Bluberi Gaming Technologies Inc. v. Callidus Capital Corporation

9354-9186 Québec inc. (Bluberi Gaming Technologies Inc.) c.

Callidus Capital Corporation

2022 QCCS 1999

SUPERIOR COURT

(Commercial Division)

CANADA

PROVINCE OF QUÉBEC

DISTRICT OF MONTRÉAL

No.:

500-11-059300-208

DATE: June 1, 2022

_____________________________________________________________________

BY THE HONOURABLE MARTIN F. SHEEHAN, J.S.C.

_____________________________________________________________________

9354-9186 QUEBEC INC. (formerly Bluberi Gaming Technologies Inc.)

9354-9178 QUEBEC INC. (formerly Bluberi Group Inc.)

GÉRALD DUHAMEL, ex officio trustee of Fiducie Gérald Duhamel

GÉRALD DUHAMEL, ex officio trustee of Fiducie Familiale Gérald Duhamel OPCO

GÉRALD DUHAMEL, ex officio trustee of Fiducie Familiale Gérald Duhamel

HOLDCO

GÉRALD DUHAMEL

Plaintiffs

v.

CALLIDUS CAPITAL CORPORATION

CATALYST CAPITAL GROUP INC.

NEWTON GERSHON ZEV GLASSMAN

DAVID M. REESE

JAMES RILEY

CATALYST FUND LIMITED PARTNERSHIP IV

CATALYST FUND GENERAL PARTNER IV INC.

Defendants

and

BLUBERI GAMING CANADA INC.

Impleaded Party

500-11-059300-208

PAGE: 2

_____________________________________________________________________

JUDGMENT

_____________________________________________________________________

OVERVIEW

[1] Defendants, Callidus Capital Corporation (“Callidus”), Catalyst Capital Group Inc.,

Catalyst Fund Limited Partnership IV, Catalyst Fund General Partner IV Inc. (together

“Catalyst”), Mr. Newton Gershon Zev Glassman (“Glassman”), Mr. David M. Reese

(“Reese”) and Mr. James Riley (“Riley”)¹present two motions:

1.1. A motion to dismiss the application on the basis that it is time barred or, in the

alternative, that it be dismissed with regard to some of the Plaintiffs who have

no interest in the matter;

1.2. A motion to strike allegations and exhibits on the grounds that they are:

a) irrelevant and prejudicial; or b) speculative and hypothetical.

[2] Plaintiffs 9354-9186 Quebec Inc. (formerly Bluberi Gaming Technologies Inc.)

(hereinafter “Bluberi Gaming”), 9354-9178 Quebec Inc. (formerly Bluberi Group Inc.)

(hereinafter “BGI”, and collectively with Bluberi Gaming, “Bluberi”) and Mr. Gérald

Duhamel (in his personal name and as a trustee of various trusts that own Bluberi shares)

(“Duhamel”) contest the motions.

[3] As a preliminary objection, they plead that Defendants should be estopped from

filing these motions because they are late. In the alternative, they submit that the principle

of prudence should govern at this stage and that any decision with regard to the merits or

relevance of their allegations should be deferred to the trial judge.

CONTEXT

[4] The context of the motions is as follows:²

[5] Bluberi is a Canadian gaming company that specialized in the development and sale

of casino games. It was founded by Duhamel in 1994.

[6] Duhamel was the president, secretary and sole director of Bluberi Gaming and BGI.

He was also a trustee and beneficiary of Plaintiffs Fiducie Gérald Duhamel, Fiducie

1

Family names in this judgment are used to facilitate the reader’s comprehension. No disrespect is

intended nor should be implied.

The description that follows is taken, in large part, from the allegations in the latest version of Plaintiffs’

2

proceedings (the Re-Modified, Re-Particularized Application Originating a Proceeding as of April 19,

2022 (the “Damage Proceedings”)). While these allegations must, for the most part, be assumed to

be true at this stage, they are contested by the Defendants and have not been proven in court.

500-11-059300-208

PAGE: 3

Familiale Gérald Duhamel OPCO and Fiducie Familiale Gérald Duhamel HOLDCO

(hereinafter collectively the “Trusts”), which are family trusts who held voting or

participating shares in Bluberi Gaming or BGI.

[7] BGI also held shares in Bluberi USA Inc., a company established for Bluberi’s US

operations.

[8] From 1994 to 2012, Bluberi focused on selling its technology and gaming content to

third parties. These parties would incorporate Bluberi’s technology into their own gaming

cabinets for use in casinos across North America. Most of Bluberi’s revenue during this

period consisted of royalties collected by virtue of a joint venture with American Gaming

Systems (“AGS”), a manufacturer/vendor of gaming machines placed in American

Indigenous casinos in the United States. During this period, Bluberi’s revenue grew from

approximately $1 million in 1997 to $10 million in 2000 and then to over $37 million in

2012.

[9] The casino gaming industry is highly competitive and requires constant and

significant investments in technology.

[10] In 2012, Bluberi decided to evolve from a content and technology provider to a full-

service gaming manufacturer. It also decided to start distributing Class III games in

addition to the Class II games developed until then.³

[11] The change would allow Bluberi to provide casinos with “turn-key” products and

services (i.e. fully functioning cabinet units that included software, hardware and technical

on-site and off-site support) in exchange for a share of the revenue generated by the

machines. Profit margins would be higher because they would no longer be divided with

AGS.

[12] To implement the change in its business model, Bluberi sought financing. A broker

was mandated to canvass opportunities.

[13] In early 2012, Callidus, which describes itself as an “asset-based or distressed

lender”,⁴was introduced to Bluberi and Duhamel.

3

In footnote 2 of their originating application, Plaintiffs explain that the three-tiered class system was

created pursuant to the Indian Gaming Regulatory Act (Public Law 100-497-Oct. 17, 1988 100th

Congress Sec. 2701) in the United States. The outcome of a Class II game is determined by the pattern

generated from an electronic bingo game: the odds are a function of the patterns on the bingo card,

and there is no strategy involved. The machine is connected to a central computer server whose

function is to draw “bingo balls” randomly. This is in contrast to Class III games (table games like

blackjack and poker, or slots and video games, where the result is determined by a random number

generator located within a given machine itself). Class III requires much more sophisticated technology,

as millions of calculations are made in a fraction of a second, applying numerous complex algorithms

and formulas, all controlled by a central server located hundreds of kilometres away, to determine the

outcome of bets placed or inputs made in hundreds or thousands of remote machines.

4

9354-9186 Québec inc. v. Callidus Capital Corp., 2020 SCC 10, para. 5.

500-11-059300-208

PAGE: 4

[14] On April 24, 2012, the parties signed a term sheet (the “Term Sheet”)⁵pursuant to

which Callidus would provide $24 million to Bluberi in the form of a demand loan carrying

interest at 18% per annum.

[15] After signing the Term Sheet, Callidus required Bluberi to hire Hilco Enterprise

Valuation Services LLC (“Hilco”) to evaluate Bluberi’s intellectual property (the “Bluberi

IP”).⁶It also hired other professionals (GDR Advisory Group and Fuller Landau) to

conduct due diligence mandates on Bluberi.

[16] In June 2012, Hilco concluded that the Bluberi IP had a liquidation value of up to

$17.8 million.⁷

[17] In July 2012, Bluberi executed documents to activate a “blocked account” (the

“Blocked Account”). Plaintiffs describe the Blocked Account as an important feature of

Callidus’ credit facility agreements. Although the account was held in Bluberi’s name,

Plaintiffs allege that Callidus used it to dictate the use of Bluberi’s working capital and

therefore indirectly controlled Bluberi’s account. The agreements compelled Bluberi to

deposit all receipts into the Blocked Account and forced Bluberi to obtain Callidus’

consent prior to debiting any sums from the Blocked Account even when the withdrawal

was to pay suppliers.

[18] Right from the start the parties had disagreements with regard to the timing of the

loan disbursements.

[19] Bluberi assumed that, upon closing, it would receive the major part of the negotiated

loan (approximately $20 million). However, on July 26, 2012, Callidus advised that

disbursements would be made incrementally in accordance with certain milestones

pertaining to the deployment of gaming machines.⁸

[20] Bluberi believed that the purpose of the loan was to fund the research, development

and manufacturing of machines and thus that the loan should pre-empt their deployment.

Thus, the very next day, Bluberi sent a demand letter to Callidus to force it to honour the

Term Sheet.⁹

[21] Discussions ensued. Bluberi agreed to retract the demand letter.

[22] On August 1, 2012, Callidus and Bluberi attended the offices of Callidus’ attorneys

to sign the loan agreements. At signing, Callidus’ attorneys advised Bluberi that only

$11.3 million would be disbursed. Duhamel protested. He picked up the signed

documents and left.

5

Exhibit P-15.

Exhibit P-16.

Exhibit P-17.

Exhibit P-19.

6

7

8

9

Exhibit P-20.

500-11-059300-208

PAGE: 5

[23] Email exchanges followed¹⁰which Bluberi considered to be reassuring. A new

closing was scheduled on August 9, 2012. Callidus advised Duhamel that it was willing

to disburse $14 million. Again, Duhamel protested and threatened to go elsewhere.

[24] Callidus sent its Chief Operating Officer, Reese, to Montréal to close the deal.

[25] On August 15, 2012, Reese proposed that Callidus distribute $18.5 million on

closing, and granted Bluberi’s request to allow it to keep, at all times, $1.5 million outside

the Blocked Account. Bluberi agreed.

[26] Hilco was asked to re-evaluate the Bluberi IP. They concluded that it was worth

$22.8 million.¹¹

[27] On August 31, 2012, the parties signed loan documents (the “Loan Documents”)¹²

for an amount of approximately $24 million. The loan was secured by all of Bluberi’s

movable and immovable property as well as a personal guarantee from Duhamel.

[28] Bluberi began distributing its new gaming machines in January 2013. Initially, the

machines underperformed the “floor average” (the average revenue of all machines on

the casino’s gaming floor) by 30%. Bluberi’s clients were upset and put significant

pressure on Bluberi to increase performance. Some clients asked that Bluberi remove its

machines.

[29] Bluberi focused on improving game profitability in a limited number of casinos.

Eventually, profit returns increased.

[30] In February 2013, Bluberi asked Callidus for an advance of $5 million, which would

bring the total loan amount to $29 million. Callidus eventually approved the disbursement

on April 15, 2013.¹³By then, Bluberi had depleted the funds in its operating account

creating an overdraft situation which triggered an additional 3% interest to Callidus over

the entire amount of the loan.

[31] In July 2013, Bluberi asked Callidus for another $5 million advance, which would

bring the total loan amount to $34 million. Callidus hesitated. Bluberi alleges that it was

forced into an overdraft position triggering additional interest. Bluberi also had to wait for

Callidus to review and approve each of Bluberi’s payables. According to Bluberi, these

approvals were late in coming which led to conflicts with some critical suppliers as a result

of them being paid late.

10

Exhibits P-22, P-23, P-87 and P-88.

Exhibit P-24.

Exhibit P-25.

Exhibit P-25D.

