Mainville c. Neopharm Labs Inc.

2022 QCCS 3279

SUPERIOR COURT

(Commercial Division)

CANADA

PROVINCE OF QUEBEC

DISTRICT OF MONTREAL

No:

500-11-049463-157

DATE: 2 September 2022

_____________________________________________________________________

BY THE HONOURABLE BABAK BARIN, J.S.C.

_____________________________________________________________________

LUC MAINVILLE

-and-

8480095 CANADA INC. (Luma Consultants)

Plaintiffs

-vs-

NEOPHARM LABS INC.

-and-

MORRIS ADLER

Defendants

_____________________________________________________________________

EQUITABLE REMEDY JUDGMENT RENDERED PURSUANT

TO SECTIONS 238 ET SEQ OF THE CANADA BUSINESS CORPORATIONS ACT &

ARTICLES 6, 7, 1375, 1457 ET SEQ. OF THE QUEBEC CIVIL CODE¹

_____________________________________________________________________

¹The additional six-month delay required for the delivery of this judgment is explained by the fact that the

parties wished to order and file with the Court a complete set of transcripts of the hearing of the merits

comprising of close to 2,000 pages. The delay required for the ordering and filing of the transcripts, the

filing of the parties’ additional written submissions following the receipt of the transcripts in August of 2021

and the time required to review the voluminous exhibits that were filed before the Court during a particularly

active judicial year consequently resulted in the necessity for a longer advisement delay. The parties’

debate and extensive submissions on a large number of topics explains, in part, the length of this judgment.

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INTRODUCTION

[1]

In an attempt to gain advantage, with a modicum of effort, anyone can make the

simple complicated, and the brief, extensive, in court proceedings. That is not what the

already overstrained justice system needs.

[2]

This case is a paragon for a section 241 of the Canada Business Corporations

Act²“fit order” compensating two aggrieved complainants.

[3]

That section, in part, reads:

Application to court

241 (1) A complainant may apply to a court for an order under this section.

(2) If, on an application under subsection (1), the court is satisfied that in respect

of a corporation or any of its affiliates

(a) any act or omission of the corporation or any of its affiliates effects a

result,

(b) the business or affairs of the corporation or any of its affiliates are or

have been carried on or conducted in a manner, or

(c) the powers of the directors of the corporation or any of its affiliates are

or have been exercised in a manner

that is oppressive or unfairly prejudicial to or that unfairly disregards the interests

of any security holder, creditor, director or officer, the court may make an order to

rectify the matters complained of.

Powers of court

(3) In connection with an application under this section, the court may make any

interim or final order it thinks fit including, without limiting the generality of the

foregoing,

[…]

[4]

The so-called oppression remedy, as it is often referred to, is considered by some

to be the Charter of Rights and Freedoms of corporate law.³It is a broad and flexible

relatively new creature of statute, in some ways not yet fully developed or tested, allowing

virtually all types of corporate activity to be the subject of judicial scrutiny.

²R.S.C., 1985, c. C-44 (Act).

³Dennis H. Peterson & Matthew J. Cumming, Shareholder Remedies in Canada, 2^ndEdition, LexisNexis

2009.

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[5] While the potential protection it offers corporate stakeholders is rather impressive,

the legislative intent of the remedy is to balance the interests of those claiming rights from

the corporation against the ability of management to conduct business in an efficient

manner.

[6]

The remedy is appropriate only where as a result of corporate activity, there is

some discrimination or unfair dealing amongst corporate stakeholders, a breach of a legal

or equitable right, or appropriation of corporate property.⁴

[7]

Section 241 provides a statutory means whereby corporate stakeholders may gain

redress for corporate conduct which has one of the effects described in that section.⁵It

enables the court to, among other things, intercede in the affairs and operation of the

corporation and to effectively override the decisions of those charged with the

responsibility of corporate governance.

[8]

The powers under section 241, which serve as a judicial brake⁶against the abuse

of corporate powers, particularly but not exclusively those in control, have been granted

to the court in dereliction of the established principle of judicial non-interference in the

management of corporations.

[9]

This principle, often referred to as the business judgment rule, encourages the

court to defer to the business decisions or judgments of directors, as long as an

appropriate degree of care has been taken in arriving at the decision. The determination

of what is what, is not always an easy task.

[10] The court generally looks at whether the decision reached is a reasonable one and

not necessarily a perfect one.⁷Said differently, as long as the decision made is one that

falls within a reasonable realm of possibilities, the court will resist interference.

[11] When the requirements of section 241 are met, in other words, there has either

been conduct which is burdensome, harsh and wrongful, there has been a visible

departure from standards of fair dealing, or an abuse of power which results in an

impairment of confidence in the probity with which the corporation’s affairs are being

carried out, the court has unfettered discretion to grant a wide variety of orders. In other

words, the Court has been trusted to be the guardian of fairness.

[12] The same applies where there has been conduct that is unfairly prejudicial or, said

differently, detrimental or damaging to an applicant’s rights in a manner which is unjust or

inequitable.

4

See: Budd v. Gentra Inc. (1998), 43 B.L.R. (2d) 27 (Ont. C.A.) (Budd), cited with approval in Wilson v.

Alharayeri [2017] 1 R.C.S. 1037 at par. 2 (Wilson).

⁵Ibid.

⁶Ibid.

⁷Maple Leaf Foods Inc. v. Schneider Corp., 42 O.R. (3d) 177.

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[13] It is often difficult to distinguish between oppression and unfair prejudice save to

say that the latter appears to be a little less harsh or offensive than the former, it can

come about without bad faith and it should be examined from the point of view of the

effect it has on the stakeholder.

[14] An applicant will not necessarily be unfairly prejudiced simply because the

operation of the corporation adversely affects it. The conduct in question must be

detrimental or damaging to the applicant’s rights in a manner which is unfair, unjust or

inequitable.

[15] The section 241-remedy, while drafted with the intention of eliminating procedural

obstacles, and while available in a wide variety of circumstances to address, among other

things, fairness and certain business behaviour, should not be resorted to when the law

or the situation in question offers an alternative and less intrusive solution. In other words,

the oppression remedy has limits and it is not open to every disgruntled shareholder.

[16] There are two prongs that require consideration in such a claim.⁸

[17] First, the court must determine whether the evidence shows that the complainant

had a reasonable expectation having regard to the facts of the case before it. Put

differently, the claimant complainant must identify the expectations that it claims have

been violated and establish that the expectations in question were reasonably held.

[18] Second, it must determine whether the conduct contrary to that expectation was

oppressive or unfairly prejudicial within the meaning of section 241 of the Act. Again put

differently, the complainant must show that those reasonable expectations were violated

by conduct falling within the statutory terms, that is, conduct that was oppressive or

unfairly prejudicial.

[19] Grounded in the common law and developed overtime by equity, the very broad

made to fit interim and final remedies found in section 241 of the Act principally address

unfair disregard for the rights, obligations and interests and oppressive or unfair

prejudicial harm to the interests of affected stakeholders by a corporation or its directors

often responsible for the governance of the entity.

[20] Oppression conveys a conduct that is “coercive and abusive, and suggests bad

faith.”⁹Unfair prejudice is indicative perhaps of a “less culpable state of mind”¹⁰and unfair

disregard is the ignoring of an interest “as being of no importance, contrary to the

stakeholders’ reasonable expectations.”¹¹

⁸See in this regard, among others, the decisions of the Supreme Court of Canada in Wilson, Mennillo v.

Intramodal inc. [2016] 2 S.C.R. 438 and BCE Inc. v. 1976 Debentureholders [2008] 3 S.C.R. 560 (BCE).

⁹BCE, par. 67.

¹⁰Ibid.

¹¹Ibid.

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[21] The reasonable expectations of these stakeholders is the cornerstone of the

remedy under section 241.¹²The principles underlying section 241 are indicative and a

recognition of the fact that a corporation “is more than a mere legal entity, with a

personality in law of its own: that there is room in company law for recognition of the fact

that behind it, or among it, there are individuals, with rights, expectations and obligations

inter se which are not necessarily submerged in the company structure.”¹³

[22] The remedies are available to a wide range of stakeholders – security holders,

creditors, directors and officers and they seek, above all, to ensure that what is fair and

just in a specific corporate reality or setting is achieved.

[23] Turning now to a correlating point, good faith confers a broad and flexible power

to create law. It also serves as a solid basis for courts to intervene and impose on

contracting parties obligations based on contractual fairness. The general duty can

temper formalistic interpretations of contractual terms while concurrently maximizing the

contract’s meaningful effect and the prestations – the duties to do and not to do something

in fulfillment of an obligation – that are for the parties its object.¹⁴

[24] It is irrefutable that the formation of a contract is subject to the principle of

consensualism. A contract is formed by consensus ad idem, the exchange of consents or

the meeting of the minds.¹⁵No particular form is required except where the legislature

intervenes to impose one.

[25] The common intention of the parties is not equivalent to the expression – oral or

written – of their declared will. As a general rule, the writing is not an autonomous act.¹⁶

The agreement lies in the common intention of the parties, despite the importance, as

between the parties or third parties, of the declaration, oral or written, of that intention.¹⁷

[26] Once an agreement of the wills is reached as between the parties, the contract

establishes a set of rules applicable to the parties, which have legal authority for them,

for the purpose of carrying out what then becomes the common plan or operation¹⁸. For

a contract to exist and become a legal reality, the parties’ undertakings must be

sufficiently precise to establish the details of the contemplated operation. In some cases,

the details of the contemplated operation will be clear immediately.

¹²Ibid., par. 61.

¹³Ebrahimi v. Westbourne Galleries Ltd., [1973] A.C. 360 (H.L.), at p. 379.

¹⁴Churchill Falls (Labrador) Corp. v. Hydro-Québec, [2018] 3 S.C.R. 101 (Churchill Falls) at par. 103.

¹⁵Article 1385 C.C.Q.

¹⁶Agence du Revenu v. Services Environnementaux AES, [2013] 3 S.C.R. 838 (AES) at par. 28.

¹⁷AES at par. 32.

¹⁸AES at par. 30.

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[27] In others cases, a plan will take shape gradually and will come into legal existence

as a contract that is binding on the parties and represents the law applicable to them once

its details are sufficiently clear.¹⁹

[28] Even though not entirely relevant in this case, in obiter and for the sake of

completeness only, as explained by the Supreme Court²⁰, three elements of article 1457

C.C.Q. are useful to the integration of the director’s duty of care into the principles of

extra-contractual liability: who has the duty, to whom is the duty owed and what breach

will trigger liability?

[29] The reach of 1457 C.C.Q. is broad, and it must be given a liberal, open and

inclusive meaning.²¹There is now no doubt in Quebec law that directors and officers owe

under article 1457 C.C.Q. a duty of care to others. The question that needs to be

answered in every case is: Has there been a breach of the standard of care, is there

causation and are there damages that have been suffered and can be established?

[30] The first paragraph of article 1457 C.C.Q. does not set out the standard of conduct

that needs to be examined. Instead, it incorporates for federally chartered corporations

governed by the Act, a rule under section 122 (1) (b), which requires that directors and

officers “exercise the care, diligence and skill that a reasonably prudent person would

exercise in comparable circumstances.”

[31] In other words, the decisions that directors and officers make “must be reasonable

business decisions in light of all the circumstances about which the directors or officers

knew or ought to have known. In determining whether the directors have acted in a

manner that breached the duty of care, it is worth repeating that perfection is not

demanded.”²²

[32] A court asked to determine whether a decision made by directors and officers is a

reasonable business decision must bear in mind that:²³

Courts are ill-suited and should be reluctant to second-guess the application of

business expertise to the considerations that are involved in corporate decision

making, but they are capable, but they are capable, on the facts of any case, of

determining whether an appropriate degree of prudence and diligence was brought

to bear in reaching what is claimed to be a reasonable business decision at the

time it was made.

[33] In this case, it all began more than a decade ago.

¹⁹AES at par. 31.

²⁰Peoples Department Stores Inc. (Trustee of) v. Wise, [2004] 3 S.C.R. 461 (Peoples).

²¹Ibid., par. 56.

²²Ibid., par. 67.

²³Ibid.

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BACKGROUND

[34] Sometime in April of 2012, Morris Adler²⁴, a shrewd businessman and the sole

director and officer of Neopharm Labs Inc., which he owns and controls through the

Mirabel Family Trust, acquired the assets of Warnex Analytical Services Inc., a distressed

subsidiary of Warnex Inc., a Canadian public life sciences entity at the time providing

laboratory services to the pharmaceutical and healthcare sectors.

[35] Adler is an observant Jew, who according to his own account speaks three

languages only – Yiddish, Hebrew and English. Despite having lived in Quebec for the

great part of his life, Adler explains that he does not speak or understand French. His

children, however, go to French school. He has no professional education and has been,

according to his own account, an astute entrepreneur since the age of 19 when he arrived

in Canada. Today, he owns a variety of real estate companies and is financially

comfortable.

[36] Neopharm was incorporated as a federally chartered entity on 1 April 2012 with its

head office in Blainville, Quebec. Neopharm was intended to be a full-service GMP

analytical testing laboratory devoted to serving the global pharmaceutical industry as well

as natural health products, veterinary and cosmetics markets.

[37] Warnex Analytical, which operated the former business of Neopharm, was a tenant

in Adler’s buildings, owned through Toval Developments Inc., in Laval and Blainville. In

addition to assuming or forgiving the unpaid rent of Warnex Analytical, Adler through

Neopharm, agreed to purchase the assets of the in-financial-difficulty company for three

hundred thousand dollars. In 2015, the approximate sales of the company ranged 12

million dollars.

[38] At around the time of purchase, the business of Warnex Analytical had

accumulated operational losses of roughly five and a half million dollars and it was

apparently losing clients and staff at an alarming rate. During the initial months following

the Neopharm transaction, namely April, May and June, the sales of Neopharm continued

to deteriorate and staff continued to leave the business, obliging Adler’s various other

companies to advance sums up to the tune of one million dollars to Neopharm to keep it

afloat. At that time, and as an interim solution, Richard Lacombe, a retired member of the

board of Warnex was managing the company.

[39] Both Adler and Lacombe were in search of a skilled and experienced chief

executive officer and president with the right business acumen and knowledge in the

pharmaceutical and health care industries to restructure Neopharm’s operations and

make it profitable. This is how, Luc Mainville, a canny and experienced business

24

Use of the first or last name of the individuals only and at times the omission of specific references to

certain individuals’ titles, such as Maîtres for example, is to make this judgment more reader-friendly. No

disrespect is intended. The interchangeable use of the references to Luma Consulting, Luma Consultants,

Luma and 8480095 Canada Inc. is based on the particular and varied references made by the parties.

500-11-049463-157

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executive with particular knowledge in the restructuring of insolvent and underperforming

companies in the pharmaceutical industry came into the picture.

[40] Mainville, a former national and international rowing athlete, is the father of two

Olympic athletes, and he holds a finance degree and accounting certificate from UQAM

in Montreal and an MBA in International marketing and finance from McGill University.

Mainville, who sat on the board of a number of private and public corporations, is a former

partner and vice-president of the accounting firm, KPMG and during the years 2006 to

early 2011 he was the CEO and president of LAB research Inc., a publicly traded

international entity with approximately 600 employees based in Laval. Among other

things, Lab Research Inc. performed services such as preclinical studies required for drug

development.

[41] 8480095 Canada Inc. or Luma Consultants is a consulting entity and service

provider incorporated in 2014 and owned entirely by Mainville, through which he rendered

a variety of executive services to Neopharm.

[42] Adler and Mainville met through the intervention of Lacombe, who was an

acquaintance of Mainville. The two protagonists then embarked upon a business venture

developing along the way their own relationship. On a great majority of issues, they had

and continue to have diverging recollections of the relevant facts. In general and as a

whole, and to the extent that such a finding is necessary, I prefer the version of events

offered by Mainville.

[43] As a general comment, given the testimony of the two individuals, I find Mainville

to be the more credible witness. I find that the version of events presented by him is less

embellished, less self-serving and better supported by the documentary evidence filed.

CONTEXT

[44] Mainville contends he was, as his then contemporaneous business card indicated,

the President and Chief Executive Officer of Neopharm from July 2012 to July 2015. He

also argues that he is entitled to relief and monetary redress pursuant to the provisions

of the Act and the Civil Code of Quebec²⁵for the oppressive and abusive actions of

Neopharm and Adler personally.

[45] Mainville, in particular, seeks a declaration that he is the 25% common shareholder

of Neopharm and that he is entitled to receive the sum of $2,953,323²⁶, which is “the

equivalent of 25% of the value of the common shares of Neopharm based on a formula

of 4.5X EBITDA the adjusted earnings not to take into consideration the effect on net

earnings resulting from the merger of WASI or the tax accruals which artificially reduced

²⁵Going forward reference in the text will be made to the C.C.Q.

²⁶Mainville is also seeking other monetary sums totalling approximately 1.2 million dollars.

500-11-049463-157

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net earnings before taxes.” He submits that he has a reasonable expectation to such a

claim and amount.

[46] He also seeks, among other things, unpaid consulting fees, dividends, damages

for abusive business practices and termination of engagement, bad faith, aggravation,

stress, damages to reputation, punitive damages and the judicial and extrajudicial legal

costs and expenses he has had to incur to prosecute the various claims.

[47] In turn, Neopharm and Adler claim the sum of $508,819.70 – one half of the entire

sum of consulting fees paid to Mainville – for substantial non-performance of certain

obligations and loss of opportunities that Mainville and Luma apparently did not share

with them.

[48] According to Adler, Mainville, through his alter ego Luma were mandated to make

Neopharm a profitable company. Adler, consequently, expected that Mainville and Luma

work exclusively for him and Neopharm to achieve such a goal. Instead, according to

Adler, Mainville and Luma offered extensive services to third parties during the years

2012 to 2015 inclusively and Mainville also contravened his Confidentiality, Non-

solicitation and Non-competition Agreement with the company.

