LSI Logic Corp. v. Logani,

• Judge: Fruman, J.
• Neutral Citation: 2001 ABQB 710
• Citation: (2001), 296 A.R. 201 (QB),2001 ABQB 710,204 DLR (4th) 443,[2001] 11 WWR 740,296 AR 201,96 Alta LR (3d) 162,19 BLR (3d) 101,[2001] CarswellAlta 1100,[2001] AJ No 1083 (QL),107 ACWS (3d) 995,204 D.L.R. (4th) 443,296 A.R. 201,[2001] A.J. No 1083 (QL),(2001), 296 AR 201 (QB)
• Date: 08 August 2001
• Court: Court of Queen's Bench of Alberta (Canada)

LSI Logic Corp. v. Logani (2001), 296 A.R. 201 (QB)

MLB headnote and full text

Temp. Cite: [2001] A.R. TBEd. AU.096

In The Matter Of Section 190 of the Canada Business Corporations Act, R.S.C. 1985, c. C-44, as amended;

And In The Matter Of LSI Logic Corporation of Canada, Inc. and its shareholders

LSI Logic Corporation of Canada, Inc. (petitioner) v. Ramesh Logani and all other Dissenting Shareholders as Listed in Schedule A to the Petition (respondents)

The Canadian Pacific Limited Pension Trust Fund (Registered in the Name of Queen & Co.), The Canadian Pacific Express Transport Pension Trust Fund (Registered in the Name of Queen & Co.), The Canadian Pacific Hotels Master Trust "B" Pension Trust Fund (Registered in the Name of Queen & Co.), The Toronto Terminals Railway Company Pension Trust Fund (Registered in the Name of Queen & Co.), David W. Martin, Brian W.F. McLoughlin, Mary A. Sarah McLoughlin, and Wilson Wong (plaintiffs) v. LSI Logic Corporation of Canada, Inc., LSI Logic Corporation, 3096467 Canada Inc., LSI Logic Netherlands BV, David E. Sanders, Albert E. Pimentel, Horst Sandfort, Travis A. White, Thomas G. Smillie and Albrecht W.A. Bellstedt (defendants)

(Action Nos. 9501-15628; 9901-04378; 2001 ABQB 710)

Indexed As: LSI Logic Corp. of Canada Inc. v. Logani et al.

Alberta Court of Queen's Bench

Judicial District of Calgary

Fruman, J.

August 8, 2001.

Summary:

LSI, a public company, undertook a "going private" transaction. By special resolution, common shares owned by minority shareholders were cashed out at $4 per share. A group of dissenting minority shareholders (the shareholders) rejected the $4 offer and pursued a determination of "fair value" in various court proceedings for three years. When the shareholders changed counsel, they abandoned that approach and advanced the new theory that LSI's going private transaction was ultra vires and that the Court of Queen's Bench was without jurisdiction to hear the fair value proceedings. The shareholders applied to strike the fair value petition, and filed a new proceeding claiming oppression and wrongful taking against various parties including LSI. Several matters in the new action were based on confidential documents disclosed to the shareholders in the course of discovery in the fair value proceedings. LSI moved to strike the shareholders' motion, asked for an injunction to prevent them from using the documents obtained via discovery for a collateral purpose, and moved to strike the oppression claim.

The Alberta Court of Queen's Bench dismissed the shareholders' motion to strike the fair value petition and granted an injunction restraining the shareholders from making improper use of the confidential information disclosed to them during the discovery process. The court struck or stayed various portions of their oppression claim, accordingly.

Company Law - Topic 2173

Shareholders - Shareholders' rights - Repurchase of shares by company or majority shareholders - LSI, a public company, undertook a "going private" transaction - By special resolution, common shares owned by minority shareholders were cashed out at $4 per share - A group of dissenting minority shareholders (the shareholders) rejected the $4 offer and argued, inter alia, that LSI's going private transaction was unlawful, ultra vires, and not authorized by the Canada Business Corporations Act - The Alberta Court of Queen's Bench rejected the argument - See paragraphs 27 to 47.

