2012 QCCA 1682, 2012 QCCA 1682

Hollinger c. Hollinger 2012 QCCA 1682 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No: 500-09-022126-114 (500-11-021834-037) MINUTES OF THE HEARING DATE: September 21 st , 2012 CORAM: THE HONOURABLE YVES-MARIE MORISSETTE, J.A. JACQUES R. FOURNIER, J.A. MARIE ST-PIERRE, J.A. APPELLANT ATTORNEY(

S) SARAH KOPYTO HOLLINGER Mtre Doug Mitchell Irving Mitchell Kalichman sencrl/llp RESPONDENTS ATTORNEY(

S) LISA FRAN HOLLINGER LISA FRAN HOLINGER, ès qualités of liquidator of the estate of Martin Hollinger Mtre Max R. Bernard HEENAN BLAIKIE SENCRL/SRL IMPLEADED PARTIES ATTORNEY(

S) MICHAEL PRADOS HOLLINGER ANDREY JUNE HOLLINGER ROBERT TORRALBO BARBARA RUTH HOLLINGER Mtre Sandra Mastrogiuseppe DAVIES WARD PHILIPS & VINEBERG S.E.N.C.R.L., S.R.L. Me George G. Sand (absent) On appeal from a judgement rendered on September 26, 2011 by the honourable Chantal Corriveau of the Superior Court, district of Montreal. Nature of the appeal : Winding-up order and order of appointment of a liquidator Clerk: Marie-Laurence Brunet Court Room: Pierre-Basile-Mignault HEARING Hearing continued from September 18, 2012 for judgement. The parties were not required to be present.

For judgement – see following pages. Marie-Laurence Brunet Clerk BY THE COURT JUDGEMENT [ 1 ] Sarah Kopyto Hollinger (“the Appellant”) appeals from a judgment rendered on September 26, 2011, by the Superior Court, district of Montreal (the Honourable Madam Justice Chantal Corriveau). By this judgment, the Court declined to grant the order sought by the Appellant. [ 2 ] The Appellant had asked that, pursuant to s. 217 (

h) of the

Canada Business Corporations Act [1] (“ CBCA ”), a provision be made

on the occasion of the liquidation of 157198 Canada Inc. (“the Company”) to protect her interests under a unanimous shareholders’ agreement (“the agreement”) entered into by the Company’s shareholders. [ 3 ] The Appellant contends that this judgment rests on an erroneous

interpretation of s. 217 (

h) of the CBCA . According to her, the judge misconstrued the provision, as if it only applied to present or future obligations, and she overlooked the possibility of making a provision for the discharge of a contingent obligation. [ 4 ] The Appellant argues that her reasonable expectation of financial security under the agreement is being curtailed: the agreement provides for financial support in the event of future needs, with no obligation on her part to prove needs or to establish their quantum.

She claims she has the right under the agreement to determine her own financial requirements and to receive unlimited dividends at any time and in her absolute discretion. [ 5 ] Given the words «may» and «make any order it thinks fit» used by Parliament in s. 217 of the CBCA , the Respondent argues that the Act grants a discretionary power to the court to decide, in equity, whether or not any order should be made for the discharge of the Company's obligations. [ 6 ] The Respondent further argues that a need for funds is a prerequisite to the exercise of the Appellant's rights under the agreement, whose language is very general and uses the words « may require funds » and « should she still require funds » in its second clause. [ 7 ] The Respondent emphasises that, according to the uncontested evidence heard below: • the Appellant was 74 years of age at the time of the hearing; • she had never lacked funds to provide for all her needs; • she had never exercised the right to sell any of her class D shares under clause 2 (

a) of the agreement since its signature in 1997; • she never was in need to exercise the right to sell any of her class D shares under

article 2 (

a) of the agreement since its signature in 1997; she would receive close to 1.2 million $ from the liquidation of the Company, to add to her other assets of more than 4.6 million $ and to her annual income of 228 034,00 $ (as of 2009), the control of which rests in her hands. [ 8 ] In light of the specific facts and circumstances of the case, the Respondent concludes that the judge exercised her discretion judicially and judiciously and that, absent any palpable and overriding error of fact, our Court should not intervene. [ 9 ] S. 217 (

h) of the CBCA reads as follows: 217 . In connection with the dissolution or the liquidation and dissolution of a corporation, the court may , if it is satisfied that the corporation is able to pay or adequately provide for the discharge of all its obligations, make any order it thinks fit including, without limiting the generality of the foregoing. (…) (

h) an order approving the payment, satisfaction or compromise of claims against the corporation and the retention of assets for such purpose , and determining the adequacy of provisions for the payment or discharge of obligations of the corporation, whether liquidated, unliquidated, future or contingent; ( Emphasis added ) [ 10 ] As for the agreement, it reads in its entirety, as follows: July 23, 1997 We, the undersigned, being all shareholders of 157198 Canada Inc. (the "CORPORATION") hereby agree as follows: 1.

