(Judgment Day profiles business-related Alberta court decisions.)
A promise is a promise, and breaking it may have legal repercussions, the Alberta Court of Appeal concluded in a recent dispute.
Back in 1995 and 1997, Aaron Shtabsky made two venture capital investments on the advice of Phil Shragge, the director and shareholder of Western New Ventures Capital Corp. Shtabsky, through his company Peter Pond Holdings Inc. (PPHL), invested a total of $170,000 in Madenta Communications Inc. and Diversity Corporation, and received shares in exchange.
Shtabsky contends that over coffee in 1995, Shragge agreed to buy back PPHL’s Madenta shares whenever Shtabsky chose to sell. Shtabsky also claims that in a meeting in 1997, Shragge agreed to buy back PPHL’s Diversity shares at Shtabsky’s option. Neither agreement was in writing, and Shragge denies he ever made such a promise.
In a suit heard in the Court of Queen’s Bench in Edmonton in July 2002, Justice D. C. Read found a promise had indeed been made, but that it “was not intended to create legal obligations.” Shragge was off the hook for the buyback deal, and awarded costs.
Shtabsky, a former lawyer, was not satisfied with that decision, and appealed the ruling against PPHL. This time PPHL won, but the reasoning for the overturn was not based on contract law. Instead, the appeal court found Read was not supplied with evidence to support her original judgment.
She had ruled that a promise was made, but it was not intended to create legal obligations. The defence, however, had actually argued that the promise was never made at all, and did not provide evidence to show the promise was not meant to be legal. As a result, the appeal court ruled to “quash the trial judgment for want of proper pleadings and evidence.”
Regardless of the reasoning, PPHL won its case, and was awarded damages for breach of the promises made.
FIX THE PIT
An Alberta gravel company had declared bankruptcy.
But what to do with the pieces left behind? The gravel could be sold, but who should fix or “reclaim” the land? These were questions answered by the Court of Queen’s Bench in Edmonton this month.
Roadstar Aggregates Inc. had a lease for a gravel pit on lands owned by Nancy and William Kovacs, and a development permit from the County of Lac Ste. Anne, secured by a $38,000 Capital City Savings and Credit Union Ltd. line of credit.
When Roadstar declared bankruptcy, the sale of its stockpiled gravel netted $76,000, which was placed into a trust account. But the county and KPMG Inc., the trustee in bankruptcy, were unable to agree on how the proceeds from the gravel would be dealt with, or who should reclaim the land.
On October 8, Alberta Environment wrote letters to KPMG and Roadstar, directing that as operators, they are responsible for reclamation of the land (a task estimated to cost around $112,000.)
KPMG filed an application for a court order specifying gravel proceeds be given to Capital City Savings, and “if the county has an issue with them (KPMG), then they should sue.”
On October 21, the court found that as receiver and bankruptcy trustee, KPMG is responsible for the reclamation. The court also denied giving the gravel proceeds to Capital City Savings, and awarded costs to the county.
RILED LANDOWNER
Alliance Pipeline Ltd. has an easement across a section of land in Alberta owned by Vernon Joseph Smith. According to an affidavit, Alliance has the right to use those lands to construct and maintain a pipeline. The pipeline was built about 1999, but Smith and Alliance have not agreed on access, workspace and compensation issues.
On June 6, 2003, Alliance sent a letter to Smith stating that the company intended to undertake reclamation works on the easement lands beginning June 9, and that Alliance understood that Smith had “indicated an intention to prohibit Alliance from accessing its right-of-way.” In response to the letter, according to a recent court judgment, Smith made threats against an employee of Alliance.
Smith “said words to the effect that if Alliance set foot on his property he would sue Alliance, and that if Alliance tried to bring the Mounties in, he would take a few of them with him if he ‘goes down.’ ”
On July 10, 2003, Alliance applied for an injunction prohibiting Smith from interfering in any way with its rights to have unhindered access onto the easement lands.
However, Smith’s counsel argued that when Smith was referring to “my lands,” it was not clear he was speaking of the easement, but rather to his private lands.
The Court of Queen’s Bench denied the application.
CLARIFICATION: A Judgment Day article published October 16 detailing an airport land development dispute should have read that the land purchased in 1997 by Airdrie Airpark Ltd. had been zoned as an airport district since the 1940s.
