Matic et al. v. Waldner et al., (2016) 330 Man.R.(2d) 107 (CA)

• Judge: Hamilton, Monnin and Pfuetzner, JJ.A.
• Court: Court of Appeal (Manitoba)
• Case Date: December 02, 2015
• Jurisdiction: Manitoba
• Citations: (2016), 330 Man.R.(2d) 107 (CA);2016 MBCA 60

Matic v. Waldner (2016), 330 Man.R.(2d) 107 (CA);

      675 W.A.C. 107

MLB headnote and full text

Temp. Cite: [2016] Man.R.(2d) TBEd. JN.026

Ante Matic and Matic Holdings Inc. (plaintiffs/appellants) v. Paul Waldner, William Waldner, Springhill Lumber Wholesale Ltd., Black Forest Holdings Ltd., Prairie Post Frame Construction Ltd., Walcan Holdings Ltd., Canamatic Ventures Ltd. and Can-American Corrugating Co. Ltd. (defendants/respondents)

Springhill Lumber Wholesale Ltd. and Black Forest Holdings Ltd. (plaintiffs by counterclaim) v. Ante Matic, Matic Holdings Inc. and Callidus Construction Group Ltd. (defendants by counterclaim)

(AI 15-30-08321; 2016 MBCA 60)

Indexed As: Matic et al. v. Waldner et al.

Manitoba Court of Appeal

Hamilton, Monnin and Pfuetzner, JJ.A.

June 6, 2016.

Summary:

Three actions were consolidated for trial pursuant to Queen's Bench Rule 6.01. In the first action, the plaintiffs, Matic and Matic Holdings, alleged that, as a result of an oral agreement, they were 30% shareholders in Springhill Lumber Wholesale Ltd. and three related companies. They sought a declaration accordingly. In the second action, Springhill claimed $150,000 and interest from Matic as repayment of a loan that it alleged it made to Matic. Matic counterclaimed alleging that he was wrongfully dismissed as general manager of Springhill. He sought general damages, exemplary damages and/or punitive damages. In its defence to the counterclaim, Springhill alleged that, in his capacity as general manager, Matic was not an employee, but that Matic Holdings was an independent contractor. Furthermore, Springhill alleged that it had just cause to dismiss Matic. In the third action, the defendant Can-Am Corrugating claimed $46,658.24 and interest from Matic as payment for materials and equipment that it alleged it sold to him. Matic denied that he owed any money for the materials and equipment.

The Manitoba Court of Queen's Bench, in a decision reported at (2014), 312 Man.R.(2d) 43, dismissed all the claims of Matic and Matic Holdings against the defendants in the shareholder/breach of fiduciary duty action. In that same action, the court dismissed a counterclaim by Springhill and another corporate defendant against the plaintiffs for breach of fiduciary duty by Matic as a director and officer of those companies. In the second action, the court awarded judgment in Springhill's favour against Matic for $150,000 and interest at the rate of 1.5% per annum from August 5, 2011. The court dismissed Matic's counterclaim for wrongful dismissal and for damages in lieu of notice. In the third action, the court awarded judgment in favour of Can-Am Corrugating against Matic for $36,973.90 and interest at the rate of 26.82% from August 5, 2011. The plaintiffs appealed and the defendants cross-appealed.

The Manitoba Court of Appeal allowed the appeal in part, holding that the trial judge committed palpable and overriding errors of fact, and of mixed fact and law in holding that there was no contract. The court returned the matter to the trial court to determine damages for breach of contract. The court allowed the cross-appeal. The court held that the trial judge erred by failing to find that Matic breached the fiduciary duty he owed to Springhill by diverting a corporate opportunity for his own benefit. The court returned the matter to the trial court to determine Springhill's damages.

Company Law - Topic 2164

Shareholders - Shareholders' rights - Derivative actions - The plaintiffs were Matic and Matic holdings - Matic was the sole shareholder of Matic Holdings, which owned a 30% interest in another company, Springhill - The plaintiffs claimed that the defendants had breached a fiduciary duty to Springhill and they suffered damages as a result of their ownership in Springhill - The Manitoba Court of Appeal rejected the claim - The duty was owed to Springhill - The plaintiffs needed to bring the claim on behalf of Springhill as a derivative action under s. 232 of the Corporations Act - The court had previously held that compliance with the statutory procedures was mandatory - See paragraphs 109 to 115.

