PAMELA EGGER, CHERYL EGGER, DEAN EGGER, KYLE EGGER, R. TODD EGGER, EGGER HOLDINGS LTD., ROGER EGGER v. CHUAN NG,, 2022 SKKB 249

KING’S BENCH FOR SASKATCHEWAN Citation: 2022 SKKB 249 Date: 2022 11 18 Docket: QBG-SA-00235-2022 Judicial Centre: Saskatoon BETWEEN: PAMELA EGGER, CHERYL EGGER, DEAN EGGER, KYLE EGGER, R.

TODD EGGER, EGGER HOLDINGS LTD., ROGER EGGER and CHUAN NG, APPLICANTS - and - ROBERT WAISMAN, MARTIN HECTOR, ARLAINA WAISMAN, ARLAINA WAISMAN FAMILY TRUST, GLORIA WAISMAN, H & H HOLDINGS LTD., HOWARD WAISMAN, JOANNA HECTOR, ROBERT HECTOR, WAISMAN INVESTMENTS LTD., RON WALDMAN, 628656 SASKATCHEWAN LTD., 101046655 SASKATCHEWAN LTD, 101048495 SASKATCHEWAN LTD., (GENERAL PARTNER FOR 101048495 SASKATCHEWAN LIMITED PARTNERSHIP) , 101050436 SASKATCHEWAN LTD., 101072099 SASKATCHEWAN LTD., 101085299 SASKATCHEWAN LTD. (GENERAL PARTNER FOR 101085299 SASKATCHEWAN LIMITED PARTNERSHIP) PROSPECT PROPERTIES INC., (GENERAL PARTNER FOR “MOOSE JAW DAYS INN LIMITED PARTNERSHIP”), AND VICTORIA PARK MOTOR INN LTD., RESPONDENTS Corrected judgment: The text of the original judgment has been changed per the corrigendum released December 29, 2022.

A copy of the corrigendum is appended to this corrected Judgment. Counsel: Douglas C. Hodson, K.C., and Shay M. Brehm for the applicants Kevin C. Mellor and Sharon R. Fox for the respondents ___________________________________________________________________________ JUDGMENT SCHERMAN J. November 18, 2022 ___________________________________________________________________________ Introduction [ 1 ] There is a long history of conflict between the individual applicants, respondents and their respective holding or investment corporations, regarding operating corporations they are shareholders of.

Six operating corporations presently own and

operate six hotels and a restaurant/bar in Saskatchewan. A seventh operating corporation owned an additional hotel, but the shareholders were able to agree on a sale of that operating corporation. The applicant Egger/Ng shareholders and the respondent Waisman/Hector shareholders each hold 50 percent of the shares in those seven operating corporations. [ 2 ] The applications presently before the Court are the following: a.

An application by the Egger/Ng shareholders, under ss. 207 and 234 of The Business Corporations Act, RSS 1978, c B-10 [ Act ], for the Court to order a process under which ownership of 100 percent of the shares of the operating corporations are transferred or exchanged between the Egger/Ng and Waisman/Hector shareholders, by alternating selections of corporations to be acquired, with the benefit of expert:

i) valuations of the operating corporations; and ii) advise on the tax effective share exchange strategy to utilize; with resulting equalization payment(

s) to be paid based on such valuations and the acquisition selections made, all as more particularly set forth in the applicants’ proposed draft order; and b. An application by the Waisman/Hector group to strike portions of the affidavits of Pamela Egger, Chaun Ng and Roger Egger.

Summary of the history of conflict between the parties and their proceedings before the Court [ 3 ] In 2010 the Waisman/Hector shareholders advised the Egger/Ng shareholders they were not interested in developing new hotel projects with the Egger/Ng shareholders and wished to sell the existing hotels or their interests therein. By 2015 the Waisman/Hector shareholders were expressing dissatisfaction with their financial return on their investments. [ 4 ] In 2016 they commenced oppressive conduct proceedings against the Egger/Ng shareholders.

This and some 11 subsequent court proceedings are notable for the nature and extent of wrongdoings alleged and demonstration of the increasingly toxic nature of the relationship between the parties. [ 5 ] On the eve of trial the parties settled the oppressive conduct proceeding brought by the Waisman/Hector shareholders on terms that included an agreement to negotiate a “Modern Shareholders Agreement” by October 31, 2018.

They failed to subsequently negotiate such an agreement. [ 6 ] The conflict continued with the Waisman/Hector shareholders making an allegation of theft and wanting a third party manager to be appointed to replace the management that has been thereto performed by an Egger/Ng entity or entities. [ 7 ] At a June 26, 2020 combined board meeting of the operating corporations, the Waisman/Hector directors sought to appoint Hurst Hospitality Inc. [Hurst] as a third party operator of the hotels. A motion to that effect was made and approved by majority vote of the two Waisman/Hector directors.

Roger Egger, the Egger family director, was not at the meeting due to illness. Chaun Ng objected to the motion being made, given the absence of Roger Egger, and he voted against the motion. [ 8 ] With the Egger/Ng shareholders and directors taking the position that the vote was invalid, the Waisman/Hector shareholders again brought oppressive conduct proceedings, seeking various relief including removal of Roger Egger and Chaun Ng from the boards of the operating corporations.

