Western Larch Ltd. et al. v. Di Poce Management Ltd. et al.,

• Jurisdiction: Ontario
• Judge: Gillese, Tulloch and Lauwers, JJ.A.
• Court: Court of Appeal (Ontario)
• Citation: 2013 ONCA 722,(2013), 313 O.A.C. 108 (CA)
• Date: 24 April 2013

Western Larch Ltd. v. Di Poce Mgt. Ltd. (2013), 313 O.A.C. 108 (CA)

MLB headnote and full text

Temp. Cite: [2013] O.A.C. TBEd. DE.002

Western Larch Limited and Donald A. MacIver (plaintiffs/appellants) v. Di Poce Management Limited, John Di Poce, Eastern Hemlock Limited, George Frankfort, Large Tooth Aspen Limited, Carmine Guglietti , Red Alder Limited, The Estate of Giovanni Guglietti, Fincourt Inc., Fincourt Partnership, Alpa Lumber Inc., and Alpa Partnership (defendants/respondents)

(C56453; 2013 ONCA 722)

Indexed As: Western Larch Ltd. et al. v. Di Poce Management Ltd. et al.

Ontario Court of Appeal

Gillese, Tulloch and Lauwers, JJ.A.

November 29, 2013.

Summary:

The motion judge granted partial summary judgment in a commercial dispute about the exercise of a shotgun buy-sell provision in a partnership agreement (see [2012] O.T.C. Uned. 7014). The judge ruled that although the respondents' buy-sell offer did not comply perfectly with the shotgun buy-sell provision, it was nonetheless valid and enforceable. He directed a trial on the appellants' claims for damages for three breaches of contract. The appellants appealed.

The Ontario Court of Appeal dismissed the appeal.

Company Law - Topic 2427

Shareholders - Agreements - Shotgun clause or order - The Ontario Court of Appeal stated that "To be enforceable, a shotgun buy-sell offer must comply strictly with the shotgun buy-sell provision in the authorizing agreement ... Strict compliance is not perfect compliance ... In deciding whether a shotgun buy-sell offer meets the strict compliance test, the commercially reasonable expectations of the parties in the factual context must be considered. Much will depend on the language of the authorizing agreement and the shotgun buy-sell provision ... The inclusion of an alternative in a shotgun buy-sell offer that does not comply strictly with the shotgun buy-sell provision in the authorizing agreement does not affect the enforceability of the buy-sell offer, provided that a compliant alternative is also included ... The court will not enforce the alternative that is not strictly compliant with a shotgun buy-sell provision. It will enforce the compliant alternative shotgun buy-sell offer ... The court will find compliance to be sufficiently strict, and will enforce a shotgun buy-sell offer containing elements of non-compliance that are, in the particular factual context, commercially insignificant, and which can be fully and fairly remedied by damages" - See paragraph 65.

Company Law - Topic 2427

Shareholders - Agreements - Shotgun clause or order - The respondents exercised a shotgun buy-sell provision in a partnership agreement (PA) and delivered a shotgun buy-sell offer to the appellants (Western Larch Ltd. and MacIver) - The buy-sell offer contained two alternatives - Alternative 2 would have repaid the partnership's debt to Western Larch on closing as required by the PA - Alternative 1 provided for the repayment of half of the debt on closing, with the balance to be paid over four years with interest - The buy-sell offer also provided that if the appellants did not choose between the alternatives, and did not elect to reverse the buy-sell offer, they would be deemed to have chosen Alternative 1 - The appellants issued a Statement of Claim, attacking the validity of the buy-sell offer - The respondents moved for summary judgment to dismiss the action - The motion judge ruled that although the respondents' buy-sell offer did not comply perfectly with the shotgun buy-sell provision, it was nonetheless valid and enforceable - He directed a trial on the appellants' claims for damages for three breaches of contract - The Ontario Court of Appeal dismissed the appellants' appeal - It was open to the respondents to include an alternative in the buy-sell offer even if an alternative offer was not contemplated by the PA - The buy-sell offer was valid and enforceable, since it contained the compliant Alternative 2 - The mere inclusion of Alternative 1 did not invalidate the buy-sell agreement or render it unenforceable - The respondents' purported imposition of Alternative 1 on the appellants also did not render the buy-sell offer unenforceable - By granting partial summary judgment and ordering the trial of the three issues as to damages, the motion judge effectively compelled the respondents to perform in conformance with Alternative 2 - The buy-sell offer was sufficiently compliant with the shotgun buy-sell provision in the PA to meet the strict compliance standard - The motion judge did not err in fixing the applicable measure of damages as the appellants' full compliance with Alternative 2 - That measure reflected the commercially reasonable expectations of the parties - See paragraphs 48 to 78.

