Aegon Capital Mgt. Inc. v. BCE Inc. (2008), 383 N.R. 119 (SCC)
MLB headnote and full text
[French language version follows English language version]
[La version française vient à la suite de la version anglaise]
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Temp. Cite: [2008] N.R. TBEd. DE.034
BCE Inc. and Bell Canada (appellants/respondents on cross-appeals) v. A Group of 1976 Debentureholders composed of: Aegon Capital Management Inc., Addenda Capital Inc., Phillips, Hager & North Investment Management Ltd., Sun Life Assurance Company of Canada, CIBC Global Asset Management Inc., Her Majesty the Queen in Right of Alberta, as represented by the Minister of Finance, Manitoba Civil Service Superannuation Board, TD Asset Management Inc. and Manulife Financial Corporation; A Group of 1996 Debentureholders composed of: Aegon Capital Management Inc., Addenda Capital Inc., Phillips, Hager & North Investment Management Ltd., Sun Life Insurance (Canada) Limited, CIBC Global Asset Management Inc., Manitoba Civil Service Superannuation Board and TD Asset Management Inc.; A Group of 1997 Debentureholders composed of: Addenda Capital Management Inc., Manulife Financial Corporation, Phillips, Hager & North Investment Management Ltd., Sun Life Assurance Company of Canada, CIBC Global Asset Management Inc., Her Majesty the Queen in Right of Alberta, as represented by the Minister of Finance, Wawanesa Life Insurance Company, TD Asset Management Inc., Franklin Templeton Investments Corp. and Barclays Global Investors Canada Limited (respondents/appellants on cross-appeals) and Computershare Trust Company of Canada and CIBC Mellon Trust Company (respondents) and Director Appointed Pursuant to the CBCA, Catalyst Asset Management Inc. and Matthew Stewart (intervenors)
6796508 Canada Inc. (appellant/respondent on cross-appeals) v. A Group of 1976 Debentureholders composed of: Aegon Capital Management Inc., Addenda Capital Inc., Phillips, Hager & North Investment Management Ltd., Sun Life Assurance Company of Canada, CIBC Global Asset Management Inc., Her Majesty the Queen in Right of Alberta, as represented by the Minister of Finance, Manitoba Civil Service Superannuation Board, TD Asset Management Inc. and Manulife Financial Corporation; A Group of 1996 Debentureholders composed of: Aegon Capital Management Inc., Addenda Capital Inc., Phillips, Hager & North Investment Management Ltd., Sun Life Insurance (Canada) Limited, CIBC Global Asset Management Inc., Manitoba Civil Service Superannuation Board and TD Asset Management Inc.; A Group of 1997 Debentureholders composed of: Addenda Capital Management Inc., Manulife Financial Corporation, Phillips, Hager & North Investment Management Ltd., Sun Life Assurance Company of Canada, CIBC Global Asset Management Inc., Her Majesty the Queen in Right of Alberta, as represented by the Minister of Finance, Wawanesa Life Insurance Company, TD Asset Management Inc., Franklin Templeton Investments Corp. and Barclays Global Investors Canada Limited (respondents/appellants on cross-appeals) and Computershare Trust Company of Canada and CIBC Mellon Trust Company (respondents) and Director Appointed Pursuant to the CBCA, Catalyst Asset Management Inc. and Matthew Stewart (intervenors)
(32647; 2008 SCC 69; 2008 CSC 69)
Indexed As: Aegon Capital Management Inc. et al. v. BCE Inc. et al.
Supreme Court of Canada
McLachlin, C.J.C., Bastarache, Binnie, LeBel, Deschamps, Abella and Charron, JJ.
June 20, 2008.
Summary:
A group headed by the Ontario Teachers Pension Plan Board (Teachers) offered to purchase all the shares of BCE Inc. (BCE) The purchase would be financed in part by the assumption by Bell Canada (Bell), a wholly owned subsidiary of BCE, of a $30 billion debt. The BCE shareholders approved the arrangement by a 97% margin. Bell debenture holders opposed it. They argued that the increased debt would reduce the value of their bonds. BCE and Bell applied for court approval of the arrangement under s. 192 of the Canada Business Corporations Act. The debenture holders applied for an oppression remedy under s. 241 of the Act.
