



COURT 
    OF APPEAL FOR BRITISH COLUMBIA




Citation:


Park 
          v. FinancialCAD Corporation,







2009 
          BCCA 7



Date: 20090113

Docket: CA036011; CA036012; CA036023; CA036024

Between:

Robert 
    Park, Takashi Yuri, Steven P. Korn, Gerri Sinclair, Frank Barr,
John Greiner, Katherine Greiner, Robert Reynolds, Nancy Petersen,
Capital G. Limited, Cayber Management Limited, Shadowood Builders Ltd.,
Conqueror Limited, Jambo Limited, Stratos Limited,
Tower Nominees Limited, William W. Stevenson, Sojitz Corporation,
Kelly L. Storteboom, Juniperus Limited G, Coral Caper Limited,
Westward Grand Cayman Limited, Sandee-Jo Butterley,
Techmatrix Corporation, Brian Kipp, Priscilla McDonald,
Lachlan Brown, Lynne Dale-Johnson, Rod Dale-Johnson,
Bari Consiglio, Bonny Consiglio and Ronald Gillies

Appellants

(
Petitioners
)

And

Gary 
    Davidson, Byron Doyle, Elizabeth Doyle, Glacier Fuels Ltd.,
David Glassco, National Tradex Limited and Pavel Vasak

Respondents

(
Respondents
)

And

FinancialCAD 
    Corporation

Appellant

(
Respondent
)




Before:


The 
          Honourable Chief Justice Finch




The 
          Honourable Mr. Justice Lowry




The 
          Honourable Madam Justice Smith








D. 
          B. Kirkham, Q.C. and R. S. Padda


Counsel for the Appellants/Petitioners,
Robert Park et al




J. 
          C. McArthur and
T. C. Louman-Gardiner


Counsel for the Appellant/Respondent, FinancialCAD 
          Corporation




B. 
          D. M. Loewen


Counsel for the Respondents




Place 
          and Date of Hearing:


Vancouver, British Columbia




November 28, 2008




Place 
          and Date of Judgment:


Vancouver, British Columbia




January 13, 2009








Written 
          Reasons by
:




The 
          Honourable Mr. Justice Lowry




Concurred 
          in by:




The 
          Honourable Chief Justice Finch

The 
          Honourable Madam Justice Smith



Reasons 
    for Judgment of the Honourable Mr. Justice Lowry:

[1]

FinancialCAD Corporation is a successful privately held software company 
    that is the subject of a shareholders dispute.  It was incorporated in British 
    Columbia in 1990 and continued under the
Canada Business Corporations Act,
R.S.C. 1985, c. C-44, in 2000.  There are five directors and approximately 
    85 shareholders.

[2]

On June 26, 2007, at the annual meeting, a special resolution 
    presented by the directors, amending the Corporations articles to restrict 
    the transfer of shares, was adopted.  A Certificate of Amendment amending 
    the articles was issued by the Director under the
Act
.  Statutory dissent 
    rights  the right of those who did not vote for the resolution to choose 
    to surrender, and be paid the fair value of, their shares  were triggered.  
    Seven of the shareholders, who hold 30 per cent of the shares, did not vote 
    and then gave notice of their dissent; the Corporation refused to accept the 
    notices, reserving the right to make a court application to have the special 
    resolution set aside.

[3]

Thirty shareholders, holding almost 60 per cent of the shares, who 
    voted in favour of the resolution, including three of the directors holding 
    more than 20 per cent of the shares, maintain they did not know its adoption 
    would trigger dissent rights.  They take the position that, had they known, 
    the resolution would not have been presented and adopted: it was a mistake. 
     They contend that, while the value of the dissenting shareholders shares 
    has not been determined, the size of the payment that might be expected could 
    so impair the Corporations financial position as to threaten its continued 
    viability, thereby substantially diminishing the value of the remaining issued 
    shares.

