Levesque, Ruel, Bachand

Appeal from a judgment of the Superior Court allowing an action for rectification of abuse of power and iniquity and an action for unjustified dismissal. Allowed in part.

The appellant is a corporation founded by the parents of the appellants and the respondent Michel. The trial judge ordered the redemption of the respondents’ shares at fair market value, which she set at $27,633,333. In addition to this amount, she ordered the appellants to pay interest at the legal rate plus the additional indemnity under article 1619 of the Civil Code of Québec (S.Q. 1991, c. 64) (C.C.Q.) as of the date of the summons. The appellants submit that the judge committed a reviewable error by setting the market value of the respondents’ shares. They also maintain that she erred in finding that any condemnation against them had to bear interest at the rate provided in the shareholder agreement. Last, they argue that the judge could not condemn them to pay the respondents an additional indemnity applied to the share redemption price.

The judge committed a reviewable error by setting the market value of the respondents’ shares, and this value should be recalculated after a necessarily approximate determination of the amount of exploitable raw material currently in the appellant’s sandpits and quarries. However, the judge did not commit a reviewable error in refusing to make a deduction to take account of the dividends received by one of the respondents after March 31, 2018, the date the parties had agreed should be the valuation date of the appellant’s shares.

In addition, the share redemption mechanisms in the shareholder agreement do not apply where there is abuse of power and iniquity within the meaning of sections 450 et seq. of the Business Corporations Act (CQLR, c. S-31.1). They therefore could not create reasonable expectations that the judge would have had to consider when determining the terms for payment of the redemption price of the respondents’ shares.

The judge also did not commit a reviewable error in ordering the appellants to pay interest at the legal rate plus the additional indemnity under article 1619 CCQ. The issue of whether the additional indemnity under this provision is applicable in respect of a condemnation that, strictly speaking, is not an award of damages was decided in 9080-0939 Québec inc. c. 2861-7918 Québec inc. (Construction Serge Gagnon), (C.A., 2008-04-24), 2008 QCCA 802, SOQUIJ AZ-50488175, J.E. 2008-1089.

What is more, the appellants’ theory is irreconcilable with the purpose of article 1619 C.C.Q. and with the interpretation of that provision in dans Québec, Ministère de la Justice Commentaires du ministre de la Justice: le Code civil du Québec, vol. 1 (Québec: Publications du Québec, 1993). In the Civil Code of Lower Canada (S.C. 1865, c. 41), the additional indemnity was not added only to orders for damages. The courts could order payment of the additional indemnity in the context of any pecuniary condemnation. When the Civil Code of Québec was enacted, the Minister of Justice’s official commentary stated that article 1619 C.C.Q. restated articles 1056c and 1078.21 C.C. and did not specify that the new provision modified the legal framework applicable to the additional indemnity in any respect. Finally, the respondents are right to argue that, in other cases involving share redemptions in cases of abuse of power and iniquity, the Court did not hesitate to apply the additional indemnity under article 1619 C.C.Q. to the redemption price determined.

Legislation interpreted: article 1619 C.C.Q.

Text of the decision: http://citoyens.soquij.qc.ca