Court File and Parties

COURT FILE NO.: CV-15-530451-00CP DATE: 20160512 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Peter Noble, Plaintiff / Proposed Class Representative AND: North Halton Golf and Country Club Limited, Defendant

BEFORE: Justice Edward P. Belobaba

COUNSEL: Morris Cooper for the Plaintiff Wendy Berman and Lara Jackson for the Defendant

HEARD: April 13, 2016

Proceeding under the Class Proceedings Act

CERTIFICATION OF CLASS ACTION

[1] This dispute between golfing and non-golfing shareholders of a company that owns and operates a historic golf and country club in Georgetown is now before the court as a proposed class action. The plaintiff says the actions of the defendant corporation unfairly disregard the interests of the non-golfing minority and are oppressive.

[2] This motion for certification raises questions about the availability of a class action for oppression and the applicability of the statutory limitations period.

[3] For the reasons that follow, both of these questions are answered in favour of the plaintiff. A class proceeding may be used to pursue oppression remedies provided that the plaintiff can show, as he has done here, that the requirements under the Class Proceedings Act [1] are satisfied. The statutory limitation period continues to run in a case of “continuing” oppression and the plaintiff must show, as he has done here, that a further and discrete act of oppression has occurred within the limitations period.

[4] The defendant’s motion for summary judgment based on the limitations argument is dismissed. The plaintiff’s motion to certify this action as a class proceeding is granted.

[5] As counsel on both sides well understand, the certification of an action as a class proceeding has nothing to do with the merits of the claim. Certification is simply a procedural measure that allows an aggregated claim to proceed to a trial where the common issues will be fully adjudicated. Whether or not the allegations against the defendant will actually prevail is a matter that will be decided at the common issues trial.

Background

[6] The plaintiff is a non-golfing shareholder of the defendant North Halton Golf and Country Club Ltd., a for-profit CBCA corporation [2] (“the defendant” or “the Company”). The defendant owns and operates the North Halton Golf and Country Club (“the Golf Club”). The Golf Club has been in operation for almost 100 years. Like any golf club, it has had to adjust to changing business conditions and market demands. And like any urban golf club, it carries on its primary activity knowing that its underlying land value is constantly being eyed by developers.

[7] The dispute between the defendant’s golfing and non-golfing shareholders is at root a dispute about conflicting visions of corporate priorities and about the recent pricing and sale of the defendant’s shares. Both sides have presented detailed affidavit evidence describing how the disagreement has developed and evolved over the last ten years. Much of this detail, however, is not necessary for the purposes of a certification motion.

[8] The facts that are relevant are these. There are about 453 shareholders, most of whom are both shareholders in the defendant Company and members of the Golf Club. A minority, about 53, are non-golfing, non-member shareholders. There are also approximately 137 golfing (non-shareholder) ordinary members of the Golf Club. The plaintiff seeks to represent the non-golfing (non-member) shareholder minority.

[9] According to the plaintiff, for many years the defendant has conducted its business for the continuing benefit of the golfing shareholders at the expense of and to the detriment of the non-golfing shareholders.

[10] Ten years ago, the stated objective was to make the Golf Club an all-equity facility by requiring both current and new members to become shareholders in the Company. This goal was not actively pursued because most of the current members would have left. The defendant also refused to buy out the shares of its non-golfing shareholders because the required refinancing would also have raised the cost of membership, causing members to leave and discouraging new ones from joining. Instead, says the plaintiff, the defendant continued to use its funds to improve the Golf Club facility for the sole benefit of the golfing shareholder-members and ordinary members.

[11] For example, the defendant has spent more than $1.5 million in the last 2 years on capital improvements to the clubhouse and golf course, replacing the roof and upgrading the irrigation system, all for the benefit of its golfing members. The plaintiff has questioned these expenditures and registered his complaints but to no avail. Meanwhile, he has been trying to sell his share, ideally at fair market value, but again to no avail.

[12] Ten years ago, it was generally accepted that the fair value of each share was around $32,000, the land parcel itself obviously being the most valuable Company asset. However, given the recent and dramatic increase in Halton Region land prices, the plaintiff, who is a retired actuary, believes that the fair market value today is closer to $100,000 per share.

