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

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2012 BCSC 1090 Northern Minerals Investment Corp. v. Mundoro Capital Inc. 136 (1) The directors of a company must, subject to this Act, the regulations and the memorandum and articles of the company, manage or supervise the management of the business and affairs of the company. … 142 (1) A director or officer of a company, when exercising the powers and performing the functions of a director or officer of the company, as the case may be, must (a) act honestly and in good faith with a view to the best interests of the company, (b) exercise the care, diligence and skill that a reasonably prudent individual would exercise in comparable circumstances, (c) act in accordance with this Act and the regulations, and (d) subject to paragraphs (a) to (c), act in accordance with the memorandum and articles of the company. (2) This section is in addition to, and not in derogation of, any enactment or rule of law or equity relating to the duties or liabilities of directors and officers of a company. (3) No provision in a contract, the memorandum or the articles relieves a director or officer from (a) (b) the duty to act in accordance with this Act and the regulations, or liability that by virtue of any enactment or rule of law or equity would otherwise attach to that director or officer in respect of any negligence, default, breach of duty or breach of trust of which the director or officer may be guilty in relation to the company. Discussion [15] I will address the issues of the postponement of the meeting and the postponement of the day of record first and the validity of the Policy second. [16] The petitioner asserts that “[u]nder contractarian corporate law such as that embodied in the BCA, directors have only those powers granted to them by the articles”. That is, that directors’ powers must be expressly conferred and that they do not have any residual powers. [17] The petitioner refers to Part 5 Division 6 of the Act dealing with the meetings of shareholders. In particular they note that s. 182 sets out specific requirements such as when the meetings must be held (within 18 months of incorporation and not more than 15 months after any prior meeting). They submit that nothing in s. 182 or Part 5 generally gives the directors the power to postpone a scheduled meeting. In support they note that under the Ontario Business Corporations Act, R.S.O. 1990, c. B.16 and the Canada Business Corporations Act, R.S.C. 1985, c. C-44, that may not be the case but that the Act operates as a form of contractarian corporate law under which directors have only those powers contracted to them by the articles. Lacking that explicit power the petitioner submits that the directors lack the authority to cancel a meeting once it has been called. [18] The respondent states this is “fundamentally wrong.” They note that s. 15.1 of the articles specifically and expressly reserves to the directors all residual powers. Those powers are those that are not required to 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. be exercised by the shareholders either by the Act or the articles. [19] The respondent also relies on s. 136(1) of the Act. They note that the British Columbia Company Law Practice Manual, 2nd ed. (Vancouver: Continuing Legal Education Society of BC, loose-leaf) states at Part 6-4: Although it is possible for the shareholders of a company (or any other person) to be granted, in the articles, extensive authority for the management of the business of the company, the actual practices (derived from s. 136(1) is to entrust a board of directors with the exclusive power to manage the company and to grant that power free from interference from the shareholders. The shareholders are usually left only with the power to change the directors at the annual general meeting or to remove them by special resolution (s. 128(3)(a)) or some other method or resolution specified in the articles (s. 128(3)(b)). [20] The petitioner in support of their interpretation of directors powers refers to Smith v. Paringa Mines Ltd., [1906] 2 Ch. 193 for the proposition that the directors’ power to set the time and place of a shareholders’ meeting and the power of the chair to adjourn it does not imply the power to postpone the meeting before it occurs. [21] Paringa was followed in the Australian cases of Bell Resources Ltd. v. Turnbridge Pty. Ltd. & Ors, [1988] 6 A.C.L.C. 842 (S.C. of Western Australia) and McPherson & Ors v. Mansell & Ors, [1995] 13 A.C.L.C. 767 (Federal Court of Australia, New South Wales, Gen. Div.). However, that is not the case in Canada. [22] The submission of the petitioner is that the Act is not a statute based on the model of the Canada Business Corporations Act or other provincial statutes. Therefore it is submitted that the authorities based on the Canada Business Corporations Act or other provincial acts are of limited assistance. [23] In Professor Welling’s Corporate Law in Canada, The Governing Principles, 1st ed., (Toronto: Butterworths, 1984) at pp. 32 and 33 the following is stated: … Prior to the 1970s there were two distinct types of corporate statutes in Canada: letters patent statutes, similar in many ways to the corporate “common law” in England prior to 1720, and Englishmodel registration statutes, similar in form and effect to the first modern English Companies Act of 1844. Now there are three types of corporate statutes in Canada, the third being based on the New York statute, which was used as a model for the major Ontario reform of 1970 and further refined in the Canadian Business Corporations Act (C.B.C.A.) of 1975. … British Columbia is anomalous, in that it has retained the general English format, but has built into it statutory remedies similar to the American based model; it is probably most accurately described as a hybrid statute. … [24] With that distinction in mind should Paringa apply such that the directors’ powers must be explicitly granted Paringa was considered by the Alberta Court of Appeal in Canadian Jorex Ltd. v. 477749 Alberta Ltd. (1991), 85 Alta. L.R. (2d) 313, 30 A.C.W.S. (3d) 819 (C.A.), where the court addressed the issue of a board of directors purporting to cancel a special meeting. The act in question was the Canada Business Corporations Act. The court said this at paras. 8-11: http://www.courts.gov.bc.ca/jdb-txt/SC/12/10/2012BCSC1090.htm[10/22/2012 1:37:45 PM]
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