2008 BCSC 587 Juno Europe LP v. PresiNet Systems Corp.

Before: The Honourable Madam Justice A.W. MacKenzie

Reasons for Judgment

Counsel for the Petitioner:	Brent A. Meckling
Counsel for the Respondent, PresiNet Systems Corp.:	Jaime A. Hall
Counsel for the Respondents, Dean M. Pothorin and Jo Surich:	Nazeer T. Mitha
Date and Place of Trial/Hearing:	April 21 – 23, 2008
	Vancouver, B.C.

INTRODUCTION

[1] Juno Europe LP petitions against PresiNet Systems Corp., Dean M. Pothorin, and Jo Surich (collectively “PresiNet”) pursuant to s. 227 of the British Columbia Business Corporations Act, S.B.C. 2002, c. 57 (the “Act”) for relief from PresiNet’s conduct, alleged to be oppressive and unfairly prejudicial to Juno. The conduct complained of is PresiNet’s treatment of Steven Haber before his termination as President of PresiNet’s U.S. operations combined with PresiNet’s failure to provide Juno with timely financial information.

[2] Juno seeks an order that PresiNet purchase all the common shares of PresiNet that Juno owns for the purchase price Juno originally paid. Alternatively, Juno seeks an order that PresiNet purchase these shares at fair market value. In the last alternative, Juno seeks an order that PresiNet be liquidated and dissolved.

FACTS

[3] PresiNet was incorporated in 1999 as a British Columbia company and was recognized under the Act in 2003.

[4] At the relevant times, the senior management team of PresiNet included Dean Pothorin (CEO) and Jo Surich (President).

[5] PresiNet’s business is the development and sale of computer software, primarily software that assists enterprises in monitoring their use of computer systems to enhance efficiency, compliance and security. It can alert companies to unauthorized use of their data base.

[6] Juno Europe is a limited partnership established under the laws of the British Virgin Islands. Juno Europe made the investment in PresiNet and holds 2,278,265 common shares.

[7] Juno Investments is a private equity firm based in New York and Chicago. Juno Investments indirectly controls Juno Europe. Juno Investments and its affiliates including Juno Europe (collectively “Juno”) are in the business of acquiring interests in companies operating in a variety of industries. Juno is run by James Haber, founder and principal of Juno Investments.

The Transaction

[8] Juno acquired approximately 11% of the common stock of PresiNet from treasury for USD $650,000 (the “Transaction”). Three documents evince the Transaction, each executed on or about May 25, 2005:

a) Share Purchase Agreement;

b) Shareholders Agreement; and

c) Employment Agreement between Steven Haber and PresiNet.

(Collectively the “Transaction documents”).

[9] The Share Purchase Agreement incorporates the Employment Agreement. Both the Share Purchase Agreement and the Shareholders Agreement contain an “entire agreement” clause described below.

[10] The Transaction ended approximately five months of negotiation between Juno’s parent, Juno Investments LLC and PresiNet.

[11] Prior to the Transaction, two discussion documents were prepared by the parties:

a. PresiNet prepared an “Approach to US Entity” document (the “Approach document”) in early March 2005; and

b. Following PresiNet’s Approach document, Juno Investments LLC sent a letter dated March 29, 2005 to PresiNet (the “Bid Letter”) which explicitly provided it was “subject to…mutually agreeable definitive documentation”.

[12] So both the Approach document and the Bid Letter are pre-contractual documents that were overtaken by the contracts. Therefore, when I consider the Transaction, it is the Transaction documents which are only the three contracts.

[13] Each of the Share Purchase Agreement and the Shareholders Agreement contain an “entire agreement” clause which provides:

This Agreement (including the Exhibits hereto, if any), the Certificate of Incorporation of the Company and the other Transaction Agreements constitute to the full and entire understanding and agreement between the parties with respect to the subject matter hereof, and any other oral agreement relating to the subject matter hereof existing between the parties are expressly cancelled.

[14] The Share Purchase Agreement includes the following:

a) Juno will purchase PresiNet Shares from treasury for USD $650,000.00;

b) There is no public market for PresiNet’s Shares;

c) PresiNet and Steven Haber have entered into the Employment Agreement;

d) Juno shall be entitled to appoint one person to PresiNet’s board of directors, at first instance Philip Kampf;

e) PresiNet shall use the purchase funds for general working capital needs; and

f) Entire agreement clause.

