Chancellor v. Maynes

2021 BCSC 391 Chancellor v. Maynes

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Chancellor v. Maynes, 2021 BCSC 391 Date: 20210308 Docket: 17975 Registry: Salmon Arm Between: Victor Keith Chancellor and National Home Owner Marketing Ltd. Plaintiffs And Cori Dean Maynes Defendant Before: The Honourable Mr. Justice Marchand Reasons for Judgment Counsel for the Plaintiffs: R.A. Chorneyko Counsel for the Defendant: G. Alfonso Place and Date of Hearing: Kamloops, B.C. February 1 & 2, 2021 Place and Date of Judgment: Salmon Arm, B.C. March 8, 2021 Introduction [1] From 2004 until December 31, 2013, the plaintiff, Victor Keith Chancellor, was the sole shareholder, officer and director of the plaintiff, National Home Owner Marketing Ltd., doing business as Century 21 Lifestyles ("Lifestyles "). Lifestyles was a real estate brokerage firm operating in Salmon Arm and Sicamous, British Columbia. [2] On January 1, 2014, the defendant, Cori Dean Maynes, entered a share purchase agreement with Mr. Chancellor to acquire 50% of the shares in Lifestyles for $60,000. On the same date, Mr. Maynes entered a shareholders agreement with Mr. Chancellor and Lifestyles governing, amongst other things, the management and financing of Lifestyles. [3] The parties' goal of returning Lifestyles to the level of success it enjoyed at its 2007 peak did not come to fruition. Instead, in February 2015, Mr. Maynes informed Mr. Chancellor

that he was leaving Lifestyles and, on March 15, 2015, Mr. Maynes advised Mr. Chancellor that he was transferring his realtor's license to a Century 21 franchise based in Sorrento, British Columbia. [4] Mr. Maynes' departure from Lifestyles led to litigation. Mr. Chancellor filed a notice of civil claim against Mr. Maynes on March 16, 2015. Mr. Maynes filed a response to civil claim and counterclaim on April 20, 2015. Mr. Chancellor filed an amended notice of civil claim on June 13, 2016. Lifestyles was not a party to the litigation. [5] The parties' dispute came before Justice Meiklem for summary trial on November 24 and 25, 2016. On April 3, 2017, Meiklem J. issued reasons for judgment that: · dismissed Mr. Chancellor's claims that Mr. Maynes had breached non-competition and restrictive covenant clauses within the shareholders agreement; · dismissed Mr. Chancellor's claim seeking financial contributions from Mr. Maynes for management fees and rent that, if owed to anyone, were owed to Lifestyles not Mr. Chancellor; · dismissed Mr. Maynes' counterclaim seeking rescission of the share purchase agreement, and return of his initial investment and subsequent shareholder loans, on the basis of alleged fraudulent or negligent misrepresentations; and · dismissed Mr. Maynes' counterclaim that Mr. Chancellor had misappropriated funds. [6] At the conclusion of his reasons for judgment,

Meiklem J. suggested that a derivative action on behalf of Lifestyles would likely succeed in recovering the financial contributions Mr. Chancellor had sought from Mr. Maynes. Justice Meiklem added that "the cost of that application would only add to the financial burden eventually to be borne equally" such that Mr. Maynes "would be well advised to make suitable arrangements to discharge his obligations without delay." [7] Subsequent negotiations between Mr. Chancellor and Mr. Maynes did not resolve matters. As a result, on December 21, 2018, Mr. Chancellor and Lifestyles filed a notice of civil claim seeking certain remedies under the Business Corporations Act, SBC 2002, c. 57 [BCA], damages for breach of the shareholders agreement and breach of fiduciary duty, and an order that Mr. Maynes disgorge profits earned by him from March 15, 2015 (when he left Lifestyles) to April 1, 2017 (when Lifestyles ceased carrying on business). [8] Mr. Maynes has applied to dismiss the claims of Mr. Chancellor and Lifestyles on the basis of res judicata and/or accrued limitation periods. Mr. Maynes says the notice of civil claim filed by Mr. Chancellor and Lifestyles essentially repeats earlier claims made by Mr. Chancellor and that could have been made by Mr. Chancellor on behalf of Lifestyles. Mr. Maynes also says the limitation period for the current claims expired no later than March 2017,

