R.L.T.V. Investments Inc. v. Saskatchewan Telecommunications et al., (2009) 331 Sask.R. 78 (CA)

• Judge: Klebuc, C.J.S., Sherstobitoff and Jackson, JJ.A.
• Court: Court of Appeal (Saskatchewan)
• Case Date: November 20, 2008
• Jurisdiction: Saskatchewan
• Citations: (2009), 331 Sask.R. 78 (CA);2009 SKCA 83

RLTV Inv. Inc. v. Sask. Telecom. (2009), 331 Sask.R. 78 (CA);

    460 W.A.C. 78

MLB headnote and full text

Temp. Cite: [2009] Sask.R. TBEd. AU.001

R.L.T.V. Investments Inc. (appellant (plaintiff)) v. Saskatchewan Telecommunications (hereinafter referred to as SaskTel), Saskatchewan Telecommunications Holding Corporation (hereinafter referred to as STHC) (respondents (defendants)) and Donald Ching, Dan Baldwin, John Meldrum, Robert Hersche (hereinafter referred to as Defendant Executive Officers) (respondents (defendants)) and Yourlink Inc. (respondent)

(No. 1544; 2009 SKCA 83)

Indexed As: R.L.T.V. Investments Inc. v. Saskatchewan Telecommunications et al.

Saskatchewan Court of Appeal

Klebuc, C.J.S., Sherstobitoff and Jackson, JJ.A.

July 23, 2009.

Summary:

At issue were two applications. The plaintiff sought to have its claim authorized as a derivative action in the name of and on behalf of a corporation formerly known as Image Wireless Communications Inc. (now Yourlink). The defendants sought to have the claim struck out as failing to disclose a cause of action.

The Saskatchewan Court of Queen's Bench, in a decision reported at 306 Sask.R. 23, dismissed the plaintiff's application and allowed the defendants' application. The plaintiff appealed.

The Saskatchewan Court of Appeal dismissed the appeal.

Company Law - Topic 2164

Shareholders - Shareholders' rights - Derivative actions - In February of 2004, Image Wireless was forced into receivership and the plaintiff sold all of its shares at a significant loss - The plaintiff was also required to satisfy certain guarantees of the indebtedness of Image Wireless and lost all of its shareholder loans - After the plaintiff sold its shares, the company amalgamated and became known as Yourlink - The plaintiff alleged that the financial collapse of Image Wireless and resulting financial losses sustained by it were caused or materially contributed to by the wrongful actions of the defendants - The plaintiff sought to have its claim authorized as a derivative action - The chambers judge dismissed the application - The plaintiff had no residual interest in Yourlink - The plaintiff retained absolutely nothing under the share purchase agreement notwithstanding that a reserving by the vendor of a specific right or interest that would normally vest in a purchaser of shares could be accomplished - The applicant had no existing interest in Yourlink and even if the action was entirely successful the only benefit that could accrue to the plaintiff was its own vindication - This, of course, was contrary to the good faith requirement under s. 232(1)(b) of the Business Corporations Act - The Saskatchewan Court of Appeal dismissed the plaintiff's appeal - See paragraphs 59 to 70.

Company Law - Topic 9731

Actions against corporations and directors - Practice - Pleadings - The Saskatchewan Court of Appeal stated that "the test to be applied on a striking out motion based on the rule in Foss v. Harbottle is two-fold: (i) whether the shareholder has alleged separate and distinct claims with respect to wrongs done to it as a shareholder, in its own right, as opposed to wrongs against the corporation; and (ii) whether the shareholder has alleged all the requisite elements of causes of action sufficient to meet the requirements for a proper pleading. This test, however, must be applied through the usual lens to striking out pleadings, i.e., in plain and obvious cases, based on an analysis of whether, assuming the plaintiff proves everything alleged in the claim, there is no reasonable chance of success" - See paragraph 30.

