It's been an eventful year in business disputes, with important decisions coming from courts across
-
Enforceability of arbitration agreements: Williams v.
- Legal and good faith obligations of corporate officers: Ponce v. Société d'investissements Rhéaume ltée at the
Supreme Court of Canada (4:26) - What makes an arrangement fair and reasonable?
HEAL Global Holdings Corp (Re) at theAlberta Court of King's Bench (8:05) - Outlook on 2024: Commercial litigation in the aviation industry (11:54)
Transcript
Mathieu: Welcome to the Blakes Sound Business podcast. I'm Mathieu Rompré.
Nathan: And I'm
Mathieu: From commercial litigation to class actions, the evolving case law is creating new considerations for businesses. Joining us to talk about the decisions that have been top of mind for them are Blakes lawyers
Nathan: And looking forward at what 2024 has in store for us,
[music]
Nathan: In August, the
Karine: Absolutely. In the Williams case, the plaintiff created an online account to make purchases from Amazon's online marketplace. In doing so, he accepted Amazon's electronic conditions of use, which contain an agreement to arbitrate all disputes relating to the agreement.
The plaintiff then commenced a proposed class action in the
The defendant successfully applied to the
After that stay was granted, there was a separate proposed class action started in the Petty case against
Nathan: So, on appeal, the
Karine: These appeals were heard the same week and by the same panel of the
The Court of Appeal determined that the chambers judge's decisions, which involved questions of mixed fact and law, were entitled to deference. The plaintiffs had unsuccessfully argued that the findings in the 2020
While an inequality of bargaining power existed between the plaintiffs and the defendants in these cases, it did not result in an improvident bargain and therefore did not give rise to a finding of unconscionability. Neither case involved contracts of necessity, and in each case the arbitration processes provided for were low or no cost to the consumers. Although the plaintiffs wanted to pursue their disputes through class actions rather than arbitration, this is not a relevant factor on a stay application.
These decisions confirm that post-Uber, in the absence of clear legislative intention to limit arbitration of consumer claims, arbitration agreements remain generally enforceable. This is so even in standard form consumer contracts of adhesion if the arbitration process provided for is accessible and offers a viable means for resolving the dispute. These recent decisions underscore that Canadian courts accept arbitration as a viable method of dispute resolution.
Mathieu: Francis, in October, the
Francis: Sure, Mathieu. So the case is about
The issue really turned on whether the appellants had a duty to inform the shareholders about the interest that was expressed by a major insurance company in acquiring the companies for which the investment companies were named as respondents and who were the shareholders that were suing
The
So the novel issue that arose in this case and in the lower courts was really a confirmation that an obligation of good faith in the context of corporate relationships between officers and companies does exist as a result of a parallel contractual agreement.
Mathieu: This matter clearly dealt with the constant struggle to find, in a corporation, the right balance between the interests of the shareholders and the directors' duties to shareholders. What impact do you expect this decision to have on other companies?
Francis: Well, I think the impact or rather the takeaway will be that shareholders, if they want to attract talent to a company in order to manage the affairs of the company, and by attracting this talent are prepared to enter into agreements to motivate these talents to bring value to the company, will have to make sure that the agreements are drafted in such a way as to not either impose greater obligations on these officers or directors of the companies. Otherwise, the Supreme Court did confirm here that irrespective of the fact that the officers or presidents in this case did not owe a fiduciary duty to the shareholders, they did, however, owe an important obligation of good faith and an obligation to inform the shareholders as a result of this parallel contractual agreement.
Nathan: Sophie, you were part of the Blakes team that worked on a unique case before the
Sophie: Yes. This arrangement was quite unique because, even though all parties to the arrangement were in favour of it, the court still refused to approve it. And in finding that the arrangement was not fair or reasonable, the
The court also found that the arrangement was quite problematic because it would have resulted in different classes of one of the party's shareholders that were going to be treated differently and have different rights and privileges.
Another concern for the court was that, between the time that the first interim order was granted and the ultimate approval, there was quite a significant deterioration of one of the corporation's financial circumstances, and what was most concerning was that that was not communicated to any of the shareholders.