two years after Mr. Chancellor filed his original notice of civil claim. [9] Mr. Chancellor and Lifestyles submit that there is no limitation period for the claim under the BCA to dissolve and liquidate Lifestyles, Mr. Maynes has committed ongoing breaches of the shareholders agreement and his fiduciary duties such that limitation periods did not expire prior to the filing of the notice of civil claim, and the limitation period related to Mr. Maynes' financial contributions did not commence until those contributions were demanded on November 14, 2018. [10] Mr. Chancellor and Lifestyles also submit that res judicata does not apply to Lifestyles' claims. In particular, they submit that Lifestyles was not a party to the first action, and that Mr. Chancellor and Lifestyles are not "privies". Background [11] The relevant background is largely set out in the reasons for judgment of Meiklem J. indexed at 2017 BCSC 554. I will not repeat all of the details. Instead, I will briefly summarize the essential facts. [12] During the negotiations that led to the parties entering the share purchase and shareholders agreements, Mr. Chancellor made financial disclosure and various representations to Mr. Maynes. Mr. Chancellor and Mr. Maynes discussed and reached agreement on financial, management and operational matters. [13] The share purchase agreement contained a number of representations made by Mr. Chancellor, including: 6. The Vendor represents and warrants that as of closing the liabilities of the Company will be nil and the Company will have in place a line of credit authority with Salmon Arm Savings and Credit Union allowing it to borrow up to $50,000.

19. The Vendor represents and warrants that the Vendor has disclosed to the Purchaser all the information known to him and which can fairly be considered to be material in order that the Purchaser can [properly] determine the value of the said shares and the nature of the representations and warranties made in this agreement in connection with the Purchaser's purchase of the said shares. [14] Of relevance to these proceedings, the shareholders agreement included the following terms: 1.5 Best Efforts and Non-Competition The shareholders shall use their best efforts, skills and abilities to promote the Company's interests and shall not engage in any other employment or business activity of a nature which is competing with that of the Company. The shareholders shall not communicate to any outside person any trade secret or other information which is acquired through their association with the Company. 1.6 Restrictive Covenant The parties hereto shall not, during the term of this Agreement and for a period of three (3) years following their ceasing to be directors, officers, employees or shareholders of the Company, directly or indirectly carry on or engage in or be concerned with the trade or business that the Company has or is then conducting as its business within twenty (20) miles of any geographical areas in which the Company has conducted or is then conducting its business

except as herein provided. The parties acknowledge that both are licensed real estate brokers. A party leaving the Company shall not be prohibited from carrying on as a broker within the prohibited time and area but shall not in so doing actively solicit either agents or clients from the Company. A party leaving the Company will not himself or by means of any other person do or cause to be done any wilful act or thing to the prejudice of the Company and will at all times use his best efforts to promote the Company and secure to it the connection and custom of the business as it has been heretofore carried on provided only that [party] leaving the Company shall not be put to any expense in or about the performance of this covenant. If a dispute should arise in relation to the application or interpretation of this restrictive provision the parties specifically agree that the resolution of such dispute shall be referred to a single arbitrator agreeable to both whose decision shall be final. 2.2 Company Borrowing Funds required from time to time by the Company will be obtained, to the greatest extent possible, by borrowing from a chartered bank or other lender acceptable to a majority of the Directors. Failing the ability of the Company to obtain funds as aforesaid the shareholders agree to equally make available to the Company sufficient funds to enable the Company to meet its

operating and capital requirements and to pay when due interest and principal obligations on all of its indebtedness and to pay when due all expenses and other amounts whatsoever owing by the Company. [15] In his reasons for judgment, Meiklem J. made the following findings: 1. Mr. Chancellor fulfilled the nil liability representation in the share purchase agreement by making a payment to the company of $18,557.43 on April 25, 2014. By agreement of the parties, this money was used to pay current rather than specific pre-closing date liabilities.

2. Mr. Chancellor did not misrepresent an intention to increase the business premises rent payable to himself by Lifestyles from a rate substantially below market to a rate closer to a market rate. In fact, Mr. Maynes was aware that Mr. Chancellor owned the business premises used by Lifestyles and agreed rent would increase to a market rate once Mr. Chancellor was no longer the sole owner of Lifestyles.

3. Mr. Chancellor did not misrepresent an intention to pay himself a managing broker salary. Mr. Chancellor had not paid himself such a salary when he was the sole owner of Lifestyles but the parties agreed a managing broker salary of $2,500 per month would be paid when that was no longer the case.

