Judge: Ex-CEO and Minority Shareholder Can’t Force Sale of Mitchell Press

The Supreme Court of British Columbia, Canada, recently ruled against the former CEO and minority shareholder of Burnaby-based Mitchell Press in his attempt to have the commercial printing company liquidated so he could access his ownership stake after being terminated in 2022.

Mitchell Press is a 85-employee, largely unionized print provider that operates out of a 64,000-sq.-ft. printing plant that, according to court records, is located in Burnaby on a valuable property worth more than (C)$20 million. A 2019 Mitchell Press “Sustainability Report” noted it’s the largest commercial heatset web offset printer in Western Canada and the Pacific Northwest, outputting on average more than 2 billion publication pages per year.

Despite claiming that he was stuck in “shareholder purgatory” as a minority shareholder, Supreme Court Justice Robin Baird ruled that Daniel Castilloux’s dismissal as CEO was justified, based on the evidence, and that the company’s articles of incorporation forbid it from being sold without approval of the majority shareholder.

Castilloux — who was formerly married to company founder Howard T. Mitchell’s granddaughter — joined the 96-year-old company in 1990 when the business was being run by her father, Howard Mitchell. Castilloux remained with the company, despite eventually getting divorced in 2010, and rose through the ranks serving in various senior-level executive positions, including when Howard Mitchell decided to retire and relinquish control of Mitchell Press to both his son, David Mitchell, and Castilloux.

Printing Company Is Restructured

According to court records, the company was restructured into five separate corporate entities in 2017. Howard Mitchell then gifted most of the shares to his children and to Castilloux. David Mitchell and Castilloux were each awarded a 37.6% equity stake, with the remainder given to David’s siblings.

As part of the gift, David Mitchell and Daniel Castilloux were named co-directors and given all of the 200 voting shares of the company, although 101 shares were bestowed to Howard Mitchell’s son and 99 shares awarded to his former son-in-law. Castilloux requested to change his title to CEO and Mitchell to president, although the court ruling indicated that Castilloux ran all day-to-day operations, which eventually became a sore spot between them.

That feeling of resentment came to a head during a November 9, 2020, meeting between Castilloux, Mitchell, and company CFO Jim Mann. The ruling said an argument ensued and Castilloux gave Mitchell “a dressing down” for not pulling his weight in running the business. Casilloux later apologized, but Mitchell reportedly did not feel it was sincere.

According to the court documents, in February 2021 Mitchell decided to step down as an employee and officer of the company so Castilloux could run the business with autonomy, but indicated that, as a substantial owner and controlling director, he wanted to be consulted about all key business decisions such as large capital expenditures, major management decisions, and key personnel changes.

Mitchell also expected Castilloux, as CEO, to act responsibly and as a fiduciary for the company’s best interests. Justice Baird noted in the ruling that he viewed these demands to be reasonable expectations.

Pandemic Creates Even More Controversy

Another rift developed between them with the onset of the COVID-19 pandemic in March of 2020. According to court records, Mitchell contended that Castilloux refused to comply with company policies such as mask wearing and social distancing — put in place by his own management team — to help contain the spread of the virus.

“Mr. Castilloux repeatedly told his managers and employees that the mandates were part of a government conspiracy to expand executive powers and eradicate their civil liberties,” the court ruling said. “Rather than comply with them, he stopped coming into the plant except occasionally, and when he did, he either refused to wear a mask, or wore one without covering his nose, or wrapped his face in a scarf.”

The court ruling added Castilloux proposed a “perfect solution” that he should remain at home and communicate electronically with employees sporadically by means of a computer tablet affixed to a pole.

Mitchell contended this led Michell Press employees to lose confidence in Castilloux, court records indicated. He said he received complaints that Castilloux would summon employees and suppliers to meetings at his home, and then encourage them to go unmasked while they were there. On one occasion, Castilloux apparently met with the company’s banker while wearing a bathrobe and offered the banker to wear one as well, the court documents indicated.

Gary Gunter, who was hired by Mitchell Press to replace David Mitchell as president, informed the court that Castilloux’s behavior did not sit well with company employees who felt obliged to tolerate it. Gunter described Castilloux’s conduct as being “unprofessional” and “embarrassing,” according to the judge’s ruling.

