Sumner v. PCL Constructors Inc., 2011 ABQB 20

Court of Queen ’ s Bench of Alberta Citation: Sumner v. PCL Constructors Inc., 2011 ABQB 20 Date: 20110112 Docket: 0503 17447 Registry: Edmonton Between: Melvin Sumner Plaintiff - and - PCL Constructors Inc. and PCL Employees Holding Ltd. Defendants _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice Don J. Manderscheid _______________________________________________________ I. Introduction.............................................................................................................. Page: 2 II.

Amendment of the Statement of Claim................................................................ Page: 3 A. BCA , s. 248 ................................................................................................ Page: 3 B. BCA , s. 242 - Oppression......................................................................... Page: 4 III. BCA , s. 242 Oppression Remedy....................................................................... Page: 5

IV. BCA , s. 248 Remedy............................................................................................. Page: 5 A. The Court’s Authority under BCA , s. 248 ................................................ Page: 7 1. BCA , s. 248 is Limited to Orders of Compliance and Prohibition Page: 7 2. BCA , s. 248 Cannot Lead to an Award of Damages................ Page: 9 3. A BCA , s. 248 Order Should Reflect PCLEH’s Intentions...... Page: 12 V. An Appropriate BCA, s. 248 Remedy............................................................... Page: 15 A.

Arguments on An Appropriate Order..................................................... Page: 16 1. Time is of the Essence................................................................ Page: 16 2. A Monetary Award is a Windfall for the Plaintiff........................ Page: 16 3. Unfairness to PCLEH, and Other Shareholders....................... Page: 17 4. The Plaintiff has Already Benefitted from the Share Repurchase Page: 17 B. At What Point Should the PCLEH Shares Purchase Have Occurred? Page: 18 VI.

Conclusion............................................................................................................ Page: 19 VII. Costs..................................................................................................................... Page: 20 I. Introduction [ 1 ] The Plaintiff, Melvin Sumner, is engaged in a legal dispute with his former employer, PCL Constructors Inc. (“PCL”), and a corporation, PCL Employees Holdings Ltd. (“PCLEH”) that owns PCL and its related corporations.

The Plaintiff sought an award for pay in lieu of notice, and also advanced a claim against PCLEH over the repurchase from the Plaintiff of shares in PCLEH. [ 2 ] These two claims were addressed in a five day trial in March, 2010. On August 23, 2010 I released a decision, reported as Sumner v. PCL Constructors Inc. , 2010 ABQB 536 , that addressed both claims.

While I resolved the claim in relation to the dismissal and appropriate notice period, I was unable to make any order in relation to the repurchase of the PCLEH shares, though I concluded that the repurchase which had occurred did not comply with the terms in the PCLEH Unanimous Shareholder Agreement [the “USA”] (trial decision, at paras. 177-182). [ 3 ] At trial the Plaintiff had sought damages for the share repurchase as a breach of contract, and that was the basis on which that element was argued.

However, the USA is not a contract, and therefore the arguments of the parties had no application to a failure of a corporation to conform to its constitutional documents (at paras. 201-204). [ 4 ] Prior to the August 23, 2010 judgment I invited submissions by the parties on what remedy may be available to the Plaintiff. The Alberta Business Corporations Act , R.S.A. 2000, c.

B-9 [the “ BCA ”] provided two potentially relevant provisions, the s. 242 “oppression” remedy, and a separate s. 248 authority for this Court to make an order where a corporation has not adhered to its constitutional documents, which includes a USA.

[ 5 ] I commented in the trial judgment at paras. 237-242 on the oppression remedy and concluded at paras. 241-242 that the pleadings did not disclose a foundation for a s. 242 oppression application. Therefore, no remedy was available on that basis.

However, I did conclude that the Plaintiff could make an application under BCA , s. 248 in response to my conclusion that PCLEH and its controlling minds had not followed the share repurchase procedure set out in the USA (trial judgment, at paras. 243-252). [ 6 ] The Plaintiff subsequently has applied for the following: 1. amendments to the Plaintiff’s Statement of Claim that would add a BCA , s. 242 oppression remedy; 2. amendments to the Plaintiff’s Statement of Claim that would add a BCA , s. 248 remedy; 3. an oppression remedy; and 4. a remedy under BCA , s. 248. [ 7 ] The Defendants resist those amendments that relate to the s. 242 oppression remedy, and argues no oppression remedy can be ordered as the Defendants have not had an opportunity to prepare and respond to that allegation.

In relation to BCA , s. 248, the Defendants take the position that no award of damages is possible under that provision, and that in any case the Plaintiff was not injured by the manner in which the PCLEH shares were (incorrectly) repurchased. [ 8 ] I will first address the proposed amendments, then turn to the question of what, if any remedy, may be appropriate. II. Amendment of the Statement of Claim A.

BCA , s. 248 [ 9 ] The Plaintiff proposes to add several paragraphs (paragraphs 15-18) to the Statement of Claim that essentially restate my conclusions in the trial decision that PCLEH had not complied with the terms of the USA during the share repurchase. I see no issue with those amendments, particularly given those were conclusions that I had reached in the trial judgment. [ 10 ] Amended paragraph 20 pleads relief under the BCA : 20. The plaintiff pleads the provisions of the Business Corporations Act, R.S.A. 2000, c.

