IN THE SUPREME COURT OF BRITISH COLUMBIA  
Citation:  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd.,  
2022 BCSC 1201  
Date: 20220715  
Docket: S171625  
Registry: Vancouver  
Between:  
And:  
Govorcin Fisheries Ltd.  
Plaintiff  
Medanic Fisheries Ltd., Denis Medanic,  
Sea Kiss Fisheries Ltd., 0999137 B.C. Ltd.,  
0739960 B.C. Ltd., John Doe, Jane Doe, ABC Ltd.  
Defendants  
Before: The Honourable Mr. Justice D.M. Masuhara  
Reasons for Judgment  
Counsel for the Plaintiff:  
B.M. Caldwell  
D.J. Barker  
K. Iacono  
Counsel for the Defendants:  
Place and Dates of Trial:  
D.K. Jones  
E. Brown  
Vancouver, B.C.  
September 27-29, 2021  
October 1, 48, 12-15, 18-22, 25-29, 2021  
November 1-5, 15-19, 2021  
December 13-15, 2021  
Place and Date of Judgment:  
Vancouver, B.C.  
July 15, 2022  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 2  
Paragraph  
Table of Contents  
Range  
INTRODUCTION  
[1] - [14]  
THE PARTIES  
[15] - [20]  
[21] - [21]  
[22] - [81]  
[82] - [83]  
[84] - [84]  
[85] - [96]  
[86] - [86]  
[87] - [89]  
ISSUES  
BACKGROUND  
MEDANIC FISHERIES MANAGEMENT PAYMENTS  
FISHING LICENCES AND QUOTA  
TRANSACTIONS BY DENIS MEDANIC  
Bly Industries  
Direction to lessees of Neekis Quota and Licence to make payments  
to parties other than to the Neekis Partnership  
Salmon Licence Revenues  
Sablefish Licence  
[90] - [93]  
[94] - [94]  
T-37 Trawl Licence  
[95] - [96]  
OTHER  
[97] - [98]  
EXPERT REPORTS  
Evidence of Stuart Nelson  
Evidence of De Greef  
Evidence of Theresa Williams  
Evidence of Jennifer Blacklock  
[99] - [120]  
[100] - [109]  
[110] - [112]  
[113] - [113]  
[114] - [120]  
[121] - [125]  
[126] - [128]  
[129] - [138]  
DISCUSSION  
WHAT WAS THE ARRANGEMENT BETWEEN MFL AND GFL?  
WHAT WAS THE NATURE OF THE RELATIONSHIP BETWEEN  
MFL AND GFL?  
HEARSAY EVIDENCE  
[139] - [158]  
[159] - [171]  
[172] - [182]  
[183] - [188]  
[189] - [196]  
[197] - [199]  
[200] - [221]  
[214] - [214]  
[215] - [215]  
[216] - [216]  
[217] - [221]  
ASSESSMENT OF CREDIBILITY OF DENIS MEDANIC  
DID A FIDUCIARY DUTY ARISE?  
UNJUST ENRICHMENT  
DUTY OF GOOD FAITH AND HONESTY  
TORT OF CONVERSION  
ASSESSMENT OF MONIES DIVERTED  
Lease Revenue Quota, column A Table 1.3  
Lease Revenue Licence, column B Table 1.3  
Lease Reimbursement of 50% Licence Fees, Column C Table 1.3  
Deposits, Column E Table 1.3  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 3  
Paragraph  
Table of Contents  
Range  
TOTAL JV REVENUE NOT DEPOSITED  
TAX GROSS UP  
[222] - [222]  
[223] - [227]  
[228] - [234]  
[235] - [242]  
[243] - [243]  
[244] - [258]  
[259] - [263]  
[264] - [267]  
DOVRE B  
PUNITIVE DAMAGES  
EQUITABLE INTEREST  
LIMITATION BAR AND LACHES  
EQUITABLE SETOFF  
NEXT STEPS  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 4  
Introduction  
[1]  
These reasons deal with a dispute essentially between two entities that were  
engaged in a commercial fishing enterprise together through the ownership of fishing  
vessels that held licences and associated quota for fish such as salmon, sablefish,  
hake and other ground fish. This business was called the Neekis Partnership.  
Govorcin Fisheries Ltd. (“GFL”), the plaintiff, asserts that Denis Medanic and the  
defendant companies which he controls including Medanic Fisheries Ltd. (“MFL”),  
wrongfully diverted, took and used monies due to it from the jointly owned fishing  
business called the Neekis Partnership, over many years. The plaintiff as its primary  
position says that Denis Medanic was in breach of the fiduciary duty owed to the  
plaintiff as a result of his position as an agent for the plaintiff and was engaged in  
fraud. The claim covers the years 1999 through 2017. The forensic report tendered  
by the plaintiff estimates that during that period $6,167,851.14 was diverted to the  
defendants and other known persons such as the two sons of Denis Medanic. The  
plaintiff says that its share of the diverted funds is $3,083,952.57. The plaintiff seeks  
an accounting and tracing order to determine whether the diverted funds were used  
to obtain other items such as a sablefish licence related to the fishing vessel Dovre  
B (including related revenues), halibut licence L-179 (including related revenues),  
and other various property. After this determination, the plaintiff will be in a position  
to elect between damages or equitable relief.  
[2]  
The basis for this action came to light upon the passing of Slavica Govorcin,  
the wife of Bogomil Govorcin (the founder of GFL), in June 2015. She was the  
beneficiary of Bogomil Govorcin’s estate which includes the fishing interests.  
Attempts to value the fishing assets by Robert and Albert Govorcin, sons of Bogomil  
and Slavica, for estate purposes led to the discovery of monies not being equally  
distributed between the parties and assets of the joint fishing enterprise being used  
wrongfully by the defendants.  
[3]  
The plaintiff’s evidence includes detailed reviews of transactions made by  
Denis Medanic in relation to the fishing assets of the Neekis Partnership with various  
entities; expert opinions on the value of fish licences and quotas; fish prices; and the  
 
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 5  
identification of unaccounted funds to which the plaintiff asserts an entitlement. This  
case involved considerable forensic analysis of financial and licensing/quota  
documentation extending back many years.  
[4]  
The defendants deny any wrongdoing. The primary defence is the assertion  
of an oral agreement between Denis Medanic and Bogomil Govorcin which in  
essence permitted Denis Medanic to take licence and quota revenues, that would  
ordinarily be deposited into the Neekis Partnership bank account, in amounts and  
the manner in which he deemed appropriate for his compensation for managing the  
assets of the joint enterprise, with no requirement to provide a record of such taking  
to GFL. I will refer the alleged agreement as the “Alleged Management Fee  
Agreement”. The Alleged Management Fee Agreement is said to have entitled  
Denis to compensation for his management services in the amount of $1,576,927.88  
for the period 1990-2004; and $105,128.52 per year for the period 2005-2016 for a  
total set off of $2,943,591. This defence was explicitly raised late in the litigation.  
[5]  
The defendants also raise a limitation defence to claims arising before  
February 2015 under the Limitation Act, S.B.C. 2012, c. 13 [Act], or alternatively the  
Limitation Act, R.S.B.C. 1996, c. 266 [Predecessor Act]; as well as, on the doctrine  
of laches and acquiescence. This action was commenced February 21, 2017.  
[6]  
The defence of equitable set-off related to the efforts in managing the joint  
enterprise by Denis Medanic is raised should liability be found.  
[7]  
I have determined below that the Neekis Partnership joint fishing enterprise  
was a joint venture. I will refer to it as the “Joint Venture”.  
[8]  
For the reasons that follow, I have found that Denis Medanic personally and  
through the corporate defendants was engaged in the wrongful diversion, taking and  
use of monies and property over many years in which GFL had an interest. The  
steps taken by Denis were to hide from GFL his wrongful conduct. I have found that  
Denis Medanic and MFL breached their fiduciary duty to the plaintiff through  
fraudulent means. I also find the remaining defendants (except 099137 B.C. Ltd.  
which is not controlled by Denis Medanic) to have participated in a joint enterprise to  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 6  
misappropriate lease revenue from the Joint Venture. Denis Medanic’s claim that  
his actions were permitted based on the existence of the Alleged Management Fee  
Agreement was not established. I have found that Denis Medanic was not  
believable and the agreement was a concoction.  
[9]  
The witnesses called in the plaintiff’s case were:  
(a)  
(b)  
Robert Govorcin, president of Govorcin Fisheries Ltd. and son  
of the founder Bogomil Govorcin.  
Tim Turyk, former general manager of Bella Coola Fisheries.  
He spoke to certain transactions conducted between Bella  
Coola and Denis Medanic. He appeared via video deposition.  
(c)  
Erika Watkins, manager in the Fisheries and Oceans Canada  
(“DFO”). She extracted various documents from DFO’s file  
pertaining to the reallocation of fishing quotas related to licences  
held by the vessels Neekis and Western Breeze.  
(d)  
(e)  
Stuart Nelson, fisheries consultant and expert. He prepared two  
reports for this case which sought to ascertain the earnings  
under the licences held by the Neekis and Western Breeze.  
Adam Keizer, regional manager, sustainable fisheries  
framework of DFO. He spoke to matters which were within his  
area of responsibility while regional manager of groundfish  
including the operation of the integrated groundfish  
management plan.  
(f)  
Mike Buston, fishing licence owner, former owner of a fish  
processing company, former fishing fleet manager. He spoke to  
his dealings in buying hake and leasing quota from the Neekis  
through Denis Medanic. Medanic is a shareholder and director  
of a company that owns a factory vessel to which Mr. Medanic  
transferred quota from the Neekis for groundfish.  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 7  
(g)  
Launa Groulx, works in a family fishing business, Leader  
Fishing Ltd (“Leader Fishing”). She has performed all office  
functions for the company. She spoke to the dealings that she  
had with Denis Medanic regarding the transfer of quota to her  
company and to another and the payments made to Denis  
Medanic or his designates.  
(h)  
Theresa Williams, is the principal of the working commercial  
trawling companies; and an expert in management of non-  
aboriginal commercial trawl quota, including hake and trawl  
licences in Canada’s pacific coast trawl fishery. She spoke to  
her tendered reports.  
(i)  
Blake Tipton, manager of the Canadian fishing fleet for  
SM Products BC Ltd (“SM Products”). He spoke to agreements  
between SM Products and Denis Medanic regarding the leasing  
of quota.  
(j)  
Robert Morreau, part owner of the fishing vessels Pacific Quest,  
Tenatious, and Summer Breeze. He spoke to the fishing  
transactions that he had with Denis Medanic.  
(k)  
Mohammed Akbanie, controller of Cold Fish Seafoods  
Company Inc. and former inventory accountant with Pasco  
Seafood Enterprise Ltd. (“Pasco”). He spoke about transactions  
between these companies and Denis Medanic and related  
companies.  
(l)  
Shirley Manfron, notary public. She spoke to various  
documents and transactions related to services she provided to  
Denis Medanic.  
(m) Joe Pastor, 82 year old retiree; formerly, sole proprietor of Bly  
Industries, a settlement company for fishing vessel owners  
since 1991. Before that he was with B.C. Packers providing  
settlement services. He knew both of the founders through this  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 8  
work. He spoke to the settlement transactions and other  
transactions he conducted for Denis Medanic. The transactions  
he spoke to were largely from 2005 to 2015 which were non-  
settlement services, largely receiving and depositing funds into  
a Bly account and disbursing them as directed by Denis  
Medanic. Mr. Pastor terminated his relationship with Denis  
Medanic in 2015.  
(n)  
(o)  
Chris Wick, is the co-owner of North Delta Seafoods Ltd. He  
spoke to his transactions with Denis Medanic. North Delta  
Seafoods Ltd. leased salmon licences from Denis Medanic.  
Nick Heras, vice president, fishing operations of Seven Seas  
Fish Co. Ltd. (“Seven Seas”), a seafood wholesaler and  
distributor. The company in 2013 acquired another seafood  
wholesaler and distributor, Pasco. Mr. Heras spoke to the  
purchases of fish he made on behalf of Seven Seas from Denis  
Medanic and the payment for such fish. He also spoke to  
various documents produced by Seven Seas in this action.  
(p)  
David Dawson, vice president of S&S Seafoods Canada. He is  
also a member of several committees, boards and organizations  
related to commercial fishing particularly with groundfish. He  
spoke to his retention as an expert by plaintiff’s counsel in  
April 2016 to investigate the fishing assets by the joint  
enterprise, the quotas attached to fishing licences, and values  
for the assets. Mr. Dawson was unable to complete his work as  
an expert due to his work commitments. His evidence was  
received not as an expert but to address the steps taken by the  
plaintiff particularly in respect to the limitation defence.  
(q)  
Robert Holmes, accountant. He worked on the financial  
statements of MFL and GFL. He provided his calculation of  
income taxes for GFL under various scenarios based on the  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 9  
revenues estimated in Table 8 of the forensic report of  
Ms. Blacklock (the “Blacklock Report”).  
(r)  
Mila Medanic Bebek, sister of Denis Medanic. Spoke about the  
Medanic family, the interactions within the family and with the  
Govorcin family, the fishing business, and her interactions with  
her brother Denis.  
(s)  
(t)  
Peter De Greef, expert on valuing sablefish and halibut.  
Mark Fernandes, former controller and bookkeeper of Select  
Seafoods Canada Ltd. (“Select Seafoods”). He spoke to  
transactions between Select Seafoods and Denis Medanic.  
(u)  
Christopher Thurgood, accountant. He testified to his  
communications, reports and statements he produced for the  
Joint Venture, MFL; and GFL. He prepared the financial  
statements for MFL until 2013. He continues to prepare the  
financial statements for GFL.  
(v)  
Robert Fraumeni, commercial fisherman and principal of FAS  
Seafoods Producers Ltd. He appeared by video. He spoke to  
his dealings with Denis Medanic.  
(w)  
John Skapski, lawyer and commercial fisherman. He practises  
in the area of fisheries and provided legal services to Denis  
Medanic and related companies. He received and distributed  
funds relating to Denis Medanic and related companies.  
(x)  
Jennifer Blacklock, forensic accountant. She reviewed  
accounting records and other documents to determine among  
other things, if GFL received its 50% share of the Joint Venture  
revenue for fiscal years ending 1998 to 2017 and to quantify the  
amount if not.  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 10  
[10] The witnesses called in the defendants’ case were:  
(a)  
Tyler Medanic, son of Denis Medanic. He testified about his  
involvement in helping his father on the fishing vessels Neekis  
and Western Breeze. His involvement was limited. He received  
significant monies through his company 0999137 B.C. Ltd. at  
the direction of his father. He had limited interest in the fishing  
industry. He was 26 years old at the time of trial.  
(b)  
Denis Medanic, a defendant and principal of MFL among others.  
[11] As noted several expert reports were tendered and the defence required all of  
the experts (listed above) to appear for cross examination. The defence did not  
tender any expert reports.  
[12] I also note that the defence in the course of the litigation objected to providing  
in the disclosure and discovery process information regarding the source of funds  
used by the defendants to purchase assets during the period of the plaintiff’s claim.  
[13] In addition to the documents, the parties tendered an Agreed Statement of  
Facts. Also, several notices to admit and responding admissions or responses were  
tendered.  
[14] This case involved a significant volume of detailed documentary evidence  
contained in 15 large binders. Further, materials were tendered during the trial. I  
appreciated counsel at my request having the documents scanned into digital form  
for my use.  
The Parties  
[15] The plaintiff, GFL, was incorporated on January 21, 1977. When it was  
incorporated, Bogomil Govorcin and his wife, Slavica Govorcin, were the sole  
directors and sole shareholders. With the death of Mrs. Govorcin in June 2015, her  
sons Robert and Albert ultimately became the directors and shareholders of the  
company.  
 
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 11  
[16] The defendant, MFL, was incorporated by Tomislav Medanic in 1977. Denis  
Medanic has been a director of the company since 1997. Mila Bebek, his sister was  
at some point a director and then removed. Neda Medanic, wife of Tomislav  
Medanic, was the sole shareholder of the company until her recent death. It  
appears that until her death she and Denis Medanic were directors of the company.  
There is no clear evidence before the Court as to the shareholdings in this company  
since the death of Neda Medanic.  
[17] The defendant, Denis Medanic, is a businessman and former fisherman. In  
addition to being a director of MFL, Sea Kiss Fisheries Ltd., and 0739960 B.C. Ltd.,  
he has also been a director of Select Seafoods Canada Ltd. since it was  
incorporated on January 23, 2012 and a 20% shareholder of that company through  
his company 0739960 B.C. Ltd.  
[18] The defendant, Sea Kiss Fisheries Ltd. (“Sea Kiss Fisheries”) is a British  
Columbia Corporation. Mr. Medanic has been its sole shareholder since it was  
incorporated on April 10, 2002. He is also its manager, director and president.  
[19] The defendant, 0739960 BC Ltd., is a British Columbia Corporation. Its  
directors are Denis Medanic and his spouse, Sandra Viktora. Denis Medanic is the  
President. Denis Medanic and his spouses are equal shareholders. Denis Medanic  
has been a director since it was incorporated on November 8, 2005 and is the  
company’s manager.  
[20] The defendant, 0999137 BC Ltd., is a British Columbia Corporation. Its sole  
director and shareholder is Tyler Medanic, the son of Denis Medanic. It was  
incorporated April 9, 2014.  
Issues  
[21] The key issues that arise are:  
(a)  
What was the arrangement and the nature of the business  
arrangement between GFL and MFL?  
 