[4]

The seven dissenting shareholders (the Davidson Petitioners) filed 
    a petition naming the Corporation the respondent and seeking a declaration 
    of entitlement with an order for payment of the value of their shares.  A 
    cross-petition was filed by the 30 shareholders and the two directors not 
    holding shares (the Park Petitioners) naming the Davidson Petitioners and 
    the Corporation the respondents.  They seek to have the special resolution 
    and the notices of dissent set aside as void, and the Certificate of Amendment 
    issued by the Director cancelled.  The Corporation supports the relief sought 
    in the petition filed by the Park Petitioners.

[5]

On hearing the petitions, Mr. Justice Pitfield, in reasons for 
    judgment, indexed as 2008 BCSC 353, 44 B.L.R. (4th) 70, concluded the Davidson 
    Petitioners should succeed.  The relief they sought was granted; the cross-petition 
    was dismissed.  The orders entered are now appealed by the Park Petitioners 
    as well as by the Corporation.  The appeals have been consolidated for hearing. 
     The question is whether, on the grounds advanced, the judge erred in his 
    conclusion such that this Court should now intervene to preclude the 
    Davidson Petitioners from exercising their dissent rights.

The 
    Resolution

[6]

The judge began by outlining the circumstances he found had led to 
    the adoption of the special resolution.  He saw the resolution to be the directors 
    strategic response to the attempt of one minority shareholder, who holds the 
    largest number of shares (24 per cent), to avoid a Shareholders Agreement 
    to which he is a party.  The agreement precludes him from selling his shares 
    without the approval of others, and such approval was not forthcoming, at 
    least not on terms satisfactory to the shareholder.  He is one of the two 
    people who founded the Corporation.  He was discharged from the position he 
    last held with the Corporation and wished to sell his interest.  He commenced 
    proceedings for a declaration he was no longer bound by the Shareholders 
    Agreement.  The directors then sought the amendment to the articles to restrict 
    the transfer of shares without their approval so that, even if the shareholders 
    court application succeeded, they would have control over the sale of his 
    shares.  Subsequent to the orders that are the subject of this appeal being 
    made, the relief sought in the petition was in material respects dismissed:
Glassco v. 554252 Saskatchewan Ltd.
, 2008 BCSC 523.

[7]

The
Canada Business Corporations Act
provides:

173. 
    (1)  Subject to sections 176 and 177, the articles of a corporation may by 
    special resolution be amended to

* * *

(n)        
    add, change or remove restrictions on the issue, transfer or ownership of 
    shares; ...

[8]

However, the
Act
also provides that, if a corporation resolves 
    to amend its articles to restrict the transfer of shares, a shareholder may 
    dissent and the corporation must then pay the shareholder the fair value of 
    the shares held:

190. 
    (1)  Subject to sections 191 and 241, a holder of shares of any class of a 
    corporation may dissent if the corporation is subject to an order under paragraph 
    192(4)(d) that affects the holder or if the corporation resolves to

(a)        
    amend its articles under section 173 or 174 to add, change or remove any provisions 
    restricting or constraining the issue, transfer or ownership of shares of 
    that class;

* * *

(3)        
    In addition to any other right the shareholder may have, but subject to subsection 
    (26), a shareholder who complies with this section is entitled, when the action 
    approved by the resolution from which the shareholder dissents or an order 
    made under subsection 192(4) becomes effective, to be paid by the corporation 
    the fair value of the shares in respect of which the shareholder dissents, 
    determined as of the close of business on the day before the resolution was 
    adopted or the order was made.

[9]

An information circular approved by the directors based on legal advice 
    they obtained was sent to the shareholders with the notice of the annual meeting 
    and a form of proxy.  The circular stated the intention to present the following 
    resolution:

BE 
    IT RESOLVED that:

1.         
    Section 4 of the Corporations articles is hereby amended to add the following:

No securities 
    (other than non-convertible debt securities) of the corporation shall at any 
    time be transferred to any person without the consent of the directors to 
    be signified by a resolution passed by the board or by any instrument or instruments 
    in writing signed by a majority of the directors.

2.         
    Any one director or officer of the Corporation is hereby authorized, on behalf 
    of the Corporation, to take such steps, and execute, file and deliver such 
    documents (including, without limitation, the required Articles of Amendment), 
    as may be necessary or advisable in order to give effect to the foregoing 
    resolution.