The Egger/Ng shareholders in turn made an application that the operating corporations be liquidated. [ 9 ] By an August 11, 2021 decision in respect of these applications [2021 SKQB 215], Bardai J. ordered the parties to engage in negotiations for the appointment of a third party manager, but dismissed the balance of Waisman/Hector applications for relief, including their request that Roger Egger and Chaun Ng be removed as directors of the operating corporations.

At para. 40 of his decision, he found that the behaviour of the Waisman/Hector faction in taking advantage of the absence of Roger Egger from the June 26, 2020 meeting was oppressive. He also dismissed the Egger/Ng application for liquidation without prejudice to it being brought back before the court at a later date. [ 10 ] At an October 8, 2021 meeting the boards of the operating corporations passed the following resolutions: We move that Hurst Hospitality Inc. be appointed as the manager of all the Operating Companies effective and completed by January 1, 2022.

After twelve months of continuous operation by the third party manager, the parties will start on January 1, 2023 the negotiation for a division and/or sale of all operating companies to be completed by no later than March 1, 2023. It is significant to note that this resolution was passed in the context of Bardai J. having ordered they negotiate the appointment of a third party manager. [ 11 ] Subsequent to the October 8, 2021 meeting there were disputes between the factions with respect to what were proper minutes of the meeting and with respect to the form of the above resolution.

The Waisman/Hector faction wished to send a signed copy of the entire resolution, as quoted, to Hurst.

The Egger/Ng faction’s position was that only the first sentence of the combined resolutions should be sent to Hurst and that it was contrary to the interests of the shareholders and operating corporations to share with Hurst, the information respecting the potential division and/or sale of the operating corporations found in the second sentence thereof. [ 12 ] On November 4, 2021, the Waisman/Hector shareholders brought the 11 th application this Court has seen from the parties, seeking an order appointing Hurst as the manager of the operating corporations.

The application included a 190-page affidavit of Howard Waisman, who had replaced his now 92-year-old father as a director, in which he states that “The applicants have been systematically oppressed by the respondents and bring this application to stop the oppression and prevent further oppression”. The application was subsequently abandoned, apparently conceding Egger/Ng shareholders never disputed that Hurst had been appointed

manager by the October 8, 2021 resolution. [ 13 ] Hurst took over the management of the hotels on January 1, 2022 as per the October 8, 2021 resolution to that effect. [ 14 ] On March 9, 2022, the present Egger/Ng applicants filed the application now to be decided by me. [ 15 ] This application was not heard until October 19. In a May 9, 2022 fiat Danyliuk J. ordered timelines for steps to be taken in preparation including a direction that cross-examination of Pamela Egger and Chaun Ng on their affidavits, as sought by counsel for the Waisman/Hector faction, were to be completed by June 19, 2022.

Such cross-examination did not occur.

In an October 6, 2022 fiat, Gerecke J. ordered that such cross-examination was to take place on October 14 and or 15 and briefs of law to be filed by noon October 17 so the present application could be heard on October 19. [ 16 ] The applicants’ position is that the relief it seeks is appropriate and necessary because the ongoing history of conflict between the parties and what has transpired since the October 8, 2022 resolution demonstrates that the Waisman/Hector faction will not negotiate a process to divide or sell off the operating corporations, as was the intent of the October 8, 2021 resolution.

The respondents’ application to strike applicants’ affidavit evidence and the applicants’ complaints with respect to the respondents’ affidavits [ 17 ] The Waisman/Hector application asks the Court to strike out all or portions of some 92 paragraphs of the affidavits of Pamela Egger, Chaun Ng and Roger Egger, which collectively total 226 paragraphs over 55 pages.

Their stated basis is that the paragraphs offend the criteria for admission of affidavit evidence by reason of being: (1) argument (2) speculation/opinion (3) hearsay (4) repetitive or redundant (5) vexatious/inflammatory/malicious (6) irrelevant; or (7) improper reply. [ 18 ] The applicants have not brought an application to strike; but in their brief of law say that the May 2, 2022 affidavit sworn by Howard Waisman of 242 paragraphs over 63 pages and 78 exhibited documents of 1168 pages should be disregarded by the Court because much of that affidavit is evidence that is irrelevant and/or hearsay.

They specifically identify some 66 paragraphs of that affidavit they say contain irrelevant or hearsay evidence that should not be considered. [ 19 ] At the outset of counsels’ submissions I observed that it appeared to me that much of the objected to information on both sides was not relevant or at most of marginal relevance to the issues I have to decide.

I commented that if I were to make seriatim decisions, with reasons, for each of the 158 particularized objections I would likely have to devote weeks making the individual decisions regarding which objections were sustained or rejected and provide reasons therefor. [ 20 ] I then asked counsel what they wished me to do – make seriatim decisions on what objected to affidavit evidence was admissible and then hear argument on the substantive issues – or did counsel want me to proceed to the fundamental issues and decide those issues utilizing only such evidence as I concluded was relevant and properly admissible, without providing detailed analysis and reasons on admissibility.