And finally, one of the main points that the court took issue with was that the shareholders were given very limited information overall about how the share price for the arrangement was actually going to be determined, and this lack of information was compounded by the fact that there was no fairness opinion obtained by any of the parties to the arrangement and no special committee was formed. And so it wasn't only the shareholders that didn't have the necessary information, but also the court was left without a foundation to be able to properly consider the arrangement.
Nathan: So what does all of this mean for businesses looking to participate in an arrangement?
Sophie: This decision is interesting because it helps to highlight that even when all parties to an arrangement agree to proceed and all voting shareholders support the arrangement, sufficient evidence is still needed to be able to show the court that the arrangement is fair and reasonable for all relevant stakeholders, and it provides some helpful points for businesses to keep in mind when considering whether to participate in an arrangement and how that would look.
And that includes ensuring that all shareholders are properly advised and have all of the up-to-date information, and ensuring that there's information available to the shareholders and to the court about how the share value for an arrangement was determined. So corporations must ensure that shareholders have all of the accurate information about the share price, whether that's through a fairness opinion or a special committee. The situation might decide whether that's appropriate. It's not always a requirement. But the ultimate decision needs to be that the shareholders have enough information to be able to see that the share value was determined with a reasonable basis and not just sort of randomly decided by the corporations.
And a very interesting point for corporations to keep in mind is that, just because there is the potential for insolvency with one of the corporations if the arrangement was not to be approved, that doesn't mean it's a rubber stamp for the court to approve it. While the benefit of a corporation's continued existence from an arrangement is a positive outcome, the court does not see that as a sufficient reason alone to approve an arrangement, and the ultimate decision is that it must be fair and reasonable.
Mathieu: So, let's go to our
So,
Max: It's a great question. The aviation sector is now on a positive rebound from the COVID pandemic, which impacted, as most people know, demand, staffing and supply chains. Coming out of that, we're seeing a return of classic commercial disputes that in many cases had been paused while industry participants focused on survival. These business-to-business disputes arise when significant new investments are pumped into new aircraft fleets and related infrastructure. During the pandemic, we saw a number of Canadian carriers focused on modernizing their fleets as well as growth from a number of startup airlines whose launch plans had been delayed because of the pandemic.
While there are many types of commercial aviation disputes, including over such things as facilities being built, delays in aircraft delivery or the purchasing of critical parts, I think the industry will be especially interested in monitoring disputes about aircraft leasing arrangements. There have been several high-profile such disputes in the last few years between lessors which have leased aircraft that they own to airlines. And these disputes typically focus on, first, whether there are events of default under an aircraft lease, which will typically give the lessor certain rights and remedies; second, what damages can be recovered if a lease is terminated; and third, whether the aircraft meets the required maintenance conditions, both at the start of the lease and on the aircraft's return at the end of the lease.
Mathieu: What impact might these disputes have on the industry?
Max: The analysis in these cases is usually very fact-specific and depends on the particular leases, but big-picture, the industry will be interested in whether there is an overall uptick in these types of disputes. This kind of uptick could suggest difficulties in the market where lessees are running into challenges meeting their contractual commitments to lessors.
Mathieu: Another related dispute area of interest in
Max: Sure. This is an international treaty ratified by
The reason the
Importantly, the court acknowledged that the Convention provides a mechanism for creditors to control and to preserve the value of aircraft while disputes between debtors and creditors over events of default are resolved. This confirmation about the availability of
[music]
Nathan: Thank you, Karine, Francis, Sophie and Max, for unpacking these disputes for us.
Mathieu: Listeners, for more insights related to litigation and dispute resolution, please visit blakes.com.
Nathan: Until next time, stay well.
[music]
For permission to reprint articles, please contact the Blakes Marketing Department.
© 2020
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Mr
Suite 2200, Tour KPMG
H3A 3J2
Tel: 4168632400
Fax: 4168632653
E-mail: bulletin@blakes.com
URL: www.blakes.com
© Mondaq Ltd, 2024 - Tel. +44 (0)20 8544 8300 - http://www.mondaq.com, source