Castilloux later contended to the court his actions to stay home were driven by his fear of catching the virus himself, and were not based on a conspiracy theory. But Justice Baird ruled that his behavior was inconsistent with the facts and was “ … unbecoming of an executive responsible for the workplace health and safety of over 100 employees.”

Health Scare Leads to Further Discord

From Castilloux’s viewpoint, his relationship with David Mitchell remained cordial, even after their contentious November 2020 meeting, court records noted. He claimed their longtime relationship soured after receiving an email from Mitchell on February 19, 2021 — a few days before Castilloux was to undergo surgery to remove a growth on his neck that doctors informed him might be cancerous.

Castilloux claimed the email was cold-hearted and cruel. Castilloux was worried that he might not survive the operation and said he implored Mitchell to resume a leadership role at Mitchell Press while he recuperated.

Justice Baird disagreed and indicated that he believed the email sent by Mitchell to be conciliatory and optimistic in nature. It expressed concern for a positive outcome and a speedy recover. Court records said it also reiterated Mitchell’s confidence in Castilloux to lead the company upon his return, upon which though Mitchell indicated he wanted to meet with him to discuss the future direction of the company.

The surgery proved to be non-life threatening — even though it did take a toll on him  and affect his vocal cords, for one thing — but the judge indicated he did not feel Mitchell was trying to get Castilloux to return to work before he had recovered. Baird also agreed with Mitchell that his return to the business on an interim basis during Castilloux’s recuperation from surgery was unnecessary, given the fact that the executive team already in place was well-qualified to run the business, just as it had done while Castllloux was largely absent from the plant during the pandemic.

During a deposition, Gunter contended he knew there was an ongoing conflict between Castilloux and Mitchell, and that “Castilloux’s refusal to communicate or involve Mr. Mitchell in the business was making it very difficult to do my job, as I frequently found myself in the middle of the two trying to sort things out.”

Expectation Document Is Drafted

As a result, Gunter indicated he finally insisted that all three of them meet to address the problem. This resulted in the creation of an “Expectation Document” document on April 19, 2021, which Gunter and Mitchell claim all three agreed to, but that Castilloux argued  was only discussed but not finalized.

Gunter indicated in his testimony that it was only a matter of weeks after the document was circulated that Castilloux set out to wrest control of the company from the Mitchell family, including Castilloux reportedly offering Gunter a 10% stake once he got control.

Gunter also testified that Castilloux further violated the Expectation Document by committing to purchase equipment for $300,000 without conferring first with Mitchell. He said Mitchell — although upset upon finding it out — acquiesced in the decision.

As several more months ensued, Castilloux  avoided meeting with Mitchell, indicating that he was working on a strategic plan for the company’s future, court documents indicated. Based on what he described to the court as Castilloux’s ongoing “erratic” behavior, Mitchell emailed Castilloux on February 15, 2022, proposing he take a paid leave of absence of at least six months and step aside as CEO. The email also stated Castiloux taking the leave of absence was mandatory for his continued employment.

Upon receiving no response and concluding that any further of attempts of reconciliation were fruitless, court records said, Mitchell sent a letter to Castilloux on March 7, 2022, titled “Negotiation of Exit Package.”

It called for his removal as CEO, but expressed Mitchell’s desire to reach an amicable departure agreement. That offer came to a head, however, the court indicated when Castilloux unilaterally decided to fire CFO Jim Mann, leading Mitchell to advise Castilloux that his employment was terminated for just cause.

Judge Baird ruled that the removal of Castilloux was justified, albeit recognizing that he had been ousted from a company to which he has devoted substantially all of his adult working life. Baird agreed that Castilloux’s options as a minority shareholder were limited, but that it didn’t justify an order to liquidate the company against the wishes of the majority shareholders.

“It would be neither just nor equitable to grant [Mr. Castilloux] the drastic remedy of a liquidation order in circumstances where the conflict that he claims to have rendered it necessary was substantially of his own making,” Justice Baird concluded in his final ruling. “The unanimous, rational, and entirely defensible ambition of the majority shareholders to carry on with business as usual must prevail.”