101114752 Saskatchewan Ltd. v. Kantor et al., 2012 SKCA 64

• Judge: Vancise, Jackson and Herauf, JJ.A.
• Court: Court of Appeal (Saskatchewan)
• Case Date: May 08, 2012
• Jurisdiction: Saskatchewan
• Citations: 2012 SKCA 64;(2012), 399 Sask.R. 36 (CA)

101114752 Sask. v. Kantor (2012), 399 Sask.R. 36 (CA);

    552 W.A.C. 36

MLB headnote and full text

Temp. Cite: [2012] Sask.R. TBEd. JL.001

101114752 Saskatchewan Ltd. (appellant/plaintiff) v. Devonian Potash Inc., 101109711 Saskatchewan Ltd. (respondents/defendants) and Viatcheslav Moshe Kantor, North Atlantic Potash Inc., Viasat Services Limited, TrustService Limited Liability Company, Joint Stock Company Acron, Dmitry Kantor, Lyubov Kantor, Tony Le-Ta, Mark Windsor-Smith, Dmitry Goloubkov and Arie Zuckerman (non-parties/defendants)

(CACV 2201; 2012 SKCA 64)

Indexed As: 101114752 Saskatchewan Ltd. v. Kantor et al.

Saskatchewan Court of Appeal

Vancise, Jackson and Herauf, JJ.A.

June 25, 2012.

Summary:

The plaintiff's claim sought shareholder oppression style remedies arising out of its status as a minority shareholder (14.3%) in 9711 Ltd. 9711 Ltd. had been created for the purpose of holding the shares of Devonian Potash Inc. Devonian sold all of its potash exploration permits for approximately $200 million to an unrelated third party. The plaintiff applied for an interlocutory injunction ordering the payment of the proceeds of the sale of the permits into court.

The Saskatchewan Court of Queen's Bench, in a decision reported at (2011), 387 Sask.R. 175, dismissed the application. The plaintiff appealed.

The Saskatchewan Court of Appeal allowed the appeal.

Company Law - Topic 2170.1

Shareholders - Shareholders' rights - Oppressive acts - Remedies - The plaintiff's claim sought shareholder oppression style remedies arising out of its status as a minority shareholder (14.3%) in 9711 Ltd. - 9711 Ltd. had been created for the purpose of holding the shares of Devonian Potash Inc. - Devonian sold all of its potash exploration permits for approximately $200 million to an unrelated third party - The plaintiff's application for an interlocutory injunction ordering the payment of the proceeds of the sale of the permits into court was dismissed - On the plaintiff's appeal, the Saskatchewan Court of Appeal rejected the argument that, because s. 234(1) of the Business Corporations Act ("Application to court re oppression") did not refer specifically to relieving against threats of oppressive conduct, the court lacked jurisdiction here to grant an injunction - Section 234 was remedial and was to be given a broad interpretation - The court had "the entire jurisdiction it needs to act in the face of the type of threatened oppressive conduct that was in issue" here - See paragraphs 31 to 35.

Company Law - Topic 2170.1

Shareholders - Shareholders' rights - Oppressive acts - Remedies - [See Injunctions - Topic 1606 , second Injunctions - Topic 1616 and Injunctions - Topic 1802 ].

Company Law - Topic 9796.1

Actions against corporations and directors - Action for oppressive conduct - Interim relief - [See first Company Law - Topic 2170.1 , Injunctions - Topic 1606 , second Injunctions - Topic 1616 and Injunctions - Topic 1802 ].

Injunctions - Topic 1606

Interlocutory or interim injunctions - General principles - Balance of convenience - The plaintiff's claim sought shareholder oppression style remedies arising out of its status as a minority shareholder (14.3%) in 9711 Ltd. - 9711 Ltd. had been created for the purpose of holding the shares of Devonian Potash Inc. - Devonian sold all of its potash exploration permits for approximately $200 million to an unrelated third party - The plaintiff's application for an interlocutory injunction ordering the payment of the proceeds of the sale of the permits into court was dismissed - The Saskatchewan Court of Appeal allowed the plaintiff's appeal - Regarding the balance of convenience, the court stated that it was clearly relevant to consider, as the application judge had, whether the injunction would interfere with 9711 Ltd.'s ongoing operations - Those concerns had to be balanced by the law of oppression applied to the whole of the evidence, including the facts that 9711 Ltd. had no business, no creditors, no other assets and no obligations of any sort and it intended to distribute the funds that represented almost all of its assets - When all relevant matters were weighed, traditional corporate law concerns had to give way to the interim protection of the interests of the minority shareholder in this closely-held corporation - Justice and equity supported the issuance of an injunction - See paragraphs 70 to 72.