The Quebec Superior Court, in decisions reported (2008), 43 B.L.R.(4th) 79; 2008 QCCS 907, (2008), 43 B.L.R.(4th) 135; 2008 QCCS 906, dismissed the application for an oppression remedy. In a decision reported (2008), 43 B.L.R.(4th) 1; 2008 QCCS 905, the court allowed the application under s. 192 and approved the transaction as fair and reasonable. The debenture holders appealed.
The Quebec Court of Appeal, in decisions reported (2008), 43 B.L.R.(4th) 157; 2008 QCCA 930, 2008 QCCA 931, 2008 QCCA 932, 2008 QCCA 933, 2008 QCCA 934, 2008 QCCA 935, overturned the Superior Court’s decision approving the transaction under s. 192. The Court of Appeal found it unnecessary to consider the s. 241 oppression claim. BCE and Bell appealed respecting the s. 192 court approval. The debenture holders cross-appealed respecting the s. 241 oppression claim.
The Supreme Court of Canada allowed the BCE and Bell appeal and dismissed the debenture holders’ cross-appeal.
Company Law – Topic 2170
Shareholders (incl. stakeholders) – Shareholders rights (incl. stakeholders’ rights) – To rectify oppressive or unfairly prejudicial act – A group offered to purchase all the shares of BCE Inc. (BCE) – The purchase would be financed in part by the assumption by Bell Canada (Bell), a wholly owned subsidiary of BCE, of a $30 billion debt – The BCE shareholders approved the arrangement by a 97% margin – Bell debenture holders opposed it – They sought an oppression remedy under s. 241 of the Canada Business Corporations Act – Before the trial judge, the debenture holders argued that they had a reasonable expectation that the directors of BCE would protect their economic interests as debenture holders in Bell by putting forward a plan of arrangement that would maintain the investment grade trading value of their debentures – The trial judge dismissed their action – The reasonable expectation alleged was not made out since the statements by Bell suggesting a commitment to retaining investment grade ratings were accompanied by warnings that explicitly precluded investors from reasonably forming such expectations, and the warnings were included in the prospectuses pursuant to which the debentures were issued – The debenture holders appealed – They argued a softer alternative: a reasonable expectation that the directors would consider their economic interests in maintaining the trading value of the debentures – The Supreme Court of Canada dismissed the appeal – With respect to the reasonable expectation argument made at trial, the trial judge’s findings were amply supported by the evidence – As for the softer alternative argued on appeal, that reasonable expectation was established but had been met – See paragraphs 95 to 114.
Company Law – Topic 2170.1
Shareholders (incl. stakeholders) – Shareholders rights (incl. stakeholders’ rights) – Oppressive acts – Remedies – The Supreme Court of Canada discussed the “twin prongs” of the oppression remedy under s. 241 of the Canada Business Corporations Act: (1) whether there was a breach of a reasonable expectation; and, if there was one, (2) whether the conduct complained of amounted to “oppression”, “unfair prejudice” or “unfair disregard” – The court made two preliminary observations: (1) oppression was an equitable remedy; and (2) it was fact-specific – Useful factors in determining whether a reasonable expectation existed included: general commercial practice, the nature of the corporation, the relationship between the parties, past practice, steps the claimant could have taken to protect itself, representations and agreements, and the fair resolution of conflicting interests between corporate stakeholders – The duty of directors to act in the best interests of the corporation comprehended a duty to treat individual stakeholders affected by corporate actions equitably and fairly – After the existence of a reasonable expectation was established, the claimant had to show that the failure to meet that expectation involved unfair conduct and prejudicial consequences within s. 241 – Not every failure to meet a reasonable expectation gave rise to the equitable considerations that grounded actions for oppression – The court had to be satisfied that the conduct fell within the concepts of “oppression”, “unfair prejudice” or “unfair disregard” of the claimant’s interest, within the meaning of s. 241 – See paragraphs 50 to 94.