4. Mr. Chancellor did not misrepresent Lifestyles' profitability. Having discussed and agreed to new and increased expenses for rent and a managing broker salary, Mr. Maynes "surely knew these [expenses] would necessarily affect the profitability of the Company, unless revenue increased commensurately." 5. Mr. Chancellor did not misappropriate each parties' additional contribution of $10,000 to the company to pay accrued unpaid rent to himself. In fact, Mr. Maynes knew and approved of the purpose of his additional $10,000 loan to the company.

6. Mr. Maynes did not breach the non-competition agreement in clause 1.5 of the shareholders agreement. Clause 1.5 "[applied] only during the term of the parties' engagement in the business activity of the Company." 7. Mr. Maynes did not breach the restrictive covenant agreement in clause 1.6 of the shareholders agreement. Though he remained a shareholder and director, Mr. Maynes had "left" Lifestyles and was free to carry on as a broker elsewhere provided he did not actively solicit either agents or clients from Lifestyles, and did not do or cause to be done any wilful act or thing to the prejudice of Lifestyles.

8. Only Lifestyles, and not Mr. Chancellor, could advance a claim against Mr. Maynes to make a contribution to the company for unpaid rent and unpaid managing broker salary due to Mr. Chancellor. [16] Justice Meiklem did not explicitly address the breach of fiduciary duty claim. I assume that is because the claim was based only on the allegation that Mr. Maynes had engaged in employment or business activity competing with Lifestyles. As Meiklem J. had concluded Mr. Maynes was entitled to do so, there was no foundation for the breach of fiduciary claim. Comparison of Pleadings [17] The amended notice of civil claim filed by Mr. Chancellor on June 13, 2016 contained the following statements of fact: · Prior to January 1, 2014, Mr. Chancellor was the sole shareholder, director, officer and operating mind of Lifestyles; · On January 1, 2014, Mr. Chancellor sold half his shares in Lifestyles to Mr. Maynes pursuant to a share purchase agreement; · On January 1, 2014, Mr. Chancellor and Mr. Maynes entered a shareholders agreement that included non-competition, restrictive covenant and financial contribution terms; · On March 15, 2015, Mr. Maynes advised Mr. Chancellor that he was in the process of becoming an associate real estate broker with a competitor contrary to the non-competition clause in the shareholders agreement; · On March 15, 2015 and June 10, 2016, Mr. Chancellor

requested that Mr. Maynes make funds available to Lifestyles, in an equal amount to be made available by Mr. Chancellor, to enable Lifestyles to meet its operating and capital requirements; · In breach of the shareholders agreement, Mr. Maynes failed to provide the requested funds; · As a result of Mr. Maynes' breaches of the shareholders agreement, Mr. Chancellor suffered and was continuing to suffer loss while Mr. Maynes earned profits competing with Lifestyles; and · Mr. Maynes breached fiduciary duties owed to Mr. Chancellor and Lifestyles. [18] The amended notice of civil claim filed by Mr. Chancellor on June 13, 2016 sought injunctive relief against Mr. Maynes, damages for breach of the shareholders agreement, damages for breach of fiduciary duty and disgorgement of profits earned by Mr. Maynes after he left Lifestyles on March 15, 2015. [19] The notice of civil claim filed by Mr. Chancellor and Lifestyles on December 21, 2018 essentially repeats each of the statements of fact and claims for relief from Mr. Chancellor's amended notice of civil claim, often in identical terms. The only meaningful changes are: · the addition of Lifestyles as a party; · a new allegation that Lifestyles ceased carrying on business on April 1, 2017; · a new allegation that Mr. Chancellor and Lifestyles demanded a financial contribution of $134,447.39 from Mr. Maynes on November 14, 2018; · the

abandonment of the claim for injunctive relief; · the abandonment of the claim that Mr. Maynes owed fiduciary duties to Mr. Chancellor (leaving only the allegation that Mr. Maynes owed fiduciary duties to Lifestyles); and · the addition of claims for relief under the BCA to liquidate and dissolve Lifestyles, appoint a liquidator, determine and enforce the duty or liability of Mr. Maynes to Lifestyles, examine the conduct of Mr. Maynes "with respect to breach of trust including breach of fiduciary duty", and require Mr. Maynes to "contribute the sum that the court considers appropriate to the assets of Lifestyles." Res Judicata Legal Principles [20] The doctrine of res judicata has two branches, issue estoppel and cause of action estoppel. Issue estoppel prevents a litigant from raising an issue that has already been decided in a previous proceeding. Cause of action estoppel prevents a litigant from pursuing a matter that was or should have been the subject of a previous proceeding: Erschbamer v. Wallster, 2013 BCCA 76 at para. 12. [21] The policy objectives underlying res judicata are well known. They are the interest of individuals in being protected from repeated claims for the same cause, and the interest of the community in the finality of judicial decisions. On the other hand, there is balance to be struck. Courts are reluctant to deprive litigants of the right to have

