Multiguide GmbH v. Broer

2022 BCSC 852 Multiguide GmbH v. Broer

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Multiguide GmbH v. Broer, 2022 BCSC 852 Date: 20220519 Docket: S1510213 Registry: Vancouver Between: Multiguide GmbH Plaintiff And Rudolf Broer, March Rummeny, Multiguide Technologies Inc., RTB Safe Traffic, Inc. Defendants Corrected Judgment: The text of the judgment was corrected at paragraph 45 on May 25, 2022. Before: The Honourable Justice Blake Reasons for Judgment Counsel for the Plaintiff: M.J. Dew Counsel for the Defendants, Rudolf Broer and Marc Rummeny: A. Crabtree Counsel for the Defendants, Multiguide Technologies Inc. and RTB Safe Traffic, Inc. J.M.S. Woolley Place and Date of Trial: Vancouver, B.C. September 20 to 23, 27 to 29, October 1, 4, 6 to 8, 2021 Written submissions of plaintiff: Written submissions of defendants, Multiguide Technologies Inc. and RTB Safe Traffic Inc.: Written submissions of defendants, Rudolf Broer and Marc Rummeny: November 12, 2021 November 26, 2021 November 26, 2021 Place and Date of Judgment: Vancouver, B.C. May 19, 2022 Table of Contents I. INTRODUCTION. 4 II. BACKGROUND. 5 A. RTB Germany and RTB Technik. 6 B. Formation of Multiguide GmbH. 6 C. Siemens Sale of PDM Business to RTB Germany. 7 D. Problems with Parktoria and Formation of MTI 7 E. Disputes between Mr. Kraus and Mr. Broer 9 F. The April 22, 2015 MTI Shareholder Meeting. 10 G. The Settlement Agreement 10 H. Purchase of Mr.

Ziola's Shares in MTI 12 III. Litigation Background. 13 A. The German Litigation. 13 B. The Initial Canadian Litigation. 13 C. Further Canadian Litigation. 14 IV. ISSUES. 15 V. LEGAL ANALYSIS. 16 A. Credibility and Reliability. 16 B. The Alleged Shareholder Loan. 18 C. Disputed Invoices. 26 D. The Management Services Agreement 30 a) Incorporation of RTB Canada. 35 b) MTI as at February 2016. 35 c) Management Services Agreement 35 d) MTI AGM December 29, 2016. 41 e) May 2018 Order 43 f) Lack of Timely Disclosure of the Management Services Agreement 44 E. Special Resolution. 46 a) MTI Special Meeting February 12, 2019. 46 b) Multiguide's Dissent with Respect to the Special Resolution. 46 c) Analysis. 48 F. Oppression. 50 1. Reasonable Expectations. 55 2. Oppression or Unfair Prejudice. 58 3. Analysis. 64 G. Breach of Fiduciary Duty. 66 VI. REMEDY. 68 I. INTRODUCTION [1] In the fall of 2011 Rudolf Broer ("Mr. Broer") and Roland Kraus ("Mr. Kraus") embarked on a promising business relationship. However, by April 2015 that promising relationship had soured and irreconcilable differences had arisen. While they managed to separate their German business interests by May 2015, for reasons which are set out in detail below, they were not able to separate their Canadian business interests at that time. The parties have engaged in acrimonious litigation in both Germany and Canada. [2] As a

result of their May 2015 agreement regarding the German businesses, Mr. Kraus became the sole shareholder of MultiguideGmbH ("Multiguide"). While he resigned as a director and officer of Multiguide Technologies Inc. ("MTI") in August 2015, Multiguide remained a 1/3 shareholder of MTI. At that time, Mr. Ziola (through his numbered company) and Mr. Broer's limited partnership of RTB GmbH & Co. KG ("RTB Germany") were the other shareholders. However, Mr. Broer obtained a majority shareholder position in MTI by October 2015, by arranging for another one of his Germany companies, RTB Technik (defined below) to purchase Mr. Ziola's shares. He then appointed Marc Rummeny ("Mr. Rummeny") (an employee of RTB Germany), as a director of MTI in October 2015. Mr. Broer then orchestrated the effective stripping of all of MTI's assets, contracts and employees to a new company he incorporated for that purpose (of which RTB Germany was the sole shareholder, see description of legal ownership in para.[6]), in return for an annual commission equal to 5% of the total sales generated by the new company (for a period of five years following the date on which this new company first generated net profits equal to 5% or more of its sales). This denuding of MTI was done effectively as of January 12, 2016, but the evidence establishes that the actual written contract (called the Master Services Agreement

or the "MSA") was not created until February 2018 and not executed until sometime later in 2018. The transfer was done in secrecy, and Mr. Kraus was not aware of the existence of the MSA, nor of the actions taken by Mr. Broer, until some years later. [3] Many of the events underlying this proceeding are not in dispute; rather, it is their legal interpretation that lies at the heart of this litigation. The plaintiff's position is that Mr. Broer's decision to enter into the MSA was oppressive, unfairly prejudicial and in breach of the directors' (and Mr. Broer's) fiduciary duties to both MTI and Multiguide. The plaintiff seeks repayment of unpaid debts and an alleged shareholder loan, an order for the purchase of the plaintiff's shares in MTI, and punitive damages. The defendants' position is that Mr. Broer's decision was eminently reasonable in the circumstances, given the financial difficulties facing MTI at the time, and the lack of any realistic possibility that MTI could continue as a business. They say the plaintiff's claim should be dismissed, although they agree that Multiguide's shares in MTI should be purchased to effectively end the parties' business relationship. II. BACKGROUND [4] This corporate dispute arises out of the business of installing and servicing pay and display parking meters, which I shall refer to as PDMs. PDMs are installed in parking lots, and drivers

who arrive at the lot purchase parking time at the PDM (paying by coin or credit card) and obtain a receipt stating the parking time that has been purchased which is then placed on the driver's vehicle dashboard. This displayed receipt may then be checked by parking lot attendants patrolling the lot. There is a hotline phone number on the PDMs for users to call for support if they are having trouble using the PDM, which is operated on a 24 hour a day, 7 day a week basis. [5] PDMs typically have a 10 year lifespan. Once installed, they must be maintained on a regular basis. In addition, as payment is possible by credit card, credit card clearing services must be provided for each PDM. Credit card clearing services ensure that when someone pays, the payment information is securely collected and correctly allocated to the right financial account. The credit card clearing process occurs instantly as the driver pays for parking and occurs by way of wireless technology. A. RTB Germany and RTB Technik [6] Mr. Broer is the sole limited partner of RTB Germany, which was registered as a limited partnership pursuant to German law in 1996, to carry on the business of developing, producing and distributing traffic light equipment, traffic control radar systems as well as parking and parking guidance systems. Their core business was traffic management. In the same year RTB Rehabilitations

Technik Broer Beteiligungs GmbH ("RTB Technick") was also incorporated pursuant to the laws of Germany. RTB Technik is the corporate general partner of RTB Germany, and Mr. Broer is the sole shareholder of RTB Technik. [7] In 2004, RTB Germany entered into a contract with Siemens AG ("Siemens"), the largest industrial equipment manufacturing company in Europe, to develop, manufacture and supply single space detection parking sensors (SSDs) for use in Siemens' parking business. [8] Mr. Kraus was an employee of Siemens from 2007 through to the end of 2011. He met Mr. Broer in approximately late 2010 for the first time. B. Formation of Multiguide GmbH [9] Mr. Kraus, in his capacity as the head of the Siemens parking division, learned Siemens' intended to sell its SSD technology and related business, which was designed to assist drivers in locating vacant parking spaces. He approached Mr. Broer and suggested a potential partnership between himself and Mr. Broer to purchase the SSD technology and the related business. They decided to purchase the SSD technology and formed Multiguide (a German company) on September 29, 2011, to acquire the SSD technology and the related business from Siemens. The initial shareholders of Multiguide were RTB Germany (owning 25% of the issued shares) and Mr. Kraus (owning 75% of the issued shares). Multiguide completed the purchase of the SSD business

from Siemens effective January 1, 2012 and Mr. Kraus resigned from his employment at Siemens the day before. [10] The parties agreed Multiguide was to be responsible for the sales and distribution of the SSD sensors, and RTB Germany was to be responsible for manufacturing the SSD sensors. Mr. Kraus' uncontroverted evidence was that he was not paid a salary for the first 15 months of his employment at Multiguide. C. Siemens Sale of PDM Business to RTB Germany [11] In 2012, Siemens gave notice it intended to divest its business of selling and servicing automated PDMs (which were at that time located in Europe and North America). [12] Mr. Kraus and Mr. Broer discussed the potential acquisition of this PDM business. They began to negotiate a potential sale with Siemens in 2013, and agreed that RTB Germany was the appropriate entity to acquire the business from Siemens, and that RTB Germany would manufacture the PDMs and Multiguide would distribute them. RTB Germany successfully acquired the PDM business from Siemens effective as of November 25, 2013. The ultimate agreement was Siemens paid RTB Germany €500,000 for purchasing the business, and RTB Germany assumed Siemens' service and warranty obligations for all Siemens PDMs for a period of 10 years (until November 2023). [13] In early 2014 RTB Germany began manufacturing the PDMs (and necessary related equipment to be supplied to

Multiguide), who then arranged for the distribution. Initially, the distribution and servicing of the PDMs in North America was handled by a Canadian partner, APARC Systems Ltd. ("APARC"), which was later taken over by a private equity firm who renamed the company Parktoria Technologies Ltd. ("Parktoria"). D. Problems with Parktoria and Formation of MTI [14] Mr. Kraus realized in 2014 that Parktoria was promoting the products of a competitor. While he had some discussion with the CEO of Parktoria to attempt to rectify this situation, he then learned that Parktoria had collaborated with a competitor to reverse engineer the PDM and swap out the RTB Germany parts for the competitors' parts. Mr. Kraus and Mr. Broer discussed this issue and ultimately decided to form a British Columbia company to be responsible for the sales, service and maintenance of the PDMs. [15] As a result, the defendant MTI was incorporated as a British Columbia company on November 14, 2014 to carry on the PDM business in North America. The initial shareholders of MTI were Multiguide (33.3%), RTB Germany (33.3%), and a numbered company (the sole shareholder of which was a man by the name of Robert Ziola ("Mr. Ziola") (33.3%)). The initial directors were Mr. Broer, Mr. Kraus and Mr. Ziola. Mr. Kraus was the president and CEO of MTI. The evidence is that Mr. Kraus was never paid a salary for his work done for

MTI, nor did MTI ever pay for his travel expenses for his trips from Germany to Canada. Rather, Multiguide incurred significant expenses in setting up MTI, including paying for many of Mr. Kraus' out of pocket expenses in his work done to set up MTI. In Mr. Kraus' words "both Multiguide and RTB Germany were providing extra support to MTI without reimbursement or compensation". Mr. Ziola was the former founder and CEO of APARC, and provided Mr. Broer and Mr. Kraus with his expertise in the North America PDM market. [16] When MTI was incorporated the parties agreed that each of the three shareholders would have the same number of shares, and that RTB Germany and Multiguide would each contribute €100,000 to MTI. Mr. Ziola would not contribute any funds but he would contribute office space and administration services (such as phones, accounting and invoicing servicing, payment assistance, etc). At this time I will not say anything further about the €100,000 contributions from RTB Germany and Multiguide, as the nature of those contributions - whether an equity contribution or a shareholder loan - is one of the central issues between the parties and is dealt with below. [17] At the time MTI was incorporated there were approximately 950 PDMs in Canada and the United States that required maintenance, spare parts and credit card clearing services (as RTB Germany had agreed to do until

November 2023). [18] There was significant work necessary to establish MTI, including setting up the necessary infrastructure in British Columbia (such as hiring employees, establishing office systems, and drafting service agreements) and dealing with both existing and prospective clients. [19] After MTI was incorporated in November 2014 the parties established a distribution channel whereby RTB Germany manufactured the parking meters, and invoiced Multiguide (who provided sales, tender and project management), who in turn invoiced MTI (who provided local sales, installation, service and spare parts in North America, with offices in Vancouver and Ontario). MTI in turn invoiced the clients for the PDMs and the services provided. RTB Germany did a direct delivery to MTI, and all logistics and export documentation was done by RTB Germany. The long standing payment agreement (which had existed since the foundation of Multiguide) was that Multiguide would only pay the outstanding RTB Germany invoices once Multiguide's invoices were paid (whether such payment was directly from the client or through MTI). This was so for both product lines - both the PDMs and the SSDs. [20] Both Mr. Kraus and Mr. Broer testified as to their frustration with Mr. Ziola's contributions to MTI. They both agreed they were disappointed that in their respective opinions Mr. Ziola had not provided the

necessary office space, furniture, and administrative services that he had promised MTI. E. Disputes between Mr. Kraus and Mr. Broer [21] Mr. Kraus and Mr. Broer historically had a good relationship, described by Mr. Kraus as "a very good team approach". Mr. Kraus described Mr. Broer as being very interested in business strategies, but not necessarily interested in the small organizational details. Mr. Broer did not disagree with this characterization of their relationship. However, in early 2015 disputes arose between Mr. Kraus and Mr. Broer. [22] Mr. Kraus testified the friction arose in March and April 2015. His perspective was that Mr. Broer had underestimated the complexity of the parking business and was unhappy with the sales of the PDMs. Mr. Broer testified that he was unhappy with Mr. Kraus' business priorities and with his lack of PDM sales. [23] In the middle of March 2015 Mr. Broer asked Mr. Kraus for Multiguide to make payment for all amounts due and owing to RTB Germany; in other words, to fundamentally alter their long-standing financial arrangement. This was a significant problem from Mr. Kraus' perspective for two reasons: Multiguide did not have the money for these outstanding invoices as their clients had not yet paid; and in Germany, if a company cannot make payments as required then the CEO is obliged to go to Court, declare they cannot pay the invoices,

and then the company (being Multiguide) is likely to go into bankruptcy. If a CEO fails to go to Court, then they may be personally responsible for all of the corporate debts. At the same time Mr. Broer advised Mr. Kraus that RTB Germany would stop providing goods to Multiguide, which posed another large problem for their existing contracts. [24] At this point, the relationship between the two quickly broke down, and effective communication ceased. F. The April 22, 2015 MTI Shareholder Meeting [25] An annual general meeting for MTI was held in Vancouver, attended by Mr. Kraus, Mr. Ziola and Mr. Rummeny (who attended on Mr. Broer's behalf upon his request), which is discussed in greater detail below, in paras. [56] - [63]. G. The Settlement Agreement [26] Mr. Kraus called an extraordinary meeting for Multiguide and the Multiguide shareholders met in Munich and came to an agreement on terms to resolve the dispute between them by way of a settlement agreement dated May 3, 2015 (the "Settlement Agreement"). The relevant portions of that Settlement Agreement for the purpose of this litigation are as follows: Resolutions in regards to Pay & Display Machines (in the following named "PDM") 4. By the end of day July 31st 2015, Multiguide shall resign from the PDM business (incl. spare parts, hosting, PCI; in Germany and in the world). Existing delivery contracts shall be taken over by

RTB at this time. Until July 31st 2015, invoicing (for PDM) shall continue to be done in the name of Multiguide. Multiguide shall make payment of RTB invoices when Multiguide will receive payment from its clients. As of August 1st 2015 invoicing (for PDM) shall be solely done in the name of RTB. Multiguide's PDM employees shall continue to work on their PDM tasks according to RTB guidance under their retirement on July 31st 2015.

5. A communication to clients shall be defined in a way to not endanger outstanding payments to Multiguide.

6. The suspension of deliveries of RTB [RTB Germany] shall be cancelled as soon as Multiguide has registered a new shareholder list according to paragraph 9.

8. In case of a shortfall in payments in Canada (Parktoria Technologies Ltd. and Multiguide Technologies Inc.), the losses shall be shared between RTB and Multiguide.

9. RTB's shares in Multiguide shall be acquired by Multiguide pursuant to § 15 Paragraph 1 of the shareholder and according to RTB's letter dated April 20th, 2015. Still it shall remain in force that receives of RTB against Multiguide, which result from the execution of the PDM business until July 31st 2015 (see paragraph 4) shall be paid when Multiguide receives payments from its clients. Resolutions in regards to Multiguide Technologies Inc.

