ALBERTA LAW REPORTS Sixth Series Reports of Selected Cases from the Courts of Alberta and Appeals
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ALBERTA LAW REPORTS Sixth Series Reports of Selected Cases from the Courts of Alberta and Appeals VOLUME 31 (Cited 31 Alta. L.R. (6th)) SELECTION EDITOR Walter J. Watson, B.A., LL.B. ASSOCIATE EDITORS E. Mirth, Q.C. E.H. Molstad, Q.C. A.D. Nielsen, B.A., LL.B., Q.C. EDITORIAL STAFF Cheryl L. McPherson, B.A.(HONS.) Director, Primary Content Operations Audrey Wineberg, B.A.(HONS.), LL.B. Product Development Manager Nicole Ross, B.A., LL.B. Supervisor, Legal Writing Julia Fischer, B.A.(HONS.), LL.B. Supervisor, Legal Writing Jim Moore, B.A.(HONS.) Senior Content Editor ALBERTA LAW REPORTS is published 18 times per year. Subscription Alberta Law Reports est publi´e 18 fois par ann´ee. L’abonnement est de rate $487.00 per bound volume including parts. 487 $ par volume reli´e incluant les fascicules. 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ISSN 0703-3117 ISBN 978-07798-5734-0 Printed in Canada by Thomson Reuters THOMSON REUTERS CANADA, A DIVISION OF THOMSON REUTERS CANADA LIMITED One Corporate Plaza Customer Relations 2075 Kennedy Road Toronto 1-416-609-3800 Toronto, Ontario Elsewhere in Canada/U.S. 1-800-387-5164 M1T 3V4 Fax 1-416-298-5082 www.carswell.com Contact www.carswell.com/email ALBERTA LAW REPORTS Sixth Series Reports of Selected Cases from the Courts of Alberta and Appeals [Indexed as: Shefsky v. California Gold Mining Inc.] Martin Shefsky and 2350183 Ontario Inc., Appellants (Applicants) and California Gold Mining Inc., Michael Churchill, Kevin Cinq-Mars, Patrick Cronin, R.W. Tomlinson Limited, John Doe #1-50, and ABC Corporation #1-50, Respondents (Respondents) Alberta Court of Appeal Docket: Edmonton Appeal 1503-0001-AC 2016 ABCA 103 Peter Costigan, Frans Slatter, Frederica Schutz JJ.A. Heard: February 5, 2016 Judgment: April 14, 2016 Business associations –––– Specific matters of corporate organization — Shareholders — Shareholders’ remedies — Relief from oppression — Mis- cellaneous –––– CGM Inc. was public mineral exploration corporation — Ap- pellants, MS and holding company, alleged respondents breached MS’s reasona- ble expectations he would control CGM Inc. if he raised $5M — MS and holding company claimed respondents engaged in oppressive conduct including secret placement of shares that diluted MS’s voting power and refusing to allow MS to appoint third member to board when initial nominee refused position — Chambers judge determined MS had reasonable expectation Term Sheet would be honoured but not reasonable expectation he had sufficient shareholder sup- port for control — He dismissed oppression motion — MS and holding com- pany appealed — Appeal dismissed — Chambers judge did not err in failing to find that loss of opportunity to gain control of CGMI was reasonable expectation violated by secret private placement — Expectation based on loss of opportu- nity, without proof that opportunity more than merely speculative, insufficient to ground oppression — MS failed to identify personal interest that was violated — Not sufficient to allege shareholders generally have expectation that directors generally will not act oppressively — In any event, chambers judge did not find that secret private placement was below market value nor was there any eviden- 2 ALBERTA LAW REPORTS 31 Alta. L.R. (6th) tiary foundation for that assertion — Chambers judge accepted evidence that CGM Inc. had to raise additional funds — Timing, source and pricing of financ- ing was solely matter of business judgment entitled to substantial deference — There was no evidence directors did not act in best interests of corporation, de- spite that so acting may not have coincided with MS’s personal interests — Chambers judge found MS had not attempted to exercise his right to appoint third director — Any expectation to control composition of board past date of annual meeting was inconsistent with corporation’s public statements, statutory disclosure obligations and basic rights of shareholders to choose board of pub- licly-traded company — MS’s reasonable expectation to appoint third director arose not out of MS’s capacity as shareholder but rather as potential financier — MS possessed legal entitlement to acquire shares but did not have right to enjoin further share placements — MS and holding company’s claims were contractual in nature and fell outside legal and jurisdictional boundaries of oppression rem- edy — Chambers judge found MS and holding company did not meet burden of showing they suffered oppression,