[13] In May, 2015 in an effort to attract new shareholder-members, the Board sought and obtained shareholder approval to sell 30 Class G treasury shares at $14,000 per share. This share price was set at less than half of the previous value and, according to the plaintiff, only a fraction of the actual value. Shareholders, such as the plaintiff, who had placed their names on a “sales list” [3] were given the option of either selling at the reduced price, or remaining on the list without losing their place in the queue. The plaintiff rejected an offer at the $14,000 price and elected to remain on the sales list. In August 2015, the Board sought and obtained shareholder approval to sell 20 more shares at $16,000 and, if these were all sold, to sell an additional 20 shares at $18,000.

[14] The plaintiff says that if the defendant’s golfing shareholders want to have a private golf club, that’s fine, but they cannot do so by disregarding the interests of the non-golfing minority and treating them inequitably and unfairly. The plaintiff says the May and August, 2015 share pricing decisions (all to attract new golfers) harmed the non-golfing shareholders and “triggered” this proposed class action.

[15] The plaintiff brings this proposed class action alleging oppression on behalf of the 53 or so Class G non-golfing shareholders. The defendant moves for summary judgment and asks that this action be dismissed outright on the basis of the two-year limitation period.

Analysis

[16] I will consider the defendant’s limitation argument first and then deal with the plaintiff’s motion for certification.

(1) The limitation argument

[17] Section 4 of the Limitations Act [4] provides that an action must be brought within two years after the claim was or should have been discovered. The action herein was commenced on June 15, 2015.

[18] The defendant says the action is time-barred because the plaintiff has been voicing his concerns and complaints for years at shareholder meetings and otherwise about his inability to sell his Class G share and was fully aware of ongoing developments. There was nothing “new”, says the defendant, in the May and August, 2015 share sale and pricing resolutions. The defendant says that any and all claims of oppression were discovered or discoverable well before June, 2013 – that is, more than two years prior to the commencement of this proceeding. The action is therefore time-barred and should be summarily dismissed.

[19] I do not agree. As the Court of Appeal recently noted in Maurice v. Alles [5], where there is an allegation of continuous oppression stretching over many years, any threatened or actual conduct that is oppressive or unfairly disregards the interests of any complainant can constitute a discrete claim of oppression. And if the action is commenced within two years of this “discrete claim of oppression” that is sufficient. Here is how the Court of Appeal put it:

A party that engages in a series of oppressive acts can always make the argument that it is all part of the same corporate malfeasance and that the limitation period begins to run with the discovery of the first oppressive act. In analyzing that conduct, courts must have regard to the remedial nature of the oppression remedy and the fact that any threatened or actual conduct that is oppressive, or unfairly prejudicial to, or unfairly disregards the interests of any complainant can constitute a discrete claim of oppression. The oppression remedy section of the OBCA is drafted in the broadest possible terms to respond to the broadest range of corporate malfeasance. [6]

[20] In my view, even though the plaintiff has been writing letters of complaint and voicing his concerns for many years, the share sale and pricing resolutions in May, 2015 (and again in August, 2015) raised a new and discrete claim of oppression. Indeed, as the plaintiff, noted in his affidavit, the May share pricing resolutions were “the trigger” for his statement of claim.

[21] The actions in May, 2015 and again in August, 2015 were the first time that the defendant decided to sell treasury shares at prices that were well below the $22,000 price that was paid for the McNally family shares in 2006 or the $32,000 book value price (let alone the price based on current land values.) These decisions reduced the capital of the non-golfing shareholders for the sole purpose of supporting the golfing shareholders and members. By reducing and redistributing shareholder equity, the defendant breached its duty, says the plaintiff, to be even-handed in its treatment of all shareholders and not to oppress the minority who did not play golf.

[22] The discrete acts of alleged oppression occurred in May and August of 2015. The action was commenced on June 15, 2015. The action is obviously not time-barred. The defendant’s motion is dismissed.