11

12

13

500-11-059300-208

PAGE: 6

[32] In November 2013, Callidus confirmed that it would approve an increase of

$12 million, subject to Bluberi agreeing to an amended contract with more onerous

conditions. These included a “kicker” of $2,8 million or 5% of the “business enterprise

value” of Bluberi (whichever was greater) payable to Callidus upon the occurrence of a

default or upon repayment of the loan. Bluberi agreed.¹⁴

[33] In June 2014, Callidus approved a credit facility for an additional $10 million.¹⁵

However, Bluberi alleges that when expenses, penalties, fees and interest are taken into

consideration very little of the money went to operating expenses.

[34] Callidus made changes to Bluberi’s management appointing a new Sales Director

and a new Chief Operating Officer.

[35] In June 2015, Callidus extended another credit facility for $14 million.¹⁶According

to Bluberi, the entire amount was used to pay for interest, fees and penalties to Callidus.

The new arrangement also entailed modification to Bluberi’s board of directors with three

of the four members being close to Callidus.

[36] Bluberi alleges that from that point on, Callidus made decisions that were prejudicial

to Bluberi (for example starting to sell cabinets at liquidation prices in September 2015)

or failed to approve strategies that were in Bluberi’s interest (for example cancellation of

the development of Jaguar circuit board and the Cole Kepro new gaming cabinet in June

2015, the delaying of a transaction with Primero, etc.) and that were subsequently

implemented when Callidus took over control of Bluberi.

[37] In November 2015, the differences between Callidus and Bluberi came to a head.

Callidus refused to fund the November 12 payroll unless Duhamel signed a Voting Trust

Agreement increasing Callidus’ control over the company.¹⁷Duhamel refused. Callidus

threatened to forcefully seize the shares of BGI¹⁸culminating in Bluberi filing proceedings

(the “CCAA Proceedings”) under the Companies’ Creditors Arrangement Act (the

“CCAA”).¹⁹

[38] In its petition, Bluberi alleged that its liquidity issues were the result of Callidus taking

de facto control of the corporation and dictating a number of purposefully detrimental

business decisions. According to Bluberi, Callidus engaged in this conduct in order to

deplete the corporation’s equity value with a view to owning Bluberi and, ultimately, selling

it.²⁰

14

Exhibit P-25E.

Exhibit P-25G.

Exhibit P-29.

Exhibit P-59.

Exhibit P-64.

Exhibit P-65.

Bluberi’s petition, paras. 14, 22, 25, 138 and 176.

15

16

17

18

19

20

500-11-059300-208

PAGE: 7

[39] On November 12, 2015, Justice Jean-François Michaud granted an Initial Order that

included a stay of proceedings against Bluberi (the “Stay of Proceedings”). Ernst &

Young was eventually appointed Monitor to the company.²¹In December 2015, Joe

Pernica (“Pernica”) of Pernica Advisory Services Inc. was appointed as Chief

Restructuring Officer (the “CRO”).

[40] The CCAA Proceedings were vigorously contested.²²

[41] In January 2016, the court approved an expedited sale and solicitation process

(“SSP”) for the assets of Bluberi.²³

[42] Eventually, Callidus made a “credit bid” for Bluberi’s assets, in an amount

corresponding to its debt at the time less $3 million (approximately $91 million when the

bid was entered), which no prospective purchaser matched.²⁴

[43] In June 2016, the court approved Callidus’ bid and the transaction closed in

February 2017.

[44] Callidus thus acquired almost all of Bluberi Gaming’s assets, which were then

integrated into Callidus’ own existing casino operations, namely with Gateway Casinos &

Entertainment Ltd. (“Gateway”).

[45] The Superior Court allowed Bluberi to retain its litigation rights against Callidus.

[46] Because Bluberi has no other assets, the Superior Court approved litigation funding

to allow Bluberi to pursue its lawsuit.

[47] In its proceedings first filed in November 2018, Bluberi alleges that Callidus and its

directors and officers (Defendants Glassman, Reese and Riley) engaged in predatory

lending practices which forced Bluberi to seek protection under the CCAA. They add that

Callidus’ conduct during the CCAA proceedings impeded Bluberi’s restructuring efforts

and led to the liquidation of Bluberi’s assets.

[48] Plaintiffs are also suing Catalyst, Callidus’ parent company on the basis that Callidus

is the alter ego of Catalyst.

ANALYSIS

[49] Defendants ask that Plaintiffs’ case be dismissed on the basis that it is time-barred.

They allege that all of the elements of civil liability forming their right of action were known

to Plaintiffs prior to November 7, 2015.

21

Exhibit P-66.

22

As appears in part from Callidus’ contestation of Bluberi’s petition for CCAA protection; exhibit P-67.

Exhibit P-71.

Exhibit P-74.

23

24

500-11-059300-208

PAGE: 8

[50] In the alternative they ask that for partial dismissal on the basis that:

50.1.The Trusts and Duhamel lack sufficient interest to be claimants in the

application or, alternatively, that they lack sufficient interest to seek damages

for the alleged loss of Bluberi’s enterprise and to seek punitive damages; and

50.2.The conclusions sought in the application in relation to: a) punitive damages;

b) the annulment of Duhamel’s personal guarantee; and c) the seizure and

sale of the shares of BGI for the execution of a judgment to be rendered in

Plaintiffs’ favour are unfounded in law.

[51] In a second motion Defendants ask that certain paragraphs of the Damage

Proceedings be struck because they: a) consist of similar fact evidence; or b) speculative

or hypothetical.

[52] Defendants Motions raise the following questions and sub-questions:

52.1.Should Plaintiffs’ case be totally or partially dismissed because it has no real

chance of success even assuming the alleged facts are proven?

a) Should the case be totally dismissed against all Plaintiffs because it is

time-barred?

b) Should the conclusions on the annulment of the personal guarantee be

dismissed?

c)

Should the conclusion regarding the seizure of Bluberi Gaming Canada

Inc. shares be struck?

52.2.Should the case be totally or partially dismissed with regard to Duhamel or the

Trusts for lack of interest?

52.3.Should certain of the allegations of Plaintiffs action be struck?

Tardiness

[53] Before addressing these questions, the Court must deal with Plaintiffs’ preliminary

argument with regard to the tardiness of the motions.

[54] Defendants are correct to point out that a case protocol is a judicial contract that

binds the parties. In many instances it may be important to bar late motions that would

500-11-059300-208

PAGE: 9

have the effect of unduly delaying proceedings. This is especially the case when the

matter is ready to be heard or when a delay agreed to in the protocol has elapsed.²⁵

[55] However, a case protocol is not a straightjacket.²⁶The fact that a party failed to

announce a motion in a case protocol does not imply a renunciation of its rights to present

one.²⁷Courts have held that the delays to file motions to dismiss²⁸or motions to strike

allegations²⁹are not peremptory. Cases evolve over time. Arguments ripen. Proceedings

are amended. These changes often influence the parties’ analysis of their case and the

way they decide to present it or respond to it. The particular fashion in which a case

unfolds should definitely be examined before a party is deprived of its rights for failing to

conform to the case protocol.

[56] In the present case, the Damage Proceedings were initially stayed for months.

[57] The first case protocol was signed by the parties in February 2021. In it, Defendants

mention that they reserve their rights to file other preliminary motions following their

receipt of particulars and documents.

[58] Plaintiffs point to case law that states that a “reservation of rights” in the conclusions

of a judgment has no effect.³⁰They conclude that the same applies to statements in a

case protocol and thus that Defendants’ notice should be ignored. This argument is

unfounded.

[59] It is true that when they are filling in a case protocol, the parties should identify fixed

dates for any pre-trial matter as opposed to dates that are contingent upon other events.

Such a requirement respects the teachings of the C.C.P. which states that the protocol

must “set the deadlines to be met within the strict time limit for trial readiness” (art. 148

C.C.P.). Therefore, a notice to the effect that other motions may be filed when

amendments or documents are received does not respect the spirit of a case protocol.

[60] This being said, while one of the purposes of the protocol is to establish a schedule

for pre-trial matters, its goal is also to give notice to other parties of one’s intention to

avoid surprises on their part. The C.C.P. also provides, for the possibility “if warranted by

the complexity of the case or by special circumstances” for a complementary protocol to

25

9091-4532 Québec inc. (X-Métal) c. Construction Polaris inc., 2019 QCCS 1437; Dubois c. 2857-3640

Québec inc. (Ferme Desjardins et Filles), 2017 QCCS 5805; Honco inc. c. Société canadienne de

transfert technologique (4 SCATT) inc., 2009 QCCS 5183.

Scene Holding Inc. c. Galeries des Monts inc., 2016 QCCA 1662, para. 27.

26

27

SSAB Hardox c. McCarthy, 2006 QCCA 152, para. 15; Développement Olymbec inc. c. Avanti Spa de

jour, 2016 QCCS 4320, para. 18.

28

Arbour c. Duclos, [2004] n^oAZ-50236370 (C.S.), para. 18; Formont inc. c. Progère Construction inc.,

J.E. 2004-832 (C.S.), para. 5; Filtrum inc. c. Roch Lessard (2000) inc., J.E. 2004-833 (C.S.), para. 17

(Withdrawal of appeal (C.A., 2004-08-05) 200-09-004779-044).

Thomas c. Transport Watson Montréal ltée, 2011 QCCA 262, para. 10.

Droit de la famille — 21366, 2021 QCCA 453, para. 17; Blumenthal c. Di Zazzo, 2020 QCCA 1032,

29

30

para. 15 (Application for order to reopen investigation abusive and dismissed, 2021 QCCS 3834).

500-11-059300-208

PAGE: 10

provide for points that could not be determined at the case protocol stage. It also allows

the parties to “identify certain points on which they were unable to reach an agreement”

(art. 148 C.C.P. in fine). The C.C.P. also allows for disclosure and filing of preliminary

exceptions at another time “with the authorization of the court” (art. 166 C.C.P.).

[61] This is what happened here.

[62] On November 25, 2021, a case management conference took place before Justice

Christian Immer. The court prayed act of Plaintiffs’ undertaking to file a re-modified

application by December 3, 2021, and allowed Defendants to file their motions by

December 29, 2021. On December 31, 2021, after the motions were filed, the parties

reappeared before Justice Immer and hearing dates were scheduled. These decisions

were not appealed.

[63] Case management decisions by the court are “considered to be part of the case

protocol” and “they govern the conduct of the proceeding together with the case protocol”

(art. 159 C.C.P.). While such measures can be revised, this should only happen in the

presence of a change in circumstances.³¹No such change occurred here.

[64] Furthermore, no prejudice is suffered by the presentation of these motions. Plaintiffs

are not taken by surprise. The case remains in its preliminary stages. Defendants have

yet to file their plea and depositions have not yet taken place.

[65] When the above circumstances are considered, it would not be appropriate to

dismiss the motions simply because they were not disclosed at the outset.

[66] It is thus necessary to delve into the merits of the motions and analyze the factors

identified by the jurisprudence for each of them.

[67] However, the fact that Defendants’ motions were filed so long after they received

notice of the Damage Proceedings is a factor that can be taken into consideration when

assessing the legal costs that should be paid in the event the motions are successful.³²

The Motion to Dismiss for Lack of Reasonable Chances of Success

Legal Principles

2.1.1 General principles

[68] The principles applicable to a motion to dismiss at the pre-trial stage of litigation are

well known. They can be summarized as follows:

31

Pop c. Boulanger, 2017 QCCA 1009, paras. 38 and 39.