[10]

The
Act
and the Regulations promulgated under it, as well as 
    the by-laws of the Corporation, prescribe the information the circular was 
    required to contain.  The
Act
provides:

150. (1)  A person shall not solicit proxies unless

(a)        
    in the case of solicitation by or on behalf of the management of a corporation, 
    a management proxy circular in prescribed form, either as an appendix to or 
    as a separate document accompanying the notice of the meeting, or

(b)        
    ...

is 
    sent to the auditor of the corporation, to each shareholder whose proxy is 
    solicited, to each director and, if paragraph (
b
) applies, to the corporation.

[11]

The prescribed form is found in the
Canada Business Corporations 
    Regulations, 2001
, SOR/2001-512:

57.  A management 
    proxy circular shall contain the following information:

* * *

(z)        if action is to be taken under section 173 
    or 174 of the Act to modify the rights, privileges, restrictions or conditions 
    attached to any class of securities of the corporation or to authorize or 
    issue securities in order to exchange them for other securities of the corporation,

(i)         ...

(ii)        ...

(iii)       
    the reasons for the proposed modification or exchange and the general effect 
    on the rights of existing security holders,

(iv)       
    ...

(v)        
    all other information material to the proposed modification or exchange, including, 
    if the corporation is a distributing corporation, information required to 
    be included in a prospectus or other similar document under the securities 
    laws of any of the provinces of Canada, unless an exemption from the laws 
    is available or a waiver of the laws or similar relief is granted by the relevant 
    provincial securities regulator;

* * *

(z.5)     
    a statement of the right of a shareholder to dissent under section 190 of 
    the Act with respect to any matter to be acted on at the meeting and a brief 
    summary of the procedure to be followed;

[12]

Under the Corporations By-law No. 1, Article 10.4 provides:

10.4
Notice of Meetings
.  ... Notice of a meeting of shareholders called 
    for any purpose other than consideration of the financial statements and auditor's 
    report, election of directors and reappointment of the incumbent auditor shall 
    state the nature of the business to be transacted in sufficient detail to 
    permit the shareholders to form a reasoned judgment thereon, and shall state 
    the text of any special resolution to be submitted to the meeting....

[13]

Under the
Act
, a dissenting shareholder who is given notice 
    of a resolution to be presented for consideration at a meeting
and
the right to dissent is required to deliver written objection prior to the 
    meeting:

190. 
    ...

(5)        
    A dissenting shareholder shall send to the corporation, at or before any meeting 
    of shareholders at which a resolution referred to in subsection (1) or (2) 
    is to be voted on, a written objection to the resolution, unless the corporation 
    did not give notice to the shareholder of the purpose of the meeting and of 
    their right to dissent.

[14]

The circular the Corporations directors approved did not, however, 
    contain a statement of the right of a shareholder to dissent under s. 190 
    of the
Act
as required by s. 150(1)(a) of the
Act
and s. 57(z.5) 
    of the Regulations.  Nor was there any discussion to that effect at the meeting 
    where the resolution was adopted.  The Davidson Petitioners took no part in 
    the meeting.  None attended in person nor did they vote their shares by proxy.

[15]

Section 190(7) of the
Act
provides a dissenting shareholder 
    shall, within 20 days of learning of the adoption of the resolution, inform 
    the corporation of the number of dissenting shares held and make demand for 
    payment.  Under subsection (8) the shareholder shall then surrender the shares 
    within the following 30 days.

[16]

It is common ground the Davidson Petitioners complied with s. 190.

The 
    Trial Judgment

[17]

The relief sought in both petitions is predicated on the following 
    provision of the
Act
:

247.     
    If a corporation or any director, officer, employee, agent, auditor, trustee, 
    receiver, receiver-manager or liquidator of a corporation does not comply 
    with this Act, the regulations, articles, by-laws, or a unanimous shareholder 
    agreement, a complainant or a creditor of the corporation may, in addition 
    to any other right they have, apply to a court for an order directing any 
    such person to comply with, or restraining any such person from acting in 
    breach of, any provisions thereof, and on such application the court may so 
    order and make any further order it thinks fit.

