Before: The Honourable Mr. Justice Rogers

Reasons for Judgment

Counsel for the Petitioners:	E.C. Ledding
Counsel for the Respondents, T. Rathwell and J. Rathwell:	S.D. Swail
Counsel for the Respondent, Executive Houseboat Charters Inc.:	R.H. Sommerey
Appearing on his own behalf:	W. Koopman
Appearing on his own behalf:	G. Koopman
Date and Place of Hearing:	February 28 and March 1, 2006
	Kelowna, B.C.

Introduction

[1] The respondents argue that this petition cannot be decided summarily, but rather that it should be converted to an action so that it be subject to the processes and procedures applicable to a proceeding commenced by writ of summons. That said, the respondents nevertheless seek various interlocutory injunctive relief to restrain the petitioners’ freedom of action with respect to the corporate respondent.

[2] The petitioners do not agree; they say that the issues between the parties can be fairly decided summarily, and even if they cannot some elements of the dispute should be addressed on an interim basis so as to lessen their burden upon the petitioners.

[3] The parties agree that the style of cause should be amended to show Mr. Rathwell as “JC Rathwell”. There will be an order to that effect.

History

[4] The petition was filed in June 2005. Its facts describe the petitioners as shareholders in Executive Houseboat Charters Inc. The petition alleges Ms. Rathwell and the company took various actions which, if proven, could amount to oppressive conduct and could entitle the petitioners to a variety of relief under s. 227 of the Business Corporations Act, S.B.C. 2000, c. 57.

[5] The respondents take issue with virtually every element of the petitioners’ recitation of the facts. The parties’ affidavits set up a reasonably straightforward credibility contest – if the petitioners are believed a claim for oppression may be made out and they might get relief of some sort under the Business Corporations Act; if the individual respondents are believed the petitioners are mere investors and arguably have no standing to press a claim for relief as oppressed shareholders.

Issue: Conversion to an Action

[6] A petition should be heard and decided summarily. It should not be decided summarily if it would be unjust to do so. I have no difficulty with the general proposition that the test for sending a petition to the trial list is substantially the same as the test for refusing a summary trial under Rule 18A. In this particular case the germane element of that test is whether contested facts can be decided on the basis of affidavit material and by reference to, among other things, documentary evidence.

[7] The affidavits here set up some pretty stark disagreements about the basic facts which underlie the petitioners’ claims. For example, Mr. Stott deposes that he had an equity interest in a business venture that he and the Rathwells operated, and that this venture was rolled into Executive Houseboat Charters Inc. at its inception. Mr. Stott says that it was agreed that he should have an ownership interest in Executive Houseboat Charters Inc., and that he is, therefore, entitled to a beneficial interest in the Executive Houseboat Charters Inc. shares that were issued to Ms. Rathwell. The Rathwells say no. They say that Mr. Stott did nothing more than loan them money from time to time and assist them in the operation of the earlier business, neither of which entitle Mr. Stott to any kind of ownership of that business. The Rathwells say that never was there discussion or agreement that Mr. Stott should have a legal or beneficial interest in shares issued by Executive Houseboat Charters Inc. By their reckoning, Mr. Stott is not a legal or beneficial shareholder and s. 227 of the Business Corporations Act can afford him no relief.

[8] For another example, Ms. Koopman asserts that she, too, is a shareholder in Executive Houseboat Charters Inc., and that an essential element of Executive Houseboat Charters Inc.’s operating plan was that it would limit itself to bare boat charters. She says that the company abandoned the original business plan when Executive Houseboat Charters Inc. committed itself to commercial chartering. Ms. Koopman argues that the change of operation, and the method by which Ms. Rathwell accomplished it, amount to oppressive conduct.

[9] Again, Ms. Rathwell’s affidavits take exception to the very foundation of the Koopman claim. Ms. Rathwell says that Ms. Koopman, along with her husband, is no more than an investor in Executive Houseboat Charters Inc. She says that Ms. Koopman has never been a shareholder and has no entitlement to be a shareholder. It is, therefore, a legal nonsense for Ms. Koopman to invoke the shareholder’s relief provisions of the Business Corporations Act.

[10] Various documents were submitted by the parties as exhibits to their affidavits. Some of these documents support one version of events; others support different versions. These documents do not, by themselves, provide a consistent, reliable, clearly defined thread against which the parties’ competing stories can be measured. The most troubling of these documents is entitled “Draft Business Agreement”, dated March 21, 2005, and apparently signed by all the individual parties. The parties candidly admit that the “Draft Business Agreement” is problematic. It is rife with inconsistency, ambiguity, and, in some respects it is actually self-contradictory. Yet in their applications the parties rely on the parts of the “Draft Business Agreement” that suit their purposes while ignoring other, less convenient, provisions. For example, Ms. Koopman maintains that under the agreement, she was entitled to 33.3 shares of Executive Houseboat Charters Inc. upon making her contribution to the acquisition of a corporate asset, yet she ignores a provision that stipulates she is not to receive her shares until some post-incorporation date and then only if the other shareholder, Ms. Rathwell, agrees that she should have them.