[15] There is no provision anywhere that provides for the employment of Steven Haber indefinitely.

[16] The Shareholders’ Agreement includes the following:

a) At least one seat on PresiNet’s board of directors shall be held by a nominee of Juno;

b) Entire agreement clause;

c) Employment Agreement referred to.

[17] The Employment Agreement includes the following:

a) Steven Haber shall be employed by PresiNet in sales and marketing;

b) Duties and compensation are dependant upon the successful completion of two phases of development;

c) Phase 1 duties are primarily centered on sales and recruiting distributors in the Northeast United States;

d) Phase 2 duties include responsibility for sales throughout the United States;

e) Steven Haber is to report to the Corporate President of PresiNet in Victoria;

f) Sales targets of USD 1.0 million required to graduate from phase 1 to phase 2;

g) PresiNet may not terminate Steven Haber’s employment without cause prior to the first anniversary to the date of the Employment Agreement.

[18] PresiNet terminated Steven Haber’s employment effective May 25, 2006. PresiNet’s grounds were that Mr. Haber made no sales at all that year, and his performance was lacklustre.

[19] James Haber on behalf of Juno agreed that PresiNet’s purpose is to sell its product, that Juno had little experience in investing in computer software companies, and that he did not consider the marketability of PresiNet’s product before Juno invested in PresiNet.

[20] However, James Haber deposed that he wanted Juno to have “direct control” of the U.S. operation of PresiNet through the employment of Steven Haber as a “key element” of the Transaction. He deposed that he expected Juno’s investment funds to be substantially used for expansion of PresiNet’s operations in to the United States. That evidence is in spite of the Share Purchase Agreement, which says that money is for general capital requirements.

[21] Juno’s primary representative in negotiating the Transaction was Yoav Millet who reported to James Haber. Mr. Millet was then the managing director of Juno Investments. Juno produced no evidence from Mr. Millet as to the pre-Transaction or pre-contractual negotiations. James Haber deposed that he would not have relied upon Steven Haber’s review of the Transaction documents.

[22] Steven Haber is the younger brother of James Haber and in 2005-2006, had the title with Juno of non-corporate “Director”. Juno paid Steven Haber no salary. His duties were to source new investments and he worked from Juno’s offices in New York city. His employment with Juno ended when he became a PresiNet employee in May 2005.

[23] Steven Haber had some involvement in the discussions that culminated in the Transaction. He understood he was to “directly manage” the U.S. operation of PresiNet. He did not deal with the lawyers regarding the Transaction documents other than his Employment Agreement which was drafted by his attorneys. He understood that under his Employment agreement, PresiNet could not terminate his employment without cause for one year. He acknowledges he made no sales in his year with PresiNet as the North East U.S. sales manager.

[24] PresiNet hired Andrew Waxman as a sales associate to work with Steven Haber. Mr. Waxman was Steven Haber’s choice. Mr. Haber acknowledged that he received from PresiNet both training and support by way of technical presentations to certain potential clients on several occasions in New York by both Mr. Surich and Mr. Pothorin.

[25] Steven Haber also agreed that the March 29, 2005 Bid Letter was not the final agreement but rather was a concept to be formulated into an agreement, and that it described benefits he would receive if his employment with PresiNet was terminated.

[26] The parties agree that in March 2008, the Directors of PresiNet approved the audited financial statements of the company for 2005, 2006 and 2007. These Directors include Mr. Philip Kampf, Juno’s nominee on PresiNet’s Board of Directors. On March 12, 2008, PresiNet held its Annual General Meeting which Juno attended by proxy and voted in favour of all resolutions including the unanimous Resolution approving the audited financial statements.

[27] For about two years, PresiNet’s offer to Juno to allow it to look at the books has been outstanding. Juno has not followed up on this invitation to assuage other complaints.

[28] Mr. Kampf remains a Director of PresiNet.