16. A provision for MTI shall be made at a shareholders' meeting of MTI. [27] In broad strokes the intent of the Settlement Agreement was to clearly separate the business of Multiguide from the business of RTB Germany. RTB Germany would be solely responsible for the PDM business, and Multiguide would be solely responsible for the SSD business. Counsel for Multiguide colloquially characterized it as a "divorce" of the German businesses. [28] However, the Settlement Agreement specifically did not deal with MTI. Mr. Kraus' evidence on that point was that as Mr. Ziola was not present at the Munich meeting, and his numbered company was a 33.3% shareholder of MTI, they could not resolve matters until they could discuss it with him. The Settlement Agreement did provide that "a provision for MTI shall be made at a shareholders' meeting of MTI". [29] Pursuant to the terms of the Settlement Agreement, Mr. Kraus became the sole shareholder in Multiguide on May 4, 2015. Mr. Kraus then resigned as a director, president and CEO of MTI as of August 2, 2015. His explanation was that as RTB Germany was going to assume the PDM business, and as he no longer had a good relationship with Mr. Broer, he did not see it to be in the best interests of MTI that he continue to attempt to be the bridge between MTI and RTB Germany and he thought it best someone else assume that job. Mr. Rummeny assumed the

role of president of MTI, and was appointed a director of MTI shortly thereafter. H. Purchase of Mr. Ziola's Shares in MTI [30] In 2015 MTI made several efforts to obtain a capital contribution from Mr. Ziola. These efforts were unsuccessful. Ultimately on October 9, 2015 RTB Technik acquired Mr. Ziola's shareholdings (owned by his holding company) in MTI for $20,000. Mr. Kraus testified he was not involved with the discussions that led to this ultimate purchase, just that he knows it took longer than expected. Mr. Broer, on the other hand, gave evidence that Mr. Kraus negotiated the purchase price of those shares. Mr. Ziola did not give any evidence on how the purchase price for his 33.3% shareholding in MTI was arrived at; rather, he testified that he sold the shares "to avoid getting caught in the middle of a large potential battle". [31] After the purchase of Mr. Ziola's shares, RTB Germany and RTB Technik (for each of which Mr. Broer was the sole shareholder) owned 2/3 of the shares of MTI. Since October 26, 2015 the directors of MTI have been Mr. Broer and Mr. Rummeny. [32] It is the actions taken by Mr. Broer and Mr. Rummeny in their capacity as directors of MTI, after the purchase of Mr. Ziola's shares, and without consultation or notice to Multiguide, which give rise to this litigation. Fundamentally, it is their decision to transfer all of the assets of MTI to a new

company effectively controlled by Mr. Broer, in return for an annual commission equal to 5% of the total sales generated by the new company for a period of five years (following the date on which this new company first generated net profits equal to 5% or more of its sales) which is at the heart of the dispute between the parties. III. Litigation Background [33] It is necessary to briefly set out the plethora of litigation which has resulted from the business dealings of the parties. A. The German Litigation [34] RTB Germany commenced litigation against Multiguide in Germany on November 30, 2015. The scope of the German litigation was not dealt with in detail at trial. However, the parties agreed that the judgment pronounced on April 26, 2018 in the German litigation provides: a) RTB Germany must pay Multiguide 50% of the losses (if any) that Multiguide suffers due to non-payment by MTI of the Disputed Invoices; b) Multiguide is liable to pay €62,099.46 to RTB Germany (this amount largely unrelated to the Disputed Invoices); and c) Multiguide is not required to pay the €62,099.46 to RTB Germany until the amount of losses Multiguide suffers due to nonpayment by MTI of the Disputed Invoices is determined. (the "German Judgment") [35] The parties also agreed the German Judgment did not deal with the alleged shareholder loan of €100,000 paid by Multiguide to MTI. B. The Initial

Canadian Litigation [36] On August 26, 2015 and November 2, 2015 Multiguide sent letters to MTI demanding payment on unpaid invoices due and owing to Multiguide in the amount of €172, 778.10 (referred to as the "Disputed Invoices" in the further amended notice of civil claim). [37] On December 8, 2015 Multiguide sent out a formal demand for repayment of its claimed shareholder loan in the amount of €100,000. On December 9, 2015 Multiguide filed a notice of civil claim in Action No. S1510213, naming MTI as the defendant, seeking repayment of the claimed €100,000 shareholder loan and payment of the Disputed Invoices. MTI defended this claim on the basis that the initial funds advanced were an equity contribution and not a shareholder loan, and that the goods supplied by Multiguide which were the basis of the Disputed Invoices were defective. C. Further Canadian Litigation [38] On March 29, 2018 Multiguide filed petition No. S184908 claiming MTI had acted in an oppressive manner. On May 29, 2018, Justice Steeves determined that oppression had occurred by MTI failing to produce audited financial statements and failing to hold annual general meetings, and made orders that audited financial statements for 2015 - 2017 be produced, and that an AGM be held. [39] Multiguide then filed petition No. S1812245 against MTI, Mr. Broer and Mr. Rummeny on November 14, 2018, seeking declarations

that MTI had, without complying with s. 301 of the Business Corporations Act, S.B.C. 2002, c. 57 [BCA], disposed of all or substantially all of its undertakings other than in the ordinary course of business, and sought permission to proceed with a derivative action. This petition was converted into an action pursuant to a consent order entered on July 12, 2019. [40] Action No. S1510213 was consolidated with Action No. S1812245 by way of order of Justice Ross entered January 20, 2020, to continue under action number S1510213. The notice of civil claim was later amended to add claims for oppression and conspiracy, and to drop the claim for permission to proceed with a derivative action. The plaintiff sought and was granted leave during trial to further amend the notice of civil claim to add an additional claim that the personal defendants had induced MTI to breach its contract with the plaintiff. The defendants accordingly filed amended responses to civil claim by the close of trial. IV. ISSUES [41] The issues in this proceeding are complex and intertwined. The following is a summary of the legal issues I will address: a) Was the €100,000 contribution from Multiguide to MTI on account of equity or a shareholder loan? b) Are the Disputed Invoices due and owing to Multiguide? c) What was the legal effect of the 2019 special resolution ratifying the transfer of the business of MTI

to RTB Canada, and what are the legal consequences of Multiguide dissenting from that special resolution? d) Were the actions of the directors of MTI in entering into the MSA oppressive to Multiguide? e) Did the directors breach their fiduciary duty to MTI in entering into the MSA? f) Did Mr. Broer (in his capacity as a director of MTI), breach a fiduciary duty to Multiguide (in its capacity as a shareholder of MTI) in entering into the MSA? g) If any of the alleged causes of actions are proven, is there a basis for either the corporate and/or the personal defendants to be personally liable to Multiguide for either the Disputed Invoices or the €100,000 contribution from Multiguide to MTI? h) Is it appropriate to order that Multiguide's shares in MTI be repurchased, and if so, on what terms? i) Was the conduct of the defendants such that it merits an award of punitive damages against all, or some, of the defendants? The plaintiff also advanced additional arguments that either or both of Mr. Broer and Mr. Rummeny induced MTI to breach its contract with Multiguide, and that there were a number of conspiracies amongst the defendants not to pay the Disputed Invoices and to transfer the business of MTI to RTB Canada. Notwithstanding that extensive arguments were made on these two additional positions, I find this is a case that clearly turns on the alleged oppressive and unfairly

prejudicial conduct of the defendants and their alleged breach of fiduciary duty. Given my findings (as set out below) that oppression and breaches of fiduciary duty occurred, it is not necessary to address these additional claims advanced by the plaintiff. V. LEGAL ANALYSIS A. Credibility and Reliability [42] The factors to be considered when assessing credibility were summarized by Justice Dillon in Bradshaw v. Stenner, 2010 BCSC 1398 at para. 186, aff'd 2012 BCCA 296, as follows: [186] Credibility involves an assessment of the trustworthiness of a witness' testimony based upon the veracity or sincerity of a witness and the accuracy of the evidence that the witness provides (Raymond v. Bosanquet (Township) (1919), 59 S.C.R. 452, 50 D.L.R. 560 (S.C.C.)). The art of assessment involves examination of various factors such as the ability and opportunity to observe events, the firmness of his memory, the ability to resist the influence of interest to modify his recollection, whether the witness' evidence harmonizes with independent evidence that has been accepted, whether the witness changes his testimony during direct and cross-examination, whether the witness' testimony seems unreasonable, impossible, or unlikely, whether a witness has a motive to lie, and the demeanour of a witness generally (Wallace v. Davis, [1926] 31 O.W.N. 202 (Ont. H.C.); Faryna v. Chorny, [1952] 2 D.L.R.

152 (B.C.C.A.) [Faryna]; R. v. S.(R.D.), [1997] 3 S.C.R. 484 at para.128 (S.C.C.)). Ultimately, the validity of the evidence depends on whether the evidence is consistent with the probabilities affecting the case as a whole and shown to be in existence at the time (Faryna at para. 356). [43] Credibility and reliability are separate concepts. Credibility relates to honesty whereas reliability relates to accuracy. The starting point in a credibility assessment is to presume truthfulness; however, truthfulness and reliability are not necessarily the same: Hardychuk v. Johnstone, 2012 BCSC 1359 at para.

10. When a witness' evidence is clearly inaccurate "the challenge from an assessment perspective is to identify the likely reason for the inaccuracy in a cautious, balanced and contextually sensitive way" (Hardychuk, at para. 10). [44] Messrs. Kraus, Broer and Rummeny all testified remotely from Germany, and both Mr. Broer and Mr. Rummeny testified through a German translator. [45] There was no argument that Mr. Kraus was neither credible, nor reliable, and I had no such concerns. Neither was there any argument that Mr. Rummeny was neither credible, nor reliable, and I likewise had no such concerns. However, Mr. Broer's evidence raises concerns about both his credibility and reliability. Messrs. Kraus, Broer and Rummeny all agreed that Mr. Broer was more of a "big picture business man" and left the details of day to day management to others. In direct examination, Mr. Broer had difficulty answering the clear questions that were being asked by counsel, and frequently set out the narrative he felt it was necessary for the court to understand rather than answering the specific question put to him. This pattern continued in cross-examination. [46] Further, there were a number of instances where Mr. Broer's evidence was directly contrary to that of others. A few examples are sufficient to demonstrate the problem. Mr. Kraus testified he was not involved with the buy out of Mr.

Ziola's shareholdings in MTI, as he had resigned as a director and officer of MTI effective August 2, 2015, and the purchase of Mr. Ziola's shares occurred October 9, 2015. However, Mr. Broer testified that Mr. Kraus conducted the negotiations with Mr. Ziola, and he thought he had a meeting with Mr. Kraus about the valuation of the shares but he could not say anything about that discussion. Given Mr. Broer's antipathy to Mr. Kraus at that time, their ongoing efforts to separate all of their businesses, and Mr. Kraus' resignation as director and officer, Mr. Broer's evidence is not believable. [47] Second, Mr. Broer testified in direct examination that the MSA contract was executed early in 2016. When asked by his counsel whether there was an oral agreement relating to the MSA before the written contract was prepared and signed, Mr. Broer became confused and asked with whom would that oral agreement be. When asked again if the MSA was conceptualized in 2016 and later written down into a contract, he was unable to provide a clear response, and just explained that it "went really fast". Finally, when asked why the MSA was not provided to Multiguide for some time, he justified that it must have just been in the rush of things, and was a mistake he was sorry for. In cross‑examination, Mr. Broer again confirmed that the MSA was signed within a few weeks of January 12, 2016. When an

email from MTI's counsel (Mr. Woolley) dated February 12, 2020 was put to him (in which Mr. Woolley confirmed that there was an oral agreement between the parties on or around January 12, 2016, and that the MSA was not executed until sometime in 2018) he was asked if he agreed with Mr. Woolley's email, and he responded "I can't agree with the content of this email because it is not from me, I do not acknowledge it". When asked if he agreed the MSA may have been signed in 2018 Mr. Broer said "I don't know it anymore, I cannot confirm anything". In the face of the admission by MTI's counsel that the MSA was not executed until 2018, I find Mr. Broer's evidence on the point to lack credibility. [48] Mr. Broer, by his own admission, did not have a detailed understanding of MTI's day to day business dealings. While I accept Mr. Broer's explanation that he was "not an integral part of the daily business", I found his evidence at various times to be unresponsive, vague, and contradicted by the evidence of others. While I do not reject all of his evidence, where there is a conflict between his evidence and that of either Mr. Kraus or Mr. Rummeny, I prefer their evidence: see McPhail v. Ross, 2019 BCSC 21 at para.

101. B. The Alleged Shareholder Loan [49] The plaintiff alleges that the initial €100,000 contribution from Multiguide to MTI was a shareholder loan, which became due and owing upon Multiguide's demand for repayment on December 8, 2015. The defendants take the position that this initial advance was not a shareholder loan but rather an equity contribution. [50] The facts underlying the initial €100,000 contribution from both Multiguide and RTB Germany are not in dispute. Both Mr. Kraus and Mr. Broer are German businesspeople, with experience with German corporate law, but no previous experience with Canadian corporate law. They both gave evidence that they initially understood that their initial €100,000 contribution was equity, as German law required a minimum equity contribution to start a company. The evidence demonstrates that each of the three shareholders received 3,000,000 shares in MTI, at 0.0001 cents (or CDN $300). [51] The contemporaneous documents are consistent with a shared understanding that this initial contribution was on account of equity. On December 9, 2014, Mr. Kraus made arrangements for a wire transfer from Multiguide to MTI and identified the transfer as for "initial equity capital Multiguide GmbH". This contribution was initially reported in Multiguide's ledger as "Participation in stock corporations". [52] On the same day Mr. Kraus wrote to Anja Hagen

(RTB Germany's corporate controller), and copied Mr. Broer, with the subject line "Equity contribution for MTI" as follows: Hi Anja, May I ask you to make the EUR 100,000 equity contribution into our joint company Multiguide Technologies Inc. on behalf of RTB GmbH & Co. KG? I have paid my share [my part] today. It is therefore no longer necessary that your payment is made in December, you are also welcome to wait until the new year. You can find the banking details on my payment slip (see attachment). I think the start in Canada is going well so far. However, I expect that we'll need to make another equity contribution in early summer (hopefully for the last time then). Best regards, Roland RTB Germany likewise advanced an initial €100,000 contribution. [53] However, between late 2014 and July 2015 Mr. Kraus corresponded with MTI's Canadian corporate counsel, Michael Stunden, regarding various corporate legal matters related to MTI. The evidence confirms that after the initial advances had been made, Mr. Stunden provided Mr. Kraus with multiple drafts of a shareholders agreement. These drafts initially referred to the initial advances as an "initial investment", and later referred to them as a "shareholder loan". While the drafts were circulated, the shareholders never executed a shareholder agreement. [54] MTI's external accountant, Mustafa Ranalawala, prepared MTI's financial

statements. On March 3, 2015 Mr. Ranalawala sought clarification from MTI regarding the nature of the initial advances from Multiguide and RTB Germany, and asked whether he should consider them as a loan or as capital. Mr. Kraus responded on the same day as follows: 100,000 Euro from Multiguide GmbH and 100,000 Euro from RTB GmbH & Co. KG I thought this was an equity input, but according to our lawyer this may be a loan. I think this is something we need to clarify in our shareholder meeting in April. Can this wait until then?? Regards, Roland Mr. Ranalawala responded on the same day with: No worries, I will treat this amount as loan as for Dec. 31, 2014 financial statement, and we can rectified thereafter. And I will show as loan to respective loan acct of Multiguide and RTB. [55] Mr. Kraus was candid that as of March 2015 it was still unclear how the funds were being characterized. On March 20, 2015 Mr. Kraus sent the directors of MTI the 2014 year end financial statements for MTI, to be approved at the April 2015 AGM. These draft financial statements recorded under Liabilities and Capital, stated as at December 31, 2014, "Loan from Shareholders $283,318.17". [56] On April 15, 2015 Mr. Kraus emailed Mr. Broer, Mr. Ziola, Mr. Rummeny and Mr. Stunden, the Agenda for the AGM set for April 22, 2015, which included: · Approve and sign financial statement Year 2014 (see

attachment) · Discuss/Finalize shareholders agreement (see attachment) On the same day Mr. Rummeny forwarded the email, with German translations of certain portions, and the attachments, to Mr. Broer. [57] The AGM was attended by Mr. Kraus, Mr. Rummeny (on behalf of RTB Germany), Mr. Ziola, and Mr. Stunden. Mr. Rummeny, an employee of RTB Germany, was asked by Mr. Broer to attend the April 22, 2015 annual general meeting of MTI in Vancouver. This was his first involvement in the business affairs of MTI, and he candidly admitted that he was overwhelmed at the April 2015 AGM and struggled with understanding some of the technical business terms in English (it being his second language). While Mr. Kraus and Mr. Broer were of the opinion that Mr. Rummeny held the proxy for Mr. Kraus for the April 2015 meeting, Mr. Rummeny did not believe he did. Whether he did or not is irrelevant as Mr. Rummeny did not sign the 2014 financial statements on behalf of Mr. Broer. [58] The parties disagree as to whether there was discussion at this AGM relating to the characterization on the 2014 financial statements of the initial contribution as a shareholder loan. In brief, Mr. Kraus says he presented the 2014 financial statements at the AGM, and that in the context of discussion regarding the adequacy of Mr. Ziola's contribution, there was reference to the fact that Multiguide and RTB Germany had

