Court File No. 31-208039-T ONTARIO

Court File No. 31-208039-T
ONTARIO
SUPERIOR COURT OF JUSTICE - COMMERCIAL LIST
IN THE MATTER OF THE BANKRUPTCY OF SHS SERVICES
MANAGEMENT INC. / GESTION DES SERVICES SHS INC. and SHS
SERVICES LIMITED PARTNERSHIP of the City of Toronto, in the Province of
Ontario
MOTION RECORD OF THE TRUSTEE
PRICEWATERHOUSE COOPERS INC.
(RETURNABLE APRIL 21, 2015)
MCMILLAN LLP
Brookfield Place
181 Bay Street, Suite 4400
Toronto, ON, M5J 2T3
Brett Harrison LSUC#: 44336A
Tel: (416) 865-7932
Stephen Brown-Okruhlik LSUC#: 66576P
Tel: (416) 865-7043
Fax: (416) 865-7048
Counsel for the Trustee
TO:
SERVICE LIST (ATTACHED)
LEGAL_23598879.3
Last updated: February 26,2015
ELECTRONIC SERVICE LIST
TO:
PRICEWATERHOUSECOOPERS INC.
18 York Street, Suite 2600, PwC Tower
Toronto, ON M5J OB2
Mica Arlette
Tel: 416.814.5834
Email: [email protected]
Tracey Weaver
Tel: 416.814.5735
Email: [email protected]
Receiver of SHS Services Management Inc. and SHS Management Limited
Partnership
AND TO:
McMILLAN LLP
181 Bay Street, Suite 4400, Brookfield Place
Toronto, ON M5J 2T3
Wael Rostom
Tel: 416.865.7790
Email: [email protected]
LSUC#43165S
Brett Harrison
Tel: 416.865.7932
Email: brett.harrisonWJ,mcmi llan.ca
LSUC# 44336A
Stephen Eddy
Tel: 416.865.7226
Email: stephen.eddy(@,mcmillan.ca
LSUC# 62703F
Lawyers for the Receiver ofSHS Services Management Inc. and
SHS Management Limited Partnership
2
AND TO:
TORYSLLP
Suite 3000, 79 Wellington Street West, TD Centre
Toronto, ON M5K 1N2
Attention: Scott Bomhof
Tel: 416.865.7370
Fax: 416.865.7380
Email: sbomhoflaltmys.com
Attention: Adam M. Slavens
Tel: 416.865.7333
Fax: 416.865.7380
Email: [email protected]
Lawyers for Sears Canada Inc.
AND TO:
FIELDLLP
400-604 1 Street SW
Calgary, AB T2P 1M7
Attention: Douglas S. Nishimura
Tel: 403 260-8548
Email: [email protected]
Lawyers for Alaris Income Growth Fund Partnership
AND TO:
BLANEY MCMURTRY LLP
2 Queen Street East, Suite 1500
Toronto, Canada M5C 3G5
Attention: Lou Brzezinski
Tel: 416.593.2952
Email: [email protected]
AND TO:
PALIARE ROLAND ROSENBERG ROTHSTEIN LLP
155 Wellington Street West, 35 111 Flo.or
Toronto, ON M5V 3H1
Attention: Gordon Capern
Tel: (416) 646-4311
Email: gordon.capernlalpaliareroland.com
Attention: Massimo (Max) Starnino
Tel: (416) 646-7431
Email: [email protected]
Lawyers for Installation Services Org. Ltd., Paul Verhoef! and Stephen Verhoef!
3
AND TO:
DENTONS CANADA LLP
77 King Street West, Suite 400
Toronto, ON M5K OAI
Attention: John Salmas
Tel: (416) 863-4737
Fax: (416) 863-4592
Email: [email protected]
Lawyers for Hunter Douglas Canada Inc.
AND TO:
ARMITSTEAD & COMPANY
320-31935 South Fraser Way
Abbotsford, BC V2T 5N7
Attention: Les Armistead
Tel: (604) 746-6782
Fax: (604) 746-6781
Email: lesialarmitco.com
Lawyers for Cedar Grove Building Products Ltd.
AND TO:
KATRICH HOLDINGS LTD. and 6343 47880 RDJ HOLDINGS LTD.
P.O. Box 44148
Bedford, NS B4A 3X5
Attention: Richard Jardine
Tel: (902) 835-8079
Email: [email protected]
AND TO:
DAOUST VUKOVICH LLP
20 Queen Street West, Suite 3000
Toronto, ON M5H 3R3
Attention: Kenneth Pimentel
Tel: (416) 597-9306
Fax: (416) 597-8897
Email: [email protected]
Attention: Gasper Galati
Tel: (416) 598-7050
Fax: (416) 597-8897
Email: [email protected]
Lawyers for Canadian Property Holdings (Alberta) Inc.
4
AND TO:
DUECK, SAUER, JUTZI & NOLL LLP
403 Albert Street
Waterloo, ON N2L 3V2
Attention: Thomas Jutzi
Tel: (519) 884-2620
Fax: (519) 884-0254
Email: [email protected]
Lawyers for Reitzel Insulation Company Limited
AND TO:
CAW- CANADA LEGAL DEPARTMENT
205 Placer Court
Toronto, ON M2H 3H9
Attention: Barry Wadsworth LSUC#: 42985H
Tel: (416) 495-3776
Fax: (416) 495-3786
Email: [email protected]
Lawyers for Unifor Local40
AND TO:
ROCKYVIEW ROOFING INC.
112 Rockyledge Crescent
Calgary, AB T3G 5N1
Attention: Justin Tremblay
Email: [email protected]
AND TO:
MERCHANT LAW GROUP
Suite 303-15127100 Ave
Surrey, BC V3R ON9
Attention: Victor Olsen
Email: [email protected]
Lawyers for Maria Lisa Code
AND TO:
COMMISSION DES NORMES DU TRAVAIL
500, boulevard Rene-Levesque Ouest, 26° etage
Montreal (Quebec) H2Z 2A5
Attention: Pascal Francoeur
Email: [email protected]
5
AND TO:
G.N. JOHNSTON EQUIPMENT CO. LTD.
5990 Avebury Road
Mississauga, ON L5R 3R2
Tel: (800) 668-5459 x 52281 or (90) 712-6006 x 52281
Attention: Yvon Touchette C.C.P.
Email: [email protected]
AND TO:
DELAGE LANDEN FINANCIAL SERVICES CANADA INC.
3450 Superior Court, Unit 1
Oakville, ON L6L OC4
Tel: (905) 901-6534 or 1-855-732-2818
Attention: Faseeh Ahmad
Email: [email protected]
AND TO:
SUN LIFE ASSURANCE COMPANY OF CANADA REPRESENTED BY
ITS AUTHORIZED AGENT BENTALL KENNEDY (CANADA)
LIMITED PARTNERSHIP (BY ITS GENERAL PARTNER), BENT ALL
KENNEDY (CANADA) G.P. LTD.
6700 chemin Cote-de-Liesse, Suite 103
Saint-Laurent QC H4T 285
Tel: (514) 744-8544
Attention: Mireille Savard, Property Administrator
Email: [email protected]
AND TO:
CGI INFORMATION SYSTEMS AND MANAGEMENT CONSULTANTS
INC.
1350 Rene-Levesque Blvd. West, Floor 15
Montreal, Quebec H3G 1T4
Tel: (514) 415- 3614
Attention: William Misinrak
Email: William [email protected]
AND TO:
NORTHGATE PROPERTIES INC. C/0 FENGATE PROPERTY
MANAGEMENT LTD.
3425 Harvester Road, Suite 105
Burlington, ON L7N 3N1
Tel: (289) 288-3822 x4325
Attention: Suzi Halfpenny, Property Manager
6
Email: suzi. hal fpenny@tengate. com
AND TO:
ROYCOM 7 LIMITED PARTNERSHIP
Compass Commercial Realty Ltd., Suite 11 0
3770 Kempt Road #110 Halifax, NS B3K 4X8
Tel: (902) 442-5510
Attention: Kendal Carter, Property Manager (Compass)
Email: [email protected] ·
AND TO:
FRASMET HOLDINGS LIMITED
16 Esna Park Drive, Suite 200
Markham ON L3R 5X1
Tel: (905) 513-2565
Attention: Elaine Rabang-Corpuz, Property Manager
Email: [email protected]
AND TO:
FUTUREMED GENERAL PARTNER INC.
7000 Cardinal Place
Dublin, OH 43017
Tel: (614) 757-5000
Attention: Shelley Vincent
Email: [email protected]
AND TO:
2281896 ONTARIO INC.
1103 Wentworth Street West, Unit 1
Oshawa, ON LIJ 8P7
Tel: (905) 725-5666 or (905) 432-0478
Attention: Harold Wotten, Landlord
Email: [email protected]
AND TO:
PINNACLE INTERNATIONAL REALTY GROUP II INC.
911 Homer Street, Unit 300
Vancouver, B.C. V6B 2W6
Tel: (604) 602-7747
Attention: Stasha Wasak, Property Management
Email: [email protected]
7
AND TO:
ICR COMMERICAL REAL EST ATE
374 Albert St.
Regina SK S4R 2N7
c/o Dave Johnson Construction Ltd.
305 -12th Avenue
Regina, SK S4N 5T7
Tel: (306) 721-6118
Attention: David Kevill, ICR Director of Property Management
Email: [email protected]
AND TO:
4063937 CANADA INC. c/o THE MOFFAT GROUP OF COMPANIES
237 Argyle Avenue
Ottawa, ON K2P lB8
Attention: Steve Moffat, Property Manager
Tel: (613)- 749- 8000
Email: [email protected]
AND TO:
CANADIAN PROPERTY HOLDINGS (ALBERTA) INC. c/o
REIT MANAGEMENT LP
140-4111 Avenue SW, Suite 210
Calgary, AB T2P 3N3
Attention: Carla Fedele, Leasing Director
Tel: (403) 268-9203
Email: [email protected]
AND TO:
TERRACON DEVELOPMENT LTD.
l Ten·acon Place
Winnipeg, MB R2J 4B3
Attention: Michael Falk, Leasing Administrator
Tel: (204) 233-4330
Email: [email protected]
AND TO:
DAVIS AVIS MACEWEN LLP
Ste. 20 l-156 Morison Avenue
P.O. Box 1600
Parksville, BC V9P 2H5
Attention: William Andrew MacEwen and Mary E. Nee Nee
Tel: (250) 248-5731
Email: [email protected]; [email protected]
Lawyers for Roofco Roofing Corp. and Todd Bullock
8
AND TO:
DENTONSLLP
77 King Street West, Suite 400
Toronto, ON M5K OAl
Attention: Blake Moran
Tel: (416) 863-4495
Fax: (416) 863-4592
Email: blake.moran!aldentons.com
Lawyers for International Comfort Products (ICP)
AND TO:
DEPARTMENT OF JUSTICE
The Exchange Tower
130 King Street West
Suite 3400
Toronto, ON M5X 1K6
Attention: Diane Winters
Tel: (416)973-3172
E-mail: diane.winters!aljustice.gc.ca
Lawyers for the Canada Revenue Agency
AND TO:
MINISTRY OF FINANCE LEGAL SERVICES BRANCH
Michael Starr Building
6th Floor, 33 King Street West
Oshawa, ON LlH 8H5
Attention: Kevin O'Hara
Tel: (905) 433-6934
Email: [email protected]
AND TO:
HER MAJESTY THE QUEEN IN RIGHT OF
THE PROVINCE OF MANITOBA
Manitoba Justice
Civil Legal Services
730- 405 Broadway
Winnipeg, MN R3C 3L6
Attention: Brian Jones
Tel: 204-945-1409
Email: [email protected]
9
AND TO:
HER MAJESTY THE QUEEN IN RIGHT OF
THE PROVINCE OF ALBERTA AS REPRESENTED BY THE
MINISTER OF FINANCE
The Tax and Revenue Administration
9811 - 1091h Street
Edmonton, AB T5K 2L5
Tel: 780-427-3044
Fax: 780-427-0348
Email: tra.revenue@gov .ab.ca
AND TO:
ALBERTA TREASURY BOARD AND FINANCE
Oxbridge Place
Room 534, 9820- 106 Street
Edmonton, AB T5K 2J6
Attention: Mary K. Brook
Tel: 780-422-7720
Email: mary-kay.brookialgov.ab.ca
Attention: Peter Thagard
Tel: 780-644-5259
Email: peter.thagardialgov.ab.ca
AND TO:
HER MAJESTY THE QUEEN IN RIGHT OF
THE PROVINCE OF BRITISH COLUMBIA
David J. Hatter
Ministry of the Attorney General, Legal Services Branch
I 00 I Douglas Street
PO Box 9290, Station Prov Govt
Victoria, BC V8W 9J7
Tel: 250-387-1274
Fax: 250-387-0700
Email: david.hatter(al,gov.bc.ca
AND TO:
CHAITONS LLP
5000 Yonge Street - I Oth Floor
Toronto, ON M2N 7E9
Attention: Philip Taylor
Tel: (416) 218-1125
Email: philipialchaitons.com
Lawyers for Century Services Inc.
10
AND TO:
WILDEBOER DELLELCE LLP
Wildeboer Dellelce Place
Suite 800, 365 Bay Street
Toronto, ON M5H 2Vl
Attention: Alfred Apps
Tel: (416) 361-6211
Fax: (416) 361-1790
Email: [email protected]
Lawyers for ARCOR Windows & Doors Inc. and NA.P. Windows & Doors Ltd.
AND TO:
MALO, PILLEY, LEHMAN LAWYERS
3250 Bloor Street West
Suite 600, East Tower
Toronto, ON M8Z 2Z9
Attention: Brian P. Pilley
Tel: (416) 534-7543
Fax: (416) 534-7625
Email: [email protected]
Lawyers for Spar Roofing & Metal Supplies Limited
AND TO:
WILSON VUKELICH LLP
60 Columbia Way, Suite 710
Markham, ON L3R OC9
Attention: Douglas D. Langley LSUC#: 16909Q
Tel: (905) 940-8711 (ext. 2232)
Fax: (905) 940-8785
Email: [email protected]
Lawyers for 1233682 Ontario Inc., 1447000 Ontario Ltd., 1812731 Ontario Inc.,
1847135 Ontario Inc., 2177059 Ontario Inc., 3543978 Ontario Inc.,484081 BC
Ltd., 70999 Alberta Ltd., 777911 Alberta Ltd., 977218 Ontario Inc., The Roaders
Holdings Co. Ltd., Stewarts Cleaning Service Inc., Gestion Cristofaro Ltee
AND TO:
PREVOST FORTIN D'AOUST
Lawyers
3080, boul. Le Garrefour
Bureau 530
Laval, Quebec H7T 2R5
Attention: Me Martin Laurendeau
Tel: (450) 681-2511
11
Fax: (450) 681-3342
Email: [email protected]
Lawyers for Hydrosolution, LP
AND TO:
WEIR FOULDS LLP
66 Wellington Street West, Snite 4100
P.O. Box 35, Toronto-Dominion Centre
Toronto, ON M5K 1B7
Attention: Graham Brown
Tel: (416) 947-5073
Email: [email protected]
Lawyers for Beacon Roofing Supply Canada Company
AND TO:
McKENZIE LAKE LAWYERS LLP
140 Fullmion Street, Suite 1800
London, ON N6A 5P2
Attention: John H. McNair
Attention: Michael Peerless
Attention: Erin C. McDermid
Tel: (519) 672-5666
Email: [email protected]
Lawyers for the Representative Plaintiff, Barry Patrick Kenny
AND TO:
CLIMITISATION ST. HUBERT INC.
3885 Montee St. Hube1i
St. Hubert, QC J3Y 4J9
Attention: M. Mohamede Ouirzane
Email: [email protected]
AND TO:
1681530 ONTARIO LTD.
o/a Total Home Comfort
458 Fairall Street, Unit 9
Ajax, ON LIS 1R6
Attention: Ivan Flood
Email: [email protected]
12
AND TO:
INSTALLATION PRECISION
503 Aline Prud-Homme
Terrebonne, QC J6Y2B7
Attention: Stephane Des biens
Email: [email protected]
AND TO:
KULDIP SINGH MATTU
14465 60th Avenue
Surrey, BC V3S IS4
Attention: Kuldip Mattu
Email: [email protected]
AND TO:
IDEE A.L. CONFORT (9144-7821 Quebec Inc.)
1445 de L'Oiselet
Mascouche, QC J7L 4H9
Attention: Johanne Gagnon or Alain Laplante
Email: [email protected]
AND TO:
ROOFING FIX LTD.
1165 40th Avenue N.E.
Calgary, AB T2E 6M9
Attention: William Hebert
Email: [email protected]
AND TO:
BENNO GOTTFRIED TRINK
6 Rawlings Avenue
Hamilton, ON L8W 2N5
Attention: Ben
Email: [email protected]
AND TO:
ADAM EXPRESS
I 007 Blair Road
Ottawa, ON KIJ 7M9
Attention: Mohanned Mohsen
Email: [email protected]
AND TO:
ZYGMUNT PACZKOWSKI
327 Manitoba Avenue
Winnipeg, MB R2W 2E9
Email: [email protected]
13
AND TO:
SUMMUM SALLE DE BAIN INC.
l-14e Avenue
Ste-Marthe-sur-le-lac, QC JON !PO
Attention: Norman Beaulac
Email: beaulacnfalvideotron.ca
AND TO:
CLOUTIER MAINTENANCE GENERALE
145 Boul. Carmel
Terrebonne, Q.C. J6Y IT!
Attention: Berthier Cloutier
Email: [email protected]
AND TO:
REGIONAL DOORS & HARDWARE (NIAGARA) LTD.
44 Scott Street West
St. Catharines, ON L2R I C9
Attention: James Dove
Email: jimdfalregionaldoors.com
AND TO:
LES ENTREPRISES HAMILTON INC.
40 Petit-Chirot
St-Eustache, QC J7R 4K3
Attention: Chantal Bouvrette
Email: [email protected]
AND TO:
TOITURES IMPER EXPERT
116 Loiuis-Chaiden
Quebec, QC GlB 2S5
Attention: Bruno Levesque
Email: entreprisesblevesguefalhotmai !.com
AND TO:
ARIANA HEATING & AIR CONDITIONING LTD.
12409 214u1 Street
Maple Ridge, BC V2X 5E5
Attention: Hamid R. Hadilou
Email: [email protected]
AND TO:
SHS -LIEN CLAIMANTS
toitureso leil@hotmai !. com
14
cinannihvaclalgmail.com
infoialtoituresalainforget.ca
[email protected]
I
big top tentslal,yahoo.com
info(a)confortlafrance.ca
nevillelalcaruanainteriors.ca
simontoitlalhotmail.com
installation.michel boi vinial.gmail.com
aceialaceplumbing.ca
rivercitiroofinglal,yahoo.ca
steve.bordtlalapexgranite.com
aguarius.genlalaccesscomm.ca
aspectroofingialymail.com
1i saial.affordableroofing. ca
bill.macleanlalhotmali.com
thorstenlalcgrs.ca
stevendgilroyialgmail.com
climatisationap(al,hotmail.com
rschuerbeke(a)convoy-supply.com
[email protected]
DPondhomeinstallationslal,gmail.com
donatoelectricltdialgmail.com
[email protected]
bmelliottlal,svmpatico.ca
emrangastechialhotmail.com
15
ericamostoiturelal,hotmail.com
[email protected]
contactlal,four 12roofing.com
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
ti·anceliiltoituresdaniel.com
[email protected]
[email protected]
[email protected]
[email protected]
mecliesbourgliilgmail.com
[email protected]
[email protected]
[email protected]
[email protected]
16
[email protected]
[email protected]
pa. [email protected]
randyial4trough.com
[email protected]
[email protected]
salesialguali tyhvac. net
[email protected]
[email protected]
mardale I @.telus.net
[email protected]
junsharperia)hotmail.com
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
srobinsonmechanicallalns.aliantzinc.ca
[email protected]
[email protected]
[email protected]
tbouchardia)guickcontractors.com
Aireservofldngstonlal:.,rmail.com
[email protected]
17
[email protected]
[email protected]
[email protected] or [email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
2170291 [email protected]
tl·[email protected] or [email protected]
[email protected]
[email protected]
to ituretl"v@hotmai l.ca
[email protected]
a [email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
18
[email protected]
rafatirolalvahoo.ca
daveandrosanne@shaw .ca
[email protected]
[email protected]
[email protected]
[email protected]
edaninstallation@gmail. com
[email protected]
entreprisesplassondeialgmail.com
[email protected]
[email protected]
[email protected]
heatherlalgualitvexteriors.ca
[email protected]
installationsmaialhotmail.com
jj [email protected]
kevin.bensonlalsympatico.ca
[email protected]
bluemountltdlalhotmail.com
serious.43ialhotmail.com
a [email protected]
[email protected]
louialreitzel.ca or [email protected]
[email protected]
19
kaysinstalllillbell.net
wood chuck!illshaw.ca
[email protected]
[email protected]
[email protected]
rushfan231 @gmail.com
[email protected]
lestoi turesj oel @hotmai 1. com
[email protected]
al bert!illtoprankroo fing.ca
tri [email protected]
[email protected]
Last updated: March 12, 2015
SERVICE LIST
AND TO:
1310294 ALBERTA LTD. o/a CARUANA INTERIORS AND
CONTRACTING
9, 8 Riel Drive
St Albert, AB T8N 3Z7
Tel: (780) 935-5831
AND TO:
HEWLETT-PACKARD FINANCIAL SERVICES COMPANY
200 Connell Drive
Berkeley Heights, NJ 07922
Tel: (908) 665-0197
AND TO:
LIFTCAPITAL CORPORATION
300 The East Mall, Suite 401
Toronto, ON M9B 6B7
Tel: (416) 621-5522
AND TO:
NATIONAL LEASING GROUP INC.
1525 Buffalo Place
Winnipeg, MB R3T 1L9
Tel: (204) 954-9000
AND TO:
HER MAJESTY THE QUEEN IN RIGHT OF
THE PROVINCE OF SASKATCHEWAN AS REPRESENTED BY THE
MINISTER OF FINANCE
Revenue Division
2350 Alberta Street, 5th Floor
Regina, SK S4P 4A6
INDEX
INDEX
Tab No.
Page No.