Company Law – Topic 4264
Directors – Duties – General principles – Remedies for breach of fiduciary duty – The Supreme Court of Canada discussed shareholder and stakeholder rights, obligations and remedies under the Canada Business Corporations Act – The court indicated that corporation directors had a fiduciary duty to act in the best interests of the corporation – Often the interests of shareholders and stakeholders were co-extensive with the interests of the corporation – But if they conflicted, the directors’ duty was clear: it was to the corporation – However, it was unlikely that the directors who controlled the corporation would sue themselves for breach of their own fiduciary duty – The common law developed a number of special remedies, taken up by the Act, to protect the interests of shareholders and stakeholders – These remedies included the s. 239 derivative action, a civil action for breach of duty of care, the s. 241 action for oppression and the s. 192 requirement for court approval of arrangements that fundamentally changed stakeholder rights – The court indicated that the s. 241 oppression action and the s. 192 court approval requirement were different types of proceedings: the former was a broad and equitable remedy that focussed on the reasonable expectations of stakeholders, while the latter focussed on whether the arrangement, objectively viewed, was fair and reasonable and looked primarily to the interests of the parties whose rights were being arranged – See paragraphs 34 to 49, 119, 120.
Company Law – Topic 7086
Fundamental changes and shareholders’ rights – Arrangement – Judicial approval – [See
Company Law – Topic 4264
].
Company Law – Topic 7086
Fundamental changes and shareholders’ rights – Arrangement – Judicial approval – The Supreme Court of Canada discussed the process for judicial approval of arrangements under s. 192 of the Canada Business Corporations Act – The court referred to the nature and purpose of the s. 192 approval process, the philosophy that underlied the s. 192 approval, the interests at play in the process, and the criteria to be applied by the judge on a s. 192 proceeding – The court indicated that determining what was fair and reasonable involved two inquiries: first, whether the arrangement had a valid business purpose; and second, whether it resolved the objections of those whose rights were being arranged in a fair and balanced way – The court concluded that in determining whether a plan of arrangement was fair and reasonable, the judge had to be satisfied that the plan served a valid business purpose and that it adequately responded to the objections and conflicts between different affected parties – Whether these requirements were met was determined by taking into account a variety of relevant factors, including the necessity of the arrangement to the corporation’s continued existence, the approval, if any, of a majority of shareholders and other security holders entitled to vote, and the proportionality of the impact on affected groups – See paragraphs 122 to 155.
Company Law – Topic 7086
Fundamental changes and shareholders’ rights – Arrangement – Judicial approval – A group offered to purchase all the shares of BCE Inc. (BCE) – The purchase would be financed in part by the assumption by Bell Canada (Bell), a wholly owned subsidiary of BCE, of a $30 billion debt – The BCE shareholders approved the arrangement by a 97% margin – Bell debenture holders opposed it – They argued that the increased debt would reduce the value of their bonds – The trial judge approved the arrangement as fair and reasonable under s. 192 of the Canada Business Corporations Act – The debenture holders were not entitled to vote on the plan of arrangement because their legal rights were not being arranged – The arrangement preserved the contractual rights of the debenture holders as negotiated – He noted that it was open to the debenture holders to negotiate protections against increased debt load or the risks of changes in corporate structure, had they wished to do so – The Supreme Court of Canada agreed with the trial judge – Only the economic interests of the debenture holders were affected by the arrangement, not their legal rights – In addition, since the debenture holders did not fall within an exceptional situation where non-legal rights should be considered under s. 192, they were not an affected class – The arrangement did not fundamentally alter the debenture holders’ rights – The investment and the return contracted for remained intact – See paragraphs 156 to 165.
Cases Noticed:
Peoples Department Stores Inc. (Bankrupt) v. Wise, [2004] 3 S.C.R. 461; 326 N.R. 267; 2004 SCC 68, consd. [para. 27].
Bradbury v. English Sewing Cotton Co., [1923] A.C. 744 (H.L.), refd to. [para. 34].
Zwicker v. Stanbury, [1953] 2 S.C.R. 438, refd to. [para. 34].
Sparling v. Quebec, [1988] 2 S.C.R. 1015; 89 N.R. 120; 20 Q.A.C. 174, consd. [para. 35].
Maple Leaf Foods Inc. v. Schneider Corp. – see Pente Investment Management Ltd. et al. v. Schneider Corp. et al.
Pente Investment Management Ltd. et al. v. Schneider Corp. et al. (1998), 113 O.A.C. 253; 42 O.R.(3d) 177 (C.A.), refd to. [para. 40].