[29] The basis for disposing of this petition makes it unnecessary to review the evidence in detail, but I have considered it all and heard extensive submissions upon it. I will refer to more of the evidence later under the discussion of whether Juno has met the onus of proving it is entitled to a remedy for alleged oppressive or unfairly prejudicial conduct of PresiNet.

ISSUE

[30] Juno agrees that the dismissal of Mr. Haber was within the terms of his Employment Agreement which provided that he could be terminated without cause after one year. It is common ground that PresiNet did not breach the Agreement.

[31] Instead, Juno alleges that PresiNet did not support Mr. Haber in his year of employment, nor did it warn him or Juno of their concerns about his performance. Juno asserts this treatment, in combination with PresiNet’s failure to provide timely financial statements, failed to meet Juno’s reasonable expectations, so was oppressive and unfairly prejudicial conduct that justifies a remedy under s. 227(3) of the Act.

[32] The issue requires a determination whether Juno’s expectations were reasonable in circumstances where the parties, both sophisticated commercial entities acting with the benefit of legal advice, entered into the transaction.

[33] For the following reasons, I have concluded that Juno has failed to meet the burden of proving its expectations were reasonable in the circumstances, even if Juno’s complaint about PresiNet’s treatment of Steven Haber were valid.

The Positions of the Parties

[34] Juno submits PresiNet’s failure to support Steven Haber and their termination of him without any advance warning or consultation constitutes oppressive and unfairly prejudicial conduct against Juno in combination with PresiNet’s failure to provide timely financial statements.

[35] Juno agrees that PresiNet has provided the financial statements for 2005, 2006 and 2007 and does not seek a remedy for this already corrected act. However, Juno says past failure to provide timely financial statements in combination with PresiNet’s failure to support Mr. Haber in his first year as President and failure warn him and Juno about PresiNet’s concerns with his performance abrogated Juno’s “reasonable expectations” amounting to “oppression”, or “unfair prejudice” within s. 227(2) of the Act which entitles them to a remedy under s. 227(3).

[36] Juno says PresiNet’s lack of support and failure to warn about their concerns with Steven Haber’s performance gave no opportunity for Mr. Haber to correct his performance. Juno emphasized that it is not saying Mr. Haber was entitled to be President of PresiNet’s U.S. operations indefinitely, that his performance was irrelevant, or that he had “carte blanche”. But Juno does say their reasonable expectation that Steven Haber would run the U.S. operations obligated PresiNet to support him and to attempt to communicate their concerns and resolve them.

[37] Juno relies on the following e-mail to Mr. Millet, sent March 14, 2005 by Dean Pothorin:

Yoav, thanks for the update, we have all the faith in Steven and look forward to him running the US operations. I believe that our growth in the US will be enormous, subject to only our ability to get to the right levels and ability to service the growth.

[38] Also, Juno relies on a comment in an email, after a meeting in New York in May 2005, in which Mr. Pothorin said to James Haber that he looked forward to working with Juno as “as a star company”. Juno says this assisted in creating Juno’s reasonable expectation that it would have a close relationship with PresiNet.

[39] Juno agrees that both Juno and PresiNet had expectations that Steven Haber would effectively perform as manager of PresiNet’s U.S. operations. However, Juno blames PresiNet for Mr. Haber’s failure to perform, saying that PresiNet impeded his performance. There is no evidence to support this assertion.

[40] Juno complains that Steven Haber’s dismissal denied Juno the opportunity for its chosen person to manage PresiNet’s U.S. operations and to grow its investment. This was, according to Juno, the unfair prejudice caused by the lack of support and failure to warn Juno about their complaints concerning Steven Haber. Juno has adduced no evidence at all of any harm to its investment from the conduct of PresiNet. Indeed, it is hard to understand Juno’s position given the lack of sales by Mr. Haber.

[41] Juno submits fairness requires recognition that Steven Haber’s role with PresiNet’s U.S. operations was an important feature of the parties’ agreement to Juno.

[42] Juno characterizes PresiNet’s position that the entire agreement clauses in the Transaction documents negate any expectation that Juno could reasonably have held as an attempt to “overwhelm this court’s assessment of the equitable principles underlying s. 227 of the Act”. Juno submits that the Transaction documents may inform the court’s assessment of whether Juno’s expectations were reasonable, but should not dictate it.