1
Notice of Motion returnable April 21, 2015
1–5
2
Trustee’s First Report to the Court dated March 13, 2015
6 – 11
A Bankruptcy Orders
12 – 18
B Notices issued February 11, 2015
19 – 25
C Email delivering the Notices to the Verhoeffs
26 – 27
D Revised Notices
28 – 36
E Statement of Claim
37 – 55
F March 6 letter
56 – 60
G Certificate of Non-Attendance
61 – 62
3
Transcript of Examination of Adam Bernard
63 – 144
4
Draft Order
145 – 147
LEGAL_23598879.3
TAB 1
Court File No. 31-208039-T
ONTARIO
SUPERIOR COURT OF JUSTICE - COMMERCIAL LIST
IN THE MATTER OF THE BANKRUPTCY OF SHS SERVICES
MANAGEMENT INC./GESTION DES SERVICES SHS INC. and SHS
SERVICES LIMITED PARTNERSHIP of the City of Toronto, in the Province of
Ontario
NOTICE OF MOTION
(returnable April 21, 2015)
The Applicant, PricewaterhouseCoopers Inc. ("PwC") m its capacity as the
Court-appointed trustee pursuant to s. 243 of the Bankruptcy and Insolvency Act ("BIA'')
(the "Trustee") of SHS Services Management Inc./Gestion des Service SHS Inc. and
SHS Services Limited Pminership (collectively, "SHS") will make a motion to a judge,
on Tuesday, April 21, 2015 at !O:OOam or as soon after that time as the motion can be
heard, at 330 University Avenue, Toronto, Ontario.
PROPOSED METHOD OF HEARING: The motion is to be heard orally.
THE MOTION IS FOR:
(a) An Order that the Paul Verhoeff and Stephen Verhoeff (the "Verhoeffs"), and
Theresa Lea ("Lea") deliver to the Trustee all documents listed in Schedule "A"
to the Notices of Appointment (as defined below) that are within their possession
or power at least seven days prior to the Exmninations (defined below);
(b) An Order, pursuant to section 163(1) of the BIA requiring that the Verhoeffs and
Lea attend examinations under oath by the Trustee as persons reasonably
believed to have knowledge of the affairs of the bankrupt by May 8, 2015 (the
"Examinations");
(c) Costs of this motion on a substantial indemnity basis; and
(d) Such further and other relief as this Honourable Comi deems just.
-2-
THE GROUNDS FOR THE MOTION ARE:
(a)
The moving party, the Trustee, was appointed as trustee of the estate of
the bankrupt, SHS, on July 31,2014.
(b)
The Verhoeffs are both individuals resident in the province of Alberta.
The Verhoeffs were involved in the creation of SHS and are former
directors of SHS.
(c)
Lea is an individual resident in the province of Alberta. Lea was involved
in the management of SHS between its creation and bankruptcy.
(d)
The Verhoeffs and Lea are persons likely to have knowledge of the
affairs of SHS.
(e)
The Trustee indicated to the Verhoeffs and Lea its intention to examine
them pursuant to Section 163 of the BIA on or about January 23, 2015.
(f)
Following a request by counsel for the Verhoeffs, the Trustee agreed to
accommodate the Verhoeffs' schedule by conducting the examinations on
March 9, 2015.
(g)
The Trustee issued each of the Verhoeffs and Lea with a notice of
appointment for examination pursuant to Section 163 of the BIA (the
"Notices of Appointment").
(h)
The Notices of Appointment required the Verhoeffs to attend at the office
of counsel for the Trustee on March 9, 2015, and Lea to attend at the
office of counsel for the Trustee on March 17,2015.
(i)
The Notices of Appointment required the Verhoeffs and Lea to bring to
their examinations certain documents in their possession or power that are
relevant to the affairs of SHS (the "Relevant Documents").
2
-3-
G)
Despite the Notices of Appointment, neither the Verhoeffs nor Lea
attended at the location and time set out in the Notices of Appointment.
(k)
Neither the Verhoeffs nor Lea have delivered to the Trustee any of the
Relevant Documents.
(I)
Section 163(1) of the BIA, which entitles a trustee in bankruptcy to
examine under oath any person reasonably believed to have knowledge of
the affairs of the bankrupt and to order any person liable to being so
examined to produce any books, documents, correspondence or paper in
that person's possession or power relating in all or in part to the
bankrupt's dealings or property; and
(m)
Such further and other grounds as counsel may advise and this
Honourable Court may permit.
THE FOLLOWING DOCUMENTARY EVIDENCE will be used at the hearing
of the motion:
(a)
The First Report of the Trustee to the Court, dated March 13, 2015; and
(b)
Such further and other evidence as counsel may advise and this
Honourable Court may permit.
April!O, 2015
McMILLAN LLP
Brookfield Place
181 Bay Street, Suite 4400
Toronto, ON, M5J 2T3
Brett HaiTison LS#: 44336A
Tel: (416)865-7932
Stephen Brown-Okruhlik LS#: 66576P
Tel: (416)865-7043
Fax:416-865-7048
Lawyers for the Trustee
-4-
TO:
SERVICE LIST
4
IN THE MATIER OF THE BANKRPUTCY OF SHS SERVICES MANAGEMENT INC.IGESTION DES SERVICES SHS INC. AND
SHS SERVICES LIMITED PARTNERSHIP
Court File No. 31-208039-T
IN THE MATTER OF AN APPLICATION PURSUANT TO SECTION 243 OF THE BANKRUPTCY AND INSOLVENCY ACT,
R.S.C. I985, c. B-5, AS AMENDED; AND SECTION IOI OF THE COURTS OF JUSTICE ACT, R.S.O. I990, c. C.43, AS AMENDED
ONTARIO
SUPERIOR COURT OF JUSTICE COMMERCIAL LIST
Proceeding commenced
at Toronto
NOTICE OF MOTION
(RETURNABLE April21, 2015)
MCMILLAN LLP
Brookfield Place
181 Bay Street, Suite 4400
Toronto, ON, M5J 2T3
Brett Harrison LS#: 44336A
Tel: 416-865-7932
Stephen Brown-Okruhlik LS#: 66576P
Tel: 416-865-7043
Fax: 416-865-7048
Lawyers for the Trustee
'-\
TAB 2
Court File No. 31-208039-T
Court File No. 31-208040-T
SHS Services Management Inc. I
Gestion des Services SHS Inc.
SHS Services Limited Partnership
TRUSTEE'S FIRST REPORT TO THE COURT
March 13, 2015
7
Court File No. 31-208039-T
Court File No. 31-208040-T
ONTARIO
SUPERIOR COURT OF JUSTICE
(COMMERCIAL LIST)
IN THE MATTER OF THE BANKRUPTCY OF SHS SERVICES MANAGEMENT INC.
/ GESTION DES SERVICES SHS INC.
AND
IN THE MATTER OF THE BANKRUPTCY OF SHS SERVICES LIMITED
PARTNERSHIP
FIRST REPORT TO THE COURT
SUBMITTED BYPRICEWATERHOUSECOOPERS INC.
IN ITS CAPACITY AS TRUSTEE
TABLE OF CONTENTS
INTRODUCTION ..•..••.••••••••••••••....•...•.•.••.•.••.••••••••••••••••••••••••..•....•....•.•.•..•••••••••••••••..••..•.... 2
TERMS OF REFERENCE .•..•....•....•.••••••••••••••••••.•.•..•..•..•...•..•..•...•••••••••••••••••••••......•..••.•••••• 2
APPLICATION FOR THE EXAMINATION ORDER .•..•..•.•..•....••.••••••••••••••.•..•..•.•••..•...•••••••• 3
RELIEF SOUGHT •••••••••••.•.•......•.•.•.•.••.......••••••••••••••••.•.•..•.•..•..•.•..•......•.•.••••••••••••••••..••..•..• 6
APPENDICES
A.
B.
C.
D.
E.
F.
G.
Bankruptcy Orders
Notices issued February 11, 2015
Email delivering the Notices to the Verhoeffs
Revised Notices
Statement of Claim
March 6 Letter
Certificates of Non-Attendance
INTRODUCTION
1.
On July 31, 2014, pursuant to an application made by Alaris Income Growth Fund
Partnership ("Alaris"), the Ontario Superior Court of Justice (Commercial List) issued
orders (the "Bankruptcy Orders") pursuant to the Bankruptcy and Insolvency Act,
R.S.C. 1985, c B-3 as amended (the "BIA'') adjudging each of SHS Services Management
Inc. / Gestion des Services SHS Inc. ("SHS") and SHS Services Limited Partnership ("SHS
LP" and collectively with SHS, the "Companies") bankrupt and PricewaterhouseCoopers
Inc. was appointed as trustee in bankruptcy (the "Trustee") of the Companies. The
Bankruptcy Orders were suspended for a period of 10 days and became effective on August
11,
2014 (the "Date of Appointment"). These proceedings are referred to as the
"Bankruptcy Proceedings". Copies of the Bankruptcy Orders are attached Appendix "A".
2. PricewaterhouseCoopers Inc. is also the receiver (in such capacity, the "Receiver") of the
Companies. Further information in respect of the receivership proceedings, and the reports
of the Receiver, are available on the Receiver's website at www.pwc.com/cm:-shs.
3. This report (the "First Report") is made in support of the Trustee's application for an order
of the CoUit (the "Examination Order") pursuant to section 163(1) of the BIA, compelling
the Verhoeffu to attend at an examination pursuant to the Revised Notices and to produce the
Exmnination Information (capitalized terms as defined below).
TERMS OF REFERENCE
4·
In preparing this report and conducting its analysis, the Trustee has obtained and relied
upon certain unaudited, draft and/ or internal financial information of the Company, the
Company's books and records, and discussions with various patties including former SHS
employees retained on an interim basis by the Receiver (collectively, the "Records").
5.
Except as otherwise described in this report:
a) The Receiver has not audited, reviewed or otherwise attempted to verify the accuracy or
completeness of the Records in a manner that would wholly or partially comply with
Generally Accepted Auditing Standards pursuant to the Chattered Professional
Accountants Canada Handbook- Assurance; and
b) The Receiver has not conducted an examination or review of any financial forecast and
projections in a manner that would comply with the procedures described in the
Chmtered Professional Accountants Canada Handbook - Assurance.
6.
Unless otherwise stated, all monetmy amounts contained herein are expressed in Canadian
Dollars and exclude hmmonized sales tax ("HST'').
APPLICATION FOR THE EXAMINATION ORDER
BACKGROUND
7.
The Trustee reviewed the Records of the Companies to identify and evaluate transactions
(the "Voidable Transactions") that may be subject to review as fraudulent preferences,
transfers at undervalue, or other voidable transactions pursuant to the BIA and relevant
federal and provincial legislation.
8.
In the course of its review, the Trustee identified cettain transactions that it considered to
be potentially Voidable Transactions.
These included certain dividends paid to the
shareholders of SHS at the time SHS commenced operations in early March
2013
(the
"Dividends").
9.
The shareholders of SHS (the "Shareholders") who received the Dividends consisted of:
a) Paul Verhoeff SHS Trust, which the Trustee understands is controlled by Paul
Verhoeff;
b) Stephen Verhoeff SHS Trust, which the Trustee understands is controlled by
Stephen Verhoeff (together with Paul Verhoeff, the "Verhoeffs");
c) Clemco SHS Inc., which the Trustee understands is controlled by Micheal
Clements; and
d) Theresa Lea SHS Trust, which the Trustee understands is controlled by Theresa
Lea.
10.
The Trustee consulted with the Verhoeffs to obtain information as pa1t of its review of the
Voidable Transactions. The Trustee received limited disclosures from the Verhoeffs in the
course ofthese discussions.
IO
11.
The Trustee reported its findings from the review of the Voidable Transactions to the
inspectors in the Bankruptcy Proceedings on January 7,
2015.
INSPECTOR RESOLUTION AND NOTICES OF EXAMINATION
12.
On or about January
23, 2015,
counsel for the Trustee discussed the intention to issue
Notices of Appointment for Examination with counsel for the Verhoeffs. The purpose of
the examinations is, inter alia, to obtain further information in respect of the Voidable
Transactions reviewed by the Trustee. The Trustee proposed that the examinations take
place in the following week. The Verhoeffs asked for a delay of the examinations at that
time given, inter alia, the need for the Verhoeffs to travel to Toronto to attend the
examination, as well as given their counsel's availability to attend. The Trustee agreed to
this delay in order to accommodate the Verhoeffs.
13.
By resolution of the inspectors dated February
10, 2015,
the Trustee issued Notices of
Appointment for Examination (the "Notices") pursuant to section
163
of the BIA to the
Shareholders. Copies of the Notices issued to the Verhoeffs on February
11, 2015,
are
attached as Appendix "B".
14.
Attached as Appendix "C" is the email sent by the Trustee's legal counsel to the Verhoeffs'
legal counsel delivering their respective Notices.
15.
Counsel for the Verhoeffs again asked that examinations be moved and the Trustee
agreed. As a result of these discussions, revised Notices of Appointment for Examination
(the "Revised Notices") were sent to the Verhoeffs' counsel on March 4,
revised examination scheduled for March 9,
2015
2015,
with the
(the "March 9 Examination").
Copies of the Revised Notices and the email delivering same to the Verhoeffs' counsel is
attached as Appendix "D".
16.
Pursuant to the Notices and the Revised Notices, the Verhoeffs were requested to produce
certain information (the "Examination Information") as part of the March 9
Examination. The Examination Information requested is detailed in Schedule "A" of the
Notices.
SETTLEMENT DISCUSSIONS WITH SEARS
17.
Concurrently with arranging to examine the Verhoeffs pursuant to the Revised Notices,
the Trustee, Sears Canada Inc. ("Sears") and Alaris (collectively the "Claimants"),
II
agreed to engage in without-prejudice discussions on a potential settlement of claims that
the Trustee may have against the Verhoeffs in respect of the Voidable Transactions, as
well as separate claims that Sears and Alaris have asserted against the Verhoeffs. An
initial settlement conference meeting between the Claimants and the Verhoeffs was held
in Toronto on March 2,
18.
2015
(the "March 2 Meeting").
As pa1t of this process the Claimants made reasonable requests for additional information
(the ''Voluntary Disclosure") from the Verhoeffs. The Verhoeffs have not to date
provided any of the Volunta1y Disclosure.
STATEMENT OF CLAIM AND RESPONSE OFVERHOEFFS
19.
Based on the information in its possession at the time, the Trustee issued a Statement of
Claim ("Statement of Claim") on February
27, 2015,
to pursue the recovery of the
Dividends. The Statement of Claim was issued prior to the March
2
Meeting to preserve
the Trustee's right to pursue recovery of the Dividends within statutmy limitation periods.
20.
On March
2, 2015,
the Trustee's legal counsel provided the Verhoeffs' legal counsel with a
copy of a Statement of Claim. A copy of the Statement of Claim and the email delivering
same to the Verhoeffs' counsel is attached as Appendix "E".
21.
On March 6,
2015,
the Verhoeffs' legal counsel issued a letter (the "March 6 Letter") via
email to the Trustee's legal counsel, indicating that the Verhoeffs would not be attending
the March 9 Examination. As well, for the first time, the March 6 Letter also raised
objections to the Examination Information requested as outlined in the Revised Notices.
A copy of the March 6 Letter, including the email sending same, is attached as Appendix
"F".
22.
Attached as Appendix "G'' are copies of the certificates evidencing that the Verhoeffs did
not attend the March 9 Examination.
REQUEST FOR EXAMINATION ORDER
23.
Discussions have been ongoing since the March 2 Meeting regarding the provision ofthe
Voluntmy Disclosure, the Examination Information, and the holding of the examinations.
As of the date of this repmt, these discussions have stalled and none of the requested
information has been provided.
/Z
24.
The Trustee is of the view that it is appropriate for the Court to make the Examination
Order, for the following reasons:
a) The Verhoeffs have, to date, refused to attend an examination duly requested by the
Trustee pursuant to section 163 of the BIA;
b) The Verhoeffs have refused to provide either the Examination Information or the
Voluntary Disclosure, which information is pertinent to the conduct of the
Bankruptcy Proceedings;
c) The delay of the Verhoeffs and their failure to provide this information has added
unnecessa1y cost and expense to the Bankruptcy Proceedings; and
d) The examination of the Verhoeffs is necessary to permit the Trustee to recommend
a further course of action to the inspectors in the Bankruptcy Proceedings with
regard to the Voidable Transactions.
25.
The Trustee respectfully submits that the requests for the Examination Information and
the Voluntary Disclosure are reasonable and appropriate in the circumstances.
RELIEF SOUGHT
26.
The Trustee respectfully requests that this Comt grant the Examination Order.
All of which is respectfully submitted on this 13th day of March,
2015.
PricewaterhouseCoopers Inc.
In its capacity as Trustee of SHS Services Management Inc. / Gestion des Services SHS Inc. and
SHS Services Limited Pattnership
~-~
Mica Arlette
Senior Vice President
TAB A
12.{~
Appendix "A"
Bankruptcy Orders
13
Court File No.
'3/ -'()((_ -2tJ ~~
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
IN BANKRUPTCY AND INSOLVENCY
E MATTER OF THE BANKRUPTCY OF SHS SERVICES MANAGEMENT
INC./GESTION DES SERVICES SHS INC. of the City of Toronto, in the Province of
Ontario
BANKRUPTCY ORDER
UPON the bankruptcy application of Alaris Income Growth Fund Partnership
("Aiaris"), filed this day;
AND UPON reading the Bankruptcy Application and the Affidavit of Verification of
Michael
Ervin
sworn
July
15,
2014
attached
thereto,
and
the
Consent
of
PricewaterhouseCoopers Inc. ("PWC") to act as trustee in bankruptcy, filed;
AND UPON hearing submissions of counsel for Alaris
and counsel for
PricewaterhouseCoopers Inc., in its capacity as court-appointed receiver, without security,
over all of the assets, undertakings and property of SHS Services Management lnc./Gestion
des Services SHS Inc. ("SHS");
AND UPON it appearing to the Court that during the six month period immediately
prior to the date of this Bankruptcy Application, S H S ceased to meet its liabilities generally
as they become due, an act of bankruptcy,
THIS COURT ORDERS that any requirement for notice of this Bankruptcy
Application is hereby dispensed with so that this Bankruptcy Application is properly
returnable today and hereby dispenses with any or other service thereof.
THIS COURT ORDERS that SHS is hereby adjudged bankrupt and a Bankruptcy
Order is hereby made against the SHS.
THIS COURT ORDERS that PWC, of the City of Toronto, in the Province of
Ontario, be and is hereby appointed Trustee of the estate of the said bankrupt.
CI851173.DOCX:I
·~;
/Lf
THIS COURT ORDERS that the notices sent by PWC in its capacity as interim
receiver of SHS to former employees of SHS pursuant to subsections 245(1) and 246(1) of the
BIA shall fulfill the obligations of PWC in its capacity as trustee in bankruptcy under
subsections 102(1) and 102(2) of the Bankruptcy and Insolvency Act, RSC !985, c B-3, as
amended (the "Notice Sections"), and PWC shall not be required to deliver additional notices
pursuant to the Notice Sections.
THIS COURT ORDERS that the Trustee and McMillan LLP as legal counsel to the
trustee, shall be entitled to the benefit of and hereby are granted a charge (the ".Trustee's
Charge") on the assets of the estate and all proceeds thereof (collectively, the "Charged
Property"), as security for the fees and disbursements of the Trustee and its legal counsel
incurred both before and after the making of this Order in respect of the administration of the
estate.
THIS COURT ORDERS that the filing, registration or perfection of the Trustee's
Charge shall not be required, and that the Trustee's Charge shall be valid and enforceable for
all purposes, as against any right, title or interest filed, registered, recorded or perfected
subsequent to the Trustee's Charge coming into existence, notwithstanding any such failure to
file, register, record or perfect.
THIS COURT ORDERS that the Trustee's Charge shall constitute a charge on the
Charged Property and shall rank in priority to all other security interests, trusts, liens, charges
and encumbrances, statutory or otherwise (collectively, "Encumbrances") in favour of any
person.
THIS COURT ORDERS that the said Trustee give security in the amount to be fixed
by the Official Receiver pursuant to subsection 16(1) of the Bankruptcy and Insolvency Act,
RSC 1985, c B-3, as amended.
THIS COURT ORDERS that the costs of and incidental to this application and order
be paid to Alaris out of the assets of the estate upon taxation thereof or upon further order of
the Court.
CI851173.DOCX:l
r-
-
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-
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IN THE MATTER OF THE BANKRUPTCY OFSHS SERVICES MANAGEMENT
INCJGESTION DES SERVICES SHS INC. of the City of Toronto, in the Province of Ontario
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Court File No.
"S 1- 0 (- 7_cf6b . ,lt D - (
ONTARIO
SUPERIOR COURT OF JUSTICE
(COMMERCIAL LIST)
Proceeding commenced at Toronto
.CAr\
APPLICATION RECORD OF
ALARIS INCOME GROWTH FUND PARTNRESHIP
FIELDLLP
400, 604- 1ST Street S.W.
Calgary, AB
.
T2P 1M7
DouglasS. Nishimura
Tel: 403-260-8548
Fax: 403-264-7084
Email: [email protected]
Lawyer for Alaris Income Growth Fund
Partnership
LEGAL_22655883.1
~
/(p
Court File No.5 f· ZOfO'$c:;:r
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
IN BANKRUPTCY AND INSOLVENCY
BANKRUPTCY ORDER
UPON the bankruptcy application of Alaris Income Growth Fund Partnership
("Alaris"), filed this day;
AND UPON reading the Bankruptcy Application and the Affidavit of Verification of
Michael
Ervin
sworn
July
15,
2014
attached
thereto,
and
the
Consent
of
PricewaterhouseCoopers Inc. ("PWC") to act as trustee in bankruptcy, filed;
AND
UPON
hearing submissions of counsel for Alaris
and counsel for
PricewaterhouseCoopers Inc., in its capacity as court-appointed receiver, without security,
over all of the assets, undertakings and property of SHS Services Limited Partnership
("SHS");
AND UPON it appearing to the Comt that during the six month period immediately
prior to the date of this Bankruptcy Application, the S H S ceased to meet its liabilities
generally as they become due, an act of bankruptcy,
THIS COURT ORDERS that any requirement for notice of this Bankruptcy
Application is hereby dispensed with so that this Bankruptcy Application is properly
returnable today and hereby dispenses with any or other service thereof.
THIS COURT ORDERS that the SHS is hereby adjudged bankrupt and a
Bankruptcy Order is hereby made against the SHS.
THIS COURT ORDERS that PWC, of the City of Toronto, in the Province of
Ontario, be and is hereby appointed Trustee of the estate of the said bankrupt.
CJ851169.DOCX;I
17
THIS COURT ORDERS that the notices sent by PWC in its capacity as interim
receiver of SHS to former employees of SHS pursuant to subsections 245(1) and 246(1) of the
BIA shall fulfill the obligations of PWC in its capacity as trustee in bankruptcy under
subsections 102(1) and 102(2) of the Bankruptcy and Insolvency Act, RSC 1985, c B-3, as
amended (the "Notice Sections"), and PWC shall not be required to deliver additional notices
pursuant to the Notice Sections.
TillS COURT ORDERS that the Trustee and McMillan LLP as legal counsel to the
trustee, shall be entitled to the benefit of and hereby are granted a charge (the "Trustee's
Charge") on the assets of the estate and all proceeds thereof (collectively, the "Charged
Property"), as security for the fees and disbursements of the Trustee and its legal counsel
incurred both before and after the making of this Order in respect of the administration of the
estate.
THIS COURT ORDERS that the filing, registration or perfection of the Trustee's
Charge shall not be required, and that the Trustee's Charge shall be valid and enforceable for
all purposes, as against any right, title or interest filed, registered, recorded or perfected
subsequent to the Trustee's Charge coming into existence, notwithstanding any such failure to
file, register, record or perfect.
