Zhang v. Chik et al., 2012 MBCA 28

Citation: Zhang v. Chik et al., 2012 MBCA 28 Date: 20120402 Docket: AI 11-30-07672 IN THE COURT OF APPEAL OF MANITOBA Coram: Madam Justice Freda M. Steel Mr. Justice Martin H. Freedman Madam Justice Holly C. Beard BETWEEN: ) V. J. BuetiLI-MEI ZHANG ) for the Appellants ) (Applicant) Respondent ) R. M.

Beamish ) for the Respondent- and - ) ) Appeal heard andKAM KUI STANLEY CHIK and ) Decision pronounced:ZC ENTERPRISES LTD. ) March 14, 2012 ) (Respondents) Appellants ) Written reasons: ) April 2, 2012 STEEL J.A. 1 This is an appeal from a decision of the application judge that the respondent, a minority shareholder, was entitled toa remedy under s. 207 of The Corporations Act, C.C.S.M., c. C225 (the Act).

The court ordered the appellant Chik, the majorityshareholder, to sell his shares to the minority shareholder at a price to be determined by an independent valuator. 2 The appellants argued that the application judge erred in the exercise of his discretion by making his decision on thebasis of disputed facts instead of ordering a trial. It is further submitted that the application judge did not consider the reasonableexpectations of the majority shareholder. 3 This is a discretionary order and the standard for appellate intervention is very high.

Unless there is an error inprinciple or a misapprehension of the facts, the decision of the application judge should not be overturned unless the decision is soclearly wrong as to amount to an injustice. See Elsom v. Elsom, (SCC), [1989] 1 S.C.R. 1367, and HomesteadProperties (Canada) Ltd. v. Sekhri et al., 2007 MBCA 61, 214 Man.R. (2d) 148. 4 We agree with the application judge that “[w]hile there is a sharp contradiction between the evidence of the parties onseveral points, the facts crucial to a determination of this dispute are not seriously disputed” (at para. 2).

Consequently, the applicationjudge did not err when he found, based on the undisputed facts, that the minority shareholder was entitled to a remedy under s. 207 of theAct and that there were irreconcilable differences that would prevent the parties from continuing as co-owners of the business. 5 Again, we believe that the application judge did not err in his consideration of the issue of reasonable expectations. Reasonable expectations can change and the majority shareholder did change his mind and offer to sell his shares.

On the other hand,the offer from the minority shareholder to sell her shares came only after the improperly held directors’ meeting on September 3, 2010,at which time she was removed from the company as an officer and director and soon after removed from her job as manager of therestaurant. 6 With respect to the remedy ordered by the application judge, we acknowledge that it might be considered unusual inother circumstances. Normally, one might expect a sale by way of sealed bids rather than the remedy selected here.

However, at thehearing, the application judge asked whether the majority shareholder was interested or in a position to buy out the minority shareholderand was told that he was not. Given that answer and the wide discretion given the application judge to fashion an equitable remedy in

the circumstances, we see no grounds for appellate intervention. 7 However, we agree with the appellants that the application judge should have dealt in some way with the majority shareholder’s personal covenant on the lease. Consequently, we would vary the order by adding a requirement that the covenant by the majority shareholder on the lease of the business’s premises be dealt with in a manner satisfactory to the parties. If the parties are unable to agree, the matter should be referred to the application judge for resolution. 8 The appeal is allowed in part, with costs to the respondent. J.A. I agree: J.A. I agree: J.A.