Executive Summary: Key Legal and Evidentiary Issues

• Shareholder deadlock in a closely held corporation prompted a petition for dissolution and liquidation.

• Dispute centered on whether the buyout should involve a sale of shares or assets.

• The court considered the appropriateness and mechanics of a “shotgun” buy/sell order under the CBCA.

• Allegations of fraud and misconduct were raised but not adjudicated due to conflicting affidavits.

• Costs were contested, with arguments for special or uplift costs based on alleged litigation conduct.

• The court ultimately awarded ordinary costs, declining to find grounds for special or uplift costs.

Facts and outcome of the case

Background and factual context

The case involved Pouria Emadi and Reza Soleymani, who were the sole directors and equal shareholders of VanEx Currency Exchange Inc. A deadlock arose between them regarding the management and direction of the company, leading Mr. Emadi to file a petition in August 2024 seeking judicial intervention. The parties agreed that it was just and equitable for VanEx to be liquidated and dissolved under the Canadian Business Corporations Act (CBCA). They also consented to the use of a buy/sell or “shotgun” order to resolve their dispute, but disagreed on the structure and mechanics of the order—specifically, whether it should be a sale of shares or a sale of assets, and who should make the first offer.

Court’s analysis and decision on the main dispute

The court determined that the nature of the shotgun sale was central to the dispute. After considering the parties’ submissions, the court ordered that the petitioner, Mr. Emadi, make a shotgun offer to buy the respondent’s shares. The court rejected the respondent’s argument for a sale of assets and also declined the petitioner’s request that the respondent make the first offer. The court found that, although neither party’s preferred mechanism was adopted in full, the petitioner achieved substantial success because the core issue was decided in his favor.

Issues regarding costs and allegations of misconduct

Following the main decision, the parties submitted arguments on costs. The respondent contended that a decision on costs was premature and raised concerns about the legitimacy of the petitioner’s offer, as well as alleged contempt of a prior court order. The court found these arguments unpersuasive and held that the determination of costs was appropriate at this stage. The respondent also argued that success was divided and that allegations of dishonesty remained unresolved due to conflicting affidavits. The court accepted that the petitioner had achieved substantial success and was entitled to costs, even though not all of his requests were granted.

Outcome on costs and damages

The petitioner sought special or uplift costs, alleging that the respondent’s conduct had complicated the proceedings and included unfounded allegations of fraud. The court declined to award special or uplift costs, finding that both parties contributed to the complexity of the hearing and that the threshold for such costs was not met. The court awarded the petitioner ordinary party and party costs at Scale B, with no special or uplift costs granted. No damages were awarded, as the decision focused solely on costs.

Conclusion

The case highlights the court’s approach to resolving shareholder deadlock in a closely held corporation, the mechanics of shotgun buy/sell orders, and the standards for awarding costs in contentious corporate disputes. The petitioner prevailed on the central issue and was awarded ordinary costs, but the court declined to find misconduct warranting special or uplift costs.