2021 QCCA 708, 2021 QCCA 708

3903460 Canada inc. c. Elphin inc. 2021 QCCA 708 COUR D'APPEL CANADA PROVINCE DE QUÉBEC GREFFE DE MONTRÉAL N o : 500-09-029407-210 ( 500-11-056181-197, 500-11-056186-196 ) PROCÈS-VERBAL D'AUDIENCE DATE : Le 23 avril 2021 L’HONORABLE STEPHEN W. HAMILTON, J.C.A. PARTIES APPELANTES AVOCATE 3903460 canada inc. jean-luc lavergne Me Janet Michelin ( IMK ) Absente PARTIES INTIMÉES AVOCATS elphin inc. anne-marie chronas Me Éric Lalanne M e Antoine Turbide-Bédard ( De Granpré Chait ) Absents PARTIES MISES EN CAUSE charles mickie nu-b inc. ABSENTS ET NON-REPRÉSENTÉS DESCRIPTION : Requête pour exécution provisoire (Art. 661 C.p.c .) . Greffière-audiencière : Mélanie Camiré Salle : Louis-H.-Lafontaine

AUDITION Continuation de l'audience du 20 avril 2021. Les parties ont été dispensées d’être présentes à la Cour. PAR LE JUGE : Jugement – voir page 3.

Mélanie Camiré, Greffière-audiencière JUGEMENT [ 1 ] The Respondents seek the provisional execution of the judgment rendered on February 11, 2021, by the Superior Court, District of Montreal (the Honorable Brian Riordan). [1] [ 2 ] In the context of a dispute between the two shareholders of the Mis en Cause company, the judge found that the Appellants were in breach of their obligations under the Unanimous Shareholder Agreement and declared that the Respondents had the right to purchase the shares held by the Appellants for a price of $147,097.95, which represents 10 % of the Fair Market Value [2] of those shares, the whole pursuant to

Section 6.6 of the Unanimous Shareholders Agreement. He set out in his judgment the mechanics for the sale. He did not order provisional execution notwithstanding appeal. [ 3 ] The Appellants filed a notice of appeal in which they raise various grounds of appeal. They ask that the Court find that the Respondents acted in an oppressive manner and that, as the remedy, the Respondents be ordered to purchase the shares of the Appellants at their fair value, as determined by an independent Chartered Business Valuator named by the Court.

There are subsidiary conclusions asking for the dissolution of the company or a forced arbitration for the purposes of making a forced shotgun offer. [ 4 ] In their motion for provisional execution, the Respondents argue that the appeal is weak and has little chance of success. They also state that they have a new strategic plan for the company which involves a $40 million expansion to take advantage of new demand for polyethylene terephthalate, the product manufactured by the company.

They allege that they will not be able to convince institutional investors to finance these expansion plans as long as the shareholdings in the company remain litigious and uncertain, because such investors will require subordination of shareholder loans and possibly personal guarantees from the shareholders. They argue that the Appellants suffer no prejudice because they want to sell anyways and the only dispute is in respect of the price. [ 5 ] The Appellants contest the motion and argue that the Respondents’ allegations do not rise to the standard of “serious or irreparable prejudice” required by

Article 661 C.C.P. and the Court’s jurisprudence. [ 6 ] I agree that the allegations of prejudice are not particularly convincing and may fall short of what the Court has required in other cases. [3] However, the context here is very different. Both parties argue that the Respondents should purchase the shares, albeit for different reasons and for a very different price.

Further, it is not unreasonable to conclude, despite the limited proof offered by the Respondents, that the presence of the Appellants as 50 % shareholders and directors of the company will make it more difficult for the company to obtain financing and to carry on its operations. There is a great potential for problems and further litigation.

Moreover, the Respondents have no legitimate interest in remaining shareholders and directors of the company during the appeal, except as a way to guarantee payment of the price. [ 7 ] I am therefore going to order the provisional execution of the judgment, such that the Respondents will be allowed to purchase the Appellants’ shares for $147,097.95 pursuant to the mechanism set out in the judgment. [ 8 ] My judicial discretion should be exercised in a way that does not disrupt the balance between the interests of the Appellants, who have a right to appeal, and the interests of the Respondents, who benefit from a judgment presumed to be valid. [4] In this case, it would not be fair to simply order provisional execution of the judgment, such that the Appellants would receive $147,097.95 for their shares and be left with an unsecured claim for any additional amount that the Court might order the Respondents to pay.

I have the power to make provisional execution conditional on the Respondents providing security. Both parties confirm that there were offers made by each party in the fall of 2018 which valued a 50% interest in the company at $3.5 to $4.5 million.

Taking that to be an indication of the fair market value of the shares in the fall of 2018, I will make provisional execution conditional on the Respondents providing an irrevocable letter of credit or other guarantee acceptable to the Appellants in the amount of $4 million which the Appellants can draw on in the amount that the Court may order the Respondents to pay for the Appellants’ shares (less the amount of $147,097.95 that will be paid pursuant to the provisional execution).

FOR THESE REASONS, THE UNDERSIGNED: [ 9 ] ORDERS the provisional execution of paragraphs 118 to 125 of the judgment rendered on February 11, 2021, by the Superior Court, District of Montreal (the Honorable Brian Riordan), provided that the Respondents provide within 60 days of the present judgment an irrevocable letter of credit or other guarantee acceptable to the Appellants in the amount of $4 million which the Appellants can draw on in the amount that the Court may order the Respondents to pay for the Appellants’ shares (less the amount of $147,097.95 that will be paid pursuant to the provisional execution).

The delay of 30 days set out in paragraph 120 of the judgment will run from the day that the Respondents provide the letter of credit or other guarantee; [ 10 ] ORDERS that the Superior Court be seized of the file in regard to any difficulties relating to the provisional execution of the judgment or any dispute relating to the sufficiency of the letter of credit or other guarantee provided by the Respondents; [ 11 ] THE WHOLE, with judicial costs to follow the appeal. STEPHEN W. HAMILTON, J.C.A.