The case of Harris v. Leikin Group Inc. provides
another illustration of the messy, and costly, fallout that can
occur when there is a dispute within a successful family
The Leikin Group was founded by Harry Leikin (now deceased), the
grandfather of the protagonists in the Harris litigation.
Harry Leikin had 11 grandchildren, each of whom received an equal
amount of common shares in the
family company. As time went on, discord grew among the
grandchildren – little trust or cooperation existed among the
group. A group of 8 grandchildren wished to sell their shares. The
remaining 3 grandchildren wished to carry on and grow the business.
Negotiations ensued for the 8 grandchildren to be bought out.
The primary asset of the Leikin Group was
College Square – a big box shopping complex in Ottawa. A
key point of the negotiations was the determination of a valuation
Negotiations between the parties was characterized by bitterness
and distrust. Ultimately the parties determined that College Square
would be valued at $60 million. This figure was negotiated between
the parties and not based on any appraisal or other determination
of fair market value.
During the course of negotiations, the selling shareholders were
aware that the non-selling shareholders might subsequently cause
the company to sell a stake in College Square in order to help
finance the cost of the share redemption. The selling shareholders
were concerned that such a sale might be based on a valuation of
College Square in excess of $60 million. The selling shareholders
asked that they be granted tag-along rights as part of the share
redemption deal so that they would be allowed to participate in any
upside, should such a sale occur above a $60 million valuation. The
non-selling shareholders refused. The selling shareholders accepted
this refusal and proceeded with the share redemption based on a
valuation of $60 million for College Square.
Some time after the parties came to terms on the share
redemption, the non-selling shareholders sold a 50% equity stake in
College Square to a third party based on a valuation of $78.8
After finding out about the third-party College Square
transaction, six of the eight selling shareholders commenced a
lawsuit against a multitude of parties connected to the Leikin
Group, including the three non-selling shareholders and various
professional advisors to the three non-selling shareholders. The
central claim was that the non-selling shareholders and their
advisors knew several months before the share redemption agreement
closed that the third party was willing to buy a share of College
Square based on a valuation of at least $70 million. The primary
legal theory was that the non-selling shareholders breached a
fiduciary duty owed to the selling shareholders.
The trial judge held, and the Court of Appeal agreed, that the
non-selling shareholders did not owe a fiduciary duty to the
Generally speaking, a fiduciary duty is a duty of good faith,
trust, confidence, and candor. Fiduciary duties generally arise in
situations where there is a relationship of vulnerability where the
fiduciary has undertaken to act in the best interests of the
In upholding the trial judge's refusal to find the existence
of a fiduciary duty, the Court of Appeal noted the explicitly
adversarial nature of the negotiation process, and the fact that
the selling shareholders entered into a share redemption agreement
in spite of the non-selling shareholders' refusal to grant them
tag-along rights. On the evidence, the selling shareholders were
not expecting the non-selling shareholders to protect their
interests in the negotiations. In these circumstances, the Court of
Appeal held, the trial judge quite properly rejected the claims of
breach of fiduciary duty.
The Court of Appeal also upheld the trial judge's finding of
fact that there was no evidence that there was a "bought
deal" with the equity investor during the time the share
redemption transaction was being negotiated in any event – a
key plank of the selling shareholders' case. However, even if
there had been a bought deal in place, it is certainly open to
debate whether this could have grounded a fiduciary duty given the
findings made by the trial judge and the Court of Appeal as to the
nature of the relationship and the tenor of the negotiations
between the parties.
The selling shareholders' claim against the various
professional advisors also failed. These claims sounded in knowing
assistance of a breach of fiduciary duty. Since there was no
underlying breach of fiduciary duty, these claims could not
The selling shareholders were ordered to pay the various
defendants $2.5 million for the costs of the trial, and $235,000
for the costs of the appeal.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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In Irwin v. Alberta Veterinary Medical Association, 2015 ABCA 396, the Alberta Court of Appeal found that the "ABVMA" failed to afford procedural fairness to a veterinarian undergoing an incapacity assessment.
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