Both counsel advised that they wanted me to take the latter approach. [ 21 ] In his decision Bardai J. concluded, as I do here, that: a. there has been a breakdown of civility, respect, confidence and trust between the two groups; b. there is significant acrimony and tensions are running high; c. there is no internal mechanism in unanimous shareholders agreements or in the operating corporations articles or bylaws to resolve director or shareholders’ deadlock. [ 22 ] Further, Bardai J. stated as follows at para. 60: The Waisman Group has devoted volumes of material to tracing the historic financial affairs of the Operating Companies, much of which predates the Settlement, all in an effort to show mismanagement and prove a need for new management.

Much of this evidence is not particularly helpful. ... The same has occurred here in Howard Waisman’s 63-page affidavit. [ 23 ] Given the undisputable fact that the parties’ relationship is one of long term conflict and a complete breakdown of civility, respect and trust, much of the evidence the Waisman/Hector group presents is simply irrelevant. Whatever the full history of their relationship, what is relevant on the application before me is evidence relating to the specific application before me.

The question now comes down to whether on a go-forward basis there is any reasonable prospect that the parties can cooperate on the decisions to be made or whether they are essentially deadlocked.

[ 24 ] In his decision Bardai J. concluded that he was not satisfied the parties had yet reached the stage of deadlock and expressed the hope that with the measures that he was ordering the parties would be able to come to agreements. Accordingly, he dismissed the Egger/Ng liquidation application, but without prejudice to it being brought back at a later date. The Parties’ Positions [ 25 ] In the brief of law filed on behalf of the respondents, counsel conceived the application before the Court as being a s. 207(1)(

a) oppression application. From this perspective they argue that the test for an oppression remedy as pronounced by the Supreme Court of Canada in BCE Inc. v 1976 Debentureholders , 2008 SCC 69 , [2008] 3 SCR 560, has not been established and therefore the application should be dismissed. [ 26 ] The applicants say their application is clearly not an oppression application nor one in which they seek liquidation as the primary remedy the Court is asked to order.

The originating notice makes it clear that the applicants’ basis for its application is the “just and equitable” criteria found in s. 207(b)(ii) of the Act and that the primary relief sought is an ordering of the division of the operating corporations between the parties pursuant to the s. 234 power given to the Court to make any final order it sees fit. Liquidation is only sought in the originating application in the alternative. [ 27 ] I agree that the applicants are not seeking an oppression remedy under s. 207(1)(a).

Rather, they seek to access the Court’s power to, if satisfied it is just and equitable, formulate such remedy as it may see fit. Their application is essentially asking the Court to make an order that divides the corporations between the parties with an equalization payment based on independent third party valuations.

They say this is a remedy less intrusive than ordering liquidation of each of the operating corporations. [ 28 ] The order sought would not liquidate and dissolve the corporations but rather would divide the operating corporations between the two groups, thereby: a. potentially minimizing, avoiding or deferring the tax implications of liquidation for the shareholders; b. ensuring that the option of downstream sales of each of the operating corporations, as going concerns, is preserved and thereby avoid the potential discount of value that could result from a court ordered liquidation; and c. permit those shareholders who wish to continue in the business of the operating corporations to do so with their assets largely intact. [ 29 ] In their submissions the applicants provided judicial authorities supporting their position that: a.

The s. 207(1)(b)(ii) “just and equitable” ground is a distinct ground from the oppressive conduct grounds of s. 207(1)(a); b. The authorities are to the effect that while the court must be satisfied it would be just and equitable to liquidate or dissolve the corporation(

s) in question, if that threshold is met the court then has the power under s. 234(3) to order any remedy other than liquidation or dissolution it thinks fit. [ 30 ] Counsel for the respondents argued that: a. There are no decisions of Saskatchewan courts which interpret ss. 207(1)(b)(ii) and 234(3) in the manner in which the applicants argue they should be interpreted and applied; and b.

The authorities relied upon by the applicants are not binding on this Court and should not be considered as instructive because the legislation in other provinces, while similar, have differences, and in any event, the factual basis on which those authorities were decided makes their conclusions distinguishable. The respondents say that I should interpret the Saskatchewan legislation without regard to the authorities relied upon by the applicants. [ 31 ] The respondents then say that even if I were to adopt the statutory

interpretations proposed by the applicants, I should not, in the circumstances, be satisfied it would be just and equitable to liquidate or dissolve the operating corporations. They say that notwithstanding the history of past conflict, the evidence does not establish a present deadlock between the parties. [ 32 ] Counsel argues that the evidence demonstrates the parties are capable of moving forward and taking steps to resolve their differences and the Court should not be imposing agreements upon the shareholders.

In this respect the respondents point to the following evidence of the parties’ ability to agree on issues and to move forward: a. The October 8, 2021 resolution of the directors of the operating corporations which they say is in essence an agreement of all parties on a process to divide or sell the corporations; and b. That process agreement has been acted upon, in decisions made in July and August of 2022 board meetings to:

i) order appraisals of the real estate of six operating corporations; and ii) sell the seventh operating corporation or its assets, Prince Albert Days Inn, which happened in September of 2022, all of which is giving effect to the October 2, 2021 resolution.