Art. 341 CCP; Luc CHAMBERLAND and al., Le Grand Collectif: Code de procédure civile:

32

commentaires et annotations, 4th ed., volume 1, Montreal, Éditions Yvon Blais, 2019, s. 168.

500-11-059300-208

PAGE: 11

68.1. The sound administration of judicial resources is essential to guarantee

access to justice. To ensure this sound administration, the courts have been

granted tools to terminate unfounded claims, even at the preliminary

stage.³³

68.2. However, the consequences of dismissing an action at a preliminary stage

are serious. Thus, the cardinal principle of access to justice also requires

the court to be circumspect in the exercise of this power. As a general rule,

the power to terminate litigation must be used “sparingly”. Premature

termination should be avoided unless the recourse is “necessarily doomed

to fail” and the situation is “clear and obvious”.³⁴

68.3. Whether the motion to dismiss alleges that a proceeding is “unfounded in

law even if the facts alleged are true” (art. 168.2 C.C.P.) or alleges that it is

abusive on the ground that it is “clearly unfounded, frivolous or intended to

delay” (art. 51 C.C.P.), the rule is the same: one must act with “the greatest

caution”. The motion will only be granted if it is clear that further

consideration would be redundant.³⁵

68.4. In the case of a motion under article 168.2 C.C.P., the purpose of the review

is to determine whether the conclusions sought are consistent with the facts

and exhibits alleged which are then assumed to be true. This assumption

applies to the facts themselves not to their characterization by the parties.³⁶

68.5. When the motion is based on article 51 C.C.P., the court may use the entire

record, including any proceedings, exhibits as well as examinations already

filed.³⁷

33

34

Brunette v. Legault Joly Thiffault, s.e.n.c.r.l., 2018 SCC 55 (hereinafter “Brunette”), paras. 48 and 49;

Hryniak v. Mauldin, 2014 CSC 7, paras. 1 to 5 (Application to the Supreme Court rejected (C.S. Can.,

2014-05-01) 34641); Canada (Procureur général) c. Confédération des syndicats nationaux, 2014 CSC

49, para. 16; Canada (Attorney General) v. Lameman, 2008 SCC 14.

Canada (Procureur général) c. Confédération des syndicats nationaux, supra, note 33, paras. 1, 17

and 18; Bélanger c. Condominiums Onyx inc., 2021 QCCA 893, para. 2; Fanous c. Gauthier, 2018

QCCA 293, paras. 15 and 16; Joyce c. Association internationale des débardeurs / International

Longshoremen's Association, 2016 QCCA 1042, para. 35; Bohémier c. Barreau du Québec, 2012

QCCA 308, para. 17; Acadia Subaru c. Michaud, 2011 QCCA 1037, paras. 30 and 31 (Motion for leave

to appeal to Supreme Court denied, 34383); Entreprises Pelletier & Garon (Toitures inc.) c. Agropur

Coopérative, 2010 QCCA 244, para. 4.

Canada (Procureur général) c. Confédération des syndicats nationaux, supra, note 33, paras. 17 and

18; Aliments Breton (Canada) inc. c. Bal Global France Canada Corporation, 2010 QCCA 1369, para.

37; Acadia Subaru c. Michaud, supra, note 34, paras. 30 and 31; Développements Cartier Avenue inc.

c. Dalla Riva, 2012 QCCA 431, para. 66; Masse c. Veilleux, 2018 QCCS 2928, para. 13.

Canada (Procureur général) c. Confédération des syndicats nationaux, supra, note 33, para. 20;

Fanous c. Gauthier, supra, note 34, para. 14; Bohémier v. Barreau du Québec, supra, note 34, para.

66(1).

35

36

37

8187819 Canada inc. c. Dumoulin, 2017 QCCS 19, para. 34; Masse c. Veilleux, supra, note 35, para.

13.

500-11-059300-208

PAGE: 12

68.6. The motion to dismiss can apply to the whole proceeding or to part of it.³⁸

68.7. The court must not consider the degree of difficulty that a party may have in

proving its allegations.³⁹

68.8. If the situation is clear or, if it is based solely on the resolution of a specific

question of law, the court must decide without unnecessarily postponing the

analysis of the problem to a later stage.⁴⁰

68.9. However, contested questions of fact or of mixed fact and law should be left

to the discretion of the trial judge, rather than being decided on a motion to

dismiss, since they undoubtedly benefit from further factual examination.⁴¹

2.1.2 The Special Case of the Limitation Period

[69] Caution is all the more warranted where the motion to dismiss alleges that the claim

is prescribed. Indeed, the determination of the day on which a right of action arises (i.e.:

the day that prescription begins to run) is a question of fact (or of mixed fact and law) that

often, if not always, depends on an assessment of the circumstances of each case.⁴²

[70] Thus, while dismissal of an action on the basis of prescription remains possible,⁴³

the situation must be unequivocal.

38

Art. 168.2.

39

Bohémier v. Barreau du Québec, supra, note 34, para. 66(3); 8187819 Canada inc. c. Dumoulin, supra,

note 37, para. 34; Masse c. Veilleux, supra, note 35, para. 13.

Gillet c. Arthur, [2005] R.J.Q. 42 (C.A.), para. 29 (Application for leave to appeal to the Supreme Court

40

dismissed, 30769); Fortin c. Tribunal des droits de la personne et des droits de la jeunesse, 2016 QCCS

3376, paras. 19 and 20; 8187819 Canada inc. c. Dumoulin, supra, note 37, para. 34; Masse c. Veilleux,

supra, note 35, para. 13.

41

Mallat c. Autorité des marchés financiers de France, 2021 QCCA 1102, para. 124; 3952851 Canada

inc. c. Groupe Montoni (1995), division Construction inc., 2017 QCCA 620, para. 34; Fanous c.

Gauthier, supra, note 34, para. 16; Marchand c. Timu, 2019 QCCS 4552, para. 45.

Pellerin Savitz LLP v. Guindon, 2017 SCC 29, para. 11; Christensen v. Roman Catholic Archbishop of

42

Québec, 2010 SCC 44, para. 2; 3632831 Canada inc. c. 4210310 Canada inc., 2018 QCCA 947, para.

18; 3952851 Canada inc. c. Groupe Montoni (1995), division Construction inc., supra, note 41, para.

34; Beaulieu v. Paquet, 2016 QCCA 1284, para. 20; J.V. c. Compagnie d'assurance-vie Croix Bleue,

2013 QCCA 1686, paras. 6 and 18; S.C. c. Archevêque catholique romain de Québec, 2009 QCCA

1349, para. 130 of Justice Chamberland’decision (confirmed by the Supreme Court of Canada, 2010

CSC 44); Air Transat AT inc. c. Taillefer, 2006 QCCA 18, para. 8; Roberge (Succession de Filteau

Roberge) c. Charland-Tousignant, 2019 QCCS 3281, paras. 28 to 32; Gestion Martin D'Astous inc. c.

WSP Canada inc., 2018 QCCS 5464, paras. 61 and 62; Dubeau c. Lessard, 2015 QCCS 6144,

para. 40; Ordre des Dominicains ou Frères prêcheurs au Canada (ODD) c. CIBC Wood Gundy inc.

(WG), 2014 QCCS 367, paras. 29 and 30.

43

Desforges c. Ratté, 2006 QCCA 1519; Rosenberg c. Canada (Procureur général), 2014 QCCA 2041;

9193-4265 Québec inc. c. Rubin & Rotman inc., 2016 QCCS 3487; Ville de Mascouche c. Architectes

Rivest-Jodoin & Associé, 2019 QCCS 1996.

500-11-059300-208

PAGE: 13

[71] For claims that seek to enforce a personal right for which no prescriptive period is

determined, the limitation period is three years from the day on which the right of action

arose.⁴⁴The day on which the right of action arises determines the beginning of the period

of extinctive prescription.⁴⁵The right of action arises when the plaintiff becomes aware of

the fault, the damage and the causal link between the two. Knowledge of these three

elements must exist with a sufficient degree of certainty which goes beyond suspicion,

fear, conjecture or a mere possibility.⁴⁶The injury must be concrete. It must have

materialized, been incurred and be present (even if it cannot always be immediately

quantified).⁴⁷

[72] On this last point, authors Baudouin, Deslauriers and Moore⁴⁸note that, as

confirmed by article 2926 C.C.Q., when the appearance of the damage is delayed in

relation to the fault, the case law considers that the prescription period starts from the day

when the damage occurs, since it is only at that moment that the legal conditions for the

right to sue are finally met.

[73] Author Céline Gervais adds:⁴⁹

La question de la connaissance du dommage ou du préjudice appelle certains

commentaires. Le dénominateur commun à toutes les situations où est examinée

la question du préjudice tient au fait que sa manifestation doit être certaine. Il faut

en effet que le dommage ait débuté, et qu’on en perçoive les premiers effets. La

jurisprudence parle du moment où le dommage s’est réalisé, d’un préjudice actuel

et certain, d’un dommage qui s’est cristallisé, ou encore du moment où le

demandeur pouvait connaitre et évaluer sa perte. […]

[L]e préjudice simplement hypothétique ou le préjudice de droit ne sont pas

suffisants pour faire naître la prescription. On peut penser à titre d’exemple à

l’hypothèse où une décision est annoncée, dont on sait qu’elle causera très

certainement un préjudice. En ces cas, la jurisprudence conclut que ce n’est pas

au moment de l’annonce d’une décision ou d’une mesure que débute la

prescription, mais plutôt au moment de son entrée en vigueur ou de sa mise en

application. Il faut en effet attendre que le dommage soit tangible.

44

Art. 2925 CCQ.

Art. 2880 CCQ.

45

46

Dehgahi c. Dufresne, 2021 QCCA 1428, para. 11; Pelletier c. Demers, 2021 QCCA 252, para. 33

(Application allowed in part, 2021 QCCQ 13671); Lavoie c. Latouche, 2019 QCCA 2116, para. 69;

Laniel Supérieur inc. c. Régie des alcools, des courses et des jeux, 2019 QCCA 753, para. 41; Beaulieu

c. Paquet, supra, note 42, para. 17; Bolduc c. Lévis (Ville de), 2015 QCCA 1428, para. 53; Bomba c.

Thomas, B.E. 2004BE-501 (C.A.), para. 11.

47

Pelletier c. Demers, supra, note 46, para. 33; Laniel-Supérieur inc. c. Régie des alcools, des courses

et des jeux, supra, note 46, paras. 47 and 48.

48

Jean-Louis BAUDOUIN, Patrice DESLAURIERS et Benoît MOORE, La responsabilité civile, 8^eéd.,

volume 1, Cowansville, Éditions Yvon Blais, 2014, para. 1-1322.

Céline GERVAIS, La prescription, Cowansville, Yvon Blais, 2009, pp. 111 and 112.

49

500-11-059300-208

Discussion

2.2.1 Dismissal on the basis of prescription

PAGE: 14

[74] Defendants ask that Plaintiffs’ case be dismissed because it is time barred.

[75] Plaintiffs first filed their Damage Proceedings against Defendants on November 7,

2018.

[76] Given the three-year limitation period, Plaintiffs claim would be time barred if the

cause of action arose before November 7, 2015.