Company Law - Topic 2170.1

Shareholders - Shareholders' rights - Oppressive acts - Remedies - [See Company Law - Topic 9785 ].

Company Law - Topic 4262

Directors - Duties - General principles - Fiduciary duty - The Manitoba Court of Appeal discussed the law regarding the fiduciary duty owed by a director of a company - The court stated that "The duty to avoid conflicts of interest with the corporation includes not only the director's personal interests, but those of any other corporation in which the director is interested. ...  The obligations required by the fiduciary duty of a director or officer will vary with the factual context. ...  The 'corporate opportunity doctrine' arises out of the fundamental obligation of a fiduciary not to allow a conflict of his or her duty with his or her own interests. ...  The determination of whether a director has taken an opportunity belonging to the corporation is a fact-intensive exercise. ... Due to the strict ethic that is imposed on directors, a breach of fiduciary duty can occur when the diverted opportunity is a potential, rather than a mature opportunity, or one that the corporation is not actively pursuing. ... [T]here is no strict formula to apply, and the existence of a corporate opportunity will depend upon the particular facts. ...  In summary, determining whether a director has breached his or her fiduciary duty under the corporate opportunity doctrine requires an extensive contextual analysis. All relevant factors must be taken into account, including: the maturity of the opportunity; whether it was actively pursued by the corporation; whether the corporation was capable of taking advantage of the opportunity; whether the opportunity was in the corporation's line of business or a related business; how the opportunity arose or came to the attention of the director; whether the other directors of the corporation had knowledge of the director's pursuit of the opportunity; and whether the other directors gave their fully informed consent to the director's pursuit of the opportunity. The overall goal of the analysis is to determine whether the opportunity fairly belonged to the corporation in the circumstances." - See paragraphs 119 to 153.

Company Law - Topic 4266

Directors - Duties - Breach of fiduciary duty - What constitutes - [See Equity - Topic 3607 ].

Company Law - Topic 9413

Actions by corporations - Parties - Derivative actions - [See Company Law - Topic 2164 ].

Company Law - Topic 9785

Actions against corporations and directors - Action for oppressive conduct - Oppression, prejudice or disregard of interests - The plaintiffs, Matic and Matic Holdings, alleged that, as a result of an oral agreement made at a meeting, they were 30% shareholders in the defendant company, Springhill - The trial judge dismissed the action - The Manitoba Court of Appeal held that the trial judge erred in holding that there was no contract and returned the matter to the trial court to determine damages for breach of contract - The court discussed whether the plaintiffs were also entitled to damages for oppression under s. 234 of the Corporations Act - The court stated "It is trite law that, when a contract has been breached, the remedy at common law is an action for damages for breach of contract. Although equitable remedies, such as ... specific performance, are also available for breach of contract, equitable remedies are discretionary, and generally will not be granted where an award of damages will adequately compensate the plaintiff. ...  In this case, common law damages for breach of contract will adequately compensate the plaintiffs. Any equitable remedy under section 234 of the Corporations Act would be duplicative even if it were available in the circumstances of this case." - See paragraphs 93 to 100.

Company Law - Topic 9797

Actions against corporations and directors - Action for oppressive conduct - Remedies (incl. compensation) - [See Company Law - Topic 9785 ].