B-9 and in particular ss. 242 , 248 and 249 . [ 11 ] While I see the amendment of the Statement of Claim to invoke BCA , s. 248 as perhaps being an unnecessary formality, I cannot identify any harm that would result from that amendment. The Defendants did not argue against the amended paragraphs 15-18, and paragraph 20 (less its reference to s. 242 ). I therefore will permit amendment of the Statement of Claim to make those additions. B. BCA , s. 242 - Oppression

[ 12 ] The Plaintiff now seeks to amend the Statement of Claim to seek a BCA , s. 242 oppression remedy. He asks to have a new paragraph added that alleges oppressive conduct: 19.

The Plaintiff says that the conduct of the Defendants was in breach of the Unamious [sic] Shareholder Agreement and was oppressive, unfairly prejudicial to the interests of the Plaintiff and unfairly disregarded the interests of the Plaintiff. [ 13 ] In the trial judgment I responded to an assertion by the Plaintiff that oppression was available as a remedy, and rejected that argument on the basis that the Defendants’ ability to respond would be unfairly impaired by their inability to address that allegation.

The most serious prejudice flows from difficulty in now arguing the factual basis of an oppression remedy: [240] However, the Defendants also argue that an oppression remedy is not available as oppression was not pled ... The Defendants stress the function of pleadings, that they provide the parties and the court with the scope of arguments and evidence involved in the proceeding, and on that basis set the limits for the parties preparations. [241] I agree .

The Statement of Claim alleges that the share repurchase was not authorized by the PCLEH USA, but not that the share repurchase was unfair or oppressive: While on disability leave, on or about May 16, 2002, PCLEH unduly, without colour of right and contrary to any contract or agreement between the parties, repurchased the PCLEH Shares (the “PCLEH Share Repurchase”) back from Melvin Sumner .

The PCLEH Share Repurchase caused a huge tax liability for Melvin Sumner and prevented Melvin Sumner from realizing future profits of $300,000 per year on the PCLEH Shares. [242] This paragraph of the Statement of Claim does mention a tax liability and future profit, but I conclude neither of these allegations suggest unfair or oppressive conduct. Tax liabilities are an ordinary and expected consequence of many transactions, including sale of capital property, and similarly a former shareholder has no right to expect dividends and bonuses.

These allegations relate to damages, not the intent of PCLEH . [Italics in original, underlining for emphasis.] [ 14 ] The Plaintiff’s argument, as I understand it, is that the current application to add an oppression remedy to the Statement of Claim no longer puts the Defendants at a disadvantage because the Defendants had the opportunity to make arguments concerning oppression in submissions provided to me after the court hearing. In the Plaintiff’s written brief the position was expressed in this way: 12.

I submit that the s. 248 and s. 242 amendments cause no prejudice to the Defendants because: a. they have been canvassed once in argument and a second opportunity arises as a result of this application, and b. no new evidence is being submitted. 13. In the circumstances the Defendants are not taken by surprise. [ 15 ] The Defendants respond that the trial decision has already addressed and rejected the oppression remedy as an option. That is my conclusion as well. I deny the Plaintiff’s application to add the new paragraph 19 to the Statement of Claim, and the reference in new paragraph 20 to BCA , s. 242. III.

BCA , s. 242 Oppression Remedy

[ 16 ] Since I have concluded that no amendment is possible to plead or otherwise advance a s. 242 oppression remedy at this point in the proceeding, there is no requirement that I address the arguments of the parties on this particular issue. [ 17 ] The Plaintiff had the right to structure and characterize its case against the Defendants. That is the function of pleadings. The manner in which the Plaintiff framed his case has eliminated any possibility to now advance a claim of shareholder oppression under BCA , s. 242. IV.

BCA , s. 248 Remedy [ 18 ] In the trial judgment I commented on the scope of BCA , s. 248, it’s function and purpose. The provision itself is quite simple.

Where a Court concludes that a corporation and/or its officers have not complied with the constitutional documents that govern corporate operation, a Court may compel activity or prohibit unauthorized action, and also make whatever other order it sees fit: 248 If a corporation or any shareholder, director, officer, employee, agent, auditor, trustee, receiver, receiver manager or liquidator of a corporation contravenes this Act, the regulations, the articles or bylaws or a unanimous shareholder agreement , a complainant or a creditor of the corporation may, in addition to any other right the complainant or creditor has, apply to the Court for an order directing that person to comply with, or restraining that person from contravening any of those things, and on the application the Court may so order and make any further order it thinks fit . [Emphasis added.] [ 19 ]

Section 248 has only rarely been used in Alberta, and that seems equally true for related provisions found in the federal and non-Alberta provincial corporate law legislation. Oppression remedies are far more common. I identified and reviewed a limited number of cases that had considered and/or applied s. 248 and its non-Alberta analogues at paras. 211-227.

The parties have not subsequently identified any additional relevant authorities. [ 20 ] The most substantial academic commentary on this provision is found in Bruce Welling, Corporate Law in Canada: Governing Principles , 3rd ed. (Mudgeeraba: Scribblers Publishing, 2006) at p. 529-532 (“Welling”): Compliance and restraining order sections provide shareholder access to judicial discretion whenever a breach (no matter how trivial) of the corporation constitution occurs. ...