Lisa Hollinger, Michael Hollinger, Barbara Hollinger and Andrey Hollinger (hereinafter collectively referred to as the "CHILDREN") acknowledge that, in the past, Sarah Hollinger has conveyed shares in the capital stock of family companies to us and has also frozen her interest in various family companies, the whole to the benefit of the CHILDREN; 2. The CHILDREN further acknowledge that, in the future, Sarah may require funds on an ongoing basis. The CHILDREN hereby consent and agree to the following procedures:

(

a) at any time or times, Sarah may enter into an agreement or agreements with the CORPORATION pursuant to which she shall sell such number of Class D preferred shares of the CORPORATION to the CORPORATION for cancellation as she desires; the CHILDREN acknowledge that such sales are more favourable to the CHILDREN than the receipt by Sarah of dividends on the said Class D preferred shares; (

b) should all of Sarah's Class D shares have been cancelled and should she still require funds, the CHILDREN hereby consent and agree that all corporate procedures be adopted to amend the charter of the CORPORATION to authorize a class of preferred shares which will have a nominal redemption value, but a right to unlimited dividends; Sarah shall subscribe for a nominal number of such newly authorized shares at a nominal subscription price and shall thereafter be entitled to receive such dividend or dividends, at such time or times, as she may decide in her absolute discretion; (

c) the CHILDREN agree to sign any and all corporate and other documentation required to implement the foregoing and hereby irrevocably appoint Sarah as their proxy to sign such documentation. The parties acknowledge that they have required and consented that this agreement be drawn up in the English language.

Les parties reconnaissent avoir exigé que la présente convention soit rédigée en anglais. (Emphasis added) [ 11 ] We cannot accept the Appellant's submission that the agreement would give her an unconditional right to claim funds, at her own and sole discretion, and with no obligation to establish, or even allege, a need. [ 12 ] To provide for the Appellant's future needs, clause 2 of the agreement establishes a two steps formula: 1. First step –

section (a) : the Appellant can sell to the Company such number of her class D shares as she desires; 2. Second step –

section (b) : should all Appellant's class D shares be sold, and should she still require funds, the creation of a new category of preferred shares to provide her with a right to unlimited dividends becomes possible. [ 13 ] In such a framework, it is obvious that the words «require» and «still require» mean need, not just want. [ 14 ] Therefore, one must dismiss the suggestion that the judge should have contemplated that the reasonable expectations of the signatories of the agreement included the possibility for the Appellant to exercise rights under clause 2 of the agreement even in the absence of any need for funds. [ 15 ] S. 217 of the CBCA grants Courts broad discretionary powers in the liquidation process, including the power to make provisions for the payment of liquidated, unliquidated, future or contingent obligation of the corporation. [ 16 ] The judge did not fail to recognize that s. 217 (

h) of the CBCA allowed her to make a provision. In paragraphs 104 to 112 of her judgment, she expressly acknowledges that she has a discretion in that regard, despite the fact that the liquidation of the Company is not a scenario contemplated in the agreement. [ 17 ] The judge did not conclude that there was a legal impediment to the making of an order.

While she accepted that an order could be made in theory, she concluded that it should not be made in the particular circumstances of the case and in light of the reasonable expectations of the Appellant. [ 18 ] The Appellant offered no evidence whatsoever of possible future needs.

Indeed, the evidence leads to the conclusion that it can be reasonably anticipated that she will not require funds since she ought be perfectly able to provide for all her future needs, whatever they may be. [ 19 ] The facts establishing that in the future, and in all likelihood, the Appellant would not need funds to attend to her needs, as noted by the judge in paragraphs 98 to 100 of her judgment, provided the backdrop against which she had to exercise her discretion and she acted accordingly.

[ 20 ] In light of the above, we have no hesitation to conclude that the trial judge exercised her discretion both judicially and judiciously. [ 21 ] The appeal is therefore dismissed with costs. YVES-MARIE MORISSETTE, J.A. JACQUES R. FOURNIER, J.A. MARIE ST-PIERRE, J.A.