[77] Defendants plead that most of the faults alleged against the Defendants took place

during the pre-contractual and contractual phases of the business relationship. These

faults include:⁵⁰

77.1.Repeatedly imposing changes, at the eleventh hour, to commercial terms

already agreed upon, after having engineered months of overdraft and

financially squeezing Bluberi, forcing it to agree under financial duress to terms

it would not otherwise have accepted;

77.2.Taking advantage of the Blocked Account, precluding or delaying payments to

critical suppliers and utilities, accountants and financial advisors, as well as to

gaming commissions for gaming licenses and fees, all of which caused

significant damage to Bluberi’s operations and commercial relationships;

77.3.Taking inordinate amounts of time to provide authorizations or respond to

urgent requests, frequently on the pretext that approval was required from

Callidus’ “credit committee”, which also caused significant damage to Bluberi’s

operations and commercial relationships;

77.4.Interfering directly in Bluberi’s commercial operations despite Bluberi not

having been declared formally in default; this included imposing certain

executives and outside financial advisors on Bluberi, who had no knowledge

of Bluberi’s business or market niche, to make decisions which were not in

Bluberi’s best interests, all in the guise of protecting Callidus’ “investment”; and

77.5.Rendering Bluberi unable to make debt repayments when due, which Callidus

used as a pretext to impose increasingly onerous financial terms and

conditions; this vicious circle caused a $40 million loan to balloon to over $130

million, thereby in effect rendering Bluberi beholden to Callidus.

50

Damage proceedings, para. 7 and Amended Application for the Issuance of an Order Extending the

Stay of Proceedings and for an Order Authorizing Litigation Funding and a Litigation Financing Charge

dated February 15, 2018, para. 8 (exhibit R-8).

500-11-059300-208

PAGE: 15

[78] In short, Bluberi alleges that Callidus was not so much interested in allowing Bluberi

to repay its loan but preferred to keep Bluberi indebted until repayment was impossible,

at which point Callidus could acquire Bluberi and exploit an otherwise valuable business

for itself.⁵¹

[79] Defendants are correct to point out that many of the alleged faults occurred prior to

November 7, 2015. It is also true that in many instances in the Damage Proceedings,

Plaintiffs allege that Defendants’ strategy became clear.⁵²However, that is not

determinative.

[80] As mentioned above, prescription does not start running before the damage occurs.

This damage, according to the complaint, occurred when Callidus acquired Bluberi’s

assets depriving the company of its property.⁵³The expedited SSP for Bluberi’s assets

was ordered in January 2016. Callidus filed a credit bid shortly thereafter which was

approved in June 2016. The transaction closed in February 2017.⁵⁴According to Bluberi

this is when their damages occurred. Prior to the acquisition, they plead that the damages

remained a mere possibility.

[81] Indeed, Bluberi’s Petition for the Issuance of an Initial Order filed on November 11,

2015, alleges that restructuring remains possible.⁵⁵The initial report of the monitor dated

November 16, 2015, echoes this possibility.⁵⁶Defendants themselves seem to agree as

they allege in their contestation to the CCAA Proceedings that Bluberi is “not cash flow

insolvent”.⁵⁷In a judgment dated December 15, 2015, granting an extension of the stay

of proceedings, Justice Michaud noted that Bluberi continues “to pursue a value

maximization strategy […], to assess their alternatives to refinance, recapitalize, find a

strategic partner to develop a business plan and/or develop a sale process for the benefit

of all stakeholders”. He adds that these alternatives are not “doomed to fail”.⁵⁸

[82] Had Bluberi’s restructuring efforts been successful, it is possible that no damages

would have been incurred.

[83] Thus, while the alleged damages were certainly a possibility in November 2015, it

cannot be established with certainty at this stage that they had materialized at that time.

It follows that when the allegations of the Damage Proceedings are taken to be true, it

cannot be said that Plaintiffs’ claim is time barred.

51

Damage proceedings, para. 145.

Damage Proceedings, paras. 153, 159 and 189.

Damage proceedings, paras. 345.8, 348 and 353.

Damage Proceedings, para. 293.

Exhibit P-65, paras. 40, 150, 151 and 169.

First Report of the Monitor dated November 16, 2015, paras. 38 and 43.

Exhibit P-67, Contestation of Callidus Capital Corporation dated November 16, 2015, paras. 5b) and

52

53

54

55

56

57

128 to 130.

58

9354-9186 Quebec Inc. c. Ernst & Young Inc Controleur, C.S., Montréal, 500-11-049737-154,

December 15, 2015, j. Jean-François Michaud.

500-11-059300-208

PAGE: 16

[84] In addition, Plaintiffs also allege faults that occurred after November 7, 2015. For

example, they allege that Defendants acted in bad faith in the course of the CCAA

Proceedings and thus impeded Bluberi’s restructuring efforts.⁵⁹

[85] Therefore, even if the Defendants’ arguments are serious, the Court cannot be

satisfied that the present situation constitutes a clear and unequivocal case, as required,

for dismissal to be ordered at this preliminary stage of the case. The matter is thus best

left to the trier of fact.

[86] Defendants argue that they will be prejudiced if they are forced to go through a

lengthy and costly trial. This is undoubtedly the case. Nonetheless, the following

comments by Justice Léger respond to this argument:⁶⁰

[14] L’argument invoqué par l’appelante d’un procès inutilement long et complexe,

vu le nombre d'employés que représente l’intimée, est essentiellement un argument

théorique. Au demeurant, il n’est pas convaincant si on le compare au grave

préjudice que représenterait un rejet prématuré de l’action que l’intimée a intentée.

2.2.2 The Annulment of Duhamel’s Personal Guarantee

[87] With respect to Duhamel’s personal guarantee,⁶¹Plaintiffs seek the following

conclusion:

ORDER and DECLARE, de benne esse, that the personal guarantee executed by

Gerald Duhamel on August 31, 2012, as subsequently amended, modified or

restated, is null, void, and inoperative, à toutes fins que de droit.

[88] Plaintiffs allege that this conclusion is justified by the allegations of false

representations and by the fact that the debt is extinguished.⁶²

[89] These allegations, which must be considered as true for the purpose of a motion to

dismiss, could possibly support the conclusions sought.⁶³

[90] This question is also best left to the judge who will hear the case on the merits.

2.2.3 The Seizure and Sale of the Shares of Bluberi Gaming Canada Inc.

[91] Plaintiffs seek the following conclusion:

59

Damage Proceedings, paras. 10 and 276 to 298.

BPR-Bechtel inc. c. Commission des normes du travail, 2011 QCCA 766, para. 14.

Exhibit R-12.

Damage Proceedings, paras. 178 to 187 and 302.

60

61

62

63

Larkin c. Boissonneault, [2003] R.D.I. 718 (C.A.), para. 43; Banque HSBC Canada c. Métivier, 2017

QCCS 2900, para. 63.

500-11-059300-208

PAGE: 17

DECLARE that any of the plaintiffs can seize and sell any or all of the shares of

Bluberi Gaming Canada Inc. for the execution of any judgment to be rendered in

their favour.

[92] Plaintiffs allege that this conclusion goes with the one before it asking that the sale

of the shares of Bluberi Gaming Canada Inc. not be set up against Plaintiffs.⁶⁴

[93] The Court of Appeal has recognized that a declaration of unenforceability can in

certain circumstances, allow the creditor to seize the property in the hands of the person

holding it as if it still belonged to the debtor.⁶⁵

[94] This question is also best left for the judge tasked to hear the case on the merits.

The Motion to Dismiss for Lack of Personal Interest

[95] Defendants seek the partial dismissal of the Damage Proceedings on the grounds

that several Plaintiffs do not have a sufficient interest. In particular, they allege that the

Trusts and Duhamel have no claim in law for loss of value of the Bluberi shares.

Conclusion

[96] The motion to dismiss with regard to the lack of interest of Duhamel is dismissed as

partial dismissal for lack of interest is not possible and Defendants concede that Duhamel

has a sufficient interest for at least part of the claim.

[97] The motion to dismiss with regard to the Trusts is granted as the Trusts do not have

a sufficient interest to claim for losses that were suffered by Bluberi.

Legal Principles

3.2.1 General principles

[98] A person who wishes to file a judicial claim must have a sufficient interest.⁶⁶This

“sufficient interest” has been defined as the benefit a plaintiff will derive from the

proceeding he or she brings, assuming that it is well founded. In order to be considered

sufficient, the interest must be “direct and personal” and cannot be premised on another

party’s right of action.⁶⁷

64

Damage Proceedings, paras. 345.1 to 345.14.

Sakellaropoulo c. SLV Films inc., 2019 QCCA 333, para. 42; Levasseur c. 9095-9206 Québec inc.,

65

2012 QCCA 45, para. 102; Didier LLUELLES and Benoît MOORE, Droit des obligations, 3rd ed.,

Montréal, Éditions Thémis, 2018, para. 2865.

Art. 85 CCP.

Brunette, para. 14; Jeunes Canadiens pour une civilisation chrétienne c. Fondation du Théâtre du

66

67

Nouveau-Monde, [1979] C.A. 491, p. 493 (Motion for leave to appeal to the Supreme Court denied

(C.S. Can., 1980-02-07).

500-11-059300-208

PAGE: 18

[99] “[T]o have the necessary interest to bring an action, a person must have sustained

personal injury”.⁶⁸

[100]When a person lacks this sufficient interest, a party may seek that the application

be dismissed.⁶⁹

[101]The legal principles applicable to a motion to dismiss for lack of interest were

recently re-examined by the Supreme Court of Canada in Brunette. These principles can

be summarized as follows:

101.1. The existence of a sufficient interest is not presumed. Plaintiff must allege

the necessary facts to justify the sufficiency of his or her interest in a precise

manner.⁷⁰

101.2. While the principle of prudence applicable to motions to dismiss also applies

to motions to dismiss for lack of personal interest, sufficient interest is a

condition of admissibility of a claim. It follows that this interest must be

established before the court considers the claim on its merits. Thus, the

plaintiff must be able to justify his or her interest at the preliminary motions’

stage.⁷¹

101.3. Unlike the rule applicable to motions to dismiss alleging the claim is

“unfounded in law even if the facts alleged are true” (art. 168.2 C.C.P.), for

the purposes of a motion to dismiss for lack of interest, the court is not

required to treat the facts alleged as true.⁷²

101.4. Furthermore, while a motion to dismiss alleging the claim is “unfounded in

law even if the facts alleged are true […] can pertain to only part of the

application or defence” (art. 168.2 C.C.P.), this possibility is not open to

motions to dismiss based on the first paragraph of article 168 (for example

a motion to dismiss based on lack of sufficient interest). Thus, if a plaintiff

has an interest for part of the claim, the motion to dismiss will fail.⁷³

3.2.2 The Particular Case of a Shareholder Suing for Damages Suffered by

a Corporation

[102]It is trite law that corporations have a legal personality that is separate from its

shareholders. This entails that shareholders of corporations are shielded from

68

Bou Malhab v. Diffusion Métromédia CMR inc., 2011 SCC 9, para. 44.

Art. 168.1(3) CCP.

Brunette, para. 16.

69

70

71

Brunette, paras. 18,19, 46, 47, 48 and 49; Société d’habitation du Québec c. Leduc, 2008 QCCA 2065,

para. 15; Paradis c. Association des propriétaires VDA, 2007 QCCA 1736, para. 5.

Brunette, para. 20; Société d’habitation du Québec v. Leduc, supra, note 71, para. 16.

Wilson c. Dias, 2016 QCCS 1302, paras. 13 to 15.

72

73

500-11-059300-208

PAGE: 19

responsibility for liabilities incurred by the corporation even when the corporation has

insufficient funds to pay.⁷⁴

[103]This benefit comes with a corresponding limit on the rights of shareholders. The

distinct personality of corporations implies that they have a separate patrimony (art. 302

C.C.Q.) and that they have the capacity to exercise and enforce their legal rights (art. 303

C.C.Q.). As such, shareholders of corporations cannot personally make claims against

third parties for damages suffered by the corporation or for the loss of value of their shares

in the corporation.⁷⁵As the Supreme Court notes in Brunette: “The corporate veil is

impermeable on both sides; just as shareholders cannot be liable for faults committed by

the corporation, so too are they barred from seeking damages for faults committed against

it.”⁷⁶This principle has been recognized by Quebec courts on numerous occasions.⁷⁷

[104]Two reasons are generally invoked to refuse such claims. Firstly, the interest of the

shareholder is not considered personal as he or she is suing for a wrong caused to the

corporation and not to the shareholder. Secondly, the damages caused to the shareholder

are considered indirect and thus unrecoverable in civil law.

74

Paul MARTEL, La société par actions au Québec: les aspects juridiques, special edition, volume 1,

Montréal, Wilson & Lafleur/Martel, 2021, paras. 24 to 247; Charles CHEVRETTE and Pierre-Christian

COLLINS HOFFMAN, Responsabilité des administrateurs de sociétés par actions du Québec: sources

supplétives de responsabilité civile et pénale, Montréal, Éditions Yvon Blais, 2016, paras. 5 and 21.

P. MARTEL, supra, note 74, paras. 1-28, 1-28.1, 31-19 and 31-22.9.

Brunette, para. 27; Frédéric PÉRODEAU (as he then was), “Le sort réservé à la réclamation d’un

75

76

actionnaire pour la perte de valeur de ses actions: une revue de la jurisprudence québécoise” in

Barreau du Québec, Les dommages en matière civile et commerciale (2006), vol. 255, Cowansville,

Éditions Yvon Blais, 2006, pp. 5 and 6.

77

Groupe d’action d’investisseurs dans Biosyntech v. Tsang, 2016 QCCA 1923, paras. 23 to 27;

Backman v. Canadian Imperial Bank of Commerce, [2004] R.R.A. 776 (C.A.), at pp. 797 and 798;

Abattoirs Laurentides (1987) inc. v. Olymel, J.E. 2003-1262 (C.S.), paras. 129 to 134; Tardif v. Huot,

B.E. 2001BE-454 (C.S.) (Out of court settlement (C.A., 2001-08-07) 500-09-010695-013);; Cartier v.

Tessier, J.E. 99-1350 (C.S.); Moulin v. Aconvenbec Ltée, [1990] R.R.A. 577 (C.S.), p. 580; White c.

Banque Nationale du Canada, [1986] R.R.A. 207 (rés.) (C.S.) (Discontinuance of appeal (C.A., 1986-

09-16) 200-09-000240-868); Charland c. Banque canadienne impériale de commerce, J.E. 86-142

(C.S.); Crevier c. Paquin, [1975] C.S. 260, p. 264; Silverman v. Heaps, [1967] C.S. 536, p. 539.

500-11-059300-208

3.2.2.1 Insufficient Interest

PAGE: 20

[105]Because the company has its own right of action for breaches of contract and to

redress delictual faults committed against it, no cause of action vests in the shareholder

for such claims. As the English Court of Appeal observed: “When the shareholder

acquires a share he accepts the fact that the value of his investment follows the fortunes

of the company and that he can only exercise his influence over the fortunes of the

company by the exercise of his voting rights in general meeting.”⁷⁸If a shareholder

believes that the people who control the company are neglecting to take action, he or she

can obtain permission to file a derivative action.⁷⁹

[106]This rule also protects the interests of other creditors of the corporation. When the

company successfully sues a wrongdoer, all of its stakeholders benefit. The proceeds of

the lawsuit can be used to pay the company’s creditors. Only the surplus enhances

shareholder value. Allowing shareholders to sue directly for prejudice suffered by the

company would permit them to circumvent the rights of company creditors.⁸⁰

3.2.2.2 Indirect damage

[107]A party is entitled to damages that are the “immediate and direct consequence of

the debtor’s fault”.⁸¹

[108]As a corollary, damages which are indirect are not recoverable. Damages are

considered indirect when they are caused, not by the act of the wrongdoer, but rather by

the damage which the wrongdoer caused.⁸²

[109]For example, when shareholders claim damages against third parties further to the

insolvency of the corporation in which they own shares, these damages are considered

indirect. Such damages were not caused directly by alleged breach of the wrongdoers

who contributed to the insolvency but rather by the insolvency itself which in turn caused

the shares to lose value.⁸³

78

Prudential Assurance Co. v. Newman Industries Ltd. (No. 2), [1982] 1 All E.R. 354, p. 367, cited with

approval by the Supreme Court of Canada in Hercules Managements Ltd. v. Ernst & Young, [1997] 2

RCS 165, para. 59.

79

Canada Business Corporations Act, R.S.C. 1985, c. C-44, s. 239; Business Corporations Act, CQLR,

c. S-31.1, s. 445; P.MARTEL, supra, note 74, paras. 31-26.

Brunette, para. 53; Groupe d’action d'investisseurs dans Biosyntech c. Tsang, supra, note 77, para.

80

25.

81

Art. 1607 CCQ.

82

J.-L. Baudouin, P. Deslauriers and B. Moore, supra, note 48, no 1-684.

Groupe d'action d'investisseurs dans Biosyntech c. Tsang, supra, note 77, para. 23.

83

500-11-059300-208

PAGE: 21

3.2.2.3 Claims for injury caused to the shareholders and suffered by the

shareholders

[110]While it is theoretically possible for shareholders to possess their own right of action

against a defendant who committed a fault against the corporation, such an exceptional

claim requires two conditions:

110.1. that the defendant breached a distinct obligation owed to the shareholders;

and

110.2. that the breach resulted in direct damage suffered by the shareholders,

independent of the damage caused to the corporation.⁸⁴

[111]This is the scenario that the Supreme Court of Canada analyzed in Houle v. Banque

Canadienne Nationale. In Houle, the court concluded that because the bank was aware

that the shareholders had received an offer to purchase their shares, the bank owed a

distinct legal obligation to the shareholders, in addition to its contractual obligations owed

to the company. This obligation was to act reasonably and more specifically not to

prejudice the imminent sale of shares by exercising its contractual rights (i.e. demanding

payment of the loan) in an abusive manner. The shareholders completed their sale at a

price far lower than the offer they had received prior to the bank demanding repayment.

The bank was held liable for the difference.

[112]It is worth noting that Justice L’Heureux-Dubé was very careful to point out that her

decision was confined to this particular set of circumstances:⁸⁵

The respondents’ family and the family business had a financial relationship with

the bank encompassing more than fifty years. […] While this may indicate that the

bank’s relationship was not only with the “company” itself, but with the

shareholders personally, these facts alone would not be sufficient to create a legal

obligation on the part of the bank towards the respondent shareholders,

independent from its contractual obligations to the company. When banks enter

into financial relationships with small, family-owned companies, the above facts

are usually present. Generally speaking, contractual obligations do not entail a

general legal obligation to act reasonably towards third parties, but only contractual

obligations towards the parties to the contract.

[…] Although the obligation to repay the loan and the right to recall the loan formed

part of the contract between the bank and the company, no obligation of diligence

towards the shareholders arose from the contract itself. Such obligation arose from

the law (art. 1053 C.C.L.C.) in the light of the facts of this case.

[Underlining in the original text]

84

Brunette, paras. 29 to 31; Houle v. Banque Canadienne Nationale, [1990] 3 S.C.R. 122 (hereinafter

« Houle »).

Houle, p. 184.

85

500-11-059300-208

Discussion

3.3.1 Duhamel

PAGE: 22

[113]With regard to Duhamel, at the hearing, Defendants conceded that Duhamel has a

sufficient interest to claim for his loss of revenue and loss of salary (para. 355 of the

Damage Proceedings).

[114]As a motion to dismiss for lack of interest cannot be filed for part of a claim only, this

concession with regard to Duhamel’s standing brings about the dismissal of Defendants’

motion with regard to Duhamel.

[115]With regard to the Trusts however, the motion must succeed.

3.3.2 The Trusts

[116]The corporate structure of Bluberi is described by Plaintiffs⁸⁶as follows:

86

Exhibit P-4.

500-11-059300-208

PAGE: 23

[117]The Trusts directly or indirectly own shares in the Bluberi corporations. Duhamel

does not own shares. He is the trustee of the Trusts and the partial beneficiary of them.

[118]A trust creates a patrimony by appropriation. Once the settlor of trust transfers

property from his patrimony to the trust, this trust property becomes autonomous and

distinct from the property of the settlor. It is also separate and distinct from the property

of the trustees or of the trust beneficiaries. The settlor, the trustees or the beneficiaries

have no real right in the trust property.⁸⁷

[119]Applying the principles discussed by the Supreme Court of Canada in Brunette and

Houle, the Trusts cannot claim damages suffered by Bluberi or corresponding to the loss

of value of their shares in Bluberi.

[120]In order to demonstrate a sufficient interest, the Trusts were bound to allege precise

facts to establish that they had an independent cause of action in civil liability against the

Defendants. This required them to show: 1) that the Defendants breached a distinct legal

obligation owed to the Trusts; and 2) that this breach caused the Trusts to suffer a direct

injury distinct from the damages suffered by the Bluberi corporations.

[121]They have failed to do so.

[122]On the one hand, Plaintiffs do not allege an independent obligation owed to the

Trusts nor do they allege an independent fault that Defendants would have committed

towards them. Rather, the Damage Proceedings either:

122.1. deal with the faults in a bulk fashion as if each breach represents a fault of

the Defendants as a whole committed towards the Plaintiffs as a group; or

122.2. focus on abuse within the contractual relationship between the lender

Callidus and the borrowing Bluberi entities.

[123]For example:

123.1. Defendants have engaged in what can be characterized as “predatory

lending practices” in respect of the Plaintiffs (para. 7).

123.2. Callidus attempted to unilaterally modify the terms of the financing (paras.

85 and 105).

123.3. Callidus dispersed funds late forcing Bluberi to languish in overdraft and

incur interest and penalties (paras. 126, 141, 144 and 165) and forced

Bluberi to agree to different and more onerous terms (paras. 134, 159 and

226).

87

Art. 1260 and 1261 C.C.Q.; Yared c. Karam, 2019 SCC 62, para. 17; Levasseur v. 9095 9206 Québec

inc., supra, note 65, para. 74.

500-11-059300-208

PAGE: 24

123.4. Callidus thwarted Bluberi’s growth by blocking new projects and ideas

(paras. 152, 188 and 194).