[18]

The judge determined the courts jurisdiction under s. 247 was properly 
    invoked with respect to the declaration the Davidson Petitioners sought to 
    compel the Corporation to comply with s. 190.  He considered the right to 
    dissent had accrued to the Davidson Petitioners and would only be vitiated 
    if the special resolution was to be rescinded or nullified.

[19]

The judge concluded s. 247 did not provide the relief sought by the 
    Park Petitioners.  He said it was not disputed the
Act
and the Regulations 
    had been breached by the failure to inform the shareholders the resolution 
    would trigger dissent rights.  He also said the Corporations by-laws had 
    not been complied with.  However, he expressed the view that nothing in the
Act
suggests a failure to notify shareholders of their right to dissent 
    in the event of certain corporate acts necessarily means that act will be 
    invalid.  In support of this conclusion, he cited provisions of the
Act
he considered suggest otherwise.

[20]

In any event, with respect to the Park Petitioners relying on s. 247 
    for the relief they seek, the judge said:

[30]  
    Section 247 contemplates the restraint of action by any of the named persons, 
    or an order requiring a named person to comply with the
CBCA
or the 
    regulations, or with a companys articles and by-laws.  It does not expressly 
    confer jurisdiction on the court to exercise discretion to rescind or nullify 
    the special resolution adopted by the shareholders in this case.  There is 
    no provision in the
CBCA
which stipulates that any resolution of shareholders 
    adopted without strict compliance with all of the provisions of the statute 
    and the regulations, or the articles and by-laws of the company is a nullity 
    and void
ab initio.
Likewise, there is no provision in the
CBCA
which empowers the court to ratify resolutions of shareholders which appear 
    to have been adopted other than in strict compliance with the statutory and 
    regulatory requirements.  In that respect, the
CBCA
differs from some 
    of its provincial counterparts:  see, for example s. 229 of the
Business 
    Corporations Act
, S.B.C. 2002, c. 57.

[21]

The judge concluded the Park Petitioners are not seeking an order to 
    either compel or restrain compliance, but rather they seek nullification of 
    a special resolution in order to restore articles that contain no restriction 
    on the transfer of shares.  Section 247 provides no jurisdiction to grant 
    that form of relief.

[22]

The Park Petitioners petition also seeks to invoke s. 265.1 of the
Act
.  It is that section on which reliance is placed for an order compelling 
    the Director to cancel the amended articles and the related certificate he 
    issued.  But the judge considered that can only be done in the circumstances 
    prescribed by s. 96 of the Regulations, which do not arise here.  Most 
    significantly, the relief appears limited to instances where it is the Director 
    who has made an obvious error, having lacked authority to issue the articles 
    and related certificate, which is clearly not the case with respect to the 
    special resolution in question.

[23]

In the absence of any other provision of the
Act
being cited 
    as providing the relief the Park Petitioners seek, the judge then engaged 
    (we are told
ex mero motu
) in weighing the factors he considered ought 
    to govern what he regarded to be the exercise of a discretion lying within 
    the power the court has, as a court of general jurisdiction, to rescind the 
    special resolution, thereby nullifying the amendment to the Corporations 
    articles.  The judge said his discretion was to be exercised having regard 
    for the interests of the Corporation and its shareholders.

[24]

The factors he considered to favour rescission were: the exercise of 
    dissent rights would permit the individual holding by far the largest number 
    of the Davidson Petitioners shares to circumvent the Shareholders Agreement 
    he was seeking to have set aside; that individual knew before the meeting 
    the effect the resolution would have in triggering dissent rights but said 
    nothing; the directors would not have presented the resolution to amend the 
    articles to the shareholders if they had known dissent rights would be triggered; 
    and the financial burden the payments to be made would have on the Corporation 
    is uncertain and could be unacceptable.  The factors the judge considered 
    to favour refusing rescission were: no provision of the
Act
suggests 
    a failure to give notice of dissent rights renders corporate acts invalid; 
    the amendment to the articles was a conscious corporate strategy to defeat 
    the largest shareholders attempt to sell his shares without the directors 
    approval; and the Corporation may have a remedy in damages suffered, if any, 
    against the solicitors who gave advice to the directors.