(2) Certification

[23] As already noted, the plaintiff seeks to have this action certified as a class proceeding on behalf of the defendant’s non-golfing and non-member Class G shareholders.

[24] Section 5(1) of the Class Proceedings Act [7] provides that the court shall certify an action as a class proceeding if (a) the pleadings disclose a cause of action; (b) there is an identifiable class of two or more persons that would be represented by the representative plaintiff; (c) the claims of the class members raise common issues; (d) a class proceeding would be the preferable procedure for the resolution of the common issues; and (e) there is a representative plaintiff who (i) would fairly and adequately represent the interests of the class, (ii) has produced a workable litigation plan (iii) does not have a conflict of interest with the class.

[25] This court has concluded, in my view correctly, that a class proceeding may be used to pursue oppression remedies provided that the plaintiff can show that the requirements under the CPA are otherwise satisfied. [8] I will consider each of the certification requirements in turn.

Cause of action

[26] The pleadings disclose two causes of action, one under s. 241 of the CBCA for relief from oppression and the other under s. 122 of the CBCA that provides that every director or officer of a corporation in the exercise of their powers must “act honestly and in good faith with a view to the best interests of the corporation.” The plaintiff agrees that his primary claim is oppression.

[27] The cause of action requirement is satisfied.

Identifiable class

[28] The identifiable class requirement is also satisfied. The plaintiff seeks to bring a class proceeding on behalf of the approximately 53 non-golfing, non-member Class G shareholders. The putative class is the minority that is alleging oppression and amounts to about 12 per cent of the shareholders.

Common issues

[29] The plaintiff presents the following common issue for the court’s consideration:

Whether the claims of the Class give rise to actionable wrongs under Sections 241 and 122 of the Canada Business Corporations Act, entitling Class members to damages, declaratory relief and statutory remedies under the Canada Business Corporations Act from the Defendant and, if so, the determination of which remedies ought to be ordered.

[30] As I have already concluded, the discrete acts of oppression that fall within the two-year limitations period are the defendant’s actions in May and August, 2015 in passing the share sale and pricing resolutions. I would therefore amend the proposed common issue to make this time period clear by adding the following under-lined words in parentheses:

Whether the claims of the class (that relate to the actions of the defendant in May, 2015 and thereafter) give rise to actionable wrongs under Sections 241 and 122 of the Canada Business Corporations Act, entitling class members to damages, declaratory relief and statutory remedies under the Canada Business Corporations Act from the defendant and, if so, the determination of which remedies ought to be ordered.

[31] With this clarification, should this common issue be certified? In my view, it should. In order to satisfy the commonality requirement, the plaintiff only needs to adduce some basis in fact for the existence of the common issue. [9] This has been generally interpreted in the case law as a two-step requirement – the plaintiff must provide some evidence that the proposed common issue actually exists and some evidence that the proposed issue can be answered in common across the entire class (that is, some evidence of class-wide commonality). [10]

[32] First, the existence of the proposed common issue. The plaintiff has certainly presented some basis in fact for the oppression claim. There is evidence that the $14,000 and $16,000 share prices that were approved in May and August, 2015 were set as a result of anecdotal evidence as to what shares were selling for privately. There is evidence that the defendant did not consider the actual land value – indeed, that it refused to even inquire as to the value of the land parcel that it owns. There is evidence that the 2015 resolutions were for the benefit of the golfing shareholders and disregarded the interests of the non-golfing shareholders. There is evidence that the defendant has given away $234,055 in shareholder equity to Golf Club customers since this lawsuit began. In short, there is some basis in fact for the existence of the proposed common issue.

[33] Next, commonality. The defendant says there is no commonality because the oppression remedy, which aims to protect shareholders’ reasonable expectations, [11] requires individualized proof about each class member’s expectation. In deciding appropriate remedy, the court will need to hear evidence on an individualized basis. Hence, no commonality.

[34] In my view, the defendant misunderstands the commonality requirement. The class members may well have acquired their Class G shares in different ways, including inheritance and transfer between family members for nominal or other consideration. And, as a result, they may well have differing interests and expectations about the appropriate remedy.