[49] Accordingly, Adler and Neopharm contend that Mainville and Luma’s substantial

non-performances of their contractual obligations justify the resiliation of their relationship

and entitle them to receive damages for services that were paid for, but never performed.

[50] I will address each of these claims in turn in the following pages.

[51] In the interim, it is useful to point out that the plaintiffs concede that success of

their section 241 of the Act claims require an affirmative answer to the following three

related inquiries, the burden of proof of which is on them: Are they complainants as

defined in section 238 of the Act? Does the evidence before the court support the

reasonable expectation asserted by them? Does the evidence establish that the

reasonable expectation was violated by conduct falling within the terms “oppression”,

“unfair prejudice” or “unfair disregard”?

ANALYSIS

[52] I will begin with the plaintiffs’ claim for the equivalent of 25% common shares of

Neopharm and its valuation. These two intertwined items represent the largest part of the

plaintiffs’ claims.

Neopharm shares and the C.C.Q.

[53] During the summer of 2012, Mainville apparently met Adler at Neopharm during

an impromptu visit with Lacombe. Mainville, who was already familiar with Neopharm

when Lab Research Inc. had carried out a due diligence of Warnex Analytical a few years

earlier, was there to meet Lacombe on an unrelated matter. While at Neopharm, one thing

500-11-049463-157

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led to another and Adler was introduced to Mainville. The two men then went to Adler’s

office to talk. During the meeting, there was obviously enough mutual interest for the

parties to pursue their discussions further.

[54] On 17 July 2012, using his lumaconsult.com email, Mainville wrote to Adler

thanking him for his time meeting and indicated that he would work on a “win-win proposal

[…] that would allow Neopharm to immediately benefit from [his] contribution [and] at the

same time – allow [him] time to disengage from [his] other commitments.” In response,

Adler requested that Mainville detail what he could and would offer to benefit Neopharm.

[55] The next day, Mainville outlined a proposal that would allow him to take over the

helm of Neopharm as early as July 30^th. In addition to outlining what would, according to

him, convert Neopharm into a powerhouse, Mainville set out the following financial terms

for discussion:

Start date: July 30, 2012

Position: President and CEO

Base salary: $250k – payable as consulting fees

Bonus: 40% of base salary – no guaranteed bonus – 100% based on financial

targets to be negotiated (50% on Sales, 50% EBITDA)

10% - on-time bonus all grants secured / 5% of all banking L/C and loans

Car allowance: $1,500 per month

Fringe benefits: customary for this position

On site presence – average 3-days per week

Equity position: 30% (20% as equity/10% as vesting options – with strike price to

be determined)

Severance – 12 months / 24 months if resulting from a sale.

Conditions to signing:

 Full access to financial information,

 Understanding of ownership structure,

 Agreement on exit strategy/liquidity events for shareholders

 Contract signing […]

[Underlining is mine]

[56] The parties then immediately began negotiating and exchanging drafts of term

sheets and agreements. On 24 July 2012 in particular, through his then lawyer, Me

Francine Wiseman, Adler circulated a long-form draft Consulting Agreement to be signed

between Neopharm, Mainville and The TOVAL GROUP Inc. proposing, among others,

the following terms to Mainville:

CONSULTING AGREEMENT

[…]

Article 2 – POSITION AND RESPONSIBILITIES OF THE CONSULTANT

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2.1.

PAGE: 11

The Consultant shall be employed by the Corporation as President,

and Chief Executive Officer. Under the direction and supervision of

TOVAL, the Consultant shall perform all duties generally

accomplished by a President, and Chief Executive Officer.

[…]

2.3

The Consulting Agreement is non-exclusive for the purpose of this

Section 2.1 and 2.2. The Consultant will be entitled to maintain its

Consulting practice and carry on such other businesses, under his

own name or as LUMA Consulting during the period of consulting.

Notwithstanding the above, the Consultant shall not without the

prior written consent of TOVAL, engage himself directly or

indirectly, in any other business activity whether as employee,

officer, director, consultant, advisor or otherwise that could cause

prejudice to the Corporation, to TOVAL or its non-real-estate

operating Subsidiaries.

[…]

Article 3 – TERM

3.1 The Consultant is engaged for an indeterminate term commencing

on July 30, 2012 and this Consulting Agreement is subject to

termination as set out in Article 6 below.

Article 4 – ON-SITE PRESENCE

4.1

The Parties agree, that the Consultant shall be required to maintain

an average on-site presence of at least 3 business days per week

at the premises of the Corporation. Off-site business

development/representation days performed on behalf of the

Corporation shall be considered as on-site presence for purposes

of this Section.

4.2

4.3

This agreement shall be revisited periodically starting January 1,

2013.

Notwithstanding the above Section 4.1, the Consultant shall devote

the majority of his time to the Corporation and the TOVAL

Subsidiaries.

Article 5 – COMPENSATION

5.1 Remuneration – In consideration of the services which shall be

rendered by the Consultant to the Corporation and the TOVAL

Subs, the Corporation shall pay to the Consultant a gross annual

base compensation of two hundred thirty five thousand dollars

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($235,000) plus applicable taxes (GST/PST) payable in monthly

instalments in arrears starting August 31, 2012.

[…]

5.2

Bonus – The Consultant will be entitled to receive on a pro-rata

basis, a yearly bonus of up to (sic) thirty (35%) of his base salary,

provided that, the Consultant meets the performance targets

mutually set forth by the Corporation and the Consultant. The

Parties agree that the criteria for payment of the bonus shall be set

out as 12.5% for each of the Revenues and EBITDA targets, and

10% for non-financial targets to be agreed to between the parties.

[…]

5.3

Equity Participation – In consideration for accepting the Terms

described in this Agreement, the Consultant shall receive an equity

participation for each of the Corporation and the TOVAL Subs […]:

(i)

For his role as President and CEO of the Corporation, the

Consultant shall:

(A)

(B)

Receive and initial Equity Participation of 15%,

Receive a further Equity Participation of 10% which

shall be granted on signing but conditional to

maintaining his functions until December 31, 2015.

[…]

5.4

Car Allowance – The Consultant shall be entitled to receive a monthly car

allowance of $1,250.

[…]

5.6

Vacation – The Consultant shall be entitled to five (5) weeks of vacation

per year, as per Corporation policy.

[…]

[Underlining is mine]

[57] In addition to the above, the draft agreement contained a possible conversion to

employment agreement clause, a twelve-month severance payment possibility upon

termination, an extensive and detailed termination provision, a confidentiality clause and

a non-compete as well as a non-solicitation clause.

[58] On 27 July 2012, Mainville presented Adler with his summary terms for a

consulting agreement. The document in question resembled the more detailed document

prepared by Adler’s lawyers three days earlier, but it differed principally with respect to

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the equity position requested by Mainville. At that point, Mainville was requesting that

25% of the shares of Neopharm be granted to him on signing, with 5% vesting per year.

He also wanted this to be reflected in a shareholder’s agreement with terms covering

liquidity, distribution of retained earnings and veto rights.

[59] As part of this arrangement, Mainville was not to enter into any business or

contractual relationships with third parties without the consent of Adler, he was to phase

out his existing business plans – except for board positions – over the following six

months, and a consulting and shareholder agreement was to be “executed/agreed to by

August 3^rd.”

[60] Mainville contends that considering the then precarious business position of

Neopharm, based on a common understanding and verbal agreement with Adler, in good

faith, he began work at Neopharm as its President and CEO on that same day.

[61] At the time, according to both Mainville and Lacombe who testified at trial,

Neopharm was both in financial and operational difficulty and the overall moral of the

company’s employees was at its lowest. Lacombe in particular recalled that the

employees had been asked on a certain Friday, known internally as “The Black Friday”,

a few weeks earlier, to reduce their income by 10 to 15 percent in order to allow for the

company to survive and continue its operations.

[62] According to Mainville, in the weeks and months that followed, he worked

assiduously and conscientiously to turnaround the fate of Neopharm, which he in fact did.

As reflected in the Expansion and Development Plan marked “October 2012” attached to

the “Certificat de Réclamation” and accompanying documents signed by Adler on 8

November 2012 and 10 April 2013 and filed with Canada Economic Development for

Quebec Regions, by October of 2012 the number of employees at Neopharm had

increased to 105 from 80 and the company’s sales and outlook for the future were already

brighter.

[63] This document also confirms that at that time Mainville was both the President and

a shareholder of Neopharm.

[64] Mainville explains that at the end of 2013, under his direction, Neopharm was able

to purchase the losses of Warnex Analytics and provide the company with significant

fiscal advantages for the following years. Moreover, starting in 2013 and continuing into

2015, Neopharm was able to increase its sales figures from approximately 6 million

dollars a year to its double.

[65] Following Mainville’s start date on 27 July 2012, the parties continued their various

negotiations and exchanged numerous drafts of a consulting agreement with the goal of

finalizing a document that could eventually be signed by them. While at the end, no such

document was visibly signed by the parties before Adler put an end to or terminated

Mainville’s relationship with Neopharm, the parties did sign on 22 March 2013, a

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document entitled “Codicil to a shareholder’s certificate pertaining to Jewish Sabbath and

holidays”.

[66] I will revert to this document momentarily.

[67] Mainville argues that in addition to the verbal agreement concluded between the

parties during their various face-to-face meetings, there is enough evidence in writing that

confirms that he is entitled to the then value of 25% of the common shares of Neopharm

or $2,953,323. He also argues that sections 238 and 241 of the Act permit the Court to

confirm such a fact and determine what is fair and just under the circumstances.

[68] Adler, on the other hand, relies on articles 1385 and following of the C.C.Q. to

argue that the agreement between the parties required a particular form – a signature or

actual execution of the agreement by the parties – and since no such document was ever

signed by them, a contract was never formed between the parties.

[69] Adler also argues that the agreement between the parties was on an “all or

nothing” basis, as evidenced by the successive draft documents exchanged overtime

between them and since no global agreement was reached between the parties, no

agreement on any of the individual elements was reached either. According to Adler,

“everything was intertwined” and nothing was definitively concluded between the parties.

[70] Adler also argues that neither Mainville nor Luma are complainants as envisaged

by the Act and in any event, neither has a reasonable expectation to the relief being

sought by them.

[71] I disagree and am of the view that there was consensus ad idem between the

parties, that Mainville had a reasonable expectation to be a shareholder of Neopharm and

that such reasonable expectation was violated by both Neopharm and Adler’s conduct, in

particular, in a manner that would constitute oppression, unfair prejudice or unfair

disregard. Mainville, therefore, is entitled to the value of 25% of the common shares of

Neopharm as more fully explained below.

[72] This is why.

[73] First, the Expansion and Development Plan marked “October 2012” attached to

the “Certificat de Réclamation” and accompanying documents signed by Adler on 8

November 2012 and 10 April 2013 were without a doubt reviewed and approved by Adler.

In section 3.8 entitled “Actionnariat” this document confirms that 25% of the shares of

Neopharm belonged to Mainville through his holding Luma Capital Inc.

[74] This is what Adler had to say at his pretrial examination that took place on 31

October 2016 in response to a very specific question put to him about the Expansion and

Development Plan.

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Q

[…] Did you […] read [the Plan de développement et d’expansion]? What

was your involvement?

A.

I saw it. I glanced at it, but Mr. Mainville and the team, whoever was

involved in helping him putting that together, definitely I did not do the

legwork, and it’s not my job to do the legwork.

Q.

A.

Q.

A.

But you saw it?

Yeah, I think I saw it.

I mean you signed this application, and it’s joined to the application.

Yeah, but why shouldn’t I sign an application to ask money from the

government? Only normal, if there’s a government program, and it’s all

legal and kosher, why not?

[Underlining is mine]

[75] At trial, however, Adler tried to move away from this testimony and explained that

despite having lived in Montreal for 25 years and carried out business in Quebec for 23

years he did not speak French then and does not speak French now, and he did not

appreciate or understand what he was signing or confirming in writing at the time.

[76] He also indicated that at the time he would receive many emails and documents

such as the Expansion and Development Plan every day – including ones in English –

and he would never really bother reviewing or reading them in any detail. He added that

he had no reason to think then that someone was “putting him into a trap”.

[77] When confronted at trial some five years later with the explicit diagram of

ownership of Neopharm that was found in the Expansion and Development Plan dated

October 2012 and that confirmed that Luma owned 25% of the shares of Neopharm and

the TOVAL Group the balance, Adler simply responded by blaming his memory and

saying that he did not remember.

Q.

And we saw earlier that on […] the Plan de Développement et d’expansion,

there’s a section 3.8 entitled shareholdings and refers to, as was

mentioned this morning, 75 percent of Group TOV property of Mr. Adler

and 25 percent for Luc Mainville via his personal holding company, Luma

Capital Inc. with 10 percent of this 25 percent being conditional on certain

conditions. And then there’s a diagram that shows Luma Capital 25 percent

of Neopharm Labs. This doesn’t require an understanding of French, Mr.

Adler. Did you see that diagram when you were given this package?

A.

I don’t — I don’t recall. But what I do know is that Groupe TOVAL didn’t

exist and never existed and I am not even sure if Luma Capital had existed

at that time, and this was a demonstration, I guess, that Mr. Mainville did

to the government for some reason. I’ve already answered that question.

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[Underlining is mine]

PAGE: 16

[78] And yet, the draft consulting agreement prepared by Wiseman and forwarded to

Mainville on behalf of Adler as early as 24 July 2012 (see excerpt above), explicitly

referred to the TOVAL Group and Luma, albeit Luma Consulting and not Luma Capital.

[79] Adler’s testimony in this regard, therefore, is at best unreliable. Consequently, I

am of the view that Adler knew well what he was signing on 8 November 2012 and 10

April 2013 and filed with Canada Economic Development for Quebec Regions and he

cannot now disengage himself from it based on stale or selective memory and the

allegation that he does not read or understand French.²⁷

[80] And there is more.

[81] On 22 March 2013, just over eight months after Mainville took over the helm of

Neopharm, he and Adler signed a “Codicil to a shareholder’s certificate pertaining to

Jewish Sabbath and Holidays”.

[82] This document confirms ‘beyond a reasonable doubt’, let alone on the balance of

probabilities, that pursuant to Torah law²⁸and Quebec civil law, in July of 2012 Adler and

Mainville verbally agreed that Mainville would be given 25% of the common shares of

Neopharm and that the Codicil was “being drawn up to validate said verbal agreement

and to allocate and specify the days and times that are included […].”

[83] The first section of the Codicil goes even further and stipulates that Adler gives

Mainville 25% of Neopharm “including” during the Jewish holidays and Sabbath time

periods specified. The Codicil also stipulates that each “party is of sound mind, and has

reviewed and understood every paragraph” in that document.

[84] The Codicil also provides that if Mainville leaves the company on his own volition

or is dismissed, then Adler or his affiliated companies will buy back (on the date of the

termination of Mainville’s employment) all of Mainville’s shares at a price of 4.5X EBITBA

for the last preceding year, the latter being conditional on Mainville not leaving on his own

volition during the first year.

[85] At trial, as in his Amended Defence and Cross-Application, Adler tried to downplay

the significance of this agreement by explaining that Mainville only referred to this

religious document for the first time during his examination on 22 March 2013 and not in

the Introductory Motion or the Particularized Introductory Motion filed in May of 2016.

[86] According to Adler, pursuant to Jewish law, “Jews are prohibited from owning a

business that operates from Friday sundown until Saturday night fall (Shabbat) as well as

²⁷See: Côté c. Côté, 2014 QCCA 388, par. 43 (Côté).

²⁸As Torah law was not proven before the Court, pursuant to article 2809 C.C.Q. the Court will apply the

law in force in Quebec. This issue was raised and fully briefed by the parties during the hearing.

500-11-049463-157

PAGE: 17

certain Jewish holidays.” Despite the fact that Neopharm is not usually open on

Saturdays, two of its employees working in the microbiology lab apparently went in a

couple of hours on Saturdays. Due to that reason, Adler had previously signed a similar

religious document with the controller of the company accepting in return for $100 to give

her the profits of Neopharm, if any, during Shabbat.

[87] Adler also explained that until the controller was let go by Mainville, there was no

need for the Codicil. According to Adler, “just as in the case of its signature with [the

controller] this document was solely for religious purposes and was never considered as

a binding agreement by the parties.”

[88] Moreover, Adler added, “no reference to this religious document [having been]

made in any of the numerous discussions or emails that were exchanged between the

parties during their [subsequent] negotiations […], and many of the elements contained

in the [Codicil having been] modified [overtime] by Mainville”, it is clear that the parties

“repudiated the legal value of this religious document for any purpose other than Jewish

religious practice.”

[89] Finally, according to Adler, the document in question being entitled a Codicil to a

shareholder’s certificate, “if there was never any shareholder’s certificate, the codicil does

not stand alone.”

[90] With respect, I disagree.

[91] If the sole purpose of the Codicil was to simply observe and respect Jewish

religious practice during Sabbath and holidays as Adler attempts to trivialize the content

of the document post fact, why did the parties expend time and energy negotiating its

detailed terms as it is apparent from the face of the document itself and the testimony of

Mainville?

[92] Why does a religious document contain a buy-back clause with a specific 4.5 times

EBITDA calculation and a specific condition that Mainville not leave the company “on his

own during the first year”?

[93] Why does Adler in one paragraph of the Codicil transfer 25% of the shares of

Neopharm to Mainville with a certain number of specific conditions attached to it and then

in another paragraph transfers to Mainville “the total shares” in the company for a certain

duration stipulated in the agreement?

[94] Why does the Codicil foresee specific business performance and growth targets

in the agreement and then specify, if those conditions are not met, the sale is valid for

only 17% of the shares of the company and not the balance 8%?

[95] Does a document prepared for religious reasons need such specific details?

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[96] Bluntly put, to ask these questions is to respond to them. In my view, the answers

to the above questions are encysted in the questions themselves. Said differently, the

questions themselves answer the questions. It is useful to highlight in passing that the

Codicil stipulates that Mainville’s ownership rights, whatever they were going to be, were

to “be defined in a Shareholder’s agreement that [was to] be drawn up by both parties at

a later date.”

