Applicant's Shares: A Case Study

[67]In light of the unfair, prejudicial and oppressive conduct of the Respondents, the applicant seeks amongst other things an order requiring the Respondents to purchase the Applicant’s shares, as is authorized by s. 248(3)(f).
[68]This remedy has the greatest potential to remedy the oppression, unfair disregard and prejudice the applicant has suffered in this circumstances.
[69] It is clear that the business relationship between and the Respondents has completely broken down. The past actions of the Respondents demonstrate that cannot expect to be treated properly as a shareholder of the companies or even as a director. Leaving the Applicant as a shareholder or simply reinstating his position as director would leave him vulnerable to Ben,
It is just and equitable. Like the oppression remedy, fair value is value based on principles of equity. It is not the same as market value.
[71] In this case, fair value is the purchase of the Applicant’s shares at the higher end of the valuation determined by the Applicant’s expert. Celestial shares should be purchased for $3 million dollars and Success shares should be purchased for $15.9 million dollars.
1. The Shares Purchase Price Should be Set Using Cattalina Anghel’s.Valuation Report
[72] Requiring the Respondents to purchase the Applicants shares at the values determined in the valuation report (“the report’) of Catalina Anghel (“Catalina”) provides “adequate compensation (indemnity), consistent with the requirements of justice and equity.” Catalina has determined that the range of values for the Applicant’s Success shares is $13.4 million dollars to $15.9 million dollars. The value of the Applicant’s shares of Celestial has been valued at $2.8 million dollars to $3 million dollars.
[73] As stated by the Supreme Court of Canada in R. v. Mohan:
Admission of expert evidence depends on the application of the following
[75] The caselaw outlines four different methods to value securities: the capitalization of maintainable earnings (the "earnings") approach; the valuation of the net assets of the company at fair market value (the "assets" approach); the quoted market price on the stock exchange (the "market" approach); or some combination thereof. Because of the frailties in the market approach, when valuing the shares of a going concern, the more acceptable approach is the "earnings" approach.
[76] Courts have consistently cautioned against the use of the market value approach where circumstances suggest that the market price is not a reliable guide to value.
[77] In the present case, a market approach to valuation was both (a) unavailable on the evidence, and (b) inappropriate in the circumstances. The last time that the shares were placed on the market they were acquired by non-arms length transactions, as such they are not a true indication of the price shares. Catalina recognized that the market approach would be inappropriate and has use EBIT