Hovsepian et al. v. Westfair Foods Ltd. et al., (2003) 341 A.R. 1 (QB)

• Judge: Hart, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: July 21, 2003
• Citations: (2003), 341 A.R. 1 (QB);2003 ABQB 641

Hovsepian v. Westfair Foods Ltd. (2003), 341 A.R. 1 (QB)

MLB headnote and full text

Temp. Cite: [2003] A.R. TBEd. AU.050

John Hovsepian, Rodney Iverson, Lois M. Hill, R. Malcolm Hill, Dorothy J. Duff, Chester Hansen, Patricia Hansen, Reuben Broadbent, Dorothy J. Broadbent, Lawrence Shelton, Arthur Lien, Theresa Lien, Janis F. Clark, Fred Pizzoferato, Ed Goralczyk, William H. Clarke, William Lupton, Montrose Development Ltd., Catherine A. Christopher, Douglas A. Christopher, Eva Christopher, David H. Christopher, Teresa L. Christopher, Mary Christopher and Gordon A. Christopher (plaintiffs) v. Westfair Foods Ltd., Westfair Properties Ltd., Loblaw Properties Limited, Loblaws Inc. and Loblaw Companies Limited (defendants)

(0001-06455; 2003 ABQB 641)

Indexed As: Hovsepian et al. v. Westfair Foods Ltd. et al.

Alberta Court of Queen's Bench

Judicial District of Calgary

Hart, J.

July 21, 2003.

Summary:

The plaintiffs were Class A shareholders of Westfair who were entitled to a dividend of $2 per share per year before dividends were paid to the common shareholder. Loblaws directly or indirectly owned all of Westfair Food's common shares. Westfair sold all of its shares in a subsidiary to a subsidiary of Loblaws for $835 Million and thereafter paid an $830 Million dividend to Loblaws and another $312 Million dividend later. The plaintiffs brought an action against Westfair and Loblaws, claiming that by paying the dividends Westfair and Loblaws undertook the liquidation, dissolution or winding up of Westfair contrary to s. 189(3) of the Canada Business Corporations Act and that their actions constituted oppressive conduct (s. 241). The plaintiffs sought general and punitive damages. The defendants applied to strike the statement of claim, submitting that res judicata and abuse of process precluded the plaintiffs from relitigating the rights of Class A shareholders. Previous litigation between the parties generally determined that Class A shares have no right, interest or reasonable expectation to share in Westfair's income (beyond the $2 dividend per share), retained earnings or company assets. Alternatively, the defendants sought summary judgment dismissing the claim on the ground that there was no genuine issue for trial.

The Alberta Court of Queen's Bench granted summary judgment dismissing the claim on the ground that there was no genuine issue for trial.

Company Law - Topic 2176

Shareholders - Shareholders' rights - Liquidation or dissolution of company - The plaintiff Class A shareholders of Westfair were entitled to a $2 preferred dividend and to share in any surplus upon the dissolution of Westfair - Loblaws directly or indirectly owned all of Westfair's common shares - Westfair sold all of its shares in a subsidiary to a subsidiary of Loblaws for $835 Million and thereafter paid dividends of $830 Million (1999) and $312 Million (2000) to Loblaws out of retained earnings and contributed surplus - The plaintiffs sued Westfair and Loblaws, claiming that, inter alia, paying the dividends constituted a "liquidation" - Previous litigation between the parties generally determined that Class A shareholders' rights were limited to the $2 dividend and a share of assets on liquidation; that they had no right, interest or reasonable expectation to share in Westfair's income (beyond the $2 dividend per share), retained earnings or company assets - The Alberta Court of Queen's Bench granted summary judgment dismissing the claim on the ground that there was no genuine issue for trial - The court held that the use of the word "liquidation", in conjunction with the words "dissolution or winding up" connoted a single event in the nature of a dissolution or winding up of the entire company, which did not occur with the two dividends - There was no "liquidation" where there were dispositions while Westfair was a going concern - See paragraphs 83 to 107.

Company Law - Topic 6855

Fundamental changes and shareholders' rights - Definitions - Sale of substantially all of property - The plaintiff Class A shareholders of Westfair were entitled to a $2 preferred dividend and to share in any surplus upon the dissolution of Westfair - Loblaws directly or indirectly owned all of Westfair's common shares - Westfair sold all of its shares in a subsidiary to a subsidiary of Loblaws for $835 Million and thereafter paid dividends of $830 Million (1999) and $312 Million (2000) to Loblaws out of retained earnings and contributed surplus - The plaintiffs sued Westfair and Loblaws, claiming that, inter alia, the 1999 dividend constituted the sale of "all or substantially all" of Westfair's assets contrary to s. 189(3) of the Canada Business Corporations Act - The Alberta Court of Queen's Bench granted summary judgment dismissing the claim - Westfair discontinued or reduced dividends for several years, diverting surplus profits to its subsidiary - The surplus profits retained their character and remained available for distribution to common shareholders - Section 189(3) did not apply to dividends - Even if it did, Westfair remained a highly profitable going concern and "all or substantially all" of its assets were not sold - Neither dividend fundamentally altered or had any adverse affect on Westfair's operations - See paragraphs 111 to 158.