[43] Juno says PresiNet takes the entire agreement clauses too far and seeks to use them as protection from Juno’s equitable claim to a remedy under the Act when it does no such thing. Instead, Juno says that clause simply prevents a party from asserting any other written or oral agreement between the parties. Juno submits it protects against common law contractual claims and does not address equitable rights, interests or expectations a shareholder may have about its relationship with the company or its majority shareholders.

[44] Juno submits there is no authority for the proposition that in a proceeding under s. 227 of the Act, an entire agreement clause in a contract excludes even the possibility of a minority shareholder holding reasonable expectations unless they are set out in the contract between the parties. It says it is not required to raise its expectations to the level of an enforceable collateral contract in order to succeed under s. 227. In the end, Juno says the determination whether its expectations were reasonable depends on an assessment of the evidence about what was discussed before the parties entered into the Transaction contracts.

[45] In my view, the Transaction documents do not at all exclude reasonable expectations of a minority Shareholder. Juno’s problem is that its asserted expectations are simply not reasonable.

[46] In answer to PresiNet’s suggestion that Juno ought to have adduced evidence to show the removal of Steven Haber adversely affected the value of its shareholding, Juno submits it would be speculation because Mr. Haber only had one year of employment. Juno submits the simple fact that its chosen person was not running the U.S. operations is innately prejudicial, and sufficient. This response fails to meet Juno’s obligation to show conduct of PresiNet that is oppressive or unfairly prejudicial, a condition precedent for a remedy under s. 227(3) of the Act. There is utterly no evidence of any prejudice or harm to Juno’s shareholding in PresiNet.

[47] The individual respondents submit there can be no claim against them under s. 227(2)(b) for unfairly prejudicial conduct because the section speaks only to an act of the “Company”. Juno says this position is untenable given the possible unlimited orders provided for under s. 227(3) that include orders requiring individual shareholders to purchase some or all of the shares of any shareholder. I need not address this interesting question of statutory interpretation given the disposition of this case.

[48] In response to the argument that there is no allegation either Mr. Surich or Mr. Pothorin benefited personally from PresiNet’s conduct, Juno says its allegations are made directly against these two men as PresiNet’s “executive team” in regard to their treatment of Steven Haber, their decision to terminate him and past failure to produce timely financial statements. Juno says their elimination of Mr. Haber as the head of PresiNet’s U.S. operations increased the control of Mr. Surich and Mr. Pothorin over PresiNet and that is enough to demonstrate a personal benefit. I note the obvious that PresiNet never gave up control to anyone. And if it was Juno’s expectation that Steven Haber would “control” the U.S. operations, that was unreasonable.

[49] Neither Mr. Pothorin nor Mr. Surich obtained any personal benefit from the conduct of which Juno complains. There is simply no air of reality to Juno’s assertions about them and I dismiss Juno’s claim against them.

DISCUSSION

The Legislation

[50] Juno seeks relief under s. 227 of the Act which provides:

227(1) For the purposes of this section, “shareholder” has the same meaning as in s. 1(1) and includes a beneficial owner of a share of the company and any other person whom the court considers to be an appropriate person to make an application under this section.

(2) A shareholder may apply to the court for an order under this section on the ground

(a) that the affairs of the company are being or have been conducted, or that the powers of the directors are being or have been exercised, in a manner oppressive to one or more of the shareholders, including the applicant, or

(b) that some act of the company has been done or is threatened, or that some resolution of the shareholders or of the shareholders holding shares of a class or series of shares has been passed or is proposed, that is unfairly prejudicial to one or more of the shareholders, including the applicant.

[51] The remedies relevant for a finding under s. 227(2) in this case are listed in s. 227(3):

227(3) On an application under this section, the court may, with a view to remedying or bringing to an end the matters complained of and subject to subsection (4) of this section, make any interim order or final order it considers appropriate, including an order

(a) directing or prohibiting any act,

(b) regulating the conduct of the company’s affairs,

…

(g) directing the company, subject to subsections (5) and (6), to purchase some or all of the shares of a shareholder and, if required, to reduce its capital in the manner specified by the court,

(h) directing a shareholder to purchase some or all of the shares of any other shareholder,

…

(m) directing the company, subject to subsections (5) and (6), to compensate an aggrieved person,

…

(o) directing that the company be liquidated and dissolved, and appointing one or more liquidators with or without security,

…

(q) requiring the trial of any issue, or

(r) authorizing or directing that legal proceedings be commenced in the name of the company against any person on the terms the court directs.

