CANADA Trends and Developments Contributed by: Laura Bevan, Craig Ferris KC, Anna Paczkowski and Catherine Whitehead, Lawson Lundell LLP
Litigation arose between the directors and share- holders of two companies. One of the parties applied to have a third party appointed to repre- sent the companies’ interests in the proceeding. The judge decided to make the order sought on the basis of Rule 20-3(15) of the Supreme Court Civil Rules and its inherent jurisdiction. Rule 20-3(15) states: “The court may give the conduct of a proceeding to any person the court considers appropriate.” The judge did not make the order pursuant to the Business Corporations Act (the “BCA”), even though Sections 232 and 233 of the BCA provide that “a complainant”, defined as a “shareholder or director of a company”, may apply to rep- resent a company in legal proceedings. These provisions, known as the derivative action provi- sions, allow an action to be brought in the name of and on behalf of a corporation. The BCA’s definition of “shareholder” includes “any other person whom the court considers to be an appropriate person to make an application under this Section”. The BCA allows a person who is appointed to represent the company to apply for a court order authorising any person to control the conduct of the legal proceeding. The judge dismissed the argument that a repre- sentation order must be made under the BCA’s derivative action provisions, noting that no such application was before her and that she was bound to follow the decision in Wray v Taylor, which said that a court can appoint a repre- sentative for a company under the former Rule (Rule 5(23)) or under a provision of the former Company Act.
Having determined she had the jurisdiction, the judge ordered the parties to reach an agree- ment within 30 days on a mechanism to appoint someone to have conduct of the proceeding on the companies’ behalf and who could appoint and instruct counsel for the companies. The parties could not agree and received further directions from the judge but were still unable to move forward. The judge’s decision was appealed, with one ground being that she erred in using Rule 20-3(15). The Court of Appeal found that Rule 20-3(15) did not authorise the appointment of a person to defend or prosecute proceedings on behalf of a company. This conclusion turned on the well-recognised principle of statutory interpre- tation that special legislation overrides general legislation. The Court of Appeal found that the Rule contained a general grant of authority and had to give way to the specific regime created under the BCA. The decision shows the importance of adher- ing to the intended statutory regime. The BCA’s derivative action provisions were tailored for this type of scenario, in contrast to Rule 20-3(15).
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