[97] In his legal arguments, Adler picks up on this point and argues, “le document

religieux s’avère être un codicille à une convention d’actionnaires qui ne sera jamais

conclue entre les parties. L’accessoire suivant le principal, ce document ne peut donc

avoir aucune valeur autonome, et ce d’autant plus que les parties avaient spécifiquement

prévu qu’elles ne seraient liées qu’une fois cette convention d’actionnaires signée.”

[98] To buttress his argument, Adler then refers to two Superior Court decisions, both

of which in my view may be distinguished from this case.

[99] In 4379047 Canada inc. c. Papagiannis²⁹, my colleague, Paul Mayer, j.s.c., with

reason concluded that “the freedom to negotiate a contract includes the right to terminate

negotiations provided it is done in good faith.” He also concluded, that in the case before

him, based on “the long chain of draft legal documents and the many comments

exchanged, the MOA was only a preliminary agreement to be used as a framework for

future negotiations. The MOA did not contain all of the essential elements necessary to

make a legally binding agreement. Further discussions were necessary. Even those

provisions that were purported to be of immediate application […] were not set in stone

and were subject of numerous negotiations.”

[100] In this case, the Codicil contained all of the essential elements necessary to make

a legally binding agreement with respect to the subject matter that it covered – the

common shares of Neopharm to be transferred to Mainville and their valuation if the

relationship between the parties did not work out. The parties in fact silently relied on that

document while negotiating on other terms to work together for close to three years,

during which Mainville ran Neopharm, made it prosperous and Adler and Neopharm

benefited from Mainville’s fruits of labour and efforts.

[101] Even though the parties continued to discuss the same and other topics in

subsequent exchanges, no further discussions were really necessary. This is in fact so

much so that three years later, in their final written exchanges with one another in July of

2015, the parties ended both in exactly the same position and referred to again the same

terms.

[102] I will have more to say about this later in the judgment.

²⁹2017 QCCA 90, permission for leave to appeal was dismissed in 2017 QCCA 576 (Papagiannis).

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[103] In Thériault c. Placements Bitumar inc.³⁰, another case cited by Adler, my

colleague Jean-Yves Lalonde, j.s.c. concluded:

[38]

Le Tribunal est convaincu que les considérations fiscales étaient

méconnues des parties lors de leur négociation du 20 juin 2011. Les échanges

subséquents démontrent que le traitement fiscal a toujours été un élément

essentiel à la conclusion d'une transaction. Sans cet élément, la transaction est

demeurée inachevée.

[39]

[…]

[41]

Il est clair que l'aspect fiscal était inconnu des parties.

L'accord de principe n'a jamais atteint sa pérennité contractuelle et par

conséquent, n'est pas susceptible d'exécution puisqu'une partie importante (les

incidences fiscales) de son contenu obligatoire restait encore à définir et à

convenir.

[42]

L'accord de principe du 20 juin 2011 n'était qu'une simple entente

préparatoire qui ne réglait pas tous les éléments essentiels du contrat envisagé.

Impossible de conclure à l'existence d'une transaction.

[43]

Il incombait aux défendeurs-requérants de prouver l'existence d'un

consentement mutuel sur tous les éléments essentiels d'une transaction. Ceux-ci

ne se sont pas dégagés de leur fardeau de preuve.

[Underlining is mine]

[104] This case can also be distinguished from Bitumar.

[105] Adler and Mainville had agreed upon the essential terms of their relationship and

they also acted upon such an arrangement for close to three years. Mainville was

operating Neopharm, he was receiving a remuneration for it, the parties had agreed that

Mainville was to be a stakeholder, and they had agreed that there was to be an exit

mechanism if the relationship between them did not work out. What, if anything that

remained was the fine tuning of the already agreed upon essential terms.

[106] Finally, even though Adler’s lawyers contend otherwise, I do not see anything in

the Codicil – and no specific provision has been pointed to – that indicates, as Adler

contends, that “les parties avaient spécifiquement prévu qu’elles seraient liées qu’une

fois cette convention d’actionnaires signée.” As I indicated earlier, the Codicil stipulates

that Mainville’s “ownership rights shall be defined in a Shareholder’s agreement that shall

be drawn up by both parties at a later date.” This is not the same thing as the parties are

not bound until a shareholder’s agreement has been signed.

³⁰2012 QCCS 4533, appeal dismissed in 2014 QCCA 397 (Bitumar).

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PAGE: 20

[107] Hence, contrary to Adler’s pretensions, I am of the view that the Codicil is a binding

agreement, governed by Quebec law, by which Adler transferred 25% of the common

shares of Neopharm to Mainville. The parties, two sophisticated businessmen, each trying

to obtain for themselves the best deal possible, each also confirmed in writing that they

“[had] reviewed and understood every paragraph of [the] Agreement”, that the agreement

between them was “valid and binding” and that the agreement was not a “Contract of

Adhesion”.

[108] As it is abundantly clear from the Codicil, the principle of consensualism was

respected in this case, a contract was formed by the exchange of consents or the meeting

of the minds of the parties establishing a set of rules applicable to them, which had legal

authority for them, for the purpose of carrying out what then became their common plan

or operation. The parties’ undertakings were sufficiently precise to establish the details of

the contemplated operation. While some of the details of the operation in question were

clear immediately, others took shape gradually and came into legal existence later.

[109] Consequently, I disagree with Adler that no agreement in writing and signed was

ever reached between the parties. I also disagree with Adler that the agreement between

the parties was on an “all or nothing” basis – as evidenced by the successive draft

documents exchanged overtime between them – and since no global agreement was

reached between the parties, no agreement on any of the individual elements was

reached either.

[110] There was sufficient meeting of the minds between the parties for each of them to

respect their personal, religious and business wishes. The fact that they continued to

negotiate after agreeing on the terms of the Codicil, each trying to ameliorate with each

stroke their position vis-à-vis the other does not offend the inviolable principle of

consensualism.

[111] The fact of the matter is that Mainville’s lawyers – and that rightly so – argue now

that the Codicil was a binding agreement and, if it was ever necessary for religious

reasons, Adler’s lawyers would not have hesitated to argue that the Codicil was a binding

agreement for the purposes of Torah law, if for example, for Adler’s personal religious

reasons that was required. They would not have equally hesitated to rely on the Codicil

and apply the encysted consequences in it arguing that it was governed by Quebec law

if for example Mainville had decided to leave his position during the first year. What is

good Adler, must also be good for Mainville.

[112] And there is even more.

[113] Three months after the conclusion and execution of the Codicil, in a letter dated

14 June 2013, after a meeting with Adler and Mainville, Adler’s business lawyers wrote

to Mainville confirming that on 9 July 2012, 25% of the shares of Neopharm had been

transferred to him and that they understood, there was a “shareholder’s agreement in

place [more likely than not – the Codicil –] governing the rights and restrictions attaching

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PAGE: 21

to [his] shares, which included provisions particular to [his] shares, including that the votes

and value were not fully vested at 25% on subscription.”

[114] A subsequent letter dated 19 August 2013 from Adler’s lawyers thereafter once

again confirmed – as in the Codicil – that the then-current equity of Mainville was 17%

(subject to adjustments) and that the maximum was going to be 25%.

[115] While in the ensuing months, the parties continued to negotiate, exchanged further

drafts of overall agreements and each tried to extract from the other a more advantageous

global deal, it is an inescapable fact that Mainville continued to assume the helm of

Neopharm, even though on at least one occasion, on 18 September 2014, he threatened

leaving or a bit earlier, on 29 May 2014, he noted that he did not have a partner or an

agreement. It is also uncontestable that the parties had, as explained above, reached an

agreement on certain important and essential aspects of their relationship.

[116] Adler’s lawyers plead that the contractual relationship between the parties was on

an “all or nothing” basis, as evidenced by the successive draft documents exchanged

overtime between them and since no global agreement was reached between them, no

agreement on any of the individual elements was reached either. According to Adler,

“everything was intertwined” and nothing was definitively concluded between the parties.

[117] Not only is such an assertion false as evidenced by the fact that Mainville

continued to profitably operate Neopharm from July 2012 to July 2015 while he was being

remunerated for it and the parties were going back forth about certain terms of their

arrangement, but it also unjustified in light of Adler’s own final confirmation as

memorialized in the letter and email he sends to Mainville on 19 January 2015. In that

letter, Adler writes:

3.

With respect to the shareholdings of [Neopharm], LM or a company

controlled by LM will receive an ownership interest in Neopharm reflecting

25% of the votes and value from the date of incorporation of the company.

Such 25% ownership interest shall be received by LM as soon as possible

as long as same does not result in negative tax consequences to LM,

[Adler] or Neopharm.

[118] Interestingly enough, even though an agreement on this commercial term between

the parties was reached as early as 22 March 2013 when the Codicil was negotiated and

signed by them, Adler indicates that “obviously, an agreement cannot be reached until

the [parties’] attorneys agree on the actual drafting of such agreement.”

[119] Adler’s lawyers, however, never circulated a draft of the agreement in question as

indicated by Adler and the intervention of Me Neil Stein on behalf of the parties did not

lead to a satisfactory resolution of any of the issues either.

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[120] In this regard, I find the contemporaneous email of Stein to Adler dated 19 June

2015 rather telling of his impression of the overall approach adopted by Adler with respect

to Mainville and their business relationship.

Morris Adler

Pursuant to our last conversation of several weeks ago you were to sit down with

[Mainville] to discuss the issue of his option which he has advised was part of the

original conditions of his engagement of employment. We are advised that not only

you have not sat down to discuss the option but that you are now refusing to honour

the 2014 bonus due to [Mainville].

We wish to advise you that you are leaving our client with no other alternative other

than to commence legal proceedings. […]

In as much as you called me to try and resolve this matter we are giving you this

final opportunity to do so and failing same a court will have to decide the matter.

[Underlining and bold is of the original text]

[121] About three weeks later, on 7 July 2015 Stein dispatched the following email to

Adler:

Morris,

Thank you for your email. […] Far too much time has passed since I was first asked

to intervene on Luc’s behalf. In good faith and based on your conversations that

matters would be resolved, first after discussions with Francine Wiseman, then

after determination of Luc’s 2014 bonus, I restrained from acting in the manner that

I would normally have acted.

It is now time to put pen to paper and clarify in writing the terms of Luc’s salary,

bonus and equity, agreed to when he was first hired and not fully done pending

various matters, including certain tax planning put in place for the benefit of

shareholders.

If you are not willing to do so that will be indicative that good faith no longer exists

between the parties in this matter and that a different approach will have to be

taken by the parties. My understanding is that the company has prospered well

and benefitted from both of your capacities and although there may be some

misgiving between the parties you still make a good team. If this not the case I

would appreciate your acknowledging same so that no further time is wasted

between the parties.

[…]

[Underlining is mine]

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[122] Following the above exchanges, despite Stein’s consistent attempts and written

communications to find a resolution to the impasse between Mainville and Adler on

numerous occasions between July 8 and July 30^th, no good faith steps were taken by

Adler in response, as it appears from Stein’s subsequent 30 July 2015 email.

Morris,

I have advised you on several occasions that I do not think it is advisable that we

have direct communication in respect to this matter and that it is advisable for you

to have your lawyer participate in the discussion. It is for that reason that I have

insisted upon a meeting with your counsel so that there is no issue as to what

[Mainville’s] position is.

To date you have not arranged for a meeting and or have delayed same advising

various excuses for not holding same, including but not limited to the last delay

stating that your controller required time to calculate the bonus due to [Mainville].

Many weeks have passed since then and no meeting has been arranged with your

counsel.

We do not see these dilatory manoeuvers as being in the realm of good faith

actions with which the parties are bound to act. Your procrastination seems to be

designed for other purposes.

[Underlining is mine]

[123] Instead of a meeting with Stein, Adler’s lawyers and Mainville as previously agreed

upon between the parties to finalize the details of the business relationship between

Mainville and Adler that began in July of 2012, approximately three years later, on 29 July

2015, Adler verbally terminated Neopharm’s relationship with Mainville indicating that

Mainville’s services were no longer required as a replacement had been found to take

charge of the company’s operations.

[124] Stein’s contemporaneous 31 July 2015 demand letter to Adler summarizes the

state of matters at the time in the following terms:

Dear Sirs,

As you are aware, we represent Mainville. Since our involvement in this matter

commencing December of 2014 to date, we have attempted to meet with you and

your counsel in order to put in writing the agreed upon terms and conditions upon

which Mainville was engaged in July 2012. These terms and conditions were

stipulated and agreed to by yourselves and formed the basis of various tax

planning for implementation and you have recognized same in various memos and

by your actions since July 2012.

You moreover undertook to have your legal counsel draft an agreement

incorporating the terms and conditions of Mainville’s engagement. To date,

notwithstanding numerous verbal request, emails and conversations and promises

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PAGE: 24

that you would have your legal counsel finalize the drafting, you have

procrastinated, made numerous excuses why you could not meet with ourselves

and your counsel to discuss same and it is clear that you have negotiated and

delayed production of the written agreement confirming the terms and conditions

agreed to, in the utmost bad faith.

Of recent date when it became clear that you were avoiding meeting we viewed

your actions as being in bad faith and suspected that over the last several months

your procrastination was designed for other purposes, as it was clear that you were

creating excuses which clearly were intended to avoid fulfilling your obligations and

agreement made Mainville in respect of various matters concerning his

engagement, including but not limited to, the issuing of equity in Neopharm to

which he was entitled in accordance with the terms of his engagement. These bad

faith actions on your part are particularly disturbing as over the past three years

Mainville has worked in the utmost good faith and has built and grown Neopharm

from nothing into a highly profitable company.

Suddenly, and with short warning and notwithstanding your conversations and

emails to the effect that you were trying to arrange for a meeting to finalize matters

with Mainville, you arrived at the offices of Neopharm at approximately 5:00 p.m.

on July 29, 2915 and advised Mainville verbally that its services were terminated

for cause immediately, that you had hired a replacement for [Mainville] as

President and CEO who would take charge of operations of Neopharm

immediately, and that he should remove all of his personal property from the

premises.

[…]

We are instructed to advise you that Mainville intends to hold you fully liable for

your illegal and bad faith actions and intends to seek redress against yourselves

in accordance with the terms and conditions upon which their engagement was

made, confirmed and illegally terminated. In as much as we view that all of these

bad faith actions and deception were directed by and orchestrated by [Adler] it is

our intention to hold him solidarily liable with Neopharm.

[…]

[Underlining is mine]

[125] At the time, Mainville claimed close to 4 million dollars from Adler and Neopharm

and then eventually proceeded to file an action in equity and law for oppression and

damages as against both Adler and Neopharm.

[126] As previously indicated, I am of the view that the various exchanges between the

parties, their actions and the negotiation and execution of the Codicil, in particular, point

to a meeting of the minds and a concluded agreement between them regarding the 25%

common shares of Neopharm and the mechanism for their valuation upon the termination

of the relationship between Mainville and Neopharm.

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[127] In the Codicil, Adler and Neopharm explicitly undertake to buy back (on the date

of the termination of the relationship with Mainville) all of his shares at a price of 4.5 times

EBITBA for the last preceding year. I will come back to the calculation of this amount later

in the judgment.

[128] Before moving onto another claim advanced by Mainville, it is important to address

another argument marshalled by Adler’s lawyers.

[129] Adler and his lawyers argue that a large number of documents exchanged

between the parties reflect Mainville’s own statements that an agreement had not been

reached between the parties. They point for example to an email dated 29 May 2014 from

Mainville to Adler, and by taking the words out of context and reproducing them in isolation

– partner to be since we don’t have a deal – they try and demonstrate that no agreement

was ever reached between the parties.

[130] They also try and do the same with an email from Mainville to an unrelated party

dated 15 July 2015, wherein Mainville writes “[…] 3 ans à grossir une business sans

contrat […] pas le choix!” and again, with an email from Mainville to Adler dated 18 July

2015 in which, Mainville writes, “I have been seeking a demonstration of trust and respect

for more than 3 years now – and this is what I get – no contracts and lack of trust – while

the company just completed a record first half and developing several key accounts to

fuel the continued growth in 2016.

[131] Adler and his lawyers also point to correspondence dispatched by Adler and his

lawyers that, according to them, reflected that there was no agreement between the

parties. For example, they refer to a letter from Adler’s lawyer, Wiseman to Mainville dated

28 November 2013, some 8 months after the conclusion and signature of the Codicil,

where she writes:

Dear Luc,

I am in receipt of your email dated Wednesday, November 27, 2013 at 4:25 p.m.

Unfortunately, there are too many issues that remain to be negotiated and I have

no instructions as to the content of the final documentation at this time.

[Underlining is mine]

[132] Interestingly, this letter is produced by the defendants, together with an internal

contemporaneous “solicitor-client” email from Wiseman to Adler dated the same date, in

which Wiseman writes:

Dear Morris,

I spoke to Aaron Rodgers, who is our litigation partner, about the situation with

Luc. He feels that the best thing to do at this point is to send him the annexed letter.

What I am basically saying is that I cannot send him documents because you never

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had a “meeting of the minds” on a number of issues and so your deal was never

finalized. At that point, he will be forced to make the next move and we will try to

proceed quickly to a settlement of the file. Obviously, you need to go to Neopharm

and make sure that you have all of the computer passwords copied of any data

which can be removed from the system, and so on. You will have to immediately

deal with human resource issues.

Please call me or email me if the annexed is acceptable to send.

[Underlining is mine]

[133] This email is perhaps most telling about the state of affairs between the parties,

Adler’s intentions and his lawyers misplaced and overreaching efforts and actions a little

over a year and a half after Mainville had taken over the helm at Neopharm to please a

corporate client. This letter also staged the prelude of what was to follow down the road.

As I noted in another commercial case about two years ago, a pause is in order at this

point to offer a needed observation.

