Executive Summary: Key Legal and Evidentiary Issues

• The central question was whether a lawyer who accepted shares as payment for incorporating his client breached his fiduciary duty to that client.
   
• Evidence from a director showed no disclosure of a conflict of interest and no advice to obtain independent legal advice.
   
• Nothing in the record showed the cost of the legal services or the value of the shares when they were issued.
   
• Subsections 23(5) and 23(6) of the Business Corporations Act, which allow shares to be issued for services of equivalent value, informed the court's analysis.
   
• An alternative oppression claim under section 166 was not decided, since it would have required assuming the share issuance was valid.
   
• Costs were fixed at the lower end of Tariff E because the application proceeded undefended.
   

Facts of the case

The Farmer's Truck Inc. is a corporation established under the laws of New Brunswick [note: para 2 of the decision describes it as "an extra-provincial corporation formed under the laws of New Brunswick," which is inconsistent with para 1]. It is engaged in social impact activities and works with non-profit organizations across North America to deliver fresh food to underserved communities. On June 1, 2015, Michael David Tripp was a registered and practising lawyer acting as the company's legal counsel. On that date he accepted 30 common voting shares, representing 3% of the corporation's shares, as payment for the legal work of incorporating the company. The record contains no indication of the cost of those legal services.

Frederic Laforge, a director of Farmer's Truck, stated that Mr. Tripp did not advise the company to seek independent legal advice on the share issuance. Mr. Laforge found no records showing that Mr. Tripp had disclosed a conflict of interest.

In 2021, Farmer's Truck began buying back its outstanding shares. Mr. Tripp signed a Letter of Intent in August 2021 agreeing to transfer his shares for $12,000.00, followed by a Share Purchase Agreement on similar terms in March 2022. When asked that month to finalize the transfer, he said he was requesting updated shareholder and financial information and suggested he might need a legal opinion before selling. Counsel for Farmer's Truck asked him for copies of the minute book, which he never provided. He followed up on the agreement on July 21, 2022 and July 21, 2023, but the parties could not connect, and he appeared to be out of the country during this period. A January 21, 2025 email went unanswered, and there has been no communication from him since July 21, 2023.

The transfer was never completed, and Mr. Tripp could not be located despite significant efforts. Farmer's Truck obtained an order for substituted service on September 1, 2026. Mr. Tripp filed no materials and did not attend the September 14, 2026 hearing before Justice Maya Hamou of the Court of King's Bench of New Brunswick. The company needed the share issue resolved so it could proceed with a capital raising initiative for its social impact mandate. Primarily, it sought to have the 2015 share issuance set aside for breach of fiduciary duty. As an alternative, it argued that Mr. Tripp's failure to complete the agreed transfer was oppressive. On that basis, it asked the court either to direct the transfer under the Letter of Intent and Share Purchase Agreement or to set aside the original issuance.

Policy and legislative provisions at issue

Subsections 23(5) and 23(6) of the Business Corporations Act, SNB 1981, c B-9.1, permit shares to be issued for services of equivalent value. In deciding whether the value is equivalent, directors may consider the expected benefit to the corporation. Section 166 of the same Act provides the oppression remedy relied on in the alternative claim.

Under the Law Society of New Brunswick's Code of Professional Conduct, lawyers must avoid conflicts of interest. A client may consent after being told about the conflict. The decision refers to this as Rule 3 in its initial discussion and cites Rule 3.4-2 in its conclusion. Costs were addressed under Rules 59.08(1.1) and 59.08(8) of the Rules of Court and Tariff E [spelled "Tarriff E" in the decision].

Reasoning and analysis

Justice Hamou held that Mr. Tripp owed Farmer's Truck a fiduciary duty while acting as its counsel on the incorporation. The court relied on Buyting v Lourensse et al., 1999 CanLII 32737 (NBQB), affirmed at 1999 CanLII 4674 (NBCA). In that case, Justice Garnett described a lawyer's fiduciary obligations as including a duty to disclose all relevant information to the client. They also include prohibitions on using the lawyer's position for personal gain and on holding a personal interest that conflicts with the client's.

Farmer's Truck relied on Hudye Inc. v Rosowsky, 2022 ABCA 279. There, outside counsel acquired an equity stake in his client's business along with a commission agreement. The Alberta Court of Appeal found he breached his fiduciary obligations by failing to disclose conflicts and failing to advise the client to seek independent legal advice. Justice Hamou also referred to West v Elizabeth Wilbur, Kelly Fletcher, Edinburgh Holdings Ltd., 2007 NBQB 67, upheld at 2008 NBCA 50. In West, Justice McNally found that counsel who acquired shares for a client and then appropriated them for personal benefit breached duties of utmost good faith, loyalty, and avoidance of conflicts of interest.

Applying these principles, the court found no indication of any discussion about the conflict involved in Mr. Tripp taking shares for the incorporation work. There was also no evidence that he advised Farmer's Truck to obtain independent legal advice. Nothing showed that the company, its directors, or its shareholders were told about the equivalent-value requirement in section 23. Neither the cost of the legal services nor the value of the shares at the time was in evidence. On that basis, the court concluded that Mr. Tripp breached his fiduciary duty.

The incorporation, the court found, was not a complicated or costly endeavour. Giving shares for that work without disclosing the conflict or advising on independent legal advice produced an inequitable transfer. Hudye and West both involved far more complex facts. Even so, the courts in those cases rescinded share transfers to counsel as an equitable remedy, and Justice Hamou found a similar remedy appropriate here. Farmer's Truck had also argued that the issuance was not properly approved by its board or shareholders, but the decision does not address that argument separately.

The oppression claim was not decided. A section 166 analysis would require assuming the original share issuance was valid, which conflicted with the finding that Mr. Tripp obtained the shares in breach of his fiduciary duty. Such an analysis, the court held, would serve no useful purpose.

Ruling and overall outcome

Farmer's Truck succeeded on its primary claim. The court rescinded the June 1, 2015 issuance of 30 shares to Mr. Tripp [note: para 25 describes this as rescinding the "transfer of shares," while the formal disposition at para 29(1) rescinds the "issuance"]. Mr. Tripp was ordered to pay costs of $2,500 plus disbursements, fixed at the lower end of the tariff because the undefended application required less preparation and attendance. Disbursements were not quantified, so the total monetary award cannot be determined from the decision. Written reasons followed on September 23, 2026, after the decision was issued on September 18, 2026.