contributed €200,000 by way of shareholder loan, but that the draft shareholder agreement was not discussed. Mr. Rummeny cannot recall any discussion at the AGM about a shareholder loan, and testified he did not make any agreements on behalf of RTB Germany as to whether the contributions were a shareholder loan or equity contribution. [59] Mr. Ziola testified that at the AGM he was asked if he would contribute additional funds, and he reminded the parties that the shareholder loans would be paid back, but that he was not going to personally contribute anything further. Mr. Ziola's contributions were by way of expertise and support, not money, and he testified that he noted at the AGM that he would not be repaid for any of these contributions. [60] Mr. Broer, who was not present at the April 2015 AGM, testified that he had no discussions with Mr. Kraus either before or after the AGM as to whether the €200,000 contribution should be classified as a shareholder loan. His evidence is not surprising, as communications between them had completely broken down by April 2015. However, the evidence is clear that Mr. Broer and Mr. Kraus both signed the 2014 MTI financial statements which characterized the initial start-up capital as "Loan from shareholders". Mr. Broer's evidence was that at the time he signed what was put in front of him, but that notwithstanding his execution of MTI's

financial statements, he always believed the initial contributions to have been in the form of equity. I do not find this explanation credible, given the level of animosity between the two by the end of April 2015, and their mutual intention to separate their business interests. [61] Likewise, Mr. Broer and Mr. Rummeny both signed the MTI 2015 and 2016 financial statements, which continued to characterize the initial start-up contributions as "Loan from shareholders". [62] Following the April 22, 2015 AGM Mr. Kraus sent an email on April 24, 2015 to Multiguide's accountant, confirming that the €100,000 contribution from Multiguide to MTI is accounted for as a shareholder loan (and not as equity), and asking him to take that into account when preparing Multiguide's 2014 financial statements. Mr. Kraus provided his accountant with MTI's 2014 financial statements when asked for documents confirming this. While the December 2014 ledger of Multiguide initially allocated the €100,000 on account of purchase of shares, this allocation was promptly amended in Multiguide's 2014 financial statements. [63] There was no evidence that the shareholders executed a resolution at the April 22, 2015 AGM, or at any time, in which they purported to "re-characterize" the initial contributions as shareholder loans. [64] On July 29, 2015, Mr. Kraus sent the email described in para. [95] below

inquiring as to whether Mr. Broer would purchase his shares in MTI, but he did not request repayment of his shareholder loan. Likewise, there was no discussion regarding repayment of Multiguide's shareholder loan when Mr. Kraus resigned as director of MTI in August 2015. [65] On November 6, 2015, Bushra Walji (MTI's Financial controller) emailed Mr. Broer, Mr. Rummeny, and Greg Jones, following up on an apparent query from Mr. Broer. Ms. Walji responded to the query: Good evening All, I have gone through the Financial Statement as of August 31, 2015, which I have attached in this email and it shows that the only Shareholders loan Is in the amount of $283,318.17 which is roughly converted to Eur. 200,000.00. As per my conversation with Greg Jones this Shareholders loan comes from Mr. Broer and Roland [Mr. Kraus] equally investing Eur 100,000.00 each. [66] On December 8, 2015 Multiguide made a formal demand for repayment of its alleged shareholder loan. It has not been repaid. [67] Determining whether an advancement of funds by a shareholder to a company is a loan or an investment of capital "is a question of fact to be determined by reference to all of the surrounding circumstances": Glacier Creek Development Corporation v. Pemberton Benchlands Housing Corporation, 2007 BCSC 286 at para. 59. [68] The plaintiff takes the position that the €100,000 was a shareholder loan. The

plaintiff points to the evidence of the agreement of the directors to record those initial advances as shareholder loans in the 2014 through 2016 financial statements as compelling evidence of the intention of the shareholders. [69] The defendants take the position that the initial contributions made by both the plaintiff and RTB Germany were on account of equity, which they say is a version of contributed surplus. They argue that courts have recognized that amounts contributed to a company by a shareholder can be on account of payment for shares, a shareholder loan, or "contributed surplus". Contributed surplus would include "premiums on shares issued, and any other contribution by shareholders in excess of amounts allocated to share capital. Contributed surplus is a category of a company's equity capital". [70] The defendants agree that in the absence of agreement or clear documentation, the question of whether a contribution is a loan or equity is a factual determination to be made in reference to the surrounding circumstances at the time of the advance. They rely upon the decision of Ghassemvand v. Premium Weatherstripping Inc., 2017 BCCA 309, in which an accountant had decided to reclassify the contributed funds as capital contributions upon realizing that the shareholder agreement appeared to preclude shareholder loans. In Ghassemvand the Court of Appeal concluded that if

funds are initially advanced as a loan or equity contribution, and it is later decided that such funds should be recharacterized, then the initial transaction must be undone and a new transaction entered into (at paras. 39-40). The defendants take the position that both Mr. Broer and Mr. Kraus initially believed the funds advanced to MTI were for equity, and not shareholder loans, and the contemporaneous documentary evidence confirms this. They say that the totality of the evidence of the circumstances following the initial investment into MTI cannot, in fact or in law, change the legal character of those initial contributions. They stress that there was no evidence, after the initial contributions were made, of either a directors' or a shareholders' resolution, concerning a shareholder loan. [71] Finally, the corporate defendants argue that the description of loans on the books of a company may be entitled to little weight, having regard to the whole of the evidence, and that the manner in which the transaction is described in the company's books is not conclusive: Ghassemvand at para.

90. They argue that the crucial difference between equity and debt "lies in the fundamental nature of their respective claims on the assets and cash flow of the company": Tudor Sales Ltd. (Re), 2017 BCSC 119 at para.

36. They point to the recent decision of the Ontario Superior Court in YG Limited Partnership and YSL Residence (Re), 2021 ONSC 4178, in which the Court set out some guidelines that can be distilled from the jurisprudence, including: neither the "intention of the parties" (as between non-arm's length parties) nor the formal characterization is conclusive as to the true nature of the transaction; the manner in which the transaction was implemented, and the surrounding economic circumstances, must be examined to determine the true nature of the transaction; and whether the parties had a subjective intent to repay principle or interest on the alleged loan and whether that expectation was reasonable. The Court also found it helpful to consider the "list of factors courts have examined in such cases" (while not applying them in a mechanical way) which relevant factors included: the presence or absence of a fixed maturity date and schedule of payments; the presence or absence of a fixed rate of interest and interest payment; the source of repayments; the security, if any, for advances; and the extent to which the advances were used to acquire capital assets (at para. 41). [72] I heard significant arguments from counsel as to the possible legal characterization of funds paid by a shareholder to a company. As a starting point, I do not find it necessary in these circumstances to

determine all of the methods in which a shareholder may contribute funds to a company. I accept that at the time the initial contributions were made to MTI, both Mr. Kraus and Mr. Broer believed they were making equity contributions to MTI, based on their experience in Germany. I find they both initially failed to obtain professional advice, nor turn their minds to, whether the initial contributions would, or should, be treated differently in Canada. [73] However, shortly after making the initial contribution of €100,000 in early December 2014, and no later than March 2015, Mr. Kraus realized that the nature of those initial advances needed to be clarified. The draft shareholder agreements being circulated between the parties between late 2014 and early 2015, drafted by their counsel, contain various iterations of clauses attempting to clarify the nature of the initial advances, including references to shareholder loans. I accept no shareholder agreement was ever executed by the shareholders. [74] Notwithstanding there does not appear to have been a substantive discussion of the legal character of the initial contributions at the April 22, 2015 shareholder meeting, the MTI financial statements for 2014 were signed by both Mr. Kraus and Mr. Broer, and clearly characterized the initial contributions as "Loan from shareholders". The 2014 financial statements clearly identify the

initial contributions as shareholder loans, and that these financial statements were finalized in April 2015, at a time well before any dispute arose as to the classification of the funds. I find the 2014 financial statements recorded the clear agreement of the shareholders that the initial contributions were properly characterized as shareholder loans. I also note this occurred at a time when Mr. Broer and Mr. Kraus were in significant conflict, and in the process of separating their German business interests, so I do not find it believable that Mr. Broer merely signed whatever was put in front of him. [75] Likewise, the 2015 and 2016 MTI financial statements, signed by Mr. Broer and Mr. Rummeny, recorded the same. This is compelling evidence that even when Mr. Broer could have corrected the characterization of the initial contributions, he did not take any steps to do so. In all of the circumstances, I find the execution of the financial statements to be determinative, and I find the initial contribution of €100,000 to be a shareholder loan. I do not accept the defendants' argument that this was a "recharacterization" of the initial contribution; rather, I find it was a clarification of the true legal character of the initial contribution after receiving professional advice. Similarly, I do not accept the defendants' argument that Mr. Broer's requests for a capital increase

in July 2015 (as set out in paras. [92] - [93]) are determinative in these circumstances because that was the language he was used to in Germany, his dominant country of business activities. His use of language he was familiar with is not conclusive. [76] Upon a consideration of all of the evidence, I find the evidence is clear that the parties quickly reached the agreement that the contribution of €100,000 by Multiguide to MTI was a shareholder loan (the "Shareholder Loan"). Given my finding, there is no need to consider nor determine the various categories of financial contributions that are possible when funding a company. C. Disputed Invoices [77] On August 26, 2015 Multiguide sent a payment reminder to MTI requesting payment of the Disputed Invoices (in the total amount of €172,778.10). Multiguide received no response to this payment reminder. Multiguide then sent a further payment reminder dated November 2, 2015 to MTI (addressed to Mr. Broer) as follows: This is the last and final request for payment of open invoices owed by Multiguide Technologies Inc. ("MTI") to Multiguide GmbH. Since the payment reminder, dated August 26th, 2015, MTI has made no payments whatsoever to reduce its debt or honor its obligations to Multiguide GmbH. Additionally, despite multiple efforts by Multiguide GmbH, MTI or its directors have failed to propose a payment plan or to propose other

measures to resolve this delicate situation. It appears that MTI is either not capable or not willing to make the overdue payments. If payments are not made by November 9th, 2015, Multiguide GmbH will have no choice but to commence insolvency proceedings against MTI. Multiguide GmbH may also pursue other remedies at its disposal. Yours sincerely, Dr. Roland Kraus [78] Mr. Broer responded to this demand on November 3, 2015. The google translation of his response which was tendered at trial is: Mr. Kraus, You have once again proven your entrepreneurial ineptitude while guiding the Multiguide in Canada. You negotiated with companies that no longer existed. You have employed people but not properly aligned them. And in the end you ran away as a managing director out of cowardice. Your inability to drive employees was also a strong theme at PARKEN in Berlin. So far we have been able to take over the majority of the Canada business and are working on a concept to proceed. That also means that we have to invest money in Canada in order to secure the jobs of the local employees. If you want to get back the money you invested in darts [there] in the form of shares or bills, you will need to develop something like patience. The money is not lost. We will not be able to draw up a precise plan for when and how the money will flow until January at the earliest. Rudolf Broer [79] Mr. Broer

testified that his reference to "patience" referred to both the Disputed Invoices and the €100,000 contribution. There was no allegation in the November 3, 2015 email that the products which were delivered, and which were the subject of the Disputed Invoices, were defective. Nor was there any communication of a plan for the future of MTI provided to Mr. Kraus in late 2015 or early 2016. Rather, on November 30, 2015 RTB Germany filed a complaint in Germany against Multiguide (the German litigation, the result of which is set out in paras. [34] - [35]). [80] Multiguide then filed the within action in British Columbia against MTI on December 9, 2015, seeking judgment for the Disputed Invoices and the alleged shareholder loan. In the response to civil claim, filed February 15, 2016, MTI alleged that the Disputed Invoices were not being paid due to defects in the equipment supplied to MTI. [81] Mr. Kraus immediately wrote to Mr. Broer on March 9, 2016, setting out his surprise about the alleged defects, and explaining that those defects which were identified in the spring of 2015 should have already been rectified as RTB Germany had commenced replacing the affected machines at that time. He noted that as Multiguide had had no communications with either RTB Germany nor MTI, he could not assess the extent to which the deficiencies remained. He also noted that pursuant to the terms of

the Settlement Agreement, the supply contracts for the PDMs were assumed by RTB Germany as at July 31, 2015, and so RTB Germany was now directly responsible to MTI for eliminating any defects. [82] Multiguide issued a demand for particulars on March 10, 2016 as to the details of the nature and extent of the alleged defects, and for immediate payment to be made to Multiguide for all product which MTI did not claim to be defective. Receiving no response to the demand, Multiguide filed a notice of application on August 18, 2019 seeking a court order compelling a response to their March 10, 2016 demand. MTI responded to the demand for particulars on September 9, 2016. The essence of their response was that MTI was alleging that only products worth €102,582.94 out of the Disputed Invoices were defective (which meant that €70,195.17 accounted for in the Disputed Invoices were not on behalf of defective product). No payment was made at this time, nor in fact ever, to Multiguide on account of the Disputed Invoices, nor on account of any interest that was alleged to be due and owing pursuant to the terms of payment between the parties. [83] As already described, RTB Germany supplied certain equipment to Multiguide, who supplied it to MTI. Among this equipment were 30 PDMs delivered to MTI in early 2015 (for which there were purchase orders only for eight). The invoice for the 30 PDMS

records the net price as €95,843.28, and the terms of payment as "6 months after invoice arrival". There were defects with respect to these PDMs, including issues relating to water ingress, paint flaking, defective buttons and defective credit card readers. These 30 defective PDMs were agreed to be replaced by RTB Germany in or about July 2015. [84] Mr. Kraus' evidence was that it was reasonable to have the 30 PDMs in Canada, to allow them to be installed in a timely manner. Mr. Broer's evidence was that Mr. Kraus had intentionally brought PDMs to Canada that were not suitable for the Canadian market, and did not have the features that Canadians would want. He argued that Mr. Kraus wanted to inflate the Multiguide balance sheet by bringing the 30 PDMs to Canada, knowing they were not suitable for the Canadian market, and knowing MTI had no purchase orders for 22 of the PDMs. Mr. Rummeny confirmed that the North American market found the RTB Germany PDMs undesirable because they lacked features - such as chip and pin option, and tap option, for payment by credit card - that the North American market found desirable. [85] In the German litigation, Mr. Rummeny testified that MTI took the position that the PDMs were unsuitable for the Canadian market. On cross-examination, he agreed that his evidence in the German litigation was that the defects had been addressed, but that even

after doing so, the PDMs were still unsuitable for the Canadian market. However, in the within action, MTI maintained there were defects and failed to pay any of the Disputed Invoices. As set out above, judgment was issued in the German litigation on April 26, 2018. [86] Mr. Rummeny testified that the Disputed Invoices were not paid because there was ongoing litigation, and confirmed that it was on Mr. Broer's direction that MTI did not pay the invoices. Further, Mr. Rummeny testified that when the decision was made to incorporate RTB Canada and enter into the MSA, he gave no consideration to the unpaid Disputed Invoices. [87] In his evidence at trial Mr. Broer initially said the Disputed Invoices were not paid because the PDMs were useless for the Canadian market and should not have been sent to Canada as MTI did not have orders for the PDMs. He could not remember why MTI did not pay the invoices, nor what had been paid. He opined that as it was costly for RTB Germany to replace the PDMs it was possible that was an additional reason why payment was not made by MTI. Further, he said he could not recall what instructions he gave to Mr. Rummeny, nor could he recall doing any analysis about which of the Disputed Invoices should be paid. Ultimately, however, Mr. Broer agreed that it was his decision not to pay the Disputed Invoices. [88] On September 3, 2021, counsel for MTI

confirmed that MTI admitted that the plaintiff has a valid claim in debt as against MTI on the unpaid invoices on €172,778.10. On September 8, 2021, counsel for Mr. Broer and Mr. Rummeny confirmed that those defendants agreed that the plaintiff has a valid claim in debt as against MTI on the unpaid invoices of €172,778.10. Notwithstanding this admission, as MTI is now insolvent, Multiguide seeks an order that MTI, RTB Canada, and Mr. Broer and Mr. Rummeny all be held liable for the Disputed Invoices. There was significant evidence at trial as to the alleged defects, the difference between "defects" and "features", the efforts made by RTB Germany to rectify the defects, the result of these efforts, and the positions taken in the German litigation and the within action. Multiguide argued, and I agree, that it is not necessary that I make any factual determination on the issue of the alleged defects, as MTI has admitted that it owes Multiguide €172,778.10. I find that MTI owes the plaintiff the amount of the Disputed Invoices, being €172,778.10, and that as a result of decisions made by Mr. Broer, and actions taken by the directors of MTI, MTI is currently insolvent and unable to pay any of that amount. D. The Management Services Agreement [89] To understand the MSA, it must be viewed in the appropriate context, that being the events leading up to the purchase of the business from

