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(1994) 48 WIR 40 Canwest International Inc and Another v Atlantic Television Ltd and Another COURT OF APPEAL OF BARBADOS

SIR DENYS WILLIAMS CJ, HUSBANDS AND MOE JJA 22 MARCH, 22 APRIL, 8 JUNE 1994 Companies Oppression, prejudice, etc by company Categories of complainant Proper persons to make applications under Part 1 of the Companies Act Parties to preincorporation contract Companies Act, Cap 308 [B], sections 225(b)(iv), 228 Parties to a pre-incorporation contract with a company are entitled to be treated by the court as proper persons to make an application under Part 1 of the Companies Act by virtue of section 225(b)(iv), and may acordingly be permitted to be complainants under section 228 (proceedings to remedy oppression, prejudice, etc.). Re Craz, 69 DLR (3d) 567 applied. Lees case (1992) (unreported) 22 January, not applied. Cases referred to in the judgment of the court Craz, Re, 69 DLR (3d) 567, Lane J. Edmonton Place Ltd v 315888 Atlanta Ltd, 40 Business Law Reports 28, McDonald J. Lees case (1992) (unreported) 22 January, British Columbia CA. Appeal Canwest International Inc (Canwest) and Canwest Romanian Television Network Inc (Canwest Romanian) appealed to the Court of Appeal (civil appeal 2 of 1994) against an order of King acting J ruling that Atlantic Television Ltd (Atlantic) and Robin James Moore Edwards (Edwards) were proper persons for the purposes of the Companies Act, section 225(b)(iv), and accordingly able to institute proceedings under section 228 40 of that Act. The facts are set out in the judgment of the court delivered by Sir Denys Williams CJ. H B St John QC and A Shepherd for Canwest and Canwest Romanian. P Williams QC and A Brewster for Atlantic and Edwards. 8 June 1994. The following judgment was delivered. Sir Denys Williams CJ delivered the judgment of the court. Part 1 of the Companies Act comprises sections 4 to 236. Section 228(1) and (2) enacts as follows: (1) A complainant may apply to the [High] Court for an order under this section. (2) If upon an application under subsection (1) the court is satisfied that in respect of a company or any of its affiliates (a) any act or omission of the company or its affiliates effects a result, (b) the business or affairs of the company or any of its affiliates are or have been carried on or conducted in a manner, or (c) the powers of the directors of the company 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 share-holder or debenture-holder, creditor, director or officer of the company, the court may make an order to rectify the matters complained of. Complainant is defined in section 225(b) to mean (i) a share-holder or debentureholder, or a former holder of a share or debenture of a company or any of its affiliates, (ii) a director or an officer or former director or officer of a company or any of its affiliates, (iii) the Registrar of Companies, or (iv) any other person who, in the discretion of the court, is a proper person to make an application under Part 1 of the Act. The plaintiffs (the respondents to this appeal), Atlantic Television Ltd (Atlantic) and Mr Robin Edwards (Edwards) took out an originating summons under section 228 seeking the following relief against Canwest International Inc (Canwest) and Canwest Romanian Television Network Inc (Canwest Romanian):

