Mills Pittman Twyne PLC Inc. v. Island Enterprises Ltd. et al., (2015) 368 Nfld. & P.E.I.R. 258 (NLTD(G))

• Judge: Handrigan, J.
• Court: Supreme Court of Newfoundland and Labrador (Canada)
• Case Date: May 11, 2015
• Jurisdiction: Newfoundland and Labrador
• Citations: (2015), 368 Nfld. & P.E.I.R. 258 (NLTD(G))

Mills Pittman v. Island Ent. (2015), 368 Nfld. & P.E.I.R. 258 (NLTD(G));

    1149 A.P.R. 258

MLB headnote and full text

Temp. Cite: [2015] Nfld. & P.E.I.R. TBEd. JN.026

Mills Pittman Twyne PLC Inc. (applicant) v. Island Enterprises Ltd. (first respondent) and Ernest Simmons (second respondent)

(201406G0085; 2015 NLTD(G) 79)

Indexed As: Mills Pittman Twyne PLC Inc. v. Island Enterprises Ltd. et al.

Newfoundland and Labrador Supreme Court

Trial Division (General)

Handrigan, J.

June 3, 2015.

Summary:

A lawyer with Mills Pitman Twyne PLC Inc. (MPT) represented Ernest Simmons in family law proceedings. Ernest was the director and majority shareholder of Island Enterprises Ltd. (IEL). Ernest's former wife (Alvina) was a minority shareholder in IEL. IEL sold land (its only assets) to the Government of Newfoundland and Labrador for $53,825.38, and the net proceeds of the sale ($49,891.25) were paid into court pending the determination of an application by Alvina in the family law proceedings respecting entitlement to business assets, including the funds. IEL, without Alvina's knowledge or consent, gave MPT a guarantee to pay the legal fees and disbursements that Ernest owed to MPT. Alvina's application resulted in a determination that she owned an equal share of the land that was sold to the government (see 348 Nfld. & P.E.I.R. 30; 1082 A.P.R. 30). Ernest did not pay MPT's account. The amount owing totalled $22,978.52. MPT applied for an order paying it $17,396 (half the amount paid into court less an amount to be deducted for accounting fees and taxes) out of the money paid into court. Alvina opposed the motion, asserting that the guarantee was not valid and the application was premature.

The Newfoundland and Labrador Supreme Court, Trial Division (General), in a decision reported at [2014] Nfld. & P.E.I.R. Uned. 45, agreed that the application was premature as the guarantee contained conditions precedent that were not met. The court adjourned the application sine die. MPT applied for an order under s. 343 of the Corporations Act to wind up IEL, naming IEL and Ernest as respondents. Alvina intervened. Alvina agreed that IEL should be wound up and a liquidator appointed, but asserted that MPT had no status to apply for relief.

The Newfoundland and Labrador Supreme Court, Trial Division (General), held that MPT lacked status to apply for a winding-up order and the guarantee IEL gave MPT was not valid and enforceable. The court held that Alvina had status to request that IEL be wound up, and allowed her request to do so. The court appointed a receiver for IEL and set out how the receiver should administer the winding-up.

Company Law - Topic 2170

Shareholders - Shareholders' rights - To rectify oppressive or unfairly prejudicial act - A lawyer with Mills Pitman Twyne PLC Inc. (MPT) represented Ernest Simmons in family law proceedings - Ernest was the director and majority shareholder of a dormant company (Island Enterprises Ltd. (IEL)) - Ernest's former wife (Alvina) was a minority shareholder in IEL - They revived IEL so that it could sell land (its only asset) - The net proceeds of the sale were paid into court pending the determination of Alvina's application respecting entitlement to the funds - IEL, without Alvina's knowledge or consent, gave MPT a guarantee to pay the legal fees and disbursements that Ernest owed to MPT - Alvina's application resulted in a determination that she owned an equal share of the land that was sold - Ernest did not pay MPT's account - MPT claimed oppression and applied for an order winding up IEL under s. 343 of the Corporations Act - Alvina intervened - She agreed that IEL should be wound up, but asserted that MPT lacked status to apply for relief - The Newfoundland and Labrador Supreme Court, Trial Division (General), agreed that MPT lacked the required standing - However, Alvina, as a minority shareholder in IEL, had standing to seek relief under s. 343 - IEL and Ernest ignored her reasonable expectations for the money that IEL paid into court and the unilateral and cavalier way in which Ernest did that was oppressive and disregarded what was fair to her - The court concluded that IEL's guarantee to MPT was null and void for three reasons: (1) it was given without notice to, or consent from, Alvina; (2) IEL and Simmons acted oppressively when they created the guarantee; and (3) the guarantee was not a bona fide corporate cause - The court ordered that IEL be wound up - See paragraphs 39 to 49.