[25]

On the factors considered, the judge concluded he should decline to 
    rescind the special resolution.

The 
    Appeal

[26]

The Park Petitioners and the Corporation raise the same grounds of 
    appeal.  The Corporation adopts the submission of the Park Petitioners.

[27]

They first say the judge erred in not exercising jurisdiction under 
    s. 154(1) of the
Act
, although it was in no way raised before him. 
     It provides:

154. 
    (1)  If a form of proxy, management proxy circular or dissidents proxy circular 
    contains an untrue statement of a material fact or omits to state a material 
    fact required therein or necessary to make a statement contained therein not 
    misleading in the light of the circumstances in which it was made, an interested 
    person or the Director may apply to a court and the court may make any order 
    it thinks fit including, without limiting the generality of the foregoing,

(
a
)        
    an order restraining the solicitation, the holding of the meeting, or any 
    person from implementing or acting on any resolution passed at the meeting 
    to which the form of proxy, management proxy circular or dissidents proxy 
    circular relates;

(
b
)        
    an order requiring correction of any form of proxy or proxy circular and a 
    further solicitation; and

(
c
)        
    an order adjourning the meeting.

[28]

The Park Petitioners continue to rely in the alternative on s. 247 
    but, for the reasons given by the judge, with which I agree, that section 
    does not provide for the remedy they seek.  As I understand it, no reliance 
    is now placed on s. 265.1 and it need not be further considered.  We 
    are asked to apply s. 154(1) now to restrain the exercise of dissent rights 
    under s. 190.  This is the primary ground argued on the appeal.  It is said 
    to give the court a jurisdiction specific to the facts of this case and to 
    constitute the complete answer to the shareholders dispute.

[29]

The contention is s. 154(1) provides the relief sought because the 
    proxy circular sent to the shareholders with the notice of the annual meeting 
    omitted to disclose a material fact  adopting the resolution to be presented 
    would trigger s. 190 dissent rights to be paid the fair value of shares 
    not voted in favour of the resolution.  Reliance is placed on what was said 
    in
Sparling v. Royal Trustco Ltd.
(1984), 6 D.L.R. (4th) 682 at 687, 
    45 O.R. (2d) 484 (Ont. C.A.), in adopting a statement from American authority 
    of what constitutes a material fact in the context of shareholder information:

an omitted fact is material if there is a substantial likelihood that a reasonable 
    shareholder would consider it important in deciding how to vote.

[30]

The disclosure was clearly required by s. 150(1)(a) of the
Act
and s. 57(z.5) of the Regulations: a statement in the proxy circular of the 
    right of a shareholder to dissent under s. 190 and a brief summary of the 
    procedure to be followed.

[31]

That being the case, the Park Petitioners say but for the omission 
    the resolution would not have been adopted and s. 154(1) can then be invoked.  
    They say the discretion s. 154(1) provides should be exercised to restrain 
    the Corporation and the Davidson Petitioners from complying with s. 190.

[32]

The Davidson Petitioners maintain s. 154(1) cannot be raised on this 
    appeal but, if it can, there was no omission of a material fact.  They argue, 
    with some force, the omission of a statement of legal rights is not the omission 
    of a material fact.  They say further what was material was not that the adoption 
    of the resolution would give rise to s. 190 dissent rights, but that some 
    shareholders would exercise those rights.

[33]

The Park Petitioners then contend in the alternative that, if the relief 
    they seek is not available under sections 154(1) or 247 of the
Act
, 
    the judge was required to exercise the courts general jurisdiction to set 
    the special resolution aside, given its adoption constituted what they maintain 
    was a serious breach of the
Act
, the Regulations, and the Corporations 
    by-laws: it was illegal.  They say the judge erred in purporting to exercise 
    any discretion but, in the further alternative, they say he erred in the exercise 
    of any discretion he did have by considering irrelevant factors: the equities 
    between a minority shareholder and the Corporation and the potential of a 
    remedy against solicitors.  The Park Petitioners say the judge failed to give 
    proper consideration to the financial harm to be suffered by the Corporation 
    and, most particularly, by the shareholders who are not among those seeking 
    to exercise dissent rights.

