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Digest of the Week – “Put-Right” Option

Digest of the Week – “Put-Right” Option

Trial judge’s finding that “Put-Right” Option was part of a bilateral contract entitled to deference.

Flintoff v. Crown William Mining Corp.
2016 CarswellOnt 1270
Ontario Court of Appeal

Business associations --- Specific matters of corporate organization — Shares — Option contracts — Miscellaneous

Plaintiff vendors had obtained judgments against A, which were unpaid — C Corp. agreed to facilitate vendors' collection of judgments — Asset purchase agreement provided that C Corp. would purchase judgments from vendors, in return for two promissory notes and issue of common shares of C Corp. — After C Corp. made some payments, $600,000 remained owing in event vendors exercised their share "Put-Right" — As for vendors' "Put-Right" option, agreement provided that following two-year holding period, vendors could require controlling shareholders of C Corp., defendant purchasers S Inc. and S S.A., to purchase vendors' issued shares at specified price per share — Vendors gave notice that they wished to exercise Put-Right option but purchasers did not purchase shares — Vendors brought action to compel purchase of shares — Vendors' motion for summary judgment was granted — Trial judge found purchasers had actual notice of vendors' letter — Trial judge found there was substantial performance in terms of notice and absence of prejudice to purchasers with respect to manner in which notice was given — Trial judge found provision in agreement for certificate under s. 116 of Income Tax Act was not condition precedent to exercise of Put-Right option — Purchasers appealed — Appeal dismissed — Trial judge's conclusion that option was part of bilateral contract was owed deference — Substantial compliance with contractual requirements had occurred — Certification under s. 116 of Income Tax was matter to be dealt with on closing not precondition to sale of shares — Trial judge properly found that release agreement did not govern option, as it did not arise until after effective date of release — Amount of award and remedy of specific damages were reasonable.
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