Everest Canadian Properties Ltd. et al. v. Mallmann et al.,

• Jurisdiction: British Columbia
• Judge: Newbury, Hall and Frankel, JJ.A.
• Neutral Citation: 2008 BCCA 275
• Citation: (2008), 258 B.C.A.C. 23 (CA),2008 BCCA 275,[2008] 10 WWR 31,82 BCLR (4th) 201,47 BLR (4th) 161,258 BCAC 23,(2008), 258 BCAC 23 (CA),258 B.C.A.C. 23
• Date: 03 July 2008
• Court: Court of Appeal (British Columbia)

Everest Cdn. Prop. v. Mallmann (2008), 258 B.C.A.C. 23 (CA);

    434 W.A.C. 23

MLB headnote and full text

Temp. Cite: [2008] B.C.A.C. TBEd. JL.022

Everest Canadian Properties Ltd., Everest Investors 12, L.P., Everest Investors 15, L.P., Everest Investors 16, L.P., Everest Del Cano Investors, L.P., Everest HCA Investors, L.P., and Everest DC EDC Investors, L.P. (appellants/plaintiffs) v. Ian M. Mallmann, Kenneth G. Isard, James E. Clark, Raymond S. Stone and CIBC World Markets Inc./Marchés mondiaux CIBC Inc. (respondents/defendants)

(CA034940; 2008 BCCA 275)

Indexed As: Everest Canadian Properties Ltd. et al. v. Mallmann et al.

British Columbia Court of Appeal

Newbury, Hall and Frankel, JJ.A.

July 3, 2008.

Summary:

The plaintiffs held shares in a real estate investment trust set up under the laws of Maryland. They made an unsolicited takeover bid of US $5,100 per share for all the shares they did not own. Other bids were received. The plaintiffs' offer was rejected. The trustees then sold the assets of the trust for US $107,550,000, netting the shareholders some US $7,352 per share. The plaintiffs sued the trustees and their financial advisor for damages. The plaintiffs alleged various breaches of duty owed to them and the trust. In particular, the plaintiffs alleged that the sale had been improvident and the trustees motivated by improper purposes. The trustees applied for summary judgment dismissing the action as against them.

The British Columbia Supreme Court, in a decision reported [2007] B.C.T.C. Uned. C02; 2007 BCSC 311, allowed the application and dismissed the action. The plaintiffs appealed.

The British Columbia Court of Appeal dismissed the appeal.

Editor's Note: For judgments relating to the financial advisor see [2007] B.C.T.C. Uned. B82; 2007 BCSC 312, affd. (2008), 258 B.C.A.C. 49; 434 W.A.C. 49; 2008 BCCA 276.

Conflict of Laws - Topic 4982

Property - Trusts - Proof of foreign law - [See Trusts - Topic 4082 ].

Practice - Topic 5702

Judgments and orders - Summary judgments - Jurisdiction or when available or when appropriate - The plaintiffs held shares in a real estate investment trust set up under the laws of Maryland - They made an unsolicited takeover bid of US $5,100 per share for all the shares they did not own - Other bids were received - The plaintiffs' offer was rejected - The trustees then sold the assets of the trust for US $107,550,000, netting the shareholders some US $7,352 per share - The plaintiffs sued the trustees and their financial advisor for damages, alleging that the sale had been improvident and the trustees motivated by improper purposes - The trustees applied for summary judgment dismissing the action as against them - The plaintiffs replied that the matter was not suitable for summary determination because (1) they were unable to use against the trustees the allegedly relevant discovery evidence given by an official of the financial advisor, and (2) (a) the court discouraged "litigation in slices", (b) credibility was in issue, and (c) the issues were too complex or the amount of the claim was likely to be large - The summary trial judge rejected the first argument as "too narrow" and the second one because the evidence before her was not conflicting - The British Columbia Court of Appeal agreed - Although questions of dishonesty usually led to a full trial, the summary trial judge correctly found that there was no conflict on the evidence - The onus was on the plaintiffs to adduce evidence that would support their allegations and they failed to do so - Nor was any fresh evidence sought to be adduced on appeal that would have cast the summary trial judge's conclusions into doubt - See paragraphs 28 to 40.

Trusts - Topic 4082

Administration - Powers of trustee - Irregularities - The plaintiffs held shares in a real estate investment trust set up under the laws of Maryland - They made an unsolicited takeover bid of US $5,100 per share for all the shares they did not own - Other bids were received - The plaintiffs' offer was rejected - The trustees then sold the assets of the trust for US $107,550,000, netting the shareholders some US $7,352 per share - The plaintiffs sued the trustees and their financial advisor for damages, alleging that the sale had been improvident and the trustees motivated by improper purposes - The plaintiffs also argued that the trustees' actions were invalid since the Declaration of Trust provided that there should never be less than five trustees and there were, as a result of a vacancy, only three trustees acting here - The summary trial judge dismissed the action as against the trustees - The summary trial judge accepted expert opinion that Maryland law did not invalidate the actions of the trustees that remained here - The British Columbia Court of Appeal upheld the decision - The summary trial judge was entitled to find as a fact that Maryland law was as stated above - In the circumstances of this case, including the absence of any contrary expert opinion, the summary trial judge's finding could not be said to be palpably wrong - See paragraphs 53 to 61.

