1

Industries Flexart Ltée et al. v. Baril et al.

Michel Baril («Baril»), through various companies, controlled two wood manufacturing facilities located in Victoriaville.  In 1997, he decided to sell his factories and entered into negotiations with the representative of an American company, Full Circle Investments Inc. (“FCI”), who had recently purchased two similar companies located in St-Raymond-de-Portneuf.

The sale was concluded on July 11, 1997.  Baril’s shares were purchased by Industries Flexart Ltd. (“Flexart”) and its parent company, St. Raymond Wood Products Holdings Ltd. (“Holdings”), both companies under the control of FCI.

The sale was concluded for a total amount of approximately $6.7M and included the following undertakings:

• An amount of $4.8M was paid in cash;

• An amount of $1.2M payable by promissory note due on August 31, 2003 and bearing a 6% annual interest, payable every three months;

• Baril received 5% of the common shares of Holdings for a consideration of $500,000, representing 86,01$ per share;

• By a contract of employment, Baril was to act as President of Flexart for a period of 3 years.

During the trial, Baril testified for a period of almost 2 days on the facts that led to his departure in August 1999.  His testimony, combined with documentary evidence, led the trial judge to the conclusion that the unilateral amendments made to his employment constituted a wrongful dismissal and that Holding had acted oppressively, in contravention with section 241 CBCA and that, therefore, the provisions of the shareholders agreement preventing payment of the amounts due for the redemption of Baril’s shares could not be invoked against him.

The Court of appeal takes notice that Baril did not receive any financial information regarding the corporation, that he was not advised of important sales and acquisitions made by the group, and that he was never notified of shareholders meetings.  His leaving the company is assimilated to a forced resignation.  However, the Court of appeal reduces the amount awarded as damages by decreasing the amount of the bonus and by refusing moral and punitive damages.  The Court also refuses to grant lawyers fees.

Industries Flexart Ltée and St-Raymond Woods Products Holdings Ltd. v. Michel Baril and 3349900 Canada Inc., Court of Appeal, 200-09-003476, 3 February 2003, Honourable Justices Fish, Brossard, Rochette.

2

Joffre v. A.V.I. Financial Corporation (1985) Inc.

A.V.I. Financial Corporation (1985) Inc. («AVI») was incorporated in May 1985.  Organizational proceeding documents indicate that the corporation has 100 class A shares issued at $1.00 each.  Harold Joffre then holds 22 shares and his brother Elliot 27.  Laurence Klugerman, through his holding company, holds 51 shares.

A corporate reorganization takes place on August 12, 1986.  Elliot gives his shares to his mother, Ruth Joffre, who now holds 27% of the shares.  Klugerman’s holding company sells half of its shares to Bernard Weiser and the other half to his brother, Reginald Weiser.  The shareholders of the corporation now represent two groups, the Weiser group, Bernard and Reginald, who hold together 51% of the shares and the Joffre group, Harold and Ruth, who hold together 49% of the shares.

All the parties then sign a unanimous shareholder agreement.  The agreement sets the quorum at 2 directors and stipulates that an independent accounting firm will audit annual financial statements of the corporation.

On August 1, 1993, Bernard purchases his brother’s shares and becomes, through his holding company, majority shareholder of AVI.  He is considered to be the directing mind of the corporation.

At the trial, evidence reveals that the minute book of the corporation was not maintained as required by section 20 of the Canada Business Corporations Act and that it was prepared in bulk in March 2001 following requests made by the Joffre group to the corporation and its officers.  No meeting of the directors or of the shareholders was called nor held in more than 10 years and no resolution was signed by all the directors and/or the concerned shareholders.  The financial statements were never audited, notwithstanding the provisions of the unanimous shareholder agreement.  Bernard Weiser’ remuneration was never approved by the Board of directors, in contravention with the by-laws of the corporation.

The Court concludes that the contravention of numerous provisions of the CBCA and of the shareholder agreement amount to oppression of the minority shareholders.  In the circumstances, taking into account the tumultuous litigation between the parties, their serious and important disagreements and the long period during which the minority was oppressed, the Court orders that the corporation be wound up.

Harold Joffre and Ruth Joffre v. A.V.I. Financial Corporation (1985) Inc. and Bernard Weiser, Reginald Weiser and 4057830 Canada Inc., Superior Court, 500-05-067040-012, 14 March 2003, Honourable Justice Sévigny.

3

Dupont v. Technologies Silver Leap Inc.

Sébastien Dupont was employed by Technologies Silver Leap Inc. (“Technologies”) until he was dismissed in July 2002.  He also held common shares of Technologies and was party to a unanimous shareholder agreement.

The shareholder agreement provides that in case of dismissal, the ex-employee is presumed to offer all his shares for sale to the corporation.  Dupont refused and filed an action against Technologies for wrongful dismissal.  The next day, on October 11, 2002, Technologies filed proceedings to obtain title to the shares.

On October 18, 2002, Technologies held a special meeting of the shareholders in order to amend the rights pertaining to the common shares.  Upon reception of the notice of the meeting, Dupont sent his notice of dissent before the meeting.  On December 27, 2002, he filed a motion to have the fair value of his shares determined by the Court as provided by section 190 CBCA.

Technologies requests that the motion be dismissed on the grounds of lis pendens or, subsidiarily, that the proceedings be suspended until judgment on the main action.

The Court dismissed the motion based on lis pendens on the grounds that the cause is not identical in the two actions.  The action filed by Technologies is based on the shareholder agreement whereas Dupont’s motion is based on section 190 CBCA.

The Court grants the motion for suspension of the proceedings based on Article 46 C.P.C.  The right to dissent is an accessory to the ownership of the shares and it must be determined if Dupont is still a shareholder.

Sébastien Dupont v. Technologies Silver Leap Inc., Superior Court, 200-05-017846-028, 18 March 2003, Honourable Justice Blondin.

4

Restaurant L’Ancestral (1988) Inc. et al. v. 9089-6663 Québec Inc.

Plaintiffs have been operating a restaurant under the name «Restaurant L’Ancestral» since 1988.  The restaurant is located at 625 west, St. Martin Boulevard, in Laval.  They request a permanent injunction and damages in the amount of $50,000.

Defendant 9089-6663 Quebec Inc. («9089») was incorporated in April 2000.  It opened a restaurant under the name “Restaurant L’Ancestral” at 13234 Labelle Boulevard, in Mirabel.  It alleges that it is continuing the operation of the “Restaurant L’Ancestral” previously operated by Mr. Alain Henrichon since 1995, first in St. Hippolyte and then in Lafontaine.

The Court reviews section 13 of the Act respecting the Legal Publicity of Sole Proprietorships, Partnerships and Legal Persons (“ALP”) which forbids the use of a name that leads to confusion with a name already used by someone else.  The Court examines the criteria for evaluating confusion set in sections 4 and 5 of the Regulation of the ALP.

The Court holds that the two businesses are in direct competition, that the accent is on the word «ancestral» and that they both operated in the restrictive sector of the northern suburb of Montreal, within 30 km from each other.

The Court grants the injunction and orders 9089 to cease using the business names «Restaurant L’Ancestral» and «Restaurant La Maison L’Ancestral II», to remove immediately all outdoor signs and all the stationery used in the operation of the business.  The Court however refuses to grand damages as no evidence of prejudice was submitted.

9042-5703 Québec Inc. and Restaurant L’Ancestral (1988) Inc. v. 9089-6663 Québec Inc., Superior Court, 700-05-009674-007, 26 March 2003, Honourable Justice Courville.