Company Law - Topic 7018

Fundamental changes and shareholders' rights - Rights of minority or dissenting shareholders - Right to valuation of shares by court - When available (incl. jurisdiction) - LSI, a public company, undertook a "going private" transaction - By special resolution, common shares owned by minority shareholders were cashed out at $4 per share - A group of dissenting minority shareholders (the shareholders) rejected the $4 offer and argued, inter alia, that LSI's going private transaction was unlawful, ultra vires, and not authorized by the Canada Business Corporations Act (CBCA) - They argued in the alternative that the Court of Queen's Bench had no authority to determine the fair value of LSI's shares, as the court's jurisdiction was restricted to the categories of fundamental change specifically enumerated in s. 190 of the CBCA - The Alberta Court of Queen's Bench held that it had the necessary jurisdiction as a court of superior jurisdiction - The CBCA neither created a separate statutory court or restricted the court's jurisdiction in any way - See paragraphs 48 to 57.

Company Law - Topic 7223

Fundamental changes and shareholders' rights - Takeover or acquisition of control - Jurisdiction of courts - [See Company Law - Topic 7018 ].

Equity - Topic 4630

Election - When applicable - Selection of one of two inconsistent courses of action - LSI, a public company, undertook a "going private" transaction - By special resolution, common shares owned by minority shareholders were cashed out at $4 per share - A group of dissenting minority shareholders (the shareholders) rejected the $4 offer and pursued a determination of "fair value" in various court proceedings for three years - The shareholders later abandoned that approach and argued that LSI's going private transaction was ultra vires - The shareholders applied to strike the fair value petition, and filed a new proceeding - LSI moved to strike the shareholders' motion on the ground (inter alia) of election - The Alberta Court of Queen's Bench dismissed the shareholders' motion to strike the fair value petition on its merits - The court stated, however, that the three requirements for election had been met in this case - See paragraphs 72 to 84.

Estoppel - Topic 386

Estoppel by record (res judicata) - Res judicata as a bar to subsequent proceedings - Issues decided in prior proceedings - LSI, a public company, undertook a "going private" transaction - By special resolution, common shares owned by minority shareholders were cashed out at $4 per share - A group of dissenting minority shareholders (the shareholders) rejected the $4 offer and pursued a determination of "fair value" in various court proceedings for three years - The shareholders later abandoned that approach and argued that LSI's going private transaction was ultra vires - The shareholders applied to strike the fair value petition, and filed a new proceeding - LSI moved to strike the shareholders' motion on the ground (inter alia) of res judicata - The Alberta Court of Queen's Bench dismissed the shareholders' motion to strike the fair value petition on its merits - The court stated, however, that the shareholders' motion was also res judicata, where they had already accepted interim payments of share value under a consent order which was based on the lawful authority of the fair value proceedings - See paragraphs 59 to 71.

Estoppel - Topic 1164

Estoppel in pais (by conduct) - Representation - By conduct - Course of conduct by litigant - [See Equity - Topic 4630 ].

Practice - Topic 4157

Discovery - General principles - Collateral use of discovery information (implied or deemed undertaking rule) - Common shares of LSI, a public company, were cashed out at $4 per share - A group of dissenting minority shareholders (the shareholders) pursued a court determination of "fair value" for three years - When the shareholders changed counsel, they abandoned that approach and filed a new proceeding claiming oppression and wrongful taking against various parties including LSI - The new action was partly based on confidential documents disclosed during discovery for the fair value proceedings - LSI sought an injunction to prevent the shareholders from using the documents for this collateral purpose, and moved to strike the oppression claim - The Alberta Court of Queen's Bench granted the injunction and struck or stayed various portions of the shareholders' oppression claim, accordingly - See paragraphs 93 to 113.

Practice - Topic 4553

Discovery - Documents - Production and inspection of documents - General - Use of documents produced - Collateral use - [See Practice - Topic 4157 ].

