In Kirke v Spartan Controls Ltd, 2025 ABCA 40, Justices Watson, Kirker and Grosse had a fact situation in which the Plaintiffs’ shares in a private company were governed by a Unanimous Shareholder Agreement which contained the following two clauses that dealt with the right of the Company to buy back the Plaintiff’s shares:
2.4 In the event any Shareholder’s employment or association with the Company is terminated, for any other reason than above stated, before reaching normal retirement age, then the Company shall have the exclusive right (but not the obligation) to purchase all (but not less than all) Shares then owned by such Shareholder. Such right may be exercised by notice in writing to such Shareholder at any time within ninety (90) days after his employment terminates.
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2.6 The Company may at any time, by Ninety (90) days notice in writing to the Shareholder, require that the Shareholder sell all or a part of the Shares then owned by such Shareholder to the Company. Upon the elapse of the notice period to the Shareholder [sic] shall have the obligation to sell and the Company shall have the obligation to buy such Shares set out in the notice.
The plaintiff was terminated and the Defendant demanded the buy back of the shares within 90 days of his actual date of termination.
The trial judge found , and the Court of Appeal agreed, that relying on section 2.6 (but not 2.4 ) that the Defendant had the right to buyback the shares after 90 days of the actual date of termination.
[13] The summary trial judge accepted that the SHPS payments were a part of Mr. Kirke’s employment compensation and therefore, as a starting point in the analysis, Mr. Kirke had established an entitlement to claim SHPS payments during the reasonable notice period. The summary trial judge was not satisfied that section 2.4 of the USA unambiguously took away Mr. Kirke’s common law right because the word “terminated” could be interpreted as referring to the end of the reasonable notice period. However, he found that section 2.6 of the USA plainly enabled Spartan Controls to trigger a buy back of shares at any time on 90 days’ notice and that this agreed upon term unambiguously limited Mr. Kirke’s common law right to damages. Reassured by the principle from Hamilton v Open Window Bakery Ltd, 2004 SCC 9, that the defendant’s least onerous method of performing a contract should be the basis for calculating damages, the summary trial judge assessed Mr. Kirke’s damages to include the loss of SHPS payments for the limited period of 90 days from the date of receipt of notice.
My Comments:
Most of the RSU or stock option agreements that I see in my mediation practice only contain a clause similar to Article 2.4 which speaks of the right to repurchase shares, or the forfeiture of shares, in relation of the termination of employment. This case makes it clear that absent express language ( which may have to comply with the ESA) referring simply to “termination of employment ” actually means ” lawful termination of employment” or in another words, the relevant day is not the actual day the employer terminates the employment but rather the last day of the reasonable or contractual notice period .
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