Siemens, and the events that occurred after the Settlement Agreement was reached in May 2015. [90] As set out above in para. [12] when RTB Germany purchased the PDM business from Siemens, it agreed to assume Siemens service and warranty obligations for all Siemens PDMs for a period of 10 years (until November 2023). [91] On May 18, 2015 Mr. Kraus emailed Mr. Broer attaching an excel spreadsheet setting out the status of the monthly revenue/expenditures, and summarized that according to that forecast MTI had an anticipated $62,000 in monthly recurring revenue and approximately $60,000 in monthly costs. [92] On July 2 and 10, 2015, Mr. Broer wrote to Mr. Ziola requesting additional capital contributions to MTI. The July 2, 2015 demand was addressed to Mr. Ziola solely and read as follows: Dear Mr. Ziola, After inspecting the "financial statement" and after further examination of the current financial situation of MTI, I would like to tell you the following: To guarantee a continued existence of MTI, I am asking you for a capital increase of 140,000.00$, same as all other shareholders have done previously. This action is urgent required to pay outstanding invoices and to provide MTI a professional administration that you have not delivered. If you will not agree with the capital increase, I find myself constrained to think of RTB providing PDM deliveries and services to MTI in the

future, Yours sincerely, Rudolf Broer [93] Mr. Ziola did not agree to this request, but made a number of alternative suggestions to improve MTI's financial circumstances. On July 10, 2015 Mr. Broer wrote to the directors of MTI, Mr. Ziola and Mr. Kraus: Dear Sirs: Based on the current financial situation I am forced to request a total increase in capital amounting to 150.000$ from all of the directors, in order to ensure the continuing existence of MTI. Cooperation with Cubic can be a long term solution. This does not, however, provide the funding needed to pay outstanding bills. I view restructuring the salaries of the employees as counter-productive and thus definitely the wrong way. If there is no agreement on the increase in capital requested here, I shall be forced to take the consequences and withdraw as an MTI director. I shall clarify the steps necessary for this with my attorney. Dr. Roland Kraus as CEO of MTI should move quickly to convene a meeting of the partners about this topic because I view the future of MTI as severely endangered, unless immediate action is taken. Sincerely, Rudolf Broer Again, Mr. Ziola declined the request to make a capital contribution. [94] On July 24, 2015 Mr. Rummeny sent out an updated list of contacts to MTI identifying who they should contact at RTB Germany regarding parking meter matters. Mr. Kraus was copied on that email, but had

been removed as the contact in the sales category (replaced with Mr. Rummeny and Mr. Schuster) and not listed as a contact person for anything. Mr. Rummeny confirmed that this contact list was consistent with the idea that neither Mr. Kraus nor Multiguide would have any further involvement in Multiguide's PDM business. [95] During the summer of 2015 Mr. Kraus attempted to communicate with Mr. Broer about methods for resolving their mutual involvement in MTI. Mr. Kraus' evidence was that his "first option" was for Multiguide and RTB Germany to become equal partners in MTI by each acquiring shares from Mr. Ziola, but that as his relationship with Mr. Broer was so strained, they never had any fulsome nor satisfactory discussions about this option. Mr. Kraus wrote to Mr. Rummeny on July 29, 2015 saying: If you speak to Mr. Broer, then please ask him for the second option (taking over my shares). Then we finally have a clear separation. Mr. Broer replied to this email on July 30, 2015, setting out no clear proposal for moving forward, and concluded by writing: If you want to get rid of your stocks, hire someone to do it for you. We both know what the result is. You have lost your last trust. [96] At his examination for discovery, Mr. Broer advised that he "was never approached with such a question or in those terms" (whether Mr. Kraus had made a request that he purchase Multiguide's

shares in MTI). However, at trial Mr. Broer agreed that he recalled Mr. Rummeny advising him Mr. Kraus had made a request that Mr. Broer purchase the shares of Multiguide in MTI, and explained that the basis for the change in his answer was that he is over 60 years old and his memory is not that good. [97] As set out above in para. [29], Mr. Kraus resigned as a director, and as president and CEO of MTI, as of August 2, 2015. The Settlement Agreement expressly noted in paragraph 4 that "Multiguide's PDM employees shall continue to work on their PDM tasks according to RTB guidance until their retirement on July 31st, 2015". After his resignation, Mr. Broer and Mr. Ziola were the two remaining directors of MTI. It is clear that at some point in time Mr. Ziola resigned as a director. Mr. Rummeny assumed the role of president and CEO of MTI, and became a director of MTI effective October 26, 2015. [98] There was no evidence of any requests made by MTI to Multiguide for any additional financial contributions to MTI after Mr. Broer's email of July 10, 2015 to the directors of MTI. However, the defendants argue that Mr. Kraus was well aware that MTI would need further funds for operations by the summer of 2015, and argue that he failed to offer to inject further funds into MTI in the summer or fall of 2015. [99] As the defendants argue that Mr. Kraus should be responsible for the

consequences arising from his resignation as director of MTI (which resulted in his lack of information from August 2015 on) it is important to discuss briefly. Mr. Kraus' evidence was that he felt he was required to resign as director as a result of the Settlement Agreement, and that it was also the best thing for MTI. He explained the role of being director and president and CEO of MTI involved close communication with RTB Germany, but the relationship with Mr. Broer had become strained and dysfunctional, and so he felt it best for MTI that he resign. Mr. Broer opined in his evidence that Mr. Kraus may have resigned as a result of the Settlement Agreement, but also because Mr. Kraus had failed to be successful in his role as director and CEO of MTI. Mr. Broer's opinion is merely that, his personal opinion. [100] After Mr. Kraus resigned, Mr. Rummeny assumed the responsibility of leading the MTI team in North America. His evidence was he was shocked when he heard of Mr. Kraus' resignation, and concerned about his own new workload and the impact the resignation would have on the MTI team. Both Mr. Rummeny and Mr. Broer testified that the MTI employees were stressed and concerned about the future of MTI. Mr. Broer and Mr. Kraus agreed that Mr. Broer made the high-level corporate strategy decisions for both MTI and RTB Canada (including when shareholder meetings would be called

and what information would be provided to shareholders) and that Mr. Rummeny focussed on the sales and management and operations of MTI. Mr. Rummeny's evidence, uncontradicted by Mr. Broer, was that Mr. Rummeny deferred to Mr. Broer on all corporate matters. [101] Mr. Rummeny testified that there had been little to no marketing done by MTI with respect to the sale of PDMs prior to Mr. Kraus' resignation, and that MTI required a dedicated sales and marketing manager to secure new clients, but lacked the necessary funds. He also testified that MTI sought bank financing in the fall of 2015, but was not able to secure any, and that Mr. Rummeny met with a potential partner for MTI in December 2015, but was advised there was a risk they would simply steal MTI's clients away, so he did not pursue this possibility any further. Mr. Broer testified that RTB Germany was not willing to either loan or invest any further funds into MTI. It was Mr. Rummeny's opinion that there were no viable investment options available for funding MTI in the fall of 2015, and he and Mr. Broer both believed that without an injection of capital, MTI "would likely have gone bankrupt". [102] As set out above in para. [30], on October 9, 2015 RTB Technik acquired Mr. Ziola's shareholdings in MTI, for the amount of $20,000. Upon purchasing Mr. Ziola's shares in MTI, Mr. Broer (through RTB Germany and RTB Technik)

effectively controlled 2/3 of the stock in MTI. [103] The original notice of civil claim in this proceeding was filed December 9, 2015. Due to difficulties in effecting service, an order for substituted service was made on January 15, 2016, allowing substituted service by email to Mr. Tepper, German counsel for RTB Germany. a) Incorporation of RTB Canada [104] RTB Safe Traffic Inc. ("RTB Canada") was incorporated in British Columbia on January 7, 2016. RTB Germany is RTB Canada's sole shareholder, and Mr. Rummeny and Mr. Broer are the directors. As Mr. Broer is the sole limited partner of RTB Germany, he benefits indirectly from the potential profits generated by RTB Canada. Mr. Rummeny confirmed that Mr. Broer formulated the idea of incorporating RTB Canada, and that he did not question Mr. Broer as to the logic behind its incorporation but rather simply accepted Mr. Broer's direction. RTB Canada was incorporated for the purpose of managing and carrying on the PDM business of MTI in Canada. b) MTI as at February 2016 [105] In his examination for discovery, Mr. Broer indicated he did not know how many bank accounts MTI had in February 2016. A request was made at his examination for discovery for confirmation of the amounts contained in the bank accounts of MTI on February 29, 2016, and the response explained that at the end of February 2016 MTI held approximately $202,643, and

held two additional bank accounts, in trust for certain clients. At the same time MTI had offices, inventory, a number of employees, expertise, and existing customers (whose contracts ensured a stream of revenue for MTI). [106] At the end of February 2016, Multiguide was a significant creditor of MTI (as set out above under The Alleged Shareholder Loan and Disputed Invoices). Both Mr. Broer and Mr. Rummeny confirmed that no creditors other than Multiguide have gone unpaid by MTI, and that no creditor other than Multiguide has filed any lawsuit against MTI, not even in small claims court. c) Management Services Agreement [107] These are the circumstances in which MTI and RTB Canada allege that they orally agreed to the terms of the MSA on or about January 12, 2016, that the MSA was effective as of that date, and that the MSA included the following material terms: a) MTI appointed RTB Canada to manage and carry on the business of MTI; b) RTB Canada agreed to assume all employment agreements with MTI's current employees; and c) RTB Canada would pay to MTI an annual commission equal to 5% of its total sales, net of all discounts and sales taxes, for a period of five years following the date on which RTB Canada first generates net profits equal to 5% or more of its sales. [108] A significant issue at trial relating to the MSA is when it was effectively entered into. Initially, in

response to a specific query, Mr. Woolley confirmed by way of a letter dated February 7, 2019 that "the Management Service Agreement was signed on the effective date i.e. 12 January 2016". [109] However, as document production proceeded, it became clear that the MSA document had not been created in 2016 and so could not have been executed then. On January 17, 2020, Justice Ross ordered amended lists of documents to be produced, including but not limited to documents related to the decision to transfer the business of MTI to RTB Canada, including by way of the MSA, and the implementation of the transfer of the business of MTI to RTB Canada. Through the discovery process it became clear that the terms of the MSA were not reduced to writing until some time in 2018. By email dated February 12, 2020, Mr. Wooley confirmed to plaintiff's counsel: We have determined, in the course of responding to the Order of Mr. Justice Ross, that you were provide with incorrect information a year ago regarding the execution of the Management Services Agreement. In my letter to you of 07 February 2019, I conveyed certain information from my client, including that the MSA had been signed on the effective date, i.e. 12 January 2016. I understand, however, that the MSA was in fact executed in 2018. I understand that the parties made an oral agreement on or about 12 January 2016, which was not papered

until 2018. I was unaware, until now, that the information I provided you was incorrect. On behalf of my client, I apologize for this error. [110] For trial, the parties agreed: The parties all agree that the Word document file "Management Services Agreement v4 BRANDI.DOCX" disclosed under cover of the February 7, 2020 letter {P002674 - Exhibit 10} of Jonathan Woolley has a "content created" date of February 5, 2018 and a "date last printed" date of February 5, 2018. [111] However, Mr. Broer maintained at trial that the MSA was signed quite quickly after RTB Canada was incorporated in early 2016. He did not give testimony that there was initially an oral agreement that was only later reduced to paper in 2018, but rather repeatedly testified that the MSA was signed within a few weeks of RTB Canada being incorporated. When Mr. Woolley's February 12, 2020 email (above) was put to him on cross-examination, Mr. Broer apologized and testified "I cannot make any statement on this". When asked whether the MSA might only have been signed in 2018, Mr. Broer testified he could not confirm anything. [112] Likewise, at his examination for discovery Mr. Rummeny said the MSA was signed in 2016 and that it was not backdated. He failed to respond to a request made at his examination for discovery as to the date the MSA was signed, and said he could not determine the date. However, at trial he

testified that the MSA was backdated, but he could not say by how much. [113] I am satisfied that the MSA was not in fact reduced to writing until early 2018, and was not executed until some point later in 2018. While Mr. Broer and Mr. Rummeny may have had a vague understanding of what they intended to do in early 2016, I do not find they have proven that they had an oral agreement in January 2016 which was reduced to writing in 2018. [114] Mr. Broer and Mr. Rummeny confirmed that all of the assets of MTI were transferred to RTB Canada. This included switching all existing employment contracts, client contracts, changing contracts with services providers, leases and all other services provided to MTI. Mr. Broer testified this took a lot of work, and approximately six months to complete. [115] In addition, all assets of MTI (its inventory and business equipment) were purchased by RTB Canada. By way of an invoice dated May 31, 2016, MTI set the inventory of their stock at an amount of $216,481.84, and applied a discount of 96.3045% (or $208,481.75) and invoiced RTB Canada for a total of only $9,040.14 for the inventory (due by December 31, 2016). Neither Mr. Rummeny nor Mr. Broer were able to explain how the discount factor of 96.3045% was calculated. Mr. Rummeny did provide the following answers in response to questions raised at his examination for discovery: Request 20:

Confirm the book value at this RTB Canada purchased the remaining assets of MTI for, and produce all documents that show that book value. Response 20: In response to request #20, it is Mr. Rummeny's understanding that the value of the inventory was set at $251,688 as outlined in the financial statements of MTI for 2015, 2016 and 2017. Mr. Rummeny notes that the PDM's which were not all market ready, are included in this figure. Request 21: Confirm if any payments have been made by RTB Canada to MTI under the MSA, and if so provide particulars (dates and amounts) of such payments made by RTB Canada to MTI under the MSA. Response 21: There are no payments from RTB Safe Traffic [RTB Canada] to MTI under the MSA. There was one profitable year for RTB Safe Traffic in 2018 where a profit of CDN $12,983.00 was earned. Request 24: Provide responses to the two unanswered questions on document RUM000162 (a Thursday, January 17, 2019 8:25 AM email from Marc Rummeny to Joan Brown) i.e. · The management prepared financials have $289,927.38 of recorded sales of products (inclusive of sales to RTB Safe Traffic in the total amount of $216,481.84) and less $208,481.75 of sales refunds (netted against sales). The sales refund of $208,481.75 appears to have all been provided to RTB Safe Traffic [RTB Canada] pursuant to an invoice dated May 31, 2016. Can you please send me support for the entry?

