In ONE Properties Holdings Corp v Turtle Bay Investments Ltd, 2025 ABKB 313, the Court held that the exercise of a contractual option to buy out a minority shareholder and the accompanying independent share valuation mechanism extinguished parallel oppression claims brought by the minority shareholder pursuant to the arbitration agreements in unanimous shareholder agreements (“USAs”). At the time, the separate option agreement had already been exercised and the minority shareholders’ shares, in respect to which the oppression was being invoked, were already subject to the independent valuation mechanism. The Court declared that, under s. 47(2) of the Alberta Arbitration Act, the arbitration provisions in the two USAs were either invalid or ceased to exist.
Factual Background: ONE Properties Senior Management Corp (“Management”) and ONE Properties Holdings Corp (“Holdings”) were part of a group of related companies engaged in real estate acquisition, development, and leasing in Alberta and elsewhere in Canada. Management’s shares were held by the holding companies of a number of employees, including Applicant Durs Corp and Respondent Turtle Bay. Holdings’ shares were held by Management and Durs Corp, who held a majority position.
Management and Holdings were the Applicants in these proceedings, along with Management employee Darren Durstling and his holding company (Durs Corp), through which Durstling held Management and Holdings shares.
The Respondents were former Management minority shareholder Turtle Bay Investments Ltd. (“Turtle Bay”), owned by former longtime Management employee Thomas Eger, and Eger personally.
The parties’ relationships were governed by two 2013 USAs: one for Management and one for Holdings. Both USAs contained arbitration clauses. The Management USA also contained buyout provisions, which were triggered by events such as retirement, death, or termination of employment. This agreement did not have a valuation mechanism.
In 2014, Durs Corp, Eger, and Turtle Bay entered into a separate Option Agreement, under which Durs Corp held a continuing option to acquire Eger’s shares in Turtle Bay at fair market value. The agreement provided an independent valuation mechanism. It also contained its own arbitration clause.
Eger retired from Management effective December 31, 2019. While he believed his retirement triggered the buyout provision in the Management USA, Durs Corp did not exercise its buyout option under that agreement and the stipulated timeframe to do so expired. Instead, in May 2021, Durs Corp exercised its rights under the 2014 Option Agreement, issuing a notice to acquire the Turtle Bay shares.
The valuation process began. Deloitte, retained by Durs Corp, produced a report valuing the shares at nil or nominal value. Grant Thornton, retained by Eger, initially advised that the ONE Properties enterprise was in a “$74 million hole,” but, as of the date of the judgment, it had not issued its written report.
Notices to Arbitrate: Against this backdrop, Eger issued three Notices to Arbitrate in May 2022—one under each of the USAs and one under the Option Agreement. In the USA Notices, his allegations of oppression were wide-ranging. The Notice to Arbitrate under the Option Agreement alleged that Durs Corp had failed to place all pertinent information in the Data Room that was to be made available to each of the valuators and had denied access to Eger and his valuator.
The Applicants sought a declaration under s. 47 of Alberta’s Arbitration Act that the arbitrations were invalid because the arbitration agreements had ceased to apply once the Option Agreement was exercised. They argued that it was an abuse of process for a minority shareholder to seek an oppression remedy where the majority has made an offer to purchase the minority’s shares by means of a contractually established valuation mechanism. As a result, in their view, the only live issue was valuation, and the mechanism for resolving it lay in the Option Agreement.
The Court held that the exercise of the option effectively extinguished the right to arbitrate under the USAs and the only dispute that could have proceeded to arbitration would have been under the arbitration clause in the Option Agreement in respect to the pricing mechanism by which the minority’s shares were to be sold. As a practical matter, the Court left the door open to having the oppression remedy allegations made in the (now invalid) arbitration be addressed in an eventual arbitration over the valuation process.
The Court’s Analysis: The Court considered s. 47(2) of the Arbitration Act (Alberta) which empowers the Court to declare that an arbitration is invalid because either the underlying arbitration agreement is invalid or has ceased to exist or the arbitration agreement does not apply to the matter in dispute.
(i) The Dell Computers Exception: The Court relied on the Supreme Court of Canada’s decision in Dell Computers Corp v Union des Consommateurs, 2007 SCC 34 to find that the question brought before it by the Applicants was a question of law that involved a minimal non-essential fact-finding based on the record. Therefore, the analysis of the validity of the arbitration or the existence of the right to arbitrate were within the jurisdiction of the Court because they only required a superficial consideration of the documentary evidence.
Here, the key facts were undisputed: the option had been exercised, the valuation process had begun, and the only divergence was whether oppression claims survived in parallel. The Court therefore held this was a question of law suitable for judicial determination at the threshold stage.