Contracts - Topic 1444

Formation of contract - Agreements which are not contracts - Agreements to agree - The plaintiffs, Matic and Matic Holdings, alleged that, as a result of an oral agreement made at a meeting, they were 30% shareholders in the defendant company, Springhill - The trial judge dismissed the action - No agreement was made at that meeting that Matic would become a shareholder - To the contrary, the discussions that took place were very general and non-committal - At most, they resulted in an agreement to agree, which was unenforceable at law - Any decisions that might have been made were on the clear and unequivocal understanding that, before there was any enforceable binding agreement: (a) Springhill's purchase from its present owners had to be completed; and (b) there had to be signed written agreements which had been prepared, reviewed and approved by the lawyers and/or accountants for both Springhill and Matic - It was understood that the written agreements would define the shareholdings in Springhill and Matic's participation as a shareholder and as general manager - The court did not believe Matic's testimony, nor did it accept any of the plaintiffs' other evidence that there was an agreement - Therefore, there was no agreement that the defendants had to disprove - The plaintiffs appealed - The Manitoba Court of Appeal held that the trial judge made palpable and overriding errors in his application of the objective reasonable bystander test - He considered irrelevant evidence, failed to consider relevant evidence and made findings without basis in the evidence - Central to his approach was his finding that it was "[the defendant] Waldner's consistent position that no binding agreement would be made without advice from his and Springhill's lawyers and accountants" (i.e., Waldner's subjective intention was fundamental to his findings) - Subjective intention was not relevant to the analysis required under the objective reasonable bystander test - "The purpose of the objective reasonable bystander test is to determine the manifested intentions of the parties, rather than their subjective intentions. ..." - If Waldner had communicated to Matic his subjective understanding that the agreement was conditional upon the execution of formal documentation, the fact of that communication would be considered under the objective reasonable bystander test - However, the absence of such communication meant that Waldner's subjective understanding was a factor not properly considered by the trial judge - On a proper application of the objective reasonable bystander test, taking into account all of the evidence, other than evidence of the parties' subjective intention, the parties had manifested their intention to contract and not merely to continue negotiations - The essential terms had been agreed to - See paragraphs 36 to 92.

Contracts - Topic 1461

Formation of contract - Intention - General - The Manitoba Court of Appeal discussed the law governing the formation of contracts - The court stated, inter alia, that "...  the first requirement is that the parties must have the intention to contract. ...  Second, the essential terms of the contract must be discernible. ...  Identification of the 'parties, property and price' are terms that are frequently cited as being essential to the formation of a contract involving the purchase and sale of shares or real estate. The closing date has been considered an essential term by some courts but not others. ... The issue of identifying essential terms may also be relevant to determining whether the parties have reached a binding agreement, despite an intention that the terms of the agreement will subsequently be formalized. ... Third, the terms agreed to must be sufficiently certain. ... 'The question of whether terms are certain asks whether the court can give reasonably definite meaning to what the parties have said' ... The determination of whether the requirements for an enforceable contract have been met involves a contextual analysis, taking into account all the material facts. Such facts can include the subsequent conduct of the parties, including subsequent negotiations ... The facts and circumstances that should be considered will depend upon the context of each case but could include written or oral communications between the parties; communications to third parties; the conduct of the parties; the nature of subsequent negotiations, including when and how they came to an end. The subjective intention of the parties is not relevant in this analysis." - See paragraphs 55 to 64.

Contracts - Topic 1503

Formation of contract - Consensus or agreement - What constitutes a consensus necessary for a binding contract - [See Contracts - Topic 1444 and Contracts - Topic 1461 ].

Contracts - Topic 1505

Formation of contract - Consensus or agreement - Essential terms - What constitute - [See Contracts - Topic 1461 ].

Contracts - Topic 7406

Interpretation - General principles - Interpretation by context - [See Contracts - Topic 1461 ].

Contracts - Topic 7409

Interpretation - General principles - Subsequent conduct of parties - [See Contracts - Topic 1461 ].

Contracts - Topic 8502

Evidence - General - Proof of contract - [See Contracts - Topic 1444 and Contracts - Topic 1461 ].

Equity - Topic 3606

Fiduciary or confidential relationships - General principles - What constitutes a fiduciary relationship - [See Equity - Topic 3607 ].

