Summary

39931

Antoine Ponce, et al. v. Société d’investissements Rhéaume ltée, et al.

(Quebec) (Civil) (By Leave)

Keywords

Civil liability — Duty to inform — Duty of good faith — Loss of chance — Commercial law — Corporations — Directors of corporation buying out controlling shareholders — Subsequent offers by third party to buy interests of directors of corporation — Interest of third party not made known to former controlling shareholders — Former controlling shareholders alleging improper appropriation of business opportunity by directors — Scope of duties owing to controlling shareholders — Given its distinction in Quebec civil law with the duty of loyalty, whether the duty to inform, deriving from the duty to act in good faith, places the responsibility on a prospective buyer to inform a prospective seller about the market for the sale — Whether the Court of Appeal of Quebec erred in upholding the award of disgorgement in the absence of a duty of loyalty — Whether the Court of Appeal of Quebec erred in awarding damages for a loss of chance to negotiate in the absence of a basis for disgorgement.

Summary

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The appellants, Mr. Ponce and Mr. Riopel, served as presidents of three companies grouped together under the name “Le Groupe Excellence” controlled by the respondent shareholders, Mr. Rhéaume and Mr. Beaulne. Rhéaume and Beaulne founded Excellence in the late 1970’s, but their working relationship ultimately broke down due to a revenue share dispute. A few years later, the appellants bought the respondents’ interests in Excellence. Rhéaume and Beaulne were unaware, however, that the appellants had been negotiating the sale of Excellence to a third party, Industrial Alliance. Shortly after acquiring the shares of Rhéaume and Beaulne, the appellants sold their interests in Excellence for a significant profit. The respondents allege that the sale of Excellence by the appellants stripped them of a business opportunity. They applied to the courts and claimed joint and several damages against the appellants. The Superior Court granted the respondents’ action in part. The court determined that the appellants used their roles to obtain information for their own benefit, and breached duties of good faith, integrity and loyalty owing to Rhéaume and Beaulne as shareholders. The Court of Appeal dismissed the appellants’ appeal. Although it found that the trial judge made an error in determining that the duty of loyalty was owed to the shareholders, as opposed to the corporation, this error was not determinative since the judge also relied on the obligation of good faith and the duty to inform to conclude that the appellants were at fault towards the respondents.

Lower Court Rulings

September 5, 2018
Superior Court of Quebec

2018 QSCS 3538, 500-11-033405-081, 500-17-047462-083, 500-17-055978-103
Motion to institute controlling shareholders’ proceedings granted in part; directors jointly and severally ordered to pay sums of $7,368,540.60 and $4,516,202.40 to controlling shareholders; motions to institute directors’ proceedings dismissed
September 14, 2021
Court of Appeal of Quebec (Montréal)

2021 QCCA 1363, 500-09-027817-188
Appeal dismissed