Unable to sell his shares, he unsuccessfully sought to liquidate and dissolve companies
The British Columbia Court of Appeal has dismissed a terminated chief executive officer’s appeal of a ruling rejecting his petition to liquidate and dissolve certain companies under s. 324(1)(b) of BC’s Business Corporations Act, 2002.
In Castilloux v. Mitchell, 2025 BCCA 282, the appellant was a director and CEO of the respondent company, which was essentially family-owned and did not pay dividends.
The appellant’s business relationship with the company’s president, who was once his brother-in-law, broke down. The company then removed the appellant as CEO for cause.
The appellant remained a shareholder of the company and its associated entities. In his petition seeking liquidation and dissolution of these companies, he alleged that he was in “shareholder purgatory” because he could not sell his shares.
In 2024, a chambers judge of the British Columbia Supreme Court denied the appellant’s petition. On appeal, the appellant applied to provide fresh evidence of the companies’ continuing decline, which allegedly showed the need for liquidation and dissolution.
The appellant argued that the judge:
- applied an overly restrictive interpretation to the “just and equitable” standard under s. 324(1)(b) in the context of a “family company”
- committed a palpable and overriding error by misstating the facts concerning who issued and who rejected a settlement offer
Denial of liquidation upheld
The Court of Appeal for British Columbia dismissed the appeal and the fresh evidence application upon determining that the proposed fresh evidence would not have impacted the lower court’s decision.
First, the appeal court ruled that the judge properly applied the legal framework and abided by the broad, context-driven, and discretionary nature of the judge’s power under s. 324(1)(b) of the Business Corporations Act.
The appeal court said the judge did not overlook or misunderstand the pertinent principles in Safarik v. Ocean Fisheries Ltd., (1996), 12 B.C.L.R. (3d) 342, 1995 CanLII 6269 (C.A.), in connection with a s. 324(1)(b) petition.
The appeal court held that Safarik did not stand for the legal principles that the appellant alleged. The appeal court added that the appellant’s interpretation of that case showed that he misunderstood the judge’s discretionary powers under s. 324.
The appeal court noted that the appellant joined the company as an adult, worked as a salaried employee for most of his time there, and received shares in 2018 when he was no longer part of the family.
The appeal court further noted that the gifted shares aimed to reward him for his contributions to the business, were not based on a familial relationship, and were structured to ensure that the president would retain ultimate control. The appeal court said the appellant could have negotiated a shareholders’ agreement to protect his interests in the company.
Regarding the appellant’s dispute with the president in 2022, the appeal court noted that the judge found that the president did not act in bad faith or against the company’s best interests, while the appellant acted irresponsibly, erratically, and uncooperatively, jeopardizing the company with his conduct.
The appeal court found the judge entitled to determine that the appellant should have reasonably expected that the president could control the company to the extent allowed under the articles of incorporation and the Business Corporations Act during disputes.
Second, the appeal court acknowledged that the judge committed a palpable error when he found that the company had offered to buy the appellant’s shares. Instead, the company had rejected the appellant’s settlement offer.
However, the appeal court did not consider this error overriding because the settlement offer was immaterial to the outcome. The appeal court said the judge comprehended and carefully considered the appellant’s plight in reaching his conclusion.
The appeal court accepted the appellant’s difficult situation, given that he could not realize the value of shares in companies he could no longer influence and given that the share value could decrease as the companies lost money.
However, the appeal court decided that the judge appropriately concluded that granting a liquidation order would be unjust and inequitable. The appeal court said the appellant’s financial circumstances were not grounds to interfere with the judge’s conclusion.