[34]

The Davidson Petitioners maintain the judge properly exercised the 
    jurisdiction afforded him under s. 247 of the
Act
in granting the relief 
    they sought against the Corporation with respect to the exercise of their 
    s. 190 rights.  They say there is now no challenge to the exercise of the 
    judges discretion under s. 247 and there is no basis upon which the relief 
    sought by the Park Petitioners should be granted as a matter of the courts 
    general jurisdiction.

A 
    Section 154 Application

[35]

What the Park Petitioners essentially seek to do is make an application 
    under s. 154(1) in this Court that was not made in the trial court.  They 
    seek to establish the omission of a material fact in the form of proxy employed 
    in respect of the special resolution.  I am unable to see on what basis that 
    can be done.

[36]

It is clear the application contemplated in the wording of the section 
    is, in this province, an application to the Supreme Court of British Columbia, 
    the court defined in s. 2 of the
Act
.  The Park Petitioners say s. 
    9 of the
Court of Appeal Act,
R.S.B.C. 1996, c. 77, gives this Court 
    jurisdiction to grant any relief that could be granted by the Supreme Court, 
    which it does.  But that is the jurisdiction the Court has on hearing an appeal 
    from the trial court.  It does not give this Court jurisdiction to entertain 
    applications under s. 154(1) in the first instance.

[37]

Section 154(1) requires the exercise of the courts discretion.  That 
    is not an exercise to be undertaken by an appellate court but rather by a 
    judge sitting in the trial court.  An order made on the exercise of the discretion 
    the section affords may be reviewed by an appellate court for error in the 
    principles applied or the understanding of facts, but generally it is only 
    where error of that kind is found there can be any intervention.  An 
    appellate court cannot entertain a s. 154(1) application and exercise 
    its own discretion as if it were sitting as a judge of the Supreme Court.

[38]

Further, s. 154(2) requires the applicant to give notice of an application 
    under s. 154(1) to the Director under the
Act
.  A copy of the Park 
    Petitioners petition was delivered to the Director and a response was received. 
     The Park Petitioners say that was sufficient to constitute the required notice 
    under s. 154(2); the petition states the information sent to the shareholders 
    with the proxy was deficient:

16.       
    There was no disclosure by the Corporation in the Information Circular, or 
    otherwise, to the shareholders that if they passed the Special Resolution 
    it would trigger dissent rights pursuant to Section 190(1).  This was contrary 
    to the requirements of the
CBCA
, the Regulations herein and the Articles 
    of the Corporation.

[39]

But the petition makes no mention of s. 154(1), nor does it make any 
    mention of a failure to disclose a material fact such as would render that 
    section applicable.  The petition the judge heard was simply not an application 
    made under s. 154(1) for a restraining order.  As I stated at the outset, 
    the relief sought is for orders setting aside the special resolution and notices 
    of dissent as well as a declaration the amendment to the articles is invalid 
    and an order cancelling the Amending Certificate issue by the Director.  The 
    sections of the
Act
under which the relief is claimed are stated to 
    be s. 247 and s. 265.1.  The judge was clear on the position taken before 
    him:

[44]  
    In this case, the Park Petitioners do not seek a restraining or compliance 
    order.  Rather, they seek nullification of a special resolution in order to 
    restore articles that contain no restriction on the transfer of shares.

[40]

Section 154(2) makes the requirement the Director be given notice of 
    a s. 154(1) application concerning the deficiency in a proxy circular 
    mandatory  [The] applicant  shall give to the Director  and the fact 
    is that was not done.  The Park Petitioners made no s. 154(1) application 
    before the Supreme Court and, accordingly, no notice of such could have been 
    given.  It is evident there was a covering letter sent to the Director with 
    a copy of the petition, which is not in the appeal record, but it is clear 
    a copy of the petition was sent to him solely to comply with s. 265.1(5) which 
    requires notice be given to him of an application under s. 265.1(4).