Company Law - Topic 7162

Fundamental changes and shareholders' rights - Buy-sell agreements - Interpretation - [See both Company Law - Topic 2427 ].

Contracts - Topic 7416

Interpretation - General principles - Most commercially reasonable interpretation - [See both Company Law - Topic 2427 ].

Cases Noticed:

Plan Group et al. v. Bell Canada (2009), 252 O.A.C. 71; 96 O.R.(3d) 81; 2009 ONCA 548, refd to. [para. 15].

Zeubear Investments Ltd. et al. v. Magi Seal Corp. et al. (2010), 271 O.A.C. 126; 103 O.R.(3d) 578; 2010 ONCA 825, refd to. [para. 15].

Ventas Inc. et al. v. Sunrise Senior Living Real Estate Investment Trust et al. (2007), 222 O.A.C. 102; 85 O.R.(3d) 254; 2007 ONCA 205, refd to. [para. 15].

Treat America Ltd. v. Nestlé Canada Inc. (2011), 282 O.A.C. 311; 2011 ONCA 560, refd to. [para. 16].

BTR Global Opportunity Trading Ltd. et al. v. RBC Dexia Investor Services Trust et al., [2011] O.A.C. Uned. 478; 2011 ONCA 518, refd to. [para. 16].

771225 Ontario Inc. v. Bramco Holdings Co., [1992] O.J. No. 1772, refd to. [para. 16].

Housen v. Nikolaisen et al., [2002] 2 S.C.R. 235; 286 N.R. 1; 219 Sask.R. 1; 272 W.A.C. 1; 2002 SCC 33, refd to. [para. 16].

Laschuk v. Poon (1993), 7 Alta. L.R.(3d) 422 (Q.B.), refd to. [para. 42].

Trimac Ltd. v. C-I-L Inc. (1987), 79 A.R. 378; 52 Alta. L.R.(2d) 263; 1987 CarswellAlta 113 (Q.B.), affd. (1987), 53 Alta. L.R.(2d) 97; 1987 CarswellAlta 142 (C.A.), refd to. [para. 43].

Hargreaves v. Charbonneau, [2003] O.J. No. 4268 (Sup. Ct.), refd to. [para. 45].

942925 Alberta Ltd. et al. v. Thompson et al. (2008), 432 A.R. 177; 424 W.A.C. 177; 2008 ABCA 81, refd to. [para. 45].

Oakley v. McDougall, 1986 CarswellBC 1500 (S.C.), varied (1987), 14 B.C.L.R.(2d) 128 (C.A.), refd to. [para. 59].

360246 B.C. Ltd. v. Evmo Holdings Ltd., [1993] B.C.J. No. 2068 (S.C.), refd to. [para. 59].

Gazo v. Gazo, [2008] O.T.C. Uned. 265 (Sup. Ct.), refd to. [para. 59].

Aronowicz et al. v. Emtwo Properties Inc. et al. (2010), 258 O.A.C. 222; 98 O.R.(3d) 641; 2010 ONCA 96, refd to. [para. 71].

Gottlieb v. Adam (1994), 21 O.R.(3d) 248 (Gen. Div.), refd to. [para. 73].

Authors and Works Noticed:

Waddams, Stephen M., The Law of Contracts (6th Ed. 2010), p. 548 [para. 73].

Counsel:

Terrence O'Sullivan and Shaun Laubman, for the appellants;

Peter H. Griffin and Matthew B. Lerner, for the respondents.

This appeal was heard on April 24, 2013, before Gillese, Tulloch and Lauwers, JJ.A., of the Ontario Court of Appeal. The following judgment of the Court of Appeal was delivered by Lauwers, J.A., and was released on November 29, 2013.