123.5. Callidus replaced several key players within Bluberi and took control of the

board of directors (paras. 175, 180, 199 and 239).

123.6. Callidus prevented Bluberi from paying its suppliers on time (paras. 209 and

210).

123.7. Callidus demonstrated bad faith in the course of the CCAA Proceedings in

an attempt to prevent Bluberi from restructuring (paras. 297 and 316).

123.8. Defendants all participated in the conspiracy to provoke and unduly benefit

from the demise of Bluberi, to ultimately take ownership of the business,

and then attempt to stifle Plaintiffs’ ability to pursue this recourse (para.

304).

123.9. The tactics employed by Callidus against Bluberi—the incremental

stranglehold over and hemorrhaging of borrowers; the insidious takeover of

the operating borrowing entities; the replacement of managers and

directors; the provocation of insolvency situations—have been alleged in

other proceedings, by other borrowers of Callidus and is part of a pattern

(paras. 305 and 306).

123.10. Defendants’ conduct in this matter was premeditated, deliberate, animated

by bad faith and an intent to injure in order to provoke and then unduly and

unlawfully profit financially from Bluberi’s demise, as well as from the fruits

of Plaintiffs’ labour and investments (para. 311).

123.11. Defendants acted in bad faith in the context of: a) the implementation and

execution of the contractual and business relationship between Callidus and

Bluberi; b) in the context of the performance of the credit facility agreements

concluded between Callidus and Bluberi; and c) in the context of the

extinction of such obligations and contracts (paras. 319 to 321).

[124]Even when the Damage Proceeding highlights faults committed by one Defendant

in particular (paras. 63, 66 and 68), it does not distinguish between the fault committed

towards the Trusts and the faults committed towards Bluberi.

[125]Therefore, as was the case in Brunette, Plaintiffs confuse the obligations owed by

the Defendants to Bluberi and those owed to the Trusts.⁸⁸

[126]The same comment can be made with regard to the damages claimed.

88

Brunette, para. 37.

500-11-059300-208

PAGE: 25

[127]With regard to the loss of value of the Bluberi business, the claim makes no

distinction between the damages suffered by Bluberi and the damages suffered by the

Trusts.

353. Accordingly, accounting for the loss of enterprise sustained, less the moneys

effectively advanced by Callidus, Plaintiffs claim from Defendants (…) in solidum,

the sum of $198,600,000, sauf à parfaire.

[128]The Damage Proceedings contain no allegation that the Trusts suffered any

independent and direct injury as a result of faults committed by the Defendants which

would be independent from the faults purportedly committed against Bluberi.

[129]The modification made on the day of the hearing and in response to Defendants

motion to dismiss (changing solidarily to in solidum) is insufficient to satisfy the

requirement that the damages claimed by the shareholders be distinct from the damages

caused to the corporation. In fact, the inescapable conclusion is that Plaintiffs have failed

to distinguish the damages because these damages cannot be distinguished.

[130]That is not to say that Duhamel and the Trusts have not suffered from the potential

injury caused to Bluberi. Because the Trusts are the shareholders of Bluberi and Duhamel

is the beneficiary of the Trusts, any damage to Bluberi would have had consequences on

them. However, this impact is an indirect damage that cannot justify a sufficient interest.

[131]As the Supreme Court of Canada noted in Kosmopoulos v. Constitution Insurance

Co., “[h]aving chosen to receive the benefits of incorporation, [they] should not be allowed

to escape its burdens.”⁸⁹

[132]Thus, the Trusts’ claim does not satisfy the requirements for an autonomous cause

of action on behalf of the shareholders for losses suffered by the corporation.

[133]Plaintiffs plead that the existence of the SSP is a circumstance that brings the

present matter closer to the factual situation present in Houle rather than the situation

present in Brunette.

[134]This argument has no merit.

[135]Unlike the very particular factual situation in Houle, the Trusts had no offer on the

table for the purchase of the Bluberi shares. While Plaintiffs are correct that the SSP did

“not place limits on the form of transaction that may be put forward by a Qualified

Bidder”,⁹⁰given the indebtedness of Bluberi at the time, the SSP could not realistically -

and in fact did not - contemplate a sale of the Bluberi shares. The SSP specifically defines

89

Kosmopoulos v. Constitution Insurance Co., [1987] 1 S.C.R. 2, p. 11 cited with approval in Brunette at

para. 39.

90

Exhibit P-71, Sale Solicitation Process, p. 3, para. 1.

500-11-059300-208

PAGE: 26

the assets that are subject to the process as the “movable and immovable assets, rights

and undertakings” belonging to Bluberi⁹¹not those belonging to the Trusts.

[136]The same conclusion applies to punitive damages. As there are no allegations of

faults committed directly against the Trusts, there can be no punitive damages attached

to such faults.

[137]Moreover, punitive damages are exceptional. They can only be awarded when they

are “provided for by law.”⁹²

[138]Section 49 of the Charter of human rights and freedoms provides for this possibility

if there has been unlawful and intentional interference with a right protected by the

Quebec Charter. This requires: 1) that the wrongful behaviour constitute a violation of a

right protected by the Charter; and 2) that this interference be intentional, that is to say

that the consequences of the behaviour must have been intended or, at the very least,

that the immediate, natural or extremely probable consequences of this conduct must

have been known.⁹³

[139]Plaintiffs allege that they have been intentionally deprived of their right to peaceful

enjoyment and free disposition of property, in violation of article 6 of the Quebec Charter.

[140]As discussed above, Bluberi’s property is distinct from that of its shareholders. With

regard to the Trusts, there are no allegations to support a conclusion that they were

deprived of their property.

[141]The Trusts still hold their shares even though the value of the shares may have

suffered.

[142]The punitive damages claimed by the Trusts and Bluberi are one and the same. The

last-minute change to add the words “divided equally” do not deter from this conclusion:

356. Moreover, Plaintiffs are entitled to claim and do hereby claim the following

sums for punitive damages to be divided equally between the Plaintiffs, including

damages pursuant to the Quebec Charter of Rights and Freedoms and article 1621

CCQ:

(a) From Callidus: the sum of $10 million;

(b) From Catalyst: the sum of $10 million;

(c) from Defendant Glassman: the sum of $5 million;

(d) from Defendant Reese: the sum of $2 million;

91

Exhibit P-71, Sale Solicitation Process, p. 1, Introduction.

Art. 1621 CCQ.

Cinar Corporation v. Robinson, 2013 CSC 73, para. 114.

92

93

500-11-059300-208

(e) from Defendant Riley: the sum of $2 million.

PAGE: 27

[143]This court has not hesitated in the past to reject, even at a preliminary stage, claims

seeking punitive damages where the allegations of the claim do not support such an

award.⁹⁴

The Motion to Strike

Conclusion

[144]The motion to strike is granted in part.

[145]While the allegations regarding other potential abusive conduct by Callidus (paras.

305 to 307) could be minimally relevant, the Court is convinced that the time required to

investigate these allegations would infringe the rule which requires that pleadings be

proportionate, in terms of the cost and time involved, to the nature and complexity of the

matter and the purpose of the application.

[146]The allegations with regard to the appointment of the CRO (para. 283), the dispute

between Boyer and Callidus (paras. 308 to 310) as well as the allegation to the effect that

Bluberi was justified in refusing some of Callidus’ proposals (para. 112) all have a logical

connection to the dispute and their evaluation is best left to the trial judge.

Legal Principles

[147]Article 169 C.C.P. allows a party to ask that allegations or exhibits⁹⁵that are

immaterial to the dispute be struck. The purpose of the rule is to circumscribe the debate

between the parties and prevent it from being diverted or tainted by irrelevant allegations.

This benefits the parties as well as the judicial system as a whole as it avoids the

unnecessary costs and delays involved to refute or explain facts which are considered

immaterial or merely tangential to a dispute’s resolution.⁹⁶

[148]In general, evidence of any relevant fact is admissible.⁹⁷Evidence is relevant when

it aims at proving or refuting a fact in dispute or when it can help the court to assess the

probative value of testimony.⁹⁸As such, relevance of allegations must be measured by

94

Parisien c. Hôtel du Lac Tremblant inc., 2018 QCCS 2068 (Appeal dismissed, 2018 QCCA 2217); CFG

Construction inc. c. Régie du bâtiment, 2017 QCCS 5686, paras. 87 to 91; Singer c. 1867054 Alberta

Inc., paras. 92 to 96 (Motions for leave to appeal and to suspend the provisional execution of the

Superior Court judgment dismissed, 2017 QCCA 718).

Desmarteau c. Ontario Lottery and Gaming Corporation, 2013 QCCA 2090, paras. 26 to 31.

Thouin c. Ultramar ltée, 2014 QCCS 3946, para. 6.

95

96

97

Art. 2857 C.C.Q.

98

Groupe Ledor inc., mutuelle d'assurances c. Bourret, 2014 QCCA 1331, para. 2; Association des

propriétaires de Boisés de la Beauce c. Monde forestier, 2009 QCCA 48, paras. 19 and 20; St-Onge-

Lebrun c. Hôtel-Dieu de St-Jérôme, [1990] R.D.J. 56 (C.A.), para. 9; Domaine de la Rivière Inc. c.

Aluminium du Canada Ltée, [1985] R.D.J. 30 (C.A.), para. 15.

500-11-059300-208

PAGE: 28

their degree of connection with the subject matter of the dispute. When dealing with a

demand, one must consider the allegations in light of the cause of action and the

conclusions sought. When dealing with a contestation, allegations are material if they are

logically connected to the denial of plaintiff’s allegations.⁹⁹When in doubt as to whether

an allegation is relevant, one must usually trust the party making the allegation.¹⁰⁰

Prudence is all the more warranted in the presence of a complicated case that raises a

myriad of issues.¹⁰¹

[149]Conclusions, arguments, opinions, speculations or innuendoes in connection with

alleged facts are generally not useful.¹⁰²

[150]Moreover, even if a fact is logically relevant, a court retains the right to refuse

otherwise admissible evidence when its probative value is low and the evidence risks:

a) causing confusion with regard to the issues in dispute; b) unduly prejudicing a party, a

witness or a third party; or c) if it involves an inordinate amount of time which is not

commensurate with its probative value.¹⁰³

[151]This often quoted rule is even more important today when considered in light of the

guiding principles which require the Court to safeguard the principle of proportionality

(article 18 C.C.P.), ensure proper case management and “confine cases to what is

necessary to resolve the dispute” (article 19 C.C.P.).¹⁰⁴As justice Gaudet wisely

observes,¹⁰⁵the importance of these principles must be kept in mind when reviewing

jurisprudence that predates 2016. While such decisions are still generally relevant and

useful, one must ensure that the solutions they provide are compatible with the principles

established by the current Code of Civil Procedure, taking into account its general

philosophy and the shift it seeks to impose on judicial culture.

[152]As the Supreme Court of Canada¹⁰⁶reminds us “[e]nsuring access to justice is the

greatest challenge to the rule of law in Canada today”. In order to create an environment

promoting timely and affordable access to the justice system, “a culture shift is required

99

2733-4077 Québec inc. c. Kingsey Falls (Municipalité de), [2002] n^oAZ-50112289 (C.S.); Jolin c.

Montreal Trust Company of Canada, [1997] n^oAZ-50376640 (C.S.).