Interpretation of the Statutory Provisions [ 33 ] The relevant provisions of the Act are the following: 207

(1) A court may order the liquidation and dissolution of a corporation or any of its affiliated corporations upon the application of a

shareholder: (

a) if the court is satisfied that in respect of a corporation or any of its affiliates: (

i) any act or omission of the corporation or any of its affiliates effects a result; (ii) the business or affairs of the corporation or any of its affiliates are or have been carried on or conducted in a manner; or (iii) the powers of the directors of the corporation or any of its affiliates are or have been exercised in a manner; that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer; or (

b) if the court is satisfied that: (

i) a unanimous shareholder agreement entitles a complaining shareholder to demand dissolution of the corporation after the occurrence of a specified event and that event has occurred; or (ii) it is just and equitable that the corporation should be liquidated and dissolved.

(2) Upon an application under this section, a court may make such order under this

section or

section 234 as it thinks fit.

(3) Section 235 applies to an application under this section. 234 ...

(3) In connection with an application under this section, the court may make any interim or final order it thinks fit including, without limiting the generality of the foregoing: (

a) an order restraining the conduct complained of; (

b) an order appointing a receiver or receiver-manager; (

c) an order to regulate a corporation’s affairs by amending the articles or bylaws or creating or amending a unanimous shareholder agreement; (

d) an order directing an issue or exchange of securities; (

e) an order appointing directors in place of or in addition to all or any of the directors in office; (

f) an order directing a corporation, subject to subsection (6), or any other person, to purchase securities of a security holder; (

g) an order directing a corporation, subject to subsection (6), or any other person, to pay to a security holder any part of the moneys paid by him for securities; (

h) an order varying or setting aside a transaction or contract to which a corporation is a party and compensating the corporation or any other party to the transaction or contract; (

i) an order requiring a corporation, within a time specified by the court, to produce to the court or an interested person financial statements in the form required by

section 149 or an accounting in such other form as the court may determine; (

j) an order compensating an aggrieved person; (

k) an order directing rectification of the registers or other records of a corporation under

section 236; (

l) an order liquidating and dissolving the corporation; (

m) an order directing an investigation under Division XVII to be made; (

n) an order requiring the trial of any issue. ...

(7) An applicant under this

section may apply in the alternative for an order under

section 207. [ 34 ] In the 1960s a task force was formed with the objective of modernizing Canadian corporate law. The result was the

Canada Business Corporations Act , RSC 1985, c C-44 , which received royal assent in March of 1975. Similar legislation was passed in the common law provinces of Canada, which followed the model of the

Canada Business Corporations Act , albeit with some minor modifications from province to province. Saskatchewan followed the basic model of the

Canada Business Corporations Act . The Saskatchewan Business Corporations Act , RSS 1978, c B-10 , became effective February 26, 1979. Sections 207 and 234 have remained in their present form since then. [ 35 ] Sections 215 and 242 of the Alberta legislation are virtually identical to ss. 207 and 234 of the Saskatchewan Act . Sections 207 and 248 of the Ontario Act, with some minor textual changes, are much the same as Saskatchewan Act ss. 207 and 234. The British Columbia Act ss. 324 and 227, with more significant drafting changes nonetheless are close comparables to Saskatchewan ss. 207 and 234.

Principles of Statutory

Interpretation [36] In Arslan v Skerbank T.A.S., 2016 SKCA 77, 400 DLR (4th) 193, Caldwell J.A. writing for the Court of Appeal,summarized the modern principle of statutory

interpretation as follows: [58] I begin the analysis under this ground by referring to the modern principle of statutory

interpretation as set out in E.A. Driedger,Construction of Statutes, 2d ed (Toronto: Butterworths, 1983) at 87, and as confirmed as the preferred approach to statutoryinterpretation in Rizzo & Rizzo Shoes Ltd. (Re), (SCC), [1998] 1 SCR 27 at 41 [Rizzo], in these terms: Today there is only one principle or approach, namely, the words of

an Act are to be read in their entire context and in their grammaticaland ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament. See Ruth Sullivan, Sullivan on the Construction of Statutes, 6th ed (Markham: LexisNexis, 2014) at 7-25 [Sullivan]. [59] Under the modern principle, the court first forms an initial impression as to the meaning of a legislative provision from its text (i.e.,its “grammatical and ordinary sense”).

Then, so as to infer what the Legislature intended to enact, the court will take into account thepurpose of the provision and all relevant context.

As this suggests, the latter part of the inquiry involves the contextual determination oflegislative intent. ... [62] As noted, even where the court’s initial impression of a legislative provision is readily arrived at, the court is required to considerthe broader context to read the provision “harmoniously with the scheme of the Act, the object of the Act, and the intention ofParliament.” In Atco Gas & Pipelines Ltd. v Alberta (Energy & Utilities Board), 2006 SCC 4 at para 48, [2006] 1 SCR 140, BastaracheJ., for the majority, wrote: This Court has stated on numerous occasions that the grammatical and ordinary sense of a

section is not determinative and does notconstitute the end of the inquiry. The Court is obliged to consider the total context of the provisions to be interpreted, no matter howplain the disposition may seem upon initial reading (see Chieu v. Canada (Minister of Citizenship and Immigration), [2002] 1 S.C.R. 84,2002 SCC 3, at para. 34; Sullivan, at pp. 20-21). I will therefore proceed to examine the purpose and scheme of the legislation, thelegislative intent and the relevant legal norms. [37] The applicants say that the meaning and legislative intent of ss. 207 and 234 are as follows: a. s. 207(1)(

a) gives the Court the power to order liquidation and dissolution of a corporation or any other remedy available unders. 234(3) if the Court is satisfied that there are actions or circumstances that are oppressive, unfairly prejudicial to or unfairly disregardsthe interests of any security holder, creditor, director or officer; and b. ss. 207(1)(b)(ii), 207(2) and 234(3) also give the Court the power to make any interim or final order it sees fit, if satisfied that it isjust and equitable that a corporation be liquidated.

