An 81-year-old woman who operated an Abbotsford motorcycle shop was found to have unfairly prejudiced two of her children as shareholders in the shop.
The finding of prejudice was over Lillian Renpenning’s decision to overpay herself by $100,000 in 2019 for her work at the shop and to fund her legal fees in the legal dispute that started as she shuttered the business following her husband’s death.
The company began shutting down in 2019, two years after the passing of Lillian’s husband, David Renpenning Sr.
The sale of the company’s assets to 3-D Cycles, a separate company owned by Lillian’s grandson, generated over $1.2 million.
The bulk of the shareholder oppression claims against Lillian by her son, Darwin Renpenning, and daughter, Denise Renpenning, were dismissed in a recent B.C. Supreme Court decision.
The dismissed claims included charges that she overpaid herself by $6,559 in 2018, that she unfairly took back pay for unpaid work in previous years and that she overpaid herself in her retirement package.
Justice John Gibb-Carsley ordered Lillian to repay the company about $30,000 for the legal fees and $93,149 for overpaying herself in 2019. In doing so, he said it would be “profoundly unfair” for shareholders of the company to cover her legal fees when she was found to have acted oppressively to the shareholders.
Lillian’s decision to pay herself $163,149 in 2019 was unreasonable, the judge found, particularly taking issue with her argument that it was back pay for past unpaid work.
Gibb-Carsley highlighted Lillian had also separately paid herself back pay for unpaid work as the store closed – another matter the plaintiffs claimed was oppressive to them as shareholders.
Lillian retroactively paid herself $223,000 for 2011 to 2017 and another $130,000 as a retirement allowance. Her children took issue with both of those payments, but Gibb-Carsley noted two other employees were also paid out retirement allowances and that she was entitled to a retirement allowance after dedicating 50 years to the company.
Lillian’s back pay was calculated based on the difference between her own salary and Darwin’s from 2011-17. While Darwin regularly made over $50,000 per year in that time, Lillian’s fluctuated between no pay and $35,200, for a total difference of $343,287.
Lillian told the court she underpaid herself to keep the business running and that she was able to repay herself after selling the company’s property.
Gibb-Garsley noted Darwin himself didn’t exactly come to the table with “clean hands,” raising the question of whether he would be eligible for court-ordered remedy for his mother’s actions. Darwin had borrowed $29,000 from the company through promissory notes in the early 2000s to fund a divorce without ever paying the money back.
“I found it difficult to accept that Darwin alleged the defendant was irresponsible with the funds of the company, and yet he had no intention of meeting his obligations to the company by repaying his debts,” Gibb-Garsley wrote.
The judge called this behaviour “hypocritical and unsavoury,” however, he ultimately decided it couldn’t preclude him from receiving his share of the remedy in the matter, as the promissory notes had been addressed in past litigation.