Executive Summary: Key Legal and Evidentiary Issues

• Section 10.3(b) of the Shareholders Agreement gave the Fulcher Group the right to compel the Munro Group to purchase its shares following Mr. Fulcher’s death.

• The Munro Group refused to comply with the share purchase demand, arguing that no obligation existed under the Agreement.

• The Defendants sought to stay the court proceeding in favour of arbitration, invoking Article 15 of the Shareholders Agreement.

• Justice Rosinski found that the Munro Group declined mediation and failed to establish readiness to proceed to arbitration.

• The Defendants attorned to the Court’s jurisdiction by filing a defence without first challenging jurisdiction, contrary to Rule 4.07.

• The motion to stay the action was dismissed, allowing the Fulcher Group’s court proceeding to continue.

Background and shareholder relationship

The case involves a dispute over the interpretation and application of a Shareholders Agreement dated November 19, 2010, involving N.W. Fulcher Limited, the late N. Wayne Fulcher, Chad Munro, and the Chad Munro Family Trust (2010). Fulcher Ltd. invested over $800,000 in Glengary Holdings Limited, and indirectly in Halifax Biomedical Inc., of which Glengary remains the majority shareholder.

Following Mr. Fulcher’s death on January 29, 2024, BMO Trust Company, as Executor of his Estate, assumed control of Fulcher Limited. On March 25, 2024, pursuant to section 10.3(b) of the Shareholders Agreement, the Fulcher Group delivered written notice to the Munro Group requiring them to purchase the shares held by the Fulcher Group. The Munro Group refused on April 8, 2024, claiming their interpretation of section 10.3 did not impose such an obligation.

Dispute and positions of the parties

The Fulcher Group alleged the Munro Group breached the Shareholders Agreement by refusing to purchase the shares, constituting an ongoing breach of contract. The Munro Group filed a motion seeking to stay the court proceedings in favour of arbitration, relying on Article 15.1 of the Shareholders Agreement, which provides for mediation and, failing that, arbitration under the Arbitration Act (Nova Scotia).

The Defendants argued that disputes about interpretation or application of the Agreement fall under mandatory dispute resolution mechanisms. They also submitted that they were under no obligation to purchase shares under section 10.3 and claimed the litigation was frivolous and vexatious.

Policy terms and key contractual clauses

Two key provisions of the Shareholders Agreement were at issue:

• Section 10.3(b): Provides that upon the death of Fulcher, the Fulcher Group has the right, but not the obligation, to require the Munro Group to purchase its shares. The Court found that the provision was unambiguous, giving the Fulcher Group a straightforward contractual right to compel the Munro Group to buy its shares.

• Article 15.1 (Dispute Resolution): Requires disputes about interpretation or application of the Agreement to first be submitted to mediation, and if unresolved, to arbitration. However, both parties must agree to proceed with mediation.

The Court noted that the Munro Group’s counsel declined to proceed with mediation on May 4, 2024, citing financial limitations. The inability or unwillingness to proceed with mediation was communicated to both the Plaintiffs and the proposed mediator.

Court’s decision

Justice Rosinski concluded that the Fulcher Group was entitled to file their Notice of Action on August 30, 2024. The Munro Group’s motion to stay the proceeding was filed on February 24, 2025—after the Defendants had already filed a Notice of Defence on October 25, 2024.

Under section 7 of the Arbitration Act, a party seeking a stay must do so before delivering any pleadings and must be ready and willing to conduct arbitration. The Court found that the Munro Group failed to satisfy these requirements and had, by filing a defence without first contesting jurisdiction, attorned to the jurisdiction of the Court.

Justice Rosinski also emphasized that the Defendants had agreed to the terms of the Shareholders Agreement, including its cost-sharing clause under Article 15.2, and could not now avoid the mediation requirement based on financial arguments.

Outcome

The Court dismissed the Munro Group’s motion to stay the proceeding in favour of arbitration. It held that the Fulcher Group was contractually entitled to demand the share purchase and to proceed by way of civil action. Costs were awarded against the Defendants.

The decision does not specify a total monetary award, damages, or detailed cost figures.