al. v. Jones (2006), 299 N.B.R.(2d) 288; 778 A.P.R. 288; 2006 NBCA 38, dist. [para. 245].

Delphinium ltée et al. v. 512842 N.B. Inc. et al. (2006), 307 N.B.R.(2d) 284; 795 A.P.R. 284; 2006 NBCA 38, appld. [para. 245].

Air Canada v. M & L Travel Ltd., Martin and Vaillant, [1993] 3 S.C.R. 787; 159 N.R. 1; 67 O.A.C. 1, refd to. [para. 257].

Authors and Works Noticed:

Halsbury's Laws of England (4th Ed.), vol. 26, p. 296, para. 562 [para. 209].

Sopinka, John, and Lederman, Sidney N., The Law of Evidence in Canada, generally [para. 65].

Counsel:

Avocats:

Eugene Mockler, Q.C., and Christian Michaud, for the plaintiffs;

Charles LeBlond, Q.C., for the defendant.

This case was heard on September 12-15, 19, 20, 2011, September 6, 2013, August 19-23 and 26-28, October 6-10, 27 and 29-31, and December 19, 2014, by Ouellette, J., of the New Brunswick Court of Queen's Bench, Trial Division, Judicial District of Moncton, who delivered the following decision in English on February 27, 2015, and the French version at a later date.