Cacv3678 in the Court of Appeal for Saskatchewan
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CACV3678 IN THE COURT OF APPEAL FOR SASKATCHEWAN ON APPEAL FROM QUEEN'S BENCH FOR SASKATCHEWAN JUDICIAL CENTRE OF SASKATOON Q.B.G. NO. 1175 OF A.D. 2018 BETWEEN: RANDY KOROLUK APPELLANT AND: KPMG INC., PRIMEWEST MORTGAGE INVESTMENT CORPORATION, DAN ANDERSON, TOM ARCHIBALD, FRANCIS BAST, DOUGH FRONDALL, MIKE HOUGH, WILL OLIVE, TOM ROBINSON, IRENE SEIFERLING, ERNST & YOUNG INC. RESPONDENTS AND: DIRECTOR OF CORPORATIONS, CANADA REVENUE AGENCY, P.I. FINANCIAL, DONALD ZEALAND, GRANITE ENTERPRISES, DEBBIE GLORIA BURWASH NON-PARTIES BRIEF OF LAW ON BEHALF OF KPMG INC., Liquidator of PrimeWest Mortgage Investment Corporation (Motion to Quash Appeal) THE W LAW GROUP LLP Barristers & Solicitors 300-110 21st Street East Saskatoon, SK S7K 0B6 Page 2 Introduction ..................................................................................................................... 3 Facts and Procedural History .......................................................................................... 3 Issues ............................................................................................................................ 12 Argument ....................................................................................................................... 13 I. The Appellant is required to apply for leave. ...................................................... 13 A. Gabrielson J.’s order was interlocutory because it did not dispose of any substantive rights of the Appellant and preserved his ability to prosecute the Class Action within the Liquidation Proceedings. ............................................................. 13 B. Section 242 of The Business Corporations Act is not applicable because the lower Court made no order expressly pursuant to this legislation, but instead clarified its prior Liquidation Order in accordance with The Queen’s Bench Rules. ............. 15 II. Further, leave to appeal should not be granted nunc pro tunc because the Appeal lacks sufficient merit and importance, and the Appellant has acted unreasonably and occasioned delay. ...................................................................................................... 17 A. Because the Appellant has already filed two Proofs of Claim in the Liquidation Proceedings, the Appeal is now moot. .................................................................... 18 B. Further, the issues raised in the Appeal lack sufficient merit based on the deferential standard of review to be applied and the existing caselaw. .................. 21 1. Grounds a, c, d, l, and m: The lower Court correctly interpreted both the Liquidation Order and the Claims Process Order as including the Class Action. 24 2. Ground j: There is no basis to assert that Gabrielson J. did not rely on Rule 10-11 to provide further direction on the Liquidation Order and the Appellant simply disagrees with the direction provided. ................................................................ 28 3. Grounds e, f, g: Gabrielson J. appropriately avoided making any summary determinations on the merits of the Class Action or the future applicability of the Indemnity Agreements. ....................................................................................... 29 4. Grounds i and n: These grounds of the Appeal misinterpret and misstate Gabrielson J.’s decision. ..................................................................................... 31 5. Grounds b, g, h: Gabrielson J. was correct to not address the irrelevant legal principles cited by the Appellant. ........................................................................ 33 C. The Appeal lacks sufficient importance to warrant leave to appeal being granted. .................................................................................................................. 35 D. The Appellant has acted unreasonably in failing to seek leave to appeal ..... 37 E. The Appellant has occasioned delay by failing to seek leave to appeal........ 38 Conclusion .................................................................................................................... 40 Page 3 Introduction 1. KPMG Inc. files this brief of law in its capacity as liquidator (the “Liquidator”) of PrimeWest Mortgage Investment Corporation (“PrimeWest” or the “Corporation”) in support of its motion requesting this appeal be quashed as disclosing no right of appeal. 