1. That Canwest Romanian issue 20 per cent of its voting and equity shares to Atlantic pursuant and in compliance with clause 2 of the letter of agreement signed on 23rd January 1993 between Atlantic and Canwest Romanian [the 1993 agreement] and that Canwest Romanians registers and records be rectified accordingly; 2. That Canwest Romanian appoint Edwards as one of its directors pursuant to and in compliance with clause 4(a) of the 1993 agreement and that Canwest Romanians corporate records be amended accordingly; 41 3. That Canwest deposit to a bank account of Canwest Romanian the sum of US $400,000 pursuant to and in compliance with clause 3 of the 1993 agreement; 4. That Atlantic and Canwest negotiate and execute a unanimous shareholders agreement to govern Canwest Romanians business and affairs pursuant to clause 4 of the 1993 agreement within fourteen days, failing which Atlantic to be at liberty to present a share-holders agreement for the approval of the court; 5. That Canwest Romanian pay to Edwards the sum of US $15,000 special fee pursuant to and in compliance with clause 4(b) of the 1993 agreement; 6. That Canwest and Canwest Romanian be restrained, pending the carrying out of the terms of the 1993 agreement and the assignment agreement from (i) carrying on any business in relation to the project as defined in clause 4(b) of the 1993 agreement and taking any action whatsoever prejudicial to the interest of Atlantic and Edwards and of their rights under the 1993 agreement and the assignment agreement; (ii) entering into any further agreement with Radioteleviziunea Romana [TVR] relating to the matters in issue or to seek to renegotiate the formation contract dated 19th May 1992 as amended by minutes of a meeting with TVR dated 10th February 1993 or any other variation thereof or any other material contracts with any other party without the consent of Atlantic and Edwards; (iii) denying to the third parties that Atlantic is and continues to be a party to the formation contract. 7. That Canwest and Canwest Romanian make full disclosure in writing to Atlantic and Edwards of their (i) company registers and records as defined by section 170 of the Companies Act and their accounts, minutes and other records as defined by section 170 of the said Act; (ii) financial records including a balance sheet and income and expense sheet; (iii) correspondence, memoranda, agreements and all other records or documents to and from them or their servants, agents or employees in any way related to the matters raised in this application and in particular the minutes of all meetings between Canwest and Canwest Romanian or their agents and TVR; and (iv) discussions, agreements and conversations in any way related to the negotiation of amendments to the formation contract, performance of the formation contract or non-performance by itself or any other party to the formation contract and their negotiation, execution performance, or non-performance of any related contracts to the formation contract. When the summons came on for hearing, Canwest and Canwest Romanian took the point in limine that Atlantic and Edwards were not complainants within section 225(b) and could not apply under section 228. They sought the dismissal of the application. King acting J, after hearing argument, reached the conclusion that the facts and the law support a finding that Atlantic and Edwards are proper 42 persons to make the application and exercised his discretion in their favour. In this appeal, Canwest and Canwest Romanian seek an order reversing the decision and order of the trial judge and dismissing the plaintiffs application for relief. The ground of appeal is that the judge erred in exercising his discretion in favour of the plaintiffs since (a) they were neither share-holders nor directors of Canwest or Canwest Romanian, and (b) the dispute between the plaintiffs and the defendants related to their status and that dispute could not or ought not to be settled in

proceedings brought under the provisions of the Companies Act. It cannot be disputed that neither Atlantic nor Edwards falls within section 225(b)(i) to (iii) of the Act. The sole issue is whether the judge erred in law in clothing them, pursuant to section 225(b)(iv), with the competence to make an application under Part 1. Mr St Johns submission for Canwest and Canwest Romanian is this: Atlantic and Edwards may have a claim on the facts deposed to in the affidavits, but such a claim cannot be made under the summary procedure provided by the Companies Act. They must proceed in the normal way by statement of claim to establish their status as a share-holder or director respectively. He relies on the following passage from the judgment of the Court of Appeal of British Columbia delivered by Macdonald J on 22 January 1992 (Lees case (unreported)). The judge, commenting on section 224 of the British Columbia Company Act 1979 (which corresponds to section 228 of the Barbados Act), said: Section 224 is directed towards the internal situation in a company. It gives relief when the powers of the company are being exercised in a manner oppressive to the members or there is some act done, or threatened, that would be unfairly prejudicial to a member. The Company Act was amended to expand the definition of member to include firstly a beneficial owner of a share and then any other person who, in the discretion of the court, is a proper person to make an application under this section. One can see why express provision was made for the inclusion of the beneficial owner of a share. Section 224(6)(b) was enacted to cover the case of persons in unforeseeable situations who ought to be included. However, in my view, the class is small. I think a finding that Lee is a proper person to apply under the section goes beyond the area of the judges discretion. If he is included there is the anomalous situation that he is given the status of a member able to complain about oppressive conduct by those in control of the company when the oppressive conduct he complains of is denial of his status as a member. If indeed he has a right to the shares his claim can be made in another proceeding.

factual and credibility problems every bit as difficult as are presented in specific performance actions, yet there is clear jurisdiction under the Canada Business Corporations Act to deal with oppression claims on affidavit in a proper case or to direct the trial of an issue if that is required. I see no policy reason why the kind of claim made by the applicants here could not if necessary be the subject of the trial of an issue. Finally, a rule requiring a party to establish the status of creditor, beneficial owner or the like in a separate proceeding before coming to the court under the Canada Business Corporations Act to obtain relief would multiply litigation to no good purpose. Later in his judgment, Lane J continued (at pages 574, 575): Once again we return to the underlying issue. Is section 241 confined to persons who have an undisputed status at the outset of the application? Bearing in mind the remedial nature of the Act and the considerations already discussed in connection with the analysis of section 238, the answer must be that persons