They say that this recognizes the legislative intent that there may be circumstances while not oppressive or unfairly disregards theinterests of a security holder, creditor, director or officer would nonetheless make it just and equitable to liquidate the corporation. [38] The applicants say that the just and equitable criteria, on which the Court may make any order it sees fit, mustbe interpreted as being independent of and distinct from the oppressive conduct provisions because: a. the plain meaning of the language of s. 207(1)(b)(ii) standing alone, creates a distinct test or criteria for the Court to exercise itspower to make any order it sees fit; b. there is a well established principle of the presumption against tautology in statutory

interpretation. As stated in Ruth Sullivan,Sullivan on the Construction of Statutes, 6th ed (Markham: LexisNexis, 2014) at para 8.23, “It is presumed that the legislature avoidssuperfluous or meaningless words, that it does not pointlessly repeat itself or speak in vain. Every word in a statute is presumed to makesense and have a specific role to play in advancing the legislative purpose.” c. If the statute were to be interpreted and applied as the respondents argue that would make s. 207(1)(b)(ii) redundant and a breach ofthe presumption against tautology. [39] In R v Proulx, 2000 SCC 5 at para 28, [2000] 1 SCR 61, Lamer C.J.C. wrote: ... It is a well accepted principle of statutory

interpretation that no legislative provision should be interpreted so as to render itmere surplusage. ... [Emphasis added] In other words, every word and provision found in a statute is supposed to have a meaning and function and courts are to avoid, as muchas possible, adopting

interpretations that would render any portion of a statute meaningless or pointless or redundant. [40] The applicants cite the following decisions of Courts in other jurisdictions, which interpret similar or identicalprovisions in those provinces’ Business Corporations Act as supporting the

interpretation they advance, namely: Name Pinpoints Legal Principle

Wittlin v Bergman (1995), (ON CA), 25OR (3d) 761 (Ont CA). Para. 7 In order to order alternative relief under thejust and equitable doctrine, the Court mustfirst find that it is just and equitable that thestakeholders’ interests be unravelled.Rogers v Agincourt HoldingsLtd. (Re) (1976), (ON CA), 74 DLR (3d)152 (Ont CA). Para. 21 The words “just and equitable” are of thewidest significance and should be given abroad

interpretation. There are not strictprinciples or rigid categories for orderingliquidation of corporations under the just andequitable doctrine.Vallée v Pickard (2007), (ON SC), 28 BLR(4th) 149 (Ont Sup Ct). Paras. 41-42 It will be just and equitable to order a remedyto unravel stakeholders’ interests where theyagree that they can no longer work togetheror that their corporation should be liquidatedand dissolved, but cannot agree on theappropriate method of unravelling theirinterests.Keho Holdings Ltd. v Noble,1987 ABCA 84, 38 DLR (4th)368. Paras. 47-59 A corporation can be dissolved under the justand equitable doctrine where (

a) there is adeadlock in management, (

b) there is a lossof confidence in management, (

c) there is aloss of substratrum, or (

d) pursuant to thepartnership analogy.Gallelli Estate v Bill GallelliInvestments Ltd., (AB KB), [1994] 5WWR 217 (Alta QB). Whole case An “oppression” remedy can be orderedunder the just and equitable doctrine in theabsence of a finding of oppression. Lavigne v 972111 Alberta Ltd.,2013 ABQB 234, 15 BLR(5th) 335. Para. 19 A “no-fault corporate divorce” may beordered where just and equitable. Nooppressive conduct is necessary to ground aclaim for liquidation and dissolution of acorporation.256593 B.C. Ltd. v 456795B.C. Ltd., 2003 BCSC 1746.

Para. 21 The Court has virtually unlimited scope incrafting remedies to unravel stakeholders’interests under the just and equitable doctrine.Boffo Family Holdings Ltd. vGarden Construction Ltd.,2011 BCSC 1246. Paras. 119-121 An “oppression” remedy can be orderedunder the just and equitable doctrine in theabsence of a finding of oppression.Callahan v Callahan, 2011BCSC 40, 78 BLR (4th) 35.

Paras. 48-49 It will be just and equitable to order a remedyto unravel stakeholders’ interests where theyagree that they can no longer work togetheror that their corporation should be liquidatedand dissolved, but cannot agree on theappropriate method of unravelling theirinterests.J&A Properties Ltd. v DeAngelis, 2020 BCSC 1254.

Whole case Liquidation of corporation ordered underfactually similar circumstances. [41] The applicants cite the following decisions of Courts of other jurisdictions where the Courts have, utilizing theauthority granted by the legislation to order any interim or final order it thinks fit, ordered one or another form of so-called “butterfly”transactions to divide the assets of corporations among the shareholders, namely: Name Pinpoints Legal PrincipleLumley v Rodney’s OysterHouse Corp., [1999] OJ No4167 (QL) (Ont Sup Ct).