TillS COURT ORDERS that the Trustee's Charge shall constitute a charge on the
Charged Property and shall rank in priority to all other security interests, trusts, liens, charges
and encumbrances, statutory or otherwise (collectively, "Encumbrances") in favour of any
person.
THIS COURT ORDERS that the said Trustee give security in the amount to be fixed
by the Official Receiver pursuant to subsection 16(1) of the Bankruptcy and Insolvency Act,
RSC 1985, c B-3, as amended.
THIS COURT ORDERS that the costs of and incidental to this application and order
be paid to Alaris out of the assets of the estate upon taxation thereof or upon further order of
the Court.
C!851169.DOCX,J
· --· --- --·-· --- --'
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IN THE MATTER OF THE BANKRUPTCY OF SHS SERVICES LIMITED PARTNERSHIP of
the-City of Toronto, in the Province of Ontario
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Court File No.
ONTARIO
SUPERIOR COURT OF JUSTICE
(COMMERCIAVLIST)
. ,;-
Proceeding commenced at Toronto
r=======
APPLICATION RECORD OF
ALARIS INCOME GROWTH FUND PARTNRESHIP
FIELDLLP
400,604 -1sT Street S.W.
Calgary, AB
T2P 1M7
DouglasS. Nishimura
Tel: 403-260-8548
Fax:403-264-7084
Email: [email protected]
Lawyer for Alaris Income Growth Fund
Partnership
LEGAL_22656002.1
;Q
TAB B
Appendix "B"
Notices issued February 11, 2015
20
Estate no. 25-094462
ONTARIO
SUPERIOR COURT OF JUSTICE
IN BANKRUPTCY AND INSOLVENCY
IN THE MATTER OF THE BANKRUPTCY OF
SHS Services Management Inc./Gestion des Services SHS Inc.
of the City of Toronto
in the Province of Ontario
NOTICE OF APPOINTMENT FOR EXAMINATION
TO: PAUL VERHOEFF, former director ofSHS Services Management Inc./Gestion des
Services SHS Inc., a bankrupt
UnitH
7003 - 511' Street SE
Calgary, AB
T2H 202
YOU ARE REQUIRED TO ATTEND FOR AN EXAMINATION pursuant to
subsection 163(1) of the Bankruptcy and Insolvency Act on Friday, March 13, 2015, at
I 0:00 a.m. at the office of McMillan LLP, Suite 4400, 181 Bay Street, Toronto,
Ontario, M5J 2T3.
YOU ARE REQUIRED TO BRING WITH YOU and produce at the examination the
following documents and things referred to in:
All books, documents, correspondence or papers in your
possession or power relating in all or in part to payments made by
the Bankrupt to Installation Services Org. Ltd. ("ISO"), Paul
Verhoeff SHS Trust; Stephen Verhoeff SHS Trust; Clemco SHS
Inc.; or Theresa Lea SHS Trust (the "March 2013 Payments"), or
the approximately $2 million paid by the Bankrupt in December
2013 for employee related expenses, and more particularly, the
documents referred to in Schedule "A" attached.
Date: February II, 2015.
MCMILLAN LLP
Barristers & Solicitors
181 Bay Street, Suite 4400
Toronto, Ontario
M5J 2T3
Brett Harrison
LEGAL_23377578.2
2/
tel: 416.865.7932
fax: 416.865.7043
email: [email protected]
Solicitors for the Trustee
Schedule "A"
You are required to bring with you as a former officer and/or director of SHS
Services Management lnc./Gestion des Services SHS Inc. ("SHS") and produce at the
examination the following without limitation:
I. Any shareholder agreements related to SHS or ISO.
2. Particulars of all shareholder loans made and/or repaid.
3. All correspondence related to the payment of dividends by SHS in the
course of its operations.
4. All correspondence related to payments made by SHS in the month
preceding the appointment of an interim receiver on December 13, 2013.
5. All correspondence related to the repayment terms of the equity and debt
financing of SHS under the Asset Transfer Agreement dated December 20,
2012.
6. All correspondence related to the repayment of ISO for monies advanced to
SHS.
7. Any documents evidencing the relationships between ISO and Paul
Verhoeff and Stephen Verhoeff.
8. All correspondence related to payments made in March of 2013 pursuant to
the Contribution Agreement dated March I, 2013.
9. All documentation evidencing the amount of initial funding received by
SHS in March of 2013 from all sources, including the use of use such funds
I 0. All conespondence and documentation related to payments made to
shareholders of SHS or ISO.
LEGAL_23377578.2
22
II. All correspondence and documentation related to BDC Investment No.
047097-01 being a loan from Business Development Bank of Canada to
ISO, which was repaid on !SO's behalf by SHS on March 4, 2013.
12. Any evidence of costs incurred by ISO on behalf of SHS at any time, and
the reimbursement of same (where made) by SHS.
13. Any evidence or analysis made in respect of the nature and
purpose of the dividend payments by SHS in March 2013,
including but not limited to the use of these funds for purposes
of ISO.
14. All correspondence discussing potential Director or Officer
liability.
15. The Business Plan presented to Sears Canada Inc. at the time of
the acquisition of SHS evidencing the funds required for the
initial funding of SHS.
16. All documentation evidencing the $15M minimum threshold
for investments made by Alaris Royalty Corp ..
LEGAL_23377578.2
23
Estate no. 25-094462
ONTARIO
SUPERIOR COURT OF JUSTICE
IN BANKRUPTCY AND INSOLVENCY
IN THE MATTER OF THE BANKRUPTCY OF
SHS Services Management Inc./Gestion des Services SHS Inc.
of the City of Toronto
in the Province of Ontario
NOTICE OF APPOINTMENT FOR EXAMINATION
TO: STEPHEN VERHOEFF, former director ofSHS Services Management Inc./Gestion
des Services SHS Inc., a bankrupt
UnitH
7003 - 5111 Street SE
Calgary, AB
T2H2G2
YOU ARE REQUIRED TO ATTEND FOR AN EXAMINATION pursuant to
subsection I 63( I) of the Bankruptcy and Insolvency Act on Friday, March 13, 2015, at
I 0:00 a.m. at the office of McMillan LLP, Suite 4400, 181 Bay Street, Toronto,
Ontario, M5J 2T3.
YOU ARE REQUIRED TO BRING WITH YOU and produce at the examination the
following documents and things referred to in:
All books, documents, correspondence or papers in your
possession or power relating in all or in part to payments made by
the Bankrupt to Installation Services Org. Ltd. ("ISO"), Paul
Verhoeff SHS Trust; Stephen Verhoeff SHS Trust; Clemco SHS
Inc.; or Theresa Lea SHS Trust (the "March 2013 Payments"), or
the approximately $2 million paid by the Bankrupt in December
2013 for employee related expenses, and more particularly, the
documents referred to in Schedule "A" attached.
Date: February 11,2015.
MCMILLAN LLP
Barristers & Solicitors
181 Bay Street, Suite 4400
Toronto, Ontario
M5J 2T3
Brett Harrison
LEGAL_23480706.1
21
tel: 416.865.7932
fax: 416.865.7043
email: [email protected]
Solicitors for the Trustee
Schedule "A"
You are required to bring with you as a former officer and/or director of SHS
Services Management Inc./Gestion des Services SI-IS Inc. ("SHS") and produce at the
examination the following without limitation:
I. Any shareholder agreements related to SHS or ISO.
2. Patticulars of all shareholder loans made and/or repaid.
3. All correspondence related to the payment of dividends by SHS in the
course of its operations.
4. All correspondence related to payments made by SHS in the month
preceding the appointment of an interim receiver on December 13,2013.
5. All correspondence related to the repayment terms of the equity and debt
financing of SHS under the Asset Transfer Agreement dated December 20,
2012.
6. All correspondence related to the repayment of ISO for monies advanced to
SHS.
7. Any documents evidencing the relationships between ISO and Paul
Verhoeff and Stephen Verhoeff.
8. All correspondence related to payments made in March of2013 pursuant to
the Contribution Agreement dated March I, 2013.
9. All documentation evidencing the amount of initial funding received by
SHS in March of2013 from all sources, including the use of use such funds
I 0. All correspondence and documentation related to payments made to
shareholders of SHS or ISO.
LEGAL_23480706.1
z5
II. All correspondence and documentation related to BDC Investment No.
047097-01 being a loan from Business Development Bank of Canada to
ISO, which was repaid on !SO's behalf by SHS on March 4, 2013.
12. Any evidence of costs incurred by ISO on behalfofSHS at any time, and
the reimbursement of same (where made) by SHS.
13. Any evidence or analysis made in respect of the nature and
purpose of the dividend payments by SHS in March 2013,
including but not limited to the use of these funds for purposes
ofiSO.
14. All correspondence discussing potential Director or Officer
liability.
15. The Business Plan presented to Sears Canada Inc. at the time of
the acquisition of SHS evidencing the funds required for the
initial funding of SHS.
16. All documentation evidencing the $15M minimum threshold
for investments made by Alaris Royalty Corp ..
LEGAL_23480706.1
TAB C
Appendix "C"
Email delivering the Notices to the Verhoeffs
27
In the Matter of the Bankruptcy of SHS Services Management
Inc.
Brett Harrison to: [email protected]
Cc: Mica J. Arlette, "Stephen Brown-Okruhlik"
02/11/201512:04 PM
2 attachments
Notice of S.163 Examination of Paul Verhoeff .pdf Notice of S.163 Examination of Stephen Verhoeff .pdf
Max,
As per my voicemail, attached are the Notices of Appointment for Examination for Paul and Stephen
Verhoeff served upon you in account with the Rules of Civil Procedure . Please confirm that you accept
service by email. If we have not received confirmation by Friday we will serve by fax.
If possible we would appreciate receiving the requested documents in advance of the examination so
that we can try to avoid having your clients re-attend. If you have any questions regarding the notices
please call me to discuss.
Sincerely,
mcmillan
Brett Harrison
Partner
d 416.865.7932 1 f 416.865.7048
[email protected]
Assistant: Wilma Leo
1
416.865.7852
1
[email protected]
McMillan LLP
Lawyers I Patent & Trade-mark Agents
Brookfield Place, 181 Bay Street, Suite 4400
Toronto, Ontario MSJ 2T3
mcmillan.ca
( VN!-i.')/'UT Ji'.i /1 \' NU riC.'':: 'ihts c mail, .·nciudrnq ,m;; attaclll'l6'Jts. irlil\) (·on tarn ;nforrnatmn that iS confidenn,l/ and pnvilcged- Anv
"lhliiliHwr.·,_·d rlisd('Sil,,.,, tct-'i'nf.' or· u;,e u [[;ic. c:n,J;I i:; rlfnilil:iled. tfyou drL~ not fiJ(' intendr><i re:::rprcm, i,·!;;dse uold}' us hy reply ,:;ndil
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Plr:d:,.:~
:--:-.n:-.!d::r lhP
\-~'wircmr1r~:rrl
befort: prin\rnu l11is
,~-rnd!l.
McMillan is committed to providing electronic communications that are
relevant to you and your business. To sign up to receive other electronic
communications from us or to unsubscribe from receiving electronic messages
sent on behalf of McMillan, please visit the McMillan Online Subscription
Centre <http://www.rncrnillan.ca/subscribeemail.aspx>.
McMillan s'engage a vous envoyer des communications electroniques appropriees
pour vous et votre entreprise. Pour vous abonner et recevoir des
communications electroniques de notre part, ou pour vous ctesabonner et ne plus
recevoir de telles communications, veuillez visiter le centre d'abonnernent en
ligne de McMillan <http://www.mcmillan.ca/subscribeernail.aspx>.
TAB D
2~
Appendix "D"
Revised Notices
2?
RE:SHS
Brett Harrison
to: [email protected]
03/04/2015 02:14PM
Cc Mica J. Arlette, "Stephen Brown-Okruhlik"
This message has been replied to.
History:
2 attachments
~
Notice of l'ppointment for Examinatior;rhen Verhoef!) ret. March 9. 2....pdf
EJ
Notice of !'ppointment for Examination (Paul Verhoef!) ret. March 9. 2D15....pdf
I just wanted to follow up on my email below. Attached are the revised Notices of Appointment for
Examination for March 9. Please let me know if your clients will be in a position to provide any of the
requested documents prior to the examination.
Thanks,
mcmillan
Brett Harrison
Partner
d 416.865.7932
brett. harrison@ mcmi II an .ca
Assistant: Wilma Leo
1
416.865.7852
I
[email protected]
,_·orvnDENTIAL!TY NOnCE: Thi·; email, inc!uamn any attachments, may r:ontwfn infOrmation that rs conf:dentiai and privi/c:necl. Any
c. l'i'f!J'in9 or use i.J{ U11s C'rTJilil rs J!rohiiJI!cJ Jr \i<JU c~re n~Jt /ftc• ll!lcndi~r! r,•ci(Jicnt, n!casc nuti{y us h}' rq1/y Cll'idil
G!' rc'f•?,r;!wnc caii atlti fJ<-'1 t:1,Jr:r;:IJUV d.::lete this email and any r:opiC:::: Immcdi,Jteiy,
!lfldt/UJr;t 17\'li cir~T:'c;:.ul
From: Brett Harrison
Sent: Monday, March 02, 2015 3:45PM
To: [email protected]
Cc: [email protected]
Subject: SHS
Max,
I spoke to Mica and it sounds as there has not been a resolution of the outstanding issues. As a result, I
just wanted to confirm that the s. 163 examinations of your client will be held at our offices
commencing at 10 am on March 9. To the extent possible it would be helpful to have the documents
requested before that.
I also wanted to provide you with a copy of the Statement of Claim which we have issued regarding the
3o
dividend payments. Given that the tolling agreement was not signed last week we had it issued on
Friday to address any possible limitation issues there may be. Please let me know if you have any
questions regarding the claim.
Thanks,
mcmillan
Brett Harrison
Partner
d 416.865.7932
1 f 416.865.7048
[email protected]
Assistant: Wilma Leo 1 416.865.7852 I [email protected]
McMillan LLP
Lawyers 1 Patent & Trade-mark Agents
Brookfield Place, 181 Bay Street, Suite 4400
Toronto, Ontario MSJ 2T3
mcmillan.ca
C:Oi'VInr:r,'TJAl.lT':' NOTJCE: Thi:: emaJ!. !ncftn1ir~<;
attachments, :nzw cont.:;m ,n(a:rnDtion that,,: con/identt,-;l and privile.;ed. Any
•r•tdui:'u:r•.·ctf t!isch,surt.'. (t)i'VIi'~l or U."'' 1:1 /!;(•,
is mowi-•.•/,•;J. rr you drr~ nul lin: inU:ndc•d n;r;,rient, 1-'i•~.-~::e :1otdv u.'· f)y tl.'f)iv un,-:i/
,;1 :e/:_onhunr" ::a!! and permanently cir::!r;r,' !his <.'mat/ and anv cop;es i.·nrn<O'diatelv.
McMillan is committed to providing electronic communications that are
relevant to you and your business. To sign up to receive other electronic
communications from us or to unsubscribe from receiving electronic messages
sent on behalf of McMillan, please visit the McMillan Online Subscription
Centre <http://www.mcmillan.ca/subscribeemail.aspx>.
McMillan s'engage a VOUS envoyer des communications electroniques appropriees
pour vous et votre entreprise. Pour vous abonner et recevoir des
communications electroniques de notre part, ou pour vous ctesabonner et ne plus
recevoir de telles communications, veuillez visiter le centre d'abonnement en
ligne de McMillan <http://www.mcmillan.ca/subscribeemail.aspx>.
3/
Estate no. 25-094462
ONTARIO
SUPERIOR COURT OF JUSTICE
IN BANKRUPTCY AND INSOLVENCY
IN THE MATTER OF THE BANKRUPTCY OF
SHS Services Management Inc./Gestion des Services SHS Inc.
of the City of Toronto, in the Province of Ontario
NOTICE OF APPOINTMENT FOR EXAMINATION
TO: PAUL VERHOEFF, former director ofSHS Services Management Inc./Gestion des
Services SHS Inc., a bankrupt
UnitH
7003 - 5th Street SE
Calgary, AB
T2H2G2
YOU ARE REQUIRED TO ATTEND FOR AN EXAMINATION pursuant to
subsection 163(1) of the Bankruptcy and Insolvency Act on Monday, March 9, 2015, at
10:00 a.m. at the office of McMillan LLP, Suite 4400, 181 Bay Street, Toronto,
Ontario, M5J 2T3.
YOU ARE REQUIRED TO BRING WITH YOU and produce at the examination the
following documents and things referred to in:
All books, documents, correspondence or papers in your possession or power
relating in all or in part to payments made by the Bankrupt to Installation
Services Org. Ltd. ("ISO"), Paul Verhoeff SHS Trust; Stephen Verhoeff SHS
Trust; Clemco SHS Inc.; or Theresa Lea SHS Trust (the "March 2013
Payments"), or the approximately $2 million paid by the Bankrupt in
December 2013 for employee related expenses, and more particularly, the
documents referred to in Schedule "A" attached.
Date: March 9, 2015.
MCMILLAN LLP
Barristers & Solicitors
181 Bay Street, Suite 4400
Toronto, ON M5J 2T3
Brett Harrison
tel: 416.865.7932
fax: 416.865.7043
email: [email protected]
Solicitors for the Trustee
32
Schedule "A"
You are required to bring with you as a former officer and/or director of SHS
Services Management IncJGestion des Services SHS Inc. ("SHS") and produce at the
examination the following without limitation:
1. Any shareholder agreements related to SHS or ISO.
2. Particulars of all shareholder loans made and/or repaid.
3. All correspondence related to the payment of dividends by SHS in the
course of its operations.
4. All con·espondence related to payments made by SHS in the month
preceding the appointment of an interim receiver on December 13, 2013.
5. All correspondence related to the repayment terms of the equity and debt
financing of SHS under the Asset Transfer Agreement dated December 20,
2012.
6. All correspondence related to the repayment oflSO for monies advanced to
SI-IS.
7. Any documents evidencing the relationships between ISO and Paul
Verhoeff and Stephen Verhoeff.
8. All correspondence related to payments made in March of2013 pursuant to
the Contribution Agreement dated March 1, 2013.
9. All documentation evidencing the amount of initial funding received by
SHS in March of 20 13 from all sources, including the use of use such funds
l 0. All correspondence and documentation related to payments made to
shareholders of SHS or ISO.
11. All correspondence and documentation related to BDC Investment No.
047097-01 being a loan from Business Development Bank of Canada to
ISO, which was repaid on !SO's behalf by SHS on March 4, 2013.
12. Any evidence of costs incuned by ISO on behalf of SHS at any time, and
the reimbursement of same (where made) by SHS.
13. Any evidence or analysis made in respect of the nature and
purpose of the dividend payments by SHS in March 2013,
including but not limited to the use of these funds for purposes
ofiSO.
14. All correspondence discussing potential Director or Officer
liability.
15. The Business Plan presented to Sears Canada Inc. at the time of
the acquisition of SHS evidencing the funds required for the
initial funding of SHS.
16. All documentation evidencing the $15M minimum threshold
for investments made by Alaris Royalty Corp ..
Estate no. 25-094462
ONTARIO
SUPERIOR COURT OF JUSTICE
IN BANKRUPTCY AND INSOLVENCY
IN THE MATTER OF THE BANKRUPTCY OF
SHS Services Management lnc./Gestion des Services SHS Inc.
of the City ofToronto, in the Province of Ontario
NOTICE OF APPOINTMENT FOR EXAMINATION
TO: STEPHEN VERHOEFF, former director of SHS Services Management Jnc./Gestion
des Services SHS Inc., a bankrupt
UnitH
7003 - 5' 11 Street SE
Calgary, AB
T2H2G2
YOU ARE REQUIRED TO ATTEND FOR AN EXAMINATION pursuant to
subsection 163(1) of the Bankruptcy and Insolvency Act on Monday, March 9, 2015, at
I 0:00 a.m. at the office of McMillan LLP, Suite 4400, 181 Bay Street, Toronto,
Ontario, M5J 2T3.
YOU ARE REQUIRED TO BRING WITH YOU and produce at the exan1ination the
following documents and things referred to in:
All books, documents, correspondence or papers in your possession or power
relating in all or in part to payments made by the Bankrupt to Installation
Services Org. Ltd. ("ISO"), Paul Verhoeff SHS Trust; Stephen Verhoeff SHS
Trust; Clem co SHS Inc.; or Theresa Lea SHS Trust (the "March 2013
Payments"), or the approximately $2 million paid by the Bankrupt in
December 2013 for employee related expenses, and more particularly, the
documents referred to in Schedule "A" attached.
Date: March 4, 2015.
MCMILLAN LLP
Barristers & Solicitors
181 Bay Street, Suite 4400
Toronto, ON M5J 2T3
Brett Ha!Tison
tel: 416.865.7932
fax: 416.865.7043
email: [email protected]
Solicitors for the Trustee
Schedule "A"
You are required to bring with you as a former officer and/or director of SHS
Services Management lnc./Gestion des Services SHS inc. ("SHS") and produce at the
examination the following without limitation:
I. Any shareholder agreements related to SHS or ISO.
2. Particulars of all shareholder loans made and/or repaid.
3. All correspondence related to the payment of dividends by SI-IS in the
course of its operations.
4. All correspondence related to payments made by SHS in the month
preceding the appointment of an interim receiver on December 13, 2013.
5. All correspondence related to the repayment terms ofthe equity and debt
financing of SHS under the Asset Transfer Agreement dated December 20,
2012.
6. All correspondence related to the repayment ofiSO for monies advanced to
SHS.
7. Any documents evidencing the relationships between ISO and Paul
V erhoeff and Stephen Verhoeff.
8. All correspondence related to payments made in March of 2013 pursuant to
the Contribution Agreement dated March I, 2013.
9. All documentation evidencing the amount of initial funding received by
SHS in March of2013 from all sources, including the use of use such funds
I 0. All conespondence and documentation related to payments made to
shareholders of SHS or ISO.
II. All correspondence and documentation related to BDC Investment No.
047097-01 being a loan from Business Development Bank of Canada to
ISO, which was repaid on ISO's behalf by SHS on March 4, 20\3.
12. Any evidence of costs incuned by ISO on behalf of SHS at any time, and
the reimbursement of same (where made) by SHS.
13. Any evidence or analysis made in respect of the nature and
purpose of the dividend payments by SHS in March 2013,
including but not limited to the use of these funds for purposes
ofiSO.
14. All correspondence discussing potential Director or Officer
liability.
15. The Business Plan presented to Sears Canada Inc. at the time of
the acquisition of SHS evidencing the funds required for the
initial funding of SHS.
16. All documentation evidencing the $15M minimum threshold
for investments made by Alaris Royalty Corp ..