Kerr et al. v. Danier Leather Inc. et al., [2007] 3 S.C.R. 331; 368 N.R. 204; 231 O.A.C. 348; 2007 SCC 44, refd to. [para. 40].
Saskatchewan Wheat Pool v. Canada, [1983] 1 S.C.R. 205; 45 N.R. 425, refd to. [para. 44].
Scottish Co-op Wholesale Society Ltd. v. Meyer, [1959] A.C. 324 (H.L.), refd to. [para. 54].
Diligenti v. RWMD Operations Kelowna Ltd. (1976), 1 B.C.L.R. 36 (S.C.), refd to. [para. 54].
Stech v. Davies, [1987] 5 W.W.R. 563; 80 A.R. 298 (Q.B.), refd to. [para. 54].
First Edmonton Place Ltd. v. 315888 Alberta Ltd. (1988), 40 B.L.R. 28 (Alta. Q.B.), varied (1989), 45 B.L.R. 110 (Alta. C.A.), refd to. [para. 55].
820099 Ontario Inc. v. Ballard (Harold E.) Ltd. – see Ballard v. Ballard Estate.
Ballard v. Ballard Estate (1991), 50 O.A.C. 254; 49 C.P.C.(2d) 239; 3 B.L.R.(2d) 113 (Div. Ct.), refd to. [para. 55].
Westfair Foods Ltd. v. Watt et al., [1991] 4 W.W.R. 695; 115 A.R. 34; 79 D.L.R.(4th) 48 (C.A.), refd to. [para. 55].
Wright v. Montgomery (Donald S.) Holdings Ltd. (1998), 51 O.T.C. 241; 39 B.L.R.(2d) 266 (Gen. Div.), refd to. [para. 58].
Keho Holdings Ltd. and Oliver v. Noble et al. (1987), 78 A.R. 131; 38 D.L.R.(4th) 368 (C.A.), refd to. [para. 58].
Ebrahimi v. Westbourne Galleries Ltd. et al., [1973] A.C. 360 (H.L.), consd. [para. 60].
Main v. Delcan Group Inc. (1999), 47 B.L.R.(2d) 200 (Ont. Sup. Ct.), refd to. [para. 63].
GATX Corp. et al. v. Hawker Siddeley Canada Inc. et al. (1996), 1 O.T.C. 322; 27 B.L.R.(2d) 251 (Gen. Div.), refd to. [para. 65].
Adecco Canada Inc. v. Broome (J. Ward) Ltd. et al., [2001] O.T.C. Uned. 628; 12 B.L.R.(3d) 275 (Sup. Ct.), refd to. [para. 73].
SCI Systems Inc. v. Gornitzki Thompson & Little Co. et al. (1997), 29 O.T.C. 148; 147 D.L.R.(4th) 300 (Gen. Div.), varied (1998), 110 O.A.C. 160 (Div. Ct.), refd to. [para. 73].
Downtown Eatery (1993) Ltd. v. Ontario et al. (2001), 147 O.A.C. 275; 200 D.L.R.(4th) 289 (C.A.), leave to appeal refused [2002] 2 S.C.R. vi; 289 N.R. 196; 163 O.A.C. 397 (S.C.C.), refd to. [para. 73].
Ferguson and Imax Systems Corp., Re (1983), 150 D.L.R.(3d) 718 (Ont. C.A.), consd. [para. 75].
Gibbons v. Medical Carriers Ltd. et al. (2001), 158 Man.R.(2d) 259; 17 B.L.R.(3d) 280; 2001 MBQB 229, refd to. [para. 76].
Alberta (Treasury Branches) v. SevenWay Capital Corp. (1999), 262 A.R. 135; 50 B.L.R.(2d) 294 (Alta. Q.B.), affd. (2000), 261 A.R. 278; 225 W.A.C. 278; 8 B.L.R.(3d) 1; 2000 ABCA 194, refd to. [para. 77].
Lyall et al. v. 147250 Canada Ltd. et al. (1993), 33 B.C.A.C. 64; 54 W.A.C. 64; 106 D.L.R.(4th) 304 (C.A.), refd to. [para. 79].
Tsui et al. v. International Capital Corp. et al., [1993] 4 W.W.R. 613; 114 Sask.R. 1 (Q.B.), affd. (1993), 113 Sask.R. 3; 52 W.A.C. 3 (C.A.), refd to. [para. 80].