claiming the status of security-holder are 44 entitled to use the mechanism of the Canada Business Corporations Act to attempt to prove that status as part of their effort to obtain relief against oppressive conduct. To establish a threshold requirement of undisputed status would undermine the broad, remedial scope of this Act I am not to be taken as saying that the applicants claim to the relevant status can never be challenged before the main hearing. If at any stage of the proceedings it becomes apparent that the applicants claim to the relevant status of beneficial owner or creditor or the like is in bad faith, frivolous or a sham, the court has ample powers to dispose of the application in a summary way. In my opinion the very wide powers of the court hearing an application under section 228 provide a clue as to how the issue is to be resolved. Section 228(3) enacts that, in connection with an application under the section, the court may make any interim or final order it thinks fit and specifies a variety of orders that the court can make, including an order requiring the trial of any issue or an order directing rectification of the registers and other records of the company under section 231. An application under section 231 can be made by any aggrieved person who alleges 43 that his name has been wrongly omitted from the registers or other records of a I would hold, with respect, that in this case the exercise of the judges discretion company and section 231(3) enacts that in connection with an application under that was based upon a wrong principle. In the result, Lee not having the status of section the court may make any order it thinks fit including: member, the appeal should be allowed and the petition dismissed. Mr St John, adopting this approach, submits that if Atlantic or Edwards has a claim (a) an order requiring the registers or other records of the company to be under the exhibited agreements to be a share-holder and a director, respectively, it (or rectified; (b) an order restraining the company from calling or holding a meeting of he) must establish its (or his) status first and then seek relief under the Companies Act. share-holders, or paying a dividend before that rectification; (c) an order It is submitted that King acting J erred in law in holding that they were proper persons to determining the right of a party to the proceedings to have his name entered or make an application under Part 1 of the Act and, in these circumstances, this court retained in, or deleted or omitted from, the registers or records of the company, could review the exercise by him of his discretion. whether the issue arises between two or more share-holders or debenture-holders On the other hand, Mr Williams for Atlantic and Edwards relies on Re Czak, 69 DLR or alleged share-holders or alleged debenture-holders, or between the company (3d) 567, a decision of the Ontario High Court, where Lane J (at page 571) observed that and any share-holders or debenture-holders, or alleged share-holders or alleged the Canada Business Corporations Act 1985 was remedial legislation and contemplated debenture-holders; and (d) an order compensating a party who has incurred a a large and sweeping jurisdiction. That case, like the present, raised the issue whether loss. persons claiming under a pre-incorporation contract had a standing as complainants in It seems clear from a reading of section 231 that a party to a pre-incorporation proceedings under the Companies Act for relief from oppression. In that case the agreement can apply under that section as an aggrieved person to have the terms of respondent argued that the applicants entitlement was a matter of dispute and until the agreement for the issue of shares to him enforced against the other parties to the the dispute was resolved in favour of the applicants by the issue of a decree of specific agreement. If an order under section 231 can be made on an application under section performance, the applicants did not have standing as beneficial owners (of the shares). 228, why should the category of persons whom the court can in its discretion permit to Lane J, in carrying out a policy analysis of the Act, said, inter alia (at page 573) be complainants for the purpose of section 228, necessarily exclude a party to a preincorporation agreement who is alleging oppressive conduct by the other parties to the one must ask whether Parliament intended to have issues such as a claim agreement and who would therefore fall within the category of aggrieved persons? for specific performance of an agreement for shares tried on an application where the evidence, initially at least is by affidavit. Cases of oppression present legal, 45

In my opinion, the approach of Lane J in the Czak case is more in keeping with the reforming spirit of the Act than that adopted by the Court of Appeal of British Columbia in the Lee case. It is common knowledge that the Barbados Companies Act borrowed heavily from Canadian precedents and I do not think it amiss to refer to the judgment of McDonald J in the Alberta Court of Queens Bench in Edmonton Place Ltd v 315888 Atlanta Ltd, 40 Business Law Reports 28 where he said (at page 62): Under section 231(b)(iii) a person may be a complainant if he is a person who, in the discretion of the court, is a proper person to make an application under this Part. This is not so much a definition as a grant to the court of a broad power to do justice and equity in the circumstances of a particular case The argument for Canwest and Canwest Romanian would require Atlantic and Edwards to take separate legal proceedings to establish themselves as a share-holder and a director, respectively, and then seek relief under section 228. This would increase litigation and costs to no good purpose because the court under section 228 can make whatever orders the interests of justice require. No error of law has been shown and there is no ground for interfering with the exercise by the judge of his discretion. I would dismiss the appeal with costs. Costs of the appeal certified for two counsel. Appeal dismissed with costs. 46

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