Oppressive or Unfairly Prejudicial Conduct

[52] D. Smith J. usefully reviewed the law of oppression in British Columbia in Walker v. Betts, 2006 BCSC 128 at paras. 80-90. At para. 80, she considered the meaning that the courts have given to the terms “oppressive” and “unfairly prejudicial”. Oppressive conduct is that which is “burdensome, harsh or wrongful”. Unfairly prejudicial conduct is that which is “unjustly or inequitably detrimental to a shareholder’s interests”. The courts have interpreted “unfairly prejudicial” as protecting a wider range of interests than those protected from “oppressive” conduct: Paley v. Leduc, 2002 BCSC 1757 at para. 31.

[53] Smith J. in Walker went on to review at para. 81 what an applicant shareholder must prove to maintain a personal action for oppression. The applicant must establish: (1) harm to his interests as a shareholder, distinct from his interests as director, officer or employee; and (2) harm to his shareholder interests, distinct from those of other shareholders. Further, when determining whether conduct is oppressive or unfairly prejudicial, “the contractual force of conduct permitted by a company’s articles of association cannot be ignored”.

[54] In her reasons, Smith J. considered whether the applicant must prove bad faith or an improper motive in order to establish oppressive or unfairly prejudicial conduct. Relying on Low v. Ascot Jockey Club (1986), 1 B.C.L.R. (2d) 123 (S.C.), she held:

There is no requirement for a finding of bad faith or an improper motive in order to establish oppressive or unfairly prejudicial conduct. All that must be shown is that the majority has not dealt fairly and honestly with the minority.

[55] I have reservations about whether the above statement has application in this case. Smith J. bases the principle that to establish oppressive or unfairly prejudicial conduct all that must be proved is that the majority has not dealt fairly and honestly with the minority on the decision in Low. However, the parties before me agreed, based on Safarik v. Ocean Fisheries Ltd. (1996), 12 B.C.L.R. (3d) 342 (C.A.), that oppressive conduct does require a finding of bad faith or improper motive.

[56] In Safarik, Southin J.A. for the court discussed her decision in Low, which was a judgment she wrote as a trial judge. She noted at para. 50 that the trial judge in Safarik found that neither bad faith nor improper motive is necessary to establish oppressive or unfairly prejudicial conduct; all the need be show is that the majority did not deal fairly and honestly with the minority. She noted that the trial judge relied on her decision in Low to support that proposition. She held at para. 54 that while that finding was not “patently incorrect”, it contained “the potentiality for serious error”.

[57] In Safarik, Southin J.A. noted at para. 54 that in Low, the president of the company “had done that which he had no legal right under the articles to do. He had usurped the powers of the directors”. She stated that in Low, she was not, except in dicta, “addressing cases in which the alleged wrong was lawful under the articles of association”.

[58] In Paley at para. 26, Romilly J. interpreted Southin J.A.’s reasons in Safarik as meaning:

[I]f the director or company has no legal right to commit a certain act, the act may be considered oppressive even if there was no mala fides; however, if it was a legally authorized act, there should be an element of bad faith for it to be oppressive.

[59] In the case before me, PresiNet did not act outside the scope of its authority when it terminated Mr. Haber. Nor did it breach any agreement that it had with Juno. This is a case where the alleged wrong was a legally authorized act. In my opinion, in order to find oppressive conduct in this case, Juno must establish bad faith or an improper motive.

[60] However, this distinction is not necessary to dispose of the case before me. Juno has failed to prove an improper motive or bad faith on PresiNet’s part. Nor did it establish that PresiNet did not deal fairly and honestly with Juno.

[61] In Walker Smith J. went on to note at para. 86 that “while a single incident may not by itself constitute oppressive or unfairly prejudicial conduct” the court must examine the combination of acts in their totality “to determine if the shareholder’s right have been so affected”: Walker at para. 86; see also Paley.

