Katotakis v. Waters Ltd., (2005) 194 O.A.C. 353 (CA)

• Judge: Feldman, Sharpe and Armstrong, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: February 23, 2005
• Jurisdiction: Ontario
• Citations: (2005), 194 O.A.C. 353 (CA)

Katotakis v. Waters Ltd. (2005), 194 O.A.C. 353 (CA)

MLB headnote and full text

Temp. Cite: [2005] O.A.C. TBEd. FE.100

Stamos Katotakis, 1066821 Ontario Inc. and 1427936 Ontario Inc. (applicants/appellants in appeal) v. William R. Waters Limited, 1427937 Ontario Inc. and BNY Capital Corporation (respondents/respondents in appeal)

(C43047; C43049; C43051)

Indexed As: Katotakis et al. v. Waters (William R.) Ltd. et al.

Ontario Court of Appeal

Feldman, Sharpe and Armstrong, JJ.A.

February 23, 2005.

Summary:

Katotakis, Waters and BNY owned 80% of FMC's shares and were parties to a shareholder's agreement with a right of first refusal and right of first offer respecting FMC shares. FMC was the target of a takeover bid by Linedata, who offered to pay $12.50 per share. Waters and BNY delivered selling notices to Katotakis under the shareholder's agreement, offering to sell their shares to him for the matching price of $12.20 per share. The notices were subject to terms and conditions set out in a draft acquisition agreement between FMC and Linedata and a draft lock-up agreement between the three shareholders, including "superior proposal" conditions permitting sellers to sell their shares to another buyer at a better price. Although Katotakis accepted the $12.20 offer, the acceptance was void for noncompliance with the Securities Act. Linedata made a further offer of $14.50 per share. Katotakis declined to match that offer, submitting that he was entitled to purchase the shares for $12.20. Waters and BNY, relying on the "superior proposal" conditions, submitted that they were entitled to tender their shares to Linedata for $14.50 per share.

The Ontario Superior Court held that the "superior proposal" conditions were incorporated into the selling notices and Katotakis' failure to match the Linedata $14.50 offer left Waters and BNY free to sell their shares to Linedata for $14.50. Katotakis appealed.

The Ontario Court of Appeal dismissed the appeal.

Company Law - Topic 5705

Sale of shares - General - Right of first refusal - Katotakis, Waters and BNY owned 80% of FMC's shares and were parties to a shareholder's agreement with a right of first refusal and right of first offer respecting FMC shares - FMC was the target of a takeover bid by Linedata, who offered to pay $12.50 per share - Waters and BNY delivered selling notices to Katotakis under the shareholder's agreement, offering to sell their shares to him for the matching price of $12.20 per share - The notices were subject to terms and conditions set out in a draft acquisition agreement between FMC and Linedata and a draft lock-up agreement between the three shareholders, including "superior proposal" conditions permitting sellers to sell their shares to another buyer at a better price - Although Katotakis accepted the $12.20 offer, the acceptance was void for noncompliance with the Securities Act - Linedata made a further offer of $14.50 per share - Katotakis declined to match that offer, submitting that he was entitled to purchase the shares for $12.20 - Waters and BNY, relying on the "superior proposal" conditions, submitted that they were entitled to sell their shares to Linedata for $14.50 per share - The trial judge held that the "superior proposal" conditions were incorporated into the selling notices and Katotakis' failure to match the Linedata $14.50 offer left Waters and BNY free to sell their shares to Linedata for $14.50 - The Ontario Court of Appeal dismissed the Katotakis' appeal - It was open to the trial judge to find that the "superior proposal" conditions were incorporated into the selling notices and that Katotakis was bound by them.

Cases Noticed:

Consolidated-Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co. (1980), 32 N.R. 488; 112 D.L.R.(3d) 49 (S.C.C.), refd to. [para. 12].

GATX Corp. v. Hawker Siddeley Canada Inc. (1996), 27 B.L.R.(2d) 251 (Ont. Gen. Div.), refd to. [para. 16].

Counsel:

Peter Howard and Timothy Banks, for the appellants;

Gordon McKee and Robin Linley, for BNY Capital Corp.;

Norman J. Emblem and Michael D. Schafler, for Linedata Services S.A.;

Paul Steep and Eric Block, for Financial Models Co.;

Jeffrey S. Leon, for the Special Committee of the Board of Directors of FMC;

William J. Burden and Linda I. Knol, for 1427937 Ontario Inc. and William R. Waters Ltd.

This appeal was heard on February 22, 2005, before Feldman, Sharpe and Armstrong, JJ.A., of the Ontario Court of Appeal.

The judgment of the Court of Appeal was delivered by Sharpe, J.A., and released on February 23, 2005.