Injunctions - Topic 1613

Interlocutory or interim injunctions - General principles - Quia timet injunctions - [See Injunctions - Topic 1802 ].

Injunctions - Topic 1616

Interlocutory or interim injunctions - General principles - Arguable issues of law involved or serious question to be tried - The plaintiff's claim sought shareholder oppression style remedies arising out of its status as a minority shareholder (14.3%) in 9711 Ltd. - 9711 Ltd. had been created for the purpose of holding the shares of Devonian Potash Inc. - Devonian sold all of its potash exploration permits for approximately $200 million to an unrelated third party - The plaintiff's application for an interlocutory injunction ordering the payment of the proceeds of the sale of the permits into court was dismissed - On the plaintiff's appeal, the Saskatchewan Court of Appeal discussed the standard that applied to measure the strength of the plaintiff's claim for injunctive relief - The court rejected 9711 Ltd.'s argument that the test should be something other than "a serious question to be tried" - There was no reason to disturb the application judge's decision to apply the test of "serious issue to be tried" - See paragraphs 26 to 30.

Injunctions - Topic 1616

Interlocutory or interim injunctions - General principles - Arguable issues of law involved or serious question to be tried - The plaintiff's claim sought shareholder oppression style remedies arising out of its status as a minority shareholder (14.3%) in 9711 Ltd. - 9711 Ltd. had been created for the purpose of holding the shares of Devonian Potash Inc. - Devonian sold all of its potash exploration permits for approximately $200 million to an unrelated third party - The plaintiff's application for an interlocutory injunction ordering the payment of the proceeds of the sale of the permits into court was dismissed - The Saskatchewan Court of Appeal allowed the plaintiff's appeal - The application judge erred by concluding that there was no serious issue to be tried that was connected to the relief requested - It appeared that the application judge had found a serious issue to be tried, but that the plaintiff would not be entitled to relief because its status as a minority shareholder would not entitle it to claim any portion of the proceeds - In doing so, he had decided the case on the merits and without considering the substantial case law pertaining to oppression - This approach reflected reviewable error - When the plaintiff's claim was considered in the context of the law of oppression, there was a serious issue to be tried that could only be addressed if an interim injunction was granted - While it was true that a minority shareholder was not entitled to demand a share of the proceeds of the sale of corporate assets, where a minority shareholder made an oppression claim, the court had to determine the reasonable expectations of that shareholder in relation to the claim that was made - Here, the application judge had only to decide whether to grant interim relief until the court could answer those questions - See paragraphs 36 to 53.

Injunctions - Topic 1802

Interlocutory or interim injunctions - Requirement of irreparable injury - What constitutes - The plaintiff's claim sought shareholder oppression style remedies arising out of its status as a minority shareholder (14.3%) in 9711 Ltd. - 9711 Ltd. had been created for the purpose of holding the shares of Devonian Potash Inc. - Devonian sold all of its potash exploration permits for approximately $200 million to an unrelated third party - The plaintiff's application for an interlocutory injunction ordering the payment of the proceeds of the sale of the permits into court was dismissed - The Saskatchewan Court of Appeal allowed the plaintiff's appeal - The application judge erred by finding that there was no meaningful risk of irreparable harm - In most injunctions, the irreparable harm question was answered by examining the nature of the harm that would occur and its likelihood - The conduct that might give rise to the harm was usually ongoing and admitted or uncontroversial - However, here, not only had the critical injury not occurred, but the conduct that would give rise to the injury (the distribution of the funds to the majority shareholder) had not yet occurred - This made the injunction sought quite similar to a quia timet injunction - In such circumstances, the probability of injury was comparatively more important and made it more relevant to weigh and consider the evidence to determine whether the defendant would commit the act that the plaintiff feared - Here, the defendant had successfully rebuffed the interlocutory injunction by adducing no evidence that it was unlikely to do the very thing that the injunction hoped to restrain despite the fact that such conduct would be in its self-interest - Further, if the threatened act occurred, there would be no means to satisfy any judgment that might be obtained - See paragraphs 54 to 69.

Statutes - Topic 8506

Remedial statutes - General principles - Interpretation - [See first Company Law - Topic 2170.1 ].

Cases Noticed:

RJR-MacDonald Inc. et Imperial Tobacco Ltd. v. Canada (Procureur général), [1994] 1 S.C.R. 311; 164 N.R. 1; 60 Q.A.C. 241, refd to. [para. 15].

Potash Corp. of Saskatchewan Inc. v. Mosaic Potash Esterhazy Limited Partnership (2011), 377 Sask.R. 78; 528 W.A.C. 78; 341 D.L.R.(4th) 407; 2011 SKCA 120, refd to. [para. 15].