[134] Corporations today are among the wealthiest and most influential protagonists of

modern economy. Never has so much attention and care been directed towards their

well-being and development. As a result, advocating for corporate clients and their rights

in recent years has commanded new and varying vigorous forms, enticing along the way,

astute and experienced professionals to seek unique creative solutions to satisfy and

address their sophisticated client’s needs and problems. The solutions proposed,

however, are not always the right ones³¹and they are not the most transparent and

appropriate long-term.

[135] It is useful to recall that before signing the Codicil in March of 2013, the parties had

since the middle of July 2012 exchanged at least eight or more different draft documents

trying to finalize the loses ends of their commercial relationship. They both wanted a

document that favoured them and they both wanted a little edge over the other. Among

the documents exchanged between the parties was a long-form draft Consulting

Agreement prepared by Adler’s lawyers, Wiseman.

[136] That fairly comprehensive document reflected, among other things, that Mainville

was to be the President and Chief Executive Officer of Neopharm, the consulting

arrangement was to be non-exclusive with certain parameters, Mainville could convert

the agreement into an employment agreement anytime, Mainville’s remuneration was to

be $235,000 annually, Mainville was to have an equity in the company equal to 25% with

an ability to purchase an additional 10% overtime, there was to be a car allowance for

Mainville and he was offered a certain amount of vacation time.

[137] The agreement also contained a termination clause, a confidentiality rider, and a

non-competition and non-solicitation clause. I repeat, this agreement was prepared by

³¹Craig Packaging Ltd. c. Beaumont, 2020 QCCS 367.

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Wiseman. On 14 June 2013, a little over three months after the conclusion of the Codicil,

and five months before the litigation-crafted “too many issues remain to be negotiated

letter”, Wiseman’s office through Me Matthew Bilmes, with a copy to Wiseman herself

confirmed to Mainville that on 9 July 2012, 25% of the shares of Neopharm had been

transferred to him. The confirmation also came with a notation that read as follows:

Note 2:We understand that there is a shareholders agreement in place governing

the rights and restrictions attaching to your shares, which includes provisions

particular to your shares, including that the votes and value were not fully vested

at 25% on subscription.

[Underlining is mine]

[138] Based on a review of the June 2013 letter and Mainville’s testimony at trial,

Wiseman’s office even went as far as representing Mainville in the creation of the Luc

Mainville Family Trust and “Transitco” on 31 December 2012. At the time, Mainville was

told that at his request a holding for him referred to as “Parkingco” could also be created.

He was advised:

8. As you know, your structure is beneficial for a number of reasons, including the

following:

a.

b.

Because of the discretionary nature of the Trust, any income or

capital of the Trust can be distributed at any time to any one, some

or all of the beneficiaries who are of the age of majority, the whole

in the discretion of the trustees;

The Trust acquired the shares in Transitco, which entitles it to

benefit from the future growth in value of Transitco (and in turn

Neopharm) as of January 1, 2013. Accordingly, if Neopharm is ever

sold, and both Neopharm and Transitco meet the requisite asset

test, it would be possible to have all of the members of your family

utilize their $750,000 capital gains exemption (as beneficiaries of

the Trust) thereby reducing the income tax payable by the family

upon the sale of the shares of Transitco;

[Underlining is mine]

[139] On 19 August 2013, Wiseman herself wrote to Mainville including in her letter two

schedules – Schedule A and B – and a “Step by Step Reorganization of Neopharm Labs

Inc.”, which in the facts section confirmed that on “July 9, 2012, at a time when Neopharm

had not increased in value, [Mainville] subscribed for 20.48 Class B shares of Neopharm,

which represented approximately 17% of Neopharm, for a subscription price of $2.04 and

204.80 Class C shares for a subscription price of $2.04. Thus, the shareholdings of

Neopharm were as follows:

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Shareholder

PAGE: 28

% Equity

83%

The Mirabel Family Trust

(Belonging to Adler)

Luc

17%

[140] Under the title “Plan”, that same document indicated, among other things, that “we

will amend the articles of Neopharm to add the same share structure but we will add 2

new class of shares…The current equity will be 17% (subject to adjustments) and the

maximum will be 25%.”

[141] On 22 August 2013, Wiseman sent to Mainville a further draft of the “various

agreements and side letters.” At trial, only a draft of the Service Agreement was filed as

an exhibit by the parties. In that agreement which was still date-stamped on the first page

“30^thday of July 2012”, Adler’s companies, the TOV Group Inc. and Neopharm Labs Inc.

proposed to agree and understand, among other things, “that the Service Provider [Luma

Consulting], and its employers and representatives, will devote reasonable and sufficient

time to rendering the Consulting Services, however, they shall not be exclusive to the

Client [TOV Group and Neopharm].”

[142] Wiseman’s letters of 14 June, 19 and 22 August and 28 November 2013 only five

and then three months apart respectively are at best irreconcilable with one another.

These contemporaneous documents are the most objective and convincing proof that on

22 March 2013, through the Codicil, Adler and Mainville reached an agreement on the

most essential terms of their relationship.

[143] In my view, therefore, Wiseman’s email to her client that after having spoken to a

litigation lawyer “the best thing to do at [that] point” was to send a letter to Mainville that

indicated that “too many issues remain to be negotiated” in order to at the request of her

client either stall or derail the finalization of the necessary paper work to gain an

advantage or unravel a commercial arrangement reached between the parties was not

only self-serving but not in good faith.

[144] Why otherwise would a lawyer who has explicitly and in writing confirmed a share

transfer between the parties and agreed to represent both parties to structure and paper

the transaction, write, “what I am basically saying is that I cannot send him documents

because you never had a meeting of the minds on a number of issues and so your deal

was never finalized. At that point, he will be forced to make the next move and we will try

to proceed quickly to a settlement of the file.”

[145] Wiseman did not testify at trial.

[146] It is rather trite that the principle of good faith confers a broad and flexible power

to the courts to create law and grant equitable relief to address unjust situations. It also,

as mentioned earlier, serves as a solid basis for courts to intervene and impose on

contracting parties obligations based on contractual fairness. The general duty can

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temper formalistic interpretations of contractual terms while concurrently highlighting the

duties to do and not to do something in fulfillment of an obligation that are for the parties

its object.

[147] In summary, Mainville’s email to Adler dated 18 September 2014 well summarizes

the situation between the parties at the time as follows:

Morris

I spent another frustrating hour on the phone with Gerry yesterday. Despite his

mandate to negotiate – Gerry keeps delivering the same information.

1) My shares have not vested last year due to a lack of performance.

2) I will be asked to work on other projects/manage other companies/ for your

benefit…

I have been trying to get you to care about my situation for a while but instead you

keep hiding behind professionals who are asked to deliver your messages. The

way you see things – I will keep building Neopharm for you with no guarantee

about my shares ownership despite exceeding the initial contract targets. I will

have to fight each year for definitions and terms that keep evolving as fast as our

profits are growing.

Considering I see no real desire from you to keep [me] incentivized – I must

consider putting an end to our relationship.

I have a contract from Francine that says I am entitled to 19% and results to date

in 2014 exceed target for 2014 – hence I am entitled to 21%.

The contract stipulates that I am entitled to 4 times the last 12 months EBITDA.

Either we sign a contract that is mutually acceptable by September 30 or you buy

me back my shares.

You know how to reach me – and please don’t send another messenger.

[Underlining is mine]

[148] Despite the above, the exchanges between the parties continued and Mainville

remained at Neopharm.

[149] In their legal submissions, Adler and Neopharm’s lawyers rely on articles 1388 and

1393 C.C.Q. to argue that the written exchanges that took place between the parties on

16 and 20 January 2015, only a few months prior to the termination of the relationship

between Adler and Mainville, constituted nothing more than a number of offers and

counter-offers that did not correspond substantially to the offer and, as such, they could

not and did not constitute a binding agreement between the parties.

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PAGE: 30

[150] With respect, I disagree.

[151] Both the version of the draft letter agreement from Adler to Mainville dated 16

January 2015 and the track-changes version of that same document sent to Adler by

Mainville with a cover email 4 days later reconfirm the agreement reached by Adler and

Mainville in the Codicil. In other words, Mainville shall receive an ownership interest in

Neopharm reflecting 25% of the common shares of that company and, moreover, should

Mainville leave the company for any reason, including but not limited to being dismissed,

which is what took place in this case, then Adler and Neopharm shall buy back Mainville’s

shares at a price of 4.5 times EBITDA for the last preceding year or as set out in the 16

January 2015 letter, should Mainville be fired without cause, die or become disabled for

a price equal to 25% of (4.5X EBITDA).

[152] In their legal submissions, Adler’s lawyers argue that in his last proposal to

Mainville, Adler offered to give Mainville “25% du capital action de [Neopharm] ‘as soon

as possible’, en autant qu’il n’en résulte pas de conséquences fiscales négatives pour

[Neopharm]. Encore une fois, cet élément fait partie d’une offre globale qui pouvait valoir

entre les parties qu’en autant qu’il y ait acceptation de l’ensemble des éléments essentiels

de la convention d’actionnaire et qu’il y ait, par la suite signature formelle d’un contrat

[…].”

[153] They also argue that the words “as soon as possible ne sont pas définis dans cette

proposition et auraient vraisemblablement été précisés dans les projets de convention

qui […] devaient être rédigés par les procureurs […].”

[154] With respect, I am of the view that the argument again is misguided and based on

a misreading of Adler’s 19 January 2015 proposal.

[155] In that document, in paragraph 3, Adler writes, “with respect to the shareholdings

of Neopharm, [Mainville] or a company controlled by him will receive an ownership interest

in Neopharm reflecting 25% of the votes and value from the date of incorporation of the

company. Such 25% ownership interest shall be received by [Mainville] as soon as

possible as long as same does not result in negative tax consequences to [Mainville,

Adler] or Neopharm.

[156] I am also of the view that Adler’s interpretation of his own words with respect to

the “as soon as possible” transfer of 25% shares of Neopharm to Mainville if there are no

tax consequences for Mainville, Adler and Neopharm (and not just Neopharm as Adler’s

lawyers contend in their legal arguments) is misplaced and a misconstruction of the plain

language used.

[157] In paragraph 3 of the 19 January 2015 draft, Adler writes that Mainville “will” or

“shall” receive 25% of the shares of Neopharm, but that may be immediate or as soon as

there was the least amount of fiscal impact for the company, Adler and Mainville. In other

words, there is no doubt that Mainville was given 25% of the shares of Neopharm, the

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PAGE: 31

question that remained was on what date exactly were the shares going to be transferred

to give rise to the least degree of impact for Adler, Mainville and Neopharm.

[158] But even if reasonably informed minds were able to differ on the interpretation,

characterization and probative value that is accorded to the Codicil and the conduct of

the parties subsequent to its conclusion, I would still reach the same conclusion pursuant

to section 238 and following of the Act.

[159] Before proceeding any further with this issue, I will open a parentheses to simply

indicate that for obvious reasons Adler placed less emphasis on this argument than on

the one based on the provisions of the C.C.Q. Put differently, he emphasized the line of

arguments that he felt offered him a greater chance of success in these proceedings.

Section 241 ‘Fit Order’

[160] There is no doubt, as the plaintiffs justifiably contend, that the remedies envisaged

in section 241 of the Act are among the broadest and most comprehensive of shareholder

remedies available in law and that they apply to a wide array of situations in both public

and private companies.

[161] Explained in more detail³²:

[149] Le recours pour oppression prévu à l’article 241 […] accorde des pouvoirs

étendus au tribunal. Inspiré des principes d’équité, ce recours est largement utilisé

en droit civil québécois. La jurisprudence a d’ailleurs étendu sa portée. Il ne vise

plus seulement la fraude, la mauvaise foi ou l’illégalité, mais également les

injustices découlant des cas d’abus de droit et de violation des attentes légitimes

des actionnaires.

[150] Voici comment l’auteur Paul Martel décrit la portée de ce recours :

Le recours de l’article 241, recours d’équité, est ouvert non seulement dans

les cas d’abus des droits du plaignant, ce qui implique des éléments de

dureté et de manque de probité et traduit l’expression anglaise

«oppression», mais aussi, et c’est là que la loi fédérale a innové par rapport

au droit anglais, dans les cas où, même en l’absence d’illégalité ou de

fraude, il est porté atteinte à ces droits ou qu’il n’en est pas tenu compte.

La Loi utilise l’expression «se montre injuste» (en anglais «unfairly») pour

décrire ces deux autres catégories de circonstances. Les mots «unfairly

disregard» ont été interprétés comme signifiant «to unjustly and without

cause (…) pay no attention to, ignore or treat as of no importance the

interests of security holders (…)».

[151] Le recours pour oppression s’attarde donc aux effets injustes que supporte

le plaignant, et ce, même lorsque le comportement reproché respecte les règles

32

Premier Tech ltée c. Dollo, 2015 QCCA 1159. The application for leave to appeal from the judgment

dated 8 September 2015 was dismissed with costs.

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PAGE: 32

de droit strict. En ce sens, la théorie des « attentes légitimes ou raisonnables »

commande l’examen des intérêts des personnes protégées, comme le précisent

les auteurs Raymonde Crête et Stéphane Rousseau :

1577. En reconnaissant ces attentes, dont le contenu est fort variable, les

tribunaux peuvent ainsi déroger aux règles de droit lorsque l’application de

celles-ci s’avère inéquitable à l’égard de ces personnes, notamment en

écartant la règle de la majorité. Ils peuvent également exercer une fonction

supplétive en comblant les carences des ententes expresses intervenues

entre les parties. Grâce à cette mesure de redressement, les personnes

placées dans une position faible ou vulnérable, tels les actionnaires

minoritaires qui normalement doivent se plier aux vœux de la majorité,

bénéficient ainsi d’un mécanisme de contrôle judiciaire lorsque les actes

contestés, bien que conforme aux règles prescrites, portent injustement

atteinte à leurs intérêts.

[152] Ils résument en ces termes le test en deux étapes élaboré par la Cour

suprême dans l’arrêt BCE Inc. c. Détenteurs de débentures de 1976 :

1583. Selon la méthode adoptée par la Cour suprême dans l’arrêt BCE, le

tribunal saisi d’une demande en cas d’abus est appelé à répondre à deux

questions. Premièrement, il doit se demander si la preuve fait ressortir

l’existence d’une attente raisonnable invoquée par le demandeur,

et deuxièmement, si la preuve permet de conclure que la violation de cette

attente raisonnable constitue un abus de pouvoir ou un acte injustement

préjudiciable.

[153] Dans cet arrêt, la Cour suprême identifie différents facteurs permettant

d’apprécier les attentes raisonnables, parmi lesquels figurent les pratiques

commerciales courantes, la nature de la société, les rapports existant entre les

parties, les pratiques antérieures, les mesures préventives qui auraient pu être

prises, les déclarations et conventions ainsi que la conciliation équitable des

intérêts opposés de parties intéressées.

[154] La Cour suprême précise que le concept d’attentes raisonnables est objectif

et contextuel. Ainsi, il importe de déterminer si les attentes sont raisonnables

compte tenu des faits propres à l’espèce, des rapports en cause et de l’ensemble

du contexte.

[155] La Cour suprême rappelle que « l’obligation des administrateurs d’agir au

mieux des intérêts de la société inclut le devoir de traiter de façon juste et équitable

les actionnaires minoritaires touchés par les actes de la société ». Bien que prise

dans l’intérêt de la société, une décision peut frustrer leurs attentes légitimes et

avoir sur eux un effet inéquitable, les intérêts de la société étant parfois divergents.

[References and all emphasis from the original text have been removed.

Underlining is mine]

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[162] In other words, when the requirements of section 241 are met, or where there has

either been conduct which is burdensome, harsh and wrongful, there has been a visible

departure from standards of fair dealing, or an abuse of power which results in an

impairment of confidence in the probity with which the corporation’s affairs are being

carried out, the court has unfettered discretion to grant a wide variety of orders. The same

applies where there has been conduct that is unfairly prejudicial or, said differently,

detrimental or damaging to an applicant’s rights in a manner which is unjust or inequitable.

[163] As explained at the outset, there are two prongs that require consideration in such

a recourse.

[164] First, the court must determine whether the evidence shows that the complainant

had a reasonable expectation having regard to the facts of the case before it. Put

differently, the claimant must identify the expectations that it claims have been violated

and establish that the expectations in question were reasonably held.

[165] Second, it must determine whether the conduct contrary to that expectation was

oppressive or unfairly prejudicial or whether there was unfair disregard within the meaning

of section 241 of the Act. Again put differently, the complainant must show that those

reasonable expectations were violated by conduct falling within the statutory terms, that

is, conduct that was oppressive or unfairly prejudicial or in unfair disregard of a relevant

interest.

[166] Only a “complainant” as defined in section 238 of the Act may benefit from the

remedies or recourse set out in section 241.

[167] According to section 238, a complainant is:

(a) a registered holder or beneficial owner and a former registered holder or

beneficial owner, of a security of a corporation or any of its affiliates,

(b) a director or an officer or a former director or officer of a corporation or any of

its affiliates,

(c) the Director, or

(d) any other person who, in the discretion of a court, is a proper person to make

an application under this Part.

[Underlining is mine]

[168] According to section 2 (1) of the Act, under the heading definitions, a “director”

means a person occupying the position of director by whatever name called and directors

and board of directors include a single director, and an “officer” includes the president,

the vice-president, the secretary, the treasurer, the comptroller, the general counsel, the

general manager or any other individual who performs functions for a corporation similar

to those normally performed by an individual occupying any of those offices.

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[169] Based on the previously detailed facts, there is no doubt that Mainville is a

registered owner or beneficial owner of the common shares or securities of Neopharm.

The Codicil concluded and signed by the parties in March of 2013 certainly confirms this

point.

[170] There is equally no doubt that Mainville was a former officer of the Neopharm. His

business card identified him as such, official government filed documents such as the

“Certificat de Réclamation PDEQ” from the Canada Economic Development for Quebec

Regions signed by Adler described him in similar terms, and the communications between

the parties also confirm such a fact.