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 12  
(b)  
Was there a compensation agreement between Denis Medanic  
and Bogomil Govorcin for management fees for his work for the  
Joint Venture?  
(c)  
If not, then what amount was diverted or taken by the  
defendants?  
(d)  
(e)  
(f)  
What liability do the defendants have?  
Does a limitation bar or laches operate in this case?  
Is Denis entitled to an equitable set off against any monies  
owing to GFL?  
(g)  
If there is liability, what are the next steps?  
Background  
[22] The founders of the principal companies, Bogomil Govorcin and Tomislav  
Medanic, were first cousins who came to Canada in the late 1960’s from the island  
of Iz in Croatia. Bogomil was about five years older than Tomislav. The founders  
died many years ago. Tomislav Medanic had previous experience in commercial  
fishing in South America before coming to Canada. In Canada, the two started out  
in commercial fishing by purchasing and operating a fishing vessel called the  
Western Breeze in about 1969. In 1983, Tomislav Medanic wished to buy a fishing  
vessel called the Neekis and asked Bogomil Govorcin to join him in purchasing the  
vessel, which he did. Each held an equal interest in the vessel. Together they  
worked as commercial fishermen off the west coast of British Columbia.  
[23] The licences issued to the Neekis were: K-20 sablefish; T-37 groundfish trawl;  
and AS-153 salmon.  
[24] The licence issued and applicable to the Western Breeze was: AS-491  
salmon by seine.  
[25] The commercial fishing industry has become highly regulated. I discuss  
some of the features of this increased regulation relevant to this case later in these  
reasons.  
 
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 13  
[26] Decisions regarding the management of the fishing operations were originally  
in the hands of Tomislav Medanic, this responsibility over time was taken over by  
Denis Medanic. This included dealing with fish processors, managing the fishing  
vessels, licences and quotas.  
[27] The financial or banking administration was done by Bogomil Govorcin and  
over time taken over by Robert Govorcin.  
[28] Each of the founders worked for a period of time on the vessels. Tomislav  
would captain the vessels and Bogomil would be the engineer/cook. The two would  
also would be involved in maintaining equipment such as handling and repairing  
nets. The two worked well together, got along and trusted each other.  
[29] The founders involved their sons (Bogomil had two sons Albert and Robert  
and Tomislav had one son Denis) in the fishing operations as they were growing up.  
Neither of Bogomil’s sons developed an interest in building a career in commercial  
fishing but Denis Medanic did and continued on in fishing for the Joint Venture. His  
role increased over the years. Denis Medanic crewed and eventually would captain  
the enterprise’s vessels starting in 1993 and was paid for his work as such. There  
were other crew members and captains who would operate the vessels as well.  
[30] Denis Medanic over the years developed many business contacts in the  
fishing industry. He has also been involved in organizing and participating in various  
industry organizations. My view, is that Dennis Medanic is experienced in business  
generally and is very experienced in commercial fishing, including the harvesting,  
selling and processing of fish, knowledge of government policies, regulations and  
rules.  
[31] Robert Govorcin’s interests were in other areas and he had limited  
involvement in the Joint Venture. However, his involvement would increase as his  
father’s health diminished starting in about 2000. Until more recently, Robert had  
limited knowledge of the operations of the fishing business such as who the players  
were in the fishing industry, how quota and licences were or could be assigned,  
leased, transferred, or who or what various entities were and what they had to do  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 14  
with Joint Venture. He trusted and relied upon his cousin Denis as manager of the  
Joint Venture.  
[32] The financial arrangement between the founders of the business was that  
monies received from fishing operations including the leasing out of licences and  
quotas were to be deposited into a joint account with the TD Bank branch in North  
Vancouver. The account was named the Neekis Partnership until it was recently  
renamed to Neekis Fishing in May 2015. This location was convenient to Bogomil  
Govorcin as he resided in North Vancouver and administered the banking for the  
Joint Venture. Cheques from buyers and lessees would be provided by Tomislav or  
Denis to Bogomil or Robert for deposit at the bank. Each of MFL and GFL could  
issue cheques from the account with a single signature. Receipts and expenses of  
the enterprise would be carefully reviewed by Bogomil Govorcin. Payments would  
be paid out of this account. Draws would be discussed between the two companies  
and each would take a similar amount. Management fees were not claimed by  
either of the companies. At the end of each year, the net profits as calculated by  
their accounting firm would be distributed equally to GFL and MFL.  
[33] The financial statements and tax returns were prepared by Mr. Reid, C.A. for  
the two companies and when Mr. Reid retired in 1988 his partner Mr. Thurgood  
became responsible for the accounts of the two companies. MFL terminated its  
arrangement with Mr. Thurgood in 2013. Throughout the years, the financial  
statements and income tax statements referred to the joint fishing enterprise as a  
joint venture.  
[34] It seems that settlement services for the payment of captain and crew out of  
the revenues of the Joint Venture were conducted by Bly Industries through its  
owner Joe Pastor as early as 1995.  
[35] In 1996 Tomislav Medanic suffered a major stroke. He lost his ability to  
speak and walk. His involvement in the fishing business thereafter was very limited.  
Over time he recovered some ability to walk and talk but required ongoing care. He  
died in 2014. Following his stroke Denis Medanic took on the role his father had  
performed in the fishing enterprise, including managing the vessels, licences and  
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Page 15  
quota. This was something he wanted to do. Denis Medanic as part of his role  
would submit meticulous and detailed accounts to be reflected in the accounting for  
the Joint Venture. He also would communicate with Bogomil about the business.  
[36] Denis Medanic became a director of MFL in 1997 and has remained so to the  
present. His sister Mila Bebek became a director in 2001. She stated that this  
ended when her mother passed. Their mother Neda Medanic was the sole  
shareholder of MFL following her husband’s death. She died in September 2021. I  
am told her estate has yet to be settled and as such the current ownership in MFL is  
not yet clear.  
[37] At trial, Denis Medanic testified that he had a major management role from an  
early point in the Joint Venture and that it continued throughout. In essence, he  
testified that he was the directing mind behind the fishing operations from about the  
time the vessel Neekis was purchased and was responsible for the success  
achieved by the Joint Venture. He agreed with the description that he considered  
himself to be “the Man”.  
[38] Bogomil Govorcin was diagnosed with cancer in the summer of 2000. He  
underwent heavy cancer treatment and surgery; his cancer would go in and out of  
remission and he resumed his involvement with the fishing enterprise when he was  
able. Unfortunately, the cancer returned and he succumbed, dying in 2005. His  
ownership in the fishing business passed onto his wife, Slavica Govorcin.  
[39] Once Bogomil became ill it seems Robert had to become involved in assisting  
his mother in caring for his father and in managing GFL. His involvement in the  
actual fishing business was limited. He did the banking deposits, signed lease  
agreements and requests for reallocation of quota documents as brought to him by  
Denis. He would consult with his father before he signed but deferred to and had  
confidence in his cousin Denis. Robert’s main focus during this time was building  
his house full-time, managing a family apartment building and assisting his mother  
who had developed health problems. This carried on until 2015.  
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Page 16  
[40] Denis Medanic stopped preparing and submitting detailed accounts of the  
fishing operations to GFL. He states he stopped in 2006. However, I accept the  
evidence of Robert Govorcin on this point.  
[41] On May 10, 2002, GFL became a one share owner of the fishing vessel  
Pachena No. 1. The K-20 licence on the Neekis was moved off the vessel onto the  
Pachena No. 1 on May 16, 2002.  
[42] In 2003, Denis Medanic purchased a permanent transfer of a sablefish quota  
attached to the fishing vessel Dovre B, owned by F.A.S. Seafood Producers, the  
principal of which is Mr. Faumeni. On November 12, 2003, Denis caused 0.2537  
percent of the non-aboriginal commercial quota to be transferred from the K-25  
licence on the Dovre B to the K-20 licence which was then on the Pachena No. 1.  
This related quota was later transferred from the K-20 to the New S Shadow on  
September 26, 2012. The quota has never been returned to the K-20 to the K-25  
licence. In 2012, Denis stated that he found an empty K licence, ie., the licence had  
zero pounds on the K-40 attached to the Ocean Maurader and transferred 0.2537%  
of quota from the K-20 to K-40. Denis also transferred MFL’s portion of the K-20  
licence to K-40. Denis then leased the quota on the K-40 to various fishers from that  
point forward. Denis stated he was able to lease all of the quota on the K-40.  
[43] On March 30, 2005, on application dated March 1, 2005 signed and sworn by  
Denis Medanic and Robert Govorcin before Shirley Manfron, a sablefish licence K-  
20 was permanently transferred from the vessel Pachena No. 1 to the vessel  
Neekis. The licence had been earlier transferred permanently off the Neekis onto  
the Pachena No. 1 on approval by Denis Medanic and Robert Govorcin in December  
2002.  
[44] Denis also began to buy halibut licences in the early 2000s.  
[45] In February 2005, a promissory note was drawn up by a solicitor under which  
MFL acknowledged a debt of $1,576,927.88 (the “Principal Debt”) owed to Denis  
Medanic and that the debt would be repayable on demand. The debt amount was  
stated to be for “Valuable Services” that Denis had provided during 1990 to 2004.  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 17  
Denis Medanic also obtained a personal guarantee from each of his parents for the  
payment of the debt.  
[46] In addition to the personal guarantee, Denis also had a further two  
agreements drawn up and executed in March 2005; namely a security agreement  
(the “Security Agreement”) and an interest agreement. Under the latter, MFL and  
Denis Medanic’s parents agreed that interest under the Principal Debt would attract  
interest at prime plus 2% compounded annually “until ALL the Principal Amount  
owing and ALL of the accumulated Interest charges have been paid in FULL to the  
"Creditor" Denis Medanic or nominee.” Under the former agreement, MFL as debtor  
and the parents of Denis Medanic as guarantors agreed to provide a security  
interest over all assets of MFL. A further agreement was also drawn up at the same  
time under which MFL and the parents agreed that the debt to Denis Medanic “may  
be repaid in whole or in part by the transfer of assets from MEDANIC FISHERIES  
LTD. to DENIS MEDANIC or his nominee in lieu of cash.”  
[47] The Principal Debt was derived by determining what captains had earned for  
crew share and bonuses over the years on the vessels held by the Joint Venture.  
The available records were incomplete as amounts for some years were not  
available at all (1994 through 1997) or in other years only partially available (1992  
and 2000). For the years 1994 through 1997, the value inserted for each of those  
years was the average of the years for which there were available values divided by  
the entire fifteen-year period. The information for the values were obtained by Denis  
Medanic and given to Mr. Thurgood, who compiled the numbers over the years 1990  
to 1993 and 1998 to 2004. By dividing the total of known amounts over the 15 years  
an “average” of $105,128.52 was derived. I note, that it is not really an average as  
there are several years that are unknown and the available historical numbers to  
1994 through 1997 never reach this “average” level. This “average” level is only  
exceeded in 1999 and then onward from 2001.  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 18  
[48] The table assembled by Mr. Thurgood is below:  
SUMMARY OF CAPTAIN'S CREW SHARE AND  
BONUS PER SETTLEMENT SHEETS  
1990  
1991  
1992  
1993  
1994  
1995  
1996  
1997  
1998  
1999  
2000  
2001  
2002  
2003  
2004  
84,927.74  
103,091.25  
32,248.31  
70,938.01  
Average 105,128.52  
Average 105,128.52  
Average 105,128.52  
Average 105,128.52  
97,569.93  
113,428.29  
75,291.92  
146,110.13  
110,273.65  
172,761.22  
147,773.43  
1,576,927,88  
There are probably missing settlements for 1992 and 2000,  
which when located will be added in to the respective years.  
[49] Denis Medanic testified his father instructed the lawyer to draw up the  
aforementioned documents. However, given the evidence of Tomislav Medanic’s  
condition, it is more likely that Denis was making arrangements for the agreements  
to be provided to him. In my view, he was the one directing the production of the  
documents.  
[50] Beyond the documents, Denis Medanic testified that there was a further  
agreement with MFL, and his parents that on a prospective basis he would be paid  
$105,128.23 annually as a management fee. From 2005 onward, Denis Medanic  
stated that he took $105,128.52 annually for his personal compensation out of MFL  
and directly from lease and quota revenues.  
[51] His parents informed his sister of the agreements. This incensed her and an  
angry physical confrontation occurred between brother and sister with their mother  
between them. There were several altercations over the years. Police were called  
on one occasion in 2011 and Denis Medanic was restricted from attending his  
parent’s home.  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 19  
[52] The promissory note is not reflected in the financial statements of MFL.  
Denis Medanic testified that he discussed this matter with Mr. Thurgood.  
Mr. Thurgood testified he was not aware of the promissory note nor of any  
discussions of an agreement by GFL to pay management fees to Denis Medanic.  
Mr. Thurgood was not challenged on these points. The promissory note and related  
agreements is material and significant from a financial perspective and could involve  
the need to restate MFL’s financial statements over the years covered by the  
promissory note. In this regard, I note that in the balance sheet of the financial  
statements of MFL, a different promissory note in a much smaller amount of $44,910  
owed to Tomislav has been reflected. The reflection of that liability supports  
Mr. Thurgood’s testimony. Given, my reservations regarding the testimony of Denis  
Medanic as discussed later and that Mr. Thurgood was not challenged in cross  
examination on these points, I prefer the testimony of Mr. Thurgood on not being  
aware of the promissory note or of any agreement by MFL or GFL to pay Denis  
management fees.  
[53] In 2005 Denis Medanic approached Joseph Pastor with the proposal of giving  
him cheques from various companies the Joint Venture did business with and  
depositing them into the Bly Industries accounts, with Mr. Pastor being free to  
deposit the funds to an interest bearing account. Mr. Pastor had stopped completing  
settlements for the Joint Venture in 2003. Mr. Pastor agreed and transferred funds  
into an interest bearing account and thereafter collected income from the funds.  
Denis began bringing cheques to Mr. Pastor in around May 2005. Mr. Pastor would  
disburse the funds in amounts to the Joint Venture as directed by Denis. Mr. Pastor  
terminated his relationship with Denis in March 2015. Over the period of this  
relationship, Denis Medanic would bring in cheques made out to Bly Industries from  
lessees of the Joint Venture. Mr. Pastor would deposit the amounts. At subsequent  
times Denis would ask for cheques to be issued to the Neekis Partnership in  
amounts that did not equate to any cheque brought. There would always be a  
positive balance until near the end of the relationship. This gave the misleading  
impression of steady or normal revenues to GFL.  
[54] On June 16, 2005, Bogomil Govorcin died.  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 20  
[55] In 2005 Robert Govorcin became a director of GFL.  
[56] In September 2005, the Neekis ran into an offshore reef in Barkley Sound  
with about 100 tonnes of fish in its hold and could not extract itself. The boat was  
being captained by Paul Puratich and his crew. It was damaged but was able to  
extract itself after unloading its fish to another ship and make its way to a shipyard in  
Vancouver. The vessel was inspected and deemed able to return to fishing for the  
rest of the season and the herring season in March 2006. The vessel was then  
hauled out for repairs. Robert and Denis participated in repairing the ship and  
received $15,000 each for their labour. During the period that Neekis underwent  
repairs, Denis leased out the licence and quota held by the Joint Venture to Leader  
Fishing on a permanent rather than temporary basis, the reason being that if leased  
on a temporary basis he then would to have to manage it from year to year.  
[57] Following the 2006 and 2008 fishing season, the Neekis and Western Breeze,  
respectively, no longer went out to harvest fish. The vessels remained docked. The  
licences and quota were leased out to third parties by Denis. This carried on  
through to the 2016/2017 fishing season.  
[58] On May 26, 2006, Denis Medanic convinced Robert Govorcin to sign the  
permanent transfer of the T-37 trawl quota from the Neekis to the Viking Storm T-  
135 licence, owned by Leader Fishing. Robert Govorcin was assured by Denis  
Medanic that the quota “would be coming back to the Neekis” in order to obtain his  
signature. This transfer allowed Denis Medanic unilaterally through Leader Fishing,  
to effect temporary or permanent transfer of all or part of the T-37 quota. In effect  
Denis Medanic took control over the T-37 licence. The T-37 quota only came back  
to the Neekis in 2017 following demand letters from counsel.  
[59] In 2006 the hake quota was permanently transferred from the T-37 licence to  
the Viking Storm, a vessel owned by Leader Fishing.  
[60] On September 5, 2008, Denis Medanic directed Luana Groulx of Leader  
Fishing to pay $250,000 in trust to Shirley Manfron and $150,000 to Bly Industries.  
He picked up the bank drafts from Ms. Groulx that same day.  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 21  
[61] Sometime in 2011 Denis Medanic learned that his parents had gifted a house  
that they owned on Granville Street to his sister. This incensed him and he sought  
to talk to his mother about this. His sister who was residing with his parents to assist  
in the care of her father Tomislav was home and an angry confrontation between  
sister and brother occurred, including Denis grabbing his sister by her shirt.  
[62] On May 6, 2011, Denis Medanic, through his company Sea Kiss Fisheries  
purchased the halibut licence L-179 associated with the vessel New S Shadow  
holding 0.2249519998% of total allowable catch from Silver Shadow Fishing  
company Ltd. for $912,480.42.  
[63] In 2012, Denis Medanic became a 20% shareholder and director in Select  
Seafoods through an investment by his company 0739960 B.C. Ltd. Other  
shareholders of Select Seafoods were: Mike Buston, John Bray, Donald Vaccher,  
and Robert Tyron. This company purchased a factory ship called the Northern  
Alliance. Each shareholder contributed $80,000 to $100,000 for the purchase. The  
financial viability of the vessel was dependent on a yearly quota of between 12 to 15  
million pounds of hake. Denis Medanic controlled 7-8 million pounds. As part of his  
participation in ownership, Mr. Medanic allocated quota from the Neekis to Select  
Seafoods, as did Don Vaccher. Denis testified that he did not commit the quota. In  
that regard I prefer the evidence of Mr. Buston who said there was an understanding  
that the entire quota was committed. There was no year which was an exception.  
[64] By letter dated March 17, 2014, Denis provided notice to MFL of his demand  
for immediate payment of $1,576,927.88 plus accrued interest under the promissory  
note of February 2, 2005. The notice further stated that if payment was not made in  
48 hours, Denis Medanic intended to take possession of the assets of MFL under  
the Security Agreement.  
[65] It appears that the demand was prompted by the medical advice that the  
outlook for Tomislav Medanic who had been hospitalized because of lympho  
leukemia was grim. Denis moved to make the demand to protect his interest from  
his sister. It is notable that Denis testified that did not know the specific amount  
owed under the promissory note, though it is apparent from the evidence and his  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 22  
testimony that he had received significant management fees from MFL before the  
demand. His father died a week after the demand on March 24, 2017.  
[66] Slavica Govorcin died on June 7, 2015, at age 83. Under her will her sons  
Albert and Robert were to receive an equal share of the assets of GFL. Robert was  
one of the executors under her will. He was advised by a solicitor to identify the  
assets and obtain values for them. He contacted Denis a number of times to obtain  
the information. Denis never provided any useful information but asked if Robert  
was interested in the sale of GFL’s portion of the quotas and licences.  
Denis Medanic in direct gave dubious evidence to the effect that he did not want to  
get involved with valuing the assets, apparently due to concerns as to his personal  
liability for doing so. Robert Govorcin then contacted Mr. Thurgood, the accountant  
for GFL, MFL, and the Joint Venture. Mr. Thurgood said he knew the values that he  
was given for accounting purposes but could not provide any more assistance.  
Robert then engaged counsel, Mr. Brad Caldwell, in early 2016 to assist in the  
obtaining the information.  
[67] In 2016, Brad Caldwell contacted David Dawson and retained him to  
investigate the fishing assets of the Joint Venture.  
[68] In an email dated April 28, 2016, David Dawson informed Brad Caldwell that  
the groundfish and hake quota “has been permanently removed from T-37”.  
[69] In a letter dated May 16, 2016, Brad Caldwell asked David Dawson to expand  
the scope of his investigation to also include determining the market value of the  
fishing assets including licences and quota; whether the joint venture sold or  
permanently transferred any fishing licences or quota since 2000; and whether GFL  
received a 50% share of the licence and quota profits from 2010 to 2015.  
[70] On July 4, 2016, David Dawson sent Brad Caldwell an email containing his  
estimates of the fishing asset prices at the time.  
[71] On July 5, 2016, David Dawson sent Brad Caldwell a further email containing  
his estimates of the fishing asset prices.  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 23  
[72] In a letter dated October 3, 2016, Brad Caldwell asked David Dawson to  
determine what the income from the Neekis and Western Breeze licences and  
quotas should have been for the years 2010 to 2016. Brad Caldwell sent an email to  
David Dawson that same day stating that he may ask David Dawson to “go back  
further” in his investigation if it has been found that GFL received less money than it  
should have in the years from 2010 to 2016.  
[73] On October 11, 2016, David Dawson sent an email to Brad Caldwell stating  
that approximately half of the Offshore Hake quota that was originally from Neekis  
licence was missing.  
[74] On November 23, 2016, Brad Caldwell emailed David Dawson a list of the  
lease payments GFL received from the joint venture in the years 2009-2015. In  
testimony, David Dawson stated that the payment of $200,000 in 2010 seemed low  
as there was a large salmon run that year and approximately $700,000 in leasable  
assets that year.  
[75] On February 20, 2017, David Dawson emailed Brad Caldwell stating that he  
was “extremely busy”. David Dawson spent approximately a few hundred hours in  
his investigations for Brad Caldwell, but could not commit to providing an expert  
opinion as he did not have the time to do so.  
[76] David Dawson based his estimates on his experience in the fishing industry  
and from inquiring about prices at a local boat broker.  
[77] In or about early 2017, Denis Medanic made a detailed proposal to split up  
the quota on the licences by species with Robert Govorcin.  
[78] In early 2017, Brad Caldwell wrote to Mr. Medanic suggesting the possibility  
of a lawsuit.  
[79] The Notice of Civil Claim for this lawsuit was filed on February 21, 2017.  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 24  
[80] On June 26, 2018, Robert Govorcin prepared a summary of the payments  
drawn from the Joint Venture from 1998 to 2017. The amounts drawn by MFL and  
GFL were equal.  
[81] Denis agreed that he never reported any sums he had taken directly out of  
monies that would have normally been deposited into the Joint Venture bank  
account for the entire period that is the subject of this action. Denis Medanic does  
not dispute that he took a significant portion of monies that but for the management  
fee would have been deposited into the account of the Joint Venture. At trial, he  
could not state the amount that he had taken but disputed the $6.167 million figure  
estimated by Ms. Blacklock that was not deposited. Interestingly, he was able to  
suggest that the amount was closer to $5 million. His main criticism was that the  
higher amount includes monies related to fish not subject to this litigation and that  
certain monies were not related to the period of time relevant to this litigation.  
Medanic Fisheries Management payments  
[82] Mr. Thurgood produced a table setting out the payouts of monies described  
as management fees to members of the Medanic family. The table shows the  
following the payouts of to family members, including to Denis Medanic through his  
company Sea Kiss Fisheries:  
Medanic Fisheries Ltd. – Management Fees Paid  
Yea  
r
201  
3
201  
2
201  
1
201  
0
200  
9
200  
8
200  
7
Tom  
Neda  
Mila  
Sea Kiss  
50,000  
75,000  
130,000  
85,000  
70,000  
90,000  
75,000  
TOTAL  
100,000  
50,000  
35,000  
35,000  
50,000  
92,500  
145,000  
233,000  
247,250  
179,550  
184,580  
164,660  
224,340  
50,000  
69,750  
109,550  
94,580  
89,660  
3,000  
200 No split available  
6
 