their cases decided on the merits: Cliffs Over Maple Bay (Re), 2011 BCCA 180 at paras. 25-26. Issue Estoppel [22] In Cliffs Over Maple Bay, the Court set out the test for issue estoppel at para. 31: (1) that the same question has been decided; (2) that the judicial decision which is said to create the estoppel was final; and, (3) that the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel is raised, or their privies. [Emphasis added by the Court in Cliffs Over Maple Bay.] [23] In the book by D.J. Lange, The Doctrine of Res Judicata in Canada, 4th ed. (Markham: LexisNexis: 2015) the author addresses what amounts to "the same question" at 27: ... † The question to be decided in the second proceeding must be the same question that has been decided in the first proceeding. † The question decided in the first proceeding, governing the same question test in the second proceeding, must be fundamental to the decision in the first proceeding, not collateral to the decision. † The question decided in the first proceeding, governing the same question test [sic] in the second proceeding, includes all the subject matter encompassing the question whether decided expressly or by necessary logical consequence. † If the question has been decided in the first proceeding, the same question cannot be relitigated in a

second proceeding based on a separate and distinct cause of action. Cause of Action Estoppel [24] In Cliffs Over Maple Bay, the Court set out the test for cause of action estoppel at para. 28: 1. There must be a final decision of a court of competent jurisdiction in the prior action [the requirement of "finality"]; 2. The parties to the subsequent litigation must have been parties to or in privy with the parties to the prior action [the requirement of "mutuality"]; 3. The cause of action and the prior action must not be separate and distinct; and 4. The basis of the cause of action and the subsequent action was argued or could have been argued in the prior action if the parties had exercised reasonable diligence. [Emphasis added by the Court in Cliffs Over Maple Bay.] [25] The Court went on make clear that "cause of action" in this context does not refer to the name or classification given to the wrong or remedy, but to the factual situation which entitles a party to a remedy: para. 28. [26] The fourth criteria requires parties to use "reasonable diligence" to bring forward points that could have been argued in the prior action. In Cliffs Over Maple Bay at para. 27, the Court adopted the following from the decision of Lord Denning, M.R. in Fidelitas Shipping Co., Ltd. v. V/O Exportchleb, [1965] 2 All E.R. 4 (C.A.): The rule then is that each party must use reasonable diligence

to bring forward every point which he thinks would help him. If he omits to raise any particular point, from negligence, inadvertence, or even accident (which would or might have decided the issue in his favour), he may find himself shut out from raising that point again, at any rate in any case where the self-same issue arises in the same or subsequent proceedings. ... But this again is not an inflexible rule. It can be departed from in special circumstances. ... [27] In Grant McLeod Contracting Ltd., 2008 BCSC 756 at para. 40, Justice Josephson held that the question is not just whether the basis of the cause of action was or could, with reasonable diligence, have been argued in the prior action but whether the party "should" have raised it. Justice Josephson then adopted the following factors to consider in determining whether a matter should have been raised in the prior action: 1. whether the proceeding constitutes a collateral attack on the earlier findings; 2. whether it simply asserts a new legal conception of facts previously litigated; 3. whether it relies on "new" evidence that could have been discovered in the earlier proceeding with reasonable diligence; 4. whether the two proceedings relate to separate and distinct causes of action; and 5. whether, in all the circumstances, the second proceeding constitutes an abuse of process. Privies [28] In Giles v. Westminster