The complainant must first prove that a breach of the statute, regulations under the statute, the articles, by-laws or a unanimous shareholder agreement occurred . The violation may be as momentous as the usurpation of the office of director by an outsider not elected by the shareholder or it may be as trivial as the failure to secure a seconder to a routine resolution passed at a shareholders’ meeting: the gravity of the breach is not material at this stage of the analysis. ... What remedies are available? The compliance and restraining order sections do not provide a list of examples.

The court is simply given statutory discretion to make any order it thinks fit in the circumstances . What type of judicial order ought to be made will vary in different situations. However, it seems clear from the broad access and

summary procedure involved that only certain types of orders are appropriate. For example, if a proxy form that did not conform to the statutory requirements had been distributed and the complainant showed that it inadequately provided for voter choice, a simple ruling would be made that no proper form had yet been distributed, leaving it up to the board of directors to distribute another form if they wished. If, however, the distribution of the improper form was

alleged to involve a breach of directors’ duty and some monetary loss to the corporation or its shareholders, a trial of the facts would be in order . ... [Citations omitted, emphasis added.] [ 21 ] The Plaintiff takes the position that since the PCLEH share repurchase has been completed, the remedy that is appropriate is to order a financial payment for any loss that has occurred to the Plaintiff from the unauthorized repurchase.

The Defendants, however, argue that result would exceed the authority provided the Court under s. 248 . [ 22 ] The Defendants have three principle arguments in relation to the s. 248 application: 1. the relief that can flow from s. 248 is restricted to orders that enforce compliance with corporate constitutional documents, 2. an order under s. 248 cannot result in an award of “damages”, and 3. the intention of PCLEH should be the basis on which any s. 248 remedy is ordered. [ 23 ] The first two arguments are interrelated as both involve the jurisdiction provided to the Court by BCA , s. 248, while the last argument instead focuses on how an order should be structured.

I will address these arguments in order. A. The Court’s Authority under BCA , s. 248 1. BCA, s. 248 is Limited to Orders of Compliance and Prohibition [ 24 ] The first argument by the Defendants is that s. 248 has a restricted application. Its function is to provide a Court with authority to instruct a corporation or other persons governed by that corporation’s constitutional documents to take certain steps, or to prohibit a corporation and other persons from taking certain steps.

The Defendants’ position is that s. 248 exists to provide a Court authority to order compliance with corporate constitutional documents. [ 25 ] The Defendants take the position that s. 248 thus has no application to past conduct, but can only be used to instruct compliance with corporate constitutional procedures. Since PCLEH has already repurchased the Plaintiff’s shares, s. 248 cannot be used to ‘unwind’ that purchase and order a new repurchase under different parameters.

The Defendants say s. 248 would only apply, for example, where PCLEH had never repurchased the Plaintiff’s PCLEH shares, and the Plaintiff now sought an instruction from the court that compelled PCLEH to make that purchase. [ 26 ] My conclusion is this argument is no different from one advanced by the Defendants in the post-trial submissions and which I addressed and rejected at paras. 243-246 of the trial judgment. Restating my analysis in that decision, the proposed

interpretation by the Defendants ignores the extremely broad authority provided by the Legislature in the language of s. 248 , where an authorized person may: … apply to the Court for an order directing that person to comply with, or restraining that person from contravening any of those things, and on the application the Court may so order and make any further order it thinks fit . [Emphasis added.] [ 27 ] Further, the

Interpretation Act , R.S.A. 2000, c. I-8, s. 10 states: 10 An enactment shall be construed as being remedial, and shall be given the fair, large and liberal construction and

interpretation that best ensures the attainment of its objects.

[28] Who here is the injured party? The Plaintiff who has been affected by a failure to follow the procedures set in a corporateUSA. The Defendants thus argue I ought to interpret s. 248 contrary to its express language and its presumed remedial legislativeobjective. [29] I disagree, and conclude that s. 248 simply means what it says.

A Court can indeed order compliance and/or prohibition, butalso can make whatever alternative or additional order the Court sees as necessary to fulfill BCA, s. 248’s remedial function. [30] I note that this broad authority is not unprecedented but is instead consistent with the remedial operation of the BCA.

BCA, s.242, the oppression provision, authorizes a court to issue seventeen different kinds of orders, but notably those are examples of the kindof relief which a court may direct in response to oppression: ... the Court may make any interim or final order it thinks fit including, without limiting the generality of the foregoing, any or all of thefollowing: [the enumerated example orders] [31] The “oppression” and “compliance” provisions thus provide the same remedies. They are distinguished by the criteria whichtriggers that remedy.

Section 242 addresses conduct which is “… oppressive or unfairly prejudicial to or that unfairly disregards …interests …”, while s. 248 cures unauthorized corporate activity. These are complimentary provisions that ensure corporations followtheir rules, and treat interested parties in a manner which is fair. [32] Again, restating my comments in the trial judgment, at its core Defendants’ position means a corporate actor can breach theterms of its articles of incorporation or a unanimous shareholder agreement, and fait accompli, deny any remedy to affected parties.