Cases Noticed:

Fullowka et al. v. Whitford et al. (1997), 147 D.L.R.(4th) 531 (N.W.T.C.A.), refd to. [para. 20].

Hunt v. T & N plc et al., [1990] 2 S.C.R. 959; 117 N.R. 321; 4 C.C.L.T.(2d) 1; 43 C.P.C.(2d) 105; 49 B.C.L.R.(2d) 273; 74 D.L.R.(4th) 321; [1990] 6 W.W.R. 385, refd to. [para. 30].

Hunt v. Carey Canada Inc. - see Hunt v. T & N plc et al.

Principal Group Ltd. (Bankrupt) v. Alberta (1991), 118 A.R. 40 (Q.B.), refd to. [para. 20].

Peace Hills Trust Co. v. Professional Property Management Ltd. et al. (1998), 223 A.R. 125; 183 W.A.C. 125 (C.A.), refd to. [para. 21].

Allied-Signal Inc. v. Dome Petroleum Ltd. et al. (1991), 122 A.R. 321; 81 Alta. L.R.(2d) 307 (Q.B.), refd to. [para. 24].

Trevor v. Whitforth (1887), 12 App. Cas. 409 (H.L.), refd to. [para. 34].

McConnell et al. v. Newco Financial Corp. (1979), 8 B.L.R. 180 (B.C.C.A.), dist. [para. 41].

Ripley International Ltd., Re (1977), 1 B.L.R. 269 (Ont. H.C.), refd to. [para. 43].

Robertson (P.L.) Manufacturing Co., Re (1974), 7 O.R.(2d) 98 (H.C.), refd to. [para. 43].

Hellenic and General Trust Ltd., In Re, [1976] 1 W.L.R. 123 (Ch. D.), refd to. [para. 45].

General Accident Assurance Co. of Canada v. Lornex Mining Corp. (1988), 66 O.R.(2d) 783 (H.C.), refd to. [para. 45].

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. 66].

Kemp v. Rath (1996), 193 A.R. 26; 135 W.A.C. 26 (C.A.), refd to. [para. 67].

Mire v. Northwestern Mutual Insurance Co. (No. 2) (1972), 31 D.L.R.(3d) 746 (Alta. C.A.), refd to. [para. 67].

Neuman v. Parkland No. 3 (County), [1998] A.R. Uned. 88 (C.A.), refd to. [para. 67].

Terroco Industries Ltd. v. Viking Oilfield Supply Ltd., [1988] 2 W.W.R. 744; 84 A.R. 274 (C.A.), refd to. [para. 67].

Smith v. Baker (1873), L.R. 8 C.P. 350 (C.A.), refd to. [para. 74].

Carlton Realty Co. v. Manitoba (Minister of Government Services) (1987), 50 Man.R.(2d) 191 (Q.B.), refd to. [para. 74].

Miller (Ed) Sales and Rentals Ltd. v. Caterpillar Tractor Co. et al. (1986), 72 A.R. 354 (Q.B.), refd to. [para. 93].

Hamilton and Malm v. Alberta (Minister of Public Works, Supply and Services) et al. (1991), 118 A.R. 267 (Q.B.), refd to. [para. 93].

Wirth Ltd. v. Acadia Pipe & Supply Corp. et al. (1991), 113 A.R. 298 (Q.B.), refd to. [para. 93].

Prudential Assurance Co. v. Fountain Page Ltd. et al., [1991] 3 All E.R. 878 (Q.B.), refd to. [para. 94].

Riddick v. Thames Board Mills Ltd., [1977] 3 All E.R. 677 (C.A.), refd to. [para. 94].

Home Office v. Harman, [1983] 1 A.C. 280 (H.L.), refd to. [para. 94].

Carbone v. De La Roche (1993), 13 O.R.(3d) 355 (Gen. Div.), refd to. [para. 95].

