Executive Summary: Key Legal and Evidentiary Issues

• Enforceability of the May 5, 2023 one-page agreement for the plaintiffs to buy the defendants’ one-half interest in Fraser Valley Holdings Limited (FVHL), versus the defence position that it was only an “agreement to agree”.

• Certainty and completeness of essential terms, including the fixed $14,000,000 price for the defendants’ one-half interest in FVHL based on a combined $28,000,000 value.

• Interpretation of the clause that “cash” to be distributed “shall include life insurance policies or their cash value”, focusing on the FVHL-held life insurance policy on the life of Pete Masztalar and its cash surrender value.

• Whether the May 5 Agreement expired 30 days after the September 6, 2023 sale of FVRL to Arcticom or was effectively extended by the parties’ conduct and communications with their accountant.

• Use of the parties’ emails and conduct, including Brian’s October 18, 2023 and May 3, 2024 emails, to pinpoint breach of the May 5 Agreement.

• Justification for specific performance (transfer of all FVHL shares held by Krafte Holdings Ltd. for $14,000,000, with cash and insurance value equalization) as the primary remedy rather than damages.

Background and parties
The dispute arises from the sale of a longstanding family refrigeration, heating and air-conditioning business based in Aldergrove, British Columbia. The plaintiffs are Masztalar Holdings Ltd., and brothers Kenneth Blaire (“Blaire”) and Allan Dean (“Dean”) Masztalar. The defendants are Krafte Holdings Ltd., and brothers Scott and Brian Krafte. Through holding companies and family trusts, each of Blaire, Dean, Scott and Brian held a 25% interest in Fraser Valley Refrigeration Ltd. (FVRL) and in Fraser Valley Holdings Limited (FVHL), which owned the Aldergrove Property and, via 0778158 BC Ltd. (“778”), the Lefeuvre Road Property in Abbotsford.

Facts and outcome of the case
After FVRL was approached in 2022 by The Arcticom Group (TAG), the parties negotiated a sale. A share purchase agreement dated September 3, 2023 led to FVHL and the individual parties selling their interests in FVRL and Accutemp Refrigeration, Air-Conditioning and Heating Ltd. to Arcticom Group Canada Limited for approximately $28,000,000 USD, with consideration paid to the individuals, their holding companies and family trusts. Shortly before closing on September 6, 2023, approximately $8.413 million in “excess cash” was transferred from FVRL to FVHL.
Meanwhile, internal tensions escalated when Brian, through counsel on January 30, 2023, demanded equal compensation back to 2017 and threatened legal proceedings. The parties then negotiated a short May 5, 2023 agreement. It provided that FVRL would pay Brian $250,000 and raise his salary to be equal to Blaire, Dean and Scott; that, upon the sale of FVRL, Scott and Brian would sell, and Blaire and Dean would buy, their one-half interest in FVHL (including 0778158 BC Ltd.) for $14,000,000, based on a combined value of $28,000,000; that any cash held in any related companies, including “life insurance policies or their cash value”, would be distributed before any sale so each of Blaire, Dean, Scott and Brian received one-quarter; and that the “final structure of any sale” would be agreed after consulting accountants, lawyers and other advisors, with the agreement binding on the parties and any related companies they controlled. The agreement stated the share acquisition would be “executed and paid as soon as possible no longer than thirty (30) days after the sale of FVRL and transfer of funds has completed.”
Brian received the $250,000 on May 8, 2023 and thereafter was paid the same wages as the others until the September 6, 2023 closing, satisfying his compensation claims. New leases for the Aldergrove and Lefeuvre Road properties were negotiated and executed on September 6, 2023. KPMG prepared a draft illustration of a buy-out of the defendants’ FVHL shares on September 14, 2023. When accountant Paul Sangha indicated September was a bottleneck, Scott emailed that “we can extend the closing”, and KPMG suggested aligning the transaction with FVHL’s October 31 year-end. Blaire circulated this proposal; Brian saw but did not respond.
On October 18, 2023, Brian emailed that he had decided to keep his properties and that they were not for sale, while indicating he would be willing to discuss the matter in the coming weeks. The plaintiffs continued to pursue completion, including a detailed proposal on January 3, 2024. On February 1, 2024, Scott and Brian wrote that the first step was to distribute all monetary assets in FVHL and 778, leaving only the properties and the insurance policy. In March and April 2024, further emails addressed valuations, distributions and structure. After a federal announcement on increasing the capital gains inclusion rate for transactions after June 25, 2024, the plaintiffs sent a share purchase agreement on April 30, 2024. On May 3, 2024, Brian emailed Blaire stating he was tired of hearing about an agreement that “expired 30 days after the sale of the company”, that he did not want to sign any agreement the plaintiffs were proposing and would not, and that he did not care about the capital gains tax. The plaintiffs filed their notice of civil claim on May 15, 2024.

Court’s analysis and breach
The court found the parties intended to contract and that the May 5 Agreement contained the essential terms: the parties, Scott and Brian’s one-half interest in FVHL (held through Krafte Holdings Ltd.) as the subject matter, and a fixed $14,000,000 price. It held that the “final structure” of the sale was a matter to be resolved with professional advice, not an essential term. The court interpreted the phrase that cash “shall include life insurance policies or their cash value” as permitting the life insurance policy held by FVHL on the life of Pete Masztalar to be taken into account by reference to its cash surrender value. It rejected the argument that the agreement expired automatically 30 days after the September 6, 2023 sale, noting Scott’s willingness to extend closing when the accountant was unavailable, the proposed alignment with the October 31 year-end, and the parties’ continued engagement into early 2024 on distribution and structure under the May 5 framework. The court concluded that the plaintiffs were ready, willing and able to complete at all material times and that Brian’s May 3, 2024 email refusing to sign any agreement the plaintiffs were proposing breached the May 5 Agreement.

Orders, adjustments and successful party
The court ordered specific performance. It directed that, within 30 days of the order, all issued and outstanding shares of FVHL held by Krafte Holdings Ltd. be transferred to the plaintiffs, with the plaintiffs paying $14,000,000 to the defendants at the time of transfer. The parties are to discuss with accountants and lawyers to agree on a mutually acceptable, tax-efficient transfer structure; if they cannot agree within 30 days, the transfer is to be a simple transfer of the common shares of FVHL held by Krafte Holdings Ltd. The court ordered the parties to determine the amount of cash in FVHL as of May 15, 2024 and the cash surrender value of the life insurance policy on the life of Pete Masztalar held by FVHL as of that date, with any dispute to be referred to the Registrar. In relation to Scott’s January 10, 2025 withdrawal of $9.320 million from FVHL by drafts of $4.660 million each to Masztalar Holdings Ltd. and Krafte Holdings Ltd., the court ordered that any excess over the appropriate cash and policy value be repaid by the defendants to FVHL within 60 days, and any shortfall be paid by FVHL to the defendants within 60 days. The plaintiffs were the successful parties and were awarded their costs, subject to further written submissions if the parties cannot agree on the amount.