TAB E
37
Appendix "E"
Statement of Claim
Wilma Leo
From:
Sent:
To:
Cc:
Subject:
Attachments:
Brett Harrison
Monday, March 02, 2015 3:45 PM
[email protected]
[email protected]
SHS
SOC- PwC v. Verhoef! et al .. pdf
Max,
I spoke to Mica and it sounds as there has not been a resolution of the outstanding issues. As a result, I just wanted to
confirm that the s. 163 examinations of your client will be held at our offices commencing at 10 am on March 9. To the
extent possible it would be helpful to have the documents requested before that.
I also wanted to provide you with a copy of the Statement of Claim which we have issued regarding the dividend
payments. Given that the tolling agreement was not signed last w~ek we had it issued on Friday to address any possible
limitation issues there may be. Please let me know if you have any questions regarding the claim.
Thanks,
mcmillan
Brett Harrison
Partner
d 416.865.7932 I f 416.865.7048
[email protected]
Assistant: Wilma Leo
I 416.865.7852 I [email protected]
McMillan LLP
Lawyers 1 Patent & Trade-mark Agents
Brookfield Place, 181 Bay Street, Suite 4400
Toronto, Ontario MSJ 2T3
mcrnill~n.ca
:.•. ·1.';.-s_! .'I__ ,~;~ ;.:1,:. i ;>- .'l:t_l J'iC[; ·1 J,:·.: (:;1·;_1,1, l!;c/,Hfln,, nr~v au._;r)t:,·!·'nf's. mvy (t>t!l;;rn !f>!t_wm,;t;(•!l til~it· ~~_. conti(/0;1!:1<!1 -:111t1 J.•rivt!C~i·.'~l- A'"~Y {/fl(1,/t/Jonz::ru
:;,.,.,.,._ ::r';'> .. ,., -..·.- fl.';ot.' -:1t n,;_, •.'•'li!il 1:, P''Ot!iil•r(•,J !I ;·1:11 ,;r.: n~:;· tilr.' •nl•;•u}..•,·.: ,,:·ci;Ji<:•:Jf'. r;lf':%·(! nofi!'y us h':' tepl~, v1n.W (II' f.(~.',;ph,)i!,? (\."t(! i/.t •.'i
·
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1
31
Court File No.
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
·.: .·. -. P)U,CEWATERHOUSECOOPERS INC., in its capacity as Trustee in Bankruptcy of
SHS•SE}<VICES MANAGMENT INC./GESTION DES SERVICE SHS INC. and SHS
-,
SERVICES LJMlTED PARTNERSHIP
Plaintiff
:.'.·.
-and~''
_,· -·
~.AUL
VERHOEFF, STEPHEN VERHOEFF, THERESA LEA, MICHAEL
•
.._ I
,
, _9-J:::EMENTS, PAUL VERHOEFF SHS TRUST, STEPHEN VERHOEFF SHS TRUST,
·CLEM CO SHS INC., THERESA LEA SHS TRUST and INSTALLATION SERVICE
ORG.LTD
Defendant
._
STATEMENT OF CLAIM
TO THE DEFENDANTS
A LEGAL PROCEEDING HAS BEEN COMMENCED AGAINST YOU by the
plaintiff. The claim made against you is set out in the following pages.
IF YOU WISH TO DEFEND TillS PROCEEDING, you or an Ontario lawyer
acting for you must prepare a statement of defence in Form 18A prescribed by the Rules
of Civil Procedure, serve it on the plaintiff's lawyer or, where the plaintiff does not have
a lawyer, serve it on the plaintiff, and file it, with proof of service, in this court office,
WITHIN TWENTY DAYS after this statement of claim is served on you, if you are
served in Ontario.
If you are served in another province or territory of Canada or in the United
States of America, the period for serving and filing your statement of defence is forty
days. If you are served outside Canada and the United States of America, the period is
sixty days.
Instead of serving and filing a statement of defence, you may serve and file a
notice of intent to defend in Form l8B prescribed by the Rules of Civil Procedure. This
will entitle you to ten more days within which to serve and file your statement of
defence.
IF YOU FAIL TO DEFEND TillS PROCEEDING, JUDGMENT MAY BE
GIVEN AGAINST YOU IN YOUR ABSENCE AND WITHOUT FURTHER NOTICE
-2-
TO YOU. IF YOU WISH TO DEFEND THIS PROCEEDING BUT ARE UNABLE TO
PAY LEGAL FEES, LEGAL AID MAY BE AVAILABLE TO YOU BY
CONTACTING A LOCAL LEGAL AID OFFICE.
IF YOU PAY THE PLAINTIFF'S CLAIM, and $5,000 for costs, within the time
for serving and filing your statement of defence, you may move to have this proceeding
dismissed by the court. If you believe the amount claimed for costs is excessive, you
may pay the plaintiff's claim and $400.00 for costs and have the costs assessed by the
court.
TAKE NOTICE: THIS ACTION WILL AUTOMATICALLY BE DISMISSED
if it has not been set down for trial or terminated by any means within five years after the
action was commenced unless otherwise ordered by the court.
J·V
Date
February /11,2015
Local registrar
Address of 393 University Avenue
court office lOth Floor
Toronto, Ontario
M5G IE6
TO:
PAUL VERHOEFF
I 0900- 46 Street SE
Calgary, AB T2C !6Y
AND TO:
STEPHEN VERHOEFF
I 0900 - 46 Street SE
Calgary, AB T2C 16Y
AND TO:
MICHEAL CLEMENTS
222 Cranleigh View SE
Calgary, AB T3M OA2
AND TO:
THERESA LEA
I 0900 - 46 Street SE
Calgary, AB T2C 16Y
AND TO:
INSTALLATION SERVICES ORG. LTD
2800, 715- 5TH AVENUE SW
Calgary, AB T2P 2X6
- 3-
CLAIM
1.
The Plaintiff, PricewaterhouseCoopers Inc. ("PwC" or the "Trustee") in its
capacity as trustee in bankruptcy of SHS Services Management Inc./Gestion des
Services SHS ("SHS") and SHS Services Limited Partnership ("SHS LP"), claims
against all of the Defendants:
(a)
that dividend payments declared by the directors of SHS on March 4,
2013
totalling
$8,000,000
(the
"Dividends")
were
fraudulent
conveyances under the Fraudulent Conveyance Act (Ontario);
(b)
in the alternative, that the Dividends were fraudulent conveyances under
the Frmtdulent Preferences Act (Alberta), and the Statute ofElizabeth;
In accordance with subparagraphs (a) and (b) the Plaintiff seeks an order:
(c)
declaring that the Dividends were fraudulent transactions;
(d)
declaring that the Dividends are void or voidable as against the Trustee;
and
(e)
requiring the Defendants to immediately repay to SHS in cash all
amounts paid in accordance with Tranche 2 (as defined below) of the
Dividends.
2.
As against the Defendants Paul Verhoeff, Stephen Verhoeff and Micheal
Clements (the "Directors") the Plaintiff claims:
(a)
that the declaration of the Dividends by the Directors was oppressive,
unfairly prejudicial to and disregarded the interests of the creditors of
SHS (the "Creditors"); and
(b)
further and in the alternative, that in relation to the Dividends and, the
Directors are liable for breach of fiducia1y duty and!or failing to exercise
care, diligence and skill that a reasonably prudent person would exercise
in pe1forming their duties on behalf of SHS;
- 4-
In accordance with subparagraphs (a) and (b) the Plaintiff seeks an order:
(c)
declaring that the Trustee has standing to bring a claim against the
Directors for oppressive conduct in accordance with sections 23 8 and 241
of the Canada Business Corporations Act ("CBCA");
(d)
declaring that the conduct of the Directors was oppressive or unfairly
prejudicial to or disregarded the interests of the Creditors;
(e)
setting aside the Dividends and declaring that SHS is entitled to be
compensated for the loss of $3,000,000 in accordance with Section
241(3)(h) and G) of the CECA;
(f)
declaring that the Directors are jointly and severally liable to SHS in the
amount of $3,000,000 in relation to the Dividends;
(g)
such further and other relief to remedy the oppressive conduct of the
Directors as may be fit and proper in the circumstances.
3.
As against the Defendants Paul Verhoeff SHS Trust, Stephen Verhoeff SHS
Trust, Clemco SHS Inc. and Theresa Lea SHS Trust (collectively, tl1e "Shareholders")
and Installation Services Org. Ltd. ("ISO") the Plaintiff claims:
(a)
that the Defendant Shareholders and ISO are constructive trustees of the
Dividends and that the Dividends are held in trust for SHS;
(b)
that the Plaintiff has an equitable or beneficial interest in the Dividends or
any assets acquired by the Defendant Shareholders with money paid to
them pursuant to the Dividends;
(c)
that as a result of the Dividends the Shareholders and ISO were unjustly
enriched at the expense of SHS and the Creditors; and
(d)
that the Defendant ISO is in knowing receipt of money impressed with a
constructive trust; and
Lf3
-5-
(e)
that the Defendant Shareholders or ISO hold money that is impressed
with a constructive trust for the benefit of SHS.
In accordance with subparagraphs (a) to (e) the Plaintiff seeks an order:
(f)
declaring that the Defendant Shareholders and ISO are in knowing receipt
of$3,000,000, which is trust property belonging to SHS;
(g)
declaring that the Defendant Shareholders and ISO were unjustly
enriched to the detriment of SHS and the Creditors in the amount of
$3,000,000;
(h)
declaring that $3,000,000 in the possession ofiSO is impressed upon with
a constructive trust;
4.
In relation to all of the relief sought above, the Plaintiff seeks an order for:
(a)
pre and post-judgment interest in accordance with the provisions of the
Courts ofJustice Act, R.S.O. 1990, c. C.43;
(b)
its costs in this action; and
(c)
such further and other relief as this Honourable Court may deem just.
THE PARTIES
5.
The Plaintiff PwC was appointed interim receiver of SHS and SHS LP pursuant
to an order of Regional Senior Justice Morawetz on December 13, 2013 (the "Interim
Receivership Order"). PwC was subsequently appointed receiver of SHS and SHS LP
by an order of Justice Brown on January 9, 2014 (the "Receivership Order") and
trustee in bankruptcy of SHS and SHS LP by order of Justice Wilton-Siegel on July 31,
2014 (the "Bankruptcy Order").
6.
The bankrupt SHS is a corporation incorporated pursuant to the CECA.
- 6-
7.
The bankrupt SHS LP is a Limited Partnership formed pursuant to the
Partnerships Act (Alberta), in which SHS is the general partner and Alaris Income
Growth Partnership ("Aiaris") is a limited partner.
8.
The Defendant Paul Verhoeff is an individual, residing m the province of
Alberta.
9.
The Defendant Stephen Verhoeff is an individnal residing in the province of
Albe1ta.
I 0.
The Defendant Theresa Lea ("Lea") is an individual residing in the province of
Alberta.
II.
The Defendant Michael Clements ("Clements") is an individnal residing in the
province of Alberta.
I2.
Paul Verhoeff and Stephen Verhoeff were directors of SHS from the time SHS
was frrst established until their resignation in or around October of2013. Clements was a
director of SHS from the time SHS was established until his resignation shortly after the
granting of the Interim Receivership Order. Collectively, Paul Verhoeff, Stephen
Verhoeffand Clements are the "Directors".
!3.
The Defendant Paul VerhoeffSHS Trust is a trust controlled by Paul Verhoeff.
14.
The Defendant Stephen Verhoeff SHS Trust is a trust controlled by Stephen
Verhoeff.
IS.
The Defendant Clemco SHS Inc. is a corporation. Clements is the sole principal
of Clemco SHS Inc.
16.
The Defendant Theresa Lea SHS Trust is a tmst controlled by Lea.
I7.
Together, Paul Verhoeff SHS Trust, Stephen Verhoeff SHS Trust, Clemco SHS
Inc. and Theresa Lea SHS Trust were the shareholders of SHS (the "Shareholders").
-7-
18.
The Defendant Installation Services Org. Ltd. ("ISO") is a corporation
incorporated under the laws of Alberta. Paul Verhoeff is a beneficial mvner of shares in
ISO. Lea is the current or former Acting Vice-President ofiSO.
BACKGROUND TO THE CREATION OF SHS AND SHS LP
19.
In 2012 Sears Canada Inc. ("Sears") and the Directors entered negotiations to
outsource certain of Sears' home installation services. As a consequence of these
negotiations, SHS was incorporated on November 19, 2012.
20.
SHS LP was formed pursuant to a limited partnership agreement between SHS
and Alaris, dated February 25,2013 (the "Limited Partnership Agreement").
21.
On December 20, 2012 SHS entered into a branded concession agreement with
Sears governing the business, assets, property and undertakings of SHS and SHS LP (the
"BCA").
22.
Under the BCA, SHS acquired the right from Sears to provide certain products
and services under the Sears brand name through prescribed channels in designated
markets.
23.
In conjunction with the BCA, Sears and SHS executed an asset transfer
agreement on December 20, 2012 (the "ATA") and a vendor take-back loan agreement
(the "VTBA"). Under the ATA, SHS acquired certain property from Sears. Under the
VTBA, Sears loaned SHS $5,676,525.80 (the "Sears Loan").
24.
In connection with the ATA, BCA and related agreements, SHS agreed to
maintain at all times a minimum of debt and equity financing of$18,000,000 (the "Debt
and Equity Obligations").
25.
In addition to the money borrowed under the VTBA, SHS borrowed $15,000,000
from Alaris (the "Alaris Loan") to meet its initial financing
requirement~.
The Alaris
loan was secured by ISO under an indenmity and guarantee dated March 1, 2013.
- 8-
26.
The transition of ownership of the rights and assets governed by the BCA to SHS
occurred on March 3, 2013.
27.
On March 4, 2013 SHS received $15,000,000 of cash from Alaris, being the full
amount of the Alaris Loan.
IMPROPER DIVIDEND PAYMENTS
28.
Also on March 4, 2013, the first day of SHS's operations, the Directors declared
the Dividends.
29.
The Dividends were paid in two !ranches, Tranche 1 and Tranche 2.
30.
Under Tranche 1, $5,000,000 was distributed to the Shareholders as follows:
31.
32.
(a)
$1,587,000 to Paul VerhoeffSHS Trust
(b)
$1,587,000 to Stephen VerhoeffSHS Trust
(c)
$1,587,000 to Clemco SHS Inc.
(d)
$239,000 to the Theresa Lea SHS Trust
Under Tranche 2, $3,000,000 was distributed to the Shareholders as follows:
(a)
$952,200 to Paul VcrhoeffSHS Trust
(b)
$952,200 to Stephen VerhoeffSHS Trust
(c)
$952,200 to Clemco SHS Inc.
(d)
$143,400 to the Theresa Lea SHS Trust
The Trustee has been advised that the money received by the Shareholders under
the Tranche I distribution was invested in shares of Alaris (the "Alaris Shares"). The
Alaris Shares were later transferred to SHS.
tf7
- 9-
33.
The Trustee has been advised that the money received by the Shareholders under
the Tranche 2 distribution was used by the Shareholders to pursue various opportunities
and to cover various liabilities relating to their interests in ISO.
34.
The $3,000,000 distributed by SHS to the Shareholders under Tranche 2 of the
Dividends was never returned to SHS in cash or in kind. SHS never received any
compensation, consideration, asset, benefit or advantage as a consequence of or in
relation to Tranche 2 of the Dividends.
35.
Payment of the Dividends significantly diminished the liquidity position of SHS
and violated the Debt and Equity Obligations.
36.
In June of 2013 Sears discovered the violation of the Debt and Equity
Obligations after reviewing the financial statements of SHS. Sears responded by issuing
a notice of breach to SHS.
EARLY REPAYMENT OF THE SEARS LOAN
37.
In early September of 2013 SHS repaid the Sears Loan in full pursuant to an
early payment option under the VTBA despite its ongoing liquidity problems (the
"Early Repayment"). The Sears Loan was not yet due at that time.
38.
Following payment of the Dividends and the Early Repayment, by October of
2013 SHS faced the prospect that it would be unable to meet its obligations as they came
due and would therefore become insolvent. On October 31, 2013 SHS received an
emergency loan of $4,000,000 from Sears and Alaris to relieve its liquidity troubles (the
"Emergency Loan").
- 10-
PREFERENTIAL PAYMENTS ON THE EVE OF INSOLVENCY
39.
In the week preceding the Interim Receivership Order, the Directors caused
payments in the approximate amount of $2,500,000 by SHS to employees and trade
creditors ofSHS to cover various ofSHS's liabilities (the "Preferential Payments").
40.
Had the Preferential Payments not been made, the employees and trade creditors
of SHS would have been entitled to lesser amounts under the distribution scheme of the
Bankruptcy and Insolvency Act than they received. The Directors believed that they
could be personally liable to the employees and trade creditors of SHS for shortfalls in
the amounts paid to these parties after SHS became insolvent.
41.
The Directors caused the payment of the Preferential Payments so as to avoid
personal liability to employees and trade creditors of SHS following its insolvency.
42.
Fmther particulars of the Preferential Payments will be provided prior to trial.
INSOLVENCY OF SHS AND SHS LP
43.
Despite the Emergency Loan, SHS faced imminent default on certain financial
obligations in December of2013.
44.
On December 13, 2013, Regional Senior Justice Morawetz granted the Interim
Receivership Order.
45.
On January 9, 2014, Justice Brown granted the Receivership Order.
46.
On July 31, 2014, Justice Wilton-Siegel granted the Bankruptcy Order.
THE DIVIDENDS WERE FRAUDULENT CONVEYANCES
4 7.
The Directors declared the Dividends with the intention to defeat, hinder, delay
or defraud the Creditors. Accordingly, the Dividends constituted fraudulent conveyances
pursuant to the Fraudulent Conveyances Act (Ontario). Alternatively, the Dividends
constituted fraudulent conveyances pursuant to the Fraudulent Preferences Act (Alberta)
and the Statute ofElizabeth.
- II -
48.
The Dividends bear a number of the badges of fraud, including:
(a)
The fmancial situation of SHS on March 3, 2013 did not favour the
declaration of the Dividends.
(b)
The Dividends were paid on the first day of SHS' s operations, at a time
when SHS was indebted to numerous creditors.
(c)
SHS had not accumulated any profits at the time that the Dividends were
paid that would justify the payment.
(d)
At the time of the payment of the Dividends, SHS required considerable
liquidity to support its business operations. Payment of the Dividends put
undue pressure on the financial resources of SHS in its first year of
operations.
(e)
SHS required emergency loans within six months of the payment of the
Dividend~.
(f)
The Dividends caused SHS to violate the Debt and Equity Obligations.
(g)
The Directors, who declared the Dividends, were also the direct and
indirect financial beneficiaries of the Dividends. The Shareholders and
the Directors are related parties. The Dividends constituted transfers
between related parties.
(h)
The benefit received by the Directors was unrelated to any servtce
provided to SHS or performance of their duties as directors of SHS.
(i)
The effect of the Dividends was to strip SHS of property that would
otherwise have been available to the Creditors.
G)
The Dividends were declared and paid in secrecy. The Trustee has been
advised by Sears that it was only upon reviewing the financial statements
of SHS and upon making requests for further information that Sears was
- 12-
alerted to the fact that SHS had paid the Dividends and violated the Debt
and Equity Obligations.
(k)
The Directors continue to benefit from the transferred property. The
Tranche 2 payments were never returned to SHS and were used for
various purposes that benefitted the Directors personally.
(1)
The Dividends were declared and paid with unusual haste. The Dividends
were declared on SHS's first day of operations.
(m)
The effect of the Dividends is to deprive the Creditors of $3,000,000 that
would otherwise form part of SHS 's estate.
THE DIRECTORS BREACHED THEIR FIDUCIARY DUTY
49.
The Plaintiff pleads that the Directors breached their fiduciary duty by declaring
the Dividends and causing the Preferential Payments.
50.
The fiduciary duty required the Directors to act in the best interests of SHS while
managing and directing SHS's finances and not in their own self-interest. By declaring
the Dividends and causing the Preferential Payments, the Directors acted to advance
their own self-interest to the detriment ofSHS and its stakeholders.
5L
The fiduciary duty required the Directors to consider the interests of all of SHS's
stakeholders, including the Creditors. The Directors breached their fiduciary duty by
failing to consider the interests of the Creditors when they declared the Dividends and
causing the Preferential Payments.
THE DIRECTORS BREACHED THEIR DUTY OF CARE BY DECLARING
THE DIVIDENDS AND CAUSING THE EARLY REPAYMENT
52.
The Plaintiff pleads that Directors at all times owed a duty of care to SHS, which
required them to exercise reasonable skill and care in administering the assets of SHS.
51
- 13-
53.
The Directors were aware that SHS was bound by the Debt and Equity
Obligations. The Directors knew or ought to have known that it was necessary to
maintain a cet1ain threshold of equity in SHS for it to carry on business.
54.
It was foreseeable that the Dividends would deprive SHS of liquidity and
undermine its operations in its first year of business.
55.
The Early Repayment was deleterious to the financial well-being of SHS. The
Early Repayment was unnecessary and did not benefit SHS.
56.
The Early Repayment contributed significantly to the fmancial hardships of SHS,
which ultimately resulted in its insolvency and bankruptcy.
57.
The Early Repayment was clearly contrary to the best interests of SHS.
58.
Causing the Early Repayment was not a decision that was within a range of
reasonable decisions available to the Directors in the circumstances.
59.
By causing the Early Repayment, the Directors failed to meet the standard of
care expected of a reasonable person exercising the responsibilities of a director of SHS
in the circumstances.
60.
The Directors are liable to SHS and the Creditors for breaching their duty of care
in relation to the Dividends and the Early Repayment.
PAYMENT OF THE DIVIDENDS WAS OPPRESSIVE
61.
The Plaintiff pleads that the actions of the Directors in relation to the Dividends
constituted oppressive conduct within the meaning of Section 241 of the CBCA.
62.
Payment of the Dividends was unfairly prejudicial to the interests of SHS by
depriving it of much needed liquidity. It was in SHS's best interest to maintain adequate
liquidity to carry on business particularly through the uncertainty of its first year of
operation.
- 14-
63.
The Creditors had an interest in SHS remaining solvent so that it could meet its
liabilities to the Creditors as they came due. By stripping the assets out of SHS, and
jeopardizing its solvency, the Directors unfairly prejudiced or disregarded the interests
of the Creditors.
THE SHAREHOLDERS WERE UNJUSTLY ENRICHED
64.
In the alternative to the causes of action plead above, the Plaintiff pleads that the
Shareholders were unjustly emiched by the Dividends to the corresponding deprivation
of the Creditors and that there is no juristic reason for the eurichment.
65.
By virtue of the Dividends, the Shareholders received $8 million from SHS. $3
million of the Dividends - the portion paid under Tranche 2 - were never returned to
SHS.
66.
The Shareholders were emiched collectively in the amount of $3 million by the
Dividends.
67.
The Creditors are deprived of$3 million that would otherwise be payable to them
by SHS or its estate but for the payment of the Dividends.
68.
Under the circumstances of SHS on March 4, 2013, there was no juristic reason
for the payment of the Dividends. SHS had not earned any profits. The payment of a
dividend on the first day of SHS's operations was entirely inappropriate and contrary to
the scheme of the CBCA.