Para. 4 Example of the Court ordering a butterflytransaction to unravel stakeholders’ interestsunder just and equitable doctrine.Palmieri v A.C. Paving Co.(1999), (BCSC), 48 BLR (2d) 130 (BCSC). Paras 32-33 Example of the Court ordering a butterflytransaction to unravel stakeholders’ interestsunder just and equitable doctrine. Hollinger c Prados- Hollinger, 2007 QCCS 2571. Para. 95 Example of the Court ordering a butterflytransaction to unravel stakeholders’ interestsunder just and equitable doctrine.Etna Foods of Windsor Ltd. vCaradonna (2000), (ON SC), 6BLR (3d) 127 (Ont Sup Ct).

Paras. 25-29 Example of the Court ordering a butterflytransaction to unravel stakeholders’ interestsunder just and equitable doctrine. [42] Counsel for the respondents advised he was unable to point to any Saskatchewan authority that interpreted the

[ 42 ] Counsel for the respondents advised he was unable to point to any Saskatchewan authority that interpreted the subject provisions of the Act in the manner he argued they should be interpreted. He sought to distinguish the authorities cited by the applicants on the grounds the legislation they were decided under was different than the Saskatchewan legislation and/or that the factual circumstances unique to those cases were the explanation for the decision.

I disagree. [ 43 ] In each instance the legislation was so close to the Saskatchewan legislation that the reasoning of the Court in those cases should be considered as persuasive authority on how to properly interpret and apply the Saskatchewan legislation. In any event, without the guidance of those authorities, I am satisfied that applying the principles of statutory

interpretation set forth above that the proper

interpretation and application of the Saskatchewan legislation leads to the same conclusions as reached in the cited decisions. [ 44 ] I conclude, on a proper

interpretation of ss. 207(1) (b)(ii) and 234(3) of the Act , that if I am satisfied that it is just and equitable that a corporation should be liquidated and dissolved the Court may make such order as it sees fit, including an order of the nature sought by the applicants here.

Specifically, such other order as the Court may see fit may be ordered in the absence of oppressive or unfairly prejudicial conduct or conduct that unfairly disregards the interests of the various stakeholders. [ 45 ] Deadlock or functional decision-making paralysis within the shareholder and directors forums and/or significant continuing conflict among the shareholders and directors, albeit falling short of being classified as oppressive or unfairly prejudicial conduct or conduct that unfairly disregards the interests of the various stakeholders, may nonetheless result in liquidation being just and equitable.

That threshold having achieved a form of relief that is less intrusive than liquidation can therefore be also appropriate.

Would it be just and equitable to order liquidation? [ 46 ] The respondents say the following four acts demonstrate the parties are able to negotiate and agree and thus they are not at deadlock: a. the fact of the October 8, 2021 resolution itself; b. directors meetings took place in July and August of 2022; c. appraisals of the properties were ordered and received in the summer and fall of 2022; and d. one of the properties, the Prince Albert Days Inn, was sold by agreement of the parties. [ 47 ] The respondents also say: a. there are many matters that need to be agreed upon to give effect to the October 8, 2021 resolutions, b. the Court should not be making agreements for the parties, and c. it would be an abuse of process and premature for the Court to grant the relief sought at this time.

They essentially argue the parties have managed to agree on certain matters and the Court should wait to see if there is in fact a deadlock. [ 48 ] I disagree that the above stated “four facts” demonstrate the parties are able to work together and the application is premature. In this respect: a.

The parties, their principal actors and counsel engaged in ongoing heated conflict over the proper form of the resolution itself, involving threats of more court applications, ill conceived and inappropriate allegations of ethical breaches by Pamela Egger and threats to make a complaint to the British Columbia Law Society; b. The Waisman/Hector faction brought an application regarding the resolution to this Court (although subsequently abandoned). The dispute about the proper form of the resolution was never resolved, albeit Hurst was engaged as the manager as contemplated by the resolution; and c.

There are, even on the respondents’ own submissions many issues that the respondents say need to be negotiated to give effect to the October 8, 2021 resolution, which I am satisfied the parties would not reach agreement on. [ 49 ] While meetings did approve the sale of the Prince Albert Days Inn and the ordering of the real estate appraisal in respect of the properties owned by the remaining six operating corporations, these actions do not demonstrate or satisfy me that the longstanding mutual distrust and conflict between the parties has been ameliorated or that the parties are capable of agreeing on the bulk of the issues that would need to be agreed upon by the parties to give effect to the October 8, 2021 resolution.

As the October 8, 2021 resolution contemplates, the parties need to negotiate any division. As the respondents’ brief of law identifies, there is much to be negotiated and based on the history of the parties the prospects of agreement are remote. [ 50 ] In paras. 15 and 16 of their memorandum of law the respondents say, albeit operating from the perspective of opposing an oppression application, the following: 15. Lastly, when the Court reviews the application and its evidence the Applicants have major deficiencies in their evidence for the remedies claimed that the Court requires to make such an order.