[62] Smith J. explained at para. 87 that the core of oppressive and unfairly prejudicial conduct is based on the reasonable expectations of the applicant shareholder:

The essence of oppressive and unfairly prejudicial conduct is the abrogation of the reasonable expectations of a shareholder in the position of the applicant.

[63] At para. 88, Smith J. reviewed how the court will determine a shareholder’s reasonable expectations through application of a modified objective test:

In determining a shareholder’s reasonable expectations, the court must apply a modified objective test. This test requires objectively identifiable expectations that a shareholder in the applicant’s position reasonably would expect to have.

[64] Smith J. noted that identification of the shareholder’s reasonable expectations “is the starting point in determining if conduct was oppressive or unfairly prejudicial”.

[65] At para. 89, Smith J. gave the following examples of when a shareholder’s reasonable expectations gave rise to a finding of oppressive or unfairly prejudicial conduct:

(i) unequal repayment of shareholder loans to the preference of one shareholder, contrary to the shareholders’ agreement (Rooke v. Rodenbush, [1993] B.C.J. No. 628 (S.C.)(Q.L.); (ii) exclusion of a shareholder from participation and management in a business, contrary to the arrangements which previously had existed between the principals (Naneff v. Con-Crete Holdings Limited et al, supra; (iii) treating a company as a sole proprietorship by failing to account for corporate funds in a timely manner, unauthorized use of corporate funds for personal expenses, and failure to obtain a shareholders; resolution on the principal’s salary (Brokx v. Tattoo Technology Inc., 2004 BCSC 1723; and, (iv) failure to follow the statutory requirements for corporate governance (Burdeny v. K & D Gournet Baked Foods and Investments Inc. (1999), 48 B.L.R. (2d) 16 (S.C.)).

Application

[66] Thus, the first step is to consider the circumstances from the point of view of a shareholder in Juno’s position to determine its reasonable expectations. In this case, Juno expected PresiNet to support Steven Haber during his year of employment, and to communicate its concerns about his performance to Mr. Haber and Juno before terminating him.

[67] It is noteworthy that here, none of the situations given as examples in Walker at para. 89 are present. Those examples involve abrogation of expectations that result in obvious prejudice, and not, as here, conduct that affects someone who is not even a shareholder of PresiNet. Mr. Haber has no standing himself to seek relief under the Act.

[68] The prejudice Juno asserts is too remote from their interests as shareholders to amount to oppression or unfair prejudice. There is no evidence from Juno at all that PresiNet’s conduct was “burdensome, harsh or wrongful”, or “unjustly or inequitable detrimental to a shareholder’s interests” as described in Walker.

[69] In Oppression and Related Remedies (Toronto: Thomson Carswell, 2004), Markus Koehnen noted at p. 155 that “the presence of a termination clause in an employment agreement or shareholder agreement, tends, without further qualification, to belie the existence of a reasonable expectation of employment, unless the termination is being effected for a collateral purpose”. He relied on the court’s decision in Safarik to support this proposition.

[70] There is no suggestion in the evidence of any bad faith on the part of PresiNet. Juno concedes PresiNet did not enter the Transaction intending to terminate Steven Haber at the end of his first year. There was no collateral purpose because there is no evidence that the dismissal was not motivated by the best interests of PresiNet. Mr. Surich described Mr. Haber’s performance as “lacklustre” and it is common ground he made no sales for PresiNet during his employment.

[71] PresiNet was also critical of Steven Haber’s methods of communication as supported by three emails from Mr. Surich to Mr. Haber. In one such email, he told Mr. Haber the manner Mr. Haber communicated with another colleague was “uncalled for and unprofessional” and did not “promote the success of the company”. In another, Mr. Surich advised Mr. Haber that the manner in which Mr. Haber communicated a price to Juno, in its capacity as a potential customer was “a major problem and not to be repeated”.

[72] Thus, it is evident that PresiNet did indeed communicate to Mr. Haber its concerns with his performance. Juno characterizes the concerns as trivial, but they were not to PresiNet, nor would a reasonable shareholder in Juno’s position consider them as such. And Mr. Haber’s lack of any sales in the entire year speaks for itself.