Inthe trial judgment I characterized that result as very problematic, and that remains my conclusion. [33] I am not alone on that point. Pandora Select Partners LP v. Strategy Real Estate Investments Ltd. (2007), (ON SC), 27 B.L.R. (4th) 299 at para. 13, 155 A.C.W.S. (3d) 1014 (Ont. Sup. Ct. J.) saw the Court conclude that the Ontarioequivalent to BCA, s. 248 provided the court authority to appoint an inspector as part of “... the extremely broad remedial discretionconferred upon the Court ...”. The New Brunswick Court of Appeal interpreted that province’s equivalent to BCA, s. 248 in a similarmanner in Carson v.

Carson, 2001 NBCA 105 at paras. 9-10, 244 N.B.R. (2d) 63: ... a court is granted not only power to direct a person to comply with or restrain from breaching the by laws of a corporation but also to"make any further order it thinks fit." ... Thus, the court is granted a wide discretion to make such orders where, as here, there has beennon compliance with a corporation's by law restricting a shareholder's right to transfer shares. [Emphasis added.] [34] Justice McIntyre at para. 35 adopts the

interpretation of s. 248 of Power J. in Caleron Properties Ltd. v. 510207 Alberta Ltd.,2004 SCC 61 , 243 D.L.R. (4th) 513: [Section 248] gives the court broad discretion to grant orders to ensure compliance with the Articles of a corporation or the provisions ofthe Act. [Emphasis added.] [35] Justice McIntyre’s approach to this provision has been subsequently endorsed in British Columbia: D&G Developments Ltd.v. Crystal Cove Beach Resorts Inc., 2006 BCSC 1432 at paras. 30-38, 274 D.L.R. (4th) 749, Davidson v.

FinancialCAD Corp., 2008BCSC 353 at paras. 35-41, 44 B.L.R. (4th) 70, affirmed 2009 BCCA 7, 264 B.C.A.C. 231, leave denied [2009] S.C.C.A. No. 102. [36] I have no difficulty in reaffirming my conclusion that the Defendants’

interpretation of s. 248 is incorrect. That provisionprovides the Court the authority to compel or inhibit unauthorized corporate conduct, and where necessary, take whatever additionalsteps are required to cure injuries that resulted from that unauthorized conduct.

2. BCA, s. 248 Cannot Lead to an Award of Damages [ 37 ] The Defendants argue that other provincial courts have concluded that “damages” are not available as a remedy under the equivalent to the Alberta BCA , s. 248. The key authority cited is a decision of the Newfoundland and Labrador Court of Appeal, American Reserve Energy Corp. v. McDorman , 2002 NFCA 57 , 217 Nfld. & P.E.I.R. 7 . Wells C.J.N. comments on the operation of Corporations Act , R.S.N.L. 1990, c. C-36, ss. 371 and 378 .

The former is the Newfoundland equivalent of the Alberta BCA , s. 242 oppression provision, while the latter has very similar language to BCA , s. 248. [ 38 ] The Defendants highlight paragraphs 28 and 37: [28]

Section 378 empowers a court to issue a restraining or compliance order to compel a corporation or a director, officer, employee, agent, etcetera, to comply with, or restrain from breaching, a provision of the Act, regulations, articles, by-laws or a unanimous shareholders agreement. It expressly authorizes a court to "so order and make a further order it thinks appropriate". In the context of

Part XVIII and the jurisprudence relating to the construction of such statutory provisions, s. 378 cannot possibly be interpreted as conferring jurisdiction to award damages, general or special . It simply gives the court power to make a "further order" necessary or appropriate to support its direct order to comply with or refrain from breaching the Act, regulations, articles, by-laws or unanimous shareholder agreement.

Therefore, if there is jurisdiction in the court, pursuant to the Corporations Act, to award damages of the nature of the damages which the trial judge awarded here, it can only be found in the provisions of s. 371. … [37] Thus, to the extent that the damages awarded by the trial judge were awarded by reason of his finding that the respondent is entitled to remedies pursuant to ss. 371 and 378 of the Corporations Act, authority to award such damages must be found in s. 371 of the Corporations Act, and the damages so awarded must be in conformity with the foregoing principles . [Emphasis added.] [ 39 ] The Defendants argue that this

interpretation of the jurisdiction provided by s. 248 means that no “damages” can be awarded under the “ … a further order it thinks appropriate” heading.

Therefore, even if the Court did conclude that the proper repurchase of the Plaintiff’s PCLEH shares would have resulted in the Plaintiff receiving a larger payment or other benefits with a monetary value, then those amounts cannot be ordered under s. 248 as those are “damages”. [ 40 ] There are a number of difficulties with this argument. [ 41 ] First, as I have reviewed at paras. 19, and 33-35, all commentators and Courts have concluded the “other remedy” provision in s. 248 and its non-Albertan equivalents means precisely what it says, and that a Court has an unrestricted authority to order whatever remedy, including a cash award, that it sees fit. [ 42 ] I emphasize how any other

interpretation would be absurd. What if, for example, a corporation was required by its articles to annually pay a dividend of a certain amount per share. Let us say a shareholder only detected that he had not been paid the full amount after a number of incomplete payments had occurred. It seems very strange that s. 248 would only allow a court to order that in the future the correct amount should be paid, but as for the past incomplete payments, tough luck. [ 43 ] A second issue is that the language of the Newfoundland s. 378 and the Alberta, s. 248 are different in a significant way:

Corporations Act , R.S.N.L. 1990, c. C-36, s. 378: … [a complainant may] apply to a court for an order directing a person to comply with, or restraining a person from acting in breach of, provisions of this Act, the regulations, articles, by-laws, or a unanimous shareholder agreement and upon the application the court may so order and make a further order it thinks appropriate. Business Corporations Act , R.S.A. 2000, c.