[171] It is also an inescapable fact that between July of 2012 until July of 2015, Mainville

was performing the functions of a CEO and president, and hence the functions of an

officer of Neopharm, and as such he would clearly fall within the definition of a

complainant under section 238 of the Act.

[172] Astonishingly, however, at trial, Adler testified that Mainville was not really the

President of Neopharm. According to Adler:

A.

[…] [Mainville] was […] never legally president. He didn’t have any signing

authority. I had the full rights of signing everything.

Q.

So for the last five years in this case, you and your lawyers, and your

proceeding, have alleged that [Mainville] was President and CEO of

[Neopharm] from July 27^th, 2012 until July 29^th, 2015. Now you’re telling us

and the Court that [Mainville] was never the President of [Neopharm]. Is

that it?

A.

I’m talking legally, by the government, and […] I had the full right to sign

everything.

[…]

Q.

So just to have clarity, and this is the last question I have on this particular

point, are you denying that you hired [Mainville] in July 2012 to be the

President and CEO of [Neopharm]?

A.

I am not denying, I am not a lawyer. Whatever is written on his proposal I

gave him, that’s what it was, and that proposal was never signed. So in

fact, he was the acting President for certain matters.

[Underlining is mine]

[173] The above exchange is yet another example of Adler reaching an agreement on

an issue and then trying to change it to his advantage at the eleventh hour by arguing

that it “was never signed”. At a minimum, such an approach is not demonstrative of good

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faith dealing and fair play in a commercial setting. This exchange is strikingly similar to

Adler’s contentions that Mainville was not a shareholder.

[174] Be that as it may, even though it is unnecessary, as based upon the facts of this

case I am of the view that Mainville qualifies as a complainant, for the sake of

completeness only, I conclude that Mainville was, at a minimum, a recipient of a promise

that he would receive 25% of the common shares of Neopharm and based on that

promise he acted for the benefit of Neopharm, such that he would be a proper person to

make an application pursuant to section 238 of the Act.³³The same conclusion can be

reached with respect to Luma Consulting on the basis that it is a creditor of Neopharm.

[175] To go back to the criteria set out by the Supreme Court in BCE, the next question

that requires an answer is whether the evidence supports a reasonable expectation on

the part of the plaintiffs, and in particular, Mainville to be a 25% shareholder of Neopharm,

benefit from its profits and be compensated for his shares if the relationship between the

parties is for whatever reason terminated.

[176] Factors that emerge from case law that are relevant in determining that a

reasonable expectation exists include general commercial practice, the nature of the

corporation, the relationship between the parties, steps that could have been taken by the

complainant to protect itself, any representations and agreements and the fair resolution

of conflicting interest between the various corporate stakeholders.³⁴

[177] In this case, there is no doubt that Mainville, in particular, had a reasonable

expectation to be a 25% common shareholder of Neopharm as early as on 22 March

2013 when the parties negotiated and signed the Codicil, on 19 August 2013, when

Adler’s lawyer Wiseman wrote to Mainville including in her letter two schedules –

Schedule A and B – and a “Step by Step Reorganization of Neopharm Labs Inc.”, which

under the title “Plan”, indicated, among other things, that the then-current equity was 17%

(subject to adjustments) and the maximum was going to be 25% or then again on 16

January 2015, when Adler wrote to Mainville for the last time to confirm their heads of

agreement before a written document was to paper the transaction.

[178] The same result would be achieved on the basis of the circumstantial evidence

available in this case and the testimony of Adler himself at trial.

Q.

The question is did you and [Mainville] agree that he would be the

President and CEO of Neopharm and he would start on July the 27^th, 2012?

A.

Yes.

³³See: Basha c. Singh, 2016 QCCS 1564 at par. 51 and Larmon v. Synergy Hospitality Inc., 2004

2562 (ONSC) at par. 32 and 33.

³⁴BCE, par. 72.

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Q.

[…] You have agreed with [Mainville] on that base income of $200,000,

right?

A.

The base consultant fee.

[…]

Q.

And you had agreed on that base consultant fee with him, that $200,000 in

2012?

A.

Q.

A.

Q.

Yes.

And that was a verbal agreement, wasn’t it?

Yes. […]

You had also agreed with him the 5 percent base for insurance and $1,500

a month for a car allowance. Again, those are things that you agreed upon

with [Mainville] before he started working July 27, 2012.

A.

Yes, I’m not disputing this invoice if that’s the question.

[179] Before continuing any further, I will open another parentheses to address a sine

qua non exclusivity argument raised by the defendants. Both during trial and in their

written submissions thereafter, Adler’s lawyers insisted on Mainville breaching his

obligations of exclusivity of service with Neopharm. In their submissions, they argue, for

example, “il s’avère que Mainville a de facto continué de conclure des contrats de

consultant et d’investissement ou tenté de conclure de telles ententes avec des tiers au

cours des 3 années où il fut le CEO de [Neopharm].”

[180] They also argue, “comme l’attribution des actions à [Mainville] était directement

reliée à son engagement de cesser toutes telles activités, le fait qu’il les ait de facto

maintenues ou tenté de les maintenir anéantit à nouveau toute prétention de sa part à

l’effet qu’il avait des attentes raisonnables que lesdites actions allaient, malgré tout, lui

être attribuées.”

[181] I do not agree with the defendants.

[182] In my view the initial discussions between the parties from day one was focused

on Mainville taking on the helm of Neopharm on a part-time non-exclusive basis. For

example, on 24 July 2012, through his then lawyer, Wiseman, Adler circulated a long-

form draft Consulting Agreement, which in clause 2.3, stated that the consulting

agreement between the parties was to be non-exclusive and Mainville was allowed to

maintain his consulting practice and carry on such other businesses, under his own name

or the name of Luma Consulting during the period of consulting.

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[183] On 22 August 2013, Wiseman again sent to Mainville a draft of a service

agreement that was date-stamped on the first page “30^thday of July 2012”, and that

document too provided, “that the service provider [Luma Consulting], and its employers

and representatives, were to devote reasonable and sufficient time to rendering certain

consulting services to the TOV Group and Neopharm, but they were not exclusive to

them.

[184] In their Amended Defence and Cross-Application, filed on 16 May 2017, Adler and

Neopharm argue that Mainville misled them on an essential consideration that vitiates

any agreement, if one in fact was concluded between them.

[185] According to the defendants, the share transfer was subject to certain terms and

conditions, one of which was for Mainville to work exclusively for Neopharm and the TOV

Group, and that “he would not enter into any business or contractual agreement with third

parties and would cease any management activities with other companies.” Put

differently, for Adler, the exclusivity of the plaintiffs’ services was apparently a sine qua

non essential condition to their contractual relationship.

[186] In their Amended Defence, the defendants also refer to a number of draft

documents exchanged between the parties in 2012, 2013, 2014 and even in 2015, that

indicate that Mainville “will not enter into any business or contractual arrangements with

third parties without the prior consent of [Adler]” and Mainville was to “phase out existing

consulting and/or employment agreements by December 31, 2012 – except for board

positions.”

[187] While it is a fact that in his first email to Adler, Mainville writes that his proposal

“takes into consideration the opportunity cost of having to ‘drop/exit’ many active

projects”, that at that time provided Mainville with significant upside, that proposal was,

as can be seen from the balance of the financial proposal, accompanied with a demand

for 30% equity in Neopharm.

[188] And yet, the only signed agreement between the parties, the Codicil that contains

a number of essential elements concerning the relationship of the parties says nothing

about this issue and the draft service agreements prepared by Adler’s lawyers and

referred to above, say nothing about it either.

[189] In my view, the glaring indisputable and uncontested facts of this case again speak

for themselves. Those facts simply are that prior to Mainville’s arrival at Neopharm, the

company was in serious financial difficulty and upon Mainville’s departure Neopharm was

performing well and was profitable.

[190] What is also most telling about the immediate significance or not, or the exact

extent of an exclusivity engagement as Adler makes a point of it post fact, is that all along

the way during the three-year relationship between the parties, Mainville did what he had

to turn Neopharm into a performing and profitable company, and Adler never complained

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about the increase in sales and Neopharm’s financial performance during the relevant

years in question.

[191] The evidence filed before the Court indicates that as at 30 November 2013,

Neopharm’s revenue was around 7 million dollars. A few months later, and just shy of a

year, that amount had increased by an additional million. As at 31 December 2014,

Neopharm’s revenue was hovering around 11.5 million and its expected income for 2015

was projected to be around 13 million.

[192] I also agree with the plaintiffs, when they write:

160. En outre, si l’on accepte pour fins de discussion l’argument des Défendeurs

à l’égard d’une exclusivité totale en faveur de Neopharm, cela impliquerait

que l’acquisition (vesting) de l’actionnariat de Mainville serait à la direction

d’Adler.

[…]

162. Ainsi, si Mainville agit comme Président et Chef de direction de Neopharm

pendant 20 ans et réalise de grands accomplissements (comme il l’a fait

pendant 3 ans). Adler pourrait néanmoins prétendre que Mainville n’a pas

rendu des services exclusivement à Neopharm (malgré des semaines de

60 heures) et prendre la position qu’aucune action de Mainville n’est

acquise (vested).

163. Il va sans dire qu’une telle position est non seulement complètement

inéquitable, mais également tout à fait contraire aux attentes raisonnables

de Mainville.

[193] In short, the parties entered into a commercial transaction, which one only side,

Adler, obtained what he was interested in and seeking – turning around the poorly

performing and not profitable company that he had taken over from Warnex Analytical

and which he did not have the know-how to operate and run himself – while the other,

Mainville, who then did the work and turned around the company did not get the equity in

the company and the bargain the parties agreed upon.

[194] Following the departure of Mainville from Neopharm, Adler himself admits the

remarkable growth of the company and the fact that customers, more than ever before,

are heading their way as follows:

Dear employees,

As you are aware “Neopharm” has been seeing substantial growth in the last few

years. We have gained the trust and loyalty of our clients and new customers are

coming our way more than ever! We expect a tremendous growth in the next

coming months.

We thank you “all” for your trust dedication and good work.

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We wish to inform you that Luc Mainville is no longer with the company to focus

on his other projects. We appreciate his work and wish him the best of luck.

As of Monday, the functions of President/General Manager will be assumed by Mr.

Nicholas Fortin. Nicolas is well known in the pharma industry and has successfully

managed other companies. He accepted the mandate to lead and further grow our

company. He’s looking forward to meet you in the next coming days.

With great appreciation,

Yours truly,

Morris Adler

Chairman & CEO

[Italics of the original text has been removed. Underlining is mine]

[195] Having reached the conclusion that the relationship between Adler and Mainville,

and their companies, was not an exclusive one, I do not see the need or utility of

examining company by company, what Mainville did and when and how Adler may have

either perceived or accepted Mainville’s actions during his tenure at Neopharm.

[196] I also do not see the need to expend any time addressing the defendants’

unsubstantiated non-performance and loss of opportunity claims initially filed for

$1,017,639.39 and then reduced on 16 May 2017 to half of that amount, or $508,819.70

anchored in their incorrect pretension that their relationship with Mainville was an

exclusive one. As I indicated before, it was not, and Mainville did not breach any

confidentiality, non-solicitation or non-compete arrangement concluded between the

parties.

[197] I will address the plaintiffs’ claim for abuse later in the judgment.

[198] Turning back to issue of the expectations of the parties, I agree with the plaintiffs

when they submit that during the period from July 2012 until early 2015, in addition to the

conclusion of the Codicil between the parties, Adler and his lawyers prepared step by

step plans and draft agreements to reflect the terms of Mainville’s engagement and equity

in Neopharm, and moreover, in anticipation of the signature of these agreements, Adler’s

lawyers incorporated a new holding for Mainville, which entity was to hold his 25% equity

in Neopharm and which was to be owned by Mainville and a family trust created for his

benefit.

[199] According to the plaintiffs, notwithstanding the above, Adler continued to delay

execution of the documents for reasons which became later apparent, as he “clearly had

no intention of complying and having Neopharm comply with their obligations towards

Mainville, and all the while in bad faith led Mainville to believe there were minor matters

to be tweaked, but that everything was agreed and would be signed.”

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[200] I also agree with the plaintiffs when they submit that the evidence in this case

clearly establishes that their reasonable expectation was violated by oppressive

behaviour and certainly conduct falling within the terms “unfair prejudice” or “unfair

disregard”.

[201] It is useful to recall that unfair prejudice is generally considered as conduct which

is less offensive than oppression. Examples include squeezing out a minority

shareholder, preferring some shareholders with management fees. Unfair disregard is

viewed as the least serious of wrongs found in section 241. Examples of that type of

conduct include failing to deliver property belonging to the complainant.³⁵

[202] To use the words of the Supreme Court, the “concepts of oppression, unfair

prejudice and unfairly disregarding relevant interest are adjectival. They indicate the type

of wrong or conduct that the oppression remedy at section 241 of the [Act] is aimed at.

However, they do not represent watertight compartments, and often overlap and

intermingle.”³⁶

[203] Under the circumstances, I am of the view that the defendants have acted in an

unfairly prejudicial, disregarding and unjust manner towards the plaintiffs, and in

particular, Mainville and as such the plaintiffs are pursuant to section 241 (3) of the Act

entitled to seek a “fit order” that includes, an order directing an issue or exchange of

securities, an order directing a corporation to purchase securities of a security holder, an

order compensating an aggrieved person or the complainant in this case and, orders, as

the opening language of section 241 (3) permits, that the court deems appropriate and

just in the circumstances.

[204] I am equally of the view that Mainville is reputed to be a 25% common shareholder

of Neopharm and that he is entitled to receive the equivalent of 25% of the value of the

common shares of Neopharm based on a formula of 4.5X EBITDA as explained as

follows.

[205] Again, as expressed in the opening line of this judgment, if there is a set of facts

that requires the use of the broad judicial powers offered to the superior court and the

discretion vested in it pursuant to section 241 of the Act, it is this one.

[206] In this case, there has clearly been a visible departure from standards of fair

dealing and conduct that is unfairly prejudiced to Mainville’s rights in a manner which was

unjust and unequitable.

Valuation of shares

[207] As part of their list of admissions, the parties agree that the figures to be used to

calculate Neopharm’s EBITDA or “earnings before interest, taxes, depreciation and

³⁵BCE, par. 93 and 94.

³⁶Ibid., par. 91.

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amortization” for the period starting 1 August 2014 and ending 31 July 2015, should that

be appropriate, are those included in a document entitled “August 2014-July 2015 internal

numbers calculation” filed as an exhibit, except for, among others, items such as bonus

accruals, inventory adjustments, destruction, supply metrology, maintenance, repair

equipment, tax credits, consulting fees, meals and entertainment and bad debt.

[208] EBITDA is the most widely used measure of a company’s financial health and

ability to generate revenue. It is a key indicator of a company’s performance, profitability,

value and ability to add debt. After stripping out factors that are not in a company’s control,

EBITDA is used to calculate a company’s valuation for purposes of business sale or

acquisition.

[209] The plaintiffs claim the sum of $2,953,323 as representing the value of 25% of the

common shares of Neopharm. They submit that a 4.5 multiplier is what the parties agreed

upon in the Codicil and then again in January of 2015.

[210] I agree with such an assertion.

[211] As I indicated earlier, in the Codicil, Adler and Neopharm explicitly undertook to

buy back (on the date of the termination of the relationship with Mainville) all of his shares

at a price of 4.5 times EBITBA for the last preceding year. Adler confirmed the same in

one of his last exchanges with Mainville in January of 2015. Moreover, this figure

represents the just and equitable value taking into consideration the facts, the reality of

Neopharm and its activities and the legitimate expectation of the parties³⁷.

[212] The sub subsidiary and astounding argument that is advanced on behalf of Adler

that the value of the common shares of Neopharm ought to be determined on the basis

of the book value of the company as at 29 July 2015 (date of termination of the

relationship between the parties according to Adler), and since the plaintiffs have not

offered any proof in this regard, the court cannot reach any conclusions with respect to it,

therefore, is not only unsubstantiated by any facts but it is devoid of any merit.

[213] This argument, like others like it throughout the proceedings, is demonstrative of

the “tous azimuts” approach adopted by Adler and his legal team that require, at a

minimum, the lifting of an eyebrow. I will come back to this point later in the judgment,

when I address the issue of legal costs.

[214] In the meantime, Adler’s lawyers submit:

³⁷Côté, par. 85. According to the Court of Appeal:

Il faut rechercher une valeur qui soit juste et équitable dans les faits, en tenant compte de

la réalité de la société et des expectatives légitimes des protagonistes. Il faut entre autres

s’assurer que l’actionnaire compensé ne se retrouve pas avec plus que ce qu’il pouvait

raisonnablement espérer toucher pour ses actions.

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vi)

Si le tribunal devait toutefois retenir l’EBITDA comme critère d’évaluation

de la valeur au livre des actions, alors les défendeurs soumettant

subsidiairement qu’il faudrait alors s’en remettre à l’EBITDA apparaissant

à l’annexe B de la liste des admissions, en ajoutant toutefois la somme de

51 041$ que les parties reconnaissent être une erreur de calcul quant à

l’item SG & A salaries qui figure à la page 2 de ladite annexe (2 118 427$

+ 51 041 $ = 2 169 468 $);

vii)

Si la formule de 25% de 4.5 fois l’EBITDA devait s’appliquer à la présente

situation (ce qui est nié, vu que ni P-10, ni D-9 n’ont été accepté par les

parties), alors, la somme que pourrait réclamer les demandeurs pour les

actions serait la suivante : 25% de (4.5 X 2 169 468 $) = 2 440 651, 50 $

et non pas 2 953 323 $ comme prétendent les demandeurs;

viii)

En effet, la contestation des demandeurs au sujet de la mauvaise créance

de Medlx Inc. ou des honoraires de TOV ou de Luma (tels qu’établis à

l’Annexe B de la liste des admissions) n’est absolument pas fondée;

[Underlining is that of the original text]

[215] In light of the above, Mainville submits that there is at least a floor-level consensus

among the parties that for the relevant period in question, the value of his shares ought

to be fixed at $2,440,651.50. This he explains is uncontestable. Over and above this

amount, however, Mainville adds three additional sums remain in dispute between the

parties – $86,325 for bad debt for Medlx Inc., dating back to 2013 and accounted for in

2014, $100,000 for the management fees of TOV and $269,383 for the consulting fees of

8480095 Canada Inc. or Luma Consultants – which amounts must either be added or not

to the uncontested amount identified by the parties.

