Westfair Foods Ltd. v. Watt, (1990) 106 A.R. 40 (QB)

Court:Court of Queen's Bench of Alberta
Case Date:April 12, 1989
Jurisdiction:Alberta
Citations:(1990), 106 A.R. 40 (QB)
 
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Westfair Foods Ltd. v. Watt (1990), 106 A.R. 40 (QB)

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Foods Ltd. (petitioner) v. Dr. Donald Watt, Douglas A. Wright, Remington Energy Ltd., Royston S. Baay and Baay Land Consultants Ltd. (respondents) Donald Richard Jepson, Executor of the Estate of Edith Maude Jepson, deceased, and Donald Richard Jepson (petitioners) v. Westfair Foods Ltd. (respondent)

(Action No. 8901-00647)

Indexed As: Westfair Foods Ltd. v. Watt et al.

Alberta Court of Queen's Bench

Judicial District of Calgary

Moore, C.J.

April 12, 1990.

Summary:

A corporation applied for declarations determining the rights and obligations attached to the Class A shares and the common shares of the corporation. A group of Class A shareholders applied under s. 241 of the Canada Business Corporations Act, claiming the corporation's policies respecting dividends and borrowing were oppressive and were unfairly prejudicial to and disregarded the interests of Class A shareholders. A Class A shareholder applied under the Act for an order liquidating the corporation or, alternatively, for an order that the corporation buy out all Class A shareholders at a fair price. The actions were consolidated.

The Alberta Court of Queen's Bench held that the dividend and borrowing policies unfairly prejudiced and disregarded the interests of Class A shareholders. The court ordered that the corporation purchase all Class A shares at a value to be determined by a court-appointed auditor or accountant.

Company Law - Topic 3803

Dividends - Limits on - [See Company Law - Topic 9785].

Company Law - Topic 4301

Directors - Duties to company and shareholders - General - The Alberta Court of Queen's Bench stated that at common law "provided the directors act honestly and in good faith with a view to the best interests of the company, the courts are reluctant to interfere with the internal management of the company" - See paragraph 44.

Company Law - Topic 9785

Actions against corporations - Action for oppressive conduct - Oppression, prejudice or disregard of interests - The Alberta Court of Queen's Bench stated that s. 241 of the Canada Business Corporations Act "was not intended to override such fundamental principles of corporate law as majority shareholder control and the clear power of directors to manage the corporation, nor has it been interpreted as conferring on majority shareholders a fiduciary duty to minority shareholders" - The court also stated that the oppression, prejudice or disregard must exist when the s. 241 application is brought and cannot be anticipatory - See paragraph 56.

Company Law - Topic 9785

Actions against corporations - Action for oppressive conduct - Oppression, prejudice or disregard of interests - The Alberta Court of Queen's Bench referred to the factors to be considered in determining whether corporate conduct was oppressive, unfairly prejudicial or in disregard to the interests of a claimant under s. 241 of the Canada Business Corporations Act - See paragraph 61.

Company Law - Topic 9785

Actions against corporations - Action for oppressive conduct - Oppression, prejudice or disregard of interests - Kelly owned all common shares and 56% of Class A shares - Class A shares had a preferred right to a fixed dividend and were to share equally in the distribution of corporate assets upon a winding-up, etc. - The corporation's directors paid the dividend, then paid 100% of the previous year's earnings to Kelly as dividends - Kelly loaned the monies back to the corporation, freezing increases in retained earnings and increasing short and long-term debt at equity's expense - The Alberta Court of Queen's Bench held that the policies, along with corporate inaction on a delisting of the Class A shares (T.S.E.), were unfairly prejudicial to and disregarded the interests of Class A shareholders, contrary to s. 241 of the Canada Business Corporations Act.

Cases Noticed:

International Power Co. Ltd. v. McMaster University et al., [1946] S.C.R. 178, refd to. [para. 30].

Will v. United Lanket Plantation Co. Ltd., [1912] 1 Ch. 571 (C.A.), affd. [1914] A.C. 11 (H.L.), refd to. [para. 42].