69.
The Plaintiff pleads that the money paid to the Shareholders pursuant to Tranche
2 of the Dividends was and is impressed with a constructive trust in favour of SHS and
the Creditors (the "Trust Money").
ISO IS IN KNOWING RECEIPT OF TRUST FUNDS
70.
Following the receipt of the Trust Money by the Shareholders, the Trustee has
been advised that the Shareholders used the Trust Money for various purposes associated
with their interests in ISO.
- 15-
71.
Some or all of the Shareholders are related parties to ISO.
72.
ISO had real or constructive knowledge that the money received by it from the
Shareholders that was paid to the Shareholders under Tranche 2 of the Dividends was
impressed with a trust in favour of SHS or the Creditors. Accordingly, ISO holds the
Trust Money in constructive trust for the Creditors.
73.
Further particulars of the knowing receipt of ISO of the Trust Money will be
provided prior to trial.
74.
75.
The Plaintiff plead~ and relies upon:
(a)
The Fraudulent Conveyances Act, R.S.O. 1990, c. F.29
(b)
The Fraudulent Preferences Act, R.S.A. 2000, c. F-24
(c)
The Statute ofElizabeth, 13 Eliz 1, c 5
(d)
The Canada Business Corporations Act, R.S.C. 1985, c. C-44, s. 2
(e)
The Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3
(f)
The Courts ofJustice Act, R.S.O. 1990, c. C.43
(g)
The inherent jurisdiction of this Honourable Court.
This claim may properly be served on the Defendants who reside outside of
Ontario pursuant to Rule 17.02 of the Rules of Civil Procedure, as it involves property in
Ontario, contracts made in Ontario, torts committed in Ontario and statutory claims
which may be brought in Ontario.
- 16-
76.
The Plaintiff proposes that this action be tried at Toronto.
February 27, 2015
McMILLAN LLP
Brookfield Place
181 Bay Street, Suite 4400
Toronto, ON, M5J 2T3
Brett Harrison LS#: 44336A
Tel: 416-865-7932
Fax: 647-722-6756
Stephen Brown-OkruhlikLS: 66576P
Tel: 416-865-7043
Fax: 416-865-7048
Lawyers for the Plaintiff
PRICEWATERHOUSECOOPERS INC., in its
capacity as Trustee in Bankmptcy of SHS
SERVICES MANAGEMENT INC./GESTION
DES SERVICE SHS INC., et al
Plaintiff
and
PAUL VERHOEFF, et al
Defendant
Court File No.
Cv ~ f,J- ocJ.c/CfCJ:L
ONTARIO
SUPERIOR COURT OF JUSTICE
Proceeding commenced at Toronto
STATEMENT OF CLAIM
MCMILLAN LLP
Brookfield Place
181 Bay Street, Suite 4400
Toronto, ON, M5J 2T3
Brett Harrison LS#: 44336A
Tel: 416-865-7932
Fax: 647-722-6756
Stephen Brown-Okruhlik
Tel: 416-865-7043
Fax: 416-865-7048
Lawyers for the Plaintiff
~
TAB F
Appendix "F"
March 6 Letter
57
Fwd: In the Matter of the Bankruptcy of SHS Services
Management Inc.
Brett Harrison
to Mica J. Arlette
03/06/2015 06:59 PM
Cc: "Stephen Brown-Okruhlik", "Wael Rostom"
This message has been replied to.
History:
4 attachments
.
ATTODDD1.htm ATTODDD2.htm MyScan.pdf
~.TTOD003.htm
I'm about to get on a flight to Toronto. Can we discuss this tomorrow?
Brett Harrison
Partner
d 416.865.7932
brett. harri son[a),m em i llan.ca
Assistant: Wilma Leo [email protected]
CONFIDENTIALITY NOTICE: This email. including any attachments, may contain information
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Begin forwarded message:
From: <[email protected]>
Date: March 6, 2015 at 4:18:24 PM MST
To: <brett.harrisonlalmcmillan.ca>
Cc: <[email protected]>, <[email protected]>, <
Gordon.Capernlalpaliareroland.com>
Subject: In the Matter of the Bankruptcy of SHS Services Management Inc.
Please see attached correspondence.
Massimo (Max) Starnino
Paliare Roland Rosenberg Rothstein LLP
155 Wellington Street West, 35 '" Floor
Toronto, Ontario, Canada
M5V 3H1
t: 416.646.7431
f: 416.646.4301
c: 416.559.6834
From: Max Starnino [mailto:[email protected]]
Sent: Friday, March 06, 2015 5:55 PM
To: Max Starnino
Subject: Your Scan File Is Attached
Copitrak Scan Notification
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Massimo (Max) Starnino
T
F
E
416.646.7431
416.646.4301
Ass! 416.646.7470
[email protected]
www.paliarerolond.com
March 6, 2015
~~"==
VIA PDF EMAIL
WITH PREJUDICE
File 23199
BARRISTERS
Chris G. Paliare
fan J. Roland
Ken Rosenberg
Linda R. Rothstein
Richard P. Stephenson
Nick Coleman
Margaret L. Waddell
Donald K. Eady
Gordon D. Capern
Lily I. Harmer
Andrew Lokan
John Monger
Odette Soriano
Andrew C. Lewis
Megan E. Shortreed
Massimo Stamina
Karen Jones
Robert A Centa
Nlnl Jones
Jeffrey larry
Kristlan Borg-Ollvler
Emily Lawrence
Denise Sayer
Tina H. Lie
Jean-Claude Killey
Jodi Martin
Michael Fenrick
Jessica Latimer
Debra McKenna
Undsay Scott
Brett G. Harrison,
McMillan LLP
Brookfield Place
181 Bay Street, Suite 4400
Toronto, ON M5J 2T3
Dear Mr. Harrison,
Re:
In the Matter of the Bankruptcy of SHS Services Management
lnc./Gestion des Services SHS Inc.
We are writing in respect of the Notices of Examination of Stephen Verhoeff and
Paul Verhoeff pursuant to s. 163 of the Bankruptcy and Insolvency Act (the
"Examinations"), returnable March 9, 2015, sent to us by email earlier this week.
We confirm that we will not be produG:ing our clients for the Examinations on
March 91h in light of the bankruptcy trustee's disclosure, on Monday of this week,
that it had prepared a statement of claim and that it had issued the claim on
Friday of last week (the "Claim").
As you know, the purpose of a s. 163 examination is to provide information to
assist the trustee in carrying out its duty to administer the bankrupt estate by
collecting the property of the bankrupt and distributing the proceeds to its
creditors; a trustee needs to find out the extent of the property of the bankrupt
and whether there have been dispositions or dealings with that property which
should be challenged (Rieger Printing Ink Co., Re, [2009] O.J. No. 755). It is
also a long established rule in bankruptcy, however, that a trustee will typically
not be entitled to examine a party to an action commenced by the trustee; a
trustee is not entitled to "have anything like a dress rehearsal of the crossexamination in the action." (Franks Ex p. Gittins, Re, [1892] 1 Q.B. 646). It
appears from the Claim that the trustee has all the factual information it needs to
plead a cause of action; indeed it seems likely that the trustee has had this
information for quite some time. In these circumstances, we do not believe that
the trustee should be entitled to examine our clients with respect to the matters
raised in the action.
Alysha Shore
GregoryKo
Denise Cooney
COUNSEL
Stephen Goudge, Q.C.
Robin D. Walker, Q.c.
HONORARY COUNSEL
Jan G. Scott, Q.C., O.C.
(1934 - 2006)
Furthermore, so the point is not lost, it appears to us that the document request
made by the trustee in the Notices of Examination is overbroad, extending
beyond-the scope of s. 163. It is also lacking in any proportionality, and would
require our clients to produce literally hundreds and perhaps thousands of
documents, which would take considerable time to assemble and review at
considerable expense.
PALIARE ROLAND ROSENBERG ROTHSTEIN LLP
155 WELLINGTON STREET WEST 35TH FLOOR TORONTO ONTARIO MSV 3H1 T 416.646.4300
Page 2
We understand that the trustee may have a different view, and may seek an
order compelling our clients' attendance at an examination. Our clients intend to
respond to that motion, and we trust that you will consult us with respect to
scheduling.
We note that we have been consulted by some of the other defendants named in
the Claim in respect of their representation, and we are considering whether we
can represent them as well.
Yours very truly,
PALIARE ROLAND, ROSENBERG ROTHSTEIN LLP
,.·
~
,· ->
_ _:*t~~~- - - - -.. . . . . • -•.-.•-.•.•. ~:)
-
Massimo (Max) Starnino
MS:sp
c:
A. Slaven
D. Nishimura
G. Capern
Client
Doc 1381051 v1
PALIARE ROLAND ROSENBERG ROTHSTEIN LLP
155 WElliNGTON STREET WEST 35TH FLOOR TORONTO ONTARIO M5V 3H1 T 416.646.4300
TAB G
Appendix "G"
Certificates of Non-Attendance
62
Estate No. 25-094462
ONTARIO
SUPERIOR COURT OF JUSTICE
IN BANKRUPTCY AND INSOLVENCY
IN THE MATTER OF THE BANKRUPTCY OF
SHS Services Management Inc./Gestion des Services SHS Inc.
of the City of Toronto, in the Province of Ontario
Certificate of Non-Attendance
I, Robyn Arndt, Examiner, hereby certifY:
That an appointment was issued for the 9th day of March, 2015, at the offices
of McMillan LLP, Suite 4400, Brookfield Place, 181 Bay Street, Toronto, Ontario, at
the hour of 10:00 a.m. for the examination of Paul Verhoeff and Stephen Verhoeff,
former directors of SHS Services Management Inc./Gestion des Services SHS Inc., a
bankrupt.
That at the said last above mentioned time and place, I was attended by
Brett Harrison, from the offices of McMillan LLP, appearing as solicitors for the
Trustee, who waited more than fifteen (15) minutes, but the said Paul Verhoeff and
Stephen Verhoeff did not appear, nor did anyone on their behalf.
Dated at Toronto this 9th day of March, 2015.
TAB 3
63 Estate No. 25-094462
ONTARIO
SUPERIOR COURT OF JUSTICE
IN BANKRUPTCY AND INSOLVENCY
CC/fm
IN THE MATTER OF THE BANKRUPTCY OF SHS Services Management
Inc./Gestion des Services SHS Inc. of the City of Toronto
in the Province of Ontario
- - - - - - - - - This is the Examination of PATRICK ADAM BARNARD
pursuant to subsection 163(1) of the Bankruptcy and
Insolvency Act, taken at the offices of McMILLAN LLP,
Brookfield Place, 181 Bay Street, Suite 440, Toronto,
Ontario, on the 17th day of March, 2015.
- - - - - - - - - APPEARANCES:
BRETT HARRISON
STEPHEN BROWN-OKRUHLIK
PATRICK ADAM BARNARD
-- for SHS Services
Management Inc.
-- Self-represented
64 P.A. Barnard - 2
INDEX OF PROCEEDINGS
PAGE
NUMBER
PATRCIK ADAM BARNARD
Examination by Mr. Harrison
Index of Exhibits
Certificate
3 - 80
81
82
65 P.A. Barnard - 3
1
PATRICK ADAM BARNARD
2
EXAMINATION BY MR. HARRISON:
3
1.
Q.
Hi, my name is Brett Harrison.
I
4
just wanted to do a few preliminary matters before
5
we start.
6
take a break or anything, just let me know.
7
Secondly, just for nomenclature, there are two
8
companies here, SHS Inc. and LP.
9
SHS Inc. "SHS", and the LP, "LP"...
10
11
2.
First, if you want to stop at any time,
I'll be calling
A.
Okay.
Q.
...just to make it easy.
Okay.
12
thank you very much for attending this morning.
13
Just if you could give me your full name for the
14
record, to start.
15
A.
16
17
3.
4.
Thank you.
And where do you reside,
Q.
Toronto.
And I'm just showing you the notice
of appointment for examination that you received?
22
25
Q.
A.
21
24
First name is Patrick, middle name,
Mr. Barnard?
19
23
That would be great.
Adam, last name, Barnard.
18
20
So,
A.
5.
Yes.
MR. HARRISON:
mark that.
Great.
I'm just going to
66 P.A. Barnard - 4
1
---
EXHIBIT NO. 1:
2
Notice of Appointment for
Examination to Mr. Barnard
3
4
BY MR. HARRISON:
5
6.
6
Q.
correct?
7
8
And you're a former employee of SHS,
A.
Q.
And what was your title?
9
A.
Associate vice-president, finance,
10
and administration.
11
7.
Correct.
8.
Q.
And what was the time period of your
12
employment with SHS?
13
A.
14
15
March 2013 through to receivership
at December 13th, 2013, I believe was the dates.
9.
16
Q.
That's it.
December 13th, that's
correct.
17
A.
And then retained by PwC, the
18
receiver, up until late February the following year.
19
So, 2014.
20
10.
21
A.
23
25
And do you currently have access to
any of the document of SHS?
22
24
Q.
So, I did have access to financial
records in the SAP Business One system.
11.
Q.
Right.
But do you currently have
access to any of those documents?
67 P.A. Barnard - 5
1
2
12.
3
4
13.
5
6
7
14.
9
15.
16.
13
Right.
A.
But I do have a USB key...
Q.
Okay.
A.
...with any and all documents that I
Q.
Okay.
A.
So, all of the documents that you
Right.
A.
...I've attached here.
Q.
Okay.
A.
17.
Q.
A.
18.
19
Thank
M'hmm.
Q.
I'm sorry, you have to say yes or
A.
Okay.
Q.
Usually when you respond...you just
no.
20
19.
22
have to articulate yes or no.
23
25
Excellent.
So, you commenced employment, you
17
24
Thank you.
All right.
said, in March 2013?
21
Thank you very much.
Q.
16
18
Okay.
you.
14
15
Q.
had asked for in the letter...
11
12
No.
worked on through my personal email address.
8
10
A.
20.
A.
Yes.
Q.
Did you know any of the officers
directors of SHS before you applied for that
68 P.A. Barnard - 6
1
position?
2
A.
Yes, I knew Michael Strachan, who
3
was the president.
4
as president.
5
21.
6
Q.
And I believe he was an officer
So, you knew him before you applied
for the role with SHS?
7
A.
I didn't actually know he was at SHS
8
when I...it was actually a recruiter that contacted
9
me for the role.
10
11
I didn't apply for the role
directly.
22.
Q.
Okay.
And then when you
12
interviewed, you found out that Mr. Strachan worked
13
at SHS?
14
15
A.
23.
Q.
Yes.
And do you recall when you were
16
contacted about that?
17
A.
That's a great question.
I think I
18
was originally contracted in December of the year
19
prior via the phone, because I remember sitting in
20
the Air Canada lounge waiting for a flight from
21
Toronto to Calgary.
22
at the time, and I had passed on the opportunity at
23
that time, and then they had reached out to me again
24
in the new year.
25
And then we started a dialogue.
I was working for Canadian Tire
I believe it was late January.
69 P.A. Barnard - 7
1
24.
2
Q.
25.
5
6
And you're aware the company
was created on or about March of 2013?
3
4
Okay.
26.
A.
2015?
Q.
No, 2013.
A.
2013, yes.
Q.
Yes, that sounds right.
And do you recall when...were you
7
there at the beginning of March?
8
you started?
9
10
A.
27.
11
Q.
Middle of March.
The reason I ask is because the
funding, the financing...
12
13
Do you know when
28.
A.
Yes.
Q.
...for the original business was
14
completed in early March.
15
some questions about that.
16
you're...so, I'm just trying to get some context
17
about when you started.
18
A.
19
20
Right.
And so I was going to ask
But I don't know what
So, when I arrived, the
money had already transacted through the bank.
29.
21
Q.
Okay.
A.
So, when I arrived...you mean, the
22
first order of business was to reconcile the bank
23
account.
24
25
30.
Q.
Okay.
A.
So, I'm aware of certain cash
70 P.A. Barnard - 8
1
transactions of the bank, but they would have
2
transacted before my day.
3
31.
Q.
Okay.
Well, this would probably be
4
a good time to sort of review what your role was as
5
the VP of finance...
6
A.
7
32.
8
Q.
AVP.
Yes, assitant VP.
So, what were
your responsibilities as AVP?
9
A.
All right, so, you mean...ultimately
10
I was responsible for financial reporting to
11
management and the board of directors.
12
33.
Q.
Right.
A.
Of the Inc. entity.
Q.
Yes.
15
A.
So, no responsibilities for the
16
limited partnership.
17
advise the executive team around, you made financial
18
performance, optimizing leads, lead cash...that's
19
more of the business, the overall business strategy,
20
and basically represent the finance function as we
21
turned around the Sears Home Services Business.
13
14
22
34.
35.
Q.
23
24
25
A.
36.
Q.
Okay.
Run the accounting staff,
Right.
So, who did you report to?
Michael Strachan.
You reported directly to Michael.
71 P.A. Barnard - 9
1
2
37.
3
38.
6
7
39.
8
Q.
Did you have any dotted line
A.
Oh, sorry.
Q.
Lea?
A.
...Lea.
Q.
So, you didn't...you also, you were
A.
40.
11
Q.
Yes.
And do you recall having developed
A.
The business plan was already done
13
before I arrived.
14
author of the document.
41.
16
42.
25
Q.
A.
21
24
Right.
And there is a copy on that USB key,
And would you have reviewed the
business plan when you started?
20
23
I think Michael Clements is the
the original business plan.
19
22
Q.
A.
17
18
Yes, that's...yes.
the business plan for SHS?
12
15
To Theresa...
part of the development of the business strategy?
9
10
Yes.
reporting, or...
4
5
A.
When I did start, yes.
Not before I
started, but when I started.
43.
Q.
Right.
And were you aware that the
business plan was provided to Sears and Alaris?
A.
I came to find that out when we were
in discussions with Sears around false expectations
72 P.A. Barnard - 10
1
2
around the business.
44.
3
4
45.
5
Q.
Right.
A.
Yes.
Q.
Do you recall when that conversation
would have been with Sears?
6
A.
7
early in the process.
8
there, I reviewed the business plan, okay, we have
9
got about a $250 million sales channel.
10
46.
11
We started the conversation very
I mean, when I first got in
Q.
Right.
A.
But then right out of the gate,
12
based on leads, and I put together a high level,
13
fairly detailed forecast.
14
were in the $150 million range.
15
started the negotiations.
16
47.
17
And our sales forecast
So, that's when we
Q.
Right.
A.
But discussions with Sears around
18
this business would be very difficult to turn around
19
with a very narrow sales channel.
20
started June or even late May of that year.
21
the...again, there might be one presentation on
22
there, because I working on it from home at the
23
time.
24
June.
25
48.
So, that probably
And all
And I think that presentation is dated around
Q.
Okay.
73 P.A. Barnard - 11
1
A.
2
of that conversation.
3
49.
Q.
And you can kind of see the context
Sure.
So, as I said, you started in
4
March.
5
sometime in that spring?
6
7
50.
You would have looked at the business plan
A.
Yes.
Q.
And then you, in effect, were stress
8
testing the business plan and basically, when you
9
completed your stress test, it would appear as
10
though the channel was a bit narrower than expected.
11
12
13
A.
Very materially lower than expected,
Q.
Right.
yes.
51.
And do you know when Michael
14
Clements prepared the business plan, what he used as
15
the basis for that plan?
16
17
52.
18
A.
This would be hearsay on my...
Q.
Yes.
Well, no, just...yes, what you
know from...just your knowledge.
19
A.
That's fine.
Is information provided by Sears or
20
around historical information.
21
business plan...if I recall, in the business plan,
22
they looked at historical sales.
23
24
25
53.
When you look at the
Q.
Right.
A.
And I think the fundamental issue
with the business plan was not a clear view as the
74 P.A. Barnard - 12
1
cost structure to support that sales channel.
2
so when you look at Sears historical sales, they
3
were in the north, apparently, allegedly, in the
4
$200 million range.
5
Clements and the board was not unreasonable around
6
the 250 mark.
7
54.
8
9
And
So, an expectation by Mike
Q.
Right.
A.
When we took the business over,
sales channel was, again, if memory serves, was
10
around $7 million.
11
needed, at least, a 12, 13, 14 million dollar sales
12
channel in order to build a $250 million business.
13
Q.
Right.
14
A.
So, there wasn't enough sales in the
15
pipeline, or leads...
16
55.
At that time, you would have
56.
17
Q.
Right.
A.
...in order to generate that sales
18
number.
19
lawyer during this conversation?
20
57.
21
I guess I should ask, should I have a
MR. HARRISON:
second.
22
23
---
DISCUSSION OFF THE RECORD
24
25
BY MR. HARRISON:
Go off the record for a
75 P.A. Barnard - 13
1
58.
Q.
So, you had indicated that you
2
reported to management...you took financial
3
reporting to management?
4
5
A.
59.
6
Q.
And so who...when you say
"management", who would that include?
7
8
9
Yes.
A.
Okay, so, there is the executive
Q.
Right.
A.
So, head by Michael Strachan, and
team.
60.
10
11
Mike Clements, at a large extent.
12
of the...any of the vice presidents in the business.
13
So, that would be Mark Rodrigue was the vice
14
president of sales, Richard Early, vice president
15
human resources, John Jobin, the vice president of
16
merchandising, the associated vice president for IT,
17
Sorin...I don't remember Sorin's last name.
18
61.
Q.
19
A.
And then the rest
M'hmm.
Who else would be on that team, the
20
executive team?
21
president, customer experience, Alexandra F‚lix, I
22
think was her last name.
We ended up...terminated
23
her I think October-ish.
Performance issues.
24
But...
25
62.
Q.
For a duration, her name, vice
So, would you report to Stephen or
76 P.A. Barnard - 14
1
Paul Verhoeff, as well?
2
somebody else?
3
4
63.
5
6
7
Or would that be done by
A.
So, Michael reported to the board?
Q.
Okay.
A.
I would accompany Michael and
present the overall financials.
64.
8
9
Q.
Right.
A.
Obviously forecast and business
strategy.
So, it really came down to...I mean, the
10
executive team, we would meet...we would look at the
11
sales channel, we would looked at leads, number of
12
customers inquiring about it, our conversion ratios.
13
All of the key performance measures that would get
14
us to profitability.
15
with a plan, communicate that plan or articulate
16
that plan back to the board in Calgary.
17
would be, obviously, Stephen, Paul, and Mike
18
Clements.
19
65.
Q.
20
A.
21
22
23
24
25
We would examine them, come up
And that
Right.
And Theresa was on the board as
well.
66.
Q.
Okay.
And so, would you go to
Calgary to do those presentations, or...
A.
alternate.
What we tried to do was we would
They would come to Toronto, we would go
77 P.A. Barnard - 15
1
2
to Calgary kind of thing.
67.
Q.
Okay.
3
those presentations?
4
A.
5
6
And how often would you make
It was supposed to be quarterly, but
when things went...you mean?
68.
7
Q.
Right.
A.