B-9, s. 248: … [a complainant may] apply to the Court for an order directing that person to comply with, or restraining that person from contravening any of those things, and on the application the Court may so order and make any further order it thinks fit. [Emphasis added.] [ 44 ] The language used by the Alberta Legislature in s. 248 is different and broader than that found in the equivalent Newfoundland legislation, “ … any further order … ” rather than “ … a further order … ”.

Since the Newfoundland Court of Appeal’s reasoning is that all remedies available in the “Civil Remedies” part of the legislation are the same, the different language in the Alberta legislation, “any other”, suggests no such restriction ought to be inferred. [ 45 ] A third issue with the Defendants’ argument flows from the nature of the matter heard by the Newfoundland Court of Appeal in American Reserve Energy Corp. v. McDorman . That case involved actions of a corporate officer which were both oppressive and also constituted the tort of civil conspiracy (para. 16).

One issue for the Newfoundland Court of Appeal was whether a damages award could be supported by either or both of the ‘tortuous’ and ‘oppressive’ misconduct. [ 46 ] Chief Justice Wells reviews Canadian jurisprudence which comments on the kinds of remedies that may be available under corporation legislation (paras. 27-37) and concludes that there are certain restrictions on those remedies, specifically: [36] … the jurisdiction of a court is limited to making only such orders as may be necessary to rectify the matters complained of.

Even that level of intervention is to be further limited to matters complained of in the complainant's capacity as a shareholder, creditor, director or officer of the corporation.

Finally the remedy is to be determined in a manner consistent with the reasonable expectations of the complainant, flowing from the original business relationship, and the remedy must not be unjust to the others involved. [ 47 ] The Court continues to conclude (unsurprisingly) that an award of damages is possible for the tort of civil conspiracy (paras. 38-39), and determines at para. 52 that an award of $99,000.00 is appropriate under the Newfoundland Corporations Act , s. 371 (oppression) heading: … in respect of the "outlays, costs and expenses" incurred by the respondent in connection with the U.S. action taken to restrain and seek correction of the matters complained of in the statement of claim. [ 48 ] In short, the Newfoundland and Labrador Court of Appeal did not conclude that an award of monies was impossible under the oppression remedy (and also the s. 248 equivalent), but rather that “damages” could not be awarded which did not flow specifically from misconduct in the corporate setting.

Wells C.J.C.’s comments at para. 53 clearly refer to ‘double recovery’, the plaintiff could not recover for an injury under an oppression remedy, then recover again for that same injury under the tort heading: … The damages must be the specifically calculated compensation necessary, and must be only the compensation necessary, to "rectify the matters complained of".

The damages awarded by the trial judge, in addition to the overall remedies necessary to rectify the matters complained of by the respondent, exceed the proven loss in respect of the matters complained of by at least $451,000.00. [Emphasis in original.]

[ 49 ] In American Reserve Energy Corp. v. McDorman , the plaintiff had sought a range of damages, including punitive damages. My conclusion is that what the Newfoundland Court of Appeal is indicating is that the Newfoundland Corporations Act does not provide an authority to claim damages that are greater than what would compensate an affected person for their provable loss. A ‘corporate’ remedy would not extend into awards for things such as pain and suffering, or punitive damages.

Notably, compensation is emphasized when Chief Justice Wells cited the Newfoundland equivalent to s. 242 at para. 30. [ 50 ] If I am incorrect on that point, then I decline to follow the statement of the Newfoundland Court of Appeal in American Reserve Energy Corp. v. McDorman at para. 28 . I conclude that an award of money is possible under BCA , s. 248 where an applicant has proven it suffered financial loss as a consequence of non-compliance with corporate constitutional documents. 3.

A BCA, s. 248 Order Should Reflect PCLEH’s Intentions [ 51 ] The last argument advanced by the Defendants is though I found that PCLEH had not properly followed the procedures in the USA during its repurchase of Sumner’s PCLEH shares (trial decision, paras. 177-182), that I should look past that error to see what PCLEH and its officers had intended to do. Yes, they did not follow the correct procedures, they acted prematurely, but their intention was clear.

Once the Plaintiff was disabled and unable to work for the requisite period, PCLEH would repurchase his shares as valued under the USA. [ 52 ] The crux of this argument is that while PCLEH did things wrong, that if the same intention had been followed and the corporation and its officers had followed the correct procedures, the result of the purchase would be the same. The Plaintiff’s shares would have been repurchased a little while later (46 days), and since no dividends, bonuses, or share price changes occurred during that period, the Plaintiff would have received the same compensation.

In short, the Plaintiff was not injured by the failure to adhere to the terms of the USA. [ 53 ] The Plaintiff raises a valid argument in response, the procedurally correct repurchase scenario advanced by PCLEH is purely a hypothetical one, and it is not the only possible outcome. On January 4, 2002, the Plaintiff was unable to work due to his medical condition. Sometime in the next several years he recovered to the point that he could work. We have no definitive evidence of when that recovery occurred, but it clearly did happen.

