One of North America’s largest seafood businesses, Ocean Choice International LP (OCI) was successful in obtaining the dismissal of a claim by its minority limited partner, Landvis Canada Inc. (Landvis) and Landvis’ parent company, Landvis ehf of Iceland, to wrest control of the enterprise from the majority limited partners. Landvis also had a minority interest in the general partner of OCI, 55104 Newfoundland & Labrador Inc. (the General Partner) and had two nominees on the 5-person board of directors.
On January 12, 2016, after a hearing on December 8 to December 10, 2015, the Supreme Court of Newfoundland and Labrador struck the 78-page Statement of Claim in its entirety, without leave to amend, and dismissed the action.
Costs were subsequently awarded to the defendants in the amount of $325,000.
The dispute arose during the course of negotiations for the refinancing of the partnership. The existing Icelandic senior secured lender had given notice that it expected repayment on the maturity of its loans on April 8, 2016. OCI had arranged for a consortium of lenders, led by GE Capital, to replace the senior secured lender by providing $210 million in new senior secured debt. Landvis ehf wanted to be repaid its subordinated loan of approximately $30 million, which had no fixed terms of repayment, and to sell its interest in OCI, which was unlikely to happen absent a change of control. The refinancing would render any change in control unlikely.
In an effort to thwart the negotiations, Landvis, Landvis ehf and their two nominee directors commenced the action against OCI, its General Partner, the CEO, President and Director, Martin Sullivan, the Secretary and Director, Blaine Sullivan, and the majority limited partners controlled by the Sullivans.
The plaintiffs alleged that the proposed refinancing was not in the best interests of the limited partnership and that the defendants had been treating the plaintiffs’ minority interests unfairly.
Claiming oppression under the Canada Business Corporations Act, R.S.C. 1985, c. C-44 (CBCA), and breach of fiduciary duty and, in the alternative, invoking the inherent jurisdiction of the court to remedy unfair conduct, the plaintiffs sought an order removing the general partner, establishing a process for the buy out of the majority interest in the limited partnership by the minority and ancillary relief. They also sought an injunction to stay the refinancing effort.
On January 12, 2016, Justice Orsborn released his 118-page decision dismissing the claim in its entirety.
The Court held that as pleaded, the assertions could not support a basis for a finding of oppression. In particular, there were no assertions of specific prejudicial consequences suffered by a particular plaintiff as a result of specific oppressive conduct.
Importantly, the Court rejected the attempt by the plaintiffs to apply the remedies available to corporate shareholders and creditors under the CBCA to a limited partnership governed by the agreements between the parties. As sophisticated partners had structured their relationship as a limited partnership, it was not for the Court to ignore that structure and impose corporate remedies, either under the CBCA or as a matter of inherent jurisdiction.
The decision of the Court is also significant for its conclusion that the Court did not have the jurisdiction to remove the General Partner, particularly as the limited partnership agreement provided that step could only be accomplished by special resolution.
There were two remaining requests for relief – a declaratory order relating to breach of duty and for access to information by the directors of the general partner.
The Court held that these claims were not adequately supported and delineated in the pleadings. Since these two claims were only marginally related to the main claim for relief, the Court exercised its discretion not to maintain the proceeding simply for the purpose of seeking leave to amend the pleadings in respect of those collateral issues.
OCI LP and 55104 were represented by Barry Bresner of Borden Ladner Gervais LLP, with a team of Maureen Doherty, Heather Pessione and Graham Splawski.
Peter O’Flaherty of O’Flaherty Wells Law acted on behalf of multiple defendants including the directors, Martin Sullivan and Blaine Sullivan.
Her Majesty in Right of Nfld. and Labrador was represented by Rolf Pritchard, QC, and David Rodgers of the Ministry of Justice.
The plaintiffs were represented by Barry Landy of Spiegel Sohmer LLP and Peter Browne, QC, and Aimee Rowe of Curtis Dawe LLP.