judge rips into 'entitled, ungrateful' b.c. man who lied to strip profits from brothers' a&w franchise
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a man who tried to obtain an “unearned and undeserved” share of his siblings’ fast-food franchise successes has been excoriated by a b.c. supreme court judge, who called him “dishonest, entitled, ungrateful and jealous.”
norman and bradley phaneuf sued their brother, vern phaneuf, for claiming 50 per cent ownership of a&w restaurants they operated in maple ridge and for trying to cut them out of any profits from the restaurants — all because of a paperwork error.
“vern has tried to leverage a simple and obvious mistake in the articles of the companies … to obtain an entirely unearned and undeserved share of the hard-earned successes of norman and bradley,” justice jasvinder basran wrote in a recent decision.
the case stems from a holding company the brothers created for several new franchise locations they were planning to open in 2010, thanks to an expansion opportunity offered by a&w.
all four brothers were shareholders in the holding company. norman and bradley, who ran the restaurants, owned 80 per cent. they offered 10 per cent each to vern and terry (now deceased), in non-voting class b shares, as gifts. vern had done accounting work for the family’s previous franchises and terry had provided loans.
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when the ownership documents were being amended, norman and bradley’s shares were mistakenly listed as “non-participating,” which means they are not entitled to profits from the restaurants, while terry and vern’s shares were “participating,” giving them access to dividends and sale proceeds, despite only making up 20 per cent of shares.
vern, a certified public accountant who works as an investment adviser, drew up the paperwork. norman and bradley, neither of whom had a post-secondary education, told the judge they did not understand or know what the terms “participating” or “non-participating” meant.
as a result of the error, which was only discovered in 2020, vern claimed that he and terry each owned 50 per cent of the holding company that controlled the franchises as part of a “de facto shareholders’ agreement” that would see norman and bradley’s shares redistributed.
the judge rejected the claim as “irrational and nonsensical.”
“it defies all logic and credulity to believe that norman and bradley would invest heavily and work tirelessly in businesses they had no ownership interest in,” basran wrote, calling vern’s claim “irrational, self-interested, and a seeming product of his imagination.”
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“vern fabricated this entire ‘de facto shareholders’ agreement’ narrative to try to take advantage of the mistake in the articles of the companies that describes the class a shares as “non-participating,” in an attempt to benefit himself,” basran wrote.
basran praised the evidence from norman and bradley as “logical, forthright, straightforward, consistent, and coherent.”
the judge had far harsher comments for vern’s testimony, noting that he “lied repeatedly and unrelentingly,” and that “virtually every element of his evidence lacked truth, clarity, and logic.”
the judge pointed out that despite claiming he always knew how the shares were structured, vern originally denied that he created the shareholder documents.
vern also claimed that his brothers lured him to b.c. from a partnership in a saskatchewan accounting firm, with an offer of 25 per cent ownership of the businesses they would operate.
the judge pointed out that, in reality, vern received a 50 per cent interest in the first franchise he was a part of and that he had never been a partner in the accounting firm.
“this evidence cannot be reconciled because it is a fiction unsupported by any documents or logic,” the judge wrote.
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norman and bradley sought $68,609 in damages, accounting for a loss of interest had the dividends been paid out to them in a timely manner. however, the judge was not convinced “that norman and bradley have established that they suffered a loss as a result of vern’s negligence,” and denied the damages they were seeking, instead ordering records be amended to reflect the proper apportioning of shares.
“the underlying funds, and any further amounts earned on them, remain available in the companies and may be paid to them whenever they wish. norman and bradley control the voting shares of the companies and can issue amounts to themselves, if they see fit, as either management fees or dividends,” basran wrote.
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