Deutsche Bank Canada v. Oxford Properties Group Inc. (1998), 78 O.T.C. 108; 40 B.L.R.(2d) 302 (Gen. Div.), refd to. [para. 80].
Themadel Foundation et al. v. Third Canadian Investment Trust Ltd. (1995), 23 O.R.(3d) 7 (Gen. Div.), varied (1998), 107 O.A.C. 188; 38 O.R.(3d) 749 (C.A.), refd to. [para. 80].
Revlon Inc. v. MacAndrews and Forbes Holdings Inc. (1985), 506 A.2d 173 (U.S. Del. Sup. Ct.), consd. [para. 86].
Unocal Corp. v. Mesa Petroleum Co. (1985), 493 A.2d 946 (Del. Sup. Ct.), consd. [para. 86].
Trizec Corp. et al., Re (1994), 158 A.R. 33; 21 Alta. L.R.(3d) 435 (Q.B.), refd to. [para. 137].
Pacifica Papers Inc. v. Johnstone – see 3017970 Nova Scotia Co. et al. v. Johnstone et al.
3017970 Nova Scotia Co. et al. v. Johnstone et al., [2001] B.C.T.C. 1069; 15 B.L.R.(3d) 249; 2001 BCSC 1069, refd to. [para. 139].
Abitibi-Consolidated Inc. (Arrangement relatif à), Re, 2007 QCCS 6830, refd to. [para. 140].
Canadian Pacific Ltd., Re (1990), 73 O.R.(2d) 212 (H.C.), refd to. [para. 143].
Cinar Corp. v. Shareholders of Cinar Corp. (2004), 4 C.B.R.(5th) 163 (Que. Sup. Ct.), refd to. [para. 143].
PetroKazakhstan Inc. v. Lukoil Overseas Kumkol B.V., [2005] A.R. Uned. 847; 12 B.L.R.(4th) 128; 2005 ABQB 789, refd to. [para. 143].
St. Lawrence & Hudson Railway Co., Re, [1998] O.J. No. 3934 (Gen. Div.), refd to. [para. 150].
Alabama, New Orleans, Texas and Pacific Junction Railway Co., Re, [1891] 1 Ch. 213 (C.A.), refd to. [para. 151].
Stelco Inc., Re (2006), 18 C.B.R.(5th) 173 (Ont. Sup. Ct.), refd to. [para. 152].
UPM-Kymmene Corp. v. UPM-Kymmene Miramichi Inc.- see UPM-Kymmene v. Repap Enterprises Inc. et al.
UPM-Kymmene v. Repap Enterprises Inc. et al., [2002] O.T.C. 798; 214 D.L.R.(4th) 496 (Sup. Ct.), consd. [para. 155].
Statutes Noticed:
Canada Business Corporations Act, R.S.C. 1985, c. C-44, sect. 192, sect. 241 [para. 1].
Authors and Works Noticed:
Canada, Consumer and Corporate Affairs Canada, Detailed background paper for an Act to amend the Canada Business Corporations Act (1977), pp. 5 [para. 124]; 6 [para. 128].
Canada, Industry Canada, Corporations Canada, Policy concerning Arrangements under Section 192 of the CBCA: Policy Statement 15.1 (November 7, 2003), online: www.strategis.ic.gc.ca/epic/site/cd-dgc.nsf/print-en/cs01073e.html, generally [para. 115]; s. 3.08 [paras. 131, 134].
Dickerson, Robert W.V., Howard, John L., and Getz, Leon, Proposals for a New Business Corporations Law for Canada (1971), vol. 1, p. 163 [para. 71].
Koehnen, Markus, Oppression and Related Remedies (2004), pp. 78 [para. 58]; 79 [paras. 54, 58]; 80 [para. 54]; 81 [paras. 67, 92]; 82 [paras. 67, 93]; 83 [paras. 67, 93, 94]; 84 [paras. 54, 67, 94]; 85 to 88 [para. 67]; 109, 110 [para. 65].
Nicholls, Christopher C., Mergers Acquisitions, and Other Changes of Corporate Control (2007), p. 76 [para. 125].