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 25  
Medanic Fisheries Ltd. – Management Fees Paid  
Yea  
r
Tom  
Neda  
Mila  
Sea Kiss  
TOTAL  
323,100  
200 No split available  
5
200  
4
200  
3
145,600  
158,000  
98,400  
303,600  
170,300  
285,500  
90,000  
71,900  
200 No split available  
2
200 No split available  
1
893,540  
3,000  
831,400  
1,727,940 Determined  
922,940  
Un[D]etermin  
ed  
[83] Denis Medanic in cross examination was questioned on whether he received  
monies for the years where there is no recipient identified. While he was not  
responsive to the suggestion that he received monies for all the years in which an  
allocation is not specified, I find it was more likely than not he received more than  
the $831,400 reflected in the chart above.  
Fishing Licences and Quota  
[84] The pacific commercial fishing industry is highly regulated with detailed rules  
and procedures both in terms of authorizations and operations. Harvesting is also  
highly monitored. The current quota system was initiated in 1997. The DFO  
produces an Integrated Fisheries Management Plan every two years that provides  
the operational and management framework for non-aboriginal groundfish fishing.  
The key regulator is DFO. It issues licences to parties which sets out the vessel, the  
method of fishing, the species of fish, and the areas authorized for fishing. The DFO  
also establishes the amount of fish that a sector can harvest and the amount any  
licence holder can harvest during a set period (the “quota”). The quota is  
established by weight by DFO, and individual licence holders are then assigned a  
percentage of the total allowable catch that can reach up to 10 decimal points of  
specificity. The quota can be assigned or transferred by a holder to another licence  
holder either temporarily or permanently. Further, sub-assignments of a quota (the  
individual species of fish and amount) and transfers can occur. This is also  
 
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 26  
administered by DFO through a reallocation system. A registry and database  
tracking the status of licences and quotas including the history of transfers and the  
identity of transferors and transferees is maintained by the DFO. There is value in  
holding a licence and quota as a holder does not have to actually engage in fishing  
as the quota can be transferred or assigned, in portions and for specific species, for  
value to others. An interesting aspect of the system that came to light during the trial  
was the existence of something called a ‘stick boat’, which is technically considered  
a vessel for licencing purposes but is in fact nothing more than two 2 x 4 studs  
nailed together to represent a keel that is certified by a professional surveyor. This  
‘stick boat’ sitting on land is sufficient to obtain a licence and to receive quota. Thus,  
exemplifying the arcane nature of the regulatory system. Denis Medanic owns such  
a ‘stick boat’ – the New S Shadow.  
Transactions by Denis Medanic  
[85] The transactions which form the basis of the plaintiff’s claim are not contested  
by the defendants. It is also not contested that they were not disclosed by Denis  
Medanic to GFL.  
Bly Industries  
[86] Cheques were issued from Bly Industries by Mr. Pastor to the Joint Venture  
from 2005 to 2015. At the time, Robert Govorcin believed that Bly Industries was a  
company which the Joint Venture sold fish to. In reality, Bly Industries was a  
settlement company but was not required for such services after 2003. As described  
earlier, Bly Industries received funds from lessees of the Joint Venture, held them in  
an interest-bearing account for Mr. Pastor’s benefit, and disbursed them in amounts  
and at times as directed by Denis Medanic to the Neekis Partnership. Significant  
funds were run through Bly Industries in this manner. Denis Medanic’s rationale for  
using Bly Industries had no discernible business purpose.  
   
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 27  
Direction to lessees of Neekis Quota and Licence to make payments to  
parties other than to the Neekis Partnership  
[87] The parties who were given the directions by Denis Medanic included: Select  
Seafoods, SM Products, Pacific Quest Fishing Ltd., Coldfish Seafoods, North Delta  
Seafoods, Pasco, Leader Fishing, Bella Coola Fisheries Ltd., and Seven Seas.  
[88] The witnesses from each of the companies testified that payments for quota  
they had leased were directed by Denis Medanic and these payments included  
payments directly in the name of Denis Medanic; his companies; Bly Industries; his  
sons; his notary public, Shirley Manfron; and his solicitor, John Skapski.  
[89] The transactions were outlined in the Blacklock Report and in the Notices to  
Admit.  
Salmon Licence Revenues  
[90] The Joint Venture held salmon licences AS-491 and AS-153. MFL and GFL  
each owned 50% of each licence through their equal partnership in the Western  
Breeze and the Neekis.  
[91] No revenues were deposited into the Joint Venture accounts by Bly Industries  
for fishing years 2007 to 2017. During this time yearly licence fees and an  
association fee were paid by the Joint Venture. Further, the quotas associated with  
the licensees were leased out to various fishing processors listed above. The fish  
processors were directed by Denis Medanic to make their payments to Denis  
Medanic, his companies and his sons.  
[92] Instead of a full payment for leased salmon quota from Bella Coola Fisheries,  
Denis Medanic arranged for a portion of the larger higher quality fish to be custom  
processed for him at a per pound rate which he would sell to another buyer.  
[93] In salmon lease transactions with Pacific Quest Fishing Ltd., Denis Medanic  
arranged for 50% of the fish revenue to be paid to him and occasionally he would  
keep his half of the fish instead of payment and arrange to process and sell the fish  
himself.  
   
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 28  
Sablefish Licence  
[94] Denis Medanic entered into lease agreements with certain parties in his own  
name and not the Joint Venture. He directed certain lessees to make payments to  
Bly Industries, to his companies, to his lawyer Mr. Skapski and to his notary public,  
Ms. Manfron.  
T-37 Trawl Licence  
[95] Denis Medanic directed Leader Fishing to make certain lease payments to  
Shirley Manfron. Denis Medanic in 2012 directed Leader Fishing to transfer a  
portion of the hake and sablefish total allowable catch to the New S Shadow T-127  
licence.  
[96] Leader Fishing stopped leasing quotas from Denis Medanic in 2011 or 2012.  
The hake and groundfish quotas controlled by Denis Medanic was then leased to  
Select Seafoods. Denis Medanic directed Select Seafoods to make lease payments  
to Bly Industries; and his own companies.  
Other  
[97] Over the period covered by this claim, Denis Medanic or members of his  
family purchased other assets such as real estate, fishing licences and quotas.  
Some of these purchases were effected through monies paid into the accounts of  
Mr. Skapski and Ms. Manfron. In one instance, Denis Medanic deposited an amount  
far in excess of the amount required for the purchase of real property. The excess  
funds were paid back to “Denis, or Tyler Matthew Medanic”.  
[98] Denis Medanic ceased producing operating summaries of revenue, their  
source, and expenses. This occurred according to Denis in 2006. This coincided  
with the death of Bogomil in 2005.  
Expert Reports  
[99] The plaintiff tendered the following expert reports:  
(a)  
October 31, 2019 by Stuart Nelson regarding salmon.  
       
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 29  
(b)  
(c)  
October 31, 2019 by Stuart Nelson regarding sablefish.  
October 21, 2019 by Theresa Williams regarding the Pacific  
trawl management system and fishery, the general practice of  
trawl quota leasing, including trawl quota lease pricing.  
(d)  
(e)  
January 6, 2020 supplementary opinion by Theresa Williams.  
May 10, 2021 supplemental and revised opinion by Theresa  
Williams.  
(f)  
November 3, 2019 report by Mr. De Greef.  
Evidence of Stuart Nelson  
[100] Mr. Nelson was asked to address the same three questions in each report  
regarding salmon and sablefish.  
[101] In the salmon report the task Mr. Nelson was requested to carry out was to  
ascertain what the earnings of the Area B salmon licences aboard Neekis and  
Western Breeze' were for the period 2010 to 2016.  
[102] The summary from his report is as follows:  
Summary  
Based on the information reviewed and analyzed, my summation of the lease revenue  
earned by the Neekis and Western Breeze salmon licences for the period is as follows:  
Confirmed  
Revenue  
Inferred  
Revenue  
Year Species  
Total Revenue  
Barkley sockeye  
$
$
$
$
$
$
$
$
$
$
$
$
11,846  
$
$
$
$
$
$
$
$
$
$
$
$
-
$
$11,846  
353,953  
8,056  
15,707  
7,657  
2010  
2011  
Fraser sockeye  
Barkley sockeye  
Pink  
-
-
353,953  
8,056  
15,707  
$
$
$
$
$
$
$
$
$
$
$
-
7,657  
-
10,684  
7,014  
239,837  
-
2012 Barkley sockeye  
-
-
-
-
-
Barkley sockeye  
Pink  
-
2013  
10,684  
7,014  
239,837  
21,426  
9,389  
Barkley sockeye  
2014  
Fraser sockeye  
2015 Barkley sockeye  
2016 Barkley sockeye  
21,426  
9,389  
408,530  
-
277,038  
685,568  
 
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 30  
[103] In the sablefish report the questions he was asked to respond to were:  
1.  
To provide my opinion as to the per pound lease value of  
sablefish quota in the Pacific Region for the years 1999 and up  
to and including 2015.  
2.  
3.  
To provide my opinion on lease rates for bare sablefish licences  
for the same period.  
To provide my opinion on the cost per pound of purchasing  
sablefish quota in 2003.  
[104] The following are the results from the report for each question.  
[105] For question one, the sablefish quota lease rates for 1999 – 2015 were  
determined to be as follows:  
Quota Lease Rate Quota Lease Rate  
Quota Lease Rate Quota Lease Rate  
Year  
Year  
per lb ($)  
Range per lb ($)  
per lb ($)  
Range per lb ($)  
1999  
2000  
2001  
2002  
2003  
2004  
2005  
2006  
2.75  
4.25  
no report  
4.00  
no report  
3.40  
2.50  
2.48-3.45  
4.00-4.50  
no report  
3.50-4.50  
no report  
2007  
2008  
2009  
2010  
2011  
2012  
2013  
2014  
2015  
2.40  
2.40  
4.25  
4.25  
6.00  
5.25  
3.35  
3.45  
3.85  
2.20-2.60  
2.25-3.00  
2.75-5.75  
3.75-4.60  
4.25-6.00  
2.70-3.80  
3.20-3.80  
3.50-4.50  
2.25  
[106] For Question 2 regarding bare licence lease rates, the report states:  
Bare sablefish licences - commonly referred to as K licences or tabs - are  
vessel-based licences that cannot be readily transferred amongst vessels  
due to a number of DFO rules and restrictions. Because K licence leasing is  
uncommon, this parameter was not included in the Valuation Reports.  
I do not offer an opinion of K licence leasing rates, other than to state that the  
practise of leasing K tabs is extremely rare.  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 31  
[107] For Question 3, the report provides the following responses:  
I do not have an opinion on the value of sablefish quota in 2003 because I did  
not prepare a Valuation Report that year. For reference, I provide the j-cut  
quota valuation for each of the years I did prepare a report.  
Value of Quota  
Year  
(per lb)  
1999  
2000  
2001  
2002  
2003  
2004  
2005  
2006  
2007  
2008  
2009  
2010  
2011  
2012  
2013  
2014  
2015  
25.00  
36.00  
no report  
38.00  
no report  
40.00  
35.00  
29.00  
32.00  
25.00  
35.00  
37.00  
55.00  
60.00  
60.00  
47.50  
55.00  
[108] A supplementary question was posed to Mr. Nelson as a result of the lack of  
a valuation for 2003:  
With respect to the cost per pound of purchasing sablefish quota in 2003,  
would you please revise your report to show a calculation of your estimated  
cost of purchasing 14,800 round pounds of sablefish quota in 2003?  
[109] The response was as follows:  
Because I did not perform a quota valuation in 2003, I offer the following  
calculations that use the 2002 and 2004 valuations. The calculations are  
done for both round and fcut pounds:  
2002Value  
Round  
14,800  
J-cut  
Lbs of quota  
10,064  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 32  
2002Value  
Round  
25.84  
J-cut  
38.00  
$
2002 Value per report  
Quota cost  
$
$
382,432  
382,432  
$
Round  
14,800  
J-cut  
10,064  
40.00  
2004Value  
Lbs of quota  
2004 Value per report  
Quota cost  
$
$
27.20  
$
$
402,560  
402,560  
If one assumes that the value of sablefish quota in 2003 was similar to that in  
2002 and 2004, then the range of cost would be in the $382,000 to $403,000  
range.  
Evidence of De Greef  
[110] Mr. De Greef provided an expert report on valuing sablefish.  
[111] Mr. De Greef noted that:  
…based on my experience, that the lease rates listed in the Nelson Reports  
are often slightly lower than the market rates. Fishermen who report lease  
rates to DFO tend to understate the lease rates because it involves reporting  
their revenue to the government. In light of that I consulted my network of  
commercial sablefish fishermen and buyers who regularly lease quota and  
derived the following average annual lease rates from that research.  
[112] This observation makes sense.  
Evidence of Theresa Williams  
[113] Ms. Williams provided expert evidence in respect to many aspects of the  
commercial Pacific groundfish fishery including topics such as:  
(a)  
(b)  
(c)  
(d)  
(e)  
licensing;  
quotas;  
transfers;  
general practices;  
markets and pricing for specific seasons including hake and  
trawl sablefish.  
   