100

Groupe Ledor inc., mutuelle d’assurances c. Bourret, supra, note 98, para. 2; Corp. McKesson Canada

c. Losier, [2004] R.J.Q. 1178 (C.A.), paras. 21 to 23; St-Onge-Lebrun c. Hôtel-Dieu de St-Jérôme,

supra, note 98, para. 10.

Hydro-Québec c. Litostroj/Arno, s.e.n.c., 2015 QCCA 874, para. 2.

101

102

St-Gédéon (Municipalité de) c. Côté, 2016 QCCS 1950, paras. 13 to 17; Mercier c. Massé, 2011 QCCS

4834, para. 38.

103

Jean-Claude ROYER and Catherine PICHÉ, La preuve civile, 6th ed., Montréal, Éditions Yvon Blais,

2020, para. 218; Claude MARSEILLE, La règle de la pertinence en droit de la preuve civile québécois,

Cowansville, Éditions Yvon Blais, 2004, paras. 41 and following; R. c. Mohan, [1994] 2 R.C.S. 9; 9217-

4887 Québec inc. c. Yves Rocher Amérique du Nord inc., 2016 QCCS 5123, para. 32; Thouin c.

Ultramar ltée, supra, note 96, para. 9.

C. PICHÉ et J.-C. ROYER, supra, note 103, para. 211;

9217-4887 Québec inc. c. Yves Rocher Amérique du Nord inc., supra, note 103, para. 25.

104

105

106

Hryniak v. Mauldin, 2014 SCC 7, paras. 1 and 2 (Request for a new hearing at the Supreme Court

rejected, 34641).

500-11-059300-208

PAGE: 29

in order to create an environment promoting timely and affordable access to the civil

justice system”. This requires “moving the emphasis away from the conventional trial in

favour of proportional procedures tailored to the needs of the particular case. The balance

between procedure and access struck by our justice system must come to reflect modern

reality and recognize that new models of adjudication can be fair and just.”

[153]According to our highest court, the proportionality principle, enshrined in many

provincial procedural rules acts “as a touchstone for access to civil justice”. Applying this

rule requires “taking account of the appropriateness of the procedure, its cost and impact

on the litigation, and its timeliness, given the nature and complexity of the litigation”.¹⁰⁷

[154]Notwithstanding the above, at a preliminary stage, the concept of relevance should

be appreciated generously as the court then only has a superficial glimpse of the evidence

that a party intends to provide. A court seized with a motion to strike allegations must thus

proceed with caution.¹⁰⁸

[155]With regard specifically to similar fact evidence, there is no cardinal rule that allows

or excludes this type of evidence.

[156]Evidence of similar conduct has been admitted (or at least allegations of this type

have been allowed to remain) in the following cases:

156.1. Where the evidence establishes something other than the character of the

defendant, such as a system or modus operandi in the way he or she does

things;¹⁰⁹

156.2. To prove entitlement to punitive damages;¹¹⁰or

156.3. To prove gross negligence where evidence of prior negligent conduct in

similar circumstances might strengthen the case.¹¹¹

107

Ibid, paras. 31 and 32; Szeto v. Dwyer, 2010 NLCA 36, para. 53.

Hydro-Québec c. Litostroj/Arno, s.e.n.c., supra, note 101, para. 3; Desmarteau c. Ontario Lottery and

108

Gaming Corporation, supra, note 95, para. 32; Thomas c. Transport Watson Montréal ltée, supra, note

29, para. 14; Poulin c. Groupe Jean Coutu (PJC) inc., 2006 QCCA 49, para. 9; Corp. McKesson Canada

c. Losier, supra, note 100, para. 23.

109

C. PICHÉ et J.-C. ROYER, supra, note 103, para. 238; Rozon c. Les Courageuses, 2020 QCCA 5,

para. 94 (Application for leave to appeal to the Supreme Court dismissed (S.C. Can., 2020-11-16)

39115); Caron c. Voyer, 2013 QCCA 1335, para. 77 (Motion to dismiss appeal dismissed, 2011 QCCA

14); Thouin c. Ultramar ltée, supra, note 96, para. 16; Ébénisterie classique inc. c. Société en

commandite Gaz Métro, 2013 QCCS 1107, para. 44, Lescoat c. Bisson, [1989] R.J.Q. 2807 (C.S.), pp.

4 and 5.

110

Ébénisterie classique inc. c. Société en commandite Gaz Métro, supra, note 109, paras. 48 and 49;

Caron c. Clément, [2005] n^oAZ-50346603 (C.S.), paras. 18 to 20.

111

Thomas c. Transport Watson Montréal ltée, supra, note 29, para. 13.

500-11-059300-208

PAGE: 30

[157]However, similar fact evidence is exactly the type of evidence that is at risk of

offending the principle of proportionality. Indeed, its probative value is often limited and

yet it involves an inordinate amount of time which is often incommensurate with its

usefulness. Thus, similar fact evidence has been refused when:

157.1. Its sole purpose is to show bad character and lead the court to conclude

that one of the parties has a propensity to act in a reckless manner;¹¹²

157.2. A party is attempting to plead a case for other plaintiffs who are not a party

to the litigation;¹¹³

157.3. Admitting the evidence would have the effect of rendering the proceedings

unnecessarily long and cumbersome and transform a claim for damages

into a commission of inquiry.¹¹⁴

Discussion

4.3.1 The Allegations with Regard to Other Loan-to-Own Strategies

[158]The disputed allegations read as follows:

8. Although the Plaintiffs did not know it at the time, the behaviour described above

is consistent with the treatment that other borrowers have been subjected to by

Callidus, which has been the product of what can be described as a "loan-to-own”

strategy.

305. The tactics employed by Callidus against Bluberi—the incremental

stranglehold over and hemorrhaging of borrowers; the insidious takeover of the

operating borrowing entities; the replacement of managers and directors; the

provocation of insolvency situations—have been alleged in other proceedings, by

other borrowers of Callidus.

306. Callidus’ approach to Bluberi appears to be part of a discernable pattern.

Callidus has been accused of operating in a very similar manner in cases involving

Groupe Arsenault Inc. (Trois-Rivières, Québec); Fortress Resources, LLC

(Kentucky, USA); Xchange Technology Group LLC (Toronto, Ontario); ESCO

Marine, Inc. (Texas, USA); and Alken Basin Drilling Ltd. (Calgary, Alberta). Certain

principal proceedings pertaining to these matters, in which a similar pattern of

behaviour on the part of Callidus is alleged, are communicated en liasse as Exhibit

P-75.

112

C. MARSEILLE, supra, note 103, para. 96; 9219-9397 Québec inc. c. Steinberg, 2012 QCCA 725,

para. 10.

113

Poulin c. Groupe Jean Coutu (PJC) inc., [2005] n^oAZ-50308512 (C.S.)), para. 28 (confirmed by the

Court of Appeal, 2006 QCCA 49).

Ibid, para. 12; 9176-8531 Québec inc. c. Quizno's Canada Restaurant Corporation, 2016 QCCS 2233,

114

para. 22.

500-11-059300-208

PAGE: 31

307. Callidus has denied all allegations of wrongdoing and has, in many instances,

sued various parties, including journalists and claimants, for defamation and other

causes of action.

[159]Defendants allege that these allegations are irrelevant and would infringe the

proportionality rule.

[160]They also raise specific arguments with regard to two of the alleged cases.

[161]The ESCO Marine case was settled out of court.¹¹⁵It is a well-established principle

that settlements or settlement discussions cannot be alleged against a party. The purpose

of settlement privilege is to promote settlements. The privilege applies even when the

negotiations have been successful.¹¹⁶Thus, where a proceeding has been settled out of

court, no inference can be drawn from this settlement in a subsequent case.¹¹⁷

[162]The allegations made in the Groupe Arsenault case were dismissed by the court.¹¹⁸

[163]Thus for these two cases, the motion to strike is well founded as the allegations are

irrelevant.

[164]Plaintiffs allege that the allegations with regard to the other three cases are relevant

for two reasons:

164.1. First they demonstrate a pattern with regard to Callidus’ ultimate objective;

164.2. Secondly, they can be useful to demonstrate “intentional, malicious or

vexatious” conduct necessary for the conclusion related to punitive

damages.

[165]With regard to the first point, the relevance of similar allegations raised against

Callidus in other proceedings is minimal at best.

[166]For one thing allegations in other proceedings are not facts. A lawsuit is a unilateral

act that has not been submitted to the scrutiny of the court. Mere evidence of the

existence of a lawsuit - or even several lawsuits - against Callidus (although the alleged

facts may have some similarity to those alleged in the current proceedings) does not allow

conclusions to be drawn. There is no indication whether these lawsuits have any merit.¹¹⁹

115

Callidus Capital Corporation v. Esco Marine, Inc., 1:2014cv00280 | US District Court for the Southern

District of Texas | Memorandum and Order denying #141 MOTION to Reopen Case for Purpose of

Enforcing Settlement Agreement Against Defendant Andrew Levy (January 28, 2020).

Sable Offshore Energy Inc. v. Ameron International Corp., 2013 SCC 37, paras. 3 and 17.

116

117

Chubb du Canada, Cie d’assurances c. Ste-Foy (Ville), 2000 7681 (QC CA), para. 24; Juneau

c. Maison de l’Espoir Saguenay-Lac St-Jean Inc., [2005] n^oAZ-50333406 (C.S.), para. 21.

118

Groupe Arsenault inc. (Avis d'intention de), 2015 QCCS 898, para. 33.

Sécurité (La), compagnie d'assurances générales du Canada c. Venmar Ventilation inc., J.E. 2001-468

119

(C.S.) para. 29; Petitclerc c. Dubois, J.E. 2000-685 (C.S.), para. 9.

500-11-059300-208

PAGE: 32

The fact that some of the alleged cases have been settled or dismissed supports being

careful about such allegations.

[167]Moreover, even if the cases did have merit, the probative value of such evidence is

limited. To be considered relevant similar facts require the use of a pattern. The number

of similarities, the time frame, the identity of the protagonists, etc. need to be taken into

consideration. Here, the alleged cases concern other borrowers, in different industries

and located, for the most part, in other jurisdictions which have their own legal rules.

[168]All is a question of context. A creditor is not at fault for exercising security. If this

option is one that is made available by the lending documents, a bank can seize assets

or give a notice of taking in payment without incurring liability. Proof of abusive conduct

in one case does not necessarily make it more likely that abuse took place in another.¹²⁰

[169]As the Court of Appeal points out in Poulin c. Groupe Jean Coutu (PJC) inc.:¹²¹

[11] La cause d’action des appelants contre les intimés Coutu repose

essentiellement sur des actes fautifs commis par ceux-ci à leur endroit, qui leur

ont causé des dommages. La preuve que ces mêmes intimés ont pu utiliser les

mêmes tactiques illégales envers d’autres personnes, ailleurs dans la province,

est étrangère au litige.

[170]With regard to the second point, it is true that previous conduct is a factor that courts

can take into consideration when assessing the severity of a fault.¹²²Repeated conduct

can also have weight in evaluating the quantum of punitive damages.¹²³

[171]Thus, viewed in the generous context that applies at this stage, the allegation may

be relevant.