We originally did our...you mean,
8
look at the business, we had a material issue here.
9
We are not going to be able to deliver on the
10
business plan. That is when we started meeting
11
monthly.
12
69.
13
Q.
And that would have been in about
May when you determined...
14
A.
Yes.
And that's why in May, we
15
looked at the business, and we said, "Okay, what can
16
we do to fix the business, and we worked towards
17
that.
18
were tracking towards that business recovery.
19
then we decided to go back to Sears in terms of...we
20
wouldn't...it's not that we wouldn't...we could turn
21
the business around, the question was the cost
22
structure under the deal.
23
services agreement...
24
25
70.
When we realized that the business was...we
Q.
Right.
A.
Right.
But
So, we had a transition
That wasn't going to work
78 P.A. Barnard - 16
1
with this turnaround strategy.
2
back to Sears was to lessen the burden on the
3
transition services agreement, because it was a very
4
high price tag we were paying to Sears...
5
71.
6
7
72.
8
Q.
Right.
A.
...on a monthly basis.
Q.
That would help with cash flow
A.
Yes, exactly.
Q.
Now, you had indicated that when you
issues?
9
10
So, really, the ask
73.
11
started in mid-March, one of the first things you
12
did was reconcile the bank statements to deal with
13
the initial funding?
14
A.
Yes, although it took us until June
15
to figure out all the bank transactions.
16
started the process.
17
74.
Q.
But we
And in mid-March, though, there
18
would only have been about two weeks of operations,
19
correct?
20
transition over until the beginning of March?
21
22
23
24
25
Because the business didn't really
A.
Yes, fair enough.
Yes, about two
Q.
So, can you describe the process of
weeks.
75.
reconciling the funding?
A.
M'hmm.
79 P.A. Barnard - 17
1
76.
2
Q.
walk through, sort of, the...
3
4
And how that...I'm just trying to
A.
77.
Q.
Sure.
My understanding, maybe I'll just
5
describe it, was...
6
A.
Yes.
Q.
...that there was a financing from
7
78.
8
Alaris of approximately $15 million.
9
10
A.
79.
Q.
Yes.
And then there was a vendor take
11
back loan from Sears of just over $5 million,
12
correct?
13
14
A.
80.
Q.
Correct.
Yes.
And so what was the process you went
15
through of reconciling?
16
that came in, payments that went back out again...
17
18
81.
19
Because there was payments
A.
Yes.
Q.
...by way of...to certain
shareholders or their holding trusts?
20
A.
Right.
Q.
So, maybe just walk through that
23
A.
Okay.
24
controller.
21
82.
22
25
process?
83.
Q.
Okay.
So, at this time I hired a
80 P.A. Barnard - 18
1
A.
2
3
Her name is
Laura Tram (phon.)
84.
4
5
So, this is...yes.
85.
6
Q.
Laura Tram?
A.
Yes.
Q.
Thank you.
A.
So, the process we went through is
7
basically isolating all the transactions and putting
8
them into buckets around...to your point, funding as
9
an example.
10
11
hitting the bank account.
86.
12
15
Q.
A.
13
14
So, the $15 million, we could see it
Right.
And then all of a sudden the outflow
of funds?
87.
Q.
Right.
A.
Really, the process came down to
16
myself calling Theresa and saying, "I need some back
17
up for these transactions.
18
There was a few emails.
19
the SHS email server.
20
dates, you'll see, sort of, probably, questions to
21
Theresa saying, like, "What are these transactions?
22
How do I journalize them?
23
reflected in the financials?"
24
described to me, and I'll go through my validation
25
procces in a second.
What do they relate to?"
You probably have access to
If you look back to those
How are they going to be
And then way it was
81 P.A. Barnard - 19
1
Q.
Sure.
2
A.
Was it's not a $15 million
3
investment by Alaris.
The...it was a $7 million
4
investment by Alaris.
So, $15 million, yes, cash,
5
net of the 8.
6
reinvested into Alaris shares.
7
88.
89.
Q.
8
A.
9
Of the 8, I believe it was 5 was
Right.
And then the original...the
remaining 3 was paid out to ISO, Paul, and Stephen
10
as a result of a shareholder recapitalization.
11
repayment of expenses incurred by ISO.
12
understanding, again, I don't...I never got any of
13
the details until actually very, very later in the
14
process.
15
received from Tom...I don't remember Tom's last
16
name.
17
90.
18
And
So, my
And on that file you'll see a document I
He is the in-house counsel.
Q.
A.
Okay.
And that was relating...it was the
19
first time I had heard of an entity called Limited.
20
Or, not Limited, sorry.
21
91.
22
23
24
25
92.
The partnership.
Q.
Right, LP, yes.
A.
Yes.
Q.
Okay.
Well, that is helpful.
maybe we can just break it down.
A.
Sure.
So,
82 P.A. Barnard - 20
1
93.
2
Q.
is two, it seems like, tranches of funding.
3
4
94.
5
6
A.
Yes.
Q.
There is the $5 million...
A.
95.
7
Q.
M'hmm.
...which, as it sounds...Theresa
indicated, was reinvested in Alaris shares?
8
9
So, when you were doing...so, there
96.
A.
Yes.
Q.
Now, my understanding is that those
10
funds came to SHS, were paid out to other
11
individuals, and then it was through them that the
12
investment to Alaris...
13
14
15
Yes, I think it was through their
Q.
Right.
A.
So, Paul, Stephen, Mike's trusts.
Q.
Right.
trusts.
97.
16
17
A.
98.
18
A.
And the trusts purchased the shares.
19
I believe.
20
around that is because the outbound transaction on
21
the bank statement was Verhoeff trust.
22
99.
23
24
25
Again, the only reason I have a sense
Q.
Right.
A.
Yes.
That's the only reason I would
have any indication of that.
100.
Q.
No, and that's my understanding, as
83 P.A. Barnard - 21
1
well.
They went to trusts for each of the
2
Verhoeffs, for Mike Clements and for, actually,
3
Theresa?
4
5
101.
6
7
102.
8
A.
Yes, a smaller amount.
Q.
Yes.
A.
Theresa, yes.
Q.
And was there any discussion about
why that had occurred?
9
A.
At the time, it was...there is only
10
$7 million going into the business.
11
we agreed on with Sears.
12
plan...
13
Yes.
Going back to the business
Q.
Right.
14
A.
...there was $7 million of funding
15
in the business plan.
16
103.
That was what
104.
Q.
It actually makes sense.
But the $5 million flowing from
17
Alaris through to SHS through the trusts, and then
18
back to Alaris...
19
A.
20
21
know that it actually went to Alaris.
105.
22
23
24
25
Well, so, at the time...I did not
Q.
Okay.
A.
So, at the time, it was...no, Alaris
is investing $7 million.
106.
Q.
Right.
A.
The remaining 8 is a shareholder
84 P.A. Barnard - 22
1
recapitalization/repaying ISO for expenses.
2
far as I'm aware at this time, which is all...by
3
this time, I guess, April, is really...it's a $7
4
million investment in the company.
5
107.
Q.
So, as
So, it didn't show up on the books
6
as a...so, there was no indebtedness to Alaris.
7
There is only a $7 million indebtedness?
8
A.
9
Yes.
the financials for the first quarter ended, which,
10
again, is on there.
11
recall my memory.
12
So, when we were going through
108.
13
And I decided to print them to
Q.
Okay.
A.
Saying...working with Theresa,
14
saying, "How do we reflect this transaction on the
15
books."
16
109.
17
18
19
Q.
Right.
A.
Because the financials, you can't
net transactions.
110.
20
Obviously that would not be GAAP.
Q.
No.
A.
Right.
So, the way we end up
21
reflecting it, and I'm showing a...it's on the USB
22
key is, okay, preferred units in the partnership for
23
$15 million, and then we showed dividends for $8
24
million.
25
111.
Q.
Right.
And that's the way that we
85 P.A. Barnard - 23
1
have been talking about this as a dividend.
2
3
112.
A.
Yes.
Q.
But if there is a dividend out to
4
shareholders, then, as you say, you're still showing
5
it on the books and records as a $15 million loan.
6
A.
Yes, but inside of equity.
Q.
Right?
8
A.
Right.
9
investment.
7
10
113.
114.
11
12
115.
13
Q.
Right.
A.
Less $8 million in dividends.
Q.
Right, but the dividend was paid
to...for trusts...
14
15
We have $15 million
A.
116.
16
Q.
Yes.
And what was the explanation for
that dividend at that time to those trusts?
17
A.
Just that at that time it
18
was...because the trusts are repaying ISO for
19
expenses incurred and for a shareholder
20
recapitalization.
21
117.
22
So, there are two components.
So,
it's $5 million.
23
A.
24
25
Q.
But again, I wouldn't have known
about $5 million versus $3 million.
118.
Q.
Oh, it was just $8 million?
86 P.A. Barnard - 24
1
A.
The only thing I knew was $8 million
2
leaving the bank account.
3
of transactions.
4
119.
Q.
5
A.
6
7
There were a whole bunch
Sure.
And the explanation being you have
$7 million to work with, figure it out.
120.
Q.
Right.
And the other 8 was being
8
pulled out for these other reasons, which was the
9
recapitalization...
10
A.
Yes.
Q.
...and the payment of ISO of
11
121.
12
pre-existing expenses that have been...
13
14
122.
A.
Yes.
Q.
Okay.
And was there ever a
15
reconciliation of any of that provided that you are
16
aware of, of...
17
A.
18
19
who got what?
123.
20
22
24
25
Q.
Not just who got what, but...yes,
A.
So, the only reason I got to a why
and why?
21
23
Like where the $8 million...like,
was later down the line.
124.
Q.
Okay.
A.
When I went back to the board and
said, "Guys, at the end of the day, this business is
87 P.A. Barnard - 25
1
2
not going to work".
125.
3
Q.
Right.
A.
"We need either additional
4
investments back in the business, or we need to make
5
some drastic measures around drastic cuts to the
6
costs of this business.
7
126.
8
Q.
A.
9
Okay.
And it only...maybe we will get to
that in a few, but that's when we started to say,
10
"Okay, well, what can we do to recapitalize the
11
business?"
12
that...it came out that, well, actually, there is $5
13
million invested in Alaris shares.
14
127.
15
A.
16
17
Q.
And that's when the conversation
Right.
And that would have been in the
summer, like, July/August time frame.
128.
Q.
Right.
I mean, so, it sounds like
18
you said in May is when you started having these
19
discussions about the fact that the business plan
20
wasn't...the model didn't seem to work because it
21
wasn't in line with actual...
22
23
A.
129.
Q.
Exactly.
And you would have discussions
24
around that time about...you said recapitalizing or
25
some other changes to the business?
88 P.A. Barnard - 26
1
2
130.
A.
M'hmm.
Q.
And...okay.
So, that's...and that's
3
when you became aware that there was this investment
4
that the $5 million had gone to be invested in
5
Alaris shares?
6
A.
M'hmm.
And I think, if memory
7
serves me, the only reason it came up was sort of
8
indirectly, when we met with Alaris.
9
Alaris in Calgary and said, "Here is the business
We met with
10
plan, and here is what the business is doing.
11
by the way, we are forecasting out the next year."
12
131.
13
And
Q.
Right.
A.
And you see the drastic differences.
14
And only...there was a comment being made at that
15
particular meeting where, like, wait a second.
16
There seems like there is other activity going on
17
behind the scenes that I'm not aware of.
18
132.
19
Q.
Right.
A.
That's when I started to probe with
20
Theresa and Tom, specifically Tom, around the nature
21
of this transaction.
22
23
24
25
133.
Q.
Okay.
And was it ever discussed why
the $5 million was...why this transaction occurred?
A.
I think the explanation given was
around tax planning or...
89 P.A. Barnard - 27
1
134.
2
135.
5
6
How would there be a tax...I'm
trying to understand the...
3
4
Q.
136.
A.
By the way, I'm shaking my...
Q.
Yes, yes.
A.
I have no idea...
Q.
I understand you may not know.
All
7
I'm wondering is whether there was ever a discussion
8
amongst the other individuals as to, like, Tom, or
9
Theresa, or anybody else about...does seem like an
10
odd transaction to have funds flow through the
11
business, the trust, back to Alaris.
12
A.
Well, yes, again, I would be
13
completely hypothesizing what the economics of the
14
transaction were.
15
economics, the business funds, $15 million of
16
dividends to Alaris, in terms...interest dividends,
17
preferred shares, therefore deemed dividends.
18
137.
19
20
21
138.
23
25
Q.
Right.
A.
Interest payments.
Right, so, the
business is financing $15 million.
22
24
But if you look at it from pure
Q.
Right.
A.
Right.
Alaris is a royalty trust.
Its job is to invest in companies.
139.
Q.
Right.
A.
Right.
By the sheer fact that it is
90 P.A. Barnard - 28
1
getting now getting money back to reinvest into its
2
business, you mean there is a lot of economic sense
3
with that.
4
140.
5
6
7
Q.
Okay.
A.
I mean, I am completely
hypothesizing.
141.
Q.
No, no.
That's no problem.
8
in my mind, I'm trying to work it out.
9
helps.
Just,
So, that
And then with regard to the $3 million, do
10
you recall when you became aware that there was a
11
distinction between the 5 and the 3?
12
A.
Yes, it was definitely when we were
13
looking at...there was a first round of, "What are
14
going to do with this business?"
15
summer, so, if I recall, late July, even early
16
August was...and that's where we started to engage
17
counsel, external counsel, around "What do we do
18
with this business?"
19
panicking in that August/September time frame
20
around, well, is this company going to go under or
21
not?
22
23
142.
And that was late
And I think there was a lot of
Are we able to save this business, yes or no?
Q.
Right.
A.
And at that time we said, okay,
24
we...the board, Mike, Stephen, Paul, had said,
25
"Well, we could reinvest this $5 million, cash it
91 P.A. Barnard - 29
1
2
out."
143.
3
Q.
Right.
A.
Right, put it back in the business.
4
There was a whole bunch of other conversations.
5
we repay Sears back because there were some
6
guarantees against that $5 million invested by
7
Sears..."invested by Sears" in quotation.
8
144.
9
10
11
Q.
Right.
A.
There was a result of the asset
Q.
Yes.
Do
buyout.
145.
No, no.
And, I mean, the
12
repayment of Sears is sort of a whole area that I
13
will get into in a minute.
14
discussion about what to do, where to get financing,
15
and what to do with it?
16
17
A.
146.
Q.
Okay, so, there is some
Yes.
And so the decision was made...now,
18
it's at that time that the Alaris investment was
19
cashed out?
20
A.
There were so many false starts with
Q.
Sure.
A.
Like, they said, "We are going to do
21
22
23
that.
147.
24
it", and then it got delayed, and then we were going
25
to do it, and it got delayed.
So, I'm pretty sure
92 P.A. Barnard - 30
1
it was in that September time frame, because that's
2
when we recapitalized the business.
3
148.
4
5
6
Q.
Right.
A.
In terms of, okay, let's get us to
great for the next year.
149.
Q.
And do you recall...because there
7
was an issue, obviously, of who held the Alaris
8
shares, because they weren't held by SHS.
9
10
150.
11
Yes.
Q.
Do you recall any discussions about
that structure and how to get the funds into SHS?
12
A.
13
14
A.
I wasn't involved in the
conversation.
151.
15
Q.
Sure.
A.
The only thing I knew was there was
16
a call that I happened to be on where the three,
17
Mike, Stephen, and Paul, were talking about them
18
having to give direction to whomever they had to
19
give direction to in order to cash this out.
20
152.
21
22
23
24
25
Q.
Right.
A.
So, I'm assuming they were held by
their own individual trusts.
153.
Q.
Right.
A.
But again, I had no visibility,
other than I knew that the cash hit our bank
93 P.A. Barnard - 31
1
2
account.
154.
3
4
5
Yes.
Where did it come from?
A.
That's a great question.
I think it
would have come from their trusts.
155.
6
7
Q.
Q.
A.
156.
Q.
Okay.
So...
Again, I'm...
Yes.
No, no, that's fine.
It's not
8
critical.
9
sometime in late summer, the decision was made to
10
So,
cash out the Alaris investment?
11
12
I'm just trying to figure out how.
157.
A.
Yes.
Q.
Funds were then transferred in, it
13
sounds like, maybe through the trust.
14
would have been about...well, it was closer to $6
15
million, I guess?
16
A.
17
against that money.
18
5.8, something like that.
19
158.
20
21
159.
And so there
Well, there was...nicely, gains
So, I think it was like, 5.6,
Q.
Right.
A.
Yes.
Q.
Now, just...with regard to the
22
initial financing with Alaris, do you recall...did
23
you ever see the documentation with regard to that
24
initial financing?
25
A.
The only document that I put on
94 P.A. Barnard - 32
1
there is because I received it very, very late in
2
the...this is when we were going through the
3
receivership.
4
160.
5
Q.
Right.
A.
PwC came in.
They were saying,
6
"What...how did this whole...give me the details on
7
the transaction."
8
161.
Q.
9
A.
Sure.
And I was never given purview to the
10
Alaris Limited deal or limited SHS deal or anything
11
of that sort.
12
getting the agreement of Alaris and I think it's the
13
partnership...
14
162.
15
16
17
But then later in the game, I end up
Q.
Right.
A.
...from Tom.
Q.
Okay.
And I put that on the
USB key.
163.
Do you recall there being any
18
discussion about a minimum investment Alaris needed
19
to make?
20
21
164.
A.
From Alaris?
Q.
Yes, that they had sort of
22
thresholds with regard to how much their minimum
23
investment would be in a business?
24
25
A.
No.
But again, in the business
plan, there is only $7 million.
95 P.A. Barnard - 33
1
165.
2
Q.
Right.
A.
From an overall reasonability
3
perspective, $7 million in a business plan, I would
4
have expected that to be what Sears would have
5
expected.
6
expectations?
7
166.
Are you talking about Sears'
Q.
No, I'm talking about if Alaris
8
has...in some business, some private equity or other
9
companies have minimum investments that they invest.
10
I'm just talking whether...do you have any knowledge
11
of the...of Alaris, because there is obviously a
12
distinction.
13
business plan, but there is $15 million advanced.
14
15
167.
16
Yes.
Q.
So, it's obviously a bit of a
A.
168.
19
Q.
A very material discrepancy, yes.
Part of which was used to flow funds
back through to Alaris...
20
21
A.
discrepancy.
17
18
There is $7 million required in the
A.
169.
Q.
M'hmm.
...which could have had, as you
22
said, some economic benefits for Alaris.
But it
23
is...I'm just trying to figure out why there would
24
be such a large discrepancy between cash needs and
25
funding?
96 P.A. Barnard - 34
1
A.
M'hmm.
Yes, it is a valid question.
2
My insight was...my sense was that was contingency
3
financing.
4
things...we went back and said, "Do you realize this
5
business is 160" or maybe actually 174, the number,
6
if I recall at that time.
7
the business.
8
this is a $170 million business.
9
owners were very upset and very concerned about the
And the reason I had that sense is when
That was my initial go at
This is not a 260 million business,
Obviously the
10
business.
11
there was back up money in order to turn this
12
business around.
13
170.
But almost having...there seemed like
Q.
Right. So, the additional financing,
14
as you say, could have been contingency financing,
15
or to address any particular issues with regard to
16
the cash flow or...
17
A.
Yes, like, in terms of how much it
18
is going to cost us to turn this business around,
19
right?
20
investor is going to say, "Well, you plan to need
21
seven."
22
171.
23
24
25
The business is losing money.
Q.
Right.
A.
Well, what happens is if you need
twice as much?
172.
Any good
Q.
Right.
97 P.A. Barnard - 35
1
A.
And the question is what is the cap?
2
What would be the maximum amount you would invest in
3
this business?
4
173.
Q.
15 does sound like the right number.
Right.
Typically, you would agree
5
with me, you would finance the first half and wait
6
for the cash needs...
7
A.
Yes.
Q.
...before you...
A.
Yes, I would agree that is a bit
Q.
Right.
A.
But...
Q.
But, okay, this...
A.
There are a lot of oddities with
8
174.
9
10
11
odd.
175.
12
13
176.
14
15
16
this whole transaction.
177.
17
Q.
Was there ever any discussion as to
why the full 15 was advanced for day 1?
18
A.
When I asked the question it was,
19
"Well, at the end of the day, it is share
20
restructuring.
21
178.
Q.
$7 million is yours."
We discussed this a bit earlier, so,
22
with regard to the $5 million, you knew that that
23
had flowed through to Alaris.
24
three million, were you ever provided with any
25
details?
With regard to the
98 P.A. Barnard - 36
1
A.
No.
The only commentary that was
2
made was...and this was subsequent conversations
3
with Theresa over the phone only, so there was no
4
documentation.
5
179.
6
Q.
Right.
A.
Was...there was about a million of
7
expenses incurred by ISO.
8
shareholder restructuring.
9
position at the time, irrelevant.
10
11
to the money?
180.
12
Q.
records.
13
14
181.
15
Again, to me, in my
17
The answer is no.
But it is a debt on the books and
Like, it's a debt to the business.
A.
M'hmm.
Q.
And it is a payment made by the
A.
Yes.
It is a debt or it's a pref
Q.
Right.
equity.
182.
19
A.
And I guess that's where the
20
distinction lies, right?
21
expertise by any stretch.
22
investment is a pref equity.
23
24
25
Do I have access
business.
16
18
And two million for
183.
Well, I don't...my area of
But it is...Alaris
Q.
Right.
A.
So, then, to take out equity against
a pref equity, I mean...
99 P.A. Barnard - 37
1
184.
Q.
But was there at the time a
2
corresponding obligation to ISO on the books and
3
records of SHS?
4
5
185.
A.
No.
Q.
So, that's my confusion, because
6
there was a payment out with no corresponding...it's
7
to something that there is no obligation to pay?
8
A.
9
10
Well, see, I agree with you in terms
of if SHS books and records were up and running.
186.
11
Q.
Right.
A.
Right, and we didn't reconcile the
12
bank and therefore implement SAP Business One, which
13
was the system we were using for our books and
14
records.
15
cursory level.
16
187.
17
18
19
I mean, that went live in May, as a very
In other words, the general ledger.
Q.
Right.
A.
So, we didn't have books and
Q.
Okay.
A.
We had Excel until that point.
records.
188.
20
21
before that point, all the accounts payable was
22
being run through ISO.
23
24
25
189.
So,
Q.
Sorry, until when?
A.
Well, certainly until March, and
then we started to transition, right?
And you can
100 P.A. Barnard - 38
1
see this through the whole HST issues that we used
2
to have, or used to...that the business was having
3
around, well, who actually gets to take the input
4
tax credit because the ISO is paying the bills, but
5
it is SHS expense.
6
know, there is an intercompany account, whether it
7
is called debt or receivable.
8
190.
9
10
11
Q.
Right.
A.
Payables.
receivables.
191.
12
So, a debt on the books, you
Sorry.
Payables, not
I guess you can call it a debt.
Q.
M'hmm.
And there would be an ISO
A.
Yes, for sure there is.
payable?