Had Sumner been properly informed of his right to challenge his allegedly disabled status at the end of the USA clause 6.01.01(a)(iii) six month period, a medical examination may have found him able to return to work. Why should the Plaintiff’s lost opportunity to avoid the share repurchase be subordinate to PCLEH’s alleged intentions and factually defective execution of that intention? [ 54 ] I agree with the Plaintiff that the share repurchase was not a certainty even had PCLEH followed the appropriate procedure in its attempt to repurchase the Plaintiff’s shares.

Arguably, I could attempt to balance the probability of whether Sumner could have successfully resisted the share repurchase, and the Defendants ask me to do just that. There are, however, problems with that approach. [ 55 ] First, the Defendants argue PCLEH’s intention is clear; it wanted to repurchase the Sumner shares.

However, the defective share repurchase was not merely a question of procedural error or accident, PCLEH’s officers and board went further, and failed to disclose their unauthorized actions: 1. the letter ordering the Plaintiff to sell his shares to PCLEH was sent almost month before the PCLEH Board met and voted to have those shares repurchased (trial decision, para. 158); 2. the premature repurchase order was followed by a Board meeting and resolution to repurchase the Plaintiff’s shares, but without explanation and contrary to PCLEH procedure the Plaintiff was never served with the resolution (trial decision, para. 179). [ 56 ] At trial PCLEH’s witness, Mr.

Stalenhoef, was unable to provide an explanation for why these events transpired as they did. That person was forthright and acknowledged that the correct procedure had not been followed. That said, the unauthorized character of the repurchase was only identified by the Plaintiff during review of documents produced during discovery. I find as fact that PCLEH’s

officers and directors were well aware that the Sumner share repurchase had not been conducted according to the USA procedure, andthat those persons did not disclose that fact to Sumner. [57] The Alberta Court of Appeal has expressly indicated in Seidel v. Kerr, 2003 ABCA 26 at para. 35 that the s. 242 oppressionremedy has its roots in equity.

I have concluded that a s. 248 order is not limited to an equitable result, but that equitable principles arerelevant in its operation (trial decision, at para. 227): [227] The element of “fairness” is not echoed in BCA, s. 248, and I agree with Welling that s. 248’s chief role is to allow a court toorder strict compliance with a corporation's constitution.

That is not to say that a court order under BCA, s. 248 should disregardequitable principles, rather a remedy under BCA, s. 248 need not strictly parallel the principles applied when ordering a remedy foroppressive conduct. [58] One principle of equity is very relevant to PCLEH’s argument concerning its intentions, what is often called the “cleanhands” principle: “he who comes to equity must come with clean hands”: Hanbury & Martin Modern Equity (17th ed. 2005), at paras.1-024 to 1-036, and I. C. F.

Spry, The Principles of Equitable Remedies: Specific Performance, Injunctions, Rectification and EquitableDamages (6th ed. 2001), at p. 6). PCLEH says it erred but that error was innocent. I disagree. The officers of PCLEH were quite wellaware the Sumner share repurchase was not conducted properly. Those persons then failed to disclose that fact to the Plaintiff. [59] That was not an accident but a choice, and a choice which was in breach of a very strict duty.

Historically, common-lawCourts have concluded that an officer or director of a corporation has no fiduciary duty to a shareholder and that shareholder’s interests.That principle makes perfect sense when one recognizes that an action which benefits a corporation may have deleterious consequencesfor one or more of its shareholders. Conventionally, a director or officer’s principle loyalty is to the corporation. [60] Nevertheless, there are a number of well developed exceptions to that general principle. The keystone English case, Percivalv.

Wright, [1902] 2 Ch. 421 (H.L.), identifies three instances where a corporate director owes a fiduciary duty to a shareholder; where adirector: 1. acts as an agent of a minority shareholder; 2. buys shares from a minority shareholder; 3. has been dishonest with or has mislead a minority shareholder. I note that in subsequent development potentially broader director liability has been recognized, see for example the reviews in VladiPrivate Islands Ltd. v. Hasse (1990), (NS CA), 96 N.S.R. (2d) 323, 20 A.C.W.S. (3d) 201 (N.S.S.C.(A.D.));Hardman Group Ltd. v. Alexander, 2003 NSSC 59, 212 N.S.R. (2d) 304; Weiss v.

Schad, [1999] O.J. No. 4356 (QL), 93 A.C.W.S. (3d)72 (Ont. Sup. Ct. J.), affirmed (ON CA), 161 O.A.C. 137, 114 A.C.W.S. (3d) 648 (Ont. C.A.). [61] The general principle in Percival v. Wright and its exceptions are generally accepted in Canadian law, see for example:Multiple Access Ltd. v. McCutcheon, (SCC), [1982] 2 S.C.R. 161, 138 D.L.R. (3d) 1; Tongue v. Vencap EquitiesAlberta Ltd. (1994), (AB KB), 148 A.R. 321, 17 Alta. L.R. (3d) 103 (Alta. C.A.), affirmed on other grounds (1996),1996 ABCA 208 , 184 A.R. 368, 39 Alta. L.R. (3d) 29 (Alta. C.A.).