Company Law - Topic 7145

Fundamental changes and shareholders' rights - Sale or lease of most of property - [See Company Law - Topic 6855 ].

Company Law - Topic 7147

Fundamental changes and shareholders' rights - Sale or lease of most of property - Distribution of funds to shareholders - [See Company Law - Topic 6855 ].

Evidence - Topic 7153

Opinion evidence - Prohibited opinions - Re legal conclusions - The defendants sought to strike portions of the plaintiffs' expert affidavit evidence on the grounds that it amounted to sworn argument and contained opinions on matters of law - In an oppression action, the affidavit evidence spoke to, inter alia, whether the defendants' actions constituted "oppression" and what "liquidation" meant - The Alberta Court of Queen's Bench struck those portions of affidavits that constituted opinions and conclusions of law - The affidavits were, essentially, impermissible sworn argument - See paragraphs 39 to 62.

Evidence - Topic 7154

Opinion evidence - Prohibited opinions - Re basic or ultimate issue to be decided - [See Evidence - Topic 7153 ].

Practice - Topic 3665

Evidence - Affidavits - Striking out - Argument - [See Evidence - Topic 7153 ].

Cases Noticed:

Hovsepian et al. v. Westfair Foods Ltd. et al. (2001), 296 A.R. 283 (Q.B.), refd to. [para. 5].

Westfair Foods Ltd. v. Watt et al., [1990] 4 W.W.R. 685; 106 A.R. 40 (Q.B.), affd. [1991] 4 W.W.R. 695; 115 A.R. 34 (C.A.), leave to appeal refused [1991] 3 S.C.R. viii; 137 N.R. 78; 127 A.R. 394; 20 W.A.C. 394, refd to. [para. 13].

Westfair Foods Ltd. v. Watt et al., [1992] 6 W.W.R. 748; 131 A.R. 142; 25 W.A.C. 142 (C.A.), leave to appeal refused [1993] 1 S.C.R. x; 150 N.R. 80; 141 A.R. 317; 46 W.A.C. 317, refd to. [para. 13].

Iverson v. Westfair Foods Ltd. - see Westfair Foods Ltd. v. Watt et al.

Westfair Foods Ltd. v. Watt et al., [1996] 7 W.W.R. 520; 183 A.R. 286 (Q.B.), affd. [1999] 4 W.W.R. 659; 223 A.R. 322; 183 W.A.C. 322 (C.A.), leave to appeal refused (1999), 243 N.R. 397; 244 A.R. 400; 209 W.A.C. 400, refd to. [para. 16].

R. v. Mohan, [1994] 2 S.C.R. 9; 166 N.R. 245; 71 O.A.C. 241, refd to. [para. 42].

R. v. Abbey, [1982] 2 S.C.R. 24; 43 N.R. 30, refd to. [para. 43].

Kelliher (Village) v. Smith, [1931] S.C.R. 672, refd to. [para. 45].

Sengbusch v. Priest (1987), 14 B.C.L.R.(2d) 26 (S.C.), refd to. [para. 45].

Gorgichuk Estate v. American Home Assurance Co. (1985), 5 C.P.C.(2d) 166 (H.C.), varied (1988), 27 O.A.C. 157; 30 C.C.L.I. 51 (C.A.), refd to. [para. 47].

Harris v. Nugent et al. (1996), 193 A.R. 113; 135 W.A.C. 113; 141 D.L.R.(4th) 410 (C.A.), leave to appeal refused (1997), 221 N.R. 160; 212 A.R. 36; 168 W.A.C. 36 (S.C.C.), refd to. [para. 48].

Canadian National Railway Co. v. Volker Stevin Contracting Ltd. et al. (1991), 120 A.R. 39; 8 W.A.C. 39; 1 Alta. L.R.(3d) 167 (C.A.), refd to. [para. 48].

Chevron Canada Resources et al. v. Canada, [1999] 7 W.W.R. 47; 239 A.R. 138 (Q.B.), refd to. [para. 49].

Human Rights Commission (Alta.) v. Blue Cross Plan (1983), 48 A.R. 192 (C.A.), refd to. [para. 50].

Hidrogas Ltd. v. Great Plains Development Co. of Canada Ltd. (1979), 20 A.R. 483 (C.A.), refd to. [para. 55].

420093 B.C. Ltd. v. Bank of Montreal (1995), 174 A.R. 214; 102 W.A.C. 214; 34 Alta. L.R.(3d) 269 (C.A.), refd to. [para. 63].

Mascan Corp. v. Ponzi et al. (1986), 17 O.A.C. 202; 56 O.R.(2d) 751 (Div. Ct.), refd to. [para. 67].

