Jaguar Financial Corp. v. Alternative Earth Resources Inc. et al., (2016) 386 B.C.A.C. 224 (CA)

• Judge: Donald, Savage and Fitch, JJ.A.
• Court: Court of Appeal (British Columbia)
• Case Date: April 12, 2016
• Jurisdiction: British Columbia
• Citations: (2016), 386 B.C.A.C. 224 (CA);2016 BCCA 193

Jaguar Financial v. Alternative Earth (2016), 386 B.C.A.C. 224 (CA);

    667 W.A.C. 224

MLB headnote and full text

Temp. Cite: [2016] B.C.A.C. TBEd. MY.005

Jaguar Financial Corporation (respondent/petitioner) v. Alternative Earth Resources Inc., Gavin Cooper, Brian D. Fairbank, and James E. Yates (appellants/respondents)

(CA43356; CA43462; 2016 BCCA 193)

Indexed As: Jaguar Financial Corp. v. Alternative Earth Resources Inc. et al.

British Columbia Court of Appeal

Donald, Savage and Fitch, JJ.A.

May 5, 2016.

Summary:

Jaguar Financial Corp., a merchant bank, brought two petitions challenging the actions of Alternate Earth Resources Inc. (AER) and incumbent directors Cooper, Fairbank and Yates. Jaguar was AER's largest individual shareholder. Petition No. 1 was brought to stop AER from acquiring, for AER shares, a private company ("Black Sea"). The "Black Sea Transaction" was intended to be a merger, allegedly directed at preventing a takeover bid from Jaguar.

The British Columbia Supreme Court, in a decision cited as 2015 BCSC 2436, enjoined AER from completing the Black Sea Transaction, finding that AER's incumbent directors had material "disclosable" interests in the transaction (Business Corporations Act, s. 150(2)), and that the transaction was not fair and reasonable to AER. The Court held that AER's directors acted in an oppressive manner to Jaguar, and enjoined AER from completing the Black Sea Transaction unless and until it obtained shareholder approval at the next annual general meeting (AGM). AER appealed from Petition No. 1. Jaguar commenced Petition No. 2, alleging that the incumbent directors were depleting AER's cash reserves and seeking to delay holding the AGM. Jaguar sought orders regarding the conduct of the AGM and orders preventing AER from disposing of its cash except in its ordinary course of business.

The British Columbia Supreme Court, in a decision cited as 2016 BCSC 257, found that AER had failed to follow many of the orders made in Petition No. 1, and that AER had again engaged in oppressive conduct. The Court made various orders, including: (1) appointing an independent chair to call, hold and conduct the AGM, and (2) limiting AER to expenses incurred in the ordinary course of business, capped at $32,000 per month. AER appealed from Petition No. 2.

The British Columbia Court of Appeal allowed both appeals. The judge erred in finding that Fairbanks and Yates had disclosable interests, and that the Special Committee did not act independently of Cooper who had an admitted, and disclosed, interest. The oppression remedies were not available in the circumstances. Those fundamental errors affected the rest of the analysis, giving rise to injunctive orders which could not be supported.

Company Law - Topic 4351

Directors - Transactions between director and company - Contracts - Disclosure by director - See paragraphs 74 to 99.

Company Law - Topic 4352

Directors - Transactions between director and company - Contracts - "Fair and reasonable" to corporation - See paragraphs 100 to 110.

Company Law - Topic 9715

Actions against corporations and directors - General - Restraining or compliance order or injunctive relief - See paragraphs 65 to 110.

Company Law - Topic 9785

Actions against corporations and directors - Action for oppressive conduct - Oppression, prejudice or disregard of interests - See paragraphs 111 to 153.

Counsel:

H. Poulus, Q.C., and J. Ensom, for the appellant, Alternative Earth Resources Inc.;

No appearance, for the appellants, Gavin Cooper, Brian D. Fairbank and James E. Yates;

M.A. Feder, S.C. D'Souza, P.D.H. Williams, for the respondent, Jaguar Financial Corporation.

These appeals were heard at Vancouver, British Columbia, on April 12, 2016, before Donald, Savage and Fitch, JJ.A., of the British Columbia Court of Appeal. In reasons written by Savage, J.A., the Court delivered the following judgment, dated May 5, 2016.