Steel Company of Canada v. Ramsay, [1931] A.C. 270 (P.C.), refd to. [para. 42].

Lubbock v. British Bank of South America, [1892] 2 Ch. 198, refd to. [para. 43].

Verner v. General and Commercial Investment Trust, [1894] 2 Ch. 239 (C.A.), refd to. [para. 43].

Brant Investments Ltd. et al. v. Keeprite Inc. et al. (1987), 37 B.L.R. 65 (Ont. H.C.J.), refd to. [para. 44].

Burland v. Earle, [1902] A.C. 83 (P.C.), refd to. [para. 44].

Bond v. Barrown Haematite Steel Co., [1902] 1 Ch. 353 (C.A.), refd to. [para. 42].

Wotherspoon v. Canadian Pacific Ltd. (1979), 22 O.R.(2d) 385 (H.C.J.), refd to. [para. 42].

Greenhalgh v. Arderne Cinemas Ltd., [1950] 2 All E.R. 1120 (C.A.), refd to. [para. 44].

Palmer v. Carling O'Keefe Breweries of Canada Ltd. and Elders IXL Ltd. (1989), 32 O.A.C. 113; 67 O.R.(2d) 161 (Div. Ct.), refd to. [para. 44].

Howard Smith v. Ampol Petroleum Ltd., [1974] 1 All E.R. 1126 (P.C.), refd to. [para. 44].

First Edmonton Place Limited v. 315888 Alberta Ltd. (1988), 60 Alta. L.R.(2d) 122 (Q.B.), refd to. [para. 50].

Keho Holdings Ltd. and Oliver v. Noble et al. (1987), 78 A.R. 131 (C.A.), refd to. [para. 51].

Scottish Co-op Wholesale Soc. Ltd. v. Meyer, [1959] A.C. 324, refd to. [para. 52].

Burnett v. Tsang et al. (1985), 61 A.R. 219; 37 Alta. L.R.(2d) 159 (Q.B.), refd to. [para. 52].

Elder v. Elder and Watson, [1952] S.C. 49, refd to. [para. 52].

Diligenti v. RWMD Operations Kelowna Ltd. (1976), 1 B.C.L.R. 36, refd to. [para. 52].

Stech v. Davies, [1987] 5 W.W.R. 563; 80 A.R. 298, refd to. [para. 52].

Ferguson and Imax Systems Corp., Re (1983), 150 D.L.R.(3d) 718, refd to. [para. 53].

Little Billy's Restaurant (1977) Ltd., Re; Faltakas v. Paskalidis et al. (1983), 21 B.L.R. 246, refd to. [para. 56].

Western Finance Company Ltd. and Hannard v. Tasker Enterprises Ltd. and Tasker, [1980] 1 W.W.R. 323, refd to. [para. 56].

Bank of Montreal v. Dome Petroleum Ltd. (1987), 54 Alta. L.R.(2d) 289, refd to. [para. 56].

Redekop v. Robco Construction Ltd. (1978), 89 D.L.R.(3d) 507, refd to. [para. 57].

Peterson and Kanata Invt. Ltd., Re (1975), 60 D.L.R.(3d) 527, refd to. [para. 57].

Statutes Noticed:

Canada Business Corporations Act, R.S.C. 1985, c. C-44, sect. 42 [para. 31]; sect. 123(4) [para. 77]; sect. 241(1), sect. 241(2) [para. 22]; sect. 241(3)(f), sect. 241(3)(g), sect. 241(3)(l), sect. 241(6) [para. 48].

Authors and Works Noticed:

Shorter Oxford English Dictionary [para 52].

Counsel:

D. O'Connor, F.R. Foran, Q.C., and M.S. Paperny, for Westfair;

D.R. Haigh, Q.C., and J.R. Quigley, for Watt, Wright, Remington & Baay;

J.C. Crawford, Q.C., for Jepson.

These applications were heard before Moore, C.J., of the Alberta Court of Queen's Bench, Judicial District of Calgary, who delivered the following judgment on April 12, 1989:

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