13
When we
14
finally reconciled the bank we came up with a
15
liability.
16
million is that...no, that is not the $1 million
17
that I'm talking about though.
18
192.
19
193.
22
23
And when would you have completed
the reconciliation, do you recall?
20
21
Q.
Now, to your point, inside the $3
194.
A.
Of all the banks?
Q.
M'hmm.
A.
I think we finally finished in June.
Q.
Now we are in the summer months, and
24
one of the things I want to talk about was the
25
repayment of the Sears vendor take back.
101 P.A. Barnard - 39
1
2
195.
A.
Yes.
Q.
So, it sounds as though in May there
3
is sort of a look at the business plan, and there
4
are discussions made in June about the fact that it
5
doesn't appear as though the business plan is going
6
to be viable...
7
8
9
196.
197.
13
Unless there is some type of
A.
Yes.
Q.
...and you reviewed a bunch of
different options?
14
198.
16
A.
Yes.
Q.
One of them, it sounds as though was
the liquidation of the Alaris investment?
17
18
Q.
restructuring...
11
15
Unless we get concessions from
Sears.
10
12
A.
199.
19
A.
Yes.
Q.
Do you recall what other options
A.
Going...so, the Sears in terms of
were...
20
21
what the transition services agreement looks like, a
22
rebate on commissions.
23
24
25
200.
Q.
Okay.
A.
We are looking at a whole bunch of
things with Sears.
102 P.A. Barnard - 40
1
201.
2
Q.
Okay.
A.
We were also looking at drastic cuts
3
to the business.
So, restructuring, we had a couple
4
of different business models going on.
5
we had a sales force, and we sell the product, we, I
6
mean, our contractors install it, and we service it.
7
And so we are looking at changing it towards
8
eliminating a direct sales force.
9
revamping of our sales structure in order to make
10
the business viable.
11
at three different things.
12
202.
13
One was that
Just a total
So, basically, we are looking
Q.
Right.
A.
With Sears, what cost concessions
14
can we get, additional financing, that's Alaris, and
15
then overall fundamental changes of the business
16
model.
17
203.
18
19
20
Q.
Okay.
A.
And we did believe at that time that
there was a way to make this business work.
204.
Q.
Right, and then so you cashed in the
21
Alaris investment, and you received about 5.8 or
22
something.
23
24
25
205.
A.
Yes.
Q.
And then there would have been a
discussion presumably about the uses of those funds?
103 P.A. Barnard - 41
1
2
A.
206.
Q.
Yes.
And what was that discussion?
3
A.
4
funds or other funds.
5
loan.
6
207.
Q.
Well, I mean, whether we use those
We paid back Sears for their
So, just on that, why was it
7
decided...because my understanding is that loan
8
wasn't due.
9
A.
No.
Q.
So, why was it determined to repay
10
208.
11
that loan at that time?
12
A.
There was conversations with
13
counsel, that's the Paul, Stephen's counsel...what's
14
the name of the firm?
15
209.
16
Q.
Burnet Duckworth & Palmer?
A.
I don't know if that's...again, I
17
was brought in very late in the conversation with
18
their...I wasn't on the phone with the lawyers.
19
it was their conversation.
20
direction to pay it.
21
is personal guarantees against that.
22
organization were to default on that loan, the Sears
23
could go back after Paul and Stephen.
24
25
210.
Q.
A.
And
They gave me the
And the direction was, there
So, if the
Okay.
And so that was the motivation, as I
104 P.A. Barnard - 42
1
2
understand it, to pay off the loan.
211.
Q.
And I'm just trying to recall what
3
the...that would not have been the most expensive
4
financing.
5
that...obviously there are other uses those funds
6
can be put to.
7
8
A.
212.
9
Q.
And there were other uses that
M'hmm.
Can you tell me what the economic
impact of repaying Sears at that time was?
10
A.
It certainly wouldn't...it didn't
11
make us insolvent by any...that didn't cause
12
insolvency by any stretch.
13
the day by encumbering the assets, it allowed us to
14
do other things with the business.
15
we wanted to sell the hot water rental business, so,
16
we were actively trying to find a buyer.
17
213.
Q.
18
A.
It was...at the end of
So, for example,
Right.
And at the time, we actually had an
19
offer to buy from...not Direct Energy.
20
company?
21
214.
22
25
Q.
Wasn't it a Quebec based business,
A.
Sorry?
Q.
Quebec based?
A.
No, it was Ontario based.
was it?
23
24
What was the
215.
What was
105 P.A. Barnard - 43
1
2
the company called?
216.
3
Reliance.
Q.
Oh, Reliance.
A.
Reliance, yes.
So, for us
4
to...because Sears had a guarantee against Paul and
5
Stephen, for sure, but they also had a lien against
6
the assets.
7
217.
8
9
Q.
Right.
A.
So, we needed to unencumber the
assets in order to sell them.
So, that was kind of
10
the other motivation.
11
was...okay, well, Paul and Stephen want,
12
obviously...they don't want any personal guarantees.
13
218.
14
So, part of our plan
Q.
Right.
A.
We can turn to all sources of
15
financing.
16
assets, and then look for bank financing, like HSBC
17
was our bank at the time.
18
219.
19
That includes selling off some of the
Q.
Right.
A.
So, looking for actual cheap money,
20
or cheaper money, if you will, from a third party
21
lender.
22
220.
23
Okay.
So, in September, the Sears
loan was repaid?
24
25
Q.
A.
221.
Q.
Yes.
And do you know what other steps
106 P.A. Barnard - 44
1
were taken with regard to restructuring, either the
2
finances or the operations of the business?
3
A.
Yes.
So, we had redone the
4
commission structure for staff.
We...where did we
5
look?
6
was through Centah, which was our technology
7
provider.
8
we curtailed what they could expense, a new expense
9
policy.
We renegotiated...our most material expense
We structured that.
Employee expenses,
We looked at closing branches, we
10
consolidated most of Western Canada into the Calgary
11
branch.
12
significantly reduce the cost of the business.
13
222.
So, we made a number of steps to
Q.
And sorry, just talking about the
14
cash flow situation, there is...my understanding,
15
there is negative cash flow throughout the operation
16
period.
17
A.
18
19
where we were positive cash flow.
223.
20
23
Q.
Okay.
That would have been in the
A.
Summer.
Q.
Okay.
A.
From an operation perspective.
spring?
21
22
Well, I think there was one month
224.
June.
24
There was still investment in infrastructure build.
25
So, we were building out end to end software.
107 P.A. Barnard - 45
1
225.
2
Q.
Sure.
A.
So, through Centah, through SAP,
3
this is the whole automation of the sales process.
4
That aside, that's a capital asset.
5
226.
6
7
227.
Q.
Yes, capex?
A.
Yes.
Q.
So, you're talking about...it sounds
8
like in August/September there is this
9
restructuring.
10
11
A.
228.
Q.
M'hmm.
The decision, rather than use the $5
12
million from Alaris for expenses, it was used...it
13
was paid down/paid off the Sears debt.
14
A.
15
16
And I will make a comment along
that.
229.
17
Q.
Sure.
A.
It was done...depsite the executive,
18
myself and Michael specifically advising that is not
19
a good idea...
20
Q.
Right.
21
A.
...that money could much better be
22
used in operations.
23
24
25
230.
231.
But advice from counsel...
Q.
Yes.
A.
..and direction we got and we
followed.
I remember being in Michael's office when
108 P.A. Barnard - 46
1
we got the...had the phonecall with Paul and Stephen
2
and Mike Clements.
3
anyway.
4
232.
5
6
233.
And they told us to do it
Q.
Right.
A.
So, we did it.
Q.
Presumably, if you had $5 million or
7
$5.8 million to use in operations, you would have
8
been able to deal with a lot of the cash flow issues
9
that the business was having.
10
A.
11
12
collateral things going on.
234.
13
14
15
But at the time, there was a lot of
Q.
Sure.
A.
Sears had announced its closure of
most of its Quebec operations.
235.
16
Q.
Right.
A.
Which took our close ratios and
17
almost cut them in half.
18
said, "Okay, we can rebuild this.
19
looked at it and said, okay, well...I think that's
20
what really scared the board to say, yes, you're
21
fixing the business, but what is the long term
22
impact of Sears' decisions in the marketplace.
23
236.
Q.
Right.
So, at the time, again, we
Yes."
But we
And just talking about cash
24
flow, you were doing cash flow statements on a
25
monthly basis?
109 P.A. Barnard - 47
1
2
237.
3
A.
Well, daily basis practically.
Q.
Okay.
A.
We showed...every day we posted
4
cash.
5
board got it, and Michael Strachan got it as well.
6
So, that's it...from my treasury...I had a treasury
7
guy.
8
reconcile cash every day.
9
until the end of the month to tell them what is
10
11
So, we sent a note.
He would post cash every day, and we would
going on with cash.
238.
12
Q.
14
No, every day.
So, do you recall when you started
A.
From day one we always talked about
Q.
Well, obviously, cash flow is
cash.
239.
16
important for all businesses.
17
18
19
So, we weren't waiting
having discussions about cash flow issues?
13
15
We had a table, the
But...
A.
Oh, like, we are not going to
Q.
Right.
A.
That conversation.
make...
240.
20
Yes, that
21
was...so, when did that happen?
So, when we really
22
understood the...when Sears announced a major
23
closure.
24
you mean, they announced, "Oh, we are closing a few
25
stores here and there."
And that was in November, I believe.
So,
But when they announced the
110 P.A. Barnard - 48
1
major closures, and even the sale, I think, of their
2
head office building...
3
241.
4
Q.
Right.
A.
...I think that sent the clear
5
signal to the marketplace, which was in November.
6
And that time, that was when we relooked at our
7
forecast and said, "We are not going to make it
8
through to spring."
9
was actually doing very well.
Because the roofing business
10
business around.
11
do that sales channel.
12
242.
13
14
15
We had turned that
We needed good weather in order to
Q.
Right.
A.
So, we need to get through to
Q.
Right.
spring.
243.
16
A.
And we looked at the cash forecasts,
17
and we said...and that was late November.
18
said, "Not going to work, unless we have additional
19
financing."
20
244.
21
And we
Q.
Right.
A.
Which I think that's at the time
22
when we went back to Sears and Alaris at the same
23
time, and they actually invested new debt into the
24
business.
25
245.
Q.
Right.
111 P.A. Barnard - 49
1
2
246.
3
I think it was $4 million.
Q.
I understand it was $4 million; 2
A.
Two each, yes.
Q.
But as of, it sounds like May and
each.
4
5
A.
247.
6
June, there as an understanding there was
7
difficulties with regard to...
8
A.
9
For sure, but there wasn't a sense
that we couldn't turn the business around in the
10
summer.
11
because you're burning cash.
12
issue.
13
good?
14
248.
15
16
249.
The cash flow issues, yes, I say cash flow
It's not really an
It's do we have enough runway to get us to
Q.
Right.
A.
We had enough runway in the summer.
Q.
So, you had enough availability to
17
get you through...did you need the sale of the water
18
heater business in order to finance the rest of the
19
cash flow needs?
20
A.
I think what we had said was we
21
didn't need the sale of the water rental business.
22
Need the sale.
23
what we presented.
24
needed the sale of the water rental business.
25
250.
Q.
I'm trying to think, going back to
No, I don't think we said we
Okay.
112 P.A. Barnard - 50
1
2
3
A.
But that was our contingency, if you
Q.
So, the original $7 million was
will.
251.
4
enough to provide for the cash flow requirements for
5
the business?
6
A.
7
business there, yes.
8
The business plan was sound.
9
252.
10
No.
So, if we had a $250 million
The $7 million was enough.
Q.
Right.
A.
The issue came to okay, well, now we
11
are into the business.
12
I've been here for a few weeks now.
13
253.
14
I am coming to you guys,
Q.
Right.
A.
I'm looking at your pipeline.
15
looking at what a business can do.
16
looking at $170 million.
17
254.
18
I'm
And we are
Q.
Right.
A.
$7 million is going to be awfully
19
tight to try to get those through.
20
when sales slipped in the summer that we said,
21
"Okay, we've got a problem here."
22
money from Alaris and all these other things kind of
23
came out of the woodwork.
24
25
255.
Q.
And it's only
And that's when
But the money from Alaris didn't
provide any relief from a cash flow perspective?
113 P.A. Barnard - 51
1
A.
No, but the expectation was that it
2
was going to.
3
about it, we need additional cash in the business...
4
256.
5
So, when we had originally talked
Q.
Right.
A.
Right.
Then...so, now this Alaris
6
financing.
7
business.
8
leads...and mostly lead channels erode.
9
again, you're constantly in a state of updating the
10
11
We continued to watch our close ratios
257.
13
Q.
Sure.
A.
At that point it was like, "Oh,
okay, this is going to be touch and go."
258.
15
Q.
And so there is discussion about
obtaining additional financing in September?
16
A.
We always talked about additional
17
financing, right?
18
sell the water rental business.
19
20
And so
business, right?
12
14
So, we put the Alaris financing into the
259.
But yes, we talked about...can we
Q.
Okay.
A.
How much money could that free up?
21
$3 million, give or take.
We are always talking
22
different modes of investing in the business.
23
we go to a bank, what would the bank financing look
24
like, would they need to guarantee it?
25
good stuff.
Could
All that
114 P.A. Barnard - 52
1
260.
Q.
Okay.
But there was never any
2
additional financing, other than the financing from
3
Alaris and Sears?
4
5
A.
261.
Q.
Correct.
Yes.
Correct.
And so you said as of November, it
6
was clear that there was not the cash required to
7
make the business...
8
A.
Correct.
Q.
Until the spring, to get it through
9
262.
10
the winter months?
11
A.
Yes.
Well, it was really around
12
could we get ourselves to spring?
13
could do that was dragging working capital which
14
none of us were comfortable with.
15
263.
16
The only way we
Q.
Right.
A.
Because now all of a sudden you're
17
making your vendors pay for your business, which no,
18
that is not good business.
19
264.
20
Q.
Could we take a quick break?
A.
Yes, sure.
21
22
---
A BRIEF RECESS
23
24
PATRICK ADAM BARNARD
25
CONTINUED EXAMINATION BY MR. HARRISON:
115 P.A. Barnard - 53
1
265.
Q.
So, we were just talking about
2
solvency issues, and you had indicated that as of
3
November, you understood that the SHS wasn't going
4
to be able to continue to operate through to the
5
spring?
6
7
266.
8
M'hmm.
Yes, yes.
Sorry, yes.
Q.
And that was, even though it had
obtained additional financing from Alaris and Sears?
9
10
A.
267.
A.
Correct, yes.
Q.
And at that time, what was the
11
decision that was made with regard to the operations
12
or financing the business?
13
A.
Well, that's when we started to meet
14
with the PwCs of this world.
15
PwC to help us talk to Sears, Sears management team,
16
and their in-house counsel around the viability of
17
the business.
18
believe us, that the business was in fact such dire
19
straits.
20
268.
21
We actually engaged
Or sense was that Sears didn't
Q.
Right.
A.
Right.
That we did, in fact, need
22
something from them, concessions around transition
23
services...well, actually, at that time, transition
24
services were over in November.
25
269.
Q.
Right.
116 P.A. Barnard - 54
1
A.
We had made the last payment against
2
that.
3
commission structure in order to make the business
4
work.
5
270.
6
7
271.
8
272.
11
12
273.
19
Right.
Q.
So, you had said before there were
A.
Yes.
Q.
One was changes to the operations?
M'hmm.
One was financing?
A.
M'hmm.
Q.
And one was renegotiating with
Sears?
16
18
A.
Q.
274.
15
17
Right.
A.
13
14
Q.
sort of three pieces to the restructuring plan?
9
10
But more going forward, how do we redo the
275.
A.
Yes.
Q.
So, at that time, you were still
pursuing those three...
A.
Yes, I think most of our business
20
turnaround strategy was done.
The question being is
21
we were also looking at changing the entire business
22
model to be almost the way that Canadian Tire does
23
theirs today.
24
lead, and the installer does everything.
25
buys the assets, and installs it.
You simply...the company manages the
Sells it,
So, that would be
117 P.A. Barnard - 55
1
a drastic change in the way we did business, which
2
was a whole different approach, which would have
3
taken us a year to implement.
4
didn't pursue it.
5
bunch of things.
6
276.
Q.
So, hence that we
But we were looking at a whole
Okay, and on the financing side,
7
were you pursuing other avenues of financing at the
8
time, or...
9
A.
When we looked at November, up until
10
we saw our close ratio drop in half, right?
11
when Sears made the big announcement.
12
277.
13
A.
15
278.
279.
21
22
25
Right.
And the market for Sears Home
Services was predominantly Quebec and Ontario.
19
24
Q.
A.
18
23
Just in Quebec, but they announced
major closures in Ontario as well.
17
20
Was it closing in half across...just
in Quebec, or across the county?
14
16
Q.
This is
A.
Right.
Q.
Right.
A.
So, you're impacting major markets.
So, closing a few stores sends a bad brand message.
280.
Q.
Sure.
A.
Closing major stores, including your
head office location, was catastrophic to close
118 P.A. Barnard - 56
1
ratios.
2
think we would be able to secure external
3
financing".
4
together, what would we be using for financing?
5
281.
6
So, we looked at it and said, "I don't
Because when I put the projections
Q.
Right.
A.
For us to repay a loan, like, you
7
take a loan out, you've got to be able to make
8
payments against it.
9
make payments against it.
10
282.
11
A.
283.
14
Q.
Yes.
And were you part of those
negotiations?
15
16
And so in the last part of it, you
were talking about renegotiating with Sears?
12
13
Q.
We wouldn't even be able to
A.
284.
Q.
Yes.
And can you give me a description of
17
sort of how those negotiations went, and what the
18
results were?
19
A.
Very poorly.
I mean, it
20
went...basically, we met with them at their office
21
with PwC in tow, for the latter part of it.
22
basically put a whole bunch of presentations
23
together about how we got here, we made false
24
expectations, et cetera.
25
285.
Q.
Right.
We
119 P.A. Barnard - 57
1
A.
2
3
And they basically said, "Well, you
guys gotta figure it out."
286.
Q.
Right.
And so were there
4
discussions about what they would be willing to do,
5
or was there an ask from them?
6
A.
7
8
Yes, there was a cash ask, and then
there was a commissions ask.
287.
9
Q.
Okay.
This would be an equity investment requirement?
10
A.
11
investment.
12
a transition.
13
expenses.
14
And so what was the cash ask?
288.
15
No.
Well, yes.
I don't know equity
More around giving us back money from a
Like, we paid them in terms of
Q.
Right.
A.
Reimbursement.
We never really
16
talked about how we would structure it, whether it
17
would be debt or equity.
18
289.
19
Q.
Okay.
A.
But really a repayment of expenses.
20
So, I guess, just repayment of expenses.
21
even an investment.
22
290.
23
24
25
291.
Q.
Okay.
A.
Recouping of costs.
Q.
Right.
So, not
And then a change in the
commission structure in the payments to Sears?
120 P.A. Barnard - 58
1
A.
Correct.
Because there was a
2
minimum commission structure, like, three and a
3
half, and it ramps up to five and a half.
4
292.
5
Q.
Sears of SHS?
6
A.
Right.
And was there an ask by
Did they ever respond and say that?
They basically said no.
I mean, it
7
wasn't as straightforward as just a no, it was a,
8
"Let's talk about it, show us what you're doing with
9
the business."
And then really we fundamentally
10
felt like we were being led on.
11
to go back to them with new asks, and they would
12
say, "Well, how about this", or, "How about that" in
13
terms of changing the business model.
14
time they came back, we can't fundamentally keep
15
changing the business model.
16
293.
Q.
Like, we continued
But every
Like, it's not...
Did Sears ever, I guess, request
17
that its current shareholders make an equity
18
injection into the business?
19
20
294.
21
Q.
Was there some discussion about
A.
23
25
No.
having an equity injection into the business?
22
24
A.
Well, I think...they always said,
"You've gotta make it work", right?
295.
Q.
Right.
A.
And, "You guys gotta figure it out."
121 P.A. Barnard - 59
1
2
So, maybe the imply is...
296.
3
4
5
Q.
Right.
A.
...restructure the business, and you
guys put the money in to make it work.
297.
Q.
Were there ever discussions
6
internally about that?
7
internally about financing through equity injection,
8
or through...
9
A.
10
11
298.
A.
299.
15
300.
19
301.
302.
23
25
Yes.
And as of sort May/June, you're
Yes.
Q.
And so Michael was on the board...
A.
Michael didn't have a permit.
He
wasn't a board member.
21
24
Q.
A.
18
22
So, you had indicated...you and
making them on a monthly basis?
16
20
Q.
Michael made the board presentations together?
13
17
Well, of course, we threw it out on
the table, but it wasn't well received, no.
12
14
Were there ever discussions
303.
Q.
Michael Clements?
A.
Oh, sorry, Mike Clements.
Q.
Sorry, yes.
A.
Yes.
Q.
That's who I meant.
And that is who
you're talking about you went...Michael Clements is
122 P.A. Barnard - 60
1
the one you went to...
2
3
A.
304.
4
5
305.
Michael Strachan.
Sorry.
Q.
I'm sorry.
A.
Sorry.
Q.
That's not your...Okay, so, you and
I apologize.
6
Michael Strachan would go and present to Mike
7
Clements and Stephen and Paul Verhoeff?
8
9
306.
A.
Correct, yes.
Q.
Okay.
And just walking through each
10
of them, so, Michael Clements, what was his role in
11
the business?
12
13
307.
14
15
308.
A.
CEO.
Q.
M'hmm.
A.
And eventually the only director.
Q.
And what did he actually...what were
16
his responsibilities?
17
A.
So, overall strategy.
Q.
Right.
A.
So, when we say overall strategy,
18
309.
19
20
it's about...what is the overall to sell model?
21
how the salespeople interact with customers.
22
worked in the Calgary branch.
23
24
25
310.
So,
He
Q.
Right.
A.
Right, so, training the guys how to
greet the installers in the back door, and all the
123 P.A. Barnard - 61
1
things that are key success factors for delivering
2
the business model.
3
311.
Q.
Okay.
4
his two main areas.
5
A.
6
312.
7
Q.
Yes.
And training.
And then Stephen
Verhoeff?
8
A.
9
operations.
10
Do, sales and strategy were
313.
Board members, so, not day to day
Not at all.
Q.
11
A.
Okay.
And Stephen, the same thing.
Not
12
day to day operations.
13
financing the business, long term vision around what
14
new markets can we do?
15
service offering in different markets, that type of
16
stuff.
17
314.
Q.
So, they were more about
Like, how do we expand
Do you know whether...did you
18
interact directly with them outside of these board
19
meetings?
20
A.
21
22
23
24
25
Well, we go for dinner on the
occasion, but...
315.
Q.
So, typically, would they interact
directly with Mike Strachan?
A.
Yes, to some degree.
But mostly
Mike Clements, and Mike Clements would interact
124 P.A. Barnard - 62
1
directly with Michael Strachan and myself.
