Everest Canadian Properties Ltd. et al. v. Mallmann et al., 2008 BCCA 276

• Judge: Newbury, Hall and Frankel, JJ.A.
• Court: Court of Appeal (British Columbia)
• Case Date: July 03, 2008
• Jurisdiction: British Columbia
• Citations: 2008 BCCA 276;(2008), 258 B.C.A.C. 49 (CA)

Everest Cdn. Prop. v. Mallmann (2008), 258 B.C.A.C. 49 (CA);

    434 W.A.C. 49

MLB headnote and full text

Temp. Cite: [2008] B.C.A.C. TBEd. JL.023

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. CIBC World Markets Inc./Marchés mondiaux CIBC Inc. (respondent/defendant)

(CA034941; 2008 BCCA 276)

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. The trustees sold the trust's assets after they had rejected the plaintiffs' unsolicited takeover bid for all the shares of the trust that they did not already own. The plaintiffs sued the trustees and their financial advisor for redress. 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. As for the financial advisor, the plaintiffs alleged that it breached a fiduciary duty owed to shareholders and provided "knowing assistance" to the trustees. The financial advisor applied under Rule 18A of the Rules of Court (B.C.) for a declaration that the action as pleaded violated the rule in Foss v. Harbottle (Eng. Ch. 1843) to the effect that the proper plaintiff in respect of a wrong done to the corporation or association was the corporation or association.

The British Columbia Supreme Court, in a decision reported [2007] B.C.T.C. Uned. B82; 2007 BCSC 312, allowed the application and dismissed the action as against the financial advisor. The plaintiffs appealed.

The British Columbia Court of Appeal dismissed the appeal.

Editor's Note: For a related decision respecting the financial advisor, see [2006] B.C.T.C. 270; 2006 BCSC 270. For decisions relating to action as against the trustees see [2007] B.C.T.C. Uned. C02; 2007 BCSC 311, affd. (2008), 258 B.C.A.C.23; 434 W.A.C. 23; 2008 BCCA 275.

Company Law - Topic 9415

Actions by corporations - Parties - Proper plaintiff - The plaintiffs held shares in a real estate investment trust set up under the laws of Maryland - The trustees sold the trust's assets after they had rejected the plaintiffs' unsolicited takeover bid for all the shares of the trust that they did not already own - The plaintiffs sued the trustees and their financial advisor for redress - 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 - As for the financial advisor, the plaintiffs alleged that it breached a fiduciary duty owed to shareholders and provided "knowing assistance" to the trustees - A summary trial judge dismissed the action as against the financial advisor on the grounds that the action as pleaded violated the rule in Foss v. Harbottle (Eng. Ch. 1843) to the effect that the proper plaintiff in respect of a wrong done to the corporation or association was the corporation or association - The British Columbia Court of Appeal upheld the decision, after discussing the rule in Foss v. Harbottle, the exceptions thereto and its application in some modern Canadian cases - See paragraphs 4 to 48 - The court also indicated that, for conflict of laws purposes, the rule was a procedural one and that, therefore, the lex fori rather than the law of Maryland was properly applied to the question of whether the plaintiffs had standing to make their claims - See paragraphs 12 to 14.

Conflict of Laws - Topic 9207

Practice - General - Status to sue - [See Company Law - Topic 9415 ].

Trusts - Topic 114

General principles - Capacity of trust - Actions by trust - Proper plaintiff - [See Company Law - Topic 9415 ].

Cases Noticed:

Foss v. Harbottle (1843), 2 Hare 461; 67 E.R. 189 (Ch. Div.), consd. [para. 1].

Edwards v. Halliwell, [1950] 2 All E.R. 1064 (C.A.), consd. [para. 7].

MacDougall v. Gardiner (1875), 1 Ch. D. 13, refd to. [para. 9].

Pender v. Lushington (1877), 6 Ch. D. 70, refd to. [para. 9].

Johnson v. Gore Wood & Co., [2001] 1 All E.R. 481; [2000] UKHL 65, refd to. [para. 10].

Heyting v. DuPont, [1964] 2 All E.R. 273; [1964] 1 W.L.R. 843 (C.A.), consd. [para. 12].

Baniuk v. Carpenter et al. (No. 2) (1987), 85 N.B.R.(2d) 385; 217 A.P.R. 385 (C.A.), refd to. [para. 13].

Teck Corp. v. Millar, [1973] 2 W.W.R. 385; 33 D.L.R.(3d) 288 (B.C.S.C.), refd to. [para. 13].

King v. On-Stream Natural Gas Management Inc., [1993] B.C.J. No. 1302 (S.C.), refd to. [para. 13].

Salomon v. Salomon, [1897] A.C. 22 (H.L.), refd to. [para. 15].

Cotter v. National Union of Seamen, [1929] All E.R. 342; [1929] 2 Ch. 58 (C.A.), consd. [para. 17].

Taff Vale Rail Co. v. Amalgamated Society of Railway Servants, [1901] A.C. 426; 70 L.J.K.B. 905, consd. [para. 17].

Lee v. Block Estates Ltd., [1984] 3 W.W.R. 118; 50 B.C.L.R. 289 (S.C.), consd. [para. 18].

Covia Canada Partnership Corp. v. PWA Corp. (1993), 105 D.L.R.(4th) 60 (Ont. Gen. Div.), affd. (1993), 106 D.L.R.(4th) 608 (Ont. C.A.), refd to. [para. 18].