Quinlan v. Newfoundland (Minister of Natural Resources) (2000), 192 Nfld. & P.E.I.R. 144; 580 A.P.R. 144 (Nfld. C.A.), refd to. [para. 68].

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, refd to. [para. 75].

Guarantee Co. of North America v. Gordon Capital Corp., [1999] 3 S.C.R. 423; 247 N.R. 97; 126 O.A.C. 1, refd to. [para. 76].

Jager Industries Inc. v. Canadian Occidental Petroleum Ltd. et al., [2000] 11 W.W.R. 737; 273 A.R. 1 (Q.B.), refd to. [para. 79].

Western Canadian Place Ltd. et al. v. Con-Force Products Ltd. et al. (1997), 208 A.R. 179 (Q.B.), refd to. [para. 80].

Otan Developments Ltd. v. Kuropatwa (1978), 12 A.R. 15 (C.A.), refd to. [para. 82].

852819 Alberta Ltd. v. Louie's Submarine Inc., [2000] A.R. Uned. 501 (Q.B. Master), refd to. [para. 82].

Abacus Cities Ltd. (Bankrupt) v. Bank of Montreal et al. (1986), 70 A.R. 55; 45 Alta. L.R.(2d) 113 (C.A.), refd to. [para. 82].

2747-3174 Québec Inc. v. Régie des permis d'alcool du Québec et autres, [1996] 3 S.C.R. 919; 205 N.R. 1, refd to. [para. 88].

Alberta (Treasury Branches) v. SevenWay Capital Corp., [2000] 10 W.W.R. 453; 261 A.R. 278; 225 W.A.C. 278 (C.A.), refd to. [para. 89].

Dauphin Plains Credit Union Ltd. v. Xyloid Industries Ltd. and R., [1980] 1 S.C.R. 1182; 31 N.R. 301; 3 Man.R.(2d) 283, refd to. [para. 93].

Linder v. Rutland Moving & Storage Ltd., [1991] 4 W.W.R. 355 (B.C.C.A.), refd to. [para. 95].

574095 Alberta Ltd. v. Hamilton Brothers Exploration Co. et al. (2003), 320 A.R. 351; 288 W.A.C. 351 (C.A.), refd to. [para. 110].

Canadian Pacific Ltd., Re (1990), 68 D.L.R.(4th) 9 (Ont. H.C.), refd to. [para. 123].

85956 Holdings Ltd. v. Fayerman Brothers Ltd., [1986] 2 W.W.R. 754; 46 Sask.R. 75 (C.A.), refd to. [para. 133].

GATX Corp. et al. v. Hawker Siddeley Canada Inc. et al. (1996), 1 O.T.C. 322; 27 B.L.R.(2d) 251 (Gen. Div.), refd to. [para. 134].

North Rock Explorations Ltd. v. Zahavy Mines Ltd. et al. (1974), 44 D.L.R.(3d) 683 (Ont. H.C.), refd to. [para. 135].

McClurg v. Minister of National Revenue (1991), 119 N.R. 101; 76 D.L.R.(4th) 217 (S.C.C.), refd to. [para. 136].

Canadian Broadcasting Corp. Pension Plan v. BF Realty Holdings Ltd. - see MacDonald et al. v. BF Realty Holdings Ltd. et al.

MacDonald et al. v. BF Realty Holdings Ltd. et al. (2002), 160 O.A.C. 72; 214 D.L.R.(4th) 121 (C.A.), refd to. [para. 137].

Cogeco Cable Inc. v. CFCF Inc. (1996), 136 D.L.R.(4th) 243 (Que. C.A.), refd to. [para. 137].

Vanalta Resources Ltd., Re, [1976] B.C.J. No. 47 (S.C.), refd to. [para. 147].

Statutes Noticed:

Canada Business Corporations Act, R.S.C. 1985, c. C-44, sect. 43 [para. 129]; sect. 189(3) [para. 119].

Rules of Court (Alta.), rule 159(2), rule 159(3) [para. 74].

Authors and Works Noticed:

Sopinka, John, Lederman, Sydney N., and Bryant, Alan W., The Law of Evidence in Canada (2nd Ed. 1999), paras. 12.85 to 12.86 [para. 46].

Stevenson, W.A., and Côté, J.E., Alberta Civil Procedure Handbook (2001), pp. 130, 131 [para. 80].

Sullivan, Ruth, Sullivan and Driedger on the Construction of Statutes (4th Ed. 2002), p. 273 [para. 132].

Counsel:

L.R. Duncan, Q.C., and J.S. Conrad, for the plaintiffs;

R.S. Russell, R.W. Block and A.F. Fanaki, for the defendant, Westfair Foods Ltd.;

C.D. O'Brien, Q.C., and J. Strekaf, for the defendants, Loblaw Properties Ltd., Loblaws Inc., Loblaw Companies Ltd. and Westfair Properties Ltd.

This application was heard on May 12-14, 2003, before Hart, J., of the Alberta Court of Queen's Bench, Judicial District of Calgary, who delivered the following judgment on July 21, 2003.