Savings Credit Union, 2006 BCSC 1600, Justice Sigurdson reviewed the question of who is a "privy": [44] First of all, as to the third ground, who is a privy? [45] In The Doctrine of Res Judicata in Canada, 2d ed., supra, the author describes what a privy is at p. 77: A privy of a party has been variously defined in issue estoppel cases. Before a person can be a privy of a party, there must be community or privity of interest between them, or a unity of interest between them. They cannot be different in substance. Privity can be one of blood, title, or interest. A person who is privy in interest to a party in an action and has notice of that action is equally bound by the findings in that action. A privy is a person who has a right to participate with a party in the proceeding or who has a participatory interest in its outcome. A person who has no right to participate as a party in a proceeding lacks a due process requirement to make a finding of privity of interest. To determine whether a person has a participatory interest in the outcome of the proceeding is to determine whether the outcome could affect the liability of that person. Privity requires parallel interest in the merits of the proceeding, not simply a financial interest in the result. However, a non-party who enters into a formal agreement with a party in a proceeding for disposing of the proceeds is a privy of that

party and bound by the first proceeding. [29] In Delane Industry Co. Ltd. v. Atkinson, 2017 BCCA 79, at para. 25, the Court held that a director and officer of a company is a "privy" of the company for the purposes of issue estoppel. Residual Discretion [30] Even where the criteria for res judicata have been made out, the court retains a residual discretion not to apply it if doing so would cause unfairness. In Tylon Steepe Homes Ltd. v. Pont, 2011 BCSC 385, Justice Ballance put it this way: [54] Generally speaking, the authorities require fastidious adherence to the constituent elements of res judicata in order to permit its application. However, even where the requisite ingredients are present, the court retains a residual discretion to decline to apply it if doing so would cause unfairness in the particular case: Danyluk at para. 33; British Columbia (Minister of Forests) v. Bugbusters Pest Management Inc. (1998), 159 D.L.R. (4th) 50 (C.A.) As Finch J.A. (now the Chief Justice) emphasized at para. 32 in Bugbusters, the doctrine "inevitably calls upon the exercise of a judicial discretion to achieve fairness according to the circumstances of each case". [31] Nevertheless, the discretion not to apply res judicata is "very limited" and is limited to "special circumstances which would include fraud, misconduct, or the discovery of decisive fresh evidence that could not have been

adduced at the earlier proceeding by the exercise of reasonable diligence ": Cliffs Over Maple Bay at paras. 43-44. Analysis Mr. Maynes' Claims for Damages and Disgorgement [32] In the December 21, 2018 notice of civil claim, Mr. Chancellor and Lifestyles pursue essentially identical claims for damages for breach of the shareholders agreement and breach of fiduciary duty[1], and disgorgement of Mr. Maynes' profits, as compared to the original action. The only difference is that the claims are for a little longer. [33] Further, Mr. Chancellor and Lifestyles have not adduced evidence of any "new" wrongdoing on the part of Mr. Maynes. The only evidence concerning events following the release of Meiklem J.'s reasons for judgment relates to: · the parties' unsuccessful negotiations; · Mr. Chancellor learning Mr. Maynes had filed a Notice of Change of Directors in the corporate registry on February 16, 2018 "purporting" that Mr. Maynes ceased to be a director effective January 1, 2017; and · Mr. Chancellor and Lifestyles' November 14, 2018 demand that Mr. Maynes make a financial contribution of $134,447.39 to Lifestyles. [34] I agree wholeheartedly with Mr. Maynes that Mr. Chancellor's claims for damages and disgorgement of profits are barred by issue estoppel. Mr. Chancellor has already advanced these claims against Mr. Maynes. The court found Mr. Maynes did not breach the

non-competition and restrictive covenant clauses in the shareholders agreement, and Mr. Chancellor could not bring a claim for financial contributions allegedly owing to Lifestyles. Mr. Chancellor did not appeal. There is no new evidence. Mr. Chancellor has not advanced any newly discovered and/or alternative theory of liability. [35] Mr. Chancellor cannot re-litigate issues simply because he says his losses have extended longer. The bases of his claims have been dismissed on the merits, no matter how long he says he suffered losses. [36] There is no basis for me to exercise my residual discretion not to apply issue estoppel against Mr. Maynes. There are no "special circumstances" to justify doing so. Lifestyles' Claims for Damages and Disgorgement [37] Lifestyles was not a party to the original action. It is a separate entity that, at the critical times, was not controlled exclusively by Mr. Chancellor. In fact, Lifestyles was controlled equally by Mr. Chancellor and Mr. Maynes. In these circumstances, Mr. Chancellor submits that he and Lifestyles are not privies. [38] Lifestyles relies on my decision in Rossner v. Nystrom, 2019 BCSC 583 for the proposition that Mr. Maynes "cannot have it both ways". Having successfully argued in the first action that Mr. Chancellor and Lifestyles were separate entities, Lifestyles submits that Mr. Maynes cannot argue in this case that they