The Applicants want the Court to order the remedies stated but they don’t provide the Court: (1) a tax plan; (2) whether Virtus Group agrees to perform the tax plan and are they aware of this application and should they have representation at this hearing; (3) should the division be based on value of the hotels and assets versus straight division of 4 Operating Companies each; (4) is an asset sale more advantageous and less risk given the Operating Companies have been operated by the Applicants with questionable conduct (i.e.

Destination Marketing Fee, thefts, unauthorized intercompany loans and shareholder loans improperly taken); (5) are the Applicants indemnifying the Respondents for unknown liabilities while they operated the hotels; (6) is the shotgun alternative contrary to the 2018 Minutes of Settlement agreement that states a shareholder cannot be forced

to sell his shares. There are many deficiencies in the evidence we submit that the Court should know before it could even consider such an application, including expert evidence. 16.

The Respondents ask this Honorable Court to dismiss this application with solicitor and client costs because no oppression has occurred against the Applicants, the application is an abuse of the court’s process and is premature as the reasonable expectations of all of the parties are being satisfied and future events have not occurred to date that would allow the Court to evaluate whether a reasonable shareholder expectation was breached. [ 51 ] The respondents’ own para. 15 identifies a host of issues that the respondents apparently contemplate need to be negotiated before an actual agreement to divide the corporations among them would be reached.

Given the history of the conflict between the parties it seems probable that a host of additional issues will arise and the prospects for a successful negotiation of a division between the parties is, I conclude, remote. [ 52 ] I am satisfied that it would be just and equitable for the Court to order liquidation of the operating corporations to bring an end to their conflict. The parties have been and will be deadlocked on a myriad of issues. Corporate divorce is appropriate when the parties are intractably at loggerheads, which is the situation here.

I find that liquidation would be just and equitable in the circumstances. That being so, the less intrusive remedy of division of the corporations between them is similarly just and equitable. Indeed, this is what the parties themselves had contemplated in their October 8, 2021 resolution. [ 53 ] I am satisfied by the evidence that: a. The longstanding and intractable conflict within the two shareholder and directors groups extends beyond mutual disrespect and a lack of trust to, in certain instances, personal attacks on others’ ethics and integrity.

I am satisfied that their conflict is very likely to continue. b. The boards of the operating corporations agreed only , as evidenced by the October 8, 2021 resolutions, that “the parties will start on January 1, 2023 the negotiation for a division and/or sale of all operating companies to be completed by no later than March 1, 2023”. c. This is no more than an agreement to potentially agree.

The lack of progress in giving effect to those resolutions, the fact of continuing conflict, including the personal attacks that have since occurred, and the numerous matters on which agreement needs to be reached, to give effect to the contemplated division makes it very unlikely that the agreement to divide the corporations among them by March 1, 2023 or at all will occur without the Court making appropriate orders. [ 54 ] Given: a. the past history of conflict between the parties, b. their ongoing suspicions of and disrespect for their fellow shareholders and directors, c. the complete lack of any level of trust in the motives and actions of the others, d. the conflict that has ensued about and since the October 8, 2021 resolution, and e. the issues already identified by the respondents that they say will need to be negotiated along with the virtual certainty other such issues will arise on both sides, on which they are destined to disagree, I find that there already effectively exists a deadlock between the parties and that it is appropriate to make an order along the lines of the order sought by the applicants.

Conclusion [ 55 ] For the reasons outlined above, I find it is just and equitable to make an order that brings an end to the conflict. The Act in ss. 207 and 234 gives me the power to make any order I see fit. I am satisfied such relief should be along the lines of the order sought by the applicants. This has the benefit of: a. not liquidating or dissolving any of the corporations thereby avoiding the significant potential that breakup values will be significantly less than the corporations’ values as going concerns, which is for the benefit of all shareholders; b.

Permitting each of the shareholders groups to acquire one-half of the operating corporations, which has the benefit of ending their ongoing conflict and permit the acquiring shareholders group to manage and deal with the acquired corporations as they see fit; c.

Putting in place independent third party valuations of each corporation’s real estate and valuation of each operating corporation as ongoing concerns and the use of such valuations to provide for value equalization payments following acquisition selections for the purpose of ensuring that the division of the corporations and the value obtained is just and equitable across the parties. [ 56 ] Accordingly I order as follows: 1.

The applicants are entitled to relief under ss. 207 and 234 of The Business Corporations Act , by way of an allocation of the shares of the operating corporations listed below as between the applicants and the respondent shareholder group [Waisman/Hector Shareholders] on the following terms and conditions: (

a) The following operating corporations shall be allocated between the parties on the terms set out in this order:

Operating Corporation Property Interest of Operating Corporation 1 Victoria Park Motor Inn Ltd. Regina Motel (formerly Victoria Park Motor Inn) 100% 2 628656 Saskatchewan Ltd. (note: this includes the shares owned by 628656 in 101050436 Saskatchewan Ltd. - Perkins Restaurant and Bakery and Movado Lounge and Grill) Regina Holiday Inn and Suites 100% 3 Prospect Properties Inc. Moose Jaw Days Inn General Partner with 75% Interest 4 101072099 Saskatchewan Ltd. Regina Holiday Inn Express 100% 5 101085299 Saskatchewan Ltd. Swift Current Holiday Inn & Suites General Partner with 92.5% Interest 6 101046655 Saskatchewan Ltd. Prince Albert Holiday Inn & Suites and Movados Bar/Liquor 100% (

b) Virtus Group LLP [Virtus Group], the accountants for each of the operating corporations, shall prepare a written report providing their opinion on the fair market value of each operating corporation as of November 1, 2022, including the actual working capital for each such operating corporation as of the effective date of the valuation [Valuation Date Working Capital]. (

c) In each of the valuations, Virtus Group shall provide a

summary of intercompany loans and shareholder loans as of the effective date of the valuation. (

d) The written valuations shall be completed and provided to the parties on or before January 16, 2023. (

e) On January 30, 2023, or a prior date agreed to between the parties on which Scherman J. is available, representatives of the shareholders groups shall attend a telephone conference before the Court to commence at 10:00 a.m. to complete the selection of operating corporations as between the two groups on the following basis:

i) first selecting a process to settle which of the shareholders groups shall have the first selection; ii) thereafter selections shall alternate until the six operating corporations are divided; iii) the selections shall be made by counsel on behalf of each shareholder company. (

f) On or before March 1, 2023 [Closing Date], the selling shareholders shall transfer all of their shares in the operating corporation to be sold to the purchasing shareholders and concurrently resign from any positions held by them or their nominees as director or officer of the operating corporation. (

g) On the Closing Date, the purchase price for the transferred shares of each operating corporation shall be 50 percent of the fair market value of such operating corporation as of the effective date of the valuation plus or minus, as the case may be, 50 percent of the amount by which actual working capital of such operating corporation as at the Closing Date is greater or less than, as the case may be, the Valuation Date Working Capital. (

h) Prior to closing of the share transfer transactions:

i) the operating corporations shall pay all outstanding intercompany loans as between them or make such other arrangements as agreed to by the applicants and the Waisman/Hector Shareholders; ii) the operating corporations shall pay all outstanding shareholder loans or make such arrangements as agreed to by the applicants and the Waisman/Hector Shareholders. (

i) In the event the parties are not able to agree on any terms or conditions in relation to the transfer of shares in the operating corporations, either party may apply to the Court for directions, and the Court shall direct the appropriate terms and conditions to be included in any share transfer agreement(s). (

j) The shareholders purchasing operating corporations with a higher aggregate fair market value, as determined by Virtus Group, shall pay an equalization amount to the other shareholders of 50 percent of the difference in aggregate values to ensure an equal division of the value of the operating corporations as between the two shareholders groups. Such payment shall be made at the time of the closing of the share transfer transactions. (

k) The transfer of shares in the operating corporations and the payment of the equalization amount shall be structured to occur in an income tax efficient manner to the extent possible and, failing agreement between the parties, as determined by Virtus Group.

2. Any party may apply to the Court to amend the terms of this order or to seek directions from the Court. 3. Upon conclusion of the process, the parties may bring any issues of costs back before Scherman J. for determination. “B. Scherman” J. B. SCHERMAN KING’S BENCH FOR SASKATCHEWAN Citation: 2022 SKKB 249 Date: 2022 12 29 File No.: QBG-SA-00235-2022 Judicial Centre: Saskatoon BETWEEN: PAMELA EGGER, CHERYL EGGER, DEAN EGGER, KYLE EGGER, R.

TODD EGGER, EGGER HOLDINGS LTD., ROGER EGGER and CHUAN NG, APPLICANTS - and - ROBERT WAISMAN, MARTIN HECTOR, ARLAINA WAISMAN, ARLAINA WAISMAN FAMILY TRUST, GLORIA WAISMAN, H & H HOLDINGS LTD., HOWARD WAISMAN, JOANNA HECTOR, ROBERT HECTOR, WAISMAN INVESTMENTS LTD., RON WALDMAN, 628656 SASKATCHEWAN LTD., 101046655 SASKATCHEWAN LTD, 101048495 SASKATCHEWAN LTD., (GENERAL PARTNER FOR 101048495 SASKATCHEWAN LIMITED PARTNERSHIP) , 101050436 SASKATCHEWAN LTD., 101072099 SASKATCHEWAN LTD., 101085299 SASKATCHEWAN LTD. (GENERAL PARTNER FOR 101085299 SASKATCHEWAN LIMITED PARTNERSHIP) PROSPECT PROPERTIES INC., (GENERAL PARTNER FOR “MOOSE JAW DAYS INN LIMITED PARTNERSHIP”), AND VICTORIA PARK MOTOR INN LTD., RESPONDENTS Counsel: Douglas C.

Hodson, K.C., and Shay M. Brehm for the applicants Kevin C. Mellor and Sharon R. Fox for the respondents ___________________________________________________________________________ CORRIGENDUM to Judgment of November 18, 2022 (2022 SKKB 249) SCHERMAN J. December 29, 2022 ___________________________________________________________________________

[1] In the judgment rendered on November 18, 2022, the first sentence of paragraph 42, is corrected to read as follows: Counsel for the respondents advised he was unable to point to any Saskatchewan authority that interpreted the subject provisions of the Act in the manner he argued they should be interpreted. ... The balance of the paragraph remains the same. J. B. SCHERMAN