[73] There is ample evidence of PresiNet’s efforts to provide support to Mr. Haber during his first year. They hired an assistant that he chose to work with him, and both Mr. Surich and Mr. Pothorin went to New York to train him and to provide technical presentations to support his sales efforts.

[74] I observe that Steven Haber agreed under cross-examination that PresiNet did support him, at least to the extent he admitted. There is no reliable evidence that PresiNet did not do so. Even if PresiNet did not warn him or Juno about their concerns with his performance, primarily his lack of sales and reluctance to learn, neither of those complaints amount to “reasonable expectations” such that PresiNet’s failure to meet them amounts to conduct that is oppressive or unfairly prejudicial under s. 227(2) of the Act.

[75] Mr. Haber’s employment contract with PresiNet permitted his dismissal without cause after one year, and PresiNet terminated his employment for proper business reasons.

[76] Any expectations Juno had must be considered in the context of the contracts, including Mr. Haber’s Employment Agreement the parties entered into on May 25, 2005. I agree with PresiNet that the Transaction is persuasive evidence of Juno’s expectations. Juno cannot sensibly suggest that their expectations regarding Mr. Haber’s employment were reasonable when they are inconsistent with binding agreements. The Share Purchase Agreement and the Shareholders Agreement each have an entire agreement clause set out above.

[77] Steven Haber had no involvement with the lawyers on the Share Purchase Agreement or Shareholders Agreement, and little on his own Employment Agreement. He deposed that he left it to his attorney.

[78] I do note there is no evidence from Juno’s primary negotiator, Yoav Millet, and much of the evidence of Philip Kampf as to Juno’s expectations is hearsay. In particular, Mr. Kampf’s information and belief from James Haber and Steven Haber as to pre-contractual discussions and expectations arising from the Transaction is inadmissible hearsay. He was not involved in those discussions.

[79] James Haber provided the only direct evidence of pre-contractual negotiations from Juno’s standpoint and in cross-examination, he could recall little about them. In any event, he deposes that he was told by Mr. Millet that the written Transaction documents were consistent with the negotiations between the parties. It matters little in any event, because I discard entirely any suggestion that Juno’s reasonable expectations could be based on any pre-contractual discussions when each of the Share Purchase Agreement and the Shareholders’ Agreement contain an entire agreement clause.

[80] The expectations Juno asserts are contrary to common sense and inconsistent with the Transaction documents. For example, Juno says its investment was to fund U.S. operations exclusively. Yet the Share Purchase Agreement specifically states the funds are for general operations. Similarly, the Employment Agreement specifically provides that PresiNet could dismiss Steven Haber after one year. James Haber acknowledges having read it. The Share Purchase Agreement incorporates the term in the Employment Agreement that Steven Haber’s employment could be terminated after his first year of employment.

[81] It is not reasonable for Juno to assert that PresiNet’s conduct unfairly prejudiced Juno because the dismissal of Mr. Haber meant Juno had to give up “control” over PresiNet’s U.S. operations because nothing in the Transaction documents gave Steven Haber or Juno that control. PresiNet U.S. is a wholly owned subsidiary of PresiNet and could only be controlled by its board of directors and shareholders. Also, under the Employment Agreement, Steven Haber was to report to Mr. Surich.

[82] Clearly, Juno’s expectations, inconsistent with the Transaction documents and common sense, fail to meet the test of “reasonable expectations”.

[83] The jurisprudence on reasonable expectations is illustrative. In Elliot v. Opticom Technologies, 2005 BCSC 529, company employees were minority shareholders. Upon their dismissal as employees, they brought oppression proceedings. The decision contains a detailed review of previous decisions to come to the conclusion that if a termination was in the best interests of the company, it cannot be said to be unfairly prejudicial. However, Tysoe J. found that on the facts before him, the termination of the minority shareholders was impermissible and unfairly prejudicial to them as shareholders. He found at paras. 70-71 that it was not in the best interests of the company to terminate the minority shareholders, as evinced by the poor performance of the company after their termination and evidence that the terminated shareholders were “top performers”. Nor were they terminated for cause. Because they were not terminated for cause and their termination was not in the best interests of the company, the majority shareholder and the company did not act in accordance with the reasonable expectations of the shareholders and their conduct was unfairly prejudicial.

