2012 BCSC 1090 Northern Minerals Investment Corp. v. Mundoro ...

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2012 BCSC 1090 Northern Minerals Investment Corp. v. Mundoro Capital Inc. articles of the company) to alter the articles and therefore the Policy requires a special resolution to amend its articles. [45] This line of reasoning is premised on the argument that the directors do not have a power unless the articles specifically grant it. In fact the reverse is correct. As previously discussed the Act and the articles give the directors the power to exercise those powers not specifically reserved to the shareholders. As noted earlier and repeated here for convenience s. 15.1 of the Articles provides: 15.1 Powers of Management. The directors must, subject to the Business Corporations Act and these Articles, manage or supervise the management of the business and affairs of the Company and have the authority to exercise all such powers of the Company as are not, by the Business Corporations Act or by these Articles, required to be exercised by the shareholders of the Company. [46] Neither the Act nor the articles expressly preclude directors from creating such a Policy. Nor has the petitioner provided any authority for the proposition that only the shareholders can create an advance notice policy. [47] The petitioner’s argument is not supported by the Act or the articles. Notwithstanding that, if the issue is one of shareholder rights being infringed, can it be inferred that in such circumstances there is a restriction on the directors’ power to create an advance notice policy In this case it has not been established that the Policy is one that infringes shareholder rights. Rather, the Policy in fact ensures an orderly nomination process and that the shareholders are informed in advance of an AGM what is in issue. In doing so the Policy prevents a group of shareholders from taking advantage of a poorly attended shareholders meeting to impose their slate of directors on what could be a majority of shareholders unaware of such a possibility arising. The submission of the petitioner equates the “rights” of a small group of dissident shareholders with all shareholders of the company. The interests of the two groups do not necessarily coincide. [48] In Blair v. Consolidated Enfield Corp., [1995] 4 S.C.R. 5, the chair of a shareholders’ meeting relied on legal advice that turned out to be incorrect and rejected proxies tendered at the meeting. Iacoucci J. commented on the proxy system and advance notice of director nominations as follows: 63. If anything, I am sympathetic to the respondent’s submission that he believed that the rejection of Osler’s advice, which is what the appellant appears to suggest Blair should have done, could not be in Enfield’s best interest: (a) (b) (c) (d) Blair was not qualified to interpret and apply the law to the ballots and proxies; Blair owed a duty to shareholders to see that the instructions contained in their proxies were followed; The shareholders who had not received notice of the surprise nomination of Price and who were not present at the shareholders' meeting and who held enough votes to change the result had they received notice might have a cause of action if Price were declared elected against the advice of Enfield's counsel; The shareholders who were represented by management proxies had no opportunity to assess Price or to vote in relation to his candidacy, and they relied on Enfield and its chairman to ensure that their rights at the meeting http://www.courts.gov.bc.ca/jdb-txt/SC/12/10/2012BCSC1090.htm[10/22/2012 1:37:45 PM]
2012 BCSC 1090 Northern Minerals Investment Corp. v. Mundoro Capital Inc. … (iv) were protected. The interests of the shareholders not present at the meeting … 71 Many of the persons issuing proxies were not present at the meeting. Although they may very well have been informed of the tensions between Blair and Canadian Express, they would certainly not have expected there to be a contested election for the position of 11th director. At the time the proxies were given to Ravelston and Canadian Express, it was assumed that the 11 persons listed in the management circular would simply be elected. The evidentiary record does not reveal that anyone's mind was alerted to the possibility that the proxyholders would use the proxies to nominate Price over Blair. No notice whatsoever was given of Price's nomination. In this context, I find some merit to Blair's submission that his decision to follow Osler's advice must be viewed also in light of the interests of the shareholders not present at the meeting. 72 In the end, by following the instructions on the proxies and then requisitioning a new shareholders' meeting on July 24, 1989, Blair gave all shareholders an opportunity to make a fully informed decision regarding the election of the directors, thereby promoting the integrity of Enfield's voting procedures. Shareholders holding fully 16 percent of the shares of Enfield who were not aware that Canadian Express would attempt to take control of the Board were thus placed in a position of being able to make an informed choice as to how to vote (see judgment of the Court of Appeal, at p. 801). The corollary is that Canadian Express suffered no prejudice in respect of its voting rights in that it had the opportunity to nominate and support Price at the new meeting or pursue legal action against Enfield. …. 73 In my mind, the fact that Blair promptly, and contrary to his personal interests, requisitioned a new meeting constitutes further evidence that his actions were taken with a view to the best interests of Enfield. If anything, Canadian Express's decision to pursue this matter through litigation drives against the wellbeing of Enfield's shareholders, especially those who have no personal interest in who acts as the 11th director, provided simply that individual discharge his or her duties to the corporation in a competent and trustworthy manner. [49] In Horton v. St. Thomas Elgin General Hospital (1982), 140 D.L.R. (3d) 274, 39 O.R. (2d) 247 (H.C.J.), an advance notice by-law was enacted by a non-profit corporation under the Ontario Corporations Act. That statute does not deal expressly with members’ voting rights nor with director nomination rights. The by-law was held invalid for technical reasons however Smith J. observed at para. 25: [25] The American reports are replete with pronouncements on the right to vote and nominate. The applicant has made reference to a large number of them. They all allow that by-laws can be passed to curtail as long as the wording is clear. I am of the same view. … [50] The respondent notes that advance notice is supported by ISS (Institutional Shareholder Services Inc.) the leading independent advisory on good governance for shareholder meetings. ISS favours advance notice of nominations to “ensure full disclosure in regard to a proponent’s economic and voting position in the company so long as the informational requirements are reasonable and aimed at providing shareholders with the necessary information to review such proposal.” [51] The Policy in this case leaves with the board the sole discretion to waive any requirement in the policy which discretion can be reviewed by a court. In addition the press release noted that the company intended to seek shareholder approval and confirmation of the Policy at the AGM. Both of these factors evidence http://www.courts.gov.bc.ca/jdb-txt/SC/12/10/2012BCSC1090.htm[10/22/2012 1:37:45 PM]
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2012 BCSC 1090 Northern Minerals Investment Corp. v. Mundoro ...

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