[11] It is obvious that if, as the parties allege, the “Draft Business Agreement” fully or partly describes the relationship between the parties, then the agreement will require considerable judicial interpretation before the details of that relationship can be accurately articulated. That interpretation might require reference to parole evidence. If the affidavits in this matter are any guide, that parole evidence, if it comes from the parties, is likely to be highly contradictory. In my view it would not be appropriate to adduce and assess that evidence in any way other than by conventional means, that is to say, by examination-in-chief and cross-examination.

[12] Accordingly, I find that the dispute described in the petition is not suitable for summary disposition. The matter must be converted to an action.

[13] I do not think it would serve the parties well to for the petition to stand as their statement of claim. That is because it came clear in the course of submissions that the primary relief Ms. Rathwell is seeking is to be relieved of a contingent liability for Executive Houseboat Charters Inc.’s debt to a bank, and that both Ms. Rathwell and Mr. Stott want to be bought out by the other parties. The petition does not, however, expressly seek that relief. The respondents deserve to know the relief the petitioners are looking to get, and the petitioners ought to have an opportunity to correct their pleadings before the case goes off to discovery and trial. Accordingly, I order that the petition shall stand as a writ of summons, deemed to have been filed and served upon the defendants on March 1, 2006. The progress of the suit shall be governed by the Rules of Court from March 1 forward, including the filing and delivery of statements of claim and defence and the discovery of documents and people.

[14] Before leaving this issue, I note the petitioners’ submission that the cost to them of prosecuting the action and the cost to the company of defending it will be substantial. That may be so, but it remains that by not clearly articulating the deal they made between themselves, the parties generated a dispute that cannot be resolved in a summary way. It is a sad fact that some disputes are messy, and do take time and money to resolve, and that sometimes there is no easy way out. Also, I have purposely refrained from expressing any opinion on the contested facts. I have done that because for me to find disputed facts on this application may put the eventual trial judge in an embarrassing position.

Issue: Injunction Against the Petitioners

[15] The respondents sought injunctions against the petitioners and Gary Koopman and Wade Koopman to prevent them from:

(a) contacting Transport Canada, creditors, suppliers or customers of Executive Houseboat Charters Inc. concerning any matter regarding the respondents or the proceeding generally;

(b) publishing information in the media or on the internet concerning the respondents or the proceeding;

[16] The test for an interim injunction was nicely stated by Lambert, J.A. in Canadian Broadcasting Corp. v. CKPG Television Ltd. (1992), 64 B.C.L.R. (2d) 96 (C.A.). Mr. Justice Lambert said at para. 21:

The longstanding test for the granting of an interim injunction in British Columbia is a two-pronged test. The test has never been altered and its force has never been affected by a decision of the Supreme Court of Canada. The two-prong test is this:. “First, the applicant must satisfy the court that there is a fair question to be tried as to the existence of the right that he alleges and a breach thereof, actual or reasonably apprehended. Second, he must establish that the balance of convenience favours the granting of an injunction.”

[emphasis added in original].

[17] Whether there is a fair question does not require that the plaintiff show a prima facie case. As the Supreme Court of Canada said in RJR-Macdonald Inc. v. Attorney-General of Canada et al. (1994), 111 D.L.R. (4th) 385, at pp. 402-3:

What then are the indicators of “a serious question to be tried”? There are no specific requirements which must be met in order to satisfy this test. The threshold is a low one. The judge on the application must make a preliminary assessment of the merits of the case…

The Supreme Court goes on to say:

Once satisfied that the application is neither vexatious nor frivolous, the motions judge should proceed to consider the second and third tests, even if of the opinion that the plaintiff is unlikely to succeed at trial. A prolonged examination of the merits is generally neither necessary nor desirable.

[18] It is a bit awkward to apply the first test to this case. That is because there is presently no claim advanced by the respondents against the petitioners or Messers. Koopman; consequently there are no pleadings that define a “question to be tried” between them. The respondents’ affidavits do, however, describe some facts which, if believed, could lead the court to conclude that the petitioners and Messers. Koopman have encouraged negative publicity for Executive Houseboat Charters Inc. and the Rathwells and have made unhelpful remarks to third parties concerning the respondents’ business operations. The petitioners and Messers. Koopman generally deny these allegations, and assert that to the extent they have communicated with third parties about the respondents it was with a view to protecting the interests of Executive Houseboat Charters Inc. and themselves.

[19] Although the pleadings do not presently define claims for defamation or interference with economic relations, the respondents’ affidavits do describe the bones of such claims and do describe a fair question that could be tried if appropriate pleadings are filed. Those claims, properly plead, would not be vexatious or frivolous. They meet the first test for an interlocutory injunction.