[216] Neither party contests the veracity of three Medlx invoices in the amount of

$28,775 dating back to June and September 2013 and the fact that they add to $86,325.

Mainville explains that he was personally involved in the Medlx affair when he was at

Neopharm, that Medlx had undertaken to reimburse this amount progressively going

forward and as such it should not be included in the calculation of EBITDA.

[217] According to Mainville, the inclusion of this amount as a bad debt in the financial

statements of Neopharm in 2014, when such inclusion is not justified based on his

communications with the representatives of that Medlx and his experience, cannot be

setup against him.

[218] Adler’s response in return is that the inclusion by Neopharm of the amount of

$86,325 as a bad debt in Neopharm’s financial statements for the year 2014 is

uncontestable because it is a business decision best saved for the company itself and no

one else. According to Adler, it is not up to Mainville, who testified at trial as an ordinary

witness and not an expert, to opine on the correctness or not of what is clearly a

company’s business decision.

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[219] I agree with Adler.

[220] The business judgment rule indubitably accords deference to a true business

decision, and in this case, the inclusion or not of a bad debt in a company’s financial

statement is one such decision, so long as it lies within a range of reasonable alternatives.

[221] The business judgment rule reflects the reality that those charged with the

management of the corporation are often better suited to determine what is in the best

interest of a corporation. This applies to a wide range of directorial decisions³⁸as long as

the appropriate degree of care has been exercised in reaching the decision.

[222] In this case, there is no reason to conclude that the amount of $86,325 was

unreasonably included as bad debt in Neopharm’s relevant financial statement. The sum

of $86,325 hence will not be added to $2,169,468.

[223] This brings me to the sum of $100,000 paid annually to Adler by Neopharm as

management fees or simply because he was the chairman and the amount of $269,383

paid by Neopharm to 8480095 Canada Inc. or Luma Consultants for the consulting fees.

Mainville submits that these two amounts must be added to $2,169,468.

[224] Adler is of the opposite view.

[225] Mainville submits that he had discussed this issue with Adler and they had

concluded between them that the calculation of EBITDA would exclude the $100,000

payable to him. Mainville also explains that in his monthly reports that he used to submit

to Adler for review, which reports have not been produced by Neopharm despite

Mainville’s continuous request for them, their availability at Neopharm, and Adler’s

undertaking during his out of court examination to file them, it was clear that this item

would be excluded from the calculation of EBITDA.

[226] In the face of Adler’s lack of cooperation and diligence to file such reports, despite

his undertaking to do so, Mainville requests that a negative inference be drawn from such

failure.

[227] I am of the view that such a negative inference is justified in this instance.

[228] In the absence of any proof to the contrary, and considering Mainville’s testimony

in this regard, which as I indicated at the beginning of this judgment I find to be more

reliable and credible than that of Adler in virtually all aspects, I find that the amount of

$100,000 ought to be excluded in the calculation of EBITDA.

[229] I also do not have any difficulty reaching the same conclusion in the face of Adler’s

refusal to comply with his undertaking, especially since during her testimony at trial, the

controller of Neopharm, France Pelletier, confirmed that there were monthly reports that

³⁸BCE, par. 40. See also: Kerr v. Danier Leather Inc., [2007] 3 S.C.R. 331.

500-11-049463-157

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were prepared and circulated within a week after the end of each month and that copies

of these documents were saved and safeguarded on the main server of the company.

[230] The person responsible for information technology at Neopharm, Benoît Ménard,

also testified at trial in this regard. His very short answer to the question put to him by

Mainville’s lawyer in cross-examination, speaks volumes about the manner in which this

case was conducted from the outset.

Q.

Dans le cas du dossier de Cour avec [Mainville], celui qui nous occupe

aujourd’hui là, il y a des demandes de documents qui ont été faites par

[Mainville] pour obtenir de la documentation. Est-ce que vous avez été

appelé à assister [Adler] pour trouver des documents qui étaient réclamés

par Mainville? Est-ce qu’on vous a fait des demandes en ce sens-là?

R.

Non. Non, du tout.

[Underlining is added]

[231] The amount of $100,000, therefore, shall be added to $2,169,468, resulting in a

total amount of $2,269,468.

[232] This leaves for consideration, the amounts paid or payable to TOV or Luma

Consulting, which Mainville submits must be excluded from the EBITDA calculation and

Adler in return argues the reverse.

[233] According to Mainville, “puisque les actionnaires peuvent choisir de se verser des

montants de plusieurs manières, soit à titre de frais de gestion, de loyer (dans le cas

TOV), de consultation ou dividendes etc.”, this amount should be added to the sum of

$2,169,468.

[234] Adler, on the other hand, submits that the parties never agreed that EBITDA be

calculated without taking into account such payments, and moreover, Mainville has failed

to offer any proof that they did.

[235] As indicated earlier, it is generally considered that after stripping out factors that

are not in a company’s control, EBITDA is used to calculate a company’s valuation for the

purposes of a sale or acquisition of a business. In this case, as Mainville submits, such

payments are in the control of the management of the company and as such they can be

increased or decreased at will to affect a company’s financial health, performance, and

profitability.

[236] I am therefore of the view that the sum of $269,383 for the consulting fees of

8480095 Canada Inc. or Luma Consultants must be added to $2,269,468.

[237] Consequently, the purchase price for 25% of the common shares of Neopharm

shall be 25% ($2,169,468 + $100,000 + $269,383) X 4.5 = $2,856,207.38. For reasons

500-11-049463-157

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that I will elaborate on later in the judgment, I am of the view that both Neopharm and

Adler are solidarily responsible and must pay this sum to Mainville.

[238] Before examining the other claims advanced by Mainville, it is useful to consider,

as Mainville’s lawyers submit in their written arguments, the manner in which Adler

terminated his three-year relationship with the person who turned Neopharm into a

profitable company for principally Adler’s benefit.

[239] The particular facts surrounding this issue shed light on the overall approach of

Adler in this case and support the need, as will be seen later, for further judicial

intervention.

Termination of relationship between the parties

[240] Mainville contends that the termination of his three-year relationship with

Neopharm and the termination of his position as President and CEO of that company by

Adler was done in an unreasonable, high-handed and abusive manner.

[241] I agree.

[242] The following paragraphs explain why.

[243] At trial, Mainville testified that on 28 July 2015, he received an anonymous call

from a person who was familiar with Neopharm, and he was told to look out for Nancy

Lemay, the person responsible for human resources and Ménard, the person in charge

of information technology at Neopharm.

[244] Upon reflection, Mainville then realized that the reason why he was receiving

automatic absence responses for his emails from Ménard was that his emails likely being

directed elsewhere and read by third parties. The next day, he contacted the information

technology service provider of Neopharm and this information was confirmed.

[245] After confronting Lemay and Ménard about the situation, Mainville was then met

by Adler who according to the testimony he offered at his pretrial examination “fired” him

without any explanation or prior written notice as follows:

A.

The day I fired him, I came down. He knew quite well what he did. I came

down, and I said: “My dear friend, it’s unacceptable, and you’re asked to

leave.”

Q.

A.

And that was the only reason you gave?

Yes, I didn’t give – I didn’t even give that. I just said you know quite well.

We won’t discuss it today. You are asked to leave everything here.

[…]

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Q.

At any time prior to terminating [Mainville], did you send him a letter or e-

mail telling him that employees were afraid of him, complaining about him?

A.

If you know the attitude that he gives and the attitude not only […]

Is the answer, no? You didn’t?

Q.

[…]

A.

I mentioned to him verbally that the attitude has to change, but […]

But nothing in writing.

Q.

A.

I was very hesitant in doing so. Gerry Bernstein told it to him also clearly.

Nothing in writing?

Q.

A.

Nothing in writing, I’m not that good in writing. I can’t write long letters. I’m

a simple guy.

[Underlining is mine]

[246] At the close of his pretrial examination, Adler testified that the relationship with

Mainville was terminated for many reasons, but the main reason was that he and

Neopharm realized that “it’s not, it can’t be a marriage. The consultant can’t turn into a

marriage.”

[247] At that time, Adler also testified that he had individuals lined up who would be able

to replace Mainville, and in response to the question, “Did you tell [Mainville] when you

met him on July 29^ththat Nicholas Fortin would be replacing him?”, he answered:

A.

Q.

A.

Maybe I told him […]

Even though you hadn’t hired him?

Yes, I said I have - - he asked me: “Who’s going to do this?” I said: “I have

people lined up, which I will conclude when you leave. You can work with

them, if you want. You can work along with them, if you wish to stay.”

[…]

Q.

You asked [Mainville] if he would stay on to mentor Nicholas Fortin, didn’t

you?

A.

Yes, so I did mention Nicholas. Nicholas only came in a month later or

something […].

[248] Earlier in the examination, Adler was asked:

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Q.

When you met with [Mainville] on July 29^th, 2015, to terminate him, had you

already hired Nicholas Fortin to replace him?

No.

A.

[…]

Q.

A.

You hadn’t hired Nicholas Fortin when you terminated [Mainville]?

You asked the question.

[…]

Q.

A.

So, you hired him by July 30^th?

No, I was told - - I told him I will hire him.

[Underlining is mine]

[249] The examination then continued as follows:

Q.

A.

Q.

A.

Q.

A.

At what point did you start reading [Mainville’s] e-mails?

I don’t remember the dates, but not long.

Several months before terminating?

No, not several months.

Two months?

Just, I had the access to everybody’s e-mails, anyways. So I started

looking?

Q.

A.

What prompted you to start looking?

The story with Zenith. […] The story with Zenith that Mr. Roberge came to

me and apologized and told me that we’ve been playing behind your back,

and it wasn’t me, Luc was pushing me, and I said, hey, what’s going on?

[…]

Q.

Did you tell [Mainville] that you were reading his e-mails?

No.

A.

[Underlining is mine]

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[250] At trial, Adler was confronted with the above facts and in response, he offered the

following answers:

Q.

Is it fair to say since you signed this contract with Mr. Fortin on June 15^th,

2015, that you had already decided by that time to terminate [Mainville]?

A.

Yes. But in certain conditions, hoping as I said in that examination, on that

I hoped that [Mainville] hopefully will be able to work with him, transition

him, train him, and be there with him, as it’s clearly written there upon the

line after, and I said it yesterday too.

Q.

A.

During your examination on discovery, you were asked at what point you

started reading [Mainville’s] emails without his knowledge, and the answer

you gave was that you started reading - - what prompted you to start

reading, and your answer was “The story with Zenith.” Do you recall that?

Yes.

[Underlining is mine]

[251] Adler was then reminded that the meeting with Roberge took place in October of

2015 not in July, and then asked :

Q.

A.

I’m going to suggest to you, Mr. Adler, and I’ll ask you whether you agree,

that the reason you started looking at [Mainville’s] emails in July 2015,

behind his back, is because you had already hired Mr. Fortin on June 15^th?

You knew that Mr. Fortin was going to start working for Neopharm early in

August and you were hoping by looking at [Mainville’s] emails to find an

after the fact justification for terminating him. That’s what I’m suggesting to

you, isn’t that right?

I don’t recall.

[Underlining is mine]

[252] At trial, the fact that Adler was desperately looking for a termination justification for

Mainville also came out during the testimony of Pelletier, who was the controller at

Neopharm from February of 2013 to December of 2015.

[253] According to Pelletier, Mainville was a diligent, polite, hard-working and

demanding executive who was at the office early in the mornings and there again late in

the evenings working hard.

[254] Pelletier also testified that she had a very good working relationship with Mainville

but also kept a professional distance. When asked, what if anything she recalled following

the departure of Mainville, which she was obviously aware of before 29 July 2015 but

could not speak about before he actually left, she answered:

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Q.

[…] Au moment où [Mainville], son contrat est terminé, est-ce que [Adler]

vous demande quoi que ce soit, en lien avec ce départ-là? Donc est-ce

qu’on vous donne un mandat en lien avec le départ de [Mainville]?

R.

Bien, je me souviendrai toujours que quand [Mainville] est parti, [Adler] est

venu peut-être quelques jours après puis il m’a demandé ses rapports de

dépenses. J’ai dit OK, je lui ai donné les rapports de dépenses, puis il dit :

« Y’a rien là-dedans » Fais que j’ai dit : « Non, il n’y a rien, c’est toutes des

dépenses légitimes. » Il m’a dit : « Find me something. » Je lui ai dit : « I

cannot find something, M. Adler, I don’t have nothing. »

[…]

Q.

OK, donc juste revenir […]. Est-ce que c’est la fin de la discussion, ou il y

a d’autres choses qui a été discuté?

R.

Bien moi je lui ai dit : « I cannot find you something, I have nothing in his

expense report, I have nothing in his expense report, I have nothing, you

know, at all. » Puis, donc j’ai sorti mes copies de rapport de dépenses et

je lui ai fait parvenir.

[Underlining is mine]

[255] In summary, I do not think any other fact highlights the unreasonable manner in

which Mainville’s relationship with Neopharm was terminated.

Payment of termination consulting fees

[256] In their Particularized Re-Modified Introductory Motion for Oppression under the

Canada Business Corporations Act and Damages, Re-purchase of Equity and for Unpaid

Remuneration and Bonus dated 12 May 2021, the plaintiffs ask for a condemnation that

the defendants solidarily pay to Luma the consulting fees in the amount of $272,692 for

one year commencing on the termination date of the relationship between the parties.

[257] According to the plaintiffs, all of the early drafts exchanged between the parties

contained a clause that foresaw an indemnity in the event of the termination of the

contract. Some of the drafts, the plaintiffs explain, contained language that there would

not be indemnity if there was termination for cause or for a serious reason.

[258] The final letter proposal of Adler to Mainville dated 16 January 2015 and Mainville’s

response to those proposals a few days later, however, the plaintiffs concede, do not

contain a reference to any remuneration in case of termination, but they argue that at that

time the parties were both conscious that more detailed documents were to follow.

[259] The plaintiffs submit that in 2015, Mainville’s remuneration of $22,724.38 was

being paid without any contestation to 8480095 Canada Inc. or Luma and there was no

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serious cause or reason either existing or invoked, when Adler terminated that

relationship on 29 July 2015.

[260] They add that factually, the agreement with Mainville’s successor, Fortin, was

signed on 15 June 2015 some six weeks before Adler met in person with Mainville to

terminate their relationship without any justified cause or reason, but for the fact that,

according to him, their marriage was not working out. Adler’s attempt to find something

post fact to justify his unilateral termination did not lead to anything either, the plaintiffs

add.

[261] According to the plaintiffs, the application of articles 2125 and 2129 C.C.Q. that

are not of public order, were waived by the parties and Luma has a reasonable

expectation to the sum of $272,692.56 plus taxes.

[262] The defendants do not expend much time in their written arguments on this issue.

Their rather short position is that Mainville and Adler never agreed on such a payment,

there was no reasonable expectation on the part of Mainville or Luma to obtain this

amount and, in any, article 2129 C.C.Q. is applicable and the plaintiff’s claims is neither

reasonable nor meritorious.

[263] I disagree with the defendants.

[264] Articles 2125 and 2129 C.C.Q. read as follows:

2125. The client may unilaterally resiliate the contract even though the work or

provision of service is already in progress.

2129. Upon resiliation of the contract, the client is bound to pay to the contractor

or the provider of services, in proportion to the agreed price, the actual costs and

expenses, the value of the work performed before the end of the contract or before

the notice of resiliation and, as the case may be, the value of the property supplied,

where it can be put into his hands and used by him.

For his part, the contractor or the provider of services is bound to repay any

advances he has received in excess of what he has earned.

In either case, each party is liable for any other injury that the other party may have

suffered.

[265] Article 2125 C.C.Q. does not permit the unilateral resiliation of a contract in order

to avoid payment of services rendered for work that has been done or services that have

been rendered. That article is also subject to the overriding principle of good faith and it

is not of public order. Parties can renounce to its application. Article 2129 C.C.Q. is also

subject to renunciation in whole or in part.

[266] In this case, while the Codicil signed by the parties which contained the essential

but not the only terms of the agreement between them is silent on the issue of termination,

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there is ample other evidence that demonstrates that the parties intended there to be a

termination indemnity payable to Mainville if Neopharm put an end to their relationship.

[267] Mainville’s first email to Adler dated 18 July 2012, confirms that he envisages there

will be a severance payment for 12 months and 24 months if there is a termination of the

relationship between the parties resulting from a sale.

[268] Article 6.1 (d) of the draft 24 July 2012 agreement, also, under the heading

“Termination” foresees that in the event of termination by the Corporation, Neopharm,

“the Consultant” would be immediately entitled to a twelve-month severance pay (base

salary and bonus) and earned and unpaid salary and vacation and business expenses

already incurred at the date of termination.

[269] Another example can be found in the draft Service Agreement that was sent to

Mainville by Wiseman’s office on 22 August 2013. That agreement which was dated

marked on the from page 30 July 2012 foresees in article 12.1 (vi), under the heading

“Termination of the Agreement”, foresaw that TOV Group Inc., would have to pay Luma

Consulting the sum of $250,000 if there was a termination without cause and if

Neopharm’s Net income for the fiscal year immediately preceding termination was at least

one million dollars.

[270] A similar provision can be found in article 12.1 (vi), under the heading “Termination

of the Agreement” of the Consulting Agreement date-stamped on the front page 14

February 2014 and forwarded to Mainville again by Wiseman’s office on 28 April 2014.

All of the early “heads or points of agreement” drafts exchanged between the parties also

contained a clause that foresaw an indemnity in the event of the termination of the

contract.

