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A-572-80
Aldo Piccinin and Ginette Tremblay (Piclo Enrg.- Piclo Reg'd) (Appellants) (Plaintiffs)
v.
The Queen (Respondent) (Defendant)
Court of Appeal, Pratte and Heald JJ. and Lalande D.J.—Montreal, March 25; Ottawa, April 16, 1981.
Crown — Contracts — Appeal from dismissal of action by wholesale distributors of Loto Canada tickets for alleged unlawful termination of their contract — Trial Judge held that shareholder's resolution directing windup of operations entitled Loto Canada to the benefit of art. 21 of the contract — Article 21 provided that if any measure whatever was taken under the Canada Business Corporations Act which would result in the liquidation of Loto Canada then the contract would be terminated — Whether "liquider" in art. 21 should be interpreted to mean "liquidate and dissolve" — Appeal dismissed — Canada Business Corporations Act, S.C. 1974- 75-76, c. 33, s. 204.
APPEAL. COUNSEL:
D. W. Seal, Q.C. and L. Seidman for appel
lants (plaintiffs).
B. Bierbrier for respondent (defendant).
SOLICITORS:
Seal & Associés, Montreal, for appellants (plaintiffs).
Deputy Attorney General of Canada for respondent (defendant).
The following are the reasons for judgment rendered in English by
HEALD J.: This is an appeal from a judgment of the Trial Division [[1981] 1 F.C. 496] dismissing the appellants' action against the respondent. In that action, the appellants, wholesale distributors of Loto Canada lottery tickets in the Montreal area, claimed for losses and damages in the sum of $184,000, said to result from the unlawful termi nation by Loto Canada on December 31, 1979, of their contract with Loto Canada for a term com mencing April 1, 1979 and expiring on March 31, 1982. Under the contract, the appellants were to be exclusive wholesale distributors of lottery tick ets for Territory 34 as that Territory is more
particularly described in Annex "A" to the con tract. Article 2 provides that the term of the contract runs from April 1, 1979 to March 31, 1982, unless it is terminated earlier pursuant to the provisions of the contract. Article 3 enables Loto Canada to replace, reduce, enlarge or other wise modify the appellants' territory without any recourse by the appellants excepting the require ment for prior notice and consultation by Loto Canada. Article 4 gives the appellants exclusive wholesaler rights in the territory but Loto Canada reserves unto itself the absolute right to sell tickets directly to retailers or clients within the territory, without compensation to the appellants. Article 6(a) provides that Loto Canada will print the lottery tickets at its expense and will also carry out the distribution thereof. Article 13 provides that in case of termination or non-renewal of the present contract, the appellants do not have any right to indemnity, reimbursement or damages against Loto Canada for loss of earnings or expenses etc. Article 17 provides that neither party to the con tract is bound by declarations, promises or stipula tions not expressly stated in the contract. Article 21, which in the view °of the learned Trial Judge, was a "crucial" clause, 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 terminat ed, and the appellants will not be able to invoke said contract in any claim against Loto Canada or Her Majesty the Queen. At the trial, the respond ent filed a document entitled "Unanimous Share holders Resolution" (Exhibit Dl) certified by the Corporate Secretary of Loto Canada to be a true copy of a resolution passed on August 21, 1979 by the sole shareholder of Loto Canada Inc. that sole shareholder being the Minister responsible for Loto Canada Inc. who held the sole share in trust for Her Majesty the Queen. The resolution reads as follows:
The Shareholder directs the Board of Directors of Loto Canada Inc. to commence the orderly windup of the operations of the Corporation effective as of the date hereof.
At the trial, the respondent (defendant) submitted that said resolution was a measure taken under the Canada Business Corporations Act which would
result in the liquidation of Loto Canada thus entitling Loto Canada to the benefit of the provi sions of article 21 referred to supra. The learned Trial Judge accepted that submission and relied on it as the sole basis for dismissing the appellants' action. He stated that basis as follows [at page 499]:
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 share holders ...". It is clear therefore that a special resolution of the shareholder 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 claim ing 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.
Counsel for the appellants submitted that the learned Trial Judge erred in so finding. Counsel argued that because the respondent, in its amend ed defence, characterized the shareholder's resolu tion of August 21, 1979 as being passed "pursuant to Section 204(3) of the Canada Business Corpo rations Act," and because said subsection 204(3) 1 states that a corporation may liquidate and dis solve by special resolution of the shareholders, that therefore the word "liquider" as used in article 21 of the contract must be interpreted to mean "liquider et dissoudre" or, in English, "to liqui date and dissolve". Counsel further submitted that the resolution under subsection 204(3) must clear ly indicate the intent of the Corporation to dissolve.
I do not agree with these submissions. In my view it is necessary to read the provisions of sub section (3) of section 204 in the context of the various other provisions of section 204. When viewed from that perspective, it is my opinion that
' Said subsection 204(3) reads as follows:
204... .