[172]However, the main issue in not so much whether the allegations in question could

be relevant, but rather whether it is justified, in accordance with the principle of

proportionality, to maintain them for the sole purpose of allowing the Plaintiffs to be able

to prove similar faults.¹²⁴Even in cases where punitive damages¹²⁵or a modus

operendi¹²⁶were alleged, courts have not hesitated to strike allegations when the

probative value of the similar facts was outweighed by the prejudice that would be caused

120

9176-8531 Québec inc. c. Quizno's Canada Restaurant Corporation, supra, note 114, para. 22; Juneau

c. Maison de l'Espoir Saguenay-Lac St-Jean Inc., supra, note 117, para. 9.

Poulin c. Groupe Jean Coutu (PJC) inc., supra, note 108, para. 11.

Thomas c. Transport Watson Montréal ltée, supra, note 29, paras. 12 and 13; Petitclerc c. Dubois,

121

122

supra, note 119, para. 5.

123

Ébénisterie classique inc. c. Société en commandite Gaz Métro, supra, note 109, paras. 48 and 49;

Caron c. Clément, supra, note 110, paras. 18 to 20.

9217-4887 Québec inc. c. Yves Rocher Amérique du Nord inc., supra, note 103, para. 28.

Juneau c. Maison de l'Espoir Saguenay-Lac St-Jean Inc., supra, note 117, paras. 8 and 10; Poulin c.

124

125

Groupe Jean Coutu (PJC) Inc., supra, note 113, para. 14.

9176-8531 Québec inc. c. Quizno's Canada Restaurant Corporation, supra, note 114, para. 28; Poulin

126

c. Groupe Jean Coutu (PJC) Inc., supra, note 113, para. 18.

500-11-059300-208

PAGE: 33

to the parties, to other litigants or to the judicial system in terms of the costs and delays

required to deal with the allegations.

[173]The evidence at issue in the present case is not typical of similar fact evidence

admitted in other cases. We are not concerned here with similar boating transportation

accidents¹²⁷or misrepresentations preceding the sale of an investment.¹²⁸Plaintiffs allege

the abusive exercise of a contractual right. Bad faith in the exercise of a right requires a

thorough analysis of the context of each situation before inferences can be drawn. Such

a thorough analysis undoubtedly takes time.

[174]For example, to allow the court to fully appreciate the context of Callidus’ conduct

toward Bluberi, Plaintiffs have filed a proceeding that comprises 357 paragraphs. The

alleged facts span a period of approximately ten years (2012 to 2022). Thus, one can

expect that a trial on the issues raised in the Damage Proceedings will take a significant

amount of time.

[175]One must assume that a similar amount of time would be required to analyze the

context of the five other cases alleged by Plaintiffs. There are simply not enough judicial

resources available to allow Plaintiffs to conduct a trial of five other situations of loan-to-

own abusive conduct.

[176]One must also be mindful of the fact that the borrowers in these other cases are not

parties to the present litigation. They themselves may not appreciate that their case is

argued in their absence or worse that they may be called to testify on these facts before

or after they have done so in their own litigation.

[177]Therefore, the Court will strike the words “the treatment that other borrowers have

been subjected to by Callidus, which has been the product of” in paragraph 8 as well as

paragraphs 305, 306 and 307. The striking of these paragraphs entails the striking of

exhibit P-75 as the motion to institute proceedings no longer contains allegations to

support them.¹²⁹

[178]If any of the alleged lawsuits give rise to judgments against Callidus, Plaintiffs can

attempt to file the related judgments and the relevance of these decisions can be

assessed by the trial judge.

4.3.2 The Allegations with Regard to the Chief Restructuring Officer

[179]Callidus asks that the following underlined portion of paragraph 283 be struck:

127

Thomas c. Transport Watson Montréal ltée, supra, note 29.

Caron c. Voyer, supra, note 110.

Centre hospitalier régional du Grand-Portage c. Michaud, J.E. 2004-1917 (C.A.), para. 4.

128

129

500-11-059300-208

PAGE: 34

283. The appointment of Pernica was ultimately the result of a compromise, seeing

as Bluberi was faced with a risk that the Court might be persuaded to appoint

another CRO, Mr. Scott Sinclair (“Sinclair”), whose candidacy was vigorously

challenged by Bluberi. Sinclair is a defendant in at least one lawsuit where he is

alleged to have helped Callidus in its loan-to-own initiative against another

borrower of Callidus: Alken Basin Drilling Ltd. v. Callidus Capital Corporation, Scott

Sinclair et al. (Alberta Court of Queen’s Bench, no. 1801-06399), which is

communicated herewith as Exhibit P-69.

[180]This allegation relates to the appointment of Mr. Joe Pernica as CRO. Callidus asks

that the allegation be removed for the same reason it opposed the reference to the other

lawsuits.

[181]With regard to paragraph 283, the situation is different. In this paragraph, the Alken

Basin Drilling proceedings are not alleged as similar fact evidence but rather to explain

why Bluberi opposed the appointment of a potential CRO. While the relevance of why

Bluberi opposed the candidacy of Mr. Sinclair is somewhat limited given that he was not

appointed, keeping the allegation does not require the parties to delve into the merits of

the Alken Basin Drilling allegations. Indeed, whether they are true or not is not the issue

as Bluberi simply invokes the allegation to justify its discomfort with the proposed

appointment of Mr. Sinclair.

[182]As such, the allegation in paragraph 283 and Exhibit P-69 can remain for the

purpose of explaining why Bluberi opposed the appointment of Mr. Sinclair.

4.3.3 The Allegations with Regard to the Legal Proceedings between Craig

Boyer and Callidus (the “Boyer Proceedings”)

[183]Defendants seek to strike the following allegations regarding a lawsuit between

Craig Boyer who was Callidus’ principal representative with Bluberi:

308. One of the lawsuits against Callidus was actually filed by Craig Boyer, one of

Bluberi’s point of contacts, who has now left and alleges a series of mistreatments

and faults in the context of his departure from Callidus, claiming $100,000. Boyer

alleges that “the management style of [Callidus] is driven by the Chief Executive

Officer of Catalyst Capital Corporation, Newton Glassman” and that “unfortunately,

that management style focuses on taking hyper-aggressive positions with third

parties.” Callidus has countersued for $150,000,000.

309. The allegations levelled by each of the parties against the other in that lawsuit

are relevant in the present matter in that they set out that Boyer reported directly

to Reese; that Boyer resigned from Callidus or that, alternatively, he was dismissed

for cause for having breached fiduciary duties. Boyer alleges that Callidus’

counterclaim is “vexatious” and is “raised for ulterior purposes” since Callidus is,

according to Boyer and other media reports, “subject to multiple complaints and

regulatory investigations with respect to its material nondisclosure to fund

members and the public as to the status of its various investments.

500-11-059300-208

PAGE: 35

310. A copy of the claim and counter-claim are communicated en liasse as Exhibit

P-76.

[184]Mr. Boyer is mentioned numerous times in the Damage Proceedings. He is referred

to as Duhamel’s “principal point of contact” (para. 64). He is one of the main actors in the

dispute between Bluberi and Callidus. There is little doubt that he will be a witness when

this case comes to trial.

[185]In view of the allegations made by Bluberi and in view of the allegations made by

both Boyer and Callidus in the Boyer Proceedings, there is no escaping that allegations

of the Boyer Proceedings will likely be used to impeach the credibility of Boyer or other

Callidus witnesses.

[186]Thus, even if the allegation were struck it would not preclude Defendants from

establishing grounds of reproach against Mr. Boyer.¹³⁰With regard to this allegation, the

ultimate use of the Boyer Proceedings is best left to the trial judge.

[187]The motion to strike the allegations in paragraphs 308 to 310 as well as exhibit P-76

is dismissed.

4.3.4 The Allegation in paragraph 112

[188]Defendants wish to have the following underlined part of paragraph 112 struck:

112. In hindsight, in early August, Callidus was purporting to be prepared to extend

credit facilities of $24 million, and indeed up to $34 million, despite having an

appraisal ranging from $12.9 million to $17.8 million. Had Bluberi agreed to allow

Callidus to retain all excess cash, as Callidus demanded at various points at the

attempted closings, Callidus would have been in a position to invoke insufficient

valuation to support the loan any further, thereby provoking a liquidity crisis and

ultimately Bluberi’s demise very shortly after contracting with Bluberi.

[189]Defendants allege that the statement is pure speculation and irrelevant.

[190]It is true that the underlined portion does not add much to the dispute since Callidus

never retained the excess cash. Nonetheless, the allegation is part of Plaintiffs’ narrative.

At this stage, prudence dictates that its evaluation be left to the trial judge.

CONCLUSION

[191]Defendants’ Motion to dismiss is granted in part.

[192]The Court dismisses all claims by the Trusts but dismisses Defendants’ motion with

regard to the other claims.

130

Ste-Anne-de-Beaupré (Ville de) c. Hamel, 2007 QCCA 371, paras. 14 and 16.

500-11-059300-208

PAGE: 36

[193]Defendants’ Motion to strike is also granted in part.

[194]The Court strikes part of paragraph 8, paragraphs 305 to 307 and exhibit P-75.

[195]The balance of the motion to strike is dismissed.

[196]Given that each party was partially successful and that the motions were filed late,

no costs are awarded.

[197]During a case management hearing held on February 24, 2022, the Court had asked

the parties to provide a draft protocol which could be approved at the same time as the

present judgment was rendered.

[198]At the hearing, the parties rightly observed that they could not foresee when the

judgment would be rendered and that some of the next steps would be contingent upon

the ruling on the Defendants’ motions.

[199]Both parties declared themselves ready to file a protocol within thirty days of the

judgment.

[200]The Court will pray act of this undertaking.

FOR THESE REASONS, THE COURT:

[201]GRANTS the Motion to dismiss in part;

[202]DISMISSES the claim with regard to Plaintiffs Fiducie Gérald Duhamel, Fiducie

Familiale Gérald Duhamel OPCO and Fiducie Familiale Gérald Duhamel HOLDCO;

[203]ORDERS that the following allegations and exhibits be struck:

203.1. The underlined portion of paragraph 8:

8. Although the Plaintiffs did not know it at the time, the behaviour described

above is consistent with the treatment that other borrowers have been

subjected to by Callidus, which has been the product of what can be

described as a "loan-to-own” strategy.

203.2. Paragraphs 305, 306 and 307;

203.3. Exhibit P-75;

[204]PRAYS ACT of the parties undertaking to file a complimentary case protocol setting

a fixed schedule for any remaining pre-trial matters before June 30, 2022;

500-11-059300-208

PAGE: 37

[205]THE WHOLE, without legal costs.

__________________________________

MARTIN F. SHEEHAN, J.S.C..

Mtre Christian Lachance

Mtre Léon Moubayed

Mtre Amélie Lehouillier

DAVIES WARD PHILLIPS & VINEBERG S.E.N.C.R.L, S.R.L.

Counsel of the Plaintiffs

Mtre Billy Katelanos

Mtre Geneviève Cloutier

Mtre Mary-Pier Marcheterre

Mtre Samuel Maheu Savard

GOWLING WLG (CANADA) S.E.N.C.R.L., S.R.L.

Counsel of the Defendants

Hearing dates:

April 20 and 21, 2022