Practice - Topic 2103

Pleadings - Amendment of pleadings - To remedy deficiency - In February of 2004, Image Wireless was forced into receivership and the plaintiff sold all of its shares at a significant loss - The plaintiff was also required to satisfy certain guarantees of the indebtedness of Image Wireless and lost all of its shareholder loans - After the plaintiff sold its shares, the company amalgamated and became known as Yourlink - The plaintiff alleged that the financial collapse of Image Wireless and resulting financial losses sustained by it were caused or materially contributed to by the wrongful actions of the defendants - The plaintiff sought to have its claim authorized as a derivative action under s. 232 of the Business Corporations Act - The defendants sought to have the claim struck out as failing to disclose a cause of action under Queen's Bench Rule 173 - The chambers judge dismissed the plaintiff's application and allowed the defendants' application - The plaintiff appealed, asserting that the chambers judge erred in not permitting the plaintiff to amend its statement of claim - The Saskatchewan Court of Appeal dismissed the appeal - The claim as drafted did not disclose crucial elements - The plaintiff amended the statement of claim after receiving the motion to strike and did not offer the chambers judge or the court any argument as to whether or how the statement of claim could be amended to assert a cause of action against the defendants directly - In such circumstances, it would be inappropriate to permit an amendment or to remit the matter for argument on the point - The plaintiff had to be taken to have put its best foot forward with the only claim that could be made, and in the only form that it could have taken - See paragraphs 56 to 58.

Practice - Topic 2209

Pleadings - Striking out pleadings - Application for - Consideration of legal issues - In February of 2004, Image Wireless was forced into receivership and the plaintiff sold all of its shares at a significant loss - The plaintiff was also required to satisfy certain guarantees of the indebtedness of Image Wireless and lost all of its shareholder loans - After the plaintiff sold its shares, the company amalgamated and became known as Yourlink - The plaintiff alleged that the financial collapse of Image Wireless and resulting financial losses sustained by it were caused or materially contributed to by the wrongful actions of the defendants - The plaintiff sought to have its claim authorized as a derivative action under s. 232 of the Business Corporations Act (BCA) - The defendants sought to have the claim struck out as failing to disclose a cause of action under Queen's Bench Rule 173 - The chambers judge dismissed the plaintiff's application and allowed the defendants' application - The plaintiff appealed, asserting that the chambers judge erred in considering the application for leave to commence the derivative action before considering the application to strike - The Saskatchewan Court of Appeal held that a judge faced with an application to strike a statement of claim under rule 173 based on the Foss v. Harbottle rule and an application for leave to commence the action as a derivative action under s. 232 of the BCA, should consider the rule 173 application first - The purpose of s. 232 was defeated if relief was denied before finding that the rule in Foss v. Harbottle applied - However, the court held that since it ultimately concluded that the rule in Foss v. Harbottle was engaged and the appeal from the s. 232 application should be denied, any error that the chambers judge made in addressing these matters in reverse could be considered harmless - See paragraphs 19 to 21.

Practice - Topic 2230

Pleadings - Striking out pleadings - Grounds - Failure to disclose a cause of action or defence - [See Company Law - Topic 9731 ].

Practice - Topic 2230

Pleadings - Striking out pleadings - Grounds - Failure to disclose a cause of action or defence - In February of 2004, Image Wireless was forced into receivership and the plaintiff sold all of its shares at a significant loss - The plaintiff was also required to satisfy certain guarantees of the indebtedness of Image Wireless and lost all of its shareholder loans - After the plaintiff sold its shares, the company amalgamated and became known as Yourlink - The plaintiff alleged that the financial collapse of Image Wireless and resulting financial losses sustained by it were caused or materially contributed to by the wrongful actions of the defendants - The chambers judge struck the claim as failing to disclose a cause of action - The plaintiff appealed, asserting that the chambers judge erred in concluding that the plaintiff's claims against the defendants for conspiracy and interference with economic relations should be struck on the basis that the losses claimed were losses of Image Wireless only - The Saskatchewan Court of Appeal dismissed the appeal - The plaintiff's claim neither alleged the existence of the elements of the tort of conspiracy nor pled facts to allege that the elements existed - Further, the claim was most clearly defeated on the basis that the acts as pled were not alleged to have been directed at the plaintiff, but rather, to Image Wireless, in addition to other entities who were in direct competition with the defendants - The plaintiff's only involvement in the telecommunications industry was through its shareholdings in Wireless Image - The same applied to the allegations of interference with economic relations - By the plaintiff's own admissions, all of the alleged acts of interference occurred in areas where the plaintiff conducted no business - The plaintiff had not pled any interference with its own business relations - These aspects of the statement of claim had to be struck - See paragraphs 22 to 49.