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 33  
Evidence of Jennifer Blacklock  
[114] The result of Ms. Blacklock’s review is summarized at para. 56 of her report:  
56. Based on my analysis as set out in this report, Govorcin Fisheries did not  
receive its 50% share in earnings from the Joint Venture. Joint Venture  
revenue (proceeds from the lease of licences and/or quota including  
reimbursed licence fees) that should have been deposited to the Joint  
Venture Accounts was paid to the following recipients including:  
a. Medanic Fisheries;  
b. Denis Medanic;  
c. Tyler Medanic;  
d. Matthew Medanic;  
e. Sea Kiss Fisheries;  
f. 07 BC Ltd.;  
g. Pasco Seafoods Ltd.;  
h. Select Seafoods Ltd.;  
i. Shirley M. Manfron “in trust”;  
j. John Skapski “in trust”; and  
k. 639122 BC. Ltd  
57. I have summarized the Joint Venture revenue that remains unpaid and  
not deposited to the Joint Venture Accounts for each licence from F1998 to  
F2017 on Table 8.0, Column E.  
58. Revenue earned by the Joint Venture between F1998 and F2017 (based  
on both actual payments and estimates) but not deposited to the Joint  
Venture Accounts was $6,167,851.14 [Table 8.0, Column E]. Govorcin  
Fisheries share of the revenue not deposited is equal to 50% of the total  
revenue not deposited or $3,083,925.57 [Table 8.0, Column F].  
[115] Table 8 from the report is set out below [notes and footnotes removed]:  
GOVORCIN FISHERIES SHARE OF JOINT VENTURE REVENUE NOT DEPOSITED TO JOINT VENTURE  
ACCOUNTS  
F1998-F2017  
FISCAL  
YEAR  
K20  
$
T37  
$
T37 Sablefish AS153 and NOT DEPOSITED  
GOVORCIN  
(50%) SHARE  
AS491  
Trawl  
$
$
$
$
F1998  
F1999  
F2000  
F2001  
F2002  
F2003  
7,055.63  
7,055.63  
3,527.82  
11,168.82  
(243,177.59)  
(213,939.12)  
4,044.29  
11,168.82  
5,584.41  
(121,588.79)  
(106,969.56)  
2,022.15  
(243,177.59)  
(213,939.12)  
4,044.29  
99,169.48  
99,169.48  
49,584.74  
 
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 34  
K20  
T37  
T37 Sablefish AS153 and NOT DEPOSITED  
GOVORCIN  
(50%) SHARE  
FISCAL  
YEAR  
AS491  
Trawl  
F2004  
F2005  
F2006  
F2007  
F2008  
F2009  
F2010  
F2011  
F2012  
F2013  
F2014  
F2015  
F2016  
F2017  
(191,218.40)  
(232,574.61)  
(142,782.09)  
(134,918.35)  
(104,099.67)  
(171,727.70)  
(370,114.25)  
(352,232.82)  
(486,303.10)  
(418,630.31)  
(162,889.55)  
(236,412.27)  
(151,604.11)  
(303,196.47)  
(191,218.40)  
(95,609.20)  
(232,574.61)  
(142,782.09)  
(347,418.35)  
(306,437.87)  
(423,347.70)  
(371,843.42)  
(968,031.82)  
(517,852.78)  
(659,826.11)  
(341,439.64)  
(600,783.49)  
(249,600.51)  
(479,015.86)  
(6,167,851.14)  
E
(116,287.31)  
(71,391.05)  
(173,709.18)  
(153,218.94)  
(211,673.85)  
(185,921.71)  
(484,015.91)  
(258,926.39)  
(329,913.06)  
(170,719.82)  
(300,391.75)  
(124,800.25)  
(239,507.93)  
(3,083,925.57)  
F
(212,500.00)  
(202,338.20)  
(251,620.00)  
(1,729.17)  
(250,000.00)  
(365,799.00)  
(23,763.00)  
(7,656.98)  
(7,786.68)  
(8,140.62)  
(3,555.72)  
(225,398.20)  
(164,310.23)  
(104,241.26)  
(57,152.73)  
(139,624.64)  
(10,684.14)  
(4,318.82) (255,811.14)  
(5,926.20)  
(34,917.47)  
(36,194.75)  
(3,794,382.18) (1,608,914.43) (29,728.04) $(734,826.48)  
A
B
C
D
[116] In terms of her investigation of Denis Medanic’s management of the Joint  
Venture, she observed that:  
a. accounting records including summaries, synoptics or invoices were not  
maintained by Mr. Medanic after F2001;  
b. lease revenue records were not maintained by Mr. Medanic or included in  
the Joint Venture Records;  
c. deposit information on the cheques or drafts paid to the Joint Venture is  
incomplete as to the fishery or licence that the lease payments represented.  
Verification of the source of funds paid to the Joint Venture was not possible  
without the information from third parties;  
d. Mr. Medanic did not represent Govorcin Fisheries as owner of the Joint  
Venture Assets;  
e. documents supporting the permanent transfers of Joint Venture Assets  
were not included in the Joint Venture Records;  
f. Mr. Medanic directed Lessees to pay lease payments for the lease of Joint  
Venture Assets to pay Bly Industries or other companies, individuals or trust  
accounts and not the Joint Venture;  
g. lease proceeds between F2006 and F2016 were obscured by the use of  
Bly Industries to hold funds for the Joint Venture;  
h. payments from Bly Industries on the instructions of Mr. Medanic were  
deposited regularly to the Joint Venture Accounts but not necessarily in the  
fiscal year (or fishery) that they were earned; and  
i. expense records supporting cancelled cheques were not maintained or  
provided to Govorcin Fisheries.  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 35  
[117] Between F2007 and F2017 (“F” here, and throughout referring to the fiscal),  
the report indicates that in total the amounts paid to Denis Medanic was  
$4,416,143.81 after removing the K-40 revenue.  
[118] In terms of the question posed to Ms. Blacklock for her report, how the  
aforesaid monies were spent, she states:  
I am unable to determine from the available records how profits received by  
Mr. Medanic, his relatives or his related companies were spent. Sea Kiss  
Fisheries bank records and 07 BC Ltd. bank records provided to me were  
redacted preventing any meaningful review of the records. [DB2, T8 and T9;  
DB2, T10 and T11]  
[119] At the conclusion of her report, Ms. Blacklock states:  
In summary, a review of the Joint Venture Records and third-party documents  
indicates that the way the Joint Venture was managed contributed to  
preventing Govorcin Fisheries from understanding the operations of the Joint  
Venture and to allowing Mr. Medanic to take advantage of undisclosed  
profits. While each of Govorcin Fisheries and Medanic Fisheries took an  
equal share of advances from the Joint Venture Accounts they did not share  
equally in the profit (revenue less expenses) from the Joint Venture.  
Mr. Medanic’s management allowed him to divert lease proceeds and quota  
from the Joint Venture for his benefit while the Joint Venture paid  
substantially all of the associated expenses.  
[120] I note Ms. Blacklock used conservative numbers in doing her analysis. She  
also used averages but replaced averages when actual figures were available.  
Discussion  
[121] I start with the observation that Tomislav Medanic and Bogomil Govorcin  
came to Canada with little. Through hard work and acumen, they achieved success  
in their joint fishing enterprise. Each invested in real estate. This provided a  
comfortable life for their respective families. The families were close in Canada and  
often socialized together. Since the passing of the founders, their respective  
children as beneficiaries have received considerable value in the assets the men  
had accumulated.  
[122] The key actors in this case are Denis Medanic and Robert Govorcin, age 59  
and 50, respectively.  
 
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 36  
[123] A primary feature of this case has to do with the actions of Denis Medanic in  
relation to monies he or his designates received arising from the licences and quotas  
held in the Joint Venture. The plaintiff asserts that the actions were wrongful. The  
defence relies upon the assertion of an oral agreement reached between Bogomil  
Gorvorcin and Denis Medanic that permitted him to take the subject monies as  
compensation for his management of the fishing enterprise.  
[124] If the agreement is not found to have arisen, then the exercise in effect turns  
into one of quantifying the amount due to the plaintiff and whether Denis Medanic is  
entitled to an offset based on quantum meruit for his efforts in managing the fishing  
enterprise. This was acknowledged as much by defendants’ counsel.  
[125] I will deal first with the nature of the arrangement between MFL and GFL in  
respect to the fishing enterprise. I will then address the admissibility of hearsay  
evidence of certain statements said to have been made by Bogomil Govorcin as  
related by Denis Medanic regarding the agreement as well as the credibility and  
reliability of Denis.  
What was the arrangement between MFL and GFL?  
[126] My view of the evidence is that the founders of the Neekis fishing enterprise,  
Tomislav Medanic and Bogomil Govorcin, agreed that their respective financial,  
operational, and administrative contributions to the business entitled each to an  
equal share in the net profits from the business. The evidence indicates that  
Tomislav dealt with fish processors and the management of the vessels, licences  
and quotas and Bogomil looked after the finances of the enterprise. Each worked on  
the vessels and associated work such as hanging and repairing nets. Bogomil’s  
duties on the vessels were the more dangerous ones, working with the mechanical  
devices, net drums and in the engine room. The evidence clearly shows that each  
side took an equal amount from net profits each year after the expenses of the  
fishing enterprise were accounted for. Neither side took monies separately from the  
joint enterprise for their specific responsibilities. There is no history of management  
fees being paid or accrued from the records of the joint enterprise.  
 
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 37  
[127] The arrangement was at its core an equal sharing of profits from a common  
fishing enterprise.  
[128] Based on the evidence, initially it was Tomislav Medanic who managed the  
fishing operations including the leasing of the available quotas and licences to third  
parties. In doing so, Tomislav in those dealings was an agent for both GFL and  
MFL. With Tomislav’s stroke in 1996, Denis Medanic assumed the responsibilities  
of his father and carried on in managing the fishing operations of the joint enterprise  
and doing deals as agent for both companies. In my view an agency relationship  
has been established and a fiduciary duty was placed upon Denis Medanic. In this  
regard, I agree with the plaintiff’s submission that (a) Denis Medanic had unlimited  
discretion while leasing out quota; (b) he had the ability to unilaterally exercise  
power that could be mis-used to affect the rights of GFL (e.g. transferring co-owned  
quota to other vessels and diverting lease payments); and (c) GFL was particularly  
vulnerable because it allowed the transfer of the quota and the K licence to other  
vessels, with the result that DFO did not recognize it as an owner of the licence  
and/or quota. With respect the breadth of discretion, under cross, Denis Medanic  
admitted that he had the discretion to direct North Delta Seafoods to pay all the  
money that was to go to the Neekis Partnership to his sons and companies. When  
further questioned on this level of discretion, Denis Medanic stated that he “felt that  
[he] was entitled to it based on past services and contributions” and that he did not  
need to tell Robert Govorcin about these payments. This indicated Denis Medanic  
exercised unfettered discretion.  
What was the nature of the relationship between MFL and GFL?  
[129] The plaintiff submits that the business arrangement between MFL and GFL  
was a joint venture.  
[130] The defendants characterize the relationship generically as a fishing  
enterprise. The defendants do not take issue with the ingredients that make up a  
joint venture.  
 
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 38  
[131] The essential factors for establishing a joint venture have been set out in  
Canlan Investment Corp. v. Gettling, (1997), 4126 at para. 31, 37 B.C.L.R.  
(3d) 140 (C.A.). There must be a contractual basis and the presence of:  
(a)  
A contribution by the parties of money, property, effort,  
knowledge, skill or other asset to a common undertaking;  
(b)  
(c)  
(d)  
A joint property interest in the subject matter of the venture;  
A right of mutual control or management of the enterprise;  
Expectation of profit, or the presence of "adventure," as it is  
sometimes called;  
(e)  
(f)  
A right to participate in the profits;  
Most usually, limitation of the objective to a single undertaking  
or ad hoc enterprise.  
[132] The defendants did not identify the absence of any of the above factors.  
[133] In my view, I agree with the plaintiff that the factors making up a joint venture  
have been established.  
[134] In regards to meeting the first two factors it is clear that Bogomil Govorcin and  
Tomislav Medanic set up two parallel corporate structures, into which they each  
transferred a 32/64 shares of both the Western Breeze and the Neekis along with  
their licences and quotas. The licences are registered in the name of the vessels.  
They then carried on a common commercial fishing enterprise together fishing with  
both vessels and sharing the net profits equally. The business was called and  
operated under the name the Neekis Partnership. Contracts were entered into using  
that name. Banking documents also were under this name. In evidence, Robert  
Govorcin observed that when he took over managing GFL, there was a joint bank  
account into which the fishing revenue was deposited, and expenses were paid out  
of, and profits distributed. I note here that the account was called the Neekis  
Partnership (until May 2015 when it changed to Neekis Fishing), while not legally  
accurate it evidences a contractual relationship between the parties and a closeness  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 39  
in the relationship which factually was true. While the boats were actively fishing,  
the founders both worked on the vessels. It appears both men contributed their  
labour to keep the venture operating. I also note that the financial statements and  
income tax returns of both MFL and GFL described the enterprise as a joint venture.  
[135] In regard to the presence of the third factor it is apparent that each party had  
a right of mutual control and management. As I have described, the founders each  
were involved in the control and management in the fishing enterprise. Each  
participated in the operations, set up a structure for how revenues, expenses, and  
net income would be recorded and distributed. They discussed such things as when  
draws would be taken and whether other opportunities should be pursued. I  
recognize that in this situation, the management of the fishing operations, quotas,  
licences, were in the hands of Tomislav Medanic, who was succeeded by Denis  
Medanic.  
[136] With respect to the presence of the factors four and five, there is no debate.  
There was clearly an expectation of profit and the right to participate in the profit.  
There is no question that the profits were to be shared equally between the two  
parties.  
[137] With respect to the presence of factor six, it is clear that the enterprise was  
singularly focussed on commercial fishing through the vessels, licences and quotas  
held in common.  
[138] Turning then to the admissibility of hearsay statements attributed to Bogomil  
Govorcin.  
Hearsay Evidence  
[139] The evidence of the existence of the Alleged Management Fee Agreement is  
through the testimony of Denis Medanic. It is said to be an oral agreement that  
arose in conversations he had with Bogomil Govorcin.  
[140] The admissibility of statements attributed to Bogomil Govorcin in regard to the  
Alleged Management Fee Agreement was contested as hearsay; thus,  
 