Radhakrishnan v. University of Calgary Faculty Association et al. (1995), 178 A.R. 221; 110 W.A.C. 221 (C.A.), refd to. [para. 97].

Chandler (B.E.) Co. v. Mor-Flo Industries Inc. et al. (1996), 7 O.T.C. 60; 50 C.P.C.(3d) 122 (Gen. Div.), refd to. [para. 105].

Ochitwa v. Bombino et al. (1997), 210 A.R. 259; 56 Alta. L.R.(3d) 37 (Q.B.), refd to. [para. 105].

Sybron Corp. v. Barclays Bank plc, [1985] 1 Ch. 299 (Ch. D.), refd to. [para. 105].

Goodman v. Rossi (1995), 83 O.A.C. 38; 24 O.R.(3d) 359 (C.A.), refd to. [para. 105].

Crest Homes Ltd. v. Marks et al., [1987] 2 All E.R. 1074; 93 N.R. 256 (H.L.), refd to. [para. 107].

Miller v. Scorey, [1996] 3 All E.R. 18 (Ch. D.), refd to. [para. 107].

Omar v. Omar, [1995] 1 W.L.R. 1428 (Ch. D.), refd to. [para. 107].

Alberta (Treasury Branches) v. SevenWay Capital Corp. (2000), 261 A.R. 278; 225 W.A.C. 278 (C.A.), refd to. [para. 115].

First Edmonton Place Ltd. v. 315888 Alberta Ltd. (1988), 60 Alta. L.R.(2d) 122 (Q.B.), affd. (1989), 71 Alta. L.R.(2d) 61 (C.A.), refd to. [para. 126].

Westfair Foods Ltd. v. Watt et al. (1996), 183 A.R. 286; 28 B.L.R.(2d) 87 (Q.B.), affd. (1998), 223 A.R. 322; 183 W.A.C. 322 (C.A.), leave to appeal dismissed (1999), 243 N.R. 397; 244 A.R. 400; 209 W.A.C. 400 (S.C.C.), refd to. [para. 126].

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

Michalak v. Biotech Electronics Ltd. (1986), 35 B.L.R. 1 (Que. S.C.), refd to. [para. 126].

Authors and Works Noticed:

Anson, W.R., The Law of Contract (27th Ed. 1998), p. 500 [para. 74].

Canada, Corporations Directorate of Industry Canada, Canada Business Corporations Act Discussion Paper; Proposals for Technical Amendments (1995), generally [para. 42].

Canada, Ministry of Supply and Services Report, Proposals for a New Business Corporations Law for Canada (Dickerson Report) (1971), vol. 1, para. 76 [para. 31].

Dickerson, R.W.V. - see Canada, Ministry of Supply and Services Report (Dickerson Report).

Ontario Securities Commission, Policy Statement 9.1, Disclosure, Valuation, Review and Approval Requirements and Recommendations for Insider Bids, Issuer Bids, Going Private Transactions and Related Party Transactions (1991), 14 O.S.C.B. 3345, sect. 2.1(4) [para. 8].

Singer, C., Going Private Transactions and Other Related Party Transactions (2000), p. 202 [para. 27].

Spencer-Bower, George, and Turner, Alexander-Kingcome, The Law Relating to Estoppel by Representation (3rd Ed. 1977), p. 333 [para. 73].

Spencer-Bower, George, Turner, Alexander Kingcome, and Handley, K.R., The Doctrine of Res Judicata (3rd Ed. 1996), p. 50 [para. 56].

Counsel:

E. David D. Tavender, Q.C., Gordon L. Tarnowsky and Lindsay A.M. Holukoff, for LSI Logic Corp. of Canada Inc.;

Leslie R. Duncan, Q.C., and Jody L. Saunders, for the shareholders;

Roderick A. McLennan, Q.C., and Donald W. Dear, for the Directors and Officers.

These motions were heard by Fruman, J., of the Alberta Court of Queen's Bench, Judicial District of Calgary, who delivered the following decision on August 8, 2001.