are one and the same. [39] Respectfully, Lifestyles misinterprets Rossner. [40] The Rossner case related to the construction of a custom home by Momentum Designs Ltd. ("Momentum") for the Rossners. Neither the construction nor the initial litigation went well. The Rossners obtained a judgment against Momentum -- but it was dry. The Rossners then commenced a second action alleging fraud against Ms. Nystrom as the sole director and Mr. Nystrom as a key employee of Momentum. [41] Though the second action shared a common factual matrix with the first action, I declined to dismiss the second action on the basis of issue estoppel or cause of action estoppel. I found that the second action raised issues that were not fundamental to and were not decided in the original action, namely allegations of fraud. [42] Of relevance to this case, I found that the Nystroms and Momentum were privies. [43] With respect to Ms. Nystrom, I relied on Delane Industry Co. Ltd. to find that, as a director of Momentum, Ms. Nystrom was a privy of Momentum. [44] With respect to Mr. Nystrom, the situation was not as clear. Mr. Nystrom was not an officer of Momentum but identified himself as the controller and was very closely involved in Momentum's operations. I resolved the "murkiness" of the situation by reference to the pleadings. In the notice of civil claim, the Rossners alleged that Momentum was a sham

and alter ego of the Nystroms. I held that the Rossners could not "have it both ways". They could not allege in the notice of civil claim that the Nystroms and Momentum were one and the same but submit, for the purposes of the application before me, otherwise. I concluded Mr. Nystrom was also a privy of Momentum. [45] Returning to the case at hand, if anything, my decision in Rosner supports Mr. Maynes, not Lifestyles. Nothing in my decision in Rossner detracts from the proposition in Delane Industry Co. Ltd. that a director and officer of a company is a privy of the company for the purposes of issue estoppel. There is no reason in principle for there to be any difference with respect to who is a privy for the purposes of cause of action estoppel. [46] There is also no reason in principle for a director and officer of a company to be a privy of the company only in the case of a sole director and officer of the company. The decision in Delane Industry Co. Ltd. was not limited in this way. Further, as alluded to by Meiklem J., as a director of Lifestyles, Mr. Chancellor was always free to seek leave of the court to commence a derivative action on behalf of Lifestyles to seek financial contributions from Mr. Maynes. [47] My comments in Rossner about not having it both ways related to Mr. Nystrom not Ms. Nystrom. Mr. Nystrom was not a director or officer of Momentum. Rather, he was

very closely connected to Momentum and was alleged in the notice of civil claim to be one and the same as Momentum. [48] In any event, in this case, there is nothing inconsistent in the positions taken by Mr. Maynes in the two actions. In the first action, Mr. Maynes successfully asserted that claims for unpaid financial contributions belonged to Lifestyles not Mr. Chancellor personally. Mr. Maynes maintains the same position in this action. He simply submits that all of Lifestyles' claims ought to be dismissed on the basis of res judicata, in part because Mr. Chancellor and Lifestyles are privies. [49] I am bound by Delane Industry Co. Ltd. to find that Mr. Chancellor and Lifestyles are privies. [50] Having made this finding, I am compelled to dismiss Lifestyles' claims for damages and disgorgement of profits arising out of Mr. Maynes' alleged breaches of the non-competition and restrictive covenant clauses in the shareholders agreement. Justice Meiklem has already found that Mr. Maynes did not breach these clauses. [51] There is no basis for me to exercise my residual discretion not to apply issue estoppel against Lifestyles. Again, there are no "special circumstances" to justify doing so. [52] The outcome with respect to Lifestyles' claim for damages arising out of Mr. Maynes' alleged failure to make required financial contributions is different. While the issue was

expressly not decided by Meiklem J., it certainly could have been. With reasonable diligence, Mr. Chancellor could have raised the issue on Lifestyles' behalf. [53] In these circumstances, issue estoppel does not apply with respect to the financial contribution claim because there was no final decision on the merits. On the other hand, subject to my residual discretion, cause of action estoppel does apply because Mr. Chancellor and Lifestyles are privies and Mr. Chancellor failed to exercise reasonable diligence to bring the claim on Lifestyles' behalf. [54] While generally parties should not have to defend a claim that was or should have been the subject of a previous proceeding, this is a case where special circumstances exist for me to exercise my residual discretion not to apply cause of action estoppel. [55] I have reached this conclusion for two reasons. First, Mr. Maynes did not raise the issue that Mr. Chancellor was not the right party to pursue a financial contribution from him in either his response to civil claim or notice of application. Second, Meiklem J. specifically contemplated Lifestyles would be able to pursue Mr. Maynes in a separate proceeding. His judgment reflects an intention to preserve Lifestyles' claim for financial contributions from Mr. Maynes: Reliable Mortgages Investment Corp. v. Chan, 2014 BCCA 14 at para. 47. [56] While Lifestyles' claim for