(ii) Abuse of Process and UK Authorities: The Applicants argued that pursuing oppression claims in these circumstances constituted an abuse of process. They relied on English authorities interpreting the unfair prejudice remedy under the UK Companies Act, where courts have held that once a majority shareholder offers to purchase a minority’s shares at fair value under an agreed mechanism, it is generally abusive for the minority to maintain an oppression or unfair prejudice petition.
The Court found these non-binding authorities persuasive despite differences in statutory context. Both the Canadian oppression remedy and the UK unfair prejudice remedy serve similar purposes and allow broad relief. In the Court’s view, the logic carried across jurisdictions: when the parties have agreed to an independent valuation process, all rights attaching to the shares are to be priced through that mechanism. Permitting parallel oppression proceedings would duplicate or undermine the agreed contractual process.
Specifically, the Court found as follows:
“To me, it is logical that the exercise of an option to purchase shares involves purchasing all of the rights that attach to the shares and that, through independent valuation, all of those rights can be priced. Thus, in this case, the ability to arbitrate those rights no longer exists as it was subsumed in the exercise of the Option Agreement option and the fair pricing mechanism stated therein.”
Accordingly, the Court declared that, under s. 47(2) of the Arbitration Act, the arbitration provisions in the two USAs were either invalid or ceased to exist, and further, that they were inapplicable to the valuation of the Turtle Bay shares under the separate Option Agreement, which was subject to its own arbitration agreement.
(iii) Validity of the Option Agreement: Eger challenged the Option Agreement as invalid because it lacked essential legal terms of an enforceable option agreement, namely: exclusivity, irrevocability, and a defined term. The argument was dismissed.
(iv) Arbitrable Issues Preserved: While the Court held that the oppression arbitrations under the USAs were extinguished, it preserved a narrow scope for arbitration under the Option Agreement itself. Disputes over access to the Data Room and the adequacy of disclosure were factual matters best suited to arbitration but could not be raised until the final report was issued by Eger’s valuators. The Court stressed that both parties needed to cooperate to allow the valuation to proceed, suggesting that confidentiality undertakings and fuller disclosure would avoid unnecessary arbitral skirmishes.
Contributor’s Notes:
First, this case adds to a relatively limited body of case law on the application of s. 47 of the Arbitration Act and its other Canadian common law equivalents (see for example previous Arbitration Matters blog – Alberta –Stay of Arbitration Granted Where Potential For “Forensic Prejudice” – #785 – Arbitration Matters). While the Court reaffirmed the competence-competence principle applicable to s. 47 (as confirmed in Dow Chemical Canada ULC v Nova Chemicals Corporation, 2023 ABCA 343), it also illustrated its limits by treating the validity of the arbitration under the USAs as a pure question of law, appropriate for judicial determination at the threshold stage under the Dell Computers exception. By deciding whether the arbitration agreements remained operative once the contractual option was exercised, the Court exercised its jurisdiction to expedite the proceeding, rather than deferring the resolution of the issue to the arbitrators under the respective USAs.
Second, the Court highlights the importance of ensuring harmonization among dispute resolution mechanisms in related contracts. Here, despite the deference typically accorded to the will of the parties to refer disputes to arbitration and the hesitation to bring arbitrations to a premature end, the Court held that the exercise of the Option Agreement superseded arbitration rights under the USAs, essentially extinguishing those clauses. The effects of this series of contracts, entered into by sophisticated arms-length companies, put in place an option mechanism that effectively overrode the earlier agreement to arbitrate.
As emphasised by the Court, while in hindsight, it might not look like such a good deal for Eger, who thought that his shares were worth $7.1M and now faced a total loss of value pursuant to the independent valuation process, there is no legal principle that allows the Courts (or arbitrators) to rewrite contracts freely made between parties. This is true for both the substance of the agreements and the dispute resolution processes put in place by the parties.
Third, the Court’s decision took a practical turn when it preserved the potential to arbitrate the practical disputes about disclosure and access to valuation documents that were raised in the USA arbitrations. In an effort to consolidate the issues under the only remaining arbitration agreement, the Court suggested a means of consolidating all the issues. The Court underlined that the valuation mechanism itself allows valuators to consider issues such as mismanagement or misappropriation, insofar as they affect the company’s financial performance or prospects. Allegations of misconduct could therefore be reflected in valuation, rather than litigated separately as oppression claims. For arbitration practitioners, this reinforces the importance of carefully framing disputes so that they are captured by (or excluded from) the scope of arbitration agreements, particularly if they are found in related agreements.