Wind Ridge Farms Ltd. et al. v. Quadra Group Investments Ltd. et al., [1999] 12 W.W.R. 203; 180 Sask.R. 231; 205 W.A.C. 231 (C.A.), refd to. [para. 25].

Naneff v. Con-Crete Holdings Ltd. et al. (1995), 85 O.A.C. 29; 23 O.R.(3d) 481 (C.A.), refd to. [para. 25].

BCE Inc. v. 1976 Debentureholders - see Aegon Capital Management Inc. et al. v. BCE Inc. et al.

Aegon Capital Management Inc. et al. v. BCE Inc. et al., [2008] 3 S.C.R. 560; 383 N.R. 119; 2008 SCC 69, refd to. [para. 25].

Air Canada Pilots Association v. Air Canada et al., [2007] O.T.C. 34; 28 C.B.R.(5th) 163 (Sup. Ct.), affd. [2008] O.A.C. Uned. 733; 2008 ONCA 531, refd to. [para. 27].

Operation Dismantle Inc. et al. v. Canada et al., [1985] 1 S.C.R. 441; 59 N.R. 1, refd to. [para. 27].

Moosomin First Nation v. 101061721 Saskatchewan Inc. et al., [2011] 2 W.W.R. 193; 359 Sask.R. 292; 494 W.A.C. 292; 2010 SKCA 110, refd to. [para. 27].

Gazit (1997) Inc. v. Centrefund Realty Corp. et al., [2000] O.T.C. 638; 8 B.L.R.(3d) 81 (Sup. Ct.), refd to. [para. 27].

Aetna Financial Services Ltd. v. Feigelman et al. - see Feigelman, Feigelman, Goldberg, R.L.L. Holdings Ltd. and Pre-Vue Co. (Canada) Ltd. v. Aetna Financial Services Ltd., Lax and Burke.

Feigelman, Feigelman, Goldberg, R.L.L. Holdings Ltd. and Pre-Vue Co. (Canada) Ltd. v. Aetna Financial Services Ltd., Lax and Burke, [1985] 1 S.C.R. 2; 56 N.R. 241; 32 Man.R.(2d) 241, refd to. [para. 29].

Bank of Montréal v. Dome Petroleum Ltd. (1987), 54 Alta. L.R.(2d) 289 (Q.B.), refd to. [para. 31].

Krynen v. Bugg et al., [2003] O.T.C. 252; 32 B.L.R.(3d) 61 (Sup. Ct.), refd to. [para. 34].

First Choice Capital Fund Ltd. v. First Canadian Capital Corp. - see Aquino et al. v. First Choice Capital Fund Ltd. et al.

Aquino et al. v. First Choice Capital Fund Ltd. et al., [1997] 9 W.W.R. 177; 157 Sask.R. 253 (Q.B.), refd to. [para. 47].

Culligan Canada Ltd. et al. v. Fettes et al., [2010] 6 W.W.R. 420; 346 Sask.R. 100; 477 W.A.C. 100; 2009 SKCA 144, refd to. [para. 36].

American Cyanamid Co. v. Ethicon Ltd., [1975] A.C. 396 (H.L.), refd to. [para. 40].

Eiserman v. Ara Farms Ltd., [1988] 5 W.W.R. 97; 67 Sask.R. 1 (C.A.), refd to. [para. 41].

Ebrahimi v. Westbourne Galleries Ltd., [1972] 2 All E.R. 492 (H.L.), refd to. [para. 41].

Turbo Resources Ltd. v. Petro Canada Inc., [1989] 2 F.C. 451; 91 N.R. 341 (F.C.A.), refd to. [para. 68].

Statutes Noticed:

Business Corporations Act, R.S.S. 1978, c. B-10, sect. 234 [para. 20].

Authors and Works Noticed:

Koehnen, Markus, Oppression and Related Remedies (2004), pp. 51 [para. 33]; 338, 339 [para. 29].

Sharpe, Robert J., Injunctions and Specific Performance (Looseleaf), para. 2.870 [para. 29].

Spry, I.C.F., The Principles of Equitable Remedies (6th Ed. 2001), pp. 380, 381 [paras. 57, 68].

Counsel:

Peter Bergbusch, for the appellant, 101114752 Saskatchewan Ltd.;

Joel Hesje, Q.C., and Tim Froese, for the respondents, Devonian Potash Inc. and 101109711 Saskatchewan Ltd.

This appeal was heard on May 8, 2012, by Vancise, Jackson and Herauf, JJ.A., of the Saskatchewan Court of Appeal. On June 25, 2012, Jackson, J.A., delivered the following reasons for judgment for the court.