[84] Juno relies on the Elliot decision to support its position that PresiNet’s conduct was oppressive or unfairly prejudicial. However, the facts before me are clearly distinguishable from those in Elliot. Here, Mr. Haber failed to make a single sale and was disciplined on several occasions for improper conduct. It was in the best interests of PresiNet to terminate Mr. Haber. Additionally, while PresiNet could permissibly terminate Mr. Haber after one year without cause, I find that he was in fact terminated for cause.

[85] In Paley, the court found oppression in the context of a family business. The petitioner was excluded from annual meetings, directors meetings and, ultimately, dismissed as an employee. The breakdown of relations between the parties made continued function of the company impossible. The case at bar is distinguishable. Mr. Kampf continues to act as a director participating in meetings. Juno attended the last Annual General Meeting via proxy, and voted in favour of the resolutions put forward, including ratification of the acts of directors and management. There is no deadlock as there was in Paley.

[86] In this case, the Employment Agreement speaks for itself. It contains no terms, express or implied, that PresiNet will warn Mr. Haber or Juno, or communicate their concerns about Mr. Haber’s performance. To impose such a requirement on PresiNet would be problematic, because Juno could always complain about the form or manner of the warning or communication, no matter what the quality. Juno is using a highly subjective and erroneous standard for “reasonable expectations”. It is to avoid such positions that parties enter into binding contracts.

[87] The provisions of the Act cannot be used in these circumstances to imply contractual terms inconsistent with those in the Transaction documents. That is not just and equitable, and failing to meet such expectations is certainly not conduct that is oppressive or unfairly prejudicial.

[88] I note that Juno’s position is contrary to settled jurisprudence in contract. In Power Consolidated (China) Pulp Inc. v. British Columbia Resources Investment Corp., [1989] B.C.J. No. 114 (S.C.) (QL); McLachlin C.J.S.C. (as she then was) made the following comments about whether parties to a written contract intended it to constitute the whole contract:

That intention, as in all matters relating to contractual construction, must be determined objectively. Here the parties expressly agreed that the contract documents constituted the whole of their agreement. While in most cases such an agreement is only a presumption based on the parol evidence rule, in this case it has been made an express term of the contract. A presumption can be rebutted; an express term of the contract, barring mistake or fraud, cannot. I have no alternative but to conclude that the parties intended the contract documents to be the whole of their agreement…

[89] These words are apposite here. The Transaction documents include an entire agreement clause. Such a clause does not preclude Juno from asserting reasonable expectations that are not contained in the contract. However, based on totality of the evidence, I find that in the circumstances Juno’s expectation that Mr. Haber and Juno ought to have been warned about Mr. Haber’s poor performance was not reasonable.

[90] I am also guided by the comments of Megarry J. in Re Fildes Bros. Ltd., [1970] 1 All E.R. 923, cited with approval by Southin J.A. in Safarik at para. 94 that “[i]t cannot be just and equitable to allow one party to come to the court and require the court to make an order which disregards his contractual obligations”.

[91] With regard to the financial statements, I observe that not only is there nothing to remedy now, but there appears to be no remedy available in any event under the strict wording of s. 227(3) which provides that the court may, “with a view to remedying or bringing to an end the matters complained of…” make an appropriate interim or final order, including an order from the variety listed. Audited financial statements were prepared, forwarded to Mr. Kampf, and presented at a General Meeting. No order is required. There is nothing left to “remedy” or to “bring to an end” in that regard.

[92] Ultimately, Juno has failed to demonstrate any conduct that could support a finding of oppression, or unfairly prejudicial conduct. Juno’s assertion of its reasonable expectations regarding the treatment and termination of Steven Haber are unsupported in fact and in law.

[93] There is no reason to order a sale of Juno’s shares. It has a minority interest in PresiNet in accordance with its bargain. It also has the opportunity to participate in the corporate governance through its nominee on the board of directors, Mr. Kampf. There is no evidence of impasse or deadlock in the affairs of PresiNet.

[94] The Petition is dismissed with costs.

“The Honourable Madam Justice MacKenzie”

Citation:	*Juno Europe LP v. PresiNet Systems Corp.,*
	2008 BCSC 587