[41]

Finally, the evidentiary record appears to be less than complete because 
    the Park Petitioners made no application under s. 154(1) seeking to establish 
    the omission of a material fact.  The Davidson Petitioners say, had it been 
    otherwise, they would have sought to adduce evidence, through cross-examination, 
    of the extent to which the omission was material to the adoption of the resolution. 
     The affidavits of the directors establish they would not have presented the 
    resolution had they known about the s. 190 dissent rights.  But as to whether 
    the omission was actually material to the shareholders, the evidence is limited.  
    Apart from the directors, only three of the shareholders and the principal 
    of eight corporate shareholders say they would not have voted the shares they 
    hold or control to adopt the resolution if they had known the amendment would 
    trigger dissent rights.  They say they may have voted against the resolution 
    or not voted at all in order to exercise the right to dissent.  No evidence 
    is adduced from any of the remaining Park Petitioners.  However, the extent 
    to which the evidence adduced, or which may have been adduced, might bear 
    on a s. 154(1) application, need not be further considered.

[42]

In my view, it is not open to the Park Petitioners to make an application 
    under s. 154(1) now.  No application under that section was made in the 
    petition before the judge and no notice of such an application was given to 
    the Director.  It then becomes unnecessary to decide whether the section provides 
    for the relief sought.

The 
    Courts General Jurisdiction

[43]

While the Park Petitioners did not seek to have the judge invoke any 
    general jurisdiction to set the special resolution aside, they contend now 
    that, because the non-disclosure of dissent rights in the proxy circular was 
    a failure to comply with the
Act
, the Regulations, and the Corporations 
    by-laws, the resolution was illegal and cannot stand.  They rely on
Caleron 
    Properties Ltd. v. 510207 Alberta Ltd.
, 2000 ABQB 720, [2001] 3 W.W.R. 
    323, as discussed by the judge at paras. 35-37 of his reasons, for the proposition 
    the court has a general jurisdiction to inquire into the legality of corporate 
    actions beyond, but not inconsistent with, the jurisdiction provided by statute.

[44]

Given the provisions of s. 150(1)(a) of the
Act
and s. 57(z.5) 
    of the Regulations in particular, it is then necessary to consider whether 
    the omission in the proxy circular of a statement of the right to dissent 
    and the procedure to be followed to obtain payment for shares held requires 
    the special resolution be set aside rendering the amendment to the articles 
    invalid.

[45]

The Park Petitioners base their case on non-compliance with statutory 
    requirements, but it is of no small significance the non-compliance of which 
    they complain is not attributable to the Davidson Petitioners against whom 
    relief is sought.  The Davidson Petitioners have done nothing but comply with 
    the provisions of s. 190 in attempting to exercise the rights given them by 
    statute.  The omission in the circular sent to the shareholders was attributable 
    to the directors who approved the contents, albeit based on legal advice.  
    They are now among the Park Petitioners seeking relief from the failure to 
    comply with the
Act
and the Regulations.

[46]

The Park Petitioners seek to have a resolution to amend the Corporations 
    articles, which they voted to adopt, set aside.  They seek to have the amendment 
    rendered invalid, solely for the purpose of depriving the Davidson Petitioners 
    of their statutory right to dissent.  The Park Petitioners cite the financial 
    implications both they and the Corporation will experience as justification 
    for depriving the Davidson Petitioners of their statutory rights.

[47]

Whether, in these circumstances, an order setting aside the resolution 
    the Park Petitioners voted to adopt, thereby defeating the exercise of the 
    minority shareholders statutory rights, could be justified would, in my view, 
    be questionable even if such would not offend the provisions of the
Act
.  
    But I consider the question to be essentially foreclosed by what appears to 
    me to be a clear legislative intention that an amendment of the articles of 
    a corporation under s. 173(1) remains valid even where it is made by 
    the adoption of a special resolution in the absence of any notice of s. 190 
    dissent rights being given when required.

[48]

First, the
Act
contemplates shareholders may not be informed 
    about dissent rights when a resolution to amend the articles pursuant to s. 173(1)(n) 
    is presented.  Section 190(5) of the
Act
(quoted above) requires a 
    dissenting shareholder to give written objection prior to the meeting where 
    the resolution is to be considered.  But the shareholder is required to do 
    so only if given notice of the right to dissent.  If no notice is given, no 
    objection need be made.  It would appear to follow that the amendment is valid 
    and the shareholders right to dissent is preserved.