2. The primary issue on the Appeal is whether the class action QBG 1727 of 2018 (the “Class Action”) is subject to the Amended and Restated Order of the Honourable Mr. Justice Gabrielson, dated November 25, 2019, (the “Liquidation Order”) pursuant to Article 1.1 (b) of said order and the Claims Process Order which incorporated the same. The Class Action is directed against PrimeWest’s directors for their alleged misconduct in their roles as directors of the Company. Article 1.1(b) of the Liquidation Order defines “Claim” for the purposes of the Liquidation Order as follows: (b) any existing or future right of any Person against any one or more of the Directors which arose or arises as a result of such Director’s position, supervision, management or involvement as a Director or otherwise in any other capacity in connection with the Corporation, whether such right, or the circumstances giving rise to it, arose before or after the Effective Date and whether enforceable in any civil, administrative or criminal proceeding…. [emphasis added]. 3. We request that this motion to quash be granted with costs of this motion payable to the Liquidator. Facts and Procedural History 4. On June 12, 2018, Merchant Law Group LLP (“MLG”) filed the Class Action pursuant to The Class Actions Act,1 by Randy Koroluk on behalf of himself and other members of a class, being shareholders of PrimeWest, against the defendants, who were or are members of the board of directors for PrimeWest, as well as Ernst & Young Inc. (“Ernst & Young”) as auditor of PrimeWest (the “Class Action”). As of 1 The Class Actions Act, SS 2001, c-12.01 Page 4 June 10, 2020, the Appellant had yet to serve all of PrimeWest’s directors named in the Class Action or Ernst & Young. 5. On October 9, 2019, PrimeWest brought an originating application pursuant to ss 204(8), 210, 215, and 216 of The Business Corporations Act,2 seeking approval of a plan for the voluntary liquidation and dissolution of the Corporation (the “Originating Application”). Included in the Originating Application was a draft Order with the Liquidation Plan for PrimeWest appended thereto as Schedule “A” (the “Liquidation Plan”). 6. Following service of the Originating Application, MLG opposed the draft Order, on behalf of the Class Action claimants, arguing that the directors of PrimeWest should not be permitted to avoid potential legal liability in the Class Action by virtue of the Corporation having sought voluntary liquidation and dissolution. In support of this position, on October 25, 2019, Mr. Anthony Merchant, Q.C., wrote to the lower Court with the following “primary” submissions: … The Liquidation Application being made today concerns only one Applicant, being PrimeWest Mortgage Investment Corporation, which corporation is seeking relief under the Business Corporations Act. MLG acts as counsel for Randy Koroluk, who is the plaintiff in a proposed class proceeding commenced in Regina on June 12, 2018. The original Statement of Claim for the same class action can be found at Exhibit “M” of the Affidavit of Marlene Kaminsky, sworn on October 9, 2019 (although an Amended Statement of Claim was filed on December 3, 2019, and that Amended Claim has not been placed before the Court by the Applicant). The same class proceedings, being Koroluk v. Anderson et al., has not named the Applicant Corporation (PrimeWest) as a Defendant -- and any reference to Mr. Koroluk’s action (being QBG 1727 of 2018, Judicial Centre of Regina) should be remove [sic] from any Order, Plan, or other documentation that may be approved by the Court (or employed by the Liquidator). 2 The Business Corporations Act, RSS 1978, c B-10 [Business Corporations Act]. Page 5 The claims made in Mr. Koroluk’s action include assertions that the individual defendants to his class action acted recklessly or inappropriately, in their personal capacities. Respectfully, there are allegations of malfeasance by these individual defendants and whether the Applicant Corporation is appropriately entitled to seek liquidation, does not obviate the legal liability of individual defendants in a separate piece of litigation. … Amongst other things, whether valid indemnification agreements existed or not, at times relevant to the Koroluk class action, is immaterial (and would be immaterial to any plaintiff). Any defendant might have a hold-harmless or indemnification agreement regarding a specific type of liability, but that is an issue to be worked out between an indemnifier and indemnified party – i.e. the possible existence of an indemnification agreement (from a solvent or insolvent indemnifier) does not result in a Court simply striking a given party as a defendant in a lawsuit. If the Applicant Corporation meets the legal standards and test for an Order of voluntary liquidation and dissolution, the Court may find that such a liquidation order should be granted. But the individual defendants to Mr. Koroluk [sic] class action are not seeking (and cannot seek) under the Business Corporations Act on [sic] order for voluntary liquidation and dissolution. The suggestion by the Applicant that the individual defendants to