Can you explain the sales to RTB Safe Traffic [RTB Canada]? Were they recorded at cost? Was the discount of $208,481.75 intended to reverse the sales? · Services income of $229,476.11 includes $75,628 in recognized deferred income. Can you please send me support for how/why the deferred income was recognized in 2016? Answer 24: In response to request #24, the sales from MTI to RTB Safe Traffic [RTB Canada] related to inventory. Mr. Rummeny has been unable to ascertain how the discount was calculated, which is reflected in the financial statements, or how the deferred income was recognized in 2016. [116] Mr. Broer was also unable to explain how the discount of 96.3045% was arrived at. [117] The MSA appointed RTB Canada as the manager of MTI. Clause 2 of the MSA provides: 2. Appointment of Manager 2.1 Appointment by the Company. The Company hereby appoints the Manager to manage and carry on the Business for and on behalf of the Company (the "Management Services"). The Manager will be responsible for all aspects of the management and conduct of the Business. 2.2 Acceptance of the Manager. The Manager hereby accepts its appointment to provide and carry out the Management Services to the Company upon and subject to the terms and conditions of this Agreement. 2.3 Employees. The Manager agrees to assume all employment agreements, written or otherwise, with the Company's current

employees (the "Employment Agreements"), including all obligations for the payment of wages, vacation pay, severance pay, health and dental benefits, and any other benefits enjoyed by such employees under their employment with the Company. The Company hereby assigns the Employment Agreement to the Manager and the Manager accepts such assignment and assumes the obligations under the Employment Agreements. 2.4 Liabilities. The Parties agree that the Manager does not assume any liability or obligation of the Company to third parties, including without limitation its financial obligations, other than those expressly set forth in Section 2.3 of this Agreement. 2.5 Term of Appointment. The Manager will provide the Management Services, at its own cost and expense, to the Company for a period commencing on the Effective Date and continuing until terminated in accordance with Section 6 hereof. [underlining in original] [118] I am satisfied that while clause 2.1 purports to appoint RTB Canada to manage and carry on the business of MTI, what in actuality occurred was all of the assets of MTI were transferred to RTB Canada, but none of the liabilities were. Clause 3.1 of the MSA sets out that commissions are payable by RTB Canada to MTI, commencing the first year that RTB Canada earns a net profit that is equal to 5% or more of the total sales for the year, and continuing for four years

after that (regardless of whether any profits are earned in the four years following). Clause 3 of the MSA provides: 3. COMPENSATION 3.1 Compensation. For a period of five years (the "Commission Period") following the date that the Manager generates Net Profits equal to 5% or more of its Turnover from the Business (the "Profit Date"), the Manager shall pay the Commission to the Company. For the purpose of this Section 3, the Profit Date shall be the date of the Financial Statements indicating that the Manager has generated Net Profits equal to 5% or more of its Turnover with the Business. 3.2 Commission. During the Commission Period, the Manager shall pay the Commission to the Company on an annual basis. [119] Mr. Rummeny testified that in determining the commission structure in clause 3.1 there had been communications with consultants to arrive at the 5% commission, but that Mr. Broer had those communications with the consultants, not Mr. Rummeny. Mr. Broer testified that the "consultants said it was a good number". He did not identify who the consultants were or what the basis of that assertion was. No documents were tendered explaining why 5% was a good number. Rather Mr. Broer asserted "I was planning on making good profit and for Multiguide to get 5% without doing any work or having any expenses" was good. [120] Mr. Broer and Mr. Rummeny's evidence at trial did not

establish confidence that they understood the application of clause 3.1. At trial, Mr. Broer could only confirm that MTI would be paid a commission when RTB Canada generated a profit. When asked on cross‑examination whether there was any specific profit threshold RTB Canada needed to reach before commissions would be payable to MTI, he responded that "he did not think so". RTB Canada did make a net profit of $12,848.44 in 2018, but Mr. Broer's evidence was that no profits have been made by RTB Canada. [121] Mr. Rummeny similarly had a lack of understanding of the terms of the MSA. At his examination for discovery he thought that the five year period referred to in the MSA had expired in 2021. On cross-examination, he explained that he had misunderstood the MSA and when he looked at it after his examination for discovery he realized it had not expired. However, Mr. Rummeny testified that commissions are payable as soon as there are profits in RTB Canada for two years in a row. This is also not correct. [122] Mr. Broer further gave evidence at trial that he considered that revenues from future sales of RTB Germany traffic management products might increase the profits of RTB Canada, and so result in an increased commission to MTI. However, the evidence of Mr. Kraus, Mr. Rummeny and Mr. Broer all confirm it was the intention of the parties that once MTI was established, other

products (RTB Germany traffic management products and Multiguide SSD systems) would also potentially be sold through MTI. His justification of the potential profits of the MSA therefore is illogical in the historical context of the parties' initial intentions. [123] The parties are in agreement that no commission payments have been made by RTB Canada to MTI pursuant to the MSA. The parties are also in agreement that after the incorporation of RTB Canada, payments were made out of the MTI bank accounts for a variety of purposes (some of which should properly have been paid by RTB Canada) and that all of the assets and contracts of MTI were also transferred to RTB Canada. Despite efforts to do so, the parties advise they were unable to fully trace the flow of funds from MTI to RTB Canada, and the financial information necessary to do so is not available. Finally, the parties are in agreement that MTI is currently insolvent, and Multiguide is the only unpaid creditor of MTI. [124] Although plaintiff's counsel made substantial submissions on potential alternate options open to MTI rather than entering into the MSA, I do not find those submissions to be relevant to the critical issues before me. d) MTI AGM December 29, 2016 [125] By letter dated September 7, 2016 counsel for Multiguide inquired with MTI about the status of an annual general meeting of MTI, and made inquiries

regarding its current business. On December 5, 2016, MTI provided a notice of an AGM to take place on December 29, 2016. [126] In the preparations leading up to the AGM, counsel for MTI advised counsel for Multiguide: a) they did not have copies of the December 2014 or December 2015 financial statements, and "as such presented the waiver of presentation of those financial statements" as motion to be voted on at the AGM; b) Mr. Kraus was CEO and president of MTI (which was clearly incorrect); c) there had been no change in shareholders and directors of MTI; and d) MTI did not intend to present a management report at the AGM. [127] Mr. Kraus sent Mr. Broer and Mr. Rummeny, in their role as directors of MTI, a letter dated December 22, 2016, enclosing a letter from his counsel, which sought answers to a number of questions, including information about the current operations of MTI and the financial outlook for MTI for 2017, and queried: a) Why would MTI seek to waive production of financial statements for the year ended December 31, 2014 when financial statements for that period were already presented to the shareholders and approved in 2015? b) Why would MTI seek to waive production of financial statements for the year ended December 31, 2015? Surely production of such documents is essential to understanding the business and status of MTI? [128] Mr. Broer testified that he did

not know why MTI sought to waive production of financial statements for 2014 and 2015, but opined it must have been a communication issue. He also could not say why there was no management report provided. [129] Notwithstanding Mr. Kraus' direct email to Mr. Broer and Mr. Rummeny, there was no response. The December 29, 2016 AGM proceeded, and no financial reports nor any other management report was presented. The directors unsuccessfully attempted to obtain approval to waive the requirement to produce any financial statements for 2014 and 2015. Unaudited financial statements as at December 31, 2016 were produced, labelled "For Management Purposes Only". [130] There is no evidence that there was any discussion of the MSA at the December 29, 2016 meeting. On cross-examination, when asked why he did not respond to Mr. Kraus' December 22, 2016 letter, and take the opportunity to inform him of the current state of affairs of MTI, Mr. Broer said he was sorry, he did not know why he did not respond, and that that was a mistake. Mr. Broer could not recall ever providing a management report to Multiguide about the status of MTI, in response to Mr. Kraus' email. Mr. Rummeny testified that he left responding to Mr. Kraus' December 22, 2015 email to Mr. Broer. [131] I find that as of December 22, 2016, when presented with a request for information about the ongoing business of MTI, its

directors failed to advise Multiguide of the existence of the MSA, and its impact on MTI's business. I also find clear that as of the end of 2016, the written MSA had not yet been created, nor executed, notwithstanding MTI's assets had been transferred to RTB Canada. e) May 2018 Order [132] On May 19, 2018 Justice Steeves, in Action No. S184908, determined that the affairs of MTI had been conducted in a manner oppressive and unfairly prejudicial to Multiguide (in failing to produce and deliver audited financial statements and failing to hold an AGM at least once each calendar year). Justice Steeves ordered that audited financial statements in respect of 2015 and 2016 be produced within 30 days (unless the requirement was waived by all shareholders of MTI), that audited financial statements for 2017 be produced (unless the requirement was waived by all shareholders of MTI on or before July 1, 2018) and that an AGM be held. Justice Steeves also awarded Multiguide the costs of the proceeding (collectively the "May 2018 Order"). [133] Mr. Broer testified that he was not aware of the May 2018 Order, and that MTI had no business activities. Mr. Rummeny likewise testified he was not aware of which years the May 2018 Order had required audited financial statements and AGMs for. Neither Mr. Broer nor Mr. Rummeny were able to give an explanation as to why audited financial statements had

not been produced and an AGM had not occurred. The evidence shows that by email dated July 17, 2018 MTI provided unaudited 2017 financial statements to Multiguide, which showed zero revenue for 2017. By email dated September 17, 2021 MTI provided unaudited draft financial statements for 2015 and 2017 to Multiguide. [134] MTI attempted to prepare audited financial statements for 2015, 2016 and 2017, and by email dated September 17, 2021 Mr. Woolley, as counsel for MTI, attached an updated set of financial statements for those years (for which 2016 was audited but 2015 and 2017 were unaudited), clarifying: As to your question, I've been informed by the auditor that MNP attempted to audit the financial statements for 2015 and 2017, but was unable to give an audit opinion for those years. The reason, I'm told, is because of the absence of the accounting personnel and systems within MTI that would have made an audit feasible (which is not uncommon with small businesses), along with the lapse of time between the audit years and when the audit was carried out. Mr. Wooley then clarified on September 19, 2021 that there was a typing error on the statement of cash flow, and that the net loss for the year ended 2017 should be $17,741 not $177,410. f) Lack of Timely Disclosure of the Management Services Agreement [135] Only on August 13, 2018 did counsel for MTI inform counsel for

Multiguide that in early 2016 MTI had entered into the MSA with RTB Canada. In that letter counsel wrote: We are informed that the relevant facts are as follows. The business of MTI was not profitable, generating substantial losses in both 2014 and 2015. MTI required an investment of additional capital from its shareholders, which Multiguide GmbH was unwilling or unable to provide. By the end of 2015, MTI was in a financial position in which it could not continue carrying on business and retain its employees. Effective early 2016, MTI executed a Management Services Agreement with Safe Traffic [RTB Canada], whereby Safe Traffic [RTB Canada] agreed to provide certain management services to MTI and effectively carry on MTI's business on its behalf. In association with that transaction, MTI's furniture, machinery, and spare parts were transferred to Safe Traffic [RTB Canada], for consideration. Under the Management Services Agreement, Safe Traffic [RTB Canada] will pay MTI a commission on turnover, for a period of five years, once Safe Traffic [RTB Canada] generates a sufficient level of profit. Safe Traffic [RTB Canada] has not yet generated sufficient profit to pay a commission. However, a modest profit is anticipated in 2018 and, therefore, a commission payment should be made to MTI in 2019. [136] I accept Mr. Kraus' uncontroverted evidence that he did not know about the

existence of the MSA until he received a copy of this letter. In response, he instructed his counsel to obtain a copy of the MSA. His response was rejected by way of an August 21, 2018 email from counsel for MTI stating that MTI would not provide Multiguide with a copy of the MSA and explaining: Our client has declined your client's request. As you know, the records you requested are not among those that a shareholder is entitled to review as of right. [137] Mr. Broer testified that the MSA was not disclosed to Multiguide due to the rush of things, and apologized. However, even two and a half years after the MSA was allegedly entered into, Mr. Kraus was still unable to obtain a copy. On cross‑examination Mr. Broer admitted he should have disclosed the MSA to Mr. Kraus and that it was a mistake not to do so, but that he thought Mr. Kraus would not agree with the MSA. Mr. Rummeny confirmed that he did not inform Multiguide of the MSA, but left that to Mr. Broer. [138] As set out in para. [39] above, petition No. S1812245 was filed November 14, 2018 seeking a declaration that MTI had, without complying with s. 301 of the BCA, disposed of all or substantially all of its undertaking other than in the ordinary course of business, and for an order granting permission to proceed with a derivative action. By letter from counsel dated February 5, 2019, Multiguide was provided with a

filed response to petition of Mr. Rummeny and Mr. Broer, and sworn affidavits from both. The first time Mr. Kraus saw a copy of the MSA was when he received a copy of Affidavit #1 of Mr. Broer, to which it was attached as an Exhibit. E. Special Resolution a) MTI Special Meeting February 12, 2019 [139] On February 1, 2019, MTI provided its shareholders (including Multiguide) notice of a special meeting of shareholders to take place on February 12, 2019 (the "Special Meeting") for the purpose of ratifying the MSA pursuant to s. 301(3)(b) of the BCA. [140] In advance of the Special Meeting, in response to requests from Multiguide's counsel, MTI provided Multiguide with copies of all available financial statements of MTI and RTB Canada, and confirmed that the 2018 financial statements of RTB Canada were unavailable. [141] The Special Meeting took place on February 12, 2019, with each of MTI's three shareholders attending by proxy. A special resolution was duly adopted by the shareholders of MTI (with the proxyholder representing Multiguide voting against it) which provided: In accordance with section 301(3)(b) of the British Columbia Business Corporations Act and section 11.2 of the Articles of the Company, the MSA and the related transfers are hereby ratified. (the "Special Resolution") [142] By letter dated February 19, 2019, pursuant to s. 240(3) of the BCA, MTI gave notice to

Multiguide of its right to dissent in respect of the Special Resolution and to have its share repurchased by MTI for their fair value. b) Multiguide's Dissent with Respect to the Special Resolution [143] By letter dated February 25, 2019, Multiguide raised a number of objections on matters related to the Special Meeting and the Special Resolution, and on a without prejudice basis also gave notice to MTI, pursuant to s. 242 of the BCA, of Multiguide's dissent with respect to the Special Resolution. The dissent notice was provided without prejudice to Multiguide's right to argue that the Special Resolution was invalid. [144] By letter dated March 21, 2019, pursuant to s. 243 of the BCA, MTI gave notice to Multiguide that MTI intended to act on the authority of the Special Resolution, and for Multiguide to complete its dissent pursuant to s. 244 of the BCA. In turn Multiguide (while maintaining that the adoption of the Special Resolution was invalid) gave notice to MTI by letter dated April 12, 2019 that Multiguide required MTI to repurchase all of Multiguide's shares in MTI. [145] By letter dated July 18, 2019, MTI then informed Multiguide that: a) MTI disagreed with Multiguide's position regarding the validity of the Special Resolution; b) pursuant to s. 244(3) of the BCA, Multiguide was deemed to have sold to MTI all its shares in the company; c) pursuant to s. 245(1) of the

BCA, MTI and Multiguide may agree on the amount of the payout value of Multiguide's shares in MTI; d) having regard to the definition of "payout value" in s. 237 of the BCA, MTI's position was that the proper payout value for Multiguide's share is the fair value that those shares had immediately before the execution of the MSA (i.e. as of January 11, 2016), excluding any appreciation or depreciation in anticipation of the execution of the MSA; and e) MTI proposed $10,000 as the payout value of Multiguide's shares. [146] There was no evidence of any different payout value being proposed for Multiguide's shares once it was revealed that the MSA was not executed in January of 2016 but rather sometime in 2018. There was no valuation evidence of the value of Multiguide's shares in MTI, either as of January 11, 2016, some time in 2018, or at the time of trial. The parties are in agreement that there has been no agreement reached regarding the repurchase of Multiguide's shares in MTI. c) Analysis [147] Section 301 (1) through (3) provides: 301(1) A company must not sell, lease or otherwise dispose of all or substantially all of its undertaking unless (a) it does so in the ordinary course of its business, or (b) it has been authorized to do so by a special resolution. (2) If the company contravenes subsection (1) in respect of a disposition of all or substantially all of a company's

undertaking, the court, on the application of any shareholder, director or creditor of the company, may, unless subsection (3) applies, do one or more of the following: (a) enjoin the proposed disposition; (b) set aside the disposition; (c) make any other order the court considers appropriate. (3) A disposition of all or substantially all of the undertaking of a company is not invalid merely because the company contravenes subsection (1), if the disposition is (a) for valuable consideration to a person who is dealing with the company in good faith, or (b) ratified by a special resolution. [148] The plaintiff takes the position that while the forms of notice, and other technical requirements under the BCA were complied with in relation to the Special Meeting, the Special Resolution and the dissent procedure, the purported ratification of the MSA is not valid and the Special Resolution should be declared null and void. In oral argument plaintiff's counsel acknowledged they do not want the MSA set aside, but rather they want the plaintiff to be compensated for the value of their shares in MTI. They argue that ratification pursuant to s. 301 of the BCA cannot occur as there was insufficient evidence of an oral agreement in 2016, and that it is not possible to ratify a contract that did not exist at the time of the transfer. Further, they say that the transfer was not capable of

ratification as Mr. Broer was in a conflict of interest position by virtue of his self dealing. In the alternative, even if the ratification is valid, they argue the ratification itself is oppressive on account of violating the reasonable expectations of the plaintiff (this argument is further dealt with below under Oppression). Their fundamental position is that the ratification by way of special resolution does not block the oppression remedy they seek. [149] The corporate defendants argue that MTI observed the requirements of s. 301 of the BCA, and its articles of incorporation, with respect to the calling of the special meeting and the adoption of the Special Resolution. They say that the totality of the evidence supports that there was some form of a verbal agreement in 2016 pursuant to which the assets of MTI were transferred to RTB Canada, that such an agreement can be inferred from the totality of the evidence, and as such it is capable of being ratified. They argue that s. 301(3)(b) does not have any time restriction for a ratification to occur, and there is no authority supporting such a time restriction. They cite Nixon v. Trace, 2012 BCCA 48, in which the Court of Appeal considered a disposition pursuant to s. 301(1) that was ratified by a special resolution two years after the board had entered into the agreement in question, and there was no suggestion that the