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 40  
presumptively inadmissible. The defence, relies upon the principled exception of  
necessity and reliability as well as admissions against one’s own interest.  
[141] The parties agreed that I could receive this evidence and make  
determinations regarding admissibility as part of my final determinations. I will now  
address this threshold issue.  
[142] Denis Medanic stated that through discussions he had with Bogomil Govorcin  
an agreement was reached which provided for compensation for his management  
services. Denis stated that Bogomil was aware that he and his father were trying to  
sort out compensation for Denis’ services. The key discussion between Bogomil  
and Denis is said to have been when the two men met to look at a seiner that was  
up for sale. It held a salmon and herring roe licence. Denis could only state that this  
was in the late 1990’s or early 2000’s. The owner of the vessel is said to have been  
a Mr. Alexich who stated to them that he wished to remain captain of the ship for 5  
years and receive payment as such as well as a fee for looking after the vessel in  
the off season. While the purchase was not pursued, in their discussion after  
meeting with Mr. Alexich, Denis said he told Bogomil that the work that Mr. Alexich  
was seeking to be compensated for was the work that Denis was doing for their joint  
fishing enterprise and he was entitled to compensation. Bogomil is said to have  
replied that he agreed and said “work it out with your dad, whatever he agrees to I  
will agree to.” Denis testified that he told Bogomil that he was trying to figure out a  
formula with his father for compensation but was having problems obtaining  
settlement sheets and statements which showed the compensation for captains on  
their vessels. Denis also said he had a discussion with Bogomil in 2004 or 2005 on  
the topic but gave no specifics as to what was said.  
[143] Upon obtaining the available settlement sheets, Denis Medanic provided  
them to Mr. Thurgood who in 2005 created the schedule of captain’s crew share and  
bonus that is set out earlier in these reasons. The calculated average amount was  
inserted into the Promissory Note. The terms of the Promissory Note and  
associated agreements are asserted by Denis Medanic to reflect the agreement  
terms that he had with Bogomil Govorcin. This is on the strength of the hearsay  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 41  
statement that Bogomil said to him that he would agree to whatever his father  
Tomislav agreed to. I note here that the examination discovery transcript of Denis  
Medanic has him stating that Bogomil Govorcin said “work it out with your dad first.”  
[144] There is no real issue on threshold necessity as Bogomil Govorcin has  
passed.  
[145] Turning then to threshold reliability. This can be established where it can be  
shown that there are adequate substitutes for testing truth and accuracy –  
procedural reliability; or there are sufficient circumstantial or evidentiary guarantees  
that the statement is inherently trustworthy – substantive reliability: R v. Bradshaw  
2017 SCC 35 at para. 27.  
[146] Based on the evidence, there is little to allow for a finding of procedural  
reliability in this case. The parties provided minimal submission on procedural  
reliability, their focus was on substantive reliability which I address next.  
[147] Although the parties cite different sources, the five factors for assessing  
substantive reliability in the context between the two are the same: (a) the presence  
or absence of a motive to lie; (b) independent corroborative evidence that “goes to  
the trustworthiness of the statement”; (c) timing of the statement relevant to the  
event, contemporaneity; (d) the declarant’s mental capacity at the time of the making  
of the statement; (e) solemnity of the occasion and whether the declarant’s  
statement was made “in circumstances that could arguably be akin to the taking of  
an oath where the importance of telling the truth and the consequences of making a  
false statement were properly emphasized.”: R. v. Khelawon, 2006 SCC 57;  
Gutierrez Estate v. Gutierrez, 2015 BCSC 185 at para. 34; and Peterson v.  
Welwood, 2018 BCSC 1379  
[148] The weight to be applied to any factor in this threshold assessment is  
dependent upon the circumstances of a case. I also note that the question of  
whether the statements were ever made is a question of ultimate reliability and does  
not arise at the threshold stage.  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 42  
[149] In this case, I find the absence of independent corroborative evidence to be  
significant. I also note the absence of any solemnity on any of the said occasions  
and the non-specific broad period of time that Denis Medanic says the conversations  
he had with Bogomil occurred. The key conversation was said to have been in late  
1990’s or early 2000’s and the nature of the discussions appear to have been casual  
with few specifics. I have concerns regarding the accuracy of the statement and the  
recall of Denis Medanic regarding the statement.  
[150] The defendants submit that the statements are corroborated in terms of the  
compensation Denis Medanic received from MFL for management as evidenced in  
the Promissory Note and associated documents; and the assertion that there was to  
be ongoing annual payments of $105,128.52 from MFL. Some paid directly to  
Mr. Medanic or his company and the balance from quota lease payments.  
[151] I do not accept this as independent corroborating evidence.  
[152] The key here is a stringent standard for the use of corroborative evidence. In  
Bradshawthe court stated:  
[47]  
…at the threshold reliability stage, corroborative evidence must work  
in conjunction with the circumstances to overcome the specific hearsay  
dangers raised by the tendered statement. When assessing the admissibility  
of hearsay evidence, “the scope of the inquiry must be tailored to the  
particular dangers presented by the evidence and limited to determining the  
evidentiary question of admissibility” (Khelawon, at para. 4). Thus, to  
overcome the hearsay dangers and establish substantive reliability,  
corroborative evidence must show that the material aspects of the statement  
are unlikely to change under cross-examination (Khelawon, at para. 107;  
Smith, at p. 937). Corroborative evidence does so if its combined effect,  
when considered in the circumstances of the case, shows that the only likely  
explanation for the hearsay statement is the declarant’s truthfulness about, or  
the accuracy of, the material aspects of the statement (see U. (F.J.), at  
para. 40). Otherwise, alternative explanations for the statement that could  
have been elicited or probed through cross-examination, and the hearsay  
dangers persist.  
[48]  
In assessing substantive reliability, the trial judge must therefore  
identify alternative, even speculative, explanations for the hearsay statement  
(Smith, at pp. 936–37). Corroborative evidence is of assistance in  
establishing substantive reliability if it shows that these alternative  
explanations are unavailable, if it “eliminate[s] the hypotheses that cause  
suspicion” (S. Akhtar, “Hearsay: The Denial of Confirmation” (2005), 26 C.R.  
(6th) 46, at p. 56 (emphasis deleted)). In contrast, corroborative evidence  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 43  
that is “equally consistent” with the truthfulness and accuracy of the  
statement as well as another hypothesis is of no assistance (R. v. R. (D.),  
1996 207 (SCC), [1996] 2 S.C.R. 291, at paras. 34–35). Adding  
evidence that is supportive of the truth of the statement, but that is also  
consistent with alternative explanations, does not add to the statement’s  
inherent trustworthiness. [At paras. 47–8; emphasis by underlining added.]  
[153] The defendants, simply make the assertion that the existence of the  
Promissory Note and associated documents and an oral agreement from MFL is  
enough to corroborate that there was an agreement made with Bogomil Govorcin.  
That is not the only explanation. It could easily be seen that the Promissory Note  
and associated documents and the oral agreement had only to do with internal  
issues within the Medanic family, particularly regarding Denis Medanic’s sister, who  
he was having difficulties particularly, but not limited to, with respect to the  
management of MFL since the early 2000’s. The effort can easily be seen as his  
attempts to have the agreements to protect his interest in MFL against his sister.  
This can be seen in the absence of similar documents which could have easily been  
drafted changing only the obligor to be Bogomil Govorcin and/or GFL and having  
them delivered to Bogomil Govorcin or GFL at the same time. There is as well the  
absence of the Promissory Note in the professionally prepared financial statements  
of MFL, an obligation which was material to the financial position of the company.  
Denis Medanic’s comment that he did not reach out to Bogomil about the agreement  
because of the illness of Bogomil Govorcin was not convincing. There is no  
evidence as to when Denis Medanic learned of the health problems of Bogomil  
Govorcin and what he knew of it. In any event, my sense of Denis Medanic is that  
this would not have been a barrier to him sending the documentation along to  
Bogomil and/or GFL to secure his interests given his disgruntlement about his  
compensation. Again, I also note that there was no written documentation  
supporting the prospective annual management fee of $105,128.52. In short, there  
is not only one hypothesis.  
[154] Threshold substantive reliability has not been made out.  
[155] Based then on the failure to establish threshold procedural or substantive  
reliability, the statement of Bogomil Govorcin is not admitted.  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 44  
[156] Even if I were to have admitted the statement, I would attach zero weight to  
the statement in the ultimate reliability assessment. My reasons are largely in  
respect to my assessment of the credibility of Denis Medanic and the improbability of  
Bogomil, an experienced business person, agreeing to terms unknown and unseen.  
I discuss this below.  
[157] Further, I agree with the submissions of the plaintiff that at best, if such  
statements had been made that they amounted only to an agreement to agree; or  
subject to further discussion.  
[158] I turn then to my assessment of Denis Medanic’s credibility generally and in  
relation to his assertion of the oral management agreement.  
Assessment of Credibility of Denis Medanic  
[159] A helpful guide on the assessment of credibility has been set out by Dillon J.  
in Bradshaw v. Stenner, 2010 BCSC 1398 aff’d 2012 BCCA 296:  
[186] Credibility involves an assessment of the trustworthiness of a witness'  
testimony based upon the veracity or sincerity of a witness and the accuracy  
of the evidence that the witness provides (Raymond v. Bosanquet (Township)  
(1919), 59 S.C.R. 452, 50 D.L.R. 560 (S.C.C.)). The art of assessment  
involves examination of various factors such as the ability and opportunity to  
observe events, the firmness of his memory, the ability to resist the influence  
of interest to modify his recollection, whether the witness' evidence  
harmonizes with independent evidence that has been accepted, whether the  
witness changes his testimony during direct and cross-examination, whether  
the witness' testimony seems unreasonable, impossible, or unlikely, whether  
a witness has a motive to lie, and the demeanour of a witness generally  
(Wallace v. Davis (1926), 31 O.W.N. 202 (Ont. H.C.); Farnya v. Chorny,  
[1952] 2 D.L.R. 354 (B.C.C.A.) [Farnya]; R. v. S.(R.D.), [1997] 3 S.C.R. 484  
at para. 128 (S.C.C.)). Ultimately, the validity of the evidence depends on  
whether the evidence is consistent with the probabilities affecting the case as  
a whole and shown to be in existence at the time (Farnya at para. 356).  
[187] It has been suggested that a methodology to adopt is to first consider  
the testimony of a witness on a 'stand alone' basis, followed by an analysis of  
whether the witness' story is inherently believable. Then, if the witness  
testimony has survived relatively intact, the testimony should be evaluated  
based upon the consistency with other witnesses and with documentary  
evidence. The testimony of non-party, disinterested witnesses may provide a  
reliable yardstick for comparison. Finally, the court should determine which  
version of events is the most consistent with the "preponderance of  
probabilities which a practical and informed person would readily recognize  
as reasonable in that place and in those conditions" (Overseas Investments  
 
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 45  
(1986) Ltd. v. Cornwall Developments Ltd. (1993), 12 Alta. L.R. (3d) 298 at  
para. 13 (Alta. Q.B.)). I have found this approach useful.  
[160] As a whole I found the testimony of Denis Medanic to be unsatisfactory and  
unpersuasive. I found him to be at various points evasive, unresponsive, equivocal,  
argumentative, defensive, and inconsistent. I found his testimony to be of a person  
whose wrongful conduct had been uncovered. Though not determinative I noted his  
demeanour at key points was one of unease, particularly when he was addressing  
the alleged oral agreement with Bogomil Govorcin and his diversion of funds. I  
noted that he began to drink from his water bottle frequently, he shifted his position  
in the witness box, became flushed, animated and agitated in his movements as he  
testified. He made unsupported and self-serving statements such as being the lead  
or “the man” in charge of the fishing enterprise and responsible for the success of  
the enterprise since 1983; this when he was only 21 years old, a time when the  
founders were healthy, active and engaged in the fishing enterprise and had  
invested significantly into the enterprise. I note that just before he turned 21 years  
Denis unfortunately suffered serious injuries in a car accident (several skull  
fractures) requiring hospitalization for weeks and several months recovery at home  
and during this general period was attending university. Also, Denis Medanic during  
a good portion of his description of the actions taken used the broader “we” meaning  
he and his father, not himself in the singular in terms of the management of the  
fishing operations. Thus, belying his singular role in the operations. I was also  
advised that Mr. Puratich who did captain’s duties on the Joint Venture vessels was  
on the defendants’ witness list (see defendants’ trial brief) and who might potentially  
have spoken to this point was not called in the defence case. The evidence of other  
witnesses who dealt only with Denis as a representative of the Joint Venture goes to  
Denis being a representative but not the directing mind since 1983.  
[161] The evidence that Tomislav Medanic would speak harshly at Denis Medanic  
(which he agreed occurred) on the boats in front of other crew members could hardly  
be seen as a recognition of his supposed leadership of the fishing operation.  
[162] I also noted the testimony of Denis’ sister Mila, who clearly stated that though  
Denis Medanic would engage and discuss the fishing business with his father, it was  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 46  
her father who was the “brains” and “boss” of the fishing operations and had the final  
say before his stroke. I accept her evidence on this point.  
[163] His testimony regarding whether he had ever discussed the alleged  
agreement with Robert Govorcin was telling. He vacillated. At first, he avoided  
answering the question, then moved towards suggesting he had, then said he had  
not, and then said there was no reason to have discussed the agreement with  
Robert. When challenged that Robert Govorcin would not have known about the  
existence of the management fee agreement and the funds taken by Denis, Denis  
maintained astonishingly that Robert would have known. When pressed on how  
Robert would know, Denis glibly answered that he did not think he had to explain.  
[164] I noted his unusual defensiveness and contrariness when questioned on the  
funds from the Joint Venture he had diverted. He stated that he stopped providing  
operating summaries to GFL because had never been given a thank you or shown  
appreciation for his efforts. This was strange in the context of his assertion that an  
agreement had been reached for his management as well as his acknowledgement  
that he had received financial assistance from his father for his purchase of real  
estate, that he had received as his normal pay for crewing and then captaining, and  
had received a distribution of net proceeds from MFL. This revealed a  
disgruntlement and motivation for his taking of the funds – a taking which he knew  
was not agreed to. He added that he stopped because the vessels were no longer  
fishing. However, it was clear that there were ongoing activities regarding the  
vessels and assets which he was managing related to fees, revenues and expenses.  
[165] I found it telling in his response when asked if he had a duty of honesty  
toward Robert Govorcin with respect to the management of the Joint Venture, he  
said “I had a duty to myself”.  
[166] Other aspects of the evidence that diminished his credibility included:  
(a)  
acknowledging that he had directed funds that would be for the  
account of the Joint Venture but then at other points disputed  
the funds were for the Joint Venture’s account.  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 47  
(b)  
(c)  
indicating that he had not provided values of the Joint Venture  
assets to Robert Govorcin but then said he had.  
he could not say how much he had diverted as management  
fees yet argued that the amounts identified in the Blacklock  
Reports were too high and offered that it was about a million  
dollars to high.  
(d)  
(e)  
testifying that the Principal Debt of the Promissory Note was for  
his management fee for MFL, but interestingly he stated the  
compensation he received from MFL included work he had done  
for his parents such as painting their home and other work at  
their home.  
testifying that he stopped providing operating summaries to GFL  
because he was not appreciated, then stating it was after 2006  
and summaries were not required because the fishing vessels  
were no longer fishing. However, it was clear that he was still  
incurring expenses for the vessels such as insurance, moorage,  
and licence fees; and that there was managing of the quotas  
and licences related to the Joint Venture. He also stated he  
prepared summaries for MFL. I accept the testimony of Robert  
Govorcin, that Denis Medanic did not provide summaries to GFL  
after 2000.  
(f)  
the payment to his sons of $20,000 each from lessees on the  
basis that they had performed work on the vessels in the  
absence of any documentation of the work performed and no  
reporting of such expenses.  
(g)  
testifying that rather than managing the fishing enterprise he  
was instead managing the vessels, quotas and licences; yet  
stated he was not responsible for keeping Robert Medanic on  
behalf of GFL apprised of what he was doing with the quotas  
and licences and associated revenues.  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 48  
(h)  
stating in his examination for discovery that he could not explain  
the lengthy delays in the payment out of monies held by Bly  
Industries; at trial he stated that it had to do with deferring  
income.  
(i)  
testifying in his examination for discovery that he did not recall  
the source of monies for the Dovre B quota he obtained, yet at  
trial he stated it was not Joint Venture revenues or his  
management fees.  
(j)  
his inability to specify the amount of monies he had received  
directly or indirectly due to him under the Alleged Management  
Fee Agreement in the face of his clear ability to be a meticulous  
and detailed recorder of accounts and other documents related  
to the Joint Venture. As well as in the face of his ability to direct  
lessees to make payments in amounts that did not directly relate  
to a specific transaction; mixing payments between different  
transactions; delaying payments out; directing lessees to make  
payments to third parties and not to the Joint Venture. He  
obviously had some running account or acute memory to  
manage things. His testimony that he destroyed documents  
after seven years and that some documents were lost due to a  
house flood was not persuasive.  
(k)  
the failure of Denis to have the Promissory Note and associated  
documents he obtained from MFL and his parents, which he  
says reflected what Bogomil had agreed to, drafted and  
delivered to Bogomil at the same time when his parents and  
MFL signed the documents.  
(l)  
his demand to MFL for payment of the full amount under the  
Promissory Note, when it was clear that the full amount was not  
due as by his own testimony monies had been paid significant  
amounts by MFL.  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 49  
(m) his testimony that he made a demand letter under the  
Promissory Note as a director of MFL, not personally. I found it  
incredible to think that MFL would cause itself to trigger an  
obligation on itself to pay Denis Medanic $1.5 million plus  
interest.  
(n)  
the surreptitious methods he used to divert the payments of  
Joint Venture monies; and the controlled manner of payouts to  
the Joint Venture through Bly Industries which created the  
impression that business was normal.  
[167] More specific to the existence of the Alleged Management Fee Agreement  
with Bogomil Govorcin, Denis Medanic’s evidence was unpersuasive based on:  
(a)  
the overall improbability of Bogomil Govorcin, given his  
substantial investment in the Joint Venture, his involvement in  
the fishing operations, his administrative responsibilities, and  
business experience, agreeing to an unwritten open-ended  
arrangement with no specifications as to amounts, terms,  
reporting or accounting as to how and what Denis Medanic  
would be entitled to take as compensation. Particularly, on  
Denis Medanic’s testimony, that triggering the Promissory Note  
for $1.5 million at the time it was entered into would have  
bankrupted MFL, which in my view would have had a similar  
effect upon GFL and entitled Denis to take GFL’s assets to  
satisfy the debt. The one-sided method of arriving at the  
$105,128 annual fee adds to the improbability. Bogomil was an  
experienced business person. The subject agreement is  
entirely inconsistent with good business sense which he no  
doubt had.  
(b)  
The absence of documentation of the asserted agreements;  
with GFL and/or Bogomil Govorcin despite Denis arranging for a  
lawyer to draft a detailed set of agreements to document his  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 50  
entitlement to compensation for his efforts from MFL and his  
parents. I find it incredible that having instructed a solicitor to  
draft the Promissory Note and associated documents mentioned  
earlier for MFL and his parents that he did not have such  
documents drafted (adjusted for GFL and Bogomil Govorcin as  
parties) at the same time. This would have been a simple  
exercise. The argument that hand shake deals are the norm in  
the fishing industry does nothing to further Denis’ position. The  
“hand shake” deals are in reference to transactions involving  
fish prices, quota leases, and licence leases; not management  
fees related to running a fishing enterprise and certainly not to  
terms that would have caused Bogomil to lose his company to  
Denis Medanic. I find his reliance on learning that Bogomil  
Govorcin was ill so he did not communicate the terms to be a  
convenient rationalization as opposed to the truth. He provided  
no evidence as when he learned of Bogomil’s poor health or the  
extent of the illness. Regardless, my sense of Denis Medanic is  
that his stated need for compensation from GFL would have  
propelled him to find a way to confirm his agreement with  
Bogomil through some type of communication to GFL.  
Furthering my lack of confidence in the testimony of Denis  
Medanic is the absence of any communication or discussion  
after Bogomil’s death with GFL or Robert Govorcin of the  
existence of the Alleged Management Fee Agreement. The  
evidence clearly establishes that Denis and Robert would have  
discussions about the business and specifically talked about  
taking draws from the Joint Venture. Denis never raised the  
topic that he had an agreement for the payment of management  
fees.  
(c)  
The absence of independent corroboration of such an  
agreement.  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 51  
(d)  
His lack of knowledge or any record keeping related to monies  
he was owed from the alleged agreement reflecting what he had  
taken or the balance owed.  
(e)  
(f)  
His astonishing assertion that he did not have to account to GFL  
for the management fees he says he was entitled to and took.  
The method of having lessees of quota and licence transfers  
originally held by the Joint Venture make their payments to third  
parties such as Bly Industries, Sea Kiss Fisheries, Denis’ sons,  
and Denis’ personal companies;  
(g)  
The method of having Bly Industries receive and hold monies  
from lessees when there was no need for settlement services as  
the Joint Venture vessels were no longer operating and thus no  
crews, nor expenses, needed to be paid out.  
(h)  
(i)  
His agreement to allow Mr. Pastor of Bly Industries to invest the  
monies he held and to keep the interest that accrued.  
His controlled payout of monies from Bly Industries to the Joint  
Venture which maintained a regular level of revenues and a  
sense that everything was normal.  
(j)  
His actions of paying himself and his son’s directly from  
revenues owed to Neekis, was not consistent with his claim or  
recording of other expenses paid out of Neekis, like when the  
boat went aground, both Robert and Denis got paid for their  
time out of the Neekis Partnership.  
(k)  
No where did Denis document the monies he diverted were for  
management fees. He did not invoice the Joint Venture; he did  
not report paying GST; and he did not report it in his income tax  
returns.  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 52  
[168] Based on the most favourable view of Denis Medanic’s evidence (which I do  
not accept), the discussion he had with Bogomil Govorcin at best was that there was  
some form of commitment that Bogomil would look at whatever came up between  
Denis and his father Tomislav. This however, could not be construed in any way as  
an agreement or licence to divert monies as he did.  
[169] Based on all of the foregoing, I conclude that the Alleged Management Fee  
Agreement did not exist. Its assertion is a concoction to provide cover for the  
intentional wrongful diversion of monies and use of Joint Venture assets.  
[170] The defence raised issues regarding the credibility of Robert Govorcin;  
however, the instances referred to do not diminish the effects of Denis Medanic’s  
actions. While Robert’s testimony was somewhat variable in certain instances, I  
found him generally credible and was justified in believing GFL had been wronged.  
The defence pointed to instances where it could be said Robert was more involved  
than he testified, my view is that he was clearly dependent on the information or the  
lack of it from Denis. He justifiably relied on the management role held by Denis  
Medanic.  
[171] I will now address the question of liability.  
Did a fiduciary duty arise?  
[172] The plaintiff submits that in the context of the Joint Venture the participants  
owed fiduciary obligations to the other when dealing with the property or enterprise  
of the joint venture. The key cases relied upon are: 0731431 B.C. Ltd. v. Panorama  
Parkview Homes Ltd., 2021 BCSC 607; Hodgkinson v. Simms, [1994] 3 S.C.R. 377,  
97 B.C.L.R (2d) 1and Wonsch Construction Company Ltd. v. National Bank of  
Canada, (1990) 75 D.L.R. (4th) 732 (Ont. C.A.), 1 O.R. (3d) 382.  
[173] The defendants deny the existence of a fiduciary relationship and argue that  
such a relationship rarely arises between arm’s length commercial parties. It is  
submitted that there was no vulnerability present. With respect to misplaced trust or  
confidence by a party in a business arrangement, it is submitted that this does not  
lead to a fiduciary relationship relying upon Dyck v. Roulston (1997), 36 B.C.L.R.  
 