[271] In my view, therefore, the parties tacitly renounced to the application of articles

2125 and 2129 C.C.Q., they intended there to be a termination pay if that act was to take

place without cause with respect to Mainville and as such they should be held to their

negotiated bargain.

[272] But assuming again another reasonable mind disagreement with the preceding

point, based on the power and discretion available under section 241(3) (j) of the Act, in

particular, I conclude that 8480095 Canada Inc., a complainant and an aggrieved party

as defined under the Act, is entitled to an appropriate fit order compensation, which in

light of the unreasonable manner and unsubstantiated basis that the termination of

Mainville and Luma Consultants took place in this case, I quantify at $250,000 plus

applicable taxes.

[273] It goes without saying but, again for the sake of certainty, I will repeat that the

reason why such an amount is being ordered to be paid, is because I am of the view that

Mainville and Luma Consultants had a reasonable expectation to a certain sum of money

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with respect to such a claim and the most fair and “fit” or justified amount under the

circumstances and supported by the evidence is the amount set out above.

[274] I also say this fully conscious of the fact that further on I decide to grant Luma

Consulting the sum of $22,724.38 for its and Mainville’s consulting fees of July 2015.

2014 bonus

[275] Mainville claims for the year 2014, the outstanding bonus sum of $68,750, which

he indicates was the fruit of a profitable year for Neopharm, on the basis that that sum

was earned and owed to him as admitted and confirmed by Bernstein, in the following

correspondence dated 15 June 2015, with which Adler himself was copied.

Luc,

The bonus calculation per the original agreement stated that a portion of the bonus

is based upon NET INCOME not EBITDA.

For the year ended December 31, 2013 the net income was negative $56,439.

Thus there is no bonus payable on the net income portion as the agreement

required a minimum base net income of $1,000,000. This point was discussed with

you in detail by Neopharm’s lawyer Francine Wiseman.

The maximum bonus was earned in 2013 on the revenue portion since the

revenues were 39% over the prior year for a 17.5% bonus on $250,000 salary +

$43,750. You received your 2013 bonus cheque based on $87,500 not $43,750.

Thus $43,750 is due to Neopharm for the 2013 bonus portion that was overpaid.

In 2014 you earned the 10% bonus on revenues and a 17.5% bonus based on net

income for a total bonus earned in 2014 of $68,750.

Thus Luma is owed $68,750 (2014 bonus) less the repayment of the overpaid

portion of the 2013 bonus of $43,750 for a net amount due by Neopharm of

$25,000 plus applicable GST and QST.

Yours truly,

Gerald Bernstein CPA, CA

[Underlining is mine]

[276] Subsidiarily, Mainville submits that the sum of $25,000 is owed to 8480095

Canada Inc., even though, he is of the view that Adler’s position about the 2013 bonus

calculation is, in his view, wrong and the 2013 bonus is not a part of the current litigation.

[277] Adler, on the other hand, argues among other things that no amount whatsoever

is owed to Mainville as there was no meeting of the minds between them, and in any

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event, an admission, if in fact there was one under the circumstances, cannot be divided³⁹

as set out in article 2853 C.C.Q. that reads:

2853. An admission may not be divided unless it contains facts which are foreign

to the issue joined, the part of the admission objected to is implausible or

contradicted by indications of bad faith or by contrary evidence, or the facts

contained in the admission are unrelated to each other.

[Underlining is mine]

[278] Hence, Adler argues, if there is any amount that is in fact owed, it is by Mainville

to him in the sum of $43,750.

[279] I am of the view that based on the representation made on behalf of Neopharm

and Adler by Bernstein, and pursuant to article 2853 C.C.Q., Luma Consulting or 8480095

Canada Inc. had a reasonable expectation to the payment of such sum and it must be

paid the sum of $25,000 plus the applicable taxes.

July 2015 unpaid consultation fee

[280] The plaintiffs submit that the sum of $22,724.38 is owed to Luma Consulting for

the work it carried out for Neopharm during the month of July 2015. They remind the Court

that Neopharm’s sales for the month of July 2015 was more than one million dollars and

Mainville was still in the employ of Neopharm at the time.

[281] The defendants contest this amount, principally on the basis that Mainville again

was not spending his entire time for the benefit of Neopharm, that during the month of

July 2015, Mainville was on vacation and that is why he claimed only one-half of the

mileage compensation for his trip to Toronto to participate in, among other things, his

father’s funeral.

[282] I disagree.

[283] In my view the sum of $22,724 is owed to Luma Consulting as Mainville was still

working for the benefit of Neopharm in July of 2015, and the significant sales of Neopharm

during that period equitably justify the payment of that monthly sum to Mainville, who was

taken, as indicated earlier in this judgment, by surprise on 29 July 2015 when his

relationship of three years was unilaterally terminated by Adler.

[284] The defendants, therefore, owe Luma Consulting or 8480095 Canada Inc. the sum

of $22,724 plus applicable taxes.

³⁹See: Lavery De Billy c. Boisbraind (Ville de), 2003 17014 (QCCS), par. 43.

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Certain unpaid expenses

[285] The plaintiffs’ request the reimbursement of the sum of $1,580 for certain

expenses incurred during the months of June and July 2015. In support of such a claim,

they submit a document entitled “Compte Dépenses-LUMA Capital (8480095 Canada

Inc.) juil-15”, which sets out a description of certain expenses apparently incurred by

Luma Consulting but without any supporting documents.

[286] The only other information that is offered to the Court in this regard is the testimony

of Mainville who in response to a brief question answers:

Q.

R.

Est-ce que vous confirmez avoir encouru toutes ces dépenses-là?

Oui.

[287] In my view, with respect, the plaintiffs have not satisfied the burden of proof

incumbent upon them in this respect, and therefore, their claim for the expenses in

question is rejected.

American Express (AMEX) points

[288] Mainville requests the reimbursement of the equivalent of 557 404 American

Express (AMEX) points, which according to his testimony adds to $6,254.33 at the rate

of $1.25 per 100 points. While this may be so, once again, in my view, Mainville has not

satisfied the burden of proof that is incumbent upon him to demonstrate that the AMEX

points in question translate into the dollar amount requested.

[289] Even though I disagree with Adler’s pretensions that Mainville is not entitled to the

points in question because he was not a 25% stakeholder of Neopharm, I do not propose

to address this issue any further other than to say that according to the controller of

Neopharm, Pelletier, Adler and Mainville shared the AMEX points obtained on the

company’s credit card on the basis of 75 % - 25 %.

Q.

[…] Donc, est-ce que vous êtes au courant de la façon dont Neopharm

traitait la question des points récompenses AMEX, pour les achats

effectués par la société?

R.

[…] Donc, c’était 25 % pour [Mainville], puis 75 % pour [Adler]. C’était selon

ce qu’on m’avait dit que l’entente là, effectivement, parce qu’il devait avoir

une entente là, ce que j’avais entendu là, il devait avoir une entente de

partenariat de cette façon, donc on l’avait mis de cette façon.

[…]

[290] Despite the fact that Mainville’s claim in this regard is rejected, the above exchange

is once again additional demonstration of how the parties themselves viewed their

relationship as shareholders.

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Unpaid management fees

[291] In their Particularized Re-Modified Introductory Motion, the plaintiffs claim an

accrued and unpaid management fee representing 25% of adjustments made to reduce

net earnings before taxes of Neopharm until December 31, 2014, in the sum of $135,000

plus GST/PST to be paid to Luma as per an invoice dated 8 June 2015 from “Luma Capital

or 8480095 Canada Inc.” to Neopharm.

[292] Filed as an exhibit in the court record, there is indeed an invoice from Luma Capital

or 8480095 Canada Inc. to Neopharm that adds to $135,000, comprised of “special

consulting fees” of ($40,000 + $40,000 + $20,000 + $15,000 = $115,000), expense

reimbursements of $12,500 and “payment driving KM” of $7,500.

[293] The plaintiffs submit that in the context of using the losses that were incurred in

the Warnex Analytical acquisition by Neopharm in 2013, in an email dated 17 October

2013, Mainville and Adler agreed that “using a 25-75% split, [they would] allocate a further

[$160,000] of expenses to Neopharm. This means [$120,000] for TOV and [$40,000] for

Luma.”

[294] Moreover, the plaintiffs submit that on 6 March 2015, more than a year later,

Mainville wrote to Adler as follows:

Hi Morris

Just completed a meeting with KPMG to finalize the November 30, 2013 and

December 31, 2013 statements, and also plan for 2014 […]

Bottom line – we have to [work] on a strategy to […]

1) Recover all of the income tax paid as at March 2013, and

2) Set the stage for a logical increase in our inventory in 2014, and 2015 to adjust

the book level to something closer to reality […] (currently we have about

[$800,000] understated)

Based on the tax planning above we need to increase out losses by [$60,000] in

2013 to help recover 100% of the paid income taxes for the previous period

considering our projected profitability – this is the last opportunity for us to recover

paid taxes […]

So I suggest a [$45,000] rental adjustment to TOV and a [$15,000] consulting fee

payable to Luma […]

Let me know if you are OK – or if you want to discuss.

Luc

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[295] In response, the plaintiffs submit, Adler’s short response was “K”, which he then

during cross-examination at trial qualified as “OK”.

[296] In their plan of arguments submitted at trial, the plaintiffs argue:

232. Par ailleurs, le 8 juin 2015, soit environ 6 semaines avant la résiliation de

son contrat, Mainville a transmis à Neopharm une facture qui reflète les

ajustements entendus entre les parties pour un montant total de 135 000

$ plus TPS et TVQ.

233. En consultant les états financiers de 2014, on constate aussi que les

dépenses de loyer de Neopharm pour 2013 (275 jours seulement) étaient

de 524 988$, comparativement à 350 185 $ pour 2014.

234. Comme l’a expliqué de façon non-contestée Mainville, cette différence

importante entre les loyers de 2014 et de 2015 s’explique par la

planification fiscale mentionnée plus haut.

235. Quant à Mainville, le projet d’états financiers pour l’année 2014 préparé

par KPMG en mai 2015 prévoit à la page 2 un montant de 1 888 056$ pour

le volet « Selling, general and administrative expenses » (les « dépenses

SG&A »).

236. Or, les états financiers finaux de 2014, rédigés à la suite du départ de

Mainville, mentionnent désormais un montant de 1 700 663 $ pour les

dépenses SG&A, soit une différence de 187 393 $.

237. Mainville a témoigné (de façon non-contredite) que cette différence entre

les deux documents au niveau des dépenses SG&A s’explique

nécessairement entre autres par le retrait des frais de gestion qui sont dus

à 8480.

238. Par conséquent, la somme de 135 000 $ plus TPS et TVQ est due à

Mainville, tel que convenu entre les parties.

[Underlining and bold emphasis is of the original text.]

[297] In response, in addition to arguing again that Mainville was not a shareholder of

Neopharm, Adler submits that the invoice submitted by Mainville is fictitious because no

corresponding work was ever done for it and Neopharm never benefitted from such an

invoice and it never included it in its financial statements. Therefore, Adler adds, Mainville

is not entitled to such a sum.

[298] I agree with the defendants.

[299] In my view, the plaintiffs and Mainville in particular, have not succeeded in

demonstrating on the balance of probabilities that there was, either an agreement

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between the parties on this subject or that Mainville had a reasonable expectation to be

compensated for it.

[300] During his examination for discovery on 11 May 2016, in response to questions

from Adler’s lawyers on this subject, Mainville answers:

Q.

Avez-vous généré une facture. N’est-il pas exact de dire qu’il n’y a aucun

service qui a été fourni par Luma à Neopharm en rapport, en lien avec cette

facture?

R.

Luma avait une entente de consultation qui était prévue et si on bonifiait

cette entente-là de gré à gré comme ça a été le cas, on faisait une

facturation additionnelle comme ça a été le cas pour la bonification. Donc

c’était accepté par Morris, révisé par Gerry, donc tout le monde était

consentant.

[Underlining is mine]

[…]

[301] At trial, in response to questions from his own lawyers, in trying to explain what

his own lawyers qualified as “une preuve un peu lourde” that they would attempt to clarify

later in their plan of arguments, Mainville explained:

R.

Évidemment, alors que j’étais en poste, la facture était valide et

comptabilisée pour 2014, et aurait été payée en 2015, et moi, je l’avais

déclaré dans mes revenus de 2015. Mais en […] me demandant de quitter,

en me forçant à quitter, on a éliminé le 120,000, je [ne] pense pas que le

135,000 était reflété à ce moment-là, mais il y avait 120 000 qui était

reflété, plus mon bonis de 60 000. Donc, 188 égal 120 plus 68, qui était le

boni reconnu par la compagnie pour 2014. Donc, en finalisant les états

financiers, on a enlevé les chiffres qui avaient été comptabilisés pour les

ajustements et mon boni.

[Underlining is mine]

[302] Hence, in my view, at best, the evidence offered by the plaintiffs with respect to

this claim is confusing and unsubstantiated on the balance of probabilities.

[303] This claim, therefore, is rejected.

2014 and 2015 unpaid dividends

[304] The plaintiffs claim the sum of $191,497.51 as unpaid amounts for dividends which

would have been paid in 2015 for the 2014 year end on the basis of 25% of common

equity in Neopharm. In their plan of arguments, the plaintiffs submit that all of the draft

agreements circulated between 2012 and 2015 foresaw that 35% of the revenues of the

company will be distributed annually between the shareholders. Such a distribution, they

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add however, was conditional on the loans of Neopharm borrowed from the other Adler

connected companies, at rate of 12% annually, having been paid back.

[305] Mainville submits that as early as 2013, he was able to secure more advantageous

loans from financial institutions, which did not require personal guarantees and would

have been available in exchange for a common immoveable hypothec on the building

from which Neopharm operated in Blainville.

[306] According to Mainville, Adler unreasonably refused such loans preferring instead

to collect the 12% interest on the loans payable to him. In the face of such a position,

Mainville claims unpaid dividends in the amount of $191,497.51 for the year 2014 and

$57,269.41 for the year 2015. Mainville submits that the defendants do not contest the

calculation and raw data used by him to reach the above numbers but they do contest the

validity of such claims.

[307] At his end, Adler confirms that he does not contest the calculation used by

Mainville to reach the numbers he presents but argues that it was Mainville who refused

to accept a loan offered to Neopharm by the TD Bank to reimburse TOV until such time

as the bonuses that were supposedly payable to him were paid.

[308] In my view, once again, there is not enough probative evidence to support a claim

of approximately $250,000 of dividends advanced by Mainville. Among other factors, the

amount of time the plaintiffs allocated to prosecute such a claim is demonstrative of its

validity and strength. There is also virtually no documentary support that lends a hand to

such a claim.

[309] Unfortunately, such a claim, like Adler’s counterclaim, qualifies as one that litigants

would advance with the hope and prospect of giving the court claims to dwell upon so as

to somehow indirectly strengthen the validity of their other claims or contentions. Such an

approach is not to be encouraged or commended.

[310] In addition to protracting the litigation and any possible amicable resolution

between the parties, it requires the court to expend time and energy in order to adjudicate

a claim that should have perhaps never been brought forward in the first place.

[311] This said, in this case, Mainville’s claim for the total sum of $248,766.92 for

dividends for the years 2014 and 2015 is rejected for the failure of meeting the required

standard of proof.

Moral and Punitive damages

[312] The plaintiffs claim the sum of $100,000 for damages due to abusive business

practices and termination of engagement, bad faith, aggravation, stress caused to

Mainville, damages to his reputation and moral, exemplary and punitive damages. In his

plan of arguments, Mainville requests that the Court condemn solidarily the defendants

to pay the sum of $75,000 in punitive and $25,000 in moral damages.

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[313] Mainville’s lawyers also submit:

250. À cet égard, Mainville a bien expliqué à quel point il avait la société

Neopharm « tatouée » sur le cœur, et combien il a été difficile d’être forcé

de devoir quitter son équipe sans avoir même la chance de leur dire au

revoir.

251. Par ailleurs, les circonstances du départ forcé de Mainville sont

particulièrement troublantes.

252. Ainsi, dans les semaines qui précèdent la résiliation, son co-actionnaire

Adler lit sans vergogne les courriels de Mainville, tout en organisant des

rencontres entre Fortin, Lemay et Pelletier dans son dos.

253. Il s’avère aussi qu’Adler n’a posé aucun filtre quant à la lecture des

courriels de Mainville.

254. À cet égard, il consulte non seulement des courriels échangés entre

Mainville et son fiscaliste personnel (protégé par le secret professionnel

enchâssé à l’article 9 de la Charte des droits et libertés de la personne),

mais il réfère à ces échanges au paragraphe 218 de la Défense et

demande reconventionnelle, et dépose cette correspondance comme

pièce (D-40) au dossier de la Cour.

255. Au procès, l’avocat des Défendeurs a d’ailleurs référé abondamment à ces

échanges confidentiels entre Mainville et son fiscaliste et à la répartition

personnelle des revenus de Mainville/8420 (qui n’ont absolument rien à

voir avec Neopharm) pour tenter de discréditer Mainville et d’affecter sa

crédibilité.

256. En contre-interrogatoire, Adler a même avoué avoir consulté les échanges

de courriels échangés exclusivement entre Mainville et Me Stein.

257. Bref, Adler a pu lire la correspondance entre la partie adverse et son

procureur en lien avec le présent litige, ce qui viole non seulement la

sphère de confidentialité de Mainville protégée par le secret professionnel,

mais également les règles de justice, d’équité et de fair-play les plus

élémentaires.

[…]

[314] Adler’s response to such claims is a recycled and repeated one. He contends that

there was enough and appropriate justification to unilaterally terminate the relationship

with Mainville because, among others, according to Adler, there were misrepresentations

by Mainville that he would abandon all of his other activities and focus exclusively on the

success of Neopharm, which he never did and moreover, there were Mainville’s

unreasonable postures and schemes in trying to modify the definition of words such as

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“net income” that were unjustifiable and could, according to the accountant Bernstein at

least, be qualified as fraudulent.