2
would meet them occasionally.
3
316.
4
Q.
317.
7
Yes, they owned...again, hearsay...
Q.
Sure.
...I didn't see anything in
documents, but they owned ISO.
318.
10
Q.
And ISO, as you said, was providing
services to SHS...
11
12
A.
A.
8
9
Were you aware of the connection
that Aeros (phon.) had with ISO?
5
6
319.
13
A.
Yes.
Q.
...prior to, at least March 2013?
A.
Yes.
It was trying to get us on our
14
feet.
15
payroll, things of that sort.
16
320.
They would do accounts payable processing,
Q.
Was there any integration of the
17
employees of ISO with SHS?
18
employed by both organizations?
19
20
321.
21
22
23
So, I
Like, was there people
A.
There was one, my payroll manager.
Q.
Okay.
A.
I don't even remember her name.
She
worked 50 percent for SHS, 50 percent for ISO.
322.
Q.
And do you remember when the books
24
and records, when things were transferred over from
25
ISO?
125 P.A. Barnard - 63
1
A.
When SAP was live, when SAP business
2
one was live.
3
by that May time frame.
4
323.
5
6
7
324.
A.
But June was when we were fully on
Q.
Okay.
A.
10
Did you have any knowledge of
Other than they...I know the
business model; it's the same as SHS's.
325.
12
13
Q.
Right.
A.
I know they had half their business
with Home Depot.
326.
15
Q.
Right.
And did you have any
knowledge of the financing of ISO?
16
17
Okay.
ISO's business?
9
14
Q.
our own.
8
11
So, we had a skeleton general ledger
327.
A.
No.
Q.
You had indicated there was an
18
intercompany ledger?
19
A.
We had a payable to ISO.
Q.
Right.
A.
But I had never had access to their
20
328.
21
22
23
24
25
books or records.
329.
Q.
No.
Do you know if there was any
documentation supporting the payable?
A.
Well, they gave us, like, an
126 P.A. Barnard - 64
1
intercompany schedule saying "Here is all the
2
expenses that you incurred."
3
330.
4
5
331.
6
7
8
Q.
Right.
A.
They are itemized.
Q.
Right.
A.
So, I wouldn't just cut a cheque for
"Trust me, you owe me money".
332.
9
Q.
Right.
A.
They gave me the expenses that were
10
related, and we journalized the expenses with the
11
obviously corresponding payable.
12
expense, and credit, of course, the intercompany
13
payable account.
14
there was anything unusual about the expenses they
15
incurred.
16
of starting a business up.
17
333.
18
So, I didn't have the sense that
Were they high?
Q.
So, debit the
Right.
Yes, but that's a cost
And was it ever explained
why ISO was providing these services?
19
A.
I don't know whether it was
20
explained, but it was implied, because there is no
21
staff in SHS.
22
23
334.
Q.
Right.
A.
Right.
So, who is transacting with
24
the recruiting company to find people and all that.
25
Like, ISO is doing that on a behalf.
And I never
127 P.A. Barnard - 65
1
saw...there is no management fee being charged from
2
ISO to SHS.
3
335.
4
5
6
Q.
Right.
A.
Who is simply an expense
reimbursement.
336.
Q.
Okay.
7
the start up costs?
8
A.
9
Yes.
And that was basically all
So, things like interim
payroll, Michael Strachan was, I'm aware that...I
10
understand that he was originally hired by ISO with
11
the expectation that he was doing SHS.
12
paid on the ISO payroll.
13
337.
14
Q.
A.
So, he was
Okay.
And therefore, when I saw the
15
intercompany expenses, I itemized things for like
16
payroll numbers and things like that.
17
338.
Q.
Okay.
And so after those payments
18
were made to ISO, was there any other interaction
19
that you're aware of between SHS and ISO?
20
A.
21
businesses separate.
22
tried not to...like, dropping product so that the
23
installers for SHS could pick it up, we really tried
24
not to do that.
25
339.
Q.
We really did try to keep the
Using their facilities, we
Okay.
128 P.A. Barnard - 66
1
A.
Can I say that never happened?
No,
2
I'm sure it did happen.
3
the extent of leasing a separate office so that ISO,
4
like, the Paul, Stephen, Theresa's office, when they
5
were working on SHS stuff was independent of their
6
ISO office.
7
340.
8
Q.
I mean, they even went to
Right, because at the time Theresa
Lea was also working at ISO?
9
A.
Yes.
She wasn't...was she on our
10
payroll?
11
her, and Mike Clements and Paul...
12
341.
13
14
342.
15
She was on our payroll, yes.
She repaid
Q.
Right.
A.
...we paid them on the SHS payroll.
Q.
But they would have...at least
Theresa Lea was also on the payroll for the ISO.
16
A.
Yes.
Q.
Do you know what her title was at
19
A.
Chief something?
20
officer or something.
21
officer.
22
But...
17
343.
18
23
ISO?
344.
24
25
anyway.
Chief operating
It wasn't chief financial
I remember thinking to myself it was odd.
Q.
That she was in operations?
A.
Yes.
Like...talking about CFO, but
129 P.A. Barnard - 67
1
345.
2
Right.
So, sorry, just going back
to the board...
3
4
Q.
A.
346.
Q.
M'hmm.
...you said that Mike Clement was
5
strategy sales and training, that the Verhoeffs were
6
dealing with issues like just financing, expanding
7
the business?
8
9
347.
A.
Yes.
Q.
In October 2013, the Verhoeffs
10
resigned...
11
A.
Yes.
Q.
...as directors?
A.
The condition on Sears was a $2
12
348.
13
14
15
16
17
million financing.
349.
Q.
Right.
Do you remember the
discussions around that?
A.
Again, I was only partly involved,
18
as it related to financial matters.
But I do
19
remember the conversation about...yes, so, I
20
remember being in Michael's office where it was
21
brought up by Stephen and Paul...we always used to
22
do weekly conference calls.
23
meeting, weekly conference calls around different
24
issues and how are things doing with the business.
25
Things like that.
We had a monthly board
130 P.A. Barnard - 68
1
350.
2
3
A.
351.
4
5
352.
6
7
Q.
Q.
Always Mike Clements.
Okay.
A.
Most of the time Paul and Stephen.
Q.
And then yourself?
A.
Yes.
Q.
And Mike Strachan?
8
A.
Michael Strachan, yes.
9
always on the call.
10
353.
Who would be on these weekly calls?
354.
11
Q.
Okay.
A.
Right.
As they needed updates on
12
financial, and even leads.
13
or updating a forecast.
14
on our current lead numbers.
15
355.
16
17
18
And I wasn't
Anything that is going
So, with the implications
Q.
Right.
A.
Those types of things, I would make
comments on, but I would come and go in the meeting.
356.
19
Q.
Okay.
A.
But anyway, in one of those
20
meetings, it was brought up that as a condition on
21
this financing that they had to resign, and they
22
were obviously not very happy about it.
23
24
25
357.
Q.
Okay.
So, presumably you would have
continued to have monthly meetings?
A.
Yes, more formal meetings with a
131 P.A. Barnard - 69
1
2
presentation.
358.
Q.
Right, okay.
And did you continue
3
after October...was there still up to the end more
4
weekly calls?
5
A.
Like, sort of into November?
Well, I think when you get to the
6
late November time frame, it was more...we still
7
were managing the business...
8
359.
9
Q.
Sure.
A.
...but it was more around, "Okay,
10
what the hell are we going to do with this
11
business."
12
360.
Q.
Okay.
And so after October, when
13
you're making presentations, did the Verhoeffs
14
attend, or was it just Michael Clement?
15
A.
16
17
Well, yes, after they were off the
board, no.
361.
18
Q.
Okay.
A.
In fact, we never gave them any
19
financial information.
Well, I never them any
20
financial information.
I don't know if they have
21
access to it or not, but...
22
23
24
25
362.
Q.
So, they weren't on the calls
A.
No.
anymore?
They were, in fact, prohibited
from being on the calls.
132 P.A. Barnard - 70
1
363.
Q.
2
A.
Okay.
And I was prohibited from having any
3
communication with them at all.
4
never...emails, no communications with them.
5
364.
Q.
6
7
365.
8
366.
11
12
13
And they were off the payroll then?
A.
Yes.
Q.
Theresa Lea, you said you had dotted
line reporting to her?
9
10
A.
Yes.
Q.
What was her title at SHS?
A.
I don't know if she had a title at
Q.
Okay.
SHS.
367.
14
A.
15
financial oversight.
16
So, I
368.
More just around, I would say,
Q.
And who did she report to, do you
18
A.
My sense, I don't know officially
19
who she reported to.
20
nothing in the SHS environment that she reported to
21
anybody.
22
to Paul.
17
23
know?
369.
24
25
But I'm assuming in the ISO she reported
Q.
A.
370.
Certainly not in the...it was
Q.
Right.
Maybe both of them.
But within the org chart for SHS,
133 P.A. Barnard - 71
1
she wouldn't have had a direct report?
2
3
371.
A.
Yes.
Q.
You would have indirectly reported
4
to her, and provided her with the same financial
5
reporting you were providing to the board?
6
A.
7
8
Yes.
And most of the time, she was
at the board meetings.
Q.
Okay.
9
A.
But she would get the presentations
10
typically in advance.
11
numbers in advance.
12
records, SAP, the software, she could log into the
13
general ledger.
14
like that because we would obviously see that.
15
372.
373.
16
17
374.
18
375.
21
22
23
24
25
She had access to the financial
She didn't make entries or anything
Q.
Right.
A.
But she had access to it.
Q.
So, was she at the SHS offices on a
daily basis?
19
20
Certainly, she would get the
A.
No.
She had her own ISO office...
Q.
Right.
A.
...but certainly, it's hard for me
to know because she was in Calgary...
376.
Q.
Right.
A.
...whether she was at our branch.
She certainly wasn't at our office.
134 P.A. Barnard - 72
1
377.
2
3
378.
4
Toronto.
A.
No.
Q.
You said she was at the board
meetings?
5
A.
6
7
Q.
She was typically at the board
meetings, yes.
379.
8
Q.
Was she on the calls?
The weekly
A.
She was on some of the calls, but I
calls?
9
10
don't think she was a required attendee on the
11
calls.
12
380.
Q.
But she obviously was on the Calgary
13
end of those calls.
14
A.
15
16
381.
18
Q.
Right.
A.
But I don't think she was an active
participant on the calls, that is for sure.
382.
20
Q.
A.
22
and Steven.
24
25
Can you maybe describe what it is
that she did on the...
21
23
So, I'm trying to think of
a...she was definitely on some of the calls.
17
19
Yes.
383.
Yes, she is more an adviser to Paul
Q.
Okay.
A.
I mean, that is my sense...financial
sounding board, right?
Obviously, I have a view, an
135 P.A. Barnard - 73
1
opinion, on the matter and would present my views,
2
hopefully in a clear and concise manner, and she
3
would obviously give her perspective on it.
4
she agreed or disagreed, whether there are
5
alternatives.
6
operational perspective, right?
7
do things.
8
384.
9
Whether
And she also had a very astute
Different ways to
So, she would advise Paul and Stephen.
Q.
Right.
A.
My sense is most of the time
10
offline, and then Paul and Stephen would be on the
11
calls.
12
385.
Q.
Just after October, her main role
13
was advisory to the Verhoeffs.
14
after they were no longer involved?
15
A.
16
17
18
What was she doing
Well, she was more my sounding board
for working through these issues.
386.
Q.
Right.
A.
Coming up with different approaches
19
to the business.
For example, like, okay, what does
20
the corporate org structure need to look like?
21
are the...revamping the finance department?
22
many roles can we cut?
Those types of things.
23
was more HR/operations.
How do we close this
24
branch, do it effectively without disrupting
25
operations?
Those types of things.
What
How
She
136 P.A. Barnard - 74
1
387.
Q.
Right.
So, November, the decision
2
is made obviously that there is going to have to be
3
some restructuring, something is going to have to
4
happen?
5
6
A.
388.
Q.
Yes.
And then at some point in December,
7
presumably the decision was made that there is going
8
to be a filing?
9
10
389.
11
Yes.
Q.
Do you recall...would that have been
the first week?
12
13
A.
390.
14
I mean, filing was...
A.
Pretty close.
Q.
...the second week, so...
A.
Yes, pretty much.
The first week we
15
met with Sears, PwC was at our side.
16
think of how that whole thing kind of fell down.
17
But we basically made one last ditch effort to go
18
back to Sears.
19
to get back to us.
20
No viable solution.
21
process.
22
391.
Q.
I'm trying to
My sense was they had until Monday
On Monday, nothing from them.
So, we sped up the filing
And who was sort of
23
driving...instructing counsel...driving that filing
24
process?
25
A.
The lawyers from Calgary.
137 P.A. Barnard - 75
1
392.
2
Q.
393.
5
A.
Making the decision about filing?
Q.
Right, and sort of driving the
process?
6
7
On the business side, who
was...
3
4
Okay.
A.
394.
Q.
8
A.
9
Mike Clements.
Okay.
And I'm sure we will get into the
order of payments that followed that week.
Because
10
we did a whole bunch of work on this leading up
11
to...
12
395.
Q.
Right.
So, the decision was made
13
the first week of December.
14
started?
15
16
A.
396.
Q.
The process was
Yes.
And so if you can walk me through
17
that last...it would have been, I'm sure, quite a
18
hectic week?
19
A.
20
21
weeks.
397.
Yes.
I don't think I slept for two
But yes.
Q.
Right.
Fair enough.
So, were
22
you...I assume you would have been in fairly
23
constant contact with Clement?
24
25
A.
Yes.
Oh, yes.
Almost daily, I would say.
138 P.A. Barnard - 76
1
398.
2
Q.
time?
And so what was occurring at that
What were the discussions?
3
A.
4
next steps.
5
exposure, so, how did the November end?
6
our liabilities, trade creditors, employee payments,
7
truing up all of our vacation, trying to get...what
8
do we owe to employees?
9
that good stuff.
10
399.
Q.
Daily calls to the lawyers around
We assessed our overall financial
What are
Payroll up to date, all
And so, as you mentioned, there was
11
a series of payments made, some to employees, there
12
were some trade creditors paid, there were a few
13
different things?
14
A.
15
16
Well, trade creditors, we
didn't pay anybody unless it was due.
400.
17
18
19
M'hmm.
Q.
Right.
A.
We just continued on normal business
course.
401.
20
Q.
And do you know how it was
determined what employee payments would be made?
21
A.
Yes, so, again, advice from counsel.
22
So, counsel told us, I think, pay vacations pays up
23
to the date.
24
25
402.
Q.
A.
Right.
And pay all outstanding wages as of
139 P.A. Barnard - 77
1
2
the date.
403.
So, we made both of those payments.
Q.
And presumably that was because
3
those were obligations the directors would otherwise
4
have to pay?
5
A.
Correct, yes.
I think there was
6
also an HST direction that we got, to pay HST up to
7
date.
8
you have to...I mean, we reconciled our sales to the
9
best we could.
Again, without knowing officially your sales,
We are fairly confident we got it
10
accurately.
11
side that goes with your sales.
12
404.
Q.
Because obviously there's see the HST
So, there is, at least from our
13
review of the books and records, approximately $2
14
million in employee related expenses.
15
16
405.
17
A.
Okay.
$2 million?
Q.
That includes payroll, source
deductions, vacation pay?
18
A.
$2 million seems a bit high, but
19
vacation pay, outstanding.
20
that...okay.
21
right.
22
in that too.
23
to date, WSIB up to date.
24
lawyers.
25
Does that...
406.
Generally, you have
Source deductions, that sounds about
Well, I guess, commissions would be included
Q.
Yes, we would have paid commissions up
Right.
Obviously, we paid
No, fair enough.
Do you
140 P.A. Barnard - 78
1
know...
2
A.
3
4
It's
hard for me to know all...
407.
Q.
5
time ago.
6
you know?
7
Right.
Fair enough.
It was a long
Who decided to make those payments, do
A.
8
9
It doesn't sound outrageous.
It comes the direction of Mike
Clements, advice from Counsel.
408.
Q.
So, this was in preparation for the
10
filing, presumably?
11
A.
Correct, yes.
Q.
So, payments were made at the same
12
409.
13
time, obviously, materials are being prepared for
14
the filing?
15
A.
Yes.
Q.
You were closing the books for the
16
410.
17
end of November?
18
19
20
21
A.
411.
Yes.
Q.
And what else was occurring at that
A.
Well, we were engaging with PwC to
time?
22
say, "Would you be willing to take this engagement
23
for receivership?"
24
there anything else in terms of other...do we have
25
enough cash to fund a receivership?
We were talking about what...was
141 P.A. Barnard - 79
1
412.
2
Q.
Right.
A.
We were also talking about, okay,
3
can we finalize the sale of the water rental
4
business in advance of filing.
5
not to finalize it.
6
care of the asset sale, just to rush it.
7
wouldn't get the full value from it.
8
413.
9
We actually decided
We would let the receiver take
MR. HARRISON:
Okay.
We
Just go off the
record for one second.
10
11
---
DISCUSSION OFF THE RECORD
12
13
BY MR. HARRISON:
14
414.
Q.
Now, you have provided us with a USB
15
key, thank you very much, of the documents that you
16
have had access to.
17
other information relating to the operations of SHS?
18
A.
Do you have any other notes or
Everything that I have...and the
19
only reason I have that information is...worked on
20
it on my personal computer.
21
415.
22
23
24
25
Q.
Sure.
A.
But that is everything I have.
And
the only paper copy I have is right here.
416.
MR. HARRISON:
Okay.
Well, thank you
very much for your attendance today, and we
142 P.A. Barnard - 80
1
will be in contact if we need anything
2
further.
3
THE DEPONENT:
Okay, thank you.
MR. HARRISON:
Thank you.
4
5
6
7
8
9
417.
143 P.A. Barnard - 81
1
2
3
4
5
6
7
8
9
10
11
12
INDEX OF EXHIBITS
EXHIBIT
NUMBER
1
DESCRIPTION
Notice of Appointment for
Examination to Mr. Barnard
PAGE
NUMBER
4
144 P.A. Barnard 82
1
2
3
4
5
6
under
7
counsel, for
8
9
10
11
12
13
14
15
16
the
17
18
19
20
21
22
23
24
25
26
27
28
29
30
REPORTER'S NOTE:
Please be advised that any undertakings, objections,
advisements and refusals are provided as a service to all
their guidance only, and do not purport to be legally binding or
necessarily accurate and are not binding upon Victory Verbatim
Reporting Services Inc.
I hereby certify the foregoing to be a true and accurate
transcription of the above-noted proceedings held before me on
17th DAY OF MARCH, 2015, and taken to the best of my skill,
ability and understanding.
}
}
}
}
}
}
}
}
}
}
Certified Correct:
_______________________
Charlotte Chittenden
Verbatim Reporter
TAB 4
ϭϰϱ
DRAFT
Court File No. 31-208039-T
ONTARIO
SUPERIOR COURT OF JUSTICE
) TUESDAY, THE21sr
THE HONOURABLE
)
JUSTICE
) DAY OF APRIL, 2015
IN THE MATTER OF THE BANKRUPTCY OF SHS SERVICES
MANAGEMENT INC./GESTION DES SERVICES SHS INC. AND SHS
SERVICES LIMITED PARTNERSHIP of the City of Toronto, in the Province of
Ontario
ORDER
THIS MOTION, made by the Trustee for an order compelling Paul Verhoeff and
Stephen Verhoeff (the "Verhoeffs") and Theresa Lea ("Lea") to attend examinations
and to produce ce1iain documents under Section 163 of the Bankruptcy and Insolvency
Act was heard this day, at 330 University Avenue, Toronto, Ontario.
ON READING the Motion Record of the Trustee, the Responding Motion
Record of the Verhoeffs and Lea and the factums of the Trustee and the Verhoeffs and
Lea and on hearing the submissions of the lawyers for the Trustee and the Verhoeffs and
Lea,
I.
THIS COURT ORDERS that the Verhoeffs and Lea deliver to the Trustee all
documents in their possession or power listed in Schedule "A" to the Notices of
Appointment that were served on them by the Trustee on February 11,2015.
2.
THIS COURT ORDERS that the Verhoeffs and Lea shall attend the Toronto
office of McMillan LLP, counsel for the Trustee, to be examined by the Trustee pursuant
to Section 163 of the Bankruptcy and Insolvency Act, on a date to be determined by the
Trustee that is no later than May 8, 2015.
- 2-
3.
THIS COURT ORDERS that the Verhoeffs and Lea pay the costs of the Trustee
on this motion in the amount of •.
ϭϰϲ
IN THE MATTER OF THE BANKRPUTCY OF SHS SERVICES MANAGEMENT INC./GESTION DES SERVICES
SHS INC. AND SHS SERVICES LIMITED PARTNERSHIP
Court File No. 31-208039-T
IN THE MATTER OF AN APPLICATION PURSUANT TO SECTION 243 OF THE BANKRUPTCY AND INSOLVENCY
ACT, R.S.C. I985, c. B-5, AS AMENDED; AND SECTION 101 OF THE COURTS OF JUSTICE ACT, R.S.O. 1990, c. C.43,
AS AMENDED
ONTARIO
SUPERIOR COURT OF JUSTICE
Proceeding commenced at Toronto
ORDER
MCMILLAN LLP
Brookfield Place
181 Bay Street, Suite 4400
Toronto, ON, M5J 2T3
Brett Harrison LS#: 44336A
Tel: 416.865.7932
Stephen Brown-Okruhlik LS#: 66576P
Tel: 416.865.7043
Fax: 416.865.7048
Lawyers for the Trustee
ϭϰϳ
IN THE MATTER OF THE BANKRUPTCY OF SHS SERVICES MANAGEMENT INC./GESTION DES SERVICES SHS INC. and SHS
SERVICES LIMITED PARTNERSHIP
Court File No: 31-208039-T
IN THE MATTER OF AN APPLICATION PURSUANT TO SECTION 243 OF THE BANKRUPTCY AND INSOLVENCY ACT, R.S.C.,
1985, c. B-5. AS AMENDED; AND SECTION 101 OF THE COURTS OF JUSTICE ACT, R.S.O. 1990, c. C.43, AS AMENDED
ONTARIO
SUPERIOR COURT OF JUSTICE COMMERCIAL LIST
Proceeding commenced at Toronto
MOTION RECORD OF THE TRUSTEE
PRICEWATERHOUSE COOPERS INC.
(RETURNABLE APRIL 21, 2015)
MCMILLAN LLP
Brookfield Place
181 Bay Street, Suite 4400
Toronto, ON, M5J 2T3
Brett Harrison LS#: 44336A
Tel: (416) 865-7932
Email: [email protected]
Stephen Brown-Okruhlik LS#66576P
Tel: 416-865-7043
Email:[email protected]
Fax: 416-865-7048
Lawyers for PricewaterhouseCoopers Inc. in its
capacity as Court-appointed trustee of SHS
Services Management Inc./Gestion des Services
SHS Inc. and SHS Services Limited Partnership
LEGAL_23598879.3