financial contributions from Mr. Maynes are not res judicata, I must still deal with Mr. Maynes' submission that they are out of time. I will do so in a moment. Claims under the Business Corporations Act [57] Mr. Chancellor and Lifestyles seek an order to liquidate and dissolve Lifestyles under s. 324 of the BCA and various ancillary orders under s. 325 of the BCA, including an order that Mr. Maynes contribute an appropriate sum of money to the assets of Lifestyles. Under s. 325(1), the company itself and Mr. Chancellor as a director both have standing to seek this relief. [58] As a preliminary matter, I note that Rule 2-1(2)(b) requires that applications under ss. 324 and 325 of the BCA be made by petition. Mr. Chancellor and Lifestyles have not done so in this case. I will address the consequences later in my reasons. [59] At this stage of the analysis, I will deal with the merits. [60] Mr. Maynes largely ignored the BCA claims during his submissions. His position is simply that Mr. Chancellor was in a position to bring these claims earlier and they must, therefore, be dismissed on the basis of res judicata. [61] The issue of whether to liquidate and dissolve Lifestyles under s. 324 of the BCA was not before Meiklem J. and involves different considerations than the damages claims advanced by Mr. Chancellor (and which could have been advanced by him on behalf of Lifestyles).

Further, Lifestyles still exists as a corporate entity. In the circumstances, neither issue estoppel nor cause of action estoppel arises in relation to the claim for an order liquidating and dissolving Lifestyles. [62] The scope of the ancillary orders sought by Mr. Chancellor and Lifestyles under s. 325 of the BCA are not particularized in the notice of civil claim. Based on the pleadings filed, evidence adduced and submissions made, it is evident Mr. Chancellor and Lifestyles are resorting to these ancillary orders to obtain compensation from Mr. Maynes for breaching the shareholders agreement and fiduciary duties owed to Lifestyles. No other factual basis for the ancillary orders was pleaded, no other evidence was adduced and no other submissions were made. [63] Though Mr. Chancellor and his privy, Lifestyles, have dressed up their claims in relation to Mr. Maynes' alleged breach of the shareholders agreement and fiduciary duties differently, the claims for ancillary relief under s. 325 of the BCA are the same in substance as claims advanced by Mr. Chancellor in the first action. If there is any different basis for these claims that I have not discerned, I agree with Mr. Maynes that such claims could have and should have been made in the first action. [64] Justice Meiklem has found that Mr. Maynes did not breach the non-competition and restrictive covenant clauses in the

shareholders agreement. These questions have been finally decided and, on the basis of issue estoppel, may not be re-litigated. There is no good reason to exercise my residual discretion not to apply issue estoppel. [65] Insofar as the requested ancillary orders relate to financial contributions that Mr. Maynes may be obliged to make to Lifestyles, for the reasons I have already given, I am exercising my residual discretion not to apply cause of action estoppel to them. The remaining question is whether they are time-barred. Limitation Periods [66] Given my findings on issue estoppel and cause of action estoppel, only one monetary claim against Mr. Maynes remains, namely Lifestyles' claim that Mr. Maynes breached the shareholders agreement by failing to make required financial contributions to Lifestyles. I will, therefore, analyse only the question of whether this claim is barred by the expiry of the applicable limitation period. [67] The issues before me are: whether the limitation period commenced when Mr. Chancellor and/or Lifestyles first demanded payment from Mr. Maynes on March 16, 2015; if not, whether a new limitation period began to run when Mr. Chancellor and/or Lifestyles made new demands; and/or whether a new limitation period began to run each month that Mr. Maynes did not make required financial contributions. [68] There is no dispute that the two-year basic