Company Law - Topic 2170.1

Shareholders - Shareholders' rights - Oppressive acts - Remedies - [See Company Law - Topic 2170 ].

Company Law - Topic 7013

Fundamental changes and shareholders' rights - Rights of minority or dissenting shareholders - Oppression - What constitutes - [See Company Law - Topic 2170 ].

Company Law - Topic 8356

Winding-up legislation - Application or petition - Persons entitled to apply - [See Company Law - Topic 2170 ].

Company Law - Topic 8356

Winding-up legislation - Application or petition - Persons entitled to apply - A lawyer with Mills Pitman Twyne PLC Inc. (MPT) represented Ernest Simmons in family law proceedings - Ernest was the director and majority shareholder of Island Enterprises Ltd. (IEL) - IEL gave MPT a guarantee to pay the legal fees and disbursements that Ernest owed to MPT - Ernest did not pay MPT's account - MPT claimed oppression and applied as a creditor of IEL for an order winding up IEL under s. 343 of the Corporations Act - The Newfoundland and Labrador Supreme Court, Trial Division (General), held that MPT was not a creditor such that it had status to apply for an order dissolving IEL - Further, MPT made a conclusory statement that IEL's failure to pay was oppressive, but offered no evidence to support its statement - It neither stated its reasonable expectations nor provided the factual basis for its expectations so that the court could determine if MPT acted reasonably - MPT failed to prove that it was entitled to relief under s. 343 - See paragraphs to 31 to 38.

Company Law - Topic 8417

Winding-up legislation - Winding-up order - Oppression remedy - [See Company Law - Topic 2170 and second Company Law - Topic 8356 ].

Company Law - Topic 8643

Winding-up legislation - Creditors - Creditor - What constitutes - [See second Company Law - Topic 8356 ].

Company Law - Topic 8643

Winding-up legislation - Creditors - Creditor - What constitutes - The Newfoundland and Labrador Supreme Court, Trial Division (General), stated that "Section 343 of the Corporations Act says that a 'creditor' has status to apply for relief from oppressive behavior; but the Act does not define who is a 'creditor' under s. 343. If legislation does not define a term used in it, the common law definition of that term applies. In Churchill v. Le Barron Mortgages Ltd. [1978, Nfld. Dist. Ct.], McCarthy D.C.J. adopted the definition of 'creditor' from the Concise Oxford Dictionary, New Edition as ' ... [t]he one to whom a debt is owing.' I will use the same definition here." - See paragraph 11.

Company Law - Topic 9781

Actions against corporations and directors - Action for oppressive conduct - When available - [See Company Law - Topic 2170 and second Company Law - Topic 8356 ].

Company Law - Topic 9783

Actions against corporations and directors - Action for oppressive conduct - Persons entitled - [See Company Law - Topic 2170 and second Company Law - Topic 8356 ].

Company Law - Topic 9797

Actions against corporations and directors - Action for oppressive conduct - Remedies - [See Company Law - Topic 2170 ].

Company Law - Topic 9799

Actions against corporations and directors - Action for oppressive conduct - Evidence (incl. onus and standard of proof) - [See second Company Law - Topic 8356 ].

Words and Phrases

Creditor - The Newfoundland and Labrador Supreme Court, Trial Division (General), considered the meaning of this word as used in s. 343 of the Corporations Act, R.S.N.L. 1990, c. C-36 - See paragraph 11.

Cases Noticed:

Korolis et al. v. Koutouki Taverna Saskatoon Inc. et al. (2010), 358 Sask.R. 164; 2010 SKQB 183, refd to. [para. 9].

Pelley v. Pelley et al. (2003), 221 Nfld. & P.E.I.R. 1; 661 A.P.R. 1; 2003 NLCA 6, refd to. [para. 10].

Churchill v. Le Barron Mortgages Ltd., O'Dea and Homeplan Realty Ltd. (1978), 26 Nfld. & P.E.I.R. 175; 72 A.P.R. 175; 1978 CarswellNfld 135 (Dist. Ct.), refd to. [para. 11].

Statutes Noticed:

Corporations Act, R.S.N.L. 1990, c. C-36, sect. 343 [para. 7].

Counsel:

Stacy MacDonald, for the applicant;

Island Enterprises Ltd., unrepresented;

Ernest Simmons, on his own behalf;

Katrina Brannan, Q.C., for Alvina Simmons.

This application was heard at Clarenville, N.L., on May 11, 2015, by Handrigan, J., of the Newfoundland and Labrador Supreme Court, Trial Division (General), who delivered the following judgment on June 3, 2015.