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 53  
(3d) 126 (C.A.), 32 B.L.R. (2d) 221, which cites the High Court of Australia case of  
Hospital Products Ltd. v. United States Surgical Corporation (1984), 55 A.L.R. 417 at  
492:  
A fiduciary relationship does not arise where, because one of the parties to a  
relationship has wrongly assessed the trustworthiness of another, he has  
reposed confidence in him which he would not have done had he known the  
true intentions of that other. In ordinary business affairs persons who have  
dealings with one another frequently have confidence in each other and  
sometimes that confidence is misplaced. That does not make the  
relationship a fiduciary one: see Lloyds Bank v. Bundy, supra, at p 341. A  
fiduciary relationship exists where one party is in a position or reliance upon  
the other because of the nature of the relationship and not because of a  
wrong assessment of character or reliability. That is to say, the relationship  
must be of a kind which of its nature requires one party to place reliance upon  
the other; it is not sufficient that he in fact does so in the particular  
circumstances.  
[174] The defendants on the topic of trust and confidence further rely upon Jasmur  
Holdings Ltd. v. Taynton Developments Inc., 2016 BCSC 1902 at para. 141.  
[175] While the facts here do not establish a partnership, there was a relationship  
between the two entities which approximated it. As I have mentioned, there is the  
name under which the Joint Venture conducted its business and their bank account:  
the Neekis Partnership. The accountant of MFL and GFL described the business as  
a joint venture and this characterization is reflected in all of the financial statements  
of MFL and GFL. Their income tax returns also stated the business as a joint  
venture. The evidence of Mr. Thurgood established that this description arose from  
a consideration of the factors typically employed for a joint venture. I infer the GFL  
and MFL were informed of and accepted this characterization.  
[176] The existence of a joint venture does not necessarily give rise to fiduciary  
duties. For example see: Blue Line Hockey Acquisition Co., Inc. v. Orca Bay  
Hockey Limited Partnership, 2008 BCSC 27, aff’d 2009 BCCA 34. However, in this  
case, I find that such duties arose. I do so on the bases that:  
(a)  
there was a close relationship between GFL and MFL as I  
described earlier as being close to a partnership; and between  
the principals;  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 54  
(b)  
the joint venture had divided responsibilities between the  
principals. MFL’s responsibilities included the management of  
the vessels, licences and quotas. Denis willingly assumed the  
responsibilities. There was clearly a reasonable expectation  
that Denis Medanic would exercise his responsibilities in good  
faith and loyalty toward the common interest in the Joint  
Venture;  
(c)  
that Denis had broad discretion to manage the assets and  
operations of the Joint Venture, which included the interest of  
the plaintiff. Given the testimony of Denis Medanic as to his  
authority and broad discretion to deal with the vessels, licences  
and quota, and revenues in the context of his management  
responsibilities, it can hardly be disputed that he had broad  
discretion. See also the defendants’ admission in the Notice to  
Admit in this regard. Importantly, the plaintiff relied upon Denis  
Medanic to carry out his responsibilities to manage the assets  
and operations in a clear and transparent way. This was not  
simply the bare belief and trust by GFL in Denis as a person.  
(d)  
in addition to Denis’ role as manager, there was a clear  
asymmetry of knowledge of the operations of the Joint Venture  
in favour of Denis Medanic over Robert as a result of the  
division of responsibilities. Robert trusted Denis and had  
confidence in him. Denis was relied upon to carry out his  
responsibilities in an open and transparent manner.  
(e)  
that Denis convinced Robert to transfer quota and the K licence  
to other vessels, with the result that DFO did not recognize  
Robert as an owner of the licence and/or quota and could not  
obtain information from DFO officials regarding the quota and  
licences. Thus, rendering GFL vulnerable.  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 55  
[177] In finding a fiduciary duty here, I find support in cases such as Canadian Aero  
Service Ltd. v. O’Malley, [1974] S.C.R. 592, 40 D.L.R. (3d) 371; MacMillan Bloedel  
Ltd. v. Binstead (1983), 22 B.L.R. 255 (B.C.S.C.), 20 A.C.W.S. (2d) 87; and  
Ruwenzori Enterprises v. Walji, 2004 BCSC 741 [Ruwenzori]. In this case, I find that  
Denis Medanic, given his role as manager of the fishing operations with broad  
discretion falls into the category of per se fiduciaries by virtue of agency. I also find  
that an ad hoc fiduciary relationship existed here based on the facts.  
[178] In light of my finding of a fiduciary duty and the non-existence of the Alleged  
Management Fee Agreement; there is was no authority for Denis Medanic to have  
diverted the funds and used Joint Venture assets in the manner he did.  
[179] I agree with the plaintiff that Denis Medanic breached his duty as follows:  
(a)  
(b)  
The general duty to act honestly and in good faith in the best  
interests of the Joint Venture;  
The failure to keep proper accounting records as described in  
the Blacklock Report; and to provide full disclosure regarding  
monies due from the management of the Joint Venture;  
(c)  
(d)  
(e)  
Controlling the lease revenue in a manner that allowed Denis  
Medanic to divert lease revenue and make it very difficult to  
track where it went as described in the Blacklock Report;  
Controlling the joint venture assets in a manner that made it  
difficult for GFL to track the source of revenue by keeping quota  
and licences on boats other than the Neekis;  
As previously described, converting ½ the hake quota, all the  
trawl sablefish quota and ½ the K-20 sablefish quota by  
transferring it in 2012 to the “New S Shadow” without telling  
GFL about it and continuing to treat the remaining ½ of the hake  
quota and sablefish quota as if MFL still owned half of it;  
(f)  
Paying for expenses out of Joint Venture account but not  
sharing the profit related to those expenses, such as the cost of  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 56  
maintaining and mooring the Western Breeze and Neekis and  
paying the licence fees;  
(g)  
Obtaining a 20 per cent ownership interest in Select Seafoods  
without offering an equal opportunity to GFL and retaining quota  
for lease to Select Seafoods when it was not always in the Joint  
Venture’s interest to do so.  
[180] Denis Medanic intentionally sought to be enriched to the detriment of GFL.  
Denis Medanic took steps to hide his wrongful actions from the plaintiff. His actions  
here were fraudulent whether a fiduciary duty existed or not.  
[181] In so far as the liability of the defendant companies, other than 0999137 B.C.  
Ltd. which is not controlled by Denis Medanic, they were and are extensions of  
Denis. They are a joint enterprise. As a result, they clearly, knowingly received and  
assisted in the diversion of funds and I find they are also joint and severally liable.  
[182] The relief the plaintiff would be entitled to includes a substantive constructive  
trust. In this regard see the elucidation on this topic by Newbury J.A. in BNSF  
Railway Company v. Teck Metals Ltd., 2016 BCCA 350.  
Unjust Enrichment  
[183] The plaintiff also submits that the defendants have been unjustly enriched  
through their wrongful actions. The plaintiff submits that the evidence establishes  
that the three conditions have been met as set out in Kerr v. Baranow, 2011 SCC  
10; namely:  
(a)  
(b)  
(c)  
The defendants were enriched;  
The plaintiff suffered a corresponding detriment; and  
There was no juristic reason for the enrichment.  
[184] In response the defendants submit that it would be inequitable to allow the  
plaintiff to recover in full for any unjust enrichment of the defendant without  
considering whether the plaintiff has also been unjustly enriched. The failure to  
 
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 57  
discount the plaintiff’s award by its corresponding enrichment would amount to more  
than perfect compensation at the expense of the defendant.  
[185] The defendants submit that the plaintiff would be unjustly enriched if any  
award was not discounted by the defendants' management fees as there would be  
an enrichment of the plaintiff, a deprivation of the defendants, and no juristic reason  
for the enrichment. The plaintiff would thus be benefitting from services for which  
they did not pay.  
[186] In my view, the plaintiff has established an unjust enrichment by the  
defendants. The argument that some equitable offset is warranted does not negate  
the overall determination based on the three key requirements indicating the  
defendants have been unjustly enriched.  
[187] Below I also deal with the quantum meruit claim of the defence in the  
discussion regarding the application of the clean hands principle.  
[188] As a result of my finding of an unjust enrichment, the relief the plaintiff is  
entitled to would include a remedial constructive trust over the diverted funds.  
Duty of Good Faith and Honesty  
[189] The plaintiff also submits that the defendants failed to adhere to the  
contractual duty of good faith arising from the joint venture that was in place from the  
beginning of the enterprise.  
[190] The plaintiff submits that with respect to the diversions up to 2012, when most  
of the defendant’s quota was transferred to the New S Shadow, that the general duty  
of honesty was breached when Denis Medanic surreptitiously caused large amounts  
of lease revenue to be diverted to himself, his two sons and to companies controlled  
and owned in part by him.  
[191] Similarly, after the transfers to the New S Shadow in 2012 the general duty  
not to knowingly mislead was breached. This was done by transferring the  
defendants’ portion of the co-owned quota without telling GFL and by continuing to  
act like the transfer had not occurred by taking 50% of advances from 2012 to 2017  
 
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 58  
and paying for expenses from the Neekis Partnership and subsequently the Neekis  
Fishing Account (starting in 2015). The “misleading” was consciously done by the  
use of Bly Industries and instructing lessees to make direct payments to payees  
other than the Neekis Partnership or Neekis Fishing to hide the fact that lease  
payments were being diverted.  
[192] The main defence argument under this topic is that the Alleged Management  
Fee Agreement permitted the diversion by Denis Medanic. I have already  
determined that Denis Medanic has failed to establish the existence of that  
agreement.  
[193] The other argument is that there was no prior agreement between the parties  
governing their relationship. Again, I reject this argument, as while there was no  
written agreement, I have found that there was clear agreement as to how the Joint  
Venture would operate and the roles and responsibilities of the parties. Denis  
Medanic took over the responsibilities of managing the fishing operations after his  
father’s stroke, whose duties were as originally established between the founders of  
MFL and GFL.  
[194] The duty of good faith and honest performance were discussed in a series of  
decisions: Bhasin v. Hrynew, 2014 SCC 71; C.M. Callow Inc. v. Zollinger, 2020 SCC  
45; and Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage  
District, 2021 SCC 7. The principles from these cases are identified and  
summarized in the decision of 2343680 Ontario Inc. v. Bazargan, 2021 ONSC 6752  
at para. 28::  
(a)  
Canadian common law has a long history of respecting private  
ordering and the freedom of contracting parties to pursue their  
own self-interest. The principle of good faith must be applied in  
a manner consistent with this history. The pursuit of economic  
self-interest, often at the expense of others, is not necessarily  
contrary to the principle of good faith. (Bhasin, para. 70;  
Wastech, para. 73);  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 59  
(b)  
(c)  
(d)  
The principle of good faith performance simply requires that  
parties generally perform their contractual duties honestly and  
reasonably and not capriciously or arbitrarily. (Bhasin, para. 63);  
While the duty of honest performance does not require parties  
to act "angelically", they must refrain from lying or knowingly  
misleading another contracting party (Bhasin, para. 86).  
A duty of honest contractual performance does not impose  
obligations of loyalty or trust. It is not a fiduciary duty. It does  
not mean that parties cannot legitimately take advantage of  
bargains they have reached. But it does mean that parties must  
not lie or knowingly mislead each other (Bhasin, paras. 60 and  
65);  
(e)  
The duty of honest performance is not an obligation of honesty  
at large. It is directly linked to performance of the contract.  
Absent a linkage requirement, the duty would be to simply not  
tell a lie, which would broaden the scope of liability beyond  
acceptable limits (Callow, para. 49);  
(f)  
Tethering the good faith analysis to a consideration of what was  
reasonable according to the parties' own bargain tends to  
prevent the analysis from "veering into a form of ad hoc judicial  
moralism or 'palm tree' justice." (Wastech, para. 74.);  
(g)  
The duty of honest performance "constrains the manner in  
which all contractual rights and obligations are exercised or  
performed, as a matter of contractual doctrine." (Callow,  
para. 54). By extension, exercising a discretionary power  
dishonestly is a breach of contract; and,  
(h)  
Honest performance requires that the exercise of contractual  
discretion be carried out in a manner consistent with the  
purposes for which it was granted. Said another way, that it be  
carried out reasonably. The assessment of reasonableness  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 60  
may be expressed in the following question: was the exercise of  
discretion unconnected to the purpose for which the contract  
granted discretion? If the answer is yes, then the exercise of  
discretion has not been carried out in good faith. (Wastech,  
para. 69).  
[195] I again refer to Denis Medanic’s refusal to acknowledge his duty of honesty to  
GFL.  
[196] Based on my findings above describing the wrongful conduct of Denis  
Medanic, I find there has been a breach of the contractual duty of honest  
performance.  
Tort of Conversion  
[197] The plaintiff as an alternative to the breach of fiduciary duty claim, submits  
that the defendants were engaged in the tort of conversion.  
[198] The plaintiff submitted in closing that this position was not as strong as its  
other claims and that its conversion claim is limited.  
[199] Given my factual findings of Denis Medanic’s conduct in relation to breach of  
fiduciary duty, unjust enrichment and breach of the contractual duty of honest  
performance, the plaintiff has also established the tort of conversion. Denis  
Medanic’s wrongful actions were intentional.  
Assessment of monies diverted  
[200] Having determined multiple breaches by the defendants against GFL, I turn to  
the assessment of monies wrongfully diverted and taken by the defendants.  
[201] The plaintiff relies in large measure on the forensic report of Ms. Blacklock,  
which to a significant extent is based on the information from fishing industry experts  
Peter de Greef, Theresa Williams and Stuart Nelson.  
   