Practice - Topic 2230

Pleadings - Striking out pleadings - Grounds - Failure to disclose a cause of action or defence - In February of 2004, Image Wireless was forced into receivership and the plaintiff sold all of its shares at a significant loss - The plaintiff was also required to satisfy certain guarantees of the indebtedness of Image Wireless and lost all of its shareholder loans - After the plaintiff sold its shares, the company amalgamated and became known as Yourlink - The plaintiff alleged that the financial collapse of Image Wireless and resulting financial losses sustained by it were caused or materially contributed to by the wrongful actions of the defendants - The chambers judge struck the claim as failing to disclose a cause of action - The plaintiff appealed, asserting that the chambers judge erred in striking out the claims for losses under the guarantees and the shareholder loans - The Saskatchewan Court of Appeal dismissed the appeal - The chambers judge correctly held that the plaintiff had neither pled a breach of a duty of care owed by the defendants to it, nor had it offered any case law to support the possible existence of a new duty of care owed by a competitor and potential buyer to the shareholders of a corporation with which it was doing business - Moreover, the amended statement of claim did not plead any fact that related to the specific claims of loss as guarantor or for the loss of any shareholder loans - See paragraphs 50 to 52.

Practice - Topic 2230

Pleadings - Striking out pleadings - Grounds - Failure to disclose a cause of action or defence - In February of 2004, Image Wireless was forced into receivership and the plaintiff sold all of its shares at a significant loss - The plaintiff was also required to satisfy certain guarantees of the indebtedness of Image Wireless and lost all of its shareholder loans - After the plaintiff sold its shares, the company amalgamated and became known as Yourlink - The plaintiff alleged that the financial collapse of Image Wireless and resulting financial losses sustained by it were caused or materially contributed to by the wrongful actions of the defendants - The chambers judge struck the claim as failing to disclose a cause of action - The plaintiff appealed, asserting that the chambers judge erred in striking out the claims for breach of contract - The plaintiff asserted that the plaintiff was party to the two contracts or privy to them - The Saskatchewan Court of Appeal dismissed the appeal - The chambers judge correctly held that there was no allegation in the pleadings asserting that the plaintiff was a party to these agreements either as a principal or as a beneficiary - Further, there was no claim for damages associated with the breach - See paragraphs 53 to 55.

Cases Noticed:

Foss v. Harbottle (1843), 67 E.R. 189; 2 Hare 461 (V.C. Ct.), appld. [para. 1].

Haig v. Bamford et al., [1977] 1 S.C.R. 466; 9 N.R. 43, refd to. [para. 12].

Royal Bank of Canada v. Roles et al., [1993] 3 W.W.R. 471; 107 Sask.R. 256 (Q.B.), refd to. [para. 12].

Jameson Livestock Ltd. v. Toms Grain & Cattle Co. - see Toms Grain and Cattle Co. et al. v. Arcola.

Toms Grain & Cattle Co. et al. v. Arcola (2006) 279 Sask.R 281; 372 WAC 281; 2006 SKCA 20, refd to. [para. 17].

Canada (Royal Canadian Mounted Police) v. Dagenais - see Dagenais v. Dagenais.

Dagenais v. Dagenais (2007), 304 Sask.R. 146; 413 W.A.C. 146; 2007 SKCA 117, refd to. [para. 17].