[35] But the commonality requirement does not require that each class member have the same exact interest or must succeed in exactly the same way. As the Supreme Court made clear in Vivendi [12] the primary concern of the commonality requirement is to avoid duplication of fact-finding or legal analysis. A common question can exist “even if the answer ... might vary from one member of the class to another.” [13] And “success for one member does not necessarily have to lead to success for all members.” [14]

[36] Here is how the Supreme Court explained the commonality requirement in Vivendi:

[A] question will be considered common if it can serve to advance the resolution of every class member's claim. As a result, the common question may require nuanced and varied answers based on the situations of individual members. The commonality requirement does not mean that an identical answer is necessary for all the members of the class, or even that the answer must benefit each of them to the same extent. It is enough that the answer to the question does not give rise to conflicting interests among the members. [15]

[37] The Supreme Court urged a “flexible approach to the commonality requirement” [16] and noted with approval what was said by the Saskatchewan Court of Appeal in Frey [17], that “different results may be possible for different class members, provided there is no conflict among the class members, in the sense that success for one class member must mean failure for another.” In other words, the fact that the class members, i.e. the non-golfing Class G shareholders, may have differing expectations or preferences about the appropriate remedy does not undermine the commonality of the proposed common issue.

[38] Some may be content with a buy-out at a share price that reflects the reality that the Company’s raison d’etre is to operate a golf club; others may argue for a buy-out at actual fair market (land parcel) value; and others, such as the plaintiff, may argue that the Company be fully wound up, the land parcel sold and the profits divided.

[39] But all of the putative class members have this in common: they want their shares sold at the highest possible price and they are entitled to expect, at a minimum, that when share pricing decisions are made by the defendant Company, that they will be made in good faith and will not unfairly disregard their interests. [18]

[40] In other words, the class members’ interests, at their core, are not in conflict “in the sense that success for one class member must mean failure for another.” [19] Put simply, the fact that the class member litigants may have differing views about the appropriate remedy does not vitiate the value of the proposed common issue.

[41] The proposed common issue asks in essence whether the actions of the defendant amount to oppression and if so, what remedies should be ordered by the court? The answer to the first part of this question - did the actions of the defendant constitute oppression - will clearly advance the resolution of every class member’s claim.

[42] The answer to the second part of the question – what remedies should the court order – will no doubt involve the presentation of evidence from the plaintiff and his witnesses and the Company and its witnesses. It has been said that s. 241 of the CBCA provides “the broadest, most comprehensive and most open-ended shareholder remedy in the common law world.” [20] The court can make any order it thinks fit, including awarding money damages, appointing a receiver, forcing the acquisition of securities, amending charter documents or dissolving the corporation. If a class action for oppression is available in principle, [21] it must follow that the common issues trial judge should be able to determine the appropriate remedy, [22] which can also include the trial of an issue.

[43] At the very least, the answer to the “what remedy?” question will avoid duplication of fact-finding and legal analysis, will benefit the class members, all of whom have been trying to sell their shares, some literally for years, and will definitely advance the resolution of the class members’ claims.

[44] The common issue, as revised, is therefore certified.

Preferability

[45] The preferability analysis asks (i) whether the class proceeding would be a fair, efficient and manageable method of advancing the claim and (ii) whether a class proceeding is preferable to other reasonably available means of resolving the dispute. [23]

[46] In my view, a class proceeding is not only a fair and efficient way to advance this claim but is preferable to commencing dozens of individual oppression suits with prohibitive costs, duplication of effort and risk of inconsistent decisions.

[47] The preferability requirement is satisfied. [24]

Suitable plaintiff

[48] This is the final requirement and it is also satisfied. The plaintiff, Peter Noble, will fairly and adequately represent the interests of the class. He has produced a workable litigation plan. He has no conflicts of interest with the other members of the class. The defendant’s primary submission on this last requirement was that the plaintiff’s action was out of time but, as I have already concluded, the action is not time-barred.

Disposition

[49] The defendant’s motion for summary judgment is dismissed. There is no limitations issue. The action may proceed.

