THE ADVOCATE 345
VOL. 80 PART 3 MAY 2022
DIVORCING YOUR TOXIC
BUSINESS PARTNER: A CASE COMMENT
By Neal Steinman
Shareholders with a minority stake in a closely held company can
have great trouble trying to leave. Retiring, leaving to pursue
other opportunities or escaping a toxic partner can be difficult.
The money tied up in the business often represents the bulk of a
shareholder’s retirement savings. Dubois v. Lucid Distributors Inc. illustrates
how difficult it can be for an owner with a minority interest to extract their
investment in a closely held company.
Lucid Distributors Inc. (“Lucid”) is a company engaged in the distribution
of pet food and supplies and was started by the defendant Carey Milne
(“Milne”).
The plaintiff, Kelvin Dubois (“Dubois”), initially bought five per cent of
the preferred shares in Lucid in 1997, then joined the company as an
employee in 1998. Some two years later, Dubois acquired a total of forty-five
per cent of the company held through non-voting shares.
Milne terminated Dubois’s employment. Like many other persons
involved in private (closely held) companies, Dubois thought that after his
employment was terminated, Milne, as majority shareholder, or the company
would buy out his shares. That did not happen. Instead, Dubois had to
start both a wrongful dismissal action and an action seeking an oppression
remedy, seeking a court order against his co-owner Milne to buy out his
shares, which took almost ten years to resolve.
In June 2021, the B.C. Supreme Court ordered Milne to buy out Dubois
for $1,048,000.1 At the date of this writing, Milne still has not fully paid out
Dubois for his shares in Lucid.
Ten years passed from the time of Dubois’s termination to the time of
Tindale J.’s judgment fixing the valuation of Dubois’s shares at $1.048 million
and ordering Milne personally to buy out Dubois’s shares for that price.
To get to that point, Dubois had to prevail in a costly nine-day trial to
prove that he was entitled to an oppression remedy and buy-out—a trial
held in 2018. Dubois then had to prevail in an appeal brought by Milne—an
appeal decided in 2020. Milne still must pay Dubois.
The courts reached the correct result. But a nagging question arises.