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 61  
[202] The amount diverted as determined in the Blacklock Report is estimated to be  
$6,167,851.14. One half of which would be GFL’s share under the profit sharing  
arrangement; namely, $3,083,925.57.  
[203] In her identification of information gaps, Ms. Blacklock noted:  
(a)  
Transactions that did not indicate whether DFO licence fees  
paid by the Joint Enterprise were reimbursed by the lessees but  
assumed that arrangements were on a ‘contract by contract  
basis’. She conservatively approached this by assuming 50%  
reimbursed and 50% did not.  
(b)  
(c)  
(d)  
(e)  
No interest that accrued on Joint Venture monies deposited with  
Bly Industries were paid to the Joint Venture;  
For certain years source documents, bank statements,  
cancelled cheques and deposited slips were missing;  
Amount of payment was for lease of licences versus lease of  
quota.  
Lease documents for licences were missing.  
[204] The defence did not tender any expert reports. The defence in cross  
examination did not challenge strenuously the experts on their key conclusions. In  
closing submissions, they took “issue with some of Ms. Blacklock’s findings” which  
were based on the opinions of experts. The defence handed up tables from the  
Blacklock Report revised to reflect their view of values that should be reflected for  
various entries. The defendants’ adjusted Table 8 shows that the total joint revenue  
not deposited was $5,272,576.54 and GFL’s 50% share at $2,636,288.27.  
[205] In this regard, the defence noted that in relation to the salmon fishery:  
(a)  
Mr. Nelson averaged the resulting amount with two other  
options to arrive at a final number for 2010 lease revenue;  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 62  
(b)  
(c)  
Mr. Nelson picked the closest date where there was “potentially”  
similarity for lease rates in 2011;  
Mr. Nelson inferred revenues for pink and sockeye fisheries for  
2010-2016 where payment records were not available based on  
another year with similar percentages.  
[206] In relation to sablefish, the defence noted that:  
(a)  
Mr. Nelson for quota lease prices relied in large measure on  
information and transaction records from a subcontractor report  
which was not produced. Also, that he relied on anecdotal  
information.  
(b)  
Mr. Nelson stated that he reflected the results from his DFO  
reports which were used internally only by DFO to track trends  
and that he had cautioned DFO against using the results as the  
basis for transactions. He confirmed that values for licence and  
quotas can change over a year and that there is considerable  
volatility from year to year.  
(c)  
(d)  
The sample sizes could be small in his reports and his  
confidence level was low in multiple years.  
He agreed to multiple errors in his DFO reports.  
[207] It is submitted that based on the undisclosed Keevil Report upon which the  
Nelson Sablefish Report is based, and the errors in these the reports, the  
Defendants argue that the quota lease rates in the Nelson Sablefish Report, which  
form a significant proportion of the data upon which the Blacklock Report relies in  
table 1.3 and 8.0 for the K-20 estimated lease revenue, should be reduced to a more  
conservative figure based on the lower level of the quota lease rates in the range of  
values in the Stuart Nelson Sablefish Report.  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 63  
[208] In relation to the Williams Report, the defence submitted that it did not take  
serious issue with Ms. Williams estimate for T-37 sablefish trawl for the years F2013  
to F2016.  
[209] In relation to the De Greef report, among many comments, it was noted that  
“Appended to his report was a one page table of data for his ’industry sample’ lease  
rates, with some years consisting of an ’average’ of only one data point.”  
[210] The defendants handed up an alternative Table 8 (with supporting tables as  
used by Ms. Blacklock but with the defendants’ adjustments) showing amounts that  
reflect their view of what the analysis of Ms. Blacklock should be. The alternative  
Table 8 is reproduced below [notes and footnotes removed]:  
GOVORCIN FISHERIES SHARE OF JOINT VENTURE REVENUE NOT DEPOSITED TO JOINT VENTURE  
ACCOUNTS F1998-F2017  
JOINT VENTURE REVENUE NOT DEPOSITED – Note 2  
FISCAL  
YEAR  
TOTAL JV  
T37 Sablefish  
GOVORCIN  
(50%) SHARE  
$
AS153 and  
AS491  
$
REVENUE NOT  
DEPOSITED  
$
Trawl  
K20  
$
T37  
$
$
17,055.63  
F1998  
F1999  
F2000  
F2001  
F2002  
F2003  
17,055.63  
8,527,872  
10,584.41  
(85,359.61)  
(85,893.17)  
7,022.15  
21,168.82  
(170,719.23)  
(171,786.35)  
14,044.30  
21,168.82  
(170,719.23)  
(171,786.35)  
14,044.30  
126,771.07  
126,771.07  
63,385.53  
F2004  
F2005  
F2006  
F2007  
F2008  
F2009  
F2010  
F2011  
F2012  
F2013  
F2014  
F2015  
F2016  
(191,218.40)  
(232,574.61)  
(142,782.09)  
(122,557.50)  
(67,964.10)  
(149,107.19)  
(244,726.10)  
(352,232.82)  
(486,303.10)  
(344,090.94)  
(70,661.76)  
(170,524.23)  
(117,789.23)  
(191,218.40)  
(232,574.61)  
(142,782.09)  
(335,057.50)  
(270,302.30)  
(400,727.19)  
(246,455.27)  
(968,031.82)  
(517,852.78)  
(585,286.74)  
(249,211.85)  
(534,895.45)  
(215,785.63)  
(95,609.20)  
(116,287.31)  
(71,391.05)  
(212,500.00)  
(202,338.20)  
(251,620.00)  
(1,729.17)  
(167,528.75)  
(135,151.15)  
(200,353.60)  
(123,227.63)  
(484,015.91)  
(258,926.39)  
(292,643.37)  
(124,605.93)  
(267,447.73)  
(107,892.82)  
(250,000.00)  
(365,799.00)  
(23,763.00)  
(7,656.98)  
(7,786.68)  
(8,140.62)  
(3,555.72)  
(225,398.20)  
(164,310.23)  
(104,241.26)  
(57,152.73)  
(10,684.14)  
(4,318.82) (255,811.14)  
(5,926.20) (34,917.47)  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 64  
JOINT VENTURE REVENUE NOT DEPOSITED – Note 2  
FISCAL  
YEAR  
TOTAL JV  
REVENUE NOT  
DEPOSITED  
T37 Sablefish  
Trawl  
GOVORCIN  
(50%) SHARE  
AS153 and  
AS491  
K20  
T37  
F2017  
(43,109.76)  
(139,624.64)  
(36,194.75)  
(218,929.15)  
(5,272,576.54)  
E
(109,464.58)  
(2,636,288.27)  
F
(2,899,107.59) (1,608,914.43)  
(29,728.04) $(734,826.48)  
A
B
C
D
Source  
Table 2.1 and  
2.2  
Table 1.3  
Table 2.3  
Table 3.0  
A+B+C+D  
Ex 1/2  
[211] The major difference between the positions of the plaintiff and defendants is  
in the amount of quota lease revenues for each year. The defendants’ view is that  
the plaintiff has reflected values that are too high. The defendants use a rate/lb for  
J-cut sablefish that is at the low end of the range of values in the evidence. A  
second difference is the reflection of revenues from the lease of licences over the  
years. A significant aspect in this regard is the defendants’ position that no licence  
lease revenues should be reflected for 1998 through 2002.  
[212] I note here Denis Medanic acknowledged he diverted monies due to the Joint  
Venture to compensate him for his management fee. While he refused or was  
unable to state how much he had taken in compensation, he interestingly testified  
that the amount identified in the Blacklock Report of $6.1 million was too high and  
offered that amount was closer to $5 million. I have discussed the reliance that can  
be placed on Denis Medanic’s testimony earlier and have applied that in the  
evaluation where relevant here.  
[213] Using Table 8 and Table 1.3 from the Blacklock Report as references in  
respect to the K-20 licence, my determination of the values are:  
Lease Revenue Quota, column A Table 1.3  
[214] The major difference in values between the parties is in relation to this item.  
While the defendants did not take issue with the values used for many of the years;  
the years for which there was disagreement, the defendant selected the lowest price  
in the range of prices identified in the expert reports. I am satisfied with the  
revenues as reflected in the Blacklock Report. There is evidence supporting the  
 
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 65  
values. Ms. Blacklock has taken a measured approach to selecting her values. She  
has also used values that she was provided as actuals from Seven Seas in respect  
to F2014 to F2017. The cross-examination of Mr. Heras referred to a discrepancy  
between an internal email indicating $3.90/lb (fees in) in 2014. Mr. Heras indicated  
that it was possible that the prices may have varied over the course of the season  
and over the other years 2014-2017. His recall of the records regarding pricing was  
somewhat uncertain, which is understandable. Given his testimony that prices he  
agreed to could vary over the course of a fishing season my view is that the initial  
approach by Ms. Blacklock should be used. As a result, the K-20 quota lease  
revenue I find is $7,196,807.30.  
Lease Revenue Licence, column B Table 1.3  
[215] The years in contention are F1998-F2002. The plaintiff relies on the  
$10,000/year figure from the Blacklock Report. The defendants argue that no  
amount should be reflected. My view of the evidence is that revenues for the leasing  
of the K-20 licence were occurring during the period but that the amount was not as  
consistent as they were from 2006 at $20,000. This appears to be the reason that  
the Blacklock Report reflects the lower amount of $10,000/year. In my view, this  
approach is supported and reasonable. I accept it.  
Lease Reimbursement of 50% Licence Fees, Column C Table 1.3  
[216] The defendants’ adjusted Table 1.3 does not reflect any adjustments to those  
in the Blacklock Report. Ms. Blacklock “assumed that payment of the fees was on a  
contract by contract basis and that the fees were paid by the lessor 50% of the time  
and reimbursed by the lessee 50% of the time.” There is evidence that supports this  
approach including that of Mr. De Greef. I find this approach is conservative and  
reasonable. I accept it.  
Deposits, Column E Table 1.3  
[217] The defendants’ adjusted Table 1.3 Column E for sablefish indicates that  
there is only one value in dispute, the deposit for F2017. The Blacklock Report  
states the amount is $90,000 whereas the defendants assert the value is  
     
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 66  
$294,013.40. The difference arises as to whether the payment by Seven Seas of  
$102,006.70 to each of GFL and MFL is in relation to F2017 or the next year. The  
Blacklock Report states that:  
Mr. Medanic instructed Seven Seas to pay drafts of $102,006.70 in February  
of 2017 and $5,000.00 in June 2017 to each of GFL and MFL. These  
payments were excluded from the deposits of the Joint Venture because they  
were payments for K20 quota and licence for the 2017/18 fishery (F2018) and  
are outside the period of review.  
The cheque stubs for each have a notation on that states “Prepayment”. Though  
there is a handwritten note on the GFL cheque stub “2016 QUOTA” there is no  
evidence as to who wrote it or why. In my view, the “Prepayment” notation is what  
should be given weight and persuades me that it relates to a future period, i.e., post  
F2017. As a result, I prefer the position of the plaintiff that the deposits for F2017  
amounts to $90,000. Thus, the total under this column is $4,189,692.12.  
[218] Thus, I find the difference in revenues and deposits for the K-20 sablefish is  
$(3,794,382.18).  
[219] In respect to Table 8 and the T-37 licence, the defendants in their adjusted  
Table 8 did not reflect any changes. There is evidence supporting the values that  
Ms. Blacklock has used. I find them to be reasonable and I accept them.  
[220] In respect to Table 8 and the T-37 Sablefish Trawl, the defendants in their  
adjusted Table 8 did not reflect any changes. There is evidence supporting the  
values that Ms. Blacklock has used. I find them to be reasonable and I accept them.  
[221] In respect to Table 8 and the AS-153 and AS-491 salmon licences, the  
defendants in their adjusted Table 8 did not reflect any changes. There is evidence  
to support the values that Ms. Blacklock has used. I find them to be reasonable and  
I accept them.  
Total JV Revenue not deposited  
[222] Based on the foregoing, the revenues that have not been deposited amounts  
to $6,167,851.14. GFL’s equal share then is $3,083,925.57.  
 
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 67  
Tax Gross Up  
[223] The plaintiff tendered a report from Mr. Holmes (the “Holmes Report”) to show  
the extra tax GFL would have to pay if it receives all of the income from the diverted  
lease revenue in 2022 rather than paying it in the years that it was earned and to  
then calculate how much extra money would be required to indemnify GFL for the  
extra tax it would have to pay. The report identifies that $453,895 of pre-tax income  
would be required to produce a net tax amount of $331,343 to offset the additional  
tax GFL would have to pay if a judgment of $3,083,926 (the amount identified in the  
Blacklock Report) were awarded. The net tax amount was corrected at trial to  
$273,247.  
[224] The defendants submit that a tax gross up cannot be awarded in the  
circumstances. The defendants argue that:  
a) Mr. Holmes agreed in cross examination that he had not been asked to  
provide an opinion that a court award would have to be declared as  
income. The Holmes Report only assumes that the plaintiff was  
concerned that if it obtained judgment it may have to pay more tax on that  
money and did not express an opinion on what tax would be payable.  
b) Mr. Holmes agreed the small business tax deduction (“SBD”) would be  
shared by associated businesses of the plaintiff and as such the full limit  
of the SBD may not be available to the plaintiff in the current year or in  
one or more of the years being reviewed, and a limit on the availability of  
the SBD for any of the years could affect the tax payable calculations.  
c) Mr. Holmes agreed that despite allocating all of the SBD deductions from  
previous years to the plaintiff (after discussing the matter with plaintiff’s  
counsel and Robert Govorcin) in actuality since 1999, there had been an  
apportionment of the SBD between GFL and an associated company  
Govorcin’s Apartments Ltd.  
[225] As a result of the foregoing the defendants argue that if the plaintiff were to  
take 100% of the SBD for the years in question (1999 – 2017), then to accurately  
 
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 68  
calculate the tax implications to the plaintiff and Govorcin Apartments Ltd., one  
would have to reconsider all years in terms of what was actually done. Mr. Holmes’  
calculations do not consider what was actually done over the years in terms of the  
apportionment of the SBD between the associated company and GFL. The  
defendants note that Mr. Holmes agreed that all of the tax returns of Govorcin  
Apartments Ltd. were available and that type of calculation could have been done,  
but was not, and that as a result of assuming the plaintiff takes 100% of the SBD, it  
is possible that Govorcin Apartments Ltd. would have for any given year paid more  
tax than indicated in its tax returns, and that is possibly a benefit to the two  
companies in terms of taxes.  
[226] The defendants also point out two further problems with Mr. Holmes’ report.  
The first was the one year offset between the plaintiff’s fiscal year and the fishing  
enterprise’s’ fiscal year. This error was corrected at trial and resulted in a reduction  
in the final total of calculated tax on income being received in current year from  
$331,343 to $273,247. The second was the incorrect numbers for the SBD limit  
available in years 2003-2007 and 2009 – 2010.  
[227] Given the identified shortcomings in the Holmes Report, I am not persuaded  
that the sought after adjustment by the plaintiff has been established.  
Dovre B  
[228] The plaintiff seeks one-half of the revenue from the Dovre B quota produced  
up to the present. This figure is estimated to be $484,411.85 as per Mr. De Greef.  
His estimate does not include a value for 2016/17. The plaintiff using what it says is  
a conservative estimate of $28,000 per year submits that this would yield an  
additional $112,000. The plaintiff seeks equitable compensation in that amount or  
reference to the registrar for an accounting for profits.  
[229] In her report, Ms. Blacklock states that she has “not seen documents  
supporting the transaction to determine whether or not the “Dovre B” quota was  
purchased with Joint Venture funds earned from the lease of the K20 licence and/or  
 