Trusts - Topic 4155

Administration - Liability of trustee - Limitation of - The plaintiffs held shares in a real estate investment trust set up under the laws of Maryland - They made an unsolicited takeover bid of US $5,100 per share for all the shares they did not own - Other bids were received - The plaintiffs' offer was rejected - The trustees then sold the assets of the trust for US $107,550,000, netting the shareholders some US $7,352 per share - The plaintiffs sued the trustees and their financial advisor for damages, alleging that the sale had been improvident and the trustees motivated by improper purposes - The trustees applied for summary judgment dismissing the action as against them - They invoked a limitation of liability clause in the Declaration of Trust that provided that no trustee would be liable to the trust or a shareholder unless the trustee was subject to a judicial finding of "active and deliberate dishonesty" - The summary trial judge dismissed the action, holding that the trustees did not act dishonestly - The British Columbia Court of Appeal upheld the decision - The trustees conducted themselves very much like the directors of a corporation subject to a takeover bid would: they bought time by adopting a shareholders' rights plan; they set about trying to maximize shareholder value, in accordance with American and Canadian authority; they formed a special committee to evaluate offers; and they engaged a financial advisor to assist in locating possible buyers, providing information required for due diligence, dealing with prospective buyers, and analyzing final offers - They took this course on the basis of legal advice that was designed to "try and manage the process so that you have all the bidders being driven towards putting their best transaction in front of the shareholders at the same time" - Absent a serious evidentiary challenge, there was no basis to interfere with the summary trial judge's conclusion - See paragraphs 41 to 52.

Cases Noticed:

Foss v. Harbottle (1843), 2 Hare 461; 67 E.R. 189 (Ch. Div.), refd to. [para. 3].

BCE Inc. et al. v. A Group of 1976 Debentureholders et al., 2008 QCCA 935, revd. [2008] S.C.C.A. No. 202, dist. [para. 4].

Inspiration Management Ltd. v. McDermid St. Lawrence Ltd. (1989), 36 B.C.L.R.(2d) 202; 36 C.P.C.(2d) 199 (C.A.), consd. [para. 29].

Anglo Canadian Shipping Co. v. Pulp, Paper and Woodworkers of Canada, Local 8 (1988), 27 B.C.L.R.(2d) 378 (C.A.), consd. [para. 34].

Hamilton v. Sutherland and VanKirk, [1992] 5 W.W.R. 151; 14 B.C.A.C. 51; 26 W.A.C. 51; 68 B.C.L.R.(2d) 115 (C.A.), refd to. [para. 34].

Orangeville Raceway Ltd. v. Wood Gundy Inc. et al. (1995), 59 B.C.A.C. 241; 98 W.A.C. 241; 6 B.C.L.R.(3d) 391 (C.A.), refd to. [para. 40].

Housen v. Nikolaisen et al., [2002] 2 S.C.R. 235; 286 N.R. 1; 219 Sask.R. 1; 272 W.A.C. 1; 2002 SCC 33, refd to. [para. 40].

Revlon Inc. v. MacAndrews and Forbes Holdings Inc. (1985), 506 A.2d 173; 66 A.L.R.(4th) 157 (U.S. Del. Sup. Ct.), refd to. [para. 49].

Corona Minerals Corp. v. CSA Management Ltd. (1989), 68 O.R.(2d) 425 (H.C.), refd to. [para. 49].

CW Shareholdings Inc. v. WIC Western International Communications Ltd. et al. (1998), 61 O.T.C. 81; 39 O.R.(3d) 755; 160 D.L.R.(4th) 131 (Gen. Div.), refd to. [para. 49].

Ventas Inc. et al. v. Sunrise Senior Living Real Estate Investment Trust et al. (2007), 222 O.A.C. 102; 85 O.R.(3d) 254; 2007 ONCA 205, refd to. [para. 49].

Viscount, The v. Shelton et al., [1986] 1 W.L.R. 985; 73 N.R. 24 (P.C.), refd to. [para. 62].

Counsel:

J. Rost, for the appellants;

K.E. Clark and C. Chilliak, for the respondents, I. Mallmann, K.G. Isard, J.E. Clark and R.S. Stone;

H. Poulus, Q.C., and P. Price, for the respondent, CIBC World Markets Inc./Marchés mondiaux CIBC Inc.

This appeal was heard at Vancouver, B.C., on May 5 to 7, 2008, by Newbury, Hall and Frankel, JJ.A., of the British Columbia Court of Appeal. The decision of the Court of Appeal was delivered at Vancouver, B.C., on July 3, 2008, by Newbury, J.A.