[49]

Second, the
Act
does specifically provide that where notice 
    of a meeting is given at which a proposal of a director or a shareholder to 
    amend the articles of a corporation is to be considered, the omission of a 
    required statement that a dissenting shareholder is entitled to the value 
    of the shares held pursuant to s. 190 does not invalidate the amendment:

175. 
    (1)  Subject to subsection (2), a director or a shareholder who is entitled 
    to vote at an annual meeting of shareholders may, in accordance with section 
    137, make a proposal to amend the articles.

(2)        
    Notice of a meeting of shareholders at which a proposal to amend the articles 
    is to be considered shall set out the proposed amendment and, where applicable, 
    shall state that a dissenting shareholder is entitled to be paid the fair 
    value of their shares in accordance with section 190, but failure to make 
    that statement does not invalidate an amendment.

[50]

The parties divide over whether the directors presentation of the 
    resolution to amend the articles was a proposal of a director made in accordance 
    with s. 137.  It is difficult to see why the reference in s. 175 is to a director 
    instead of to the directors as it was until the
Act
was amended in 
    1978 (see s. 169 of the
Canada Business Corporations Act
, S.C. 1974-75-76, 
    c. 33).  It is also difficult to see why the section provides a proposal 
    of a director is to be made in accordance with s. 137 when that section 
    appears to govern only proposals made by shareholders.

[51]

However, even if s. 175 is not directly applicable, I see no basis 
    on which it could be said the absence of a statement about s. 190 dissent 
    rights required in a proxy circular under s. 57(z.5) of the Regulations will 
    render an amendment of the articles of a corporation invalid.  I see no reason 
    why an amendment made by a resolution presented by the directors for the shareholders 
    consideration should be invalid if the required notice of dissent rights is 
    not given when the same amendment made by a resolution proposed by a shareholder 
    without the required notice will be preserved by s. 175(2).

[52]

Further, there are, as the judge observed, other sections in the
Act
similar to s. 175(2) where a failure to notify shareholders of their right 
    to dissent will not render the corporate act invalid: ss. 183(2), 188(3), 
    189(4).  These sections all relate to fundamental changes such as an amalgamation, 
    the continuance of the corporation in another jurisdiction, and the sale of 
    substantially all of a corporations assets.  It appears to me the requirement 
    that there be a statement about s. 190 dissent rights is largely procedural 
    in nature.  Parliament has not seen fit to provide that non-compliance will 
    render amendments to the articles, or other corporate changes, invalid.

[53]

The legislation does not provide non-compliance with s. 150(1)(a) 
    of the
Act
and s. 57(z.5) of the Regulations renders the amendment 
    invalid.  To the contrary, the intention appears to be the amendment stand.

[54]

I do not consider support for the relief sought in the petition filed 
    by the Park Petitioners for an order setting aside the special resolution 
    lies in the exercise of the courts general jurisdiction.  Given the provisions 
    of the
Act
, I do not consider an order that would invalidate the amendment 
    to the articles should be made.

Conclusion

[55]

I would not then accede to any of the grounds of appeal raised by the 
    Park Petitioners and the Corporation.  The underlying question the judge had 
    to address was whether he should exercise jurisdiction under s. 247 of the
Act
to grant the relief sought by the Davidson Petitioners in the petition 
    they filed.  His exercise of discretion in their favour under that section 
    is not now directly challenged; the grounds of the appeal are confined to 
    the Park Petitioners reliance first on s. 154(1), then on s. 247, and then 
    on the general jurisdiction of the court in support of the relief sought in 
    their petition.  No case for interfering with the judges determination the 
    Davidson Petitioners are entitled to exercise their s. 190 rights has been 
    made out.  They are statutory rights and the Davidson Petitioners have done 
    what is required by the statute to exercise them.  The Corporation must comply 
    with the provisions of the
Act
.

Disposition

[56]

I would dismiss the appeals.

The Honourable Mr. Justice Lowry

I 
    agree:

The 
    Honourable Chief Justice Finch

I 
    agree:

The 
    Honourable Madam Justice Smith