The third fiduciary duty, to not mislead, was re-affirmed inDusik v. Newton (1985), (BC CA), 62 B.C.L.R., 131 A.C.W.S. (2d) 199 (B.C.C.A.). [62] In the present matter, PCLEH’s directors and officers breached their fiduciary duty when they failed to promptly disclose thatan incorrect procedure had been followed to repurchase Sumner’s shares. They were dishonest and misled a minority shareholder.

Thatalone is an adequate basis for me to conclude that I should not give effect to PCLEH’s claimed intention. [63] To be clear, my conclusion would be very different had PCLEH simply taken steps to properly inform Sumner that hisoriginal notice to repurchase was premature, and make him aware of his rights. Had a defect occurred in that setting, then I would haveno hesitation to give full effect to PCLEH’s intentions.

[ 64 ] I conclude that a fair and just result would not be obtained by giving effect to PCLEH’s alleged intentions where PCLEH and its officers have breached their fiduciary duty to not mislead a shareholder, the Plaintiff. Accordingly, I will not value the repurchased shares on the basis of a procedurally and temporally correct application of the USA special withdrawing shareholder procedure. V.

An Appropriate BCA , s. 248 Remedy [ 65 ] I have concluded that in the present case: 1. that BCA , s. 248 is available, 2. the Plaintiff has suffered an injury that cannot be remedied simply by a declaration under s. 248 , and 3. I am not prohibited from making an order that involves monies. [ 66 ] My next step is to determine what that order should be. This is an instance where a simple declaration to comply or restrain corporate conduct is not adequate to remedy the injury suffered by the Plaintiff, so this Court will have to go further and “make any further order it thinks fit”.

The objective, as I have previously explained, is to take steps that will cure the deleterious effects of PCLEH’s unauthorized actions on the Plaintiff. [ 67 ] As I noted in the trial judgment, BCA , s. 248 and its equivalents in other jurisdictions have been rarely applied. As a consequence, there is very little legal precedent for this kind of order. A. Arguments on An Appropriate Order [ 68 ] The parties made some comments on what kind of order would be appropriate in these circumstances. 1.

Time is of the Essence [ 69 ] There was some argument between the parties on the relevance of a ‘time is of the essence’ clause in the USA. I will not comment at length on those arguments as I consider them irrelevant. My task in responding to a BCA , s. 248 application is to cure any injury suffered by the applicant that flowed from unauthorized corporate activity, specifically PCLEH taking ownership (repurchasing) shares held by a shareholder. [ 70 ] So the situation here is that a party (the corporation) holds property that ought to belong to another (the shareholder).

The injury is therefore entirely outside the scope and context of the USA and its terms, including the ‘time is of the essence’ clause. 2. A Monetary Award is a Windfall for the Plaintiff

[ 71 ] The Defendants argue if I were to award any amount to the Plaintiff then that would be a windfall for the Plaintiff. I disagree. Succinctly, PCLEH unlawfully took possession of some of the Plaintiff’s property. If that denied the Plaintiff a direct benefit, then the Plaintiff is owed some kind of compensation for that deprivation. [ 72 ] The Plaintiff has identified the nature of that lost benefit. Sumner did not receive a number of bonuses and dividends that were received by other PCLEH shareholders. The PCLEH shares also changed in value after the repurchase occurred.

If Sumner was owed any of those amounts, then an award of those lost sums would not be a windfall. 3. Unfairness to PCLEH, and Other Shareholders [ 73 ] The Defendants argue that a key operational principle is that any order under s. 248 should be fair to all parties, and that an award of money to Sumner would have an unfair effect.

This argument seems to be in response to the Plaintiff’s allegation that PCLEH “reaped a substantial benefit” from its breach of the USA, and that PCLEH should not be allowed to retain this unlawfully obtained benefit. [ 74 ] The Defendants take the position that PCLEH received no direct benefit as the share repurchase meant that the bonuses and dividends that would have been received by the Plaintiff were simply divided among the other remaining shareholders. PCLEH therefore has not been enriched by its unauthorized conduct.

Further, it would be wrong to make an order that would injure those innocent shareholders. [ 75 ] Assuming that the Defendants are correct that PCLEH did not receive any direct benefit, I note that the corporation nevertheless received a very real indirect benefit. Its shares became that much more desirable as the shareholders received a greater benefit from their shares. PCLEH came out ahead as a more attractive investment. [ 76 ] The special character of the PCL family of corporations makes that advantage just that much more significant.

PCLEH owns the PCL family of corporations, and PCLEH itself is owned by employees of the PCL corporations. This shareholder/employee structure can be very attractive for certain employees, so larger dividends and bonuses also assists PCL’s efforts to attract and retain desirable and skilled employees. That is a significant marketplace advantage. [ 77 ] As for the argument that only innocents will be harmed, those innocents nevertheless are in possession of property that belongs to someone else.

Any award I might make to Sumner will most likely mean the PCLEH owners receive a smaller dividend or bonus at some future date. In effect that balances out their ‘windfall’ from Sumner’s unlawful PCLEH share repurchase. 4. The Plaintiff has Already Benefitted from the Share Repurchase [ 78 ] As I understand their submissions, the Defendants argue that Sumner ought not receive compensation via s. 248 for the unauthorized share repurchase as he already received the benefits that flowed from the payment for his shares.