limitation period set out in s. 6 of the Limitation Act, S.B.C. 2021, c. 13 applies. There is also no dispute that the basic limitation period begins to run on the day a claim is "discovered". [69] Section 14 of the Limitation Act provides that "[a] claim for a demand obligation is discovered on the first day that there is a failure to perform the obligation after a demand for performance has been made." [70] The parties did not cite any authority to help me understand whether a demand for payment under the shareholders agreement can be properly characterized as a demand obligation. I will assume for the purposes of my analysis that it is. I do so because, in my view, s. 14 of the Limitation Act does not assist Mr. Chancellor and Lifestyles. [71] I reach this conclusion because Mr. Chancellor commenced the first action to recover the demanded financial contributions on March 16, 2015. The original notice of civil claim asserts that a demand for payment was made the day before on March 15, 2015. The amended notice of civil claim in the first action was filed on June 13, 2016. It repeats the assertion that a demand was made on March 15, 2015 and adds an assertion that a second demand was made on June 10, 2016. Even if Mr. Chancellor took these steps (rather than Lifestyles), they can only be characterized as steps taken by a director and the managing broker of Lifestyles to

collect money owed to Lifestyles. [72] In my respectful view, in these circumstances, the limitation period commenced no later than the date Mr. Chancellor filed the original notice of civil claim in the first action, namely March 16, 2015. I am unable to conclude that Mr. Chancellor and Lifestyles can rely on s. 14 of the Limitation Act to restart the applicable limitation period whenever they want by simply making a new demand. [73] The more difficult issue is whether Lifestyles can take advantage of a "rolling limitation period". If a new limitation period commenced each time Mr. Maynes failed to make required financial contributions then Lifestyles would not be out of time to claim against Mr. Maynes for financial contributions dating back to December 20, 2016, two years before Mr. Chancellor and Lifestyles filed the present notice of civil claim. Lifestyles would then be able to claim contributions for unpaid management fees from that date until Lifestyles ceased operations in April 2017, and for unpaid rent from that date until Mr. Chancellor sold the business premises in August 2017. [74] Justice Masuhara recently confronted this very question in the context of an oppression claim involving allegations of ongoing oppression. In Boulet v. Inventys Thermal Technologies Inc., 2019 BCSC 1416, he held that the concept of rolling limitation periods is foreign to the Limitation

Act in British Columbia. Mr. Boulet's oppression claim was time-barred because he failed to take steps to prevent a continuation of the oppressive conduct when it first arose more than two years prior to the filing of his petition. [75] In this case, Mr. Maynes left Lifestyles in February 2015. A demand was made on behalf of Lifestyles on March 15, 2015. A notice of civil claim to enforce the demand was filed by Mr. Chancellor the next day. Mr. Chancellor may have required leave of the court but was in a position to advance a derivative action on behalf of Lifestyles soon after. [76] Lifestyles did not take steps to pursue Mr. Maynes for his alleged ongoing failure to make financial contributions within two years of the date Mr. Chancellor made the first demand. Lifestyles is now time-barred from doing so, whether in a claim for damages or for ancillary relief under s. 325 of the BCA. Procedural Issues [77] For the reasons I have given, the only claim that is not res judicata or time-barred is the claim under s. 324 of the BCA to liquidate and dissolve Lifestyles. As the claims for ancillary relief under s. 325 of the BCA have been dismissed, I am not aware of any reason for Mr. Chancellor and/or Lifestyles to now pursue an application under s.

324. Further, as mentioned earlier, Mr. Chancellor and Lifestyles have not followed the correct procedure for such an application. [78] The parties did not make submissions on the consequences of Mr. Chancellor and Lifestyles failing to choose the correct form of proceeding for the claims under s. 324 of the BCA. Nevertheless, in all of the circumstances, I consider it appropriate to dismiss the claim to liquidate and dissolve Lifestyles. This decision should not, however, be taken as precluding Mr. Chancellor and/or Lifestyles from applying, by way of petition, to liquidate and dissolve Lifestyles in the future. Perhaps there is a good reason to do so that was not brought to my attention. [79] I feel compelled to add that Mr. Chancellor and Lifestyles are also free to seek ancillary relief not addressed in these reasons. Any such claims for ancillary relief will, of course, be subject to all available defences, including res judicata and limitation defences. Conclusion [80] It is never desirable to dismiss a claim without addressing the merits. Regrettably, Lifestyles' claim for financial contributions from Mr. Maynes falls into that category. [81] The action is dismissed. [82] The parties have leave to address the issue of costs. If the parties do not contact Supreme Court Scheduling within three weeks, Mr. Maynes shall have his costs on Scale B. "L.S. Marchand J." MARCHAND J. [1] The notice of civil claim is somewhat flawed in the sense that Mr. Chancellor does not allege Mr. Maynes owed him fiduciary duties but still personally seeks damages for breach of fiduciary duty.