[50] The plaintiff’s motion for certification is granted. The action is certified as a class proceeding. The proposed common issue, as revised, is certified as the sole common issue. [25] Counsel shall prepare an Order in the form contemplated by s. 8 of the CPA.

[51] The plaintiff is entitled to costs. If costs cannot be resolved by the parties, I would be pleased to receive brief written submissions – from the plaintiff within 14 days and from the defendant within 14 days thereafter. Counsel are advised to review my previous cost awards. [26]

[52] A final comment. This is a dispute that can and should be reasonably resolved by the parties without further litigation. If I can be of any assistance in this regard, counsel should let me know.

Belobaba J. Date: May 12, 2016

[1] Class Proceedings Act, 1992, S.O. 1992, c. 6, s. 5(1) (“CPA”). [2] The defendant was incorporated in 1954 under the Corporations Act, R.S.O. 1990, c. C-38 and, after a restructuring, was continued in 2008 under the Canada Business Corporations Act, R.S.C. 1985, c. 44 (“CBCA”). [3] There are two lists of shareholders that want to sell their shares: one with the names of 53 non-golfing shareholders and the other with the names of 22 golfing shareholders. [4] Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, s. 4(1). [5] Maurice v. Alles, 2016 ONCA 287. [6] Ibid., at para. 52. [7] Supra, note 1. [8] Stern v. Imasco Ltd. (1999), 1 B.L.R. (3rd) 198. [9] Fulawka v. Bank of Nova Scotia, 2012 ONCA 443, at para. 79: “some evidentiary basis indicating that a common issue exists beyond a bare assertion in the pleadings.” [10] Dine v Biomet, 2015 ONSC 7050, at para. 15. [11] Naneff v. Con-crete Holdings Ltd., (1995), 23 O.R. (3d) 48 (C.A.). [12] Vivendi Canada Inc. v. Dell’Aniello, 2014 SCC 1 at paras. 43-47. [13] Ibid., at para. 45. [14] Ibid. [15] Ibid., at para. 46. [16] Ibid. at para. 47. [17] Frey v. BCE Inc., 2011 SKCA 136 at para. 60. [18] Joncas v. Spruce Falls Power & Paper Co., [2000] O.J. No. 1721 at para. 35: “Corporate conduct this is oppressive, unfairly prejudicial or unfairly disregards the interests of [any shareholder] is corporate conduct which defeats the reasonable expectations of such persons.” [19] Frey, supra, note 17. [20] Beck, "Minority Shareholders’ Rights in the 1980’s", in Special Lectures of the Law Society of Upper Canada: Corporate Law in the 80s, (1982) at 312. [21] Supra, note 8. [22] See, for example, Jellema v. American Bullion Minerals Ltd., 2010 BCCA 495, at para. 20, and the decision of the motion judge, 2009 BCSC 1605, at para. 55. It is clear that, but for another (unrelated) issue, the court would have certified both the “oppressive conduct” question and the “what remedy” question. [23] Hollick v. Toronto (City), 2001 SCC 68, [2001] 3 S.C.R. 158, at paras. 28-31. [24] This is not a case like Asp v. Boughton Law Corporation, 2014 BCSC 1124, (relied on by the defendant) where the class was specifically asking that a trust be unwound. The B.C. motion judge concluded that a class action was not the preferable procedure because some of the class member beneficiaries were actually satisfied with the status quo and could not opt out, and there were other beneficiaries who were not part of the class. Here, however, the common issue does not seek a specific remedy (the court is being asked to consider all the facts and determine the appropriate remedy), there is a right of opt-out, and all of the putative class members want to sell their Class G shares (and are obviously not satisfied with the status quo). [25] I could have insisted that the common issue be divided into two parts, s. 241 and s. 122 of the CBCA, but as the plaintiff has readily acknowledged, the main allegation is oppression under s. 241. [26] See any of Dugal v Manulife Financial, 2013 ONSC 4083; Rosen v BMO Nesbitt Burns, 2013 ONSC 2144; Crisante v DePuy Orthopaedics, 2013 ONSC 5186; Brown v. Canada (Attorney General) 2013 ONSC 5637; or Sankar v Bell Mobility, 2013 ONSC 5916.