Watson et al. v. Imperial Financial Services Ltd. et al., [1994] 5 W.W.R. 197; 40 B.C.A.C. 174; 65 W.A.C. 174; 88 B.C.L.R.(2d) 88 (C.A.), consd. [para. 19].

Prudential Assurance Co. v. Newman Industries Ltd. et al. (No. 2), [1982] 1 All E.R. 354; [1982] 2 W.L.R. 31 (C.A.), consd. [para. 21].

Robak Industries Ltd. et al. v. Gardner et al. (2007), 236 B.C.A.C. 237; 390 W.A.C. 237; 28 B.L.R.(4th) 1; 2007 BCCA 61, consd. [para. 22].

Hercules Management Ltd. et al. v. Ernst & Young et al., [1997] 2 S.C.R. 165; 211 N.R. 352; 115 Man.R.(2d) 241; 139 W.A.C. 241; 146 D.L.R.(4th) 577, consd. [para. 22].

Haig v. Bamford et al., [1977] 1 S.C.R. 466; 9 N.R. 43; 72 D.L.R.(3d) 68, consd. [para. 23].

Meditrust Healthcare Inc. v. Shoppers Drug Mart et al. (2002), 165 O.A.C. 147; 61 O.R.(3d) 786; 220 D.L.R.(4th) 611 (C.A.), consd. [para. 27].

Buschau et al. v. Rogers Communications Inc. et al., [2006] 1 S.C.R. 973; 349 N.R. 324; 226 B.C.A.C. 25; 373 W.A.C. 25; 2006 SCC 28, refd to. [para. 29].

Barnes v. Addy (1873-1874), L.R. 9 Ch. App. 244; 43 L.J. Ch. 513, refd to. [para. 30].

Selangor United Rubber Estates Ltd. v. Cradock (No. 3), [1968] 2 All E.R. 1073; [1968] 1 W.L.R. 1555 (Ch. Div.), refd to. [para. 30].

Air Canada v. M & L Travel Ltd., Martin and Vaillant, [1993] 3 S.C.R. 787; 159 N.R. 1; 67 O.A.C. 1; 108 D.L.R.(4th) 592, refd to. [para. 30].

3464920 Canada Inc. v. Strother et al. (2005), 208 B.C.A.C. 39; 344 W.A.C. 39; 38 B.C.L.R.(4th) 159; 2005 BCCA 35, varied [2007] 2 S.C.R. 177; 363 N.R. 123; 241 B.C.A.C. 108; 399 W.A.C. 108; 2007 SCC 24, refd to. [para. 30].

Mortgage & Realty Securities Litigation, Re (1991), 787 F. Supp. 84 (U.S. Dist. Ct., E.D. Pa.), consd. [para. 36].

Buschau et al. v. Rogers Communications Inc. et al. (2004), 193 B.C.A.C. 258; 316 W.A.C. 258; 236 D.L.R.(4th) 18; 2004 BCCA 80, revd. [2006] 1 S.C.R. 973; 349 N.R. 324; 226 B.C.A.C. 25; 373 W.A.C. 25; 2006 SCC 28, refd to. [para. 40].

McGauley v. British Columbia (1989), 39 B.C.L.R.(2d) 223 (C.A.), consd. [para. 41].

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, consd. [para. 46].

Peoples Department Stores Inc. (Bankrupt) v. Wise, [2004] 3 S.C.R. 461; 326 N.R. 267; 2004 SCC 68, consd. [para. 46].

BCE Inc. et al. v. A Group of 1976 Debentureholders et al., 2008 QCCA 935, revd. [2008] S.C.C.A. No. 202, refd to. [para. 46].

Authors and Works Noticed:

Baxter, Colin, The True Spirit of Foss v. Harbottle (1987), 38 N. Ir. Legal Q. 6, generally [para. 11].

Beck, Stanley M., An Analysis of Foss v. Harbottle, in Ziegel, Jacob S., Studies in Canadian Company Law (1967), pp. 545 to 600 [para. 11].

Boyle, Anthony, A Liberal Approach to Foss v. Harbottle (1964), 27 Mod. L. Rev. 603, generally [para. 13].

Boyle, Anthony, The Shareholders' Derivative Action in the English Conflict of Laws (2000), Eur. Bus. L. Rev. 130, p. 131 [para. 13].

Davies, Paul L., Gower's Principles of Modern Company Law (6th Ed. 1997), pp. 660 to 665 [para. 9].

Manzer, Alison, Canadian Partnership Law (2006 Looseleaf), para. 4.1020 [para. 20].

Rider, B.A.K., Amiable Lunatics and the Rule in Foss v. Harbottle (1978), 37 Camb. L.J. 270, generally [para. 11].

Scott, Austin Wakeman, and Fratcher, William Franklin, The Law of Trusts (4th Ed. 1988), § 294 [para. 34].

Shapira, Giora, Shareholder Personal Action in Respect of a Loss Suffered by the Company, The Problem of Overlapping Claims and "Reflective Loss" in English Company Law (2003), 37 Int'l. L. 137, generally [para. 11].

Wedderburn, K.W., Shareholders' Rights and the Rule in Foss v. Harbottle, [1957] Camp. L.J. 194, generally [para. 11].

Wedderburn, K.W., Shareholders' Rights and the Rule in Foss v. Harbottle, [1958] Camp. L.J. 93, generally [para. 11].

Ziegel, Jacob S., Studies in Canadian Company Law (1967), pp. 545 to 600 [para. 11].

Counsel:

D. Gooderham, for the appellants;

H. Poulus, Q.C., and P. Price, for the respondent.

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.