Equity - Topic 3607

Fiduciary or confidential relationships - General principles - Relationships which are not fiduciary - Matic was the general manager of Springhill Lumber Wholesale Ltd. - Matic was also a director and officer of Springhill - Callidus Construction Group Ltd. was an incorporated construction company whose shareholders were Matic and his daughter - The trial judge held that Matic did not breach his fiduciary duty to Springhill by having Callidus participate in a construction project at Keewaywin First Nation, as it was not satisfied that he had a fiduciary duty to Springhill as it related to construction projects - Notwithstanding that Springhill had participated in construction projects for First Nations bands prior to its purchase, there was insufficient evidence to satisfy the court that Springhill intended to continue to do construction for First Nations bands that were its customers - Waldner, Springhill's President, testified that it would have been nice for Springhill to have made the amount of money that Callidus apparently made on the Keewaywin Project - However, Waldner's interest in that regard did not create a fiduciary duty for Matic - Matic might have had a fiduciary duty if Springhill had embarked upon a program of performing construction projects or had established a construction division after its purchase - The Manitoba Court of Appeal held that the trial judge made an overriding error in finding that there was no evidence that Springhill was doing construction projects at the time of the trial - This was critical to his conclusion that Springhill had no intention to do construction work while Matic was general manager and that, accordingly, "construction projects" were not being actively pursued by Springhill and were not opportunities belonging to Springhill - The court held that Matic breached the fiduciary duty he owed to Springhill by diverting a corporate opportunity for his own benefit - The court returned the matter to the trial court to determine Springhill's damages - See paragraphs 154 to 178.

Equity - Topic 3608

Fiduciary or confidential relationships - General principles - Standard of conduct - [See Company Law - Topic 4262 ].

Equity - Topic 3721

Fiduciary or confidential relationships - The employer-employee relationship - General - [See Equity - Topic 3607 ].

Equity - Topic 3991

Fiduciary or confidential relationships - Practice - General - [See Company Law - Topic 2164 ].

Interest - Topic 5308

Interest as damages (prejudgment interest) - Interest on payment of money or debt withheld - Rate of interest applicable - Matic was general manager of Springhill Lumber Wholesale Ltd. - A related company shipped building materials to his home in Kelowna - Matic claimed that they were a gift - According to Waldner, the President of both companies, invoices accompanied the materials and those invoices showed an interest rate of 26.82% per annum - The trial judge held that Matic was well aware that he was being charged for the materials - He was also aware of the interest rate that was being charged if he failed to pay - Formal demand for payment was made on August 5, 2011, over three years ago and Matic had paid nothing - Regarding the Genie Lift, whether it was initially given to Matic on loan, with an option to purchase, or whether he bought it outright, had become irrelevant because of the passage of time - He had taken no steps to return it - It was obvious that the price was $25,000, and not $21,000 as Matic alleged, because that was the amount he was invoiced in November 2010 and there was no evidence that he ever raised an objection - The trial judge also found that the interest rate was 26.82%, to be calculated on the principal amount from the date of demand for payment - The Manitoba Court of Appeal upheld these findings on appeal - No palpable and overriding error had been shown - See paragraphs 105 to 108.

Master and Servant - Topic 7550

Dismissal or discipline of employees - Grounds - Cause or just cause defined - Matic was general manager of Springhill Lumber Wholesale Ltd. - The plaintiffs claimed that Matic had been wrongly dismissed - The trial judge held that Springhill had just cause to dismiss Matic because of his abusive and bullying manner in his treatment of employees - Springhill also had grounds to dismiss Matic based on his attempts to entice employees to leave Springhill and join him in starting a competing lumber business - The plaintiffs appealed, taking issue with the trial judge's credibility and factual findings - The Manitoba Court of Appeal dismissed this ground of appeal - The plaintiffs had not demonstrated that the trial judge made any palpable and overriding errors in this respect - All of his factual findings were amply supported by the evidence - See paragraphs 101 to 104.

Master and Servant - Topic 7553

Dismissal of employees - Grounds - Misconduct or misconduct of business - [See Master and Servant - Topic 7550 ].

Master and Servant - Topic 7582

Dismissal or discipline of employees - Grounds - Conduct incompatible with employer's interests - [See Master and Servant - Topic 7550 ].

Master and Servant - Topic 7585

Dismissal of employees - Grounds - Threatening to open competing business - [See Master and Servant - Topic 7550 ].

Counsel:

R.I. Good and C.C.S. Fergusson, for the appellants;

J.A. Kagan and A.D.F. Sain, for the respondents.

This appeal was heard on December 2, 2015, by Hamilton, Monnin and Pfuetzner, JJ.A., of the Manitoba Court of Appeal. Pfuetzner, J.A., delivered the following decision for the court on June 6, 2016.