Shapira, G., Minority Shareholders’ Protection – Recent Developments (1982), 10 N.Z. Univ. L. Rev. 134, pp. 138, 145, 146 [para. 74].
Veasey, E. Norman, and Di Guglielmo, Christine T., What Happened in Delaware Corporate Law and Governance from 1992-2004? A Retrospective on Some Key Developments (2005), 153 U. Pa. L. Rev. 1399, p. 1431 [para. 87].
Counsel:
Guy Du Pont, Kent E. Thomson, William Brock, James Doris, Louis-Martin O’Neill, Pierre Bienvenu and Steve Tenai, for the appellants/respondents on cross-appeals, BCE Inc. and Bell Canada;
Benjamin Zarnett, Jessica Kimmel, James A. Woods and Christopher L. Richter, for the appellant/respondent on cross-appeals, 6796508 Canada Inc.;
John Finnigan, John Porter, Avram Fishman and Mark Meland, for the respondents/ appellants on cross-appeals, Aegon Capital Management Inc., Addenda Capital Inc., Phillips, Hager & North Investment Management Ltd., Sun Life Assurance Co. of Canada, CIBC Global Asset Management Inc., Her Majesty the Queen in Right of Alberta, as represented by the Minister of Finance, Manitoba Civil Service Superannuation Board, TD Asset Management Inc. and Manulife Financial Corp.;
Markus Koehnen, Max Mendelsohn, Paul Macdonald, Julien Brazeau and Erin Cowling, for the respondent/appellant on cross-appeals, Addenda Capital Management Inc., Manulife Financial Corp., Phillips, Hager & North Investment Management Ltd., Sun Life Assurance Co. of Canada, CIBC Global Asset Management Inc., Her Majesty the Queen in Right of Alberta, as represented by the Minister of Finance, Wawanesa Life Insurance Co., TD Asset Management Inc., Franklin Templeton Investments Corp. and Barclays Global Investors Canada Ltd.;
Written submissions only by Robert Tessier and Ronald Auclair, for the respondent, Computershare Trust Company of Canada;
Christian S. Tacit, for the intervenor, Catalyst Asset Management Inc.;
Raynold Langlois, Q.C., and Gerald Apostolatos, for the intervenor, Matthew Stewart.
Solicitors of Record
:
Davies, Ward, Phillips & Vineberg, Montreal, Quebec, for the appellants/respondents on cross-appeals, BCE and Bell Canada;
Woods & Partners, Montreal, Quebec, for the appellant/respondent on cross-appeals, 6796508 Canada Inc.;
Fishman, Flanz, Meland, Paquin, Montreal, Quebec, for the respondents/appellants on cross-appeals, Aegon Capital Management Inc., Addenda Capital Inc., Phillips, Hager & North Investment Management Ltd., Sun Life Assurance Co. of Canada, CIBC Global Asset Management Inc., Her Majesty the Queen in Right of Alberta, as represented by the Minister of Finance, Manitoba Civil Service Superannuation Board, TD Asset Management Inc. and Manulife Financial Corp.;
McMillan, Binch, Mendelsohn, Toronto, Ontario, for the respondent/appellant on cross-appeals, Addenda Capital Management Inc., Manulife Financial Corp., Phillips, Hager & North Investment Management Ltd., Sun Life Assurance Co. of Canada, CIBC Global Asset Management Inc., Her Majesty the Queen in Right of Alberta, as represented by the Minister of Finance, Wawanesa Life Insurance Co., TD Asset Management Inc., Franklin Templeton Investments Corp. and Barclays Global Investors Canada Ltd.;
Miller, Thomson, Pouliot, Montreal, Quebec, for the respondent, Computershare Trust Company of Canada;
Christian Tacit, Kanata, Ontario, for the intervenor, Catalyst Asset Management Inc.;
Langlois, Kronström, Desjardins, Montreal, Quebec, for the intervenor, Matthew Stewart.
This appeal was heard on June 17 and 20, 2008, by McLachlin, C.J.C., Bastarache, Binnie, LeBel, Deschamps, Abella and Charron, JJ., of the Supreme Court of Canada. The
Supreme Court delivered its decision on June 20, 2008, with written reasons in both official languages delivered by the Court on December 19, 2008. Bastarache, J., took part in the June 20, 2008, judgment but not in the December 19, 2008, reasons.