[20] The second test is balance of convenience. There can be no doubt that it would be inconvenient for Executive Houseboat Charters Inc. to be the subject of negative publicity over its business operations, ownership, or economic viability. The harm caused by loss of commercial reputation could be very difficult for the company to quantify, particularly because it is likely that a large part of that harm would be revenue from potential customers whose identities the company may have no way of knowing.

[21] I do not see how the petitioners and Messers. Koopman would be inconvenienced by an injunction preventing them from generating negative publicity for the respondents. They deny having done so in the past and aver no desire to do so in the future. They can hardly be inconvenienced by being required to not doing something they say they have no intention of doing in the first place. I am not, however, prepared to make a long-term order enjoining behaviour that is not the subject of a lawsuit. Accordingly, an injunction shall go to enjoin the petitioners and Gary Koopman and Wade Koopman from publishing information on the internet or contacting the media concerning the respondents, but that injunction will have a lifespan of 60 days from the release of these Reasons. In the event that the respondents file pleadings which do frame a “fair question to be tried” concerning the subject of the injunction, they may apply to extend the injunction.

[22] In December 2005 and January 2006 Masters of this court made orders requiring Executive Houseboat Charters Inc. to give the petitioners disclosure of the company’s finances on a monthly basis. That disclosure is designed to supply the petitioners with the kind of information that they would otherwise have to gather from third parties. If that disclosure removes the petitioners’ motivation to discuss the company’s affairs with those third parties, then it is unlikely that there is a need for an injunction preventing them from having those discussions. Accordingly I am not convinced that the injunction concerning the petitioners’ contact with non-publicity oriented third parties is necessary. That application is dismissed.

[23] On review of those disclosure orders, though, I note that the orders do not oblige the company to supply information concerning accounts payable, accounts receivable and charter bookings. I think that the petitioners should have access to that information on a monthly basis so that they may have an opportunity to perceive financial problems as they develop. Accordingly, I will make an order that Executive Houseboat Charters Inc. provide the petitioners with a listing of its accounts payable and accounts receivable by creditor or debtor, invoice date, and invoice amount, and a listing of charter bookings by customer, booking date and charter date(s). That information shall be provided on the same schedule as set out in Master Bishop’s January 23, 2006 order, and shall be subject to the same restrictions of use.

[24] Finally, the respondents ask for an order that the petitioners and Messers. Koopman must obtain leave before commencing a proceeding in the Federal Court. Section 18 of the Supreme Court Act gives this court the authority to make an order of that sort with respect to vexatious litigants and their proceedings in the Provincial Court and the Supreme Court. There is nothing in the section that gives this court authority over the process of the Federal Court of Canada. In my view the Federal Court is entitled to control its own process and the respondents should look to that court for this particular relief. That portion of the respondents’ motion is dismissed.

Issue: Interim Relief for the Petitioners

[25] Ms. Koopman asked for a specific term of interim relief: she would like the court to order that the company refinance a loan which she and her husband’s company, Glacier Peaks Adventures Inc., guaranteed. She wants an order that the company achieve that refinancing within 30 days, and if it is unsuccessful that a receiver be appointed over the company’s affairs.

[26] Ms. Koopman submitted that this order was necessary because she and Glacier Peaks are substantially prejudiced by this contingent liability. Oddly, the petitioners submitted no evidence to that effect. It is trite to say that a mandatory injunction of the sort Ms. Koopman seeks can only be granted when, the other essential elements for an injunction having been made out, the balance of convenience favours the applicant. Ms. Koopman had an opportunity to adduce evidence that the contingent liability actually stymies her or Glacier Peaks from accomplishing some legitimate goal. She did not take advantage of that opportunity, and I must conclude that she cannot make out a case for it.

[27] As to the possibility that Ms. Koopman and Glacier Peaks may be inconvenienced by the bank making a demand on their guarantees, there was no evidence that there is a substantial risk that this will occur. Executive Houseboat Charters Inc. has been able to keep its debt to the bank current. The evidence on the application was that Executive Houseboat Charters Inc. is heading into the new houseboating season with business on its books and the prospect of a successful season. There was no evidence that Executive Houseboat Charters Inc. is likely to fail to meet its obligations as they come due. So, again, Ms. Koopman has had an opportunity to show that there is a substantial risk to her of being called on to make good her guarantee, but she has adduced no evidence that such a risk exists.

[28] The balance of convenience does not favour granting the mandatory injunction Ms. Koopman has requested, and her application for it is dismissed.

Ancillary Issues

[29] The respondents asked that Gary Koopman and Wade Koopman be added as parties to the action. That application was, it turned out, premature. That application is neither allowed nor dismissed. It will be for the respondents to decide, in due course, whether to proceed against Gary Koopman or Wade Koopman by counterclaim or third party notice.

Costs

[30] As the parties’ have requested, costs of the hearing of the petition and the parties’ competing notices of motion shall be in the cause.

“P.J. Rogers, J.”

The Honourable Mr. Justice P.J. Rogers

Citation:	*Koopman et al. v. Rathwell et al.,*
	2006 BCSC 366