•
T-5794-79
Aldo Piccinin and Ginette Tremblay (Piclo Enrg.-
Piclo Reg'd) (Plaintiffs)
v.
The Queen (Defendant)
Trial Division, Dubé J.—Montreal, June 19;
Ottawa, July 16, 1980.
Crown — Contracts — Action by wholesale distributors of
Loto Canada tickets for losses and damages allegedly result
ing from unlawful termination of their contract — Contract
deemed to be terminated, pursuant to its art. 21, if any
measure whatever taken under Canada Business Corporations
Act results in Corporation's liquidation — Whether unani
mous shareholders resolution directing windup of operations
such a measure — Canada Business Corporations Act, S.C.
1974-75-76, c. 33, s. 204(3).
This is an action by wholesale distributors of Loto Canada
lottery tickets for losses and damages allegedly resulting from
the unlawful termination on December 31, 1979 of their con
tract for the period of April 1, 1979 to March 31, 1982. Article
21 of the contract provides inter alia that if Loto Canada is
liquidated by any measure whatever taken under the Canada
Business Corporations Act which would result in its liquida
tion, then the contract will be deemed to be terminated and the
wholesaler may not invoke it in any claim against Loto Canada
or the Queen. The question is whether a "unanimous sharehold
ers resolution" passed on August 21, 1979, directing the Board
of Directors of Loto Canada to commence the orderly windup
of the operations of the Corporation effective as of that date,
constitutes such a measure.
Held, the action is dismissed. Under subsection 204(3) of the
Canada Business Corporations Act, "a corporation may liqui
date and dissolve by special resolution of the shareholders". It
is clear therefore that a special resolution of the shareholders of
the Board of Directors of Loto Canada is a step taken under
the provisions of the Act which would liquidate Loto Canada:
the resolution directs the Board to commence the orderly
windup of the operations effective as of the date thereof.
ACTION.
COUNSEL:
D. W. Seal, Q.C., Leonard E. Seidman and
Gerald Barry for plaintiffs.
B. Bierbrier and P. Coderre, Q.C. for
defendant.
SOLICITORS:
Seal & Associates, Montreal, for plaintiffs.
Deputy Attorney General of Canada for
defendant.
The following are the reasons for judgment
rendered in English by
DuBÉ J.: This is an action by wholesale distribu
tors of Loto Canada lottery tickets in the Montreal
area for losses and damages in the amount of
$184,000 allegedly resulting from the unlawful
termination on December 31, 1979 of their con
tract for the period of April 1, 1979 to March 31,
1982.
Plaintiffs claim that the termination of the na
tional lottery, of the activities by Loto Canada Inc.
("Loto Canada"), and the subsequent termination
of plaintiffs' rights to distribute the lottery tickets
and derive the anticipated revenue therefrom is
clearly a breach of defendant's contractual obliga
tions, particularly in view of the fixed term pro
vided for in the contract.
The defendant avers that under the terms of the
contract Loto Canada was under no obligation to
hold any number of draws during the period of the
contract, and under no obligation to provide plain
tiffs with any number of lottery tickets inasmuch
as the contract reserved unto Loto Canada the
right in its own discretion to sell lottery tickets
directly to retailers or consumers located in plain
tiffs' territory without compensation to plaintiffs.
The defendant claims moreover that Loto
Canada was under no obligation expressed or
implied in the said contract to continue its lottery
operations for the period defined in the contract.
In its amended statement of defence filed on the
opening date of the trial, the defendant added the
following paragraph:
14 (a). In fact, the shareholders of Loto Canada Inc., by
unanimous Shareholders Resolution adopted in August 21,
1979 pursuant to section 204(3) of the Canada Business Corpo
rations Act, directed the Board of Directors of Loto Canada
Inc. to commence the orderly windup of the operations of the
Corporation effective as of date thereof.
The contract provides that Piclo Enrg. will be
the exclusive wholesale distributors of lottery tick
ets for territory 34 which includes the City of
Montreal. Article 2 provides that the contract
binds both parties for a period of three years from
April 1, 1979 to March 31, 1982, unless it is
terminated ("résilié") before, pursuant to the
provisions of the contract. Under article 3 Loto
Canada may at any time replace, reduce, or
enlarge, or otherwise modify the territory, without
recourse from the wholesaler. Article 4 provides
that the nomination of a wholesaler is exclusive for
the territory, but that Loto Canada reserves unto
itself the absolute right to sell tickets directly to
retailers or clients within the territory, without
compensation to the wholesaler. Article 6 provides
that Loto Canada prints the tickets and carries out
the distribution thereof.
Article 13 provides that in case of termination
or non-renewal of the present contract, the whole
saler has no right to indemnity, reimbursement or
damages against Loto Canada for loss of earnings,
expenses, etc. Article 17 stipulates that neither
party will be bound by declarations, promises or
stipulations not expressly stated in the contract.
Article 21 which, in my view, is crucial to the
solution of this matter, provides that if Loto
Canada is liquidated by a law of the Parliament of
Canada, or a regulation passed, or any measure
whatever taken under the Canada Business Cor
porations Act, S.C. 1974-75-76, c. 33, which
would result in the liquidation of Loto Canada,
then the present agreement will be deemed to be
terminated, and the wholesaler may not invoke
said contract in any claim against Loto Canada or
Her Majesty the Queen. This key provision reads
as follows:
[TRANSLATION] 21. In the event that, following signature of
this cohtract, an Act of the Parliament of Canada is enacted, a
Regulation adopted or any measure undertaken pursuant to the
Canada Business Corporations Act, having the effect of liqui
dating Loto Canada Inc., this agreement shall be deemed to be
terminated, and the Wholesaler may not then rely on the said
contract in any claim against Loto Canada Inc. or Her Majesty
the Queen in right of Canada.
It is common ground that the Parliament of
Canada has enacted no law to liquidate Loto
Canada and that no regulation has been passed in
the matter, but the defendant asserts that a meas
ure has been taken under the Canada Business
Corporations Act which will result in the liquida
tion of Loto Canada.
At the opening of the hearing counsel for the
defendant filed a document titled "Unanimous
Shareholders Resolution" and signed by the Secre
tary of State and the Minister of State, Fitness,
Amateur Sport and Multiculturalism. The docu-
ment is certified by the Corporate Secretary to be
a true copy of a resolution passed on August 21,
1979. By that resolution the shareholder directs
the Board of Directors of Loto Canada to com
mence the orderly windup of the operations of the
Corporation effective as of the date thereof.
Counsel for the defendant rightly claims that
said resolution is truly a "mesure quelconque"
(any measure whatever) taken under the above
Act resulting in the liquidation of Loto Canada.
Under subsection 204(3) of the Canada Business
Corporations Act as amended [French version] "a
corporation may liquidate and dissolve by special
resolution of the shareholders ...". It is clear
therefore that a special resolution of the sharehold
er of the Board of Directors of Loto Canada is a
step taken under the provisions of the Act which
would liquidate Loto Canada: the resolution
directs the Board to commence the orderly windup
of the operations effective as of that date.
On that ground, therefore, plaintiffs are barred
from claiming damages against Loto Canada or
Her Majesty the Queen. It is not necessary under
the circumstances to deal with the other grounds
of defence advanced by the Crown in this matter.
The action is dismissed, but in view of the late
filing of the amended defence and of the decisive
Loto Canada resolution (which was not on defend
ant's list of documents)' there will be no costs
taxed against the plaintiffs.
' The existence of the document was only brought to the
attention of Crown counsel on June 12, 1980 and he immedi
ately informed plaintiffs' attorney.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.