ratification was invalid on account of the delay. They say that the resulting ratification of the MSA was valid. Multiguide has exercised its dissent rights under Division 2 of Part 8 of the BCA, and subject to the court ordering otherwise, Multiguide is deemed to have sold its shares in MTI to MTI, and MTI is deemed to have purchased those shares. The corporate defendants say the plaintiff should not be granted a remedy under s. 301(2)(c) of the BCA, and they seek an order for the repurchase of Multiguide's shares in MTI, under Division 2 of Part 8 of the BCA. They acknowledge that MTI has no financial ability to repurchase Multiguide's shares. [150] I find that the Special Resolution ratifying the MSA and related transfers to RTB Canada is a valid special resolution, approved by the necessary majority of the shareholders. In those circumstances, the consequences of the plaintiff's dissent to that special resolution is that MTI must repurchase their shares. Failing agreement by the parties on the payout value of those shares (pursuant to s. 245(1) of the BCA) then the court may determine the payout value of Multiguide's shares, or may refer that question to an arbitrator or registrar (s. 245(2) of the BCA). The payout value for those shares is the fair value the shares had immediately before the passing of the Special Resolution, excluding any appreciation or depreciation in

anticipation of the execution of the MSA. The parties agreed, given the lack of financial information available, it would not be proportionate for this question to be posed to an arbitrator or the registrar. [151] The only evidence before this Court on the value of Multiguide's 1/3 shareholding in MTI is the price that RTB Germany paid to Mr. Ziola's holding company for his 1/3 shareholding in MTI in October 2015 (three months before the transfer of assets to RTB Canada commenced) of $20,000. I accept this is the only available evidence, and I find it reasonable to conclude that the value of Multiguide's shares in MTI is $20,000. [152] However, s. 245(5) of the BCA prohibits payment to a dissenting shareholder if there are reasonable grounds for believing that the company is insolvent, which MTI is. I will deal with this issue under the Remedy section below. [153] Finally, I accept the plaintiff's argument, that the ratification of the MSA by way of special resolution does not block their claims for oppression and breach of fiduciary duty, nor the remedies they seek. I note the corporate defendants agreed that ratification under the BCA could not operate to bar a successful claim for oppression. F. Oppression [154] The plaintiff alleges that the actions of the directors of MTI in entering into the MSA with RTB Canada, whereby MTI transferred all of its assets and business to

RTB Canada in return for a potential commission, was not reasonable, and violated their reasonable expectations as a minority shareholder of MTI in a manner that was oppressive and unfairly prejudicial to Multiguide. They say this transfer was done without regard for the interests of the plaintiff as either a minority shareholder or a creditor of MTI, without advising the plaintiff it was occurring, and without transferring the debts owing to the plaintiff by MTI to RTB Canada. The plaintiff further claims that as a result of these allegedly oppressive actions, there is a basis for not only the corporate defendants to be liable to Multiguide, but also for the personal defendants to be personally liable for both the Disputed Invoices and the Shareholder Loan. [155] Both the personal and corporate defendants say their decision to enter into the MSA was a legitimate business decision made with the best interests of MTI and Multiguide in mind. Their position is that the PDM business in North America had always had issues, both for Siemens and for MTI, and that it was a complex and difficult business with no hope of financial success. They say there were no oppressive actions, and no basis upon which to find either the corporate defendants or the personal defendants liable. [156] The plaintiff applies for relief pursuant to s. 227 of the BCA. Section 227 authorizes shareholders to

apply to the court for remedies to address conduct that is alleged to be oppressive or unfairly prejudicial, and provides: 227 (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. [157] Section 227(3) provides broad remedial powers for the Court, with a view to remedying or bringing to an end the conduct complained of, to make any interim or final order it considers appropriate, including: (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, (i) directing the company, subject to subsections (5) and (6), or

any other person, to pay to a shareholder all of any part of the money paid by that shareholder for shares of the company, (j) varying or setting aside a transaction to which the company is a party and directing any party to the transaction to compensate any other party to the transaction, (m) directing the company, subject to subsections (5) and (6), to compensate an aggrieved person, [158] The BCA distinguishes between oppressive (s. 227(2)(a)) and unfairly prejudicial (s. 227(2)(b)) conduct. Section 227(3) provides the court with broad discretion in terms of a remedy should oppression be found. [159] The leading authority on the oppression remedy is BCE Inc. v. 1976 Debentureholders, 2008 SCC 69 [BCE], in which the Supreme Court addressed the oppression remedy in the context of the Canada Business Corporations Act, R.S.C. 1985, c. C-44 [CBCA], which contains an analogous provision to s. 227 of the BCA. [45] Unlike the derivative action, which is aimed at enforcing a right of the corporation itself, the oppression remedy focuses on harm to the legal and equitable interests of stakeholders affected by oppressive acts of a corporation or its directors. This remedy is available to a wide range of stakeholders - security holders, creditors, directors and officers. [56] In our view, the best approach to the interpretation of s. 241(2) is one that combines the two approaches

developed in the cases. One should look first to the principles underlying the oppression remedy, and in particular the concept of reasonable expectations. If a breach of a reasonable expectation is established, one must go on to consider whether the conduct complained of amounts to "oppression", "unfair prejudice" or "unfair disregard" as set out in s. 241(2) of the CBCA. [57] We preface our discussion of the twin prongs of the oppression inquiry by two preliminary observations that run throughout all the jurisprudence. [58] First, oppression is an equitable remedy. It seeks to ensure fairness - what is "just and equitable". It gives a court broad, equitable jurisdiction to enforce not just what is legal but what is fair: Wright v. Donald S. Montgomery Holdings Ltd. (1998), 39 B.L.R. (2d) 266 (Ont. Ct. (Gen.Div.)), at p. 273; Re Keho Holdings Ltd. and Noble (1987), 38 D.L.R. (4th) 368 (Alta.C.A.), at p. 374; see, more generally, Koehnen, at pp. 78-79. It follows that courts considering claims for oppression should look at business realities, not merely narrow legalities Scottish Co-operative Wholesale Society, at p. 343. [59] Second, like many equitable remedies, oppression is fact-specific. What is just and equitable is judged by the reasonable expectations of the stakeholders in the context and in regard to the relationships at play. Conduct that may be oppressive in one

situation may not be in another. [160] The Supreme Court set out a two-step analysis the court must undertake to determine the merits of an oppression claim. First, the court must determine what the reasonable expectations are that the claimant asserts about how the company's business would be conducted: BCE at paras. 56, 60 - 66; Jaguar Financial Corporation v. Alternative Earth Resources, 2016 BCCA 193 at para. 112 [Jaguar]. The reasonable expectations must be assessed on an objective and contextual basis: BCE at paras. 62, 68; Jaguar at para. 112; Canex Investment Corporation v. 0799701 B.C. Ltd., 2020 BCCA 231 at paras. 14 - 15 [Canex]. While this analysis is necessarily fact specific, the Supreme Court set out a number of considerations that may be of assistance in determining whether a reasonable expectation exists, including: general commercial practice; the nature of the corporation; the relationship between the parties; past practice; steps the applicant could have taken; representations and agreements; and the fair resolution of conflicts between the shareholders: BCE at paras. 72 - 84. The reasonable expectations of the parties are also to be considered contextually, viewed in the specific circumstances, and guided by the considerations described above: BCE at para. 72; Canex at para.

15. It is the reasonable expectations of the claimant, and not the intent to harm of the alleged oppressor, that is relevant: Wilson v. Alharayeri, 2017 SCC 39 at para. 42 . What is oppressive in one factual context may not be oppressive in another. [161] Second, the court must determine if the claimant has established that their reasonable expectations were violated. This requires the court to consider whether the conduct complained of was "oppressive" or "unfairly prejudicial". Oppressive conduct is "coercive and abusive, and suggests bad faith": BCE at para.

67. Oppressive conduct is "generally associated with conduct that has variously been described as 'burdensome, harsh and wrongful', 'a visible departure from standards of fair dealing', and an 'abuse of power' going to the probity of how the corporation's affairs are being conducted": BCE at para.

92. Unfairly prejudicial conduct is a "less culpable state of mind, that nevertheless has unfair consequences": BCE at para.

67. Unfair prejudice is considered to not be as severe or offensive as oppressive conduct: BCE at para. 93; Canex at para. 16. [162] In many if not most cases, proof of a claimant's reasonable expectations will be intertwined with either or both of the concepts of oppression and unfair prejudice, and the two prongs will merge. They "do not represent watertight compartments, and often overlap and intermingle": BCE at paras. 90-91. [163] The claimant has the onus to demonstrate that the failure to meet these reasonable expectations constitutes oppressive conduct or unfair prejudice: Jaguar at para. 113; BCE at paras. 70, 89. [164] Our Court of Appeal considered the decision of BCE in Canex: [11] Conduct that is oppressive or unfairly prejudicial is conduct that violates the reasonable expectations of shareholders, causing them harm. It often has its genesis in actions taken by the company, but can also arise from actions taken by one or more of the company's directors or other actors, including shareholders: BCE Inc. v. 1976 Debentureholders, 2008 SCC 69 at para. 65 [BCE]. [12] Oppression is a statutory remedy available to shareholders who have suffered, in their capacity as shareholders, a harm that is typically (but not necessarily) separate and distinct from a harm to the corporation: see, for example, Dubois v. Milne, 2020 BCCA 216 [Dubois]. There is arguably an unresolved question about whether it is necessary for a claimant to show direct and special harm in their capacity as shareholder in a manner distinct from all other shareholders before an oppression remedy is available: see Radford v. MacMillan, 2018 BCCA 355 at para.

61. This question relates to the relationship between the circumstances in which an oppression remedy may properly be sought, as opposed to the requirement to commence a derivative action in the name of the company: see Jaguar Financial Corporation v. Alternative Earth Resources Inc., 2016 BCCA 1934 [Jaguar] and 1043325 Ontario Ltd. v. CSA Building Sciences Western Ltd., 2016 BCCA 258 [CSA Building sciences Western Ltd.], leave to appeal ref'd [2016] S.C.C.A. No. 383 [165] However, in Jaguar the Court of Appeal concluded that the authorities establish that a shareholder must show "it suffered harm that is 'direct and special', 'peculiar', or 'separate and distinct' from the harm suffered generally by all of the shareholders" (at para. 179). In the case of a closely held corporation, a minority shareholder may be able to demonstrate particular harm which, had it occurred in the case of a more widely held corporation may not in fact be oppressive: Jaguar at paras. 181-184.

1. Reasonable Expectations [166] Multiguide, as a shareholder and creditor of MTI, has the necessary standing to seek a remedy pursuant to s. 227 of the BCA: BCE at para. 45. [167] The plaintiff argues that the defendants disregarded the interests of Multiguide as a creditor and shareholder of MTI, when they intentionally and unjustifiably refused to pay the Disputed Invoices, and when they secretly transferred the entire business of MTI to RTB Canada. They say both of these actions were contrary to the reasonable expectations of Multiguide. In the amended notice of civil claim filed September 28, 2021, the plaintiff plead in Part 1 the following reasonable expectations: 133 Were oppressive to, unfairly prejudicial to, and contrary to the reasonable expectation of, Multiguide as a shareholder and creditor of MTI, including because: f. the terms of the MSA were not reasonable; g. the MTI Business Transfer impacted Multiguide differently, and more adversely, than the other shareholders of MTI because: o Whereas the other shareholders of MTI had interests, directly or indirectly, in RTB Canada, Multiguide did not; and o Through their relationships with each other, with Mr. Broer, and with RTB Canada, the other shareholders of MTI had more complete access to information about the MSA, the Ongoing Business, and all matters involving the MSA and the business of RTB Canada. h.

Multiguide is vulnerable to Mr. Broer and Mr. Rummeny (who have been and are in conflict of interest as managers of both MTI and RTB Canada) manipulating amounts charged and other accounting variables such that RTB Canada has reduced revenues, or never makes a meaningful profit, including due to RTB Canada paying RTB Germany for goods and services at rates that result in RTB Canada never making a meaningful profit, and the accounting recording of MTI and RTB Canada will show such manipulation occurred; and i. unlike the persons controlling the other shareholders of MTI, Multiguide was not provided access to the information needed to verify the accuracy of information provided by RTB Canada to MTI, only Mr. Broer and Mr. Rummeny have ever had the ability to control or influence the information provided by RTB Canada to MTI but given their relationships with RTB Canada they are in a position of conflict of interest.

134. Multiguide has suffered loss and damage related to the MTI Business Transfer and the oppressive conduct of Mr. Broer, Mr. Rummeny and MTI, such loss and damage including, without limitation: a. MTI having not paid and now not having the financial means to pay the Disputed Invoices to Multiguide in its capacity as creditor of MTI; b. MTI not having the financial means to repay the 100k€ shareholder loan due to Multiguide as creditor of MTI; and c. Loss of value of Multiguide's shares in MTI. [168] The defendants argue that the amended notice of civil claim fails to expressly set out the plaintiff's reasonable expectations as they related to the repayment of the Shareholder Loan and payment of the Disputed Invoices. While the pleading could have been crafted more succinctly, I find that the plaintiff has set out their reasonable expectations in all of the circumstances. [169] The defendant directors admit that the plaintiff could reasonably expect that MTI would follow applicable corporate procedures and that as a creditor the plaintiff could reasonably expect that MTI would not take steps to put its assets out of reach of a legitimate creditor. However, they argue that Multiguide was not a non-arm's length debtor, and so this reasonable expectation would be impacted by: a) Mr. Kraus' knowledge of MTI's cash flow, in his capacity as director and president and CEO of MTI;

and b) Mr. Kraus' knowledge that when he ordered the PDMs from RTB Germany, which were ultimately delivered to MTI, he knew of the existing and potential future purchase orders for those PDMs. [170] They further argue that any reasonable expectation Multiguide had as a creditor of MTI (with specific reference to the €100,000 Shareholder Loan) must be affected by: a) the terms of the draft shareholder's agreement (including the fact they were not demand loans, required unanimous consent to be repaid, and could not be repaid until MTI was profitable); b) the fact those funds were required for operating expenses and cash flow purposes; and c) at the time they were advanced, MTI was expected to need that initial capital and additional capital in the future. [171] In all of the circumstances described above, the shareholders of MTI had legitimate shareholder expectations which had not been reduced to paper. As set out by Justice Farley in 820099 Ontario Inc. v. Harold E. Ballard Limited, [1991] O.J. No. 266 (Gen. Div.), 3 B.L.R. (2d) 113: Shareholder interests would appear to be intertwined with shareholder expectations. It does not appear to me that the shareholder expectations which are to be considered are those that a shareholder has as his own individual 'wish list'. They must be expectations which could be said to have been (or ought to have been considered as) part of the

compact of the shareholders. Expectations were discussed in Welling, Corporate Law in Canada: The Governing Principles (Toronto: Butterworths, 1984), pp. 535-5: Thwarted shareholder expectation is what the oppression remedy is all about. Each shareholder buys his shares with certain expectations. Some of these are outlandish. But some of them, particularly in a small corporation with few shareholders, are quite reasonable expectations in the circumstances. It is not unusual for three or four individuals to go into business together with shared expectations of mutual profits, to use a corporate form as a convenient organizing vehicle, and to have a subsequent falling out. Individuals in such a situation are like the parties to a decaying marriage relationship: they cannot be expected to operate by friendly compromise in search of mutually satisfactory or "fair" settlements of the many routine disagreements that can arise. The corporate vehicle that was once a convenience now becomes a mere set of rigid rules, a frame of reference for bad tempered dispute settlement. These rules are like all legalistic rules tools for dictatorship of the majority, oppression of the minority. When this occurs, some measure of disinterested judicial activism can be useful. As the situation will usually (though not always) arise in small corporations one assumes that the oppression remedy was

essentially designed for these corporations, where legitimate shareholder expectations are highly likely to exist, are just as unlikely to be set out on paper, yet are, because only a few parties are involved, susceptible of objective proof in the usual legal manner. This, we suggest, is the place for the oppression remedy. And there is ample authority for judicial intervention in aid of shareholder expectations in such situations. [172] I find that in all of the circumstances, including but not limited to reaching the Settlement Agreement in May 2015, which provided that in furtherance of the separation of the business interests of Mr. Broer and Mr. Kraus, "provision for MTI shall be made at a shareholders' meeting of MTI", the plaintiff could reasonably expect that MTI's directors would further MTI's financial interests in good faith, would follow applicable corporate procedures, would notify Multiguide of material developments (such as the transfer of the business to RTB Canada), and would not denude MTI of its assets for less than fair market value. Likewise, I find that Multiguide as a creditor could reasonably expect that MTI would not take steps to put its assets out of reach of a legitimate creditor. The reasonable expectation was not that the plaintiff was guaranteed payment of the Disputed Invoices or the Shareholder Loan, but rather, that the directors would not take steps to effectively strip MTI of its assets for less than reasonable compensation, putting its assets out of reach of its shareholders and legitimate creditors. See Salesco Limited v. Lee Paige, 2007 CanLII 37463 (Ont. S.C.J) at paras. 227-229, 36 BLR (4th) 229.

2. Oppression or Unfair Prejudice [173] Conflicts may arise between the interests of corporate stakeholders inter se, and between stakeholders and the corporation itself. In BCE the Supreme Court described the fair resolution of conflicting interests between corporate stakeholders as follows: [81] As discussed, conflicts may arise between the interests of corporate stakeholders inter se and between stakeholders and the corporation. Where the conflict involves the interests of the corporation, it falls to the directors of the corporation to resolve them in accordance with their fiduciary duty to act in the best interests of the corporation, viewed as a good corporate citizen. [82] The cases on oppression, taken as a whole, confirm that the duty of the directors to act in the best interests of the corporation comprehends a duty to treat individual stakeholders affected by corporate actions equitably and fairly. There are no absolute rules. In each case, the question is whether, in all the circumstances, the directors acted in the best interests of the corporation, having regard to all relevant considerations, including, but not confined to, the need to treat affected stakeholders in a fair manner, commensurate with the corporation's duties as a responsible corporate citizen. [83] Directors may find themselves in a situation where it is impossible to please all stakeholders. The

"fact that alternative transactions were rejected by the directors is irrelevant unless it can be shown that a particular alternative was definitely available and clearly more beneficial to the company than the chosen transaction": Maple Leaf Foods, per Weiler J.A., at p. 192. [84] There is no principle that one set of interests - for example the interests of shareholders - should prevail over another set of interests. Everything depends on the particular situation faced by the directors and whether, having regard to that situation, they exercised business judgment in a responsible way. [174] The plaintiff argues that the directors of MTI, by transferring the entirety of the business to RTB Canada as they did, oppressed and/or were unfairly prejudicial to Multiguide, in its capacity as a creditor of MTI and minority shareholder of MTI. Their position is that Mr. Kraus did not expect the business of MTI to be transferred in the manner in which it was, and the totality of the evidence supports a finding of oppression. They stress that the directors of MTI did not sell the business at fair market value but rather transferred the entirety of the business to a company under the effective control of Mr. Broer, for his benefit and the benefit of RTB Germany, for significantly less than reasonable compensation. [175] The plaintiff points to the following which they say support the

finding of oppression: a) Multiguide was not a shareholder of RTB Canada, and so could not obtain any financial compensation through RTB Canada arising from the business that had been started, built, and formerly operated by MTI; b) as a result of the transfer of the entirety of MTI's business and assets being transferred to RTB Canada, MTI will never earn sufficient income to either repay the Disputed Invoices, the €100,000 advance, nor repurchase the shares Multiguide holds in MTI; c) the transfer of the business adversely impacts the plaintiff and Mr. Kraus, but does not adversely impact Mr. Broer as he is, through RTB Germany, the sole owner of RTB Canada; in fact, the transfer is to Mr. Broer's benefit as it leaves the debts due and owing to the plaintiff unpaid; d) the evidence establishes that the MSA was not signed until 2018, notwithstanding Mr. Broer's assertions it was signed early in 2016, and the MSA itself does not state that it is documenting a prior oral agreement; they argue there was no oral agreement to transfer the business of MTI to RTB Canada but rather that Mr. Broer unilaterally chose to do so, and tried to cover up that decision a couple of years later; e) the defendants were secretive in transferring the business without advising the minority shareholder, failed to provide the plaintiff with financial statements, and when they did finally advise the

plaintiff about the MSA in 2018 they refused to disclose it to the plaintiff until after legal proceedings had been commenced; and f) as Mr. Broer effectively controls both RTB Germany and RTB Canada, Mr. Broer was in a conflict of interest position, clearly engaged in self dealing, and notwithstanding his allegation that the MSA was fair and reasonable, in his position could manipulate the profits of RTB Canada to ensure it never needs to pay any profits to MTI pursuant to the terms of the MSA. [176] The plaintiff also argues that Mr. Broer had other reasonable business options available to him other than entering into the MSA. They suggest MTI could have changed its name to RTB Canada, could have issued further shares, could have looked for additional funding or entered into arrangements with another partner. They say the totality of the evidence supports a finding that Mr. Broer wanted to own and control the entire business, and so simply took all of MTI's assets to ensure that Multiguide could no longer be involved in the business. They argue that the path Mr. Broer chose, and which Mr. Rummeny agreed to proceed with, ensured that the plaintiff could not recover any of the funds owing to it as a shareholder or a creditor. [177] The defendant directors argue that entering into the MSA was a reasonable business decision in all of the circumstances that were facing MTI at the time. They argue that "fairness has to be judged in all of the circumstances, including the necessity of the action for the health or survival of the company": Casey v. CopperLeaf Technologies Inc., 2010 BCSC 417 at para.

156. They say the authorities establish that courts should give deference to the decisions of directors, so long as their business judgment has resulted in a decision that lies within a range of reasonable alternatives: Kerr v. Danier Leather Inc., 2007 SCC 44 at para.

57. This is known as the "business judgment rule" and reflects the reality that directors are often better suited than the courts to determine what is in the best interests of the corporation: BCE at para.

40. They argue that a court should not review directors' decisions under a microscope; should look only for reasonableness, not perfection, in those decisions; and should avoid intervention where decisions made were honest, prudent, reasonable and done in good faith: see Peoples Department Stores Inc. (Trustee of) v. Wise, 2004 SCC 68 at para. 67; CW Shareholdings Inc. v. WIC International Communications Ltd., [1998] O.J. No. 1886, 39 O.R. (3d) 755, (Gen. Div.) at para. 57.. [178] The defendants submit the options available in early 2016 were to maintain the status quo; declare bankruptcy; or enter into the MSA. They say Mr. Broer chose not to "simply let MTI wither away" but rather made a reasonable business decision in the circumstances and sought to "preserve the remaining value left in MTI" by transferring the business to RTB Canada and entering into the MSA. They argue this benefitted both Mr. Kraus and Multiguide by avoiding the reputational damage resulting from a bankruptcy. While that may not have been a perfect option, they say it was a reasonable one at the time given the economic challenges that were facing MTI and should be shown deference. They further argue that with the benefit of hindsight, and the fact that notwithstanding the efforts and capital RTB Germany has put into RTB Canada it has not yet generated significant profits, it is clear the MSA was a

reasonable option and advantageous to MTI. They argue there is no evidence the MSA was unfair in all of the circumstances. [179] The defendants argue that MTI was a precarious business with inherent risks, including that the PDM business was dying. Their position is that the sales of new PDMs to new and existing customers was virtually non-existent, and that the technology was not designed for the North American market and was not keeping pace with consumer preferences. They point to the fact that Mr. Broer would not have purchased the North American market from Siemens if he had the choice, but that it was required by Siemens. They argue that Mr. Broer had no obligation as a director or shareholder of MTI to either buy more shares or invest further capital into MTI. They say that the MSA must be looked at in context, which is that it was created as a reactionary measure to the problems with Parktoria and losing customers. They argue that MTI was never a financially successful business, and that the evidence supports the finding that staying the course was not a feasible one. They say that in the absence of new PDM sales (which were non-existent in 2015, and minimal thereafter, even with the sales person RTB Canada employed) MTI had no additional revenue sources available after it had secured the contracts it was able to after Parktoria. [180] Fundamentally they argue that the

MSA was a reasonable option, that it ensured that the assets of MTI were "deployed in a different manner", and was entered into to try to preserve value for MTI. They argue that: a) RTB Germany could have satisfied its contractual obligations to Siemens in the event MTI went bankrupt without a dedicated company in North America; b) the MSA allows MTI to profit from a broader revenue base than MTI previously had; c) MTI's value as at January 2016 was minimal, as seen by the price Mr. Ziola sold his shares for; and d) they say the plaintiff has presented no evidence to demonstrate the terms of the MSA were inadequate or did not reflect fair value given MTI's circumstances at the time. They stress that RTB Germany has invested further time and money into RTB Canada, and sells additional products through RTB Canada, all of which may be to the ultimate benefit of MTI in due course. [181] Both Mr. Broer and Mr. Rummeny testified that they believed the commission rate under the MSA was fair. Mr. Broer testified that in advance of the MSA, he knew MTI had to be properly compensated if the business was transferred to RTB Canada and an "equilibrium" had to be agreed upon. His evidence was that he consulted with some professionals who advised him the rate was fair for the industry. He argued that "the commission is based on the revenue of both the sale and servicing of PDMs, as well as

the sale of other RTB products, thus giving MTI additional income streams that it was unable to integrate based on its existing resources in 2015". There was no evidence from the professionals Mr. Broer consulted with. Further, both Mr. Broer and Mr. Rummeny were unclear in their understanding of the terms of the MSA, and when profits would be due and owing to MTI. Finally, there was no financial audit of MTI as of January 2016, at the time before the transfer of the assets to RTB Canada began. [182] The defendants attempt to put the blame on Mr. Kraus, and argue that Mr. Kraus knew all of the above, and even with all of this knowledge, he chose to resign as president and CEO and also as a director. They argue: The resignation was done with full knowledge of the financial circumstances that were facing the company at that time and the existential risk facing MTI at that time. He could have remained as a director to offer strategic guidance (or financing) but he chose not to. Like Mr. Ziola's departure, this decision is telling. They say that Mr. Kraus knew MTI would need additional funds for operation by the summer of 2015, and that he failed to offer to inject further funds into MTI but rather voluntarily resigned as director.

3. Analysis [183] In these circumstances, I find that the plaintiff has proven that MTI, Mr. Broer and Mr. Rummeny have violated Multiguide's reasonable expectations and acted in an oppressive and unfairly prejudicial manner to the plaintiff, by entering into the MSA. Mr. Broer formed a plan to strip Multiguide of all of its assets and value, and convinced Mr. Rummeny to participate in his plan. RTB Canada, through Mr. Broer and Mr. Rummeny, participated in his plan. As set out above, the parties were in the middle of separating their worldwide business assets, had effectively accomplished this in Germany and had agreed in their Settlement Agreement they would do so at a shareholder's meeting of MTI. Rather than calling such a shareholder's meeting, once he had purchased Mr. Ziola's shares, Mr. Broer used his de facto control as the majority shareholder of MTI to transfer all of its assets, but none of its liabilities, to a company effectively controlled by him, for clearly less than fair market value. Notwithstanding the defendants attempt to argue the terms of the MSA were reasonable, in the circumstances I find it was not a reasonable business decision, and entering into it was oppressive and unfairly prejudicial to the plaintiff. I say this for the following reasons: a) the defendants failed to provide any evidence corroborating their bald statements that the 5% commission

structure was reasonable in the circumstances, other than hearsay evidence that unnamed professionals had deemed it reasonable; b) failed to ascribe any value to the ongoing business opportunity RTB Canada took from MTI, other than the bald allegation that the business was a failing one with no chance of financial success; c) were unable to provide a satisfactory explanation for the discount of 96.3045% applied to MTI's inventory; d) provided no evidence of any value ascribed to MTI's other assets, namely employees, service contracts, goodwill, etc.; and e) provided no reasonable justification for why RTB Canada was entitled to use MTI's financial assets to pay some of RTB Canada's invoices, when the terms of the MSA when it was eventually executed provided RTB Canada was not responsible for any of MTI's liabilities. [184] I also find that the defendants violated Multiguide's reasonable expectations and acted in an oppressive and unfairly prejudicial manner to the plaintiff, by entering into the MSA in secrecy. The directors entered into, and implemented, the MSA without calling a shareholder's meeting, without advising the plaintiff, and without documenting their decision to do so. Notwithstanding Mr. Broer's protestations that there was an oral agreement to do so, it is clear the MSA was not formalized until sometime in 2018. It is also clear that any oral agreement to strip

MTI of all of its assets was orchestrated by Mr. Broer - in his capacity as a director of MTI, in his capacity of control of the majority of shareholders of MTI, and as a director of the newly formed RTB Canada. RTB Canada stands to benefit from the terms of the MSA, and so Mr. Broer stands to benefit from the terms of the MSA, through his sole control of RTB Germany, which is the sole shareholder of RTB Canada. As set out in para. [6], Mr. Broer is the sole limited partner of RTB Germany, and the sole shareholder of RTB Technick (the corporate general partner of RTB Germany). [185] What is oppressive in one factual context may not be oppressive in another, and in these circumstances I find the conduct to be clearly oppressive and unfairly prejudicial. This conduct was a visible departure from the standards of fair dealing, and was an abuse of Mr. Broer's position of effective control of MTI which went to the probity of how he conducted MTI's corporate affairs. [186] While Mr. Rummeny was not the orchestrating mind of the oppressive events, in his capacity as a director of both MTI and RTB Canada he accepted Mr. Broer's instructions and requested and acquiesced in his plan. His conduct is likewise oppressive and unfairly prejudicial to the plaintiff. [187] I find the plaintiff has proven that its reasonable expectations were breached by the defendants in an oppressive and

unfairly prejudicial manner. G. Breach of Fiduciary Duty [188] The parties agree that directors owe a fiduciary duty to their company. As summarized in BCE: [36] The directors are responsible for the governance of the corporation. In the performance of this role, the directors are subject to two duties: a fiduciary duty to the corporation under s. 122(1)(a) (the fiduciary duty); and a duty to exercise the care, diligence and skill of a reasonably prudent person in comparable circumstances under s. 122(1)(b) (the duty of care). The second duty is not at issue in these proceedings as this is not a claim against the directors of the corporation for failing to meet their duty of care. However, this case does involve the fiduciary duty of the directors to the corporation, and particularly the fair treatment component of this duty, which, as will be seen, is fundamental to the reasonable expectations of stakeholders claiming an oppression remedy. [37] The fiduciary duty of the directors to the corporation originated in the common law. It is a duty to act in the best interests of the corporation. Often the interests of shareholders and stakeholders are co-extensive with the interests of the corporation. But if they conflict, the directors' duty is clear - it is to the corporation: Peoples Department Stores. [38] The fiduciary duty of the directors to the corporation is a broad,

contextual concept. It is not confined to short-term profit or share value. Where the corporation is an ongoing concern, it looks to the long-term interests of the corporation. The content of this duty varies with the situation at hand. At a minimum, it requires the directors to ensure that the corporation meets its statutory obligations. But, depending on the context, there may also be other requirements. In any event, the fiduciary duty owed by directors is mandatory; directors must look to what is in the best interests of the corporation. [189] BCE makes clear that directors, in most circumstances, owe their duty to the corporation, and the reasonable expectation of shareholders is simply that directors will act in the best interests of the corporation. However, in exceptional circumstances where there is a special relationship of trust and dependency between a minority shareholder and a director, the courts have found directors to owe a fiduciary duty to other shareholders: Valastiak v. Valastiak, 2010 BCCA 71 at paras. 46-51; Canex at paras. 97-102. [190] The plaintiff argues that the defendant directors breached their fiduciary duty to MTI, and that Mr. Broer owed a personal fiduciary duty to Multiguide (in its capacity as a minority shareholder to MTI) which he likewise breached. [191] The defendant directors argue that they fulfilled their fiduciary duty to MTI. They

argue that in their capacity as directors they owed a fiduciary duty to MTI, and a duty to exercise the care, diligence and skill of a reasonably prudent person in all of the circumstances: see BCE at paras. 37-39, 66. Further, Mr. Broer says he had no fiduciary duty to Multiguide in its capacity as a minority shareholder and creditor of MTI. He argues that the imposition of a fiduciary duty owed directly to Multiguide can only occur in very limited, "exceptional" circumstances, which were not present in this case: Canex at para.