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 69  
quota and that should otherwise have been deposited to the Joint Venture.” She  
notes however, that:  
Table 1.0 shows the Joint Venture did not receive lease payments from FAS  
Seafood Producers in 2003 (F2004), the year that the “Dovre B” quota was  
placed on the K20. Deposits for the K20 lease received by the Joint Venture  
dropped in 2003 (F2004) and did not recover to the levels received in F1998  
to F2002.  
[230] Further, she states:  
In the Joint Venture Records, the “Dovre B” quota is treated as a Joint  
Venture Asset. If the “Dovre B” quota were a non-Joint Venture Asset, I  
would expect to see consideration for the use of the Joint Venture K20  
licence. There was no evidence of proceeds received into the Joint Venture  
Accounts at any time relative to the “Dovre B” quota. There are no  
documents to separately identify the cost, the lease revenue or lease  
expenses (DFO licence fees and CSA fees) associated with the added quota  
in the Joint Venture Records for the 9-year period from 2003-2012 (F2004 to  
F2013) when the “Dovre B” quota was transferred to the “New S Shadow”.  
[231] In terms of expenses, she states:  
The Joint Venture Accounts indicate Joint Venture expenses related to  
leasing Joint Venture Assets were consistent year over year and were  
independent of leasing revenue. After the Joint Venture stopped active  
fishing, payments from the Joint Venture Accounts were for licence fees and  
dues, moorage, storage, boat maintenance and insurance. In drawing equal  
advances, Govorcin Fisheries and Medanic Fisheries shared the Joint  
Venture expenses that were recorded in the Joint Venture Accounts equally.  
[Schedule 13; DB7, DB8, DB10]  
[232] Denis in cross examination agreed that the Joint Venture paid the licence  
fees for the Dovre B quota when it was part of the K-20. He argued though that the  
fees were always returned from those who leased the quota. However, the evidence  
does not support that in my view. Reimbursement was varied and was determined  
on a contract specific basis.  
[233] In terms of revenues, there is no evidence of proceeds being received into the  
Joint Venture accounts at any time relative to the Dovre B quota.  
[234] It appears that the Dovre B quota was incorporated into the assets of the  
Joint Venture and that the expenses for the licence was paid for by the Joint  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 70  
Venture. Revenues identified for the Dovre B quota do not appear to have been  
reflected in the accounts of the Joint Venture. Also, as noted above it appears that  
deposits for the K-20 lease dropped in 2003 (F2004). Denis was unable to say what  
the source of funds were for the purchase of the licence. It appears that the Dovre B  
quota thus was acquired from Joint Venture. However, I will await further  
information obtained through the tracing exercise before making a final  
determination.  
Punitive Damages  
[235] The plaintiff seeks punitive damages. The plaintiff relies on Whiten v. Pilot  
Insurance Co., 2002 SCC 18 for this claim.  
[236] The purpose of punitive damages is not compensatory. Their aim is to punish  
the defendant for their conduct. Courts may award punitive damages where a  
defendant’s conduct has been egregious and worthy of rebuke. That is, where it can  
be characterized as malicious, oppressive and high-handed, offensive to the court’s  
sense of decency and representing a marked departure from the standards of  
ordinary decency: Whiten at paras. 36, 92; Paragon Testing Enterprises Inc. v. Lee,  
2018 BCSC 634 at para. 46 [Paragon].  
[237] When deciding whether to award punitive damages, the court must also  
consider whether the damages already awarded in the action have achieved the  
objectives of retribution, deterrence and denunciation: Paragon at para. 46.  
[238] The Supreme Court of Canada in Whiten recognized that it is rational to use  
punitive damages to prevent a wrongdoer from profiting from their wrongdoing,  
where compensatory damages are insufficient (at para. 72).  
[239] The quantum of punitive damages must be proportional to the defendant’s  
level of blameworthiness. The more reprehensible the conduct, the higher the  
award necessary to achieve appropriate denunciation. In determining the  
defendant’s level of blameworthiness, the court should have regard to the following  
factors; Louis Vuitton Malletier S.A. v. Singga Enterprises (Canada) Inc., 2011 FC  
776 at para. 166:  
 
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
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(a)  
(b)  
(c)  
(d)  
Whether the defendant’s conduct was planned and deliberate;  
The motive or intention behind the defendant’s conduct;  
The length of time over which the conduct occurred;  
Any attempt by the defendant to conceal or cover up the  
conduct;  
(e)  
Whether the defendant was aware their conduct was wrongful;  
and  
(f)  
Whether the defendant profited from their conduct.  
See Whiten, above, at paragraph 112-113.  
[240] The plaintiff also refers to Prince v. Hamilton (May 15, 2018), Victoria 15/0518  
(B.C.S.C.), a decision of B. McKenzie J., which is similar to the present case at  
para. 84 et seq.  
[241] I am persuaded that the plaintiff is entitled to punitive damages based on my  
review that the above factors have been established by the wrongful conduct of the  
defendants I have found.  
[242] The quantum, however, will await the further findings and result from the  
tracing exercise.  
Equitable Interest  
[243] A determination of equitable prejudgment or post judgment interest is not  
required at this point. The question should be raised when the findings and results  
from the tracing exercise returns.  
Limitation bar and Laches  
[244] The defendants have pleaded the defence of laches and the current and  
predecessor Limitation Act. This action was commenced February 21, 2017.  
[245] In respect to laches, there are two branches to the doctrine: (1) the delay that  
constitutes acquiescence, and (2) the delay that results in circumstances that make  
   
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 72  
the prosecution of the action unreasonable. Either branch on its own is sufficient as  
a defence to a claim in equity: BNSF Railway Company v. Teck Metals Ltd., 2020  
BCSC 1133 at para. 276. Under either branch of laches, mere delay is not sufficient  
to trigger laches: M.(K) v. M.(H), [1992] 3 S.C.R. 6 at 77-78, 96 D.L.R. (4th) 289.  
Ultimately, laches must be resolved as a matter of justice as between the parties.  
[246] At paragraph 32 of its Response to Civil Claim, the defendants have pleaded  
that, “[t]he plaintiff has inexcusably delayed in making its claims and seeking the  
relief claimed herein. The delay has prejudiced the defendants”. The defendants  
submit that the plaintiff could have discovered its claims by the exercise of  
reasonable diligence long before 2016. As a result, they argue that the plaintiff  
acquiesced. They rely upon M.(K) at 77-78 and Pioneer Corp. v. Godfrey, 2019  
SCC 42 at paras. 31-32. The defendants point out the Robert Govorcin had been  
involved in the management of GFL since 2000 and a director of GFL since June 16,  
2005. The defendants point to Robert Govorcin’s admission in cross examination  
that he “could have” at all times sought information from DFO regarding the status of  
licences and quota as the basis to argue that had Robert reasonably informed  
himself with respect to the quota transfers listed in the reallocation history details.  
Had he done so he would have noticed that not every quota transfer was associated  
with a deposit into the Joint Venture’s bank account.  
[247] To demonstrate acquiescence for the purpose of a laches defence, the  
defendant must point to a “clear act” on behalf of the plaintiff that constitutes  
acquiescence in the circumstances. The length of the delay itself may amount to a  
clear act, but that is highly dependent on the circumstances: Zurich Insurance  
Company v. TD General Insurance Company, 2014 ONSC 3191 rev’d on other  
grounds 2015 ONCA 764.  
[248] The plaintiff submits that any delays in the plaintiff bringing this proceeding  
were as a direct and foreseeable result of the defendant, Denis Medanic’s, scheme  
to defraud the plaintiff, an integral part of which was to hide that scheme from the  
plaintiff. I agree.  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 73  
[249] Given my findings regarding the management role of Denis Medanic for the  
Joint Venture; the relationship between the Medanics and Govorcins; the  
surreptitious steps taken by Denis Medanic in diverting monies due to the Joint  
Venture and the limited management role in the Joint Venture and knowledge of  
Robert Govorcin; it is clear that GFL could not have known or reasonably ought to  
have known the diversions were taking place. Any statements or actions of Robert  
Govorcin do not amount to acquiescence in the context of laches.  
[250] The defendants’ laches defence has not been made out.  
[251] In regard to the defendants’ defence under the Limitation Act. They also raise  
the limitation ban under the Predecessor Act for that portion of the claim that pre-  
dates June 1, 2013 when the current act came into force. They submit that the  
plaintiff’s claims were discoverable in 2005, when Robert Govorcin became the  
director of GFL. From that point, it is argued that the relevant limitation periods have  
run.  
[252] In respect to the Predecessor Act, the defendants acknowledge that s. 6.1 of  
that act can operate to postpone a limitation in actions based on fraud, fraudulent  
breach of trust, conversion or other act of the trustee on which the action is based  
until the beneficiary becomes “fully aware” of the stated wrongful actions. The  
burden rests on the defendant to establish that time has begun to run on an action.  
Similarly, under s. 12 of the Act , a claim in fraud or trust claim is discovered when  
the beneficiary becomes “fully aware” of items listed which include “fraud”, fraudulent  
breach of trust, or conversion.  
[253] The Limitation Act imposes strict time limits on a plaintiff to bring their action  
against a defendant. The Act does not interfere with the application of the doctrine  
of laches: Act, s. 5(b). The limitation period for any claim is 2 years: Act, s. 6(1).  
Section 8 of the Act provides for general discovery rules. A claim is discovered by a  
person on the first day on which they knew or reasonably ought to have known the  
following: (a) that injury, loss or damage had occurred; (b) that the injury, loss or  
damage was caused by or contributed to by an act or omission; (c) that the act or  
omission was that of the defendant; and (d) that, having regard to the nature of the  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 74  
injury, loss or damage, a court proceeding would be an appropriate means to seek  
to remedy the injury, loss or damage.  
[254] Section 12 of the Act contains special rules for claims based on fraud  
involving trustees; namely that a “fraud or trust claim is discovered when the  
beneficiaries becomes fully aware” that an injury, loss or damage was caused or  
contributed to by fraud, fraudulent breach of trust, etc. The burden of proving  
discovery rests on the trustee, the defendants in this case.  
[255] The defendants acknowledge that the general discovery rules do not apply to  
claims based on fraud, trust, or conversion; and that a fraud or trust claim is  
discovered when the beneficiary becomes “fully aware” of the loss (see s. 12 of the  
Act).  
[256] The defendants submit that the plaintiff has failed to establish that the general  
discovery rule does not apply.  
[257] The defendants submit the general discovery rules apply to the portions of the  
plaintiff’s claim – that post date June 1, 2013 and pre-date February 21, 2015, which  
are two years before the plaintiff’s first Notice of Civil Claim.  
[258] In my view, the limitation defence has not been made out. I base this on the  
same rationale used in rejecting the laches defence, in essence, any delay was not  
a clear act amounting to acquiescence by the plaintiff. Based on the wrongful  
conduct of Denis Medanic in surreptitiously diverting funds away from the Joint  
Venture. It is clear to me that the general discovery rule does not apply in this case.  
In addition, the defence has not established that the plaintiff was “fully aware” of the  
wrongful conduct of the defendants outside of the applicable limitation period.  
Equitable Setoff  
[259] The defendants seek equitable set-off if liability is found against a defendant.  
The defendants in this regard submit that they are entitled to management fees on  
the basis of the Alleged Management Fee Agreement between Denis Medanic and  
Bogomil Govorcin. The defendants argue that it would be unjust to allow the plaintiff  
 
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 75  
to be enriched by the defendants’ skill and labour. The defendants submit that it  
would be inequitable to allow the plaintiff to recover in full for any unjust enrichment  
of the defendant without considering whether the plaintiff has been unjustly enriched.  
The failure to discount the plaintiff’s award by its corresponding enrichment would  
amount to more than perfect compensation at the expense of the defendant. In  
short, the plaintiff would be unjustly enriched.  
[260] The defendants submit that even in circumstances where a party seeking  
equitable relief does not come before the court with clean hands, the courts have  
narrowly applied this doctrine. Reliance for this approach is placed on cases such  
as Ruwenzori and Peters v. Brosseuk, 2004 BCSC 239.  
[261] The defendants submit that the value of the set-off can be quantified using  
the value received approach, and deducted from the plaintiff’s award as a dollar  
figure. The defendants submit that this is the appropriate approach given that the  
value of the defendants’ services has already been calculated with respect to the  
services provided by Mr. Medanic to MFL.  
[262] In response to the plaintiff’s submission that equitable set-off is barred by the  
doctrine of laches and acquiescence, the defendants argue that there is no such bar  
as the defendants are defending against the plaintiff’s claim which was filed on  
February 21, 2017 and the defendants were operating on the basis that there was  
an enforceable contract between the parties as to management fees.  
[263] Though equitable remedies are to be applied flexibly to “do equity” between  
the parties, even in circumstances where a party seeking such a remedy does not  
come before the court with clean hands; in these circumstances, I am not disposed  
to granting such a remedy to the defendants. The cases relied upon are  
distinguishable in that the negative conduct could be separated from the specific  
actions related to which relief was sought. In the present case, Denis Medanic’s  
negative conduct was intertwined entirely with the circumstances underlying the  
enrichment he achieved. He should not be rewarded for this conduct. Moreover,  
the work that he provided to the Joint Venture was in line with the original  
arrangement made between the founders. From the beginning Tomislav Medanic  
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 76  
had the responsibility to manage the fishing operations which constituted his  
entitlement to 50% of the profits of the joint enterprise; Denis Medanic voluntarily  
took this on when his father’s health failed and was entrusted to carry on with this  
responsibility. Management fees were never taken or authorized in the Joint  
Venture. Denis Medanic’s assertion of an agreement whereby Bogomil Govorcin  
gave him unfettered discretion to be paid management fees and to take it in any  
manner he wished has been found to be untrue. I also find that the work he  
performed post-2006 was not so onerous given the joint enterprise no longer  
operated the vessels. Denis Medanic was largely leasing out quota and licences.  
Further, the considerable value that he claims to have created for the Joint Venture  
through his efforts alone was not demonstrated. His entitlement to management  
fees is unjustified and an equitable set-off is unwarranted and is denied.  
Next Steps  
[264] The plaintiff has established a fraudulent breach of fiduciary duty, unjust  
enrichment, and conversion and that the defendants have wrongfully diverted  
$3,083,925.57. The plaintiff has also established that it is entitled to disgorgement  
of profits by the defendants. The plaintiff before electing damages or a proprietary  
remedy seeks a tracing order. This will inform the plaintiff as to the remedy it wishes  
to elect.  
[265] In this regard, the plaintiff is granted an order reflecting the following terms:  
(a)  
further discovery of both documents and account holders of bank  
records obtained in this litigation to determine what assets, if any, were  
purchased with the loans that have been paid with funds from these  
accounts;  
(b)  
(c)  
further examination/questioning of Denis Medanic as to his knowledge  
of the source of funds used to purchase any assets that he or the  
companies he managed acquired between 2000 and the end of 2017.  
A reference to the registrar to trace the source of funds used to  
purchase all of the assets listed at para. 86 of the NOCC and those  
listed in the plaintiff’s written submissions under Disgorgement of  
Profits; namely:  
i. A house and land for Denis Medanic at 860 Alderside  
Road, Port Moody, B.C. V3H 3A6, Parcel Identifier 011-  
 
Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd. et al.  
Page 77  
148-641 Lot 16 Block A District Lot 226 Group 1 New  
Westminster District Plan 5683);  
ii. A 9/10 interest in a house and land for Denis Medanic on  
12 July 2006 at 140 Hemlock Drive, Anmore, B.C, Parcel  
Identifier 016-999-622 Lot 5 Section 20 Township 39 New  
Westminster District Plan NWP87804;  
iii. A 20 per cent ownership interest for the Defendant,  
0739960 B.C. Ltd. in Select Seafoods Canada Ltd.  
(incorporated 23 January 2012), which owns a large trawl  
vessel named the “Northern Alliance” with trawl licenceT-  
82 and an amount of trawl quota unknown to the Plaintiff  
as well as to contribute to a shareholder’s loan account;  
iv. halibut licence L-179;  
v. Sablefish licence K-40;  
vi. Halibut licence L-33 and its related quota on the vessel the  
“Sea Kiss” along with halibut licence L-278 and its related  
quota on the vessel “Handliner” for Sea Kiss Fisheries;  
vii. Eight or nine gillnet herring licences acquired in 2010;  
viii. Purchase of the “Dovre B” quota in 2003;  
ix. Purchase and pay down the line of credit used to purchase  
[of] a pre-sale condominium in May of 2016 located in  
Coquitlam.  
[266] The question as to the level of costs is to be addressed the following the final  
determinations in this proceeding.  
[267] If further orders or directions are required in respect of the terms set out  
above the parties are to request a return to appear before me through trial  
scheduling office.  
“The Honourable Mr. Justice Masuhara”  


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