Liu et al. v. Sung et al. (1988), 69 C.B.R.(N.S.) 43 (B.C.S.C.), affd. (1991), 4 B.C.A.C. 300; 9 W.A.C. 300; 82 D.L.R.(4th) 283 (C.A.), refd to. [para. 19].

Richardson Greenshields of Canada Ltd. v. Kalmacoff et al. (1995), 80 O.A.C. 98; 123 D.L.R.(4th) 628 (C.A.), refd to. [para. 20].

Collins v. McMahon et al., [2002] Sask.R. Uned. 96; 2002 SKQB 201, refd to. [para. 22].

Swift Current (City) v. Saskatchewan Power Corp. et al., [2007] 5 W.W.R. 387; 293 Sask.R. 6; 397 W.A.C. 6; 2007 SKCA 27, refd to. [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, refd to. [para. 24].

Goldex Mines Ltd. v. Revill (1974), 54 D.L.R.(3d) 672 (Ont. C.A.), refd to. [para. 28].

Sagon v. Royal Bank of Canada et al. (1992), 105 Sask.R. 133; 32 W.A.C. 133 (C.A.), refd to. [para. 30].

Rogers et al. v. Bank of Montreal et al., [1985] 5 W.W.R. 193 (B.C.S.C.), affd. [1987] 2 W.W.R. 364 (B.C.C.A.), leave to appeal refused [1987] 1 S.C.R. xiii; 80 N.R. 80 (S.C.C.), dist. [para. 35].

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.), dist. [para. 35].

Robak Industries Ltd. et al. v. Gardner et al. (2007), 236 B.C.A.C. 237; 390 W.A.C. 237; 2006 BCCA 61, dist. [para. 35].

Canada Cement LaFarge Ltd. et al. v. British Columbia Lightweight Aggregate Ltd. et al., [1983] 1 S.C.R. 452; 47 N.R. 191, refd to. [para. 44].

Duke et al. v. Puts, [2004] 6 W.W.R. 208; 241 Sask.R. 187; 313 W.A.C. 187; 2004 SKCA 12, refd to. [para. 48].

Neufeld et al. v. United Food and Commercial Workers International Union, Local 1400 (No. 2) (1984), 32 Sask.R. 245 (Q.B.), refd to. [para. 57].

Farr Farms Transport Ltd. v. Cargill Ltd. et al. (1999), 179 Sask.R. 292 (Q.B.), refd to. [para. 57].

ICR Commercial Real Estate (Regina) Ltd. v. Bricore Land Group Ltd. - see Bricore Land Group Ltd., Re.

Bricore Land Group Ltd., Re, [2007] 9 W.W.R. 79; 299 Sask.R. 194; 408 W.A.C. 194; 2007 SKCA 72, refd to. [para. 62].

Schafer v. International Capital Corp. et al., [1997] 5 W.W.R. 98; 153 Sask.R. 241 (Q.B.), affd. (1997), 152 Sask.R. 273; 140 W.A.C. 273 (C.A.), refd to. [para. 64].

Jacobs Farms Ltd. v. Jacobs et al., [1992] O.J. No. 813 (Gen. Div.), refd to. [para. 64].

Authors and Works Noticed:

Stevenson, William A., and Côté, Jean E., Civil Procedure Encyclopedia (2003), vol. 1, p. 11-7 [para. 58].

Counsel:

Wayne M. Rusnak, Q.C., and Larry B. Ayers, for R.L.T.V. Investments Inc.;

Robert W. Leurer, Q.C., and Jennifer Olijnyk, for Saskatchewan Telelcommunications, Saskatchewan Telecommunications Holding Corp., Donald Ching, Dan Baldwin, John Meldrum and Robert Hersche;

Gordon J. Kuski, Q.C., for Yourlink Inc.

This appeal was heard on November 20, 2008, by Klebuc, C.J.S., Sherstobitoff and Jackson, JJ.A., of the Saskatchewan Court of Appeal. The following judgment of the Court of Appeal was delivered by Jackson, J.A., on July 23, 2009.