(3) A corporation may liquidate and dissolve by special resolution of the shareholders or, where the corporation has issued more than one class of shares, by special resolutions of the holders of each class whether or not they are otherwise entitled to vote.
the words "liquidation" and "dissolution" as used in subsection (3) are not synonymous and should not be so interpreted. Section 204 sets out the procedure for voluntary liquidation and dissolution of a corporation. The section is contained in Part XVII of the Act which is entitled "Liquidation and Dissolution". [Emphasis added.] Subsection (4) of section 204 provides for the filing of a statement of intent to dissolve with the Director. This step was not taken, at all relevant times, in the case at bar. Subsection (5) provides that the Director shall issue a certificate of intent to dis solve upon receipt of the statement of intention to dissolve as contemplated in subsection (4).
Subsection (6) provides that: "Upon issue of a certificate of intent to dissolve, the corporation shall cease to carry on business except to the extent necessary for the liquidation, but its corpo rate existence continues until the Director issues a certificate of dissolution." In my opinion, this sub section shows clearly that the two terms are not and should not be used synonymously or inter changeably. Subsection (10) provides that at any time after issue of a certificate of intent to dissolve and before issue of a certificate of dissolution, the corporation may send to the Director a statement of revocation of intent to dissolve if such revoca tion is also supported by a special shareholders' resolution. Subsection (12) provides that upon completion of the formalities set out in subsection (11), the corporation may continue to carry on its business. Subsection (16) provides that the corpo ration ceases to exist on the date shown in the certificate of dissolution issued by the Director pursuant to subsection (15).
I thus conclude that section 204 treats liquida tion as a preliminary step which may but does not necessarily lead to the dissolution of the corpora tion. Accordingly a Court would not be justified in reading into article 21 of the contract a word such as "dissolve" which, in the context of the appli cable statutory provision, has a quite distinct, separate and different meaning from the word "liquidate" which is used in the clause under review.
I therefore agree with counsel for the respondent that the shareholders' special resolution of August 21 is the first step resulting in or leading to liquidation of the corporation and as such is:
[TRANSLATION] "... any measure undertaken pursuant to the Canada Business Corporations Act, having the effect of liquidating Loto Canada Inc...." as those words are used in article 21 of the contract.
Appellants' counsel also referred to articles 1013 to 1021 inclusive of the Quebec Civil Code which set out the rules relating to the interpretation of contracts. However, it is my view that those provi sions do not assist the appellants since I believe the meaning of article 21 is not doubtful nor is it susceptible of two meanings.
I have accordingly concluded that the learned Trial Judge was not in error in deciding that the operation of article 21 of the contract bars the appellants' claim against Loto Canada or the respondent.
At the hearing of the appeal, counsel for the respondent advanced an additional argument in support of his position that appellants' action against the respondent cannot succeed. Shortly stated, it was the respondent's submission that Loto Canada Inc., in ceasing its lottery operations with the draw ending December 31, 1979, was not in breach of any obligation, express or implied, contained in its contract with the appellants. I agree with this submission and find it to be a good and sufficient basis for affirming the decision of the Trial Division, quite apart from the basis of the applicability of article 21 of the contract which was relied on by the learned Trial Judge. The central position taken by the appellants was that pursuant to the contract between the parties, Loto Canada was legally obligated to sell and deliver Loto Canada lottery tickets to appellants for the three year term of the contract and by ceasing its lottery operations with the sixteenth draw on December 31, 1979, it had breached that contract. It was the position of counsel for the appellants that, whether Loto Canada wished to continue its lottery operations or not, it was bound to do so for a period of three years for the benefit of the appellants or expose itself to an action in damages for said breach. I cannot accept this submission. In my opinion, a careful perusal of the terms and conditions of the contract and the annexes thereto do not support that view of the matter. The con tract imposes no obligation on Loto Canada to continue its lottery operations nor does it specify
the number of draws to be held during the term thereof. It does not even give to the appellants the exclusive right to sell tickets in Territory No. 34 since Loto Canada specifically reserved unto itself the absolute right to sell lottery tickets directly to retailers or consumers in Territory No. 34. What the contract did give to the appellants was the exclusive wholesaler rights to Territory No. 34. Additionally, Loto Canada could, pursuant to the contract, replace, reduce, enlarge or otherwise modify the appellants' territory. I am satisfied that there is nothing in the terms of the contract or the annexes thereto, express or implied, which would have the effect of imposing on Loto Canada a legal obligation to continue having lottery draws throughout the term of the contract. The contract details the terms of the agreement between the parties which governs their relationship in the event of and so long as lotteries are held, but, in my view, such provisions do not justify any infer ence that Loto Canada has warranted or contract ed to hold a specified number of draws or to hold draws for the entire term of the contract, particu larly so, in the absence of any specific provision to that effect. It therefore follows that since Loto Canada did not breach the contract, there can be no remedy against it or the respondent for any damages said to be sustained by the appellants.
For all the foregoing reasons, I would dismiss the appeal with costs.
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PRATTE J.: I agree.
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LALANDE D.J.: I agree.
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