Limiting a court's powers on a private liquidation?

Can the Court make an order approving a process for the sale of a company’s assets in a private liquidation?

Callahan v. Ernst & Young Inc. (as Liquidator), 2025 BCCA 11
Can the Court make an order approving a process for the sale of a company’s assets in a private liquidation?

Summary: In this case, a party appealed an order establishing a process for the sale of a company’s assets in a private liquidation. The appellant argued that the Court did not have jurisdiction to advance the mandate of a privately-appointed liquidator. The Court of Appeal disagreed, and set out a helpful summary of the differences between privately-appointed and court-appointed liquidators, and privately-appointed and court-appointed receivers, both in terms of powers and duties owed. The Court clarified that there is no difference in the primary duties owed by liquidators - whether appointed voluntarily or by the court. All liquidators are agents of the company in liquidation and do not serve the interests of a particular party. Instead, they must act to best advance the interests of the corporation and its shareholders.

Edward Callahan appealed an order obtained by Ernst & Young Inc. in its capacity as liquidator (the “Liquidator”) of 0081092 B.C. Ltd. (the “Company”). The Order established a process for the sale of an 18.5-acre property on Lakeshore Road in Kelowna (the “Lands”) owned by the Company. Edward and his three brothers—Douglas, Bruce and Robert—have been involved in numerous legal disputes concerning the family’s considerable assets. One particular decision dismissed Edward’s oppression proceeding and restored special resolutions of the Company, which appointed the Liquidator and approved the private liquidation of the Company’s assets and its ultimate dissolution.

On November 6, 2020, the shareholders of the Company resolved to appoint the Liquidator. Douglas, Bruce and Robert voted in favour of the resolutions and Edward voted against. The resolutions provided for what is known as a “voluntary” or “private” liquidation, as opposed to a court appointment. The Liquidator’s authority flows from the resolutions and from Part 10 of the British Columbia Business Corporations Act (“BCA”).

The application giving rise to this appeal was the Liquidator’s second application for approval of a process for the sale of the Company’s assets. The chambers judge declined to make an order on the first application because “the material was insufficient for approval to be granted”. The Liquidator brought its second application in February 2024, before the same judge. The second application proposed either an auction process for a sale of shares in the Company, or a process for the sale of the Lands. The judge found that the former was unworkable in the absence of the parties’ agreement, and issued the order under appeal, which established a process that incorporated many of the terms proposed by the Liquidator, and some of the terms proposed by Edward (who had argued for a different process than that proposed by the Liquidator). Edward appealed from the Order.

The liquidation and dissolution of a company must be conducted in accordance with the relevant statutory authority. A liquidation may be commenced in two ways. First, a corporation may commence a voluntary liquidation by special resolution of its shareholders, as provided in s. 319 of the BCA (which is what the Company did here). Alternatively, on the application of a shareholder, director, or creditor of a company, a court may order that a company be liquidated and dissolved in accordance with s. 324(1) in certain circumstances, including where the court “considers it just and equitable to do so.” Once a company is in liquidation—either by way of voluntary liquidation or court order—the provisions of s. 325 of the BCA apply to the liquidation. Section 325(3) gives the court authority on any such application to grant a broad array of orders.

On appeal, Edward argued that if the provisions of s. 325(3) of BCA are read “as a whole and harmoniously with the [BCA]’s object of allowing companies to privately liquidate, as distinct from liquidating through the courts”, the powers of a court to make orders and give directions for a voluntary liquidation should be constrained. He submitted that, contrary to the approach of the chambers judge, the BCA does not confer the court with a jurisdiction to advance the mandate of a privately appointed liquidator. The essence of Edward’s complaint was that the chambers judge erred in making the Order that established a process that allowed the Liquidator to do that which it was appointed to do: liquidate the assets of the Company.

The Court of Appeal noted that reading s. 325 of the BCA in its grammatical and ordinary sense indicates that it applies equally to voluntary and court-appointed liquidators. Further, the duties and powers granted to a liquidator are necessarily broad and include the use of “the liquidator’s own discretion in realizing the assets of the company or distributing those assets among the creditors and shareholders of the company”. A liquidator is given the “powers to manage or supervise the management of the business and affairs of the company that were, before the appointment, held by the directors and officers of the company”. According to the Court, nothing in the BCA supported Edward’s position that a liquidator’s discretion in a voluntary liquidation is somehow constrained such that a court cannot make an order that would move the liquidation forward.

The Court rejected Edward’s analogy between a voluntarily appointed liquidator and a privately appointed receiver. A privately appointed receiver is appointed by, and acts as an agent for, a creditor. Its primary duties are owed to the appointing creditor, unlike a court-appointed receiver whose primary duty is owed to the court. The distinction between the types of appointments flows from the difference in those duties. There is no such distinction in the primary duties owed by liquidators, whether appointed voluntarily or by the court. All liquidators are agents of the company in liquidation and do not serve the interests of a particular party. Instead, they must act to best advance the interests of the corporation and its shareholders. Even if the duties of a court-appointed liquidator were broader than those of a voluntary liquidator, that factor cannot limit the jurisdiction of the Court to make orders pursuant to s. 325(3). Pursuant to s. 325(3) of the BCA, the court has the ability to “make any order it considers appropriate” including to give “directions on any matter arising in a liquidation”.

The Court held that the chambers judge was tasked with making a discretionary order and his conclusions were entitled to considerable deference. Edward failed to demonstrate any manifest error in the chamber judge’s reasons, and, accordingly, there was no basis for the appellate court to interfere. The Court dismissed the appeal.

Judges: The Honourable Justice Griffin, The Honourable Mr. Justice Butler and The Honourable Justice Riley

Professionals involved:

  • William Roberts and Sarah Hannigan of Lawson Lundell for EY as Liquidator

  • Taylor-Marie Young of Rush Ihas Hardwick for Callahan AE #3 Trust, Bruce Callahan, and Robert Callahan

  • Abbas Sabur and Yan Gao of Kornfeld for Douglas Callahan

  • Patrick Sullivan and Savannah Hamilton of Whitelaw Twining for Edward Callahan