[315] I have already addressed at length the issues of unilateral termination and

exclusivity earlier in this judgment and do not propose to revisit them again at this point.

I also do not propose to spill any further ink on Mainville’s various positions and posturing

during the relationship between the parties. Suffice it to say that Mainville was not always

without reproach. As a rather seasoned businessman, Mainville should have at times

known better.

[316] This said, I do not think that the overall manner in which Adler proceeded in his

relationship with Mainville and in this case was fair and justified. I have also explained

this point in detail above. Adler’s intrusion in Mainville’s communications with his lawyer

and his personal affairs was particularly egregious. That kind of impingement in anyone’s

personal and private life without their clear and unequivocal consent is unacceptable and

wrong.

[317] A fundamental right, without which, the administration of justice will, and not may,

fall into disrepute, and the rule of law in a free and democratic society irreparably afflicted,

to paraphrase the words of the Court of Appeal, the right to consult a lawyer in confidence

under the protection of professional secrecy, is one of the pillars of a fair, just and efficient

system of justice.⁴⁰

[318] I am, therefore, of the view that there must be adequate consequences for Adler’s

behaviour. Under the circumstances and taking stock of the preceding facts, I am of the

view that the sum of $25,000 as punitive damages is justified. Had Mainville not advanced

some of the unmeritorious claims above, I may have been open to granting a larger sum

in this regard.

[319] This is not the first time that Adler is being condemned to pay punitive damages.

In a decision filed before the Court by the plaintiffs, Sansfaçon, J., as he then was at the

Superior Court (now a judge of the Court of Appeal) condemned Adler to pay punitive

damages in the following terms:

[2]

Les faits sont les suivants.

[3]

Après plusieurs demandes en ce sens, M. Adler s’est soumis à un premier

interrogatoire le 4 juillet 2013. Les extraits des notes sténographiques consultées

par le Tribunal permettent de constater que M. Adler s’est, à un grand nombre

d’occasions, montré évasif et qu’il tente de dévier les questions et fait tout pour ne

pas y répondre.

[4]

Un deuxième interrogatoire tenu le 4 novembre 2014, que le Tribunal a lu

en entier, est de cette matière susceptible de passer aux annales à titre d’exemple

⁴⁰Schenker du Canada ltée c. Groupe Intersand Canada inc., 2012 QCCA 171, par. 39.

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de l’ingéniosité qu’une personne peut déployer afin d’éviter de répondre aux

questions légitimes, pertinentes et légales qui lui sont posées.

[5]

Par exemple, M. Adler fait fi durant un long moment de connaître une

personne à qui il a lui-même transmis un document, tout simplement parce que le

nom de cette personne tel qu’inscrit à la requête introductive d’instance comporte

une faute de frappe, et ce, alors que le procureur des demanderesses lui montre

une copie de l’envoi.

[6]

M. Adler s’objecte lui-même et refuse de répondre aux questions légales

qui lui sont posées malgré l’invitation de son procureur d’y répondre, dans tous les

cas sans motifs valables, argumente avec le procureur des demanderesses et

érige de fait un barrage systématique à toutes les questions qui lui sont posées.

[…]

[8]

Ceci dit, le principal responsable du temps perdu par ces agissements

abusifs est évidemment M. Adler. […] Le Tribunal souligne ici qu’il est d’avis que

M. Adler, un homme d’affaires avisé, n’est pas la personne naïve qu’a tenté de le

faire paraître son procureur lors des plaidoiries, alors qu’il tente de l’excuser. La

transcription des interrogatoires dit tout à cet égard.

[9]

[…] le comportement de M. Adler puisse être assimilé à un refus de se

soumettre à l’interrogatoire, […]

[10]

[…]

[16]

[…] le comportement de M. Adler était à la fois vexatoire et dilatoire, […]

Par conséquent, le Tribunal, s’appuyant sur les pouvoirs qui lui sont

conférés par l’article 54.4 C.p.c. qui lui permet de condamner une partie à payer

des dommages-intérêts en réparation du préjudice subi par une autre partie, mais

aussi d’attribuer des dommages-intérêts punitifs, et sur l’article 46 du Code de

procédure civile qui l’autorise à imposer d’office une réprimande à une partie,

condamnera M. Adler à payer aux demanderesses 657,08 $ en remboursement

des frais de sténographie du 25 juillet 2013, 863,59 $ en remboursement des frais

de sténographie du 4 décembre 2014, les frais de huissiers de 33,22 $ et à payer

au cabinet Lex Group Inc. la somme de 8 000 $.

[…]

[320] As for Mainville’s request for moral damages, I think that such a condemnation is

neither justified nor supported by the facts in this case. No real proof in this regard was

placed before the Court either. Such a claim for moral damages, therefore, is rejected.

Plaintiffs’ claim for abuse

[321] The plaintiffs request that the defendants’ so-called non-performance and loss of

opportunity counterclaim initially filed for $1,017,639.39 and then reduced on 16 May

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2017 to one-half of that amount, or $508,819.70, and anchored principally in their

pretension that their relationship with Mainville was an exclusive one be dismissed and

declared abusive.

[322] It is useful to recall that according to the defendants, in consideration for the sum

of just over a million dollars, the plaintiffs were to work exclusively for the defendants and

devote 100% of their time and efforts to them, seeking, among other things, new clients,

expanding the business and strengthening the existing contractual relationships of

Neopharm.

[323] The defendants also argue, without much probative proof, that plaintiffs’ extensive

work with third parties during the years 2012, 2013, 2014 and 2015 interfered with their

contractual obligations to such an extent that it justified the resiliation of their relationship

with Mainville and his company, and entitling them thereby to receive damages in the now

revised amount of $508,819.70.

[324] One such example, and there are others, which I will not get into for reasons

explained at length before, is Mainville’s involvement in an entity known as “Fitt n Lean”

with respect to which Adler fished for something – anything – to hold against Mainville in

his emails and Adler’s lawyers filed hundreds of pages of email exchanges involving

Mainville trying to force a search for a needle in a haystack but concluded with nothing

more than a tempest in a teapot.

[325] Adler’s own submissions well summarize what really happened:

xiii)

[Adler], qui pendant tout ce temps, croira que [Mainville] a mis fin à son

implication dans [Fitt n Lean] (sous réserve de son poste d’administrateur),

ne découvrira le pot aux roses qu’après la terminaison du contrat de

consultant de [Mainville], suite à l’examen des courriels de ce dernier.

[Underlining is mine]

[326] Hence, Adler who was all along satisfied with the positive direction that the

company was taking and the growth and expansion that it was experiencing, did not really

have much to complain of while Mainville had control of Neopharm’s helm, but started to

look for something to try and justify his unilateral termination of Mainville’s position after

the fact.

[327] And if this is not enough, I accept the plaintiffs’ submissions, when they advance

that:

284. Ces allégations sont totalement non fondées.

285. Encore une fois, les Défendeurs font appel à une preuve sélective et

déforment la réalité.

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286. Dans un premier temps, il importe de souligner que la preuve non

contredite démontre que tous les revenus reçus de Mainville et des sociétés qui

lui sont liées entre 2013 et juillet 2015 proviennent exclusivement de Neopharm, à

l’exception du modeste salaire versé pour des cours donnés par Mainville à

l’université McGill (à la connaissance d’Adler) et un montant d’approximativement

500 $ pour un mandat de KPMG mené en 2012, mais payé en 2013.

287. De plus, la preuve révèle qu’au cours de cette période de trois ans,

Mainville n’a été partie à aucune transaction et n’a pas investi dans quelque projet

que ce soit, à l’exception d’un investissement minoritaire et non-opérationnel dans

un projet de course dans le bois (qui n’a évidemment rien à voir avec Neopharm),

à la connaissance d’Adler.

[Underlining is of the original text]

[328] Again, in light of the conclusions reached above, including the finding that the

agreement reached between the parties was a non-exclusive one and the stark financial

situation in which Neopharm found itself before and after the arrival of Mainville, I find that

the non-performance and loss of opportunity damages claim advanced by the defendants

is not only absurd but abusive.

[329] I also find that nothing is more demonstrative of this point than the exchange that

took place between Adler, his lawyer and the plaintiffs’ lawyer during Adler’s pretrial

examination, where he assertively advanced:

Q.

You have filed a Defence and counter lawsuit or Cross-Application to the

lawsuit filed by [Mainville], correct?

A.

Yes.

Q.

And you are requesting that the Court condemn [Mainville] and [Luma] or

8480095 Canada [Inc.] to pay a million seventeen thousand six hundred

and thirty-nine dollars ($1,017,639.00) to you and to [Neopharm]. That’s

right?

A.

Yes.

Q.

And would I be right that that is every cent that [Mainville] was paid for the

three years that he was president and CEO of Neopharm?

A.

Every cent is a very strong word, but again, whatever has been paid to him

is questionable. Plus, even the expenses that were lately discovered that

he requested and even got paid for in many cases are also very

questionable. So, to the word “every cent”, may be there’s more and maybe

there’s less, but that’s approximately what he got paid.

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Q.

To be clear, your intention is to have the Court order [Mainville] to return

everything that he was paid for the three consecutive years that he served

as president and CEO of Neopharm?

A.

Yes.

Q.

You are asking the Court to condemn [Mainville] to pay back the consulting

fees or salary that he was paid as president and CEO, the bonuses that he

was paid, and the expenses that he was paid.

A.

Yes, well, unless […]

Me Alain Chevrier,

Attorney for Defendants:

For now, the expenses are not included in the amount.

[Underlining is mine]

[330] In Biron c. 150 Marchand Holding inc.⁴¹in the context of interpretation and

application of article 342 of the Code of Civil Procedure (C.C.P.), Chamberland J.A. made

the following observations about article 19 C.C.P., in particular:

Les obligations et devoirs prescrits par le législateur dans les articles 19 et 20

C.p.c., ainsi que dans la disposition préliminaire, sont bien évidemment fort

valables, mais il ne faut pas oublier qu’ils s’inscrivent dans une dynamique où les

avocats impliqués ont (généralement) plusieurs dossiers à gérer en même temps.

L’idéalisme est de mise dans la formulation des principes et des objectifs à

atteindre, mais le réalisme l’est tout autant dans leur application quotidienne, au

risque, autrement, de compliquer sérieusement, et inutilement, le travail des

avocats et de les exposer, de même que les parties qu’ils représentent, à des

demandes de ce genre dans la quasi-totalité des dossiers. En d’autres mots, il

convient de viser haut dans la formulation des principes, mais de viser juste dans

leur application.

[331] I do not think there is anything unjust or unfair here to conclude that the defendants

counterclaim was, as I indicated earlier, not only absurd but abusive. Based on the above

description, a similar conclusion is also readily reached with respect to the manner in

which the defendants behaved in this case both before and after the litigation was

commenced.

[332] Article 19 C.C.P. requires, demands, obliges and directs all parties to “be careful

to confine the case to what is necessary to resolve the dispute” and “refrain from acting

with the intent to cause prejudice to another person or behaving in an excessive or

unreasonable manner, contrary to the requirements of good faith.”

⁴¹2020 QCCA 1537.

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[333] The last paragraph of article 19 C.C.P., in echo of the first paragraph of article 1

C.C.P., encourages parties, at any stage, without necessarily stopping the progress of

their case, to “agree to settle their dispute through a private dispute resolution process or

judicial conciliation”.

[334] While the consideration of such a mechanism is not optional before referring their

dispute to the courts, once the matter has been referred to court, they may by mutual

agreement opt for a private dispute prevention and resolution process. Had the parties

benefitted from such a possibility, they would not have found themselves where they have

today.

[335] Regrettably, they did not. As the plaintiffs did not claim a specific amount under

this rubric, I will take into consideration the above findings when I address the issue of

professional fees.

Personal liability of Adler

[336] The plaintiffs seek the personal liability of Adler on the basis of his conduct

throughout his dealings with them and the abusive manner in which he has treated

Mainville, in particular, by wrongfully withholding the Neopharm shares owed to him and

terminating Mainville’s relationship without any proper notice or justification.

[337] Adler in turn qualifies the plaintiffs’ claims in this regard as abusive and devoid of

any merit. According to Adler, not agreeing with Mainville on certain contractual elements

does not constitute actions or a fault, such that the application of section 241 of the Act

may be triggered.

[338] At issue, therefore, is whether or not the Court should exercise its remedial powers

under section 241 (3) of the Act to issue an appropriate “fit order” to hold Adler personally

liable for oppression.

[339] In my view, this is a case that requires the Court to exercise its remedial powers

under article 241 (3) of the Act, pursuant to the principle of good faith or article 1457

C.C.Q., which was not briefed by the parties in this case. As indicated at the beginning of

this judgment, I do not plan to examine this provision.

[340] My analysis, instead, will only focus on the application of article 241 (3) of the Act.

As explained by the Ontario Court of Appeal in Budd⁴²close to a quarter of a century ago,

and upheld and cited with approval by the Supreme Court⁴³some twenty years later, in

other words, five years ago, a director or officer of a corporation may be personally liable

for a monetary order “if that director or officer is implicated in the conduct said to constitute

the oppression and if in all of the circumstances, rectification of the harm done by the

⁴²See : Note 4.

⁴³Wilson, par. 30.

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oppressive conduct is appropriately made by an order requiring the director or officer to

personally compensate the aggrieved [party]”.⁴⁴

[341] In other words, the oppressive conduct must be attributable to the individual

director or officer because of his or her action or conduct. And moreover, the order must

be fit in all of the circumstances.⁴⁵The first requirement alone is an inadequate basis for

holding a director personally liable. The second prong requires that the imposition of

personal liability be fit in all the circumstances.⁴⁶

[…] Fitness is necessarily an amorphous concept. But the case law has distilled at

least four general principles that should guide courts in fashioning a fit order under

s. 241 (3).The question of director liability cannot be considered in isolation from

these general principles.

[49]

First, the oppression remedy request must in itself be a fair way of dealing

with the situation.

[Underlining is mine]

[342] As explained in Wilson, citing then author Markus Koehnen, now an Ontario

Superior Court judge, cases across Canada appear to suggest a number of situations in

which the personal liability of directors may be appropriate. Among them are, where a

director obtains a personal benefit from his or her conduct, or where a director misuses a

corporate power. The plaintiffs also refer to a Quebec Superior Court case that considered

abusive the conduct of administrators who refused to respect their undertaking to issue

shares.⁴⁷These situations are indicia of fairness considerations used by the courts to

address oppressive, unfair or unjust behaviour.

[343] As also explained in Wilson, while the presence or absence of control may be

considered as a factor in determining whether it is fit to impose personal liability, it is not

an absolutely necessary criterion. Moreover, while a director’s bad faith may militate

strongly in favour of holding him or her personally liable, bad faith is not a necessary

condition to imposing personal liability.

[344] To continue with the three remaining criteria:⁴⁸

[50]

[…] The appropriateness of an order under s. 241(3) turns on equitable

considerations, and in the context of an oppression claim, it would be impossible,

and wholly undesirable, to define the circumstances in which these considerations

may arise. […] But personal benefit and bad faith remain hallmarks of conduct

properly attracting personal liability, and although the possibility of personal liability

⁴⁴Ibid.

⁴⁵Ibid., par. 31.

⁴⁶Ibid., par. 48.

⁴⁷Goupil c. 9323-7063 Québec Inc., 2020 QCCS 3415, par. 60.

⁴⁸Ibid.

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in the absence of both of these elements is not foreclosed, one of them will typically

be present in cases which it is fair and fit to hold a director personally liable for

oppressive corporate conduct. […]

[53]

Second, […], any order made under s. 241(3) should go no further than

necessary to rectify the oppression. […] This follows from s. 241’s remedial

purpose insofar as it aims to correct the injustice between the parties.

[54]

Third, any order made under s. 241(3) may serve only to vindicate the

reasonable expectations of security holders, creditors, directors or officers in their

capacity as corporate stakeholders. […] Overall, the third principle requires that an

order under s. 241(3) remain rooted in, informed by, and responsive to the

reasonable expectations of the corporate stakeholder.

[55]

Fourth – and finally – a court should consider the general corporate law

context in exercising its remedial discretion under s. 241(3). As Farley J. put it,

statutory oppression can be a help; it can’t be the total law with everything else

ignored or completely secondary. […]

[56]

Under s. 241(3), fashioning a fit remedy is a fact-dependent exercise. […]

[57]

The four principles articulated above therefore serve as guideposts

informing the flexible and discretionary approach the courts have adopted to orders

under s. 241(3) […].

[Underlining is mine]

[345] In this case, I am of the view that Adler was directly implicated in the oppressive

conduct against the plaintiffs and in all of the circumstances, rectification of the harm done

by the oppressive conduct of Adler is appropriately made by an order requiring him to,

personally and along with the company, compensate the aggrieved parties, Luc Mainville

and 8480095 Canada Inc.

[346] As I indicated before, what is most telling about this case is that all along the way

during the three year relationship between the parties, Mainville did what he had to turn

Neopharm into a performing and profitable company and Adler never complained about

the increase in sales and Neopharm’s financial performance during the relevant years in

question but when it was advantageous for Adler to terminate his relationship with

Mainville he did so without any scruples.

[347] The evidence filed indicates that as at 30 November 2013, Neopharm’s revenue

was around 7 million dollars. A few months later, and just shy of a year, that amount had

increased by an additional million. As at 31 December 2014, Neopharm’s revenue was

hovering around 11.5 million and its expected income for 2015 was projected to be around

13 million. That is when Adler dismissed Mainville without any notice or justification.

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[348] And, moreover, for reasons of personal gain, and I will add in not good faith, Adler

never paid the amounts that were owed to the plaintiffs and instead tried to find

“something” – “anything” – to hold against Mainville.

[349] Again, as I indicated earlier in this judgment, nothing is more indicative of what

took place in this case than a letter produced by the defendants, themselves, in which

Adler’s lawyer, Wiseman, writes: