Hardman v. Alexander

Hardman v. Alexander Court Supreme Court Date 2003-03-13 Citation 2003 NSSC 59 Docket SH 150389 Judge/Registrar/Adjudicator Hood, Suzanne M. (Honourable Justice) Document Type Decision Decision Content IN THE SUPREME COURT OF NOVA SCOTIA Citation: Hardman v. Alexander, 2003 NSSC 59 Date: 20030313 Docket: SH 150389 Registry: Halifax Between: W.B. Hardman, The Hardman Group Limited and Bryman Enterprises Limited and D.S. Precious Maxillofacial Surgery Inc. Plaintiffs (Defendants by Counter-Claim and Defendants) - and - Christopher Alexander, Susan Pratt and Herman’s Point Developments Limited Defendants (Plaintiffs by Counter-Claim) and Plaintiffs) - and - Ronald Stockton and Bernadette Maxwell Second Defendants D E C I S I O N Judge: The Honourable Justice Suzanne M. Hood Heard: April 2-16; June 17-July 2; October 1-3, 2002 at Halifax, Nova Scotia Final Written Submissions: November 18, 2002 Written Decision: March 13, 2003 Counsel: John Merrick, Q.C. and Dufferin Harper for the plaintiffs William L. Ryan, Q.C. for the defendants, Christopher Alexander and Herman’s Point Development Ltd. Robert G. Belliveau, Q.C. for the defendant, Susan Pratt Self-represented: Ronald Stockton and Bernadette Maxwell By the Court: INTRODUCTION [1] Herman’s Point Development Limited is a company formed to buy and develop land on Herman’s Island in Lunenburg County. The investors entered into a shareholders agreement and the company executed a management/development contract with the Hardman Group Limited. William Hardman, one of HPDL’s shareholders and directors, is president of the Hardman Group. He also became president of Herman’s Point Development Limited. [2] Relations among the shareholders and directors began to deteriorate within approximately 12 - 18 months. There were disagreements about the mandate and actions of the Hardman Group, as developer, and about communications between William Hardman and some of the other directors and shareholders. The culmination of the dispute came at a directors meeting at which it is alleged that William Hardman resigned as president of HPDL and Christopher Alexander became president. Thereafter, a dispute developed about whether certain shares in the company had been validly transferred. ISSUES 1. Validity of transfer of shares; 2. The presidency of HPDL; 3. Management/development agreement; 4. Fiduciary duty; 5. Damages FACTS NOT IN DISPUTE The beginnings of the Project [3] In 1996 the Roman Catholic Episcopal Corporation decided to sell 54 acres of its lands known as Camp Villa Marie on Herman’s Island in Lunenburg County. Bernadette Maxwell and Ron Stockton are husband and wife and both are lawyers practicing in Halifax. They reside near Herman’s Island and were interested in acquiring a portion of the Herman’s Island lands on which to build a home. Bernadette Maxwell approached William Hardman about his interest in being part of a group which would buy and develop the lands. William Hardman is the president of the Hardman Group in Halifax which is a property development and management company. He owns a cottage on Herman’s Island adjacent to the Church lands. David Precious also joined the group. His wife owns a cottage property adjacent to the Church lands. He is a surgeon and the sole shareholder of D. S. Precious Maxillofacial Surgery Inc. Another couple was contacted and expressed an interest but withdrew quite early on. They in turn had contacted Susan Pratt, who also owns a cottage on Herman’s Island. She is retired and resides part of the year in Lunenburg and Herman’s Island and part of the year in Florida. Christopher Alexander also joined the group. He is a retired businessman residing in Bedford who owns investment properties, including a commercial rental property in Mahone Bay, and a summer residence in Indian Point. [4] In the course of their early meetings, all agreed that they had a similar vision for the proper development of the lands. They intended that large lots be created and the beauty and tranquility of the area maintained. [5] At the initial meetings, William Hardman said that he had connections with the Church and with the Bank of Nova Scotia. It was agreed that he would deal with the realtor acting for the Church about the possibility of acquiring the lands and would deal with the bank about financing for the project. Ultimately, it was agreed that a full price offer of $1.25 million be made which the Church accepted. [6] Further meetings were held in the late summer and early fall of 1996 to determine the shareholdings and investment required of each. A loan was arranged with the Bank of Nova Scotia, with each investor signing a personal guarantee. William Hardman arranged for the incorporation documents to be prepared. This was done by Blair Mitchell, a lawyer retained by William Hardman and whose office was in Mr. Hardman’s building. HPDL was incorporated on September 27, 1996 with William Hardman named both president and secretary. [7] When HPDL was incorporated the shareholdings were as follows: Bryman Enterprises Limited (William Hardman) 300 D. S. Precious Maxillofacial Surgery Inc. (David Precious) 300 Christopher Alexander 200 Susan Pratt 200 Bernadette Maxwell/Ron Stockton 200 Bryman and Maxillofacial each took 300 shares, instead of 200, because they each took one-half of the shares not taken by the couple who withdrew. They contributed $150,000.00 each and the others contributed $100,000.00 each. Each shareholder however was entitled to elect one director, who would have one vote. [8] Ron Stockton and Bernadette Maxwell had initially wanted land on the “point” on which to build their dream home. That was their principal reason for becoming involved in the development. Bernadette Maxwell was appointed a director, since each shareholder was entitled to appoint one director. Both she and Ron Stockton attended and spoke at meetings. November 1996 to Fall 1997 [9] Although William Hardman was named both president and secretary in the incorporation documents, he resigned as secretary and Bernadette Maxwell was appointed secretary at a meeting on October 20, 1996. A shareholder’s agreement was approved on that date and executed among all the shareholders, as of November 4, 1996. Susan Pratt testified that she requested an amendment to clause 8 of the agreement. The agreement provided in paragraph 2.03: President: William B. Hardman Secretary: Bernadette Maxwell Schedule “A” to the shareholders agreement was a management/development agreement between HPDL and the Hardman Group. It was prepared by William Hardman, approved at the October 20, 1996 meeting and effective as of November 4, 1996. [10] Lester Berrigan, N.S.L.S. was retained as a surveyor to begin work on the lot layout and the subdivision application. He proposed a development of 25 lots. By the time of the board of directors meeting on November 29,1996, it was apparent that the soil was category 3 (later called category 4). The soil permeability was such that a subdivision of 20 or 25 lots was not possible, but larger lots had to be created or special arrangements made for septic disposal. Because of this, the concept of Biogreen was discussed and thereafter explored. It is a method of treating sewage without an on-site septic system and would have permitted a greater number of smaller lots. [11] The closing for the purchase of the lands occurred in December 1996. [12] It was agreed in March of 1997 to create larger “estate lots”. A subdivision was proposed with only 15 lots. Lester Berrigan later reconfigured the large non-waterfront lots to create a 16th lot. That plan was finalized in June 1997. [13] Lot prices were established in March 1997. The list of prices did not include Lot 9, shown as “NA at this time” and Lots 11 and 12, shown as “NA Common Lands” (Exhibit 1, Tab 25). [14] The municipality required land to be dedicated for public open space or cash-in-lieu paid. [15] A contract was let for the construction of the road and it was completed in the summer of 1997 to public highway standards, that is 66 feet of paved width. The marketing of the lots in 1997 [16] During 1997, the Hardman Group took charge of the marketing of the lots. Louis Lemoine was hired by the Hardman Group in August of 1997. One of his roles was to be project manager for this project. This included dealing with marketing of the lots and liaison with Lester Berrigan about the subdivision process. Fall 1997 [17] No lots were sold during the spring and summer of 1997. William Hardman wrote to the others on September 25, 1997 to advise of the need for a further cash infusion of $100,000 (Exhibit 1, Tab 29). [18] In response to the letter from William Hardman asking for a cash infusion, Ron Stockton and Bernadette Maxwell wrote to all the shareholders on October 6, 1997 (Exhibit 1, Tab 30). In that letter they proposed that prices be reduced and that the marketing of the lots be turned over to a realtor. The letter is entitled “Re: Current state of our investment”. In that letter they also express concern about the delay in the project. This was the first in a series of letters that extended through until July 1998. [19] Under Louis Lemoine’s supervision, an information brochure was prepared and circulated to realtors on the South Shore and the development was advertised. There were typographical errors in both the brochure and in newspaper advertisements. These were discussed at the directors meeting on October 21, 1997. [20] By the time of this meeting, it was known that the municipality would not accept a land dedication but wanted cash. [21] Lot 9 was a very large lot (3.71A) with 660 feet of water frontage. However, because of its dimensions and the setback from the shoreline required for onsite sewage disposal system, Lester Berrigan concluded it could not be subdivided into two building lots. [22] An offer was received in October 1997 to purchase part of Lot 9. A subdivision application was made to subdivide Lot 9 to create Lot 9A. The subdivision plan shows its approval as a “non development” lot which meant that it was not approved for the installation of an on-site sewage disposal system, without which the lot could not be built on. The lot was subdivided and sold on that basis for $107,000.00. Final subdivision approval for Lot 9A was given in January of 1998. This was the first lot sold. A residential building has now been built on that lot (Exhibit 33). [23] After the October 21, 1997 meeting, Ron Stockton, Bernadette Maxwell, Christopher Alexander and Susan Pratt met and discussed a letter to be sent to William Hardman. They invited David Precious to meet with them but he said that he would not attend if William Hardman was not invited. As a result of their meeting, the four sent a letter dated October 30, 1997 to William Hardman and Louis Lemoine at HGL setting out their concerns. Among other things, they said they wanted more information about the development and felt left out of the process. [24] William Hardman replied to the letter with a letter dated November 24, 1997 (Exhibit 1, Tab 40). Both Louis Lemoine and William Hardman were involved in the preparation of the response to the letter. November 24, 1997 was the date of the next meeting of the directors. [25] Lots 11 and 12 were discussed at this meeting as a result of the October 30, 1997 letter. [26] In his response which was circulated at that meeting, William Hardman suggested that the directors have regular monthly meetings to provide greater communications. His letter said a price for Lots 11 and 12 would be discussed at the next meeting. [27] The Hardman Group received a number of inquiries but no lots were under agreement or sold in 1997, other than Lot 9A. Early 1998 [28] In early 1998, Louis Lemoine and William Hardman interviewed three brokers and hired Land and Sea Real Estate Services Inc. to be the listing agent and to be on retainer to market the lots. Sheila Sinnott was the broker. The contract was between Land and Sea and HPDL. It was initially for six months with a $1,500.00 per month retainer. Sheila Sinnott provided monthly updates to HGL (including those at Exhibit 1, Tabs 70, 83, 91). [29] The first of the monthly meetings promised by William Hardman in November was scheduled for January 5, 1998, but only Ron Stockton and Bernadette Maxwell attended along with William Hardman and Louis Lemoine. [30] William Hardman wrote a memo to all on January 6, 1998 (Exhibit 1, Tab 49). Ron Stockton wrote to William Hardman and Louis Lemoine on January 8, 1998, following up on that memo. In his letter, he raised additional issues (Exhibit 1, Tab 53). Although he asked for a response “at your earliest convenience” no reply was sent. [31] The next meeting was held on February 9, 1998. At the meeting, William Hardman reported on the hiring of and Land and Sea. After the meeting of February 9, 1998, William Hardman called no more meetings until the July 13, 1998 meetings. [32] Final approval of the first nine lots was received in March of 1998. [33] William Hardman wrote to Lester Berrigan about the order in which to seek subdivision approval. (Exhibit 1, Tab 64). Thereafter, application for subdivision approval of Lots 10, 13, 14, 15 and 16 was made on March 10, 1998. Approval was granted on May 28, 1998. The “Sold” Designation [34] On February 11, 1998, William Hardman wrote to Sheila Sinnott at Land and Sea outlining the agreement between Land and Sea and HPDL (Exhibit 1, Tab 54). He attached to that letter a list of the lots and prices. It showed Lots 4 and 13 as “under contract”. On February 12, 1998, Louis Lemoine wrote to a list of realtors advising that five lots were sold (Exhibit 1, Tab 57 is one of the letters). In the brochure prepared by Land and Sea, four lots were shown as sold. The brochure (Exhibit 1, Tab 71) was provided to realtors on the South Shore and elsewhere. “Sold” signs were also placed on these lots. Lots 4 and 13 were marked as “Sold” but they were not. Lots 11 and 12 were shown as “Reserved”. [35] It was after Lots 4 and 13 were advertised as “Sold” and “Sold” signs placed on them that the frequency of correspondence from Ron Stockton and/or Bernadette Maxwell increased. The letters went unanswered. [36] William Hardman wrote on March 16, 1998 to advise of a full price offer for Lot 16. He wrote a further memo on April 28, 1998 (Exhibit 1, Tab 76) to advise that the deal for Lot 16 was finalized and to provide some other information, including financial statements. [37] Susan Pratt, upon her return from Florida in May or June of 1998, went over from her cottage on Herman’s Island to see William Hardman at his cottage about advertising as sold lots that were not sold. The “Meeting on the Hill” [38] There was a meeting held on site on Sunday, June 21,1998 at the request of Ron Stockton and Bernadette Maxwell. There was an argument among Ron Stockton, Bernadette Maxwell and William Hardman over the sold designation and sold signs on lots which were not sold. William Hardman left and removed the sold signs on Lots 4 and 13. He said to Ron Stockton or Ron Stockton said to him (it is not clear from testimony) that one would have to buy the other out. The Aftermath of the “Meeting on the Hill” [39] Thereafter on June 23, 1998, William Hardman wrote (Exhibit 1, Tab 85) to Ron Stockton and Bernadette Maxwell offering to buy their shares for $100,000.00. The Hardman Group made the offer “as trustees for the balance of the shareholders”. The offer was not accepted nor was the counter-offer made by Stockton/Maxwell. [40] On June 23, 1998, William Hardman prepared notices of a series of meetings to be held on July 13, 1998. [41] As discussed at the “meeting on the hill”, Ron Stockton wrote a memo dated July 8, 1998 (Exhibit 1, Tab 90) about how the group could “go forward”. [42] On July 12, 1998, Susan Pratt, Christopher Alexander, Ron Stockton and Bernadette Maxwell met to prepare motions to be presented at the meeting to deal with their concerns. They also prepared an invitation to William Hardman and David Precious to buy their shares (Exhibit 1, Tab 96). The July 13, 1998 Meetings [43] There was a series of three meetings on that date: a directors meeting, followed by a shareholders meeting, then a second directors meeting. [44] David Precious was late and the others adjourned the shareholders meeting to await his arrival. At that meeting, the shareholders appointed the directors. Also at that meeting, a motion of non-confidence in the Hardman Group was put forward. The motion was withdrawn to be put forward later at the directors meeting. [45] At the second directors meeting, several items of regular business were dealt with, but the second item, appointment of officers, was deferred until the end of the agenda. Then Ron Stockton began to bring forward the previously prepared motions. There is a conflict in the evidence about what then ensued, which will be dealt with hereinafter with respect to the issue of the presidency of HPDL. William Hardman and David Precious say that William Hardman did not resign as president and Christopher Alexander is not the president of HPDL. Christopher Alexander, Susan Pratt, Ron Stockton and Bernadette Maxwell all say that William Hardman resigned and Christopher Alexander became the president of HPDL at that meeting. What is not in dispute is that after the meeting, at least from September, 1998 onwards, William Hardman carried on as president and continues to do so. [46] Either at the end or toward the end of the meeting, the invitation to buy the shares of Christopher Alexander, Susan Pratt and Stockton/Maxwell for $140,000.00 was given to William Hardman and David Precious. Events after July 13, 1998 [47] After the July 13 meeting, an offer was made for the purchase of the shares of Christopher Alexander, Susan Pratt and Ron Stockton and Bernadette Maxwell for $130,000.00 (Exhibit 1, Tab 97). That offer was not accepted. Stockton/Maxwell indicated that they would be prepared to sell their shares for $140,000.00 on certain terms. [48] At a meeting on August 13, 1998, a deal or a tentative deal was reached to sell the shares of Christopher Alexander, Susan Pratt and Ron Stockton and Bernadette Maxwell. It was put in writing (Exhibit 1, Tab 103) and sent to William Hardman, but when his lawyer had it executed and returned his letter (Exhibit 1, Tab 105) to Alan Chandler, who was acting for Christopher Alexander and Susan Pratt, said: Acceptance is subject to the following collateral conditions.... [49] There was a dispute about whether the deal had been concluded and the transfer of the shares of Christopher Alexander, Susan Pratt and Ron Stockton and Bernadette Maxwell did not occur. This became the subject of a legal action, however, it was dropped on the first day of trial. [50] Christopher Alexander tried to act as president but was unable to obtain the books and records of HPDL or any information from Land and Sea. Christopher Alexander had the records for HPDL at the Registry of Joint Stock Companies changed to reflect the change in officers. William Hardman later had them changed back to show that he was the president. The project continued to be managed by William Hardman and the Hardman Group. Christopher Alexander tried unsuccessfully through court proceedings to be declared president of HPDL. William Hardman took the position that, after the negotiations for the sale of the shares, there was a deal for the shares of Christopher Alexander Susan Pratt and Stockton/Maxwell to be sold to Bryman and D. S. Precious Maxillofacial Surgery Inc. Accordingly, he said he did not need to consult with them about HPDL. [51] On August 19, 1998, an agreement of purchase and sale was executed for the sale of Lot 9 for $222,000.00. The Meeting of August 26, 1998 [52] Christopher Alexander called a directors meeting for August 26. William Hardman did not attend, but called to say that the meeting was invalidly called. Nor did David Precious attend. Only three were there: Christopher Alexander, Susan Pratt and Ron Stockton. Events after September 1998 [53] No other meetings of the directors or shareholders of HPDL were held until August 2001. [54] After the August 26 meeting, Christopher Alexander, on September 7, acting as president of HPDL, wrote to William Hardman asking for the books and records of HPDL. He wrote again with the same request on September 25, 1998, having received no response to his earlier letter. Also on September 7, 1998, Christopher Alexander acting as President of HPDL wrote a second letter to William Hardman as president of the Hardman Group setting out numerous areas of dissatisfaction with the work of the Hardman Group (Exhibit 1, Tab 120) and requesting that the Hardman Group terminate its contract with HPDL. Also on September 7, 1998 and acting in the same capacity, Christopher Alexander wrote to Sheila Sinnott of Land and Sea and again requesting information from her. [55] On September 25, 1998, Christopher Alexander wrote to the Bank of Nova Scotia (Exhibit 1, Tab 126) asking the Bank to freeze the accounts of HPDL. The Bank’s response was that it was aware of the internal dispute and that HPDL should seek legal advice (Exhibit 1, Tab 129). On the same date, he again requested information from Sheila Sinnott (Exhibit 1, Tab 130). The Lawsuits [56] Four proceedings were commenced within the next six weeks. They are: 1. S.H. 150107 [57] The first of the legal proceedings, as mentioned above, was commenced on September 10, 1998 by Bryman (William Hardman’s company and the owner of the HPDL shares) against Christopher Alexander, Susan Pratt, Ron Stockton, Bernadette Maxwell and Alan Chandler seeking specific performance of the agreement to sell the shares of Christopher Alexander, Susan Pratt and Stockton/Maxwell. The action was later discontinued against Stockton, Maxwell and Chandler. This action was dropped on the first day of trial. 2. S.H. 150389 [58] This action was commenced on September 23, 1998 by William Hardman, the Hardman Group and Bryman against Christopher Alexander for unlawfully taking control of HPDL. Christopher Alexander filed a counter-claim on his own on behalf of HPDL claiming that William Hardman and HGL carried on the development in the interests of William Hardman and HGL and breached fiduciary obligations. They seek, inter alia, damages for negligence, breach of contract and breach of fiduciary duty, punitive damages and solicitor-client costs. Susan Pratt also counter-claimed on her own behalf and on behalf of HPDL. Her claim is for damages for breach of contract, breach of fiduciary duty and special damages for loss of value of shares and loss of opportunity, as well as punitive damages and solicitor-client costs. This is the basis of much of this litigation, since the other claims of William Hardman, Bryman and HGL Group have been abandoned. 3. S. H. No. 151138 [59] This action was commenced by Christopher Alexander on October 21, 1998 against Bryman and Stockton/Maxwell asking the court to prohibit the transfer of shares from Stockton/Maxwell to Bryman and to require the shares to be offered to the other shareholders pursuant to the shareholders agreement. This action continued at trial. Susan Pratt was added to this action at trial by agreement. 4. S.H. No. 151139 [60] This action was also commenced on October 21, 1998 by HPDL against William Hardman and HGL for an injunction to turn over the books and company documents of HPDL to Christopher Alexander. The remedies claimed are for negligence, breach of contract, breach of fiduciary duty, special damages for loss of profits for sales at prices less than those authorized, punitive damage and solicitor-client costs. This action too continued at trial. Offer to settle [61] After the lawsuit about the sale of the shares was begun, a settlement offer pursuant to CPR 41A was made to Bernadette Maxwell, Ron Stockton, Christopher Alexander and Susan Pratt to sell their shares to Bryman and D. S. Precious Maxillofacial Surgery Inc. Ron Stockton and Bernadette Maxwell accepted the offer and their shares were transferred. The offer included indemnifications arising from the lawsuits and from their acceptance of the offer to settle After the offer to settle was accepted, Bryman discontinued its action against Stockton and Maxwell. Court Orders [62] After an application was brought by Susan Pratt, an order was granted dated November 6, 1998, requiring William Hardman to provide information to Susan Pratt. The Order (Exhibit 64) provided: IT IS ORDERED that the Plaintiffs and Defendants by Counterclaim The Hardman Group Limited and W.B. Hardman, and each of them; 1. Provide to the Plaintiff by Counterclaim Susan Pratt all information within their knowledge with respect to sales or potential sales of property at Herman’s Point owned by Herman’s Point Development Limited; 2. Provide to the Plaintiff by Counterclaim Susan Pratt continuing information pending trial, with respect to all sales, offers, or other activity with respect to the property at Herman’s Point, Lunenburg County, Nova Scotia; and 3. Provide to the Plaintiff by Counterclaim Susan Pratt access to examine all books, records and accounts and any other documents, which relate to the operations of Herman’s Point Development Limited which any one or more of them may possess or have under their direction and control. AND IT IS FURTHER ORDERED that such information be provided forthwith to the Plaintiff by Counterclaim Susan Pratt for her use and the use of her counsel or expert financial or other advisers, and to no other person, other than the Plaintiffs and Defendants by Counterclaim, Christopher Alexander or D.S. Precious Maxillofacial Surgery Inc.... [63] It required William Hardman and the Hardman Group to provide information about “offers” and sales and access to the books and records of HPDL. [64] A further order was obtained by Susan Pratt dated April 14, 1999 which provided for delivery of tax and financial information with respect to a T-5 issued for Susan Pratt. [65] The actions were consolidated by court order dated October 7, 1999. An application was made to amend the pleadings to seek the winding up of HPDL. At that time, D.S. Precious Maxillofacial Surgery Inc. was added as a party. That issue was abandoned at the start of the trial. Progress of the Development since Legal Actions were Commenced [66] By the time the trial concluded in October 2002 all but three lots were sold: Lots 10, 11 and 12. [67] The price list was changed on a couple of occasions since the fall of 1998. The prices for Lots 3, 4, 5 and 6 were increased to $200,000.00 (Exhibit 1, Tabs 144-147) Lots 11 and 12 were priced and put on the market in October 2000. In October 2002, a full price offer was received from a third party for Lot 12. [68] The bank loan has been repaid. Profit distributions have been made. [69] The circumstances surrounding competing bids for Lot 10 will be dealt with hereinafter. In June 2001, Ed Kinley wrote to William Hardman to express interest in Lot 10. Thereafter in August, there were a series of offers from Ed Kinley and Elizabeth Precious, with the final offer from each made on August 25. Elizabeth Precious’ final bid was the highest at $166,500. The transaction has not closed. [70] David Precious and William Hardman in September 2002 put in offers for Lots 11 and 12. [71] The trial began on April 2, 2002 and ran until April 17. It recommenced on June 17 and continued until July 3. It then concluded on October 1, 2 and 3. Written submissions totalling more than 250 pages followed with the last received on November 18, 2002. CREDIBILITY [72] There was conflicting testimony from the witnesses about several key events. Principal among them was the testimony and exhibits concerning the July 13, 1998 meetings. [73] Seven attended the meetings: William Hardman, David Precious, Christopher Alexander, Susan Pratt, Ron Stockton, Bernadette Maxwell and Louis Lemoine. David Precious was late and only arrived part way through the shareholders meeting, which adjourned to await his arrival. Christopher Alexander, Ron Stockton, Bernadette Maxwell and Louis Lemoine made notes at the meeting. [74] The testimony of the seven conflicts about whether William Hardman resigned at the second directors meeting: William Hardman and David Precious said he did not resign, Louis Lemoine testified he did not remember William Hardman resigning. Christopher Alexander, Susan Pratt, Ron Stockton and Bernadette Maxwell recall him resigning. The notes taken at the meeting by Christopher Alexander, Ron Stockton and Bernadette Maxwell confirm this (Exhibit 5, Vol. 2, Tab 45; Exhibit 5, Vol. 5, Tabs 56 and 55 respectively). More importantly, in my view, the notes of Louis Lemoine (Exhibit 32) say: “Officers of the company: William B. Hardman to resign as president Nominees for president: Chris Alexander Secretary: Ron Stockton” These notes also conflict with the evidence of William Hardman and David Precious about the motions put forward by Christopher Alexander, Susan Pratt, Ron Stockton and Bernadette Maxwell. The former testified that no motions were passed. Louis Lemoine testified that the motions passed and his notes confirm this. His notes also confirm the testimony of Christopher Alexander, Susan Pratt and Ron Stockton and Bernadette Maxwell that David Precious voted with them and against William Hardman to put sold signs only on lots which were sold. [75] Louis Lemoine admitted on cross-examination that he would not have written these things down unless they in fact occurred. [76] The minutes of the July 13, 1998 meeting (Exhibit 1, Tabs 93, 94 and 95) prepared by Ron Stockton are consistent with his testimony and that of Christopher Alexander, Susan Pratt and Bernadette Maxwell. These minutes are also consistent with the notes made by Christopher Alexander, Ron Stockton and Bernadette Maxwell and those of Louis Lemoine. The comments in the minutes of the August 14, 2001 shareholders meeting, attended only by William Hardman and David Precious, are consistent with the testimony of William Hardman and David Precious and inconsistent with all the other testimony and exhibits on this subject. The August 14, 2001 minutes are at Exhibit 1, Tab 150 and the relevant extract is Exhibit 16. David Precious was quite uncomfortable during cross-examination on this subject and became red in the face when he changed his testimony. He first told Mr. Belliveau under cross-examination that he read the earlier minutes in preparation for the meeting 25 months later and could not recall if he had written down his thoughts about them. On further cross-examination by Mr. Ryan, he admitted he had in fact written that part of the minutes. He said he did not recall that when Mr. Belliveau asked him the question but had now corrected himself. He denied that the change in his testimony was because he saw Mr. Ryan pick up his own yellow folder with his notes in it. [77] After the meeting on July 13, William Hardman wrote a note to Christopher Alexander on July 29, 1998 about signing renewal documents for the bank. In his note, William Hardman referred to Christopher Alexander’s “new capacity”. He said two different things at trial and on discovery to explain why he was not then referring to Christopher Alexander’s “new capacity” being that of president. Not only are the two explanations inconsistent but they are both inconsistent with the testimony and exhibits referred to above. [78] Based upon all of the above testimony and exhibits, I conclude that the testimony of William Hardman and David Precious about the events of July 13, 1998 is not credible. Accordingly, I accept the evidence of Christopher Alexander, Susan Pratt, Ron Stockton and Bernadette Maxwell about these events. [79] Because I do not find the evidence of William Hardman and David Precious credible with respect to the critical events of July 13, 1998, I conclude that, where their testimony conflicts with that of other witnesses about other events, I prefer that of the other witnesses. DISPUTED FACTS [80] There were several key areas about which the testimony of the witnesses diverged substantially. These are: 1. The construction of the road; 2. Lot 9A; 3. Lots 11 and 12; 4. The “sold” designations on Lots 4 and 13; and 5. Lot 10. The events at the July 13, 1998 meeting have been discussed above. 1. The Construction of the Road [81] Christopher Alexander, Susan Pratt, Ron Stockton and Bernadette Maxwell all testified that they wanted the new road in the development to be a private road, not a 66 foot road built to public highway standards. They said their concern was that there was a right-of-way to the water between two of the most attractive lots and that, if the road was a public road, there would be public access to the water. They were also concerned about the effect on the value of the two lots abutting the right-of-way. They said this was discussed by the directors and they thought it was understood by all from the outset that public water access was not desirable. [82] Lester Berrigan testified that he was instructed by the developer to have it done that way and that, in particular, he was told by either William Hardman or Louis Lemoine to leave the right-of-way to the water by doing so. He said a private road could have been built as little as twenty feet wide. [83] Tammy Wilson, the Director of Planning for the Municipality of the District of Lunenburg, was the development officer for the municipality at the time the subdivision was approved. She said there was no requirement to build the road to public highway standards. She said that developers could construct a private road. She said however that, if the road was to be turned over to the municipality in the future, it then had to be constructed to public highway standards. She testified the developer could reserve 66 feet of road right-of-way in case the decision was later made to have the municipality take over the road. I accept the evidence of Tammy Wilson and Lester Berrigan that the road did not have to be built to public highway standards. I also accept the evidence of Christopher Alexander, Susan Pratt, Ron Stockton and Bernadette Maxwell about the wishes of the majority. 2. Lot 9A [84] An offer was made on October 17, 1997 (Exhibit 1, Tab 32) by Jacqueline Kinley to buy part of Lot 9. The offer was open until 12:00 noon on October 20. As discussed above, it was a large (3.71A) shallow lot with 660 feet of water frontage. Because it was shallow, it could not, according to Lester Berrigan, meet the Department of Environment requirements for septic system setbacks from the water. It therefore could not be subdivided into two building lots. [85] The Biogreen system of sewage treatment was investigated which would have eliminated the need for an outside septic system. If the province approved the system, a lot like Lot 9 could be subdivided. However, the province by the fall of 1997 had not approved it. [86] The subject of selling part of Lot 9 was raised at the October 21, 1997 directors meeting. Ron Stockton, Bernadette Maxwell, Christopher Alexander and Susan Pratt all testified that William Hardman announced with great excitement the “sale” of part of Lot 9. [87] Ron Stockton testified that he was quite surprised about this because he had not known the lot had been subdivided. He testified that Christopher Alexander asked what would happen if the offer was not approved. He said that William Hardman’s response was there could be a lawsuit. Christopher Alexander confirmed this in his testimony. He said that William Hardman told him it was “a done deal”, he had “given his word” and they would be sued if they backed out now. [88] David Precious testified that the deal was not finalized when he was told. However, he admitted that he was not present at this meeting. William Hardman denies that he said anything about a lawsuit. He also testified that the offer was not accepted until after the October 21 meeting. When asked why the offer had the date of October 17 as the date it was accepted, he testified that the date was pre-printed on the offer when he received it but that he did not accept it and sign it on behalf of HPDL until after the October 21 board meeting. Louis Lemoine testified there was some dissension about this sale at the meeting. [89] William Hardman says the directors agreed to accept the offer on October 21 but thereafter began to have second thoughts about it. He said they raised these concerns at the November 24, 1997 meeting, but it was too late then to do anything about it. [90] I accept the evidence of Christopher Alexander and Ron Stockton about the events of October 21, 1997. [91] The subdivided portion of Lot 9, known as Lot 9A, was sold as a “non-development” lot. The subdivision plan is the fundamental document without which the conveyance of a piece of land cannot validly occur. The stamp on the subdivision plan for Lot 9A says: “IMPORTANT NOTICE Lot 9-A (has, have) been created for a purpose which does not require an on-site sewage disposal system and will not be eligible for a permit to install a system unless the requirements of the Department of Environment are met.” [92] However, in 2001 a very nice summer residence (shown on Exhibit 33) was built on Lot 9A. This will be dealt with further hereinafter. 3. Lots 11 and 12 [93] It is in dispute whether both William Hardman and David Precious said from the outset that they were interested in acquiring lands in the development. William Hardman testified that he and David Precious always indicated they were interested in the lands adjoining their existing properties. David Precious testified that he at no time said he was interested in the lot adjacent to his wife’s property. [94] William Hardman also testified that it was always agreed that those interested in acquiring land would do so at the end of the project. The others say that this was stated by William Hardman and not disputed by them, rather than being agreed to. Ron Stockton said that William Hardman and David Precious indicated early on that they might be interested in Lots 11 and 12. [95] Sheila Sinnott testified that William Hardman told her he was interested in Lot 12 and one of the other investors in Lot 11. She said this was her under-standing from the start of her involvement with the project in early 1998. [96] Lot 11 abuts the existing properties of Elizabeth Precious, the wife of David Precious, which are shown on Exhibit 1, Tab 66 as lands of Elizabeth F. Precious and lands “now or formerly of Saras Albano-Muller”. The cottage is on the Precious lot. [97] Lot 12 is across a private driveway from the cottage property of William and Shirley Hardman and a piece of land owned by a Hardman company, shown on Exhibit 1, Tab 66 as lands of “P.W.C. Holdings Limited”. [98] Neither lot 11 or 12 has water frontage but the abutting Precious and Hardman lands do. Lot 11 is 4.406A and Lot 12 is 3.805A. [99] Lots 11 and 12 were shown on the first price list (Exhibit 1, Tab 25) as “NA common lands”. No price was set for either at that time, March 1997. [100] In October 1997, it was known that the municipality would not accept land for public open space but insisted upon the payment of cash-in-lieu. [101] When Land and Sea was retained in February 1998, Sheila Sinnott was provided with a listing of lots and prices (Exhibit 1, Tab 54). Lots 11 and 12 were designated as sold. When Louis Lemoine wrote on February 12, 1998 to a list of realtors on the South Shore and in the western Halifax County area (Exhibit 1, Tab 57 is an example), he told them five lots (which included Lots 11 and 12) had been sold. When Land and Sea produced its brochure to promote the sale of the Herman’s Islands lands, Sheila Sinnott marked these two lots as “sold” (as well as 4 and 13). [102] Ron Stockton and Bernadette Maxwell questioned how they could be designated “Sold” when no agreement had been executed . When they were told the lots were “reserved”, they similarly questioned how this could occur since the directors had not approved it. This issue was soon over-shadowed by the concerns about Lots 4 and 13 (to be discussed following), but by July 13, 1998, no agreements were signed nor was a decision made to “reserve” these two lots. [103] Christopher Alexander said that William Hardman and, to some extent, David Precious were telling them the size of the lots, setting the prices and telling the rest of them when they would buy them. He said they were getting a benefit the others were not. [104] At the July 13, 1998 meeting, one of the motions passed was one to price and market these lots. However, this was not done and the lots were not granted final subdivision approval until October 2000. [105] They were priced in October 2000 and on September 20 and 24, 2002 counsel for William Hardman and D.S. Precious Maxillofacial Surgery Inc. wrote (Exhibit 63) to say that each was prepared to buy at “the average price set out by two independent appraisals”. [106] I conclude that the majority of directors wanted these two lots priced and marketed as early as October 1997, soon after it became known the municipality would not accept them for public open space. Nothing was done by William Hardman or HGL to carry out the direction of the majority of the directors. Nor did William Hardman or David Precious commit themselves firmly to buy the lots until the letters of September 2002. 4. Lots 4 and 13 [107] As mentioned above, a list of lots and prices was given by William Hardman to Land and Sea. On that list (Exhibit 1, Tab 54), Lots 4 and 13 were designated “under contract”. Louis Lemoine’s letter to realtors , referred to above, announced “to date we have sold five properties ...”. [108] The Land and Sea brochure (Exhibit 1, Tab 71) was provided to realtors on the South Shore and elsewhere in April 1998. It showed Lots 4 and 13 to be “Sold”. Sheila Sinnott testified that “Sold” signs were also placed on these lots. Louis Lemoine testified he placed these signs in late May or early June. [109] Both William Hardman and Louis Lemoine testified this was a marketing strategy which was a common practice. Louis Lemoine testified that he had done this in other developments in which he had been involved while working in Vancouver. He said he thought there was nothing wrong with this practice. Nor did he or William Hardman have the advertising changed after the concerns of the others were brought to their attention. William Hardman testified that the Armoyan Group and the Annapolis Group used this practice. [110] George Armoyan is a developer and president of Geosam Investments. He testified about his practice in this regard and his knowledge of the practice in the real estate development community during almost twenty years. He said that he has never engaged in this practice and is not aware that other developers do. He said that “Sold” signs are only erected when all conditions of an offer have been met. [111] Michael Laycock is the project manager for the Annapolis Group which is a residential land developer in Bedford. He testified that he worked on the Glen Arbour development among others and that his company does not engage in this practice and he is unaware of others that do. He testified that their practice is to place “Sold” signs only when there is an executed agreement of purchase and sale or a conditional sale. He said to do otherwise is not an acceptable practice in the industry. [112] Lester Berrigan also testified that he is unaware of this practice. [113] Sheila Sinnott testified that by the time of her July 10, 1998 reporting letter to the Hardman Group she had been told that the deals on Lots 4 and 13 had fallen through. She also testified that, when she learned there had never been agreements for Lots 4 and 13, she called Louis Lemoine and he confirmed it. She said this was a “stupid” thing for the Hardman Group to have done because it would reflect badly on her credibility, since she had put that information in her brochure and that it would only serve to further irritate South Shore realtors when they learned the truth. She testified that it would not, however, adversely affect the project because it was a good one and also because the lots adjacent to each were very similar and were still available. [114] When Louis Lemoine’s letter of February 12, 1998 was sent out, Ron Stockton testified that one of the realtors who received it called him to offer congratulations on the sale of five lots which was announced in the letter. On February 16, Ron Stockton called Louis Lemoine who confirmed Lots 4 and 13 were sold (the notes of this conversation are in Exhibit 1, Tab 59). Ron Stockton wrote to Louis Lemoine on the same day (Exhibit 1, Tab 60) and referred to the lots being “conditionally sold” only and asked for copies of the offers. He wrote again on April 22, 1998 (Exhibit 1, Tab 75) asking for a meeting and saying he hoped five lots were in fact sold. On May 6 (Exhibit 1, Tab 79), he was still asking for copies of the agreements of purchase and sale for the lots. [115] The only reply Ron Stockton and Bernadette Maxwell received was a letter from William Hardman dated May 7, 1998 (Exhibit 1, Tab 80) in which he did not respond to their questions about Lots 4 and 13 but chastised them for their negativity. [116] Ron Stockton testified that he was very concerned about the lots being represented as “Sold” for four reasons: 1) it was not true; 2) it would only further alienate realtors when they found out; 3) it exposed them to liability if a purchaser wanted to resell and found out that no other lots had been sold; and 4) he and Bernadette Maxwell had professional responsibilities as lawyers to act ethically not only in their law practice but also in business dealings. [117] Even at trial, William Hardman would not admit there was anything wrong with advertising Lots 4 and 13 as “Sold” when they were not. Louis Lemoine, on the other hand, did agree on cross-examination that this was wrong. Sheila Sinnott said she would not have become involved with the project if she had known of this. [118] I conclude that the practice was not in fact a common one. George Armoyan, Michael Laycock and Lester Berrigan testified they were not aware of it. Sheila Sinnott said she would not have had anything to do with the project had she known of it. Even Louis Lemoine eventually admitted it was wrong. Ron Stockton, Bernadette Maxwell, Christopher Alexander and Susan Pratt had serious concerns about possible lawsuits and the effect it might have on their reputations. Ron Stockton and Bernadette Maxwell in particular have ethical obligations as lawyers which extend to any business in which they become engaged. Even David Precious agreed at the “meeting on the hill” the “Sold” signs had to come down. He testified that, if information was sent out containing this representation (which he was not sure had occurred), it would be “disastrous”. [119] I therefore conclude that the practice was not only not common but was, at best, misleading. 5. Lot 10 [120] As mentioned previously, there were two competing sets of bids for Lot 10. Both Ed Kinley and Elizabeth Precious put offers in on the lot. Elizabeth Precious testified about her interest in Lot 10. She said that she had spoken to William Hardman at a Christmas party in 2000 expressing an interest in Lot 10. She testified that she had her husband contact William Hardman on her behalf around Christmas or early in the new year of 2001 about the lot. She said she understood that she would have to wait until the litigation was resolved before she could buy it. [121] Later in 2001(June 27), however, Ed Kinley wrote to William Hardman to make a full price offer of $150,000.00 on Lot 10 (Exhibit 2, Tab 10). Sara Kinley, the wife of Ed Kinley, testified she met William Hardman at a reception in July of that year and was told that the board would meet soon and the offer would be considered then. [122] Elizabeth Precious testified that William Hardman called her to advise her there was an offer on Lot 10. On August 3, 2001, she made an offer of $152,500.00 (Exhibit 45). She made a further offer of $157,500.00 on August 17 (Exhibit 1, Tab 15). On August 20, 2001, Ed Kinley made an offer of $155,000.00 (Exhibit 2, Tab 15) and made it clear that it was unconditional offer. [123] Ed Kinley testified he did not know that it was Elizabeth Precious against whom he was bidding . In fact he called David Precious about his offer to buy Lot 10 and David Precious did not tell him that it was his wife who was bidding against him. Ed Kinley was not sure whether he told David Precious what his final offer would be. Elizabeth Precious said that, at the time of the call, her last offer had not been prepared. David Precious confirmed the call from Ed Kinley and that he did not tell him it was Elizabeth Precious against whom he was bidding. [124] On August 23, 2001, William Hardman wrote to advise that final offers would have to be made by August 25. One letter was sent to Ed Kinley, but the other was sent to David Precious not to Elizabeth Precious (Exhibit 12). Elizabeth Precious’ final offer was $166,500.00 (Exhibit 1, Tab 152) and that of Ed Kinley was $165,000.00 (Exhibit 2, Tab 17). [125] The letter to Elizabeth Precious advising her of her successful bid is dated August 23, 2001which is two days before the final offers were to be made. It is that letter which Elizabeth Precious says she received. From the Hardman Group files came another copy of that same letter with “file” noted on it and a date of August 31, 2001. [126] William Hardman confirmed that Elizabeth Precious had an interest in Lot 10 around the beginning of 2001. He said she herself spoke to him about it at a Christmas party in late 2000. However, I accept the evidence of Elizabeth Precious with respect to David Precious contacting William Hardman on her behalf. [127] William Hardman, on direct examination, denied ever discussing Lot 10 with David Precious, but on cross-examination he admitted there may have been some pressure on him from David Precious. He testified that David Precious could not understand why Elizabeth Precious’ offer could not just be accepted. William Hardman explained that the letter of August 23, which was sent to David Precious not Elizabeth Precious, may have been because of David Precious’ involvement around that time. William Hardman said he had a call from and a discussion with David Precious around that time. [128] David Precious denied any involvement with the offers for Lot 10. Elizabeth Precious said he typed them up for her on their computer and he admitted he may have typed up her final offer. I accept the evidence of William Hardman over that of David Precious about David Precious’ involvement in the offers for Lot 10. [129] I find that David Precious also tried to cover up his involvement by failing to provide to the other parties and his own counsel the letter of August 23 which was addressed to him. It was not produced until trial. Elizabeth Previous testified she had no file of her own about Lot 10 but that David Precious kept the documentation. At trial, David Precious was asked to retrieve his file during a court recess and the August 23 letter was only then produced. [130] William Hardman could not explain why the letter accepting Elizabeth Precious’ offer was dated two days before she made her final offer. He produced a file copy of the letter dated August 31. I conclude there is an innocent explanation for the date on the August 23 letter. A previous letter dated August 23 had been sent to the Precious’ address on Cedar Street (albeit to David Precious). When the August 31 letter was to be sent, I find it probable that the previous letter was used as a template and, in error, the date was not changed. I conclude this from the computer file identifier at the bottom of Exhibit 1, Tab 153. It refers to the date of the letter as August 31. However, the existence of the file copy dated August 31 may not have such an innocent explanation, since it was produced with the date corrected. [131] I conclude that William Hardman was facing pressure from David Precious about Elizabeth Precious buying Lot 10 but had received a legitimate offer from Ed Kinley. When neither dropped out, he called for final bids from each. I do not accept the evidence that David Precious was not involved in these offers and find it highly suspicious that each of Elizabeth Precious’ offers (until the last) was $2,500.00 higher than each of Ed Kinley’s offers. [132] William Hardman wrote on August 31, 2001 to Christopher Alexander and Susan Pratt advising that Lot 10 had sold for $16,500.00 over the list price but did not then disclose the details of how that occurred or the name of the purchaser. When Christopher Alexander and Susan Pratt later learned who it was, they would not consent to the sale and it did not occur. The lot has not been sold to anyone else in spite of Ed Kinley’s “back-up” offer of $165,000.00 given to Sheila Sinnott (Exhibit 42) in March 2002, just prior to trial. VALIDITY OF TRANSFER OF STOCKTON/MAXWELL SHARES [133] The shareholders agreement provides in clauses 1.04 and 7: 1.04 During the term of this Agreement neither Hardman, Precious, Pratt, Alexander or Maxwell/Stockton shall, without the prior written consent of the others be entitled to sell, transfer, assign or otherwise dispose of any share or shares in the capital stock of Herman’s Point except as provided in this Agreement. 7. VOLUNTARY PURCHASE AND SALE 7.01 In the event that either Hardman, Precious, Pratt, Alexander or Maxwell/Stockton desire to sell its shares in Herman’s Point (the “Withdrawing Shareholder”) it shall first notify the Other Shareholders (the “Other Shareholders”) of its intentions in writing (the “Notice of Intention”) and the parties shall, within a period of fourteen (14) days from the Other Shareholders’ receipt of the Notice of Intention, meet to discuss the sale of the Withdrawing Shareholder shares to the Other Shareholders. If the parties reach an agreement, the Other Shareholders shall notify the Withdrawing Shareholder in writing and the purchase shall be completed within sixty (60) days after acceptance. 7.02 If the parties are unable to reach an agreement within thirty (30) days (the “Discussion Period”) after receipt of the Notice of Intention, the Withdrawing Shareholder shall deliver an Offer (the “Offer”) in writing to the Other Shareholders who shall have thirty (30) days to accept or reject the Offer. If the Other Shareholders accept the Offer, it shall notify the Withdrawing Shareholder in writing and the purchase shall be completed within forty-five (45) days after acceptance. 7.03 If the Other Shareholders do not accept the Offer within thirty (3) days after receipt of the written Offer, the Offer will be deemed to have been declined. If the Offer is declined or deemed to have been declined by the Other Shareholders, the Withdrawing Shareholder may offer and sell the shares to a third party at the price stated in the Offer or a higher price, which sale shall conclude within three (3) months following the decline or deemed decline and, if no sale is concluded within that time period, this provision shall again apply. If the Withdrawing Shareholder wishes to sell the shares for a lower price than the price stated in the Offer, it must first offer the shares to the Other Shareholders for that lower price and this provision shall again apply. 7.04 It shall be a condition precent to the voluntary purchase and sale under this paragraph that it be a term of any offer that any third party purchasing the offered Shares pursuant to paragraph 7.03 covenants and agrees to execute and deliver on a closing of such sale of written Agreement with the parties hereto containing al the terms and conditions of this Agreement. [134] At the November 24, 1997 meeting, William Hardman offered Ron Stockton and Bernadette Maxwell $100,000.00 for their shares. This was after their letter of October 6 and the letter from them and Christopher Alexander and Susan Pratt dated October 30. [135] The next mention of selling or buying shares was in William Hardman’s May 7, 1998 letter to Bernadette Maxwell (Exhibit 1, Tab 80). William Hardman said: I would suggest to solve our problems that you offer to sell your interest in the Company to the other shareholders. [136] It was next mentioned by William Hardman and/or Ron Stockton at “the meeting on the hill” on June 21, 1998. After that meeting, William Hardman wrote to Ron Stockton and Bernadette Maxwell on June 23 (Exhibit 1, Tab 85) offering to buy their shares for $100,000.00. David Precious testified that he knew of or saw the letter before it was sent. Ron Stockton testified that he discussed it with Christopher Alexander and Susan Pratt. The offer was refused and a counter-offer was made to sell for $150,000.00 on certain conditions. [137] It is clear that soon after June 23 everyone knew that there had been an offer to buy the Stockton/Maxwell shares. [138] The subject of the sale of shares was discussed among Christopher Alexander, Susan Pratt, Ron Stockton and Bernadette Maxwell on July 12 when they met to prepare for the July 13 meeting. They were careful to make their letter an invitation to buy (Exhibit 1, Tab 96) so as not to trigger clause 7 of the shareholders agreement. Ron Stockton testified that they were concerned about the wording of the shareholders agreement regarding the sale of shares. He said that if they offered to sell their shares and William Hardman declined he would be in a position to force them to buy his shares. Ron Stockton said he and Bernadette Maxwell did not want to put up any more money or be further involved with the project at this point. He said this was the reason they made an invitation to buy their shares rather than offering to sell them. Ron Stockton testified that Bernadette Maxwell was anxious to get out of the company. [139] Blair Mitchell wrote to Christopher Alexander, Susan Pratt, Ron Stockton and Bernadette Maxwell on July 16 (Exhibit 1, Tab 97) saying that “William Hardman on behalf of Bryman Enterprises Limited and/or Maxillofacial Surgery Inc.” offered to buy the shares of each for $130,000.00 on certain conditions. David Precious testified that he gave William Hardman authority to negotiate on his behalf. Ron Stockton and Bernadette Maxwell counter-offered on July 29 (Exhibit 1, Tab 98) to sell for $140,000.00 on certain conditions. [140] Christopher Alexander had discussed with Ron Stockton and Bernadette Maxwell the proposal from William Hardman. He said that later they were in almost daily contact. He said he was trying to convince them to stay in the company and had discussed with them on July 21 buying their shares himself. Susan Pratt testified that she was aware of this. She said she knew in July that Ron Stockton and Bernadette Maxwell wanted out and that she knew this still to be the case on September 4, 1998. Christopher Alexander said he did not advise William Hardman of his discussions with Ron Stockton and Bernadette Maxwell about buying their shares. [141] Ron Stockton testified that he told Christopher Alexander and Susan Pratt about the offer for his shares. They discussed selling their shares to Christopher Alexander. Ron Stockton’s notes of their conversation on July 21, 1998 are at Tab 64, Vol. 5, Exhibit 5. Those notes also disclose that Ron Stockton talked to Susan Pratt that day. According to Ron Stockton’s notes (Exhibit 5, Vol. 5, Tab 68), he and Christopher Alexander had another conversation on July 24. He said he told the lawyer for Christopher Alexander and Susan Pratt that he intended to accept the offer from William Hardman. He wrote to Susan Pratt on July 20 (Exhibit 5, Vol. 5, Tab 60) and to both Christopher Alexander and Susan Pratt on July 21 (Exhibit 5, Vol. 5, Tab 61). On page 2 of the latter, he said: Unless Mark David comes back and says something is really amiss it is now certain that we will be accepting the offer and we prefer to do so at the very earliest time. [142] Ron Stockton’s notes on the draft of the letter to Alan Chandler (Exhibit 1, Tab 98) confirm that on July 29 he spoke to Christopher Alexander and that Christopher Alexander told him that Alan Chandler was then also acting for Susan Pratt. The letter from Mark David on behalf of Ron Stockton and Bernadette Maxwell was sent to Alan Chandler. Ron Stockton said he and Bernadette Maxwell told their lawyer “to get us out of this”. Exhibit 1, Tab 102 is the notes of a teleconference Ron Stockton had with Christopher Alexander and Susan Pratt on August 12. The notes indicate that they discussed Christopher Alexander buying the shares. They had a further telephone conversation on September 4, 1998 (Exhibit 5, Vol. 5. Tab 81). Ron Stockton wrote to Christopher Alexander on September 10, 1998 (Exhibit 5, Vol. 5, Tab 83). [143] Bernadette Maxwell was not certain that she discussed accepting the offer to settle pursuant to Civil Procedure Rule 41A with Christopher Alexander and Susan Pratt. She said that, after June 23, Christopher Alexander and Susan Pratt tried to convince them to stay in. She also said that she and Ron Stockton told Christopher Alexander and Susan Pratt that they would rather sell to them. She recalled a meeting at Susan Pratt’s cottage at which time they discussed the value of the shares. [144] At a meeting on August 13, 1998 attended by William Hardman and Blair Mitchell and by Alan Chandler and Christopher Alexander, further negotiations occurred about the sale of the shares of Christopher Alexander, Susan Pratt, Ron Stockton and Bernadette Maxwell. Although there is a dispute about whether an agreement was reached and whether it bound all three shareholders, it is clear that the deal was never completed by the transfer of the shares of Christopher Alexander, Susan Pratt, Ron Stockton and Bernadette Maxwell. William Hardman says that a deal was concluded and that is why he considered himself and David Precious thereafter to be the only two shareholders. [145] Christopher Alexander knew that Ron Stockton and Bernadette Maxwell would accept an offer from William Hardman. He testified that Bernadette Maxwell told him he had better hurry or they would sell to William Hardman. He was unable to arrange to buy the shares himself. Susan Pratt testified that she could not afford to do so in July or in the September/October period. She said she was not approached by William Hardman or David Precious about the shares nor was she offered a pro rata share of them. Nor was she asked to consent to the transfer of the Stockton/Maxwell shares after litigation began. [146] Bryman Enterprises Limited commenced a lawsuit against Christopher Alexander, Susan Pratt, Ron Stockton and Bernadette Maxwell on September 10, 1998 claiming that there had been an agreement to sell their shares. After the litigation began, an offer to settle pursuant to Civil Procedure Rule 41A was made (Exhibit 1, Tab 128) on September 28 to Christopher Alexander, Susan Pratt, Ron Stockton and Bernadette Maxwell. Ron Stockton testified that he told both Christopher Alexander and Susan Pratt that, if Christopher Alexander could not buy their shares, they were going to accept the 41A offer. Ron Stockton and Bernadette Maxwell accepted it after negotiating conditions, including indemnification. [147] The issue before the court is whether the sale of the shares of Ron Stockton and Bernadette Maxwell is valid. Christopher Alexander and Susan Pratt say that it is not because it did not comply with s. 7 of the shareholders agreement. [148] It is clear to me from the evidence that the sale of the Stockton/Maxwell shares did not strictly comply with the wording of the shareholders agreement. The offer to buy their shares was contained in an offer to settle pursuant to Civil Procedure Rule 41A. It did not purport to refer to the shareholders agreement. An identical offer to settle was made to both Christopher Alexander and Susan Pratt. [149] To determine if the transfer is valid, I must consider not only the wording of clause 7 but its intent. The intent of clause 7 is to ensure that, before shares are sold to someone who is not already a shareholder of HPDL, those shares are offered to the other shareholders first. [150] I therefore must consider the intent of Ron Stockton and Bernadette Maxwell and of Christopher Alexander and Susan Pratt. Ron Stockton and Bernadette Maxwell wanted out and I find as a fact that Christopher Alexander and Susan Pratt knew that. Susan Pratt and Christopher Alexander had discussed it with them and, before the July 13 meeting, all had agreed to invite William Hardman and/or David Precious to buy the shares of all of them. In fact, negotiations thereafter occurred to do so. They had discussed among themselves the possibility of Ron Stockton and Bernadette Maxwell selling their shares to Christopher Alexander. Susan Pratt testified that she was not in a financial position in the July to October period to purchase additional shares. The discussions with Christopher Alexander did not prove fruitful but both Christopher Alexander and Susan Pratt knew that Ron Stockton and Bernadette Maxwell wanted to sell their shares. [151] Susan Pratt testified that she had mixed feelings about selling her shares but did not want to leave Christopher Alexander in the company alone with William Hardman and David Precious so she decided not to sell her shares unless Christopher Alexander did. [152] Christopher Alexander and Susan Pratt also received the offer to settle. They knew from constant contact with Ron Stockton and Bernadette Maxwell that they were intent upon selling their shares. They also knew Ron Stockton and Bernadette Maxwell preferred to sell their shares to Christopher Alexander. Negotiations in that regard had occurred of which Christopher Alexander did not advise William Hardman. Susan Pratt knew of the discussions with Christopher Alexander to buy the Stockton/Maxwell shares. She did not object. Ron Stockton and Bernadette Maxwell time and again told Christopher Alexander and Susan Pratt they wanted out of the company. Ron Stockton told his lawyer on August 18, 1998 (Exhibit 1, Tab 111) “Chris A. seems very intent on buying Bernadette and me out ...”. Christopher Alexander, for whatever reason, did not or could not purchase their shares. Susan Pratt admitted she could not afford to. [153] In Carson v. Carson 2000 CarswellNB 287, 6 B.L.R. (3d) 242, 2000 N.B.J. No. 305 (N.B.Q.B.), Creaghan, J. dealt with a transfer of shares of a company which had a by-law similar to cl. 7 of the shareholders agreement in this case. [154] In that case, shares were transferred without notice to Wayne Carson. Nor was he given an opportunity to purchase a pro rata portion of the shares. Creaghan, J. concluded that the by-law should be enforced. In doing so, he said at para. 12: In fact, clearly he refused to waive his rights under the By-Laws of the Respondent corporations and cannot at any time be seen to have acquiesced or to have consented to the disposition and transfer that the other shareholders purported to effect. The decision was upheld on appeal (2001 CarswellNB 409; 2001 N.B.C.A 105; 18 B.L.R. (3d) 165, 244 N.B.R. (2d) 63; 634 A.P.R. 63 (N.B.C.A.). [155] I conclude that Christopher Alexander and Susan Pratt had notice of the intent of Ron Stockton and Bernadette Maxwell to sell their shares and ample opportunity to offer to buy them. They did not. I therefore conclude that they acquiesced in or consented to the transfer of the Stockton/Maxwell shares. I also conclude that the intent, although not the letter of clause 7 was sufficiently complied with so that the transfer of the Stockton/Maxwell shares is valid. The transfer is not prohibited nor must an offer of those shares or a pro rata share of them be made to Christopher Alexander and Susan Pratt. WHO IS THE PRESIDENT OF HERMAN’S POINT DEVELOPMENT LIMITED? [156] In my findings on credibility, I concluded that I do not accept the testimony of William Hardman and David Precious where it differs from that of other witnesses. In making that finding, I referred in particular to the events of July 13, 1998. Because of my findings on credibility, I conclude that William Hardman did in fact resign as president on July 13, 1998. The subject of appointment of officers was on the agenda for the directors meeting and I find as a fact that Christopher Alexander was nominated for president, no one else was nominated and Christopher Alexander became president on July 13, 1998. [157] Counsel for William Hardman says that, if I conclude that William Hardman resigned, there are two reasons why his actions do not constitute a valid resignation. He says, first, that there must be a clear and unequivocal intent to resign. Secondly, he says that the position of president is governed by the shareholders agreement and, therefore, any change in the presidency must be made by the shareholders not the directors. [158] In R. v. Giglio (1997), CarswellNat 82; [1997] 2 C.T.C. 2608 (Tax Court of Canada), the court concluded that a director of a company did not resign when he gave instructions to his lawyer to write a letter of resignation nor when he intended to do so at a directors meeting. The court said at para. 13: Mr. Giglio did not cease to be a director by virtue of expressing an intention to do so or by instructing a solicitor to prepare the necessary documents ... [159] On appeal, Giglio v. R. (1999 CarswellNat 364), [1999] 2 C.T.C. 2591 (Tax Court of Canada) Rip, J. said at para. 38: Mr. Giglio never put his resignation in writing and never delivered anything in writing to an officer of Nu-West indicating his intention to resign, if not his act of resigning, as director of Nu-West. [160] There are several distinctions between the situation in Giglio and the present situation. First, the Tax Court was interpreting a specific section of the Ontario Business Corporations Act which required the written resignation of a director. Second, William Hardman did not merely have the intent to resign. I have concluded above that he did resign and that Christopher Alexander became president. Third, the Tax Court was dealing with a criminal matter and Mr. Giglio’s assertion that he had resigned as a director would have saved him from criminal responsibility under the Income Tax Act. [161] In Perricelli v. R. 2002 CarswellNat 1346 (Tax Court of Canada), the court dealt with the same provision of the Ontario Business Corporations Act. Although there was a statutory requirement for a resignation to be in writing, the Tax Court concluded that Mr. Perricelli had effectively ceased to be a director after a meeting at which all directors were present and that the other directors understood this. [162] In this case, everyone understood that William Hardman had resigned. All were present when he said so and when a new president was elected. The confirmation of this exists in the letter William Hardman wrote to Christopher Alexander (Exhibit 1, Tab 99) in which he refers to Christopher Alexander’s “new capacity”. As I have found above, William Hardman was referring to Christopher Alexander’s “new capacity” as president of HPDL. [163] In Cox v. Victoria Plywood Co-Operative Assn. 1993 CarswellBC 1197, 2 C.C.E.L . (2d) 78 (B.C.S.C.), the court concluded the company’s operations manager had not resigned. Drake, J. said at para. 17: I am satisfied, and find, that the plaintiff’s apparent resignation was made in ‘a spontaneous outburst of anger’ to use the phrase employed by Davison, J. in Widmeyer v. Municipal Enterprises Ltd. ... and it was accepted without proper deliberation by the directors, some of whom were, according to Mr. Cox’s affidavit and as I find, not friendly towards him. [164] Drake, J. referred to the decision of Davison, J. in Widmeyer v. Municipal Enterprises Ltd. (1991), 36 C.C.E.L. 237, N.S.T.D. In that case, Davison, J. concluded that a statement made in anger was not sufficient to end an eleven year employment relationship. He said at para. 36: In my view, it is necessary to establish an agreement to terminate an employment relationship in clear terms. The most that can be said of the actions and words of the plaintiff in the summer months of 1988 is that they were expressions of dissatisfaction and of an intention to look for an alternate position. [165] These cases too can be distinguished. First, they were decided in the context of wrongful dismissal claims in the employment law context and dealt with long-term employees. Second, although William Hardman was, according to all the evidence, angry, the election of officers was an agenda item for the directors meeting. This is quite unlike the situation where the contract of an employee was purportedly terminated without advance notice and where the subject was not already on a meeting agenda. [166] I therefore cannot conclude that these cases are of assistance in determining whether the resignation of William Hardman as president was invalid. [167] The second submission made by counsel for William Hardman is that the presidency of HPDL could only be changed by an amendment to the shareholders agreement. William Hardman claims that, since his position as president is referred to in the shareholders agreement in clause 2.03, any change in the presidency must be made by the shareholders. He said this was why he wanted a shareholders meeting to rescind the appointment of officers made at the directors meeting. David Precious testified that this was his position as well. [168] William Hardman says that, since the articles require that directors and managing directors must resign in writing, by implication, the president must also resign in writing. Christopher Alexander says that, if that is the intent, the articles should have and could have so provided. I agree. There is no provision in the articles for an officer’s resignation to be in writing; therefore, there is no such requirement. [169] Furthermore, these events occurred at the annual meeting of the company at which election of officers was an agenda item (Exhibit 1, Tab 92). Although when William Hardman first became president, no specific term was set, the appointment of officers was an agenda item at the annual meeting. It was on the agenda when Christopher Alexander became president. Although William Hardman said he made it clear at the outset that he had to have control, I accept the evidence of Christopher Alexander, Susan Pratt, Ron Stockton and Bernadette Maxwell that there was no such agreement. [170] William Hardman also says the shareholders agreement had to be amended to change the presidency. The articles can be amended by special resolution and William Hardman says the shareholders agreement is such a special resolution. He says that the wording of the shareholders agreement makes it clear that the presidency is a matter for the shareholders. I disagree. [171] Firstly, there is nothing “clear” about the provision with respect to officers in the shareholders agreement. Clause 2.03 simply states: 2.03 Herman’s Point shall have at least two officers. The officers are: President: William B. Hardman Secretary: Bernadette Maxwell It does not state that the shareholders elect the president and secretary. It merely sets out the names of the holders of those offices at the time the agreement was executed. In fact, they were not elected in the first instance by the shareholders. William Hardman became the president as well as the secretary upon the incorporation of HPDL. He arranged for the incorporation of HPDL. When Bernadette Maxwell resigned as secretary in May 1997 and Pat Bloodworth became secretary, this was done at a directors meeting (Exhibit 1, Tab 22). [172] Christopher Alexander says that a shareholders agreement cannot supersede the articles of association of a company. In order for the shareholders to have the power to elect officers, the articles would have to be amended since the articles specifically provide for the directors to elect the officers in clause 125 (a): PRESIDENT AND VICE-PRESIDENT 125. (a) The Directors shall elect the President of the Company (who need not be a Director) and may determine the period for which he is to hold office. The President shall have general supervision of the business of the Company and shall perform such duties as may be assigned to him from time to time by the Board. [173] Christopher Alexander says that the shareholders agreement does not constitute a special resolution which amended the articles of association. [174] Therefore, unless these articles were specifically amended by special resolution, the directors continued to have the power to appoint the president pursuant to s. 125 (a) and all of the officers pursuant to s. 141 (6). [175] Christopher Alexander says that the execution by the shareholders of the shareholders agreement does not supersede the articles of association. In Halsbury’s Laws of England (4th ed.) at Vol. 7.1, para. 149 it says: 149. Shareholders’ agreements. Individual shareholders may deal with their own interests by contract in such way as they may think fit; but such contracts, whether made by all or some only of the shareholders, create personal obligations, or an exceptio personalis against themselves only, and do not become a regulation of the company or binding on the transferees of the parties to it or upon new or non-assenting shareholders. [176] Christopher Alexander also says that the shareholders agreement did not amend the articles. The articles cannot be amended by implication. A special resolution must be passed specifically altering the articles which give the directors the power to appoint the president and all other officers. [177] In John Shaw and Sons (Salford), Limited v. Shaw, [1935] 2 K.B. 113 (C.A.), Lord Justice Greer said at p. 134: I think the judge was also right in refusing to give effect to the resolution of the meeting of the shareholders requiring the chairman to instruct the company’s solicitors not to proceed further with the action. A company is an entity distinct alike from its shareholders and its directors. Some of its powers may, according to its articles, be exercised by directors, certain other powers may be reserved for the shareholders in general meeting. If powers of management are vested in the directors, they and they alone can exercise these powers. The only way in which the general body of the shareholders can control the exercise of the powers vested by the articles in the directors is by altering their articles, or, if opportunity arises under the articles, by refusing to re-elect the directors of whose actions they disapprove. They cannot themselves usurp the powers which by the articles are vested in the directors any more than the directors can usurp the powers vested by the articles in the general body of shareholders. (emphasis added) [178] In Imperial Hydropathic Hotel Company, Blackpool v. Hampson (1882), 23 Ch.D. 1 (Eng. C.A.), the shareholders of the company purported to remove certain directors of the company whose term of office had not yet expired. There was no provision in the articles allowing the shareholders to do so. They argued that, since they could amend the articles to give themselves the power to remove directors, a resolution passed by the shareholders removing directors had the same effect as amending the articles to permit them to do so. Cotton, L.J. said at p. 11: Now in my opinion it is an entire fallacy to say that because there is power to alter the regulations, you can by a resolution which might alter the resolutions, do that which is contrary to the regulations as they stand in a particular and individual case. It is in no way altering the regulations. He therefore concluded at p. 12 that the regulations of the company were not amended. The attempt to remove the director was “... an illegal act on the part of those who attempt to remove him - by illegal I mean an act ultra vires and not supported by any regulation of the company”. As Jessel, M.R. said at p. 8 of that decision: They can only alter the articles of association. [179] In this case, the articles were never altered and the power to elect the president of HPDL remained vested in the directors. [180] I therefore conclude that the resignation by William Hardman at a directors meeting and the election of Christopher Alexander at that meeting were valid. [181] I reject the submission that the resolutions put forward at the July 13 meeting were designed to make William Hardman offer a better price for the shares of Christopher Alexander, Susan Pratt, Ron Stockton and Bernadette Maxwell. [182] Susan Pratt testified that they had too often not insisted upon formal motions and that things had been done too informally and against the wishes of the majority. She said they met to ensure that motions were presented and voted on. She testified that they wanted to be sure that William Hardman knew the views of the majority of the directors. She said they hoped this would work because their intent was to make the project run better. She said they had not anticipated that William Hardman would resign and had made no plan for that. [183] Christopher Alexander said he thought that once the motions were passed that William Hardman “would come around” and do what the majority of directors wanted. He testified that he wanted these things to be put clearly to William Hardman. He said that if William Hardman did not get the message they would let him “have the project”. He said that his objective was to save the project which Ron Stockton was threatening to “bring down” over the issue of the false advertising. [184] I conclude that the purpose of the resolutions, including the one dealing with the loss of confidence in William Hardman as president, was, as Susan Pratt and Christopher Alexander said, to get the message to William Hardman that he had to follow the will of the majority of the directors. MANAGEMENT/DEVELOPMENT AGREEMENT 1. Breach of Contract [185] The management/development agreement between HPDL and HGL is at the heart of many of the problems that arose during the course of development on Herman’s Island and among the shareholders and directors of HPDL. As Ron Stockton said, the disagreement over the respective roles of HGL and HPDL “permeated” the relationship. The agreement provided for the developer’s duties in clause 4. The relevant parts of that clause are: 4. DEVELOPER’S DUTIES 4.01 The Developer shall be responsible for the management of the affairs of the project for the Owner during the term hereof and in that connection shall act as manager, developer, and representative to manage and coordinate the planning, development and construction of the Project. Without limiting the generality of the foregoing, the Developer shall perform the following specific duties for the Owner. (a) Coordinate al the work of solicitors, real estate brokers, accountants and other professionals retained by the Owner for the Project. (b) Negotiate for survey, engineering and other services required for the Project. (c) Consult with the surveyors, engineers and other consultants in the preparation of all drawings for the Project. (d) Negotiate with all necessary parties in connection with all contracts including, without limitation, the construction contract and/or contracts for the financing or marketing of the project and present the same to the Owners for their final written approval; (e) Supervise the construction of the Project ... (f) Approve all invoices ... (g) Pay all accounts ... (h) Secure all... permits ... (i) Prepare a merchandising program plan for single family residential lots in accordance with the plan approved by the Owner and negotiate, settle, and complete sales within approved budget amounts. (j) Obtain financing for the Project. (k) Prepare quarterly progress reports and recommendations for the Owner at the request of the Owner. (l) Provide quarterly accounting services for the Project. (m) Oversee property maintenance. (n) Prepare projections of income and expenses for the approval of the Owner. (o) Generally, to act as Manager of the Project in accordance with the policy directives set down by the Owner. (p) Consult on all legal matters affecting the Project with the Owner. [186] The role of HGL is exemplified by the use of the words: “manage and coordinate” (in the introductory part of clause 4.01); - “coordinate” (para. (a)); - “negotiate” for services (para. (b)); - “consult” with (para. (c)); - “present” them to the owners “for approval” (para. (d)); - prepare a merchandising plan in accordance with “the plan approved by” the owner (para. (i)); - prepare quarterly progress reports and “recommendations” for the owner (para. (k)); - prepare projections of income and expenses for the “approval” of the owner (para. (n); - “consult” on all legal matters (para. (p)); Most important is para. (o) which refers to acting as manager “in accordance with the policy directives” of the owner. [187] According to the agreement the directors of HPDL were to make policy decisions and HGL was to carry them out. [188] The agreement was discussed at the October 20, 1996 directors meeting and executed as of November 4, 1996. Susan Pratt testified that she was glad the arrangement among the investors was being put on a business-like footing since the parties did not know each other. She said she was happy that someone was to do the “nitty gritty” since she did not have the time. She said they had a general discussion about what decisions the directors would make and these included the design and layout of the subdivision. She said that she expected to have complete input into decisions. [189] Ron Stockton said that he understood that HGL was to do the “leg work”. His expectation was that the directors would have control over key aspects of the development. He said that the role of HGL was one of “coordination”. He also said HGL should have taken direction from HPDL, although William Hardman was president of both HGL and HPDL. With respect to the phrase “negotiate” in clause 4, Ron Stockton said that a person cannot negotiate unless one has a mandate to do so. Ron Stockton said that William Hardman misunderstood the difference between HPDL and HGL.. [190] Christopher Alexander referred to the duties of HGL as taking care of the “niceties” . He said his understanding was that the group would make decisions and HGL would carry them out. William Hardman agreed that was the way the arrangement was to work. The difficulty arose over what William Hardman (and to some extent David Precious), on the one hand, and Christopher Alexander, Susan Pratt, Ron Stockton and Bernadette Maxwell, on the other, defined as “managing”. [191] William Hardman said that Christopher Alexander, Susan Pratt, Ron Stockton and Bernadette Maxwell were trying to run the company. He also referred to running the company by “committee”. David Precious referred to them as “micro-managing”. The others saw themselves as asserting their right to make policy decisions and to get the information they needed to make those decisions. Their viewpoint was that they were not trying to run the company but only make policy decisions. [192] Christopher Alexander said that William Hardman ran HPDL as if he were the only one with the “answers” and the rest were just there to provide the money. Susan Pratt Said that William Hardman viewed the project as his own “not ours”. Bernadette Maxwell agreed with this. Ron Stockton said that William Hardman ran things as if the others had “no say”. [193] William Hardman testified that he told the others at the outset that he would not become involved with the project unless he was in charge. Christopher Alexander, Susan Pratt, Ron Stockton and Bernadette Maxwell said that was not their understanding. Bernadette Maxwell said that she did not approach William Hardman about the project because he was a developer but because he owned a cottage adjacent to the lands. [194] Louis Lemoine said that HGL had control “over the destiny of the project” and was responsible for “delivering the project to the market”. He said they were to keep the shareholders advised of the big picture. He also said that HGL either had “autonomy and control” or it did not. [195] Ron Stockton said that Louis Lemoine did not appreciate that HGL was the manager for the owners. Louis Lemoine during his testimony in fact referred to HGL as a shareholder. [196] To perform operational duties, it is necessary to have the policy decisions underlying them approved. The problem between HPDL and HGL was a misunderstanding about what were policy and what were operational decisions and whether policy decisions were made or at least agreed to by the directors. There was fault on both parts, but the greatest fault was that of William Hardman. He blurred the distinction between his role as president of HGL and that of president of HPDL. That is not to say that all the decisions were wrong, only that they were not authorized by the owners as contemplated by the agreement. [197] At HGL, William Hardman was in charge as president of what was essentially his own company. At HPDL he was not in the same position: HPDL was not his company but one in which he was a minority shareholder and a director, although president. According to the Articles of Association, the president’s duties were supervisory. In addition, the relationship between HPDL and HGL was governed by the contract between them. Unfortunately, William Hardman ran HPDL as he ran HGL, but HPDL was not a one-man operation. [198] William Hardman led the others to believe that HGL had experience in development that was useful to the Herman’s Island project. However, the successes of HGL were not in the marketing and development of raw residential land. In particular, HGL had never done such a development on the South Shore. Louis Lemoine testified that HGL was primarily a commercial and industrial developer. The other projects which were referred to in evidence were in the metro Halifax area. It was William Hardman who wanted the agreement in place and it was his responsibility to ensure it was complied with. [199] The development agreement provided that services and contracts were to be negotiated and contracts brought to the owners for approval (paras. (b) and (d)). The following are some of the contracts entered into by HGL on behalf of HPDL, ostensibly pursuant to the management agreement: the hiring of the surveyor; contracts for road construction, landscaping and land clearing; demolition of old buildings; marketing, including the hiring of Land and Sea. How were these contracts handled by HGL? [200] William Hardman hired Lester Berrigan, N.S.L.S. to prepare the subdivision plan and obtain subdivision approval from the municipality. He did not “negotiate” for his services (para. (b)) and bring the contract to the directors for approval (para. (d)). Instead, only two days before the directors meeting on October 20, he wrote to Lester Berrigan to say: “We accept your fee proposal....” (Exhibit 1, Tab 7). He signed the letter on behalf of the Hardman Group “acting as agents for HPDL”. Two days later he presented to the directors for their approval the agreement between HPDL and HGL which required written approval for contracts. William Hardman testified that the development agreement was in the same form as others he had entered into in the past. Christopher Alexander said that the only discussion about the hiring of Lester Berrigan at the directors meeting on October 21, 1996 was William Hardman telling them that Lester Berrigan was the best. Christopher Alexander, Susan Pratt, Ron Stockton and Bernadette Maxwell say no approval was sought for the hiring of Lester Berrigan nor were the terms of his contract discussed with the directors. I accept that evidence. [201] There were no meetings between November 1996 and March 1997 and William Hardman wrote a progress report to the directors on February 24, 1997 (Exhibit 1, Tab 15). In that report he refers to the tenders for demolition of the old buildings on the site. He said: We were not happy with any of the bids for the cape or the church and as a result we intend on keeping them until we can come up with a satisfactory purchaser.... He went on to say for the rest of the buildings: “... we have accepted the low price.” [202] The contracts for demolition were not brought to the owners for approval pursuant to the development agreement. [203] There were no meetings were held between March and October 1997. During that time, a contract was entered into and the new road for the project was constructed. Lester Berrigan testified that the developer, HGL, instructed him about the road layout on the subdivision plan. The contract for road construction was never brought to the owners for approval pursuant to the development agreement. Christopher Alexander, Susan Pratt, Ron Stockton and Bernadette Maxwell were disappointed and unhappy about the construction of a 66 foot wide road built to public highway standards. [204] Land clearing work was also done which included tree cutting. The contracts for this work were not brought to the owners for approval either. There was some concern expressed by Ron Stockton/Bernadette Maxwell about whether the best price was obtained for this work because some of the timber had a value. [205] Lot 9 was subdivided and a price put on it without the owners’ approval in the fall of 1997. I conclude that this was a policy decision but it was not one made by the owners. The other circumstances surrounding Lot 9A have been discussed hereinbefore. [206] Initially HGL took it upon itself to market the project. The development agreement called for the presentation of a marketing plan, but HGL never presented one. When embarrassing errors were found in marketing materials and when there were indications that South Shore realtors were not supportive of the system of registering clients but not being designated as the listing agent, the majority wanted a realtor to be engaged. This was not done until February 1998. [207] At the directors meeting on February 9, 1998, the directors were advised that Land and Sea had been hired to market the project. William Hardman did not tell the directors that a $1,500.00 monthly retainer was being paid to Land and Sea for the six-month term of the contract. This was paid by HPDL. Although Ron Stockton, Bernadette Maxwell, Christopher Alexander and Susan Pratt had wanted to turn the marketing over to a realtor since the previous fall, this was the first they learned that it was being done. No marketing plan had ever been presented to the owners for approval as contemplated by the development agreement (clause 4.01 para. (i)). No authority was given to negotiate with realtors nor were the owners consulted about the terms of the contract. William Hardman in fact told them that the contract was with HGL but it was in fact with HPDL (Exhibit 1, Tab 54). No copy of the contract was provided until after litigation began. [208] As part of their marketing efforts for the project, William Hardman and Louis Lemoine decided to “kickstart” the project by indicating that Lots 4 and 13 were “Sold” when they were not. The brochure put out by Land and Sea showed this and “Sold” signs were placed on the lots. This was done without the approval of the owners since no marketing plan had been presented and approved by them. This action gave Ron Stockton, Bernadette Maxwell, Christopher Alexander and Susan Pratt grave concerns. Even David Precious later expressed his disagreement with it. [209] William Hardman gave Lester Berrigan instructions about the lots for which he should first seek subdivision approval. I conclude that this is an operational act, that is to carry out a policy decision made by the directors. However, the directors did not make that policy decision, William Hardman did. Nor did they decide that the approval of Lots 11 and 12 should be left for last. Again this was William Hardman’s decision. [210] Similarly, the lots to be dedicated to meet the municipality’s public open space requirement was, I conclude, a policy decision. On the first price list, Lots 11 and 12 were marked “N/A Common lands”. The directors had not approved this designation but saw it for the first time when the price list was circulated. Then, when it became known that the municipality would not accept land but wanted cash-in-lieu of the land dedication for public open space, a further board decision was called for: that is, the disposition of the lots previously earmarked for this purpose. I conclude that this was not done in spite of requests to William Hardman by Christopher Alexander, Susan Pratt, Ron Stockton and Bernadette Maxwell for Lots 11 and 12 to be priced and marketed. I cannot conclude that the owners agreed that these lots would be reserved for William Hardman and David Precious, although the brochure put out by Land and Sea showed them as ‘Reserved”. In light of the interest of William Hardman in acquiring Lot 12, it should have been apparent to him that he had to be especially careful when dealing with Lot 12 to ensure that the development agreement was complied with. [211] There is no provision in the development agreement for HGL to accept offers within 10% of the asking price. Yet William Hardman said he had this authority and negotiated less than full price offers. David Precious agreed that he had that authority. Louis Lemoine testified that he understood that all offers other than full price offers had to be approved by the directors. The others said that HGL did not have that authority. I accept their evidence. [212] From the foregoing, I conclude that William Hardman, as president of both HPDL and HGL, usurped the role of the owners pursuant to the development agreement between HGL and HPDL. However, the owners to some extent let this happen and also acted outside their roles as owners. [213] Christopher Alexander admitted on cross-examination that he did not want to get into a fight with William Hardman over his actions. Ron Stockton agreed on cross-examination that they never told William Hardman that he was acting beyond the scope of the agreement. However, they did raise it in the October 30, 1997 letter. Christopher Alexander, Susan Pratt, Ron Stockton and Bernadette Maxwell all said they did not want to confront William Hardman and acknowledged that, because of that, they did not object to the actions of William Hardman. They said they tried to get along with William Hardman and operate by consensus. I accept that is what they did. In hindsight, they now recognize that was a mistake. It allowed William Hardman, as president of both companies, to run the project as if he was its sole owner. [214] Although the directors were justly dismayed by the errors in the first marketing material, in my view, their response was inappropriate. Their offer to proofread, etc., encroached upon the jurisdiction of the developer. They sought to become involved in what were operational matters and the “nitpicking” began. Instead of insisting on the presentation of an acceptable marketing plan which could have involved Land and Sea Real Estate Services or a similar company, they got off track and irritated both William Hardman and Louis Lemoine by focussing on such things as spelling errors and whether the Lunenburg Yacht Club could be called “world class”. [215] However, it was William Hardman who proposed the development agreement and who had used such agreements in the past. He is the professional who held himself out as having experience and working under development agreements. It was therefore I conclude his responsibility to ensure the agreement was complied with. A properly designed marketing plan if approved and implemented in the fall of 1997 would in my view have done a great deal to prevent the development of bad relations among the investors. [216] Similarly, if the other investors had been kept informed and called upon to decide policy, things would have run more smoothly. It is quite likely that many of the decisions made by William Hardman would have been approved by the directors: the hiring of Lester Berrigan, the hiring of Land and Sea, the subdivision of Lot 9. The construction of a 66 foot wide road and the advertising of Lots 4 and 13 as “Sold” could have been avoided had they been dealt with by the directors. There is no evidence that the 66 foot wide road contributed to the success of the project. Nor is there any indication that advertising Lots 4 and 13 as “Sold” was of assistance. In fact, William Hardman denies that Lot 16 sold as a result of this initiative, although Susan Pratt said he told her otherwise. [217] William Hardman’s position that the project would have been unsuccessful had he let the directors make decisions is not supported by the evidence. If he felt it necessary to be able to negotiate offers within ten percent of the list price, the directors may have agreed had he sought their approval. He did not. [218] In summary, HGL, the development agreement was breached in many respects and from the time it was executed, through the actions of William Hardman. 2. Negligence [219] In his closing submissions, counsel for Christopher Alexander sets out a list of negligent acts by HGL in carrying out its contract. He says: ... The Hardman Group Limited acted negligently throughout the course of this project by not having the proper expertise as represented initially, by putting its own interest above that of the interest of the owner, by preparing incompetent and misleading advertisement brochures, by acting against the policies of the Nova Scotia Real Estate Commission in advertising lots as being sold when they were not, by not dealing properly with real estate agents, by inhibiting the sale and marketing of the lots, by holding back certain lots for Mr. Hardman and Dr. Precious, by not keeping the investors properly informed, by not making the records and books available to the investors at their request, by putting misleading signs on the lots, by disseminating and promulgating information in the community which it knew was false and misleading and fraudulent in nature and generally acting in a despicable way in not acknowledging the interest and investment of the owners in the project. To these he later adds: ... It is submitted that the Hardman Group was negligent in failing to see that Lot 9A constituted a building lot, and therefore failed to obtain a significantly higher price for that lot. Alexander is also seeking damages for negligence on this issue. [220] It was William Hardman in his role as president of HPDL who refused to deal with real estate agents. This is apparent from the evidence that the subject was discussed at meetings of the directors where the role of William Hardman was president of HPDL. [221] It was William Hardman as its president who had information about HPDL and its activities and did not pass it on to the other investors. The obligation by HGL to provide access to information and to books and records is a limited one under the agreement. Clause 4.01 (k) requires the developer to provide progress reports and recommendations “at the request of” the investors. Clause 4.02 deals with access to HGL’s records for the project “to determine whether the bills ... are properly rendered.” I cannot conclude that either of these obligations was breached or done negligently. [222] Some of the other allegations of negligence are with respect to advertising, including the advertising of Lots 4 and 13 as “Sold” when they were not and lot sales. These have been dealt with above as breaches of contract. [223] Christopher Alexander also refers to HGL “acting in a despicable way in not acknowledging the interest and investment of the owners in the project”. I cannot conclude that is a negligent act, even if true. [224] Reference is also made to “putting its own interest above” the owners’ interests. HGL itself had no interest adverse to that of the investors. It was William Hardman who had a conflict of interest. [225] The overall claim in negligence is one of lack of experience and misrepresentation of experience. The only remaining allegation of negligence is with respect to the sale of Lot 9A for $107,000.00 as a “non-development” lot and its subsequent development with a summer residence. [226] I have dealt above with the circumstances of the sale of Lot 9A for “non-development” purposes. Several people testified about what happened thereafter. [227] Sara Kinley, the mother of the purchaser, Jacqueline Kinley, testified that approval was granted quickly for an on-site septic system. [228] Lester Berrigan testified that, because there could be no on-site sewage system on the lot, it was a “non-development” lot. [229] Tammy Wilson, the Director of Planning for the Municipality, testified that, if a lot is given subdivision approval for non-development purposes only, the owner of that lot takes the risk that he may never be permitted to build on that lot. She said, after subdivision approval, the planning department has no involvement or input as to whether a non-development lot later gets on-site septic system approval by the provincial Department of the Environment. [230] Barry Gillis is an engineer with the Nova Scotia Department of Environment in Bridgewater. He testified that, when the test pits were dug in 1996, no areas were found that were better than category 4, but subsequent tests found category 2 soil. Therefore, conditions were met for an on-site system and approval was given on October 14, 1998. He said, however, the design was revised in September 2000 because the original had components too close to the water. He also pointed out that, after subdivision approval is given by the municipality, the issue of an on-site septic system for a lot is assessed by the Department of the Environment only. He also said there are no minimum lot sizes but approval is granted only if all Department of Environment requirements are met. [231] I conclude that there was no negligence by HGL in selling Lot 9A as a “non-development” lot. Louis Lemoine received correspondence from the Department of Environment saying that, if a separate lot was created for “non-development purposes”, there would be “no guarantee that an on-site sewage disposal system approval can be given”. [232] Tammy Wilson said the purchaser “takes the risk” the lot cannot be built on. The correspondence from the Department of the Environment and the testimony of Barry Gillis make it clear that Lot 9A was later re-tested with different results for its soil category. Until those testes were done, HGL could not know the soil would test differently in other locations than those dug in the fall of 1996. [233] I therefore conclude there was no negligence by HGL in the sale of the lot for “non-development” purposes. FIDUCIARY DUTY [234] Christopher Alexander and Susan Pratt claim that William Hardman owed a fiduciary duty to them and to Herman’s Point Development Limited which they allege he breached. They say that William Hardman owed them a fiduciary duty as fellow directors and shareholders. 1. Duty to Christopher Alexander and Susan Pratt [235] In Ellis, Fiduciary Duties in Canada (2002, Thomson Carswell, Toronto), the author at p. 1-1 defines a fiduciary duty as: ... one that arises in the context of trust. A fiduciary individual is someone who stands in a position of trust to another individual. He continued at p. 1-2: ... the fiduciary concept has so dramatically expanded that it is now universally applicable: where one party has placed its ‘trust and confidence’ in another and the latter has accepted - expressly or by operation of law - to act in a manner consistent with the reposing of such ‘trust and confidence’ a fiduciary relationship has been established. [236] When describing the nature of the duty ( p. 1-2), the author refers to the fiduciary acting in “a circumspect manner toward the beneficiary”. He says the duty is one of “utmost good faith” and requires that the fiduciary act with a “heightened sense of loyalty and fidelity”. [237] In Frame v. Smith, [1987] 2 S.C.R. 99, Justice Wilson identified three characteristics of a fiduciary relationship at para. 60: Relationships in which a fiduciary obligation have been imposed seem to possess three general characteristics: (1) The fiduciary has scope for the exercise of some discretion or power. (2) The fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary’s legal or practical interests. (3) The beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding the discretion or power. [238] This statement was adopted by Justice Sopinka writing for the majority in LAC Minerals Ltd. v. International Corona Resources, [1989] 2 S.C.R. 574. In Hodgkinson v. Simms (1994), 117 D.L.R. (4th) 161, [1994] W.W.R. 609, La Forest, J. said at p. 176 (D.L.R. 4th): ... Wilson J.’s mode of analysis has been followed as a ‘rough and ready guide’ in identifying new categories of fiduciary relationships: ... Wilson J.’s guidelines constitute indicia that help recognize a fiduciary relationship rather than ingredients that define it. [239] At p. 176, he referred to what he called the two “truly fiduciary” uses of the word “fiduciary”. The first use, he said, was to describe relationships “that have as their essence discretion, influence over interests, and an inherent vulnerability.” He said that Wilson, J.’s “three-step analysis is a useful guide” in determining whether “new classes of relationships are per se fiduciary....”. [240] He continued at pp. 176-77: As I noted in LAC Minerals, however, the three-step analysis proposed by Wilson J. encounters difficulties in identifying relationships described by a slightly different use of the term ‘fiduciary’, viz., situations in which fiduciary obligations, though not innate to a given relationship, arise as a matter of fact out of the specific circumstances of that particular relationship: ... . In these cases, the question to ask is whether, given all the surrounding circumstances, one party could reasonably have expected that the other party would act in the former’s best interests with respect to the subject-matter at issue. Discretion, influence, vulnerability and trust were mentioned as non-exhaustive examples of evidential factors to be considered in making this determination. Thus, outside the established categories, what is required is evidence of a mutual understanding that one party has relinquished its own self-interest and agreed to act solely on behalf of the other party. [241] At p. 178, La Forest, J. said: The existence of a fiduciary duty in a given case will depend upon the reasonable expectations of the parties, and these in turn depend on factors such as trust, confidence, complexity of subject matter, and community or industry standards. [242] In England in 1902, the decision in Percival v. Wright, [1902] 2 C.H. 421 established that a director does not owe a fiduciary duty to shareholders except in three instances. Those exceptions are not applicable in this case. [243] The New Zealand Court of Appeal decision in Coleman v. Myers, [1977] 2 N.Z.L.R. 225 (N.Z.C.A.) has been considered and cited with approval by Canadian courts as authority for a move away from the strictness of the rule in Percival v. Wright. [244] In Vladi Private Islands Ltd. v. Haase et al (1990, 96 N.S.R. (2d) and 253 A.P.R. 323, the Nova Scotia Court of Appeal considered Coleman v. Myers and the Canadian cases which have referred to it. Macdonald, J.A. said of that decision at p. 326: ... the Court rejected the proposition that individual directors could never be in a fiduciary position vis-à-vis shareholders with whom they were dealing. The Court expressed the view that the existence of such duty or duties must depend on ‘all of the facts of the particular case’. [245] Vladi referred to cases from the British Columbia Court of Appeal and the Ontario Court of Appeal which considered Coleman v. Myers. Those cases involved minority shareholders. In Dusik v. Newton et al (1985), 62 B.C.L.R., 1 C.A., the court at para. 35 quoted from Gower’s Principles of Modern Company Law, 4th ed. (1979). Gower referred to Percival v. Wright but said “this, however, does not mean that directors can never stand in a fiduciary relationship to the members ...”, citing the decision in Coleman v. Myers. [246] In Dusik, portions of Coleman v. Myers were quoted at para. 35, including the following from the judgment of Woodhouse, J. at pp. 324-25: As I have indicated it is my opinion that the standard of conduct required from a director in relation to dealings with a shareholder will differ depending upon all the surrounding circumstances and the nature of the responsibility which in a real and practical sense the director has assumed towards the shareholder. In the one case there may be a need to provide an explicit warning and a great deal of information concerning the proposed transaction. In another there may be no need to speak at all. There will be intermediate situations. It is, however, an area of the law where the courts can and should find some practical means of giving effect to sensible and fair principles of commercial morality in the cases that come before them; and while it may not be possible to lay down any general test as to when the fiduciary duty will arise for a company director or to prescribe the exact conduct which will always discharge it when it does, there are nevertheless some factors that will usually have an influence upon a decision one way or the other. They include, I think, dependence upon information and advice, the existence of a relationship of confidence, the significance of some particular transaction for the parties and, of course, the extent of any positive action taken by or on behalf of the director or directors to promote it. [247] The court in Dusik in para. 37 quoted from Goldex Mines Ltd. v. Revill (1975), 7 O.R. (2d) 216, 54 D.L.R. (3d) 672 (Ont. C.A.) where the court said at pp. 679-80: The category of cases in which fiduciary duties and obligations arise is not a closed one ... [248] The court in Dusik also quoted from the decision of Arnup, J.A. in Laskin v. Bache & Co. Inc., [1972] 1 OR. 465 at p. 472, 23 D.L.R. (3d) 385 at p. 392 (C.A.): In my opinion the category of cases in which fiduciary duties and obligations arise from the circumstances of the case and the relationship of the parties is no more ‘closed’ than the categories of negligence at common law. [249] The court in Dusik concluded with respect to Percival v. Wright: In our view, the law is no longer that restrictive. The correct approach is stated in the passages we have quoted from Coleman v. Myers and the Ontario cases. [250] Macdonald, J.A. in Vladi referred to the Ontario Court of Appeal decision in Bell et al v. Source Data Control Ltd. et al (1988), 66 O.R. (2d) 78. In Bell, Cory, J.A. (as he then was) said: “... the New Zealand Court of Appeal departed from the rule set out in Percival v. Wright ...” (at p. 87). He also said at pp. 87-88: ... The court set forward a test for determining whether or not a fiduciary duty existed. It provided that the standard of conduct required from a director in dealing with a shareholder would differ depending upon the surrounding circumstances and the nature of the responsibility that the director had assumed towards the shareholder. [251] Cory, J.A. quoted the above passage from the decision in Coleman v. Myers. He considered the same Ontario cases to which the British Columbia Court of Appeal had made reference and referred to the decision in Dusik. He said at p. 91: It can then be seen that the original rule that individual shareholders are not owed a fiduciary duty by other directors or majority shareholders has been altered. It is now clear that the issue as to whether fiduciary obligations are owed will depend upon the facts of the particular case and will not be dependent solely upon the formal classification of the parties as majority and minority shareholders or director and shareholder. [252] Cory, J.A. applied that principle, saying at p. 91: Applying that principle to the facts of this case I have concluded that a fiduciary duty was indeed owed by Hood to the minority shareholders. This was a small, very closely held corporation. The parties had worked together very hard and in close association for a number of years. They had all dedicated themselves to the success of the company. They had, until 1978 or 1980, enjoyed a special relationship arising from their long and close association in S.D.C. In all probability they would have continued their association had it not been for the marital difficulties experienced by Hood. The fact that as a result of his personal problems he was difficult to deal with and the minority shareholders no longer trusted him nor wished to continue their association with him does not relieve him from his obligation. Where, as here, parties have worked together in a close association for some years, equitable fairness requires the majority shareholder at least to disclose the fact of the take-over. He concluded at p. 92: In circumstances where a small, closely held corporation has existed for a number of years and has been the source of livelihood for all the shareholders, common decency and elementary fairness dictate that a fiduciary obligation rests upon the majority shareholder to disclose the sale of the majority interest and at least whether there is to be a premium for the majority shares. [253] Macdonald, J.A. said in Vladi at p. 327: The majority of the Court of Appeal (Brooke and McKinlay, JJ.A.) did not disagree with the foregoing principles stated by Mr. Justice Cory. He concluded at p. 328: In result, I am of the opinion that the authorities establish that a fiduciary duty may be owed by a director to a shareholder. As the cases establish, that will depend on the facts of each particular case. The respondents here have alleged that Mineral Water was a closely held private corporation. This would appear to be the type of situation in which the authorities at least recognize that a fiduciary duty flowing from directors of the company to the shareholders may exist. Whether or not the facts support such a conclusion is a matter to be determined at the trial. [254] A more recent decision in Nova Scotia has considered fiduciary principles. In 2475813 Nova Scotia Ltd. v. Rodgers et al (2001), 189 N.S.R. (2d) 363; 590 A.P.R. 363 (N.S.C.A.), Cromwell, J.A. discussed fiduciary principles at paras. 55 to 62. In para. 58 he says: In considering whether a fiduciary relationship exists, the fundamental purposes of this equitable concept must be kept in mind. These purposes, which have been expressed in both scholarly and judicial writing, are to protect and foster the integrity of important social relationships and institutions where one party is given power to affect the important interests of another. The fiduciary principle helps to prevent, and may provide redress for abuse of such power, thereby ensuring that interdependence does not lead to subjugation. This point was made by Leonard I. Rotman, Fiduciary Obligations, in Mark Gillen and Faye Woodman (eds), The Law of Trusts A Contextual Approach (2000), 739-806, at 742: Fiduciary law has its origins not only in equity but also in public policy. The creation of fiduciary doctrine may be traced to the need to protect the continued existence of certain types of relationships within a given society. ... Fiduciary law exists to preserve the integrity of socially valuable or necessary relationships that arise as a result of human interdependency. Maintaining the viability of an interdependent society requires that interdependency be closely monitored to avoid the potential for abuse existing within such relations. Protecting the integrity of socially valuable relationships requires that those who possess the ability to affect others’ interests be prevented from abusing their powers for personal gain. ... (emphasis added by Cromwell, J.A.) [255] Cromwell, J.A. referred in para. 60 to Frame v. Smith and the factors set out therein by Wilson, J. and to Justice La Forest’s decision in Hodgkinson v. Simms et al. He said in para. 60: ... For present purposes, I find particularly helpful the statement of the characteristics of a fiduciary relationship as set out by McLachlin, J. (as she then was), in her reasons in Canson at 544, where, citing Cooter and Freedman, The Fiduciary Relationship: Its Economic Character and Legal Consequence (1991), 66 N.Y.U.L. Rev. 1045, she identified three characteristics, each of which is potentially relevant here. First, fiduciary relationships are often characterized by a separation between ownership and control. ... Second, fiduciary relationships are often characterized by the fiduciary having open-ended obligations in that specific conduct and definite results are not stipulated.. ...Third, a fiduciary relationship is often characterized by what Cooter refers to as ‘asymmetry of information concerning acts and results’. By this I take it he means that the fiduciary is better informed than those to whom the duty is owed about the actions to be taken and their results. [256] In 2475813 Nova Scotia Ltd., Bruce Brett owned the majority of the condominium units. Cromwell, J.A. said at para. 61: ... This does not preclude the fiduciary from acting in the joint interests of him or herself and those to whom the duty is owed. La Forest, J., in Hodgkinson at 407 specifically approved the statement of Professor P.D. Flinn in Contract and the Fiduciary Principle (1989), 12 U.N.S.W.L.J. 76, at 88 that the key consideration is whether ‘... the one has the right to expect that the other will act in the former’s interests (or, in some instances, in their joint interest) to the exclusion of his own several interests.’ (emphasis added by Cromwell, J.A.) [257] Cromwell, J.A. concluded that Bruce Brett was “subject to two fiduciary duties”. He stated them (at para. 81) to be: ... First, by virtue of being the owner and controlling mind of the developer and having effective voting control of the corporation, he owed a fiduciary duty to all of the unit holders not to use that voting control to authorize a sale of the property where, as here, their interests and his could conflict. Second, by virtue of Mr. Brett’s position as a director of the corporation, he owed a fiduciary duty to the corporation of a similar character. [258] Mr. Merrick, counsel for Mr. Hardman, HGL, Bryman and D.S. Precious Maxillofacial Surgery Inc., has referred the court to the decision in Smith’s Field Manor Development Ltd. v. Campbell, [2001] CarswellNS 208, 2001 N.S.S.C. 44, 10 C.L.R. (3d) 63, 195 N.S.R. (2d) 220, 609 A.P.R. 220, [2001] N.S.J. 230 which is a decision of mine. In that case, I dealt with the issue of a fiduciary duty arising out of a joint venture. I concluded at para. 233 that there was no joint venture and therefore no fiduciary duty arising from it. I went on to say at para. 234 under the same heading “joint venture/fiduciary duty”: Furthermore, I conclude that any fiduciary duty owed by a director is owed to the company and not to other directors. No further reference is made to the issue nor is there any discussion of the cases to which reference has been made above. Later in the decision, in another context, reference is made to Hodgkinson and to 2475813 Nova Scotia Ltd. The decision was appealed and, although upheld, Freeman, J.A. said at para. 68: I do not, however, endorse all of the numerous conclusions of the trial judge, for example her finding that a fiduciary duty would not have been owed by Campbell to he appellants in the present circumstances if their allegations had been proved ... The conclusion at para. 234 was therefore not upheld by the Court of Appeal. [259] The law with respect to fiduciary duties within the corporate setting has evolved since the decision in 1902 in Percival v. Wright, supra. Courts in Canada have taken a broader view of the duties of directors of companies towards the shareholders of those companies. Although the decisions in Dusik and Bell dealt with rights of minority shareholders, Cory, J.A. said in Bell (as quoted above from p. 91) that: ... the original rule that individual shareholders are not owed a fiduciary duty by other directors or shareholders has been altered. He went on to say that whether fiduciary obligations exist does not depend on “the formal classification of the parties as majority or minority shareholders or director and shareholder.” (emphasis added) [260] Cory, J.A. contemplated that, depending upon the facts, there could be occasions when a director could have a fiduciary obligation to a shareholder. In Vladi, Macdonald, J.A. said that the situation of a closely held private corporation is one in which a fiduciary duty flowing from directors to shareholders may exist, depending upon the facts. Cromwell, J.A. in 2455813 Nova Scotia Ltd. reviewed fiduciary principles. He referred to Hodgkinson, saying at para. 57: ... A fiduciary duty may arise from the nature of a relationship in specific circumstances even though, in general, a fiduciary duty would not otherwise exist. The question in such cases is whether ‘fiduciary obligations’ ... arise as a matter of fact out of the specific circumstances of that particular relationship... [261] Cromwell, J.A. said, in determining if a fiduciary duty arises, “ ... the fundamental purposes of this equitable concept must be kept in mind”. (para 58) He said that the fundamental purposes are: to protect and foster the integrity of important social relationships and institutions where one party is given power to affect the important interests of another. The fiduciary principle helps to prevent, and may provide redress for abuse of such power, thereby ensuring that interdependence does not lead to subjugation. [262] At para. 59, Cromwell, J.A. quoted from the decision of La Forest, J. in Hodgkinson at p. 422: The desire to protect and reinforce the integrity of social institutions and enterprises is prevalent through fiduciary law. The reason for this is that the law has recognized the importance of instilling in our social institutions and enterprises some recognition that not all relationships are characterized by a dynamic of mutual autonomy, and that the marketplace cannot always set the rules ... [263] It is also clear that there is no closed category of instances in which a fiduciary relationship may be found, depending upon the surrounding circumstances. However, the courts have been cautious about finding a fiduciary relationship in arms length business dealings. [264] In Hodgkinson, La Forest, J. said at p. 180: In summary the categories of fiduciary relationships are not closed and a director can in certain circumstances have a fiduciary obligation to shareholders. However, in business dealings with persons who are not minority shareholders the courts are reluctant to impose fiduciary obligations. [265] La Forest, J. said in LAC Minerals at p. 43, “Commercial relationships will more rarely involve fiduciary obligations. That is not because they are immune from them, but because in most cases, they would not be appropriately imposed.” [266] I conclude that it is possible for a fiduciary relationship to have existed between William Hardman on the one hand and Christopher Alexander and Susan Pratt on the other. I must examine the surrounding circumstances to determine if one in fact should be imposed, since in business relationships courts have been reluctant to impose fiduciary obligations. [267] William Hardman was the president of Herman’s Point Development Limited, a position he took when the company was incorporated and to which the other directors at the outset took no exception. He became involved in the project through the suggestion of Bernadette Maxwell and was interested in it as an abutter of the lands. He held himself out as having contacts with both the bank and the church from which the land was to be acquired. He also held out that his company, the Hardman Group Limited, was experienced in dealing with development. He arranged for all the corporate documentation to be prepared, including the shareholders agreement, which, after discussion and amendment, was executed. He presented the development agreement between Herman’s Point Development Limited and the Hardman Group Limited as president of both companies and signed as president of both after the contract was approved by the directors of Herman’s Point Development Limited. [268] The position of William Hardman has characteristics not always found as incidents of shareholding in a closely held company or as incidents of the directorship of such a company. William Hardman was president of HPDL and there is no dispute that he was the directing and controlling mind of the Hardman Group Limited. [269] What of the others? Ron Stockton and Bernadette Maxwell are lawyers, it is true, but their principal area of practice is labour and employment law. Other than buying their own home, there is no evidence they had other experience in real estate and land development matters. [270] The evidence is clear that David Precious, the president and controlling mind of D.S. Precious Maxillofacial Surgery Inc., is an extremely busy surgeon. He travelled a great deal in his professional pursuits and the evidence is that he paid little attention to the operations of HPDL, often missing meetings or arriving late. There is no evidence of his previous involvement in real estate development. [271] Christopher Alexander is a retired businessman but his business career was in the field of dental supply. He owns investment properties and leases commercial property in Mahone Bay. He has no previous experience with land development. [272] Susan Pratt is retired and resides in Lunenburg and Herman’s Island part of the year and spends approximately 6 months of the year in the United States. She too missed a number of meetings when they were held between the months of November and May. She testified that she was glad William Hardman and the Hardman Group Limited would look after the day to day operations of HPDL and developing the company’s lands on Herman’s Island because she said she would not have time to do so. She too had not been involved in a project like this previously. [273] All five (Stockton/Maxwell being treated as one investor) invested in HPDL with the goals of proper development of the former church lands and making a profit. In addition, William Hardman and David Precious’ wife owned adjacent lands and each had a particular interest in ensuring the development did not adversely affect those properties. Ron Stockton and Bernadette Maxwell hoped to be able to buy a piece of the land to build on. Susan Pratt’s property on Herman’s Island was further from the HPDL lands than those of Elizabeth Precious and William Hardman but she too wished to ensure proper development of the lands. Christopher Alexander testified that he might have been interested in acquiring land but that was not his principal goal in becoming involved in the development. [274] William Hardman owns a cottage immediately adjacent to the HPDL lands; he wished to acquire a piece of the HPDL lands contiguous to his; he is a man of fairly substantial means; he held himself and his company out to the other investors as experienced in development of this nature; he became president of HPDL; he was president and controlling mind of the Hardman Group Limited with which HPDL has a management development contract; he is in business with a fairly unsophisticated group of investors (at least in terms of experience in dealing with development) who were happy to have someone they believed had experience, William Hardman and the Hardman Group Limited, to do “the leg work”. [275] Applying the test from Hodgkinson v. Simms, as modified, with respect to joint interests, in these circumstances would Christopher Alexander and Susan Pratt have reasonably expected William Hardman to act in their joint interests with respect to Herman’s Point Development Limited? The factors listed non-exhaustively in Hodgkinson as examples of evidential factors to be considered are “discretion, influence, vulnerability, and trust”. To paraphrase La Forest, J. in Hodgkinson, what evidence is there of a mutual understanding that William Hardman relinquished his own self-interest and agreed to act in their joint interest? I have regard to the three characteristics of a fiduciary relationship cited by Cromwell, J.A. in 2475813 Nova Scotia Limited and initially identified by McLachlin, J. and referred to above. [276] First, fiduciary relationships are often characterized by a separation between ownership and control. In this case, although William Hardman was not the majority shareholder, he was president of both HPDL and of the Hardman Group Limited. As discussed above under the heading “Management/Development Agreement”, as president of HGL, he overstepped the bounds of the agreement between HPDL and HGL and, as president of HPDL, condoned it. It was William Hardman who decided that Lot 9 should be subdivided; it was he who decided that the road should be 66 feet wide; it was he who, with Louis Lemoine, decided to advertise lots as sold which were not sold; it was he who contracted with Lester Berrigan and Land and Sea, to name just two; it was he who agreed to pay a $1,500.00 per month retainer to Land and Sea. Other instances have been referred to under that heading. In this way, he managed to separate ownership from control and took control of HPDL. He ran HPDL as if he were the sole owner. [277] Second, the fiduciary often has open-ended obligations with no specific conduct and results stipulated. In this case, the obligations of HGL of which William Hardman was president, were not, as I have concluded above, open-ended and with no definite results stipulated. They were set out in the agreement. In fact, because of the way in which William Hardman ran HPDL and made decisions, the agreement between HPDL and HGL became an open-ended one with no specific results stipulated except those chosen by William Hardman. [278] Third, the fiduciary is better informed than those to whom the duty is owed. In this case, because of William Hardman’s control over the flow of information, as a result of his dual role, he was far better informed than Christopher Alexander and Susan Pratt. It was he who took the actions and knew of their results. Christopher Alexander and Susan Pratt depended upon William Hardman to provide them with information. In many instances, they did not receive information. For example: they did not know of the road construction until they saw the completed road; they did not know Lot 9 was being subdivided until the meeting at which William Hardman told them a subdivided part of Lot 9 was being sold; they did not know lots were being advertised as sold until after the brochure showing this was printed and circulated to realtors. [279] William Hardman was dealing with investors, including Christopher Alexander and Susan Pratt, who had no experience with development or with projects like this. William Hardman acknowledged this in his testimony. He said this was why he had to be in control. Christopher Alexander and Susan Pratt relied upon the expertise he represented to them that he had. They relied upon William Hardman acting in their interests in the development of the project. They did not object to him being president of HPDL and approved the agreement between HPDL and HGL. Not only was it reasonable for Christopher Alexander and Susan Pratt to rely upon William Hardman, he encouraged it. [280] William Hardman invited Christopher Alexander and Susan Pratt and the others to place their trust and confidence in him. In doing so, he undertook to act with loyalty to them and in the utmost good faith. He held out to them that he had experience they did not have. In effect, he said to them: Trust me to supervise this project on your behalf and mine. Let me be your president. We’ll enter a contract with my company which will have obligations I will enforce. Christopher Alexander and Susan Pratt and the others agreed to repose their trust and confidence in William Hardman. [281] The characteristics of the fiduciary relationship were in evidence from the outset of the relationship and became more pronounced after the events of July and August 1998. This was not a relationship characterized by “mutual autonomy” (Hodgkinson) but one in which William Hardman took control over HPDL and the development of the project. [282] Although initially there were a few meetings (October and November 1996) and another in March 1997, many of the initial decisions affecting the development were made with no input or approval by investors. These have been referred to above where I dealt with the management/development agreement. [283] It is no answer for William Hardman to say that Christopher Alexander and Susan Pratt could have insisted upon meetings or forced the issue. It was William Hardman who was acting and it was he who knew what was going on. He was also the president of HGL. By the time Susan Pratt and Christopher Alexander found out what was occurring, it was a fait accompli, as the examples given previously illustrate. [284] A fiduciary duty was owed by William Hardman to Christopher Alexander and Susan Pratt and it was up to William Hardman to ensure that it was not breached. As a result of this relationship, certain duties were imposed upon William Hardman. What is the nature of these duties and were they breached? Breach of Fiduciary Duty to Christopher Alexander and Susan Pratt [285] In his closing submissions, William Ryan, for Christopher Alexander, sets out a list of example breaches of fiduciary duty by William Hardman. They are: A. Lack of financial information B. Failure to respond to shareholders/directors concerns C. Acting as trustee for balance of shareholders D. Accepting less than full price offers E. Sold signs F. Lots 11 and 12 G. Lot 10 [286] In this closing submissions, Robert Belliveau, on behalf of Susan Pratt, adds the following to the list of breaches of fiduciary duty: H. Entering into contracts without approval, including the following: 1) Lester Berrigan 2) Land and Sea Real Estate Services Inc. 3) contract for road construction; and 4) contract for tree removal I. Failure to put forward a merchandising plan J. Lot 9A K. Continuing to act as president after July 13, 1998 L. Varying restrictive covenants without approval M. Distributing profits to shareholders without consent. [287] Not every act by William Hardman as president of HPDL which was not approved by the directors constitutes a breach of a fiduciary obligation owed to Christopher Alexander and Susan Pratt by William Hardman. To assist in determining which actions, if any, breached the fiduciary duty owed, I have regard to cases in which there was determined to be in breach of a fiduciary duty. [288] In 2475813 Nova Scotia Limited, it was a breach of Bruce Brett’s fiduciary obligations to the condominium unit holders to authorize a sale of the property where his interests conflicted with theirs. In Vladi, two directors of Vladi embarked upon a scheme to force out the other shareholders and gain control of the company for themselves. In Hodgkinson, the defendant advised the plaintiff to invest in MURBS without disclosing that he would receive a fee from the developers when the plaintiff invested. [289] In all these cases, what was done was in the interests of the fiduciary and contrary to the interests of those to whom the fiduciary duty was owed. As McLachlin, J. (as she then was) said in Norberg v. Wynrib (1992), 92 D.L.R. 4th 449 (S.C.C.): The fiduciary relationship has trust, not self-interest, at its core, and when breach occurs, the balance favours the person wronged. The freedom of the fiduciary is limited by the obligation he or she has undertaken - an obligation which ‘betokens loyalty, good faith and avoidance of a conflict of duty and self-interest’: Canadian Aero Service Ltd. v. O’Malley ... [290] I must therefore analyze the list of thirteen allegations of breach of fiduciary duty with the question in mind: “Was William Hardman acting in furtherance of his obligations of “loyalty, good faith and avoidance of a conflict of duty and self-interest ...”? [291] Some of the breaches alleged relate to the development agreement between HPDL and HGL. These can only constitute breaches of a fiduciary duty owed by William Hardman to Christopher Alexander and Susan Pratt insofar as William Hardman as president of HPDL permitted the agreement with HGL to be breached in circumstances where Christopher Alexander and Susan Pratt could reasonably have expected William Hardman to act in their interests. I have concluded above that there were numerous breaches of the agreement between HPDL and HGL; however, most breaches of that agreement did not result in breaches of fiduciary duty. As I previously said, not all the decisions improperly made were necessarily wrong. I add to that, nor were they all in breach of William Hardman’s fiduciary duties to Christopher Alexander and Susan Pratt. [292] I fail to see how the construction of a 66 foot wide road breached a fiduciary duty, even though contrary to their wishes. Nor did the following: the contract for tree removal; the hiring of Lester Berrigan and of Land and Sea; and the failure of William Hardman as president of HPDL to ensure that HGL put forward a merchandising plan. [293] Certain other actions, apart from the development agreement, are alleged by Christopher Alexander and Susan Pratt to have been done in breach of William Hardman’s fiduciary obligations to them. These include accepting less than full price offers; agreeing to sell Lot 9A without first obtaining the directors’ approval; varying restrictive covenants without approval; and distributing profits without approval. I conclude these were acts of William Hardman as president of HPDL. However, I cannot conclude that these actions were in breach of William Hardman’s duties of loyalty and good faith and avoidance of conflict of interest, so as to constitute a breach of fiduciary duty. The same holds true for the failure to respond to shareholders’ and/or directors’ concerns except as it relates to Lots 11 and 12. [294] At p. 1-5 of Ellis, Fiduciary Duties in Canada, the author says that “it must be remembered that any act will be evaluated in keeping with the premise of dedication to the best interests of the beneficiary.” [295] In many of the decisions, the fiduciary breached the fiduciary duty by acting in his own interests and contrary to those of the beneficiary. However, breaches of the duties owed by a fiduciary can also be found by focussing on the best interests of the beneficiary and the obligations of loyalty and good faith. [296] In Fiduciary Duties in Canada, the author at pp. 1-6 to 1-8 gives a “non-exhaustive” list of “specifically prohibited activity”. This includes the following which I consider to be relevant to this case: 1. failure to completely disclose material information ... [297] In addition, it is clear from the definition of a fiduciary duty and from the decided cases that a fiduciary must avoid a conflict of interest between his own interests and those of the beneficiary. [298] The above analysis leaves six areas where I conclude there is a potential for a claim that William Hardman had a fiduciary obligation to Christopher Alexander and Susan Pratt: 1. Acting as trustee for the balance of the shareholders 2. Lots 1l and 12 3. Failure to provide information 4. Sold designation on Lot 4 and 13 5. Lot 10 6. Continuing to act as president after July 13, 1998. l. Acting as Trustee for the Balance of the Shareholders [299] When William Hardman wrote to Ron Stockton and Bernadette Maxwell on June 23, 1998 (Exhibit 1, Tab 85), he said: The Hardman Group Limited, as trustees for the balance of the shareholders of Herman’s Point Development Limited, hereby offer to you the sum of $100,000 in full payment for your shares and shareholder’s loans ... . He signed the letter as “The Hardman Group Limited as Trustee for the Shareholders of Herman’s Point Development Ltd.” Christopher Alexander testified that he was not consulted by William Hardman before that offer was made nor did he give his consent to William Hardman or HGL to act as his trustee. Susan Pratt testified that, although she was unsure what the reference to “trustees” was, she was not happy that William Hardman said he was speaking for all the shareholders when he had not consulted with her. [300] William Hardman admitted that he had not contacted Christopher Alexander and Susan Pratt, although David Precious knew about the letter before it was sent. William Hardman said he intended to consult with Christopher Alexander and Susan Pratt if the offer was accepted. He said the use of the word “trustee” was not correct. [301] Since neither the offer nor the counter-offer was accepted, there is no evidence about anything further being done with either the offer or the counter-offer, including any discussions by William Hardman with Christopher Alexander and Susan Pratt. In the June 23 letter, William Hardman said HGL “as trustee” undertook to comply with the shareholders agreement. William Hardman testified that he intended to comply. There is no evidence to the contrary and both the letter and William Hardman’s testimony are consistent. I accept the testimony of William Hardman in this instance. Although William Hardman did not have the consent of Christopher Alexander and Susan Pratt to have HGL act as their trustee, I find no evidence that in writing the letter of June 23 William Hardman was acting in breach of his duties or loyalty and good faith or in a conflict of interest. The evidence which I accept contradicts any intent by William Hardman to buy the shares without complying with the terms of the shareholders agreement and in his own interests. 2. Lots 11 and 12 a) Lot 12 [302] There is no dispute about the interest of William Hardman in acquiring Lot 12. Were his actions with respect to Lot 12 in conflict with those of Christopher Alexander and Susan Pratt? I conclude they were. In summary, he did everything he could to ensure there was a buffer between his existing cottage and the new development. Lot 12 was first designated for possible park dedication to the municipality in March 1997. That was not a decision made by the directors but one made by William Hardman. If the land had been dedicated for public open space, no residential development could occur on it. [303] After October 1997, when it was known that the municipality would not accept the land but wanted cash-in-lieu, Lot 12 was designated as “Reserved” on the brochure prepared by Land and Sea Realty. Sheila Sinnott dealt only with William Hardman and Louis Lemoine, the employee of William Hardman’s company, and testified that she understood it was reserved for William Hardman. I accept the evidence of Christopher Alexander that there was a “Sold” sign on Lot 12 which he removed around September 1998, after he became president of HPDL. [304] The marketing of Lots 11 and 12 was, according to Christopher Alexander, whose testimony I accept, raised “time and again”. Even Louis Lemoine said the marketing of Lot 12 (and Lot 11) was a “bone of contention” ever since October 1997. He said there was “a bit of dissension” about it at the February 9, 1998 meeting. [305] The sale of Lots 11 and 12 was raised in the letter from Ron Stockton and Bernadette Maxwell dated October 6, 1997. After the October 21, 1997 meeting, it was one of the subjects in the October 30, 1997 letter from Ron Stockton, Bernadette Maxwell, Christopher Alexander and Susan Pratt. Lots 11 and 12 were discussed at the November 24 meeting. It was at this meeting that William Hardman said they should be left until the end and David Precious said they would be worth more then. William Hardman also said in his memorandum of November 24 they would be discussed again at the next meeting. This correspondence and discussion were in the context of the company needing a further infusion of cash from the shareholders because no lots had been sold one year into the project (although Lot 9A was by then under agreement of sale). [306] I conclude that William Hardman knew that Christopher Alexander, Susan Pratt, Ron Stockton and Bernadette Maxwell wanted these two lots priced and marketed and that this continued to be their position into 1998. Their letter of October 30, 1997 refers to pricing Lots 11 and 12. I conclude that, based upon that letter and the discussion at the November 24 meeting, William Hardman knew or should have known these views continued to be shared in 1998 by Christopher Alexander and Susan Pratt. [307] Lots 11 and 12 were not priced until October 2000 (Exhibit 2, Tab 11). There is no evidence before me that the price put on them then ($100,000.00 + HST and $125,000.00 + HST respectively) is greater than it would have been in 1997 or 1998. An offer has now been made by William Hardman to purchase Lot 12 and there is another offer for it for $140,000.00 (inclusive of HST) (Exhibit 1, Tab 140). [308] In all these circumstances, I conclude that William Hardman breached his duty to Christopher Alexander and Susan Pratt . For almost six years, he held off the market the lands he wanted as a buffer to his existing lands. His offer to purchase them was made only in September of 2002. During at least part of this time, there was a bank loan outstanding on which Christopher Alexander and Susan Pratt were guarantors and further cash infusions in the form of shareholders loans had to be made to HPDL from Christopher Alexander and Susan Pratt. b) Lot 11 [309] In the same way that Lot 12 was held off the market so was Lot 11. However, William Hardman did not have a personal interest in Lot 11. His treatment of Lot 11 was incidental to the way he treated Lot 12 and was for the benefit of David Precious. The position of Christopher Alexander, Susan Pratt, Ron Stockton and Bernadette Maxwell was the same for Lot 11 as it was for Lot 12. [310] Throughout the corporate life of HPDL, David Previous has agreed with everything William Hardman did, with the exception of the “Sold” designations. He testified in support of William Hardman and the only difference in their testimony was with respect to David Precious’ role in the offers for Lot 10. I have dealt with that previously. [311] William Hardman and David Precious are cottage neighbours on Herman’s Island. David Precious is highly educated and a well-known and well-respected surgeon. He and Elizabeth Precious apparently have fairly substantial means: it was he who, along with William Hardman, came up with an additional $50,000.00 to buy shares in HPDL at the outset; it was he who offered to put more money into HPDL at the July 13, 1998 meeting; Elizabeth Precious offered $166,500.00 for Lot 10; he and his wife were prepared to build a winter residence on Lot 10 while keeping their principal Halifax residence and Elizabeth Precious’ existing cottage on Herman’s Island; it was he who paid for part of the Stockton/Maxwell shares. [312] Susan Pratt described the relationship between William Hardman and David Precious as “very friendly” and said that William Hardman held David Precious “in high regard”. His relationship with William Hardman as well as his status and means appear to have been important to William Hardman as is evidenced by the favourable treatment accorded him by William Hardman. To mention just two examples: he updated David Precious on the events of a meeting he missed but never did so for Susan Pratt who missed meetings regularly when she was in Florida approximately six months each year; he contacted David Precious on two occasions about his availability for meetings but never did so for Christopher Alexander, Susan Pratt, Ron Stockton or Bernadette Maxwell. [313] Because of the favoured treatment David Precious received, I conclude that William Hardman breached his fiduciary duty to Christopher Alexander and Susan Pratt with respect to keeping Lot 11 off the market. 3. Failure to Provide Information [314] Ellis in Fiduciary Duties in Canada at p.1-6.1 says the premise underlying the requirement to completely disclose material information is “the principle that only a fully informed beneficiary can adequately advise the fiduciary”. In Ford v. Laidlaw Carriers Inc., [1993] O.J. No. 2941 (Ont. Gen. Div.), Granger, J. said at para. 205: One aspect of the duty to act in utmost good faith is that the trustee, as fiduciary, is responsible for complete disclosure of material information. [315] I have concluded above that William Hardman did not keep Christopher Alexander and Susan Pratt informed. This began almost at the start of the project. Although there were no meetings between November 1996 and March 1997, there is only one progress report. Louis Lemoine testified that at the October 21, 1997 meeting, there was discussion about how Christopher Alexander, Susan Pratt, Ron Stockton and Bernadette Maxwell felt “left out” and wanted more information. [316] After the March meeting, there were no further meetings until October 21, 1997. During this time, the final plan was submitted for approval of Lots 1-9, negotiations began for the subdivision and sale of Lot 9A and the road was built. [317] After the October and November meetings, there was a meeting scheduled for January 5, 1998 but there was no quorum. A meeting was held on February 9, 1998 and, except for the informal “meeting on the hill”, no meetings were held thereafter until the annual meeting on July 13, 1998. During this time, beginning on January 8, there was a series of letters to William Hardman and/or Louis Lemoine from Ron Stockton and/or Bernadette Maxwell, copies of which, except the first, were sent to everyone. [318] Questions were asked about the contract with Land and Sea, pricing of Lots 11 and 12 and the agreements for Lots 4 and 13, among other things. [319] Except for the May 7, 1998 letter, which could scarcely be called an information letter, William Hardman’s only correspondence was to advise of an offer on Lot 16 on March 16 and a further memo of April 28 (Exhibit 1, Tab 76) to advise the offer was finalized. These letters did not provide the information sought. Although Christopher Alexander and Susan Pratt did not write to ask for the same information, they received copies of the letters from Ron Stockton and Bernadette Maxwell. Susan Pratt was away from November 1997 until approximately May 1998. She testified she could not understand why the letters were not answered or a meeting called. Louis Lemoine discussed the letters with William Hardman who told him to leave them with him. I accept this evidence and his understanding that William Hardman would reply to them. He also testified that on one occasion William Hardman told him they were not worthy of reply. [320] Susan Pratt, upon her return to Nova Scotia which she said was in May or June 1998, talked to Bernadette Maxwell and then went to see William Hardman at his cottage. Her principal purpose was to get information about the “Sold” designations on Lots 4 and 13. She testified that William Hardman told her this was a common practice and had resulted in the sale of Lot 16. [321] She testified she asked William Hardman about a meeting, to which he responded that he would not “meet with those people”, referring to Ron Stockton and Bernadette Maxwell. [322] I have referred to the efforts of Christopher Alexander to obtain the books and records of HPDL and information about lot sales from Land and Sea. This information was not provided. After the lawsuits were commenced in the fall of 1998, no information was forthcoming about HPDL to Christopher Alexander and Susan Pratt. William Hardman took the position (confirmed in the legal action he commenced) that a deal for the sale of the shares of Christopher Alexander and Susan Pratt had been concluded in the August/September period of 1998 and they were no longer shareholders. [323] The court orders of November 6, 1998 and April 14, 1999 to obtain information have been mentioned earlier. [324] Because of the role he undertook, William Hardman had a fiduciary duty to provide information to Christopher Alexander and Susan Pratt. I conclude from the above that he breached that duty. However, because legal proceedings had been commenced in the fall of 1998 and a court order issued in November 1998 dealing with provision of information, the relationship between William Hardman on one hand and Christopher Alexander and Susan Pratt on the other, changed. I therefore cannot conclude that the fiduciary duty to provide information continued beyond the date of the first order, November 6, 1998. 4. The “Sold” Designation [325] William Hardman and HGL’s employee, Louis Lemoine, decided to kickstart the development by advertising Lots 4 and 13 as “Sold” and putting “Sold” signs on the lots, although they were not sold. As has been discussed above, Ron Stockton and Bernadette Maxwell were the first to be seriously concerned about this practice. Christopher Alexander and Susan Pratt were opposed to it as well as was David Precious. [326] One of the concerns was of a possible lawsuit if the purchaser of Lot 16 found out these lots were not sold since he had bought his lot on the strength of these representations. There was a risk of legal action which fortunately did not materialize. [327] One of the other concerns was about the effect of this upon the reputations of those involved in the company, including Christopher Alexander and Susan Pratt. Christopher Alexander owned rental property in nearby Mahone Bay and Susan Pratt was a resident of Lunenburg and Herman’s Island itself. [328] It is one thing for William Hardman to subject himself to the risk of a lawsuit or to the risk of damage to his reputation. It is quite another for him to expose Christopher Alexander and Susan Pratt to these risks. As fiduciary, William Hardman was bound to act in the interests of the beneficiaries and do so with loyalty and good faith, in consequence of Christopher Alexander and Susan Pratt having put their trust and confidence in him. [329] I conclude that William Hardman acted in breach of his fiduciary duty to Christopher Alexander and Susan Pratt by exposing them to these risks without their knowledge or consent. These risks continued for at least the period during which the “Sold” signs remained on the lots and the unamended brochure was in circulation. In addition, the risk of the purchaser of Lot 16 suing continued at least until other lots were sold. 5. Lot 10 [330] I accept the evidence of Ed Kinley that his June 27, 2001 offer (Exhibit 2, Tab 12) for Lot 10 was not subject to conditions. However, William Hardman did not accept it as he had previous full price offers. As has been discussed previously, he instead did not respond until he spoke to Ed Kinley on August 18 (see para. 2 of Exhibit 2, Tab 15). In the meantime, an offer was received from Elizabeth Precious and the bidding war previously referred to began. [331] Furthermore, William Hardman did not advise Christopher Alexander and Susan Pratt of the competing bids or identities of the bidders even though he wrote to them (and the others) on August 31 to advise that “Lot 10 has been sold at ... $16,500.00 over list price.” Louis Lemoine testified that William Hardman did not usually deal with offers directly. He also said William Hardman did not advise him of the offers. He said he would have been happy to receive a full price offer. [332] Although under normal circumstances such an advantageous price would be desirable, the end result of the bidding war and the successful bid by Elizabeth Precious was that the lot has not yet sold one and a half years later. [333] Furthermore, a non-armslength sale (to the wife of the sole owner of a corporate shareholder) requires unanimous consent of all shareholders according to cl. 2.07 (c) of the shareholders agreement. The non-armslength nature of this transaction is reflected in the fact that one of the letters from William Hardman about Lot 10 is written, not to Elizabeth Precious, but to David Precious at D.S. Precious Maxillofacial Surgery Inc. (part of Exhibit 45) As well, the road to Lot 10 was an agenda item at the August 14, 2001 shareholders meeting, attended only by William Hardman and David Precious. The meeting occurred after Ed Kinley’s original offer and Elizabeth Precious’ initial offer but before the August 23, 2001 letter from William Hardman giving both bidders a final opportunity to bid on Lot 10. [334] Ed Kinley, in his offer of June 27, said he was prepared to “move quickly” to conclude the transaction. [335] William Hardman testified he was under pressure from David Precious concerning Lot 10. Elizabeth Precious testified she was extremely interested in acquiring it as early as the Christmas/New Year’s period in late 2000 but understood she could not pursue that interest while this litigation was ongoing. [336] I therefore conclude that William Hardman breached his fiduciary duty to Christopher Alexander and Susan Pratt by not accepting the full price offer from Ed Kinley and by giving in to the pressure of David Precious, the director and shareholder who sided with him in almost every dispute with the others (the exception being the issue of the “sold” designations). 6. Continuing to Act as President After July 13, 1998 [337] I have found as a fact that Christopher Alexander became president of HPDL on July 13, 1998. However, William Hardman never relinquished the presidency, although he acknowledged Christopher Alexander as president in the July 29 memo referring to his “new capacity”. William Hardman steadfastly held on to the position of president of HPDL, refusing any cooperation to Christopher Alexander in assuming the role. Not only did he not cooperate, he thwarted Christopher Alexander’s efforts to assume the presidency. He did not turn over corporate records; he instructed Sheila Sinnott not to divulge information to Christopher Alexander; he changed the records at the Registry of Joint Stock Companies after Christopher Alexander had them changed to reflect the actual officers after July 13; he somehow maintained control of the bank accounts of HPDL even after Christopher Alexander advised the bank of the change of officers and sought to freeze the accounts. William Hardman did these things in utter disregard for the process and results at the properly constituted directors meeting on July 13. [338] Merely listing these actions in contempt of the decision of the directors is answering the question of whether William Hardman was acting in the interests of Christopher Alexander and Susan Pratt and with the loyalty and good faith required of a fiduciary. William Hardman acted deliberately and contrary to a directors decision made after he resigned. He persisted in this for the succeeding 4 years to the point where the project is almost complete. This was in breach of his fiduciary duty to Christopher Alexander and Susan Pratt. It is particularly egregious since one of those to whom this duty was owed is the president of the company, although he has never been permitted by William Hardman to take on that role. [339] In summary, I find the following were breaches of fiduciary duties owed by William Hardman to Christopher Alexander and Susan Pratt: 1. holding Lots 11 and 12 off the market; 2. failing to provide information; 3. advertising Lots 4 and 13 as “sold” when they were not; 4. failing to accept the Ed Kinley full price offer for Lot 10; and 5. failing to give up the presidency of HPDL after July 13, 1998. 3. Duty to HPDL [340] It is clear that a director owes a fiduciary duty to the company of which he is a director. Did William Hardman breach the duty he owed to HPDL? [341] I conclude that in putting his own interests ahead of those of the company, with respect to Lot 12, William Hardman breached his fiduciary duty to HPDL. He had a conflict between his duty as a director of HPDL to act in its best interests and his personal interest in avoiding or delaying the purchase of Lot 12. DAMAGES [342] Christopher Alexander and Susan Pratt make the following claims for damages: 1. Loss of value of shares; 2. Losses for breach of contract and negligence by HGL; 3. Breach of fiduciary duty; 4. Punitive damages. They also claim on behalf of HPDL for certain losses. [343] However, I need to hear further submissions from the parties about the damages to be awarded. Much of the submissions already made on the subject of damages addressed the issue of punitive damages. However, I conclude I need further submissions on the other heads of damages: breaches of contract and fiduciary duties. It was agreed that submissions on costs would be made after this decision was rendered. I conclude that both damages and costs should be addressed at that time. Hood, J.