102. Mr. Broer argues that Mr. Kraus was in charge of the operations of MTI until he voluntarily resigned on August 2, 2015, and he chose to resign; and that upon doing so, he did not seek as a condition of his resignation as a director and officer of MTI that Mr. Broer "would specifically look out for Mr. Kraus' interests". [192] I find, for the reasons set out above, that in entering into the MSA, on terms that were neither reasonable nor in the best interests of MTI, the directors breached their fiduciary duty to act in MTI's best interests. [193] Further, in these circumstances, whereby Mr. Broer and Mr. Kraus had separated their German businesses, and agreed they needed to make arrangements to separate the interest in MTI, I am satisfied that Mr. Broer was in a special relationship of trust and dependency with MTI, and that he owed the plaintiff, in its capacity as a minority shareholder of MTI, a fiduciary duty. I do not accept Mr. Broer's argument that Mr. Kraus chose to resign as a director and officer of MTI, and that the consequences of that choice are Mr. Kraus' to bear. I find Mr. Broer breached his fiduciary duty to Multiguide by taking advantage of Mr. Kraus' resignation as a director of MTI to take actions to effectively take all value out of MTI without his knowledge. He further breached that duty by failing to disclose his actions, failing to produce financial

statements that would have disclosed his actions, failing to hold shareholder meetings, and refusing to produce a copy of the MSA. VI. REMEDY [194] As I have found that MTI, Mr. Broer and Mr. Rummeny engaged in oppressive and unfairly prejudicial conduct with the full cooperation of RTB Canada, that Messrs. Broer and Rummeny breached their fiduciary obligations to MTI, and Mr. Broer breached his fiduciary obligations to Multiguide, I must next determine the appropriate remedy. [195] As set out in para. [159], oppression is an equitable remedy which seeks to ensure fairness. Pursuant to s. 227(3) of the BCA, the court has broad remedial authority when it determines that the claimant has established either oppression or unfairly prejudicial conduct has occurred. Determining an appropriate remedy requires a flexible and discretionary approach: Wilson at para.

57. The authorities establish at least four general principles that should guide the courts in fashioning a fit remedy, including in determining whether an order of personal liability against the directors is "fit" in all of the circumstances: a) the remedy requested must be a fair way of dealing with the situation; b) the order should go no further than is necessary to rectify the oppressive conduct; c) the order should only serve to vindicate the reasonable expectations of shareholders, creditors, directors or officers in their capacity as corporate stakeholders, and not in any personal capacity; and d) the court should consider the general corporate law context when exercising its remedial discretion. [196] A remedy for oppressive conduct is available to address the objective and substantive reality of the conduct of the affairs of a company. As set out in Canex: [13] Several observations may assist in structuring the analytical framework to be brought to bear in assessing whether a remedy is available for oppressive conduct. It is not limited by mere formalities of corporate structure. What matters is substance, not form. Hence, courts are entitled to examine the realities of how a company is controlled and by whom, and the trust nature of relationships within and between related companies. Doing so does not displace the importance of legal structures and corporate law principles which inform the analysis. This is the approach the judge took in this case, and rightly so. The judge was entitled to look past corporate formalities to determine who truly controlled the Company, and who benefited from the transactions that were impugned in these proceedings: BCE at para.

58. The judge's finding of liability against the personal defendants was rooted in this approach, and does not reflect an error in principle. The court is entitled to look past corporate formalities (but not ignore the legal principles of corporate law) to determine who controlled the company and who benefited from the impugned transactions: Canex at paras. 13, 69; BCE at para.

58. The remedy should bring an end to the conduct complained of, but should go no further than necessary to correct the injustice of unfairness between the parties: Wilson at para. 27; 63833 Manitoba Corp. v. Cosman's Furniture (1972) Ltd., 2018 MBCA 72 at paras. 43-47. [197] Further, the authorities establish that in certain circumstances personal orders against directors are appropriate: Wilson at paras. 32-33. These circumstances include where directors: obtain a personal benefit from their conduct; have increased their control of the corporation by the oppressive conduct; have breached a personal duty they have as directors; have misused a corporate power; or where a remedy against the corporation would prejudice other security holders. They may also include cases involving closely held corporations where a director has virtually total control over the corporation: Wilson at paras. 32-33. Some of these cases "have involved small, closely held corporations, where the director whose conduct was attached has been the sole controlling owner of the corporation and its sole and directing mind; and where the conduct in question has redounded directly to the benefit of that person": Pitney Bowes of Canada Ltd. v. Belmonte, 2011 ONSC 3755 at para. 28 [Pitney]; citing Sidaplex-Plastic Suppliers Inc. v. Elta Group Inc., 1995 CanLII 7419 (Ont. S.C.J (Gen. Div.)), 131 DLR (4th) 399, at para.

22. The focus is on the fairness of the remedy in the circumstances. The court must consider whether the oppressive conduct is properly attributed to the individual director, and whether the imposition of liability is "fit in all of the circumstances": Wilson at paras. 47-50. The remedy crafted should be commensurate "with rectifying the breach of the plaintiffs' reasonable expectations": Canex at para. 78. [198] Courts have also granted oppression remedies against corporate directors when the company has ceased to do business and has an inability to pay any judgment: Pitney; Downtown Eatery (1993) Ltd. v. Ontario, 2001 CanLII 8538, 200 D.L.R. (4th) 289 (C.A.). [199] Section 227(5) of the BCA provides that if an order is made pursuant to subsection (3)(g), (i) or (m), the company must pay the full amount of the order unless there are reasonable grounds for believing that the company is insolvent, or the payment would render the company insolvent. If so, s. 227(6) of the BCA provides a scheme for payments which can be made, effectively only to the extent that they would not render the company insolvent. Here, the evidence is clear that MTI is insolvent, and has no ability to make any payments ordered. [200] Counsel for the plaintiff made clear in closing arguments that notwithstanding his position that the Special Resolution is invalid, the plaintiff does not seek to have the

MSA set aside and the resulting transactions undone. The financial records from the time are wholly inadequate to allow that to happen. Further, given the acrimonious plethora of litigation that has occurred between Mr. Broer and Mr. Kraus, they have no ability to function as business partners. Fundamentally, the plaintiff seeks the defendants to be jointly and severally liable for payment of the Disputed Invoices, the Shareholder Loan, and for payment of the plaintiff's shares in MTI. The plaintiff also set out a complicated decision tree of potential alternate remedies dependent upon my findings of fact. [201] The defendant companies take no position on the claims arising between the plaintiff and Messrs. Broer and Rummeny, including those claims where the plaintiff is seeking orders which would affect the companies. In that regard, they say MTI and RTB Canada will abide by whatever orders this Court makes. The defendant companies admit that the plaintiff is entitled to a judgment against MTI in the amount of the Disputed Invoices, along with pre-judgment interest calculated in accordance with the contractual payment terms on those invoices, but they admit that MTI is currently insolvent and so unable to pay any such order. The defendant companies say that the plaintiff's claim for judgment in respect of the shareholder loan and for a remedy under s. 301(2)(c) of the BCA

should be dismissed, and that there should be an order for the repurchase of Multiguide's shares in MTI, under Division 2 of Part 8 of the BCA. [202] The defendant directors argue that notwithstanding their admission the Disputed Invoices are due and owing, they say that a majority of that amount was due to PDMs that the plaintiff ordered for the North American market, that Mr. Kraus should have known did not possess the requisite technology for the market, and that the plaintiff had failed to secure purchasers for those units before they were ordered. They say the order for payment of the Disputed Invoices should only be made as against MTI, which they acknowledge is insolvent, but they say may make money in the future through the MSA. [203] The defendant directors also argue that they should not face personal liability for any remedy, as they had no intent to harm Multiguide, and the plaintiff had no reasonable expectation of the guaranteed repayment of the Disputed Invoices or the Shareholder Loan. They say as a creditor and shareholder of MTI, the plaintiff will be entitled to repayment once MTI begin to realize profits through the MSA, and any remedy ordered should only be made as against MTI. [204] In the alternative, they say that in February 2016 MTI had only $200,000 in its bank accounts, and those are the only funds that would have been available to satisfy Multiguide

as a creditor or shareholder, and any remedy should be limited to that amount. They argue this is not a situation where valuable assets were appropriated by RTB Canada and Multiguide as a creditor or shareholder was deprived of its rights. However, this argument ignores the fact that in February 2016 MTI also had service contracts with existing clients, offices, inventory, and employees, all of which were transferred to RTB Canada for minimal compensation, in accordance with the terms of the MSA. [205] Finally, the defendants argued that the plaintiff seeks a 100% return on its investment in an industry that was clearly not a safe investment, and had considerable risks which Mr. Kraus had knowledge and awareness of. That argument, however, ignores the fact that Mr. Broer clearly wanted to maintain his investment in the industry, and orchestrated events so that he could personally benefit from the work that had been done by MTI to establish itself in North America. His oppressive and unfairly prejudicial actions eliminated the possibility of the plaintiff sharing in any future success created by MTI, and eliminated the plaintiff's ability to receive partial repayment for the Disputed Invoices and the Shareholder Loan had decided to allow MTI to pursue bankruptcy. It is clear that the potential future 5% payment by RTB Canada to MTI pursuant to the terms of the MSA (which has yet

to have any payments made on it) would never result in MTI receiving any significant profits, and so Multiguide would likewise never receive any significant profits. It is telling that since January 2016 no commission has been paid by RTB Canada to MTI. [206] Given the conduct which has occurred, which was orchestrated by Mr. Broer and in which Mr. Rummeny participated, and from which RTB Canada profited, I find this is a case where it is appropriate to find the directors of both MTI and RTB Canada, together with the two companies, to be jointly and severally liable. While Mr. Broer and Mr. Rummeny may not have personally benefited from the MSA, both RTB Canada and RTB Germany received the potential to benefit from the MSA, which indirectly benefits Mr. Broer. As I have found that both Mr. Broer and Mr. Rummeny have breached their fiduciary duty as directors of MTI to MTI, that Mr. Broer has breached his fiduciary duty to Multiguide, and both have misused their powers to benefit RTB Canada, personal liability is appropriate and fair. Accordingly, I order: a) MTI, RTB Canada, Mr. Broer and Mr. Rummeny are jointly and severally liable to pay the amount of the Disputed Invoices to the plaintiff, within 60 days of these reasons for judgment, with pre-judgment interest calculated in accordance with the contractual terms of the invoices; and b) MTI, RTB Canada, Mr. Broer and Mr.

Rummeny are jointly and severally liable to pay the Shareholder Loan, within 60 days of these reasons for judgment, together with pre-judgment interest in accordance with the Court Order Interest Act, R.S.B.C. 1996, c. 79, from the date of demand for repayment, being December 8, 2015. [207] With respect to the purchase of Multiguide's shares in MTI, the plaintiff seeks judgment against all of the defendants for $20,000 on account of those shares, in return for which it will surrender its shares in MTI. In the alternative, they proposed a complicated remedy by which Multiguide became a 1/3 shareholder of RTB Canada, and surrendered its shares in MTI. Counsel for the defendants vehemently objected to any remedy which would require a continuing business relationship between the parties, as it is clear that Mr. Broer and Mr. Kraus no longer have the ability to work together, and such a result (even if it were available at law, which I do not accept it is) would not be equitable in the circumstances. They argued that the goal of any remedy should be to create a full and final resolution between the shareholders of MTI. I agree. [208] Notwithstanding that the parties had not agreed on the amount of the payout value of Multiguide's shares (pursuant to s. 245(1) of the BCA), none of the parties believed it was proportionate to refer the question of the value of the shares to an

arbitrator or the registrar (pursuant to s. 245(2) of the BCA). Counsel for MTI acknowledged that the best and only evidence before the court on the value of Multiguide's 1/3 shareholding in MTI was the price RTB Germany paid to Mr. Ziola for his 1/3 shareholding, three months before the allegedly effective date of the MSA, namely $20,000. Counsel for MTI agreed I could conclude that Multiguide's 1/3 shareholder in MTI was worth $20,000. Counsel for the plaintiff sought a payment for the plaintiff's shares in MTI of $20,000. [209] In all of the circumstances, I order that Mr. Broer and/or RTB Canada are to purchase Multiguide's shares in MTI within 60 days of these reasons for judgment for $20,000, and upon payment for those shares Multiguide is to relinquish its shares in MTI to the purchaser. [210] Finally, the plaintiff seeks an award of $100,000 for punitive damages against the defendants. Punitive damages are limited to exceptional circumstances where defendants engage in "malicious, oppressive and high handed" misconduct that "offends the court's sense of decency". Awards of punitive damages are limited to circumstances where there is a "marked departure from the ordinary standards of decent behaviour": Whiten v. Pilot Insurance Co., 2002 SCC 18 at para.

36. The objective of punitive damages is to punish the defendants rather than to compensate a plaintiff: Whiten at para.

36. In Whiten (at para. 113) the Supreme Court of Canada identified a number of factors to consider when assessing the level of blameworthiness, including: a) whether the misconduct was planned and deliberate; b) the intent and motive of the defendant(s); c) whether the defendant persisted in the outrageous conduct over a lengthy period of time; d) whether the defendant concealed or attempted to cover up the misconduct; e) the defendant's awareness that what he or she was doing was wrong; f) whether the defendant profited from the misconduct; and g) whether the interest violated by the misconduct was known to be deeply personal to the plaintiff, or was something that was irreplaceable. [211] The parties both rely upon the Canex decision, in which the Court of Appeal confirmed that punitive damages can be awarded concurrently with a remedy for oppression, and in those circumstances awarded punitive damages of $100,000. They both quote the following paragraph in support of their position: [106] I agree that on the facts found by the judge, an award of punitive damages was called for. I agree that the defendants engaged in a coordinated effort to misappropriate the plaintiffs' investment. They did so by using the Company to their personal financial benefit. They used the Company as if it were their own personal asset. They took money from the Company for their own personal

benefit. They attempted to justify their conduct by falsifying financial records. They advanced defences the judge effectively found to be bogus, such as that the plaintiffs had not made their required contributions, that they should pay interest on their under-contributions, and that they owed money on other projects. Ms. Familamiri effectively admitted that the financial records were falsified to allow collection on these other debts without having to prove them or pursue proper processes to establish them. [212] The plaintiff says this is an appropriate case in which to award punitive damages over and above damages for oppression and breach of fiduciary duty. They argue that the conduct of the defendants to strip MTI of all of its assets was clearly intentional, and that the intent of the participants "was to deprive the plaintiff of a fair corporate divorce". They argue that the defendants hid the transfer of the business of MTI from the plaintiff, and then refused to provide information upon request about the transfer and the MSA without court order. They say this impugned conduct persisted until trial (pointing to the fact that the admission the Disputed Invoices were due was not made until September 2021). [213] The defendants say there is no basis for an award of punitive damages. They argue that if oppression is found, the evidence does not support going further than the remedy imposed for the oppressive or unfairly prejudicial conduct. They argue that punitive damages should only be awarded where compensatory damages are insufficient: Churchill v. Aero Auction Sales Inc., 2019 ONSC 4766 at para.

45. They stress that the imposition of personal liability for oppressive conduct is meant to achieve the same purpose as punitive damages, and is sufficient to deter future conduct: Churchill at para.

45. They acknowledge the evidence establishes that certain corporate procedures were not followed - such as the holding of an AGM and the disclosure of financial statements - but they say that failure is not sufficiently reprehensible conduct to warrant punitive damages. They say there is no evidence that any of the directors personally benefitted from their actions, and they say that there is no evidence that RTB Germany has benefitted from the MSA, but rather, that RTB Germany has continued to invest money into RTB Canada. Messrs. Broer and Rummeny argue that the evidence of Mr. Rummeny made it clear RTB Germany could have fulfilled its service obligations in North America without either MTI or RTB Canada. They say this is not a case like Canex, where the director and related companies had received monetary benefits from the oppressive acts (which included manipulation of financial statements and misappropriation of assets). [214] For the reasons set out above, I find that the behaviour of Mr. Broer, when viewed in light of the totality of the evidence, was high handed and very poor conduct. However, in the circumstances, I am satisfied that my award for the oppressive and unfairly prejudicial conduct, and the breaches of fiduciary duty, and in particular the imposition of personal liability upon Messrs. Broer and Rummeny, is sufficient penalty for his impugned conduct. In my

view it is neither necessary nor appropriate to also impose punitive damages. [215] All counsel agreed that given the broad scope of potential remedies, it was most proportionate that they be given leave to argue costs after reviewing these reasons for judgment. Accordingly, the plaintiff is to make written submissions (of no more than 15 pages double spaced, 12 point font) on the issue of costs within 35 days of these reasons, and the defendants are to respond within 21 days thereafter in the same manner. Should counsel need to set down a hearing on the issue of costs after the exchange of written materials, they are to contact scheduling to advise of that fact and to schedule a hearing, as required. [216] Finally, all counsel are commended for making significant efforts before and during trial to streamline the complicated evidence of corporate events by way of an Agreed Statement of Facts, a Chronology, and two further Agreements as to Evidence during the trial. "Blake J."