If I had accepted the Defendants’ argument that PCLEH’s intention should be given effect, then that would be a reasonable conclusion. In that scenario Sumner had not been injured. [ 79 ] However, if I do conclude that Sumner had been deprived appropriate compensation in some manner, then the fact he has received some of what he is due does not eliminate his right to the total amount. It is not simply that Sumner has not benefited, but rather that he has a right to benefit in full for his ownership of the PCLEH shares.

B. At What Point Should the PCLEH Shares Purchase Have Occurred? [80] Since I have concluded above that PCLEH’s intention to repurchase should not be given effect, the question naturally arises:at what point in time does the Plaintiff’s right to the PCLEH shares end? That point would also mark the end of any lost benefits. [81] The Plaintiff has argued and I accept that Sumner would have preferred to not sell his shares.

That preference is objectivelyreasonable, as ownership of those shares would have entitled Sumner to an ongoing and substantial flow of benefits. [82] I have concluded that PCLEH’s alleged intention to repurchase the shares on the basis of Sumner’s disability should not begiven effect. [83] The Plaintiff suggests two dates for when Sumner’s right to the shares would end: 1. at the point that Sumner’s pay in lieu of notice period ended (April 6, 2007: trial judgment, at para. 50); or 2. on March 30, 2007, as the Plaintiff had become a “Retiring Shareholder”. [84] The first alternative flows from the Alberta Court of Appeal judgment of Holmes v.

PCL Construction Management Inc.(1994), 1994 ABCA 358 , 157 A.R. 306, 26 Alta. L.R. (3d) 1 (Alta. C.A.): 18 In respect of dividends, counsel for Holmes submits that Holmes is entitled to that portion of the 1989 dividends which weredeclared subsequent to the notice period, but accrued within the notice period. We do not agree. No dividends are payable until declaredby the company. Dividends are then payable to shareholders who hold shares at the time the dividend is declared or at the date fixed bythe company pursuant to the Business Corporations Act. Nothing in the evidence or the agreement suggests otherwise.

The learned TrialJudge allowed Holmes' claim for the dividend which was declared and paid in February 1989, during the reasonable notice period. Heproperly did not allow any further amount. 19 Regarding the value of the shares, the learned Trial Judge found that the value of the shares increased by $8,000 in February,1989, a date which falls within the reasonable notice period. He correctly awarded the benefit of this increase (less reasonable interest onthe purchase price of the shares) to Holmes.

He correctly refused to grant any amount for any additional increase in the value of theshares. ... [Emphasis added.] [85] Holmes v. PCL Construction Management Inc. indicates Sumner is owed any dividends, bonuses, and benefits that hewould have received as a shareholder between the date of the repurchase and the end of the notice period. [86] The second alternative suggested by the Plaintiff involves provisions of the USA which automatically lead to the repurchaseof shares held by any employee who reached 64 years of age.

The relevant USA provisions, clauses 7.01.01, 7.02.01 require repurchaseof any outstanding shares 150 days after the end the PCLEH financial year in which a shareholder turned 64. [87] The Defendants do not challenge the Plaintiff’s

interpretation of these USA provisions, nor do they offer any reason why therules stated in Holmes v. PCL Construction Management Inc. would not apply to the present scenario. [88] Coincidentally, the two methods result in Sumner not having received the same cash amount as a consequence of the

premature dispossession of his PCLEH shares; the period includes the very same bonuses, dividends, and the shares end with the same value.

The parties do not seem to dispute that fact, and agree that the additional cash amount that Sumner would have received for his shares is $1,493,100.00. [ 89 ] I think both proposed dates on which the Plaintiff no longer had a right to the PCLEH shares are potentially appropriate, however I prefer the March 30, 2007 for two reasons: 1. that date is the earlier of the two, and 2. that endpoint is the consequence of a clear and explicit USA mechanism whose application is not in dispute. [ 90 ] If I am wrong that is the appropriate point at which to assess the end of Sumner’s lost benefit, then I would have no difficulty concluding the April 6, 2007 date also provides an appropriate basis for my order to cure the Plaintiff’s injury.

VI. Conclusion [ 91 ] I therefore conclude that the appropriate order under BCA , s. 248 to address the breach of the PCLEH USA and the unauthorized repurchase of the Plaintiff’s PCLEH shares is that the Plaintiff receive from PCLEH a payment of $1,493,100.00. Interest shall be paid on the net judgment amount pursuant to the Judgment Interest Act , R.S.A. 2000, c. J 1 and amendments thereto, from March 30, 2007, the date at which the Plaintiff’s loss crystallized, to the date of this Judgment. VII.

Costs [ 92 ] If the parties cannot agree on costs, they can be spoken to within 30 days of the date of this Judgment. Heard on the 30th day of November, 2010. Dated at the City of Edmonton, Alberta this 12 th day of January, 2011. Don J. Manderscheid J.C.Q.B.A.

Appearances: Dennis Groh, Q.C. Randall C. Heil Professional Corporation for the Plaintiff Fred Kozak, Q.C. and Jeremy Taitinger Reynolds Mirth Richards & Farmer LLP for the Defendants