Question
Pebble Bay Corp. (PBC) owns 67% of the outstanding common shares of Lakeside Golf Courses Inc. (Lakeside), which had, in turn and until recently, owned
Pebble Bay Corp. ("PBC") owns 67% of the outstanding common shares of Lakeside Golf Courses Inc. ("Lakeside"), which had, in turn and until recently, owned and operated two luxury golf courses near Huntsville, Ontario. Lakeside has only one class of shares and was incorporated as aprivately-held company under theBusiness Corporations Act (Ontario).
In November 2020, PBC, with its majority voting power, elected all three directors on Lakeside's board of directors. Then, the board decided to sell Lakeside's most popular and profitable golf course ("Long Play"), together with the Restaurant described below, to PBC for only half of Long Play's fair market value.
One of the reasons that Long Play had been so popular and profitable related to a charming restaurant (the "Restaurant") that Lakeside had constructed on the shores of Lake Vernon on a separate piece of real estate Lakeside had purchased after Long Play had first been developed. The Restaurant is located near the putting green on the 9th hole of the golf course, but it is separated from the Long Play property by a small parcel of land that has been owned by a cottager (the "Adjacent Property"). Since 1996 when the Restaurant first opened, Long Play's golf patrons (the "Golfers") have very much enjoyed the unique experience of eating lunch at the Restaurant overlooking Lake Vernon, and they have done this on a regular basis each year during the May to October golf season.
One of the concerns that Lakeside had, when it initially built the Restaurant, was that its Golfers may not want to eat at the Restaurant because of the long walk involved to get there (it appeared that they needed to walk out to a nearby road, walk along the road around the Adjacent Property and then walk back to the Restaurant on a driveway that provided vehicle access to the Restaurant). However, during the first year that the Restaurant was open, the Golfers avoided this long walk by instead crossing along the edge of the Adjacent Property to get to and from the Restaurant from the 9th hole of Long Play. The Golfers have accessed the Restaurant this way since 1996, and the cottager has not seemed to mind them doing so because the Golfers have been careful not to damage the Adjacent Property. In fact, the cottager and the President of Lakeside have recently become friends and, every year over the past 3 years, Lakeside has hosted a complimentary Labour Day Weekend dinner for the cottager in the Restaurant.
PBC believes that the pattern of activity described above (allowing quick access for the Golfers, to and from the Restaurant) has created a particular type of right that enhances the market value of Long Play. In fact, PBC believes that Long Play has been a particularly valuable asset for Lakeside, in part because of the unique dining experience that the Restaurant provides for the Golfers. PBC is therefore (quietly) very pleased that it has acquired Long Play and the Restaurant from Lakeside for the low price that it paid.
- (a) What right does PBC believe has been created regarding access to and from the Restaurant, and is PBC correct in that belief? (5 marks)
- (b) How have the minority shareholders of Lakeside been affected by the sale of Long Play and the Restaurant to PBC, and what types of legal recourse are available to Lakeside's minority shareholders in this regard? (5 marks)
Please explain your answer fully, with thorough factual analysis and comprehensive reference to all potential legal actions and relevant statutory provisions.
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